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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 1934For the quarterly period ended March 31, 2005
 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)
 216-696-7000
(Registrants Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
     Yes  þ    No  o Indicate by check mark whether the
registrant is an accelerated filer as defined in Rule 12b-2 of
the Exchange Act.     Yes  o    No  þ Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date (May 19, 2005). Common Stock: 34,487,872 shares




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PENTON MEDIA, INC.
Form 10-Q INDEX PagePart I  FINANCIAL INFORMATIONItem 1.   Financial StatementsConsolidated Balance Sheets (Unaudited) at March 31, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Operations (Unaudited) for the Three Months
Ended March 31, 2005 and 2004
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months
Ended March 31, 2005 and 2004
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7Item 2.   Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    28Item 3.   Quantitative and Qualitative Disclosures About Market Risk
    
    
    42Item 4.   Controls and Procedures
    
    
    43Part II  OTHER INFORMATIONItem 2.  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 6.  Exhibits
    
    
    44Signature
    
    
    45Exhibit Index
    
    
    46EX-31.1 CEO Certification Pursuant to Section 302EX-31.2 CFO Certification Pursuant to Section 302EX-32 Certification Pursuant to 18 U.S.C. Section 1350
  2




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Part I  FINANCIAL INFORMATION 
 ITEM 1.       FINANCIAL STATEMENTS PENTON MEDIA, INC. 
 CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in thousands)
 March 31,
    
    
    December 31,2005
    
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,832
    
    
    $
    7,661Restricted cash
    
    
    193
    
    
    
    125Accounts receivable, less allowance for doubtful accounts of $2,623
and $2,826 in 2005 and 2004, respectively
    
    
    27,866
    
    
    
    30,571Inventories
    
    
    1,125
    
    
    
    856Deferred tax assets
    
    
    276
    
    
    
    276Prepayments, deposits and other
    
    
    5,111
    
    
    
    3,672Current assets held for sale
    
    
    7,432
    
    
    
    Total current assets
    
    
    46,835
    
    
    
    43,161Property and equipment, less accumulated depreciation of $31,679
and $30,989 in 2005 and 2004, respectively
    
    
    13,007
    
    
    
    14,793Other assets:Goodwill
    
    
    172,871
    
    
    
    176,162Other intangible assets, net
    
    
    6,331
    
    
    
    6,846Other non-current assets
    
    
    6,338
    
    
    
    6,412185,540
    
    
    
    189,420$
    245,382
    
    
    $
    247,374
 The accompanying notes are an integral part of these consolidated financial statements. 3




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PENTON MEDIA, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in thousands, except share and per share amounts) March 31,
    
    
    December 31,2005
    
    
    2004Liabilities and stockholders deficitCurrent liabilities:Accounts payable
    
    $
    6,144
    
    
    $
    6,808Accrued compensation and benefits
    
    
    3,695
    
    
    
    5,880Other accrued expenses
    
    
    23,191
    
    
    
    13,937Unearned income, principally trade show and conference deposits
    
    
    13,664
    
    
    
    23,274Current liabilities held for sale
    
    
    4,450
    
    
    
    Total current liabilities
    
    
    51,144
    
    
    
    49,899Long-term liabilities and deferred credits:Senior secured notes, net of discount
    
    
    157,082
    
    
    
    157,047Senior subordinated notes, net of discount
    
    
    166,678
    
    
    
    172,017Net deferred pension credits
    
    
    10,422
    
    
    
    10,568Deferred tax liability
    
    
    20,600
    
    
    
    19,903Other non-current liabilities
    
    
    6,687
    
    
    
    7,010361,469
    
    
    
    366,545Commitments and contingenciesMandatorily redeemable convertible preferred stock, par value $0.01
per share; 50,000 shares authorized, issued and outstanding;
redeemable at $1,000 per share
    
    
    68,985
    
    
    
    67,162Series M preferred stock, par value $0.01 per share; 150,000 shares authorized, 68,625 shares issued and outstanding at March 31, 2005 and
December 31, 2004, respectively
    
    
    8
    
    
    
    4Stockholders 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; 34,487,872 and 33,832,004 shares issued and outstanding
at March 31, 2005 and December 31, 2004, respectively
    
    
    343
    
    
    
    337Capital in excess of par value
    
    
    213,312
    
    
    
    215,027Retained deficit
    
    
    (448,254
    )
    
    
    (450,067
    )Notes receivable from officers, less reserve of $5,848 at March 31, 2005
and December 31, 2004, respectively
    
    
    
    
    
    
    Accumulated other comprehensive loss
    
    
    (1,625
    )
    
    
    (1,533
    )(236,224
    )
    
    
    (236,236
    )$
    245,382
    
    
    $
    247,374
 The accompanying notes are an integral part of these consolidated financial statements. 4




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PENTON MEDIA, INC. 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Dollars and shares in thousands, except per share amounts)
 Three Months EndedMarch 31,2005
    
    
    2004Revenues
    
    $
    53,331
    
    
    $
    52,791Operating expenses:Editorial, production and circulation
    
    
    20,370
    
    
    
    20,335Selling, general and administrative (including
$2.4 million of executive separation costs in 2004)
    
    
    17,465
    
    
    
    22,603Restructuring and other charges
    
    
    66
    
    
    
    860Depreciation and amortization
    
    
    2,267
    
    
    
    2,84840,168
    
    
    
    46,646Operating income
    
    
    13,163
    
    
    
    6,145Other income (expense):Interest expense
    
    
    (9,383
    )
    
    
    (9,458
    )Interest income
    
    
    30
    
    
    
    86Gain on extinguishment of debt
    
    
    1,589
    
    
    
    Other, net
    
    
    (8
    )
    
    
    (2
    )(7,772
    )
    
    
    (9,374
    )Income (loss) from continuing operations before
income taxes
    
    
    5,391
    
    
    
    (3,229
    )Provision for income taxes
    
    
    778
    
    
    
    764Income (loss) from continuing operations
    
    
    4,613
    
    
    
    (3,993
    )Discontinued operations:Loss from discontinued operations, net of taxes
    
    
    (2,800
    )
    
    
    (1,909
    )Net income (loss)
    
    
    1,813
    
    
    
    (5,902
    )Amortization of deemed dividend and accretion
of preferred stock
    
    
    (1,823
    )
    
    
    (5,193
    )Net loss applicable to common stockholders
    
    $
    (10
    )
    
    $
    (11,095
    )Net income (loss) per common share  basic and diluted:Income (loss) from continuing operations applicable
to common stockholders
    
    $
    0.08
    
    
    $
    (0.27
    )Discontinued operations, net of taxes
    
    
    (0.08
    )
    
    
    (0.06
    )Net income (loss) applicable to common stockholders
    
    $
    0.00
    
    
    $
    (0.33
    )Weighted-average number of shares outstanding:Basic and diluted
    
    
    34,522
    
    
    
    33,536
 The accompanying notes are an integral part of these consolidated financial statements. 5




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PENTON MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, Dollars in thousands)
 Three Months EndedMarch 31,2005
    
    
    2004Net cash provided by operating activities
    
    $
    1,578
    
    
    $
    2,040Cash flows from investing activities:Capital expenditures
    
    
    (189
    )
    
    
    (875
    )Decreases in notes receivable
    
    
    
    
    
    
    98Net cash used for investing activities
    
    
    (189
    )
    
    
    (777
    )Cash flows from financing activities:Repurchase of 10-3/8% senior subordinated notes
    
    
    (3,795
    )
    
    
    Increase in restricted cash
    
    
    (68
    )
    
    
    (193
    )Decrease in cash overdraft balance
    
    
    (348
    )
    
    
    (220
    )Net cash used for financing activities
    
    
    (4,211
    )
    
    
    (413
    )Effect of exchange rate changes on cash
    
    
    (7
    )
    
    
    (26
    )Net (decrease) increase in cash and cash equivalents
    
    
    (2,829
    )
    
    
    824Cash and cash equivalents at beginning of year
    
    
    7,661
    
    
    
    29,626Cash and cash equivalents at end of period
    
    $
    4,832
    
    
    $
    30,450
 The accompanying notes are an integral part of these consolidated financial statements. 6




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1  ACCOUNTING POLICIES Basis of Presentation Penton Media, Inc., together with its subsidiaries, is herein referred to as either Penton or the
Company. These financial statements have been prepared by management in accordance with
generally accepted accounting principles (GAAP) for interim financial information and the
applicable rules and regulations of the Securities and Exchange Commission (SEC). Accordingly,
they do not include all information and footnotes required by GAAP for complete financial
statements. However, in the opinion of management, the interim financial statements reflect all
adjustments, which are of a normal recurring nature, 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, 2004. The Company realigned its business segments during the third quarter of 2004. Accordingly, the
historical results of operations of the Companys segments have been recast to reflect the current
segment reporting (See Note 13  Segments, for additional information). Use of Estimates The preparation of financial statements in accordance with GAAP 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. Restricted Cash Restricted cash represents deposits related to medical self insurance requirements. At March 31,
2005, cash balances totaling $0.2 million were subject to such restrictions, compared to $0.1
million at December 31, 2004. Accounting for Stock-Based Compensation The Company accounts for stock-based compensation plans under Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25). Pro forma information regarding net
income (loss) and earnings per share is required by Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation (SFAS 123), as amended by SFAS No.
148, Accounting for Stock-Based Compensation Transition and Disclosure, and has been determined
as if Penton had accounted for its stock-based compensation under SFAS 123. The weighted-average fair value of options granted during the first three months of 2004 was $0.84.
No options were granted in the first three months of 2005. The fair value of the 2004 options was
estimated on the date of grant using the Black-Scholes option-pricing model, under the following
assumptions: 2004Risk-free interest rate
    
    
    3.65
    %Dividend yield
    
    
    0.00
    %Expected volatility
    
    
    136.29
    %Expected life
    
    7 years
 Had compensation cost for Pentons stock-based compensation plans been determined based on the fair
value methodologies consistent with SFAS 123, Pentons net loss applicable to common stockholders
and earnings per share for the three months ended March 31, 2005 and 2004 would have been as
follows (in thousands, except per share data): 7




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Three Months EndedMarch 31,2005
    
    
    2004Net loss applicable to common stockholders:As reported
    
    $
    (10
    )
    
    $
    (11,095
    )Add: Stock-based employee compensation expense included in net
loss applicable to common stockholders, net of related tax effects
    
    
    3
    
    
    
    127Less: Total stock-based employee compensation expense determined under
fair value based methods for all awards, net of related tax effects
    
    
    (115
    )
    
    
    (360
    )Pro forma net loss applicable to common stockholders
    
    $
    (122
    )
    
    $
    (11,328
    )Basic and diluted earnings per share:As reported
    
    $
    0.00
    
    
    $
    (0.33
    )Pro forma
    
    $
    0.00
    
    
    $
    (0.34
    )
 New Accounting Pronouncements In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS 123 (revised 2004),
Share-Based Payment (SFAS 123(R)), which replaces SFAS 123 and supersedes APB 25. SFAS 123(R)
requires recognition of an expense when a company exchanges its equity instruments for goods or
services, based on the fair value of the share-based compensation at the grant date. The related
expense is recognized over the period in which the share-based compensation vests. SFAS 123(R)
permits either a prospective or one of two modified versions of retrospective application under
which financial statements for prior periods are adjusted on a basis consistent with the pro forma
disclosures required for those periods by the original SFAS 123. The Company is required to adopt
the provisions of SFAS 123(R) effective January 1, 2006, at which time the Company will begin
recognizing an expense for unvested share-based compensation that has been issued or will be issued
after that date. Prior periods may be restated. In March 2005, the SEC issued Staff Accounting
Bulletin No. 107, TOPIC 14: Share-based payment (SAB 107). SAB 107 addresses the interaction
between SFAS 123(R) and certain SEC rules and regulations and provides views regarding the
valuation of share-based payment arrangements for public companies. This bulletin is effective
immediately. The Company has not yet finalized its decision concerning the transition method it
will utilize to adopt SFAS 123(R) and its impact on the financial statements. In March 2005, the FASB Staff issued Interpretation No. 47, Accounting for Conditional Asset
Retirement Obligations (FIN 47). FIN 47 clarifies the term conditional asset retirement
obligation as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations as well
as other issues related to asset retirement obligations. FIN 47 is effective for fiscal years
ending after December 15, 2005. The Company is in the process of determining if this
interpretation will have any impact on its financial statements. NOTE 2  DISPOSALS Pentons management regularly reviews its portfolio to determine what markets and properties
provide the Company with the greatest opportunity for market leadership and long-term growth. As
part of that review process, management determined that our International segment did not fit our
strategic growth objectives as we focus new product innovation on e-media and on leveraging our
strong print brands in the United States and Asia. At March 31, 2005, the assets of our Penton Media Europe (PM Europe) operations were classified
as held for sale under SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets
(SFAS 144). The sale of 90% of the Companys interest in PM Europe was completed in April 2005
for approximately $4.4 million, with no gain or loss on disposal. However, the Company recorded an
impairment charge of $1.8 million for its long-lived assets during the three months ended March 31,
2005, in contemplation of this sale. PM Europe was part of our International segment. The results
of PM Europe are reported as discontinued operations for all periods presented. The Companys 10%
interest that remains, will be accounted for using the cost method, as the Company does not
exercise significant influence. In December 2004, the Company completed the sale of 70% of its interest in Penton Media Germany
(PM Germany), a consolidated subsidiary, to Neue Medien Ulm Holdings GmbH (Neue Medien) for
$0.8 million in cash. PM Germany was 8




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) also part of our International segment. At December 31, 2004, the sale of PM Germany did not
qualify for discontinued operations treatment because PM Germany and PM Europe are considered one
component for SFAS 144 purposes and PM Europe did not meet the held for sale criteria at such date.
However, since PM Europe is being classified as held for sale at March 31, 2005, the results of PM
Germany are reported as part of discontinued operations for all periods presented. At March 31,
2005, the Company retains a 15% interest in PM Germany, which includes a call/put option. The
Company accounts for its investment using the cost method, as the Company does not exercise
significant influence. Revenues and net loss from discontinued operations, net of taxes for all periods present are as
follows: Three Months EndedMarch 31,2005
    
    
    2004Revenues
    
    $
    559
    
    
    $
    1,151Discontinued operations:Loss from operations of discontinued component
    
    $
    (2,800
    )
    
    $
    (1,430
    )Gain (loss) on disposal
    
    
    
    
    
    
    Income tax provision
    
    
    
    
    
