<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934.
For the Quarterly Period Ended: September 30, 2000
Commission File Number: 333-57201
Advanstar, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
94-3243499
(I.R.S. Employer
Identification No.)
545 Boylston Street, Boston, Massachusetts
(Address of principal executive offices)
02116
(Zip Code)
Registrant's telephone number, including area code: (617) 267-6500
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- -------
As of November 14, 2000, 100 shares of the Registrant's common stock were
outstanding.
<PAGE>
<TABLE>
<CAPTION>
PART I Financial Information
Page in this
Quarterly
Item 1. Financial Statements: Report
------------
<S> <C>
Condensed Consolidated Balance Sheets at September 30, 2000 (unaudited)
and December 31, 1999 .......................................................... 2
Condensed Consolidated Statements of Operations (unaudited) for the three
months ended September 30, 2000 and 1999 ....................................... 3
Condensed Consolidated Statements of Operations (unaudited) for the nine
months ended September 30, 2000 and 1999 ....................................... 4
Condensed Consolidated Statements of Cash Flows (unaudited) for the
three months ended September 30, 2000 and 1999 ................................ 5
Condensed Consolidated Statements of Cash Flows (unaudited) for the
nine months ended September 30, 2000 and 1999 ................................. 6
Notes to Condensed Consolidated Financial Statements (unaudited) ................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................................... 17
PART II Other Information
Item 4. Submissions of Matters to a Vote of Security Holders ............................... 29
Item 6(a). Exhibits ........................................................................... 29
Item 6(b). Reports on Form 8-K ................................................................ 29
Signature .......................................................................... 30
Exhibit Index ...................................................................... 31
Exhibits ...........................................................................
</TABLE>
1
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents .......................................................... $ 11,263 $ 11,237
Investments ........................................................................ 24,797 52,456
Accounts receivable, net ........................................................... 33,439 29,447
Prepaid expenses ................................................................... 18,243 15,380
Other .............................................................................. 1,670 2,220
-------- --------
Total current assets ........................................................... 89,412 110,740
-------- --------
DEFERRED INCOME TAXES ................................................................. 16,442 16,442
PROPERTY, PLANT AND EQUIPMENT, net .................................................... 30,974 20,866
INTANGIBLE ASSETS, net ................................................................ 654,754 684,547
-------- --------
Total Assets ................................................................... $791,582 $832,595
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt ............................................... $ 19,051 $ 13,740
Accounts payable ................................................................... 28,719 18,691
Accrued liabilities ................................................................ 43,284 39,495
Deferred revenue ................................................................... 51,207 69,483
-------- --------
Total current liabilities ...................................................... 142,261 141,409
-------- --------
LONG-TERM DEBT, net of current maturities ............................................. 494,804 509,414
OTHER LONG-TERM LIABILITIES ........................................................... 4,238 6,645
MINORITY INTEREST ..................................................................... 15,214 15,161
COMMITMENTS AND CONTINGENCIES (Notes 4, 6, and 8)
STOCKHOLDER'S EQUITY
Common stock, $.01 par value; 40,000 shares authorized; 33,630 shares
issued and outstanding at September 30, 2000 and December 31, 1999 ............... 336 336
Capital in excess of par ........................................................... 183,537 186,578
Accumulated deficit ................................................................ (52,467) (49,772)
Accumulated other comprehensive income (loss) ...................................... 3,659 22,824
-------- --------
Total stockholder's equity ..................................................... 135,065 159,966
-------- --------
Total liabilities and stockholder's equity ..................................... $791,582 $832,595
======== ========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
2
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands data - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
----------------------------------
<S> <C> <C>
Net revenue ................................................................ $ 96,479 $ 84,049
-------- --------
Operating expenses:
Costs of production .................................................... 17,719 16,793
Selling, editorial and circulation ..................................... 38,862 33,364
General and administrative ............................................. 9,346 9,080
Depreciation and amortization .......................................... 14,055 16,062
-------- --------
Total operating expenses ............................................ 79,982 75,299
-------- --------
Operating income (loss) ................................................... 16,497 8,750
Other income (expense):
Interest expense, net .................................................. (12,358) (10,743)
Non-recurring charge ................................................... -- (1,442)
Other income (expense), net ............................................ (2,655) 5
-------- --------
Income (loss) before income taxes and minority interest .................... 1,484 (3,430)
Provision (benefit) for income taxes ...................................... 1,698 (470)
Minority interest in (earnings) losses of subsidiary ....................... (292) 1,276
-------- --------
Net loss ................................................................... $ (506) $ (1,684)
======== ========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
3
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands data - Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
----------------------------------
<S> <C> <C>
Net revenue ................................................................ $304,586 $254,223
-------- --------
Operating expenses:
Costs of production .................................................... 59,858 50,765
Selling, editorial and circulation ..................................... 123,548 105,049
General and administrative ............................................. 36,721 33,790
Depreciation and amortization .......................................... 39,039 37,310
-------- --------
Total operating expenses ............................................ 259,166 226,914
-------- --------
Operating income .......................................................... 45,420 27,309
Other income (expense):
Interest expense, net .................................................. (36,804) (28,134)
Non-recurring charge ................................................... -- (1,442)
Other income (expense), net ............................................ (1,889) (89)
-------- --------
Income (loss) before income taxes and minority interest .................... 6,727 (2,356)
Provision for income taxes ................................................ 8,419 224
Minority interest in (earnings) losses of subsidiary ....................... (1,003) 1,341
-------- --------
Net loss ................................................................... $ (2,695) $ (1,239)
======== ========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
4
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
----------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ................................................................ $ (506) $ (1,684)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation and amortization .......................................... 14,055 16,062
Non-cash interest ...................................................... 300 325
Non-cash stock option compensation ..................................... (2,825) (987)
(Gain) Loss on sales of assets and other ............................... (259) (2,237)
Changes in operating assets and liabilities ............................ 2,181 (3,726)
------- ---------
Net cash provided by (used in) operating activities ................. 12,946 7,753
------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment ............................. (7,283) (2,898)
Change in notes receivable ............................................. 68 96
Acquisition of publications and trade shows, net ....................... (3,063) (143,022)
Proceeds from sale of publishing and other assets ...................... 3,826 17
------- ---------
Net cash used in investing activities ............................... (6,452) (145,807)
------- ---------
FINANCING ACTIVITIES
Net proceeds (payments) on revolving credit loan ....................... (3,000) (1,500)
Proceeds (payments) on long-term debt .................................. (4,412) 134,509
------- ---------
Net cash provided by (used in) financing activities ............... (7,412) 133,009
------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .................................. (448) (422)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................... (1,366) (5,467)
CASH AND CASH EQUIVALENTS, beginning of period ........................... 12,629 14,530
------- ---------
CASH AND CASH EQUIVALENTS, end of period ................................. $11,263 $ 9,063
======= =========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
5
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands - Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
----------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss .............................................................. $ (2,695) $ (1,239)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation and amortization ........................................ 39,039 37,310
Non-cash interest .................................................... 899 864
Non-cash stock option compensation ................................... (3,008) 3,708
(Gain) Loss on sales of assets and other ............................. 952 (1,439)
(Gain) Loss on investments ........................................... (771)
Changes in operating assets and liabilities .......................... (6,539) (464)
-------- ---------
Net cash provided by operating activities ......................... 27,877 38,740
-------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment ........................... (15,558) (6,036)
Change in notes receivable ........................................... (35) 204
Acquisition of publications and trade shows, net ..................... (12,359) (149,860)
Proceeds from sale of publishing and other assets .................... 3,826 39
Proceeds from sale of investments and other assets ................... 5,688 -
-------- ---------
Net cash used in investing activities ............................. (18,438) (155,653)
-------- ---------
FINANCING ACTIVITIES
Net proceeds (payments) on revolving credit loan ..................... -- (20,500)
Proceeds (payments) on long-term debt ................................ (9,328) 132,739
-------- ---------
Net cash provided by (used in) financing activities ............. (9,328) 112,239
-------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ................................ (85) (279)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................... 26 (4,953)
CASH AND CASH EQUIVALENTS, beginning of period ......................... 11,237 14,016
-------- ---------
CASH AND CASH EQUIVALENTS, end of period ............................... $ 11,263 $ 9,063
======== =========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
6
<PAGE>
ADVANSTAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared by Advanstar, Inc. (the Company) in accordance with the
instructions to Form 10-Q and, therefore, do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Although management believes that the disclosures are
adequate to make the information presented not misleading, these condensed
consolidated financial statements should be read in conjunction with the audited
financial statements and the related notes, included in the Company's Form 10-K
for the year ended December 31, 1999. The results of operations for the three
and nine month periods ended September 30, 2000, are not necessarily indicative
of the operating results that may be expected for the entire year ending
December 31, 2000.
2. Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, is effective for
fiscal years beginning after June 15, 2000. Because of the Company's minimal
use of derivatives, management does not anticipate that the adoption of the new
statement will have a significant effect on earnings or the financial position
of the Company.
3. Events Subsequent to September 30, 2000
On October 11, 2000, DLJ Merchant Banking Partners III L.P., affiliated
funds and certain members of management, acquired all of the Company's
outstanding shares of the Company for an aggregate consideration of
approximately $900.0 million (the DLJ Acquisition) representing cash of $292.2
and the assumption of outstanding debt. In connection with the DLJ Acquisition,
the existing credit facility was replaced by a syndicated senior secured credit
facility (the Replacement Credit Facility) with a group of financial
institutions. The Replacement Facility consists of (i) $415 million of term
loans payable in quarterly installments beginning March 31, 2001 through October
11, 2007 and (ii) $80 million of revolving loan availability. The initial
borrowing of $415.0 million of term loans under the Replacement Credit Facility
occurred simultaneously with the consummation of the DLJ Acquisition. The
Replacement Credit Facility contains a number of covenants that, among other
things requires the Company to maintain certain financial ratios, as defined in
the Replacement Credit Agreement. Failure of the Company to comply with any of
these covenants may cause an event of default under the Replacement Credit
Facility.
Deferred financing costs, related to the Amended Credit Facility, will be
written off in the fourth quarter of 2000, resulting in an extraordinary charge
of approximately $1.4 million, net of the related tax benefit. The DLJ
Acquisition constituted a change of control under the 9.25% Senior Subordinated
Notes due 2008 (the Notes) issued by Advanstar Communications Inc.
(Communications), the Company's wholly-owned subsidiary. Upon the occurrence of
a change of control, each holder of the Notes may require the Company to
repurchase all or any part of the Notes held by such holder at an offer price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued
interest and other specified costs to the date of repurchase. On November 10,
2000 a notice of a change of control and an offer to purchase were mailed to the
note holders.
In addition, in connection with the DLJ Acquisition, all outstanding stock
options were exercised by the option holder and the shares subsequently sold.
The option plan was then cancelled. The Company will record compensation
expense of approximately $0.6 million during the fourth quarter related to these
options.
7
<PAGE>
ADVANSTAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. Non-Recurring Charge
Beginning in the quarter ended March 31,1999, the Company began
capitalizing direct costs related to a planned initial public offering of our
common stock. During the quarter ended September 30, 1999, we determined not to
move forward at that time with the initial public offering. As a result, we
recognized a $1.4 million charge in the third quarter of 1999 for costs
previously capitalized.
5. Investments
As part of a 1999 agreement with PurchasePro.com, Inc., a developer and
operator of web-based e-commerce solutions, to provide business-to-business
electronic commerce services, Advanstar IH, Inc., a wholly owned subsidiary of
the Company, received warrants to purchase 525,000 shares of PurchasePro.com,
Inc. common stock at an exercise price of $37.58 per share, to expire in May
2000. The Company has classified these warrants as available for sale under the
provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." In January 2000, Advanstar IH, Inc. exercised 141,000
warrants and subsequently sold the common stock received upon exercise for
proceeds of $5.7 million. A gain of $3.7 million was recorded on the sale and
is included in other income in the consolidated financial statements.
In June 2000, the agreement with PurchasePro.com, Inc., as more fully
described in the Company's 1999 Form 10-K, was amended. This amendment included
revisions to PurchasePro's responsibilities under the agreement, the timing and
amount of payments, extending the terms of the remaining 384,000 warrants to
December 1, 2000 and adjusting the exercise price to $27.00 per share. As a
result of the amendment, the Company recorded a loss of $2.9 million during the
second quarter ended June 30, 2000, included in other expense in the
consolidated financial statements.
In September 2000, Advanstar IH, Inc. exercised the remaining
PurchasePro.com warrants in a cashless exercise and received approximately
268,000 shares of common stock in exchange. At September 30, 2000, the shares
are recorded at their fair value using quoted market prices, resulting in an
unrealized gain of $12.6 million, net of applicable taxes, reported in other
comprehensive income.
On March 31, 2000, the Company entered into an on-line ad network
agreement and a stock purchase agreement with a third party advertising broker.
As part of the stock purchase agreement, Advanstar IH, Inc. received 497,500
shares of common stock which the Company has classified as available for sale
under the provisions of SFAS No. 115. The Company has valued these shares on the
date of issuance at their fair value of $1.2 million and has recorded this
amount as deferred revenue which is being amortized over the contract period. As
these shares are not readily marketable, no adjustment is required to reflect
any potential changes to market value.
6. Acquisitions
On July 28, 1999, the Company acquired certain trade show and
publishing properties of Larkin-Pluznik-Larkin, LLC and LPL/Style Group, LLC,
(collectively, Larkin) which operates apparel trade shows. The purchase price
was approximately $135.4 million in cash and assumed liabilities. Concurrent
with the Larkin acquisition, the Company amended and restated its credit
agreement to provide additional borrowing capacity to finance the acquisition.
From January 1, 1999 through December 31, 1999, the Company completed
three other acquisitions of trade shows, conferences and publishing properties,
with a cumulative purchase price totaling approximately $17.3 million in cash
and assumed liabilities.
8
<PAGE>
ADVANSTAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On January 7, 2000, the Company acquired the Documents, Messaging and
Security (DMS) tradeshow and Info 21 magazine from Gruppe 21 Informations-GmbH
for approximately $7.8 million in cash and assumed liabilities.
On July 26, 2000 we acquired the Brand Licensing London tradeshow for
approximately $4.6 million in cash and assumed liabilities.
The acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the assets acquired and liabilities assumed have
been recorded at their fair values as of the dates of the acquisitions. The
excess of the purchase price over the fair value of the assets acquired and
liabilities assumed has been recorded as goodwill. Certain of the liabilities
assumed have been recorded based upon preliminary estimates as of the dates of
acquisition. The Company does not believe the final allocation of purchase price
will be materially different from preliminary allocations. Any changes to the
preliminary estimates during the allocation period will be reflected as an
adjustment to goodwill. Results of operations for these acquisitions have been
included in the accompanying consolidated financial statements since their
respective dates of acquisition.
The following are unaudited pro forma operating results as if the
acquisitions had taken place at January 1, 1999 (in thousands):
<TABLE>
<CAPTION>
Nine months ended
September 30,
2000 1999
---- ----
<S> <C> <C>
Total revenues................................................. $304,579 $282,689
Operating income............................................... 45,546 34,337
Net income (loss).............................................. (2,617) (3,411)
</TABLE>
7. Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
(In thousands)
<S> <C> <C>
Tranche A term loan, interest at LIBOR plus 2.00%, 6.62% at September 30, 2000
due October 31, 2003 ........................................................ $ 80,882 $ 90,210
Tranche B term loan, interest at LIBOR plus 2.50%, 6.62% at September 30, 2000 147,223 147,223
due April 30, 2005. .........................................................
Tranche C term loan, Interest at LIBOR plus 3.00%, 6.62% at September 30, 2000
due June 30, 2007............................................................ 136,043 136,043
Senior subordinated notes at 9.25%, due May 31, 2008, Net of discount .............. 149,707 149,678
-------- --------
513,855 523,154
Less--Current maturities ........................................................... (19,051) (13,740)
-------- --------
$494,804 $509,414
======== ========
</TABLE>
9
<PAGE>
ADVANSTAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The senior credit facility contains certain financial covenants,
including a minimum fixed charge coverage ratio and a maximum leverage ratio.
The Company was in compliance with all covenants as of September 30, 2000.
Certain financial covenants under the senior subordinated notes issued
by Communications, include a maximum leverage ratio and limitations on certain
asset dispositions, dividends and other restricted payments. The Company was in
compliance with all covenants as of September 30, 2000.
