** **

**UNITEDSTATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

**(Mark One)**

**x****    QuarterlyReport Pursuant to Section 13 or 15(d) of The Securities Exchange Actof 1934.**

**For the quarterly period ended: March 31,2006**

**OR**

**        TransitionReport Pursuant to Section 13 or 15(d) of the Securities Exchange Actof 1934**

**Commission File Number: 333-61386**

**Advanstar, Inc.**

(Exact name of registrant as specified in its charter)

| **Delaware**                     | **94-3243499**       |
|----------------------------------|----------------------|
| (State or other  jurisdiction of | (I.R.S. Employer     |
| incorporation or  organization)  | Identification  No.) |

** **

**641 Lexington Avenue, New York, NY** (Address of principalexecutive offices)

**10022**(ZipCode)

**Registrant’sTelephone Number, Including Area Code: (212) 951-6600**

Indicate by check markwhether the registrant: (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for thepast 90 days. Yes x  No o

Indicate by check mark if the registrant is a largeaccelerated filer, an accelerated filer or a non accelerated filer.  Large Accelerated Filer  o  AcceleratedFiler  o  Non-AcceleratedFiler  x

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o  No x

As of May 15, 2006, 100 shares of the registrant’scommon stock were outstanding.

 

 

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| **PART I    Financial Information** |
|---------------------------------------------------------|
| ** **                                              |
| **Item 1.**                                             | ***Financial Statements*** |
| *** ***                                            | *** *** |
|                                                    | Condensed  Consolidated Balance Sheets (unaudited) at March 31, 2006 and  December 31, 2005 |
|                                                    |   |
|                                                    | Condensed  Consolidated Statements of Operations (unaudited) for the three months ended  March 31, 2006 and 2005 |
|                                                    |   |
|                                                    | Condensed  Consolidated Statements of Cash Flows (unaudited) for the three months ended  March 31, 2006 and 2005 |
|                                                    |   |
|                                                    | Notes to  Condensed Consolidated Financial Statements (unaudited) |
|                                                    |   |
| **Item 2.**                                             | ***Management’s  Discussion and Analysis of Financial Condition and Results of Operations*** |
| ** **                                              | *** *** |
| **Item 3.**                                             | ***Quantitative and Qualitative Disclosures About Market  Risk*** |
| ** **                                              | *** *** |
| **Item  4.**                                            | ***Controls  and Procedures*** |
| ** **                                              | *** *** |
| **PART II    OTHER INFORMATION**    |
| ** **                                              |
| **Item 6.**                                             | ***Exhibits*** |
| ** **                                              | *** *** |
| **SIGNATURES**                                          |

 

 

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** PART 1 FINANCIAL INFORMATION**

**Advanstar, Inc.Condensed Consolidated Balance Sheets (Unaudited)**(In thousands, except share and per share data)

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| ** **                                                                                                                                    | ** ** | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|--------------------|------------|-----------------------|------------|
| **ASSETS**                                                                                                                                    | ** ** | ** ** | **2006**           | ** ** | **2005**              | ** ** |
| ** **                                                                                                                                    | ** ** |       |               |       |                  |       |
| Current assets:                                                                                                                               |       |       |               |       |                  |       |
| Cash and cash  equivalents                                                                                                                    |       |       | $                  | 58,539     |                  | $          | 46,641 |   |
| Accounts receivable,  net of allowance of $1,305 and $1,076 at March 31, 2006 and  December 31, 2005                                |       |       | 24,255             |       | 24,607                |       |
| Prepaid expenses                                                                                                                              |       |       | 6,757              |       | 7,871                 |       |
| Other                                                                                                                                         |       |       | 2,334              |       | 1,965                 |       |
| Total current  assets                                                                                                                         |       |       | 91,885             |       | 81,084                |       |
| Due from parent                                                                                                                               |       |       | 829                |       | 804                   |       |
| Property, plant and  equipment, net                                                                                                           |       |       | 20,662             |       | 21,306                |       |
| Intangible and other  assets:                                                                                                                 |       |       |               |       |                  |       |
| Goodwill                                                                                                                                      |       |       | 595,255            |       | 594,982               |       |
| Intangibles and other,  net                                                                                                                   |       |       | 55,751             |       | 63,157                |       |
| Total intangible  and other assets, net                                                                                                       |       |       | 651,006            |       | 658,139               |       |
| Non current assets held  for sale                                                                                                             |       |       | 4,620              |       | 4,620                 |       |
|                                                                                                                                          |       |       | $                  | 769,002    |                  | $          | 765,953 |   |
| **LIABILITIES  AND STOCKHOLDER’S EQUITY**                                                                                                |       |       |               |       |                  |       |
|                                                                                                                                          |       |       |               |       |                  |       |
| Current liabilities:                                                                                                                          |       |       |               |       |                  |       |
| Current maturities of  long-term debt                                                                                                         |       |       | $                  | 201        |                  | $          | 201 |   |
| Accounts payable                                                                                                                              |       |       | 17,771             |       | 12,507                |       |
| Accrued compensation                                                                                                                          |       |       | 2,401              |       | 7,236                 |       |
| Other accrued expenses                                                                                                                        |       |       | 46,761             |       | 36,126                |       |
| Deferred revenue                                                                                                                              |       |       | 26,617             |       | 46,472                |       |
| Total current  liabilities                                                                                                                    |       |       | 93,751             |       | 102,542               |       |
| Long-term debt, net of  current maturities                                                                                                    |       |       | 620,674            |       | 620,391               |       |
| Deferred income taxes                                                                                                                         |       |       | 33,449             |       | 31,500                |       |
| Other long-term liabilities                                                                                                                   |       |       | 6,144              |       | 4,933                 |       |
| Commitments and  contingencies                                                                                                                |       |       |               |       |                  |       |
| Stockholder’s equity:                                                                                                                    |       |       |               |       |                  |       |
| Common stock, $.01 par  value, 10,000 shares authorized; 100 shares issued and outstanding at  March 31, 2006 and December 31, 2005 |       |       | —             |       | —                |       |
| Capital in excess  of par value                                                                                                               |       |       | 370,424            |       | 370,424               |       |
| Accumulated deficit                                                                                                                           |       |       | (364,047           | )          | (372,250              | )          |
| Accumulated other  comprehensive income                                                                                                       |       |       | 8,607              |       | 8,413                 |       |
| Total stockholder’s  equity                                                                                                              |       |       | 14,984             |       | 6,587                 |       |
|                                                                                                                                          |       |       | $                  | 769,002    |                  | $          | 765,953 |   |

 

The accompanyingnotes are an integral part of these condensed consolidated financialstatements.

2

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**Advanstar, Inc.Condensed Consolidated Statements of Operations (Unaudited)**(In thousands)

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| ** **                                                                  | ** ** | **For the  Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                                  | ** ** | **2006**                                                       | ** ** | **2005** | ** ** |
| Revenue                                                                     |       | $                                                              | 106,578    |   | $ | 90,570 |   |
|                                                                        |       |                                                           |       |   |   |
| Operating expenses:                                                         |       |                                                           |       |   |   |
| Cost of production (excluding depreciation)                                 |       | 22,139                                                         |       | 16,226 |   |
| Selling, editorial and circulation (excluding  depreciation)                |       | 31,477                                                         |       | 27,998 |   |
| Cost of segment operations (excluding depreciation)                         |       | 2,370                                                          |       | 3,174 |   |
| General and administrative (excluding depreciation)                         |       | 9,010                                                          |       | 11,800 |   |
| Restructure charge                                                          |       | 2,405                                                          |       | — |   |
| Amortization of intangibles                                                 |       | 6,700                                                          |       | 7,668 |   |
| Depreciation                                                                |       | 1,962                                                          |       | 2,290 |   |
| Total operating expenses                                                    |       | 76,063                                                         |       | 69,156 |   |
| Operating income                                                            |       | 30,515                                                         |       | 21,414 |   |
|                                                                        |       |                                                           |       |   |   |
| Other income (expense):                                                     |       |                                                           |       |   |   |
| Interest expense                                                            |       | (20,589                                                        | )          | (23,462 | ) |
| Interest income                                                             |       | 503                                                            |       | 177 |   |
| Other (expense) income, net                                                 |       | (153                                                           | )          | 17 |   |
| Income (loss)  from continuing operations before income taxes               |       | 10,276                                                         |       | (1,854 | ) |
| Provision for  income taxes                                            |       | 1,999                                                          |       | 1,795 |   |
| Income (loss)  from continuing operations                                   |       | 8,277                                                          |       | (3,649 | ) |
| Loss from  operations of discontinued businesses, net of taxes (see Note 4) |       | (74                                                            | )          | (868 | ) |
| Net income (loss)                                                           |       | $                                                              | 8,203      |   | $ | (4,517 | ) |

 

 

 

The accompanyingnotes are an integral part of these condensed consolidated financialstatements.

