More challenges await Advanstar - Advanstar Communications - Company Profile

Folio: The Magazine for Magazine Management, Sept 1, 1994 by Tony Silber

Talk to Advanstar Communications CEO Ed Aster, and he'll tell you with great pride about what his company is up to and how much things have changed in the past year and a half since he took over the company. after its purchase of his 14-title Aster Communications.

In fact, a lot is going on at Advanstar. The Cleveland-based trade-publishing company is in a significant transition. But while Aster is positively bullish, the outlook for Advanstar is much less certain. Although there is much to point to that appears positive, some recent developments also suggest new challenges for a company that barely survived a disastrous 1987 leveraged buyout, and later, in 1992, suffered the ignominy of bankruptcy.

Most important, perhaps, is the news from the financial front. It's mixed. last year, the company - which is controlled by, Goldman, Sachs & Co.'s Water Street Recovery, Fund - produced an improved balance sheet. Advanstar reduced its 1993 operating loss to $23.2 million from $44.3 million in 1992, while increasing its revenues to $140.1 million from $110.4. Earnings before interest, taxes, depreciation and amortization totaled $21 million last year, up from $18.6 million in 1992.

But the company's performance in the first quarter of this year was a major disappointment. Revenues for the period were $41.1 million,up 1.1 percent from the same period in 1993. But operating income before interest, taxes, depreciation and amortization was $3.7 million, down 43.3 percent from the same period last year. The decline was attributed to the disappointing results of three consumer expo start-ups and to the poor performance of the company's healthcare magazines, which Advanstar says were affected by the ongoing debate over healthcare reform.

"They had a really bad first quarter based on their report, and it doesn't appear they're going to see much upside this year," says one industry executive.

Advanstar's finances remain uncertain because of other factors, as well. The company, which changed its name from Edgell Communications in early 1993, still has $175 million in debt left over from the LBO, and even Aster himself admits that Advanstar's long-term fate is still an open question. Essentially, there are three routes to take: refinancing, doing an initial public offering and/or selling. Although Aster (who owns a 10 percent stake in the company) said this spring that an IPO is unlikely, the ultimate decision will be made by Goldman, Sachs, which holds a 49 percent equity stake in Advanstar. Peter Sachs, a Goldman, Sachs limited partner, is Advanstar's chairman.

Ventures in CD-ROM, online

As Aster is quick to note, there are plenty of good things happening at Advanstar despite the uncertain future. For example, there's the new corporate strategy of focusing on markets where the company expects major growth. The Advanstar Millennium unit, for example, will launch as many as 20 CD-ROM products over the next 18 months in medical, pharmaceutical and telecommunications sectors. There are online ventures as well, including the July launch of a stand-alone service for the Chicago-based America Network. And the company expects its international business - which now accounts for about 10 percent of total revenues of about $155 million - to "go right through the roof" in coming years, Aster exclaims.

Then there's Advanstar's new commitment to its core products - the 57 business and trade magazines. "I'm more concerned with turning our corporate culture around," says Aster. "We've gone from a company that ignored editorial quality and cut ad rates, to one where editorial quality is paramount - one that's stopped cutting rates and increased the yield per page from $3,250 to $3,850."

There has been one acquisition during Aster's tenure (PC Graphics & Video, formerly, High Color, obtained from Camden, Maine-based Imagetech Publications, Inc., last October) and three start-ups (Independent Stylist, Hospitality Product News and Voice in the U.K.). Two titles, Advanced Composites and Candy Marketer, have been folded. Also, the company's plastics magazines were overhauled, starting with the dismissal of the group publisher, T. Peter Sullivan, and the subsequent departure of much of his staff.

But for all of Aster's new initiatives, the company still reorganized its management earlier this year. Among other moves, Brian Nairn, who had been heading Advanstar's exposition division, became president of the publishing division which produces 60 percent of the company's revenues. The decision was designed to allow Aster to concentrate on development of the company's international operations, long-term strategic planning and other new programs.

Aster acknowledges that the company's board of directors suggested the change and that he agreed. "I'm going to be around as long as it takes to do a good job and bring a return on it," he says. "The board wants me here - I'm having a lot of fun running the company."

The name of the game is cashflow

One publishing executive outside the company critiques the changes this way: "When a company is heavily in debt and the name of the game is cashflow, an entrepreneurial-type leader is not the best fit. They're good at developing ideas - not as good at managing the cost side of the business."