Alloy, the "Gossip Girl" Agency, Suddenly Finds $1M in the Sofa Cushions
Alloy (ALOY), the ad agency that created Gossip Girl and The Vampire Diaries, seems to be having real difficulty keeping track of its money recently. The company just announced it will restate its Q3 2009 revenues, adjusting them upward by $1.1 million to recognize revenue it had wrongly deferred.
It's the accounting equivalent of suddenly finding a stack of bills amid the sofa cushions, but losing a similar-sized stack from under the mattress where you thought you'd left them.
The maneuver comes on the heels of a separate exchange between the SEC and CEO Matt Diamond over Diamond's compensation, which the SEC believed was not adequately explained to investors. Diamond promised to be more forthcoming in future.
The restatement isn't an indication of anything wrong at Alloy. In simple terms, it means that the company recorded sales in the fourth quarter when it should have recorded them in the third quarter. Generally, companies must match revenues on their books against the expenses invested to get them in the same quarter. Sometimes, those expenses and revenues occur months apart, which can make it difficult for the company to make a call as to when they should go into the books. Occasionally, that judgment call is subject to abuse, when companies attempt to recognize sales they haven't made or defer recording expenses they've already paid. There's no indication that's the case at Alloy.
The company said it should have recognized $341,000 in revenue from its Alloy Marketing and Promotions unit, and its On-Campus Marketing division should have recognized $796,000 in revenue and $675,000 in operating income. Alloy's explanation for the latter change is quite mysterious:
... as a result of obtaining additional facts subsequent to the filing of the 10-Q, the Company determined that $796,000 in revenue and $675,000 in Operating Income from sales of a certain product should have been recognized during the quarter ended October 31, 2009, and not as deferred revenue ..."Additional facts"? "Sales of a certain product"? Whatever could that mean? I'm going to guess that Alloy will claim it's proprietary and not elucidate when it refiles its numbers. The company also said:
The Company's restatement of its financial statements for the fiscal quarter ended October 31, 2009 does not have any impact on the Company's full year revenue, net income, cash flow, or cash balances.That's nice to know, but we don't know actually know it yet. Alloy has not put out either a press release or a formal quarterly report for Q4 2009. Instead it issued one of those annoying pre-results press releases that relies on estimates instead of actual results:
Revenue for fiscal 2009 is expected to be in the range of $204.0 to $206.0 million.In that release, the company said it expected to file fully in late March. Tick-tock, tick-tock ...
Related: