Viad Corp (VVI) 2008 Q2 法說會逐字稿

Good morning and thank you for standing by.

All participants will be able to listen only until the question and answer portion of today's conference..

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

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

I would like to turn the conference over to Ms.

Carrie Long, Director, Investor Relations.

You may begin.

Thank you, Julie.

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

Before we begin I'd like to remind you that certain statements made during this call which are not historical facts may constitute forward-looking statements.

Actual results could differ early 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 reported filed with the SEC.

This call may not be recorded or reproduced in transcripts without the expressed written permission of Viad and during today's call we'll refer to tables one and two in our earnings press release.

That press release can be found on our website at www.viad.com.

Now I'll turn it over to Paul Dykstra, President, CEO of Viad.

Thanks, Carrie, and good morning, everybody.

Thank you very much for being with us today.

On today's call you'll hear from Kevin Rabbitt, although Kevin is fighting some nasty laryngitis.

I'll handle the prepared comments for GES and Kevin will conserve his voice and will be available for questions at the end.

John Jastrem, President of Exhibitgroup/Giltspur, and Ellen Ingersoll, Chief Financial Officer.

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

We had a very good quarter and I want to recognize the terrific effort of all of Viad's employees.

Second quarter revenue was $277.2 million with segment operating income of $21.1 million, and income from continuing operations of $13.1 million or $0.63 per diluted share.

Income before other items which excludes income from the favorable resolution of tax matters was $12.2 million or $0.59 per share.

These results are better than our prior guidance of $0.37 to $0.48 per share mainly due to stronger than expect revenue growth at Exhibitgroup/Giltspur.

As John will discuss shortly Exhibitgroup/Giltspur realized a revenue increase of $3.6 million despite negative show rotation of $13 million.

The expected year-over-year decline in our income per share was driven by a change in the mix of shows and 2007 second quarter income of $3.9 million from a contract settlement at GES as well as the seasonal operating loss at the Becker Group.

Now let's move on to the individual segment results and again you may want to refer to table one of the press release which provides revenues and operating income for each of the segments.

I will first cover GES.

GES had a solid quarter with operating income of $14 million on revenue of $187.6 million.

Operating income was at the high end of our prior guidance reflecting strong execution by the GES team and continued growth in the trade show industry.

As compared to the 2007 second quarter revenue was down $5.2 million.

This decline was due in part to the loss of a major trade show which we were able to offset through new business wins and growth in other shows.

Operating income was $8.1 million lower than the 2007 second quarter reflecting several factors including a nonrecurring contract settlement of $3.9 million in the 2007 quarter, shifts from some shows from higher margin to lower margin geographies, and higher year-over-year staffing levels needed to produce a record revenue year.

During the second quarter we signed $260 million in future bookings including multi-year renewals with magic and the National Restaurant Association.

We currently have over 70% of our remaining 2008 forecasted revenue under contract, and our total revenue backlog for 2008 and beyond stands at $1.4 billion.

I'm also very happy to report that this week we extended our contract with the International Consumer Electronics show.

This is the largest annual trade show in North America through 2013.

This extension is not including in the backlog figures I just reported.

Our base same show growth was 4.6%, reflecting growth across all of our industry sectors.

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

Base same shows represented 27% of our total second quarter revenue.

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

While the trade show industry as a whole continues to grow at a modest pace it is experiencing softness in certain sectors in shows, particularly retail and consumer as Kevin discussed last quarter.

During the third quarter we will have a heavier mix of retail and consumer type shows as compared to the second quarter and as a result we are expecting our basis show growth metric to post a sequential quarter decline.

At the same time we also have a heavier mix of industrial shows as three major nonannual shows rotate into the third quarter including IMTS, mine expo and the international woodworking machinery and furniture supply fair.

Industrial shows continue to be strong and keep in mind that due to the rotating nature of IMTS, mine expo and the woodworking show, these shows will not be included in our third quarter base same show growth metric.

Overall we expect third quarter revenue to be in the range of $195 million to $210 million as compared to $151.6 million in the 2007 third quarter.

Operating income is expected to be in the range of $7 million to $8.5 million as compared to a loss of $2.7 million in the 2007 third quarter.