    
    (479
    )Loss on discontinued operations, net of taxes
    
    $
    (2,800
    )
    
    $
    (1,909
    )
 At March 31, 2005, assets and liabilities related to PM Europe were classified separately on the
consolidated balance sheets as held for sale. The carrying amounts of the major classes of assets
and liabilities included in these balances are as follows: March 31,2005ASSETSAccounts receivable, net
    
    $
    3,275Prepayments, deposits and other
    
    
    1,093Property and equipment
    
    
    388Goodwill
    
    
    1,884Other assets
    
    
    792Current assets held for sale
    
    $
    7,432LIABILITIESAccounts payable
    
    $
    102Accrued expenses and other
    
    
    342Unearned income
    
    
    4,006Current liabilities held for sale
    
    $
    4,450
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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 3  GOODWILL AND OTHER INTANGIBLES As required under SFAS 142, Goodwill and Other Intangible Assets (SFAS 142), the Company
assesses goodwill for impairment at least annually since its initial adoption of SFAS 142 on
January 1, 2002. As a result of PM Europe being classified as held for sale during the three
months ended March 31, 2005, the Company performed a SFAS 142 analysis for this reporting unit,
which resulted in an impairment charge of approximately $1.4 million. Changes in the carrying amount of goodwill for the three months ended March 31, 2005, by operating
segment, are as follows (in thousands): Balance at
    
    
    
    
    
    
    Reclassed to
    
    
    Balance atDecember 31,
    
    
    Impairment
    
    
    held for
    
    
    March 31,2004
    
    
    charge
    
    
    sale
    
    
    2005Industry
    
    $
    35,777
    
    
    $
    
    
    
    $
    
    
    
    $
    35,777Technology
    
    
    26,346
    
    
    
    
    
    
    
    
    
    
    
    26,346Retail
    
    
    25,824
    
    
    
    
    
    
    
    
    
    
    
    25,824Lifestyle
    
    
    84,924
    
    
    
    
    
    
    
    
    
    
    
    84,924International
    
    
    3,291
    
    
    
    (1,407
    )
    
    
    (1,884
    )
    
    
    Total
    
    $
    176,162
    
    
    $
    (1,407
    )
    
    $
    (1,884
    )
    
    $
    172,871
 The Company also performed an SFAS 144 impairment analysis for PM Europe, which resulted in an
impairment charge of approximately $0.4 million. At March 31, 2005, other intangibles recorded in the consolidated balance sheets are comprised of
the following (in thousands): Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    BookValue
    
    
    Amortization
    
    
    ValueTrade names
    
    $
    4,823
    
    
    $
    (3,987
    )
    
    $
    836Mailing/exhibitor lists
    
    
    9,364
    
    
    
    (5,626
    )
    
    
    3,738Advertiser relationships
    
    
    5,624
    
    
    
    (4,368
    )
    
    
    1,256Subscriber relationships
    
    
    1,929
    
    
    
    (1,442
    )
    
    
    487Other
    
    
    38
    
    
    
    (24
    )
    
    
    14Balance at March 31, 2005
    
    $
    21,778
    
    
    $
    (15,447
    )
    
    $
    6,331
 Other intangibles are being amortized over 3 to 15 years. Total amortization expense for the three
months ended March 31, 2005 and 2004 was $0.4 million and $0.6 million, respectively. Amortization
expense estimated for these intangibles for 2005 through 2009 are as follows (in thousands): Year EndedDecember 31,
    
    Amount2005
    
    $
    1,7142006
    
    $
    1,5362007
    
    $
    9042008
    
    $
    4142009
    
    $
    401
 10




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 4  DEBT Loan and Security Agreement At March 31, 2005, the Company has $39.8 million available under its Loan and Security Agreement.
Pursuant to the terms of the Loan and Security Agreement, the Company can borrow up to the lesser
of (i) $40.0 million; (ii) 2.25x the Companys last twelve months adjusted EBITDA measured through
August 13, 2005, and 2.0x thereafter; (iii) 40% of the Companys last six months of revenues; or
(iv) 25% of the Companys enterprise value, as determined annually by a third party. The Loan and
Security Agreement facility bears interest at LIBOR plus 5.0% subject to a LIBOR minimum of 1.5%.
The Company must comply with a quarterly financial covenant limiting the ratio of maximum bank debt
to the last twelve months adjusted EBITDA to 2.0x after March 31, 2005. The Loan and Security
Agreement permits the Company to sell assets of up to $12.0 million in the aggregate during the
term or $5.0 million in any single asset sale; and complete acquisitions of up to $5.0 million per
year. Included in the Loan and Security Agreement are two stand-by letters of credit of $0.1
million and $0.1 million, respectively, required by two of the Companys facility leases. The
amounts of the letters of credit reduce the availability under the Loan and Security Agreement. As
of March 31, 2005, no amounts were drawn under the stand-by letters of credit. Costs representing
bank fees and other professional fees of $1.9 million are being amortized over the life of the
agreement. At March 31, 2005, there were no amounts outstanding under the Loan and Security
Agreement (see Note 16  Subsequent Events). The Loan and Security Agreement expires in August
2007. The Loan and Security Agreement contains several provisions that could have a significant impact as
to the classification as well as the acceleration of payments for borrowings outstanding under the
agreement, including the following:  (i)
    the obligation of the lender to provide any advances under the agreement is
subject to no material adverse change events;(ii)
    reserves may be established against the borrowing base for sums that the
Company is required to pay, such as taxes and assessments and other types of required
payments, and has failed to pay;(iii)
    in the event of a default under the agreement, the lender has the right to
direct all cash that is deposited in the Companys lock boxes to the lender to pay down
outstanding borrowings;(iv)
    the agreement establishes cross-defaults to the Companys other indebtedness
(such as the 11-7/8% senior secured notes and 10-3/8% senior subordinated notes) such
that a default under the Loan and Security Agreement could cause a default under the
note agreements and vice versa; however, default-triggering thresholds are different in
the loan agreement and the notes; and(v)
    if the Company is in default of any material agreement to which it is a party
and the counter-party to that agreement has the right to terminate such agreement as a
result of the default, this constitutes an event of default under the Loan and Security
Agreement. Under the Loan and Security Agreement, the lenders reserve the right to deem loans in default, and
in those limited circumstances, could accelerate payment of any outstanding loan balances should
the Company undergo a material adverse event. Even though the criteria defining a material adverse
event are subjective, the Company does not believe that the exercise of the lenders right is
probable nor does it foresee any material adverse events in 2005. In addition, the Company
believes that the 11-7/8% senior secured notes and 10-3/8% senior subordinated notes are long-term
in nature. Accordingly, the Company continues to classify its notes as long term. Senior Secured Notes At March 31, 2005, the Company has $157.5 million of 11-7/8% senior secured notes (the Secured
Notes) that are due in October 2007. Interest is payable on the Secured Notes semiannually on
April 1 and October 1. The Secured Notes were offered at a discount of $0.8 million, which is
being amortized using the interest method over the term of the Secured Notes. Amortization of the
discount was immaterial for the three months ended March 31, 2005 and 2004, respectively. 11




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Senior Subordinated Notes At March 31, 2005 the Company has $169.5 million of 10-3/8% senior subordinated notes (the
Subordinated Notes) that are due in June 2011. Interest is payable on the Subordinated Notes
semiannually on June 15 and December 15. The Subordinated Notes were offered at a discount of $4.2
million, which is being amortized using the interest method, over the term of the Subordinated
Notes. Amortization of the discount was approximately $0.2 million and $0.1 million for the three
months ended March 31, 2005 and 2004, respectively. In February 2005, the Company repurchased $5.5 million par value of the Subordinated Notes for a
total of $3.9 million, including $0.1 million of accrued interest, using excess cash on hand. The
notes were purchased in the open market and were trading at 69% of their par value at the time of
purchase. The repurchase resulted in a gain of approximately $1.6 million, which is classified as
gain on extinguishment of debt in the consolidated statement of operations. The repurchase will
reduce the Companys annual interest charges by nearly $0.6 million. Interest Payments Interest payments of $0.1 million were made during the three months ended March 31, 2005. No
interest payments were made in the first quarter 2004. Interest of $14.5 million and $5.4 million
were accrued for at March 31, 2005 and December 31, 2004, respectively, and are included in other
accrued expenses on the consolidated balance sheets. NOTE 5  PREFERRED STOCK On September 13, 2004, the Company filed a Certificate of Designations governing a new series of
preferred stock, $0.01 par value (the Series C Preferred), with the Secretary of State for the
State of Delaware. The Series C Preferred was exchanged on a share-for-share basis with the
Companys Series B Preferred Stock, $0.01 par value (the Series B Preferred). The Certificate of
Designations for the Series C Preferred is identical to the Series B Preferred Stock Certificate of
Designations except:  
    the new series allows for the sharing of the liquidation preference with the new Series
M Preferred stock (discussed below),
    certain technical and correcting amendments have been made to the Certificate of
Designations for the Series C Preferred stock, including fixing the formula used to
calculate the Change of Control Cap (as defined in the Series C Preferred Stock
Certificate of Designations), and
    certain conforming changes were made to the Series C Preferred Stock Certificate of
Designations to account for the fact that the Series C Preferred stock was issued in
exchange for the Series B Preferred stock. At March 31, 2005, an event of non-compliance continues to exist under our Series C Convertible
Preferred because the Companys leverage ratio of 10.5 (defined as debt less cash balances in
excess of $5.0 million plus the liquidation value of the preferred stock and unpaid dividends
divided by adjusted EBITDA) exceeds 7.5. Upon the occurrence of this event of non-compliance, the
5% per annum dividend rate on the Series C Preferred stock has increased by one percentage point as
of April 1, June 30, September 28 and December 27, 2003 and March 26, 2004 to the current maximum
rate of 10% per annum. The dividend rate will adjust back to 5% as of the date on which the
leverage ratio is less than 7.5. The conversion price of the preferred stock at March 31, 2005 is $7.61. The leverage ratio event of non-compliance does not represent an event of default or violation
under any of the Companys outstanding notes or the Loan and Security Agreement. As such, there is
no acceleration of any outstanding indebtedness as a result of this event. In addition, this event
of non-compliance and the resulting consequences have not resulted in any cash outflow from the
Company. Under the conversion terms of the Series C Preferred, each holder has a right to convert dividends
into additional shares of common stock. At March 31, 2005, no dividends have been declared.
However, in light of each holders conversion right and considering the increase in the dividend
rate, the Company has recognized a deemed dividend for the beneficial conversion feature inherent
in the accumulated dividend based on the original commitment date(s). For the three months 12




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ended March 31, 2005, $1.8 million has been reported as an increase in the carrying value of the
Series C Preferred stock and a charge to capital in excess of par value in light of the
stockholders deficit. The Board of Directors of the Company created the Series M Preferred (Series M Preferred) in 2004
as a long-term incentive plan to incentitize management by giving them an equity stake in the
performance of the Company. The Series M Preferred is limited to 150,000 shares, of which 68,625
shares have been issued at March 31, 2005. The Series M Preferred is treated under fixed plan
accounting and is classified in the mezzanine section of the balance sheet because redemption is
outside the control of the Company. An immaterial amount of expense was recognized for the three
months ended March 31, 2005. Among other rights and provisions, the Series M Preferred provides that the holder of each share
will receive a cash distribution upon any liquidation, dissolution, winding up or change of control
of the Company. The amount of such distribution is first a percentage of what the holders of
Series C Preferred and second a percentage of what the holders of the Companys common stock would
receive upon such liquidation, dissolution, winding up or change of control. If the Company had been sold on March 31, 2005, the bondholders would have been entitled to receive
$330.3 million and the preferred stockholders would have been entitled to receive $154.2 million
before the common stockholders would have received any amounts for their common shares. The amount
the preferred stockholders would be entitled to receive could increase significantly in the future
under certain circumstances. Common stockholders are urged to read the terms of the preferred
stock carefully. NOTE 6  COMMON STOCK AND COMMON STOCK AWARD PROGRAMS Executive Loan Program On March 31, 2005 and December 31, 2004, the outstanding loan balance due under the Executive Loan
Program was approximately $5.8 million. The loan balance is fully reserved for and is classified
in the stockholders deficit section of the consolidated balance sheets as notes receivable from
officers. Management Stock Purchase Plan During the first three months of 2005, 69,775 shares of the Companys common stock were issued
under this plan leaving a balance of 847 restricted stock units (RSUs) outstanding at March 31,
2005. Equity and Performance Incentive Plan Stock Options In the first quarter of 2005, 4,350 options were cancelled, leaving 1,428,325 options outstanding
at March 31, 2005. Deferred Shares For the three months ended March 31, 2005, 614,706 shares of the Companys common stock were issued
under this plan leaving no outstanding deferred shares at March 31, 2005. An immaterial amount of
expense was recognized in 2005. For the three months ended March 31, 2004, approximately $0.1
million was recognized as expense related to deferred shares. Performance Units At March 31, 2005, 113,500 performance units remain outstanding related to two executives. Subject
to the attainment of certain performance goals from January 1, 2003 through December 31, 2005, each
grantee can earn a cash award with respect to each performance unit. For the three months ended
March 31, 2005 and 2004, respectively, an immaterial amount and $0.1 million were recognized as
expense related to these performance units. 13




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Treasury Stock In the first three months of 2005, 28,613 shares were returned to the Company by a certain
executive to cover taxes for deferred shares which were issued. Treasury stock is purchased for
constructive retirement and is carried at cost and recorded as a net decrease in capital in excess
of par value. NOTE 7  EMPLOYEE BENEFIT PLANS Effective January 1, 2004, the Companys defined benefit plan was amended to freeze benefit
accruals. The Company is not required to make any contributions to its defined benefit plan in
2005. The following table summarizes the components of our defined benefit pension expense and
supplemental executive retirement plan (SERP) pension expense for the three months ended March
31, 2005 and 2004 (in thousands): Retirement Plan
    
    
    SERP Plan2005
    
    
    2004
    
    
    2005
    
    
    2004Interest cost
    
    $
    632
    
    
    $
    612
    
    
    $
    6
    
    
    $
    13Expected return on plan assets
    
    
    (715
    )
    
    
    (721
    )
    
    
    
    
    
    
    Amortization of actuarial gain
    
    
    
    
    
    
    (26
    )
    
    
    
    
    
    
    Net periodic benefit cost (benefit)
    
    $
    (83
    )
    
    $
    (135
    )
    
