NEW YORK--(BUSINESS WIRE)--March 30, 2004--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 January 31, 2004 of
$116.3 million and a net loss attributable to common stockholders of
$76.6 million or $1.82 per diluted share. Excluding the impact of a
$70.8 million non-cash write-down of goodwill, trademarks and
long-lived assets, the net loss attributable to common stockholders
was $5.8 million, or $0.14 per diluted share. This compares with our
previously announced guidance range of a fourth fiscal quarter net
loss attributable to common stockholders of $0.09 to $0.14 per diluted
share. The write-down of goodwill, trademarks and long-lived assets
occurred exclusively in our direct marketing segment and resulted from
our annual valuation review as of December 31, 2003 with assistance
from an independent valuation firm. For its fourth fiscal quarter,
Alloy generated $1.4 million in earnings before interest and other
income/expense, income taxes, depreciation and amortization,
stock-based compensation expense, restructuring charges, and goodwill
and other asset write-downs due to valuation impairment ("Adjusted
EBITDA"). This compares with our previously announced guidance range
for fourth fiscal quarter Adjusted EBITDA of $1.0 million to $3.0
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 fourth fiscal quarter increased 12% to
$116.3 million, compared with $103.7 million for the fourth quarter of
fiscal 2002. Fiscal fourth quarter net merchandise revenues of $78.4
million were up 23% compared with $63.7 million for last year's fiscal
fourth quarter. The increase resulted from our acquisition of dELiA*s
Corp., which offset an overall decline in revenues for Alloy's catalog
titles. Fiscal fourth quarter sponsorship and other revenues of $37.9
million were down 5% versus $40.0 million for the comparable period in
our last fiscal year. The decrease was attributable to a reduction in
revenues in our advertising placement business, along with revenue
declines in our print and interactive advertising operations, offset
partially by the revenue contribution of the OCM business that we
purchased at the beginning of the second quarter of fiscal 2003.
Fourth fiscal quarter gross profit increased to $58.4 million, or
50.3% of revenues, compared with $52.0 million, or 50.1% of revenues,
for the comparable period last year, largely as a result of the
overall increase in revenues.
Operating expenses were $132.7 million for the fourth quarter of
fiscal 2003 versus $46.5 million for the fourth quarter of fiscal
2002. Excluding the impact of goodwill and other asset write-downs and
restructuring charges, operating expenses increased to $61.9 million
from $43.9 million. The increase resulted primarily from the expenses
of the acquired dELiA*s Corp. and OCM operations, along with $0.4
million of stock-based compensation.
Net loss for the fourth quarter of fiscal 2003 was $76.2 million,
compared with net income of $8.1 million for last fiscal year's fourth
quarter. Net loss attributable to common stockholders for the fourth
quarter of fiscal 2003 was $76.6 million, or $1.82 per diluted share,
compared with net income attributable to common stockholders of $7.6
million, or $0.18 per diluted share, for last fiscal year's fourth
quarter. As indicated above, in the fourth quarter of fiscal 2003 we
wrote-down $70.8 million of goodwill, trademarks and long-lived assets
as a result of our annual valuation testing. Excluding these
write-downs, Alloy's net loss attributable to common stockholders for
the fourth quarter of fiscal 2003 would have been $5.8 million or
$0.14 per diluted share. Adjusted EBITDA decreased from $11.8 million
for the fourth fiscal quarter of 2002 to $1.4 million for the fourth
fiscal quarter of 2003. In the fourth 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 managed to meet our revenue and Adjusted
EBITDA forecast for our fourth fiscal quarter despite significant
transitional challenges in our merchandise business and substantial
costs related to outstanding litigation matters. We acknowledge the
efforts of our staff during this challenging period, and we approach
fiscal 2004 with an expectation of improved financial performance
throughout our businesses over the course of the year. We plan to
remain focused in our efforts to separate our media and merchandising
businesses at an opportune time in the foreseeable future."
Our name database now stands at over 26 million total names, of
which over 8 million have a buying history with us.
Total revenues for the twelve months ended January 31, 2004
increased 24% to $371.9 million compared with $299.3 million for the
twelve months ended January 31, 2003. Net merchandise revenues for the
twelve months ended January 31, 2004 of $186.9 million were up 12%
versus $167.6 million for the twelve months ended January 31, 2003.
Sponsorship and other revenues of $185.0 million for the twelve-month
period were up 40% compared with $131.8 million for the previous
fiscal year. Gross profit for the twelve months ended January 31, 2004
increased to $182.6 million, or 49.1% of revenues, compared with
$154.2 million, or 51.5% of revenues, for fiscal 2003. Operating
expenses were $258.7 million for fiscal 2003 versus $134.2 million for
fiscal 2002. Net loss for the twelve months ended January 31, 2004 was
$83.7 million, compared with net income of $23.3 million for the
twelve months ended January 31, 2003. Net loss attributable to common
stockholders for fiscal 2003 was $85.7 million, or $2.08 per diluted
share, compared with net income attributable to common stockholders of
$21.2 million, or $0.53 per diluted share for fiscal 2002. Excluding
the $70.8 million write-down of goodwill, trademarks and long-lived
assets in the fourth quarter, Alloy's net loss attributable to common
stockholders for fiscal 2003 would have been $14.9 million or $0.36
per diluted share.
