Viad Corp (VVI) 2004 Q2 法說會逐字稿

Thank you for standing by.

Good day, everyone, and welcome to the Viad Second Quarter 2004 Earnings Release.

Today's conference is being recorded.

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

Please go ahead, ma'am.

Thank you.

Good morning, and thank you for attending our conference call.

I'd 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 in contained under the caption forward-looking statements in Viad's financial statements filed with the Security and Exchange Commission.

This conference call may not be recorded, or reproduced in transcript, without the explicit written permission of Viad.

During today's call we will refer to tables 1 and 2 in the press release.

And our press release is available on our website at www.viad.com.

Now I'll introduce Bob Bohannon, CEO of Viad Corp.

Hi, everyone.

We're happy that you're with us today, and later will speak to Paul Dykstra, president of GES, Kim Fracalossi, President of Exhibitgroup/Giltspur, Carrie Long, who heads Investor Relations, and you just heard from Ellen, and Ellen will talk about some of the numbers a bit later.

As most you know, we completed the spin-off of MoneyGram on June 30th.

The reasons for spin-off are many, but all are in line with attempting to enhance shareholder value.

Each company now has a separate management team that is entirely focused on its business, by trying to create opportunities for growth.

The separation eliminated competition for available capital between MoneyGram and remaining Viad businesses.

MoneyGram now has direct access to the capital markets, which we believe will enable it to issue equity and debt more easily and on more favorable terms.

And in addition MoneyGram also has a pure play equity currency that we believe will enhance their ability to pursue acquisitions and joint ventures.

While MoneyGramless in the mix though, they had first call on capital and so now the remaining Viad businesses GES and Exhibitgroup, Brewster, they all have first call obviously on the available capital that we have.

And as we will discuss later, we did have a substantial net cash position at June 30th.

We'll also have capacity up to $150 million under a new credit facility.

On the acquisition front, we see some opportunities in the Convention and Event industry primarily on the GES side.

The scope, the size, most of these would be in the revenue range of 50 to $60 million.

However, something larger could be possible.

And as market leaders in this segment, this Convention and Event industry, we believe we would be acquirer of choice, or probably (INAUDIBLE) who are looking to monetize their holdings.

We've said often that we would not do any acquisitions that are dilutive, unless they have great strategic value.

Then we might be willing to do a deal that is mildly dilutive in the first year.

I'll also add that we do not intend to pay for synergies that we create through any acquisition.

And whenever we look at one, we'll also consider whether share repurchases would be a better use of capital from a shareholder value standpoint.

And, of course, along those lines I'll mention that both acquisitions and share repurchases, as well as dividends will be subject to the terms of our new credit agreement.

For the second quarter, let me refer you to Table 1 and Table 2 in the Earnings Press Release.

For the second part quarter net income was $0.42 per diluted share that compared to last year's second quarter net of $0.66.

Segment operating income was $18.9 million, down 29% compared to the 2003 second quarter op income of $26.6.

And the decline in the prior year's second quarter was due mainly to the show rotation.

We'll have positive show rotation in the third quarter, and the third quarter of '04 will be up significantly over the third quarter of '03.

Paul Dykstra will discuss this a bit later on in the call.

Second quarter '04 results included an after-tax charge, also of $530,000 or $0.02 per diluted share related to some restructuring activities.

For the first quarter, cash and cash equivalents were $110 million.

We'll use about $27 million of this cash in the third quarter, to pay certain liabilities, which related to the spin-off of MoneyGram, legal investment banking fees, things like that.

At June 30th, debt outstanding was $22.6 million, and the debt-to-capital ratio was 5.2%.

EBITDA shown in Table 2 of the Press Release was $19.7 million for the quarter, down from 30.3 in the second quarter of '03.

And free cash flow for the quarter was $10.9 million down from $17.2 in the second quarter of 03, and again that's driven primarily by the op income - the decline.

On it's second highlight, GES revenue was 137.4 down 7% from the second quarter of 03.

Op income was 14.1 and that was down nearly 33%, and again that's due to the show rotation side.