3

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**Advanstar, Inc.Condensed Consolidated Statements of Cash Flows (Unaudited)**(In thousands)

 
| ** **                                                                         | ** ** | **For the**                 | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                         | ** ** | **Three Months Ended** | ** ** |
| ** **                                                                         | ** ** | **March 31,**               | ** ** |
| ** **                                                                         | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| Operating activities:                                                              |       |                             |       |   |   |
| Net income (loss)                                                                  |       | $                                | 8,203      |   | $ | (4,517 | ) |
| Adjustments to  reconcile net income (loss) to net cash from operating activities: |       |                             |       |   |   |
| Depreciation and amortization                                                      |       | 8,662                            |       | 11,620 |   |
| Gain on derivative financial instruments                                           |       | —                           |       | (26 | ) |
| Loss on asset disposal                                                             |       | 176                              |       | — |   |
| Losses of minority interest holders                                                |       | —                           |       | 646 |   |
| Non-cash interest expense                                                          |       | 1,019                            |       | 6,606 |   |
| Deferred income taxes                                                              |       | 1,949                            |       | 3,000 |   |
| Provision for bad debts                                                            |       | 738                              |       | 123 |   |
| Changes in operating assets and liabilities                                        |       | (6,878                           | )          | (13,481 | ) |
|                                                                               |       |                             |       |   |   |
| Net cash provided by operating activities                                     |       | 13,869                           |       | 3,971 |   |
|                                                                               |       |                             |       |   |   |
|                                                                               |       |                             |       |   |   |
| Investing activities:                                                              |       |                             |       |   |   |
| Additions to property, plant and equipment                                         |       | (1,877                           | )          | (1,525 | ) |
| Acquisitions of intangible assets and other                                        |       | (9                               | )          | — |   |
|                                                                               |       |                             |       |   |   |
| Net cash used in investing activities                                              |       | (1,886                           | )          | (1,525 | ) |
|                                                                               |       |                             |       |   |   |
| Financing activities:                                                              |       |                             |       |   |   |
| Payments of long-term debt                                                         |       | (25                              | )          | (4,888 | ) |
|                                                                               |       |                             |       |   |   |
| Net cash used in financing activities                                              |       | (25                              | )          | (4,888 | ) |
|                                                                               |       |                             |       |   |   |
| Effect of  exchange rate changes on cash                                           |       | (60                              | )          | 251 |   |
|                                                                               |       |                             |       |   |   |
| Net increase  (decrease) in cash and cash equivalents                              |       | 11,898                           |       | (2,191 | ) |
|                                                                               |       |                             |       |   |   |
| Cash and cash equivalents,  beginning of period                                    |       | 46,641                           |       | 41,328 |   |
|                                                                               |       |                             |       |   |   |
| Cash and cash  equivalents, end of period                                          |       | $                                | 58,539     |   | $ | 39,137 |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

4

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**Advanstar, Inc.Notes to Condensed Consolidated Financial Statements (Unaudited)**

**1.****                          Basis ofPresentation**

Theaccompanying unaudited condensed consolidated financial statements have beenprepared by Advanstar, Inc. (“Advanstar”), its wholly owned subsidiary,Advanstar Communications Inc. (“Communications”), and Communications’ majorityowned subsidiaries (collectively, the “Company”) in accordance with theinstructions to Form 10-Q and, therefore, do not include all theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements. Management believes that all adjustments,consisting solely of normal recurring items considered necessary for a fairstatement of financial position and results of operations, have been included. Thesecondensed consolidated financial statements, however, should be read inconjunction with the audited financial statements and the related notesincluded in the Company’s annual report on Form 10-K for the yearended December 31, 2005, filed with the Securities and Exchange Commissionon March 30, 2006. The results of operations for the three months ended March 31,2006 are not necessarily indicative of the operating results that may beexpected for the entire year ending December 31, 2006.

**2.**                          Summary of Significant Interim Accounting Policies

**Interim income tax expense**The Companydetermines its quarterly income tax provision based upon an estimated annualeffective income tax rate and discrete items as they occur. In determining the effectiveincome tax rate applicable to interim periods, the Company excludes taxjurisdictions where no tax expense or benefit is expected for the entire year.

**3.**                          Goodwill and OtherIntangible Assets

Thechanges in the carrying amount of goodwill by operating segment are as follows(in thousands):

|                                                               | ** ** | **Fashion &** | ** ** | **Life**     | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------|------------|------------------------|------------|--------------|------------|-----------------|------------|------------|------------|------------|------------|
| ** **                                                    | ** ** | **Licensing**          | ** ** | **Sciences** | ** ** | **Powersports** | ** ** | **Other**  | ** ** | **Total**  | ** ** |
| Balance as of  December 31, 2005                         |       | $                      | 188,837    |         | $          | 316,554         |       | $          | 79,674     |       | $          | 9,917 |   | $ | 594,982 |   |
| Goodwill  acquired or completion of purchase price allocation |       | (13                    | )          | —       |       | 41              |       | —     |       | 28         |       |
| Foreign currency  translation                                 |       | —                 |       | —       |       | —          |       | 245        |       | 245        |       |
| Balance as of  March 31, 2006                            |       | $                      | 188,824    |         | $          | 316,554         |       | $          | 79,715     |       | $          | 10,162 |   | $ | 595,255 |   |

 

5

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Trade exhibitor andadvertiser lists are amortized on a double-declining balance method over sixyears and five years, respectively, subscriber lists and other intangibleassets are amortized on a straight-line basis over three to ten years, andtrademarks and trade names are amortized on a straight-line basis over twentyyears. These intangible assets consist of the following (in thousands):

|                                         | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **2006**           | ** ** | **2005**              | ** ** |
| Trade exhibitor  lists                  |       | $                  | 132,989    |                  | $          | 132,936 |   |
| Advertiser lists                        |       | 29,680             |       | 29,680                |       |
| Subscriber lists                        |       | 6,023              |       | 6,023                 |       |
| Trade names and  trademarks             |       | 19,211             |       | 19,211                |       |
| Other intangible  assets                |       | 20,072             |       | 20,275                |       |
| Deferred  financing costs               |       | 19,789             |       | 19,789                |       |
|                                    |       | 227,764            |       | 227,914               |       |
| Accumulated  amortization               |       | (172,013           | )          | (164,757              | )          |
| Total intangible  and other assets, net |       | $                  | 55,751     |                  | $          | 63,157 |   |

 

Estimated amortizationexpense of identified intangible and other assets for the remaining nine monthsof 2006 and for the next five years is as follows (in thousands):

** **

| 2006 |   | $     | 14,439 |   |
|------|--------|-------|--------|--------|
| 2007 |   | 8,372 |   |
| 2008 |   | 5,454 |   |
| 2009 |   | 1,919 |   |
| 2010 |   | 1,570 |   |
| 2011 |   | 1,092 |   |

 

**4.**                          Acquisitions and Divestitures

**Acquisitions**All acquisitionshave been accounted for using the purchase method of accounting and,accordingly, the assets acquired and liabilities assumed have been recorded attheir fair values as of the dates of the acquisitions. The excess of thepurchase price over the fair value of the assets acquired and liabilitiesassumed has been recorded as goodwill. Results of operations for theseacquisitions have been included in the accompanying condensed consolidatedfinancial statements since their respective dates of acquisition. Allacquisitions (collectively, the “Acquired Businesses”) have been consummated toexpand the Company’s show and publication presence within its existing marketsector and to maximize marketing and customer service infrastructure andexpertise.

On September 12,2005, the Company purchased an off-road consumer event business from PetersenEvents Corporation (“Off-Road Expo”) for $2.2 million in cash. In addition, theCompany may pay additional contingent cash consideration to the formershareholders based on the 2006 operating revenue from the acquired business. Anycontingent consideration paid will be recorded as goodwill when earned by theformer shareholder.

6

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On August 23, 2005,the Company purchased a fashion industry tradeshow business and relatedproducts from the owner of POOL Tradeshow (‘‘POOL’’) for $3.0 million in cash. Inaddition, the Company may pay additional contingent cash consideration to theformer owner based on the 2007 and 2008 operating results from the acquiredbusiness and the owner’s continued employment with the Company. Any contingentconsideration paid will be recorded as compensation expense when earned by theformer owner.

On August 19, 2005,the Company purchased Project Global Tradeshow, Inc. (‘‘Project”), aproducer of tradeshows serving the premium contemporary sector of the fashionindustry, for $9.9 million in cash, subject to a working capital adjustment, whichwill be completed in 2006. The Company does not believe the final allocation ofpurchase price will be materially different from preliminary estimates. Inaddition, the Company may pay additional contingent cash consideration to theformer shareholders based on the 2007 and 2008 operating results of theacquired business and their continued employment with the Company. Anycontingent consideration paid will be recorded as compensation expense whenearned by the former shareholders.

In the second quarter of2005, the Company completed two other acquisitions of consumer tradeshowbusinesses with an aggregate purchase price of $0.5 million in cash.

In 2004, the Companypurchased a portfolio of pharmaceutical industry conferences and magazines (“IVT”)for which it is required to pay additional contingent cash consideration during2006 to the former shareholders based on 2004 and 2005 operating results of theacquired business and their continued employment with the Company which wasrecorded as compensation expense when earned by the former shareholders in2005.

TheCompany has recognized contingent consideration for the Acquired Businesses ascompensation expense in the condensed consolidated statements of operations asfollows (in thousands):

|                               | ** ** | **Three Months Ended** | ** ** |
|-------------------------------|------------|----------------------------------|------------|
| ** **                    | ** ** | **March 31,**               | ** ** |
| ** **                    | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| IVT contingent  consideration |       | $                                | —     |   | $ | 300 |   |
|                               |            |                                  |            |  |  |  |  |

 

Thechange in the balance of accrued contingent consideration in the accompanyingcondensed consolidated balance sheet included as part of other accrued expensesis as follows (in thousands):

|                                         | ** ** | **Total** | ** ** |
|-----------------------------------------|------------|-----------|------------|
| Balance at  December 31, 2005 |       | $         | 1,336      |   |
| Contingent consideration                |       | —    |       |
| Payments to former shareholders         |       | (446      | )          |
| Balance at  March 31, 2006         |       | $         | 890        |   |

 

The pro forma operating resultsof the Acquired Businesses for the threemonths ended March 31, 2005 discussed above are immaterial to theCompany’s consolidated results of operations.