    $
    6
    
    
    $
    13
 Concurrent with the freeze, the Company began making contributions to a new retirement account in
the 401(k) Plan, which has been renamed the Penton Media, Inc. Retirement and Savings Plan (RSP).
The RSP now includes the new retirement account and the old 401(k) savings account. Beginning
in 2004, the Company began making monthly contributions to each employees retirement account equal
to between 3% and 6% of the employees annual salary, based on age and years of service. Effective
January 1, 2005, the Company changed the contribution to 3% and began making contributions
quarterly instead of monthly. The Companys contributions become fully vested once the employee
has completed five years of service. The Company expects to make contributions of $1.6 million to
the RSP in 2005. During the first three months of 2005, contributions of $0.4 million have been
made. Effective January 1, 2004, Pentons SERP was amended to freeze benefits. In place of the SERP, the
Company will accrue an amount equal to between 3% and 6% of the participants eligible salary plus
an investment return equal to the Moodys Aa Corporate Bond note. The accrued percentage is based
on each executives age and years of service. 14




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 8  EARNINGS PER SHARE Earnings per share have been computed pursuant to the provisions of SFAS No. 128, Earnings Per
Share (SFAS 128). Computations of basic and diluted earnings per share for the three months
ended March 31, 2005 and 2004 are as follows (in thousands, except per share amounts): Three Months EndedMarch 31,2005
    
    
    2004Net loss applicable to common stockholders
    
    $
    (10
    )
    
    $
    (11,095
    )Number of shares:Weighted average shares outstanding  basic and diluted
    
    
    34,522
    
    
    
    33,536Per share amount:Income (loss) applicable to common stockholders 
basic and diluted
    
    $
    0.00
    
    
    $
    (0.33
    )
 Our preferred stock and RSUs are participating securities, such that in the event a dividend is
declared or paid on the common stock, the Company must simultaneously declare and pay a dividend on
the preferred stock and the RSUs as if the preferred stock and the RSUs had been converted into
common stock. Emerging Issues Task Force (EITF) Issue 03-6, Participating Securities and the
Two-Class Method Under FASB Statement 128, Earnings Per Share (EITF 03-6) requires that
participating securities included in the scope of EITF 03-6 be included in the computation of basic
earnings per share if the effect of inclusion is dilutive. Vested RSUs and vested deferred shares
are always included in the computation of basic earnings per share, as they are considered
equivalent to common stock. For participating securities included in the scope of EITF 03-6, the
use of the two-class method to determine whether the inclusion of such securities is dilutive is
required. Furthermore, non-vested RSUs are included in basic EPS using the two-class method in
accordance with SFAS 128. To the extent not included in basic earnings per share, the redeemable
preferred stock and the non-vested RSUs are considered in the diluted earnings per share
calculation under the if-converted method and treasury stock method, respectively. At March
31, 2005 and 2004, redeemable preferred stock and non-vested RSUs were excluded from the
calculation of basic earnings per share, as the results were anti-dilutive. For the three months ended March 31, 2005, 1,428,325 stock options, 50,000 redeemable preferred
shares and 1,600,000 warrants were excluded from the calculation of diluted earnings per share, as
the result would have been anti-dilutive. For the three months ended March 31, 2004, 2,338,380 stock options, 381,250 performance shares,
445,000 non-vested deferred shares, 83,882 non-vested RSUs, 50,000 redeemable preferred shares and
1,600,000 warrants were excluded from the calculation of diluted earnings per share, as the result
would have been anti-dilutive. 15




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 9  COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) represents net income (loss) plus the results of certain stockholders
equity changes not reflected in the consolidated statements of operations. The after-tax component
of comprehensive income (loss) for the three months ended March 31, 2005 and 2004 are as follows
(in thousands): Three Months EndedMarch 31,2005
    
    
    2004Net income (loss)
    
    $
    1,813
    
    
    $
    (5,902
    )Change in accumulated translation adjustment
    
    
    (92
    )
    
    
    155Total comprehensive income (loss)
    
    $
    1,721
    
    
    $
    (5,747
    )
 NOTE 10  INCOME TAXES For the three months ended March 31, 2005, the Company recorded tax expense of $0.8 million, from
continuing operations. The difference between the Companys effective tax rate and the U.S.
statutory rate was primarily attributable to the Company continuing to maintain a full valuation
allowance against its net operating loss carryforward as well as the amount by which its deferred
tax assets exceeded its deferred tax liabilities, excluding the deferred tax liability related to
indefinite-lived assets and state taxes. For the first quarter of 2004, the Company recorded tax
expense of $0.8 million on a loss from continuing operations before income taxes of $3.2 million. The Company assesses the recoverability of its deferred tax assets in accordance with the
provisions of SFAS No. 109, Accounting for Income Taxes (SFAS 109). At March 31, 2005 and
December 31, 2004, the valuation allowance for net deferred tax assets and net operating loss
carryforwards, excluding the deferred tax liability related to indefinite-lived intangibles totaled
$103.8 million and $106.0 million, respectively. The American Job Creation Act of 2004 was signed into law in October 2004. Due to the Companys
U.S. tax loss position, the law should not have a material impact on our income taxes. NOTE 11  COMMITMENTS AND CONTINGENCIES Legal Proceedings On November 3, 2003, a lawsuit was brought against the Company for an unspecified amount by Alison
& Associates, Inc. under the Telephone Consumer Protection Act (TCPA), which prohibits against
the transmission of unsolicited fax advertisements. The lawsuit is a punative class action that
seeks to represent a class of plaintiffs comprised of all individuals and entities who, during the
period from November 3, 1999 through the present, received one or more facsimiles sent by or on
behalf of the Company advertising the commercial availability of its products or services and who
did not give their prior expressed permission or invitation to receive such faxes. The statutory
penalty for a single violation of the TCPA is $500, although the penalty can increase to $1,500 per
violation if the Company is found to have willfully or knowingly violated these laws. The case is
currently pending in the Richmond County, Georgia, Superior Court, and the Company is complying
with the Courts order for discovery. The Company is uncertain as to the outcome of this case. 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. Tax Matters The calculation of our tax liabilities involves dealing with uncertainties in the application of
complex tax regulations. We recognize liabilities for anticipated tax audit issues based on our
estimate of whether, and the extent to which, additional 16




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we
reverse the liability and recognize a tax benefit during the period in which we determine that the
liability is no longer necessary. We also recognize tax benefits to the extent that it is probable
that our positions will be sustained when challenged by the taxing authorities. As of March 31,
2005 we had not recognized tax benefits of approximately $2.3 million relating to various state tax
positions. Should the ultimate outcome be unfavorable, we would be required to make a cash payment
for all tax reductions claimed as of that date. Current Liquidity The Company believes that its existing sources of liquidity, along with revenues expected to be
generated from operations, will be sufficient to fund operations, anticipated capital expenditures,
working capital, and other financing requirements. However, if the Company continues to incur
operating losses and negative cash flows in the future, Penton may need to further reduce its
operating costs or obtain alternate sources of financing, or both, to remain viable. The Companys
ability to meet cash operating requirements depends upon its future performance, which is subject
to general economic conditions and to financial, competitive, business, and other factors. The
Companys ability to return to sustained profitability at acceptable levels will depend on a number
of risk factors, many of which are largely beyond the Companys control. If the Company is unable
to meet its debt obligations or fund its other liquidity needs, particularly if the revenue
environment deteriorates, Penton may be required to raise additional capital through additional
financing arrangements or the issuance of private or public debt or equity securities. Such
additional financing may not be available at acceptable terms. In addition, the terms of our
convertible preferred stock and warrants issued, including the conversion price, dividend and
liquidation adjustment provisions could result in substantial dilution to common stockholders. The
redemption price premiums and board representation rights could negatively impact our ability to
access the equity markets in the future. Other Commitments In February 2005, the Company replaced its printing agreement with R.R. Donnelley dated December
1999 with a new seven-year agreement. The new agreement expires on December 31, 2011 unless a
minimum revenue commitment to R.R. Donnelley of $42.0 million is not reached at which time the
agreement would extend until the commitment is reached. The Company also agreed to consolidate
certain magazines under the new agreement when the current contracts with other vendors expire. In
exchange, the Company will receive certain credits in 2005 and pricing reductions in 2006 through
2011. In addition, the purchase commitments required in the old agreement of $7.2 million and $6.8
million in 2005 and 2006 have been eliminated. NOTE 12  BUSINESS RESTRUCTURING CHARGES AND SENIOR EXECUTIVE SEVERANCE Senior Executive Severance During the first quarter of 2004, the Company recorded $2.4 million of severance and other related
costs as part of the separation of the Companys former Chief Executive Officer as announced on
March 24, 2004. For the three months ended March 31, 2004, these costs are classified with
selling, general and administrative costs in the consolidated statements of operations. Restructuring Charges To maintain competitiveness and in reaction to the downturn in the business-to-business (b-to-b)
media industry, Penton has implemented restructuring actions over the past several years for the
purpose of reducing excess capacity, eliminating redundancies and reducing costs. The cost reduction initiatives included workforce reductions, the consolidation and closure of over
30 facilities, and the cancellation of various contracts. For facilities that the Company no longer occupies, management makes assumptions, including the
number of years a property will be subleased, square footage, market trends, property location and
the price per square foot based on discussions with realtors and/or parties that have shown
interest in the space. The Company records estimated sublease income accordingly. The Company is
actively attempting to sublease all vacant facilities. 17




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Personnel costs include payments for severance, benefits and outplacement services. The following table shows the reconciliation of the liability balance between periods (in
thousands): Severanceand Other
    
    
    Facility
    
    
    OtherPersonnel Costs
    
    
    Closing Costs
    
    
    Exit Costs
    
    
    TotalAccrual at December 31, 2004
    
    $
    835
    
    
    $
    7,492
    
    
    $
    417
    
    
    $
    8,744Charges
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    156Adjustments
    
    
    (1
    )
    
    
    1
    
    
    
    (90
    )
    
    
    (90
    )Cash payments
    
    
    (437
    )
    
    
    (765
    )
    
    
    (85
    )
    
    
    (1,287
    )Accrual at March 31, 2005
    
    $
    553
    
    
    $
    6,728
    
    
    $
    242
    
    
    $
    7,523
 In the first quarter of 2005, the Company announced its plans to shut down its Wireless Systems
Designprint magazine, which is part of the Technology segment. The shutdowns will result in the
termination of eight employees at a cost of approximately $0.2 million. As of March 31, 2005, the
elimination of six positions had been completed. In March 2005, the Company was able to negotiate
the termination of all of its restructured copier leases, which were classified in other exit
costs, for approximately $0.1 million less than its original obligation. Management expects to make cash restructuring payments during the remainder of 2005 of
approximately $1.7 million, comprised of $0.5 million for employee separation costs, $1.0 million
for facility lease obligations and $0.2 million for other contractual obligations. The balance of
severance costs will be paid through the first quarter of 2007, and the balance of facility costs,
primarily long-term leases, are expected to be paid through the end of the respective lease terms,
which extend through 2013. Amounts due within one year, approximately $2.0 million and $2.7 million at March 31, 2005 and
December 31, 2004, respectively, are classified in other accrued expenses on the consolidated
balance sheets. Amounts due after one year, approximately $5.6 million and $6.0 million at March
31, 2005 and December 31, 2004, respectively, are included in other non-current liabilities on the
consolidated balance sheets. Restructuring charges, including adjustments, for the three months ended March 31, 2005 and 2004
are as follows, by segment: Three Months EndedMarch 31,2005
    
    
    2004Industry
    
    $
    49
    
    
    $
    350Technology
    
    
    (11
    )
    
    
    235Lifestyle
    
    
    
    
    
    
    13Retail
    
    
    
    
    
    
    18Corporate
    
    
    28
    
    
    
    166Total
    
    $
    66
    
    
    $
    782
 Also included in restructuring and other charges on the consolidated statements of operations for
the three months ended March 31, 2004 is approximately $0.1 million in legal settlement costs. NOTE 13  SEGMENTS Penton designates its operating segments based on how the chief operating decision maker reviews
the Companys performance. As the Companys new CEO, Mr. Nussbaum, along with his executive team,
assess and manage the Companys operations differently than the prior management team resulting in
a change in the Companys reportable 18




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) segments effective in the third quarter of 2004. As a result of this change in reportable
segments, all prior periods were recast to conform with the new segment format. The Companys segments include: Industry, Technology, Lifestyle, and Retail. As discussed in Note
2  Disposals, the Company sold PM Germany in December 2004 and classified PM Europe as held for
sale at March 31, 2005. These two operating subsidiaries, which are now classified as discontinued
operations, made up our International segment. The results of our segments will, consistent with
past practice, be regularly reviewed by the Companys chief operating decision maker and the
executive team to determine how resources will be allocated to each segment and to assess the
performance of each segment. Pentons four segments derive their revenues from publications,
trade shows and conferences, and online media products. Content of each of our segment publications, trade shows and conferences, and online media products
is geared to customers in the following market sectors: Industry
    
    TechnologyManufacturing
    
    Business TechnologyDesign/Engineering
    
    AviationMechanical Systems/Construction
    
    Enterprise Information TechnologyGovernment/Compliance
    
    ElectronicsLifestyle
    
    RetailNatural Products
    
    Food/RetailHospitality
 The executive management team evaluates performance of each segment based on its revenues and
adjusted segment EBITDA. As such, in the analysis that follows, the Company uses adjusted segment
EBITDA, which is defined as net income (loss) before interest, taxes, depreciation and
amortization, non-cash compensation, impairment of assets, restructuring charges, executive
separation costs, provision for loan impairment, gain on extinguishment of debt, discontinued
operations, general and administrative costs, and other non-operating items. General and
administrative costs include functions such as finance, accounting, human resources and information
systems, which cannot reasonably be allocated to each segment. Assets are not allocated to
segments and as such have not been presented. Summary information by segment for the three months ended March 31, 2005 and 2004, adjusted for
discontinued operations, is as follows (in thousands): Revenues
    
    
    Adjusted Segment EBITDAMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Industry
    
    $
    17,415
    
    
    $
    17,181
    
    
    $
    4,919
    
    
    $
    4,285Technology
    
    
    13,326
    
    
    
    13,942
    
    
    
    2,231
    
    
    
    1,977Lifestyle
    
    
    17,918
    
    
    
    17,224
    
    
    
    11,795
    
    
    
    10,908Retail
    
    
    4,672
    
    
    
    4,444
    
    
    
    1,245
    
    
    
