CHICAGO, IL – Playboy Enterprises, Inc. reported an increase in net income for the third quarter of 2005 over the same period last year, but shares of Playboy stock dropped in price early Wednesday, as the rise in profit was attributed primarily to lower interest costs, and overall Playboy revenues were essentially flat.Playboy reported that a profit for the quarter of $3.2 million, or $0.10 per basic and diluted share, a bump in net income over the same quarter in 2004 of $1.9 million or $0.06 per basic and diluted share.

“A significant decline in interest expense in the current year quarter, reflecting the refinancing of the company’s debt earlier this year, was primarily responsible for the improved net income,” Playboy stated in a press release. “Revenues increased $0.7 million to $80.9 million versus $80.2 million last year.”

Playboy’s publishing segment posted a loss for the quarter, and the entertainment segment’s income was down 7% compared to last year, while the company’s licensing division saw an increase in revenues of 21%.

The company’s release cited a 23% increase in paper prices, flat circulation numbers and a 19% drop in advertising revenues as the cause for the publishing division’s switch from a profit in Q3 of last year to this year’s loss of $0.7 million.

In its release, Playboy reported that operating income totaled $5.4 million, a drop from $6.7 million in Q3 of 2004. Higher profits from its licensing division could not offset the swing of its publishing sector from profit to loss and “a small decline in Entertainment Group operating income.”

“We are on track to delivering the higher revenues and improved net income and earnings per share in 2005 that we projected, despite a significantly more challenging publishing environment than we initially anticipated,” said Playboy Chairman and CEO Christie Hefner. “We continue to believe that our Licensing and Entertainment Groups will achieve our projected operating income growth of greater than 25% in 2005, more than offsetting an anticipated loss in Publishing.”

Shares of Playboy fell 7% in early trading today, and as of press time was down 1.84 from today’s opening price of $14.05, a drop of 12.05%.