<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) November 24, 1998
-----------------
Penton Media, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-14337 36-2875386
- --------------------------------------------------------------------------------
(State or Other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification No.)
1100 Superior Avenue, Cleveland, Ohio
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (216) 696-7000
----------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 2. ACQUISITION OF ASSETS.
----------------------
On November 24, 1998, Penton Media Inc. (the "Company"), pursuant to an
Agreement and Plan of Merger, dated October 7, 1998 (the "Merger Agreement")
among the Company, Mecklermedia Corporation ("Mecklermedia") , a Delaware
corporation who is a leading provider of information about the Internet , Alan
M. Meckler, a significant stockholder of Mecklermedia, and Internet World Media,
Inc. ("World Media"), a newly organized wholly owned subsidiary of the Company,
completed its cash tender offer for all of the outstanding shares of
Mecklermedia. Pursuant to the Merger Agreement, the acquisition was accomplished
by merging (the "Merger") World Media into Mecklermedia. Mecklermedia then
changed its name to World Media.
In connection with the Merger, each Mecklermedia shareholder received
$29.00 in cash for each share of common stock held by the shareholder. Each
share not tendered was converted into the right to receive $29.00 in cash,
without interest, pursuant to the merger of Mecklermedia and World Media. The
total value of the transaction was approximately $274 million.
In connection with the acquisition, Penton entered into a joint venture
agreement with Alan M. Meckler, Mecklermedia's founder, with respect to the
limited liability company Internet.com, a subsidiary of World Media.
Internet.com is a network of Web sites that provides news, analysis and
information resources for Internet professionals. Penton sold an 80.1% equity
interest in Internet.com to Mr. Meckler for $18 million, retaining 19.9% of the
equity and warrants to acquire up to a 29.9% interest. Mr. Meckler will be
Internet.com's managing member and chief executive officer. He also will be
engaged in a consulting relationship with Penton Media. Internet.com and Penton
also have entered into various agreements relating to the exchange of services
between the two companies.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
----------------------------------
(a) Financial statements of business acquired.
(1) Audited financial statements of Mecklermedia Corporation,
Inc. as of September 30, 1998, 1997 and 1996 and for the
years then ended are included in this report.
(b) Pro forma financial information.
(1) Pro forma combined financial information consisting of a
pro forma combined balance sheet as of September 30, 1998
and pro forma consolidated statements of operations for
the nine month period ended September 30, 1998 and the
year ended December 31, 1997 are included in this report.
(c) Exhibits.
(23) Consent of Independent Accountants
<PAGE> 3
PENTON MEDIA, INC.
INDEX TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
Report of Independent Public Accountants F-2
Consolidated Balance Sheets - September 30, 1998 and 1997 F-3
Consolidated Statements of Operations for the years ended
September 30, 1998, 1997, and 1996 F-5
Consolidated Statements of Changes in Stockholders' Equity
for the years ended September 30, 1998, 1997, and 1996 F-6
Consolidated Statements of Cash Flows for the years ended
September 30, 1998, 1997 and 1996 F-7
Notes to Consolidated Financial Statements F-8
PENTON MEDIA, INC. PRO FORMA - (UNAUDITED)
Consolidated Balance Sheet as of September 30, 1998 F-20
Consolidated Statement of Operations for the nine
month period ended September 30, 1998 and for the year
ended December 31, 1997 F-22
</TABLE>
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Mecklermedia Corporation:
We have audited the accompanying consolidated balance sheets of Mecklermedia
Corporation (a Delaware corporation) and subsidiaries as of September 30, 1998
and 1997, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mecklermedia Corporation and
subsidiaries as of September 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1998 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
November 11, 1998
F-2
<PAGE> 5
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
SEPTEMBER 30, 1998 AND 1997
---------------------------
(In thousands)
--------------
<TABLE>
<CAPTION>
1998 1997
-------- --------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,432 $ 23,971
Accounts receivable, less allowances of $909 and $670, respectively 5,163 3,960
Advanced billings for trade shows 10,068 9,497
Income tax receivable 754 135
Inventory 295 1,074
Prepaid trade show expenses 5,892 3,198
Deferred income taxes - 1,715
Prepaid expenses and other 727 1,689
-------- --------
Total current assets 32,331 45,239
DEFERRED INCOME TAXES 754 134
PROPERTY AND EQUIPMENT:
Computer equipment 3,575 2,594
Furniture, fixtures and equipment 1,280 986
Leasehold improvements 433 341
-------- --------
5,288 3,921
Less: Accumulated depreciation and amortization (2,204) (1,393)
-------- --------
3,084 2,528
INTANGIBLE ASSETS, net of accumulated amortization of $3,492
and $1,026, respectively 38,419 3,760
OTHER ASSETS 217 120
-------- --------
Total assets $ 74,805 $ 51,781
======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-3
<PAGE> 6
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
SEPTEMBER 30, 1998 AND 1997
---------------------------
(In thousands, except share and per share amounts)
--------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 3,102 $ 4,219
Accrued expenses 3,743 3,780
Deferred income taxes 397 -
Deferred trade show revenue 28,146 21,406
Deferred print publishing revenue 598 2,640
-------- --------
Total current liabilities 35,986 32,045
DEFERRED PRINT PUBLISHING REVENUE - LONG-TERM 49 320
-------- --------
Total liabilities 36,035 32,365
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value, 1,000,000 shares authorized,
no shares issued and outstanding)
Common stock ($.01 par value, 35,000,000 shares authorized, 9,369,376 and - -
8,526,896 shares issued at September 30, 1998
and 1997, respectively) 94 85
Additional paid-in capital 41,831 24,857
Treasury stock, at cost (260,000 and 10,000 shares at September 30, 1998
and 1997, respectively) (5,272) (172)
Retained earnings (accumulated deficit) 2,282 (5,306)
Foreign currency translation adjustment (165) (48)
-------- --------
Total stockholders' equity 38,770 19,416
-------- --------
Total liabilities and stockholders' equity $ 74,805 $ 51,781
======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-4
<PAGE> 7
