CHICAGO - Playboy Enterprises will stop making DVDs and slash 80 jobs from the company payroll as part of a restructuring that will save $12 million in annual expenses.
Playboy outlined its plans in a report filed with the U.S. Securities and Exchange Commission. In addition to shutting down its DVD operations, the company said it would consolidate its West Coast offices, outsource newsstand sales, switch to lighter magazine paper, and cut back on employee travel, entertainment and overtime.
"Our goal is to return the company to solid profitability in 2009," CEO Christie Hefner wrote in a letter to employees. "When we reported earnings two months ago, we indicated that we expected to reduce expenses by $10 million, with approximately half coming from corporate and other overhead and the other half from the publishing and television businesses. Today we are announcing the specific actions being taken to achieve those goals."
Hefner said that Playboy will continue to increase its focus on internet content delivery and other digital media platforms while phasing out DVD production over a period of several months.
Playboy is prepared to post a loss for the third quarter ended Sept. 30. Restructuring costs account for a third of the company's projected $6 million in charges against operating income.
"The company is well-positioned to weather these difficult economic times," Hefner said. "Our balance sheet is strong, our debt level is reasonable with a below market interest rate of 3 percent, and we have a solid cash position of more than $25 million and access to a $50 million revolving credit agreement."
Playboy expects to see some benefits of the cuts in the fourth quarter, and the full results next year.