7

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**Divestitures**The operatingresults, related income taxes, and any gains or losses of the followingdivestitures (collectively, the “Disposed Businesses”) have been reported indiscontinued operations in the condensed consolidated statements of operationsfor the three months ended March 31, 2006 and 2005. ****Interest expense wasnot allocated to any of the Company’s discontinued operations.****

*Arenacross*In December 2005, the Company closed on the sale of itsArenacross Championship Series business (“Arenacross”) for a total sellingprice of $0.2 million. The Company recorded a $0.4 million loss on the sale. Arenacrosshad no revenue in the three months ended March 31, 2005.

*EastCoast Fashion Trade Show Acquired from Larkin-Pluznik-Larkin, LLC*In the secondquarter of 2005, the Company discontinued the remaining East Coast Fashiontrade show business acquired in the 1999 Larkin transaction (“East CoastFashion”) and recognized a $2.3 million impairment, which was the carryingvalue of the related intangibles. East Coast Fashion had no revenue in thethree months ended March 31, 2005.

*PortfolioGroup*On May 23,2005, the Company, Advanstar, Inc. and certain affiliates (AdvanstarExpositions Canada Limited and Advanstar.com) completed the sale of virtuallyall its business assets and liabilities associated with its tradeshows andconferences, trade publications and direct marketing products servinginformation, technology, communications, travel, beauty, home entertainment,and portfolio markets, including the shares of the Company’s Hong Kongsubsidiaries. The shares of the Company’s Brazilian subsidiary were sold to thesame buyer in July 2005 after obtaining final regulatory approval.Collectively, all of the above properties are referred to as “the PortfolioGroup.” The sale price for these assets and shares was $185.0 million in cashless selling expensesand working capital adjustments of $11.2 million. The Company recorded a gainof $52.9 million on the sale.

Revenue of the Portfolio Group, included indiscontinued operations in the condensed consolidated statements of operations,was $23.4 million for the three months ended March 31, 2005.

**AssetsHeld for Sale**In the second quarter of 2005, the Company committed to aplan to sell its Cleveland office building and land (“the Cleveland Office”) asa result of the sale of the Portfolio Group. The Company ceased depreciation ofthese assets, effective second quarter of 2005. As of March 31, 2006 and December 31,2005, the Company reported this building and land as assets held for sale inthe condensed consolidated balance sheet.

8

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The financial results ofthe Disposed Businesses included in discontinued operations in the accompanyingcondensed consolidated statements of operations are as follows (in thousands):

|                                                  | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| (Loss) income  before income taxes               |       | $                                                | (119       | ) | $ | 1,432 |   |
| Income tax  (benefit) provision                  |       | (45                                              | )          | 1,654 |   |
| Minority  interests                              |       | —                                           |       | (646 | ) |
| Loss from operations of  discontinued businesses |       | $                                                | (74        | ) | $ | (868 | ) |

 

The Company allocatedgoodwill to the Portfolio Group and included the allocated goodwill in itscalculation of gain on disposal in the second quarter of 2005. Goodwillallocated to the Portfolio Group was based on its relative fair value to the entirereporting unit prior to disposal. No goodwill was allocated to DisposedBusinesses during the quarters ended March 31, 2006 and 2005.

**5.**                          Debt

**Creditfacility**Communications isparty to a credit facility (the “Credit Facility”) with a group of financialinstitutions acting as lenders. The Credit Facility is collateralized byCommunications’ domestic subsidiaries and is collateralized by first priorityliens on substantially all of the assets of Communications and its guarantors. TheCredit Facility contains restrictive covenants, including limitations oncertain asset dispositions, dividends, investments and other restrictedpayments. In addition, the Credit Facility requires a minimum fixed chargecoverage ratio (asdefined). Failure to comply with the covenants could cause an event of defaultunder the Credit Facility.

Prior to the June 2005transaction described below, the Credit Facility consisted of (i) $25.0million of term B loans due October 11, 2008, and (ii) $60.0 millionof revolving loan availability through April 11, 2007.

InJune 2005, Communications repaid the outstanding term B loans withproceeds from the sale of the Portfolio Group (see Note 4) and amended theCredit Facility to allow Communications to retain its revolving loanavailability at $60.0 million while allowing for repayment of second lien andjunior debt with proceeds from the sale of the Portfolio Group. As of March 31,2006, Communications had $1.1 million of unused letters of credit, which reduceborrowings available under the Credit Facility to $58.9 million.

**Seniorsecured notes**Communications’ Senior Secured Notes initially consisted of $130.0million of Second Priority Senior Secured Floating Rate Notes due 2008, whichrequire quarterly amortization equal to 0.25% of the principal amount thereof(the “floating rate notes”), and $300.0 million of 10.75% Second PrioritySenior Secured Notes due 2010 (the “fixed rate notes”). Interest on thefloating rate notes is payable at a rate equal to three-month LIBOR, which isreset quarterly, plus 7.5%.

9

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The floating rate notesand fixed rate notes prior to the transaction described below, were fully andunconditionally guaranteed on a senior basis, jointly and severally, byCommunications’ wholly owned domestic subsidiaries and collateralized by second priorityliens on substantially all the collateral pledged against borrowings underCommunications’ Credit Facility (other than the capital stock of certain of itssubsidiaries and assets of its parent companies, including the Company).  The financial covenants underthe notes include limitations, among other things, on Communications’ abilityto make payments, incur debt incurrence, pay dividends, and make otherrestricted payments.

In June 2005, Communications used a portion of the proceeds fromthe Portfolio Group sale to repurchase $8.7 million of the fixed rate notes ata price equal to 100% of the principal amount plus accrued interest. Communicationsalso consummated a tender offer in June 2005 for the floating rate notesand repurchased $117.8 million of the floating rate notes at a price equal to$1,073 per $1,000 principal amount tendered plus accrued and unpaid interest tothe date of settlement. In the second quarter of 2005, Communications recognized a $12.6 million loss onextinguishment of debt related to the repurchase, including $8.6 million in tender offerpremium and consent fees, a write-off of $3.5 million in unamortized deferredfinancing costs, and $0.5 million in legal fees and expenses.

In connection with the tender offer, the Company and the trustee entered into asupplemental indenture that eliminated substantially all of the restrictive andreporting covenants, certain events of default and certain other provisionswith respect to the floating rate notes and released the floating rate notes’lien on the collateral under the indenture. The fixed rate notes remaincollateralized by the collateral and subject to the restrictive covenants inthe indenture.

**Seniorsubordinated notes**Communications’$160.0 million unsecured, 12% senior subordinated notes due 2011 (the “SeniorSubordinated Notes”) bear interest payable semiannually on February 15 andAugust 15 of each year. The Senior Subordinated Notes are fully andunconditionally guaranteed on a senior subordinated basis, jointly andseverally, by Communications’ wholly owned domestic subsidiaries. The covenantsunder the Senior Subordinated Notes include limitations on certain assetdispositions, liens, debt incurrence, dividends, investments and otherrestricted payments.

**Discountnotes**The Company’ssenior discount notes due October 2011 (the “Discount Notes”) with aprincipal amount at maturity of $171.8 million bear interest at 15%,payable semiannually beginning October 2005, and have an implied yield tomaturity of approximately 17.2%. The notes are redeemable at the Company’soption at specified premiums through 2007 and at par thereafter. The notes mayalso be redeemed at a premium upon a qualifying change of control of theCompany.

The Discount Notes arenot guaranteed by the Company’s subsidiaries and require cash interest paymentsstarting in April 2006. The Discount Notes contain restrictive covenantsthat, among other things, limit the Company’s ability and that of itssubsidiaries to incur debt, pay dividends and make investments. Since theCompany is a holding company and its subsidiaries serve as its only source ofcash flow, its ability to pay interest on these notes will be dependent uponthe receipt of dividends from its subsidiaries. The Credit Facility, the SeniorSecured Notes and the Senior Subordinated Notes impose substantial restrictionson the Company’s subsidiaries’ ability to pay dividends to the Company.

 

10

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The restricted paymentscovenants in Communications’ Senior Secured Notes indenture and SeniorSubordinated Notes indenture provide that Communications can pay dividends onlyif its leverage ratio (as defined) is 6.0 to 1.0 or better and only from “abasket” as defined as the amount by which its cumulative EBITDA (as defined)since January 1, 2001 exceeds 150% of Communications’ cumulative interestexpense in that period plus certain other items, including proceeds from equityofferings. The Company cannot assure you Communications’ results will allow itto make future distributions in light of these restrictions. Failure to pay interest on these notes will be adefault under the notes and also result in a default under Communications’Credit Facility, which could have a material adverse effect on the Company’sfinancial position, results of operations, and cash flows and/or could impactthe Company’s ability to continue to operate without an amendment orrestructuring of its credit facility and the notes. Notwithstanding the leverage ratio limitation onrestricted payments, Communications can make restricted payments in anaggregate amount of up to $20 million to the Company, none of which hasbeen used as of March 31, 2006. On March 14, 2006, Communicationsdeclared and paid a dividend of $12.9 million to the Company to be used for theCompany’s April 2006 interest payment on the Discount Notes.

Accretionof the debt discount on the Discount Notes was $0.3 million and $5.8 million during the three months endedMarch 31, 2006 and 2005. These amounts are included in interest expense inthe respective accompanying condensed consolidated statements of operations.