This guidance reflects the expectation that show rotation would positively impact revenues by about $45 million relative to the 2007 third quarter.

Additionally it reflects the assumption that base same show growth will decline from the second quarter as I mentioned previously.

For the full year we are still targeting operating income growth of at least 14% and we continue to expect low double digit revenue growth as compared to 2007.

The economy is clearly more challenging today than it was a year ago, and some show organizers have expressed some concern about attendance and exhibitor participation at future events.

To date the trade show business has seen only limited impact in select industry sectors from the economic challenges.

Overall the trade show industry continues to grow.

And we continue to look for every opportunity to gain market share, grow our base business and drive additional efficiencies to increase shareholder value.

The GES team remains committed to driving growth, delivering solid results and positioning the company for ongoing success.

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

In closing I'd like to thank the dedicated hard working employees at GES for their ongoing efforts for another winning year for GES.

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

Next I'll hit the highlights of our experiential marketing segment, and as a reminder our experiential marketing services include Exhibitgroup/Giltspur and Becker Group.

We acquired Becker Group on January 4th, 2008.

Second quarter revenue for the segment was $65.7 million with operating income of $1.9 million which is substantially better than our prior guidance due to stronger than expected revenues at Exhibitgroup/Giltspur.

As compared to the 2007 second quarter, segment revenue increased $4.2 million or 6.9% and segment operating income declined by $2.6 million.

The decline in operating income on higher revenues was due to the acquisition of Becker Group which produced an operating loss of $2.7 million on revenues of $660,000.

As I discussed last quarter, Becker Group business is seasonal and we expect operating losses in each of the first three quarters with the substantial profit in the fourth quarter.

For the year we expect the acquisition to be accretive to earnings.

While Becker Group had a quiet quarter in terms of revenue the team was very busy with the June 7th launch of The Chronicles of Narnia: The Exhibition.

Based on the blockbuster film series and CS Lewis's fictional books, this immersive and interactive exhibition blends education with entertainment.

As visitors walked through the word of Narnia they learn about subjects such as weather, the environment and animal habitat.

Visitors can build a free-standing arch, experience a frozen waterfall, and view many original props and costumes from the films.

The exhibition will run at the Arizona Science Center until October 26 and then we'll move on to its next museum venue.

This is a fantastic exhibition and has well received by visitors.

We are thrilled that we are able to open it in Phoenix and the Arizona Science Center has been and continues to be a great partner in this venture.

Narnia is Becker Group's first major touring exhibition.

Becker Group is also busy developing its next major touring exhibition, which is based on the Harry Potter books and films.

This exhibition is scheduled to launch in 2009 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.

Producing and managing exhibitions of this size and profile is a significant milestone for Becker Group, and we are very proud to have been entrusted with this iconic and successful brand.

Now let me get back to second quarter results.

On an organic basis, in other words excluding the Becker Group acquisition, segment revenue was $65.1 million up $3.6 million or 5.8% from the 2007 second quarter, and segment operating income was $4.7 million, up 2.3% despite negative show rotation of $13 million.

This organic growth reflects the positive results of exhibit groups efforts to reposition the company as an experienced marketing agency.

Now I'll turn it over to John to elaborate on the great work that the EG team is doing.

John?

Thanks, Paul.

Our success continues to be driven by our client-centric approach which allow us to partner with and advise our clients on their show activities to generate better results.

We have also expanded our scope of services.

Clients are viewing us as a broader brand and marketing partner as opposed to a traditional trade show exhibit producer.

This has enabled us to capture incremental client spend, win new clients and increase client satisfaction and loyalty.

During the quarter, clients in certain industry sectors such as healthcare, decided to invest in more engaging attendee experiences by utilizing technologies at the show site.

Our close working relationships with our clients enabled us to benefit from this incremental discretionary spend.

Our new client business during the quarter included Honeywell and the permanent installation for the pro football hall of fame.

In addition we picked up new international business with existing clients.

And we collaborated with the Becker Group to produce the highly creative Narnia Exhibition which was a win win for EG, Becker Group and Viad.

We also have a great success story with our EG retail business which produces kiosks and retail merchandising unit through shopping malls and lifestyle centers.

