Exhibit 99.1
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[PLAYBOY ENTERPRISES, INC. GRAPHIC OMITTED]
FOR IMMEDIATE RELEASE Investor Contact:
Martha Lindeman
312-373-2430
Media Contact:
Linda Marsicano
312-373-2447
PLAYBOY ENTERPRISES ANNOUNCES
SECOND QUARTER RESULTS
CHICAGO, Tuesday, August 8, 2006 -- Playboy Enterprises, Inc. (PEI) (NYSE: PLA,
PLAA) today reported a net loss of $3.3 million, or $0.10 per basic and diluted
share, for the second quarter ended June 30, 2006, in line with its updated
guidance range. As a result of the company's previously announced cost reduction
plan, second quarter results include a net restructuring charge of $1.9 million,
or $0.06 per basic and diluted share. In the same period last year, the company
reported net income of $4.6 million, or $0.14 per basic and diluted share.
In the 2006 second quarter, PEI reported an operating loss of $1.2
million, which included the net restructuring charge, compared to operating
income of $7.3 million in the prior year quarter. The company said that,
excluding the effects of the restructuring expense, the decline in second
quarter operating results reflected lower Entertainment Group results combined
with increased Corporate Administration expense. In the quarter, revenues
declined by $2.3 million to $80.5 million.
PEI Chairman and Chief Executive Officer Christie Hefner said: "During
the second quarter we took a number of actions to better align our cost
structure with our digital media strategy. These moves, which we announced
last month, included both expense reductions in our mature businesses and the
elimination of approximately 30 positions, roughly half of which were open.
While we have improved our cost structure, we will continue to prudently
invest in our expanding international, online, wireless and licensing
businesses to ensure we are optimally positioned to capitalize on growth
opportunities.
"The challenges we face center around our two largest businesses of
domestic publishing and domestic TV, each of which is in the midst of
significant industry-wide structural changes. On the magazine side we are
seeing lower revenues stemming from shifts in advertising spending to other
media and a difficult newsstand market combined with higher paper and postage
expenses. We've already taken actions to address these issues and the results
are evident in the narrowing of the loss despite the lower revenue base,"
Hefner said.
"The year-over-year negative variance in our second quarter results stems
from a significant revenue shortfall in our domestic television business,
where an increasingly competitive environment has combined with a technology
shift to VOD from linear networks to create a difficult operating environment.
We believe that our performance will begin to improve in the fourth quarter as
a result of the rollout of Playboy as a subscription video-on-demand product,
the opening of our venues at the Palms, the leveraging of our recent CJI
acquisition and reductions in spending. As a result of having only one strong
quarter, we now expect net income for the year of approximately $0.05 to $0.10
per share including the restructuring charge and an expected loss in the third
quarter.
"The positive is that all of the contributors to the fourth quarter in
terms of both deals and trends will carry forward into 2007 and beyond,"
Hefner said. "We believe that we have the strategies in place to take
advantage of the value of our brand, appeal of our content and loyalty of our
audiences and that the actions we are taking will result in significant
improvements in future results."
Entertainment
Second quarter segment income for the Entertainment Group declined to $4.9
million in 2006 from $9.8 million last year. Group revenues declined 3% to $47.5
million.
The quarter-over-quarter downturn was due primarily to lower revenues and
profits in the domestic television business. The company said that challenges
in the domestic television business included the loss of exclusivity on
DirecTV as well as increased competition on the cable platforms. In addition,
second quarter 2005 results benefited from the accelerated recognition of
deferred revenues related to the discontinuation of the VOOM satellite
television service. In late June 2006, Playboy began to significantly increase
its video-on-demand carriage when the nation's largest cable operator began to
rollout Playboy and the company's movie product as VOD services.
While second quarter revenues and profits from online subscriptions rose
compared to last year, the gains were more than offset by lower e-commerce
results. The e-commerce decline primarily reflected the receipt in the
prior-year period of a one-time payment for the termination of a
direct-marketing alliance.
Revenues from international TV, wireless and online increased during the
2006 second quarter compared to the prior year, primarily due to higher
revenues from the company's U.K. networks and increased wireless royalties. The
revenue gains coincided with increased investments in distribution and
marketing.
Second quarter 2006 programming expense was essentially flat compared to
the prior year quarter.
