EX-99.(C)(2) 2 dex99c2.htm PRESENTATION, DATED JANUARY 9, 2011 Presentation, dated January 9, 2011
PRIVATE AND CONFIDENTIAL
January 9
th
, 2011
Presentation to the Special Committee and the     
Board of Directors
Playboy Enterprises
Exhibit (c)(2)


PRIVATE AND CONFIDENTIAL
Table of Contents
I.
Financial Projections
II.
Valuation Summary
Appendix A: Supplemental Valuation / Ownership Materials
Appendix B: Public Trading Comparables
Appendix C: Sum-of-the-Parts Analysis
Appendix D: Discounted Cash Flow Analysis
Appendix E: Leveraged Buyout Analysis
Appendix F: Select Precedent Transactions
Appendix G: Miscellaneous
1


PRIVATE AND CONFIDENTIAL
I. Financial Projections
2


PRIVATE AND CONFIDENTIAL
Financial Projections Assumptions
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1.No longer relevant due to DIRECTV settlement
3


PRIVATE AND CONFIDENTIAL
Financial Projections Assumptions (Cont.)
4
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1.Based on latest Project Synergy negotiations however does not reflect updated DIRECTV subscriber levels


PRIVATE AND CONFIDENTIAL
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
5-Year Plan Case Comparison –
Revenue
($ millions)
5
2011 revenue decline in Project Synergy Cases reflects sale of Adult TV and digital operations as part of the transaction contemplated by Project Synergy
2012
revenue
decline
in
Base,
Upside,
and
Downside
Cases
reflects
sale
of
Adult
TV
and
digital
operations
to
a
3
party
(not
Project
Synergy)
Without Project Synergy
With Project Synergy
218.8
218.8
211.8
218.8
218.8
215.6
215.6
196.7
122.5
123.3
177.7
187.2
154.1
128.2
131.1
182.0
197.5
152.4
134.3
140.7
186.7
210.9
151.2
139.4
151.0
0.0
50.0
100.0
150.0
200.0
250.0
Base
Upside
Downside
Base with Project Synergy
Upside with Project Synergy
2010E
2011E
2012E
2013E
2014E
rd


PRIVATE AND CONFIDENTIAL
17.3
17.3
10.6
17.3
17.3
12.2
11.2
4.9
17.3
17.3
20.3
26.0
11.0
23.7
28.1
23.9
33.6
10.4
28.4
35.9
26.9
43.5
9.8
32.2
44.6
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Base
Upside
Downside
Base with Project Synergy
Upside with Project Synergy
2010E
2011E
2012E
2013E
2014E
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1.Includes legal expenses related to Mexican litigation, impairment charges related to capitalized programming costs and one time expenses related to Mr. Hefner’s indication of interest
5-Year Plan Case Comparison –
Adjusted EBITDA
($ millions)
6
Adjusted
EBITDA
excludes
the
DIRECTV
payment,
restructuring
costs,
and
other
extraordinary
expenses¹
and
adjusts
for
cash
programming
investments
-
Raine
has included stock based compensation in Adjusted EBITDA (differs from management approach where stock based compensation is backed out of
Adjusted EBITDA)
Adjusted EBITDA growth from 2012 through 2014 driven primarily by the Licensing segment performance, offset by varied performance in other segments
Without Project Synergy
With Project Synergy


PRIVATE AND CONFIDENTIAL
II. Valuation Summary
7


PRIVATE AND CONFIDENTIAL
$2.24
$0.64
$2.51
$0.94
$4.50
$1.70
$2.73
$3.96
$2.98
$4.00
$3.14
$5.29
$3.50
$2.99
$4.78
$3.23
$6.50
$5.55
$7.49
$5.16
$6.19
$5.23
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
Valuation Summary
Base Case
($ per Share)
LTM Trading
Range
Wall Street
Research
Discounted Cash
Flow Analysis
Methodology
Illustrative Price per Share ($)
Commentary
Precedent
Transactions
8
Sum-of-the-Parts
Public Trading
Comparables
Leveraged Buyout
Analysis
Share Price Prior to Mr. Hefner
Initial Indication of Interest
($3.94)
Includes value of Non Operating Assets (Mansion, Art, NOLs)
n
Closing
Price
High:
$5.55
(7/12/2010)
n
Closing
Price
Low:
$3.14
(2/8/2010)
n
RBC –
Prior to indication of interest: $4.00 (6/29/10); post indication of interest:
$5.50 (11/9/10)
n
Carris
Prior to indication of interest: $4.00 (6/30/10); post indication of interest:
$6.50 (12/22/10)
n
Based on 2012E Adjusted EBITDA by segment
n
Applies 2012E EBITDA trading multiple ranges for public companies in comparable
industries
n
Adjusted for proceeds from planned sale of Adult assets in 2012
n
2012E Adjusted EBITDA of $20.3mm
n
Diversified
Media
2012E
EBITDA
multiple
range:
5.0x
8.5x
n
Adjusted for proceeds from planned sale of Adult assets in 2012
n
2012E Adjusted EBITDA of $20.3mm
n
Precedent
Transactions
NTM
EBITDA
multiple
range:
8.0x–
14.0x
n
Value discounted 1 year using Playboy midpoint WACC of 11.0%
n
Based on select public Diversified Media, Publishing, Content and Licensing
transactions over $100mm
n
Adjusted for proceeds from planned sale of Adult assets in 2012
n
4 year Discounted Cash Flow analysis
n
WACC:
10.0%
12.0%
n
2014
Exit
Multiple:
6.0x
10.0x
n
Implied
Terminal
Growth
Rate:
(1.0%)
5.0%
n
4 year Leveraged Buyout analysis
n
Target
IRR%:
20.0%
30.0%
n
2014
Exit
Multiple:
6.0x
10.0x
n
Leverage:
3.5x
4.5x
2012E
Adjusted
EBITDA
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
Mr. Hefner Revised
Indication of Interest
($6.15)
Mr. Hefner Initial Indication
of Interest Price
($5.50)


PRIVATE AND CONFIDENTIAL
$3.39
$3.03
$3.41
$1.76
$6.06
$3.30
$5.24
$5.38
$4.31
$4.00
$3.14
$7.25
$6.30
$6.69
$6.08
$4.48
$6.50
$5.55
$9.87
$8.94
$8.01
$6.97
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
Valuation Summary
Upside Case
($ per Share)
LTM Trading
Range
Wall Street
Research
Discounted Cash
Flow Analysis
Methodology
Illustrative Price per Share ($)
Commentary
Precedent
Transactions
9
Sum-of-the-Parts
Public Trading
Comparables
Leveraged Buyout
Analysis
Share Price Prior to Mr. Hefner
Initial Indication of Interest
($3.94)
Mr. Hefner Initial Indication
of Interest Price
($5.50)
n
Closing Price –
High: $5.55 (7/12/2010)
n
Closing Price –
Low: $3.14 (2/8/2010)
n
Based on 2012E Adjusted EBITDA by segment
n
Applies 2012E EBITDA trading multiple ranges for public companies in comparable
industries
n
Adjusted for proceeds from planned sale of Adult assets in 2012
n
2012E Adjusted EBITDA of $26.0mm
n
Diversified
Media
2012E
EBITDA
multiple
range:
5.0x
8.5x
n
Adjusted for proceeds from planned sale of Adult assets in 2012
n
2012E Adjusted EBITDA of $26.0mm
n
Precedent
Transactions
NTM
EBITDA
multiple
range:
8.0x–
14.0x
n
Value discounted 1 year using Playboy midpoint WACC of 11.0%
n
Based on select public Diversified Media, Publishing, Content and Licensing
transactions over $100mm
n
Adjusted for proceeds from planned sale of Adult assets in 2012
n
4 year Discounted Cash Flow analysis
n
WACC:
10.0%
12.0%
n
2014
Exit
Multiple:
6.0x
10.0x
n
Implied
Terminal
Growth
Rate:
(2.5%)
4.0%
n
4 year Leveraged Buyout analysis
n
Target
IRR%:
20.0%
30.0%
n
2014
Exit
Multiple:
6.0x
10.0x
n
Leverage:
3.5x
4.5x
2012E
Adjusted
EBITDA
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
n
RBC
Prior
to
indication
of
interest:
$4.00
(6/29/10);
post
indication
of
interest:
$5.50 (11/9/10)
n
Carris
Prior to indication of interest: $4.00 (6/30/10); post indication of interest:
$6.50 (12/22/10)
Includes value of Non Operating Assets (Mansion, Art, NOLs)
Mr. Hefner Revised
Indication of Interest
($6.15)


