Exhibit 99.1
[PLAYBOY LOGO]
FOR IMMEDIATE RELEASE Investor/Media Contact:
Martha Lindeman
312-373-2430
PLAYBOY ENTERPRISES REPORTS STRONG
FOURTH QUARTER AND FULL YEAR OPERATING RESULTS
ACROSS ITS FOUR BUSINESSES
Guidance for FY 2004 Raised on Positive Operating Results
Company Reports Settlement of Legal Claim
CHICAGO, Wednesday, February 11, 2004 - Playboy Enterprises, Inc. (PEI)
(NYSE:PLA, PLAA) today said that operating income for the quarter ended
December 31, 2003, was $8.8 million, versus $0.1 million in the prior year
period. Excluding the restructuring charges of $0.4 million and $6.6 million in
the fourth quarters of 2003 and 2002, respectively, and a $0.4 gain in the 2002
quarter, segment income in the 2003 fourth quarter rose 46% to $9.2 million
from $6.3 million in the 2002 time period. Fourth quarter 2003 net income was
affected by an $8.5 million non-operating charge related to the settlement of a
previously disclosed lawsuit with Logix Development Corporation. The net loss
for the 2003 fourth quarter was $6.7 million, or $0.26 per basic and diluted
share, compared to a net loss of $4.0 million, or $0.16 per basic and diluted
share, in the prior year's quarter. Excluding that settlement, fourth quarter
2003 net income was $1.8 million, or $0.05 per basic and diluted share.
Revenues in the 2003 fourth quarter increased 24% to $91.1 million from $73.5
million last year.
For the year, PEI reported operating income totaling $29.5 million in
2003, more than triple the $8.7 million reported in 2002, on a 14% increase in
revenues to $315.8 million. Net loss for the 2003 year totaled $7.6 million, or
$0.31 per basic and diluted share, compared to a net loss in 2002 of $17.1
million, or $0.67 per basic and diluted share. Excluding the legal settlement,
2003 net income was $0.9 million, or $0.00 per basic and diluted share.
Christie Hefner, PEI's chairman and chief executive officer, said:
"All of our businesses reported strong operating results last year. The Online
Group had its first full year of profitability, with a nearly $12 million swing
to positive segment income driven by a 38% year-over-year increase in
subscription and e-commerce revenues. Growth in the number of retail outlets
plus new licensees and product lines, together with our successful auction,
helped the Licensing Group achieve record results. Publishing benefited both on
the newsstand and in advertising sales from the new look and editorial changes
at Playboy magazine. Revenue and profit growth in our domestic TV operations as
well as the across-the-board cost-control efforts we put in place at year-end
2002 also contributed to the strong 2003 operating results.
"All four of our businesses enter 2004 with operating momentum and we
believe we are well positioned to capitalize on future revenue opportunities.
We continue to project increased profitability in all four businesses,
excluding the sale of artwork in the Licensing Group.
"As a result, we are raising our 2004 operating profit guidance from
the $30 million we projected in December to approximately $33 million and are
reiterating our earlier guidance that we will return to net profitability and
positive earnings per share in 2004," Hefner said.
Entertainment
Fourth quarter 2003 Entertainment Group segment income declined as expected by
$1.1 million to $6.8 million from $7.9 million in the prior year period as
higher results from the domestic TV business were offset primarily by lower
profits from international TV, which benefited from the restructuring of the
international TV operations at year end 2002. Fourth quarter revenues increased
14% in 2003 over 2002 to $36.3 million, primarily due to the increased
ownership position in the international TV operations.
Domestic TV revenues in the 2003 fourth quarter increased 4% to $24.1
million from $23.2 million in the prior year. Increased distribution of both
Playboy TV and the movie networks helped drive the increase.
Publishing
The Publishing Group's fourth quarter 2003 segment income increased 9% to $2.3
million compared to the 2002 fourth quarter. Revenues for the same periods rose
26% to $36.8 million from $29.1 million, mostly due to gains from the U.S.
edition of Playboy magazine but reflecting increases from other domestic
publishing and international editions as well.
