Viad Corp (VVI) 2008 Q1 法說會逐字稿

Welcome and thank you for standing by.

At this time, all participants are in a listen-only mode.

(OPERATOR INSTRUCTIONS) Today's conference is being recorded.

If you have any objections you may disconnect at this time.

Now I will turn the meeting over to Ms.

Carrie Long, Director Investor Relations.

You may begin.

Good morning and thank you for attending the Viad Corp first quarter 2008 earnings conference call.

I'd like to remind everyone that certain statements made during the 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 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 transcripts without the expressed written permission of Viad.

During today's call, we'll be referring to tables one and two in our earnings press release which can be found on our website at www.viad.com.

With that I'd like to introduce Paul Dykstra, Chairman, President and CEO, of Viad Corp.

Good morning, everyone.

Thank you very much for being with us today.

On today's call you will also hear from Kevin Rabbitt, President of GES Expedition Services, John Jastrem, President of Exhibitgroup/Giltspur, and Ellen Ingersoll, Viad's Chief Financial Officer.

As we discuss our first quarter results you may want to refer to tables one and two in the earnings press release.

First quarter income from continuing operations was $16.7 million or $0.81 per diluted share and this is in line with our prior guidance of $0.75 to $0.86 per share and up 22.7% from 2007 first quarter income of $0.66 per share.

First quarter revenue was $335.4 million, up $51.8 million or 18.2% from the 2007 quarter.

And segment operating income increased 13.8% to $28.6 million.

This growth was driven by positive show rotation at GES and strong revenue growth at Exhibitgroup/Giltspur.

Now let's move on tho the individual operating segment results.

Again you may want to refer to table one of the press release which provides revenues and operating income for each of the operating segments.

First I'd like to turn it over to Kevin Rabbitt to discuss GES.

Kevin.

Thanks, Paul.

The first quarter was a record quarter for us with revenue of $285.7 million, up $40.8 million or 16.7% from the first quarter of 2007.

Operating income increased 11.3% to $35.8 million.

This growth was driven in part by show rotation which positively impacted our revenues by $18 million.

During the quarter we serviced four trade shows that will be among the top 10 in the trade show week top 200 this year including the two largest trade shows, the International Consumer Electronics show, and CONEXPO-CON/AGG and IFPE, a major construction trade show held every three years.

Both of these shows experienced growth and set new records for net square footage this year.

The International Consumer Electronics show encompassed over 1.8 million net square feet of exhibit space.

And CONEXPO-CON/AGG and IFPE grew by more than 20% to 2.4 million net square feet.

Producing shows of this magnitude significant undertaking and requires considerable resources and a great commitment from the entire GES network.

Our first quarter revenue was also bolstered by $8.7 million from an additional month of revenue at Melville, which we acquired on February 1st, 2007, as well as continued growth in exhibit discretionary revenue and new business which includes the National Retail Federation Annual Convention and Expo and the Philadelphia International Auto show.

During the quarter we signed nearly $150 million in future bookings.

We currently have 60% of our remaining 2008 forecasted revenue under contract, and our total revenue backlog for 2008 and beyond stands at $1.3 billion.

Even though we had a record quarter generating operating income of $35.8 million, we missed our operating income guidance by $652,000.

This was primarily due to a couple of major shows in the retail sector.

The largest was a show that had a date shift and took place after the buying season for its industry.

Because of this timing, some exhibitors chose not to participate and some of those that did participate chose smaller spaces causing freight weight to decline significantly.

We had anticipated some decline but clearly underestimated the extent.

We also experienced some weakness in other retail consumer shows which result in the drag on our overall base same show growth during the quarter.

As a reminder base the same show growth is a measure of growth in our shows that occur in the same city in the same quarter every year.

Base same shows represented 44% of our total first quarter revenue.

On a net basis our first quarter base same shows were essentially flat year-over-year.

If you exclude retail consumer shows, our base same show growth would have been 7.2% for the quarter reflecting continued strength in other sectors including technology, hotel and food service, and government and military shows.

And as I mentioned earlier, CONEXPO and CON/AGG which is not included in the same show growth measure because it's a tri-annual event realized very strong growth over it's last occurrence in 2005.

The trade show industry is a reflection of the broader economy, and our shows represent every sector of the economy.

Right now we're seeing pockets of weakness in select events and industries but continued growth in others.

