Exhibit 99.1
[GRAPHIC OMITTED]
NEWS
FROM PLAYBOY ENTERPRISES, INC.
FOR IMMEDIATE RELEASE Investor Contact:
Martha Lindeman
312-373-2430
Media Contact:
Linda Marsicano
312-373-2447
PLAYBOY ENTERPRISES REPORTS
THIRD QUARTER RESULTS
CHICAGO, Tuesday, November 7, 2006 - Playboy Enterprises, Inc. (PEI) (NYSE: PLA,
PLAA) today reported net income of $1.1 million, or $0.03 per basic and diluted
share, for the third quarter ended September 30, 2006, better than the loss the
company had projected. The results compare to net income of $3.2 million, or
$0.10 per basic and diluted share in the prior year period. Revenues in the
quarter rose 2% to $82.3 million from $80.9 million last year.
Third quarter 2006 operating income was $3.7 million, down 31% from
$5.4 million in last year's third quarter. While Licensing results were up more
than 40%, the gain was more than offset by lower Entertainment profits and
increased Corporate Administration expense.
Playboy Chairman and Chief Executive Officer Christie Hefner said: "The
quarter's results reflected the continued strength of our growth businesses of
global licensing and new digital media, both of which reported double-digit
profit gains. The fourth quarter marks the opening of our venues at the Palms,
and we expect that the related high-margin revenues will further accelerate the
growth of our Licensing business.
"The domestic TV business remains in transition and publishing
challenging. Our goal is to maintain our leadership position. To that end, in
TV, we just launched new movie networks, which offer consumers better
programming, packaging and scheduling. In addition, we continue to encourage
operators to offer and market Playboy TV as a subscription-on-demand package,
which we believe is a compelling new product. However, because of the recent
introduction of these products and the lag in reporting by our distribution
partners, we do not yet have enough data to determine how well we are
performing, which makes it difficult to make near-term projections. Rather than
lower guidance, however, at this time we are maintaining our estimate of $0.05
to $0.10 EPS for the year that we had previously announced," Hefner said.
Entertainment
Entertainment Group 2006 third quarter segment income was $5.8 million, down 18%
from $7.1 million in last year's quarter. Revenues in the same period rose 5% to
$50.2 million from $47.8 million.
In domestic TV, increased revenues from Playboy TV as a subscription
service and from video-on-demand distribution of the movie services were more
than offset by lower cable and satellite pay-per-view revenues for both Playboy
TV and the movie networks, resulting in a 19% decline in revenues in the quarter
compared to last year.
Third quarter international revenues rose 17% versus last year,
reflecting improved performance of the UK networks, favorable currency exchange
rates and increased royalties from mobile agreements. Recent acquisitions were
primarily responsible for the 41% growth in online revenues year-over-year and
for the increase in DVD sales, which led to a more-than-doubling of other
revenues. As a result of these top-line increases, the international, online and
other businesses reported significant profit gains, offsetting the reduced
contribution from domestic TV.
Planned increases in online spending were responsible for the 12%
increase in 2006 third quarter programming and content expense.
Publishing
The Publishing Group reported a segment loss of $0.8 million for the 2006 third
quarter, comparable to the prior year quarter. Reduced editorial and operating
expenses for Playboy Magazine offset the $2.7 million decline in third quarter
revenues to $24.6 million this year from $27.3 million last year, which were a
result of weak market conditions in domestic newsstand and advertising sales.
The company said that it expects advertising revenues to be up
approximately 10% in the 2006 fourth quarter compared to last year.
Licensing
Third quarter 2006 Licensing Group segment income rose 41% to $4.6 million
compared to the prior year on a 28% increase in revenues to $7.5 million. The
improved results were driven by increased international royalties, especially
from Europe.
Other
Third quarter 2006 Corporate Administration and Promotion expense was $5.8
million, up 31% from $4.3 million from the 2005 third quarter, primarily due to
the elimination of intra-company agreements related to trademark, content and
administrative services as a result of the company's repurchase of the minority
interest in Playboy.com in late 2005.
