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Playboy Enterprises Reports Improved Third Quarter Results

CHICAGO, Nov. 7 /PRNewswire-FirstCall/ -- Playboy Enterprises, Inc. (PEI) (NYSE: PLA; PLAA) today reported net income for the third quarter ended September 30, 2007 of $2.6 million, or $0.08 per basic and diluted share, versus $1.1 million, or $0.03 per basic and diluted share in the same period last year. Third quarter 2007 revenues were essentially flat at $82.8 million compared to $82.3 million last year.

Operating income was $4.2 million in the 2007 third quarter, up 11% 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.

Playboy Chairman and Chief Executive Officer Christie Hefner said: "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. 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% 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."

Entertainment

Third quarter 2007 Entertainment Group segment income was $7.2 million, up 23% 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% 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.

Publishing

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% decline in revenues to $23.1 million.

Despite a 4% 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% compared to last year, although it is projecting that combined online and print advertising sales will be up in the same period.

Licensing

The Licensing Group's segment income increased 37% to $6.3 million from $4.6 million in the third quarter 2007 compared to the prior year on a 35% 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.

Corporate Administration and Promotion

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.

Additional information regarding third quarter 2007 earnings will be available on the earnings release conference call, which is being held today, November 7, at 11:00 a.m. Eastern / 10:00 a.m. Central. The call may be accessed by dialing 800-896-8445 (for domestic callers) or 785-830-1916 (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" 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 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 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 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, 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 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 certain
         television 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 MSOs, satellite platforms and
         telecommunications companies); and
    (22) Risks associated with the viability of our subscription, on demand,
         e-commerce and ad-supported Internet models.

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
                                                          September 30,
                                                     2007               2006
    Net revenues
    Entertainment:
      Domestic TV                                    $17.6              $20.5
      International TV                                14.3               12.4
      Online/mobile                                   15.3               15.4
      Other                                            2.4                1.9
      Total Entertainment                             49.6               50.2
    Publishing:
      Domestic magazine:
        Subscription                                  10.3               11.2
        Newsstand                                      1.6                2.3
        Advertising                                    6.4                6.2
        Total domestic magazine                       18.3               19.7
      International magazine                           1.9                1.7
      Special editions and other                       2.9                3.2
      Total Publishing                                23.1               24.6
    Licensing:
      Consumer products                                8.7                6.8
      Location-based entertainment                     0.9                0.3
      Marketing events                                 0.4                0.3
      Other                                            0.1                0.1
      Total Licensing                                 10.1                7.5

    Total net revenues                               $82.8              $82.3

    Net income
    Entertainment                                     $7.2               $5.8
    Publishing                                        (1.4)              (0.8)
    Licensing                                          6.3                4.6
    Corporate Administration and Promotion            (7.9)              (5.8)

    Segment income                                     4.2                3.8

    Restructuring expenses                               -               (0.1)

    Operating income                                   4.2                3.7

      Investment income                                0.6                0.6
      Interest expense                                (1.2)              (1.5)
      Amortization of deferred financing fees         (0.1)              (0.1)
      Other, net                                       0.1               (0.2)

    Income before income taxes                         3.6                2.5

    Income tax expense                                (1.0)              (1.4)

    Net income                                        $2.6               $1.1

    Weighted average number of common
     shares outstanding
      Basic                                         33,251             33,169
      Diluted                                       33,301             33,173


    Basic and diluted earnings per common
     share                                           $0.08              $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)

                                                         Nine Months Ended
                                                           September 30,
                                                      2007               2006
    Net revenues
    Entertainment:
      Domestic TV                                    $58.9              $63.7
      International TV                                41.8               36.5
      Online/mobile                                   45.6               44.2
      Other                                            6.0                4.5
      Total Entertainment                            152.3              148.9
    Publishing:
      Domestic magazine:
        Subscription                                  31.6               34.4
        Newsstand                                      6.4                7.4
        Advertising                                   18.4               17.3
        Total domestic magazine                       56.4               59.1
      International magazine                           5.6                5.0
      Special editions and other                       7.1                7.8
      Total Publishing                                69.1               71.9
    Licensing:
      Consumer products                               24.9               20.5
      Location-based entertainment                     2.7                0.3
      Marketing events                                 3.0                2.8
      Other                                            1.9                0.5
      Total Licensing                                 32.5               24.1

    Total net revenues                              $253.9             $244.9

    Net income (loss)
    Entertainment                                    $18.8              $18.6
    Publishing                                        (6.1)              (4.9)
    Licensing                                         19.5               13.0
    Corporate Administration and Promotion           (20.2)             (18.7)

    Segment income                                    12.0                8.0

    Restructuring expenses                            (0.1)              (2.0)

    Operating income                                  11.9                6.0

      Investment income                                1.7                1.8
      Interest expense                                (3.7)              (4.2)
      Amortization of deferred financing fees         (0.4)              (0.4)
      Other, net                                      (0.2)              (0.3)

    Income before income taxes                         9.3                2.9

    Income tax expense                                (3.3)              (4.3)

    Net income (loss)                                 $6.0              $(1.4)

    Weighted average number of common
     shares outstanding
      Basic                                         33,241             33,156
      Diluted                                       33,281             33,156


    Basic and diluted earnings (loss) per
     common share                                    $0.18             $(0.04)


    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)

                                   Third Quarter Ended    Nine Months Ended
                                      September 30,         September 30,
    EBITDA and Adjusted EBITDA
                                              % Better               % Better
                                  2007  2006  /(Worse)  2007  2006   /(Worse)
      Net Income (loss)           $2.6  $1.1   136.4    $6.0 $(1.4)       -
      Adjusted for:
        Income Tax Expense         1.0   1.4    28.6     3.3   4.3     23.3
        Interest Expense           1.2   1.5    20.0     3.7   4.2     11.9
        Amortization of Deferred
         Financing Fees            0.1   0.1       -     0.4   0.4        -
        Equity in Operations of
         Investments               0.2  (0.1)      -     0.2  (0.1)       -
        Depreciation and
         Amortization             10.6  11.7     9.4    31.7  33.4      5.1
      EBITDA (1)                  15.7  15.7       -    45.3  40.8     11.0
      Adjusted for:
        Cash Investments in
         Television Programming   (9.1) (8.8)   (3.4)  (26.7)(28.3)     5.7
      Adjusted EBITDA (2)         $6.6  $6.9    (4.3)  $18.6 $12.5     48.8



                                   Third Quarter Ended    Nine Months Ended
                                      September 30,         September 30,

    Financial and Operating Data
                                                   % Inc                % Inc
                                    2007    2006   /(Dec) 2007    2006  /(Dec)
    Entertainment
       Cash Investments in
        Television Programming      $9.1    $8.8    3.4   $26.7   $28.3  (5.7)
       Programming Amortization
        and Online Content
        Expenses                    $9.2   $10.9  (15.6)  $29.5   $30.6  (3.6)

    Publishing
       Domestic Magazine
        Advertising Pages          110.8   102.2    8.4   318.3   291.7   9.1

    At September 30
       Cash, Cash Equivalents,
        Marketable Securities and
          Short-Term Investments   $38.6   $37.3    3.5   $38.6   $37.3   3.5
       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 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.
SOURCE Playboy Enterprises, Inc.
11/07/2007.
CONTACT: Investors and Media, Martha Lindeman of Playboy Enterprises,.
Inc., +1-312-373-2430/.
/Web site: http://www.peiinvestor.com /.
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