Company's $5.4 million slide could have been worse
With an offer from its iconic founder to take the company private on the table, Playboy Enterprises reported on Thursday that it lost $5.4 million during the second quarter.
Playboy attributed the loss, in part, to a $1.6 million restructuring charge, legal fees related to a lawsuit at its Mexican edition and a continued slide in profits for Playboy’s print and digital group.
The $5.4 million net loss, however, was less than the $8.7 million slide the company reported during the same period last year, as Playboy continued its cost-cutting.
“Our goal of reducing overhead expense is a priority, and previous cost reduction initiatives helped offset the revenue decline in the second quarter,” Playboy chief Scott Flanders said in a statement accompanying the earnings report. “These efforts continue, and the staff reductions we made in the second quarter should yield annual savings of approximately $3.0 million.”
Playboy’s licensing group reported a 35 percent bump in income, but that was more than offset by the loss at Playboy’s print and digital operations. The group’s quarterly revenues were $20.9 million, down from $28.3 million in the prior year. The magazine’s domestic revenues fell 38 percent, or $6.2 million. (Playboy published one less issue during the quarter, which contributed to the decrease in print revenue.)
The company reported that group’s loss at $1.2 million, compared to a $2.3 million profit last year — and attributed most of that to a $1.6 million litigation expense related to the termination of a contract for a Mexican edition of Playboy magazine.
Flanders said the company expects a 20 percent increase in ad pages during the third quarter – mostly due to the publication of an additional issue – and “a return to modest profitability” in the second half.
The company announced on Tuesday that its board of directors has formed a special committee to evaluate the offer Hugh Hefner made last month to take the company private.
On July 9, Hefner offered $5.50 per share to acquire all of the outstanding shares of Class A and Class B common stock of PEI he doesn’t already own. Hef’s bid values Playboy at $185 million.
The move prompted Penthouse and Friendfinder Networks chief Marc Bell to make a counteroffer — worth $25 million more than Hef's — for the outstanding shares.
"Playboy isn't in play," Hefner responded. "I'm buying, not selling."