Great companies anticipate challenges and take action to ensure their long-term health.

GES demonstrated this after the Dotcom meltdown in 9/11.

Our aggressive actions enabled GES to grow and prosper during the years that followed.

Today we are once again confronted with the turbs in the economy.

While the trade show business has seen only limited impact in select industries reeled to the economic challenges thus far, show organizers have expressed some concern about attendance and exhibiter participation and events during late 2008 and into 2009.

With our busiest quarter of 2008 behind us we've completed a thorough review of our cost structure.

Based on this review we are making changes within our business that will not only reduce our costs but also better align our resources to address the challenges and opportunities that lie ahead.

At the overhead support level we have reduced positions and increased the spans of control of several Managers to ensure we remain lean as an organization.

In San Francisco we have integrated our operations into the California regional management structure that is working very well in L.A.

and San Diego to deliver strong customer service and financial results.

We'll still maintain a full production facility with over 50,000 square feet in San Francisco, which is slightly larger than our competitors in that market.

And our largest trade show city, Las Vegas, we have made some organizational changes that will enable us to continue increasing our customer service and safety levels while also driving productivity gains.

As a result of these changes, we are still targeting full year operating income in the range of 14% to 18% despite the first quarter miss, and we continue to expect to realize low double-digit revenue growth as compared to 2007.

For the second quarter we expect revenue to be in the range of $180 million to $195 million as compared to $192.8 million in the 2007 second quarter.

This guidance reflects the expectation that show rotation will negatively impact revenues by about $5 million.

Operating income is expected to to be in the range of $12 million to $14 million as compared to $22 million in the 2007 second quarter.

The lower operating income is due to several factors including a nonrecurring contract settlement of $3.9 million in the 2007 quarter, negative geographic shift of some shows from higher margin to lower margin geographies, and continued higher year-over-year staffing levels needed to produce a larger third quarter.

We expect the third quarter revenue to increase by more than $50 million from the 2007 third quarter.

The cost structure adjustments discussed earlier are not expected to have a large impact in the second quarter as the benefits generate off are offset by one-time severance costs.

The cost savings will provide benefit in the third and fourth quarters.

We're also feeling some pressure from higher fuel costs as a result we will be adjusting our petroleum surcharge rates to help cover a portion of the increase in costs, the adjustment will be effective for shows beginning in the third quarter of 2008.

In closing I would like to thank the dedicated hard working employees at GES for their ongoing efforts to ensure another winning year for our Company.

While our first quarter results were somewhat affected by weakness in certain industry shows, other shows performed well.

We are not seeing a significant broad-based slowdown that we are keeping a close eye on the health of the underlying industries of the shows which we will service later this year.

Overall we remain bullish on our outlook for 2008.

We'll benefit from significant positive show rotation of about $50 million revenue, and the cost reduction efforts that I discussed earlier should position us well to produce strong results despite the economic turbulence while also continuing to provide great service to our clients.

Going forward, we'll remain focused on delivering solid results and positioning ourselves for continued success.

We will continue to provide quality products and services along with best-in-class customer service at a great value to our customers.

As always, the GES team is committed to winning for all our stakeholders.

Thanks, Kevin.

Next I'll hit the highlights of our experiential marketing service segment and then ask John to discuss Exhibitgroup/Giltspur in more detail.

As we announced last quarter we completed the acquisition of Becker Group, an experiential marketing company on January 4th, 2008.

For financial reporting purposes Becker Group will be combined with Exhibitgroup/Giltspur to form our new experiential marketing service segment.

First quarter revenue for this segment was $43.9 million with an operating loss of $4.1 million, which is in line with our overall guidance for Exhibitgroup/Giltspur and Becker Group.

On an organic basis, in other words excluding the Becker Group acquisition, segment revenue was $42.7 million, up $8.4 million or 24.4% from the 2007 first quarter and segment operating results improved by $2.7 million to a loss of $2 million.

This reflects very strong growth and better than expected performance at Exhibitgroup/Giltspur driven by revenue from new clients and growth in international revenues.

We continue to be encouraged by the progress at Exhibitgroup/Giltspur is making to restore this business to profitability.

The acquisition of Becker Group added $1.2 million in revenue to the first quarter with an operating loss of $2.1 million.

Becker Group's results are slightly below our prior guidance due to the timing of various projects that were deferred to later quarters.

