The information included in the foregoing interim financial statements is unaudited. In the opinion of management, all adjustments, which are of a normal recurring nature and necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. Readers are referred to the company's Form 10-K for the year ended June 30, 2002 for complete financial statements and related notes. Certain prior-year amounts have been reclassified to conform with current-year presentation.

The following table presents the calculations of earnings per share:

Antidilutive options excluded from the above calculations totaled 446,000 options at March 31, 2003 (with a weighted average exercise price of $42.40) and 488,000 options at March 31, 2002 (with a weighted average exercise price of $40.84).

Options to purchase 674,000 shares were exercised during the nine months ended March 31, 2003 (528,000 options were exercised in the nine months ended March 31, 2002).

Meredith accounts for awards of stock-based employee compensation under the recognition and measurement provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Accordingly, compensation costs are reflected in net earnings for restricted stock plans; however, no stock-based compensation cost is reflected in net earnings for options granted as all options had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation.

Meredith does not have any off-balance sheet arrangements. The Company's use of special-purpose entities is limited to Meredith Funding Corporation, whose activities are fully consolidated in Meredith's Condensed Consolidated Financial Statements.

On December 5, 2002, Meredith purchased American Baby magazine and related assets from Primedia Inc., for $115.0 million plus certain costs, for a total cost of $117.6 million. The acquisition was financed with existing credit facilities and cash on hand. The cost was allocated based on the fair values of assets acquired and liabilities assumed as follows: property, plant and equipment of $0.1 million; intangible assets of $43.2 million; goodwill of $76.5 million; and a liability for unearned subscription revenues of $2.2 million.

Operating results of the properties are included in Meredith's Condensed Consolidated Statement of Earnings since the acquisition date. American Baby magazine, which was launched in 1938, is currently published monthly and has a circulation of 2 million. Other American Baby group properties acquired include Childbirth and First Year of Life magazines, three Hispanic titles and related marketing programs, the American Baby and Healthy Kids television programs currently shown on the Discovery television network, websites, custom publications and other related programs.

The acquisition of the American Baby group of assets builds on Meredith's strategy to expand its home and family leadership position to a younger and more culturally diverse demographic spectrum of the family marketplace. Management believes this multi-tier franchise will help the Company reach young families who are just beginning to build their home and family lives. The American Baby group is a well-established large-scale brand with a strong array of products that reaches younger women and the Hispanic market -- two areas that management believes will enhance the Company's already strong presence in the home and family arena.

Pro forma results of operations as if this asset purchase had occurred at the beginning of the fiscal year for each period presented are as follows:

Meredith adopted Statement of Financial Accounting Standard (SFAS) No. 142, "Goodwill and Other Intangible Assets," effective July 1, 2002. SFAS No. 142 requires that goodwill and intangible assets with indefinite lives no longer be amortized to earnings, but be reviewed at least annually for impairment. The adoption of this standard has eliminated much of Meredith's amortization expense related to intangible assets and goodwill. The Company expects intangible asset amortization expense to be $2.4 million in fiscal 2003. This estimate includes $2.2 million of amortization resulting from the acquisition of the American Baby group in December 2002. Fiscal 2002 amortization expense related to intangible assets and goodwill totaled $25.6 million.

SFAS No. 142 does not permit the restatement of prior year's results. Amortization expense recorded in the prior year that would not have been recorded had the amortization provisions of SFAS No. 142 been effective July 1, 2001 totaled $6.5 million in the fiscal 2002 third quarter and $19.4 million for the nine months ended March 31, 2002.

