CHICAGO, May 6 /PRNewswire-FirstCall/ -- Playboy Enterprises, Inc. (PEI)
(NYSE: PLA, PLAA) today reported a net loss for the first quarter ended March
31, 2008, of $3.1 million, or $0.09 per basic and diluted share, on revenues
of $78.5 million.
Revenues were down 8% compared with the prior-year quarter due primarily
to continued structural and economic pressures on the company's domestic media
businesses. While international licensing and media operations provided some
offset, first quarter 2008 segment income declined to $0.1 million, compared
to $3.9 million in last year's first quarter.
Playboy's net loss for the first quarter included approximately $1.1
million in charges related to restructuring and severance expense and
approximately $0.4 million in unrealized losses on foreign currency contracts.
In the 2007 first quarter, the company reported net income of $1.5 million, or
$0.04 per basic and diluted share, which included a total of $2.3 million in
benefits related to the sale of artwork and a higher-than-estimated stock
option forfeiture rate, partially offset by $0.8 million in severance charges.
Playboy Chairman and Chief Executive Officer Christie Hefner said: "The
quarter's results reflected the dual challenges of structural transformation
in our traditional media business and a difficult U.S. economy. Our
international operations and our core Licensing business, which generates a
significant portion of revenue from overseas sales, showed solid growth in the
quarter.
"Our publishing and domestic entertainment businesses continue to face
unprecedented change in the way consumers access and use media content. We
believe we are making good strategic progress in streamlining our operations
and improving the future performance prospects of these businesses through
steps like the recently completed sale of the assets of our Andrita television
studio, the outsourcing of our e-commerce business and reductions in overhead
as well as print manufacturing and editorial expense.
"However, our goal is not just to contain costs; it is to build
shareholder value by generating profitable and sustainable revenue growth.
Our brand and our ability to extend the Playboy lifestyle to consumers over a
variety of platforms will drive these gains. On the media side, our focus is
on redesigning and upgrading the Playboy.com site to accelerate growth of that
business, expand our total audience and create a better portal to our other
properties. This will be a transitional year, as we are still in the
investment stage of the retooling process, and results won't be apparent until
year end at the earliest.
"Despite weakness in the retail sector, we believe the Licensing business
is on track to report high single-digit growth this year compared to last,
excluding the sale of artwork in 2007, and we still expect to open additional
concept stores this year. We are pleased with the progress on our Macau
facility as we work towards a late 2009 opening and we are actively pursuing
other location-based opportunities. Overall, however, we do not expect the
gains in Licensing to offset weaker results anticipated in our media
businesses this year," Hefner said.
Entertainment
First quarter 2008 segment income was $2.7 million, down from $4.3 million
in the prior year period on a 6% decline in revenues to $47.9 million.
Total Domestic TV revenues declined 16% to $16.5 million in the 2008 first
quarter compared to $19.7 million last year, in part due to a negative $2.6
million variance related to cash adjustments compared to last year. First
quarter 2008 Playboy TV monthly subscription revenues increased, but the gains
were more than offset by lower pay-per-view revenues reflecting continued
consumer migration from linear networks to on-demand platforms. International
TV revenues rose 6% in the 2008 first quarter to $14.7 million, primarily
reflecting higher sales from European networks.
Online revenues declined 3% in the 2008 first quarter to $15.2 million as
gains in e-commerce, advertising and mobile revenues could not offset lower
pay site revenues. A one-time inventory expense related to the outsourcing of
e-commerce business and the previously announced investments in upgrading
Playboy.com contributed to lower online profits in the 2008 first quarter
compared to last year.
Publishing
The Publishing Group reported a segment loss of $3.2 million in the 2008
first quarter, versus a loss of $2.4 million in the prior year, on a 14%
revenue decline to $20.1 million. Circulation and advertising sales at Playboy
magazine declined while revenues from the company's international editions of
the magazine increased.
The company said that it expects second quarter 2008 advertising pages to
be down 5% compared to last year's second quarter.
Licensing
Segment income for the Licensing Group was $6.7 million, down 13%, on a 6%
revenue decline to $10.5 million compared to the 2007 first quarter, which
included proceeds of $1.3 million from the sale of original art. Revenues
from international consumer products increased 10% in the 2008 first quarter
versus last year. Excluding the sale of art in last year's first quarter, the
Group's revenues increased 5%.
Corporate Administration and Other
First quarter 2008 Corporate Administration expense increased 7% to $6.1
million.
Playboy reported $0.6 million in restructuring expense in the 2008 first
quarter, which primarily was related to the outsourcing of the company's
e-commerce operations to eFashionSolutions, LLC.
The 2008 quarter's results also included a $0.2 million increase in non-
operating expense due in part to a $0.4 million unrealized loss on foreign
currency contracts, which will reverse over the remainder of the year.
