NEW YORK--(BUSINESS WIRE)--March 29, 2006--Alloy, Inc. (Nasdaq:
ALOY):
-- Full Year Revenue Up 6% To $195.3 Million; Fourth Quarter
Revenue Up 3.3% To $43.2 Million
-- Full Year Adjusted EBITDA Up 259% To $17.3 Million; Fourth
Quarter Adjusted EBITDA $3.0 Million Compared with ($0.5)
Million in 2004
-- Full Year and Fourth Quarter Results Include a Non-Cash
Impairment Charge of $32.7 Million
Alloy, Inc. (Nasdaq: ALOY), a media and marketing services company
primarily targeting the dynamic Generation Y population, today
reported results for the full fiscal year ended January 31, 2006
("fiscal 2005") and the fourth quarter ended January 31, 2006. Alloy
completed its spinoff of dELiA*s, Inc. ("dELiA*s") on December 19,
2005. The financial results of dELiA*s are presented as discontinued
operations for all periods. Following the spinoff of dELiA*s, we
changed the composition of our reportable segments to the following
three operating segments: (i) Promotion, whose products and services
are promotional in nature, including the Alloy Marketing and
Promotions Agency business, the On-Campus Marketing unit, Sampling and
Mall Marketing services; (ii) Media, which includes our Out-of-Home
business, our Internet and Database businesses and our Specialty Print
and Intellectual Property businesses; and (iii) Placement, which
aggregates and markets third party media properties.
For fiscal 2005, revenue increased 6% to $195.3 million from
$184.2 million in fiscal 2004, reflecting a 14.6% growth in our Media
Segment, a 6.2% growth in our Promotion Segment and a nominal decrease
in our Placement Segment. Revenue in our Media Segment was $48.1
million in fiscal 2005 compared with $41.9 million in the year ended
January 31, 2005 ("fiscal 2004"). The increase is primarily
attributable to strong sales momentum in our Out-of-Home business, as
well as strength in the Alloy Entertainment unit. Revenue in our
Promotion Segment was $88.7 million in fiscal 2005 compared with $83.6
million in fiscal 2004. The increase is principally attributable to
revenue growth in our direct selling services and sampling businesses,
partially offset by lower revenue from sales of promotions and
sponsorships. Revenue in our Placement Segment was $58.5 million in
fiscal 2005 compared with $58.7 million in fiscal 2004.
Operating loss decreased $53.7 million, or 69%, to $24.2 million
in fiscal 2005 from $78.0 million in fiscal 2004. In fiscal 2005 we
recorded Special Charges of $36.2 million compared with $73.3 million
in fiscal 2004. The Special Charges in fiscal 2005 resulted from a
$32.7 million non-cash goodwill and long-lived asset impairment
charge, which was recorded in our fourth quarter, and $3.5 million of
expenses related to the dELiA*s spinoff. The fiscal 2004 Special
Charges resulted from a $72.9 million non-cash goodwill and long-lived
asset impairment charge, which was recorded in the fourth quarter of
fiscal 2004, and $0.4 million in restructuring costs. Our current
business segments of Promotion, Media and Placement were operated as
one segment in fiscal 2004. Despite the strength of the business this
past year, as a result of evaluating impairment on our three redefined
business segments, we determined that an additional impairment charge
was required for fiscal 2005. Excluding the Special Charges, our
Operating Income would have increased $16.7 million to $12.0 million
in fiscal 2005 compared with an Operating Loss of $4.7 million in
fiscal 2004. The significant improvement in Operating Income excluding
the Special Charges is primarily attributable to revenue growth, an
increased percentage of our total revenue coming from our Media
Segment, and a fiscal 2005 cost reduction program.
For fiscal 2005, Adjusted EBITDA, defined as Operating Loss plus
depreciation and amortization, special charges and non-cash stock
based compensation was $17.3 million compared with $4.8 million for
fiscal 2004, an increase of $12.5 million, or 259%.