A major recently hired EG to be the primary supplier for the replacement of its merchandising units across the United States.

This client previously used an overseas supplier and decided to make the switch to EG based on their need for a local partner who can deliver higher level quality and lower transportation costs.

With fuel prices reaching record levels, EG's national and global network of locations for managing and storing plant properties is a major advantage over our regional and local competitors.

In addition we manage the client properties entrusted to our network through a proprietary technology that facilitates efficient handling and processing.

Through our network our clients realized significant savings on shipping and handling of their properties.

These savings enable smarter spending on targeted marketing activities that help our clients gain market share.

We've had some really great wins this year, and we are happy with our progress to date.

We have a solid pipeline of work for the third quarter, and we will benefit from approximately $10 million of positive show rotation from the Farnborough air show in England.

However, we are facing an uncertain economic environment.

Clients are scrutinizing their marketing budgets.

Some are delaying decision regarding trade show and other marketing spend and some are decreasing their plan spend.

As a result we have poor visibility into revenues in the fourth quarter.

Accordingly we are cautious in our outlook for the fourth quarter, but given the strong growth we've realized thus far, we are confident in our ability to achieve the full year guidance that we set forth at the beginning of this year.

Going forward we continue to work closely with our clients to identify smarter ways for them to deploy their 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 of any reduction in client budgets may have on our results.

We are taking all proactive measures to ensure EG's cost stay in line with customer 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 make sure 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 on to Travel and Recreation Services results.

For the full year our guidance for the 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 loss $2 million to break even as a 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 $3.3 million to $4.8 million excluding the noncash amortization of acquired intangible assets.

For the third quarter, we expect segment revenue to be in the range of $41 million to $47 million including $1 million to $2 million at Becker Group.

We expect an operating loss of $3 million to $5 million including a loss of $2.5 million to $3.5 million at Becker Group.

The loss at Becker Group is expected due to the seasonality of the business.

On an organic basis, excluding the Becker Group acquisition, third quarter revenue is expected to be in the range of $40 million to $45 million with an operating loss of $.5 million to $1.5 million.

This reflects substantial growth over 2007 third quarter revenue of $26.8 million and an operating loss of $6.2 million driven by positive show rotation revenue of about $10 million and increases in existing client spend and new business at Exhibitgroup/Giltspur.

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

The travel and recreation services segment was in line with our second quarter.

Revenue was $23.8 million, up 11.5% from 2007 and operating income increased $15.2% to $5.2 million.

Relative to the 2007 second quarter, Brewster experienced increase in transportation volume, improved occupancy and RevPar at its (monorail) and stronger volume at its Minnewanka Lake cruise operation.

Passenger volumes at the ice field were down slightly reflecting lower group volume from Japan and some softness in US volume.

However this volume decline was more than offset by price increases.

Brewster has a very diverse base of clientele from across the globe.

Canadians represent the largest customer segment and given the relative strength of the Canadian economy and scenic nature of Brewster's properties and attractions, overall demand for Brewster's services remains very healthy.

Glacier Park realized an increase in the number of rooms occupied and in room revenue versus the 2007 second quarter.

This was despite a seasonably late and heavy snowfall in June that delayed the opening of the Going to the Sun Road which is a popular tourist attraction in the park.

The road did not open to the public until July 2nd, which is about three weeks later than normal, but comparable to last year.

Although the economy is soft and travel costs are increasing action demand for our unique locations and attractions remained strong during the quarter.

We expect the Travel and Recreation Services segment to continue to post solid performance during the remainder of 2008.

We are maintaining our full year guidance to single digit growth in revenue with operating margin comparable to 2007.

For the third quarter, we expect revenue to be in the range of $50 million to $52 million as compared to $50.3 million in the 2007 third quarter.

We expect third quarter operating income to be in the range of $22 million to $23 million as compared to $22.1 million in the 2007 second quarter.

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

Ellen?

Thanks Paul.

As shown in table two of the earning release adjusted EBITDA was $26.8 million during the quarter versus $35.6 million in the second quarter 2007.

As shown in table two free cash flow defined as net cash provided by operating activities minus capital expenditures and dividends was $68,000 for the quarter versus $5.9 million in the 2007 second quarter.

