IPT Iparty Corp.

iParty Corp. (AMEX: IPT - news), a party goods retailer that operates 50 iParty retail stores, today reported financial results for its first quarter of fiscal year 2007, which ended on March 31, 2007. For the quarter, consolidated revenues were $15.6 million, a 15.2% increase compared to $13.5 million for the first quarter in 2006. The increase in first quarter revenues from the year-ago period was due to an 11.3% 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 39.7% for the quarter compared to a margin of 37.3% for the same period in 2006. Consolidated net loss for the quarter was $1.5 million, or $0.07 per share, compared to consolidated net loss of $2.2 million, or $0.10 per share, for the first quarter in 2006. On a non-GAAP basis, loss for the quarter before interest, taxes, depreciation and amortization (�EBITDA�) was $0.9 million compared to EBITDA net loss of $1.7 million for the first quarter in 2006. EBITDA is calculated as net loss, 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 loss for the first quarters of 2007 and 2006 under GAAP to a non-GAAP, EBITDA basis. Sal Perisano, Chairman and Chief Executive Officer of iParty Corp., commented, �These results are consistent with our stated goal of further improving our overall business by driving increases in same store sales. For the third 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 are obviously pleased with a same store sales increase of 11.3% for the first quarter of 2007.�Our first fiscal quarter this year began on December 31, 2006. We believe that the strong sales comparisons for the quarter to the year-ago period were helped by the inclusion this year of sales from December 31st, traditionally a strong sales day, which was not included in the first quarter of 2006, which began on January 1. Nonetheless, we believe that our strong first quarter performance this year was more directly attributable to our focus on improving efficiencies and operations and better execution on every level. Going forward, it remains our intention to continue to drive increases in same store sales, better leverage our costs and to achieve, maintain, and grow profitability.� 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 Mar 31, 2007 Apr 1, 2006 Net loss, as reported under GAAP $ (1,502,856) $ (2,158,357) � plus, Interest expense, net 226,310� 157,528� plus, Depreciation and amortization 414,875� 292,570� plus, Income taxes � -� � -� � EBITDA, non-GAAP $ (861,671) $ (1,708,259) 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 quarter ended Mar 31, 2007 Apr 1, 2006 Revenues $ 15,599,159� $ 13,545,799� Operating costs: Cost of products sold 9,406,774� 8,498,254� Marketing and sales 5,586,074� 5,355,098� General and administrative � 1,882,857� � 1,693,276� � Operating loss (1,276,546) (2,000,829) � Interest expense, net � (226,310) � (157,528) � Net loss $ (1,502,856) $ (2,158,357) � Loss per share: Basic and diluted $ (0.07) $ (0.10) � Weighted-average shares outstanding: Basic and diluted � 22,614,544� � 22,544,257� iPARTY CORP. CONSOLIDATED BALANCE SHEETS � Mar 31, 2007 Dec 30, 2006 ASSETS Current assets: Cash and cash equivalents $ 63,523� $ 760,376� Restricted cash 527,758� 706,066� Accounts receivable 831,558� 1,116,042� Inventory, net 13,209,006� 12,264,737� Prepaid expenses and other assets � 1,395,435� � 752,172� Total current assets 16,027,280� 15,599,393� Property and equipment, net 4,629,662� 4,817,993� Intangible assets, net 2,038,983� 2,153,482� Other assets � 126,862� � 126,505� Total assets $ 22,822,787� $ 22,697,373� � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,646,980� $ 5,516,406� Accrued expenses 2,428,408� 3,070,003� Current portion of capital lease obligations 262,052� 343,761� Current notes payable 571,384� 551,515� Borrowings under line of credit � 2,458,525� � 1,162,719� Total current liabilities 12,367,349� 10,644,404� � Long-term liabilities: Capital lease obligations, net of current portion 34,145� 42,456� Notes payable, net of discount of $494,330 3,589,616� 3,736,309� Other liabilities � 977,359� � 929,199� Total long-term liabilities 4,601,120� 4,707,964� � Commitments and contingencies � Convertible preferred stock 13,756,570� 13,771,450� Common stock 22,623� 22,604� Additional paid-in capital 51,698,114� 51,671,084� Accumulated deficit � (59,622,989) � (58,120,133) Total stockholders' equity � 5,854,318� � 7,345,005� � Total liabilities and stockholders' equity $ 22,822,787� $ 22,697,373