Viad Corp (VVI) 2002 Q4 法說會逐字稿

Please standby we are about to begin.

Good day everyone and welcome to Viad’s fourth quarter 2002 earnings release conference call.

Today's conference is being recorded.

At this time, I would like to turn the call over to Ms. Ellen Ingersoll, the Chief Financial Officer.

Please go ahead ma 'am.

Good morning and thank you for attending our conference call.

I would like to remind everyone that certain statements made during this conference call, which are not historical facts, may constitute forward-looking statements.

Actual results may differ materially from those projected in the forward-looking statements.

Additional information concerning business and other risk factors that could cause actual results to materially differ from those in the forward-looking statements is contained under the caption [forward-looking] statements and Viad’s financial statements filed with Securities and Exchange Commission.

Before we begin today, I will remind you that beginning of the first quarter of 2002 financial results reflect the implementation and statement of financial accounting standards, number 142.

As you know, this pronouncement means that goodwill is no longer amortized to operating expenses.

For comparability in our comments, we will present 2001 results without goodwill amortization and 2002 results before the goodwill impairment charge resulting from the implementation of FAS 142.

Also, the 2001 and 2002 numbers discussed throughout this conference call will before restructuring charges and other items.

All Viad and payment services, revenues and operating income are presented on the taxable equivalent basis.

For reconciliation from a taxable equivalent to GAAP, please see the tables in the earnings press release.

We have also added some new information to the earnings release; which we think you will find helpful.

First, in supplemental tables A and B, we provide historical information on a taxable equivalent basis, and GAAP basis related to Travelers Express interest income -- net interest income and net income margin.

In table three, we provide the calculation of EBITDA.

Finally, I would like to talk about financial reporting using GAAP versus the taxable equivalent basis.

Historically, Viad has discussed financial results specifically revenue and operating income on a taxable equivalent basis.

Tax equivalent reporting is [inaudible] among companies, particularly banks that have tax-exempt securities in their portfolios.

As the municipal securities portfolio Travelers Express MoneyGram is reduced due to Viad’s alternative minimum tax position.

The effect of the tax-exempt income is becoming less meaningful to results.

Therefore, beginning with 2003, Viad will begin to report on a GAAP basis only.

The guidance we give on this call today for first quarter and full year 2003 will also be on a GAAP basis.

Today, fourth quarter and full year results will be given on a taxable equivalent basis to be consistent with past quarters.

Now, I will introduce Bob Bohannon, Chairman, CEO, and President of Viad Corp.

Good morning everyone.

Thanks very much for being with us today.

We have the operating company President Phil Milne with Travelers, Paul Dykstra GES, Kim Fracalossi, Exhibitgroup, and of course we just heard from Ellen here in Phoenix.

Let me begin by referring as we talked of the fourth quarter and full year 2002 to the tables 1 and 2 in the earnings press release.

The quarter was a bit better than we anticipated due to stronger results at convention event services.

For the fourth quarter, earnings per share was 31 cents that was down 6.1 compared to last year’s fourth quarter EPS of 33.

Operating income was 48.6; it was down 5.5% compared to last year’s fourth quarter, half the income of 51.4 and earnings per share for the full year 2002 was $45 flat to last year’s EPS.

During the fourth quarter, the financial strength of the company continued to improve.

The cash and corporate investments stood at 304m, debt decreased 20m since the third quarter to 362m, and for the full year our cash and debt has improved by total of $122m.

Cash flow was strong as shown by the EBITDA in table three of the press release which was [not] quite 60m for the quarter that was down from 62.9 in the fourth quarter of ’01. for the full year, EBITDA cash flow was 281m.

Free cash flow for the quarter was 14 -- not quite 40m and for the year was 146.8.

And Ellen will talk more about cash flow momentarily.

Other segment highlights;

Travelers showed revenue growth of 7.8% this quarter over fourth quarter 2001.

Operating income growth with Travelers was down about 7% quarter-over-quarter primarily due to the effect of lower interest rate and for the year the revenue growth was 10.2% and operating growth was 10.2% and operating growth was 3.1.

Performance in the conventional event services segment was inline and in fact a bit better than what our original expectations were for this quarter.

Revenues were down from last year's fourth quarter, while the operating loss was less than the prior year.

For the year, revenue was down 11.1% and operating income was down 14.7%.

To put this perspective Exhibitgroup/Giltspur is a primary reason for the decline in second results.

GES's operating income grew over 16% year-over-year.

And so we find that Exhibitgroup/Giltspur customers are still not building new exhibits, they are simply republishing.

The Travel and Recreational businesses had a good year when you consider the softness in the travel market.

In the fourth quarter, first during Glacier Park combined showed revenue up slightly from the 2001 fourth quarter.

For the full year revenue fell by roughly $3m and operating income was about 1.8 below last year.

And again, overall, I think, this was a very good performance given in travel environment that we had experienced.

On the convention and event services segment again they performed better than expected this quarter and for the year.

As we talk about segment performance you might want to refer to the results in table IV in the press release.

In light of the continued weak economic conditions and the uncertain level demands in new exhibit building services.

We did record a restructuring charge for the Exhibitgruop/Giltspur in the fourth quarter.

The total charge was 20.5m, 13.3 after-tax.

Kim will be consolidating some manufacturing and certain other locations while maintaining full sales, design and support centers in all the cities they currently serve and Kim will discuss the restructuring in more detail in her comments.

I think, all of you that the convention and trade show industry has been hit hard over the last couple of years, I think what is most encouraging at this time is that we see a continuing commitment to trade shows and conventions as a cost effective means of doing business.

GES, for example, just completed the consumer electronic show in Las Vegas.

The show well attended and occupied more square footage this year than last year.

So despite the downturn in other external factors that have pressured these businesses, we believe that there is battle in healthy industry and we will certainly bounce back as the economy improves.

And with that I would like to turn it over to Paul Dykstra to talk a few minutes about GES.

Paul.

Thanks Bob.

Excuse me.

Good morning everybody.

I am pleased to report that GES had a good year in 2002, despite challenging market conditions.

During the year we were able to attract significant new business.

We successfully serviced some of the largest shows in the world including the international manufacturing technology show, Comdex, The Consumer Electronic show, [inaudible], National Association of Broadcasters.

We were working in the Men's Apparel Show, Magic and at the same time we continued to make major improvements that have resulted in lower operating cost.

For 2002, revenues were virtually flat, but operating income improved by over 15% and cash flow was strong.

Fourth quarter revenues were also relatively flat compared to the prior year quarter.

In the fourth quarter we benefited from the year's Comdex show that is new to the mix of business for GES.

Comdex was smaller this year in terms of square footage and exhibitor attendance, but nonetheless it was a great show and a very good piece of fourth quarter business for GES.

Convention and event industry continues to suffer from a slow economy, but there is definitely some good news.

As I said before, on these calls, the health of a particular show is strongly correlated with the health of the underlying industry and to better explain industry conditions, let me segment shows into three categories, for example, first there are trade shows that have actually improved year-over-year 2002 versus 2001, in terms of exhibitor and show attendance relative to the prior year.

Shows in the healthcare industry, for example have fared well and are up despite the downturn in the economy.

