##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549-1004
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER 1-14337
 PENTON MEDIA, INC.
  DELAWARE
    
    36-2875386(State of Incorporation)
    
    (I.R.S. Employer Identification No.)1300 East Ninth Street, Cleveland, OH
    
    44114(Address of Principal Executive Offices)
    
    (Zip Code)
 (Registrants
Telephone Number, Including Area Code)
 þ o
  o o þ
 o þ




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##### 



PENTON MEDIA, INC.
Form 10-Q
  
 INDEX
 PagePart I  FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets (Unaudited) at September 30, 2006 and December 31, 2005
    
    
    3Consolidated Statements of Operations (Unaudited) for the Three and Nine Months
Ended September 30, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months
Ended September 30, 2006 and 2005
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    31Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    43Item 4. Controls and Procedures
    
    
    43Part II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    44Item 6. Exhibits
    
    
    45Signature
    
    
    46Exhibit Index
    
    
    47EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 PENTON
MEDIA, INC.
 
 CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in thousands)
 September 30,
    
    
    December 31,2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,793
    
    
    $
    632Restricted cash
    
    
    319
    
    
    
    299Accounts receivable, net
    
    
    28,256
    
    
    
    27,471Inventories
    
    
    890
    
    
    
    1,098Deferred tax asset
    
    
    314
    
    
    
    314Prepayments, deposits and other
    
    
    5,219
    
    
    
    2,452Total current assets
    
    
    36,791
    
    
    
    32,266Property and equipment, net
    
    
    8,506
    
    
    
    10,401Goodwill
    
    
    173,612
    
    
    
    173,603Other intangible assets, net
    
    
    5,292
    
    
    
    5,962Other non-current assets
    
    
    3,440
    
    
    
    4,937$
    227,641
    
    
    $
    227,169Liabilities and stockholders deficitCurrent liabilities:Loan and security agreement revolver
    
    $
    
    
    
    $
    10,200Accounts payable
    
    
    4,707
    
    
    
    4,557Accrued compensation and benefits
    
    
    5,031
    
    
    
    5,016Other accrued expenses
    
    
    19,043
    
    
    
    9,890Unearned income, principally trade show and conference deposits
    
    
    26,321
    
    
    
    22,702Total current liabilities
    
    
    55,102
    
    
    
    52,365Senior secured notes, net of discount
    
    
    157,318
    
    
    
    157,195Senior subordinated notes, net of discount
    
    
    153,205
    
    
    
    152,956Accrued pension liability
    
    
    11,714
    
    
    
    12,400Deferred tax liability
    
    
    24,680
    
    
    
    22,667Other non-current liabilities
    
    
    7,070
    
    
    
    8,061Total liabilities
    
    
    409,089
    
    
    
    405,644Commitments and contingencies (Note 10)Mandatorily redeemable convertible preferred stock, par value $0.01
per share; 50,000 shares authorized, issued and outstanding;
redeemable at $1,000 per share (Note 11)
    
    
    81,129
    
    
    
    74,849Series M preferred stock, par value $0.01 per share; 150,000 shares authorized,
73,500 and 69,000 shares issued and outstanding at September 30, 2006 and
December 31, 2005, respectively (Note 11)
    
    
    36
    
    
    
    18Stockholders deficit:Preferred stock, par value $0.01 per share; 1,800,000 shares
authorized; none issued or outstanding
    
    
    
    
    
    
    Common stock, par value $0.01 per share; 155,000,000 shares
authorized; 34,511,869 and 34,487,872 shares issued and outstanding
at September 30, 2006 and December 31, 2005, respectively
    
    
    345
    
    
    
    343Capital in excess of par value
    
    
    201,183
    
    
    
    207,449Retained deficit
    
    
    (461,458
    )
    
    
    (458,489
    )Notes receivable from officers, net of reserve
    
    
    
    
    
    
    Accumulated other comprehensive loss
    
    
    (2,683
    )
    
    
    (2,645
    )(262,613
    )
    
    
    (253,342
    )$
    227,641
    
    
    $
    227,169
  3




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##### Table of Contents



PENTON
MEDIA, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Dollars and shares in thousands, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues
    
    $
    42,163
    
    
    $
    50,986
    
    
    $
    144,115
    
    
    $
    148,131Operating expenses:Editorial, production and circulation
    
    
    18,795
    
    
    
    21,322
    
    
    
    59,732
    
    
    
    61,992Selling, general and administrative
    
    
    16,449
    
    
    
    17,434
    
    
    
    52,023
    
    
    
    51,597Restructuring and other charges (credits), net
    
    
    14
    
    
    
    (22
    )
    
    
    41
    
    
    
    230Depreciation and amortization
    
    
    1,254
    
    
    
    1,486
    
    
    
    4,185
    
    
    
    5,06136,512
    
    
    
    40,220
    
    
    
    115,981
    
    
    
    118,880Operating income
    
    
    5,651
    
    
    
    10,766
    
    
    
    28,134
    
    
    
    29,251Other income (expense):Interest expense
    
    
    (9,721
    )
    
    
    (9,861
    )
    
    
    (29,112
    )
    
    
    (29,609
    )Interest income
    
    
    22
    
    
    
    41
    
    
    
    65
    
    
    
    103Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,589Other, net
    
    
    (2
    )
    
    
    (69
    )
    
    
    (2
    )
    
    
    (93
    )(9,701
    )
    
    
    (9,889
    )
    
    
    (29,049
    )
    
    
    (28,010
    )Income (loss) from continuing operations before
income taxes
    
    
    (4,050
    )
    
    
    877
    
    
    
    (915
    )
    
    
    1,241Provision for income taxes
    
    
    691
    
    
    
    618
    
    
    
    2,054
    
    
    
    2,014Income (loss) from continuing operations
    
    
    (4,741
    )
    
    
    259
    
    
    
    (2,969
    )
    
    
    (773
    )Discontinued operations:Loss from discontinued operations, net of
taxes (Note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,959
    )Net income (loss)
    
    
    (4,741
    )
    
    
    259
    
    
    
    (2,969
    )
    
    
    (3,732
    )Amortization of deemed dividend and accretion
of preferred stock
    
    
    (2,170
    )
    
    
    (1,961
    )
    
    
    (6,281
    )
    
    
    (5,675
    )Net loss applicable to common stockholders
    
    $
    (6,911
    )
    
    $
    (1,702
    )
    
    $
    (9,250
    )
    
    $
    (9,407
    )Net loss per common share  basic and diluted: (Note 13)Loss from continuing operations applicable
to common stockholders
    
    $
    (0.20
    )
    
    $
    (0.05
    )
    
    $
    (0.26
    )
    
