Viad Corp (VVI) 2007 Q2 法說會逐字稿

Good day and welcome to this Viad Corp. 2007 second quarter conference call. Today's call will be recorded.

I would now like to turn the call over to director of investor relations, Carrie Long. Please go ahead.

Good morning and thank you for attending or conference call. Before we get started I'd like to remained everyone that certain statements made during this call, which are not historical facts, may constitute forward-looking statements, and actual results may differ materially from those projected in the forward-looking statements. Additional information concerning business and other risk factors that could cause results to materially differ from those in the forward-looking statements can be found in Viad's annual and quarterly reports filed with the SEC. This conference call may not be recorded or reproduced in transcript without the express written permission of Viad. During today's call we'll refer to tables 1 and 2 in our earnings press release, which can be found on our website at www.viad.com. And with that, I'd like to introduce Paul Dykstra, President and CEO of Viad.

Good morning, everyone. Thanks a lot for being with us today. Also on today's call you'll hear from Kevin Rabbitt, President and CEO of GES Exposition Services, John Jastrem, President and CEO of Exhibitgroup/Giltspur, and Ellen Ingersoll, Viad's Chief Financial Officer. As I discuss our second quarter results you may want to refer to tables 1 and 2 in the earnings press release. Overall we had a very good quarter. Second quarter income from continuing operations was $18.3 million, or $0.87 per diluted share. 2007 second quarter income before other items, which excludes impairment recoveries of $61,000 after tax, was $18.2 million or $0.87 per share, up 22.5% from $0.71 in the second quarter of 2006, and favorable to our prior guidance of $0.68 to $0.77 per share.

Included in our second quarter results was $2.4 million after tax, or $0.11 per share related to favorable resolution of contract dispute at GES. Second quarter revenue $275.7 million, up $38.3 million or 16.1% from the 2006 quarter. Segment operating income increased $5.3 million or 20.6% to $31.1 million. These results reflect positive show rotation at Exhibitgroup, the acquisition of Melville, and solid performance at all of our operating companies. Now let's move on to the individual operating segment results, and again you may want to refer to table 1 of the press release, which provides revenues and operating income for each of the operating segments. I'll turn it it over to Kevin Rabbitt and Kevin will discuss GES. Kevin?

Thanks, Paul. I'd like to start by once again thanking the hard working and dedicated employees of GES for another solid quarter. Revenue for the quarter was $192.8 million up $23.5 million or 13.9% from 2006 second quarter. Operating income increased 20.1% or $3.7 million to $22 million. The revenue increase was driven mainly by acquisition of Melville. We also realized strong base same-show growth of 12.3%, which helped offset negative show rotation of $7 million in revenue. As a reminder, base same-show growth is a measure of growth in our shows that occur in the same city in the quarter every year. Our strong same-show growth continues to be driven by overall growth in the industry and by the efforts of our products and services group to increase penetration into exhibitor discretionary spending. Base same-shows represent 33% of our second quarter revenue, Additionally our 2007 second quarter results included $3.9 million pretax related to favorable resolution of a contract dispute, which was partially offset by an increase in certain insurance-related costs.

Melville continues to perform very well and once again exceeded our expectations during the quarter. We're making good progress rolling out various growth initiatives aimed at increasing efficiency and capturing a greater portion of exhibitors' discretionary spending. During the quarter we implemented activity-based labor planning models and developed target exhibitor marketing materials for upcoming shows. We're also able to leverage the GES Worldwide Network to service a U.S.-based client in London and a Melville, Scotland client was exhibiting in the U.S. Additionally, Melville produced graphics for clients of Exhibitgroup's S.E.D. division who exhibited at the Paris Airshow. These are just a few examples of how we're realizing success with the Melville acquisition,

During the quarter we also strengthened our leading market position across Canada through the acquisition of Poitras Exposition Services on June 29th. Poitras is the market leader om Quebec City, and has a talented management team that shares our values. The company has been in business since 1933 and has a longstanding reputation for excellent service. Poitras is a small acquisition but will enable to us increase economies of scale in eastern Canada. We are happy to welcome Poitras to the GES Worldwide Network.

