PRIMEDIA INC - 10-K Annual Report

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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, 2002

OR

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

COMMISSION FILE NUMBER: 1-11106

PRIMEDIA INC.
(Exact name of registrant as specified in its charter)

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:

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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.

[ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

Yes__X__ No____

The aggregate market value of the voting common equity of PRIMEDIA Inc.
("PRIMEDIA") which is held by non-affiliates of PRIMEDIA, computed by reference
to the closing price as of the last business day of the registrant's most
recently completed second fiscal quarter, June 28, 2002, was approximately
$120 million. The registrant has no non-voting common stock.

As of February 28, 2003, 259,261,439 shares of PRIMEDIA's Common Stock were
outstanding.

The following documents are incorporated into this Form 10-K by reference:
None.
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TABLE OF GUARANTORS

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).

These companies are listed as guarantors of the debt securities of the
registrant. The consolidating financial statements of the Company depicting
separately its guarantor and non-guarantor subsidiaries are presented as
Note 26 of the notes to the consolidated financial statements. All of the equity
securities of each of the guarantors 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 guarantors.

ii

PRIMEDIA INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 2002

iii

PART I

ITEM 1. BUSINESS.

GENERAL

PRIMEDIA Inc. ("PRIMEDIA" or the "Company") is a targeted media company with
leading positions in consumer and business-to-business markets. Our properties
deliver content via print (magazines, books and directories), video (digital
broadband, satellite and cable), live events (trade and consumer shows) and the
Internet. Our products serve highly specialized niches and capitalize on the
growing trend toward targeted rather than mass information distribution.

Many of the Company's products, such as those provided by PRIMEDIA's
consumer magazines, About.com, CHANNEL ONE NEWS, apartment and home guides and
business-to-business magazines afford advertisers an opportunity to directly
reach niche market audiences. In 2002, 48% of PRIMEDIA's total revenue was from
lead generation advertising, 13% was from brand awareness advertising and 39%
was from non-advertising sources (subscription revenue and non-advertising
sales). Unlike general brand awareness advertising, lead generation advertising
is focused on triggering a potential purchase decision by the reader, user or
viewer.

The Company's products compete in two principal segments, Consumer and
Business-to-Business. The Consumer segment produces and distributes magazines,
guides, videos and Internet products for consumers in various niche markets.
This segment consists of the Consumer Magazines and Media Group, Consumer
Guides, PRIMEDIA Television and About, Inc. ("About"). The Company's
Business-to-Business segment produces and distributes magazines, books,
directories, databases, vocational training materials and Internet products to
business professionals in such fields as communications, agriculture,
professional services, media, transportation and healthcare. The
Business-to-Business segment includes the Company's trade magazines and trade
shows (the Business Magazines and Media Group), as well as Workplace Learning, a
provider of video and interactive professional training, and Federal
Sources Inc., an information and consulting provider for government contractors.
These segment results are regularly reviewed by the Company's chief operating
decision maker and the remainder of the executive team to determine how
resources will be allocated to the segment and assess its performance.

CONSUMER SEGMENT

CONSUMER MAGAZINE AND MEDIA GROUP

The Company is one of the largest specialty consumer magazine companies in
the U.S., with over 125 titles including AUTOMOBILE, MOTOR TREND, NEW YORK,
SEVENTEEN, HOT ROD, FLY FISHERMAN and POWER & MOTORYACHT and leadership
positions in such categories as automotive, motorcycle, crafts, teens, home
entertainment technology and outdoor recreation. In 2002, over half of these
specialty consumer magazines were number one in their markets. The principal
sources of specialty consumer magazines sales are lead generation advertising,
circulation and ancillary revenues. For the year ended December 31, 2002, 50% of
sales was from advertising, 34% from circulation and 16% from ancillary sources.

Readers value specialty consumer magazines for their targeted editorial
content and also rely on them as catalogues of products in the relevant topic
areas. This catalogue aspect makes the specialty consumer magazines important
media buys for advertisers. Advertising sales for the Company's specialty
consumer magazines are generated largely by in-house sales forces. 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 the high quality of its targeted editorial, which is provided by
in-house and free lance writers.

The Company publishes 44 automotive enthusiast magazines, including
AUTOMOBILE and MOTOR TREND, catering to the high-end automotive market, as well
as such highly specialized enthusiast titles as TRUCKIN' and LOWRIDER, the
largest retail sales magazines in the automotive category, MUSCLE MUSTANG & FAST
FORDS, VETTE and SPORT COMPACT CAR. The Company also publishes nine motorcycle
enthusiast magazines, including MOTORCYCLIST and DIRT RIDER. Supplementing the
print publications, PRIMEDIA has a strong presence on the Internet with a
companion website to each publication or a presence for each publication on the

About.com network. In the high-end and new car markets, PRIMEDIA's publications
compete against CAR AND DRIVER and ROAD AND TRACK, both owned by Hachette
Filipacchi Magazines.

The Company is a leading publisher of magazines for outdoor enthusiasts with
such titles as FLORIDA SPORTSMAN, FLY FISHERMAN, SAIL, POWER & MOTORYACHT, EQUUS
and PRACTICAL HORSEMAN. The Company also publishes numerous magazines targeting
action sports enthusiasts such as SURFER, SURFING, SKATEBOARDER and SNOWBOARDER.
One of the Company's major competitors in the enthusiast market is the
Time4Media division of AOL Time Warner. The Company also competes in individual
enthusiast markets with a number of smaller, privately-owned or regionally-based
magazine publishers.

The Company publishes the flagship magazine for the New York City
metropolitan area. Since it was founded in April 1968, NEW YORK has been New
York City's magazine of record, with New York City centric news, entertainment,
culture, fashion and personalities. NEW YORK competes with other New York-themed
magazines for local and national advertising. Competitors include the NEW YORK
TIMES MAGAZINE, Advance Magazine Publishers Inc.'s THE NEW YORKER and TIME OUT
NEW YORK.

The Company is the largest publisher of teen media in the United States.
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 ages 12 to 24. SEVENTEEN'S monthly rate
base is 2.35 million and its total monthly readership is over 14.4 million. The
Company acquired TEEN magazine in 2001. In February 2002, TEEN became a
newsstand only special publication with such topics as back to school and teen
prom. Competition for newsstand sales, advertising dollars and subscribers in
the teen magazine market is especially intense. Competitors of the Company's
publications include Gruner & Jahr's YM, AOL Time Warner's TEEN PEOPLE, Hearst's
COSMOGIRL, Hachette Filipacchi's ELLEGIRL and Conde Nast's TEEN VOGUE. In
December 2002, the Company sold TIGER BEAT and TEEN BEAT. The Company announced
on February 5, 2003 that it was exploring strategic, value-creating options for
SEVENTEEN and a number of related teen properties.

PRIMEDIA publishes the two leading soap opera magazines, SOAP OPERA DIGEST
and SOAP OPERA WEEKLY. Both publications compete for circulation on the basis of
editorial content and quality against SOAPS IN DEPTH which has substantially
lower circulation.

The Company's consumer magazine circulation revenue is divided between
retail sales (largely newsstand and other retail outlets) and subscriptions with
revenue weighted slightly towards subscriptions. To acquire new subscribers, the
Company depends on direct mail, telemarketing and in magazine promotions. The
Internet has also become an efficient, cost-effective source of subscription
sales for the Company. In 2002, the Company generated an estimated 470,000 paid
subscriptions via the Internet.

The Company operates RetailVision, the largest specialty magazine
distribution company in the U.S., which distributes over 700 titles, including
those of the Company and 98 other publishers, to approximately 50,000
independent niche retailers such as auto parts retailers, craft shops, tackle
shops, and record/music stores.

CONSUMER GUIDES

The Company is the largest publisher of rental apartment guides in the U.S.
with 88 local versions, most of which are distributed monthly and provide
informational listings about featured apartment communities. Apartment community
managers, who need to fill vacant apartments, provide virtually 100% of
apartment guide advertising revenues.

The Company is the dominant information provider in apartment listings and
continues to gain in market share due to the cost effectiveness of its products
as measured by cost per lease to the advertiser. The Company's national
competitors include Trader Publishing Company (publishers of FOR RENT) and
Network Communications Inc. The majority of customers purchase 12-month
contracts, and in 2002, approximately 90% of standard listing customers renewed
their contracts when they expired.

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The average number of monthly visitors to the Company's Internet site,
apartmentguide.com, grew to approximately 1,230,000 per month in 2002.
Apartmentguide.com is the exclusive partner of MSN's House & Home. The site,
which carries all of the listings included in the print products, listed
approximately 20,000 properties as of December 31, 2002. Rental leads delivered
to apartment advertisers were up approximately 99%, from approximately 2,260,000
in 2001 to approximately 4,500,000 in 2002. The site offers many premium
features not provided by its print products including virtual tours and search
functionality. Approximately 111,000 of these premium products were sold during
2002.

The Company is a leader in new home guides with guides in 18 major markets
including Northern California, Denver, Phoenix, Dallas-Fort Worth and
Philadelphia.

A major strategic advantage is the Company's DistribuTech Division which is
the nation's largest distributor of free publications, including its own
consumer directories and over 1,300 other titles. In 2002, it distributed
publications to over 19,000 grocery, convenience, video and drug stores in over
80 metropolitan areas, as well as universities, military bases, major employers
and over 30,000 other locations. The majority of these locations are operated
under exclusive distribution agreements. The guides are typically displayed in
free-standing, multi-pocket racks. DistribuTech generates revenues by leasing
rack pockets to other third party publications. DistribuTech competes for
third-party publication distribution primarily on the basis of its prime retail
locations. DistribuTech's principal competitor is Trader Distribution Services,
a division of Trader Publishing Company.

PRIMEDIA TELEVISION

CHANNEL ONE NETWORK'S news program, CHANNEL ONE NEWS, is the only daily,
advertising supported television news program delivered to secondary school
students in their classrooms. The award-winning program contains news stories
and features on issues of concern to teenagers, delivered in a relevant and
engaging way. CHANNEL ONE NEWS broadcasts every school day via satellite to
approximately 8.1 million students, 360,000 classrooms and approximately
400,000 educators in approximately 12,000 secondary schools in the United
States. On an average school day, ten times more teens watch CHANNEL ONE NEWS
than the nightly newscast of ABC, NBC, CBS and the cable networks combined.
Channel One's average audience is 25 times larger than MTV's average prime time
audience.

CHANNEL ONE NETWORK generates the majority of its revenue by selling the two
minutes of advertising shown during each 12-minute CHANNEL ONE NEWS daily
newscast. Because it is shown in schools, CHANNEL ONE NEWS airs only during the
school year, typically September to June. Accordingly, CHANNEL ONE NETWORK earns
the largest share of its revenue in the beginning of the school year, in the
Company's fourth quarter. The CHANNEL ONE NEWS program does not air during the
summer months and, accordingly, CHANNEL ONE NETWORK sees a seasonal revenue drop
in the Company's third quarter each year.

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 schools with a
turnkey system of videocassette recorders and network televisions. These
products and services are provided to schools at no charge. In addition, CHANNEL
ONE CONNECTION provides a maximum of 120 minutes of educational programming per
school day at no charge.

CHANNEL ONE NETWORK has a library of over 2,300 broadcasts including
approximately 200 single subject series, 95 of which have been released as
videos. The Company's channelone.com online network and its
channeloneteacher.com website provide supplemental information to students and
educators.

3

CHANNEL ONE NEWS has no direct competition in the schools but does compete
for advertising dollars with other media businesses, such as MTV and the WB
Network. The Company's primary competitive advantages are award winning
programming and total audience reach.

Films for the Humanities and Sciences ("Films") is a distributor of
approximately 2,250 owned and 9,600 licensed educational videos, DVDs, CD-ROMs
and related products. These products are sold mostly by direct mail to teachers,
instructors and librarians primarily serving students in grades 8 to 12 and the
college markets. Films is the largest distributor of such products to colleges
and high schools and competes on the basis of exclusivity, quality, breadth and
depth of the subject matter.

PRIMEDIA Digital Video ("PDV"), formed in 2000, develops, produces and
distributes video properties based on the Company's brands and franchises, and
recently launched the Video Magazine Rack, a video-on-demand cable TV service
offering a selection of video content related to the Company's print production.
Additionally, PDV manages the Company's Dallas-based video production facility
where video product is developed and produced for both the Company's own
programming needs and for third party customers.

ABOUT

About is a leading producer of information and original content on the
Internet. About generates revenue from three sources: brand advertising on the
About Network, auction-based pay-per-click classified advertising on the About
Network and 3rd party sites, and web-hosting services.

The About Network consists of a network of more than 400 highly-targeted web
sites covering over 10,000 discrete topics. The information and original content
on the web sites are generated by human guides. Each guide is carefully screened
and trained by About. All guides must successfully complete the About training
program and maintain standards in user services and community leadership. The
About and PRIMEDIA sites combined were the 5th most visited sites on the
Internet in December 2002 with over 44 million unique visitors, as measured by
MEDIA METRIX.

In the brand advertising arena, the About Network competes with other
large-scale Internet properties such as America Online, Yahoo and Microsoft
Network, to sell display advertising on About's web sites to national
advertisers.

About's auction-based classified advertising business, Sprinks, enables an
advertiser to bid for link placement on targeted content web pages, search
results and email newsletters on the About Network and on Sprinks affiliate
sites. An advertiser pays About a fee when a consumer clicks their link,
providing the advertiser with a targeted and efficient means of marketing their
services on the Web. Other companies providing pay-per-click classified
advertising of this sort include Overture Services Inc. and Google.

About's web-hosting service allows a consumer to register a domain name and
then pay a monthly fee for hosting and support of his or her personal web site.
Competitors include Yahoo and Terra Lycos.

BUSINESS-TO-BUSINESS SEGMENT

BUSINESS MAGAZINES AND MEDIA GROUP

The Company is a leading publisher of business-to-business magazines in the
U.S. with over 65 titles that provide vital information to professionals in such
fields as communications (TELEPHONY), agriculture (SOYBEAN DIGEST), broadband
(CABLEWORLD), transportation (FLEET OWNER), industrial (ENGINEERING AND MINING
JOURNAL), professional services (REGISTERED REPRESENTATIVE) and entertainment
(BROADCAST ENGINEERING). In 2002, 78% of these titles ranked number one or
number two in their category based on advertising pages. In 2002, over 95% of
magazine revenue was derived from advertising as most copies of these magazines
are distributed on a controlled circulation basis, meaning that they are
distributed free of charge to select qualified readers.

4

Because each of the business-to-business magazines is distributed almost
exclusively to purchasing decision-makers in a targeted industry group, product
and service providers are able to focus their advertising. Advertising rates are
based on the quality and 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 and are
supplemented by independent representatives in selected regions and overseas.

The Company sponsors conferences and trade shows, serving the advertisers
and readers of the corresponding publications, including WASTE AGE, LIGHTING
DIMENSIONS and TRANSMISSION & DISTRIBUTION.

On both the publishing and trade show sides of the business, there are
large, domestic and internationally-based competitors that vary by the industry
served. Some of those competitors are Reed Business Information (owned by Reed
Elsevier plc group), VNU Business Media (owned by VNU NV) and Advanstar
Communications.

The Company also publishes periodicals that provide in-depth data on
selected markets. WARD'S AUTOMOTIVE REPORTS is recognized as the authoritative
source for industry-wide statistics on automotive production and sales. In
addition, the Company publishes used vehicle valuation information in print and
electronic formats including EQUIPMENT WATCH. Other databases include THE
ELECTRONICS SOURCE BOOK and AC-U-KWIK.

The Company also operates a business-to-business Internet operation serving
numerous industries and leveraging off of PRIMEDIA's already strong traditional
media presence. In December 2002, these sites collectively received more than
4.5 million page views.

WORKPLACE LEARNING

PRIMEDIA Workplace Learning is a leading provider of integrated training,
education and information solutions, helping public and private enterprises
create and retain qualified, competent workforces. The Company largely delivers
its products via satellite, videotape, CD-ROM, live events and increasingly over
the Internet. It is a leader in such markets as automotive (Automotive Satellite
Television Network), industrial (Industrial Training Systems), healthcare
(Health and Sciences Television Network), pharmaceuticals (Interactive Medical
Networks), government (Law Enforcement Training Network
("LETN")), fire and emergency services (Fire and Emergency Television Network),
and banking (Bankers Training and Consulting Company). To provide online
learning management services in addition to content, the Company has launched
PRIMEnet, a comprehensive e-learning delivery and management platform.

In 2002, the United States Customs Service selected PRIMEDIA Workplace
Learning to implement Customs Television Network, which includes LETN. The
implementation of a satellite-based training and communications network is
designed to provide Customs Officials in 350 locations with the latest
techniques in critical emergency response, homeland security, safety and health
issues.

The Company has numerous direct and indirect competitors, including BVS,
General Physics and Healthstream. In addition, many potential customers continue
to do their own in-house training. The Company is pursuing opportunities to
capture market share in those markets migrating to e-learning solutions. It is
also capitalizing on opportunities to increase product and content sales through
resellers, distributors, associations, and consortia.

ADVERTISING

Over 60% of the Company's revenue is derived from advertising. In general,
the Company sells two types of advertising: lead generation advertising (48% of
total revenue) and brand awareness advertising (13% of total revenue). In a
given media market in which the Company competes (e.g. fishing), lead generation
advertising is purchased by advertisers who are "endemic" to that market (e.g.
fishing rod

5

manufacturers) and are seeking to trigger a direct, specific buying decision.
The Company's specialty magazines, consumer guides, About.com and
Business-to-Business units derive a majority of their revenue from this type of
advertising.

In contrast, brand awareness advertising concentrates on introducing or
reinforcing a product's brand image with the reader, user or viewer. The
Company's larger circulation magazine properties, such as SEVENTEEN, and
television properties, such as CHANNEL ONE NETWORK, generate more of their
revenue from brand awareness advertising, primarily from the fashion, health and
beauty and entertainment sectors.

PRIMEDIA's focus on lead generation advertising from endemic buyers gives
the Company a stable base of advertising revenue, less susceptible to the
fluctuations of the business cycle than the brand advertising market. PRIMEDIA's
2001 acquisitions of EMAP and About and its divestiture in 2002 of large
circulation magazine titles such as MODERN BRIDE and AMERICAN BABY, have
accelerated the Company's trend toward more targeted, niche media and endemic
advertising.

In addition, PRIMEDIA has successfully expanded beyond its base in
publishing into related, high growth media such as video (Primedia Digital
Video) and Internet (About, Consumer Magazine and Media Group and Consumer
Guides Internet sites) serving the same base of niche-focused enthusiasts and
advertisers. The Company has implemented an integrated sales effort (PRISM) to
garner additional revenues from national advertisers across these media
platforms and properties.

ACQUISITIONS AND DIVESTITURES

Historically, PRIMEDIA has actively sought to acquire magazines and other
media properties to strengthen its competitive position in the segments and
markets in which it competes. The Company has also traditionally managed its
portfolio of media assets by opportunistically divesting assets no longer core
to the Company's overall strategy. In 2002, PRIMEDIA focused on improving its
operating results through the integration of its 2001 acquisitions of EMAP Inc.
("EMAP", formerly known as Petersen Publishing) and About, and reducing the
amount of debt on its balance sheet through the divestiture of several large
consumer magazine properties.

In February 2001, About, a leading producer of information and original
content on the Internet, was merged into a subsidiary of PRIMEDIA and as a
result became a wholly-owned subsidiary of PRIMEDIA. About's financial results
are included in the Company's Consumer segment for the last ten months of 2001
and for the full year 2002. PRIMEDIA has integrated About's operations into the
Company's Consumer segment, where it provides a vital platform for the delivery
of Internet-based content and advertising. About also serves as a source of
subscribers for the Company's magazine businesses. The integration of About has
driven headcount reductions and has decreased capital spending and expenses
across the Company's Internet and new media businesses.

In August 2001, the Company acquired EMAP from UK-based magazine publisher
EMAP plc. EMAP had more than 60 consumer titles reaching over 75 million
enthusiasts through a combination of magazines, live events, television shows
and web sites. In 2002, these operations were fully integrated into PRIMEDIA's
Consumer Magazine and Media Group and its financial results are reported in the
Consumer segment for the full year. The results of the acquired EMAP assets are
included for the last four months of 2001.

With EMAP, the Company has been able to add scale in the automotive
enthusiast market, particularly as the result of the combination of sales
efforts for AUTOMOBILE and MOTOR TREND magazines. The acquisition of EMAP also
enhanced PRIMEDIA's market position in the action sports and home entertainment
technology magazine markets. Finally, the Company expects to continue to achieve
efficiencies through increased scale of operations in the areas of paper
purchasing, circulation, production, technology and finance.

6

In July 2001, at the time of announcement of the EMAP acquisition, PRIMEDIA
announced its intention to sell $250 million of assets in order to pay down debt
associated with the acquisition. Since that time, the Company has sold assets
for proceeds of over $345 million. Asset sales in 2002 accounted for
approximately $228 million of that total.

Major 2002 divestitures included the American Baby Group, CHICAGO magazine,
MODERN BRIDE and other small enthusiast titles. The American Baby Group which is
comprised of the AMERICAN BABY magazine, web site and cable television show, as
well as the Baby Faire consumer expo was sold to Meredith Corporation at the end
of 2002 for $115 million. The Company also sold CHICAGO magazine in August 2002
for $35 million to an affiliate of The Chicago Tribune Company and sold the
Modern Bride Group ("MBG"), including MODERN BRIDE magazine, in February 2002 to
Advance Magazine Publishers Inc. for $50 million. Other 2002 divestitures
included the sale of ExitInfo, a publisher of free local travel guides and
coupon books, to Trader Publishing for $24 million, as well as a number of small
magazine divestitures including the sale of HORTICULTURE to F&W Publications,
DOLL READER to Ashton International Media, Inc. and IN NEW YORK to Best Read
Guides LLC. Financial results for these divestitures are reported in
Discontinued Operations.

Prior to 2001, the Company was an active acquirer of consumer and
business-to-business magazines, rental apartment and other real estate guides,
trade shows, directories, educational training content providers and other media
businesses. In 2000, major acquisitions included Adams/Laux Company, Inc. and
Adams/Intertec International Inc., publishers of business-to-business magazines
and other publications relating to the meetings and conference industry and the
electric power industry. In that year, the Company also acquired the assets of
Paul Kagan Associates Inc. and the stock of Kagan World Media Inc. and certain
of its affiliated companies, which is a newsletter, conference, consulting
service and content business focused on the media and telecommunications
industries.

Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7, page 13) provides a description of segment results.

PRODUCTION AND FULFILLMENT

Virtually all of the Company's print products are printed and bound by
independent printers. The Company believes that because of its buying power,
outside printing services can be purchased at favorable prices. The Company
provides most of the content for its electronically delivered products but
outsources technology and production.

The principal raw material used in the Company's products is paper. PRIMEDIA
purchases paper directly from several paper mills, including the three major
paper mills. The Company has used strategic sourcing principles to gain stable
supplies at favorable prices.

The Company uses the U.S. Postal Service for distribution of many of its
products and marketing materials and is therefore subject to postage rate
changes. 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.

As discussed below in Item 7 under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Impact of Inflation
and Other Costs", postal rates increased in 2002 while paper prices decreased.
Going forward, the Company may be impacted by future cost increases, driven by
inflation or market conditions in these categories.

EMPLOYEES

As of December 31, 2002, the Company had approximately 5,100 full-time
equivalent employees. During 2002, the Company's headcount declined primarily
due to divestitures and consolidation of

7

functions. None of these employees are union members. Management considers its
relations with its employees to be good.

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.

The Company holds regular meetings to inform investors about the Company. To
obtain information on these meetings or to learn more about the Company please
contact:

James Magrone
Senior Vice President, Investor Relations
Tel: 212-745-0634
Email: jmagrone@primedia.com

The 2003 PRIMEDIA Annual Meeting will be held on Wednesday, May 14, 2003 at
10:00 a.m., at the Four Seasons Hotel, 57 East 57th Street, New York, NY.

AVAILABLE INFORMATION

The Company's Internet address is: www.primedia.com. The Company makes
available free of charge through its web site its annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, as soon as reasonably practicable
after such documents are electronically filed with, or furnished to, the
Securities and Exchange Commission.

ITEM 2. PROPERTIES.

During 2002 and 2001, in connection with the cost reduction and integration
plans, the Company has closed and consolidated in excess of 44 office locations.

The Company's principal leased properties used by the Consumer segment are
located in Alabama, Arizona, Arkansas, California, Colorado, Connecticut,
Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts,
Michigan, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North
Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah,
Vermont, Virginia, Washington and Wisconsin; and the principal leased properties
used by the Business-to-Business segment are located in Alabama, California,
Colorado, Connecticut, Georgia, Illinois, Indiana, Kansas, Maryland,
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Jersey, New York,
Pennsylvania, Tennessee, Texas, United Kingdom, Virginia, Washington and
Washington D.C.

Property is owned by the Company and used in the Consumer segment in
Minnesota and Mississippi and in the Business-to-Business segment in
Mississippi. The Company's only production facilities are small printing
operations for Films, broadcast production facilities for PDV, 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 2002, to
which the Company is or was a party.

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 2002.

8

PART II

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

MARKET INFORMATION

PRIMEDIA Common Stock is listed on the New York Stock Exchange, under Ticker
Symbol "PRM". As of February 28, 2003, there were 419 holders of record of
PRIMEDIA Common Stock. The Company has not paid and has no present intention to
pay dividends on its Common Stock. In addition, the Company's bank credit
facility and Senior Notes impose certain limitations on the amount of dividends
permitted to be paid on the Company's Common Stock. See Item 7 of Part II,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Financing Arrangements." High, low
and closing sales prices for 2002 and 2001 were as follows:

The closing stock price decreased by 52.6% from December 31, 2001 to
December 31, 2002. From January 1, 2003 through March 21, 2003, the high price
for the stock was $3.05, the low price was $1.87 and the closing price on March
21, 2003 was $2.08.

EQUITY COMPENSATION PLAN INFORMATION

Information required by this item with respect to equity compensation plans
of the Company is included in Part III, Item 12 of this Form 10-K under the
caption "Equity Compensation Plan Information."

RECENT SALES OF UNREGISTERED SECURITIES

In February 2002, May 2002 and August 2002, the Company issued to KKR 1996
Fund L.P. ("KKR 1996 Fund") unregistered warrants to purchase 1 million,
1.25 million and 1.5 million shares of the Company's Common Stock, respectively.
The warrants were issued in connection with the equity financing by KKR 1996
Fund in August 2001 as more fully described under "Certain Relationships and
Related Transactions" in Item 13 of this Form 10-K.

In November 2002, the Company issued 78,000 shares of its unregistered
Common Stock to Paul Kagan as deferred purchase price payable in connection with
the acquisition by the Company in November 2000 of the assets of Paul Kagan
Associates, Inc. and the stock of certain of its affiliated companies. The
aggregate purchase price paid by the Company in connection with the transaction
was 1,190,000 shares of the Company's Common Stock, of which 390,000 shares are
payable in five equal annual installments of 78,000 shares on each annual
anniversary of the closing date of the transaction.

In February 2003, the Company issued to Michael Tokarz, a former Director of
the Company, 29,284 shares of the Company's unregistered Common Stock as
compensation for his services as a director from October 1998 to May 2002. Mr.
Tokarz, was permitted to defer the payment of his director's fees and receive
the fees in the form of Common Stock pursuant to the Directors' Deferred
Compensation Plan. Mr. Tokarz deferred the payment of an aggregate of $186,367
of directors' fees that he would have otherwise received in cash at the time the
services were provided.

The above issuances of securities were made by the Company in reliance on
exemptions from registration contained in Section 4(2) of the Securities Act of
1933, as amended, and the rules and regulations thereunder, as offerings not
involving a public offering.

9

ITEM 6. SELECTED FINANCIAL DATA.

The selected consolidated financial data were derived from the audited
consolidated financial statements of the Company as of December 31, 2002 and
2001 and for the years ended December 31, 2002, 2001 and 2000. 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 elsewhere herein. On January 1, 2002, the
Company adopted Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144").
As a result of this adoption, prior year results have been reclassified to
reflect the results of the Modern Bride Group, ExitInfo, Chicago, Horticulture,
Doll Reader, the American Baby Group and IN New York as discontinued operations
for the periods prior to their respective divestiture dates. On January 1, 2002,
the Company also adopted Emerging Issues Task Force ("EITF") Consensus
No. 00-25, "Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendors Products," ("EITF 00-25") and EITF Consensus No. 01-9,
"Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendor's Products)" ("EITF 01-9") which resulted in a net
reclassification of product placement costs previously recorded as operating
expenses to reductions of sales from such activities.

PRIMEDIA INC. AND SUBSIDIARIES

(See notes on the following page)

10

NOTES TO SELECTED FINANCIAL DATA

(1) As a result of the adoption of EITF 00-25, EITF 01-9 and SFAS 144, the
Company reclassified amounts from sales, net, for the years ended
December 31, 2001, 2000, 1999 and 1998, as follows:

(2) Includes an impairment of long-lived assets of $11,610 for the year ended
December 31, 2002.

(3) Includes an impairment of intangible assets, goodwill and other, of
$154,828, $444,699 and $275,788 for the years ended December 31, 2002, 2001
and 1999, respectively.

(4) Represents non-cash compensation and non-recurring charges of $15,665,
$58,181 and $35,210 for the years ended December 31, 2002, 2001 and 2000,
respectively, a provision for severance, closures and restructuring related
costs of $51,914, $43,920, $20,798 and $22,000 for the years ended
December 31, 2002, 2001, 2000 and 1999, respectively, and loss (gain) on
the sale of businesses and other, net, of $7,247, ($57,233), ($14,438),
($235,580) and ($7,216) for the years ended December 31, 2002, 2001, 2000,
1999 and 1998, respectively.

(5) Represents impairments of the Company's investment in CMGI, Inc. of
approximately $7,000 and $155,500 for the years ended December 31, 2001 and
2000, respectively, the Company's investment in Liberty Digital of
approximately $700 and $21,900 for the years ended December 31, 2001 and
2000, respectively, the Company's investments in various assets-for-equity
transactions of approximately $10,000 and $84,000 for the years ended
December 31, 2002 and 2001, respectively, and various other PRIMEDIA
investments of approximately $9,200, $14,900 and $11,200 for the years
ended December 31, 2002, 2001 and 2000, respectively.

(6) Historically, the Company did not need a valuation allowance for the
portion of the tax effect of net operating losses equal to the amount of
deferred income tax liabilities related to tax-deductible goodwill and
trademark amortization expected to occur during the carryforward period of
the net operating losses based on the timing of the reversal of these
taxable temporary differences. As a result of the adoption of SFAS
No. 142, "Goodwill and Other Intangible Assets", the reversal will not
occur during the carryforward period of the net operating losses.
Therefore, the Company recorded a deferred income tax expense of
approximately $52,000 on January 1, 2002 and $20,500 during 2002 which
would not have been required prior to the adoption of SFAS 142. The charge
recorded to increase the valuation allowance was reduced by the reversal of
tax liabilities of $23,000 during the third quarter of 2002 as a result of
the impairments of goodwill and certain indefinite lived intangible assets.
The income tax expense recorded in 2002 is net of tax refunds received.
During 2001 and 2000, the Company increased its valuation allowance due to
continued historical operating losses and the impairment of long-lived
assets, primarily goodwill and investments, resulting in a net provision
for income taxes of $135,000 and $41,200, respectively. At December 31,
1999 and 1998, the Company's management determined that no adjustment to
net deferred income tax assets was required. In 1999, the Company recorded
income tax expense of $6,500 related to a provision for current state and
local taxes incurred as a result of the gain on the sale of the
Supplemental Education Group. At December 31, 2002, the Company had
aggregate net operating and capital loss carryforwards of $1,722,781 which
will be available to reduce future taxable income.

(7) In connection with the adoption of SFAS 142 on January 1, 2002, the Company
recorded an impairment charge related to its goodwill and certain
indefinite lived intangible assets as a cumulative effect of a change in
accounting principle.

(8) Includes the premiums paid on the redemptions of the $11.625 Series B
Exchangeable Preferred Stock in 1998, a $32,788 gain on exchange of
exchangeable preferred stock in 2002 and the issuance

11

of warrants valued at $5,891 and $498 to KKR 1996 Fund during 2002 and
2001, respectively, in connection with the EMAP acquisition.

(9) Basic and diluted loss per common share, as well as the basic and diluted
common shares outstanding, were computed as described in Note 15 of the
notes to the consolidated financial statements included elsewhere in this
Annual Report.

(10) Includes current maturities of long-term debt and net assets held for
sale, where applicable. Consolidated working capital reflects certain
industry working capital practices and accounting principles, including
the expensing of certain editorial and product development costs when
incurred and the recording of deferred revenue from subscriptions 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.

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

12

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 summarizes the financial condition and
operating performance of the Company and its two segments and should be read in
conjunction with the Company's historical consolidated financial statements and
notes thereto included elsewhere in this Annual Report.

FORWARD-LOOKING INFORMATION

PRIMEDIA, in its fourth quarter 2002 earnings conference call with investors
and related earnings release on February 12, 2003, indicated that it expected
modest revenue growth and high single-digit Segment EBITDA growth in 2003 as
compared to 2002. As noted in the conference call and related earnings release,
the Company's revenue and earnings guidance does not factor in the consequences
of extended geopolitical conflict and may change as circumstances warrant.
PRIMEDIA's 2003 guidance followed a 2002 in which the Company significantly
increased its Segment EBITDA by integrating its 2001 acquisitions of About and
EMAP, including their results for the full year 2002, and by materially reducing
the Company's operating costs.

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 the assumptions may not materialize and unanticipated
events will occur which can affect the Company's results.

WHY WE USE SEGMENT EBITDA

PRIMEDIA believes that Segment EBITDA is the most accurate indicator of its
segments' results, because it focuses on revenue and operating cost items driven
by operating managers' performance, and excludes non-recurring items and items
largely outside of operating managers' control. Internally, the Company's chief
operating decision maker and the remainder of the executive team measure
performance primarily based on segment EBITDA. Segment EBITDA represents
earnings before interest, taxes, depreciation, amortization and other charges
(income) ("Segment EBITDA"). Other charges (income) include non-cash
compensation and non-recurring charges, provision for severance, closures and
restructuring related costs and (gain) loss on the sale of businesses and other,
net.

