Viad Corp (VVI) 2009 Q4 法說會逐字稿

Welcome to the Viad Corp 2009 fourth-quarter and full-year earnings release conference.

All lines will be in listen-only during today's presentation.

(Operator Instructions).

Today's conference is being recorded; if you do have any objections you make disconnect.

I would like to introduce your host, Carrie Long, Director of Investor Relations.

Please begin.

Thank you, and good morning.

We appreciate you attending our conference call today.

Before we begin I'd like to remind everyone that certain statements made during the call which are not historical facts may constitute 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.

During today's call we'll be referring to Tables 1 and 2 in our earnings press release which is available on our website at, www.Viad.com.

Today you'll hear from Paul Dykstra, Viad's Chairman, President and CEO, and Ellen Ingersoll, Viad's Chief Financial Officer.

Additionally, John Jastrem, President of our Marketing & Events Group, and Michael Hannan, President of our Travel & Recreation Group, will both be available for comments during the question-and-answer portion at the end of the call.

And now I'll turn it over to Ellen to discuss financial results.

Good morning, everyone.

Thank you for being with us today.

As I cover our fourth-quarter and full-year results you may want to refer to Tables 1 and 2 of our earnings press release.

Our fourth-quarter loss before other items was $0.35 per share on revenues of $170.2 million and a segment operating loss of $9.6 million.

These results were better than our prior guidance but down from 2008 fourth-quarter income before other items of $0.18 per share, revenues of $205.8 million and segment operating income of $6.3 million.

The expected declines were primarily due to recessionary pressures on our Marketing & Events Group which includes GES and the Experiential Marketing Services segment.

GES experienced a fourth-quarter revenue decline of $14.9 million or 11.3% and operating results declined by $5.4 million to a loss of $5.1 million.

The decreases from 2008 were driven primarily by same show declines partially offset by positive show rotation revenue of $5 million.

Revenues from GES' (inaudible) same shows, which we define as shows that occur every year in the same quarter and city, declined by 20% in the fourth quarter as a result of continued weakness in exhibitor spending.

Our Experiential Marketing Services segment saw a fourth-quarter revenue decline of $20.1 million or nearly 30% reflecting a significant decline in demand for holiday installations from shopping center clients and reduced exhibitor spending.

Fourth-quarter segment operating results declined by $9.8 million to a loss of $2.1 million.

The Travel & Recreation Group's seasonally slow fourth-quarter revenues of $5.7 million and operating loss of $2.4 million were comparable to the 2008 quarter.

We also had some unusual items during the quarter that are excluded from our definition of income before other items.

More specifically we had restructuring charges of $0.22 per share related to reorganization activities, non-cash impairment charges of $0.20 per share related to a non-operating asset held for sale as of December 31, 2009, as well as the non-cash write-down of certain intangible assets at GES and income of $0.01 per share from the favorable resolution of tax matters.

Including these items our quarterly loss from continuing operations was $0.76 per share.

A reconciliation of fourth-quarter and full-year income before other items to income from continuing operations can be found on table two of the earnings release.

For the full year of our loss before other items was $0.11 per share on revenues of $805.8 million and segment operating income of $4.2 million.

As compared to the 2008 full-year, segment operating income declined by $77.8 million on a revenue decline of $315.1 million or 28.1%.

In addition to recessionary pressures, our full-year revenues were also negatively affected by $87 million as a result of share rotation and $31 million as a result of foreign exchange rate variances.

Our Marketing & Events Group experienced a full-year revenue decline of $303.7 million or 29.4%.

GES' full-year revenues were down $246.9 million or 30.5%.

Excluding negative show rotation of $87 million and unfavorable currency translation of about $19 million, the decline in GES' full-year revenues was roughly 17%.

This was driven primarily by reduced exhibitor spending which resulted in full-year base same show revenue declines of 22.5%.

Full-year Experiential Marketing Services revenues were down $56.9 million or 25.2% reflecting reduced exhibitor spending and weak demand for holiday installations from shopping centers.

The declines in full-year operating results of $56.3 million in GES and $16.5 million in the Experiential Marketing Services segment were driven by lower revenues partially offset by ongoing cost reduction efforts.

As a result of headcount and facility rationalizations, tight control over discretionary spending and lower performance-based incentives, total Marketing & Events Group overhead costs were more than $40 million lower than 2008.

