Viad Corp (VVI) 2013 Q3 法說會逐字稿

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  • Operator

  • Welcome to the Viad Corporation third quarter earnings conference call. 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 Mr. Joe Diaz. Sir, you may begin.

  • Joe Diaz - IR

  • Thank you. Good morning and thanks to all of you for participating on the Viad Corp third quarter 2013 earnings conference call. I would like to remind everyone that certain statements made during this call, which are not historical facts, may constitute forward-looking statements.

  • Additional information concerning business and other risk factors that could cause actual results to materially differ from those in the forward-looking statements, can be found in Viad's Annual and Quarterly Reports filed with the SEC.

  • During today's call we will refer to the earnings press release, which is available on the Viad website at www.viad.com.

  • Today you will hear from Paul Dykstra, Viad's Chairman, President, and CEO, and Ellen Ingersoll, Viad's Chief Financial Officer. Additionally, Steve Moster, president of Viad's marketing and events group, and Michael Hannan, president of Viad's travel and recreation group will be available for comment during the question and answer session at the end of the call.

  • With that, I would like to turn the call over to Paul Dykstra. Paul?

  • Paul Dykstra - Chairman, President, CEO

  • Thanks, Joe, and thanks to all of you for participating on today's call. We appreciate your continued interest and support of the Company.

  • I am pleased to report that our third quarter income before other items is $0.69 per share. It was better than our prior guidance, reflecting stronger than expected performance from our travel and recreation group, and in-line performance from our marketing and events group.

  • Consolidated revenue for the quarter was $236.5 million with operating income [of] $24.6 million. As expected, year-over-year results were impacted by significant negative show rotation in our marketing and events group of about $70 million in revenue during the quarter. But the team worked diligently to minimize the impact of the lower revenues on operating results and posted solid results for the quarter.

  • The travel and recreation group also turned in a very good performance, with all three of its business units posting higher revenue and operating income as compared to the 2012 third quarter. Now I will cover some highlights for each business group before turning the call over to Ellen, who will discuss our financial results in more detail.

  • Our marketing and events group maintained a strong focus on sales and marketing activities to retain existing business and generate new business, and on improving US profit margins to a more efficient service delivery network and rigorous labor management. As I have previously indicated, we set a goal to increase the operating margin of our marketing and events group from 2% in 2012 to 2.5% in 2013.

  • In order to deliver this 50 basis point margin improvement in a down rotation year, a lot of things needed to turn out right for us. And while not everything has gone our way this year, it is important to recognize that confronting challenges are part and parcel of running a business. And it is our job to stay in the batter's box, and not be afraid to swing the bat.

  • It is how you respond to those challenges that defines what an organization is all about. While we have taken a few strikes this year, we have also hit a fair number of doubles and triples that have positioned us for improved operating result this year and beyond.

  • We expect to be able to deliver on our 2.5% operating margin goal this year, with continued improvement in 2014 and beyond. I am proud of the team for maintaining a diligent focus on our key initiatives throughout the year to make this happen.

  • As it relates to business development, we successfully secured renewals with a number of our larger customers in the US and internationally. And, in several cases, the renewal contracts included additional business from those customers.

  • We recently reached an agreement to extend our partnership with Advanstar, a leading event and marketing services business focused on the fashion, licensing, life sciences, and power sports industries. For a number of years, we have produced Advanstar's MAGIC Marketplace event in Las Vegas. This event takes place twice each year with each occurrence connecting more than 5000 fashion brands with over 65,000 visitors around the world, across exhibit space that exceeds 1 million square feet.

  • We have also produced Advanstar's ENK events in New York and its brand licensing show in the UK. With this renewal, Advanstar is also awarding us additional business beginning in 2014, including its PROJECT show and its US brand licensing show, two nights' competitive takeaways. Our ability to bring creative solutions and innovative ideas to Advanstar's events, was key to this win.

  • We also extended our contract with ICSC, the premier global trade association of the shopping center industry, to produce its events through 2017. And we picked up ICSC's Florida and Texas events which were previously produced by a competitor.

  • Another major show organizer, Penton Media, has renewed GES as its official services provider through 2018. GES has partnered with Penton for more than 25 years and the new contract covers 10 shows, including Natural Products Expo, West and East, Waste Expo, and LDI. The Penton portfolio leverages GES's innovative suite of technology tools and sustainable products to deliver leading edge solutions that make their events meaningful and valuable for their exhibitors.

