Alloy Reports Second Quarter Fiscal 2006 Results.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): --Income From Continuing Operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the a Record $1.6 Million - Up 49% --Income Per Share From Continuing Operations a Record $0.13 - Up 40% --Amends Indenture An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. to Provide Holders With Ability to Convert at Any Time Alloy, Inc. (Nasdaq: ALOY), a nontraditional Adj. 1. nontraditional - not conforming to or in accord with tradition; "nontraditional designs"; "nontraditional practices" untraditional traditional - consisting of or derived from tradition; "traditional history"; "traditional morality" media and marketing services company primarily targeting the 10 to 24 year old demographic See demographics. group, today reported financial results for the three and six-month periods ended July July: see month. 31, 2006. For the fiscal quarter, revenue and income from continuing operations increased to $46.7 million and $1.6 million, respectively. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of from continuing operations increased to $0.13. 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 and free cash flow decreased to $3.4 million and $2.6 million, respectively. The Company completed its spinoff Spinoff A new, independent company created through selling or distributing new shares for an existing part of another company. Notes: Spinoffs may be done through a rights offering. of 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, Inc. ("dELiA*s") on December December: see month. 19, 2005. The financial results of dELiA*s are presented in the Company's financial statements as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . Effective February February: see month. 1, 2006, the Company adopted SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R, "Share-Based Payment" using the modified-prospective application method. Accordingly, prior period results have not been restated. Commenting on the second quarter financial results, Matt Diamond, the Company's Chairman and Chief Executive Officer stated, "I am pleased with our second quarter operating performance. Consistent with our overall strategy, we achieved growth in our more profitable Media business segment while continuing to minimize In a graphical environment, to hide an application that is currently displayed on screen. For example, in Windows and Mac, the application's window is removed from the screen and represented by an icon on the Windows Taskbar. In the Mac, the icon is placed in the Dock. See Win Minimize windows. our operating costs operating costs npl → gastos mpl operacionales ." Mr. Diamond added, "In addition, we are committed to taking the necessary steps to effect a conversion of our convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. , which would have the effect of eliminating our net debt position. Looking forward, the visibility we have for the remainder of the year makes us confident that we will be reporting record revenue and Adjusted EBITDA for this fiscal year." Results for the Second Quarter Ended July 31, 2006 Revenue in the second quarter of fiscal 2006 increased 1.4% to a record $46.7 million, compared with $46.1 million in the second quarter of fiscal 2005, driven by growth in the Company's Media and Promotion segments, partially offset by lower Placement segment revenue. Revenue in the second quarter of 2005 benefited from a mall mall: see shopping center. (World-Wide Web) mall - A collection of World-Wide Web documents featuring commercial products and services, usually served by one particualr Internet access provider. marketing program and the release of The Sisterhood sisterhood: see monasticism. of the Traveling Pants motion picture. There were no comparable items in the second quarter of fiscal 2006. Excluding the effect of these items, revenue would have increased approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 6%. Adjusted EBITDA for the second quarter of fiscal 2006, defined as operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. plus depreciation and amortization, special charges and non-cash stock-based compensation expense, was $3.4 million compared with $3.9 million for the same period of fiscal 2005, a decrease of $0.5 million, or 12%. In the second quarter of fiscal 2005, the Company benefited from royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. associated with the release of The Sisterhood