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
-----------------------------------------------------
(In thousands, except per share amounts)
----------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Trade shows $ 46,472 $ 32,818 $ 12,717
Print publishing 12,611 19,067 15,511
Web sites 3,544 1,479 498
Other 1,425 1,829 1,868
-------- -------- --------
64,052 55,193 30,594
-------- -------- --------
COST OF SALES AND DIRECT COSTS:
Trade shows 21,128 16,255 7,843
Print publishing 10,021 13,982 9,792
Web sites 2,071 1,104 513
Other 377 521 483
-------- -------- --------
33,597 31,862 18,631
-------- -------- --------
Gross profit after cost of sales and direct costs 30,455 23,331 11,963
OPERATING EXPENSES:
Advertising, promotion and selling 9,380 12,514 9,890
General and administrative 9,072 8,089 6,615
Amortization of intangibles 2,429 834 192
-------- -------- --------
Operating income (loss) 9,574 1,894 (4,734)
-------- -------- --------
Interest income 741 1,123 1,001
Minority interest (42) - -
Gain on sale of assets, net 2,036 - -
-------- -------- --------
Income (loss) before income taxes 12,309 3,017 (3,733)
Provision (benefit) for income taxes 4,721 (727) 135
-------- -------- --------
Net income (loss) $ 7,588 $ 3,744 ($ 3,868)
======== ======== ========
Basic earnings (loss) per share $ 0.88 $ 0.44 ($ 0.46)
-------- -------- --------
Diluted earnings (loss) per share $ 0.85 $ 0.43 ($ 0.46)
======== ======== ========
Weighted average number of common shares and equivalents 8,672 8,506 8,422
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE> 8
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
-----------------------------------------------------
(In thousands, except share amounts)
------------------------------------
<TABLE>
<CAPTION>
Foreign
Common Stock Additional Retained Currency Total
------------------------ Paid-In Treasury Earnings Translation Stockholders'
Shares Amount Capital Stock (Deficit) Adjustment Equity
---------- --------- ----------- -------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, September 30, 1995 8,368,876 $ 84 $ 22,990 $ - ($ 5,182) ($ 3) $ 17,889
Net loss - - - - (3,868) - (3,868)
Options exercised by
directors and employees 98,826 1 372 - - - 373
Shares tendered in lieu
of cash for exercise of
options (3,959) - (70) - - - (70)
Warrants exercised 15,500 - 56 - - - 56
Foreign currency
translation
adjustment - - - - - 13 13
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, September 30, 1996 8,479,243 85 23,348 - (9,050) 10 14,393
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income - - - - 3,744 - 3,744
Options exercised by
directors and employees 47,653 - 606 - - - 606
Elimination of income
tax valuation
allowances for
disqualifying stock
option dispositions - - 903 - - - 903
Purchase of
treasury stock (10,000) - - (172) - - (172)
Foreign currency
translation adjustment - - - - - (58) (58)
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, September 30, 1997 8,516,896 85 24,857 (172) (5,306) (48) 19,416
========== ========== ========== ========== ========== ========== ==========
Net income - - - - 7,588 - 7,588
Options exercised by
directors and employees 92,480 1 1,169 - - - 1,170
Shares issued relating
to Boardwatch/One
acquisition 750,000 8 15,461 - - - 15,469
Income tax benefit
for disqualifying
stock option
dispositions - - 344 - - - 344
Purchase of
treasury stock (250,000) - - (5,100) - - (5,100)
Foreign currency
translation adjustment - - - - - (117) (117)
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, September 30, 1998 9,109,376 $ 94 $ 41,831 ($ 5,272) $ 2,282 ($ 165) $ 38,770
========== ========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
<PAGE> 9
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
-----------------------------------------------------
(In thousands)
--------------
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 7,588 $ 3,744 ($ 3,868)
Adjustments to reconcile net cash provided by operations-
Depreciation and amortization 3,721 1,574 555
Accretion of interest income on note receivable (8) (24) (41)
(Gain) on sale of assets, net (2,036) - -
Deferred income taxes 1,492 (946) -
Changes in assets and liabilities-
(Increase) in accounts receivable and advanced billings for trade (1,774) (6,130) (5,027)
shows
(Increase) decrease in income tax receivable (275) (159) 126
(Increase) decrease in inventory 779 (563) 155
(Increase) decrease in prepaid trade show expenses (2,694) (933) (584)
(Increase) decrease in prepaid expenses and other 635 (457) (383)
Increase (decrease) in accounts payable and accrued expenses (2,733) 2,811 2,414
Increase (decrease) in deferred trade show revenue 6,740 9,268 8,303
Increase (decrease) in deferred print publishing revenue (577) 93 679
-------- -------- --------
Net cash provided by operating activities 10,858 8,278 2,329
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of assets 300 - -
Proceeds from notes receivable 238 212 200
Sales of short-term investments - - 9,947
Purchases of short-term investments - - (9,947)
Additions to property and equipment (1,784) (1,610) (970)
Additions to intangible assets (20,104) (3,144) (1,500)
-------- -------- --------
Net cash (used in) investing activities (21,350) (4,542) (2,270)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options and warrants 1,170 606 359
Purchase of treasury stock (5,100) (172) -
Repayment of notes and loans - - (14)
-------- -------- --------
Net cash provided by (used in) financing activities (3,930) 434 345
-------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (117) (58) 13
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (14,539) 4,112 417
-------- -------- --------
CASH AND CASH EQUIVALENTS, beginning of period 23,971 19,859 19,442
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of period $ 9,432 $ 23,971 $ 19,859
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW:
Cash paid for interest $ - $ - $ 1
Cash paid for income taxes $ 3,448 $ 145 $ 88
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-7
<PAGE> 10
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 1998, 1997 AND 1996
---------------------------------
(1) Pending Sale of the Company to Penton Media, Inc.:
--------------------------------------------------
On October 7, 1998, the Company entered into a definitive agreement to be
acquired by Penton Media, Inc. ("Penton") for $29.00 per share of common stock
in an all cash tender offer.
The boards of directors of Penton and the Company have approved the transaction
and Alan M. Meckler ("Meckler"), Chairman of the Board and Chief Executive
Officer, has agreed to tender all of the shares he beneficially owns which
represents approximately 30% of the Company's shares. Meckler has also granted
an option to Penton to purchase such shares.