Now I'll cover our revenue backlog before commenting on our outlook for the remainder of 2007. During the second quarter we signed over $90 million in future bookings, our total backlog for the rest of 2007 beyond stands at nearly $1.2 billion, and we have about 75% of our remaining forecasted revenue under contract. For the third quarter we expect revenue to be in the range of $140 million to $155 million as compared to $151.7 million in the 2006 third quarter. Included within this revenue range is the expectation that Melville will generate between $15 million and $20 million in revenue. Therefore, excluding Melville, we expect revenue to decrease by $17 million to $27 million. This is due to negative show rotation of about $36 million in revenue, which we expect to be partially offset by continued same-show growth, Shows rotating out include the International Manufacturing Technology show and the International Woodworking Machinery and Furniture Supply Fair, among others.

We expect our third quarter operating results to be a loss in the range of $3.5 million to $1.5 million, as compared to income of $9.6 million in the 2006 quarter. The decline in operating results expected to be driven by the decrease in revenue from our North American operations, as well as expected operating loss at Melville. As we have outlined in past earnings press releases, Melville is expected to generate operating losses during the third and fourth quarters which are seasonally slower for that business. For third quarter we expect Melville's operating loss to be in the range of $2 million to $1.5 million. Our outlook for the 2007 full year remains unchanged. We continue to expect that strong growth in exhibitor discretionary revenue, strong same-show revenue growth and market share gains will more than offset negative show rotation of about $35 million in revenue. At our North American operations we expect to realize low single-digit revenue growth with improved operating margins. In addition to this organic growth, Melville is expected to provide another $80 million to $90 million in revenue and be accretive to Viad's earnings in 2007.

I'd like to reiterate in 2008 rotation will be significantly in our favor and we're expecting a banner year. Several of our large shows that do not occur in 2007 will take place in 2008, including [ConExpo Conaganiste], the International Manufacturing Technology show, Mine Expo, and the International Woodworking Machinery and Furniture Supply Fair. Positive show rotation in 2008 is expected in to excess of $45 million in revenue relative to 2007. 2008 should also bring stronger profits from Melville, as we continue to gain traction from our initiatives to accelerate growth and drive margin expansion. 2007 should be another winning year for GES. Our underlying business is performing very well. We're experiencing great success from our initiatives to drive revenue growth and productivity improvement. And while the pricing environment is somewhat challenging, the industry seems to be holding its upward course. Together GES and Melville will continue to provide quality product and services along with best-in-class customer service at great value to our customers. As always the GES team is committed to winning in 2007 for all our stakeholders.

Thanks, Kevin. Next I'll ask John to comment on Exhibitgroup/Giltspur.

Thanks, Paul. We had a very good second quarter. Revenues was $61.5 million, up $14.6 million from the 2006 second quarter. Operating income was $4.6 million, up $1.9 million from the 2006 quarter. These increases were driven mainly by positive show rotation from the Paris Airshow which last occurred in 2005 second quarter. We also realized an increase in our domestic business. The changes we've made on the sales side and our efforts to embrace a client-centric approach are paying off. We've already sold more new business this year than all of last year, and we're receiving very positive feedback from our clients.

I continue to spend a significant amount of my time meeting with clients. During these meetings I've heard how our clients value the changes they have seen in EG and how EG has become a trusted advisor. In addition, our new strategic approach is really resonating with clients and helping us to close more business. We are no longer just selling the best exhibit, we are developing and delivering holistic, custom marketing solutions, working closely with our clients to deliver a successful trade show program that combines powerful show floor presence and brand building, including sophisticated pre and post-show direct marketing and program measurement. We are quickly evolving into a strategic marketing services partner, providing compelling solutions that enable our clients to get more value out of their event marketing spend.

