Playboy Enterprises Inc. Tuesday reported a narrowed fourth-quarter net loss aided by a growing cable television channels and better results in online businesses.

After years of losses on the Web, the Chicago-based adult entertainment company and owner of Playboy magazine, is poised for positive operating results in 2002 and expects its online unit to breakeven, Chief Executive Christie Hefner said.

"(This) is the culmination of our strategies over the last two years, taking full advantages of the cable TV marketplace and taking advantage of cost cutting online," Hefner told analysts and reporters in a conference call after the report.

For the quarter, Playboy lost $11.7 million after all costs, or 47 cents cents a share, compared with last year's net loss of $29 million, or $1.19 a share, including restructuring expenses of $3.7 million and a $24 million tax-related charge.

Earnings before interest, taxes, depreciation and amortization, EBITDA, rose to $10.2 million from $9.3 million last year. EBITDA is a common measure for media companies where start-up costs for programming is high.

Fourth-quarter revenues fell slightly to $77.97 million from $79.5 million in 2000's fourth quarter, due primarily to the advertising market slump that has affected all publishers, and newsstand sales of the magazine, which had fewer A-list celebrities on the cover this past quarter.

But Playboy executives and Wall Street analysts see the magazine as a steady, mature business, and view Playboy's aggressive move into cable TV and online as its growth driver.

"This year the focus has been growing those cable networks and expanding online ... and clearly it looks like they are," said Jeff Hoskins, analysts at Gerard, Klauer, Mattison.

Hoskins said he has not published research on Playboy but as a cable TV analyst, he is tracking its expansion.


Hefner said Playboy's "Spice" brand of XXX movie channels, coupled with its softer, original shows on the Playboy Channel, now reach just over 113 million household units. Domestic TV revenues rose to $26.5 million in the fourth quarter, up 15 percent from the third quarter and 55 percent from last year.

As cable system operators switch to digital set-top boxes from old analog, Playboy is seeing its digital subscribers rise. That is important because revenues per subscriber are typically higher on digital systems than on analog.

Online, Playboy continued to cut its losses to $5.1 million in this year's fourth quarter from $7.2 million last year, and for the year to $21.7 million from $25.2 million.

Web-based sales in the quarter rose to $7.7 million, up 13 percent from the third quarter and 18 percent from last year, led largely by increases in e-commerce and subscriptions to its "Cyberclub," which now total some 100,000 members. That is up from 67,000 at the same time last year, according to Hoskins.

"Clearly, the (online) ad market has dropped, but sales are up and subscriptions are up ... they have found some new money, and it's whole new game," said veteran entertainment analyst Dennis McAlpine, who runs his own firm, McAlpine Assoc.

One of the main issues keeping Playboy's stock in the doldrums in 2001 had been Online losses, and Playboy has been looking for investors to pump money into the unit so it did not have to continue funding losses through this year.

Playboy officials said they have lined up a total of $20 million in loan commitments, including $5 million in December, to keep the online unit operating until it reaches break-even.

While the projection of zero losses at Playboy Online by the year's end had analysts thinking positively following the quarterly earnings report, they all cautioned that if Playboy can't deliver on that goal, then the share price will suffer.

Playboy's shares reached as high as $14.75 early on the New York Stock Exchange after the earnings report, but near the end of trading were up only 2 cents, or 0.14 percent, at $14.40.

Playboy shares are up nearly 25 percent since closing at a post Sept. 11 low of $11.56 on Sept. 19.