PRIVATE AND CONFIDENTIAL
$0.04
($2.69)
$0.86
($0.68)
$1.73
($0.47)
($1.86)
$1.49
$0.45
$4.00
$3.14
$1.78
($0.07)
($1.01)
$2.56
$1.02
$6.50
$5.55
$3.46
($0.14)
$3.18
$2.15
($4.00)
($2.00)
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
Valuation Summary
Downside Case
($ per Share)
LTM Trading
Range
Wall Street
Research
Discounted Cash
Flow Analysis
Methodology
Illustrative Price per Share ($)
Commentary
Precedent
Transactions
10
Sum-of-the-Parts
Public Trading
Comparables
Leveraged Buyout
Analysis
Share Price Prior to Mr. Hefner
Initial Indication of Interest
($3.94)
Mr. Hefner Initial Indication
of Interest Price
($5.50)
n
Closing
Price
High:
$5.55
(7/12/2010)
n
Closing
Price
Low:
$3.14
(2/8/2010)
n
Based on 2012E Adjusted EBITDA by segment
n
Applies 2012E EBITDA trading multiple ranges for public companies in comparable
industries
n
Adjusted for proceeds from planned sale of Adult assets in 2012
n
2012E Adjusted EBITDA of $11.0mm
n
Diversified
Media
2012E
EBITDA
multiple
range:
5.0x
8.5x
n
Adjusted for proceeds from planned sale of Adult assets in 2012
n
2012E Adjusted EBITDA of $11.0mm
n
Precedent
Transactions
NTM
EBITDA
multiple
range:
8.0x–
14.0x
n
Value discounted 1 year using Playboy midpoint WACC of 11.0%
n
Based on select public Diversified Media, Publishing, Content and Licensing
transactions over $100mm
n
Adjusted for proceeds from planned sale of Adult assets in 2012
n
4 year Discounted Cash Flow analysis
n
WACC:
10.0%
12.0%
n
2014
Exit
Multiple:
6.0x
10.0x
n
Implied Terminal Growth Rate: N/A
n
4 year Leveraged Buyout analysis
n
Target
IRR%:
20.0%
30.0%
n
2014
Exit
Multiple:
6.0x
10.0x
n
Leverage:
3.5x
4.5x
2012E
Adjusted
EBITDA
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
n
RBC –
Prior to indication of interest: $4.00 (6/29/10); post indication of interest:
$5.50 (11/9/10)
n
Carris
Prior to indication of interest: $4.00 (6/30/10); post indication of interest:
$6.50 (12/22/10)
Includes value of Non Operating Assets (Mansion, Art, NOLs)
Mr. Hefner Revised
Indication of Interest
($6.15)


PRIVATE AND CONFIDENTIAL
$3.51
$2.31
$3.45
$2.03
$6.06
$2.76
$4.47
$5.39
$4.35
$4.00
$3.14
$7.04
$5.06
$5.04
$6.00
$4.62
$6.50
$5.55
$9.54
$7.24
$7.90
$6.89
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
Valuation Summary
Base Case with Project Synergy
($ per Share)
LTM Trading
Range
Wall Street
Research
Discounted Cash
Flow Analysis
Methodology
Illustrative Price per Share ($)
Commentary
Precedent
Transactions
11
Sum-of-the-Parts
Public Trading
Comparables
Leveraged Buyout
Analysis
Share Price Prior to Mr. Hefner
Initial Indication of Interest
($3.94)
Mr. Hefner Initial Indication
of Interest Price
($5.50)
n
Closing
Price
High:
$5.55
(7/12/2010)
n
Closing
Price
Low:
$3.14
(2/8/2010)
n
Based on 2012E Adjusted EBITDA by segment
n
Applies 2012E EBITDA trading multiple ranges for public companies in comparable
industries
n
Adjusted for proceeds from Project Synergy transaction in 2011
n
2012E Adjusted EBITDA of $23.7mm
n
Diversified
Media
2012E
EBITDA
multiple
range:
5.0x
8.5x
n
Adjusted for proceeds from Project Synergy transaction in 2011
n
2012E Adjusted EBITDA of $23.7mm
n
Precedent
Transactions
NTM
EBITDA
multiple
range:
8.0x–
14.0x
n
Value discounted 1 year using Playboy midpoint WACC of 11.0%
n
Based on select public Diversified Media, Publishing, Content and Licensing
transactions over $100mm
n
Adjusted for proceeds from Project Synergy transaction in 2011
n
4 year Discounted Cash Flow analysis
n
WACC:
10.0%
12.0%
n
2014
Exit
Multiple:
6.0x
10.0x
n
Implied
Terminal
Growth
Rate:
(1.9%)
4.4%
n
4 year Leveraged Buyout analysis
n
Target
IRR%:
20.0%
30.0%
n
2014
Exit
Multiple:
6.0x
10.0x
n
Leverage:
3.5x
4.5x
2012E
Adjusted
EBITDA
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
n
RBC
Prior
to
indication
of
interest:
$4.00
(6/29/10);
post
indication
of
interest:
$5.50 (11/9/10)
n
Carris
Prior to indication of interest: $4.00 (6/30/10); post indication of interest:
$6.50 (12/22/10)
Includes value of Non Operating Assets (Mansion, Art, NOLs)
Mr. Hefner Revised
Indication of Interest
($6.15)


PRIVATE AND CONFIDENTIAL
$4.38
$4.00
$4.23
$2.66
$7.02
$3.92
$6.04
$6.30
$5.35
$4.00
$3.14
$8.56
$7.12
$7.74
$6.87
$5.38
$6.50
$5.55
$11.16
$9.83
$8.91
$8.01
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
Valuation Summary
Upside Case with Project Synergy
($ per Share)
LTM Trading
Range
Wall Street
Research
Discounted Cash
Flow Analysis
Methodology
Illustrative Price per Share ($)
Commentary
Precedent
Transactions
12
Sum-of-the-Parts
Public Trading
Comparables
Leveraged Buyout
Analysis
Share Price Prior to Mr. Hefner
Initial Indication of Interest
($3.94)
Mr. Hefner Initial Indication
of Interest Price
($5.50)
n
Closing
Price
High:
$5.55
(7/12/2010)
n
Closing
Price
Low:
$3.14
(2/8/2010)
n
Based on 2012E Adjusted EBITDA by segment
n
Applies 2012E EBITDA trading multiple ranges for public companies in comparable
industries
n
Adjusted for proceeds from Project Synergy transaction in 2011
n
2012E Adjusted EBITDA of $28.1mm
n
Diversified
Media
2012E
EBITDA
multiple
range:
5.0x
8.5x
n
Adjusted for proceeds from Project Synergy transaction in 2011
n
2012E Adjusted EBITDA of $28.1mm
n
Precedent
Transactions
NTM
EBITDA
multiple
range:
8.0x–
14.0x
n
Value discounted 1 year using Playboy midpoint WACC of 11.0%
n
Based on select public Diversified Media, Publishing, Content and Licensing
transactions over $100mm
n
Adjusted for proceeds from Project Synergy transaction in 2011
n
4 year Discounted Cash Flow analysis
n
WACC:
10.0%
12.0%
n
2014
Exit
Multiple:
6.0x
10.0x
n
Implied
Terminal
Growth
Rate:
(2.5%)
4.0%
n
4 year Leveraged Buyout analysis
n
Target
IRR%:
20.0%
30.0%
n
2014
Exit
Multiple:
6.0x
10.0x
n
Leverage:
3.5x
4.5x
2012E
Adjusted
EBITDA
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
n
RBC –
Prior to indication of interest: $4.00 (6/29/10); post indication of interest:
$5.50 (11/9/10)
n
Carris
Prior to indication of interest: $4.00 (6/30/10); post indication of interest:
$6.50 (12/22/10)
Includes value of Non Operating Assets (Mansion, Art, NOLs)
Mr. Hefner Revised
Indication of Interest
($6.15)


PRIVATE AND CONFIDENTIAL
Appendix A: Supplemental Valuation / Ownership Materials
13


PRIVATE AND CONFIDENTIAL
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
10/17/08:
Playboy
announces downsizing;
55 employees are laid
off, consolidates
facilities, and reduces
travel and overtime
06/01/09:
Scott
Flanders elected
CEO of Playboy
Historical Public Trading Performance
Stock Price Performance –
Last Three Years
14
7/12/2010:
Playboy
announces Mr. Hefner’s
indication of interest to
acquire all outstanding Class A
and Class B common shares
not currently owned by Mr.
Hefner for $5.50 per share
7/15/2010:
FriendFinder
submits indication of
interest for $210mm¹ 
equity value
11/12/09:
Playboy
reportedly in sale
talks with Iconix
03/09/09: Bob Meyers,
President of Media,
announces plans to leave
Playboy.  Jerome Kern is
named interim President.
Before
7/12/2010
High²
Low²
High²
Low²
3 yr
8.99
1.06
11.84
1.06
2 yr
5.55
1.15
5.55
1.06
1 yr
5.55
3.14
5.55
2.35
6 mo
5.55
3.93
5.55
3.14
3 mo
5.39
4.77
5.55
3.16
Source: Public sources, Capital IQ
1.Implies a $5.93 per share assuming a change of control and fullydiluted shares outstanding based on the treasury stock method; all stock options and restricted stock units vest
2.Represents closing price
12/08/08:
Christie
Hefner announces
plans to step down
as Playboy CEO
and Chairman
10/21/2010:
Playboy
announces a non-cash
write down of its
programming inventory
and provides updated
information related to
DIRECTV lawsuit


