NEW YORK--(BUSINESS WIRE)--April 14, 2005--Alloy, Inc. (Nasdaq:
ALOY), a media, marketing services, direct marketing and retail
company primarily targeting the dynamic Generation Y population, today
reported revenues for the fiscal quarter ended January 31, 2005 of
$118.1 million and a net loss attributable to common stockholders of
$73.7 million or $1.72 per diluted share. Excluding the impact of a
$73.0 million non-cash write-down of goodwill and other intangibles,
the net loss attributable to common stockholders was $0.7 million, or
$0.02 per diluted share. The write-down of goodwill and other
intangible assets occurred principally in our sponsorship segment and
resulted from our annual impairment review as of December 31, 2004.
For our fourth fiscal quarter, Alloy generated $4.9 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"). For the full year ended
January 31, 2005 the Company generated $3.2 million of Adjusted
EBITDA. For additional financial detail, including the reconciliation
of Adjusted EBITDA to net income (loss) as determined under GAAP,
please refer to the financial tables provided at the end of this
release.
Total revenues for the fourth fiscal quarter increased 1.6% to
$118.1 million, compared with $116.3 million for the fourth quarter of
fiscal 2003. Fiscal fourth quarter net merchandise revenues of $76.2
million decreased 2.8% compared with $78.4 million for last year's
fiscal fourth quarter. The decrease resulted primarily from planned
reductions in catalog circulation and closure of poorly performing
retail locations. Fiscal fourth quarter sponsorship and other revenues
of $41.9 million were up 10.5% versus $37.9 million for the comparable
period in our last fiscal year. Excluding the contribution of InSite,
which was not included in the 2003 results, sales increased by 7.9%
year over year driven primarily by new consumer marketing programs in
our promotions business. Fourth fiscal quarter gross profit decreased
to $57.6 million, or 48.8% of revenues, compared with $58.4 million,
or 50.3% of revenues, for the comparable period last year, largely as
a result of lower than expected margins in our merchandise business as
we cleared more non-apparel inventory than expected in our dELiA*s
retail business.
Operating expenses were $129.8 million for the fourth quarter of
fiscal 2004 versus $124.2 million for the fourth quarter of fiscal
2003. Excluding the impact of goodwill and other asset write-downs,
operating expenses decreased to $56.7 million from $62.3 million. The
decrease resulted primarily from the cost savings derived from
integrating the operations of dELiA*s, which we acquired in September
2003, into our merchandise operations, along with lower legal costs
resulting from the settlement of several ongoing litigations.
Beginning in the third quarter of fiscal 2004, we began to more fully
realize many of the synergies we expected to result from combining our
direct marketing operations with those of dELiA*s, leveraging our
combined scale, selling across our combined databases while
controlling overall catalog circulation, and consolidating fulfillment
operations. Separately, in an effort to improve earnings in our
sponsorship business we have been selectively eliminating positions
and reducing other variable and fixed overhead costs.
The net loss for the fourth quarter of fiscal 2004 was $73.3
million, compared with a net loss of $67.7 million for last fiscal
year's fourth quarter. Net loss attributable to common stockholders
for the fourth quarter of fiscal 2004 was $73.7 million, or $1.72 per
diluted share, compared with a net loss attributable to common
stockholders of $68.1 million, or $1.62 per diluted share, for last
fiscal year's fourth quarter. Excluding the impact of fourth quarter
write-downs related to goodwill and other assets, Alloy's net loss
attributable to common stockholders for the fourth quarter of fiscal
2004 would have been a loss of $0.7 million, or $0.02 per diluted
share, as compared to last year's fourth quarter loss of $6.1 million,
or $0.15 per diluted share. Adjusted EBITDA increased from $1.0
million for the fourth fiscal quarter of 2003 to $4.9 million for the
fourth fiscal quarter of 2004.
