GES plans cutbacks despite profit gains

Trade show and convention contractor GES Exposition Services will pare its Las Vegas work force and increase fuel surcharges despite posting first-quarter revenue of $285.7 million, an increase of nearly 17 percent from the same period last year.

Company officials wouldn’t quantify the extent of the cutbacks beyond saying they would represent somewhere between $1 million and $10 million in savings on an annual basis.

The cutbacks will be coupled with a boost in fuel surcharge from 2 percent to 3 percent — a 50 percent increase.

“Our staffing levels are at an all-time high even after the restructuring,” said Kevin Rabbitt, president of GES, which employs about 750 full-time workers in Las Vegas and supports about 6,500 crafts people who set up and tear down trade shows.

Company officials mentioned the cutbacks Friday during a conference call regarding first-quarter earnings for Viad Corp., the Phoenix-based parent company of GES.

Viad had net income of $16.7 million, or 81 cents per share, for the three months ended March 31, up from $14 million, or 66 cents per share, a year earlier.

Analysts polled by Thomson Financial had expected earnings of 84 cents per share.

Revenue rose 18 percent to $335.4 million from $283.7 million.

Viad shares fell $5.69, or 15.35 percent, on the news to close at $31.37 on the New York Stock Exchange.

A transcript of the call posted at quoted Rabbitt as saying, “At the overhead level we have reduced positions and increased the spans of control of several managers to ensure we remain lean as an organization.”

Rabbitt and Viad Chairman, President and Chief Executive Officer Paul Dykstra wouldn’t elaborate on the cutbacks.

“That’s as far as we’ll go,” Dykstra told an analyst who asked for more details.

Savings from the cutbacks won’t kick in until the third quarter, however, because of severance payments to affected workers, officials said.

The cutbacks and increased charges for fuel come in anticipation of a potential slowdown in the convention business, an industry that generates more than $8 billion annually for the Las Vegas economy.

During the first quarter of 2008, GES posted an 11 percent increase in operating growth to $35.8 million and parent company Viad posted an 8.5 percent operating margin.

Rabbitt credited about $18 million of the $41 million first-quarter revenue increase at GES to a positive show rotation, meaning the company worked shows during the quarter that didn’t occur in the first quarter of 2007. The acquisition of another company in February 2007 also boosted first-quarter revenue by $8.7 million, he said.

Working for four of the top 200 trade shows in the country also boosted GES’ first-quarter bottom line.

The shows included the International Consumer Electronics Show in January and the ConExpo-Con/Agg show in March.

There were factors that worked against GES during the first quarter, too.

Rabbitt cited one major retail show changing its dates. He said the date change and tough times in the retail industry reduced the number of exhibitors at the show, which hurt GES.

“We get paid by the exhibitors,” he said. “What exhibitors bring and what they buy is the primary portion of our business.”

Rabbitt didn’t identify the show by name. But the World Shoe Association, an event that attracts more than 30,000 people from the footwear industry, did shift its date a few weeks ago. People who attended the show said the shift pushed the event past the peak buying season and depressed attendance.

He and other company officials said they suspect a continuing retail slump could affect shows for that industry.

“We are facing a turbulent economy right now and while our clients have been following through on their show commitments in the first part of this year, some are scrutinizing their plans for future trade show spending,” said John Jastrem, president of Viad’s Exhibitgroup/Giltspur, a marketing subsidiary based in Illinois.

Contact reporter Benjamin Spillman at or 702-477-3861.

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