Fourth Quarter Segment Income Up Over Prior Year
CHICAGO, Feb. 18 /PRNewswire-FirstCall/ -- Playboy Enterprises, Inc. (PEI) (NYSE:PLANYSE:PLAA) today reported a net loss for the 2008 fourth quarter ended Dec. 31 of $145.7 million, or $4.37 per basic and diluted share, which included impairment, restructuring and other charges totaling $157.2 million. This compares to a net loss in the 2007 fourth quarter of $1.1 million, or $0.03 per share, which included a $1.9 million charge primarily related to the sale of the company's television studio and a $2.6 million tax benefit.
Fourth quarter 2008 segment income was $1.1 million versus $0.0 million in the prior year quarter. The improvement reflected higher Entertainment profits and reduced Corporate Administration and Promotion expense, partially offset by lower Licensing profits resulting from weak consumer demand globally. Revenues declined to $69.8 million from $85.9 million in the 2007 fourth quarter, in part related to the television studio sale and the outsourcing of the company's e-commerce business.
PEI Interim Chairman and Chief Executive Officer Jerome Kern said: "Playboy continues to enjoy a unique, globally popular brand. However, our financial performance is not reflective of its potential. Over the past several months, the company has accelerated the pace of expense reductions designed to bring our cost structure in line with current market realities and the positioning of our businesses going forward. The results of our efforts to date should be meaningful, but in the face of current economic conditions, it is clear that our streamlining initiatives need to continue.
"At the same time, we are focused on profitable revenue growth," Kern said. "We believe that our licensing business will continue to be a long-term growth engine for the company, in spite of the pressure on consumer spending that affected fourth quarter results. We also have signed two entertainment venue deals, one of which could open even before Playboy Mansion Macau is completed next year. The difficult economic environment makes growing media revenues even more challenging, but we are committed to implementing global business models that effectively monetize our content.
"With a disciplined operating approach and the worldwide appeal of the brand, we believe we can exit the downturn in a position of renewed strength and return this company to profitability," Kern said.
Entertainment Fourth quarter 2008 Entertainment Group segment income doubled to $5.0 million compared to the prior year period, due in part to improved profitability in the company's domestic TV business. Revenues in the same time periods declined 21% to $39.9 million.
Strong fourth quarter growth in Playboy TV and video-on-demand revenues partially offset the continuing decline in linear networks' buy rates and the loss of revenues resulting from the sale of the company's television studio in the 2008 second quarter. Although domestic TV revenues were $16.7 million, essentially flat compared to the 2007 fourth quarter, profitability increased.
International TV recorded fourth quarter 2008 revenues of $9.9 million, down from $14.1 million in the prior year period, primarily due to unfavorable foreign exchange rates and increased competition, primarily in the U.K. Online/mobile revenues were off 41% year over year to $10.7 million in the 2008 fourth quarter, reflecting the outsourcing of e-commerce as well as reduced pay-site traffic and lower advertising sales.
Other revenues rose in the quarter as licensing fees from 'The Girls Next Door' and a Fox Searchlight movie project were partially offset by lower revenues from DVDs, a business the company recently announced that it is exiting.
Publishing The Publishing Group reported a $1.2 million segment loss in the 2008 fourth quarter, a 17% improvement compared with the prior year's fourth quarter loss of $1.5 million. Revenues were down 11% to $22.0 million year over year, primarily due to lower advertising and circulation revenues at Playboy magazine. Ongoing efforts to reduce the magazine's cost structure resulted in lower sales and marketing expense in the 2008 fourth quarter versus the prior year and helped offset the revenue decline.
The company said that it expects to report an approximately 27% decline in advertising revenues in the first quarter 2009 compared to first quarter 2008.
Licensing Segment income for the Licensing Group was $4.3 million in the 2008 fourth quarter, down from $6.9 million in the 2007 fourth quarter. Fourth quarter revenues also were down by $2.6 million, declining to $7.9 million in 2008 from $10.5 million in 2007. The downturn in fourth quarter 2008 revenues and income reflected the global weakness in spending on apparel and accessories and the resulting reduction in royalty payments from licensees.
Corporate Administration and Other Corporate Administration and Promotion expense improved by $0.9 million in the 2008 fourth quarter to $7.0 million from $7.9 million in the prior year period primarily due to lower compensation-related and other benefits expense.
