<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 2000
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PENTON MEDIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
36-2875386
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
1100 SUPERIOR AVENUE
CLEVELAND, OHIO 44114
(216) 696-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOSEPH G. NECASTRO
1100 SUPERIOR AVENUE
CLEVELAND, OHIO 44114
(216) 696-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
Copies to:
CHRISTOPHER M. KELLY, ESQ.
JONES, DAY, REAVIS & POGUE
599 LEXINGTON AVENUE, 32ND FLOOR
NEW YORK, NEW YORK 10022
(212) 326-3939
GREGG A. NOEL, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
TITLE OF SHARES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $.01 par value................................ 4,184,883(1)(2) $33.69 $140,988,708 $37,221(3)
Right to purchase Series A Junior Participating Preferred
Stock, $.01 par value..................................... 4,184,883(4) --(5) -- --
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(1) These shares were previously registered under Registration Statement on
Form S-3 (Registration File No. 333-44582) and are included herein pursuant
to Rule 429(b) under the Securities Act of 1933, as amended. Includes an
aggregate of 545,854 shares of common stock that the underwriters have an
option to purchase to cover over-allotments, if any.
(2) Each right to purchase Series A Junior Participating Preferred Stock
registered on this form will attach to and trade with each share of common
stock previously registered under Registration File No. 333-44582.
(3) Registration fees in the aggregate amount of $37,221 were paid in
connection with the first filing of Registration File No. 333-44582.
(4) Includes an aggregate of 545,854 rights to purchase Series A Junior
Participating Preferred Stock that the underwriters have an option to
purchase to cover over-allotments, if any.
(5) The value attributable to each right, if any, is reflected in the market
price of each share of common stock to which it is attached.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
CONTAINED IN THIS REGISTRATION STATEMENT ALSO RELATES TO SECURITIES REGISTERED
ON THE REGISTRANT'S REGISTRATION STATEMENT ON FORM S-3 (REGISTRATION FILE NO.
333-44582).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH
WE ARE PERMITTED BY U.S. FEDERAL SECURITIES LAWS TO OFFER THESE
SECURITIES USING THIS PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR
OFFER TO BUY THEM UNTIL THE DOCUMENTATION FILED WITH THE SEC RELATING TO
THESE SECURITIES HAS BEEN DECLARED EFFECTIVE BY THE SEC. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR SOLICITATION OF YOUR
OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THAT WOULD NOT BE
PERMITTED OR LEGAL.
SUBJECT TO COMPLETION -- SEPTEMBER 28, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROSPECTUS
, 2000
[PENTON LOGO]
PENTON MEDIA, INC.
3,638,320 SHARES OF COMMON STOCK
--------------------------------------------------------------------------------
PENTON:
- We are a leading business-to-business media company providing industry-
focused publications, trade shows and conferences and online media products.
- Penton Media, Inc.
1100 Superior Avenue
Cleveland, Ohio 44114
(216) 696-7000
- NYSE SYMBOL: PME
THE OFFERING:
- All of the shares of common stock are being sold by existing stockholders.
- In addition, the underwriters have an option to purchase an additional 242,748
shares from an existing stockholder and 303,000 shares from Penton to cover
over-allotments.
- There is an existing trading market for these shares. The reported last sales
price on September 22, 2000 was $32.375 per share.
- Penton will not receive any proceeds from the sale of the shares being sold by
existing stockholders.
- Closing: September 29, 2000.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Per Share Total
-------------------------------------------------------------------------------
<S> <C> <C>
Public offering price: $30.00 $109,149,600
Underwriting fees: $ 1.35 $ 4,911,732
Proceeds to selling stockholders: $28.65 $104,237,868
-------------------------------------------------------------------------------
</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
--------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
--------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE MERRILL LYNCH & CO.
---------------
CREDIT SUISSE FIRST BOSTON
SALOMON SMITH BARNEY
DLJDIRECT INC.
<PAGE> 3
Connecting Communities in a New Economy
[Graphic]
[graphic from floor of trade show]
In Person
Penton produces 116 trade shows and conferences worldwide, including
Internet World, a leading Internet business and technology event.
In Print
Penton publishes 51 specialized trade magazines that link buyers and
sellers in the industries we serve.
[graphic of trade magazines]
[graphic of page from web site]
Online
Penton offers a broad range of electronic media, including 104 Web sites
and other online products.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 1
Risk Factors............................... 8
Use of Proceeds............................ 12
Price Range of Common Stock and Dividend
Policy................................... 12
Capitalization............................. 13
Selected Historical Financial
Information.............................. 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 15
Business................................... 25
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management................................. 31
Principal and Selling Stockholders......... 34
Principal United States Federal Tax
Consequences to Non-U.S. Holders......... 38
Underwriting............................... 41
Legal Matters.............................. 43
Experts.................................... 43
Where You Can Find More Information........ 44
Index to Financial Statements.............. F-1
</TABLE>
ABOUT THIS PROSPECTUS
You may obtain the information incorporated by reference into this
prospectus without charge by following the instructions in the "Where You Can
Find More Information" section of this prospectus. Market and industry data used
in this prospectus are based on independent industry publications, other
publicly available information or the good faith belief of our management.
Although we believe that these sources are reliable, the accuracy and
completeness of the information is not guaranteed and has not been independently
verified. Our logo and some of the titles and logos of our publications, trade
shows and conferences and online media products referred to in this prospectus
are trademarks of Penton Media, Inc. Each trade name, trademark or service mark
of any other company appearing in this prospectus is the property of its holder.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: A number of statements made in this prospectus are not historical or
current facts, but deal with potential future circumstances and developments.
Those statements are qualified by the inherent risks and uncertainties
surrounding future expectations generally, and also may materially differ from
our actual future experience involving any one or more of these matters and
subject areas. We attempted to identify, in context, some of the factors that we
currently believe may cause future experience and results to differ from our
current expectations regarding the relevant matter or subject area. We have
identified some of these forward-looking statements with words, for example,
"anticipates," "estimates," "believes," "expects," "intends," "may," "will,"
"should" or the negative of those words or other comparable terminology. The
operation and results of our business also may be subject to the effect of other
risks and uncertainties, including, but not limited to:
- our ability to maintain customer loyalty from both users and advertisers;
- our ability to leverage our existing products and infrastructures;
- our ability to maintain our diverse revenue sources;
- our ability to make strategic acquisitions and efficiently integrate them
into our existing businesses;
- our ability to launch new products and/or services that fit strategically
with and add value to our businesses;
- our ability to achieve market penetration of new markets both
domestically and internationally;
- the receptivity of our Internet business by our customers; and
- our ability to execute our Internet strategy.
i
<PAGE> 5
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
business information and the financial statements and related notes that appear
elsewhere in this prospectus and in the documents that we incorporate by
reference into this prospectus. Unless otherwise indicated, the information
contained in this prospectus assumes that the underwriters do not exercise the
over-allotment option.
PENTON MEDIA
OUR BUSINESS
We are a leading business-to-business media company. We provide media
products that deliver proprietary business information to owners, operators,
managers and professionals in the industries we serve. Through these products,
we offer industry suppliers multiple ways to reach their customers and
prospects. We produce 51 specialized trade magazines, 116 trade shows and
conferences, and online media products. We have an experienced management team
with an average of 23 years in the media industry. For the year ended December
31, 1999, our revenues were $300.8 million and our EBITDA, as defined, was $67.3
million.
We believe we have leading media products in each of the ten industry
sectors we serve. We publish Electronic Design and Machine Design, two of the
top 15 trade magazines in the United States in 1999 based on advertising
revenues, according to Advertising Age magazine. We own four of the largest
trade shows in the United States based on net exhibit space, including the
Internet World and Natural Products Expos trade shows, according to the 2000
Tradeshow Week 200 directory. We produce online media products and are
developing a new generation of market-focused Web sites that include features
for e-commerce transactions and for information exchange within the industries
we serve.
Since our founding in 1892, we have grown from an industrial trade magazine
publishing company into a leading, integrated business-to-business media company
serving a range of industrial, service and technology markets. We are structured
along industry rather than product lines. This enables us to promote our related
group of products, including publications, trade shows and conferences and
online media products, to our more than 18,000 customers. We have successfully
introduced many new products in the industries we serve, and, since our spinoff
in August 1998, we have acquired 12 companies. These product launches and
acquisitions have diversified our operations by:
- strengthening our presence in our existing markets;
- providing us with strong market positions in new, high-growth
markets;
- expanding our presence in higher-margin trade shows and conferences;
and
- increasing our international product offerings.
In 1999, 67.6% of our revenues was from publications and 32.4% was from trade
shows and conferences.
We became an independent company as a result of our spinoff from Pittway
Corporation in August 1998. Our independence has enabled us to focus on building
our business through acquisitions and internal growth. The selling stockholders
in this offering are members of the Harris family that received their shares as
part of our spinoff from Pittway Corporation. This offering will substantially
reduce the Harris family's ownership from 3,487,470 shares to 156,237 shares and
will increase the number of shares of our common stock available for trading by
investors.
OUR INDUSTRY
The business-to-business communications industry is one of the largest and
fastest growing segments of the media industry. Veronis Suhler Media Merchant
Bank reports that our market is larger than radio broadcasting, outdoor media,
consumer book publishing and consumer magazine publishing, based on spending in
1999. In addition, Veronis Suhler projects that the business-to-business
communications industry will experience a 6.8% compound annual growth rate
through 2004 and will surpass $32.0 billion in revenue by 2004. Over the same
1
<PAGE> 6
period, Veronis Suhler forecasts that business magazine revenues will grow
annually at a rate of 5.7% and trade show revenues at a rate of 8.5%.
The business-to-business communications industry is highly fragmented.
There are about:
- 1,500 publishing companies, according to American Business Media;
- 5,000 trade magazine titles, according to Oxbridge Communications; and
- 3,000 trade shows in the United States and Canada produced by about 1,500
independent companies and industry associations, according to Tradeshow
Week Research Services.
OUR PRODUCTS AND SERVICES
Publications. We are one of the largest specialized trade magazine
publishers in the United States, according to American Business Media. In 1999,
our publications represented about $203.4 million of our revenues and about
$45.9 million of our EBITDA, before corporate expenses.
- We publish 51 specialized trade magazines with a total circulation of
over 3.5 million and 22 directories and buyer's guides.
- 34 of our magazines serve industry segments that are measured by audit
services; of these, 26 are ranked either #1 or #2 in their industry
segment.
- We control the circulation of our publications so that they reach the key
decision-makers in each of the industries we serve.
Trade Shows and Conferences. We have significantly expanded our trade show
and conference business in recent years. In 1999, our trade shows and
conferences represented about $97.4 million of our revenues and about $43.0
million of our EBITDA, before corporate expenses.
- We produce 116 trade shows and conferences worldwide.
- Our revenues from trade shows and conferences increased to 32.4% of our
revenues in 1999 from 13.5% of revenues in 1998.
- We continuously launch new trade shows and conferences within the
industry sectors we serve, including ASPCON, Internet Everywhere CEO
Summit, Natural Product Expo Europe and IW eCRM, which we launched in
2000.
Online Media Products. In response to the growing business use of the
Internet, we are launching new product offerings that enable buyers and sellers
within each of our industry sectors to access product information and news about
their industry and to interact with each other through the Internet. Our
products offer proprietary content, targeted advertising, online trade shows,
e-mail newsletters, publication subscriber services and trade show and
conference information and registration. Online media products are a growing
part of our business and represented less than 1% of our revenues in 1999.
- We produce 104 Web sites.
- We produce B2BShowplace.com, a network of online trade shows that
provides industry focused content, product information and
business-to-business exchanges.
- We are developing Healthwell.com, a leading online content and
business-to-business exchange focused on the natural products industry.
2
<PAGE> 7
OUR INDUSTRIES
The ten industries we serve are set forth below.
<TABLE>
<CAPTION>
TRADE SHOWS % OF 1999
INDUSTRY PUBLICATION(S) AND CONFERENCES ONLINE MEDIA REVENUE
------------------------- ----------------------- -------------------- ----------------------- ---------
<S> <C> <C> <C> <C>
1. Internet/Broadband Internet World Internet World internetworld.com 27
Boardwatch ISPCON boardwatch.com
2. Manufacturing American Machinist Computers in newequipment.com 14
New Equipment Digest Manufacturing
3. Electronics Electronic Design Wireless Symposium/ elecdesign.com 13
EE Product News Portable by Design eepn.com
Microwaves & RF wirelessportable.com
4. Design/Engineering Machine Design A/E/C SYSTEMS machinedesign.com 13
Computer-Aided IMET MDcybercad.com
Engineering
5. Natural Restaurant Hospitality Natural Products healthwell.com 10
Products/Food/ Retail Convenience Store Expo Bakery-net.com
Decisions
6. Management IndustryWeek IW's Best Plants industryweek.com 6
Expansion Management Conferences expansionmanagement.com
7. Supply Chain/Aviation Transportation & Supply Chain Expo atwonline.com 6
Distribution mhmanagement.com
Air Transport World
8. Mechanical Systems/ Contracting Business HVAC Comfortech hvacrshowplace.com 4
Construction Show
9. Government/Compliance Government Product News govgroup.com 4
Occupational Hazards occupationalhazards.com
10. Leisure/Hospitality Lodging Hospitality International lhonline.com 3
Leisure
Industry Week
</TABLE>
OUR GROWTH STRATEGY
Our objective is to be the leading business media company in the industries
we serve. To achieve this objective, we intend to continue to:
- broaden our product offerings;
- expand our trade show and conference business;
- acquire leading positions in new, growing markets;
- expand market positions globally; and
- accelerate development of Internet products.
RECENT DEVELOPMENTS
On September 15, 2000, we acquired Duke Communications International for an
aggregate purchase price of $100.0 million, which was paid at closing in cash,
and a contingent payment of up to $50.0 million. The contingent payment, if
earned, will be paid over the next three years and will be earned if the
operations of the business exceed specified targets in each of the next three
years. We used existing cash to pay the aggregate purchase price at closing.
Founded in 1982, Duke is a multi-platform technology-focused information
provider. Duke produces magazines, books, e-mail newsletters and Web sites to
educate and inform computer and financial professionals about trends in
technology and business. The leading trade magazines produced by Duke are
Windows 2000, which targets Windows NT professionals, and NEWS/400, which
targets IT professionals using IBM systems.
On August 31, 2000, we entered into an asset purchase agreement to acquire
the trade shows operated by Professional Trade Shows, Inc. for $17.0 million in
cash. We expect to use cash on hand and our existing
3
<PAGE> 8
revolving credit facility to pay the aggregate purchase price at closing.
Founded in 1981, Professional Trade Shows produces 50 regional trade shows and
conferences for the plant engineering and maintenance, material handling,
buildings and facilities maintenance, design engineering, and machine tool
industries. We cannot assure you that this proposed acquisition will be
consummated. The transaction is subject to satisfaction of customary closing
conditions.
On August 31, 2000, we entered into a non-binding letter of intent to
acquire a business media company. The letter of intent provides for an aggregate
purchase price of $65.0 million, to be paid at closing in cash, and a contingent
payment of up to $35.0 million. The contingent payment, if earned, would be paid
after the first year following the closing of the acquisition and would be
earned if the results of operations of the business exceed specified targets in
that year. We cannot assure you that this proposed acquisition will be
consummated. The transaction is subject to a number of conditions, including,
among others, satisfactory completion of due diligence and obtaining government
approval.
In February 2000 we sold 2.0 million shares of common stock of internet.com
Corporation in a public offering at a price of $60.00 per share for net proceeds
of $113.1 million. internet.com provides a network of Web sites for Internet
professionals that allows advertisers to target specific Internet audiences. We
currently own about 3.0 million shares of internet.com.
4
<PAGE> 9
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by selling
stockholders............................... 3,638,320 shares
Common stock to be outstanding after the
offering................................... 31,818,279 shares, based on 31,818,279 shares
outstanding as of June 30, 2000. This does
not include the 303,000 shares of common
stock to be offered and sold by Penton in the
event the underwriters exercise the
over-allotment option, and 1,539,284 shares
of common stock issuable upon vesting of
deferred share awards or exercise of
outstanding options under our various equity
plans.
Use of proceeds.............................. We will not receive any of the proceeds from
the sale of the shares unless the
underwriters exercise the over-allotment
option. If we receive any proceeds, we intend
to use them for general corporate purposes.
</TABLE>
5
<PAGE> 10
SUMMARY HISTORICAL FINANCIAL DATA
The following tables present our summary financial data. The summary
historical statement of income data for each of the three years in the period
ended December 31, 1999 have been derived from our audited consolidated
financial statements and related notes, which appear elsewhere in this
prospectus. The summary historical statement of income data for the six months
ended June 30, 1999 and 2000 and the summary balance sheet data as of June 30,
2000 have been derived from our unaudited interim financial statements and
related notes, which appear elsewhere in this prospectus and, in the opinion of
management, include all adjustments, consisting only of normal recurring
accruals, that are necessary for a fair presentation of our financial position
and operating results for these periods. The results of operations for interim
periods are not necessarily indicative of results for a full year's operations.
You should read the following information together with our historical
consolidated financial statements and related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" appearing
elsewhere in this prospectus.
The information contained in the tables assumes that the underwriters do
not exercise the over-allotment option.
You should also consider the following when reading the summary statement
of income data in the tables below:
- All historical amounts have been restated to reflect the classification
of our Printing segment and Direct Mail segment as discontinued.
- EBITDA is earnings from continuing operations before interest, taxes,
depreciation, amortization and other one-time, non-recurring items.
- In 2000, we began disclosing Internet revenues and EBITDA separately.
- EBITDA margin is EBITDA divided by total revenues.
We have included EBITDA because we believe that investors find it to be a
useful tool for measuring a company's ability to generate cash. EBITDA does not
represent cash flow from operations, as defined by generally accepted accounting
principles, and is not calculated in the same way by all companies. In addition,
you should not consider EBITDA as a substitute for net income or net loss, as an
indicator of our operating performance or cash flow, or as a measure of
liquidity.
6
<PAGE> 11
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Publishing........................... $170,323 $179,729 $203,380 $ 96,838 $108,935
Trade shows & conferences............ 10,786 27,953 97,444 34,338 74,801
Internet............................. -- -- -- 134 1,147
-------- -------- -------- -------- --------
Total revenues.................... 181,109 207,682 300,824 131,310 184,883
Operating expenses..................... 156,255 181,464 261,434 119,242 155,874
-------- -------- -------- -------- --------
Operating income....................... 24,854 26,218 39,390 12,068 29,009
Interest expense, net.................. (823) (5,545) (21,558) (12,159) (5,176)
Miscellaneous, net..................... (2) (45) 257 25 (1,495)
Gain on sale of investments............ 1,040 -- 5,906 -- 110,210
Provision for income taxes............. (10,457) (9,442) (16,065) (257) (57,430)
Income (loss) from discontinued
operations........................... 262 (296) 33 651 (85)
Gain on sale of discontinued
operations........................... -- -- 8,660 -- --
Extraordinary item -- early
extinguishment of debt............... -- -- (8,413) (2,156) --
-------- -------- -------- -------- --------
Net income (loss)...................... $ 14,874 $ 10,890 $ 8,210 $ (1,828) $ 75,033
======== ======== ======== ======== ========
Basic earnings per share............... $ 0.70 $ 0.50 $ 0.29 $ (0.07) $ 2.36
Diluted earnings per share............. $ 0.70 $ 0.50 $ 0.29 $ (0.07) $ 2.34
Basic average shares outstanding....... 21,240 21,882 28,108 24,900 31,769
Diluted average shares outstanding..... 21,240 21,882 28,209 24,900 32,006
CASH FLOWS AND OTHER DATA:
Cash flows:
Operating............................ $ 23,186 $ 25,749 $ 34,357 $ (3,191) $(10,534)
Investing, includes capital
expenditures...................... (53,192) (271,157) (27,770) (48,708) 93,895
Financing............................ 30,854 246,993 19,879 55,484 (1,218)
Capital expenditures, excluding
businesses acquired.................. 5,450 5,775 5,884 (2,162) (5,833)
Depreciation and amortization.......... 3,903 7,791 27,918 13,154 15,029
EBITDA................................. 28,757 34,009 67,308 25,222 44,038
EBITDA margin.......................... 15.9% 16.4% 22.4% 19.2% 23.8%
</TABLE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, 2000
--------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Cash........................................................ $112,414
Working capital (deficit)................................... 85,359
Goodwill and other intangibles.............................. 439,454
Total assets................................................ 700,949
Total debt.................................................. 215,000
Stockholders' equity........................................ 358,338
</TABLE>
7
<PAGE> 12
RISK FACTORS
An investment in Penton's common stock involves risk. In addition to the
other information contained or incorporated by reference in this prospectus, you
should carefully consider the following risk factors in deciding whether to
invest in our common stock.
WE DEPEND ON ADVERTISING REVENUES, WHICH DECREASE DURING ECONOMIC DOWNTURNS AND
FLUCTUATE FROM PERIOD TO PERIOD.
For the year ended December 31, 1999, about 67.6% of our revenues came from
advertising. Our advertising revenues fluctuate with general economic cycles.
Any material decline in advertising revenue would have a material adverse effect
on our business, results of operations and financial condition. Historically,
advertising revenues have increased during economic recoveries and decreased
during both general economic downturns and regional economic recessions. In the
event of a general economic downturn or a recession, our advertisers may reduce
their advertising budgets or intensify their attempts to negotiate lower
advertising rates.
Our advertising revenues may fluctuate from period to period based on the
spending patterns of our customers. Many of our large customers may concentrate
their advertising expenditures around major new product launches. We cannot
always know or predict when our large customers intend to launch new products.
We cannot predict any related fluctuation in our advertising revenues.
IF WE ARE UNABLE TO COMPLETE ACQUISITIONS OR INTEGRATE ACQUISITIONS EFFECTIVELY,
OUR BUSINESS COULD BE ADVERSELY AFFECTED.
We intend to continue to grow in part through acquisitions. We may not be
able to identify suitable candidates or make acquisitions on terms that are
favorable to us. In addition, we may not be able to successfully complete any
acquisitions, including our proposed acquisition of Professional Trade Shows,
Inc., or integrate acquisitions into our existing operations or effectively
manage those businesses once integrated. If we are unable to integrate our
recent or future acquisitions successfully, our business could be adversely
affected.
FINANCING OF FUTURE ACQUISITIONS MAY INCREASE OUR DEBT, REDUCE OUR CASH AND
ADVERSELY AFFECT OUR STOCKHOLDERS.
We may finance future acquisitions with internally generated funds, bank
borrowings, public offerings or private placements of debt securities, or
through a combination of these sources. This may have the effect of increasing
our debt and reducing our cash available for other purposes. In addition, we
could issue additional shares of our common stock as consideration for
acquisitions. If we do, our stockholders may experience dilution.
ACQUISITIONS MAY DIVERT OUR MANAGEMENT'S ATTENTION AWAY FROM RUNNING OUR
COMPANY.
Acquisitions are an important part of our business strategy. Acquisitions
may require substantial attention from, and place substantial additional demands
upon, our senior management. This may divert their attention from our existing
businesses, making it more difficult to manage them effectively. In addition,
unanticipated events or liabilities relating to these acquisitions or the
failure to retain key personnel could have a material adverse effect on our
business, results of operations and financial condition.
THE TERMS OF OUR INDEBTEDNESS MAY RESTRICT OUR ABILITY TO PURSUE OUR GROWTH
STRATEGY.
The terms of our credit agreement impose restrictions on our ability to,
among other things, borrow and make investments, acquire other businesses, and
make capital expenditures and distributions on our capital stock. In addition,
our credit agreement requires us to satisfy specified financial covenants. Our
ability to comply with these provisions depends, in part, on factors over which
we may have no control. These restrictions could adversely affect our ability to
pursue our growth strategy. If we breach any of our financial covenants or fail
to make scheduled payments, our creditors could declare all amounts owed to them
to be immediately due and payable. We may not have available funds sufficient to
repay the amounts declared due and payable, and we may have to sell assets to
repay those amounts. Our credit agreement is secured by substantially all of our
assets, including the stock of our subsidiaries. If we cannot repay all amounts
that we have borrowed under our credit agreement, our lenders could proceed
against our assets.
8
<PAGE> 13
THE PROFITABILITY AND SUCCESS OF OUR TRADE SHOWS AND CONFERENCES COULD BE
ADVERSELY AFFECTED IF WE LOSE SCHEDULED DATES AND LOCATIONS OR ARE UNABLE TO
INCREASE THE SIZE OF THOSE EVENTS.
As the trade show and conference industry grows, we increasingly compete
for desirable dates and venues for our trade shows and conferences. As this
competition intensifies, we could lose important engagements. If we lose dates
and venues for events, the profitability and future success of these events
could be adversely affected. Although we generally reserve venues and dates more
than a year in advance, these reservations are not binding until we sign a
contract with a facility operator. These contracts generally hold venues and
dates for only one year. In addition, we may desire to increase the size of our
trade shows and conferences to take advantage of increasing demand in the
future. If we are unable to secure larger venues with suitable exhibit space to
accommodate this demand, the growth of our trade show and conference business
could be adversely affected. Moreover, circumstances beyond our control, like
natural disasters, labor strikes and transportation shutdowns, could present
financial risk to our trade shows and conferences, which could have an adverse
effect on our business, results of operations and financial condition.
A SIGNIFICANT DECLINE IN OUR INTERNET/BROADBAND TRADE SHOW AND CONFERENCE
BUSINESS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Our Internet/Broadband trade shows and conferences produce a significant
portion of our cash flow. As a result, a significant decline in the performance
of these trade shows and conferences could adversely affect our business,
results of operations and financial condition.
WE DEPEND ON TRADE SHOW AND CONFERENCE AND PUBLISHING REVENUES, WHICH VARY DUE
TO SEASONALITY.
Our trade shows and conferences and publishing revenues are seasonal. Our
revenue typically reaches its highest level during the second and fourth
quarters of each calendar year. As a result, we could incur a net loss during
the first and third calendar quarters. This is due largely to the timing of our
trade shows and conferences and the general increase in publishing revenue in
the second and fourth quarters.
CONTINGENT TAX LIABILITY RELATED TO THE SPINOFF OF OUR COMMON STOCK BY PITTWAY.
In connection with the tax-free spinoff of our common stock by Pittway to
its stockholders on August 7, 1998, we agreed not to take any action that would
cause the spinoff to be taxable to Pittway under section 355 of the Internal
Revenue Code. We also agreed to indemnify Pittway for any liability suffered by
it if we were to take any action that caused the spinoff to be taxable to
Pittway. The spinoff would be taxable to Pittway if this offering were part of a
plan or series of related transactions, including transactions involving our
common stock that have already taken place, pursuant to which one or more
persons, acting independently or in concert, acquire 50.0% or more of our common
stock. Under proposed Treasury regulations, this offering would not be
considered part of a plan or series of related transactions because it is being
made more than two years after the spinoff and there was no agreement,
understanding or arrangement concerning this offering at the time of the spinoff
or within two years thereafter. The proposed regulations will not be effective
until promulgated in final form and are subject to change. We cannot assure you
that the proposed regulations will be promulgated in final form. Because of the
present uncertainty in this area of the tax law, we believe, but we cannot
assure you, that the Internal Revenue Service could not successfully assert that
this offering is part of a plan or series of related transactions that causes
the spinoff to be taxable to Pittway. If the spinoff were taxable to Pittway,
our payment to Pittway under our indemnity agreement could have a material
adverse effect on our financial condition.
COMPETITION MAY ADVERSELY AFFECT OUR EARNINGS AND RESULTS OF OPERATIONS.
We experience intense competition for our products and services. If we fail
to compete effectively, our earnings and results of operations could be
adversely affected. We compete with several much larger international firms that
operate in many markets and have broad product offerings in publishing and trade
shows and conferences. We compete for readers and advertisers in the publishing
marketplace and for trade show and conference expenditures, sponsorships,
exhibit space, and show attendees in the trade show and conference marketplace.
Because our industry is relatively easy to enter, we anticipate that additional
competitors, some of whom may have greater resources than Penton, may enter
these markets and intensify competition.
9
<PAGE> 14
OUR OVERALL OPERATIONS MAY BE ADVERSELY AFFECTED BY RISKS ASSOCIATED WITH
INTERNATIONAL OPERATIONS.
We have operations outside the United States. We intend to expand further
into international markets. We have limited experience in developing localized
versions of our publications and trade shows and conferences and in marketing
and distributing them internationally. In addition, the following risks in
international markets could have a material adverse effect on our future
international operations and, consequently, on our business, results of
operations and financial condition:
- the uncertainty of product acceptance by different cultures;
- the risks of divergent business expectations or cultural incompatibility
inherent in establishing joint ventures with foreign partners;
- difficulties in staffing and managing multi-national operations;
- currency fluctuations;
- general economic and political uncertainties and potential for social
unrest;
- limitations on our ability to enforce legal rights and remedies;
- state-imposed restrictions on the repatriation of funds; and
- potentially adverse tax consequences.
NEW PRODUCT LAUNCHES OR ACQUIRED PRODUCTS MAY REDUCE OUR EARNINGS OR GENERATE
LOSSES.
Our future success will depend in part on our ability to continue offering
new products that successfully gain market acceptance by addressing the needs of
specific audience groups within our targeted industries. Our efforts to
introduce new or integrate acquired products may not be successful or
profitable. The process of internally researching and developing, launching,
gaining acceptance and establishing profitability for a new product, or
assimilating and marketing an acquired product, is both risky and costly. New
products generally incur initial operating losses.
In addition, we have invested in, and intend to continue to invest in, the
development of various Internet products, which are currently generating losses.
The Internet is still in the early stages of development as a commercial medium.
These products may not be successful or profitable.
Costs related to the development of new products are expensed as incurred
and, accordingly, our profitability from year to year may be adversely affected
by the number and timing of new product launches.
RELIANCE ON PRINCIPAL VENDORS COULD ADVERSELY AFFECT OUR BUSINESS.
We rely on our principal vendors. Currently, our principal vendors are
paper suppliers, the United States Postal Service and our printing supplier. If
any of our principal vendors discontinues or temporarily terminates its services
and we are unable to find adequate alternatives, we may experience increased
prices, interruptions and delays in services. These factors could adversely
affect our business.
INCREASES IN PAPER OR POSTAGE COSTS WOULD CAUSE OUR EXPENSES TO INCREASE AND MAY
ADVERSELY AFFECT OUR PROFITABILITY.