    839Total
    
    $
    53,331
    
    
    $
    52,791
    
    
    $
    20,190
    
    
    $
    18,009
 19




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Segment revenues, all of which are realized from external customers, equal Pentons consolidated
revenues. The following is a reconciliation of Pentons total adjusted segment EBITDA to
consolidated income (loss) from continuing operations before income taxes (in thousands): Three Months EndedMarch 31,2005
    
    
    2004Total adjusted segment EBITDA
    
    $
    20,190
    
    
    $
    18,009General and administrative costs
    
    
    (4,680
    )
    
    
    (5,679
    )Depreciation and amortization
    
    
    (2,267
    )
    
    
    (2,848
    )Restructuring and other charges
    
    
    (66
    )
    
    
    (860
    )Executive separation costs
    
    
    (3
    )
    
    
    (2,354
    )Non-cash compensation
    
    
    (11
    )
    
    
    (123
    )Interest expense
    
    
    (9,383
    )
    
    
    (9,458
    )Interest income
    
    
    30
    
    
    
    86Gain on extinguishment of debt
    
    
    1,589
    
    
    
    Other, net
    
    
    (8
    )
    
    
    (2
    )Income (loss) from continuing operations
before income taxes
    
    $
    5,391
    
    
    $
    (3,229
    )
 NOTE 14  SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Portions of the following transactions do not provide or use cash and accordingly, are not
reflected in the condensed consolidated statements of cash flows. For the three months ended March 31, 2005, Penton issued 69,775 shares under the Management Stock
Purchase Plan and 614,706 deferred shares. In addition, Penton recorded amortization of deemed
dividend and accretion on preferred stock of $1.8 million in the first quarter of 2005. For the three months ended March 31, 2004, Penton issued 11,217 shares under the Management Stock
Purchase Plan, 400,056 deferred shares and 17,000 shares under the stock option plan. In addition,
in February 2004, 473,700 stock options, 595 RSUs and 445,000 deferred shares were granted.
Furthermore, for the three months ended March 31, 2004, Penton recorded amortization of deemed
dividend and accretion on preferred stock of $5.2 million. NOTE 15  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES The following schedules set forth condensed consolidated balance sheets as of March 31, 2005, and
December 31, 2004, and condensed consolidated statements of operations for the three months ended
March 31, 2005 and 2004, and condensed consolidated statements of cash flows for the three months
ended March 31, 2005 and 2004. In the following schedules, Parent refers to Penton Media, Inc.,
Guarantor Subsidiaries refers to Pentons wholly owned domestic subsidiaries, and Non-guarantor
Subsidiaries refers to Pentons foreign subsidiaries. Eliminations represent the adjustments
necessary to eliminate the investments in Pentons subsidiaries. Effective January 1, 2005, several domestic subsidiaries were merged into Penton Media, Inc. Prior
period condensed consolidating financial information has been adjusted to reflect these changes. 20




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PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 15  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued) PENTON MEDIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2005 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,054
    
    
    $
    185
    
    
    $
    593
    
    
    $
    
    
    
    $
    4,832Restricted cash
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    193Accounts receivable, net
    
    
    23,145
    
    
    
    3,696
    
    
    
    1,025
    
    
    
    
    
    
    
    27,866Inventories
    
    
    825
    
    
    
    295
    
    
    
    5
    
    
    
    
    
    
    
    1,125Deferred tax assets
    
    
    273
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    276Prepayments, deposits and other
    
    
    4,690
    
    
    
    253
    
    
    
    168
    
    
    
    
    
    
    
    5,111Current assets held for sale
    
    
    36
    
    
    
    
    
    
    
    7,396
    
    
    
    
    
    
    
    7,43233,216
    
    
    
    4,432
    
    
    
    9,187
    
    
    
    
    
    
    
    46,835Property and equipment, net
    
    
    11,310
    
    
    
    1,544
    
    
    
    153
    
    
    
    
    
    
    
    13,007Goodwill
    
    
    136,689
    
    
    
    36,182
    
    
    
    
    
    
    
    
    
    
    
    172,871Other intangible assets, net
    
    
    4,574
    
    
    
    1,743
    
    
    
    14
    
    
    
    
    
    
    
    6,331Other non-current assets
    
    
    6,131
    
    
    
    199
    
    
    
    8
    
    
    
    
    
    
    
    6,338Investments in subsidiaries (1)
    
    
    (228,041
    )
    
    
    
    
    
    
    
    
    
    
    228,041
    
    
    
    (69,337
    )
    
    
    39,668
    
    
    
    175
    
    
    
    228,041
    
    
    
    198,547$
    (36,121
    )
    
    $
    44,100
    
    
    $
    9,362
    
    
    $
    228,041
    
    
    $
    245,382Liabilities and stockholders deficitCurrent liabilities:Accounts payable and accrued expenses
    
    $
    27,695
    
    
    $
    1,320
    
    
    $
    320
    
    
    $
    
    
    
    $
    29,335Accrued compensation and benefits
    
    
    3,246
    
    
    
    426
    
    
    
    23
    
    
    
    
    
    
    
    3,695Unearned income
    
    
    8,833
    
    
    
    2,839
    
    
    
    1,992
    
    
    
    
    
    
    
    13,664Current liabilities held for sale
    
    
    
    
    
    
    
    
    
    
    4,450
    
    
    
    
    
    
    
    4,45039,774
    
    
    
    4,585
    
    
    
    6,785
    
    
    
    
    
    
    
    51,144Long-term liabilities and deferred credits:Senior secured notes, net of discount
    
    
    80,112
    
    
    
    76,970
    
    
    
    
    
    
    
    
    
    
    
    157,082Senior subordinated notes, net of discount
    
    
    85,006
    
    
    
    81,672
    
    
    
    
    
    
    
    
    
    
    
    166,678Net deferred pension credits
    
    
    10,422
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,422Deferred tax liability
    
    
    19,642
    
    
    
    958
    
    
    
    
    
    
    
    
    
    
    
    20,600Intercompany advances
    
    
    (108,543
    )
    
    
    68,219
    
    
    
    40,324
    
    
    
    
    
    
    
    Other non-current liabilities
    
    
    4,697
    
    
    
    1,924
    
    
    
    66
    
    
    
    
    
    
    
    6,68791,336
    
    
    
    229,743
    
    
    
    40,390
    
    
    
    
    
    
    
    361,469Commitments and contingenciesMandatorily redeemable convertible
preferred stock
    
    
    68,985
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,985Series M preferred stock
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Stockholders deficit:Common stock and capital in excess
of par value
    
    
    213,655
    
    
    
    203,752
    
    
    
    16,566
    
    
    
    (220,318
    )
    
    
    213,655Retained deficit
    
    
    (448,254
    )
    
    
    (393,938
    )
    
    
    (52,744
    )
    
    
    446,682
    
    
    
    (448,254
    )Notes receivable from officers, less
reserve of $5,848
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated other comprehensive
income (loss)
    
    
    (1,625
    )
    
    
    (42
    )
    
    
    (1,635
    )
    
    
    1,677
    
    
    
    (1,625
    )(236,224
    )
    
    
    (190,228
    )
    
    
    (37,813
    )
    
    
    228,041
    
    
    
    (236,224
    )$
    (36,121
    )
    
    $
    44,100
    
    
    $
    9,362
    
    
    $
    228,041
    
    
    $
    245,382
 21




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 15  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued) PENTON MEDIA, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2004 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    5,991
    
    
    $
    73
    
    
    $
    1,597
    
    
    $
    
    
    
    $
    7,661Restricted cash
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125Accounts receivable, net
    
    
    22,033
    
    
    
    4,248
    
    
    
    4,290
    
    
    
    
    
    
    
    30,571Inventories
    
    
    560
    
    
    
    291
    
    
    
    5
    
    
    
    
    
    
    
    856Deferred tax asset
    
    
    273
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    276Prepayments, deposits and other
    
    
    2,896
    
    
    
    39
    
    
    
    737
    
    
    
    
    
    
    
    3,67231,878
    
    
    
    4,654
    
    
    
    6,629
    
    
    
    
    
    
    
    43,161Property and equipment, net
    
    
    12,304
    
    
    
    1,693
    
    
    
    796
    
    
    
    
    
    
    
    14,793Goodwill
    
    
    136,689
    
    
    
    36,182
    
    
    
    3,291
    
    
    
    
    
    
    
    176,162Other
intangible assets, net
    
    
    4,688
    
    
    
    1,950
    
    
    
    208
    
    
    
    
    
    
    
    6,846Other non-current assets
    
    
    6,168
    
    
    
    208
    
    
    
    36
    
    
    
    
    
    
    
    6,412Investment in subsidiaries
    
    
    (221,148
    )
    
    
    
    
    
    
    
    
    
    
    221,148
    
    
    
    (61,299
    )
    
    
    40,033
    
    
    
    4,331
    
    
    
    221,148
    
    
    
    204,213$
    (29,421
    )
    
    $
    44,687
    
    
    $
    10,960
    
    
    $
    221,148
    
    
    $
    247,374Liabilities and stockholders equity (deficit)Current liabilities:Accounts payable and accrued expenses
    
    $
    18,121
    
    
    $
    1,724
    
    
    $
    900
    
    
    $
    
    
    
    $
    20,745Accrued compensation and benefits
    
    
    4,961
    
    
    
    902
    
    
    
    17
    
    
    
    
    
    
    
    5,880Unearned income
    
    
    16,337
    
    
    
    2,760
    
    
    
    4,177
    
    
    
    
    
    
    
    23,27439,419
    
    
    
    5,386
    
    
    
    5,094
    
    
    
    
    
    
    
    49,899Long-term liabilities and deferred credits:Senior secured notes, net of discount
    
    
    80,094
    
    
    
    76,953
    
    
    
    
    
    
    
    
    
    
    
    157,047Senior subordinated notes, net of discount
    
    
    87,729
    
    
    
    84,288
    
    
    
    
    
    
    
    
    
    
    
    172,017Net deferred pension credits
    
    
    10,568
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,568Deferred tax liability
    
    
    18,947
    
    
    
    956
    
    
    
    
    
    
    
    
    
    
    
    19,903Intercompany advances
    
    
    (102,089
    )
    
    
    61,420
    
    
    
    40,669
    
    
    
    
    
    
    
    Other non-current liabilities
    
    
    4,981
    
    
    
    2,029
    
    
    
    
    
    
    
    
    
    
    
    7,010100,230
    
    
    
    225,646
    
    
    
    40,669
    
    
    
    
    
    
    
    366,545Commitments and contingenciesMandatorily redeemable convertible
preferred stock
    
    
    67,162
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,162Series M preferred stock
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Stockholders equity (deficit):Common stock and capital in excess
of par value
    
    
    215,364
    
    
    
    203,660
    
    
    
    16,566
    
    
    
    (220,226
    )
    
    
    215,364Retained earnings (deficit)
    
    
    (450,067
    )
    
    
    (389,963
    )
    
    
    (49,826
    )
    
    
    439,789
    
    
    
    (450,067
    )Notes receivable from officers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated other comprehensive loss
    
    
    (1,533
    )
    
    
    (42
    )
    
    
    (1,543
    )
    
    
    1,585
    
    
    
    (1,533
    )(236,236
    )
    
    
    (186,345
    )
    
    
    (34,803
    )
    
    
    221,148
    
    
    
    (236,236
    )$
    (29,421
    )
    
    $
    44,687
    
    
    $
    10,960
    
    
    $
    221,148
    
    
    $
    247,374
 22




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 15  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued) PENTON MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2005 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Revenues
    
    $
    47,029
    
    
    $
    6,103
    
    
    $
    199
    
    
    $
    
    
    
    $
    53,331Operating expenses:Editorial, production and circulation
    
    
    16,991
    
    
    
    3,345
    
    
    
    34
    
    
    
    
    
    
    
    20,370Selling, general and administrative
    
    
    15,445
    
    
    
    1,815
    
    
    
    205
    
    
    
    
    
    
    
    17,465Restructuring and other charges
    
    
    77
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    66Depreciation and amortization
    
    
    1,890
    
    
    
    357
    
    
    
    20
    
    
    
    
    
    
    
    2,26734,403
    
    
    
    5,506
    
    
    
    259
    
    
    
    
    
    
    
    40,168Operating income (loss)
    
    
    12,626
    
    
    
    597
    
    
    
    (60
    )
    
    
    
    
    
    
    13,163Other income (expense):Interest expense
    
    
    (4,755
    )
    
    
    (4,570
    )
    
    
    (58
    )
    
    
    
    
    
    
    (9,383
    )Interest income
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30Equity in losses of subsidiaries
    
    
    (6,893
    )
    
    
    
    
    
    
    
    
    
    
    6,893
    
    
    
    Gain on extinguishment of debt
    
    
    1,589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,589Other, net
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )(10,037
    )
    
    
    (4,570
    )
    
    
    (58
    )
    
    
    6,893
    
    
    
    (7,772
    )Income
(loss) from continuing operations before
income taxes
    
    
    2,589
    
    
    
    (3,973
    )
    
    
    (118
    )
    
    
    6,893
    
    
    
    5,391Provision for income taxes
    
    
    776
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    778Income
(loss) from continuing operations
    
    
    1,813
    
    
    
    (3,975
    )
    
    
    (118
    )
    
    
    6,893
    
    
    
    4,613Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    (2,800
    )
    
    
    
    
    
    
    (2,800
    )Net
income (loss)
    
    $
    1,813
    
    
    $
    (3,975
    )
    
    $
    (2,918
    )
    
    $
    6,893
    
    
    $
    1,813
 23




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 15  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued) PENTON MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2004 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Revenues
    
    $
    45,042
    
    
    $
    7,360
    
    
    $
    389
    
    
    $
    
    
    
    $
    52,791Operating expenses:Editorial, production and circulation
    
    
    16,442
    
    
    
    3,760
    
    
    
    133
    
    
    
    
    
    
    
    20,335Selling, general and administrative
    
    
    19,574
    
    
    
    2,506
    
    
    
    523
    
    
    
    
    
    
    
    22,603Restructuring and other charges
    
    
    631
    
    
    
    219
    
    
    
    10
    
    
    
    
    
    
    
    860Depreciation and amortization
    
    
    2,214
    
    
    
    599
    
    
    
    35
    
    
    
    
    
    
    
    2,84838,861
    
    
    
    7,084
    
    
    
    701
    
    
    
    
    
    
    
    46,646Operating income (loss)
    
    
    6,181
    
    
    
    276
    
    
    
    (312
    )
    
    
    
    
    
    
    6,145Other income (expense):Interest expense
    
    
    (4,859
    )
    
