PLAYBOY ENTERPRISES, INC. reports second quarter 2009 results
CHICAGO, Tuesday.-Playboy Enterprises, Inc. (PEI) (NYSE: PLA, PLAA) today reported a net loss for the second quarter ended June 30, 2009, of $8.7 million, or $0.26 per basic and diluted share, which included a $9.1 million, or $0.27 per basic and diluted share, restructuring charge primarily related to the closing of the company?s New York office. Excluding that charge, PEI net income was $0.4 million or $0.01 per basic and diluted share. In the same period last year, the company reported a net loss of $3.2 million, or $0.10 per basic and diluted share.
Second quarter 2009 segment income was $3.6 million, which compares to a segment loss of $0.3 million in the 2008 second quarter. Increased profits in the Entertainment and Print/Digital businesses combined with lower corporate expense were responsible for the improvement. Year-over-year second quarter revenues declined from $73.4 million last year to $62.2 million in 2009.
Playboy’s Chief Executive Officer Scott Flanders said: ?It is clear that the cost- reduction initiatives that we began implementing late last year are responsible for the improvements in both segment income and margins. Our accomplishments were most evident in the Print/Digital and Entertainment segments, which reported significantly increased profitability in the 2009 second quarter compared to last year.
Efforts to better manage our cost structure while improving our customers? experience will continue, Flanders said. I believe this company has taken many of the right steps in outsourcing or exiting unprofitable businesses and that those which remain are critical to our future. However, I also believe we can create a more effective operating and financial structure, and our goal is to do just that.
While we continue to look at ways to improve our business model, particularly in our mature businesses, we have a parallel focus on expanding our revenue base, Flanders said. In the Licensing business, the global economic slowdown has affected consumer spending and, therefore, reduced royalty payments. To offset this weakness and continue growing this business, we are launching in new territories, including Latin America; working with our partners on a new entertainment venue, which we think could open before year end; and developing a number of new product categories. As a result, we continue to believe that the Licensing Group will show year-over-year revenue and income growth in the 2009 second half, which we expect will be driven by strong fourth quarter results.
?The media businesses will face a more challenging second half with fewer near-term opportunities to grow revenues. As a result, we do not expect the media businesses to report top- or bottom-line improvement in the second half of 2009 compared to the same period last year, Flanders said.
The Entertainment Group reported second quarter 2009 segment income of $2.0 million, which compares to a segment loss of $0.2 million in the same period last year. Cost-savings initiatives were largely responsible for the profit improvement. Revenues in the same time periods declined to $23.8 million from $29.6 million, primarily reflecting the effects of a stronger U.S. dollar on international TV revenues as well as the continuation of trends that have reduced our domestic TV market share.
In the 2009 second quarter, domestic TV revenues declined $2.1 million, to $12.7 million, compared to the same period last year, led by lower movie network sales resulting from the ongoing transition from dedicated linear networks to a more competitive video-on-demand platform. The Group?s revenues in the quarter also were negatively affected by lower DVD revenues, which reflected the company?s decision last year to exit this business. The year-over-year decline in the Entertainment Group?s total revenues was more than offset by lower staffing, marketing, programming and other expenses.
The Print/Digital Group reported an increase in second quarter 2009 segment income to $2.3 million from $0.1 million in the prior year period. Revenues for the Group were $28.3 million in the quarter, down $3.9 million from second quarter 2008.
Expense reduction efforts together with the decision to combine the July and August issues of Playboy magazine into one editorial package that was cost effective to produce and distribute were primarily responsible for the Group?s improved second quarter 2009 segment income. Primarily as a result of the double issue, Playboy magazine?s circulation revenues grew 16% in the 2009 second quarter to $12.9 million compared to the same period last year, nearly offsetting a 38% decline in advertising revenues to $3.5 million in the same time periods.
The company said that it expects to report a 47% decline in Playboy magazine ad pages in the 2009 third quarter, when the company will publish one fewer issue than in the prior year period.
Lower paysite, e-commerce and advertising sales in the 2009 second quarter were responsible for the decline in Digital revenues and profits versus the same period last year.
Second quarter 2009 Licensing Group revenues and segment income were $10.1 million and $4.8 million, down 14% and 22%, respectively, from the 2008 second quarter. The effects of the global recession on consumer spending led to lower product sales, particularly in Western Europe. The resulting revenue decline was partially offset by increased sales in Latin America.
Corporate and Other
Corporate expense declined 12% in the 2009 second quarter to $5.5 million from $6.2 million in the previous year?s second quarter.
In May 2009, PEI closed its New York office and recorded a restructuring charge in the second quarter 2009 of $9.1 million, which primarily reflects the discounted value of the anticipated loss on the remaining lease net of the sublease income based on current broker estimates. In second quarter 2008, the company reported an impairment charge of $0.1 million related to the sale of assets.
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