The tender offer is subject to certain terms and conditions, including a minimum
tender of a majority of the fully diluted shares. The tender offer will be
conditioned on Penton funding its financing. Penton has entered into commitments
with affiliates of Donaldson, Lufkin & Jenrette to provide the financing
necessary for the acquisition. Any shares not purchased in the tender offer will
be acquired for $29.00 in cash in a subsequent merger. It is anticipated that
the transaction could be completed as early as November 1998.
Upon completion of the merger, Meckler will purchase 80.1% of the Company's Web
site business from Penton for $18.0 million. In addition, Meckler will provide
consulting services to Penton.
(2) The Company:
------------
The Company is a leading provider of information about the Internet through its
(i) INTERNET WORLD and ISPCON trade shows and conferences, (ii) publication of
INTERNET WORLD, a weekly controlled circulation newspaper, (iii) publication of
BOARDWATCH, a monthly general circulation magazine, (iv) publication of the
DIRECTORY OF INTERNET SERVICE PROVIDERS, a general circulation publication, and
(v) INTERNET.COM, the Company's network of Web sites for Internet news and
information resources. Because all of the Company's products and services relate
to providing Internet-related information to business and information technology
professionals and consumers, the Company's success is dependent on the continued
growth of the Internet.
(3) Summary of Significant Accounting Policies:
-------------------------------------------
Principles of consolidation-
----------------------------
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. The financial statements also include the
accounts of the Company's minority-owned subsidiaries. All significant
intercompany transactions have been eliminated. Investments in affiliated
international trade shows are accounted for using the equity method. The
Company's investment interests in these affiliated international trade shows
range from 35% to 50%.
Revenue recognition-
--------------------
Trade show revenues-
--------------------
Proceeds from the sale of trade show space and
prepaid admission fees are deferred and recognized as revenue
at the time the trade shows are held. Equity income from the
Company's international trade shows is included in trade show
revenue. Equity losses from the Company's international trade
shows are included in trade show cost of sales and direct
costs.
F-8
<PAGE> 11
Print publishing revenues-
--------------------------
Advertising revenue-
--------------------
Revenue from the sales of advertising space in print
publications is recognized at the time the issue is
circulated.
Subscription revenues-
----------------------
Proceeds from subscriptions are recorded as deferred
print publishing revenue when received and are
included in revenue over the terms of the
subscriptions, generally one to two years, upon
commencement of subscription services. Subscriptions
expiring within one year are included as a current
liability and the portion of the subscriptions in
excess of one year are classified as a non-current
liability under the caption deferred print publishing
revenue.
Newsstand revenue-
------------------
Sales to newsstand distributors are recognized as
revenue in the month of distribution utilizing
historical experience to estimate the ultimate sales
of print publishing to the newsstand. In the event
that actual sales differ from estimates, adjustments
are made in subsequent months. Historically, these
adjustments have not been material.
Web site revenues-
------------------
Revenue from the sales of advertising space in the
Company's INTERNET.COM network of Web sites is
recognized during each display period, which
typically does not exceed one month.
Revenue from the licensing of editorial content is
recognized during the period of the license.
Other revenues-
---------------
Revenue from list rentals is recognized at the time
of use by the renter. Royalty revenue from the sales
of books and directories is recognized upon shipment.
Use of estimates-
- -----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Foreign currency translation-
- -----------------------------
Assets and liabilities of the Company's foreign subsidiary are translated into
U.S. dollars using the exchange rate in effect at the balance sheet date.
Results of operations are translated using the average exchange rate prevailing
throughout the period. The effects of exchange rate fluctuations on translating
foreign currency assets and liabilities into U.S. dollars are included as part
of the foreign currency translation adjustment component of stockholders'
equity, while gains and losses resulting from foreign currency transactions are
included in net income (loss).
F-9
<PAGE> 12
Cash and cash equivalents-
- --------------------------
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Inventory-
- ----------
Inventory is stated at the lower of cost (first-in, first-out) or market.
Components of inventory are as follows as of September 30, 1998 and 1997 (in
thousands):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Paper $172 $667
Work-in-process 123 407
------ ------
$295 $1,074
====== ======
</TABLE>
Publication costs of print publications, including paper, editorial, typesetting
and printing costs are included in work-in-process until the issue or volume is
released for sale, at which time the related costs are charged to operations.
Prepaid trade show expenses-
- ----------------------------
Prepaid trade show expenses consist of deposits on trade show facilities,
advertising and promotion and related direct labor costs. These costs are
expensed at the time the trade show is held. Advances to the Company's
affiliated international trade shows are included in prepaid trade show
expenses.
Prepaid expenses and other-
- ---------------------------
Prepaid expenses and other consist principally of refundable deposits, royalty
advances and other prepaid items.
Property and equipment-
- -----------------------
Property and equipment are stated at cost. The Company records depreciation,
using the straight-line method, in amounts sufficient to write-off the cost of
depreciable assets over the following estimated useful lives:
Computer equipment 3-5 years
Furniture, fixtures and equipment 3-10 years
Leasehold improvements Estimated useful lives or lease
term, whichever is shorter
Depreciation expense amounted to approximately $1,292,000, $741,000 and $363,000
for the years ended September 30, 1998, 1997 and 1996, respectively.
Maintenance and repair expenditures are charged to appropriate expense accounts
in the period incurred; replacements, renewals and betterments are capitalized.
Upon sale or other disposition of property, the cost and accumulated
depreciation of such properties are eliminated from the accounts and the gains
or losses thereon are reflected in operations.
F-10
<PAGE> 13
Intangible assets-
- ------------------
Intangible assets are stated at cost and consist of the following as of
September 30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
Acquisition costs (a) $38,748 $2,744
Trademarks and copyrights 3,163 2,042
------- ------
41,911 4,786
Less: Accumulated amortization (3,492) (1,026)
------- ------
Intangible assets, net $38,419 $3,760
======= ======
</TABLE>
(a) Acquisition costs pertain to publishing rights, sponsorship
rights and subscription lists which the Company has acquired
for various trade shows, print publication and Web site
acquisitions.
Acquisition costs and trademarks and copyrights are being amortized using the
straight-line method over the estimated useful lives of three to fifteen years.
Amortization expense amounted to approximately $2,429,000, $834,000 and $192,000
for the years ended September 30, 1998, 1997 and 1996, respectively.
The Company periodically reviews the carrying value of its intangible assets and
property and equipment to determine whether an impairment may exist. The Company
considers relevant cash flow, estimated future operating trends and other
available information in assessing whether the carrying value of these assets
can be recovered. The Company believes no such impairment exists as of
September 30, 1998.
General promotion costs-
- ------------------------
Costs incurred in connection with the general procurement of subscriptions and
the general promotion of new projects are expensed in the period incurred.
Income taxes-
- -------------
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires an asset and liability approach which
requires the recognition of deferred tax assets and deferred tax liabilities for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Earnings (loss) per share-
- --------------------------
The weighted average number of common shares outstanding as presented have been
adjusted for dilutive common stock equivalents.
Presentation-
- -------------
Certain amounts have been reclassified in the prior year statements to conform
to the current year presentation.
F-11
<PAGE> 14
Other-
- ------
The Company does not believe any recently issued accounting standards will have
a material impact on its financial condition or results of operations.
(4) Income Taxes:
-------------
Income (loss) before income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------
1998 1997 1996
------- ------ -------
<S> <C> <C> <C>
Domestic $12,586 $3,083 ($4,113)
Foreign (277) (66) 380
------- ------ -------
$12,309 $3,017 ($3,733)
======= ====== =======
</TABLE>
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current provision (benefit)
Federal $ 2,573 $ - $ -
State 632 59 64
Foreign 24 121 71
------- ------- -------
3,229 180 135
Deferred provision (benefit)
Federal 1,169 (779) -
State 323 (128) -
------- ------- -------
$ 4,721 ($ 727) $ 135
======= ======= =======
</TABLE>
At September 30, 1998 and 1997, the Company had future U.S. federal and state
income tax benefits of approximately $357,000 and $1.8 million, respectively, as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Net operating losses $ - $ 1,346
Excess of amortization of intangibles for financial
reporting 928 260
purposes over income taxes
Excess of depreciation of property and equipment for
income tax purposes over financial reporting (174) (126)
Reserves recorded for financial reporting purposes 469 291
Trade show expenses recorded for income tax purposes (982) -
Inventory capitalization for income tax purposes 116 78
------- -------
Deferred income tax asset $ 357 $ 1,849
======= =======
</TABLE>
At September 30, 1998, and 1997, Mecklermedia Limited, the Company's
wholly-owned United Kingdom subsidiary, had future United Kingdom income tax
benefits of approximately $703,000 and $591,000,respectively, for which
valuation allowances have been fully provided.
F-12
<PAGE> 15
A reconciliation setting forth the difference between the effective income tax
rate of the Company and the U.S. Federal statutory income tax rate is as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Federal statutory rate $ 4,185 $ 1,026 ($1,269)
State income taxes 601 187 64
Foreign income taxes 24 121 71
Foreign losses without income tax benefits 94 22 44
Domestic losses without income tax benefits - - 1,200
Elimination of valuation allowances and other (223) (2,134) -
Provision for non-deductible expenses 40 51 25
------- ------- -------
$ 4,721 ($ 727) $ 135
======= ======= =======
</TABLE>
(5) Commitments and Contingencies:
------------------------------
The following is a schedule of approximate annual future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of September 30, 1998 (in thousands):
<TABLE>
<CAPTION>
Fiscal Year
---------------
<S> <C>
1999 $ 716
2000 504
2001 300
2002 27
-------
Total $ 1,547
=======
</TABLE>
For the years ended September 30, 1998, 1997, and 1996, the total rent expense
incurred by the Company was approximately $616,000, $446,000 and $235,000,
respectively.
The Company has employment agreements with three key employees with terms
ranging from six months to one year.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position of the Company.
(6) Transactions with Related Parties:
----------------------------------
A director of the Company is a principal in a law firm which provides counsel to
the Company. The Company incurred expenses of approximately $12,000, $36,000 and
$74,000 related to services provided by this law firm for the years ended
September 30, 1998, 1997 and 1996, respectively. These fees were negotiated at
arms length.
(7) Preferred Stock:
----------------
In December 1993, the Company authorized the issuance of 1,000,000 shares of
preferred stock, $.01 par value (the "Preferred Stock").
The Board of Directors has the authority, without further vote or action by the
stockholders, to issue the undesignated shares of Preferred Stock in one or more
series and to fix all rights, qualifications,
F-13
<PAGE> 16
preferences, limitations and restrictions of each series, including dividend
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series.
(8) Common Stock:
-------------
On December 23, 1996, the Company's Board of Directors authorized the Company to
purchase up to $2.0 million of the Company's common stock in the public market.
On May 15, 1997, the Company purchased 10,000 shares of its common stock for
$172,000. On December 2, 1997, the Company's Board of Directors authorized the
Company to purchase up to an additional $5.0 million of the Company's common
stock in the public market. On December 2, 1997 and December 30, 1997, the
Company purchased an aggregate of 250,000 shares of its common stock in private
transactions for approximately $5.1 million.
On March 13, 1996, the Company's stockholders approved an increase in the number
of authorized shares of common stock from 9,000,000 to 35,000,000.
In fiscal 1996 and 1995, warrants to purchase 15,500 and 180,000 shares of
common stock, respectively, for $3.60 per share were exercised. The Company
realized net proceeds, after expenses, of approximately $56,000 and $616,000,
respectively. As of September 30, 1998, the Company had warrants outstanding to
purchase 4,500 shares of common stock exercisable at a price of $3.60 per share.
(9) Stock Option Plans:
-------------------
In December 1993, the Company established a stock option plan under which the
Company may issue qualified incentive stock options to key employees, including
officers, up to an aggregate of 400,000 shares of common stock. The purchase
price of the common stock under each option must be at least 100% of the fair
market value of the shares on the date of grant. The plan will terminate on
December 1, 2003.
