Pursuit Attractions and Hospitality, Inc. (PRSU) Q3 2008 Earnings Report, Transcript and Summary

Welcome to the Viad Corporation’s 2008 third quarter earnings release conference call. All participants are currently in a listen-only mode. (Operator Instructions) I would now like to turn the conference over to your host, Ms. Carrie Long, Director of Investor Relations.

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

Good morning everyone. Thanks very much for being with us today. As usual on today’s call you will hear from Kevin Rabbitt, President and CEO of GES; John Jastrem, President of Exhibitgroup and Ellen Ingersoll, Viad’s Chief Financial Officer. As we discuss our third quarter results you may want to refer to tables I and II in the earnings press release. We had a very strong third quarter and for that I would like to recognize and thank all of the dedicated people of Viad for delivering these results in a very busy time. During the quarter we had solid execution and continued positive results from the repositioning efforts at Exhibitgroup/Giltspur. We also benefited from positive show rotations. As compared to the 2007 third quarter, revenue increased 32.1% to $302.4 million. Segment operating income nearly doubled to $26.1 million. Income from continuing operations was $16.8 million or $0.81 per diluted share. Income before other items which excludes income from the favorable resolution of tax matters was $14.4 million or $0.70 per share. These results are in line with our prior guidance of $0.64 to $0.74 per share and more than double 2007 third quarter income before other items of $0.32 per share. We had very strong free cash flow of $51.7 million during the quarter of which we used $10.1 million to repurchase 328,000 shares of our common stock. This brings our total repurchases since the first quarter of 2006 to 2.6 million shares. At the end of the quarter our cash balances totaled $152.9 million. Now lets move on to the individual operating segment results and again you may want to refer to table I of the press release which provides revenues and operating income for each of the operating segments. First I’d like to turn it over Kevin Rabbitt, President and CEO of GES. Kevin?