While Becker Group had a quiet quarter in terms of revenue, the team has been very busy preparing for the launch of a new touring exhibition, "The Chronicles of Narnia: The Exhibition." This 10,000 square foot exhibition is being produced in association with Walt Disney pictures and Walden Media and will blend educational content with an immersive environment that is based on the blockbuster film series inspired by C.S.

Lewis' fictional books.

The Narnia Exhibition will premier at the Arizona Science Center in June to coincide with the opening of Prince Caspian, the second installment of this blockbuster film series.

The first film adaption grossed over $745 million worldwide and over 100 million books have been sold.

We're also very excited and proud to announce that in 2009 Becker Group in partnership with Warner Brothers consumer products will launch another major touring exhibition, "Harry Potter: The Exhibition." This 10,000 square foot exhibit is based on the Warner Brothers films and J.K.

Rowling's book series, and will enable fans to experience the magical world of Harry Potter through authentic film artifacts including costumes, props, set dressings and magical creatures from all of the films.

"Harry Potter: The Exhibition" will be faithful to the spirit of the amazing world created by J.K.

Rowling that has been captured in films.

The Harry Potter book series has sold over 350 million copies, and the film franchise has grossed over $4.5 billion worldwide.

Producing and managing exhibitions of this size and profile is a significant milestone for Becker Group, and we're very proud to have been entrusted with these iconic and tremendously successful brands.

Now I'll ask John to add a bit more color on Exhibitgroup/Giltspur's first quarter growth.

John.

Thanks, Paul.

As I've discussed on prior calls, we have been very focused on embracing a client centered culture throughout our organization and using a consolidative sales approach to deliver more value to our clients.

The entire EG team is partnering closely with our clients to help plan and execute their exhibit programs.

And our clients are providing positive feedback regarding the difference this approach is making in driving the success of their programs.

And perspective clients are also taking notice.

We are winning business with market leaders in high tech, consumer products and manufacturing such as Topcon Positioning Systems for whom we did a new build for CONEXPO-CON/AGG this year as well as Homemedics at the recent housewares show.

Our innovative work continues to set our clients apart.

For example, LG Electronics drew crowds at the 2008 international consumer electronics show by featuring a digital virtual fashion show.

Most recently LG's presence at a major Telecom show did more than highlight their brand and business leadership.

It also captivated the attendees and dominated the show.

LG's success was continued at the recent kitchen and bath show as well.

Our work with LG was recently recognized at a leading industry conference with the gold ex award for Best Trade Show Exhibit at CES 2008.

Another key success factor is our network of 25 client care centers.

With fuel prices reaching record levels, EG's national and global network of locations to manage and store client properties is a major advantage over our regional and local competitors.

In addition, we manage our client properties in the network through a proprietary technology branded Trace that facilitates efficient handling and processing.

Through our network -- throughout our network our clients are realizing savings on shipping and handling of their properties.

These savings enable our clients to increase spending on targeted marketing activities that we provide that help our clients gain market share.

All of these factors, our culture change, our outstanding creative work, and our global resources are attracting extremely talented people to EG.

Specifically, we have attracted outstanding people in creative, design and marketing.

Our consistently improving level of talent is helping to transform EG into an integrated marketing services firm and setting us apart from our competition.

Because of our client focus, our exceptional creative talent, our high quality work, we realized very strong first quarter revenue growth of 24.4% year-over-year.

As Kevin mentioned earlier, we are facing a turbulent economy right now.

And while our clients have been following through on their show commitments in the first part of this year, some are scrutinizing their plans for future trade show spending.

We will be watching this closely for the remainder of this year and into 2009.

We are working closely with our clients to identify smarter ways for them to deploy their budget dollars which may include custom rentals, targeting customers through preshow marketing, and shifting from a fixed to variable model by outsourcing their planning, coordination and program execution to us.

These efforts should help us manage in the current climate and potentially capture a greater share of our clients marketing spend, thereby mitigating the impact that any reduction in client budgets may have on our results.

And we are taking proactive measures to ensure EG's costs stay in line with our customer's spending.

In closing, we have a lot of positive momentum as demonstrated by our strong revenue growth.

We are cognizant of the current market conditions and are proactively taking steps to ensure that EG continues to gain market share and produce the best results possible.

Paul, back to you.

Thank you, John.

