<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- --------------------
COMMISSION FILE NUMBER 1-6813
PLAYBOY ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-2258830
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
680 NORTH LAKE SHORE DRIVE, CHICAGO, IL 60611
(Address of principal executive offices) (Zip Code)
(312) 751-8000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
As of April 30, 1995, there were 4,713,954 shares of Class A Common Stock,
par value $.01 per share and 15,275,674 shares of Class B Common Stock, par
value $.01 per share, outstanding.
<PAGE> 2
PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
____________
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
Part I. Financial Information
Condensed Consolidated Statements of Operations
for the Quarters Ended March 31, 1995 and 1994 3
Condensed Consolidated Statements of Operations
for the Nine Months Ended March 31, 1995 and 1994 4
Condensed Consolidated Balance Sheets
at March 31, 1995 and June 30, 1994 5
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended March 31, 1995 and 1994 6
Notes to Condensed Consolidated Financial
Statements 7-9
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-17
Part II. Other Information 18-19
</TABLE>
2
<PAGE> 3
PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the Quarters Ended March 31 (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Net revenues $ 58,025 $ 51,800
-------- --------
Costs and expenses:
Cost of sales (51,019) (48,795)
Selling and administrative expenses (6,770) (7,955)
Restructuring expenses - (425)
Unusual items - (1,754)
-------- --------
Total costs and expenses (57,789) (58,929)
-------- --------
Operating income (loss) 236 (7,129)
-------- --------
Nonoperating income (expense):
Investment income 62 6
Interest expense (221) (183)
Other, net (95) (213)
-------- --------
Total nonoperating expense (254) (390)
-------- --------
Loss from continuing operations
before income taxes (18) (7,519)
Income tax expense (329) (246)
-------- --------
Loss from continuing operations (347) (7,765)
Loss on disposal of discontinued operations - (620)
-------- --------
Net loss $ (347) $ (8,385)
======== ========
Weighted average number of common shares outstanding 19,989 19,951
======== ========
Loss per common share:
From continuing operations $ (.02) $ (.39)
From discontinued operations - (.03)
-------- --------
Net loss $ (.02) $ (.42)
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the Nine Months Ended March 31 (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Net revenues $179,906 $159,022
-------- --------
Costs and expenses:
Cost of sales (157,989) (145,671)
Selling and administrative expenses (21,254) (24,177)
Restructuring expenses - (2,875)
Unusual items - (1,754)
-------- --------
Total costs and expenses (179,243) (174,477)
-------- --------
Operating income (loss) 663 (15,455)
-------- --------
Nonoperating income (expense):
Investment income (expense), net 93 (130)
Interest expense (564) (481)
Other, net (56) (155)
-------- --------
Total nonoperating expense (527) (766)
-------- --------
Income (loss) from continuing operations before
income taxes and cumulative effect of change
in accounting principle 136 (16,221)
Income tax expense (710) (737)
-------- --------
Loss from continuing operations before
cumulative effect of change in accounting principle (574) (16,958)
Loss on disposal of discontinued operations - (620)
-------- --------
Loss before cumulative effect of change
in accounting principle (574) (17,578)
Cumulative effect of change in accounting principle - 7,500
-------- --------
Net loss $ (574) $(10,078)
======== ========
Weighted average number of common shares outstanding 19,982 19,919
======== ========
Income (loss) per common share:
Loss before cumulative effect of change
in accounting principle:
From continuing operations $ (.03) $ (.86)
From discontinued operations - (.03)
-------- --------
Total (.03) (.89)
Cumulative effect of change in accounting principle - .38
-------- --------
Net loss $ (.03) $ (.51)
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
(Unaudited)
March 31, June 30,
1995 1994
--------- ---------
<S> <C> <C>
Assets
- - ------
Cash and cash equivalents $ 1,312 $ 1,258
Receivables, net of allowances for doubtful accounts of
$4,738 and $3,155, respectively 19,952 20,590
Inventories 20,631 19,268
Programming costs 28,999 27,658
Deferred subscription acquisition costs 11,340 10,086
Other current assets 12,089 8,808
-------- --------
Total current assets 94,323 87,668
-------- --------
Property and equipment, at cost 36,484 36,521
Accumulated depreciation (22,478) (20,867)
-------- --------
Property and equipment, net 14,006 15,654
-------- --------
Programming costs - noncurrent 5,800 4,108
Trademarks 10,828 10,106
Net deferred tax assets 7,276 7,153
Other noncurrent assets 6,820 7,232
-------- --------
Total assets $139,053 $131,921
======== ========
Liabilities
- - -----------
Short-term borrowings $ 7,700 $ 6,000
Current financing obligations 332 1,827
Accounts payable 17,160 13,680
Accrued salaries, wages and employee benefits 2,512 3,811
Reserves for losses on disposals of discontinued operations 788 890
Income taxes payable 751 780
Deferred revenues 46,974 41,734
Other liabilities and accrued expenses 8,432 8,040
-------- --------
Total current liabilities 84,649 76,762
Long-term financing obligations 683 1,020
Other noncurrent liabilities 7,836 7,828
-------- --------
Total liabilities 93,168 85,610
-------- --------
Shareholders' Equity
- - --------------------
Common stock, $.01 par value
Class A - 7,500,000 shares authorized; 5,042,381 issued 50 50
Class B - 30,000,000 shares authorized; 16,477,143 issued 165 165
Capital in excess of par value 36,397 36,381
Retained earnings 17,343 17,917
Less cost of treasury stock (8,070) (8,202)
-------- --------
Total shareholders' equity 45,885 46,311
-------- --------
Total liabilities and shareholders' equity $139,053 $131,921
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Nine Months Ended March 31 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Cash Flows From Operating Activities
- - ------------------------------------
Net loss $ (574) $(10,078)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation of property and equipment 1,900 2,101
Amortization of intangible assets 1,298 1,148
Amortization of investments in entertainment programming 13,674 12,725
Investments in entertainment programming (16,707) (13,686)
Cumulative effect of change in accounting principle - (7,500)
Net change in operating assets and liabilities 744 4,243