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

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

At June 30, 2008, Viad had total cash and cash equivalence of $111.6 million as compared to $108.5 million at March 31, 2008.

Viad's total debt at the end of the quarter was $13.5 million with a debt to capital ratio of 2.6%.

Our net interest income for the quarter was $238,000 versus $1 million in the second quarter 2007.

Depreciation and amortization for the quarter was $7.2 million compared to last year's second quarter of $5.8 million.

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

Capital expenditures were $13.5 million in the second quarter of 2008 compared to $6.5 million in the second quarter of 2007.

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

Payments on Viad's restructuring reserves were $485,000 during the quarter versus $714,000 in the second quarter 2007.

Full year 2008 restructuring payments are expected to approximate $2.2 million.

2008 income tax rate year-to-date was 35.5% versus 38.4% in 2007.

The 2008 rate reflects aggregate favorable resolution of tax matters of $853,000.

The 2008 tax rate excluding the favorable resolution of tax matters was 37.4%.

Back to you, Paul.

Thanks, Ellen.

Before wrapping up comments and opening the call to questions, let me give some guidance for 2008 full year and for the third 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 24% as compared to 2007.

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

The increases over 2007 are also expect to be driven by continued growth in GES 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 37% to 38% as compared to the 2007 effective tax rate on income before other items of 35.9%.

For the third quarter we expect income per diluted share to be in the range of $0.64 to $0.74.

This compares to 2007 third quarter income before other items of $0.32.

Revenue is expect to be in the range of $286 million to $309 million with operating income in the range of $24.5 million to $28 million.

This compares to 2007 third quarter revenue of $228.8 million and operating income of $13.2 million.

Our third quarter results are expected to benefit from positive show rotation of about $55 million including $45 million at GES and $10 million at Exhibitgroup/Giltspur.

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

In closing we had a solid first half of the year, and we remain on track to deliver substantial growth in earnings this year, and I again want to recognize and thank the hard work and dedication of all of Viad's employees.

The trade show industry is proving to be quite resilient, despite a softer economy.

While we have seen some pockets of weakness the overall trade show industry continued to grow during the second quarter.

GES realized positive base same show growth and Exhibitgroup/Giltspur continued to be successful in winning new client business and increasing penetration into existing client spending.

Becker Group launched its Chronicles of Narnia exhibition in June and is gearing up for a holiday season.

In our travel and recreation segment our unique and scenic locations and attractions in the national parks continue to be in demand despite higher fuel costs and reduced airline capacity.

Brewster and Glacier Park should continue to produce strong operating margins and cash flow.

All of our businesses are focused on capitalizing on growth opportunities while also increasing efficiencies to drive strong results.

Our balance sheet remains strong, enabling us to pursue strategic acquisitions, invest in our existing businesses and return capital to our shareholders.

The entire Viad team remains committed to driving growth and enhancing shareholder.

With that we'll close and take your questions.

Julie, can you open the line to questions, please?

Yes.

Thank you.

(OPERATOR INSTRUCTIONS) Our first question comes from Troy Mastin with William Blair & Company.

Your line is open.

Good morning.

Thank you.

First question relates to the strength of the quarter.

Looks like it was primarily at Exhibitgroup.

I'm curious why the upside driven by that strength doesn't flow through to impact your full year guidance.

Maybe something has been pulled forward from Q4, Q3, or you put in some extra conservatism into the outlook.

Just some perspective there.

Good morning, Troy.

Yes.

While the trade show industry held up well this year, the deterioration of the economy is causing us to be a little bit more cautious in our outlook.

At Exhibitgroup we are seeing clients delay decisions.

Some are talking about reducing their spend later this year and as we always talk with Exhibitgroup/Giltspur, we have a little less visibility than we have in some of our other businesses.

Exhibitgroup/Giltspur had great success thus far and are trying to get ahead of the curve by being as aggressive as we can in the second quarter and that resulted in some great results from John and his team.

So far we've been exceeding expectations and we hope we are a little bit conservative.

At GES we expect two major retail shows to be softer than previously reflected in our guidance.

In Q2, the retail piece of our business is fairly small, but that was actually up a little bit but we do expect two shows in the third quarter to be soft.

