iParty Corp. Reports Fiscal 2006 Financial Results

Business Wire, Feb 27, 2007

DEDHAM, Mass. -- iParty Corp. (AMEX: IPT - news), a party goods retailer that operates 50 iParty retail stores, today reported financial results for its fourth quarter and fiscal year 2006, which ended on December 30, 2006. The Company's accounting cycle resulted in a 13-week fourth quarter and 52-week year in fiscal 2006, compared to a 14-week fourth quarter and 53-week year in fiscal 2005.

For the 13-week quarter, consolidated revenues were $29.1 million, a 3.8% increase compared to $28.0 million for 14-week quarter in 2005. On a comparable 13-week quarter basis for both fiscal 2006 and fiscal 2005, consolidated revenues increased 9.9% which included a 5.8% increase in comparable store sales. Consolidated gross profit margin was 47.5% for the quarter compared to a margin of 47.7% in the year-ago quarter. Consolidated net income for the quarter was $3.9 million, or $0.10 per share, compared to consolidated net income of $3.9 million, or $0.10 per share, for the fourth quarter in 2005. On a non-GAAP basis, income for the quarter before interest, taxes, depreciation and amortization ("EBITDA") was $4.5 million compared to EBITDA of $4.3 million for the fourth quarter in 2005. 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 fourth quarters of 2006 and 2005 under GAAP to a non-GAAP, EBITDA basis.

For the 52-week fiscal year, consolidated revenues were $78.5 million, an 8.2% increase compared to $72.5 million for the 53-week fiscal year of 2005. On a comparable 52-week fiscal year basis for both fiscal 2006 and fiscal 2005, consolidated revenues increased 10.3% which included a 3.8% increase in comparable store sales. Consolidated gross profit margin was 42.7% for fiscal 2006 compared to 42.9% for fiscal 2005. For fiscal 2006, consolidated net income was $0.4 million, or $0.01 per share, compared to consolidated net loss of $0.3 million, or $0.01 per share, for fiscal 2005. On a non-GAAP basis, EBITDA for the fiscal year was $2.5 million compared to an EBITDA of $1.4 million for fiscal 2005. EBITDA is calculated as net income, as reported under GAAP, plus net interest expense, depreciation and amortization and income taxes. The schedule accompanying this release provides the reconciliation of net income for fiscal 2006 and net loss for fiscal 2005 under GAAP to a non-GAAP, EBITDA basis.

Sal Perisano, Chairman and Chief Executive Officer of iParty Corp., commented, "We successfully met the various opportunities and challenges that we encountered during 2006. I am pleased to report that we posted a $375,000 profit for the year and that, for the year, we realized a $2.5 million EBITDA, which is an 84.0% increase over 2005's EBITDA of $1.4 million. We made significant progress in our goal of increasing our comparable store sales by achieving a 3.8% increase for the year and a 6.2% increase in the last six months. Additionally, we were able to better leverage our costs and were able to realize improvements in both marketing and sales expense and general and administrative expense as a percentage of sales in 2006."

Mr. Perisano further commented, "For 2007, our plan is to continue to increase our comparable store sales growth, improve our gross margins and continue to better leverage our overall cost structure. At this time, we have no plans to open or acquire any new stores in 2007, unless we come across or are presented with strategic opportunities."

About iParty Corp.

Headquartered in Dedham, Massachusetts, iParty Corp. (AMEX: IPT - news) 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

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.