 |  |  |  |  |  |  |  |  |
|
Playboy Enterprises Inc. Reports Results for Fourth Quarter and Full Year 2006
CHICAGO, Feb. 13 /PRNewswire-FirstCall/ -- Playboy Enterprises, Inc. (PEI) (NYSE: PLA) today reported net income for the fourth quarter ending December 31, 2006, of $3.7 million, or $0.11 per basic and diluted share, in line with the company's 2006 financial guidance, compared to net income for the 2005 fourth quarter of $4.6 million, or $0.14 per basic and diluted share. The 2006 fourth quarter results included a $1.8 million charge related to a legal settlement; $0.8 million in additional expense due to modifications to how the company accounts for certain trademark costs and carriage agreements and a $2.6 million tax benefit related to the carriage agreement modification. Fourth quarter operating income totaled $3.1 million in 2006 versus $7.3 million in 2005 on revenues of $86.2 million and $91.0 million, respectively. The Licensing and Publishing Groups showed improved operating results in the 2006 quarter compared to the prior year, but the gains were more than offset by lower Entertainment Group income due to weakness in the domestic TV business and a litigation settlement. The fourth quarter 2006 results also were positively affected by lower variable compensation expense compared to 2005. The company said that, effective with the 2006 fourth quarter, it has begun expensing certain trademark costs, which were previously being capitalized, and has begun amortizing certain TV carriage agreements, which were previously determined to be indefinite lived. These modifications will result in higher recorded expenses for these items going forward and are expected to reduce future reported earnings by approximately $3.3 million, or $0.10 per basic and diluted share, in 2007. For the year ended December 31, 2006, PEI reported net income of $2.3 million, or $0.07 per basic and diluted share, compared to a net loss in 2005 of $0.7 million, or $0.02 per basic and diluted share. Operating income in 2006 was $9.1 million, versus $30.9 million in the prior year, on a 2% decline in revenues to $331.1 million. PEI Chairman and Chief Executive Officer Christie Hefner said: "Looking at the quarter, continued strong profit growth in Licensing and a significant improvement in Publishing results helped us deliver on our guidance for full year 2006. While the year clearly has been challenging for the domestic TV and magazine businesses, growth in our licensing, online, international TV and mobile initiatives support our belief that these businesses will drive the company's performance going forward. "As we look at 2007, we expect the Licensing Group again to report revenue and profit growth of 15 - 20% year over year. In addition to our Palms Casino Resort agreement, we will benefit from continued growth of our merchandising business into new territories and categories as well as expansion of our retail stores. "At the same time, it is clear that the publishing and domestic TV businesses will remain under pressure. Magazine trends, which include a weak newsstand market and competition for advertising from non-print media, are well documented. We are seeing a good start on the advertising side and the anticipated ad revenue growth, combined with the cost reductions initiatives we have taken, should allow us to keep the 2007 Publishing loss at recent levels. As we previously have discussed, domestic TV remains challenging, impacted by a number of factors including reduced market share resulting from the adoption of video-on-demand technology and the loss of exclusivity on one of the satellite services. As a consequence, although we do not yet have definitive data on the new networks launched in November, it appears likely that domestic TV revenues will be lower in 2007 versus 2006," Hefner said. Entertainment The Entertainment Group reported fourth quarter 2006 segment income of $4.7 million, down from $12.3 million in the prior year, primarily due to lower profits in the domestic TV