8. Comprehensive Income
The table below presents comprehensive income, defined as changes in the
equity of the Company excluding changes resulting from investments by and
distributions to shareholders.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------- ------- -------- -------
(In thousands)
<S> <C> <C> <C> <C>
Net loss................................................ $ (506) $(1,684) $ (2,695) $(1,239)
Change in cumulative translation adjustment............. (1,776) (177) (3,304) (4,606)
Change in unrealized gains on securities arising
during the period, net of tax........................ 10,035 -- (12,196) --
Less reclassification adjustment for losses included
in net income, net of tax.......................... -- -- (3,663) --
------- ------- -------- -------
Comprehensive income (loss)............................. $ 7,753 $(1,861) $(21,858) $(5,845)
======= ======= ======== =======
</TABLE>
9. Segment Information
<TABLE>
<CAPTION>
Trade Shows Corporate
and Trade Marketing and
Conferences Publications Services Other Totals
------------ ------------ ----------- ----------- -----------
(In thousands)
Three months ended September 30, 2000
<S> <C> <C> <C> <C> <C>
Revenues ................................... $ 54,027 $ 37,108 $ 4,212 $ 1,132 $ 96,479
Gross profit ............................... 28,413 10,364 1,766 (645) 39,898
Segment assets ............................. 459,015 227,308 2,479 102,780 791,582
Three months ended September 30, 1999
Revenues ................................... 45,219 34,234 4,340 256 84,049
Gross profit ............................... 23,398 8,270 2,133 91 33,892
Segment assets ............................. 479,539 241,505 2,273 49,659 772,976
Nine months ended September 30, 2000
Revenues ................................... 173,067 116,018 13,300 2,201 304,586
Gross profit ............................... 81,845 33,838 5,857 (360) 121,180
Segment assets ............................. 459,015 227,308 2,479 102,780 791,582
Nine months ended September 30, 1999
Revenues ................................... 132,362 108,239 12,982 640 254,223
Gross profit ............................... 61,842 30,035 6,281 251 98,409
Segment assets ............................. 479,539 241,505 2,273 49,659 772,976
</TABLE>
10
<PAGE>
ADVANSTAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The reconciliation of total segment gross profit to consolidated pre-tax
income for the three and nine months ended September 30, 2000 and 1999 is as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C>
Total segment gross profit ................. $ 39,898 $ 33,892 $121,180 $ 98,409
General and administrative expense ......... (9,346) (9,080) (36,721) (33,790)
Depreciation and amortization .............. (14,055) (16,062) (39,039) (37,310)
Other expense .............................. (15,013) (12,180) (38,693) (29,665)
-------- -------- -------- --------
Consolidated income (loss) before
minority interest and taxes .............. $ 1,484 $ (3,430) $ 6,727 $ (2,356)
======== ======== ======== ========
</TABLE>
10. Supplemental Guarantor Condensed Consolidating Financial Statements
Basis of presentation
The Notes are fully and unconditionally guaranteed on a senior subordinated
basis, jointly and severally, by the Company and the wholly-owned domestic
subsidiaries of Communications. With the exception of Advanstar IH, Inc.,
Communications is the only direct subsidiary of the Company. Both Advanstar IH,
Inc. and Communications are wholly-owned by the Company. Advanstar IH, Inc., a
non-guarantor, was created for the purpose of operating and developing the
Company's internet business. The subsidiary guarantors are Mens Apparel Guild
In California, Inc. (MAGIC); and Applied Business TeleCommunications, Inc.
(ABC). Communications, the subsidiary guarantors and the non-guarantor
subsidiaries comprise all of the direct and indirect subsidiaries of the
Company. The condensed consolidated financial statements of the guarantors are
presented below and should be read in connection with the consolidated financial
statements of the Company. Separate financial statements of the guarantors are
not presented because the guarantors are jointly, severally and unconditionally
liable under the guarantees and the Company believes the condensed consolidated
financial statements presented are more meaningful in understanding the
financial position of the guarantors and management has determined that such
information is not material to investors.
There are no significant restrictions on the ability of the subsidiary
guarantors to make distributions to the Company.
11
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
At September 30, 2000
(In thousands - Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Communi- Non-
--------- Guarantor Guarantor Consolidated
Company cations Magic ABC Subsidiaries Subsidiaries Eliminations Total
---------- --------- ------- ----- ------------ ------------- ------------ -----------
ASSETS
Current assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents .......... $ -- $ 5,746 $ 4 $ $ 4 $ 5,513 $ $ 11,263
Accounts receivable net ............ 30,415 452 47 499 2,525 33,439
Prepaid expenses ................... 9,700 3,035 762 3,797 4,746 18,243
Investments ......................... - 24,797 24,797
Intercompany receivable (payable) ... 190 (84,302) 101,887 1,784 103,671 (19,559)
Other .............................. 1,334 336 1,670
-------- -------- --------
Total current assets ............... 190 (37,107) 105,378 2,593 107,971 18,358 89,412
------- -------- -------- ------- -------- -------- --------
Non current assets 16,442 16,442
Deferred taxes
Property, plant and equipment, net .. 22,909 732 16 748 7,317 30,974
Investment in subsidiaries .......... 131,406 332,599 (5,100) (458,905)
Intangible assets, net .............. 395,652 189,868 16,312 206,180 52,922 654,754
-------- -------- ------- -------- -------- --------
$131,596 $730,495 $295,978 $18,921 $314,899 $ 73,497 $(458,905) $791,582
======== ======== ======== ======= ======== ======== ========= ========
LIABILITIES AND
STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt .. $ $ 19,051 $ $ $ $ $ $ 19,051
Accounts payable ................... 124 18,395 5,159 5,159 5,041 28,719
Deferred revenue ................... 26,684 3,823 4,230 8,053 16,470 51,207
Accrued liabilities ................ 66 16,136 18,302 (208) 18,094 8,988 43,284
-------- -------- -------- ------- -------- -------- --------
Total current liabilities .......... 190 80,266 27,284 4,022 31,306 30,499 142,261
-------- -------- -------- ------- -------- -------- --------
Long term debt, net of current
maturities ......................... 494,804 494,804
Other long term liabilities ......... 4,238 4,238
Minority interest ................... 15,214 15,214
Shareholder interest
Common stock ....................... 336 10 1 2 3 431 (444) 336
Capital in excess of par value ..... 183,537 183,863 220,627 15,739 236,366 58,756 (478,985) 183,537
Retained earnings (deficit) ........ (52,467) (47,901) 48,066 (842) 47,224 (19,847) 20,524 (52,467)
Accumulated other comprehensive
income ............................ 1 3,658 3,659
-------- -------- --------
Total shareholder's equity ........ 131,406 135,973 268,694 14,899 283,593 42,998 (458,905) 135,065
-------- -------- -------- ------- -------- -------- --------- --------
$131,596 $730,495 $295,978 $18,921 $314,899 $ 73,497 $(458,905) $791,582
======== ======== ======== ======= ======== ======== ========= ========
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2000
(In thousands)
<TABLE>
<CAPTION>
Communi- Non-
--------- Guarantor Guarantor Consolidated
Company cations Magic ABC Subsidiaries Subsidiaries Eliminations Total
---------- --------- ------- ----- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue ............................. $ -- $ 53,445 $32,009 $ 196 $32,205 $10,829 $ -- $ 96,479
------- -------- ------- ----- ------- ------- -------- --------
Operating expenses:
Cost of sales and selling, editorial
And circulation ................... -- 36,711 8,935 623 9,558 10,312 -- 56,581
General and administrative ........... -- 5,292 262 -- 262 3,792 -- 9,346
Depreciation and amortization ........ -- 9,563 2,533 225 2,758 1,734 -- 14,055
------- -------- ------- ----- ------- ------- -------- --------
Total operating expenses .......... -- 51,566 11,730 848 12,578 15,838 -- 79,982
------- -------- ------- ----- ------- ------- -------- --------
Operating income (loss) ................. -- 1,879 20,279 (652) 19,627 (5,009) -- 16,497
Other income (expense):
Interest income (expense), net ....... -- (11,825) -- (533) -- (12,358)
Other income (expense), net .......... -- (2,454) -- (201) -- (2,655)
------- -------- ------- ----- ------- ------- -------- --------
Income (loss) before income taxes ....... -- (12,400) 20,279 (652) 19,627 (5,743) -- 1,484
Provision (benefit) for income tax ... -- 4,430 (8,397) 81 (8,316) 2,188 -- (1,698)
Minority interest in earnings ........ -- (292) -- -- -- -- -- (292)
Equity in earnings of subsidiaries ... (506) 9,238 -- -- -- (1,196) (7,536) --
------- -------- ------- ----- ------- ------- -------- --------
Net income (loss) ....................... $(506) $ 976 $11,882 $(571) $11,311 $(4,751) $(7,536) $ (506)
======= ======== ======= ===== ======= ======= ======== ========
</TABLE>
13
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2000
(In thousands)
<TABLE>
<CAPTION>
Communi- Non-
--------- Guarantor Guarantor Consolidated
Company cations Magic ABC Subsidiaries Subsidiaries Eliminations Total
---------- --------- ------- ----- ------------ ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue ............................ $ -- $200,321 $62,072 $ 1,618 $ 63,690 $ 40,575 $ -- $304,586
-------- -------- ------- ------- -------- -------- -------- --------
Operating expenses:
Cost of sales and selling, editorial
And circulation .................. -- 130,088 17,693 2,285 19,978 33,340 -- 183,406
General and administrative .......... -- 25,214 703 -- 703 10,804 -- 36,721
Depreciation and amortization ....... -- 26,311 8,490 675 9,165 3,563 -- 39,039
-------- -------- ------- ------- -------- -------- -------- --------
Total operating expenses ......... -- 181,613 26,886 2,960 29,846 47,707 -- 259,166
-------- -------- ------- ------- -------- -------- -------- --------
Operating income (loss) ................ -- 18,708 35,186 (1,342) 33,844 (7,132) -- 45,420
Other income (expense):
Interest income (expense), net ...... -- (35,629) -- -- -- (1,175) -- (36,804)
Other income (expense), net ......... -- (954) -- -- -- (935) -- (1,889)
-------- -------- ------- ------- -------- -------- -------- --------
Income (loss) before income taxes ...... -- (17,875) 35,186 (1,342) 33,844 (9,242) -- 6,727
Provision (benefit) for income tax .. -- 6,338 (15,951) 241 (15,710) 953 -- (8,419)
Minority interest in earnings ....... -- (1,003) -- -- -- -- -- (1,003)
Equity in earnings of subsidiaries .. (2,695) 14,411 -- -- -- (5,100) (6,616) --
-------- -------- ------- ------- -------- -------- -------- --------
Net income (loss) ...................... $(2,695) $ 1,871 $19,235 $ 1,101 $ 18,134 $(13,389) $(6,616) $ (2,695)
======== ======== ======= ======= ======== ======== ======== ========
</TABLE>
14
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended September 30, 2000
(In thousands)
<TABLE>
<CAPTION>
Communi- Non-
--------- Guarantor Guarantor Consolidated
Company cations Magic ABC Subsidiaries Subsidiaries Eliminations Total
--------- --------- ------- ----- ------------ ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss) ..................... $(506) $ 976 $11,882 $(571) $ 11,311 $(4,751) $(7,536) $ (506)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Undistributed earnings of
subsidiaries ........................ 506 (9,238) -- -- -- 1,196 7,536 --
Depreciation and amortization ........ -- 9,563 2,533 225 2,758 1,734 -- 14,055
Non cash Items ....................... -- (2,784) -- -- -- -- -- (2,784)
Change in working capital items ...... -- 10,414 (14,348) 350 (13,998) 5,765 -- 2,181
----- ------- ------- ------ ------- ------- ------- -------
Net cash provided by (used in)
operating activities ................. -- 8,931 67 4 71 3,944 -- 12,946
----- ------- ------- ------ ------- ------- ------- -------
Investment Activities:
Investment in subsidiaries ............ -- (826) -- -- -- -- 826 --
Additions to property, plant and
equipment, net ....................... -- (2,547) (106) (4) (110) (4,626) -- (7,283)
Acquisitions of publications and
trade shows and other adjustments .... -- 4,168 -- -- -- (3,337) -- 831
----- ------- ------- ------ ------- ------- ------- -------
Net cash provided by (used in)
investing activities ................. -- 795 (106) (4) (110) (7,963) 826 (6,452)
----- ------- ------- ------ ------- ------- ------- -------
Financing Activities:
Proceeds from sale of common
stock and capital contributions ...... -- -- -- -- -- 826 (826) --
Dividends paid to minority interest
holders ........................... -- -- -- -- -- -- -- --
Borrowings of long-term debt, net ..... -- (7,412) -- -- -- -- -- (7,412)
----- ------- ------- ------ ------- ------- ------- -------
Net cash provided by (used in)
financing activities ................ -- (7,412) -- -- -- 826 (826) (7,412)
----- ------- ------- ------ ------- ------- ------- -------
EFFECT OF EXCHANGE RATE ON CASH.......... -- -- -- -- -- (448) -- (448)
NET INCREASE IN CASH AND CASH
EQUIVALENTS: .......................... -- 2,314 (39) -- (39) (3,641) -- (1,366)
CASH AND CASH EQUIVALENTS,
beginning of period: .................. -- 3,432 43 -- 43 9,154 -- 12,629
----- ------- ------- ------ ------- ------ ------- -------
CASH AND CASH EQUIVALENTS,
end of period: ........................ $ -- $5,746 $ 4 $ -- $ 4 $ 5,513 $ -- $11,263
===== ====== ======== ====== ======= ======= ======= =======
</TABLE>
15
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 2000
(In thousands)
<TABLE>
<CAPTION>
Communi- Non-
--------- Guarantor Guarantor Consolidated
Company cations Magic ABC Subsidiaries Subsidiaries Eliminations Total
---------- --------- ------- ----- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss) ..................... $(2,695) $ 1,871 $ 19,235 $(1,101) $ 18,134 $(13,389) $ (6,616) $ (2,695)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Undistributed earnings of subsidiaries. 2,695 (14,411) -- -- -- 5,100 6,616 --
Depreciation and amortization ........ -- 26,311 8,490 675 9,165 3,563 -- 39,039
Non cash Items ....................... -- (1,157) -- -- -- (771) -- (1,928)
Change in working capital
items ................................ -- 15,656 (27,933) 430 (27,503) 5,308 -- (6,539)
------- ------- ------- ------ ------- -------- -------- -------
Net cash provided by (used in)
operating activities ................. -- 28,270 (208) 4 (204) (189) -- 27,877
------- -------- ------- ------ ------- -------- -------- -------
Investment Activities:
Investment in subsidiaries ............ -- (13,915) -- -- -- -- 13,915 --
Additions to property, plant and
equipment, net ....................... -- (8,418) (321) (4) (325) (6,815) -- (15,558)
Acquisitions of publications and
trade shows and other adjustments .... -- 3,525 500 -- 500 (12,593) -- (8,568)
Proceeds from sale of assets .......... -- -- -- -- -- 5,688 -- 5,688
------- -------- ------- ------ ------- -------- -------- -------
Net cash provided by (used in)
investing activities ................. -- (18,808) 179 (4) 175 (13,720) 13,915 (18,438)
------- -------- ------- ------ ------- -------- -------- -------
Financial Activities:
Proceeds from sale of common
stock and capital contributions ...... -- -- -- -- -- 13,915 (13,915) --
Dividends paid to minority interest
holders............................. -- -- -- -- -- -- -- --
Borrowings of long-term debt, Net ..... -- (9,328) -- -- -- -- -- (9,328)
------- -------- -------- ------ ------- -------- -------- -------
Net cash provided by (used in)
Financing activities ................. -- (9,328) -- -- -- 13,915 (13,915) (9,328)
------- -------- -------- ------ ------- -------- -------- -------
EFFECT OF EXCHANGE RATE ON CASH.......... -- -- -- -- -- (85) -- (85)
NET INCREASE IN CASH AND CASH
EQUIVALENTS: .......................... -- 134 (29) -- (29) (79) -- 26
CASH AND CASH EQUIVALENTS,
Beginning of period: .................. -- 5,612 33 -- 33 5,592 -- 11,237
------- -------- -------- ------ ------- -------- --------- -------
CASH AND CASH EQUIVALENTS,
end of period: ........................ $ -- $ 5,746 $ 4 $ -- $ 4 $ 5,513 $ -- $11,263
======= ======== ======== ====== ======= ======== ========= =======
</TABLE>
16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
This quarterly report on Form 10-Q contains forward-looking statements
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Investors are cautioned not to place undue reliance on these
forward-looking statements, including statements about plans and objectives of
management and market growth and opportunity. These forward-looking statements
involve risks and uncertainties that could cause actual results to differ
materially from those indicated by such forward-looking statements. Important
cautionary statements and risk factors that would affect actual results are
discussed in the Advanstar, Inc, (Advanstar or the Company) periodic reports and
registration statements filed with the Securities and Exchange Commission,
including those under the caption entitled "Factors That May Affect Future
Results" in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 30, 2000.
General
Advanstar is a worldwide provider of integrated, business-to-business
marketing communications products and services for targeted industry sectors,
principally through trade shows and conferences and through controlled
circulation trade, business and professional magazines. We also provide a broad
range of other marketing services products, including classified advertising,
direct mail services, reprints, database marketing, guides, reference books and
internet based advertising, sponsorships and custom projects.
Advanstar reports its business in three segments:
. trade shows and conferences, which consist primarily of the
management of expositions and seminars held in convention and
conference centers;
. publications, which consists primarily of the creation and
distribution of controlled circulation trade, business and
professional magazines; and
. marketing services, which consists primarily of sales of a variety
of direct mail and database products, magazine editorial reprints,
and directory and classified advertising.
Trade shows and conferences accounted for 56.8% and 52.1% of total
revenue for the nine months ended September 30, 2000 and 1999, respectively.
Publications accounted for 38.1% and 42.6% of total revenue for the nine months
ended September 30, 2000 and 1999, respectively. Marketing services accounted
for 5.1% and 5.3% of total revenue for the nine months ended September 30, 2000
and 1999, respectively. Our revenue reaches its highest levels during the first
and third quarters of the year due to the timing of the MAGIC trade shows and
our other large trade shows and conferences. Because trade shows and conferences
revenue is recognized when a particular event is held, we may experience
fluctuations in quarterly revenue based on the movement of annual trade show
dates from one quarter to another.
In late 1999, we began a development and launch program to extend our
market communities to the online environment of the Internet and deepen our
involvement in the commercial transactions within these communities. This
development program includes strategic alliances with developers of Web-based e-
commerce software and operators of Web community and exchange sites. In
January 2000, we incorporated a wholly-owned subsidiary, Advanstar IH, Inc. and
its wholly-owned subsidiary, Advanstar.com Inc. to operate our internet
business. We launched our first market community, Hive4 Media, in July 2000,
and anticipate the development and launch additional market communities in the
fourth quarter of 2000 and the first quarter of 2001.
Beginning in the quarter ended March 31,1999, we began capitalizing
direct costs related to a planned initial public offering of our common stock.
During the quarter ended September 30, 1999, we determined not to move forward
at that time with the initial public offering. As a result, we recognized a $1.4
million charge in the third quarter of 1999 for costs previously capitalized.
17
<PAGE>
On October 11, 2000, we were acquired by DLJ Merchant Banking Partners
III, L.P., certain of its affiliated funds and members of our executive
management team (the Acquisition) for aggregate consideration of approximately
$900.0 million, including assumed debt and debt repaid at closing. The
Acquisition was financed with $415.0 million of term loans under a new credit
facility, as well as $50.0 million received by Advanstar from the sale of units,
consisting of discount notes of Advanstar and warrants to purchase stock in our
ultimate parent company, Advanstar Holdings Corp., to DLJ Investment Partners
II, O.P. and related funds, and $296.5 million received by Advanstar Holdings
Corp. from the sale of its common stock to the DLJ Merchant Banking funds and
members of our executive management team. The assumed debt includes $150.0
million of senior subordinated notes issued by Advanstar Communications Inc.
(Communications). We are required to make an offer to purchase these notes at
101% of principal amount as a result of the change of control caused by the
acquisition. On November 10, 2000, a notice of a change in control and an offer
to purchase were mailed to the noteholders.
The Acquisition
As a result of the Acquisition, we will have significantly higher
indebtedness and interest expense than reflected in our historical results of
operations. In addition, our acquisition was accounted for under the purchase
method of accounting. Under purchase accounting, the purchase price is
allocated to the tangible and identifiable intangible assets acquired and
liabilities assumed based on their respective fair values, with the remainder
being allocated to goodwill. The increase in basis of these assets will result
in non-cash depreciation and amortization charges in future periods that will be
significantly higher than reflected in our historical financial information.
In connection with the repayment of debt in connection with the
Acquisition and the related financings, we will record an extraordinary charge
of $1.4 million, net of applicable taxes, related to the write-off of deferred
financing costs in the fiscal quarter ending December 31, 2000.
Stock Option Compensation Charges
We account for stock-based compensation using the intrinsic value
method. As a result, due to the variable features of option grants under the
Company's old stock option plan, we measure compensation cost as the difference
between the exercise price of the options and the fair value of the shares
underlying the options at the end of the period. We then recognize a non-cash
compensation expense.
Our results for the nine months ended September 30, 2000, including our
EBITDA, were positively impacted by non-cash compensation benefits recognized
due to a decrease in the fair value of the shares underlying the options at the
end of the period. We expect that, in the fourth quarter, we will recognize a
$0.6 million non-cash compensation charge to reflect the impact of accelerated
vesting of all options in connection with the Acquisition.
We no longer have a variable-feature benefit plan after the
Acquisition and will therefore not recognize stock option compensation charges
under that plan as currently in effect.
Sources of Revenue
Trade shows and conferences. The trade shows and conferences segment
derives revenue principally from the sale of exhibit space and conference
attendance fees generated at its events. Events are generally held on an annual
basis in major metropolitan or convention areas such as New York City or Las
Vegas. At many of our trade shows, a portion of exhibit space is reserved and
partial payment is received as much as a year in advance. The sale of exhibit
space is affected by the on-going quality and quantity of attendance, venue
selection and availability, industry life cycle and general market conditions.
Revenue and related direct event expenses are recognized in the month in which
the event is held. Cash is collected in advance of an event and is recorded on
our balance sheet as deferred revenue.
18
<PAGE>
Publications. The publications segment derives revenue principally from
the sale of advertising in its business-to-business magazines. Additionally,
certain publications derive revenue from paid subscriptions, custom publishing,
and internet based advertising and sponsorship activities. Paid subscriptions
comprise less than 5% of total publishing revenue. Most publications are
produced monthly with advertising sold both on an annual schedule and single
insertion basis. The sale of advertising is affected by new product releases,
circulation quality, readership and general market conditions. Advertising
revenue is recognized on the publication issue date, and subscription revenue,
if any, is recognized over the subscription period, which is typically one year.
Marketing services. The marketing services segment derives its revenue
from the sale of value-added marketing products such as classified advertising,
both print and internet based, direct mail services, reprints, database
marketing, directories, guides and reference books. These products complement
and, in many cases, utilize the content or databases generated by our trade
shows, conferences and publications. The sale of these products is affected by
the success of the event or publication from which these products are derived,
the quality of the sales team and general market conditions. Revenue is
generally recognized when the applicable product is shipped.
Components of Expenses
Trade shows and conferences. Costs incurred by the trade shows and
conferences segment include facility rent, outsourced services such as
registration, security and decorator, and attendee and exhibitor promotion.
Exhibitors generally contract directly with third parties for on-site services
such as electrical, booth set-up and drayage. Staff salaries and related payroll
expenses are treated as monthly period expenses. All other direct costs are
expensed in the month the event occurs. General and administrative costs are not
allocated to the segments. Our trade shows normally contract for event venue
space one to two years in advance of the given events. We currently are
contracted with our venue for facility rent for MAGIC, our largest trade show,
through the fall 2005 event.
Publications. Costs incurred by the publications segment include
printing, paper and postage; selling and promotion; editorial and prepress; and
circulation acquisition and fulfillment. Additionally, publisher, sales,
production, editorial and circulation staff costs, with related payroll taxes
and benefits, are charged to the publications. We outsource the actual printing
of our publications. General and administrative costs are not allocated to the
segments.
Marketing services. Costs of the marketing services segment include
printing and distribution costs, database administration fees and selling and
product development salaries and related payroll taxes and benefits. General and
administrative costs are not allocated to the segments.
Selected Financial Data
The following table sets forth selected statements of operations and
other financial data.
We define "EBITDA" as operating income plus amortization and
depreciation and less amounts attributable to minority interest. EBITDA does not
represent, and should not be considered to be, an alternative to net income or
cash flow from operations as determined in accordance with GAAP, and our
calculation thereof may not be comparable to that reported by other companies.
We believe that EBITDA provides useful information regarding our ability to
service and/or incur indebtedness and is used by many other companies. Our key
financial covenants under our existing credit facility, which impact the amount
of indebtedness we are permitted to incur, are based, in part, on our EBITDA.
EBITDA does not take into account our working capital requirements, debt service
requirements and other commitments. Accordingly, EBITDA is not necessarily
indicative of amounts that may be available to us for discretionary uses.
