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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 1-11106

PRIMEDIA INC.
(FORMERLY K-III COMMUNICATIONS CORPORATION)
(Exact name of registrant as specified in its charter)
(SEE TABLE OF ADDITIONAL REGISTRANTS)

DELAWARE 13-3647573
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

745 FIFTH AVENUE, NEW YORK, NEW YORK 10151
(Address of principal executive offices) (Zip Code)

(212) 745-0100
(Registrant's telephone number, including area code)

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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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COMMON STOCK, PAR VALUE $.01 PER SHARE......................... NEW YORK STOCK EXCHANGE

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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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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 registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes__X__ No____

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the common equity of PRIMEDIA Inc.
("PRIMEDIA") which is held by non-affiliates of PRIMEDIA at February 19, 1998
was approximately $275 million.

As of February 19, 1998, 129,120,309 shares of PRIMEDIA's Common Stock were
outstanding.

The following documents are incorporated into this Form 10-K by reference:
PRIMEDIA's notice of annual meeting and proxy statement for its 1998 annual
meeting of shareholders into Part III hereof.
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TABLE OF ADDITIONAL REGISTRANTS

STATE OR OTHER PRIMARY STANDARD I.R.S.
EXACT NAME OF JURISDICTION OF INDUSTRIAL EMPLOYER
REGISTRANT AS SPECIFIED INCORPORATION OR CLASSIFICATION IDENTIFICATION
IN ITS CHARTER ORGANIZATION CODE NUMBER NUMBER
--------------------------------- ---------------- ------------------- -------------

The Apartment Guide of Nashville, Inc........................ Tennessee 2741 62-1224076
Argus Publishers Corporation................................. California 2721 95-2219151
American Heat Video Productions, Inc. ....................... Missouri 8299 43-1418177
ASTN, Inc. .................................................. Delaware 8299 75-2590386
A WEP Company................................................ California 2721 95-4129732
Bacon's Information, Inc. ................................... Delaware 7389 36-4011543
Bankers Consulting Company................................... Missouri 8299 43-1771756
Bowhunter Magazine, Inc. .................................... Pennsylvania 2721 23-2667502
Canoe & Kayak, Inc. ......................................... Delaware 2721 41-1895510
Cardinal Business Media, Inc. ............................... Delaware 2721 23-2695564
Cardinal Business Media Holdings, Inc. ...................... Delaware 2721 23-2695951
Channel One Communications Corp. ............................ Delaware 4833 13-3783278
Climbing, Inc. .............................................. Delaware 2721 41-1885204
Cover Concepts Marketing Services, LLC....................... Delaware 7319 04-3370389
Cowles Business Media, Inc. ................................. Connecticut 2721 06-0935977
Cowles Enthusiast Media, Inc. ............................... Pennsylvania 2721 23-1577768
Cowles History Group, Inc. .................................. Virginia 2721 54-1606227
Cowles/Simba Information, Inc. .............................. Connecticut 2721 06-1281600
CSK Publishing Company Incorporated.......................... Delaware 2721 13-3023395
Cumberland Publishing, Inc. ................................. Maryland 2721 52-1758147
DRF Finance, Inc. ........................................... Delaware 2721 13-3616341
Daily Racing Form, Inc. ..................................... Delaware 2721 13-3616342
Data Book, Inc. ............................................. Georgia 2741 58-1482678
The Electronics Source Book, Inc. ........................... Delaware 2741 36-0645610
Excellence in Training Corporation........................... Delaware 8299 75-2532442
Films for the Humanities & Sciences, Inc. ................... Delaware 7812 13-1932571
Funk & Wagnalls Yearbook Corp. .............................. Delaware 2731 13-3603787
Gareth Stevens, Inc. ........................................ Wisconsin 2731 39-1462742
GO LO Entertainment, Inc. ................................... California 7389 95-4307031
Guinn Communications, Inc. .................................. Tennessee 2741 62-1486552
Haas Publishing Companies, Inc. ............................. Delaware 2741 58-1858150
Health & Sciences Network, Inc. ............................. California 8299 95-3654568
Horse & Rider, Inc. ......................................... California 2721 33-0480523
Intermodal Publishing Company, Ltd. ......................... New York 2721 13-2633752
IDTN Leasing Corporation..................................... Delaware 8299 13-3414420
Industrial Training Systems Corporation...................... New Jersey 8299 22-2070040
IntelliChoice, Inc. ......................................... California 2721 77-0168905
Intertec Market Reports, Inc. ............................... Delaware 2721 36-1534790
Intertec Presentations, Inc. ................................ Colorado 2721 84-0840004
Intertec Publishing Corporation.............................. Delaware 2721 48-1071277
K-III HPC, Inc. ............................................. Delaware 6719 58-2105885
K-III Prime Corporation...................................... Delaware 6719 13-3631019
Kitplanes Acquisition Company................................ Delaware 2721 95-4617433
Law Enforcement Television Network, Inc. .................... Texas 8299 75-2257839
Lifetime Learning Systems, Inc. ............................. Delaware 2741 13-3783276
Little Rock Apartment Guide, Inc. ........................... Arkansas 2741 74-2298918
Lockert Jackson & Associates, Inc. .......................... Washington 8299 91-1395126
Low Rider Publishing Group, Inc.............................. California 2721 95-4307029
McMullen Argus Publishing, Inc. ............................. California 2721 95-2663753
Memphis Apartment Guide, Inc. ............................... Tennessee 2741 62-0964956
Musical America Publishing, Inc. ............................ Delaware 2721 13-2782528
Nelson Information, Inc. .................................... Delaware 2741 13-3740812
Pictorial, Inc. ............................................. Indiana 2731 35-1616640
Plaza Communications, Inc. .................................. California 2721 95-3053189
PRIMEDIA Holdings III Inc. .................................. Delaware 6719 13-3617238
PRIMEDIA Information Inc. ................................... Delaware 2721 13-3555670

PRIMEDIA Magazines Inc. ..................................... Delaware 2721 13-3616344
PRIMEDIA Magazines Finance Inc. ............................. Delaware 2721 13-3616343
PRIMEDIA Reference Inc. ..................................... Delaware 2731 13-3603781
PRIMEDIA Special Interest Publications Inc. ................. Delaware 2721 52-1654079
PRIMEDIA Workplace Learning, Inc. ........................... Texas 8299 75-2110878
QWIZ, Inc. .................................................. Delaware 7372 58-2302364
R.E.R. Publishing Corporation................................ New York 2721 13-3090623
RetailVision, Inc. .......................................... Delaware 2721 03-0339898
Southwest Art, Inc. ......................................... Delaware 2721 76-0233343
Straight Down, Inc........................................... California 2721 95-3824415
Symbol of Excellence Publishers, Inc. ....................... Alabama 2721 63-0845698
Tel-A-Train, Inc............................................. Delaware 8299 75-2532446
The Virtual Flyshop, Inc. ................................... Colorado 2721 84-1318377
TI-IN Acquisition Corporation................................ Texas 8299 75-2478738
Vegetarian Times, Inc. ...................................... Illinois 2721 36-3636836
Weekly Reader Corporation.................................... Delaware 2721 13-3603780
Westcott Communications Michigan, Inc. ...................... Michigan 8299 38-2955660
Westcott ECI, Inc. .......................................... Texas 8299 75-2475419
Western Empire Publications, Inc. ........................... Delaware 2721 95-3363328

The address, including zip code, and telephone number, including area code,
of each additional registrant's principal executive office is 745 Fifth Avenue,
New York, New York 10151 (212-745-0100).

The financial statements of the guarantor subsidiaries are omitted because
PRIMEDIA believes the separate financial statements would not be material to the
shareholders and potential investors. The total assets, revenues, income or
equity of non-guarantor subsidiaries, both individually and on a combined basis
are inconsequential in relation to the total assets, revenues, income or equity
of PRIMEDIA. All of the equity securities of each of the additional registrants
set forth in the table above are owned, either directly or indirectly, by
PRIMEDIA, and there has been no default during the preceding 36 calendar months
with respect to any indebtedness or material long-term leases of PRIMEDIA or any
of the additional registrants.

iii

PRIMEDIA INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1997

CROSS REFERENCE SHEET FOR
PARTS I, II, III AND IV

PAGE
-----

PART I
Item 1. Business...................................................................................... 1
Item 2. Properties.................................................................................... 10
Item 3. Legal Proceedings............................................................................. 10
Item 4. Submission of Matters to a Vote of Security Holders........................................... 10

PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................... 11
Item 6. Selected Financial Data....................................................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................................... 25
Item 8. Financial Statements and Supplementary Data................................................... 26
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......... 61
PART III -- Omitted, except Item 10 as to Executive Officers is included as part of Part I
Item 1........................................................................................ 61

PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................... 61

PART I

ITEM 1. BUSINESS.

GENERAL

PRIMEDIA Inc. (which together with its subsidiaries (and its predecessors)
is herein referred to as either "PRIMEDIA" or the "Company" unless the context
implies otherwise) is the authoritative source of specialized information for
highly targeted audiences in the education, business and special interest
consumer markets. Most of the Company's products have leadership positions in
the specialty niche markets in which such products compete: specialty magazines
(E.G., SEVENTEEN, AMERICAN BABY, SOAP OPERA DIGEST, TRUCKIN', SEW NEWS and
TELEPHONY); education (E.G., CHANNEL ONE NETWORK, WEEKLY READER and PRIMEDIA
Workplace Learning); and information (E.G., APARTMENT GUIDES, WARD'S, THE WORLD
ALMANAC and BACON'S).

The Company has achieved substantial revenue growth through the development
of its franchises, combined with its operating expertise and a successful
acquisition strategy. For the period starting in 1993 through 1997, sales have
grown at a compound annual rate of 15% to $1,488 million. Operating loss in 1997
was $20.8 million compared to $7.7 million in 1993 (after deductions for
amortization and depreciation of $184.2 million in 1997 and $143.3 million in
1993).

GROWTH STRATEGY

PRIMEDIA's strategy is to address growing needs in today's information
economy. Technology has created a flood of information. Consequently, management
believes the key role of the media is shifting from making information broadly
available across all audiences to sifting out and qualifying information for the
benefit of specific audiences. The Company's products are authoritative
information sources meeting customers' particular needs in the most beneficial
formats--print, electronic, and multimedia. Its pursuit of this strategy in its
targeted markets has enabled PRIMEDIA to achieve an average market share across
all products of 60%, with 80% ranking number one or two in their markets.

PRIMEDIA provides authoritative information in six areas that show superior
growth: specialty consumer magazines and technical and trade magazines in the
specialty magazine segment; classroom learning and workplace learning in the
education segment; and consumer and business information products in the
information segment. In each of these six areas, the Company offers
authoritative information products that have a branded presence and leading
market positions.

The Company is taking advantage of fundamental growth trends in these six
markets. The Company's specialty magazines take advantage of trends in the
specialty consumer market where advertising growth has outpaced general interest
magazine, broadcast television, radio and newspaper advertising growth since
1989. In classroom and workplace learning, PRIMEDIA is building on rising
elementary and secondary school enrollments, increased spending on supplementary
educational materials and the rapid growth in outsourced workplace education.
The Company's consumer and business information products are capitalizing on the
trend towards targeted marketing and away from general interest sources such as
newspapers and the increased spending by businesses for information.

The Company seeks to maximize its operating performance by capitalizing on
its leading position in each of these growing markets. Each of PRIMEDIA's six
growth vehicles has opportunities for expansion through both internal organic
development and product line acquisitions. Organic growth results from both
market expansion and product innovation in conventional and new media formats.
Growth through product line acquisition is made possible by the constant
availability of leading brands for sale in niche markets in PRIMEDIA's six
growth areas. To support this aspect of growth, the Company has successfully
developed a selective and disciplined process of identifying, evaluating and
integrating acquired companies. The primary source of funds for these product
line acquisitions is the cash generated by the Company's operations, which by
their nature have high operating margins and low capital requirements. Net
capital expenditures were approximately $31.1 million, $28.8 million and $23.4
million, or 2.1%, 2.1% and 2.2% of sales, in 1997, 1996 and 1995, respectively.
Additionally, cash available for reinvestment is

amplified because the Company pays virtually no income taxes largely as a result
of having structured most of its acquisitions to create tax-deductible
amortization of intangible assets which results in net operating losses.

The Company has focused on the areas of its business that have the greatest
potential for strong organic growth and growth through product line
acquisitions. Those growth vehicles by segment are: specialty
magazines--specialty consumer magazines and technical and trade magazines;
education-- classroom learning and workplace learning; and information--consumer
information and business information.

On November 18, 1997, the Company changed its name to PRIMEDIA Inc. to
better reflect the "prime" positioning the Company has in six areas of
specialized "media." On November 18, 1997, the Company's New York Stock Exchange
symbol was changed from KCC to PRM.

Refer to Item 7 for a description of segment sales and income.

SPECIALTY MAGAZINES

The specialty magazines segment consists of specialty consumer magazines and
technical and trade magazines. In 1997, 60% of its 67 specialty consumer
magazines and nearly 50% of its 65 technical and trade magazines, were number
one in their respective markets. According to the WALL STREET JOURNAL, PRIMEDIA
is the largest magazine publisher in the United States of America by ad page
count. Some of the Company's specialty consumer magazines include SOAP OPERA
DIGEST, SEVENTEEN, NEW YORK, CHICAGO, TRUCKIN' and SEW NEWS; leading technical
and trade publications include TELEPHONY, FLEET OWNER and AMERICAN PRINTER.

SPECIALTY CONSUMER MAGAZINES

The Company's specialty consumer magazines include SOAP OPERA DIGEST, MODERN
BRIDE, SEVENTEEN, AMERICAN BABY, over 36 automotive titles, and 13 local bridal
as well as sewing, crafts and other titles. The principal sources for specialty
consumer magazines' sales are advertising and circulation. In the year ended
December 31, 1997, approximately 54% of the specialty consumer magazines' sales
were from advertising, 42% were from circulation and 4% were from other sources.

SOAP OPERA DIGEST and SOAP OPERA WEEKLY are the leading publications
covering soap operas aired on network television. SOAP OPERA DIGEST was a
bi-weekly publication through 1996. In the spring of 1997, SOAP OPERA DIGEST
became a weekly publication with an average circulation of 1.1 million per week.
SOAP OPERA WEEKLY had an average 1997 circulation of 465,000. Both publications
are distributed mainly at supermarket, convenience store and drugstore checkout
counters with SOAP OPERA DIGEST also having a significant subscriber base. They
compete for circulation on the basis of editorial content and quality against
such publications as SOAP OPERA NEWS and SOAP OPERA MAGAZINE, both of which have
substantially lower circulation.

SEVENTEEN is the leading young women's fashion and beauty magazine based on
both circulation and advertising pages, with fashion, boys, beauty, talent and
lifestyle editorial targeted to girls aged 12 to 19. SEVENTEEN's monthly rate
base is 2.3 million; it is the largest circulation teen and fashion and beauty
magazine in the United States. Its principal competitor is YM. SEVENTEEN
competes for circulation based on the nature and quality of its editorial.

AMERICAN BABY, a baby care publication distributed monthly to approximately
1.7 million expectant and new parents, contains articles on all aspects of
pregnancy and baby care. While the magazine competes with PARENTS, PARENTING and
CHILD for the larger childcare market, AMERICAN BABY'S principal competitor is
BABY TALK. AMERICAN BABY also offers several ancillary products including
sampling and couponing programs and a cable television show.

The Company's other specialty consumer magazines include AUTOMOBILE, which
caters to the high-end automotive market, MODERN BRIDE, a guide to bridal
fashions, home furnishings and honeymoons, the city magazines NEW YORK and
CHICAGO, TRUCKIN', the leading truck customization publication, SEW NEWS, the
premier sewing title and DOG WORLD, the leading publication for dog breeders.
The Company's sales of the automotive titles are primarily newsstand driven; the
sewing and crafts titles are primarily sold by subscription, and the other
titles have significant sales both by subscription and on the newsstand.
Subscriptions are obtained using printed advertisements, direct mail,
clearinghouses and subscription cards in each magazine.

In 1997, the Company acquired CONTEMPORARY BRIDE OF DETROIT, SHOTGUN NEWS,
SURFING, CAR AUDIO AND ELECTRONICS, VETTE, MUSCLE MUSTANGS, LOW RIDER, and
several other related titles. The Company, on January 8, 1998, executed a
definitive agreement with McClatchy Newspapers, Inc. and Cowles Media Company
(the "Cowles Transaction") to acquire Cowles Enthusiast Media consisting of
specialty consumer magazines.

Readers value specialty consumer magazines for their editorial content and
also rely on them as a catalog of products in the relevant topic area. This
catalog aspect makes the specialty consumer magazines an important media buy for
advertisers. Advertising sales for the Company's specialty consumer magazines
are generated by a combination of in-house staff and outside advertising firms.
The magazines compete for advertising on the basis of circulation and the niche
markets they serve. Each of the Company's specialty consumer magazines faces
competition in its subject area from a variety of publishers, and competes for
readers on the basis of high quality, targeted editorial, which is provided by
in-house writers and freelance authors.

In 1997, SEVENTEEN established a brand licensing program centered around the
launch of select categories of SEVENTEEN-branded merchandise. This merchandise
will begin to appear in retail outlets in mid-1998.

With the 1997 launch of websites for SOAP OPERA DIGEST (www.soapdigest.com)
and NEW YORK MAGAZINE (www.newyorkmag.com), the Company now has websites for the
vast majority of its specialty consumer magazines.

In 1997, the Company launched numerous special issues of titles including,
but not limited to, SEVENTEEN, AUTOMOBILE MAGAZINE, HORTICULTURE and TRUCKIN'.

TECHNICAL AND TRADE MAGAZINES

The Company publishes 65 technical and trade magazines that provide vital
information to professionals in fields such as telecommunications (TELEPHONY and
WIRELESS REVIEW), agriculture (SOYBEAN DIGEST), transportation (FLEET OWNER) and
real estate (NATIONAL REAL ESTATE INVESTOR). In 1997, 31 of these publications
ranked number one, and approximately 72% of these publications ranked number one
or two, in the fields they serve based on advertising pages. These magazines are
distributed primarily on a "controlled circulation" basis to members of a
targeted industry group and provide career and business-enhancing technical and
tutorial editorial content. Capitalizing on the centralized circulation,
fulfillment, production and other back office services, new titles can be
spun-off from existing titles or acquired and integrated.

During 1997, approximately 78% of the sales of the technical and trade
titles were generated from advertising. Because each of the technical and trade
magazines is distributed almost exclusively to purchasing decision makers in a
targeted industry group, product and service providers are able to focus their
advertising. The advertising rates charged are based on the size of the
circulation within the target group as well as competitive factors. These
magazines compete for advertising on the basis of advertising rates,
circulation, reach, editorial content and readership commitment. Advertising
sales are made by in-house sales forces, supplemented by independent
representatives in selected regions and overseas.

Classified advertising is sold through telemarketing. Magazine editorial is
provided by in-house writers and freelance authors, well-known in their specific
industry niches.

In 1997, the Company announced a joint venture with Cheng Cheng Enterprises
Holdings (China) Ltd. to publish technical and trade magazines in China.
Additionally, the company acquired both Cardinal Business Media, Inc., a leading
publisher of technical entertainment business magazines and REGISTERED
REPRESENTATIVE, the leading magazine for retail brokers. As part of the Cowles
Transaction, the Company will acquire Cowles Business Media consisting of 11
technical and trade magazine titles and 15 trade shows.

In addition to its technical and trade magazines, the Company sponsors
seminars and trade shows, including LIGHTING DIMENSIONS INTERNATIONAL,
INTERNATIONAL WIRELESS COMMUNICATIONS EXPO and THE SATELLITE COMMUNICATIONS EXPO
& CONFERENCE, serving the advertisers and readers of the corresponding
publications.

In the technical and trade magazine segment, the Company launched numerous
new media products including 14 websites and a CD-ROM for ELECTRICAL
WHOLESALING.

In 1997, the Company introduced several new products. These include Internet
sites for SOAP OPERA DIGEST (WWW.SOAPDIGEST.COM), NEW YORK (WWW.NEWYORKMAG.COM),
and 14 other sites for technical and trade magazines. Many of these sites carry
paid advertising. The Company also launched a brand licensing program at
SEVENTEEN magazine.

EDUCATION

The Company is a leading provider of supplemental educational materials and
programming in the United States, targeting both classroom and workplace
learning. PRIMEDIA's best-known brands in classroom learning include CHANNEL ONE
and WEEKLY READER, and in workplace learning, PRIMEDIA Workplace Learning,
formerly known as Westcott Communications. Classroom learning takes advantage of
the growth in spending on supplementary educational materials and the projected
increases in elementary and secondary school enrollments over the next decade
(in particular, school enrollments are expected to rise 7% between 1995 and
2005). Workplace learning focuses on the $69 billion training market of which
the outsourced segment is the fastest growing portion, expected to rise 142%
between 1995 and 2005.

CLASSROOM LEARNING

The Company operates CHANNEL ONE NETWORK, WEEKLY READER and Films for the
Humanities and Sciences ("Films").

CHANNEL ONE'S NETWORK news program, CHANNEL ONE NEWS, is the only daily news
program targeted to secondary school students. CHANNEL ONE NEWS broadcasts every
school day via satellite to over eight million students and 350,000 educators in
approximately 12,000 secondary schools in the United States. CHANNEL ONE NETWORK
pioneered the delivery of world events and educational programming into
classrooms via satellite. Its award-winning daily news broadcast reaches more
students than any other electronically delivered educational product. CHANNEL
ONE NEWS has ten times the audience of the evening newscasts of ABC, CBS, NBC
and cable networks.

Schools sign up for the CHANNEL ONE NETWORK service under a three-year
contract pursuant to which they agree to show CHANNEL ONE NEWS, in its entirety,
on at least 90% of all school days. CHANNEL ONE NETWORK provides to schools a
turnkey system of video cassette recorders and networked televisions. These
products and services are provided to schools at no charge; sales are generated
by two minutes of advertising shown during the 12-minute daily newscast.
Substantially all school contracts have come up for renewal at least once and
approximately 99% have been renewed in each renewal cycle.

CHANNEL ONE NEWS is produced at CHANNEL ONE NETWORK'S Los Angeles studio,
using staff anchors and correspondents who report from U.S. and international
locations. CHANNEL ONE NETWORK has a library of over 1,500 broadcasts including
approximately 200 single subject series, 60 of which have been released as
educational videos.

CHANNEL ONE NEWS has no direct competition in the schools but does compete
for advertising dollars with other media aimed at teenagers. The Company's
primary competitive advantage is its total audience of over eight million
teenagers each school day. For 1997, approximately 64% of CHANNEL ONE NEWS'
advertising sales were from contracts having terms of three or more years. The
top five advertisers in 1997 by dollars were PepsiCo, M&M Mars, Quaker Oats,
Reebok, and Nintendo, which together accounted for approximately 56% of
advertising sales, and 93% of which was pursuant to multi-year contracts
expiring between June 1998 and December 1999.

CHANNEL ONE'S THE CLASSROOM CHANNEL offers a range of instructional
programming to enhance the schools' curriculum. THE CLASSROOM CHANNEL offers an
average of 80 minutes of daily programming at no charge to schools. In 1997,
CHANNEL ONE NETWORK expanded its franchise by expanding the distribution of THE
COLLEGE CHANNEL, a college preparation service produced in conjunction with The
Princeton Review, to more than 5,000 high schools; increasing the traffic on its
CHANNELONE.COM on-line network by more than 100%; licensing its programming in
Thailand; and renewing its weekly ONEZONE news program for a second broadcast
season on public television. Additionally, in 1997, CHANNEL ONE NETWORK acquired
Cover Concepts, a publisher of customized school book covers.

WEEKLY READER is the best-known and highest-circulation student newspaper in
the United States, with over 6.6 million subscriptions for elementary school
students alone. WEEKLY READER and its related products are sold in approximately
70% of all elementary schools and 59% of all secondary schools, and for the
1996-1997 school year had a 55% share of the elementary school market and a 38%
share of the secondary school market.

Eight separate editions of WEEKLY READER, each consisting of 26 issues per
year, are distributed to elementary school students. Each edition is written and
designed for a particular reading and comprehension level in order to bring
current world news to children at a level commensurate with their comprehension
abilities. A teacher's guide with background information, discussion topics and
follow-up questions is included with each edition. In order to capitalize on its
large teacher and school customer base for organic growth, WEEKLY READER
launched SCIENCE SPIN, an optional monthly supplement with separate editions for
grades K to 6. SCIENCE SPIN achieved an initial circulation of 510,000 in its
first year of publication. Every full-color issue contains current and
interesting science news tailored to student reading levels and the school
curriculum.

