Alloy Announces Third Quarter Financial Results; Management Reaffirms Full Year EBITDA Guidance in the $3-$6 Million Range; Continues Program to Improve Sponsorship Business Profitability.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Alloy alloy (ăl`oi, əloi`) [O. Fr.,=combine], substance with metallic properties that consists of a metal fused with one or more metals or nonmetals. , Inc. (Nasdaq:ALOY), a media, marketing services, direct marketing and retail company primarily targeting the dynamic Generation Y population, today reported revenues for its fiscal quarter ended October October: see month. 31, 2004 of $110.0 million and net income attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to common stockholders of $1.6 million or $0.04 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. For this third fiscal quarter, Alloy generated earnings of $7.5 million before interest and other income/expense, income taxes, depreciation and amortization, stock-based compensation expense, and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. ("Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become "). For additional financial detail, including the reconciliation of Adjusted EBITDA to net income (loss) determined under GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , please refer to the financial tables provided at the end of this release. E[acute accent acute accent n. A mark (´) indicating: a. that a vowel is close or tense, as é in French été. b. that a vowel or syllable has a high or rising pitch, as in Chinese or Ancient Greek. c. ]Total revenues for the third fiscal quarter increased 4.0% to $110.0 million, compared with $105.8 million for the third quarter of fiscal 2003. Third fiscal quarter net merchandise MERCHANDISE. By this term is understood all those things which merchants sell either wholesale or retail, as dry goods, hardware, groceries, drugs, &c. It is usually applied to personal chattels only, and to those which are not required for food or immediate support, but such as remain revenues of $54.0 million increased 11.3% compared with $48.6 million for last year's third fiscal quarter. The increase resulted primarily from the inclusion of a full fiscal quarter's sales for dELiA The delia ['dεlja] was an item of male apparel worn over the żupan by szlachta (nobility) of the Polish-Lithuanian Commonwealth. It was usually of wool or velvet, finished with fur. *s which we acquired during last year's third fiscal quarter in September September: see month. 2003. Third fiscal quarter sponsorship and other revenues of $56.0 million were down 2.2% versus $57.2 million for the comparable period of the prior fiscal year. The decrease was primarily attributable to reduced sales in our promotions business. E[acute accent]Third fiscal quarter gross profit remained relatively flat at $53.2 million, or 48.3% of revenues, compared with $53.3 million, or 50.4% of revenues, for the comparable period last year. The decrease in gross margin percentage was primarily the result of decreased gross margins in our promotions business. E[acute accent]Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were $50.0 million for the third quarter of fiscal 2004 versus $53.6 million for the third quarter of fiscal 2003. The decrease resulted primarily from the cost savings derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from integrating the acquired dELiA*s operations into our merchandise operations, along with lower legal costs. During the third quarter, we began to realize some 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 catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. circulation, and consolidating fulfillment ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. operations. Separately, in an effort to improve earnings in our sponsorship business we have been selectively eliminating positions and reducing other fixed overhead costs overhead costs see fixed costs. . E[acute accent]Net income for the third quarter of fiscal 2004 was $2.0 million, compared with a net loss of $6.8 million for last fiscal year's third quarter. Net income attributable to common stockholders for the third quarter of fiscal 2004 was $1.6 million, or $0.04 per diluted share, compared with a net loss attributable to common stockholders of $7.2 million, or $0.17 per diluted share, for last fiscal year's third quarter. Adjusted EBITDA increased from $4.6 million for the third fiscal quarter of 2003 to $7.5 million for the third fiscal quarter of 2004. E[acute accent]Commenting on the quarter, Matt Diamond, Chairman and Chief Executive Officer stated, "In our sponsorship business, we made significant strides in reducing operating expenses and we plan to continue making improvements in the cost structure during the fourth quarter. In addition, we have stimulated our sales efforts by hiring new media sales specialists and expanding our regional sales initiatives. We believe that the moves we are making will allow us to show increased sales productivity and give us a cost structure that should allow us to deliver significant EBITDA growth in fiscal 2005. In our merchandise business, we are beginning to realize the benefits of the efficiency initiatives the management team has put in place. We expect the financial improvement to continue into and through the holiday season. Overall, we remain comfortable with the fiscal 2004 financial guidance we provided in our second quarter earnings release on September 1st." E[acute accent]Total revenues for the nine months ended October 31, 2004 increased 11.2% to $284.4 million compared with $255.7 million for the nine months ended October 31, 2003. Net merchandise revenues for the nine months ended October 31, 2004 of $142.0 million were up 30.8% versus $108.6 million for the nine months ended October 31, 2003. Sponsorship and other revenues of $142.4 million for the nine-month period ended October 31, 2004 were down 3.2% compared with $147.1 million for the same period last year. Gross profit for the nine months ended October 31, 2004 increased to $136.5 million, or 48.0% of revenues, compared with $124.1 million, or 48.5% of revenues, for the first nine months of fiscal 2003. Operating expenses were $151.1 million for the nine months ended October 31, 2004 versus $126.0 million for the nine months ended October 31, 2003. The net loss for the nine months ended October 31, 2004 was $18.4 million, compared with a net loss of $7.5 million for the nine months ended October 31, 2003. Net loss attributable to common stockholders for the nine months ended October 31, 2004 was $19.6 million, or $0.46 per diluted share, compared with a net loss attributable to common stockholders of $9.1 million, or $0.22 per diluted share for the nine months ended October 31, 2003. E[acute accent]About Alloy E[acute accent]Alloy, Inc. (Nasdaq: ALOY) 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 boys and girls mercurialisannua. in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. 