Advanstar Reports Second Quarter 2006 Results.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Advanstar Communications Inc. ("Advanstar"), a leading worldwide media company providing integrated marketing solutions for the Fashion & Licensing, Life Sciences, and Powersports Powersports are a subset of the generalized category motorsports. Examples of powersport vehicles are motorcycles, ATVs, snowmobiles and PWCs. One of the defining features of any powersport is the use of an engine, in one form or another. industries, today reported operating results for the second quarter ended June June: see month. 30, 2006. Second Quarter and First Half 2006 Overview Advanstar's results for the second quarter and first half of 2006 reflect the positive impact of the strategies, operating structure, and growth initiatives we implemented in the last year. Joe Loggia loggia Hall, gallery, or porch open to the air on one or more sides. It evolved in the Mediterranean region as an open sitting room with protection from the sun. It is often a roofed, arcaded open gallery on an upper story overlooking a court, though it can also be a , President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Advanstar, said, "We are continuing to build on our outstanding start to 2006 and have maintained our positive momentum through the second quarter. Launching new products and enhancing the customer experience, combined with continuous improvement in our operating efficiencies, drove our 13% revenue growth and 28% EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become increase for the first half of the year." The following table summarizes Advanstar's performance for the second quarter and first half ended June 30, 2006 and 2005:
(in thousands of dollars)
Quarter Ended Six Months Ended
June 30, June 30,
2006 2005 % Change 2006 2005 % Change
-------- -------- --------- --------- --------- ---------
Revenue $59,238 $55,990 6% $165,816 $146,562 13%
Operating
(loss)
income (843) (3,285) 74% 29,756 18,385 62%
Net (loss)
income (16,835) 15,509 -209% (1,759) 21,654 -108%
Operating
cash flow 2,377 (17,667) 113% 16,218 (13,623) 219%
EBITDA (1) 9,187 6,234 47% 48,448 37,862 28%
(1) A reconciliation of the differences between this non-GAAP
financial measure and the most directly comparable GAAP measure
can be found at the end of this press release.
Second Quarter Results Revenue increased 6% to $59.2 million from $56.0 million for the same quarter last year. The increase is due to 9% growth in the Fashion & Licensing segment, 24% growth in the Powersports segment and 3% growth in the Life Sciences segment. There were no material event timing differences in the quarter. Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the improved to $0.8 million from $3.3 million in the second quarter of 2005. Contribution margin grew 17% in the Fashion & Licensing segment and 8% in the Life Sciences segment, while losses were reduced in our Powersports segment. The 2005 results include a restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $2.0 million related to a workforce and leased office space reduction. EBITDA in the second quarter grew 47% to $9.2 million from $6.2 million in the same quarter of 2005. EBITDA in the second quarter of 2005 includes the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. restructuring charge of $2.0 million. The balance of the improvement is driven by both solid revenue growth and generally improved operating performance. Cash provided by operations was $2.4 million compared to cash used by operations of $17.7 million in the second quarter last year. Operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. in 2006 benefited from strong operating performance, tradeshow booth deposits from the Project tradeshow business which was acquired in August 2005 and a reduction in cash interest expense as a portion of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. was repaid in June of 2005. Net loss was $16.8 million, compared to net income of $15.5 million in the second quarter of 2005. The reduction is primarily due to non-recurring items in the second quarter of 2005. Net income in the second quarter of 2005 included the results of assets sold to Questex, which are reported separately as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , and included a $53.0 million gain on the sale of these assets. These gains were partially offset by costs of $12.6 million incurred in relation to the extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of a portion of the Company's debt. Second Quarter Segment Operating Summary The following table summarizes the quarterly segment operating results:
(in thousands of dollars)
Contribution
Revenue Margin (1)
Quarter Ended Quarter Ended
June 30, % June 30, %
2006 2005 Change 2006 2005 Change
-------- -------- ------ ------- ------- ------
Fashion & Licensing $10,952 $10,074 9% $4,999 $4,286 17%
Life Sciences 40,002 38,977 3% 13,428 12,488 8%
Powersports 5,514 4,435 24% (115) (1,043) 89%
Other 2,770 2,504 11% 173 1,199 -86%
(1) Contribution margin is defined as revenue less cost of production;
selling, editorial and circulation costs; and segment management
costs.