For the secondary school market, WEEKLY READER publishes eight other
periodicals: READ MAGAZINE, WRITING, CURRENT EVENTS, CURRENT SCIENCE, CURRENT
HEALTH I AND II, CAREER WORLD and KNOW YOUR WORLD EXTRA. These periodicals
provide current information and skills practice in the curriculum areas of
language arts, science, health and remedial reading. Editorial materials for
these publications are generated by in-house writers and freelance authors. The
Company's main competitors in these markets are Scholastic Corporation and Time
Warner, Inc. WEEKLY READER generally competes on the basis of editorial quality,
content and value.

Films is the exclusive distributor of approximately 6,500 educational videos
as well as videodiscs, CD-ROMs and related products that are sold primarily by
direct mail to teachers, instructors and librarians serving primarily grades 8
to 12 and college markets. Films is the largest distributor of such products to
colleges and high schools and competes on the basis of quality and breadth of
the subject matter. In 1997, Films acquired the exclusive right to distribute
the non-theatrical British Broadcasting Corporation videos to the U.S. education
markets.

WORKPLACE LEARNING

PRIMEDIA Workplace Learning, formerly Westcott Communications, Inc., is a
leading provider of high quality workplace educational materials including video
programming, print and computer based products. PRIMEDIA Workplace Learning has
approximately 20,000 corporate and institutional subscribers. The group's
satellite-delivered and video programming reaches three million professionals
each year on more than 20 networks and is the premier provider of
electronically-delivered workplace training in such fields as automotive,
healthcare, banking, and insurance.

The Company's leading networks include the Executive Education Network
("EXEN") and the Interactive Medical Networks ("IMN"). EXEN delivers executive
education courses taught by professors from leading business schools including
Harvard University, Columbia University and the University of Southern
California to corporate and professional clients nationwide. In 1997, EXEN
expanded internationally with its first live EXEN broadcast featuring expert
leadership strategist John Kotter of Harvard. IMN offers a variety of live
programming, telecourses and other video products, including graduate degree
courses, in-service training and accredited continuing education programming,
designed to reach multiple target audiences within the hospital setting.

In 1997, PRIMEDIA Workplace Learning launched two networks: the WORKPLACE
TRAINING NETWORK ("WTN") which provides satellite-delivered information on
industrial safety and training and the PRIMEDIA FINANCIAL NETWORK ("PFN") which
provides training for financial professionals, delivered by satellite and video.

PRIMEDIA Workplace Learning does not have any multi-industry competitors in
the workplace learning market. The Company competes with a number of businesses
and governmental agencies that provide videotaped training material, consulting
services and instruction via television, print, video, Internet or seminars.

In 1997, PRIMEDIA Workplace Learning acquired Pictorial, the largest
provider of specialized training and certification products for the insurance
industry and QWIZ, the leading provider of computer-based office skills testing.
Both acquisitions add critical training and testing expertise in growth
industries.

INFORMATION

The Company produces over 170 highly targeted consumer and business
information products, most of which hold dominant positions in their niche
markets. The Company's premier consumer information products include APARTMENT
GUIDES, THE WORLD ALMANAC and such specialty reference products as FACTS ON FILE
NEWS SERVICES which is used by public and institutional libraries. Its leading
business directories include BACON'S for public relations professionals and
NELSON for financial professionals.

The growth in advertising supported consumer information (E.G.--targeted
free publications, such as the APARTMENT GUIDES) is being driven by the desire
of advertisers to reach their customers as cost effectively as possible. From
1995 to 2005, advertising revenue generated from free shopping guides is
expected to nearly double. Consequently, APARTMENT GUIDES and PRIMEDIA's other
targeted free publications should continue to provide significant opportunities
for growth through new ventures and acquisitions. Business directories
capitalize on the growth in business spending on information which is expected
to increase 8% on a compound annual basis, between 1995 and 2005.

CONSUMER INFORMATION

The Company publishes over 70 consumer directories and specialized reference
products. These products are distributed nationally in retail outlets and are
sold to public and institutional libraries. The Company publishes and
distributes consumer guides in three categories: rental apartments, new homes

and computer shopping. The Company's leading reference products include THE
WORLD ALMANAC, FACTS ON FILE NEWS SERVICES and the Gareth Stevens line of
juvenile reference works.

The Company is the leading publisher of rental apartment guides in the
United States with 63 local versions of its apartment guides, each of which is
published no less frequently than quarterly and provides informational listings
about featured apartment communities. All listed apartments are carried on the
Internet at WWW.APTGUIDES.COM. These listings are paid for by apartment
community managers, who need to fill vacant apartments, and who represent 100%
of the apartment guide sales. The Company is the dominant information provider
in apartment guides. The Company's only national competitor, FOR RENT, is
present in 37 of the Company's markets. In those markets, on average, the
Company captured 52% of total 1997 advertising pages, with FOR RENT capturing
43% of such advertising pages.

In 1997, the Company acquired apartment guides in Dayton, Nashville, Memphis
and Little Rock, and made its most successful launch ever in Salt Lake City.
Additionally, the Company acquired a new homes guide in Austin.

The Company's DistribuTech Division is the nation's largest distributor of
free publications, including its own consumer directories and over 600 other
titles. In 1997, it managed the distribution of its and other publishers' free
publications to over 19,000 grocery, convenience and drug stores in 65 U.S.
cities, as well as universities, military bases and major employers. The
majority of these locations are operated under exclusive distribution
agreements. The Company's consumer information guides typically are displayed in
free standing, multi-pocket racks. DistribuTech generates substantial revenues
by leasing additional distribution rack pockets to other publications that it
also distributes. DistribuTech competes on the basis of its prime retail
locations for its rack program.

THE WORLD ALMANAC is the leading almanac in the English language ranked by
unit sales and data content with approximately 1.0 million copies of the 1998
edition sold as of December 31, 1997. In 1997, the Company published the third
annual edition of THE WORLD ALMANAC FOR KIDS, which sold approximately 220,000
copies. THE WORLD ALMANAC licenses its content for use on seven CD-ROM products
and six on-line services. The Company's World Almanac Education Division sells
reference books to the school and library market by catalog. Facts On File News
Services publishes subscription products that are sold to schools and libraries.
The flagship product, WORLD NEWS DIGEST, published weekly, is available in
print, CD-ROM and on-line formats, and has a subscriber base of approximately
7,000.

Gareth Stevens, a publisher and distributor of juvenile reference works and
a distributor of multi-media products, was acquired by the Company in February
1997. Gareth Stevens has a title list of approximately 800 titles and its market
focus is North America's primary and secondary school libraries and public
libraries. Funk & Wagnalls' New Encyclopedia licenses its editorial content, for
electronic delivery, to Microsoft Corporation as the textual basis for
Microsoft's ENCARTA CD-ROM product and for use on four CD-ROM products and five
on-line services. The Company experiences competition for its reference products
from other print and electronic products from a variety of publishers.

BUSINESS INFORMATION

The Company publishes nearly 100 specialized directories and databases
focused on the specialized information needs of professionals in such areas as
commerce, public relations, and transportation. The databases are compiled by an
in-house editorial staff, marketed directly to subscribers and advertisers
primarily by an in-house sales staff and distributed predominantly on a paid
subscription basis. Products are available in the most appropriate format for
the customer: Internet, CD-ROM, or print. The Company's Bacon's Information,
Inc. publishes MEDIASOURCE, a CD-ROM directory for public relations and media
professionals, as well as print directories including BACON'S INTERNATIONAL
MEDIA DIRECTORY and BACON'S BUSINESS MEDIA DIRECTORY. To complement its public
relations directories, the Company operates a periodicals clipping service.
NELSON is a premier brand name in the institutional investment industry,

providing specialized investment research and management information through
products such as INSTITUTIONAL MARKETPLACE FOR WINDOWS.

The Company also publishes newsletters that provide in-depth information on
selected markets. WARD'S AUTOMOTIVE REPORTS is recognized as the authoritative
source for industry-wide statistics on automotive production and sales. This
newsletter competes on the basis of the nature and quality of its editorial
content. In addition, the Company publishes, in print and electronic formats,
used vehicle valuation information. Other databases include THE ELECTRONICS
SOURCE BOOK and AC-U-KWIK.

Most of the business directories published by the Company have no
competition. Where competition does exist, in most cases, the Company's
publication is dominant. Competition is on the basis of price and quality of
data. Management believes that the comprehensiveness and quality of its data and
the specialized focus of its publications have prevented others from launching
competing publications or competing effectively.

In 1997, the Company acquired INTELLICHOICE, the leading provider of
Internet-based automobile cost information over the life of the automobile.

In 1997, the Company released several CD-ROM products, including THE
BLUEBOOK OF LOGISTICS EXECUTIVES and ELECTRICAL WHOLESALING.

NON-CORE BUSINESSES SOLD

As part of its strategy to focus on areas of its business that have the
greatest potential for growth, the Company divested certain businesses that did
not fit within its growth vehicles. Those businesses are: Krames Communications,
the Katharine Gibbs Schools, Newbridge Book Clubs, Newbridge Educational
Publishing, NEW WOMAN magazine, STAGEBILL, and Intertec Mailing Services. The
Company intends to divest THE DAILY RACING FORM, a national daily newspaper
covering thoroughbred horse racing.

PRODUCTION AND FULFILLMENT

Virtually all of the Company's print products are printed and bound by
independent printers. The Company believes that outside printing services at
competitive prices are readily available. With the exception of PRIMEDIA
Workplace Learning and Films, which produce video products in-house, and most
Internet sites, all other production of electronic and video products is
performed by third party vendors.

The principal raw material used in the Company's products is paper. The
Company has paper supply contracts and, in almost all cases, supplies paper used
by its outside printers. The Company believes that even if at some point in the
future paper is in limited supply, the existing arrangements providing for the
supply of paper will be adequate. The Company was able to meet its paper
requirements during 1997. In 1997, approximately 39% and 34% of the Company's
paper purchases were supplied through Lindenmeyr Central and Bulkley Dunton,
respectively. The Company's relationship with these suppliers is good and is
expected to continue to be good for the foreseeable future.

Many of the Company's products are packaged and delivered to the U.S. Postal
Service directly by the printer. Other products are sent from warehouses and
other facilities operated by the Company.

COMPANY ORGANIZATION

PRIMEDIA was incorporated on November 22, 1991 in the State of Delaware. The
principal executive office of the Company is located at 745 Fifth Avenue, New
York, New York 10151, telephone number (212) 745-0100.

EXECUTIVE OFFICERS

The following table sets forth certain information regarding the executive
officers of PRIMEDIA:

NAME AGE POSITION(S)
- ----------------------------------------------------- --- -----------------------------------------------------

William F. Reilly.................................... 59 Chairman of the Board and Chief Executive Officer and
Director
Charles G. McCurdy................................... 42 President and Director
Beverly C. Chell..................................... 55 Vice Chairman, General Counsel, Secretary and
Director
Jack L. Farnsworth................................... 52 Executive Vice President
James A. Warner...................................... 44 Vice President
Richard J. LeBrasseur................................ 55 Vice President
Michaelanne C. Discepolo............................. 45 Vice President, Human Resources
George Philips....................................... 67 Vice President
Douglas B. Smith..................................... 37 Vice President and Treasurer
Curtis A. Thompson................................... 46 Vice President and Controller

Mr. Reilly is Chairman of the Board, Chief Executive Officer and a Director
of PRIMEDIA and has served in such capacities since November 1991. Mr. Reilly is
also a director of FMC Corporation.

Mr. McCurdy is President and a Director of PRIMEDIA and has served in such
capacities since November 1991 and was Treasurer from 1991 to August 1993.

Ms. Chell is Vice Chairman, General Counsel, Secretary and a Director of
PRIMEDIA. Ms. Chell has served as Vice Chairman, General Counsel and Secretary
since November 1991 and as a Director since March 1992. She is also a director
of Mecklermedia Corporation.

Mr. Farnsworth has been Executive Vice President of PRIMEDIA since May 1997,
Vice President of PRIMEDIA since May 1992, President of PRIMEDIA Information
Group since May 1992 and President of PRIMEDIA Workplace Learning, Inc. since
June 1996.

Mr. Warner has been a Vice President of PRIMEDIA since March 1998 and
President of PRIMEDIA Specialty Magazines since February 1998. Prior to that
time, he was President of the CBS Television Network starting in 1995. From 1989
to 1995 he was President of CBS Enterprises.

Mr. LeBrasseur has been a Vice President of PRIMEDIA since March 1998,
President of the Supplemental Education Group since October 1997 and President
and Chief Executive Officer of Weekly Reader Corporation since April 1993.

Ms. Discepolo is Vice President, Human Resources of PRIMEDIA.

Mr. Philips has been a Vice President of PRIMEDIA since May 1992.

Mr. Smith has been a Vice President of PRIMEDIA since May 1997 and Treasurer
of PRIMEDIA since August 1993. Prior to that time he was at The Bank of New York
starting in 1982 holding various positions. He held the position of Senior Vice
President prior to joining PRIMEDIA.

Mr. Thompson is a Vice President and Controller of PRIMEDIA and has served
in such capacities since November 1991.

The business address of the above executive officers of the Company is the
address of the principal executive office of PRIMEDIA.

EMPLOYEES

As of December 31, 1997, the Company had approximately 6,300 full- and
part-time employees, of whom approximately 20 were union members. Management
considers its relations with its employees to be good.

ITEM 2. PROPERTIES.

The Company's principal leased properties used by the education segment are
located in California, Connecticut, Iowa, New Jersey, New York, Tennessee and
Texas; used by the information segment are in Arizona, California, Georgia,
Illinois, Indiana, Iowa, Maryland, New Jersey, New York, Ohio and Wisconsin; and
used by the specialty magazines segment are in Alabama, California, Colorado,
Connecticut, Georgia, Illinois, Kansas, Massachusetts, Michigan, Minnesota,
Mississippi, New York, Pennsylvania and Texas. Property is owned by the Company
and used in the information segment in New Jersey and Georgia and in the
specialty magazines segment in California, Illinois and Missouri. The Company's
only production facilities are small printing operations for THE DAILY RACING
FORM and Films, broadcast production facilities for PRIMEDIA Workplace Learning
and CHANNEL ONE and video duplicating facilities for PRIMEDIA Workplace Learning
and Films. The Company's distribution properties and their capacity is adequate
to satisfy the Company's needs.

ITEM 3. LEGAL PROCEEDINGS.

There are no material pending legal proceedings and no material legal
proceedings including any that were terminated in the fourth quarter of 1997, to
which the Company is or was a party other than ordinary routine litigation
incidental to the business of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no matters submitted to a vote of security holders during the
fourth quarter of 1997.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

PRIMEDIA Common Stock is listed on the New York Stock Exchange. As of
February 19, 1998, there were 323 holders of record of PRIMEDIA Common Stock.
The Company has not and has no present intention to pay dividends on its Common
Stock. High and low sales prices for 1997 and 1996 were as follows:

1997 SALES PRICE
--------------------
QUARTER ENDED HIGH LOW
- -------------------------------------------------------------------- --------- ---------

March 31............................................................ $ 12 3/4 $ 9 1/2
June 30............................................................. $ 13 1/8 $ 10
September 30........................................................ $ 12 3/4 $ 10 3/4
December 31......................................................... $ 13 7/16 $ 11 5/8

1996 SALES PRICE
--------------------
QUARTER ENDED HIGH LOW
- -------------------------------------------------------------------- --------- ---------

March 31............................................................ $ 12 5/8 $ 11 1/4
June 30............................................................. $ 12 7/8 $ 10 5/8
September 30........................................................ $ 12 5/8 $ 10
December 31......................................................... $ 11 5/8 $ 8 1/2

On September 26, 1997, PRIMEDIA completed a private offering of 1,250,000
shares of $9.20 Series E Exchangeable Preferred Stock Redeemable 2009, par value
$.01 per share, liquidation preference $100 per share (the "Series E Preferred
Stock"). All shares of the Series E Preferred Stock were sold initially to
Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Brothers Inc., as the placement agents (the "Placement
Agents"). The Placement Agents subsequently sold the Series E Preferred Stock to
qualified institutional buyers and accredited investors in reliance on Rule 144A
and Regulation S under the Securities Act of 1933, as amended. The aggregate
offering price for the Series E Preferred Stock was $125 million; and the net
proceeds to PRIMEDIA, after deduction of discounts, commissions and expenses,
were approximately $121.5 million. The net proceeds were used to redeem the
4,000,000 outstanding shares of $2.875 Senior Exchangeable Preferred Stock of
PRIMEDIA, par value $.01 per share, liquidation preference $25.00 per share on
November 3, 1997 at a redemption price of $26.45 per share plus accrued and
unpaid dividends to the redemption date and to repay borrowings outstanding
under PRIMEDIA's Bank Credit Facilities (as defined herein). Pursuant to a
Registration Rights Agreement between PRIMEDIA and the Placement Agents,
PRIMEDIA caused to become effective on January 16, 1998 a Registration Statement
(Registration No. 333-38451) for 1,250,000 shares of $9.20 Series F Exchangeable
Preferred Stock Redeemable 2009, par value $.01 per share, liquidation
preference $100 per share (the "Series F Preferred Stock"). The shares of Series
F Preferred Stock are exchangeable into 9.20% Class F Subordinated Exchange
Debentures due 2009, in whole but not in part, at the option of PRIMEDIA. The
exchange of shares of Series E Preferred Stock in exchange for Series F
Preferred Stock was completed on February 17, 1998. There were no cash proceeds
to PRIMEDIA from such exchange.

ITEM 6. SELECTED FINANCIAL DATA.

The selected consolidated financial data were derived from the consolidated
financial statements of the Company which are included elsewhere in this Annual
Report. The data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and the related notes thereto included herein.

PRIMEDIA INC. AND SUBSIDIARIES

YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

OPERATING DATA:
Sales, net....................................... $1,487,595 $ 1,374,449 $ 1,046,329 $ 964,648 $ 844,748
Depreciation and amortization.................... 184,165 190,702 192,276 136,866 143,267
Other charges(1)................................. 138,640 -- 50,114 15,025 2,644
Operating income (loss)(2)....................... (20,793) 85,901 (26,275) 10,203 (7,669)
Interest expense................................. 136,625 124,601 105,837 78,351 74,336
Income tax benefit(3)............................ 1,685 53,300 59,600 42,100 --
Income (loss) before extraordinary charge........ (157,439) 17,597 (75,435) (29,529) (86,496)
Extraordinary charge-extinguishment of debt(4)... (15,401) (9,553) -- (11,874) --
Net income (loss)(2)............................. (172,840) 8,044 (75,435) (41,403) (86,496)
Preferred stock dividends(5)..................... 65,073 43,526 28,978 25,959 22,290
Loss applicable to common shareholders........... (237,913) (35,482) (104,413) (67,362) (108,786)
Basic and diluted loss applicable to common
shareholders per common share(2)(6):
Loss before extraordinary charge............... $ (1.72) $ (.20) $ (.92) $ (.55) $ (1.22)
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------
Net loss....................................... $ (1.84) $ (.27) $ (.92) $ (.67) $ (1.22)
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------
Basic and diluted common shares outstanding...... 129,304,900 128,781,518 113,218,711 101,171,427 89,295,531
OTHER DATA:
EBITDA(7)........................................ $ 302,012 $ 276,603 $ 216,115 $ 162,094 $ 138,242
Capital expenditures, net........................ 31,108 28,790 23,414 14,184 11,485
Net cash provided by operating activities........ 125,360 150,192 64,062 64,890 27,072
Net cash used in investing activities............ (185,725) (721,709) (318,712) (442,126) (95,669)
Net cash provided by financing activities........ 46,688 580,946 263,644 383,924 63,579

AT DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 22,978 $ 36,655 $ 27,226 $ 18,232 $ 11,544
Working capital (deficiency)(8).................. (146,245) (44,705) (56,560) 1,338 3,605
Intangible assets, gross......................... 2,508,650 2,649,805 1,996,564 1,656,590 1,343,482
Less: accumulated amortization............... 736,597 896,824 762,393 602,542 504,538
---------- ----------- ----------- ----------- -----------
Intangible assets, net........................... 1,772,053 1,752,981 1,234,171 1,054,048 838,944
Total assets..................................... 2,485,990 2,552,215 1,881,416 1,589,692 1,166,502
Long-term debt(9)................................ 1,656,541 1,565,686 1,134,916 1,034,689 661,297
Exchangeable preferred stock..................... 470,280 442,729 231,606 216,229 202,453
Common stock subject to redemption............... 4,376 5,957 28,022 16,552 25,287
Shareholders' equity (deficiency):
Common stock................................. 1,298 1,283 1,259 1,053 947
Additional paid-in capital................... 780,191 772,642 748,194 572,940 488,541
Accumulated deficit.......................... (929,011) (691,098) (655,616) (551,203) (483,841)
Cumulative foreign currency translation
adjustments................................ (1,543) (1,270) (1,275) (1,324) (1,220)
Common stock in treasury, at cost............ (13,158) -- -- -- --
---------- ----------- ----------- ----------- -----------
Total shareholders' equity (deficiency).......... $ (162,223) $ 81,557 $ 92,562 $ 21,466 $ 4,427
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------

(See notes on the following page)

NOTES TO SELECTED FINANCIAL DATA

(1) Represents net provision for loss on the sales of businesses in 1997, 1995
and 1994, provision for restructuring and other costs in 1995 and provision
for write-down of real estate no longer utilized in 1993.

(2) The adoption of a change in method of accounting for direct-response
advertising costs effective July 1, 1994, resulted in an increase in
operating income (decrease in operating loss), an equal decrease in net loss
(increase in net income) and a decrease in basic and diluted loss per common
share of approximately $3,128 ($.02 per share), $2,000 ($.02 per share),
$11,800 ($.10 per share) and $9,800 ($.10 per share) for the years ended
December 31, 1997, 1996, 1995 and 1994, respectively.

(3) At December 31, 1997, 1996, 1995 and 1994, management of the Company
reviewed recent operating results for the years then ended and projected
future operating results for the years through December 31, 2003. At
December 31, 1997, the Company's management determined that no adjustment to
net deferred income tax assets was required. In prior years, management
determined that a portion of the net deferred income tax assets at December
31, 1996, 1995 and 1994 would likely be realized. Accordingly, the Company
recorded an income tax benefit of $53,300 in 1996, $59,600 in 1995 and
$42,100 in 1994. For the year ended December 31, 1997, the Company recorded
an income tax carryback claim of $1,685. At December 31, 1997, the Company
had net operating loss carryforwards ("NOLs") of approximately $749,000
which will be available to reduce future taxable income. In addition to the
NOLs, management estimates that approximately $864,000 of unamortized
goodwill and other intangible assets will be available as deductions from
any future taxable income.

(4) Represents the write-off of unamortized deferred financing costs. For the
years ended December 31, 1997 and 1996, amount also includes the premiums
paid on the redemptions of the 10 5/8% Senior Notes.

(5) In 1997, the Company recorded a preferred stock dividend accrual in the
amount of $9,517. Of the total dividend accrual recorded in 1997, the
amounts that relate to prior periods were not material.

(6) Basic and diluted loss per common share, as well as the basic and diluted
common shares outstanding, were computed as described in Note 17 of the
notes to the audited consolidated financial statements included elsewhere in
this Annual Report. Previously reported loss per share amounts have been
restated as required by the adoption of a new accounting pronouncement.

(7) Earnings before interest, taxes, depreciation, amortization and provision
for one-time charges ("EBITDA") is not intended to represent cash flow from
operations and should not be considered as an alternative to net income
(loss) as an indicator of the Company's operating performance or to cash
flows as a measure of liquidity. The Company believes EBITDA is a standard
measure commonly reported and widely used by analysts, investors and other
interested parties in the media industry. Accordingly, this information has
been disclosed herein to permit a more complete comparative analysis of the
Company's operating performance relative to other companies in its industry.
This measure may not be comparable to similarly titled measures used by
other companies.

(8) Includes current maturities of long-term debt and assets held for sale.

(9) Excludes current maturities of long-term debt.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS).

INTRODUCTION

The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's
historical consolidated financial statements and notes thereto included herein.
The Company organizes its businesses into three segments: specialty magazines,
education and information. The specialty magazines segment has in prior periods
been referred to as the specialty media segment, but the Company believes the
new name is more reflective of the focus of the segment.

Management believes a meaningful comparison of the results of operations for
1997, 1996 and 1995 is obtained by using segment information. This year, the
Company begins presenting results from continuing businesses ("Continuing
Businesses") which exclude the results of the non-core businesses ("Non-Core
Businesses"), which are either sold businesses or businesses held for sale. The
Non-Core Businesses include Krames Communications Incorporated ("Krames"), The
Katharine Gibbs Schools, Inc. ("Katharine Gibbs"), NEW WOMAN, Intertec Mailing
Services, Newbridge Communications, Inc. (excluding Films for the Humanities and
Sciences), and STAGEBILL which have been divested and THE DAILY RACING FORM
which is being held for sale. Management believes that this presentation is the
most useful way to analyze the historical trends of its businesses.