Successful advertising and newsstand sales of the 50th anniversary
issue of Playboy magazine were primarily responsible for the revenue increase
as circulation increased 11% to $18.2 million and advertising revenues were up
67% to $13.7 million compared to the 2002 fourth quarter. These increases were
partially offset by the editorial and promotional expenses related to the 50th
anniversary issue.
The company said that it expects to report a modest increase in
advertising pages and revenues for the first quarter of 2004.
Online
A 28% increase in the Online Group's revenues to $12.3 million in the 2003
fourth quarter contributed to the swing to a segment profit of $1.9 million
from a loss of $0.3 million in the 2002 fourth quarter.
Fourth quarter 2003 subscription and e-commerce revenues rose 56% and
28% to $5.2 million and $6.2 million, respectively, as compared to the prior
year's fourth quarter.
Licensing
Fourth quarter segment income for the Licensing Group more than tripled to $3.7
million compared to last year, reflecting both increased international sales
and a $1.8 profit from the 50th anniversary auction of art, manuscripts,
cartoons, photographs and memorabilia at Christie's. Revenues for the Group
totaled $5.7 million in the 2003 quarter, nearly double the $2.9 million
recorded in the prior year quarter.
Other
The company recorded fourth quarter restructuring charges of $0.4 million in
2003 primarily related to a revision to the office space assumptions made at
the time of the 2002 restructuring versus a $6.6 million restructuring charge
in 2002. In the 2002 fourth quarter the company recorded a $0.4 million gain
from the sale of its remaining interest in the Polish edition of Playboy
magazine.
PEI also announced today that it recorded an $8.5 million charge in
the fourth quarter to settle the lawsuit with Logix Development Corp., which
related to an undisclosed liability of the former Spice Entertainment Companies
that PEI inherited as a result of the Spice transaction. After completing
discovery and mediation, and in light of the cost of litigation and
uncertainties of a jury trial, PEI decided on recommendation of counsel that it
would be best to settle the case.
The company's earnings per share calculation for the 2003 fourth
quarter and full year was affected by the accounting for a preferred dividend
of $0.3 million and $0.9 million, respectively. There was no preferred stock
outstanding in the prior year.
Additional information regarding fourth quarter 2003 earnings and year-end
results will be available on the earnings release conference call, which is
being held today, February 11, 11:00 a.m. EST/10:00 a.m. CST, 1-800-245-3043
(for domestic callers) or +1-785-832-1508 (for international callers) and using
the password: "Playboy." The call also will be webcast. To listen to the call,
visit www.peiinvestor.com and select the Investor Relations content section.
* * * *
Playboy Enterprises is a brand-driven, international multimedia entertainment
company that publishes editions of Playboy magazine around the world; operates
Playboy and Spice television networks and distributes programming via home
video and DVD globally; licenses the Playboy and Spice trademarks
internationally for a range of consumer products and services; and operates
Playboy.com, a leading men's lifestyle and entertainment Web site.
FORWARD-LOOKING STATEMENTS
This release contains "forward-looking statements, as to expectations, beliefs,
plans, objectives and future financial performance, and assumptions underlying
or concerning the foregoing. We use words such as "may," "will," "would,"
"could," "should," "believes," "estimates," "projects," "potential," "expects,"
"plans," "anticipates," "intends," "continues" and other similar terminology.