Fashion & Licensing: Revenue from Fashion & Licensing for the second quarter of 2006 increased 9% to $11.0 million from $10.1 million in the same quarter of 2005. Revenue from the Licensing International show grew 6%, or $0.5 million, reflecting a 5% increase in square feet, which increased the size of the event to more than 200,000 square feet. License! magazine revenue grew 18%, or $0.3 million, due largely to a 15% increase in advertising pages. Contribution margin from Fashion & Licensing increased 17% to $5.0 million in the second quarter of 2006 from $4.3 million in the second quarter of 2005 due to the successful Licensing International event and revenue growth in License! magazine. Life Sciences: Revenue from Life Sciences increased 3% to $40.0 million in the second quarter of 2006 from $39.0 million in the same quarter of 2005. The increase in revenue was due to strong performances of several publications, including DVM DVM Doctor of Veterinary Medicine. DVM abbr. Doctor of Veterinary Medicine DVM Doctor of Veterinary Medicine. Newsmagazine news·mag·a·zine n. 1. A magazine, usually published weekly, containing reports and analyses of current events. 2. A television program that presents a variety of topics, usually on current events, often by using interviews and , Dental Lab Products, Formulary formulary /for·mu·lary/ (for´mu-lar?e) a collection of recipes, formulas, and prescriptions. National Formulary see under N. for·mu·lar·y n. , and Contemporary Pediatrics pediatrics (pēdēă`trĭks), branch of medicine dedicated to the attainment of the best physical, emotional, and social health for infants, children, and young people generally. , as well as the launches of new conferences and publications. These revenue gains were partially offset by a decline in revenue from our IVT IVT intravenous transfusion. pharmaceutical conferences. Contribution margin from Life Sciences increased 8% in the second quarter of 2006 to $13.4 million from $12.5 million in the second quarter of 2005, due primarily to increased revenue and improved operating efficiencies from the management restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). undertaken in the second quarter of 2005. Powersports: Revenue from Powersports in the second quarter of 2006 increased 24% to $5.5 million from $4.4 million reported in the same quarter of 2005 driven primarily by strong growth in our off-road off-road adj. Existing, taking place, or designed for use off paved or public roads or in rugged terrain: off-road sports such as snowmobiling. sector, including the launch of Off-Road Expo in Salt Lake City. Contribution margin from Powersports improved in the second quarter of 2006 to a loss of $0.1 million from a loss of $1.0 million in the second quarter of 2005 due primarily to the performance of the off-road properties launched in 2004 and 2005. General and Administrative: General and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. increased 8% to $9.4 million from $8.7 million in the second quarter of 2005 primarily due to increases in legal costs related to outstanding legal claims. First Half Segment Operating Summary The following table summarizes the first half segment operating results:
(in thousands of dollars)
Contribution
Revenue Margin (1)
Six Months Ended Six Months Ended
June 30, % June 30, %
2006 2005 Change 2006 2005 Change
-------- -------- ------ -------- -------- ------
Fashion & Licensing $59,046 $46,970 26% $33,917 $27,872 22%
Life Sciences 75,122 71,679 5% 23,580 21,660 9%
Powersports 26,660 23,060 16% 10,410 8,114 28%
Other 4,988 4,853 3% 1,170 2,458 -52%
(1) Contribution margin is defined as revenue less cost of production;
selling, editorial and circulation costs; and segment management
costs.
Fashion & Licensing: Revenue from Fashion & Licensing for the first half of 2006 increased 26% to $59.0 million from $47.0 million in the same period of 2005. Revenue from MAGIC Marketplace Spring in Las Vegas Las Vegas (läs vā`gəs), city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States. grew 22% or $8.2 million due to an increase in square feet sold, yields and sponsorships, which included the Las Vegas Project and POOL events acquired in the third quarter of 2005. First half revenue in Fashion & Licensing also benefited from successful Project and Licensing International events held in New York. Contribution margin from Fashion & Licensing increased 22% to $33.9 million in the first half of 2006 from $27.9 million in the first half of 2005 due largely to revenue growth from the MAGIC Marketplace Spring, including the Las Vegas Project and POOL events, as well as the New York Project and Licensing International events. Life Sciences: Revenue from Life Sciences increased 5% to $75.1 million in the first half of 2006 from $71.7 million in the same period of 2005. The increase in revenue was driven by a 32% increase in healthcare custom projects revenue, strong performances in our specialty care, dental and pharmaceutical publications, and the launch of Firstline and Modern Hygienist hygienist /hy·gien·ist/ (hi-jen´ist) (hi?je-en´ist) a specialist in hygiene. dental hygienist magazines as well as the addition of a new Veterinary veterinary /vet·er·i·nary/ (vet´er-i-nar?e) 1. pertaining to domestic animals and their diseases. 