Second, we have shows that are smaller than the 1999-2000 timeframe, and flat to last year, and these shows appear to have stabilized, for example, shows in the service industries and government related shows have been fairly stable.

Third, our shows, such as those related to tech and telecom sectors, these shows are down significantly from prior years and where we plan to continue to see shrinkage into 2003.

The good news for GES is that we have a very diversified portfolio of business that cuts across all major industries.

We manage our business to avoid concentration in any single industry or show, and we have good shows in good industries and we have slower shows in industries that are not doing as well right now, but overall our base of business is solid.

Our revenues are relatively predictable.

Because so much of our business is under long-term contracts, GES can count on about 75% of next year's revenue with relative certainty.

The progress we have made in improving operations in costs enables us to turn our attention to product development.

Given success of our ongoing efforts to enhance the efficiency of operations, we are in great shape to begin rolling out new product offerings.

These offerings have the potential to offset some of the loss in tech and telecom business and negative show rotations.

It is also important to note that in a weak economic environment, GES has also taken steps to ensure effective credit management.

In terms of an outlook for 2003, it looks very challenging.

We don't expect to see any noticeable increase in show size.

The economy is the big wild card here.

Should the economy deteriorate, convention and event industry will be affected.

We also have negative show rotation in 2003; we have two large shows IMTS and [Conx] and [Conag] that do not occur this year.

But we also have other shows that rotate in and is -- as in the case every year, we attempt to offset negative rotation by signing business that we call in the year for the year.

While we are not bullish on the economy, we are bullish on GES's ability to win in this environment.

The restructuring that we undertook in 2001 has been fully and successfully implemented.

Because of significant improvement in work processes, we expect to show positive operating income growth in 2003 over 2002.

And I assure you that we will continue to do everything possible to make our business as profitable as possible and to position it for a very strong future.

Bob, I'll turn it back to you.

Okay, thanks, Paul.

And now I'll ask Kim Francalossi to talk about Exhibitgroup/Giltspur.

Kim.

Thank you.

Conditions in the convection and event industry has not markedly improved from what we spoke last October, just as Paul has been saying.

Visibility into revenues remains poor, and Exhibitgroup/Giltspur continues to face weak demand as exhibitors re-serviced all [booths] in lieu of building new ones.

The buoyancy [saw] aligning into a slow economy.

This environment provides us an opportunity to reinvest in value-enhancing elements of our process chain, helping us to further differentiate ourselves from our competitors, and it allows us to strengthen our company for the future.

So we can't change market conditions, we can change our company; we can continue to take our cost, we can make our company more flexible and customer-service-oriented, and regardless of the economic conditions, we are moving in the right direction for our customer, for our employees, and company, for the [out] shareholders.

In the first quarter of 2002, we undertook further restructuring; we did this to reinvent and to streamline our business.

By centralizing manufacturing, we will reducing overall capacity, improving efficiency in manufacturing agility and lowering cost.

With these moves we will be increasing capacity utilization by over 20%.

By centralizing certain support functions, we'll continue to tighten up management control and further reduce costs.

By establishing network sales and design offices throughout the country, we are moving closer to our core customers, highlighting our product values and improving our service responsiveness.

When the economy improves, all of the activities we are undertaking will produce clear and significant gains in product differentiation, value, and in operating profitability.

We expect this restructuring to reduce our fixed and semi-variable cost by about 12-14m pre-tax on an annualized basis, with about 8-9m in pre-tax saving planned for 2003.

This projected level of cost savings will be realized, forever.

If there is additional pressure on revenues, the savings will be offset by the loss related to that revenue decline.

If you recall, this is what we experienced over the past year and a half.

Though we were very successful in taking our costs, the savings were offset by the loss associated with reduced revenues.

As an industry, our revenue remains under pressure in an environment of diminished corporate spending and cautious investment.

With this in mind, we are working to develop product and service offerings that meet the demand for better value.

We believe Exhibitgroup/Giltspur is best positioned among its competitors to provide a variety of exhibit offerings that, in combination, should improve our overall performance.

In spite of a difficult market, we are proud of our modest share gain in 2002 and are confident that this trend will continue in the future -- that we further differentiate Exhibitgroup/Giltspur from the competition.

Our company will weather the protracted economic downturn, because we remain exceptionally strong, both financially and organizationally.

None of our competitors average the level of financial support that Viad provides.

They can't effort to reinvest in their core businesses as Exhibitgroup/Giltspur is currently doing. [inaudible] of our balance sheet is already yielding measurable results is evidenced by the increasing number of significant -- and by significant I mean 5m-plus [inaudible] goals that we are pursuing currently.

Larger customers demand financial strength in [inaudible] partner and will continue to use our help as a source of that advantage.

No less important, we have numerous "A" players at Exhibitgroup/Giltspur.

And in my short time up here, several "A" players -- someone known to us previously -- helped step up to [the play] and have identified process improvements and growth opportunities.

These individuals will play a large role in the company's future success, and we are proud to have them on the team.

I would just want to summarize by saying, I am really excited about Exhibitgroup/Giltspur because I know its potential.

As an example, driving these initiatives we have underway has resulted in operating margins over 10% for our [audio gap] margins late in the fourth quarter.

Our goal is to continue to increase the capabilities gap between our company and the competition, and I'm confident that when the economy rebounds, we would have positioned Exhibitgroup/Giltspur to emerge in the lead.

Bob, back to you.

Okay Kim thank you very much.

We next have a follow-up from Travelers and we are very, very pleased to the acquisition we've already have done.

Phil is going to spend some time talking about that, so you'll fully understand it.

That was a very, very important one for us to do.

So with that Phil, I'll turn it over to you.

Thanks Bob and good morning everyone.

As Bob said and I'll like to start by discussing the acquisition of the minority interest of MoneyGram International. [inaudible], we did last week announce that we had purchased the 49% minority interest in MoneyGram International Limited from Travelers [Express].

If you remember, MoneyGram had established a joint venture with Thomas Cook Global and Financial Services back in February of 1997, prior to our purchase of MoneyGram in 1998.

Thomas Cook sold its interest in Travelers [Express] -- to Travelers [Express] in 2002.

MoneyGram International transactions -- the revenue on the operating [net] income has really grown dramatically for us over the past 4 years, and we expect to see this strong performance continue.

So with that under the sole control of MIL now with MoneyGram International, we'll improve our ability to execute our strategy and our speed to market, and I think that is really key for us in the future.

International growth is a real key focus for us and a big partner of future growth of MoneyGram.

This acquisition is expected to be accretive to earnings; in 2003, it would be slightly accretive, and much more accretive in the following years.

Just one '03 number -- that a 100% of MIL's revenues and expenses has [inaudible] include my number so difference you'll see will really be in bottom line.

I'd like to turn our attention now to fourth quarter results -- results for the fourth quarter were in line with our guidance.

Both revenues and operating income were constrained by lower interest rates.

In general, short-term rates were down about 70 basis points in this year's fourth quarter in comparison to the same quarter last year.

Similarly, the 5-year U.S. trade result was down over a 100 basis points.

In addition, as we've discussed before, our portfolio's turnover increased as mortgage-related investors prepaid.