Publishing
Despite a 7% decline in revenues to $23.8 million, the Publishing Group narrowed
the second quarter 2006 segment loss to $1.8 million, $0.5 million better than
the same period last year. Effective cost reduction measures were primarily
responsible for the improved year-over-year results. The company said that it
expects advertising revenues to be down approximately 17% in the 2006 third
quarter compared to the same period last year.
Licensing
The Licensing Group's second quarter 2006 segment income rose 4% to $4.1 million
compared to the 2005 second quarter. Higher international and domestic revenues
were responsible for the group's 8% increase in revenues to $9.2 million.
Corporate Administration and Promotion
Second quarter Corporate Administration and Promotion expense increased to $6.5
million, up from $4.2 million last year. The increase primarily reflects the
elimination of intra-company agreements related to trademark, content and
administrative services as a result of the company's late 2005 repurchase of the
minority interest in Playboy.com as well as increased marketing expense.
Additional information regarding second quarter 2006 earnings will be available
on the earnings release conference call, which is being held today, August 8, at
11:00 a.m. Eastern /10:00 a.m. Central. The call may be accessed by dialing
877-707-9632 (for domestic callers) or 1-785-830-1921 (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 web sites including Playboy.com, a leading men's lifestyle
and entertainment web site; and licenses the Playboy trademark internationally
for a range of consumer products and services.
FORWARD-LOOKING STATEMENTS
This release contains "forward-looking statements," including statements in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, 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, 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, Internet and wireless 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) Failure to maintain our agreements with multiple system operators and
direct-to-home operators on favorable terms, as well as any decline in
our access to, and acceptance by, direct-to-home 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;
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, printing or postage costs;
19) Risks associated with revenue guarantees under our cable distribution
agreements;
20) Effects of the national consolidation of the single-copy magazine
distribution system; and
21) Risks associated with the viability of our primarily subscription- and
e-commerce-based Internet model.
Playboy Enterprises, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts)
Quarters Ended
June 30,
---------------------------
2006 2005
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Net revenues
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Entertainment:
Domestic TV $ 20.9 $ 24.9
International 13.2 11.9
Online subscriptions and e-commerce 11.4 10.8
Other 2.0 1.3
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Total Entertainment 47.5 48.9
Publishing:
Playboy magazine
Subscription 11.3 12.4
Newsstand 2.5 2.1
Advertising 6.4 7.6
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Total Playboy magazine 20.2 22.1
Special editions and other 2.0 1.9
International 1.6 1.5
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Total Publishing 23.8 25.5
Licensing:
International licensing 5.6 4.7
Domestic licensing 1.3 1.2
Marketing events 2.3 2.4
Other - 0.1
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Total Licensing 9.2 8.4
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Total net revenues $ 80.5 $ 82.8
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Net income (loss)
- -----------------
Entertainment $ 4.9 $ 9.8
Publishing (1.8) (2.3)
Licensing 4.1 4.0
Corporate Administration and Promotion (6.5) (4.2)
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Segment income 0.7 7.3
Restructuring expenses (1.9) -
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Operating income (loss) (1.2) 7.3
Investment income 0.6 0.6
Interest expense (1.3) (1.5)
Amortization of deferred financing fees (0.2) (0.2)
Minority interest - (0.3)
Other, net 0.1 (0.2)
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Income (loss) before income taxes (2.0) 5.7
Income tax expense (1.3) (1.1)
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Net income (loss) $ (3.3) $ 4.6
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Weighted average number of common shares outstanding
Basic 33,158 33,080
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Diluted 33,158 33,265
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Basic and diluted earnings (loss) per common share $ (0.10) $ 0.14
============= ===========
Note: Certain reclassifications have been made to conform to the current
presentation.
