FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                   QUARTERLY REPORT UNDER SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934.


                      For Quarter Ended: September 30, 1996


                         Commission file number: 1-11106


                        K-III COMMUNICATIONS CORPORATION
             (Exact name of registrant as specified in its charter)



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


                      745 Fifth Avenue, New York, New York
                    (Address of principal executive offices)

                                      10151
                                   (Zip Code)



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



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,  and (2) has been subject to such filing  requirements
for the past 90 days.
     Yes   X   No  
         ----      ----  


Number of shares of common stock, par value $.01 per share, outstanding as of
November 11, 1996: 128,957,055






<PAGE>


                                                              


                K-III COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                      INDEX



                                                                      PAGE


Part I.  Financial Information


     Item 1.   Financial Statements

               Condensed Consolidated Balance Sheets
               (Unaudited) as of December 31, 1995 and
               September 30, 1996                                        2

               Condensed Statements of Consolidated
               Operations (Unaudited) for the nine months
               ended September 30, 1995 and 1996                         3

               Condensed Statements of Consolidated
               Operations (Unaudited) for the three months
               ended September 30, 1995 and 1996                         4

               Condensed Statements of Consolidated
               Cash Flows (Unaudited) for the nine months
               ended September 30, 1995 and 1996                         5

               Notes to Condensed Consolidated
               Financial Statements (Unaudited)                       6-10

     Item 2.   Management's Discussion and Analysis of Financial
               Condition and Results of Operations                   11-18


Part II.  Other Information

     Item 6.    Exhibits                                                19


Signatures                                                              20



<PAGE>


                                       -2-

                K-III COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>

                                                            December 31,             September 30,
                                                                1995                     1996
                                                                ----                     ----
                                                     (dollars in thousands, except per share amounts)
ASSETS
Current assets:
<S>                                                        <C>                       <C>        
     Cash and cash equivalents                             $    27,226         $    32,504
     Accounts receivable, net                                  173,771             234,635
     Inventories, net                                           70,844              56,752
     Net assets held for sale                                    5,253              18,605
     Prepaid expenses and other                                 26,732              39,405
                                                           -----------         -----------
     Total current assets                                      303,826             381,901

Property and equipment, net                                    112,013             129,788
Other intangible assets, net                                   699,617             924,792
Excess of purchase price over net
     assets acquired, net                                      534,554             828,521
Other non-current assets                                       231,406             244,107
                                                           -----------         -----------
                                                           $ 1,881,416         $ 2,509,109
                                                           ===========         ===========
LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities:
     Accounts payable                                      $    90,414         $    79,319
     Accrued interest payable                                    9,326              24,971
     Accrued expenses and other                                125,967             120,317
     Deferred revenues                                         128,679             155,913
     Current maturities of long-term debt                        6,000               6,000
                                                           -----------         -----------

     Total current liabilities                                 360,386             386,520
                                                           -----------         -----------

Long-term debt                                               1,134,916           1,602,112
                                                           -----------         -----------
Other non-current liabilities                                   33,924              37,953
                                                           -----------         -----------
Exchangeable Preferred Stocks                                  231,606             438,375
                                                           -----------         -----------

Common stock  subject  to  redemption  ($.01  par  value,
     2,406,513  shares and 720,810 shares  outstanding at
     December   31,   1995  and   September   30,   1996,
     respectively)                                              28,022               6,479
                                                           -----------         -----------

Shareholders'   Equity  Common  stock  ($.01  par  value,
     125,921,221    shares   and    128,174,765    shares
     outstanding  at December 31, 1995 and  September 30,
     1996, respectively)                                         1,259               1,282
     Additional paid-in-capital                                748,194             771,872
     Accumulated deficit                                      (655,616)           (734,215)
     Cumulative foreign currency translation adjustments        (1,275)             (1,269)
                                                           -----------         -----------

     Total shareholders' equity                                 92,562              37,670
                                                           -----------         -----------

                                                           $ 1,881,416         $ 2,509,109
                                                           ===========         ===========
                                                        
</TABLE>


               See notes to condensed consolidated financial statements.













<PAGE>


                           -3-

    K-III COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                Nine Months Ended
                                                                                  September 30,
                                                                            1995                  1996
                                                              (dollars in thousands, except per share amounts)
Sales, net:
<S>                                                                  <C>                   <C>          
     Education                                                       $     246,970         $     268,277
     Information                                                           187,069               221,684
     Media                                                                 327,457               505,090
                                                                     -------------         -------------

Total sales, net                                                           761,496               995,051

Operating costs and expenses:
     Cost of goods sold                                                    181,050               250,806
     Marketing and selling                                                 132,414               183,937
     Distribution, circulation and fulfillment                             140,807               169,444
     Editorial                                                              53,998                74,804
     Other general expenses                                                 91,004               111,996
     Corporate administrative expenses                                      13,596                15,336
     Depreciation and amortization of
          prepublication costs, property and equipment                      19,385                27,182
     Provision for loss on the sales of businesses, net                     35,447                    --
     Restructuring and other costs                                          14,667                    --
     Amortization of intangible assets, excess of purchase
          price over net assets acquired and other                         111,826               112,762
                                                                     -------------         -------------

Operating income (loss)                                                    (32,698)               48,784

Other income (expense):
     Interest expense                                                      (78,683)              (90,385)
     Amortization of deferred financing and organizational costs            (2,309)               (2,784)
     Write-off of unamortized deferred financing costs                          --                (7,572)
     Other, net                                                               (575)                4,684

Net loss                                                                  (114,265)              (47,273)

Preferred stock dividends:
     Non-cash                                                              (13,621)              (12,257)
     Cash                                                                   (8,625)              (19,069)
                                                                     -------------         ------------- 
                                                                     
Loss applicable to common shareholders                               $    (136,511)        $     (78,599)
                                                                     =============         ============= 

Loss per common share                                                $       (1.24)        $        (.61)
                                                                     =============         ============= 

Weighted average common shares outstanding                             110,120,522           128,721,459
                                                                     =============         ============= 

</TABLE>




        See notes to condensed consolidated financial statements.












<PAGE>


                           -4-

    K-III COMMUNICATIONS CORPORATION AND SUBSIDIARIES
 CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                 Three Months Ended
                                                                                    September 30,
                                                                             1995                  1996
                                                              (dollars in thousands, except per share amounts)

Sales, net:
<S>                                                                  <C>                   <C>          
     Education                                                       $      75,715         $      95,983
     Information                                                            69,116                76,992
     Media                                                                 120,773               171,443
                                                                     -------------         -------------

Total sales, net                                                           265,604               344,418

Operating costs and expenses:
     Cost of goods sold                                                     67,930                84,345
     Marketing and selling                                                  44,863                61,794
     Distribution, circulation and fulfillment                              48,229                59,392
     Editorial                                                              19,284                27,715
     Other general expenses                                                 30,282                39,454
     Corporate administrative expenses                                       4,065                 5,485
     Depreciation and amortization of
          prepublication costs, property and equipment                       6,431                10,529
     Amortization of intangible assets, excess of purchase
          price over net assets acquired and other                          31,390                37,185
                                                                     -------------         -------------

Operating income                                                            13,130                18,519

Other income (expense):
     Interest expense                                                      (27,132)              (33,409)
     Amortization of deferred financing and organizational costs              (815)                 (917)
     Other, net                                                                182                 3,912
                                                                     -------------         -------------

Net loss                                                                   (14,635)              (11,895)

Preferred stock dividends:
     Non-cash                                                               (4,876)               (4,203)
     Cash                                                                   (2,875)               (7,875)
                                                                     -------------         -------------

Loss applicable to common shareholders                               $     (22,386)        $     (23,973)
                                                                     =============         ============= 

Loss per common share                                                $        (.20)        $        (.19)
                                                                     =============         ============= 

Weighted average common shares outstanding                             110,909,810           128,874,002
                                                                     =============         ============= 

</TABLE>



           See notes to condensed consolidated financial statements.