Exhibitgroup revenue was 52.7, down nearly 31% from the 2003 second quarter, mainly due to continued weak demand, and highly competitive pricing situations in the Exhibit construction business.

Also Kim experienced a negative show rotation that she'll talk about her comments.

Exhibitgroup operating results declined to about break even compared to income of $3 million in the second quarter of '03.

Revenue in the Travel and Recreation segment though increased 41% to $17.3 million from the 2003 second quarter, due to increased visitation at both Glacier and Brewster.

And segment-operating income was up nicely.

That increased 78% to $4.7 million.

Now for the individual operating segment results, you may want to refer to Table 1 of the Press Release that will provide revenues and op income for each of the operating segment, and I'd like now to turn it over to Paul Dykstra to make -- and talk about GES.

Thanks, Bob, and good morning, everyone.

GES had another solid quarter with low double-digit operating margins.

As expected, revenue was down about 7% from second quarter 2003, due to negative show rotation, mainly the National Plastics Expo, which took place in the second quarter last year, as well as the Ford Centennial event which is a nonrecurring event.

For those of you who are new, the term "show rotation" refers to certain shows that are not annual.

And we have shows that take place sometimes every other year, every third year, even every fourth year.

And once in a while these also will shift quarters.

As Bob mentioned, we will have positive show rotation in the third quarter, which should drive a revenue increase of about 40% over the prior year third quarter.

This year we have three shows that occur every other year that we will produce in the third quarter.

The International Manufacturing Technology Show or IMTS, the International Woodworking Show and the International Baking Show.

In addition we'll service Mine Expo in September in Las Vegas.

This show occurs every four years and all of these shows are amongst the largest trade shows in North America.

We're also currently servicing the Democratic National Convention in Boston and this special benefit will benefit the third quarter as well.

Our fourth quarter -- seasonally slow quarter for us and we do not expect any significant show rotation impact.

We do expect the modest increase in revenue over the 2003 fourth quarter, mainly as the result of initiatives that we've put in place through our new products and services division.

Speaking of that, in 2003, in November, we established what we call our products and services division.

This division was formed to focus on driving value-added service to exhibitors.

The objective here was to enhance the exhibitors experience through proactive servicing and to increase GES's penetration into exhibitors discretionary spending.

We're utilizing our National Service Center to drive this proactive service and selling.

These discretionary services include things like booth furniture and carpet, graphics, transportation, and exhibit installation and dismantle.

Discretionary services by definition are nonexclusive to GES, and account for 25 to 30% of our total revenue from this discretionary exhibitors spending.

Our goal for the products and services division is to drive a mid-teens growth rate in discretionary services revenue, and we're seeing positive results so far.

Although somewhat improved, the trade show and convention industry continues to be challenged.

Statistics for the first quarter of 2004 published by Trade Show Week show modest growth in the size of conventions, as well as the number of exhibitors and attendees.

Good news though is for the first time in more than 13 quarters, GES saw same show growth in both the first and second quarters.

Our same show revenue did a bit better than the Trade Show Week's statistics mainly because of an increased discretionary spending by exhibitors driven by our products and services division.

This growth is encouraging.

However, technology shows continued to struggle.

Comdex, which used to be a marquee technology show was cancelled this year after shrinking substantially over the past few years.

In addition to Comdex, the 2004 occurrence of the Sun Network Conference, a Sun Microsystems corporate event was cancelled as was the 2005 Oracle Apps World (ph) show.

At the same time, however, the consumer electronics show on E3 have grown nicely and strengthened their positions as marquee shows.

In addition, we've seen some new computer shows that have been launched.

We'll continue to keep a close watch over the health of our technology shows.

Outside of technology, we're seeing strength in healthcare, security, and industrial and construction shows.

And the diversity of our portfolio of business is a natural head for exposure to any particular industry.

On an annual basis, our top 10 shows represent less than 20% of our annual revenue, and no one show is more than 4%.

Our strong book of business helps us to consistently deliver good annual performance, even in an inconsistent market.

During the second quarter, we signed about $75 million of future revenue and our revenue backlog stands at just over $600 million for 2004 and beyond.