    
    (4,510
    )
    
    
    (89
    )
    
    
    
    
    
    
    (9,458
    )Interest income
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86Equity in losses of subsidiaries
    
    
    (6,548
    )
    
    
    
    
    
    
    
    
    
    
    6,548
    
    
    
    Other, net
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )(11,323
    )
    
    
    (4,510
    )
    
    
    (89
    )
    
    
    6,548
    
    
    
    (9,374
    )Loss from continuing operations before
income taxes
    
    
    (5,142
    )
    
    
    (4,234
    )
    
    
    (401
    )
    
    
    6,548
    
    
    
    (3,229
    )Provision for income taxes
    
    
    760
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    764Loss from continuing operations
    
    
    (5,902
    )
    
    
    (4,238
    )
    
    
    (401
    )
    
    
    6,548
    
    
    
    (3,993
    )Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    (1,909
    )
    
    
    
    
    
    
    (1,909
    )Net loss
    
    $
    (5,902
    )
    
    $
    (4,238
    )
    
    $
    (2,310
    )
    
    $
    6,548
    
    
    $
    (5,902
    )
 24




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 15  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued) PENTON MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
For the Three Months Ended March 31, 2005 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Net cash provided by (used for)
operating activities
    
    $
    2,557
    
    
    $
    139
    
    
    $
    (1,118
    )
    
    $
    
    
    
    $
    1,578Cash flows from investing activities:Capital expenditures
    
    
    (149
    )
    
    
    (27
    )
    
    
    (13
    )
    
    
    
    
    
    
    (189
    )Net cash used for investing activities
    
    
    (149
    )
    
    
    (27
    )
    
    
    (13
    )
    
    
    
    
    
    
    (189
    )Cash flows from financing activities:Repurchase of 10-3/8% senior subordinated notes
    
    
    (3,795
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,795
    )Increase in restricted cash
    
    
    (68
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68
    )Increase
(decrease) in cash overdraft balance
    
    
    (475
    )
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    (348
    )Net cash provided by (used for) financing activities
    
    
    (4,338
    )
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    (4,211
    )Effect of exchange rate changes on cash
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )Net increase (decrease) in cash and cash equivalents
    
    
    (1,937
    )
    
    
    112
    
    
    
    (1,004
    )
    
    
    
    
    
    
    (2,829
    )Cash and cash equivalents at beginning of year
    
    
    5,991
    
    
    
    73
    
    
    
    1,597
    
    
    
    
    
    
    
    7,661Cash and cash equivalents at end of period
    
    $
    4,054
    
    
    $
    185
    
    
    $
    593
    
    
    $
    
    
    
    $
    4,832
 25




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 15  GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (Continued) PENTON MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
For the Three Months Ended March 31, 2004 Guarantor
    
    
    Non-guarantor
    
    
    
    
    
    
    PentonParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Cash flows provided by (used for)
operating activities
    
    $
    2,513
    
    
    $
    (76
    )
    
    $
    (397
    )
    
    $
    
    
    
    $
    2,040Cash flows from investing activities:Capital expenditures
    
    
    (838
    )
    
    
    (11
    )
    
    
    (26
    )
    
    
    
    
    
    
    (875
    )Decrease in notes receivable
    
    
    
    
    
    
    
    
    
    
    98
    
    
    
    
    
    
    
    98Net cash provided by (used for)
investing activities
    
    
    (838
    )
    
    
    (11
    )
    
    
    72
    
    
    
    
    
    
    
    (777
    )Cash flows from financing activities:Increase in restricted cash
    
    
    (193
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (193
    )Decrease in cash overdraft balance
    
    
    (220
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (220
    )Net cash used for financing activities
    
    
    (413
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (413
    )Effect of exchange rate changes on cash
    
    
    (26
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26
    )Net increase
(decrease) in cash and cash equivalents
    
    
    1,236
    
    
    
    (87
    )
    
    
    (325
    )
    
    
    
    
    
    
    824Cash and
cash equivalents at beginning of year
    
    
    27,125
    
    
    
    147
    
    
    
    2,354
    
    
    
    
    
    
    
    29,626Cash and
cash equivalents at end of period
    
    $
    28,361
    
    
    $
    60
    
    
    $
    2,029
    
    
    $
    
    
    
    $
    30,450
 26




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##### Table of Contents



PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 16  SUBSEQUENT EVENTS On April 1, 2005, the Company borrowed $6.0 million under the Companys Loan and Security
Agreement. The proceeds were used to pay the interest due on April 1 under the Companys 11-7/8%
senior secured notes. As of the date of this filing, the Company has repaid all outstanding
amounts under the Loan and Security Agreement with proceeds from the sale of PM Europe and cash
provided from operations. At March 31, 2005, the assets of our PM Europe operations were classified
as held for sale. The sale of 90% of the Companys interest in PM Europe was completed in April
2005 for approximately $4.4 million, with no gain or loss on disposal. However, the Company
recorded impairment charges of $1.8 million during the three months ended March 31, 2005, in
contemplation of this sale. The results of PM Europe, including these impairment charges, are
included in discontinued operations for all periods presented. PM Europe was part of the Companys
International segment. 27




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##### Table of Contents



ITEM 2.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements
and the notes thereto. 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 results. Penton considers portions of this information to be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, both as amended, with respect to expectations for future periods.
Although Penton believes that the expectations reflected in such forward-looking statements are
based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.
For this purpose, any statements contained herein that are not statements of historical fact may
be deemed to be forward-looking statements. Without limiting the foregoing, the words believes,
anticipates, plans, expects, seeks, estimates and similar expressions are intended to
identify forward-looking statements. A number of important factors could cause Pentons results to
differ materially from those indicated by such forward-looking statements, including, among other
factors:  
    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. Except as expressly required by the federal securities laws, Penton does not undertake any
obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events, changed circumstances, or any other reason. OVERVIEW Penton Media, Inc. is a diversified business-to-business (b-to-b) 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 as part of their sales and marketing efforts.
In June 2004, the Company appointed David B. Nussbaum as Chief Executive Officer (CEO). Mr.
Nussbaum is now Pentons chief operating decision maker. After reviewing the Companys operations,
Mr. Nussbaum and the executive team implemented a change in the Companys reportable segments
effective in the third quarter of 2004 to conform with the way the Companys businesses are now
assessed and managed. The Company is structured along segment and industry lines rather than by
product lines. This enables us to promote our related group of products, including publications,
trade shows and conferences, and online media products, to our customers. As a result of this
change in reportable segments, all prior periods were recast to conform with the new segment
format. Managements key objective is to restore value for our stockholders. We are focused on conserving
cash and maintaining liquidity. We reduced long-term debt from $332.5 million at December 31, 2004
to $327.0 million at March 31, 2005 through the repurchase of $5.5 million face value of our
Subordinated Notes in February 2005. The purchase will result in a reduction of the Companys
annual interest payments by $0.6 million. We continue to work with our Board of Directors on
strategies for strengthening the Companys balance sheet. 28




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##### Table of Contents



RECENT DEVELOPMENTS Sale of Properties Pentons management regularly reviews its portfolio to determine what markets and properties
provide us with the greatest opportunity for market leadership and long-term growth. As part of
that review process, management determined that our International segment did not fit our strategic
growth objectives as we focus new product innovation on e-media and on leveraging our strong print
brands in the United States and Asia. At March 31, 2005, the assets of our Penton Media Europe (PM Europe) operations were classified
as held for sale. The sale of 90% of the Companys interest in PM Europe was completed in April
2005 for approximately $4.4 million, with no gain or loss on disposal. However, the Company
recorded impairment charges of $1.8 million for its long-lived assets during the three months ended
March 31, 2005, in contemplation of this sale. PM Europe was part of the Companys International
segment. The Companys 10% interest which remains, will be accounted for using the cost method, as
the Company does not exercise significant influence. In December 2004, the Company completed the sale of 70% of its interest in PM Germany, a
consolidated subsidiary, to Neue Medien Ulm Holdings GmbH (Neue Medien) for $0.8 million in cash.
PM Germany was part of our International segment. At March 31, 2005, the Company retains a 15%
interest in PM Germany, which includes a call/put option. The Company accounts for its investment
using the cost method, as the Company does not exercise significant influence. Restatement of Financial Statements On March 24, 2005, the Companys management concluded that the Companys previously issued
consolidated financial statements should be restated to increase income tax expense to correct the
computation of our valuation allowance for deferred tax assets. Management reached this conclusion
following a comprehensive review of the Companys deferred tax assets and deferred tax liabilities.
The Company evaluated the materiality of the correction on its consolidated financial statements
using the guidelines of Staff Accounting Bulletin No. 99, Materiality, (SAB 99) and concluded
that the cumulative effects of the corrections were material to its annual consolidated financial
statements for 2004, 2003 and 2002 and the related quarterly consolidated financial statements for
such periods. These financial statements reflect adjustments to the Companys previously reported financial
information on Form 10-Q for the three months ended March 31, 2004. The Company has restated and
filed an amendment to its quarterly report on Form 10-Q for the period March 31, 2004 prior to the
filing of its March 31, 2005 Form 10-Q and will restate the financial statements included in its
quarterly reports on Form 10-Q for the periods ended June 30, 2004 and September 30, 2004 as
expeditiously as possible. Senior Subordinated Notes Repurchase In February 2005, the Company repurchased $5.5 million par value of its 10-3/8% senior subordinated
notes for a total of $3.9 million, including $0.1 million of accrued interest, using excess cash on
hand. These notes were purchased in the open market and were trading at 69% of their par value at
the time of purchase. The repurchase resulted in a gain of approximately $1.6 million. Loan and Security Agreement On April 1, 2005, the Company borrowed $6.0 million under the Companys Loan and Security
Agreement. The proceeds were used to pay the interest due on April 1 under the Companys 11-7/8%
senior secured notes. As of the date of this filing, the Company has repaid all outstanding
amounts under the Loan and Security Agreement with proceeds from the sale of PM Europe and cash
provided from operations. 29




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##### Table of Contents



Board of Director Changes On April 20, 2005, the Companys Board of Directors increased the number of directors from seven to
eight and appointed Harlan A. Levy as a new Director. Mr. Levy will stand for election for a
two-year term expiring in 2007 at the Companys annual meeting of stockholders to be held on July
19, 2005. RESULTS OF OPERATIONS Revenues Our magazines generate revenues primarily from the sale of advertising space. Our magazines are
primarily controlled circulation and are distributed free of charge to qualified subscribers in our
target industries. Subscribers to controlled-circulation publications qualify to receive our trade
magazines by verifying their responsibility for specific job functions, including purchasing
authority. We survey our magazine subscribers annually to verify their continuing qualification.
Trade show exhibitors pay a fixed price per square foot of booth space. In addition, we receive
revenues from attendee fees at trade shows and from exhibitor sponsorships of promotional media.
Our conferences are supported by either attendee registration fees or marketer sponsorship fees, or
a combination of each. Online media revenues are generated from a variety of sources, such as:
advertising on Web sites, including search-engine advertising; sponsorship of Web conferences;
advertising in and sponsorships of electronic newsletters; sponsorship of content on Web sites and
in electronic books; and listings in online databases and directories. The following table summarizes our revenues for the three months ended March 31, 2005 and 2004: Three Months EndedMarch 31,2005
    
    
    2004
    
    
    Change(Dollars in millions)Revenues
    
    $
    53.3
    
    
    $
    52.8
    
    
    
    1.0
    %
 A summary of these revenues by product is as follows: Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % Change(In thousands)Publishing
    
    $
    32,688
    
    
    $
    33,510
    
    
    $
    (822
    )
    
    
    (2.5
    )%Trade shows & conferences
    
    
    16,530
    
    
    
    15,849
    
    
    
    681
    
    
    
    4.3
    %Online media
    
    
    4,113
    
    
    
    3,432
    
    
    
    681
    
    
    
    19.8
    %Total revenues
    
    $
    53,331
    
    
    $
    52,791
    
    
    $
    540
    
    
    
    1.0
    %
 Total revenues increased $0.5 million, or 1.0%, from $52.8 million for the three months ended March
31, 2004 to $53.3 million for the same period in 2005. The increase was due to an increase in
online media revenues of $0.7 million, or 19.8%, from $3.4 million for the three months ended March
31, 2004 to $4.1 million for the same 2005 period and an increase in trade show and conferences
revenue of $0.7 million, or 4.3%, from $15.8 million for the three months ended March 31, 2004 to
$16.5 million for the same 2005 period. This increase was offset by a decrease in publishing
revenues of $0.8 million, or 2.5%, from $33.5 million for the three months ended March 31, 2004 to
$32.7 million for the same 2005 period. The $0.8 million, or 2.5%, decrease in publishing revenues was primarily due to lower advertising
revenues, lower subscription revenues and lower list rental revenues. Approximately $0.2 million
of the decrease was a result of our shutdown of ePromagazine in May 2004. The $0.7 million, or 4.3%, increase in trade show and conference revenues between the first quarter
of 2004 and the first quarter of 2005 is due to a year-over-year revenue increase of $0.8 million
from our Natural Products Expo West show held in March 2005 and revenues of $1.6 million due to the
shift in timing of three conferences from the second quarter of 2004 to the first 30




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##### Table of Contents



quarter of 2005. These increases were partially offset by the loss of $0.6 million in revenues in
the first quarter of 2004 from our Wireless Systems Design conference, which was shutdown after the
2004 event. In addition, the first quarter of 2004 included revenues of nearly $1.2 million
related to a road show event. The Natural Products Expo West show held in Anaheim, California in March 2005 posted growth over
the 2004 event in total revenues, number of exhibitors, number of booths sold, and number of
attendees, with more than 38,000 attendees in 2005. The $0.7 million, or 19.8%, increase in online media revenues was primarily due to increases of
nearly $0.2 million in Web site related sponsorship revenues, an increase of $0.2 million in Web
conference revenues, and an increase of $0.1 million in electronic newsletter revenues. One of our
fastest growing online products is Web conferences, which saw revenues increase 33% between the
first quarter of 2004 and the first quarter of 2005. Our Web site related growth ties closely to
improvement of Web site traffic. Revenue trends within each segment are further detailed below in the segment discussion section. Editorial, Production and Circulation Three Months EndedMarch 31,2005
    
    
    2004
    
    
    Change(Dollars in millions)Editorial, production and circulation
    
    $
    20.4
    
    
    $
    20.3
    
    
    