Segment EBITDA is not intended to represent cash flows from operating
activities and should not be considered as an alternative to net income or loss
(as determined in conformity with generally accepted accounting principles) as
an indicator of the Company's operating performance, or to cash flows as a
measure of liquidity. Segment EBITDA may not be available for the Company's
discretionary use as there are requirements to redeem preferred stock and repay
debt, among other payments. Segment EBITDA as presented may not be comparable to
similarly titled measures reported by other companies since not all companies
necessarily calculate Segment EBITDA in identical manners, and therefore, it is
not necessarily an accurate measure of comparison between companies. See
reconciliation of Segment EBITDA to operating income detailed below under the
caption "Segment Data."

The Company's two segments are Consumer and Business-to-Business. PRIMEDIA
groups its businesses into these two segments based on the nature of the
products and services they provide and the type or class of customer for these
products or services. The Company's Consumer segment produces and distributes
content through magazines, guides, videos and over the Internet to consumers
primarily in niche and enthusiast markets. The Consumer segment includes the
Consumer Magazine and Media Group, Consumer Guides, PRIMEDIA Television and
About.com. The Company's Business-to-Business

13

segment produces and distributes content via magazines, books, video, exhibits,
the internet and databases to business professionals in such fields as
communications, agriculture, professional services, media, transportation and
healthcare. The Business-to-Business segment includes the Business Magazines &
Media Group, PRIMEDIA Workplace Learning and PRIMEDIA Information. Corporate
represents items not allocated to other business segments such as general
corporate administration.

INTRACOMPANY AND INTERCOMPANY TRANSACTIONS

In addition, the information presented below includes certain allocations
and intracompany and intercompany transactions and is, therefore, not
necessarily indicative of the results had the operations existed as stand-alone
businesses. Eliminations represent intracompany and intercompany content and
brand licensing, advertising and other services, which are billed at what
management believes are prevailing market rates. These intracompany and
intercompany transactions, which represent transactions between operating units
within the same business segment or transactions between operating units in
different business segments, are eliminated in consolidation. Intracompany
eliminations were $104,271, $61,621 and $44,696 for the years ended
December 31, 2002, 2001 and 2000, respectively. Intercompany eliminations were
$6,106, $3,830 and $1,616 for the years ended December 31, 2002, 2001 and 2000,
respectively.

NON-CORE BUSINESSES

Management believes a meaningful comparison of the results of operations for
2002, 2001 and 2000 is obtained by using the segment information and by
presenting results from continuing businesses ("Continuing Businesses") which
exclude the results of the non-core businesses ("Non-Core Businesses"). The
Non-Core Businesses are those businesses that have been divested, discontinued
or that management is evaluating for turnaround or shutdown. The Non-Core
Businesses include: QWIZ, Inc. (divested in April 2001), Bacon's (divested in
November 2001) and certain titles of the Business Magazines and Media Group and
the Consumer Magazines & Media Group which are discontinued or divested. In
addition, the Company has restructured or consolidated several new media
properties, whose value can only be realized through the far greater efficiency
of having select functions absorbed by the core operations and has included
these properties in Non-Core Businesses. For the year ended December 31, 2002,
the Company has reclassified certain product lines as Non-Core Businesses and in
certain instances has reclassified prior periods accordingly. The Company
believes that the amounts that have not been reclassified are not significant.
Since June 30, 2002, the Company has not classified any additional businesses as
Non-Core Businesses nor have any additional costs been allocated to the Non-Core
Businesses subsequent to this date.

DISCONTINUED OPERATIONS AND RECLASSIFICATIONS OF PRODUCT PLACEMENT COSTS

Prior years' results have been restated to reflect the adoption SFAS 144,
EITF 00-25 and EITF 01-9.

On January 1, 2002, the Company adopted SFAS 144. As a result of this
adoption, prior year results have been reclassified to reflect the results of
the Modern Bride Group, ExitInfo, Chicago, Horticulture, Doll Reader, the
American Baby Group and IN New York as discontinued operations for the periods
prior to their respective divestiture dates.

On January 1, 2002, the Company also adopted EITF 00-25 and EITF 01-9, which
resulted in a net reclassification of product placement costs previously
recorded as operating expenses to reductions of sales from such activities.

14

SEGMENT DATA

Segment data for the Company organized on the foregoing basis are presented
below:

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

(1) Segment EBITDA represents earnings before interest, taxes, depreciation,
amortization and other charges (income) including non-cash compensation and
non-recurring charges of $15,665, $58,181, and $35,210 for the years ended
December 31, 2002, 2001 and 2000, respectively, provision for severance,
closures and restructuring related costs of $51,914, $43,920 and $20,798 for
the years ended December 31, 2002, 2001 and 2000, respectively, and loss
(gain) on sale of businesses and other, net of $7,247, ($57,233) and
($14,438) for the years ended December 31, 2002, 2001 and 2000,
respectively. Segment EBITDA excludes $8,537 of additional restructuring
related costs included in general and administrative expenses for the year
ended December 31, 2001. Segment EBITDA is not intended to represent cash
flows from operating activities and should not be considered as an
alternative to net income or loss (as determined in conformity with
generally accepted accounting principles) as an indicator of the Company's
operating performance or to cash flows as a measure of liquidity. It is
presented herein as the Company evaluates and measures each business unit's
performance based on their Segment EBITDA results. Segment EBITDA may not be
available for the Company's discretionary use as there are requirements to
redeem preferred stock and repay debt, among other payments. Segment EBITDA
as presented may not be comparable to similarly titled measures reported by
other companies, since not all companies necessarily calculate Segment
EBITDA in identical manners, and therefore, is not necessarily an accurate
measure of comparison between companies.

15

The following represents a reconciliation of Segment EBITDA to operating
income (loss) by segment for the years ended December 31, 2002, 2001 and
2000.

Consolidated EBITDA represents operating income (loss) before depreciation
of property and equipment and amortization of intangible assets, goodwill
and other. Operating income (loss) excludes interest and taxes.
Consolidated EBITDA is presented in order to reconcile Segment EBITDA to
operating income (loss). Consolidated EBITDA is not intended to represent
cash flows from operating activities and should not be considered as an
alternative to net income or loss (as determined in conformity with
generally accepted accounting principles) as an indicator of the Company's
operating performance, or to cash flows as a measure of liquidity.
Consolidated EBITDA may not be available for the Company's discretionary
use as there are requirements to redeem preferred stock and repay debt,
among other payments. Consolidated EBITDA as presented may not be
comparable to similarly titled measures reported by other companies, since
not all companies necessarily calculate Consolidated EBITDA in identical
manners, and, therefore, is not necessarily an accurate measure of
comparison between

16

companies. See reconciliation of Segment EBITDA to Consolidated EBITDA and
then to operating income (loss) for the three years ended December 31, 2002
detailed below.

(2) Includes reversals of sales tax accruals that were no longer required of
$1,321 and $4,000 in 2002 and 2001, respectively. Also includes a one time
insurance refund of $521 in 2002 related to the prior year.

(3) Depreciation includes an impairment of long lived assets of $11,610 for the
year ended December 31, 2002. Amortization includes an impairment of
intangible assets, goodwill and other of $154,828 and $444,699 for the years
ended December 31, 2002 and 2001, respectively. Other charges (income)
include non-cash compensation and non-recurring charges, a provision for
severance, closures and restructuring related costs, loss (gain) on the sale
of businesses and other, net and other restructuring related costs included
in general and administrative expenses referred to in Note (1) above.

RESULTS OF OPERATIONS

2002 COMPARED TO 2001

CONSOLIDATED RESULTS:

SALES, NET

Consolidated sales from Continuing Businesses increased 4.6% to $1,574,073
in 2002 from $1,504,822 in 2001. 2002 sales growth is attributable mostly to the
inclusion of the full year results of EMAP, acquired in the latter part of 2001,
in the Consumer segment. The increase in the Consumer segment of $179,629 was
partially offset by a decline in the Business-to-Business segment of $65,452
before intercompany and intracompany eliminations. Further details about segment
performance is included in the segment specific sections below.

Total sales, including Continuing and Non-Core Businesses, increased 0.6% to
$1,587,564 in 2002 from $1,578,357 in 2001. The adoption of EITF 00-25 and 01-9,
on January 1, 2002, resulted in a net reclassification of product placement
costs previously classified as distribution, circulation and fulfillment expense
on the statements of consolidated operations to reductions of sales from such
activities. The change in classification had no impact on the Company's results
of operations, cash flows or financial position. The reclassification resulted
in a net decrease in sales and a corresponding decrease in operating expenses of
$20,614 for the year ended December 31, 2001.

The Company had entered various assets-for-equity investments in start-ups
and early stage companies in 2001 and did so to a much lesser extent in 2002.
Some of these transactions included cash consideration paid by the Company. The
non-cash consideration was comprised of advertising, content licensing and other
services to be rendered by the Company in exchange for equity in these entities.
The Company recognizes revenue when these services are delivered in accordance
with the Company's revenue recognition policies. Revenue recognized in
connection with these assets-for-equity transactions was approximately $7,600
and $46,900 during the years ended December 31, 2002 and 2001, respectively. The
revenue from these transactions declined substantially throughout 2002 and will
continue to decline in future periods. In addition, for the years ended
December 31, 2002 and 2001, revenue from barter transactions was approximately
$18,200 and $36,600, respectively, with equal related expense amounts in each
year.

17

SEGMENT EBITDA

Segment EBITDA from Continuing Businesses increased 32.7% to $250,085 in
2002 from $188,519 in 2001 due to an increase of $86,031 in the Consumer segment
partially offset by a decline in the Business-to-Business segment of $24,063,
further detailed below. Total Segment EBITDA, including Continuing and Non-Core
Businesses, increased 54.1% to $246,832 in 2002 from $160,179 in 2001.

OPERATING INCOME (LOSS)

Operating loss from Continuing Businesses was $114,765 in 2002 compared to
$586,693 in 2001. The decrease was primarily due to a decrease in amortization
expense ($383,076), primarily due to higher impairments of goodwill and other
intangible assets in 2001 ($192,679) as well as the elimination of goodwill and
trademark amortization upon the adoption of SFAS 142 on January 1, 2002
($181,141). In addition, Segment EBITDA from Continuing Businesses increased by
$61,566 in 2002 over 2001.

NET LOSS

Interest expense decreased by $5,071 or 3.5% in 2002 compared to 2001
primarly due to lower average levels of indebtedness as a result of the
Company's use of divestiture proceeds to pay down borrowings under the Company's
credit facilities, as well as a reduction in interest rates.

In connection with the adoption of SFAS 142 effective January 1, 2002, the
Company recorded an impairment charge related to its goodwill and certain
indefinite lived intangible assets of $388,508, as a cumulative effect of a
change in accounting principle.

The total impairment charge recorded in depreciation and amortization under
SFAS 142 and SFAS 144 for the year end December 31, 2002 was $146,934 related to
goodwill, intangibles and other assets and $11,610 related to property and
equipment. In addition, the Company recorded $49,500 of related non-cash
deferred income tax expense. See Recent Accounting Pronouncements for further
discussion of SFAS 142 and SFAS 144.

During 2002, the Company completed the sales of the Modern Bride Group
("MBG"), ExitInfo, Chicago, Horticulture, Doll Reader, IN New York and the
American Baby Group and, as a result of adopting SFAS 144, reclassified the
financial results of these divested units into discontinued operations on the
statements of consolidated operations for the years ended December 31, 2002 and
2001. SFAS 144 requires sales or disposals of long-lived assets that meet
certain criteria to be classified on the statement of operations as discontinued
operations and to reclassify prior periods accordingly. These divestitures
resulted in a gain of $111,449 and were part of the Company's planned program
which targeted the divestiture of $250,000 of assets.

CONSUMER SEGMENT (INCLUDING CONSUMER MAGAZINE AND MEDIA GROUP, CONSUMER GUIDES,
PRIMEDIA TELEVISION AND ABOUT):

SALES, NET

Sales from Continuing Businesses increased 15.7% to $1,326,698 in 2002 from
$1,147,069 in 2001 before eliminations primarily due to the inclusion of the
full year results of EMAP (191.8%) acquired in the latter part of 2001, and
growth at Consumer Guides (5.8%). Consumer Guides revenue growth was
attributable to strong performance at the unit's Apartment Guides division,
continuing the sales trend of recent years. The Consumer Magazines and Media
Group, excluding EMAP, saw a decline in brand advertising revenues primarily in
the Company's larger circulation titles. The revenue decline can also be
attributed to a reduction of non-cash revenue items such as barter and
assets-for-equity revenue transactions primarily at the PRIMEDIA Television and
About units.

These sales include new media sales from Continuing Business which increased
6.4% to $88,136 in 2002 from $82,868 in 2001, primarily due to the inclusion of
EMAP for the period subsequent to the acquisition date and the organic growth at
apartmentguide.com, partially offset by the decreases at About. In general, new
media sales reflect the results of About, the Consumer Guides Internet
properties including apartmentguide.com, and Internet operations associated with
the Company's consumer magazine brands. These new media sales include the
allocation of bundled revenues (print and online billed

18

together) and various intracompany and intercompany transactions, which are
eliminated in consolidation. As a result, the new media sales from Continuing
Businesses are not necessarily indicative of the results had the new media
businesses been operated as stand-alone operations. Eliminations of $86,817 in
2002 and $50,762 in 2001 represent intersegment sales ($4,197 and $3,466 for the
years ended December 31, 2002 and 2001, respectively) and intrasegment sales
($82,620 and $47,296 for the years ended December 31, 2002 and 2001,
respectively) which are eliminated in consolidation. Total Consumer Segment
sales, including Continuing and Non-Core Businesses, for the year ended
December 31, 2001 reflect reclassifications related to the adoption of EITF
00-25 and 01-9. The adoption of these pronouncements resulted in a reduction of
sales, net of $20,614, and a corresponding reduction of distribution,
circulation and fulfillment expense on the statements of consolidated operations
for the year ended December 31, 2001. Revenue recognized in connection with
assets-for-equity transactions was approximately $3,500 and $36,800 for the
years ended December 31, 2002 and 2001, respectively. For the years ended
December 31, 2002 and 2001, revenue from barter transactions was approximately
$11,000 and $27,600, respectively, with equal related expense amounts in each
year.

SEGMENT EBITDA

Segment EBITDA from Continuing Businesses increased 56.6% to $237,961 in
2002 from $151,930 in 2001 primarily due to the acquisition of EMAP (183.2%)
whose results were included for periods subsequent to its acquisition date, and
cost-cutting measures taken across the segment in 2002 and 2001. Cost cutting
actions included significant headcount reductions, the shut-down of unprofitable
magazine titles and the rationalization of costs at the Company's Internet
operations. The Segment EBITDA margin increased to 17.9% in 2002 compared to
13.2% in 2001.

OPERATING INCOME (LOSS)

Operating income (loss) from Continuing Businesses was $34,613 in 2002
compared to ($500,269) in 2001. The increase in operating income was
attributable to lower amortization expense ($445,836) as a result of higher
impairment charges in 2001 ($271,940) as well as the elimination of goodwill and
trademark amortization upon the adoption of SFAS 142 ($171,703). In addition, an
increase in Segment EBITDA ($86,031) and a decrease in non-cash compensation
expense contributed to the higher operating income.

BUSINESS-TO-BUSINESS SEGMENT (INCLUDING BUSINESS MAGAZINES AND MEDIA GROUP,
WORKPLACE LEARNING AND PRIMEDIA INFORMATION):

SALES, NET

Sales from Continuing Businesses decreased 15.5% to $357,752 in 2002 from
$423,204 in 2001 before eliminations. The decline in revenue was attributable to
industry-wide softness in business-to-business advertising. The majority of the
drop occurred in the Company's Business Magazines and Media Group, with the
steepest declines in advertising revenue at the telecommunications,
entertainment technology, agribusiness and trucking divisions. PRIMEDIA
Workplace Learning also saw a revenue decline, in part because of a cyclical
pull-back in business demand for corporate training.

These sales include new media sales from Continuing Businesses which
increased 12.2% to $14,025 in 2002 from $12,502 in 2001. The new media sales
include various intracompany and intercompany transactions, which are eliminated
in consolidation. As a result, the new media sales from Continuing Businesses
are not necessarily indicative of the results had the new media businesses been
operated as stand-alone operations. Eliminations of $23,560 in 2002 and $14,689
in 2001 represent intersegment sales ($1,909 and $364 for the years ended
December 31, 2002 and 2001, respectively) and intrasegment sales ($21,651 and
$14,325 for the years ended December 31, 2002 and 2001, respectively) which are
eliminated in consolidation. Revenue recognized in connection with
assets-for-equity transactions was approximately $4,100 and $10,100 for the
years ended December 31, 2002 and 2001, respectively. For the years ended
December 31, 2002 and 2001, revenue from barter transactions was approximately
$7,200 and $9,000, respectively, with equal related expense amounts in each
year.

19

SEGMENT EBITDA

Segment EBITDA from Continuing Businesses decreased 34.9% to $44,834 in 2002
from $68,897 in 2001 primarily due to weakness at the Business Magazines and
Media Group ($22,311). The Segment EBITDA margin decreased to 12.5% in 2002
compared to 16.3% in 2001 primarily due to softness in business-to-business
advertising partially offset by cost cutting measures, including significant
staff reductions in the Business Magazines and Media Group. The segment also
recorded one-time credits of $1,842 in 2002 and $4,000 in 2001 related to
reversals of sales tax accruals in both years and an insurance refund of $521 in
2002.

OPERATING INCOME (LOSS)

Operating loss from Continuing Businesses was $99,239 in 2002 compared to
$22,938 in 2001. The increase was attributable to lower EBITDA ($24,063) and an
increase in amortization expense ($62,380) primarily due to higher impairment
charges during 2002 ($79,261), partially offset by the elimination of goodwill
and trademark amortization upon the adoption of SFAS 142 ($9,680) and a decrease
in amortization expense in 2002 for definite lived intangible assets.

CORPORATE:

Corporate EBITDA losses reflect corporate overhead and other expenses not
allocated to one of the Company's segments. EBITDA losses increased by 1.2% to
$32,710 in 2002 from $32,308 in 2001. This increase was due to higher
professional fees and certain incremental technology and consulting costs
partially offset by headcount reductions. The Company is committed to continuing
its investment in better systems and technology.

Operating loss decreased to $50,139 in 2002 from $63,486 in 2001. Operating
loss includes $11,624 and $30,199 of non-cash compensation and non-recurring
charges during the years ended December 31, 2002 and 2001, respectively,
representing executive compensation in the form of stock and option grants and
the extension of certain stock option expiration periods. In addition, the
operating loss includes a provision for severance, closures and restructuring
related costs of $3,570 and $7,298 during the years ended December 31, 2002 and
2001, respectively. This provision is comprised of employee related termination
costs and real estate lease commitments for space that the Company no longer
occupies.

NON-CORE BUSINESSES:

During 2001, the Company shut down or divested approximately 40 properties.
Segment EBITDA losses from these properties approximated $36,800 for the year
ended December 31, 2001. These Segment EBITDA losses were partially offset by
positive Segment EBITDA at Bacon's, which was divested during 2001, resulting in
a net Segment EBITDA loss for the Non-Core Businesses of $28,340.

Corporate administrative costs of approximately $1,900 and $9,900 were
allocated to the Non-Core Businesses during the years ended December 31, 2002
and 2001, respectively. The Company believes that these costs, many of which are
transaction driven, such as the processing of payables and payroll, will be
permanently reduced or eliminated due to the shutdown or divestiture of the
Non-Core Businesses.

Effective June 30, 2002, the Company has not classified any additional
businesses as Non-Core Businesses nor will any additional costs be allocated to
the Non-Core Businesses subsequent to this date.

DISCONTINUED OPERATIONS:

In 2002, the Company completed the sale of the MBG, which included Modern
Bride plus 16 regional bridal magazines, ExitInfo, Chicago, Horticulture, Doll
Reader, IN New York and the American Baby Group. In accordance with SFAS 144,
the operating results of these divested entities have been reclassified to
discontinued operations on the statements of consolidated operations for
the years ended December 31, 2002 and 2001. Sales from Continuing Businesses
excludes sales from discontinued operations of $82,476 and $143,322 for the
years ended December 31, 2002 and 2001, respectively. Segment EBITDA from
Continuing Businesses excludes Segment EBITDA from discontinued operations of
$8,502 and $11,587 for the years ended December 31, 2002 and 2001, respectively.
The discontinued operations include expenses related to certain

20

centralized functions that are shared by multiple titles, such as production,
circulation, advertising, human resource and information technology costs but
exclude general overhead costs. These costs were allocated to the discontinued
entities based upon relative revenues for the related periods. The allocation
methodology is consistent with that used across the Company. Management has
allocated direct incremental costs of $3,357 and $5,112 to the discontinued
operations for the years ended December 31, 2002 and 2001, respectively.

RESULTS OF OPERATIONS

2001 COMPARED TO 2000

CONSOLIDATED RESULTS:

SALES, NET

Consolidated sales from Continuing Businesses increased 6.4% to $1,504,822
in 2001 from $1,413,758 in 2000. The growth in the consumer segment of $160,588
was partially offset by a decline in the business-to-business segment of $50,385
before intercompany and intracompany eliminations, further detailed below. Total
sales, including Continuing and Non-Core Businesses, increased 2.0% to
$1,578,357 in 2001 from $1,547,491 in 2000. On January 1, 2002, the Company
adopted EITF No. 00-25 and 01-9 which resulted in a net reclassification of
product placement costs previously classified as distribution, circulation and
fulfillment expense on the statements of consolidated operations to reductions
of sales from such activities. The reclassification resulted in a net decrease
in sales and a corresponding decrease in operating expenses of $20,614 and
$15,298 for the years ended December 31, 2001 and 2000, respectively.

During 2001 and 2000, the Company entered various assets-for-equity
transactions, some of which also included cash consideration. The non-cash
consideration was comprised of advertising, content licensing and other services
to be rendered by the Company in exchange for equity in these entities. The
Company recognizes these amounts as revenue in accordance with the Company's
revenue recognition policies. Revenue recognized in connection with these
assets-for-equity transactions was approximately $46,900 and $43,400 during the
years ended December 31, 2001 and 2000, respectively. In addition, for the years
ended December 31, 2001 and 2000, revenue from barter transactions was
approximately $36,600 and $7,900, respectively, with equal related expense
amounts in each year.

SEGMENT EBITDA

Segment EBITDA from Continuing Businesses decreased 26.5% to $188,519 in
2001 from $256,358 in 2000 due to decreases of $24,326 and $45,179 related to
the Consumer and Business-to-Business segments, respectively, further detailed
below. Total Segment EBITDA, including Continuing and Non-Core Businesses,
decreased 31.3% to $160,179 in 2001 from $233,187 in 2000 due to declines in
both segments.

OPERATING INCOME (LOSS)

Operating income (loss) from Continuing Businesses was ($586,693) in 2001
compared to $64,037 in 2000. This decrease was primarily due to an increase in
amortization expense of $497,062 of which approximately $154,400 related to
acquisitions and approximately $345,000 related to the impairment of long-lived
assets of our Continuing Businesses, primarily goodwill. These impairments,
further detailed below, were the result of certain product discontinuances as
well as the Company's determination that the estimated future undiscounted cash
flows were not sufficient to cover the carrying value of these assets. Total
operating income (loss), including Continuing and Non-Core Businesses, was
($680,702) in 2001 compared to $20,401 in 2000.

NET LOSS

Interest expense increased by $1,972 or 1.4% in 2001 compared to 2000 due to
increased borrowings under the Company's bank credit facilities to finance the
2001 EMAP acquisition.

21

During 2001 and 2000, the net deferred income tax asset was reduced by
$135,000 and $41,200, respectively, as the Company increased its valuation
allowance and recorded a related provision for income taxes due to continued
historical operating losses and the impairment of long-lived assets, primarily
goodwill and investments.

CONSUMER SEGMENT (INCLUDING CONSUMER MAGAZINE AND MEDIA GROUP, CONSUMER GUIDES,
PRIMEDIA TELEVISION AND ABOUT):

SALES, NET

Sales from Continuing Businesses increased 16.3% to $1,147,069 in 2001 from
$986,481 in 2000 before eliminations primarily due to growth at the Company's
Consumer Guides ($26,582) and the acquisitions of About and EMAP whose combined
results (approximately $139,100) are included in the Consumer segment for the
periods subsequent to their respective acquisition dates.

Sales includes new media sales from Continuing Businesses which increased
230.6% to $82,868 in 2001 from $25,068 in 2000, primarily due to acquisitions
and organic growth at apartmentguide.com (approximately $52,800) of which
approximately $10,200 represents organic growth. These new media sales include
the allocation of bundled revenues (print and online billed together) and
various intracompany and intercompany transactions, which are eliminated in
consolidation. As a result, the new media sales from Continuing Businesses are
not necessarily indicative of the results had the new media businesses been
operated as stand-alone operations. Eliminations of $50,762 in 2001 and $33,114
in 2000 represent intersegment sales ($3,466 and $1,616 for the years ended
December 31, 2001 and 2000, respectively) and intrasegment sales ($47,296 and
$31,498 for the years ended December 31, 2001 and 2000, respectively) which are
eliminated in consolidation. Total Consumer segment sales, including Continuing
and Non-Core Businesses, reflect reclassifications related to the adoption of
EITF 00-25 and 01-9. The adoption of these pronouncements resulted in a
reduction of sales, net of $20,614 and $15,298 and a corresponding reduction of
distribution, circulation and fulfillment expense on the statements of
consolidated operations for the years ended December 31, 2001 and 2000,
respectively. Revenue recognized in connection with assets-for-equity
transactions, which was generally in the traditional businesses, was
approximately $36,800 and $30,000 for the years ended December 31, 2001 and
2000, respectively. For the years ended December 31, 2001 and 2000, revenue from
barter transactions was approximately $27,600 and $1,900, respectively, with
equal related expense amounts in each year.

SEGMENT EBITDA

Segment EBITDA from Continuing Businesses decreased 13.8% to $151,930 in
2001 from $176,256 in 2000 primarily due to Segment EBITDA declines at certain
consumer magazines ($35,707 in the aggregate) resulting from advertising
softness, partially offset by growth at Consumer Guides ($19,050) and a Segment
EBITDA increase from the acquisitions of EMAP and About (approximately $2,800
net) whose results are included for periods subsequent to their respective
acquisition dates. The Segment EBITDA margin decreased to 13.2% in 2001 compared
to 17.9% in 2000 primarily due to increased industry-wide advertising softness
as well as increased Internet spending as a result of the About acquisition.

OPERATING INCOME (LOSS)

Operating income (loss) from Continuing Businesses was ($500,269) in 2001
compared to $77,466 in 2000. The decrease in operating income was attributable
to an increase in goodwill and intangibles amortization expense as a result of
the About and EMAP acquisitions (approximately $154,400) and the write-off of
goodwill approximating $326,300 relating to About. This write-off was the result
of the Company's determination that the estimated future undiscounted cash flows
were not sufficient to cover the carrying value of the goodwill. This
determination did not reflect other benefits realized or expected to be
realized, across PRIMEDIA, as a result of the integration of About. In addition,
the decrease in Segment EBITDA and increase in provision for severance, closures
and restructuring related costs also contributed to the increased operating loss
in 2001.

22

BUSINESS-TO-BUSINESS SEGMENT (INCLUDING BUSINESS MAGAZINES AND MEDIA GROUP,
WORKPLACE LEARNING AND PRIMEDIA INFORMATION):

SALES, NET

Sales from Continuing Businesses decreased 10.6% to $423,204 in 2001 from
$473,589 in 2000 before eliminations primarily due to industry advertising
softness at certain business-to-business magazines and trade shows
(approximately $49,500).

Sales includes new media sales from Continuing Businesses which decreased
2.8% to $12,502 in 2001 from $12,860 in 2000. The new media sales include
various intracompany and intercompany transactions which are eliminated in
consolidation. As a result, the new media sales from Continuing Businesses are
not necessarily indicative of the results had the new media businesses been
operated as stand-alone operations. Eliminations of $14,689 in 2001 and $13,198
in 2000 represent intersegment sales ($364 and $0 for the years ended
December 31, 2001 and 2000, respectively) and intrasegment sales ($14,325 and
$13,198 for the years ended December 31, 2001 and 2000, respectively) which are
eliminated in consolidation. Revenue recognized in connection with
assets-for-equity transactions was approximately $10,100 and $13,400 for the
years ended December 31, 2001 and 2000, respectively. For the years ended
December 31, 2001 and 2000, revenue from barter transactions was approximately
$9,000 and $6,000, respectively, with equal related expense amounts in each
year.

SEGMENT EBITDA

Segment EBITDA from Continuing Businesses decreased 39.6% to $68,897 in 2001
from $114,076 in 2000 primarily due to weakness at the Business Magazines and
Media Group (approximately $42,800). The Segment EBITDA margin decreased to
16.3% in 2001 compared to 24.1% in 2000 primarily due to softness in
business-to-business advertising.

OPERATING INCOME (LOSS)

Operating income (loss) from Continuing Businesses, was ($22,938) in 2001
compared to $50,750 in 2000. The decrease in operating income was attributable
to lower EBITDA levels and an increase in amortization expense related to the
write-off of goodwill and intangible assets at certain Business-to-Business
segment products (approximately $17,700). This write-off was the result of the
Company's determination that the estimated future undiscounted cash flows were
not sufficient to cover the carrying value of certain long-lived assets,
primarily goodwill.

CORPORATE:

Segment EBITDA losses decreased to $32,308 in 2001 from $33,974 in 2000.

Operating loss decreased to $63,486 in 2001 from $64,179 in 2000. Operating
loss includes $30,199 and $27,810 of non-cash compensation and non-recurring
charges during the years ended December 31, 2001 and 2000, respectively,
representing executive compensation in the form of stock and option grants and
the extension of certain stock option expiration periods. In addition, the
operating loss includes a provision for severance, closures and restructuring
related costs of $7,298 and $14,371 during the years ended December 31, 2001 and
2000, respectively.

NON-CORE BUSINESSES:

Sales from Non-Core Businesses decreased to $73,535 in 2001 from $133,733 in
2000 due to the completion of certain divestitures.

Segment EBITDA from the Non-Core Businesses was $(28,340) in 2001 compared
to $(23,171) in 2000. Corporate administrative costs of approximately $9,900 and
$9,600 were allocated to the Non-Core Businesses during the years ended
December 31, 2001 and 2000, respectively. The Company believes that

23

these costs, many of which are transaction driven, such as the processing of
payables and payroll, will be permanently reduced or eliminated due to the
shutdown or divestiture of the Non-Core Businesses.

During 2001, the Company shut down or divested approximately 40 properties.
Segment EBITDA losses from these properties approximated $36,800 for the year
ended December 31, 2001 and were partially offset by positive Segment EBITDA at
Bacon's, which was divested during 2001, resulting in a net Segment EBITDA loss
for the Non-Core businesses of $28,340.

Operating loss from Non-Core Businesses increased to $94,009 in 2001 from
$43,636 in 2000 due to the decline in Segment EBITDA. Operating loss includes an
increase in depreciation and amortization primarily due to impairments of
long-lived assets, primarily goodwill (approximately $111,000), resulting from
the Company's decision to shutdown certain operations which was offset by the
gain on the sale of Bacon's of approximately $54,600. In November 2001, the
Company completed the sale of Bacon's to Observer AB for $90,000, $15,000 of
which represented a note receivable as of December 31, 2001 which was collected
in 2002. The proceeds from the sale were used primarily to pay down borrowings
under the Company's credit facilities.

DISCONTINUED OPERATIONS

In 2002, the Company completed the sale of the MBG, which includes Modern
Bride plus 16 regional bridal magazines, ExitInfo, Chicago, Horticulture, Doll
Reader, IN New York and the American Baby Group. Upon adoption of SFAS 144 on
January 1, 2002, the operating results of these divested entities have been
reclassified to discontinued operations on the statements of consolidated
operations for the years ended December 31, 2001 and 2000, respectively. Sales
from Continuing Businesses excludes sales from discontinued operations of
$143,322 and $128,163 for the years ended December 31, 2001 and 2000,
respectively. Segment EBITDA from Continuing Businesses excludes Segment EBITDA
from discontinued operations of $11,587 and $23,492 for the years ended
December 31, 2001 and 2000, respectively. The discontinued operations include
expenses related to certain centralized functions that are shared by multiple
titles, such as production, circulation, advertising, human resource and
information technology costs but exclude general overhead costs. These costs
were allocated to the discontinued entities based upon relative revenues for the
related periods. The allocation methodology is consistent with that used across
the Company. Management has allocated direct incremental costs of $5,112 and
$4,020 to the discontinued operations for the years ended December 31, 2001 and
2000, respectively.

RISK FACTORS

Set forth below are risks and uncertainties that could cause actual results
to differ materially from the results contemplated by the forward-looking
statements contained in this Annual Report.

GENERAL ECONOMIC TRENDS MAY REDUCE OUR ADVERTISING REVENUES.

Our advertising revenues are subject to the risks arising from adverse
changes in domestic and global economic conditions. A decline in the level of
business activity of our advertisers has had an adverse effect on our revenues
and profit margins. Because of the recent economic slowdown in the United
States, many advertisers, particularly business-to-business advertisers, are
reducing advertising expenditures. The further impact of this slowdown on us is
difficult to predict, but it may result in further reductions in advertising
revenue. If the current economic slowdown continues or worsens, or if the
current geopolitical risk materializes, our results of operations may be
adversely affected.

WE HAVE SUBSTANTIAL INDEBTEDNESS AND OTHER MONETARY OBLIGATIONS, WHICH CONSUME A
SUBSTANTIAL PORTION OF THE CASH FLOW THAT WE GENERATE.

A substantial portion of our cash flow is dedicated to the payment of
interest on indebtedness and to the payment of dividends on our preferred stock,
which reduces funds available for capital expenditures

24

and business opportunities and may limit our ability to respond to adverse
developments in our business or in the economy.

OUR DEBT INSTRUMENTS LIMIT OUR BUSINESS FLEXIBILITY BY IMPOSING OPERATING AND
FINANCIAL RESTRICTIONS ON OUR OPERATIONS.