SELECTED FINANCIAL DATA

PRIMEDIA is a targeted information company, focused on highly specialized
niches of the specialty magazine, education and information markets.

SPECIALTY MAGAZINES (57.9% of sales from Continuing Businesses, 67.0% of
operating income from Continuing Businesses before corporate overhead and 50.5%
of EBITDA from Continuing Businesses before corporate overhead): Includes 67
specialty consumer magazines such as SEVENTEEN, SOAP OPERA DIGEST, NEW YORK,
CHICAGO, AMERICAN BABY and LOW RIDER plus 65 technical and trade magazines
including TELEPHONY, FLEET OWNER and REGISTERED REPRESENTATIVE.

This group focuses on reaching enthusiasts, or those interested in the key
topics (hobbies, lifestyles, industry, etc.) that its customers demand, while
providing its advertisers with the most efficient mechanism for reaching the
targeted audience through print, Internet and other allied products.

EDUCATION (18.6% of sales from Continuing Businesses, 5.2% of operating
income from Continuing Businesses before corporate overhead and 22.9% of EBITDA
from Continuing Businesses before corporate overhead): Includes classroom
learning products such as CHANNEL ONE NEWS, WEEKLY READER and Films for the
Humanities and Sciences, plus PRIMEDIA Workplace Learning (formerly Westcott
Communications, Inc.).

The classroom learning group targets grades Kindergarten through 12 with
highly targeted supplemental periodical, video and network products to help
teach students. The workplace learning group is the leading provider of high
quality workplace learning programs in such fields as healthcare, automotive,
banking and insurance.

INFORMATION (23.5% of sales from Continuing Businesses, 27.8% of operating
income from Continuing Businesses before corporate overhead and 26.6% of EBITDA
from Continuing Businesses before corporate overhead): Includes over 70 consumer
guides such as APARTMENT GUIDES, MICROTIMES and new homes guides; specialized
reference products such as THE WORLD ALMANAC and Facts On File News Services;
and nearly 100 specialized directories.

The information segment produces consumer and business information products
in a variety of formats for decision makers in business, professional and
special interest consumer markets. The information is compiled and sold as
reference works, CD-ROMs, almanacs and directories.

In 1997, PRIMEDIA executed a focusing program to accelerate growth, divest
Non-Core Businesses, and strengthen its balance sheet. Proceeds from the sales
of the Non-Core Businesses, excluding THE DAILY RACING FORM which is expected to
be sold in 1998, were $171,575 net of direct selling expenses. The Company
incurred a provision for loss on sales of businesses in the 1997 third quarter
of $138,640, primarily associated with the write-down of the net assets of THE
DAILY RACING FORM.

Additional selected financial data for the Company organized on the
foregoing basis are presented below:

YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------

Sales, Net:
Continuing Businesses:
Specialty Magazines............................................... $ 718,134 $ 635,392 $ 409,308
Education......................................................... 230,057 181,972 127,660
Information....................................................... 292,053 249,936 202,240
------------ ------------ ------------
Subtotal........................................................ 1,240,244 1,067,300 739,208
Non-Core Businesses................................................... 247,351 307,149 307,121
------------ ------------ ------------
Total........................................................... $ 1,487,595 $ 1,374,449 $ 1,046,329
------------ ------------ ------------
------------ ------------ ------------

Depreciation, Amortization and Other Charges(1):
Continuing Businesses:
Specialty Magazines............................................... $ 66,134 $ 71,424 $ 53,347
Education......................................................... 64,326 51,706 77,320
Information....................................................... 45,276 37,306 54,052
Corporate......................................................... 99 779 703
------------ ------------ ------------
Subtotal........................................................ 175,835 161,215 185,422
Non-Core Businesses................................................... 146,970 29,487 56,968
------------ ------------ ------------
Total........................................................... $ 322,805 $ 190,702 $ 242,390
------------ ------------ ------------
------------ ------------ ------------

Operating Income (Loss):
Continuing Businesses:
Specialty Magazines............................................... $ 91,295 $ 64,971 $ 36,504
Education......................................................... 7,130 7,232 (32,126)
Information....................................................... 37,823 36,668 4,513
Corporate......................................................... (25,644) (22,276) (17,737)
------------ ------------ ------------
Subtotal........................................................ 110,604 86,595 (8,846)
Non-Core Businesses................................................... (131,397) (694) (17,429)
------------ ------------ ------------
Total........................................................... (20,793) 85,901 (26,275)

(CONTINUED ON FOLLOWING PAGE)

YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
Other Income (Expense):

Interest expense...................................................... (136,625) (124,601) (105,837)
Amortization of deferred financing and organizational costs........... (3,071) (3,662) (3,135)
Other, net............................................................ 1,365 6,659 212
------------ ------------ ------------
Loss before income tax benefit and extraordinary charge................. (159,124) (35,703) (135,035)
Income tax benefit...................................................... 1,685 53,300 59,600
------------ ------------ ------------
Income (loss) before extraordinary charge............................... (157,439) 17,597 (75,435)
Extraordinary charge--extinguishment of debt............................ (15,401) (9,553) --
------------ ------------ ------------
Net income (loss)....................................................... $ (172,840) $ 8,044 $ (75,435)
------------ ------------ ------------
------------ ------------ ------------

- ------------------------
(1) Other charges includes net provision for loss on the sales of businesses in
1997 and 1995 and provision for restructuring and other costs in 1995.

RESULTS OF OPERATIONS

1997 COMPARED TO 1996

Sales from Continuing Businesses increased 16.2% to $1,240,244 in 1997 from
$1,067,300 in 1996 due to sales increases in all segments. Sales as reported,
including the Non-Core Businesses, increased by 8.2% in 1997 over 1996.

Operating income from Continuing Businesses increased 27.7% to $110,604
during 1997 from $86,595 during 1996. This increase is attributable to the sales
increase as well as declines in paper costs which began declining in 1996.

Interest expense increased by $12,024 or 9.7% in 1997 over 1996 reflecting
increased borrowings associated with acquisitions.

The loss before income tax benefit and extraordinary charge increased by
$123,421 to $159,124 during 1997 compared to $35,703 during 1996. This increase
is attributable to the provision for loss on the sales of businesses of $138,640
recorded during the third quarter of 1997.

At December 31, 1997 and 1996, management of the Company reviewed recent
operating results for the years then ended and projected future operating
results for the years through 2003. The Company's management determined that no
adjustment to net deferred income tax assets was required at December 31, 1997
and that an income tax benefit of $53,300 should be recognized at December 31,
1996. The Company reported a Federal income tax carryback claim of $1,685 in
1997.

The extraordinary charge in 1997 reflects the aggregate premium paid of
$9,537 on the redemption of the Company's 10 5/8% Senior Notes and an additional
write-off of related deferred financing costs of $5,864. The extraordinary
charge of $9,553 in 1996 resulted primarily from the write-off of deferred
financing costs relating to the replacement of the Company's then existing
credit facilities with new credit facilities.

SPECIALTY MAGAZINES

Results from Continuing Businesses exclude NEW WOMAN, STAGEBILL and Intertec
Mailing Services. Sales from Continuing Businesses increased 13.0% to $718,134
in 1997 from $635,392 in 1996 due largely to $24,388 of advertising and
circulation growth at SEVENTEEN, which achieved record revenues in 1997, and at
SOAP OPERA DIGEST, which became a weekly publication during 1997. Technical and
trade magazines also showed strong growth, and revenue from Internet
advertising, while still a small portion of the segment,

grew significantly. Acquisitions such as LOW RIDER, MUSCLE MUSTANG, SURFING,
REGISTERED REPRESENTATIVE and MIX, also contributed $51,544 to the sales growth.

Operating income from Continuing Businesses increased 40.5% to $91,295 in
1997 from $64,971 in 1996 due to the sales increase as well as declines in paper
costs which began declining in 1996.

EDUCATION

Results from Continuing Businesses exclude Krames, Katharine Gibbs and
Newbridge (excluding Films for the Humanities and Sciences). Sales from
Continuing Businesses increased 26.4% to $230,057 from $181,972 in 1996. The
increase is attributable to advertising growth at CHANNEL ONE, and the
acquisitions of PRIMEDIA Workplace Learning, QWIZ, Cover Concepts and Pictorial
which added $43,995 to sales growth.

Operating income from Continuing Businesses decreased 1.4% to $7,130 in 1997
from $7,232 in 1996 due primarily to increased goodwill and other intangible
amortization expense resulting from acquisitions.

INFORMATION

Results from Continuing Businesses exclude THE DAILY RACING FORM. Sales from
Continuing Businesses increased 16.9% to $292,053 from $249,936 in 1996. This
increase is largely attributable to approximately a $32,000 increase at the
apartment guides, including the start-up of new guides and acquisitions, and
strong performance at BACON'S and the directory units.

Operating income from Continuing Businesses increased 3.1% to $37,823 in
1997 from $36,668 in 1996, largely attributable to the strong sales increases at
the apartment guides partially offset by an $8,000 increase in amortization
expense resulting from acquisitions and increases in other operating expenses.

CORPORATE

Corporate expenses increased 15.1% to $25,644 in 1997 from $22,276 in 1996,
largely attributable to an increase in corporate headcount to accommodate the
growth of the Company as well as a one-time executive death benefit.

NON-CORE BUSINESSES

Sales from Non-Core Businesses declined 19.5% to $247,351 from $307,149 in
1996. Most of this decline resulted from the divestitures of Krames, Katharine
Gibbs and NEW WOMAN during 1997, and lower revenue levels at Newbridge
(excluding Films for the Humanities and Sciences) and THE DAILY RACING FORM. The
operating loss from Non-Core Businesses increased to $131,397 in 1997 from $694
in 1996, attributable to the $138,640 provision for the loss on the sales of
businesses.

1996 COMPARED TO 1995

Sales from Continuing Businesses increased 44.4% to $1,067,300 in 1996 from
$739,208 in 1995. Sales increased due to internal growth in all segments as well
as the impact of acquisitions. Specifically, the acquisitions of Cahners
Consumer Magazines ("Cahners"), PRIMEDIA Workplace Learning and the trade
magazines of Argus Inc. ("Argus") added approximately $199,144 to sales growth.
Sales as reported, including the Non-Core Businesses, increased by 31.4% in 1996
over 1995.

Operating income (loss) from Continuing Businesses increased to $86,595
during 1996 from $(8,846) during 1995. This improvement was driven by increases
in sales, the impact of acquisitions and the impact of several one-time,
principally non-cash charges totaling $68,072 in the second quarter of 1995.
This increase was achieved despite an increase in average purchase prices for
paper in the first half of 1996.

Interest expense increased by $18,764 or 17.7% in 1996 over 1995 primarily
due to increased borrowings associated with acquisitions.

The Company reported an income tax benefit of $53,300 in 1996 compared to
$59,600 in 1995 associated with the partial recognition of NOLs and other
deferred income tax assets. At the end of each year, the Company reviewed its
recent operating results and projected future operating results and determined
that there should be sufficient future taxable income so that a portion of the
net deferred income tax assets would likely be realized. Such future taxable
income is determined principally from management's projection of future
operating results in conjunction with scheduled reductions in intangible asset
amortization expense. The amount of the net deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced. Such reductions in
taxable income could occur as a result of many external factors including but
not limited to increased paper and postage costs and rates of interest.

The $9,553 extraordinary charge in 1996 reflects the aggregate premium paid
on the redemptions of the Company's 10 5/8% Senior Notes and the write-off of
unamortized deferred financing costs. The Company reported consolidated net
income of $8,044 in 1996 versus a consolidated net loss of $75,435 in 1995.

SPECIALTY MAGAZINES

Results from Continuing Businesses exclude NEW WOMAN, STAGEBILL and Intertec
Mailing Services. Sales from Continuing Businesses increased 55.2% to $635,392
in 1996 from $409,308 in 1995 due largely to growth of existing properties as
well as the impact of the Cahners and Argus acquisitions. The increases at the
existing properties were primarily due to the double-digit organic revenue
growth at the specialty consumer magazines led by SEVENTEEN, SOAP OPERA DIGEST,
TRUCKIN' and CRAFTS. The full year effect of Argus, acquired in December 1995,
and Cahners, acquired in January 1996, contributed $51,459 and $95,397,
respectively, to the 1996 sales growth.

Operating income from Continuing Businesses increased by $28,467 or 78.0% in
1996 over 1995. This increase was the result of an increase in sales partially
offset by an increase in average paper prices in 1996 over 1995.

EDUCATION

Results from Continuing Businesses exclude Krames, Katharine Gibbs and
Newbridge (excluding Films for the Humanities and Sciences). Sales from
Continuing Businesses increased 42.5% to $181,972 in 1996 from $127,660 in 1995.
The growth is attributable to sales increases at WEEKLY READER and Films for the
Humanities and Sciences and the addition of PRIMEDIA Workplace Learning.

Operating income (loss) from Continuing Businesses increased to $7,232 in
1996 from $(32,126) in 1995. This improvement is primarily due to the one-time
charges in the second quarter of 1995 for the provision for loss associated with
the sale of Newfield Publications, Inc.

INFORMATION

Results from Continuing Businesses exclude THE DAILY RACING FORM. Sales from
Continuing Businesses increased 23.6% to $249,936 in 1996 from $202,240 in 1995.
This increase is largely attributable to double-digit organic growth at the
apartment guides as well as the impact of acquisitions which contributed
approximately $17,600 to the increase in sales.

Operating income from Continuing Businesses increased to $36,668 in 1996
from $4,513 in 1995, largely attributable to the increase in sales and a
decrease in amortization expense. Goodwill and intangible amortization expense
decreased by $24,277 in 1996 over 1995 primarily as a result of an

adjustment to the carrying values of goodwill and other intangibles totaling
approximately $18,000 in the second quarter of 1995.

CORPORATE

Corporate expenses increased 25.6% to $22,276 in 1996 from $17,737 in 1995,
largely attributable to an increase in corporate headcount to accommodate the
growth of the Company.

NON-CORE BUSINESSES

The operating loss from Non-Core Businesses decreased to $694 in 1996 from
$17,429 in 1995, attributable to the one-time restructuring charge recorded in
1995.

LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth certain information regarding the Company's
EBITDA and other net cash flow items. Data is presented for both Continuing
Businesses and Non-Core Businesses.

YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------

EBITDA(1):
Continuing Businesses:
Specialty Magazines.................................................... $ 157,429 $ 136,395 $ 89,851
Education.............................................................. 71,456 58,938 45,194
Information............................................................ 83,099 73,974 58,565
Corporate.............................................................. (25,545) (21,497) (17,034)
----------- ----------- -----------
Subtotal............................................................. 286,439 247,810 176,576
Non-Core Businesses...................................................... 15,573 28,793 39,539
----------- ----------- -----------
Total................................................................ $ 302,012 $ 276,603 $ 216,115
----------- ----------- -----------
----------- ----------- -----------
Net Cash Provided by (Used in) Operating Activities:
Continuing Businesses:
Specialty Magazines.................................................... $ 152,323 $ 125,437 $ 69,853
Education.............................................................. 57,103 59,063 26,716
Information............................................................ 66,690 61,106 64,646
Corporate.............................................................. (162,248) (129,090) (111,521)
----------- ----------- -----------
Subtotal............................................................. 113,868 116,516 49,694
Non-Core Businesses...................................................... 11,492 33,676 14,368
----------- ----------- -----------
Total................................................................ $ 125,360 $ 150,192 $ 64,062
----------- ----------- -----------
----------- ----------- -----------

YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------

Net Cash Provided by (Used in) Investing Activities:
Continuing Businesses:
Specialty Magazines.................................................... $ (137,414) $ (213,203) $ (234,755)
Education.............................................................. (165,657) (434,603) 10,441
Information............................................................ (46,397) (58,813) (82,371)
Corporate.............................................................. (1,740) (1,735) (2,424)
----------- ----------- -----------
Subtotal............................................................. (351,208) (708,354) (309,109)
Non-Core Businesses...................................................... 165,483 (13,355) (9,603)
----------- ----------- -----------
Total................................................................ $ (185,725) $ (721,709) $ (318,712)
----------- ----------- -----------
----------- ----------- -----------
Net Cash Provided by (Used in) Financing Activities:
Continuing Businesses:
Specialty Magazines.................................................... $ (4,318) $ (10,073) $ (5,332)
Education.............................................................. (1,586) (2,653) (160)
Information............................................................ (2,982) (4,698) (2,094)
Corporate.............................................................. 54,656 600,156 272,293
----------- ----------- -----------
Subtotal............................................................. 45,770 582,732 264,707
Non-Core Businesses...................................................... 918 (1,786) (1,063)
----------- ----------- -----------
Total................................................................ $ 46,688 $ 580,946 $ 263,644
----------- ----------- -----------
----------- ----------- -----------

- ------------------------
(1) Earnings before interest, taxes, depreciation, amortization and provision
for one-time charges ("EBITDA") is not intended to represent cash flow from
operations and should not be considered as an alternative to net income
(loss) as an indicator of the Company's operating performance or to cash
flows as a measure of liquidity. The Company believes EBITDA is a standard
measure commonly reported and widely used by analysts, investors and other
interested parties in the media industry. Accordingly, this information has
been disclosed herein to permit a more complete comparative analysis of the
Company's operating performance relative to other companies in its industry.

Consolidated working capital deficiency including current maturities of
long-term debt was $146,245 at December 31, 1997 compared to $44,705 at December
31, 1996. Consolidated working capital deficiency reflects certain industry
working capital practices and accounting principles, including the expensing of
editorial and product development costs when incurred and the recording of
unearned subscription income as a current liability. Advertising costs are
expensed when the promotional activities occur except for certain
direct-response advertising costs which are capitalized and amortized over the
estimated period of future benefit.

1997 COMPARED TO 1996

Consolidated EBITDA from Continuing Businesses increased by 15.6% to
$286,439 in 1997 from $247,810 in 1996 because of higher revenues, paper price
declines and acquisitions of new businesses.

EBITDA from Continuing Businesses in the Specialty Magazines segment
increased 15.4% in 1997 to $157,429 from $136,395 in 1996. This increase is
attributable to strong organic revenue growth, paper price declines and
acquisitions.

EBITDA from Continuing Businesses in the Education segment increased 21.2%
to $71,456 in 1997 from $58,938 in 1996 due to advertising revenue growth at
CHANNEL ONE and the inclusion of acquisitions including PRIMEDIA Workplace
Learning.

EBITDA from Continuing Businesses in the Information segment increased 12.3%
in 1997 to $83,099 from $73,974 in 1996 primarily due to growth at the APARTMENT
GUIDES which was attributable to increased advertising revenue and the impact of
acquisitions.

EBITDA from Non-Core Businesses declined 45.9% to $15,573 in 1997 from
$28,793 in 1996, due to sales declines at Newbridge (excluding Films for the
Humanities and Sciences) and THE DAILY RACING FORM.

The reported net cash provided by operating activities during the year ended
December 31, 1997, after interest payments of $142,421, was $125,360, a decrease
of $24,832 over the 1996 period, due primarily to an increase in interest
payments.

The reported net cash used in investing activities decreased in 1997 as a
result of decreased acquisition activities. The Company spent $326,192 for
acquisitions during 1997 compared with $700,990 in 1996. The reported net
capital expenditures were $31,108 during the 1997 period, an 8.1% increase from
$28,790 in 1996. Increased investment in production and new product technology
is expected to result in increased capital spending in 1998.

The reported net cash provided by financing activities decreased in 1997 as
a result of reduced debt and stock issuances during 1997 as well as the
redemption of certain outstanding borrowings.

1996 COMPARED TO 1995

Consolidated EBITDA from Continuing Businesses increased by 40.3% to
$247,810 in 1996 from $176,576 in 1995 because of growth from existing
operations, new product additions and acquisitions of businesses.

EBITDA from Continuing Businesses in the Specialty Magazines segment
increased 51.8% in 1996 to $136,395 from $89,851 in 1995 due to strong organic
growth in circulation and advertising as well as acquisitions.

EBITDA from Continuing Businesses in the Education segment increased 30.4%
to $58,938 in 1996 from $45,194 in 1995 due to advertising revenue growth at
CHANNEL ONE and the inclusion of the acquisition of PRIMEDIA Workplace Learning.

EBITDA from Continuing Businesses in the Information segment increased 26.3%
in 1996 to $73,974 from $58,565 in 1995 due to increased advertising revenues in
the apartment guides and a portion of Intertec as well as the inclusion of
acquisitions.

EBITDA from Non-Core Businesses declined 27.2% to $28,793 in 1996 from
$39,539 in 1995, primarily due to the sales decline at Newbridge (excluding
Films for the Humanities and Sciences).

The reported net cash provided by operating activities during the year ended
December 31, 1996, after interest payments of $111,752, was $150,192, an
increase of $86,130 over the 1995 period, primarily due to EBITDA growth.

The reported net cash used in investing activities increased as a result of
increased acquisition activities, substantially all of which were financed with
borrowings under the then existing credit agreements and funds from operations.
Payments for businesses acquired of $700,990 were made during the year ended
December 31, 1996 as compared to $353,954 in 1995. The reported net capital
expenditures were $28,790 during the 1996 period, a 23.0% increase from $23,414
in 1995. These expenditures included data processing equipment, televisions,
videocassette recorders, satellite dishes, furniture and leasehold improvements
and were financed with net cash provided by operations.

The reported net cash provided by financing activities increased in 1996 as
a result of increased debt and preferred stock issuances.

NET OPERATING LOSS CARRYFORWARDS

At December 31, 1997, the Company had NOLs of approximately $749,000 which
will be available to reduce future taxable income. In addition, management
estimates that approximately $864,000 of unamortized goodwill and other
intangible assets will be available as deductions from any future taxable
income.

FINANCING ARRANGEMENTS

In January 1997, the Company purchased, in aggregate, $20,850 of the 10 5/8%
Senior Notes at a weighted average price of 105%, plus accrued and unpaid
interest from various brokers on the open market. On May 1, 1997, the Company
redeemed the $212,400 remaining principal amount of the 10 5/8% Senior Notes at
104% plus accrued and unpaid interest. The aggregate premium paid and the
write-off of related deferred financing costs are classified as an extraordinary
charge and are recorded at an aggregate value of $15,401 on the accompanying
statement of consolidated operations for the year ended December 31, 1997.

On April 21, 1997, the Company entered into a new 364-day credit facility
with The Chase Manhattan Bank, the Bank of New York, Bankers Trust Company and
the Bank of Nova Scotia as agents (the "New Credit Facility") which expires
April 20, 1998. Under the terms of the New Credit Facility, the Company has
commitments of $150,000 which can be borrowed in the form of revolving loans to
be used for general corporate and working capital purposes as well as to finance
certain future acquisitions.

The amounts borrowed pursuant to the New Credit Facility bear interest at
rates per annum identical to those in the previously existing credit facilities
("Credit Facilities"). The New Credit Facility combined with the Credit
Facilities are collectively referred to as the "Bank Credit Facilities." At
December 31, 1997, the Company had two interest rate swap agreements in effect
with an aggregate notional amount of $200,000 and an interest rate cap agreement
based on a notional principal amount of $100,000. Under the outstanding swap
agreements, the Company receives a floating rate of interest based on
three-month LIBOR, which resets quarterly, and pays a fixed rate of interest,
each quarter, for the term of the agreements. As of December 31, 1997, the
weighted average variable rate and weighted average fixed rate were 5.88% and
6.68%, respectively. In addition, in July 1997, the Company entered into four,
three-year and two, four-year interest rate swap agreements, with an aggregate
notional amount of $600,000. Under these new swap agreements, which commence on
January 2, 1998, the Company will receive a floating rate of interest based on
three-month LIBOR, which resets quarterly, and the Company will pay a fixed rate
of interest, each quarter, for the terms of the respective agreements.

The Company is exposed to credit risk in the event of nonperformance by
counterparties to its interest rate swap and cap agreements. Credit risk is
limited by entering into such agreements with primary dealers only; therefore,
the Company does not anticipate that nonperformance by counterparties will
occur. Notwithstanding this, the Company's treasury department monitors
counterparty credit ratings at least quarterly through reviewing independent
credit agency reports. Both current and potential exposure are evaluated, as
necessary, by obtaining replacement cost information from alternative dealers.
Potential loss to the Company from credit risk on these agreements is limited to
amounts receivable, if any. The Company enters into these agreements solely to
hedge its interest rate risk.