Paper is a significant expense relating to our print products, accounting
for about 4.9% of our total operating expenses in 1999. Significant increases in
paper prices, which have been volatile in recent years, may have an adverse
effect on our business. We do not use forward contracts and all of our paper
supply vendor arrangements provide for price adjustments on a quarterly basis to
reflect then-prevailing market prices.
Postage for magazine distribution and direct mail solicitations is also a
significant expense for us, accounting for about 6.3% of our total operating
expenses in 1999. Significant increases in postage prices may have an adverse
effect on our business. We use the United States Postal Service for domestic
distribution of substantially all of our products and marketing materials.
10
<PAGE> 15
LOSS OF KEY PERSONNEL COULD IMPAIR OUR SUCCESS.
We benefit from the leadership and experience of our senior management
team, and we depend on their continued services in order to successfully
implement our business strategy. Although we have entered into employment
agreements with Thomas L. Kemp and Daniel J. Ramella and other management
members, they and other key personnel may not remain in our employment. The loss
of key personnel could have a material adverse effect on our business, results
of operations and financial condition.
TAKEOVER DEFENSE PROVISIONS MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.
Various provisions of Delaware corporation law and of our corporate
governance documents may inhibit changes in control not approved by our Board of
Directors and may have the effect of depriving stockholders of an opportunity to
receive a premium over the prevailing market price of our common stock in the
event of an attempted hostile takeover. In addition, the existence of these
provisions may adversely affect the market price of our common stock. These
provisions include:
- a classified Board of Directors;
- a prohibition on stockholder action through written consents;
- a requirement that special meetings of stockholders be called only by the
Board of Directors;
- advance notice requirements for stockholder proposals and nominations;
and
- availability of "blank check" preferred stock.
We also have a stockholder rights plan that provides for, among other
things, distributions to our stockholders upon an actual or prospective change
in control of our company. The plan has an anti-takeover effect because a
distribution under the plan may cause a substantial dilution to a person or
group that attempts to acquire a substantial number of our shares without
approval of our Board of Directors.
THE INFRINGEMENT OR INVALIDATION OF OUR PROPRIETARY RIGHTS COULD HAVE AN ADVERSE
EFFECT ON OUR BUSINESS.
We regard our copyrights, trademarks, including our Internet domain names,
service marks and similar intellectual property as critical to our success. We
rely on copyright and trademark laws in the United States and other
jurisdictions and on confidentiality agreements with some of our employees and
others to protect our proprietary rights. If any of these rights were infringed
or invalidated, our business could be materially adversely affected. In
addition, our business activities could infringe upon the proprietary rights of
others, who could assert infringement claims against us. We could face costly
litigation if we are forced to defend these claims. If we are unsuccessful in
doing so, our business could be adversely affected.
We seek to register our trademarks in the United States and elsewhere.
These registrations could be challenged by others or invalidated through
administrative process or litigation. In addition, our confidentiality
agreements with some of our employees or others may not provide adequate
protection of our proprietary rights in the event of unauthorized use or
disclosure of our proprietary information or if our proprietary information
otherwise becomes known, or is independently developed, by competitors.
11
<PAGE> 16
USE OF PROCEEDS
Penton will not receive any proceeds from the sale of common stock by the
selling stockholders. If the underwriters' over-allotment option is exercised in
full, we will receive net proceeds (after deducting the underwriters' discounts
and commissions and estimated offering expenses) of about $8.2 million.
We currently intend to use the net proceeds of this offering received by us
for general corporate purposes. Pending these uses, we expect to invest these
funds in short-term, interest-bearing, investment grade securities.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is traded on the New York Stock Exchange under the symbol
PME. Our common stock commenced trading on August 10, 1998 after we completed
our spinoff from Pittway. The following table sets forth, for the periods
indicated, the high and low sales prices for the common stock as reported on the
New York Stock Exchange.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON
STOCK
---------------
HIGH LOW
---- ---
<S> <C> <C>
Year Ended December 31, 2000:
First Quarter............................................. $27 13/16 $21 1/4
Second Quarter............................................ $36 $22 3/16
Third Quarter (through September 22, 2000)................ $36 3/8 $30 1/4
Year Ended December 31, 1999:
First Quarter............................................. $22 1/2 $18 1/8
Second Quarter............................................ $29 5/8 $19 1/2
Third Quarter............................................. $24 1/4 $12 5/8
Fourth Quarter............................................ $24 3/4 $14 3/4
Year Ended December 31, 1998:
Third Quarter (from August 10, 1998)...................... $17 $12 7/8
Fourth Quarter............................................ $20 1/4 $12 1/2
</TABLE>
On September 22, 2000, the reported last sales price of our common stock on
the New York Stock Exchange was $32.375 per share.
Our dividend policy is determined by our Board of Directors. We currently
pay quarterly dividends in an amount of $0.03 per share. Any declaration or
payment of dividends in the future will be made by our Board of Directors from
time to time based upon the results of our operations and our financial
condition and such other matters as our Board of Directors considers relevant.
12
<PAGE> 17
CAPITALIZATION
The following table presents the capitalization of Penton as of June 30,
2000, based on common stock outstanding on that date of 31,818,279 shares, on an
actual basis. The capitalization information set forth in the table below should
be read together with the more detailed consolidated financial statements and
related notes appearing elsewhere in this prospectus. The information assumes
that the underwriters do not exercise the over-allotment option.
<TABLE>
<CAPTION>
AS OF
JUNE 30, 2000
-------------
(IN THOUSANDS)
<S> <C>
Cash........................................................ $112,414
========
Debt:
Revolving credit facility................................. $ --
Term loan A............................................... 140,000
Term loan B............................................... 75,000
--------
Total debt............................................. 215,000
Stockholders' equity:
Preferred stock, par value $0.01 per share; 2,000,000
shares authorized; none issued or outstanding.......... --
Common stock, par value $0.01 per share; 60,000,000 shares
authorized; 31,818,279 shares issued and outstanding... 318
Capital in excess of par value............................ 226,078
Retained earnings......................................... 110,098
Other comprehensive income................................ 31,486
Notes receivable officers/directors....................... (9,642)
--------
Total stockholders' equity............................. 358,338
--------
Total capitalization.............................. $573,338
========
</TABLE>
13
<PAGE> 18
SELECTED HISTORICAL FINANCIAL INFORMATION
The following tables present our selected financial data. The statement of
income data for each of the three years in the period ended December 31, 1999
and the balance sheet data as of December 31, 1998 and 1999 have been derived
from our audited consolidated financial statements and related notes, which
appear elsewhere in this prospectus. The statement of income data for each of
the two years in the period ended December 31, 1996 and the balance sheet data
as of December 31, 1995, 1996 and 1997 have been derived from our audited
consolidated financial statements and related notes that are not included in
this prospectus. The statement of income data for the six months ended June 30,
1999 and 2000 and balance sheet data as of June 30, 2000 have been derived from
our unaudited interim financial statements, which appear elsewhere in this
prospectus. The balance sheet data as of June 30, 1999 have been derived from
our unaudited interim financial statements that are not included in this
prospectus. In the opinion of management, our unaudited interim financial
statements include all adjustments, consisting only of normal recurring
accruals, that are necessary for a fair presentation of our financial position
and operating results for these periods. The results of operations for interim
periods are not necessarily indicative of results for a full year's operations.
You should read the following information together with our historical
consolidated financial statements and related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" appearing
elsewhere in this prospectus.
You should also consider the following when reading the statement of income
data below:
- All historical amounts have been restated to reflect the classification
of our Printing segment and Direct Mail segment as discontinued.
- EBITDA is earnings from continuing operations before interest, taxes,
depreciation, amortization and other one-time, non-recurring items.
- EBITDA margin is EBITDA divided by total revenues.
We have included EBITDA because we believe that investors find it to be a
useful tool for measuring a company's ability to generate cash. EBITDA does not
represent cash flow from operations, as defined by generally accepted accounting
principles, and is not calculated in the same way by all companies. In addition,
you should not consider EBITDA as a substitute for net income or net loss, as an
indicator of our operating performance or cash flow, or as a measure of
liquidity.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues..................................... $158,314 $166,631 $181,109 $207,682 $300,824 $131,310 $184,883
Operating expenses........................... 148,886 148,950 156,255 181,464 261,434 119,242 155,874
-------- -------- -------- -------- -------- -------- --------
Operating income............................. 9,428 17,681 24,854 26,218 39,390 12,068 29,009
Interest expense, net........................ (5) (3) (823) (5,545) (21,558) (12,159) (5,176)
Impairment of assets......................... -- -- -- -- -- -- (1,051)
Miscellaneous, net........................... 1,426 2 (2) (45) 257 25 (444)
Gain on sale of investments.................. 1,700 -- 1,040 -- 5,906 -- 110,210
Provision for income taxes................... (5,440) (7,205) (10,457) (9,442) (16,065) (257) (57,430)
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing operations..... 7,109 10,475 14,612 11,186 7,930 (323) 75,118
Income (loss) from discontinued operations... 1,468 481 262 (296) 33 651 (85)
Gain on sale of discontinued operations...... -- -- -- -- 8,660 -- --
Extraordinary item -- early extinguishment of
debt....................................... -- -- -- -- (8,413) (2,156) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............................ $ 8,577 $ 10,956 $ 14,874 $ 10,890 $ 8,210 $ (1,828) $ 75,033
======== ======== ======== ======== ======== ======== ========
Basic earnings per share..................... $ 0.40 $ 0.52 $ 0.70 $ 0.50 $ 0.29 $ (0.07) $ 2.36
Diluted earnings per share................... $ 0.40 $ 0.52 $ 0.70 $ 0.50 $ 0.29 $ (0.07) $ 2.34
Basic average shares outstanding............. 21,240 21,240 21,240 21,882 28,108 24,900 31,769
Diluted average shares outstanding........... 21,240 21,240 21,240 21,882 28,209 24,900 32,006
CASH FLOWS AND OTHER DATA:
Cash flows:
Operating.................................. $ 7,423 $ 20,507 $ 23,186 $ 25,749 $ 34,357 $ (3,191) $(10,534)
Investing, includes capital expenditures... (4,989) (4,722) (53,192) (271,157) (27,770) (48,708) 93,895
Financing.................................. (1,697) (15,888) 30,854 246,993 19,879 55,484 (1,218)
Capital expenditures, excluding businesses
acquired................................... 4,989 4,822 5,450 5,775 5,884 (2,162) (5,833)
Depreciation and amortization................ 3,302 3,335 3,903 7,791 27,918 13,154 15,029
EBITDA....................................... 12,730 21,016 28,757 34,009 67,308 25,222 44,038
EBITDA margin................................ 8.0% 12.6% 15.9% 16.4% 22.4% 19.2% 23.8%
BALANCE SHEET DATA (AT END OF PERIOD):
Cash......................................... $ 1,674 $ 1,571 $ 2,419 $ 3,953 $ 30,370 $ 7,516 $112,414
Working capital (deficit).................... 20,670 14,363 (25,316) (20,709) (34,566) (2,631) 85,359
Goodwill and other intangibles............... 21,916 21,940 71,822 387,612 451,236 454,270 439,454
Total assets................................. 116,494 108,799 156,426 479,301 809,379 622,565 700,949
Total debt................................... -- -- 34,170 307,000 215,000 246,740 215,000
Stockholders' equity......................... 70,763 59,151 69,613 87,489 402,601 279,280 358,338
</TABLE>
14
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Set forth below is a discussion and analysis of our financial condition and
results of operations. You should read this discussion and analysis together
with the financial statements and the related notes appearing elsewhere in this
prospectus. Historical results and percentage relationships set forth in the
consolidated financial statements, including trends that might appear, should
not be taken as indicative of future operations.
OVERVIEW
Penton was spunoff from Pittway Corporation and acquired Donohue Meehan
Publishing in August 1998; Penton then acquired Mecklermedia Corporation, now
known as Internet World Media, in November 1998; MFG Publishing, Inc. in
February 1999; Jon Peddie Associates in May 1999; New Hope Communications, Inc.
in May 1999; Multimedia Week in August 1999; Stardust.com in October 1999;
Nutracon in December 1999; Profit.Net, Inc. in February 2000; ComMunic in May
2000; National Advisory Group in July 2000; Meko Ltd. in July 2000; and Duke
Communications International in September 2000. In addition, in August 2000 we
signed an agreement to acquire Professional Trade Shows, Inc. As Penton acquires
additional companies, its sales mix, market focus, cost structure, operating
leverage and the seasonality of its business may change significantly.
Consequently, Penton's historical and future results of operations reflect and
will reflect the impact of acquisitions, and period-to-period comparisons may
not be meaningful in certain respects. Historical information for companies
subsequent to their acquisition may include integration and other costs that are
not expected to continue in the future.
On November 30, 1999, Penton completed the sale of its Printing segment to
R.R. Donnelley & Sons Company for approximately $31.0 million in cash. Penton
recorded a gain on the sale of $15.5 million, or $9.3 million, $0.33 per share,
after tax. In March 2000, Penton sold its Direct Mail segment for approximately
$4.0 million in cash. The sales price of $4.0 million resulted in a loss for
Penton of approximately $0.7 million, or $0.02 per share, including a provision
of $0.06 million for operating losses during the phase-out period. Operating
results, net assets and cash flows for the Printing and Direct Mail segments
have been reflected as discontinued operations in the accompanying financial
statements. Net income for the Printing segment was $0.3 million, $0.5 million
and $0.9 million in 1999, 1998 and 1997, respectively, or $0.01, $0.02 and $0.04
per share, on revenues of $10.4 million, $11.7 million and $10.5 million,
respectively. Net losses for the Direct Mail segment were $0.3 million, $0.8
million and $0.7 million in 1999, 1998 and 1997, respectively, or $0.01, $0.04
and $0.03 per share, on revenues of $12.2 million, $13.8 million and $13.3
million, respectively.
15
<PAGE> 20
RESULTS OF OPERATIONS
The following table sets forth income statement data of Penton expressed as
a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------------- ----------------
1997 1998 1999 1999 2000
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues......................................... 100.0% 100.0% 100.0% 100% 100%
Operating expenses:
Editorial, production and circulation.......... 44.3 41.5 38.9 40.4 35.3
Selling, general and administrative............ 39.8 42.2 38.8 40.4 40.9
Depreciation and amortization.................. 2.2 3.7 9.2 10.0 8.1
----- ----- ----- ----- -----
86.3 87.4 86.9 90.8 84.3
----- ----- ----- ----- -----
Operating income................................. 13.7 12.6 13.1 9.2 15.7
----- ----- ----- ----- -----
Other income (expense):
Interest expense, net.......................... (0.5) (2.7) (7.2) (9.3) (2.8)
Gain on sale of investments.................... 0.6 -- 2.0 -- 59.6
Impairment of assets........................... -- -- -- -- (0.6)
Miscellaneous, net............................. -- -- 0.1 -- (0.2)
----- ----- ----- ----- -----
0.1 (2.7) (5.1) (9.3) 56.0
----- ----- ----- ----- -----
Income (loss) from continuing operations before
income taxes................................... 13.8 9.9 8.0 (0.1) 71.7
Provision for income taxes....................... (5.7) (4.5) (5.4) (0.2) (31.1)
----- ----- ----- ----- -----
Income (loss) from continuing operations......... 8.1 5.4 2.6 (0.3) 40.6
Discontinued operations.......................... 0.1 (0.2) 2.9 0.5 --
----- ----- ----- ----- -----
Income before extraordinary item................. 8.2 5.2 5.5 0.2 40.6
Extraordinary item--early extinguishment of
debt........................................... -- -- (2.8) (1.6) --
----- ----- ----- ----- -----
Net income (loss)................................ 8.2 5.2 2.7 (1.4) 40.6
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
REVENUES
Total revenues increased $53.6 million, or 40.8%, from $131.3 million for
the six months ended June 30, 1999 to $184.9 million for the same period in
2000.
Publishing revenues increased $12.1 million, or 12.5%, from $96.8 million
for the six months ended June 30, 1999 to $108.9 million in the same period in
2000, due primarily to the following: (1) the addition of Natural Foods
Merchandiser, Delicious!, Nutrition Science News and Expansion Management
magazines, which were part of the New Hope acquisition in May 1999; (2) the
turnaround of Internet World magazine, which nearly doubled its revenues for the
six months ended June 30, 2000 when compared with the same prior year period;
(3) increased revenues year-over-year in our core magazines, such as Electronic
Design, American Machinist, Food Management, Government Product News and EE
Product News; (4) the Fluid Power Handbook & Directory, which was published in
2000 and is published every other year; and (5) the addition of Supply Chain
Technology News and CLEC Magazine, which were published for the first time after
the second quarter of 1999. These increases were offset somewhat by the
discontinuance of the IW Growing Companies magazine during the first quarter of
2000.
Trade show and conference revenues increased $40.5 million, or 117.8%, from
$34.3 million for the six months ended June 30, 1999 to $74.8 million for the
same period in 2000, due primarily to the following: (1) the first-time
inclusion of the Natural Products Expo East and Natural Products Expo Europe
shows, which were part of the New Hope acquisition in May 1999; (2) the
first-time inclusion of Stardust.com conferences, which were acquired in October
1999; (3) the addition of the Internet Everywhere CEO Summit, the IW China show,
the IW
16
<PAGE> 21
eCRM Spring show, the ABS Technology show and the Enterprise Customer Management
Spring show, which were held for the first time in 2000; (4) the IW Australia
and Supply Chain Expo shows, which were held in the third quarter of 1999 and
(5) significant year-over-year revenue increases from the Internet World Spring,
Internet World UK, ISPCON Spring, Wireless/Portable Spring and ISPCON London
shows. These increases were somewhat off-set by the IW Mexico, ISPCON Australia
and IW France shows, which were held during the second quarter of 1999 but will
not be held in 2000 until later in the year; lower year-over-year revenues from
the Service Management Europe show and the absence of the ConExpo show, which
was held in 1999 and is held every three years.
Internet revenues increased $1.0 million, or 756%, from $0.1 million for
the six months ended June 30, 1999 to $1.1 million for the same period in 2000,
due primarily to the addition of a number of new Web sites in the second half of
1999 and first half of 2000.
OPERATING EXPENSE
Operating expenses increased $36.6 million, or 30.7%, from $119.2 million
for the six months ended June 30, 1999 to $155.9 million for the same period in
2000. As a percentage of revenues, operating costs decreased from 90.8% in 1999
to 84.3% in 2000. The improvement in operating expenses as a percentage of
revenues was due primarily to higher margins earned from the trade shows held
during the first half of 2000, offset in part by higher corporate costs and
spending on Web development.
Editorial, Production and Circulation. Total editorial, production and
circulation expenses grew to $65.2 million for the six months ended June 30,
2000 compared to $53.0 million for the same period in 1999, representing an
increase of $12.2 million, or 23.0%. The increase was due primarily to the
acquisition of New Hope in May 1999 and costs associated with new trade shows
held for the first time in 2000.
As a percentage of revenues, editorial, production and circulation expenses
decreased from 40.4% in 1999 to 35.3% in 2000. The decrease was due largely to
higher margins earned from trade shows.
Selling, General and Administrative. Total selling, general and
administrative expenses grew $22.6 million, or 42.5%, from $53.1 million for the
six months ended June 30, 1999 to $75.6 million for the same period in 2000. The
increase was due primarily to the acquisition of New Hope in May 1999 and
Stardust in October 1999, costs associated with trade shows held for the first
time in 2000, the timing of corporate spending and higher executive compensation
expense.
As a percentage of revenues, selling, general and administrative expenses
increased from 40.4% in 1999 to 40.9% in 2000. The increase was due largely to
the timing of corporate spending and to higher executive compensation expenses.
Depreciation and Amortization. Depreciation and amortization increased $1.9
million, or 14.3%, to $15.0 million for the six months ended June 30, 2000. The
higher expense was the result primarily of the amortization of intangible assets
from the New Hope acquisition in May 1999. The acquisitions of Jon Peddie,
Multimedia Week, Stardust.com and Nutracon also contributed to the increase.
OPERATING INCOME
Overall, our operating income increased $16.9 million, or 140.4%, from
$12.1 million for the six months ended June 30, 1999 to $29.0 million for the
same period in 2000. Operating income as a percentage of revenue increased from
9.2% in 1999 to 15.7% in 2000.
OTHER INCOME (EXPENSE)
Interest expense decreased $7.0 million to $5.2 million for the six months
ended June 30, 2000, compared to $12.2 million the same prior year period, due
to a lower average debt balance outstanding for the six months ended June 30,
2000 when compared to the same prior year period as well as the significant
increase in interest earned on our cash balance in 2000.
17
<PAGE> 22
In February 2000, we sold 2.0 million shares of internet.com Corporation
stock and recognized a pre-tax gain of approximately $110.2 million.
In accordance with our review of impairment of long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," we recorded a $1.0 million non-cash charge to write down the carrying value
of certain leasehold improvements, furniture and fixtures, and computer
equipment to fair value.
EFFECTIVE TAX RATES
The effective tax rates from continuing operations were 43.0% and 66.2% for
the six months ended June 30, 2000 and 1999, respectively. The decrease in the
effective tax rate was due to our sale of a portion of our investment in
internet.com Corporation. The sale resulted in the recognition of $110.2 million
gain in pre-tax income.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUES
Total revenues increased $93.1 million, or 44.8%, from $207.7 million in
1998 to $300.8 million in 1999.
Publishing revenues increased $23.7 million, or 13.2%, from $179.7 million
to $203.4 million, due primarily to the following: (1) the addition of Baking
Management, Modern Baking and Convenience Store Decisions magazines, which were
part of the Donohue Meehan Publishing Company acquisition in August 1998; (2)
the addition of Boardwatch magazine and Internet World magazine, which were part
of the Internet World Media acquisition in November 1998; (3) the addition of
Natural Foods Merchandiser, Delicious!, Health and Nutrition Breakthroughs,
Nutrition Science News and Expansion Management magazines, which were part of
the New Hope acquisition in May 1999; (4) the addition of Mid-Range ERP
magazine, which was part of the MFG acquisition in February 1999; (5) the
addition of IW Growing Companies, the first issue of which was not published
until the second quarter of 1998; and (6) increased revenues year-over-year in
Penton's core magazines, such as Contracting Business, Machine Design, Foundry
Management and Technology, Government Procurement and Penton's Embedded Systems
Development. These increases were offset by (1) lower revenues from Electronic
Design magazine compared to the same period in the prior year, due to a slowdown
in the electronics market; (2) the absence of the Fluid Power Handbook &
Directory, which was published in 1998, and is published every other year; and
(3) lower revenues from various other core magazines compared with the same
period in the prior year.
Trade show and conference revenues increased $69.5 million, or 248.6%, from
$28.0 million to $97.4 million, due primarily to the following: (1) the
first-time inclusion of Internet World Media, which was acquired in late
November 1998 and which added the Fall and Spring Internet World trade shows as
well as the ISPCON tradeshows; (2) the first-time inclusion of New Hope, which
was acquired at the end of May 1999 and includes the Natural Products Expo East
and West trade shows; (3) the addition of A/E/C Systems UK Show, A/E/C GEO Expo
and the Metalmecanica show, all of which were held for the first time in 1999;
and (4) significant year-over-year revenue increases for the Supply Chain Expo,
Service Management Europe and Wireless Symposium/ Portable by Design Conference
& Exhibition.
OPERATING EXPENSE
Operating expenses increased $80.0 million, or 44.1%, from $181.5 million
in 1998 to $261.4 million in 1999. As a percentage of revenues, operating costs
decreased from 87.4% in 1998 to 86.9% in 1999. The improvement in operating
expenses as a percentage of revenues was due primarily to higher margins earned
on acquired trade shows that were held for the first time in 1999. These
improvements were offset by the increase in depreciation and amortization
related to the acquisitions and to the change in our goodwill amortization
policy for acquired trade shows, which reduced the write-off period from 40
years to 20 years.
Editorial, Production and Circulation. Total editorial, production and
circulation expenses grew to $116.9 million in 1999 compared to $86.1 million in
1998, representing an increase of $30.8 million, or 35.8%. Approximately $29.4
million of the increase was due to the Donohue Meehan Publishing acquisition in
18
<PAGE> 23
August 1998, the Internet World Media acquisition in November 1998 and the New
Hope acquisition in May 1999. These increases in costs were offset by the
absence of costs related to the biennial Fluid Power Handbook & Directory, which
was published in 1998, but not in 1999. In addition, costs related to our core
publishing operations were down due to advertising slowdowns, primarily in the
electronics and computer markets.
As a percentage of revenues, editorial, production and circulation expenses
decreased from 41.5% in 1998 to 38.9% in 1999. The decrease was due largely to
Donohue Meehan Publishing magazines, higher margins earned from the Internet
World Media and New Hope tradeshows, and production improvements.
Selling, General and Administrative. Total selling, general and
administrative expenses grew $29.0 million, or 33.1%, from $87.6 million in 1998
to $116.6 million in 1999. Approximately $27.2 million of the increase was due
to the Donohue Meehan Publishing acquisition in August 1998, the Internet World
Media acquisition in November 1998 and the acquisition of New Hope in May 1999.
Costs related to the biennial Fluid Power Handbook & Directory, which was
published in 1998, were not incurred in 1999. In addition, costs related to our
core publishing operations decreased due to advertising slowdowns, primarily in
the electronics and computer markets.
As a percentage of revenues, selling, general and administrative expenses
decreased from 42.2% in 1998 to 38.8% in 1999. The improvement was due largely
to the addition of new trade shows and conferences to our product mix.
Depreciation and Amortization. Depreciation and amortization increased
$20.1 million, or 258.3%, to $27.9 million. The higher expense was the result
primarily of the amortization of intangible assets of approximately $0.6 million
associated with the Donohue Meehan Publishing acquisition in August 1998; of
approximately $15.9 million from the Internet World Media acquisition in
November 1998; and approximately $2.5 million from the New Hope acquisition in
May 1999. In addition, the increase was due to the change in our goodwill
amortization policy for acquired tradeshows, effective with the fourth quarter
of 1998. We reduced the write-off period from 40 years to 20 years. The
acquisitions of MFG, Jon Peddie, Multimedia Week, Stardust.com and Nutracon also
contributed to the increase.
OPERATING INCOME
Overall, our operating income increased $13.2 million, or 50.2%, to $39.4
million from $26.2 million in the prior year. Operating income as a percentage
of revenue increased from 12.6% in 1998 to 13.1% in 1999.
OTHER INCOME (EXPENSE)
Interest expense increased $16.0 million to $21.6 million, due to
additional borrowings used to finance our acquisition strategy since our spinoff
in August 1998.
In July 1999, we sold 510,000 shares of internet.com Corporation stock and
recognized a gain of approximately $5.9 million.
EFFECTIVE TAX RATES
The effective tax rates from continuing operations were 67.0% and 45.8% in
1999 and 1998, respectively. Our acquisition of Independent Exhibitions, Ltd. in
December 1997, Donohue Meehan Publishing in August 1998 and Internet World Media
in November 1998 resulted in the recording of goodwill. The amortization of
goodwill for these transactions is recognized for financial statement purposes,
but is not deductible for tax purposes due to the structure of the purchase
transactions. Accordingly, our effective tax rate increased from 1998 due to the
full-year effect of the acquisitions.
EXTRAORDINARY ITEM
The extraordinary item in 1999, which aggregated $8.4 million, net of $5.6
million in taxes, relates to the write-off of unamortized deferred finance costs
associated with the partial paydown of senior debt with the proceeds from the
common stock offering completed in May 1999 and the refinancing of senior debt
in September 1999.
19
<PAGE> 24
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUES
Total revenues increased $26.6 million, or 14.7%, from $181.1 million in
1997 to $207.7 million in 1998.
Publishing revenues increased $9.3 million to $179.7 million, due primarily
to the following: (1) the Donohue Meehan Publishing acquisition in August 1998;
(2) two publications launched in the first quarter, IW Growing Companies and our
Embedded Systems Development; (3) the publication of Fluid Power Handbook &
Directory, which is published every other year; and (4) higher pricing on other
advertising business.
Trade show and conference revenues increased $17.2 million to $28.0 million
in 1998. About $12.0 million of the increase was due to the first-time inclusion
of the operations of INDEX, and about $5.0 million was due to Industrial Shows
of America. We acquired both Independent Exhibitions, Ltd. and Industrial Shows
of America in December 1997. In addition, 1998 included an increase in the
Wireless Symposium/Portable by Design Conference & Exhibition and approximately
$0.8 million related to the addition of Internet World Media in November 1998.
OPERATING EXPENSE
Operating expenses increased $25.2 million, or 16.1%, from $156.3 million
in 1997 to $181.5 million in 1998. As a percentage of revenues, operating costs
increased from 86.2% in 1997 to 87.4% in 1998. The increase in percentage was
due primarily to the increase in amortization related to acquisitions, period
costs related to Internet World Media and one-time spinoff and start up costs.
These increases were offset partially by the first full year of operations of
Independent Exhibitions, Ltd. and Industrial Shows of America.
Editorial, Production and Circulation. Total editorial, production and
circulation expenses grew to $86.1 million in 1998 compared with $80.3 million
in 1997, representing an increase of $5.8 million, or 7.2%. The increase was due
to the inclusion of the Independent Exhibitions, Ltd. and Industrial Shows of
America trade shows acquired in late 1997, which accounted for $4.7 million of
the total production expense increase. Other expense increases related to our
acquisition of Donohue Meehan Publishing in August 1998, our acquisition of
Internet World Media in November 1998 and our publication of the biennial Fluid
Power Handbook & Directory, which was not published in 1997. Accordingly,
editorial, production and circulation expenses declined as a percentage of
revenues from 44.3% in 1997 to 41.5% in 1998.
Selling, General and Administrative. Total selling, general and
administrative expenses grew $15.6 million, or 21.7%, to $87.6 million in 1998.
The increase was due to: (1) expenses of the Independent Exhibitions, Ltd. and
Industrial Shows of America trade shows held in 1998, which amounted to $4.9
million and $3.7 million, respectively; (2) period costs of the newly acquired
Internet World Media trade shows in the amount of $1.7 million, for which
related revenues were deferred until those trade shows were held in future
periods; (3) costs related to launching two publications in the first quarter,
IW Growing Companies and our Embedded Systems Development; (4) the Donohue
Meehan Publishing acquisition in August 1998; (5) one-time spinoff costs of
approximately $0.4 million; (6) costs related to the biennial Fluid Power
Handbook & Directory; (7) sales volume growth; and (8) higher charges related to
Pittway stock appreciation rights held by our employees, which will not recur.
Total costs charged to Penton by Pittway for 1998 and 1997 were $1.4 million.
