This excerpt taken from the ALOY 8-K filed Mar 29, 2006.
Alloy Reports Results For the First Time as a Separate Public Company Following its Spinoff of dELiA*s on December 19, 2005
New York, NY March 29, 2006 - 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.
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 2004s fourth quarter, an improvement of $4.5 million.
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.
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.
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 Alloys 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)