DEDHAM, Mass., July 23 /PRNewswire-FirstCall/ -- iParty Corp.
(AMEX:IPT), a party goods retailer, today reported financial
results for its second quarter of fiscal year 2008, which ended on
June 28, 2008. For the quarter, consolidated revenues were $20.1
million, a 1.5% decrease compared to $20.4 million for the second
quarter in 2007. The decrease in second quarter revenues from the
year-ago period included a 2.8% decrease in comparable store sales,
offset by sales from two stores that were acquired during the first
quarter. Consolidated gross profit margin was 42.2% for the quarter
compared to a gross profit margin of 43.2% for the same period in
2007. Consolidated net income for the quarter was $184 thousand, or
$0.00 per share, compared to $512 thousand, or $0.01 per share, for
the second quarter in 2007. On a non-GAAP basis, earnings for the
quarter before interest, taxes, depreciation and amortization
("EBITDA") were $0.9 million compared to EBITDA of $1.2 million for
the second quarter in 2007. 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 2008 and 2007, 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 $36.2
million, a 0.6% increase compared to $36.0 million for the first
six months of 2007. Consolidated revenues for the first six months
of 2008 included a 0.7% decrease in comparable store sales from the
year ago period. Consolidated gross profit margin was 40.4% for the
six-month period, compared to 41.7% for the same period in 2007.
For the six-month period, consolidated net loss was $1.7 million,
or $0.07 per basic and diluted share, compared to a consolidated
net loss of $1.0 million, or $0.04 per basic and diluted share for
the first six months of 2007. On a non-GAAP basis, net loss for the
six-month year-to- date period before interest, taxes, depreciation
and amortization ("EBITDA net loss") was $258 thousand compared to
a positive EBITDA of $309 thousand for the first six months of
2007. Sal Perisano, Chairman and Chief Executive Officer of iParty
Corp., commented, "Our second quarter 2008 sales were negatively
affected by the early Easter holiday, which shifted sales out of
the month of April into the first quarter. Beyond that shift, we
are relatively pleased with our sales performance for the quarter
and six months. In the midst of perhaps the most serious economic
downturn in decades, our stores have experienced only a slight
softening of customer traffic, and even that softening has been
partly offset by an overall increase in our average sale
transaction amounts. Our customers have continued to support our
core Birthday categories, and have responded strongly to regional
celebration events such as the Super Bowl and the NBA Finals.
"Gross profit margin and net profits for the second quarter of 2008
were negatively impacted by increases in store occupancy costs
compared to the same period last year. Underlying product margin
rates, however, returned to relatively normal levels after the
first quarter markdowns to clear out seasonal inventory items. For
the six month period ended June, those first quarter markdowns,
increased occupancy costs, as well as some one-time grand opening
expenses for our two new Rhode Island stores, taken together
contributed to an overall increase in net loss compared to the same
period in 2007. "Overall, it appears to us that our customers are
not sacrificing their children's birthday parties and they are
continuing to celebrate life's milestones however big or small. We
believe that our sales and profit performance through June,
considering the current economic climate, leave us relatively well
positioned as we move forward into the fall season, and we are
currently focusing our energies on being fully prepared to take
advantage of the all-important Halloween season." About iParty
Corp. Headquartered in Dedham, Massachusetts, iParty Corp. 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 http://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 http://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. For the quarter ended
For the six months ended RECONCILIATION OF NON-GAAP June 28, June
30, June 28, June 30, MEASURES 2008 2007 2008 2007 Net income
(loss) as reported under GAAP $183,606 $512,138 $(1,680,922)
$(990,718) plus, Interest expense, net 184,381 230,012 396,733
456,322 plus, Depreciation and amortization 524,378 428,623
1,026,102 843,498 plus, Income taxes - - - - EBITDA, non-GAAP
$892,365 $1,170,773 $(258,087) $309,102 Safe harbor statement under
the Private Securities Litigation Reform Act of 1995: This press
release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 as contained
in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 that reflect management's current
views and estimates regarding, among other things, our growth
strategy, industry and market trends, expectations regarding our
two new Rhode Island stores, belief regarding our positioning as we
move into the fall and Halloween seasons, and our belief as to the
appropriateness of our holiday inventory levels. You can identify
these statements by the fact that they use words such as
"anticipate," "believe," "estimate," "expect," "intend," "project,"
"plan," "outlook," and other words and terms of similar meaning.