The agreements and indentures governing our indebtedness impose specific
operating and financial restrictions on us. These restrictions impose
limitations on our ability to, among other things:

- change the nature of our business;

- incur additional indebtedness;

- create liens on our assets;

- sell assets;

- issue stock;

- engage in mergers, consolidations or transactions with our affiliates;

- make investments in or loans to specific subsidiaries;

- make guarantees or specific restricted payments; and

- declare or make dividend payments on our common or preferred stock.

INCREASES IN PAPER AND POSTAGE COSTS MAY HAVE AN ADVERSE IMPACT ON OUR FUTURE
FINANCIAL RESULTS.

The price of paper is a significant expense relating to our print products
and direct mail solicitations. Paper price increases may have an adverse effect
on our future results. Postage for product distribution and direct mail
solicitations is also a significant expense. We use the U.S. Postal Service for
distribution of many of our products and marketing materials. Postage costs
increased in July 2002 and can be expected to increase in the future. We may not
be able to pass these cost increases through to our customers.

INCOMPATIBLE FINANCIAL SYSTEMS LIMIT THE COMPANY'S ABILITY TO OPERATE
EFFICIENTLY.

PRIMEDIA is the result of numerous acquisitions since its inception in 1989.
Many of the companies acquired had financial systems which are incompatible.
Incompatible financial systems across PRIMEDIA have negatively impacted the
Company's ability to efficiently analyze data and respond to business
opportunities on a timely basis. Significant capital expenditures are necessary
to upgrade and standardize financial systems across the Company. Despite the
economic slowdown, the Company is engaged in upgrading its key financial
systems, which are designed to make the financial reporting and analysis
functions more efficient. To address management's concerns regarding the current
lack of compatible financial systems across the Company and the demands
surrounding increased financial disclosure, the Company has begun to install an
integrated enterprise-wide financial system across all companies. Several
smaller units have already been converted to an integrated enterprise-wide
financial system this year with the remaining units to be converted over the
next 12 months. Despite the difficult economic environment, the Company plans to
spend approximately $20 million on the systems upgrade, of which approximately
$5 million has been spent during 2002. However, it will take approximately
18 months to complete the systems upgrade and fully realize the planned benefits
of an integrated enterprise-wide financial system. The Company recognizes that
there are inherent risks in a system implementation and has taken reasonable
steps to mitigate these risks.

25

WE DEPEND ON SOME IMPORTANT EMPLOYEES, AND THE LOSS OF ANY OF THOSE EMPLOYEES
MAY HARM OUR BUSINESS.

Our performance is substantially dependent on the performance of our
executive officers and other key employees. In addition, our success is
dependent on our ability to attract, train, retain and motivate high quality
personnel, especially for our management team. The loss of the services of any
of our executive officers or key employees may harm our business.

The decline in advertising revenues has necessitated cost cuts including the
reduction of certain personnel at the Company. Such workforce reductions may
impact the ability of remaining personnel to perform their assigned
responsibilities in an efficient manner, due to the increased volume of work
being generated in the financial area, among other things, by the process of
converting our systems. The Company believes that it has in place the necessary
financial workforce to analyze data and has put in place additional financial
personnel during the period prior to the completion of the financial systems
upgrade, in order to improve the efficiency of financial analysis and mitigate
the risk of employee turnover.

The Company's management is concerned about the intense competition in this
economy for the hiring and retention of qualified financial personnel, the
current lack of compatible financial systems across the Company and the demands
surrounding increased financial disclosure. To mitigate management's concerns
regarding the hiring and retention of qualified financial personnel and to
ensure future stability in the financial workforce, the Company has upgraded the
skill level of its back office personnel, consolidated certain back office
functions and cross trained and continues to cross train individuals in the
performance of multiple job functions, and is continuing to aggressively recruit
qualified professionals to strengthen and increase its financial personnel. The
Company is currently close to being fully staffed in the finance area.

LIQUIDITY, CAPITAL AND OTHER RESOURCES

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 in 2003. The Company has
implemented and continues to implement various cost-cutting programs and cash
conservation plans, which involve the limitation of capital expenditures and the
control of working capital. These plans should help mitigate any future possible
cash flow shortfalls.

WORKING CAPITAL

Consolidated working capital deficiency, which includes current maturities
of long-term debt, was $248,280 at December 31, 2002 compared to $221,047 at
December 31, 2001. The change in working capital is primarily attributable to a
decrease in accounts receivable attributable to lower sales which was only
partially offset by a decrease in accounts payable and accrued expenses related
to company-wide cost reductions. Consolidated working capital reflects certain
industry working capital practices and accounting principles, including the
recording of deferred revenue from subscriptions as a current liability as well
as the expensing of certain advertising, editorial and product development costs
as incurred.

As of December 31, 2002, the Company had cash and unused credit facilities
of $302,165 as further discussed below.

CASH FLOW - 2002 COMPARED TO 2001

Net cash provided by (used in) operating activities, as reported, during
2002 after interest payments of $141,696, increased to $50,281 as compared to
($101,348) during 2001, primarily due to the increase in Segment EBITDA. Net
capital expenditures decreased 35.5% to $39,163 during 2002 compared to $60,740
during 2001 due primarily to the Company's efforts to control capital spending.
As in 2001, the Company also continued to reduce capital investment in its new
media operations. The Company expects the level of capital spending to increase
in 2003 as it continues to invest in enterprise-wide financial systems. Net cash

26

provided by (used in) investing activities during 2002 was $194,783 primarily
due to proceeds from the divestiture program compared to ($407,057) during 2001
primarily due to the acquisition of EMAP. Net cash provided by (used in)
financing activities during 2002 was ($260,099) primarily due to the use of
divestiture proceeds to pay down debt compared to $518,303 during 2001, which
represented proceeds from equity and debt issuances primarily used to finance
the acquisition activity.

CASH FLOW - 2001 COMPARED TO 2000

Net cash provided by (used in) operating activities, as reported, during
2001 after interest payments of $128,639, decreased to ($101,348) as compared to
$52,546 during 2000, primarily due to the decrease in Segment EBITDA of $73,008,
as well as payments related to accounts payable and other accrued expenses of
approximately $59,974. Net capital expenditures decreased 21.7% to $60,740
during 2001 compared to $77,579 during 2000 due primarily to higher levels of
spending during 2000 on new office space and capitalized software expenditures
associated with the Company's new media operations. Net cash used in investing
activities during 2001 was $407,057 compared to $54,644 during 2000. This
increase was primarily due to the EMAP acquisition of $515,000 partially offset
by the cash acquired from the About acquisition of $109,490. Net cash provided
by (used in) financing activities during 2001 was $518,303 compared to ($2,873)
during 2000. The change was primarily attributable to proceeds from the debt
drawdowns of approximately $265,000 and equity issuances associated with the
EMAP financing of approximately $250,000.

FINANCING ARRANGEMENTS

On June 20, 2001, the Company completed a refinancing of its existing bank
credit facilities pursuant to new bank credit facilities with The Chase
Manhattan Bank, Bank of America, N.A., The Bank of New York, and The Bank of
Nova Scotia, as agents. The debt under the credit agreement and as otherwise
permitted under the credit agreement and the indebtedness relating to the Senior
Notes of the Company is secured by a pledge of the stock of PRIMEDIA Companies
Inc., an intermediate holding company owned directly by the Company which owns
directly or indirectly all shares of PRIMEDIA subsidiaries that guarantee such
debt (as well as certain of the Company's other equally and ratably secured
indebtedness). Borrowings under the bank credit facilities are guaranteed by
each of our wholly owned domestic restricted subsidiaries as determined by the
Company's management in accordance with the provisions and limitations of the
Company's credit agreement. Certain of our subsidiaries are not guarantors of
the bank credit facilities.

Substantially all proceeds from sales of businesses and other investments
were used to pay down borrowings under the credit agreement. Amounts under the
bank credit facilities may be reborrowed and used for general corporate and
working capital purposes as well as to finance certain future acquisitions. The
bank credit facilities consist of the following:

With the exception of the Term Loan B, the amounts borrowed bear interest,
at the Company's option, at either the base rate plus an applicable margin
ranging from .125% to 1.5% or the Eurodollar Rate plus an applicable margin
ranging from 1.125% to 2.5%. The term loan B bears interest at the base rate
plus 1.75% or the Eurodollar Rate plus 2.75%. At December 31, 2002, the weighted
average variable interest rate on all outstanding borrowings under the bank
credit facilities was approximately 4.4%.

27

Under the bank credit facilities, the Company has agreed to pay commitment
fees at a per annum rate of either .375% or .5%, depending on its debt to EBITDA
ratio, as defined in the credit agreement, on the daily average aggregate
unutilized commitment under the revolving loan commitment. During 2002, the
Company's commitment fees totaling $953 were paid at a weighted average rate of
..5%. The Company also has agreed to pay certain fees with respect to the
issuance of letters of credit and an annual administration fee.

The commitments under the revolving loan facility are subject to mandatory
reductions semi-annually on June 30 and December 31, commencing December 31,
2004, with the final reduction on June 30, 2008. The aggregate mandatory
reductions of the revolving loan commitments under the bank credit facilities
are $22,550 in 2004, $45,100 in 2005, $67,650 in 2006, $135,300 in 2007 and a
final reduction of $180,400 in 2008. 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. In 2002, the Company voluntarily reduced the commitment
under the revolving loan facility by $24,000. Aggregate term loan payments under
the bank credit facilities are $4,038 in 2003, $15,913 in 2004, $27,788 in 2005,
2006 and 2007, $15,913 in 2008 and $373,503 in 2009. During 2002, the Company
made voluntary pre-payments towards the Term Loans A and B in the amounts of
$5,000 and $21,000, respectively.

The bank credit facilities, among other things, limit the Company's ability
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 and or repurchases of
the Company's common stock in excess of $75,000 in any given year.

The bank credit facilities and senior notes of the Company contain certain
customary events of default which generally give the banks or the noteholders,
as applicable, the right to accelerate payments of outstanding debt. Under the
bank credit facilities, these events include:

- failure to maintain required covenant ratios, as described below;

- failure to make a payment of principal, interest or fees within five days
of its due date;

- default, beyond any applicable grace period, on any aggregate indebtedness
of PRIMEDIA exceeding $20,000;

- occurrence of certain insolvency proceedings with respect to PRIMEDIA or
any of its material subsidiaries;

- entry of one judgment or decree involving a liability of $15,000 or more
(or more than one involving an aggregate liability of $25,000 or more);
and

- occurrence of certain events constituting a change of control of the
Company.

The events of default contained in PRIMEDIA's senior notes are similar to,
but generally less restrictive than, those contained in the Company's bank
credit facilities.

Under the most restrictive debt covenants as defined in the Company's credit
agreement, the Company must maintain a minimum interest coverage ratio, as
defined, of 1.80 to 1 and a minimum fixed charge coverage ratio, as defined, of
1.05 to 1. The Company's maximum allowable debt leverage ratio, as defined, is
6.0 to 1. The maximum leverage ratio decreases to 5.75 to 1, 5.5 to 1, 5.0 to 1
and 4.5 to 1, respectively, on July 1, 2003, January 1, 2004, January 1, 2005
and January 1, 2006. The minimum interest coverage ratio increases to 2.0 to 1,
2.25 to 1 and 2.5 to 1, respectively, on July 1, 2003, January 1, 2004 and
January 1, 2005. The Company is in compliance with the financial and operating
covenants of its financing arrangements.

28

The Company is herewith providing detailed information and disclosure as to
the methodology used in determining compliance with the leverage test in the
credit agreements. The purpose for providing this information is to provide more
clarity as to the substantial amount of disclosure already provided. Under its
various credit and senior note agreements, the Company is allowed to designate
certain businesses as unrestricted subsidiaries to the extent that the value of
those businesses does not exceed the permitted amounts, as defined in these
agreements. The Company has designated certain of its businesses as unrestricted
(the "Unrestricted Group"), which primarily represent Internet businesses,
trademark and content licensing and service companies, new launches (including
traditional start-ups), other properties under evaluation for turnaround or
shutdown and foreign subsidiaries. Indebtedness under the bank credit facilities
and senior note agreements is guaranteed by each of the Company's domestic
restricted subsidiaries in accordance with the provisions and limitations of the
Company's credit and senior note agreements. The guarantees are full,
unconditional and joint and several. The Unrestricted Group does not guarantee
the bank credit facilities or senior notes, and its results (positive or
negative) are not reflected in the EBITDA of the Restricted Group, as defined in
the Company's credit and senior note agreements for purposes of determining
compliance with certain financial covenants under these agreements. The Company
has established intracompany and intercompany arrangements that implement
transactions, such as leasing, licensing, sales and related services and
cross-promotion, between restricted and unrestricted subsidiaries, on an arms'
length basis and as permitted by the credit and senior note agreements. These
intracompany and intercompany arrangements afford strategic benefits across the
Company's properties and, in particular, enable the Unrestricted Group to
utilize established brands and content, promote brand awareness and increase
traffic and revenue to the Company's new media properties. For company-wide
consolidated financial reporting, these intracompany and intercompany
transactions are eliminated in consolidation. Additionally, the EBITDA of the
Restricted Group, as determined for purposes of the leverage ratio and the
pricing of the loans under the credit agreement in accordance with these
agreements, omits restructuring charges and is adjusted for the trailing four
quarters results of acquisitions and divestitures and estimated savings for
acquired businesses.

As calculated per the definition within leverage covenants in the Company's
credit agreement, EBITDA of the Restricted Group (as defined) for the year ended
December 31, 2002 was $379,225. The EBITDA of the Restricted Group can be
derived by adding back the EBITDA loss of the Unrestricted Group to the EBITDA
set forth on the condensed statements of consolidated operations and adjusting
for the net pro forma effect of acquisitions/divestitures and a number of other
adjustments.

Total Segment EBITDA for the year ended December 31, 2002 was $246,832. The
EBITDA of the Unrestricted Group for 2002 was a loss of $131,966. Adjustments
(such as divestitures and non-recurring cash charges), which are included in the
compliance calculations, were $427 for the year ended December 31, 2002. The
EBITDA loss of the Unrestricted Group is comprised of the following categories
in the following percentages for the year ended December 31, 2002: Internet
properties 65%; traditional turnaround and start-up properties 26%; non-core
properties 2%; and related overhead and other charges 7%. The majority of the
losses on Internet properties for the year ended December 31, 2002 relates to
intercompany and intracompany transactions (including trademark/content
licensing and cross promotion).

The calculation of the Company's leverage ratio, as required under the
credit agreement for covenant purposes, is defined as the Company's consolidated
debt divided by the EBITDA of the Restricted Group. At December 31, 2002, this
leverage ratio was approximately 4.6 to 1, an improvement from the corresponding
ratio at December 31, 2001 of approximately 5.5 to 1.

As a result of the refinancing of the Company's existing bank credit
facilities in 2001, the Company wrote-off the remaining balances of deferred
financing costs originally recorded approximating $7,250. This write-off is
included within amortization of deferred financing costs on the statement of
consolidated operations for the year ended December 31, 2001 included elsewhere
in this Annual Report.

The 8 1/2% Senior Notes are due in February 2006, the 7 5/8% Senior Notes
are due in April 2008 and the 8 7/8% Senior Notes are due in May 2011. On
March 5, 2003, the Company redeemed its $84,175 10 1/4%

29

Senior Notes. These notes were called at redemption value plus accrued interest
of $2,229. These notes were redeemed 15 months ahead of maturity and this
redemption will save the Company approximately $7,000 in net cash interest
payments. The Company funded this transaction with additional borrowings under
its credit facilities.

During the third quarter of 2002, the Board of Directors authorized the
Company to expend up to $20,000 for the purchase of its senior notes in private
or public transactions. In the fourth quarter of 2002, the Board of Directors
increased the authorization to an aggregate of $90,000. In 2002, the Company
repurchased $15,825 of the 10 1/4% Senior Notes (carrying value of $15,825) for
$14,300 plus accrued interest, $8,500 of the 8 1/2% Senior Notes (carrying value
of $8,485) for $7,838 plus accrued interest, $23,885 of the 7 5/8% Senior Notes
(carrying value of $23,806) for $21,089 plus accrued interest and $24,500 of the
8 7/8% Senior Notes (carrying value of $24,176) for $21,210 plus accrued
interest. The Senior Note purchases include fees associated with these
purchases. These purchases resulted in a gain of $7,855 recorded in other, net
on the statement of consolidated operations for the year ended December 31,
2002, included elsewhere in this Annual Report.

A change in the rating of our debt instruments by the outside rating
agencies does not negatively impact our ability to use our available lines of
credit or the borrowing rate under our credit facilities. As of March 1, 2003,
the Company's senior debt rating from Moody's was B3 and from Standard and
Poor's was B.

There are no significant required debt repayments until 2006. The contractual
obligations of the Company, adjusted to reflect the Company's early redemption
of its 10 1/4% Senior Notes in March 2003, are as follows:

The Company has no variable interest (otherwise known as "special purpose")
entities or off balance sheet debt, other than as related to operating leases in
the ordinary course of business and the contingent liability with NBC Sports
relating to the Gravity Games, which are more fully disclosed below.

OTHER ARRANGEMENTS

Two senior executives of About entered into share lockup agreements with the
Company. Under the terms of those agreements, during the first year after the
closing of the merger, the executives could sell a portion of their shares of
the Company's common stock, subject to the Company's right of first refusal with
respect to any sale. In the event that the gross proceeds received on sale were
less than $33,125 (assuming all shares are sold), the Company agreed to pay the
executives the amount of such shortfall ("the Shortfall Payment").

A liability of approximately $18,400, representing the Shortfall Payment
based on the fair value of the Company's common stock, was included as a
component of accrued expenses and other on the consolidated balance sheet at
December 31, 2001. In 2002, the Company paid approximately $21,000 related to
these agreements.

As a result of one of these executives leaving the Company, effective
December 2001, half of his restricted shares (1,105,550 shares) and options
(1,302,650 options) were accelerated and the remainder were forfeited, resulting
in a reversal of unearned compensation of $19,166 during the fourth quarter of
2001. The accelerated options expired unexercised during the first quarter of
2002.

30

During the first quarter of 2002, the Board of Directors authorized the
exchange by the Company of up to approximately $100,000 of exchangeable
preferred stock. During May 2002, the Board of Directors increased the
authorization to an aggregate of approximately $165,000 of exchangeable
preferred stock. During 2002, the Company exchanged $23,013 liquidation value of
Series D Exchangeable Preferred Stock (carrying value of $22,650) for 4,467,033
shares of common stock, $22,667 liquidation value of Series F Exchangeable
Preferred Stock (carrying value of $22,103) for 4,385,222 shares of common stock
and $35,911 liquidation value of Series H Exchangeable Preferred Stock (carrying
value of $35,152) for 8,368,516 shares of common stock. The Company recognized a
gain of $32,788 on these exchanges which is included in additional paid in
capital on the Company's consolidated balance sheet as of December 31, 2002 and
in preferred stock dividends and related accretion, net, on the statement of
consolidated operations for the year ended December 31, 2002. The Company
expects to realize approximately $7,000 in annualized cash savings from reduced
dividend payments associated with its exchangeable preferred stock.

FINANCING ARRANGEMENTS - EMAP FINANCING

On August 24, 2001, the Company acquired 100% of the outstanding common
stock of the publishing business of EMAP. The total consideration was $525,000,
comprised of $515,000 in cash, including an estimate of working capital
settlements of $10,000 (which is subject to final settlement), and warrants to
acquire 2,000,000 shares of the Company's common stock at $9 per share. The fair
value of the warrants was approximately $10,000 and was determined using a Black
Scholes pricing model. These warrants expire ten years from the date of
issuance.

The Company financed the acquisition of EMAP by (1) issuing 1,000,000 shares
of Series J Convertible Preferred Stock to KKR 1996 Fund (a limited partnership
associated with Kohlberg Kravis Roberts & Co. L.P., ("KKR") a related party of
the Company) for $125,000 and (2) drawing upon its revolving credit facility in
an amount of approximately $265,000. In addition, KKR 1996 Fund purchased from
the Company $125,000 of common stock and Series K Convertible Preferred Stock,
both at a price per share equal to $4.70. This resulted in an additional
10,800,000 shares of common stock and 15,795,745 shares of Series K Convertible
Preferred Stock. On September 27, 2001, all of the issued and outstanding shares
of the Series K Convertible Preferred Stock were, in accordance with their
terms, converted into 15,795,745 shares of the Company's common stock.

The Series J Convertible Preferred Stock is convertible at the option of the
holder into approximately 17,900,000 shares of the Company's common stock at a
conversion price of $7 per share, subject to adjustment. Dividends on the
Series J Convertible Preferred Stock accrue at an annual rate of 12.5% and are
payable quarterly in-kind. During 2002, the Company paid dividends-in-kind
(135,076 shares of Series J Convertible Preferred Stock) valued at approximately
$16,884.

In connection with the equity financing by KKR 1996 Fund, the Company paid
KKR 1996 Fund a commitment fee consisting of warrants to purchase 1,250,000
shares of common stock ("commitment warrants") of the Company at an exercise
price of $7 per share, subject to adjustment, and a funding fee consisting of
warrants to purchase an additional 2,620,000 shares of the Company's common
stock ("funding warrants") at an exercise price of $7 per share, subject to
adjustment. These warrants may currently be exercised and expire on the earlier
of August 24, 2011 or upon a change in control, as defined therein. In addition,
the Company was required to issue to KKR 1996 Fund additional warrants to
purchase up to 4,000,000 shares of the Company's common stock at an exercise
price of $7 per share, subject to adjustment, contingent upon the length of time
that the Series J Convertible Preferred Stock was outstanding. As the Series J
Convertible Preferred Stock was outstanding for twelve months from the date of
issuance, KKR 1996 Fund received the additional warrants to purchase four
million shares of common stock. These warrants expire on the earlier of
ten years from the date of issuance or upon a change in control.

31

All of the above described financing transactions between the Company and
KKR were reviewed by and recommended for approval by a Special Committee of the
Company's Board of Directors, comprised solely of independent directors (neither
employees of the Company nor affiliated with KKR). In connection therewith, the
Special Committee retained its own counsel and investment banker to advise it as
to the financing transactions. Such financing transactions were approved by the
full Board of Directors, following such recommendation.

CONTINGENCIES AND OTHER

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 effect on the consolidated financial
statements of the Company.

During 2002, PRIMEDIA contributed the Gravity Games, acquired from EMAP, to
a limited liability company (the "LLC") formed jointly by PRIMEDIA, on the one
hand, and Octagon Marketing and Athlete Representation, Inc., on the other hand,
with each party owning 50%. To date, the Company has contributed $2,803 in cash
to this venture. The LLC has entered into an agreement with NBC Sports, a
division of National Broadcasting Company, Inc., which requires the LLC to pay
specified fees to NBC for certain production services performed by NBC and
network air time provided by NBC, during each of 2002 and 2003. Under the terms
of this agreement and a related guarantee, PRIMEDIA could be responsible for the
payment of a portion of such fees, in the event that the LLC failed to satisfy
its payment obligations to NBC. The LLC satisfied all of its payment obligations
due to NBC in 2002. The maximum amount for which PRIMEDIA could be liable in
2003 is $2,200. As this liability is contingent on the LLC's failure to pay and
the occurrence of certain other events and existence of certain other
conditions, the Company has not recorded a liability on the accompanying
consolidated balance sheet as of December 31, 2002; however, the asset
representing the Company's 50% investment in the LLC as well as the Company's
share of the LLC's losses are reflected in the Company's consolidated financial
statements. The Company's investment in the LLC ($1,526) is reflected as a
component of other investments on the accompanying consolidated balance sheet at
December 31, 2002. The Company's share of the LLC's losses ($1,277) is reflected
as a component of other, net on the accompanying statements of consolidated
operations for the year ended December 31, 2002.

The Company anticipates that a capital investment will be required after
2003 to continue the current business operations and to maintain profit margins
at Channel One. We expect spending would begin in 2004 and extend over a
three-year period. However, management is pursuing alternative solutions which
would decrease the required capital investment of the Company and provide
additional significant revenue streams.

As of and for the year ended December 31, 2002, no officers or directors of
the Company have been granted loans by the Company, nor has the Company
guaranteed any obligations of such persons.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements require us to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosures of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including
those related to allowances for doubtful accounts, reserves for sales returns
and allowances, reserves for severance, closures and restructuring related
costs, purchase price allocations, impairments of investments, divestiture
reserves and the recoverability of long-lived assets including goodwill. We base
our estimates on historical experience and on various other assumptions that we
believe are reasonable under the circumstances. These estimates or assumptions
form the basis of our judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates which would affect our reported results from
operations. We believe the following is a

32

description of the critical accounting policies and estimates used in the
preparation of our consolidated financial statements.

Allowances for doubtful accounts are estimated losses resulting from our
customers' failure to make required payments. The Company continually monitors
collections from customers and provides a provision for estimated credit losses.
The Company aggressively pursues collection efforts on these overdue accounts
and upon collection reverses the write-off in future periods. If future payments
by our customers were to differ from our estimates, we may need to increase or
decrease our allowances for doubtful accounts.

Reserves for sales returns and allowances are primarily related to our
newsstand sales. The Company estimates and maintains these reserves based
primarily on its distributors' historical return practices and our actual return
experience. If actual sales returns and allowances were to differ from our
estimates, we may need to increase or decrease our reserve for sales returns and
allowances.

Reserves for severance, closures and restructuring related costs are
estimated costs resulting from management's plans and actions to integrate the
Company and consolidate certain back office functions. If the future payments of
these costs were to differ from our estimates, we may need to increase or
decrease our reserves.

The Company records purchase price allocations for acquisitions based on
preliminary information received at the date of acquisition and based on our
acquisition experience. These allocations are subject to adjustments and are
finalized once additional information concerning asset and liability valuations
is obtained, typically from an independent appraisal. The final asset and
liability fair values may differ from the preliminary allocations. If the final
allocations for the acquisitions differ from the preliminary allocations, we may
need to increase or decrease our depreciation and/or amortization expense, for
the acquired assets.

The Company has held or currently holds investments in various companies.
Investments where the Company has the ability to exercise significant influence
over financial and accounting policies are accounted for under the equity method
of accounting and the Company records its share of income (losses) of these
investments based upon the investee's most recent available financial
information, typically on a three-month lag. Investments where the Company does
not have significant influence are accounted for under the cost method. Some of
the investments that we have made have been in publicly traded companies, which
may have highly volatile share prices. Other investments are in private
companies that have no active market by which fair values can be easily
assessed. For significant transactions involving equity securities in private
companies, the Company obtains and considers independent third-party valuations
where appropriate. Such valuations use a variety of methodologies to estimate
fair value, including comparing the security with securities of publicly traded
companies in similar lines of business, comparing the nature of security, price,
and related terms of investors in the same round of financing, applying price
multiples to estimated future operating results for the private company, and
then also estimating discounted cash flows for that company. Using these
valuations and other information available to the Company, such as the Company's
knowledge of the industry and knowledge of specific information about the
Investee, the Company determines the estimated fair value of the securities
received. As required by EITF No. 00-8, "Accounting by a Grantee for an Equity
Instrument to Be Received in Conjunction with Providing Goods and Services," the
fair value of the equity securities received is determined as of the earlier of
the date a performance commitment is reached or the vesting date.

We record an investment impairment charge when we believe an investment has
experienced a decline in value that is other than temporary. Future adverse
changes in market conditions or poor operating results of underlying investments
could result in losses or an inability to recover the carrying value of the
investments, thereby possibly requiring an impairment charge to the carrying
value of the asset in the future.

33

Reserves for estimated obligations relating to divestitures may arise as a
result of the sale of certain titles or business units. These reserves are
established for such items that we remain liable for after the sale is completed
and are recorded at the time of the divestiture as part of the gain or loss on
the sale of the divested asset or business. If the future payments for such
items differ from our estimates, there could be a change in the determination of
the gain or loss on sale.

On January 1, 2002, the Company adopted SFAS 142 for all remaining goodwill
and indefinite lived intangible assets. Upon adoption, the Company ceased the
amortization of goodwill and indefinite lived intangible assets, which consist
primarily of trademarks. All of the Company's other intangible assets are
subject to amortization.

The Company's SFAS 142 evaluations at both January 1, 2002 and October 31,
2002, including the reassessment of its trademark valuation during the third
quarter, were performed by an independent valuation firm, utilizing reasonable
and supportable assumptions and projections and reflects management's best
estimate of projected future cash flows. The Company's discounted cash flow
evaluation used a range of discount rates that represented the Company's
weighted-average cost of capital and included an evaluation of other companies
in each reporting unit's industry. The assumptions utilized by the Company in
these evaluations are consistent with those utilized in the Company's annual
planning process. If the assumptions and estimates underlying these goodwill and
trademark impairment evaluations are not achieved, the ultimate amount of the
impairment could be adversely affected.

The Company periodically evaluates the recoverability of our long-lived
assets, including property and equipment and intangible assets, whenever events
or changes in circumstances indicate that the carrying amount may not be
recoverable or in connection with its annual financial review process. Our
evaluations include analyses based on the cash flows generated by the underlying
assets, profitablity information, including estimated future operating results,
trends or other determinants of fair value. If the value of the asset determined
by these evaluations is less than its carrying amount, an impairment is
recognized for the difference between the fair value and the carrying value of
the asset. Future adverse changes in market conditions or poor operating results
of the related business may indicate an inability to recover the carrying value
of the assets, thereby possibly requiring an impairment charge to the carrying
value of the asset, in the future.

NET OPERATING LOSS CARRYFORWARDS

During 2001 and 2000, the Company increased its valuation allowance due to
continued historical operating losses and the impairment of investments,
resulting in a net provision for income taxes of $135,000 and $41,200,
respectively. To the extent that the Company achieves positive net income in the
future, the net operating loss carryforwards may be able to be utilized and the
Company's valuation allowance will be adjusted accordingly.

At December 31, 2002, the Company had aggregate net operating and capital
loss carryforwards of $1,722,781 which will be available to reduce future
taxable income through 2022.

PROVISION FOR SEVERANCE, CLOSURES AND RESTRUCTURING RELATED COSTS

During 2001 and 2000, the Company implemented plans to integrate the
operations of the Company and consolidate many functions and facilities. The
Company expects that these plans will continue to result in future savings. All
restructuring related charges were expensed as incurred.

During 2002, the Company undertook additional cost initiatives that would
continue to implement and expand upon the cost initiatives enacted during 2001
and 2000.

34

Details of the initiatives implemented and the payments made in furtherance
of these plans in the years ended December 31, 2002 and 2001 are presented in
the following tables:

The remaining costs, comprised primarily of real estate lease commitments
for space that the Company no longer occupies, are expected to be paid through
2015. To reduce the lease related costs, the Company is aggressively pursuing
subleases of its available office space. These leases have been recorded at
their net present value amounts and are net of estimated sublease income
amounts.

Included in the net provision for the years ended December 31, 2002 and 2001
are reversals of $4,847 and $1,884, respectively, of previously recorded
accruals.

As a result of the implementation of these plans, the Company has closed and
consolidated in excess of twenty office locations and has notified a total of
1,756 individuals that they would be terminated under these plans. As of
December 31, 2002, all but three of those individuals have been terminated.

35

The Company expects to realize sufficient savings from its plans to
integrate the operations of the Company and to recover the costs associated with
employee termination costs within approximately a one-year period. Savings from
terminations of contracts and lease costs will be realized over the estimated
life of the contract or lease.

The liabilities representing the provision for severance, closures and
restructuring related costs are included in accrued expenses and other on the
consolidated balance sheets as of December 31, 2002 and 2001. The provision for
severance, closures and restructuring related costs is omitted from the
Company's calculation of consolidated EBITDA in accordance with the Company's
Credit and Senior Note agreements.

RECENT ACCOUNTING PRONOUNCEMENTS

In 2001 and 2002 the Company adopted a series of accounting changes, as
recommended by the Financial Accounting Standard Board ("FASB") and Emerging
Issues Task Force ("EITF"), that impact year-over-year comparisons of financial
results. These changes are summarized below.

ADOPTION OF EITF 00-25 AND EITF 01-9, EFFECTIVE JANUARY 1, 2002

In April 2001, the EITF issued Consensus No. 00-25, which addresses whether
consideration from a vendor to a reseller of the vendor's products is an
adjustment to the selling price or the cost of the product. This issue was
further addressed by EITF Consensus No. 01-9, issued in September 2001. The
Company adopted EITF 00-25 and EITF 01-9 effective January 1, 2002. The adoption
of EITF 00-25 and EITF 01-9 resulted in a net reclassification of product
placement costs relating to single copy sales, previously classified as
distribution, circulation and fulfillment expense on the accompanying statements
of consolidated operations, to reductions of sales from such activities. The
change in classifications is industry-wide and had no impact on the Company's
results of operations, cash flows or financial position. The reclassification
resulted in a net decrease in sales and a corresponding decrease in operating
expenses of $20,614 and $15,298 for the years ended December 31, 2001 and 2000,
respectively.

ADOPTION OF SFAS 141 AND CERTAIN PROVISIONS OF SFAS 142 DURING 2001

In July 2001, the Financial Accounting Standards Board ("FASB") issued, SFAS
No.141 "Business Combinations" and SFAS 142. SFAS No. 141 requires that the
purchase method be used for all business combinations initiated after June 30,
2001 and prohibits the use of the pooling of interest method. SFAS No.142
changes the method by which companies may recognize intangible assets in
purchase business combinations and generally requires identifiable intangible
assets to be recognized separately from goodwill. In addition, it eliminates the
amortization of all existing and newly acquired goodwill and indefinite lived
intangible assets on a prospective basis and requires companies to assess
goodwill and indefinite lived intangible assets for impairment, at least
annually.

During 2001, the Company adopted SFAS 141 and certain provisions of
SFAS 142 in connection with the EMAP acquisition as required by the statements.
The goodwill and indefinite lived intangible assets related to the acquisition
of EMAP have not and will not be amortized. The other identifiable intangible
assets are being amortized over a five to ten year useful life.