Long-term debt consists of the following (inthousands):

|                                                                                                                                                                                             | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Revolving credit  loan, interest at LIBOR plus 3.75%; due April 11, 2007                                                                                                               |       | $                        | —     |                        | $          | — |   |
| Second priority  senior secured floating rate notes, interest at  LIBOR plus 7.5%; 12.33% at March 31, 2006, due 2008                                                                  |       | 9,848                    |       | 9,872                       |       |
| 10.75% Second  priority senior secured notes, due 2010, plus  unamortized premium of $643 and $680 at March 31, 2006  and December 31, 2005, respectively                         |       | 291,978                  |       | 292,015                     |       |
| Senior  subordinated notes, interest at 12.00%, due 2011                                                                                                                                    |       | 160,000                  |       | 160,000                     |       |
| Senior discount  notes, interest at 15.00%, due October 11, 2011,  net of unamortized discount of $12,843 and $13,187 at  March 31, 2006 and December 31, 2005, respectively |       | 158,949                  |       | 158,605                     |       |
| Acquisition note  payable, due June 2006                                                                                                                                               |       | 100                      |       | 100                         |       |
|                                                                                                                                                                                        |       | 620,875                  |       | 620,592                     |       |
| Less current  maturities                                                                                                                                                                    |       | (201                     | )          | (201                        | )          |
|                                                                                                                                                                                        |       | $                        | 620,674    |                        | $          | 620,391 |   |

** **

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** **

**6.**                          Comprehensive Income

The table below presentscomprehensive income, defined as changes in the equity of the Company excludingchanges resulting from investments by and distributions to shareholders (inthousands):

|                                                                  | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                       | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Net income  (loss)                                               |       | $                                                | 8,203      |   | $ | (4,517 | ) |
| Change in  cumulative translation adjustment                     |       | 194                                              |       | (458 | ) |
| Change in  unrealized losses on derivative financial instruments |       | —                                           |       | (26 | ) |
| Comprehensive income  (loss)                                     |       | $                                                | 8,397      |   | $ | (5,001 | ) |

** **

**7.**                          Segments

The Company follows theprovisions of SFAS No. 131, “Disclosures about Segments of an Enterpriseand Related Information.” During the first quarter of 2006, the Companyundertook a strategic change in the monitoring and management of the businessto better reflect management’s focus and commitment to its threeindustry-focused segments: Fashion & Licensing, Life Sciences, andPowersports. This change was prompted as a result of a substantial change inthe business organization following the divestiture of the Portfolio Group (seeNote 4). The Company has included its non reportable operating segments inOther. In the Company’s most recently filed annual report on Form 10-Kfor the year ended December 31, 2005, the Company’s reportable segmentswere by product type rather than by market sector as currently is beingreported. The Company has restated its segment information for the quarterended March 31, 2005 into the new reportable segments.

The Company evaluates theperformance of, and allocates resources to, its segments based on contributionmargin — defined as revenue less cost of production; selling,editorial and circulation costs; and segment management costs (excluding depreciation), which is anon-GAAP measure.  The accountingpolicies of the reportable segments are the same as those described in thesummary of significant accounting policies. There are no inter-segment sales ortransfers. Assets are not allocated to segments and therefore have not beenpresented. Revenue and contribution margins of the Company’s reportablesegments are as follows (in thousands):

|                                                 | ** ** | **Fashion &** | ** ** | **Life**     | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------------|------------|------------------------|------------|--------------|------------|-----------------|------------|------------|------------|------------|------------|
| ** **                                      | ** ** | **Licensing**          | ** ** | **Sciences** | ** ** | **Powersports** | ** ** | **Other**  | ** ** | **Total**  | ** ** |
| Three months  ended March 31, 2006 Revenue |       | $                      | 48,093     |         | $          | 35,103          |       | $          | 21,154     |       | $          | 2,228 |   | $ | 106,578 |   |
| Contribution margin                             |       | 28,918                 |       | 10,135       |       | 10,535          |       | 1,004      |       |       |       |
|                                            |       |                   |       |         |       |            |       |       |       |       |       |
| Three months  ended March 31, 2005 Revenue |       | $                      | 36,896     |         | $          | 32,701          |       | $          | 18,624     |       | $          | 2,349 |   | $ | 90,570 |   |
| Contribution  margin                            |       | 23,586                 |       | 9,172        |       | 9,157           |       | 1,257      |       |       |       |

 

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The reconciliation oftotal segment contribution margin to consolidated income from continuingoperations before income taxes is as follows (in thousands):

 

|                                                                | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                     | ** ** | **March 31,**               | ** ** |
| ** **                                                     | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| Total segment  contribution margin                             |       | $                                | 50,592     |   | $ | 43,172 |   |
| General and  administrative expense                            |       | (9,010                           | )          | (11,800 | ) |
| Restructuring charge                                           |       | (2,405                           | )          | — |   |
| Depreciation and  amortization                                 |       | (8,662                           | )          | (9,958 | ) |
| Other expense  (primarily interest)                            |       | (20,239                          | )          | (23,268 | ) |
| Income (loss) from continuing  operations  before income taxes |       | $                                | 10,276     |   | $ | (1,854 | ) |

** **

**8.**                          RestructuringActivity

Relatedto the sale of the Portfolio Group (see Note 4), in May 2005, the Companyceased use of certain leased office space in New York, NY, Milford, CT, andSanta Ana, CA. In the third quarter of 2005,the Company vacated additional leased office space in Milford, CT and Chicago,IL. These activities resulted in charges to the Company’s operations during2005. In the first quarter of 2006, the Company vacatedadditional leased office space in New York, NY, and revised its estimate ofexpected future sublease income for this space, resulting in additionalcharges during thethree months ended March 31, 2006.These charges consist of the discounted remaining future minimum lease paymentsdue under non-cancelable leases, net of estimated future sublease income. Theselease commitments expire at various dates through 2010.

During2005 the Company notified 120 employees that they would be severed from theCompany in connection with the sale of the Portfolio Group and thereorganization of the Company’s operating and support department managementteam. As of March 31, 2006, 117 of these employees have been terminated. Severancepayments are expected to continue through 2006.

Restructuring charges incurredare as follows (in thousands):

|                         | ** ** | **Three Months Ended** | ** ** |
|-------------------------|------------|----------------------------------|------------|
| ** **              | ** ** | **March 31,**               | ** ** |
| ** **              | ** ** | **2006**                         | ** ** |
| Facility exit costs     |       | $                                | 2,421      |   |
| Employee  severance and |       |                             |       |
| other termination costs |       | (16                              | )          |
| Restructuring charge    |       | $                                | 2,405      |   |

 

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Thesummary of the Company’s change in restructuring accruals is as follows (inthousands):

|                                    | ** ** | **Facility Exit** | ** ** | **Employee**  | ** ** | ** ** | ** ** |
|------------------------------------|------------|------------------------|------------|---------------|------------|------------|------------|
| ** **                         | ** ** | **Costs**              | ** ** | **Severance** | ** ** | **Total**  | ** ** |
| Balance at  December 31, 2005 |       | $                      | 3,412      |          | $          | 807        |       | $ | 4,219 |   |
| Restructuring charge               |       | 2,421                  |       | (16           | )          | 2,405      |       |
| Utilized-cash                      |       | (542                   | )          | (480          | )          | (1,022     | )          |
| Utilized-non-cash                  |       | —                 |       | —        |       | —     |       |
| Balance at  March 31, 2006    |       | $                      | 5,291      |          | $          | 311        |       | $ | 5,602 |   |

 

Therestructuring accrual balance in the accompanying condensed consolidatedbalance sheet is $5.6 million and $4.2 million at March 31, 2006 and December 31,2005, of which $2.0 million and $2.1 million is in other accrued expenses at March 31,2006 and December 31, 2005, and $3.6 million and $2.1 million is in otherlong term liabilities at March 31, 2006 and December 31, 2005.

**9.**                          Stock Based Compensation

OnJanuary 1, 2006, the Company adopted Statements of Financial Accounting Standards No. 123R, *Share-Based Payment* (“SFAS 123R”). Under SFAS 123R, theCompany’s share based awards meet the definition of liability awards. As allowed under the provisions of thisstatement for entities not meeting the public company definition, the Companyadopted the intrinsic value method of accounting for its liability awards. Accordingly,compensation expense and a related liability is recorded only if the value ofthe Company’s shares underlying its share based awards are greater than theawards’ exercise price as of the end of the applicable reporting period. As of March 31,2006, the Company’s management has determined that the fair value of its commonstock is less than its exercise price of all its options. Accordingly, noliability or expense has been recorded during the three months ended March 31,2006. The Company had no options exercised or cash settlement transactionsduring the three months ended March 31, 2006 relating to its stock optionplan.

Priorto January 1, 2006, the Company accounted for its stock options and awards to employees under theprovisions of Accounting Principles Board (“APB”) Opinion No. 25, *Accounting for Stock Issued to Employees*, and relatedinterpretations. No compensation expense was recorded in the condensedconsolidated statement of operations for the three months ended March 31,2005.

On October 12, 2000,Advanstar Holdings Inc. (“Holdings”), the parent company of the Company,adopted the 2000 Management Incentive Plan (“the Plan”). A maximum of 4,072,789shares of Holdings are authorized for grant to participants under the Plan. Optionsare granted by Holdings’ board of directors at an exercise price of not lessthan the fair value of Holdings common stock at the date of grant and vest overa maximum of nine years.  Sharesavailable for grant under the Plan totaled 147,789 at March 31, 2006.