Net cash provided by (used for) discontinued operations (102) 543
Increase in reserve for loss on disposal of discontinued operations - 620
Other, net 38 25
------- -------
Net cash provided by (used for) operating activities 271 (9,859)
------- -------
Cash Flows From Investing Activities
- - ------------------------------------
Additions to property and equipment (281) (646)
Acquisition of Critics' Choice Video, Inc. minority interest - (1,510)
Net decrease in short-term investments - 50
Other, net 16 4
------- --------
Net cash used for investing activities (265) (2,102)
------- -------
Cash Flows From Financing Activities
- - ------------------------------------
Increase in short-term borrowings 1,700 11,000
Repayment of debt (1,850) (350)
Proceeds from exercise of stock options 198 350
------- -------
Net cash provided by financing activities 48 11,000
------- -------
Net increase (decrease) in cash and cash equivalents 54 (961)
Cash and cash equivalents at beginning of period 1,258 1,903
------- -------
Cash and cash equivalents at end of period $ 1,312 $ 942
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the Quarters and Nine Months Ended March 31, 1995 and 1994
(A) BASIS OF PREPARATION
The financial information included herein is unaudited, but in the opinion
of management, reflects all adjustments (which include only normal
recurring adjustments, except for the restructuring expenses and unusual
items described below) necessary for a fair presentation of the results
for the interim periods. The interim results of operations and cash flows
are not necessarily indicative of such results and cash flows for the
entire year. These financial statements should be read in conjunction
with the financial statements and notes thereto contained in the Annual
Report on Form 10-K for the fiscal year ended June 30, 1994 of Playboy
Enterprises, Inc. and Subsidiaries (the "Company").
(B) RESTRUCTURING EXPENSES
A $2.5 million charge was recorded in the quarter ended September 30, 1993
related to a reduction in the Company's work force of approximately 10%.
This charge primarily related to employee termination payments associated
with approximately 60 positions that were eliminated through a combination
of early retirement, attrition and layoffs. An additional $0.4 million
charge, primarily related to employee termination payments, was recorded
in the quarter ended March 31, 1994 due to further reductions in overhead
costs. Employee termination payments of $0.1 million and $0.5 million,
respectively, were made in the quarter and nine months ended March 31,
1995 related to restructurings in the prior year.
(C) UNUSUAL ITEMS
The $1.8 million charge for unusual items in the quarter and nine months
ended March 31, 1994 consisted of a $1.2 million market value adjustment
for a documentary film, Hugh Hefner: Once Upon a Time, a $0.4 million
write-off of photo inventory that would not be published in Playboy
magazine and a $0.2 million real estate tax obligation related to the
Company's former office space in Los Angeles, California.
(D) INVESTMENT INCOME (EXPENSE), NET
The Company realized a net loss of $150,000 in the nine months ended March
31, 1994 related to the maturity of offsetting options on interest rate
swap agreements entered into late in fiscal 1993.
(E) INCOME TAXES
The adoption of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, in fiscal 1994 resulted in the recognition of
$7.5 million, or $0.38 per share, of deferred federal tax benefits. This
amount is included in the net loss for the nine months ended March 31,
1994 as "Cumulative effect of change in accounting principle." The
Company's net deferred tax asset at March 31, 1995 remained at $7.5
million. As reported in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1994, the significant components of the net
deferred tax asset include net operating loss, capital loss and tax credit
carryforwards. Of the $7.5 million net deferred tax asset included in the
Condensed Consolidated Balance Sheet at March 31, 1995 and June 30, 1994,
$0.2 million and $0.3 million, respectively, are included in "Other
current assets" with the remainder segregated as "Net deferred tax
assets".
Realization of deferred tax benefits is dependent upon the Company's
ability to generate taxable income in future years. The recognition of
benefits in the financial statements is based upon projections by
management of future operating income and the anticipated reversal of
temporary differences that will result in taxable income. Projections of
future earnings were based on adjusted historical earnings.
7
<PAGE> 8
In order to fully realize the net deferred tax asset of $7.5 million, the
Company will need to generate future taxable income of approximately $22.1
million. Management believes that it is more likely than not that the
required amount of taxable income will be realized. Management will
periodically reconsider the assumptions utilized in the projection of
future earnings and, if warranted, increase or decrease the amount of
deferred tax benefits recognized through an adjustment to the valuation
allowance.
(F) INVENTORIES
Inventories, which are stated at the lower of cost (average cost, specific
cost and first-in, first-out) or market, consisted of the following (in
thousands):
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
--------- ---------
<S> <C> <C>
Paper $ 5,775 $ 4,471
Editorial and other prepublication costs 5,875 7,252
Merchandise finished goods 8,981 7,545
--------- ---------
Total inventories $ 20,631 $ 19,268
========= =========
</TABLE>
(G) PROGRAMMING COSTS
Effective with the fourth quarter of fiscal 1994, the Company revised its
amortization method for licensed film costs as a result of its decision to
offer Playboy Television on a 24-hour basis, which resulted in a change in
the scheduling of licensed films. Licensed films will be aired throughout
the term of the license period, and related costs will be amortized over
such period, generally three years. This change in accounting estimate
resulted in a decrease in programming expense (and a decrease in the
Company's net loss) of $0.2 million, or $0.01 per share, and $0.7 million,
or $0.04 per share, for the quarter and nine months ended March 31, 1995,
respectively. There was no related net income tax effect as the
additional income tax expense resulting from the lower programming expense
was offset by a corresponding change in the valuation allowance related to
the deferred tax asset established with the adoption of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes.