Accordingly, selling, general and administrative expenses increased as a
percentage of revenues from 39.8% in 1997 to 42.2% in 1998.
Depreciation and Amortization. Depreciation and amortization increased $3.9
million to $7.8 million in 1998. The higher expense was the result primarily of:
(1) the amortization of intangible assets associated with the trade shows
acquired in December 1997; (2) the Donohue Meehan Publishing acquisition in
August 1998; (3) the Internet World Media acquisition in November 1998; and, (4)
beginning with the fourth quarter of 1998, the change from 40 years to 20 years
in our goodwill amortization policy for acquired trade shows, which accounted
for $0.3 million of additional amortization in 1998. While this change
negatively impacted the reported earnings per share, it has no impact on EBITDA.
20
<PAGE> 25
OPERATING INCOME
Overall, our operating income increased $1.3 million, or 5.2%, to $26.2
million from $24.9 million in the prior year. Operating income as a percentage
of revenue decreased from 13.7% to 12.6%, due primarily to the increase in
amortization associated with our acquisitions.
OTHER INCOME (EXPENSE)
Interest expense increased $4.7 million to $5.6 million due to additional
borrowings used to finance the two trade show company acquisitions in December
1997, the Donohue Meehan Publishing acquisition in August 1998 and the Internet
World Media acquisition in November 1998.
In 1998, we wrote down the carrying value of various intangible assets by
$1.0 million. In 1997, we recognized a $1.0 million gain on the sale of Managing
Office Technology magazine.
EFFECTIVE TAX RATES
The effective tax rates from continuing operations were 45.8% and 41.7% in
1998 and 1997, respectively. our acquisition of Independent Exhibitions, Ltd. in
December 1997, Donohue Meehan Publishing in August 1998 and Internet World Media
in November 1998 resulted in the recording of goodwill. The amortization of
goodwill for these transactions is recognized for financial statement purposes,
but is not deductible for tax purposes due to the structure of the purchase
transactions. Accordingly, our effective tax rate increased in 1998.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
EBITDA is earnings from continuing operations before interest, taxes,
depreciation, amortization and other one-time, non-recurring items. EBITDA is a
widely used and commonly reported standard measure utilized by analysts and
investors in the analysis of the media industry. EBITDA is not a measure of
performance under GAAP because it excludes those items listed above that are
significant components in understanding and evaluating our financial
performance. However, the following EBITDA information can be helpful in
determining our ability to meet our debt service requirements and in comparative
analyses of operating performance relative to other media companies. EBITDA is
not calculated in the same way by all companies. Our calculation of EBITDA is as
follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------- --------------------
1998 1999 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss)................ $ 10,890 $ 8,210 $ (1,828) $ 75,033
Interest expense, net............ 5,545 21,558 12,159 5,176
Gain on sale of investments...... -- (5,906) -- (110,210)
Provision for income taxes....... 9,442 16,065 257 57,430
Depreciation and amortization.... 7,791 27,918 13,154 15,029
Extraordinary item, net of
taxes.......................... -- 8,413 2,156 --
Discontinued operations, net of
taxes.......................... 296 (8,693) (651) 85
Impairment of assets............. -- -- -- 1,051
Miscellaneous, net............... 45 (257) (25) 444
-------- -------- -------- --------
EBITDA......................... $ 34,009 $ 67,308 $ 25,222 $ 44,038
======== ======== ======== ========
</TABLE>
Penton's EBITDA increased $33.3 million, or 97.9%, from $34.0 million in
1998 to $67.3 million in 1999. EBITDA margins increased from 16.4% in 1998 to
22.4% in 1999. The increases were due primarily to the addition of trade shows
and conferences to Penton's product mix. For the six months ended June 30, 2000,
our EBITDA increased $18.8 million, or 74.6%, to $44.0 million from $25.2
million for the same period in 1999. EBITDA margins increased to 23.8% for the
period compared with 19.2% in the same period in 1999. The increase was due
primarily to: (1) the acquisition of New Hope in May 1999; (2) the turnaround in
Internet World magazine; and (3) significant year-over-year revenue increases
from the Spring Internet World, Internet World
21
<PAGE> 26
UK, ISPCON Spring, and ISPCON London shows, offset in part by higher corporate
spending and Web site development charges. Our calculation of EBITDA is as
follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------- --------------------
1998 1999 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Publishing........................... $ 45,147 $ 45,897 $ 20,078 $ 25,086
Trade shows and conferences.......... 4,024 43,008 13,996 36,669
Internet............................. -- -- (455) (2,146)
Corporate............................ (15,162) (21,597) (8,397) (15,571)
-------- -------- -------- --------
EBITDA.......................... $ 34,009 $ 67,308 $ 25,222 $ 44,038
======== ======== ======== ========
</TABLE>
EBITDA for our publishing operations increased $0.8 million to $45.9
million in 1999, compared to $45.1 million in 1998. The increase was due
primarily to a full year of Donohue Meehan Publishing, offset by an advertising
decrease from slowdowns in the technology markets. EBITDA for our trade show and
conference operations increased $39.0 million, or 968.8%, from $4.0 million in
1998 to $43.0 million in 1999. This increase was due primarily to the acquired
Internet World Media and New Hope trade shows and conferences. Corporate costs
increased $6.4 million when compared with the same prior-year period due
primarily to 1998 and 1999 acquisitions.
For the six months ended June 30, 2000, EBITDA for our publishing
operations increased $5.0 million, or 24.9%, when compared with the prior year
period. EBITDA increases for publishing operations were due primarily to: (1)
the addition of the Natural Foods Merchandiser, Delicious!, Nutrition Science
News and Expansion Management magazines, which were part of the New Hope
acquisition in May 1999; (2) the turnaround of Internet World magazine in 2000
when compared with the same prior year period; and (3) the Fluid Power Handbook
& Directory, which was not published in 1999. For the six months ended June 30,
2000, EBITDA for our trade show and conference operations increased $22.7
million, or 162.0%. These increases were due primarily to: (1) the first-time
inclusion of the Natural Products Expo West trade show, which was part of the
New Hope acquisition in May 1999; (2) the first-time inclusion of Stardust.com
conferences, which were acquired in October 1999; (3) the addition of the
Internet Everywhere CEO Summit, IW eCRM Spring, IW China, ABS Technology and
Enterprise Customer Management shows, which were held for the first time in
2000; and (4) significant year-over-year revenue increases from the Internet
World Spring, Internet World UK, ISPCON Spring, and ISPCON London shows. For the
six months ended June 30, 2000, EBITDA for our Internet operations decreased
from a loss of $0.5 million to a loss of $2.1 million. These decreases were due
primarily to the increase in various costs associated with the development of
market-focused Web sites. For the six months ended June 30, 2000, corporate
costs increased $7.2 million, when compared with the same prior-year period. The
increases were due primarily to the timing of corporate spending, costs
associated with acquisitions and to higher executive compensation expense.
FOREIGN CURRENCY
The functional currency of our foreign operations is the local currency.
Accordingly, assets and liabilities of foreign operations are translated to U.S.
dollars at the rates of exchange on the balance sheet date; income and expense
are translated at the average rates of exchange prevailing during the year.
There were no significant foreign currency transaction gains or losses in 2000,
1999 or 1998.
LIQUIDITY AND CAPITAL RESOURCES
During the periods presented, we financed our operations primarily through
cash generated from operating activities, borrowings under our credit facilities
and the sale of equity securities, investments and assets.
Cash flow provided by operations in 1999 was $34.4 million, up $8.7 million
from $25.7 million in 1998. The increase was attributable to the acquisitions
completed in 1998 and 1999 and to the effect of non-cash items, including
depreciation and amortization, gains and losses on the sale of investments and
assets, and the extraordinary loss on the extinguishment of debt.
22
<PAGE> 27
Cash flow used by operations for the six months ended June 30, 2000 was
$10.5 million, up $7.3 million from the same period in 1999. The increase was
attributable to the acquisitions, principally New Hope, completed in the second
quarter of 1999 and to the effect of non-cash items, including the gain on the
sale of internet.com Corporation stock in the first quarter of 2000.
During 1999, cash from operating activities, along with cash from the sale
of internet.com Corporation stock and the sale of the Printing segment, was used
for capital expenditures, to make acquisitions and to exercise options for
internet.com Corporation stock. Our capital expenditures for 1997 were $5.5
million; in 1998, $5.8 million; and in 1999, $5.9 million.
During the first six months of 2000, cash from operating activities, along
with cash from the sale of internet.com Corporation stock and the sale of the
Direct Mail segment, was used for capital expenditures, to make acquisitions, to
pay earnouts and to pay dividends to shareholders. Our capital expenditures for
the six months ended June 30, 2000 were $5.8 million. We anticipate that total
capital expenditures for 2000 will be about $18.3 million, which will be used
primarily to relocate our corporate headquarters. These expenditures will be
funded from cash on hand, cash flow from operations, and, if necessary,
borrowings under our credit facility.
On September 1, 1999, we entered into a credit agreement with several banks
under which we can borrow up to $340.0 million. The agreement provides for a
revolving credit facility of up to $125.0 million, a long-term loan of $140.0
million (term loan A) and a long-term loan of $75.0 million (term loan B). The
proceeds of this credit agreement were used to repay debt outstanding under the
$325.0 million credit facility we obtained when we purchased Internet World
Media. On April 3, 2000, we amended our credit agreement to give us the
flexibility to sell assets of up to $30.0 million and the ability to monetize
our joint venture investments. At June 30, 2000, we had $215.0 million
outstanding under our term loans and $125.0 million available under our
revolving credit facility.
In May 1999, we completed a 6.5 million common share offering and received
net proceeds of approximately $118.4 million, which were used to repay senior
debt and for general corporate purposes, including the acquisition of New Hope.
On September 15, 2000, we acquired Duke Communications International for an
aggregate purchase price of $100.0 million, which was paid at closing in cash,
and a contingent payment of up to $50.0 million. The contingent payment, if
earned, will be paid over the next three years and will be earned if the
operations of the business exceed specified targets in each of the next three
years. We used existing cash to pay the aggregate purchase price at closing. In
addition, on August 31, 2000, we entered into an asset purchase agreement to
acquire the assets of Professional Trade Shows, Inc. for about $17.0 million in
cash. We expect to use cash on hand and our existing revolving credit facility
to pay the aggregate purchase price at closing. The transaction is subject to
satisfaction of customary closing conditions. We cannot assure you that the
proposed acquisition will be consummated.
Based upon current and anticipated levels of operations, management
believes that cash on hand and cash flow from operations, combined with
borrowings available under our credit facilities, will be sufficient to enable
us to meet current and anticipated cash operating requirements, including
scheduled interest and principal payments, capital expenditures and working
capital needs. However, actual capital requirements may change, particularly as
a result of any acquisitions that we may make. Our ability to meet current and
anticipated operating requirements will depend upon our future performance,
which, in turn, will be subject to general economic conditions and to financial,
business and other factors, including factors beyond our control. Depending on
the nature, size and timing of future acquisitions, we may be required to raise
additional capital through additional financing arrangements or the issuance of
private or public debt or equity securities. Management cannot assure that such
additional financing will be available on acceptable terms. Substantially all of
our debt bears interest at floating rates. Therefore, our liquidity and
financial condition are, and will continue to be, affected by changes in
prevailing interest rates.
23
<PAGE> 28
SEASONALITY
Prior to 1998, we had not experienced significant seasonality in our
business. The introduction of trade shows and conferences into our product mix
through the acquisitions of Independent Exhibitions, Ltd. and Industrial Shows
of America in late 1997, the acquisition of Internet World Media in November
1998 and the acquisition of New Hope in May 1999 has changed the seasonal
pattern of revenue and profit because all four companies have pronounced
seasonal patterns in their businesses. The majority of the trade shows owned by
Industrial Shows of America and Internet World Media are held in the second and
fourth quarters and, accordingly, the majority of their revenue is recognized in
these quarters. Furthermore, the majority of the Independent Exhibitions, Ltd.
shows historically have been held in the fourth quarter, and the New Hope shows
have been held in the first and third or fourth quarters. Accordingly, these
acquisitions had a positive impact on revenue and profit for these quarters.
We also may experience seasonal fluctuations as trade shows and conferences
held in one period in the current year may be held in a different period in
future years.
INFLATION
The impact of inflation on our results of operations has not been
significant in recent years.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). We were required to adopt this
statement in the first quarter of 2000. In June 1999, the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral
of the Effective Date of FASB Statement No. 133 an Amendment of FASB Statement
No. 133." SFAS 137 deferred the effective date of SFAS 133 for all fiscal
quarters beginning after June 15, 2000. Even though we have entered into
interest rate cap, collar and swap agreements, management does not believe these
statements will have a material impact on our business, results of operations or
financial condition.
Staff Accounting Bulletin (SAB) No. 101 "Revenue Recognition in Financial
Statements" provides guidance on existing revenue recognition policies and is
not expected to change or have a material impact on our consolidated financial
statements. Subsequent to the initial release of the bulletin, the staff issued
SAB 101B "Second Amendment: Revenue Recognition in Financial Statements," which
delayed the effective period for adoption to the fourth quarter of 2000.
EURO CONVERSION
On January 1, 1999, 11 of the 15 participating countries that are members
of the European Union established a new uniform currency known as the Euro. The
currency existing prior to such date in the participating countries will be
phased out during the transition period commencing January 1, 1999 and ending
January 1, 2002. During this transition period, both the Euro and the existing
currency will be available in the participating countries. Although we generate
revenues in some of the participating countries, management does not anticipate
that the introduction and use of the Euro will materially affect our business,
results of operations or financial condition.
24
<PAGE> 29
BUSINESS
OVERVIEW
Established in 1892, we are a leading business-to-business media company,
providing media products to professionals in ten industries. We provide
integrated marketing solutions to suppliers in our industries through:
- trade publications;
- trade shows and conferences; and
- online media products.
We produce 51 specialized trade magazines, 116 trade shows and conferences,
and online media products, including 104 Web sites, serving the following ten
industries:
<TABLE>
<S> <C> <C>
- Internet/Broadband - Management
- Design/Engineering - Supply Chain/Aviation
- Electronics - Government/Compliance
- Manufacturing - Mechanical Systems/Construction
- Natural Products/Food/Retail - Leisure/Hospitality
</TABLE>
OUR COMPETITIVE STRENGTHS
Market Leadership in Industries Served. Our media products provide
proprietary information to business users who need to stay informed about their
industries. They provide marketers with cost-efficient, highly effective access
to business professionals with purchasing authority. Thirty-four of our
magazines serve industry segments that are measured by audit services; of these,
26 are ranked either #1 or #2 in their industry segment. We believe our market
leadership creates customer loyalty and makes us less vulnerable to revenue
losses during economic downturns, primarily because marketers tend to
concentrate their spending on top-tier publications and trade shows.
Ability to Capitalize on Our Established Industry Positions. We believe we
are able to effectively launch new media products by:
- using the industry knowledge and editorial expertise of our staff;
- capitalizing on the brand recognition and reputation of our existing
publications;
- building on our strong relationships with advertisers and readers;
and
- cross-promoting new products with our existing trade magazines,
trade shows and conferences, and online media products that serve
the same industry.
For example, within the past year we have launched the CLEC Magazine trade
publication; the CLEC Expo, ASPCON, Internet Everywhere CEO Summit, Natural
Products Expo Europe and IW eCRM trade shows and conferences; and the
B2BShowplace.com, totalsupplychain.com and MDcybercad.com online media products.
Ability to Successfully Identify and Integrate Acquisitions. We have
acquired twelve companies since our spinoff in August 1998. For each acquisition
we consider, we carefully analyze the growth potential of the company and its
impact on cash flow and profitability as part of our extensive evaluation
process. We consider ourselves uniquely positioned to make strategic
acquisitions due to our size and expertise in managing trade publications, trade
shows and conferences, and online media products. In addition, we believe that
our size enables us to efficiently integrate our acquisitions and eliminate
redundant marketing, administrative and corporate expenses and that our
experience in cross promoting our products enables us to identify opportunities
to expand the media products of the companies we acquire. For example, as part
of our acquisition of Mecklermedia Corporation, we repositioned Internet World
magazine, doubling its revenues for the six months ended June 30, 2000 compared
to the same period in 1999.
Diversity of Products, Targeted Industries and Customers. We are diverse
in terms of the products we offer and the industries and customers we serve.
None of our publications, trade shows and conferences or online media products
accounted for more than 7.4% of our total revenues in 1999. We provide our
products in ten
25
<PAGE> 30
diverse industries. Our top ten customers accounted for only 5.1% of our total
revenues in 1999. Our diversity should provide opportunities for growth and
mitigate our exposure to downturns in any one industry we serve.
Experienced Management Team. Our senior management team has an average of
23 years of experience in the media industry and with increasing revenues and
EBITDA, developing new products, penetrating new markets and identifying,
negotiating, completing and integrating acquisitions.
OUR GROWTH STRATEGY
We believe we have significant growth potential. We intend to increase our
revenues, cash flows and market share by continuing to:
Broaden Our Product Offerings. We believe we can strengthen our market
positions by:
- capitalizing on our industry expertise to create new products to
serve the needs of our customers;
- completing strategic acquisitions of complementary business media
products and services;
- adding Internet-based products and services to meet the expanding
information and marketing needs of our customers; and
- cross-promoting media products within similar markets.
Expand Our Trade Show and Conference Business. We believe that significant
opportunities exist to capitalize on the editorial content and the nationally
recognized brand names of our existing publications to produce new and expand
existing trade shows and conferences. For example, the recent creation of our IW
eCRM, ASPCON and CLEC trade shows demonstrates our ability to adapt our content
and industry contacts to meet the changing needs of Internet and broadband
professionals. In addition, we intend to continue to acquire trade shows and
conferences, such as our 1999 acquisition of the New Hope trade shows. We
believe that increasing the percentage of revenues generated by trade shows and
conferences improves margins and profitability and mitigates the cyclicality of
advertising in slower economic times.
Acquire Leading Positions in New, Growing Markets. We continuously
evaluate trends in new markets to identify acquisition opportunities in
attractive markets. For example, our acquisition of Mecklermedia Corporation in
1998 provided us with a leadership position in the Internet/Broadband industry
sector and expanded our international media portfolio. In addition, we recently
acquired Duke Communications International. Duke produces magazines, books,
e-mail newsletters and Web sites to educate and inform computer and financial
professionals about trends in technology and business.
Expand Market Positions Globally. We intend to extend our established
brands into key international markets. In doing so, we hope to broaden our
customer base by capitalizing on our strong brand names. For example, we expect
to add Internet World, ISPCON and ASPCON trade shows in Europe and Asia in 2000
and 2001.
Accelerate Development of Internet Products. We intend to further develop
our portfolio by continuing to launch online media products that enhance our
in-print and in-person offerings. The customized information delivery, real-time
access to customers, transaction capabilities and global reach of the Internet
provide us with unique opportunities to offer marketing solutions to our
customers. We believe that online media products are most effective when offered
in conjunction with trade publications and trade shows because our established
brand names and contacts provide critical mass and credibility to these new
offerings.
OUR INDUSTRY
The business-to-business communications industry is one of the largest and
fastest growing segments of the media industry. Veronis Suhler Media Merchant
Bank reports that our market is larger than radio broadcasting, outdoor media,
consumer book publishing and consumer magazine publishing, based on spending in
1999. In addition, Veronis Suhler projects that the business-to-business
communications industry will experience a 6.8%
26
<PAGE> 31
compound annual growth rate through 2004 and will surpass $32.0 billion in
revenue by 2004. Over the same period, Veronis Suhler forecasts that business
magazine revenues will grow annually at a rate of 5.7% and trade show revenues
at a rate of 8.5%.
The business-to-business communications industry is highly fragmented.
There are about:
- 1,500 publishing companies, according to American Business Media;
- 5,000 trade magazine titles, according to Oxbridge Communications; and
- 3,000 trade shows in the United States and Canada produced by about 1,500
independent companies and industry associations, according to Tradeshow
Week Research Services.
OUR PRODUCTS AND SERVICES
We serve ten specific industries with our trade publications, trade shows
and conferences, and online media products.
IN PRINT: PUBLICATIONS
Trade Magazines. We are one of the leading publishers of specialized trade
magazines in the United States. According to Advertising Age's annual ranking of
magazines in the United States, we publish two of the 15 largest trade
magazines, based on advertising revenues. Seventy-six percent of our audited
magazines hold the leading or number-two market share positions in their fields.
Our publications are recognized for the quality of their editorial content.
Since 1990, our magazines have won over 700 editorial awards.
We publish 51 trade magazines with a combined circulation of over 3.5
million worldwide. Our magazines are primarily controlled-circulation. They are
distributed free-of-charge to qualified subscribers in our targeted industries.
Our magazines generate revenues primarily from the sale of advertising
space. Subscribers to controlled-circulation magazines qualify to receive our
trade magazines by verifying their responsibility for specific job functions,
including purchasing authority. We survey subscribers to our
controlled-circulation magazines annually to verify their continued
qualification status.
Circulation information for the majority of our magazines is audited each
year by BPA International, an independent auditor of magazine circulation. These
audits verify that we have accurately identified the number and job
responsibilities of qualified subscribers and that those subscribers are
eligible to receive the relevant magazine according to our established criteria.
Each of our magazines has its own advertising sales team and rate
structure. Some advertisers may qualify for discounts based on advertising in
multiple magazines. In addition, each of our magazines has its own editorial
staff, including writers, designers and production personnel. To preserve the
editorial integrity of each magazine's news reporting and analysis, we seek to
maintain separation between the editorial and sales staffs of each magazine. We
believe that our reputation for objective, fair and credible editorial content
contributes significantly to our success. Fifteen of our magazines have served
their industries for over 50 years.
Our editorial staffs meet frequently with readers of their magazines to
maintain a current understanding of the information needs and interests of those
readers in an effort to serve them more effectively. We devote considerable
resources to the study of trends in our industries and strive to make our
publications the most respected and widely used among our targeted audiences.
Many of our editors and contributors are recognized as experts in their fields
and are regularly contacted by the general press to comment on developments and
trends in their respective markets.
Directories and Buyer's Guides. We also publish 22 directories and buyer's
guides, which are respected sources of buying information for industry decision
makers. We believe that most of the business directories we publish have limited
competition.
27
<PAGE> 32
IN PERSON: TRADE SHOWS AND CONFERENCES
We produce 116 trade shows and conferences in our ten industry sectors. In
addition to these trade shows and conferences, we maintain licensing agreements
for seven trade shows and we produce one trade show under a management contract.
According to the 2000 Tradeshow Week Data Book, we are the seventh largest
producer of trade shows in North America.
In the early 1990s, we entered the trade show and conference business, and
we have more recently expanded our presence through acquisitions. For example,
the acquisitions of New Hope in 1999 and Mecklermedia in 1998 added the Natural
Products Expo East and West, ISPCON and Internet World trade shows to our
portfolio. In addition, we have expanded our global presence. In 1997, we
acquired INDEX, a United Kingdom-based producer of trade shows and Industrial
Shows of America, which produces industrial trade shows in the United States and
Latin America.
Attendees at our trade shows and conferences are professionals and managers
in the industries we serve. Most trade shows include an extensive conference
program, which provides a forum for the exchange and dissemination of
information relevant to the particular event's focus. In addition, most trade
shows have one or more keynote sessions with speakers who are known for their
industry knowledge and expertise. The 1999 and 2000 Internet World trade shows
featured keynote speakers, including Lawrence J. Ellison of Oracle, Steve Case
of America Online and Charles B. Wang of Computer Associates International.
Trade show exhibitors pay a fixed price per square foot of booth space.
Typically, a majority of each trade show's exhibitors commit to booth space
during the current year's show for the following year. In 1999, exhibitor space
fees accounted for 68.4% of our total trade show and conference revenues. We
also earn revenues from attendee fees at trade shows and conferences and
sponsorship and advertising fees from exhibitors.
ONLINE: INTERNET
In response to the growing business use of the Internet, we are launching
new product offerings that enable buyers and sellers within each of our
industries to access product information and news about their industry and to
interact with each other through the Internet. Our products offer proprietary
content, targeted advertising, online trade shows, e-mail newsletters,
publication subscriber services and trade show and conference information and
registration. We currently produce online media products, including 104 Web
sites, serving our ten industry sectors.
We believe that the Internet, and more specifically, the growth of
business-to-business commerce being conducted over the Internet, presents us
with significant growth opportunities. We are developing a new generation of
market-focused Web sites that include features for e-commerce transactions and
for information exchange within targeted business communities. These sites will
leverage the inherent assets of our existing media products, the brand
recognition of our magazines and trade shows, our editorial content and our
customer and product databases.
In the first six months of 2000:
- We launched a major Web initiative, B2BShowplace.com, a network of
online trade shows that provides industry focused content, product
information and business-to-business exchanges.
- We began developing Healthwell.com, a leading online content and
business-to-business exchange focused on the natural products
industry.
- We began developing PlanetEE.com, a portal site for electronic
engineers worldwide.
We believe we have a competitive advantage in the online business because
of our established customer relationships in the markets we serve, the industry
expertise of our staff, and the opportunities we have to promote our online
media products to targeted audiences through the trade publications and trade
shows and conferences that we operate. Online media products are a growing part
of our business and represented less than 1.0% of our revenues in 1999.
28
<PAGE> 33
OTHER
We also provide ancillary information and marketing services that
complement our principal business media platforms. These services include:
- Market Access & Business Development Services. We provide a variety
of marketing services, including database rentals. We use
information from our subscription lists and other available
databases to compile detailed mailing lists for rental by marketers
who want to promote their products and services through direct mail
programs.
- Specialized Advertising Services. We collect and forward reader
inquiries to our advertisers. In addition, classified and
recruitment advertising sections in our publications and on our Web
sites provide a cost-efficient medium for reaching prospects who are
ready to buy specialized products and services or who are seeking
career opportunities.
- Custom Communications/Promotion. Penton Custom Media produces a full
range of client-specific communications for print, electronic media
and the Internet, including newsletters, magazines, catalogs,
directories, education and training materials and other support
materials.
OUR TEN INDUSTRY SECTORS
1. INTERNET/BROADBAND
The Internet/Broadband industry sector contributed about 27% of our
revenues in 1999. This industry sector primarily targets service providers and
other professionals in the worldwide Internet business. Some of our leading
brands in this industry sector are Internet World, Boardwatch and ISPCON. The
Internet World trade shows are among the leading events serving the Internet
industry. Boardwatch and ISPCON are among the leading magazines and events in
the Internet service provider market. In addition, Internet World magazine is
published in North America and has nine international editions that are
published under license. In the Internet/Broadband industry sector we produce
five trade magazines, 63 trade shows and conferences and 22 Web sites.
2. MANUFACTURING
The manufacturing industry sector contributed about 14% of our revenues in
1999. This industry sector targets users at every level, from the plant floor to
the executive offices, in industrial markets including general manufacturing and
metals. Some of our leading brands in this market are American Machinist and New
Equipment Digest. In the manufacturing industry sector we produce 10 trade
magazines, 18 trade shows and conferences and 16 Web sites.
3. ELECTRONICS
The electronics industry sector contributed about 13% of our revenues in
1999. This industry sector targets engineers who design electronics used in
applications, including small appliances, medical equipment, sophisticated
microwave-RF and wireless communications systems, and Internet-enabled devices.
Some of our leading brands in this industry sector are EE Product News and
Electronic Design. According to Advertising Age, Electronic Design is the
thirteenth largest trade magazine in the United States, based on advertising
revenues in 1999. In the electronics industry sector we produce five trade
magazines, five trade shows and conferences and 12 Web sites.
4. DESIGN/ENGINEERING
The design/engineering industry sector contributed about 13% of our
revenues in 1999. This industry sector targets designers and engineers of
machinery, consumer products, buildings and systems. Some of our leading brands
in this industry sector are A/E/C SYSTEMS and Machine Design. Machine Design is
the ninth largest trade magazine in the United States, based on advertising
revenue in 1999, according to Advertising Age magazine. In the
design/engineering industry sector we produce eight trade magazines, eight trade
shows and conferences and 18 Web sites.
29
<PAGE> 34
5. NATURAL PRODUCTS/FOOD/RETAIL
The natural products/food/retail industry sector contributed about 10% of
our revenues in 1999. This industry sector targets decision-makers in the
natural products supply chain, commercial and institutional foodservice,
convenience store headquarters and retail, and large-volume baking operations.
Some of our leading brands in this sector are Natural Foods Merchandiser,
Natural Products Expo, Modern Baking and Restaurant Hospitality. In the natural
products/food/retail industry sector we produce eight trade magazines, nine
trade shows and conferences and 14 Web sites.
6. MANAGEMENT
The management industry sector contributed about 6% of our revenues in
1999. This industry sector targets managers of manufacturing and related firms
and corporate relocation decision-makers. Some of our leading brands in this
industry sector are Industry Week and Expansion Management. In the management
industry sector we produce two trade magazines, three trade shows and
conferences and two Web sites.
7. SUPPLY CHAIN/AVIATION
The supply chain/aviation industry sector contributed about 6% of our
revenues in 1999. This industry sector targets decision-makers along the entire
supply chain, including material handling engineers, third-party logistics
providers, and those responsible for carrying, delivering and warehousing goods,
as well as commercial airline executives worldwide. Some of our leading brands
in this industry sector are Material Handling Management, Transportation &
Distribution and Air Transport World. In the supply chain/aviation industry
sector we produce six trade magazines, one trade show and eight Web sites.
8. MECHANICAL SYSTEMS/CONSTRUCTION
The mechanical systems/construction industry sector contributed about 4% of
our revenues in 1999. This industry sector targets professionals who design,
build and install mechanical systems focusing on heating and ventilation. Some
of our leading brands in this industry sector are Contracting Business and HPAC
Engineering. In the mechanical systems/construction industry sector we produce
three trade magazines, four trade shows and conferences and four Web sites.
9. GOVERNMENT/COMPLIANCE
The government/compliance industry sector contributed about 4% of our
revenues in 1999. This industry sector targets government buyers and
professionals who manage industrial safety, occupational health and
environmental compliance. Some of our leading brands in this industry sector are
Government Product News and Occupational Hazards. We produce Web sites that
provide best practices and the latest news related to these areas. In the
government/compliance industry sector we produce three trade magazines and three
Web sites.
10. LEISURE/HOSPITALITY
The leisure/hospitality industry sector contributed about 3% of our
revenues in 1999. This industry sector targets key professionals managing parks,
golf courses, sports grounds, leisure attractions, and, in the United Kingdom,
facilities for fitness, health and hospitality. It also targets management in
the United States lodging industry. Our leading brands in this industry sector
are International Leisure Industry Week and Lodging Hospitality. In the
leisure/hospitality industry sector we produce one trade magazine, five trade
shows and conferences and three Web sites.