14

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A summary of stock option activity under the Plan isas follows:

|                                        | ** ** | ** **      | ** ** | **Weighted** | ** ** |
|----------------------------------------|------------|-----------------|------------|--------------|------------|
| ** **                             | ** ** | ** **      | ** ** | **Average**  | ** ** |
| ** **                             | ** ** | **Options**     | ** ** | **Exercise** | ** ** |
| ** **                             | ** ** | **Outstanding** | ** ** | **Price**    | ** ** |
| Outstanding at  December 31, 2005 |       | 3,965,000       |       | $            | 10.00      |   |
| Cancelled                              |       | (40,000         | )          | 10.00        |       |
| Outstanding at  March 31, 2006    |       | 3,925,000       |       | $            | 10.00      |   |

 

At March 31, 2006,the outstanding stock options had a weighted average remaining contractual lifeof 5.0 years and an exercise price of $10.00 per option. Of the optionsoutstanding at March 31, 2006, 2,744,321 were exercisable.

**10.**                   Related-Party Transactions

**Financial Advisory Fees andAgreements**

In May 2005, theCompany paid a consulting fee of $1.5 million to Credit Suisse Securities(USA), LLC (“CSS (USA)”), an affiliate of Credit Suisse Corporation (“CS Corp.”),an affiliate of the DLJ Merchant Banking funds, related to the sale of thePortfolio Group (see Note 4).

In June 2005,the Companyrepurchased $7.1 million of Communications’ fixed rate notes at par, and $4.6million of Communications’ floating rate notes at a price equal to 107.3% ofprincipal, from CSS (USA) pursuant to Communications’ tender offer (see Note5).

 

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**Item 2.  *Management’s Discussionand Analysis of Financial Condition and Results of Operations***

This quarterly report on Form 10-Q contains forward-lookingstatements made pursuant to the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. Investors are cautioned not to placeundue reliance on these forward-looking statements, including statements aboutplans and objectives of management, potential acquisitions, market growth andopportunity. These forward-looking statements are neither promises norguarantees and involve risks and uncertainties that could cause actual resultsto differ materially from those indicated by such forward-looking statements. Youshould not expect that these forward-looking statements will be updated orsupplemented as a result of changing circumstances or otherwise, and we disavowand disclaim any obligation to do so. Important cautionary statements and riskfactors that would affect actual results are discussed in the our periodicreports and registration statements filed with the Securities and ExchangeCommission, including those under the caption entitled “Risk Factors” in our2005 annual report on Form 10-K filed with the Securities andExchange Commission on March 30, 2006.

**Overview**

We are an integrated mediacompany providing market access media and services for bothbusiness-to-business and business-to-consumer firms targeting customersprimarily in the US. Our products and services are targeted to specificindustry sectors through shows and conferences, controlled circulation trade,business, professional and consumer magazines and electronic media. We alsoprovide a broad range of other marketing support, including classifiedadvertising, direct mail services, reprints, database marketing, guides andreference books.

During the first quarterof 2006, we undertook a strategic change in the monitoring and management of ourbusiness to better reflect our focus and commitment to our threeindustry-focused segments. This change was prompted as a result of asubstantial change in the business organization following the divestiture ofthe Portfolio Group. See “Presentation of Financial Information—Acquisitionsand Divestitures.”

We report our business in thesethree industry focused segments:

·                                     Fashion & Licensing, which serves the men’s,women’s, children’s and product sourcing sectors of the apparel industry andthe merchandise licensing industry through industry tradeshows, conferences andon-line showrooms; publishing targeted magazines and directories; and offeringa broad range of marketing support services;

·                                    Life Sciences, which serves the healthcare,dental, veterinary, pharmaceutical, and science fields through publishingprimary and specialty care magazines and professional journals; organizing conferencesand other events; developing continuingmedical education (“CME”) products; and the creation of a wide variety ofcustom marketing projects; and

·                                     Powersports, which serves the powersports,off-road and automotive aftermarket industries through publishing trade andconsumer magazines and shows  andelectronic products.

In addition to our three segmentsdescribed above, we combine our European, market development and e-Mediaoperations into “Other.”

16

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Unless otherwise noted, disclosuresherein relate only to our continuing operations. All historical amounts havebeen reclassified to exclude results and gains or losses from discontinuedoperations, unless noted otherwise. For further information on discontinuedproperties, see “Presentation of Financial Information—Acquisitions andDivestitures.”

Fashion & Licensingaccounted for 45% and 41% of total revenue for the three months ended March 31,2006 and 2005. Life Sciences accounted for33% and 36% of total revenue for the three months ended March 31,2006 and 2005. Powersports accounted for 20%of total revenue for each of the three months ended March 31, 2006 and 2005, while Other operations accounted for 2%and 3% of total revenue for the three months ended March 31, 2006 and 2005. Our revenue reaches its highest levelsduring the first and third quarters of the year due to the timing of the MAGICMarketplace tradeshows and our other large tradeshows and conferences. Becauseshow and conference revenue is recognized when a particular event is held, wemay experience fluctuations in quarterly revenue based on the movement of showdates from one quarter to another.

## **Trendsand Developments**

Results for the first quarter of 2006 reflects the impact of ourstrategy put in place in 2005 to focus our portfolio on industry sectors wherewe can leverage our strong market positions, customer relationships andmanagement teams. We continue to develop new revenue streams through a varietyof growth initiatives across all segments and are constantly striving to improveoperating efficiency.

A number of new products have expanded and diversified our revenuestreams in Fashion & Licensing, and Powersports. In addition to theexpansion and development of new categories and trend areas in MAGIC, therecent acquisitions of POOL and Project have been integrated into the overallMAGIC Marketplace and contributed to the expansion of our fashion offerings toour exhibitors and attendees during the quarter.

The recent launches in Powersports in the off-road market continue to develop,including *DIRTsports* and *Off-RoadBusiness* magazines, Off-Road Impact tradeshow and the Off-Road Expoconsumer event acquired in October 2005.

In Life Sciences we have made good progress in refocusing ourhealthcare projects business through the strengthening of our sales efforts andeffectively addressing our pharmaceutical customers’ needs to comply withtighter regulations relating to the management and delivery of educationalprojects. We continued our growth initiatives including the launch of three newpublications and the development of several new webinars and conferenceproducts.

In the first quarter of 2006 we established a dedicated electronicmedia group to focus on developing opportunities for electronic products tomeet our customers’ evolving marketing and information requirements. Weanticipate accelerating our growth in electronic media as we move through thebalance of the year.

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## **Presentationof Financial Information**

*Acquisitionsand divestitures*

We continue to look foropportunities to execute our strategy of building significant product positionsin targeted markets, through both the acquisition and sale of identified assets.Dispositions completed in 2005 are as follows:

·                  On December 31, 2005, we sold ourArenacross Championship Series (“Arenacross”) for a total selling price of$0.2 million. The loss on the sale of $0.4 million was recorded in December 2005.Arenacross had no revenue or contribution margin in the first quarter of 2005.

·                  In the second quarter of 2005, we discontinuedthe remaining East Coast Fashion trade show business acquired in 1999 fromLarkin-Pluznik-Larkin, LLC. (the “East Coast Fashion Group”) as part of our newstrategy. We recorded a $2.3 million impairment charge for the remainingintangible assets of this business in 2005. East Coast Fashion Group had norevenue in the first quarter of 2005. Contribution loss for the three monthsended March 31, 2005 was $0.1 million.

·                  On May 23, 2005, we and certainaffiliates (Communications, Advanstar Expositions Canada Limited andAdvanstar.com) completed the sale of our business assets and liabilitiesassociated with our tradeshows and conferences, trade publications and directmarketing products servicing the information, technology, telecommunications,travel, beauty, home entertainment, and portfolio markets, including the sharesof our Hong Kong subsidiaries. The shares of our Brazilian subsidiary were soldin July 2005 after receipt of final regulatory approval. Collectively,these assets and shares are referred to as the “Portfolio Group.” The saleprice for the Portfolio Group was $185.0 million less $11.2 million in workingcapital adjustments and expenses. We recorded a gain on the sale of $52.9million. Revenue and contribution margin for the first quarter of 2005 was$23.4 million and $4.6 million.

The financial results of the businesses included indiscontinued operations in the accompanying condensed consolidated statementsof operations are as follows (in thousands):

|                                                  | ** ** | **Three Months  Ended March 31,** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| (Loss) income  before income taxes               |       | $                                                | (119       | ) | $ | 1,432 |   |
| Income tax  (benefit) provision                  |       | (45                                              | )          | 1,654 |   |
| Minority  interests                              |       | —                                           |       | (646 | ) |
| Loss from operations of  discontinued businesses |       | $                                                | (74        | ) | $ | (868 | ) |

18

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In 2005, we completed five acquisitions.

·                  OnSeptember 12, 2005, we purchased an off-road consumer event business fromPetersen Events Corporation (“Off-Road Expo”) for $2.2 million in cash. Inaddition, we may pay additional contingent cash consideration to the formershareholders based on the 2006 operating revenue from the acquired business.

·                  OnAugust 23, 2005, we purchased two fashion industry tradeshows and relatedproducts from the owner of the POOL Tradeshow (‘‘POOL”) for $3.0 million incash, which will be completed in 2006. In addition, we may pay additionalcontingent cash consideration to the former owner based on the 2007 and 2008operating results from the acquired business and the owner’s continuedemployment with us.