Now I'll give some guidance for the experiential marketing services segment, before moving to Travel and Recreation services routes.

For the full year our guidance for this segment remains unchanged.

On an organic basis excluding the acquisition of Becker Group revenue is expected to increase at a single-digit rate from 2007 revenue of $172.7 million.

Operating results are expected to be in the range of a loss of $2 million to break even as compared to a loss of $4.8 million in 2007.

Full year revenue from the Becker Group acquisition is expected to be in the range of $32 million to $36 million with operating income in the range of $1.5 million to $3 million or $3.4 million to $4.9 million excluding the noncash amortization of acquired intangible assets.

Due to the seasonal nature of Becker Group's business, it is expected to generate operating losses during the first three quarters of the year with a substantial profit in the fourth quarter.

For the second quarter we expect segment revenue to be in the range of $53.3 million to $59 million including $300,000 to $1 million at Becker Group.

Segment operating results are expected to be in the range of a loss of $2 million to break even including a loss of $3 million to $4 million at Becker Group.

On an organic basis excluding the Becker Group acquisition, second quarter revenues expected to be in the range of $53 million to $58 million as compared to $61.5 million in the 2007 second quarter.

Organic operating income is expected to be in the range of $2 million to $3 million as compared to 2007 second quarter operating income of $4.6 million.

The decline from 2007 is entirely related to negative show rotation of $13 million in revenue due to the timing of the Paris Air show and every other year's show that will occur again in the second quarter of 2009.

Now I'll cover highlights for the Travel and Recreation Services segment.

First quarter performance at the Travel and Recreation Services segment was in line with our guidance for the seasonally slow quarter.

Revenue was $5.9 million with an operating loss of $3.1 million, and this compares to 2007 first quarter revenue of $4.5 million an operating loss of $2.4 million.

Year-over-year results were impacted by foreign currency translation which caused both revenue and the operating loss to increase versus the 2007 quarter.

Due to it's seasonal nature, the Travel and Recreation Services segment generates less than 10% of its full year revenues during the first quarter.

As a result, our main focus during this time is on preparing for the busy summer season and controlling costs.

The fourth quarter is similarly slow.

The third quarter is the segments strongest quarter providing roughly 55% to 65% of full year revenue and the second quarter provides about 20% to 30%.

Early indications are positive for another year of strong results in this segment, and we are maintaining our full year guidance of single-digit growth in revenue with operating margins that are comparable to 2007.

For the second quarter we expect revenue to be in the range of $22 million to $24 million as compared to $21.4 million in the 2007 second quarter.

We expect operating income to be in the range of $4 million to $5 million as come compared to $4.5 million in the 2007 quarter.

I'll now ask Ellen Ingersoll to discuss some financial highlights for the quarter.

Ellen.

Thanks, Paul.

As shown in table two to the earnings press release adjusted EBITDA was $34 million during the quarter versus $28.6 million in the first quarter of 2007.

As shown in table two free cash flow defined as net cash provided by operating activities minus cash-- capital expenditures and dividends was an outflow of $35.6 million for the quarter versus an outflow of $11.4 million in the 2007 first quarter.

The decrease in free cash flow is due primarily to fluctuations in working capital.

Directionally for 2008 free cash flow is expected to approximate net income plus depreciation and amortization minus capital expenditures and dividends.

For the full year 2008 our working capital is expected to have a negative impact.

At March 31, 2008, Viad had total cash and cash equivalents of $108.5 million as compared to $165.1 million at December 31, 2007.

The decrease in cash was due to the purchase of Becker Group and cash used in operations.

Viad's total debt at the end of the quarter was $14 million with a debt-to-capital ratio of 2.8%.

Our net interest income for the quarter was $637,000 versus $1.3 million in the first quarter of 2007.

Depreciation and amortization for the quarter was $6.6 million compared to last year's first quarter of $5.2 million.

The full year 2008 forecast is approximately $27 million to $29 million.

Capital expenditures were $12 million in the first quarter of 2008, and this is compared to $11.3 million in the first quarter of 2007.

The full year 2008 forecast is approximately $38 million to $40 million.

Payments on Viad's restructuring reserves were $477,000 during the first quarter and this is versus $1.2 million in the first quarter of 2007.

For the full year 2008 restructuring payments are expected to approximate $1.8 million.

The 2008 income tax rate for the first quarter was 38%.