<PAGE>


                           -5-

    K-III COMMUNICATIONS CORPORATION AND SUBSIDIARIES
 CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>


                                                                                Nine Months Ended
                                                                                   September 30,
                                                                             1995                 1996
                                                                             ----                 ----
                                                                               (dollars in thousands)
OPERATING ACTIVITIES:
<S>                                                                     <C>                 <C>         
     Net loss                                                           $  (114,265)        $   (47,273)
     Adjustments to reconcile net loss to net
        cash provided by (used in) operating activities:
          Depreciation, amortization and other                              133,520             142,728
          Accretion of discount on acquisition obligation,
            distribution advance and other                                    5,899               3,631
          Write-off of deferred financing costs                                  --               7,572
          Provision for loss on the sales of businesses, net                 35,447                  --
          Other, net                                                           (102)             (5,258)

        Changes in operating assets and liabilities:
        (Increase) Decrease in:
            Accounts receivable, net                                         (7,256)            (28,170)
            Inventories, net                                                (13,247)             20,971
            Prepaid expenses and other                                       (9,145)             (6,423)
        Increase (Decrease) in:
            Accounts payable                                                (13,464)            (17,477)
            Accrued interest payable                                         12,758              15,645
            Accrued expenses and other                                      (23,415)            (24,744)
            Deferred revenues                                                 8,155               3,393
            Other non-current liabilities                                       849                (759)
                                                                        -----------         -----------

            Net cash provided by operating activities                        15,734              63,836
                                                                        -----------         -----------
INVESTING ACTIVITIES:
     Additions to property, equipment and other                             (17,940)            (18,669)
     Proceeds from sales of businesses and other                             58,314               5,788
     Proceeds from sales of property, equipment and other                     1,686                 566
     Payments for businesses acquired                                      (262,967)           (671,023)
                                                                        -----------         -----------

            Net cash (used in) investing activities                        (220,907)           (683,338)
                                                                        -----------         -----------
FINANCING ACTIVITIES:
     Borrowings under credit agreements                                     422,059           1,685,910
     Repayments of borrowings under credit agreements                      (351,000)         (1,218,800)
     Proceeds from issuance of 8 1/2% Senior Notes, net of discount              --             298,734
     Repayment of acquisition obligation                                     (3,000)             (3,000)
     Borrowings under Chase Term Loan                                       150,000                 -
     Repayment of Chase Term Loan                                                --            (150,000)
     Repayment of BONY Term Loan                                                 --            (150,000)
     Proceeds from issuances of common stock, net of redemptions             26,740               2,951
     Proceeds from issuance of old preferred stock                           50,000                  --
     Proceeds from issuance of Series C (exchanged into Series D )
          Preferred Stock, net of issuance costs                                 --             193,720
     Redemption of old preferred stock                                      (52,691)                 --
     Dividends paid to preferred shareholders                                (8,625)            (19,069)
     Deferred financing costs paid                                           (3,580)            (14,926)
     Other                                                                     (374)               (740)
                                                                        -----------         ----------- 
 
          Net cash provided by financing activities                         229,529             624,780
                                                                        -----------         -----------

Increase in cash and cash equivalents                                        24,356               5,278
Cash and cash equivalents, beginning of period                               18,232              27,226
                                                                        -----------         -----------

Cash and cash equivalents, end of period                                $    42,588         $    32,504
                                                                        ===========         ===========
Supplemental information:
    Cash interest paid                                                  $    62,487         $    73,420
                                                                        ===========         ===========

</TABLE>


      See notes to condensed consolidated financial statements.




<PAGE>


                           -6-

    K-III COMMUNICATIONS CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
     (dollars in thousands, except per share amounts)


1.   Basis of Presentation
     ---------------------

K-III   Communications   Corporation,   together  with  its   subsidiaries,   is
collectively  referred  to as "K-III" or the  "Company".  In the  opinion of the
Company's management,  all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. All significant
intercompany  accounts and transactions  have been eliminated in  consolidation.
Certain  reclassifications have been made to the prior year financial statements
to conform to the  classifications  used in the current  period.  The  operating
results  for  the  three  and  nine-month  periods  ended  September  30 are not
necessarily indicative of the results that may be expected for a full year.

The Company's  operations  have been  organized  into three  business  segments:
education, information and media.

Effective  January  1,  1996,  the  Company  adopted  the  Financial  Accounting
Standards Board's Statement of Financial  Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of". This standard  establishes the accounting for the impairment of
long-lived  assets,  certain  identifiable  intangibles and goodwill  related to
those  assets  to be  held  and  used  and for  long-lived  assets  and  certain
identifiable  intangibles  to be disposed of. The adoption of this  standard did
not have a  material  effect on the  consolidated  financial  statements  of the
Company.

Effective  January  1,  1996,  the  Company  adopted  the  Financial  Accounting
Standards Board's SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123").  This  standard  establishes   accounting  and  reporting  standards  for
stock-based  employee  compensation.   The  Company  will  continue  to  measure
compensation  costs for its  stock-based  compensation  plan using the intrinsic
value based method of  accounting  prescribed  by  Accounting  Principles  Board
Opinion No. 25,  "Accounting  for Stock Issued to  Employees",  and will include
certain  pro forma  disclosures  required  by SFAS 123 in its  published  annual
report.  The  adoption of this  standard  did not have a material  effect on the
consolidated financial statements of the Company.

2.    Acquisitions
      ------------

In January  1996,  K-III  Magazine  Corporation  acquired  certain net assets of
Cahners  Consumer  Magazines,  a  publisher  of consumer  and  special  interest
magazines  including  AMERICAN BABY, MODERN BRIDE, SAIL and POWER & MOTORYACHT,
along  with 20  related  properties.  In May  1996,  the  Company  acquired  the
outstanding  shares of and completed  its merger with  Westcott  Communications,
Inc. ("Westcott").  Westcott utilizes various multimedia technologies to provide
workplace  training,  news, and information to professionals and students in the
corporate and professional,  automotive, banking, government and public service,
education,  health care, and interactive  distance training markets. In addition
to the aforementioned transactions,  the Company completed several other smaller
acquisitions  during the nine-month  period ended  September 30, 1996. The above
acquisitions  were  financed  through  borrowings  under  the  Company's  credit
agreements.   These  acquisitions  had  an  aggregate  purchase  price  (net  of
liabilities  assumed of  approximately  $70,027) of $671,023  including  certain
immaterial  purchase price adjustments  related to prior year acquisitions.  The
excess  purchase  price  over the  fair  value of the net  assets  acquired  was
approximately $312,948.


The preliminary  purchase cost allocations for the 1996 acquisitions are subject
to  adjustment  when  additional  information  concerning  asset  and  liability
valuations  is obtained.  The final asset and  liability  fair values may differ
from those set forth in the accompanying condensed consolidated balance sheet at
September  30,  1996;  however,  the changes are not expected to have a material
effect on the consolidated financial position of the Company.