GES had a record third quarter with revenue of $203.3 million, up $51.7 million from the 2007 third quarter. Operating income was $7.9 million as compared to an operating loss of $2.7 million in the 2007 quarter. The significant growth was driven mainly by very strong performance in some major rotating shows. For the quarter show rotation added $53 million to our revenues. This number was considerably higher than the $45 million we had expected due to strong exhibitor participation and great execution by the GES team. Many of the major rotating shows during the quarter were industrial shows which is a sector that has continued to show strength. Positive show rotation along with continued growth in exhibitor discretionary spending helped offset negative based same show growth of 11.1%. As a reminder same show growth is a measure of growth in the same city the same quarter every year. These same shows represent 31% of our total third quarter revenue. These shows were heavily weighted for the retail sector which has been a soft sector most of the year. As we expected, the negative base same show growth was driven primarily by two major retail shows. Excluding these two shows base same-show growth was negative 3% for the quarter reflecting modest declines across all industry sectors as the result of the economic slow down. In general the declines we experienced are more the result of lower [inaudible] density as opposed to net square footage declines. Rather than pulling out of a show altogether, exhibitors are seeking reduced costs by sending fewer people to staff their booths and by using lighter weight exhibitry and less product which lowers shipping and drayage costs. In terms of the size of show and exhibitor participation we are not seeing an overall decline. It is a bit of a mixed bag right now. We are not seeing an increase in show cancellations but we are seeing fewer new launches and short-term bookings of smaller conferences and meetings. During the third quarter we signed $185 million in future bookings including a multi-year extension with the Consumer Electronics Show. We currently have over 75% of our remaining 2008 forecast revenue under contract and our total revenue backlog for 2008 and beyond stands at $1.4 billion. For the fourth quarter we expect revenue to be in the range of $133-148 million, a decline from the 2007 fourth quarter revenue of $157.4 million expected to be driven primarily by negative show rotation of about $10 million and the impact of lower foreign exchange rates on our U.K. and Canadian revenues. Fourth quarter operating results are expected to be in a range of a loss of $750,000 to income of $750,000 as compared to a loss of $681,000 in the 2007 quarter reflecting the benefit of our earlier initiatives to reduce overhead costs. Given the negative base same-show growth during the third quarter we have trimmed our full-year outlook somewhat. We are now expecting revenue growth of 8.5-10.5% with operating income growth at 12-15%. 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. In response, we are diligently monitoring and managing our direct labor costs which are highly variable and represent 1/3 of our total cost structure. Following the last downturn of 2001 we focused heavily on implementing operations excellence initiatives to help us manage labor more efficiently and drive productivity. We developed proprietary, activity based labor plant model that allows us to build a bottoms up labor [call]. We codified a number of best practices and rolled those out throughout our entire network. We have also done a lot of work to variablize the rest of our cost structure so we can respond faster to the ebbs and flows of the trade show industry. We regionalized creative services which are our design and graphics production capabilities to capitalize on scale advantages. We manage our equipment needs at a national level to ensure optimal usage across our network and we staff our shows from a national perspective. In short, we believe we are well positioned to quickly scale up or down to meet future demand of the trade show industry. We believe we are the best in the industry at managing direct labor costs. Additionally, we have a highly diversified revenue base with our shows spanning every sector of the U.S. economy. We break our industry sectors down into six general categories. For 2008 industrial shows will account for about 25-35% of our revenue. Retail type shows will represent a similar mix. The following three sectors will represent approximately 15% of our revenue; healthcare and education, services and technology and 5-10% comes from hotel and food service shows. Heading into the last economic downturn we were much more heavily weighted to technology shows and the start up, tech and dot com companies were great show spenders. After the dot com bubble burst in 2001 we saw both tech exhibitors and some tech shows fall by the wayside. The current market is different in that the bubble in real estate and mortgages which are not big trade show sectors. Clearly there are still broader reaching implications of the overall economy but the good news is we do not have a meaningful exposure to the real estate development or banking shows. In addition to greater industry diversification, we also had greater geographical diversification. With the addition of Melville in 2007 we have expanded our base of operations beyond the U.S. and Canada into the U.K. and more recently into the United Arab Emirates and the Mid East. The UAE opportunity is small today but the market opportunity is projected to experience rapid growth over the next several years. The region is heavily investing in developing world-class exhibition facilities surrounded by hospitality, tourism and business infrastructure. We first entered the UAE market in late 2007 with an 8-year exclusive contract to provide new services including electrical distribution and rigging at ADNEC, the Abu Dhabi National Exhibition Center. This has been a highly successful venture for us though it is small dollars overall. Today we announced our intention to expand our presence in the region by creating a full-service offering that leverages the innovations and capabilities we have developed across the GES worldwide network. Expanded services will include carpet, graphics, standard exhibitor packages and exhibitor discretionary services such as furniture rental, exhibitry and logistics. This expansion will require a small capital investment on our part and has significant upside potential as the market grows. We continue to look for every opportunity to grow our business through market share gains, increased productivity and geographic expansion. 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 would like to thank the dedicated, hard-working employees at GES for their ongoing efforts to ensure another winning year for our company. As always, the GES team is committed to winning for all our stakeholders.

Next I will hit the highlights of our experiential marketing services segment and then I will ask John to discuss our Exhibitgroup/Giltspur in more detail. As a reminder, our experiential market services segment includes Exhibitgroup/Giltspur and Becker Group. We acquired Becker Group on January 4, 2008. Third quarter revenue for the segment was $48.6 million with an operating loss of $3.6 million. These results include revenues of $2.2 million and a loss of $2.7 million at Becker Group. Becker Group’s third quarter results reflect the seasonal matrix of the business which is heavily weighted towards holiday installations during the fourth quarter. On a year-to-date basis Becker Group has generated revenues of $4 million. During the fourth quarter we are expecting revenues of $22-25 million with an operating profit of $7.5-8.5 million. In the next month or so the Becker Group team will deliver holiday environments to 109 shopping centers across the U.S. for clients that include Tubman’s, Macerich, Westfield and Simon. We also have some internet international projects as well. The volume of holiday work is lower than we had originally expected as some clients have reduced their holiday décor budgets in light of the current economy and credit markets. Even though the holiday program sales are less than we had expected, we are still expecting substantial growth over 2007 when Becker Group provided holiday environments for 85 different properties. That translates to a number of properties being up 28% this year. Beginning in November, Becker’s highly creative The Chronicles of Narnia exhibition will open at the world renowned Franklin Institute in downtown Philadelphia, which is the nation’s fourth largest consumer media market. The Franklin has a history of hosting successful traveling exhibits and we are excited about our partnership on the Narnia project. We have also realized some good synergies between Becker Group and Exhibitgroup/Giltspur. In addition to the Narnia exhibition, Becker also worked with Exhibitgroup to expand Macerich’s high successful Santa Tracking Station Program from nine regional shopping centers to sixteen this year. Becker was able to capitalize on EG’s significant experience building high quality exhibits to further enhance the Santa Tracking Station which shows how North American Aerospace Defense Command (NORAD) follows Santa’s journey around the world on Christmas Eve. Now let me get back to third quarter results. On an organic basis, in other words excluding the Becker Group acquisition, segment revenue was $46.4 million up $19.6 million from the 2007 third quarter and segment operating results improved by $5.3 million to a loss of $909,000. This improvement was driven primarily by positive show rotation revenue of approximately $13 million from a biennial European air show and new client wins at Exhibitgroup/Giltspur. Excluding the air show, EG revenue increased 25.9% from the 2007 quarter. John and the exhibit group team continue to do a great job positioning the company and driving growth in revenue and profits. Now I will turn it over to John to elaborate on the great work the EG team is doing. John can you make some comments please?