Commenting on the fiscal year and fourth quarter financial
results, Matt Diamond, Chairman and Chief Executive Officer, stated,
"We are very pleased with the year over year operating improvement
shown by Alloy Media + Marketing. We have reinvigorated sales growth
in our key Media Segment, significantly reduced our cost structure,
and very recently acquired Sconex, a key interactive acquisition, all
of which we believe position us well for the future. Moreover, we are
thrilled to have successfully completed a tax-free spinoff of dELiA*s,
Inc. to our stockholders during the fourth quarter of fiscal 2005."
Loss from continuing operations decreased $54.4 million, or 66%,
to $28.0 million, or $2.41 per share, in fiscal 2005 from $82.4
million, or $7.74 per share, in fiscal 2004. The improvement is
primarily attributable to the decreased operating loss and higher
interest income.
Net loss attributable to common stockholders decreased $57.3
million, or 61%, to $36.1 million, or $3.11 per share, in fiscal 2005
from $93.4 million, or $8.77 per share, in fiscal 2004. In June 2005,
all of our outstanding shares of Series B Redeemable Convertible
Preferred Stock were converted into shares of Common Stock.
Accordingly, the non-cash dividends on the shares of Series B
Preferred Stock decreased in fiscal 2005 to $0.6 million from $1.6
million in fiscal 2004.
For fiscal 2005, free cash flow, defined as net income (loss) plus
depreciation and amortization, special charges, stock-based
compensation, and amortization of deferred financing costs less
capital expenditures, was approximately $13.3 million, or $1.15 per
share, as compared with ($1.8) million, or ($0.17) per share, in
fiscal 2004, an improvement of $15.1 million.
FOURTH QUARTER
For the fourth quarter of fiscal 2005, revenue increased 3.3% to
$43.2 million from $41.8 million in the comparable period of fiscal
2004, driven by a 25.4% growth in our Media Segment partially offset
by modest declines in our Promotions and Placement Segments. The Media
Segment growth was principally attributable to strong sales in our
Out-of-Home business. The decrease in Promotion Segment revenue was
attributable to increased selectivity in the type of business we
choose to accept. The Placement Segment market was softer than
expected in the quarter.
For the fourth quarter of fiscal 2005, Adjusted EBITDA was $3.0
million as compared with a loss of $0.5 million in the same period of
fiscal 2004, an increase of $3.5 million.
Operating loss decreased $43.8 million, or 58%, to $32.1 million
in the fourth quarter of fiscal 2005 from $75.9 million in the same
period of fiscal 2004. Excluding Special Charges, our Operating Income
would have increased $4.9 million to $2.0 million in the fourth
quarter of fiscal 2005 from an Operating Loss of $2.9 million in the
same period of fiscal 2004. The significant improvement in operating
income excluding the Special Charges is primarily attributable to
stronger sales in our higher margin Media Segment and our continued
cost reduction efforts.
Loss from continuing operations for the quarter decreased $43.9
million, or 57%, to $33.0 million, or $2.78 per share, in fiscal 2005
from $76.8 million, or $7.17 per share, in the fourth quarter of
fiscal 2004. The improvement is primarily attributable to the
decreased operating loss and higher interest income.
For the fourth quarter of fiscal 2005, free cash flow was
approximately $2.2 million, or $0.19 per share, compared with ($2.3)
million, or ($0.22) per share, in 2004's fourth quarter, an
improvement of $4.5 million.
RECENT DEVELOPMENTS
On March 28, 2006, we announced our acquisition of Sconex, a
leading social networking site in the high school market. We believe
that optimizing and growing our interactive properties is important as
the youth market spends increasing amounts of time online. Further, we
believe that Sconex will be an important contributor to our strategy
of expanding our media business segment.
BUSINESS OUTLOOK
Consistent with last year, we are not providing earnings per share
or Adjusted EBITDA target ranges for the year but rather, during our
quarterly conference calls, 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.