These  acquisitions  have all been  accounted  for by the purchase  method.  The
financial  statements  include  the  operating  results  of  these  acquisitions
subsequent  to  their  respective   dates  of  acquisition.   If  the  foregoing
acquisitions  excluding  Cahners and  Westcott  had occurred on January 1, 1995,
they would not have had a material  impact on the results of operations  for the
nine-month periods ended September 30, 1995 and 1996.









<PAGE>


                                       -7-

The  following pro forma  information  presents the results of operations of the
Company as if the  acquisitions  of Cahners and Westcott had occurred on January
1, 1995:

                                             Nine Months Ended
                                               September 30,
                                          1995             1996
                                          ----             ----
     Sales                           $   902,614   $ 1,034,532
                                     ===========   ===========

     Net loss                        $  (173,259)  $   (74,794)
                                     ===========   ===========

     Loss per common share           $     (1.78)  $      (.82)
                                     ===========   ===========


 3.  Divestitures
     ------------

Upon the acquisitions of Argus Publishers  Corp./Autostar  Productions and Argus
Inc. ("Argus") in 1995, the Company decided to sell AutoStar  Productions,  Inc.
("AutoStar")  and certain product lines of Argus. The net assets of AutoStar and
the Argus  product  lines were  recorded at net  realizable  value and have been
classified  as a current  asset in net assets held for sale on the  accompanying
condensed  consolidated  balance  sheet at December 31, 1995.  On April 3, 1996,
McMullen  Argus  completed  the sale of  AutoStar.  During  June 1996,  Intertec
completed  the sale of certain  Argus product  lines.  In connection  with these
sales, the Company received aggregate cash proceeds of approximately $5,100. The
differences  between the proceeds  received  and the carrying  values of the net
assets held for sale were treated as adjustments to the excess of purchase price
over the net assets acquired related to the retained  businesses.  The operating
results  of these  businesses  since  acquisition  have been  excluded  from the
accompanying  statements of condensed consolidated operations for the nine-month
period ended September 30, 1996.

4.   Assets Held for Sale
     --------------------

During  September 1996, the Company  decided to divest  Katharine Gibbs Schools,
Inc.  ("Gibbs"),  a component  of the  Education  segment.  K-III  achieved  its
objective of  strengthening  the  operations  and realized  substantial  revenue
growth at Gibbs;  however,  it was determined that the growth  opportunities for
Gibbs will be better  accomplished within an organization that has a fundamental
commitment to  classroom-based  career schools.  The Company expects to complete
the sale of Gibbs  in 1997.  The net  assets  of  Gibbs  are  recorded  at their
carrying  value of $18,605 and have been  classified  as a current  asset in net
assets held for sale on the accompanying condensed consolidated balance sheet at
September  30,  1996.  The  operating  results  of  Gibbs  are  included  in the
accompanying  statements of condensed consolidated  operations for the three and
nine-month periods ended September 30, 1995 and 1996. Total sales for Gibbs were
$5,909 and $18,391 for the three and  nine-month  periods  ending  September 30,
1995,  respectively and $6,912 and $20,424 for the same periods ending September
30, 1996,  respectively.

5.   Offerings
     ---------

8 1/2% SENIOR NOTES DUE 2006

On January 24, 1996,  K-III  completed a private  offering of $300,000 of 8 1/2%
Senior  Notes.  The Senior Notes were issued at 99.578%  with  related  issuance
costs of  approximately  $6,000.  On August 21, 1996, the Company  exchanged its
Senior Notes ("Old  Notes") for a new series of $300,000 8 1/2% Senior Notes due
2006 ("New Notes").  The terms of the New Notes are the same as the terms of the
Old Notes except that the New Notes have been  registered  under the  Securities
Act of 1933.  The New Notes  mature on February 1, 2006,  with no sinking  fund.
Interest on the New Notes is payable semi-annually in February and August at the
annual rate of 8 1/2%.  The New Notes may not be  redeemed  prior to February 1,
2001 other than in  connection  with a change of control.  Beginning in 2001 and
thereafter,  the New Notes are  redeemable in whole or in part, at the option of
the Company,  at prices  ranging from 104.25% with annual  reductions to 100% in
2003  plus   accrued  and  unpaid   interest.   The  New  Notes  are  fully  and
unconditionally  guaranteed  jointly and  severally on a senior basis by each of
the domestic restricted subsidiaries.








<PAGE>


                                       -8-

$10.00 SERIES C EXCHANGEABLE PREFERRED STOCK

On January 24, 1996,  K-III completed a private  offering of 2,000,000 shares of
$10.00 Series C Exchangeable  Preferred  Stock  ("Series C Preferred  Stock") at
$100 per share.  Annual  dividends of $10.00 per share on the Series C Preferred
Stock are cumulative and payable quarterly,  in cash, commencing May 1, 1996. On
August  21,  1996,  the  Company  exchanged  the  Series C  Preferred  Stock for
2,000,000  shares of $10.00 Series D  Exchangeable  Preferred  Stock  ("Series D
Preferred Stock"). The terms of the Series D Preferred Stock are the same as the
terms of the Series C  Preferred  Stock  except  that (i) the Series D Preferred
Stock has been registered under the Securities Act of 1933 and (ii) the Series D
Preferred  Stock  is  exchangeable  into  10%  Class  D  Subordinated   Exchange
Debentures  due 2008,  in whole but not in part,  at the  option of the  Company
provided that no shares of the Senior  Preferred  Stock are  outstanding  on the
date of exchange.  On and after February 1, 2001,  the Series D Preferred  Stock
may be redeemed in whole or in part, at the option of the Company,  at specified
redemption prices plus accrued and unpaid dividends.  The Company is required to
redeem the Series D Preferred  Stock on February 1, 2008 at a  redemption  price
equal to the liquidation  preference of $100 per share,  plus accrued and unpaid
dividends.

Net proceeds from these offerings of approximately  $486,000 were primarily used
to pay down borrowings under the Revolving Credit Agreement.

6.   Inventories
     -----------

Inventories consist of the following:
                                                December 31,     September 30,
                                                    1995              1996
                                                    ----              ----
          Finished goods                          $49,026           $37,431
          Work in process                             969             4,478
          Raw materials                            27,978            23,244
                                                  -------           -------
                                                   77,973            65,153
          Less:  allowance for obsolescence         7,129             8,401
                                                  -------           -------
                                                  $70,844           $56,752
                                                  =======           =======

7.   Long-term debt
     --------------

Long-term debt consists of the following:
                                               December 31,     September 30,
                                                   1995              1996
                                                   ----              ----
      Borrowings under Revolving Credit
         Agreement                               $435,988        $       --
      Borrowings under New Credit Facilities           --           903,115
      BONY Term Loan                              150,000                --
      Chase Term Loan                             150,000                --
      8 1/2% Senior Notes due 2006, net                --           298,790
      10 1/4% Senior Notes due 2004               100,000           100,000
      10 5/8% Senior Notes due 2002               250,000           250,000
                                               ----------        ----------
      Total                                     1,085,988         1,551,905
      Acquisition obligation payable               54,928            56,207
                                               ----------        ----------
                                                1,140,916         1,608,112
          Less:  current portion                    6,000             6,000
                                               ----------        ----------
                                               $1,134,916        $1,602,112
                                               ==========        ==========

On May 31, 1996, the Company  replaced its existing credit  facilities under the
Revolving Credit Agreement, BONY Term Loan and the Chase Term Loan through which
the Company could borrow  $970,000 in the aggregate  with new credit  facilities
with The Chase Manhattan  Bank, The Bank of New York,  Bankers Trust Company and
the Bank of Nova Scotia as agents (the "New Credit  Facilities").  Under the New
Credit  Facilities,  the Company has commitments of $1,250,000 and can borrow up
to $1,500,000 in the aggregate.  The Company used approximately  $910,000 of the
proceeds from the New Credit Facilities to repay the previously  existing credit
facilities and to pay certain related fees and expenses.

