Exhibit 99.1
[Playboy Logo] Contact: Martha Lindeman
312-373-2430
For Immediate Release
Playboy Enterprises Reports Strong First Quarter Operating Profit Growth
Entertainment, Licensing Drive 46% Improvement in Operating Income;
Company Reaffirms 2005 Earnings Guidance
CHICAGO, Thursday, May 5, 2005 -- Playboy Enterprises, Inc. (PEI) (NYSE: PLA,
PLAA) today reported operating income for the first quarter ended March 31,
2005, totaled $10.9 million, up 46% from the same period last year, due to
segment income growth of 58% and 40%, respectively, in the company's
entertainment and licensing businesses. Revenues in the 2005 first quarter
rose 3% to $83.5 million compared to last year.
The company reported a net loss for the 2005 quarter of $13.1 million, or
$0.39 per basic and diluted share, due to a previously disclosed debt
extinguishment charge of $19.3 million, or $0.58 per basic and diluted share,
which was related to the March refinancing of the company's debt. The new debt
structure will result in an approximately $4.2 million, or $0.13 per share,
decline in interest expense in 2005. Excluding that one-time charge, PEI
reported 2005 first quarter net income of $6.2 million, or $0.19 per basic and
diluted share, versus 2004 first quarter net income of $1.9 million, or $0.06
per basic and diluted share.
Christie Hefner, Playboy chairman and chief executive officer said:
"Entertainment and Licensing are off to a strong start in the first quarter
and are on pace to drive improved operating income and margins for the company
this year. This reflects the benefits of new technologies like video-on-
demand and wireless along with the global popularity of the Playboy brand. We
believe that entertainment and licensing performance will more than offset the
current weakness in publishing that is resulting from soft advertising sales
and higher expenses and that, as a result, PEI's total 2005 operating income
will exceed last year's.
"Consumer demand for Playboy content and branded products remains strong and
our brand has never reached more consumers than it does today. With the
magazine as the brand driver and the positive financial outlook for our TV,
online, wireless and licensing businesses, we believe that we will deliver on
our previous guidance of approximately $0.54 to $0.59 in earnings per share,
excluding the debt restructuring charge, and that we are well positioned for
continued future growth," Hefner said.
Entertainment
The Entertainment Group posted first quarter 2005 segment income of $11.9
million, up 58% from $7.6 million in the same period last year. Revenues rose
9% to $50.5 million from $46.5 million. Prior period results have been
restated to include the operations formerly reported separately in the Online
Group.
The Group reported first quarter 2005 revenue and profit improvement in all
three of its primary growth areas: television, wireless and online
subscriptions. In domestic TV, growth in the number of monthly cable and DTH
subscribers to Playboy TV as well as increased carriage and buys of the movie
networks on video-on-demand platforms were responsible for the year-over-year
growth. International results benefited in the quarter from the launch of new
TV networks, increased sales of programming and higher royalty payments
related to the company's international wireless deals. Growth in online
subscription revenues in this year's first quarter was driven by both an
increase in the number of subscribers and higher revenue-per-subscriber. Lower
programming amortization expense compared to the prior year quarter also
contributed to the Group's improved results.
Publishing
The Publishing Group posted a $0.4 million segment loss for the first quarter
of 2005, versus $1.9 million of segment income last year on a 9% decline in
revenues to $27.0 million. Lower advertising revenues combined with higher
paper prices and increased subscription acquisition expense led to a reduction
in Playboy magazine profits in the quarter. Additionally, the magazine booked
a negative adjustment in this year's first quarter related to fourth quarter
2004 newsstand sales versus a positive adjustment last year. Continued growth
in the company's international publishing business partially offset the
decline.
The company said that it expects second quarter 2005 advertising pages to be
down by approximately 14% compared to last year.
Licensing
First quarter operating income for the Licensing Group rose 40% to $3.6
million in 2005 compared to last year due to a 26% increase in revenues to
$6.0 million, which reflected the addition of new licensees and higher royalty
payments from existing partners.
Other
First quarter 2005 Corporate Administration and Promotion expense declined 8%
to $4.2 million from last year's $4.6 million, due to a decrease in
benefit-related expenses.
In addition, interest expense in the 2005 first quarter declined by 36% to
$2.6 million, reflecting the retirement in April 2004 of $35.0 million of the
company's 11.00% senior secured notes. The remaining $80.0 million of those
notes were repurchased in March 2005, resulting in a first quarter debt
extinguishment charge of $19.3 million, or $0.58 per share. During the 2005
first quarter, the company also successfully completed the sale of $115.0
million of 3.00% convertible senior subordinated notes.
Additional information regarding first quarter 2005 earnings will be available
on the earnings release conference call, which is being held today, May 5,
11:00 a.m. EDT/10:00 a.m. CDT, 1-800-795-1259 (for domestic callers) or
+1-785-832-0326 (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 globally via
DVD and a network of Websites including Playboy.com, a leading men's lifestyle
and entertainment Web site; and licenses the Playboy and Spice trademarks
internationally for a range of consumer products and services.
