Spin-Off of dELiA*s On Schedule to Occur Before Fiscal Year End
NEW YORK--(BUSINESS WIRE)--Nov. 21, 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 October 31, 2005 of $122.9 million and net earnings
attributable to common stockholders of $7.3 million or $0.15 per
diluted share. The net earnings attributable to common stockholders
increased 368% versus the $1.6 million in net earnings attributable to
common stockholders for the fiscal quarter ended October 31, 2004 and
include the impact of the one time spin-off related expenses of $1.5
million, or $0.03 per diluted share. In the third fiscal quarter of
2005, Alloy achieved $12.4 million of earnings from continuing
operations before interest and other income/expense, income taxes,
depreciation and amortization, stock-based compensation expense, spin
off costs, restructuring charges, and asset write-downs due to
impairment ("Adjusted EBITDA"). Adjusted EBITDA in the third fiscal
quarter of 2005 increased 93.7% compared to the third fiscal quarter
of 2004. 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 third fiscal quarter increased 17.7% to
$122.9 million, compared with $104.4 million for the third quarter of
fiscal 2004. Third fiscal quarter net merchandise revenues of $59.9
million increased 23.6% compared with $48.5 million for last year's
third fiscal quarter. The increase resulted from strength in both the
direct marketing and retail segments, as revenues were up 27% and 18%,
respectively, in those segments. Third fiscal quarter sponsorship and
other revenues increased from $55.9 million for last year's third
fiscal quarter to $63.0 million for the third quarter of fiscal 2005,
a 12.7% increase. Third fiscal quarter gross profit increased to $62.6
million, or 50.9% of revenues, from $50.2 million, or 48.1% of
revenues, for the comparable period last year, driven primarily by
significant gross margin improvement in both our media and promotional
marketing businesses as well as improvements in the both segments of
our merchandising business.
Operating expenses were $54.2 million for the third quarter of
fiscal 2005 versus $47.8 million for the third quarter of fiscal 2004.
Contributing to the increase were expenses of $1.5 million associated
with the anticipated separation of our merchandising business from our
media and marketing services business (i.e., the spin-off transaction)
in the fourth quarter of this fiscal year. Despite these one-time
transaction-driven expenses, operating expenses decreased as a
percentage of total revenues to 44.1% for the third quarter of fiscal
2005 from 45.8% for the third quarter of fiscal 2004. The percentage
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, and to a lesser extent reduced
overhead costs including technology, finance, legal and other fixed
overhead expenses.
Net earnings attributable to common stockholders for the third
quarter of fiscal 2005 were $7.3 million, or $0.15 per diluted share,
compared with net earnings attributable to common stockholders of $1.6
million, or $0.04 per diluted share, for last year's fiscal third
quarter. Our weighted average common shares outstanding now include
the impact of the conversion of the Series B Redeemable Convertible
Preferred Stock into approximately 3.3 million shares of Alloy, Inc.
common stock on June 15, 2005. Adjusted EBITDA improved from $6.4
million for the third quarter of fiscal 2004 to $12.4 million for the
third quarter of fiscal 2005.
Commenting on the third quarter, Matt Diamond, Chairman and Chief
Executive Officer stated, "We are pleased to report that both the
dELiA*s and Alloy Media + Marketing businesses demonstrated improved
sales productivity, margin expansion and increased cost efficiencies
which resulted in meaningful profitability expansion. In addition, we
began our previously announced dELiA*s retail store roll-out plan as
10 new stores were open during the third quarter. We expect these
positive operational and financial trends largely to continue in our
fourth quarter. In addition, we remain well on track to complete the
dELiA*s, Inc. spin-off by the end of this fiscal year."
Total revenues for the nine months ended October 31, 2005
increased 11.0% to $299.8 million compared with $270.1 million for the
nine months ended October 31, 2004. Net merchandise revenues for the
nine months ended October 31, 2005 of $147.4 million were up 15.3%
versus $127.8 million for the nine months ended October 31, 2004.
Sponsorship and other revenues of $152.5 million for the nine-month
period ended October 31, 2005 increased 7.1% compared with $142.3
million for the same period last year. Gross profit for the nine
months ended October 31, 2005 increased to $153.6 million, or 51.2% of
revenues, compared with $129.2 million, or 47.8% of revenues, for the
first nine months of fiscal 2004. Operating expenses were $151.0
million for the nine months ended October 31, 2005 versus $144.6
million for the nine months ended October 31, 2004. The loss from
continuing operations, including preferred stock dividends and
accretion, for the nine months ended October 31, 2005 was $1.2
million, or $0.03 per diluted share compared with a loss of $20.5
million for the nine months ended October 31, 2004 or $0.48 per
diluted share. The net loss for the nine months ended October 31, 2005
was $11.7 million, compared with a net loss of $18.4 million for the
nine months ended October 31, 2004. Net loss attributable to common
stockholders for the nine months ended October 31, 2005 was $12.3
million, or $0.27 per diluted share, compared with net loss
attributable to common stockholders of $19.6 million, or $0.46 per
diluted share for the nine months ended October 31, 2004.
Our fiscal 2005 results reflect our sale of the operations of
Dan's Competition ("Dan's") in June 2005. Accordingly, our results
reflect Dan's as a discontinued operation and include a loss on
disposition of the related net assets of approximately $11.4 million.
We received approximately $13 million in net proceeds from the sale.
Our fiscal 2004 results have been restated to reflect Dan's as a
discontinued operation.
