Exhibit 99.1
[PLAYBOY ENTERPRISES, INC. LOGO]
FOR IMMEDIATE RELEASE Investor Contact:
Martha Lindeman
312-373-2430
Media Contact:
Linda Marsicano
312-373-2447
PLAYBOY ENTERPRISES REPORTS
INCREASED THIRD QUARTER NET INCOME
Reduced Interest Expense Contributes to Improvement;
Licensing Group Reports Continued Strong Profit Growth
CHICAGO, Wednesday, November 2, 2005 - Playboy Enterprises, Inc. (PEI) (NYSE:
PLA, PLAA) today reported net income for the third quarter ended September 30,
2005, of $3.2 million, or $0.10 per basic and diluted share, compared to net
income in the prior year quarter of $1.9 million or $0.06 per basic and
diluted share. A significant decline in interest expense in the current year
quarter, reflecting the refinancing of the company's debt earlier this year,
was primarily responsible for the improved net income. Revenues increased $0.7
million to $80.9 million versus $80.2 million last year.
Third quarter 2005 operating income totaled $5.4 million, down from
$6.7 million in the 2004 quarter, as improved Licensing Group profits and
lower corporate expense could not offset the swing in Publishing Group results
from profit to loss and a small decline in Entertainment Group operating
income.
Playboy Chairman and Chief Executive Officer Christie Hefner said:
"We are on track to delivering the higher revenues and improved net income and
earnings per share in 2005 that we projected, despite a significantly more
challenging publishing environment than we initially anticipated. We continue
to believe that our Licensing and Entertainment Groups will achieve our
projected operating income growth of greater than 25% in 2005, more than
offsetting an anticipated loss in Publishing. As a result, 2005 earnings per
share, excluding the $0.58 debt restructuring expense recorded in this year's
first quarter, are expected to nearly double to $0.54 to $0.59, compared to
the $0.30 reported last year."
Entertainment
Third quarter 2005 segment income for the Entertainment Group was
$7.3 million, down 7% from $7.9 million last year, on revenues that increased
3%. Prior period results have been restated to include the operations of
Online, which last year was reported as a separate business.
Domestic TV revenues grew by 4% to $25.4 million in the 2005 third
quarter compared to last year. Playboy TV revenues rose, reflecting increased
sales via direct-to-home services. Growing consumer access to our movie
networks on video-on-demand (VOD) platforms resulted in growth from that
revenue source, although the gains did not quite offset the lower movie
networks pay-per-view revenues. Domestic TV profitability declined due to a
one-time adjustment related to a contractual agreement for certain licensed
programming.
Higher revenues from the company's European TV networks were
primarily responsible for the 9% increase in third quarter international
revenues to $12.2 million. Online subscriptions revenues rose 1% to $5.4
million while E-commerce revenues rose 6% to $3.6 million during what is
typically the company's slowest season in the online business. The Group's
profitability benefited from a 12%, or $1.3 million, planned decrease in third
quarter 2005 programming amortization expense versus the prior year.
Publishing
The Publishing Group reported a segment loss of $0.7 million for the 2005
third quarter compared to profit of $1.2 million in the 2004 quarter, due
primarily to lower profits in Playboy magazine. While circulation revenues
were essentially flat, advertising revenues were off 19%, leading to the 8%
decline in third quarter Publishing Group revenues to $27.3 million from $29.5
million last year. A 23% increase in paper prices versus the third quarter
last year and higher subscription acquisition expense, partially offset by
lower editorial expense, also contributed to the segment loss in the quarter.
The company said that it expects advertising revenues and pages for
the fourth quarter to be down approximately 23%.
Licensing
Segment income for the Licensing Group was $3.1 million, up 21% in this year's
third quarter, from $2.6 million last year. Revenues rose 29% in the same
periods to $5.9 million from $4.6 million. Higher royalty payments from new
and existing licensees in Europe and Asia were the primary contributors to the
revenue and profit growth.
Other
Third quarter Corporate Administration and Promotion expense declined in the
third quarter 2005 by 12% to $4.3 million, in part due to the comparison with
last year's quarter when the company recorded a legal settlement.
