<PAGE>

                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                      FORM 10-Q


(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934. 

                 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

                                         OR


[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934.  FOR THE TRANSITION PERIOD FROM _____ TO _____



                           COMMISSION FILE NUMBER 1-13373



                            THE PETERSEN COMPANIES, INC.
               (Exact name of Registrant as specified in its charter)


                  DELAWARE                              36-4099296
        (State or other jurisdiction of     (I.R.S. Employer Identification No.)
        incorporation or organization)

        6420 WILSHIRE BOULEVARD
        LOS ANGELES, CALIFORNIA                           90048
      (Address of principal executive offices)         (Zip Code)


         Registrant's Telephone Number, Including Area Code: (213) 782-2000



   Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [   ].

   Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

     Class of Common Stock                   Outstanding at September 30, 1998
     ---------------------                   ---------------------------------
     Class A, $0.01 par value                          26,877,658
     Class B, $0.01 par value                           7,886,290

                                       
                                       1

<PAGE>

                            THE PETERSEN COMPANIES, INC.
                                          
                                 INDEX TO FORM 10-Q


                                                                           PAGE

PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

   Condensed Consolidated Balance Sheets as of September 30, 1998
   (unaudited) and December 31, 1997 . . . . . . . . . . . . . . . . . . . .  3

   Unaudited Condensed Consolidated Statements of Operations 
   for the three and nine months ended September 30, 1998 and 1997 . . . . .  4
   
   Unaudited Condensed Consolidated Statements of Cash Flows
   for the nine months ended September 30, 1998 and 1997 . . . . . . . . . .  5
   
   Notes to Unaudited Condensed Consolidated Financial Statements. . . . . .  6


Item 2.   Management's Discussion and Analysis of Financial 
          Condition and Results of Operations . . . . . . . . . . . . . . .  11


PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 16

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

                                       
                                       2

<PAGE>

<TABLE>
                            THE PETERSEN COMPANIES, INC.
                       CONDENSED CONSOLIDATED BALANCE SHEETS 
                (in thousands, except share and per share amounts) 



<CAPTION>                                                                                         SEPTEMBER 30,        DECEMBER 31,
               ASSETS                                                                                 1998                1997
                                                                                                   (UNAUDITED)
Current assets:                                                                                   ------------        -------------
<S>                                                                                                  <C>                 <C>      
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $   2,021           $   5,925
Accounts receivable, net of allowance for doubtful accounts of $1,049 (1998)
  and $1,286 (1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              48,439              25,408
Receivable from related party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  42               2,420
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               4,047               4,124
Current portion of deferred subscription acquisition costs . . . . . . . . . . . . . . . .              41,107              39,070
Deferred direct mail advertising costs, net of accumulated amortization of $8,792
(1998) and $2,058 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               8,832               5,339
Other prepaid expenses and current assets. . . . . . . . . . . . . . . . . . . . . . . . .               3,363               2,795
                                                                                                  ------------        ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             107,851              85,081
Deferred subscription acquisition costs. . . . . . . . . . . . . . . . . . . . . . . . . .              48,601              36,905
Deferred direct mail advertising costs . . . . . . . . . . . . . . . . . . . . . . . . . .               6,851                --  
Property and equipment, net of accumulated depreciation of $3,739 (1998) and
   $2,391 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               4,082               3,248
Goodwill, net of accumulated amortization of $50,299 (1998) and $30,038 (1997) . . . . . .             410,964             334,102
Subscriber list and established work force, net of accumulated amortization of
   $24,475 (1998) and $15,000 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . .             102,645             105,000
Deferred financing costs, net of accumulated amortization of $14,977 (1998)
   and $11,397 (1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               3,016               3,336
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               8,353               2,075
                                                                                                  ------------        ------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            $692,363            $569,747
                                                                                                  ------------        ------------
                                                                                                  ------------        ------------
          LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities:
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . .           $  17,781           $  14,299
Accrued payroll and related costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . .               6,249               6,414
Accrued interest on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 644               1,283
Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . .               1,500                --  
Customer incentives payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               8,208               6,982
Current portion of unearned subscription revenues. . . . . . . . . . . . . . . . . . . . .              79,347              71,585
Other accrued expenses and current liabilities . . . . . . . . . . . . . . . . . . . . . .               1,585               1,705
                                                                                                  ------------        ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             115,314             102,268
Unearned subscription revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              62,420              46,360
Bank borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             236,750              65,000
Senior subordinated notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                --                75,000
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               6,564               7,592
                                                                                                  ------------        ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             421,048             296,220
Commitments and contingencies
Stockholders' equity:
Class A Common Stock, $.01 par value; 75,000,000 shares authorized, 26,877,658
  (1998) and 27,022,974 (1997) shares issued and outstanding . . . . . . . . . . . . . . .                 269                 270
Class B Common Stock, $.01 par value; 25,000,000 shares authorized,
  7,886,290 shares issued and outstanding. . . . . . . . . . . . . . . . . . . . . . . . .                  79                  79
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             329,215             330,624
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             (57,505)            (55,696)
                                                                                                  ------------        ------------
                                                                                                       272,058             275,277
Less: notes receivable from related parties. . . . . . . . . . . . . . . . . . . . . . . .                (743)             (1,750)
                                                                                                  ------------        ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             271,315             273,527
                                                                                                  ------------        ------------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . .            $692,363            $569,747
                                                                                                  ------------        ------------
                                                                                                  ------------        ------------
</TABLE>

                             See accompanying notes.
                                       
                                       3

<PAGE>

<TABLE>

                            THE PETERSEN COMPANIES, INC. 
              UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 