Our Travel & Recreation Group was also negatively impacted by recessionary pressures and unfavorable currency translation.

Full-year revenue decreased $11.3 million from 2008 with a $5 million drop in operating income.

Excluding unfavorable currency translation, Travel & Recreation Group revenues were down $7.3 million or 8.4% and our operating margins remained very strong at 22.7%.

Now I'll cover some balance sheet and cash flow items before turning the call over to Paul who will elaborate on the performance of our business as well as key initiatives.

Our balance sheet remains very strong.

At December 31, 2009 our cash and cash equivalents totaled $116.3 million and our total debt at the end of the quarter was $12.8 million with a debt to capital ratio of 3.2%.

Free cash flow was an outflow of $11.3 million for the quarter versus an inflow of $5.5 million in the 2008 fourth quarter reflecting lower income and changes in working capital partially offset by lower capital expenditures.

Capital expenditures were $2.6 million for the 2009 quarter versus $7 million in the 2008 quarter.

Fourth-quarter depreciation and amortization expense was $6.9 million versus $6.7 million in the 2008 quarter and payments on our restructuring reserves were $1.9 million in the 2009 quarter versus $788,000 in the 2008 quarter.

And now I'll turn the call over to Paul.

Thanks, Ellen, and good morning, everyone.

Thanks for being with us.

As we entered 2009 we knew we would face significant headwinds and 2009 proved to be one of the most challenging years ever for the world economy and for our industries.

Trade show net square footage, exhibitor spending and attendance were all down double-digits.

Spending by retail and holiday decor clients dropped significantly in response to lower consumer spending and our Travel & Recreation Group saw a significant drop in its leisure group tour business.

As the economy contracted on our clients reduced their spending, we aggressively began making significant changes to our business during 2009 that will put us in a better position for 2010 and beyond.

We reduced headcount, rationalized facilities and kept a tight rein on discretionary spending.

As a result of these actions and lower expense related to performance-based incentives, we realized a reduction in total company overhead cost of approximately $44 million as compared to 2008.

We also introduced the GES Excellence program which applies lean techniques to drive efficient, timely and quality service for our customers.

This is a very effective program and we've had several early successes throughout the organization, including solutions for both complex and simple processes that improve efficiency and customer service.

In addition, by employing lean warehousing techniques we've been able to substantially reduce our facility footprint and we are creating more efficient processes for installing and dismantling shows.

During 2010 we'll continue to roll out these techniques so that lean becomes an integral part of our culture of continuous improvement and we are targeting $10 million in efficiency savings for 2010.

And last July we began a transformational reorganization process that redefines the way we think about and operate our business.

We aligned our operating companies under common leadership, centralized our legal and human resources functions, and initiated a project to create a shared services center for accounting and IT.

This new organizational structure will streamline our operations and enable our business units to focus on brand leadership, service delivery and sales and marketing.

It will also provide a highly efficient and responsive corporate support across the enterprise.

Our reorganization efforts are ongoing and we expect to realize incremental overhead savings of approximately $10 million in 2010.

I need to take a moment to acknowledge the incredible effort from all of Viad's employees to embrace new and innovative approaches to managing our business while continuing to deliver great value and service to our customers.

I really appreciate that from all of our employees.

Let me switch gears and give you an update on our sales activity.

During the fourth quarter GES signed $120 million in business and its total revenue backlog for 2010 and beyond stands at more than $1 billion.

One of our recent signings was the American Association of Diabetes Educators annual meeting.

Our account team's ability to offer a full-service package of exhibition services, including audiovisual services through our strategic partner, PRG, as well as our healthcare industry expertise enabled us to win this show from a major competitor.

The EG sales team continued the strong momentum it established in 2008 when it grew the value of new business wins substantially over 2007.

We maintained the same level of new business wins in 2009 which is impressive in this economy and speaks to the strength of our client centric approach and compelling solutions.

We have now moved into 2010 and the Marketing & Events Group no longer represents a set of sister companies that operate in similar industries.

It has come together as one company that serves many different customers to meet their experiential marketing it needs.

On January 1 we combined GES, Exhibitgroup/Giltspur and Becker Group into the GES legal entity.

And earlier this week we unveiled a new brand identity for GES, Global Experience Specialists, and this name supports the new company direction and expanded capabilities and retains the GES acronym that is widely known in the marketplace as a leader in exhibition and events.