    0.2
    %Percent of revenues
    
    
    38.2
    %
    
    
    38.5
    %
 Our editorial, production and circulation expenses include personnel costs, purchased editorial
costs, exhibit hall costs, online media costs, postage charges, circulation qualification costs and
paper costs. The increase in editorial, production and circulation expenses for the first quarter
of 2005 compared with the first quarter of 2004 primarily reflect the shift in costs of
approximately $0.7 million for three conferences which were held in the second quarter of 2004 and
moved to the first quarter of 2005. These increases were partially offset by lower printing costs
as the Company signed a new seven-year contract with R.R. Donnelley. The Company agreed to
consolidate certain magazines under the new agreement when the current contracts with other vendors
expire. In exchange, the Company will receive certain credits in 2005 and pricing reductions in
2006 through 2011. The increase was also partially offset by lower headcount and personnel-related
costs as a result of restructuring activities completed in 2004. Selling, General and Administrative Three Months EndedMarch 31,2005
    
    
    2004
    
    
    Change(Dollars in millions)Selling, general and administrative
    
    $
    17.5
    
    
    $
    22.6
    
    
    
    (22.7
    )%Percent of revenues
    
    
    32.7
    %
    
    
    42.8
    %
 Our selling, general and administrative (SG&A) expenses include personnel costs, independent
sales representative commissions, product marketing, and facility costs. Our SG&A expenses also
include costs of corporate functions, including accounting, finance, legal, human resources,
information systems, and communications. The decrease in SG&A expenses for the first quarter of
2005 compared with the first quarter of 2004 was due primarily to a $2.4 million charge recorded in
the first quarter 2004 related to executive separation costs for Mr. Kemp. Mr. Kemp left the
Company on June 30, 2004. The decrease was also due to lower staff costs, lower facility costs and
lower corporate overhead costs as a result of restructuring efforts in 2004. 31




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##### Table of Contents



Restructuring and Other Charges Three Months EndedMarch 31,2005
    
    
    2004
    
    
    Change(Dollars in millions)Restructuring and other charges
    
    $
    0.1
    
    
    $
    0.9
    
    
    
    n/mPercent of revenues
    
    
    0.1
    %
    
    
    1.6
    %
 To maintain competitiveness and in reaction to the downturn in the b-to-b industry, Penton has
implemented restructuring actions over the past several years for the purpose of reducing excess
capacity, eliminating redundancies and reducing costs. 2005 Restructuring Plan In the first quarter of 2005, the Company announced its plans to shutdown its Wireless Systems
Designmagazine, which is part of the Technology segment. The shut down resulted in the
termination of eight employees at a cost of approximately $0.2 million. As of March 31, 2005, the
elimination of six positions had been completed. In March 2005, the Company was able to negotiate
the termination of all of its restructured copier leases, which were classified in other exit
costs, for approximately $0.1 million less than its original obligation. Summary of Restructuring Activities The following table summarizes all of the Companys restructuring activity through March 31, 2005
(in thousands): Severanceand Other
    
    
    Facility
    
    
    OtherPersonnel Costs
    
    
    Closing Costs
    
    
    Exit Costs
    
    
    TotalCharges
    
    $
    6,774
    
    
    $
    8,669
    
    
    $
    4,364
    
    
    $
    19,807Adjustments
    
    
    (23
    )
    
    
    
    
    
    
    (994
    )
    
    
    (1,017
    )Cash payments
    
    
    (4,468
    )
    
    
    (267
    )
    
    
    (2,423
    )
    
    
    (7,158
    )Accrual at December 31, 2001
    
    
    2,283
    
    
    
    8,402
    
    
    
    947
    
    
    
    11,632Charges
    
    
    10,344
    
    
    
    3,421
    
    
    
    1,648
    
    
    
    15,413Adjustments
    
    
    65
    
    
    
    1,246
    
    
    
    (363
    )
    
    
    948Cash payments
    
    
    (7,569
    )
    
    
    (2,283
    )
    
    
    (1,217
    )
    
    
    (11,069
    )Accrual at December 31, 2002
    
    
    5,123
    
    
    
    10,786
    
    
    
    1,015
    
    
    
    16,924Charges
    
    
    2,736
    
    
    
    1,505
    
    
    
    661
    
    
    
    4,902Adjustments
    
    
    (18
    )
    
    
    (17
    )
    
    
    (10
    )
    
    
    (45
    )Cash payments
    
    
    (6,044
    )
    
    
    (3,273
    )
    
    
    (965
    )
    
    
    (10,282
    )Accrual at December 31, 2003
    
    
    1,797
    
    
    
    9,001
    
    
    
    701
    
    
    
    11,499Charges
    
    
    4,752
    
    
    
    51
    
    
    
    364
    
    
    
    5,167Adjustments
    
    
    116
    
    
    
    657
    
    
    
    255
    
    
    
    1,028Cash payments
    
    
    (5,830
    )
    
    
    (2,217
    )
    
    
    (903
    )
    
    
    (8,950
    )Accrual at December 31, 2004
    
    
    835
    
    
    
    7,492
    
    
    
    417
    
    
    
    8,744Charges
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    156Adjustments
    
    
    (1
    )
    
    
    1
    
    
    
    (90
    )
    
    
    (90
    )Cash payments
    
    
    (437
    )
    
    
    (765
    )
    
    
    (85
    )
    
    
    (1,287
    )Accrual at March 31, 2005
    
    $
    553
    
    
    $
    6,728
    
    
    $
    242
    
    
    $
    7,523
 We expect to make cash payments through the remainder of 2005 of approximately $1.7 million,
comprised of $0.5 million for employee separation costs, $1.0 million for lease obligations and
$0.2 million for other contractual obligations. The balance of severance costs will be paid
through 2007 and the balance of facility costs, primarily long-term leases, is expected to be paid
through the end of the respective lease terms, which extend through 2013. Amounts due within one year of approximately $2.0 million and $2.7 million at March 31, 2005 and
December 31, 2004, respectively, are classified in other accrued expenses on the consolidated
balance sheets. Amounts due after one year of 32




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##### Table of Contents



approximately $5.5 million and $6.0 million at March 31, 2005 and December 31, 2004, respectively,
are included in other non-current liabilities on the consolidated balance sheets. The Company expects to realize sufficient savings from its 2005 restructuring efforts to recover
the employee termination costs by October 2005. Other Income (Expense) Other income (expense) consists of the following: Three Months EndedMarch 31,2005
    
    
    2004
    
    
    Change(Dollars in millions)Interest expense
    
    $
    (9.4
    )
    
    $
    (9.5
    )
    
    
    (0.8
    )%Interest income
    
    $
    
    
    
    $
    0.1
    
    
    
    n/mGain on extinguishment of debt
    
    $
    1.6
    
    
    $
    
    
    
    
    n/mOther, net
    
    $
    
    
    
    $
    
    
    
    
    n/m
 The decrease in interest expense for the three months ended March 31, 2005 compared with the same
period in 2004 was due to the repurchase of $5.5 million par value of our 10-3/8% senior
subordinated notes in February 2005. The repurchase is expected to reduce interest costs by $0.6
million annually. The Company recognized a gain of approximately $1.6 million from the repurchase of our senior
subordinated notes, as discussed above. The Company repurchased $5.5 million in notes for
approximately $3.8 million, as the notes were trading at 69% of their par value at the time of
purchase. Effective Tax Rates The effective tax rates for the three months ended March 31, 2005 and 2004 were a provision of
14.4% and 23.7%, respectively. For the three months ended March 31, 2005, the Company recorded tax
expense of $0.8 million, from continuing operations. The difference between the Companys
effective tax rate and the U.S. statutory rate was primarily attributable to the Company continuing
to maintain a full valuation allowance against its net operating loss carryforward as well as the
amount by which its deferred tax assets exceeded its deferred tax liabilities, excluding the
deferred tax liability related to indefinite-lived assets and state taxes. For the first quarter
of 2004, the Company recorded tax expense of $0.8 million on a loss from continuing operations
before income taxes of $3.2 million. The calculation of our tax liabilities involves dealing with uncertainties in the application of
complex tax regulations. We recognize liabilities for anticipated tax audit issues based on our
estimate of whether, and the extent to which, additional taxes will be due. If we ultimately
determine that payment of these amounts is unnecessary, we reverse the liability and recognize a
tax benefit during the period in which we determine that the liability is no longer necessary. We
also recognize tax benefits to the extent that it is probable that our positions will be sustained
when challenged by the taxing authorities. As of March 31, 2005 we had not recognized tax benefits
of approximately $2.3 million relating to various state tax positions. Should the ultimate outcome
be unfavorable, we would be required to make a cash payment for all tax reductions claimed as of
that date. Discontinued Operations The loss from discontinued operations of $2.8 million and $1.9 million for the three months ended
March 31, 2005 and 2004, respectively, include the results of PM Europe, which was classified as
held for sale at March 31, 2005, and PM Germany, which was sold in December 2004. The sale of PM
Europe was completed in April 2005 for approximately $4.4 million, with no gain or loss on
disposal. However, the Company recorded impairment charges of $1.8 million for long-lived assets
during the three months ended March 31, 2005, in contemplation of this sale. 33




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##### Table of Contents



Discontinued operations include revenues from PM Europe of $0.6 million and $1.2 million for the
three months ended March 31, 2005 and 2004, respectively, and revenues from PM Germany of $0.6
million for the three months ended March 31, 2004. Income taxes were not material for the three
months ended March 31, 2005 and were approximately $0.5 million for the three months ended March
31, 2004. The Company had a full valuation allowance established for both entities in 2005. SEGMENTS Mr. Nussbaum is Pentons chief operating decision maker. Mr. Nussbaum and the executive team
assess and manage the Companys operations differently than the prior management team resulting in
a change in the Companys reportable segments effective in the third quarter of 2004. As a result
of this change in reportable segments, all prior periods have been recast to conform with the new
segment format. The Companys segments include: Industry, Technology, Lifestyle, and Retail. As discussed in Note
2  Disposals, the Company sold PM Germany in December 2004 and classified PM Europe as held for
sale at March 31, 2005. These two operating subsidiaries, which are now classified as discontinued
operations, made up our International segment. The results of our segments will, consistent with
past practice, be regularly reviewed by the Companys chief operating decision maker and the
executive team to determine how resources will be allocated to each segment and to assess the
performance of each segment. Pentons four segments derive their revenues from publications, trade
shows and conferences, and online media products. The executive management team evaluates performance of the segments based on revenues and adjusted
segment EBITDA. As such, in the analysis that follows, we have used adjusted segment EBITDA, which
we define as net income (loss) before interest, taxes, depreciation and amortization, non-cash
compensation, executive separation costs, impairment of assets, restructuring charges, provision
for loan impairment, discontinued operations, general and administrative costs, and other
non-operating items. General and administrative costs include functions such as finance,
accounting, human resources and information systems, which cannot reasonably be allocated to each
segment. See Note 13  Segments, for a reconciliation of total adjusted segment EBITDA to
consolidated income (loss) from continuing operations before income taxes. Financial information by segment for the three months ended March 31, 2005 and 2004, is summarized
as follows (in thousands): Adjusted
    
    
    Adjusted SegmentRevenues
    
    
    Segment EBITDA
    
    
    EBITDA Margin2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Industry
    
    $
    17,415
    
    
    $
    17,181
    
    
    $
    4,919
    
    
    $
    4,285
    
    
    
    28.2
    %
    
    
    24.9
    %Technology
    
    
    13,326
    
    
    
    13,942
    
    
    
    2,231
    
    
    
    1,977
    
    
    
    16.7
    %
    
    
    14.2
    %Lifestyle
    
    
    17,918
    
    
    
    17,224
    
    
    
    11,795
    
    
    
    10,908
    
    
    
    65.8
    %
    
    
    63.3
    %Retail
    
    
    4,672
    
    
    
    4,444
    
    
    
    1,245
    
    
    
    839
    
    
    
    26.6
    %
    
    
    18.9
    %Total
    
    $
    53,331
    
    
    $
    52,791
    
    
    $
    20,190
    
    
    $
    18,009
 Industry Our Industry segment, which represented 32.6% and 32.6% of total Company revenues for the three
months ended March 31, 2005 and 2004, respectively, serves customers in the manufacturing,
design/engineering, construction, government/compliance and supply/logistics industries. For the
three months ended March 31, 2005 and 2004, respectively, 93.4% and 96.0% of this segments
revenues were generated from publishing operations and 6.6% and 3.6% from online media products.
Trade shows and conferences for the three months ended March 31, 2004 generated 0.4% of segment
revenues. Revenues for this segment increased $0.2 million, or 1.4%, from $17.2 million for the three months
ended March 31, 2004 to $17.4 million, for the same period in 2005. This increase was due to
higher online revenues of $0.5 million, partially offset by lower conference revenues of $0.1
million and lower publication revenues of $0.2 million. The increase in online revenues was
attributable to all groups within the Industry segment with the manufacturing group and design
engineering group showing the largest quarter-on-quarter increases. Lower publication revenues was
due to lower quarter-on-quarter revenues from our manufacturing group of $0.3 million and our
government/compliance group of $0.3 million, partially 34