2. veterinarian. vet·er·i·nar·y adj. conference and trade show. Contribution margin from Life Sciences increased 9% in the first half of 2006 to $23.6 million from $21.7 million in the first half of 2005 due primarily to increased revenue and improved operating efficiencies achieved in the management restructuring undertaken in the second quarter of 2005. Powersports: Revenue from Powersports in the first half of 2006 increased 16% to $26.7 million from $23.1 million reported in the same period of 2005. The International Motorcycle motorcycle, motor vehicle whose design is based on the bicycle. The German inventor Gottlieb Daimler is generally credited with building the first practical motorcycle in 1885. The motorcycle did not become dependable and popular, however, until after 1900. Show tour events and Dealer Expo increased square feet 6% and revenue 10% in 2006. In the off-road market we held a strong second year Off-Road Impact Expo trade event and launched Off-Road Expo-Salt Lake City, a consumer off-road event. Ad pages and ad revenue for Powersports publications grew 24% and 26%, respectively, due to new product segments and Asian manufacturing advertisers in our automotive titles as well as the continued development of our Off-Road publications, DIRTsports and Off-Road Business. Contribution margin from Powersports increased 28% in the first half of 2006 to $10.4 million from $8.1 million in the first half of 2005. Revenue growth across the segment drove the contribution increase and provided for continued investments in our off-road publication and event launches as well as an expansion of product categories in the International Motorcycle Show Tour and Dealer Expo event. General and Administrative: General and administrative costs decreased 10% to $18.3 million from $20.2 million in the first half of 2005 primarily due to items in 2005, including strategic consulting costs and deferred earn-out Earn-out Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement. compensation costs for the IVT acquisition, as well as lower legal and accounting fees as more of our SOX (1) (Schema for Object-oriented XML) An XML schema developed by Veo Systems and Muzino Communications, which was submitted to the W3C. SOX is based on DTD, but adds data typing and reuse mechanisms. section 404 preparation is done by in-house In-house In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. staff, reduced costs from the new employee health plan implemented in the third quarter of 2005, and lower foreign currency exchange losses compared to the first half of last year. Office costs decreased $0.8 million due to the office consolidations begun in 2005. Discontinued Operations Advanstar completed a significant strategic realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. and refocusing Noun 1. refocusing - focusing again focalisation, focalization, focusing - the act of bringing into focus of its portfolio through the sale of its non-core assets in a series of transactions in 2005. In May 2005, Advanstar sold its tradeshows, publications and direct marketing products in the information technology, travel, beauty, home entertainment and portfolio sectors to Questex Media Group. Also during 2005, Advanstar closed the remaining East Coast fashion events acquired in the Larkin Lar·kin , Philip 1922-1985. British poet noted for his witty distrust of the modern world and self-deprecating humor, as in The Whitsun Weddings (1964). He was also a well-known jazz critic. transaction and sold its Arenacross Championship Series events. Income from discontinued operations for 2005 includes the results of the operations of assets sold or discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: during 2005 and the gain on the sale of assets. The results included in discontinued operations are not included in reported revenue, contribution margin or EBITDA. Conference Call Information Advanstar will hold a conference call to review second quarter of 2006 results today at 11:00 a.m. Eastern. The call can be accessed by dialing 1-800-399-1392 with access code number 3785767. A copy of this release will also be available at our website, www.advanstar.com. About Advanstar Advanstar Communications Inc. (www.advanstar.com) is a leading worldwide media company providing integrated marketing solutions for the Fashion, Life Sciences and Powersports industries. Advanstar serves business professionals and consumers in these industries with its portfolio of 87 events, 58 publications and directories, 125 electronic publications and Web sites, as well as educational and direct marketing products and services. Market leading brands and a commitment to delivering innovative, quality products and services enables Advanstar to "Connect Our Customers With Theirs." Advanstar has roughly 1,000 employees and currently operates from multiple offices in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). .Business Risks The statements contained in this press release and our other oral and written statements that are not historical in nature are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties. Management of Advanstar believes that its expectations are based upon reasonable assumptions within the bounds of its knowledge of Advanstar's business. However, there can be no assurance that they in fact will be realized. Numerous factors may affect Advanstar's actual results and may cause results to differ materially from those expressed in forward-looking statements made by or on behalf of Advanstar including such factors listed from time to time in Advanstar's reports filed with the Securities and Exchange Commission including the factors described in Advanstar's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. (333-57201) filed March 30, 2006 under the heading "Risk Factors." Advanstar does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Non-GAAP Financial Information In this press release Advanstar discloses various non-GAAP financial measures as defined by SEC Regulation G, including EBITDA. A reconciliation of the differences between the GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial measures and the non-GAAP financial measures can be found at the end of this press release.
Advanstar Communications Inc.
