Business News

Playboy Enterprises, Inc. Reports Fourth Quarter and Full-Year Results

Wednesday 16. February 2011 - Segment Income for the Licensing Group Nearly Doubles in the Quarter

Playboy Enterprises, Inc. (PEI) (NYSE: PLA, PLAA) today announced a net loss for the fourth quarter ended December 31, 2010, of $14.7 million, or $0.43 per basic and diluted share, compared to a net loss of $27.8 million, or $0.83 per basic and diluted share, in the year earlier period. The fourth quarter results included a $12.5 million charge related to a legal settlement in 2010 versus a total of $28.6 million of impairment and restructuring charges in 2009.
Revenues in the 2010 fourth quarter declined 9% to $55.0 million from $60.6 million in the prior year quarter. In the same time periods, the company reported segment income of $0.6 million, down from segment income of $2.1 million. Fourth quarter segment income for the Licensing Group nearly doubled compared to the 2009 quarter, although weaker performance in the media businesses and increased Corporate expense more than offset this gain.
PEI Chief Executive Officer Scott Flanders said: “We are pleased with our accomplishments through the year and in the fourth quarter in particular. In spite of the challenges created by a weak economy, changes in how consumers use media, the loss of a critical customer’s revenues in the second half and the burden of expenses related to the potential going-private transaction, we made significant progress in our businesses during 2010. We began implementing a strategy to transition Playboy to a brand management company, outsourced major portions of our publishing and licensing businesses, accelerated efforts to further reduce our overhead and opened two new Playboy clubs and closed deals for two additional venues. In December, we also held a successful sale of artwork from our extensive collection, although the majority of the proceeds are being recorded in 2011 and are not evident in our fourth quarter earnings.
“Our 2010 results demonstrate the viability of our brand management strategy. Our licensing business recorded its most profitable full year and single quarter ever as well as improved operating margins, all of which reflected the completion of new licensing agreements, continued growth in our relationships with existing licensees, and the rollout of new product lines and categories. The Playboy brand remains this company’s greatest asset, and we continue to find new opportunities to monetize its value,” Flanders said.
Entertainment
The Entertainment Group reported a segment loss of $0.9 million in the 2010 fourth quarter compared to segment income of $2.6 million in the prior year. Revenues were $18.8 million, down from $23.7 million, in the same time periods. The declines in revenues and profits were mainly due to a U.S. distributor withholding payment for the company’s TV programming, which last year totaled $3.4 million. The dispute with the distributor has since been settled, which resulted in a $12.5 million charge recorded in the 2010 fourth quarter.
The group was able to offset approximately $1.4 million of the year-over-year revenue decline through lower programming amortization expense and other favorable cost comparisons, primarily related to marketing and programming distribution.
Print/Digital
Fourth quarter 2010 Print/Digital segment income was $1.5 million, down $1.0 million from the prior year on a $6.2 million decline in revenues to $22.0 million.
Playboy magazine fourth quarter revenues were down 36% in the year-over-year comparison to $10.0 million, reflecting both a planned rate base reduction and the recognition in the 2009 fourth quarter of four issues of subscription revenues versus three in the 2010 fourth quarter. Reduced editorial and manufacturing costs and operating expenses helped offset the magazine’s lower revenue base.
Despite higher royalties from mobile licensees, fourth quarter digital revenues were down by $0.7 million in 2010 versus 2009 reflecting lower pay site and advertising sales.
Licensing
Licensing Group segment income nearly doubled in the 2010 fourth quarter to $9.7 million from $5.1 million in the prior year on a 62% increase in revenues to $14.2 million from $8.7 million. New licensing agreements in Asia and the introduction of a new product line in Western Europe contributed to a 79% gain in fourth quarter consumer products revenues to $12.8 million. The company auctioned selected pieces of art from its collection in the 2010 fourth quarter totaling $2.5 million, of which $0.3 million was recognized in December with the remainder being recorded in 2011.
Corporate and Other
Corporate expense increased to $9.7 million in the 2010 fourth quarter from $8.1 million in the previous year, primarily due to legal and advisory costs associated with the possible going-private transaction announced on January 10, 2011.
As a result of the ongoing tender offer to purchase all of PEI’s common stock at $6.15 per share, the company will not hold a conference call to discuss the fourth quarter results.