Our success in driving top line growth continues to be powered by our client centric approach and the hard work, creativity and dedication of all EG employees. [inaudible] our clients every day along with our culture of continuous improvement. We have invested significant time and energy over the last two years to elevate the level of service we provide our clients and to reposition EG as an experienced marketing agency by adding CRM capabilities and increasing the quality and quantity of our creative and strategic thought leaders. We have plans to continue to invest in our people to provide them and EG the capability to deliver innovative solutions that deliver value to our clients. The experienced marketing capability is becoming a key differentiator for us. Experience brings a brand to life in an immersive, 3-D setting. It can be more impactful than traditional forms of marketing like TV and print in that it allows targeted audiences to interact with the brand and have an experience that leaves them with a memorable and meaningful impression. Allow me to give you a recent example of how we used our experience and marketing capabilities to win a new client through a competitive RFP. We were up against some of our top competitors in this bid. To differentiate ourselves we focused on the attendee experience rather than focusing merely on our core capabilities of designing and building a great exhibit. We began with a detailed discovery process to learn as much as possible about the client’s brand. Then using this intelligence our creative and marketing strategy team developed an overriding theme for a big idea for the experience. This particular client is a software supplier to the automotive aftermarket industry and EG’s theme was “Tune up your business for higher performance.” Next our creative team translated the theme into a bold graphic. The theme and graphic were incorporated into all aspects of the attendee experience including pre-show direct marketing and an in-booth experience built around a service record card like the one found in your car owners manual. Attendees were encouraged to take these cards from station to station within the exhibit to reinforce the tune up theme. We then closed the loop by interfacing with the client’s CRM system ensuring the right information [plat] by utilizing our CRM experts. By brining these ideas and capabilities to the table we were able to engage with the client at a higher level during the final RFP presentation and demonstrate additional value and measure a return on the investment for our client. We were no longer talking about just a booth structure and logistics but more on marketing strategies and how to maximize the attendee experience through all the different touches we had developed. Ultimately the client informed us we were selected because of our creative services, integrated marketing and focus on the attendee experience which really separated us from the competition. We have since been invited to bid on their annual user conference event, demonstrating EG’s opportunity to provide additional services on this plan. I am especially fond of this example because it demonstrates two important facts. One, we are successfully differentiating EG from the competition. Two, once you get a client’s confidence and show them you execute flawlessly and deliver additional value you will be given additional opportunities to further that relationship. I have been with EG for two years now and I am very happy with the level of success we have realized and the momentum we are building. We clearly have a way to go on the profitability side of the equation and we need to continue the sales momentum and our continuous improvement culture to actively identify new opportunities to increase efficiency and drop down costs. Going forward we expect the economy to present us with challenges as well as opportunities. Many of our competitors do not have the financial strength of Viad, our broad service offering, our global reach with 26 locations throughout the world (our newest being in South Korea) or our network approach to servicing clients. I believe there will be opportunities for us to gain additional market share because other service providers are going to have issues. It is a tough market out there right now. Clients are more and more concerned, as they should be, with the financial viability of their provider and EG is well positioned for success. All of the things we have demonstrated to consistently serve our clients better to invest the time of our talented team to understand their business and to efficiently provide effective, integrated positions are all important as clients are going to be looking for that type of help now more than ever from a trusted advisor like EG. Typically companies come into the fourth quarter with opportunities for further spending. We are not sure this additional spend will materialize this year given the state of the economy and credit markets. Accordingly, we are cautious in our outlook for the fourth quarter. However, as a close and trusted partner to our clients we will constantly seek those opportunities and given the strong growth we have realized thus far we are confident in our ability to achieve and perhaps exceed the full-year guidance that we set forth at the beginning of this year. For the year we are expecting revenue to be in the range of $188-193 million reflecting growth of 8-11% from 2007. We expect operating results in the range of loss of $1 million to income of $500,000 which compares favorably to our prior guidance of a loss of $2 million to break even. Going forward we continue to work closely with our clients to identify smarter ways for them to deploy their budget dollars which includes leveraging our global network to decrease shipping costs, coordinating with our highly talented in-house ecoservices installation and dismantle teams, to lower show floor cost expanding custom rental solutions and creating integrated marketing campaigns to successfully engage our client’s customers and prospects before, during and after trade shows and events. All at a lower cost per touch point thereby delivering immeasurable value to our clients. These efforts should help us manage the current economic climate and potentially capture a greater share of our clients’ marketing expense thereby mitigating the impact that any reduction in client budgets may have on our results. I would like to thank the entire EG team for its efforts to date and reiterate our commitment to delivering for our shareholders. In closing, we have a long positive momentum as demonstrated by our strong revenue growth. We are cognizant of the current market conditions and are proactively and aggressively taking steps to ensure EG continues to gain market share and produce the best results possible. Paul, back to you.