  • On the corporate account side, Boehringer Ingelheim, leading international pharmaceutical company, extended its master services agreement with GES. This agreement now runs through 2016 and includes most of the US and international business for Boehringer's oncology group.

  • We also continue to win and renew business internationally. Pennwell Corporation, a leading international exhibition organizer, selected GES to deliver contracting services for all of its events in the Middle East for the next two years. The shows in that contract include Avionics International and the offshore Middle East 2015 Expo, among others.

  • This award expands our share in the growing Middle East market. With the addition of Pennwell's events, GES will now deliver more than 50 shows a year in the United Arab Emirates.

  • GES also secured a four-year extension with i2i Events Group, a leading global events company, to provide a broad scope of services, infrastructure, and logistics in the UK. The scope of the contract over the next four years is likely to be the largest event services contract ever signed in the UK.

  • These are but a few examples of the great job being done by our sales and marketing team to extend our relationships with current customers and to win new business that bolsters our market share. Our intense development efforts, coupled with superior customer service and leading edge technology are the catalysts that are attracting new business, both domestically and internationally. We are pleased with the progress that is being achieved.

  • On the expense side of the ledger, we continue to make measurable progress. During the third quarter we continued to rationalize our service delivery network to increase efficiency and lower cost.

  • During the quarter, we sold our New Jersey facility that housed our Northeast operations for $12.7 million. We will relocate to a more efficient leased facility in the same market during the fourth quarter.

  • Also during the third quarter, we really accorded relocated our Baltimore, Washington, D.C. area operations into a more efficient facility in that market.

  • From 2008 to 2012, we reduced our US facility footprint by nearly one-third and realized a net reduction in annual US facility costs of almost $7 million. We expect the changes made in the service delivery network to benefit 2013 US segment operating income by more than $4 million as compared to 2012.

  • Excluding the one-time gain in related move costs, beyond going -- annualized run rate savings are closer to $600,000 when comparing this year to 2012.

  • Much has been accomplished in our US margin improvement initiatives to this point and we will continue to strategically target areas of improvement. With the final phases of the East Coast network changes underway, our focus has shifted to our West Coast operations.

  • Additionally, we continue to put into place tools and training to help our operations and account managers more effectively manage our labor. We will continue to improve our cost structure and remain committed to increasing the operating margins in the marketing and events business to their historical levels.

  • As it relates to our touring exhibitions, Harry Potter the Exhibition just completed a record-breaking run in Tokyo where more than 420,000 visitors experienced the exhibition. Based on its ongoing success, we reach an agreement with Warner Bros. to extend its original five-year tour by another three years.

  • Additionally, on September 28, we opened our new Earth Explorers exhibition which was created in partnership with National Geographic. It is currently on display at the Science Center of Iowa.

  • Earth Explorers is the third new touring exhibition that we launched this year. The other two include Alien Worlds and Androids, which is currently on display at the Rochester Museum and Science Center in New York, and Camp Ice Age, which just finished its premier run at the Mall of America in Minneapolis.

  • Let me now transition over to the travel and recreation group. Travel and recreation group posted strong results for the quarter that exceeded our prior guidance. The momentum that we experienced in the second quarter, prior to the massive flooding in Alberta, picked up steam again during the third quarter.

  • All three of our operating units -- Brewster, Alaska Denali Travel, and Glacier Park -- reported increased revenue and operating income as compared to the third quarter of 2012. These improvements were driven by greater visitation to our attractions and higher occupancy rates at most of our lodges and hotels.

  • Brewster recovered nicely from the flooding that occurred in late June, and delivered solid growth across the majority of its lines of business. I am also happy to report the construction of Brewster's new Glacier Skywalk attraction is now essentially complete, and the breathtaking visitor experience that we envisioned is coming to life.

  • We began offering tours for the media and travel industry professionals earlier this month and the feedback has been very positive. We believe that the Glacier Skywalk will soon take its place among the leading iconic attractions in North America.

  • At Glacier Park, we are on pace for our record year. RevPAR for the third quarter was up across all properties, both in park and out of the park. And we continue to experience significant year-over-year growth at Grouse Mountain Lodge, resulting from our refreshed efforts.

  • As Ellen will discuss in more detail shortly, we had a slower than expected start with Grouse post-acquisition, but the renovations we completed earlier this year combined with our sales and marketing efforts are paying off with strong revenue growth and profit margins.

