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iParty Corp. Reports Third Quarter Sales Increase of 3% - Comp Stores up 1.4%

Date : 10/20/2010 @ 10:30AM
Source : Business Wire

iParty Corp. Reports Third Quarter Sales Increase of 3% - Comp Stores up 1.4%

Iparty (AMEX:IPT)
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iParty Corp. (NYSE Amex: IPT - news), a party goods retailer, today reported financial results for its third quarter of fiscal year 2010, which ended on September 25, 2010.

Third Quarter 2010 Highlights

  • Consolidated revenues of $16.9 million for the third quarter of 2010, a 3.0% increase compared to the third quarter of 2009.
  • Comparable store sales increase of 1.4% for the third quarter of 2010, and for the nine month period then ended.
  • Net loss of $1.9 million for the third quarter of 2010, including incremental pre-Halloween season costs of $400 thousand, compared to net loss of $1.4 million for the third quarter of 2009.
  • Net loss for the nine month period of $2.7 million, compared to net loss of $2.4 million for the nine month period in 2009.
  • EBITDA net loss for the third quarter of 2010 of $1.4 million, compared to EBITDA net loss in the third quarter of 2009 of $775 thousand (See accompanying schedule for reconciliation of non-GAAP EBITDA to net loss for the period).
  • EBITDA net loss for the nine month period of $1.1 million compared to an EBITDA net loss of $481 thousand for the nine month period in 2009.
  • The opening of eleven temporary Halloween stores in September, bringing the number of iParty storefronts this Halloween season to 62 from 54 last year.

Sal Perisano, iParty’s Chairman and Chief Executive Officer, stated, “The third quarter results reflect a continuation of the modest sales increases we saw in the first and second quarters of this year. The bottom line for the third quarter was impacted by incremental costs related to the expansion of our temporary Halloween stores, from four stores in 2009 to eleven in 2010. These costs include pre-opening rents and other expenses as well as related advertising.

Mr. Perisano further stated, “As we close out our third quarter and report our operating results for those three months, we are now well positioned for Halloween, the most important part of our year, with an increased presence in our markets. With eleven temporary stores now open and ready for business, we have 62 storefronts open this Halloween season, compared to 54 storefronts at this time last year. Also, one of those new temporary stores, in Boston’s South Bay Center, will reopen shortly after Halloween as the 52nd full-line iParty store. The opening of this new permanent store will further develop the urban store strategy we initiated in late 2009, when we opened our first urban store on Boylston Street in the Back Bay section of Boston.”

Operating Results

For the third quarter of 2010, consolidated revenues were $ 16.9 million, a 3.0% increase compared to $16.4 million for the third quarter in 2009. Comparable store sales in the third quarter of 2010 increased 1.4% compared to the year-ago period. Consolidated gross profit margin was 36.8% for the third quarter of 2010 compared to a gross profit margin of 37.3% for the same period in 2009. Consolidated net loss for the third quarter of 2010 was $1.9 million, or $0.08 per basic and diluted share, compared to consolidated net loss of $1.4 million, or $0.06 per basic and diluted share, for the third quarter in 2009. On a non-GAAP basis, net loss for the third quarter of 2010 before interest, taxes, depreciation and amortization (“EBITDA net loss”) was $1.4 million compared to EBITDA net loss of $775 thousand for the third quarter in 2009. 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 2010 and 2009, and net loss for the nine-month periods then ended, under GAAP to a non-GAAP, EBITDA basis.

For the nine-month year-to-date period ended September 25, 2010, consolidated revenues were $ 51.8 million, a 2.5% increase compared to $50.5 million for the first nine months of 2009. Consolidated revenues for the first nine months of 2010 included a 1.4% increase in comparable store sales from the year-ago period. Consolidated gross profit margin was 38.0% for both the 2010 and 2009 nine-month periods. For the nine-month period, consolidated net loss was $2.7 million, or $0.12 per basic and diluted share, compared to a consolidated net loss of $2.4 million, or $0.11 per basic and diluted share for the first nine months of 2009. On a non-GAAP basis, EBITDA net loss was $1.1 million compared to an EBITDA net loss of $481 thousand for the first nine months of 2009.

About iParty Corp.

Headquartered in Dedham, Massachusetts, iParty Corp. 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.

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 three months ended For the nine months ended RECONCILIATION OF NON-GAAP MEASURES Sep 25, 2010 Sep 26, 2009 Sep 25, 2010 Sep 26, 2009   Net income (loss) as reported under GAAP $ (1,945,873 ) $ (1,396,982 ) $ (2,663,523 ) $ (2,443,385 )   plus, Interest expense, net 70,326 125,724 208,034 390,759 plus, Depreciation and amortization 446,307 495,986 1,322,568 1,571,641 plus, Income taxes   -     -     -     -     EBITDA, non-GAAP $ (1,429,240 ) $ (775,272 ) $ (1,132,921 ) $ (480,985 )

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 or sustained high levels of 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 our existing credit line 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 26, 2009 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 25, 2010 Sep 26, 2009 Sep 25, 2010 Sep 26, 2009 Revenues $ 16,898,251 $ 16,404,046 $ 51,799,462 $ 50,541,462 Operating costs: Cost of products sold and occupancy costs 10,676,032 10,282,326 32,114,729 31,356,342 Marketing and sales 6,371,234 5,810,227 16,894,562 16,231,004 General and administrative   1,726,532     1,582,751     5,245,660     5,006,742     Operating income (loss) (1,875,547 ) (1,271,258 ) (2,455,489 ) (2,052,626 )   Interest expense, net   (70,326 )   (125,724 )   (208,034 )   (390,759 )   Net income (loss)

$

(1,945,873

)

$

(1,396,982

)

$

(2,663,523

)

$

(2,443,385

)   Income (loss) per share: Basic and diluted $ (0.08 ) $ (0.06 ) $ (0.12 ) $ (0.11 )   Weighted-average shares outstanding: Basic and diluted   23,267,507     22,731,667     23,081,165     22,731,667  

iPARTY CORP. CONSOLIDATED BALANCE SHEETS     Sep 25, 2010 Dec 26, 2009 ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 72,950 $ 61,050 Restricted cash 577,185 1,056,525 Accounts receivable 930,171 688,506 Inventories, net 20,509,587 13,048,104 Prepaid expenses and other assets 381,591 174,752 Deferred income tax asset - current   70,997     70,997   Total current assets 22,542,481 15,099,934 Property and equipment, net 3,060,266 2,892,835 Intangible assets, net 1,102,504 1,606,585 Other assets 294,645 349,378 Deferred income tax asset   343,690     343,690   Total assets $ 27,343,586   $ 20,292,422     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 11,480,751 $ 3,885,062 Accrued expenses 2,586,045 2,649,468 Current portion of capital lease obligations 9,228 9,228 Current note payable - 600,000 Borrowings under line of credit   5,129,464     2,526,982   Total current liabilities 19,205,488 9,670,740   Long-term liabilities: Capital lease obligations, net of current portion 6,920 13,841 Other liabilities   1,511,331     1,529,257   Total long-term liabilities 1,518,251 1,543,098   Commitments and contingencies   Convertible preferred stock 13,043,321 13,589,491 Common stock 23,268 22,799 Additional paid-in capital 53,061,546 52,311,059 Accumulated deficit   (59,508,288 )   (56,844,765 ) Total stockholders' equity   6,619,847     9,078,584     Total liabilities and stockholders' equity $ 27,343,586   $ 20,292,422  



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