business. Revenues were down 8% to $52.1 million. Domestic TV revenues declined 18% in the 2006 fourth quarter. Revenues from video-on-demand and from Playboy TV subscriptions increased, but these gains were more than offset by lower satellite and cable pay-per-view revenues. Fourth quarter domestic TV profits also were negatively affected by a litigation settlement, which resulted in a $1.8 million charge, and by a $0.3 million charge related to a change in the estimated useful lives of certain carriage agreements. In the 2006 fourth quarter, international revenues were off slightly compared to the prior year period due to lower third-party sales. In online, the growth in fourth quarter 2006 subscription revenues was more than offset by the decrease in e-commerce revenues resulting from our strategic decision to outsource our Spice catalog and website. Revenues from other businesses rose, reflecting the launch of Playboy Radio and higher online advertising revenues. Publishing The Publishing Group narrowed its segment loss to $0.5 million in the 2006 fourth quarter, a significant improvement from the $3.1 million loss in the 2005 fourth quarter, in spite of a $1.5 million decline in revenues to $25.2 million during the same time periods. Increased advertising revenues combined with lower editorial and marketing expenses at Playboy magazine primarily were responsible for the improved year-over-year results. The company said that it expects advertising revenues to be up approximately 22% in the first quarter of 2007 compared to last year. Licensing The Licensing Group's fourth quarter 2006 segment income rose 16% to $5.9 million versus the prior year, as revenues were up 21% to $8.9 million. The first quarter of results from the Playboy venue at the Palms Casino Resort in Las Vegas drove the gains in quarterly revenues and profits. Corporate Administration and Promotion and Other Corporate Administration and Promotion fourth quarter 2006 expense was $7.0 million, essentially flat compared to the prior year. The 2006 quarterly results also included a $0.5 million charge related to expensing certain trademark costs, which were previously being capitalized. PEI also recorded in the 2006 fourth quarter a tax benefit of $2.6 million, which was related to the modification to the way certain TV carriage agreements are amortized, which resulted in a reduction in the valuation allowance for deferred tax assets. As a result, fourth quarter 2006 taxes were a benefit of $1.8 million versus expense of $1.2 million in the prior year quarter. Additional information regarding fourth quarter 2006 earnings will be available on the earnings release conference call, which is being held today, February 13, at 11:00 a.m. Eastern /10:00 a.m. Central. The call may be accessed by dialing 800-909-5202 (for domestic callers) or 1-785-830-7975 (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 website; 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, new
electronic media 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 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 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;
(21) Effects of the national consolidation of television distribution
companies (e.g. cable multiple system operators, satellite platforms
and telecommunications companies); and
(22) Risks associated with the viability of our subscription-, on demand-
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 http://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
December 31,
2006 2005
Net revenues
Entertainment:
Domestic TV $18.8 $23.1
International 14.4 14.6
Online subscriptions and e-commerce 14.9 16.1
Other 4.0 3.0
Total Entertainment 52.1 56.8
Publishing:
Playboy magazine
Subscription 11.0 12.1
Newsstand 2.4 2.5
Advertising 8.2 7.3
Total Playboy magazine 21.6 21.9
Special editions and other 2.0 3.1
International 1.6 1.7
Total Publishing 25.2 26.7
Licensing:
International licensing 6.2 5.5
Domestic licensing 1.5 1.5
Marketing events 0.2 0.3
Other 1.0 0.2