of the Traveling Pants motion picture and a mall marketing sponsorship program. Excluding the effect of these items, Adjusted EBITDA would have increased approximately 9% for the second quarter of fiscal 2006. Stock-based compensation includes the expense attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to both stock option and restricted share grants. Free cash flow, defined as net income from continuing operations plus depreciation and amortization, special charges, stock-based compensation, and amortization of deferred financing costs less capital expenditures, in the second quarter of fiscal 2006 was approximately $2.6 million, or $0.21 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, compared with $2.7 million, or $0.23 per diluted share, in the second quarter of fiscal 2005, a decrease of $0.1 million, or 4%. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased approximately $0.3 million, or 14%, to $2.3 million in the second quarter of fiscal 2006 from $2.0 million in the second quarter of fiscal 2005 as a result of lower depreciation and amortization and special charges, partially offset by higher stock-based compensation expense. Income from continuing operations increased $0.5 million, or 49%, to a record $1.6 million, or $0.13 per diluted share, in the second quarter of fiscal 2006 from $1.1 million, or $0.09 per diluted share, in the second quarter of fiscal 2005 due principally to improved operating income and higher interest income. On a per diluted share basis, income from continuing operations increased 40%. Net income attributable to common stockholders increased $4.9 million to $1.6 million, or $0.13 per diluted share, in the second quarter of fiscal 2006 from a loss of $3.3 million, or $0.28 per diluted share, in the comparable period of fiscal 2005. In June June: see month. 2005, all of the Company's outstanding shares of Series B Redeemable Redeemable Eligible for redemption under the terms of an indenture. Convertible Preferred Stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". were converted into shares of common stock. Accordingly, there were no non-cash dividends on the Series B Preferred Stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. in the in the second quarter of fiscal 2006. Results for the Six Months Ended July 31, 2006 Revenue for the six-month period ended July 31, 2006 increased 2.5% to $91.6 million from $89.3 million in the comparable period of fiscal 2005. An increase in Media segment revenue was partially offset by decreases in Promotion and Placement segment revenue. Revenue in the six-month period ended July 31, 2005 benefited from a mall marketing sponsorship program and royalties associated with the release of The Sisterhood of the Traveling Pants motion picture. Excluding the effect of these items, revenue would have increased approximately 6%. Adjusted EBITDA for the six-month period ended July 31, 2006 decreased $0.3 million, or 5.5%, to $4.9 million from $5.2 million in the comparable fiscal 2005 period. The benefit from the release of The Sisterhood of the Traveling Pants motion picture and the mall marketing program, if excluded from the six-month period ended July 31, 2005, would have resulted in an increase in Adjusted EBITDA in the 2006 period of approximately 22%. Free cash flow in the six-month period ended July 31, 2006 was approximately $3.0 million, or $0.24 per diluted share, compared with $3.0 million, or $0.27 per diluted share in the six-month period ended July 31, 2005. The decrease in free cash flow per share Free Cash Flow per Share A measure of a company's financial flexibility. It is calculated as net income plus all non-cash expenses less dividends and capital expenditures. The total is then divided by the number of shares outstanding. is attributable to a higher weighted average share total in the 2006 period compared with the 2005 period. Operating income increased approximately $0.5 million, or 39%, to $1.9 million in the six-month period of 2006 from $1.4 million in the six-month period of 2005. Lower depreciation and amortization and special charges were partially offset by higher stock-based compensation expense. Income from continuing operations increased $1.1 million to $0.5 million ($0.04 per diluted share) in the six-month period ended July 31, 2006 from a loss from continuing operations of $0.6 million ($0.05 per diluted share) in the six-month period ended July 31, 2005. Net income attributable to common stockholders increased $20.1 million to $0.5 million ($0.04 per diluted share) in the six-month period ended July 31, 2006 from a net loss attributable to common stockholders of $19.6 million ($1.79 per diluted share) in the 2005 period. Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: and Segment Results The tables below present the Company's revenue, adjusted EBITDA and operating income for the three-month periods ended July 31, 2006 and 2005:
(In thousands)
Three Months
Ended July 31, Change
----------------- -----------------
2006 2005 $ %
-------- -------- -------- --------
Revenue
Promotion $26,120 $24,937 $1,183 5%
Media 11,132 10,312 820 8%
Placement 9,481 10,822 (1,341) -12%
-------- -------- --------
Total Revenue $46,733 $46,071 $662 1%
======== ======== ========
Adjusted EBITDA
Promotion $2,649 $3,480 ($831) -24%
Media 2,381 2,163 218 10%
Placement 399 357 42 12%
Corporate (2,024) (2,131) 107 5%
-------- -------- --------
Total Adjusted EBITDA $3,405 $3,869 ($464) -12%
======== ======== ========
Operating Income (Loss)*
Promotion $2,408 $3,240 ($832) -26%
Media 1,880 1,536 344 22%
Placement 371 125 246 197%
Corporate (2,349) (2,875) 526 18%
-------- -------- --------
Total Operating Income $2,310 $2,026 $284 14%
======== ======== ========
* From continuing operations
Promotion revenue increased 5% to $26.1 million from $24.9 million in the prior year second fiscal quarter primarily due to increased on campus marketing sales and promotion activity, partially offset by a reduction in mall marketing revenue. Adjusted EBITDA decreased 24% primarily due to lower profitability on several promotion contractual relationships, higher sampling costs and the termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of a mall marketing sponsorship program, partially offset by higher on campus marketing profitability. Operating income decreased $0.8 million as a result of stock-based compensation expense and lower Adjusted EBITDA, partially offset by lower depreciation and amortization. Media revenue increased 8% to $11.1 million from $10.3 million in last year's second fiscal quarter primarily as a result of strong sales performance in the out-of-home and interactive businesses, partially offset by lower royalties in our entertainment business as a result of the higher royalties in the second quarter of fiscal 2005 associated with the non-recurring release of The Sisterhood of the Traveling Pants motion picture. Adjusted EBITDA increased 10% driven by higher revenue, partially offset by lower royalties. Operating income rose 22% to $1.9 million from $1.5 million as a result of higher Adjusted EBITDA and lower depreciation and amortization, partially offset by higher stock-based compensation expense. Placement revenue decreased 12% to $9.5 million from $10.8 million in the second quarter of fiscal 2005 principally as a result of lower 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. and military newspaper revenue. Adjusted EBITDA increased 12% as a result of a reduction in operating costs in the Company's newspaper business. Operating income increased 197% due to the adjusted EBITDA improvement and lower depreciation and amortization. Corporate adjusted EBITDA increased 5% to $(2.0) million from $(2.1) million in last year's second quarter due principally to lower insurance and legal costs. Operating loss decreased 18% principally as a result of lower special charges and higher adjusted EBITDA, partially offset by higher stock-based compensation expense. The tables below present the Company's revenue, adjusted EBITDA and operating income for the six-month periods ended July 31, 2006 and 2005:
(In thousands)
Six Months Ended
July 31, Change
----------------- -----------------
2006 2005 $ %
-------- -------- -------- --------
Revenue
Promotion $43,371 $44,479 ($1,108) -2%
Media 24,224 19,403 4,821 25%
Placement 23,973 25,413 (1,440) -6%
-------- -------- --------
Total Revenue $91,568 $89,295 $2,273 3%
======== ======== ========
Adjusted EBITDA
Promotion $2,598 $4,496 ($1,898) -42%
Media 4,568 3,284 1,284 39%
Placement 2,098 1,757 341 19%
Corporate (4,356) (4,343) (13) 0%
-------- -------- --------
Total Adjusted EBITDA $4,908 $5,194 ($286) -6%
======== ======== ========
Operating Income (Loss)*
Promotion $2,001 $3,779 ($1,778) -47%
Media 3,216 1,852 1,364 74%
Placement 2,035 1,293 742 57%
Corporate (5,374) (5,574) 200 4%
-------- -------- --------
Total Operating Income $1,878 $1,350 $528 39%
======== ======== ========
* From continuing operations.