Refinance activity in the mortgage business continues to add unprecedented levels really reaching at its historical high in October of 2002.

After third quarter, we expected a slight slowing in mortgage refinance activity and that just simply has not occurred.

Short-term balances continue to be high in the fourth quarter and they'll continue to be high.

Short-term balance is typically represented by 8-10% of total balances during the fourth quarter; they are closer to 15% of our total balances.

As you may recall, in a strong refinance market, this money is invested for very short-term intervals because refinance money moves in and out very quickly, and remember our spread comes for money invested over the longer term.

This really resulted in non-core balance growth with virtually nothing to the bottom line due to the short tenure of these funds. [Hikes] refinancing also resulted in repricing assets and low rates for us.

And although interest rates, spreads, and the mortgage refinancing wave affected our fourth quarter, our core operating business continues to perform very, very well, and I would like to stay off talking about that by moving on to MoneyGram.

MoneyGram really continues to be a growth engine for Travelers Express.

Our transaction volume in the fourth quarter was up 34% over the fourth quarter of last year and that was really led by strong performances in International Express Payment and our domestic-to-domestic corridors.

International French Transactions grew by nearly 60%.

Domestic, which we always include to Express Payments in their calculation, grew by over 50%, and they said the full year transaction growth was up over 32%.

Transaction volume in our US to Mexico quarter was down slightly over last year's fourth quarter, but our fixed price product, Cambio Plus, continued to grow on a high teens for the year, and well over two thirds of our Mexico volume outcomes through our Cambio Plus product.

Agent base growth is a very positive story, it grew by 14% year-over-year to 57,000 agents.

During the quarter, we signed new agents in key countries including [Kaha] Navarre in Spain with 233 locations and Bank of Communications in China with 212 locations.

We have strong from momentum from chief domestic signings in 2002 such as Wal-Mart and SuperValue, and we had a record year in signing new pillars for Express Payments.

Our Wal-Mart continues to be a key part of MoneyGram's success with all the stores up in running.

Wal-Mart is now one of our top customers.

Moving on and talking a little bit about technology, to start MoneyGram [inaudible] will pick up testing from the first quarter. [We will] start MoneyGram as our ATM-to-ATM money transfer product ventured with Concorde EFS.

Once ruled out fully, we will have access to over 200,000 ATMs for person-to-person money transfers.

I would like to spend a few minutes also now on talking about Official Cheques.

As this product line continue to drive revenue growth for us, Official Cheques is now branded under the PrimeLink name and our new products PrimeLink [Plus], which we have talked about is the secured printing product on a remote basis, and Travelers Express is marketing to both bank and non-bank financial institutions.

Our initial marketing efforts are began this month, we are receiving very favorable response from existing customers and prospects, and we are seeing a very positive growth in the pipeline of prospects really because of the products and its functionality.

This product continues to out perform our initial expectations with our customers and a number of different fronts.

Printer efficiency is reporting and reconciliation and just overall greater control on the authorization and dispersement of official items.

Our plan is to really build up sales force with this non-financial institution channel and that remains on track.

Average investable balances grew 29% in the fourth quarter versus last year, as mentioned earlier portion, this growth is coming on via the Morgan’s refinancing group.

We are also extremely pleased that we re-signed US Bank for a long-term agreement.

US Bank has been and will continue to be a very important customer for us on PrimeLink.

Finally, our installation backlog stands with a healthy 220m and new [balances] at year-end.

Let's talk for a minute about money orders.

Money order volume was slightly down in the fourth quarter and full year versus last year.

We continued to selectively proven existence agents and closely scrutinize new agents to really work out reserving net credit quality of our agent portfolio.

The money order business continues to be important to us because of the high margins and strong cash flow, and looking forward to 2003 with our leadership position in that product, we really plan on focusing on increasing our growth rate in money orders in this year.

Really to tie all this together, Travelers Express, we will continue to face certain challenges in 2003, and they would include the effective interest rates on our float revenue and income revenue and income.

If rate stay low and refinance activity continues to be strong, that will affect both operating income and revenue growth.

For guidance purposes, we have assumed that interest rate stabilize in the current levels and the yield curve is normal.

If these assumptions change in 2003, it can affect results both negatively or positively.

A tight credit environment which slows the agent signings and [sub state's] existing agents could have some impact and of course competitive pressures, competition for domestic business, in particular, is increasing.

We will compete by focusing on profitable growth that meets our margin requirements and adds to shareholder value.

Travelers Express remains committed to discipline and profitable growth. [inaudible] performance and prospects, the company is performing very well despite a tough interest rate environment and competitive pressures.

We expect continued strength in MoneyGram and we expect to add new Official Check and PrimeLink policy customers in 2003.

We have a solid backlog.

And if rates and refinancing activities stabilize, we expect to realize the benefits associated with a more stable market.

And with that, I would like to turn it back to Bob.

Okay, thanks Phil.

I will now ask Ellen to go through some of the financial numbers with you.

Ellen.

Thanks Bob.

As shown in table 3 of the press release, cash flow EBITDA on gross-up basis was 59.8m versus 62.9m in 2001, down 5%.

For 2002, EBITDA was 281.2m compared to 289m in 2001.

Free cash flow defined as cash from operations excluding the change in Travelers Payment service assets and obligations, less capital expenditures and dividend, was 33.9m for the quarter, and this is not considering investment settled after quarter-end in September, which is how we reported it for the September quarter, and this is versus 33.5m last year.

For the full year 2002, free cash flow was 146.8m versus a 135.6m for 2001.

Payment services total average investable balances were up nearly 22% for the quarter and over 23% year-to-date.

Official Check balances were up 29% for the quarter and 34% year-to-date.

At December 31, 2002, Viad had total cash and corporate investments of 304m.

This is an increase of a 11m from the September balance of 293m.

And again, that is before the investments that settled after quarter-end as we reported last quarter.

Viad’s total debt at the end of the quarter was 362m bringing our debt-to-capital ratio to 33.5%.

We paid down nearly 20m in the quarter from 381m at the end of September.

Net interest expense for the quarter decreased 2.5m when compared to the fourth quarter of 2002.

Depreciation and amortization for the quarter was 12.8m, up slightly on comparable basis with last year’s 12.3m.

Capital expenditures for the quarter was 12.3m, down from 13.5m in the prior year’s fourth quarter.

For the full-year, capital expenditures were 40.2m, down from last year's 49.8m.

The income tax rate for the fourth quarter of 2002 was 22.9% versus 18.3% for the 2001 quarter; and the full-year rate was 27.2% compared to 22. 8% for 2001.

This rate is expected to be around 30 for 2003.

Average outstanding potentially dilutive shares for the quarter were 86.068m compared to 86.248m in the fourth quarter of 2001.

And there were no treasury shares purchased during the fourth quarter of 2002.

And with that, I will pass it back to you, Bob.

Okay, thanks, Ellen.

Before I give the guidance, there are few other things.

Let me talk about Travelers.

I know that many of you would like to know what the status of the contemplated transaction, Travelers Express, and I would remind you that in the second quarter, Viad announced that it had postponed a proposed [RPO] and possible [spend off] for Travelers until market conditions improved.

