Playboy Reports 2nd Quarter Financial Results

Bob Johnson
CHICAGO – Playboy Enterprises, Inc. today announced its second quarter financial results ending June 30.

The company reported a net loss of $5.4 million that compares to a net loss in the prior year's quarter of $8.7 million, or 26 cents per basic and diluted share.

Second quarter income was $0.4 million, down from $3.6 million in the prior year on a 10 percent decline in revenues to $56 million from $62.2 million last year.

The results included a restructuring charge of $1.6 million, while the 2009 second quarter included a $9.1 million restructuring charge that was primarily related to the closing of the company's New York office.

Second quarter corporate expense rose 17 percent to $6.4 million from $5.5 million in the same quarter last year.

The company’s Licensing Group income increased by 35 percent but was offset by a loss in the Print/Digital Group which was due in part to litigation expense related to a lawsuit that terminated the Mexican edition of Playboy magazine.

The Print/Digital result was unfavorably affected by the company's decision to publish the equivalent of four issues last year versus three in the current year.

Playboy magazine circulation and advertising revenues declined as expected compared to last year reflecting both the company's decision to lower the magazine's rate base by 42 percent and to publish a combined double issue. As a result, domestic magazine revenues were off by $6.2 million, a 38 percent decline from the prior year.

The company said that it expects to record a 20 percent increase in third quarter advertising pages compared to last year in part because it will be publishing three issues of Playboy magazine this year versus two in the 2009 third quarter.

The magazine's expense structure benefited from the savings in production, circulation and marketing expense that resulted from the lower rate base, which helped offset the revenue decline.

Playboy's Chief Executive Officer Scott Flanders said, "The Licensing Group's strong performance in the quarter demonstrates the viability of our strategy to transform Playboy from a business operator into a brand management company. Through the years, we have successfully built a brand with unrivaled global appeal, and our future success hinges on finding partners who can best exploit that popularity. We already are seeing the benefits of our recent partnerships with AMI and IMG, and additional agreements are in development.

"Our goal of reducing overhead expense is a priority, and previous cost reduction initiatives helped offset the revenue decline in the second quarter. These efforts continue, and the staff reductions we made in the second quarter should yield annual savings of approximately $3 million,” Flanders said.

Playboy’s Entertainment Group's second quarter income was $1.6 million, down $0.4 million from $2 million in the same period last year with a $1.1 million decline in revenues to $22.7 million from $23.8 million. Playboy said ongoing cost reduction measures helped offset the lower revenue base.

An increase in subscription revenues led to improved Playboy TV revenues versus the prior year but was more than offset by continued weakness in video-on-demand sales, resulting in a four percent, or $0.4 million, decline in domestic TV revenues. Second quarter international TV revenues were off 9 percent to $9.4 million versus last year, reflecting softness in some European markets and increased competition from other providers.

Flanders said, "Looking to the second half of 2010, we expect the Print/Digital Group to return to modest profitability and to see continued solid growth in the Licensing Group's results." He added, "In TV, competition remains intense, and we are likely to see a decline in second half Entertainment Group profits compared to last year as a result. Although we are developing a new look and programming for Playboy TV, we do not expect to launch the new shows until the fourth quarter. We continue to make progress across our businesses in this transition year and look forward to building on our accomplishments."