Total Licensing 8.9 7.5
Total net revenues $86.2 $91.0
Net income
Entertainment $4.7 $12.3
Publishing (0.5) (3.1)
Licensing 5.9 5.1
Corporate Administration and Promotion (7.0) (6.9)
Segment income 3.1 7.4
Restructuring expenses - (0.1)
Operating income 3.1 7.3
Investment income 0.6 0.8
Interest expense (1.4) (1.5)
Amortization of deferred financing
fees (0.1) (0.1)
Minority interest - (0.5)
Other, net (0.3) (0.2)
Income before income taxes 1.9 5.8
Income tax benefit (expense) 1.8 (1.2)
Net income $3.7 $4.6
Weighted average number of common
shares outstanding
Basic 33,214 33,119
Diluted 33,268 33,451
Basic and diluted earnings per common
share $0.11 $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)
Twelve Months Ended
December 31,
2006 2005
Net revenues
Entertainment:
Domestic TV $82.5 $98.6
International 55.7 52.1
Online subscriptions and e-commerce 52.1 46.9
Other 10.7 6.4
Total Entertainment 201.0 204.0
Publishing:
Playboy magazine
Subscription 45.4 49.4
Newsstand 9.8 10.5
Advertising 25.5 29.5
Total Playboy magazine 80.7 89.4
Special editions and other 9.8 10.5
International 6.6 6.6
Total Publishing 97.1 106.5
Licensing:
International licensing 22.8 19.0
Domestic licensing 5.4 5.2
Marketing events 3.0 3.0
Other 1.8 0.5
Total Licensing 33.0 27.7
Total net revenues $331.1 $338.2
Net income (loss)
Entertainment $23.3 $41.1
Publishing (5.4) (6.5)
Licensing 18.9 16.0
Corporate Administration and Promotion (25.7) (19.6)
Segment income 11.1 31.0
Restructuring expenses (2.0) (0.1)
Operating income 9.1 30.9
Investment income 2.4 2.2
Interest expense (5.6) (7.0)
Amortization of deferred financing
fees (0.5) (0.6)
Minority interest - (1.6)
Debt extinguishment expenses - (19.3)
Other, net (0.6) (1.3)
Income before income taxes 4.8 3.3
Income tax expense (2.5) (4.0)
Net income (loss) $2.3 $(0.7)
Weighted average number of common
shares outstanding
Basic 33,171 33,163
Diluted 33,276 33,163
Basic and diluted income (loss) per
common share $0.07 $(0.02)
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)
Fourth Quarter Ended Twelve Months Ended
December 31, December 31,
% %
EBITDA and Adjusted Better/ Better/
EBITDA 2006 2005 (Worse) 2006 2005 (Worse)
Net Income (Loss) $3.7 $4.6 (19.6) $2.3 $(0.7) ---
Adjusted for:
Income Tax Expense
(Benefit) (1.8) 1.2 --- 2.5 4.0 37.5
Interest Expense 1.4 1.5 6.7 5.6 7.0 20.0
Amortization of
Deferred Financing
Fees 0.1 0.1 --- 0.5 0.6 16.7
Equity in Operations
of Investments 0.2 0.1 (100.0) 0.1 0.4 75.0
Depreciation and
Amortization 10.7 10.2 (4.9) 44.1 43.1 (2.3)
EBITDA (1) 14.3 17.7 (19.2) 55.1 54.4 1.3
Adjusted for:
Cash Investments in
Television
Programming (10.2) (8.8) (15.9) (38.5) (33.1) (16.3)
Adjusted EBITDA (2) $4.1 $8.9 (53.9) $16.6 $21.3 (22.1)
Fourth Quarter Ended Twelve Months Ended
December 31, December 31,
% %
Financial and Operating Inc/ Inc/
Data 2006 2005 (Dec) 2006 2005 (Dec)
Entertainment
Cash Investments in
Television
Programming $10.2 $8.8 15.9 $38.5 $33.1 16.3
Programming
Amortization and
Online Content
Expenses $11.2 $10.4 7.7 $41.8 $40.1 4.2
International TV
Household Units at
End of Period (in
millions) (3) 47.5 44.3 7.2 47.5 44.3 7.2
Domestic TV Household
Units at End of
Period (in millions)
(3):
Playboy TV:
Satellite 28.6 26.8 6.7 28.6 26.8 6.7
Cable 22.5 20.1 11.9 22.5 20.1 11.9
Movie Networks:
Satellite 40.8 53.0 (23.0) 40.8 53.0 (23.0)
Cable 42.3 43.8 (3.4) 42.3 43.8 (3.4)
On Demand Households:
VOD 19.5 8.6 126.7 19.5 8.6 126.7
SVOD 11.6 1.9 510.5 11.6 1.9 510.5
Publishing
Magazine Advertising
Pages 137.1 119.0 15.2 428.8 479.0 (10.5)
At December 31
Cash, Cash
Equivalents,
Marketable
Securities and
Short-Term
Investments $35.7 $52.1 (31.5) $35.7 $52.1 (31.5)
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.
Website: http://www.peiinvestor.com/ |
Issuers of news releases and not PR Newswire are solely responsible for the accuracy of the content.
Terms and conditions, including restrictions on
redistribution, apply.
Copyright © 1996-2003 PR Newswire Association LLC.
All Rights Reserved.
A United Business Media company.