Promotion revenue decreased 2% to $43.4 million in the six-month period ended July 31, 2006 from $44.5 million in the prior year primarily due to a reduction in mall marketing revenue partially offset by increased on campus marketing sales and promotion activity. Adjusted EBITDA decreased 42% primarily due to lower sales in the Company's spring break promotion, the termination of a mall marketing sponsorship program and lower profitability on several promotion contractual relationships, partially offset by higher on campus marketing profitability. Operating income decreased $1.8 million as a result of stock-based compensation expense and lower adjusted EBITDA, partially offset by lower depreciation and amortization. Media revenue increased 25% to $24.2 million in the six-month period ended July 31, 2006 from $19.4 million in last year's comparable period primarily as a result of strong sales performance in the Company's out-of-home and interactive businesses, partially offset by lower royalties in our entertainment business as a result of higher royalties in the 2005 period associated with the non-recurring release of The Sisterhood of the Traveling Pants motion picture. Adjusted EBITDA increased 39% driven by higher revenue, partially offset by lower royalties. Operating income rose 74% to $3.2 million from $1.9 million as a result of higher Adjusted EBITDA and lower depreciation and amortization, partially offset by higher stock-based compensation expense. Placement revenue decreased 6% to $24.0 million in the six-month period ended July 31, 2006 from $25.4 million in the comparable six-month period of fiscal 2005 principally as a result of lower multicultural and military newspaper revenue. Adjusted EBITDA increased 19% as a result of a reduction in operating costs in the Company's newspaper business. Operating income increased 57% due to the adjusted EBITDA improvement and lower depreciation and amortization. Corporate adjusted EBITDA was $(4.4) million in the six-month periods ended July 31, 2006 and 2005. Operating loss decreased 4% principally as a result of lower special charges, partially offset by higher stock-based compensation expense. Fiscal 2006 Outlook For its full fiscal year ending January January: see month. 31, 2007, the Company expects its Adjusted EBITDA to increase mid single digits to the mid teens from fiscal 2005's Adjusted EBITDA. Other Matters The Company 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. Section 12.1(a) of the Indenture governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. its 5.375% Convertible Senior Debentures Due 2023 to remove all conditions of eligibility, with the result that all of the debentures are now immediately convertible into shares of Company common stock and shares of common stock of dELiA*s. About Alloy Alloy, Inc., under the banner Same as banner ad. 1. banner - The title page added to printouts by most print spoolers. Typically includes user or account ID information in very large character-graphics capitals. 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.alloymarketing.com). 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. 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 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; the uncertain economic and political climate 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. 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 31, 2006, 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 (Unaudited; In millions) A. Adjusted EBITDA The following tables set forth the Company's adjusted EBITDA for the three and six-month periods ended July 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 See Income statement. : 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 measures used by management for planning and forecasting future periods. The Company believes that this measure is an important indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of the Company's operational strength and performance of its business because it provides a link between profitability and operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. . 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 Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , it should not be considered in isolation from, 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 and adjusted EBITDA by segment to operating income (loss).
Three Months Six Months
Ended Ended
July 31, July 31,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Net Income (Loss) $1.6 ($3.1) $0.5 ($19.0)
Plus (Minus):
Loss from Discontinued Operations -- 4.2 -- 18.4
Income Taxes 0.1 -- 0.1 0.1
Interest Income (0.4) (0.1) (0.8) (0.3)
Interest Expense 1.0 1.0 2.1 2.1
Special Charges -- 0.4 0.1 0.6
Depreciation and Amortization 0.6 1.4 1.7 3.1