Being shareholders, our sales were firmly committed to and interested in realizing the market value potential of Travelers, and in fact, all Viad assets.

Based on the advise of our external advisors, we believe market conditions have not improved sufficiently to move forward at this day and time.

Having said that, let me assure you that we are not looking for project market conditions.

We understand that uncertainty is probably a reality for the foreseeable future.

So, we continue to evaluate all the options and intend to move forward as quickly as possible when we believe we have the best chance to maximize the value for the long-term shareholders.

We are still looking at both the equity and credit markets to improve.

All of our companies, if we were to anything, must have access to capital.

Relative to the balance sheet, we will certainly like to see net debt as low as possible.

After the MIL transaction, our net debt is about $160m.

And so, our goal is to have both remaining Viad and Travelers Express to have strong balance sheet towards any type of market conditions.

And as we reflect back over the last couple of years, that clearly is very, very, very important given some of the things that occurred that no one, I don't think, anticipated.

And then relative to cash flow and net operating results, we don't have a number in mind.

There is a range in respect to where we should be, but obviously, cash flow from the remaining Viad companies needs to be sufficient to lead the basic operating requirements of those companies.

Now, let me give some guidance please.

For the full year 2003, the earnings growth, we expect that in a range of 3-7%, that would translate into expected diluted EPS in the range of $1.50-1.55.

And I hope that we are being a [inaudible] conservative on that.

A lot depends upon what happens in the back half of the year.

If we get some improvement, I think, we can do a lot better than that.

If not, I think, this is a reasonable range.

Payment services segment revenues expected to grow to high-single to low-double digit rate.

Payment services segment operating income is expected to grow at the mid-single digit rate.

That reflects, again, much of what Phil talked about with respect to interest rates and other thing.

Convention and event services segment revenue is expected to decline to mid-single to low-double digit rates from 2002 levels, primarily due to the decreased demand for [civic] construction.

However, the segment's operating income is expected to increase at low-double digit rate from 2002, primarily due to ongoing cost improvements.

Another note for the full year, at corporate, the expenses are expected to be about $5m higher in '03 than '02.

The two big drivers of this are pension expense and insurance premium expense for 2003, and we have had some very dramatic insurance premium expense increases.

For the first quarter of '03, we think, the quarter will be relatively flat.

This translates into expected EPS in the range of 36-39.

Payment services segment revenue and operating income are expected to grow to a high-single to low double-digit rates compared to the first quarter of '02.

And convention and event services segment revenue and operating income are expected to decline by low-double digit to low teens from the first quarter of 2002.

I am sure, as you heard from our every company, you have listened to this year, there is no doubt that 2002 has been very, very challenging for all of our companies and all of our people.

And while we have had that, we tried to keep in mind a few things and we are very fortunate in that we have some great long-term customers, perfect long-term contracts, particularly GES, Travellers, we have had some tangible results that showed growth and improvement.

For example, the MoneyGram agent network, the growth in the Official Check balances, the rebound in GES.

Considering everything, we have had very strong free cash flow.

I think we have put some terrific management teams out in these locations, and we are very, very pleased, obviously, that as Kimbra said Exhibitgroup/Giltspur, we now see some light at the end of that long tunnel that we have been in.

And we think overall, we have had some very, very good performance and a weak -- very weak economic environment.

In convention and event, for example, our revenues are down about 30% from just two short years ago.

Yet, continues to produce strong cash flow and profits.

Travelers Express, it produced double digit growth in revenue and MoneyGram and Official Check continued to grow with leaps and bounce.

And while we are not pleased by the persistence of the low interest rates on our float balances, particularly in the overnight funding market, this situation, we reckon as, is temporary.

Rates will go back up.

Our convention and event businesses are growing more efficient and cash flow is getting stronger.

These companies are certainly challenged by the current market environment but it weathers the storm and I think all in all very, very nicely.

So with that, I would like to close and open up the call please to the Q&A part of it.

Thank you sir.

Thank you.

If you would like to signal for a question on today’s call, you may do so by pressing “*” "1" on your touchtone telephone.

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Once again, i.e., “*” "1” to signal for a question.

We will pause a moment to assemble our roster.

We will take our first question from Adam Waldo with Lehman Brothers.

Hi, good morning Bob, Ellen, Phil , Paul, Kim, [Pat].

How are you all?

Fine.

You all have been busy so forgive the large number of questions.

With respect to the restructuring charge booked in the fourth quarter, I guess a couple of questions arise.

One is, if we were to assume sort of 15-20% revenue decline in 2003 at Exhibitgroup/Giltspur.

What sort of operating margin do you think that business would be, you know, operating at in light of the cost reduction actions taken in the fourth quarter assuming that business was for 2002 lets say, essentially close to breakeven.

Do I take up Bob].

Yeah.

Adam we could stop for a 25% decline in revenue and still breakeven next year.

Okay.

And is it fair to assume that in the company’s collective guidance Kim and Bob, that impulsively what you are looking for when you sort of roll up the convention event segment together is maybe a mid-team.

Say, 20% revenue decline at Exhibitgroup/Giltspur?

Yeah.

I don’t have the exact number , but our worry, our concern is that -- not to mention the GES-P7 but rather on the Exhibitgroup.

On the other hand, we have some terrific upside at Exhibitgroup.

If revenue stabilizes in '03 at '02 numbers given the cost take outs and the prior re-structuring, and now on this one so.

Its all a bit of a roll of a dice now.

But if -- I think we have got some of the revenue down-side covered but there is a tremendous upside again if revenue stabilizes here.

Kim do you want to add to that?

That’s exactly right.

The bulk of what we are seeing in the guidance is related to the Exhibitgroup/Giltspur and we are just going into the year cautious because we have not seen any improvement on the revenue side and our visibility is so poor.

So we want to go in with a cautious outlook.

Kim, what kind of capacity will you be leaving in place should demand snap back late in ’03 and early ’04, given the slightest restructuring?

We will have the opportunity to increase revenues from where -- another 30% without adding any additional overhead or working beyond the single shift.

Okay.

We have plenty of capacity available.

Okay.

And Ellen if you cut on the charge [than that would be looked in] Kim’s business in the quarter, could you give us a sense for the cash and non-cash components for that charge.

Any balance sheet reserves you expect to arise from the charge and give use sense for the timings of the cash dispersments?.

Sure.

The cash/non-cash, cash is about 16m, non-cash is about 4m.

We have about 16m in restructuring reserves on the books at the end of 2002 related to this restructuring and we also have about 20m in reserves related to the 2001 restructuring.

Okay.

And that’s basically facilities lease is going out as they expire.

Okay.

And maybe if I could turn over to Phil for a second.

Phil could you give us a rough sense then for, roughly what percentage of the company’s total revenue -- each of the four payment services product groups were at the end of 2002?

Adam we are historically --

Phil, could you get closer to the phone?

Its difficult to hear you.

Yeah.

And historically, we have really not disclosed that.

And maybe just overall in revenue I could tell you that we have had excellent performance out of MoneyGram, and we added significant balance for the official check side and of course, money orders was challenging with the volume being down slightly but we have really not broken out historically on the revenue side.

Right.

Thanks for that.