(H) TREASURY STOCK
Treasury stock consisted of 328,427 Class A common shares and 1,201,583
Class B common shares at March 31, 1995. At June 30, 1994, treasury stock
consisted of 332,927 Class A common shares and 1,222,254 Class B common
shares.
(I) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
During the nine months ended March 31, 1994, the Company had noncash
investing and financing activities related to its July 1988 purchase of an
80% interest in Critics' Choice Video, Inc. Effective July 1, 1993, the
Company acquired the remaining 20% interest in Critics' Choice Video, Inc.
for $3.0 million, which consisted of $1.5 million in cash and one-year
promissory notes totaling $1.5 million, which were paid July 1, 1994.
(J) REVOLVING LINE OF CREDIT
In March 1995, the Company and its banks extended the maturity of the
existing $30.0 million revolving line of credit to September 30, 1997.
The revolving line of credit is collateralized by substantially all of the
Company's assets and will decrease to $19.5 million at December 31, 1995.
The credit agreement requires the Company to maintain two financial
covenants pertaining to net worth and leverage.
8
<PAGE> 9
(K) ADVERTISING COSTS
Effective July 1, 1994, the Company adopted the provisions of Statement of
Position 93-7, Reporting on Advertising Costs, which is applicable to
annual financial statements. Management believes that the adoption of
these provisions will not have a material impact on the Company's results
of operations or financial condition.
(L) STOCK INCENTIVE PLAN
In February 1995, the Board of Directors of the Company adopted the 1995
Stock Incentive Plan ("the Plan"), which is subject to stockholder
approval. The Plan, which consists of two agreements, authorizes the
issuance of 1,176,750 shares of the Company's Class B common stock. The
Incentive Stock Option Agreement authorizes the grant of options to key
employees to purchase shares of Class B common stock at a price that is
equal to the fair market value at the date of grant. As of March 31,
1995, options to purchase 452,500 Class B common shares had been granted
under the Plan at a price of $9.13 per share. Such options were granted
for a term of ten years and are exercisable beginning in February 1996 in
cumulative annual installments of 25 percent each year. The Restricted
Stock Agreement provides for the issuance of Class B common stock to key
employees subject to certain restrictions. Under the terms of the
agreement, restricted stock awards in the amount of 516,250 Class B common
shares were granted during the quarter ended March 31, 1995. Such awards
can be accelerated if at the end of specified periods certain predefined
performance objectives covering a predefined performance period are met.
However, all restrictions will lapse automatically and any remaining
unvested stock will be issued on June 30, 2005. For the fourth quarter
and fiscal year ended June 30, 1995, the Company expects $0.2 million of
compensation expense to be recorded related to the Plan.
(M) CONTINGENCIES
In January 1993, the Company received a General Notice from the United
States Environmental Protection Agency (the "EPA") as a "potentially
responsible party" ("PRP") in connection with a site identified as the
Southern Lakes Trap & Skeet Club, apparently located at the Resort-Hotel
in Lake Geneva, Wisconsin (the "Resort"), formerly owned by a subsidiary
of the Company. The Resort was sold by the Company's subsidiary to LG
Americana-GKP Joint Venture in 1982. Two other entities were also
identified as PRPs in the notice. The notice relates to actions that may
be ordered taken by the EPA to sample for and remove contamination in
soils and sediments, purportedly caused by skeet shooting activities at
the Resort property. During fiscal 1994, the EPA advised the Company of
its position that the area of land requiring remediation is approximately
twice the size of the initial site, which resulted in an increase in the
Company's reserve for this matter. As a result, a $0.6 million loss on
disposal of discontinued operations was recorded in the quarter and nine
months ended March 31, 1994. The Company believes that it has established
adequate reserves, which totaled $0.8 million at March 31, 1995, to cover
the eventual cost of its anticipated share (based on an agreement with one
of the other PRPs) of any remediation that may be agreed upon. The
Company is also reviewing available defenses, insurance coverage and
claims it may have against third parties.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS
The Company's revenues increased 12% to $58.0 for the quarter ended March
31, 1995 compared to $51.8 for the prior year quarter. Revenues were $179.9
for the nine months ended March 31, 1995, a 13% increase over revenues of
$159.0 for the nine months ended March 31, 1994. These increases were
primarily due to higher revenues from the catalog, pay television,
Playboy-related and domestic home video businesses.
The Company reported operating income of $0.2 for the quarter ended March
31, 1995 compared to an operating loss of $7.1 in the prior year quarter. This
increase was largely due to $4.7 of charges in the prior year quarter as
described in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1994 related to unusual items, the establishment of various reserves,
a reduction in carrying value of inventories and restructuring. Also
contributing to the favorable quarter-to-quarter comparison were significant
improvements in the operating performances of the Publishing and Entertainment
Groups.
For the nine months ended March 31, 1995, the Company reported operating
income of $0.7 compared to an operating loss of $15.5 in the prior year. This
increase was largely due to significant improvements in the operating
performances of the Publishing and Entertainment Groups. In addition, the
favorable year-to-year comparison was impacted by a $2.9 restructuring charge
and the previously discussed charges for unusual items, establishment of
various reserves and reduction in carrying value of inventories in the prior
year. The $2.9 restructuring charge primarily related to employee termination
payments as a result of a reduction in the Company's work force of
approximately 10%.
The net loss for the quarter ended March 31, 1995 was $0.3, or $0.02 per
share, compared to a net loss of $8.4, or $0.42 per share, for the prior year
quarter. For the nine months ended March 31, 1995, the net loss was $0.6, or
$0.03 per share, compared to a net loss of $10.1, or $0.51 per share, for the
prior year period. A $0.6 loss on disposal of discontinued operations in the
prior year quarter and nine-month period resulted from increasing the reserve
related to the environmental cleanup of a site in Lake Geneva, Wisconsin
formerly owned by a subsidiary of the Company. The net loss for the nine
months ended March 31, 1994 also included a one-time tax benefit of $7.5 that
resulted from the adoption of Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes, which required a change in the method of
accounting for income taxes.
