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Contacts Gary J Yusko

By Joel Dixon,2014-06-27 23:11
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Contacts Gary J Yusko ...

    Contacts: Gary J. Yusko

    Chief Financial

    Officer

    Alloy, Inc.

    212/329-8431

    For immediate release:

    ALLOY REPORTS FIRST QUARTER FISCAL 2007 RESULTS

New York, NY June 6, 2007 - Alloy, Inc. (Nasdaq: ALOY), one of the country’s largest providers of

    nontraditional media programs reaching targeted consumer segments, today reported its operating results

    for its fiscal quarter ended April 30, 2007.

Revenue in the first quarter of fiscal 2007 decreased $7.0 million, or 16%, to $37.8 million from $44.8

    million in the first quarter of fiscal 2006. Excluding revenue attributable to our recently announced

    acquisitions of Channel One and Frontline, Inc., our revenue would have decreased an additional $0.7

    million.

Adjusted EBITDA for the first quarter of fiscal 2007, defined as operating loss plus depreciation and

    amortization, special charges and non-cash stock-based compensation was $(0.1) million compared with

    $1.5 million for the same period of fiscal 2006, a decrease of $1.6 million. The decrease was principally

    resultant from to lower revenue attributable to media segment assets and internal investments in several

    growth initiatives, including our interactive sites and display-board businesses.

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, in the

    first quarter of fiscal 2007 decreased approximately $1.5 million to $(1.1) million, or $(0.08) per share,

    compared with $0.4 million, or $0.03 per share, in the first quarter of fiscal 2006. Capital expenditures for

    the first quarter of fiscal 2007 increased $0.7 million, to $1.2 million from $0.5 million in the first quarter

    of fiscal 2006.

Commenting on the first quarter financial results, Matt Diamond, Chairman and Chief Executive Officer

    stated, “As we had previously communicated and expected, our first quarter operating results were below

    last year’s first quarter. There was softness in demand in the quarter and some of our business segments are

    expected to deliver more of their revenue and profits in the back half of the year.” Mr. Diamond added,

    “We are very excited at the foundation we are building for growth in 2008 and beyond with our

    acquisitions of Channel One and Frontline Marketing, and strategic investments in our internet and

    database assets. We have made substantial progress in reducing Channel One’s cost structure and have

    been encouraged by advertiser interest in the medium. In addition, the recently announced sequel to The

    Sisterhood of the Traveling Pants movie and the expected fall debut of Gossip Girl on the CW network will provide additional growth for our entertainment division late this year and into fiscal 2008.”

Operating loss increased approximately $1.5 million to $1.9 million in the first quarter of fiscal 2007 from

$0.4 million in the first quarter of fiscal 2006.

Interest expense decreased 98%, or approximately $1.0 million, from the first quarter of fiscal 2006, while

    income tax expense increased 126% in the first quarter of fiscal 2007 from the amount expensed in the first

    quarter of fiscal 2006.

Net loss increased $0.5 million, or 47%, to $1.7 million, or $0.13 per share, in the first quarter of fiscal

    2007 from $1.2 million, or $0.10 per share, in the first quarter of fiscal 2006. On a per share basis, net loss

    increased 29%.

Consolidated and Segment Results

    The tables below present the Company’s revenue, adjusted EBITDA and operating loss for the three-month periods ended April 30, 2007 and 2006:

(In thousands)

    Three Months Ended April 30, Change

    2007 2006 $ %

     Revenue

     Promotion $13,540 $19,128 ($5,588) -29%

     Media 10,416 11,215 (799) -7%

     Placement 13,831 14,492 (661) -5%

     Total Revenue $37,787 $44,835 ($7,048) -16%

     Adjusted EBITDA

     Promotion $286 $686 ($400) -58%

     Media 509 1,450 (941) -65%

     Placement 1,512 1,699 (187) -11%

     Corporate (2,415) (2,332) (83) -4%

     Total Adjusted EBITDA ($108) $1,503 ($1,611) NM

     Operating Income (Loss)

     Promotion ($111) $330 ($441) NM

     Media (325) 597 (922) NM

     Placement 1,467 1,664 (197) -12%

     Corporate (2,919) (3,023) 104 3%

     Total Operating Loss ($1,888) ($432) ($1,456) -337%

     NM Not meaningful

Promotion revenue decreased 29% to $13.5 million from $19.1 million in the prior year quarter primarily

    due to fewer promotional events, lower sponsorship sales for our spring break promotion and lower

    sampling revenue due to a combination of client budget reductions and program scheduling, partially offset

    by higher OCM revenue. Adjusted EBITDA decreased $0.4 million, or 58%, primarily due to lower sales

    in our spring break promotion. Operating loss increased $0.4 million as a result of lower adjusted

    EBITDA.

Media revenue decreased $0.8 million, or 7%, to $10.4 million from $11.2 million in last year’s first

quarter primarily as a result of lower out-of-home and interactive revenue, partially offset by revenue from

    the recently announced Channel One and Frontline acquisitions and increased royalties in our

    entertainment business. Excluding the effects of the Frontline and Channel One acquisitions, revenue in

    this segment would have decreased approximately $1.5 million, or 13%. Adjusted EBITDA decreased

    65% as a result of the lower revenue and investment spending on our interactive and out-of-home

    properties. Operating income decreased $0.9 million as a result of lower adjusted EBITDA.

Placement revenue decreased 5% to $13.8 million from $14.5 million in the first quarter of fiscal 2006 due

    to lower broadcast and multicultural revenue, partially offset by higher college and military newspaper

    revenue. Adjusted EBITDA decreased $0.2 million, or 11% as a result of the reduction in broadcast

    revenue. Operating income decreased 12% due to lower adjusted EBITDA.

Corporate adjusted EBITDA decreased 4% to $(2.4) million from $(2.3) million in last year’s first quarter

    due to higher personnel costs. Operating loss decreased 3% principally as a result of the non-recurrence of

    special charges related to the dELiA*s, Inc. spin-off.

    Second Quarter Outlook

We currently expect our second quarter revenue to experience a mid-teen percentage increase, due in part

    to the acquisition of Frontline Marketing, and adjusted EBITDA to be lower than this past quarter, due

    principally to the acquisition of Channel One and continued investment spending on our media assets. In

    addition, we currently expect to spend about $12.5 million this year on capital improvements to Channel

    One’s infrastructure.

About Alloy

    Alloy, Inc. (ALOY) is one of the country's largest providers of nontraditional media programs reaching targeted consumer segments. Alloy manages a diverse array of assets and services in interactive, display, direct mail, content production and educational programming. Alloy, Inc. works with over 1,500 companies including half of the Fortune 200. For further information regarding Alloy, please visit our corporate website at (www.alloymarketing.com)

Forward-Looking Statements

    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

null

    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 Ended

    April 30,

     2007 2006

     Net Loss ($1.7) ($1.2)

     Plus:

     Income Taxes 0.1 0.1

     Interest Income (0.3) (0.4)

     Interest Expense 0.0 1.1

     Special Charges 0.0 0.2

     Depreciation and Amortization 1.0 1.0

     Stock-based Compensation 0.8 0.7

     Adjusted EBITDA ($0.1) $1.5

    Three Months Ended April 30, 2007

     Adjusted Depreciation Stock-based Special Operating

     EBITDA and Amortization Compensation Charges Income (loss)

     -- Promotion $0.3 ($0.3) ($0.1) ($0.1)

     -- Media 0.5 (0.5) (0.3) (0.3)

     -- Placement 1.5 -- -- 1.5

     Corporate (2.4) (0.2) (0.3) -- (2.9)

     Total ($0.1) ($1.0) ($0.8) -- ($1.9)

    Three Months Ended April 30, 2006

     Adjusted Depreciation Stock-based Special Operating

     EBITDA and Amortization Compensation Charges Income (loss)

     ($0.1) -- Promotion $0.7 ($0.2) $0.3

     (0.3) -- Media 1.5 (0.6) 0.6

     -- -- Placement 1.7 -- 1.7

     Corporate (2.4) (0.2) ($0.3) ($0.2) (3.0)

     Total $1.5 ($1.0) ($0.7) ($0.2) ($0.4)

    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, repurchase 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 value. The Company believes 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 weighted average shares outstanding used in the computation 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

    to remove the impact of cash flow timing differences to arrive at a measure which the Company believes more

    accurately reflects funds available for discretionary use. 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 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 Ended

    April 30,

    2007 2006

     (In millions, except per share amounts)

     Net cash provided by (used in)

     operating activities $(1.1) $0.1

     Plus (Minus)

     Changes in operating assets and liabilities 1.2 0.6

     Spinoff costs included in Special

     Charges -- 0.2

     Capital expenditures (1.2) (0.5)

     Free Cash Flow ($1.1) $0.4

     Weighted Average Shares Outstanding 13.1 11.6

     Free Cash Flow per Share ($0.08) $0.03

    ALLOY, INC.