I realised I just might take another chance.

And then finally if you could disclose this, give us a [inaudible] Phil for the percentage or probably the EBIT contribution you would have booked in payment in 2002, had you consolidated MIL for full year just so that we can our models fine tuned for 03.

I think it would just be the minority interest part of it that is reported in the financial --.

Okay.

So there was not anything else beyond the minority interest line.

Phil we are having a very difficult time hearing you.

Is that better?

No.

No -- better.

But would it be fair to say Bob and Ellen just a minority interest line from the prior income statement presentation is essentially what he guessed [inaudible] segment.

Going forward --.

Yeah, [inaudible].

Well, Glacier Park there is a very small minority interest there, but the bulk of it that you see in the minority interest one was MIL.

Okay, thank you very much.

Thank you.

We will take our next question from Michael Millman with Salomon Smith Barney.

Thank you.

I just have a few questions as well I will be following up on the minority interest.

At least last [inaudible] was about $2m.

Could you maybe give us some color on your spending over $100m and [inaudible] pick up $2m as to what you see in terms of actual earnings or it was only $2m, could you -- well maybe we will go there and we will have some other questions, okay.

Michael I don't know what you mean by the $2m.

I can tell you that in the fourth quarter alone the minority interest of '02 was a million [inaudible] almost $2m exactly just for the fourth quarter.

What we had -- what we have seen a very explosive growth in MoneyGram and international.

With the standing of Italian Post Office and all over in many of these countries you can go on and on.

Minority interest in the first quarter to give an example to reflect that growth, the minority interest in the first quarter of '02 was slightly under $500,000 and it lead again to 2m in the fourth quarter of '02.

It is still mentioned that deal was put together in 1997 before we acquired MoneyGram.

There were some [inaudible] in our contract both for Thomas Cook back in those days and for MoneyGram it self.

When we acquired them the international piece was very, very small, that's where all the efforts and the expenditures and [inaudible] have been to try to grow that and it has been very, very successful.

The more successful it became the more [awfully] it was going to cost us or in that case Travellers Express to [buy out].

The international piece is a very, very huge part of [Phil's] strategy.

So when you look through at the growth it has gained about 100m as we said, it is slightly accretive in 2003 and it is going to be much more accretive in 04 and beyond because of the growth size.

So we felt we have got a terrific deal and we were very, very happy with it.

Phil I will be quiet now and I would let you add to that if would like?

Yeah, and just one thing on the minority interest Michael.

Remember that is [net] of taxes as well.

But I think just to add to Bob, I mean, we are absolutely thrilled to death that we own a 100% of MIL.

As Bob said that has really just had explosive growth for us and, you know, we have even invested heavily on that business over the last few years.

And, you know, for us it was really gaining control of our brand on a global basis and strategically allows us to you know to take our strategy to market much more quickly and we also believe that the international side has a huge, huge part of our future growth storage so overall, I mean, we couldn’t be more pleased with this transaction.

You know, Thomas Cook Travel X was a great partner, but you know, it is time for us to forward and we are very excited about it.

In view [CNN] and Michael I would like to say too.

This is was a great deal for Travel X and great deal for MoneyGram Travellers Express and those deals are hard to do.

I think both a majority partner, minority partner did very, very on this [inaudible].

Should we assume since you don’t break out the minority interest, which I don’t see where to break it out.

Should we assume the modelling purposes that we kind of start with this 2m base and it grows at the same kind of rate that you have shown from first quarter to first quarter this year?

Michael, I am sorry.

I did not understand your question.

Should we assume --

Should we assume that minority interest at 2m is kind of a base and will continue to grow quarterly in ’03 and beyond?

Well, the minority interest -- well if I understand you correctly --.

[inaudible] properly.

Well, the minority interest [inaudible] on that books, if you want to see that, I mean, you will see a big decrease, what you will see though is that minority interest that -- in ’02 going into the net income line of Travelers on a go forward basis.

I am sorry, bad use -- choice of words.

That the benefit we should start at [inaudible] at a 2m after-tax basis ramp up from there on a quarterly basis.?

Yes.

Okay.

Great.

Another question, you’d mentioned, I think, some competitive market situations domestically in MoneyGram.

Can you talk a little bit more about what you mean?

Are we seeing Western Union no longer keep the price [umbrella].

Are we seeing competition from other places?

Phil.

Yeah, just on a couple of fronts Michael.

I think, we have seen Western Union to be more aggressive on the pricing front especially, to Mexico and there is just a lot of increased activities right now on the Asian acquisition side, and I think, everybody is just being more aggressive in the business.

I think, you specifically mentioned domestic?

Yeah, that’s where we are really seeing the increased activity.

I think, the Mexico quarters are good examples with the aggressiveness that Western Union being pricing the product.

You call Mexico the part of domestic?

Well, it’s out bound U.S. so, it is really the Asian base for -- that’s critical for Mexico is within the U.S.

I see.

On a different topic.

In the press release you mentioned that, I guess, $3.5m tax gain, tax related gain, you didn’t -- at least I couldn’t find whether there was any gain from the sale of municipal bonds?

And if so, what was it in the fourth quarter?

Sure.

We don’t break that out between where the municipal bond gains and the regular gains.

The gains for the fourth quarter were about 3.5m -- total securities gains.

Which was down from the level in the third quarter?

Yes.

Because in the third quarter, we did have an unusual amount of municipal securities gains.

Yes it’s correct.

And should we assume that the level of municipal bonds now is going to be stable thus?

When we look it on a GAAP basis, we are not going to have some movement towards by changes in debt level?

No.

I mean, municipal bonds of debt level is analyzed all the time in conjunction with our alternative minimum tax division.

So, yes, I wouldn’t say it’s going to stay stable.

It’s likely, Michael, we will have to [audio gap] close into ‘03

38% tax guidance takes that into account?

Exactly.

Yes.

Thank you.

Thank you.

And it takes into account the municipals we sold in September and the full year at that.

We will take our next question from Jack Kelly with Goldman Sachs.

Good morning.

Good morning, Jack.

Just one question for you, Bob, and then may be one for Kim.

It seems like, you know, one of the [pacing] items to the IPO of Travelers, you know, is improving operations at conventional services and then I guess, specifically, Exhibitgroup.

I mean, can you give us some sense of what you need to see to make you confident of that, you know, it can kind of flourish as an independent company.

You know, in the past you had talked about, you know, certain margin levels for conventional services whether it was low double digit, etcetera, as an objective.

Can you give us some framework, you know, the market conditions can change suddenly.

It seems like on conventional services you had to make some progress there before you would kind of do anything and then secondly, with regard to Exhibitgroup, Kim.

If we could just kind of pro forma 2002 in the sense that you had mentioned the utilization rate at Exhibitgroup will go up 20% by closing this capacity.

You know, what have been the results at the Exhibitgroup last year -- its kind of all of this had been [prior] note a tough question because business mix changes.

But just to give -- give us a sense of what Exhibitgroup might have done after maybe -- actually breaking even?

Jack, [inaudible] now I'll turn it over to Kim.

Certainly, Exhibitgroup is a piece of the whole thing, but I like what Kim and her team are doing up there.

We have got some first rate people in that Company.