This backlog is a bit less than I've reported in the past few quarters, due to the amortization of some big contracts that we hope to resign in the near future.

Our sales pipeline is very strong, and our retention rate continues to be better than 90%.

We continue to be bullish on GES.

We have the leading market share in the country's number 1 and growing trade show market -- Las Vegas, as well as the leading national position.

We've done a lot of heavy lifting in the past few years to get our house in order.

We've taken out about $25 million in fixed cost since 2000, that we built a culture that makes cost savings and productivity improvements a part of everyone's job, not just a special project.

I've got a great management team with diverse backgrounds and expertise, and we're all focused on driving growth both organically, through the products and services division, and other initiatives, as well as through possible acquisitions.

We are committed to improvement and winning for our clients and shareholders.

With that, I'll pass it back to you, Bob.

Okay, thanks Paul.

Now I'll turn it over to Kim Fracalossi of Exhibitgroup/Giltspur.

Thanks Bob.

For the quarter we're proud of our performance with respect to managing our cost, and improving our growth margins, but we were disappointed with our break-even results.

We continue to be diligent in what we can control, and in managing each job as well as possible.

Our second quarter revenue was down just over 30% from the prior year.

The revenue decrease from last year was expected, and was driven in part by negative show rotation.

The loss of certain business in late 2003, and the first quarter of 2004, as a result of highly competitive price situations, is also a big contributor to that.

The show rotation relates mainly to a European Air show that generally provides the equivalent of about 10 million US Dollars in annual revenue to our division in the U.K.

Now this is an annual show that rotates each year between Paris in the second quarter, and Farn burrow (ph) in the U.K. in the third quarter.

Last year's show was in Paris and occurred in the second quarter, and this year it took place last week in Farn burrow (ph) during the third quarter.

So this should contribute nicely to our expected revenue improvement over the 2003 third quarter.

Overall there's still not much activity on the construction side.

And year-to-date our construction revenue, which has about twice the margins of our shows services revenue, is running at about 25 to 30% of total revenue.

And this compares to historical norms of 40 to 45%.

Now as I mentioned on the last earnings call, the competitive environment in the exhibit, design and construction industry has become more aggressive.

And we are seeing signs of irrational pricing.

This continues to pressure both our existing business, as well as slow us down in generating additional sales.

However, we will not price irrationally, just to win revenue.

That's not a strategy for long-term success.

Our commitment to margin discipline, and providing an acceptable return to our shareholders has caused us to walk away from certain business that would not have been profitable at the awarded prices.

We don't need to get business in the door to fund our working capital needs, as many of our competitors do.

To that point, we are still seeing signs of competitor weakness.

We're seeing them scaling back their manufacturing operations, closing operations, or actually going out of business.

Now, we led the way in consolidating our manufacturing, improving our costs and streamlining our processes, and now two years later, the competition has to follow to survive.

The good news is that we have the bulk of that activity behind us now, and when the market returns, we should be in very good shape.

On the cost side, our year-to-date discretionary and fixed costs are down over $8 million in absolute dollars from a year ago.

Since 2000 we have removed about 65% of our manufacturing capacity, and over $20 million in fixed cost.

But due to the slow economy, and the increased competition for fewer available construction jobs, our production hours through the shop, is down 74%.

We've sized the business to breakeven at about $200 million in revenue.

And we should be able to flex up to about $325 million on a single shift, or $375 with a second shift.

We believe that we need this capacity when the pent-up demands in our market releases.

However, if our market does not improve, there are certainly more opportunities to take costs out.

Now, while we expect competition to remain fierce until our industry rebounds, we are starting to see some indications that exhibitors are realizing that a lower quoted price does not necessarily mean a better deal, or better overall cost to them.

We have recently been contacted by some former clients who are now interested in doing business with us again.

They appreciate that we're up front about our pricing, that we don't apply hidden charges to jobs, and they continue to value our creative talent, and our continuing improvements in customer service.

Though the competitive situation is intense right now, we have won several new clients, one of which was a lead generator from the exhibitor show that we participated in, in March.

We've won some small projects with a couple of very large clients that we hope will give us a good opportunity to win a greater share of their business in the future.