Now I will cover highlights for the Travel and Recreation services segment. The Travel and Recreation services segment had a solid third quarter. Revenue was $50.5 million with operating income of $21.7 million and operating margins of 43%. These results are in line with the 2007 third quarter despite a softer economy and higher travel costs. At Brewster passenger volumes were affected by reduced international travel however Glacier Park realized a healthy increase in room revenue over the 2007 third quarter as the result of strong demand from U.S. travelers who opted to vacation closer to home. The year is essentially complete for the Travel and Recreation segment. Glacier Park is now closed for the season and Brewster is seasonally very slow during the fourth quarter. Overall, 2008 is on track to be another good year for both Brewster and Glacier. For the full year we expect revenue to be in the range of $86.5-87.5 million with operating income in the range of $21.5-22.5 million. I will now ask Ellen Ingersoll, Viad’s Chief Financial Officer, to discuss some financial highlights for the quarter. Ellen?

Thank you Paul. As show in table II to the earnings release, adjusted EBITDA was $31 million during the quarter versus $16.7 million in the third quarter of 2007. Also shown in table II, free cash flow defined as net cash provided by operating activities minus capital expenditures and dividends was $51.7 million for the quarter versus $30.8 million in the 2007 quarter. Directionally for 2008 free cash flow is expected to be approximately net income plus depreciation and amortization, minus capital expenditures and dividends and including the effect of working capital. For the full year 2008 our working capital is expected to have a negative impact. At September 30, 2008 Viad had total cash and cash equivalents of $152.9 million. This compares to $111.6 million at June 30, 2008. Our total debt at the end of the quarter was $12.9 million with a debt to capital ratio of 2.5%. Net interest income for the quarter was $379,000 versus $1.1 million in the third quarter of 2007. Our depreciation and amortization expense for the quarter was $7.5 million compared to last year’s third quarter of $6 million. The full-year 2008 forecast is approximately $27 million to $29 million. Capital expenditures were $6.5 million during the third quarter 2008 compared to $5.6 million in the third quarter of 2007. The full-year 2008 forecast is approximately $38 million to $40 million. Payments on our restructuring reserves were $688,000 during the quarter versus $1.1 million in the third quarter of 2007. For the full year 2008, restructuring payments are expected to approximate $1.9 million. The 2008 income tax rate year-to-date was 32.3% versus 34.5% in 2007. The 2008 and 2007 rates reflect aggregate favorable resolution of tax matters of $3.2 million and $1.9 million respectively. The 2008 and 2007 tax rates excluding the favorable resolution of tax matters were 36.8% and 37.5% respectively. Back to you Paul.