ADOPTION OF SFAS 142 REGARDING IMPAIRMENT OF GOODWILL AND INDEFINITE-LIVED
INTANGIBLE ASSETS, EFFECTIVE JANUARY 1, 2002

On January 1, 2002, the Company adopted SFAS 142, which requires an
evaluation of goodwill for impairment at the reporting unit level within
six months of mandatory adoption of this Standard. As required by SFAS 142, the
Company reviewed its indefinite lived intangible assets (primarily trademarks)
for impairment as of January 1, 2002 using a relief from royalty valuation
model, and determined that certain indefinite lived intangible assets were
impaired. As a result, the Company recorded an impairment

36

charge within cumulative effect of a change in accounting principle of $21,535
($0.08 per share) during the first quarter of 2002. The impairment of $21,535
referred to above relates to the consumer segment.

During the second quarter of 2002, the Company completed its assessment of
whether there was an indication that goodwill was impaired at any of its eight
identified reporting units (step one). Step one of the transitional impairment
test uses a fair value methodology, which differs from the undiscounted cash
flow methodology that continues to be used for intangible assets with an
identifiable life. Based on the results of step one of the transitional
impairment test, the Company identified two reporting units in the Consumer
segment and one reporting unit in the Business-to-Business segment for which the
carrying values exceeded the fair values at January 1, 2002, indicating a
potential impairment of goodwill in those individual reporting units.

During the third quarter of 2002, the Company completed step two of the
transitional impairment test for the reporting units in which an indication of
goodwill impairment existed. The Company determined the implied fair value of
each of those reporting units, principally using a discounted cash flow analysis
and compared such values to the respective reporting unit's carrying amounts.
This evaluation indicated that goodwill associated with two reporting units in
the Consumer segment and one reporting unit in the Business-to-Business segment
was impaired as of January 1, 2002. As a result, the Company recorded an
impairment charge within cumulative effect of a change in accounting principle
of $329,659 ($1.30 per share) as of January 1, 2002 related to the impairment of
goodwill. Of the goodwill impairment noted above, $174,076 relates to the
Consumer segment and $155,583 relates to the Business-to-Business segment. In
connection with step two of the SFAS 142 implementation as it relates to
goodwill, the Company reassessed its trademark valuation as of January 1, 2002
and recorded an additional $37,314 ($0.15 per share) impairment and has included
such impairment in the cumulative effect of change in accounting principle. Of
the impairment of $37,314 referred to above, $23,703 relates to the Consumer
segment and $13,611 relates to the Business-to-Business segment.

SFAS 142 also requires that companies assess goodwill and indefinite lived
intangible assets for impairment at least once per year subsequent to adoption
of the statement. Any impairment subsequent to the initial implementation is
recorded in operating income. The Company performed its first annual impairment
test as of October 31, 2002. Step one of this subsequent impairment test
indicated that there may be a goodwill impairment at two reporting units in the
Business-to-Business segment and two reporting units in the Consumer segment.
Step two of the October 31, 2002 impairment test indicated that goodwill
associated with the two reporting units in the Business-to-Business segment and
the two reporting units in the Consumer segment was impaired as of October 31,
2002. As a result, the Company recorded an impairment charge within amortization
of $97,227 ($0.38 per share) as of October 31, 2002 related to the impairment of
goodwill. Of the goodwill impairment referred to above, $23,676 relates to the
Consumer segment and $73,551 relates to the Business-to-Business segment. In
connection with step two of the subsequent impairment test, the Company assessed
its trademark valuation as of October 31, 2002, and recorded $819 ($0.00 per
share) as an impairment within amortization. Of the trademark impairment noted
above, $710 relates to the Consumer segment and $109 relates to the
Business-to-Business segment.

The Company's SFAS 142 evaluations at both January 1, 2002 and October 31,
2002, including the reassessment of its trademark valuation during the third
quarter, were performed by an independent valuation firm, utilizing reasonable
and supportable assumptions and projections and reflects management's best
estimate of projected future cash flows. The Company's discounted cash flow
evaluation used a range of discount rates that represented the Company's
weighted-average cost of capital and included an evaluation of other companies
in each reporting unit's industry. The assumptions utilized by the Company in
these evaluations are consistent with those utilized in the Company's annual
planning process. If the assumptions and estimates underlying these goodwill and
trademark impairment evaluations are not achieved, the ultimate amount of the
impairment could be adversely affected. Subsequent impairments, if any, will be
classified as an operating expense. Future impairment tests will be performed at
least annually (as of October 31) in conjunction with the Company's annual
budgeting and forecasting process.

37

Historically, the Company did not need a valuation allowance for the portion
of the net operating losses equal to the amount of tax-deductible goodwill and
trademark amortization expected to occur during the carryforward period of the
net operating losses based on the timing of the reversal of these taxable
temporary differences. As a result of the adoption of SFAS 142, the reversal
will not occur during the carryforward period of the net operating losses.
Therefore, the Company recorded a deferred income tax expense of approximately
$52,000 on January 1, 2002 and $20,500 during 2002 which would not have been
required prior to the adoption of SFAS 142. The charge recorded to increase the
valuation allowance was reduced by $23,000 during the third quarter as a result
of the impairment of goodwill and certain indefinite lived intangible assets
discussed above.

In addition, since amortization of tax-deductible goodwill and trademarks
ceased on January 1, 2002, the Company will have deferred tax liabilities that
will arise each quarter because the taxable temporary differences related to the
amortization of these assets will not reverse prior to the expiration period of
the Company's deductible temporary differences unless the related assets are
sold or an impairment of the assets is recorded. The Company expects that it
will record approximately $13,300 to increase deferred tax liabilities during
2003.

SFAS 143, EFFECTIVE JANUARY 1, 2003

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". The standard requires entities to record the fair value
of a liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. The standard is
effective for the Company beginning January 1, 2003. The adoption of SFAS 143 is
not expected to have a material impact on the Company's results of operations or
financial position.

ADOPTION OF SFAS 144 REGARDING DISPOSAL OF LONG-LIVED ASSETS, EFFECTIVE
JANUARY 1, 2002

In August 2001, the FASB issued SFAS 144, which superseded SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of". This statement also supersedes accounting and reporting
provisions of Accounting Principles Board ("APB") Opinion 30, "Reporting the
Results of Operations--Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," relating to the disposal of a segment of a business. SFAS 121 did
not address the accounting for business segments accounted for as discontinued
operations under APB Opinion 30 and therefore two accounting models existed for
long-lived assets to be disposed of. SFAS 144 established one accounting model
for long-lived assets to be held and used, long-lived assets (including those
accounted for as a discontinued operation) to be disposed of by sale and
long-lived assets to be disposed of other than by sale, and resolved certain
implementation issues related to SFAS 121. The Company adopted SFAS 144 on
January 1, 2002 and, as a result, the operations of the Modern Bride Group,
ExitInfo, Chicago, Horticulture, Doll Reader, the American Baby Group and IN New
York were recorded as discontinued operations for the periods prior to their
respective divestiture dates. Discontinued operations includes sales of $82,476,
$143,322 and $128,163 and income of $115,273 (including a gain on sale of
$111,449), $3,042 and $13,433 for the years ended December 31, 2002, 2001 and
2000, respectively. The discontinued operations include expenses related to
certain centralized functions that are shared by multiple titles, such as
production, circulation, advertising, human resource and information technology
costs but exclude general overhead costs. These costs were allocated to the
discontinued entities based upon relative revenues for the related periods. The
allocation methodology is consistent with that used across the Company. These
allocations amounted to $3,357, $5,112 and $4,020 for the years ended
December 31, 2002, 2001 and 2000, respectively.

38

ADOPTION OF SFAS 144 REGARDING IMPAIRMENT OF LONG-LIVED ASSETS, EFFECTIVE
JANUARY 1, 2002

The independent valuation reports received in connection with step two of
the SFAS 142 impairment test completed during the third and fourth quarters
indicated that the carrying value of certain finite-lived assets might not be
recoverable. Accordingly, impairment testing under SFAS 144 was undertaken
resulting in an impairment charge of $60,498 ($35,577 and $24,921 in the
Consumer and Business-to-Business segments, respectively). These charges are
included in depreciation of property and equipment ($11,610) and amortization of
intangible assets, goodwill and other ($48,888) in the statement of consolidated
operations for the year ended December 31, 2002.

SALES RECLASSIFICATIONS RESULTING FROM THE ADOPTION OF EITF 00-25, EITF 01-9 AND
SFAS 144

As a result of the adoption of EITF 00-25, EITF 01-9 and SFAS 144, the
Company reclassified amounts from sales, net for the years ended December 31,
2001 and 2000, as follows:

EARLY ADOPTION FOR 2002 OF SFAS 145

In April 2002, the FASB issued SFAS 145 "Rescission of FASB Statements
Nos. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections". For most companies, SFAS 145 will require gains and losses on
extinguishments of debt to be classified within income or loss from continuing
operations rather than as extraordinary items as previously required under SFAS
4, "Reporting Gains and Losses from Extinguishment of Debt an amendment of APB
Opinion No. 30." Extraordinary treatment will be required for certain
extinguishments as provided under APB Opinion No. 30. The Company has early
adopted SFAS 145 in accordance with the provisions of the statement.
Accordingly, during the year ended December 31, 2002, the Company recorded a
gain in other expense of $7,855 related to the repurchase and retirement of
$72,710 of the Company's notes, which had a carrying value of $72,292, at a
discount.

SFAS 146, EFFECTIVE FOR TRANSACTIONS INITIATED AFTER DECEMBER 31, 2002

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" which will supersede EITF Consensus No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)". SFAS
146 will affect the timing of the recognition of costs associated with an exit
or disposal plan by requiring them to be recognized when incurred rather than at
the date of a commitment to an exit or disposal plan. SFAS 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.

SFAS 148, EFFECTIVE FOR ANNUAL PERIODS ENDING AFTER DECEMBER 15, 2002

In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation--Transition and Disclosure--an amendment of FASB Statement
No. 123, "Accounting for Stock-Based Compensation". This Statement amends SFAS
123 to provide alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee compensation. In
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee

39

compensation and the effect of the method used on reported results. SFAS 148 is
effective for annual periods ending after December 15, 2002 and interim periods
beginning after December 15, 2002.

SFAS No. 123, "Accounting for Stock Based Compensation," 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 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 ("APB") No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. Under
APB No. 25, when the exercise price of the Company's stock options equals or
exceeds the market price of the underlying stock on the date of grant, no
compensation expense is recognized. Assuming the Company had accounted for the
options in accordance with SFAS 123, the estimated non-cash option expense would
have approximated $36,309, $37,409 and $19,785 for the years ended December 31,
2002, 2001 and 2000, respectively. As of December 31, 2002, approximately 25% of
the stock options outstanding were granted in connection with the About merger.
The options granted in connection with the About merger replaced options granted
to certain employees of About prior to the merger. Approximately 55% of the
About replacement options have expired or have been forfeited as of
December 31, 2002, and the majority of the remaining About options are expected
to expire during 2003. We do not expect a material amount of these options to be
exercised, as the various exercise prices of the outstanding options
significantly exceed the current price of the underlying stock.

FASB INTERPRETATION NO. 45

In November 2002, the FASB approved FASB Interpretation No. 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others, an Interpretation of FASB Statement
No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34" ("FIN 45").
FIN 45 clarifies the requirements of SFAS No. 5, "Accounting for Contingencies",
relating to a guarantor's accounting for, and disclosure of, the issuance of
certain types of guarantees. Specifically, FIN 45 requires a guarantor to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. The provisions for initial
recognition and measurement are effective on a prospective basis for guarantees
that are issued or modified after December 31, 2002, irrespective of a
guarantor's fiscal year-end. However, the disclosure provisions of FIN 45 are
effective for financial statements of interim or annual periods ending after
December 15, 2002. The adoption of FIN 45 is not expected to have a material
impact on the Company's results of operations or financial position.

FASB INTERPRETATION NO. 46, EFFECTIVE FOR VARIABLE INTEREST ENTITIES CREATED
AFTER JANUARY 31, 2003

In January 2003, the FASB issued FASB Interpretation No. 46 "Consolidation
of Variable Interest Entities" ("FIN 46"). FIN 46 clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements", to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The Company is required to adopt the provisions of
FIN 46 for variable interest entities created after January 31, 2003. The
adoption of FIN 46 is not expected to have a material impact on the Company's
results of operations or financial position.

IMPACT OF INFLATION AND OTHER COSTS

The impact of inflation was immaterial during 2002, 2001 and 2000. Postage
for product distribution and direct mail solicitations is 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 rates increased
approximately 10% in January 2001, approximately 3% in July 2001 and
approximately 12% effective July 1, 2002.

40

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 the future. 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. The Company's paper expense
decreased approximately 20% and 7% in 2002 and 2001, respectively. During 2002,
2001 and 2000, paper cost represented approximately 5%, 5% and 8%, respectively,
of the Company's total operating costs and expenses. The Company attributes the
decrease in paper expenses to the continuing decline in 2002 of paper prices
generally, as well as the smaller folio sizes of magazines, primarily in the
business-to-business sector, that have seen significant advertising drops.

SEASONALITY

The Company's operations are seasonal in nature. Operating results have
historically been stronger in the second half of the year with generally
strongest results generated in the fourth quarter of the year. The seasonality
of the Company's business reflects (i) the relationship between advertising
purchases and the retail and academic cycles and (ii) subscription promotions
and the holiday season. As discussed above in the Business section, PRIMEDIA
Television, including Channel One and Films for the Humanities, conducts most of
its business during the school year, with the majority of sales occuring in the
fourth quarter. The Company's Business-to-Business trade shows also generally
occur in the second and fourth quarters. This seasonality causes, and will
likely continue to cause, a variation in the Company's quarterly operating
results. Such variations have an effect on the timing of the Company's cash
flows and the reported quarterly results.

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

The Company is exposed to the impact of changes in interest rates. In the
normal course of business, the Company had managed fluctuations in interest
rates through the use of swap agreements to hedge a portion of its floating rate
borrowings. The Company's objective in managing this exposure was to reduce
fluctuations in earnings and cash flows associated with changes in interest
rates. At December 31, 2002, the Company was not a party to any interst rate
swap contracts.

The following table provides information about our financial instruments
that are sensitive to changes in interest rates, including debt obligations at
December 31, 2002 and 2001. For debt obligations, the table presents mandatory
principal reductions, repayment schedules of outstanding debt and projected
weighted average interest rates by expected maturity dates and reflects the
Company's early redemption of its 10 1/4% Senior Notes in March 2003 through
increased borrowings under its credit facilities. For interest rate swaps, the
table presents notional amounts and projected weighted average interest rates by
contractual maturity dates. For variable rate instruments, we have indicated the
applicable floating rate index. The fair value of financial instruments are
estimates based upon market conditions and perceived risks at December 31, 2002
and 2001 and may not be indicative of their actual fair values.

AT DECEMBER 31, 2002

41

AT DECEMBER 31, 2001

42

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS

PRIMEDIA INC. AND SUBSIDIARIES
Independent Auditors' Report.............................. 44
Statements of Consolidated Operations for the Years Ended
December 31, 2002, 2001 and
2000.................................................... 45
Consolidated Balance Sheets as of December 31, 2002 and
2001.................................................... 46
Statements of Consolidated Cash Flows for the Years Ended
December 31, 2002, 2001
and 2000................................................ 47
Statements of Shareholders' Deficiency for the Years Ended
December 31, 2002, 2001 and 2000........................ 50
Notes to Consolidated Financial Statements for the Years
Ended December 31, 2002, 2001
and 2000................................................ 52

43

INDEPENDENT AUDITORS' REPORT

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 (the "Company") as of December 31, 2002 and 2001, and the
related statements of consolidated operations, shareholders' deficiency, and
cash flows for each of the three years in the period ended December 31, 2002.
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 auditing standards generally
accepted in the United States of America. 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 consolidated financial position of the Company at
December 31, 2002 and 2001, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
2002, in conformity with accounting principles generally accepted in the United
States of America.

As discussed in Notes 2 and 19 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended, effective
January 1, 2001. Also, as discussed in Notes 2 and 8 and Notes 2 and 4 to the
consolidated financial statements, the Company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" and
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", respectively, on January 1, 2002.

DELOITTE & TOUCHE LLP
New York, New York
February 28, 2003
(March 5, 2003 as to Note 11)

44

PRIMEDIA INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See notes to consolidated financial statements.

45

PRIMEDIA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See notes to consolidated financial statements.

46

PRIMEDIA INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

(DOLLARS IN THOUSANDS)

47

PRIMEDIA INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED CASH FLOWS (CONTINUED)

(DOLLARS IN THOUSANDS)

See notes to consolidated financial statements.

48

(This page has been left blank intentionally.)

49

PRIMEDIA INC. AND SUBSIDIARIES

STATEMENTS OF SHAREHOLDERS' DEFICIENCY

YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Balance at January 1, 2000.........
Comprehensive loss:
Net loss.......................
Other comprehensive loss:
Unrealized loss on
available-for-sale
securities..................
Foreign currency translation
adjustments.................
Comprehensive loss.............
Issuances of common stock, net of
issuance costs...................
Issuance of common stock in
connection with CMGI
investment.......................
Issuance of common stock in
connection with Liberty Digital
investment.......................
Issuance of common stock in
connection with Kagan
acquisition......................
Purchases of common stock..........
Purchases of treasury stock........
Compensation expense recognized....
Expiration of redemption feature on
common stock subject to
redemption.......................
$10.00 Series D Exchangeable
Preferred Stock--cash
dividends........................
$9.20 Series F Exchangeable
Preferred Stock--cash
dividends........................
$8.625 Series H Exchangeable
Preferred Stock--cash
dividends........................
Other..............................
Balance at December 31, 2000.......
Comprehensive loss:
Net loss.......................
Other comprehensive loss:
Cumulative effect of
SFAS 133 adoption...........
Change in fair value of
derivative instruments......
Unrealized loss on
available-for-sale
securities..................
Foreign currency translation
adjustments.................
Comprehensive loss.............
Issuances of common stock and
replacement options in connection
with About merger................
Issuances of restricted stock and
options to About executives......
Forfeiture of common stock and
options related to About
executive separation.............
Net compensation expense recognized
in connection with About
merger...........................
Issuances of common stock, net of
issuance costs...................
Issuance of warrants in connection
wtih EMAP acquisition............
Issuance of Series J Convertible
Preferred Stock and related
warrants in connection with EMAP
acquisition, net.................
Issuance of Common Stock in
connection wtih EMAP
acquisition......................
$10.00 Series D Exchangeable
Preferred Stock--cash
dividends........................
$9.20 Series F Exchangeable
Preferred Stock--cash
dividends........................
$8.625 Series H Exchangeable
Preferred Stock--cash
dividends........................
Series J Convertible Preferred
Stock--Dividends in kind (31,248
shares)..........................
Other..............................
Balance at December 31, 2001.......

Comprehensive loss:
Net loss.......................
Other comprehensive loss:
Change in fair value of
derivative instruments......
Foreign currency translation
adjustments.................
Comprehensive loss.............
Net compensation expense recognized
in connection with About
merger...........................
Issuance of warrants in connection
with EMAP acquisition............
Issuances of common stock, net of
issuance costs...................
Purchases of common stock..........
$10.00 Series D Exchangeable
Preferred Stock--cash
dividends........................
$9.20 Series F Exchangeable
Preferred Stock--cash
dividends........................
$8.625 Series H Exchangeable
Preferred Stock--cash
dividends........................
Series J Convertible Preferred
Stock--Dividends in kind (135,076
shares)..........................
Conversions of preferred stock into
common shares (including gain on
conversions of $32,788)..........
Issuance of options to a consulting
firm in connection with services
received.........................
Other..............................
Balance at December 31, 2002.......

See notes to consolidated financial statements.

50

51

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 a
targeted media company with leading positions in consumer and
business-to-business markets. PRIMEDIA's properties deliver content via print
(magazines, books and directories), video (digital broadband, satellite and
cable), live events (trade and consumer shows) and the Internet. PRIMEDIA's
products serve highly specialized niches and capitalize on the growing trend
toward targeted rather than mass information distribution.

The Company's two business segments are consumer and business-to-business.
The Company's consumer segment produces and distributes magazines, guides,
videos and internet products for consumers in various niche markets. The
consumer segment includes the Consumer Magazine and Media Group, Consumer
Guides, PRIMEDIA Television and About.com, Inc. ("About"). The Company's
business-to-business segment produces and distributes magazines, books,
directories, databases, vocational training materials and internet products to
business professionals in such fields as communications, agriculture,
professional services, media, transportation and healthcare. The
business-to-business segment includes the Business Magazines and Media Group,
Workplace Learning and PRIMEDIA Information.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of PRIMEDIA and its subsidiaries. All significant intracompany and
intercompany accounts and transactions have been eliminated in consolidation.
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform with the current year presentation.

USE OF ESTIMATES. The preparation of the consolidated financial statements
in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates. Significant accounting
estimates include the establishment of the allowances for doubtful accounts,
reserves for sales returns and allowances, provisions for severance, closures
and restructuring related costs, purchase price allocations, impairments of
investments, divestiture reserves and the recoverability of long-lived assets
including goodwill.

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

CONCENTRATIONS OF CREDIT RISK. Substantially all of the Company's trade
receivables are from subscription and advertising customers located throughout
the United States. The Company establishes its credit policies based on an
ongoing evaluation of its customers' credit worthiness and competitive market
conditions and establishes its allowance for doubtful accounts based on an
assessment of exposures to credit losses at each balance sheet date. The Company
believes its allowance for doubtful accounts is sufficient based on the credit
exposures outstanding at December 31, 2002.

INVENTORIES. Inventories, including paper, purchased articles, photographs
and art, are valued at the lower of cost or market, principally on a first-in,
first-out ("FIFO") basis.

PROPERTY AND EQUIPMENT. Property and equipment, net are stated at cost less
accumulated depreciation and amortization. Depreciation of property and
equipment, including the amortization of leasehold

52

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
improvements, is 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. Whenever
significant events or changes occur, such as those affecting general market
conditions or pertaining to a specific industry or an asset category, the
Company reviews the property and equipment for impairment. When such factors,
events or circumstances indicate that property and equipment should be evaluated
for possible impairment, the Company uses an estimate of cash flows
(undiscounted and without interest charges) over the remaining lives of the
assets to measure recoverability. If the estimated cash flows are less than the
carrying value of the asset, the loss is measured as the amount by which the
carrying value of the asset exceeds fair value.

GOODWILL AND OTHER INTANGIBLE ASSETS. On January 1, 2002, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill
and Other Intangible Assets". Under SFAS 142, goodwill and intangible assets
deemed to have an indefinite life (primarily trademarks) are no longer amortized
but are subject to annual impairment tests. Upon adoption, the Company ceased
amortizing goodwill and indefinite lived intangible assets.

The Company tests goodwill for impairment, at least annually, using a fair
value approach at the reporting unit level. A reporting unit is an operating
segment or one level below an operating segment for which discrete financial
information is available and reviewed regularly by management. Assets and
liabilities of the Company have been assigned to the reporting units to the
extent that they are employed in or are considered a liability related to the
operations of the reporting unit and were considered in determining the fair
value of the reporting unit. See Note 8 for further discussion on SFAS 142.

Indefinite lived intangible assets will also be tested at least annually for
impairment using a fair value approach and intangible assets with a finite life
will continue to be tested for impairment in accordance with the guidance in
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
See Note 8 for further discussion on SFAS 144.

OTHER INVESTMENTS. Investments where the Company has the ability to
exercise significant influence over financial and accounting policies are
accounted for under the equity method of accounting. The Company records its
share of income (losses) of certain equity investees based upon the investee's
most recent available financial information, typically on a three month lag.
Investments where the Company does not have significant influence are accounted
for under the cost method.

In accordance with the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," investments in marketable securities
are classified as available-for-sale and are carried at fair market value, with
the unrealized gains and losses reported in accumulated other comprehensive
income (loss) ("OCI").

Other investments are periodically reviewed by the Company for impairment
whenever significant events or changes occur, such as those affecting general
market conditions or those pertaining to a specific industry or an individual
investment, which could result in the carrying value of an investment exceeding
its fair value. An impairment will be considered to have occurred when it is
determined that the decline in fair value below its carrying value is other than
temporary, based on consideration of all available evidence. If it has been
determined that an impairment in value has occurred, the carrying value of the
investment would be written down to an amount equivalent to the fair value of
the investment. The determination of fair value begins with a contemporaneous
market price because that price reflects the market's most recent

53

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
evaluation of the total mix of available information. Absent a contemporaneous
market price, determination of fair value is based on all other available
information, including but not limited to, recent financing obtained and/or
projected revenue streams.

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

DEFERRED WIRING AND INSTALLATION COSTS. Wiring and installation costs
incurred by PRIMEDIA Workplace Learning and Channel One have been capitalized
and are being amortized by the straight-line method over the related estimated
useful lives which are 5 years for PRIMEDIA Workplace Learning and 3 years for
Channel One. In 2000, management reduced the estimated remaining useful life of
all wiring and installation costs at Channel One from 5 years to 3 years due to
the anticipated obsolescence of such assets in the beginning of 2003. The change
in estimated useful life of all wiring and installation costs at Channel One
resulted in a decrease in operating income and an equal increase in net loss of
approximately $6,500 ($.04 per share) for the year ended December 31, 2000. In
2002, the Company extended the estimated remaining useful life of all wiring and
installation costs at Channel One through the end of 2003 to coincide with the
likely implementation of the technological upgrade of a new video distribution
platform, which resulted in a decrease in amortization expense and an equal
increase in operating income and a decrease in net loss of $4,035 ($0.02 per
share) for the year ended December 31, 2002.

$10.00 SERIES D EXCHANGEABLE PREFERRED STOCK ("SERIES D PREFERRED STOCK"),
$9.20 SERIES F EXCHANGEABLE PREFERRED STOCK ("SERIES F PREFERRED STOCK"), $8.625
SERIES H EXCHANGEABLE PREFERRED STOCK ("SERIES H PREFERRED STOCK") AND SERIES J
CONVERTIBLE PREFERRED STOCK ("SERIES J CONVERTIBLE PREFERRED STOCK"). The
Series D Preferred Stock, Series F Preferred Stock, Series H Preferred Stock and
Series J Convertible Preferred Stock were stated at fair value on the date of
issuance less issuance costs. The difference between their carrying values and
their redemption values is being accreted (using the interest method) by
periodic charges to additional paid-in capital. The accretion is deducted in the
calculation of net loss applicable to common shareholders.

STOCK-BASED COMPENSATION. At December 31, 2002, the Company has a
stock-based employee compensation plan, which is described more fully in
Note 14. The Company accounts for the plan under the recognition and measurement
principles of APB Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees ("APB 25")," and related Interpretations. In general, no stock-based
employee compensation cost is reflected in net income, as most options granted
under the plan had an exercise price equal to or greater than the market value
of the underlying common stock on the date of grant.

54

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of FASB
Statement No. 123, "Accounting for Stock-Based Compensation," to stock-based
employee compensation.

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. Online advertising is
generally recognized as advertisements are run. Newsstand sales are recognized
as revenue 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 revenue over the term of the subscription. Workplace
Learning's 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 upon shipment, net of an allowance for
returns. In compliance with Emerging Issues Task Force ("EITF") No. 00-10,
"Accounting for Shipping and Handling Fees and Costs," distribution costs
charged to customers are recognized as revenue when the related product is
shipped. Channel One's 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.
The Company also derives revenue from various licensing agreements, which grant
the licensee rights to use the trademarks and brand names of the Company in
connection with the manufacture and sale of certain designated products.
Licensing revenue is generally recognized by the Company as earned.

From time to time, the Company enters into multiple element arrangements
whereby it may provide a combination of services including print advertising,
content licensing, customer lists, on-line advertising and other services.
Revenue from each element is recorded when the following conditions exist:
(1) the product or service provided represents a separate earnings process;
(2) the fair value of each element can be determined separately and; (3) the
undelivered elements are not essential to the functionality of a delivered
element. If the conditions for each element described above do not exist,
revenue is recognized as earned using revenue recognition principles applicable
to those elements as if it were one arrangement, generally on a straight-line
basis. In November 2002, the EITF reached a consensus on EITF No. 00-21,
"Accounting for Revenue Arrangements with Multiple Element Deliverables". The
Issue addresses how to account for arrangements that may involve the delivery or
performance of multiple products, services

55

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
and/or rights to use assets. Revenue arrangements with multiple deliverables
should be divided into separate units of accounting if the deliverables in the
arrangement meet certain criteria. Arrangement consideration should be allocated
among the separate units of accounting based on their relative fair values. EITF
00-21 also supersedes certain guidance set forth in Staff Accounting Bulletin
Number 101, "Revenue Recognition in Financial Statements", issued by the
Securities and Exchange Commission. The final consensus is applicable to
agreements entered into in quarters beginning after June 15, 2003, with early
adoption permitted. Additionally, companies are permitted to apply the consensus
guidance to all existing arrangements as a cumulative effect of a change in
accounting principle. The adoption of EITF 00-21 is not expected to have a
material impact on the Company's results of operations or financial position.

BARTER TRANSACTIONS. The Company trades advertisements in its traditional
and online properties in exchange for trade show space and booths and
advertising in properties of other companies. Revenue and related expenses from
barter transactions are recorded at fair value in accordance with EITF
No. 99-17, "Accounting for Advertising Barter Transactions." Revenue from barter
transactions is recognized in accordance with the Company's revenue recognition
policies. Expense from barter transactions is generally recognized as incurred.
Revenue from barter transactions was approximately $18,200, $36,600 and $7,900
for the years ended December 31, 2002, 2001 and 2000, respectively with equal
related expense amounts in each year.

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 certain 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. The amortization periods range from one to two years
subsequent to the promotional event. Amortization of direct-response advertising
costs is included in marketing and selling expenses on the accompanying
statements of consolidated operations. Advertising expense was approximately
$100,000, $141,000 and $142,000 during the years ended December 31, 2002, 2001
and 2000, respectively.

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 OCI within
shareholders' deficiency on the accompanying consolidated balance sheets.

INTERNAL-USE SOFTWARE. In compliance with American Institute of Certified
Public Accountants ("AICPA") Statement of Position ("SOP") 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use," the
Company expenses costs incurred in the preliminary project stage and,
thereafter, capitalizes costs incurred in the developing or obtaining of
internal use software and includes them in property and equipment, net. Certain
costs, such as maintenance and training, are expensed as incurred. Capitalized
costs are amortized over a period of not more than three years using the

56

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
straight-line method. In addition, in compliance with SOP 98-1 and EITF
No. 00-2, "Accounting for Web Site Development Costs," direct internal and
external costs associated with the development of the features and functionality
of the Company's websites incurred during the application and infrastructure
development phase have been capitalized, and are included in property and
equipment, net on the accompanying consolidated balance sheets. Typical
capitalized costs include but are not limited to, acquisition and development of
software tools required for the development and operation of the website,
acquisition and registration costs for domain names and costs incurred to
develop graphics for the website. These capitalized costs are amortized over the
estimated useful life of up to three years using the straight-line method.
Capitalized software costs are subject to impairment evaluation in accordance
with the provisions of SFAS 144.

DERIVATIVE FINANCIAL INSTRUMENTS. Effective January 1, 2001, the Company
adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS 133, as amended and interpreted, establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities.

SFAS 133 requires that all derivatives, whether designated in hedging
relationships or not, be recorded on the balance sheet at fair value regardless
of the purpose or intent for holding them. If a derivative is designated as a
fair-value hedge, changes in the fair value of the derivative and the related
change in the hedged item are recognized in operations. If a derivative is
designated as a cash-flow hedge, changes in the fair value of the derivative are
recorded in OCI and are recognized in the statement of consolidated operations
when the hedged item affects operations. For a derivative that does not qualify
as a hedge, changes in fair value are recognized in operations.

RECENT ACCOUNTING PRONOUNCEMENTS

EITF 00-25 "VENDOR INCOME STATEMENT CHARACTERIZATION OF CONSIDERATION PAID TO A
RESELLER OF THE VENDOR'S PRODUCTS," AND EITF 01-9 "ACCOUNTING FOR
CONSIDERATION GIVEN BY A VENDOR TO A CUSTOMER (INCLUDING A RESELLER OF THE
VENDOR'S PRODUCTS)"

In April 2001, the EITF issued Consensus No. 00-25 which addresses whether
consideration from a vendor to a reseller of the vendor's products is an
adjustment to the selling price or the cost of the product. This issue was
further addressed by EITF Consensus No. 01-9 issued in September 2001. The
Company adopted EITF 00-25 and 01-9 effective January 1, 2002, which resulted in
a net reclassification of product placement costs, relating to single copy
sales, previously classified as distribution, circulation and fulfillment
expense on the accompanying statements of consolidated operations, to reductions
of sales from such activities. The change in classifications is industry-wide
and had no impact on the Company's results of operations, cash flows or
financial position. The reclassification resulted in a net decrease in sales and
a corresponding decrease in operating expenses of $20,614 and $15,298 for
the years ended December 31, 2001 and 2000, respectively.

SFAS 141 "BUSINESS COMBINATIONS" AND SFAS 142 "GOODWILL AND OTHER INTANGIBLE
ASSETS"

In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS 141, and SFAS 142. SFAS 141 requires, among other matters, that the
purchase method be used for all business combinations initiated after June 30,
2001 and prohibits the use of the pooling of interest method. SFAS 142 changes
the

57

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
method by which companies may recognize intangible assets in purchase business
combinations and generally requires identifiable intangible assets to be
recognized separately from goodwill.

During 2001, the Company adopted SFAS 141 and certain provisions of
SFAS 142 in connection with the EMAP Inc. ("EMAP") acquisition as required by
the statements. The goodwill and indefinite lived intangible assets related to
the acquisition of EMAP have not and will not be amortized. The other
identifiable intangible assets are being amortized over a five to ten year
useful life.

SFAS 143 "ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS"

In August 2001, the FASB issued SFAS 143 which requires entities to record
the fair value of a liability for an asset retirement obligation in the period
in which it is incurred. When the liability is initially recorded, the entity
capitalizes a cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles the obligation
for its recorded amount or incurs a gain or loss upon settlement. The standard
is effective for the Company beginning January 1, 2003. The adoption of
SFAS 143 is not expected to have a material impact on the Company's results of
operations or financial position.