In addition, we are seeing many RSPs (ph) for show programs.

We have a good pipeline with several big name logos in it, and we're optimistic about some of these opportunities.

There's good activity on the new construction sales front, but it is not yet translating into revenue.

We believe strongly that the business will come around and that the irrationality on the pricing will subside.

Historically, normal, average life cycles of exhibits is about three years.

And many of our clients are now in the five to seven-year range with their exhibits.

Needless to say, these exhibits are looking tired, and the marketing contacts at our clients are looking for new constructions in their future, to better support their brand image.

The limiting factor at this point is really the client's marketing budget.

We're hopeful that corporate profits will continue to improve, and this will result in marketing budgets that allow more room for new exhibit construction in 2005.

In the meantime, we intend to stay the course, continue to manage our costs, improve efficiencies, and customer service levels, and work to win good profitable business.

Thank you.

Back to you, Bob.

Okay.

Thanks, Kim.

Let me now spend a few minutes covering some highlights from the Travel and Recreation segment.

We haven't spent much time talking about this segment on prior calls; so let me start off just giving you a little basic information.

The Travel and Rec segment is comprised of two companies.

They provide lodging tourist and concessions, that's Brewster Tourists operating out of Banff, Alberta, Canada and Glacier Park operating in Glacier International Park, Montana.

Brewster is the larger of the two companies representing on annual basis, roughly 70% of total segment revenues, and close to 80% of total segment operating income.

Both companies have great operating margins and cash flows.

These are seasonal businesses with very slow first and fourth quarters.

The second quarter represents roughly 25% of annual revenues for this segment.

And the third quarter is the strongest, with roughly 60% of annual segment revenues.

In 2003, this segment was hard hit by a decreased visitation that was due to the war in Iraq, SARS, and forest fires among other things.

This year we're seeing a very nice rebound in visitation at both Brewster and Glacier.

Second quarter revenues for the segment up more than 40% over the second quarter of '03.

Glacier Park opened for business at the end of May, and is off to a record start, so far this year, as well as people who visited and reservations for the remaining part of the year.

And barring a recurrence of forest fires in the park, we expect that 2004 will be a great year for glacier.

Brewster is also off to a terrific start as compared to 2003.

Year-to-date passenger volumes are up more than 60% for Brewster snow coach tourists on to the Columbia Ice Field and nearly 30% for the Banff Gondola , which takes passengers to the summit of Sulphur Mountain.

Now the Ice Field draws tourists from all over the globe, and we track visitation by country.

So far this year, we have seen an increase in passengers from almost every country that we track.

The most substantial increases were from Japan, China, Taiwan and Korea, which are all well ahead of the 2002 year-to-date volumes.

This is significant in that these countries accounted for about 85% of our 4-year passenger decline from 2000 to 2003.

So overall the travel and recreation segment is on track for a much, much improved 2004.

Now with that, I'll ask Ellen to take you through a few additional financial highlights.

Ellen.

Thank you.

As shown in Table 2 to the Earnings Release, adjusted EBITDA was $19.7 million during the quarter, versus $30.3 million in the second quarter 2003.

Also on that Table 2, free cash flow as defined, as cash from operations less capital expenditures and dividends, was $10.9 million for the quarter, versus $17.2 million last year.

Viad's total debt at the end of the quarter was $22.6 million with a debt-to-capital ratio of 5.2%.

And net interest expense for the quarter was $265,000 -- this was down from $1.5 million in the second quarter of '03.

The difference is primarily related to lower average debt balances.

Depreciation/amortization for the quarter was $5.4 million compared with last year's second quarter of $5.7 million.

For the full year 2004, forecast is approximately $22 million and this is in line with actual 2003.

Capital expenditures for the quarter were $2.1 million, down from $4.8 million in the prior year's second quarter.

For the full year 2004 forecast, we approximate $15 to $18 million in CAPEX.

This, lags depreciation a bit, but it is higher than last year of $15.5 million actual.

The income tax rate year-to-date 2004 was 38.6% versus 44.3% year-to-date 2003.