The New Credit  Facilities are comprised of a $750,000  Tranche A Revolving Loan
Commitment ("Tranche A Loan Commitment"), a $250,000 Term Loan ("Term Loan") and
an additional  $250,000  Revolving Loan Commitment,  which is convertible at the
Company's  option into a term loan  ("Revolver/Term  Loan").  In  addition,  the
Company has the right to solicit commitments of up to $250,000 under the Tranche
B Revolving Loan Facility ("Tranche B Facility").  The Tranche A Loan Commitment
may be utilized  through the  incurrence  of Tranche A revolving  credit  loans,
swingline  loans which may not exceed  $40,000 in total,  Canadian  dollar loans
which may not exceed the Canadian  dollar  equivalent of $40,000 in total or the
issuance  of letters  of credit  which may not exceed  $40,000.  If the  Company
establishes commitments under


<PAGE>


                                       -9-

the Tranche B  Facility,  the  Tranche B Facility  may be  utilized  through the
incurrence of Tranche B revolving  credit loans.  The proceeds of the New Credit
Facilities  may be used for general  corporate and working  capital  purposes as
well as to finance certain future acquisitions of stock and assets.

The  commitments  under  Tranche  A and  Tranche  B  are  subject  to  mandatory
reductions  semi-annually on June 30 and December 31 with the first reduction on
June 30, 1999 and the final reduction on June 30, 2004. The mandatory reductions
for the Tranche A Loan  Commitment are $75,000 in 1999,  $150,000 in each of the
years 2000 through 2003 and $75,000 in 2004.  The mandatory  reductions  for the
Tranche B  Facility  are based on  defined  percentages  of the total  Tranche B
Facility. To the extent that the total revolving credit loans outstanding exceed
the reduced  commitment  amount,  these loans must be paid down to equal or less
than the reduced commitment amount. However, if the total revolving credit loans
outstanding  do not  exceed  the  reduced  commitment  amount,  then there is no
requirement to pay down any of the revolving credit loans.

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

The revolving loans outstanding under the Revolver/Term Loan will convert at the
Company's option to term loans on May 23, 1997 and will mature on June 30, 2004.
If the  Company  exercises  that  right,  then the  term  loans  will be  repaid
according to the same schedule as stated for the Term Loan above.

The amounts  borrowed  (other than swingline  loans)  pursuant to the New Credit
Facilities  bear  interest at the  following  rates per annum,  at the Company's
option:  (i) the higher of (a) the Federal Funds  Effective Rate as published by
the  Federal  Reserve  Bank of New York plus  0.5% and (b) the prime  commercial
lending rate  announced by the Agent from time to time (the "Base Rate");  plus,
in each case,  an  applicable  margin of up to 1/8 of 1% as specified in the New
Credit  Facilities or (ii) the Eurodollar Rate plus an applicable margin ranging
from  1/2  of 1% to 1 1/2%  as  specified  in the  New  Credit  Facilities.  All
swingline loans bear interest at the Base Rate plus the applicable  margin of up
to 1/8 of 1% as specified in the New Credit Facilities.

The  Company has agreed to pay  commitment  fees equal to 3/8 of 1% per annum on
the daily  average  unused  commitment  of Tranche A and Tranche B, certain fees
with respect to the  issuance of letters of credit and an annual  administration
fee.  The Company has agreed to pay a  commitment  fee of 1/8 of 1% per annum on
the daily average unused  commitment of the $250,000  revolving credit under the
Revolver/Term Loan.

The  covenants  in the New Credit  Facilities,  among  other  things,  limit the
ability of the  Company to change the nature of its  businesses,  incur  certain
indebtedness,  create liens, sell assets,  engage in mergers,  consolidations or
transactions   with  affiliates,   make  investments  in  or  loans  to  certain
subsidiaries,  make guarantees and make certain restricted payments. The Company
is also  prohibited  from  declaring or making  dividend  payments on the common
stock in excess of $25,000 per annum,  unless the leverage test is below certain
levels. In addition,  the New Credit Facilities require that the Company and its
restricted  subsidiaries,  on a consolidated basis, satisfy an interest coverage
test, a leverage  test and a fixed charge  coverage  test.  All of the Company's
subsidiaries are currently restricted subsidiaries.

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

8. Exchangeable Preferred Stocks
   -----------------------------

Exchangeable Preferred Stocks consist of the following:

                                                 December 31,   September 30,
                                                     1995           1996
                                                     ----           ----
$2.875 Senior Exchangeable Preferred Stock         $ 97,992       $ 98,197
$11.625 Series B Exchangeable Preferred Stock       133,614        146,109
$10.00 Series D Exchangeable Preferred Stock             --        194,069
                                                   --------       --------
                                                   $231,606       $438,375
                                                   ========       ========




<PAGE>


                                      -10-

$2.875 SENIOR EXCHANGEABLE PREFERRED STOCK

The  Company  authorized  4,000,000  shares of $.01 par value  Senior  Preferred
Stock,  all of which  was  issued  and  outstanding  at  December  31,  1995 and
September 30, 1996. The  liquidation  and redemption  value at December 31, 1995
and September 30, 1996 was $100,000.

$11.625 SERIES B EXCHANGEABLE PREFERRED STOCK

The Company  authorized  2,000,000  shares of $.01 par value  Series B Preferred
Stock,   1,365,707  shares  and  1,488,273  shares  of  which  were  issued  and
outstanding  at December  31, 1995 and  September  30, 1996,  respectively.  The
liquidation and redemption value at December 31, 1995 and September 30, 1996 was
$136,571 and $148,827, respectively.

$10.00 SERIES D EXCHANGEABLE PREFERRED STOCK

The Company  authorized  2,000,000  shares of $.01 par value  Series D Preferred
Stock,  all of which was issued and  outstanding  at  September  30,  1996.  The
liquidation and redemption value at September 30, 1996 was $200,000.


9.   Loss per Common Share
     ---------------------

Loss per common share for the three and nine-month  periods ended  September 30,
1995 and 1996 was  computed  using the weighted  average  number of common stock
shares  outstanding  during each period.  The effect of the assumed  exercise of
stock  options is not  included  because  the effect is  antidilutive.  Loss per
common share assuming full dilution is not presented because such calculation is
antidilutive.






<PAGE>


                                      -11-



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


     INTRODUCTION

     K-III  Communications  Corporation,  together  with  its  subsidiaries,  is
     collectively  referred  to as  "K-III"  or  the  "Company".  The  following
     discussion  and  analysis  of K-III's  unaudited  financial  condition  and
     results of  operations  should be read in  conjunction  with the  unaudited
     condensed  consolidated financial statements and notes thereto. The Company
     organizes its businesses  into three segments:  education,  information and
     media.  Management believes that a meaningful  comparison of the results of
     operations for 1995 and 1996 is obtained by using this segment information.