    $
    (0.19
    )Discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.08
    )Net loss applicable to common stockholders
    
    $
    (0.20
    )
    
    $
    (0.05
    )
    
    $
    (0.26
    )
    
    $
    (0.27
    )Weighted-average number of shares outstanding:Basic and diluted
    
    
    34,495
    
    
    
    34,489
    
    
    
    34,498
    
    
    
    34,489
  4




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PENTON
MEDIA, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, Dollars in thousands)
 Nine Months EndedSeptember 30,2006
    
    
    2005Net cash provided by operating activities
    
    $
    12,626
    
    
    $
    5,090Cash flows from investing activities:Capital expenditures
    
    
    (807
    )
    
    
    (780
    )Cash paid for acquisitions
    
    
    (570
    )
    
    
    (1,748
    )Increase in restricted cash
    
    
    (20
    )
    
    
    (236
    )Net proceeds from sale of properties
    
    
    
    
    
    
    4,073Net cash provided by (used for) investing activities
    
    
    (1,397
    )
    
    
    1,309Cash flows from financing activities:Repurchase of senior subordinated notes
    
    
    
    
    
    
    (3,795
    )Repayment of loan and security agreement revolver, net
    
    
    (10,200
    )
    
    
    Increase (decrease) in cash overdraft balance
    
    
    84
    
    
    
    (77
    )Net cash used for financing activities
    
    
    (10,116
    )
    
    
    (3,872
    )Effect of exchange rate changes on cash
    
    
    48
    
    
    
    66Net increase in cash and cash equivalents
    
    
    1,161
    
    
    
    2,593Cash and cash equivalents at beginning of year
    
    
    632
    
    
    
    7,661Cash and cash equivalents at end of period
    
    $
    1,793
    
    
    $
    10,254
  5




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##### Table of Contents



PENTON
MEDIA, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 1  ACCOUNTING POLICIES
 Basis of Presentation
    Use of Estimates
  Reclassifications
  Restricted Cash
   Recent Accounting Pronouncements
   6




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
    NOTE 2  ACQUISITIONS AND DISPOSALS
 Strategic Alternatives
     7




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Acquisitions
     Disposals
  8




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Nine Months EndedSeptember 30,2005Revenues
    
    $
    654Discontinued operations:Loss from operations of discontinued component
    
    $
    (2,959
    )Gain (loss) on disposal
    
    
    Income tax provision
    
    
    Loss from discontinued operations, net of taxes
    
    $
    (2,959
    )
 NOTE 3 ACCOUNTS RECEIVABLE
  September 30,
    
    
    December 31,2006
    
    
    2005Trade
    
    $
    30,469
    
    
    $
    28,747Employee
    
    
    26
    
    
    
    36Other
    
    
    5
    
    
    
    1,01030,500
    
    
    
    29,793Less: Allowance for doubtful accounts
    
    
    (2,244
    )
    
    
    (2,322
    )$
    28,256
    
    
    $
    27,471
 NOTE 4 PROPERTY AND EQUIPMENT
  September 30,
    
    
    December 31,2006
    
    
    2005Leasehold improvements
    
    $
    8,371
    
    
    $
    8,348Furniture and fixtures
    
    
    9,455
    
    
    
    9,480Computer hardware and software
    
    
    23,263
    
    
    
    23,151Web site development costs
    
    
    3,264
    
    
    
    3,106Other
    
    
    652
    
    
    
    30845,005
    
    
    
    44,393Less: Accumulated depreciation
    
    
    (36,499
    )
    
    
    (33,992
    )$
    8,506
    
    
    $
    10,401
  9




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 5  GOODWILL AND OTHER INTANGIBLES
  Balance at
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    September 30,2005
    
    
    Activity (1)
    
    
    2006Industry
    
    $
    23,519
    
    
    $
    
    
    
    $
    23,519Technology
    
    
    39,233
    
    
    
    9
    
    
    
    39,242Retail
    
    
    25,865
    
    
    
    
    
    
    
    25,865Lifestyle
    
    
    84,986
    
    
    
    
    
    
    
    84,986Total
    
    $
    173,603
    
    
    $
    9
    
    
    $
    173,612
 
 (1)
    
    Activity represents adjustments related to MSD2D, which was acquired in August 2005.  NOTE 6  OTHER ACCRUED EXPENSES
  September 30,
    
    
    December 31,2006
    
    
    2005Accrued restructuring costs  short term
    
    $
    1,326
    
    
    $
    1,159Accrued interest
    
    
    14,062
    
    
    
    5,414Accrued taxes
    
    
    235
    
    
    
    329Accrued other
    
    
    3,420
    
    
    
    2,988$
    19,043
    
    
    $
    9,890
 NOTE 7  DEBT
  Loan and Security Agreement
  10




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   Senior Secured Notes
 
 Senior Subordinated Notes
 
  NOTE 8  INCOME TAXES
    11




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 9  EMPLOYEE BENEFIT PLANS
 Retirement and Savings Plan
  Defined Benefit Plan and Supplemental Executive Retirement Plan
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest cost
    
    $
    687
    
    
    $
    691
    
    
    $
    2,005
    
    
    $
    1,922Expected return on plan assets
    
    
    (708
    )
    
    
    (745
    )
    
    
    (2,150
    )
    
    
    (2,237
    )Settlement charge
    
    
    159
    
    
    
    
    
    
    
    159
    
    
    
    Net periodic benefit cost (benefit)
    
    $
    138
    
    
    $
    (54
    )
    
    $
    14
    
    
    $
    (315
    )
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest cost
    
    $
    7
    
    
    $
    7
    
    
    $
    21
    
    
    $
    20
 12




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 10  COMMITMENTS AND CONTINGENCIES
 Senior Managers  Sale Bonuses
   Equity Proceeds from Sale of Company
    
    Sale BonusLess than $135.0 million
    
    $
    25,000$135.0 million or more but less than $145.0 million
    
    $
    50,000$145.0 million or more but less than $185.0 million
    
    $
    100,000$185.0 million or greater
    
    $
    150,000
 Leases
  September 30,20062007
    
    $
    3912008
    
    
    6172009
    
    
    6382010
    
    
    5312011
    
    
    Total
    
    $
    2,177
 Legal Proceedings
  Tax Matters
  13




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 11  PREFERRED STOCK
 Series C Preferred Stock
        Series M Preferred Stock
  14




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  NOTE 12  COMMON STOCK AND COMMON STOCK AWARD PROGRAMS
 Equity and Performance Incentive Plan
     15




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2005
    
    
    2005Net loss applicable to common stockholders:As reported
    
    $
    (1,702
    )
    
    $
    (9,407
    )Add: Stock-based employee compensation expense included in net
loss applicable to common stockholders, net of related tax effects
    