PRIVATE AND CONFIDENTIAL
Shareholder Summary
Source: Latest public filings, Capital IQ as of 1/5/10
15
As of the latest filings, Mr. Hefner beneficially owned 69.5% of
the Class A common stock (1 vote per share)
The Class B stock is nonvoting; therefore Mr. Hefner controls the shareholder vote on matters including the election of directors
and approval on transactions which represent a change of control
Class A
Class B
Total
Shareholders
Investor Type
Shares Held
%
Shares Held
%
Shares Held
%
Hugh Hefner
Insider
3,381,836
69.5%
7,935,596
27.5%
11,317,432
33.6%
BlackRock
Institution
2,637,961
9.1%
2,637,961
7.8%
Fidelity Investments
Institution
1,895,600
6.6%
1,895,600
5.6%
AQR Capital Management
Hedge Fund
1,061,035
3.7%
1,061,035
3.1%
Plainfield Asset Management
Hedge Fund
926,700
19.1%
926,700
2.7%
Wells Capital Management
Institution
847,879
2.9%
847,879
2.5%
Trafalgar Asset Managers
Hedge Fund
737,993
2.6%
737,993
2.2%
Dimensional Fund Advisors
Institution
48,731
1.0%
509,107
1.8%
557,838
1.7%
The Vanguard Group
Institution
22,850
0.5%
521,863
1.8%
544,713
1.6%
Whitebox Advisors
Hedge Fund
534,246
1.9%
534,246
1.6%
Arbitrage & Trading Management
Hedge Fund
531,500
1.8%
531,500
1.6%
BNY Mellon Asset Management
Institution
503,649
1.7%
503,649
1.5%
State Street Global Advisors
Institution
446,112
1.5%
446,112
1.3%
Afton Capital Management
Hedge Fund
396,739
1.4%
396,739
1.2%
Boyar Asset Management
Institution
374,778
1.3%
374,778
1.1%
Weintraub Capital Management
Hedge Fund
350,000
1.2%
350,000
1.0%
Northern Trust Global Investments
Institution
322,649
1.1%
322,649
1.0%
Christie Hefner
Insider
72,274
1.5%
198,062
0.7%
270,336
0.8%
Capital Group International
Institution
72,274
1.5%
198,062
0.7%
270,336
0.8%
Tewksbury Capital Management
Hedge Fund
202,476
0.7%
202,476
0.6%
Others
-
339,437
7.0%
8,642,925
30.0%
8,982,362
26.6%
Total
4,864,102
100.0%
28,848,232
100.0%
33,712,334
100.0%


PRIVATE AND CONFIDENTIAL
0.3
4.2
5.5
0.4
0
3
6
9
$3.00 -
$3.49
$3.50 -
$3.99
$4.00 -
$4.49
$4.50 -
$4.99
5.4
7.9
5.5
0.4
0
3
6
9
$3.00 -
$3.49
$3.50 -
$3.99
$4.00 -
$4.49
$4.50 -
$4.99
Shares Traded Volume by Closing Price –
Since Indication of Interest¹
,
²
(Since
the
indication
of
interest,
40.5mm
shares
have
been
traded
~190%
of
free
float³)
Shares Traded Volume by Closing Price –
3 Months Prior to Indication of Interest¹
,
²
(During the 3 months prior to the indication of interest, 10.5mm
shares were traded)
Shares Traded Volume by Closing Price –
6 Months Prior to Indication of Interest¹
,
²
(During the 6 months prior to the indication of interest, 19.3mm
shares were traded)
Shares Traded Volume by Closing Price –
12 Months Prior to Indication of Interest¹
,
²
(During the 12 months prior to the indication of interest, 68.5mm shares were traded)
Source: Capital IQ
1.Represents volume traded by closing price of Class B shares
2.Mr. Hefner initial indication of interest announced on 7/12/2010
3.~21.3mm shares are in free float (includes both Class A and Class B shares)
Recent Trading Activity by Volume
16
Share Price Range ($)
Share Price Range ($)
Share Price Range ($)
Share Price Range ($)
5.3
10.0
15.1
17.9
12.9
7.4
0
5
10
15
20
$2.00 -$2.49
$2.50 -
$2.99
$3.00 -
$3.49
$3.50 -
$3.99
$4.00 -
$4.49
$4.50 -
$4.99
3.5
18.3
18.7
0
5
10
15
20
$4.50 -
$4.99
$5.00 -
$5.49
$5.50 -
$5.55


PRIVATE AND CONFIDENTIAL
Analysis at Various Prices
Total Company Value
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1.Assumes a change of control and fully diluted shares outstanding
based on the treasury stock method; all stock options and restricted stock units vest
17
Day Before Mr. Hefner
Initial Indication of Interest
(7/9/10)
Current Price
(1/5/11)
Mr. Hefner
Initial Indication of Interest
(7/12/10)
Mr. Hefner Revised
Indication of Interest
Share Price
$3.94
$5.25
$5.50
$6.15
Premium to 7/9/2010 (date of unaffected share price)
0.0%
33.2%
39.6%
56.1%
Premium to Current
(25.0%)
0.0%
4.8%
17.1%
Premium to Mr. Hefner's Initial Indication of Interest
(28.4%)
(4.5%)
0.0%
11.8%
Shares Outstanding ¹
35.0
35.3
35.3
35.4
Equity Value
$137.7
$185.3
$194.4
$218.0
Plus Debt
115.0
115.0
115.0
115.0
Less Cash
(27.6)
(27.6)
(27.6)
(27.6)
Enterprise Value
$225.1
$272.7
$281.8
$305.4
Base - Adjusted EBITDA Multiple
Adjusted EBITDA
2011E
$14.8
15.3x
18.5x
19.1x
20.7x
2012E
$20.3
11.1x
13.4x
13.9x
15.0x
Upside - Adjusted EBITDA Multiple
Adjusted EBITDA
2011E
$13.7
16.4x
19.8x
20.5x
22.2x
2012E
$26.0
8.7x
10.5x
10.9x
11.8x
Downside - Adjusted EBITDA Multiple
Adjusted EBITDA
2011E
$4.9
45.8x
55.5x
57.3x
62.1x
2012E
$11.0
20.4x
24.7x
25.5x
27.7x
Base with Project Synergy - Adjusted EBITDA Multiple
Adjusted EBITDA
2011E
$17.3
13.0x
15.7x
16.3x
17.6x
2012E
$23.7
9.5x
11.5x
11.9x
12.9x
Upside with Project Synergy - Adjusted EBITDA Multiple
Adjusted EBITDA
2011E
$17.3
13.0x
15.7x
16.2x
17.6x
2012E
$28.1
8.0x
9.7x
10.0x
10.9x


PRIVATE AND CONFIDENTIAL
Analysis at Various Prices
Adjusting for Value of Non-Operating Assets
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1.Assumes a change of control and fully diluted shares outstanding
based on the treasury stock method; all stock options and restricted stock units vest
18
Day Before Mr. Hefner
Initial Indication of Interest
(7/9/10)
Current Price
(1/5/11)
Mr. Hefner
Initial Indication of Interest
(7/12/10)
Mr. Hefner Revised
Indication of Interest
Share Price
$3.94
$5.25
$5.50
$6.15
Premium to 7/9/2010 (date of unaffected share price)
0.0%
33.2%
39.6%
56.1%
Premium to Current
(25.0%)
0.0%
4.8%
17.1%
Premium to Mr. Hefner's Initial Indication of Interest
(28.4%)
(4.5%)
0.0%
11.8%
Shares Outstanding ¹
35.0
35.3
35.3
35.4
Equity Value
$137.7
$185.3
$194.4
$218.0
Plus Debt
115.0
115.0
115.0
115.0
Less Cash
(27.6)
(27.6)
(27.6)
(27.6)
Less: Mansion & Art
(57.9)
(57.9)
(57.9)
(57.9)
Enterprise Value
$167.2
$214.8
$223.9
$247.5
Base - Adjusted EBITDA Multiple
Adjusted EBITDA
2011E
$14.8
11.3x
14.6x
15.2x
16.8x
2012E
$20.3
8.2x
10.6x
11.0x
12.2x
Upside - Adjusted EBITDA Multiple
Adjusted EBITDA
2011E
$13.7
12.2x
15.6x
16.3x
18.0x
2012E
$26.0
6.4x
8.3x
8.6x
9.5x
Downside - Adjusted EBITDA Multiple
Adjusted EBITDA
2011E
$4.9
34.0x
43.7x
45.5x
50.4x
2012E
$11.0
15.1x
19.5x
20.3x
22.4x
Base with Project Synergy - Adjusted EBITDA Multiple
Adjusted EBITDA
2011E
$17.3
9.7x
12.4x
12.9x
14.3x
2012E
$23.7
7.0x
9.1x
9.4x
10.4x
Upside with Project Synergy - Adjusted EBITDA Multiple
Adjusted EBITDA
2011E
$17.3
9.6x
12.4x
12.9x
14.3x
2012E
$28.1
5.9x
7.6x
8.0x
8.8x


PRIVATE AND CONFIDENTIAL
Research Summary
Source: Wall Street research, Bloomberg
19
Analyst Target Prices
Analyst Commentary
Date
Name
Recommendation
Price Target ($)
Pre-Mr. Hefner Indication of Interest
6/29/10
Hold
4.00
6/30/10
Hold
4.00
Post-Mr. Hefner Indication of Interest
11/09/10
Hold
5.50
12/22/10
Buy
6.50
Average Target Post Mr. Hefner Indication of Interest
$6.00
Premium to Current Share Price (1/5/2011)
14.3%
Carris
& Company
12/22/2010 
“We
believe
the
time
is
right
for
a
more
constructive
rating,
for
2
reasons:
1.
Reliable
sources
on
the
ground
are
telling
us
that,
not only does Mr. Hefner’s bid now have the necessary financing
at $5.50, but that the financing in question could allow Mr.
Hefner
to
raise
his
bid
to
$6.50,
offering
28%
upside
from
current
levels; and 2. Should we be wrong in that regard and a transaction
not materialize, we believe PLA is set for a series of earnings
releases reflecting its LBE catalysts, not necessarily in the current
quarter, but in the 2H of 2011, with the crown jewel being the
opening of PLA’s
LBE asset in London, slated for July 2011.
RBC Capital Markets
11/09/2010 
“Continued
Progress
In
Turn-around;
On
A
Clear
Day,
You
Can
See
2013—3Q10 was another stop on the turn-around route that
began
when
CEO
Scott
Flanders
took
over
in
2009.
The
magazine
has stabilized and Licensing is ramping to levels that, if executed
properly, could suggest longer-term upside for shareholders.
Challenging TV business fundamentals and near-term operating
metrics make material stock appreciation hard to justify,
keeping us on the sidelines