Under the Bank Credit Facilities, the Company has total commitments of
$1,550,000 and can borrow up to $1,650,000 in the aggregate. As of December 31,
1997, aggregate borrowings under the Bank Credit Facilities were $1,218,101. As
of December 31, 1997, the amounts borrowed under the Bank Credit Facilities bore
interest at a weighted average variable interest rate of 7.05%. Also, at
December 31, 1997, the Company had outstanding $100,000 of 10 1/4% Senior Notes,
$300,000 of 8 1/2% Senior Notes, 1,576,036 shares of $11.625 Series B
Exchangeable Preferred Stock, 2,000,000 shares of $10.00 Series D Exchangeable
Preferred Stock and 1,250,000 shares of $9.20 Series E Exchangeable Preferred
Stock.

arrangements. Borrowings under the above indebtedness are guaranteed by each of
the domestic wholly-owned subsidiaries of the Company. Such guarantees are full,
unconditional and joint and several. The separate financial statements of the
domestic subsidiaries are not presented because the Company believes the
separate financial statements would not be material to the shareholders and
potential investors. The Company's foreign subsidiaries are not guarantors of
the above indebtedness. The total assets, revenues, income or equity of such
foreign subsidiaries, both individually and on a combined basis, are
inconsequential in relation to the total assets, revenues, income, or equity of
the Company.

The aggregate mandatory reductions of the commitments under the Bank Credit
Facilities are $150,000 in 1998, $90,000 in 1999, $280,000 per year in 2000
through 2003 with a final reduction or paydown of $190,000 in 2004. The 10 1/4%
Senior Notes mature in June 2004 and the 8 1/2% Senior Notes mature in February
2006. The per annum principal and interest payments relating to an acquisition
obligation are scheduled to be $14,333, $21,167, $19,167, and $8,833 to be made
in semi-annual installments in 1998 through 2001, respectively. The Company's
aggregate lease obligations for 1998, 1999 and 2000 are expected to be
approximately $30,000, $27,000 and $24,000, respectively. The Company believes
its liquidity, capital resources and cash flow are sufficient to fund planned
capital expenditures, working capital requirements, interest and principal
payments on its debt, the payment of preferred stock dividends and other
anticipated expenditures for the foreseeable future.

RECENT ACCOUNTING PRONOUNCEMENTS

In 1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" which became effective for the Company's
1997 consolidated financial statements beginning in the fourth quarter of 1997.
SFAS No. 128 eliminates the disclosure of primary earnings per share which
includes the dilutive effect of stock options, warrants and other convertible
securities ("Common Stock Equivalents") and instead requires reporting of
"basic" earnings per share, which excludes Common Stock Equivalents.
Additionally, SFAS No. 128 changes the methodology and criteria for calculating
and reporting fully diluted earnings per share. The adoption of this new
accounting standard did not have a material effect on the reported loss per
share of the Company. SFAS No. 128 also required previously reported loss per
share to be restated.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which become effective for the
Company's 1998 consolidated financial statements. SFAS No. 130 requires the
disclosure of comprehensive income, defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources, in the Company's consolidated financial
statements. SFAS No. 131 requires that a public business enterprise report
certain financial and descriptive information about its reportable operating
segments. In the opinion of the Company's management, it is not anticipated that
the adoption of these new accounting standards will have a material effect on
the consolidated financial statements of the Company.

In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits,"
which becomes effective for the Company's 1998 consolidated financial
statements. SFAS No. 132 standardizes the disclosure requirements for pensions
and other postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain previously
required disclosures. In the opinion of the Company's management, it is not
anticipated that the adoption of this new accounting standard will have a
material effect on the consolidated financial statements of the Company.

RECENT DEVELOPMENTS

On January 8, 1998, the Company entered into a Stock Purchase Agreement
pursuant to which it will acquire the Cowles Enthusiast Media and Cowles
Business Media divisions of Cowles Media Company

from McClatchy Newspapers, Inc. ("McClatchy") for approximately $200,000. The
transaction is subject to the completion of McClatchy's purchase of Cowles Media
Company, which is expected to close by March 31, 1998.

In January 1998, the Company elected to terminate its defined benefit
pension plan effective March 31, 1998. In connection with this termination, the
Company froze benefit accruals effective December 31, 1997. In the opinion of
the Company's management, the plan termination is adequately accrued for and
will not have a material impact on the Company's consolidated financial
statements. Plan participants will be eligible to participate in the Company's
defined contribution plans.

On February 5, 1998, KKR 1996 Fund L.P., a Delaware limited partnership
affiliated with KKR (the "KKR Fund"), executed an agreement with the Company
pursuant to which the KKR Fund will pay $200,000 for 16,666,667 newly issued
shares of common stock from the Company (the "KKR Fund Investment"). It is
expected that the KKR Fund Investment will be consummated in March 1998.

On February 17, 1998, the Company exchanged the 1,250,000 shares of its
$9.20 Series E Exchangeable Preferred Stock for 1,250,000 shares of $9.20 Series
F Exchangeable Preferred Stock ("Series F Preferred Stock"). The terms of the
Series F Preferred Stock are the same as the $9.20 Series E Exchangeable
Preferred Stock except that the Series F Preferred Stock has been registered
under the Securities Act of 1933.

On February 17, 1998, the Company completed a private offering of 2,500,000
shares of $8.625 Series G Exchangeable Preferred Stock for $250,000 and $250,000
principal amount of 7 5/8% Senior Notes Due 2008. The net proceeds of these
offerings will be used to redeem all of the Company's outstanding $11.625 Series
B Exchangeable Preferred Stock at $105.80 per share plus accrued and unpaid
dividends and to reduce outstanding bank borrowings.

IMPACT OF INFLATION

The impact of inflation was immaterial during 1997 and 1996. Paper prices,
which had risen significantly during 1995 and early 1996, declined around
mid-year 1996 and continued that trend through the first six months of 1997.
Moderate paper price increases occurred in July 1997 for most of the grades of
paper used by the Company. During 1997, paper costs represented approximately
7.8% of the Company's total operating costs and expenses. Postage for product
distribution and direct mail solicitations is also a significant expense of the
Company. The Company uses the U.S. Postal Service for distribution of many of
its products and marketing materials. Postage costs increase periodically and
can be expected to increase in the future. In the past, the effects of inflation
on operating expenses have substantially been offset by PRIMEDIA's ability to
increase selling prices. No assurances can be given that the Company can pass
such cost increases through to its customers. In addition to pricing actions,
the Company is continuing to examine all aspects of the manufacturing and
purchasing processes to identify ways to offset some of these price increases.

YEAR 2000

The Company has evaluated the potential impact of the situation commonly
referred to as the "Year 2000 problem." The Year 2000 problem, which is common
to most corporations, relates to the inability of information systems, primarily
computer software programs, to properly recognize and process date sensitive
information related to the year 2000 and beyond. An assessment of the Company's
systems indicates that the costs associated with solving the Year 2000 problem
will be immaterial, due largely to investments already made in information
systems in recent years. A significant portion of the Company's efforts related
to this issue involves assessing vendor compliance and developing contingency
plans to deal with situations where significant vendors are perceived to be at
risk from the Year 2000 problem.

FORWARD-LOOKING INFORMATION

This report contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition. These
statements are based upon a number of assumptions and estimates which are
inherently subject to uncertainties and contingencies, many of which are beyond
the control of the Company, and reflect future business decisions which are
subject to change. Some of these assumptions may not materialize and
unanticipated events will occur which can affect the Company's results.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

TABLE OF CONTENTS TO FINANCIAL STATEMENTS

PRIMEDIA INC. AND SUBSIDIARIES
Report of Independent Auditors--Deloitte & Touche LLP................................ 27
Statements of Consolidated Operations for the Years Ended December 31, 1997, 1996 and
1995............................................................................... 28
Consolidated Balance Sheets as of December 31, 1997 and 1996......................... 29
Statements of Consolidated Cash Flows for the Years Ended December 31, 1997, 1996 and
1995............................................................................... 30
Statements of Shareholders' Equity (Deficiency) for the Years Ended December 31,
1997, 1996 and 1995................................................................ 31
Notes to Consolidated Financial Statements for the Years Ended December 31, 1997,
1996 and 1995...................................................................... 33

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors of
PRIMEDIA Inc.
New York, New York:

We have audited the accompanying consolidated balance sheets of PRIMEDIA
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
statements of consolidated operations, shareholders' equity (deficiency), and
consolidated cash flows for each of the three years in the period ended December
31, 1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and subsidiaries at
December 31, 1997 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
New York, New York
January 27, 1998
(February 17, 1998 as to Note 25)

PRIMEDIA INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

YEARS ENDED DECEMBER 31,
------------------------------------
NOTES 1997 1996 1995
--------- ----------- ----------- ----------

Sales, net:
Specialty Magazines............................................. $ 754,410 $ 684,341 $ 452,373
Education....................................................... 379,552 376,217 330,414
Information..................................................... 353,633 313,891 263,542
----------- ----------- ----------
Total sales, net.................................................. 1,487,595 1,374,449 1,046,329

Operating costs and expenses:
Cost of goods sold.............................................. 341,879 337,065 251,347
Marketing and selling........................................... 271,351 249,301 177,167
Distribution, circulation and fulfillment....................... 262,151 230,533 188,147
Editorial....................................................... 120,952 104,484 73,703
Other general expenses.......................................... 163,705 154,966 122,816
Corporate administrative expenses............................... 25,545 21,497 17,034
Depreciation and amortization of prepublication costs, property
and equipment................................................. 9, 11 37,334 38,233 25,761
Provision for loss on the sales of businesses and other, net.... 4 138,640 -- 35,447
Restructuring and other costs................................... 5 -- -- 14,667
Amortization of intangible assets, excess of purchase price over
net assets acquired and other................................. 6, 10 146,831 152,469 166,515
----------- ----------- ----------

Operating income (loss)........................................... (20,793) 85,901 (26,275)
Other income (expense):
Interest expense................................................ (136,625) (124,601) (105,837)
Amortization of deferred financing and organizational costs..... 11 (3,071) (3,662) (3,135)
Other, net...................................................... 4 1,365 6,659 212
----------- ----------- ----------
Loss before income tax benefit and extraordinary charge........... (159,124) (35,703) (135,035)
Income tax benefit................................................ 14 1,685 53,300 59,600
----------- ----------- ----------
Income (loss) before extraordinary charge......................... (157,439) 17,597 (75,435)
Extraordinary charge--extinguishment of debt...................... (15,401) (9,553) --
----------- ----------- ----------
Net income (loss)................................................. (172,840) 8,044 (75,435)

Preferred stock dividends:
Cash............................................................ (45,305) (26,944) (11,500)
Non-cash dividends in kind...................................... (4,451) (16,582) (17,478)
Senior Preferred Stock redemption premium....................... 15 (5,800) -- --
Dividend accrual................................................ 15 (9,517) -- --
----------- ----------- ----------
Loss applicable to common shareholders............................ $ (237,913) $ (35,482) $ (104,413)
----------- ----------- ----------
----------- ----------- ----------
Basic and diluted loss applicable to common shareholders per
common share: 17
Loss before extraordinary charge................................ $ (1.72) $ (.20) $ (.92)
Extraordinary charge............................................ (.12) (.07) --
----------- ----------- ----------
Net loss........................................................ $ (1.84) $ (.27) $ (.92)
----------- ----------- ----------
----------- ----------- ----------
Basic and diluted common shares outstanding....................... 17 129,304,900 128,781,518 113,218,711
----------- ----------- ----------
----------- ----------- ----------

See notes to consolidated financial statements.

PRIMEDIA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

DECEMBER 31,
--------------------------
NOTES 1997 1996
------------ ------------

ASSETS
Current assets:
Cash and cash equivalents............................................. $ 22,978 $ 36,655
Accounts receivable, net.............................................. 7 199,289 233,603
Inventories, net...................................................... 8 27,597 52,743
Net assets held for sale.............................................. 4 38,665 18,684
Prepaid expenses and other............................................ 33,971 34,834
------------ ------------
Total current assets.............................................. 322,500 376,519

Property and equipment, net............................................. 9 116,361 122,823
Other intangible assets, net............................................ 10 660,268 781,316
Excess of purchase price over net assets acquired, net.................. 10 1,111,785 971,665
Deferred income tax asset, net.......................................... 14 176,200 176,200
Other non-current assets................................................ 11 98,876 123,692
------------ ------------
$ 2,485,990 $ 2,552,215
------------ ------------
------------ ------------

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable...................................................... $ 95,546 $ 107,258
Accrued interest payable.............................................. 13,622 22,150
Accrued expenses and other............................................ 12 204,770 140,959
Deferred revenues..................................................... 140,474 144,857
Current maturities of long-term debt.................................. 13 14,333 6,000
------------ ------------
Total current liabilities......................................... 468,745 421,224
------------ ------------
Long-term debt.......................................................... 13, 25 1,656,541 1,565,686
------------ ------------
Other non-current liabilities........................................... 48,271 35,062
------------ ------------
Commitments and contingencies 21

Exchangeable preferred stock (aggregated liquidation and redemption
values of $482,604 and $453,153 at December 31, 1997 and 1996,
respectively)......................................................... 15 470,280 442,729
------------ ------------
Common stock subject to redemption ($.01 par value, 402,650 shares and
643,310 shares outstanding at December 31, 1997 and 1996,
respectively)......................................................... 16 4,376 5,957
------------ ------------
Shareholders' equity (deficiency):
Common stock ($.01 par value, 250,000,000 shares authorized;
129,797,078 shares and 128,349,045 shares issued at December 31,
1997 and 1996, respectively)........................................ 16 1,298 1,283
Additional paid-in capital............................................ 16 780,191 772,642
Accumulated deficit................................................... 18 (929,011) (691,098)
Cumulative foreign currency translation adjustments................... (1,543) (1,270)
Common stock in treasury, at cost (1,048,600 shares at December 31,
1997)............................................................... 16 (13,158) --
------------ ------------
Total shareholders' equity (deficiency)........................... (162,223) 81,557
------------ ------------
$ 2,485,990 $ 2,552,215
------------ ------------
------------ ------------

See notes to consolidated financial statements.

PRIMEDIA INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)

YEARS ENDED DECEMBER 31,
---------------------------------

1997 1996 1995
---------- ---------- ---------

OPERATING ACTIVITIES:
Net income (loss)........................................................... $ (172,840) $ 8,044 $ (75,435)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation, amortization and other...................................... 187,236 194,364 195,411
Provision for loss on the sales of businesses and other, net.............. 138,640 -- 35,447
Accretion of discount on acquisition obligation, distribution advance and
other................................................................... 7,343 6,398 8,147
Extraordinary charge - extinquishment of debt............................. 15,401 9,553 --
Non-cash income tax benefit............................................... -- (53,300) (59,600)
Other, net................................................................ (1,090) (6,213) (122)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable, net.................................................. 7,885 (24,692) (2,525)
Inventories, net.......................................................... 8,738 24,531 (23,630)
Prepaid expenses and other................................................ (10,433) (598) (13,127)
Increase (decrease) in:
Accounts payable.......................................................... (7,366) 5,807 6,742
Accrued interest payable.................................................. (8,528) 12,824 1,131
Accrued expenses and other................................................ (16,864) (12,674) (26,857)
Deferred revenues......................................................... (17,377) (11,201) 16,971
Other non-current liabilities............................................. (5,385) (2,651) 1,509
---------- ---------- ---------
Net cash provided by operating activities................................. 125,360 150,192 64,062
---------- ---------- ---------
INVESTING ACTIVITIES:
Additions to property, equipment and other, net............................. (31,108) (28,790) (23,414)
Proceeds from sales of businesses........................................... 171,575 8,071 58,656
Payments for businesses acquired............................................ (326,192) (700,990) (353,954)
---------- ---------- ---------
Net cash used in investing activities..................................... (185,725) (721,709) (318,712)
---------- ---------- ---------
FINANCING ACTIVITIES:
Borrowings under credit agreements.......................................... 1,028,049 1,683,787 622,459
Repayments of borrowings under credit agreements............................ (694,950) (1,384,800) (522,500)
Proceeds from issuance of 8 1/2% Senior Notes, net of discount.............. -- 298,734 --
Payments of acquisition obligation.......................................... (6,000) (6,000) (6,000)
Payments of floating rate indebtedness...................................... -- (150,000) --
Proceeds from issuance of common stock, net of redemptions.................. 7,843 3,498 187,520
Proceeds from issuance of Old Preferred Stock............................... -- -- 50,000
Proceeds from issuance of Series C (exchanged into Series D) Preferred
Stock, net of issuance costs.............................................. -- 193,451 --
Proceeds from issuance of Series E (exchanged into Series F) Preferred
Stock, net of issuance costs.............................................. 120,434 -- --
Redemption of Old Preferred Stock........................................... -- -- (52,691)
Redemption of Senior Preferred Stock........................................ (105,800) -- --
Redemptions and purchases of 10 5/8% Senior Notes........................... (242,787) (17,655) --
Purchases of common stock for the treasury.................................. (13,158) -- --
Dividends paid to preferred stock shareholders.............................. (45,305) (26,944) (11,500)
Deferred financing costs paid............................................... (1,372) (13,132) (3,204)
Other....................................................................... (266) 7 (440)
---------- ---------- ---------
Net cash provided by financing activities................................. 46,688 580,946 263,644
---------- ---------- ---------
Increase (decrease) in cash and cash equivalents.............................. (13,677) 9,429 8,994
Cash and cash equivalents, beginning of year.................................. 36,655 27,226 18,232
---------- ---------- ---------
Cash and cash equivalents, end of year........................................ $ 22,978 $ 36,655 $ 27,226
---------- ---------- ---------
---------- ---------- ---------
SUPPLEMENTAL INFORMATION:
Businesses acquired:
Fair value of assets acquired............................................. $ 406,382 $ 779,192 $ 429,810
Liabilities assumed....................................................... 80,190 78,202 75,856
---------- ---------- ---------
Cash paid for businesses acquired......................................... $ 326,192 $ 700,990 $ 353,954
---------- ---------- ---------
---------- ---------- ---------
Interest paid............................................................... $ 142,421 $ 111,752 $ 102,040
---------- ---------- ---------
---------- ---------- ---------
Non-cash investing and financing activities:
Assets acquired under capital lease obligations........................... $ 15,760 $ -- $ 11,738
---------- ---------- ---------
---------- ---------- ---------
Preferred stock dividends in kind......................................... $ 4,451 $ 16,582 $ 17,478
---------- ---------- ---------
---------- ---------- ---------
Accretion in carrying value of preferred stock............................ $ 2,666 $ 1,090 $ 590
---------- ---------- ---------
---------- ---------- ---------
Accretion (reduction) in carrying value of common stock subject to
redemption.............................................................. $ 755 $ (885) $ 9,927
---------- ---------- ---------
---------- ---------- ---------

See notes to consolidated financial statements.

PRIMEDIA INC. AND SUBSIDIARIES

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Balance at January 1, 1995........................................................................................
Issuances of common stock, net of issuance costs..................................................................
Expiration of redemption feature on common stock subject to redemption............................................
$11.625 Series B Exchangeable Preferred Stock--dividends in kind..................................................
$2.875 Senior Exchangeable Preferred Stock--cash dividends........................................................
Old Preferred Stock--dividends in kind............................................................................
Accretion of differences between carrying value and redemption value of:
$2.875 Senior Exchangeable Preferred Stock....................................................................
$11.625 Series B Exchangeable Preferred Stock.................................................................
Common stock subject to redemption............................................................................
Cumulative foreign currency translation adjustments...............................................................
Net loss..........................................................................................................
Balance at December 31, 1995......................................................................................
Issuances of common stock, net of issuance costs..................................................................
Expiration of redemption feature on common stock subject to redemption............................................
$11.625 Series B Exchangeable Preferred Stock--dividends in kind..................................................
$2.875 Senior Exchangeable Preferred Stock--cash dividends........................................................
$10.00 Series D Exchangeable Preferred Stock--cash dividends......................................................

Reduction (accretion) of differences between carrying value and redemption value of:
$2.875 Senior Exchangeable Preferred Stock....................................................................
$11.625 Series B Exchangeable Preferred Stock.................................................................
$10.00 Series D Exchangeable Preferred Stock..................................................................
Common stock subject to redemption............................................................................
Cumulative foreign currency translation adjustments...............................................................
Net income........................................................................................................
Balance at December 31, 1996......................................................................................
Issuances of common stock, net of issuance costs..................................................................
Purchases of treasury stock.......................................................................................
Expiration of redemption feature on common stock subject to redemption............................................
$11.625 Series B Exchangeable Preferred Stock--dividends in kind..................................................
$11.625 Series B Exchangeable Preferred Stock--dividends..........................................................
$2.875 Senior Exchangeable Preferred Stock--dividends.............................................................
$10.00 Series D Exchangeable Preferred Stock--dividends...........................................................
$9.20 Series E Exchangeable Preferred Stock--dividends............................................................
$2.875 Senior Exchangeable Preferred Stock Redemption Premium.....................................................

Accretion of differences between carrying value and redemption value of:
$2.875 Senior Exchangeable Preferred Stock....................................................................
$11.625 Series B Exchangeable Preferred Stock.................................................................
$10.00 Series D Exchangeable Preferred Stock..................................................................
$9.20 Series E Exchangeable Preferred Stock...................................................................
Common stock subject to redemption............................................................................
Cumulative foreign currency translation adjustments...............................................................
Net loss..........................................................................................................
Balance at December 31, 1997......................................................................................

See notes to consolidated financial statements.

CUMULATIVE
FOREIGN COMMON STOCK
COMMON STOCK ADDITIONAL CURRENCY IN TREASURY
- --------------------------- PAID-IN ACCUMULATED TRANSLATION --------------------
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENTS SHARES AMOUNT TOTAL
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------

105,337,809 $ 1,053 $ 572,940 $ (551,203) $ (1,324) -- $ -- $ 21,466
20,435,782 204 184,964 185,168
147,630 2 807 809
(14,787) (14,787)
(11,500) (11,500)
(2,691) (2,691)
(273) (273)
(317) (317)
(9,927) (9,927)
49 49
(75,435) (75,435)
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------
125,921,221 1,259 748,194 (655,616) (1,275) -- -- 92,562
681,890 7 3,440 3,447
1,745,934 17 21,213 21,230
(16,582) (16,582)
(11,500) (11,500)
(15,444) (15,444)

(273) (273)
(317) (317)
(500) (500)
885 885
5 5
8,044 8,044
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------
128,349,045 1,283 772,642 (691,098) (1,270) -- -- 81,557
1,209,693 12 8,404 8,416
1,048,600 (13,158) (13,158)
238,340 3 2,566 2,569
(4,451) (4,451)
(16,794) (16,794)
(11,564) (11,564)
(23,333) (23,333)
(3,131) (3,131)
(5,800) (5,800)

(1,734) (1,734)
(317) (317)
(546) (546)
(69) (69)
(755) (755)
(273) (273)
(172,840) (172,840)
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------
129,797,078 $ 1,298 $ 780,191 $ (929,011) $ (1,543) 1,048,600 $ (13,158) $(162,223)
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. DESCRIPTION OF BUSINESS

PRIMEDIA Inc. (which together with its subsidiaries is herein referred to as
either "PRIMEDIA" or the "Company" unless the context implies otherwise) is the
authoritative source for specialized information to targeted markets. The
Company's three business segments are specialty magazines, education and
information. The specialty magazines segment has in prior years been referred to
as the specialty media segment, but the Company believes that the term specialty
magazines is more reflective of the focus of the segment. The specialty
magazines segment includes PRIMEDIA Consumer Magazines, PRIMEDIA Special
Interest Publications (formerly PJS Publications, Inc.), McMullen Argus and the
majority of Intertec. The specialty magazines segment is concentrated primarily
on specialty consumer magazines, and technical and trade magazines. The
education segment includes CHANNEL ONE, Films for the Humanities and Sciences,
PRIMEDIA Workplace Learning (formerly Westcott Communications) and WEEKLY
READER. This segment specializes in providing educational materials to the
classroom learning and workplace learning markets. The information segment
includes PRIMEDIA Reference, PRIMEDIA Information, Haas, BACON'S, NELSON, a
portion of Intertec and THE DAILY RACING FORM. The information segment produces
consumer and business information products in a variety of formats for decision
makers in business, professional and special interest consumer markets. The
information is compiled and sold as guides, reference works, newspapers,
CD-ROMs, almanacs, directories and via the Internet.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of PRIMEDIA and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts of
assets, liabilities, revenues and expenses reported in the consolidated
financial statements.

Significant accounting estimates used include estimates for sales returns
and allowances and estimates for the realization of deferred tax assets.
Management has exercised reasonableness in deriving these estimates. However,
actual results may differ from these estimates.

Certain reclassifications have been made to the prior year consolidated
financial statements to conform with the presentation used in the current
period.

In 1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" which became effective for the Company's
consolidated financial statements beginning in the fourth quarter of 1997. SFAS
No. 128 eliminates the disclosure of primary earnings per share which includes
the dilutive effect of stock options, warrants and other convertible securities
("Common Stock Equivalents") and instead requires reporting of "basic" earnings
per share, which excludes Common Stock Equivalents. Additionally, SFAS No. 128
changes the methodology and criteria for calculating and reporting fully diluted
earnings per share. The adoption of this new accounting standard did not have a
material effect on the reported loss per share of the Company. SFAS No. 128 also
required previously reported loss per share to be restated (see Note 17).