SFAS No. 142 also establishes requirements for the periodic impairment review of goodwill and intangible assets with indefinite lives. Reviews are based on a fair-value approach as described in SFAS No. 142. SFAS No. 142 requires an initial review of goodwill and intangible assets with indefinite lives as of the beginning of the fiscal year of adoption. The Company has completed this initial review and it resulted in transitional impairment losses of $139.9 million ($85.7 million after-tax), or $1.68 per diluted share. This charge was recorded net of tax as the cumulative effect of a change in accounting principle in the first quarter of fiscal 2003. The impairment losses relate to certain television Federal Communication Commission (FCC) licenses/network affiliation agreements ($33.7 million) and goodwill at certain television stations ($106.2 million). The fair values of the FCC licenses/network affiliation agreements and goodwill were determined by developing discounted cash flow analyses. The impairm ents are primarily the result of lower revenues and cash flows at television station WGCL-TV in Atlanta as compared to the projections on which the purchase price was based.

Intangible assets and goodwill at March 31, 2003, consisted of the following:

On December 5, 2002, Meredith acquired American Baby magazine and related assets from Primedia Inc. This acquisition resulted in the recognition of $4.4 million in intangible assets subject to amortization, $38.8 million in intangible assets not subject to amortization and $76.5 million in goodwill.

Amortization expense was $2.1 million for the nine months ended March 31, 2003. Estimated annual amortization expense is $2.4 million in fiscal 2003. This estimate includes $2.2 million of amortization resulting from the acquisition of the American Baby group of assets in December 2002. The majority of this amortization was recorded in the fiscal third quarter. Future amortization expense for intangible assets is expected to be as follows: $0.7 million in fiscal 2004, $0.6 million in fiscal 2005, $0.4 million in fiscal 2006, $0.3 million in fiscal 2007, and $0.1 million in fiscal 2008.

The noncompete agreements are being amortized on a straight-line basis over periods of 3 or 5 years. The customer lists are being amortized over periods of one year or less, primarily on a straight-line basis.

As part of the adoption of SFAS No. 142, $0.6 million in previously recorded intangible assets were reclassified as goodwill. The carrying amount of goodwill was reduced by $106.2 million for transitional impairment losses recorded as part of the adoption of SFAS No. 142. In addition, goodwill was increased by $2.4 million because of adjustments to preliminary valuations of fixed assets recorded as part of the June 2002 acquisition of KPTV in Portland, OR and by $76.5 million for the acquisition of the American Baby group of assets.

In fiscal 2001, Meredith took steps to reduce the number of employees through a one-time, special voluntary early retirement program and additional selective workforce reductions through attrition, realignments and job eliminations. In addition, the company wrote-off certain Internet investments. These actions resulted in a fiscal 2001 net nonrecurring charge of $25.3 million for personnel costs ($18.4 million) and asset write-downs and other ($8.2 million), offset by the reversal of excess accruals ($1.3 million). The nonrecurring charge resulted in balance sheet adjustments of $8.5 million and cash payments of $1.1 million in fiscal 2001, leaving an accrual balance of $15.7 million for personnel costs at June 30, 2001. Details of the activities affecting the accrual since that date follow:

Payments made during the quarter were for enhanced retirement benefits and severance. Payments for certain early retirement benefit costs will continue for approximately six years.

At June 30, 2002, Meredith also had an accrual of $0.4 million related to contractual obligations from a nonrecurring charge recorded in fiscal 2000. There has been no change in that accrual since June 30, 2002.

Major components of inventories are summarized below. Of total inventory values shown, approximately 34 percent are under the LIFO method at March 31, 2003 and 37 percent at June 30, 2002.

In April 2002, Meredith entered into an agreement to sell all of its rights, title and interest in the majority of its accounts receivable related to advertising, book and miscellaneous revenues to Meredith Funding Corporation, a special purpose entity established to purchase accounts receivable from Meredith. At March 31, 2003, $148.4 million of accounts receivable, net of reserves, were outstanding under the agreement. Meredith Funding Corporation in turn sells receivable interests to an asset-backed commercial paper conduit administered by Bank One, N.A. In consideration of the sale, Meredith receives cash and a subordinated note, bearing interest at the prime rate (4.25 percent at March 31, 2003), from Meredith Funding Corporation. The agreement is structured as a true sale under which the creditors of Meredith Funding Corporation will be entitled to be satisfied out of the assets of Meredith Funding Corporation prior to any value being returned to Meredith or its creditors. The accounts of Meredith Funding Corporation are fully consolidated in Meredith's Condensed Consolidated Financial Statements. At March 31, 2003, $85.0 million was outstanding under the asset-backed commercial paper facility and reflected in long-term debt on Meredith's Condensed Consolidated Balance Sheet. The asset-backed commercial paper facility renews annually in April. Meredith has the ability and the intent to renew the facility each year and, therefore, the principal is reflected as due on April 9, 2007, the facility termination date.

At March 31, 2003, Meredith had interest rate swap contracts to pay fixed-rates of interest (average 5.3 percent) and receive variable-rates of interest (average 3-month LIBOR rate of 1.3 percent) on $150.0 million notional amount of indebtedness. These contracts expire in June 2004. The notional amount varies over the terms of the contracts. The average notional amount of indebtedness outstanding under the contracts is $166 million in fiscal 2003 and $132 million in fiscal 2004.

The fair market value of the interest rate swap contracts was a liability of $6.8 million at March 31, 2003. Assuming no change in interest rates, the estimated amount of the loss expected to be reclassified into earnings over the next 12 months is $5.7 million.

As a result of the April 2002 debt refinancing and a reduction in variable-rate obligations, Meredith has interest rate swap contracts that no longer hedge variable-rate obligations. These contracts have been dedesignated as hedge contracts. Therefore, all changes in the fair market value of these contracts are recorded in interest expense. Fair market value changes resulted in income of $0.8 million in the quarter ended March 31, 2003. In the nine-months ended March 31, 2003 the net effect of the fair market value changes was immaterial.

Comprehensive income is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. The company's comprehensive income includes foreign currency translation adjustments and changes in the fair market value of interest rate swap contracts in addition to net earnings. Total comprehensive income (in thousands) for the three-month periods ended March 31, 2003 and 2002, was $25,811 and $19,124, respectively. Total comprehensive (loss) income (in thousands) for the nine-month periods ended March 31, 2003 and 2002, was $(24,393) and $33,665, respectively.

Meredith Corporation is a diversified media company primarily focused on the home and family marketplace. Based on products and services, the Company has established two reportable segments: publishing and broadcasting. The publishing segment includes magazine and book publishing, integrated marketing, interactive media, database-related activities, brand licensing, and other related operations. The broadcasting segment includes the operations of 11 network-affiliated television stations. There are no material intersegment transactions. There have been no changes in the basis of segmentation or the measurement of segment profit since June 30, 2002.

Expenditures for long-lived assets other than capital expenditures included the acquisition of American Baby magazine and related assets from Primedia Inc. for $115.0 million. This acquisition resulted in additions to publishing segment assets of $43.2 million in intangible assets and $76.5 million in goodwill. Corporate assets declined primarily due to the use of cash for the acquisition. Broadcasting assets at March 31, 2003 declined from June 30, 2002 primarily due to the impairment write-down recognized as part of the adoption of SFAS No. 142.

The following discussion presents the key factors that have affected the Company's business in the third quarter and first nine months of fiscal 2003 and fiscal 2002. This commentary should be read in conjunction with the condensed consolidated financial statements presented elsewhere in this report and with the Company's Form 10-K for the year ended June 30, 2002. All per share amounts refer to diluted earnings per share and are computed on an after-tax basis.

Sections of this report-and management's public commentary from time to time-may contain certain forward-looking statements that are subject to risks and uncertainties. The words expect, anticipate, believe, likely, will, and similar terms generally identify forward-looking statements. These statements are based on management's current knowledge and estimates of factors affecting the Company's operations. Readers are cautioned not to place undue reliance on such forward-looking information; actual results may differ materially from those currently anticipated.

Factors that could adversely affect future results include but are not limited to: downturns in national and/or local economies; a softening of the domestic advertising market; increased consolidation among major advertisers or other events depressing the level of advertising spending; national or world events that could interrupt broadcast television nationally, regionally, or in specific local markets; the unexpected loss of one or more major clients; changes in consumer reading, purchasing, and/or television viewing patterns; unanticipated increases in paper, postage, printing, or syndicated programming costs; changes in television network affiliation agreements and/or network affiliation relationships; technological developments affecting products or methods of distribution such as the Internet or e-commerce; changes in government regulations affecting the Company's industries; unexpected changes in interest rates; and any acquisitions and/or dispositions. Meredith undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.

On December 5, 2002, Meredith Corporation purchased American Baby magazine and related assets from Primedia Inc., for $115.0 million. American Baby magazine, which was launched in 1938, is currently published monthly and has a circulation of 2 million. Other American Baby group properties acquired include Childbirth and First Year of Life magazines, three Hispanic titles and related marketing programs, the American Baby and Healthy Kids television programs currently shown on the Discovery television network, websites, custom publications and other related programs. Operating results of the properties are included in Meredith's Consolidated Statement of Earnings from the date of acquisition. For all of fiscal 2003, the acquisition is expected to result in an approximate $30 million increase in revenues and be slightly accretive to earnings per share. The calculation of the effect on earnings per share reflects the after-tax impact of the exp ected operating results of the new properties, net of amortization expense for definite-lived intangible assets and interest expense.

Meredith adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, effective July 1, 2002. SFAS No. 142 requires that goodwill and intangible assets with indefinite lives no longer be amortized to earnings, but be reviewed at least annually for impairment. SFAS No. 142 also requires an initial review of goodwill and intangible assets with indefinite lives as of the beginning of the fiscal year of adoption. Meredith has completed this initial review, and it resulted in transitional impairment losses of $139.9 million ($85.7 million after tax), or $1.68 per diluted share. This charge was recorded net of tax as the cumulative effect of a change in accounting principle in the first quarter of fiscal 2003. The impairment losses reflect the write-down of Federal Communication Commission (FCC) television licenses/network affiliation agreements ($33.7 million) and goodwill at certain television stations ($106.2 million). The majority of the impairments relate to the acquisition of television station WGCL-TV in Atlanta in March 1999.

The adoption of SFAS No. 142 eliminated much of Meredith's amortization expense related to intangible assets and goodwill. The Company expects intangible asset amortization expense to be $2.4 million in fiscal 2003. This estimate includes $2.2 million of amortization resulting from the acquisition of the American Baby group of assets in December 2002. The majority of this amortization was recorded in the fiscal third quarter. Fiscal 2002 amortization expense related to intangible assets and goodwill totaled $25.6 million. SFAS No. 142 does not permit the restatement of prior year's results. For ease of comparison, this report includes fiscal 2002 results as previously reported and on an adjusted basis as if the amortization provisions of SFAS No. 142 had been adopted on July 1, 2001. (See section entitled "Use of non-GAAP financial measures.")

In June 2002, Meredith exchanged its Orlando and Ocala, FL, television stations for station KPTV, a UPN affiliate in Portland, OR. The transaction with News Corporation and Fox Television Stations, Inc., created a Meredith duopoly in Portland where the Company already owned KPDX-TV, a FOX affiliate. A duopoly, defined as the ownership of two stations in a single market, offers increased efficiency while providing stronger outlets for advertisers and viewers. In September 2002, Meredith switched the FOX affiliation from KPDX, an UHF station, to KPTV, a VHF station, to take advantage of the stronger VHF signal. KPDX assumed the UPN affiliation, previously held by KPTV. In addition, KPDX dropped local news coverage to avoid competing with KPTV.

