Segment Income Up Over Prior Year; CEO Flanders Outlines Future
Direction CHICAGO, Feb. 18 /PRNewswire-FirstCall/ -- Playboy
Enterprises, Inc. (PEI) (NYSE:PLANYSE:PLAA) today reported a net
loss of $27.8 million, or $0.83 per basic and diluted share, for
the 2009 fourth quarter compared to a net loss of $146.8 million,
or $4.40 per basic and diluted share, for the 2008 fourth quarter.
Both quarters included impairment, restructuring and other charges,
which totaled $28.6 million in the 2009 fourth quarter and $157.2
million in the prior year quarter. Segment income for the 2009
fourth quarter was $2.1 million, up from $1.1 million reported for
the 2008 fourth quarter. Stronger Licensing and Print/Digital
results were responsible for the improvement. Lower revenues in the
media businesses led to a 13% decline in fourth quarter revenues
year-over-year from $69.8 million to $60.6 million. Playboy Chief
Executive Officer Scott Flanders said: "We are a long way from
effectively monetizing the power of the Playboy brand. Today, we
distribute content across five unique media platforms and oversee
well over 100 licensing agreements globally. Although each of our
businesses has promising opportunities, our operations are subscale
in industries dominated by large players. In our business, size
matters. Our mission is to create a stronger and significantly more
profitable company. To do so, we are changing the way we do
business. "Earlier today we announced a deal with IMG to outsource
our Asian licensing business," Flanders said. "This follows our
November announcement of an agreement with American Media, Inc. to
handle most of the non-editorial operations of Playboy magazine.
These partnerships illustrate our strategic direction and represent
the first steps in our repositioning. "Going forward, we will
refine our focus around the management of the Playboy brand and
lifestyle. Core creative competencies will remain in-house, but we
will seek to identify partners who can effectively manage and build
our businesses. In executing this strategy, our goal is to create a
leaner organization and to remove cost centers and overhead, while
building relationships that create value for the brand, our
businesses and our shareholders," Flanders said. "As the deals
we've signed demonstrate, we are making progress in transforming
the company," Flanders said. "This work continues, and our
direction is clear. Evaluations of each of our businesses are
underway and ongoing, as are discussions with potential partners.
"We will be putting the pieces of our new structure together in
2010 and expect to begin to see significant financial benefits from
this transition next year. The media businesses will remain
challenged through this year, although the domestic magazine
business will benefit from our recently announced partnership with
AMI in the 2010 second half. With new licensees in place and
consumer spending showing signs of improvement, the Licensing Group
is expected to report solid improvement in 2010 revenue and
profits. In total, we expect double-digit percentage growth in
segment income for 2010, but, more importantly, our goal this year
is to position the company for much greater future profitability in
2011 and beyond by focusing on our core strengths and better
optimizing the use of the brand," Flanders said. Entertainment
Fourth quarter 2009 Entertainment Group segment income was down by
$1.6 million to $2.6 million on a $5.5 million decrease in revenues
to $23.7 million compared to the prior year quarter. Contributing
to the year-over-year profit decline was a nearly 29% reduction in
domestic TV revenues, which totaled $12.0 million in the 2009
fourth quarter. Although Playboy TV monthly subscription revenues
increased modestly in the 2009 fourth quarter compared to the prior
year quarter, pay-per-view, movie network and video-on-demand
revenues all were down over the same time period due to increased
competition and an overall reduction in consumer spending on
premium television services. Revenues and profit from other
entertainment businesses were also down in the fourth quarter of
2009, primarily as a result of the comparison with the prior year
quarter when the company recorded high-margin revenues related to
licensing fees for third-party productions. Partially offsetting
these results were increased revenues and profits from
international TV in the 2009 fourth quarter, which reflected both
higher licensing fees from European partners and reduced overhead.
Print/Digital The Print/Digital Group reported fourth quarter 2009
segment income of $2.5 million, which compares to a segment loss of
$0.4 million in the prior year quarter. The group's revenues in the
same period were down 14% to $28.2 million. Playboy magazine
recorded a swing from a loss in the 2008 fourth quarter to a profit
in the 2009 fourth quarter. The decision to combine the
January/February 2010 issues into one editorial package and the
newsstand success of the November 2009 'Marge Simpson' issue led to
an increase in fourth quarter 2009 circulation revenues and profit
contribution. These revenue benefits were more than offset by a
decline in the magazine's advertising revenues compared to the
prior year. Cost reduction efforts also contributed to the
improvement in domestic magazine segment results. International
publishing recorded top- and bottom-line declines in the fourth
quarter due to the global economic slowdown and resulting pressure
on advertisers and publishers. The company said that in part
because it will be publishing one fewer issue in the 2010 first
quarter, it expects to report a 47% decline in advertising revenues
compared to last year's first quarter. Fourth quarter 2009 digital
revenues were down versus the prior year due to lower paysite and
advertising contributions, however reductions in overhead and
content expense together with improved revenues and profits from
the international and mobile businesses led to an improvement in
fourth quarter digital results compared to the prior year.