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
during a period from transactions and other events and circumstances from
non-owner sources, in the Company's consolidated financial statements. SFAS No.
131 requires that a public business enterprise report certain financial and
descriptive information about its reportable operating segments. In the opinion
of the Company's management, it is not anticipated that the adoption of these
new accounting standards will have a material effect on the consolidated
financial statements of the Company.

CASH AND CASH EQUIVALENTS. Management considers all highly liquid
instruments purchased with an original maturity of 90 days or less to be cash
equivalents.

INVENTORIES. Inventories, including paper, purchased manuscripts,
photographs and art, are valued at the lower of cost or market principally on a
first-in, first-out ("FIFO") basis and include the value of inventory for which
a provision for estimated sales returns has been made.

PROPERTY AND EQUIPMENT. Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation of property and
equipment, and the amortization of leasehold improvements are provided at rates
based on the estimated useful lives or lease terms, if shorter, using primarily
the straight-line method. Improvements are capitalized while maintenance and
repairs are expensed as incurred.

EDITORIAL AND PRODUCT DEVELOPMENT COSTS. Editorial costs and product
development costs are generally expensed as incurred. Product development costs
include the cost of artwork, graphics, prepress, plates and photography for new
products.

ADVERTISING AND SUBSCRIPTION ACQUISITION COSTS. Advertising and
subscription acquisition costs are expensed the first time the advertising takes
place, except for direct-response advertising, the primary purpose of which is
to elicit sales from customers who can be shown to have responded specifically
to the advertising and that results in probable future economic benefits.
Direct-response advertising consists of product promotional mailings,
catalogues, telemarketing and subscription promotions. These direct-response
advertising costs are capitalized as assets and amortized over the estimated
period of future benefit using a ratio of current period revenues to total
current and estimated future period revenues. The amortization periods range
from 6 months to 2 years subsequent to the promotional event. Amortization of
direct-response advertising costs is included in marketing and circulation
expenses on the accompanying statements of consolidated operations. Advertising
expense was $122,365, $121,158 and $88,176 during the years ended December 31,
1997, 1996 and 1995, respectively (see Note 11).

DEFERRED FINANCING COSTS. Deferred financing costs are being amortized by
the straight-line method over the terms of the related indebtedness.

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED WIRING AND INSTALLATION COSTS. Wiring and installation costs
incurred by CHANNEL ONE and PRIMEDIA Workplace Learning have been capitalized
and are being amortized by the straight-line method over the related estimated
useful lives which range from five to 15 years.

$2.875 SENIOR EXCHANGEABLE PREFERRED STOCK ("SENIOR PREFERRED STOCK"),
$11.625 SERIES B EXCHANGEABLE PREFERRED STOCK ("SERIES B PREFERRED STOCK"),
$10.00 SERIES D EXCHANGEABLE PREFERRED STOCK ("SERIES D PREFERRED STOCK") and
the $9.20 SERIES E EXCHANGEABLE PREFERRED STOCK ("SERIES E PREFERRED
STOCK"). The Senior Preferred Stock, Series B Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock are stated at fair value on the
date of issuance less issuance costs. The difference between their carrying
values and their redemption values is being amortized (using the interest
method) by periodic charges to additional paid-in capital.

COMMON STOCK SUBJECT TO REDEMPTION. The common stock subject to redemption
is stated at redemption value which at December 31, 1997 and 1996, is equal to
quoted market value. The difference between the carrying value of such stock and
its redemption value is being amortized by periodic charges to additional
paid-in capital.

COMPUTER SOFTWARE. Computer software costs are expensed as incurred, except
for certain costs incurred in connection with computer software to be sold,
leased or otherwise marketed. These costs, limited to production costs
subsequent to establishing technological feasibility, are reported as other non-
current assets and amortized over the estimated period of future benefit using
the straight-line method.

INTEREST RATE SWAP AGREEMENTS. The Company's interest rate swap agreements
are designated and effective as modifications to existing debt obligations to
reduce the impact of changes in the interest rates on its floating rate
borrowings and, accordingly, are accounted for using the settlement method of
accounting. The differentials to be paid or received under the interest rate
swap agreements are accrued as interest rates change and are recognized as
adjustments to interest expense. The Company considers swap terms including the
reference rate, payment and maturity dates and the notional amount in
determining if an interest rate swap agreement is effective at modifying an
existing debt obligation. If the criteria for designation are no longer met or
the underlying instrument matures or is extinguished, the Company will account
for outstanding swap agreements at fair market value and any resulting gain or
loss will be recognized as other income or expense. Any gains or losses upon
early termination of the agreements will be deferred and amortized over the
shorter of the remaining life of the hedged existing debt obligation or the
original life of the interest rate swap agreement.

PURCHASE ACCOUNTING. With respect to the acquisitions, the total purchase
price has been allocated to the tangible and intangible assets and liabilities
based on their respective fair values.

EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED AND INTANGIBLE
ASSETS. Intangible assets are being amortized using both accelerated and
straight-line methods over periods ranging from 1/4 of 1 year to 40 years. The
excess of purchase price over net assets acquired is being amortized on a
straight-line basis over 40 years. The recoverability of the carrying values of
the excess of the purchase price over the net assets acquired and intangible
assets is evaluated quarterly to determine if an impairment in value has
occurred. An impairment in value will be considered to have occurred when it is
determined that the undiscounted future operating cash flows generated by the
acquired businesses are not sufficient to recover the carrying values of such
intangible assets. If it has been determined that an impairment in value has
occurred, the

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
excess of the purchase price over the net assets acquired and intangible assets
would be written down to an amount which will be equivalent to the present value
of the future operating cash flows to be generated by the acquired businesses.

REVENUE RECOGNITION. Advertising revenues for all consumer magazines are
recognized as income at the on-sale date, net of provisions for estimated
rebates, adjustments and discounts. Other advertising revenues are generally
recognized based on the publications' cover dates. Newsstand sales are
recognized as income at the on-sale date for all publications, net of provisions
for estimated returns. Subscriptions are recorded as deferred revenue when
received and recognized as income over the term of the subscription. PRIMEDIA
Workplace Learning subscription and broadcast fees for satellite and videotape
network services are recognized in the month services are rendered. Sales of
books and other items are recognized as revenue principally upon shipment, net
of an allowance for returns which is provided based on sales. Distribution costs
charged to customers are recognized as revenue when the related product is
shipped. CHANNEL ONE advertising revenue, net of commissions, is recognized as
advertisements are aired on the program. Certain advertisers are guaranteed a
minimum number of viewers per advertisement shown; the revenue recognized is
based on the actual viewers delivered not to exceed the original contract value.

FOREIGN CURRENCY. Gains and losses on foreign currency transactions, which
are not significant, have been included in other, net on the accompanying
statements of consolidated operations. The effects of translation of foreign
currency financial statements into U.S. dollars are included in the cumulative
foreign currency translation adjustments account in shareholders' equity
(deficiency).

3. ACQUISITIONS

The Company acquired certain net assets or stock of:

1995--a publisher of 13 specialty consumer magazine titles serving the
sewing, crafts, woodworking and shooting sports areas; a publisher of 11 trade
magazines in the mining, printing and packaging industries, a specialty consumer
magazine, 15 truck and automobile price guides and three marketing and sales
oriented magazines; an information provider for the public relations industry; a
publisher of 21 specialty consumer magazines serving the automobile, truck,
motorcycle and watercraft areas; a publisher of specialty consumer magazines
serving the automotive area; and a publisher of trade magazines and directories
and an operator of trade shows. In addition to the aforementioned, the Company
completed several other smaller acquisitions during 1995.

1996--Cahners Consumer Magazines ("Cahners"), a publisher of specialty
consumer magazines including AMERICAN BABY, MODERN BRIDE, SAIL and POWER &
MOTORYACHT, along with 20 related properties and PRIMEDIA Workplace Learning,
which utilizes various multi-media technologies to provide workplace training,
news, and information to professionals and students in the corporate and
professional, automotive, banking, government and public service, education,
healthcare, and interactive distance training markets. In addition to the
aforementioned, the Company completed several other smaller acquisitions during
1996.

The foregoing acquisitions, except Cahners and PRIMEDIA Workplace Learning,
if they had occurred on January 1 of the year prior to acquisition, would not
have had a material impact on the results of operations. The following unaudited
pro forma information presents the results of operations of the

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3. ACQUISITIONS (CONTINUED)
Company as if the acquisitions of Cahners and PRIMEDIA Workplace Learning had
taken place on January 1, 1995:

YEARS ENDED DECEMBER 31,
--------------------------

1996 1995
------------ ------------
Sales, net........................................................ $ 1,413,930 $ 1,238,254
Operating income (loss)........................................... 82,100 (12,563)
Income (loss) before extraordinary charge......................... 1,314 (106,012)
Loss applicable to common shareholders before extraordinary
charge.......................................................... (42,212) (134,990)
Basic and diluted loss applicable to common shareholders per
common share before extraordinary charge........................ (.33) (1.19)

1997--a provider of interactive, computer-based testing and training
products; a leading electronic automotive cost guide; a publisher of automotive
enthusiast magazines including LOW RIDER, ARTE, LOW RIDER BICYCLE and LOW RIDER
JAPAN; the publisher of REGISTERED REPRESENTATIVE, a trade magazine edited for
and circulated to the retail securities industry in the United States; a
publisher of specialty magazines targeting the professional recording, sound and
music production industry; and the leading provider of highly specialized
training and certification software products for the insurance industry. In
addition to the aforementioned, the Company completed several other smaller
acquisitions during 1997. The 1997 acquisitions, if they had occurred on January
1 of the year prior to acquisition, would not have had a material impact on the
results of operations.

The acquisitions have been accounted for by the purchase method. The
preliminary purchase cost allocations for the above-mentioned current year's
acquisitions are subject to adjustment when additional information concerning
asset and liability valuations are obtained. The final asset and liability fair
values may differ from those set forth on the accompanying consolidated balance
sheet at December 31, 1997; however, the changes are not expected to have a
material effect on the consolidated financial position of the Company. The
consolidated financial statements include the operating results of these
acquisitions subsequent to their respective dates of acquisition.

4. DIVESTITURES

In 1995, the Company sold certain technical and trade magazines, PREMIERE
magazine and Newfield. In connection with these sales, the Company has received
aggregate cash proceeds of $58,656 in 1995 and $1,000 in 1997 and has recorded
amounts due from buyer of approximately $4,000 and $5,000 on the accompanying
consolidated balance sheets at December 31, 1997 and 1996, respectively. In
connection with these sales, the Company recorded a net aggregate provision for
loss on the sales of businesses of $35,447 for the year ended December 31, 1995.

During the second quarter of 1996, the Company completed the sale of certain
technical and trade magazines, which were acquired in 1995 and upon acquisition
were designated to be sold. The differences between the proceeds received and
the carrying values of the assets sold were treated as adjustments to the excess
of purchase price over net assets acquired related to the retained businesses.
In addition, during the second quarter of 1996, the Company sold a monthly
tabloid targeted to electronic design engineers for consideration of a motion
picture and television production magazine and cash proceeds. During the

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

4. DIVESTITURES (CONTINUED)
fourth quarter of 1996, the Company completed the sale of the Kits and Leaflets
Division of PRIMEDIA Special Interest Publications and certain specialty
consumer magazines. In connection with these sales, the Company received
aggregate cash proceeds of $8,071 and recorded a net gain on sale of businesses
of approximately $5,800.

During September 1996, the Company decided to divest Katharine Gibbs and
recorded its net assets at net realizable value as net assets held for sale on
the accompanying consolidated balance sheet at December 31, 1996.

On March 11, 1997, the Company announced its intention to divest the
following four non-core business units: THE DAILY RACING FORM, Newbridge
Communications, Inc. (excluding Films for the Humanities and Sciences), NEW
WOMAN magazine, and Krames Communications Incorporated ("Krames"). Subsequently,
the Company decided to sell STAGEBILL and Intertec Mailing Services. These
planned divestitures combined with Katharine Gibbs are collectively referred to
as the Non-Core Businesses ("Non-Core Businesses") and are part of the Company's
plan to focus on six key growth vehicles in markets that have dynamic growth
opportunities.

During the second quarter of 1997, the Company completed the sale of
Katharine Gibbs. During the third quarter of 1997, the Company recorded a
provision aggregating $138,640 for the reduction of the carrying values of
Newbridge Communications, Inc. (excluding Films for the Humanities and
Sciences), THE DAILY RACING FORM, STAGEBILL, Krames, NEW WOMAN magazine and
Intertec Mailing Services to the estimated realizable value of the net assets of
such businesses. During the third quarter, the Company also completed the sales
of Krames, NEW WOMAN magazine and Intertec Mailing Services. During the fourth
quarter, the Company completed the sales of Newbridge Book Clubs, Newbridge
Educational Publishing and STAGEBILL. In connection with these sales, the
Company received aggregate proceeds of $171,575 net of direct selling expenses.

The remaining planned divestiture of THE DAILY RACING FORM is expected to be
completed during 1998. Its net assets have been recorded at net realizable value
as net assets held for sale on the accompanying consolidated balance sheet at
December 31, 1997.

The operating results of the Non-Core Businesses are included on the
accompanying statements of consolidated operations for the years ended December
31, 1997, 1996 and 1995. Total sales for the Non-Core Businesses were $247,351,
$307,149 and $307,121 for the years ended December 31, 1997, 1996 and 1995,
respectively. Excluding the 1997 provision for loss on the sales of businesses
and other, net, operating income (loss) for the Non-Core Businesses was $7,243,
$(694) and $(17,429) for the years ended December 31, 1997, 1996 and 1995,
respectively.

5. RESTRUCTURING AND OTHER COSTS

In the second quarter of 1995, the Company recorded charges of $14,667
related to a corporate restructuring effort at Newbridge Communications, Inc.
("Newbridge"), its professional book club business, and the completion of a
manufacturing outsourcing effort at THE DAILY RACING FORM. Included in the
restructuring charge of $7,272 were employee separation costs of $1,287,
litigation matters of $3,349, a write-down of inventory and other assets of
$2,086 related to the exit of a product line at Newbridge and costs associated
with the termination of a real estate lease which is no longer needed in the
operations of THE DAILY RACING FORM of $550. Included in the other costs of
$7,395 were costs incurred and associated

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

5. RESTRUCTURING AND OTHER COSTS (CONTINUED)
with the correction of customer and accounting systems and write-down of certain
assets. During early 1995, the Company experienced certain operational problems
at Newbridge relating to periodic mailings which described its then current
product offerings. These operational problems resulted in higher than normal
levels of bad debts and returns. In addition, Newbridge implemented a new
customer information processing system which inadvertently suppressed a number
of customer and product offering mailings resulting in lower than anticipated
demand for certain products and a corresponding increase in obsolete inventory.
Subsequently, the operational and new system problems were corrected. As a
result of these operational problems, provisions for inventory obsolescence of
approximately $2,500 and for bad debts of approximately $3,500 were recorded,
along with expenses associated with the outside consultants and systems
corrections of approximately $1,400. Approximately $700, $1,200 and $4,100 of
the restructuring and other charges were paid in cash in 1997, 1996 and 1995,
respectively. At December 31, 1997, $700 of these charges is included in accrued
liabilities.

6. ADJUSTMENTS TO THE CARRYING VALUES OF LONG-LIVED ASSETS

In accordance with its accounting policy, during 1995, the Company recorded
aggregate write-downs of $17,958 and $5,786 to the carrying values of the
identifiable intangible assets and goodwill of PRIMEDIA Reference and a product
line of Newbridge, respectively. These adjustments are included in amortization
of intangible assets, excess of purchase price over net assets acquired and
other on the accompanying statement of consolidated operations for the year
ended December 31, 1995 and affect the operating results of the information and
education segments.

7. ACCOUNTS RECEIVABLE, NET

Accounts receivable consist of the following:

DECEMBER 31,
----------------------

1997 1996
---------- ----------
Accounts receivable................................................... $ 236,819 $ 273,119
Less: Allowance for doubtful accounts................................. 10,521 15,418
Allowance for returns and rebates................................ 27,009 24,098
---------- ----------
$ 199,289 $ 233,603
---------- ----------
---------- ----------

8. INVENTORIES, NET

Inventories consist of the following:

DECEMBER 31,
--------------------

1997 1996
--------- ---------
Finished goods.......................................................... $ 12,271 $ 41,497
Work in process......................................................... 3,314 2,111
Raw materials........................................................... 14,494 17,838
--------- ---------
30,079 61,446
Less: Allowance for obsolescence........................................ 2,482 8,703
--------- ---------
$ 27,597 $ 52,743
--------- ---------
--------- ---------

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

9. PROPERTY AND EQUIPMENT, NET

Property and equipment, including that held under capital leases, consist of
the following:

DECEMBER 31,
RANGE OF LIVES ----------------------
(YEARS) 1997 1996
--------------- ---------- ----------

Land.................................................. -- $ 4,986 $ 2,022
Buildings and improvements............................ 1-40 33,808 24,219
Furniture and fixtures................................ 4-10 28,135 26,027
Machinery and equipment............................... 2-10 81,226 94,091
School equipment...................................... 5-10 58,665 55,860
Other................................................. 2-7 2,992 2,401
---------- ----------
209,812 204,620
Less: Accumulated depreciation and amortization....... 93,451 81,797
---------- ----------
$ 116,361 $ 122,823
---------- ----------
---------- ----------

Included in property and equipment are assets which were acquired under
capital leases in the amount of $27,498 and $11,738 with accumulated
amortization of $3,043 and $1,739 at December 31, 1997 and 1996, respectively
(see Note 21).

10. INTANGIBLE ASSETS AND EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, NET

Other intangible assets consist of the following:

DECEMBER 31,
RANGE OF LIVES --------------------------
(YEARS) 1997 1996
--------------- ------------ ------------

Trademarks........................................ 40 $ 342,645 $ 448,490
Membership, subscriber and customer lists......... 2-20 456,716 504,951
Non-compete agreements............................ 1-10 194,116 227,312
Trademark license agreements...................... 2-15 2,909 17,500
Copyrights........................................ 12-20 25,715 47,849
Video library..................................... 1-7 14,837 14,837
Databases......................................... 4-12 10,577 121,377
Advertiser lists.................................. .25-15 223,443 133,850
Distribution agreements........................... 1-7 11,525 15,336
Other............................................. 1.5-15 19,647 63,875
------------ ------------
1,302,130 1,595,377
Less: Accumulated amortization.................... 641,862 814,061
------------ ------------
$ 660,268 $ 781,316
------------ ------------
------------ ------------

The excess of the purchase price over the fair value of the net assets
acquired is net of accumulated amortization of $94,735 and $82,763 at December
31, 1997 and 1996, respectively.

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

11. OTHER NON-CURRENT ASSETS

Other non-current assets consist of the following:

DECEMBER 31,
----------------------

1997 1996
---------- ----------

Deferred financing costs, net......................................... $ 15,276 $ 22,814
Deferred wiring and installation costs, net........................... 54,387 58,086
Direct-response advertising costs, net................................ 16,520 28,452
Prepublication and programming costs, net............................. 4,526 6,506
Other................................................................. 8,167 7,834
---------- ----------
$ 98,876 $ 123,692
---------- ----------
---------- ----------

The deferred financing costs are net of accumulated amortization of $5,093
and $9,794 at December 31, 1997 and 1996, respectively. The deferred wiring and
installation costs are net of accumulated amortization of $18,718 and $12,850 at
December 31, 1997 and 1996, respectively. Direct-response advertising costs are
net of accumulated amortization of $53,840 and $70,661 at December 31, 1997 and
1996, respectively. Prepublication and programming costs are net of accumulated
amortization of $6,843 and $7,968 at December 31, 1997 and 1996, respectively.

12. ACCRUED EXPENSES AND OTHER

Accrued expenses and other current liabilities consist of the following:

DECEMBER 31,
----------------------

1997 1996
---------- ----------

Payroll, commissions and related employee benefits.................... $ 53,494 $ 40,553
Systems costs......................................................... 2,066 2,991
Rent and lease liabilities............................................ 27,247 13,502
Retail display costs and allowances................................... 10,407 8,263
Promotion costs....................................................... 2,739 2,663
Royalties............................................................. 8,367 8,362
Circulation costs..................................................... 6,037 5,420
Professional fees..................................................... 12,319 4,408
Taxes................................................................. 18,528 17,162
Customer advances..................................................... 946 2,482
Deferred purchase price............................................... 16,204 8,231
Other................................................................. 46,416 26,922
---------- ----------
$ 204,770 $ 140,959
---------- ----------
---------- ----------

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

13. LONG-TERM DEBT

Long-term debt consists of the following:

DECEMBER 31,
--------------------------

1997 1996
------------ ------------
Borrowings under Bank Credit Facilities........................... $ 1,218,101 $ 884,992
10 5/8% Senior Notes Due 2002..................................... -- 233,250
10 1/4% Senior Notes Due 2004..................................... 100,000 100,000
8 1/2% Senior Notes Due 2006..................................... 298,902 298,811
------------ ------------
1,617,003 1,517,053
Acquisition obligation payable.................................... 53,871 54,633
------------ ------------
1,670,874 1,571,686
Less: Current maturities of long-term debt........................ 14,333 6,000
------------ ------------
$ 1,656,541 $ 1,565,686
------------ ------------
------------ ------------

On May 31, 1996, the Company replaced its existing credit facilities under
the Revolving Credit Agreement, BONY Term Loan and the Chase Term Loan through
which the Company could borrow $970,000 in the aggregate with new credit
facilities with The Chase Manhattan Bank, the Bank of New York, Bankers Trust
Company and the Bank of Nova Scotia as agents (the "Credit Facilities"). The
Company used approximately $910,000 of the borrowings under the Credit
Facilities to repay borrowings under the previously existing credit facilities
and to pay certain related fees and expenses.

The Credit Facilities are comprised of a $750,000 Tranche A Revolving Loan
Commitment ("Tranche A Loan Commitment"), a $250,000 Term Loan ("Term Loan") and
an additional $250,000 Revolving Loan Commitment ("Revolver/Term Loan"). In
addition, the Company has the right to solicit commitments of up to $250,000
under the Tranche B Revolving Loan Facility ("Tranche B Facility"). In May 1997,
the Company solicited commitments of $150,000 ("Tranche B Loan Commitment")
under the Tranche B Facility. The Tranche A Loan Commitment may be utilized
through the incurrence of Tranche A revolving credit loans, swingline loans
which may not exceed $40,000 in total, Canadian dollar loans which may not
exceed the Canadian dollar equivalent of $40,000 in total or the issuance of
letters of credit which may not exceed $40,000. The Tranche B Facility may be
utilized through the incurrence of Tranche B revolving credit loans. The
borrowings under the Credit Facilities may be used for general corporate and
working capital purposes as well as to finance certain future acquisitions.

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

13. LONG-TERM DEBT (CONTINUED)
The commitments under the Tranche A Loan Commitment and the Tranche B Loan
Commitment are subject to mandatory reductions semi-annually on June 30 and
December 31 with the first reduction on June 30, 1999 and the final reduction on
June 30, 2004. The mandatory reductions for the Tranche A Loan Commitment are as
follows:

YEARS ENDING
DECEMBER 31,
------------

1999............................................................................ $ 75,000
2000............................................................................ 150,000
2001............................................................................ 150,000
2002............................................................................ 150,000
2003............................................................................ 150,000
2004............................................................................ 75,000
------------
$ 750,000
------------
------------

The mandatory reductions for the Tranche B Loan Commitment are as follows:

YEARS ENDING
DECEMBER 31,
------------

1999............................................................................ $ 15,000
2000............................................................................ 30,000
2001............................................................................ 30,000
2002............................................................................ 30,000
2003............................................................................ 30,000
2004............................................................................ 15,000
------------
$ 150,000
------------
------------

The mandatory reductions for the Tranche B Loan Commitment are based on
defined percentages of the total Tranche B Loan Commitment. To the extent that
the total revolving credit loans outstanding exceed the reduced commitment
amount, these loans must be paid down to an amount equal to or less than the
reduced commitment amount. However, if the total revolving credit loans
outstanding do not exceed the reduced commitment amount, then there is no
requirement to pay down any of the revolving credit loans.

The principal amounts of the Term Loan and the Revolver/Term Loan will each
be repaid semi-annually on June 30 and December 31 of each year, with an initial
payment of $25,000 on June 30, 2000, installments of $25,000 on each payment
date thereafter through December 31, 2003 and a final payment of $50,000 on June
30, 2004.