Commenting on the quarter, Matt Diamond, Chairman and Chief
Executive Officer stated, "We are pleased to report that in addition
to meeting our profitability targets, we made meaningful progress
toward improved sustained profitability in both our merchandising and
sponsorship businesses. In the year since our acquisition of dELiA*s,
the merchandise business has consolidated operations, rationalized the
store base, strengthened its management team and revitalized sales
productivity. In the sponsorship business, we have made deep cuts in
our overhead costs and instilled greater margin discipline in our
contracted event marketing business. We foresee both businesses
delivering improved year over year financial results in fiscal 2005
along with commencement of our dELiA*s retail store roll-out plan."
The Company is presently analyzing a number of strategic
alternatives for its merchandising business and currently contemplates
being able to announce more specifics, in addition to today's other
Alloy announcement, within the next four to six weeks. In the
meantime, the Company has decided to redeem its outstanding shares of
Series B Preferred Stock in exchange for Alloy common stock when the
Company becomes obligated to redeem such Series B Preferred Stock in
mid-June. The Company elected to effect a common stock redemption, as
opposed to a cash redemption, in order to devote corporate capital to
fund retail store expansion and other operational requirements.
Total revenues for the year ended January 31, 2005 increased 8.2%
to $402.5 million, compared with $371.9 million for the year ended
January 31, 2004. Net merchandise revenues for the year ended January
31, 2005 of $218.2 million were up 16.8% versus $186.9 million for the
year ended January 31, 2004. Sponsorship and other revenues of $184.3
million for the twelve-month period decreased 0.4% compared with
$185.0 million for the previous fiscal year. Gross profit for the year
ended January 31, 2005 increased to $194.1 million, or 48.2% of
revenues, compared with $182.6 million, or 49.1% of revenues, for
fiscal 2003. Operating expenses were $280.9 million for fiscal 2004
versus $250.3 million for fiscal 2003. The net loss for the year ended
January 31, 2005 was $91.8 million, compared with a net loss of $75.2
million for the twelve months ended January 31, 2004. The net loss
attributable to common stockholders for fiscal 2004 was $93.4 million,
or $2.19 per diluted share, compared with a net loss attributable to
common stockholders of $77.2 million, or $1.87 per diluted share for
fiscal 2003. Excluding the impact of write-downs related to goodwill
and other assets, Alloy's net loss attributable to common stockholders
for fiscal 2004 would have been $20.3 million or $0.48 per diluted
share, as compared to last fiscal year's net loss of $15.2 million, or
$0.37 per diluted share.
Looking ahead, Mr. Diamond concluded, "As we have previously
stated, we look forward to pursuing value enhancing strategies for our
strengthened merchandising business in fiscal year 2005 while driving
improved financial performance throughout all of our operations and
opening new dELiA*s stores. In fiscal 2005 the Company will not be
providing an earnings per share or Adjusted EBITDA target range for
the year. Instead, during our quarterly conference calls we will
provide a recap and outlook for key operating metrics that influence
our earnings per share and Adjusted EBITDA and our strategies to
improve these metrics along with our actual financial results
throughout the year."
About Alloy
Alloy, Inc. is a media, marketing services, direct marketing and
retail company primarily 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 and is comprised of two distinct
divisions: Alloy Media + Marketing and Alloy Merchandising Group.
Alloy Media + Marketing is one of the largest providers of targeted
media and promotional marketing programs incorporating such industry
recognized divisions as Alloy Marketing & Promotions (AMP), 360 Youth,
American Multicultural Marketing (AMM), Market Place Media (MPM),
Alloy Education, Alloy Entertainment, and Alloy Out-of-Home. Working
with these groups, marketers can connect with their targeted audience
through a host of advertising and marketing programs incorporating
Alloy's wide ranging media and marketing assets such as direct mail
catalogs, college and high school newspapers, Web sites, display media
boards, college guides, and promotional events. Alloy Merchandising
Group, our direct marketing and retail store division, includes the
dELiA*s, Alloy, CCS and Dan's Competition brand names and sells
apparel, accessories, footwear, room furnishings and action sports
equipment directly to the youth market through catalogs, websites and
retail stores. For further information regarding Alloy, please visit
our corporate website at (www.alloyinc.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, www.delias.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, 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, 2004, 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, to changes in
management's expectations or otherwise, except as may be required by
law.
