iParty Corp. Reports Transactions with Amscan and Party City and Store Closures by Two of its Competitors
August 07 2006 - 4:35PM
Business Wire
iParty Corp. (AMEX: IPT - news), a party goods retailer that
operates 50 iParty retail stores, today reported that it has
entered into a five-year Supply Agreement with Amscan Inc.
("Amscan"), its largest supplier, and has also entered into a $2.45
million agreement with Party City Corporation ("Party City") to buy
a retail party goods store from Party City in Peabody,
Massachusetts and receive a five-year non-compete agreement from
Party City covering most of iParty's core market in New England.
iParty also announced that during the months of June and July 2006,
two different competitors had closed a total of five retail stores
that had previously competed with five different iParty store
locations in New Hampshire and Massachusetts. On August 7, 2006,
iParty and its wholly-owned subsidiary, iParty Retail Stores Corp.,
entered into and simultaneously closed an Asset Purchase Agreement
with Party City, an affiliate of Amscan, that provides for, among
other things, the acquisition of a Party City retail party goods
store in Peabody, Massachusetts, for aggregate consideration of
$2,450,000, payable by a note in the principal amount of $600,000
and $1,850,000 in cash. The Agreement also provides that Party City
and its affiliates will not compete with iParty in Massachusetts,
Rhode Island, Maine, New Hampshire, Vermont, and Windsor and New
London counties in Connecticut for a period of five years, subject
to certain terms and conditions. On August 7, 2006, iParty also
entered into a Supply Agreement with Amscan, its largest supplier
and the largest supplier in the party goods industry. The Supply
Agreement gives iParty the right to receive certain additional
rebates and more favorable pricing terms over the term of the
Agreement than what is generally available to it under its current
terms with Amscan, subject to iParty's achievement of increased
levels of purchases and other factors. In exchange, the Supply
Agreement obligates iParty to purchase increased levels of
merchandise from Amscan until 2012. The Supply Agreement provides
for a ramp-up period during 2006 and 2007 and, beginning with 2008,
requires iParty to purchase, on an annual basis, merchandise equal
to the total number of iParty stores open during such calendar
year, multiplied by $180,000. The Supply Agreement also provides
for Amscan to extend, until October 31, 2006, approximately
$1,150,000 of certain currently due receivables owed by iParty to
Amscan, and gives iParty the right, at its option, to convert these
extended receivables into a three-year subordinated promissory
note. iParty currently intends to exercise its option to convert
these extended receivables into a note in October 2006. Sal
Perisano, Chairman and Chief Executive Officer of iParty Corp.,
commented, "Each of these transactions presents iParty with a
significant opportunity. First, we are acquiring a high volume
store from a competitor in the important Peabody, Massachusetts
market where we don't have a store. Secondly, in connection with
this store acquisition, the nation's largest chain of party supply
superstores, Party City, has entered into a five-year non-compete
agreement with us that covers most of our core New England region.
Third, our Supply Agreement with Amscan, which extends to 2012,
affords us the opportunity to realize better product margin and
improved business terms with our largest supplier. These
transactions with the largest supplier and the largest retailer in
our industry are encouraging evidence of the respect that those in
our industry have for iParty's overall business performance and the
strong market position that we have been able to achieve in our
core New England area. We believe that both of these transactions
are excellent business opportunities for iParty." Mr. Perisano
further commented, "Finally, we are also encouraged by and happy to
report that over the past two months two different competitors have
closed a total of five retail stores that had previously competed
with five different iParty store locations in New Hampshire and
Massachusetts. We believe that these recent store closings further
validate our overall business performance and strategy and present
us with important opportunities to improve our market position and
sales at our five nearby locations. We are evaluating and adjusting
our operational and strategic plans accordingly." About iParty
Corp. Headquartered in Dedham, Massachusetts, iParty Corp. (AMEX:
IPT - news) is a party goods retailer that operates 51 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. 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 better business terms, future
expectations of sales growth, improved gross margins,
profitability, the ability to take advantage of business
opportunities, 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 newly-installed
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 and which we are considering replacing in 2007;
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;
rising oil and gas 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;
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
31, 2005 and iParty's most recently filed Quarterly Report on Form
10-Q.
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