Advanstar Embarks on Corporate Restructuring

89 layoffs and closure of three offices slated to save $9 million per year

By Margo McCall -- Tradeshow Week, 8/29/2005

Advanstar Communications is moving ahead with a corporate restructuring that by year's end will result in the layoff of 89 employees and closure of three offices at a $9 million annual cost savings.

Virtually all of the affected employees work in the Duluth, Minn., office in corporate and administrative functions. The company said the positions are no longer needed as a result of its $185 million sale of five divisions to Questex Media Group in May. Questex Media picked up 400 Advanstar employees with the merger, leaving Advanstar with a workforce of 1,000.

The changes come as Advanstar's backers, DLJ Merchant Bankers, explore a sale of the company. The private-equity fund bought Advanstar in 2000 for a record $900 million.

The offices in Chicago; Milford, Conn.; and Wayne, Pa., are targeted for closure. The Chicago employees, assigned to the automotive aftermarket group, will work from either home or the Northfield, Ill., office. The Milford workers, part of the licensing group, will work from home or the New York office. And the Wayne employees, who work for Motor Age, will work from home.

Advanstar operated 27 offices in five countries as of the beginning of this year. Six of the offices were transferred to Questex, which will continue to occupy space in Advanstar's Cleveland, New York, Duluth, and Santa Ana, Calif., offices throughout this year.

"The sale of these assets has enabled us to restructure operations, eliminate inefficiencies and pay down debt," Advanstar CEO Joe Loggia told analysts during the company's recent conference call. "Over the last 18 months, we have implemented a lot of change at Advanstar. All of that change has been focused on balancing our current performance, while preparing for the future."

The company's overall second-quarter revenue of $56 million represented a slight decline over the year-ago quarter. During the quarter, Advanstar produced $15.5 million in net income, an improvement over the $27.8 million net loss turned in during the year-ago quarter.

Tradeshow revenue of $11.9 million was up from the $10.3 million generated in the second quarter of last year. In addition to L!CENSING Intl., whose 194,385 net square foot showfloor was up nearly 7 percent from the previous year, Advanstar hosted 16 conferences and four teleseminars in the quarter.

Among them were nine new pharmaceutical conferences and a new dental conference from the life sciences group. Together, they added $2 million to the top line, making up for the shift of four conferences to the last half of 2005.

Advanstar took a $1.2 million charge in the quarter for employee severance and an $800,000 charge for reducing office space. The company expects future severance charges to total $700,000.

Spokesman Marc Merrill said the Duluth employees are leaving the company as they find other jobs. Those staying during a transition period will be given additional severance, he said. Advanstar's sale of Questex — at a multiple of 9.3 times 2004 operating cash flow — also let the company trim its debt to $462.1 million, down 25 percent from its previous level.

During Advanstar's second-quarter earnings call, however, Loggia was tight-lipped about the company's potential sale. "We are in the process of exploring strategic alternatives, including a possible sale of the company. As of today, no final decision has been made, and it would be premature to discuss this matter at this time any further," he said.

Blantyre Partners CEO and Chairman Bob Krakoff, former CEO and chairman of Advanstar, has been named as one of the possible suitors for the company.