As I've said before, our goal is to make EG the market leader in face to face and experiential marketing services and to deliver the highest level of value and innovation to our clients. In order to accomplish this we need to ensure that our team has the necessary skill sets to succeed. To this end we have reallocated our resources so that they are closely aligned with delivering value-added client services. We continue to make personnel changes that further support the organizational realignment I discussed last quarter. In connection with these personnel changes, we will record a severance-related restructuring charge in the third quarter of approximately $500,000 after tax. At the same time, we have been driven -- been successful in hiring talented professionals who will help drive our new strategic direction. We believe that the Company we now have in place is the right team to execute our strategy. They are committed to providing compelling solutions to our clients' needs, to leveraging our network and global presence as one team, and to performing at the highest levels of excellence at all times.

Going forward, we will continue to actively recruit and hire the best new talent to deepen our bench strength and help drive our future growth. Another key benefit of our organizational realignment is that it enables us to better leverage our network of resources in order to deliver the best value in innovation to our clients. Because of our national scale and global reach we are able to construct, store, and refurbish our clients' exhibit properties in geographic locations that minimize the cost and time required to ship those assets from show to show. By reducing this expense our clients can reallocate their event marketing budgets toward value-added solutions that drive ROI. I believe this is a true discernible difference for EG.

Now let me give some guidance for the rest of 2007 before turning it back over to Paul. For the third quarter, we expect revenue to be in the range of $21 million to $27 million, down from $32 million in the 2006 third quarter. $This decline reflects negative show rotation of about 10 million in revenue from the Farnborough Airshow, which is an every other year show that last occurred in the 2006 third quarter. We expect an operating loss in the range of $6 million to $7 million as compared to a loss of $2.8 million in the 2006 quarter. For the full -- for the the 2007 full year we are increasing the bottom end of our operating income range by $1 million to reflect cost savings and other benefits of our initiatives to reposition the Company. We now expect an operating loss in the range of $5 million to $6.5 million. Revenues are expected to be comparable to 2006.

While it is still too early to celebrate our successes, we are more optimistic today than we were at the beginning of the year. We are improving our sales pipeline and win rate. We are making the transition to a client focused and flexible partner that offers comprehensive, innovative, value-added solutions that extend our clients' brands, enable our clients to generate a higher return on their marketing investment, and we are hiring and developing great people to support our mission. Our approach is working, our sales are improving, our client relationships are getting stronger every day, and we are working hard to accelerate our momentum. With this I'd like to thank the EG team for their hard work and dedication to our mission. There is still much work to be done and the EG team is committed to performing at that highest level to ensure our success. We will continue looking for additional growth and cost savings opportunities in every aspect of the business.

Paul, back to you.

Thank you, John. Now I'll cover highlights for the Travel and Recreation segment. Second quarter revenue for the Travel and Recreation Services segment was $21.4 million, with operating income of $4.5 million. comparable to 2006 second quarter revenue of $21.2 million and operating income of $4.8 million. At Glacier Park, the park service has completed major repairs on going to Sun Road, and this scenic and important travel route across the park is open. The Glacier Park team did a great job planning for this disruption. We opened a bit later than usual but add good quarter due to strong occupancy and expense management.

At Brewster, during the second quarter we completed acquisition of a small company that has the exclusive right to operate motorized boat tours and charters on Lake Minnewanka in Banff. This acquisition is a great strategic fit with Brewster's existing attractions, lodging, charter and sight-seeing services. We expect the Travel and Recreation Services segment to continue to post solid performance during the remainder of 2007. For the third quarter we expect revenue to be in the range of $45 million to $50 million as compared to $46.9 million in the 2006 third quarter. We expect third quarter operating income to be in the range of $21 million to $22 million as compared to $20.8 million in the 2006 quarter. For the full year we expect segment revenue and operating income to be comparable to 2006.

I will now ask Ellen Ingersoll to discuss some financial highlights for the quarter. Ellen?

Thanks, Paul. As shown in table 2 to the earnings release adjusted EBITDA was $35.6 million during the quarter versus $30.2 million in the second quarter of 2006. As shown in table 2, free cash flow, defined as net cash provided by operating activities minus capital expenditures and dividends, was $7 million for the quarter versus $22.8 million in the 2006 second quarter. This decrease in cash flow is due primarily to unfavorable working capital during the quarter. Directionally for 2007, free cash flow is expected to approximate net income plus depreciation and amortization minus capital expenditures and dividends. For the full-year 2007 our working capital is expected to have a slightly negative impact. At June 30, 2007, Viad had had total cash and cash equivalents of $131.9 million as compared to $128.6 million at March 31, 2007. Viad's total debt at end of quarter was $14.4 million with debt-to-capital ratio of 3%. Net interest income was $1 million versus $1.5 million in the second quarter of 2006.