·                  On August 19, 2005, we purchasedProject Global Tradeshow, Inc. (‘‘Project”), a producer of tradeshows forthe premium contemporary sector of the fashion industry, for $9.9 million incash, subject to a working capital adjustment, which will be completed in 2006.In addition, we may pay additional contingent cash consideration to the formershareholders based on the 2007 and 2008 operating results of the acquiredbusiness and their continued employment with us. The purchase price workingcapital adjustment has yet to be finalized. We do not believe the finalallocation of purchase price will be materially different from preliminaryestimates.

·                  In 2005, we completed two otheracquisitions of consumer shows with an aggregate purchase price of $0.5 millionin cash.

We have accounted for these acquisitions under thepurchase method of accounting. Accordingly, our results of operations includethe effect of the acquisition from the date of purchase.

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**SelectedFinancial Data**

The following table sets forth selected statements ofoperations and other financial data.
| ** **                                                      | ** ** | **For the**                 | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                      | ** ** | **Three Months Ended** | ** ** |
| ** **                                                      | ** ** | **March 31,**               | ** ** |
| ** **                                                      | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| ** **                                                      | ** ** | **(in thousands)**          | ** ** |
| **Income Statement Data:**                                      |       |                             |       |   |   |
| Revenue                                                         |       |                             |       |   |   |
| Fashion & Licensing                                    |       | $                                | 48,093     |   | $ | 36,896 |   |
| Life Sciences                                                   |       | 35,103                           |       | 32,701 |   |
| Powersports                                                     |       | 21,154                           |       | 18,624 |   |
| Other                                                           |       | 2,228                            |       | 2,349 |   |
| Total revenue                                                   |       | 106,578                          |       | 90,570 |   |
| Cost of production,  selling, and segment management costs      |       |                             |       |   |   |
| Fashion & Licensing                                    |       | 19,175                           |       | 13,310 |   |
| Life Sciences                                                   |       | 24,968                           |       | 23,529 |   |
| Powersports                                                     |       | 10,619                           |       | 9,467 |   |
| Other                                                           |       | 1,224                            |       | 1,092 |   |
|                                                            |       |                             |       |   |   |
| Total cost of production, selling and segment  management costs |       | 55,986                           |       | 47,398 |   |
|                                                            |       |                             |       |   |   |
| General and  administrative expenses                            |       | 9,010                            |       | 11,800 |   |
| Restructuring  charge                                           |       | 2,405                            |       | — |   |
| Depreciation and  amortization                                  |       | 8,662                            |       | 9,958 |   |
| Operating income                                                |       | 30,515                           |       | 21,414 |   |
| Other income (expense):                                         |       |                             |       |   |   |
| Interest expense                                                |       | (20,589                          | )          | (23,462 | ) |
| Interest income                                                 |       | 503                              |       | 177 |   |
| Other (expense) income, net                                     |       | (153                             | )          | 17 |   |
| Income (loss)  from continuing operations before income taxes   |       | 10,276                           |       | (1,854 | ) |
| Provision for  income taxes                                     |       | 1,999                            |       | 1,795 |   |
| Income (loss)  from continuing operations                       |       | 8,277                            |       | (3,649 | ) |
| Loss from  operations of discontinued businesses, net of taxes  |       | (74                              | )          | (868 | ) |
| Net income (loss)                                               |       | $                                | 8,203      |   | $ | (4,517 | ) |

 

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**Results ofOperations**

# THREEMONTHS ENDED MARCH 31, 2006 COMPARED TO THE THREE MONTHS ENDEDMARCH 31, 2005

# *Revenue*

Revenue in the firstquarter of 2006 increased 17.7% to $106.6 million from $90.6 million in thefirst quarter of 2005.

Revenue from Fashion &Licensing of $48.1 million increased 30.3% or $11.2 million from $36.9 millionin the first quarter of 2005. Revenue from our spring 2006 MAGIC Marketplaceincreased $8.2 million or 22.5% over 2005. Total exhibit space increased by16.2% to 1,043,000 square feet. Additional growth came from a 3.4% increase inyield and growth in sponsorship and turnkey booth package programs. The August 2005acquisitions of POOL and Project expanded our presence in the contemporary andboutique fashion markets. The POOL and Project events, which were integratedinto MAGIC Marketplace in Las Vegas, along with the Project New York event in January contributed$9.2 million of revenue and 192,000 of square feet in the first quarter or2006.

Revenue from LifeSciences of $35.1 million increased 7.3% or $2.4 million from $32.7 million inthe first quarter of 2005. Revenue from healthcare custom projects increased$1.8 million or 103.6% from first quarter 2005 primarily due to a more focusedselling effort. We believe we are now well positioned to meet the newpharmaceutical regulatory rules governing the management and delivery ofmany of these projects. Revenue also increased $0.6 million in the firstquarter of 2006 compared to the first quarter of 2005 due to new publicationlaunchesincluding *Locum Life*, *Firstline*,and *Modern Hygienist*. Additionally, revenueincreased in the first quarter of 2006 compared to the first quarter of 2005across publications serving dental, specialty healthcare and pharmaceuticalmarkets primarily due to an increase in ad pages. These revenue gains werepartially offset by declines in primary care healthcare and veterinarypublications’ revenue of $1.0 million.

Revenue from Powersportsof $21.2 million increased 13.6% or $2.5 million from $18.6 million in thefirst quarter of 2005. Powersportsshows revenue increased by 11.3% and square footage by 8.1%, due to strongperformances from the International Motorcycle Shows, Off-Road Impact tradeshowand conference, and Dealer Expo. These shows contributed $1.6 million inrevenue growth. Ad pages in the Powersports publications increased 24.9%and revenue grew $0.8 million or 23.0% due to growth in our off-road launchpublications, *DIRTsports*and *Off-Road Business*, in the second year of their launch cyclealong with strong performances from *Dealernews* and *Motor Age.*

Revenue from Other operations in the firstquarter of 2006 was $2.2 million, compared to $2.3 million reported in firstquarter of 2005.

# *Cost of production, selling and segmentmanagement costs*

Cost of production,selling and segment management expenses in the first quarter of 2006 increased18.1% to $56.0 million from $47.4 million in the first quarter of 2005 due toacquisitions and growth in revenue across segments.

Expenses of Fashion &Licensing in the first quarter of 2006 increased 44.1%, or $5.9 million, to$19.2 million from $13.3 million in the first quarter of 2005, primarily due tocosts related to the POOL and Project acquisitions of $5.4 million.Non-acquisition expenses increased 3.4% from first quarter 2005.

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Expenses in our LifeSciences segment in the first quarter of 2006 increased 6.1%, or $1.4 million,to $25.0 million from $23.5 million in the first quarter of 2005. The increaseis due to the growth in volume in healthcare custom projects causing expensesto increase along with increased costs for staffing and publication launches.

Powersports expensesincreased in the first quarter of 2006 by 12.2%, or $1.2 million, to $10.6million from $9.5 million in the first quarter of 2005. Expenses increasedprimarily due to investments in our Off-Road Impact tradeshow and conference,staffing and other direct costs related to the 2005 acquisition of Offroad.com.

Expenses of Otheroperations in thefirst quarter of 2006 were $1.2 million, compared to $1.1 million in the firstquarter of 2005.

# *General and administrative expenses*

General andadministrative costs decreased 23.6% to $9.0 million in the first quarter of2006 from $11.8 million in the first quarter of 2005. Costs declined due to$0.6 million of cost savings related to office restructuring actions taken in2005, a $0.6 million decline in employee benefit costs and a decline of $0.6million in audit, tax and Sarbanes-Oxley consulting services. Expensereductions also consisted of certain first quarter 2005 costs which did notrecur in 2006, including $0.6 million of strategic consulting fees for the LifeSciences segment and a $0.3 million employee compensation accrual related tothe IVT acquisition.

# *Restructuring charge*

In thefirst quarter of 2006, we vacated the remaining part of our old leased officespace in New York and occupied smaller leased space, also in midtown Manhattan.We also revised our estimate of expected future sublease income for the vacatedspace. These actions resulted in additional charges during the three months ended March 31,2006, and consist of the discountedremaining future minimum lease payments due under non-cancelable leases, net ofestimated future sublease income. These lease commitments expire at variousdates through 2010.

Pre-tax restructuring chargesincurred are as follows (in thousands):

|                                                 | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------------|------------|----------------------------------|------------|
| ** **                                      | ** ** | **March 31,**               | ** ** |
| ** **                                      | ** ** | **2006**                         | ** ** |
| Facility exit  costs                            |       | $                                | 2,421      |   |
| Employee  severance and other termination costs |       | (16                              | )          |
| Restructuring  charge                           |       | $                                | 2,405      |   |

# *** ***

# *Depreciation and amortization expense*

Depreciation andamortization expense declined $1.3 million to $8.7 million in the first quarterof 2006 from $10.0 million in the first quarter of 2005 primarily due to theeffect of the double declining balance method of accelerated amortization onour exhibitor and advertiser lists partially offset by additional amortizationexpense related to the businesses acquired in 2005.

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# *Interest expense*

Interest expense in the first quarter of 2006 declined$2.9 million, or 12.3%, to $20.6 million from $23.5 million in the firstquarter of 2005 primarily due to the repayment of $20.4 million ofCommunications’ term loans, $8.7 million of Communications’ fixed rate notes,and $117.8 million of Communications’ floating rate notes in the second quarterof 2005 with the proceeds from the sale of the Portfolio Group. See “—Liquidity and Capital Resources-*Credit Facility Amendment and Credit Facility and Second PrioritySecured and Floating Rate Notes Repayment*.”

At March 31, 2006,$610.4 million, or 98%, of our total debt is at a fixed rate with the remaining2% of our debt subject to interest rate fluctuations.