Thanks Ellen. Before wrapping up my comments and opening this call to questions let me discuss our guidance for the 2008 fourth quarter and full-year. For the fourth quarter we expected income per diluted share to be in the range of $0.01 to $0.011. This compares to 2007 fourth quarter income before other items of $0.02 per share. The upside relative to 2007 is due primarily to the Becker Group acquisition. Becker Group is expected to generated fourth quarter operating income of $7.5 to $8.5 million. Partially offsetting the incremental income from Becker Group is a lower fourth quarter revenue outlook for Exhibitgroup/Giltspur due to some shifting of revenue into earlier quarters this year and the expectation we won’t benefit from an end of the year budget flush as we have in the past couple of years. We are also expecting higher taxes in the 2008 fourth quarter relative to the 2007 quarter. For the 2008 full year we expect income before other items to be in the range of $2.12 to $2.22 which continues to reflect double digit growth over 2007. Regrettably this range is lower than our prior guidance of $2.17 to $2.32. The decrease is driven mainly by a reduced fourth quarter revenue outlook for Becker Group as the result of reductions in holiday décor spending by shopping centers. Several of the holiday programs Becker Group had in its sales pipeline were postponed or reduced in light of the recent economic slow down and tight credit markets. As a result we lowered Becker Group’s full-year operating income range by $1.5 million on the low end and $2 million on the high end which equates to about $0.045 $0.06. The additional decrease to the high end of our guidance range reflects a narrowing of the range based on better visibility over full-year results. Specifically we are expecting less upside in results from the Travel and Recreation services segment and GES partially offset by a slightly better outlook for EG based on its strong year-to-date revenue growth. Specific full-year and fourth quarter guidance for each of our operating segments can be found in the earnings press release. In closing, we are still on track to recognizing double digit earnings growth in 2008’s quite challenging economy. Although we are seeing signs of the economic slow down impacting trade show attendance and to a lesser degree exhibitor participation, GES and Exhibitgroup/Giltspur have both realized strong growth so far this year. We are staying close to our clients and we are working with them to maximize their return on their trade show and marketing spend. Looking back over the last 35 years the trade show industry has proven to be quite resilient with a long history of steady growth. While recessionary periods have resulted in temporary slow downs the industry has always recovered and resumed its upward trend. Becker Group is heading into its busy holiday season. While some of its clients have reduced their holiday décor budgets this year we still expect Becker Group to realize a substantial profit in the fourth quarter. As Becker Group is gearing up our Travel and Recreation services segment is heading into its seasonally slow period. Brewster and Glacier park are focused on cost control in order to preserve the strong results they have realized this year to date. In the current economic environment we are focused not only on controlling costs, but also on identifying and capitalizing on new opportunities for each of our businesses. Our strong balance sheet, long-term customer contracts, leading market positions and talented employees are a great advantage in uncertain times like this. We will continue to pursue strategic acquisitions, selectively invest in our existing businesses and return capital to our shareholders. As always we remain committed to driving growth and enhancing shareholder value. With that we will close and open it up for questions.

(Operator Instructions) The first question comes from John [Heely] – FTN Midwest Securities. John [Heely] – FTN Midwest Securities: I have a question on the GES business. If you look at same-show revenue growth, I was hoping to get your expectations and your thoughts on how you might see that trending a bit in the fourth quarter and maybe your thoughts on how we should think about same-show revenue growth based on what we see in the economy today heading into 2009. Any color you could provide would be a great help.

We are forecasting same-show revenue growth in the fourth quarter to probably be around flat. We don’t have as much heavy retail shows and don’t have the flip side of that which is some of the rotating industrial shows that perform very well. As we go into the fourth quarter I think that is how we are looking at it right now. Kevin do you want to make a comment on that?

I agree with your comments on the fourth quarter and looking into next year it is really too early to tell. There is a lot of uncertainty out there. We have spent a lot of time with our clients in understanding what they are expecting in their shows moving forward. We certainly wouldn’t expect the same high same-show growth we saw last year but I still see a lot of opportunity from a products and services perspective and believe in the overall strength of the marketing industry. I think there are a lot of factors you have to take into account and we’ll certainly have more sense of that as we move forward and get closer to next year. John [Heely] – FTN Midwest Securities: Taking a step back and looking at the last economic downturn I thought you guys did a great job in talking about how this was different. Can you maybe talk about how same-show revenue growth performed in the prior slowdown?

I’ll give you the best of my recollection. We had much more exposure to tech back then and there was a lot of dot com, telecom spending in just about all the shows we did an I think we saw fairly good drop offs in that. But the rest of the business held up and bounced back fairly quickly. I think this time it is a little bit different in that we didn’t have the same level of financial crisis the last time around and I think there was still a good rallying cry going on in the country to get people to go back out and spend. Kevin do you have any more color on that?

I would go with the same as you and it is the best of my recollection on that. I go back to that Trade Show Week data that shows the industry trends. I think you had a little bit of downturn in that 2001 and 2002 perspective and started showing positive around 2003. Those were overall but that gives you a general direction. If you take that all the way back into the 70’s you have got steady positive trends so anything we saw was short lived and we moved into the positive real quickly.