19
<PAGE>
To calculate EBITDA for the three months ended September 30, 2000 and
1999, we adjusted operating income by $(0.6) million and $(0.7) million,
respectively, to reflect minority interest. To calculate EBITDA for the nine
months ended September 30, 2000 and 1999, we adjusted operating income by $(2.0)
million and $(1.1) million, respectively, to reflect minority interest.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Net revenue:
Trade shows and conferences................................ $ 54,027 $ 45,219 $173,067 $132,362
Publications............................................... 37,108 34,234 116,018 108,239
Marketing services and other............................... 5,344 4,596 15,501 13,622
-------- -------- -------- --------
Total net revenues...................................... 96,479 84,049 304,586 254,223
Production, selling and other direct expenses:
Trade shows and conferences................................ 25,614 21,821 91,222 70,520
Publications............................................... 26,744 25,964 82,180 78,204
Marketing services and other............................... 4,223 2,372 10,004 7,090
-------- -------- -------- --------
Total production, selling and other direct expenses..... 56,581 50,157 183,406 155,814
General and administrative expenses........................ 14,149 11,032 44,539 32,802
Non-cash stock option compensation......................... (2,825) (987) (3,008) 3,708
Amortization............................................... 12,077 15,097 34,229 34,590
-------- -------- -------- --------
Operating income........................................ 16,497 8,750 45,420 27,309
Other income (expense):
Interest expense (net).................................. (12,358) (10,743) (36,804) (28,134)
Other income (expense).................................. (2,947) (161) (2,892) (190)
Provision (benefit) for income taxes........................... 1,698 (470) 8,419 224
-------- -------- -------- --------
Net income (loss).............................................. $ (506) $ (1,684) $ (2,695) $ (1,239)
======== ======== ======== ========
EBITDA......................................................... $ 29,920 $ 24,110 $ 82,468 $ 63,567
======== ======== ======== ========
</TABLE>
20
<PAGE>
Three Months Ended September 30, 2000 Compared to the Three Months Ended
September 30, 1999 Revenue
Revenue increased $12.5 million or 14.8% from $84.0 million for the
three months ended September 30, 1999 to $96.5 million for the comparable period
in 2000.
Revenue from our trade shows and conferences increased $8.8 million or
19.5% from $45.2 million for the three months ended September 30, 1999 to $54.0
million for the comparable period in 2000. This increase was primarily
attributable to:
. the growth of existing product portfolio, including MAGIC;
. new product launches, such as iEB West, Field Service Solutions and
Call Center West;
. the DMS trade show acquired in January 2000;
. the shift in the timing of when events are held.
These revenue gains were partially offset by the discontinuation or sale of
certain trade shows and conferences held in 1999.
Revenue from publications increased $2.9 million or 8.4% from $34.2
million in the three months ended September 30, 1999 to $37.1 million for the
comparable period in 2000. The increase in revenue was due primarily to:
. the growth in advertising pages on our existing product portfolio;
. new launches, such as E-Learning;
. acquisition of Sensors and Info 21 that we made in 1999 and 2000;
These revenue gains were partially offset by the sale or discontinuation of
certain magazines published in 1999.
Marketing services and other revenue increased $0.8 million or 16.3%
from $4.6 million in the three months ended September 1999 to $5.4 million for
the comparable period of 2000. Growth in revenue from list rentals, reprints and
classified advertising was primarily responsible for the increase.
Production, Selling and Other Direct Expenses
Production, selling and other direct expenses increased $6.4 million or
12.8% from $50.2 million for the three months ended September 30, 1999 to $56.5
million for the comparable period of 2000.
Expenses of trade shows and conferences increased $3.8 million or 17.4%
from $21.8 million for the three months ended September 30, 1999 to $25.6
million for the comparable period in 2000. This increase was primarily due to
increases in operations, promotion and management costs associated with our
acquisition of DMS and product launches as well as costs attributable to growth
in existing events. These increases were partially offset by costs associated
with discontinued events.
Publications' production, selling and other direct expenses increased
$0.7 million or 3.0% from $26.0 million for the three months ended September 30,
1999 to $26.7 million for the comparable period of 2000. This increase was
primarily attributable to direct costs related to acquisitions and launches as
well as normal increases in line with the growth in revenue.
Marketing services production, selling and other direct expenses
increased $1.8 million or 78.0% from $2.4 million for the three months ended
September 30, 1999 to $4.2 million for the comparable period of 2000. This
increase was primarily due to increased selling expenses incurred as a result of
our efforts to market these products as well as increased costs of production in
line with revenue growth in those respective product lines.
21
<PAGE>
General and Administrative Expenses
General and administrative expenses increased $3.1 million, or 28.3%,
from $11.0 million for the three months ended September 30, 1999 to $14.1
million for the three months ended September 30, 2000. The increase was
primarily due to:
. the development of our internet management infrastructure and Web-
based e-commerce communities;
. the consolidation of our New York metropolitan area offices and
office expansion in several locations due to acquisitions and
growth;
. full-period depreciation effect of the development and expansion of
our information technology infrastructure; and
. continued implementation of our market-focused cluster management
structure.
For the three months ended September 30, 2000 we recognized a benefit of $2.8
million related to our stock option compensation plan. This represents a
decrease in compensation expense of approximately $1.8 million from the
comparable period of 1999, resulting from a decrease in the fair value of the
shares underlying the options at the end of the period.
Amortization
Amortization expense decreased $3.0 million from $15.1 million for the
three months ended September 30, 1999 to $12.1 million for the three months
ended September 30, 2000. This decrease was primarily due to the impact of
certain of our intangibles becoming fully amortized in early 2000, partially
offset by increased amortization related to our acquisitions.
Operating Income
Operating income increased $7.7 million or 88.5% from $8.8 million for
the three months ended September 30, 1999 to $16.5 million for the three months
ended September 30, 2000. The increase was primarily due to revenue growth
across our segments and decreased in amortization expense, partially offset by
increased general and administrative expense after stock option compensation
expense, as more fully described above.
Interest Expense
Net interest expense increased $1.7 million or 15.0% from $10.7 million
for the three months ended September 30, 1999 to $12.4 million for the nine
months ended September 30, 2000 due to the additional indebtedness necessary to
fund acquisitions and an aggregate increase in interest rates of approximately
90 basis points. In July 1999, we obtained an additional $138.0 million in term
debt financing that was used to fund the Larkin and other acquisitions during
the year.
Income Taxes
Provision for income taxes increased $2.2 million from a tax benefit of
$0.5 million for the three months ended September 30, 1999 to a provision of
$1.7 million for the three months ended September 30, 2000. This increase was
primarily due to the utilization in 1999 of a significant portion of the
Company's net operating loss carryforward and an increase in taxable earnings.
Net Loss
Net loss decreased $1.2 million from $1.7 million for the three months
ended September 30, 1999 to $0.5 million for the comparable period of 2000.
This decrease was primarily due to an increase in operating income offset by
increases in interest expense and income taxes as more fully described above.
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EBITDA
EBITDA increased $5.8 million or 24.1% from $24.1 million for the three
months ended September 30, 1999 to $29.9 million for the three months ended
September 30, 2000. The increase was primarily due to revenue growth across our
segments and the effect of stock option compensation, partially offset by
increased general and administrative expense and increased production, selling
and other direct expense as more fully described above.
Nine Months Ended September 30, 2000 Compared to the Nine Months Ended September
30, 1999 Revenue
Revenue increased $50.4 million or 19.8% from $254.2 million for the
nine months ended September 30, 1999 to $304.6 million for the comparable period
in 2000.
Revenue from our trade shows and conferences increased $40.7 million or
30.8% from $132.4 million for the nine months ended September 30, 1999 to $173.1
million for the comparable period in 2000. This increase was attributable to:
. trade shows and conferences acquired in 1999 and 2000, such as
Larkin and DMS;
. new product launches, such as iEB West, InterExpo, Custom
Relationship Management New York and Art Expo Florida;
. the growth of our existing product portfolio.
These revenue gains were partially offset by the discontinuation or sale of
certain trade shows and conferences held in 1999.
Revenue from publications increased $7.8 million or 7.2% from $108.2
million in the first nine months of 1999 to $116.0 million for the comparable
period in 2000. The increase in revenue was due primarily to:
. acquisition of Sensors and Info 21 that we made in 1999 and 2000;
. new launches, such as E-Learning and Wireless Asia; and
. the growth in advertising pages on our existing product portfolio.
These revenue gains were partially offset by the sale or discontinuation of
certain magazines published in 1999.
Marketing services and other revenue increased $1.9 million or 13.8%
from $13.6 million in the first nine months of 1999 to $15.5 million in the
first nine months of 2000. Growth in revenue from list rentals, reprints and
classified advertising was primarily responsible for the increase.
Production, Selling and Other Direct Expenses
Production, selling and other direct expenses increased $27.6 million
or 17.7% from $155.8 million for the first nine months of 1999 to $183.4 million
for the comparable period of 2000.
Expenses of trade shows and conferences increased $20.7 million or
29.4% from $70.5 million for the first nine months of 1999 to $91.2 million for
the comparable period in 2000. This increase was primarily due to increases in
operations, promotion and management costs associated with our acquisitions and
launches as well as costs attributable to growth in existing events. These
increases were partially offset by costs associated with discontinued events.
Publications' production, selling and other direct expenses increased
$4.0 million or 5.1% from $78.2 million for the first nine months of 1999 to
$82.2 million for the comparable period of 2000. This increase was primarily
attributable to direct costs related to acquisitions and launches as well as
normal increases in line with the growth in revenue.