The Company's operating income of $0.2 and net loss of $0.3, or $0.02 per
share, for the quarter ended March 31, 1995 compared to an operating loss of
$4.9 and a net loss of $6.2, or $0.31 per share, for the quarter ended March
31, 1994, excluding the impact of a $0.4 restructuring charge and a $1.8 charge
related to unusual items. The Company's operating income of $0.7 and net loss
of $0.6, or $0.03 per share, for the nine months ended March 31, 1995 compared
to an operating loss of $10.8 and a net loss of $12.9, or $0.65 per share, for
the nine months ended March 31, 1994, excluding the impact of the $2.9
restructuring charge, the $1.8 charge related to unusual items and the $7.5
one-time tax benefit.
Several of the Company's businesses can experience variations in quarterly
performance. For example, Playboy magazine newsstand revenues vary from issue
to issue, with revenues generally higher for holiday issues and any issues
including editorial or pictorial features that generate unusual public
interest. Advertising revenues also vary from quarter to quarter, depending on
product introductions by advertising customers, changes in advertising buying
patterns and economic conditions. In addition, Entertainment Group revenues
vary with the timing of sales to international customers, including the timing
of multiyear agreements to both program and supply programming for exclusive
Playboy- branded time slots on overseas pay television services. As a result,
the Company's performance in any quarterly period is not necessarily reflective
of full-year or longer-term trends.
10
<PAGE> 11
PUBLISHING GROUP
The revenues and operating income of the Publishing Group were as follows
for the periods indicated below:
<TABLE>
<CAPTION>
REVENUES OPERATING INCOME
------------------------------------- ------------------------------------
QUARTERS NINE MONTHS QUARTERS NINE MONTHS
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
---------------- ----------------- ---------------- ----------------
1995 1994 1995 1994 1995 1994 1995 1994
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Playboy Magazine . . . . . $ 23.7 $ 24.0 $ 77.9 $ 76.6 $ 1.2 $ (0.7) $ 5.5 $ 1.2
Playboy-Related Businesses 5.6 4.7 17.4 15.0 2.1 1.2 6.1 4.1
------ ------ ------ ------ ------ ------ ------ ------
Subtotal . . . . . . . 29.3 28.7 95.3 91.6 3.3 0.5 11.6 5.3
Catalogs . . . . . . . . . 15.9 12.4 46.5 35.3 1.5 1.3 4.9 3.3
Administrative Expenses
and Other . . . . . . . - - - - (0.8) (1.2) (3.0) (4.1)
------ ------ ------ ------ ------ ------ ------ ------
Total . . . . . . . . $ 45.2 $ 41.1 $141.8 $126.9 $ 4.0 $ 0.6 $ 13.5 $ 4.5
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
Playboy Magazine
Playboy magazine circulation revenues decreased 2%, or $0.3, for the
quarter ended March 31, 1995 compared to the prior year quarter. The decrease
was primarily due to 19% fewer U.S. and Canadian newsstand copies sold in the
current year quarter, partially offset by 5% higher subscription revenues in
the current year quarter. For the nine months ended March 31, 1995,
circulation revenues increased 4%, or $2.3, compared to the prior year
principally due to 5% higher subscription revenues in the current year, and
favorable newsstand sales adjustments related to prior issues in the current
year compared to unfavorable adjustments related to prior issues in the prior
year. Advertising revenues were stable for the quarter ended March 31, 1995
compared to the prior year quarter as higher average net revenue per page,
primarily due to a 5% rate increase effective with the January 1995 issue,
offset 4% fewer advertising pages in the current year quarter. For the nine
months ended March 31, 1995, advertising revenues decreased 4%, or $1.0,
compared to the prior year primarily due to 2% more advertising pages in the
prior year, which included the January 1994 40th anniversary issue that
contained a higher than normal number of advertising pages. Additionally,
average net revenue per page declined despite the 5% rate increase principally
as a result of higher frequency and special discounts in the current year and a
change in the mix of advertising pages sold. Advertising sales for the fourth
quarter fiscal 1995 issues of the magazine are closed, and the Company expects
to report 8% more advertising pages for the quarter compared to the prior year
quarter, resulting in advertising pages being flat for fiscal 1995 compared to
fiscal 1994.
For the quarter ended March 31, 1995, the operating performance of Playboy
magazine increased $1.9 compared to the prior year quarter primarily due to a
decrease in direct costs and operating expenses, which more than offset the
previously discussed $0.3 decrease in revenues. Direct costs and operating
expenses for the quarter ended March 31, 1995 decreased 12% principally due to
charges in the prior year totaling $1.4 related to a reduction in carrying
value of editorial inventory, the establishment of reserves and the write-off
of photo inventory that would not be published in Playboy magazine, combined
with lower advertising promotion expenses in the current year quarter,
partially offset by an increase in subscription acquisition amortization
expense. For the nine months ended March 31, 1995, operating income increased
$4.3 due to the previously discussed $1.3 net increase in revenues, combined
with decreases in manufacturing costs and direct costs and operating expenses.