Additional information regarding first quarter 2008 earnings will be
available on the earnings release conference call, which is being held today,
May 6, 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 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 is one of the most recognized and popular consumer brands in the
world. Playboy Enterprises, Inc. is a media and lifestyle company that
markets the brand through a wide range of media properties and licensing
initiatives. The company publishes Playboy magazine in the United States and
abroad and creates content for distribution via television networks, websites,
mobile platforms, DVD and radio. Through licensing agreements, the Playboy
brand appears in more than 100 countries on a wide range of consumer products,
entertainment locations and retail stores.
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. We want to caution you not to place undue
reliance on any forward-looking statements. We undertake no obligation to
publicly update any forward-looking statements, whether as a result of new
information, future events or otherwise.
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, Internet and wireless 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 and partners;
(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, wireless,
new electronic media and product licensing markets;
(11) Attempts by consumers, distributors, merchants 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 implementation which might
affect our plans and assumptions;
(13) Risks associated with losing access to transponders or technical
failure of transponders or other transmitting or playback equipment
that is beyond our control and competition for channel space on
linear television platforms or video-on-demand platforms;
(14) Failure to maintain our agreements with multiple system operators,
or MSOs, and direct-to-home, or DTH, operators on favorable terms,
as well as 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, pressure on splits or
adverse changes in certain minimum revenue amounts 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) Effects of the national consolidation of the single-copy magazine
distribution system and risks associated with the financial
stability of major magazine wholesalers;
(20) Effects of the national consolidation of television distribution
companies (e.g., cable MSOs, satellite platforms and
telecommunications companies); and
(21) Risks associated with the viability of our subscription, on demand,
e-commerce and ad-supported Internet models.
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 http://www.sec.gov or at http://www.peiinvestor.com in the
Investor Relations section of our website.
Playboy Enterprises, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts)
Quarters Ended
March 31,
2008 2007
Net revenues
Entertainment:
Domestic TV $16.5 $19.7
International TV 14.7 13.8
Online/mobile 15.2 15.7
Other 1.5 1.7
Total Entertainment 47.9 50.9
Publishing:
Domestic magazine:
Subscription 10.1 10.9
Newsstand 2.1 2.5
Advertising 3.9 5.7
Total domestic magazine 16.1 19.1
International magazine 2.1 1.9
Special editions and other 1.9 2.3
Total Publishing 20.1 23.3
Licensing:
Consumer products 9.2 8.7
Location-based entertainment 0.9 0.9
Marketing events 0.2 0.3
Other 0.2 1.3
Total Licensing 10.5 11.2
Total net revenues $78.5 $85.4
Net income (loss)
Entertainment $2.7 $4.3
Publishing (3.2) (2.4)
Licensing 6.7 7.7
Corporate Administration and Promotion (6.1) (5.7)
Segment income 0.1 3.9
Restructuring expense (0.6) -
Operating income (loss) (0.5) 3.9
Investment income 0.3 0.5
Interest expense (1.1) (1.4)
Amortization of deferred financing fees (0.1) (0.1)
Other, net (0.5) (0.2)
Income (loss) before income taxes (1.9) 2.7
Income tax expense (1.2) (1.2)
Net income (loss) $(3.1) $1.5
Weighted average number of common shares
outstanding
Basic 33,275 33,230
Diluted 33,275 33,269
Basic and diluted earnings (loss) per common
share $(0.09) $0.04
PLAYBOY ENTERPRISES, INC.
Reconciliation of Non-GAAP Financial Information (in millions of dollars)
First Quarter Ended March 31,
EBITDA and Adjusted EBITDA % Better/
2008 2007 (Worse)
Net Income (Loss) $(3.1) $1.5 -
Adjusted for:
Income Tax Expense 1.2 1.2 -
Interest Expense 1.1 1.4 21.4
Amortization of Deferred Financing
Fees 0.1 0.1 -
Depreciation and Amortization 10.4 10.0 (4.0)
EBITDA (1) 9.7 14.2 (31.7)
Adjusted for:
Cash Investments in Television
Programming (8.3) (9.8) 15.3
Adjusted EBITDA (2) $1.4 $4.4 (68.2)
First Quarter Ended March 31,
Financial and Operating Data 2008 2007 % Inc/(Dec)
Entertainment
Cash Investments in Television
Programming $8.3 $9.8 (15.3)
Programming Amortization and
Online Content Expenses $9.8 $10.2 (3.9)
Publishing
Domestic Magazine Advertising Pages 86.0 99.0 (13.1)
At March 31
Cash, Cash Equivalents, Marketable
Securities and Short-Term Investments $22.2 $40.4 (45.0)
Long-Term Financing Obligations $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
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 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
other things, 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.
SOURCE Playboy Enterprises, Inc.