30
<PAGE> 35
MANAGEMENT
The directors, executive officers and other key employees of Penton, and
their ages and positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
King W. Harris............................ 57 Chairman of the Board and Director
Thomas L. Kemp............................ 49 Chief Executive Officer and Director
Daniel J. Ramella......................... 48 President, Chief Operating Officer and
Director
Joseph G. NeCastro........................ 43 Chief Financial Officer and Treasurer
David B. Nussbaum......................... 42 Executive Vice President, Group President
and Director
James W. Zaremba.......................... 60 Executive Vice President and Group
President
Preston L. Vice........................... 52 Senior Vice President and Secretary
Jocelyn A. Bradford....................... 42 Vice President and Controller
Paul W. Brown............................. 47 Director
Anthony Downs............................. 69 Director
William J. Friend......................... 36 Director
R. Douglas Greene......................... 50 Director
John J. Meehan............................ 52 Director
Don E. Schultz............................ 66 Director
Edward J. Schwartz........................ 59 Director
William B. Summers........................ 50 Director
Richard B. Swank.......................... 69 Director
</TABLE>
King W. Harris has served as a Director of Penton since May 1987 and as
Non-executive Chairman of the Board of Penton since May 1998. From 1987 to
February 2000, Mr. Harris served as President, Chief Executive Officer and
Director of Pittway Corporation, a manufacturer and distributor of alarm and
other security products. Pittway was acquired by Honeywell International, Inc.
in February 2000 at which time Mr. Harris became President and Chief Executive
Officer of the Security and Fire Solutions Business of Honeywell's Home and
Building Control Group. On May 1, 2000, he relinquished the title of President
but remained Chief Executive Officer. Mr. Harris currently serves as
Non-executive Chairman of the Board and Director of Aptar Group, Inc., a
specialty packaging components manufacturer.
Thomas L. Kemp has served as a Director and as Chief Executive Officer of
Penton since September 1996. Mr. Kemp also served as Chairman of the Board of
Penton from September 1996 to May 1998. Mr. Kemp's publishing career spans more
than 26 years. He spent 22 years with San Francisco based Miller Freeman, Inc.,
and was Miller Freeman's President and Chief Operating Officer in 1996 when he
left that company to join Penton. From 1994 to 1996 Mr. Kemp was Miller
Freeman's Executive Vice President and Chief Operating Officer. He also held a
series of executive, publishing management and sales positions with Miller
Freeman subsequent to joining that company in 1974. Mr. Kemp is a Director and
Treasurer of Business Publications Audit International. He is a Director of the
Business Press Educational Foundation and a former Director of American Business
Media and the Association of Medical Publishers. Mr. Kemp is a frequent speaker
at media industry conferences and events. In 1998, Mr. Kemp was named Business
Publishing's "Person of the Year" by min magazine.
Daniel J. Ramella has served as a Director of Penton since July 1990. He
has served as President and Chief Operating Officer since 1990 and has worked
for Penton for more than 24 years. Mr. Ramella was Senior Vice President,
Publishing, from 1989 to 1990, and Vice President, Foodservice Group, from 1987
to 1989. He was publisher of Restaurant Hospitality magazine from 1985 to 1987.
Mr. Ramella held management positions with Production Engineering magazine
between 1977 and 1985. Before joining Penton in 1977, he was an Audit
31
<PAGE> 36
Senior for Arthur Andersen & Co. He is Chairman of American Business Media and
has served as a Director of the Business Press Educational Foundation. He is a
former Director, Treasurer and Executive Committee member of Business
Publications Audit International. Mr. Ramella was awarded American Business
Media's McAllister Top Management Fellowship Award for 2000.
Joseph G. NeCastro has served as Chief Financial Officer and Treasurer of
Penton since June 1998. Before joining Penton, Mr. NeCastro spent five years
with Reader's Digest Association, Inc. He was Vice President, Finance, for
Reader's Digest USA from 1995 until 1998, Corporate Controller in 1994 and 1995,
and held other corporate financial management positions with that company in
1993 and 1994. Mr. NeCastro was Vice President and Treasurer of U.S. News &
World Report between 1990 and 1993, and Director of Finance from 1987 to 1990.
He held senior business development and finance positions with MCI
Communications Corporation between 1983 and 1987 before moving into the
publishing industry.
David B. Nussbaum has served as a Director of Penton since May 2000 and as
Executive Vice President and Group President of Penton since September 1998.
Since December 1998, he has served as President of Internet World Media, Inc., a
subsidiary of Penton. Before joining Penton, Mr. Nussbaum served as Senior Vice
President of the New York Division of Miller Freeman, Inc. from 1995 to August
1998 and as Vice President from 1994 to 1995. He has worked in the business
media industry for 20 years.
James W. Zaremba has served as Executive Vice President and Group President
of Penton since 1999 and Group President of Penton since 1991. He has spent most
of his 32-year business-to-business publishing career with Penton. From 1988 to
1989, he was Publisher of Machine Design magazine, and from 1983 to 1988, he was
Publisher of PT Design magazine.
Preston L. Vice has served as Secretary of Penton since July 1998 and as
Senior Vice President of Publishing Services since 1989. Mr. Vice has 21 years
of business-to-business publishing experience and 30 years of accounting and
finance experience. He was Penton's Vice President of Finance from 1982 to 1989,
and Director of Finance from 1979 to 1982. Mr. Vice transferred to Penton from
Pittway Corporation in 1979. Prior to his tenure at Pittway he was with Coopers
& Lybrand.
Jocelyn A. Bradford has served as Vice President and Controller of Penton
since January 2000. Before joining Penton, Ms. Bradford spent three years at
Century Business Services, Inc. as Controller from December 1996 through April
1998 and as Treasurer from April 1998 through January 2000. Ms. Bradford was
Manager -- Financial Reporting at Allen Telecom, Inc. from August 1992 until
December 1996.
Paul W. Brown has served as a Director of Penton since May 2000. He has
served as General Partner, Bedrock Capital Partners, a venture capital firm,
since January 1998, and as Managing Director, Prudential Volpe Technology Group,
investment banking, since May 1989. Mr. Brown has served as Chairman of Genesis
Medical Technologies, Inc., a surgical products manufacturer, since July 1999.
Anthony Downs has served as a Director of Penton since June 1998. Since
1977, Mr. Downs has served as a Senior Fellow of the Brookings Institution, a
non-profit social policy research center, and as a consultant. Mr. Downs
currently serves as a Director of Bedford Property Investors, Inc., a real
estate investment trust, General Growth Properties, Inc., a real estate
investment trust, Massachusetts Mutual Life Insurance Corporation, an insurance
company, and National Housing Partnership Foundation, a low-income housing
operator.
William J. Friend has served as a Director of Penton since June 1998. Mr.
Friend served as Vice President Corporate Development of Pittway Corporation
from August 1999 to February 2000 at which time Pittway was acquired by
Honeywell International, Inc. Mr. Friend served as Vice President Corporate
Development with the Security and Fire Solutions Business of Honeywell's Home
and Building Control Group until August 1, 2000. From August 1996 to July 1999,
Mr. Friend served as Assistant to the President/Strategic Planning Manager of
Pittway Corporation. From April 1994 to July 1996 he served as national Sales
Manager of Xetron, a division of Pittway Corporation. From August 1992 to March
1994 he served as an Engineering Product Manager of System Sensor, a division of
Pittway Corporation.
R. Douglas Greene has served as a Director of Penton since June 1999. Since
May 1999, he has served as a Director and Chief Executive Officer of New Hope
Group, Inc., an investment holding company, and as Non-
32
<PAGE> 37
executive Chairman of New Hope Communications, a division of Penton. From
February 1981 to May 1999, Mr. Greene served as Chairman and Chief Executive
Officer of New Hope Communications, Inc., a business media company.
John J. Meehan has served as a Director of Penton since August 1998. Since
January 1987 Mr. Meehan has served as Executive Vice President of Donohue Meehan
Publishing Company. Mr. Meehan started his 28-year career in
business-to-business publishing at the former Chilton Publishing, where he held
marketing and sales management positions with the company's electronics
publications from 1972 to 1977. From 1977 to 1986, he was Publisher of Gorman
Publishing's Bakery Production & Marketing and Prepared Foods magazines. He was
Group Publishing Director for Tompson Publishing in New York from 1986 to 1987
before forming Donohue Meehan Publishing Company in 1987.
Don E. Schultz has served as a Director of Penton since June 1998. Mr.
Schultz currently serves as President of Agora, Inc., an integrated marketing
and branding consulting firm. He is a professor of Integrated Marketing
Communications at the Medill School of Journalism at Northwestern University.
Mr. Schultz serves as a Senior Partner of Targetbase Marketing International and
the Targetbase Institute. Mr. Schultz also serves as Director of Insignia
Systems, Inc., an in-store, supermarket signage systems company and Simon
Richards Group, a direct marketing agency serving Australia and Malaysia.
Edward J. Schwartz has served as a Director of Penton since June 1998. Mr.
Schwartz served as Vice President of Pittway Corporation from 1989 to February
2000 at which time Pittway was acquired by Honeywell International, Inc. Mr.
Schwartz has served as Vice President of the Security and Fire Solutions
Business of Honeywell's Home and Building Control Group since February 2000.
William B. Summers has served as a Director of Penton since May 2000. Mr.
Summers has served as the Chairman and Chief Executive Officer of McDonald
Investments Inc., an investment banking and securities firm and a subsidiary of
Key Corp., since August 1995. Mr. Summer has also served as Chairman of Key
Capital Partners, a provider of brokerage and investment banking services, and
Executive Vice President and a member of the Management Committee of Key Corp.
since November 1998. Mr. Summers is a Director of the New York Stock Exchange,
Chairman of the Board of Trustees of Baldwin Wallace College and Chairman of the
Board for the Law Enforcement Foundation for the state of Ohio.
Richard B. Swank has served as a Director of Penton since June 1998. Mr.
Swank is currently retired. Prior to his retirement, Mr. Swank served as
Chairman and Chief Executive Officer, from April 1990 to December 1994, and as a
Director from April 1990 to May 1996, of Advanstar Communications, Inc., a
magazine publishing, exhibition and marketing services enterprise. Mr. Swank
currently serves as a director of Bright Station plc, an online information and
data provider.
33
<PAGE> 38
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information known to Penton with respect to
the beneficial ownership of its common stock (1) as of August 31, 2000 and (2)
immediately following this offering by:
- the persons known by Penton to be the beneficial owners of more than 5%
of the outstanding shares of common stock,
- each director of Penton,
- all directors and executive officers of Penton as a group, and
- each selling stockholder.
Except where otherwise indicated, the mailing address of each of the
stockholders named in the table is: c/o Penton Media, Inc., 1100 Superior
Avenue, Cleveland, Ohio 44114-2543. See "-- Relationships of Selling
Stockholders to Penton."
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THIS OFFERING(1) AFTER THIS OFFERING(1)
-------------------------- -----------------------
NAME NUMBER PERCENT OFFERED(2) NUMBER PERCENT
---- ------------ ----------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Mario J. Gabelli, et al.(3).................. 5,442,096 17.1% -- 5,442,096 17.1%
One Corporate Center
Rye, New York 10580
William Harris Investors, Inc.(4)............ 1,733,107 5.4% 1,729,398 3,709 *
2 North LaSalle Street
Suite 400
Chicago, Illinois 60602
R. Douglas Greene(2)(5)...................... 2,076,923 6.5% -- 2,076,923 6.5%
c/o New Hope Group, Inc.
600 Linden Ave.
Boulder, Colorado 80304
Current Harris Group(6)...................... 3,487,470 10.9% 3,331,233 156,237 *
King Harris(6)(7)............................ 1,596,047 5.0% 1,447,739 148,308 *
William J. Friend(6)(8)...................... 75,755 * 45,826 29,929 *
John J. Meehan............................... 450,819 * -- 450,819 *
Paul W. Brown................................ -- -- -- -- --
Anthony Downs................................ 14,839 * -- 14,839 *
Thomas L. Kemp............................... 210,509 * -- 210,509 *
Daniel J. Ramella(9)......................... 159,553 * -- 159,553 *
Don E. Schultz............................... 5,400 * -- 11,400 *
Edward J. Schwartz........................... 22,144 * -- 22,144 *
William B. Summers........................... -- -- -- -- --
Richard B. Swank............................. 6,500 * -- 6,500 *
Joseph G. NeCastro........................... 42,989 * -- 42,989 *
David B. Nussbaum............................ 54,619 * -- 54,619 *
James W. Zaremba............................. 66,848 * -- 66,848 *
Preston L. Vice.............................. 45,519 * -- 45,519 *
Jocelyn A. Bradford.......................... -- -- -- -- --
All Directors and Executive Officers as a
Group (17 persons)(2)(10).................. 4,828,464 15.2% 1,493,565 3,334,899 10.5%
Jewish Federation of Metropolitan
Chicago(11)................................ 307,087 * 307,087 -- --
1 South Franklin Street
Suite 850
Chicago, Illinois 60606
Cottage Investments L.P.(4)(6)............... 66,971 * 66,971 -- --
</TABLE>
34
<PAGE> 39
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THIS OFFERING(1) AFTER THIS OFFERING(1)
-------------------------- -----------------------
NAME NUMBER PERCENT OFFERED(2) NUMBER PERCENT
---- ------------ ----------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Bern L.P.(4)(6).............................. 272,124 * 272,124 -- --
Wilikenia L.P.(4)(6)......................... 226,385 * 226,385 -- --
Dromara Investors, L.P.(4)(6)................ 77,911 * 77,911 -- --
St. Louis L.P.(4)(6)......................... 267,419 * 267,419 -- --
Coydog Foundation(4)(6)...................... 17,997 * 17,997 -- --
2029 L.P.(4)(6).............................. 252,531 * 252,531 -- --
Katherine P. Harris Trust, dated January 18,
1991(6).................................... 110,500 * 110,500 -- --
Toni H. Paul(6).............................. 88,215 * 88,215 -- --
John B. Harris Fund under the R. Neison
Harris Trust of 1954 for King William W.
Harris(6).................................. 133,454 * 133,454 -- --
Robert L. Barrows(4)(6)...................... 62,104 * 62,104 -- --
Donna E. Barrows(4)(6)....................... 64,269 * 64,269 -- --
David M. Wark and Mary Ann Barrows Wark
Foundation(12)............................. 51,212 * 51,212 -- --
Harris Foundation(4)(6)...................... 74,475 * 74,475 -- --
Pam F. Szokol Fund under the R. Neison Harris
Trust of 1954 for Katherine P. Harris(6)... 38,000 * 38,000 -- --
Patricia J. Rosbrow(4)(6).................... 16,309 * 16,309 -- --
Sidney Barrows and June H. Barrows
Foundation(12)............................. 16,309 * 16,309 -- --
Pam F. Szokol Trust, dated February 18,
1993(6).................................... 12,000 * 12,000
Daniel H. Meyer Investment Trust(4)(6)....... 19,272 * 19,272 -- --
The Summer Fund(12).......................... 23,985 * 23,985 -- --
Allen H. Paul Fund under the R. Neison Harris
Trust of 1954, for Toni L. Harris(6)....... 33,600 * 33,600 -- --
Charles H. Paul Fund under the R. Neison
Harris Trust of 1954, for Toni L.
Harris(6).................................. 35,200 * 35,200 -- --
Kelly L. Paul Fund under the R. Neison Harris
Trust of 1954, for Toni L. Harris(6)....... 35,200 * 35,200 -- --
Laurie B. Paul Fund under the R. Neison
Harris Trust of 1954, for Toni L.
Harris(6).................................. 33,600 * 33,600 -- --
Thomas W. Meyer Trust(4)(6).................. 21,525 * 21,525 -- --
VHP - Jack 76 Trust (4)(6)................... 22,723 * 22,723 -- --
VHP - James 76 Trust(4)(6)................... 18,667 * 18,667 -- --
VHP - George 76 Trust(4)(6).................. 17,428 * 17,428 -- --
VHP - Charles 76 Trust(4)(6)................. 17,481 * 17,481 -- --
VHP Trust dated December 29, 1975 fbo Jean
Polsky(4)(6)............................... 394 * 394 -- --
VHP - Jean 76 Trust(4)(6).................... 14,090 * 14,090 -- --
Trust f/b/o John B. Harris under the Bette D.
Harris Grandchildren's Trust, dated January
13, 1959(6)................................ 10,000 * 10,000 -- --
Harris Family Foundation(6).................. 630,154 2.0% 630,154 -- --
John B. Harris 1998 Trust(6)................. 7,500 * 7,500 -- --
Trust f/b/o Alan H. Paul under the Toni L.
Harris Trust for Children, dated December
15, 1976(6)................................ 6,000 * 6,000 -- --
Trust f/b/o Charles H. Paul under the Toni L.
Harris Trust for Children, dated December
15, 1976(6)................................ 6,000 * 6,000 -- --
Trust f/b/o Kelly L. Paul under the Toni L.
Harris Trust for Children, dated December
15, 1976(6)................................ 6,000 * 6,000 -- --
Trust f/b/o Laurie B. Paul under the Toni L.
Harris Trust for Children, dated December
15, 1976(6)................................ 6,000 * 6,000 -- --
Jack Polsky Investment Trust(4)(6)........... 6,008 * 6,008 -- --
Trust f/b/o Alan H. Paul under the Bette D.
Harris Grandchildren's Trust, dated January
13, 1959(6)................................ 2,900 * 2,900 -- --
Trust f/b/o Laurie B. Paul under the Bette D.
Harris Grandchildren's Trust, dated January
13, 1959(6)................................ 2,900 * 2,900 -- --
</TABLE>
35
<PAGE> 40
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THIS OFFERING(1) AFTER THIS OFFERING(1)
-------------------------- -----------------------
NAME NUMBER PERCENT OFFERED(2) NUMBER PERCENT
---- ------------ ----------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Trust f/b/o Charles H. Paul under the Bette
D. Harris Grandchildren's Trust, dated
January 13, 1959(6)........................ 2,900 * 2,900 -- --
Trust f/b/o Kelly L. Paul under the Bette D.
Harris Grandchildren's Trust, dated January
13, 1959(6)................................ 2,900 * 2,900 -- --
Charles H. Paul 2000 Trust(6)................ 2,800 * 2,800 -- --
King W. Harris as custodian for Kelly L.
Paul(6).................................... 2,700 * 2,700 -- --
Trust uwo Mildred Harris fbo Patricia
Rosbrow(4)(6).............................. 4,797 * 4,797 -- --
Trust uwo Mildred Harris fbo William
Barrows(4)(6).............................. 3,801 * 3,801 -- --
Charles Polsky Investment Trust(4)(6)........ 3,600 * 3,600 -- --
Benjamin Harris Investment Trust(4)(6)....... 2,437 * 2,437 -- --
IBH Trust dated February 27, 1974 fbo Jean
Polsky(4)(6)............................... 3,945 * 3,945 -- --
IBH - Benjamin 74 Trust(4)(6)................ 1,578 * 1,578 -- --
IBH - David 74 Trust(4)(6)................... 1,578 * 1,578 -- --
WWH -Benjamin 76 Trust(4)(6)................. 39,140 * 39,140 -- --
WWH - David 76 Trust(4)(6)................... 39,355 * 39,355 -- --
Benjamin 75 Trust(4)(6)...................... 789 * 789 -- --
David 75 Trust(4)(6)......................... 789 * 789 -- --
William Friend Fund under the R. Neison
Harris Trust of 1954, for Katherine P.
Harris(6).................................. 17,394 * 17,394 -- --
Scott Friend Fund under the R. Neison Harris
Trust of 1954, for Katherine P.
Harris(6).................................. 48,085 * 48,085 -- --
Scott C. Friend Trust, dated November 11,
1998(6).................................... 39,734 * 39,734 -- --
King W. Harris Trust for Children, dated
December 15, 1976; Katherine Harris, Denise
Saul and Robert Barrows, Trustees(6)....... 65,881 * 65,881 -- --
</TABLE>
---------------
* Less than one percent
(1) Except as otherwise indicated below, beneficial ownership means the sole
power to vote and dispose of shares.
(2) Amounts reflected in the above table assume no exercise of the
underwriters' over-allotment option. If the over-allotment option is
exercised in full, we will issue and sell 303,000 shares and R. Douglas
Greene will sell 242,748 shares.
(3) The information as to Mario J. Gabelli and entities controlled directly or
indirectly by Mr. Gabelli is derived from Schedule 13D/A as filed with the
Commission on July 7, 2000. Such statement discloses that
- Mr. Gabelli is the chief investment officer for most of the entities
signing such statements and is deemed to have beneficial ownership of the
shares beneficially owned by all such entities,
- Mr. Gabelli and such entities do not admit that they constitute a group
within the meaning of Section 13(d) of the Exchange Act and the rules and
regulations thereunder, and
- with respect to Penton common stock, Mr. Gabelli and such entities have
the sole power to vote and dispose of all the shares of which they are
beneficial owners unless the aggregate voting interest of all such
entities exceeds 25% of Penton's total voting interest or other special
circumstances exist, in which case the proxy voting committees of certain
of such entities would have the sole power to vote certain shares of
Penton common stock except 87,683 shares of Penton's common stock as to
which they have no voting power.
(4) The information as to William Harris Investors, Inc. ("WHI") is derived
from Schedule 13G as filed with the Commission on February 14, 2000 and
additional information provided by members of WHI. Such statement, together
with information furnished to Penton separately by WHI, disclose that
- WHI, an investment adviser registered under the Investment Advisers Act of
1940, holds all its shares of Penton common stock on behalf, and in
terminable discretionary accounts, of certain members of the "Harris
Group,"
36
<PAGE> 41
- WHI shares voting power with such persons, and has sole dispositive power,
with respect to all such shares,
- Irving B. Harris and his children are the sole voting stockholders of WHI,
and
- Irving B. Harris is the Chairman of WHI.
Certain clients of WHI, as identified individually in the table, are
selling shares in the offering.
(5) The information as to Mr. Greene is derived in part from Schedule 13D, as
filed with the commission on June 21, 1999, statements required to be filed
by Mr. Greene pursuant to Section 16(a) of the Exchange Act, and
information furnished to Penton separately by Mr. Greene.
- Mr. Greene has indirect beneficial ownership of the common stock under
Rule 13d-3 of the Securities Exchange Act of 1934 through New Hope Group,
Inc., a Colorado corporation.
- Mr. Greene is the chief executive officer, sole director and majority
shareholder of New Hope Group.
- The minority shareholder of New Hope Group is New Hope Alliance, LLC, a
Delaware limited liability company, of which Mr. Greene is the managing
member.
- Mr. Greene is a director of Penton.
(6) The information as to the Current Harris Group (as defined below), King
Harris, and William J. Friend is derived in part from Schedule 13D as filed
with the Commission on May 24, 1999, and statements required to be filed by
such named persons pursuant to Section 16(a) of the Securities Exchange Act
of 1934. Such statements were filed on behalf of such named persons as well
as those other persons and entities who are currently members of the
"Harris Group" beneficially owning, directly or indirectly, shares of
Penton common stock (the "Current Harris Group"). Such statements disclose
that, because of the relationships among members of the Current Harris
Group, such persons may be deemed to be a group within the meaning of
Section 13(d) of the Exchange Act and the rules and regulations thereunder.
The "Harris Group" means Messrs. Irving B. Harris, Neison Harris, King
Harris, William W. Harris, and June Barrows, and their respective spouses,
descendants and spouses of descendants, trustees of trusts established for
the benefit of such persons, and executors of estates of such persons. King
Harris is the uncle of William J. Friend. The aggregate number of
outstanding shares which may be deemed to be beneficially owned by the
Current Harris Group includes all the shares shown in this table for WHI,
King Harris, and William J. Friend. The total excludes duplication of
shares within such group. Certain members of the Current Harris Group, as
identified individually in the table, are selling shares in the offering.
See footnote (2).
(7) Mr. King Harris shares the power to vote and dispose of 1,290,847 such
shares.
(8) Mr. Friend shares the power to vote and dispose of 70,826 such shares.
(9) Mr. Ramella shares the power to vote and dispose of 159,553 such shares.
(10) Includes 1,521,226 shares as to which voting power will be shared other
than with directors and officers of Penton.
(11) The shares of common stock offered were gifted to the Jewish Federation of
Metropolitan Chicago by the Irving B. Harris Revocable Trust.
(12) Reflects shares of common stock that have been gifted to charitable
organizations by specific members of the Current Harris Group. The address
for these organizations is: 2 North LaSalle Street, Suite 400, Chicago,
Illinois 60602.
RELATIONSHIPS OF SELLING STOCKHOLDERS TO PENTON
Mr. King Harris and Mr. William J. Friend, who are selling shares of common
stock in the offering, are directors of Penton. In the event the underwriters
exercise their over-allotment option, R. Douglas Greene, a director of Penton,
will sell shares of common stock.
37
<PAGE> 42
PRINCIPAL UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS
GENERAL
The following is a general discussion of the principal United States
federal income and estate tax consequences of the ownership and disposition of
our common stock that may be relevant to you if you are a non-U.S. holder. For
purposes of this summary, a non-U.S. holder is a beneficial owner of our common
stock that is not, for United States federal income tax purposes:
- a citizen or individual resident of the United States;
- a corporation, or other entity treated as a corporation or partnership
created in or under the laws of the United States or of any state
thereof;
- an estate, the income of which is subject to United States federal income
taxation regardless of its source; or
- a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust, or a trust in existence on August 20, 1996 and treated as a
United States person before this date that timely elected to continue to
be treated as a United States person.
This discussion does not address all aspects of United States federal
income and estate taxation that may be relevant to non-U.S. holders in light of
their particular circumstances or to certain non-U.S. holders that may be
subject to special treatment (e.g. certain financial institutions, tax-exempt
organizations, insurance companies, dealers in securities or foreign currencies,
persons holding our common stock as part of a hedging, conversion or straddle
transaction or holders whose functional currency is not the United States
dollar) under United States federal income or estate tax laws. In addition, this
discussion does not address any foreign, state or local tax consequences.
Furthermore, this discussion is based on provisions of the Internal Revenue
Code, Treasury regulations and administrative and judicial interpretations as of
the date of this prospectus. All of these authorities are subject to change,
possibly with retroactive effect, or different interpretations. If you are
considering purchasing our common stock you are urged to consult your tax
advisor about current and possible future tax consequences of holding and
disposing of our common stock in your particular situation.
DISTRIBUTIONS
Distributions on our common stock generally will constitute dividends for
United States federal income tax purposes to the extent paid from our current or
accumulated earnings and profits, as determined under United States federal
income tax principles. To the extent the distributions exceed those earnings and
profits, the distributions will constitute a return of capital that will be
applied against and will reduce your tax basis in our common stock, and then
will be treated as gain from the sale of the stock to the extent the
distributions exceed your tax basis. Dividends paid to a non-U.S. holder that
are not effectively connected with a United States trade or business of the
non-U.S. holder will, to the extent paid out of earnings and profits, be
generally subject to United States withholding tax at a 30 percent rate or, if a
tax treaty applies, a lower rate specified by the treaty. To receive a reduced
treaty rate, a non-U.S. holder must furnish to us or our paying agent a duly
completed Form W-8BEN, or other appropriate documentation, certifying to its
qualification for the reduced rate.
Dividends that are effectively connected with the conduct of a United
States trade or business of a non-U.S. holder and, if a tax treaty applies, are
attributable to a United States permanent establishment of the non-U.S. holder,
are exempt from United States federal withholding tax, provided that the
non-U.S. holder furnishes to us or our paying agent a duly completed Form
W-8ECI, or other appropriate documentation, certifying the exemption. However,
dividends exempt from United States withholding because they are effectively
connected or they are attributable to a United States permanent establishment
are subject to United States federal income tax on a net income basis at the
regular graduated United States federal income tax rates. Any such effectively
connected dividends received by a foreign corporation may, under specified
circumstances, be subject to an additional "branch profits tax" at a 30 percent
rate or a lower rate specified by an applicable income tax treaty.
38
<PAGE> 43
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of our
common stock unless one of the following applies:
- the gain is effectively connected with a United States trade or business
of the non-U.S. holder and, if a tax treaty applies, the gain is
attributable to a United States permanent establishment maintained by the
non-U.S. holder. In this case, the non-U.S. holder will, unless an
applicable treaty provides otherwise, be subject to tax on its net gain
derived from the sale under regular graduated United States federal
income tax rates. Any such effectively connected gain received by a
foreign corporation may, under specified circumstances, be subject to an
additional "branch profits tax" at a 30 percent rate or a lower rate
specified by an applicable income tax treaty; or
- the non-U.S. holder is an individual, holds our common stock as a capital
asset, is present in the United States for 183 or more days in the
taxable year of the disposition, and other conditions are met. In this
case, the non-United States holder will be subject to a flat 30 percent
tax on the gain derived from the sale, which gain may be offset by
specified United States capital losses.
FEDERAL ESTATE TAX
Common stock owned or treated as owned by an individual non-U.S. holder at
the time of death, or common stock as to which the non-U.S. holder made
specified lifetime transfers, will be included in that holder's gross estate for
United States federal estate tax purposes, unless an applicable estate tax
treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Under United States Treasury regulations, we must report annually to the
Internal Revenue Service and to each non-U.S. holder the amount of dividends
paid to that holder and the tax withheld with respect to the dividends. These
information reporting requirements apply even if withholding was not required
because the dividends were effectively connected dividends or withholding was
reduced by an applicable income tax treaty. Pursuant to an applicable tax
treaty, information may also be made available to the tax authorities in the
country in which the non-United States holder resides. For dividends paid after
December 31, 2000, a non-U.S. holder generally will be subject to United States
backup withholding tax at a 31 percent rate rather than at a 30 percent rate or
a reduced rate under an income tax treaty, as described above, unless the
non-U.S. holder complies with Internal Revenue Service certification procedures
or, in the case of payments made outside the United States with respect to an
offshore account, specified IRS documentary evidence procedures. Further, to
claim the benefit of a reduced rate of withholding under a tax treaty for
dividends paid after December 31, 2000, a non-U.S. holder must comply with
certain modified IRS certification requirements. Special rules also apply to
dividend payments made after December 31, 2000 to foreign intermediaries, United
States or foreign wholly owned entities that are disregarded for United States
federal income tax purposes and entities that are treated as fiscally
transparent in the United States, the applicable income tax treaty jurisdiction,
or both. You are urged to consult your tax advisor concerning the effect, if
any, of the rules affecting post-December 31, 2000 dividends on your investment
in our common stock.