As previously announced, the company recorded a $4.0 million restructuring charge in the 2008 fourth quarter as well as non-cash impairment charges on goodwill and other intangible assets of $146.4 million, which were primarily related to television acquisitions the company made in the late 1990s. The company also reported a $4.8 million deferred subscription cost write-off. Primarily as a result of these charges, the company recorded a fourth quarter 2008 tax benefit of $13.4 million.
PEI also said that it expects to take additional charges in 2009, including a non-cash impairment charge of approximately $5.0 million in the first quarter. In addition, in the first half of 2009, the company expects to record an approximately $9.0 million charge relating to the close of the New York office, roughly half of which will be non-cash, and an additional restructuring charge of at least $2.0 million.
Additional information regarding fourth quarter 2008 earnings will be available on the earnings release conference call, which is being held today, February 18, at 11:00 a.m. Eastern /10:00 a.m. Central. The call may be accessed by dialing 800-895-1085 (for domestic callers) or 785-424-1055 (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 150 countries on a wide range of consumer products, entertainment locations.
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 sales and 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 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) 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, distribution and/or unforeseen delays in implementation
which might affect our financial results, 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;
(14) Competition for channel space on linear television or video-on-
demand platforms;
(15) 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;
(16) Risks that we may not realize the expected increased sales and
profits and other benefits from acquisitions;
(17) Any charges or costs we incur in connection with restructuring
measures we may undertake in the future;
(18) Risks associated with the financial condition of Claxson Interactive
Group, Inc., our Playboy TV-Latin America, LLC, joint venture
partner;
(19) Increases in paper, printing or postage costs;
(20) Effects of the national consolidation of the single-copy magazine
distribution system and risks associated with the financial
stability of major magazine wholesalers;
(21) Effects of the national consolidation of television distribution
companies (e.g., cable MSOs, satellite platforms and
telecommunications companies);
(22) Risks associated with the viability of our subscription, on-demand,
e-commerce and ad-supported Internet models; and
(23) Risks that adverse market and economic conditions may result in a
decrease in the value of our investments in marketable securities
and risks that adverse market conditions in the securities and
credit markets may significantly affect our ability to access the
capital and credit markets. 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,
2008 2007
Net revenues
Entertainment:
Domestic TV $16.7 $16.9
International TV 9.9 14.1
Online/mobile 10.7 18.1
Other 2.6 1.6
Total Entertainment 39.9 50.7
Publishing:
Domestic magazine:
Subscription 9.8 10.2
Newsstand 1.8 2.4
Advertising 6.6 8.0
Total domestic magazine 18.2 20.6
International magazine 2.0 1.8
Special editions and other 1.8 2.3
Total Publishing 22.0 24.7
Licensing:
Consumer products 6.5 9.1
Location-based entertainment 0.9 1.1
Marketing events 0.2 0.2
Other 0.3 0.1
Total Licensing 7.9 10.5 Total net revenues $69.8 $85.9 Net loss
Entertainment $5.0 $2.5
Publishing (1.2) (1.5)
Licensing 4.3 6.9
Corporate Administration and Promotion (7.0) (7.9) Segment income 1.1 - Restructuring expense (4.0) (0.4)
Impairment charges (146.4) (1.5)
Deferred subscription cost write-off (4.8) - Operating loss (154.1) (1.9) Investment income (expense) (0.4) 0.8
Interest expense (1.1) (1.2)
Amortization of deferred financing fees (0.1) (0.1)
Impairment charge on investments (2.0) (0.1)
Other, net (1.4) - Loss before income taxes (159.1) (2.5) Income tax benefit 13.4 1.4 Net loss $(145.7) $(1.1) Weighted average number of common shares
outstanding
Basic 33,337 33,261
Diluted 33,337 33,261
Basic and diluted loss per common share $(4.37) $(0.03) 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,