SFAS 144 "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS"

In August 2001, the FASB issued SFAS 144 which superseded SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of". This statement also supersedes accounting and reporting
provisions of APB 30, "Reporting the Results of Operations--Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," relating to the disposal of a
segment of a business. SFAS 121 did not address the accounting for business
segments accounted for as discontinued operations under APB 30 and therefore two
accounting models existed for long-lived assets to be disposed of. SFAS 144
established one accounting model for long-lived assets to be held and used,
long-lived assets (including those accounted for as a discontinued operation) to
be disposed of by sale and long-lived assets to be disposed of other than by
sale, and resolved certain implementation issues related to SFAS 121. The
Company adopted SFAS No. 144 on January 1, 2002, and as a result, the results of
the Modern Bride Group, ExitInfo, Chicago, Horticulture, Doll Reader, the
American Baby Group and IN New York, which were divested during 2002 were
recorded as discontinued operations. As a result, prior year statements of
operations have been reclassified to reflect the operations of these entities in
discontinued operations. Discontinued operations includes sales of $82,476,
$143,322 and $128,163 and income of $115,273 (including a gain on sale of
$111,449), $3,042 and $13,433 for the years ended December 31, 2002, 2001 and
2000, respectively. The discontinued operations include expenses related to
certain centralized functions that are shared by multiple titles, such as
production, circulation, advertising, human resource and information technology
costs but exclude general overhead costs. These costs were allocated to the
discontinued entities based upon relative revenues for the related periods. The
allocation methodology is consistent with that used across the Company. These
allocations amounted to $3,357, $5,112 and $4,020 for the years ended
December 31, 2002, 2001 and 2000, respectively.

58

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
As a result of the adoption of EITF 00-25, EITF 01-9 and SFAS 144, the
Company reclassified amounts from sales, net for the years ended December 31,
2001 and 2000, as follows:

SFAS 145 "RESCISSION OF FASB STATEMENTS NO.S 4, 44 AND 64, AMENDMENT OF FASB
STATEMENT NO. 13 AND TECHNICAL CORRECTIONS"

In April 2002, the FASB issued SFAS 145 which for most companies, will
require gains and losses on extinguishments of debt to be classified within
income or loss from continuing operations rather than as extraordinary items as
previously required under SFAS 4, "Reporting Gains and Losses from
Extinguishment of Debt an amendment of APB Opinion No. 30." Extraordinary
treatment will be required for certain extinguishments as provided under APB
Opinion No. 30. The Company has early adopted SFAS 145 in accordance with the
provisions of the statement. Accordingly, during the year ended December 31,
2002, the Company recorded a gain in other expense of $7,855 related to the
repurchase and retirement of $72,710 of the Company's notes, which had a
carrying value of $72,292, at a discount (see Note 11).

SFAS 146 "ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES"

In June 2002, the FASB issued SFAS 146 which superseded EITF Consensus
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". SFAS 146 will affect the timing of the recognition of costs
associated with an exit or disposal plan by requiring them to be recognized when
incurred rather than at the date of a commitment to an exit or disposal plan.
SFAS 146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. The Company is currently evaluating the impact of this
adoption.

SFAS 148 "ACCOUNTING FOR STOCK-BASED COMPENSATION--TRANSITION AND DISCLOSURE--AN
AMENDMENT OF FASB STATEMENT NO. 123 ACCOUNTING FOR THE STOCK BASED
COMPENSATION"

In December 2002, the FASB issued SFAS 148 which amends SFAS 123 to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition,
SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS 148 is effective for annual periods ending after
December 15, 2002 and interim periods beginning after December 15, 2002.

59

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FASB INTERPRETATION NO. 45, "GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS
FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS, AN
INTERPRETATION OF FASB STATEMENT NO. 5, 57 AND 107 AND RESCISSION OF FASB
INTERPRETATION NO. 34"

In November 2002, the FASB approved FASB Interpretation No. 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others, an Interpretation of FASB Statement
No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34" ("FIN 45"). FIN
45 clarifies the requirements of SFAS No. 5, "Accounting for Contingencies",
relating to a guarantor's accounting for, and disclosure of, the issuance of
certain types of guarantees. Specifically, FIN 45 requires a guarantor to
recognize a liability for the non-contingent component of certain guarantees,
representing the obligation to stand ready to perform in the event that
specified triggering events or conditions occur. The provisions for initial
recognition and measurement are effective on a prospective basis for guarantees
that are issued or modified after December 31, 2002, irrespective of a
guarantor's fiscal year-end. However, the disclosure provisions of FIN 45 are
effective for financial statements of interim or annual periods ending after
December 15, 2002. The adoption of FIN 45 is not expected to have a material
impact on the Company's results of operations or financial position.

FASB INTERPRETATION NO. 46, "CONSOLIDATION OF VARIABLE INTEREST ENTITIES"

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"). FIN 46 clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements", to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The Company is required to adopt the provisions of
FIN 46 for variable interest entities created after January 31, 2003. The
adoption of FIN 46 is not expected to have a material impact on the Company's
results of operations or financial position.

3. ACQUISITIONS AND OTHER INVESTMENTS

ACQUISITIONS. The Company acquired certain net assets or stock of:

2000--Adams/Laux Company, Inc. and Adams/Intertec International, Inc. which
publish, sell advertising in and distribute magazines and other publications
relating to the meeting and conference industry and the electric power industry
and Kagan World Media, Inc. and affiliated companies which publish, host
seminars and provide consulting services dealing with the professional sports,
media, telecommunications, cable, internet and broadcast industries. In
addition, the Company completed several other smaller acquisitions. The 2000
acquisitions were primarily financed through borrowings under the Company's
credit agreements. The cash payments for these acquisitions on an aggregate
basis were approximately $70,100, in addition to the issuance of 800,000 shares
of the Company's common stock valued at approximately $12,400.

2001--About, a platform comprised of a network of more than 400 highly
targeted topic-specific websites and EMAP from EMAP America Partners. EMAP
publishes more than 60 consumer titles reaching over 75 million enthusiasts
through a combination of magazines, network and cable television shows, web
sites and live consumer events. The acquisitions have been accounted for by the
purchase method. The consolidated financial statements include the operating
results of the acquisitions subsequent to their respective dates of acquisition.
In addition, the Company completed several other smaller

60

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3. ACQUISITIONS AND OTHER INVESTMENTS (CONTINUED)
acquisitions. The other acquisitions, if they had occurred on January 1, 2001
would not have had a material impact on the results of operations. The cash
payments for these acquisitions, net of cash received were approximately
$425,800. The payments were net of liabilities assumed of approximately
$160,800. The excess of purchase price over net assets acquired and other
intangible assets were approximately $1,112,500. The pro forma effect of the
About and EMAP acquisitions on the Company's operations is presented below.

ABOUT

On February 28, 2001, the Company completed its merger with About. This
merger created an integrated traditional and new media company, providing an
array of potential marketing solutions to advertisers and niche content to
users. Through the efforts of knowledgeable human guides who manage the About
sites, the sites provide high-quality original articles, moderated forums and
chat rooms and links to related websites.

Under terms of the merger agreement, shareholders of About received
approximately 45,000,000 shares of the Company's common stock or 2.3409 shares
for each About share. An independent appraisal was completed during 2001 and was
used to allocate the purchase price to the fair value of assets acquired and
liabilities assumed including identifiable intangibles. The goodwill related to
the About merger was amortized during 2001 over an estimated useful life of
three years. The Company believed that a three-year life was responsive to the
rapid rate of change in the Internet industry and was consistent with other
recent mergers of a comparable nature. Other finite lived identifiable
intangible assets are being amortized over a period of three years. The Company
determined that the value of its shares of common stock issued was $11.81 per
share, based on the weighted-average market values for the two days prior and
two days succeeding the acquisition announcement date. The fair value of the
vested and unvested options issued was determined using a Black Scholes pricing
model. The following is a summary of the calculation of the purchase price, as
well as the allocation of purchase price to the fair value of net assets
acquired:

Total number of shares of PRIMEDIA common stock issued to
consummate the merger..................................... 44,951,034
Fair value per share of PRIMEDIA common stock............... $ 11.81
----------
Value of shares of PRIMEDIA common stock issued............. $ 530,872
Fair value of replacement options issued (13,383,579
options).................................................. 102,404
Less: Unearned compensation related to unvested options..... (7,592)
Cost of About shares acquired prior to the merger converted
to treasury stock......................................... 74,865
Direct merger costs......................................... 16,792
----------
Total purchase price........................................ 717,341
Less: Fair value of net tangible assets (including cash
acquired of $109,490)..................................... (175,050)
Less: Fair value of identifiable intangible assets.......... (24,743)
----------
Goodwill.................................................... $ 517,548
==========

In connection with the merger with About, outstanding options to purchase
shares of About common stock held by certain individuals were converted into
13,383,579 options to purchase shares of PRIMEDIA common stock. The fair value
of the vested and unvested options issued by PRIMEDIA was $102,404 determined
using a Black Scholes pricing model. On February 28, 2001, the date that the
Company granted these unvested replacement options, the intrinsic value of the
"in-the-money" unvested replacement options was $19,741. Based on a four-year
service period from the original date that these options were

61

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3. ACQUISITIONS AND OTHER INVESTMENTS (CONTINUED)
granted, the Company classified $7,592 as unearned compensation relating to
unvested options. The Company recorded charges related to the amortization of
the intrinsic value of unvested "in-the-money" options of $2,775 and $3,360 for
the years ended December 31, 2002 and 2001, respectively (see Note 17). The
remaining $12,149 is included within the total purchase price. As of
December 31, 2002, a number of these options have been forfeited or expired
unexercised. Most of these remaining outstanding options have an exercise price
which exceeded the Company's share price on December 31, 2002.

In the fourth quarter of 2001, concurrent with its annual financial review
process, the Company determined that the estimated future undiscounted cash
flows of About were not sufficient to recover the carrying value of the
goodwill. Accordingly, the Company recorded an impairment charge of $326,297 to
write down About's goodwill to the estimated fair value.

In connection with the acquisition, the Company entered into various
agreements with two key executives of About as discussed in Note 17.

EMAP

On August 24, 2001, the Company acquired 100% of the outstanding common
stock of the publishing business of EMAP. The strategic acquisition of EMAP has
strengthened the Company's unique mix of category specific endemic advertising
as well as circulation revenue. This acquisition solidified PRIMEDIA as the
leader in the specialty magazine industry in terms of revenue and single copy
sales. The total consideration was $525,000, comprised of $515,000 in cash,
including an estimate of working capital settlements of $10,000 (which is
subject to final settlement), and warrants to acquire 2,000,000 shares of the
Company's common stock at $9 per share. The fair value of the warrants was
approximately $10,000 and was determined using a Black Scholes pricing model.
These warrants expire ten years from the date of issuance.

The Company financed the acquisition of EMAP by (1) issuing 1,000,000 shares
of Series J Convertible Preferred Stock to KKR 1996 Fund (a limited partnership
associated with Kohlberg Kravis Roberts & Co. L.P., ("KKR") a related party of
the Company) for $125,000 and (2) drawing upon its revolving credit facility in
an amount of approximately $265,000. In addition, KKR 1996 Fund purchased from
the Company $125,000 of common stock and Series K Convertible Preferred Stock,
both at a price per share equal to $4.70. This resulted in an additional
10,800,000 shares of common stock and 15,795,745 shares of Series K Convertible
Preferred Stock. On September 27, 2001, all of the issued and outstanding shares
of the Series K Convertible Preferred Stock were, in accordance with their
terms, converted into 15,795,745 shares of the Company's common stock.

The Series J Convertible Preferred Stock is convertible at the option of the
holder into approximately 17,900,000 shares of the Company's common stock at a
conversion price of $7 per share, subject to adjustment. Dividends on the
Series J Convertible Preferred Stock accrue at an annual rate of 12.5% and are
payable quarterly in-kind. The Company paid dividends-in-kind (135,076 shares of
Series J Convertible Preferred Stock) valued at $16,884 for the year ended
December 31, 2002. The Company has the option to redeem any or all of the shares
of the Series J Convertible Preferred Stock at any time for cash at 100% of the
liquidation preference of each share being redeemed. On any dividend payment
date, the Company has the option to exchange, in whole but not in part, the
Series J Convertible Preferred Stock into 12.5% Class J Subordinated Notes. The
Company's ability to redeem or exchange the Series J Convertible Preferred Stock
into debt is subject to the approval of a majority of the independent directors.

62

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3. ACQUISITIONS AND OTHER INVESTMENTS (CONTINUED)
In connection with the equity financing by KKR 1996 Fund, the Company paid
KKR 1996 Fund a commitment fee consisting of warrants to purchase 1,250,000
shares of common stock ("commitment warrants") of the Company at an exercise
price of $7 per share, subject to adjustment, and a funding fee consisting of
warrants to purchase an additional 2,620,000 shares of the Company's common
stock ("funding warrants") at an exercise price of $7 per share, subject to
adjustment. These warrants may be currently exercised and expire on the earlier
of August 24, 2011 or upon a change in control, as defined therein. In addition,
the Company was required to issue to KKR 1996 Fund additional warrants to
purchase up to 4,000,000 shares of the Company's common stock at an exercise
price of $7 per share, subject to adjustment. The issuance of the additional
4,000,000 warrants was contingent upon the length of time that the Series J
Convertible Preferred Stock was outstanding. As the Series J Convertible
Preferred Stock was outstanding for three, six, nine and twelve months from the
date of issuance, KKR 1996 Fund received the additional warrants to purchase
250,000, 1 million, 1.25 million and 1.5 million shares of common stock,
respectively. The Company ascribed a value of $498, $2,160, $1,988 and $1,743
respectively, to these warrants using the Black Scholes pricing model. These
warrants expire on the earlier of ten years from the date of issuance or upon a
change in control.

The 1,250,000 commitment warrants issued to KKR 1996 Fund represent a
commitment fee related to the financing transaction as a whole. The Company
valued these warrants at $5,622 using the Black Scholes pricing model and
recorded them as a component of additional paid-in capital.

The Company attributed the 2,620,000 funding warrants to the issuance of the
Series J Convertible Preferred Stock. The Company valued these warrants at
$9,679 using the Black Scholes pricing model and has accordingly reduced the
face value of the Series J Convertible Preferred Stock. The Company accreted the
difference between the carrying value and the redemption value of the Series J
Convertible Preferred Stock to additional paid-in capital using the effective
interest method over a one year period as the earliest date at which the
preferred stock was convertible was one year from the date of issuance. The
accretion was deducted in the calculation of loss applicable to common
shareholders.

During 2002, the Company elected to account for the EMAP acquisition as an
asset acquisition for income tax purposes. An independent valuation of EMAP's
intangible assets and other aspects of the purchase cost allocation resulted in
a reclassification of $37,532 from other intangible assets to goodwill on the
accompanying consolidated balance sheet at December 31, 2002.

The following is a summary of the calculation of the purchase price, as
described above, as well as the allocation of the purchase price to the fair
value of the net assets acquired:

Purchase consideration (including working capital and other
settlements).............................................. $525,000
Direct acquisition costs.................................... 6,565
--------
Total purchase price........................................ 531,565
Add: Fair value of net tangible liabilities of EMAP......... 40,435
Less: Fair value of identifiable intangible assets.......... 121,600
--------
Goodwill.................................................... $450,400
========

Of the $121,600 fair value of identifiable intangible assets, $99,200
represents trademarks not subject to amortization and $22,400 represents
amortizable membership, subscriber and customer lists.

The Company's consolidated results of operations includes results of
operations of About and EMAP from their respective dates of acquisition. The
results of About and EMAP are included in the Company's

63

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3. ACQUISITIONS AND OTHER INVESTMENTS (CONTINUED)
consumer segment. The unaudited pro forma information below presents the
consolidated results of operations as if the About and EMAP acquisitions had
occurred as of January 1, 2001. In accordance with SFAS 142, these pro forma
adjustments assume that none of the goodwill and indefinite lived intangible
assets associated with the EMAP acquisition are amortized. If the Company had
recorded amortization of the goodwill and indefinite lived intangible assets in
connection with the EMAP acquisition in accordance with the Company's historical
amortization policies, assuming the acquisition occurred on January 1, 2001,
amortization expense would have increased by approximately $13,700 in 2001. The
unaudited pro forma information has been included for comparative purposes and
is not indicative of the results of operations of the consolidated Company had
the transactions occurred as of January 1, 2001, nor is it necessarily
indicative of future results.

No material acquisitions were completed during 2002. Payments for businesses
acquired on the accompanying statement of consolidated cash flows for the year
ended December 31, 2002, primarily represent payment for certain deferred
purchase price liabilities associated with prior year acquisitions.

OTHER INVESTMENTS.

Other investments consist of the following:

The Company's cost method investments consist primarily of the PRIMEDIA
Ventures' investments and the assets-for-equity investments, detailed below.
PRIMEDIA's equity method investments represent PRIMEDIA's investment in certain
companies where PRIMEDIA has the ability to exercise significant influence over
the operations (including financial and operational policies).

PRIMEDIA VENTURES' INVESTMENTS.

In 1998, the Company created PRIMEDIA Ventures, Inc. ("PRIMEDIA Ventures")
to invest in early-stage Internet companies and other technology opportunities
such as e-commerce services, enterprise software applications and
advertising-related technologies.

64

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3. ACQUISITIONS AND OTHER INVESTMENTS (CONTINUED)
The Company recorded provisions for impairment of various PRIMEDIA Ventures'
investments of approximately $5,600, $6,500 and $11,200 in 2002, 2001 and 2000,
respectively. These provisions for impairment are included as a component of
provision for impairment of investments on the accompanying statements of
consolidated operations for the years ended December 31, 2002 and 2001.

The Company sold certain PRIMEDIA Ventures' investments and received
proceeds of approximately $323, $3,100 and $10,100, and realized gains on these
sales of approximately $28, $1,400 and $8,600 in 2002, 2001 and 2000,
respectively. These gains are included in gain on the sale of businesses and
other, net on the accompanying statements of consolidated operations.

Since inception, proceeds from the sales of certain PRIMEDIA Ventures'
investments as well as related distributions have exceeded amounts invested.

INVESTMENT IN CMGI, INC.

In May 2000, the Company acquired 1,530,000 shares of common stock of
CMGI, Inc. in exchange for 8,000,000 shares of the Company's common stock (par
value $.01) subject to a one year lockup. The transaction was valued at
$164,000, which represents the fair value of the Company's common stock
exchanged on the exchange date. The Company recorded provisions for impairment
of $7,000 and $155,500 related to its investment in CMGI, Inc. in 2001 and 2000,
respectively, as the decline in the market value of the investment was deemed to
be other than temporary. In October 2001, the Company sold its investment in
CMGI for total proceeds and gain on sale of $2,149 and $619, respectively. The
gain on sale is included as a component of gain on sale of businesses and other,
net on the accompanying statement of consolidated operations for the year ended
December 31, 2001.

INVESTMENT IN LIBERTY DIGITAL.

In April 2000, the Company completed its purchase of 625,000 shares of
Liberty Digital Series A common stock at forty dollars per share for an
aggregate purchase price of $25,000. The Company recorded provisions for
impairment of $658 and $21,869 related to its investment in Liberty Digital in
2001 and 2000, respectively, as the decline in the market value of the
investment was deemed to be other than temporary. During 2001, the Company sold
its investment in Liberty Digital for total proceeds and loss on sale of $1,838
and $668, respectively. The loss on sale is included as a component of gain on
sale of businesses and other, net on the accompanying statement of operations
for the year ended December 31, 2001.

ASSETS-FOR-EQUITY TRANSACTIONS.

During 2000, the Company began making strategic investments in companies
("Investees") which included various assets-for-equity transactions. Under these
transactions, the Company provides promotional services, such as print
advertising, content licensing, customer lists, online advertising and other
services in exchange for equity in these entities. Additionally, the Company
made cash investments in certain of these Investees. The Company's investments
in Investees, included in other investments on the accompanying consolidated
balance sheets, totaled $16,870 ($15,956 representing cost method investments
and $914 representing equity method investments) and $32,753 ($27,313
representing cost method investments and $5,440 representing equity method
investments) at December 31, 2002 and 2001, respectively. At December 31, 2002
and 2001, respectively, $4,963 and $12,696 relating to these agreements is
included as deferred revenues on the accompanying consolidated balance sheets.
This deferred revenue represents advertising, content licensing and other
services to be rendered by the Company in exchange for

65

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3. ACQUISITIONS AND OTHER INVESTMENTS (CONTINUED)
the equity in these entities. The Company recognizes these amounts as revenue in
accordance with the Company's revenue recognition policies. The Company recorded
revenue from these agreements related to its continuing operations of
approximately $7,600, $46,900 and $43,400 for the years ended December 31, 2002,
2001 and 2000, respectively. The Company recorded revenue from these agreements
related to its discontinued operations of approximately $6,900 and $3,400 for
the years ended December 31, 2001 and 2000.

These transactions are recorded at the fair value of the equity securities
received, which are typically based on cash consideration for like securities.
For significant transactions involving equity securities in private companies,
the Company obtains and considers independent third-party valuations where
appropriate. Such valuations use a variety of methodologies to estimate fair
value, including comparing the security with the securities of publicly traded
companies in similar lines of business, comparing the nature of the security,
price, and related terms of investors in the same round of financing, applying
price multiples to estimated future operating results for the private company,
and then also estimating discounted cash flows for that company. Using these
valuations and other information available to the Company, such as the Company's
knowledge of the industry and knowledge of specific information about the
Investee, the Company determines the estimated fair value of the securities
received. As required by EITF No. 00-8, "Accounting by a Grantee for an Equity
Instrument to Be Received in Conjunction with Providing Goods and Services," the
fair value of the equity securities received is determined as of the earlier of
the date a performance commitment is reached or the vesting date.

The Company continually evaluates all of its investments for potential
impairment in accordance with APB No. 18, "The Equity Method of Accounting for
Investments in Common Stock". If an investment is deemed to be other than
temporarily impaired, its carrying value will be reduced to fair market value.
The Company recorded a net provision for impairment of its investments in
certain Investees of $10,030 and $83,959, for the years ended December 31, 2002
and 2001, respectively, as the decline in value of the investments was deemed to
be other than temporary. No provision for impairment was recorded for assets-
for-equity investments in 2000.

The Company recorded $3,474, $35,784 and $7,721 of equity method losses from
Investees for the years ended December 31, 2002, 2001 and 2000, respectively.
These equity method losses from Investees are included in other, net on the
accompanying statements of consolidated operations. The Company recognized
$1,493, $14,500 and $16,314 of revenue related to the equity method Investees
for the years ended December 31, 2002, 2001 and 2000, respectively.

INVESTMENTS IN ABOUT

During 2000, the Company entered into additional business arrangements with
About whereby the Company has provided or will provide approximately $89,000 of
advertising and promotional services, over a five-year period, as well as the
right to use a mailing list owned by the Company, in exchange for an aggregate
of 2,873,595 shares of common stock of About. The Company and About have also
entered into certain agreements pursuant to which the Company has agreed to
purchase advertising and promotional services on the About network. These
agreements provide for payments to About in the aggregate of $15,900. At the
merger completion date, these agreements became intercompany agreements, the
activity of which, subsequent to the merger completion date, has been and will
continue to be eliminated in consolidation. During the two months ended
February 28, 2001 and the year ended December 31, 2000, in accordance with the
terms of these agreements, the Company recorded revenue of approximately $21,000
and $9,000, respectively, and expenses of approximately $3,500 and $4,700,
respectively.

66

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3. ACQUISITIONS AND OTHER INVESTMENTS (CONTINUED)
In addition, during 2000, the Company purchased 316,500 shares of About on
the open market for approximately $7,800. The Company recorded an unrealized
gain of $693 relating to its investment in About, which met the criteria of SFAS
No. 115.

4. DIVESTITURES

2000

On March 30, 2000, the Company announced its intention to divest
QWIZ, Inc., Pictorial, Inc. and 18 business directories ("Directories"). At that
time, in accordance with SFAS 121, these businesses ceased to depreciate their
property and equipment and ceased to amortize their other intangible assets and
excess of purchase price over net assets acquired.

On June 30, 2000, the Company completed the sale of Pictorial, Inc. to BISYS
for total consideration of $129,000 in cash, which includes proceeds from the
sale of the business as well as payments received related to a non-compete
agreement. The value of the non-compete agreement is approximately $25,000 and
is included in deferred revenues on the accompanying consolidated balance
sheets. The non-compete agreement is being amortized over a 15-year period. In
connection with the sale, the Company recorded a gain of approximately $17,300,
net of estimated selling costs. The Company has used the proceeds from this sale
for repayment of borrowings under its credit facilities.

During the quarter ended June 30, 2000, the Company received $10,000 related
to the final settlement on a prior period divestiture. This receipt is included
in other, net on the accompanying statement of consolidated operations.

On October 18, 2000, the Company completed the sale of Directories to an
acquisition group formed by Bariston Partners, LLC for $34,000 in cash. In
connection with the sale, the Company recorded a gain of approximately $10,800.
Proceeds from the sale of Directories were primarily used to pay down borrowings
under the Company's credit facilities.

During the fourth quarter of 2000, the Company recorded a provision of
approximately $28,200, to write-down the assets of QWIZ, Inc. to their net
realizable value. This provision is included in gain on the sales of businesses
and other, net on the accompanying statement of consolidated operations for the
year ended December 31, 2000.

2001

In April 2001, the Company completed the sale of QWIZ, Inc. for $7,000 of
cash. The related gain on the sale of QWIZ, Inc. approximates $300 and is
included in the gain on sales of businesses and other, net on the accompanying
statement of consolidated operations for the year ended December 31, 2001.
Proceeds from the sale of QWIZ, Inc. were primarily used to pay down borrowings
under the Company's credit facilities.

In November 2001, the Company completed the sale of Bacon's Information,
Inc. ("Bacons") to Observer AB for $90,000, $15,000 of which represented a note
receivable and is included as a component of prepaid expenses and other on the
accompanying balance sheet as of December 31, 2001. The gain on the sale of
Bacons approximates $54,600 and is included in gain on the sales of businesses
and other, net on the accompanying statement of consolidated operations for the
year ended December 31, 2001. Proceeds from the sale of Bacons were primarily
used to pay down borrowings under the Company's credit facilities.

67

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

4. DIVESTITURES (CONTINUED)
In addition, during 2001, the Company completed several other smaller
divestitures which were not material to the results of operations or cash flows
of the Company for the year ended December 31, 2001.

2002

In 2002, the Company completed several divestitures, the results of which
have been included in discontinued operations in accordance with SFAS 144. These
divestitures include the Modern Bride Group, ExitInfo, Chicago, the American
Baby Group, IN New York, Horticulture and Doll Reader which were sold. The
related net gain on sale of businesses of $111,449 for the year ended
December 31, 2002 has been included in discontinued operations on the
accompanying statement of consolidated operations.

During 2002, the Company completed the sale of several other properties
which did not qualify as discontinued operations under SFAS 144 since they had
been previously classified as non-core businesses. The related net loss on sale
of businesses of $7,247 is included in loss (gain) on sale of businesses and
other, net, on the accompanying statement of consolidated operations for the
year ended December 31, 2002.

Proceeds from these sales were approximately $228,000 ($1,000 of which is in
escrow) and were used to pay down the Company's outstanding debt and borrowings
under the credit facilities. In connection with certain of the divestitures, the
Company agreed to provide certain services to the purchasers including space
rental and finance, sales and systems support at negotiated rates over specified
terms.

During 2002, the Company received $15,000, representing the entire amount of
the note receivable on the sale of Bacon's.

5. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net, consisted of the following:

6. INVENTORIES, NET

Inventories, net, consisted of the following:

68

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

7. PROPERTY AND EQUIPMENT, NET

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

Included in property and equipment are assets which were acquired under
capital leases in the amount of $44,078 and $45,357 with accumulated
amortization of $20,527 and $17,089 at December 31, 2002 and 2001, respectively
(see Note 22).

8. GOODWILL, OTHER INTANGIBLE ASSETS AND OTHER

On January 1, 2002, the Company adopted SFAS 142, which requires, among
other matters, an evaluation of goodwill for impairment at the reporting unit
level within six months of mandatory adoption of this Standard, as well as
subsequent annual evaluations (more frequently if circumstances indicate a
possible impairment). As required by SFAS 142, the Company reviewed its
indefinite lived intangible assets (primarily trademarks) for impairment as of
January 1, 2002 using a relief from royalty valuation model, and determined that
certain indefinite lived intangible assets were impaired. As a result, the
Company recorded an impairment charge within cumulative effect of a change in
accounting principle of $21,535 ($0.08 per share) during the first quarter of
2002. The impairment of $21,535 referred to above relates to the consumer
segment.

During the second quarter of 2002, the Company completed its assessment of
whether there was an indication that goodwill was impaired at any of its eight
identified reporting units (step one). Step one of the transitional impairment
test uses a fair value methodology, which differs from the undiscounted cash
flow methodology that continues to be used for intangible assets with an
identifiable life. Based on the results of step one of the transitional
impairment test, the Company identified two reporting units in the Consumer
segment and one reporting unit in the Business-to-Business segment for which the
carrying values exceeded the fair values at January 1, 2002, indicating a
potential impairment of goodwill in those individual reporting units.

During the third quarter of 2002, the Company completed step two of the
transitional impairment test for the reporting units in which an indication of
goodwill impairment existed. The Company determined the implied fair value of
each of those reporting units, principally using a discounted cash flow analysis
and compared such values to the respective reporting unit's carrying amounts.
This evaluation indicated that

69

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

8. GOODWILL, OTHER INTANGIBLE ASSETS AND OTHER (CONTINUED)
goodwill associated with two reporting units in the Consumer segment and one
reporting unit in the Business-to-Business segment were impaired as of
January 1, 2002. As a result, the Company recorded an impairment charge within
cumulative effect of a change in accounting principle of $329,659 ($1.30 per
share) as of January 1, 2002 related to the impairment of goodwill. Of the
goodwill impairment noted above, $174,076 relates to the Consumer segment and
$155,583 relates to the Business-to-Business segment. In connection with step
two of the SFAS 142 implementation as it relates to goodwill, the Company
reassessed its trademark valuation as of January 1, 2002 and recorded an
additional $37,314 ($0.15 per share) impairment and has included such impairment
in the cumulative effect of a change in accounting principle. Of the impairment
of $37,314 referred to above, $23,703 relates to the Consumer segment and
$13,611 relates to the Business-to-Business segment.

SFAS 142 also requires that companies assess goodwill and indefinite lived
intangible assets for impairment at least once per year subsequent to adoption
of the statement. Any impairment subsequent to the initial implementation is
recorded in operating income. The Company performed its first annual impairment
test as of October 31, 2002. Step one of this subsequent impairment test
indicated that there may be a goodwill impairment at two reporting units in the
Business-to-Business segment and two reporting units in the Consumer segment.
Step two of the October 31, 2002 impairment test indicated that goodwill
associated with the two reporting units in the Business-to-Business segment and
the two reporting units in the Consumer segment was impaired as of October 31,
2002. As a result, the Company recorded an impairment charge within amortization
of $97,227 ($0.38 per share) as of October 31, 2002 related to the impairment of
goodwill. Of the goodwill impairment referred to above, $23,676 relates to the
Consumer segment and $73,551 relates to the Business-to-Business segment. In
connection with step two of the subsequent impairment test, the Company assessed
its trademark valuation as of October 31, 2002, and recorded $819 ($0.00 per
share) as an impairment within amortization. Of the trademark impairment noted
above, $710 relates to the Consumer segment and $109 relates to the
Business-to-Business segment.

The Company's SFAS 142 evaluations at both January 1, 2002 and October 31,
2002, including the reassessment of its trademark valuation during the third
quarter, were performed by an independent valuation firm, utilizing reasonable
and supportable assumptions and projections and reflects management's best
estimate of projected future cash flows. The Company's discounted cash flow
evaluation used a range of discount rates that represented the Company's
weighted-average cost of capital and included an evaluation of other companies
in each reporting unit's industry. The assumptions utilized by the Company in
these evaluations are consistent with those utilized in the Company's annual
planning process. If the assumptions and estimates underlying these goodwill and
trademark impairment evaluations are not achieved, the ultimate amount of the
impairment could be adversely affected. Subsequent impairments, if any, will be
classified as an operating expense. Future impairment tests will be performed at
least annually (as of October 31) in conjunction with the Company's annual
budgeting and forecasting process.

Historically, the Company did not need a valuation allowance for the portion
of the tax effect of net operating losses equal to the amount of deferred tax
liabilites related to tax-deductible goodwill and trademark amortization
expected to occur during the carryforward period of the net operating losses
based on the timing of the reversal of these taxable temporary differences. As a
result of the adoption of SFAS 142, the reversal will not occur during the
carryforward period of the net operating losses. Therefore, the Company recorded
a deferred income tax expense of approximately $52,000 on January 1, 2002 and
$20,500 during 2002 which would not have been required prior to the adoption of
SFAS 142. The charge

70

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

8. GOODWILL, OTHER INTANGIBLE ASSETS AND OTHER (CONTINUED)
recorded to increase the valuation allowance was reduced by the reversal of tax
liabilities of $23,000 during the third quarter of 2002 as a result of the
impairment of goodwill and certain indefinite lived intangible assets discussed
above.

In addition, since amortization of tax-deductible goodwill and trademarks
ceased on January 1, 2002, the Company will have deferred tax liabilities that
will arise each quarter because the taxable temporary differences related to the
amortization of these assets will not reverse prior to the expiration period of
the Company's deductible temporary differences unless the related assets are
sold or an impairment of the assets is recorded. The Company expects that it
will record approximately $13,300 to increase deferred tax liabilities during
2003.

The independent valuation reports received in connection with step two of
the SFAS 142 impairment test completed during the third and fourth quarters
indicated that the carrying value of certain finite-lived assets might not be
recoverable. Accordingly, impairment testing under SFAS 144 was undertaken
resulting in an impairment charge of $60,498 ($35,577 and $24,921 in the
Consumer and Business-to-Business segments, respectively). These charges are
included in depreciation of property and equipment ($11,610) and amortization of
intangible assets, goodwill and other ($48,888) in the accompanying statement of
consolidated operations for the year ended December 31, 2002.