The new name represents a united global team of specialists dedicated to building powerful brand experiences that define our clients' success.

So far 2010 is off to a solid start with a multimillion dollar win for a project for the 2010 Winter Olympics in Canada.

Our Marketing & Events group was given two weeks to prepare a complicated bid that was judged on an objective point-based system.

With our new integrated structure we were better able to leverage the strengths of legacy GES Exhibitgroup and Becker to design a winning proposal.

We were awarded this contract based on the quality of our design, the breadth and depth of our global network and our financial strength.

This is an exciting and high profile project and a testament to our strength and skill as a combined global team.

GES is reinventing itself in the industry to meet the growing needs of business leaders today.

In the age of digital media face-to-face events continue to be an important driver of the entire marketing mix.

No matter how far technology evolves nothing can truly replace the in person experience of handling and trying out new products or shaking hands with a business partner.

John Jastrem and his team are focusing their efforts on elevating the exhibitor and attendee experience and challenging the conventional practices of the past by serving as a strategic marketing partner to all of our clients, from show organizers to corporate brand marketers and offering a cohesive product portfolio and award-winning creative talent that is unmatched by the competition.

The magnitude of our products and service offerings, from video measurement and expanded rental solutions to comprehensive marketing programs, is matched only by the breadth of our worldwide production and storage network.

Now let me switch gears to our Travel & Recreation Group.

As Ellen mentioned, Travel & Rec Group revenues were down only 8.4% excluding exchange rate variances and operating margins remain very strong at nearly 23%.

These are great results given the economic environment.

Brewster and Glacier Park both successfully executed a strategy focused on growing visitation in the local and regional markets in order to help offset weak demand from long-haul group business.

Additionally, Brewster secured a long-term agreement effective in April of 2009 to become the exclusive provider of motor coach services in Lake Louise, Banff and Calgary for guests of Rocky Mountaineer, a large Canadian rail tour operator.

At Glacier Park, despite the weaker economy, demand for our lodging accommodations remained high enabling us to maintain a very strong occupancy during the peak season.

We are fortunate to have unique assets, great people and highly defensible market positions at both Brewster and Glacier Park.

Now let me discuss our outlook for 2010.

As the economy begins to show some signs of improvement the trade show industry lags general economic trends.

As evidenced by our strong results in 2008 we were slow to follow into the recession and we expect to lag the broader economic rebound.

While we experienced some stabilization in same show revenue declines during late 2009, we anticipate another challenging year in 2010.

Corporate brand marketer and retail client spending on exhibitions and other Experiential Marketing Services are expected to remain under pressure reflecting constrained marketing budgets.

We recently produced the 2010 International Consumer Electronics Show which tends to be a bellwether of sorts for the exhibition and event industry.

The show was a huge success as always with 2,500 exhibiting companies which was down about 7% from 2009.

This decline was less than we expected as CEA was successful in selling to last-minute exhibitors.

On another positive note, CES attendance increased about 6% from 2009 according to preliminary estimates and exhibit space sales for 2011 are tracking ahead of the 2010 show.

Despite continued revenue pressures this year, we are expecting improved profitability as a result of our aggressive and ongoing efforts to reduce costs and drive efficiency gains.

We also see some bright spots on the top line.

As I mentioned previously, we were successful in winning business related to the 2010 Olympic Games in Vancouver and Brewster will provide motor coach services during the games and should also benefit from greater end market visitation by Winter Olympics attendees that choose to experience nearby Banff and Jasper national parks.

Finally, Glacier National park will celebrate its centennial this year and Glacier Park Inc.'s 2010 advanced bookings are trending well ahead of last year's pace.

We are fortunate to have a strong balance sheet and we ended the year with $116 million in cash and very little debt.

Not many of our competitors have this level of financial stability and this is a competitive advantage that is more valuable than ever in this difficult economy.

As always we will use our capital judiciously by investing in areas of our business that will drive the greatest benefits for our customers, employees and shareholders.

And we will continue to employ lean thinking across the organization to look for new ways to become more efficient.

We are taking the right actions to fundamentally improve the Company from our cost structure to our competitive positioning in the marketplace.

And we are resolved to make the best out of a challenging external market and environment, ensuring that we are well positioned to realize substantial margin improvement as exhibition marketing budgets recover.

With that I'll turn the call over to Ellen to provide some more specific guidance for the 2010 first quarter and full year.