This is compared to 39% in the 2007 first quarter.

And back to you, Paul.

Thanks, Ellen.

Before wrapping up my comments and opening the call to questions, let me give some guidance for 2008 full year and second quarter.

Our guidance for 2008 full year income remains unchanged.

We continue to expect 2008 full year income to be in the range of $2.17 to $2.32 per share, up significantly from 2007 income before other items of $1.88 per share.

We expect full year revenue to increase at a low double-digit rate with an increase in operating income of 18% to 26% as compared to 2007.

Show rotation is expect to positively impact full year revenues by about $50 million.

The increases over 2007 are also expected to be driven by continued growth in GES's base operations, improved performance at Exhibitgroup/Giltspur, the addition of Becker Group and continued solid performance at the Travel and Recreation Services segment.

Our guidance range for 2008 assumes an effective tax rate of approximately 38% as compared to the 2007 effective tax rate on income before other items of 35.9%.

For the second quarter we expect income per diluted share to be in the range of $0.37 to $0.48.

This compares to 2007 income from continuing operations of $0.87 per share in the 2007 second quarter.

Revenue is expected to be in the range of $255 million to $275 million as compared to $275.7 million in the 2007 quarter.

Segment operating income is expected to be in the range of $14.5 million to $18.5 million as compared to $31.1 million in the 2007 quarter.

Our year-over-year second quarter growth will be impacted by negative show rotation of about $18 million and an operating loss at Becker Group.

Additionally, last year's second quarter included income of $3.9 million from the settlement of a contract dispute.

Specific full year and second quarter guidance for each of our operating segments can be found in the earnings press release.

In closing, our strong growth during the first quarter got us off to a good start for 2008, and we continue to expect to deliver substantial growth and earnings this year despite the challenging economic environment.

While we did experience some weakness in certain industry trade shows during the quarter, other shows performed well, including the International Consumer Electronics show, and CONEXPO-CON/AGG and IFPE which will be the two largest trade shows in the U.S.

this year.

We're keeping a close eye on the health of the shows that we will service later this year, but we remain bullish on our outlook for 2008.

GES will benefit from significant positive show rotation, and the implementation of cost reduction efforts.

Additionally, Exhibitgroup/Giltspur continues to make great progress with its turn around efforts realizing very strong revenue growth this quarter.

The addition of Becker Group will provide new opportunities for growth beyond the trade show environment, and we're very excited about the prospects for Becker Group's "The Chronicles of Narnia" and Harry Potter touring exhibitions.

Brewster and Glacier Park should continue to produce strong operating margins and cash flow, and our balance sheet remains strong, enabling us to pursue strategic acquisitions, invest in our existing businesses and return capital to our share holders.

As always the entire Viad team remains committed to driving growth and enhancing share holder value.

With that we'll close and take your questions.

Julie, can you open up the question line, please?

Yes, thank you.

(OPERATOR INSTRUCTIONS) Our first question comes from Kartik Mehta, FTN Midwest.

Your line is open.

Good morning, Paul.

Good morning, Kartik.

Kevin, I just wanted to better understand what happened to GES.

You had indicated some shows-- the dates of some shows got pushed back, and as a result maybe smaller -- exhibitors had smaller booths, and I just wanted to better understand maybe what happened there, was it just strictly timing?

Was it maybe what's happening in the economy?

So maybe if we could get your thoughts there?

Kevin, do you want to handle that one?

Sure.

Kartik, how you doing today?

I'm well, thank you.

The-- as I talked about in my comments, it was a-- it started with-- still was a very-- was a record quarter in substantial growth.

And the myth was, as I'd outlined, there was really two factors there.

There's one sector we talked about, and that's the retail/consumer sector that is down and talked about how that impacted base same show growth relatively flat when you include that sector, up 7.2% when you exclude that sector.

And then we did have a couple of shows in the retail side that had significant decline in square footage and one of those did have dates that were just unfortunately past the traditional buying season, and that impacted whether exhibitors came and what size space they took and as well as how much freight they brought.

I think that's a short-term challenge, and it's a -- we believe it's a healthy event as it moves forward.

And Paul, if you look at the Company overall, do you think you're better positioned this time around if there's a downturn in the economy versus last time?

Or would you think the implications on the Company financially would be about the same?

I think we're pretty well-positioned Kartik.