The operations of the acquired property have been included in the Company's consolidated operating results since the acquisition date. The exchange is expected to result in a revenue reduction of approximately $10 million in fiscal 2003, but it is not expected to have a material effect on operating results.

For financial reporting purposes, Meredith recorded the exchange as two simultaneous but separate events: the sale of the two Florida stations, for which a nonoperating gain was recognized, and the acquisition of the Portland station, which was treated as an asset purchase. The fourth quarter nonoperating gain on the sale of the Florida stations was $61.8 million based on the fair value of the assets acquired as determined by an independent appraisal. The fair value of $90.0 million also represented the purchase price of the Portland station.

Certain financial measures included in this Management's Discussion and Analysis section are not in accordance with generally accepted accounting principles (GAAP). These are referred to as non-GAAP financial measures. These financial measures should not be considered in isolation or as a substitute for actual performance as reported under GAAP. Meredith's primary use of non-GAAP financial measures relates to adjustments for amortization no longer required under SFAS No. 142, exclusion of nonrecurring items and the use of EBITDA.

As discussed previously, the adoption of SFAS No. 142 eliminated a significant amount of amortization related to intangible assets and goodwill. Because this elimination of amortization results from a change in accounting principle and does not reflect a change in the underlying performance of the business, management believes it is useful to present adjusted earnings as if the amortization provisions of SFAS No. 142 had been effective July 1, 2001. Amortization that would have been eliminated totaled $6.5 million ($4.0 million after tax or 8 cents per share) in the third quarter and $19.4 million ($11.9 million after tax or 24 cents per share) in the nine months ended March 31, 2002. The adjusted data does not reflect the after-tax impairment loss of $85.7 million that was recognized by the Company upon the adoption of SFAS No. 142 on July 1, 2002, and does not consider what impairment charges may have been recorded had the Company adopted this statement on July 1, 2001.

Earnings for the nine months ended March 31, 2002 also included $2.0 million ($1.2 million after tax or 2 cents per share) in nonoperating income representing proceeds from the demutualization of an insurance company with which Meredith holds policies. This type of income does not relate to the performance of the Company's core businesses and is not expected to recur. Therefore management believes it is useful to present adjusted earnings excluding this income.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, is a common alternative measure of performance used by investors, financial analysts and ratings agencies. These groups use EBITDA, along with other measures, to estimate the value of a company and to evaluate a company's ability to meet its debt service requirements. Meredith management believes EBITDA is a useful measure because it is used in determining compliance with the Company's debt agreements. In addition, EBITDA is used for comparisons with other businesses in the same industry, especially the television broadcasting industry.

Reconciliations of non-GAAP financial measures to the most directly comparable measure calculated and presented in accordance with GAAP are presented at the end of Management Discussion and Analysis under the heading "Reconciliation of Non-GAAP Financial Measures."

Fiscal 2003 third quarter net earnings were $25.5 million, or 50 cents per share, compared to net earnings of $17.9 million, or 35 cents per share, in the prior-year second quarter. Net earnings before the cumulative effect of a change in accounting principle were $61.3 million, or $1.20 per share, in the nine months ended March 31, 2003 compared to net earnings of $35.3 million, or 69 cents per share in the prior-year period. As discussed previously, fiscal 2002 results include intangible asset amortization expense that is no longer required upon adoption of SFAS No. 142 and nonoperating income representing proceeds from the demutualization of an insurance company. Excluding these items, adjusted net earnings were $21.8 million, or 43 cents per share, in the fiscal 2002 third quarter and $45.9 million, or 90 cents per share, in the nine months ended March 31, 2002. Net earnings before the cumulative effect of a change in accounting principle increased 17 percent in the third quarter and 34 percent in th e nine-month period compared to the adjusted earnings of the comparable prior-year period. The increases reflected higher advertising revenues and improved results at many of the Company's non-advertising based businesses, in particular the book business.