Stock-based Compensation 0.5 0.1 1.2 0.2
-------- -------- -------- --------
Adjusted EBITDA $3.4 $3.9 $4.9 $5.2
======== ======== ======== ========
Three Months Ended July 31, 2006
----------------------------------------------------------------------
Depreciation Operating
Adjusted and Stock-based Special Income
EBITDA Amortization Compensation Charges (loss)
-------- ------------- ------------ ------- ---------
Promotion $2.6 ($0.1) ($0.1) -- $2.4
Media 2.4 (0.3) (0.2) -- 1.9
Placement 0.4 -- -- -- 0.4
Corporate (2.0) (0.2) (0.2) -- (2.4)
-------- ------------- ------------ ------- ---------
Total $3.4 ($0.6) ($0.5) -- $2.3
======== ============= ============ ======= =========
Three Months Ended July 31, 2005
----------------------------------------------------------------------
Depreciation Operating
Adjusted and Stock-based Special Income
EBITDA Amortization Compensation Charges (loss)
-------- ------------- ------------ ------- ---------
Promotion $3.5 ($0.3) -- -- $3.2
Media 2.2 (0.6) -- -- 1.6
Placement 0.3 (0.2) -- -- 0.1
Corporate (2.1) (0.3) ($0.1) ($0.4) (2.9)
-------- ------------- ------------ ------- ---------
Total $3.9 ($1.4) ($0.1) ($0.4) $2.0
======== ============= ============ ======= =========
Six Months Ended July 31, 2006
----------------------------------------------------------------------
Depreciation Operating
Adjusted and Stock-based Special Income
EBITDA Amortization Compensation Charges (loss)
-------- ------------- ------------ ------- ---------
Promotion $2.6 ($0.4) ($0.2) -- $2.0
Media 4.6 (0.9) (0.5) -- 3.2
Placement 2.1 -- -- -- 2.1
Corporate (4.4) (0.4) (0.5) ($0.1) (5.4)
-------- ------------- ------------ ------- ---------
Total $4.9 ($1.7) ($1.2) ($0.1) $1.9
======== ============= ============ ======= =========
Six Months Ended July 31, 2005
----------------------------------------------------------------------
Depreciation Operating
Adjusted and Stock-based Special Income
EBITDA Amortization Compensation Charges (loss)
-------- ------------- ------------ ------- ---------
Promotion $4.5 ($0.8) -- -- $3.7
Media 3.3 (1.4) -- -- 1.9
Placement 1.7 (0.4) -- -- 1.3
Corporate (4.3) (0.5) ($0.2) ($0.6) (5.6)
-------- ------------- ------------ ------- ---------
Total $5.2 ($3.1) ($0.2) ($0.6) $1.3
======== ============= ============ ======= =========
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 capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) , repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. 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 Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. value. The Company believes that 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 diluted weighted average shares outstanding used in the computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. 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 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 Operating Assets Another term for working capital. 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 Six Months
Ended Ended
July 31, July 31,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
(In millions, except per share
amounts)
Net cash provided by (used in)
operating activities $20.0 ($2.6) $11.9 ($11.4)
Plus (Minus):
Net cash used by operating
activities attributable to
discontinued operations -- 5.4 -- 10.1
Changes in operating assets and
liabilities (17.1) (0.1) (8.3) 4.2
Spinoff costs included in Special
Charges (0.1) 0.4 0.1 0.6
Capital expenditures (0.2) (0.4) (0.7) (0.5)
-------- -------- -------- --------
Free Cash Flow $2.6 $2.7 $3.0 $3.0
======== ======== ======== ========
Weighted Average Shares
Outstanding 12.5 11.8 12.4 10.9
======== ======== ======== ========
Free Cash Flow per Share $0.21 $0.23 $0.24 $0.27
======== ======== ======== ========
ALLOY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Six Months
Ended Ended
July 31, July 31,
----------------- ------------------
2006 2005 2006 2005
-------- -------- -------- ---------
(Unaudited) (Unaudited)
Revenue $46,733 $46,071 $91,568 $89,295
-------- -------- -------- ---------
Expenses:
Operating 40,344 38,602 80,247 76,819
General and administrative 3,443 3,684 7,618 7,421
Depreciation and amortization 679 1,332 1,698 3,090
Special charges (43) 427 127 615
-------- -------- -------- ---------
Total expenses 44,423 44,045 89,690 87,945
-------- -------- -------- ---------
Operating income 2,310 2,026 1,878 1,350
Interest expense (1,063) (1,061) (2,123) (2,122)
Interest income and other 449 154 830 262
-------- -------- -------- ---------
Income (loss) from continuing
operations before income taxes 1,696 1,119 585 (510)
Income taxes (50) (17) (100) (66)
-------- -------- -------- ---------
Income (loss) from continuing
operations 1,646 1,102 485 (576)
Net loss from discontinued
operations -- (4,159) -- (18,378)