And the average outstanding and potentially dilutive shares for the quarter were $21,839,000 versus $21,627,000 in the second quarter of '03.

Back to you, Bob.

Okay, thanks, Ellen.

Let me give you some guidance for the remainder of '04.

Please keep in mind the guidance is subject to change, as we've talked about numerous times, the visibility of Exhibitgroup is still very murky.

We expect that Exhibitgroup's revenue will remain under pressure due to the prolonged weak demand and increased pricing competition that Kim talked about.

For the third quarter, we expect diluted earnings-per-share to be in the range of $0.43 to $0.54 reflecting positive show rotation at GES and at Exhibitgroup.

GES segment revenues expected increase by $35 to $40 million from the third quarter 2003, revenue of 96.3 as a result of positive show rotation.

Their segment operating income is expected to increase by 8 to $10 million from the third quarter of '03, which was $1.2 million.

On Exhibitgroup, their segment revenue is expected to increase $4 to $8 million, as compared to the 2003 segment revenue of $36 million.

And segment operating results are expected to improve $1 to $2 million from the 2003 third-quarter loss of $3.5 million and again that's due to the positive air show rotation that Kim talked about.

Travel and Recreation services segment, the revenue is expected to increase by $4 to $6 million from the third quarter 2003 revenue of $32.7 million.

And the operating income is expected to increase by $3 to $4 million from the 2003 third quarter op income of $11.1.

For the fourth quarter the diluted loss per share is expected to be in the range of $0.13 to $0.16.

This reflects the normal slower seasonal pattern for the Convention and Event, and Travel and Recreation businesses.

For GES, the segment revenue is expected to increase slightly from the 2003 amount of $87 million.

Their segment operating results are expected to improve by $2 to $3 million from the fourth quarter, 2003 loss of $2.2.

Exhibitgroup revenue is expected to decrease $5 to $7 million from the 2003 fourth quarter revenue of $51.8.

And their operating income is expected to decrease by $3 to $4 million from the 2003 amount of $4.4.

On a Travel and Recreation side results are expected to improve slightly from the 2003 fourth quarter segment revenue of $4.9 million, and the segment operating loss of $2 million.

Now for the full year, we expect diluted earnings-per-share to be in the range of 104 to 118 that's up from $0.97 in 2003.

The overall segment operating income is expected to increase by more than 7% from 2003 segment op income of 51.2.

GES, their revenue is expected to increase by $25 to $40 million from 2003 revenue of 498.7.

Op income is expected to increase by $4 to $6 million from the 2003 op income of 40.2.

And Exhibitgroup's revenue is expected to decrease $35 to $40 million from the 2003 revenue of $218.6.

On Exhibitgroup's operating results they are expected to decrease $4 to $6 million from the '03 of $1.1 million.

And Travel and Recreation revenue is expected to increase $10 to $12 million from the 2003 revenue of $53.2.

And the operating income in Travel and Rec -- that should be up $6 to $7 million from the 2003 op income of $10 million.

Corporate activities are expected to be comparable to the 2003 amount of $15.2.

Let me close today and operator, in a few minutes we'll open up for questions, but let me close today by saying we're really excited about the direction of the company.

We're very happy, obviously that MoneyGram is now spun.

We believe that 2004 will be a much-better year for all of our companies with the exception of Exhibitgroup.

And until we see evidence of a sustained increase in new exhibit construction orders, and that increase corporate spending is translating into increased marketing expense budget we'll remain cautious in the outlook for Exhibitgroup.

Having said that, I know that Kim and her team though are diligently taking out every penny of cost that they can, and they'll continue to do that until the market turns around.

And the other thing that I would say in that respect, we've talked before.

We understand that capital is not free, it's not free for a public company.

It certainly is not free for a privately held company.

And we have seen over the last couple years, quite a few of the companies in Kim's industry bite the dust, and work capital continues to dry up.

And given (ph) as you talk about --on some of the irrational pricing it's not easy to understand why some of those companies are going south and are going south in a hurry.

Now as we emerge from the spin-off of MoneyGram, we're very excited about these opportunities on a go-forward basis.

