NEW YORK--(BUSINESS WIRE)--June 1, 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 April 30, 2005 of $87.7
million and a loss from continuing operations of $4.7 million or $0.12
per diluted share. The net loss attributable to common stockholders
was $16.3 million or $0.38 per diluted share. The first quarter
results reflect management's intent to sell the operations of Dan's
Competition ("Dan's"). Accordingly, the Company's results reflect
Dan's as a discontinued operation and include an anticipated loss on
disposition of the related net assets of $11.5 million. In the first
fiscal quarter of 2005, Alloy registered a $0.4 million loss from
continuing operations before interest and other income/expense, income
taxes, depreciation and amortization, stock-based compensation
expense, restructuring charges, and asset write-downs due to
impairment ("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 first fiscal quarter increased 4.6% to
$87.7 million, compared with $83.9 million for the first quarter of
fiscal 2004. Fiscal first quarter net merchandise revenues of $44.4
million increased 10.3% compared with $40.3 million for last year's
fiscal first quarter. The increase resulted primarily from strength in
the direct marketing segment as all of the Company's direct marketing
titles exceeded last year's first quarter sales and gross margin
levels. Fiscal first quarter sponsorship and other revenues of $43.3
million were virtually flat versus $43.6 million for the comparable
period in our last fiscal year. First fiscal quarter gross profit
increased to $42.8 million, or 48.9% of revenues, compared with $39.3
million, or 46.9% of revenues, for the comparable period last year,
driven primarily by significant gross margin improvement in our
promotional marketing business.
Operating expenses were $46.4 million for the first quarter of
fiscal 2005 versus $47.7 million for the first quarter of fiscal 2004.
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 reduced corporate
overhead costs including technology, finance, legal and other fixed
overhead expenses. 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.
The loss from continuing operations for the first quarter of
fiscal 2005 was $4.7 million, or $0.12 per diluted share compared with
a loss of $9.1 million for last fiscal year's first quarter or $0.22
per diluted share. The net loss for the first quarter of fiscal 2005
was $15.9 million, compared with a net loss of $9.2 million for last
fiscal year's first quarter. Net loss attributable to common
stockholders for the first quarter of fiscal 2005 was $16.3 million,
or $0.38 per diluted share, compared with a net loss attributable to
common stockholders of $9.6 million, or $0.23 per diluted share, for
last fiscal year's first quarter. Adjusted EBITDA improved from a loss
of $4.4 million for the first fiscal quarter of 2004 to a loss of $0.4
million for the first fiscal quarter of 2005.
Commenting on the quarter, Matt Diamond, Chairman and Chief
Executive Officer stated, "We are pleased to report that we made
meaningful progress toward improved sustained profitability in both
our merchandising and sponsorship businesses. 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."
Alloy has entered into an asset purchase agreement pursuant to
which substantially all of the assets and liabilities of Dan's will be
sold to XP Innovation, LLC. The transaction is expected to close
within the week. Approximately $13 million in gross proceeds are
expected from the sale. Commenting on this divestiture, Mr. Diamond
stated, "Strategically, we are focusing our efforts and financial
resources on our core dELiA*s, Alloy and CCS consumer brands which
should create increased shareholder value going forward."
Looking ahead, Mr. Diamond concluded, "As announced in yesterday's
press release, we look forward to pursuing the separation of our media
and marketing services business from our merchandising business
through a spin off transaction later in the year. To execute this
strategy, there will be an estimated $2.5 million to $3.5 million of
spin related expenses in 2005. We plan to continue promoting improved
financial performance throughout all of our continuing operations and
opening new dELiA*s stores." As previously announced, 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 we expect will 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 31 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, 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 per share data)
(Unaudited)
Three Months Three Months
Ended Ended
4/30/2004 4/30/2005
Net merchandise revenues $ 40,293 44,430
Sponsorship and other revenues 43,566 43,267
-------------------------
Total revenues 83,859 87,697
Cost of goods sold 44,527 44,888
-------------------------
Gross profit 39,332 42,809
Selling and marketing expenses 34,754 35,460
General and administrative expenses 11,218 9,711
Amortization of acquired intangible assets 1,259 1,093
Stock-based compensation 351 55
Impairment of long-lived assets 0 35
Restructuring charges 126 0
-------------------------
Total operating expenses 47,708 46,354
Loss from continuing operations before
interest and other income (expense) and
income taxes (8,376) (3,545)
Interest and other income (expense), net (686) (1,063)
-------------------------
Loss from continuing operations before
income taxes (9,062) (4,608)
Income tax expense 10 49
-------------------------
Loss from continuing operations (9,072) (4,657)
Discontinued operations
Loss from operations of discontinued
Dan's Competition (including loss on
disposal of 11,488) (171) (11,242)
-------------------------
Net loss (9,243) (15,899)
Preferred stock dividend and accretion 394 403
-------------------------
Net loss attributable to common stockholders ($9,637) ($16,302)
=========================
Basic loss per common share:
Loss from continuing operations ($0.22) ($0.12)
Loss from discontinued operations ($0.01) ($0.26)
-------------------------
Total basic loss attributable to
common stockholders ($0.23) ($0.38)
=========================
Diluted loss per common share:
Loss from continuing operations ($0.22) ($0.12)
Loss from discontinued operations ($0.01) ($0.26)
-------------------------
Total diluted loss attributable to
common stockholders ($0.23) ($0.38)
=========================
Weighted average basic common shares
outstanding: 42,347,834 42,945,321
Diluted shares outstanding per GAAP: 42,347,834 42,945,321
Weighted average basic common shares outstanding:
Diluted shares outstanding per GAAP:
Reconciliation of EBTA and Adjusted EBITDA to GAAP Results (1):
--------------------------------------------------------------
Net loss from continuing operations ($9,072) ($4,657)
Income tax expense 10 49
Amortization of acquired intangible assets 1,259 1,093
Stock-based compensation 351 55
Impairment of long-lived assets 0 35
Restructuring charges 126 0
----------------------------------------------------------------------
EBTA excluding stock-based compensation,
restructuring and asset write-downs ($7,326) ($3,425)
Interest and other income (expense), net (686) (1,063)
Depreciation and amortization 2,210 1,937
----------------------------------------------------------------------
Adjusted EBITDA ($4,430) ($425)
=========================
(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, 2005 April 30, 2005
Assets
Current Assets
Cash and cash equivalents $ 25,137 $ 17,340
Marketable securities 6,341 4,014
Accounts receivable, net 39,657 38,799
Inventories 26,623 25,993
Prepaid catalog costs 2,588 2,095
Other current assets 6,651 7,226
Current assets of discontinued
operations 2,763 2,967
---------------- --------------
Total current assets 109,760 98,434
Property and equipment, net 24,505 23,887
Goodwill, net 185,763 185,763
Intangible and other assets, net 17,159 15,907
Noncurrent assets of discontinued
operations 21,946 10,617
---------------- --------------
Total assets $ 359,133 $ 334,608
================ ==============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 29,287 $ 21,260
Deferred revenues 18,144 16,685
Mortgage Note payable 160 170
Accrued expenses and other current
liabilities 26,433 27,400
Current liabilities of discontinued
operations 822 584
---------------- --------------
Total current liabilities 74,846 66,099
Long term liabilities 6,209 6,218
Convertible debt 69,300 69,300
Series B Preferred Stock 16,042 16,445
Stockholders' Equity 192,736 176,546
---------------- --------------
Total liabilities and
stockholders' equity $ 359,133 $ 334,608
================ ==============
CONTACT:
Alloy, Inc.
James K. Johnson
212-244-4307
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