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Playboy Announces Improved Third Quarter Results

Licensing the Strongest Sector, Says Christie Hefner

Playboy Announces Improved Third Quarter Results
CHICAGO — Playboy Enterprises, Inc. reported net income of $2.6 million for the third quarter ended September 30, 2007, up $1.5 million from the same period last year. Third quarter 2007 revenues remained essentially flat, rising to $82.8 million compared to $82.3 million last year.

Operating income was $4.2 million in the 2007 third quarter, up 11 percent from $3.7 million in the 2006 time period, reflecting improved results in the Entertainment and Licensing businesses. These gains were partially offset by higher Corporate Administration and Promotion expense.

Said Playboy chairman and CEO Christie Hefner, "The quarter demonstrated many of the trends we have seen across 2007, particularly the strength of our licensing business and its ability to drive profits.

"We believe that these same dynamics will continue for the remainder of the year," Hefner continued. "We are again raising guidance for the Licensing Group, as we now anticipate that 2007 segment income — excluding original art sales — will be up 25 to 30 percent compared to last year. Given the continued success of the Playboy venues at the Palms Casino Resort in Las Vegas, the reception to our first store in Europe, which opened in London in September, and sales of existing product lines, we remain enthusiastic about the ongoing potential of this business. Publishing Group results in the fourth quarter are expected to be in line with the third quarter. In the Entertainment Group, we believe that the domestic TV business has stabilized, which will contribute to the group reporting segment income in 2007 that is similar to last year."

Third quarter 2007 Entertainment Group segment income was $7.2 million, up 23 percent from $5.8 million last year. Revenues in the 2007 quarter were $49.6 million compared to $50.2 million in the same period last year.

Domestic television revenues declined to $17.6 million in the 2007 third quarter from $20.5 million last year as a function of a downward adjustment of previously reported revenues, which is based on revised information from a large cable operator. Improved results from European networks and favorable foreign currency exchange rate fluctuations contributed to a 15 percent gain in international TV revenues to $14.3 million in the third quarter compared to last year. In the same time periods, online/mobile revenues were flat at $15.3 million as growth in e-commerce and advertising sales this year were offset by lower revenues from paysites and mobile platforms compared to last year.

The Publishing Group reported a segment loss in the 2007 third quarter of $1.4 million, compared to a loss of $0.8 million in last year on a 6 percent decline in revenues to $23.1 million.

Despite a 4 percent increase in third quarter 2007 advertising revenues versus last year, Playboy magazine revenues were down in the quarter due to lower newsstand and subscription circulation. A reduction in paper and printing expense during the quarter helped offset some of the year-over-year revenue decline.

The company said that it expects Playboy magazine's fourth quarter 2007 advertising revenues to be down 3 percent compared to last year, although it is projecting that combined online and print advertising sales will be up in the same period.

The Licensing Group’s segment income increased 37 percent to $6.3 million from $4.6 million in the third quarter 2007 compared to the prior year's 35 percent revenue increase to $10.1 million from $7.5 million. Increased sales of consumer products and royalties from a licensing deal with the Palms Casino Resort were primarily responsible for the year-over-year revenue and profit growth.

Third quarter 2007 Corporate Administration and Promotion expense rose to $7.9 million from $5.8 million last year, reflecting the addition of certain trademark costs that previously had been capitalized as well as the timing of some expenses.
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