Depreciation and amortization for the quarter was $5.8 million compared to last year's second quarter of $5.2 million. The full year 2007 forecast is approximately $22 million to $24 million. Capital expenditures were $6.5 million in the second quarter of 2007 compared to $4.3 million in the second quarter of 2006. The full-year 2007 is forecast is expected to approximate $34 million to $36 million. Payments on Viad's restructuring reserves were $713,000 during the second quarter versus $231,000 in the second quarter of 2006. Full-year restructuring payments are expected to approximate $3.9 million in 2007, and the 2007 income tax rate year to date was 38.4% versus 30.2% in 2006. The 2006 rate reflects aggregate favorable resolution of tax matters of $4.2 million, and the 2006 rate excluding these tax matters was 39.3%.

Back to you, Paul.

Thanks, Ellen. Before wrapping up my comments and opening up the call to question, let me give some guidance for the 2007 full year and third quarter. Full-year 2007 we expect income to be in the range of $1.72 and $1.80 per share. This compares to our prior guidance of $1.72 to $1.82 per share and 2006 income before other items of $1.75 per share. The change in guidance reflect the third quarter restructuring charge at Exhibitgroup at $0.02 per share. As a reminder this guidance reflects significant negative show rotation of $32 million in revenue, as well as investments in growth initiatives at Exhibitgroup. Excluding Melville. full-year revenue and operating income are expected to be comparable to 2006. Melville is expected to provide another $80 million to $90 million in revenue and be accretive to earnings in 2007.

The guidance range assumes effective tax rate of 38% to 39% as compared to the 2006 effective tax rate on income before other items of 37.2%. For the third quarter we expect income per diluted share to be in the range of $0.21 to $0.29, and this compares to the 2006 third quarter income before other items of $0.77 per share. Revenue is expected to be in the range of $206 million to $232 million, including $15 million to $20 million from Melville. Segment operating income is expected to be in the range of $11million to $14 million, as compared to $27.6 million in the 2006 third quarter. As Kevin and John mentioned earlier, this guidance reflex negative show rotation of about $36 million in revenue at GES and another $10 million at Exhibitgroup, and an operating loss of $1.5 million to $2 million at Melville. Specific full-year and third quarter guidance for each of our operating segments can be found in the earnings press release.

In closing, we've had many successes during the first half of 2000. This includes -- 2007. This includes two straight quarters of double-digit base same-show growth at GES, positive results from our early efforts to reposition Exhibitgroup, and the acquisitions of Melville and Poitras Exposition Services for GES and Lake Minnewanka boat tours for Brewster. While the pricing environment remains somewhat challenging, the exhibition and event industry continues to grow, and the teams at GES and Exhibitgroup are working hard to drive profitable growth. The Travel and Recreation Services businesses have just entered their peak season, and we continue to expect that 2007 will be another year of solid performance at both Brewster and Glacier Park. The entire Viad team is focused on driving growth and increasing shareholder value.

Before I open up the call for questions I'd like to remind you that, while our growth will be temporarily restricted in 2007 by negative show rotation at GES and cost-related growth initiatives at Exhibitgroup, we expect to realize significant growth in 2008. GES should have a banner year. Several major shows that did not occur in 2007 will take place in 2008, and as a result positive show rotation in 2008 is expected to be in excess of $45 million relative to 2007. And we expect Melville to produce stronger profits, as we will have substantially completed our integration efforts and our growth initiatives continue to gain traction. Results at Exhibitgroup should also be stronger as we be bin to realize the benefits of our work to reposition the Company. And lastly, we have some acquisition opportunities in the pipeline that could provide even more up side in 2008. We remain committed to driving growth and enhancing shareholder value.