  • The St. Mary Lodge, which was our other acquisition within the Glacier Park business unit, is also performing well and is meeting the expectations we set forth at the time of purchase. St. Mary is ideally situated at the eastern end of the iconic Going-to-the-Sun Road, which is one of the main attractions within Glacier National Park.

  • In addition to Grouse Mountain Lodge and St. Mary Lodge, we also own three other properties adjacent to Glacier National Park, namely Glacier Park Lodge, which is located near the Amtrak station on the east side of the park; the Prince of Wales Hotel, which is situated on the Canadian side of the park with awesome views overlooking Waterton Lake; and the Stewart Motel, which is an inn holding within Glacier National Park, adjacent to Lake McDonald Lodge.

  • As you may know, Glacier Park also operates five properties within Glacier National Park under a concession contract with the US National Park Service. In mid-August, we announced that our term as a concessionaire would expire at the end of 2013.

  • We greatly appreciate the opportunity to have worked with the US National Park Service to provide an exceptional experience to Glacier National Park visitors. And, although we would have preferred to retain the confession operations as part of our travel and recreation portfolio, this disappointment is mitigated by the fact that we will receive cash payments of approximately $30 million when our contract expires.

  • These payments to be made by the National Park Service and the new concessionaire should be received in January 2014. Ellen will provide some additional detail regarding our revised outlook for the Glacier Park business unit at a result of the contract expiration.

  • With that, I will turn the call over to Ellen for a more detailed review of our financial results and guidance. After Ellen's prepared remarks, I will provide some additional updates, including an update on our strategic review. We will then open the call for your questions. Ellen?

  • Ellen Ingersoll - CFO

  • Thanks, Paul. And thanks to all of you for joining our call this morning. As I cover our third quarter results, you may want to refer to tables 1 and 2 and the business group highlights section of our earnings press release.

  • Our third-quarter income before other items was $0.69 per share, higher than our prior guidance, but lower than 2012 third-quarter income before other items of $1.01 per share. The expected decline from 2012 was driven primarily by a significant negative share rotation of about $70 million in revenue.

  • Viad's consolidated revenue for the quarter was $236.5 million as compared to $307.5 million in the 2012 quarter. Segment operating income was $24.6 million as compared to $34.2 million in the 2012 quarter.

  • By definition, our third quarter 2013 income before other items excludes restructuring charges of $0.02 per share and non-cash impairment charges of $0.14 per share. A reconciliation of income before other items to income from continuing operations can be found in table 2 of our earnings press release.

  • I will discuss the impairment charges in more detail in a moment, but first let me cover the core operating results of each business group. Our marketing and events group's third quarter revenue was $156.5 million, down $73.8 million from the 2012 quarter, with an operating loss of $7.9 million as compared to income of $2.8 million in the 2012 quarter.

  • Marketing and events US segment revenue for the quarter was $120.5 million, down $47.9 million from the 2012 third quarter with an operating loss of $3.7 million as compared to a loss of $585,000 in the 2012 quarter.

  • The declines from the 2012 quarter were primarily due to negative share rotation revenue of $57 million, partially offset by base same share revenue growth of 5.2% and stronger revenue from our entertainment and corporate events divisions. The relatively small change in operating results [on a] $47.9 million revenue drop is a result of continued cost structure improvements as well as the benefit from the sale of our facility in New Jersey and lower performance-based incentives.

  • As a reminder, share rotation refers to shows that occur less frequently than annually and shows that shift quarters from one year to the next. And our base same show metric, which is similar to a same-store metric, includes only those shows that we produced out of the same city in both the current year quarter and the prior year quarter.

  • Marketing and events international segment revenue was $40.3 million, down $27.4 million from the 2012 quarter, with an operating loss of $4.2 million as compared to operating income of $3.4 million in the 2012 quarter. The decline in revenue was primarily driven by negative share rotation revenue of approximately $13 million and, revenue earned in 2012 in support of the summer Olympics in London.

  • Additionally, foreign-exchange rate variances had an unfavorable impact on revenue of approximately $642,000, and a favorable impact on operating income of approximately $172,000 compared to the 2012 quarter.

  • Our travel and recreation group delivered revenue growth of $2.8 million, or 3.7%, with a $1.2 million increase in operating income and an operating margin of 40.7%. Unfavorable foreign exchange rate variances impacted revenues and operating income by approximately $1.8 million and $812,000, respectively, compared to the 2012 quarter.

  • Excluding the impact of exchange rate variances, travel and rec group revenue was up $4.7 million or 6%, and operating income was up $2 million, reflecting increases at Brewster, Glacier Park, and Alaska Denali travel.

