iParty Corp. (AMEX: IPT - news), a party goods retailer that
operates 50 iParty retail stores, today reported financial results
for its second quarter of fiscal year 2007, which ended on June 30,
2007. For the quarter, consolidated revenues were $20.4 million, a
9.7% increase compared to $18.6 million for the second quarter in
2006. The increase in second quarter revenues from the year-ago
period was due to a 5.9% increase in comparable store sales from
stores open more than one year and sales from one store that was
acquired during the third quarter 2006. Consolidated gross profit
margin was 43.2% for the quarter compared to a gross profit margin
of 41.4% for the same period in 2006. Consolidated net income for
the quarter was $512 thousand, or $0.01 per share, compared to $122
thousand, or $0.00 per share, for the second quarter in 2006,
representing an increase of 320%. On a non-GAAP basis, earnings for
the quarter before interest, taxes, depreciation and amortization
(�EBITDA�) were $1.2 million compared to EBITDA of $577 thousand
for the second quarter in 2006. EBITDA is calculated as net income,
as reported under United States generally accepted accounting
principles (�GAAP�), plus net interest expense, depreciation and
amortization and income taxes. The schedule accompanying this
release provides the reconciliation of net income for the second
quarters of 2007 and 2006, and net loss for the six-month periods
then ended, under GAAP to a non-GAAP, EBITDA basis. For the
six-month year-to-date period, consolidated revenues were $36.0
million, a 12.1% increase compared to $32.1 million for the first
six months of 2006. This year�s six month year-to-date revenues
included an 8.1% increase in comparable store sales. Consolidated
gross profit margin was 41.7% for the six-month period, compared to
39.6% for the same period in 2006. For the six-month period,
consolidated net loss was $991 thousand, or $0.04 per basic and
diluted share, compared to a consolidated net loss of $2.0 million,
or $0.09 per basic and diluted share for the first six months of
2006. On a non-GAAP basis, earnings for the six-month year-to-date
period before interest, taxes, depreciation and amortization
(�EBITDA�) were $309 thousand compared to an EBITDA net loss of
$1.1 million for the first six months of 2006. Sal Perisano,
Chairman and Chief Executive Officer of iParty Corp., commented:
�Obviously, we are very pleased with $512 thousand in net income
for our second quarter, representing a 320% increase over last
year. These results were driven by strong sales from our graduation
season. For the fourth consecutive quarter, we achieved positive
sales increases in stores open at least one year. As previously
disclosed, we achieved a 6.2% increase in same store sales in the
last six months of 2006.�We have now followed this with a same
store sales increase of 8.1% for the first six months of
2007.�Also, for the fourth consecutive quarter we have reported an
improvement in the Company�s financial performance over the
previous year. We are very proud of the improvements made
throughout our business which are helping us to drive same store
sales increases. We will continue to strive to provide our
customers with the best shopping experience in our industry.� About
iParty Corp. Headquartered in Dedham, Massachusetts, iParty Corp.
(AMEX: IPT - news) is a party goods retailer that operates 50
iParty retail stores and licenses the operation of an Internet site
for party goods and party planning at www.iparty.com. iParty�s aim
is to make throwing a successful event both stress-free and fun.