<CAPTION>
                                                                            FOR THE THREE MONTHS           FOR THE NINE MONTHS    
                                                                             ENDED SEPTEMBER 30,           ENDED SEPTEMBER 30,    

                                                                             1998           1997           1998           1997
                                                                         ------------   ------------   ------------   ------------
<S>                                                                         <C>            <C>            <C>            <C>      
Net revenues:
Advertising. . . . . . . . . . . . . . . . . . . . . .                      $  48,070      $  38,421      $ 129,423      $ 111,860
Newsstand. . . . . . . . . . . . . . . . . . . . . . .                         14,967         11,746         40,156         32,995
Subscriptions, net of agency commissions of $15,988,
   $46,084, $13,604 and $41,327 for the three and nine
   months ended September 30, 1998 and 1997, 
   respectively. . . . . . . . . . . . . . . . . . . .                         15,873         11,814         44,083         33,551
Other. . . . . . . . . . . . . . . . . . . . . . . . .                          4,100          1,704         15,028          5,423
                                                                         ------------   ------------   ------------   ------------
Total net revenues . . . . . . . . . . . . . . . . . .                         83,010         63,685        228,690        183,829
Production, selling and other direct costs, including
   rent paid to a related party of $1,062, $3,268, 
   $1,093 and $3,280 for the three and nine months
   ended September 30, 1998 and 1997, respectively . .                         55,054         43,530        152,488        125,970
                                                                         ------------   ------------   ------------   ------------
Gross profit . . . . . . . . . . . . . . . . . . . . .                         27,956         20,155         76,202         57,859

General and administrative expenses. . . . . . . . . .                          5,655          3,464         18,105         12,461
Compensation expense . . . . . . . . . . . . . . . . .                           --           12,182           --           12,182
Amortization of goodwill and other intangible assets .                         10,881          9,012         30,051         27,163
                                                                         ------------   ------------   ------------   ------------
Income (loss) from operations. . . . . . . . . . . . .                         11,420         (4,503)        28,046          6,053
Other income (expense):
Interest income. . . . . . . . . . . . . . . . . . . .                            211            324            592            685
Interest expense . . . . . . . . . . . . . . . . . . .                         (4,555)        (7,211)       (11,964)       (23,064)
                                                                         ------------   ------------   ------------   ------------
Income (loss) before extraordinary item. . . . . . . .                          7,076        (11,390)        16,674        (16,326)
Extraordinary item:
   Loss on early extinguishment of debt. . . . . . . .                           --           (6,307)       (18,483)        (6,307)
                                                                         ------------   ------------   ------------   ------------
Net income (loss). . . . . . . . . . . . . . . . . . .                          7,076        (17,697)        (1,809)       (22,633)
Preferred unit dividends . . . . . . . . . . . . . . .                           --            5,472           --           20,891
                                                                         ------------   ------------   ------------   ------------
Net income (loss) attributable to common stockholders.                      $   7,076       $(23,169)      $ (1,809)      $(43,524)
                                                                         ------------   ------------   ------------   ------------
                                                                         ------------   ------------   ------------   ------------

PER SHARE:
Income (loss) before extraordinary items . . . . . . .                      $    0.20      $   (0.42)     $    0.47      $   (0.61)
Loss on early extinguishment of debt . . . . . . . . .                            --           (0.24)         (0.52)         (0.23)
Preferred unit dividends . . . . . . . . . . . . . . .                            --           (0.20)           --           (0.78)
                                                                         ------------   ------------   ------------   ------------
Net income (loss) attributable to common stockholders
 (basic and diluted). . . . . . . . .                                       $    0.20       $  (0.86)      $  (0.05)      $  (1.62)
                                                                         ------------   ------------   ------------   ------------
                                                                         ------------   ------------   ------------   ------------

Weighted average number of common shares
   outstanding (basic) . . . . . . . . . . . . . . . .                     34,961,448     26,859,264     34,940,010     26,806,104
                                                                         ------------   ------------   ------------   ------------
                                                                         ------------   ------------   ------------   ------------

Weighted average number of common shares
   outstanding (diluted) . . . . . . . . . . . . . . .                     35,279,162     26,859,264     35,202,768     26,806,104
                                                                         ------------   ------------   ------------   ------------
                                                                         ------------   ------------   ------------   ------------
</TABLE>

                            See accompanying notes.
                                       
                                       4

<PAGE>

<TABLE>
                           THE PETERSEN COMPANIES, INC. 
             UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
                                  (IN THOUSANDS) 