On April 21, 1997, the Company entered into a new 364-day credit facility
with The Chase Manhattan Bank, the Bank of New York, Bankers Trust Company and
the Bank of Nova Scotia as agents (the "New Credit Facility") which expires
April 20, 1998. Under the terms of the New Credit Facility, the Company has
commitments of $150,000 which can be borrowed in the form of revolving loans to
be used for general, corporate and working capital purposes as well as to
finance certain future acquisitions.

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

13. LONG-TERM DEBT (CONTINUED)
At December 31, 1997, the Company has commitments of $1,550,000 and can
borrow up to $1,650,000 in the aggregate under the Credit Facilities and the New
Credit Facility (collectively referred to as the "Bank Credit Facilities").

As of December 31, 1997, the borrowings under the Bank Credit Facilities
consist of the $568,101 under the Tranche A Loan Commitment, $250,000 under the
Revolver/Term Loan, $150,000 under the Tranche B Loan Commitment and $250,000
under the Term Loan.

The amounts borrowed pursuant to the Bank Credit Facilities bear interest,
at the Company's option as follows: (i) the higher of (a) the Federal Funds
Effective Rate as published by the Federal Reserve Bank of New York plus 1/2 of
1% and (b) the prime commercial lending rate announced by the Agent from time to
time (in each case, the "Base Rate"); plus, in each case, an applicable margin
of up to 1/8 of 1% as specified in the Bank Credit Facilities or (ii) the
Eurodollar Rate plus an applicable margin ranging from 1/2 of 1% to 1 1/2% as
specified in the Bank Credit Facilities. All swingline loans bear interest at
the Base Rate plus the applicable margin of up to 1/8 of 1% as specified in the
Bank Credit Facilities. During 1997, the weighted average interest rate on the
Bank Credit Facilities was 7.11%. During 1996, the weighted average interest
rates on the Revolving Credit Agreement, BONY Term Loan, Chase Term Loan and
Bank Credit Facilities were 7.04%, 7.50%, 6.94% and 7.07%, respectively.
Interest rates on the borrowings under the Bank Credit Facilities outstanding at
December 31, 1997 ranged from 7.04% to 8.50%. Interest rates on the borrowings
under the Bank Credit Facilities outstanding at December 31, 1996 ranged from
7.00% to 7.13%.

Under the Credit Facilities, the Company has agreed to pay commitment fees
equal to 3/8 of 1% per annum on the daily average aggregate unutilized
commitment under the Tranche A Loan Commitment and the Tranche B Loan
Commitment. The Company has also agreed to pay certain fees with respect to the
issuance of letters of credit and an annual administration fee. Under the New
Credit Facility, the Company has agreed to pay commitment fees equal to 1/8 of
1% per annum on the daily average aggregate unutilized revolving loan
commitment.

10 5/8% SENIOR NOTES. During November and December 1996, the Company
purchased $16,750 of the 10 5/8% Senior Notes at a premium of 105.4% plus
accrued interest from various brokers on the open market. In January 1997, the
Company purchased, in aggregate, $20,850 of the 10 5/8% Senior Notes at a
weighted average price of 105%, plus accrued and unpaid interest from various
brokers on the open market. On May 1, 1997, the Company redeemed the $212,400
remaining principal amount of the 10 5/8% Senior Notes at 104% plus accrued and
unpaid interest. The aggregate premium paid and the write-off of related
deferred financing costs are classified as an extraordinary charge and are
recorded at an aggregate value of $15,401 on the accompanying statement of
consolidated operations for the year ended December 31, 1997.

10 1/4% SENIOR NOTES. Interest is payable semi-annually in June and
December at an annual rate of 10 1/4%. The 10 1/4% Senior Notes mature on June
1, 2004, with no sinking fund requirements. The 10 1/4% Senior Notes may not be
redeemed prior to June 1, 1999 other than in connection with a change of
control. Beginning in 1999 and thereafter, the 10 1/4% Senior Notes are
redeemable at prices ranging from 104.95% with annual reductions to 100% in 2002
plus accrued and unpaid interest.

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

13. LONG-TERM DEBT (CONTINUED)
8 1/2% SENIOR NOTES. On January 24, 1996, the Company completed a private
offering of $300,000 of 8 1/2% Senior Notes. The 8 1/2% Senior Notes were issued
at 99.578% with related issuance costs of approximately $7,000. On August 21,
1996, the Company exchanged its 8 1/2% Senior Notes ("Old Notes") for a new
series of $300,000 8 1/2% Senior Notes Due 2006 ("New Notes"). The New Notes
have been registered under the Securities Act of 1933. The New Notes mature on
February 1, 2006, with no sinking fund requirements. Interest on the New Notes
is payable semi-annually in February and August at the annual rate of 8 1/2%.
The New Notes may not be redeemed prior to February 1, 2001 other than in
connection with a change of control. Beginning in 2001 and thereafter, the New
Notes are redeemable in whole or in part, at the option of the Company, at
prices ranging from 104.25% with annual reductions to 100% in 2003 plus accrued
and unpaid interest. Net proceeds from the Old Notes of approximately $293,000
were primarily used to pay down borrowings under the Revolving Credit Agreement.

The 10 1/4% Senior Notes and 8 1/2% Senior Notes (together referred to as
the "Senior Notes"), and the Bank Credit Facilities, all rank senior in right of
payment to all subordinated indebtedness of PRIMEDIA Inc. (a holding company).

The above indebtedness, among other things, limits the ability of the
Company to change the nature of its businesses, incur indebtedness, create
liens, sell assets, engage in mergers, consolidations or transactions with
affiliates, make investments in or loans to certain subsidiaries, issue
guarantees and make certain restricted payments including dividend payments on
its common stock. Under the Company's most restrictive debt covenants, the
Company must maintain a minimum interest coverage ratio of 1.8 to 1 and a
minimum fixed charge coverage ratio of 1.05 to 1. The Company's maximum
allowable leverage ratio is 6.0 to 1. The Company believes it is in compliance
with the financial and operating covenants of its principal financing
arrangements. Borrowings under the above indebtedness are guaranteed by each of
the domestic wholly-owned subsidiaries of the Company. Such guarantees are full,
unconditional and joint and several. The separate financial statements of the
domestic subsidiaries are not presented because the Company believes the
separate financial statements would not be material to the shareholders and
potential investors. The Company's foreign subsidiaries are not guarantors of
the above indebtedness. The total assets, revenues, income or equity of such
foreign subsidiaries, both individually and on a combined basis, are
inconsequential in relation to the total assets, revenues, income or equity of
the Company.

ACQUISITION OBLIGATION. In connection with the acquisition of certain of
the Company's specialty consumer magazine operations and THE DAILY RACING FORM,
an obligation was recorded equivalent to the present value of the principal and
interest payments of the notes payable in the amount of $53,871 at December 31,
1997 and $54,633 at December 31, 1996. The interest rate used in calculating the
present value was 13%, which represents management's estimate of the prevailing
market rate of interest for such obligation at the time of the acquisition.
Principal and interest amounts aggregating $63,500 will be repaid from June 1998
through June 2001.

INTEREST RATE SWAP AGREEMENTS. In May 1995, the Company entered into two,
three-year interest rate swap agreements with an aggregate notional amount of
$200,000. Under the outstanding swap agreements, the Company receives a floating
rate of interest based on three-month LIBOR, which resets quarterly, and pays a
fixed rate of interest which increases each year during the terms of the
respective agreements. The weighted average variable rate and weighted average
fixed rate were 5.7% and 6.5%, respectively, in 1997, 5.5% and 6.2%,
respectively, in 1996 and 6.0% and 6.1%, respectively, in 1995. Also, in May
1995, the

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

13. LONG-TERM DEBT (CONTINUED)
Company entered into a three-year interest rate cap agreement. As a result of
this transaction, the Company currently has the right to receive payments based
on a notional principal amount of $100,000 to the extent that three-month LIBOR
exceeds 7.75% in year one, 8.75% in year two and 9.75% in year three of the
agreement. Any interest differential received is recognized as an adjustment to
interest expense. The interest rate cap fee is recognized as an adjustment to
interest expense over the life of the interest rate cap agreement.

In the fourth quarter of 1996, the Company entered into six, one-year
interest rate swap agreements with an aggregate notional amount of $600,000.
Under these swap agreements, the Company received a floating rate of interest
based on three-month LIBOR, which resets quarterly, and paid a fixed rate of
interest, each quarter, for the term of the agreements. The weighted average
variable rate and weighted average fixed rate were 5.7% and 5.8%, respectively,
in 1997 and 5.5% and 5.8%, respectively, in 1996. These interest rate swap
agreements expired during the fourth quarter of 1997.

In July 1997, the Company entered into four, three-year and two, four-year
interest rate swap agreements, with an aggregate notional amount of $600,000.
Under these new swap agreements, which commence on January 2, 1998, the Company
will receive a floating rate of interest based on three-month LIBOR, which
resets quarterly, and the Company will pay a fixed rate of interest, each
quarter, for the terms of the respective agreements.

The net interest differential, related to the interest rate swap agreements
and the interest rate cap agreement, charged to interest expense in 1997, 1996
and 1995 was $2,048, $1,943 and $539, respectively. The Company is exposed to
credit risk in the event of nonperformance by counterparties to its interest
rate swap and cap agreements. Credit risk is limited by entering into such
agreements with primary dealers only; therefore, the Company does not anticipate
that nonperformance by counterparties will occur. Notwithstanding this, the
Company's treasury department monitors counterparty credit ratings at least
quarterly through reviewing independent credit agency reports. Both current and
potential exposure are evaluated, as necessary, by obtaining replacement cost
information from alternative dealers. Potential loss to the Company from credit
risk on these agreements is limited to amounts receivable, if any. The Company
enters into these agreements solely to hedge its interest rate risk.

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

14. INCOME TAXES

At December 31, 1997, the Company had aggregate net operating loss
carryforwards for Federal and state income tax purposes ("NOLs") of
approximately $749,000 which will be available to reduce future taxable income.
The utilization of such NOLs is subject to certain limitations under Federal
income tax laws. In certain instances, such NOLs may only be used to reduce
future taxable income of the respective company which generated the NOL. The
NOLs are scheduled to expire in the following years:

2003.............................................................. $ 24,900
2004.............................................................. 60,300
2005.............................................................. 121,800
2006.............................................................. 93,400
2007.............................................................. 82,700
2008.............................................................. 83,700
2009.............................................................. 68,900
2010.............................................................. 156,100
2011.............................................................. 26,100
2012.............................................................. 31,100
---------
$ 749,000
---------
---------

Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (b)
operating loss carryforwards. The tax effects of significant items comprising
the Company's net deferred income tax assets are as follows:

DECEMBER 31, 1997
---------------------------------

FEDERAL STATE TOTAL
---------- --------- ----------
DEFERRED INCOME TAX ASSETS:
Difference between book and tax basis of inventory............................. $ 2,187 $ 641 $ 2,828
Difference between book and tax basis of accrued expenses and other............ 16,075 4,709 20,784
Reserves not currently deductible.............................................. 2,615 766 3,381
Difference between book and tax basis of other intangible assets............... 80,945 23,714 104,659
Operating loss carryforwards................................................... 215,832 44,065 259,897
---------- --------- ----------
Total.......................................................................... 317,654 73,895 391,549
---------- --------- ----------
DEFERRED INCOME TAX LIABILITIES:
Difference between book and tax basis of other intangible assets............... 39,283 11,508 50,791
Difference between book and tax basis of property and equipment................ 16,405 4,806 21,211
Other.......................................................................... 19,424 5,691 25,115
---------- --------- ----------
Total.......................................................................... 75,112 22,005 97,117
---------- --------- ----------
Net deferred income tax assets................................................. 242,542 51,890 294,432
Less: Valuation allowances..................................................... 85,500 32,732 118,232
---------- --------- ----------
Net............................................................................ $ 157,042 $ 19,158 $ 176,200
---------- --------- ----------
---------- --------- ----------

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

14. INCOME TAXES (CONTINUED)

DECEMBER 31, 1996
---------------------------------

FEDERAL STATE TOTAL
---------- --------- ----------
DEFERRED INCOME TAX ASSETS:
Difference between book and tax basis of inventory............................. $ 3,550 $ 1,041 $ 4,591
Difference between book and tax basis of accrued expenses and other............ 18,583 5,444 24,027
Reserves not currently deductible.............................................. 2,277 667 2,944
Difference between book and tax basis of other intangible assets............... 31,043 9,094 40,137
Operating loss carryforwards................................................... 192,267 56,326 248,593
---------- --------- ----------
Total.......................................................................... 247,720 72,572 320,292
---------- --------- ----------
DEFERRED INCOME TAX LIABILITIES:
Difference between book and tax basis of other intangible assets............... 32,612 9,554 42,166
Difference between book and tax basis of property and equipment................ 11,382 3,335 14,717
Other.......................................................................... 9,757 2,858 12,615
---------- --------- ----------
Total.......................................................................... 53,751 15,747 69,498
---------- --------- ----------
Net deferred income tax assets................................................. 193,969 56,825 250,794
Less: Valuation allowances..................................................... 36,927 37,667 74,594
---------- --------- ----------
Net............................................................................ $ 157,042 $ 19,158 $ 176,200
---------- --------- ----------
---------- --------- ----------

At December 31, 1997, 1996 and 1995, management of the Company reviewed
recent operating results and projected future operating results. At the end of
each of the respective years, management determined that a portion of the net
deferred income tax assets would likely be realized. The amount of the net
deferred income tax assets was not adjusted in 1997. In 1996, the Company
reduced the valuation allowances by $62,400 and recorded an income tax benefit
of $53,300 ($47,500 and $5,800 related to Federal and state income tax benefits,
respectively) and a reduction of the excess of purchase price over net assets
acquired of $9,100; and in 1995, the Company reduced the valuation allowances by
$67,700 and recorded an income tax benefit of $59,600 ($53,100 and $6,500
related to Federal and state income tax benefits, respectively) and a reduction
of the excess of purchase price over net assets acquired of $8,100. The amount
of the net deferred tax asset considered realizable, however, could be reduced
in the near term if estimates of future taxable income during the carryforward
period are reduced. After the reduction in the valuation allowances discussed
above, there was a net increase in the valuation allowance of $43,638 during
1997 and net decreases in the valuation allowances of $59,420 and $1,404 during
1996 and 1995, respectively.

A portion of the valuation allowances in the amount of approximately $39,000
at December 31, 1997 relates to net deferred tax assets which were recorded in
accounting for the acquisitions of various entities. The recognition of such
amount in future years will be allocated to reduce the excess of the purchase
price over the net assets acquired and other non-current intangible assets.

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

15. EXCHANGEABLE PREFERRED STOCK

Exchangeable Preferred Stock consists of the following:

DECEMBER 31,
1997 1996
---------- ----------

$2.875 Senior Exchangeable Preferred Stock................................................ $ -- $ 98,266
$11.625 Series B Exchangeable Preferred Stock............................................. 155,281 150,513
$10.00 Series D Exchangeable Preferred Stock.............................................. 194,495 193,950
$9.20 Series E Exchangeable Preferred Stock............................................... 120,504 --
---------- ----------
$ 470,280 $ 442,729
---------- ----------
---------- ----------

$2.875 SENIOR EXCHANGEABLE PREFERRED STOCK

The Company authorized 4,000,000 shares of $.01 par value Senior Preferred
Stock, all of which was issued and outstanding at December 31, 1996. The
liquidation and redemption value at December 31, 1996 was $100,000. Annual
dividends of $2.875 per share on the Senior Preferred Stock were cumulative and
payable quarterly. In November 1997, the Company redeemed all 4,000,000
outstanding shares of the Senior Preferred Stock for $105,864, which includes a
redemption premium of $5,800, plus accrued and unpaid dividends of $64.

$11.625 SERIES B EXCHANGEABLE PREFERRED STOCK

The Company authorized 2,000,000 shares of $.01 par value Series B Preferred
Stock, 1,576,036 shares and 1,531,526 shares of which were issued and
outstanding at December 31, 1997 and 1996, respectively. The liquidation and
redemption value at December 31, 1997 and 1996 was $157,604 and $153,153,
respectively. Annual dividends of $11.625 per share on the Series B Preferred
Stock are cumulative and payable quarterly in cash or by issuing additional
shares of the Series B Preferred Stock. Commencing in the second quarter of
1997, the Company elected to satisfy its Series B Preferred Stock dividend
requirements in cash. On or after February 1, 1998, the Series B Preferred Stock
may be redeemed in whole or in part, at the option of the Company, at specified
redemption prices plus accrued and unpaid dividends. The Company is required to
redeem the Series B Preferred Stock on May 1, 2005 at a redemption price equal
to the liquidation preference of $100 per share, plus accrued and unpaid
dividends. The Series B Preferred Stock is exchangeable at the option of the
Company on or after an initial public offering of the Company's common stock for
its 11 5/8% Class B Subordinated Exchange Debentures due 2005 provided no shares
of the Senior Preferred Stock are then outstanding. Such debentures are
subordinate to all existing and future liabilities and obligations of the
Company and its subsidiaries. The Series B Preferred Stock is recorded on the
accompanying consolidated balance sheets at the aggregate redemption value (net
of issuance costs) of $155,281 and $150,513 at December 31, 1997 and 1996,
respectively (see Note 25).

$10.00 SERIES D EXCHANGEABLE PREFERRED STOCK

On January 24, 1996, the Company completed a private offering of 2,000,000
shares of $.01 par value, $10.00 Series C Exchangeable Preferred Stock ("Series
C Preferred Stock") at $100 per share. Annual dividends of $10.00 per share on
the Series C Preferred Stock were cumulative and payable quarterly, in cash,
commencing May 1, 1996. On August 21, 1996, the Company exchanged the Series C
Preferred Stock

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

15. EXCHANGEABLE PREFERRED STOCK (CONTINUED)
for 2,000,000 shares of $.01 par value, Series D Preferred Stock. Dividend
payment terms of the Series D Preferred Stock are the same as the terms of the
Series C Preferred Stock. The Series D Preferred Stock has been registered under
the Securities Act of 1933. The liquidation and redemption value at December 31,
1997 and 1996 was $200,000. On and after February 1, 2001, the Series D
Preferred Stock may be redeemed in whole or in part, at the option of the
Company, at specified redemption prices plus accrued and unpaid dividends. The
Company is required to redeem the Series D Preferred Stock on February 1, 2008
at a redemption price equal to the liquidation preference of $100 per share,
plus accrued and unpaid dividends. The Series D Preferred Stock is exchangeable
in whole but not in part, at the option of the Company, on any scheduled
dividend payment date into 10% Class D Subordinated Exchange Debentures due 2008
provided that no shares of the Senior Preferred Stock are outstanding on the
date of exchange. Net proceeds from the Series C Preferred Stock offering of
approximately $193,000 were primarily used to pay down borrowings under the
Revolving Credit Agreement. The Series D Preferred Stock is recorded on the
accompanying consolidated balance sheets at the aggregate redemption value (net
of issuance costs) of $194,495 and $193,950 at December 31, 1997 and 1996,
respectively.

$9.20 SERIES E EXCHANGEABLE PREFERRED STOCK

On September 26, 1997, the Company completed a private offering of 1,250,000
shares of $9.20 Series E Preferred Stock at $100 per share, all of which are
issued and outstanding at December 31, 1997. The liquidation and redemption
value at December 31, 1997 was $125,000. Annual dividends of $9.20 per share on
the Series E Preferred Stock are cumulative and payable quarterly, in cash,
commencing February 1, 1998. Prior to November 1, 2002, the Series E Preferred
Stock may be redeemed in whole or in part, at the option of the Company, at a
redemption price equal to the sum of the aggregate liquidation preference plus
accrued and unpaid dividends to the redemption date and the applicable
make-whole premium as defined in the private offering prospectus. On or after
November 1, 2002, the Series E Preferred Stock may be redeemed in whole or in
part, at the option of the Company, at specified redemption prices plus accrued
and unpaid dividends. The Company is required to redeem the Series E Preferred
Stock on November 1, 2009 at a redemption price equal to the liquidation
preference of $100 per share, plus accrued and unpaid dividends. The Series E
Preferred Stock is exchangeable, in whole but not in part, at the option of the
Company, on any scheduled dividend payment date into 9.20% Class E Subordinated
Debentures. The Series E Preferred Stock is recorded on the accompanying
consolidated balance sheet at the aggregate redemption value (net of unamortized
issuance costs) of $120,504 at December 31, 1997. Net proceeds from this private
offering were used to pay down borrowings under the Bank Credit Facilities (see
Note 25).

In 1997, the Company recorded a preferred stock dividend accrual in the
amount of $9,517. Of the total dividend accrual recorded in 1997, the amounts
that relate to prior periods were not material.

16. COMMON STOCK

In October 1995, the Company increased the authorized number of shares of
common stock by 50,000,000 shares to 250,000,000 shares. During November 1995,
the Company completed a public offering of 17,250,000 shares of common stock at
a price of $10.00 per share. Proceeds from this initial public offering, net of
commissions and other related expenses of approximately $9,500, were
approximately

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

16. COMMON STOCK (CONTINUED)
$163,000. The Company used the net proceeds from this initial public offering to
repay borrowings outstanding under its Revolving Credit Agreement.

SHARE REPURCHASE PROGRAM. On September 9, 1997, the Company announced that
its board of directors had authorized a program for the Company to repurchase up
to $15,000 of its outstanding common stock from time to time in the open market
and through privately negotiated transactions. During the year ended December
31, 1997, the Company repurchased 1,048,600 shares of common stock for $13,158
at a weighted average price of $12.52.

STOCK PURCHASE AND OPTION PLAN. The PRIMEDIA Stock Purchase and Option Plan
(the "Plan") authorizes sales of shares of common stock and grants of incentive
awards in the forms of, among other things, stock options to key employees and
other persons with a unique relationship with the Company. The stock options are
granted with exercise prices at quoted market value at time of issuance. For the
purpose of determining fair value prior to November 1995, it was recognized that
the Company's common stock was not readily saleable to third parties at that
time, and therefore, was valued at a discount to a publicly-traded common stock.
The common stock issued prior to November 1995 and redeemed is included in the
table of the activity of the common stock subject to redemption.

COMMON STOCK SUBJECT TO REDEMPTION. Under the following circumstances,
employees who purchased shares prior to the Company's initial public offering of
common stock have the right to resell their shares of common stock to the
Company: termination of employment in connection with the sale of the business
for which they work, death, disability or retirement after age 65. The resale
feature expires five years after the effective purchase date of the common
stock. Since inception of the Company, none of the employees has exercised such
resale feature as a result of such sale, death, disability or retirement and the
likelihood of significant resales because the stock is freely tradeable on the
public market is considered by management to be remote.

The following summarizes the activity of the common stock subject to
redemption:

SHARES AMOUNT
--------- ---------

Balance at January 1, 1995.................................................................. 2,152,180 $ 17,217
Acquisitions of common stock held by management............................................. (57,031) (430)
Issuances of common stock................................................................... 458,994 3,274
Expiration of redemption feature............................................................ (147,630) (809)
Accretion in carrying value................................................................. -- 9,927
--------- ---------
Balance at December 31, 1995................................................................ 2,406,513 29,179
Acquisitions of common stock held by management............................................. (17,269) (148)
Expiration of redemption feature............................................................ (1,745,934) (21,230)
Reduction in carrying value................................................................. -- (885)
--------- ---------
Balance at December 31, 1996................................................................ 643,310 6,916
Acquisitions of common stock held by management............................................. (2,320) (19)
Expiration of redemption feature............................................................ (238,340) (2,569)
Accretion in carrying value................................................................. -- 755
--------- ---------
Balance at December 31, 1997................................................................ 402,650 $ 5,083
--------- ---------
--------- ---------

The redemption values of the common stock subject to redemption of $5,083
and $6,916 at December 31, 1997 and 1996, respectively, were based on a
repurchase price of $12.625 per share and $10.75 per

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

16. COMMON STOCK (CONTINUED)
share which are the quoted market values at December 31, 1997 and 1996,
respectively. Common stock subject to redemption is recorded on the accompanying
consolidated balance sheets net of the amounts of notes receivable from
employees (related to common stock issuances) outstanding of $707 and $959 at
December 31, 1997 and 1996, respectively.

ACCOUNTING FOR EMPLOYEE STOCK BASED COMPENSATION. The Plan has authorized
grants of up to 25,000,000 shares of the Company's common stock or options to
management personnel. The options are exercisable at the rate of 20% per year
over a five-year period commencing on the effective date of the grant; however,
some optionees have received credit for periods of employment with the Company
and its predecessors and subsidiaries prior to the date the options were
granted. All options granted pursuant to the Plan will expire no later than ten
years from the date the option was granted.