PRIVATE AND CONFIDENTIAL
Appendix B: Public Trading Comparables
20


PRIVATE AND CONFIDENTIAL
Source: Public filings, Wall Street research, Capital IQ
Note:  As of 1/5/2011
Public Trading Comparables –
Diversified Media
21
EV / EBITDA (x)
Share Price ($)
% of 52 - Week
High
Market Cap
($mm)
Enterprise Value
($mm)
LTM
2010E
2011E
2012E
DIVERSIFIED MEDIA
Time Warner
$33.17
97.4%
$36,795
$48,263
7.2x
7.6x
7.1x
6.8x
Viacom
$40.60
100.0%
$24,866
$30,526
8.1x
8.6x
7.5x
7.2x
Disney
$39.96
99.9%
$78,523
$93,427
11.3x
10.4x
9.3x
8.6x
News Corp
$14.85
87.4%
$40,308
$36,990
6.5x
6.3x
5.7x
5.3x
DIVERSIFIED MEDIA – AVERAGE
8.3x
8.2x
7.4x
7.0x
DIVERSIFIED MEDIA – MEDIAN
7.7x
8.1x
7.3x
7.0x
DIVERSIFIED MEDIA – HIGH
11.3x
10.4x
9.3x
8.6x
DIVERSIFIED MEDIA – LOW
6.5x
6.3x
5.7x
5.3x


PRIVATE AND CONFIDENTIAL
Source: Public filings, Wall Street research, Capital IQ
Note: As of 1/5/2011
Public Trading Comparables –
Segment Specific
22
EV / EBITDA (x)
Share Price ($)
% of 52 - Week
High
Market Cap
($mm)
Enterprise Value
($mm)
LTM
2010E
2011E
2012E
BRAND LICENSING
Iconix
$20.56
98.8%
$1,534
$2,084
10.8x
10.1x
9.2x
7.9x
PUBLISHING
Meredith
$36.81
96.7%
$1,643
$1,906
7.8x
7.2x
7.6x
7.0x
New York Times
$10.46
70.3%
$1,526
$2,034
5.2x
5.4x
5.7x
5.5x
Gannett
$15.31
77.8%
$3,658
$5,961
4.8x
4.6x
4.8x
4.6x
PUBLISHING – AVERAGE
5.9x
5.7x
6.0x
5.7x
PUBLISHING – MEDIAN
5.2x
5.4x
5.7x
5.5x
PUBLISHING – HIGH
7.8x
7.2x
7.6x
7.0x
PUBLISHING – LOW
4.8x
4.6x
4.8x
4.6x
ENTERTAINMENT CONTENT
Discovery Communications
$40.55
89.3%
$16,560
$18,128
12.7x
11.0x
9.9x
9.0x
Scripps Networks
$50.21
94.1%
$8,488
$10,355
13.3x
11.4x
10.0x
8.9x
WWE
$14.29
75.4%
$1,057
$880
8.9x
8.8x
8.1x
7.3x
Liberty Starz
$69.56
99.7%
$3,676
$2,760
7.5x
7.1x
6.6x
5.8x
Outdoor Channel
$7.42
99.6%
$188
$127
11.9x
14.2x
11.8x
NA
ENTERTAINMENT CONTENT – AVERAGE
10.9x
10.5x
9.3x
7.8x
ENTERTAINMENT CONTENT – MEDIAN
11.9x
11.0x
9.9x
8.1x
ENTERTAINMENT CONTENT – HIGH
13.3x
14.2x
11.8x
9.0x
ENTERTAINMENT CONTENT – LOW
7.5x
7.1x
6.6x
5.8x


PRIVATE AND CONFIDENTIAL
Appendix C: Sum-of-the-Parts Analysis
23


PRIVATE AND CONFIDENTIAL
Sum-of-the-Parts Analysis
Base Case
($ millions, except per share values)
24
Segement
2012E
Adjusted EBITDA
Low Multiple
High Multiple
Low Enterprise Value
High Enterprise Value
Entertainment
1.0
5.5x
9.5x
$5.7
$9.9
Print / Digital
3.7
4.5x
7.0x
16.8
26.1
Licensing
38.5
7.5x
8.5x
288.4
326.8
Corporate ¹
(22.1)
7.0x
7.0x
(155.0)
(155.0)
Total
21.1
$155.9
$207.9
Less: Debt
($115.0)
($115.0)
Plus: Cash
$27.6
$27.6
Plus: Discounted Proceeds from Sale of Assets ²
$18.0
$18.0
Total Equity Value
$86.5
$138.5
Shares Outstanding ³
34.4
35.0
Implied Share Price
$2.51
$3.96
Plus Non Operating Assets:
Low Value
High Value
Implied Share Price
Plus: Mansion and Art
4
57.9
57.9
$1.68
$1.66
Plus: NOLs
5
20.0
20.0
$0.58
$0.57
Subtotal of Non Operating Assets
77.9
77.9
$2.26
$2.23
Total Implied Share Price (incl. Non Operating Assets)
$4.78
$6.19
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1. Assume corporate multiple as the average of the Diversified Media comparables (DIS, TWX, VIA, NWS)
2. Sale of assets discounted using a 11.0% WACC
3. Assumes a change of control and fully diluted shares outstanding based on the treasury stock method; all stock options and restricted stock units vest
4. Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax related to sale is shielded by NOLs
5. Assumes a 11.0% WACC on NOL tax benefits


PRIVATE AND CONFIDENTIAL
Sum-of-the-Parts Analysis
Upside Case
($ millions, except per share values)
25
Segement
2012E
Adjusted EBITDA
Low Multiple
High Multiple
Low Enterprise Value
High Enterprise Value
Entertainment
4.8
5.5x
9.5x
$26.5
$45.7
Print / Digital
4.8
4.5x
7.0x
21.5
33.4
Licensing
40.2
7.5x
8.5x
301.9
342.1
Corporate ¹
(23.1)
7.0x
7.0x
(162.0)
(162.0)
Total
26.7
$187.8
$259.3
Less: Debt
($115.0)
($115.0)
Plus: Cash
$27.6
$27.6
Plus: Discounted Proceeds from Sale of Assets ²
$18.0
$18.0
Total Equity Value
$118.4
$189.9
Shares Outstanding ³
34.8
35.3
Implied Share Price
$3.41
$5.38
Plus Non Operating Assets:
Low Value
High Value
Implied Share Price
Plus: Mansion and Art
4
57.9
57.9
$1.66
$1.64
Plus: NOLs
5
35.2
35.2
$1.01
$1.00
Subtotal of Non Operating Assets
93.1
93.1
$2.68
$2.63
Total Implied Share Price (incl. Non Operating Assets)
$6.08
$8.01
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1. Assume corporate multiple as the average of the Diversified Media comparables (DIS, TWX, VIA, NWS)
2. Sale of assets discounted using a 11.0% WACC
3. Assumes a change of control and fully diluted shares outstanding based on the treasury stock method; all stock options and restricted stock units vest
4. Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax related to sale is shielded by NOLs
5. Assumes a 11.0% WACC on NOL tax benefits


PRIVATE AND CONFIDENTIAL
Sum-of-the-Parts Analysis
Downside Case
($ millions, except per share values)
26
Segement
2012E
Adjusted EBITDA
Low Multiple
High Multiple
Low Enterprise Value
High Enterprise Value
Entertainment
(0.1)
5.5x
9.5x
($0.7)
($1.2)
Print / Digital
(5.4)
4.5x
7.0x
(24.3)
(37.9)
Licensing
35.6
7.5x
8.5x
266.8
302.4
Corporate ¹
(19.1)
7.0x
7.0x
(134.0)
(134.0)
Total
10.9
$107.8
$129.3
Less: Debt
($115.0)
($115.0)
Plus: Cash
$27.6
$27.6
Plus: Discounted Proceeds from Sale of Assets ²
$9.0
$9.0
Total Equity Value
$29.4
$50.9
Shares Outstanding ³
34.1
34.2
Implied Share Price
$0.86
$1.49
Plus Non Operating Assets:
Low Value
High Value
Implied Share Price
Plus: Mansion and Art
4
57.9
57.9
$1.70
$1.69
Plus: NOLs
5
0.0
0.0
$0.00
$0.00
Subtotal of Non Operating Assets
57.9
57.9
$1.70
$1.69
Total Implied Share Price (incl. Non Operating Assets)
$2.56
$3.18
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1. Assume corporate multiple as the average of the Diversified Media comparables (DIS, TWX, VIA, NWS)
2. Sale of assets discounted using a 11.0% WACC
3. Assumes a change of control and fully diluted shares outstanding based on the treasury stock method; all stock options and restricted stock units vest
4. Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax related to sale is shielded by NOLs
5. Assumes a 11.0% WACC on NOL tax benefits