At that time we had not yet formed the products and services division. We put that in place in 2003 and 2004 time frame which really started to put a lot of focus on exhibitor discretionary spend and we continue to believe as Kevin said there is continued opportunity there. John [Heely] – FTN Midwest Securities: If you look at the last downturn the company you have the product and services division now. You don’t have the exposure to technology as you did in the past. In the environment we see today do you think it is possible next year we could have at least flat if not slightly positive same-show revenue growth or is it too early to make that conclusion either?

I would hate to speculate right now. As Kevin mentioned we are spending a lot of time with our clients getting to understand their views on their shows. Another thing to keep in mind here is a lot of the business we do is with associations and associations have to have annual meetings and the trade show is a big part of their revenue stream. We have great customers that are out there driving whatever they can do to continue show growth and things like this in this economic market and we are certainly trying to be a very good partner to them to help them in that process. John [Heely] – FTN Midwest Securities: Lastly, if you look at your shows that are taking place in the first quarter of 2009 have you seen from your association partners have you seen much change in plans for those shows? Have you seen the exhibitor list contract a little bit? Are you still seeing exhibitors added to those shows? Any color you can provide on some of the big shows in the first quarter of 2009 if you are seeing any change in the outlook for those shows yet.

I think it is really mixed again by industry. If you look across those big shows there are some showing some decline, some showing flat and some showing positive at these early stages. As I outlined in my comments net square footage hasn’t necessarily been the big driver. What we won’t have as much visibility into is kind of general participation and that is a shorter-term decision on how much freight and product do they bring to the show and how many people do they bring to the show. So that is why we are spending a lot of time with clients and kind of understanding what they are seeing from their budgets is important but the short answer is it is a very, very mixed bag on what kind of people are predicting at this point in time.

The last comment I would make along those lines is that last time around I think we showed a very good ability to flex down quickly in our cost structure and we did I think a very good job adjusting the business accordingly and we certainly continue to believe we have a strong ability to do that regardless of what happens here. John [Heely] – FTN Midwest Securities: You talk about the ability to change the cost structure of GES, say if that business were to show a 5% decline in same-show revenue growth next year how fast can you change the cost structure? Maybe what would be the margin impact if you saw that kind of decline in basic show revenue?

In Kevin’s comments he talked about 1/3 of the cost is trade variable labor and that is the casual union labor we have on our shows and a significant chunk on top of that, I don’t have it right in front of me, is variable too. I don’t know right off the top of my head what the margin hit is. It kind of depends on how fast and which shows and what month it hits because of the ups and downs we have in the volume of this on a monthly basis. Kevin do you have any color to add to that?

I would just reiterate the variable labor piece is about 1/3 of our cost structure. That we can ramp up and down very quickly. The other portions we talk about would take a little bit more time but still have the ability to ramp them. From a margin perspective I think they generally remain relatively the same or similar just ramping up or down with the revenue in whatever time period that takes. Again, the variable piece takes a lot less time.

The other piece there is we have continued to build economies of scale and in Kevin’s comments he talked about regionalizing our creative services and that allows us to spread out a base of six slots over a bigger area and it is easier to leverage that and then national equipment planning as well as national staffing. We have done a lot of that to again regionalize and nationalize our costs to smooth things out over peaks and valleys in the system.

The next question comes from Troy Mastin - William Blair & Company. Troy Mastin - William Blair & Company: I want to understand a little bit more on growth in the experiential marketing side of the business. Can you give us perspective on Becker’s fourth quarter performance last year to help us figure that out?

As I mentioned the number of properties is up 28%. I don’t have exact revenues in front of me but it was up substantially in the fourth quarter this year too. It is not up as much as we thought it was going to be due to cancellations and postponements of some fairly significant projects with some of our mall developer clients. Troy Mastin - William Blair & Company: I can probably back in to this number but if you have it on hand that would be helpful, the revenue you are expecting from just Exhibitgroup in the fourth quarter. I guess you said $22 million for the contribution of Becker. Is that correct?

It is 33.8 to 38.8 for EG standalone. Troy Mastin - William Blair & Company: Last year it was $50 million?

Yes. Troy Mastin - William Blair & Company: So maybe you can quantify for us how much of that is from business that have been pulled earlier into the year versus what you see as lack of budget flush or pull back a bit so we can maybe get an idea of what the trajectory looks like on a go forward basis in 2009.