During the last 4 years we've faced very challenging market conditions as everyone has in the form of a weak economy. 9-11, dot.com, meltdown, telecommunications clap, SARS, forest fires and the list goes on and on.

We've seen a revenue decline of about 30% from $1.1 billion that we did in revenue in these companies in 2000, to $771 million in 2003.

And during this time, we worked as fast as we possibly could to take out cost and keep the margins as strong as possible.

We've become much more efficient and still have the capacity to support revenue growth especially at Exhibitgroup.

And so because of this, we see a great upside just getting back to our historical levels of revenue.

And if the recovery in the economy holds we believe that we're going to be well positioned to benefit significantly.

We add to that factor that we will have the ability to do some acquisitions from time to time, and that's why we see again, if this economy holds, some great upside.

So, then with that I will close and I'll take your questions.

Thank you, sir.

The question-and-answer session will be conducted electronically.

If you would like to ask a question, please do so by pressing the s* key followed by the digit 1 on your touchtone telephone.

If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

We'll proceed in the order that you signal us and take as many time permits.

Once again that is * one to ask a question.

Additionally, if you find that your question has been answered you may remove yourself from the queue by pressing the pound key.

We'll take our first question from Kartik Mehta with MidWest Research

Good morning.

Good morning.

Kim, I wanted to ask a little bit about the Exhibitgroup and the potential in terms of the leverage in that business.

I know you said you know, $200 million or breakeven.

You could do up $325 million with first shift.

And I think we also decided for -- if I remember correctly, that -- that that business should have double the operating income margins of GES.

I'm just trying to work through maybe the math of what the -- would that imply the incremental margins are almost 30% to 40% on the $125 million that you potentially see, or does it take a lot more to get to that double operating income number.

Kartik, this is Bob.

Before Kim answers, if I've heard you right, maybe I misunderstood but double the operating margins of GES.

No it should not, I mean GES and Exhibitgroup what we believe can both be good low double-digit margins companies.

But you probably meant on the incremental volume to that so ...

Yes, I apologize.

Kim, I'll let you pick up from there.

On the -- what Bob has said is true.

Our overall margins aren't going to be double GES.

I think if you look historically, and you see where we've are, we been a little bit below GES on just all of our historical margins.

But on the incremental throughput, it does depend on the type of business that is.

So if it is construction business, then we do think that the throughput on that is certainly in -- that the ability on the throughput on the construction -- so if it's stuff going through our shop, which is the build side of it then we can have, sort of, you know, 20% throughput to 25% throughput on that.

If, however, it's just services or pull in ship, it's half that.

So that's the thing.

It depends on the complexion of the business that we get.

And one of the issues that we're suffering right now is we're just not getting much on the construction side.

We're doing a lot of activity but the absolute revenue on the construction -- or on the business that we're doing is significantly lower than construction revenue, and the margins on that are about half of what the construction margins are.

So it does depend on the complexion of it.

Historically the mix is probably 40%, 45% construction, and, you know, 55, 60% services.

Right now that mix is much more heavily weighted toward services.

So the hope is when we get back to sort of a normalized period, then you would have a blended margin on that incremental 125.

If it ended up being all construction we could really hum, but that's not likely.

It'll be a blend between the construction and the services.

Right.

As you look out to maybe 2005 and more interested in show rotation, Paul, are there any shows that in 2005 that might not be occurring that have occurred in 2004, any big show rotation we could anticipate for the year?

Yeah, one for sure, Kartik, good morning, is ConExpo/ConAg will occur in March of '04.

That is a big heavy equipment show that's every 3 years in Las Vegas.

We'll have Worldwide Food, which is an every other year show.

I believe that's in October of '05.

Those are 2 big ones and Pro Mac (ph) is in the first quarter, I believe as well in Chicago.

What we've committed to do Kartik, is make sure that we you know, give you very good details as to the ins-and-outs of our show rotation schedule, because it can be very significant on a quarter-to-quarter basis.

Great.

And, Bob, just looking at the third quarter guidance, trying to figure out why the range is so wide.

If you could just walk, kind of walk through the thought process at the 2 ends of the guidance.

Sure.

