iParty Corp. (NYSE Amex: IPT - news), a party goods retailer,
today reported financial results for its third quarter of fiscal
year 2011, which ended on September 24, 2011. In addition, the
Company announced the signing of a five year extension on improved
economic terms to its revolving credit facility with Wells Fargo
Capital Finance, part of Wells Fargo & Company (NYSE: WFC)
(“Wells Fargo”).
Third Quarter 2011 Highlights
- Consolidated revenues of $16.5 million
for the third quarter of 2011, a 2.6% decrease compared to the
third quarter of 2010.
- Comparable store sales decrease of 5.7%
for the third quarter of 2011, and 4.4% for the nine month period
then ended, as compared to the applicable prior year periods.
- Net loss of $2.8 million for the third
quarter of 2011, including an extraordinary loss of $393 thousand
related to a flood casualty from Tropical Storm Irene, compared to
net loss of $1.9 million for the third quarter of 2010.
- Adjusted EBITDA net loss for the third
quarter of 2011 of $2.0 million, compared to Adjusted EBITDA net
loss in the third quarter of 2010 of $1.4 million (See accompanying
schedule for reconciliation of non-GAAP Adjusted EBITDA to net loss
for the period).
- The opening of eleven temporary
Halloween stores in September, bringing the number of iParty
storefronts this Halloween season to 63 from 62 last year.
- Five year extension on improved
economic terms to the Company’s existing revolving credit facility,
including lower margins on borrowings and reduced reserves.
Sal Perisano, iParty’s Chairman and Chief Executive Officer,
stated, "Our third quarter results continue to reflect the effects
of a sluggish retail environment. The bottom line in the third
quarter was also impacted by a significant flood loss in our West
Lebanon, NH store caused by Tropical Storm Irene, which is
temporarily closed during repairs to the store and shopping center
that are expected to last three months. This same storm caused a
disruption in business to several stores during the week after it
hit New England."
Mr. Perisano further stated, “While we are disappointed with our
year to date sales performance, we believe we are well positioned
for Halloween, the most important part of our year. We have
adjusted the site selection for our temporary stores, which we
believe will result in stronger sales performance from our
temporary stores as compared to last year despite the sluggish
retail environment. In addition, with eleven temporary stores now
open and ready for business, and the West Lebanon store temporarily
closed for repairs, we have 63 storefronts open this Halloween
season, compared to 62 storefronts at this time last year.”
“Finally, we are very happy to announce the extension and
improvement of our credit facility with Wells Fargo for an
additional five years,” Mr. Perisano stated. “This facility will
provide the Company with more liquidity at a lower cost.”
Operating Results
For the third quarter of 2011, consolidated revenues were $16.5
million, a 2.6% decrease compared to $16.9 million for the third
quarter in 2010. Comparable store sales in the third quarter of
2011 decreased 5.7% compared to the year-ago period. Consolidated
gross profit margin was 34.3% for the third quarter of 2011
compared to a gross profit margin of 36.8% for the same period in
2010. Consolidated net loss for the third quarter of 2011 was $2.8
million, or $0.12 per basic and diluted share, compared to
consolidated net loss of $1.9 million, or $0.08 per basic and
diluted share, for the third quarter in 2010. On a non-GAAP basis,
net loss for the third quarter of 2011 before interest, taxes,
depreciation and amortization (“EBITDA net loss”) was $2.4
million compared to EBITDA net loss of $1.4 million for the third
quarter in 2010. 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. Adjusted EBITDA net loss, which
adjusts EBITDA net loss for the Extraordinary Item of $393,036 for
the Tropical Storm Irene flood loss, was $2.0 million. The schedule
accompanying this release provides the reconciliation of net loss
for the third quarters of 2011 and 2010, and net loss for the
nine-month periods then ended, under GAAP to a non-GAAP, EBITDA and
Adjusted EBITDA bases.
For the nine-month year-to-date period ended September 24, 2011,
consolidated revenues were $51.1 million, a 1.2% decrease compared
to $51.8 million for the first nine months of 2010. Consolidated
revenues for the first nine months of 2011 included a 4.4% decrease
in comparable store sales from the year-ago period. Consolidated
gross profit margin was 37.0% for the first nine months of 2011,
compared to 38.0% for the comparable period in 2010. For the
nine-month period, consolidated net loss was $4.3 million, or $0.18
per basic and diluted share, compared to a consolidated net loss of
$2.7 million, or $0.12 per basic and diluted share for the first
nine months of 2010. On a non-GAAP basis, EBITDA net loss was $2.9
million compared to an EBITDA net loss of $1.1 million for the
first nine months of 2010. Adjusted EBITDA net loss, which adjusts
EBITDA net loss for the Extraordinary item of $393,036 for the
Tropical Storm Irene flood loss, was $2.5 million for the first
nine months of 2011 as compared to Adjusted EBITDA net loss of $1.1
million for the same period in 2010.
iParty Corp. Extends Revolving Loan Agreement
On October 14, 2011, the Company entered into an amendment (the
“Amendment”) to its existing revolving credit facility (the
“Facility”) with Wells Fargo.
The Amendment continues the Facility in the amount of up to
$12,500,000 and extends the current maturity date of the Facility
for an additional five years from the date of signing to October
14, 2016. Prior to the Amendment, the Facility was set to mature in
July 2012. The Facility also allows iParty to increase the
revolving line of credit up to a maximum level of $15,000,000. The
amount of credit that is available from time to time under the
Facility is determined as a percentage of the value of eligible
inventory plus a percentage of the value of eligible credit card
receivables, as reduced by certain reserve amounts that may be
required by Wells Fargo.
The Amendment also includes a number of improved terms to the
Facility, including:
- Advances under the Facility will carry
interest of 0.25% over Bank Prime Rate or 2.00% over LIBOR, at
iParty’s option, compared to margins of up to 3.5% under the prior
Facility.