With that we'll close and open it up for questions. Anthony, if you could open up the question line, please?

Thank you. (OPERATOR INSTRUCTIONS) We'll take our first question from Kartik Mehta with FTN Midwest.

Hi, good morning. This is John calling in for Kartik.

Morning, John.

Question on the show rotation, the benefit of $45 million 2008. Is this $45 million incremental to growth you would have seen in 2007 or would you anticipate the normal growth rates of GES to go beyond that $45 million? And the second part of the question, what sort of impact do you think that show rotation can have on the EG business next year?

I'll take a stab at that first, John, then ask Kevin to comment, too. The show rotation, the $45 million, strictly refers to shows that we do not do in 2007 that occur in the 2008 year. We certainly expect to continue to make progress on our initiatives to drive same-show growth through products and services divisions and productivity improvements and the other things that we've been successful with. Show rotation at Exhibitgroup is -- on an annual basis is less volatile because the Paris Airshow and Farnborough Airshow tend to offset each other. They just happen in different quarters. Kevin, you want to comment any more on that?

What you said was very clear. Show rotation is just for those shows that aren't occurring and that we still expect products and services growth as well as same-show growth.

We have certain shows that happen every other year and every third year, and as a result, once every six years we have a bunch of those shows that don't occur, and then once every six years we have a heavy rotation. 2007 and 2008 are those two years, and then it tends to be more normalized after that.

That's helpful. Question on the EG side of the business. Obviously the repositioning activity continues to progress well and I was curious to know how far you guys think you are away from your target structure and was hoping to see if you could provide us with any color on -- maybe what the sales force for EG looks like today maybe compared to what it was a year ago and maybe you hope for it to look like in a year from now?

Yes, we -- we have made a lot of progress. John and his team have done a great job in -- a good chunk of our efforts have been focused on revamping the sales force, and we've had some good success bringing in some new talent to help us with that. I'll ask John to comment but I think we've -- while we've made a lot of progress we still after long ways to go. We're feeling better today than we did certainly at the beginning of the year with that progress, and we've had some wins this year on the sales side that have certainly helped us. But we continue to have limited visibility in this business and we continue to work very hard. John, you want to make any comments on that?

I think that's all very accurate. No, I would say the only other thing is that we have increased our focus and our reach out to the clients to make them more aware of the capabilities that we are currently expanding and how we can better become a partner with them. In some ways you could say it's developing more of a consultive approach, the sales that you would typically have in a marketing services type of business, and that has primarily been the biggest benefit. To the point about we do have a lot of work to do and our clients and our success with our clients will really determine how fast that moves.

That's helpful. Just a clarification question. The guidance of $1.72 to $1.80, is that assuming the $0.11 benefit during the quarter from the contract resolution, or is that excluding that $0.11?

That includes.

Okay, good. Thank you so much.

Thanks, John.

(OPERATOR INSTRUCTIONS) We'll take our next question from Troy Mastin with William Blair & Company.

Thank you, good morning. Want to ask a question about GES and your overall third quarter outlook. It's quite a bit below overall expectations and I think versus our model it's largely in the GES segment, so I want to understand the impact on profitability on show rotation in a little more detail. You've got, I think, negative $36 million in show rotation, and based on your results last year --

Troy, are you there? We lost you.

We'll take our next question from Tom Bacon.

Morning, Tom.

Hi, how are you, Paul?

Good, thank you.

I was just wondering if you could maybe talk a little bit more about the -- in terms of the GES business. You had -- your guidance was at the incremental revenue for Melville was going to be $20 million to $25 million, and you had negative show rotation in there, and you're saying you had had same-store -- or the same-show growth was something like 12%. I'm just wondering, what's the offset in there? Is there still pressure on [Draege] or is it a customer loss? What's the offset in there?

Say that one more time for me, John. I want to make sure I follow the question.

Well, in terms of -- if you take what you had in the first quarter last year, and you back out the negative show rotation of $7 million, you throw on the $20 million to $25 million from Melville, it seems like -- and then you consider the 12% that you said that you had in same-show growth, or I guess maybe that's in discretionary services, it seems like there's something in there that maybe acted as a little bit of an offset and I'm just wondering, A, if I'm thinking about that right, or -- I'm just trying to get into what the moving parts are there.

