iParty Corp. Reports Fiscal 2012 and Fourth Quarter Financial Results

Wed Mar 6, 2013 4:00pm EST

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DEDHAM, Mass.--(Business Wire)--
iParty Corp. (NYSE MKT: IPT - news), a party goods retailer, today reported
financial results for its fourth quarter and fiscal year 2012, which ended on
December 29, 2012. 

Fiscal Year 2012 Highlights

* Consolidated 52 week revenues of $79.1 million, a 2.2% decrease compared to
the 53 week fiscal year 2011; and a 0.1% increase compared to the 52 week sales
in fiscal 2011. 
* EBITDA of $539 thousand compared to EBITDA of $494 thousand for fiscal year
2011. 
* Comparable store sales decrease of 0.1%. 
* Net loss before taxes of $949 thousand, compared to $1.3 million in 2011. 
* Net loss of $1.5 million, after a $588 thousand non-cash tax related charge,
compared to net loss of $1.3 million for fiscal year 2011.

Sal Perisano, iParty`s Chairman and Chief Executive Officer, stated, "For the
second consecutive year, a weather event affected our fourth quarter and annual
performance. The anticipation of Hurricane Sandy affected our sales the week
leading up to Halloween and hit our primary market on October 29th, knocking out
power and closing a number of our stores in southern New England. This storm was
the major cause of the loss we sustained for the year, and our business remains
otherwise healthy. Despite the unfortunate timing of this Hurricane, sales in
our non-seasonal categories remained solid through the year helping us regain
positive momentum going into fiscal 2013. " 

Operating Results

For the thirteen week fourth quarter of 2012, consolidated revenues were $26.89
million, a 9.5% decrease compared to $29.71 million for the fourteen week fourth
quarter in 2011, or a 3.4% decrease compared to the 13 week fourth quarter of
fiscal 2011. Comparable store sales in the fourth quarter of 2012 decreased 5.7%
compared to the year-ago period. Consolidated gross profit margin was 41.6% for
the fourth quarter of 2012 compared to a gross profit margin of 43.1% for the
fourth quarter in 2011. Consolidated net income for the fourth quarter of 2012
was $1.8 million, compared to $3.0 million for the 14 week fourth quarter of
2011. Net income per basic and diluted share were $0.05 and $0.05, respectively,
compared to $0.08 and $0.08 per basic and diluted share, for the fourth quarter
in 2011. On a non-GAAP basis, net income for the 13 week fourth quarter of 2012
before interest, taxes, depreciation and amortization ("EBITDA") was $2.7
million, compared to $3.4 million for the 14 week fourth quarter in 2011. 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 income (loss) for the fourth quarters of 2012
and 2011 and for the twelve month periods then ended, under GAAP to a non-GAAP,
EBITDA basis. 

For the fifty-two week fiscal year ended December 29, 2012, consolidated
revenues were $79.09 million, a 2.2% decrease compared to $80.88 million for
fifty-three week fiscal year 2011. Consolidated revenues for 2012 included a
0.1% decrease in comparable store sales from the year-ago period. Consolidated
gross profit margin was 38.3% for 2012 compared to 39.2% in 2011. Consolidated
net loss for the fiscal year 2012 was $1.5 million, or $0.06 per basic and
diluted share, compared to $1.3 million, or $0.05 per basic and diluted share
for fiscal year 2011. Consolidated net loss for fiscal 2012 was affected by a
non-cash charge related to the write-off of a deferred tax asset of $588
thousand. On a non-GAAP basis, EBITDA was $539 thousand for fiscal year 2012,
compared to EBITDA of $494 thousand for 2011. 

Subsequent Event

On March 1, 2013, iParty announced that it had entered into a merger agreement
with Party City Holdings Inc. The consummation of the merger is subject to
customary conditions to closing, including the approval of iParty`s
stockholders, and is expected to close in the second quarter of 2013. 

About iParty Corp.

