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Auditor of Penthouse's Publisher Warns Company May Go Out of Business
Fri Mar 29, 5:56 PM ET
Dow Jones Newswires
WASHINGTON -- The auditor for General Media Inc., publisher of Penthouse and other magazines, said there is substantial doubt about the company's ability to continue as a going concern.
The New York -based company also disclosed it cut 26% of its work force, or 39 employees, in February.
In the firm's annual report, filed late Thursday with the Securities and Exchange Commission (news - web sites), Grant Thornton LLP said General Media's current liabilities exceeded current assets by $22.3 million as of Dec. 31 .
The auditor added the company is unlikely to generate sufficient funds from operations to make all its interest payments due this year. General Media also said it doesn't believe it can generate sufficient funds to make the required interest payments this year -- about $7 million on series C notes and $5.8 million in amortization payments.
As a result, the company is negotiating with the holders of the notes for a reduction in General Media's debt-service payments. If the company doesn't make the payments, the notes' trustee could assume control of the company and substantially all of its assets, including its registered trademarks.
General Media said it posted a 2001 net loss of $9.9 million, compared with year-earlier net income of $3.8 million. Revenue fell 14% to $65.4 million from $76 million.
The company has experienced a steady decline in the number of newsstand copies of Penthouse magazine and its affiliate publications sold over the past several years. Penthouse circulation averaged 652,000 copies last year, down from a recent high of one million in 1998 and 779,000 in 2000. Newsstand revenue for Penthouse and the affiliated publications fell 15% in 2001 to $33.8 million.
General Media attributed the decline to the change in social climate toward men's magazines, together with advances in technology -- including the proliferation of retail video outlets and the increased market share of cable television and the Internet.
The company said it sees newsstand sales improving slightly during 2002 because of special marketing strategies it is using aimed at developing new outlets for its magazines and rewarding growth in sales by distributors, as well as the economic recovery expected during the second half of the year.
General Media added it plans to return to profitability and improve cash flow by cutting production costs, promotion expenses and costs for other selling, general and administrative expenses.
Auditor of Penthouse's Publisher Warns Company May Go Out of Business
Fri Mar 29, 5:56 PM ET
Dow Jones Newswires
WASHINGTON -- The auditor for General Media Inc., publisher of Penthouse and other magazines, said there is substantial doubt about the company's ability to continue as a going concern.
The New York -based company also disclosed it cut 26% of its work force, or 39 employees, in February.
In the firm's annual report, filed late Thursday with the Securities and Exchange Commission (news - web sites), Grant Thornton LLP said General Media's current liabilities exceeded current assets by $22.3 million as of Dec. 31 .
The auditor added the company is unlikely to generate sufficient funds from operations to make all its interest payments due this year. General Media also said it doesn't believe it can generate sufficient funds to make the required interest payments this year -- about $7 million on series C notes and $5.8 million in amortization payments.
As a result, the company is negotiating with the holders of the notes for a reduction in General Media's debt-service payments. If the company doesn't make the payments, the notes' trustee could assume control of the company and substantially all of its assets, including its registered trademarks.
General Media said it posted a 2001 net loss of $9.9 million, compared with year-earlier net income of $3.8 million. Revenue fell 14% to $65.4 million from $76 million.
The company has experienced a steady decline in the number of newsstand copies of Penthouse magazine and its affiliate publications sold over the past several years. Penthouse circulation averaged 652,000 copies last year, down from a recent high of one million in 1998 and 779,000 in 2000. Newsstand revenue for Penthouse and the affiliated publications fell 15% in 2001 to $33.8 million.
General Media attributed the decline to the change in social climate toward men's magazines, together with advances in technology -- including the proliferation of retail video outlets and the increased market share of cable television and the Internet.
The company said it sees newsstand sales improving slightly during 2002 because of special marketing strategies it is using aimed at developing new outlets for its magazines and rewarding growth in sales by distributors, as well as the economic recovery expected during the second half of the year.
General Media added it plans to return to profitability and improve cash flow by cutting production costs, promotion expenses and costs for other selling, general and administrative expenses.
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