August 1-15, 2004 Edition

Penguin Group

Reports 2004

First Half Results

New York, NY/07/26/04—The Penguin Group, part of Pearson (FTSE: PSON; NYSE: PSO), the international media company, today reported its operating results for the first half of 2004.

Penguin Group Overview

Penguin Group’s sales for the first half of this year were level with last year but profits were down. Penguin generates the majority of its revenues in dollars but reports its results in sterling. The weakness of the dollar is the principal reason for the decline in reported profits at the half-year stage. The success of our publishing program, particularly in the U.S., mitigated the effect of increased investment in new channel initiatives and start up problems at a new warehouse in the UK.

Penguin U.S. Market Overview

In the U.S., Penguin Group’s largest market, first half sales and profits were up significantly at the half-year stage. This strong growth was driven by a number of key elements, most importantly: the company’s ongoing successful new imprint strategy, another Oprah Book Club selection, the release of one of the Group’s strongest nonfiction lists ever, a record number of homegrown bestsellers, brand-name bestsellers and a New York Times bestseller performance that is well ahead of last year’s pace.

During the first half of 2004, Penguin Group (USA) had a total of 75 titles on The New York Times bestseller list (adult hardcover, adult paperback and children’s), a 27 percent increase above 2003’s mid-year total of 59. The Group was ahead in every category (40 hardcovers, 10 above last year; 27 paperbacks, four above last year; eight Young Readers titles, two above last year). Penguin Group (USA) also benefited from contributions from its new imprints, including The Penguin Press, Portfolio and Gotham Books.

New Imprint Strategy Yields Impressive Results

The company’s new imprint strategy shifted into high gear in the first half of 2004, when The Penguin Press, Portfolio and Gotham Books each released New York Times bestsellers.

The Penguin Press is already profitable after only six months since the debut of its first titles, two of which landed on The New York Times bestseller list – Alexander Hamilton by Ron Chernow on the list for 12 weeks and counting, and Ghost Wars by Steve Coll on the list for seven weeks. Portfolio has continued to build on its very steady bestseller track record established in its debut year in 2003, expanding its success in 2004 with another New York Times bestseller, David Cay Johnson’s Perfectly Legal, which was on the list for six weeks, while Seth Godin’s Purple Cow has spent 11 months and counting on the Business Week bestseller list. Gotham Books had its first New York Times bestseller with Lynne Truss’ Eats, Shoots & Leaves, which hit #1 and has stayed on the list for 15 weeks and counting. There are now over 840,000 copies of Eats, Shoots & Leaves in print after 18 printings.

Anna Karenina is The Oprah Book Club’s Summer Selection

When it was announced at the end of May that the Penguin Classics Deluxe Edition of Leo Tolstoy’s Anna Karenina was the Summer Selection of Oprah’s Book Club, the title debuted at #1 on The New York Times, USA Today and Publishers Weekly bestseller lists simultaneously. This book normally sells in the neighborhood of 20,000 annually, but there are now more than 960,000 copies of this Penguin Classics Deluxe Edition in print. This is the second year in a row that Oprah has pointed her powerful wand in the direction of Penguin Group (USA), with Anna Karenina following the bestseller path that John Steinbeck’s East of Eden blazed when it became “The Book That Brought Oprah’s Book Club Back” last summer.

An Unprecedented Nonfiction List

In the first half of this year, Penguin Group (USA) released one of its strongest nonfiction lists ever. To date, the Group has had 27 nonfiction books on The New York Times bestseller list (17 hardcover and 10 paperback titles). This represents a 41 percent increase over the first half of 2003, when we placed 16 books on the Times nonfiction bestseller list (nine hardcover and seven paperback titles). Among the many weeks that the company’s nonfiction titles appeared on the Times hardcover nonfiction bestseller list, Penguin Group owned that list for the week of May 2nd with an unprecedented seven nonfiction titles, giving the house more than 40 percent of the nonfiction list that week.

This was an astounding achievement that far exceeded any competitor and established a new landmark for the house.