  • The non-cash impairment charges recorded during the quarter totaled $5.4 million on a pretax basis and included the write-off of $4.5 million in goodwill at Glacier Park and $952,000 at the marketing and events group, related to the write-off of a touring exhibition asset and amounts capitalized for internally developed software that is not anticipated to be put into use.

  • The impairment charge at Glacier Park was triggered by the National Park Service's decision to award the new concession contract for Glacier National Park to another concessionaire. Glacier Park currently derives about one-half of its revenues from a concession contract which will expire at the end of this year. While we continue to develop our detailed operating and financial plans for 2014, we currently anticipate operating income at Glacier Park to decline by $3 million to $4 million, relative to 2013.

  • As a result of our revised outlook for future revenues and profits from that business unit, we performed a preliminary impairment evaluation of goodwill and determined that it was necessary to write off all goodwill associated with Glacier Park. Although the concession contract was clearly the triggering event for the impairment testing, performance at Grouse Mountain Lodge was also a contributing factor to the impairment charge.

  • While the hotel is generating solid profits and margins this year, its revenue growth has been slower than anticipated, necessitating that we push out the timeline for achieving the objectives we set out at the time of acquisition. The Grouse Mountain Lodge is located in a desirable year-round resort destination that benefits from its close proximity to Glacier National Park. And, as Paul discussed earlier, we are now seeing great traction on RevPAR growth as well as a result of renovation work that began in 2012 and was completed earlier this year.

  • Now I will cover some cash flow and balance sheet items for the quarter. Free cash flow is $21.8 million for the quarter as compared to $45.2 million in the 2012 third quarter, primarily reflecting lower income and changes in working capital as well as higher capital expenditures and dividend payments. Capital expenditures were $11.2 million for the 2013 quarter, versus $5.8 million in the 2012 quarter, primarily reflecting costs associated with the construction of the Glacier Skywalk attraction.

  • Depreciation and amortization expense was $7.4 million versus $8.6 million in the 2012 quarter. And payments on our restructuring reserves were approximately $1.4 million in the 2013 quarter versus $823,000 in the 2012 quarter.

  • Our balance sheet remains strong. At September 30, 2013 Viad's cash and cash equivalents totaled $120.1 million compared to $83.1 million at the end of June. And our total debt at the end of September was $1.7 million with a debt to capital ratio of 0.4%.

  • Now I will cover guidance for the fourth quarter and full year 2013, which reflects our best estimates based on information available at this time. Marketing and events group's full-year revenue is expected to decrease at a mid-single-digit rate compared to 2012 with low single-digit growth in US same share revenues. Share rotation is expected to have a net negative impact on full-year revenue of about $50 million.

  • Marketing and events group segment operating margins are expected to approximate 2.5%, driven by continued execution against our service delivery network and labor management initiatives, in addition to lower administrative overhead expenses.

  • Exchange rate variances are expected to negatively impact revenue by approximately $5 million versus 2012.

  • Travel and recreation group full-year revenues expected to increase by a low single-digit rate from 2012. Exchange rate variances are expected to negatively impact revenue by approximately $3 million versus 2012. And travel and recreation group operating margins are expected to be in the range of 19% to 20% as compared to 2012 margins of 19.5%.

  • Corporate activities expense is expected to approximate $7 million. Our full-year cash flow from operations is expected to approximate $20 million to $25 million. We expect full-year capital expenditures to be between $40 million and $42 million, which includes an estimated $12 million for construction of the Glacier Skywalk attraction. And depreciation and amortization expense is expected to be between $28 million and $30 million.

  • For the fourth quarter, we expect to have seasonal loss before other items to be in the range of $0.25 to $0.16 per share as compared to the 2012 fourth-quarter loss per share of $0.34. Revenue is expected to be in the range of $188 million to $200 million as compared to $202.6 million in the 2012 quarter. We expect a segment operating loss in the range of $4 million to $1.5 million as compared to a loss of $8.4 million in the 2012 quarter.

  • The improved operating results are expected to be driven primarily by continued cost structure improvements in the marketing and events group. Additional details regarding our 2013 outlook can be found in the earnings press release. And back to you, Paul.

  • Paul Dykstra - Chairman, President, CEO

  • Thanks, Ellen. Now I would like to provide an update on our strategic review of options to enhance shareholder value, including the possible separation of our marketing and events, and travel and recreation groups.

