Sparks Exhibits Buys Showtime Enterprises

Exhibit design company picks up competitor that filed for reorganization

By Margo McCall -- Tradeshow Week, 1/31/2005

For years, executives at Sparks Exhibits & Environments had wanted to talk with Showtime Enterprises about a possible merger. But they could never get their neighboring competitor to call them back. Until, that is, Showtime ran into financial trouble.

Now, after six months of talks, Sparks' parent Marlton Technologies has made an offer to buy Showtime's assets for $2.3 million and assume $5.3 million of its debt. The $7.6 million offer, part of Showtime's Jan. 12 Chapter 11 filing, still needs the approval of a bankruptcy judge.

Managers of both companies say they're looking forward to the merger, which is expected to be approved within two months. "We've really always respected them as a competitor," said Jeff Harrow, Marlton's chairman.

"We are excited about it as well," said Harold Jensen, executive vice president of Showtime, which employs 90 people, operates six offices and produces about $21 million in annual revenue. "There are a lot of synergies, and we're really looking forward to that."

This is Marlton's second recent acquisition.

Last August, the company spent $694,000 to buy the assets of Exhibit Crafts, a Los Angeles area exhibit manufacturer, and along with it a 20-percent stake in Intl. Exposition Services, a tradeshow shipping and installation provider.

In the most recent merger, Marlton plans to retain Showtime's management, including Jensen, CEO David Sudjian and many of its employees. "That's why we're buying them," Harrow said. "There's a lot of creative talent."

Despite providing complementary services — design and production of tradeshow exhibits, museum interiors and retail displays — the two companies have very few overlapping customers, Harrow said.

Among the 15-year-old Show-time's six facilities are a company headquarters in the Philadelphia suburb of Paulsboro, N.J., and production facilities in Las Vegas. Although the Las Vegas facility is strategically valuable, said Harrow, "there are obviously consolidation possibilities."

According to the bankruptcy filing, Showtime was forced to file for reorganization when it couldn't secure financing after Wachovia Bank, which is owed $1.8 million, cut off Showtime's line of credit. At the time of the filing, Showtime had $6.4 million in assets, but owed $11.9 million to hundreds of creditors. The three largest creditors are Wachovia, Argosy Investment Partners, which is owed $4.8 million, and the federal Small Business Administration, which is owed about $602,000.

Showtime is seeking the court's approval to pay its employees $422,000 in unpaid wages and secure financing to keep the company operating during the reorganization process.

Harrow said he had tried often before to open discussions with Sudjian, the company founder.

Harrow believes that larger companies have a better chance of survival in the current environment. "You need to be a certain size to provide the pricing that clients are looking for," he said.

But even that doesn't ensure that navigating the current environment will be easy. Exhibitgroup/Giltspur, a subsidiary of the publicly traded Viad, is the market-share leader. But Viad late last year had to write off $80.4 million of the company's value due to the persistently glum outlook for new booth orders.

Showtime Enterprises isn't the first exhibit designer to wind up in bankruptcy court. The Grand Prairie, Texas-based Exhibit Dynamics filed for Chapter 11 in early 2004, leaving vendors and its financial backer owed more than $30 million. An unrelated Atlantic City company called Showtime Exhibit Builders also filed for bankruptcy in early 2004.

Jensen said his company is impressed that Marlton is faring so well in a depressed market. In the third quarter of 2004, the company reported $16.8 million revenue, up 33 percent from the year-ago quarter. At the same time, it narrowed its net loss to $185,000, from $1.9 million in the third quarter of 2003. Tradeshow exhibits generated $8.2 million of that quarter's revenue, up 56 percent from the year-ago quarter.

But Sparks also previously struggled in the challenging market. Sales declined to $61.6 million in 2003 and Marlton declared a $2.1 million loss.