    
    
    
    
    
    Less: Total stock-based employee compensation expense determined under
fair value based methods for all awards, net of related tax effects
    
    
    (7
    )
    
    
    (25
    )Pro forma net loss applicable to common stockholders
    
    $
    (1,709
    )
    
    $
    (9,432
    )Basic and diluted earnings per share:As reported
    
    $
    (0.05
    )
    
    $
    (0.27
    )Pro forma
    
    $
    (0.05
    )
    
    $
    (0.27
    )
  Number of Options
    
    Weighted-Average
    
    AggregateEmployees
    
    Directors
    
    Exercise Price
    
    Intrinsic ValueOutstanding and exercisable at December 31, 2005
    
    
    1,080
    
    
    
    163
    
    
    $
    6.08Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (23
    )
    
    
    
    
    
    $
    0.37Canceled
    
    
    (69
    )
    
    
    (10
    )
    
    $
    6.39Outstanding and exercisable at September 30, 2006
    
    
    988
    
    
    
    153
    
    
    $
    6.18
    
    
    $
    0.08
  Options Outstanding and ExercisableWeighted-average
    
    Weighted-Number
    
    remaining
    
    averageRange of
    
    of
    
    contractual
    
    exerciseexercise prices
    
    options
    
    life
    
    price$27.75 - 28.375
    
    
    36
    
    
    3.9 years
    
    $
    28.10$16.225 - 24.29
    
    
    183
    
    
    2.9 years
    
    $
    20.27$6.89 - 6.89
    
    
    286
    
    
    5.2 years
    
    $
    6.89$0.90 - 0.90
    
    
    244
    
    
    7.3 years
    
    $
    0.90$0.37 - 0.37
    
    
    392
    
    
    5.5 years
    
    $
    0.37Total
    
    
    1,141
    
    
    5.3 years
    
    $
    6.18
 16




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Executive Loan Program
  Management Stock Purchase Plan
  NOTE 13  EARNINGS PER SHARE
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net loss applicable to common stockholders
    
    $
    (6,911
    )
    
    $
    (1,702
    )
    
    $
    (9,250
    )
    
    $
    (9,407
    )Number of shares:Weighted average shares outstanding  basic and diluted
    
    
    34,495
    
    
    
    34,489
    
    
    
    34,498
    
    
    
    34,489Per share amount:Loss applicable to common stockholders  basic and diluted
    
    $
    (0.20
    )
    
    $
    (0.05
    )
    
    $
    (0.26
    )
    
    $
    (0.27
    )
    17




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 14  COMPREHENSIVE INCOME (LOSS)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    (4,741
    )
    
    $
    259
    
    
    $
    (2,969
    )
    
    $
    (3,732
    )Cumulative translation adjustment related to sale of business
    
    
    
        
    
    
    
    
    
    
    
    
    
    1,244Change in accumulated translation adjustment
    
    
    (1
    )
    
    
    (2
    )
    
    
    (38
    )
    
    
    (37
    )Total comprehensive income (loss)
    
    $
    (4,742
    )
    
    $
    257
    
    
    $
    (3,007
    )
    
    $
    (2,525
    )
 NOTE 15  RESTRUCTURING CHARGES
   EmployeeSeparation
    
    
    FacilityCosts
    
    
    Closing Costs
    
    
    TotalAccrual at December 31, 2005
    
    $
    25
    
    
    $
    5,998
    
    
    $
    6,023Adjustments
    
    
    
    
    
    
    21
    
    
    
    21Cash payments
    
    
    (4
    )
    
    
    (1,018
    )
    
    
    (1,022
    )Accrual at September 30, 2006
    
    $
    21
    
    
    $
    5,001
    
    
    $
    5,022
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Industry
    
    $
    2
    
    
    $
    10
    
    
    $
    13
    
    
    $
    319Technology
    
    
    (50
    )
    
    
    (36
    )
    
    
    (71
    )
    
    
    (54
    )Lifestyle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65
    )Corporate
    
    
    62
    
    
    
    4
    
    
    
    99
    
    
    
    30$
    14
    
    
    $
    (22
    )
    
    $
    41
    
    
    $
    230
 18




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 16  SEGMENTS
   Industry
    
    TechnologyManufacturing
    
    Business TechnologyDesign/Engineering
    
    AviationMechanical Systems/Construction
    
    Enterprise Information TechnologyGovernment/Compliance
    
    Electronics
 Lifestyle
    
    RetailNatural Products
    
    Food/RetailHospitality
   Revenues
    
    
    Adjusted Segment EBITDA2006
    
    
    2005
    
    
    2006
    
    
    2005Industry
    
    $
    20,446
    
    
    $
    19,772
    
    
    $
    7,110
    
    
    $
    6,016Technology
    
    
    12,712
    
    
    
    14,354
    
    
    
    2,916
    
    
    
    3,281Lifestyle
    
    
    4,144
    
    
    
    11,233
    
    
    
    (279
    )
    
    
    5,142Retail
    
    
    4,861
    
    
    
    5,627
    
    
    
    1,525
    
    
    
    1,905Total
    
    $
    42,163
    
    
    $
    50,986
    
    
    $
    11,272
    
    
    $
    16,344
  Revenues
    
    
    Adjusted Segment EBITDA2006
    
    
    2005
    
    
    2006
    
    
    2005Industry
    
    $
    58,773
    
    
    $
    57,225
    
    
    $
    19,274
    
    
    $
    17,219Technology
    
    
    42,239
    
    
    
    42,931
    
    
    
    9,684
    
    
    
    8,949Lifestyle
    
    
    27,313
    
    
    
    32,069
    
    
    
    11,954
    
    
    
    15,800Retail
    
    
    15,790
    
    
    
    15,906
    
    
    
    5,083
    
    
    
    5,047Total
    
    $
    144,115
    
    
    $
    148,131
    
    
    $
    45,995
    
    
    $
    47,015
 19




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Total adjusted segment EBITDA
    
    $
    11,272
    
    
    $
    16,344
    
    
    $
    45,995
    
    
    $
    47,015General and administrative costs
    
    
    (4,343
    )
    
    
    (4,109
    )
    
    
    (13,613
    )
    
    
    (12,451
    )Depreciation and amortization
    
    
    (1,254
    )
    
    
    (1,486
    )
    
    
    (4,185
    )
    
    
    (5,061
    )Restructuring and other charges
    
    
    (14
    )
    
    
    22
    
    
    
    (41
    )
    
    
    (230
    )Non-cash compensation
    
    
    (10
    )
    
    
    (5
    )
    
    
    (22
    )
    
    
    (22
    )Interest expense
    
    
    (9,721
    )
    
    
    (9,861
    )
    
