Playboy Enterprises Reports Increased Operating and Net Income Excluding 1997 Tax Benefit

Business Wire, July 30, 1998

CHICAG0--(BUSINESS WIRE)--July 30, 1998--Playboy Enterprises, Inc. today reported net income for the second quarter ended June 30, 1998, of $2.1 million or $.10 basic earnings per share, compared to net income, excluding a tax benefit of $13.5 million or $.66 basic earnings per share, of $1.5 million or $.08 basic earnings per share in the same period last year. Operating income rose 18% to $4.0 million on revenues that were essentially flat at $77.8 million.

Playboy Enterprises Chairman and Chief Executive Officer Christie A. Hefner said: "We are pleased with the Entertainment Group's continued growth, which fueled this quarter's more than 50% increase in operating income before planned investments in our Online business. We also are encouraged by the doubling of revenues in the quarter from Playboy Online. This level of performance together with investments in growth businesses will help us achieve our goal of turning Playboy into a $1 billion market cap company."

PUBLISHING

Publishing Group operating income for the second quarter was $2.9 million compared to $3.4 million in the year earlier period as revenues declined 5% to $34.8 million.

Playboy magazine revenues declined slightly in the quarter to $27.2 million from $28.9 million, primarily a result of softer newsstand sales and a previously announced 5% decline in advertising pages compared to last year's quarter. The company said that it expects ad pages for the upcoming third quarter to be up approximately 5%. Revenues for Other Domestic Publishing businesses declined due to softer sales on the newsstand, while International Publishing revenues increased 27%.

ENTERTAINMENT

The Entertainment Group reported a 75% increase in second quarter operating income to $7.6 million from $4.3 million as revenues rose 15% to $24.8 million from $21.6 million.

A 19% increase in direct-to-home (DTH) revenues was responsible for the 6% rise in Playboy TV second quarter revenues to $13.8 million. Cable revenues were flat compared to last year, in part reflecting the effect of Section 505 of the Telecommunications Act, which was implemented in May 1997. At June 30, 1998, Playboy TV was available in 12.1 million addressable cable and 8.7 million DTH U.S. households, compared to 11.2 million and 6.3 million households, respectively, a year earlier.

Second quared with increased sales of new releases. Revenued home video sales.

PRODUCT MARKETING

Product Marketing Group revenues declined 5% in the second million.

CATALOG

Second quarter CASINO GAMING

The Casino Gaming Grou the fourth quarter of 1998.

PLAYBOY ONLINE

Increased subscription and e-commerce revenues contributed to a doubling of the Online Group's second quarter revenues to $1.6 million from $.8 million last year. Planned investments in staff and content were responsible for then and promotion expense to $5.7 million.

Iketing business, including Critics' Choice Video, Collectors' Choice Music and Playboy catalogs and Web sites; markets Playboy-branded consumer products sold worldwide; operates Playboy Online, which includes the Playboy.com and Playboy ance, and assumptions underlying or concerning the foregoing. Such forward-looking statements involve risks aatements. The following are some of the important factors that could cause actual results or outcomes to difpts to limit or otherwise regulate the sale of a in postal regulations or rates, (2) further incompany's plans and assumptions regarding carriae adult male market, (5) increased competition single-copy magazine distribution system, and (7) new competition in the adult cable television market.

           (In thousands, except per share amoun---
                                   --------:
   Playboy Magazine                    $ 27,2          -------------        --------------
Total Publishing                         34,784                36,496
Entertainment:
   Playboy TV                            13,772                12,964
   Domestic Home Video              20,036
   AdulTVision                                                24,766                21,606
Product Marketing                         1,607                                -
Playboy Online          duct Marketing                           394                   324
Catalog                                     514                   607
Casino Gaming                              (1,497)                 (174)
Corpora            3,991                 3,384

Interest expense, net                      (328)                  (  --------------
Income before income taxes                3,626                 3,015
Income tax benefit (expense) (1)         (1,547)               12,007
                                   -------------        --------------
Net income                              $ 2,079                        20,362
                                   =============        ==============
   Diluted      t income per common share
   Basic                                                =============                             =============
Diluted                               $ 0.12  -----------------------------------------------
mon share
   Basic                                                =============        ========nc. and Subsidiaries
      Condensed Statements                June 30,
                                  ------------------------------------
            International Publishing               5,208                 4,723
                                  --------                           27,252                24,997
   Domestic Home Video                    5,841                 4,627
   International TV & Home Video          5,822                 7,879
                                  --------------        --------------
     Total Playboy Businesses            38,915                37,503
   AdulTV
                                  --------------        --------------
Total Entertainment                      43,060                40,834
Product Marketing                         4,206                 3,695
Catalog                                  34,486                36,283
Ca          $ 4,986
Entertainment                            12,451                10,560
Product Marketing                             --------------             10,113
                                  -erage number of
 common shares outstanding
          ==============
   Diluted                  ==============
   Diluted                                 $ 4,046
                                  ==============        ==============

Net income per common share
   Basic                                 $ 0.1====        ==============
   Diluted          ayboy.com