Yes, we did have a little bit higher insurance settlement cost for the quarter than we typically have. That's really the main offset. Other than that I think things were as expected.

But even on the revenue side?

I think revenue was right in middle of our guidance for the quarter.

Okay. And then maybe just -- in terms of the $1.72 to $1.80, so that includes the $0.11 benefit that you got from the contract settlement.

Right, offset by a little higher insurance costs.

Did the prior guidance include that or no?

Yes.

Okay.

We had had it -- e had it in a later quarter.

Okay. And then maybe in terms of the -- I hate to steal the previous caller's question that got cut off, but maybe if you could just talk a little bit about the seasonality. It looks like -- obviously in order to get there with your third quarter guidance, that you look -- you expect GES to be profitable in the fourth quarter, which is unusual given the seas -- the typical seasonality of that business. So, I guess I'm wondering what -- is that -- in terms of the fourth quarter, is that the impact from Melville or what's -- what's driving that?

It's not from Melville. As we talked previously, Melville is strong in the first two quarters and has an operating loss in the second two quarters. As far as GES goes, it's not uncommon -- we were definitely first half of the year loaded in the business. When we have the heavy show rotation like we'll have in 2008, a lot of that is third quarter business. When we don't have that, that certainly affects the overall third quarter results. I don't think anything else -- I mean, we are typically a front-end, first half of the year loaded business. As far as the fourth quarter goes this year, Tom, we do have positive show rotation from a big October show, which certainly helps out the fourth quarter as opposed to 2006.

Okay. But, I mean, that's like maybe $8 million or something like that, right?

Yes.

For GES?

Yes.

Okay. And cab you just remind us, obviously the -- you didn't repurchase any shares. What's the status of the share repurchase program right now?

You're right, we did not purchase any shares during the quarter. To date we've purchased 1.75 million. We have an existing announcement up of to two million shares, so we have 250,000 remaining on that, and our strategy hasn't changed there. We will be a repurchaser of our shares from time to time.

Okay. Great. That's it for me. Thank you.

Thanks, Tom.

(OPERATOR INSTRUCTIONS) We'll go next to Troy Mastin with William Blair & Company.

Let's try that again. I hope you can hear me okay.

Yes, we got you now, Troy. Good morning.

Thank you. I was just trying to understand what sort available impact show rotation has on profitability, because as I was saying, I think the third quarter EPS numbers are quite a bit below expectations, and I suspect that's show rotation having more of an incremental negative effect on profit, because that's where we saw more of a shortfall versus what we were looking for. So, as I back into some numbers taking a couple million out for the hit from Melville in the quarter, it looks like you're probably losing maybe $10 million to $12 million in operating profit in the third quarter due to that negative $36 million show rotation. So tell me if that matches relatively correct. Are your incremental margins, positive or negative from show rotation, that 30% to 40%, 30% to 35% range?

Yes, I think that's fairly accurate, Troy. Losing $36 million on the infrastructure is a lot in one quarter, and certainly we try to manage that as much as we can, but at the same time, our expense base needs to be geared up as we move into 2008 with a heavy positive show rotation. It's always a challenge for Kevin and his team to manage expenses down in down rotation years, but at the same time we have to be able to service the business when it ramps back up, and that's certainly one of the trickier parts of our business. Kevin, you want to comment on that at all?

I think you're exactly right there, Paul. $36 million in one quarter is a substantial drop. The other thing I'd comment on is that last year's third quarter was an exceptionally large quarter, so you put the two together and you compare them year over year.

Okay, good. Do you have a number for Melville's contribution? I didn't see it in the press release.

We said $1.5 million to $2 million loss for the third quarter.

Sorry, I meant top line in the quarter -- in the second quarter.

We didn't disclose that.

Okay. And then have you tried to estimate how much of a negative effect your feeling in the Travel and Rec segment due to the late opening at Glacier Park?

