Exhibit Dynamics Succumbs to Tough Times

Booth design firm Exhibit Dynamics has filed for bankruptcy, leaving a string of unpaid vendors in its wake.

Its creditors range from William Blair Mezzanine Capital Fund, which is owed $21.9 million, to a host of small transportation, labor management and installation and dismantling firms owed varying amounts. All told, the Grand Prairie, Texas-based company owes its 25 largest creditors more than $30 million.

The company, in its Feb. 4 Chapter 11 filing, said it had been struggling in an exhibit and tradeshow environment that had been depressed since the Sept. 11 attacks. A month ago, Exhibit Dynamics believed it had secured enough cash to continue operating and allow it to access its Banc of America credit line.

But that plan fell apart when two salespersons, who together controlled $6 million in annual revenue, resigned. The situation worsened after Exhibit Dynamics was sued by one landlord and threatened with eviction by others. Furthermore, the company's "relationship with certain key vendors had substantially deteriorated due to cash-flow difficulties," stated the U.S. Bankruptcy Court filing in the northern district of Texas. Due to the changed circumstances, the investors backed out, leaving Exhibit Dynamics with no other choice but reorganization.

The company operates offices in Strongsville, Ohio; East Brunswick, N.J.; and San Jose and Santa Ana, Calif. J. Mark Chevallier, the company's attorney, said Exhibit Dynamics is continuing to operate during the reorganization. Bank of America has agreed to let the company operate using its existing cash and accounts receivable, which are B of A's secured loan collateral. CEO Ray Kingsbury did not return phone calls.

The William Blair Mezzanine Capital Fund is an investor in Exhibit Dynamics. A William Blair representative did not return a phone call from Tradeshow Week about the $21.9 million owed it by Exhibit Dynamics.

Creditors were circumspect about the company's financial distress. "Obviously, it's just a further indication of some of the difficulties in the industry," said John Yohe, CEO of event-services company Nth Degree, which is owed $252,580.

Pete Dicks, executive director of the Exhibit Design and Production Assn., said Exhibit Dynamics isn't the first booth design firm to succumb to the tough operating environment. "It's been a very challenging couple of years. There have been a number of businesses that have gone out of business," he said. "All of our industry has been suffering."

Some exhibit designers have reported sales declines of more than 30 percent. Dicks said 2002 was the worst, prompting companies to slash costs in 2003. Those most likely to survive were companies that offered services such as booth rental in addition to exhibit design and production.

Ironically, Exhibit Dynamics' financial troubles come just as business seems to be improving. "Most people are saying that the industry has turned the corner and there's gradual improvement. Pockets are keeping very, very busy," Dicks said.

Although it's been a rough ride for exhibit design houses, it hasn't exactly been smooth sailing for exhibit services firms, such as those left unpaid for services they performed for Exhibit Dynamics. Jim Wurm, executive director of the Exhibitor Appointed Contractor Assn., said he worries that Exhibit Dynamics' bankruptcy will create a "trail of devastation" similar to that generated by The Folio Group's July 2002 closing.

The Northborough, Mass.-based exhibit design and marketing firm was on an aggressive growth track in the late '90s, opening new offices and acquiring smaller competitors. Even three months before Folio closed, it was continuing to hire people. When the company ceased operations, more than 300 employees were laid off.

Wurm said such situations are particularly troublesome for vendors because they're not only out their potential profit, but also have to make up for the expenses incurred in doing the work too. "People on the (creditor) list are probably concerned. It's a very difficult problem to deal with," he said.

The problem is acute enough that Wurm hopes to address it in an executive roundtable during the week of The Exhibitor Show, March 14-18 in Las Vegas. Wurm said he was informed of Exhibit Dynamics' bankruptcy the day of the filing. Several of its biggest creditors are EACA members.