Thanks, Paul.

Our current guidance for 2010 reflects our best estimates based on information available at this time.

First I'll provide some guidance for the full year and then the first quarter.

Revenues at our Marketing & Events Group, or GES, are expected to remain relatively flat to 2009 with positive show rotation and new business wins offsetting same show declines.

Same show revenues are expected to decline by approximately 10% driven by continued year-on-year decreases in exhibitor spending on trade show activity.

Annual show rotation, which refers to shows that occur less frequently than annually, is expected to positively impact full-year revenues by approximately $25 million.

Additional guidance for show rotation by quarter can be found in our earnings press release.

Variable cost savings from our lean initiatives are expected to approximate $10 million.

We expect this savings to offset general market pressures on margins.

Overhead cost savings related to our reorganization activities are expected to be partially offset by accruals for performance-based incentives during 2010 and savings from furloughs during 2009 that are not expected to recur, resulting in a net savings of approximately $10 million.

Performance-based incentives were insignificant in 2009.

For our Travel & Recreation Group, park visitation is expected to improve in Glacier National park as a result of its centennial anniversary.

However, visitation to Banff and Jasper national parks is expected to decrease slightly due to lingering recessionary pressures on global tourism.

Room occupancy is expected to increase by a low single-digit rate at Glacier Park's properties due to the Park's centennial anniversary and told relatively constant at Brewster's Mount Royal Hotel as compared to 2009.

Revenue per available room, or RevPAR, is expected to increase slightly.

Passenger volumes at Brewster's attractions are expected to decline at a single-digit rate from 2009.

Planned price increases are expected to partially offset the volume declines.

And transportation revenue is expected to increase slightly as a result of motor coach contracts relating to the Vancouver Olympic games, partially offset by general market weakness.

Corporate activities expense is expected to increase by approximately $1 million from 2009, reflecting the reversal of long-term performance-based incentives in 2009.

Exchange rates are assumed to approximate $0.95 US dollars per Canadian dollar and $1.64 US dollars per British pound.

Currency translation is expected to have a slight positive impact on income per share.

Our full-year cash flow from operations is expected to approximate $10 million to $15 million.

We expose expect full-year capital expenditures of approximately $22 million, depreciation and amortization of approximately $30 million, and restructuring payments of approximately $7 million.

For the first quarter we expect a loss before other items per share in the range of $0.20 to $0.05 as compared to 2009 first-quarter income before other items of $0.15 per share.

Revenue is expected to be in the range of $205 million to $220 million as compared to $240.9 million in the 2009 quarter.

We expect segment operating results to be in the range of a loss of $5 million to breakeven as compared to segment operating income of $6.7 million in the 2009 quarter.

The year-over-year first-quarter declines reflect recessionary declines in exhibition marketing spend including same show declines of 15% to 20%, as well as negative show rotation revenues of approximately $5 million.

Please keep in mind that while our first-quarter results will be down from last year we will benefit from significant positive share rotation during the third quarter.

And we also expect same show declines to moderate as we move through the year resulting in higher year-over-year profits.

Additional details regarding our first-quarter and full-year outlook, including quarterly show rotation, can be found in the earnings press release.

And with that let's open the call for questions.

Audra, can you open up for questions, please?

(Operator Instructions).

At this time there are no questions.

Okay, thanks, Audra.

Let me just make a few closing comments.

While we're not expecting much topline growth in 2010 we are focused on delivering the best results possible by capitalizing on the market opportunities that exist and continuing to drive down cost and delivering high-quality customer service.

Viad is fortunate to have industry-leading brands and capabilities, talented and dedicated employees and a strong balance sheet.

These assets, along with continued investment in our business, give us advantages relative to many of our competitors, especially in the weakened economic environment.

With the comprehensive reorganization of our business we have more strength to better leverage our resources than ever before.

We have incredible creative minds banding together to deliver new innovative ways to manage our business and this blending of talent, coupled with a companywide support system, will offer new solutions to the opportunities and challenges our customers face every day.

I'd like to once again thank Viad's employees for their continued hard work and dedication as we continue to transform the Company into an integrated and innovative industry-leading organization.

I would also like to thank our customers and shareholders for your ongoing support.

And I thank you for being with us today and we look forward to updating you on our progress in April.

Have a terrific weekend.

Thank you.

Thank you for participating.

Today's conference has concluded.

Please disconnect at this time.