About Alloy
Alloy, Inc., under the banner of Alloy Media + Marketing ("AM+M"),
is a widely recognized pioneer in nontraditional marketing. Working
with AM+M, marketers reach consumers through a host of programs
incorporating Alloy's diverse array of media and marketing assets and
expertise in direct mail, college and high school media, interactive,
display media, college guides, promotional and social network
marketing. For further information regarding Alloy, please visit our
corporate website at (www.alloyinc.com).
Forward-Looking Statements
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.delias.com, and www.ccs.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, 2005, and in subsequent filings that we
make 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.
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
-----------------------------------------------------------------
(In millions)
A. Adjusted EBITDA
The following tables set forth the Company's Adjusted EBITDA for the
three month period and year ended January 31, 2006 and 2005. The
Company defines Adjusted EBITDA as net income (loss) adjusted to
exclude the following line items and amounts presented in its
Statement of Operations: income (loss) from discontinued operations,
income taxes, other items, interest income, interest expense, special
charges, depreciation and amortization and stock-based compensation
expense.
The Company uses Adjusted EBITDA, among other things, to evaluate the
Company's operating performance and to value prospective acquisitions.
The measure is also one of several components of incentive
compensation targets for certain management personnel, and this
measure is among the primary measure used by management for planning
and forecasting future periods. The Company believes that this measure
is an important indicator of the Company's operational strength and
performance of its business because it provides a link between
profitability and operating cash flow. The Company believes the
presentation of this measure is relevant and useful for investors
because it allows investors to view performance in a manner similar to
the method used by the Company's management, helps improve their
ability to understand the Company's operating performance and makes it
easier to compare the Company's results with other companies that have
different financing and capital structures or tax rates. In addition,
this measure is also among the primary measures used externally by the
Company's investors, analysts and peers in its industry for purposes
of valuation and comparing the operating performance of the Company to
other companies in the industry.
Since Adjusted EBITDA is not a measure of performance calculated in
accordance with GAAP, it should not be considered in isolation of, or
as a substitute for, net income as an indicator of operating
performance. Adjusted EBITDA, as the Company calculates it, may not be
comparable to similarly titled measures employed by other companies.
In addition, this measure does not necessarily represent funds
available for discretionary use, and is not necessarily a measure of
the Company's ability to fund its cash needs. As Adjusted EBITDA
excludes certain financial information compared with net income, the
most directly comparable GAAP financial measure, users of this
financial information should consider the types of events and
transactions that are excluded. As required by the Securities and
Exchange Commission ("SEC"), the Company provides below a
reconciliation of Adjusted EBITDA to net income.
Three Months Ended Fiscal Year Ended
January 31, January 31,
----------------- -----------------
2006 2005 2006 2005
------ ------- ------- -------
Net Loss ($23.8) ($73.3) ($35.5) ($91.8)
Plus:
Income (Loss) from Discontinued
Operations (9.2) (3.5) 7.5 9.4
Income Taxes 0.1 0.0 0.4 0.1
Other Items, net 0.0 0.0 0.0 0.4
Interest Income (0.3) (0.1) (0.9) (0.4)
Interest Expense 1.1 1.0 4.3 4.3
Special Charges 34.1 72.9 36.2 73.3
Depreciation and Amortization 0.9 2.0 5.0 7.9
Stock-based Compensation (included
in General and Administrative
Expenses) 0.1 0.5 0.3 1.6
------ ------- ------- -------
Adjusted EBITDA $ 3.0 ($ 0.5) $17.3 $ 4.8
====== ======= ======= =======
B. Free Cash Flow
Free cash flow is defined by the Company as net income (loss) plus
depreciation and amortization, special charges, stock-based
compensation, and amortization of deferred financing costs less
capital expenditures. The Company uses free cash flow, among other
measures, to evaluate its operating performance. Management believes
free cash flow provides investors with an important perspective on the
Company's cash available to service debt and the Company's ability to
make strategic acquisitions and investments, maintain its capital
assets, repurchase its Common Stock and fund ongoing operations. As a
result, free cash flow is a significant measure of the Company's
ability to generate long-term value. The Company believes the
presentation of free cash flow is relevant and useful for investors
because it allows investors to view performance in a manner similar to
the method used by management. In addition, free cash flow is also a
primary measure used externally by the Company's investors, analysts
and peers in its industry for purposes of valuation and comparing the
operating performance of the Company to other companies in its
industry. Free cash flow per weighted average shares outstanding is
defined by the Company as free cash flow divided by the weighted
average shares outstanding used in the computation of net income
(loss) per share.