    
    (29,112
    )
    
    
    (29,609
    )Interest income
    
    
    22
    
    
    
    41
    
    
    
    65
    
    
    
    103Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,589Other, net
    
    
    (2
    )
    
    
    (69
    )
    
    
    (2
    )
    
    
    (93
    )Income (loss) from continuing operations
before income taxes
    
    $
    (4,050
    )
    
    $
    877
    
    
    $
    (915
    )
    
    $
    1,241
 NOTE 17  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
   20




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 17  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued)
 PENTON MEDIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
At September 30, 2006
 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,115
    
    
    $
    5
    
    
    $
    673
    
    
    $
    
    
    
    $
    1,793Restricted cash
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    319Accounts receivable, net
    
    
    23,595
    
    
    
    3,390
    
    
    
    1,271
    
    
    
    
    
    
    
    28,256Inventories
    
    
    705
    
    
    
    181
    
    
    
    4
    
    
    
    
    
    
    
    890Deferred tax assets
    
    
    402
    
    
    
    
    
    
    
    
    
    
    
    (88
    )
    
    
    314Prepayments, deposits and other
    
    
    4,869
    
    
    
    252
    
    
    
    98
    
    
    
    
    
    
    
    5,219Total current assets
    
    
    31,005
    
    
    
    3,828
    
    
    
    2,046
    
    
    
    (88
    )
    
    
    36,791Property and equipment, net
    
    
    7,347
    
    
    
    1,076
    
    
    
    83
    
    
    
    
    
    
    
    8,506Goodwill
    
    
    136,689
    
    
    
    36,923
    
    
    
    
    
    
    
    
    
    
    
    173,612Other intangible assets, net
    
    
    3,885
    
    
    
    1,017
    
    
    
    390
    
    
    
    
    
    
    
    5,292Other non-current assets
    
    
    3,285
    
    
    
    148
    
    
    
    7
    
    
    
    
    
    
    
    3,440Investments in subsidiaries
    
    
    (254,723
    )
    
    
    
    
    
    
    
    
    
    
    254,723
    
    
    
    $
    (72,512
    )
    
    $
    42,992
    
    
    $
    2,526
    
    
    $
    254,635
    
    
    $
    227,641Liabilities and stockholders deficitCurrent liabilities:Accounts payable and accrued expenses
    
    $
    21,925
    
    
    $
    1,350
    
    
    $
    475
    
    
    $
    
    
    
    $
    23,750Accrued compensation and benefits
    
    
    4,489
    
    
    
    485
    
    
    
    57
    
    
    
    
    
    
    
    5,031Unearned income
    
    
    21,997
    
    
    
    2,717
    
    
    
    1,607
    
    
    
    
    
    
    
    26,321Total current liabilities
    
    
    48,411
    
    
    
    4,552
    
    
    
    2,139
    
    
    
    
    
    
    
    55,102Senior secured notes, net of discount
    
    
    80,232
    
    
    
    77,086
    
    
    
    
    
    
    
    
    
    
    
    157,318Senior subordinated notes, net of discount
    
    
    78,135
    
    
    
    75,070
    
    
    
    
    
    
    
    
    
    
    
    153,205Accrued pension liability
    
    
    11,714
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,714Deferred tax liability
    
    
    23,816
    
    
    
    952
    
    
    
    
    
    
    
    (88
    )
    
    
    24,680Intercompany advances
    
    
    (139,077
    )
    
    
    101,955
    
    
    
    37,122
    
    
    
    
    
    
    
    Other non-current liabilities
    
    
    5,705
    
    
    
    1,365
    
    
    
    
    
    
    
    
    
    
    
    7,070Total liabilities
    
    
    108,936
    
    
    
    260,980
    
    
    
    39,261
    
    
    
    (88
    )
    
    
    409,089Commitments and contingenciesMandatorily redeemable convertible
preferred stock (Note 11)
    
    
    81,129
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,129Series M preferred stock (Note 11)
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36Stockholders deficit:Common stock and capital in excess
of par value
    
    
    201,528
    
    
    
    202,145
    
    
    
    16,866
    
    
    
    (219,011
    )
    
    
    201,528Retained deficit
    
    
    (461,458
    )
    
    
    (420,088
    )
    
    
    (53,276
    )
    
    
    473,364
    
    
    
    (461,458
    )Notes receivable from officers, net of
reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated other comprehensive
income (loss)
    
    
    (2,683
    )
    
    
    (45
    )
    
    
    (325
    )
    
    
    370
    
    
    
    (2,683
    )(262,613
    )
    
    
    (217,988
    )
    
    
    (36,735
    )
    
    
    254,723
    
    
    
    (262,613
    )$
    (72,512
    )
    
    $
    42,992
    
    
    $
    2,526
    
    
    $
    254,635
    
    
    $
    227,641
 21




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 17  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued)
 PENTON MEDIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31, 2005
 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    286
    
    
    $
    58
    
    
    $
    288
    
    
    $
    
    
    
    $
    632Restricted cash
    
    
    299
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    299Accounts receivable, net
    
    
    22,853
    
    
    
    3,558
    
    
    
    1,060
    
    
    
    
    
    
    
    27,471Inventories
    
    
    904
    
    
    
    190
    
    
    
    4
    
    
    
    
    
    
    
    1,098Deferred tax asset
    
    
    402
    
    
    
    
    
    
    
    
    
    
    
    (88
    )
    
    
    314Prepayments, deposits and other
    
    
    2,179
    
    
    
    227
    
    
    
    46
    
    
    
    
    
    
    
    2,452Total current assets
    
    
    26,923
    
    
    
    4,033
    
    
    
    1,398
    
    
    
    (88
    )
    
    
    32,266Property and equipment, net
    
    
    9,003
    
    
    
    1,304
    
    
    
    94
    
    
    
    
    
    
    
    10,401Goodwill
    
    
    136,689
    
    
    
    36,914
    
    
    
    
    
    
    
    
    
    
    
    173,603Other intangible assets, net
    
    
    4,219
    
    
    
    1,743
    
    
    
    
    
    
    
    
    
    
    
    5,962Other non-current assets
    
    
    4,791
    
    
    
    138
    
    
    
    8
    
    
    
    
    
    
    
    4,937Investment in subsidiaries
    
    
    (240,510
    )
    
    
    
    
    
    
    
    
    
    
    240,510
    
    
    
    $
    (58,885
    )
    
    $
    44,132
    
    
    $
    1,500
    
    
    $
    240,422
    
    
    $
    227,169Liabilities and stockholders deficitCurrent liabilities:Loan and security agreement revolver
    
    $
    10,200
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    10,200Accounts payable and accrued expenses
    
    
    12,676
    
    
    