Manufacturing costs for the nine months ended March 31, 1995 decreased 9%
compared to the prior year principally due to the increased size of the January
1994 40th anniversary issue of the magazine in the prior year, combined with
lower paper prices, which began benefiting the Company in the fourth quarter of
fiscal 1994 and were in effect for the first half of fiscal 1995. However,
average paper prices increased 13% in the third quarter of fiscal 1995 over the
second quarter of fiscal 1995, and another quarter-to-quarter increase of
approximately $0.4, or 10%, is expected in the fourth quarter. For the quarter
and nine months ended March 31, 1995, average paper prices were 2% higher and
4% lower, respectively, than the prior year. Direct costs and operating
expenses decreased 2% for the nine months ended March 31, 1995 compared to the
prior year primarily due to the previously mentioned prior year charges
totaling $1.4, $0.7 of costs related to restructuring in the prior year, lower
advertising promotion and department expenses in the current year and expenses
in the prior year associated with the 40th anniversary issue, partially offset
by an increase in subscription acquisition amortization expense and editorial
costs associated with celebrity pictorials in the current year. Direct costs
and operating
11
<PAGE> 12
expenses will be impacted approximately $0.3 in the fourth quarter of fiscal
1995 due to the 14% postal rate increase which was effective January 1, 1995.
Playboy-Related Businesses
For the quarter and nine months ended March 31, 1995, operating income
from the Company's Playboy-related businesses increased $0.9 and $2.0,
respectively, on $0.9 and $2.4 increases, respectively, in revenues. These
increases were primarily due to higher revenues from the sale of newsstand
specials as a result of the publication of an additional newsstand special in
both the current year quarter and nine-month period, combined with higher
royalties from foreign editions of Playboy magazine. Additionally, benefiting
the comparison for the nine-month period were higher revenues from ancillary
businesses.
Catalogs
For the quarter and nine months ended March 31, 1995, revenues of the
catalog business increased 28% and 32%, respectively, compared to the prior
year. These increases were due to higher sales volume from all of the
catalogs, encompassing the Critics' Choice Video, Collectors' Choice Music,
which was first mailed to prospective customers in October 1993, and Playboy
catalogs. For the quarter and nine months ended March 31, 1995, operating
income increased 13% and 50%, respectively, compared to the prior year
primarily due to higher operating income from the Critics' Choice Video and
Collectors' Choice Music catalogs. The higher operating income from the
Critics' Choice Video catalog was primarily the result of an improved operating
margin in the current year, partially attributable to a licensing agreement
entered into in February 1994 that allows the Company to purchase inventory at
a lower cost, despite higher expenses due to increased mailings to prospective
customers and paper price and postal rate increases. Since the launch of the
Collectors' Choice Music catalog in October 1993, it has continued to generate
meaningful profits despite higher expenses related to significantly expanding
circulation and paper price and postal rate increases. Catalog direct costs
will be impacted approximately $0.2 in the fourth quarter of fiscal 1995 due to
the previously discussed paper price and postal rate increases.
Administrative Expenses and Other
The Publishing Group's administrative expenses and other costs decreased
35% and 28%, respectively, for the quarter and nine months ended March 31, 1995
compared to the prior year primarily due to lower salary expense due in part to
an unfilled executive position and lower employee medical benefit expenses in
the current year, partially offset by the receipt of a management fee from
duPont Publishing, Inc. in the prior year.
12
<PAGE> 13
ENTERTAINMENT GROUP
The revenues and operating loss of the Entertainment Group were as follows
for the periods indicated below:
<TABLE>
<CAPTION>
QUARTERS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
--------------- ---------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Domestic Pay Television:
Pay-Per-View . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.1 $ 2.3 $ 8.7 $ 6.6
Monthly Subscription . . . . . . . . . . . . . . . . . . . . . . . 1.7 1.8 5.2 5.7
Satellite Direct-to-Home and Other . . . . . . . . . . . . . . . . 2.6 1.7 6.9 4.6
----- ----- ----- -----
Total Domestic Pay Television . . . . . . . . . . . . . . . . . . 7.4 5.8 20.8 16.9
Domestic Home Video . . . . . . . . . . . . . . . . . . . . . . . . 2.3 1.4 6.5 4.9
International Television and Home Video . . . . . . . . . . . . . . 1.2 1.4 5.2 5.0
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 0.3 0.5 0.1
----- ----- ----- -----
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . $11.1 $ 8.9 $33.0 $26.9
===== ===== ===== =====
OPERATING LOSS
Profit Contribution Before Programming Expense . . . . . . . . . . . $ 3.4 $ 0.8 $10.5 $ 3.9
Programming Expense . . . . . . . . . . . . . . . . . . . . . . . . (4.5) (3.9) (13.4) (11.6)
----- ----- ----- -----
Total Operating Loss . . . . . . . . . . . . . . . . . . . . . . $(1.1) $(3.1) $(2.9) $(7.7)
===== ===== ===== =====
</TABLE>
The following discussion focuses on the profit contribution of each
business before programming expense ("profit contribution"). Profit
contribution increased $2.6 and $6.6, respectively, for the quarter and nine
months ended March 31, 1995, compared to the prior year.
Domestic Pay Television
For the quarter and nine months ended March 31, 1995, pay-per-view
revenues for the domestic pay television service, Playboy Television, were 32%
and 31% higher, respectively, compared to the prior year, primarily
attributable to higher buy rates and an increase in the number of addressable
homes to which Playboy Television was available. Also favorably impacting the
nine-month comparison was higher average revenue per buy in the current year.
At March 31, 1995, Playboy Television was available to 10.4 million addressable
homes, a 12% increase compared to March 31, 1994. The number of addressable
homes to which Playboy Television was available at March 31, 1995 was flat
compared to December 31, 1994. Management believes that beginning in the
fourth quarter of fiscal 1993, growth of the Company's domestic pay television
business slowed due to the effects of cable reregulation by the Federal
Communications Commission ("FCC"), which has resulted in a slowdown in the
industry's rollout of addressability. Additionally, competition for channel
space has also contributed to the slower growth as cable operators have
utilized available channel space for new cable networks in connection with
mandated retransmission consent agreements and for other new services,
including adult movie pay television services. Management believes that growth
will continue to be affected in the near term as the cable television industry
responds to the FCC's initial rules and to subsequent modifications, including
the recently announced "going-forward rules". Over the coming months,
management expects to continue to be impacted by the slower growth of
addressable homes related to these "going-forward rules," as a result of cable
operators being provided with incentives to add basic services. Nevertheless,
management believes that ultimately reregulation should benefit pay-per-view
services as cable operators seek unregulated sources of revenue, such as
pay-per-view. Monthly subscription revenues declined 2% and 8%, respectively,
for the quarter and nine months ended March 31, 1995, compared to the prior
year as a result of a decline in the average number of subscribing households.