Homegrown Successes Land on The New York Times Bestseller List

The U.S. Group set a new record for “homegrown bestsellers” in the first half of 2004, creating 19 New York Times bestsellers. Among these titles were: The Jane Austen Book Club by Karen Joy Fowler (one of the most talked about and best-reviewed books of 2004, with more than 175,000 copies in print to date); I Am Jesse James by Jesse James, Eric Hameister, Dave McClain and Curtis Cummings; Blue Blood by Edward Conlon;

The Faith of George W. Bush by Stephen Mansfield; Tampa Burns by Randy Wayne White; Shadowmancer by G.P. Taylor; and The Pentagon’s New Map by Thomas P.M. Barnett.

Penguin Young Readers Group Emerging Authors Earn First Half Bestsellers

At Penguin Young Readers Group, in addition to major titles from such well-known names as Madonna and Eric Carle, a number of emerging authors made exceptional debuts during the first half of 2004. Shadowmancer, the first novel from UK author G.P. Taylor, rose to #1 on The New York Times Children’s Chapter Book bestseller list amid unprecedented media coverage all across the US. There are over 300,000 copies in print, and Taylor’s second book, Wormwood, will publish in September. Eagle Strike launched British sensation Anthony Horowitz onto the Hardcover Fiction list for the first time. The Young Readers Group has been building this author for several years and is thrilled that he’s made it to the next level. Walter the Farting Dog, while no stranger to The New York Times list, hit it with Penguin Young Readers Group for the first time this spring and made its way to #1. We’ve taken an established character, brought him to Penguin for a multi-book deal, and have kept him on The New York Times list for 17 weeks and counting.

Perennial Brand Name Bestselling Authors Deliver

Penguin Group (USA) is home to one of the industry’s most prestigious award-winning, brand name bestselling authors. Among our New York Times bestselling authors with books that hit The New York Times bestseller list in the first half of 2004 were Tom Clancy, Nora Roberts, John Sandford, Clive Cussler, Catherine Coulter, Daniel Silva, J.D. Robb, Robert B. Parker, Jayne Ann Krentz, Amanda Quick, Harlan Coben and Dave Pelzer.

Looking Ahead

In the second half of 2004, we expect growth to continue ahead of the overall U.S. publishing industry, with major frontlist titles across all categories, and expect to hit our targets for the full year.

Penguin Group (USA) will benefit from another strong publishing schedule in the second half, which includes major books from many of our award-winning bestselling authors. In hardcover fiction, we have new titles from Patricia Cornwell, Nora Roberts, T.C. Boyle, Ken Follett, Sue Grafton, Eric Jerome Dickey and John Jakes, among others. We also have a strong fall hardcover nonfiction list, including titles from Jan Karon, Garrison Keillor, Sylvia Browne, Cornel West, Jim Hightower, and His Holiness the Dalai Lama, among others. In paperback, Penguin Group (USA) will be releasing fiction titles from such bestselling authors as Jan Karon, Clive Cussler, Diane Johnson and Eric Jerome Dickey, among others. Our fall nonfiction paperback list includes bestselling titles by Al Franken, Nathaniel Philbrick, Sylvia Browne, Marianne Williamson and A. Scott Berg, among others.

John Makinson, Penguin Group Chairman and CEO, commented, “The weakness of the dollar has had a marked effect on Penguin’s reported profits during the first six months of the year. We have also been grappling with start-up problems at a new warehouse in the UK, although the profit impact of this disruption has been substantially offset by an excellent publishing performance on both sides of the Atlantic.”

Penguin Group (USA) Inc. is the U.S. member of the internationally renowned Penguin Group. Penguin Group (USA) is one of the leading U.S. adult and children’s trade book publishers, owning a wide range of imprints and trademarks, including Berkley Books, Dutton, Frederick Warne, G.P. Putnam’s Sons, Grosset & Dunlap, New American Library, Penguin Books, The Penguin Press, Philomel, Plume, Puffin, Riverhead Books and Viking, among others. The Penguin Group ( is part of Pearson plc, the international media company.