Looking ahead, Mr. Diamond concluded, "We hope to demonstrate
improved financial performance in fiscal 2004 relative to fiscal 2003.
We believe that the improvements will occur in the second half of the
year after the first anniversary of our acquisition of dELiA*s. We are
establishing a fiscal 2004 merchandise revenue range of $220 million
to $230 million, together with a sponsorship revenue range of $210
million to $220 million, a diluted net loss attributable to common
stockholders per share range of ($0.25) to ($0.40) and an Adjusted
EBITDA range of $11 million to $16 million."
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 Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
1/31/2003 1/31/2004 1/31/2003 1/31/2004
Net merchandise
revenues $63,706 $78,366 $167,572 $186,923
Sponsorship and other
revenues 39,993 37,886 131,758 185,026
-----------------------------------------------
Total revenues 103,699 116,252 299,330 371,949
Cost of goods sold 51,739 57,805 145,148 189,379
-----------------------------------------------
Gross profit 51,960 58,447 154,182 182,570
Selling and marketing
expenses 36,812 47,211 108,791 145,316
General and
administrative
expenses 4,414 12,244 17,209 33,021
Acquired intangible
asset amortization
(1) 2,651 2,124 5,554 7,887
Stock-based
compensation 8 353 31 1,002
Restructuring charge 2,571 0 2,571 730
Write-down of long-
lived assets due to
impairment 0 198 0 198
Write-down of goodwill
and trademarks due to
impairment 0 70,594 0 70,594
-----------------------------------------------
Total operating
expenses 46,456 132,724 134,156 258,748
Income (loss) income
from operations 5,504 (74,277) 20,026 (76,178)
Interest and other
income (expense), net 334 (1,563) 1,797 (2,250)
-----------------------------------------------
Income (loss) before
income taxes 5,838 (75,840) 21,823 (78,428)
Income tax (benefit)
expense (2,251) 342 (1,472) 5,280
-----------------------------------------------
Net income (loss) 8,089 (76,182) 23,295 (83,708)
Preferred stock
dividend and
accretion 458 396 2,100 1,944
-----------------------------------------------
Net income (loss)
attributable to
common stockholders $7,631 ($76,578) $21,195 ($85,652)
Net income (loss)
attributable to
common stockholders
per basic share $0.19 ($1.82) $0.55 ($2.08)
Net income (loss)
attributable to
common stockholders
per diluted share $0.18 ($1.82) $0.53 ($2.08)
Weighted average basic
common shares
outstanding: 39,714,625 41,976,530 38,436,256 41,175,046
Diluted shares
outstanding per GAAP: 41,446,677 41,976,530 40,071,412 41,175,046
Reconciliation of EBTA
and Adjusted EBITDA to
GAAP Results (2):
-----------------------
Net income (loss) $8,089 ($76,182) $23,295 ($83,708)
Income tax expense (2,251) 342 (1,472) 5,280
Acquired intangible
asset amortization 2,651 2,124 5,554 7,887
Stock-based
compensation 8 353 31 1,002
Restructuring charge 2,571 0 2,571 730
Write-down of long-
lived assets due to
impairment 0 198 0 198
Write-down of goodwill
and trademarks due to
impairment 0 70,594 0 70,594
----------------------------------------------------------------------
EBTA excluding stock-
based compensation,
restructuring and
asset write-downs $11,068 ($2,571) $29,979 $1,983
Interest and other
income (expense), net 334 (1,563) 1,797 (2,250)
Depreciation and
amortization 1,088 2,376 4,265 6,734
----------------------------------------------------------------------
Adjusted EBITDA $11,822 $1,368 $32,447 $10,967
(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)
Jan. 31, Jan. 31,
2003 2004
(audited) (unaudited)
Assets
Current Assets
Cash and cash equivalents $35,187 $26,619
Marketable securities 23,169 24,599
Accounts receivable, net 30,022 31,848
Inventories, net 23,466 28,599
Prepaid catalog costs 2,100 2,028
Other current assets 10,130 3,124
----------------------
Total current assets 124,074 116,817
Property and equipment, net 10,081 27,193
Deferred tax asset 5,621 0
Goodwill, net 270,353 263,367
Intangible and other assets, net 24,471 30,131
----------------------
Total assets $434,600 $437,508
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $28,032 $25,348
Deferred revenues 15,106 20,878
Accrued expenses and other current
liabilities 27,679 31,088
----------------------
Total current liabilties 70,817 77,314
Deferred tax liability 2,698 0
Other long term liabilities 93 3,657
Convertible debt 0 69,300
Series B Preferred Stock 15,550 14,434
Stockholders' Equity 345,442 272,803
----------------------
Total liabilities and stockholders'
equity $434,600 $437,508
CONTACT: Alloy, Inc.
Sam Gradess, 212-244-4307
SOURCE: Alloy, Inc.
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