In January 1995, the Company established a second stock option plan under which
the Company may issue qualified incentive stock options to key employees,
including officers, up to an aggregate of 400,000 shares of common stock. This
amount was increased to 800,000 shares during fiscal 1997 through a plan
amendment. The purchase price of the common stock under each option must be at
least 100% of the fair market value of the shares on the date of the grant. The
plan will terminate on January 31, 2005.
A summary of the status of the Company's two stock option plans as of September
30, 1998, 1997 and 1996, and changes during the years ending on those dates is
presented below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 625 $13.19 521 $10.78 455 $ 7.37
Granted 236 $23.29 210 $20.21 260 $ 15.39
Exercised (83) $14.15 (48) $12.73 (99) $ 3.78
Forfeited (79) $21.56 (58) $17.25 (95) $ 9.19
------ ------ ------ ------ ------ --------
Outstanding at end of year 699 $15.80 625 $13.19 521 $ 10.78
====== ====== ======
Options exercisable at end of year 332 $24.43 272 $ 9.22 191 $ 8.14
====== ====== ======
Weighted average fair value of
options granted during year $14.48 $14.34 $10.85
====== ====== ======
</TABLE>
F-14
<PAGE> 17
The following table summarizes information about stock options outstanding at
September 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------- -------------------------------------
Weighted-
Options Average Weighted- Weighted-
Outstanding at Remaining Average Options Exercisable Average
Range of Exercise September 30, Contractual Exercise at September 30, Exercise Price
Prices 1998 Life Price 1998
- ------------------------ --------------- ------------ ---------- ------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$2.89 $8.95 157 5.78 $3.44 157 $3.44
$9.88 $15.38 133 7.08 $13.25 98 $13.24
$16.00 $21.75 216 8.35 $18.83 67 $18.59
$22.06 $28.75 193 9.19 $24.27 10 $24.43
--- ---
699 332
=== ===
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for
grants in 1998, 1997, and 1996, respectively: risk-free interest rates of 4.7%,
6.0%, and 6.3 %; expected lives of 5.0 years; expected dividend rate of zero;
and expected volatility of 73.0%, 78.6 %, and 85.4%.
The Company applies Accounting Principles Board Opinion No. 25 in accounting for
its stock option plans. Accordingly, no compensation expense has been recognized
for its stock option plans. If compensation expense had been determined in
accordance with Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation", net income would have been reduced by $1.4
million, $2.3 million and $2.2 million for fiscal 1998, 1997 and 1996,
respectively. Basic earnings per share would have been reduced by $0.17, $0.26
and $0.26 for fiscal 1998, 1997 and 1996, respectively.
(10) Employee Benefit Plan:
----------------------
The Company has a defined contribution plan which qualifies under Section 401(k)
of the Internal Revenue Code for employees meeting certain service requirements.
The plan allows eligible employees to contribute up to 15% of their compensation
to the plan. At the discretion of the Board of Directors, the Company may also
make contributions dependent on profits each year for the benefit of all
eligible employees under the plan. There were no discretionary contributions for
the years ended September 30, 1998, 1997 and 1996.
(11) Earnings (Loss) Per Share:
--------------------------
Effective December 31, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), which
requires the replacement of primary and fully diluted earnings per share with
basic and diluted earnings per share, respectively. SFAS 128 also requires
restatement of previously reported earnings per share information for certain
periods presented in the accompanying statements of operations to ensure
consistency with currently reported amounts. Accordingly, the Company has
restated previously reported earnings per share amounts.
F-15
<PAGE> 18
Computations of basic and diluted earnings (loss) per share for the years ended
September 30, 1998, 1997 and 1996 are as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Year Ended September 30, 1998
---------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net income available to common stockholders $7,588 8,672 $0.88
Effect of Dilutive Securities: =====
Stock options and warrants - 252
------ -----
DILUTED EARNINGS PER SHARE
Net income available to common stockholders $7,588 8,924 $0.85
====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30, 1997
---------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net income available to common stockholders $3,744 8,506 $0.44
Effect of Dilutive Securities: =====
Stock options and warrants - 256
------ -----
DILUTED EARNINGS PER SHARE
Net income available to common stockholders $3,744 8,762 $0.43
====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30, 1996
---------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
BASIC (LOSS) PER SHARE
Net loss available to common stockholders ($3,868) 8,422 ($0.46)
Effect of Dilutive Securities: ======
Stock options and warrants - -
------- -----
DILUTED (LOSS) PER SHARE
Net loss available to common stockholders ($3,868) 8,422 ($0.46)
======= ===== ======
</TABLE>
Options to purchase 143,000, 59,000 and 521,000 shares of common stock at prices
ranging from $23.25 - $28.75, $21.75 - $27.50 and from $2.89 - $21.75 were
outstanding during the years ended September 30, 1998, 1997 and 1996,
respectively, but were not included in the computation of diluted earnings
(loss) per share because the options would have been anti-dilutive.
(12) Sale of Assets:
---------------
On February 3, 1998, the Company sold the active subscriber list of the paid
monthly print publication formerly known as INTERNET WORLD to The McGraw-Hill
Companies, Inc. for cash and assumption of INTERNET WORLD's outstanding deferred
subscription liabilities. The Company recognized a gain on the sale of
approximately $2.0 million.
F-16
<PAGE> 19
(13) Acquisition:
------------
On May 15, 1998, the Company consummated the acquisition of all of the
outstanding capital stock of Boardwatch Magazine, Inc. ("Boardwatch") and One,
Inc. ("One"), each a Colorado corporation ("Boardwatch/One acquisition"). The
consideration paid consisted of cash in the amount of $14.0 million and 750,000
shares of the Company's common stock. Boardwatch is the publisher of the monthly
trade magazine BOARDWATCH which has a circulation of approximately 25,000
readers. One is the organizer of the ISPCON trade shows, the largest tradeshows
in the Internet Service Provider industry. Boardwatch's Web site,
Boardwatch.com, and One's Web site, Ispcon.com, were included in the
acquisition. The excess of the purchase price over the fair value of the net
assets acquired of approximately $30.4 million was recorded to intangible assets
and will be amortized using the straight-line method over fifteen years.