<CAPTION>
                                                                                                          FOR THE NINE MONTHS
                                                                                                          ENDED SEPTEMBER 30,
                                                                                                        1998                 1997
OPERATING ACTIVITIES                                                                              -------------      --------------
<S>                                                                                                <C>                  <C>
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         $  (1,809)           $(22,633)
Adjustment to reconcile net loss to net cash provided by
operating activities:  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             1,350               1,406
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            40,366              36,179
Allowance for doubtful accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             1,375               1,110
Non-cash compensation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              --                12,182
Changes in operating assets and liabilities: 
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (25,006)             (1,524)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                77                 594
Deferred direct mail advertising costs . . . . . . . . . . . . . . . . . . . . . . . . . .           (18,078)             (4,542)
Deferred subscription acquisition costs. . . . . . . . . . . . . . . . . . . . . . . . . .           (13,733)              4,502
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . .             3,482              (4,246)
Accrued payroll and related costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . .              (165)              2,912
Unearned subscription revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            23,822                (836)
Other current and noncurrent assets, net . . . . . . . . . . . . . . . . . . . . . . . . .            (6,411)               (555)
Other current and noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . .              (561)              3,287
                                                                                                  -------------      --------------
Total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             6,518              50,469
                                                                                                  -------------      --------------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . .             4,709              27,836
                                                                                                  -------------      --------------
INVESTING ACTIVITIES
Purchases of property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . .            (2,185)               (669)
Acquisitions, including liabilities assumed and net of costs . . . . . . . . . . . . . . .          (104,993)               (122)
Adjustment to purchase price of assets of publishing division. . . . . . . . . . . . . . .             2,225               2,500
                                                                                                  -------------      --------------
Net cash provided by (used in) investing activities. . . . . . . . . . . . . . . . . . . .          (104,953)              1,709
                                                                                                  -------------      --------------
FINANCING ACTIVITIES 
Repayment of bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (10,750)            (22,500)
Proceeds from bank borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           184,000                --
Proceeds from issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . .               190                --
Proceeds from issuance of Membership Units . . . . . . . . . . . . . . . . . . . . . . . .                --                 914
Repayment of Senior Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . . . .           (75,000)               --
Increase in deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . .            (3,260)               --
Payment on notes receivable, related party including interest. . . . . . . . . . . . . . .             1,160                 200
                                                                                                  -------------      --------------
Net cash provided by (used in) financing activities. . . . . . . . . . . . . . . . . . . .            96,340             (21,386)
                                                                                                  -------------      --------------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .            (3,904)              8,159
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . .             5,925               7,761
                                                                                                  -------------      --------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . .         $   2,021           $  15,920
                                                                                                  -------------      --------------
                                                                                                  -------------      --------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         $  11,995           $  18,845
                                                                                                  -------------      --------------
                                                                                                  -------------      --------------

Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         $     267          $       43
                                                                                                  -------------      --------------
                                                                                                  -------------      --------------
</TABLE>


                             See accompanying notes.

                                       5

<PAGE>


                           THE PETERSEN COMPANIES, INC. 
          NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
                                          
                                          
1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

     ORGANIZATION 

     BrightView Communications Group, Inc., a Delaware corporation, changed its
name to The Petersen Companies, Inc. ("Petersen" or the "Company") on August
7, 1997. Prior to October 2, 1997, Petersen owned 1.0% of Petersen Holdings
L.L.C. ("Holdings") and .1% of Petersen Publishing Company, L.L.C.
("Publishing"). Subsequent to October 2, 1997, Petersen owns 100% of Holdings.
Petersen was organized in August 1996 for the principal purpose of investing in
Holdings and Publishing and has no business operations other than the
investments in Holdings and Publishing. Publishing is engaged in the publishing
business with revenues generated primarily from the publication of various
special interest magazines and the sale of related advertising, principally
within the United States. Petersen is Holdings' sole member and as such,
controls the policies and operations of Holdings and of Publishing through
Holdings.  In January 1998, Holdings was merged into Publishing.

     BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X.  Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments consisting
of normal recurring accruals considered necessary for a fair presentation have
been included.  Operating results for the three and nine month periods ended
September 30, 1998, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.  These unaudited condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997.
     
     The unaudited condensed consolidated financial statements reflect the
consolidated activity of Petersen, Holdings and Publishing for the three and
nine months ended September 30, 1997 and 1998, respectively, after elimination
of intercompany transactions. Certain reclassifications have been made to the
consolidated balance sheets and statements of operations for the three and nine
months ended September 30, 1997, to conform to the presentation for the three
and nine months ended September 30, 1998.  For 1997, the Company has not
presented separate financial statements and other disclosures concerning
Holdings and Publishing because management has determined that such information
is not material to investors.  For 1998, all activity of Holdings and Publishing
has been consolidated with that of the Company.
     
     EARNINGS PER SHARE

     In 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." SFAS 128 replaced the calculation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. All earnings per share amounts presented
have been calculated according to SFAS 128. 

                                       
                                       6

<PAGE>

                           THE PETERSEN COMPANIES, INC. 
    NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 


     COMPREHENSIVE INCOME 

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components. The statement is effective for fiscal years beginning
after December 15, 1997.  The statement, which has been adopted for calendar
year 1998, had no impact on the financial statements or disclosures of the
Company.

     EXTRAORDINARY ITEM-LOSS ON EARLY RETIREMENT OF DEBT

     On March 30, 1998, the Company redeemed the remaining $75 million of its 11
1/8% Senior Subordinated Notes due 2006 (the "Notes").  Additionally, the
Company established a new Senior Credit Facility, a portion of which was used to
repay the Notes (see Note 4).  Accordingly, the Company recorded an
extraordinary loss of $18.5 million which consisted of $14.8 million in
prepayment charges in connection with the early retirement of debt, a write off
of $3.2 million of unamortized deferred financing costs, and $.5 million in fees
relating to the retirement of debt.  There was no tax benefit recognized for the
extraordinary item because it generated a taxable loss position for the Company.


     ADVERTISING EXPENSES

     The Company accounts for its direct response advertising costs in
accordance with the American Institute of Certified Public Accountants'
Statement of Position 93-7 "Reporting on Advertising Costs", pursuant to which
qualified direct response advertising is capitalized and amortized over its
expected period of future benefit.  Such capitalized costs include primarily
printing and postage to current and potential subscribers and totaled $15.7
million and $5.3 million at September 30, 1998 and December 31, 1997
respectively, net of accumulated amortization.

     The Company amortizes all capitalized advertising costs over lives ranging
from 12 to 24 months.  Amortization expense for direct response advertising
costs was $6.7 million and $1.0 million for the nine months ended September 30,
1998 and 1997, respectively, and is included in production, selling and other
direct costs.  The Company expenses all other costs of advertising as incurred. 
Advertising expense was approximately $204,000, $837,000, $39,000 and $985,000
for the three and nine months ended September 30, 1998 and 1997, respectively.