These forward-looking statements involve known and unknown risks, uncertainties
and other factors, which could cause our actual results, performance or
outcomes to differ materially from those expressed or implied in the
forward-looking statements. The following are some of the important factors
that could cause our actual results, performance or outcomes to differ
materially from those discussed in the forward-looking statements:
(1) foreign, national, state and local government regulation, actions or
initiatives, including:
(a) attempts to limit or otherwise regulate the sale, distribution
or transmission of adult-oriented materials, including print,
video and online materials,
(b) limitations on the advertisement of tobacco, alcohol and other
products which are important sources of advertising revenue for
us, or
(c) substantive changes in postal regulations or rates which could
increase our postage and distribution costs;
(2) risks associated with our foreign operations, including market acceptance
and demand for our products and the products of our licensees and our
ability to manage the risk associated with our exposure to foreign
currency exchange rate fluctuations;
(3) changes in general economic conditions, consumer spending habits, viewing
patterns, fashion trends or the retail sales environment which, in each
case, could reduce demand for our programming and products and impact our
advertising revenues;
(4) our ability to protect our trademarks, copyrights and other intellectual
property;
(5) risks as a distributor of media content, including our becoming subject to
claims for defamation, invasion of privacy, negligence, copyright, patent
or trademark infringement, and other claims based on the nature and
content of the materials we distribute;
(6) dilution from any potential issuance of additional common or convertible
preferred stock in connection with financings or acquisitions;
(7) competition for advertisers from other publications, media or online
providers or any decrease in spending by advertisers, either generally or
with respect to the adult male market;
(8) competition in the television, men's magazine, Internet and product
licensing markets;
(9) attempts by consumers or private advocacy groups to
exclude our programming or other products from
distribution;
(10) the television and Internet businesses' reliance on third parties for
technology and distribution, and any changes in that technology and/or
unforeseen delays in its implementation which might affect our plans and
assumptions;
(11) risks associated with losing access to transponders and competition for
transponders and channel space;
(12) the impact of industry consolidation,
any decline in our access to, and acceptance by, DTH and/or cable
systems and the possible resulting deterioration in the terms,
cancellation of fee arrangements or pressure on margin splits with
operators of these systems;
(13) risks that we may not realize the expected increased sales and profits and
other benefits from acquisitions and the restructuring of our
international TV joint ventures;
(14) risks associated with the financial condition of Claxson Interactive
Group, Inc., our Playboy TV-Latin America, LLC joint venture partner;
(15) increases in paper or printing costs;
(16) effects of the national consolidation of the single-copy magazine
distribution system; and
(17) uncertainty of the viability of our
primarily subscription- and e-commerce-based Internet model.
Playboy Enterprises, Inc. and Subsidiaries
Condensed Statements of Consolidated Operations (Unaudited)
(In thousands, except per share amounts)
Quarters Ended
December 31,
---------------------------------
2003 2002
------------- -------------
Net Revenues
Entertainment:
Domestic TV Networks $ 24,075 $ 23,196
International TV 10,436 6,607
Worldwide DVD/Home Video 1,643 1,989
Other 178 54
------------- -------------
Total Entertainment 36,332 31,846
Publishing:
Playboy Magazine 31,879 24,627
Other Domestic Publishing 3,299 2,906
International Publishing 1,618 1,590
------------- -------------
Total Publishing 36,796 29,123
Online:
Subscriptions 5,162 3,312
E-Commerce 6,166 4,825
Other 984 1,497
------------- -------------
Total Online 12,312 9,634
Licensing 5,704 2,934
------------- -------------
Total net revenues $ 91,144 $ 73,537