With over 20,000 party supplies and costumes and an online party
magazine and party-related content, iParty offers consumers a
sophisticated, yet fun and easy-to-use, resource with an extensive
assortment of products to customize any party, including birthday
bashes, Easter get-togethers, graduation parties, summer barbecues,
and, of course, Halloween. iParty aims to offer reliable,
time-tested knowledge of party-perfect trends, and superior
customer service to ensure convenient and comprehensive merchandise
selections for every occasion. Please visit our site at
www.iparty.com. Non-GAAP Financial Measures Regulation G,
�Conditions for Use of Non-GAAP Financial Measures,� prescribes the
conditions for use of non-GAAP financial information in public
disclosures. For purposes of Regulation G, a non-GAAP financial
measure is a numerical measure of a company�s historical or future
financial performance, financial position or cash flows that
excludes amounts, or is subject to adjustments that have the effect
of excluding amounts, that are included in the most directly
comparable measure calculated and presented in accordance with GAAP
in the statements of operations, balance sheets, or statement of
cash flows of the company; or includes amounts, or is subject to
adjustments that have the effect of including amounts, that are
excluded from the most directly comparable measure so calculated
and presented. Pursuant to the requirements of Regulation G, we
have provided reconciliations of any non-GAAP financial measures we
use to the most directly comparable GAAP financial measures. We
believe that our presentation of EBITDA, which is a non-GAAP
financial measure, is an important supplemental measure of
operating performance to investors. The discussion below defines
this term, why we believe it is a useful measure of our
performance, and explains certain limitations on the use of
non-GAAP financial measures such as our use of EBITDA. EBITDA
Earnings before interest, taxes, depreciation and amortization
(�EBITDA�) is a commonly used measure of performance in our
industry which we believe, when considered with measures calculated
in accordance with United States generally accepted accounting
principles (�GAAP�), gives investors a more complete understanding
of operating results before the impact of investing and financing
transactions and income taxes and facilitates comparisons between
us and our competitors.�EBITDA is a non-GAAP financial measure and
has been presented in this release because our management and the
audit committee of our board of directors use this financial
measure in monitoring and evaluating our ongoing financial results
and trends. Our management and audit committee believe that this
non-GAAP operating performance measure is useful for investors
because it enhances investors� ability to analyze trends in our
business and compare our financial and operating performance to
that of our peers. Limitations on the Use of Non-GAAP Measures The
use of EBITDA has certain limitations. Our presentation of EBITDA
may be different from the presentation used by other companies and
therefore comparability may be limited. Depreciation expense for
various long-term assets, interest expense, income taxes and other
items have been and will be incurred and are not reflected in the
presentation of EBITDA. Each of these items should also be
considered in the overall evaluation of our results. Additionally,
EBITDA does not consider capital expenditures and other investing
activities and should not be considered as a measure of our
liquidity. In particular, we have opened new stores through the
expenditure of capital funded with borrowings under our bank line
of credit. Our results of operations, therefore, reflect
significant charges for depreciation, amortization and interest
expense. EBITDA, which excludes these expenses, provides helpful
information about the operating performance of our business, but
EBITDA does not purport to represent operating income or cash flow
from operating activities, as those terms are defined under GAAP,
and should not be considered as an alternative to those
measurements as an indicator of our performance. Accordingly,
EBITDA should be used in addition to and in conjunction with
results presented in accordance with GAAP and should not be
considered as an alternative to net income, operating income, net
cash flows from operations or any other operating performance
measure prescribed by GAAP, nor should these measures be relied
upon to the exclusion of GAAP financial measures. EBITDA reflects
additional ways of viewing our operations that we believe, when
viewed with our GAAP results and the reconciliations to the
corresponding GAAP financial measures, provide a more complete
understanding of factors and trends affecting our business than
could be obtained absent this disclosure. We strongly encourage
investors to review our financial information in its entirety and
not to rely on a single financial measure. For the quarter ended
For the six months ended RECONCILIATION OF NON-GAAP MEASURES June
30,2007 July 1,2006 June 30,2007 July 1,2006 � Net income (loss) as
reported under GAAP $ 512,138 $ 121,932 $ (990,718) $ (2,036,425) �
plus, Interest expense, net 230,012 169,993 456,322 327,521 plus,
Depreciation and amortization 428,623 285,309 843,498 577,879 plus,