Certainly since 9/11 and kind of the couple of years that followed that, we have gotten a lot leaner cost structure.

We've done a lot of centralizing and regional rising at GES at Exhibitgroup.

We've really taken down our overall capacity, John and his team have done a good job there.

So in a lot of ways we're quite well-positioned if that happens, and if you remember even back in those days, we reacted to the conditions very quickly, continued to have very positive results at GES.

We had other issues that we were still working through at Exhibitgroup, but clearly Exhibitgroup is a much better Company today than it was at that time when we were still continuing to take large chunks of capacity out.

So our portfolio is very diverse as Kevin said.

We've always said shows go as their industries go, so strong industries tend to have strong shows, weaker industries tend to have weaker shows.

But overall we are very, very diverse and don't have any specific concentration in the portfolio.

So Paul, it sounds like from your statements overall really there hasn't been that much of an impact from the weakening economy to the Company.

Obviously some of the shows or some of the sectors might be impacted.

But if you looked at the Company, what would be some of the first signs you would see where you would say, gosh, there is some overall broad based slowing both for GES and EG?

Well, both those Companies are very close to their customers, so in general we've-- I think we've talked in the past we've got pretty good visibility at GES.

We're working with our clients several months to a year out in front of these events, and have a pretty good pulse on what square footage is going to look like on certain types of shows, we'll even call exhibitors to understand what kind of freight they're bringing in which helps us plan for equipment needs and that type of stuff.

Same thing at John's business.

Maybe a little bit less lead time, but again what John and his team have been trying to do is get very close to our clients, not only to understand their business needs and their future, but also to find pockets of spending that we haven't maybe serviced before, and I think we've been successful in doing that.

So again we're going to watch those things that would be indicators of square footage is shrinking we'll make the adjustments.

If budgets become contingencies on the Exhibitgroup side, we will certainly make adjustments, but right now what we've seen has not been any kind of broad-based issues.

It has been more industry specific which has been typical of what we've seen in the past.

And just one last question.

Kevin, on GES, would the margins from the-- the drop off in margins in the second quarter from the first quarter, would that just be the lack of incremental revenue that you would have had in the second quarter versus the first quarter?

Kevin, can you handle that one?

Absolutely.

Kartik (inaudible) my statements which you said there is correct.

I mean, you-- we have talked about the lumpiness of revenue many, many times before, and if we could kind of run our shows one after another during a specific time period, we could leverage our overhead structure better.

So really the factors that are in the second quarter are the ones I outlined that it's -- we don't have the contract settlement that we had in the past, and then we do have some geographic shift, and we've talked about how not all geographies drive the same margins.

And then we do have higher year-over-year staffing costs, and those are related to the huge third quarter that we have coming up, and we need those to continue to produce the high levels of service that we are used to providing for our customers.

But this wasn't unexpected to us, and it doesn't change the full year at all for us.

Thank you very much, gentlemen.

Thanks, Kartik.

Our next question comes from Troy Mastin with William Blair & Company.

Your line is open.

Good morning, thank you.

Good morning, Troy.

Quick question.

It seems that there's a bit more caution in your tone today than three months ago, and I am curious what economic environment is reflected in your guidance today versus three months ago?

Either qualitative statements or quantitative would be great.

I really don't think there is a whole lot of change in our tone, Troy.

We've seen a pretty good solid first quarter here, indications are that that should continue throughout the year, but we are in a very uncertain economic time.

Certainly you're seeing a lot of uncertainty out there.

And so I wouldn't pinpoint any one thing other than there is some general uncertainty that we see, but we feel again, to reiterate my earlier comments to Kartik's question, we're positioned pretty well in order to handle that.

We're looking forward to the rest of this year and also starting to look into 2009 and what we need to do to continue to strengthen the business.

Okay.

And then at the mid-point of your second quarter guidance I think in the first half of the year you'll have about $1.25 in EPS.

You've had a lot of volatility in your Q3 and Q4 numbers over the past two years, I think in '07 you had about 70% of the back half of EPS in Q3 and 30% in Q4, in '06 it was 110 and minus 10.

Can you give us some sense based on what you see in show rotation and other factors what the back half of 2008 might look like so we get a better sense for how the earnings per share might fall out?

I'm not looking for specific guidance but maybe give us some general indication.

Sure, Ellen, do you want to take that one?

Sure.

Troy, for the third quarter it's probably easiest to give you kind of some directional kind of guidance there.