  • This review continues to be a top priority for our board of directors and management team, and we spent considerable time and effort over the past nine months carefully evaluating options available to us to enhance shareholder value. Our approach to this review has recognized that if we are to sell or otherwise separate a part of the business, we need to be comfortable that any remaining business is either configured in a way that permits it to drive as a standalone company, or would otherwise be involved in a transaction that makes it part of a larger business.

  • While we continue to work through our strategic review, we have determined at this time that we are unlikely to engage in a transaction that would require us to expend a substantial amount of the cash we have on our balance sheet. In light of this, today we announced that we will return approximately $50.8 million to shareholders through a special dividend of $2.50 per share, payable on November 14.

  • We also intend to pay another special dividend in January 2014 of $1.50 per share or approximately $30.5 million in the aggregate. The January dividend would be funded primarily from cash we receive from the National Park Service and the new concessionaire at Glacier National Park.

  • These dividend payments are consistent with our commitment to prudently manage capital. And we continue to work with JPMorgan to carefully evaluate additional options to further enhance shareholder value, including the possible separation of the marketing and events, and travel and recreation groups.

  • Before I open the call for your questions, I would like to thank you once again for participating in today's call. We have covered a lot of ground today and I want to leave you with one very important message.

  • The board and the management team of Viad are committed to enhancing shareholder value. And this is concretely evidenced by the actions announced today.

  • The strategic review is ongoing and remains a priority. And, as we continue to move forward, both businesses are operating more efficiently and are poised for future growth.

  • Our marketing and events group has strong sales momentum, having recently secured important new wins and key renewals. Next year we will benefit from significant positive show rotation in the range of $60 million to $65 million in revenue. We will maintain our intense focus on margin improvement initiatives and expect to deliver an operating margin of 4%.

  • Our travel and recreation group is seeing good results from our refresh initiatives as we make measured investments to update our high-margin assets. And next year we will celebrate the grand opening of our much-anticipated Glacier Skywalk attraction. The prospects for the business in 2014 and beyond are good, and we look forward to building on the progress of recent years.

  • With that, let's open up the call for questions. Pat, if you could open up the question line, please.

  • Operator

  • (Operator Instructions) Steve Altebrando, Sidoti & Company.

  • Steve Altebrando - Analyst

  • The 4% -- 4.5% gain on the Jersey facility sale, was that always contemplated in the 2.5% operating margin target?

  • Paul Dykstra - Chairman, President, CEO

  • We did not plan that in our original plan. We had a very aggressive plan. As you know, we started to this year with a significant negative show rotation headwind. So we were starting the year down about $55 million and that was compounded by the grow-over that we had from our Olympics business in 2012 as well.

  • We set a very aggressive target to get to 2.5% for 2013. While I think we did a lot of things very, very well, we did not hit everything out of the park that we wanted to. As a result, the sale of the business was not contemplated in the plan, but was included in our 2.5% margin for 2013.

  • Steve Altebrando - Analyst

  • Okay. And then, in terms of a target you have previously spoken -- spoke of for 4% next year, is that still something you are striving to achieve?

  • Paul Dykstra - Chairman, President, CEO

  • Yes, we are. We do benefit from -- in my comments, I said $60 million to $65 million of positive show rotation, but we also have the ongoing momentum of a number of our cost initiatives. We will continue to optimize our service delivery network, improve our labor to revenue and very, very, very carefully manage our overhead.

  • Steve Altebrando - Analyst

  • Okay. Thanks for that. And then, last one, just, if you -- if possible, provide a very broad timeline of when you would expect that strategic review to be complete?

  • Paul Dykstra - Chairman, President, CEO

  • The strategic review continues to be a top priority for our board of directors and management team. We spent a considerable amount of time over the past nine months really thoroughly and carefully evaluating our options available to us to enhance shareholder value.

  • Throughout the process, we have been guided by two important objectives in evaluating any potential transaction. And, really, first of all, is maximizing shareholder value. And we also want to ensure that we do our best to maximize the prospects of any segment of our business that may be left to stand on its own.

  • So we continue to keep this as a top priority for the board and for management. We have not set a specific timeline, but we continue to thoroughly and carefully evaluate our opportunities to enhance shareholder value. So I just want to reiterate that it is a top priority and shareholder value is our number one commitment.

  • Operator

  • John Healy, Northcoast Research.