We are a bit conservative but we will do everything possible to maximize.

What would be implied fairly negative organic growth in the Exhibitgroup business in the fourth quarter, are you seeing that necessarily, or you just not have visibility and it wouldn't be prudent at this moment to take out your expectation?

Some of the Exhibitgroup stronger results in the second quarter were the results of accelerated client spend that was anticipated to hit the second half of the year.

John, do you want to comment too?

Sure.

To give more clarity on that, two items I think jump out.

One is on the EG retail side where some of the use were delivered sooner than we had originally projected, and then the other part was on our new Becker relationship where we scheduled and took advantage of some of the slower time in our shop to accelerate some work and get those projects completed.

Can you give us ballpark estimate how much that helped Exhibitgroup in the quarter?

It was a few million, Troy.

Okay.

Great.

And I'm curious on the experiential marketing side, if you can give more detail on these kiosks that you have gotten involve, how substantial this is, how the revenue will flow over the longer term if this will be a certain period of time over a number of quarters and then will cease or would this a more ongoing type of business?

Well, certainly it's a key part of our business.

It's something that we continue to aggressively pursue and look at new opportunities all the time.

I think it's hard to project because it is project oriented type of work, and I think it is very tied to the economy.

So it's really difficult to say exactly how that would lay out but we do have a number of opportunity that is we are pursuing.

We have some terrific opportunities in that business that we are working on and one of those came to fruition for this year and it's a business that John and his team has put good focus on.

The one you mentioned, does that just impact you through the remainder of the year?

It impact us from the visibility point this year but we are hoping to build relationship ask deliver great products.

We would expect that to continue.

Good.

I also want to ask about free cash flow.

It's been weak for the past two quarters.

I think you mentioned for the full year you expect working capital to be negative.

That was one of the primary reasons for the weakness versus where you were last year.

Can you give us some guidelines as to where it might come for the year versus 2007 and these working capital trends I would assume would reverse themselves over time.

If you can give more insight as to why it's been so negative.

I'll have Ellen comment on that but our cash flow for the quarter is where we expected it to be.

We will definitely see stronger cash flow going forward.

Ellen, do you want to --

Sure.

We have one time capital gains in '07.

We have more advanced deposits come in in December and cash flow really exceeded our expectation at the end of the year.

It ended up over $45 million which was much higher than we thought.

So it did set us up for a hole in the beginning of the year.

The first half of the year is our negative cash flow quarter and the second half of the year we expect substantial cash flow and good cash flow in the fourth quarter.

In terms of '07 -- '08 as compared to '07, I would think we should see an uptick in free cash flow for the full year.

An uptick from now but not from '07.

It will be lower than that because of the positive impact in working capital in '07 and negative impact in '08.

When you look back to '06 it was about $53 million.

I'm trying to understand the declining trend and maybe there was an unusual item.

Exactly.

In that year there was also a big push in AR Exhibitgroup which added to that positive working capital there.

There's no significant declining trend.

No.

We are very focused on receivables and making sure that we are managing that working capital especially in this economic environment.

As we look into '09, are we at a low water mark in terms of the kind of impact we should see in working capital and is it reasonable we should expect to see a profitable growth?

Yes.

We are constantly focused on it.

In '06 you referred to the pick up there.

We had good activities.

We are now in more incremental activity and managing our receivable and other working capital items to make sure that we are moving those forward.

Okay.

And then if I can move on to talk about a little bit more about GES and show rotation more generally as we look forward into 2009, I'd like to give the opportunity to offer up any thoughts on show rotation '09 and how other factors might impact your margins in GES in '09 things like energy prices and any other factors that might be driving operating margins and where you might see margins in '09 directionally versus '08.

Okay.

Kevin has been able to conserve his voice and I'll call on him in a second.

He has three beautiful daughters but he pick up a little bug from one of them.

Rotation for '09 is still a moving target.

We expect it to be upward of $50 million negative but again it's very early in the process and part of that depends on how the heavy show rotation in the third quarter comes out, Troy.

It's kind of too early to set an exact number here because clients are still going through the budgeting process.

We are very excited.

We are going to have some nice opportunity to bid some nice competitive business.

And Kevin, do you want to comment on that?