PRIVATE AND CONFIDENTIAL
Sum-of-the-Parts Analysis
Base Case with Project Synergy
($ millions, except per share values)
27
Segement
2012E
Adjusted EBITDA
Low Multiple
High Multiple
Low Enterprise Value
High Enterprise Value
Entertainment
5.3
5.5x
9.5x
$29.0
$50.1
Print / Digital
4.3
4.5x
7.0x
19.5
30.3
Licensing
38.5
7.5x
8.5x
288.4
326.8
Corporate ¹
(24.0)
7.0x
7.0x
(168.0)
(168.0)
Total
24.1
$168.9
$239.3
Less: Debt
($115.0)
($115.0)
Plus: Cash
$27.6
$27.6
Plus: Discounted Proceeds from Sale of Assets ²
$38.4
$38.4
Total Equity Value
$119.9
$190.3
Shares Outstanding ³
34.8
35.3
Implied Share Price
$3.45
$5.39
Plus Non Operating Assets:
Low Value
High Value
Implied Share Price
Plus: Mansion and Art
4
57.9
57.9
$1.66
$1.64
Plus: NOLs
5
31.0
31.0
$0.89
$0.88
Subtotal of Non Operating Assets
88.9
88.9
$2.56
$2.52
Total Implied Share Price (incl. Non Operating Assets)
$6.00
$7.90
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1. Assume corporate multiple as the average of the Diversified Media comparables (DIS, TWX, VIA, NWS)
2. Sale of assets discounted using a 11.0% WACC
3. Assumes a change of control and fully diluted shares outstanding based on the treasury stock method; all stock options and restricted stock units vest
4. Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax related to sale is shielded by NOLs
5. Assumes a 11.0% WACC on NOL tax benefits


PRIVATE AND CONFIDENTIAL
Sum-of-the-Parts Analysis
Upside Case with Project Synergy
($ millions, except per share values)
28
Segement
2012E
Adjusted EBITDA
Low Multiple
High Multiple
Low Enterprise Value
High Enterprise Value
Entertainment
5.3
5.5x
9.5x
$29.0
$50.1
Print / Digital
5.5
4.5x
7.0x
24.9
38.7
Licensing
40.2
7.5x
8.5x
301.9
342.1
Corporate ¹
(22.6)
7.0x
7.0x
(158.5)
(158.5)
Total
28.4
$197.2
$272.4
Less: Debt
($115.0)
($115.0)
Plus: Cash
$27.6
$27.6
Plus: Discounted Proceeds from Sale of Assets ²
$38.4
$38.4
Total Equity Value
$148.2
$223.4
Shares Outstanding ³
35.0
35.5
Implied Share Price
$4.23
$6.30
Plus Non Operating Assets:
Low Value
High Value
Implied Share Price
Plus: Mansion and Art
4
57.9
57.9
$1.65
$1.63
Plus: NOLs
5
34.9
34.9
$0.99
$0.98
Subtotal of Non Operating Assets
92.7
92.7
$2.65
$2.61
Total Implied Share Price (incl. Non Operating Assets)
$6.87
$8.91
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1. Assume corporate multiple as the average of the Diversified Media comparables (DIS, TWX, VIA, NWS)
2. Sale of assets discounted using a 11.0% WACC
3. Assumes a change of control and fully diluted shares outstanding based on the treasury stock method; all stock options and restricted stock units vest
4. Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax related to sale is shielded by NOLs
5. Assumes a 11.0% WACC on NOL tax benefits


PRIVATE AND CONFIDENTIAL
Appendix D: Discounted Cash Flow Analysis
29


PRIVATE AND CONFIDENTIAL
Discounted Cash Flow Overview ¹
Indicative Valuation Overview
Share Price Sensitivity Analysis ($)
Discounted Cash Flow Analysis
Base Case
($ millions, except per share values)
30
4Q 2010
2011E
2012E
2013E
2014E
Adjusted EBITDA ²
$3.7
$12.2
$20.3
$23.9
$26.9
% Margin
6.5%
5.7%
11.4%
13.1%
14.4%
Less: Cash Taxes
(0.6)
(4.2)
(4.5)
(5.0)
(5.3)
Less: Capex
(0.5)
(1.0)
(1.0)
(1.0)
(1.0)
Less: Investment in Trademarks & Copyrights
(0.6)
(2.3)
(2.3)
(2.3)
(2.3)
Less: Cash Restructuring
-
(12.0)
(21.7)
(1.0)
(1.0)
Less: Deferred Acquisition Payments
(0.3)
(0.8)
-
-
-
Less: London Club Financing
(4.0)
0.7
0.8
0.8
0.8
Less: Extraordinary Expenses
(15.1)
(0.5)
(3.3)
(2.8)
-
Plus: Asset Sale
-
-
20.0
-
-
WC (Use)/Benefit
4.7
(0.7)
0.3
(0.2)
(0.2)
Unlevered Free Cash Flow
($12.7)
($8.4)
$8.7
$12.4
$17.9
Valuation Summary
Terminal Value Summary
Present Value of Enterprise
$148.5
Terminal EBITDA
$26.9
Less: Debt
(115.0)
Terminal EBITDA Multiple
8.0x
Plus: Cash
27.6
Terminal Value
$214.9
Equity Value
$61.1
Present Value of Enterprise
$148.5
Shares Outstanding ³
34.3
Present Value of TV
$139.8
Share Price
$1.78
Terminal Value %  of EV
94.1%
Plus: Value of Art
4
$0.41
Implied Perpetuity Growth
Plus: Value of Mansion
4
$1.28
WACC
11.0%
Plus: Value of NOLs
$0.45
Terminal Unlevered FCF
$17.9
Share Price (Incl. Non Op. Assets)
$3.91
Implied Perpetuity Growth
2.5%
Terminal
Discount Rate (%)
Multiple
5
10.0%
10.5%
11.0%
11.5%
12.0%
6.0x
$0.90
$0.83
$0.77
$0.70
$0.64
7.0x
1.43
1.35
1.28
1.20
1.13
8.0x
1.95
1.87
1.78
1.70
1.62
9.0x
2.47
2.38
2.28
2.19
2.10
10.0x
2.99
2.88
2.78
2.68
2.58
Share Price Including Non Operating Assets
Terminal
Discount Rate (%)
Multiple
5
10.0%
10.5%
11.0%
11.5%
12.0%
6.0x
$3.10
$3.01
$2.91
$2.82
$2.73
7.0x
3.63
3.52
3.42
3.32
3.22
8.0x
4.14
4.03
3.91
3.81
3.70
9.0x
4.65
4.53
4.41
4.29
4.18
10.0x
5.16
5.03
4.90
4.78
4.66
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy
negotiations (where applicable)
1.Valuation date as of 9/30/2010; Balance sheet data as of 9/30/2010
2.Adjusted EBITDA includes stock based compensation
3.Assumes
a
change
of
control
and
fullydiluted
shares
outstanding
based
onthe
treasury
stock
method;
all
stock
options
and
restricted stock units outstanding vest
4.Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax related to sale is shielded by NOLs
5.Terminal EBITDA multiple is based on the LTM EBITDA multiple range of the Diversified Media and Licensing comparables


PRIVATE AND CONFIDENTIAL
Discounted Cash Flow Overview ¹
Indicative Valuation Overview
Share Price Sensitivity Analysis ($)
Discounted Cash Flow Analysis
Upside Case
($ millions, except per share values)
31
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy
negotiations (where applicable)
1.Valuation date as of 9/30/2010; Balance sheet data as of 9/30/2010
2.Adjusted EBITDA includes stock based compensation
3.Assumes
a
change
of
control
and
fullydiluted
shares
outstanding
based
onthe
treasury
stock
method;
all
stock
options
and
restricted stock units outstanding vest
4.Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax related to sale is shielded by NOLs
5.Terminal EBITDA multiple is based on the LTM EBITDA multiple range of the Diversified Media and Licensing comparables
4Q 2010
2011E
2012E
2013E
2014E
Adjusted EBITDA ²
$3.7
$11.2
$26.0
$33.6
$43.5
% Margin
6.5%
5.2%
13.9%
17.0%
20.6%
Less: Cash Taxes
(0.6)
(4.2)
(4.8)
(5.6)
(6.3)
Less: Capex
(0.5)
(1.0)
(1.0)
(1.0)
(1.0)
Less: Investment in Trademarks & Copyrights
(0.6)
(2.3)
(2.3)
(2.3)
(2.3)
Less: Cash Restructuring
-
(12.5)
(22.2)
(1.0)
(1.0)
Less: Deferred Acquisition Payments
(0.3)
(0.8)
-
-
-
Less: London Club Financing
(4.0)
0.7
0.8
0.8
0.8
Less: Extraordinary Expenses
(15.1)
(0.5)
(3.3)
(2.8)
-
Plus: Asset Sale
-
-
20.0
-
-
WC (Use)/Benefit
4.7
0.3
0.3
(0.2)
(0.2)
Unlevered Free Cash Flow
($12.7)
($8.9)
$13.5
$21.5
$33.6
Valuation Summary
Terminal Value Summary
Present Value of Enterprise
$256.3
Terminal EBITDA
$43.5
Less: Debt
(115.0)
Terminal EBITDA Multiple
8.0x
Plus: Cash
27.6
Terminal Value
$348.2
Equity Value
$168.9
Present Value of Enterprise
$256.3
Shares Outstanding ³
35.2
Present Value of TV
$226.4
Share Price
$4.80
Terminal Value %  of EV
88.3%
Plus: Value of Art
4
$0.40
Implied Perpetuity Growth
Plus: Value of Mansion
4
$1.25
WACC
11.0%
Plus: Value of NOLs
$0.58
Terminal Unlevered FCF
$33.6
Share Price (Incl. Non Op. Assets)
$7.02
Implied Perpetuity Growth
1.2%
Terminal
Discount Rate (%)
Multiple
5
10.0%
10.5%
11.0%
11.5%
12.0%
6.0x
$3.45
$3.34
$3.24
$3.13
$3.03
7.0x
4.26
4.14
4.02
3.90
3.79
8.0x
5.07
4.93
4.80
4.67
4.54
9.0x
5.88
5.73
5.58
5.43
5.29
10.0x
6.69
6.52
6.36
6.20
6.04
Share Price Including Non Operating Assets
Terminal
Discount Rate (%)
Multiple
5
10.0%
10.5%
11.0%
11.5%
12.0%
6.0x
$5.75
$5.62
$5.49
$5.36
$5.24
7.0x
6.54
6.40
6.25
6.11
5.98
8.0x
7.34
7.18
7.02
6.86
6.71
9.0x
8.14
7.96
7.79
7.62
7.45
10.0x
8.94
8.75
8.56
8.38
8.20