  • John Healy - Analyst

  • Paul, I wanted to ask a little bit about some of the show wins that you have had on the marketing and events group. If you kind of look at the wins have you brought together in 2013 and you compare it to maybe the loss of the Consumer Electronics Show, how do you feel that those two items kind of net against each other as we think about headwind, or maybe essentially a tailwind or neutral affect the next year?

  • Paul Dykstra - Chairman, President, CEO

  • We have worked very hard to replace the lost revenue from the CES contract. The Advanstar win is a very big win and does include some incremental shows from that win; same with the ICSC win and several others.

  • Overseas, we have had some very, very good wins in renewing some key pieces of business. And, similarly to the US, those overseas wins have often included some new shows that we didn't previously do. So we are very excited about that. I think we have some good momentum on the show sales side.

  • I guess I would ask Steve if you want to add anything to that comment.

  • Steve Moster - President, Marketing & Events Group

  • Yes. Sure, John. John, I think that the way to think about it is, obviously we have some sales win momentum behind us and I think that the goal is to continue to get doubles and triples here in order to completely offset the CEA loss.

  • John Healy - Analyst

  • Where do we stand today? Are we kind of near a maybe breakeven level between those two items?

  • Paul Dykstra - Chairman, President, CEO

  • No. I think we have still got a little ways to go to replacing that. But, we are working very hard and I think the sales pipeline looks good. And we are going to continue our aggressive business development efforts.

  • John Healy - Analyst

  • Okay. Great. And then, I wanted to ask a CapEx question, as you look out to next year. I know we went through some periods where you guys have ramped up a little bit for the Discovery Walk and then, now, with the concession contract not being in the business. Do you have a preliminary view of the goalpost where CapEx might be for next year?

  • Ellen Ingersoll - CFO

  • Well, we are rolling that up right now, John. On the GES side, it will be pretty consistent to this year and last year, which was about $15 million. On the travel and rec side, you are right; we won't have the Glacier Skylark Skywalk in next year, which was a total of $12 million this year? About $12 million this year.

  • We will, however, have some refresh projects within travel and rec, within the hotels, and other items -- some IT items. So we are rolling that up right now. I don't anticipate it to be as high as this year just because of the Glacier Skywalk, but that is currently in process.

  • Operator

  • (Operator Instructions) [Lily Solau, Singular Research].

  • Lily Solau - Analyst

  • Could you talk a bit more about your strategic initiatives for your efficiency improvements on your West Coast facilities, along with any anticipating timeframe you have there? As well as, if you could talk a little bit about what initiatives maybe on the international marketing front, given what appears to be some nice improved business there going forward?

  • Paul Dykstra - Chairman, President, CEO

  • Sure. Steve, can you take that one, please?

  • Steve Moster - President, Marketing & Events Group

  • Sure. So our efforts on the West Coast, similar to what we have done on the East Coast, is to really maximize the efficiency of our individual facilities in each of the cities. And we are under a strategic review right now, on what that means to the West Coast.

  • We have had significant progress on the East Coast and we expect that over the next couple years, with a lot of effort in 2014, we will be able to do the same -- have the same impact on the West Coast.

  • In terms of the international business, as you noted, we have had some strong wins internationally as well. We continue to look for new opportunities and new markets to serve in that area.

  • Lily Solau - Analyst

  • So, then, for the -- with respect to the West Coast and the 4% margin goal, should we not anticipate too much coming from the West Coast at this point for 2014?

  • Steve Moster - President, Marketing & Events Group

  • I think the goal of 4% is driven a lot by the cost initiatives we have done, which is labor management, which impacts the entire business across the US and internationally. There will be some impact from the West Coast service delivery network, but then also the positive show rotation that we have coming into 2014. So it is a factor, but there are other factors as well.

  • Paul Dykstra - Chairman, President, CEO

  • I think, for 2014, we won't benefit a lot, but we will benefit some. But we will really start to see benefits then beyond that.

  • Lily Solau - Analyst

  • Great. And a question for Ellen. Could you just repeat the two factors that accounted for the write-offs within the marketing events business? You had mentioned a touring exhibition and there was something else.

  • Ellen Ingersoll - CFO

  • Yes. It was an internally developed software project that was being -- we would not be able to use it in the business.

  • Operator

  • And, at this time, I am showing nothing further.

  • Paul Dykstra - Chairman, President, CEO

  • Okay. We will wrap up then. I thank you very much for participating on today's call and we will look forward to talking with you again at the conclusion of the current quarter. Have a great day and a great weekend. Thank you.

  • Operator

  • Thank you for your participation. You may disconnect at this time.