Statements of Operations
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
--------- -------- --------- ---------
(in thousands)
Revenue $59,238 $55,990 $165,816 $146,562
Operating expenses:
Cost of production 11,806 11,293 33,945 27,519
Selling, editorial and
circulation 26,894 24,422 58,371 52,420
Segment management costs 2,053 3,345 4,423 6,519
General and administrative
expenses 9,378 8,681 18,304 20,227
Restructuring charge (80) 2,015 2,325 2,015
Depreciation and amortization 10,030 9,519 18,692 19,477
--------- -------- --------- ---------
Total operating expenses 60,081 59,275 136,060 128,177
Operating (loss) income (843) (3,285) 29,756 18,385
Other income (expense):
Interest expense (14,054) (17,610) (27,826) (35,274)
Interest income 482 668 957 845
Loss on extinguishment of debt (497) (12,581) (497) (12,581)
Other (expense) income, net (4) (38) (157) (21)
--------- -------- --------- ---------
(Loss) income from continuing
operations before
income tax expense (14,916) (32,846) 2,233 (28,646)
Provision (benefit) for income
taxes 1,871 (3,680) 3,870 (1,885)
--------- -------- --------- ---------
Loss from continuing operations
before
cumulative effect of accounting
change (16,787) (29,166) (1,637) (26,761)
(Loss) income from operations of
discontinued businesses (48) 44,675 (122) 43,797
--------- -------- --------- ---------
(Loss) income before cumulative
effect of accounting change (16,835) 15,509 (1,759) 17,036
Cumulative effect of accounting
change - - - 4,618
--------- -------- --------- ---------
Net (loss) income $(16,835) $15,509 $(1,759) $21,654
========= ======== ========= =========
The following table reconciles EBITDA to cash flows provided by
operating activities for each period presented:
Quarter Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
-------- --------- -------- ---------
(in thousands)
EBITDA $9,187 $6,234 $48,448 $37,862
Depreciation and amortization (10,030) (9,519) (18,692) (19,477)
-------- --------- -------- ---------
Operating (loss) income (843) (3,285) 29,756 18,385
Interest expense, net (13,572) (16,942) (26,869) (34,429)
Write-off of deferred financing
costs (497) (12,581) (497) (12,581)
Other (expense) income, net (4) (38) (157) (21)
Provision (benefit) for income
taxes (1,871) 3,680 (3,870) 1,885
Cumulative effect of accounting
change - - - 4,618
(Loss) income from operations of
discontinued businesses (48) 44,675 (122) 43,797
-------- --------- -------- ---------
Net (loss) income (16,835) 15,509 (1,759) 21,654
Gain on sale of business - (53,053) (53,053)
Impairment loss on intangible
assets - 2,272 - 2,272
Cumulative effect of accounting
change - - - (4,618)
Write-off of deferred financing
costs 497 3,517 497 3,517
Depreciation and amortization 10,030 10,811 18,692 22,431
Deferred income taxes 1,867 7,940 3,816 10,940
Other non-cash items 371 1,012 1,929 2,572
Changes in operating assets and
liabilities 6,447 (5,675) (6,957) (19,338)
-------- --------- -------- ---------
Net cash provided by operating
activities $2,377 $(17,667) $16,218 $(13,623)
======== ========= ======== =========
Use of Non-GAAP Financial Information To supplement our consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ("GAAP"), we use non-GAAP measures, such as EBITDA, which are derived from results based on GAAP. The presentation of this additional information is not meant to be considered superior to, in isolation of, or as a substitute for results prepared in accordance with GAAP. We define "EBITDA" as operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. or loss plus amortization and depreciation. EBITDA is a key liquidity measure but should not be construed as an alternative to cash flows from operating activities or operating income (as determined in accordance with GAAP) or as a measure of our profitability or performance. We provide information about EBITDA because we believe it is a useful way for us and our investors to measure our ability to satisfy cash needs, including interest payments on our debt, taxes and capital expenditures. GAAP requires us to provide information about cash flow generated from operations. However, GAAP cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses is reduced by the amount of interest and tax payments and also takes into account changes in net current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. (e.g., changes in working capital) that do not impact net income. Because changes in working capital can reverse in subsequent periods, and because we want to provide information about cash available to satisfy interest and income tax expense (by showing our cash flows before deducting interest and income tax expense), we are also presenting EBITDA information. Our definition of EBITDA does not take into account our working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. , debt service requirements or other commitments. Accordingly, EBITDA is not necessarily indicative of amounts of cash that may be available to us for discretionary purposes. Our method of computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. may not be comparable to other similarly titled measures of other companies. Additionally, our management uses EBITDA to determine our compliance with key financial covenants under our existing Credit Facility, which impact the amount of indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. we are permitted to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. . The definition of EBITDA in our existing Credit Facility is based, in part, on our EBITDA and includes other adjustments described in our credit agreement. |
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