PRIVATE AND CONFIDENTIAL
Discounted Cash Flow Overview ¹
Indicative Valuation Overview
Share Price Sensitivity Analysis ($)
Discounted Cash Flow Analysis
Downside Case
($ millions, except per share values)
32
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy
negotiations (where applicable)
1.Valuation date as of 9/30/2010; Balance sheet data as of 9/30/2010
2.Adjusted EBITDA includes stock based compensation
3.Assumes
a
change
of
control
and
fullydiluted
shares
outstanding
based
onthe
treasury
stock
method;
all
stock
options
and
restricted stock units outstanding vest
4.Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax related to sale is shielded by NOLs
5.Terminal EBITDA multiple is based on the LTM EBITDA multiple range of the Diversified Media and Licensing comparables
Valuation Summary
Terminal Value Summary
Present Value of Enterprise
$9.4
Terminal EBITDA
$9.8
Less: Debt
(115.0)
Terminal EBITDA Multiple
8.0x
Plus: Cash
27.6
Terminal Value
$78.6
Equity Value
($78.0)
Present Value of Enterprise
$9.4
Shares Outstanding ³
34.1
Present Value of TV
$51.1
Share Price
($2.29)
Terminal Value %  of EV
543.3%
Plus: Value of Art
4
$0.41
Implied Perpetuity Growth
Plus: Value of Mansion
4
$1.29
WACC
11.0%
Plus: Value of NOLs
$0.00
Terminal Unlevered FCF
($12.4)
Share Price (Incl. Non Op. Assets)
($0.59)
Implied Perpetuity Growth
N/A
Terminal
Discount Rate (%)
Multiple
5
10.0%
10.5%
11.0%
11.5%
12.0%
6.0x
($2.64)
($2.65)
($2.66)
($2.68)
($2.69)
7.0x
(2.44)
(2.46)
(2.48)
(2.49)
(2.51)
8.0x
(2.25)
(2.27)
(2.29)
(2.31)
(2.33)
9.0x
(2.05)
(2.08)
(2.10)
(2.12)
(2.15)
10.0x
(1.86)
(1.89)
(1.91)
(1.94)
(1.97)
Share Price Including Non Operating Assets
Terminal
Discount Rate (%)
Multiple
5
10.0%
10.5%
11.0%
11.5%
12.0%
6.0x
($0.92)
($0.94)
($0.96)
($0.99)
($1.01)
7.0x
(0.72)
(0.75)
(0.78)
(0.80)
(0.83)
8.0x
(0.53)
(0.56)
(0.59)
(0.62)
(0.65)
9.0x
(0.33)
(0.37)
(0.40)
(0.44)
(0.47)
10.0x
(0.14)
(0.18)
(0.22)
(0.25)
(0.29)
4Q 2010
2011E
2012E
2013E
2014E
Adjusted EBITDA ²
$0.8
$4.9
$11.0
$10.4
$9.8
% Margin
1.5%
2.5%
7.2%
6.8%
6.5%
Less: Cash Taxes
(0.6)
(3.7)
(4.4)
(4.6)
(4.9)
Less: Capex
(0.5)
(1.3)
(1.3)
(1.3)
(1.3)
Less: Investment in Trademarks & Copyrights
(0.6)
(2.3)
(2.3)
(2.3)
(2.3)
Less: Cash Restructuring
-
(12.0)
(22.7)
(5.0)
(1.0)
Less: Deferred Acquisition Payments
(0.3)
(0.8)
-
-
-
Less: London Club Financing
(4.0)
0.7
0.8
0.8
0.8
Less: Extraordinary Expenses
(3.1)
(1.5)
(1.0)
(1.0)
(13.5)
Plus: Asset Sale
-
-
10.0
-
-
WC (Use)/Benefit
2.7
(2.7)
0.3
(0.2)
(0.2)
Unlevered Free Cash Flow
($5.6)
($18.5)
($9.4)
($3.2)
($12.4)


PRIVATE AND CONFIDENTIAL
Discounted Cash Flow Overview ¹
Indicative Valuation Overview
Share Price Sensitivity Analysis ($)
Discounted Cash Flow Analysis
Base Case with Project Synergy
($ millions, except per share values)
33
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy
negotiations (where applicable)
1.Valuation date as of 9/30/2010; Balance sheet data as of 9/30/2010
2.Adjusted EBITDA includes stock based compensation
3.Assumes
a
change
of
control
and
fullydiluted
shares
outstanding
based
onthe
treasury
stock
method;
all
stock
options
and
restricted stock units outstanding vest
4.Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax related to sale is shielded by NOLs
5.Terminal EBITDA multiple is based on the LTM EBITDA multiple range of the Diversified Media and Licensing comparables
4Q 2010
2011E
2012E
2013E
2014E
Adjusted EBITDA ²
$3.7
$17.3
$23.7
$28.4
$32.2
% Margin
6.5%
14.1%
18.5%
21.1%
23.1%
Less: Cash Taxes
(0.6)
(4.2)
(4.5)
(5.0)
(5.3)
Less: Capex
(0.5)
(0.8)
(0.8)
(0.8)
(0.8)
Less: Investment in Trademarks & Copyrights
(0.6)
(2.3)
(2.3)
(2.3)
(2.3)
Less: Cash Restructuring
-
(11.9)
(20.5)
(1.0)
(1.0)
Less: Deferred Acquisition Payments
(0.3)
(0.8)
-
-
-
Less: London Club Financing
(4.0)
0.7
0.8
0.8
0.8
Less: Extraordinary Expenses
(15.1)
(0.5)
(3.3)
(2.8)
-
Plus: Asset Sale
-
41.0
-
-
-
WC (Use)/Benefit
4.7
(1.2)
0.3
(0.2)
(0.2)
Unlevered Free Cash Flow
($12.7)
$37.6
($6.4)
$17.2
$23.5
Valuation Summary
Terminal Value Summary
Present Value of Enterprise
$214.1
Terminal EBITDA
$32.2
Less: Debt
(115.0)
Terminal EBITDA Multiple
8.0x
Plus: Cash
27.6
Terminal Value
$257.8
Equity Value
$126.7
Present Value of Enterprise
$214.1
Shares Outstanding ³
34.8
Present Value of TV
$167.6
Share Price
$3.64
Terminal Value %  of EV
78.3%
Plus: Value of Art
4
$0.40
Implied Perpetuity Growth
Plus: Value of Mansion
4
$1.26
WACC
11.0%
Plus: Value of NOLs
$0.52
Terminal Unlevered FCF
$23.5
Share Price (Incl. Non Op. Assets)
$5.82
Implied Perpetuity Growth
1.7%
Terminal
Discount Rate (%)
Multiple
5
10.0%
10.5%
11.0%
11.5%
12.0%
6.0x
$2.63
$2.55
$2.46
$2.38
$2.31
7.0x
3.24
3.14
3.05
2.97
2.88
8.0x
3.84
3.74
3.64
3.54
3.44
9.0x
4.44
4.32
4.21
4.11
4.00
10.0x
5.04
4.91
4.79
4.67
4.56
Share Price Including Non Operating Assets
Terminal
Discount Rate (%)
Multiple
5
10.0%
10.5%
11.0%
11.5%
12.0%
6.0x
$4.89
$4.78
$4.67
$4.57
$4.47
7.0x
5.48
5.36
5.25
5.14
5.03
8.0x
6.07
5.94
5.82
5.70
5.58
9.0x
6.65
6.52
6.38
6.25
6.12
10.0x
7.24
7.10
6.95
6.81
6.67