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##### Table of Contents



offset by an increase of $0.4 million for our design engineering group publications. Lower trade
show and conference revenues was due to the cancellation of a conference that was held in the first
quarter of 2004 but not repeated in 2005. Adjusted segment EBITDA for our Industry portfolio increased $0.6 million, or 14.8%, from $4.3
million for the three months ended March 31, 2004 to $4.9 million for the same period in 2005.
Industry publications increased $0.3 million and online media improved $0.3 million, while trade
shows and conferences were flat. The increase in adjusted segment EBITDA margin was due primarily
to higher revenues and cost reduction efforts undertaken in 2004. Technology Our Technology segment, which represented 25.0% and 26.4% of total Company revenues for the three
months ended March 31, 2005 and 2004, respectively, serves customers in the business technology,
aviation, enterprise information technology and electronics industries. For the three months ended
March 31, 2005 and 2004, respectively, 67.0% and 67.1% of this segments revenues were generated
from publishing operations, 12.0% and 13.4% from trade shows and conferences, and 21.0% and 19.5%
from online media products. Revenues for this segment decreased $0.6 million, or 4.4%, from $13.9 million for the three months
ended March 31, 2004 to $13.3 million for the same period in 2005. The decrease was due primarily
to lower publishing revenues of $0.4 million and lower trade show and conference revenues of $0.3
million, partially offset by higher online media revenues of $0.1 million. The decrease in
publishing revenues was primarily the result of lower revenues from our IT Media and electronics
publications, partially offset by slightly higher revenues from our business technology and
aviation group magazines. The decrease in trade show and conference revenues was attributable to
the cancellation of the Wireless Systems Design conference, which had revenues of $0.6 million in
the first quarter of 2004 and was not repeated in 2005, and to revenues of nearly $1.2 million
related to a road show in the first quarter last year that was not repeated in the first quarter of
2005. These decreases were partially offset by the shift in timing of two conferences from the
second quarter of 2004 to the first quarter of 2005, generating revenues of $1.3 million. Adjusted segment EBITDA for our Technology portfolio increased $0.3 million, or 12.8%, from $2.0
million for the three months ended March 31, 2004 to $2.2 million for the same period in 2005. The
increase was attributable to online media of $0.2 million and publications of $0.3 million. These
improvements were partially offset by a decline of $0.2 million in the segments trade shows and
conferences. The increase in adjusted segment EBITDA margin was due primarily to cost-reduction
efforts undertaken in this segment, particularly in the publications product line. Lifestyle Our Lifestyle segment, which represented 33.6% and 32.6% of total Company revenues for the three
months ended March 31, 2005 and 2004, respectively, serves customers in the natural products
industry. For the three months ended March 31, 2005 and 2004, respectively, 18.4% and 20.1% of
this segments revenues were generated from publishing and 81.3% and 79.7% from trade shows and
conferences. Online media products for the three months ended March 31, 2005 generated 0.3% of
segment revenues. Revenues for this segment increased $0.7 million, or 4.0%, from $17.2 million for the three months
ended March 31, 2004 to $17.9 million for the same period in 2005. Trade shows and conferences
accounted for $0.8 million of this increase, offset slightly by a decrease in publishing revenues
of $0.1 million. The increase in trade shows and conference revenues was due to year-on-year
growth in our Natural Products Expo West event, which is held in Anaheim, California. The Natural
Products Expo West show held in March 2005 show posted growth in total revenues, number of
exhibitors, number of booths sold, and number of attendees, with more than 38,000 visitors over the
March 2004 event. Adjusted segment EBITDA for the Lifestyle segment increased $0.9 million, or 8.1%, from $10.9
million for the three months ended March 31, 2004 to $11.8 million for the same period in 2005.
Trade shows and conferences accounted for all of this improvement. Retail Our Retail segment, which represented 8.8% and 8.4% of total Company revenues for the three months
ended March 31, 2005 and 2004, respectively, serves customers in the food/retail and hospitality
industries. For the three months ended March 35




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31, 2005 and 2004, respectively, 88.9% and 94.1% of this segments revenues were generated from
publishing, 8.7% and 4.1% from trade shows and conferences, and 2.3% and 1.8% from online media
products. Revenues for this segment increased $0.2 million, or 5.1%, from $4.4 million for the three months
ended March 31, 2004, to $4.6 million for the same period in 2005. This increase was due to a
shift in timing for our National Convenience Store Advisory Group (NCSAG) event from the second
quarter of 2004 to the first quarter of 2005. Publishing and online media revenues remained flat
in the first quarter of 2005 compared with the same 2004 period. Adjusted segment EBITDA for the Retail segment increased $0.4 million, or 48.4%, from $0.8 million
for the three months ended March 31, 2004 to $1.2 million for the same period in 2005. The
increase was due primarily to the shift in timing of the NCSAG event and cost-cutting initiatives
undertaken in 2004. Liquidity and Capital Resources Current Liquidity At March 31, 2005, our principal sources of liquidity are our existing cash reserves of $4.8
million and available borrowing capacity under our Loan and Security Agreement of $39.8 million.
On April 1, 2005, the Company borrowed $6.0 million under the Companys Loan and Security
Agreement. The proceeds were used to pay the interest due on April 1 under the Companys 11-7/8%
senior secured notes (Secured Notes). As of the date of this filing, the Company has repaid all
outstanding amounts under the Loan and Security Agreement with proceeds from the sale of PM Europe
and cash provided from operations. In February 2005, the Company repurchased $5.5 million par value of its 10-3/8% senior subordinated
notes (Subordinated Notes) for a total of $3.9 million, including $0.1 million of accrued
interest, using excess cash on hand. The repurchase will reduce our interest charges by nearly
$0.6 million annually. Cash payments expected to be made in the second quarter of 2005 include:  
    debt service charges of $18.3 million;
    capital expenditures of approximately $0.4 million;
    payments related to our business restructuring initiatives of approximately $0.7 million; and
    a contribution of $0.4 million to our Retirement and Savings Plan. We have no principal repayment requirements until maturity of our Secured Notes in October 2007.
In addition, as of the date of this filing, we have no outstanding balance under our Loan and
Security Agreement and no maintenance covenants on our existing bond debt. We believe that our existing sources of liquidity, along with revenues expected to be generated
from operations, will be sufficient to fund our operations, anticipated capital expenditures,
working capital, and other financing requirements. However, we cannot assure you that this will be
the case, and if we continue to incur operating losses and negative cash flows in the future, we
may need to further reduce our operating costs or obtain alternate sources of financing, or both,
to remain in business. Our ability to meet cash operating requirements depends upon our future
performance, which is subject to general economic conditions and to financial, competitive,
business, and other factors. The Companys ability to return to sustained profitability at
acceptable levels will depend on a number of risk factors, many of which are largely beyond the
Companys control. If we are unable to meet our debt obligations or fund our other liquidity
needs, particularly if the revenue environment does not substantially improve, we may be required
to raise additional capital through additional financing arrangements or the issuance of private or
public debt or equity securities. We cannot assure you that such additional financing will be
available at acceptable terms. In addition, the terms of our convertible preferred stock and
warrants issued, including the conversion price, dividend, and liquidation adjustment provisions,
could result in substantial dilution to common stockholders. The redemption price premiums and
board representation rights could negatively impact our ability to access the equity markets in the
future. The Company has implemented, and continues to implement, various cost-cutting programs and cash
conservation plans, which involve the limitation of capital expenditures and the control of working
capital. 36




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##### Table of Contents



Analysis of Cash Flows Pentons total cash and cash equivalents was $4.8 million at March 31, 2005, compared with $7.7
million at December 31, 2004. Cash provided by operating activities was $1.6 million for the three
months ended March 31, 2005 and $2.0 million for the same period in 2004. Operating cash flows for
the three months ended March 31, 2005, reflected net income of $1.8 million and a net increase in
non-cash charges (primarily depreciation and amortization) of approximately $3.0 million, offset by
a net decrease in working capital of approximately $3.3 million. Operating cash flows for the
three months ended March 31, 2004, reflected a net loss of $5.9 million, offset by a net increase
in working capital items of approximately $2.5 million and non-cash charges (primarily depreciation
and amortization) of approximately $5.5 million. Investing activities used $0.2 million and $0.8 million of cash for the three months ended March
31, 2005 and 2004, respectively, for capital expenditures. Financing activities used $4.2 million of cash for the three months ended March 31, 2005 primarily
due to the purchase of $5.5 million face value of our Subordinated Notes at prevailing market
prices. Financing activities used $0.4 million of cash for the three months ended March 31, 2004,
due primarily for cash overdrafts. Debt Service At March 31, 2005, we had total indebtedness of $327.0 million. Our principal obligations are
described below. Subordinated Notes: In June 2001, we issued $185.0 million of 10-3/8% Subordinated Notes due June 2011, of which $169.5
million is outstanding at March 31, 2005. Interest on the notes is payable semiannually, on June
15 and December 15. The Subordinated Notes were offered at a discount of $4.2 million. This
discount is being amortized using the interest method over the term of the Subordinated Notes.
Costs representing underwriting fees and other professional fees of approximately $1.7 million are
being amortized over the term of the Subordinated Notes. The Subordinated Notes are the Companys
unsecured senior subordinated obligations, subordinated in right of payment to all existing and
future senior indebtedness, including the Loan and Security Agreement and the Secured Notes
discussed below. In February 2005, the Company repurchased $5.5 million par value of its 10-3/8% Subordinated Notes
for a total of $3.9 million, including $0.1 million of accrued interest, using excess cash on hand.
The notes were purchased in the open market and were trading at 69% of their par value at the time
of purchase. The repurchase resulted in a gain of approximately $1.6 million, which is classified
in gain on extinguishment of debt in the consolidated statements of operations. In March 2002, the Company repurchased $10.0 million of its Subordinated Notes with $8.7 million of
the proceeds from the Secured Notes offering, completed in March 2002. The Subordinated Notes are fully and unconditionally, jointly and severally guaranteed, on a senior
subordinated basis, by the assets of our domestic subsidiaries, which are 100% owned by the
Company, and may be redeemed, in whole or in part, on or after June 15, 2006. The indenture
governing the Subordinated Notes contains covenants that, among other things, restrict our and our
subsidiaries ability to borrow money; pay dividends on or repurchase capital stock; make certain
investments; enter into agreements that restrict our subsidiaries from paying dividends or making
other distributions, making loans or otherwise transferring assets to us or to any other
subsidiaries; create liens on assets; engage in transactions with affiliates; sell assets,
including capital stock of our subsidiaries; and merge, consolidate or sell all or substantially
all of our assets and the assets of our subsidiaries. Our ability to obtain dividends from our
subsidiaries is restricted only if we are in default under our Loan and Security Agreement or if we
have exceeded our limitation of additional indebtedness, as specified in the indenture. Secured Notes: In March 2002, Penton issued $157.5 million of 11-7/8% Secured Notes due in October 2007. Interest
is payable on the Secured Notes semiannually on April 1 and October 1. The Secured Notes are fully
and unconditionally, jointly and severally guaranteed, on a senior basis, by all of our domestic
subsidiaries, which are 100% owned by the Company, and also the stock of certain subsidiaries. We
may redeem the Secured Notes, in whole or in part, during the periods October 1, 2005 through
October 1, 2006 and thereafter at redemption prices of approximately 105.9% and 100.0% of the
principal amount, 37




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##### Table of Contents



respectively, together with accrued and unpaid interest to the date of redemption. In addition, at
any time prior to October 1, 2005, upon certain public equity offerings of our common stock, up to
35% of the aggregate principal amount of the Secured Notes may be redeemed at our option, within 90
days of such public equity offering, with cash proceeds from the offering at a redemption price
equal to 111.875% of the principal amount, together with accrued and unpaid interest to the date of
redemption. The Secured Notes were offered at a discount of $0.8 million, which is being amortized, using the
interest method, over the term of the Secured Notes. Costs representing underwriting fees and
other professional fees of $6.6 million are being amortized over the term of the Secured Notes.
The Secured Notes rank senior in right to all of our senior subordinated indebtedness, including
our Subordinated Notes. The guarantees are senior secured obligations of each of our subsidiary
guarantors and rank senior in right of payment to all subordinated indebtedness of the subsidiary
guarantors, including the guarantees of our Subordinated Notes, and equal in right of payment with
all of our senior indebtedness. The notes and guarantees are secured by a lien on substantially
all of our assets and those of our subsidiary guarantors, other than specified excluded assets.
Excluded assets consist of, among other things, the capital stock of Duke Communications
International, Inc. and Internet World Media, Inc.; the capital stock of our foreign subsidiaries
directly owned by us or the subsidiary guarantors which exceed 65% of the outstanding capital stock
or equity interest of such foreign subsidiaries; and all of the capital stock of our other foreign
subsidiaries. The indenture governing the Secured Notes contain covenants that, among other things, restrict our
and our subsidiaries ability to borrow money; pay dividends on or repurchase capital stock; make
certain investments; enter into agreements that restrict our subsidiaries from paying dividends or
other distributions, making loans or otherwise transferring assets to us or to any other
subsidiaries; create liens on assets; engage in transactions with affiliates; sell assets,
including capital stock of our subsidiaries; and merge, consolidate or sell all or substantially
all of our assets and the assets of our subsidiaries. Our ability to obtain dividends from our
subsidiaries is restricted only if we are in default under our Loan and Security Agreement or if we
have exceeded our limitation of additional indebtedness, as specified in such agreement. Loan and Security Agreement: In August 2003, the Company entered into a four-year revolving Loan and Security Agreement.
Pursuant to the terms of the Loan and Security Agreement, the Company can borrow up to the lesser
of (i) $40.0 million; (ii) 2.25x the Companys last twelve months consolidated adjusted EBITDA
measured monthly through August 13, 2005 and 2.0x thereafter; (iii) 40% of the Companys last six
months of revenues; or (iv) 25% of the Companys enterprise value, as determined annually by a
third party. The Loan and Security Agreement facility bears interest at LIBOR plus 5.0% subject to
a LIBOR minimum of 1.5%. The Company must comply with a quarterly financial covenant limiting the
ratio of maximum bank debt to the last twelve months consolidated adjusted EBITDA to 2.0x after
March 31, 2005. The Loan and Security Agreement permits the Company to sell assets of up to $12.0
million in the aggregate during the term or $5.0 million in any single asset sale, and complete
acquisitions of up to $5.0 million per year. Included in the Loan and Security Agreement are two
stand-by letters of credit of $0.1 million and $0.1 million, respectively, required by two of the
Companys facility leases. The amounts of the letters of credit reduce the availability under the
Loan and Security Agreement. As of March 31, 2005, no amounts were drawn under the stand-by
letters of credit. Costs representing bank fees and other professional fees of $1.9 million are
being amortized over the life of the agreement. At March 31, 2005, $39.8 million was available
under the Loan and Security Agreement. On April 1, 2005, the Company borrowed $6.0 million under the Companys Loan and Security
Agreement. The proceeds were used to pay the interest due on April 1 under the Companys Secured
Notes. As of the date of this filing, the Company has repaid all outstanding amounts under the
Loan and Security Agreement with proceeds from the sale of PM Europe and cash provided from
operations. Consolidated Adjusted EBITDA As described above, under Loan and Security Agreement, the Companys borrowing capacity under the
Loan and Security Agreement is determined in part by the Companys last 12 months Consolidated
Adjusted EBITDA. In addition, under our Loan and Security Agreement, we are not permitted to allow
the ratio of outstanding indebtedness to Consolidated Adjusted EBITDA to exceed 2.0 to 1.00 after
March 31, 2005. 38




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##### Table of Contents



Consolidated Adjusted EBITDA is a non-GAAP financial measure that is presented not as a measure of operating
results, but rather as a measure of our ability to service debt. It should not be construed as an
alternative to either income (loss) before income taxes, or cash flows from operating activities.
Our inability to borrow based on the terms of the Loan and Security Agreement could have a material
adverse effect on our liquidity and operations. Accordingly, management believes that the
presentation of Consolidated Adjusted EBITDA will provide investors with information needed to
assess our ability to continue to have access to funds as necessary. The following table presents
a reconciliation of net income (loss) to EBITDA and Consolidated Adjusted EBITDA (in thousands).
Other companies may calculate similarly titled measures differently than we do. Three Months EndedMarch 31,2005
    