As a general matter, information reporting and backup withholding will not
apply to a payment by or through a foreign office of a foreign broker of the
proceeds of a sale of our common stock effected outside the United States.
However, information reporting requirements, but not backup withholding, will
apply to a payment by or through a foreign office of a broker of the proceeds of
a sale of our common stock effected outside the United States if that broker:
- is a United States person for United States federal income tax purposes;
- is a foreign person that derives 50 percent or more of its gross income
for specified periods from the conduct of a trade or business in the
United States;
- is a "controlled foreign corporation" as defined in the Internal Revenue
Code; or
39
<PAGE> 44
- is a foreign partnership with specified United States connections, for
payments made after December 31, 2000.
Information reporting requirements will not apply in the above cases if the
broker has documentary evidence in its records that the holder is a non-U.S.
holder and specified conditions are met or the holder otherwise establishes an
exemption.
Payment by or through a United States office of a broker of the proceeds of
a sale of our common stock is subject to both backup withholding and information
reporting unless the holder certifies to the payor in the manner required as to
its status as a non-U.S. holder under penalties of perjury or otherwise
establishes an exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate United States federal income tax. Rather, any amounts withheld under
the backup withholding rules will be refunded or allowed as a credit against the
holder's United States federal income tax liability, if any, provided the
required information or appropriate claim for refund is filed with the Internal
Revenue Service.
40
<PAGE> 45
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement
dated September 25, 2000, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, Salomon
Smith Barney Inc. and DLJdirect Inc. (the "Representatives"), have severally
agreed to purchase from the selling stockholders the number of shares set forth
opposite their names below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS: OF SHARES
------------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......... 893,496
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 893,496
Credit Suisse First Boston Corporation...................... 595,664
Salomon Smith Barney Inc. .................................. 595,664
DLJdirect Inc. ............................................. 100,000
Banc of America Securities LLC.............................. 80,000
Dresdner Kleinwort Benson North America LLC................. 80,000
FIRST UNION SECURITIES, INC................................. 80,000
Gabelli & Company, Inc...................................... 80,000
Lazard Freres & Co. LLC..................................... 80,000
McDonald Investments Inc., a KeyCorp Company................ 80,000
Robertson Stephens Inc...................................... 80,000
---------
Total.................................................. 3,638,320
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares included in this
offering are subject to approval of specific legal matters by their counsel and
to specific other conditions. Except for those shares covered by the
over-allotment option, the underwriters are obligated to purchase and accept
delivery of all the shares if they purchase any of the shares. The over-
allotment option is discussed below.
The underwriters propose to initially offer some of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the shares to some dealers at the public offering price
less a concession not in excess of $.81 per share. The underwriters may allow,
and these dealers may re-allow, a concession not in excess of $.10 per share on
sales to some other dealers. After the initial offering of the shares to the
public, the underwriters may change the public offering price and these
concessions.
An electronic prospectus is available on the Web site maintained by
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation.
An existing stockholder and Penton have granted the underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase up to an
additional 242,748 shares from the existing stockholder and up to 303,000 shares
from Penton at the public offering price less the underwriting fees. The
underwriters may exercise this option solely to cover over-allotments, if any,
made in connection with this offering. To the extent that the underwriters
exercise this option, each underwriter will become obligated, subject to
specific conditions, to purchase a number of additional shares about
proportionate to that underwriter's initial purchase commitment.
The following table shows the underwriting fees to be paid to the
underwriters by the selling stockholders and by us in connection with this
offering. These amounts are shown assuming both no exercise and full exercise of
the underwriters' option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY SELLING STOCKHOLDERS PAID BY PENTON
---------------------------- ---------------------------
NO EXERCISE FULL EXERCISE NO EXERCISE FULL EXERCISE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Per Share................................ $ 1.35 $ 1.35 $ -- $ 1.35
Total.................................... $4,911,732 $ 5,239,442 $ -- $409,050
</TABLE>
41
<PAGE> 46
We estimate that the expenses for this offering, other than underwriting
fees, will be $836,821, approximately $386,321 of which will be paid by the
selling stockholders and $450,000 of which will be paid by Penton.
Penton and the selling stockholders have agreed to indemnify the
underwriters against some civil liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments that the underwriters may
be required to make in respect of any of those liabilities.
Penton and its executive officers and directors and certain of its
stockholders have agreed that, for a period of 90 days from the date of this
prospectus, they will not, subject to some exceptions, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation: (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any shares
of common stock or any securities convertible into or exercisable or
exchangeable for common stock; or (2) enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated with the
ownership of any common stock (regardless of whether any of the transactions
described in clause (1) or (2) is to be settled by the delivery of common stock
or other securities, in cash or otherwise). In addition, for a 90 day period
Penton has agreed not to file any registration statement with respect to, and
each of its executive officers, directors and some of the selling stockholders
have agreed not to make any demand for, or exercise any right with respect to,
the registration of any shares of common stock or any securities convertible
into or exercisable for common stock without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation.
The shares included in this offering may not be offered or sold, directly
or indirectly, nor may this prospectus or any other offering material or
advertisement in connection with the offer and sale of any of these shares be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of that
jurisdiction. Persons who receive this prospectus are advised to inform
themselves about and to observe any restrictions relating to the offering of the
common stock and the distribution of this prospectus. This prospectus is not an
offer to sell or a solicitation of an offer to buy any shares of common stock
included in this offering in any jurisdiction where that would not be permitted
or legal.
Each of the underwriters has agreed that (1) it has not offered or sold
and, prior to the expiration of a period of six months from the date hereof,
will not offer or sell, any shares of our common stock to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (2) it
has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the shares
of our common stock to a person who is of a kind described in Article 11(3) of
the Financial Services Act of 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom the document may otherwise lawfully be issued
or passed on; and (3) it has complied and will comply with all applicable
provisions of the Financial Services Act of 1986 with respect to anything done
with all applicable provisions of the Financial Services Act of 1986 with
respect to anything done by it in relation to any shares of our common stock in,
from or otherwise involving the United Kingdom.
In connection with this offering, some underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may overallot this offering,
creating a syndicate short position. In addition, the underwriters may bid for
and purchase shares of common stock in the open market to cover syndicate short
positions or to stabilize the price of the common stock. These activities may
stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities
and may end any of these activities at any time.
The Representatives have provided investment banking and advisory services
for us from time to time for which each of them has received customary fees and
reimbursement of expenses and may in the future provide additional services.
Donaldson, Lufkin & Jenrette Securities Corporation provided advisory services
in connection with our acquisition of Duke Communications International and
received a customary fee for those services. Because of Mr. Gabelli's ownership
of more than 5% of our common stock, this offering is being conducted in
accordance with Rule 2720 of the NASD conduct rules.
42
<PAGE> 47
LEGAL MATTERS
Legal matters in connection with the offering described in this prospectus
will be passed upon for Penton Media, Inc. by Jones, Day, Reavis & Pogue. Legal
matters in connection with this offering will be passed upon for the
underwriters by Skadden, Arps, Slate, Meagher & Flom LLP.
EXPERTS
The financial statements of Penton Media, Inc. (formerly Penton Publishing,
Inc. and, prior to August 7, 1998, a wholly-owned subsidiary of Pittway
Corporation) as of December 31, 1999 and 1998 and for each of the three years in
the period ended December 31, 1999, included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The audited financial statements of Mecklermedia Corporation as of
September 30, 1998 and 1997 and for each of the two years in the period ended
September 30, 1998 incorporated by reference in this prospectus and elsewhere in
the registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
The financial statements of New Hope Natural Media (a division of New Hope
Communications, Inc.) as of December 31, 1998 and for the year ended December
31, 1998 have been included and incorporated by reference herein and in the
registration statement in reliance upon the report by KPMG LLP, independent
certified public accountants, appearing elsewhere and incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
43
<PAGE> 48
WHERE YOU CAN FIND MORE INFORMATION
AVAILABLE INFORMATION
We file reports, proxy statements, and other information with the
Securities and Exchange Commission. These reports, proxy statements and other
information can be read and copied at the Commission's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for further information on the Public Reference Room. The
Commission maintains an internet site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission, including Penton. In
addition, our common stock is listed on the New York Stock Exchange and our
reports and other information can be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005.
INCORPORATION BY REFERENCE
The Commission allows us to "incorporate by reference" the documents that
we file with the Commission. This means that we can disclose information to you
by referring you to those documents. Any information we incorporate in this
manner is considered part of this prospectus except to the extent updated and
superseded by information contained in this prospectus. Some information we file
with the Commission after the date of this prospectus and until this offering is
completed will automatically update and supersede the information contained in
this prospectus.
We incorporate by reference the following documents that we have filed with
the Commission and any filings that we will make with the Commission in the
future under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 until this offering is completed:
- Current Report on Form 8-K dated and filed on December 9, 1998;
- Current Report on Form 8-K/A dated and filed on February 8, 1999;
- Registration Statement on Form 8-A/A dated and filed on March 30, 1999;
- Current Report on Form 8-K dated and filed on May 19, 1999;
- Current Report on Form 8-K/A dated and filed on August 10, 1999;
- Annual Report on Form 10-K for the year ended December 31, 1999;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
- Quarterly Report on Form 10-Q for the quarter ended June 30, 2000;
- Current Report on Form 8-K dated and filed on June 12, 2000;
- Registration Statement on Form 8-A, filed on June 12, 2000; and
- Current Report on Form 8-K dated and filed on September 15, 2000.
We will provide without charge, upon written or oral request, a copy of any
or all of the documents which are incorporated by reference into this
prospectus. Requests should be directed to: Penton Media, Inc., Attention: Mary
Abood, Director of Corporate Communications, 1100 Superior Avenue, Cleveland,
Ohio 44114, telephone number: (216) 696-7000.
44
<PAGE> 49
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Penton Media, Inc. Pro Forma Consolidated Financial
Statement (Unaudited):
Introduction to Unaudited Pro Forma Consolidated Financial
Statement.............................................. F-2
Unaudited Pro Forma Consolidated Statement of Income for
the year ended December 31, 1999....................... F-3
Notes to Unaudited Pro Forma Consolidated Financial
Statement.............................................. F-4
Penton Media, Inc. Consolidated Financial Statements
(Audited):
Report of Independent Accountants......................... F-5
Consolidated Statements of Income for the years ended
December 31, 1997, 1998, and 1999...................... F-6
Consolidated Balance Sheets at December 31, 1998 and
1999................................................... F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998, and 1999...................... F-8
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1997, 1998, and 1999.......... F-9
Notes to Consolidated Financial Statements................ F-10
Penton Media, Inc. Consolidated Financial Statements
(Unaudited):
Consolidated Statements of Income for the six months ended
June 30, 1999 and 2000................................. F-29
Consolidated Balance Sheets at December 31, 1999 and June
30, 2000............................................... F-30
Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and 2000........................... F-31
Notes to Unaudited Consolidated Financial Statements...... F-32
New Hope Natural Media (A division of New Hope
Communications, Inc.) Financial Statements:
Report of Independent Auditors............................ F-38
Statements of Operations and Owner's Equity (Deficit) for
the year ended December 31, 1998 and for the three
months ended March 31, 1998 and 1999 (Unaudited)....... F-39
Balance Sheets at December 31, 1999 and March 31, 1999
(Unaudited)............................................ F-40
Statements of Cash Flows for the year ended December 31,
1998 and for the three months ended March 31, 1998 and
1999 (Unaudited)....................................... F-41
Notes to Financial Statements............................. F-42
</TABLE>
F-1
<PAGE> 50
INTRODUCTION TO
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENT
The following unaudited pro forma consolidated statement of income reflects
adjustments to Penton's historical consolidated statement of income for the year
ended December 31, 1999, to give effect to the acquisition of New Hope Natural
Media (a division of New Hope Communications, Inc.), which was completed on May
27, 1999, as if it had occurred on January 1, 1999.
The unaudited pro forma consolidated statement of income is not necessarily
indicative of what the actual results of operations of Penton would have been
assuming the transactions had been completed as set forth above, nor do they
purport to represent Penton's results of operations for future periods.
The unaudited pro forma consolidated financial statement should be read in
conjunction with the historical financial statements and related notes of
Penton.
F-2
<PAGE> 51
PENTON MEDIA, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
----------------------------------------------
PENTON NEW HOPE PRO FORMA PRO FORMA
HISTORICAL 1/1/99-5/27/99 ADJUSTMENTS AS ADJUSTED
----------- --------------- ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues................................ $ 300,824 $ 15,963 $ 316,787
--------- -------- -------- ---------
Operating Expenses:
Editorial, production and
circulation........................ 116,924 5,161 122,085
Selling, general and administrative... 116,592 4,780 121,372
Depreciation and amortization......... 27,918 194 1,539(a) 29,651
--------- -------- -------- ---------
261,434 10,135 1,539 273,108
--------- -------- -------- ---------
Operating income........................ 39,390 5,828 (1,539) 43,679
Other income (expense):
Interest expense...................... (21,558) -- (21,558)
Gain on sale of investments........... 5,906 -- 5,906
Miscellaneous, net.................... 257 247 504
--------- -------- -------- ---------
(15,395) 247 -- (15,148)
--------- -------- -------- ---------
Income from continuing operations before
income taxes.......................... 23,995 6,075 (1,539) 28,531
Provision for income taxes.............. 16,065 2,430(b) (616)(b) 17,879
--------- -------- -------- ---------
Income from continuing operations....... 7,930 3,645 (923) 10,652
Discontinued operations................. 8,693 -- 8,693
--------- -------- -------- ---------
Income before extraordinary item...... 16,623 3,645 (923) 19,345
Extraordinary item -- early
extinguishment of debt................ 8,413 -- 8,413
--------- -------- -------- ---------
Net income.............................. $ 8,210 $ 3,645 (923) $ 10,932
========= ======== ======== =========
Earnings per common share -- basic and
diluted:
Income from continuing operations..... $ 0.28 $ 0.37
Discontinued operations............... 0.31 0.30
Extraordinary item.................... (0.30) (0.29)
--------- ---------
Net income............................ $ 0.29 $ 0.38
========= =========
Weighted -- average number of shares
outstanding:
Basic................................. 28,108 28,961(c)
========= =========
Diluted............................... 28,209 29,062(c)
========= =========
</TABLE>
The accompanying notes are an integral part of this unaudited pro forma
consolidated financial statement.
F-3
<PAGE> 52
NOTES TO
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENT
(a) Penton acquired New Hope Natural Media (a division of New Hope
Communications, Inc.) on May 27, 1999. Penton agreed to pay a total purchase
price of up to $97.0 million for New Hope, comprised of $41.0 million in
cash and $41.0 million (2,102,564 shares) in common stock, which were paid
and issued at closing, and up to $15.0 million in contingent payments based
on future earnings targets. The adjustment reflects incremental amortization
of intangible assets resulting from the acquisition as if Penton owned New
Hope from January 1, 1999 to May 27, 1999. Goodwill is being amortized over
a period ranging from 20 to 40 years and other intangibles are being
amortized over periods ranging from 5-15 years.
(b) Reflects the provision for federal and state income taxes at 40 percent on
the acquired company as well as the related pro forma income statement
adjustment noted above.
(c) Pro forma earnings per share is calculated by dividing net income by the
average number of shares outstanding during the period. The average number
of shares outstanding during the period is calculated as follows.
<TABLE>
<CAPTION>
BASIC DILUTED
------ -------
<S> <C> <C>
Average number of shares outstanding....................... 28,108 28,209
Pro Forma Adjustments:
To reflect New Hope shares as if issued on January 1,
1999.................................................. 853 853
------ ------
28,961 29,062
====== ======
</TABLE>
F-4
<PAGE> 53
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Penton Media, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Penton Media, Inc. (formerly Penton Publishing, Inc. and, prior to
August 7, 1998, a wholly-owned subsidiary of Pittway Corporation) and its
subsidiaries at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. 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 of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers, LLP
Cleveland, Ohio
February 9, 2000
F-5
<PAGE> 54
PENTON MEDIA, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1997 1998 1999
-------- -------- --------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues................................................... $181,109 $207,682 $300,824
-------- -------- --------
Operating expenses:
Editorial, production and circulation.................... 80,321 86,091 116,924
Selling, general and administrative...................... 72,031 87,582 116,592
Depreciation and amortization............................ 3,903 7,791 27,918
-------- -------- --------
156,255 181,464 261,434
-------- -------- --------
Operating income........................................... 24,854 26,218 39,390
Other income (expense):
Interest expense......................................... (823) (5,545) (21,558)
Gain on sale of investments.............................. 1,040 -- 5,906
Miscellaneous, net....................................... (2) (45) 257
-------- -------- --------
215 (5,590) (15,395)
-------- -------- --------
Income from continuing operations before income taxes...... 25,069 20,628 23,995
Provision for income taxes................................. 10,457 9,442 16,065
-------- -------- --------
Income from continuing operations.......................... 14,612 11,186 7,930
Discontinued operations:
Income (loss) from discontinued operations (less
applicable income taxes (benefit) of $34, $(199), and
$175, respectively)................................... 262 (296) 33
Gain on sale of discontinued operations, including
provision of $60 for operating losses during phaseout
period (less applicable income taxes of $5,771)....... -- -- 8,660
-------- -------- --------
262 (296) 8,693
Income before extraordinary item........................... 14,874 10,890 16,623
Extraordinary item -- early extinguishment of debt (net of
income taxes of $5,600).................................. -- -- 8,413
-------- -------- --------
Net income................................................. $ 14,874 $ 10,890 $ 8,210
======== ======== ========
Earnings per common share -- basic and diluted:
Income from continuing operations........................ $ 0.69 $ 0.51 $ 0.28
Discontinued operations.................................. 0.01 (0.01) 0.31
Extraordinary item....................................... 0.00 0.00 (0.30)
-------- -------- --------
Net income............................................... $ 0.70 $ 0.50 $ 0.29
======== ======== ========
Weighted average number of shares outstanding:
Basic.................................................... 21,240 21,882 28,108
======== ======== ========
Diluted.................................................. 21,240 21,882 28,209
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 55
PENTON MEDIA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 3,953 $ 30,370
Accounts and notes receivable, less allowance for doubtful
accounts of $4,899 and $3,958 in 1998 and 1999,
respectively........................................... 37,956 40,199
Inventories............................................... 2,361 818
Deferred tax assets....................................... 5,797 --
Prepayments, deposits and other........................... 8,086 7,201
Net current assets of discontinued operations............. -- 4,228
-------- --------
58,153 82,816
-------- --------
Property, plant and equipment, at cost:
Land and buildings........................................ 6,596 95
Machinery and equipment................................... 69,730 45,243
-------- --------
76,326 45,338
Less: accumulated depreciation............................ 47,395 30,252
-------- --------
28,931 15,086
-------- --------
Other assets:
Goodwill, less accumulated amortization of $10,129 and
$27,399 in 1998 and 1999, respectively................. 340,706 411,173
Other intangibles, less accumulated amortization of $7,828
and $9,541 in 1998 and 1999, respectively.............. 46,906 40,063
Investments............................................... 4,472 259,859
Other..................................................... 133 382
-------- --------
392,217 711,477
-------- --------
$479,301 $809,379
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Senior debt facility...................................... $ 11,250 $ 3,875
Revolving credit facility................................. 6,000 --
Notes payable............................................. 1,000 --
Accounts payable.......................................... 10,823 7,499
Income taxes payable...................................... 8,059 10,172
Accrued earnouts.......................................... 4,616 7,447
Accrued compensation and benefits......................... 7,238 8,377
Other accrued expenses.................................... 15,312 10,546
Deferred tax liability.................................... -- 39,634
Unearned income, principally trade show and conference
deposits............................................... 14,564 30,214
-------- --------
78,862 117,764
-------- --------
Long-term liabilities and deferred credits:
Senior debt facility...................................... 288,750 211,125
Net deferred pension credits.............................. 18,007 16,269
Deferred taxes............................................ 5,313 60,887
Other..................................................... 880 733
-------- --------
312,950 289,014
-------- --------
Stockholders' equity:
Preferred stock, 2,000,000 shares authorized; none
issued................................................. -- --
Common stock, $.01 par value, 60,000,000 shares
authorized; 31,325,896 and 22,781,713 shares issued and
outstanding at December 31, 1999, and 1998,
respectively........................................... 228 313
Capital in excess of par value............................ 55,050 214,551
Retained earnings......................................... 32,262 36,970
Other comprehensive income................................ (51) 150,767
-------- --------
87,489 402,601
-------- --------
$479,301 $809,379
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 56
PENTON MEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1997 1998 1999
-------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 14,874 $ 10,890 $ 8,210
Adjustments to reconcile income from operations to net
cash provided by operating activities:
Depreciation and amortization........................... 6,551 10,720 27,918
Gain on sale of investments (1,040) -- (5,906)
Gain of sale of Press segment -- -- (9,324)
Non-cash loss on sale of Direct Mail segment............ -- -- 668
Extraordinary loss on extinguishment of debt............ -- -- 8,413
Deferred income taxes................................... 878 (5,093) (363)
Retirement and deferred compensation plans.............. (2,000) (1,584) (1,182)
Provision for losses on accounts receivable............. 662 282 943
Writedown on impairment of assets....................... -- 1,000 --
Changes in assets and liabilities, excluding effects
from acquisitions and dispositions:
Accounts and notes receivable......................... 1,261 (1,960) (3,470)
Inventories........................................... 931 284 (389)
Prepayments and deposits.............................. 630 (1,481) 869
Accounts payable and accrued expenses................. 1,584 10,170 (5,444)
Unearned income....................................... (552) 2,421 12,325
Other changes, net.................................... (593) 100 1,089
-------- --------- --------
Net cash provided by continuing operations......... 23,186 25,749 34,357
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, excluding businesses acquired....... (5,450) (5,775) (5,884)
Net assets of businesses acquired, net of cash............ (48,733) (283,382) (53,969)
Proceeds from sale of internet.com........................ -- 18,000 --
Proceeds from sale of investments......................... -- -- 6,640
Cash paid for investments................................. -- -- (3,446)
Net proceeds from sale of Printing segment................ -- -- 28,889
Proceeds from sale of publications........................ 991 -- --
-------- --------- --------
Net cash used by investing activities.............. (53,192) (271,157) (27,770)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility................... -- 6,000 --
Proceeds from $325 million senior debt facility........... -- 300,000 24,500
Repayment of $325 million senior debt facility............ -- -- (330,500)
Proceeds from $340 million senior debt facility........... -- -- 235,000
Repayment of $340 million senior debt facility -- -- (20,000)
Payment of notes payable.................................. (14,000) (38,066) (1,000)
Payment of financing costs................................ -- (14,754) (3,461)
Increase in notes payable................................. 48,342 -- --
Advances to parent company................................ 924 (4,820) --
Proceeds from equity offering, net........................ -- -- 118,416
Dividends to shareholders................................. (4,412) (1,367) (3,246)
Proceeds from deferred shares and options exercised....... -- -- 170
-------- --------- --------
Net cash provided by financing activities.......... 30,854 246,993 19,879
-------- --------- --------
Effect of exchange rate..................................... -- (51) (49)
-------- --------- --------
Net increase in cash........................................ 848 1,534 26,417
Cash at beginning of period................................. 1,571 2,419 3,953
-------- --------- --------
Cash at end of period....................................... $ 2,419 $ 3,953 $ 30,370
======== ========= ========
Supplemental cash flow disclosure:
Interest paid............................................. $ 841 $ 5,545 $ 19,947
======== ========= ========
Income taxes paid......................................... $ 10,759 $ 10,026 $ 13,900
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 57
PENTON MEDIA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL IN OTHER
PREFERRED COMMON STOCK EXCESS OF COMPREHENSIVE RETAINED
SHARES SHARES PAR VALUE PAR VALUE INCOME EARNINGS TOTAL
--------- ------- --------- ---------- ------------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- December 31,
1996.................... -- 21,240 $212 $ 29,630 $ -- $29,309 $ 59,151
---- ------ ---- -------- -------- ------- --------
Net income.............. -- -- -- -- -- 14,874 14,874
Dividends............... -- -- -- -- -- (4,412) (4,412)
---- ------ ---- -------- -------- ------- --------
Balance -- December 31,
1997.................... -- 21,240 212 29,630 -- 39,771 69,613
---- ------ ---- -------- -------- ------- --------
Net income.............. -- -- -- -- -- 10,890 10,890
Dividends............... -- -- -- -- (1,367) (1,367)
Issuance of common stock
with Donohue/Meehan
Publishing
combination.......... -- 1,542 16 25,420 -- -- 25,436
Dividend to Pittway..... -- -- -- -- -- (17,032) (17,032)
Cumulative foreign
currency
translation.......... -- -- -- -- (51) -- (51)
---- ------ ---- -------- -------- ------- --------
Balance -- December 31,
1998.................... -- 22,782 228 55,050 (51) 32,262 87,489
---- ------ ---- -------- -------- ------- --------
Net income.............. -- -- -- -- -- 8,210 8,210
Dividends............... -- -- -- -- -- (3,502) (3,502)
Foreign currency
translation.......... -- -- -- -- (787) -- (787)
Mark to Market.......... -- -- -- -- 151,605 -- 151,605
Issuance of common stock
with New Hope
acquisition.......... -- 2,103 21 40,979 -- -- 41,000
Issuance of common
stock, net........... -- 6,430 64 118,352 -- -- 118,416
Deferred shares and
options exercised.... -- 11 -- 170 -- -- 170
---- ------ ---- -------- -------- ------- --------
Balance -- December 31,
1999.................... -- 31,326 $313 $214,551 $150,767 $36,970 $402,601
==== ====== ==== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE> 58
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Penton Media, Inc., ("Penton") is a leading diversified
business-to-business media company that produces market focused magazines, Web
sites, trade shows and conferences. Penton's integrated media portfolio serves
the following market sectors: Internet/broadband; design/engineering;
electronics; natural products/food/retail; government/compliance;
leisure/hospitality; management; manufacturing; mechanical systems/construction;
and supply chain/aviation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Penton and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated. Acquisitions are accounted for under the purchase method of
accounting and are included in the consolidated financial statements from their
respective dates of acquisition.
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 these estimates.
CASH AND CASH EQUIVALENTS
Cash and short-term investments include cash on hand and commercial paper.
Short-term investments that have an original maturity of three months or less
are considered cash equivalents. All investments in debt securities that have an
original maturity of three months or less are considered to be held to maturity.
Short-term securities are carried at amortized cost, which approximates fair
value.
INVENTORIES
Inventories are stated at the lower of cost or market. Costs included in
inventories are raw materials, direct labor and manufacturing overhead. Prior to
the sale of the Printing segment and the classification of the Direct Mail
segment as discontinued in 1999, Penton's raw material inventory consisted of
paper and ink stock, which is valued using the last-in, first-out (LIFO) method.
After the sale and discontinuance of these businesses, raw material inventory
consists of paper stock only. The LIFO reserve balances of $0.3 million and $0.4
million at December 31, 1999, and 1998, respectively, represent, the excess of
current replacement cost over the LIFO value of paper inventory.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Penton records
depreciation, using the straight-line method, in amounts sufficient to write off
the cost of depreciable assets over the following estimated useful lives:
<TABLE>
<S> <C>
Computer equipment................................... 3-5 years
Furniture, fixtures and equipment.................... 3-10 years
Building............................................. 18-40 years
Leasehold improvements............................... Estimated useful lives or lease term,
whichever is shorter
</TABLE>
F-10
<PAGE> 59
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation expense amounted to approximately $4.9 million, $3.4 million
and $2.8 million for the years ended December 31, 1999, 1998 and 1997,
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.
INTANGIBLE ASSETS
Goodwill, trademarks and trade names identified in purchase transactions
are amortized using the straight-line method over periods ranging from 20 to 40
years. Effective October 1, 1998, Penton changed its estimated useful life on
goodwill associated with trade show acquisitions from 40 years to 20 years. The
change decreased 1998 net income by $0.3 million, or $0.01 per share. The change
was made to better reflect the estimated useful life of goodwill and to be
consistent with prevalent industry practice.
It is Penton's policy to continually evaluate the period of amortization
and the recoverability of goodwill. This review is based upon an evaluation of
significant adverse events or changes in our operating environment. If expected
future net cash flows, undiscounted and without interest, are less than the
carrying amount of the asset, an impairment loss is recognized in the period the
determination is made.
Other intangibles developed internally or acquired in purchase
transactions, consisting of non-compete agreements, customer mailing lists,
exhibitor lists, patents and copyrights, are being amortized using the straight-
line method over their estimated useful lives, ranging from 3 to 15 years.
Amortization expense amounted to approximately $23.0 million, $4.4 million
and $1.1 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
DEFERRED FINANCING COSTS
Costs incurred in obtaining long-term financing are included in "other
intangible assets" in the accompanying balance sheet, and are amortized by the
straight-line method over the terms of the related indebtedness.
INTEREST RATE SWAP AGREEMENTS
Penton's interest rate swap agreements are designated and effective as
modifications to existing debt obligations to reduce the impact of changes in
the interest rates on its floating-rate borrowings and, accordingly, are
accounted for using the settlement method of accounting. The differentials to be
paid or received under the interest rate swap agreements are accrued as interest
rates change and are recognized as adjustments to interest expense. Penton
considers swap terms, including the reference rate, payment and maturity dates,
and the notional amount, in determining if an interest rate swap agreement is
effective at modifying an existing debt obligation. If the criteria for
designation are no longer met or the underlying instrument matures or is
extinguished, Penton accounts for outstanding swap agreements at fair market
value, and any resulting gain or loss is recognized. Any gains or losses upon
early termination of the agreements are deferred and amortized over the shorter
of the remaining life of the hedged existing debt obligation or the original
life of the interest rate swap agreement.
At December 31, 1999, the effects of swap transactions were insignificant
and recorded in interest expense. There were no swap agreements in effect at
December 31, 1998.
REVENUE RECOGNITION
Advertising revenues from Penton's trade magazines are generally recognized
in the month the publications are mailed. Revenues from trade shows and
conferences are recognized in the month the events are held. Licensing revenues
are recognized on a straight-line basis over the term of the license agreement.
F-11
<PAGE> 60
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING AND PROMOTION EXPENSES
Advertising and promotion costs are expensed primarily as incurred. These
costs amounted to $18.2 million, $12.4 million and $7.7 million in 1999, 1998
and 1997, respectively.