I think Paul you are right on there with what we are seeing in rotation at this point in time.

Around the other things you talked about Troy, fuel cost is something we continue to manage very aggressively.

We talked about it in the past that PSP partially offsets that, but we also have been working very hard on supply consolidation and working with major suppliers around finding joint productivity opportunities.

So the challenges out there that we look at around the economy and fuel costs are the things we'll continue to manage through.

We are a very good company.

We've weathered tough economic challenges in the past.

And we have got very good people who will make the necessary adjustments and feel very positive about the momentum and things that we've done whether it would be international or metrics or the technology offerings.

So we'll continue to stay focus on addressing challenges in front of us and taking advantage of opportunities that are out there.

Is there reason to think you'll have a significant change in your operating margin profile in 2009 from 2008, given what you see now?

No.

Okay.

And then there's a lot of negative headlines as it relates to the state of Las Vegas.

Maybe this is a little more on the consumer end but if you can give us your perspective on the Las Vegas market for trade shows.

And maybe an extension of this or maybe an adjacent question is, if you look or have looked into some of the larger shows that you you have coming up, and where your bookings are in terms of the number of exhibitors or the square footage versus where you would have expected or where it's been in the past to maybe get a gauge as to where you are seeing meaningful signs of change early signs of change or if it's just more specific to the industries in which those shows are exposed.

Let me make a comment first.

Yes.

We are seeing some adjustments in airline schedules and things like that.

Its something that we are watching closely.

You referenced specifically the Las Vegas market, and the convention and visitors bureau in Las Vegas is very well funded.

They're very aggressive They have close relationships working with the airlines to make sure there's good lift in to support both the tourism business and convention businesses in those towns.

Kevin, do you want to make any comments on that?

Let me add, Troy, there's nothing I see kind of geography by geography that would impact what we are seeing from an outlook perspective.

Paul had talked about in the comments around the industry sectors and that's much more relevant.

There is nothing specific to Las Vegas or any other geography, but just looking around industry segments and that's where you are seeing trends.

Okay.

And one final question and I'll turn the floor over.

The deceleration of same show growth in GES, maybe this is just tied to those same industry sectors.

I'm curious if there's anything else that might be causing the deceleration.

And are there areas in which you've seen in particular service areas that are notably less robust than other areas if it has to do with some discretionary items, or if it has something to do with some exhibitor exclusive services or anything else?

Thanks.

Thanks Troy.

I'll make some general comments and then maybe Kevin can get a little more specific.

Same show growth is a little less than it has been but in these economic times I think we are feeling good that the trade show business is growing.

As we've always said, it is tied very closely to the industries that they operate in.

Retail and consumer shows have probably been one of the softer sectors so far this year, but again I think we commented on the last call that is not across all shows.

So in the second quarter retail was up slightly.

In the third quarter we do expect it to be down.

The industrial shows and heavy equipment shows we do in the third quarter are nonannual pieces of business.

We do expect those to perform very well.

Kevin, do you want to make any additional comments?

Any additional comments, I would say that all sectors are different just depending on what is happening in those sectors from an economic standpoint, and seeing very strong growth in other sectors, we talked a lot about retail and the consumer being down, but we've seen good growth in other sectors, services and government related sectors and even some nice solid growth in technology.

So we might be down in same show growth perspective compared to last year, but again last year it was a very high level and we still continue do very well from services standpoint of growing that portion of our business.

We have not seen that slow at all.

Okay.

Thank you.

Thanks Troy.

(OPERATOR INSTRUCTIONS).

Our next question comes from Clint Fendley with Davenport.

Your line is open.

Thank you.

Good morning, guys.

Nice quarter in a tough environment here.

I wondered on the loss of the major trade show at GES, was that due to a cancellation or a show rotation or was it a competitive loss?

That was a competitive loss.

Okay.

So you knew about that well in advance then.

Yes.

Yes.

That was built into our forecast.

Okay.

And any reason why the consumer electronic show would not be in the backlog or is that a timing issue with regard to the June 30?

It was just a technicality, Clint.

It was signed in July and the numbers we gave you were through June 30.

Okay.

Okay.

And then I think we heard from the previous questioner, no major operating margin changes expected at least at this point in '09 for GES, if I heard correctly.