Changes in the carrying amount of goodwill for the year ended December 31,
2002, by operating segment, are as follows:

The finalization of purchase price allocations includes EMAP as well as
other immaterial adjustments.

71

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

8. GOODWILL, OTHER INTANGIBLE ASSETS AND OTHER (CONTINUED)
A reconciliation of the reported net loss and loss per common share to the
amounts adjusted for the exclusion of amortization of goodwill and indefinite
lived intangible assets, the cumulative effect of a change in accounting
principle and the deferred provision for income taxes follows:

Intangible assets subject to amortization after the adoption of SFAS 142
consist of the following:

Intangible assets not subject to amortization had a net carrying value of
$270,006 and $342,425 at December 31, 2002 and 2001, respectively, and consisted
of trademarks. Amortization expense for other

72

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

8. GOODWILL, OTHER INTANGIBLE ASSETS AND OTHER (CONTINUED)
intangible assets still subject to amortization (excluding provision for
impairment) was $53,893, $56,073 and $64,234 for the years ended December 31,
2002, 2001 and 2000, respectively. Amortization expense (excluding provision for
impairment) for goodwill and trademarks was $188,888 and $40,920 for the years
ended December 31, 2001 and 2000, respectively. Amortization of deferred wiring
costs (excluding provision for impairment) of $11,239, $16,380 and $13,932 for
the years ended December 31, 2002, 2001 and 2000, respectively, has also been
included in amortization of intangible assets, goodwill and other on the
accompanying statements of consolidated operations. At December 31, 2002,
estimated future amortization expense of other intangible assets still subject
to amortization is as follows: approximately $32,000, $18,000, $11,000, $7,000
and $5,000 for 2003, 2004, 2005, 2006 and 2007, respectively.

9. OTHER NON-CURRENT ASSETS

Other non-current assets consisted of the following:

The deferred financing costs are net of accumulated amortization of $12,923
and $8,911 at December 31, 2002 and 2001, respectively. The deferred wiring and
installation costs are net of accumulated amortization of $69,063 and $56,449 at
December 31, 2002 and 2001, respectively. Direct-response advertising costs are
net of accumulated amortization of $81,621 and $116,700 at December 31, 2002 and
2001, respectively. Prepublication and programming costs are net of accumulated
amortization of $42,223 and $35,196 at December 31, 2002 and 2001, respectively.

73

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

10. ACCRUED EXPENSES AND OTHER

Accrued expenses and other current liabilities consisted of the following:

The above amounts include $5,199 and $9,043 of restructuring related payroll
costs, $1,729 and $2,318 of contract termination costs and $42,506 and $13,037
of restructuring related leases at December 31, 2002 and 2001, respectively.

11. LONG-TERM DEBT

Long-term debt consisted of the following:

On June 20, 2001, the Company completed a refinancing of its existing bank
credit facilities pursuant to new bank credit facilities with The Chase
Manhattan Bank, Bank of America, N.A., The Bank of New York, and The Bank of
Nova Scotia, as agents. The debt under the new credit agreement and as otherwise
permitted under the credit agreement and the indebtedness relating to the Senior
Notes of the Company is secured by a pledge of the stock of PRIMEDIA Companies
Inc., an intermediate holding company, owned

74

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

11. LONG-TERM DEBT (CONTINUED)
directly by the Company, which owns directly or indirectly all shares of
PRIMEDIA subsidiaries that guarantee such debt (as well as certain of the
Company's other equally and ratably secured indebtedness).

Substantially all proceeds from sales of businesses and other investments
were used to pay down borrowings under the credit agreement. Amounts under the
bank credit facilities may be reborrowed and used for general corporate and
working capital purposes as well as to finance certain future acquisitions. The
bank credit facilities consist of the following:

With the exception of the term loan B, the amounts borrowed bear interest,
at the Company's option, at either the base rate plus an applicable margin
ranging from 0.125% to 1.5% or the Eurodollar Rate plus an applicable margin
ranging from 1.125% to 2.5%. The term loan B bears interest at the base rate
plus 1.75% or the Eurodollar Rate plus 2.75%. At December 31, 2002, the weighted
average variable interest rate on all outstanding borrowings under the bank
credit facilities was approximately 4.4%.

Under the bank credit facilities, the Company has agreed to pay commitment
fees at a per annum rate of either 0.375% or 0.5%, depending on its debt to
EBITDA ratio, as defined in the credit agreement, on the daily average aggregate
unutilized commitment under the revolving loan commitment. During 2002, the
Company's commitment fees totaling $953 were paid at a weighted average rate of
..5%. The Company also has agreed to pay certain fees with respect to the
issuance of letters of credit and an annual administration fee.

The commitments under the revolving loan facility are subject to mandatory
reductions semi-annually on June 30 and December 31, commencing December 31,
2004, with the final reduction on June 30, 2008. The aggregate mandatory
reductions of the revolving loan commitments under the bank credit facilities
are $22,550 in 2004, $45,100 in 2005, $67,650 in 2006, $135,300 in 2007 and a
final reduction of $180,400 in 2008. 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. In 2002, the Company voluntarily reduced the commitment
under the revolving loan facility by $24,000. Aggregate term loan payments under
the bank credit facilities are $4,038 in 2003, $15,913 in 2004, $27,788 in 2005,
2006 and 2007, $15,913 in 2008 and $373,503 in 2009. During 2002, the Company
made voluntary pre-payments towards the term loans A and B in the amounts of
$5,000 and $21,000, respectively.

The bank credit facilities, among other things, limit the Company's ability
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

75

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

11. LONG-TERM DEBT (CONTINUED)
restricted payments including dividend payments on or repurchases of the
Company's common stock in excess of $75,000 in any given year.

The bank credit facilities and senior notes of the Company contain certain
customary events of default which generally give the banks or the noteholders,
as applicable, the right to accelerate payments of outstanding debt. Under the
bank credit facilities, these events include:

- failure to maintain required covenant ratios, as described below;

- failure to make a payment of principal, interest or fees within five days
of its due date;

- default, beyond any applicable grace period, on any aggregate indebtedness
of PRIMEDIA exceeding $20,000;

- occurrence of certain insolvency proceedings with respect to PRIMEDIA or
any of its material subsidiaries;

- entry of one judgment or decree involving a liability of $15,000 or more
(or more than one involving an aggregate liability of $25,000 or more);
and

- occurrence of certain events constituting a change of control of the
Company.

The events of default contained in PRIMEDIA's senior notes are similar to,
but generally less restrictive than, those contained in the Company's bank
credit facilities.

Under the most restrictive debt covenants as defined in the Company's credit
agreement, the Company must maintain a minimum interest coverage ratio, as
defined, of 1.80 to 1 and a minimum fixed charge coverage ratio, as defined, of
1.05 to 1. The Company's maximum allowable debt leverage ratio, as defined, is
6.0 to 1. The maximum leverage ratio decreases to 5.75 to 1, 5.5 to 1, 5.0 to 1
and 4.5 to 1, respectively, on July 1, 2003, January 1, 2004, January 1, 2005
and January 1, 2006. The minimum interest coverage ratio increases to 2.0 to 1,
2.25 to 1 and 2.5 to 1, respectively, on July 1, 2003, January 1, 2004 and
January 1, 2005. The Company is in compliance with the financial and operating
covenants of its financing arrangements.

As a result of the refinancing of the Company's existing bank credit
facilities, in 2001, the Company wrote-off the remaining balances of deferred
financing costs originally recorded approximating $7,250. This write-off is
included within amortization of deferred financing costs on the accompanying
statement of consolidated operations for the year ended December 31, 2001.

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 are
redeemable at 100% in 2003 plus accrued and unpaid interest.

On March 5, 2003 the Company redeemed its $84,175 10 1/4% Senior Notes.
These notes were called at redemption value plus accrued interest of $2,229.
These notes were redeemed 15 months ahead of maturity. The Company funded this
transaction with additional borrowings under its credit facilities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

11. LONG-TERM DEBT (CONTINUED)
8 1/2% SENIOR NOTES. Interest is payable semi-annually in February and
August at an annual rate of 8 1/2%. The 8 1/2% Senior Notes mature on
February 1, 2006, with no sinking fund requirements. The 8 1/2% Senior Notes are
redeemable in whole or in part, at the option of the Company, at 100% in 2003
plus accrued and unpaid interest. The unamortized discount for these notes
totaled $493 and $646 at December 31, 2002 and 2001, respectively.

7 5/8% SENIOR NOTES. Interest is payable semi-annually in April and
October at the annual rate of 7 5/8%. The 7 5/8% Senior Notes mature on
April 1, 2008, with no sinking fund requirements. The 7 5/8% Senior Notes may
not be redeemed prior to April 1, 2003 other than in connection with a change of
control. Beginning on April 1, 2003 and thereafter, the 7 5/8% Senior Notes are
redeemable in whole or in part, at the option of the Company, at prices ranging
from 103.813% in 2003 with annual reductions to 100% in 2006 and thereafter,
plus accrued and unpaid interest. The unamortized discount for these notes
totaled $803 and $989 at December 31, 2002 and 2001, respectively.

8 7/8% SENIOR NOTES. In 2001, the Company completed an offering of $500,000
of 8 7/8% Senior Notes. Net proceeds from this offering of $492,685 were used to
repay borrowings under the revolving credit facilities. The 8 7/8% Senior Notes
mature on May 15, 2011, with no sinking fund requirements, and have interest
payable semi-annually in May and November at an annual rate of 8 7/8%. Beginning
in 2006, the 8 7/8% Senior Notes are redeemable at 104.438% with annual
reductions to 100% in 2009 plus accrued and unpaid interest. The unamortized
discount for these notes totaled $6,201 and $7,022 at December 31, 2002 and
2001, respectively.

If the Company becomes subject to a change of control, each holder of the
notes will have the right to require the Company to purchase any or all of the
notes at a purchase price equal to 101% of the aggregate principal amount of the
notes plus accrued and unpaid interest, if any, to the date of purchase.

During the third quarter of 2002, the Board of Directors authorized the
Company to expend up to $20,000 for the purchase of its senior notes in private
or public transactions. During the fourth quarter of 2002, the Board of
Directors increased the authorization to an aggregate of $90,000. In 2002, the
Company repurchased $15,825 of the 10 1/4% Senior Notes (carrying value of
$15,825) for $14,300 plus accrued interest, $8,500 of the 8.50% Senior Notes
(carrying value of $8,485) for $7,838 plus accrued interest, $23,885 of the
7 5/8% Senior Notes (carrying value of $23,806) for $21,089 plus accrued
interest and $24,500 of the 8 7/8% Senior Notes (carrying value of $24,176) for
$21,210 plus accrued interest. The Senior Note purchases include fees associated
with these purchases. These purchases resulted in a gain of $7,855 recorded in
other, net on the accompanying statement of consolidated operations for the year
ended December 31, 2002.

The 10 1/4% Senior Notes, 8 1/2% Senior Notes, 7 5/8% Senior Notes, and the
8 7/8% Senior Notes (together referred to as the "Senior Notes"), and the credit
facilities, all rank senior in right of payment to all subordinated obligations
which PRIMEDIA Inc. (a holding company) may incur. The Senior Notes are secured
by a pledge of stock of PRIMEDIA Companies Inc.

The Company is herewith providing detailed information and disclosure as to
the methodology used in determining compliance with the leverage test in the
credit agreements. Under its various credit and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

11. LONG-TERM DEBT (CONTINUED)
senior note agreements, the Company is allowed to designate certain businesses
as unrestricted subsidiaries to the extent that the value of those businesses
does not exceed the permitted amounts, as defined in these agreements. The
Company has designated certain of its businesses as unrestricted (the
"Unrestricted Group"), which primarily represent Internet businesses, trademark
and content licensing and service companies, new launches (including traditional
start-ups), other properties under evaluation for turnaround or shutdown and
foreign subsidiaries. Indebtedness under the bank credit facilities and senior
note agreements is guaranteed by each of the Company's domestic restricted
subsidiaries in accordance with the provisions and limitations of the Company's
credit and senior note agreements. The guarantees are full, unconditional and
joint and several. The Unrestricted Group does not guarantee the bank credit
facilities or senior notes, and its results (positive or negative) are not
reflected in the EBITDA of the Restricted Group, as defined in the Company's
credit and senior note agreements for purposes of determining compliance with
certain financial covenants under these agreements. The Company has established
intracompany and intercompany arrangements that implement transactions, such as
leasing, licensing, sales and related services and cross-promotion, between
restricted and unrestricted subsidiaries, which management believes is on an
arms length basis and as permitted by the credit and senior note agreements.
These intracompany and intercompany arrangements afford strategic benefits
across the Company's properties and, in particular, enable the Unrestricted
Group to utilize established brands and content, promote brand awareness and
increase traffic and revenue to the Company's new media properties. For
company-wide consolidated financial reporting, these intracompany and
intercompany transactions are eliminated in consolidation. Additionally, the
EBITDA of the Restricted Group, as determined for purposes of the leverage ratio
and the pricing of the loans under the credit agreement in accordance with these
agreements, omits restructuring charges and is adjusted for the trailing four
quarters results of acquisitions and divestitures and estimated savings for
acquired businesses.

The scheduled repayments of all debt outstanding, net of unamortized
discount, including capital leases and adjusted to reflect the Company's early
redemption of its 10 1/4% Senior Notes in March 2003, are as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

12. INCOME TAXES

At December 31, 2002, the Company had aggregate net operating and capital
loss carryforwards for Federal and State income tax purposes of $1,722,781 which
will be available to reduce future taxable income. The utilization of such net
operating losses ("NOLs") and capital losses 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
NOLs. The capital losses may only be used to offset future capital gains. The
NOLs and capital losses are scheduled to expire in the following years:

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PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

12. INCOME TAXES (CONTINUED)
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 and capital loss carryforwards. The tax effects of significant items
comprising the Company's net deferred income tax assets are as follows:

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PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

12. INCOME TAXES (CONTINUED)

A reconciliation of the income tax expected at the U.S. federal statutory
income tax rate of 35% to the income taxes provided is set forth below:

At December 31, 2002, 2001, and 2000, management of the Company reviewed
recent operating results and projected future operating results. At the end of
2000, management determined that a portion of the net deferred income tax assets
would likely be realized. However, at the end of 2001, management determined
that the net deferred income tax assets would not likely be realized.
Historically, the Company did not need a valuation allowance for the portion of
the tax effect of net operating losses equal to the amount of tax-deductible
goodwill and trademark amortization expected to occur during the carryforward
period of the net operating losses based on the timing of the reversal of these
taxable temporary differences. As a result of the adoption of SFAS 142, the
reversal will not occur during the carryforward period of the net operating
losses. Therefore, the Company recorded a deferred income tax expense of
approximately $52,000 on January 1, 2002 and $20,500 during 2002 which would not
have been required prior to the adoption of SFAS 142. The charge recorded to
increase the valuation allowance was reduced by the reversal of tax liabilities
of $23,000 during the third quarter of 2002 as a result of the impairments of
goodwill and certain indefinite lived intangible assets. The income tax expense
recorded in 2002 is net of tax refunds received. During 2001 and 2000, the
Company increased its valuation allowance due to continued historical operating
losses and the impairment of investments, resulting in a net provision for
income taxes of $135,000 and $41,200, respectively. In addition, during 2001 and
2000, the Company's valuation allowance was impacted by the acquisition of About
and various dispositions. This change in valuation allowance did not impact the
provision for income taxes.

A portion of the valuation allowances in the amount of approximately
$103,900 at December 31, 2002 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.

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PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

13. EXCHANGEABLE PREFERRED STOCK

Exchangeable Preferred Stock consists of the following:

$10.00 SERIES D EXCHANGEABLE PREFERRED STOCK. Annual dividends of $10.00
per share on the Series D Preferred Stock are cumulative and payable quarterly,
in cash. On or 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 the Company is in
compliance with the terms of its credit agreement. The liquidation and
redemption value at December 31, 2002 and 2001 was $176,987 and $200,000,
respectively.

$9.20 SERIES F EXCHANGEABLE PREFERRED STOCK. Annual dividends of $9.20 per
share on the Series F Preferred Stock are cumulative and payable quarterly, in
cash. The Company is required to redeem the Series F 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 F Preferred Stock
is exchangeable into 9.20% Class F Subordinated Exchange Debentures due 2009, in
whole but not in part, at the option of the Company on any scheduled dividend
payment date provided the Company is in compliance with the terms of its credit
agreement. As of December 31, 2002 and 2001, the liquidation and redemption
value of the Series F Preferred Stock was $102,333 and $125,000, respectively.

$8.625 SERIES H EXCHANGEABLE PREFERRED STOCK. Annual dividends of $8.625
per share on the Series H Preferred Stock are cumulative and payable quarterly,
in cash. On or after April 1, 2003, the Series H Preferred Stock may be redeemed
in whole or in part, at the option of the Company, at prices ranging from
104.313% with annual reductions to 100% in 2006, plus accrued and unpaid
dividends. The Company is required to redeem the Series H Preferred Stock on
April 1, 2010 at a redemption price equal to the liquidation preference of $100
per share, plus accrued and unpaid dividends. The Series H Preferred Stock is
exchangeable, in whole but not in part, at the option of the Company, on any
scheduled dividend payment date into 8 5/8% Class H Subordinated Exchange
Debentures due 2010 provided the Company is in compliance with the terms of its
credit agreement. As of December 31, 2002 and 2001, the liquidation and
redemption value of the Series H Preferred Stock was $214,089 and $250,000,
respectively.

During the first quarter of 2002, the Board of Directors authorized the
exchange by the Company of up to approximately $100,000 of exchangeable
preferred stock. During May 2002, the Board of Directors

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

13. EXCHANGEABLE PREFERRED STOCK (CONTINUED)
increased the authorization to an aggregate of approximately $165,000 of
exchangeable preferred stock. In 2002, the Company exchanged $23,013 liquidation
value of Series D Exchangeable Preferred Stock, with a carrying value of
$22,650, for 4,467,033 shares of common stock, $22,667 liquidation value of
Series F Exchangeable Preferred Stock, with a carrying value of $22,103, for
4,385,222 shares of common stock and $35,911 liquidation value of Series H
Exchangeable Preferred Stock, with a carrying value of $35,152, for 8,368,516
shares of common stock. The cumulative gain on these exchanges of $32,788 for
the year ended December 31, 2002 is included as a component of additional
paid-in capital on the accompanying consolidated balance sheet at December 31,
2002. This gain is included in the calculation of basic and diluted loss
applicable to common shareholders per common share on the statements of
consolidated operations for year ended December 31, 2002.

There are no required maturity payments for the Company's Exchangeable
Preferred Stock during the next five years.

14. COMMON STOCK

During the second quarter of 2002, the Board of Directors approved and the
shareholders ratified an amendment to the Company's Certificate of
Incorporation, which increased the number of authorized shares of the Company's
common stock from 300,000,000 to 350,000,000.

STOCK ISSUANCES. In April 2000, Liberty Media Corporation ("Liberty Media")
invested $200,000 in cash in exchange for 8,000,000 shares of the Company's
issued and outstanding shares of common stock, subject to a one-year lockup, and
a warrant to purchase an additional 1,500,000 shares of the Company's common
stock. The warrant received by Liberty Media is exercisable at $25 per share on
or before April 19, 2003. Additionally, Liberty Media has received an option to
acquire a 12.5% stake in the Company's subsidiary, PRIMEDIA Digital Video.

During 2000, in connection with PRIMEDIA's investment in Internet Gift
Registries, Inc. ("IGR"), PRIMEDIA agreed to make an offer to exchange shares of
its common stock ("the exchange offering") for up to 3,764,000 shares of IGR
stock and up to 556,088 shares of IGR Series B Preferred Stock. In July 2001,
pursuant to the exchange offering, PRIMEDIA issued 969,633 shares of common
stock. The exchange was recorded at approximately $6,500, the fair market value
of the Company's shares on the date of issuance.

Pursuant to PRIMEDIA's acquisition of About in February 2001, the Company
exchanged approximately 52,400,000 shares of its common stock for the common
stock of About. Of the total shares exchanged, approximately 7,500,000 were held
by PRIMEDIA prior to the acquisition and were classified as treasury shares
after the exchange.

In August 2001, in connection with PRIMEDIA's acquisition of EMAP, KKR 1996
Fund L.P. ("KKR 1996 Fund"), a limited partnership associated with KKR purchased
10,800,000 shares of newly issued common stock for $50,760. Concurrently, KKR
1996 Fund purchased 15,796,000 shares of PRIMEDIA's Series K Convertible
Preferred Stock for $74,240. These shares were converted into approximately
15,796,000 shares of the Company's common stock in September 2001 (See Note 3).

SHARE REPURCHASES. Under its share repurchase program, the Company's board
of directors authorized the repurchase of up to $30,000 of its outstanding
common stock from time to time in the open market and through privately
negotiated transactions. In connection with the exchange of $6,150 of Series H
Preferred Stock in December 2002, the Company repurchased the related 2,860,465
common shares exchanged for the Series H Preferred Stock for $1.48 per share.
The transaction settled in January

83

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

14. COMMON STOCK (CONTINUED)
2003. There were no repurchases during 2001. During 2000, the Company
repurchased 29,500 shares of common stock for $512 at a weighted average price
of $17.36. All repurchases above are recorded at cost.

STOCK PURCHASE AND OPTION PLANS. The PRIMEDIA Inc. 1992 Stock Purchase and
Option Plan (the "Stock Option Plan") authorizes sales of shares of common stock
and grants of incentive awards in the form of, among other things, stock options
to key employees and other persons with a unique relationship with the Company.
The Stock Option Plan has authorized grants of up to 35,000,000 shares of the
Company's common stock or options to management personnel.

During 1999, the Company granted 1,380,711 restricted shares of common stock
from the treasury, to a senior executive. During 2000, pursuant to the grant,
the vesting period accelerated based upon the achievement of certain stock
performance measures. Accordingly, non-cash compensation expense of $15,250 was
recognized in 2000. In addition, in 2001, 2,955,450 restricted shares of the
Company's common stock were issued to About executives in connection with the
employment agreements entered into as a result of the About merger (see
Note 17).

As part of the merger with About, the Company assumed certain About stock
purchase and option plans. No stock purchases will be allowed and no options
will be granted under these plans and grantees will be issued the Company's
common stock upon exercise of options. On the date of merger, the Company
assumed approximately 13,400,000 options outstanding under the About plan (see
Note 3). These have been included as options granted in 2001 in the table below.

Stock options are generally granted with exercise prices at or above quoted
market value at time of issuance. Most of the options are exercisable at the
rate of 20% per year over a five-year period commencing on the effective date of
the grant. Most options granted pursuant to the Stock Option Plan will expire no
later than ten years from the date the option was granted.

During 1999, the Company granted 5,000,000 stock options to a senior
executive. These options were to vest over 4 years, with accelerated vesting
upon the achievement of certain stock performance measures. During 2000,
2,000,000 of these options vested in accordance with the accelerated vesting
provisions of the original grant. During 2001, the Company granted approximately
2,200,000 stock options to its employees at an exercise price of $1.85 per
share, the market price of the Company's common stock on the date of issuance.

In addition, in connection with the employment agreements entered into as a
result of the About merger, 3,482,300 stock options were issued to About
executives at an exercise price equal to 30% of the fair market value per share
on the date of issuance (see Note 17).

In August 2001, in connection with the EMAP financing, the Company paid the
KKR 1996 Fund a commitment fee consisting of warrants to purchase
1,250,000 shares of common stock of the Company at an exercise price of
$7.00 per share and a funding fee consisting of warrants to purchase an
additional 2,620,000 shares of the Company's stock at an exercise price of
$7.00 per share. The Company also granted 4,000,000 warrants to the KKR 1996
Fund in 2001 and 2002. The grants were based on the length of time that the
Series J Preferred Stock was outstanding. See Note 3 for further discussion.

In April 2002, the Company granted certain executives an aggregate total of
6,630,000 options to purchase shares of the Company's common stock. The exercise
prices of these options range from $4.00 per share to $6.00 per share. The
options granted at $4.00 per share vest monthly over a four-year period
following the date of the grant. The remaining options vest in 2010 unless the
Company achieves certain earnings targets. Upon the achievement of these
targets, the vesting of the respective options is accelerated upon the financial
statements for the relevant year being finalized.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

14. COMMON STOCK (CONTINUED)
A summary of the status of the Company's stock option plan as of December
31, 2002, 2001 and 2000, and changes during the years ended on those dates is
presented below:

The weighted-average fair value per option for options granted in 2002, 2001
and 2000 was $2.52, $5.39 and $13.02, respectively.

Consistent with the past practices of the Company, as part of director's
compensation for non-management, non-KKR directors, on May 24, 2002, the Company
granted Messrs. Bell, Feldberg and Greeniaus 50,000 options to purchase common
stock of the Company at an exercise price of $2.02 per share under the Stock
Option Plan. These options are included in the above stock option table.

In 2001, the Company retained Capstone Consulting LLC ("Capstone") to
provide consulting services to the Company primarily to identify and advise on
potential opportunities to reduce costs at the Company. In 2002, the Company
paid Capstone $800 in cash for consulting services received. In addition, on
July 26, 2002, the Company granted 1,800,000 options to purchase the Company's
common stock to Capstone for services received. These options are fully vested
as of the grant date, have a ten year life and an exercise price of $1.80 per
share. The exercise price equals 200% of the share price on the grant date.
Although neither KKR nor any entity affiliated with KKR owns any of the equity
of Capstone, KKR has provided financing to Capstone. Related non-cash
compensation of $990, determined using the Black Scholes pricing model, was
recorded for the year ended December 31, 2002. These options are not included in
the above stock option table.

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PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

14. COMMON STOCK (CONTINUED)
The following table summarizes information about stock options outstanding
and exercisable at December 31, 2002:

SFAS 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 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 APB 25. Under APB 25, when the
exercise price of the Company's employee stock options equals or exceeds 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 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of SFAS 123. The fair
value of these options was estimated at the date of grant using the Black-
Scholes pricing model for options granted in 2002, 2001 and 2000. The following
weighted-average assumptions were used for 2002, 2001 and 2000, respectively:
risk-free interest rates of 4.61%, 4.70% and 6.29%; dividend yields of 0.0%,
0.0% and 0.0%; volatility factors of the expected market price of the Company's
common stock of 122.20%, 100.42% and 72.12%; and a weighted-average expected
life of the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

14. COMMON STOCK (CONTINUED)
option of ten years. The estimated fair value of options granted during 2002,
2001 and 2000 was $17,630, $110,007 and $18,467, respectively.

The Black Scholes pricing 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. See Note 2 for
discussion of pro forma information and SFAS 148.

The Company had reserved approximately 13,200,000 shares of the Company's
common stock for future grants in connection with the Stock Option Plan at
December 31, 2002.

15. LOSS PER COMMON SHARE

Loss per common share for the years ended December 31, 2002, 2001 and 2000
has been determined based on net loss available to common shareholders, divided
by the weighted average number of common shares outstanding for all years
presented.

Diluted net loss per share is computed using the weighted average number of
common and potentially dilutive common shares outstanding during the period
using the treasury stock method. Potentially dilutive common shares include the
effect of stock options, warrants and convertible preferred stock. Options to
purchase 29,068,881, 28,752,939, and 13,463,101 shares of common stock were
outstanding at December 31, 2002, 2001 and 2000, respectively, but were not
included in the computation of diluted loss per share because the effect of
their inclusion would be antidilutive. In addition, warrants to purchase
11,370,000, 7,620,000 and 1,500,000 shares of common stock, and the potential
conversion of the Series J Convertible Preferred Stock including declared
dividends into approximately 20,800,000, 18,400,000 and 0 shares of common stock
were not included in the computation of diluted loss per share for 2002, 2001
and 2000, respectively, because the effect of their inclusion would be
antidilutive.

16. ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss as of December 31, 2002 and 2001 is
presented in the following table:

17. NON-CASH COMPENSATION AND NON-RECURRING CHARGES

In connection with the About merger, certain senior executives were granted
2,955,450 shares of restricted PRIMEDIA common stock. These shares of restricted
PRIMEDIA common stock, which were valued at $9.50 per share, the closing stock
price on February 28, 2001, vest at a rate of 25% per year and are subject to
the executives' continued employment. Unearned compensation of $28,077 was
recorded for the year ended December 31, 2001. Non-cash compensation of $2,210
and $13,572, which reflects pro rata vesting on a graded basis, were recorded
for the years ended December 31, 2002 and 2001, respectively.

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PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

17. NON-CASH COMPENSATION AND NON-RECURRING CHARGES (CONTINUED)
In addition, these senior executives were granted options to purchase
3,482,300 shares of PRIMEDIA common stock at an exercise price of $2.85 per
share, equal to thirty percent of the fair market value per share on that date.
These options vest at a rate of 25% per year and are subject to the executives'
continued employment. Unearned compensation of $23,157 was recorded for the year
ended December 31, 2001. Non-cash compensation of $1,823 and $11,194, which
reflects pro rata vesting on a graded basis was recorded for the years ended
December 31, 2002 and 2001 respectively. Amounts reflect a 70% market value
discount ($6.65 per share) based on a PRIMEDIA per share market value of $9.50
which was the closing price on February 28, 2001.

Two senior executives of About also entered into share lockup agreements
with the Company, pursuant to which they agreed to specific restrictions
regarding the transferability of their shares of PRIMEDIA common stock issued in
the merger. Under the terms of those agreements, during the first year after the
closing of the merger, the executives could sell a portion of their shares of
the Company's common stock, subject to the Company's right of first refusal with
respect to any sale. In the event that the gross proceeds received on sale were
less than $33,125 (assuming all shares are sold), the Company agreed to pay the
executives the amount of such shortfall ("the Shortfall Payment").

During the third quarter of 2001, one of the executives, who subsequently
left the Company, advised the Company that he was selling 1,429,344 shares of
the Company's common stock in the market. Concurrently therewith, the executive
assigned to a financial institution the right to receive his Shortfall Payment
on that number of shares. The financial institution advised the Company that it
purchased 1,429,344 shares of the Company's common stock in the market. The
financial institution agreed to waive its right to the Shortfall Payment in
exchange for the Company's agreement to make the financial institution whole if
it sold such shares, which it purchased in the market, for proceeds of less than
approximately $23,400. As of March 8, 2002, the financial institution had sold
all of the shares in the open market for proceeds of approximately $3,300. A
liability of approximately $18,400 representing the Shortfall Payments due under
both agreements, based on the fair value of the Company's stock was included as
a component of accrued expenses and other on the accompanying consolidated
balance sheet at December 31, 2001. In 2002, the Company recorded an additional
expense of $2,635 related to the mark to market of the shortfall payment. In
April 2002, the Company paid approximately $20,300 to the financial institution
upon which the liability has been fully settled. In addition, in 2002, the
Company paid approximately $700 to the other executive under this agreement.

As a result of this executive leaving the Company, effective December 2001,
half of his restricted shares (1,105,550 shares) and options (1,302,650 options)
were accelerated and the remainder were forfeited, resulting in a reversal of
unearned compensation of $19,166 in 2001. The accelerated options expired
unexercised during the first quarter of 2002.

On July 26, 2002, the Company granted 1,800,000 options to purchase the
Company's common stock to Capstone for services received. Related non-cash
compensation of $990, determined using the Black Scholes pricing model, was
recorded for the year ended December 31, 2002. See Note 14 for additional
information regarding the terms of the option grant and the services provided by
Capstone.

For the year ended December 31, 2002, the Company recorded $15,665 of
non-cash compensation and non-recurring charges. These non-cash compensation
charges consisted of a $4,033 charge related to the restricted stock and option
grants to the senior executives of About discussed above, a $2,775 related to
the amortization of the intrinsic value of unvested "in-the-money" options
issued in connection with the About merger, a $5,232 charge related to the
issuance of stock in connection with an acquisition and a $990

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

17. NON-CASH COMPENSATION AND NON-RECURRING CHARGES (CONTINUED)
charge for the options granted for consulting services received as discussed
above. Additionally, a charge of $2,635 was recorded to account for the mark to
market of the Shortfall Payment discussed above.

For the year ended December 31, 2001, the Company recorded $58,181 of
non-cash compensation and non-recurring charges. These non-cash compensation
charges consisted of a $24,766 charge related to the restricted stock and option
grants to the senior executives of About discussed above, a $3,360 charge
related to the amortization of the intrinsic value of unvested "in-the-money"
options issued in connection with the About merger and a $1,502 charge related
to the vesting of stock in connection with an acquisition. These non-recurring
charges included a $26,480 charge related to the share lockup arrangements with
certain executives of About discussed above and a $2,073 charge related to
certain non-recurring compensation arrangements with certain senior executives.

During the year ended December 31, 2000, the Company recorded $27,810 of
non-cash compensation charges relating to the hiring and retention of certain
key executives. These non-cash compensation charges consisted of a $15,250
charge related to 1,380,711 restricted shares of common stock granted to a
senior executive in 1999, a $12,437 charge related to the extension of the
expiration period of 1,000,000 options, previously granted to a senior
executive, for an additional 10 year period beyond the original expiration date
and a $123 charge related to the granting of stock options to certain directors.
During the second quarter of 2000, the Company recorded $7,400 of non-recurring
charges relating to the recoverability of certain assets of the
business-to-business segment.

Non-cash compensation and non-recurring charges are omitted from the
Company's calculation of EBITDA, as defined in the Company's Credit and Senior
Note agreements (see Note 11).

18. PROVISION FOR SEVERANCE, CLOSURES AND RESTRUCTURING RELATED COSTS

During 2001 and 2000, the Company implemented plans to integrate the
operations of the Company and consolidate many functions and facilities. The
Company expects that these plans will continue to result in future savings. All
restructuring related charges were expensed as incurred.

During 2002, the Company announced additional cost initiatives that would
continue to implement and expand upon the cost initiatives enacted during 2001
and 2000.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

18. PROVISION FOR SEVERANCE, CLOSURES AND RESTRUCTURING RELATED COSTS
(CONTINUED)
Details of the initiatives implemented and the payments made in furtherance
of these plans in the years ended December 31, 2002 and 2001 are presented in
the following tables:

The estimated fair value of the senior notes was determined based on the
quoted market prices and the fair value of the preferred stocks was based on
recent bid prices. The estimated fair value of the interest rate swap agreements
was determined using discounted cash flow models.