Income taxes � - � - � - � - � EBITDA, non-GAAP $ 1,170,773 $
577,234 $ 309,102 $ (1,131,025) Safe harbor statement under the
Private Securities Litigation Reform Act of 1995: This release
contains forward-looking statements that are based on our current
expectations, beliefs, assumptions, estimates, forecasts and
projections, including those about future profitability, future
store openings or acquisitions, future expectations of comparable
store sales growth, improved gross margins, increases in EBIDTA,
and the industry and markets in which iParty operates. The
statements contained in this release are not guarantees of future
performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed
in such forward-looking statements, and such statements should not
be relied upon as representing iParty�s expectations or beliefs as
of any date subsequent to the date of this press release. Important
factors that may affect future operating results include, but are
not limited to, economic and other developments such as
unseasonable weather, that affect consumer confidence or consumer
spending patterns, particularly those impacting the New England
region, where 45 of our 50 stores our located, and particularly
during the Halloween season, which is our single most important
season; intense competition from other party supply stores and
stores that merchandise and market party supplies, including big
discount retailers, dollar store chains, and temporary Halloween
merchandisers; the failure of any of our systems, including,
without limitation, our point-of-sale system and our existing
merchandise management system, the latter of which was developed by
a vendor who is no longer in business; the success or failure of
our efforts to implement our business growth and marketing
strategies; our inability to obtain additional financing, if
required, on terms and conditions acceptable to us; fluctuating oil
and gasoline prices which impact prices of petroleum-based/plastic
products, which are a key raw material in much of our merchandise,
affect our freight costs and those of our suppliers, and affect
consumer confidence and spending patterns; third-party suppliers�
failure to fulfill their obligations to us; our ability or
inability to meet our material contractual obligations with third
parties; the availability of retail store space on reasonable lease
terms; compliance with evolving federal securities, accounting, and
stock exchange rules and regulations applicable to publicly-traded
companies listed on the American Stock Exchange. For a discussion
of these and other risks and uncertainties which could cause actual
results to differ from those contained in the forward-looking
statements, see Item 1A, �Risk Factors� of iParty�s most recently
filed Annual Report on Form 10-K for the fiscal year ended December
30, 2006. iPARTY CORP. CONSOLIDATED STATEMENTS OF OPERATIONS � �
For the three months ended For the six months ended Jun 30,2007
July 1,2006 Jun 30,2007 July 1,2006 Revenues $ 20,411,919 $
18,587,169 $ 36,011,078 $ 32,132,968 Operating costs: Cost of
products sold and occupancy costs 11,600,874 10,897,816 21,007,648
19,396,070 Marketing and sales 6,079,698 5,993,016 11,665,772
11,348,114 General and administrative � 1,989,197 � 1,404,412 �
3,872,054 � 3,097,688 � Operating income (loss) 742,150 291,925
(534,396) (1,708,904) � Interest expense, net � (230,012) �
(169,993) � (456,322) � (327,521) � Income (loss) before income
taxes 512,138 121,932 (990,718) (2,036,425) � Income taxes � - � -
� - � - � Net income (loss) $ 512,138 $ 121,932 � ($990,718) �
($2,036,425) � Income (loss) per share: Basic $ 0.01 $ 0.00 $
(0.04) $ (0.09) Diluted $ 0.01 $ 0.00 $ (0.04) $ (0.09) �
Weighted-average shares outstanding: Basic � 38,199,738 �
37,728,932 � 22,618,685 � 22,545,872 Diluted � 40,054,445 �
39,283,126 � 22,618,685 � 22,545,872 � � iPARTY CORP. CONSOLIDATED
BALANCE SHEETS � Jun 30, 2007 Dec 30, 2006 (Unaudited) ASSETS �
Current assets: Cash and cash equivalents $ 65,015 $ 760,376
Restricted cash 592,504 706,066 Accounts receivable 801,367
1,116,042 Inventory, net 13,970,586 12,264,737 Prepaid expenses and
other assets � 1,035,983 � 752,172 Total current assets 16,465,455
15,599,393 Property and equipment, net 4,508,648 4,817,993
Intangible assets, net 1,939,390 2,153,482 Other assets � 102,030 �
126,505 Total assets $ 23,015,523 $ 22,697,373 � LIABILITIES AND
STOCKHOLDERS' EQUITY � Current liabilities: Accounts payable $
7,467,587 $ 5,516,406 Accrued expenses 2,536,384 3,070,003 Current
portion of capital lease obligations 30,473 343,761 Current notes
payable 587,373 551,515 Borrowings under line of credit � 1,476,163
� 1,162,719 Total current liabilities 12,097,980 10,644,404 �
Long-term liabilities: Capital lease obligations, net of current
portion 25,834 42,456 Notes payable, net of discount $443,192
3,487,943 3,736,309 Other liabilities � 1,017,764 � 929,199 Total
long-term liabilities 4,531,541 4,707,964 � Commitments and
contingencies � Stockholders' equity: Convertible preferred stock
13,756,570 13,771,450 Common stock 22,623 22,604 Additional paid-in
capital 51,717,660 51,671,084 Accumulated deficit � (59,110,851) �
(58,120,133) Total stockholders' equity � 6,386,002 � 7,345,005 �
Total liabilities and stockholders' equity $ 23,015,523 $
22,697,373
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