A summary of the status of the Company's stock option plan as of December
31, 1997, 1996 and 1995, and changes during the years ending on those dates is
presented below:

1997 1996 1995
------------------------------------- ------------------------------------- ------------------------

WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE PRICE OPTIONS PRICE PRICE OPTIONS PRICE
--------- ------------- ----------- --------- ------------- ----------- --------- -------------

Outstanding--
beginning of
year........... 13,211,212 $5.00-$11.94 $ 6.69 12,326,087 $5.00-$ 8.00 $ 5.98 9,610,447 $5.00-$8.00
Granted........ 135,800 1$0.88-$12.00 $ 11.27 1,830,400 1$0.00-$11.94 $ 11.12 3,139,325 $8.00
Exercised...... (1,209,693) $5.00-$11.81 $ 6.96 (681,890) $5.00-$ 8.00 $ 5.36 (193,401) $5.00-$8.00
Forfeited...... (574,389) $5.00-$11.81 $ 9.22 (263,385) $5.00-$ 8.00 $ 7.69 (230,284) $5.00-$8.00
--------- --------- ---------
Outstanding--end
of the year.... 11,562,930 $5.00-$12.00 $ 6.58 13,211,212 $5.00-$11.94 $ 6.69 12,326,087 $5.00-$8.00
--------- --------- ---------
--------- --------- ---------
Exercisable--end
of the year.... 8,953,280 $5.00-$11.94 $ 5.73 8,707,528 $5.00-$ 8.00 $ 5.38 7,269,817 $5.00-$8.00
--------- --------- ---------
--------- --------- ---------

WEIGHTED
AVERAGE
EXERCISE
PRICE
-----------
Outstanding--
beginning of
year........... $ 5.31
Granted........ $ 8.00
Exercised...... $ 5.19
Forfeited...... $ 6.28
Outstanding--end
of the year.... $ 5.98
Exercisable--end
of the year.... $ 5.18

The weighted-average fair value per option for options granted in 1997, 1996
and 1995 was $4.45, $4.13 and $3.06, respectively.

The following table summarizes information about stock options outstanding
at December 31, 1997:

NUMBER WEIGHTED WEIGHTED
RANGE OF OUTSTANDING AVERAGE REMAINING AVERAGE
EXERCISE PRICES AT 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE
- --------------- ----------- ----------------------- ---------------

$5.00-$5.44 7,104,260 4 $ 5.00
$7.00 125,400 6 $ 7.00
$8.00 2,711,210 8 $ 8.00
$10.00-$12.00 1,622,060 9 $ 11.12
-----------
11,562,930 6 $ 6.58
-----------
-----------

SFAS No. 123 provides for a fair-value based method of accounting for
employee options and measures compensation expense using an option valuation
model that takes into account, as of the grant date, the exercise price and
expected life of the option, the current price of the underlying stock and its

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

16. COMMON STOCK (CONTINUED)
expected volatility, expected dividends on the stock, and the risk-free interest
rate for the expected term of the option. The Company has elected to continue
accounting for employee stock-based compensation under Accounting Principles
Board Opinion ("APB") No. 25 and related interpretations. Under APB No. 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.

Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of SFAS No.
123. The fair value of these options was estimated at the date of grant using
the Black-Scholes option pricing model for options granted in 1997, 1996 and
1995. The following weighted-average assumptions were used for 1997, 1996 and
1995, respectively: risk-free interest rates of 6.65%, 6.36% and 6.34%; dividend
yields of 0.0%, 0.0% and 0.0%; volatility factors of the expected market price
of the Company's common stock of 27.70%, 20.83% and 22.59%; and a
weighted-average expected life of the option of six years. The estimated fair
value of options granted during 1997, 1996 and 1995 was $604, $7,560 and $9,592,
respectively.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The Company's
pro forma information is as follows:

1997 1996 1995
--------- --------- ---------

Pro forma net income (loss)....................................................... $(176,351) $ 5,738 $ (76,388)
Pro forma loss applicable to common shareholders.................................. $(241,424) $ (37,788) $(105,366)
Pro forma basic and diluted loss per common share................................. $ (1.87) $ (.29) $ (.93)

The Company had reserved approximately 12,000,000 shares of the Company's
common stock or options for future grants in connection with the Plan at
December 31, 1997.

17. LOSS PER SHARE

Loss per share has been determined based on income (loss) before
extraordinary charge after preferred stock dividends, divided by the weighted
average number of common shares outstanding for all periods presented.

Options to purchase 11,562,930, 13,211,212, 12,326,087 shares of common
stock were outstanding at December 31, 1997, 1996 and 1995, respectively, but
were not included in the computation of diluted loss per share because the
effect of their inclusion would be antidilutive.

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

18. ACCUMULATED DEFICIT

The accumulated deficit of $929,011 at December 31, 1997 includes non-cash
expenses related to the accumulated amortization of intangible assets, the
excess of the purchase price over the net assets acquired and deferred financing
costs, the write-offs of the unamortized balance of deferred financing costs
associated with all previous financings, the restructuring and other costs and
the net provision on sales of businesses in the aggregate amount of
approximately $1,219,300 which is net of the non-cash income tax benefits
aggregating $155,000 through December 31, 1997.

19. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and the estimated fair values of the Company's
financial instruments for which it is practicable to estimate fair value are as
follows:

DECEMBER 31,
----------------------------------------------

1997 1996
---------------------- ----------------------

CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
---------- ---------- ---------- ----------

10 5/8% Senior Notes............................................. $ -- $ -- $ 233,250 $ 260,950
10 1/4% Senior Notes............................................. 100,000 108,000 100,000 105,400
8 1/2% Senior Notes.............................................. 298,902 307,470 298,811 291,750
Acquisition Obligation........................................... 53,871 55,329 54,633 55,339
Senior Preferred Stock........................................... -- -- 98,266 107,500
Series B Preferred Stock......................................... 155,281 169,818 150,513 154,684
Series D Preferred Stock......................................... 194,495 210,500 193,950 196,000
Series E Preferred Stock......................................... 120,504 125,000 -- --
Interest Rate Swap Agreements.................................... 485 410 982 3,531
Purchased Interest Rate Cap Agreement............................ (43) -- (159) (2)

The bracketed amounts above represent assets.

The fair values of the senior notes and preferred stocks were determined
based on the quoted market prices and the fair value of the acquisition
obligation was estimated using discounted cash flow analysis, based on current
incremental borrowing rates for similar types of borrowing arrangements. The
fair value of the interest rate swap agreements was determined using discounted
cash flow models.

For instruments including cash and cash equivalents, accounts receivable and
accounts payable, the carrying amount approximates fair value because of the
short maturity of these instruments. The fair value of floating-rate long-term
debt approximates carrying value because these instruments re-price frequently
at current market prices.

20. RETIREMENT PLANS

Substantially all of the Company's employees are eligible to participate in
defined contribution plans. The expense recognized for all of these plans was
approximately $6,300 in 1997, $5,400 in 1996 and $5,200 in 1995.

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

20. RETIREMENT PLANS (CONTINUED)
In addition, the employees at PRIMEDIA Magazines and the non-union employees
at THE DAILY RACING FORM are eligible to participate in a non-contributory
defined benefit pension plan ("Pension Plan"). The benefits to be paid under the
Pension Plan are based on years of service and compensation amounts for the
highest consecutive five years of service in the most current ten years. The
Pension Plan is funded by means of contributions by the Company to the plan's
trust. The pension funding policy is consistent with the funding requirements of
U.S. Federal and other governmental laws and regulations. Plan assets consist
primarily of fixed income, equity and other short-term investments. The
components of the net periodic pension cost of the Pension Plan for the years
ended December 31, 1997, 1996 and 1995 are summarized as follows:

1997 1996 1995
--------- --------- ---------

Service cost........................................................................ $ 1,387 $ 1,203 $ 755
Interest cost....................................................................... 1,073 769 581
Actual investment gain on plan assets............................................... (1,763) (610) (812)
Net amortization and deferral....................................................... 945 462 774
--------- --------- ---------
Net periodic pension cost........................................................... $ 1,642 $ 1,824 $ 1,298
--------- --------- ---------
--------- --------- ---------

The following is a reconciliation of the funded status of the Pension Plan:

DECEMBER 31,
----------------------
1997 1996
---------- ----------

Actuarial present value of benefit obligation:
Vested.............................................................. $ (10,737) $ (6,342)
Non-vested.......................................................... (851) (617)
---------- ----------
Accumulated benefit obligation........................................ (11,588) (6,959)
Additional liability based on projected compensation levels........... (6,448) (5,118)
---------- ----------
Projected benefit obligation.......................................... (18,036) (12,077)
Plan assets at fair value............................................. 13,391 5,473
---------- ----------
Projected benefit obligation in excess of plan assets................. (4,645) (6,604)
Unrecognized net loss (gain).......................................... (1,440) 172
Obligation recorded at acquisition date............................... 2,587 2,861
---------- ----------
Accrued pension cost.................................................. $ (3,498) $ (3,571)
---------- ----------
---------- ----------

The obligation recorded at the acquisition date of PRIMEDIA Magazines and
THE DAILY RACING FORM is the excess of the projected benefit obligation over the
plan assets at the date of acquisition which is included in other non-current
liabilities. The weighted average discount rates used in determining the
actuarial present value of the projected benefit obligation were 7.0% and 7.5%
for 1997 and 1996, respectively. The weighted average rate of compensation
increases used was 4.0% for 1997 and 1996. The weighted average expected
long-term rate of return on plan assets was 8.5% for 1997 and 1996 (see Note
25).

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

21. COMMITMENTS AND CONTINGENCIES

COMMITMENTS. Total rent expense under operating leases was $36,844, $31,561
and $24,409 for the years ended December 31, 1997, 1996 and 1995, respectively.
Certain leases are subject to escalation clauses and certain leases contain
renewal options. Minimum rental commitments under noncancelable operating leases
are approximately as follows:

YEARS ENDING DECEMBER 31,
-------------------------

1998............................................................... $ 26,868
1999............................................................... 22,759
2000............................................................... 20,218
2001............................................................... 15,365
2002............................................................... 12,504
Thereafter......................................................... 38,579
--------
$ 136,293
--------
--------

Future minimum lease payments under capital leases (see Note 9) are
approximately as follows:

YEARS ENDING DECEMBER 31,
-------------------------

1998............................................................... $ 3,102
1999............................................................... 3,663
2000............................................................... 3,663
2001............................................................... 3,663
2002............................................................... 3,663
Thereafter......................................................... 23,379
-------
41,133
Less: amount representing interest................................. 15,760
-------
Present value of net minimum lease payments........................ 25,373
Less: current portion.............................................. 1,373
-------
Long-term obligations (included in other non-current
liabilities)..................................................... $ 24,000
-------
-------

CONTINGENCIES. The Company is involved in ordinary and routine litigation
incidental to its business. In the opinion of management, there is no pending
legal proceeding that would have a material adverse affect on the consolidated
financial statements of the Company.

At December 31, 1997, the Company had letters of credit outstanding of
approximately $3,100.

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

22. RELATED PARTY TRANSACTIONS

During each of the years ended December 31, 1997, 1996 and 1995, the Company
paid $1,000 in administrative and other fees to Kohlberg Kravis Roberts & Co.
("KKR"), an affiliated party. The Company paid an aggregate of $180, in
directors' fees to certain partners of KKR during the years ended December 31,
1997, 1996 and 1995.

On March 1, 1995, 3,125,000 shares of common stock were issued to a
partnership affiliated with KKR at $8.00 per share which was the fair value per
share at such date. On March 1, 1995, pursuant to the related certificate of
designations, 2,500 shares of Series C Preferred Stock ("Old Preferred Stock")
were authorized for issuance and 1,000 shares were issued to partnerships
affiliated with KKR at $50,000 per share, which was the liquidation value per
share at such date. The proceeds from both issuances were used to pay down the
borrowings under the Revolving Credit Agreement. On August 3, 1995, the Company
redeemed all 1,054 shares then outstanding (which included dividends accrued
through redemption date) of the Old Preferred Stock at $50,000 per share for a
total of $52,691. This transaction was financed with borrowings under the
Revolving Credit Agreement (see Notes 13 and 25).

23. UNAUDITED QUARTERLY FINANCIAL INFORMATION

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------------- ------------- ------------- ------------- -------------

FOR THE YEAR ENDED DECEMBER 31, 1997:
Sales, net...................................... $352,291 $368,762 $368,944 $397,598 $1,487,595
Operating income (loss)......................... 20,478 39,518 (112,326) 31,537 (20,793)
Income (loss) before extraordinary charge....... (12,546) 3,700 (147,674) (919) (157,439)
Extraordinary charge--extinguishment of debt.... (1,554) (13,847) -- -- (15,401)
Net loss........................................ (14,100) (10,147) (147,674) (919) (172,840)
Loss applicable to common shareholders.......... (26,426) (22,602) (160,130) (28,755) (237,913)
Basic and diluted loss applicable to common
shareholders per common share:
Loss before extraordinary charge.............. $(.19) $(.07) $(1.24) $(.22) $(1.72)
Net loss...................................... $(.20) $(.18) $(1.24) $(.22) $(1.84)
Basic and diluted common shares outstanding..... 129,114,344 129,289,307 129,411,579 129,404,368 129,304,900

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

23. UNAUDITED QUARTERLY FINANCIAL INFORMATION (CONTINUED)

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------------- ------------- ------------- ------------- -------------

FOR THE YEAR ENDED DECEMBER 31, 1996:
Sales, net...................................... $314,953 $335,680 $344,418 $379,398 $1,374,449
Operating income................................ 6,985 23,280 18,519 37,117 85,901
Income (loss) before extraordinary charge....... (20,740) (7,066) (11,895) 57,298 17,597
Extraordinary charge--extinguishment of debt.... -- (7,572) -- (1,981) (9,553)
Net income (loss)............................... (20,740) (14,638) (11,895) 55,317 8,044
Income (loss) applicable to common
shareholders.................................. (27,584) (27,041) (23,973) 43,116 (35,482)
Basic income (loss) applicable to common
shareholders per common share:
Income (loss) before extraordinary charge..... $(.21) $(.15) $(.19) $.35 $(.20)
Net income (loss)............................. $(.21) $(.21) $(.19) $.33 $(.27)
Diluted income (loss) applicable to common
shareholders per common share:
Income (loss) before extraordinary charge..... $(.21) $(.15) $(.19) $.34 $(.20)
Net income (loss)............................. $(.21) $(.21) $(.19) $.32 $(.27)
Basic common shares outstanding................. 128,502,847 128,787,528 128,874,002 128,961,695 128,781,518
Diluted common shares outstanding 128,502,847 128,787,528 128,874,002 133,866,122 128,781,518

The sum of the above quarterly per share amounts may not equal reported
year-to-date per share amounts due to rounding.

During the first quarter of 1997, the Company purchased, in aggregate
$20,850 of the 10 5/8% Senior Notes from various brokers on the open market. The
premium paid on the purchase and the write-off of the related deferred financing
fees totaled $1,554. In the second quarter, the Company redeemed the remaining
principal of the 10 5/8% Senior Notes. The aggregate premium paid and the
write-off of the related deferred financing fees totaled $13,847. During the
third quarter of 1997, the Company recorded a provision for loss on the sales of
businesses and other in the amount of $138,640.

As a result of previous bank refinancings, the Company wrote off $7,572 of
unamortized deferred financings costs in the second quarter of 1996 and $1,981
of unamortized deferred financing costs in the fourth quarter of 1996. In
addition, in the fourth quarter of 1996, the Company recognized an income tax
benefit of $53,300.

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

24. BUSINESS SEGMENT INFORMATION

The Company's operations have been classified into three business segments:
specialty magazines, education and information (see Note 1). Summarized
financial information by business segment as of December 31, 1997, 1996 and 1995
and for each of the years then ended is set forth below:

1997 1996 1995
------------ ------------ ------------

SALES, NET:
Specialty Magazines............................... $ 754,410 $ 684,341 $ 452,373
Education......................................... 379,552 376,217 330,414
Information....................................... 353,633 313,891 263,542
------------ ------------ ------------
Total............................................. $ 1,487,595 $ 1,374,449 $ 1,046,329
------------ ------------ ------------
------------ ------------ ------------
OPERATING INCOME (LOSS):
Specialty Magazines............................... $ 71,580 $ 59,693 $ 32,169
Education......................................... 12,089 15,011 (32,024)
Information....................................... (78,818) 33,473 (8,683)
Corporate......................................... (25,644) (22,276) (17,737)
------------ ------------ ------------
Total............................................. $ (20,793) $ 85,901 $ (26,275)
------------ ------------ ------------
------------ ------------ ------------
TOTAL ASSETS:
Specialty Magazines............................... $ 972,550 $ 908,374 $ 723,711
Education......................................... 911,299 939,947 547,587
Information....................................... 435,153 531,771 499,418
Corporate......................................... 166,988 172,123 110,700
------------ ------------ ------------
Total............................................. $ 2,485,990 $ 2,552,215 $ 1,881,416
------------ ------------ ------------
------------ ------------ ------------
DEPRECIATION, AMORTIZATION AND OTHER CHARGES:
Specialty Magazines............................... $ 86,364 $ 76,281 $ 58,100
Education......................................... 68,275 64,228 107,284
Information....................................... 171,138 53,091 79,435
Corporate......................................... 99 764 706
------------ ------------ ------------
Total............................................. $ 325,876 $ 194,364 $ 245,525
------------ ------------ ------------
------------ ------------ ------------
CAPITAL EXPENDITURES, NET:
Specialty Magazines............................... $ 9,353 $ 8,252 $ 5,724
Education......................................... 16,258 14,460 10,750
Information....................................... 3,757 4,343 4,516
Corporate......................................... 1,740 1,735 2,424
------------ ------------ ------------
Total............................................. $ 31,108 $ 28,790 $ 23,414
------------ ------------ ------------
------------ ------------ ------------

- ------------------------

There were no significant intersegment sales or transfers during 1997, 1996
and 1995. Operating income (loss) by business segment excludes interest income
and interest expense. Corporate assets consist

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

24. BUSINESS SEGMENT INFORMATION (CONTINUED)
primarily of cash, receivables, property and equipment and the net deferred
income tax asset. Depreciation, amortization and other charges includes the
amortization of deferred financing and organizational costs, the net provision
for loss on sales of businesses of $138,640 and $35,447 in 1997 and 1995,
respectively, and provision for restructuring and other costs of $14,667 in
1995.

25. SUBSEQUENT EVENTS

On January 8, 1998, the Company entered into a Stock Purchase Agreement
pursuant to which it will acquire the Cowles Enthusiast Media and Cowles
Business Media divisions of Cowles Media Company from McClatchy Newspapers, Inc.
("McClatchy") for approximately $200,000. The transaction is subject to the
completion of McClatchy's purchase of Cowles Media Company, which is expected to
close by March 31, 1998.

In January 1998, the Company elected to terminate its defined benefit
pension plan (see Note 20) effective March 31, 1998. In connection with this
termination, the Company froze benefit accruals effective December 31, 1997. In
the opinion of the Company's management, the plan termination is adequately
accrued for and will not have a material impact on the Company's consolidated
financial statements. Plan participants will be eligible to participate in the
Company's defined contribution plans.

On February 17, 1998, the Company exchanged the 1,250,000 shares of its
Series E Preferred Stock for 1,250,000 shares of $9.20 Series F Exchangeable
Preferred Stock ("Series F Preferred Stock"). The terms of the Series F
Preferred Stock are the same as the Series E Preferred Stock except that the
Series F Preferred Stock has been registered under the Securities Act of 1933.

On February 17, 1998, the Company completed a private offering of 2,500,000
shares of $8.625 Series G Exchangeable Preferred Stock for $250,000 and $250,000
principal amount of 7 5/8% Senior Notes Due 2008. The net proceeds of these
offerings will be used to redeem all of the Company's outstanding Series B
Preferred Stock at $105.80 per share plus accrued and unpaid dividends and to
reduce outstanding bank borrowings.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

None

PART III

Items 10, 11, 12 and 13 are omitted, except for information as to Executive
Officers set forth in Part I, Item 1.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.

(a) Documents filed as part of this report:

1. Index to Financial Statements
See Table of Contents to Financial Statements included in Part II, Item 8
of this report.

2. Index to Financial Statement Schedules

PAGE
-----

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
PRIMEDIA Inc. and Subsidiaries
For the Year Ended December 31, 1997.............................................................. S-1
For the Year Ended December 31, 1996.............................................................. S-2
For the Year Ended December 31, 1995.............................................................. S-3
Independent Auditors' Report on Schedules--Deloitte & Touche LLP.................................... S-4

All schedules, except those set forth above, have been omitted since the
information required to be submitted has been included in the Consolidated
Financial Statements or Notes thereto or has been omitted as not applicable or
not required.

(b)--Reports on Form 8-K

--The Company has not filed any reports on Form 8-K during the fourth
quarter of 1997.

(c)--Exhibits

3.1 --Certificate of Incorporation of K-III. (7)
3.2 --Certificate of Amendment to Certificate of Incorporation of K-III
(changing name to PRIMEDIA Inc.) (*)
3.3 --Certificate of Designations of the Senior Preferred Stock. (2)
3.4 --Certificate of Designations of the Series B Preferred Stock. (3)
3.5 --Certificate of Designations of the Series C Preferred Stock. (9)
3.6 --Amended and Restated By-laws of K-III. (7)
3.7 --Certificate of Incorporation of K-III Prime Corporation. (2)
3.8 --By-laws of K-III Prime Corporation. (2)
3.9 --Certificate of Incorporation of Intertec Publishing Corporation. (2)
3.10 --Amended and Restated By-laws of Intertec Publishing Corporation. (2)
3.11 --Certificate of Incorporation of Newbridge Communications, Inc. (2)

3.12 --Certificate of Amendment to Certificate of Incorporation of Newbridge
Communications, Inc. (changing name to Films for the Humanities and
Sciences, Inc.) (*)
3.13 --By-laws of Newbridge Communications, Inc. (2)
3.14 --Certificate of Incorporation of K-III Directory Corporation (1)
3.15 --Certificate of Amendment to Certificate of Incorporation of K-III
Directory Corporation (changing name to PRIMEDIA Information Inc.) (*)
3.16 --By-laws of K-III Directory Corporation (1)
3.17 --Certificate of Incorporation of R.E.R. Publishing Corporation. (2)
3.18 --Amended and Restated By-laws of R.E.R. Publishing Corporation. (2)
3.19 --Certificate of Incorporation of Intermodal Publishing Company, Ltd. (2)
3.20 --Amended and Restated By-laws of Intermodal Publishing Company, Ltd. (2)
3.21 --Certificate of Incorporation of Weekly Reader Corporation. (2)
3.22 --By-laws of Weekly Reader Corporation. (2)
3.23 --Certificate of Incorporation of K-III Reference Corporation. (9)
3.24 --Certificate of Amendment to Certificate of Incorporation of K-III
Reference Corporation (changing name to PRIMEDIA Reference Inc.) (*)
3.25 --By-laws of K-III Reference Corporation. (2)
3.26 --Certificate of Amendment to Certificate of Incorporation of Funk &
Wagnalls Corporation (changing name to K-III Reference Corporation) (12)
3.27 --Certificate of Incorporation of Funk & Wagnalls Yearbook Corp. (2)
3.28 --By-laws of Funk & Wagnalls Yearbook Corp. (2)
3.29 --Certificate of Incorporation of Daily Racing Form, Inc. (2)
3.30 --By-laws of Daily Racing Form, Inc. (2)
3.31 --Certificate of Incorporation of DRF Finance, Inc. (2)
3.32 --By-laws of DRF Finance, Inc. (2)
3.33 --Certificate of Incorporation of K-III Magazine Corporation. (2)
3.34 --Certificate of Amendment to Certificate of Incorporation of K-III Magazine
Corporation (changing name to PRIMEDIA Magazines Inc.) (*)
3.35 --By-laws of K-III Magazine Corporation. (2)
3.36 --Certificate of Incorporation of K-III Magazine Finance Corporation. (2)
3.37 --Certificate of Amendment to Certificate of Incorporation of K-III Magazine
Finance Corporation (changing name to PRIMEDIA Magazines Finance Inc.) (*)
3.38 --By-laws of K-III Magazine Finance Corporation. (2)
3.39 --Certificate of Incorporation of Musical America Publishing, Inc. (1)
3.40 --By-laws of Musical America Publishing, Inc. (1)
3.41 --Certificate of Incorporation of K-III Holdings Corporation III. (2)
3.42 --Certificate of Amendment to Certificate of Incorporation of K-III Holdings
Corporation III (changing name to PRIMEDIA Holdings III Inc.) (*)
3.43 --By-laws of K-III Holdings Corporation III. (2)
3.44 --Certificate of Incorporation of Nelson Information, Inc. (5)
3.45 --Certificate of Amendment to Certificate of Incorporation of Nelson
Publications, Inc. (changing name to Nelson Information, Inc.) (12)
3.46 --By-laws of Nelson Information, Inc. (5)
3.47 --Certificate of Incorporation of K-III HPC, Inc. (5)