     LICENSING AGREEMENTS

     During the nine months ended September 30, 1998, the Company entered into
certain licensing agreements with third parties to license the Company's
trademarks such as HOT ROD, MOTORTREND and TEEN.  Each of these agreements
includes a minimum guarantee as well as future royalties based on product sales.
The Company has recorded approximately $1.1 million and $6.3 million in
licensing revenues during the three and nine months ended September 30, 1998. 
Minimum guarantees are recorded into income at the time the Company has provided
all services to the licensee and collection is reasonably assured.  Royalties
for licensing arrangements are reflected into income when earned.  There can be
no assurance that the current level of licensing sales activity will continue in
future periods.

     INCOME TAXES

     At September 30, 1998, the Company had no provision or liability for
federal or state income taxes based on the Company's taxable loss for the nine
months ended September 30, 1998.

                                       
                                       7

<PAGE>

                           THE PETERSEN COMPANIES, INC. 
    NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 


2.   ACQUISITIONS 

     During the nine month period ended September 30, 1998, Petersen acquired
substantially all of the assets of various magazine publishers, including all
rights to certain magazines.  These acquisitions were financed primarily through
borrowings under the Company's credit agreement and have been accounted for by
the purchase method.  Cash payments for these acquisitions on an aggregate basis
was $91.0 million.  

     As a result of these acquisitions, Petersen recorded goodwill totaling
approximately $105.0 million. Intangible assets are amortized using the
straight-line method over lives ranging from 5 to 15 years. 

     Amortization of goodwill and other intangibles for the three and nine
months ended September 30, 1998 and 1997, was approximately $10.8 million, $30.0
million, $9.0 million and $27.1 million, respectively.


3.   INVENTORIES 

     Inventories consist of (in thousands):

<TABLE>
<CAPTION>
                                             September 30,  December 31,
                                                 1998           1997
                                              ---------      ---------
<S>                                            <C>            <C>
Paper. . . . . . . . . . . . . . . . .         $   326        $   824
Work in process . . . . . . . . . .              3,721          3,300
                                             ----------      ---------
                                               $ 4,047        $ 4,124
                                             ----------      ---------
                                             ----------      ---------
</TABLE>

     The Company no longer inventories its paper, but purchases it on an as
needed basis, together with its printing services from one vendor. 


4.   LONG-TERM DEBT 

     SENIOR CREDIT FACILITY:

          In March 1998, the Company entered into a Senior Secured Revolving
Credit Facility (the "Revolving Credit Facility") with First Union National
Bank and a syndicate of other financial institutions. The Revolving Credit
Facility provides for up to $325 million in borrowings, comprised of a $175
million seven-year Senior Secured Revolving Loan (the "Revolver") due 2005, and
a $150 million nine-year Senior Secured Term Loan (the "Term Loan") due 2007. 
The Revolving Credit Facility includes up to $10 million for standby letters of
credit and $10 million for swingline loans.  The new facilities replaced the
Company's existing $175 million senior credit facility with First Union National
Bank and a syndicate of other lenders.  

     The Revolver bears interest at the Company's election of either LIBOR
(5.31% at September 30, 1998) plus .625% to 1.5%, based on certain ratios
defined in the Revolver agreement, or the Revolver base rate (8.25% at September
30, 1998) plus .0 % to .25%, based on certain ratios defined in the Revolver
agreement.  As of September 30, 1998, the Company had $89.0 million outstanding
under the Revolving Credit Facility at a weighted average interest rate of
6.50%. In addition, at September 30, 1998, a $1.6 million letter of credit was
outstanding, reducing the amount available under the Revolving Credit Facility. 
The letter of credit expires in January 1999 and is renewable annually. 

                                       
                                       8

<PAGE>

                           THE PETERSEN COMPANIES, INC. 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     The Term Loan bears interest at the Company's election of either LIBOR
(5.31% at September 30, 1998) plus 1.75% to 2.25%, based on certain ratios
defined in the Term Loan agreement, or the Term Loan base rate (8.25% at
September 30, 1998) plus  .5 % to 1.0%, based on certain ratios defined in the
Term Loan agreement.  As of September 30, 1998, the Company had $149.3 million
outstanding under the Term Loan at a weighted average interest rate of 7.44%.
     
     The Revolving Credit Facility is required to be permanently reduced with
(i) 100% of insurance proceeds not applied toward the repair or replacement of
damaged properties within 180 days, (ii) 100% of proceeds from assets sales not
reinvested within 180 days, other than assets sold in the normal course of
business, and (iii) 25% of the proceeds from the issuance of any equity
(excluding equity issued for acquisitions) or 100% of any debt.

     The Revolving Credit Facility contains certain restrictive covenants
including, but not limited to, restrictions on indebtedness, liens, disposals of
assets, payments of dividends and investments, as well as certain financial
ratio covenants. As of September 30, 1998, the Company was in compliance with
the covenants of the Revolving Credit Facility. 

     The Revolving Credit Facility is guaranteed by the Company, Publishing and
all wholly-owned subsidiaries of the Company, if any.  As collateral for the
Revolving Credit Facility, Publishing pledged a first priority security interest
in all of its assets and all of the assets of any wholly-owned subsidiaries. 

     The Company estimates that at September 30, 1998, the book value of the
Revolving Credit Facility approximated its fair value. 

     The Company incurred costs of approximately $3.3 million in connection with
establishing the Revolving Credit Facility. These costs are included in Deferred
Financing Costs and are being amortized over seven and nine years. During the
three and nine months ended September 30, 1998, the Company amortized
approximately $107,000 and $244,000 of such deferred financing costs. 

