NEW YORK--(BUSINESS WIRE)--Dec. 11, 2003--Alloy, Inc. (Nasdaq:
ALOY), a media, marketing services, direct marketing and retail
company targeting the dynamic Generation Y population, today reported
revenues for the fiscal quarter ended October 31, 2003 of $105.8
million and a net loss attributable to common stockholders of $7.2
million or $0.17 per diluted share. Excluding the impact of a $5.2
million non-cash valuation allowance for the remaining net deferred
tax asset, the net loss attributable to common stockholders was $2.0
million, or $0.05 per diluted share. This compares with our previously
announced guidance range of a third fiscal quarter net loss
attributable to common stockholders of $0.06 to $0.11 per diluted
share. For its third fiscal quarter, Alloy generated $4.6 million in
earnings before interest and other income/expense, income taxes,
depreciation and amortization, stock-based compensation expense and
restructuring charges ("Adjusted EBITDA"). This compares with our
previously announced guidance range for third fiscal quarter Adjusted
EBITDA of $2.0 million to $4.0 million. For additional financial
detail, including the reconciliation of Adjusted EBITDA to net income
(loss) determined under GAAP, please refer to the financial tables
provided at the end of this release.
Total revenues for the third fiscal quarter increased 13% to
$105.8 million, compared with $93.2 million for the third quarter of
fiscal 2002. Fiscal third quarter net merchandise revenues of $48.6
million were up 18% compared with $41.3 million for last year's fiscal
third quarter. The increase resulted from our acquisition of dELiA*s
Corp. during the fiscal third quarter, which offset an overall decline
in revenues for Alloy's catalog titles. Fiscal third quarter
sponsorship and other revenues of $57.2 million were up 10% versus
$52.0 million for the comparable period in our last fiscal year. The
increase was attributable to the operations of the OCM business that
we purchased at the beginning of the second quarter of fiscal 2003,
which offset a decrease in our advertising placement revenues.
Third fiscal quarter gross profit increased to $53.3 million, or
50.4% of revenues, compared with $45.5 million, or 48.8% of revenues,
for the comparable period last year, largely as a result of the
overall increase in revenues. The modest increase in gross profit
percentage was primarily due to the slightly increased proportion of
higher gross margin merchandise revenues in our overall revenue mix,
along with a higher sponsorship gross margin relative to the prior
year quarter.
Operating expenses were $53.6 million for the third quarter of
fiscal 2003 versus $33.9 million for the third quarter of fiscal 2002.
The increase resulted primarily from the expenses of the acquired
dELiA*s Corp. during the quarter; the expenses from the acquired OCM
operations; additional acquired intangible asset amortization
resulting from recent acquisitions; the impact of $0.4 million of
stock-based compensation; and a $0.4 million restructuring charge
related to the early termination of our fulfillment services agreement
with a third-party provider.
Net loss for the third quarter of fiscal 2003 was $6.8 million,
compared with net income of $11.6 million for last fiscal year's third
quarter. Net loss attributable to common stockholders for the third
quarter of fiscal 2003 was $7.2 million, or $0.17 per diluted share,
compared with net income attributable to common stockholders of $11.0
million, or $0.28 per diluted share, for last fiscal year's third
quarter. As indicated above, in the third quarter of fiscal 2003 we
fully reserved the remaining net deferred tax asset by increasing the
valuation allowance via a $5.2 million non-cash income tax provision.
Adjusted EBITDA decreased from $14.4 million for the third fiscal
quarter of 2002 to $4.6 million for the third fiscal quarter of 2003.
In the third fiscal quarter of 2003, Alloy did not repurchase any
shares of its common stock under its previously announced share
repurchase program.
Commenting on the quarter, Matt Diamond, Chairman and Chief
Executive Officer stated, "We are pleased to have exceeded our revised
Adjusted EBITDA forecast for our third fiscal quarter. We have made
recent senior management additions throughout the business that we
expect to drive improved future financial performance. Our excellent
Merchandise management team will be focused on realizing the synergies
of the combined Alloy and dELiA*s businesses, while capitalizing on
the large database and recognized brands we own. In our Sponsorship
business, we look to continue expanding our client base and the scope
of our customer relationships."
With the acquisition of dELiA*s, our name database as of October
31, 2003, the end of our fiscal third quarter, totaled over 25 million
names, of which approximately 8 million were established buyers.