(14) Business Segments and Geographic Information:
---------------------------------------------
Information with respect to the revenues, operating income (loss), identifiable
assets, additions to property and equipment and intangibles, and depreciation
and amortization of the Company's principal business segments is as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Trade shows $ 46,472 $ 32,818 $ 12,717
Print publishing (a) 12,611 19,067 15,511
Web sites 3,544 1,479 498
Other 1,425 1,829 1,868
-------- -------- --------
$ 64,052 $ 55,193 $ 30,594
======== ======== ========
OPERATING INCOME (LOSS):
Trade shows $ 18,395 $ 12,400 $ 2,555
Print publishing (8,139) (10,379) (7,472)
Web sites (1,534) (1,191) (695)
Other 852 1,064 878
-------- -------- --------
$ 9,574 $ 1,894 ($ 4,734)
======== ======== ========
IDENTIFIABLE ASSETS:
Trade shows $ 44,327 $ 14,737 $ 7,807
Print publishing 11,699 7,131 3,698
Web sites 6,439 2,114 376
Other 1,315 676 814
Cash and other - unallocated 11,025 27,123 21,891
-------- -------- --------
$ 74,805 $ 51,781 $ 34,586
======== ======== ========
</TABLE>
F-17
<PAGE> 20
<TABLE>
<CAPTION>
Year Ended September 30,
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
ADDITIONS TO PROPERTY AND
EQUIPMENT AND INTANGIBLE ASSETS:
Trade shows $25,939 $ 1,319 $ 982
Print publishing 8,147 983 728
Web sites 3,953 1,790 362
Other 122 70 32
Corporate - unallocated 854 592 366
------- ------- -------
$39,015 $ 4,754 $ 2,470
======= ======= =======
DEPRECIATION AND AMORTIZATION:
Trade shows $ 1,806 $ 431 $ 61
Print publishing 816 305 68
Web sites 505 345 42
Other 39 13 4
Corporate - unallocated 555 480 380
------- ------- -------
$ 3,721 $ 1,574 $ 555
======= ======= =======
</TABLE>
Significant financial information by geographic area is as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
United States (b) $ 60,929 $ 54,419 $ 30,003
Europe 1,673 347 432
Other 1,450 427 159
-------- -------- --------
$ 64,052 $ 55,193 $ 30,594
======== ======== ========
NET INCOME (LOSS):
United States (b) $ 9,672 $ 4,872 ($ 3,310)
Europe (519) (66) (130)
Other (1,565) (1,062) (428)
-------- -------- --------
$ 7,588 $ 3,744 ($ 3,868)
======== ======== ========
IDENTIFIABLE ASSETS:
United States (b) $ 70,610 $ 51,047 $ 33,736
Europe 3,601 734 850
Other 594 - -
-------- -------- --------
$ 74,805 $ 51,781 $ 34,586
======== ======== ========
</TABLE>
F-18
<PAGE> 21
(a) Print publishing revenues consist of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Advertising revenues $10,274 $13,058 $ 9,413
Circulation revenues 1,687 5,678 5,908
All other 650 331 190
------- ------- -------
Total print publishing revenues $12,611 $19,067 $15,511
======= ======= =======
</TABLE>
All print publishing costs of sales and direct costs relate to circulation
revenues. The Company does not incur any incremental costs of sales and direct
costs with respect to advertising revenues.
(b) Includes United States and Canada
(15) Supplemental Disclosure of Noncash Investing and Financing Activities:
----------------------------------------------------------------------
Year ended September 30, 1998
The Company issued 750,000 shares of its common stock in connection with the
Boardwatch/One acquisition.
The Company recorded an income tax benefit of $344,000 for disqualifying stock
option dispositions which was recorded as an increase to additional paid-in
capital.
Year ended September 30, 1997
The Company recorded an income tax benefit of $903,000 for disqualifying stock
option dispositions which was recorded as an increase to additional paid-in
capital.
Year ended September 30, 1996
A former employee tendered 3,959 shares of common stock with a fair value of
approximately $70,000 in lieu of cash for the exercise of stock options.
(15) Subsequent Events:
------------------
Subsequent to September 30, 1998, the Company acquired four websites for
approximately $2.4 million. The excess of the purchase price over the fair value
of the assets acquired for the websites will be recorded as an intangible asset
and will be amortized using the straight-line method over five years.
F-19
<PAGE> 22
PENTON MEDIA, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
(Unaudited)
The following unaudited pro forma consolidated balance sheet is presented as if
the merger of Mecklermedia Corporation had occurred on September 30, 1998. This
pro forma consolidated balance sheet should be read in conjunction with the pro
forma consolidated statement of income of the Company presented herein and the
historical financial statements and notes thereto of the Company included in the
Penton Media, Inc.'s Forms 10-Q and S-1 for the nine month period ended
September 30, 1998 and the year ended December 31, 1997, respectively.
All purchase price allocations for the INDEX acquisition (December 1997), the
Donohue Meehan acquisition (August 1998), and the Mecklermedia Corporation
acquisition (November 1998), are treated as purchase transactions, are
preliminary in nature and are subject to change within the twelve months
following each acquisition based on refinements as actual data becomes
available. The unaudited pro forma consolidated balance sheet does not purport
to represent what the actual financial position of the Company would have been
at September 30, 1998, nor does it purport to represent the future financial
position of the Company.