The number of monthly subscribers at March 31, 1995 was relatively flat
compared to June 30, 1994. Satellite direct-to-home and other revenues were
54% and 49% higher for the quarter and nine months ended March 31, 1995,
respectively, compared to the prior year. The increases were primarily due to
13
<PAGE> 14
55% increases in revenues for both the quarter and nine-month period from sales
of Playboy Television to home satellite dish viewers, due to growth in selling
directly to the backyard satellite dish market and distribution by commercial
retailers of satellite programming, increased emphasis on consumer marketing,
and new revenues from the launch of Playboy Television on DIRECTV, the first
commercial digital broadcast satellite service.
Profit contribution for domestic pay television increased $1.5 and $2.1,
respectively, for the quarter and nine months ended March 31, 1995 as the net
increases in revenues offset higher expenses in the current year related to
selling directly to the backyard satellite dish market and the absence of
sublease income from the Company's satellite transponder in the current year.
As a result of the Company's move in May 1994 to 24-hour availability for
Playboy Television, it no longer receives monthly sublease income of
approximately $0.1, the loss of which was completely offset for the first time
during the second quarter of fiscal year 1995. At March 31, 1995, Playboy
Television was available in 2.6 million homes on a 24-hour basis.
Domestic Home Video
Domestic home video revenues increased $0.9 for the quarter ended March
31, 1995 compared to the prior year primarily due to revenues in the current
year quarter related to two new product lines, The Eros Collection, a low-cost
Playboy-produced line of movies, and royalties related to sales in the direct
response continuity-series marketplace for Playboy's core titles. For the
nine-month period, revenues increased $1.6 compared to the prior year primarily
due to the revenues from the new product lines and higher sales of catalog
titles in the current year, combined with adjustments in the prior year
attributable to weak sales of fiscal 1993 titles. Partially offsetting these
increases was higher average revenue per unit in the prior year principally
attributable to the release of two higher-priced rental titles. Profit
contribution increased $1.0 and $2.8 for the quarter and nine months ended
March 31, 1995, respectively, compared to the prior year principally due to the
increases in revenues in the current year combined with lower marketing
expenses.
International Television and Home Video
For the quarter ended March 31, 1995, revenues and profit contribution of
the international television and home video business decreased $0.2 and $1.2,
respectively, compared to the prior year. The decrease in profit contribution
is primarily due to bad debt expense of $1.3 recorded in the current year
quarter related to sales to an international television distributor in the
prior year, combined with lower international home video sales to various
countries. For the nine months ended March 31, 1995, revenues and profit
contribution increased and decreased $0.2 and $0.8, respectively, compared to
the prior year. The increase in revenues is primarily due to higher
international television revenues in the current year associated with multiyear
agreements, partially offset by an unfavorable adjustment in the current year
related to revenues associated with a multiyear agreement recorded in the prior
year and lower international home video sales to various countries. The
decrease in profit contribution is principally due to the previously discussed
bad debt expense recorded in the current year, partially offset by the higher
revenues. Variations in quarterly performance are caused by revenues and
profit contribution from multiyear agreements being recognized depending upon
the timing of program delivery, license periods and other factors.
Programming Expense
Programming amortization expense associated with the Entertainment Group
businesses discussed above increased $0.6 and $1.8 for the quarter and nine
months ended March 31, 1995, respectively, compared to the prior year. The
increase for the quarter was primarily due to increased investments in
entertainment programming and the current year quarter sales of The Eros
Collection movies, partially offset by the favorable effect of the previously
mentioned change in accounting estimate. For further discussion see Note G of
Notes to Condensed Consolidated Financial Statements. The increase for the
nine months ended March 31, 1995 was primarily due to the increased investments
in entertainment programming and the higher revenues from the international
television multiyear agreements, partially offset by the favorable effect of
the change in accounting estimate.
14
<PAGE> 15
Other
For the quarter and nine months ended March 31, 1995, the operating
performance of the Entertainment Group's other businesses increased $1.3 and
$1.7, respectively, primarily as a result of a $1.2 market value adjustment in
the prior year quarter for the home video release of the documentary film, Hugh
Hefner: Once Upon a Time.
The Entertainment Group's administrative expenses and other costs for the
quarter ended March 31, 1995 remained flat compared to the prior year quarter.
For the nine months ended March 31, 1995, administrative expenses and other
costs decreased $0.8 compared to the prior year primarily due to restructuring
expenses of $0.6 in the prior year.
PRODUCT MARKETING GROUP
The revenues and operating income (loss) of the Product Marketing Group
were as follows for the periods indicated below:
<TABLE>
<CAPTION>
QUARTERS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
--------------- ---------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . . . . . . $ 1.7 $ 1.8 $ 5.1 $ 5.2
===== ===== ===== =====
OPERATING INCOME (LOSS) . . . . . . . . . . . . . . . $ 0.9 $(0.1) $ 1.4 $ 1.0
===== ===== ===== =====
</TABLE>
Revenues for the quarter ended March 31, 1995 decreased $0.1 compared to
the prior year as higher international product licensing royalties in the
current year quarter were more than offset by lower royalties from a principal
Sarah Coventry licensee experiencing financial difficulties, resulting in the
Company's termination of the licensing agreement, combined with lower revenues
from Special Editions, Ltd., the Company's art publishing and art products
business. Operating performance for the quarter increased $1.0 as the net
decrease in revenues was more than offset by a $0.5 reduction in the carrying
value of art publishing inventory in the prior year quarter, and lower
marketing and bad debt expenses in the current year quarter related to
reversals of reserves established in the second quarter of fiscal 1995.