    1,512
    
    
    
    259
    
    
    
    
    
    
    
    14,447Accrued compensation and benefits
    
    
    4,218
    
    
    
    736
    
    
    
    62
    
    
    
    
    
    
    
    5,016Unearned income
    
    
    18,774
    
    
    
    2,464
    
    
    
    1,464
    
    
    
    
    
    
    
    22,702Total current liabilities
    
    
    45,868
    
    
    
    4,712
    
    
    
    1,785
    
    
    
    
    
    
    
    52,365Senior secured notes, net of discount
    
    
    80,169
    
    
    
    77,026
    
    
    
    
    
    
    
    
    
    
    
    157,195Senior subordinated notes, net of discount
    
    
    78,008
    
    
    
    74,948
    
    
    
    
    
    
    
    
    
    
    
    152,956Accrued pension liability
    
    
    12,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,400Deferred tax liability
    
    
    21,803
    
    
    
    952
    
    
    
    
    
    
    
    (88
    )
    
    
    22,667Intercompany advances
    
    
    (125,039
    )
    
    
    88,547
    
    
    
    36,492
    
    
    
    
    
    
    
    Other non-current liabilities
    
    
    6,381
    
    
    
    1,680
    
    
    
    
    
    
    
    
    
    
    
    8,061Total liabilities
    
    
    119,590
    
    
    
    247,865
    
    
    
    38,277
    
    
    
    (88
    )
    
    
    405,644Mandatorily redeemable convertible
preferred stock (Note 11)
    
    
    74,849
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,849Series M preferred stock (Note 11)
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Stockholders deficit:Common stock and capital in excess
of par value
    
    
    207,792
    
    
    
    202,405
    
    
    
    16,566
    
    
    
    (218,971
    )
    
    
    207,792Retained deficit
    
    
    (458,489
    )
    
    
    (406,093
    )
    
    
    (53,058
    )
    
    
    459,151
    
    
    
    (458,489
    )Notes receivable from officers, net of reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated other comprehensive loss
    
    
    (2,645
    )
    
    
    (45
    )
    
    
    (285
    )
    
    
    330
    
    
    
    (2,645
    )(253,342
    )
    
    
    (203,733
    )
    
    
    (36,777
    )
    
    
    240,510
    
    
    
    (253,342
    )$
    (58,885
    )
    
    $
    44,132
    
    
    $
    1,500
    
    
    $
    240,422
    
    
    $
    227,169
 22




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 17  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued)
 PENTON MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2006
 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Revenues
    
    $
    34,682
    
    
    $
    6,573
    
    
    $
    908
    
    
    $
    
    
    
    $
    42,163Operating expenses:Editorial, production and circulation
    
    
    15,368
    
    
    
    3,110
    
    
    
    317
    
    
    
    
    
    
    
    18,795Selling, general and administrative
    
    
    12,160
    
    
    
    3,776
    
    
    
    513
    
    
    
    
    
    
    
    16,449Restructuring and other charges (credits), net
    
    
    64
    
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    14Depreciation and amortization
    
    
    905
    
    
    
    333
    
    
    
    16
    
    
    
    
    
    
    
    1,25428,497
    
    
    
    7,169
    
    
    
    846
    
    
    
    
    
    
    
    36,512Operating income (loss)
    
    
    6,185
    
    
    
    (596
    )
    
    
    62
    
    
    
    
    
    
    
    5,651Other income (expense):Interest expense
    
    
    (5,619
    )
    
    
    (4,069
    )
    
    
    (33
    )
    
    
    
    
    
    
    (9,721
    )Interest income
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22Equity in losses of subsidiaries
    
    
    (4,649
    )
    
    
    
    
    
    
    
    
    
    
    4,649
    
    
    
    Other, net
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )(10,248
    )
    
    
    (4,069
    )
    
    
    (33
    )
    
    
    4,649
    
    
    
    (9,701
    )Income (loss) from continuing operations before
income taxes
    
    
    (4,063
    )
    
    
    (4,665
    )
    
    
    29
    
    
    
    4,649
    
    
    
    (4,050
    )Provision for income taxes
    
    
    678
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    691Net income (loss)
    
    $
    (4,741
    )
    
    $
    (4,665
    )
    
    $
    16
    
    
    $
    4,649
    
    
    $
    (4,741
    )
 23




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 17  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued)
 PENTON MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2005
 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Revenues
    
    $
    42,064
    
    
    $
    8,353
    
    
    $
    569
    
    
    $
    
    
    
    $
    50,986Operating expenses:Editorial, production and circulation
    
    
    17,196
    
    
    
    4,036
    
    
    
    90
    
    
    
    
    
    
    
    21,322Selling, general and administrative
    
    
    14,880
    
    
    
    2,174
    
    
    
    380
    
    
    
    
    
    
    
    17,434Restructuring and other charges (credits), net
    
    
    10
    
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (22
    )Depreciation and amortization
    
    
    1,111
    
    
    
    356
    
    
    
    19
    
    
    
    
    
    
    
    1,48633,197
    
    
    
    6,534
    
    
    
    489
    
    
    
    
    
    
    
    40,220Operating income (loss)
    
    
    8,867
    
    
    
    1,819
    
    
    
    80
    
    
    
    
    
    
    
    10,766Other income (expense):Interest expense
    
    
    (5,266
    )
    
    
    (4,572
    )
    
    
    (23
    )
    
    
    
    
    
    
    (9,861
    )Interest income
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Equity in losses of subsidiaries
    
    
    (2,726
    )
    
    
    
    
    
    
    
    
    
    
    2,726
    
    
    
    Other, net
    
    
    (42
    )
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    (69
    )(7,993
    )
    
    
    (4,599
    )
    
    
    (23
    )
    
    
    2,726
    
    
    
    (9,889
    )Income (loss) from continuing operations before
income taxes
    
    
    874
    
    
    
    (2,780
    )
    
    
    57
    
    
    
    2,726
    
    
    
    877Provision for income taxes
    
    
    615
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    618Net income (loss)
    
    $
    259
    
    
    $
    (2,783
    )
    
    $
    57
    
    
    $
    2,726
    
    
    $
    259
 24




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 17  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued)
 PENTON MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2006
 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Revenues
    
    $
    121,779
    
    
    $
    20,386
    
    
    $
    1,950
    
    
    $
    
    
    
    $
    144,115Operating expenses:Editorial, production and circulation
    
    
    49,311
    
    
    
    9,608
    
    
    
    813
    
    
    
    
    
    
    
    59,732Selling, general and administrative
    
    
    39,309
    
    
    
    11,494
    
    
    
    1,220
    
    
    
    
    
    
    
    52,023Restructuring and other charges (credits), net
    
    
    112
    
    
    