Alloy, Inc.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
1/31/2004 1/31/2005 1/31/2004 1/31/2005
Net merchandise revenues $78,367 $76,210 $186,924 $218,242
Sponsorship and other
revenues 37,885 41,868 185,024 184,251
--------------------------------------------
Total revenues 116,252 118,078 371,948 402,493
Cost of goods sold 57,806 60,472 189,379 208,349
--------------------------------------------
Gross profit 58,446 57,606 182,569 194,144
Selling and marketing
expenses 47,552 43,860 145,702 155,478
General and administrative
expenses 12,248 10,998 32,981 44,133
Amortization of acquired
intangible assets 2,123 1,362 7,887 6,275
Impairment of goodwill and
other indefinite-lived
intangible assets 60,638 72,102 60,638 72,102
Impairment of long-lived
assets 1,315 942 1,315 942
Stock-based compensation 353 507 1,002 1,581
Restructuring charges 0 0 730 347
--------------------------------------------
Total operating expenses 124,229 129,771 250,255 280,858
Loss from operations (65,783) (72,165) (67,686) (86,714)
Interest and other income
(expense), net (1,564) (1,141) (2,250) (4,894)
--------------------------------------------
Loss before income taxes (67,347) (73,306) (69,936) (91,608)
Income tax expense 342 28 5,279 158
--------------------------------------------
Net loss (67,689) (73,334) (75,215) (91,766)
Preferred stock dividend
and accretion 396 408 1,944 1,608
--------------------------------------------
Net loss attributable to
common stockholders ($68,085) ($73,742) ($77,159) ($93,374)
Net loss attributable to
common stockholders per
basic share ($1.62) ($1.72) ($1.87) ($2.19)
Net loss attributable to
common stockholders per
diluted share ($1.62) ($1.72) ($1.87) ($2.19)
Weighted average basic
common shares
outstanding: 41,976,530 42,757,410 41,175,046 42,606,905
Diluted shares outstanding
per GAAP: 41,976,530 42,757,410 41,175,046 42,606,905
Reconciliation of EBTA and Adjusted EBITDA to
GAAP Results (1):
------------------------------------------------
Net loss ($67,689) ($73,334) ($75,215) ($91,766)
Income tax expense 342 28 5,279 158
Amortization of acquired
intangible assets 2,123 1,362 7,887 6,275
Impairment of goodwill and
other indefinite-lived
intangible assets 60,638 72,102 60,638 72,102
Impairment of long-lived
assets 1,315 942 1,315 942
Stock-based compensation 353 507 1,002 1,581
Restructuring charges 0 0 730 347
----------------------------------------------------------------------
EBTA excluding stock-based
compensation,
restructuring and asset
write-downs ($2,918) $1,607 $1,636 ($10,361)
Interest and other income
(expense), net (1,564) (1,141) (2,250) (4,894)
Depreciation and
amortization 2,376 2,141 6,733 8,692
----------------------------------------------------------------------
Adjusted EBITDA $1,022 $4,889 $10,619 $3,225
(1) 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 31, January 31,
2004 2005
Assets
Current Assets
Cash and cash equivalents $30,543 $25,137
Marketable securities 19,014 6,341
Accounts receivable, net 31,492 39,693
Inventories 29,021 29,099
Prepaid catalog costs 2,028 2,717
Other current assets 4,431 6,773
-------------------------
Total current assets 116,529 109,760
Marketable securities 5,585 0
Property and equipment, net 27,234 24,517
Goodwill, net 274,796 207,104
Intangible and other assets, net 25,865 17,752
-------------------------
Total assets $450,009 $359,133
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $28,740 $29,792
Deferred revenues 15,124 18,144
Mortgage Note payable 2,914 160
Accrued expenses and other current
liabilities 37,459 26,750
-------------------------
Total current liabilities 84,237 74,846
Long term liabilities 743 6,209
Convertible debt 69,300 69,300
Series B Preferred Stock 14,434 16,042
Stockholders' Equity 281,295 192,736
-------------------------
Total liabilities and
stockholders' equity $450,009 $359,133
CONTACT: Alloy, Inc.
James K. Johnson, 212-244-4307
SOURCE: Alloy, Inc.
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