-------- -------- -------- ---------
Net income (loss) 1,646 (3,057) 485 (18,954)
Dividends on redeemable
convertible preferred stock -- (217) -- (620)
-------- -------- -------- ---------
Net income (loss) attributable to
common stockholders $1,646 ($3,274) $485 ($19,574)
======== ======== ======== =========
Income (loss) per basic share:
Continuing operations $0.14 $0.10 $0.04 ($0.05)
======== ======== ======== =========
Discontinued operations -- ($0.37) -- ($1.68)
======== ======== ======== =========
Attributable to common
stockholders $0.14 ($0.29) $0.04 ($1.79)
======== ======== ======== =========
Income (loss) per diluted share:
Continuing operations $0.13 $0.09 $0.04 ($0.05)
======== ======== ======== =========
Discontinued operations -- ($0.35) -- ($1.68)
======== ======== ======== =========
Attributable to common
stockholders $0.13 ($0.28) $0.04 ($1.79)
======== ======== ======== =========
Weighted average shares
outstanding:
Basic 11,954 11,155 11,750 10,949
======== ======== ======== =========
Diluted 12,551 11,765 12,409 10,949
======== ======== ======== =========
ALLOY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
July 31, January 31,
2006 2006
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $27,175 $39,631
Marketable securities 16,898 1,200
Accounts receivable, net of allowance for
doubtful accounts of $1,731 and $1,690,
respectively 32,339 42,483
Inventory 5,082 2,974
Other current assets 4,597 4,877
----------- -----------
Total current assets 86,091 91,165
Fixed assets 3,764 4,072
Goodwill 118,453 114,728
Intangible assets 7,868 7,006
Other assets 1,409 2,517
----------- -----------
Total assets $217,585 $219,488
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,268 $9,345
Amounts payable to dELiA*s 1,107 8,244
Deferred revenue 13,232 10,552
Accrued expenses and other current
liabilities 16,626 15,972
----------- -----------
Total current liabilities 37,233 44,113
Senior convertible debentures 69,300 69,300
Other long-term liabilities 875 891
----------- -----------
Total liabilities 107,408 114,304
----------- -----------
Stockholders' equity:
Common stock; $.01 par value: authorized
200,000 shares;
issued and outstanding, 12,612 and 11,874,
respectively 126 119
Additional paid-in capital 372,932 364,228
Deferred compensation (4,742) (539)
Accumulated deficit (253,974) (254,459)
----------- -----------
114,342 109,349
Less treasury stock, at cost; 197 shares (4,165) (4,165)
----------- -----------
Total stockholders' equity 110,177 105,184
----------- -----------
Total liabilities and stockholders' equity $217,585 $219,488
=========== ===========
Alloy, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
July 31,
-------------------
2006 2005
--------- ---------
(Unaudited)
Net income (loss) $485 ($18,954)
Less net loss from discontinued operations -- (18,378)
--------- ---------
Net income (loss) from continuing operations 485 (576)
Adjustments to reconcile net income (loss) from
continuing operations to net cash provided by
(used in) operating activities:
Depreciation and amortization of fixed assets 1,047 1,486
Amortization of debt issuance costs 256 256
Amortization of intangible assets 651 1,605
Compensation charge for restricted stock and
issuance of options 1,205 139
Changes in operating assets and liabilities:
Accounts receivable, net 10,144 (6,537)
Other assets (1,669) (950)
Accounts payable, accrued expenses, and other (239) 3,297
Net cash used in operating activities
attributable to discontinued operations -- (10,148)
--------- ---------
Net cash provided by (used in) operating
activities 11,880 (11,428)
--------- ---------
Cash Flows from Investing Activities
Capital expenditures (739) (541)
Acquisition of companies (155) --
Purchases of marketable securities (16,898) (800)
Proceeds from the sales and maturity of
marketable securities 1,200 4,363
Purchase of domain name / mailing list /
marketing rights (78) (62)
Net cash provided by investing activities
attributable to discontinued operations -- 9,768
--------- ---------
Net cash (used in) provided by investing
activities (16,670) 12,728
--------- ---------
Cash Flows from Financing Activities
Cash payment to dELiA*s pursuant to spinoff (8,155) --
Issuance of common stock 489 465
Repurchase of common stock -- (66)
Net cash provided financing activities
attributable to discontinued operations -- 3,844
--------- ---------
Net cash (used in) provided by financing
activities (7,666) 4,243
--------- ---------
Net change in cash and cash equivalents (12,456) 5,543
Cash and cash equivalents:
Beginning of period (includes cash from
discontinued operations of $0 and $4,528,
respectively) 39,631 25,137
--------- ---------
End of period $27,175 $30,680
========= =========
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