    (71
    )
    
    
    
    
    
    
    
    
    
    
    41Depreciation and amortization
    
    
    3,091
    
    
    
    1,050
    
    
    
    44
    
    
    
    
    
    
    
    4,18591,823
    
    
    
    22,081
    
    
    
    2,077
    
    
    
    
    
    
    
    115,981Operating income (loss)
    
    
    29,956
    
    
    
    (1,695
    )
    
    
    (127
    )
    
    
    
    
    
    
    28,134Other income (expense):Interest expense
    
    
    (16,721
    )
    
    
    (12,301
    )
    
    
    (90
    )
    
    
    
    
    
    
    (29,112
    )Interest income
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65Equity in losses of subsidiaries
    
    
    (14,213
    )
    
    
    
    
    
    
    
    
    
    
    14,213
    
    
    
    Other, net
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )(30,871
    )
    
    
    (12,301
    )
    
    
    (90
    )
    
    
    14,213
    
    
    
    (29,049
    )Income (loss) from continuing operations before
income taxes
    
    
    (915
    )
    
    
    (13,996
    )
    
    
    (217
    )
    
    
    14,213
    
    
    
    (915
    )Provision for income taxes
    
    
    2,054
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,054Net income (loss)
    
    $
    (2,969
    )
    
    $
    (13,996
    )
    
    $
    (217
    )
    
    $
    14,213
    
    
    $
    (2,969
    )
 25




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 17  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued)
 PENTON MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2005
 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Revenues
    
    $
    123,714
    
    
    $
    22,619
    
    
    $
    1,798
    
    
    $
    
    
    
    $
    148,131Operating expenses:Editorial, production and circulation
    
    
    50,334
    
    
    
    11,201
    
    
    
    457
    
    
    
    
    
    
    
    61,992Selling, general and administrative
    
    
    44,162
    
    
    
    6,350
    
    
    
    1,085
    
    
    
    
    
    
    
    51,597Restructuring and other charges (credits), net
    
    
    280
    
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    230Depreciation and amortization
    
    
    3,932
    
    
    
    1,071
    
    
    
    58
    
    
    
    
    
    
    
    5,06198,708
    
    
    
    18,572
    
    
    
    1,600
    
    
    
    
    
    
    
    118,880Operating income (loss)
    
    
    25,006
    
    
    
    4,047
    
    
    
    198
    
    
    
    
    
    
    
    29,251Other income (expense):Interest expense
    
    
    (15,789
    )
    
    
    (13,720
    )
    
    
    (100
    )
    
    
    
    
    
    
    (29,609
    )Interest income
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103Equity in losses of subsidiaries
    
    
    (12,575
    )
    
    
    
    
    
    
    
    
    
    
    12,575
    
    
    
    Gain on extinguishment of debt
    
    
    1,589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,589Other, net
    
    
    (52
    )
    
    
    (27
    )
    
    
    (14
    )
    
    
    
    
    
    
    (93
    )(26,724
    )
    
    
    (13,747
    )
    
    
    (114
    )
    
    
    12,575
    
    
    
    (28,010
    )Income (loss) from continuing operations before
income taxes
    
    
    (1,718
    )
    
    
    (9,700
    )
    
    
    84
    
    
    
    12,575
    
    
    
    1,241Provision for income taxes
    
    
    2,014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,014Income (loss) from continuing operations
    
    
    (3,732
    )
    
    
    (9,700
    )
    
    
    84
    
    
    
    12,575
    
    
    
    (773
    )Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    (2,959
    )
    
    
    
    
    
    
    (2,959
    )Net income (loss)
    
    $
    (3,732
    )
    
    $
    (9,700
    )
    
    $
    (2,875
    )
    
    $
    12,575
    
    
    $
    (3,732
    )
 26




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 17  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued)
 PENTON MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
For the Nine Months Ended September 30, 2006
 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Net cash provided by operating activities
    
    $
    12,187
    
    
    $
    43
    
    
    $
    396
    
    
    $
    
    
    
    $
    12,626Cash flows from investing activities:Capital expenditures
    
    
    (706
    )
    
    
    (91
    )
    
    
    (10
    )
    
    
    
    
    
    
    (807
    )Cash paid for acquisitions
    
    
    (565
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (570
    )Increase in restricted cash
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Net cash used for investing activities
    
    
    (1,291
    )
    
    
    (96
    )
    
    
    (10
    )
    
    
    
    
    
    
    (1,397
    )Cash flows from financing activities:Repayment of loan and security agreement revolver, net
    
    
    (10,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,200
    )Increase (decrease) in cash overdraft balance
    
    
    85
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    84Net cash provided by (used for) financing activities
    
    
    (10,115
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (10,116
    )Effect of exchange rate changes on cash
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48Net increase (decrease) in cash and cash equivalents
    
    
    829
    
    
    
    (53
    )
    
    
    385
    
    
    
    
    
    
    
    1,161Cash and cash equivalents at beginning of year
    
    
    286
    
    
    
    58
    
    
    
    288
    
    
    
    
    
    
    
    632Cash and cash equivalents at end of period
    
    $
    1,115
    
    
    $
    5
    
    
    $
    673
    
    
    $
    
    
    
    $
    1,793
 27




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 17  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued)
 PENTON MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
For the Nine Months Ended September 30, 2005
 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Net cash provided by (used for)
operating activities
    
    $
    4,786
    
    
    $
    1,544
    
    
    $
    (1,240
    )
    
    $
    
    
    
    $
    5,090Cash flows from investing activities:Capital expenditures
    
    
    (694
    )
    
    
    (69
    )
    
    
    (17
    )
    
    
    
    
    
    
    (780
    )Cash paid for acquisitions
    
    
    (375
    )
    
    
    (1,373
    )
    
    
    
    
    
    
    
    
    
    
    (1,748
    )Increase in restricted cash
    
    
    (236
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (236
    )Net proceeds from sale of properties
    
    
    4,073
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,073Net cash provided by (used for) investing activities
    
    
    2,768
    
    
    
    (1,442
    )
    
    
    (17
    )
    
    
    
    
    
    
    1,309Cash flows from financing activities:Repurchase of 10-3/8% senior subordinated notes
    
    
    (3,795
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,795
    )Increase (decrease) in cash overdraft balance
    
    
    (200
    )
    
    
    (4
    )
    
    
    127
    
    
    
    
    
    
    
    (77
    )Net cash provided by (used for) financing activities
    
    
    (3,995
    )
    
    
    (4
    )
    
    
    127
    
    
    
    
    
    
    
    (3,872
    )Effect of exchange rate changes on cash
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66Net increase (decrease) in cash and cash equivalents
    
    
    3,625
    
    
    