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

21. BENEFIT PLANS AND OTHER EMPLOYEE COSTS

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 $5,100 in 2002, $5,500 in 2001 and $5,800 in 2000.

EMPLOYEE STOCK PURCHASE PLAN ("ESPP"). During March 2000, the Company
approved and implemented the PRIMEDIA Employee Stock Purchase Plan. The ESPP is
intended to encourage long-term

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

21. BENEFIT PLANS AND OTHER EMPLOYEE COSTS (CONTINUED)
investment in the Company and to assist eligible employees of the Company and
its eligible subsidiaries to purchase common stock of the Company through
payroll deductions at a discount. The ESPP permits full-time or part-time
employees who customarily work at least 20 hours per week and five months a year
to purchase shares of the Company's common stock at the lesser of 90% of the
closing stock price on the first or last day of the offering period.

For the offering period ended December 31, 2000, 132,793 shares were issued
in January 2001, at a share price of $10.7438. For the offering period ended
June 30, 2001, 182,106 shares were issued in July 2001, at a share price of
$6.111 and for the offering period ended December 31, 2001, 207,044 shares were
issued in January 2002, at a share price of $3.915. For the offering period
ended June 30, 2002, 573,986 shares were issued in July 2002, at a share price
of $1.098 and for the offering period ended December 31, 2002, 365,207 shares
were issued in January 2003, at a share price of $1.206.

22. COMMITMENTS AND CONTINGENCIES

COMMITMENTS. Total rent expense under operating leases was $41,953, $49,388
and $41,310 for the years ended December 31, 2002, 2001 and 2000, respectively.
Certain leases are subject to escalation clauses and certain leases contain
renewal options. The leases primarily relate to real estate and equipment. The
following annual rental commitments includes an aggregate of $138,656 which has
been reserved for as part of the provision for severance, closures and
restructuring related costs (see Note 18) and is included in accrued expenses
and other in the accompanying December 31, 2002 consolidated balance sheet at
its net present value and net of related sublease income. Minimum rental
commitments under noncancelable operating leases are as follows:

Future minimum lease payments under capital leases (see Notes 7 and 11) are
as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

22. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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 effect on the consolidated
financial statements of the Company.

During 2002, PRIMEDIA contributed the Gravity Games, a product previously
acquired from EMAP, to a limited liability company (the "LLC") formed jointly by
PRIMEDIA, on the one hand, and Octagon Marketing and Athlete
Representation, Inc., on the other hand, with each party owning 50%. To date,
the Company has contributed $2,803 in cash to this venture. The LLC has entered
into an agreement with NBC Sports, a division of National Broadcasting
Company, Inc., which requires the LLC to pay specified fees to NBC for certain
production services performed by NBC and network air time provided by NBC,
during each of 2002 and 2003. Under the terms of this agreement and a related
guarantee, PRIMEDIA could be responsible for the payment of a portion of such
fees, in the event that the LLC failed to satisfy its payment obligations to
NBC. The LLC satisfied all of its payment obligations due to NBC in 2002. The
maximum amount for which PRIMEDIA could be liable in 2003 is $2,200. As this
liability is contingent on the LLC's failure to pay and the occurrence of
certain other events and existence of certain other conditions, the Company has
not recorded a liability on the accompanying consolidated balance sheet as of
December 31, 2002; however, the asset representing the Company's 50% investment
in the LLC as well as the Company's share of the LLC's losses are reflected in
the Company's consolidated financial statements. The Company's investment in the
LLC ($1,526) is reflected as a component of other investments on the
accompanying consolidated balance sheet at December 31, 2002. The Company's
share of the LLC's losses ($1,277) is reflected as a component of other, net on
the accompanying statements of consolidated operations for the year ended
December 31, 2002.

At December 31, 2002, the Company had $19,388 aggregate face amount of
letters of credit outstanding (see Note 11).

As of and for the year ended December 31, 2002, no officers or directors of
the Company have been granted loans by the Company, nor has the Company
guaranteed any obligations of such persons.

23. RELATED PARTY TRANSACTIONS

The Company and the KKR 1996 Fund completed the financing transactions
described in Note 3. In addition, during each of the years ended December 31,
2002, 2001 and 2000, the Company incurred and paid administrative and other fees
to KKR, an affiliated party, of $1,000. For the years ended December 31, 2002,
2001 and 2000, $250, $750 and $250, respectively, of these fees were capitalized
as acquisition and financing costs. During the years ended December 31, 2002,
2001 and 2000, the Company paid directors' fees to certain partners of KKR
aggregating $206, $220 and $206, respectively. In February 2003, $186 of
director fees were paid to Michael Tokarz, a former director of the Company, in
the form of 29,284 shares of the Company's common stock as he was permitted to
defer the payment of his fees and receive them in the form of common stock
pursuant to the Directors' Deferred Compensation Plan.

During 2000, a partnership affiliated with KKR purchased shares of About on
the open market. These shares converted to shares of the Company at the merger
completion date.

On July 26, 2002, the Company granted 1,800,000 options to purchase the
Company's common stock to Capstone for services received. See Note 14 for
additional information regarding the terms of the option grant, the services
provided by Capstone and the Company's relationship with Capstone.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

24. UNAUDITED QUARTERLY FINANCIAL INFORMATION

In the opinion of the Company's management, all adjustments, consisting of
normal recurring accruals, except as described below, considered necessary for a
fair presentation have been included on a quarterly basis.

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PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

24. UNAUDITED QUARTERLY FINANCIAL INFORMATION (CONTINUED)

During the first quarter of 2002, the Company recorded non-cash compensation
and non-recurring charges of $5,685, provision for severance, closures and
restructuring related costs of $10,531, gain on the sale of businesses and
other, net of $555, provision for the impairment of investments of $3,459,
deferred income tax expense of $58,000 and an impairment of its goodwill and
trademarks of $388,508 as a cumulative effect of a change in accounting
principle in connection with the Company's adoption of SFAS 142. During the
second quarter of 2002, the Company recorded non-cash compensation and non-
recurring charges of $2,061, provision for severance, closures and restructuring
related costs of $14,562, loss on the sale of businesses and other, net of
$2,686, provision for impairment of investments of $4,098 and deferred income
tax expense of $6,500. During the third quarter of 2002, the Company recorded
non-cash compensation and non-recurring charges of $2,866, provision for
severance, closures and restructuring related costs of $2,158, gain on the sale
of businesses and other, net of $290, provision for impairment of investments of
$8,140, a provision for impairment related to certain long-lived assets of
$15,199 in connection with SFAS 144 and a deferred income tax benefit of
$19,000. During the fourth quarter of 2002, the Company recorded non-cash
compensation and non-recurring charges of $5,053, provision for severance,
closures and restructuring related costs of $24,663, loss on the sale of
businesses and other, net of $5,406, a provision for impairment of investments
of $3,534, a provision for impairment of goodwill and trademarks of $98,046
related to SFAS 142, a provision for impairment of certain long-lived assets of
$45,299 related to SFAS 144 and deferred income tax expense of $4,000. All of
these items, with the exception of the provision for the impairment of
investments, income tax expense and cumulative effect of a change in accounting
principle are included in operating loss.

During the first quarter of 2001, the Company recorded non-cash compensation
and non-recurring charges of $2,560, provision for severance, closures and
restructuring related costs of $6,487, gain on the sale of businesses and other,
net of $527 and provision for impairment of investments of $3,248. During the
second quarter of 2001, the Company recorded non-cash compensation and
non-recurring charges of $10,168, provision for severance, closures and
restructuring related costs of $6,015, loss on the sale of businesses and other,
net of $24 and provision for impairment of investments of $27,559. During the
third quarter of 2001, the Company recorded non-cash compensation and
non-recurring charges of $47,440, provision for severance, closures and
restructuring related costs of $15,633, loss on the sale of businesses and
other, net of $70 and provision for impairment of investments of $57,684. In
addition, during the third quarter of 2001, the Company recorded $47,460 of
impairments to write-down certain long-lived assets, primarily the excess of
purchase price over net assets acquired and other intangible assets. These
impairments are included as a component of amortization of intangible assets,
excess of purchase price over net assets acquired and other on the accompanying
statement of consolidated operations. During the fourth quarter of 2001, the
Company recorded non-cash compensation and non-recurring charges of ($1,987),
provision for severance, closures and restructuring related costs of $15,785,
gain on the sale of businesses and other, net of $56,800 primarily attributable
to the sale of Bacons, provision for impairment of investments of $18,021 and
deferred income tax expense of $135,000. In addition, during the fourth quarter
of 2001, the Company recorded $397,239 of impairments to write down certain
long-lived assets, primarily the excess of purchase price over net assets
acquired and other intangible assets. These impairments are included as a
component of amortization of intangible assets, excess of purchase price over
net assets acquired and other on the accompanying statement of consolidated
operations. All of these items, with the exception of the provision for the
impairment of investments and income tax expense, are included in operating
income (loss).

96

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

25. BUSINESS SEGMENT INFORMATION

Upon adoption of SFAS 144, prior year results have been reclassified to
reflect the results of the Modern Bride Group, Exitinfo, Chicago, Horticulture,
Doll Reader, the American Baby Group and IN New York as discontinued operations
for the years prior to their respective divestiture dates. In addition, the
Company adopted EITF 00-25 and 01-9 which resulted in a net reclassification of
product placement costs previously recorded as operating expenses to reductions
of sales from such activities.

The Company's operations have been classified into two business segments:
consumer and business-to-business. The Company's consumer segment produces and
distributes magazines, guides, videos and internet products for consumers in
various niche markets. The Company's business-to-business segment produces and
distributes magazines, books, directories, databases, vocational training
materials and internet products to business professionals in such fields as
communications, agriculture, professional services, media, transportation and
healthcare. These segment results are regularly reviewed by the Company's chief
operating decision-maker and the remainder of the executive team to make
decisions about resources to be allocated to the segment and assess its
performance. The information presented below includes certain allocations and
intracompany and intercompany transactions and is therefore, not necessarily
indicative of the results had the operations existed as stand-alone businesses.
Eliminations include intracompany and intercompany content and brand licensing,
advertising and other services, which are billed at what management believes are
prevailing market rates. These transactions, which represent transactions
between operating units within the same business segment or transactions between
operating units in different business segments, are eliminated in consolidation.
Intracompany eliminations were $104,271, $61,621 and $44,696 for the years ended
December 31, 2002, 2001 and 2000, respectively. Intercompany eliminations were
$6,106, $3,830 and $1,616 for the years ended December 31, 2002, 2001 and 2000,
respectively.

The Non-Core Businesses include: QWIZ, Inc. (divested in April 2001),
Bacon's (divested in November 2001) and certain titles of The Business
Magazines & Media Group and The Consumer Magazines & Media Group which are
discontinued or divested. In addition, during 2001, the Company has restructured
or consolidated several new media properties, whose value can be realized with
far greater efficiency by having select functions absorbed by the core
operations and has included these properties in Non-Core Businesses. The Company
has segregated the Non-Core Businesses from the aforementioned segments because
the Company's chief operating decision-maker and the remainder the executive
team view these businesses separately when evaluating and making decisions
regarding ongoing operations. In the ordinary course of business, corporate
administrative costs of approximately $1,900, $9,900 and $9,600 were allocated
to the Non-Core Businesses for the years ended December 31, 2002, 2001 and 2000,
respectively. In 2002, the Company has reclassified certain product lines as
Non-Core Businesses and in certain instances has reclassified prior periods
accordingly. The Company believes that the amounts that have not been
reclassified are not significant. Effective June 30, 2002, the Company has not
classified any additional businesses as Non-Core Businesses nor have any
additional costs been allocated to the Non-Core Businesses subsequent to
June 30, 2002.

Information as to the operations of the Company in different business
segments is set forth below based on the nature of the targeted audience.
Corporate represents items not allocated to other business segments. PRIMEDIA
evaluates performance based on several factors, of which the primary financial
measure is segment earnings before interest, taxes, depreciation, amortization
and other (income) charges ("EBITDA"). Other (income) charges include non-cash
compensation and non-recurring charges, provision for severance, closures and
restructuring related costs and (gain) loss on sale of businesses and other,
net.

97

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

25. BUSINESS SEGMENT INFORMATION (CONTINUED)

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PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

25. BUSINESS SEGMENT INFORMATION (CONTINUED)
The following is a reconciliation of Segment EBITDA to operating income
(loss):

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

(1) Segment EBITDA represents earnings before interest, taxes, depreciation,
amortization and other (income) charges including non-cash compensation and
non-recurring charges of $15,665, $58,181, and $35,210 for the years ended
December 31, 2002, 2001 and 2000, respectively, a provision for severance,
closures and restructuring related costs of $51,914, $43,920 and $20,798 for
the years ended December 31, 2002, 2001 and 2000, respectively, and gain
(loss) on sale of businesses and other, net of ($7,247), $57,233 and $14,438
for years ended December 31, 2002, 2001 and 2000, respectively. Segment
EBITDA excludes $8,537 of additional restructuring related costs included in
general and administrative expenses for year ended December 31, 2001.
Segment EBITDA is not intended to represent cash flow from operating
activities and should not be considered as an alternative to net income or
loss (as determined in conformity with generally accepted accounting
principles) as an indicator of the Company's operating performance or to
cash flows as a measure of liquidity. It is presented herein as the Company
evaluates and measures each business unit's performance based on their
Segment EBITDA results. Segment EBITDA may not be available for the
Company's discretionary use as there are requirements to redeem preferred
stock and repay debt, among other payments. Segment EBITDA as presented may
not be comparable to similarly titled measures reported by other companies,
since not all companies necessarily calculate Segment EBITDA in identical
manners, and therefore, is not necessarily an accurate measure of comparison
between companies.

(2) Includes reversals of sales tax accruals that were no longer required of
$1,321 and $4,000 for the years ended December 31, 2002 and 2001,
respectively. Also includes a one-time insurance refund of $521 in 2002
related to the prior year.

(3) Depreciation includes an impairment of long-lived assets of $11,610 for the
year ended December 31, 2002. Amortization includes a provision for the
impairment of intangible assets, goodwill and other of $154,828 and $444,699
for the years ended December 31, 2002 and 2001 respectively.

(4) Includes certain integration costs primarily related to the About merger and
other Company-wide integration efforts. These costs principally represent
internal personnel costs associated with the consolidation of company-wide
functions as well as fees paid to consultants related to the centralization
of certain support functions and implementation of certain standardized
technology.

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PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT

The information that follows presents condensed consolidating financial
information as of December 31, 2002 and 2001 and for years ended December 31,
2002, 2001 and 2000 for a) PRIMEDIA Inc. (as the Issuer), b) the guarantor
subsidiaries, which are with limited exceptions, the restricted subsidiaries,
represent the core PRIMEDIA businesses and exclude investment and other
development properties included in the unrestricted category, c) the
non-guarantor subsidiaries (primarily representing Internet assets and
businesses, new launches and other properties under evaluation for turnaround or
shutdown and foreign subsidiaries), which are with limited exceptions the
unrestricted subsidiaries, d) elimination entries and e) the Company on a
consolidated basis. Certain businesses, which were included as either guarantor
or non-guarantor in 2001 have been reclassified in 2002.

The condensed consolidating financial information includes certain
allocations of revenues, expenses, assets and liabilities based on management's
best estimates which are not necessarily indicative of financial position,
results of operations and cash flows that these entities would have achieved on
a stand-alone basis and should be read in conjunction with the consolidated
financial statements of the Company. The intercompany balances in the
accompanying condensed consolidating financial statements include cash
management activities, management fees, cross promotional activities and other
intercompany charges between Corporate and the business units and among the
business units. The non-guarantor subsidiary results of operations include:
internet operations, foreign operations, certain distribution operations,
certain start-up magazine businesses, revenues and related expenses derived from
the licensing of certain products of guarantor subsidiaries and expenses
associated with the cross promotion by the guarantor subsidiaries of the
activities of the non-guarantor subsidiaries. The transactions described above
are billed, by the Company, at what the Company believes are market rates. All
intercompany related activities are eliminated in consolidation.

100

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)

PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
(DOLLARS IN THOUSANDS)

101

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)

PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2002
(DOLLARS IN THOUSANDS)

102

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)

PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2002
(DOLLARS IN THOUSANDS)

103

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)
PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2002
(DOLLARS IN THOUSANDS)

104

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)
PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)

105

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)
PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)

106

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)
PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)

107

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)

PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)

108

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)

PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)

109

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)

PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)

110

PRIMEDIA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

26. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)

PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)

111

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

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information as of March 28, 2003
regarding the Directors and executive officers of PRIMEDIA. All Directors hold
office until the next annual meeting of stockholders, and until their successors
are duly elected and qualified.

Mr. Rogers is Chairman of the Board, Chief Executive Officer and a Director
of PRIMEDIA. Mr. Rogers joined the Company in October 1999 and before that
served as President of NBC Cable since 1988 and Executive Vice President of NBC
since 1992. Mr. Rogers is also Chairman of the Executive Committee.

Mr. McCurdy has held the position of President and a Director of PRIMEDIA
for more than five years.

Ms. Chell has held the position of Vice Chairman, General Counsel, Secretary
and a Director of PRIMEDIA for more than five years.

Mr. Bae became a Director in April 2002. Mr. Bae is a limited partner of KKR
Associates and has been an executive of KKR since September 1996. Previously, he
worked at Goldman Sachs & Co. from 1994 to 1996. He is also a director of The
Boyd's Collection Ltd. and Shoppers Drug Mart. Mr. Bae serves on the
Compensation and Executive Committees.

112

Mr. Bell became a Director in May 2001. He has been the Chairman and Chief
Executive Officer of the Interpublic Group of Companies since February 2003 and
was the Vice Chairman of the Interpublic Group of Companies from July 2001 to
January 2003 and the Chairman of the Board and Chief Executive Officer of True
North Communications Inc. from 1999 through 2001. From 1994 through 1999, he was
President and Chief Executive Officer of Bozell World Wide, a division of True
North. Mr. Bell is a member of the Audit Committee.

Professor Feldberg is Professor and Dean of the Columbia University Graduate
School of Business and has been since 1989. He joined the Board in January 1997.
He is also a director of UBS Funds, Federated Department Stores, Inc., Revlon,
Inc., SAPPI, Ltd., and Select Medical Corporation. He is the Chairman of the
Audit Committee and a member of the Special Compensation Committee.

Mr. Golkin became a Director of PRIMEDIA in November 1991. He is a General
Partner of KKR Associates and was a General Partner of KKR from January 1, 1995
until January 1, 1996 when he became a member of the limited liability company
which serves as the general partner of KKR. He is also a director of Walter
Industries, Inc. and Willis Group Holdings Limited. Mr. Golkin is a member of
the Compensation and Executive Committees.

Mr. Greeniaus has been President of G-Force, Inc. since 1998. He was
Chairman and Chief Executive Officer of Nabisco, Inc. from 1993 through 1997.
Mr. Greeniaus has been a Director of PRIMEDIA since June 1998. He is also a
director of the Interpublic Group of Companies, Inc. He is a member of the Audit
Committee and the Special Compensation Committee.

Mr. Kravis became a Director of PRIMEDIA in November 1991. He is a Founding
Partner of KKR and KKR Associates. Effective January 1, 1996, he became a
managing member of the Executive Committee of the limited liability company
which serves as the general partner of KKR. He is also a director of Accuride
Corporation, Alliance Imaging, Inc., Amphenol Corporation, Borden Chemical Inc.,
The Boyd's Collection Ltd., Evenflo Company, Inc., KinderCare Learning Centers,
Inc., Sotheby's Holdings, Inc., and Willis Group Holdings Limited. Mr. Kravis is
Chairman of the Compensation Committee and serves on the Executive Committee.

Mr. Roberts became a Director of PRIMEDIA in March 1992. He is a Founding
Partner of KKR and KKR Associates. Effective January 1, 1996, he became a
managing member of the Executive Committee of the limited liability company
which serves as the general partner of KKR. He is also a director of Borden
Chemical, Inc., The Boyd's Collection Ltd., DPL, Inc., KinderCare Learning
Centers, Inc., Owens-Illinois, Inc., Safeway, Inc. and Willis Group Holdings
Limited.

Mr. Rutkowski has been Executive Vice President and Chief Financial Officer
of PRIMEDIA since January 2000. Before joining the Company, Mr. Rutkowski was
Senior Vice President and Chief Financial Officer of Business Development and
Strategic Planning for NBC and prior to 1999 was Vice President, Corporate
Finance and Controller at NBC since 1993.

Ms. Discepolo has been Executive Vice President, Human Resources of PRIMEDIA
since March 2001, Senior Vice President, Human Resources from December 1999 to
March 2001 and Vice President, Human Resources from January 1993 to December
1999.

Mr. Ferm has been Executive Vice President of the Company since
February 2000, President and Chief Executive Officer of the PRIMEDIA Magazine
and Media Group since June 2002 and President and Chief Executive Officer of the
PRIMEDIA Business-to-Business Group from February 2000 to May 2002. Before
joining the Company, Mr. Ferm was President of McGraw Hill's Business Week Group
and prior to 1999 was the publisher of BUSINESS WEEK.

Mr. Metz has been Executive Vice President of the Company since May 2000 and
Chief Executive Officer of the Consumer Guides Group for over five years.

Mr. Ritts has been Executive Vice President of the Company since June 2002
and President and Chief Executive Officer of PRIMEDIA Television which includes
Channel One Network, Films for the Humanities and Sciences, PRIMEDIA Digital
Video and Gravity Games LLC since April 2000. Before joining the Company, Mr.
Ritts served as Chief Executive Officer of the Digital Entertainment Network
from March

113

1999 to March 2000 and Commissioner of the Ladies Professional Golf Association
from 1996 to 1999. Before that, Mr. Ritts was a co-founder of Channel One.

Mr. Flynn has been Senior Vice President and Treasurer since March 2001.
Before joining the Company, Mr. Flynn was Managing Director for Banc of America
Securities LLC, in the Media and Telecom Group.

Mr. Fraser has been Senior Vice President--Law of PRIMEDIA since April 2002,
Deputy General Counsel from December 1999 through May 2001 and Associate General
Counsel from October 1994 through November 1999.

Mr. Sforzo, a Senior Vice President of PRIMEDIA since December 1999, has
been Vice President and Controller of PRIMEDIA since October 1998. Prior to that
time, he was the Vice President of Internal Audit starting in June 1997.

Messrs. Kravis and Roberts are first cousins.

The business address of the above executive officers of the Company, with
the exception of Messrs. Metz and Ritts, is the address of the principal
executive office of PRIMEDIA. The business addresses of Messrs. Metz and Ritts
are 3119 Campus Drive, Norcross, GA 30071 and 1440 Broadway, New York, New York
10018, respectively.

PRIMEDIA CODE OF BUSINESS CONDUCT AND ETHICS

The Board of Directors of the Company adopted a Code of Business Conduct and
Ethics (the "Code") effective March 21, 2003. The Code applies to all officers,
directors and employees of the Company, including the principal executive
officer, the principal financial officer, the principal accounting officer and
persons performing similar functions (the "Officers"). The Code addresses a
variety of areas of professional and business conduct, including employment
practices, conflicts of interest, compliance with laws and insider trading,
marketing practices, antitrust and unfair competition, and relations with
government agencies and outside organizations. A copy of the Code has been
distributed to all employees of the Company and is also found on the Company's
website at www.primedia.com under the caption "Company Overview--Code of
Business Conduct and Ethics." The full text of the Code is also attached as an
exhibit to this Annual Report. We intend to disclose future amendments to, or
waivers from, certain provisions of the Code for Officers on our web site
promptly following the date of such amendment or waiver.

The Company has also established a toll-free hotline for employees to
register concerns about the Company's accounting and auditing practices. The
Company has informed all of the employees of the Company of the availability of
the hotline and how to use it. The hotline is administered by an outside
provider and reports of all calls will be provided directly to the Chairman of
the Audit Committee. Employees who call the hotline have the option of
registering their concerns anonymously.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors, executive officers, and persons who own more than 10%
of a registered class of its equity securities to file reports of ownership and
reports of changes in ownership of such equity securities with the Securities
and Exchange Commission (the "SEC"). Directors, executive officers and greater
than 10% stockholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.

To the Company's knowledge, based solely on a review of the copies of such
forms furnished to the Company and written representations that no other reports
were required, the Company believes that all of its Directors, executive
officers and greater than 10% stockholders complied with all Section 16(a)
filing requirements, except that due to the recent changes in the law requiring
expedited filings of Form 4 statements, Form 4 statements were inadvertently
filed late by Perry Golkin and George Roberts in connection with the "crediting"
of the Company's Common Stock to their accounts in lieu of their director's fees
on September 30, 2002 and December 31, 2002. In addition, Mr. Feldberg was late
in filing a Form 4 Statement required to be filed in connection with the
purchase by Mr. Feldberg of 50,000 shares of the Company's Common Stock on
June 28, 2002.

114

ITEM 11. EXECUTIVE COMPENSATION

The following table shows compensation paid for the fiscal years ended
December 31, 2000 and 2001 and compensation payable for the fiscal year ended
December 31, 2002 by the Company to the Chief Executive Officer and each of the
other four most highly compensated executive officers of the Company in 2002 in
all capacities in which they served:

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

(1) During the calendar year ended December 31, 2002, all executive officers
participated in the Company's annual executive incentive and discretionary
performance plans. Under these plans, cash awards are contingent and are
based on various factors including earnings performance and cash flow of the
Company (or in the case of Messrs. Metz and Ferm, earnings and cash flow of
the operations they respectively manage) and the executive's individual
performance during the calendar year in question as evaluated by the
committee overseeing the Executive Incentive Plan.

(2) Payments made in 2000 were contingent on the attainment of cash flow targets
pursuant to a Long-Term Incentive Compensation Plan. Ms. Chell and Mr.
McCurdy are the only current employees of the Company who were eligible to
participate in the Long-Term Incentive Compensation Plan. The Long-Term
Incentive Compensation Plan was cancelled effective May 2000.

(3) Represents contributions made by the Company for the benefit of the
executives to the PRIMEDIA Thrift & Retirement Plan, a defined contribution
plan covering most of the Company's employees, and interest and
contributions to the PRIMEDIA Restoration Plan, a deferred unfunded program
restoring to employees the amount of the Company contribution to the
PRIMEDIA Thrift & Retirement Plan which the Company was not permitted to
contribute because of the compensation limit on contributions to qualified
plans under the Internal Revenue Code. Commencing January 1, 2001, the
Company suspended contribution accruals to the Restoration Plan but
continues to accrue interest on existing balances, which amounts are
reflected under "All Other Compensation." In addition, the amounts set forth
in the table for Mr. Rogers include payments made by the Company for
additional Life Insurance and Long Term Disability Insurance.

115

STOCK OPTION GRANTS IN LAST FISCAL YEAR (1)(2)

Increase in market value of PRIMEDIA Common Stock for all
stockholders at assumed annual rates of stock price 5% (to 10% (to
appreciation (as used in the table above) from $2.06 per $3.3555/share) $11.2828/share)
share, over the ten-year period, based on approximately ---------- --------------
284.6 million shares outstanding on December 31, 2002. $368,745,223 $934,486,639

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

(1) The options have exercise prices of $4, $5 and $6. The $4 options vest in
equal monthly installments over the first four years following the date of
grant. The $5 options automatically vest in 2010 but may vest earlier if the
Company's EBITDA (as defined in the agreement) from continuing businesses
exceeds $300 million in 2003. The $6 options vest automatically in 2010 but
may vest earlier if (as to 75% thereof) 2004 EBITDA is $340 million and (as
to the remainder) 2005 EBITDA is $380 million. In the event an EBITDA
acceleration target (as set forth above) is met, the underlying options will
vest when the financial statements for the relevant year are finalized.
EBITDA acceleration targets are subject to adjustment by the Board of
Directors to reflect acquisitions, divestitures and other material items not
contemplated when the acceleration targets were set.

(2) No Stock Appreciation Rights were granted to the named executive officers
during 2002.

(3) The options described above are intended to be treated for federal income
tax purposes as Incentive Stock Options under section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), to the maximum extent
permissible under the Code. If for any reason, all or any of these options
cannot be treated as Incentive Stock Options under the Code, the part of
these options that cannot be treated as Incentive Stock Options shall be
valid and outstanding non-qualified stock options.

(4) Potential Realizable Value is based on the assumed annual growth rates for
each of the grants shown over their ten-year option term. Actual gains, if
any, on stock option exercises are dependent on the future performance of
the stock.

116

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES (1)

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

(1) No options were exercised by the named executive officers in 2002.

(2) The Company's stock price on December 31, 2002 was $2.06 per share.

COMPENSATION OF DIRECTORS

Directors who are full-time employees of the Company receive no additional
compensation for services as a director. In 2002, non-employee directors
received an annual all inclusive fee of $55,000 for all services on the Board
and all committees, except that in connection with serving on the Audit
Committee of the Board, and in recognition of the additional duties and time
commitments required of audit committee members, each of Messrs. Bell, Feldberg
and Greeniaus received an additional $25,000. Consistent with the past practices
of the Company, as part of director's compensation for non-management, non-KKR
directors, on May 24, 2002, the Company granted Messrs. Bell, Feldberg and
Greeniaus 50,000 options to purchase Common Stock of the Company at an exercise
price of $2.02 per share under the Stock Option Plan.

Pursuant to the Directors' Deferred Compensation Plan, a non-employee
director may elect to defer all or part of the fee. Deferred amounts are
"credited" to an unfunded cash account or Common Stock equivalent account, as
selected by the director. Interest, at PRIMEDIA's average borrowing rate, is
credited quarterly for bookkeeping purposes to a director's cash account.
Subject to certain restrictions, a director is permitted to take distributions
in cash from a cash account or in shares of Common Stock or cash equivalent
equal to the then value of credited shares, at the Company's option, in whole or
in part, from his account following retirement or termination of service. Two of
the non-employee directors have elected to defer their fees in Common Stock
equivalents.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee consisted of Messrs. Kravis, Tokarz and Golkin in
2002, and upon Mr. Tokarz's resignation from the Board in May 2002, Mr. Bae
became a member of the Compensation Committee. None of Messrs. Kravis, Tokarz,
Bae or Golkin have been an officer or employee of the Company. Mr. Tokarz was
through his resignation from the Board and each of Messrs. Kravis and Golkin are
general partners of KKR Associates and members of KKR 1996 GP LLC, the general
partners of the partnerships, which own as of February 28, 2003, approximately
63.89% of the outstanding Common Stock. As general partners of KKR Associates
and members of KKR 1996 GP LLC, Messrs. Kravis and Golkin may be deemed to share
beneficial ownership of the Common Stock beneficially owned by KKR Associates;
however, they disclaim such beneficial ownership. See "Certain Relationships and
Related Transactions" and "Security Ownership of Certain Beneficial Owners and
Management."

EMPLOYMENT AGREEMENTS

In September 1999, Mr. Rogers and the Company entered into an employment
agreement expiring in December 2003 providing for an annual salary of
$1,200,000, an annual target performance bonus of $800,000 and a potential
annual discretionary bonus of up to $1,000,000 based on extraordinary
performance. In May 2001, Mr. Rogers was granted a 7% increase in base salary
which took effect in July 2001.

117

Under the agreement, Mr. Rogers was granted 1,300,000 shares of restricted stock
and 5,000,000 stock options. Under the terms of Mr. Rogers' agreement, if his
employment is terminated by reason of death or disability, he is entitled to
receive (a) his base salary through the end of the month in which death occurs
or in which disability benefits commence, as applicable, (b) his annual
incentive bonus based on his annual target bonus for such year, and (c) vesting
of outstanding unvested stock options and restricted stock. If Mr. Rogers'
employment is terminated by the Company without cause or by Mr. Rogers following
a Constructive Termination without Cause (as defined in the agreement), he is
entitled to receive (a) his base salary through the date of termination,
(b) his base salary for a period of 24 months following such termination, (c) a
prorated portion of his annual incentive bonus based on his annual target bonus
for such year, (d) his annual incentive bonus for a period of 24 months
following such termination based on his annual target bonus in the year the
termination occurs, (e) vesting of outstanding unvested stock options and
restricted stock, and (f) continued coverage in PRIMEDIA's health benefit plans
for a period of time determined by the agreement. Mr. Rogers shall be entitled
to (a) all of the entitlements set forth in the immediately preceding sentence
if Mr. Rogers' agreement is not renewed by the Company except that any reference
to 24 months shall be substituted with 12 months and (b) all of the rights and
benefits set forth in the immediately preceding sentence and all other rights or
benefits granted by the Company to Mr. Rogers, whether pursuant to this
Agreement or otherwise, shall become vested, in the event of a Change of Control
(as defined in the agreement) of the Company. If Mr. Rogers' employment is
terminated by the Company with cause or Mr. Rogers voluntary terminates this
employment (excluding any termination following a Constructive Termination
without Cause), Mr. Rogers shall be entitled to (a) his base salary through the
date of termination, and (b) exercise all vested options by the earlier of
45 days and the expiration date of such options and all unvested options and
restricted stock shall be forfeited.

In April 2001, Ms. Chell entered into an agreement with the Company
providing for an annual salary of $700,000, an annual target performance bonus
of $385,000, and an additional annual discretionary bonus of $700,000 based on
performance of certain start-up business areas for the Company. In the event of
a Change of Control (as defined by the agreement) or if Ms. Chell's employment
is terminated by reason of retirement or any other termination at or after age
65, Ms. Chell shall be entitled to receive $200,000 annually for life. If
Ms. Chell's retirement occurs between the age of 60 and 65, the $200,000 annual
payment shall be reduced by 7% for each year that payments commence prior to age
65, subject to adjustment in certain limited circumstances.