Again, there's still a lot of uncertainty in the marketplace.

That's part about the range, but the other part, it doesn't take very much now, at 22 million shares, and that's the issue so, in other words, $1 million would be about - let me quickly do some math here -- more than, you know, almost a nickel a share.

So that's not an awful lot at $22 million shares out versus the 88 that we have.

So that's why it looks wider than perhaps it really is.

Thank you very much.

Thank you.

Once again, as a reminder that's *, 1 to ask a question, or make a comment.

We do have a question from Adam Wees (ph) with Chilton (ph).

Hi.

With respect to the question about show rotation, are there any shows, I'm sorry, I joined the call late, but shows in '05 that are annual shows, that were in '04 but are not going to take place in '05?

Yeah, Adam (ph), this is Bob and I'll ask Paul to respond to it too.

We are going to have some shows in '05 that did not occur in '04.

On the other hand we're going to have some in -- some that will not recur in '05 that did in '04.

But Paul I think net-net for the '05 give some guidance on what the net show rotation effect is going to be.

Thank you.

Paul?

Yeah, I don't know if we've totaled it up completely yet.

But it's probably going to be a push to '04 or slightly down rotation-wise.

We'll always have some shows, you know, new shows and shows that, you know, don't take place in the following year for whatever reason, either they've been cancelled or, you know, God forbid, lost to a competitor, something like that.

But overall the big ones are going to be the ones that rotate in on an every 3-year/every 2-year basis.

So you only expect moderate show rotation effect.

Is that correct?

Yes, on a full-year basis for '05 it should be very moderate.

Okay.

I guess the difference shows the magnitude of the impact varies right.

I don't know.

I'm not familiar with the circuit but ...

Typically Adam, these are all going to be you know, pretty big shows.

They tend to be heavy equipment, or machinery, which come in every second, or every third year show, just because of the substantial cost and planning that goes in for those exhibitors.

So when we talk about the every 2 and every 3-year and every 4-year shows, those are always going to be fairly large.

You know, I think I read that there's not going to be Comdex.

Comdex was, I think the term was postponed for 2004.

It's still to be seen whether or not there'll be a Comdex in 2005.

They're doing some substantial restructuring of the Comdex portfolio.

And does a show like that have any kind of impact, or -- of a significant nature?

Like if it was to take place in '05 would that be a good bump for you?

Yeah, Comdex is substantially smaller than it used to be.

So you know, it'll definitely be a nice bump, but not nearly as significant it used to be.

And again, I'm sorry I joined late, but could you just quickly talk about why the construction business hasn't come back yet?

Summarize it quickly.

I know it's probably more lengthy explanation but ...

No that's fine.

Kim?

Yeah, actually it's not a very lengthy answer.

The answer is that they're using their old exhibits.

And you can do some minor re-furb, change the graphics and still get to go to a show.

But you're not spending money on, sort of, messaging in a big way.

So really what they're doing is they're substituting a new bill that historically they did about every 3 years, for using something that's probably about 5 or 6 years old.

And are trying to refresh it.

So we get that business, but it's significantly less in magnitude to the tune of probably a good 80% less than a new build would be.

Did that help?

And what do you think is -- could stop that trend, or is there anything -- what's going to ...

Well, I think corporate profits certainly are a good indication.

Any kind of major brand change, new product introductions, new acquisitions, or name changes and things like that require a lot of, you know, new messaging from the marketing department.

So it's really marketing budget dollars that come after corporate profits are sustained in a positive way.

It's usually one of the places that they yank first.

Because you can still go to a show without spending a whole lot of money, and still you know, have your presence.

But if you're not going to spend on new graphics, or new construction, that impacts us pretty significantly, but the customer still gets to go to the show.

So what's going to change is mark, is corporate profits that then translate into marketing dollars, that then translate into spending money, on show program.

The new technology in terms of video and audio doesn't -- isn't much of a driver?

No.

It really isn't.

It's a compliment and we use it at the shows to sort of set - to help the customers with their messages.

But it's not a substitute for actually being there, having a presence, and seeing all of the competitive products at one time.

It just is not a substitute.