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Marketing services production, selling and other direct expenses
increased $2.9 million or 41.1% from $7.1 million for the first nine months of
1999 to $10.0 million for the comparable period of 2000. This increase was
primarily due to increased selling expenses incurred as a result of our efforts
to market these products as well as increased costs of production in line with
revenue growth in those respective product lines.
General and Administrative Expenses
General and administrative expenses increased $11.7 million, or 35.8%,
from $32.8 million for the nine months ended September 30, 1999 to $44.5 million
for the nine months ended September 30, 2000. The increase was primarily due to:
. the development of our internet management infrastructure and Web-
based e-commerce communities;
. the consolidation of our New York metropolitan area offices and
office expansion in several locations due to acquisitions and
growth;
. full-period depreciation effect of the development and expansion of
our information technology infrastructure;
. continued implementation of our market-focused cluster management
structure; and
. increases in central services groups such as finance and legal
administration in line with our growth in scale and complexity.
For the nine months ended September 30, 2000 we recognized a benefit of $3.0
million related to our stock option compensation plan. This represents a
decrease in compensation expense of approximately $6.7 million from the
comparable period of 1999, resulting from a decrease in the fair value of the
shares underlying the options at the end of the period.
Amortization
Amortization expense decreased $0.4 million from $34.6 million for the
nine months ended September 30, 1999 to $34.2 million for the nine months ended
September 30, 2000. This decrease was primarily due to the impact of certain of
our intangibles becoming fully amortized in 2000, partially offset by increased
amortization related to our acquisitions.
Operating Income
Operating income increased $18.1 million or 66.3% from $27.3 million
for the nine months ended September 30, 1999 to $45.4 million for the nine
months ended September 30, 2000. The increase was primarily due to revenue
growth across our segments partially offset by increased general and
administrative expense after stock option compensation expense, as more fully
described above.
Interest Expense
Net interest expense increased $8.7 million or 30.8% from $28.1 million
for the nine months ended September 30, 1999 to $36.8 million for the nine
months ended September 30, 2000 due to the additional indebtedness necessary to
fund acquisitions and an aggregate increase in interest rates of approximately
90 basis points. In July 1999, we obtained an additional $138.0 million in term
debt financing that was used to fund the Larkin and other acquisitions during
the year.
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Income Taxes
Provision for income taxes increased $8.2 million from $0.2 million for
the nine months ended September 30, 1999 to $8.4 million for the nine months
ended September 30, 2000. This increase was primarily due to the utilization in
1999 of a significant portion of Advanstar's net operating loss carryforward and
an increase in taxable earnings.
Net Loss
Net loss increased $1.5 million from a loss of $1.2 million for the
nine months ended September 30, 1999 to a loss of $2.7 million for the
comparable period of 2000. This increase was primarily due to increased general
and administrative expense after stock option compensation expense, increases in
interest expense and income taxes as more fully described above.
EBITDA
EBITDA increased $18.9 million or 29.7% from $63.6 million for the nine
months ended September 30, 1999 to $82.5 million for the nine months ended
September 30, 2000. The increase was primarily due to revenue growth across our
segments and the effect of stock option compensation, partially offset by
increased general and administrative expense and increased production, selling
and other direct expense as more fully described above.
Liquidity and Capital Resources
Post Acquisition
On October 11, 2000, as part of the Acquisition, we repaid our senior credit
facility and replaced it with the new credit facility. Following the
Acquisition, our principal sources of liquidity will be cash flow from
operations and borrowings under our new credit facility entered into by
Communications. Our principal uses of cash will be debt service requirements to
service our debt described below, capital expenditures and acquisitions and
investments.
Debt service. On a pro forma basis, as of September 30, 2000, we had: (a) total
indebtedness of $615.0 million; and (b) approximately $76.0 million of
borrowings available under our new credit facility, subject to customary
conditions.
New credit facility. The term loan facility under the new credit facility
consists of a $100.0 million amortizing term loan A maturing six and one-half
years after the closing date of the new credit facility and a $315.0 million
amortizing term loan B maturing seven years after that closing date, or eight
years after the closing date if our existing 9 1/4% notes are repaid or defeased
within six and one-half years after the closing date. The new credit facility
also includes a $80.0 million revolving credit facility. The revolving credit
facility may be increased by up to $50.0 million at our request, with the
consent of the lenders providing the increased revolving commitments, and will
terminate six and one-half years of the closing date.
Borrowings under the new credit facility generally bear interest based on a
margin over, at our option, the base rate or the reserve-adjusted London-
interbank offered rate, or LIBOR. The applicable margin, until approximately six
months after the closing date, is 3.00% over LIBOR and 1.75% over the base rate
for borrowings under the revolving credit facility and for term loan A, and
3.50% over LIBOR and 2.25% over the base rate for term loan B. Thereafter, the
applicable margin for revolving credit loans and term A loans will vary based
upon our ratio of consolidated debt to EBITDA, as defined in the new credit
facility. The obligations of Communications under the new credit facility are
guaranteed by Advanstar and all of the existing and future domestic subsidiaries
of Communications, and will be secured by substantially all of the assets of
Advanstar and the subsidiary guarantors, including a pledge of the capital stock
of all our existing and
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future domestic subsidiaries, a pledge of no more than 65% of the voting stock
of any foreign subsidiary directly owned by Advanstar or any domestic
subsidiary, a pledge of all intercompany indebtedness in favor of Communications
and its domestic subsidiaries, and a pledge of Communication's capital stock by
Advanstar. The new credit facility contains customary covenants, including
covenants that limit our ability to incur debt, pay dividends and make
investments, and customary events of default.
Senior Subordinated Notes. The senior subordinated notes issued in conjunction
with the MAGIC acquisition are unsecured obligations of Communications, limited
to $150.0 million aggregate principal amount, and will mature on May 1, 2008.
Each note bears interest at 9.25%, payable semiannually. The notes are
redeemable at Communications' option after May 1, 2003 through April 30, 2006 at
specified premiums, and at par thereafter. Upon the occurrence of the change of
control, each holder of the notes may require Advanstar to repurchase all or any
part of the notes held by such holder at an offer price in cash equal to 101% of
the aggregate principal amount thereof, plus accrued interest and other
specified costs to the date of repurchase.
On November 10, 2000, Communications launched the change of control
offer, which is expected to expire on January 4, 2001. The Company expects to
finance the repurchase of all tendered notes with proceeds from the issuance by
Communications of new senior subordinated notes or bridge notes. The Company has
not received any commitment with respect to the new senior subordinated notes,
but has received a commitment for the bridge notes from DLJ Bridge Finance,
Inc., although the commitment is subject to various conditions, including the
absence of any material adverse change. If those conditions cannot be satisfied,
then the Company will be required to obtain alternative financing to repurchase
the notes, and there can be no assurance that it would be able to obtain such
financings on acceptable terms or at all. If Communications issues new senior
subordinated notes, the notes are expected to require semiannual interest
payments in cash and to have a maturity of ten years after issuance. The
covenants are expected to be customary and substantially similar to those
contained in the existing senior subordinated notes. The notes are expected to
be guaranteed by Communications' domestic restricted subsidiaries.
If Communications issues the bridge notes, the notes are expected to
bear interest at a rate equal to 13.5% per annum, subject to increase after
three months and then every three months thereafter at a rate equal to the
higher of (I) the prime rate plus a margin that increases by 0.5% every three
months, (ii) the rate borne by Treasury securities with a maturity closest to
the bridge notes plus a margin that increases by 0.5% every three months, (iii)
the DLJ High Yield Index Rate plus a margin that increases by 0.5% every three
months, and (iv) the initial interest rate plus 0.5% every three months. The
interest rate may not exceed 17.0% or be less than 10.0%, and interest in excess
of 15.0% may be paid in kind. The bridge notes will mature one year after
issuance, subject to automatic extension to a date six months after the original
final maturity of the new credit facility if, on the first anniversary, no
default under the bridge notes, the new credit facility or any other material
debt has occurred and is continuing and all fees and expenses payable to DLJ
Bridge Finance, Inc. have been paid in full. The bridge notes will be subject to
mandatory prepayment with the net cash proceeds of asset sales and debt and
equity issuances, subject to specified exceptions. The bridge notes are expected
to include customary covenants, including limitations on debt, investments and
the payment of dividends, and customary events of default.
Parent Company Notes. As part of the financing for the Acquisition, Advanstar
issued senior discount notes due 2011. These notes will not require cash
interest payments until 2005 and contain customary covenants and events of
default, including covenants that limit the ability of Advanstar and its
subsidiaries to incur debt, pay dividends and make investments. Neither
Communications nor any of its subsidiaries guaranteed the notes. However,
Advanstar is a holding company and its ability to pay interest on these notes
will be dependent upon the receipt of dividends from its subsidiaries, including
Communications. The new credit facility and the senior subordinated notes
impose substantial restrictions on Communication's ability to pay dividends.