Total revenues for the nine months ended October 31, 2003
increased 31% to $255.7 million compared with $195.6 million for the
nine months ended October 31, 2002. Net merchandise revenues for the
nine months ended October 31, 2003 of $108.6 million were up 5% versus
$103.9 million for the nine months ended October 31, 2002. Sponsorship
and other revenues of $147.1 million for the nine-month period were up
60% compared with $91.8 million for the comparable period last fiscal
year. Gross profit for the nine months ended October 31, 2003
increased to $124.1 million, or 48.5% of revenues, compared with
$102.2 million, or 52.3% of revenues, for the comparable period in
fiscal 2002. Operating expenses were $126.0 million for the first nine
months of fiscal 2003 versus $87.7 million for the first nine months
of fiscal 2002. Net loss for the nine months ended October 31, 2003
was $7.5 million, compared with net income of $15.2 million for the
nine months ended October 31, 2002. Net loss attributable to common
stockholders for the first nine months of fiscal 2003 was $9.1
million, or $0.22 per diluted share, compared with net income
attributable to common stockholders of $13.6 million, or $0.34 per
diluted share for the first nine months of fiscal 2002.
Looking ahead, Mr. Diamond concluded, "We are establishing a
fiscal fourth quarter merchandise revenue range of $78 million to $81
million, together with a sponsorship revenue range of $37 million to
$39 million, a diluted net loss attributable to common stockholders
per share range of ($0.09) to ($0.14) and an Adjusted EBITDA range of
$1.0 million to $3.0 million. The conditions for our businesses remain
challenging, but we are confident in the programs management is
putting in place to improve long-term performance. Please also note
that the diluted net loss estimate range does not include the impact
of any goodwill impairment that may occur following our annual testing
planned for our fourth fiscal quarter."
Additionally, Alloy's audit committee recently engaged the law
firm of Mayer, Brown, Rowe & Maw, LLP ("Mayer, Brown") to conduct an
independent investigation into the allegations raised in the
consolidated class action complaint filed against Alloy in August 2003
and the derivative action filed in October 2003. We currently
contemplate that Mayer, Brown will deliver a preliminary report to our
audit committee on December 12th regarding the results of its
investigation. Although we believe that the investigation will not
uncover any material improper procedures or practices, we can give no
assurances in that regard. Due to the timing of the investigation,
along with the additional financial review procedures associated with
the dELiA*s Corp. acquisition, we may not be in a position to complete
and file our Quarterly Report on Form 10-Q for the fiscal quarter
ended October 31, 2003 by its due date of December 15, 2003. In that
event, we anticipate filing a Form 12b-25, which would allow us an
additional 5 business days to file such Form 10-Q, during which time
we would endeavor to complete and file such report.
About Alloy
Alloy, Inc. is a media, marketing services, direct marketing and
retail company targeting Generation Y, a key demographic segment
comprising the more than 60 million boys and girls in the United
States between the ages of 10 and 24. Alloy's convergent media model
uses a wide range of media assets to reach more than 25 million
Generation Y consumers each month. Through Alloy's 360 Youth media and
marketing services unit, marketers can connect with the Generation Y
audience through a host of advertising and marketing programs
incorporating Alloy's media and marketing assets such as direct mail
catalogs, college and high school newspapers, Web sites, school-based
media boards, college guides, and sponsored on- and off-campus events.
Alloy generates revenue from its broad reach in the Generation Y
community by providing marketers advertising and marketing services
through 360 Youth and by selling apparel, accessories, footwear, room
furnishings and action sports equipment directly to the youth market
through catalogs, Web sites and retail stores. For further information
regarding Alloy, please visit our Web site (www.alloyinc.com) and
click on "Investor Relations". Information on 360 Youth's marketing
services can be found at www.360youth.com.
This announcement may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, including statements
regarding our expectations and beliefs regarding our future results or
performance. Because these statements apply to future events, they are
subject to risks and uncertainties. When used in this announcement,
the words "anticipate", "believe", "estimate", "expect",
"expectation", "project" and "intend" and similar expressions are
intended to identify such forward-looking statements. Our actual
results could differ materially from those projected in the
forward-looking statements. Additionally, you should not consider past
results to be an indication of our future performance. Factors that
might cause or contribute to such differences include, among others,
our ability to: increase revenues, generate high margin sponsorship
and multiple revenue streams, increase visitors to our Web sites
(www.alloy.com, www.ccs.com, and www.danscomp.com) and build customer
loyalty; develop our sales and marketing teams and capitalize on these
efforts, develop commercial relationships with advertisers and the
continued resilience in advertising spending to reach the teen market;
manage the risks and challenges associated with integrating newly
acquired businesses; and identify and take advantage of strategic,
synergistic acquisitions and other revenue opportunities. Other
relevant factors include, without limitation: our competition;
seasonal sales fluctuations; the uncertain economic and political
climate in the United States and throughout the rest of the world and
the potential that such climate may deteriorate further; and general
economic conditions. For a discussion of certain of the foregoing
factors and other risk factors see the "Risk Factors That May Affect
Future Results" section included in our annual report on Form 10-K for
the year ended January 31, 2003, as amended, which is on file with the
Securities and Exchange Commission. We do not intend to update any of
the forward-looking statements after the date of this announcement to
conform these statements to actual results or to changes in
management's expectations, except as may be required by law.