     11 1/8% SENIOR SUBORDINATED NOTES DUE 2006: 

     In March 1998, the Company completed a cash tender offer for all $75
million of its remaining outstanding Notes.  The Company recorded an
extraordinary loss of approximately $17.8 million, for redemption premium
incurred and write-off of previously deferred finance charges in connection with
the purchase of the Notes. 


5.   COMMITMENTS AND CONTINGENCIES

     LEGAL MATTERS

     The Company is party to various legal actions and disputes arising in the
ordinary course of business.  Management believes, based in part on the advice
of counsel, that any resulting liabilities from these actions will not have a
material adverse effect on the financial position of the Company.


6.   LOSS PER SHARE

     As required by SFAS 128, basic earnings per share is based upon the
weighted-average number of common shares outstanding. Diluted earnings per share
is based upon the weighted-average number of common shares and dilutive
potential common shares outstanding. Potential common shares are outstanding
options under the Company's stock option plan. 

                                       
                                       9

<PAGE>

                           THE PETERSEN COMPANIES, INC. 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     Since the Company's operations resulted in income before extraordinary
items for the three and nine month periods ended September 30, 1998, options to
purchase 317,714 shares and 262,758 shares respectively of common stock, which
will be exercisable in periods subsequent to September 30, 1998 and could
potentially dilute basic loss per share, have been included in the diluted loss
per share computations, in accordance with SFAS 128.

<TABLE>
<CAPTION>
                                                               FOR THE THREE MONTHS     FOR THE NINE MONTHS
                                                               ENDED SEPTEMBER 30,      ENDED SEPTEMBER 30, 

                                                                 1998        1997         1998        1997
                                                              ---------   ---------    ---------   ---------
<S>                                                               <C>         <C>           <C>         <C>
NUMERATOR: 
Income (loss) before extraordinary items . . . . . . . . . . .    $ 7,076     $(11,390)     $16,674     $(16,326)
Loss on early extinguishment of debt . . . . . . . . . . . . .      --           6,307       18,483        6,307
                                                                 ---------   ---------     ---------   ---------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . .     7,076       (17,697)      (1,809)     (22,633)
Preferred stock dividends. . . . . . . . . . . . . . . . . . .      --           5,472         --         20,891
                                                                 ---------   ---------     ---------   ---------
Numerator for basic and dilutive earnings per 
  share -- net income (loss) attributable to common
  stockholders . . . . . . . . . . . . . . . . . . . . . . . .    $7,076      $(23,169)     $(1,809)    $(43,524)
                                                                 ---------   ---------     ---------   ---------
                                                                 ---------   ---------     ---------   ---------

DENOMINATOR:
Denominator for basic earnings per share -- 
   weighted-average shares . . . . . . . . . . . . . . . . .  34,961,448    26,859,264   34,940,010   26,806,104
Effect of dilutive securities:
   Employee stock options                                        317,714          --        262,758         --
                                                              -----------  -----------   -----------  -----------
Denominator for diluted earnings per share - adjusted
   weighted-average shares and assumed conversions . . . . .  35,279,162    26,859,264   35,202,768   26,806,104
                                                              -----------  -----------   -----------  -----------
                                                              -----------  -----------   -----------  -----------

Net income (loss) per share (basic and diluted). . . . . . .       $0.20        $(0.86)      $(0.05)       $(1.62)
                                                              -----------  -----------   -----------  -----------
                                                              -----------  -----------   -----------  -----------
</TABLE>
                                       
                                       10


<PAGE>

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                             AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report.

OVERVIEW

     The Company is a leading publisher of special-interest magazines with a 
diverse portfolio of more than 120 publications, including 38 monthly, 14 
bimonthly and 68 single issue or annual publications. According to the latest 
survey by Veronis, Suhler and Associates ("VSA") of 84 general-interest and 
111 special-interest magazines, special-interest magazine publishing was the 
fastest growing sector of the consumer magazine industry over the most 
recently reported five year period.  The special-interest nature of the 
Company's magazines creates an opportunity for its advertisers to efficiently 
reach their target audience, as the Company's enthusiast readers value 
special-interest magazines for both their product information as well as 
editorial content.  The Company is actively expanding and diversifying the 
scope of its media activities to enhance its revenues by providing 
multi-media solutions for marketers.  These activities include licensing 
arrangements, trade shows, consumer events, databases, custom publishing, 
radio and television programs and retail promotions.

     The Company's principal sources of revenues from the publication of its 
magazines are derived from advertising and circulation.  Circulation revenues 
are generated from subscription, newsstand and list rental sales.  
Advertising revenues of the Company, as well as those of the consumer 
magazine industry in general, are cyclical and dependent upon general 
economic conditions. As compared to general-interest magazine publishers, 
however, the Company believes that its advertising revenues are less 
susceptible to changes in general economic conditions due to the diversity of 
its publications and the endemic nature of its advertiser base.  For the 
periods reported, no single advertiser has comprised more than 5.0% of the 
Company's advertising revenues.  The Company's revenues are generated 
predominantly from U.S. sources.

     The principal components of the Company's production and selling costs 
are raw materials, advertising sales, distribution, printing and binding and 
editorial expenses.  During the second quarter of 1998, the Company extended 
its contract with its current printer.  This extension also included 
extending the terms on which the Company will purchase paper through 2006.  
The Company currently purchases all of its paper requirements on an as needed 
basis.  As a result, the Company does not carry a significant amount of paper 
in inventory.