Licensing Revenues for the Licensing Group rose 10% to $8.7 million
in the 2009 fourth quarter, leading to a 17% increase in segment
income to $5.1 million compared to the 2008 fourth quarter.
Increased revenues from domestic and international consumer
products, reflecting new categories of product and increased
consumer spending, and from location-based entertainment venues
were responsible for the year-over-year improvement. Other Fourth
quarter 2009 Corporate expense rose to $8.1 million from $7.0
million in the 2008 fourth quarter largely due to increased
severance and other employee-benefit-related items. In addition,
the prior year period was favorably impacted by a decrease in the
company's deferred compensation plan liability. In the 2009 fourth
quarter, the company recorded a restructuring charge of $6.4
million as well as a $22.2 million non-cash impairment charge,
which was related to television acquisitions the company made many
years ago. The restructuring is a result of both a reduction in
head count, in part due to the previously announced partnership
with AMI, as well as additional charges related to the closing of
the New York office. PEI said that the New York space has not been
sublet and those efforts are ongoing. The company recorded a tax
benefit of $0.9 million in the 2009 fourth quarter, primarily due
to the tax effect of the impairment charge and an adjustment to
foreign withholding tax. Additional information regarding fourth
quarter 2009 earnings will be available on the earnings release
conference call, which is being held today, February 18, 2010, at
11:00 a.m. Eastern /10:00 a.m. Central. The call may be accessed by
dialing: 800-895-0231 (for domestic callers) or 785-424-1054 (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 and radio. Through licensing agreements, the Playboy
brand appears on a wide range of consumer products in more than 150
countries as well as retail stores and entertainment venues.
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 mobile materials;
b. attempts to limit or otherwise regulate the sale or distribution
of certain consumer products sold by our licensees, including
nutriceuticals and energy drinks; or c. limitations on the
advertisement of tobacco, alcohol and other products which are
important sources of advertising revenue for us; 2. Risks
associated with our foreign operations, including market acceptance
and demand for our products and the products of our licensees and
other business partners; 3. Our ability to effectively manage our
exposure to foreign currency exchange rate fluctuations; 4. Further
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 and licensing 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. Further
competition for advertisers from other publications, media or
online providers or decreases in spending by advertisers, either
generally or with respect to the men's market; 10. Competition in
the television, men's magazine, Internet, mobile 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
mobile businesses' reliance on third parties for technology and
distribution, and any changes in that technology, distribution
and/or delays in implementation which might affect our plans,
assumptions and financial results; 13. Risks associated with losing
access to transponders or technical failure of transponders or
other transmitting or playback equipment that is beyond our
control; 14. Competition for channel space on linear or
video-on-demand television platforms; 15. Failure to maintain our
agreements with multiple system operators and direct-to-home, or
DTH, operators on favorable terms, as well as any decline in our
access to households or acceptance by DTH, cable and/or telephone
company systems and the possible resulting cancellation of fee
arrangements, pressure on splits or other deterioration of contract
terms with operators of these systems; 16. Risks that we may not
realize the expected sales and profits and other benefits from
acquisitions; 17. Any charges or costs we incur in connection with
restructuring measures we have taken or may take in the future; 18.
Increases in paper, printing, postage or other manufacturing costs;
19. Effects of the consolidation of the single-copy magazine
distribution system in the U.S. and risks associated with the
financial stability of major magazine wholesalers; 20. Effects of
the consolidation and/or bankruptcies of television distribution
companies; 21. Risks associated with the viability of our
subscription, ad-supported and e-commerce Internet models; 22. Our
ability to sublet our excess space may be negatively impacted by
the market for commercial rental real estate as well as by the
global economy generally; 23. The risk that our common stock could
be delisted from the New York Stock Exchange, or NYSE, if we fail
to meet the NYSE's continued listing requirements; 24. Risks that
adverse market conditions in the securities and credit markets may
significantly affect our ability to access the capital markets; 25.
The risk that we will be unable to refinance our 3.00% convertible
senior subordinated notes due 2025, or convertible notes, or the
risk that we will need to refinance our convertible notes, prior to
the first put date of March 15, 2012, at significantly higher
interest rates; 26. The risk that we are unable to either extend
the maturity date of our existing credit facility beyond the
current expiration date of January 31, 2011 or establish a new
facility with a later maturity date and acceptable terms; and 27.