Income tax expense in the 2006 quarter was $1.4 million compared to
$0.5 million in last year's third quarter when the company recorded a tax refund
related to its European television operations.
Additional information regarding third quarter 2006 earnings will be available
on the earnings release conference call, which is being held today, November 7,
at 11:00 a.m. Eastern /10:00 a.m. Central. The call may be accessed by dialing
800-862-9098 (for domestic callers) or 1-785-424-1051 (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
television networks and distributes programming globally; owns 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 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 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 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 certain minimum revenue amounts 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.
More detailed information about factors that may affect our performance may be
found in our filings with the Securities and Exchange Commission, which are
available at www.sec.gov or in the Investor Relations section of our website. We
undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise.
Playboy Enterprises, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts)
Quarters Ended
September 30,
-------------------------
2006 2005
-------------------------
Net revenues
- ------------
Entertainment:
Domestic TV $ 20.5 $ 25.4
International 14.3 12.2
Online subscriptions and e-commerce 12.6 9.0
Other 2.8 1.2
---------- ----------
Total Entertainment 50.2 47.8
Publishing:
Playboy magazine
Subscription 11.2 12.3
Newsstand 2.3 2.6
Advertising 6.2 7.6
---------- ----------
Total Playboy magazine 19.7 22.5
Special editions and other 3.2 3.2
International 1.7 1.6
---------- ----------
Total Publishing 24.6 27.3
Licensing:
International licensing 5.5 4.3
Domestic licensing 1.3 1.2
Marketing events 0.3 0.1
Other 0.4 0.2
---------- ----------
Total Licensing 7.5 5.8
---------- ----------
Total net revenues $ 82.3 $ 80.9
========== ==========
Net income
- ----------
Entertainment $ 5.8 $ 7.1
Publishing (0.8) (0.7)
Licensing 4.6 3.3
Corporate Administration and Promotion (5.8) (4.3)
---------- ----------
Segment income 3.8 5.4
Restructuring expenses (0.1) -
---------- ----------
Operating income 3.7 5.4
Investment income 0.6 0.6
Interest expense (1.5) (1.4)
Amortization of deferred financing fees (0.1) (0.1)
Minority Interest - (0.4)
Other, net (0.2) (0.4)
---------- ----------
Income before income taxes 2.5 3.7
Income tax expense (1.4) (0.5)
---------- ----------
Net income $ 1.1 $ 3.2
========== ==========
Weighted average number of common shares outstanding
Basic 33,169 33,102
========== ==========
Diluted 33,173 33,366
========== ==========
Basic and diluted earnings per common share $ 0.03 $ 0.10
========== ==========
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)
Nine Months Ended
September 30,
---------------------------
2006 2005
-------------- -----------
Net revenues
- ------------
Entertainment:
Domestic TV $ 63.7 $ 75.5
International 41.3 37.5
Online subscriptions and e-commerce 37.2 30.8
Other 6.7 3.4
------------ -----------
Total Entertainment 148.9 147.2
Publishing:
Playboy magazine
Subscription 34.4 37.3
Newsstand 7.4 8.0
Advertising 17.3 22.2
------------ -----------
Total Playboy magazine 59.1 67.5
Special editions and other 7.8 7.4
International 5.0 4.9
------------ -----------
Total Publishing 71.9 79.8
Licensing:
International licensing 16.6 13.5
Domestic licensing 3.9 3.7
Marketing events 2.8 2.7
Other 0.8 0.3
------------ -----------
Total Licensing 24.1 20.2
------------ -----------
Total net revenues $244.9 $ 247.2
============== ===========
Net Loss
- --------
Entertainment $ 18.6 $ 28.8
Publishing (4.9) (3.4)
Licensing 13.0 10.9
Corporate Administration and Promotion (18.7) (12.7)
-------------- -----------
Segment income 8.0 23.6
Restructuring expenses (2.0) -
-------------- -----------
Operating income 6.0 23.6
Investment income 1.8 1.4
Interest expense (4.2) (5.5)
Amortization of deferred financing fees (0.4) (0.5)
Minority interest - (1.1)
Debt extinguishment expenses - (19.3)
Other, net (0.3) (1.1)
-------------- -----------
Income (loss) before income taxes 2.9 (2.5)
Income tax expense (4.3) (2.8)
-------------- -----------
Net Loss $ (1.4) $ (5.3)
============== ===========
Weighted average number of common shares outstanding
Basic and diluted 33,156 33,178
============== ===========
Basic and diluted loss per common share $ (0.04) $ (0.16)
============== ===========
Note: Certain reclassifications have been made to conform to the
current presentation.