     With the exception of historical information (information relating to 
the Company's financial condition and results of operations at historical 
dates or for historical periods), the matters discussed in this Management's 
Discussion and Analysis of Financial Condition and Results of Operations are 
forward-looking statements that necessarily are based on certain assumptions, 
and are subject to certain risks and uncertainties.  These forward-looking 
statements are based on management's expectations as of the date hereof, and 
the Company does not undertake any responsibility to update any of these 
statements in the future. Actual future performance and results could differ 
from that contained in or suggested by these forward-looking statements as a 
result of the factors set forth in this Management's Discussion and Analysis 
of Financial Condition and Results of Operations, various aspects of the 
business as described in the Company's  Report on Form 10-K for the year 
ended December 31, 1997 and elsewhere in the Company's filings with the 
Securities and Exchange Commission. 

                                       11

<PAGE>

            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - (CONTINUED)
                                         
                                         
                               RESULTS OF OPERATIONS
                                         
                                         
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1998 WITH THE
THREE MONTHS ENDED SEPTEMBER 30, 1997

     NET REVENUES.  Net revenues increased $19.3 million, or 30.3%, to $83.0 
million for the three months ended September 30, 1998 from $63.7 million for 
the three months ended September 30, 1997. This increase is primarily the 
result of a $9.6 million, or 25.1%, increase in advertising revenues, a $3.2 
million, or 27.4% increase in newsstand revenues, a $4.1 million or 34.4% 
increase in subscription revenues and a $2.4 million increase in other 
revenues over the same period in the prior year.  These increases are 
primarily the result of an overall increase in the Company's advertising 
rates and higher advertising revenues from several of the Company's core 
magazines.  Also, the Company experienced increases in subscription activity 
and copies of the Company's magazines sold at the newsstand, all primarily 
resulting from the Company's increased direct mail campaigns and nationwide 
marketing efforts.  Additionally, during the third quarter of 1998, the 
Company recognized revenues of $3.6 million resulting from various projects 
relating to its Enterprises and Events divisions, which included significant 
licensing activity, and various other events and shows.  Licensing revenues 
will vary from period to period depending on the volume and extent of these 
licensing arrangements entered into during any particular period.

     PRODUCTION, SELLING AND OTHER DIRECT COSTS.  Production, selling and 
other direct costs increased approximately $11.6 million, or 26.7%, to nearly 
$55.1 million for the three months ended September 30, 1998, from $43.5 
million for the three months ended September 30, 1997.  The increase is 
primarily a result of: (i) a $2.7 million, or 39.3% increase in advertising 
sales costs related to the Company's continuing efforts to invest in and 
market its current and new products, (ii) a $2.1 million, or 40.2% increase 
in editorial costs which resulted from expanding the number and size of 
current products and the consolidation of acquired publications, (iii) an 
increase of $1.0 million in direct costs relating to shows and licensing 
activities, and (iv) an increase in overall distribution expenses of $2.2 
million, or 37.3%.  In addition, paper and printing costs increased by $5.3 
million, or 39.1%, resulting from a significant increase in the number of 
copies produced during the third quarter of 1998, compared to the third 
quarter of 1997, as evidenced by a corresponding substantial increase in 
newsstand and subscription revenues.  

     GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative 
expenses increased approximately $2.2 million, or 62.9%, to nearly $5.7 
million for the three months ended September 30, 1998, from $3.5 million for 
the same period of the prior year.  This increase resulted primarily from the 
Company's hiring of additional management and personnel relating to its 
various operations, including the continued development of its Enterprises 
division and events operations as a result of its continuing efforts to 
become a complete marketing solutions company, as well as the absorption of 
expenses from acquired companies.
     
     INCOME FROM OPERATIONS.  Income from operations increased $15.9 million 
to $11.4 million for the three months ended September 30, 1998 from a loss of 
$4.5 million for the three months ended September 30, 1997, primarily as a 
result of the combination of reasons stated above, as well as a $12.2 million 
non-cash compensation expense which was recorded in 1997.

     INTEREST EXPENSE.  Interest expense decreased by nearly $2.7 million to 
$4.6 million for the third quarter of 1998 compared to $7.2 million for third 
quarter of 1997.  This decrease was the result of the Company eliminating its 
11 1/8% Senior Subordinated Notes with proceeds from its initial public 
offering, cash from operations and proceeds from the Company's new credit 
facilities.  In addition, the Company's interest rate on borrowed funds 
decreased compared to the same quarter of the prior year.  (See Note 4 in the 
Notes to Condensed Consolidated Financial Statements herein).  

     NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS.  Net income 
attributable to common shareholders for the three months ended September 30, 
1998 was nearly $7.1 million, compared to a net loss of $23.2 million for the 
same period of the prior year.  The $30.3 million increase in net income is 
primarily the result of: (i) improved operations during the third quarter of 
1998 as noted above, (ii) the decrease in interest expense period to period, 
and (iii) a $12.2 million non-cash compensation charge relating to the 
Company's initial public offering and a $5.5 million preferred unit dividend, 
both of which were recorded during the third quarter of 1997.