Revenues for the nine months ended March 31, 1995 decreased $0.1 as higher
international product licensing royalties in the current year were more than
offset by revenues in the prior year related to certain businesses that have
been discontinued and lower royalties in the current year from the Sarah
Coventry licensee previously discussed. Operating income for the nine months
ended March 31, 1995 increased $0.4 largely due to the previously discussed
$0.5 reduction in carrying value of inventory in the prior year, slightly
offset by the net decrease in revenues in the current year.
CORPORATE ADMINISTRATION AND PROMOTION
Corporate administration and promotion expenses of $3.6 and $11.3 for the
quarter and nine months ended March 31, 1995, respectively, decreased $0.9, or
20%, and $2.0, or 15%, respectively, compared to the prior year periods. The
decreases were primarily due to lower employee medical benefit expenses in the
current year and a $0.2 charge in the prior year for a real estate tax
obligation related to the Company's former office space in Los Angeles,
California. Additionally, the prior year quarter and nine-month period
included restructuring expenses of $0.3 and $1.1, respectively. Excluding the
restructuring expenses and unusual item in the prior year, corporate
administration and promotion expenses decreased 9% and 6% for the quarter and
nine months ended March 31, 1995, respectively, compared to the prior year
periods.
15
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, the Company had $1.3 in cash and cash equivalents and
$7.7 in short-term borrowings, compared to $1.3 in cash and cash equivalents
and $6.0 in short-term borrowings at June 30, 1994. The Company expects to
meet its short-term and long-term cash requirements through its revolving line
of credit and cash generated from operations. See Cash Flows From Financing
Activities below.
Cash Flows From Operating Activities
Net cash provided by operating activities was $0.3 for the nine months
ended March 31, 1995 compared to net cash used for operating activities of $9.9
for the prior year period. This increase was principally due to the Company's
improved operating performance in the current year. The Company invested
$16.7 in Company-produced and licensed entertainment programming during the
first nine months of fiscal 1995 compared to $13.7 in the prior year period,
and expects to invest approximately $4.5 in such programming during the
remainder of fiscal 1995. However, the Entertainment Group's net use of cash
improved over the prior year nine-month period. Net cash provided by
discontinued operations in fiscal 1994 of $0.5 primarily resulted from a United
Kingdom tax refund in connection with the settlement in fiscal 1993 of
litigation related to the Company's discontinued United Kingdom gaming
operations.
Cash Flows From Investing Activities
Net cash used for investing activities was $0.3 for the nine months ended
March 31, 1995 compared to $2.1 for the prior year period. Under the terms of
its July 1988 purchase of an 80% interest in Critics' Choice Video, Inc.,
effective July 1, 1993, the Company acquired the remaining 20% interest in
Critics' Choice Video, Inc. for $3.0, which consisted of $1.5 in cash and
one-year promissory notes totaling $1.5, which were paid July 1, 1994.
Cash Flows From Financing Activities
Net cash provided by financing activities was $11.0 lower for the nine
months ended March 31, 1995 compared to the prior year period. This decrease
was principally due to a $9.3 lower increase in the level of short-term
borrowings under the Company's revolving line of credit in the current year
combined with the payment on July 1, 1994 of the $1.5 promissory notes referred
to above.
In March 1995, the Company and its banks extended the maturity of the
existing $30.0 revolving line of credit to September 30, 1997. The revolving
line of credit is collateralized by substantially all of the Company's assets
and will decrease to $19.5 at December 31, 1995. The credit agreement requires
the Company to maintain two financial covenants pertaining to net worth and
leverage.
Income Taxes
Based on current tax law, the Company must generate approximately $22.1 of
future taxable income prior to the expiration of the Company's net operating
loss carryforwards ("NOLs") for full realization of the net deferred tax asset.
At June 30, 1994, the Company had NOLs of $51.6 for tax purposes, with $3.2
expiring in 1998, $13.6 expiring in 2001, $8.9 expiring in 2003, $8.2 expiring
in 2004, $1.1 expiring in 2007, $1.1 expiring in 2008 and $15.5 expiring in
2009.
Although the Company reported a taxable loss in the first nine months of
fiscal 1995 and in each of fiscal years 1994, 1993 and 1992, management
believes that it is more likely than not that a sufficient level of taxable
income will be generated prior to the expiration of the Company's NOLs to
realize the $7.5 net deferred tax asset recorded at March 31, 1995. Following
is a summary of the bases for management's belief that it is more likely than
not that the net deferred tax asset of $7.5 will be realized:
. Management reviewed the components of the Company's NOLs and determined
that they primarily resulted from several nonrecurring events, which were
not indicative of the Company's ability to generate future earnings.
16
<PAGE> 17
. As a result of the restructurings implemented in fiscal 1994, operating
expenses have been reduced by approximately $3.0 on an annual basis.
. The Publishing and Product Marketing Groups continue to generate earnings.
The Company expects the Entertainment Group to be profitable in the fourth
quarter of fiscal 1995, and believes that its substantial investments in
the Entertainment Group should result in profitability on an annual basis
beyond that.
. In assessing the Company's ability to generate future earnings, management
considered fiscal 1993 as a base year and adjusted for one-time items,
which indicated ongoing earnings potential, assuming no growth, more than
sufficient to fully utilize the Company's net deferred tax asset over the
life of the asset.
. The Company has several opportunities to accelerate taxable income into
the NOL carryforward period. Tax planning strategies would include the
capitalization and amortization versus immediate deduction of circulation
expenditures, the immediate inclusion versus deferred recognition of
prepaid subscription income, the revision of depreciation and amortization
methods for tax purposes and the sale- leaseback of certain property that
would generate taxable income in future years.