# *Provision (benefit) for income taxes*

The provision for incometaxes before discontinued operations was a provision of $2.0 million in thefirst quarter of 2006 compared to a provision of $1.8 million in the firstquarter of 2005. The provision relates to income taxes in certain foreignjurisdictions and a deferred tax provision related to the basis of goodwill fortax purposes being less than the carrying value of goodwill for financialreporting purposes. We recorded no income tax benefit related to the netoperating losses we generated during 2005 or 2004 because we have established avaluation allowance to offset any related tax benefits due to uncertainty aboutrealization of these benefits.

# *Discontinued operations*

In December 2005, we sold our ArenacrossChampionship Series for a total selling price of $0.2 million. The loss onthe sale of $0.4 million was recorded in December 2005.

In the second quarter of 2005, the Companydiscontinued the remaining East Coast Fashion trade show business acquired inthe 1999 Larkin transaction and recognized a $2.3 million impairment charge forthe remaining carrying value of the intangible assets of this business.

In May and July 2005, Advanstar sold certainbusinesses to Questex for net cash of $173.8 million. A gain of $52.9 millionon the sale of these assets was recorded in 2005.

Seefurther information regarding discontinued operations in “—Presentation ofFinancial Information—Acquisitions and Divestitures.”

**Liquidityand Capital Resources**

The following discussion presents our liquidity andcapital resources on a consolidated basis, including our subsidiaries.

We are aholding company and have no direct material operations. Our principal assetsare our ownership of Communications, and Advanstar.com, and our only materialliabilities are the senior discounts notes and our guarantee of theCommunications credit facility. Our principal liquidity needs are for debtservice on the senior discount notes.

Communications’ principal cash needs are for debtservice, capital expenditures, investmentsin our products and selective acquisitions, as well as to provide uswith cash to finance our cash needs. Its principal sources of liquidity will becash flow from operations and borrowings under its credit facility.

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*Sources and uses of funds*

We generally operate with negative working capital,excluding cash and current maturities of long-term debt, due to the impact ofdeferred revenue from shows, which is billed and collected as deposits up toone year in advance of the respective show.

Operating cash flows may be significantly affected bythe working capital characteristics of our business. Deferred revenue increaseson the balance sheet in the quarters immediately preceding our busy firstquarter show season as we collect deposits for booth space several months inadvance of the shows. Revenue and contribution margin are recognized in thequarter that the events are held, releasing the deferred revenue from thebalance sheet.

We anticipate that our operating cash flow, togetherwith borrowings under the credit facility and other future financings andrefinancings, will be sufficient to fund our anticipated future operatingexpenses, capital expenditures, debt service and other obligations as theybecome due. However, our ability to make scheduled payments of principal, topay interest on or to refinance our indebtedness and to satisfy our other debtobligations will depend upon our future operating performance. Our future performance and continued compliancewith the covenants contained in our credit facility will be affected bygeneral economic, financial, competitive, legislative, regulatory, business andother factors beyond our control. We expect to be in compliance with our debtcovenants during 2006.

Historically, our financing requirements have beenfunded primarily through cash generated by operating activities and borrowingsunder Communications’ revolving credit facility. From time to time, we havealso raised additional funds through sales of common stock, high yieldofferings and term borrowings under Communications’ credit facility forpurposes of completing selective acquisitions.

As of March 31, 2006, we had cash and cashequivalents of $58.5 million and also had $58.9 million in availability underCommunications’ revolving credit facility. The following table shows our cashflow activity for the three months ended March 31, 2006, and 2005, andshould be read in conjunction with the consolidated statements of cash flows (in thousands):

|                                                       | ** ** | **Three Months**         | ** ** |
|-------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                            | ** ** | **Ended March 31,** | ** ** |
| ** **                                            | ** ** | **2006**                      | ** ** | **2005** | ** ** |
| Net cash  provided by operating activities            |       | $                             | 13,869     |   | $ | 3,971 |   |
| Net cash used in  investing activities                |       | (1,886                        | )          | (1,525 | ) |
| Net cash used in  financing activities                |       | (25                           | )          | (4,888 | ) |
| Effect of  exchange rate changes on cash              |       | (60                           | )          | 251 |   |
| Net increase  (decrease) in cash and cash equivalents |       | $                             | 11,898     |   | $ | (2,191 | ) |

 

The$9.8 million increase in cash provided by operating activities as compared tothe first quarter of 2005 was due to the $7.8 million increase in operatingincome before depreciation and amortization and a reduction in cash interestpayments of $3.9 million. These increases were partially offset by $0.4 millionin IVT acquisition contingent consideration payments and cash flow provided bydiscontinued operations in first quarter 2005.

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Net cash used in investingactivities increased $0.4 millionto $1.9 million in the first three months of 2006, from $1.5 million inthe first three months of 2005. This increase was principally due to theincrease in capital expendituresfor computer upgrades and applications development and forbuild-outs and furnishing of our new downsized office in New York. We incurred capital expenditures of $1.9 millionand $1.5 million in the first three months of 2006 and 2005. We anticipate thatwe will spend $9.8 million on capital expenditures in 2006, which will befunded by cash flows from operations. The majority of these expenditures arerelated to expansions and enhancements to our IT and communicationsinfrastructure and management and operating group information systems, andoffice build-outs arising from our recent office consolidations. We believethat this amount of capital expenditure will be adequate to grow our businessaccording to our business strategy and to maintain the key tradeshows,publications and business of our continuing operations.

We did not complete any acquisitions in the firstquarter of 2006. In connection with anyfuture acquisitions, as a part of our on-going business strategy, we mayrequire additional funding, which may be provided in the form of additionaldebt or equity financing or a combination thereof. There can be no assurancethat any additional financing will be available to us on acceptable terms or ina manner that complies with the restrictive covenants in our debt instruments. Consistentwith our longstanding strategy, we continue to pursue potential acquisitions ofcomplementary businesses.

Cash used in financing activitiesin the first three months of 2005 was$4.9 million. We had no significant financing activities in the firstquarter of 2006. In the first quarter of 2005, we repaid $4.6 million of ouroutstanding Term Loan B with the proceeds from the sale of a tradeshow businessin the first quarter of 2004.

*Debt service*

As of March 31, 2006, we hadtotal indebtedness of $620.2 million and $58.9 million of borrowingsavailable under our revolving credit facility. Our principal debt obligationsare described below.

*Credit Facility Amendment and Credit Facility andSecond Priority Secured and Floating Rate Notes Repayment*

Inconnection with the sale of the Portfolio Group, Communications repaid alloutstanding term debt under Communications’ credit facility and amended thecredit facility to retain revolving loan availability at $60.0 million whileallowing for repayment of second lien and junior debt with a portion of theproceeds from the sale of the Portfolio Group. The amendment also revised thefixed charge coverage ratio to exclude from the calculation any interestexpense related to debt repaid prior to July 31, 2005 with the proceedsfrom the sale of the Portfolio Group.

Asa result of the sale of the Portfolio Group, Communications’ second prioritysenior secured notes indenture required that Communications either use theremaining net proceeds (after repayment of the Credit Facility borrowings) toinvest in Communications’ business or to offer to purchase Communications’second priority senior secured notes at par plus accrued interest. In June 2005,Communications offered to purchase up to $140.0 million of the second liennotes. Holders of the $8.7 million principal amount of the 10.75% SecondPriority Senior Secured Notes (the “fixed rate notes”) tendered their notes forpurchase, and Communications purchased all such notes.

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Alsoin June 2005, Communications completed a cash tender offer for any and allof Communications’ outstanding Second Priority Senior Secured Floating RateNotes due 2008 (the “floating rate notes”). Holders of the $117.8 millionaggregate outstanding principal amount of the floating rate notes tenderedtheir notes for purchase, and Communications purchased all such notes at aprice equal to 107.3% (including a 3% consent fee) of outstanding principalplus accrued interest. In connection with the tender offer, Communicationsreceived consents to proposed amendments to the indenture governing the notes,resulting in the elimination of substantially all of the restrictive covenantsand certain default provisions with respect to the floating rate notes. Seefurther information regarding the Portfolio Group divestiture in “—Presentationof Financial Information—Acquisitions and Divestitures.”

*Credit facility*

Communications’ Credit Facility consists of a$60.0 million revolving credit facility, which will terminate in April 2007.Borrowings under the credit facility generally bear interest based on a marginover, at Communications’ option, the base rate or LIBOR. The applicable marginfor revolving credit loans varies based upon Communications’ ratio ofconsolidated debt to EBITDA, as defined in the credit facility, and iscurrently 3.75% over LIBOR and 2.50% over the base rate. Communications’obligations under the credit facility are guaranteed by Advanstar HoldingsCorp. (“Advanstar Holdings” or “Holdings”), our parent company, us,Communications, and all Communications’ existing and future domestic subsidiaries.Communications’ obligations under the credit facility are collateralized bysubstantially all of the assets of Communications and the subsidiaryguarantors, including a pledge of the capital stock of all Communicationsexisting and future domestic subsidiaries, a pledge of no more than 65% of thevoting stock of any foreign subsidiary directly owned by Communications or anydomestic subsidiary, a pledge of all intercompany indebtedness in favor ofCommunications and Communications domestic subsidiaries, a pledge ofCommunications, and Advanstar IH, Inc’s capital stock held by us and a pledgeof our capital stock held by Advanstar Holdings. The Credit Facility containsrestrictive covenants which require Communications to, among other things,maintain a minimum fixed charge coverage ratio (as defined in the creditfacility documents) as of the end of each fiscal quarter. Although there can beno assurance, we believe, based on our anticipated performance and expectedeconomic conditions, that we will be able to comply with the fixed chargecoverage ratio covenant contained in the credit facility in 2006.