3.48 --By-laws of K-III HPC, Inc. (5)
3.49 --Certificate of Incorporation of Haas Publishing Companies, Inc. (5)
3.50 --By-laws of Haas Publishing Companies, Inc. (5)
3.51 --Certificate of Incorporation of Lifetime Learning Systems, Inc. (8)
3.52 --By-laws of Lifetime Learning Systems, Inc. (8)
3.53 --Certificate of Incorporation of Channel One Communications Corporation.
(8)
3.54 --By-laws of Channel One Communications Corporation. (8)
3.55 --Certificate of Incorporation of Bacon's Information, Inc. (9)
3.56 --By-laws of Bacon's Information, Inc. (9)
3.57 --Certificate of Incorporation of Intertec Market Reports, Inc. (9)
3.58 --By-laws of Intertec Market Reports, Inc. (8)
3.59 --Certificate of Incorporation of Intertec Presentations, Inc. (9)
3.60 --By-laws of Intertec Presentations, Inc. (8)
3.61 --Certificate of Incorporation of Argus Publishers Corporation (9)
3.62 --By-laws of Argus Publishers Corporation (9)
3.63 --Certificate of Incorporation of PJS Publications, Inc. (8)
3.64 --Certificate of Amendment to Certificate of Incorporation of PJS
Publications, Inc. (changing name to PRIMEDIA Special Interest
Publications Inc.) (*)
3.65 --By-laws of PJS Publications, Inc. (8)
3.66 --Certificate of Incorporation of Symbol of Excellence Publishers, Inc. (8)
3.67 --By-laws of Symbol of Excellence Publishers, Inc. (8)
3.68 --Certificate of Incorporation of American Heat Video Productions, Inc. (12)
3.69 --By-laws of American Heat Video Productions, Inc. (12)
3.70 --Certificate of Incorporation of ASTN, Inc. (12)
3.71 --By-laws of ASTN, Inc. (12)
3.72 --Certificate of Incorporation of A WEP Company (12)
3.73 --By-laws of A WEP Company (12)
3.74 --Certificate of Incorporation of Bankers Consulting Company (12)
3.75 --By-laws of Bankers Consulting Company (12)
3.76 --Certificate of Incorporation of Data Book, Inc. (12)
3.77 --By-laws of Data Book, Inc. (12)
3.78 --Certificate of Incorporation of Excellence in Training Corporation (12)
3.79 --By-laws of Excellence in Training Corporation (12)
3.80 --Certificate of Incorporation of Gareth Stevens, Inc. (12)
3.81 --By-laws of Gareth Stevens, Inc. (12)
3.82 --Certificate of Incorporation of IDTN Leasing Corporation (12)
3.83 --By-laws of IDTN Leasing Corporation (12)
3.84 --Certificate of Incorporation of Industrial Training Systems Corporation
(12)
3.85 --By-laws of Industrial Training Systems Corporation (12)
3.86 --Certificate of Incorporation of Law Enforcement Television Network, Inc.
(TX) (12)
3.87 --By-laws of Law Enforcement Television Network, Inc. (TX) (12)
3.88 --Certificate of Incorporation of Lockert Jackson & Associates, Inc. (12)
3.89 --By-laws of Lockert Jackson & Associates, Inc. (12)

3.90 --Certificate of Incorporation of Straight Down, Inc. (12)
3.91 --Agreement of shareholders of Straight Down, Inc. (12)
3.92 --Certificate of Incorporation of Tel-A-Train, Inc. (12)
3.93 --By-laws of Tel-A-Train, Inc. (12)
3.94 --Certificate of Incorporation of TI-IN Acquisition Corporation (12)
3.95 --By-laws of TI-IN Acquisition Corporation (12)
3.96 --Certificate of Incorporation of Westcott Communications, Inc. (12)
3.97 --Certificate of Amendment to Certificate of Incorporation of Westcott
Communications, Inc. (changing name to PRIMEDIA Workplace Learning, Inc.)
(*)
3.98 --By-laws of Westcott Communications, Inc. (12)
3.99 --Certificate of Incorporation of Westcott Communications Michigan, Inc.
(12)
3.100 --By-laws of Westcott Communications Michigan, Inc. (12)
3.101 --Certificate of Incorporation of Westcott ECI, Inc. (12)
3.102 --By-laws of Westcott ECI, Inc. (12)
3.103 --Certificate of Incorporation of Western Empire Publications, Inc. (12)
3.104 --By-laws of Western Empire Publications, Inc. (12)
3.105 --Certificate of Incorporation of McMullen Argus Publishing, Inc. (12)
3.106 --By-laws of McMullen Argus Publishing, Inc. (12)
3.107 --Certificate of Incorporation of The Electronics Source Book, Inc. (12)
3.108 --By-laws of The Electronics Source Book, Inc. (12)
3.109 --Certificate of Incorporation of The Apartment Guide of Nashville, Inc. (*)
3.110 --By-laws of The Apartment Guide of Nashville, Inc. (*)
3.111 --Certificate of Incorporation of Cardinal Business Media, Inc. (*)
3.112 --By-laws of Cardinal Business Media, Inc. (*)
3.113 --Certificate of Incorporation of Cardinal Business Media Holdings, Inc. (*)
3.114 --By-laws of Cardinal Business Media Holdings, Inc. (*)
3.115 --Certificate of Formation of Cover Concepts Marketing Services, LLC (*)
3.116 --Limited Liability Company Agreement of Cover Concepts Marketing Services,
LLC (*)
3.117 --Certificate of Incorporation of CSK Publishing Company Incorporated (*)
3.118 --By-laws of CSK Publishing Company Incorporated (*)
3.119 --Certificate of Incorporation of GO LO Entertainment, Inc. (*)
3.120 --By-laws of GO LO Entertainment, Inc. (*)
3.121 --Certificate of Incorporation of Guinn Communications, Inc. (*)
3.122 --By-laws of Guinn Communications, Inc. (*)
3.123 --Certificate of Incorporation of Health & Sciences Network, Inc. (*)
3.124 --By-laws of Health & Sciences Network, Inc. (*)
3.125 --Certificate of Incorporation of IntelliChoice, Inc. (*)
3.126 --By-laws of IntelliChoice, Inc. (*)
3.127 --Certificate of Incorporation of Little Rock Apartment Guide, Inc. (*)
3.128 --By-laws of Little Rock Apartment Guide, Inc. (*)
3.129 --Certificate of Incorporation of Memphis Apartment Guide, Inc. (*)
3.130 --By-laws of Memphis Apartment Guide, Inc. (*)

3.131 --Certificate of Incorporation of Low Rider Publishing Group, Inc. (*)
3.132 --By-laws of Low Rider Publishing Group, Inc. (*)
3.133 --Certificate of Incorporation of Pictorial, Inc. (*)
3.134 --By-laws of Pictorial, Inc. (*)
3.135 --Certificate of Incorporation of Plaza Communications, Inc. (*)
3.136 --By-laws of Plaza Communications, Inc. (*)
3.137 --Certificate of Incorporation of QWIZ, Inc. (*)
3.138 --By-laws of QWIZ, Inc. (*)
3.139 --Certificate of Incorporation of Bowhunter Magazine, Inc. (*)
3.140 --By-laws of Bowhunter Magazine, Inc. (*)
3.141 --Certificate of Incorporation of Canoe & Kayak, Inc. (*)
3.142 --By-laws of Canoe & Kayak, Inc. (*)
3.143 --Certificate of Incorporation of Climbing, Inc. (*)
3.144 --By laws of Climbing, Inc. (*)
3.145 --Certificate of Incorporation of Cowles Business Media, Inc. (*)
3.146 --By-laws of Cowles Business Media, Inc. (*)
3.147 --Certificate of Incorporation of Cowles Enthusiast Media, Inc. (*)
3.148 --By-laws of Cowles Enthusiast Media, Inc. (*)
3.149 --Certificate of Incorporation of Cowles History Group, Inc. (*)
3.150 --By-laws of Cowles History Group, Inc. (*)
3.151 --Certificate of Incorporation of Cowles/Simba Information, Inc. (*)
3.152 --By-laws of Cowles/Simba Information, Inc. (*)
3.153 --Certificate of Incorporation of Cumberland Publishing, Inc. (*)
3.154 --By-laws of Cumberland Publishing, Inc. (*)
3.155 --Certificate of Incorporation of Horse & Rider, Inc. (*)
3.156 --By-laws of Horse & Rider, Inc. (*)
3.157 --Certificate of Incorporation of Kitplanes Acquisition Company (*)
3.158 --By-laws of Kitplanes Acquisition Company (*)
3.159 --Certificate of Incorporation of RetailVision, Inc. (*)
3.160 --By-laws of RetailVision, Inc. (*)
3.161 --Certificate of Incorporation of Southwest Art, Inc. (*)
3.162 --By-laws of Southwest Art, Inc. (*)
3.163 --Certificate of Incorporation of Vegetarian Times, Inc. (*)
3.164 --By-laws of Vegetarian Times, Inc. (*)
3.165 --Certificate of Incorporation of The Virtual Flyshop, Inc. (*)
3.166 --By-laws of The Virtual Flyshop, Inc. (*)
4.1 --10 5/8% Senior Note Indenture (including form of note and form of
guarantee). (1)
4.2 --Form of 11 1/2% Subordinated Debenture Indenture,
(including form of debenture). (1)
4.3 --Form of Class B Subordinated Debenture Indenture
(including form of debenture). (2)
4.4 --10 1/4% Senior Note Indenture (including form of note and form of
guarantee). (8)
4.5 --8 1/2% Senior Note Indenture (including forms of note and guarantee). (9)
4.6 --Form of Class D Subordinated Debenture Indenture. (11)

4.7 --Form of 9.20% Subordinated Debenture Indenture (including form of note).
(13)
4.8 --Form of Class G Subordinated Debenture (including form of debenture). (*)
4.9 --7 5/8% Senior Note Indenture (including form of note and form of
guarantee). (*)
10.1 --Non-Competition Agreement, dated as of June 17, 1991, between News America
Holdings Incorporated, K-III Holdings Corporation III, K-III Magazines and
Daily Racing Form. (2)
10.2 --Agreement and Plan of Merger, dated as of April 22, 1996, by and among the
Company, K-III Prime Corporation, Acquiror Sub and Westcott. (10)
10.3 --$250,000 Credit Facility with The Chase Manhattan Bank, The Bank of New
York, Bankers Trust Company and The Bank of Nova Scotia, as agents
(including forms of Guaranty and Contribution Agreements). (12)
10.4 --$1,250,000 Credit Facility with The Chase Manhattan Bank, The Bank of New
York, Bankers Trust Company and the Bank of Nova Scotia,
as agents (including forms of Guaranty and Contribution Agreements). (12)
10.5 --$150,000 Credit Facility with The Chase Manhattan Bank, The Bank of New
York, Bankers Trust Company and The Bank of Nova Scotia, as agents
(including forms of Guaranty and Contribution Agreements) (*)
+10.6 --Form of Amended and Restated K-III 1992 Stock Purchase and Option Plan.
(7)
+10.7 --Amendment No. 1 to the 1992 Stock Purchase and Option Plan Amended and
Restated as of March 5, 1997. (12)
+10.8 --Form of Common Stock Purchase Agreement between K-III and senior
management. (2)
+10.9 --Form of Common Stock Purchase Agreement between K-III and various
purchasers. (2)
+10.10 --Form of Non-Qualified Stock Option Agreement between K-III and various
employees. (2)
10.11 --Form of Common Stock Purchase Agreement between K-III and senior
management. (2)
10.12 --Form of Common Stock Purchase Agreement between K-III and various
purchasers. (2)
+10.13 --Form of Non-Qualified Stock Option Agreement between K-III and various
employees. (2)
10.14 --Amended Registration Rights Agreement dated as of May 13, 1992 among
K-III, MA Associates, L.P., FP Associates, L.P., Magazine Associates,
L.P., Publishing Associates, L.P. and KKR Partners II, L.P. with respect
to common stock of K-III. (1)
10.15 --Registration Rights Agreement dated as of September 30, 1994 among K-III,
Channel One Associates, L.P. and KKR Partners II, L.P. with respect to
common stock of K-III. (8)
10.16 --Registration Rights Agreement dated as of March 1, 1995 among K-III and
Channel One Associates, L.P. with respect to common stock of K-III. (8)
+10.17 --Free Cash Flow Long-Term Plan. (1)
+10.18 --Executive Incentive Compensation Plan. (8)
+10.19 --Pension Plan. (1)
+10.20 --1995 Restoration Plan. (8)
+10.21 --Form of K-III Communications Short Term Senior Executive
Non-Discretionary Plan. (7)

+10.22 --Form of K-III Communications Short Term Senior Executive Performance Plan.
(7)
+10.23 --Form of K-III Communications Corporation Directors' Deferred Compensation
Plan. (12)
+10.24 --Agreement, dated as of December 24, 1996, between K-III Communications
Corporation and Harry A. McQuillen (12)
+10.25 --Agreement, dated as of December 24, 1996, between K-III Communications
Corporation and Jack L. Farnsworth (12)
21 --Subsidiaries of K-III. (*)
27.1 --1997 Financial Data Schedule (*)
27.2 --1995 and 1996 Financial Data Schedule (*)

- ------------------------

(1) Incorporated by reference to K-III Communications Corporation's Annual
Report on Form 10-K for the year ended December 31, 1992. File No. 1-11106.

(2) Incorporated by reference to K-III Communications Corporation's Registration
Statement on Form S-1, File No. 33-46116.

(3) Incorporated by reference to K-III Communications Corporation's Registration
Statement on Form S-1, File No. 33-60786.

(4) Incorporated by reference to K-III Communications Corporation's Annual
Report on Form 10-K for the year ended December 31, 1993. File No. 1-11106.

(5) Incorporated by reference to K-III Communications Corporation's Registration
Statement on Form S-1, File No. 33-77520.

(6) Incorporated by reference to K-III Communications Corporation's Current
Report on Form 8-K dated September 30, 1994.

(7) Incorporated by reference to K-III Communications Corporation's Registration
Statement on Form S-1, File No. 33-96516.

(8) Incorporated by reference to K-III Communications Corporation Annual Report
on Form 10-K for the year ended December 31, 1994, File No. 1-11106.

(9) Incorporated by reference to K-III Communications Corporation's Form 10-K
for the year ended December 31, 1995, File No. 1-11106.

(10) Incorporated by reference to K-III Communications Corporation's Form 10-Q
for the quarter ended March 31, 1996.

(11) Incorporated by reference to K-III Communications Corporation's
Registration Statement on Form S-4, File No. 333-3691.

(12) Incorporated by reference to K-III Communications Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996, File No. 1-11106.

(13) Incorporated by reference to K-III Communications Corporation's
Registration Statement on Form S-4, File No. 333-38451.

(*) Filed herewith.

+ Executive contract or compensation plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this Annual Report on Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York on March 30, 1998.

PRIMEDIA INC.

By /S/ BEVERLY C. CHELL
...................................
(Beverly C. Chell)
VICE CHAIRMAN AND SECRETARY

Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following persons
in the capacities indicated on March 30, 1998.

SIGNATURES TITLE
- --------------------------------------------------- ------------------------------------------------------------

/s/ WILLIAM F. REILLY Chairman, Chief Executive Officer and Director (Principal
................................................... Executive Officer)
(William F. Reilly)

/s/ CHARLES G. MCCURDY

(Charles G. McCurdy) President and Director (Principal Financial Officer)

/s/ BEVERLY C. CHELL

(Beverly C. Chell) Vice Chairman, Secretary and Director

/s/ MEYER FELDBERG Director
...................................................
(Meyer Feldberg)

/s/ PERRY GOLKIN Director
...................................................
(Perry Golkin)

/s/ HENRY KRAVIS Director
...................................................
(Henry Kravis)

/s/ GEORGE R. ROBERTS Director
...................................................
(George R. Roberts)

/s/ MICHAEL T. TOKARZ Director
...................................................
(Michael T. Tokarz)

/s/ CURTIS A. THOMPSON Vice President and Controller (Principal Accounting Officer)
...................................................
(Curtis A. Thompson)

SIGNATURES

The Apartment Guide of Nashville, Inc.
Argus Publishers Corporation
American Heat Video Productions, Inc.
ASTN, Inc.
A WEP Company
Bacon's Information, Inc.
Bankers Consulting Company
Bowhunter Magazine, Inc.
Canoe & Kayak, Inc.
Cardinal Business Media, Inc.
Cardinal Business Media Holdings, Inc.
Channel One Communications Corp.
Climbing, Inc.
Cover Concepts Marketing Services, LLC
Cowles Business Media, Inc.
Cowles Enthusiast Media, Inc.
Cowles History Group, Inc.
Cowles/Simba Information, Inc.
CSK Publishing Company Incorporated
Cumberland Publishing, Inc.
DRF Finance, Inc.
Daily Racing Form, Inc.
Data Book, Inc.
The Electronics Source Book, Inc.
Excellence in Training Corporation
Films for the Humanities & Sciences, Inc.
Funk & Wagnalls Yearbook Corp.
Gareth Stevens, Inc.
GO LO Entertainment, Inc.
Guinn Communications, Inc.
Haas Publishing Companies, Inc.
Health & Sciences Network, Inc.
Horse & Rider, Inc.
Intermodal Publishing Company, Ltd.
IDTN Leasing Corporation
Industrial Training Systems Corporation
IntelliChoice, Inc.
Intertec Market Reports, Inc.
Intertec Presentations, Inc.

Intertec Publishing Corporation

K-III HPC, Inc.
K-III Prime Corporation
Kitplanes Acquisition Company
Law Enforcement Television Network, Inc.
Lifetime Learning Systems, Inc.
Little Rock Apartment Guide, Inc.
Lockert Jackson & Associates, Inc.
Low Rider Publishing Group, Inc.
McMullen Argus Publishing, Inc.
Memphis Apartment Guide, Inc.
Musical America Publishing, Inc.
Nelson Information, Inc.
Pictorial, Inc.
Plaza Communications, Inc.
PRIMEDIA Holdings III Inc.
PRIMEDIA Information Inc.
PRIMEDIA Magazines Inc.
PRIMEDIA Magazines Finance Inc.
PRIMEDIA Reference Inc.
PRIMEDIA Special Interest Publications Inc.
PRIMEDIA Workplace Learning, Inc.
QWIZ, Inc.
R.E.R. Publishing Corporation
RetailVision, Inc.
Southwest Art, Inc.
Straight Down, Inc.
Symbol of Excellence Publishers, Inc.
Tel-A-Train, Inc.
The Virtual Flyshop, Inc.
TI-IN Acquisition Corporation
Vegetarian Times, Inc.
Weekly Reader Corporation
Westcott Communications Michigan, Inc.
Westcott ECI, Inc.
Western Empire Publications, Inc.

By: /s/ BEVERLY C. CHELL
--------------------------------------
(Beverly C. Chell)
VICE CHAIRMAN AND SECRETARY

Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following persons
in the capacities indicated on March 30, 1998.

SIGNATURES TITLE
- --------------------------------------------------- ------------------------------------------------------------

/s/ WILLIAM F. REILLY Chairman and Director (Principal Executive Officer)
...................................................
(William F. Reilly)

/s/ CHARLES G. MCCURDY Vice Chairman, Chief Financial Officer and Director
................................................... (Principal Financial Officer)
(Charles G. McCurdy)

/s/ BEVERLY C. CHELL Vice Chairman, Secretary and Director
...................................................
(Beverly C. Chell)

/s/ CURTIS A. THOMPSON Vice President (Principal Accounting Officer)
...................................................
(Curtis A. Thompson)

SCHEDULE II

PRIMEDIA INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)

BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- -------------------------------------------------- ------------ ---------- ---------- ----------- --------------

Accounts receivable
Allowance for doubtful
accounts...................................... $ 15,418 $ 20,904 $ 850(1) $ (21,982)(3) $ 10,521
$ 1,732(2)
$ (6,401)(4)
Allowance for sales returns
and rebates................................... $ 24,098 $ 83,438 $ (3,378)(4) $ (77,149)(3) $ 27,009
Inventory
Allowance for obsolescence...................... $ 8,703 $ 5,674 $ 218(2) $ (4,837)(3) $ 2,482
$ (7,276)(4)

Accumulated amortization
Goodwill........................................ $ 82,763 $ 29,024 $(17,026)(4) $ (26)(3) $ 94,735

Other intangibles............................... $814,061 $110,799 $(282,911)(4) $ (87)(3) $ 641,862

Deferred financing costs........................ $ 9,794 $ 3,071 $ -- $ (7,772)(3) $ 5,093

Deferred wiring and
installation costs............................ $ 12,850 $ 7,008 $ (7)(4) $ (1,133)(3) $ 18,718

Prepublication and programming costs............ $ 7,968 $ 4,491 $ (3,489)(4) $ (2,127)(3) $ 6,843
Direct-response advertising
costs......................................... $ 70,661 $ 42,659 $(49,320)(4) $ (10,160)(3) $ 53,840

- ------------------------
Notes:

(1) Increases in related valuation account result from acquisitions.

(2) Increases in related valuation account result from the recovery of amounts
previously written off.

(3) Deductions from related valuation account result from write-offs and actual
returns.

(4) Deductions from related valuation account result from reclassifications and
write-offs related to net assets held for sale.

S-1

SCHEDULE II

PRIMEDIA INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

Accounts receivable
Allowance for doubtful
accounts...................................... $ 14,364 $ 21,438 $ 62(1) $(21,069)(3) $ 15,418
$ 970(2)
$ (347)(4)
Allowance for sales returns and
rebates....................................... $ 23,015 $ 79,819 $ -- $(78,736)(3) $ 24,098
Inventory
Allowance for obsolescence...................... $ 7,129 $ 4,423 $ 279(2) $ (3,128)(3) $ 8,703

Accumulated amortization
Goodwill........................................ $ 66,889 $ 23,576 $ (640)(4) $ (7,062)(3) $ 82,763

Other intangibles............................... $695,504 $122,140 $(2,932)(4) $ (651)(3) $ 814,061

Deferred financing costs........................ $ 8,139 $ 3,662 $ -- $ (2,007)(3) $ 9,794

Deferred wiring and
installation costs............................ $ 7,163 $ 6,753 $ -- $ (1,066)(3) $ 12,850

Prepublication and programming costs............ $ 4,121 $ 5,963 $ -- $ (2,116)(3) $ 7,968

Direct-response advertising costs............... $ 29,569 $ 41,481 $ -- $ (389)(3) $ 70,661

- ------------------------
Notes:

(1) Increases in related valuation account result from acquisitions.

(2) Increases in related valuation account result from the recovery of amounts
previously written off.

(3) Deductions from related valuation account result from write-offs and actual
returns.

(4) Deductions from related valuation account result from reclassifications and
write-offs related to net assets held for sale.

S-2

SCHEDULE II

PRIMEDIA INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)

Accounts receivable
Allowance for doubtful
accounts...................................... $ 13,482 $ 19,276 $ 1,195(1) $(20,526)(3) $ 14,364
$ 937(2)
Allowance for sales returns and
rebates....................................... $ 23,543 $ 80,859 $ 663(2) $(82,072)(3) $ 23,015
$ 22(2)
Inventory
Allowance for obsolescence...................... $ 5,138 $ 2,662 $ 622(1) $ (1,463)(3) $ 7,129
$ 170(2)
Accumulated amortization
Goodwill........................................ $ 29,312 $ 37,572 $ 5(2) $ -- $ 66,889

Other intangibles............................... $573,230 $122,609 $ -- $ (335)(3) $ 695,504

Deferred financing costs........................ $ 5,004 $ 3,135 $ -- $ -- $ 8,139

Deferred wiring and
installation costs............................ $ 1,413 $ 6,334 $ -- $ (584)(3) $ 7,163

Prepublication and programming costs............ $ 6,732 $ 1,954 $ -- $ (4,565)(3) $ 4,121

Direct-response advertising costs............... $ 3,126 $ 28,774 $ -- $ (2,331)(3) $ 29,569

- ------------------------
Notes:

(1) Increases in related valuation account result from acquisitions.

(2) Increases in related valuation account result from the recovery of amounts
previously written off.

(3) Deductions from related valuation account result from write-offs and actual
returns.

S-3

INDEPENDENT AUDITORS' REPORT ON SCHEDULES

To the Shareholders and Board of Directors of
PRIMEDIA Inc.
New York, New York:

We have audited the consolidated balance sheets of PRIMEDIA Inc. and
subsidiaries as of December 31, 1997 and 1996, and the related statements of
consolidated operations, consolidated cash flows and shareholders' equity
(deficiency) for each of the three years in the period ended December 31, 1997,
and have issued our report thereon dated January 27, 1998 (February 17, 1998 as
to Note 25); such report is included elsewhere in this Form 10-K. Our audits
also included the financial statement schedules of PRIMEDIA Inc. and
subsidiaries, listed in Item 14. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP

New York, New York
January 27, 1998
(February 17, 1998 as to Note 25)

S-4