Non-operating expense was down 56% to $1.7 million, reflecting a $1.5 million
decline in interest expense and a $0.5 million increase in investment income
compared to last year. In addition, the company recorded
lower-than-anticipated tax expense, due to a tax refund related to its
European television operations.
Additional information regarding third quarter 2005 earnings will be available
on the earnings release conference call, which is being held today, November
2, at 9:30 a.m. Eastern / 8:30 a.m. Central. The call may be accessed by
dialing 877-707-9628 (for domestic callers) or 1-785-832-1508 (for
international callers) and using the password: Playboy. In addition, the call
will be webcast. To listen to the call, please visit
http://www.peiinvestor.com and select the Investor Relations 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 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 regulations, actions or
initiatives, including:
(a) attempts to limit or otherwise regulate the sale, distribution
or transmission of adult-oriented materials, including print,
television, 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 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 splits with operators of these systems;
15) Risks that we may not realize the expected increased sales and profits
and other benefits from acquisitions, joint ventures and/or licensing
arrangements;
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, postage 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 Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts)
Quarters Ended
September 30,
---------------------
2005 2004
------------- ----------
Net Revenues
- ------------
Entertainment:
Domestic TV networks $ 25.4 $ 24.5
International 12.2 11.3
Online subscriptions 5.4 5.3
E-commerce 3.6 3.4
Other 1.1 1.6
------------- ----------
Total Entertainment 47.7 46.1
Publishing:
Playboy magazine
Subscription 12.3 12.5
Newsstand 2.6 2.7
Advertising 7.6 9.4
------------- ----------
Total Playboy magazine 22.5 24.6
Other domestic publishing 3.2 3.4
International publishing 1.6 1.5
------------- ----------
Total Publishing 27.3 29.5
Licensing:
International licensing 4.2 3.1
Domestic licensing 0.8 0.8
Entertainment licensing 0.5 0.5
Marketing events 0.2 0.2
Other 0.2 -
------------- ----------
Total Licensing 5.9 4.6
------------- ----------
Total net revenues $ 80.9 $ 80.2
============= ==========
Results of Operations
- ---------------------
Entertainment $ 7.3 $ 7.9
Publishing (0.7) 1.2
Licensing 3.1 2.6
Corporate Administration and Promotion (4.3) (5.0)
------------- ----------
Operating income 5.4 6.7
Investment income 0.6 0.1
Interest expense (1.4) (2.9)
Amortization of deferred financing fees (0.1) (0.3)
Minority interest (0.4) (0.4)
Other, net (0.4) (0.1)
------------- ----------
Income before income taxes 3.7 3.1
Income tax expense (0.5) (1.2)
------------- ----------
Net income $ 3.2 $ 1.9
============= ==========
Weighted average number of common
shares outstanding
Basic 33,102 33,371
============= ==========
Diluted 33,366 33,384
============= ==========
Basic and diluted earnings per common share $ 0.10 $ 0.06
============= ==========
Playboy Enterprises, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts)
Nine Months Ended
September 30,
----------------
2005 2004
------------- -----------
Net Revenues
- ------------
Entertainment:
Domestic TV networks $ 75.5 $ 71.4
International 37.5 32.2
Online subscriptions 16.9 15.4
E-commerce 13.9 12.0
Other 3.3 5.0
------------- -----------
Total Entertainment
147.1 136.0
Publishing:
Playboy magazine
Subscription 37.3 38.6
Newsstand 8.0 9.6
Advertising 22.2 26.6
------------- -----------
Total Playboy magazine 67.5 74.8
Other domestic publishing 7.4 8.9
International publishing 4.9 4.6
------------- -----------
Total Publishing
79.8 88.3
Licensing:
International licensing 13.3 8.9
Domestic licensing 2.4 2.3
Entertainment licensing 1.5 1.5
Marketing events 2.8 2.7
Other 0.3 0.1
------------- -----------
Total Licensing
20.3 15.5
------------- -----------
Total net revenues $ 247.2 $ 239.8
============= ===========
Results of Operations
- ---------------------
Entertainment $ 29.1 $ 18.4
Publishing (3.4) 5.2
Licensing 10.6 7.6
Corporate Administration and Promotion (12.7) (13.9)
------------- -----------
Operating income 23.6 17.3
Investment income 1.4 0.3
Interest expense (5.5) (10.7)
Amortization of deferred financing fees (0.5) (1.0)
Minority interest (1.1) (1.1)
Debt extinguishment expenses (19.3) (5.9)
Other, net (1.1) (0.8)
------------- -----------
Loss before income taxes (2.5) (1.9)
Income tax expense (2.8) (2.6)
------------- -----------
Net loss (5.3) (4.5)
Dividend requirements of preferred stock - (0.4)
------------- -----------
Net loss applicable to common shareholders $ (5.3) $ (4.9)
============= ===========
Basic and diluted weighted average number
of common shares outstanding 33,178 30,978
============= ===========
Basic and diluted loss per common share $ (0.16) $ (0.16)
============= ===========
PLAYBOY ENTERPRISES, INC.