Any thoughts on any of the remaining segments there?

We should be doing as well or better in the remaining segments and certainly are very optimistic about margin improvement in the Exhibitgroup.

Okay.

Thank you.

And then on the CapEx, I guess we saw pretty good increase in that for the quarter.

Would we expect that to be sustained through the remainder of the year?

We did have a high CapEx quarter, but the estimate for the year remains the same.

So the estimate is still at [38 to 40] for the entire year.

And second quarter was about comparable to first quarter.

It's just that it was a lot higher than second quarter of last year.

And any idea how much the Canadian FX helped the travel segment in the quarter?

It was about $300,000.

$350,000 on the bottom line.

I think it was $0.93 a year-ago and about par this year.

So there was a little bit of help.

Okay.

And then --

We did have, though, good organic growth despite that help.

Okay.

And I guess final question, not a big deal, but I wondered what the [disc] ops charges related to for the entity that had previously been sold.

Ellen, can you handle that?

Yes.

Just one second.

We had some obligation from our legacy companies, and I believe those were related to some environmental payments that we had to pay.

These things go back several decades.

Yes.

Okay.

Is there expectation for that to continue?

Was it sort of an unexpected charge if you will?

It wasn't an unexpected charge because we have it -- it's been reserved long ago.

This was just something outside of what we had reserved, but no.

We have ongoing payments, and occasionally we'll have a small amount that is outside that.

These have been winding down for a number of years and over the last five years has substantially abated.

Okay.

Thanks guys.

Thanks Clint.

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

Your line is open.

Sorry.

A couple of quick follow ups.

Is there a different way we should maybe think about same show growth for the third quarter, given the shows that are not included in that calculation since those are more robust industries?

I'm curious if you've done any analysis like that to maybe get a different representation.

Because I do want to understand the implication for Q3 same show growth, if you are saying it will be lower than Q2 or will be negative.

So first, maybe answer that, and then if there's a different way you think we can look at that to better understand the true organic growth of your business, that would be helpful.

It should be positive with the exception of the two retail shows that I talked about.

Our calculation excludes the nonannual pieces of business just because we haven't figure out a good way to do that, but those shows will be -- one is in every four year show.

That's min expo.

That is a fairly strong industry and should be real solid, and then INTS and IWFR every other year shows.

We exclude them from the calculation, but we certainly expect both of those to be very well.

The major rotation show in the first quarter that we talked about was CONEXPO and that was up substantially over the three-year period from the last occurrence.

Just to be clear, are you saying the total same show growth number in Q3 will still be positive?

Excluding two retail shows.

If you include those, what would happen?

It goes down.

In the comments we talked about the sequential decline quarter-over-quarter.

Yes.

I don't understand what that means.

Does that mean it will be negative or not?

Yes.

It will be negative for the third quarter, including those two shows.

Excluding those two shows it will be positive, and again that does not include the non annual pieces of business that we expect to be very strong for the quarter.

And after the third quarter our retail shows are substantially done for the year.

So --

Okay.

Good -- which would may be imply fourth quarter without really having the visibility necessarily without any retail shows given recent trends same show growth is positive?

Absolutely.

Yes.

But could you include those shows, those larger shows that are not annual probably would have a positive effect on same show growth to where it would be a more positive sort of organic measure if such a measure existed?

Yes.

Yes.

Absolutely.

Okay.

And then finally just to clarify on the question you got on travel and rec business in terms of the currency benefit.

Can you give us some insight on the revenue impact from the weak dollar versus the Canadian dollar?

Yes.

It was a little over $1 million.

Okay.

Great.

Thanks.

Thanks Troy.

I currently show no further questions.

I would now like to turn it back to Paul Dykstra for closing comments.

Thanks, Julie, and again thanks, everybody, for being with us today.

We continue to feel very good about our full year.

It's going to be a very solid year.

Again I want to thank the employees that do such a great job for our customers and our shareholders.

Our long-term prospects remain very good.

We continue to have very strong management teams and the ability to adjust as necessary going forward.

So we are very, very excited about this year and our longer-term prospects.

We look forward to getting together again with you in October.

Have a great rest of the summer.

Thank you.