    98
    
    
    
    (1,130
    )
    
    
    
    
    
    
    2,593Cash and cash equivalents at beginning of year
    
    
    5,991
    
    
    
    73
    
    
    
    1,597
    
    
    
    
    
    
    
    7,661Cash and cash equivalents at end of period
    
    $
    9,616
    
    
    $
    171
    
    
    $
    467
    
    
    $
    
    
    
    $
    10,254
 28




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 18  SUBSEQUENT EVENTS
 Plan of Merger
       Voting agreement
  29




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Allocation agreement amendment
  30




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  
    
    our pending acquisition by Prism may create uncertainties that could affect our
business, including satisfaction of the conditions to the merger agreement;
    
    fluctuations in advertising revenue with general economic cycles;
    
    economic uncertainty exacerbated by potential terrorist attacks on the United States,
the impact of U.S. military and political engagement in Iraq, and other geopolitical
events;
    
    the performance of our natural products industry trade shows;
    
    the seasonality of revenues from trade shows and conferences;
    
    our ability to launch new products that fit strategically with and add value to our business;
    
    our ability to penetrate new markets internationally;
    
    increases in paper and postage costs;
    
    the effectiveness of our cost-saving efforts;
    
    the infringement or invalidation of Pentons intellectual property rights;
    
    pending litigation;
    
    government regulation;
    
    competition; and
    
    technological changes.
  OVERVIEW
     31




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##### Table of Contents



Plan of Merger
       Allocation of Potential Sales Proceeds
   32




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##### Table of Contents



Senior Managers  Sale Bonuses
   Equity Proceeds from Sale of Company
    
    Sale BonusLess than $135.0 million
    
    $
    25,000$135.0 million or more but less than $145.0 million
    
    $
    50,000$145.0 million or more but less than $185.0 million
    
    $
    100,000$185.0 million or greater
    
    $
    150,000
 2006 Acquisitions
 
    
    In February 2006, the Company acquired the assets of WeldingWeb.com. WeldingWeb.com is a
web site with more than 7,000 registered members and generates more than 220,000 page views
monthly. The site has been integrated with our Metalworking group, which is part of our
Industry segment.
    
    In April 2006, the Company acquired the assets of HVAC-Talk.com, a website with more
than 43,000 registered members and generates over 104,000 unique visitors and 2,700,000
page views per month. HVAC-Talk.com has been integrated with Pentons Contracting Business
group, which is part of our Industry segment. The web site adds a key interactive
component to the group.
    
    In July 2006, the Company acquired the assets of Web-EE. Web-EE offers schematics,
project and tutorial content, and components application notes for electronic design
engineers. The Website has been integrated with Pentons Electronics group, which is part
of our Technology segment.
    
    In September 2006, the Company acquired the assets of NPI International Corporation
(NPI). NPI is an online information resource serving nutraceutical, nutritional, dietary
supplement, cosmetic, and food industries. NPIcenter.com generates over 400,000 visits per
month from natural supply executives. The site will be integrated with Pentons natural
products group, which is part of our Lifestyle segment.
  33




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##### Table of Contents



RESULTS OF OPERATIONS
 Revenues
 Three-Month Comparison
  2006
    
    
    2005
    
    
    $ Change
    
    
    % Change(In thousands)Publishing
    
    $
    33,042
    
    
    $
    33,994
    
    
    $
    (952
    )
    
    
    (2.8
    )%Trade shows & conferences
    
    
    3,424
    
    
    
    12,699
    
    
    
    (9,275
    )
    
    
    (73.0
    )%Online media
    
    
    5,697
    
    
    
    4,293
    
    
    
    1,404
    
    
    
    32.7
    %Total revenues
    
    $
    42,163
    
    
    $
    50,986
    
    
    $
    (8,823
    )
    
    
    (17.3
    )%
    Nine-Month Comparison
  2006
    
    
    2005
    
    
    $ Change
    
    
    % Change(In thousands)Publishing
    
    $
    101,201
    
    
    $
    102,250
    
    
    $
    (1,049
    )
    
    
    (1.0
    )%Trade shows & conferences
    
    
    25,849
    
    
    
    32,790
    
    
    
    (6,941
    )
    
    
    (21.2
    )%Online media
    
    
    17,065
    
    
    
    13,091
    
    
    
    3,974
    
    
    
    30.4
    %Total revenues
    
    $
    144,115
    
    
    $
    148,131
    
    
    $
    (4,016
    )
    
    
    (2.7
    )%
   34




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##### Table of Contents



Editorial, Production and Circulation
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    Change(In millions)Editorial, production and circulation
    
    $
    18.8
    
    
    $
    21.3
    
    
    
    (11.9
    )%
    
    $
    59.7
    
    
    $
    62.0
    
    
    
    (3.6
    )%Percent of revenues
    
    
    44.6
    %
    
    
    41.8
    %
    
    
    
    
    
    
    41.4
    %
    
    
    41.8
    %
  Selling, General and Administrative
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    Change(In millions)Selling, general and administrative
    
    $
    16.4
    
    
    $
    17.4
    
    
    
    (5.6
    )%
    
    $
    52.0
    
    
    $
    51.6
    
    
    
    0.8
    %Percent of revenues
    
    
    39.0
    %
    
    
    34.2
    %
    
    
    
    
    
    
    36.1
    %
    
    
    34.8
    %
   35




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##### Table of Contents



Restructuring and Other Charges (credits), net
  EmployeeSeparation
    
    
    FacilityCosts
    
    
    Closing Costs
    
    
    TotalAccrual at December 31, 2005
    
    $
    25
    
    
    $
    5,998
    
    
    $
    6,023Adjustments
    
    
    
    
    
    
    21
    
    
    
    21Cash payments
    
    
    (4
    )
    
    
    (1,018
    )
    
    
    (1,022
    )Accrual at September 30, 2006
    
    $
    21
    
    
    $
    5,001
    
    
    $
    5,022
   Wireless Systems Design
 Other Income (Expense)
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    Change(In millions)Interest expense
    
    $
    (9.7
    )
    
    $
    (9.9
    )
    
    
    (1.4
    )%
    
    $
    (29.1
    )
    
    $
    (29.6
    )
    
    
    (1.7
    )%Gain on extinguishment of debt
    
    $
    
    
    
    $
    
    
    
    
    n/m
    
    
    $
    
    
    
    $
    1.6
    
    
    
    n/m
   Effective Tax Rates
   36




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##### Table of Contents



Discontinued Operations
   SEGMENTS
    Adjusted
    
    
    Adjusted SegmentRevenues
    
    
    Segment EBITDA
    
    
    EBITDA Margin2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Industry
    
    $
    20,446
    
    
    $
    19,772
    
    
    $
    7,110
    
    
    $
    6,016
    
    
    