FORWARD-LOOKING STATEMENTS
This earnings 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,
television, including 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;
(3) Our ability to manage the risk associated with our exposure to
foreign currency exchange rate fluctuations;
(4) 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;
(5) Our ability to protect our trademarks, copyrights and other
intellectual property;
(6) 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;
(7) The risk our outstanding litigation could result in settlements or
judgments which are material to us;
(8) Dilution from any potential issuance of additional common or
convertible preferred stock or convertible debt in connection with
financings or acquisition activities;
(9) 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;
(10) Competition in the television, men's magazine, Internet and product
licensing markets;
(11) Attempts by consumers or private advocacy groups to exclude our
programming or other products from distribution;
(12) Our 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;
(13) Risks associated with losing access to transponders and competition
for transponders and channel space;
(14) 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;
(15) 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;
(16) Any charges or costs we incur in connection with restructuring
measures we may take in the future;
(17) Risks associated with the financial condition of Claxson Interactive
Group Inc., our Playboy TV-Latin America, LLC joint venture partner;
(18) Increases in paper or printing costs;
(19) Effects of the national consolidation of the single-copy magazine
distribution system; and
(20) Risks associated with the viability of our primarily subscription-
and e-commerce-based Internet model.
Playboy Enterprises, Inc. and Subsidiaries
Condensed Statements of Consolidated Operations (Unaudited)
(In millions, except per share amounts)
Quarter Ended
March 31,
-------------------------
2005 2004
-------- -------
Net Revenues
Entertainment:
Domestic TV networks $25.2 $24.4
International 13.4 10.5
Online subscriptions 5.8 5.2
E-commerce 5.2 4.8
Other 0.9 1.6
-------- -------
Total Entertainment 50.5 46.5
Publishing:
Playboy magazine
Subscription 12.6 13.4
Newsstand 3.3 4.3
Advertising 7.0 7.7
-------- -------
Total Playboy magazine 22.9 25.4
Other domestic publishing 2.3 2.7
International publishing 1.8 1.6
-------- -------
Total Publishing 27.0 29.7
Licensing:
International licensing 4.4 3.2
Domestic licensing 0.8 0.8
Entertainment licensing 0.6 0.5
Marketing events 0.2 0.2
-------- -------
Total Licensing 6.0 4.7
======== =======
Total net revenues $83.5 $80.9
Results of Operations
Entertainment $11.9 $7.6
Publishing (0.4) 1.9
Licensing 3.6 2.6
Corporate Administration & Promotion (4.2) (4.6)
-------- -------
Operating income 10.9 7.5
Investment income 0.2 0.1
Interest expense (2.6) (4.2)
Amortization of deferred financing
fees (0.2) (0.4)
Minority interest (0.4) (0.4)
Debt extinguishment expense (19.3) -
Other, net (0.5) (0.4)
-------- -------
(Loss) income before income taxes (11.9) 2.2
Income tax expense (1.2) (0.3)
-------- -------
Net (loss) income (13.1) 1.9
Dividend requirements of preferred
stock - (0.3)
-------- -------
Net (loss) income applicable to
common shareholders $(13.1) $1.6
======== =======
Basic weighted average number
of common shares outstanding 33,354 27,478
======== =======
Diluted weighted average number
of common shares outstanding 33,354 29,345
======== =======
Basic and diluted (loss) earnings per
common share $(0.39) $0.06
======== =======
PLAYBOY ENTERPRISES, INC.
Reconciliation of Non-GAAP Financial Information
(in millions of dollars)
Three Months Ended March 31,
EBITDA and Adjusted EBITDA 2005 2004(1) %
-------------------------- -------- ---------
Better/(Worse)
--------------
Reconciliation to GAAP Financial
Measure:
Net (Loss) Income $(13.1) $1.9 ---
Adjusted for:
Income Tax Expense 1.2 0.3 (300.0)
Interest Expense 2.6 4.2 38.1
Amortization of Deferred
Financing Fees 0.2 0.4 50.0
Equity in Operations of
Investments 0.2 - ---
Depreciation and Amortization 10.8 12.3 12.2
------- ------- -------
EBITDA (2) 1.9 19.1 (90.1)
Adjusted for:
Cash Investments in
Entertainment Programming (8.7) (11.5) 24.3
------- ------- -------
Adjusted EBITDA (3) $(6.8) $7.6 ---
Three Months Ended March 31,
Financial and Operating Data 2005 2004(1) %Inc/(Dec)
---------------------------- ------ -------- ---------
Entertainment
Cash Investments in Programming $8.7 $11.5 (24.3)
Programming Amortization $9.3 $10.3 (9.7)
Online Content Expense $0.5 $0.6 (16.7)
International TV Households at
End of Period (in millions) (4) 40.9 38.1 7.3
Domestic TV Household Units at End of Period (in millions) (4):
Playboy TV:
Satellite 25.1 22.1 13.6
Cable 20.8 21.8 (4.6)
Movie Networks:
Satellite 49.5 43.4 14.1
Cable 45.5 50.5 (9.9)
On Demand Households:
VOD 6.4 2.1 204.8
SVOD 1.6 1.0 60.0
Publishing
Magazine Advertising Pages 121.2 120.6 0.5
At March 31
Cash and Cash Equivalents $22.9 $15.4 48.7
Long-Term Financing
Obligations $115.0 $115.0 0.0
Shareholders' Equity $151.4 $108.7 39.3
See Notes on accompanying page.
PLAYBOY ENTERPRISES, INC.
Notes to Reconciliation of Non-GAAP Financial Information and 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. Investors
should recognize that EBITDA might not be comparable to similarly
titled measures of other companies. 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
accounting principles generally accepted in the United States, or
U.S. GAAP.
(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. Investors should recognize that Adjusted
EBITDA might not be comparable to similarly titled measures of other
companies. 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. GAAP.
(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.