Headquartered in Dedham, Massachusetts, iParty Corp. is a party goods retailer
that operates 54 iParty retail stores in New England and Florida. iParty`s aim
is to make throwing a successful event both stress-free and fun. With an
extensive assortment of party supplies and costumes in our stores, iParty offers
consumers a sophisticated, yet fun and easy-to-use, resource to help them
customize any party, including birthday bashes, Easter get-togethers, graduation
parties, summer barbecues and, of course, Halloween. iParty also operates an
internet site that offers a strong assortment of Halloween and related
merchandise for sale on the internet and focuses on increasing customer visits
to our stores by highlighting the ever changing store product assortment for all
occasions and seasons. The site also features sales flyers, enter-to-win
contests, monthly coupons and ideas and themes to offer consumers an easy and
fun approach to any party. 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, cash flows from operating
activities 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 twelve months ended                                           
 RECONCILIATION OF NON-GAAP MEASURES             Dec 29, 2012                          Dec 31, 2011              Dec 29, 2012                                Dec 31, 2011              
                                                                                                                                                                                       
 Net income (loss) as reported under GAAP        $        1,781,138                    $        2,983,683        $      (1,536,430  )                        $      (1,314,638  )      
                                                                                                                                                                                       
 plus, Interest expense, net                              43,996                                56,847                  184,854                                     305,530            
 plus, Depreciation and amortization                      304,676                               361,626                 1,302,500                                   1,484,212          
 plus, Income tax expense (benefit)                       587,750                               19,343                  587,750                                     19,343             
                                                                                                                                                                                       
 EBITDA, non-GAAP                                $        2,717,560                    $        3,421,499        $      538,674                              $      494,447            
                                                                                                                                                                                       
                                                                                                                                                                                       


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; disruptions to our most important
selling season, Halloween; 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; effect of Chinese
inflation on our suppliers and product pricing; 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; risks related to
e-commerce, compliance with evolving federal securities, accounting, and stock
exchange rules and regulations applicable to publicly-traded companies listed on
the NYSE MKT; and the impact of a failure to satisfy the conditions of or to
consummate the closing of our recently announced merger agreement with Party
City. 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 31, 2011 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. 

Additional Information and Where You Can Find It

In connection with the proposed merger transaction, iParty will file a proxy
statement and other relevant documents concerning the proposed merger
transaction with the SEC. Investors and security holders of iParty are urged to
read the proxy statement and any other relevant documents filed with the SEC
when they become available, because they will contain important information
about iParty and the proposed transaction that should be considered before
making a decision about the merger. 

The proxy statement (when it becomes available) and any other documents filed by
iParty with the SEC may be obtained free of charge at the SEC`s web site at
www.sec.gov. In addition, investors and security holders may obtain free copies
of the documents filed with the SEC by iParty by contacting David Robertson,
iParty`s Chief Financial Officer, at 781-355-3770. 

iParty and its directors and certain executive officers may, under SEC rules, be
deemed to be participants in the solicitation of proxies from iParty`s
shareholders in connection with the transaction. Information regarding the
directors and executive officers and their respective interests in the Company
by security holdings or otherwise is included in the Company`s proxy statements
and Annual Reports on Form 10-K, previously filed with the SEC, and information
concerning all of iParty`s participants in the solicitation will be included in
the proxy statement relating to the proposed transaction when it becomes
available.

                                                                                                                                                                                                   
 iPARTY CORP.                                                                                                                                                                                      
 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)                                                                                                                                                 
                                                                                                                                                                                                   
                                                  For the three months ended                                                 For the twelve months ended                                           
                                                  Dec 29, 2012                             Dec 31, 2011                      Dec 29, 2012                                Dec 31, 2011              
 Revenues                                         $      26,889,345                        $      29,710,785                 $      79,094,317                           $      80,882,751         
 Operating costs:                                                                                                                                                                                  
 Cost of products sold and occupancy costs               15,703,830                               16,912,576                        48,787,267                                  49,147,010         
 Marketing and sales                                     7,162,185                                8,082,924                         24,450,968                                  25,509,559         
 General and administrative                              1,610,452                                1,649,771                         6,619,978                                   6,834,443          
 Flood loss                                              -                                        5,715                             -                                           398,751            
                                                                                                                                                                                                   
