Playboy Enterprises reports improved operating results

Business Wire, Nov 3, 1994

CHICAGO--(BUSINESS WIRE)--Nov. 3, 1994--Playboy Enterprises, Inc. (NYSE, PSE: PLAA, PLA) today reported a net loss of $1.2 million, or $.06 per share, for the fiscal 1995 first quarter ended September 30, 1994 compared to net income of $.1 million for the same period last year, which included a one-time tax benefit of $7.5 million. The results reflected a 20% increase in first quarter revenues to $57.2 million and an 88% improvement in operating results over the prior year period.

Playboy posted an operating loss of $.9 million for the first quarter of fiscal 1995 versus a loss of $6.9 million last year, which included a $2.5 million restructuring charge related to a 10% reduction in the company's work force. The fiscal 1995 first quarter operating improvement was primarily attributable to substantial revenue and profit growth from the catalog business, a sharp reduction in the Entertainment Group's operating loss on strong revenue growth, and the impact of the restructuring in the prior year period.

Publishing

For the first quarter of fiscal 1995, Publishing Group operating income rose to $3.5 million compared to $.8 million for the same period last year, which included restructuring costs of $1.0 million. First quarter revenues grew to $45.2 million, 19% over the same quarter last year. The Publishing Group's strong fiscal 1995 first quarter results were primarily due to significant growth from the catalog business and increased operating income from Playboy-related businesses, particularly newsstand specials.

Excluding fiscal 1994 restructuring expense of $.7 million, fiscal 1995 first quarter operating income for Playboy magazine was flat at $1.0 million. Higher revenues and lower department expenses and paper costs were offset by higher subscription acquisition amortization expense and editorial costs related to a celebrity pictorial. Playboy magazine revenues grew 7% to $25.1 million primarily due to a 17% rise in newsstand revenues and a 4% increase in subscription revenues. As reported earlier, advertising pages were up 5% over the first quarter of last year.

Fiscal 1995 first quarter operating income for Playboy-related businesses excluding restructuring expense of $.2 million in fiscal 1994 was up 39% to $2.2 million on a 26% increase in revenues to $6.9 million. The higher operating results were primarily attributable to the release of one additional newsstand special, The Playboy Book: Forty Years and royalties for the use of Playboy images on trading cards.

Catalog operating income for the first quarter of fiscal 1995 more than doubled to $1.5 million on a 47% increase in revenues to $13.3 million. Revenue and profit growth from the Critics' Choice Video and Playboy catalogs plus Collectors' Choice Music, which was launched in last year's second quarter, all contributed to this segment's strong performance.

Entertainment

The Entertainment Group reported an operating loss of $1.0 million for the first quarter of fiscal 1995 compared to a loss of $3.4 million, which included $.6 million in restructuring costs, for the prior year quarter. First quarter fiscal 1995 revenues increased 31% over the same period last year to $10.3 million.

The group's first quarter results reflected 18% growth in pay television profit contribution due primarily to higher pay-per-view buy rates from the rollout of Playboy TV as a 24-hour service to approximately 2 million homes plus a significant increase in direct-to-home sales. The number of addressable homes to which Playboy TV was available grew 4% from the end of the fourth quarter of fiscal 1994 to 9.9 million while the number of monthly subscribers was flat during the same period.

International revenues rose 89% to $1.8 million principally due to the completion of a multiyear, exclusive programming deal to enter the Taiwan TV market.

Domestic home video reported a significant improvement in profit contribution over the prior year quarter. The company said that the 31% growth in revenues and the profit level achieved this quarter are signals that the video release schedule established last year is on track.

Programming amortization expense rose 16% over the previous year's quarter to $4.1 million.

Product Marketing

First quarter Product Marketing results reflected a 29% rise in operating income from international licensing, primarily from higher Southeast Asian royalties and lower direct costs. The current quarter's results also included increased investments in corporate marketing research and brand marketing activities. The group's operating income of $.5 million was flat compared with the same period last year.

Other Items

Corporate administration and promotion expense declined to $3.8 million in the first quarter of fiscal 1995 from $4.8 million last year, which included $.8 million of restructuring costs.

Fiscal 1994 first quarter results included a one-time tax benefit of $7.5 million resulting from the company's adoption of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. For the first quarter of fiscal 1995, the company's use of cash for operating activities improved $6.2 million over the prior year quarter.