They have been [hit] hard a whole series of events, and I am pleased that over the last few months the actions that have been taken in that type of thing and as I said earlier, if once the revenues stabilizes and she has got some tremendous upside given the take-ups that we have, and again if they can yet [know] [inaudible] the revenue we had in '02, but just a lot of upsets.

I am also -- though Jack, heartened by the fact, Kim eluded to this and talked a tiny bit about it, but Kim and [inaudible] John [Herald] and others of the Exhibitgroup had been working a lot at process improvement, and if the largest -- one of the largest if not the largest city that we have from a manufacturing standpoint -- in the fourth quarter were that had been implemented because they hit over double-digit margins.

So, as I said before we have had and we had other cities there in that Company [doing], so we know what is possible.

Its question of getting the capacity utilization inline with the market conditions, and we are hopeful that -- things will stabilize within the Company.

Although, and I must say that I have been a bit disappointed in respect to reading some of the early comments about some of the very large companies that have reported out and many of them happen to be our customers, but you just don’t see a lot of optimism about some of these very large companies, and from what I have read many of [inaudible] they are essentially still in the dark as to what is going to happen in the economy.

Then overall, that’s the Exhibitgroup piece, but overall, Jack, of course what people are telling us -- the advice that we are getting in so forth is that there is a big overhang on the market because of a lag and the whole mid-east situation -- not to mention North Korea that added to that -- and you still have -- although, I think this is starting to stabilize a bit, I mean, you still have some rocky points in the whole [credit] markets certainly the corporate governance market -- and so the general view seems to be that [plains] are still a bit murky, a lot murkier than what anyone would like to see.

And I am hopeful that just as [whole wacky] thing is that; however, that resolved one way or the other over the next 3, 4, 5 months or so forth, I am hopeful that will help, but that’s a hope on our part and nothing obviously that I am going count on just yet.

So I hope that adds a little bit of flavour to it, Jack, and Kim, I will turn it over to you for the other piece of that.

Okay, Jack, if we have to same revenues this year and you talk [inaudible] you would have another [audio gap] we have the same revenue this year we would be in the mid-to-high single digits.

And you know, so lot of work to do, that’s why we have always said that, that business should be given normal conditions double digit -- a low double digit margin business.

On the GES side -- they have not lost near the revenues that Exhibitgroup has.

They were hurt by telecom; they were hurt by technology.

That you know we don't believe is going to come back in a big way any time soon.

But Paul and his group are making very, very steady improvements there in the process itself.

And again, I would think, in a normal environment certainly believe that double digit-- low double-digit margins are clearly achievable there over the course of the next couple of years.

Paul, you want to add to that?

No, I think that is accurate, Bob.

We made significant process improvements, and if we can get some expansion in the economy, which would translate into expansion in show growth, obviously that is the highest margin growth that we can get.

So, and as a upside if we get some economic improvement.

Okay, Thanks.

Thank you.

We will take our next question from Clair Low(ph.) with Credit Suisse First Boston.

Hi, this is Clair standing in for Dris.

I just wanted to go back to the money transfer business, and I was wondering if you guys have any particular target [for an agent] based?

And also what specific areas you would be wanting to look into geographically going foreign -- you have done a lot in China and Italy and so forth recently.

Clair, I would just add that and then I would certainly let [Bill] take the bulk of this [aspect].

China, you know I think China is going to be a very important country.

We have just made the first entry a couple of months ago with a very large bank and just found another.

So, that certainly is an area that we are really interested in.

India would be another one; and also much stronger presence down in Latin America as well.

And that is to me the excitement about the whole MoneyGram [inaudible] and what we talked earlier in the call about MoneyGram International will be a partnership with Thomas Cook and [Travel Ex].

That is what is driving all of that growth.

So, the signings that they have had from a very, very, very old base worldwide has just been terrific.

Bill, you want to pick up from there?

Yeah.

Thanks, Bob.

Hi, Clair how are you doing?

Good, how are you doing?

Good.

I think from an agent standpoint, we don't have a specific target.

What we are really trying to do is drive the high potential [corridors], and then as Bob said, trying to work out over the future to places like China and India where we see a potential down the road.

So I think from an agent acquisition stand point in the US it will be to drive you know the international [corridors] the Latin America and Mexico and then overseas really trying to drive the high potential [corridors] that we have already established over there and then looking towards the future to places like China and India, where we see down the road a lot of potential.

Okay, and then also, what sectors -- how long would you imagine, I guess, [inaudible] it would take to really ramp up these new agents?

Do you think that, and I guess you sign in your agents now would it be approximately two quarters before they really start to ramp up and then maybe another two years before they are sort of as efficient and [trying] you know processing as many as the current ones?

Well that is a tough question because it really depends on the type of agent and where it is.

If you get in to a neighborhood in LA with the right type of independent, those ramp up very quickly.

You know probably [changed door] type locations, probably take a little bit more time.

So it is really dependent on the type of location and where it is located and to give you an answer on that.

Okay.

Great I think that is it.

Thank you.

Once again, if you would like to ask a question on today's call you may do so by pressing "*" "1" on your touchtone telephone.

Again that is "*" "1" to ask a question.

We will take a follow up from Adam Waldo with Lehman Brothers.

Just one quick follow up on your 2003 guidance, Bob.

Is it fair to say that the EPS guidance contemplates no additional share repurchases, no additional leveraging benefits, and no additional acquisitions?

That's correct.

Okay.

Thank you.

Thank you.

Once again that is "*" "1" to signal for a question.

We will take our next question from Patrick Samgolcium(ph.) with New Burge Barman(ph.)

Good morning.

Good morning Patrick.

How are you?

Good, how are yourself?

Good.

Can you give us the official check backlog at the end of the quarter?

About 220m.

And what was it at the end of last quarter?

Third quarter?

Yes.

Phil, do you recall?

Yeah Bob, I don't have that sitting in front of me.

I think it was a little bit less than that, but Patrick I'm sorry I don't have them in front of me.

I think -- I don't think there was a material difference between the [of them] Patrick.

I think fourth quarter is slightly better than third.

Yeah.

I think that is right Bob.

Okay.

The question for Ellen, just [still I] understand these supplemental tables you gave, just the difference between the GAAP and tax equivalent basis on the net flowed margin.

On the GAAP basis, it shows that from the third quarter to the fourth quarter the margin was up from 1.7-1.71%, but it shows spread compression on the tax equivalent basis, so can you -- taking me through why these things are showing opposite trends and what is best one to look at going forward and …

Sure.

… And finally, with the guidance you've given in for the next year and [flat] interest rates, should this margin have reached the bottom or is there more risk this margin going forward?

I'll take the first part of that.

Maybe Phil can follow-up with that.

These -- the tables in the [bad] GAAP basis versus tax [for] equivalently.

We put the tax equivalent in because it is how we've been reporting in the past, but what you are saying is, as the tax [for] equivalent adjustment goes down, due to the sale of municipal securities, you are going to see a fluctuation in the rate because of the tax [for] equivalent and that's why we wanted to -- one of the reasons why we want to go on a GAAP basis is just -- isn't as meaningful anymore to look it at on a tax [for] equivalent basis.