 Operating income (loss)                                 2,412,878                                3,059,799                         (763,896    )                               (1,007,012  )      
                                                                                                                                                                                                   
 Change in fair value of warrant liability               6                                        74                                70                                          17,247             
 Interest expense, net                                   (43,996     )                            (56,847     )                     (184,854    )                               (305,530    )      
                                                                                                                                                                                                   
 Income (loss) before income taxes                       2,368,888                                3,003,026                         (948,680    )                               (1,295,295  )      
                                                                                                                                                                                                   
 Income taxes (benefit)                                  587,750                                  19,343                            587,750                                     19,343             
                                                                                                                                                                                                   
 Net income (loss)                                $      1,781,138                         $      2,983,683                  $      (1,536,430  )                        $      (1,314,638  )      
                                                                                                                                                                                                   
 Income (loss) per share:                                                                                                                                                                          
 Basic                                            $      0.05                              $      0.08                       $      (0.06       )                        $      (0.05       )      
 Diluted                                          $      0.05                              $      0.08                       $      (0.06       )                        $      (0.05       )      
                                                                                                                                                                                                   
                                                                                                                                                                                                   
 Weighted-average shares outstanding:                                                                                                                                                              
 Basic                                                   38,930,285                               38,930,281                        24,418,004                                  24,386,220         
 Diluted                                                 39,388,444                               39,201,487                        24,418,004                                  24,386,220         
                                                                                                                                                                                                   
                                                                                                                                                                                                   


                                                                                                               
 iPARTY CORP.                                                                                                  
 CONSOLIDATED BALANCE SHEETS (UNAUDITED)                                                                       
                                                                                                               
                                                   Dec 29, 2012                     Dec 31, 2011               
 ASSETS                                                                                                        
 Current assets:                                                                                               
 Cash                                              $      64,650                    $      63,650              
 Restricted cash                                          480,816                          819,604             
 Accounts receivable                                      821,903                          1,377,234           
 Inventories                                              17,004,269                       15,965,507          
 Prepaid expenses and other assets                        1,646,950                        1,415,780           
 Deferred income tax asset - current                      -                                46,762              
 Total current assets                                     20,018,588                       19,688,537          
 Property and equipment, net                              2,693,991                        2,664,086           
 Intangible assets, net                                   327,329                          626,900             
 Other assets                                             282,878                          333,731             
 Deferred income tax asset                                -                                540,841             
 Total assets                                      $      23,322,786                $      23,854,095          
                                                                                                               
 LIABILITIES AND STOCKHOLDERS' EQUITY                                                                          
 Current liabilities:                                                                                          
 Accounts payable and book overdrafts              $      6,829,864                 $      5,970,015           
 Accrued expenses                                         1,870,906                        2,295,467           
 Current portion of capital lease obligations             -                                4,613               
 Borrowings under line of credit                          5,764,312                        5,366,512           
 Total current liabilities                                14,465,082                       13,636,607          
                                                                                                               
 Long-term liabilities:                                                                                        
 Deferred rent                                            1,507,732                        1,504,973           
 Total long-term liabilities                              1,507,732                        1,504,973           
                                                                                                               
 Commitments and contingencies                                                                                 
                                                                                                               
 Convertible preferred stock                              12,986,628                       13,012,668          
 Common stock                                             24,431                           24,409              
 Additional paid-in capital                               53,187,479                       52,987,574          
 Accumulated deficit                                      (58,848,566  )                   (57,312,136  )      
 Total stockholders' equity                               7,349,972                        8,712,515           
                                                                                                               
 Total liabilities and stockholders' equity        $      23,322,786                $      23,854,095          
                                                                                                               
                                                                                                               


iParty Corp.
David Robertson, 781-355-3770
Chief Financial Officer
drobertson@iparty.com

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