PRIVATE AND CONFIDENTIAL
Discounted Cash Flow Overview ¹
Indicative Valuation Overview
Share Price Sensitivity Analysis ($)
Discounted Cash Flow Analysis
Upside Case with Project Synergy
($ millions, except per share values)
34
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy
negotiations (where applicable)
1.Valuation date as of 9/30/2010; Balance sheet data as of 9/30/2010
2.Adjusted EBITDA includes stock based compensation
3.Assumes
a
change
of
control
and
fullydiluted
shares
outstanding
based
onthe
treasury
stock
method;
all
stock
options
and
restricted stock units outstanding vest
4.Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax related to sale is shielded by NOLs
5.Terminal EBITDA multiple is based on the LTM EBITDA multiple range of the Diversified Media and Licensing comparables
4Q 2010
2011E
2012E
2013E
2014E
Adjusted EBITDA ²
$3.7
$17.3
$28.1
$35.9
$44.6
% Margin
6.5%
14.1%
21.5%
25.5%
29.5%
Less: Cash Taxes
(0.6)
(4.4)
(4.8)
(5.6)
(6.3)
Less: Capex
(0.5)
(0.8)
(0.8)
(0.8)
(0.8)
Less: Investment in Trademarks & Copyrights
(0.6)
(2.3)
(2.3)
(2.3)
(2.3)
Less: Cash Restructuring
-
(12.5)
(22.2)
(1.5)
(1.5)
Less: Deferred Acquisition Payments
(0.3)
(0.8)
-
-
-
Less: London Club Financing
(4.0)
0.7
0.8
0.8
0.8
Less: Extraordinary Expenses
(15.1)
(0.5)
(3.3)
(2.8)
-
Plus: Asset Sale
-
41.0
-
-
-
WC (Use)/Benefit
4.7
(0.2)
0.3
(0.2)
(0.2)
Unlevered Free Cash Flow
($12.7)
$37.7
($4.1)
$23.6
$34.4
Valuation Summary
Terminal Value Summary
Present Value of Enterprise
$293.0
Terminal EBITDA
$44.6
Less: Debt
(115.0)
Terminal EBITDA Multiple
8.0x
Plus: Cash
27.6
Terminal Value
$356.9
Equity Value
$205.6
Present Value of Enterprise
$293.0
Shares Outstanding ³
35.4
Present Value of TV
$232.1
Share Price
$5.81
Terminal Value %  of EV
79.2%
Plus: Value of Art
4
$0.40
Implied Perpetuity Growth
Plus: Value of Mansion
4
$1.24
WACC
11.0%
Plus: Value of NOLs
$0.42
Terminal Unlevered FCF
$34.4
Share Price (Incl. Non Op. Assets)
$7.87
Implied Perpetuity Growth
1.2%
Terminal
Discount Rate (%)
Multiple
5
10.0%
10.5%
11.0%
11.5%
12.0%
6.0x
$4.43
$4.32
$4.21
$4.10
$4.00
7.0x
5.26
5.13
5.01
4.89
4.77
8.0x
6.09
5.95
5.81
5.67
5.54
9.0x
6.92
6.76
6.61
6.46
6.31
10.0x
7.74
7.57
7.40
7.24
7.08
Share Price Including Non Operating Assets
Terminal
Discount Rate (%)
Multiple
5
10.0%
10.5%
11.0%
11.5%
12.0%
6.0x
$6.55
$6.42
$6.29
$6.17
$6.04
7.0x
7.37
7.22
7.08
6.94
6.80
8.0x
8.19
8.03
7.87
7.71
7.56
9.0x
9.01
8.83
8.66
8.49
8.32
10.0x
9.83
9.64
9.45
9.27
9.09


PRIVATE AND CONFIDENTIAL
Appendix E: Leveraged Buyout Analysis
35


PRIVATE AND CONFIDENTIAL
Indicative Sources and Uses
Implied Share Price Analysis ($)
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1.Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax is shielded by NOLs
2.Assumes cost of debt at 10.5%
3.Cash flow deficit in 4Q 2010 due to extraordinary items
4.Assumes a 4.0x 2012E leverage multiple
5.Assumes a 8.0x 2014E exit multiple
Leveraged Buyout Analysis
Base Case
($ millions, except per share values)
36
Sources
Amount
Cash on Balance Sheet
$ 27.6
Sale of Mansion and Art ¹
57.9
Senior Secured Notes (@ 4.0x 2012E EBITDA)²
81.2
Sponsor Equity
58.9
Total Sources
$ 225.6
Uses
Amount
Minimum Cash
$ 10.0
4Q 2010 Cash Flow Deficit ³
12.7
Implied Equity Purchase Price
85.4
Outstanding Debt
115.0
Financing Fee (@ 3.0% of Note Payable)
2.4
Cash
$ 225.6
Expected IRR %
25.0%
Implied Equity Purchase Price
$ 85.4
Shares Outstanding
34.4
Implied Share Price
$2.48
Expected
Exit Multiple – 2014E Adjusted EBITDA
4
IRR
6.0x
7.0x
8.0x
9.0x
10.0x
20.0%
2.04
2.41
2.78
3.14
3.50
22.5%
1.94
2.28
2.62
2.96
3.29
25.0%
1.85
2.17
2.48
2.80
3.10
27.5%
1.77
2.06
2.35
2.65
2.93
30.0%
1.70
1.97
2.24
2.51
2.77
Expected
2012E Leverage Multiple
5
IRR
3.0x
3.5x
4.0x
4.5x
5.0x
20.0%
2.64
2.71
2.78
2.85
2.92
22.5%
2.45
2.54
2.62
2.72
2.80
25.0%
2.27
2.38
2.48
2.59
2.69
27.5%
2.12
2.23
2.35
2.47
2.59
30.0%
1.97
2.11
2.24
2.37
2.50


PRIVATE AND CONFIDENTIAL
Indicative Sources and Uses
Implied Share Price Analysis ($)
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1.Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax is shielded by NOLs
2.Assumes cost of debt at 10.5%
3.Cash flow deficit in 4Q 2010 due to extraordinary items
4.Assumes a 4.0x 2012E leverage multiple
5.Assumes a 8.0x 2014E exit multiple
Leveraged Buyout Analysis
Upside Case
($ millions, except per share values)
37
Sources
Amount
Cash on Balance Sheet
$ 27.6
Sale of Mansion and Art ¹
57.9
Senior Secured Notes (@ 4.0x 2012E EBITDA)²
103.8
Sponsor Equity
112.9
Total Sources
$ 302.3
Uses
Amount
Minimum Cash
$ 10.0
4Q 2010 Cash Flow Deficit ³
12.7
Implied Equity Purchase Price
161.5
Outstanding Debt
115.0
Financing Fee (@ 3.0% of Note Payable)
3.1
Cash
$ 302.3
Expected IRR %
25.0%
Implied Equity Purchase Price
$ 161.5
Shares Outstanding
35.1
Implied Share Price
$4.59
Expected
Exit Multiple – 2014E Adjusted EBITDA
4
IRR
6.0x
7.0x
8.0x
9.0x
10.0x
20.0%
3.99
4.57
5.15
5.72
6.30
22.5%
3.79
4.32
4.86
5.39
5.92
25.0%
3.61
4.10
4.59
5.08
5.58
27.5%
3.45
3.90
4.36
4.81
5.26
30.0%
3.30
3.72
4.14
4.56
4.98
Expected
2012E Leverage Multiple
5
IRR
3.0x
3.5x
4.0x
4.5x
5.0x
20.0%
4.97
5.06
5.15
5.24
5.33
22.5%
4.64
4.75
4.86
4.97
5.08
25.0%
4.34
4.47
4.59
4.72
4.85
27.5%
4.07
4.21
4.36
4.50
4.65
30.0%
3.82
3.98
4.14
4.30
4.46


PRIVATE AND CONFIDENTIAL
Indicative Sources and Uses
Implied Share Price Analysis ($)
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1.Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax is shielded by NOLs
2.Assumes cost of debt at 10.5%
3.Cash flow deficit in 4Q 2010 due to extraordinary items
4.Assumes a 4.0x 2012E leverage multiple
5.Assumes a 8.0x 2014E exit multiple
Leveraged Buyout Analysis
Downside Case
($ millions, except per share values)
38
Sources
Amount
Cash on Balance Sheet
$ 27.6
Sale of Mansion and Art ¹
57.9
Senior Secured Notes (@ 4.0x 2012E EBITDA)²
44.2
Sponsor Equity
(8.1)
Total Sources
$ 121.5
Uses
Amount
Minimum Cash
$ 10.0
4Q 2010 Cash Flow Deficit ³
5.6
Implied Equity Purchase Price
(10.4)
Outstanding Debt
115.0
Financing Fee (@ 3.0% of Note Payable)
1.3
Cash
$ 121.5
Expected IRR %
25.0%
Implied Equity Purchase Price
$ (10.4)
Shares Outstanding
34.1
Implied Share Price
($0.30)
Expected
Exit Multiple – 2014E Adjusted EBITDA
4
IRR
6.0x
7.0x
8.0x
9.0x
10.0x
20.0%
(0.62)
(0.49)
(0.35)
(0.21)
(0.07)
22.5%
(0.58)
(0.45)
(0.32)
(0.20)
(0.07)
25.0%
(0.54)
(0.42)
(0.30)
(0.19)
(0.07)
27.5%
(0.50)
(0.39)
(0.29)
(0.18)
(0.07)
30.0%
(0.47)
(0.37)
(0.27)
(0.17)
(0.07)
Expected
2012E Leverage Multiple
5
IRR
3.0x
3.5x
4.0x
4.5x
5.0x
20.0%
(0.43)
(0.39)
(0.35)
(0.31)
(0.26)
22.5%
(0.43)
(0.37)
(0.32)
(0.27)
(0.22)
25.0%
(0.42)
(0.36)
(0.30)
(0.25)
(0.19)
27.5%
(0.42)
(0.35)
(0.29)
(0.22)
(0.15)
30.0%
(0.42)
(0.34)
(0.27)
(0.20)
(0.12)