                K-III COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                  Unaudited Results of Consolidated Operations
                             (dollars in thousands)
<TABLE>
<CAPTION>


                                               Nine Months Ended           Three Months Ended
                                                 September 30,                September 30,
                                               1995          1996          1995          1996
                                               ----          ----          ----          ----
Sales, net:
<S>                                         <C>           <C>           <C>           <C>      
     Education                              $ 246,970     $ 268,277     $  75,715     $  95,983
     Information                              187,069       221,684        69,116        76,992
     Media                                    327,457       505,090       120,773       171,443
                                            ---------     ---------     ---------     ---------

     Total                                  $ 761,496     $ 995,051     $ 265,604     $ 344,418
                                            =========     =========     =========     =========

Operating income (loss):
     Education                              $ (33,058)    $   6,672     $   1,659     $  (3,365)
     Information                              (15,757)       15,154         4,821         8,232
     Media                                     30,247        42,863        10,884        19,342
     Corporate                                (14,130)      (15,905)       (4,234)       (5,690)
                                            ---------     ---------     ---------     ---------
 
     Total                                    (32,698)       48,784        13,130        18,519

Other income (expense):
     Interest expense                         (78,683)      (90,385)      (27,132)      (33,409)
     Amortization of deferred financing and
         organizational costs                  (2,309)       (2,784)         (815)         (917)
     Write-off of unamortized deferred
         financing costs                           --        (7,572)           --            --
     Other, net                                  (575)        4,684           182         3,912
                                            ---------     ---------     ---------     ---------

Net loss                                    $(114,265)    $ (47,273)    $ (14,635)    $ (11,895)
                                            =========     =========     =========     ========= 

</TABLE>













<PAGE>


                                      -12-

RESULTS OF OPERATIONS (dollars in thousands, except per share amounts)
----------------------------------------------------------------------

Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
--------------------------------------------------------------------------------
1995:
-----

Consolidated Results:
---------------------

Consolidated  sales increased 30.7% to $995,051 in the 1996 period over 1995 due
to internal growth in all three segments as well as the impact of  acquisitions.
Specifically,  the acquisitions of the Cahners Consumer  Magazines  ("Cahners"),
which now form the K-III Family and Leisure Group, Westcott Communications, Inc.
("Westcott")  and the trade magazines of Argus Inc.  ("Argus") added $138,146 to
revenue  growth.  Consolidated  operating  income was $48,784 in the 1996 period
compared to an operating loss of $32,698 in 1995. This improvement was driven by
the  increase  in sales,  the impact of recent  acquisitions,  and the effect of
several one-time,  principally non-cash charges,  totaling $68,072 in the second
quarter of 1995. The increase  occurred despite a 16.7% increase in paper prices
in the first nine  months of 1996 and the effect of the  required  adoption of a
new method of accounting for advertising costs (the "Accounting Change"),  which
K-III adopted on July 1, 1994. The  Accounting  Change had a $8,343 net positive
impact  on  operating  income  in the first  six  months  of 1995  versus  1996,
predominantly  within the  education  segment.  In the third quarter and for all
future  quarters,  the  comparative  effects of the  adoption of the  accounting
change will not be material.  Interest expense  increased by $11,702 or 14.9% in
the  1996  period  over  1995  because  of the  increased  level  of  borrowings
associated  with  acquisitions  as well as higher interest rates. As a result of
the  refinancing of the Company's bank debt during the second quarter of 1996, a
non-cash charge of $7,572 was recorded representing the write-off of unamortized
deferred  financing costs related to the previous bank  financing.  Despite this
write-off,  the  consolidated net loss decreased by $66,992 or 58.6% in the 1996
period over 1995.

Education:
----------

The education  segment's  sales  increased by $21,307 or 8.6% in the 1996 period
over 1995.  Increases at Krames,  Weekly Reader and Films for the Humanities and
Sciences  and the  addition  of  Westcott  offset  declines  at  Newbridge.  The
restructuring   at  Newbridge  is  stabilizing  the  operation  as  anticipated.
Newbridge is experiencing improved back-end performance in terms of lower return
rates, lower member attrition, and higher acceptance rate per announcement.  The
education  segment's  operating profit increased to $6,672 in the 1996 period as
compared to an operating loss of $33,058 in the 1995 period. This improvement is
primarily  due to the  one-time  charges  in the  second  quarter  of 1995 for a
provision  for loss  associated  with the sale of Newfield  and a  restructuring
charge at Newbridge.  Offsetting  those  charges,  the  Accounting  Change had a
$8,541 net positive  impact on operating  profit in the first six months of 1995
versus 1996.

Information:
------------

The information segment's sales increased by $34,615 or 18.5% in the 1996 period
over 1995 primarily  because of double-digit  growth at the Apartment Guides and
Nelson as well as the impact of recent acquisitions.  The information  segment's
operating  profit  increased  to $15,154 in the 1996  period as  compared  to an
operating loss of $15,757 in 1995 due to the increase in sales and a decrease in
amortization  expense.   Goodwill  and  intangible  asset  amortization  expense
decreased  by $17,870 in the 1996 period over 1995 as a result of an  adjustment
to the carrying values of K-III Reference's goodwill and other intangible assets
totaling $17,958 in the second quarter of 1995.

Media:
------

The media segment's sales increased by $177,633 or 54.3% in the 1996 period over
1995 due to the growth of existing properties and the impact of the Cahners and
Argus acquisitions. Organic revenue growth was driven by the consumer magazines,
led  principally  by SEVENTEEN,  SOAP OPERA DIGEST,  NEW YORK and the enthusiast
magazines,  led by the crafts  area.  Operating  profit  increased by $12,616 or
41.7% in the 1996 period over 1995. This increase was the result of the increase
in sales and the impact of the Cahners and Argus acquisitions,  partially offset
by a 22.9%  increase in average  paper  prices for  magazine  operations  in the
nine-month period ending September 30, 1996.










<PAGE>


                                      -13-

RESULTS OF OPERATIONS (dollars in thousands, except per share amounts)
----------------------------------------------------------------------

Three Months Ended September 30, 1996 Compared to Three Months Ended  September
-------------------------------------------------------------------------------
30, 1995:
---------

Consolidated Results:
---------------------

Consolidated  sales  increased by 29.7% to $344,418 in the third quarter of 1996
over 1995. The sales  increase  resulted from strong  performances  in all three
segments,  as well as from the  impact of  recent  acquisitions,  in  particular
Westcott,  Cahners,  and Argus  which added  $52,857 to the sales  growth in the
third quarter of 1996. Consolidated operating profit increased to $18,519 in the
third  quarter of 1996 as  compared to  operating  profit of $13,130 in the same
period  in 1995.  This  improvement  was due to the  increases  in sales and the
favorable impact of recent  acquisitions.  Average paper prices were 2.5% higher
in the 1996 quarter versus 1995.  Interest expense  increased by $6,277 or 23.1%
in the third  quarter 1996 over 1995  primarily  due to the  increased  level of
borrowings  associated with  acquisitions as well as higher interest rates.  The
consolidated net loss was $11,895 in the third quarter of 1996 versus $14,635 in
1995.