INCOME TAXES
Income taxes are accounted for using the asset and liability method.
Deferred tax assets and liabilities are recognized for the expected future tax
consequences attributable to temporary differences between the financial
statement carrying amounts and the tax basis of assets and liabilities. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized.
For periods prior to and including the spin-off date (see Note 2), Penton's
results were included in Pittway's consolidated U.S. federal income tax returns.
The 1998 provision for income taxes included in the consolidated statement of
income represented an allocated share of Pittway's tax expense. The allocated
share approximated the tax expense that was incurred on a separate return basis.
Pittway recorded the liability as income taxes payable at December 31, 1997.
Pursuant to the Combination Agreement (see Note 2), Penton is required to
indemnify Pittway for any additional federal, state, local and foreign income
tax liabilities with respect to all periods prior to and including the date of
the spinoff. The Internal Revenue Service has audited all consolidated federal
income tax returns of Pittway through 1995.
TRANSLATION OF FOREIGN CURRENCIES
The functional currency of Penton's foreign operations is their local
currency. Accordingly, assets and liabilities of foreign operations are
translated to U.S. dollars at the rates of exchange at December 31, 1999, and
1998; income and expense are translated at the average rates of exchange
prevailing during the applicable year. There were no significant foreign
currency gains or losses in 1999 or 1998. The effects of translation are
included in "accumulated other comprehensive income" in stockholders' equity.
EARNINGS PER SHARE
The weighted-average number of common shares outstanding is adjusted for
common stock equivalents when they are dilutive.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). Penton was required
to adopt this statement in the first quarter of 2000. In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133 an
Amendment of FASB Statement No 133" ("SFAS 137"). SFAS 137 deferred the
effective date of SFAS 133 for all fiscal quarters beginning after June 15,
2000. Even though Penton has entered into interest rate cap, collar and swap
agreements, management does not believe these statements will have a material
impact on Penton's business, results of operations or financial condition.
F-12
<PAGE> 61
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the 1999 presentation.
NOTE 2 -- SPINOFF FROM PITTWAY AND SUBSEQUENT ACQUISITION
Prior to August 7, 1998, Penton was a wholly owned subsidiary of Pittway
Corporation. On August 7, 1998, Pittway distributed 100% of Penton's common
stock on a share-for-share basis to holders of Pittway stock.
Immediately after the spinoff, Penton entered into an agreement (the
"Combination Agreement") and completed the acquisition of DM Publishing. DM
Publishing was acquired for $7.0 million in cash, 6.767% of Penton's stock
(1,541,638 shares) to be outstanding immediately after the acquisition, and up
to an additional $4.0 million in cash based on DM Publishing's pre-tax income
for the years 1998 and 1999, of which $2.0 million and $0.8 million were earned,
respectively. Penton also agreed to make a contingent cash payment to the
extent, if any, that the shares issued in the acquisition have an average
aggregate market value of less than $29.0 million during either of two 30-day
periods in the year 2000. This contingent payment is subject to certain
limitations as to any of such shares sold prior to the calculation date. A
portion of the contingent payment may be payable in common stock rather than
cash under certain conditions. At December 31, 1999, Penton was not required to
accrue for this event. The final review period is 30 days, ending on the second
anniversary of the date of the combination.
The transaction was accounted for as a purchase and, accordingly, the
operating results of DM Publishing have been included in Penton's consolidated
financial statements since the date of acquisition. The excess of the aggregate
purchase price over the fair market value of net assets acquired of
approximately $31.3 million is being amortized over 40 years.
NOTE 3 -- ACQUISITIONS
In December 1999, Penton completed the acquisition of the assets of
Nutracon for $3.1 million in cash. The excess of the aggregate purchase price
over the fair market value of net assets acquired of approximately $3.1 million
is being amortized over 20 years. Nutracon is a conference serving the
functional foods/nutraceutical market.
In October 1999, Penton acquired all the outstanding stock of Stardust.com
and simultaneously purchased the net assets of Stardust Technologies Inc.
(collectively "Stardust"), for a combined purchase price of $4.0 million in cash
and future contingent payments of up to $5.0 million tied to future earnings of
Stardust through the year 2002. The excess of the aggregate purchase price over
the fair market value of net assets acquired of approximately $3.7 million is
being amortized over 20 years. Stardust, through its Web portal site,
conferences, forums and newsletters, facilitates collaboration between Internet
technology standards bodies, technology product vendors and the IT user
community to speed market adoption of next-generation Internet technologies.
In August 1999, Penton completed the asset acquisition of Multimedia Week
for $0.2 million in cash. Multimedia Week is a weekly publication that features
IPOs and venture capital tracking; in-depth product and technology spotlights;
information about new and emerging technologies; and market data.
In May 1999, Penton acquired substantially all the assets of New Hope. In
full consideration for the transfer of the assets, Penton agreed to pay a total
purchase price of up to $97.0 million for New Hope. The purchase price comprised
$41.0 million in cash and $41.0 million (2,102,564 shares) in common stock which
were paid and issued at the closing. New Hope is eligible to earn a contingent
payment of up to $15.0 million to be paid half in cash and half in common stock,
based on New Hope's performance for the fiscal years 1999, 2000 and 2001. At
December 31, 1999, Penton accrued $2.3 million for the 1999 contingent payout.
The excess of the aggregate
F-13
<PAGE> 62
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchase price over the fair market value of net assets acquired of
approximately $78.2 million is being amortized over periods ranging from 20 to
40 years. New Hope is a leading business media company serving the natural
products industry through trade shows, conferences, magazines and Web sites.
In May 1999, Penton completed the acquisition of Jon Peddie Associates for
$1.3 million in cash and contingent payments of up to $3.0 million tied to
future earnings of Jon Peddie through the year 2001. The excess of the aggregate
purchase price over the fair market value of net assets acquired of
approximately $1.0 million is being amortized over 40 years. At December 31,
1999, Penton accrued $1.0 million for the 1999 contingent payout. Jon Peddie is
an information company that conducts research, publishes market studies and
special reports, and provides consulting services to the electronics,
semiconductor and digital media industries.
In February 1999, Penton acquired the assets of MFG Publishing, Inc. for a
total purchase price of up to $2.5 million, of which $0.8 million was paid in
cash and the remaining $1.7 million is contingent upon earnings through the year
2001. The excess of the aggregate purchase price over the fair market value of
net assets acquired of approximately $0.6 million is being amortized over 40
years. MFG provides information to the enterprise resource planning segment of
the manufacturing technology industry.
In November 1998, Penton completed a cash tender offer for all the
outstanding shares of Mecklermedia Corporation ("Mecklermedia"). Each
Mecklermedia shareholder received $29.00 in cash for each share of common stock
held. The total value of the transaction was $273.8 million, funded with the net
proceeds from Penton's credit facility (see Note 7). Simultaneous with the
completed transaction, Penton sold an 80.1% equity interest in internet.com
Corporation to Alan M. Meckler for $18.0 million (see Note 6) and renamed
Mecklermedia Internet World Media, Inc. The excess of the aggregate purchase
price over the fair market value of net assets acquired of approximately $244.0
million is being amortized over periods ranging from 20 to 40 years. Penton
increased its goodwill by $1.5 million in 1999 as a result of resolving certain
contingencies existing at the date of acquisition. IWM is a business media
company serving the Internet market through publications, trade shows and
conferences, and Web sites.
During 1997, Penton acquired one foreign and two domestic trade show
companies for $45.6 million in cash and $2.5 million of notes payable to the
sellers. The acquisitions also included contingent payments up to $13.5 million
tied to future earnings of the acquired companies through the year 2000, of
which $3.3 million, $2.4 million and $0.7 million was earned in 1999, 1998 and
1997, respectively.
NOTE 4 -- DISCONTINUED OPERATIONS AND DISPOSITIONS
On November 30, 1999, Penton sold its Printing segment, realizing cash
proceeds of $31.0 million. The sale resulted in a gain of $9.3 million, net of
$6.2 million in income taxes. Operating results of the discontinued Printing
segment are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues.................................................... $10,526 $11,657 $10,424
------- ------- -------
Income before income tax expense............................ 1,534 821 531
Provision for income taxes.................................. 614 328 220
------- ------- -------
Income from discontinued operations......................... $ 920 $ 493 $ 311
======= ======= =======
</TABLE>
On December 30, 1999, Penton signed a letter of intent to sell its Direct
Mail segment for approximately $4.0 million in cash, and expects to complete the
sale in the first quarter of 2000. Penton recorded the net assets available for
sale as a separate line in the balance sheet at December 31, 1999. Such sale
will result in a loss
F-14
<PAGE> 63
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
estimated at $0.7 million, including a provision of $0.06 million for operating
losses during the phase-out period. Operating results of the discontinued Direct
Mail segment are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues.................................................... $13,296 $13,779 $12,199
------- ------- -------
Loss before income tax benefit.............................. (1,097) (1,316) (464)
Benefit for income taxes.................................... (439) (527) (186)
------- ------- -------
Loss from discontinued operations........................... $ (658) $ (789) $ (278)
======= ======= =======
</TABLE>
In 1997, Penton sold one publication for $1.0 million cash and recognized a
gain on the sale of approximately $1.0 million. Penton classified the sale as
"Gain on sale of investments."
NOTE 5 -- PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma operating data are presented for the
twelve months ended December 31, 1999, as if each of the following transactions
had occurred on January 1, 1999: (i) the acquisition of MFG in February 1999;
(ii) the addition of $15 million in Term B loans in April 1999; (iii) the sale
by Penton of 6,430,000 common shares in May 1999; (iv) the acquisition of New
Hope in May 1999; (v) the sale of 510,000 shares of internet.com Corporation in
July 1999; (vi) the refinancing of debt in September 1999; (vii) the acquisition
of Stardust.com in October 1999; (viii) the sale of the Printing segment in
November 1999; (ix) the acquisition of Nutracon in December 1999; and (x) the
discontinuation of the Direct Mail segment in December 1999.
The following unaudited pro forma operating data are presented for the
twelve months ended December 31, 1998, as if each of the following transactions
had occurred on January 1, 1998: (i) the acquisition of DM Publishing in August
1998; (ii) the issuance of 1,541,638 shares of common stock for the acquisition
of DM Publishing; (iii) the acquisition of Mecklermedia in November 1998; (iv)
the sale of an 80.1% interest in internet.com Corporation to Mr. Meckler in
November 1998; (v) and the 1999 pro forma transactions noted above.
The 1999 and 1998 pro forma disclosures above do not include the operations
of Jon Peddie and Multimedia Week, because the impact of these transactions is
immaterial to such information.
The pro forma financial information is presented for informational purposes
only and may not be indicative of the actual results of operations had the
acquisitions occurred as indicated, nor does it purport to represent the results
of the operations for future periods (in thousands, except per share data):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Pro forma revenues.......................................... $309,755 $319,922
======== ========
Pro forma income before extraordinary item.................. $ 11,618 $ 21,760
======== ========
Pro forma net income applicable to common shareholders...... $ 11,618 $ 13,347
======== ========
Per share data:
Earnings per common share -- basic and diluted:
Income before extraordinary item.......................... $ 0.37 $ 0.69
Extraordinary item........................................ -- (0.26)
-------- --------
Net income................................................ $ 0.37 $ 0.43
======== ========
</TABLE>
F-15
<PAGE> 64
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- INVESTMENTS
In November 1998, Penton entered into a joint venture agreement with Mr.
Meckler, formerly associated with Mecklermedia, with respect to internet.com,
LLC. As part of the acquisition of Mecklermedia, Penton sold 80.1% of its
interest in internet.com, LLC to Mr. Meckler; other ownership interests were
made to internet.com, LLC management such that Penton's ownership interest
decreased to 19.0%. In April and June 1999, Penton contributed $0.4 million in
cash and exercised a warrant for $3.0 million in cash, respectively, increasing
its ownership interest from 19.0% to 27.4%.
On June 23, 1999, internet.com, LLC converted into a corporation and
completed its initial public offering at $14.00 per share. At that time, Penton
received 5,483,383 shares in exchange for its interest in internet.com, LLC,
retaining a 23.4% ownership interest. In July 1999, Penton sold 510,000 shares
of internet.com Corporation stock as part of internet.com Corporation's initial
public offering over-allotment option which reduced Penton's ownership interest
to 21.25%. Penton received cash of $6.6 million, net of expenses, and recognized
a gain of $5.9 million. Penton intends for its investment to be temporary;
accordingly, Penton marks to market its investment in internet.com Corporation.
At December 31, 1999, Penton's investment totaled $259.9 million; including a
cumulative mark to market adjustment of $252.7 million and related adjustment in
long-term deferred taxes of $101.1 million and other comprehensive income of
$151.6 million.
Penton and internet.com have also entered into various agreements relating
to the exchange of services between the two companies, which are in effect until
November 24, 2001.
NOTE 7 -- DEBT
SENIOR SECURED CREDIT FACILITY
On September 1, 1999, Penton entered into a credit agreement with several
banks under which it may borrow up to $340.0 million. The agreement provides for
a revolving credit facility of up to $125.0 million, a long-term loan of $140.0
million ("Term Loan A") and a long-term loan of $75.0 million ("Term Loan B").
Some of the proceeds were used to retire debt under Penton's former $325.0
million credit facility. In the third quarter, Penton recognized a non-cash
extraordinary charge of approximately $6.3 million ($0.20 per share), net of
$4.2 million in taxes, relating to the writeoff of unamortized deferred finance
costs associated with the former credit facility.
The credit facility is collateralized by all tangible and intangible assets
of Penton, including the equity interests in all of its U.S. subsidiaries and
not less than 65% of the equity interests of any of its foreign subsidiaries.
Under the terms of the agreement, Penton is required to maintain certain
financial ratios and other financial conditions. The agreement also prohibits
Penton from incurring certain additional indebtedness; limits certain
investments, advances or loans; and restricts substantial asset sales and cash
dividends. At December 31, 1999, Penton was in compliance with all loan
covenants.
The revolving credit facility bears interest, at Penton's option, at either
the Alternative Base Rate ("ABR"), defined as the higher of the Administrative
Agent's Prime Rate or the Federal Funds Rate plus 0.50%, or at LIBOR, plus a
rate margin ranging from 0.25% to 2.125% based on Penton's consolidated leverage
ratio, as defined. Up to the full amount of the revolving credit facility may be
borrowed, repaid and reborrowed until maturity on August 31, 2006; however, the
revolving credit facility commitment shall be reduced as of September 30, 2003,
by 7.5% per quarter until September 30, 2005, at which time it will be reduced
by 10% per quarter until maturity. Penton may also, prior to the first
anniversary of the credit facility, request an increase in the revolving credit
facility by an amount not to exceed $60.0 million. At December 31, 1999, no
amounts were outstanding under the revolving credit facility. Penton has agreed
to pay a commitment fee ranging from 0.375% to 0.50%, based on Penton's
consolidated leverage ratio, on the average unused portion of the revolving
credit facility commitment. At December 31, 1999, $125.0 million was available
under the facility.
F-16
<PAGE> 65
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Term Loan A bears interest, at Penton's option, at either the ABR rate or
at LIBOR, plus a rate margin ranging from 0.25% to 2.125%, based on Penton's
consolidated leverage ratio. Interest on ABR loans is payable quarterly in
arrears, while interest on LIBOR loans is payable in arrears at the end of each
applicable interest period not to exceed three months. At December 31, 1999, the
rate in effect was 8.0%. The loan, which requires quarterly principal payments
starting in September 2000, will mature on August 31, 2006. At December 31,
1999, $140.0 million was outstanding under Term Loan A.
Term Loan B bears interest, at Penton's option, at either the ABR rate or
at LIBOR, plus a rate margin ranging from 0.5% to 2.50%, based on Penton's
consolidated leverage ratio. Interest on ABR loans is payable quarterly in
arrears, while interest on LIBOR loans is payable in arrears at the end of each
applicable interest period not to exceed three months. At December 31, 1999, the
rate in effect was 8.5%. The loan requires quarterly principal payments of
approximately $0.2 million starting in September 2000, and four balloon payments
of $17.6 million beginning in September 2006, and will mature on August 31,
2007. At December 31, 1999, $75.0 million was outstanding under Term Loan B.
In May 1999, Penton recognized a non-cash extraordinary charge of
approximately $2.1 million ($0.08 per share), net of approximately $1.4 million
in taxes, for the writeoff of unamortized deferred finance costs upon the
extinguishment of part of the outstanding former senior debt with the proceeds
from the 6.5 million share common stock offering (see Note 12).
As of December 31, 1999, the scheduled principal payments of the Term A and
B loans for the next five years and thereafter are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
2000........................................................ $ 3,875
2001........................................................ 11,250
2002........................................................ 18,250
2003........................................................ 25,250
2004........................................................ 32,250
Thereafter.................................................. 124,125
--------
$215,000
========
</TABLE>
The Credit Agreement requires Penton to hedge not less than 50% of the term
loans outstanding for a period of at least three years (see Note 8).
NOTE PAYABLE
The short-term note of $1.0 million payable at December 31, 1998,
represented foreign indebtedness, was denominated in British pounds and bore
interest at Penton's foreign borrowing rate (8.2% at December 31, 1998). The
note, plus accrued interest, was paid off in January 1999.
NOTE 8 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of accounts and notes receivable, accounts payable,
accrued expenses and notes payable approximates fair value due to the short
maturity of these instruments.
In connection with the refinancing of Penton's debt in September 1999,
Penton entered into two interest rate caps, an interest rate collar and a swap
agreement with several financial institutions, as required under the senior
secured credit facility. The notional amounts of the interest rate agreements
are used to measure interest to be paid or received, and do not represent the
amount of exposure to credit loss. The net cash paid for the interest rate caps,
collar and swap of approximately $0.2 million has been deferred and will be
amortized over the life of the term loans.
F-17
<PAGE> 66
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1999, Penton had the following interest rate instruments in
effect that provide protection on the three-month LIBOR rate upon which Penton's
variable-rate term loans are based (actual rate paid is LIBOR plus the
respective margin) (in thousands):
<TABLE>
<CAPTION>
NOTIONAL
AMOUNT RATE PERIOD
-------- ------------- -----------
<S> <C> <C> <C>
Interest rate caps................................... $53,750 8.50% 10/99-10/02
Interest rate swap................................... $17,916 5.95% 10/99-10/02
Interest rate collar................................. $35,832 6.00% to 7.5% 10/99-10/02
Interest rate cap.................................... $28,500 8.50% 2/99-2/01
</TABLE>
Swap agreements, which were required under the former credit facility, were
unwound, and proceeds of approximately $0.2 million were credited against
interest expense.
NOTE 9 -- INCOME TAXES
The source of income (loss) on continuing operations before income tax
expense consists of (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
U.S. domestic.............................. $25,322 $20,359 $23,021
Foreign.................................... (253) 269 974
------- ------- -------
$25,069 $20,628 $23,995
======= ======= =======
</TABLE>
The provision for income taxes (benefits) on continuing operations in the
consolidated statements of income is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Current --
Federal.................................. $ 7,982 $11,379 $12,797
State and local.......................... 1,597 2,423 2,837
Foreign.................................. -- 733 794
------- ------- -------
9,579 14,535 16,428
------- ------- -------
Deferred --
Federal.................................. 851 (4,348) (301)
State and local.......................... 98 (816) (62)
Foreign.................................. (71) 71 --
------- ------- -------
878 (5,093) (363)
------- ------- -------
$10,457 $ 9,442 $16,065
======= ======= =======
</TABLE>
The consolidated provision for income taxes comprises the following (in
thousands):
<TABLE>
<S> <C> <C> <C>
Provision for income taxes from continuing
operations:.................................... $10,457 $9,442 $16,065
Provision for income taxes (benefit) from
discontinued operations:....................... 175 (199) 5,805
Provision for income (benefit) from extraordinary
item:.......................................... -- -- (5,600)
------- ------ -------
Consolidated tax provision....................... $10,632 $9,243 $16,270
======= ====== =======
</TABLE>
F-18
<PAGE> 67
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The difference between the actual income tax provision on continuing
operations and the tax provision computed by applying the statutory federal
income tax rate of 35% to income before income taxes is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------ -------
<S> <C> <C> <C>
Income tax at statutory rate..................... $ 8,774 $7,220 $ 8,398
Tax effect of:
State income taxes, net of federal benefit..... 1,101 1,049 1,804
Non-deductible goodwill........................ -- -- 4,830
Non-deductible expenses........................ 582 1,173 548
Other items, net............................... -- -- 485
------- ------ -------
Actual income tax provision...................... $10,457 $9,442 $16,065
======= ====== =======
Effective income tax rate........................ 41.7% 45.8% 67.0%
======= ====== =======
</TABLE>
The components of deferred tax assets and liabilities at December 31, 1999,
1998 and 1997 follow:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Deferred tax assets --
Deferred pension credits................... $ 7,651 $ 7,087 $ 6,532
Accrued vacation........................... 1,159 1,335 989
Bad debts.................................. 805 2,541 1,551
Reserves recorded for financial reporting
purposes................................ 826 1,735 2,107
Inventory capitalization................... 29 164 158
Other...................................... 252 379 482
-------- -------- ---------
Total deferred tax assets.......... 10,722 13,241 11,819
-------- -------- ---------
Deferred tax liabilities --
Mark to market adjustment for securities... -- -- (101,070)
Depreciation............................... (3,640) (3,312) (1,366)
Amortization............................... (164) (9,249) (9,209)
Trade show expenses........................ -- (196) (668)
Other...................................... -- -- (27)
-------- -------- ---------
Total deferred tax liabilities..... (3,804) (12,757) (112,340)
-------- -------- ---------
Net deferred tax asset (liability)........... $ 6,918 $ 484 $(100,521)
======== ======== =========
</TABLE>
At December 31, 1999, the net deferred tax liability is allocated between
current liabilities ($39.6 million) and long-term liabilities ($60.9 million).
The net change from the net deferred asset as of December 31, 1998, and the
net deferred liability as of December 31, 1999, is primarily the result of the
mark to market adjustment for investments, with such change having a balance
sheet impact only.
NOTE 10 -- EMPLOYEE PLANS
RETIREMENT PLAN
Penton has various non-contributory retirement plans covering substantially
all current and former domestic employees. Retirement benefits for employees in
foreign countries generally are provided by national statutory programs.
Benefits for domestic employees are based on years of service and annual
compensation as defined by each plan. The Combination Agreement (see Note 2)
provided that all employees receive credit for their years of service in the
Pittway plan. Prior to 1995, Pittway allocated net pension plan income credits
to Penton based upon
F-19
<PAGE> 68
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the assets of a previously separate Pittway plan, which was merged into the
Pittway plan in 1991. At the time the plans were merged, the amount of Penton's
plan assets exceeded its projected benefit obligation and, by 1995, such funding
excess had increased and had become substantially disproportionate to the
funding excess for the remainder of the Pittway plan. As a result, for 1997,
Pittway limited the allocation of net pension income credits to Penton to $1.5
million.
As provided in the Combination Agreement, Pittway transferred $45.0 million
of its plan assets ("Allocated Assets"), including approximately $10.5 million
of funding excess, as of December 31, 1997, to the new Penton plan. The amount
of Allocated Assets was determined by Pittway as the estimated proportion of
total Pittway plan assets that would result in the elimination of the funding
excess for Penton in the same future year as such elimination for the remainder
of the Pittway plan, based on historical rates of service cost increases and
return on plan assets.
The following table sets forth the funded status of Penton's portion of the
plan and amounts recognized in the balance sheet:
<TABLE>
<CAPTION>
1998 1999
--------- --------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation, January 1......................... $ 34,539 $ 42,370
Service cost....................................... 1,684 2,107
Interest cost...................................... 2,488 2,666
Benefits paid...................................... (3,944) (2,947)
Actuarial (gain) loss.............................. 7,603 (6,099)
Plan amendments.................................... -- 91
Curtailments....................................... -- (755)
--------- --------
Benefit obligation, December 31....................... $ 42,370 $ 37,433
========= ========
CHANGE IN PLAN ASSETS
Fair value of plan assets, January 1.................. $ 45,000 $ 37,800
Actual return on plan assets....................... (3,256) 6,055
Benefits paid...................................... (3,944) (2,947)
--------- --------
Fair value of plan assets, December 31................ $ 37,800 $ 40,908
========= ========
FUNDED STATUS OF THE PLAN
Projected benefit obligation (in excess of) less than
fair value of assets as of December 31................ $ (4,570) $ 3,475
Unrecognized actuarial gain........................... (13,368) (19,926)
Unrecognized prior service cost....................... 1,612 1,022
Unrecognized net transition asset..................... (1,681) (840)
--------- --------
Net deferred pension credits.......................... $ (18,007) $(16,269)
========= ========
ASSUMPTIONS AS OF DECEMBER 31
Discount rate......................................... 7% 8%
Expected return on plan assets........................ 7% 9%
Weighted-average salary increase rate................. 5% 5%
</TABLE>
F-20
<PAGE> 69
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the components of pension expense:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
NET PERIODIC COST
Service cost................................... $ 1,767 $ 1,684 $ 2,107
Interest cost.................................. 2,226 2,488 2,667
Expected return on assets...................... (2,684) (3,065) (3,782)
Amortization of:
Transition asset............................ (841) (841) (841)
Prior service cost.......................... 357 357 346
Actuarial (gain) loss....................... (2,325) (2,207) (1,679)
------- ------- -------
Net pension expense (income)..................... $(1,500) $(1,584) $(1,182)
------- ------- -------
Cost of special termination benefits............. -- -- 91
Curtailment gain................................. -- -- (647)
------- ------- -------
Total net periodic pension cost
(benefit)............................ $(1,500) $(1,584) $(1,738)
======= ======= =======
ASSUMPTIONS AS TO PERIODIC PENSION COST
Discount rate.................................. 7% 7% 7%
Expected return on plan assets................. 7% 7% 9%
Weighted-average salary increase rate.......... 5% 5% 5%
</TABLE>
During 1999, Penton sold its Printing segment and as a result incurred
$0.09 million in special termination benefits and recognized curtailment gains
of $0.6 million.
401(k) PLAN
Effective September 1, 1998, Penton adopted a 401(k) defined contribution
plan (the "401(k) Plan") covering substantially all officers and employees. The
Combination Agreement provided for assets and liabilities attributable to Penton
employees in the Pittway 401(k) plan to be transferred to Penton's Plan. The
401(k) Plan permits participants to defer up to a maximum of 15% of their
compensation. Penton matches 50% of the employee's contributions up to a maximum
of 6% of the employee's annual compensation. The employee's contribution and
Penton's matching contribution vest immediately. Penton's contributions to the
401(k) Plan for the years ended December 31, 1999, and 1998 were $1.5 million
and $0.4 million, respectively. The 401(k) Plan was fully funded at December 31,
1999.
SERP
Two executive officers participate in Penton's supplemental executive
retirement plan, which is not tax qualified. At December 31, 1999, the estimated
annual benefit payable under the plan upon retirement at age 65 was $0.1 million
for both participants, assuming a life expectancy of 80 years and a discount
rate of 7%. At December 31, 1999, $0.05 million was accrued related to this
future obligation and $0.02 million of expense was recognized, representing
service costs and interest.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
Penton leases certain office space and equipment under non-cancelable
operating leases. Some of the leases contain renewal options, and certain
equipment leases include options to purchase during or at the end of the lease
term. Following is a schedule of approximate annual future minimum rental
payments required under
F-21
<PAGE> 70
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
operating leases that have initial or remaining non-cancelable lease terms in
excess of one year as of December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
2000........................................................ $ 8,793
2001........................................................ 3,505
2002........................................................ 2,818
2003........................................................ 2,314
2004........................................................ 2,018
Thereafter.................................................. 6,796
-------
$26,244
=======
</TABLE>
On January 5, 2000, Penton signed a 10-year lease agreement to relocate its
corporate headquarters. The lease begins on December 1, 2000, with annual
minimum rental payments for 2000, 2001, 2002, 2003, 2004 and thereafter of $0.2
million, $2.5 million, $2.5 million, $2.5 million, $2.5 million and $15.7
million, respectively. The lease provides that Penton pay taxes, maintenance,
insurance and certain other operating expenses applicable to the premises.
Penton has an option to extend this lease for two terms of five years each.
Future minimum lease payments under capital leases are as follows (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
2000........................................................ $125
2001........................................................ 89
2002........................................................ 43
2003........................................................ 16
2004........................................................ 1
Thereafter.................................................. --
Less: amount representing interest.......................... (34)
----
Present value of net minimum lease payments................. 240
Less: current portion....................................... (78)
----
Long-term obligations (included in other long-term
liabilities).............................................. $162
====
</TABLE>
For the years ended December 31, 1999, 1998, and 1997, the total rent
expense (including taxes, insurance and maintenance when included in the rent)
incurred by Penton was approximately $7.5 million, $6.3 million and $6.3
million, respectively.
In connection with the tax-free spinoff of Penton common stock by Pittway
to its stockholders in August 1998, Penton agreed not to take any action that
would cause the spinoff to be taxable to Pittway under section 355 of the
Internal Revenue Code. Penton also agreed to indemnify Pittway for any liability
suffered if Penton were to take any action that would cause the spinoff to be
taxable to Pittway. The spinoff would become taxable to Pittway, on a
presumptive basis, if 50% or more of Penton common stock is acquired during a
period that ends two years from the date of the spinoff. Penton believes that
the major transactions involving its common stock that have occurred since the
spinoff and that, to its knowledge, are contemplated to occur, will not trigger
any tax liability. If, however, the Internal Revenue Service were to assert that
any future major transactions involving Penton's common stock during this
two-year period resulted in the spinoff being taxable to Pittway on a
presumptive basis, Penton could not assure, in light of the lack of specific
guidance in this area of the tax law, that it could successfully rebut the
presumption. If any such liability became due and payable by Penton to Pittway,
the payment of such liability could have a material adverse effect on Penton's
financial condition.
F-22
<PAGE> 71
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the acquisition of Mecklermedia, a lawsuit was brought
against Penton by a former shareholder of Mecklermedia for an unspecified
amount, as well as other relief. The plaintiff is claiming that Penton violated
the federal securities laws by selling Mr. Meckler an 80.1% interest in
internet.com, LLC for what the plaintiff alleges was a below-market price,
thereby giving to Mr. Meckler more consideration for his common stock in
Mecklermedia than was paid to the other stockholders of Mecklermedia. Penton
believes that the allegations are without merit and intends to contest them
vigorously. In January 2000, the United States District Court for the Southern
District of New York denied class certification for this case. Two other former
shareholders have since moved to intervene as plaintiffs and renewed the motion
for class certification.