F-20
<PAGE> 23
PENTON MEDIA, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(Dollars in thousands)
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Company Pro Forma
Company Mecklermedia Adjustments (Unaudited)
Historical Historical (a)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash and equivalents $ 7,273 $ 9,432 $ (8,560) $ 8,145
Accounts receivable 33,166 15,985 -- 49,151
Inventories 2,971 295 -- 3,266
Deferred tax asset 3,230 -- -- 3,230
Prepaid tradeshow expenses
and other assets 8,024 6,619 -- 14,643
--------- --------- --------- ---------
54,664 32,331 (8,560) 78,435
--------- --------- --------- ---------
Property, Plant & Equipment, net 27,458 3,084 -- 30,542
--------- --------- --------- ---------
Other assets:
Goodwill, net 97,111 38,419 196,088 331,618
Other intangibles, net 6,074 -- 14,503 47,458
26,881
Deferred tax assets 3,533 754 -- 4,287
Investment in JV -- -- 22,472 4,472
(18,000)
Miscellaneous 88 217 -- 305
--------- --------- --------- ---------
106,806 39,390 241,944 388,140
--------- --------- --------- ---------
$ 188,928 $ 74,805 $ 233,384 $ 497,117
========= ========= ========= =========
LIABILITIES:
Current Liabilities:
Senior Debt facility $ 38,900 -- $ (38,900) $ 11,250
11,250
Notes payable 2,550 -- -- 2,550
Accounts payable 9,727 3,102 -- 12,829
Accrued compensation and
Benefits 10,021 3,743 -- 13,764
Other accrued expenses 8,557 397 11,054 20,008
Unearned income 14,035 28,744 -- 42,779
--------- --------- --------- ---------
83,790 35,986 (16,596) 103,108
--------- --------- --------- ---------
Long-term liabilities:
Senior debt facility -- -- 288,750 288,750
Deferred pension credit 18,592 -- -- 18,592
Other 985 49 -- 1,034
--------- --------- --------- ---------
19,577 49 288,750 308,376
--------- --------- --------- ---------
STOCKHOLDERS EQUITY:
Preferred stock -- -- -- --
Common stock 227 94 (94) 227
Capital in excess of par value 55,051 41,831 (41,831) 55,051
Treasury stock -- (5,272) 5,272 0
Retained earnings 30,360 2,282 (2,282) 30,360
Foreign currency adjustments (77) (165) 165 (77)
--------- --------- --------- ---------
85,561 38,770 (38,770) 85,561
--------- --------- --------- ---------
$ 188,928 $ 74,805 $ 233,384 $ 497,117
========= ========= ========= =========
</TABLE>
F-21
<PAGE> 24
PENTON MEDIA, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(Unaudited)
The unaudited pro forma consolidated statement of income reflects adjustments to
Penton's historical Consolidated Statement of Income for the nine month period
ended September 30, 1998, to give effect to: (i) the Donohue Meehan Publishing
acquisition , which was completed on August 7, 1998, as if such acquisition had
occurred on January 1, 1997, (ii) the issuance of Common Stock pursuant to the
Donohue Meehan Publishing acquisition as if such issuance had occurred on
January 1, 1997, (iii) the acquisition of Mecklermedia Corporation on November
24, 1998, as if such acquisition had occurred on January 1, 1997 and had been
included on the basis of its nine months ended June 30, 1998, (iv) the sale of
an 80.1% interest in Internet.com to Alan M. Meckler and (v) other adjustments
required to reflect the combined results of operations of Penton as a separate
public company.
The unaudited pro forma consolidated statement of income reflects adjustments to
Penton's historical Consolidated Statement of Income for the year ended December
31, 1997, to give effect to: (i) the acquisition of INDEX, which was completed
on December 12, 1997, as if such acquisition had occurred on January 1, 1997 and
had been included on the basis of its twelve months ended November 30, 1997,
(ii) the Donohue Meehan Publishing acquisition , which was completed on August
7, 1998, as if such acquisition had occurred on January 1, 1997, (iii) the
issuance of Common Stock pursuant to the Donohue Meehan Publishing acquisition
as if such issuance had occurred on January 1, 1997, (iv) the acquisition of
Mecklermedia Corporation on November 24, 1998, as if such acquisition had
occurred on January 1, 1997 and had been included on the basis of its twelve
months ended September 30, 1998, (v) the sale of an 80.1% interest in
Internet.com to Alan M. Meckler, and (vi) other adjustments required to reflect
the combined results of operations of Penton as a separate public company.
The acquisition of ISOA in December 1997 and the disposition of one publication
during 1997 have not been reflected in the Unaudited Pro Forma Combined
Financial Information as the impact of both transactions is immaterial to such
information.
The following pro forma information is based upon the historical consolidated
results of operations of the Company for the nine month period ended September
30, 1998 and the year ended December 31, 1997, giving effect to the transactions
described above. The pro forma consolidated statements of income should be read
in conjunction with the pro forma consolidated balance sheet of the Company
presented herein and the historical financial statements and notes thereto of
the Company, included in the Penton Media, Inc.'s Forms 10-Q and S-1 for the
nine month period ended September 30, 1998 and the year ended December 31, 1997,
respectively.
All purchase price allocations for the INDEX acquisition, the Donohue Meehan
acquisition, and the Mecklermedia Corporation acquisition are treated as
purchase transactions, are preliminary in nature and are subject to change
within the twelve months following each acquisition based on refinements as
actual data becomes available. The unaudited pro forma consolidated statements
of income are not necessarily indicative of what the actual results of
operations of the Company would have been assuming the transactions had been
completed as set forth above, nor do they purport to represent the company's
results of operations for future periods.