So, the one to look at for [go forth] basis is the GAAP basis, and that's why we added this one in as well.

We wanted everyone to have the tax [for] equivalent basis because those are the historic numbers that you have.

So, GAAP basis is the one to look at and on that it looks like your -- the margin bottom in the third quarter, should that be the bottom [and] we can assume, flat increasing margins going forward, [with the] flat interest environment?

Phil, do you want to take that.

Sure, I think there is couple of things.

One is, obviously, the activity on refinancing, and what happens with that heading into the first part of the year.

I think Fanny and Freddy are thinking it's going to continue at least through the first part of the year.

So, a lot of it will really depend on the mix issue, with how much short-term cash we end up going through with the first quarter, and then, of course you've got the whole war situation and that is that injects a lot of risk [until], we just don't know which way the markets will react to that.

So, that's probably the best way I can answer that Patrick.

But, Patrick I would add that -- and again on that making any predictions that I'll take.

Then, I will simply add [though], I mean cash '02 was a very, very, very volatile period, and we saw no one of the fourth quarter [veil] with all the wake up that take things.

I [withhold] that with where we are and we expect too, the [1.25] on the [said] overnight funds, the five-year back slightly '04.

It is difficult for me to look up and say that [he] going to have a lot more volatility that would drive the fed funds rate 1.25 to 0.75 for example.

That can happen, I understand that, but it doesn't seem to me with that this economy is in that bad of a shape, where you getting [inaudible] a reasonably anticipate that occurring.

I am guessing too, but I suspect that if history repeats, if in fact there is any type of situation with the [rack] and so forth, historically when we have those [issues], we've seen a little bit of a wide spiking.

So, when we sit around, I know that Phil and his people have to be more cautious that they see it day-to-day, I don't, but I cannot believe that there is going to be anything on the refinance activity.

Mortgage rates are going to go a lot lower in '03 versus where we are today that would drive a lot more refinance activity and I have to think too, again, if history repeats itself, we should be at the tail-end of this whole refinance activity, I mean, rates have been there -- mortgage rates have been low for [buying], certainly over the last 4,5,6 months and I think that majority of the people, again, if history repeats itself that we're going to refinance or in the process of doing that and so we should be seeing tail [or a whole] that finally finishes up in the first quarter.

Okay, and just to understand your presentation here, the way you reported this number that the net flow margin; it’s a blend of higher margin money order number, and a lower margin official cheque numbers, so all has [being] equal has official cheque grows faster than money order, which has been the case and should be.

This margin should look, as if it compressing simply on that mix shift because of the way you recorded as a brand, is that right?

Yes.

Yes that’s correct.

Okay.

My final question and I don’t believe the answer to this gives away any competitive information and if it does help me understand this…

Okay.

… If you assume the IPO market never comes back for you, you were going to raise something like 300-400m in an IPO, 20% of Travelers, but this company generates a 150m of free cash flow on an annual basis, so you gave us debt was and what the cash balance was.

We know you spend, a 102m on the MIL transaction.

What balance sheet do you need to get to -- to be able to do a spin-off not a split-off?

And, if that’s how you think about it and or what do you need to see from the businesses in terms of performance to feel comfortable tough doing a spin-off transaction?

I think, its correct question, and again I got to be careful where I don’t speculate, obviously, but -- originally, Patrick with where we were, back then we had always thought in terms as we talked about the adjourned announcement that we were looking out up to a 20% IPO.

A lot of things [rolled] that changed since the time as we were -- we have been looking at that [debt-to-cash] for quite sometime, and if the market was there today, I don’t think we would be out it at 20%.

I think, we'd out at something less given the improvements that we’ve seen the balance sheet and particularly in respect to the occasion depth position.

But if I it a step further, and again as terrible as [inaudible] on the convention side and update [inaudible] and the interest rates, overall with the cash flow that we have been flowing off that’s [been] pretty good.

So, we clearly one of the options that we would clearly have if that continued would be to not thin in terms of an IPO, but think in terms of just a separation that certainly becomes one of the options.

If we were to look at [that then], we had to make certain -- that because of the official cheque business in Travelers as they would absolutely maintain their trip will be [waiting].

Therefore, [Travelers] that they would need some cash on their balance sheet.

The same thing is true on the Exhibitgroup/ Giltspur GES side; they certainly would have to have cash.

I don’t want to get too much on that, but we were -- close at the end of the year, 304m roughly cash, cash equivalents 361, 362, and debt.

We were very close before MoneyGram over net [debt] position.

I don’t think we are about -- and we were not years away from that again, if nothing else happened.

So, lets kind of around the ball park, but that’s something that we have this market -- this IPO market does not improve, it [ever] comes back.

There are other ways to do things.

So worst-case scenario, you would a net cash balance on both balance sheets to be able to split-up the company?

I think, that’s [fair].

I think that’s [fair].

Fair assumption.

And, finally to accelerate cash generation, are there any non-core businesses you are contemplating selling?

We don’t have anything out in the market today, Patrick we certainly [inaudible] look at that every quarter, and we've just gone through November, December the strategy reviewed, the plans of these companies are that type thing and so there are something's that we cannot always think about.

Okay.

Thank you.

Thank you.

We will take our next question from Lauren Romeo with Dalton Greiner.

Hi.

Good morning Lauren.

How are you doing?

Good.

How about yourself?

Good.

Just wanted to go back to this Travelers Express.

Phil, what was the EBIT -- the revenues, EBIT and, if you can, the older rate has been, if we didn’t have the extra 700 basis points, in mortgage of the percent of your balances?

I am sorry Lauren.

Are you asking the impact that carrying the extra balances had on the op inc.?

Yes.

Phil, let me just say one thing.

You know, we talk about and we have the re-finance activity and the extra that comes in and where they essentially make very little on the extra, but the fact of it is -- that is extra.

The growth that they had in that product, still, was very robust, without that extra.

I think, Lauren, the way that I have thought about Travelers is that -- and they could do nothing about the re-finance market.

But the thing that has hurt us up there, not judgment, more than anything else is, again, simply the over the [fledge], overnights market, because they have to keep 500-600-700m, depending on the type of the month and overnight balances for liquidity purposes as these very instance come in next day for payment settlement.

And, so, when I look at that and look at where rates were, you will go where they are today.

In 2002, that cost them very easily between $12m and 15m.

And, so, if I take $15m and add on to their year-end number -- terrific year -- and forgetting re-finance and all the other stuff.

Now, the other piece that, obviously, has hurt them is that as this activity -- this re-finance activity picked up.

If they were on a [standing may] Security, for example, at 7%, they had this refinance activity.

They got the money back much more quickly then what they ever anticipated, and so they have a lot of excess cash.

Now, they go back out by sending [standing may] Security, maybe for 6%.

That's the stuff that’s killed them.

Not this refinance stuff -- because the refinance stuff is extra.

It's getting it back today and where we are [heading to grab] and re-invest at a lower yield than what we had in the original security.

Okay.

Just on that, I heard, in the last quarter conference call, you gave some figures as to the impact of the Traveler Express -- about the impact on revenue was and what EBIT would have been, had you not had these -- the interest rate, if you see, you were just talking about.