I mean, there's great example in our own industry, the TS2 show that we were at.

They're 2 industry shows, where all of the exhibitors are people in the business show up and that's The Exhibitor Show in March and the TS2 in the summer that we just had about a month ago.

And there were some main competitors, some big competitors of ours that did not show up at that show.

Now, whatever, you know, decision-making went on in their house doesn't really matter from a customer's viewpoint, because the talk of the show was they're having financial difficulties if they didn't show up at 1 of 2 industry shows.

Now that is not something any company that cares about their brand wants to happen.

Okay. 80% cheaper is a pretty compelling economic decision I guess so you ...

Well, it is when their budgets are really, really tight, right.

But it wears out.

And these are not built to last.

So they look very, very tired.

And I think if you go to some shows, and you walk around, you can see that these things are very tired.

And generally what triggers some spending in an industry is if 1 or 2 of the big guys spend some money on a new booth, then you've got the competition looking at it saying, "Okay.

Now we've got to start spending."

So that's kind of what we're waiting for.

I would think you have pretty good visibility on that side of the business in terms of lead times and so forth?

No, actually we don't.

Depending on the size of the exhibits, our average exhibits are probably, you know, 125 to 150,000 on a new build.

And something like that -- our shop because of our skill set, and one of our competitive advantage is that we can probably turn that around very, very quickly.

Now, a large exhibit like a $1 million dollar exhibit, we usually have a good 3 months of knowledge that we're actually going to be doing that.

So for the customers that spend a lot of money, you do have some visibility.

But right now that's not a lot of them.

So the smaller ones you really, you know, if you need a month, you can probably turn around pretty quick in a month.

Okay.

I appreciate your answers.

Thank you.

Thank you.

We do have a question from Thomas Stellmach (ph) with Goldman Sachs.

Hi, thank you.

Can you tell me what you'd expect your - sorry -- ongoing level of corporate overhead to be?

I know you'd brought it to $15 million in '04.

Do you expect to be able to cut that a little bit, given that you spun off MoneyGram or are there fewer (INAUDIBLE) synergies from the spin-off?

And I have a follow-up.

No, Thomas.

We'll be able to cut that some, and we have some plans now that we'll start executing.

And that we're also hopeful -- as you know, as we go into '05, for example, that there's more rationality in the insurance markets, and that type of thing, particularly as it pertains to D&O insurance and whatever.

But aside from things like that the run up of those types of costs that we've had and they've been very significant over the last few years for all companies, there are other costs that we're going to get after.

Thank you.

The second question relates to one of the risk factors, which you mentioned in your Form 10 filing.

With respect to Glacier, The Glacier Park contract.

Yes.

Could you tell me what sort of what operating contribution that is.

And you know, what your, sort of, sense is as to the prospects for renewal.

What you're doing to continue (ph) that early on?

Sure.

And there's a thing attached to that contract that's called Possessor Re-interest, and I'll have to explain that.

The government can automatically extend this contract for 3 years if they wish.

What Possessor Re-interest is - we're grand fathered on to that.

The law did change in the late '90s, we're grand fathered, and it essentially says for the 23 years that we have been in the park, and the improvements that we've made on the park property, and so forth.

That at the end of the contract period there is a settlement, a settlement phase of that, and then the government would owe us a certain amount of what had been put in, over those years.

And so, I can tell you without getting too specific on that is that Glacier would represent about a $1 million inside the park, that if we had not renewed that contract it would be about $1 million op income that we would lose.

However, I can tell you that given that we believe we're owed on Possessor Re-interest as that was paid back to us by the government we could certainly have put that in the bank and earn the million dollars.

So.

Great, thanks very much.

You're welcome.

As a reminder, it's *, 1 to ask a question, or make a comment.

At this time there appears there are no further questions.

Please go ahead.

Kim, thank you.

Thanks, everyone, for being with us today.

We all look forward to talking to you again soon.

And we'll keep our fingers crossed that the Fortune 1000 companies will increase their marketing budgets because we've got big lift in our (ph) business, once that that starts happening.

So thank you very much.

That's concludes today's conference.

Thank you for your participation and you may now disconnect your line.