IPT Iparty Corp.

iParty Corp. (AMEX: IPT - news), a party goods retailer that operates 50 iParty retail stores, today reported financial results for its fourth quarter and fiscal year 2006, which ended on December 30, 2006. The Company�s accounting cycle resulted in a 13-week fourth quarter and 52-week year in fiscal 2006, compared to a 14-week fourth quarter and 53-week year in fiscal 2005. For the 13-week quarter, consolidated revenues were $29.1 million, a 3.8% increase compared to $28.0 million for 14-week quarter in 2005. On a comparable 13-week quarter basis for both fiscal 2006 and fiscal 2005, consolidated revenues increased 9.9% which included a 5.8% increase in comparable store sales. Consolidated gross profit margin was 47.5% for the quarter compared to a margin of 47.7% in the year-ago quarter. Consolidated net income for the quarter was $3.9 million, or $0.10 per share, compared to consolidated net income of $3.9 million, or $0.10 per share, for the fourth quarter in 2005. On a non-GAAP basis, income for the quarter before interest, taxes, depreciation and amortization (�EBITDA�) was $4.5 million compared to EBITDA of $4.3 million for the fourth quarter in 2005. 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 fourth quarters of 2006 and 2005 under GAAP to a non-GAAP, EBITDA basis. For the 52-week fiscal year, consolidated revenues were $78.5 million, an 8.2% increase compared to $72.5 million for the 53-week fiscal year of 2005.�On a comparable 52-week fiscal year basis for both fiscal 2006 and fiscal 2005, consolidated revenues increased 10.3% which included a 3.8% increase in comparable store sales. Consolidated gross profit margin was 42.7% for fiscal 2006 compared to 42.9% for fiscal 2005.�For fiscal 2006, consolidated net income was $0.4 million, or $0.01 per share, compared to consolidated net loss of $0.3 million, or $0.01 per share, for fiscal 2005. On a non-GAAP basis, EBITDA for the fiscal year was $2.5 million compared to an EBITDA of $1.4 million for fiscal 2005. EBITDA is calculated as net income, as reported under GAAP, plus net interest expense, depreciation and amortization and income taxes. The schedule accompanying this release provides the reconciliation of net income for fiscal 2006 and net loss for fiscal 2005 under GAAP to a non-GAAP, EBITDA basis. Sal Perisano, Chairman and Chief Executive Officer of iParty Corp., commented, �We successfully met the various opportunities and challenges that we encountered during 2006. I am pleased to report that we posted a $375,000 profit for the year and that, for the year, we realized a $2.5 million EBITDA, which is an 84.0% increase over 2005�s EBITDA of $1.4 million. We made significant progress in our goal of increasing our comparable store sales by achieving a 3.8% increase for the year and a 6.2% increase in the last six months. Additionally, we were able to better leverage our costs and were able to realize improvements in both marketing and sales expense and general and administrative expense as a percentage of sales in 2006.� Mr. Perisano further commented, �For 2007, our plan is to continue to increase our comparable store sales growth, improve our gross margins and continue to better leverage our overall cost structure. At this time, we have no plans to open or acquire any new stores in 2007, unless we come across or are presented with strategic opportunities.� 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, 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. RECONCILIATION OF NON-GAAP MEASURES � For the quarter ended For the year ended Dec 30, 2006 Dec 31, 2005 Dec 30, 2006 Dec 31, 2005 13 weeks 14 weeks 52 weeks 53 weeks Net income (loss), as reported under GAAP $ 3,883,400� $ 3,854,876� $ 374,647� $ (267,676) � plus, Interest expense, net 212,311� 149,308� 762,117� 531,848� plus, Depreciation and amortization 405,819� 307,528� 1,343,857� 1,093,221� plus, Income taxes 17,279� -� 17,279� -� � EBITDA, non-GAAP $ 4,518,809� $ 4,311,712� $ 2,497,900� $ 1,357,393� 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 or acquisitions, future expectations of comparable store sales growth, improved gross margins, increases in EBIDTA, 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, 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 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; fluctuating 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; 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 31, 2005, and its subsequently filed Quarterly Reports on Form 10-Q. iPARTY CORP. CONSOLIDATED STATEMENTS OF OPERATIONS � � For the quarter ended For the year ended Dec 30, 2006 Dec 31, 2005 Dec 30, 2006 Dec 31, 2005 13 weeks 14 weeks 52 weeks 53 weeks Revenues $ 29,084,826� $ 28,021,662� $ 78,458,329� $ 72,537,998� Operating costs: Cost of products sold 15,279,667� 14,642,851� 44,942,542� 41,395,193� Marketing and sales 7,693,653� 7,799,233� 25,625,547� 24,116,050� General and administrative 1,998,516� 1,575,394� 6,736,197� 6,762,583� � Operating income 4,112,990� 4,004,184� 1,154,043� 264,172� � Interest expense, net (212,311) (149,308) (762,117) (531,848) � Income (loss) before taxes 3,900,679� 3,854,876� 391,926� (267,676) � Income taxes 17,279� -� 17,279� -� � Net income (loss) $ 3,883,400� $ 3,854,876� $ 374,647� $ (267,676) � Income (loss) per share: Basic $ 0.10� $ 0.10� $ 0.01� $ (0.01) Diluted $ 0.10� $ 0.10� $ 0.01� $ (0.01) � Weighted-average shares outstanding: Basic 38,191,009� 37,724,517� 37,862,928� 22,186,581� Diluted 40,186,640� 39,337,114� 39,535,874� 22,186,581� iPARTY CORP. CONSOLIDATED BALANCE SHEETS � Dec 30, 2006 Dec 31, 2005 ASSETS Current assets: Cash and cash equivalents $ 760,376� $ 699,194� Restricted cash 706,066� 651,617� Accounts receivable 1,116,042� 1,246,545� Inventory, net 12,264,737� 13,251,307� Prepaid expenses and other assets 752,172� 548,114� Total current assets 15,599,393� 16,396,777� Property and equipment, net 4,817,993� 5,187,099� Intangible assets, net 2,153,482� -� Other assets 126,505� 133,200� Total assets $ 22,697,373� $ 21,717,076� � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,516,406� $ 4,695,094� Accrued expenses 3,070,003� 2,532,238� Current portion of capital lease obligations 343,761� 442,358� Current notes payable 551,515� -� Borrowings under line of credit 1,162,719� 6,635,874� Total current liabilities 10,644,404� 14,305,564� � Long-term liabilities: Capital lease obligations, net of current portion 42,456� 426,995� Notes payable, net of discount of $545,468 3,736,309� -� Other liabilities 929,199� 669,003� Total long-term liabilities 4,707,964� 1,095,998� � Commitments and contingencies � Convertible preferred stock 13,771,450� 13,816,101� Common stock 22,604� 22,537� Additional paid-in capital 51,671,084� 50,971,656� Accumulated deficit (58,120,133) (58,494,780) Total stockholders' equity 7,345,005� 6,315,514� � Total liabilities and stockholders' equity $ 22,697,373� $ 21,717,076