Well, as I recall, I mean -- I think we have pretty much described that the way we just did that -- again the overnight market.

Now, I am talking full year now -- stock in third quarter.

Full three quarters and it was $12-15m for the year.

And again with some impact in respect to their whole refinance thing.

So, I just mentioned getting the -- where the assets came back much more quickly than the liabilities we placed.

We talked about that would be on the slots, but I think that is pretty much the deed of the confession.

Phil, you want to add to that?

No.

I think you did a good job with that Bob.

I think the only thing I have to add is that the refinance activity just added to the short-term cash that we sitting on that you were describing.

So, I think that just compounded that issue.

And on the GES and Exhibitgroup.

If you look back at -- in the year -- any peak levels, or maybe just laid assets.

How much of the revenues do you think were -- touched double revenues that you aren’t going to see return even if get improvement finally in those businesses.

Well, its very difficulty.

And, I think, clearly Exhibitgroup/Giltspur on strictly the dotcoms and [that type] of things that are out of business and will not return; and then, certainly, some of the telecommunications company.

Kim would be looking at the impairment of probably in the neighborhood of 20-22%.

Kim, you can correct me on that if you have better information than I do.

And Paul Dykstra for GES, on that whole thing, Paul would be looking I think in the neighborhood of 15-20%.

Okay.

Great.

Kim, Paul, do you want to change or add anything that I have said.

I think, Bob, this is Paul.

Hi, Lauren.

Hi.

You know, historically, the show growth has been in the 7-8% range throughout the 90s, and then you saw our spike that probably added 2-3% points of abnormal growth I will call it -- kind of tied to that tech.com manias syndrome.

So, until we have something like that, we think, eventually, it could return back to those normalized growth rates.

And unless something happens that creates the next 2-3% points extra kind a deal.

That’s what we think will happen.

Okay.

Thanks very much.

Lauren, Paul makes a good point because prior to the whole dotcom run up -- and if you look at that industry, historically, you saw somewhere from 3-5 or 4-6 range in respect to industry growth.

I would say, though, let me add too on Exhibitgroup.

The exciting thing to me, the promise for me, and I think, for Kim too, is that, yes, we have been hurt by the dotcoms being out of business and some of the telecommunications company that collapsed there [that type] thing.

On the other hand, we did not have, historically, a very high penetration into the fortune 1000 companies.

Okay.

So, when I look at the base, again, and what’s possible, there is still plenty of room there to grow by having a deeper penetration into that fortune 1000 customer base once things return to normal.

Okay.

But I don’t think it’s a situation in where Exhibitgroup example is at the end the rope and nobody [terms it].

Okay and then…

I think just the offset.

Okay.

And Paul this is a follow up.

Do you have any sense that, you know, as the result of the cut back in attendance in trade shows that corporations have sort of had a change in their view as to what is the most effective use of their advertising or promotional dollars, and then they may decide trade [show] is, you know, less necessary for them?

I really don’t think so, Lauren.

Certainly, there is a short-term impact here.

But, if, you know, the consumer electronics show that was just here in Las Vegas is in the indication.

Their attendance was up over 16,000 people year over year.

Now, that’s just one show; but certainly, one that hopefully, made [barrack] in some other industries or categories.

So, we don’t think so.

Keep in mind that it’s a very, very cost effective way to get at your clients, produce leads, as well as, it’s still is the best place to introduce new products.

Okay.

And just few, sort of, clean up questions.

When you spoke [NABs] for this full year and ’02?

I am sorry.

What will be what?

Depreciation and amortization.

And you said, ’03?

Yes.

Pretty much flat with this year.

Okay.

And the $50-55 guidance for ’03 -- Is that on a GAAP basis.

You said No.

Does that -- is a percentage increase over the GAAP numbers for ’02?

The EPS is always on the GAAP basis, because the tax for [approval] is not the number by that [20].

Okay.

And with the 3-7% increase is on the $45, which does not include the restructuring charge.

Okay.

Great.

Thank you.

Sure.

We will take our next question from Peter Monaco (ph.) with Truderm (ph.) Investment Corporation.

Good morning.

Good morning.

Thanks for your time.

I joined the call very late; so I apologized if you addressed this in your comments or Q&A prior this.

The question is as follows -- there was a time with the stock, at this level, that you folks were pretty aggressive of buyers of your own shares.

There came a point -- it’s my understanding -- where the economic uncertainty as well as the difficulty at CES made you back away from that.

Now, with payment services still going well and with -- I gather you folks feeling a bit better about CES as evidenced by your expectation of an operating income increase in ’03.

Is share repurchase back on the table, given the cash flow characteristics of the company or is it still off the table not because of economic and CES uncertainty but because of the need to further improve the balance sheet related to the some day hope for spin or split?

Thanks.

And no I didn't talk about that.

We repurchased, in '02, 1.2m shares.

And we would like to have -- in those days -- have done more, given where the stock price was and is, but we also have started working very hard.

And late '01 to try to put this MoneyGram deal together.

And it took a long time.

But throughout '02 on the 1.2 that we repurchased, we contemplated being able to do the MoneyGram transactions sometime in '02 or early '03.

I mean, that was what we had believed at that time and it turned out to be true.

So we knew that, given what our cash position was, the rating agencies and net pricing that we were not going to be able to buy anything else back.

Now, at that same time, we also had an acceleration in respect to some real good jobs.

I think, done at GES and other places in respect to receivables and net [type] things that generated more cash flow than we anticipated.

And we are working simultaneously on the potential [RPO].

We had -- well given the shake in this, of all the double [limeas], the credit markets, the equity markets, you throw in corporate governance [that type] thing, it certainly came to -- and I am thinking that what if this market metrics is, as Patrick said early, what if this market does not improve anytime in the near term.

And so it certainly came part of our thinking during the year that well let's just key accumulating cash.

Now, a long story on that.

In all likelihood, in '03, we are not going to be repurchases of the stock, but we know -- we said acquisitions would always be the first part; there is nothing today that we are taking it up, any type of a hard look at them.

We would look at a bunch of things, but there is nothing that will -- that we are likely to do right now that can change tomorrow.

But we do though want the option that if that this [RPO] market does not improve, the Iraqi situation is not settled any time soon, and if we don't see some overall optimism in the markets in respect to the economy and that type thing, we would like to have the option of being able to have a separation of these companies.

And to do that we think it is best thing to conserve cash.

So, its not that -- Peter it is not that we believe that -- we fully valued if we repurchase it, and obviously it is a very accretive to us at this prices, but it certainly could have the effect if the [RPO] market does not get better offsetting this back and some of the things we might like to try to get done.

Thanks very much Phil.

Thank you.

Mr. Bohannon, there appears to be no further questions.

I would like to turn the call back over to you, sir.

Okay.

I would like to thank everyone, again, for taking your time to be with us today.

A lot of favorable things can be said about '02, then a lot of good things.

And we are particularly pleased with the great results [inaudible] GES, with what the Exhibitgroup team now is getting down and so forth.

And while we remain cautious while -- if we get lucky break here there, I think '03 can turn out to be a real good year.

So thank you very much.

Bye.

This does concludes today's conference call.

At this time, you may disconnect.