Last year we were at $0.32 a share, and we're going to be a bit more than double that for this year.

We have a very big third quarter.

And then the fourth quarter we do have the Becker Group this year, so the fourth quarter is going to be quite a bit higher than last year in the '07 quarter.

Okay.

That should help a lot.

Moving on to GES, you mentioned the moves you're taking to eliminate some costs.

It sounds as if those have all been absorbed right into the P&L in the first quarter and they'll be some more in the second quarter.

Wonder if you could just quantify that, how much severance and other related sort of one time costs you're encountering in the first two quarters?

And then how meaningful those benefits might be in the back half of the year?

Yes.

The dollar amounts are relatively significant in the seven figures, Troy.

None of that hit in the first quarter.

We had to get through our major shows including CONEXPO.

We do anticipate that there is benefits in the third and fourth quarters as a result of those actions.

Is there anything you can do to quantify a little bit or is seven figures as far as you'll go?

That's as far as we'll go.

Okay.

And then you've got the surcharge coming on in the third quarter, you said, as it relates to fuel.

I am curious, I don't think this makes up all the added cost, you implied is makes up part of the costs.

And then if it only makes up part of the costs, how much of a margin impact might fuel have if we look out to the rest of the year?

Kevin, do you want to handle that one?

Sure.

Troy the-- as we talked about many times before PSP it really does as you described there only make up a portion of the increased costs.

And we talked about the different things that petroleum drives in our business.

You've got the product of carpet and visqueen and substraights, and then you've got obviously all of the trucking that we do.

The increase will only make up a portion of it.

But you look at impact, we'll make up the rest of it by again working with our suppliers as well as driving productivity that the costs of petroleum-based products in any given quarter could be $1 million or more, but I don't believe it will have an impact on the bottom line numbers with the actions that we're taking.

Okay, great.

And then so same show growth was flat in the quarter.

I want to understand if your exposure to retailers, which seems to be one of the key drivers here to flat same show growth, is unusually heavily weighted in the first quarter.

How does your exposure to retailers compare in the rest of the year?

And what might that mean for same show growth if it's relatively light?

Would it imply maybe mid-single-digit same show growth for the rest of the year, something like that?

Kevin, do you want to take that one?

Sure.

At the-- for a retail mix perspective, Troy, the first quarter is a heavier quarter.

If you-- there's a lot of different ways to kind of look at the numbers.

But if you look at is as just total as a percentage of total U.S.

revenue, in total U.S.

revenue was somewhere around 25% in the first quarter.

If you look at forecasting into the Q2 and beyond, it's a lower percentage rest of the year, it's less than 20%.

So it is-- it's still a large sector, but not -- we've got a lot of it past us in the first quarter here.

And I don't know how to predict same show growth, Troy.

We've talked about that before.

There's different ways that-- I'm still cautiously optimistic that we'll continue to see strong growth just like we did outside the retail sector.

And I suppose that it sounds like part of the same show growth softness was due to this timing issue and part of it was softness in the retail.

So do you foresee any timing-related issues from the retail vertical in the rest of the year?

There's none that we've identified.

As I talked about in my comments, we did know about this timing perspective in the first quarter.

We just-- we-- it was a bigger impact than we had anticipated.

So it wasn't something we didn't see, it's just that we didn't appropriately quantify the impact at a level that did take enough reduction.

Okay but you don't see any for the rest of the year right now?

No, I don't see any out there.

Okay and then finally, one last one.

Cash flow softness down significantly year-over-year.

It sounds like this may have had to do with collections or if you can give a little more detail if it was DSO-related, just something to help us understand a little bit more?

Sure.

Well, we ended up '07 very strong, above our expectations for '07, and that was a lot of our collections at the end of the year, a lot of advanced deposits, other working capital, payables increasing getting ready for the first quarter, so it-- this was expected for us that the first quarter would be down, because we had a very, very strong fourth quarter.

So that-- it kind of flipped from out of the first and back into the fourth quarter.

So it was expected for us for free cash flow for the year.

So last year ended up with a positive impact in working capital, this year on mostly negative impact on working capital.

Okay, thanks.

Sure.

Thanks, Troy.

(OPERATOR INSTRUCTIONS) Our next question comes from Clint Fendley with Davenport.

Your line is open.

Thank you.

Good morning, everyone.