Other
In January 1993, the Company received a General Notice from the United
States Environmental Protection Agency (the "EPA") as a "potentially
responsible party" ("PRP") in connection with a site identified as the Southern
Lakes Trap & Skeet Club, apparently located at the Resort-Hotel in Lake Geneva,
Wisconsin (the "Resort"), formerly owned by a subsidiary of the Company. The
Resort was sold by the Company's subsidiary to LG Americana-GKP Joint Venture
in 1982. Two other entities were also identified as PRPs in the notice. The
notice relates to actions that may be ordered taken by the EPA to sample for
and remove contamination in soils and sediments, purportedly caused by skeet
shooting activities at the Resort property. During fiscal 1994, the EPA
advised the Company of its position that the area of land requiring remediation
is approximately twice the size of the initial site, which resulted in an
increase in the Company's reserve for this matter. As a result, a $0.6 loss on
disposal of discontinued operations was recorded in the quarter and nine months
ended March 31, 1994. The Company believes that it has established adequate
reserves, which totaled $0.8 at March 31, 1995, to cover the eventual cost of
its anticipated share (based on an agreement with one of the other PRPs) of any
remediation that may be agreed upon. The Company is also reviewing available
defenses, insurance coverage and claims it may have against third parties.
Effective July 1, 1994, the Company adopted the provisions of Statement of
Position 93-7, Reporting on Advertising Costs, which is applicable to annual
financial statements. Management believes that the adoption of these
provisions will not have a material impact on the Company's results of
operations or financial condition.
17
<PAGE> 18
PART II. OTHER INFORMATION
Item 6(a) Exhibits
PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
March 31, March 31,
--------------------- ----------------------
1995 1994 1995 1994
------- ------- ------- --------
<S> <C> <C> <C> <C>
Primary:
- - --------
Earnings:
Loss from continuing operations before
cumulative effect of change in accounting principle $ (347) $(7,765) $ (574) $(16,958)
Loss on disposal of discontinued operations - (620) - (620)
-------- ------- -------- --------
Loss before cumulative effect of change in
accounting principle (347) (8,385) (574) (17,578)
Cumulative effect of change in accounting principle - - - 7,500
-------- -------- -------- --------
Net loss $ (347) $(8,385) $ (574) $(10,078)
======= ======= ======= ========
Shares:
Weighted average number of common
shares outstanding 19,989 19,951 19,982 19,919
Assuming exercise of options reduced
by the number of shares which could have
been purchased with the proceeds from
exercise of such options 268 350 229 342
------- ------- ------- --------
Weighted average number of common shares
outstanding as adjusted 20,257 20,301 20,211 20,261
======= ======= ======= ========
Primary earnings per common share:
Loss before cumulative effect of change in
accounting principle:
From continuing operations $ (0.02) $ (0.38) $ (0.03) $ (0.84)
From discontinued operations - (0.03) - (0.03)
-------- ------- -------- --------
Total (0.02) (0.41) (0.03) (0.87)
Cumulative effect of change in accounting principle - - - 0.37
-------- -------- -------- --------
Net loss $ (0.02) $ (0.41)(1) $ (0.03) $ (0.50)(1)
======= ======= ======= ========
</TABLE>
18
<PAGE> 19
PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
March 31, March 31,
--------------------- ----------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Fully Diluted:
- - --------------
Earnings:
Loss from continuing operations before
cumulative effect of change in accounting principle $ (347) $(7,765) $ (574) $(16,958)
Loss on disposal of discontinued operations - (620) - (620)
-------- ------- -------- --------
Loss before cumulative effect of change in
accounting principle (347) (8,385) (574) (17,578)
Cumulative effect of change in accounting principle - - - 7,500
-------- -------- -------- --------
Net loss $ (347) $(8,385) $ (574) $(10,078)
======= ======= ======= ========
Shares:
Weighted average number of common
shares outstanding 19,989 19,951 19,982 19,919
Assuming exercise of options reduced
by the number of shares which could have
been purchased with the proceeds from
exercise of such options 268 349 295 402
------- ------- ------- --------
Weighted average number of common shares
outstanding as adjusted 20,257 20,300 20,277 20,321
======= ======= ======= ========
Earnings per common share assuming full dilution:
Loss before cumulative effect of change in
accounting principle:
From continuing operations $ (0.02) $ (0.38) $ (0.03) $ (0.84)
From discontinued operations - (0.03) - (0.03)
-------- ------- -------- --------
Total (0.02) (0.41) (0.03) (0.87)
Cumulative effect of change in accounting principle - - - 0.37
-------- -------- -------- --------
Net loss $ (0.02) $ (0.41)(1) $ (0.03) $ (0.50)(1)
======= ======= ======= ========
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No.
15 because it produces an anti-dilutive result.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLAYBOY ENTERPRISES, INC.
-------------------------
(Registrant)
Date May 11, 1995 By /s/David I. Chemerow
--------------- -------------------------------
David I. Chemerow
Executive Vice President,
Finance and Operations and
Chief Financial Officer
20
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 1,312
<SECURITIES> 0
<RECEIVABLES> 24,690
<ALLOWANCES> 4,738
<INVENTORY> 20,631
<CURRENT-ASSETS> 94,323
<PP&E> 36,484
<DEPRECIATION> 22,478
<TOTAL-ASSETS> 139,053
<CURRENT-LIABILITIES> 84,649
<BONDS> 683
<COMMON> 215
0
0
<OTHER-SE> 45,670
<TOTAL-LIABILITY-AND-EQUITY> 139,053
<SALES> 179,906
<TOTAL-REVENUES> 179,906
<CGS> 157,989
<TOTAL-COSTS> 179,243
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 564
<INCOME-PRETAX> 136
<INCOME-TAX> 710
<INCOME-CONTINUING> (574)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (574)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