*Second priority senior secured notes*

Communications’ $9.8 million of floating ratenotes mature in 2008. The floating rate notes bear interest at an annual rateequal to the three-month LIBOR, which is reset quarterly, plus 7.50%. Intereston the floating rate notes, along with amortization of 0.25% of the principalof such floating rate notes, is payable quarterly in cash. In connection withthe tender offer described above, Communications and the trusteeentered into a supplemental indenture that eliminated substantially all of therestrictive and reporting covenants, certain events of default and certainother provisions with respect to the floating rate notes and released thefloating rate notes’ lien on the collateral under the indenture. The fixed ratenotes remain secured by the collateral and subject to the restrictive covenantsin the indenture.

Communications’ $292.0 million of fixed ratenotes mature in 2010. The notes are guaranteed by each of Communications’existing and future domestic restricted subsidiaries and collateralized bysecond-priority liens on the assets collateralizing Communications’credit facility (other than certain subsidiary stock and assets of its parentcompanies). The fixed rate notes bear interest at an annual rate of 10.75%,which is payable semi-annually in cash. The notes contain restrictive covenantsthat, among other things, limit Communications’ ability to incur debt, paydividends and make investments.

 

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*Senior subordinated notes*

Communications’ $160 million 12% seniorsubordinated notes mature in 2011 and are guaranteed by each of Communications’existing and future domestic restricted subsidiaries. Interest on the notes ispayable semi-annually in cash. The notes contain restrictive covenants that,among other things, limit Communications’ ability to incur debt, pay dividendsand make investments.

*Senior discount notes*

As part of the financing for the acquisition ofsubstantially all of the common stock of Holdings, our parent company, bycertain DLJ Merchant Banking funds in October 2000, we issued seniordiscount notes due October 2011 with a principal amount at maturity of$103.2 million. Concurrently with the closing of the offering ofCommunications’ 12% senior subordinated notes, we sold additional seniordiscount notes due October 2011 with an additional aggregate principalamount at maturity of $68.6 million. These notes do not require cashinterest payments until April 2006 and contain restrictive covenants that,among other things, limit our ability and that of our subsidiaries to incurdebt, pay dividends and make investments. However, we are a holding company andour ability to pay interest on these notes will be dependent upon the receiptof dividends from our subsidiaries. Communications credit facility, the seniorsubordinated notes and second priority senior secured notes impose substantialrestrictions on our subsidiaries’ ability to pay dividends.

The restricted payments covenants in Communications’senior secured notes indenture and senior subordinated notes indenture providethat Communications can pay dividends only if its leverage ratio (as defined)is 6.0 to 1.0 or better and only from “a basket” equal to the amount by whichits cumulative EBITDA (as defined) since January 1, 2001 exceeds 150% ofits cumulative interest expense in that same period plus other items, includingproceeds from equity offerings. In addition to the basket and notwithstandingthe leverage ratio limitation on restricted payments, Communications can makeadditional restricted payments in an aggregate amount of up to $20million to us. As of December 31, 2005, Communications’ leverageratio under the most restrictive of these indentures was 5.96 to 1.0.In March 2006, Communications declared and paid a dividend of $12.9million to us to be used for servicing our debt obligations. As of March 31,2006, Communications’ leverage ratio under the most restrictive of theseindentures was 5.55 to 1.0.

We expect Communications’ results will allow it tocontinue to make dividend payments to us for purposes of debt service. However,Communications’ results are subject to a variety of factors, including generaleconomic conditions and conditions in its markets, and we cannot assure youCommunications’ will be able to make distributions.

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*Contractual and contingent obligations*

Our contractual obligations (excluding accountspayable and accrued expenses), as of March 31, 2006 are as set forth below (in millions):
| ** **                          | ** ** | **Payments Due By Period** | ** ** |
|-------------------------------------|------------|-------------------------------------------|------------|
| ** **                          | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **After** | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **2006(1)**                               | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2011** | ** ** | **Total** | ** ** |
| Indebtedness                        |       | $                                         | 0.2        |   | $ | 0.1 |   | $ | 9.7 |   | $ | — |   | $ | 292.1 |   | $ | 331.8 |   | $ | — |   | $ | 633.9 |   |
| Interest on  indebtedness (2)  |       | 67.6                                      |       | 77.0 |   | 76.6 |   | 76.4 |   | 68.5 |   | 30.0 |   | — |   | 396.1 |   |
| Operating lease obligations         |       | 4.7                                       |       | 5.3 |   | 5.1 |   | 3.8 |   | 1.9 |   | 1.0 |   | 4.0 |   | 25.8 |   |
| Total  contractual cash obligations |       | $                                         | 72.5       |   | $ | 82.4 |   | $ | 91.4 |   | $ | 80.2 |   | $ | 362.5 |   | $ | 362.8 |   | $ | 4.0 |   | $ | 1,055.8 |   |

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(1)                                  For the period from April 1, 2006 through December 31,2006.

(2)                                  Interest on our variable rate debt is calculatedusing LIBOR of 4.83%, the rate in effect on March 31, 2006. Because ourvariable rate debt bears interest at a variable rate, actual payments coulddiffer.

We haveno material capital lease obligations or purchase obligations. We havecontingent obligations composed of $1.1 million of letters of creditsecuring our lease facilities. Additionally, as a result of acquisitionsdiscussed above, we may have future cash consideration payable to the formerselling shareholders based on the acquired businesses’ future periods operatingresults.

*Off-balancesheet arrangements*

We haveno material off-balance sheet arrangements.

# **Item 3**. ***Q******uantitative and Qualitative Disclosuresabout Market Risk***

We are exposed to various marketrisks, which are the potential losses arising from adverse changes in marketrates and prices, such as foreign currency exchange and interest rates. We donot enter into derivatives or other financial instruments for trading orspeculative purposes. We have previously entered into financial instruments tomanage and reduce the impact of changes in interest rates and foreign currencyexchange rates.

# **Interest Rates**

At March 31, 2006, we hadfixed rate debt of $610.4 million and variable rate debt of $9.8 million. Achange in interest rates of 1% would not be material to our operatingresults.

# **Currencies**

Outsideof the United States, we maintain assets and operations in the United Kingdom.These assets and operations, and our exposure to any currency gains or losses,are not material to our operating results.

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# **Item 4**. ***Controlsand Procedures***

*Evaluationof disclosure controls and procedures*.

Advanstar’s ChiefExecutive Officer and Chief Financial Officer, after evaluating theeffectiveness of the Company’s disclosure controls and procedures (as definedin Rules 13a-15(e) and 15d-15(e) of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”)) as of the end of theperiod covered by this report (the “Evaluation Date”), have concluded that asof the Evaluation Date, our disclosure controls and procedures were effective

*Changesin internal controls*.

There were no significantchanges during the Company’s first fiscal quarter in our internal controls overfinancial reporting that have materially affected or are reasonably likely tomaterially affect the Company’s internal controls over financial reporting.

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# **PART II OTHER INFORMATION**

Items 1 to 5 of form 10-Qare not applicable.

 

| Item 6.    | ** ** | Exhibits                                                                                                                  | ** ** | ** ** |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------|------------|------------|
| ** ** | ** ** | ** **                                                                                                                |
| 31.1       |       | Certification of  principal executive officer required by Rule 13a-14(a) or 15d-14(a) of  the Exchange Act |
|       |       |                                                                                                                      |
| 31.2       |       | Certification of  principal financial officer required by Rule 13a-14(a) or 15d-14(a) of  the Exchange Act |
|       |       |                                                                                                                      |
| 32.1       |       | Certification of  principal executive officer required by Rule 13a-14(b) or 15d-14(b) of  the Exchange Act |
|       |       |                                                                                                                      |
| 32.2       |       | Certification of principal financial officer  required by Rule 13a-14(b) or 15d-14(b) of the  Exchange Act |

 

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**SIGNATURES**

Pursuant to the requirementsof the Securities Exchange Act of 1934, the Registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 
|        | ** **        | ADVANSTAR, INC.                        |
|--------|-------------------|---------------------------------------------|
|   | ** **        |                                        |
|   | ** **        |                                        |
|   | ** **        |                                        |
|        | May 15, 2006 | /s/ DAVID W. MONTGOMERY                     |   |
|   |              | David W. Montgomery                         |
|   | ** **        | Vice President-Finance, Secretary and       |
|   | ** **        | Chief Financial Officer                     |
|   | ** **        | (Principal Financial Officer and Authorized |
|   | ** **        | Representative of the Registrant)           |

 

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**Exhibit Index**

 
| Exhibit No. | ** ** | **Document**                                                                                                               |
|------------------|------------|----------------------------------------------------------------------------------------------------------------------------|
| ** **       | ** ** | ** **                                                                                                                 |
| 31.1             |       | Certification of principal executive officer  required by Rule 13a-14(a) or 15d-14(a) of the  Exchange Act  |
|             |       |                                                                                                                       |
| 31.2             |       | Certification of principal financial officer  required by Rule 13a-14(a) or 15d- 14(a) of the Exchange  Act |
|             |       |                                                                                                                       |
| 32.1             |       | Certification of principal executive officer  required by Rule 13a-14(b) or 15d-14(b) of the  Exchange Act  |
|             |       |                                                                                                                       |
| 32.2             |       | Certification of principal financial officer  required by Rule 13a-14(b) or 15d-14(b) of the  Exchange Act  |

 

 

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