PLAYBOY ENTERPRISES, INC.
-------------------------------------------------------------------------------------------------------------------------------
Reconciliation of Non-GAAP Financial Information (in
millions of dollars)
Third Quarter Ended September 30, Nine Months Ended September 30,
EBITDA and Adjusted EBITDA 2006 2005 % Better/(Worse) 2006 2005 % Better/(Worse)
--------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 1.1 $ 3.2 (65.6) $ (1.4) $ (5.3) 73.6
Adjusted for:
Income Tax Expense 1.4 0.5 (180.0) 4.3 2.8 (53.6)
Interest Expense 1.5 1.4 (7.1) 4.2 5.5 23.6
Amortization of Deferred Financing Fees 0.1 0.1 --- 0.4 0.5 20.0
Equity in Operations of Investments (0.1) 0.1 --- (0.1) 0.3 ---
Depreciation and Amortization 11.7 10.9 (7.3) 33.4 32.9 (1.5)
-------------------------------------------------------------------- --------------------
EBITDA (1) 15.7 16.2 (3.1) 40.8 36.7 11.2
Adjusted for:
Cash Investments in Television Programming (8.8) (8.3) (6.0) (28.3) (24.3) (16.5)
-------------------------------------------------------------------- --------------------
Adjusted EBITDA (2) $ 6.9 $ 7.9 (12.7) $ 12.5 $ 12.4 0.8
-------------------------------------------------------------------- --------------------
Third Quarter Ended September Nine Months Ended September 30,
30,
Financial and Operating Data 2006 2005 % Inc/(Dec) 2006 2005 % Inc/(Dec)
-------------------------------------------------------------------------------- ---------------------------------
Entertainment
Cash Investments in Television Programming $ 8.8 $ 8.3 6.0 $ 28.3 $ 24.3 16.5
Programming Amortization and Online
Content Expenses $ 10.9 $ 9.7 12.4 $ 30.6 $ 29.7 3.0
International TV Household Units at End of
Period (in millions) (3) 48.0 43.7 9.8 48.0 43.7 9.8
Domestic TV Household Units at End of Period (in millions) (3):
Playboy TV:
Satellite 28.2 26.4 6.8 28.2 26.4 6.8
Cable 22.4 23.6 (5.1) 22.4 23.6 (5.1)
Movie Networks:
Satellite 40.1 52.0 (22.9) 40.1 52.0 (22.9)
Cable 45.6 48.7 (6.4) 45.6 48.7 (6.4)
On Demand Households:
VOD 17.9 7.7 132.5 17.9 7.7 132.5
SVOD 10.8 1.8 500.0 10.8 1.8 500.0
Publishing
Magazine Advertising Pages
102.2 110.1 (7.2) 291.7 359.6 (18.9)
At September 30
Cash, Cash Equivalents, Marketable
Securities and Short-Term Investments $ 37.3 $ 64.4 (42.1) $ 37.3 $ 64.4 (42.1)
Long-Term Financing Obligations $ 115.0 $ 115.0 --- $ 115.0 $ 115.0 ---
-------------------------------------------------------------------------------- ---------------------------------
See notes on accompanying page.
PLAYBOY ENTERPRISES, INC.
--------------------------------------------------------------------------
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.