These statements involve a number of risks and uncertainties that
could cause actual results to differ materially from the potential
results discussed in the forward-looking statements. Among the
factors that could cause actual results and outcomes to differ
materially from those contained in such forward-looking statements
are the following: changes in consumer confidence and consumer
spending patterns, particularly those impacting the New England
region; the successful implementation of our growth and marketing
strategies; our ability to obtain additional financing, if
required, on acceptable terms and conditions; rising commodity
prices, especially oil and gas prices; our relationships with our
third party suppliers; our inventory management system; and the
availability of retail store space on reasonable lease terms. For a
more detailed discussion of 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 29, 2007. iParty is providing this information as of
this date, and does not undertake to update the information
included in this press release, whether as a result of new
information, future events or otherwise. iPARTY CORP. CONSOLIDATED
STATEMENTS OF OPERATIONS For the three months ended For the six
months ended Jun 28, 2008 Jun 30, 2007 Jun 28, 2008 Jun 30, 2007
Revenues $20,103,668 $20,411,919 $36,247,756 $36,011,078 Operating
costs: Cost of products sold and occupancy costs 11,612,587
11,600,874 21,595,934 21,007,648 Marketing and sales 6,176,460
6,079,698 12,026,212 11,665,772 General and administrative
1,946,634 1,989,197 3,909,799 3,872,054 Operating income (loss)
367,987 742,150 (1,284,189) (534,396) Interest expense, net
(184,381) (230,012) (396,733) (456,322) Net income (loss) $183,606
$512,138 ($1,680,922) ($990,718) Income (loss) per share: Basic
$0.00 $0.01 $(0.07) $(0.04) Diluted $0.00 $0.01 $(0.07) $(0.04)
Weighted-average shares outstanding: Basic 38,210,583 38,199,738
22,713,989 22,618,685 Diluted 38,319,767 40,054,445 22,713,989
22,618,685 iPARTY CORP. CONSOLIDATED BALANCE SHEETS Jun 28, 2008
Dec 29, 2007 ASSETS Current assets: Cash and cash equivalents
$64,792 $71,532 Restricted cash 657,079 862,536 Accounts receivable
891,285 1,105,807 Inventory, net 14,045,935 13,639,531 Prepaid
expenses and other assets 680,115 996,779 Total current assets
16,339,206 16,676,185 Property and equipment, net 4,243,183
4,360,123 Intangible assets, net 2,582,646 1,756,800 Other assets
207,465 183,978 Total assets $23,372,500 $22,977,086 LIABILITIES
AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable
$6,458,549 $4,723,370 Accrued expenses 2,960,151 2,503,752 Current
portion of capital lease obligations 23,065 30,473 Current notes
payable 655,701 620,706 Borrowings under line of credit 2,590,988
2,613,511 Total current liabilities 12,688,454 10,491,812 Long-term
liabilities: Capital lease obligations, net of current portion -
9,213 Notes payable, net of discount of $238,642 3,036,793
3,271,632 Other liabilities 1,152,187 1,113,522 Total long-term
liabilities 4,188,980 4,394,367 Commitments and contingencies
Convertible preferred stock 13,647,720 13,682,167 Common stock
22,732 22,701 Additional paid-in capital 52,013,978 51,894,481
Accumulated deficit (59,189,364) (57,508,442) Total stockholders'
equity 6,495,066 8,090,907 Total liabilities and stockholders'
equity $23,372,500 $22,977,086 DATASOURCE: iParty Corp. CONTACT:
David Robertson, Chief Financial Officer, iParty Corp.,
+1-781-355-3770, Web site: http://www.iparty.com/
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