In April 2002, Mr. McCurdy entered into a four-year employment agreement
providing for an annual salary of $700,000, an annual target performance bonus
of $385,000, and an additional discretionary bonus based on his performance in
connection with the restructuring/reformation program. Under the terms of
Mr. McCurdy's agreement, if his employment is terminated by reason of death or
disability, he is entitled to receive (a) his base salary through the end of the
month in which death occurs or in which disability benefits commence, as
applicable, (b) his annual incentive bonus based on his annual target bonus for
such year, and (c) vesting of outstanding unvested stock options granted prior
to 2002. If Mr. McCurdy's employment is terminated by the Company without cause
or by Mr. McCurdy following a Constructive Termination without Cause (as defined
in the agreement), he is entitled to receive (a) his base salary through the
date of termination, (b) his base salary for a period of 24 months following the
date of termination, (c) a prorated portion of his annual incentive bonus based
on his annual target bonus for such year, (d) his annual incentive bonus for a
period of 24 months following such termination based on his annual target bonus
in the year the termination occurs, (e) vesting of outstanding unvested stock
options granted prior to 2002, and (f) continued coverage in PRIMEDIA's health
benefit plans for a period of time determined by the agreement. Mr. McCurdy
shall be entitled to (a) all of the entitlements set forth in the immediately
preceding sentence except that any reference to 24 months shall be substituted
with 12 months if Mr. McCurdy's agreement is not renewed by the Company and
(b) all of the rights and benefits set forth in the immediately preceding
sentence and all other rights or benefits granted by the Company to
Mr. McCurdy, whether pursuant to this Agreement or otherwise, shall become
vested (excluding any stock options granted in 2002 or thereafter which shall be
governed by the relevant stock

118

option agreement), in the event of a Change of Control (as defined in the
agreement) of the Company. If Mr. McCurdy's employment is terminated by the
Company with cause or Mr. McCurdy voluntary terminates this employment
(excluding any termination following a Constructive Termination without Cause),
Mr. McCurdy shall be entitled to (a) his base salary through the date of
termination, and (b) exercise all vested options by the earlier of 45 days and
the expiration date of such options and all unvested options shall be forfeited.

In March 2002, Mr. Ferm and the Company entered into an agreement extending
his employment agreement through December 31, 2003. The agreement provides for a
base salary of $750,000, an annual target performance bonus of $450,000 based on
the performance of the PRIMEDIA Magazine and Media Group, of which Mr. Ferm is
President and Chief Executive Officer. The agreement provides for the grant of
stock options as described in the Executive Compensation Table. Under the terms
of Mr. Ferm's agreement, if his employment is not renewed by the Company
following its expiration or his employment is terminated by reason of death or
disability or by Mr. Ferm voluntarily due to a material reduction of his duties,
removal by the Company from his current position, relocation or a breach of the
agreement by the Company, he is entitled to receive (a) his base salary through
the date of termination, (b) his base salary for a period of 12 months from the
date of termination, and (c) a prorated portion of his annual incentive bonus
for the year in which such termination occurs. In the event of a Change of
Control (as defined by the agreement), all unvested stock options granted
pursuant to the agreement shall vest.

In February 2002, a three-year compensation plan was established for Mr.
Metz and three other senior executives in the Consumer Guides Group. Under this
plan, Mr. Metz has target payouts of $100,000, $150,000 and $450,000 for 2002,
2003 and 2004, respectively. This plan replaced a prior plan (payments to Mr.
Metz in 2001 and 2000 under this prior plan are reflected on the Executive
Compensation Table). Payment of any amount is contingent on the Consumer Guides
Group achieving certain financial targets.

In 1999, Messrs. Rogers, McCurdy and Metz and Ms. Chell and in 2000, Mr.
Ferm were granted stock options in some of the Company's subsidiaries generally
known as the Internet entities. No information has been given about such options
because such options have no value or liquidity. In March 2003, Messrs. Rogers
and McCurdy and Ms. Chell waived and released all of the stock options granted
to each of them in those Internet entities.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of February 15, 2003 by (i) each beneficial
owner of more than five percent of the Company's

119

outstanding Common Stock, (ii) each of the Company's directors and named
executive officers, and (iii) all directors and executive officers of the
Company as a group:

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

* Less than one percent

(1) For the purpose of this table, a person or group is deemed to have
"beneficial ownership" of any shares as of a given date which such person
has the right to acquire within 60 days after such date. For purposes of
computing the percentage of outstanding shares held by each person or group
of persons named above on a given date, any security which such person or
persons has the right to acquire within 60 days after such date is deemed to
be outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage of ownership of any other person.

(2) Shares of Common Stock shown as owned by KKR Associates are owned of record
by MA Associates, L.P., FP Associates, L.P., Magazine Associates, L.P.,
Publishing Associates, L.P., Channel One Associates, L.P., and KKR Partners
II, L.P., of which KKR Associates is the sole general partner and as to
which it possessed sole voting and investment power. Messrs. Kravis,
Roberts, and Golkin (directors of PRIMEDIA) and Paul E. Raether, Michael W.
Michelson, James H. Greene, Edward A. Gilhuly and Scott M. Stuart, as the
general partners of KKR Associates, may be deemed to share beneficial
ownership of the shares shown as beneficially owned by KKR Associates. Such
persons disclaim beneficial ownership of such shares. Mr. Bae (a director of
PRIMEDIA) is a limited partner of KKR Associates and an executive of KKR. He
disclaims beneficial ownership of such shares.

(3) Of the shares shown as owned by KKR 1996 GP LLC, 49,190,039 shares are
represented by shares of the Company's Common Stock, 7,870,000 shares are
represented by warrants to purchase 7,870,000 shares of the Company's Common
Stock which are currently exercisable by the holder and 17,900,000 shares
are represented by 1,000,000 shares of Series J Convertible Preferred Stock
which are convertible at the option of the holder into approximately
17,900,000 shares of the Company's Common Stock. The shares of Common Stock
and Series J Convertible Preferred Stock and the warrants to purchase Common
Stock shown as owned by KKR 1996 GP LLC are owned of record by

120

KKR 1996 Fund L.P., of which KKR Associates 1996 L.P. is the sole general
partner. KKR 1996 GP LLC is the sole general partner of KKR Associates 1996
L.P. and possesses sole voting and investment power. Messrs. Kravis, Roberts
and Golkin (directors of PRIMEDIA) and Paul E. Raether, Michael W.
Michelson, James H. Greene, Edward A. Gilhuly, Scott M. Stuart, Todd Fisher,
Johannes Huth, Alexander Navab and Neil Richardson are the members of KKR
1996 GP LLC. Each of such individuals disclaims beneficial ownership of such
shares and warrants. Messrs. Kravis and Roberts constitute the Executive
Committee of KKR 1996 GP LLC. Mr. Bae (a director of PRIMEDIA) is a limited
partner of KKR Associates and an executive of KKR. He disclaims beneficial
ownership of such shares and warrants.

(4) Information based upon Schedule 13G (the "Schedule 13G") filed on February
6, 2003 by Shapiro Capital Management, Inc. ("SCMI"), Samuel R. Shapiro
("Shapiro") and The Kaleidoscope Fund, LP ("Kaleidoscope"). According to the
Schedule 13G, 15,999,126 shares are owned by SCMI as to which it has sole
voting and dispositive power, 221,700 shares may be deemed to be
beneficially owned by Shapiro as to which he has sole voting and dispositive
power and 445,100 shares are owned by Kaleidoscope as to which it has sole
voting and dispositive power.

(5) Of the shares shown as owned, 4,787,502, 2,816,042 and 1,838,984 shares,
respectively, for Messrs. Rogers, McCurdy and Ms. Chell are in fact
represented by options to purchase Common Stock which were either
exercisable on February 15, 2003 or become exercisable within 60 days
thereafter.

(6) Of the shares shown as owned, 62,835 and 62,835 shares, respectively, for
Messrs. Golkin and Roberts are in fact represented by shares Messrs. Golkin
and Roberts may be entitled to receive pursuant to the Directors' Deferred
Compensation Plan. See Item 11 of this Form 10-K under the caption
"Compensation of Directors" for a description of the Directors' Deferred
Compensation Plan.

(7) Of the shares shown as owned, 6,250, 35,000 and 30,000 shares, respectively,
for Messrs. Bell, Feldberg and Greeniaus are in fact represented by options
to purchase Common Stock which were either exercisable on February 15, 2003
or become exercisable within 60 days thereafter.

(8) Includes 160,000 shares held in trust for his minor children.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information about shares of the Company's
Common Stock that may be issued upon the exercise of options, warrants and other
rights and other equity compensation under the Company's equity compensation
plans as of December 31, 2002:

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

(1) Represents 13,154,498 shares of the Company's Common Stock which may be
issued pursuant to future awards under the Stock Option Plan and 3,538,864
shares issuable pursuant to the ESPP.

121

(2) The number of shares issuable pursuant to the Directors' Deferred
Compensation Plan described in Item 11 of this Form 10-K under the caption
"Compensation of Directors" is not presently determinable.

(3) The table does not include information for the following equity compensation
plans and options and other warrants and rights assumed by the Company in
connection with mergers and acquisitions pursuant to which there remain
outstanding options or other warrants or rights (collectively, the "Assumed
Plans"): Amended and Restated 1999 Non-Officer Stock Option/Stock Issuance
Plan of About.com, Inc.; Glowbug.com, Inc. 2000 Stock Option/Stock Issuance
Plan; Sombasa Media Inc. 1999 Stock Option Plan; 1999 Stock Option Plan of
Wiseads Interactive, Inc.; About.com, Inc. Second Amended and Restated 1998
Stock Option/Stock Issuance Plan; and North Sky, Inc. (formerly Direct
Connect, Inc.) 1997 Stock Option Plan. A total of 6,346,379 shares of the
Company's Common Stock may be purchased under the Assumed Plans, at a
weighted average price of $10.84. No further grants may be made under any
Assumed Plan.

(4) Excludes warrants to purchase 7,870,000 shares of the Company's Common Stock
owned by KKR 1996 GP LLC. The warrants to purchase shares of the Company's
Common Stock owned by KKR 1996 GP LLC are owned of record by KKR 1996 Fund
L.P., of which KKR Associates 1996 L.P. is the sole general partner. KKR
1996 GP LLC is the sole general partner of KKR Associates 1996 L.P., and
possesses sole voting and investment power. Messrs. Kravis, Roberts and
Golkin (directors of PRIMEDIA) and nine other individuals are the members of
KKR 1996 GP LLC. Each of such individuals disclaims beneficial ownership of
such warrants. Messrs. Kravis and Roberts constitute the Executive Committee
of KKR 1996 GP LLC. Mr. Bae (a director of PRIMEDIA) is a limited partner of
KKR Associates and an executive of KKR. He disclaims beneficial ownership of
such warrants.

(5) Represents 1,800,000 options to purchase the Company's Common Stock issued
to Capstone, a consultant of the Company, for services performed, and
877,000 options to purchase the Company's Common Stock issued to Bill Day
pursuant to the PRIMEDIA Inc. 2001 Stock Incentive Plan (the "2001 Plan").
See Item 13 of this Form 10-K for a description of the stock options issued
to Capstone.

(6) Represents 3,710,850 shares of the Company's Common Stock which may be
issued pursuant to future awards under the 2001 Plan. In connection with the
Company's acquisition of About, the Company established the 2001 Plan to
provide certain key executives of About grants of stock options in the
Company's Common Stock. The 2001 Plan permits the grant of stock options,
Incentive Stock Options, stock appreciation rights, restricted stock,
purchase stock, dividend equivalent rights, performance units, performance
shares and other stock-based grants. The only outstanding incentive award
under the 2001 Plan is the 877,000 options to purchase Common Stock granted
to Mr. Day in 2001 and reflected in the table above. The Company has no
present intention to issue any additional incentive awards under the 2001
Plan. The stock options that were granted pursuant to the 2001 Plan expire
ten years from the date of grant, vest at a rate of 20% per year over a
five-year period commencing on the effective date of the grant and have an
exercise price of $2.85.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company financed its acquisition of EMAP in part by issuing
1,000,000 shares of Series J Convertible Preferred Stock to KKR 1996 Fund (a
limited partnership associated with KKR) for $125 million. The Company was
required to issue to KKR 1996 Fund additional warrants to purchase up to
4,000,000 shares of the Company's Common Stock at an exercise price of $7 per
share, subject to adjustment contingent upon the length of time that the
Series J Convertible Preferred Stock was outstanding. If the Series J
Convertible Preferred Stock was outstanding for three, six, nine or twelve
months from the date of issuance, KKR 1996 Fund was required to receive
additional warrants to purchase 250,000, 1 million, 1.25 million and
1.5 million shares of the Company's Common Stock, respectively. Since the
Series J Convertible Preferred Stock was outstanding for three, six, nine and
twelve months from the date of issuance, in November 2001, February 2002, May
2002 and August 2002, the Company issued to KKR 1996 Fund warrants to purchase
250,000, 1 million, 1.25 million and 1.5 million shares of the

122

Company's Common Stock, respectively. The Company ascribed a value of $498,000,
$2,160,000, $1,988,000 and $1,743,000 to these warrants using the Black Scholes
pricing model. These warrants expire on the earlier of ten years from the date
of issuance or a change in control.

All of the above described financing transactions between the Company and
KKR were reviewed by and recommended for approval by the Special Committee of
the Board which retained its own counsel and investment banker to advise it as
to the financing transactions.

From time to time, KKR, which is an affiliate of KKR Associates, may receive
customary investment banking fees for services rendered to the Company in
connection with divestitures, acquisitions and certain other transactions. In
addition, KKR renders management, consulting, acquisition and financial services
to the Company for an annual fee of $1 million payable quarterly in arrears. The
Company believes that this fee is no less favorable than that which could be
obtained for comparable services from unaffiliated third parties. Partners of
KKR who also serve as directors of the Company do not receive additional
compensation for service in such capacity, other than customary director's fees.

On April 5, 2001, the Company sold the capital stock of QWIZ, Inc. and QWIZ
(UK) Limited to QWIZ Acquisition Corporation ("QWIZ Acquisition") in exchange
for $7 million in cash plus preferred stock of QWIZ Acquisition having a
liquidation value at such time of $3 million. On May 17, 2002, QWIZ Acquisition
repurchased from the Company all of the preferred stock in QWIZ Acquisition held
by the Company for a cash payment in the amount of $735,872. Mr. Tokarz, a
former director of the Company, owns more than 10% of QWIZ Acquisition.

See Item 11 of Part III, "Executive Compensation--Employment Agreements" for
a description of the employment agreements between the Company and certain
executive officers.

In 2001, the Company retained Capstone to provide consulting services to the
Company primarily to identify and advise on potential opportunities to reduce
costs at the Company. In 2002, the Company paid Capstone $800,000 in cash for
consulting services received. In addition, on July 26, 2002, the Company granted
1,800,000 options to purchase the Company's Common Stock to Capstone for
services received. These options are fully vested as of the grant date, have a
ten year life and an exercise price of $1.80 per share. The exercise price
equals 200% of the share price on the grant date. Although neither KKR nor any
entity affiliated with KKR owns any of the equity of Capstone, KKR has provided
financing to Capstone. Related non-cash compensation of $990,000 determined
using the Black Scholes pricing model, was recorded for the year ended
December 31, 2002.

ITEM 14. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") are
responsible for, and have established and maintained Disclosure Controls and
Procedures, as well as evaluated the effectiveness of those controls and
procedures as of a date within 90 days prior to the filing date of this report
(the "Evaluation Date").

In discharging these responsibilities, among other actions, the CEO and CFO
have caused the Company to do the following:

- Required that the Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 adapted to their particular responsibilities be
signed by key senior operating executives and financial executives
responsible for the various operations of the Company (aggregating over 50
key executives).

- Distributed an updated version of the PRIMEDIA Financial Policies to the
business units to ensure compliance with internal policies, as well as
generally accepted accounting principles.

- Distributed a Section 302 Certification Diagnostics Form to be followed
and completed by the Company's operating units which is designed to help
ensure that the appropriate control processes are in place to support the
CEO's and CFO's disclosure controls certification responsibilities.

123

- Distributed Disclosure Controls and Procedures Guidelines to ensure that
the Company has effective mechanisms for the timely collection, analysis,
and dissemination of material information.

- Established, in accordance with SEC regulations, a Disclosure Committee
consisting of five senior executives of the Company whose charge is to
ensure that disclosure issues are identified and communicated to the
Disclosure Committee.

- On March 12, 2003, the Board of Directors adopted a Code of Business
Conduct and Ethics (the "Code"). The Code applies to all officers,
directors and employees of the Company, including the principal executive
officer, the principal financial officer, the principal accounting officer
and persons performing similar functions. A copy of the Code has been
distributed to all employees of the Company and is also found on the
Company's website under the caption "Company Overview--Code of Business
Conduct and Ethics". A copy of the Code is also included as an exhibit to
this Annual Report.

- Established a toll-free hotline for employees to register concerns about
the Company's accounting and auditing practices. The Company has informed
all of the employees of the Company of the availability of the hotline and
how to use it. The hotline is administered by an outside provider and
reports of all calls will be provided directly to the Chairman of the
Audit Commitee.

Based upon the above policies and procedures that are in place within the
Company, the CEO and CFO have concluded that (i) as of the Evaluation Date, the
Disclosure Controls and Procedures are effective in ensuring that all material
information required to be filed in this annual report has been made known to
them in a timely fashion, and (ii) there were no significant changes in our
internal controls or, in other factors that could significantly affect our
disclosure controls and procedures subsequent to the Evaluation Date.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE 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:

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.

3. Exhibits.

Refer to Exhibit Index on pages E-1 through E-6 which
is incorporated
herein by reference................................... E-1

(b) Reports on Form 8-K
None.

(c) Exhibits
Exhibits listed in Item 15(a)(3) are incorporated herein by reference

124

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

PRIMEDIA INC.

DATE: MARCH 31, 2003 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 report has been signed below by the following persons in the capacities
indicated.

125

CERTIFICATIONS

I, Thomas S. Rogers, certify that:

1. I have reviewed this annual report on Form 10-K of PRIMEDIA, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 31, 2003 /s/ THOMAS S. ROGERS
---------------------------------------------
Name: Thomas S. Rogers
Title: Chairman and Chief Executive Officer

126

CERTIFICATIONS

I, Lawrence R. Rutkowski, certify that:

1. I have reviewed this annual report on Form 10-K of PRIMEDIA Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 31, 2003 /s/ LAWRENCE R. RUTKOWSKI
---------------------------------------------
Name: Lawrence R. Rutkowski
Title: Executive Vice President and Chief
Financial Officer

127

SCHEDULE II

PRIMEDIA INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 2002
(DOLLARS IN THOUSANDS)

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

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

(2) Deductions from related valuation account result from write-offs and
returns, as applicable, related to accounts receivable and inventory and
write-offs of fully amortized amounts.

(3) Deductions from related valuation account result principally from
divestitures.

S-3

INDEPENDENT AUDITORS' REPORT ON SCHEDULE

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 (the "Company") as of December 31, 2002 and 2001, and the related
statements of consolidated operations, shareholders' deficiency and cash flows
for each of the three years in the period ended December 31, 2002, and have
issued our report thereon dated February 28, 2003 (March 5, 2003 as to Note 11)
(which report on the consolidated financial statements expresses an unqualified
opinion and includes an explanatory paragraph referring to the Company's
adoption of Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, effective
January 1, 2001 and Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" and Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets," effective January 1, 2002), such financial statements and report are
included elsewhere in this Form 10-K. Our audits also included the financial
statement schedule of the Company, listed in Item 15. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

DELOITTE & TOUCHE LLP

New York, New York
February 28, 2003
(March 5, 2003 as to Note 11)

S-4

EXHIBIT INDEX

2.1 --Agreement and Plan of Merger among PRIMEDIA Inc.,
Abracadabra Acquisition Corporation and About.com, Inc.
dated as of October 29, 2000. (18)

2.2 --Stock Purchase Agreement date as of July 1, 2001 among
Emap PLC, Emap America Partners, Emap Inc. and PRIMEDIA
Inc. (23)

3.1 --Certificate of Incorporation of K-III. (7)

3.2 --Certificate of Amendment to Certificate of Incorporation
of K-III (changing name from K-III to PRIMEDIA Inc.) (14)

3.3 --Certificate of Amendment to Certificate of Incorporation
of PRIMEDIA INC. (26)

3.4 --Certificate of Designations of the Series D Preferred
Stock (11)

3.5 --Certificate of Designations of the Series F Preferred
Stock (13)

3.6 --Certificate of Designations of the Series H Preferred
Stock (15)

3.7 --Certificate of Designations of the Series K Preferred
Stock (24)

3.8 --Certificate of Designations of the Series J Preferred
Stock (24)

3.9 --Amended and Restated By-laws of K-III. (7)

3.10 --Certificate of Incorporation of Intertec Publishing
Corporation. (2)

3.11 --Certificate of Amendment to Certificate of Incorporation
of Intertec Publishing Corporation (changing name to
PRIMEDIA Intertec Corporation) (16)

3.12 --Certificate of Amendment to Certificate of Incorporation
of Intertec Publishing Corporation (changing name from
PRIMEDIA Intertec Corporation to Intertec Publishing
Corporation) (17)

3.13 --Amended and Restated By-laws of Intertec Publishing
Corporation. (2)

3.14 --Certificate of Amendment to Certificate of Incorporation
of PRIMEDIA Business Magazines & Media Inc. (changing name
from Intertec Publishing Corporation) (24)

3.15 --Certificate of Incorporation of Newbridge Communications,
Inc. (2)

3.16 --Certificate of Amendment to Certificate of Incorporation
of Newbridge Communications, Inc. (changing name to Films
for the Humanities and Sciences, Inc.) (14)

3.17 --By-laws of Newbridge Communications, Inc. (2)

3.18 --Certificate of Incorporation of K-III Directory
Corporation (1)

3.19 --Certificate of Amendment to Certificate of Incorporation
of K-III Directory Corporation (changing name to PRIMEDIA
Information Inc.) (14)

3.20 --By-laws of K-III Directory Corporation (1)

3.21 --Certificate of Incorporation of K-III Magazine
Corporation. (2)

3.22 --Certificate of Amendment to Certificate of Incorporation
of K-III Magazine Corporation (changing name to PRIMEDIA
Magazines Inc.) (14)

3.23 --By-laws of K-III Magazine Corporation. (2)

3.24 --Certificate of Incorporation of K-III Magazine Finance
Corporation. (2)

3.25 --Certificate of Amendment to Certificate of Incorporation
of K-III Magazine Finance Corporation (changing name to
PRIMEDIA Magazines Finance Inc.) (14)

3.26 --By-laws of K-III Magazine Finance Corporation. (2)

3.27 --Certificate of Incorporation of K-III Holdings Corporation
III. (2)

E-1

3.28 --Certificate of Amendment to Certificate of Incorporation
of K-III Holdings Corporation III (changing name to
PRIMEDIA Holdings III Inc.) (14)

3.29 --By-laws of K-III Holdings Corporation III. (2)

3.30 --Certificate of Incorporation of Haas Publishing Companies,
Inc. (5)

3.31 --By-laws of Haas Publishing Companies, Inc. (5)

3.32 --Certificate of Incorporation of Channel One Communications
Corporation. (8)

3.33 --By-laws of Channel One Communications Corporation. (8)

3.34 --Certificate of Incorporation of PJS Publications, Inc. (8)

3.35 --Certificate of Amendment to Certificate of Incorporation
of PJS Publications, Inc. (changing name to PRIMEDIA
Special Interest Publications Inc.) (14)

3.36 --By-laws of PJS Publications, Inc. (8)

3.37 --Certificate of Incorporation of Hacienda Productions, Inc.
(*)

3.38 --By-laws of Hacienda Productions, Inc. (*)

3.39 --Certificate of Incorporation of HPC Brazil, Inc. (*)

3.40 --By-laws of HPC Brazil, Inc. (*)

3.41 --Certificate of Incorporation of Liberty Productions, Inc.
(*)

3.42 --By-laws of Liberty Productions, Inc. (*)

3.43 --Certificate of Incorporation of Kagan Media Appraisals,
Inc. (*)

3.44 --By-laws of Kagan Media Appraisals, Inc. (*)

3.45 --Certificates of Incorporation of Kagan Seminars, Inc. (*)

3.46 --By-laws of Kagan Seminars, Inc. (*)

3.47 --Certificate of Incorporation of Kagan World Media, Inc.
(*)

3.48 --By-laws of Kagan World Media, Inc. (*)

3.49 --Certificate of Incorporation of Paul Kagan Associates,
Inc. (*)

3.50 --By-laws of Paul Kagan Associates, Inc. (*)

3.51 --Certificate of Incorporation of PRIMEDIA Finance Shares
Services Inc. (*)

3.52 --By-laws of PRIMEDIA Finance Shares Services Inc. (*)

3.53 --Certificate of Formation of PRIMEDIA Workplace Learning
LLC (*)

3.54 --Limited Liability Company Agreement of PRIMEDIA Workplace
Learning LLC (*)

3.55 --Certificate of Limited Partnership of PRIMEDIA Workplace
Learning LP (*)

3.56 --Limited Partnership Agreement of PRIMEDIA Workplace
Learning LP (*)

3.57 --Certificate of Incorporation of McMullen Argus Publishing,
Inc. (12)

3.58 --By-laws of McMullen Argus Publishing, Inc. (12)

3.59 --Certificate of Formation of Cover Concepts Marketing
Services, LLC (14)

3.60 --Limited Liability Company Agreement of Cover Concepts
Marketing Services, LLC (14)

3.61 --Certificate of Incorporation of CSK Publishing Company
Incorporated (14)

3.62 --By-laws of CSK Publishing Company Incorporated (14)

E-2

3.63 --Certificate of Incorporation of GO LO Entertainment,
Inc. (*)

3.64 --By-laws of GO LO Entertainment, Inc. (*)

3.65 --Certificate of Incorporation of IntelliChoice, Inc. (14)

3.66 --By-laws of IntelliChoice, Inc. (14)

3.67 --Certificate of Incorporation of Canoe & Kayak, Inc. (14)

3.68 --By-laws of Canoe & Kayak, Inc. (14)

3.69 --Certificate of Amendment to Certificate of Incorporation
of Cowles Enthusiast Media, Inc. (changing name to
PRIMEDIA Enthusiast Publications, Inc.) (16)

3.70 --Certificate of Incorporation of Cowles Enthusiast Media,
Inc. (14)

3.71 --By-laws of Cowles Enthusiast Media, Inc. (14)

3.72 --Certificate of Incorporation of Cowles/Simba Information,
Inc. (14)

3.73 --Certificate of Amendment to Certificate of Incorporation
of Cowles/Simba Information, Inc. (changing name to Simba
Information) (16)

3.74 --By-laws of Cowles/Simba Information, Inc. (14)

3.75 --Certificate of Incorporation of The Virtual Flyshop,
Inc. (14)

3.76 --By-laws of The Virtual Flyshop, Inc. (14)

3.77 --Certificate of Incorporation of PRIMEDIA Companies Inc.
(24)

3.78 --By-Laws of PRIMEDIA Companies, Inc. (24)

3.79 --Certificate of Incorporation of PRIMEDIA Leisure Group
Inc. (24)

3.80 --By-Laws of PRIMEDIA Leisure Group Inc. (24)

3.81 --Certificate of Incorporation of PRIMEDIA Specialty Group
Inc. (24)

3.82 --By-Laws of PRIMEDIA Specialty Group Inc. (24)

4.1 --10 1/4% Senior Note Indenture (including form of note and
form of guarantee). (8)

4.2 --8 1/2% Senior Note Indenture (including forms of note and
guarantee). (9)

4.3 --Form of Class D Subordinated Debenture Indenture
(including form of debenture). (11)

4.4 --Form of Class F Subordinated Debenture Indenture
(including form of debenture). (13)

4.5 --Form of Class H Subordinated Debenture Indenture
(including form of debenture). (15)

4.6 --7 5/8% Senior Note Indenture (including form of note and
form of guarantee). (15)

4.7 --8 7/8% Senior Note Indenture (including forms of note and
guarantee). (22)

10.1 --Credit Agreement dated as of June 20, 2001 with The Chase
Manhattan Bank, as administrative agent, Bank of America
N.A., as syndication agent, and The Bank of New York and
The Bank of Nova Scotia, as co-documentation agents. (24)

10.2 --Forms of Pledge Agreement, Subsidiary Guaranty and
Contribution Agreement (with respect to Exhibit 10.1).
(24)

+10.3 --Form of Amended and Restated K-III 1992 Stock Purchase and
Option Plan. (7)

+10.4 --Amendment No. 1 to the 1992 Stock Purchase and Option Plan
Amended and Restated as of March 5, 1997. (12)

E-3

+10.5 --Form of Common Stock Purchase Agreement between K-III and
senior management. (2)

+10.6 --Form of Common Stock Purchase Agreement between K-III and
various purchasers. (2)

+10.7 --Form of Non-Qualified Stock Option Agreement between K-III
and various employees. (2)

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 Securities Purchase Agreement between PRIMEDIA
Inc. and KKR 1996 Fund L.P. (16)

+10.11 --Form of Non-Qualified Stock Option Agreement between K-III
and various employees. (2)

+10.12 --Form of Incentive and Performance Stock Option Agreement
under the PRIMEDIA Inc. Stock Purchase and Options Plan
(26)

10.13 --Amended Registration Rights Agreement dated as of
February 5, 1998 among PRIMEDIA Inc., KKR 1996 Fund L.P.,
MA Associates, L.P., FP Associates, L.P., Magazine
Associates, L.P., Publishing Associates, L.P., Channel One
Associates, L.P. and KKR Partners II, L.P. with respect to
common stock of K-III. (16)

10.14 --Securities Purchase Agreement (Common) dated as of
August 24, 2001 between PRIMEDIA Inc. and KKR 1996 Fund
L.P. (24)

10.15 --Securities Purchase Agreement (Preferred) dated as of
August 24, 2001 between PRIMEDIA Inc. and KKR 1996 Fund
L.P. (24)

10.16 --Stock Option Agreement dated as of July 26, 2002 between
PRIMEDIA Inc. and Capstone Consulting LLC(*)

+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 --Agreement, dated as of November 30, 1999, between PRIMEDIA
Inc. and William F. Reilly (17)

+10.22 --Agreement, dated as of October 27, 1999, between PRIMEDIA
Inc. and Thomas S. Rogers and Amendment I dated as of
October 27, 1999 (17)

+10.23 --Agreement, dated October 29, 2000, among PRIMEDIA Inc.,
About.com, Inc. and Scott Kurnit (18)

+10.24 --Agreement dated December 2, 2000 between PRIMEDIA Inc. and
Larry Rutkowski. (23)

+10.25 --Agreement dated February 25, 2000 between PRIMEDIA Inc.
and David Ferm. (23)

+10.26 --Amendment dated as of June 20, 2002 and Amendment dated as
of August 20, 2002 to Agreement dated February 25, 2000
between PRIMEDIA Inc. and David Ferm (*)

E-4

+10.27 --Incentive and Performance Stock Option Agreement under the
1992 PRIMEDIA Inc. Stock Purchase and Option Plan, as
amended, dated July 1, 2002 between PRIMEDIA Inc. and
David Ferm. (27)

+10.28 --Agreement dated September 17, 2001 between PRIMEDIA Inc.
and Scott Kurnit (24)

+10.29 --Option Extention Agreement dated April 7, 2001 between
PRIMEDIA Inc. and Beverly Chell (24)

+10.30 --Agreement dated April 19, 2002 between PRIMEDIA Inc. and
Charles McCurdy (25)

+10.31 --Agreement dated April 7, 2001 between PRIMEDIA Inc. and
Charles McCurdy (24)

+10.32 --Stock Option Agreement dated December 3, 1999 between
PRIMEDIA Inc. and Thomas Rogers (24)

+10.33 --Option Extention Agreement dated April 7, 2001 between
PRIMEDIA Inc. and Charles McCurdy (24)

+10.34 --Agreement dated April 2, 2001 between PRIMEDIA Inc. and
Beverly Chell (24)

+10.35 --Lock-Up Agreement dated as of October 29, 2000 between
PRIMEDIA Inc. and Scott Kurnit. (18)

+10.36 --PRIMEDIA Inc. 2001 Stock Incentive Plan (19)

14 --PRIMEDIA Code of Business Conduct and Ethics(*)

21 --Subsidiaries of PRIMEDIA. (*)

23 --Independent Auditors' Consent (*)

99.1 --Certification pursuant to 18 U.S.C Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, signed by Thomas S. Rogers. (*)

99.2 --Certification pursuant to 18 U.S.C Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, signed by Lawrence R. Rutkowski. (*)

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

(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's 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.

E-5

(11) Incorporated by reference to K-III Communications Corporation's
Registration Statement on Form S-4, File No. 333-03691.

(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.

(14) Incorporated by reference to K-III Communications Corporation's Annual
Report on Form 10-K for the year ended December 31, 1997,
File No. 1-11106.

(15) Incorporated by reference to PRIMEDIA Inc.'s Registration Statement on
Form S-4, File No. 333-51891.

(16) Incorporated by reference to K-III Communications Corporation's Annual
Report on Form 10-K for the year ended December 31, 1998, File No. 1-11106.

(17) Incorporated by reference to PRIMEDIA Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1999, File No. 1-11106.

(18) Incorporated by reference to PRIMEDIA Inc.'s Registration Statement on Form
S-4, File No. 333-54540.

(19) Incorporated by reference to PRIMEDIA Inc.'s Registration Statement on Form
S-8, File No. 333-56300.

(20) Incorporated by reference to About.com, Inc.'s Quarterly Report on Form
10-Q for the quarter ended June 30, 2000, File No. 000-25525.

(21) Incorporated by reference to Exhibit 3.5 of About.com, Inc.'s Registration
Statement on Form S-1, File No. 333-69881.

(22) Incorporated by reference to Exhibit 4.7 filed with PRIMEDIA Inc.'s
Registration Statement Form S-4 (Registration No 333-67804).

(23) Incorporated by reference to PRIMEDIA Inc.'s Annual Report on Form 10-K for
the year ended December 31, 2000, File No. 1-11106.

(24) Incorporated by reference to PRIMEDIA Inc.'s Annual Report on Form 10-K for
the year ended December 31, 2001, File No. 1-11106.

(25) Incorporated by reference to PRIMEDIA Inc.'s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2002, File No. 1-11106.

(26) Incorporated by reference to PRIMEDIA Inc.'s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2002, File No. 1-11106.

(27) Incorporated by reference to PRIMEDIA Inc.'s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2002, File No. 1-11106.

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

+ Executive contract or compensation plan or arrangement.

(*) Filed herewith.

E-6