- Higher advance rates on eligible
inventory during part of iParty’s fiscal year.
- Reduced reserves against eligible
inventory, increasing iParty’s borrowing base.
- Increased ability to secure equipment
financing through leasing or purchase money loans.
- Potential for reduced administrative
expense based on level of outstanding loans.
- No prepayment penalty through the term
of the Facility.
The Facility also continues to provide for letters of credit and
includes an unused line fee on the unused portion of the revolving
credit line, which has been reduced under the Amendment.
The Company’s obligations under the Facility, as amended,
continue to be secured by a lien on substantially all of its and
its wholly owned subsidiary’s personal property.
About iParty Corp.
Headquartered in Dedham, Massachusetts, iParty Corp. is a party
goods retailer that operates 53 iParty retail stores in New England
and Florida and an internet site (www.iparty.com) for costume and
related goods and party planning. 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 and
available at our online store, 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. In addition to the extensive assortment of costume and
related merchandise available through iParty’s internet site our
web site focuses on increasing customer visits to our retail stores
by highlighting the ever changing store product assortment for all
occasions and seasons and featuring sales flyers, enter-to-win
contests, monthly coupons and ideas and themes offering 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.
About Wells Fargo Capital Finance
Wells Fargo Capital Finance is the trade name for certain
asset-based lending, accounts receivable and purchase order finance
services of Wells Fargo & Company and its subsidiaries, and
provides traditional asset-based lending, specialized senior
secured financing, accounts receivable financing, purchase order
financing and channel finance to companies across the United States
and Canada. Dedicated teams within Wells Fargo Capital Finance
provide financing solutions for companies in specific industries
such as retail, software publishing and high-technology, commercial
finance, staffing, government contracting and others. For more
information, visit wellsfargocapitalfinance.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. Due to the Extraordinary Item
related to the Tropical Storm Irene flood loss, the Company has
presented Adjusted EBITDA to permit comparison with the
corresponding periods of the prior year.
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. Due to the Extraordinary
Item related to the Tropical Storm Irene flood loss, the Company
has presented Adjusted EBITDA to permit comparison with the
corresponding periods of the prior year.
For the three months ended For the nine
months ended RECONCILIATION OF NON-GAAP MEASURES Sep 24, 2011 Sep
25, 2010 Sep 24, 2011 Sep 25, 2010 Net loss as reported
under GAAP $ (2,830,663) $ (1,945,873) $ (4,298,321) $ (2,663,523)
plus, Interest expense, net 89,018 70,326 238,683 208,034
plus, Depreciation and amortization 377,807 446,307 1,132,586
1,322,568 plus, Income taxes - - - - EBITDA, non-GAAP $ (2,363,838)
$ (1,429,240) $ (2,927,052) $ (1,132,921) plus,
Extraordinary item 393,036 - 393,036 - Adjusted EBITDA,
non-GAAP $ (1,970,802) $ (1,429,240) $ (2,534,016) $ (1,132,921)
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; 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; 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 25, 2010 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 24, 2011 Sep 25,
2010 Sep 24, 2011 Sep 25,
2010 Revenues $ 16,462,631 $ 16,898,251 $ 51,171,966 $
51,799,462 Operating costs: Cost of products sold and occupancy
costs 10,813,669 10,676,032 32,234,434 32,114,729 Marketing and
sales 6,329,882 6,371,234 17,426,635 16,894,562 General and
administrative 1,667,689 1,726,532 5,177,499 5,245,660
Operating loss (2,348,609) (1,875,547) (3,666,602) (2,455,489)
Interest expense, net (89,018) (70,326) (238,683) (208,034)
Loss before extraordinary loss ($2,437,627) ($1,945,873)
($3,905,285) ($2,663,523) Extraordinary loss (net of taxes)
(393,036) - (393,036) - Net loss ($2,830,663)
($1,945,873) ($4,298,321) ($2,663,523) Loss
per share: basic and diluted $ (0.12) $ (0.08) $ (0.18) $ (0.12)
Weighted-average shares outstanding: Basic and diluted
24,408,594 23,267,507 24,378,188 23,081,165
iPARTY CORP. CONSOLIDATED BALANCE SHEETS (unaudited)
Sep 24, 2011 Dec 25, 2010
ASSETS Current assets: Cash $ 74,650 $ 62,650 Restricted
cash 597,287 616,742 Accounts receivable 929,528 626,181
Inventories 21,486,972 14,950,933 Prepaid expenses and other assets
473,267 253,749 Deferred income tax asset
95,163
95,163 Total current assets 23,656,867 16,605,418
Property and equipment, net 2,907,002 3,000,798 Intangible assets,
net 700,562 934,477 Other assets 223,974 264,179 Deferred income
tax asset
476,354 476,354 Total assets
$ 27,964,759 $ 21,281,226
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable and book overdrafts $ 10,544,820 $ 4,572,147
Accrued expenses 2,475,238 2,254,049 Warrant liability - 10,000
Current portion of capital lease obligations 6,921 9,228 Borrowings
under line of credit
7,751,550 3,102,213
Total current liabilities 20,778,529 9,947,637 Long-term
liabilities: Capital lease obligations, net of current portion -
4,613
Deferred rent
1,504,226 1,517,157 Total long-term
liabilities 1,504,226 1,521,770 Commitments and
contingencies Convertible preferred stock 13,012,668
13,024,721 Common stock 24,409 24,294 Additional paid-in capital
52,940,746 52,760,302 Accumulated deficit
(60,295,819)
(55,997,498) Total stockholders' equity
5,682,004 9,811,819 Total
liabilities and stockholders' equity
$ 27,964,759
$ 21,281,226
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