(tables to follow)
Alloy, Inc.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
10/31/2002 10/31/2003 10/31/2002 10/31/2003
Net merchandise revenues $41,270 $48,558 $103,866 $108,557
Sponsorship and other
revenues 51,956 57,193 91,765 147,140
--------------------------------------------
Total revenues 93,226 105,751 195,631 255,697
Cost of goods sold 47,687 52,473 93,410 131,574
--------------------------------------------
Gross profit 45,539 53,278 102,221 124,123
Selling and marketing
expenses 28,055 40,947 71,978 98,105
General and administrative
expenses 4,693 9,844 12,793 20,777
Acquired intangible asset
amortization (1) 1,180 2,083 2,904 5,763
Stock-based compensation 8 358 24 649
Restructuring charge 0 351 0 730
--------------------------------------------
Total operating expenses 33,936 53,583 87,699 126,024
Income (loss) income from
operations 11,603 (305) 14,522 (1,901)
Interest and other income
(expense), net 330 (970) 1,462 (687)
--------------------------------------------
Income (loss) before
income taxes 11,933 (1,275) 15,984 (2,588)
Income tax expense 336 5,543 779 4,938
--------------------------------------------
Net income (loss) 11,597 (6,818) 15,205 (7,526)
Preferred stock dividend
and accretion 605 393 1,642 1,548
--------------------------------------------
Net income (loss)
attributable to common
stockholders $10,992 ($7,211) $13,563 ($9,074)
Net income (loss)
attributable to common
stockholders per basic
share $0.28 ($0.17) $0.36 ($0.22)
Net income (loss)
attributable to common
stockholders per diluted
share $0.28 ($0.17) $0.34 ($0.22)
Weighted average basic
common shares
outstanding: 38,856,057 41,405,485 38,005,450 40,904,949
Diluted shares outstanding
per GAAP: 39,684,118 41,405,485 39,598,541 40,904,949
Reconciliation of EBTA and Adjusted EBITDA to
GAAP Results (2):
------------------------------------------------
Net income (loss) $11,597 ($6,818) $15,205 ($7,526)
Income tax expense 336 5,543 779 4,938
Acquired intangible asset
amortization 1,180 2,083 2,904 5,763
Restructuring charge 0 351 0 730
Stock-based compensation 8 358 24 649
----------------------------------------------------------------------
EBTA excluding stock-based
compensation expense and
restructuring charge $13,121 $1,517 $18,912 $4,554
Interest and other income
(expense), net 330 (970) 1,462 (687)
Depreciation and
amortization 1,599 2,108 3,177 4,358
----------------------------------------------------------------------
Adjusted EBITDA $14,390 $4,595 $20,627 $9,599
(1) Reflects the adoption of FAS 142 "Goodwill and Other Intangible
Assets" as of February 1, 2002 which eliminates regular periodic
amortization of goodwill.
(2) This press release contains the non-GAAP financial measures EBTA
and Adjusted EBITDA. Alloy uses EBTA and Adjusted EBITDA to
evaluate its performance period to period without taking into
account certain expenses which, in the opinion of Alloy
management, do not reflect Alloy's results from its core business
activities. These non-GAAP financial measures should be considered
in addition to, and not as a substitute for, or superior to, other
measures of financial performance prepared in accordance with
GAAP. These non-GAAP measures included in this press release have
been reconciled to the nearest GAAP measure as is now required
under new SEC rules regarding the use of non-GAAP financial
measures. As used herein, "GAAP" refers to accounting principles
generally accepted in the United States of America.
Alloy, Inc.
SELECTED CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
January October 31,
31, 2003 2003
(audited)(unaudited)
Assets
Current Assets
Cash and cash equivalents $35,187 $27,704
Marketable securities 23,169 24,894
Accounts receivable, net 30,022 33,752
Inventories, net 23,466 43,251
Prepaid catalog costs 2,100 3,927
Other current assets 10,130 5,730
--------------------
Total current assets 124,074 139,258
Property and equipment, net 10,081 31,581
Deferred tax asset 5,621 0
Goodwill, net 270,353 324,045
Intangible and other assets, net 24,471 32,901
--------------------
Total assets $434,600 $527,785
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $28,032 $33,689
Deferred revenues 15,106 20,958
Accrued expenses and other current
liabilities 27,679 40,266
--------------------
Total current liabilties 70,817 94,913
Deferred tax liability 2,698 0
Other long term liabilities 93 3,618
Convertible debt 0 69,300
Series B Preferred Stock 15,550 14,038
Stockholders' Equity 345,442 345,916
--------------------
Total liabilities and stockholders'
equity $434,600 $527,785
CONTACT: Alloy, Inc.
Sam Gradess, 212-244-4307
or
Investor Relations:
PR21, Inc.
Kurt Genden, 212-299-8888
SOURCE: Alloy, Inc.
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