Third quarter revenues increased 9 percent to $278.2 million from $256.2 million for the same quarter a year ago. For the nine months of the fiscal year, revenues increased 8 percent to $779.9 million from $720.7 million. Excluding the impact of the American Baby acquisition and adjusting for same-station broadcasting revenues, revenues increased 5 percent in the quarter and 8 percent in the nine-month period. Same-station comparisons include revenues of KPTV-Portland in all periods and exclude revenues of the two Florida stations traded for KPTV in June 2002. The increase in comparable revenues reflected higher advertising revenues, including $20.5 million of political revenue at the broadcasting stations (primarily in the first half of fiscal 2003), and increased book sales. These revenue increases were partially offset by lower revenues from integrated marketing operations.

Operating costs and expenses increased 8 percent in the quarter and 5 percent in the nine-month period compared to prior-year expenses adjusted to exclude SFAS No. 142 amortization. When costs of the American Baby properties, which were acquired in December 2002 are also excluded, costs increased 1 percent in the quarter and 3 percent in the nine-month period. Production, distribution, and editorial costs were up because of higher volumes in publishing and higher postage rates. Higher volumes resulted from an increase in the number of advertising pages and books sold. Partially offsetting these cost increases were lower paper prices and lower volumes in the integrated marketing operations. Selling, general, and administrative expenses, when adjusted for the American Baby acquisition, were flat in the quarter and increased 3 percent in the year-to-date period primarily because of higher performance-based incentive accruals. Depreciation and amortization costs increased 6 percent in the quarter and 2 percent in the year-to-date period after adjusting for SFAS No. 142 amortization and the American Baby acquisition.

Nonoperating expense totaled $0.3 million in the nine months ended March 31, 2003. It consisted of a nonoperating charge of $1.6 million for the write-off of an investment in a start-up technology company and a nonoperating gain of $1.3 million related to the final settlement with News Corporation and Fox Television Stations, Inc., of the June 2002 exchange of two Florida stations for KPTV in Portland, OR.

Net interest expense was $6.4 million in the third quarter compared with $6.5 million in the third quarter of fiscal 2002. The decline reflected a favorable fair market value adjustment on interest rate swap contracts in the current quarter net of higher rates due to a change in the mix of fixed and variable-rate debt. In the prior year, all fair market value adjustments on interest rate swap contracts were recorded in other comprehensive income. As a result of debt refinancing in April 2002 and a reduction in the amount of variable-rate debt outstanding, Meredith has interest rate swap contracts that no longer hedge variable-rate obligations. The fair market value adjustment on those contracts therefore is recorded in interest expense. Net interest expense was $21.2 million in the nine months ended March 31, 2003, compared to $21.0 million in the comparable prior-year period. In the year-to-date period, the net effect of fair market value adjustments on interest rate swap contracts was immaterial.

The Company's effective tax rate for the quarter and nine months just ended and for the same periods in the previous fiscal year was 38.7 percent. The rate is expected to remain unchanged throughout fiscal 2003.

The following statements reflect Meredith's current expectations for the remainder of fiscal 2003.

Management believes that earnings per share of $1.75 are achievable for fiscal 2003. This represents earnings before the cumulative effect of a change in accounting principle related to SFAS No. 142, which was recorded in the first quarter of fiscal 2003.

Previously, the Company reported adjusted fiscal 2002 earnings of $1.42 per share. In light of new guidelines from the Securities and Exchange Commission concerning items that may be identified as non-recurring, infrequent or unusual, the Company's adjusted net earnings for fiscal 2002 are now reported as $1.38 per share. This includes a $0.04 per share write-down of broadcast film rights that was previously excluded from adjusted fiscal 2002 earnings.

In the following sections, segment operating profit for the quarter and nine months ended March 31, 2002 is shown as previously reported in accordance with GAAP and on an adjusted basis as if the amortization provisions of SFAS No. 142 were effective July 1, 2001. See previous section entitled "Use of non-GAAP financial measures" for further discussion.