IPT Iparty Corp.

iParty Corp. (NYSE Amex: IPT - news), a party goods retailer, today reported financial results for its third quarter of fiscal year 2009, which ended on September 26, 2009.

Third Quarter 2009 Highlights

• Net loss of $1.4 million for the third quarter of 2009, compared to a net loss of $1.3 million for the third quarter of 2008.
• Consolidated net loss for the nine month period of $2.4 million in 2009, compared to $3.0 million for the nine month period in 2008.
• EBITDA net loss for the third quarter of 2009 of $775 thousand compared to an EBITDA net loss in the third quarter of 2008 of $648 thousand, an increase of $127 thousand (See accompanying schedule for reconciliation of non-GAAP EBITDA to net income (loss) for these periods).
• EBITDA net loss for the nine month period in 2009 of $481 thousand compared to an EBITDA net loss of $906 thousand for the nine month period in 2008.
• Consolidated revenues of $16.4 million for the third quarter of 2009, a 7.6% decrease compared to the third quarter of 2008.
• Comparable store sales in the third quarter of 2009 decreased 7.7% compared to the year-ago period.
• Payoff of $2.5 million Highbridge Note on September 15, 2009.

Sal Perisano, iParty’s Chairman and Chief Executive Officer, stated, “Our cost cutting initiatives, which began late last year, continue to result in significant expense saving through the third quarter, mitigating the overall effects of the economic recession to date. With these cost cutting initiatives in place, we were able to deliver bottom line results for the third quarter of 2009 that were substantially equal to last year’s third quarter results, despite the recession related sales shortfall during the quarter. Also, our consolidated net loss for the first nine months of 2009 is substantially less than last year.”

Mr. Perisano further stated that “We are also pleased to report that we were able to retire the $2.5 million Highbridge note on its due date of September 15, 2009, with proceeds from our revolving credit facility with Wells Fargo.”

Operating Results

For the third quarter of 2009, consolidated revenues were $16.40 million, a 7.6% decrease compared to $17.74 million for the third quarter in 2008. Comparable store sales in the third quarter of 2009 decreased 7.7% compared to the year-ago period. Consolidated gross profit margin was 37.3% for the third quarter of 2009 compared to a gross profit margin of 40.1% for the same period in 2008. Consolidated net loss for the third quarter of 2009 was $1.40 million, or $0.06 per basic and diluted share, compared to consolidated net loss of $1.32 million, or $0.06 per basic and diluted share, for the third quarter in 2008. On a non-GAAP basis, net loss for the third quarter of 2009 before interest, taxes, depreciation and amortization (“EBITDA”) was $775,272, compared to EBITDA net loss of $648,173 for the third quarter in 2008. EBITDA is calculated as net income (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 third quarters of 2009 and 2008, and for the nine-month periods then ended, under GAAP to a non-GAAP, EBITDA basis.

For the nine-month year-to-date period ending September 26, 2009, consolidated revenues were $50.54 million, a 6.4% decrease compared to $53.99 million for the first nine months of 2008. Consolidated revenues for the first nine months of 2009 included a 6.5% decrease in comparable store sales from the year ago period. Consolidated gross profit margin was 38.0% for the nine-month period, compared to 40.3% for the same period in 2008. For the nine-month period, consolidated net loss was $2.44 million, or $0.11 per basic and diluted share, compared to a consolidated net loss of $3.00 million, or $0.13 per basic and diluted share for the first nine months of 2008. On a non-GAAP basis, EBITDA net loss was $480,985 compared to an EBITDA net loss of $906,260 for the first nine months of 2008, an improvement of 47% or $425,153.

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 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

Pursuant to the requirements of Regulation G, we have provided below reconciliations of any non-GAAP financial measures we use in this press release 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

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, provides 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 nine months ended RECONCILIATION OF NON-GAAP MEASURES Sept 26, 2009 Sept 27, 2008 Sept 26, 2009 Sept 27, 2008   Net income (loss) as reported under GAAP $ (1,396,982 ) $ (1,322,630 ) $ (2,443,385 ) $ (3,003,552 )   plus, Interest expense, net 125,724 177,821 390,759 574,554 plus, Depreciation and amortization 495,986 496,636 1,571,641 1,522,738 plus, Income taxes   -     -     -     -     EBITDA, non-GAAP $ (775,272 ) $ (648,173 ) $ (480,985 ) $ (906,260 )

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. 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 and Florida, which may result from, among other factors, rising unemployment, access to consumer credit, mortgage foreclosures, credit market turmoil, declines in the stock market, general feelings and expectations about the overall economy, and unseasonable weather; the successful implementation of our growth and marketing strategies; our ability to access existing credit lines or 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; the failure of our inventory management system and our point of sale system; 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 availability of retail store space on reasonable lease terms; and compliance with evolving federal securities, accounting, and stock exchange rules and regulations applicable to publicly-traded companies listed on the NYSE Amex. 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 27, 2008 and our other periodic reports filed with the SEC. 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 (Unaudited)         For the three months ended For the nine months ended Sep 26, 2009 Sep 27, 2008 Sep 26, 2009 Sep 27, 2008 Revenues $ 16,404,046 $ 17,742,315 $ 50,541,462 $ 53,990,071 Operating costs: Cost of products sold and occupancy costs 10,282,326 10,629,144 31,356,342 32,225,078 Marketing and sales 5,810,227 6,677,703 16,231,004 18,703,915 General and administrative   1,582,751     1,580,277     5,006,742     5,490,076     Operating income (loss) (1,271,258 ) (1,144,809 ) (2,052,626 ) (2,428,998 )   Interest expense, net   (125,724 )   (177,821 )   (390,759 )   (574,554 )   Net income (loss)   ($1,396,982 )   ($1,322,630 )   ($2,443,385 )     ($3,003,552 )   Income (loss) per share: Basic and diluted $ (0.06 ) $ (0.06 ) $ (0.11 ) $ (0.13 ) Weighted-average shares outstanding: Basic and diluted   22,731,667     22,730,295     22,731,667     22,719,425   iPARTY CORP. CONSOLIDATED BALANCE SHEETS   Sep 26, 2009   (Unaudited) Dec 27, 2008 ASSETS Current assets: Cash and cash equivalents $ 64,350 $ 60,250 Restricted cash 512,641 775,357 Accounts receivable 1,012,979 730,392 Inventories, net 18,377,554 13,022,142 Prepaid expenses and other assets   445,156     279,185   Total current assets 20,412,680 14,867,326 Property and equipment, net 3,008,388 3,646,481 Intangible assets, net 1,780,862 2,303,692 Other assets   371,082     177,774   Total assets $ 25,573,012   $ 20,995,273     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and book overdrafts $ 10,838,220 $ 4,048,833 Accrued expenses 2,403,546 2,495,955 Current portion of capital lease obligations 9,228 6,444 Current notes payable 600,000 2,876,182 Borrowings under line of credit   4,741,878     1,950,019   Total current liabilities 18,592,872 11,377,433   Long-term liabilities: Capital lease obligations, net of current portion 16,148 - Notes payable - 600,000 Other liabilities   1,469,377     1,200,174   Total long-term liabilities 1,485,525 1,800,174   Commitments and contingencies   Convertible preferred stock 13,663,891 13,663,891 Common stock 22,732 22,732 Additional paid-in capital 52,199,874 52,079,540 Accumulated deficit   (60,391,882 )   (57,948,497 ) Total stockholders' equity   5,494,615     7,817,666     Total liabilities and stockholders' equity $ 25,573,012   $ 20,995,273