    34.8
    %
    
    
    30.4
    %Technology
    
    
    12,712
    
    
    
    14,354
    
    
    
    2,916
    
    
    
    3,281
    
    
    
    22.9
    %
    
    
    22.9
    %Lifestyle
    
    
    4,144
    
    
    
    11,233
    
    
    
    (279
    )
    
    
    5,142
    
    
    
    (6.7
    )%
    
    
    45.8
    %Retail
    
    
    4,861
    
    
    
    5,627
    
    
    
    1,525
    
    
    
    1,905
    
    
    
    31.4
    %
    
    
    33.9
    %Total
    
    $
    42,163
    
    
    $
    50,986
    
    
    $
    11,272
    
    
    $
    16,344
 37




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##### Table of Contents



Adjusted
    
    
    Adjusted SegmentRevenues
    
    
    Segment EBITDA
    
    
    EBITDA Margin2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Industry
    
    $
    58,773
    
    
    $
    57,225
    
    
    $
    19,274
    
    
    $
    17,219
    
    
    
    32.8
    %
    
    
    30.1
    %Technology
    
    
    42,239
    
    
    
    42,931
    
    
    
    9,684
    
    
    
    8,949
    
    
    
    22.9
    %
    
    
    20.8
    %Lifestyle
    
    
    27,313
    
    
    
    32,069
    
    
    
    11,954
    
    
    
    15,800
    
    
    
    43.8
    %
    
    
    49.3
    %Retail
    
    
    15,790
    
    
    
    15,906
    
    
    
    5,083
    
    
    
    5,047
    
    
    
    32.2
    %
    
    
    31.7
    %Total
    
    $
    144,115
    
    
    $
    148,131
    
    
    $
    45,995
    
    
    $
    47,015
 Industry
 Three Months
    Nine Months
    38




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##### Table of Contents



Technology
 Three Months
    Nine Months
    39




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##### Table of Contents



Lifestyle
 Three Months
    Nine Months
    Retail
 Three Months
  Restaurant Hospitality
 40




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##### Table of Contents



Nine Months
    LIQUIDITY AND CAPITAL RESOURCES
 Current Liquidity
   
    
    debt service charges of $17.6 million;
    
    capital expenditures of approximately $0.5 million;
    
    payments related to our business restructuring initiatives of approximately $0.3 million; and
    
    a contribution of $0.3 million to our Retirement and Savings Plan.
   41




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##### Table of Contents



Analysis of Cash Flows
    Consolidated Adjusted EBITDA
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    (4,741
    )
    
    $
    259
    
    
    $
    (2,969
    )
    
    $
    (3,732
    )Interest expense
    
    
    9,721
    
    
    
    9,861
    
    
    
    29,112
    
    
    
    29,609Provision for income taxes
    
    
    691
    
    
    
    618
    
    
    
    2,054
    
    
    
    2,014Depreciation and amortization
    
    
    1,254
    
    
    
    1,486
    
    
    
    4,185
    
    
    
    5,061EBITDA
    
    
    6,925
    
    
    
    12,224
    
    
    
    32,382
    
    
    
    32,952Loan and Security Agreement Adjustments:Restructuring and other charges
    
    
    14
    
    
    
    (22
    )
    
    
    41
    
    
    
    230Non-cash compensation
    
    
    10
    
    
    
    5
    
    
    
    22
    
    
    
    22Interest income
    
    
    (22
    )
    
    
    (41
    )
    
    
    (65
    )
    
    
    (103
    )Discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,959Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,589
    )Other, net
    
    
    2
    
    
    
    69
    
    
    
    2
    
    
    
    93Consolidated Adjusted EBITDA
    
    $
    6,929
    
    
    $
    12,235
    
    
    $
    32,382
    
    
    $
    34,564
 42




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##### Table of Contents



NEW ACCOUNTING PRONOUCEMENTS
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
  43




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##### Table of Contents



Part II  OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
  The proposed merger of the Company into a wholly owned subsidiary of Prism Business Media Holdings,
Inc., is subject to certain closing conditions that, if not satisfied or waived, will result in the
transaction not being completed, which may cause the price of the Companys common stock to
decline.
   Whether or not the transaction with Prism Business Media Holdings, Inc. is completed, the
announcement and pendency of the transaction could cause disruptions in the Companys business,
which could have an adverse effect on its business and financial results.
  
    
    current and prospective employees may experience uncertainty about their future roles
with the Company, which might adversely affect the Companys ability to retain key managers
and other employees or hire new employees; and
    
    the attention of management may be directed toward the completion of the transaction,
rather than toward the execution of existing business plans.
 44




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##### Table of Contents



ITEM 6. EXHIBITS
 Exhibit No.
    
    Description of Document2.1
    
    Agreement and Plan of Merger, dated as of November 1, 2006 among
Prism Business Media Holdings, Inc., Prism Acquisition Co. and Penton Media,
Inc., (filed as Exhibit 2.1 to the Companys Form 8-K on November 2, 2006 and
incorporated herein by reference).10.1
    
    Allocation Agreement dated July 11, 2006 between Penton Media,
Inc. and the Series C Preferred Holders (filed as Exhibit 10.1 to the Companys
Form 10-Q on August 14, 2006 and incorporated herein by reference).10.2
    
    Summary of Senior Manager  Sale Bonuses terms as approved by the
Companys Board of Directors on July 17, 2006 (filed as Exhibit 10.2 to the
Companys Form 10-Q on August 14, 2006 and incorporated herein by reference).31.1
    
    Principal executive officers certification pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Principal financial officers certification pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 45




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##### Table of Contents



SIGNATURE
  Penton Media, Inc.
(Registrant)By:
    /s/ PRESTON L. VICEPreston L. ViceChief Financial Officer  46




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description of Document2.1
    
    Agreement and Plan of Merger, dated as of November 1, 2006 among Prism Business Media
Holdings, Inc., Prism Acquisition Co. and Penton Media, Inc., (filed as Exhibit 2.1 to the
Companys Form 8-K on November 2, 2006 and incorporated herein by reference).10.1
    
    Allocation Agreement dated July 11, 2006 between Penton Media, Inc. and the Series C
Preferred Holders (filed as Exhibit 10.1 to the Companys Form 10-Q on August 14, 2006 and
incorporated herein by reference).10.2
    
    Summary of Senior Manager  Sale Bonuses terms as approved by the Companys Board of
Directors on July 17, 2006 (filed as Exhibit 10.2 to the Companys Form 10-Q on August 14,
2006 and incorporated herein by reference).31.1
    
    Principal executive officers certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.31.2
    
    Principal financial officers certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.32
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 47