It's been very minimal, Troy. As I mentioned in my comments, I think the Glacier Park team did a fantastic job in planning for that. Going to Sun Road is a key attraction to park visitorship. We knew that due to the late fall storms last year that the park service was going to have to repair the road. [Cindy Augunof, Joe Fasler] and the GPI team did a fantastic job of planning for that. As a result, we opened up lighter, but they did a great job managing expenses and driving occupancy for the later opening, and it's actually been a very good season so far.

Okay. Good. And then on EG, you mentioned that you filled more business first half of this year. I'm curious how the pipeline looks, if you think this trend can continue, or is this a relatively seasonal sales cycle to where maybe it would be unrealistic to expect maybe double the amount of sales that you had last year?

I don't know that I'd do that because we continue to have limited visibility on the sales front here, and we're getting later in the season where clients are really looking at every dollar they spend, especially if they're on a calendar year. We certainly feel good about the improvements we've seen. We're excited is about some of the progress that we've made, but we -- we recognize that we still got a lot of work to do.

Okay, and then there was one I overlooked on GES. Specifically, the benefit from the new acquisition up in Quebec City, is there anything you can provide there? You said it's relatively immaterial, but can you give some perspective there?

Yes, that's a small acquisition. We paid around $2 million for that, Troy. It'll have -- it helps our economies of scale in the eastern Canada market, and a great little company up there, great management team, but quite small.

Okay. And then I meant to ask about the pricing environment. You mentioned it remains somewhat challenging. I think this is a statement you haven't made in the past, necessarily, as it relates to GES. Is there something you've seen there that's marginally more price sensitive?

Yes, and it ebbs and flows a little bit during business cycles. I think we see a little bit more competitive environment than we've probably seen in recent times. I think Kevin and his team are doing a good job of managing that and continuing to get a fair price increase where we can.

Okay. Thank you very much.

Thanks, Troy.

We'll take our next question from Clint Fendley with Davenport.

Thank you. Good morning. I guess I'm a bit confused by your guidance here. What I thought I heard you say was that you had anticipated the $0.11 up side on the contract dispute and that that was already baked into your prior guidance of $1.72 to $1.82 so that in effect you've only shaved guidance by $0.02 cents. Is that correct?

I think the comment was that it happened tin second quarter. We anticipated it in the second half of the year, so it it didn't affect full year, it just was a little bit of mix between the two quarters. We've changed our guidance from $1.72 to $1.82 to $1.72 to $1.80, and really what we've done there is just tighten up the range a little bit on Exhibitgroup due to the restructuring that we took there. But we think the bottom end of the range will make up the restructuring cost with the ongoing savings.

So are there any other contingencies similar to the contract dispute that are inherent in your guidance then at this point?

No.

Okay. And I guess one final question. On the Travel segment did you see any impact from some of the U.S. passport problems that they've had there in D.C.?

Yes, the U.S. government recently -- they fell way behind in issuing passports, and it's a requirement now, certainly if you're flying in, and probably the biggest impact we see is just from the confusion that it creates in people not knowing who has to have a passport, when you have to have a passport. I think it affects people mostly traveling with children because you have to have passport for your kids now. The government came out and said is as long as you have proof that you applied for it, you're okay because they've fallen so far behind.

It's something we're watching fairly closely. We do believe it could have some negative impact on U.S. visitorship into Canada. The news that they were relaxing a little bit the requirement and that you could get in and out of the country with proof that you had applied for the passport I think will help. Overall, though, sophisticated travelers know how to get in and out. It's more often when they're people that have not done at lot that are impacted.

Thank you.

Thank you.

It appears there are no further questions at this time. I would like to turn the call over to Mr. Paul Dykstra for any additional or closing remarks.

Thanks, Anthony. Again, we're doing everything we can to make this as good a Company as we can. John, Kevin, at Exhibitgroup and GES. are working very hard, as well as the Brewster and Glacier Park teams. Had a good quarter, we expect to have a good year, and then are certainly positioning ourselves for an extremely strong 2008. We look forward to giving you another update in three months, and thanks very much for being with us.

That does conclude today's conference call. You may now disconnect.