F-22
<PAGE> 25
PENTON MEDIA, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
(Dollars in thousands, except per share amounts)
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
DM Company
Penton Publishing Meckler Pro forma Pro forma
Historical Historical Historical Adjustments (Unaudited)
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 164,471 $ 5,892 $ 49,835 $ (971) (h) $ 219,227
--------- ----------- --------- ---------- ----------
Operating Expenses:
Editorial, production and 74,806 1,748 26,254 (553) (h) 102,255
circulation
Selling, general and 67,036 1,690 14,391 (588) (h) 82,017
administrative (512) (c)
Depreciation and amortization 6,316 50 1,340 (263) (h) 20,101
--------- ----------- --------- ----------
10,631 (b)
1,554 (d)
473 (e)
----------
148,158 3,488 41,985 10,742 204,373
--------- ----------- --------- ---------- ----------
Operating Income 16,313 2,404 7,850 (11,713) 14,854
--------- ----------- --------- ---------- ----------
Other Income(Expense):
Interest expense (2,164) (15) -- (341) (e) (18,208)
(18,208) (f)
2,520 (g)
Miscellaneous, net 76 37 2,700 -- 2,813
--------- ----------- --------- ---------- ----------
(2,088) 22 2,700 (16,029) (15,395)
--------- ----------- --------- ---------- ----------
Income (loss) before income taxes 14,225 2,426 10,550 (27,742) (541)
Provision for income taxes 5,956 -- 4,143 202 (c) 1,384
--------- ----------- --------- ----------
(134) (e)
975 (c)
(818) (b)
(7,166) (f)
(612) (d)
(170) (h)
(992) (g)
----------
Net income (loss) $ 8,269 $ 2,426 $ 6,407 $ (19,027) $ (1,925)
========= =========== ========= ========== ========
Net income per share basic $ .38 $ (0.08)
and diluted ========= ========
Weighted average number of common 21,583 21,583
shares, basic and diluted ========= ========
</TABLE>
F-23
<PAGE> 26
PENTON MEDIA, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in thousands, except per share amounts)
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
DM Company
Penton Index Publishing Meckler Pro forma Pro forma
Historical Historical Historical Historical Adjustments (Unaudited)
---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 204,931 $ 8,668 $ 9,358 $ 55,193 $(1,479) (h) $ 276,671
--------- ------- ----------- --------- ------- ----------
Operating Expenses:
Editorial, production and 94,560 3,455 2,826 31,862 (1,281) (h) 131,422
circulation
Selling, general and 78,523 4,971 2,894 20,603 (1,389) (h) 104,581
administrative 1,119 (c)
(2,140) (c)
Depreciation and amortization 6,551 26 75 834 (345) (h) 25,077
--------- ------- ----------- --------- ----------
14,174 (b)
2,072 (d)
1,690 (e)
-------
179,634 8,452 5,795 53,299 13,900 261,080
--------- ------- ----------- --------- ------- ----------
Operating Income 25,297 216 3,563 1,894 (15,379) 15,591
--------- ------- ----------- --------- ------- ----------
Other Income(Expense):
Interest expense (841) -- (21) -- (2,704) (e) (24,279)
(24,279) (f)
3,566 (g)
Gain on sale of publication 1,040 -- -- -- -- 1,040
Miscellaneous, net 10 44 75 1,123 -- 1,252
--------- ------- ----------- --------- ------- ----------
209 44 54 1,123 (23,417) (21,987)
--------- ------- ----------- --------- ------- ----------
Income (loss) before income taxes 25,506 260 3,617 3,017 (38,796) (6,396)
Provision for income taxes 10,632 49 36 (727) 549 (c) (3,108)
--------- ------- ----------- --------- ----------
(179) (e)
(9,555) (f)
(815) (d)
(1,091) (b)
(604) (h)
(1,403) (g)
-------
Net income (loss) $ 14,874 211 $ 3,581 $ 3,744 $(25,698) $ (3,288)
========= ======= =========== ========= ======= ==========
Net income per share basic $ .70 $ (0.15)
and diluted ========= ==========
Weighted average number of 21,200 21,200
common shares, basic and ========= ==========
diluted
</TABLE>
F-24
<PAGE> 27
PENTON MEDIA, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
(a) On November 24, 1998, Internet World Media, Inc., a wholly owned
subsidiary of Penton Media, Inc. (the "Company"), acquired all outstanding
shares of Mecklermedia Corporation ("Mecklermedia") common stock for
approximately $274 million in cash. Funds used to consummate the
acquisition came from borrowings of the company under a $300 million
Credit Agreement dated November 24, 1998. The following represents the
source of funds and use of funds for the purchase, assuming the
transaction had occurred on September 30, 1998 (in thousands):
<TABLE>
<S> <C>
Source of funds:
Senior debt facility $300,000
Cash on hand - Meckler and Penton Media Inc. 8,560
Funds received from Internet.com (i) 18,685
--------
$327,245
========
Use of funds:
Payoff existing line of credit $ 38,900
Financing fees 14,503
Purchase price (ii) 273,842
--------
$327,245
========
</TABLE>
(i) At the completion of the merger, the Company sold an 80.1%
interest in Internet.com back to Alan M. Meckler for an aggregate
purchase price of $18.0 million. In addition, Internet.com
reimbursed the Company $685 as a result of Internet.com performing
several acquisitions at a net purchase price in excess of an
amount specified in the Merger agreement.
(ii) The purchase price was allocated as follows:
<TABLE>
<S> <C>
Goodwill $ 235,543
Other intangibles 26.881
Investment in joint venture 22,472
Deferred taxes and liabilities assumed (11,054)
---------
$ 273,842
=========
</TABLE>
(b) Goodwill for publications is being amortized over 40 years while goodwill
for tradeshows is being amortized over 20 years. Other intangibles are
being amortized over periods ranging from 3 to 15 years. The pro forma
adjustments reflect nine months and twelve months of amortization expense
for the nine months ended September 30, 1998 and twelve months ended
December 31, 1997, respectively, assuming the transaction had occurred on
January 1, 1997.
(c) To eliminate fees paid to former owners of INDEX in 1997 and deferred
compensation provisions under terminated DM Publishing agreements ($2.037
million), to record incremental general and administrative costs of Penton
as a separate public company ($1.2 million in 1997 and $900 in 1998), to
adjust income taxes for these expenses, and to provide income taxes for DM
Publishing as if it were a wholly owned subsidiary of Penton rather than a
Subchapter S corporation.
(d) Reflects the amortization of financing fees and related tax effect
incurred with the $300 million Credit Agreement. Amounts are being
amortized over a seven year period, the life of the agreement.
(e) To reflect interest and amortization expense with respect to the debt and
intangible assets resulting from the acquisition of INDEX and the DM
Publishing Combination.
(f) Reflects interest expense and related tax effect on the $300 million
Credit Agreement as if it was outstanding for the entire period. The
interest rate used reflects the rate charged at December 31, 1998 or 7.79%
for the $175 million Tranche A loan and 8.54% for the $125 million Tranche
B loan.
F-25
<PAGE> 28
(g) Reflects the elimination of interest expense incurred resulting from the
payoff of all outstanding debt with the proceeds of the $300 million
Credit Agreement and related tax effect.
(h) Reflects the elimination of revenues and expenses associated with
Internet.com which was sold back to Alan Meckler.
F-26
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PENTON MEDIA, INC.
------------------
(Registrant)
By: /s/Joseph G. NeCastro
-----------------------
Joseph G. NeCastro
Chief Financial Officer
(Duly authorized officer
and Principal Financial
Officer)
Date: February 8, 1998
F-27
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
included in or made a part of this registration statement.
Stamford, Connecticut
February 8, 1999