============= =============
Results of Operations
Entertainment $ 6,810 $ 7,933
Publishing 2,271 2,081
Online 1,864 (284)
Licensing 3,669 1,105
Corporate Administration & Promotion (5,441) (4,551)
------------- -------------
Segment income 9,173 6,284
Restructuring expenses (350) (6,643)
Gain on disposal - 442
------------- -------------
Operating income 8,823 83
Investment income 99 42
Interest expense (4,277) (3,600)
Amortization of deferred financing fees (385) (264)
Minority interest (351) (445)
Debt extinguishment expenses - -
Legal settlement (8,500) -
Vendor settlement - 750
Other, net (601) 131
------------- -------------
Loss before income taxes (5,192) (3,303)
Income tax expense (1,482) (742)
------------- -------------
Net loss (6,674) (4,045)
Dividend requirements of preferred stock (336) -
------------- -------------
Net loss applicable to common shareholders $ (7,010) $ (4,045)
============= =============
Basic and diluted weighted average number
of common shares outstanding 27,442 26,042
============= =============
Basic and diluted earnings per common share $ (0.26) $ (0.16)
============= =============
Playboy Enterprises, Inc. and Subsidiaries
Condensed Statements of Consolidated Operations (Unaudited)
(In thousands, except per share amounts)
Twelve Months Ended
December 31,
---------------------------------
2003 2002
------------- -------------
Net Revenues
Entertainment:
Domestic TV Networks $ 95,266 $ 94,391
International TV 35,496 16,442
Worldwide DVD/Home Video 5,553 10,547
Other 576 259
------------- -------------
Total Entertainment 136,891 121,639
Publishing:
Playboy Magazine 102,031 94,665
Other Domestic Publishing 12,977 11,676
International Publishing 5,670 5,461
------------- -------------
Total Publishing 120,678 111,802
Online:
Subscriptions 18,171 10,981
E-Commerce 16,845 14,377
Other 3,828 5,606
------------- -------------
Total Online 38,844 30,964
Licensing 19,431 13,217
------------- -------------
Total net revenues $ 315,844 $ 277,622
============= =============
Results of Operations
Entertainment $ 28,061 $ 32,365
Publishing 5,160 2,669
Online 2,762 (8,916)
Licensing 10,358 4,581
Corporate Administration & Promotion (16,539) (15,810)
------------- -------------
Segment income 29,802 14,889
Restructuring expenses (350) (6,643)
Gain on disposal - 442
------------- -------------
Operating income 29,452 8,688
Investment income 363 125
Interest expense (16,309) (15,147)
Amortization of deferred financing fees (1,407) (993)
Minority interest (1,660) (1,724)
Debt extinguishment expenses (3,264) -
Legal settlement (8,500) -
Vendor settlement - 750
Other, net (1,265) (290)
------------- -------------
Loss before income taxes (2,590) (8,591)
Income tax expense (1) (4,967) (8,544)
------------- -------------
Net loss (7,557) (17,135)
Dividend requirements of preferred stock (893) -
------------- -------------
Net loss applicable to common shareholders $ (8,450) $ (17,135)
============= =============
Basic and diluted weighted average number
of common shares outstanding 27,023 25,595
============= =============
Basic and diluted earnings per common share $ (0.31) $ (0.67)
============= =============
(1) 2002 includes a $5,816 noncash income tax charge related to the adoption of Statement
of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.
PLAYBOY ENTERPRISES, INC.
- ---------------------------------------------------------------------------------------------------------------------------------
Summary of Financial and Operating Data (in millions of dollars)
4th Quarter Ended December 31, Twelve Months Ended December 31,
EBITDA and Adjusted EBITDA 2003 2002 (1) %Inc/(Dec) 2003 2002 (1) % Inc/(Dec)
- ----------------------------------------------------------------------------------------- ---------------------------------
Reconciliation to GAAP Financial Measure: | |
Net Loss $ (6.7) $ (4.0) | (67.5) $ (7.6) $ (17.1) | 55.6
Adjusted for: | |
Income Tax Expense 1.5 0.7 | 114.3 5.0 8.5 | (41.2)
Interest Expense 4.3 3.5 | 22.9 16.3 15.1 | 7.9
Amortization of Deferred Financing Fees 0.4 0.3 | 33.3 1.4 1.0 | 40.0
Equity in Operations of Investments - (0.3)| 100.0 0.1 (0.3) | ---
Depreciation and Amortization 13.1 14.6 | (10.3) 49.6 54.4 | (8.8)
- ------------------------------------------------------------------------------| --------------------- |