2008 2007
Net revenues
Entertainment:
Domestic TV $62.6 $75.8
International TV 49.8 55.9
Online/mobile 48.4 64.0
Other 6.4 7.3
Total Entertainment 167.2 203.0
Publishing:
Domestic magazine:
Subscription 39.6 41.8
Newsstand 6.8 8.8
Advertising 21.6 26.4
Total domestic magazine 68.0 77.0
International magazine 8.0 7.4
Special editions and other 8.5 9.4
Total Publishing 84.5 93.8
Licensing:
Consumer products 33.1 34.0
Location-based entertainment 3.8 3.8
Marketing events 2.9 3.2
Other 0.6 2.0
Total Licensing 40.4 43.0 Total net revenues $292.1 $339.8 Net income (loss)
Entertainment $12.3 $21.3
Publishing (7.6) (7.6)
Licensing 23.7 26.4
Corporate Administration and Promotion (23.9) (28.1) Segment income 4.5 12.0 Restructuring expense (6.8) (0.5)
Impairment charges (146.5) (1.5)
Deferred subscription cost write-off (4.8) -
Provisions for reserves (4.1) - Operating income (loss) (157.7) 10.0 Investment income 0.5 2.5
Interest expense (4.5) (4.9)
Amortization of deferred financing fees (0.4) (0.5)
Impairment charge on investments (2.0) (0.1)
Other, net (1.8) (0.2) Income (loss) before income taxes (165.9) 6.8 Income tax benefit (expense) 9.8 (1.9) Net income (loss) $(156.1) $4.9 Weighted average number of common shares
outstanding
Basic 33,307 33,246
Diluted 33,307 33,281
Basic and diluted earnings (loss) per common
share $(4.69) $0.15 Note: Certain reclassifications have been made to conform to the current presentation 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 2008 2007 (Worse) 2008 2007 (Worse)
Net income
(loss) $(145.7) $(1.1) (13,145.5) $(156.1) $4.9 -
Adjusted for:
Income Tax
Expense
(Benefit) (13.4) (1.4) 857.1 (9.8) 1.9 -
Interest
Expense 1.1 1.2 8.3 4.5 4.9 8.2
Amortization of
Deferred
Financing Fees 0.1 0.1 - 0.4 0.5 20.0
Equity in
Operations of
Investments 0.2 0.1 (100.0) 0.1 (0.1) -
Depreciation and
Amortization 10.2 11.1 8.1 40.5 42.8 5.4
Impairment
charges 146.4 1.5 (9,660.0) 146.5 1.5 (9,666.7)
Impairment charge
on investments 2.0 0.1 (1,900.0) 2.0 0.1 (1,900.0)
Deferred
subscription
cost write-off 4.8 - - 4.8 - -
Provisions for
reserves - - - 4.1 - -
EBITDA (1) 5.7 11.6 (50.9) 37.0 56.5 (34.5)
Adjusted for:
Cash Investments
in Television
Programming (6.5) (7.9) 17.7 (30.2) (34.6) 12.7
Adjusted
EBITDA (2) $(0.8) $3.7 - $6.8 $21.9 (68.9)
Fourth Quarter Ended Twelve Months Ended
December 31, December 31,
Net Income Before
Restructuring
and Impairment
Charges and % Better/ % Better/
Reserves (3) 2008 2007 (Worse) 2008 2007 (Worse)
Net income
(loss) $(145.7) $(1.1) (13,145.5) $(156.1) $4.9 -
Adjusted for:
Restructuring
expense 4.0 0.4 (900.0) 6.8 0.5 (1,260.0)
Impairment
charges 146.4 1.5 (9,660.0) 146.5 1.5 (9,666.7)
Impairment charge
on investments 2.0 0.1 (1,900.0) 2.0 0.1 (1,900.0)
Deferred
subscription cost
write-off 4.8 - - 4.8 - -
Provisions for
reserves - - - 4.1 - -
Net income before
restructuring and
impairment charges
and reserves $11.5 $0.9 1,177.8 $8.1 $7.0 15.7
Basic and diluted
earnings before
restructuring and
impairment charges
and reserves per
common share $0.35 $0.03 1,066.7 $0.25 $0.21 19.0
Fourth Quarter Ended Twelve Months Ended
December 31, December 31, Financial and %Inc/ %Inc/
Operating Data 2008 2007 (Dec) 2008 2007 (Dec)
Entertainment
Cash Investments
in Television
Programming $6.5 $7.9 (17.7) $30.2 $34.6 (12.7)
Programming
Amortization
and Online
Content
Expenses $10.0 $10.1 (1.0) $39.5 $39.6 (0.3) Publishing
Domestic
Magazine
Advertising
Pages 138.4 141.2 (2.0) 428.2 459.5 (6.8) At December 31
Cash, Cash
Equivalents,
Marketable
Securities and
Short-Term
Investments $31.3 $33.6 (6.8) $31.3 $33.6 (6.8)
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
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 before restructuring and impairment charges and
reserves is an appropriate measure for evaluating our operating
performance and liquidity. Investors should recognize that Net
income before restructuring and impairment charges and reserves
might not be comparable to similarly titled measures of other
companies. Net income before restructuring and impairment charges
and 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: Investor-Media, Martha Lindeman of Playboy Enterprises, Inc., +1-312-373-2430 Web site: http://www.peiinvestor.com/
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