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 31 million
Generation Y consumers each month and is comprised of two distinct
businesses: Alloy Media + Marketing and dELiA*s, Inc. 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. dELiA*s, Inc., our
direct marketing and retail store subsidiary, includes the dELiA*s,
Alloy, and CCS 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.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, 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 share and per share data)
(Unaudited)
Three Three
Months Months Nine Months Nine Months
Ended Ended Ended Ended
10/31/2004 10/31/2005 10/31/2004 10/31/2005
Net merchandise
revenues $48,474 $59,906 $127,776 $147,367
Sponsorship and other
revenues 55,933 63,030 142,342 152,468
----------------------- -----------------------
Total revenues 104,407 122,936 270,118 299,835
Cost of goods sold 54,194 60,354 140,916 146,211
----------------------- -----------------------
Gross profit 50,213 62,582 129,202 153,624
Selling and marketing
expenses 36,435 42,439 107,130 116,787
General and
administrative
expenses 9,472 9,544 31,906 28,475
Amortization of
acquired intangible
assets 1,463 430 4,126 2,272
Stock-based
compensation 371 83 1,074 222
Impairment of long-
lived assets 0 0 0 924
Spin off costs 0 1,538 0 2,153
Restructuring charges 29 144 347 144
----------------------- -----------------------
Total operating
expenses 47,770 54,178 144,583 150,977
Income (Loss) from
continuing operations
before interest and
other income
(expense) and income
taxes 2,443 8,404 (15,381) 2,647
Interest and other
income (expense), net (1,238) (962) (3,753) (3,068)
----------------------- -----------------------
Income (Loss) from
continuing operations
before income taxes 1,205 7,442 (19,134) (421)
Income tax expense 10 137 130 203
----------------------- -----------------------
Income (Loss) from
continuing operations 1,195 7,305 (19,264) (624)
Discontinued
operations
Income (loss) from
operations of
discontinued Dan's
Competition
(including loss on
disposal of 11,405),
net of tax 770 0 831 (11,029)
----------------------- -----------------------
Net income (loss) 1,965 7,305 (18,433) (11,653)
Preferred stock
dividend and
accretion 405 0 1,200 620
----------------------- -----------------------
Net income (loss)
attributable to
common stockholders $1,560 $7,305 ($19,633) ($12,273)
======================= =======================
Basic income (loss)
per common share:
Income (loss) from
continuing
operations including
preferred stock
dividends and
accretion $0.02 $0.16 ($0.48) ($0.03)
Income (loss) from
discontinued
operations $0.02 $0.00 $0.02 ($0.24)
----------------------- -----------------------
Total basic income
(loss) attributable
to common
stockholders $0.04 $0.16 ($0.46) ($0.27)
======================= =======================
Diluted income (loss)
per common share:
Income (loss) from
continuing
operations including
preferred stock
dividends and
accretion $0.02 $0.15 ($0.48) ($0.03)
Income (loss) from
discontinued
operations $0.02 $0.00 $0.02 ($0.24)
----------------------- -----------------------
Total diluted income
(loss) attributable
to common
stockholders $0.04 $0.15 ($0.46) ($0.27)
======================= =======================
Weighted average basic
common shares
outstanding: 42,951,223 46,357,107 42,672,454 44,659,263
======================= =======================
Weighted average
diluted common shares
outstanding: 43,044,459 55,142,653 42,672,454 44,659,263
======================= =======================
Reconciliation of EBTA
and Adjusted EBITDA
to GAAP Results (1):
----------------------
Net income( loss) from
continuing operations $1,195 $7,305 ($19,264) ($624)
Income tax expense 10 137 130 203
Amortization of
acquired intangible
assets 1,463 430 4,126 2,272
Stock-based
compensation 371 83 1,074 222
Impairment of long-
lived assets 0 0 0 924
Spin off costs 0 1,538 0 2,153
Restructuring charges 29 144 347 144
---------------------------------------------- -----------------------
EBTA excluding stock-
based compensation,
restructuring, asset
write-downs and spin
off costs $3,068 $9,637 ($13,587) $5,294
Interest and other
income (expense), net (1,238) (962) (3,753) (3,068)
Depreciation and
amortization 2,075 1,761 6,406 5,504
---------------------------------------------- -----------------------
Adjusted EBITDA $6,381 $12,360 ($3,428) $13,866
======================= =======================
(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 required under 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, October 31,
2005 2005
----------- -----------
Assets
Current Assets
Cash and cash equivalents $25,137 $36,695
Marketable securities 6,341 1,000
Accounts receivable, net 39,657 53,613
Inventories 26,623 37,591
Prepaid catalog costs 2,588 5,993
Other current assets 6,651 6,021
Current assets of discontinued operations 2,763 0
----------- -----------
Total current assets 109,760 140,913
Property and equipment, net 24,505 28,476
Goodwill, net 185,763 185,763
Intangible and other assets, net 17,159 14,837
Noncurrent assets of discontinued operations 21,946 0
----------- -----------
Total assets $359,133 $369,989
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $29,287 $33,792
Deferred revenues 18,144 19,122
Mortgage Note payable 160 112
Bank Loan Payable 0 7,254
Accrued expenses and other current liabilities 26,433 36,038
Current liabilities of discontinued operations 822 43
----------- -----------
Total current liabilities 74,846 96,361
Long term liabilities 6,209 6,467
Convertible debt 69,300 69,300
Series B Preferred Stock 16,042 0
Stockholders' Equity 192,736 197,861
----------- -----------
Total liabilities and stockholders' equity $359,133 $369,989
=========== ===========
CONTACT: Alloy, Inc.
James K. Johnson, 212-244-4307
SOURCE: Alloy, Inc.
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