Education:
----------

The education segment's sales increased by $20,268 or 26.8% in the third quarter
of 1996 versus 1995.  The increase in sales  reflected  gains at Weekly  Reader,
Krames and Channel One,  along with the  addition of Westcott  which the Company
acquired at the end of May.  These gains offset the decline at  Newbridge  which
resulted from the restructuring plan discussed above. Channel One experienced an
increase in revenues,  but an increase in operating  loss for the quarter due to
startup   investments   relating  to  the  College  Channel  and  other  product
developments.  The College  Channel was launched  this fall with its first phase
consisting of educational programming on college preparation and selection.  The
second phase, an SAT preparation  course produced in partnership  with Princeton
Review,  will  begin in Spring  1997.  In  addition,  this fall,  Channel  One's
30-minute  weekly news  program for teens  called,  "One  Zone",  was  launched,
appearing  initially on the PBS station WNET in the New York metropolitan  area.
The  education  segment  had an  operating  loss of $3,365 in the third  quarter
versus a profit of $1,659 in 1995.

Information:
------------

The  information  segment's  sales  increased  by  $7,876  or 11.4% in the third
quarter of 1996 over 1995. The increase in revenues was driven by a 26% increase
at the Apartment Guides and a 31% increase at Nelson. Daily Racing Form reported
an increase in revenues due to the  stabilization  of its operating  results and
the  addition of Pro  Football  Weekly,  which was  acquired  in July 1996.  The
operating profit for the information  segment increased to $8,232 compared to an
operating profit of $4,821 in the 1995 period.

Media:
------

The media  segment's sales increased by $50,670 or 42% in the third quarter of
1996 versus 1995 primarily due to the acquisition of new titles, particularly in
the Cahners and Argus acquisitions, and strong organic growth in all three areas
of consumer, trade and technical, and special interest magazines.  Organic sales
growth was driven by an 11.4% increase in  advertising  revenues at the consumer
magazines,  led  principally  by SOAP  OPERA  DIGEST,  SEVENTEEN,  NEW  YORK and
CHICAGO.  The media segment's operating profit increased to $19,342 in the third
quarter 1996 from  $10,884 in the 1995 period due to the impact of  acquisitions
and the effect of the organic  growth in  revenues,  partially  offset by a 4.6%
increase in paper prices in 1996.


Liquidity and Capital Resources
-------------------------------

Consolidated  working  capital  (deficiency)  including  current  maturities  of
long-term  debt was  $(4,619) at  September  30, 1996  compared to  $(56,560) at
December 31,  1995.  Consolidated  working  capital  reflects  the  expensing of
editorial  and product  development  costs when  incurred  and the  recording of
unearned  subscription  income as a  current  liability.  Advertising  costs are
expensed   when  the   promotional   activities   occur   except   for   certain
direct-response  advertising  costs which are  capitalized as other  non-current
assets and amortized over the estimated period of future benefit.

Earnings before interest,  taxes,  depreciation,  amortization and provision for
one-time charges, or EBITDA, is included in the


<PAGE>


                                      -14-

following  discussion to provide  additional  information  for  determining  the
ability of the Company to meet its future debt service  requirements  and to pay
cash dividends on its preferred stock.  EBITDA is not intended to represent cash
flow from  operations  and should not be  considered  as an  alternative  to net
income or loss as an indicator of the Company's operating performance or to cash
flows as a measure  of  liquidity.  The  Company  believes  EBITDA is a standard
measure  commonly  reported  and widely used by  analysts,  investors  and other
interested  parties in the media  industry.  Accordingly,  this  information  is
disclosed herein to permit a more complete comparative analysis of the Company's
operating performance relative to other companies in its industry.



<PAGE>


                                      -15-

<TABLE>
<CAPTION>

                                           Nine Months Ended            Three Months Ended
                                             September 30,                 September 30,
                                          1995           1996           1995           1996
                                          ----           ----           ----           ----
EBITDA:
<S>                                  <C>            <C>            <C>            <C>       
     Education                       $   56,495     $   54,484     $   13,569     $   18,191
     Information                         43,866         54,314         17,272         19,656
     Media                               61,862         95,266         24,175         33,871
     Corporate                          (13,596)       (15,336)        (4,065)        (5,485)
                                     ----------     ----------     ----------     ---------- 
     Total                           $  148,627     $  188,728     $   50,951     $   66,233
                                     ==========     ==========     ==========     ==========

Net Cash Provided by (Used in)
       Operating Activities:

     Education                       $   12,059     $   36,922     $   13,427     $   28,227
     Information                         40,897         46,550         13,646         14,223
     Media                               38,327         69,102         16,123         38,024
     Corporate                          (75,549)       (88,738)       (21,100)       (27,753)
                                     ----------     ----------     ----------     ---------- 
     Total                           $   15,734     $   63,836     $   22,096     $   52,721
                                     ==========     ==========     ==========     ==========

Net Cash Provided by (Used in)
      Investing Activities:

     Education                       $   10,753     $ (435,255)    $   15,880     $  (11,768)
     Information                        (82,096)       (46,727)        (5,427)       (11,642)
     Media                             (147,560)      (200,479)          (349)        (6,451)
     Corporate                           (2,004)          (877)          (365)          (425)
                                     ----------     ----------     ----------     ---------- 
     Total                           $ (220,907)    $ (683,338)    $    9,739     $  (30,286)
                                     ==========     ==========     ==========     ========== 

Net Cash Provided by (Used in)
       Financing Activities:

     Education                       $     (640)    $   (1,887)    $     (128)    $     (281)
     Information                         (1,291)        (2,608)            18             68
     Media                               (3,515)        (5,603)            (3)           (77)
     Corporate                          234,975        634,878         (9,959)        (7,337)
                                     ----------     ----------     ----------     ---------- 
     Total                           $  229,529     $  624,780     $  (10,072)    $   (7,627)
                                     ==========     ==========     ==========     ========== 

Excess (Deficiency) of Earnings
       to Fixed Charges:

     Education                       $  (34,510)    $    3,554     $    1,555     $   (3,451)
     Information                        (21,219)         9,874          2,860          8,524
     Media                               27,737         41,576         10,103         21,755
     Corporate                          (86,273)      (102,277)       (29,153)       (38,723)
                                     ----------     ----------     ----------     ---------- 
     Total                           $ (114,265)    $  (47,273)    $  (14,635)    $  (11,895)
                                     ==========     ==========     ==========     ========== 

Excess (Deficiency) of Earnings
   to Fixed Charges and Preferred
   Stock Dividends:

     Education                       $  (34,510)    $    3,554     $    1,555     $   (3,451)
     Information                        (21,219)         9,874          2,860          8,524
     Media                               27,737         41,576         10,103         21,755
     Corporate                         (108,519)      (133,603)       (36,904)       (50,801)
                                     ----------     ----------     ----------     --------- 
     Total                           $ (136,511)    $  (78,599)    $  (22,386)    $  (23,973)
                                     ==========     ==========     ==========     ========== 

</TABLE>







<PAGE>


                                      -16-

Consolidated  EBITDA increased by $40,101 in the nine months ended September 30,
1996 over  1995  mainly as a result of  growth  from  existing  operations,  new
product  additions  and  acquisitions  of  businesses.  The net cash provided by
operating  activities  during the nine months ended  September  30, 1996,  after
interest  payments of  $73,420,  was  $63,836.  Net cash  provided by  operating
activities  increased by $48,102 during the nine months ended September 30, 1996
over 1995 due primarily to the EBITDA growth.  Capital expenditures increased by
$729 to $18,669 as compared to the 1995 period.  Payments  for Cahners  Consumer
Magazines,  Westcott  Communications,  Inc.  and other  acquisitions  (including
certain immaterial purchase price adjustments relating to previous acquisitions)
totaled $671,023.  Net cash used in investing  activities increased as a result
of an  increase  in  acquisition  activity in the 1996 period as compared to the
1995 period.