    
    2004Net income (loss)
    
    $
    1,813
    
    
    $
    (5,902
    )Interest expense
    
    
    9,383
    
    
    
    9,458Provision for income taxes
    
    
    778
    
    
    
    764Depreciation and amortization
    
    
    2,267
    
    
    
    2,848EBITDA
    
    
    14,241
    
    
    
    7,168Loan and Security Agreement Adjustments:Restructuring and other charges
    
    
    66
    
    
    
    860Executive separation costs
    
    
    3
    
    
    
    2,354Non-cash compensation
    
    
    11
    
    
    
    123Interest income
    
    
    (30
    )
    
    
    (86
    )Discontinued operations, net of taxes
    
    
    2,800
    
    
    
    1,909Gain on extinguishment of debt
    
    
    (1,589
    )
    
    
    Other, net
    
    
    8
    
    
    
    2Consolidated Adjusted EBITDA
    
    $
    15,510
    
    
    $
    12,330
 Credit Ratings: Our credit ratings as of the date of this report are as follows: S&P
    
    Moodys$169.5 million 10-3/8% Senior Subordinated Notes
    
    CC
    
    Ca$157.5 million 11-7/8% Senior Secured Notes
    
    CCC
    
    B3Corporate Rating
    
    CCC
    
    Caa3
 A change in the rating of our debt instruments by outside rating agencies would not negatively
impact our ability to access our Loan and Security Agreement. A rating reflects only the view of a
rating agency and is not a recommendation to buy, sell or hold securities. Any rating can be
revised upward or downward at any time by a rating agency if such rating agency decides that
circumstances warrant such a change. 39




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##### Table of Contents



Convertible Preferred Stock In March 2002, we entered into an agreement with a group of investors to sell 50,000 shares of
Series B Preferred stock and warrants to purchase 1.6 million shares of our common stock for $50.0
million. We received gross proceeds of $40.0 million from the sale of 40,000 shares of convertible
preferred stock and warrants to purchase 1,280,000 shares of our common stock on March 19, 2002 and
gross proceeds of $10.0 million from the sale of 10,000 shares of convertible preferred stock and
warrants to purchase 320,000 shares of our common stock on March 28, 2002. On September 13, 2004, the Company filed a Certificate of Designations governing a new series of
convertible preferred stock, $0.01 par value (the Series C Preferred), with the Secretary of
State for the State of Delaware. The Series C Preferred was exchanged on a share-for-share basis
with the Companys Series B Convertible Preferred, $0.01 par value (the Series B Preferred). The
Certificate of Designations for the Series C Preferred is identical to the Series B Preferred
Certificate of Designations except that:  
    the new series allows for the sharing of the liquidation preference with the new Series
M Preferred Stock (discussed below),
    certain technical and correcting amendments have been made to the Certificate of
Designations for the Series C Preferred stock, including fixing the formula used to
calculate the Change of Control Cap (as defined in the Series C Preferred stock
Certificate of Designations), and
    certain conforming changes were made to the Series C Preferred stock Certificate of
Designations to account for the fact that the Series C Preferred stock was issued in
exchange for the Series B Preferred stock. At March 31, 2005, an event of non-compliance continues to exist under our Series C Convertible
Preferred Stock (the preferred stock) because the Companys leverage ratio of 10.5 (defined as
debt less cash balances in excess of $5.0 million plus the liquidation value of the preferred stock
and unpaid dividends divided by adjusted EBITDA) exceeds 7.5. Upon the occurrence of this event of
non-compliance, the 5% per annum dividend rate on the preferred stock has increased by one
percentage point as of April 1, June 30, September 28 and December 27, 2003 and March 26, 2004 to
the current maximum rate of 10% per annum. The dividend rate will adjust back to 5% as of the date
on which the leverage ratio is less than 7.5. The conversion price of the preferred stock at March 31, 2005 is $7.61. The leverage ratio event of non-compliance does not represent an event of default or violation
under any of the Companys outstanding notes or the Loan and Security Agreement. As such, there is
no acceleration of any outstanding indebtedness as a result of this event. In addition, this event
of non-compliance and the resulting consequences have not resulted in any cash outflow from the
Company. If the Company had been sold on March 31, 2005, the bondholders would have been entitled to receive
$330.3 million and the preferred stockholders would have been entitled to receive $154.2 million
before the common stockholders would have received any amounts for their common shares. The amount
the preferred stockholders would be entitled to receive could increase significantly in the future
under certain circumstances. Common stockholders are urged to read the terms of the preferred
stock carefully. 40




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##### Table of Contents



CONTRACTUAL OBLIGATIONS The following are summaries of our contractual obligations and other commercial commitments as of
March 31, 2005 (in thousands): Annual Payments DueAfter2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2008
    
    
    Total10-3/8% Senior Subordinated Notes (1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    169,500
    
    
    $
    169,50011-7/8% Senior Secured Notes (1)
    
    
    
    
    
    
    
    
    
    
    157,500
    
    
    
    
    
    
    
    
    
    
    
    157,500Letter of credit
    
    
    231
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    231Interest on indebtedness (1)
    
    
    36,289
    
    
    
    36,289
    
    
    
    36,289
    
    
    
    17,586
    
    
    
    43,963
    
    
    
    170,416Capital lease obligations
    
    
    18
    
    
    
    24
    
    
    
    25
    
    
    
    25
    
    
    
    4
    
    
    
    96Operating leases obligations (2)
    
    
    5,357
    
    
    
    5,231
    
    
    
    4,683
    
    
    
    4,548
    
    
    
    8,483
    
    
    
    28,302Printing contract obligation (3)
    
    
    6,000
    
    
    
    6,000
    
    
    
    6,000
    
    
    
    6,000
    
    
    
    18,000
    
    
    
    42,000Communications service agreement (4)
    
    
    663
    
    
    
    800
    
    
    
    133
    
    
    
    
    
    
    
    
    
    
    
    1,596Expected pension contributions (5)
    
    
    
    
    
    
    
    
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    1,800Other long-term obligations reflected
in the balance sheet
    
    
    606
    
    
    
    36
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    671Total
    
    $
    49,164
    
    
    $
    48,380
    
    
    $
    206,459
    
    
    $
    28,159
    
    
    $
    239,950
    
    
    $
    572,112
  (1)
    There are no required debt principal payments until October 2007. Interest is paid
semi-annually in June and December for the Subordinated Notes and April and October for the
Secured Notes. In February 2005, the Company repurchased $5.5 million par value of its
10-3/8% senior subordinated notes for a total of $3.9 million, including $0.1 million of
accrued interest. The notes were purchased in the open market and were trading at 69% of
their par value at the time of purchase. As a result of this repurchase, future interest
payments will be reduced annually by $0.6 million.(2)
    We lease all of our facilities and certain equipment under non-cancelable operating leases.
The leases expire at various dates through 2014 and some contain various provisions for rental
adjustments.(3)
    In February 2005, the Company signed a new agreement with R.R. Donnelley, which expires in
December 2011, unless a minimum revenue commitment of $42.0 million is not reached, at which
time the agreement would extend until the commitment is reached.(4)
    In February 2004, the Company amended its communication services agreement with Sprint,
originally entered into in 2002, to extend the term to February 2007. The agreement provides
for annual minimum usage levels by Penton of $0.8 million each year.(5)
    Based on current estimates, the Company expects to make a contribution of approximately $1.8
million in 2007. No contributions are expected in 2005 or 2006. Due to the presence of
significant variables, actual future contributions may differ materially. We expect to make contributions totaling $1.6 million to the employees Retirement Savings Plan
accounts in 2005. Contributions are made at the discretion of our Board of Directors. The Company is self-insured for health and workers compensation benefits up to certain stop-loss
limits. Payments of between $3.5 million and $4.0 million are expected to be made in 2005. In December 2003, the Company entered into an agreement with a former employee to provide trade
show and conference services to select Penton events. Under the agreement, the former employee was
to receive guaranteed minimum payments of $0.7 million in 2005 unless the contract was cancelled.
In December 2004, the Company terminated the agreement, which required a $0.2 million cancellation
fee. The fee will be paid in twelve equal installments throughout 2005. Risk Factors Managements concerns remain consistent with and should be read in conjunction with the Risk
Factors section of the Companys Annual Report on Form 10-K for the year ended December 31, 2004. 41




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##### Table of Contents



New Accounting Pronouncements See Note 1  Accounting Policies, New Accounting Pronouncements, of the notes to the consolidated
financial statements. Critical Accounting Policies and Estimates During the three months ended March 31, 2005, there were no significant new critical accounting
policies or estimates. Foreign Currency The functional currency of our foreign operations is their 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 period. There were no significant foreign currency transaction gains or losses for the
periods presented. Seasonality We 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. 
 ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our long-term debt consists of Secured Notes and Subordinated Notes with interest at fixed rates.
Consequently, we do not have significant interest rate risk exposure related to our long-term debt.
However, the fair value of our senior notes fluctuates with the market, as they are publicly
traded. At March 31, 2005, the fair value of the Subordinated Notes and the Secured Notes was
$132.2 million and $158.3 million, respectively, compared to $115.5 million and $157.5 million,
respectively, at December 31, 2004. The fair value of the notes is determined by the price
investors are willing to pay in the open market. We currently do not manage the fair value risk
related to our senior notes. The table below provides information about the expected cash flows associated with our long-term
debt obligations and their fair value at March 31, 2005 (in thousands): Expected Maturity Datefor the Years Ended December 31,Fair2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2011
    
    
    Total
    
    
    ValueLong-Term Debt:Senior Subordinated Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    169,500
    
    
    $
    169,500
    
    
    $
    132,210Interest rate
    
    
    10-3/8
    %
    
    
    10-3/8
    %
    
    
    10-3/8
    %
    
    
    10-3/8
    %
    
    
    10-3/8
    %
    
    
    10-3/8
    %Senior Secured Notes
    
    
    
    
    
    
    
    
    
    $
    157,500
    
    
    
    
    
    
    
    
    
    
    $
    157,500
    
    
    $
    158,288Interest rate
    
    
    11-7/8
    %
    
    
    11-7/8
    %
    
    
    11-7/8
    %
    
    
    
    
    
    
    
    
    
    
    11-7/8
    %
 During the three months ended March 31, 2005, there were no other significant changes related to
the Companys market risk exposure. 42




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##### Table of Contents



ITEM 4.       CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We maintain disclosure and controls and procedures (as defined in Exchange Act Rules 13a  15(e)
and 15d  15(e)) that are designed to ensure that information required to be disclosed in reports
that we file or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized, and reported within the time periods specified in the Securities and Exchange
Commissions rules and forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding the required disclosures. As of March 31, 2005, an evaluation was performed under the supervision and with the participation
of the Companys management, including the CEO and CFO, of the effectiveness of the design and
operation of the Companys disclosure controls and procedures. Based upon, and as of the date of,
this evaluation, the CEO and the CFO concluded that our disclosure controls and procedures were not
effective, because of the material weakness discussed below. A material weakness is a condition in which the design or operation of one or more of the internal
control components does not reduce to a relatively low level the risk that misstatements caused by
error or fraud in amounts that would be material in relation to the financial statements being
audited may occur and not be detected within a timely period by employees in the normal course of
performing their assigned functions. On March 24, 2005, following a comprehensive review of the Companys deferred tax assets and
deferred tax liabilities, management concluded that the Companys previously issued consolidated
financial statements should be restated to correct the computation of our valuation allowance for
deferred tax assets, which resulted in an increase to income tax expense. Management determined
that certain deferred tax liabilities had been incorrectly offset against deferred tax assets.
Under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, taxable
temporary differences related to indefinite-lived intangible assets or tax-deductible goodwill (for
which reversal cannot be anticipated) should not be offset against deductible temporary differences
for other indefinite-lived intangible assets or tax-deductible goodwill when scheduling reversals
of temporary differences. Management determined that this control deficiency constitutes a
material weakness in the Companys disclosure controls and procedures and internal control over
financial reporting. Management evaluated the materiality of the correction on its consolidated financial statements
using the guidelines of Staff Accounting Bulletin No. 99, Materiality and concluded that the
cumulative effects of the corrections were material to its annual consolidated financial statements
for 2004, 2003 and 2002 and the related quarterly consolidated financial statements for such
periods. As a result, management concluded that it would restate its previously issued
consolidated financial statements to recognize the impact of the correction. For complete details,
see Note 2  Restatement, in the notes to the consolidated financial statements included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2004. We are continuing to implement steps to remediate this matter by adding additional levels of tax
review and requiring all personnel who have responsibilities for the Companys income taxes to
attend an annual SFAS 109 review course. Changes in Internal Control Over Financial Reporting During the Companys fiscal quarter ended March 31, 2005, there were no changes in internal control
over financial reporting (as defined in Exchange Act Rules 13a  15(f) and 15(d)  15(f)), that
have materially affected or are reasonably likely to materially affect the Companys internal
control over financial reporting. 43




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##### Table of Contents



Part II  OTHER INFORMATION 
 ITEM 2.       UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The following table presents information with respect to changes in our common stock made during
the three months ended March 31, 2005. Maximum NumberTotal Number
    
    
    
    
    
    
    Total Number of
    
    
    of Shares that Mayof Shares
    
    
    Average Price
    
    
    Shares Purchased
    
    
    Yet be PurchasedPeriod
    
    Purchased
    
    
    Paid per Share
    
    
    Under a Program
    
    
    Under a ProgramJanuary 1-31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    February 1-29, 2005
    
    
    28,613
    (1)
    
    $
    0.10
    
    
    
    
    
    
    
    March 1-31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    28,613
    
    
    $
    0.10
    
    
    
    
    
    
    
    
 (1) In February 2005, 28,613 shares were returned to the Company by a certain
executive to cover taxes on deferred shares which were issued. 
 ITEM 6.       EXHIBITS Exhibit No.
    
    Description of Document31.1
    
    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.
 44




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##### Table of Contents



SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. Penton Media, Inc.
(Registrant)By:
    /s/       PRESTON L. VICEPreston L. ViceChief Financial Officer Date: May 20, 2005 45




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##### Table of Contents



EXHIBIT INDEX Exhibit No.
    
    Description of Document31.1
    
    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.
 46