                                       12

<PAGE>

            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (CONTINUED)

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1998 WITH THE
NINE MONTHS ENDED SEPTEMBER 30, 1997

     NET REVENUES.  Net revenues increased $44.9 million, or 24.4%, to $228.7 
million for the nine months ended September 30, 1998 from $183.8 million for 
the nine months ended September 30, 1997. This increase is primarily the 
result of a $17.6 million, or 15.7%, increase in advertising revenues, a $7.2 
million, or 21.7% increase in newsstand revenues, a $10.5 million or 31.4% 
increase in subscription revenues and a $9.6 million increase in other 
revenues over the same period in the prior year.  These increases are 
primarily the result of: (i) an overall increase in the Company's advertising 
rates as well as higher advertising revenues from several of the Company's 
core magazines and (ii) increases in subscription activity and copies of the 
Company's magazines sold at the newsstand, all primarily resulting from the 
Company's increased direct mail campaigns and nationwide marketing efforts.  
Additionally, during the first nine months of 1998, the Company recognized 
revenues of $13.6 million resulting from numerous projects relating to its 
Enterprises and Events divisions, which included significant licensing 
activity, and various other events and shows. Licensing revenues will vary 
from period to period depending on the volume and extent of these licensing 
arrangements entered into during any particular period.

     PRODUCTION, SELLING AND OTHER DIRECT COSTS.  Production, selling and 
other direct costs increased approximately $26.5 million, or 21.0%, to $152.5 
million for the nine months ended September 30, 1998, from $126.0 million for 
the nine months ended September 30, 1997.  The increase is primarily a result 
of:  (i) a $4.9 million, or 23.6% increase in advertising sales costs related 
to the Company's continuing efforts to invest in and market its current and 
new products, (ii) a $4.8 million, or 33.7% increase in editorial costs which 
resulted from expanding the number and size of current products and the 
consolidation of acquired publications, (iii) an increase of $4.2 million in 
direct costs relating to shows and licensing activities, and (iv) an increase 
in overall distribution expenses of $4.4 million, or 25.7%.  In addition, 
paper and printing costs increased by  $10.1 million, or 25.2%, resulting 
from a significant increase in the number of copies produced during the first 
nine months of 1998, compared to same period in 1997, as evidenced by a 
corresponding substantial increase in newsstand and subscription revenues.  

     GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative 
expenses increased approximately $5.6 million, or 44.8%, to $18.1 million for 
the nine months ended September 30, 1998, from $12.5 million for the same 
period of the prior year.  This increase resulted primarily from the 
Company's continuing efforts to become a complete marketing solutions company 
by (i) hiring additional management and personnel relating to its various 
operations including the establishment of its Enterprises division and events 
operations and (ii) the absorption of general and administrative expenses 
from acquired companies.
     
     INCOME FROM OPERATIONS.  Income from operations increased $21.9 million 
to $28.0 million for the nine months ended September 30, 1998 from $6.1 
million for the nine months ended September 30, 1997, primarily as a result 
of the combination of reasons stated above, as well as a $12.2 million 
non-cash compensation expense which was recorded in 1997.

     INTEREST EXPENSE.  Interest expense decreased to $12.0 million for the 
nine months ended September 30, 1998 compared to $23.1 million for the same 
period in 1997.  This decrease was primarily the result of the Company 
eliminating its 11 1/8% Senior Subordinated Notes with proceeds from its 
initial public offering, cash from operations and proceeds from the Company's 
new credit facilities.  In addition, the Company's interest rate on borrowed 
funds decreased compared to the same period of the prior year.  (See Note 4 
in the Notes to Condensed Consolidated Financial Statements herein).  
     
     EXTRAORDINARY ITEM.  During the nine months ended September 30, 1998, 
the Company recorded a loss on early extinguishment of debt in the amount of 
$18.5 million resulting from one time charges relating to the repurchase of 
$75.0 million in its 11 1/8% Senior Subordinated Notes and establishing the 
new Senior Credit Facility.

                                       13

<PAGE>

              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS - (CONTINUED)

     NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS.  Net loss attributable to 
common shareholders for the nine months ended September 30, 1998 was $1.8 
million, compared to $43.5 million for the same period of the prior year.  
The $41.7 million decrease in net loss is primarily the result of: (i) 
improved operations during the first nine months of 1998 as noted above, (ii) 
the decrease in interest expense period to period, and (iii) a $20.9 million 
preferred unit dividend, a $12.2 million non-cash compensation expense and a 
$6.3 million loss on early extinguishment of debt, all of which were recorded 
during the first nine months of 1997, offset by a $18.5 million loss on early 
extinguishment of debt recorded in 1998.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary cash needs are for daily operations including the 
production and distribution of its publications, capital expenditures and 
strategic business acquisitions.  Historically, the Company's primary sources 
of cash for its business activities have been cash flows from operations, 
issuing debt instruments and borrowings under its various credit facilities.

     Cash and cash equivalents totaled $2.0 million and working capital 
(excluding the current portion of unearned subscription revenue) totaled 
$30.8 million at September 30, 1998.  At December 31, 1997, cash and cash 
equivalents totaled $5.9 million and working capital (excluding the current 
portion of unearned subscription revenue) totaled $15.3 million.

     The Company's net cash provided by operations was $4.7 million for the 
nine months ended September 30, 1998 compared to $27.8 million for the nine 
months ended September 30, 1997.  Of this decrease, approximately $36.2 
million was related to changes of operating asset and liability balances.  
EBITDA, which is a measure of cash based income, increased $12.5 million, or 
26.3%, to $60.0 million for the nine months ended September 30, 1998, from 
$47.5 million for the same period in 1997.  Improved operations including an 
increase in revenues from the events and enterprise divisions of the Company 
were the primary contributing factors to the increase in EBITDA.

     The Company's net cash used in investing activities was $105.0 million 
for the nine months ended September 30, 1998, compared to net cash provided 
by investing activities of $1.7 million for the same period of the prior 
year. During the first nine months of 1998, the Company used funds of 
approximately $91.0 million for acquisitions, including the purchase of 
nearly twenty-five (25) magazine titles from various publishers and a variety 
of other media ventures.  The Company's operations are not capital intensive 
and at September 30, 1998, there are no material capital commitments. The 
Company's capital expenditures were $2.2 million and $.7 million in the nine 
months ended September 30, 1998 and 1997, respectively.