Consolidated EBITDA increased by $15,282 in the three months ended September 30,
1996 over  1995  mainly as a result of  growth  from  existing  operations,  new
product  additions  and  acquisitions  of  businesses.  The net cash provided by
operating  activities  during the three months ended  September 30, 1996,  after
interest  payments of  $28,723,  was  $52,721.  Net cash  provided by  operating
activities increased by $30,625 during the three months ended September 30, 1996
over 1995 due primarily to the EBITDA growth.  Capital  expenditures were $8,511
during the three months ended September 30, 1996 which was an increase of $2,563
from the 1995 period. Payments of $21,587 (including certain immaterial purchase
price adjustments relating to previous  acquisitions) were made during the three
months ended September 30, 1996 for other acquisitions.

The  Company's  earnings  (defined  as pretax  income  or loss  from  continuing
operations)  are  inadequate  to cover  fixed  charges  and fixed  charges  plus
preferred  stock  dividends by $114,265 and $136,511 and $47,273 and $78,599 for
the  nine-month  periods ended  September 30, 1995 and 1996,  respectively,  and
$14,635 and $22,386 and $11,895 and $23,973 for the  three-month  periods  ended
September 30, 1995 and 1996,  respectively.  Fixed  charges  consist of interest
expense on long-term debt and other non-current  obligations  (including current
maturities  on  long-term  debt),  amortization  of  deferred  financing  costs,
write-off  of deferred  financing  costs and that  portion of  operating  rental
expense that  represents  interest.  Such earnings have been reduced by non-cash
charges  (including  depreciation,   amortization  and  non-cash  dividends)  of
approximately  $200,154 and $163,188 for the nine-month  periods ended September
30, 1995 and 1996,  respectively,  and  $45,503 and $53,353 for the  three-month
periods ended September 30, 1995 and 1996,  respectively.  Adjusted to eliminate
these  non-cash  charges,  earnings  would have exceeded fixed charges and fixed
charges plus preferred stock dividends by approximately  $72,268 and $63,643 and
$103,658 and $84,589 for the  nine-month  periods ended  September 30, 1995 and
1996,  respectively,  and  $25,992  and  $23,117 and $37,255 and $29,380 for the
three-month periods ended September 30, 1995 and 1996, respectively.

Financing Arrangements
----------------------

OFFERINGS

On January 24, 1996,  K-III  completed a private  offering of $300,000 of 8 1/2%
Senior  Notes.  The Senior Notes were issued at 99.578%  with  related  issuance
costs of  approximately  $6,000.  On August 21, 1996, the Company  exchanged its
Senior Notes ("Old  Notes") for a new series of $300,000 8 1/2% Senior Notes due
2006 ("New Notes").  The terms of the New Notes are the same as the terms of the
Old Notes except that the New Notes have been  registered  under the  Securities
Act of 1933.  The New Notes  mature on February 1, 2006,  with no sinking  fund.
Interest on the New Notes is payable semi-annually in February and August at the
annual rate of 8 1/2%.  The New Notes may not be  redeemed  prior to February 1,
2001 other than in  connection  with a change of control.  Beginning in 2001 and
thereafter,  the New Notes are  redeemable in whole or in part, at the option of
the Company,  at prices  ranging from 104.25% with annual  reductions to 100% in
2003  plus   accrued  and  unpaid   interest.   The  New  Notes  are  fully  and
unconditionally  guaranteed  jointly and  severally on a senior basis by each of
the domestic restricted subsidiaries.

On January 24, 1996,  K-III completed a private  offering of 2,000,000 shares of
$10.00 Series C Exchangeable  Preferred  Stock  ("Series C Preferred  Stock") at
$100 per share.  Annual  dividends of $10.00 per share on the Series C Preferred
Stock are cumulative and payable quarterly,  in cash, commencing May 1, 1996. On
August  21,  1996,  the  Company  exchanged  the  Series C  Preferred  Stock for
2,000,000  shares of $10.00 Series D  Exchangeable  Preferred  Stock  ("Series D
Preferred Stock"). The terms of the Series D Preferred Stock are the same as the
terms of the Series C  Preferred  Stock  except  that (i) the Series D Preferred
Stock has been registered under the Securities Act of 1933 and (ii) the Series D
Preferred  Stock  is  exchangeable  into  10%  Class  D  Subordinated   Exchange
Debentures  due 2008,  in whole but not in part,  at the  option of the  Company
provided that no shares of the Senior  Preferred  Stock are  outstanding  on the
date of exchange. On and


<PAGE>


                                      -17-

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.

Net proceeds from these offerings of approximately  $486,000 were primarily used
to pay down borrowings under the Revolving Credit Agreement.


NEW CREDIT FACILITIES

On May 31, 1996, the Company  replaced its existing credit  facilities under the
Revolving Credit Agreement, BONY Term Loan and the Chase Term Loan through which
the Company could borrow  $970,000 in the aggregate  with new credit  facilities
with The Chase Manhattan  Bank, The Bank of New York,  Bankers Trust Company and
the Bank of Nova Scotia as agents (the "New Credit  Facilities").  Under the New
Credit  Facilities,  the Company has commitments of $1,250,000 and can borrow up
to $1,500,000 in the aggregate.  The Company used approximately  $910,000 of the
proceeds from the New Credit Facilities to repay the previously  existing credit
facilities and to pay certain related fees and expenses.

The New Credit  Facilities are comprised of a $750,000  Tranche A Revolving Loan
Commitment ("Tranche A Loan Commitment"), a $250,000 Term Loan ("Term Loan") and
an additional  $250,000  Revolving Loan Commitment,  which is convertible at the
Company's  option into a term loan  ("Revolver/Term  Loan").  In  addition,  the
Company has the right to solicit commitments of up to $250,000 under the Tranche
B Revolving Loan Facility ("Tranche B Facility").  The Tranche A Loan Commitment
may be utilized  through the  incurrence  of Tranche A revolving  credit  loans,
swingline  loans which may not exceed  $40,000 in total,  Canadian  dollar loans
which may not exceed the Canadian  dollar  equivalent of $40,000 in total or the
issuance  of letters  of credit  which may not exceed  $40,000.  If the  Company
establishes commitments under the Tranche B Facility, the Tranche B Facility may
be utilized  through the  incurrence of Tranche B revolving  credit  loans.  The
proceeds  of the New Credit  Facilities  may be used for general  corporate  and
working capital  purposes as well as to finance  certain future  acquisitions of
stock and assets.