As free cash flow is not a measure of performance calculated in
accordance with GAAP, free cash flow should not be considered in
isolation of, or a substitute for, net income as an indicator of
operating performance or net cash flow provided by operating
activities as a measure of liquidity. Free cash flow, as the Company
calculates it, may not be comparable to similarly titled measures
employed by other companies. In addition, free cash flow does not
necessarily represent funds available for discretionary use and is not
necessarily a measure of operating cash flow to remove the impact of
cash flow timing differences to arrive at a measure which the Company
believes more accurately reflects funds available for discretionary
use.
Specifically, the Company adjusts operating cash flow (the most
directly comparable GAAP financial measure) for capital expenditures,
deferred taxes, non-recurring expenditures and certain other non-cash
items in addition to removing the impact of sources and or uses of
cash resulting from changes in operating assets and liabilities.
Accordingly, users of this financial information should consider the
types of events and transactions, which are not reflected. The Company
provides below a reconciliation of free cash flow to the most directly
comparable amount reported under GAAP, net cash flow provided by
operating activities.
Three Months Ended Year Ended
January 31, January 31,
------------------ -------------
2006 2005 2006 2005
------ -------- ------ ------
(In millions, except per share amounts)
Net cash provided by (used in) operating
activities $ 8.9 $ 23.1 $ 5.2 ($9.5)
Plus (Minus)
Net cash provided by operating activities
attributable to discontinued operations (2.8) (21.7) 5.6 (0.6)
Changes in operating assets and
liabilities (5.3) (2.8) (0.3) 10.6
Spinoff and restructuring costs included
in Special Charges 1.4 0.1 3.5 0.4
Capital expenditures 0.0 (1.0) (0.7) (2.7)
------- -------- ------ ------
Free Cash Flow $ 2.2 ($2.3) $13.3 ($1.8)
======= ======== ====== ======
Weighted Average Shares Outstanding 11.9 10.7 11.6 10.7
======= ======== ====== ======
Free Cash Flow per Share $ 0.19 ($0.22) $1.15 ($0.17)
======= ======== ====== ======
Alloy, Inc.
Statement of Operations
(In thousands, except per share data)
Three Months Ended Fiscal Year Ended
January 31, January 31,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Revenue $ 43,211 $ 41,842 $ 195,324 $ 184,208
---------- ---------- ---------- ----------
Expenses
Operating 36,322 37,764 163,487 161,057
General and Administrative 3,964 5,055 14,893 19,926
Depreciation and
Amortization 925 1,955 4,973 7,930
Special Charges 34,066 72,921 36,219 73,268
---------- ---------- ---------- ----------
Total Expenses 75,277 117,695 219,572 262,181
---------- ---------- ---------- ----------
Operating Loss (32,066) (75,853) (24,248) (77,973)
Interest Expense (1,061) (1,060) (4,243) (4,262)
Interest Income 349 103 898 351
Other Items, net (25) (9) (27) (365)
---------- ---------- ---------- ----------
Loss from Continuing
Operations
before Taxes (32,803) (76,819) (27,620) (82,249)
Income Taxes (160) (28) (363) (158)
---------- ---------- ---------- ----------
Loss from Continuing
Operations (32,963) (76,847) (27,983) (82,407)
Income (Loss) from
Discontinued Operations 9,178 3,500 (7,525) (9,374)
---------- ---------- ---------- ----------
Net Loss (23,785) (73,347) (35,508) (91,781)
Dividends on Preferred Stock -- (408) (620) (1,608)
---------- ---------- ---------- ----------
Net Loss attributable to
Common Stockholders' ($23,785) ($73,755) ($36,128) ($93,389)
========== ========== ========== ==========
Basic and Diluted Net Loss
per Share:
Continuing Operations ($2.78) ($7.17) ($2.41) ($7.74)
Discontinued Operations $ 0.77 $ 0.33 ($0.65) ($0.88)
---------- ---------- ---------- ----------
Attributable to Common
Stockholders' ($2.01) ($6.88) ($3.11) ($8.77)
========= ========= ========= =========
Weighted Average Basic and
Diluted Shares Outstanding 11,855 10,718 11,598 10,652
========== ========== ========== ==========
Reconciliation of Operating
Loss to Adjusted EBITDA (1):
Net Loss ($23,785) ($73,347) ($35,508) ($91,781)
Plus:
Income (Loss) from
Discontinued Operations (9,178) (3,500) 7,525 9,374
Income Taxes 160 28 363 158
Other Items, net 25 9 27 365
Interest Income (349) (103) (898) (351)
Interest Expense 1,061 1,060 4,243 4,262
Special Charges 34,066 72,921 36,219 73,268
Depreciation and
Amortization 925 1,955 4,973 7,930
Stock-based Compensation
(included in General and
Administrative Expenses) 84 508 307 1,581
--------- --------- --------- ---------
Adjusted EBITDA $ 3,009 ($469) $ 17,251 $ 4,806
========= ========= ========= =========
(1) Adjusted EBITDA is a non-GAAP financial measure. Alloy uses 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 measures should be considered in
addition to, and not as a substitute for, other measures of
financial performance prepared in accordance with GAAP.
ALLOY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
January 31,
--------------------
2006 2005
--------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 39,631 $ 25,137
Marketable securities -- 6,341
Accounts receivable, net of allowance for doubtful
accounts of $1,690 and $1,835, respectively 42,483 34,413
Other current assets 7,851 8,548
Current assets of discontinued operations -- 30,769
--------- ----------
Total current assets 89,965 105,208
Fixed assets 4,072 6,067
Goodwill 114,728 145,559
Intangible assets 7,006 10,131
Other assets 3,717 3,233
Other assets of discontinued operations -- 84,383
--------- ----------
Total assets $ 219,488 $ 354,581
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,345 $ 13,075
Amount payable to dELiA*s 8,155 --
Deferred revenue 10,552 12,313
Accrued expenses and other current liabilities 16,061 9,228
Current liabilities of discontinued operations -- 35,692
--------- ----------
Total current liabilities 44,113 70,308
Senior convertible debentures 69,300 69,300
Other long-term liabilities 891 1,044
Other liabilities of discontinued operations -- 5,166
Series B redeemable convertible preferred stock,
$10 per share liquidation preference; $.01 par
value; 3 shares designated; mandatorily
redeemable; 0 (2006) and 1 shares (2005) issued
and outstanding, respectively -- 16,042
--------- ----------
Total liabilities 114,304 161,860
--------- ----------
Stockholders' equity:
Common stock; $.01 par value: authorized 50,000
shares; issued and outstanding, 11,874 (2006) and
10,981 (2005) 119 110
Additional paid-in capital 364,228 416,208
Deferred compensation (539) (517)
Accumulated deficit (254,459) (218,951)
Accumulated other comprehensive loss -- (31)
--------- ----------
109,349 196,819
Less treasury stock, at cost; 194 (2006) and 191
(2005) shares (4,165) (4,098)
--------- ----------
Total stockholders' equity 105,184 192,721
--------- ----------
Total liabilities and stockholders' equity $ 219,488 $ 354,581
========= ==========
CONTACT: Alloy, Inc.
Gary J. Yusko, 212-329-8431
SOURCE: Alloy, Inc.
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