I’ll have John comment on that but I think we talked on our earlier calls we were certainly trying to get out in front of the economic curve a little bit in working with our clients. I think we did a good job of that this year and we have some nice orders for kiosk business earlier into the year. That might have been in last year’s fourth quarter. And a couple of other things. John do you want to comment on that?

First of all, I think a lot of what we are talking about as Paul mentioned is due to timing and in addition to that many of our healthcare clients had spend with us earlier in the year thus leaving us less than the budget for the fourth quarter. We also had a shift of kiosk revenue and some international revenues into earlier quarters. So most of it tends to be timing and that is why we are looking at and emphasize full-year numbers just to really get a handle on the revenue growth which was pretty strong. Our guidance does not include revenue, as we mentioned, from the typical end of the year orders that typically come on short notice because we believe that companies are going to not be as aggressive this year in particularly using up the remaining budget dollars. So given the state of the economy we are trying to take a conservative look but we are also very much out pushing and building up a lot of relationships to demonstrate to our clients the more they can spend and generate results that would be a good result for them. Troy Mastin - William Blair & Company: If you compare last year how much of that short-term budget flush you got versus what you are predicting this year what is the delta there?

Probably around a few million. Troy Mastin - William Blair & Company: You said in the past you think at least as it relates to Exhibitgroup you can turn the profitability on a full-year basis in 2009. Maybe you can do it even sooner. Do you still feel like that can be the case in 2009?

Yes, we are still trying to get there for 2008 and I know John and Bryson and the EG team is doing everything possible and we still have our sights set on that for 2009 as well. Troy Mastin - William Blair & Company: Questions on GES, it looks like the implication for fourth quarter growth is maybe for the mid single digits. I want to confirm if that is what you would agree with on eliminating the show rotation business and then also the minus 11.1 same-show growth in the quarter to me this feels like it is overly negative representation of the state of the business. Is there another way that you might look at the growth in the third quarter that might be a little bit more representative of truly what is going on organically in the business?

We try to be conservative in the calculation and again we define that as shows that occur each year in the same quarter and the same city. That gives us the best representative year-over-year calculation. I think it was a little over 30% of our revenue for this quarter. It may be a little hard on ourselves because it didn’t factor in the terrific growth we saw in our non-annual business and maybe things that moved from city to city but we haven’t found a good way to calculate that and make it consistent and understandable so we have stuck with our other calculation. Our non-annual business performed extremely well as Kevin mentioned from exhibitor participation but it was also very good execution by the GES team. Troy Mastin - William Blair & Company: Can you give us any idea of the early outlook for your significant show in the first quarter you are sort of seeing consumer electronics show and if you feel like that is a good indicator or barometer for how the rest of the year might go?

I don’t know exactly where we are at on the planning of that show. The [Own Eight] event occurs in the first or second week of January was strong and they tend to have pretty good rebookings for that show for the following year. My guess is there is probably some adjustments being made given the current economy but that has been a very, very strong show for many years. Kevin do you want to comment?

From the standpoint of that show, from what we know to date there is still a lot of moving parts is square footage looks pretty similar from a year-over-year perspective. It may be up and may be slightly down but the last few month sales. The bigger question as I laid out earlier was around overall participation and density and that we won’t know until we get closer to the move in. Troy Mastin - William Blair & Company: I just wanted to ask about Melville. The U.K. economy seems to be slowing more rapidly than others and I just wonder if you can give us an update on how Melville has been performing and if you think this is an indicator for where things might go in the U.S.?

Melville is performing well. That acquisition has been a good acquisition. It has integrated well. We have been able to capture the productivity gains by exporting some of the successful things we have done in the U.S. there. I think the economy there seems to be somewhat similar to some of the challenges we are seeing here. Kevin do you have a comment on Melville?

From a trend perspective from what is happening in different sectors it is somewhat similar to the U.S. The retail sector has struggled the most but some of the other sectors have performed better. I see a lot of parallels in terms of how the trade show industry is performing across the two areas. Troy Mastin - William Blair & Company: Is the growth there similar to what you are seeing in the U.S. as well?

It would be similar trends from that standpoint too. Troy Mastin - William Blair & Company: On oil prices coming down I wonder if you have done any estimates or calculations in terms of what the current price of oil would do to your business in 2009 or 2008 if you determined it can give you a certain amount of cost reduction for 2008. Any estimates along those lines?