     The Company's net cash provided by financing activities was $96.3 
million for the nine months ended September 30, 1998 and was comprised 
primarily of $184.0 million in proceeds from bank borrowings, offset in part 
by $75.0 million used to pay off the remaining 11 1/8% Senior Subordinated 
Notes, all of which represented an early repayment.  During the nine months 
ended September 30, 1998, the Company entered into the Revolving Credit 
Facility which provides for up to $325 million in borrowings, comprised of a 
$175 million seven-year Senior Secured Revolving Loan Facility due 2005, and 
a $150 million nine-year Senior Secured Term Loan due 2007.  
     
     The Company believes that net cash provided by operations and funds 
available under the Revolving Credit Facility will be sufficient to fund its 
future cash requirements. Excluding any acquisition activity, the Company 
currently projects that it will not have to utilize the Revolving Credit 
Facility to fund operations. No assurances can be given, however, that this 
will be the case. The Company expects that future cash requirements will 
principally be for repayments of indebtedness, working capital requirements, 
capital expenditures and strategic acquisitions. The Company's future 
operating performance and ability to service or refinance its current 
indebtedness will be subject to future economic conditions and to financial, 
business and other factors, many of which are beyond the Company's control.

                                       14
<PAGE>
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - (CONTINUED)

EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION

     Earnings before interest expense, taxes, depreciation and amortization 
("EBITDA") is a widely used and commonly reported standard measure utilized 
by analysts and investors in the analysis of the media industry.  EBITDA is 
not a measure of performance under GAAP because it excludes those items 
listed above which are significant components in understanding and evaluating 
the Company's financial performance.  However, the following EBITDA 
information can provide additional information for determining the ability of 
the Company to meet its debt service requirements and for other comparative 
analyses of the Company's operating performance relative to other publishing 
companies.
<TABLE>
<CAPTION>
                                                Nine Months Ended September 30,
      (unaudited and in thousands)                     1998          1997
                                                     --------      --------
    <S>                                              <C>           <C>
    Total net revenues                               $228,690      $183,829
    Production, selling & other direct costs 
     (excluding depreciation of $1,350 and $1,405 
     for the nine months ended September 30, 1998 
     and 1997, respectively)                          151,138       124,565
                                                     --------      --------
                                                       77,552        59,264
    General & administrative expenses                 (18,105)      (12,461)
    Other adjustments                                     593           683
                                                     --------      --------
    EBITDA                                           $ 60,040      $ 47,486
                                                     ========      ========
</TABLE>

     The Company's EBITDA increased $12.5 million, or 26.3%, to $60.0 million 
for the nine months ended September 30, 1998 from $47.5 million for the nine 
months ended September 30, 1997.  Improved operations including an increase 
in revenues from the events and enterprise divisions of the Company were the 
primary contributing factors to the increase in EBITDA.  EBITDA as a 
percentage of net revenues increased to 26.3% from 25.8% for the same periods.

YEAR 2000 

     The Company currently is working to resolve the potential impact of the 
year 2000 on the processing of date-sensitive information by the Company's 
information technology ("IT") and non-IT systems.  The year 2000 problem is 
the result of computer programs being written using two digits, rather than 
four, to define the applicable year.  Any of the Company's programs that have 
time-sensitive software may recognize a date using "00" as the year 1900 
rather than the year 2000, which could result in miscalculations or system 
failures.

     The Company has conducted a review of its computer systems devices, 
applications and manufacturing equipment (collectively, "Computer Systems") 
and has identified those areas that could be affected by Year 2000 
noncompliance. Additionally, the Company has appointed a program manager for 
Year 2000 compliance and is presently assessing the affected Computer Systems 
and is developing plans to address the required modifications. The Company 
presently intends to utilize internal and external resources to correct or 
reprogram and test its Computer Systems for Year 2000 compliance. The Company 
has estimated that its total cost associated with Year 2000 compliance will 
be less than $1.0 million and as such, not material to its financial 
position, results of operations or cash flows. As of September 30, 1998, the 
Company had incurred costs of approximately $90,0000 relating to the Year 
2000 issue.

     Additionally, the Company is in the process of communicating with all 
known suppliers, service providers, distributors, wholesalers and other 
entities with which it has a business relationship (collectively, "Third 
Party Businesses") regarding compliance with Year 2000 requirements. The 
Company has not determined the impact, if any, on its operations if Third 
Party Businesses fail to comply with Year 2000 requirements. However, if 
modifications of the Company's business critical Computer Systems, or 
Computer Systems of key Third Party Businesses, are not completed in a timely 
manner, the Year 2000 issue could have an adverse effect on the operations 
and financial position of the Company.

                                       15
<PAGE>

PART II - OTHER INFORMATION


Item 1.   LEGAL PROCEEDINGS
            Not applicable

Item 2.   CHANGES IN SECURITIES
            Not applicable

Item 3.   DEFAULTS UPON SENIOR SECURITIES
            Not applicable

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            Not applicable

Item 5.   OTHER INFORMATION
            Not applicable

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K.

         (a)  Exhibits:

              27   Financial Data Schedule

         (b)  Reports on Form 8-K:

              None

                                       16

<PAGE>


                                    SIGNATURES

     Pursuant to the requirements 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.


                              The Petersen Companies, Inc.


Dated:    November 6, 1998    By:   /s/  Richard S Willis
                                  --------------------------
                                  Richard S Willis
                                  Executive Vice President and 
                                  Chief Accounting Officer


                                       17