PRIVATE AND CONFIDENTIAL
Indicative Sources and Uses
Implied Share Price Analysis ($)
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1.Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax is shielded by NOLs
2.Assumes cost of debt at 10.5%
3.Cash flow deficit in 4Q 2010 due to extraordinary items
4.Assumes a 4.0x 2012E leverage multiple
5.Assumes a 8.0x 2014E exit multiple
Leveraged Buyout Analysis
Base Case with Project Synergy
($ millions, except per share values)
39
Sources
Amount
Cash on Balance Sheet
$ 27.6
Sale of Mansion and Art ¹
57.9
Senior Secured Notes (@ 4.0x 2012E EBITDA)²
94.9
Sponsor Equity
91.2
Total Sources
$ 271.6
Uses
Amount
Minimum Cash
$ 10.0
4Q 2010 Cash Flow Deficit ³
12.7
Implied Equity Purchase Price
131.1
Outstanding Debt
115.0
Financing Fee (@ 3.0% of Note Payable)
2.8
Cash
$ 271.6
Expected IRR %
25.0%
Implied Equity Purchase Price
$ 131.1
Shares Outstanding
34.9
Implied Share Price
$3.76
Expected
Exit Multiple – 2014E Adjusted EBITDA
4
IRR
6.0x
7.0x
8.0x
9.0x
10.0x
20.0%
3.34
3.77
4.20
4.63
5.06
22.5%
3.18
3.57
3.97
4.36
4.76
25.0%
3.02
3.39
3.76
4.12
4.48
27.5%
2.89
3.23
3.56
3.90
4.24
30.0%
2.76
3.08
3.39
3.70
4.01
Expected
2012E Leverage Multiple
5
IRR
3.0x
3.5x
4.0x
4.5x
5.0x
20.0%
4.05
4.12
4.20
4.28
4.36
22.5%
3.77
3.87
3.97
4.07
4.16
25.0%
3.53
3.64
3.76
3.87
3.99
27.5%
3.30
3.43
3.56
3.70
3.83
30.0%
3.10
3.24
3.39
3.54
3.68


PRIVATE AND CONFIDENTIAL
Indicative Sources and Uses
Implied Share Price Analysis ($)
Source: Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
1.Assumes mansion and art is sold in 1.5 years time at a 11.0% WACC, all tax is shielded by NOLs
2.Assumes cost of debt at 10.5%
3.Cash flow deficit in 4Q 2010 due to extraordinary items
4.Assumes a 4.0x 2012E leverage multiple
5.Assumes a 8.0x 2014E exit multiple
Leveraged Buyout Analysis
Upside Case with Project Synergy
($ millions, except per share values)
40
Sources
Amount
Cash on Balance Sheet
$ 27.6
Sale of Mansion and Art ¹
57.9
Senior Secured Notes (@ 4.0x 2012E EBITDA)²
112.5
Sponsor Equity
130.2
Total Sources
$ 328.2
Uses
Amount
Minimum Cash
$ 10.0
4Q 2010 Cash Flow Deficit ³
12.7
Implied Equity Purchase Price
187.1
Outstanding Debt
115.0
Financing Fee (@ 3.0% of Note Payable)
3.4
Cash
$ 328.2
Expected IRR %
25.0%
Implied Equity Purchase Price
$ 187.1
Shares Outstanding
35.3
Implied Share Price
$5.30
Expected
Exit Multiple – 2014E Adjusted EBITDA
4
IRR
6.0x
7.0x
8.0x
9.0x
10.0x
20.0%
4.75
5.34
5.94
6.53
7.12
22.5%
4.51
5.06
5.60
6.15
6.69
25.0%
4.29
4.80
5.30
5.80
6.31
27.5%
4.10
4.56
5.03
5.49
5.96
30.0%
3.92
4.35
4.78
5.21
5.64
Expected
2012E Leverage Multiple
5
IRR
3.0x
3.5x
4.0x
4.5x
5.0x
20.0%
5.75
5.84
5.94
6.03
6.12
22.5%
5.37
5.49
5.60
5.72
5.83
25.0%
5.03
5.17
5.30
5.44
5.57
27.5%
4.72
4.87
5.03
5.18
5.34
30.0%
4.44
4.61
4.78
4.95
5.12


PRIVATE AND CONFIDENTIAL
Appendix F: Select Precedent Transactions
41


PRIVATE AND CONFIDENTIAL
Source: Public filings, Wall Street research
Select Precedent Transactions
42
Transaction Value / NTM
Date
Acquiror
Target
Transaction Value
($mm)
Revenue
EBITDA
Apr-10
Iconix
Peanuts Worldwide
175
2.3
10.4
Nov-09
Scripps Network Interactive
Travel Channel
975
4.5
12.4
Aug-09
Disney
Marvel
4,000
6.2
13.1
Jan-09
Lions Gate
TV Guide
255
1.8
8.3
Jul-08
NBCU, Bain, Blackstone
The Weather Channel
3,500
6.4
11.7
May-08
Cablevision
Sundance Channel
496
6.2
13.5
Oct-07
NBC Universal
Oxygen
875
4.7
12.5
Nov-06
Ripplewood
Readers Digest
2,400
1.0
11.3
Low
1.0x
8.3x
Mean
4.1
11.7
Median
4.6
12.1
High
6.4
13.5


PRIVATE AND CONFIDENTIAL
Appendix G: Miscellaneous
43


PRIVATE AND CONFIDENTIAL
Based
on
the
latest
appraisals
done
the
Mansion
(appraisal
as
of
October
2010)
and
art
(appraisal
as
of
July
2009)
are
worth:
-
Mansion: $54mm
-
Art:
$19.7mm
(~$2.5mm
was
sold
at
the
December
8
th
2010
auction,
currently
included
in
Management
projections)
The appraisal states the mansion could take up to 1.5 years to be sold
Mansion and art work discounted at Company WACC of 11.0%
Tax on sale of mansion and art are shielded by current NOLs
Value of Mansion and Art
Playboy
currently
has
$153.5mm
of
federal
NOLs
and
$131.4mm
of
local
and
state
NOLs
-
Any
sale
of
the
mansion
and
art
will
reduced
the
amount
of
NOLs
outstanding
Valuation of NOLs
based on Base Case Management projections; EBT from 2015 onwards grown at average year-over-year GDP growth rate of 3% (last 50 years)
35% federal tax rate and 4.5% effective local and state tax rate
NOLs
tax shield discounted at Company WACC of 11.0%
Value of NOLs
Source: Public filings, Management projections, includes stock-based compensation and adjusted for latest DIRECTV settlement and Project Synergy negotiations (where applicable)
Non-Operating Assets Valuation
44
Apprasial Value
($mm)
Selling Costs
Adjusted Value Post
Selling Costs ($mm)
Tax Basis
NOLs Used if Sold
Discount Period
(Years)
Amount
Per Share
Mansion
54.0
5.0%
51.3
0.7
50.6
1.5
43.9
$1.25
Art Work
17.2
5.0%
16.4
1.3
15.1
1.5
14.0
$0.40
Total
71.2
67.7
2.0
65.6
57.9
$1.66
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
EBT
(37.5)
(25.4)
(0.5)
5.6
11.4
11.8
12.1
12.5
12.8
13.2
13.6
14.0
Federal NOL Tax Shield
0.0
0.0
0.0
2.0
4.0
4.1
4.2
4.4
4.5
4.6
4.8
2.8
State & Local NOL Tax Shield
0.0
0.0
0.0
0.3
0.5
0.5
0.5
0.6
0.6
0.6
0.2
0.0
Total NOL Tax Shield
0.0
0.0
0.0
2.2
4.5
4.6
4.8
4.9
5.1
5.2
5.0
2.8
TOTAL NPV OF NOL TAX SHIELD
$19.7


PRIVATE AND CONFIDENTIAL
WACC Analysis
Source: Public filings, Bloomberg, Ibbotson
45
Comparable Companies
Levered Beta
Total Debt ($000)
Equity Value ($000)
Debt / Equity
Average Tax Rate
Unlevered Beta
Walt Disney Co.
1.06
$12,480
$78,523
15.9%
38.0%
0.97
News Corp.
1.48
13,318
40,308
33.0%
38.0%
1.23
Time Warner Inc.
1.08
16,557
36,795
45.0%
38.0%
0.84
Viacom, Inc.
1.18
6,752
24,866
27.2%
38.0%
1.01
Iconix Brand Group, Inc.
1.23
601
1,534
39.2%
38.0%
0.99
Discovery Communications, Inc.
0.84
3,613
16,560
21.8%
38.0%
0.74
Scripps Networks Interactive, Inc.
1.01
884
8,488
10.4%
38.0%
0.95
World Wrestling Entertainment Inc.
0.83
3
1,057
0.3%
38.0%
0.82
Liberty Starz Group
0.70
99
3,676
2.7%
38.0%
0.68
Outdoor Channel Holdings, Inc.
0.94
0
188
0.0%
38.0%
0.94
The New York Times Company
1.48
774
1,526
50.7%
38.0%
1.13
Gannett Co., Inc.
2.01
2,420
3,658
66.1%
38.0%
1.42
Meredith Corp.
1.43
285
1,643
17.4%
38.0%
1.29
Median
1.08
$884
$3,676
21.8%
38.0%
0.97
Average
1.17
$4,445
$16,832
25.4%
38.0%
1.00
Playboy Cost of Debt
Estimated Pre-Tax Cost of Debt
10.5%
Tax Rate
40.0%
After-Tax Cost of Debt
6.3%
Playboy Cost of Equity
Risk-Free Rate (10-yr Treasury)
3.3%
Average Peer Group Unlevered Beta
1.00
                  
Playboy Levered Beta
1.28
                  
Size Premium
2.7%
Market Risk Premium
6.0%
Playboy Cost of Equity
13.7%
Playboy Weighted Average Cost of Capital
Playboy Debt to Capitalization
31.3%
Playboy Equity to Capitalization
68.7%
Weighted Average Cost of Debt
2.0%
Weighted Average Cost of Equity
9.4%
Playboy WACC
11.4%