IPT Iparty Corp.

iParty Corp. (AMEX: IPT - news), a party goods retailer that operates 50 iParty retail stores, today reported financial results for its third quarter of fiscal year 2005, which ended on September 24, 2005. For the quarter, consolidated revenues were $14.8 million, a 12.8% increase compared to $13.2 million for the third quarter of 2004. The increase in third quarter revenues from the year-ago period was due to a 2.5% increase in comparable store sales and sales from eight new stores that opened since the end of the third quarter of 2004. Consolidated gross profit margin was 39.1% for the third quarter compared to a margin of 40.0% for the same period in 2004. Consolidated net loss was $2.4 million, or $0.11 per basic and diluted share, compared to consolidated net loss of $1.6 million, or $0.07 per basic and diluted share, in the third quarter of 2004. For the nine-month year-to-date period, consolidated revenues were $44.5 million, a 9.8% increase compared to $40.6 million for the first nine months of 2004. This year's nine-month year-to-date consolidated revenues included a 0.4% increase in comparable store sales. Consolidated gross profit margin was 39.9% for the nine-month period compared to 42.2% for the same period in 2004. For the nine-month year-to-date period, consolidated net loss was $4.1 million, or $0.19 per basic and diluted share, compared to a net loss of $1.7 million, or $0.08 per basic and diluted share, for the first nine months of 2004. Sal Perisano, Chief Executive Officer of iParty Corp., commented, "We are pleased with our continuing ability to implement our growth strategy. We opened five new stores during the quarter bringing our total number of stores to 50. Sales from our new stores contributed towards a total sales increase of 12.8% for the quarter while our comparable stores increased by 2.5%. The increase in comparable store sales was mostly driven by higher sales of Boston Red Sox related merchandise which we feel was due to increased exposure for our brand through our Red Sox sponsorship program as well as better inventory levels. Higher occupancy costs as a percentage of sales continue to put pressure on our gross profit margin. The increase in occupancy costs continues to be largely attributable to our new stores, which, as we have previously reported, operate at a higher occupancy to sales ratio until they reach maturity. Our marketing and sales costs as a percentage of sales continue to run higher than last year largely due to increased advertising, including our sponsorship program with the Boston Red Sox and higher depreciation costs associated with the acquisition of fixed assets for our new stores. Our general and administrative expenses are higher than last year primarily due to consultant costs associated with the selection of a new merchandise system that we are currently planning to install in 2006. We continue to believe that our investment in growth, new stores and improved infrastructure will yield longer-term increases in profitability." "We also continue to seek out marketing opportunities to increase our public profile and build our brand. The Red Sox sponsorship this past year was an example of this focus. As another example, we are especially excited about our partnership with Boston Medical Center in connection with Halloween Town, a Halloween celebration for the city of Boston that will be held on October 30, 2005 at the Seaport World Trade Center. This is a fundraising event for Boston Medical Center that we expect will draw thousands of children and parents. We believe that our participation in Halloween Town, like our Red Sox sponsorship, will help us reach new customers and continue to meet our important goal of further establishing the iParty brand." 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 offers 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. 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 store openings, future expectations of profitability 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 the effects of adverse changes in overall economic conditions, the success or failure of iParty's efforts to implement its business strategy; the success or failure of iParty's marketing initiatives and its efforts to build the iParty brand; iParty's inability to obtain additional financing, if required; third-party suppliers' failure to fulfill their obligations to iParty; unseasonable weather, particularly in the New England region; intense competition from other party supply stores and stores that merchandise and market party supplies, including big discount retailers and dollar store chains; the availability of retail store space on reasonable lease terms; the failure of iParty's systems or those of its third-party suppliers; general economic and other developments affecting consumer confidence or spending patterns, particularly in the New England region; compliance with evolving federal securities, accounting, and stock exchange rules and regulations applicable to publicly-traded companies listed on the American Stock Exchange; and government regulation of the Internet. 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 "Cautionary Statements and Risk Factors" in iParty's most recently filed Annual Report on Form 10-K and "Factors That May Affect Future Results" in iParty's most recently filed Quarterly Report on Form 10-Q. -0- *T iPARTY CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the three For the nine months ended months ended ------------------------- ------------------------- Sep 24, 2005 Sep 25, 2004 Sep 24, 2005 Sep 25, 2004 ------------ ------------ ------------ ------------ Revenues $14,839,051 $13,157,546 $44,516,336 $40,554,000 Operating costs: Cost of products sold and occupancy costs 9,042,165 7,897,580 26,752,342 23,454,594 Marketing and sales 6,204,540 5,276,532 16,316,817 14,367,835 General and administrative 1,852,047 1,509,548 5,187,189 4,674,898 ----------- ----------- ----------- ----------- Operating loss (2,259,701) (1,526,114) (3,740,012) (1,943,327) Other income - 28,000 - 382,500 ----------- ----------- ----------- ----------- Loss before interest (2,259,701) (1,498,114) (3,740,012) (1,560,827) Interest income 477 271 758 1,280 Interest expense (151,437) (77,580) (383,298) (148,900) ----------- ----------- ----------- ----------- Net loss $(2,410,661) $(1,575,423) $(4,122,552) $(1,708,447) =========== =========== =========== =========== Basic and diluted net loss per share $ (0.11) $ (0.07) $ (0.19) $ (0.08) =========== =========== =========== =========== Weighted-average shares outstanding: Basic and diluted 22,147,063 22,019,408 22,123,289 21,123,511 =========== =========== =========== =========== iPARTY CORP. CONSOLIDATED BALANCE SHEETS Sep 24, 2005 Dec 25, 2004 ------------- ------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,001,298 $ 1,757,157 Restricted cash 451,798 561,407 Accounts receivable 945,417 700,961 Inventory, net 17,399,118 11,400,971 Prepaid expenses and other assets 809,662 476,046 ------------ ------------ Total current assets 20,607,293 14,896,542 Property and equipment, net 5,311,804 4,483,705 Other assets 102,775 99,690 ------------ ------------ Total assets $ 26,021,872 $ 19,479,937 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,459,521 $ 3,421,195 Accrued expenses 3,036,100 2,615,835 Current portion of capital lease obligations 425,847 365,674 Borrowings under line of credit 9,519,470 5,257,690 ------------ ------------ Total current liabilities 22,440,938 11,660,394 Long-term liabilities: Capital lease obligations, net of current portion 555,150 796,693 Other liabilities 565,146 471,759 ------------ ------------ Total long-term liabilities 1,120,296 1,268,452 Commitments and contingencies Convertible preferred stock 14,217,861 14,308,002 Common stock 22,189 22,093 Additional paid-in capital 50,570,243 50,448,100 Accumulated deficit (62,349,655) (58,227,104) ------------ ------------ Total stockholders' equity 2,460,638 6,551,091 ------------ ------------ Total liabilities and stockholders' equity $ 26,021,872 $ 19,479,937 ============ ============ *T