Playboy Enterprises' second quarter net income up 14% on 11% revenue increase

Business Wire, Feb 1, 1996

CHICAGO--(BUSINESS WIRE)--Feb. 1, 1996--Playboy Enterprises, Inc. (NYSE, PSE: PLA A, PLA) today reported a 14% increase in net income to $1.1 million, or $.06 per share, for the second quarter of fiscal 1996, which ended December 31, 1995, compared to net income of $1.0 million, or $.05 per share, for the same period last year. The results reflected an 11% increase in revenues to $71.6 million and a $1.6 million improvement in operating income to $2.9 million. Higher revenues from domestic pay television and royalties from international product sales were primarily responsible for the earnings increase.

Publishing

The Publishing Group reported fiscal 1996 second quarter operating income of $3.4 million, an 18% decline from the previous year quarter, on a 2% increase in revenues to $34.8 million. As anticipated, Playboy magazine was impacted by higher paper prices of $2.8 million, which represented a 65% increase in average paper price. Reducing the effect of the paper price increase were lower operating expenses for Playboy magazine and higher revenues and operating income from newsstand specials.

Playboy magazine operating income declined $.8 million, or 23%, to $2.6 million during the second quarter of fiscal 1996, reflecting the higher paper prices and lower operating expenses mentioned above. Magazine revenues were up 1% to $29.3 million. Playboy magazine's December 1995 issue featuring Farrah Fawcett was an exceptionally strong seller, contributing to a 14% increase in second quarter newsstand revenues. Second quarter advertising revenues declined 15% as a result of 17% fewer ad pages.

Operating income for Playboy-related businesses rose 18% to $1.9 million on a 12% increase in revenues to $5.5 million principally due to the publication of two additional newsstand specials during the second quarter and the continuing favorable impact of a $1.00 cover price increase for newsstand specials.

Catalogs

The Catalog Group also was affected by higher paper as well as postage prices but was able to report an 8% rise in operating income to $1.9 million on a 20% increase in revenues to $20.8 million for the second quarter of fiscal 1996. These results reflected significant revenue and profit growth from Critics' Choice Video's fall introduction of a competitive pricing strategy, which enabled the catalog to compete more effectively with other direct sellers and mass marketers.

Entertainment

The Entertainment Group reported operating income of $.7 million for the second quarter of fiscal 1996 compared to a loss of $.9 million for the same period last year on a 19% increase in revenues to $13.7 million. A 43% increase in domestic pay television revenues accounted for most of the group's operating improvement. Domestic pay television revenues rose $3.0 million to $9.8 million due largely to the explosive growth of DirecTV and PrimeStar satellite direct-to-home services, a 5% increase in Playboy TV's average pay-per-view buy rate, and revenues from AdulTVision, an adult movie pay-per-view flanker channel that the company launched in July 1995.

Playboy TV was available in 11.3 million cable addressable households at December 31, 1995, up 9% from the end of the second quarter last year and 4% from the end of the first quarter of fiscal 1996. Currently, 3.3 million households, or 29% of the 11.3 million cable addressable households, have access to Playboy TV on a 24-hour basis.

Domestic home video revenues were down $.1 million, or 5%, to $2.2 million.

International television and home video revenues of $1.4 million were 40% lower than last year's results primarily due to quarterly fluctuations in television programming sales and contracts. As a result, programming amortization expense for the second quarter of fiscal 1996 was down 13% to $4.2 million.

Product Marketing

Operating income for the Product Marketing Group more than quadrupled to $1.2 million on a 30% increase in revenues to $2.3 million chiefly due to higher royalties from product sales in Asia.

Other Items

Corporate administration and promotion expense increased 8% to $4.4 million in the second quarter of fiscal 1996 from $4.1 million in the previous year quarter.

Outlook

"We are pleased with the strong growth of our domestic pay television business and our ability to mitigate the impact of paper price and postal rate increases in our catalog business," said Playboy Chairman and Chief Executive Officer Christie Hefner. "In publishing, we expect to report a 6% increase in third quarter ad pages over the same period last year, although higher paper prices will continue to exert pressure on Playboy magazine's profitability for the remainder of the fiscal year."

Six-Month Results

The company reported net income of $2.2 million, or $.11 per share, for the first six months of fiscal 1996 compared to a net loss of $.2 million, or $.01 per share, for the same period in fiscal 1995.

Operating income for the first half of this fiscal year rose to $4.3 million from $.4 million for the same period last year.