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 merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. 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 American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Multicultural mul·ti·cul·tur·al adj. 1. Of, relating to, or including several cultures. 2. Of or relating to a social or educational theory that encourages interest in many cultures within a society rather than in only a mainstream culture. Marketing (AMM AMM Autorisation de Mise sur le Marche (French) AMM Autorisation de Mise sur le Marché (French: Commission of Marketing Authorization) AMM ASEAN Ministerial Meeting AMM American Metal Market ), Market Place Media (MPM MPM Multi-Processing Module (Apache) MPM Manufacturing Process Management MPM Milwaukee Public Museum MPM MMW (Millimeter Wave) Power Module MPM Master of Project Management (degree) ), 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 (1) (Common Channel Signaling) A communications system in which one channel is used for signaling and different channels are used for voice/data transmission. Signaling System 7 (SS7) is a CCS system, also known as CCS7. See SS7. and Dan's Competition brand names and sells apparel, accessories, footwear Footwear consists of garments worn on the feet. It is worn for a variety of reasons, including protection against the environment, hygiene and adornment. Usually, socks and other hosiery are worn between the feet and the footwear, except for sandals and flip flops (thongs). , room furnishings furnishings the extra type or quantity of hair on the head, tail, ears or legs, specified for a particular breed. For example, the feathers in setters, the beard in Bearded collies, the eyebrows in Schnauzers. 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). E[acute accent]This announcement may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Delias is a genus of butterflies. External Links
v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. these efforts, develop commercial relationships with advertisers and the continued resilience resilience (r  ·zilˑ·yens),n 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 synergistic /syn·er·gis·tic/ (sin?er-jis´tik) 1. acting together. 2. enhancing the effect of another force or agent. syn·er·gis·tic adj. 1. acquisitions and other revenue opportunities. Other relevant factors include, without limitation: our competition; seasonal sales fluctuations; inventory performance; changes in consumer preference or fashion trends; reliance on third party suppliers; our inability to achieve and maintain profitability; 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 de·te·ri·o·rate v. 1. To grow worse in function or condition. 2. To weaken or disintegrate. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended January January: see month. 31, 2004, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , 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.
Alloy, Inc.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
10/31/2003 10/31/2004 10/31/2003 10/31/2004
Net merchandise revenues $48,558 $54,049 $108,557 $142,032
Sponsorship and other
revenues 57,193 55,954 147,140 142,383
--------------------------------------------
Total revenues 105,751 110,003 255,697 284,415
Cost of goods sold 52,473 56,830 131,574 147,877
--------------------------------------------
Gross profit 53,278 53,173 124,123 136,538
Selling and marketing
expenses 41,290 38,361 98,157 111,618
General and administrative
expenses 9,501 9,474 20,725 33,135
Amortization of acquired
intangible assets 2,083 1,724 5,763 4,913
Stock-based compensation 358 371 649 1,074
Restructuring charges 351 29 730 347
--------------------------------------------
Total operating expenses 53,583 49,959 126,024 151,087
(Loss) income from
operations (305) 3,214 (1,901) (14,549)
Interest and other income
(expense), net (970) (1,238) (687) (3,753)
--------------------------------------------
(Loss) income before
income taxes (1,275) 1,976 (2,588) (18,302)
Income tax expense 5,543 10 4,938 130
--------------------------------------------
Net (loss) income (6,818) 1,966 (7,526) (18,432)
Preferred stock dividend
and accretion 393 405 1,548 1,200
--------------------------------------------
Net (loss) income
attributable to common
stockholders ($7,211) $1,561 ($9,074) ($19,632)
Net (loss) income
attributable to common
stockholders per basic
share ($0.17) $0.04 ($0.22) ($0.46)
Net (loss) income
attributable to common
stockholders per diluted
share ($0.17) $0.04 ($0.22) ($0.46)
Weighted average basic
common shares
outstanding: 41,405,485 42,951,223 40,904,949 42,672,454
Diluted shares
outstanding per GAAP: 41,405,485 43,044,459 40,904,949 42,672,454
Reconciliation of EBTA
and Adjusted EBITDA to
GAAP Results (1):
-----------------------
Net (loss) income ($6,818) $1,966 ($7,526) ($18,432)
Income tax expense 5,543 10 4,938 130
Amortization of acquired
intangible assets 2,083 1,724 5,763 4,913
Stock-based compensation 358 371 649 1,074
Restructuring charges 351 29 730 347
----------------------------------------------------------------------
EBTA excluding stock-based
compensation,
restructuring and asset
write-downs $1,517 $4,100 $4,554 ($11,968)
Interest and other income
(expense), net (970) (1,238) (687) (3,753)
Depreciation and
amortization 2,108 2,119 4,358 6,551
----------------------------------------------------------------------
Adjusted EBITDA $4,595 $7,457 $9,599 ($1,664)
(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, October 31,
2004 2004
(audited) (unaudited)
Assets
Current Assets
Cash and cash equivalents $30,543 $11,636
Marketable securities 19,014 6,537
Accounts receivable, net 31,492 48,328
Inventories 29,021 42,907
Prepaid catalog costs 2,028 4,960
Other current assets 3,813 5,906
----------------------
Total current assets 115,911 120,274
Marketable securities 5,585 1,016
Property and equipment, net 27,234 25,153
Goodwill, net 274,796 277,615
Intangible and other assets, net 25,865 22,192
----------------------
Total assets $449,391 $446,250
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $28,740 $34,403
Deferred revenues 15,124 20,711
Accrued expenses and other current
liabilities 39,755 34,911
----------------------
Total current liabilities 83,619 90,025
Long term liabilities 743 5,082
Convertible debt 69,300 69,300
Series B Preferred Stock 14,434 15,634
Stockholders' Equity 281,295 266,209
----------------------
Total liabilities
and stockholders' equity $449,391 $446,250
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