Good morning, Clint.

Paul, I wondered in the last few weeks we've seen Freeman pick up and win the plastics show which was for '09 which was a number 12 ranked show, and that kind of followed a few months ago when we saw them also went from you guys the broadcasting show which was a top 13 show.

I mean, why do you think they're winning some of these big shows and what role has pricing played here in these moves?

Kevin, why don't you comment on that, and then I'll add to that.

Sure.

Clint, how are you doing?

Doing well, thanks.

The-- talked about this in the past a little bit is that we try not to comment on specific accounts, but things get reported in the trade press, certainly need to do that.

We continue over the last several years to win more than we lose, occasionally accounts do change hands, and we pride ourselves on the great service we provide to our clients, and there to try and win back the clients in the past after an opportunity presents itself.

But I don't recall a lot of the ones that have been reported that have been kind of our direction, I'll just rattle off a few that are very large shows as well.

One, Chicago Auto, Dallas Market Center, American Foundry and Cast Expo, Java One, National Retail Federation, TruValue, Toy preview in Dallas, so it's a competitive market out there.

We're all battling for accounts, and we continue to win more than we lose, and we'll continue to keep fighting that.

Okay.

So it sounds like the trade mags need to do a little bit better job of paying attention to your wins then.

I prefer that we all just keep battling out, and we'll keep battling them ourselves.

And what about I mean maybe even the impact on -- I know you guys aren't looking forward yet really to '09, but is there any impact from this-- the Plastic show on '09 and any preliminary thoughts here on how that might be looking given the macroenvironment that we're in currently?

If you, it's me, it was an every three-year show that would have positively impacted show rotation for next year, Clint.

The one thing we do have is the ability now to work on generating some new business and Kevin and his team are out working very hard to replace that business, and as Kevin mentioned, we're generally successful in doing that, so we do have a little bit of time.

We are looking at both what we need to do to hit this year's revenues numbers in 2008, but also not losing sight that we're looking for positive things to happen in 2009 as well.

Kevin, do you want to add any color to that?

I think you summarized it very good, Paul.

It was an every three-year event.

We provided very, very strong service and we're told we'll have the opportunity to bid it the next time around as well.

And we are actively working to sell things and fill holes in 2009 and have a very strong pipeline at this point in time.

Okay, great.

And switching over to GES, and not to beat a dead horse here, but obviously the revenue was well within your expectations, but at the-- it was the operating earnings that were a bit short.

I mean, was it all really due to the retail weakness that we saw or were there some other cost pressures that were at work during the quarter?

Kevin?

Clint, it is really with what I outlined in the-- in my comments.

And we really had kind of two factors, same thing I had talked with Kartik about.

We had this retail and consumer segment that was not performing as strong as the other sectors, and then we had a couple of shows in the specifically in the retail segment and one that had the date issue.

And I think we we're less than 2% off of where we thought we'd be.

We would like to have been there, but it doesn't affect the full year, and we will-- we'll make sure that we deliver on the full year.

Okay.

Okay.

Fair enough.

And then finally here, obviously you guys are excited about the "The Chronicles of Narnia" win and the Harry Potter.

I mean is this something that we should expect to move the revenue needle very much here?

Potentially.

The Harry Potter one is not until 2009, and again those are the things that we're doing to prepare ourselves for growth beyond 2008.

The "The Chronicles of Narnia" will launch in June of this year in Arizona at the Arizona Science Center, so in our home town backyard here.

We're extremely excited about this touring exhibition obviously, the ability to partner with Walt Disney and Walden Books for something that has the popularity of C.S.

Lewis and the movies is a tremendous opportunity for us.

And we're working very hard to take full advantage of that opportunity that we hope then will lead to other opportunities as well.

Okay.

Great.

Thank you, guys.

Thanks, Clint.

We have no further questions.

I will now turn it back to the speakers.

Okay.

Well, again, we appreciate everybody spending time with us today.

We're off to a good start.

We're going to watch things very closely and make sure that we're making adjustments as we get information.

We are operating in a fairly uncertain economy right now, but right now we're still bullish on 2008.

We made a lot of progress at Exhibitgroup and great wins there and good revenue growth, solid performance at the other companies, and some tremendously exciting new opportunities at Becker Group.

So thanks again for being with us.

We look forward to talking to you at the end of the next quarter.

Thank you.