Further downward pressure on our operating results and/or further
deterioration of economic conditions could result in further
impairments of our long-lived assets. 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
December 31, ------------ 2009 2008 ---- ---- Net revenues
------------ Entertainment: Domestic TV $12.0 $16.7 International
TV 10.2 9.9 Other 1.5 2.6 --- --- Total Entertainment 23.7 29.2
Print/Digital: Domestic magazine 15.7 18.2 International magazine
1.5 2.0 Special editions and other 1.4 1.8 Digital 9.6 10.7 ---
---- Total Print/Digital 28.2 32.7 Licensing: Consumer products 7.1
6.5 Location-based entertainment 1.1 0.9 Marketing events 0.2 0.2
Other 0.3 0.3 --- --- Total Licensing 8.7 7.9 --- --- Total net
revenues $60.6 $69.8 ===== ===== Net loss -------- Entertainment
$2.6 $4.2 Print/Digital 2.5 (0.4) Licensing 5.1 4.3 Corporate (8.1)
(7.0) ---- ---- Segment income 2.1 1.1 Restructuring expense (6.4)
(4.0) Impairment charges (22.2) (146.4) Deferred subscription cost
write-off - (4.8) Operating loss (26.5) (154.1) Investment income
(expense) 0.1 (0.4) Interest expense (2.2) (2.1) Amortization of
deferred financing fees (0.2) (0.2) Impairment charge on
investments - (2.0) Other, net 0.1 (1.4) --- ---- Loss before
income taxes (28.7) (160.2) Income tax benefit 0.9 13.4 --- ----
Net loss $(27.8) $(146.8) ====== ======= Weighted average number of
common shares outstanding Basic and diluted 33,489 33,337 ======
====== Basic and diluted loss per common share $(0.83) $(4.40)
====== ====== 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) Twelve Months Ended December
31, ------------ 2009 2008 ---- ---- Net revenues ------------
Entertainment: Domestic TV $50.5 $62.6 International TV 42.6 49.8
Other 5.0 6.4 --- --- Total Entertainment 98.1 118.8 Print/Digital:
Domestic magazine 55.0 68.0 International magazine 6.3 8.0 Special
editions and other 6.8 8.5 Digital 37.4 48.4 ---- ---- Total
Print/Digital 105.5 132.9 Licensing: Consumer products 29.0 33.1
Location-based entertainment 4.6 3.8 Marketing events 2.5 2.9 Other
0.7 0.6 --- --- Total Licensing 36.8 40.4 ---- ---- Total net
revenues $240.4 $292.1 ====== ====== Net loss --------
Entertainment $9.9 $8.1 Print/Digital 1.6 (3.4) Licensing 21.0 23.7
Corporate (25.4) (23.9) ----- ----- Segment income 7.1 4.5
Restructuring expense (19.2) (6.8) Impairment charges (27.7)
(146.5) Deferred subscription cost write-off - (4.8) Provisions for
reserves - (4.1) --- ---- Operating loss (39.8) (157.7) Investment
income 0.8 0.5 Interest expense (8.7) (8.5) Amortization of
deferred financing fees (0.7) (0.7) Impairment charge on
investments - (2.0) Other, net (0.2) (1.8) ---- ---- Loss before
income taxes (48.6) (170.2) Income tax benefit (expense) (2.7) 9.8
---- --- Net loss $(51.3) $(160.4) ====== ======= Weighted average
number of common shares outstanding Basic and diluted 33,447 33,307
====== ====== Basic and diluted loss per common share $(1.53)
$(4.81) ====== ====== Note: Certain reclassifications have been
made to conform to the current presentation. PLAYBOY ENTERPRISES,
INC. ------------------------- Reconciliation of Non-GAAP Financial
Information (dollars in millions, except per share amounts) Fourth
Quarter Twelve Months Ended December 31, Ended December 31,
------------------ ------------------ EBITDA and Adjusted % Inc/ %
Inc/ EBITDA 2009 2008 (Dec) 2009 2008 (Dec) ---------- ---- ----
------ ---- ---- ------ Net Loss $(27.8) $(146.8) (81.1) $(51.3)
$(160.4) (68.0) Adjusted for: Income Tax Expense (Benefit) (0.9)
(13.4) (93.3) 2.7 (9.8) - Interest Expense 2.2 2.1 4.8 8.7 8.5 2.4
Amortization of Deferred Financing Fees 0.2 0.2 - 0.7 0.7 -
Depreciation and Amortization 8.6 10.0 (14.0) 36.1 39.4 (8.4)
--------------- --- ---- ---- ---- EBITDA (1) (17.7) (147.9) (88.0)