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Acquisitions and Investments. We are party to several put/call agreements under
which we will be required to purchase joint venture interests from our partners.
The aggregate consideration that we would be required to pay under these
agreements is approximately $14.0 million, including $9.0 million that was
funded in the fourth quarter of 2000 to purchase the minority interest of our
venture partner in one of our subsidiaries. We funded that consideration with
borrowings under our revolving credit facility.
Our business strategy includes the consummation of acquisitions. In
connection with any future acquisitions, we may require additional funding,
which may be provided in the form of additional debt or equity financing or a
combination thereof. There can be no assurance that any additional financing
will be available to us on acceptable terms or in a manner that complies with
the restrictive covenants in our debt instruments.
Source of funds. We generally operate with negative working capital, excluding
cash and current maturities of long-term debt, due to the impact of deferred
revenue from trade shows, which is billed and collected as deposits up to one
year in advance of the respective trade show. Consequently, our existing
operations are expected to maintain very low or negative working capital
balances, excluding cash and current maturities of long-term debt. We
anticipate that our operating cash flow, together with borrowings under the new
credit facility, will be sufficient to meet our anticipated future operating
expenses, capital expenditures and debt service obligations as they become due,
other than the repayment obligation under the senior subordinated notes, as
described above. However, our ability to make scheduled payments of principal
of, to pay interest on or to refinance our indebtedness and to satisfy our other
debt obligations will depend upon our future operating performance, which will
be affected by general economic, financial, competitive, legislative,
regulatory, business and other factors beyond our control. From time to time we
will continue to explore additional financing methods and other means to lower
our cost of capital, which could include stock issuance or debt financing and
the application of the proceeds therefrom to the repayment of bank debt or other
indebtedness.
Historical
Historically, our financing requirements have been funded through cash
generated by operating activities, the sale of additional shares of common stock
to our stockholder, revolving and term loan borrowings and, in 1998, the
issuance of $150.0 million of senior subordinated notes.
Cash flows from operating activities. Net cash provided by operations decreased
$10.8 million, or 28.0%, to $27.9 million for the nine months ended September
30, 2000 from $38.7 million for the comparable period of 1999. The decrease was
primarily due to a reduction in earnings before non-cash stock option
compensation, depreciation, amortization and gains of $4.7 million and an
increase in working capital items of $6.1 million in the nine months ended
September 30, 2000.
Cash flows from investing activities. Net cash used in investing activities
decreased $137.2 million to $18.4 million for the nine months ended September
30, 2000 from $155.7 million for the comparable period of 1999. The decrease
was primarily due to a reduction in acquisition activity in 2000, an increase in
proceeds received on the sale of certain of our properties, partially offset by
an increase in fixed asset expenditures more fully discussed below.
Cash flows from financing activities. Net cash provided by financing activities
decreased to a use of cash of $9.3 million for the nine months ended September
30, 2000 from a source of cash of $112.2 million for the comparable period of
1999. This decrease was principally due to our financing of fewer acquisitions
in 2000 in comparison to 1999, and repayments of our long-term debt. In July
1999, we also obtained an additional $138.0 million in term debt financing that
was used to fund the Larkin acquisition.
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Capital expenditures. Capital expenditures increased $9.6 million to $15.6
million for the nine months ended September 30, 2000 from $6.0 million for the
comparable period of 1999. The increase was primarily due to the consolidation
of multiple office locations in New York into a single office location and other
strategic investments, including the development of web-sites to extend our
market communities to the online environment of the Internet. Capital
expenditures have been financed by our cash flows from operations.
Market Risk
We are exposed to various market risks, which is the potential loss
arising from adverse changes in market rates and prices, such as foreign
currency exchange and interest rates. We do not enter into derivatives or other
financial instruments for trading or speculative purposes. We enter into
financial instruments to manage and reduce the impact of changes in interest
rates and foreign currency exchange rates.
Interest. We rely significantly on long-term floating rate and fixed rate debt
in our capital structure. At September 30, 2000, our pro forma debt totaled
$615.0 million of which $258.0 million was either fixed rate debt or covered by
interest rate cap agreements limiting our interest rate exposure at 10.25% -
11.5%.
At September 30, 2000, on a pro forma basis after the effect of the
Acquisition, we had fixed rate debt of $200.0 million and floating rate debt of
$415.0 million. Holding other variables constant (such as debt levels), a one
percentage point decrease in interest rates would have a net increase in the
fair market value of the fixed rate debt of approximately $13.6 million. The
pre-tax earnings and cash flows impact for the next year resulting from a one
percentage point increase in interest rates on variable rate debt would be a
reduction of $4.2 million, holding other variables constant and excluding the
impact of our interest rate cap agreements.
Currencies. We maintain assets and operations in Europe, South America and
Asia. The results of operations and financial position of the our foreign
operations are principally measured in their respective currency and translated
into U. S. dollars. As a result, exposure to foreign currency gains and losses
exists. The reported income of these subsidiaries will be higher or lower
depending on a weakening or strengthening of the US dollar against the
respective foreign currency. Our subsidiaries and affiliates also purchase and
sell products and services in various currencies. As a result, we may be
exposed to cost increases relative to the local currencies in the markets in
which it sells.
A portion of our assets are based in our foreign locations and are
translated into U. S. dollars at foreign currency exchange rates in effect as of
the end of each period, with the effect of such translation reflected in other
comprehensive income. Accordingly, our consolidated stockholder's equity will
fluctuate depending upon the weakening or strengthening of the U S dollar
against the respective foreign currency.
Our strategy for management of currency risk relies primarily upon
conducting our operations in a country's respective currency and may, from time
to time, involve currency derivatives, primarily forward exchange contracts, to
reduce our exposure to currency fluctuations. At September 30, 2000 there were
open foreign exchange derivative contracts with a notional amount totaling $3.9
million. The potential loss in fair value resulting from a hypothetical 10%
adverse change in quoted foreign currency exchange rates amounts to $0.4
million. Actual results may differ. There were no material forward exchange
contracts outstanding at September 30, 1999.
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PART II Other Information
Item 4. Submissions of Matters to a Vote of Security Holders.
On August 14, 2000, the sole stockholder of the Company approved
by written consent the Agreement and Plan of Merger among the
Company, Advanstar Holdings Corp. (formerly known as Jetman
Acquisition Corp.), Junior Jetman Corp. and the sole stockholder
of the Company.
Item 6. Exhibits and Reports filed on Form 8-K
Item 6(a). Exhibits
2.1 Agreement and Plan of Merger dated August 14, 2000, among
the Company, Advanstar Holdings Corp. (formerly known as
Jetman Acquisition Corp.), Junior Jetman Corp. and AHI
Advanstar LLC (filed as Exhibit 2.1 to Form 8-K filed with
the Securities and Exchange Commission on October 26, 2000,
and incorporated by reference herein).
10.1 Employment Agreement dated August 14, 2000 by and between
the Company and Robert L. Krakoff.
10.2 Employment Agreement dated August 14, 2000 by and between
the Company and James M. Alic.
27 Financial Data Schedule for the three months ended
September 30, 2000.
99.1 Press release of the Company dated August 14, 2000 (filed
as Exhibit 99.1 to Form 8-K filed with the Securities and
Exchange Commission on October 26, 2000 and incorporated by
reference herein).
Item 6(b). Reports on Form 8-K
Advanstar filed no reports on Form 8-K during the quarter ended
September 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Advanstar, Inc.
By: /s/ David w. montgomery
Date: November 14, 2000
David W. Montgomery
Vice President - Finance and
Chief Financial Officer
(Authorized Officer and
Principal Financial Officer)
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Advanstar, Inc.
Exhibit Index
Exhibit No.
2.1 Agreement and Plan of Merger dated August 14, 2000, among the
Company, Advanstar Holdings Corp. (formerly known as Jetman
Acquisition Corp.), Junior Jetman Corp. and AHI Advanstar LLC
(filed as Exhibit 2.1 to Form 8-K filed with the Securities and
Exchange Commission on October 26, 2000, and incorporated by
reference herein).
10.1 Employment Agreement dated August 14, 2000 by and between the
Company and Robert L. Krakoff.
10.2 Employment Agreement dated August 14, 2000 by and between the
Company and James M. Alic.
27 Financial Data Schedule for the three months ended September 30,
2000.
99.1 Press release of the Company dated August 14, 2000 (filed as
Exhibit 99.1 to Form 8-K filed with the Securities and Exchange
Commission on October 26, 2000 and incorporated by reference
herein).
31