EBITDA (2) 12.6 14.8 | (14.9) 64.8 61.6 | 5.2
Adjusted for: | |
Cash Investments in Entertainment Programming (10.2) (9.9)| (3.0) (44.7) (41.7) | (7.2)
- ------------------------------------------------------------------------------| --------------------- |
Adjusted EBITDA (3) $ 2.4 $ 4.9 | (51.0) $ 20.1 $ 19.9 | 1.0
- ------------------------------------------------------------------------------| --------------------- |
Financial and Operating Data
- ---------------------------------------------------------------------------------------------------------------------------------
Entertainment | |
Cash Investments in Programming $ 10.2 $ 9.9 | 3.0 $ 44.7 $ 41.7 | 7.2
Programming Amortization $ 11.4 11.5 | (0.9) $ 40.6 $ 40.6 | 0.0
Units at End of Period (in millions) (4): | |
Playboy TV: | |
Satellite Direct-to-Home 21.6 19.2 | 12.5 21.6 19.2 | 12.5
Cable Digital 16.9 14.0 | 20.7 16.9 14.0 | 20.7
Cable Analog Addressable 5.7 5.7 | 0.0 5.7 5.7 | 0.0
Playboy TV en Espanol (5): | |
Satellite Direct-to-Home 8.1 7.0 | 15.7 8.1 7.0 | 15.7
Cable Digital 3.3 2.7 | 22.2 3.3 2.7 | 22.2
| |
Movie Networks: | |
Satellite Direct-to-Home 42.2 38.4 | 9.9 42.2 38.4 | 9.9
Cable Digital 42.8 36.9 | 16.0 42.8 36.9 | 16.0
Cable Analog Addressable 9.1 10.8 | (15.7) 9.1 10.8 | (15.7)
International TV Households at End of Period 37.0 30.9 | 19.7 37.0 30.9 | 19.7
(in millions) | |
| |
Publishing | |
Playboy Magazine: | |
Circulation Revenues $ 18.2 $ 16.5 | 10.3 $ 65.9 $ 62.3 | 5.8
Advertising Revenues $ 13.7 $ 8.2 | 67.1 $ 36.1 $ 32.4 | 11.4
Advertising Pages 207.3 130.7 | 58.6 555.3 514.9 | 7.8
| |
Online | |
Subscription Revenues $ 5.2 $ 3.3 | 57.6 $ 18.2 $ 11.0 | 65.5
Subscribers at End of Period (in thousands) 163.0 147.6 | 10.4 163.0 147.6 | 10.4
| |
At December 31 | |
Cash and Cash Equivalents $ 31.3 $ 4.1 | 663.4 $ 31.3 $ 4.1 | 663.4
Short-Term Financing Obligations $ - $ 23.6 | (100.0) $ - $ 23.6 | (100.0)
Long-Term Financing Obligations $ 115.0 $ 68.9 | 66.9 $ 115.0 $ 68.9 | 66.9
Shareholders' Equity $ 106.6 $ 87.8 | 21.4 $ 106.6 $ 87.8 | 21.4
- ---------------------------------------------------------------------------------------------------------------------
See Notes on accompanying page.
Notes to Summary of Financial and Operating Data
(1) Certain reclassifications have been made to conform to the current
presentation.
(2) In order to fully assess our financial results, management believes that
EBITDA is an appropriate measure for evaluating our operating performance
and liquidity, because it reflects the resources available for, among
other things, investments in entertainment programming. The resources
reflected in EBITDA are not necessarily available for our discretionary
use because of legal or functional requirements to conserve funds for
capital replacement and expansion, debt service and other commitments and
uncertainties. EBITDA should be considered in addition to, and not as a
substitute for or superior to, any measure of performance, cash flows or
liquidity prepared in accordance with U.S. generally accepted accounting
principles.
(3) In order to fully assess our financial results, management believes that
Adjusted EBITDA is an appropriate measure for evaluating our operating
performance and liquidity, because it reflects the resources available
for strategic opportunities including, among others, to invest in the
business, make strategic acquisitions and strengthen the balance sheet.
In addition, a comparable measure of Adjusted EBITDA is used in our
credit facility to, among other things, determine the interest rate that
we are charged on borrowings under the credit facility. Adjusted EBITDA
should be considered in addition to, and not as a substitute for or
superior to, any measure of performance, cash flows or liquidity prepared
in accordance with U.S. generally accepted accounting principles.
(4) Each household unit is defined as one household carrying one given
network per carriage platform. A single household can represent multiple
household units if two or more of our networks and/or multiple platforms
(i.e. digital and analog) are available to that household.
(5) We obtained 100% distribution rights of Playboy TV en Espanol in the U.S.
Hispanic market in December 2002 in connection with the restructuring of
the ownership of our international TV joint ventures.