(3.1) (121.6) (97.5) Adjusted for: Restructuring Expense 6.4 4.0
60.0 19.2 6.8 182.4 Stock Options and Restricted Stock Awards 0.2
0.2 - 0.8 1.1 (27.3) Equity in Operations of Investments (0.4) 0.2
- (0.4) 0.1 - Impairment Charges 22.2 146.4 (84.8) 27.7 146.5
(81.1) Impairment Charge on Investments - 2.0 (100.0) - 2.0 (100.0)
Deferred Subscription Cost Write-Off - 4.8 (100.0) - 4.8 (100.0)
Provisions for Reserves - - - - 4.1 (100.0) Cash Investments in
Entertainment Programming (6.5) (6.5) - (24.9) (30.2) (17.5)
---------------- ----- ----- ------ ------ Adjusted EBITDA (2) $4.2
$3.2 31.3 $19.3 $13.6 41.9 ---------------- ----- ----- ------
------ Fourth Quarter Twelve Months Ended December 31, Ended
December 31, ----------------- ----------------- Net Income (Loss)
Before Restructuring, Impairment Charges, Write-Off and Provisions
for % Better/ % Better/ Reserves (3) 2009 2008 (Worse) 2009 2008
(Worse) ----------------- ---- ---- --------- ---- ---- ----------
Net Loss $(27.8) $(146.8) 81.1 $(51.3) $(160.4) 68.0 Adjusted for:
Restructuring Expense 6.4 4.0 (60.0) 19.2 6.8 (182.4) Impairment
Charges 22.2 146.4 84.8 27.7 146.5 81.1 Impairment Charge on
Investments - 2.0 100.0 - 2.0 100.0 Deferred Subscription Cost
Write-Off - 4.8 100.0 - 4.8 100.0 Provisions for Reserves - - - -
4.1 100.0 -------------- ---- ----- ----- ----- Net Income (Loss)
Before Restructuring, Impairment Charges, Write-Off and Provisions
for Reserves $0.8 $10.4 (92.3) $(4.4) $3.8 - -------------- ----
----- ----- ----- Basic Earnings (Loss) Before Restructuring,
Impairment Charges, Write-Off and Provisions for Reserves Per
Common Share $0.03 $0.32 (90.6) $(0.13) $0.12 - -------------- ----
----- ----- ----- Diluted Earnings (Loss) Before Restructuring,
Impairment Charges, Write-Off and Provisions for Reserves Per
Common Share $0.02 $0.32 (93.8) $(0.13) $0.12 - -------------- ----
----- ----- ----- Fourth Quarter Twelve Months Ended December 31,
Ended December 31, ------------------ ------------------ Financial
and % Inc/ % Inc/ Operating Data 2009 2008 (Dec) 2009 2008 (Dec)
--------------- ---- ---- ---------- ---- ---- ----------
Entertainment Cash Investments in Entertainment Programming $6.5
$6.5 - $24.9 $30.2 (17.5) Programming Amortization Expense $6.9
$8.2 (15.9) $29.3 $32.5 (9.8) Print/Digital Advertising Sales
(Playboy-Branded) $5.3 $7.8 (32.1) $17.0 $25.7 (33.9) Digital
Content Expense $1.4 $1.8 (22.2) $6.3 $7.0 (10.0) Domestic Magazine
Advertising Pages 94.3 138.4 (31.9) 285.4 428.2 (33.3) At December
31 Cash, Cash Equivalents, Marketable Securities and Short-Term
Investments $24.6 $31.3 (21.4) $24.6 $31.3 (21.4) Long-Term
Financing Obligations $104.1 $99.8 4.3 $104.1 $99.8 4.3
------------ ------ ----- ------ ----- 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 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
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. 3) In order to fully assess our
financial results, management believes that Net Income (Loss)
Before Restructuring, Impairment Charges, Write-Off and Provisions
for Reserves is an appropriate measure for evaluating our operating
performance and liquidity. Investors should recognize that Net
Income (Loss) Before Restructuring, Impairment Charges, Write-Off
and Provisions for Reserves might not be comparable to similarly
titled measures of other companies. Net Income (Loss) Before
Restructuring, Impairment Charges, Write-Off and Provisions for
Reserves 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. DATASOURCE:
Playboy Enterprises, Inc. CONTACT: Investors, Martha Lindeman,
+1-312-373-2430, or Media, Matthew Pakula, +1-312-373-2435, both of
Playboy Enterprises, Inc.
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