1st Quarter 2005 EARNINGS CONFERENCE CALL
                               Michael Geltzeiler
                                October 28, 2004


Thanks, Tom.


I will briefly review our cash flow performance and debt
position, and provide a status update on the sales of
non-strategic assets and certain one-time items reported this
quarter.

As expected, we reported a net use of cash in the first quarter
of fiscal 2005.  This is typical for our business.  Our first
quarter is a period of seasonally low business volumes, while we
incur  outlays for the build-up of working capital at QSP and
Books Are Fun for their fall campaigns.

Free cash flow was a net use of $87 million for the quarter. This
compares to a use of $71 million in the first Quarter of Fiscal
2003.  The comparatively higher use of cash this year versus
last, is attributed primarily to timing issues.  Working capital
was higher in Q1 attributed to earlier and larger outflows of
inventory purchases at Books Are Fun and timing of promotion and
product shipments in certain International markets.  Additionally, cash
interest payments were higher in the current quarter, as interest
on our public debt is paid semi-annually versus bank debt that it
replaced which is paid quarterly and we generated approximately
$4 million in cash from asset sales in the prior year.

Total debt increased by $77 million to $799 million as of
September 30th.  We were particularly effective in repatriating
idle foreign cash this quarter enabling us to reduce our cash on
hand by $14 million to $36 million.  We utilized our revolver to
finance the first quarter working capital build.

Looking ahead, the second quarter is our strongest period for
operating and cash flow performance.  During the second quarter,
we expect to fully pay-down our revolver, as well as make an
additional principal payment on the term loans.  Additionally, we
expect to generate proceeds in the second quarter from the sale
and partial leaseback our Westchester HQ facility, which will
also be used to repay debt.  We are confirming our Full Year
guidance that free cash flow will exceed the $172 million
reported last year, with additional proceeds arising from the
sale of our HQ facility.

During the quarter, we made considerable progress in our effort
to divest and monetize non-productive assets.  We have recently
completed transactions to sell a UK magazine called Moneywise and
a US publication called Crafting Traditions.  Both magazines were
determined to be non-strategic to our overall magazine
portfolio.  We also successfully sold the Gifts.com URL.  These
three transactions will be reported in our second quarter
results.

During the second quarter, we expect to complete the agreement to
sell and partially leaseback our Westchester Headquarter
facility.  As previously announced, we have sold our Australian
facility and expect to close on this transaction in December.  We
have also sublet excess space at our Canary Wharf offices in the
UK and  negotiated a sale of our Portuguese facility, with
closing planned for our Fiscal third quarter.

As previously announced, effective July 1st, we have begun to
expense all magazine direct-response promotion costs as
incurred.  Previously, certain of these costs were deferred and
amortized over the future benefit periods.  After voluntary
consultation with the SEC and our public accountants, it was
determined that the existing deferred promotion balance would
need to continue to be amortized over its useful life.
Excluding the amortization of the historic asset, the change is
expected to have a minimal impact on the full fiscal year but
will result in timing differences in year-to-year quarterly
comparisons.  In Fiscal 2005, first half results will include a
higher proportion of the year's promotion expenses because mail
volumes are greater during this period.  Full Year   results will
be negatively affected by a non-cash $77 million or $0.49 per
share charge related to recognizing the historical deferred
promotion balance.  Our bank covenants have been amended to
exclude the impact of this charge.

Lastly, this quarter we have made a minor change to our segment
reporting to reflect a change in management reporting.  Financial
Services and RD Young Families have been moved from Consumer
Business Services to RD North America.  Prior year balances have
also been restated.

Tom and I will now take your questions.