In the normal course of business, Penton is subject to a number of lawsuits
and claims, both actual and potential in nature. While management believes that
resolution of existing claims and lawsuits will not have a material adverse
effect on Penton's financial statements, management is unable to estimate the
magnitude or financial impact of claims and lawsuits that may be filed in the
future.
NOTE 12 -- COMMON STOCK
In connection with the spinoff (see Note 2), Penton amended its Certificate
of Incorporation on June 4, 1998, to authorize capital stock consisting of 60
million shares of common stock, par value $0.01 per share, and 2 million shares
of preferred stock, par value $0.01 per share. Immediately thereafter, Penton
issued 21,240,000 shares of common stock in replacement of the 1,000 shares of
$1 par value stock previously outstanding. An amount of $0.2 million was
transferred from capital in excess of par value to common stock. The financial
statements and related notes have been restated to reflect this recapitalization
retroactively. Penton's transfer agent and registrar for preferred and common
shares is Harris Trust & Savings Bank.
In May 1999, Penton completed a 6,500,000 common share offering; Penton
offered 6,250,000 of the shares and existing stockholders offered 250,000
shares. The underwriters exercised their option to purchase an additional
180,000 shares from Penton and 795,000 shares from existing stockholders to
cover over-allotments. Penton received net proceeds of approximately $118.4
million, which were used to repay debt, finance the acquisition of New Hope and
for general corporate purposes. Penton did not receive any proceeds from the
shares sold by the selling stockholders.
Effective August 1998, Penton established a stock option plan under which
Penton may issue qualified incentive stock options to key employees, including
officers, up to an aggregate of 2,500,000 shares of common stock. Awards may be
issued in the form of options to purchase shares of common stock, stock
appreciation rights ("SARs"), restricted shares, deferred shares, performance
shares and performance units. In 1999 and 1998, 405,749 shares and 700,452
shares, respectively, were granted under the Equity and Incentive Plan, of which
349,500 and 686,055, respectively, were stock options and 56,249 and 14,397,
respectively, were deferred shares. Options granted under the plan generally
vest equally over three years from the date of grant. Included in the stock
options issued during 1998 are 47,655 non-qualified shares, which represent the
conversion of the chief executive officer's non-qualified Pittway options for an
equal value of Penton options. These options vest 50% in 1999 and 50% in 2000.
All options granted pursuant to the plan will expire no later than 10 years from
the date the option was granted.
As noted above, 56,249 and 14,397 deferred shares were granted in 1999 and
1998, respectively. Of the shares granted in 1999, 47,553 shares vest on the
third anniversary of the grant date, while the remaining 8,696 shares vest at
the rate of 20% per year over a five-year period from date of grant. The shares
granted in 1998 vest between one and three years; in 1999, 7,619 of these
deferred shares were issued. During 1999 and 1998, approximately $0.01 million
and $0.08 million, respectively, was charged to expense for these shares. The
Board of Directors may authorize the payment of dividend equivalents on such
shares on a current, deferred or contingent basis, either in cash or in
additional shares of common stock. At December 31, 1999, no such authorization
had been made.
F-23
<PAGE> 72
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition to the Equity and Incentive Plan described above, in 1998,
Penton granted options for a total of 69,000 shares to its directors who are not
employees of Penton. Such options were granted at the fair market value on the
date of grant. Options with respect to 13,000 shares were exercisable
immediately upon grant, and the remaining options vest in 25% increments
commencing with the date of grant. The option price at the date of grant was
$16.23 per share.
Penton accounts for stock options under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and not the fair
value method as provided by Financial Accounting Standard 123, "Accounting and
Disclosure of Stock-Based Compensation" ("FAS 123"). Penton's Equity and
Incentive Plan requires options to be granted at the market price on Penton's
common stock on the date the options are granted and, as a result, under APB 25,
no compensation expense is recognized.
The following table presents a summary of Penton's stock option activity
and related information for the years ended 1997, 1998 and 1999 (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
----------------------
EMPLOYEES DIRECTORS WEIGHTED AVERAGE
--------- --------- ----------------
<S> <C> <C> <C>
Balance, December 31, 1997............... -- -- --
Granted.................................. 686 69 $16.23
Exercised................................ -- -- --
Canceled................................. (5) -- $16.23
----- -----
Balance, December 31, 1998............... 681 69
----- -----
Granted.................................. 349 -- $21.50
Exercised................................ (4) -- $16.23
Canceled................................. (65) -- $17.70
----- -----
Balance, December 31, 1999............... 961 69
===== =====
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- --------------------------
WEIGHTED-
AVERAGE WEIGHTED- OPTIONS WEIGHTED-
NUMBER REMAINING AVERAGE EXERCISABLE AT AVERAGE
OF CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICE OPTIONS LIFE PRICE 1999 PRICE
-------------- ------- ----------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$21.50 ... 331 9.0 years $21.50 -- --
$16.23 ... 699 8.5 years $16.23 42 $16.23
</TABLE>
Pro forma information regarding net income and earnings per share is
required by FAS 123, and has been determined as if Penton had accounted for its
employee stock options under the fair value method of FAS 123. The weighted
average fair value of options granted in 1999 and 1998 was $5.07 and $3.70,
respectively. For purposes of the pro forma presentation, the fair value of each
option grant was estimated on the date of grant using the Black-Scholes option
pricing model, under the following assumptions for 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Risk-free interest rate..................... 6.2% 5.4%
Dividend yields............................. 0.5% 0.3%
Expected volatility......................... 61.25% 70.6%
Expected life............................... 1 to 5 years 1 to 5 years
</TABLE>
F-24
<PAGE> 73
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Had compensation cost for Penton's stock-based compensation plans been
determined based on the fair values of the options granted at the grant dates,
consistent with FAS 123, Penton's net income and earnings per share would have
been as follows (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Net income applicable to common shareholders
As reported............................................... $14,874 $10,890 $ 8,210
Pro forma................................................. $14,874 $10,007 $ 6,238
Basic and diluted earnings per share
As reported............................................... $ 0.70 $ 0.50 $ 0.29
Pro forma................................................. $ 0.70 $ 0.46 $ 0.22
</TABLE>
In November 1999, the Board of Directors approved a plan to establish an
Employee Stock Purchase Plan, with the intent of aligning the interests of
Penton's employees and its shareholders by allowing employees the opportunity to
purchase shares of Penton. The plan, which was effective January 1, 2000, allows
employees to purchase common stock at 85% of the lower of the market price at
the beginning or end of each quarter.
In November 1999, the Board of Directors approved a plan, effective January
1, 2000, to establish a Management Stock Purchase Plan for designated officers
and other key employees. Participants in the plan may elect to receive
restricted stock units ("RSUs") in lieu of a designated portion of up to 100% of
their annual incentive bonus. Each RSU represents the right to receive one share
of Penton common stock. RSUs are granted at a 20% discount from fair market
value on the date awarded. RSUs vest two years after the date of grant and are
settled in shares of common stock after a period of deferral selected by the
participant, or upon termination of employment. On February 15, 2000, 25,507
RSUs were granted at a fair market value of $25.94 per share.
NOTE 13 -- RELATED-PARTY TRANSACTIONS
Included in the Consolidated Statements of Income for 1998 and 1997 is an
allocation of corporate expenses related to services provided for Penton by
Pittway. This allocation was based on an estimate of the incremental corporate
expenses related to Penton's operations for the periods presented, and, in the
opinion of management, has been made on a reasonable basis. However, the
allocation is not necessarily indicative of the level of expenses that might
have been incurred had Penton been a separate company. The aggregate allocated
costs totaled $0.02 million and $0.04 million for the years ended 1998 and 1997,
respectively. Penton's employees also participated in Pittway's pension plan
(see Note 10). Certain Penton employees participated in Pittway's 1990 stock
awards plan, for which Pittway allocated costs to Penton totaling $1.2 million
and $1.0 million in 1998 and 1997, respectively.
Other transactions between Penton and Pittway, consisting principally of
taxes and other reimbursable expenses paid by Pittway, have been reflected in
the 1998 and 1997 financial statements as though on a stand-alone basis, except
that no interest income or expense has been allocated on intercompany balances.
Pittway utilized a centralized cash management system. Under this system,
cash generated by Penton in excess of its cash requirements (including cash
requirements for Penton's income taxes and other reimbursable expenses paid by
Pittway) were transferred to Pittway and reflected as "Due from parent company"
in the balance sheet. In August 1998, a final non-cash dividend of $12.2 million
was made to Pittway to settle the "Due from parent company" account.
There were no related-party transactions in 1999.
F-25
<PAGE> 74
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- EARNINGS PER SHARE
Earnings per share ("EPS") have been computed pursuant to the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
The following table provides a reconciliation of both income before
extraordinary item and the number of common shares used in the computations of
basic EPS, which utilized the weighted average number of common shares
outstanding without regard to dilutive potential common shares, and diluted EPS,
which include all such shares.
Computations of basic and diluted earnings per share for the years ended
December 31, 1999, 1998 and 1997 are as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Income from continuing operations applicable to common
shareholders.............................................. $14,612 $11,186 $ 7,930
======= ======= =======
Number of shares:
Basic - average shares outstanding.......................... 21,240 21,882 28,108
Effect of dilutive securities:
Stock options............................................. -- -- 71
Deferred shares........................................... -- -- 3
Contingent shares......................................... -- -- 27
------- ------- -------
Diluted - average shares outstanding........................ 21,240 21,882 28,209
======= ======= =======
Per share amount:
Income from continuing operations
Basic..................................................... $ 0.69 $ 0.51 $ 0.28
Diluted................................................... $ 0.69 $ 0.51 $ 0.28
</TABLE>
Options to purchase 750,055 shares of common stock at $16.23 per share were
outstanding at December 31, 1998, but were not included in the computation of
diluted earnings per share because the options would have been anti-dilutive.
NOTE 15 -- SEGMENT INFORMATION
Historically, Penton had three reportable segments: Media Services,
Printing and Direct Mail. As discussed in Note 4, Penton sold its Printing
segment in November 1999 and has classified its Direct Mail segment as
discontinued. Consequently, Penton currently operates within one segment.
Within the Media Services segment, operating units serving differing
industries were combined due to the manner in which these segments are managed,
the similarity of their economic characteristics and other factors. The Media
Services segment serves specific industries with integrated product offerings,
including trade magazines, trade shows and conferences, Web sites, and a variety
of other products and services. Revenues of this segment are generated primarily
from magazine advertising and trade show booth rentals.
Non-current assets at December 31, 1999 and 1998 include $31.3 million and
$31.7 million, respectively, identified with operations in the United Kingdom,
substantially all of which are intangible assets, with the remaining assets
identified with domestic operations. Export sales were not material, and no
single customer accounted for 10% or more of sales.
F-26
<PAGE> 75
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16 -- SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Penton assumed liabilities of approximately $5.6 million in connection with
acquisitions completed in 1999. In conjunction with the acquisition of New Hope
in May 1999, Penton issued 2.1 million common shares valued at $41.0 million as
consideration.
In 1999, Penton marked to market its investment in internet.com Corporation
for approximately $252.7 million.
At December 31, 1999, Penton had $4.2 million of net current assets of
discontinued operations for the Direct Mail segment and a related non-cash loss
of $0.7 million.
At December 31, 1999 and 1998, dividends of $0.9 million and $0.7 million,
respectively, were declared and not paid.
In August 1998, a final non-cash dividend of $12.2 million was made to
Pittway to settle the "Due from parent company" account. In addition, 1,541,638
shares of common stock were issued in conjunction with the DM Publishing
acquisition.
The foregoing transactions do not provide or use cash and, accordingly, are
not reflected in the statements of cash flows.
For 1999, 1998, and 1997, cash paid for income taxes was $13.9 million,
$10.0 million and $10.8 million, respectively. Cash paid for interest for 1999,
1998 and 1997, was $19.9 million, $5.5 million and $0.8 million, respectively.
NOTE 17 -- QUARTERLY RESULTS (UNAUDITED)
Quarterly results of operations for the years ended December 31, 1999, and
1998, are shown below. (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 QUARTERS
------------------------------------------ TOTAL
FIRST SECOND THIRD FOURTH FOR YEAR
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues............................ $52,518 $78,792 $ 64,435 $105,079 $300,824
Operating income (loss)............. (2,637) 14,705 (953) 28,275 39,390
Income (loss) from continuing
operations........................ (3,033) 2,710 (5) 8,258 7,930
Discontinued operations............. 197 454 205 7,837 8,693(a)
Extraordinary item - extinguishment
of debt........................... -- (2,156) (6,257) -- (8,413)
Net income (loss)................... (2,836) 1,008 (6,057)(b) 16,095 8,210
Earnings per share (basic and
diluted):
Income from continuing
operations..................... (0.13) 0.10 -- 0.26 0.28
Discontinued operations........... 0.01 0.02 0.01 0.25 0.31
Extraordinary item................ -- (0.08) (0.20) -- (0.30)
Net income (loss)................. (0.12) 0.04 (0.19) 0.51 0.29
</TABLE>
F-27
<PAGE> 76
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998 QUARTERS
-------------------------------------------- TOTAL
FIRST SECOND THIRD FOURTH FOR YEAR
------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues............................ $46,631 $52,633 $ 46,345 $ 62,073 $207,682
Operating income.................... 4,495 6,910 4,709 10,104 26,218
Income from continuing operations... 2,239 3,679 2,229 3,039 11,186
Discontinued operations............. 101 2 19 (418)(c) (296)
Net income.......................... 2,340 3,681 2,248 2,621 10,890
Earnings per share (basic and
diluted):
Income from continuing
operations..................... 0.11 0.17 0.10 0.13 0.51
Discontinued operations........... -- -- -- (0.01) (0.01)
Net income........................ 0.11 0.17 0.10 0.12 0.50
</TABLE>
Income per share calculations for each of the quarters are based on the
weighted average number of shares outstanding for each quarter, and the sum of
the quarters may not necessarily be equal to the full year income per share
amount.
---------------
(a) Includes gain on disposal of the Printing segment of $9.3 million net of tax
and loss on disposal of Direct Mail segment of $0.7 million net of tax. In
addition, includes income from operations of the Printing segment of $0.3
million and loss from operations of the Direct Mail segment of $0.3 million.
(b) Includes $5,906, or $0.19 per share, gain on sale of 510,000 shares of
internet.com stock.
(c) Includes $600, or $0.03 per share, after-tax writedown on impairment of
assets.
NOTE 18 -- SUBSEQUENT EVENTS
On January 14, 2000, the Board of Directors approved an executive loan
program, which allows Penton to loan money to five key executives to purchase an
aggregate of up to 400,000 shares of Penton common stock at the then fair market
value. The loans, in the form of recourse notes, bear interest compounded
semiannually, at a rate equal to the applicable interest rate as published by
the Internal Revenue Service, and mature on or before the fifth anniversary of
the first loan date. No principal or interest payments are required until
maturity, at which time all outstanding amounts are due. As of March 20, 2000,
400,000 shares had been issued with a weighted average share price of $23.54 and
an outstanding principal balance of approximately $9.4 million.
In February 2000, Penton sold 2.0 million shares of internet.com
Corporation stock as part of a 3.75 million-share offering. Penton received cash
of $113.1 million and recognized a gain of approximately $110.2 million. Penton
maintains an 11.8% ownership interest in internet.com, or approximately 3.0
million shares.
On February 7, 2000, Penton signed a purchase agreement for the sale of its
Direct Mail segment (see Note 4). The sale was completed on March 15, 2000.
In February 2000, the Board of Directors approved a grant of 99,000
performance shares to certain key executives, subject to the attainment of
certain performance goals over a three-year period from January 1, 2000, through
December 31, 2002. Performance shares are convertible into common stock on a
one-for-one basis and are not issuable until earned.
In February 2000, the Board of Directors approved the addition of 10 key
employees to participate in Penton's supplemental executive retirement plan (see
Note 10).
In February 2000, Penton acquired the assets of Profit.Net, Inc. for $0.4
million in cash and contingent payments of up to $0.1 million in 2000. The
assets of Profit.Net, Inc. include BAKERY-NET.com, a Web site for the commercial
baking market.
F-28
<PAGE> 77
PENTON MEDIA, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1999 2000
--------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C> <C>
REVENUES.................................................... $131,310 $184,883
-------- --------
OPERATING EXPENSES:
Editorial, production and circulation..................... 53,010 65,204
Selling, general and administrative....................... 53,078 75,641
Depreciation and amortization............................. 13,154 15,029
-------- --------
119,242 155,874
-------- --------
OPERATING INCOME............................................ 12,068 29,009
-------- --------
OTHER INCOME (EXPENSE):
Interest expense, net..................................... (12,159) (5,176)
Gain on sale of investments............................... -- 110,210
Impairment of assets...................................... -- (1,051)
Miscellaneous, net........................................ 25 (444)
-------- --------
(12,134) 103,539
-------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES..................................................... (66) 132,548
PROVISION FOR INCOME TAXES.................................. 257 57,430
-------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS.................... (323) 75,118
INCOME (LOSS) FROM OPERATIONS OF DISCONTINUED BUSINESSES,
NET....................................................... 651 (85)
-------- --------
INCOME BEFORE EXTRAORDINARY ITEM............................ 328 75,033
EXTRAORDINARY ITEM -- EARLY EXTINGUISHMENT OF DEBT.......... (2,156) --
-------- --------
NET INCOME (LOSS)........................................... $ (1,828) $ 75,033
======== ========
EARNINGS PER SHARE -- BASIC
Income (loss) from continuing operations.................. $ (0.01) $ 2.36
Discontinued operations................................... 0.03 0.00
Extraordinary Item........................................ (0.09) 0.00
Net income (loss)......................................... $ (0.07) $ 2.36
EARNINGS PER SHARE -- DILUTED
Income (loss) from continuing operations.................. $ (0.01) $ 2.35
Discontinued operations................................... 0.03 (0.01)
Extraordinary item........................................ (0.09) 0.00
Net income (loss)......................................... $ (0.07) $ 2.34
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic................................................ 24,900 31,769
======== ========
Diluted.............................................. 24,900 32,006
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-29
<PAGE> 78
PENTON MEDIA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 2000
------------ --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 30,370 $112,414
Accounts receivable, less allowance for doubtful accounts
of $5,382 and $3,958 in 2000 and 1999, respectively..... 40,199 49,367
Inventories............................................... 818 751
Deferred tax assets....................................... -- 4,454
Net current assets of discontinued operations............. 4,228 --
Prepayments, deposits and other........................... 7,583 9,218
-------- --------
83,198 176,204
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and buildings........................................ 95 95
Machinery and equipment................................... 45,243 48,566
-------- --------
45,338 48,661
Less: Accumulated depreciation............................ 30,252 31,704
-------- --------
15,086 16,957
-------- --------
OTHER ASSETS:
Goodwill, less accumulated amortization of $37,290 and
$27,399 in 2000 and 1999, respectively.................. 411,173 401,107
Other intangibles, less accumulated amortization of
$11,840 and $9,541 in 2000 and 1999, respectively....... 40,063 38,347
Investments............................................... 259,859 68,334
-------- --------
711,095 507,788
-------- --------
$809,379 $700,949
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Senior debt facility...................................... $ 3,875 $ 5,813
Accounts payable.......................................... 7,499 8,128
Income taxes payable...................................... 10,172 7,988
Accrued earnouts.......................................... 7,447 --
Accrued compensation and benefits......................... 8,377 11,911
Other accrued expenses.................................... 10,546 11,036
Unearned income, principally trade show and conference
deposits................................................ 30,214 45,969
Deferred taxes............................................ 39,634 --
-------- --------
117,764 90,845
-------- --------
LONG-TERM LIABILITIES AND DEFERRED CREDITS:
Senior debt facility...................................... 211,125 209,187
Net deferred pension credits.............................. 16,269 16,269
Deferred taxes............................................ 60,887 25,599
Other..................................................... 733 711
-------- --------
289,014 251,766
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, none issued.............................. -- --
Common stock.............................................. 313 318
Capital in excess of par value............................ 214,551 226,078
Retained earnings......................................... 36,970 110,098
Notes receivable officers/directors....................... -- (9,642)
Accumulated other comprehensive income.................... 150,767 31,486
-------- --------
402,601 358,338
-------- --------
$809,379 $700,949
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-30
<PAGE> 79
PENTON MEDIA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
-------------------------
1999 2000
---------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net cash used for operating activities...................... $ (3,191) $(10,534)
-------- --------
Cash flows from investing activities:
Capital expenditures...................................... (2,162) (5,833)
Acquisitions, including earnouts paid..................... (43,100) (17,372)
Proceeds from sale of Direct Mail segment................. -- 4,000
Investment in internet.com Corporation stock.............. (3,446) --
Proceeds from sale of internet.com Corporation stock...... -- 113,100
-------- --------
Net cash provided by (used for) investing
activities.......................................... (48,708) 93,895
-------- --------
Cash flows from financing activities:
Repayment of senior debt facility...................... (84,261) --
Proceeds from senior debt.............................. 15,000 --
Proceeds from revolving credit facility................ 9,500 --
Proceeds from equity offering, net..................... 118,644 --
Payment of finance fees................................ (1,033) --
Repayment of note payable.............................. (1,000) --
Proceeds from options exercised........................ -- 688
Dividends paid......................................... (1,366) (1,906)
-------- --------
Net cash provided by (used for) financing
activities.......................................... 55,484 (1,218)
-------- --------
Effect of exchange rate changes on cash..................... (22) (99)
-------- --------
Net increase in cash and equivalents................. 3,563 82,044
Cash and equivalents at beginning of period................. 3,953 30,370
-------- --------
Cash and equivalents at end of period....................... $ 7,516 $112,414
======== ========
</TABLE>
Supplemental disclosure of non cash investing and financing activities:
For the six months ended June 30, 2000, Penton issued 52,920 common
shares valued at approximately $1.4 million in connection with New Hope's
earnout; issued 400,000 shares to officers and directors, and marked to
market its investment in internet.com Corporation stock by approximately
$54.2 million.
For the six months ended June 30, 1999, Penton issued 2.1 million
common shares valued at $41.0 million in conjunction with the acquisition
of New Hope.
The foregoing transactions did not provide for or require the use of
cash and, accordingly, are not reflected in the statements of cash flows.
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE> 80
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- NATURE OF BUSINESS AND FINANCIAL STATEMENT PRESENTATION
These financial statements have been prepared by management in accordance
with generally accepted accounting principles for interim financial information
and the applicable rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. However, in the opinion of management, the interim financial
statements reflect all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of the results of the periods
presented. The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the full year.
The accompanying unaudited interim consolidated financial statements should
be read together with the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1999 financial statements
to conform to the 2000 presentation.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
NOTE 2 -- ACQUISITIONS
In May 2000, Penton purchased 50% of the outstanding stock of a German
Corporation, trading under the name of ComMunic, which produces trade shows,
conferences and business publications in Germany and its German speaking
neighboring countries, serving the Internet, telecommunications and other
growing technology markets. Penton paid approximately $1.4 million for the 50%
interest in the joint venture with the potential for future contingent payments
in 2000 and 2001 tied to future earnings.
In February 2000, Penton acquired the assets of Profit.Net, Inc. for $0.4
million in cash and contingent payments of up to $0.1 million in 2000. The
excess of the aggregate purchase price over the fair market value of net assets
acquired of approximately $0.4 million is being amortized over 15 years. The
assets of Profit.Net, Inc. include BAKERY-NET.com, a Web site for the commercial
baking market.
In December 1999, Penton completed the acquisition of the assets of
Nutracon for $3.1 million in cash. The excess of the aggregate purchase price
over the fair market value of net assets acquired of approximately $3.1 million
is being amortized over 20 years. Nutracon is a conference serving the
functional foods/nutraceutical market.
In October 1999, Penton acquired all the outstanding stock of Stardust.com
and simultaneously purchased the net assets of Stardust Technologies Inc.
(collectively "Stardust"), for a combined purchase price of $4.0 million in cash
and future contingent payments of up to $5.0 million tied to future earnings of
Stardust through the year 2002. The excess of the aggregate purchase price over
the fair market value of net assets acquired of approximately $3.7 million is
being amortized over 20 years. Stardust, through its Web portal site,
conferences, forums and newsletters, facilitates collaboration between Internet
technology standards bodies, technology product vendors and the IT user
community to speed market adoption of next-generation Internet technologies.
In August 1999, Penton completed the asset acquisition of Multimedia Week
for $0.2 million in cash. The excess of the aggregate purchase price over the
fair market value of net assets acquired of approximately
F-32
<PAGE> 81
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$0.2 million is being amortized over 40 years. Multimedia Week is a weekly
publication that features IPOs and venture capital tracking; in-depth product
and technology spotlights; information about new and emerging technologies; and
market data.
In May 1999, Penton acquired substantially all the assets of New Hope. In
full consideration for the transfer of the assets, Penton agreed to pay a total
purchase price of up to $97.0 million for New Hope. The purchase price comprised
$41.0 million in cash and $41.0 million (2,102,564 shares) in common stock which
were paid and issued at the closing. New Hope is eligible to earn a contingent
payment of up to $15.0 million to be paid half in cash and half in common stock,
based on New Hope's performance for the fiscal years 1999, 2000 and 2001. In
March 2000, Penton paid approximately $1.4 million in cash and issued 52,920
shares of common stock with a fair market value of approximately $1.4 million in
contingent consideration for 1999. The excess of the aggregate purchase price
over the fair market value of net assets acquired of approximately $78.2 million
is being amortized over periods ranging from 20 to 40 years. New Hope is a
leading business media company serving the natural products industry through
trade shows, conferences, magazines and Web sites.
In May 1999, Penton completed the acquisition of Jon Peddie Associates
("Jon Peddie") for $1.3 million in cash and contingent payments of up to $3.0
million tied to future earnings of Jon Peddie through the year 2001. The excess
of the aggregate purchase price over the fair market value of net assets
acquired of approximately $1.0 million is being amortized over 40 years. Jon
Peddie is an information company that conducts research, publishes market
studies and special reports, and provides consulting services to the
electronics, semiconductor and digital media industries.
In February 1999, Penton acquired the assets of MFG Publishing, Inc.
("MFG") for a total purchase price of up to $2.5 million, of which $0.8 million
was paid in cash and the remaining $1.7 million is contingent upon earnings
through the year 2001. The excess of the aggregate purchase price over the fair
market value of net assets acquired of approximately $0.6 million is being
amortized over 40 years. MFG provides information to the enterprise resource
planning segment of the manufacturing technology industry.
NOTE 3 -- DISCONTINUED OPERATIONS
During the first quarter of 2000, Penton completed the sale of the net
assets of its Direct Mail segment for $4.0 million in cash. An additional
operating loss for the six months ended June 30, 2000 of $0.08 million, net of a
tax benefit of $0.06 million, was recorded and classified as discontinued
operations in the accompanying financial statements.
At June 30, 1999, the Printing segment had operating income of
approximately $0.7 million, net of taxes of $0.5 million. The Direct Mail
segment had an operating loss of approximately $0.05 million, net of a tax
benefit of $0.03 million.
NOTE 4 -- INVESTMENTS
In February 2000, Penton sold 2.0 million shares of internet.com
Corporation stock as part of a 3.75 million-share offering. Penton received cash
of $113.1 million and recognized a pre-tax gain of approximately $110.2 million.
As of June 30, 2000 Penton maintains an 11.8% ownership interest in
internet.com, or approximately 3.0 million shares. Penton intends for its
investment to be temporary; accordingly, Penton marks to market its investment
in internet.com Corporation. At June 30, 2000, Penton's investment totaled $58.5
million, including a cumulative mark to market adjustment of $54.2 million and
related adjustment in long-term deferred taxes of $21.7 million and other
comprehensive income of $32.5 million.
In March 2000, Penton entered into a strategic alliance agreement with
Cayenta, Inc. ("Cayenta"), a subsidiary of the Titan Corporation. Cayenta is a
total service provider of end-to-end, e-commerce systems. As part of its
alliance with Penton, Cayenta will initially develop and host the e-commerce
systems for Penton's
F-33
<PAGE> 82
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Healthwell.com Web site, a B2B exchange site for the natural products industry.
Development work and hosting of other Penton vertical portal sites is expected
to follow the Healthwell.com project.
As part of the agreement, Penton purchased 250,000 shares of Cayenta stock,
which is recorded at its historical cost of $6.3 million. The two companies will
also provide each other with reciprocal marketing services for a two-year
period.
In June 2000, Penton entered into a strategic investment and partnership
agreement with LeisureHub.com, the online B2B trading community for the global
leisure industry. Penton paid approximately $4.4 million for a 19.9% stake in
the company. The agreement also provides for reciprocal marketing and other
services between the two companies.
NOTE 5 -- PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited supplemental pro forma operating data is presented
for the six months ended June 30, 1999 as if each of the following transactions
had occurred on January 1, 1999: (i) the acquisition of MFG in February 1999;
(ii) the addition of $15 million in Term B loans in April 1999; (iii) the sale
by Penton of 6,430,000 common shares in May 1999; (iv) the acquisition of New
Hope in May 1999; (v) the sale of 510,000 shares of internet.com Corporation in
July 1999; (vi) the refinancing of debt in September 1999; (vii) the acquisition
of Stardust.com in October 1999; (viii) the sale of the Printing segment in
November 1999; (ix) the acquisition of Nutracon in December 1999; (x) the
discontinuation of the Direct Mail segment in December 1999; and (xi) the sale
of 2.0 million shares of internet.com Corporation in February 2000.
The pro forma information is presented for information purposes only and is
not necessarily indicative of the results of operations that actually would have
been achieved had these transactions been consummated at the beginning of the
period presented (in thousands, except per share data):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
----------------
<S> <C>
Pro forma revenues........................................ $149,252
========
Pro forma income from continuing operations............... $ 5,783
========
Pro forma net income applicable to common shareholders.... $ 4,278
========
Per share data:
Earnings per common share -- basic and diluted:
Income from continuing operations.................... $ 0.18
========
Net income........................................... $ 0.13
========
</TABLE>
The 1999 pro forma information above does not include the operations of Jon
Peddie, Multimedia Week, Profit-Net, Inc., Leisurehub.com or ComMunic, as the
historical information is immaterial. 2000 pro formas have not been prepared as
2000 transactions have been immaterial.
NOTE 6 -- DEBT
Penton maintains a credit agreement with several banks under which it may
borrow up to $340.0 million. The agreement provides for a revolving credit
facility of up to $125.0 million, a long-term loan of $140.0 million ("Term Loan
A") and a long-term loan of $75.0 million ("Term Loan B").