    CONSOLIDATED BALANCE SHEETS

    (In thousands, except per share amounts)

     April 30, 2007 January 31, 2007

     (Unaudited)

    ASSETS

    Current assets:

     Cash and cash equivalents $12,636 $6,366

     Marketable securities 13,275 21,145

     Accounts receivable, net of allowance for doubtful

     accounts of $2,313 and $2,680 respectively 36,532 29,534

     Inventory 7,177 3,225

     Other current assets 5,343 4,862

     Total current assets 74,963 65,132 Fixed assets 7,548 4,403 Goodwill 119,218 119,218 Intangible assets 11,324 7,424 Other assets 453 389

     Total assets $213,506 $196,566

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:

     Accounts payable $12,163 $7,246

     Deferred revenue 12,516 10,542

     Accrued expenses and other current liabilities 22,643 13,887

     Total current liabilities 47,322 31,675 Senior convertible debentures 1,397 1,397 Other long-term liabilities 2,089 823

     Total liabilities 50,808 33,895

    Stockholders' equity:

     Common stock; $.01 par value: authorized 200,000 shares; issued and outstanding, 15,082 and 14,698,

     respectively 151 147

     Additional paid-in capital 441,526 438,428

     Accumulated deficit (264,414) (261,692)

     177,263 176,883 Less treasury stock, at cost; 1,182 and 1,151

     shares (14,565) (14,212)

     Total stockholders' equity 162,698 162,671

Total liabilities and stockholders' equity $213,506 $196,566

    ALLOY, INC.

    CONSOLIDATED STATEMENTS OF OPERATIONS

    (In thousands, except per share amounts)

    Three Months Ended

    April 30,

    2007 2006

     (Unaudited) Revenue $37,787 $44,835

    Expenses:

     Operating 34,529 39,772

     General and administrative 4,129 4,306

     Depreciation and amortization 1,017 1,019

     Special charges - 170

     Total expenses 39,675 45,267

    Operating loss (1,888) (432)

    Interest expense (19) (1,060) Interest income and other 312 381

    Loss before income taxes (1,595) (1,111)

    Income taxes (113) (50)

    Net loss ($1,708) ($1,161)

    Loss per basic and diluted share: ($0.13) ($0.10)

    Weighted average shares outstanding:

     Basic and Diluted 13,138 11,602

    Alloy, Inc.

    CONSOLIDATED STATEMENTS OF CASH FLOWS

    (Amounts in Thousands)

    Three Months Ended

    April 30,

    2007 2006

     (Unaudited)

    Net loss ($1,708) ($1,161) Adjustments to reconcile net loss

     to net cash provided by (used in) operating

    activities:

    Depreciation and amortization of fixed

     assets 570 534

    Amortization of debt issuance costs and

     other -- 128

     Amortization of intangible assets 447 485

    Compensation charge for restricted stock

     and issuance

     of options 763 746

    Changes in operating assets and

     liabilities:

     Accounts receivable, net (631) 2,980

     Other assets (3,504) (4,234)

    Accounts payable, accrued

     expenses, and other 2,935 578

    Net cash provided by (used in)

     operating activities (1,128) 56

    Cash Flows from Investing Activities

     Capital expenditures (1,149) (503)

     Acquisition of companies 1,312 (247)

     Purchases of marketable securities (8,345) (3,225)

     Proceeds from the sales and maturity of marketable

    securities 16,215 1,200

     Purchase of domain name / mailing list / marketing

    rights (810) (23)

    Net cash provided by (used in)

     investing activities 7,223 (2,798)

    Cash Flows from Financing Activities Cash payment to dELiA*s pursuant to spinoff -- (8,155) Issuance of common stock 528 453 Repurchase of common stock (353) --

    Net cash provided by (used in)

     financing activities 175 (7,702)

    Net change in 6,270 (10,444)

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