Certainly the trends on oil prices are good for us as we have talked about before. It takes awhile for some of those things to cycle through and the commodity prices we buy but certainly we see it when we are refueling our fleet. Kevin do we have any quantification on that?

No, similar to what I said last time on the last call when they had gone up to a pretty substantial high is that we had been able to offset those and make those relatively negligible and also participate the down adding a great deal of benefit although it would add some benefit. So it is something we have really just been able to manage and really treat as a variable cost and it is something that does take some time on the supplier side to drive lower costs into their product production. Troy Mastin - William Blair & Company: On share buybacks you were somewhat active in the quarter. I’m curious if you have any plans to slow down or accelerate your share repurchase activity?

I think we believe our stock is under valued like most of the market does. We have always executed our authorization with a disciplined approach but we don’t comment on when we are or are not buying. Troy Mastin - William Blair & Company: It is fair to say you haven’t suspended your buyback program as some other companies have done?

No we have not. Again, we have a very strong balance sheet. We had terrific cash flow for the quarter and ended up with a very nice net cash position. Troy Mastin - William Blair & Company: Finally, if you could talk about currency probably most relevant to the Travel and Rec segment. In terms of how that may be connected to your guidance and your thoughts looking into 2009 and if it is relevant enough to mention as it relates to Melville I would appreciate that as well.

With Melville in the U.K. and our Canadian operations for both GES and Brewster is where our foreign exchange issues come from. Ellen?

The fourth quarter really is a Melville impact. GES’ revenues can be impacted by about $5.5 million in the fourth quarter. On the op income line quite a bit less about $200,000. The Travel and Rec business is essentially done for the fourth quarter so there isn’t a huge impact on the Travel and Rec business. Versus prior years it is about negative $700,000 on the revenue line and break even on the op income line. Troy Mastin - William Blair & Company: So it will be negative $5.5 million on the revenue line in GES on a year-over-year basis?

For the fourth quarter.

Negligible on the bottom line. Troy Mastin - William Blair & Company: Based on where rates are today can you give us an approximation of what kind of effect you would expect in 2009 on currency?

I don’t have a total for 2009 but obviously with rates where they are today there will be an effect since most of the year the rates were very high. Since they just started coming down it will have an effect. I don’t have that quantified.

The upside is with the stronger U.S. dollar versus the Canadian dollar hopefully that will help tourism with the U.S. going to Canada again because as we enjoy higher FX exchange rates it did impact I think in making it more expensive for the U.S. traveling into Canada. Hopefully there is some positive pick up there too.

The next question comes from Clint Fendley - Davenport & Company. Clint Fendley - Davenport & Company: A question on Becker. I wonder if you guys could help me understand. Obviously with the properties up by 28% how we are now looking at sort of an at-best break even or slight operating loss for the year with Becker here. Are you giving up pricing? Is there a mix shift in the type of work you are doing and why does the property increase?

No, we made some investments in the growth of Becker and we felt very good about the pipeline and a lot of things happened very recently with the most recent kind of things that have happened it definitely impacted our developer client. We still believe very strongly in the fundamental reasons of acquiring Becker Group. I think it is playing out. We are seeing great synergies between Becker, Exhibitgroup and GES. We have not seen these types of challenges before from that marketplace in the time we have been in this business and we still feel very good about these things going forward in 2009 and our growth opportunities with Becker. Clint Fendley - Davenport & Company: So as you talk to the leaders there and they look back historically how has that business typically fared during recessionary periods? It seems quite surprising they would be cutting back this significantly just on the decorations in the mall during the holiday period.

I think you hit the nail on the head there. Typically we have not seen it. I think it is the magnitude of what has happened with the economy and the credit markets quite frankly because some of these issues were financing issues too. We have not seen that in the 15-20 years going back, certainly not to this level because holiday spending is important to the retail mall and it is consumer shoppers in drawing those people in similar to drawing people into your booth at a trade show. So, we have seen reduced spending in some cases and postponed or cancelled spending in others. The postponed stuff we are doing everything possible to get that wrapped up as tightly as we can as we head into 2009.

I show no further questions at this time. I will now turn the conference back over to the speakers for closing comments.

In closing again we had a terrific third quarter. We have a little bit of economic headwinds we are dealing with heading into the fourth quarter but we have a very, very strong balance sheet, terrific cash flow, terrific people and you can count on Viad and its operating subsidiaries and their teams to make the adjustments necessary that we need to as we aggressively look into the future here to make sure our business is sized correctly and we look forward to talking to you again in three months.