The credit facility is collateralized by all tangible and intangible assets
of Penton, including the equity interests in all of its U.S. subsidiaries and
not less than 65% of the equity interests of any of its foreign subsidiaries.
Under the terms of the agreement, Penton is required to maintain certain
financial ratios and other financial conditions. The agreement also prohibits
Penton from incurring certain additional indebtedness; limits
F-34
<PAGE> 83
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
certain investments, advances or loans; and restricts substantial asset sales
and cash dividends. At June 30, 2000, Penton was in compliance with all loan
covenants.
On April 3, 2000, Penton amended its Credit Agreement to give the Company
the flexibility to sell assets of up to $30.0 million and the ability to
monetize the Company's joint venture investments.
The revolving credit facility bears interest, at Penton's option, at either
the Alternative Base Rate ("ABR"), defined as the higher of the Administrative
Agent's Prime Rate or the Federal Funds Rate plus 0.50%, or at LIBOR, plus a
rate margin ranging from 0.25% to 2.125% based on Penton's consolidated leverage
ratio, as defined. Up to the full amount of the revolving credit facility may be
borrowed, repaid and reborrowed until maturity on August 31, 2006; however, the
revolving credit facility commitment shall be reduced as of September 30, 2003,
by 7.5% per quarter until September 30, 2005, at which time it will be reduced
by 10% per quarter until maturity. Penton may also, prior to the first
anniversary of the credit facility, request an increase in the revolving credit
facility by an amount not to exceed $60.0 million. At June 30, 2000, no amounts
were outstanding under the revolving credit facility. Penton has agreed to pay a
commitment fee ranging from 0.375% to 0.50%, based on Penton's consolidated
leverage ratio, on the average unused portion of the revolving credit facility
commitment. At June 30, 2000, $125.0 million was available under the facility.
Term Loan A bears interest, at Penton's option, at either the ABR rate or
at LIBOR, plus a rate margin ranging from 0.25% to 2.125%, based on Penton's
consolidated leverage ratio. Interest on ABR loans is payable quarterly in
arrears, while interest on LIBOR loans is payable in arrears at the end of each
applicable interest period not to exceed three months. At June 30, 2000, the
rate in effect was 7.9375%. The loan, which requires quarterly principal
payments starting in September 2000, will mature on August 31, 2006. At June 30,
2000, $140.0 million was outstanding under Term Loan A.
Term Loan B bears interest, at Penton's option, at either the ABR rate or
at LIBOR, plus a rate margin ranging from 0.5% to 2.50%, based on Penton's
consolidated leverage ratio. Interest on ABR loans is payable quarterly in
arrears, while interest on LIBOR loans is payable in arrears at the end of each
applicable interest period not to exceed three months. At June 30, 2000, the
rate in effect was 8.4375%. The loan requires quarterly principal payments of
approximately $0.2 million starting in September 2000, and four balloon payments
of $17.6 million beginning in September 2006, and will mature on August 31,
2007. At June 30, 2000, $75.0 million was outstanding under Term Loan B.
NOTE 7 -- NET INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in thousands) for the six months ended June 30, 2000 and
1999:
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED
JUNE 30,
-----------------------
2000 1999
--------- ---------
<S> <C> <C>
Numerator:
Income (loss) applicable to common shareholders........... $75,033 $(1,828)
======= =======
Denominator (Number of shares):
Basic -- average shares outstanding....................... 31,769 24,900
Effect of dilutive securities:
Stock options........................................ 199 --
Restricted stock units............................... 26 --
Deferred shares...................................... 12 --
------- -------
Diluted -- average shares outstanding..................... 32,006 24,900
======= =======
</TABLE>
F-35
<PAGE> 84
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Due to the net loss from operations for the six months ended June 30, 1999,
any potential common stock equivalents would have been antidilutive.
Accordingly, they were excluded from the calculation of diluted earnings per
share.
NOTE 8 -- COMMON STOCK
On June 9, 2000, the Board of Directors of the Company adopted a
Shareholder Rights Agreement (the "Rights Agreement"). Under the plan, the
rights will initially trade together with Penton Media, Inc. common stock and
will not be exercisable. In the absence of further board action the rights
generally will become exercisable and allow the holder to acquire Penton Media,
Inc. common stock at a discounted price if any person or group acquires 20
percent or more of the outstanding shares of the Company's common stock. Rights
held by the persons who exceed the applicable threshold will be void. Under
certain circumstances, the rights will entitle the holder to buy shares in an
acquiring entity at a discounted price.
The plan also includes an exchange option. In general, after the rights
become exercisable, the Penton board may, at its option, effect an exchange of
part or all of the rights other than rights that have become void for shares of
Penton Media, Inc. common stock. Under this option, Penton Media, Inc. would
issue one share of common stock for each right, subject to adjustment in certain
circumstances.
The Penton board may, at its option, redeem all rights for $0.01 per right,
generally at any time prior to the rights becoming exercisable. The rights will
expire June 27, 2010, unless earlier redeemed, exchanged or amended by the
Penton board.
In June 2000, the Board of Directors approved a grant of 20,000 performance
shares to two key executives. Subject to the attainment of certain performance
goals over a three-year period from January 1, 2000, through December 31, 2002
the grantee is eligible to receive between 10% and 150% of the granted shares.
Performance shares are not issuable until earned.
In February 2000, the Board of Directors approved a grant of 136,054
performance shares to certain key executives, subject to the attainment of
certain performance goals over a three-year period from January 1, 2000, through
December 31, 2002. For 99,000 of the shares, the grantee is eligible to receive
between 50% and 150% of the granted shares. Performance shares are not issuable
until earned.
In February 2000, the Board of Directors approved the addition of 10 key
employees to participate in Penton's supplemental executive retirement plan.
On January 14, 2000, the Board of Directors approved an Executive Loan
Program, which allows Penton to issue stock to six key executives to purchase an
aggregate of up to 400,000 shares of Penton common stock at the then fair market
value, in exchange for recourse notes. The notes bear interest compounded
semiannually, at a rate equal to the applicable interest rate as published by
the Internal Revenue Service, and mature on or before the fifth anniversary of
the first loan date. No principal or interest payments are required until
maturity, at which time all outstanding amounts are due. All 400,000 shares had
been issued with a weighted average share price of $23.54 and an outstanding
balance of approximately $9.6 million (including $0.2 million of accrued
interest), which is classified in the shareholders equity section of the balance
sheet as notes receivable from officers and directors.
Penton's Board of Directors approved a plan to establish an Employee Stock
Purchase Plan, with the intent of aligning the interests of Penton's employees
and its shareholders by allowing employees the opportunity to purchase shares of
Penton. The plan, which was effective January 1, 2000, allows employees to
purchase common stock at 85% of the lower of the market price at the beginning
or end of each quarter.
Penton's Board of Directors approved a plan, effective January 1, 2000, to
establish a Management Stock Purchase Plan for designated officers and other key
employees. Participants in the plan may elect to receive restricted stock units
("RSUs") in lieu of a designated portion of up to 100% of their annual incentive
bonus.
F-36
<PAGE> 85
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Each RSU represents the right to receive one share of Penton common stock. RSUs
are granted at a 20% discount from fair market value on the date awarded. RSUs
vest two years after the date of grant and are settled in shares of common stock
after a period of deferral selected by the participant, or upon termination of
employment. On February 15, 2000, 25,507 RSUs were granted at a fair market
value of $25.94 per share.
In May 1999, the Company completed a 6,500,000 common share offering of
which 6,250,000 of the shares were offered by the Company and 250,000 were
offered by existing stockholders. The underwriters also exercised their option
to purchase an additional 180,000 shares from Penton and 795,000 shares from
existing stockholders to cover over-allotments. The Company received net
proceeds of approximately $118.4 million which were used to repay debt and for
general corporate purposes, including the acquisition of New Hope.
NOTE 9 -- COMPREHENSIVE INCOME
Financial Accounting Standard ("FAS") No. 130, "Reporting Comprehensive
Income", requires that the Company report comprehensive income and its
components in a full set of general-purpose financial statements. Comprehensive
income represents the change in stockholders' equity during the period from
non-owner sources.
Total comprehensive income (loss) for the six months ended June 30, 2000
and 1999 was $(44.2) million and $33.8 million, respectively.
Activity in Stockholders' Equity is as follows (dollar amounts in
thousands)
<TABLE>
<CAPTION>
NOTES ACCUMULATED
CURRENT CAPITAL IN RECEIVABLE OTHER
COMPREHENSIVE COMMON EXCESS OF RETAINED OFFICERS/ COMPREHENSIVE
INCOME STOCK PAR VALUE EARNINGS DIRECTORS INCOME TOTAL
------------- ------ ---------- -------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999............ $ -- $313 $214,551 $ 36,970 $ -- $150,767 $402,601
Dividends............................... -- -- -- (1,905) -- (1,905)
Executive loan shares issued............ -- 4 9,412 -- -- -- 9,416
Receivable from officers/directors...... -- -- -- -- (9,642) -- (9,642)
Contingent shares issued................ -- 1 1,428 -- -- -- 1,429
Issuance of shares related to exercise
of stock options...................... -- -- 729 -- -- -- 729
Employee Stock Purchase Plan............ -- -- (42) -- -- -- (42)
Comprehensive Income:
Net income.......................... 75,033 -- -- 75,033 -- -- 75,033
Unrealized gain on securities
reported at fair value............ (48,792) -- -- -- -- (48,792) (48,792)
Reclassification adjustment for gain
on securities..................... (70,272) -- -- -- -- (70,272) (70,272)
Foreign currency translation
adjustment........................ (217) -- -- -- -- (217) (217)
-------- ---- -------- -------- ------- -------- --------
Balance at June 30, 2000................ $(44,248) $318 $226,078 $110,098 $(9,642) $ 31,486 $358,338
======== ==== ======== ======== ======= ======== ========
</TABLE>
NOTE 10 -- SEGMENT INFORMATION
Penton adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in 1998. As previously reported, Penton's business
units had been aggregated into three reportable segments: Media Services,
Printing, and Direct Mail. The sale of the Printing and Direct Mail segments has
eliminated all segments except for the Media Services segment. Accordingly, the
Company now operates in only one segment.
NOTE 11 -- SUBSEQUENT EVENTS
In July 2000, Penton acquired the assets of National Advisory Group ("NAG")
of Jacksonville, Florida for $1.5 million in cash. NAG is a trade group serving
the convenience store and petroleum marketing industry.
In August 2000, Penton acquired the assets of Meko Ltd. of Surrey, UK, for
$0.3 million in cash. Meko Ltd. is a leading provider of newsletters,
comprehensive market studies, and custom information services for the European
computer display market.
F-37
<PAGE> 86
INDEPENDENT AUDITORS' REPORT
The Board of Directors
New Hope Communications, Inc.:
We have audited the accompanying balance sheet of New Hope Natural Media (a
division of New Hope Communications, Inc.) as of December 31, 1998, and the
related statements of operations and owner's deficit, and cash flows for the
year then ended. 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 audit.
We conducted our audit 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 audit provides 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 New Hope Natural Media as of
December 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Boulder, Colorado
July 28, 1999
F-38
<PAGE> 87
NEW HOPE NATURAL MEDIA
(A DIVISION OF NEW HOPE COMMUNICATIONS, INC.)
STATEMENTS OF OPERATIONS AND OWNER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------------
1998 1998 1999
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Advertising...................................... $13,364,438 $ 3,510,191 $ 4,520,774
Trade shows...................................... 11,025,935 6,790,069 8,058,566
Retail sales..................................... 2,304,074 454,339 638,083
Other............................................ 329,290 137,904 224,324
----------- ----------- -----------
Total revenue............................ 27,023,737 10,892,503 13,441,747
----------- ----------- -----------
Operating expenses:
General and administrative....................... 5,653,823 967,468 1,707,832
Selling.......................................... 5,668,731 1,271,388 1,219,704
Production....................................... 3,905,397 876,146 1,223,929
Editorial........................................ 3,274,594 719,141 831,424
Circulation...................................... 1,799,948 280,988 424,432
Trade show management............................ 1,856,194 781,839 902,550
Depreciation and amortization.................... 423,671 93,289 101,890
Provision for uncollectible accounts
receivable.................................... 360,808 7,025 76,242
Other............................................ 205,252 87,962 124,458
----------- ----------- -----------
Total operating expenses................. 23,148,418 5,085,246 6,612,461
----------- ----------- -----------
Operating income......................... 3,875,319 5,807,257 6,829,286
Other income (expense):
Interest expense................................. (9,777) (1,156) (157)
Other............................................ 6,835 2,222 8,731
----------- ----------- -----------
Net earnings............................. 3,872,377 5,808,323 6,837,860
Owner's deficit at beginning of period............. (700,273) (1,200,273) (2,884,925)
Distributions to owner............................. (6,057,029) (2,741,955) (361,316)
----------- ----------- -----------
Owner's equity (deficit) at end of period.......... $(2,884,925) $ 1,866,095 $ 3,591,619
=========== =========== ===========
Pro forma information:
Historical net earnings.......................... $ 3,872,377 $ 5,808,323 $ 6,837,860
Pro forma adjustment for income taxes............ (1,549,000) (2,323,000) (2,735,000)
----------- ----------- -----------
Pro forma net earnings................... $ 2,323,377 $ 3,485,323 $ 4,102,860
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-39
<PAGE> 88
NEW HOPE NATURAL MEDIA
(A DIVISION OF NEW HOPE COMMUNICATIONS, INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 428,007 $ 890,618
Receivables:
Trade, net of allowance of $569,213 and $638,780,
respectively.......................................... 3,455,426 3,977,127
Employees.............................................. 16,869 13,569
---------- ----------
3,472,295 3,990,696
Prepaid expenses and other................................ 272,164 226,150
---------- ----------
Total current assets.............................. 4,172,466 5,107,464
Equipment and leasehold improvements, net (note 2).......... 1,190,054 1,195,896
Other assets................................................ 1,022 766
---------- ----------
Total assets...................................... $5,363,542 $6,304,126
========== ==========
LIABILITIES AND OWNER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses..................... $1,141,735 $1,294,888
Deferred revenue.......................................... 6,843,258 1,053,930
Deferred rent concessions................................. 195,010 312,016
Current portion of obligations under capital leases
(note 3)............................................... 23,638 14,387
---------- ----------
Total current liabilities......................... 8,203,641 2,675,221
Obligations under capital leases, less current portion
(note 3).................................................. 44,826 37,286
---------- ----------
Total liabilities................................. 8,248,467 2,712,507
Owner's equity (deficit).................................... (2,884,925) 3,591,619
---------- ----------
Commitments and contingencies (notes 3, 4, and 5)
Total liabilities and owner's equity (deficit).... $5,363,542 $6,304,126
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-40
<PAGE> 89
NEW HOPE NATURAL MEDIA
(A DIVISION OF NEW HOPE COMMUNICATIONS, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ------------------------
1998 1998 1999
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings........................................ $3,872,377 $5,808,323 $6,837,860
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization.................... 423,671 93,289 101,890
Provision for uncollectible accounts
receivable..................................... 360,808 7,025 76,242
Changes in operating assets and liabilities:
Receivables.................................... (560,372) 319,828 (597,943)
Prepaid expenses and other..................... (105,845) (441) 46,014
Accounts payable and accrued expenses.......... (800,484) (1,137,189) 153,153
Deferred revenue............................... 1,410,094 (3,801,507) (5,789,328)
Deferred rent concessions...................... 195,010 -- 117,006
---------- ---------- ----------
Net cash provided by operating activities... 4,795,259 1,289,328 944,894
---------- ---------- ----------
Cash flows from investing activities:
Increase in notes receivable from affiliates........ (6,019) -- --
Payments received on notes receivable from
affiliates....................................... 1,150 -- 3,300
Purchase of equipment and leasehold improvements.... (597,229) (139,169) (107,732)
Other............................................... 1,021 255 256
---------- ---------- ----------
Net cash used by investing activities....... (601,077) (138,914) (104,176)
---------- ---------- ----------
Cash flows from financing activities:
Payments on capital lease obligations............... (68,980) (15,678) (16,791)
Distributions to owner.............................. (6,057,029) (2,741,955) (361,316)
---------- ---------- ----------
Net cash used by financing activities....... (6,126,009) (2,757,633) (378,107)
---------- ---------- ----------
Increase (decrease) in cash and cash
equivalents............................... (1,931,827) (1,607,219) 462,611
Cash and cash equivalents, beginning of period........ 2,359,834 2,359,834 428,007
---------- ---------- ----------
Cash and cash equivalents, end of period.............. $ 428,007 $ 752,615 $ 890,618
========== ========== ==========
Supplemental disclosure of cash flow information -
cash payments for interest.......................... $ 9,444 $ 1,006 $ 157
========== ========== ==========
Noncash investing and financing activities:
Acquisition of property and equipment under capital
lease obligation................................. $ 68,404 $ -- $ --
========== ========== ==========
Note payable issued to shareholder for retention of
cash............................................. $ -- $ -- $ 500,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE> 90
NEW HOPE NATURAL MEDIA
(A DIVISION OF NEW HOPE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Business and Basis of Presentation
New Hope Communications, Inc. (New Hope or the Company) was incorporated in
1980. Effective May 27, 1999, Penton Media, Inc. (Penton) entered into an Asset
Purchase Agreement (the Agreement) with New Hope to purchase substantially all
of the net assets of the Company's publishing and trade show businesses, which
operate primarily in the natural foods industry (New Hope Natural Media or the
Division). New Hope retained its local newspaper and theater operations. The
accompanying financial statements include the assets, liabilities and operations
of the Division, assuming that the Division had been operated separately as of
January 1, 1998 and thereafter.
The accompanying unaudited financial information as of March 31, 1999 and
for the three-month periods ended March 31, 1999 and 1998 has been prepared in
accordance with generally accepted accounting principles for interim financial
information. All significant adjustments, consisting of only normal and
recurring adjustments, which, in the opinion of management, are necessary for a
fair presentation of the results for the three months ended March 31, 1999 and
1998 have been included. Operating results for the three-month period ending
March 31, 1999 are not necessarily indicative of the results that may be
expected for the full year.
The preparation of the 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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(b) Cash Equivalents
The Division considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
(c) Equipment and Leasehold Improvements
Equipment and leasehold improvements, including equipment acquired under
capital leases, are recorded at cost. Depreciation and amortization is
calculated using the straight-line method over the estimated useful lives of the
assets or the lease term for leasehold improvements, whichever is less, which
range from 3 to 7 years for equipment. Repairs and maintenance are charged to
operations and major improvements are capitalized.
(d) Revenue Recognition
Advertising revenue is recognized upon publication of magazines including
the advertisement. Advance deposits received from customers for exhibit space
and attendance at trade shows sponsored by the Division are deferred until the
trade show occurs, at which time such amounts are recognized as revenue.
(e) Income Taxes
The operations of the Division are included in the income returns of New
Hope, which has elected S corporation status for income tax purposes.
Accordingly, the results of operations of the Company and the Division were
included in the individual income tax returns of the shareholders of New Hope,
and no provision for income taxes has been included in the accompanying
financial statements of the Division. However, pro forma information has been
included in the accompanying statement of operations to reflect a pro forma
adjustment for
F-42
<PAGE> 91
NEW HOPE NATURAL MEDIA
(A DIVISION OF NEW HOPE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
income tax expense as if the Division had been a separate taxable entity subject
to federal and state income taxes for all periods presented.
(f) Concentration of Credit Risk and Financial Instruments
Financial instruments that potentially subject the Division to
concentrations of credit risk consist primarily of cash and cash equivalents,
accounts receivable and accounts payable. As of December 31, 1998 and March 31,
1999, the Division had no concentrations of credit risk. Concentrations of
credit risk with respect to trade receivables are limited due to the large
number of customers comprising the Division's customer base and the relatively
minor balances of each individual account. At December 31, 1998 and March 31,
1999, the fair value of the Division's financial instruments approximate their
carrying value, based on their terms and interest rates.
(2) EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
Computer equipment........................................ $2,221,479 $2,249,985
Office furniture, machinery and equipment................. 756,642 756,642
Software and other........................................ 325,247 404,216
Leasehold improvements.................................... 29,106 29,106
---------- ----------
3,332,474 3,439,949
Less accumulated depreciation and amortization............ (2,142,420) (2,244,053)
---------- ----------
$1,190,054 $1,195,896
========== ==========
</TABLE>
(3) LEASES AND RELATED PARTY TRANSACTIONS
The Division rents its operating and other facilities under leases with the
Chief Executive Officer and majority stockholder of New Hope. A summary of these
lease commitments is as follows:
<TABLE>
<CAPTION>
BUILDING BUILDING BUILDING
------------ ------------ -------------
<S> <C> <C> <C>
Expiration date................................... July 1, 2011 July 1, 2011 June 30, 2000
Monthly payments.................................. $ 13,175 $ 7,180 $ 4,000
Rent paid during the year ended December 31,
1998............................................ $ 158,100 $ 86,160 $ 48,000
</TABLE>
F-43
<PAGE> 92
NEW HOPE NATURAL MEDIA
(A DIVISION OF NEW HOPE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
The Division also leases equipment under other operating and capital lease
agreements. Future minimum rental payments required under all related party and
third-party operating and capital leases as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
1999........................................................ $28,665 $ 662,027
2000........................................................ 20,119 694,526
2001........................................................ 20,119 615,996
2002........................................................ 9,461 604,332
2003 and thereafter......................................... -- 2,459,607
------- ----------
Future minimum lease payments............................. 78,364 $5,036,488
----------
Less amount representing interest........................... (9,900)
-------
Present value of minimum lease payments................... 68,464
Less current portion........................................ (23,638)
-------
$44,826
=======
</TABLE>
Total rent expense, including month-to-month rentals, for the year ended
December 31, 1998 and the three months ended March 31, 1999 and 1998 was
$719,864, $262,534 and $109,218, respectively.
The following is a summary of the net book value of equipment owned under
capital leases at December 31, 1998:
<TABLE>
<S> <C>
Cost of equipment........................................... $845,803
Less accumulated depreciation............................... (726,565)
--------
Net book value............................................ $119,238
========
</TABLE>
(4) RETIREMENT PLAN
The Division's employees participated in New Hope's retirement plan, which
was established under the requirements of Internal Revenue Code Section 401(k).
Employees could make voluntary contributions and the Division and New Hope, at
the discretion of the Board of Directors of New Hope, could match a percentage
of the employees' contribution. There were no employer contributions to the Plan
for the year ended December 31, 1998 or for the three months ended March 31,
1999 and 1998.
(5) YEAR 2000 ISSUES (UNAUDITED)
The Company has initiated a plan (Plan) to identify, asses and remediate
"Year 2000" issues within each of its significant computer systems and
applications. The Plan is addressing the issue of computer systems being unable
to distinguish between the year 1900 and the year 2000, if a program uses only
two digits rather than four to define the applicable year. Systems which have
been determined not to be Year 2000 compliant are being either replaced or
reprogrammed, and thereafter tested for Year 2000 compliance. The Plan
anticipates compliance by September 1, 1999. The Company is also in the process
of identifying and contacting critical suppliers whose computerized systems are
used by the Company and the Division, regarding their plans and progress in
addressing their Year 2000 issues. The Company has received varying information
from such third parties on the state of compliance or expected compliance.
F-44
<PAGE> 93
NEW HOPE NATURAL MEDIA
(A DIVISION OF NEW HOPE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
and the Division's operations, liquidity and financial condition. Due to the
general uncertainty inherent in the Year 2000 problem, resulting in part from
the uncertainty of the Year 2000 readiness of third-party suppliers, the Company
and the Division are unable to determine at this time whether the consequences
of Year 2000 failures will have a material impact on the Company's and the
Division's operations, liquidity or financial condition.
F-45
<PAGE> 94
[LOGO]
<PAGE> 95
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
, 2000
PENTON MEDIA, INC.
[PENTON LOGO]
3,638,320 SHARES OF COMMON STOCK
--------------------------------
PROSPECTUS
--------------------------------
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
SALOMON SMITH BARNEY
DLJDIRECT INC.
--------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell those securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus or any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the company
have not changed since the date hereof.
--------------------------------------------------------------------------------
<PAGE> 96
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than underwriting
discounts and commissions) payable in connection with the sale of the shares of
our common stock, together with the associated preferred stock purchase rights,
pursuant to this offering. Penton and the selling stockholders will split the
printing, legal and accounting fees and expenses, Penton will pay the
miscellaneous expenses, and the selling stockholders will pay all other
expenses. All of the amounts shown are estimates, except for the SEC
registration fee and the NASD filing fee, and include the expenses previously
reported in Registration File No. 333-44582.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 37,221
Printing expenses........................................... 300,000
NASD Fee.................................................... 14,600
Legal fees and expenses (other than blue sky)............... 300,000
Blue Sky fees and expenses.................................. 5,000
Accounting fees and expenses................................ 50,000
Transfer agent fees......................................... 5,000
Miscellaneous............................................... 125,000
----------
Total.................................................. $ 836,821
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Elimination of Liability
Penton Media, Inc.'s certificate of incorporation provides that, to the
fullest extent permitted by the DGCL as the same exists or may hereafter be
amended, no director of Penton Media, Inc. shall be liable to it or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this provision will not adversely affect any right
or protection of a director of Penton Media, Inc. existing at the time of that
repeal or modification.
Indemnification and Insurance
Section 145 of the DGCL contains provisions permitting (and, in some
situations, requiring) Delaware corporations such as Penton Media, Inc. to
provide indemnification to their officers and directors for losses and
litigation expense incurred in connection with, among other things, their
service to the corporation in those capacities. Penton Media, Inc.'s certificate
of incorporation contains provisions requiring indemnification by Penton Media,
Inc. of its directors, officers, and employees to the fullest extent permitted
by law. Among other things, these provisions provide that Penton Media, Inc. is
required to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (including
any action by or in the right of Penton Media, Inc.) (a "Proceeding") by reason
of the fact that such person is or was a director, officer, or employee of
Penton Media, Inc., or is or was serving at the request of Penton Media, Inc. as
a director, officer or employee of another corporation, partnership, joint
venture, trust, or other enterprise (including service with respect to any
employee benefit plan) against expenses (including attorneys' fees), judgments,
fines, ERISA excise taxes, penalties, and amounts paid in settlement actually
and reasonably incurred by such person in connection with such Proceeding to the
fullest extent permitted by the DGCL, as the same exists or may be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits Penton Media, Inc. to provide broader indemnification rights than such
law permitted Penton Media, Inc. to provide prior to such amendment). These
provisions also provide for the advance payment of fees and expenses reasonably
incurred by the director, officer, or employee in defense of any such
Proceeding, subject to reimbursement by the director, officer, or employee if it
is ultimately determined that such director, officer, or employee is not
entitled to be indemnified by Penton Media, Inc. In addition, the Certificate of
Incorporation authorizes Penton Media, Inc. to purchase insurance for its
directors, officers, and employees insuring them against certain risks as to
which Penton Media, Inc. may be unable lawfully to indemnify them. Penton Media,
Inc. maintains insurance coverage for its directors, officers and
II-1
<PAGE> 97
employees as well as insurance coverage to reimburse Penton Media, Inc. for
potential costs of its corporate indemnification of directors, officers and
employees.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement, incorporated by reference
from Exhibit 1.1 to the Registration Statement on Form S-3
(Registration Statement File No. 333-44582)
* 5.1 Opinion of Jones, Day, Reavis & Pogue regarding legality of
securities
*23.1 Consent of Independent Accountants
*23.2 Consent of Independent Public Accountants
*23.3 Consent of Independent Auditors
*23.4 Consent of Jones, Day, Reavis & Pogue, included in Exhibit
5.1
*24.1 Powers of Attorney
</TABLE>
---------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities and Exchange
Act of 1934) that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
C. The undersigned registrant hereby undertakes that:
(i) For the purpose of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 98
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Penton Media,
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cleveland, State of Ohio, on September 28, 2000.
Penton Media, Inc.
By: /s/ Joseph G. NeCastro
------------------------------------
Joseph G. NeCastro, Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates as indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer and September 28, 2000
------------------------------------------------ Director (Principal Executive
Thomas L. Kemp Officer)
/s/ JOSEPH G. NECASTRO Chief Financial Officer September 28, 2000
------------------------------------------------ (Principal Financial Officer)
Joseph G. NeCastro
* Vice President/Controller September 28, 2000
------------------------------------------------ (Controller or Principal
Jocelyn A. Bradford Accounting Officer)
* Director September 28, 2000
------------------------------------------------
Anthony Downs
* Director September 28, 2000
------------------------------------------------
William J. Friend
* Director September 28, 2000
------------------------------------------------
R. Douglas Greene
* Director September 28, 2000
------------------------------------------------
King W. Harris
* Director September 28, 2000
------------------------------------------------
Daniel J. Ramella
* Director September 28, 2000
------------------------------------------------
Edward J. Schwartz
* Director September 28, 2000
------------------------------------------------
Don E. Schultz
* Director September 28, 2000
------------------------------------------------
Richard B. Swank
* Director September 28, 2000
------------------------------------------------
Paul W. Brown
* Director September 28, 2000
------------------------------------------------
John J. Meehan
* Director September 28, 2000
------------------------------------------------
David B. Nussbaum
* Director September 28, 2000
------------------------------------------------
William B. Summers
</TABLE>
<PAGE> 99
* Joseph G. NeCastro, by signing his name hereto, does hereby execute this
registration statement on behalf of the directors and officers of the
Registrant indicated above by asterisks, pursuant to powers of attorney duly
executed by such directors and officers, which are filed herewith with the
Securities and Exchange Commission on behalf of such directors and officers.
By: /s/ JOSEPH G. NECASTRO
------------------------------------
Joseph G. NeCastro
Attorney-in-Fact
<PAGE> 100
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGINATION
BY
SEQUENTIAL
EXHIBIT EXHIBIT NUMBERING
NUMBER DESCRIPTION SYSTEM
------- ----------- ----------
<C> <S> <C>
1.1 Form of Underwriting Agreement, incorporated by reference
from Exhibit 1.1 to the Registrant's Registration Statement
on Form S-3 (Registration Statement File No. 333-44582)
* 5.1 Opinion of Jones, Day, Reavis & Pogue regarding legality of
securities
*23.1 Consent of Independent Accountants
*23.2 Consent of Independent Public Accountants
*23.3 Consent of Independent Auditors
*23.4 Consent of Jones, Day, Reavis & Pogue, included in Exhibit
5.1
*24.1 Powers of Attorney
</TABLE>
---------------
* Filed herewith.