The amounts  borrowed  (other than swingline  loans)  pursuant to the New Credit
Facilities  bear  interest at the  following  rates per annum,  at the Company's
option:  (i) the higher of (a) the Federal Funds  Effective Rate as published by
the  Federal  Reserve  Bank of New York plus  0.5% and (b) the prime  commercial
lending rate  announced by the Agent from time to time (the "Base Rate");  plus,
in each case,  an  applicable  margin of up to 1/8 of 1% as specified in the New
Credit  Facilities or (ii) the Eurodollar Rate plus an applicable margin ranging
from  1/2  of 1% to 1 1/2%  as  specified  in the  New  Credit  Facilities.  All
swingline loans bear interest at the Base Rate plus the applicable  margin of up
to 1/8 of 1% as specified in the New Credit Facilities.

The  Company has agreed to pay  commitment  fees equal to 3/8 of 1% per annum on
the daily  average  unused  commitment  of Tranche A and Tranche B, certain fees
with respect to the  issuance of letters of credit and an annual  administration
fee.  The Company has agreed to pay a  commitment  fee of 1/8 of 1% per annum on
the daily average unused  commitment of the $250,000  revolving credit under the
Revolver/Term Loan.

At September 30, 1996,  $896,000 of bank loans,  $7,106 of Canadian dollar loans
and  $5,092  of  letters  of  credit  were  outstanding  under  the  New  Credit
Facilities.  Also, at September 30, 1996,  K-III had outstanding  $250,000 of 10
5/8%  Senior  Notes due 2002 (the "10 5/8% Senior  Notes"),  $100,000 of 10 1/4%
Senior  Notes due 2004 (the "10 1/4% Senior  Notes"),  $300,000 of 8 1/2% Senior
Notes due 2006 (the "8 1/2% Senior  Notes"),  4,000,000  shares of $2.875 Senior
Exchangeable  Preferred Stock,  liquidation preference $25.00 per share ("Senior
Preferred Stock"),  1,488,273 shares of $11.625 Series B Exchangeable  Preferred
Stock, liquidation preference $100.00 per share ("Series B Preferred Stock") and
2,000,000 shares of $10.00 Series D Exchangeable  Preferred  Stock,  liquidation
preference $100.00 per share ("Series D Preferred Stock").  The Senior Preferred
Stock  is  exchangeable,  at  K-III's  option,  for  the  11  1/2%  Subordinated
Debentures  due 2004,  and the  Series B  Preferred  Stock is  exchangeable,  at
K-III's  option,  for the 11 5/8% Class B Subordinated  Exchange  Debentures due
2005  (the  "Subordinated   Debentures").   The  Series  D  Preferred  Stock  is
exchangeable, at K-III's option, for the 10% Class D Subordinated Debentures due
2008.  Before May 1, 1998,  dividends  or  interest,  as the case may be, on the
Series B Preferred Stock or the Subordinated Debentures,  may be paid in cash or
by issuing additional


<PAGE>


                                      -18-

shares of the Series B Preferred Stock or additional Subordinated Debentures, as
the case may be. On or after May 1, 1998,  such  dividends  or interest  must be
paid in cash. Dividends on the Senior Preferred Stock and the Series D Preferred
Stock are paid quarterly in cash.

The above indebtedness,  among other things, limit the ability of the Company to
change the nature of its businesses,  incur certain indebtedness,  create liens,
sell assets, engage in mergers,  consolidations or transactions with affiliates,
make investments in or loans to certain  subsidiaries,  make guarantees and make
certain restricted  payments.  The Company is also subject to certain provisions
before making  dividend  payments.  In addition,  the Company and its restricted
subsidiaries, on a consolidated basis, must satisfy an interest coverage test, a
leverage  test  and  a  fixed  charge   coverage  test.  All  of  the  Company's
subsidiaries are currently restricted  subsidiaries.  Borrowings under the above
indebtedness are guaranteed by each of the domestic wholly-owned subsidiaries of
the Company. Such guarantees are full, unconditional and joint and several. Each
such guarantee is enforceable  to the fullest extent  permitted by law,  limited
only to the extent  necessary for such  guarantee to not constitute a fraudulent
conveyance.

The  commitments  under  Tranche  A and  Tranche  B  are  subject  to  mandatory
reductions  semi-annually on June 30 and December 31 with the first reduction on
June 30, 1999 and the final reduction on June 30, 2004. The mandatory reductions
for the Tranche A Loan  Commitment are $75,000 in 1999,  $150,000 in each of the
years 2000 through 2003 and $75,000 in 2004.  The mandatory  reductions  for the
Tranche B  Facility  are based on  defined  percentages  of the total  Tranche B
Facility. To the extent that the total revolving credit loans outstanding exceed
the reduced  commitment  amount,  these loans must be paid down to equal or less
than the reduced commitment amount. However, if the total revolving credit loans
outstanding  do not  exceed  the  reduced  commitment  amount,  then there is no
requirement to pay down any of the revolving credit loans.

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

The revolving loans outstanding under the Revolver/Term Loan will convert at the
Company's option to term loans on May 23, 1997 and will mature on June 30, 2004.
If the  Company  exercises  that  right,  then the  term  loans  will be  repaid
according to the same schedule as stated for the Term Loan above.

Principal  payments on the 10 5/8% Senior Notes are  scheduled to be $125,000 in
May 2001 and $125,000 in May 2002.  The 10 1/4% Senior Notes mature in June 2004
and the 8 1/2% Senior  Notes  mature in February  2006.  In  addition,  interest
payments of $6,000  relating to an  acquisition  obligation  are scheduled to be
made in semi-annual  installments of $3,000 on June 30 and December 31 each year
through 1997.  The remaining  principal and interest  amounts of $63,500 will be
repaid from June 1998 through June 2001.  K-III believes its liquidity,  capital
resources and cash flows are  sufficient to fund planned  capital  expenditures,
working capital  requirements,  interest and principal payments on its debt, the
payment of preferred stock dividends and other anticipated  expenditures for the
foreseeable future.

Impact of Inflation
-------------------

The impact of inflation was immaterial  during 1995 and 1996, with the exception
of paper prices which began to rise around  mid-year  1994 and continued to rise
more  dramatically in 1995, and postal costs.  Overall,  paper prices  increased
approximately 24% in 1995. In 1995, paper costs represented  approximately 9% of
the Company's total operating costs and expenses.  The Company  believes it will
be able to meet its paper requirements in the future. Due to recent softening in
certain  segments of the paper  market,  paper price  increases of the magnitude
experienced in 1995 seem unlikely in the  foreseeable  future.  In early 1995, a
postal rate  increase of  approximately  13% went into  effect,  the second such
increase since 1991. In 1995, postal costs represented approximately 7% of total
operating  costs and  expenses.  In an  attempt to contain  postage  costs,  the
Company takes  advantage of various postal  discounts.  The Company  continually
addresses   postal  cost   increases  by  taking   advantage  of  sortation  and
classification  efficiencies  and by passing  costs onto the  customer  wherever
possible.  In the past,  the effects of  inflation on  operating  expenses  have
substantially  been offset by K-III's  ability to increase  selling  prices.  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 cost increases.





<PAGE>


                                      -19-

Item 6.  EXHIBITS

     (11)  Statement Regarding Computation of Per Share Earnings


















<PAGE>


                                      -20-


SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                                       K-III Communications Corporation
                                       --------------------------------
                                                (Registrant)





Date: November 14,1996                 /s/ William F. Reilly
      ----------------                 --------------------------------
                                       (Signature)
                                       Chairman and Chief Executive Officer






Date: November 14, 1996                /s/ Curtis A. Thompson
      -----------------                --------------------------------
                                       (Signature)
                                        Vice President, Controller and Chief
                                        Accounting Officer