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Reconciliation of Non-GAAP Financial Information (in millions of dollars)
3rd Quarter Ended September 30, Nine Months Ended September 30,
%Better/ %Better/
EBITDA and Adjusted EBITDA 2005 2004(1) (Worse) 2005 2004(1) (Worse)
----------------------------------------------------------------------------------- -------------------------------------
Reconciliation to GAAP Financial Measure:
Net Income (Loss) $ 3.2 $ 1.9 68.4 $ (5.3) $ (4.5) (17.8)
Adjusted for:
Income Tax Expense 0.5 1.2 58.3 2.8 2.6 (7.7)
Interest Expense 1.4 2.9 51.7 5.5 10.7 48.6
Amortization of Deferred Financing Fees 0.1 0.3 66.7 0.5 1.0 50.0
Equity in Operations of Investments 0.1 - --- 0.3 - ---
Depreciation and Amortization 10.9 11.9 8.4 32.9 36.8 10.6
--------------------------------------------------------------------- --------------------
EBITDA (2) 16.2 18.2 (11.0) 36.7 46.6 (21.2)
Adjusted for:
Cash Investments in Entertainment (8.3) (11.1) 25.2 (24.3) (34.2) 28.9
Programming
--------------------------------------------------------------------- --------------------
Adjusted EBITDA (3) $ 7.9 $ 7.1 11.3 $ 12.4 $ 12.4 0.0
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3rd Quarter Ended September 30, Nine Months Ended September 30,
Financial and Operating Data 2005 2004(1) % Inc/(Dec) 2005 2004(1) % Inc/(Dec)
----------------------------------------------------------------------------------- -------------------------------------
Entertainment
Cash Investments in Programming $ 8.3 $ 11.1 (25.2) $ 24.3 $ 34.2 (28.9)
Programming Amortization $ 9.2 $ 10.5 (12.4) $ 28.1 $ 32.0 (12.2)
Online Content Expense $ 0.5 $ 0.5 0.0 $ 1.6 $ 1.8 (11.1)
International TV Households at End of Period 43.7 39.5 10.6 43.7 39.5 10.6
(in millions) (4)
Domestic TV Household Units at End of Period
(in millions) (4):
Playboy TV:
Satellite 26.4 23.7 11.4 26.4 23.7 11.4
Cable 23.6 21.9 7.8 23.6 21.9 7.8
Movie Networks:
Satellite 52.0 46.6 11.6 52.0 46.6 11.6
Cable 48.7 50.3 (3.2) 48.7 50.3 (3.2)
On Demand Households:
VOD 7.7 2.5 208.0 7.7 2.5 208.0
SVOD 1.8 1.3 38.5 1.8 1.3 38.5
Publishing
Magazine Advertising Pages 110.1 152.4 (27.8) 359.6 420.4 (14.5)
At September 30
Cash and Cash Equivalents (5) $ 27.5 $ 22.0 25.0 $ 27.5 $ 22.0 25.0
Long-Term Financing Obligations $ 115.0 $ 80.0 43.8 $ 115.0 $ 80.0 43.8
Shareholders' Equity $ 159.6 $ 153.8 3.8 $ 159.6 $ 153.8 3.8
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See Notes on accompanying page.
PLAYBOY ENTERPRISES, INC.
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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.
(5) Cash and cash equivalents in the prior year have been restated
to reflect the inclusion in marketable securities and
short-term investments of auction rate securities that were
previously classified as cash and cash equivalents.