Playboy Enterprises, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts)
Six Months Ended
June 30,
--------------------------
2006 2005
------------ ------------
Net revenues
- ------------
Entertainment:
Domestic TV $ 43.2 $ 50.1
International 27.0 25.3
Online subscriptions and e-commerce 24.6 21.8
Other 3.9 2.2
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Total Entertainment 98.7 99.4
Publishing:
Playboy magazine
Subscription 23.2 25.0
Newsstand 5.1 5.4
Advertising 11.1 14.6
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Total Playboy magazine 39.4 45.0
Special editions and other 4.6 4.2
International 3.3 3.3
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Total Publishing
47.3 52.5
Licensing:
International licensing 11.1 9.2
Domestic licensing 2.6 2.5
Marketing events 2.5 2.6
Other 0.4 0.1
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Total Licensing 16.6 14.4
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Total net revenues $ 162.6 $ 166.3
============ ============
Net Loss
- --------
Entertainment $ 12.8 $ 21.7
Publishing (4.1) (2.7)
Licensing 8.4 7.6
Corporate Administration and Promotion (12.9) (8.4)
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Segment income 4.2 18.2
Restructuring expenses (1.9) -
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Operating income 2.3 18.2
Investment income 1.2 0.8
Interest expense (2.7) (4.1)
Amortization of deferred financing fees (0.3) (0.4)
Minority interest - (0.7)
Debt extinguishment expenses - (19.3)
Other, net (0.1) (0.7)
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Income (loss) before income taxes 0.4 (6.2)
Income tax expense (2.9) (2.3)
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Net Loss $ (2.5) $ (8.5)
============ ============
Weighted average number of common shares outstanding
Basic and diluted 33,149 33,216
============ ============
Basic and diluted loss per common share $ (0.08) $ (0.26)
============ ============
Note: Certain reclassifications have been made to conform to the current
presentation.
PLAYBOY ENTERPRISES, INC.
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Reconciliation of Non-GAAP Financial Information (in millions of dollars)
Second Quarter Ended June 30, Six Months Ended June 30,
EBITDA and Adjusted EBITDA 2006 2005 % Better/(Worse) 2006 2005 % Better/(Worse)
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Net Income (Loss) $ (3.3) $ 4.6 --- $ (2.5) $ (8.5) 70.6
Adjusted for:
Income Tax Expense 1.3 1.1 (18.2) 2.9 2.3 (26.1)
Interest Expense 1.3 1.5 13.3 2.7 4.1 34.1
Amortization of Deferred Financing Fees 0.2 0.2 0.0 0.3 0.4 25.0
Equity in Operations of Investments (0.1) 0.1 --- - 0.3 100.0
Depreciation and Amortization 11.3 11.2 (0.9) 21.7 22.0 1.4
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EBITDA (1) 10.7 18.7 (42.8) 25.1 20.6 21.8
Adjusted for:
Cash Investments in Television Programming (10.2) (7.3) (39.7) (19.5) (16.0) (21.9)
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Adjusted EBITDA (2) $ 0.5 $ 11.4 (95.6) $ 5.6 $ 4.6 21.7
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Second Quarter Ended June 30, Six Months Ended June 30,
Financial and Operating Data 2006 2005 % Inc/(Dec) 2006 2005 % Inc/(Dec)
---------------------------------------------------------------------------------- ---------------------------------
Entertainment
Cash Investments in Television Programming $ 10.2 $ 7.3 39.7 $ 19.5 $ 16.0 21.9
Content Amortization and Expense $ 10.3 $ 10.2 1.0 $ 19.7 $ 20.0 (1.5)
International TV Households at End of
Period (in millions) (3) 46.2 41.2 12.1 46.2 41.2 12.1
Domestic TV Household Units at End of
Period (in millions) (3):
Playboy TV:
Satellite 28.0 25.9 8.1 28.0 25.9 8.1
Cable 21.0 20.7 1.4 21.0 20.7 1.4
Movie Networks:
Satellite 39.9 51.1 (21.9) 39.9 51.1 (21.9)
Cable 46.2 46.0 0.4 46.2 46.0 0.4
On Demand Households:
VOD 14.4 7.4 94.6 14.4 7.4 94.6
SVOD 2.3 1.7 35.3 2.3 1.7 35.3
Publishing
Magazine Advertising Pages 103.4 128.4 (19.5) 189.5 249.6 (24.1)
At June 30
Cash, Cash Equivalents, Marketable
Securities and Short-Term Investments $ 40.9 $ 70.8 (42.2) $ 40.9 $ 70.8 (42.2)
Long-Term Financing Obligations $ 115.0 $ 115.0 --- $ 115.0 $ 115.0 ---
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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 Financial and
Operating Data
1) 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 television content. 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 generally accepted accounting principles in the United States, or
GAAP.
2) 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 GAAP.
3) 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 distribution
platforms (i.e. digital and analog) are available to that household.