Party City Announces Third Quarter 2020 Financial Results; Total Revenue for Fiscal October 2020

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  • PRTY

Total Sales of $533.8 million for Third Quarter; Brand comparable sales growth of 8.3%, highest in 9 years  
Net Income of $ 2 39 . 7 Million; Adjusted EBITDA of $49. 2 million up 187% from Third Quarter 2019
Better Than Expected Halloween and October Performance

ELMSFORD, N.Y., Nov. 09, 2020 (GLOBE NEWSWIRE) -- Party City Holdco Inc. (the Company or PRTY; NYSE:PRTY) today announced financial results for the third quarter ended September 30, 2020, as well as total revenue for fiscal October 2020.

Brad Weston, Chief Executive Officer, stated, We are very pleased with our better than expected third quarter performance, highlighted by the continued strength in our core business. Against a pandemic-impacted environment, we delivered $534 million in sales, including an 8.3% brand comparable sales increase, a stabilization in our Wholesale revenues and an almost threefold increase in Adjusted EBITDA over the prior year period.

The strides we are making to increase relevancy and elevate our customer experience across channels continue to strengthen our position of authority when it comes to celebrations. In addition, these results reflect the consumers desire and willingness to celebrate and are a testament to the agility and discipline with which we are operating the business. Mr. Weston added.

Third Quarter Summary:

  • Total revenues were $533.8 million, a decrease of 1.2% on a reported basis and a decrease of 1.6% on a constant currency basis.

  • Total Retail sales decreased 1.3% on a reported basis and 1.5% on a constant currency basis, with a brand comparable sales increase of 8.3%, offset primarily by the divestiture of 65 Canadian retail stores in October 2019 as well as the impact of 76 store closures from the company's store optimization program throughout 2019 and 2020. The total number of corporate Party City stores was 739 as of September 30, 2020 compared to 843 a year ago.

  • Brand comparable sales increased 8.3% in the third quarter due to strength in our core business particularly in the balloon, birthday, and entertaining categories.

  • North American digitally enabled sales increased 36.0% including BOPIS, curbside pickup, and delivery.

  • Net third-party Wholesale revenues decreased 0.8% or a decrease of 1.6% in constant currency, with continued improvement in independent and franchise customer trends.  

  • Total gross profit margin increased 250 basis points to 33.1% of net sales. Excluding certain items not indicative of core operating performance, gross profit margin increased 250 basis points to 34.4% of net sales mainly due to occupancy leverage, lower sales promotions, and favorable sales mix.

  • Operating expenses totaled $160.2 million or $25.0 million lower than the third quarter of 2019 (excluding the goodwill impairment charges in 2020 and 2019). Excluding certain items not indicative of core operating performance, operating expenses totaled $152.4 million, or 28.6% of revenue, a reduction of $23.6 million or 400 basis points compared to the third quarter of 2019, primarily due to lower retail operating expenses as a result of the lower store count, lower Wholesale selling expenses and the temporary benefits from cost cutting related to the pandemic.

  • Interest expense was $13.4 million during the third quarter of 2020, compared to $29.4 million during the third quarter of 2019 mainly due to $12.2 million in forgiveness of certain semi-annual interest as a result of the debt exchange refinancing transaction completed in July 2020.

  • Reported GAAP net income was $239.7 million, or $2.24 per share.

  • Adjusted net income was $11.0 million, or $0.10 per diluted share, an improvement of $0.38 per share compared to adjusted net loss of $25.7 million, or $0.28 per share, in the third quarter of 2019. (See Non-GAAP Financial Information)

  • Adjusted EBITDA was $49.2 million, versus $17.1 million during the third quarter of 2019. (See Non-GAAP Financial Information)

Fiscal October 2020 Update:

For fiscal October 2020 (for the Companys retail segment, fiscal October 2020 consisted of the five-week period ended October 31, 2020), the Company reported total revenue of $364.3 million, or 15.9% below the same period of last year. Total Retail revenue decreased approximately 16.0%. Brand comparable sales, which include Company-owned Party City stores in the U.S and North American e-commerce operations, decreased 2.9% with Halloween declines partially offset by continued strength in core categories. North American digitally enabled sales, including BOPIS, curbside pickup, and delivery increased 30.2%. The remaining decrease was due to a strategic reduction in store count versus the prior year period. During the month of October 2020, the Company operated 740 total Party City locations vs 778 in the prior year period, and 25 temporary Halloween City stores, compared to 256 in 2019.

Mr. Weston continued, Our Halloween results were ahead of our expectations, driven by strong results within décor and better than expected sales of costumes, despite the challenges of a pandemic-impacted backdrop. We are very proud of our entire Party City team who delivered an exceptional Halloween experience for our customers, despite the backdrop. We are particularly encouraged by the performance of our core categories into October, which demonstrate the strength and resiliency of our business and the traction we are seeing from our strategic initiatives, both of which bode well for our future performance.

We continue to relentlessly focus on our customers as we work to fulfill our mission of creating joy and making it easy to create unforgettable memories. We look forward to building on our progress as we close out the year in a substantially stronger competitive and financial position, concluded Mr. Weston.

Balance Sheet Highlights:

As of the end of the third quarter on September 30, 2020, the Company had $170.6 million in cash and approximately $178.5 million of availability under the ABL Facility, for total liquidity of $349.1 million.

In addition, the principal balance of debt net of cash on September 30, 2020 is $1,323 million. The principal balance of debt is used for the purpose of all leverage ratio calculations under our debt agreements. The following table shows the bridge from the balance sheet debt to the principal balance of debt:

 

 

Party City
Credit Group

 

 

Anagram
Holdings, LLC

 

 

PCHI Consolidated

 

 

 

September   30,
2020

 

 

September   30,
2020

 

 

September   30,
2020

 

 

December   31,
2019

 

 

September   30,
2019

 

Balance sheet debt, net of deferred financing costs

 

$

1,349,512

 

 

$

303,062

 

 

$

1,652,574

 

 

$

1,704,317

 

 

$

2,038,613

 

Less: Future interest payments

 

 

50,172

 

 

 

108,376

 

 

 

158,548

 

 

 

-

 

 

 

-

 

Principal balance of debt outstanding, net of deferred financing costs

 

 

1,299,340

 

 

 

194,686

 

 

 

1,494,026

 

 

 

1,704,317

 

 

 

2,038,613

 

Less: Cash

 

 

150,352

 

 

 

20,210

 

 

 

170,562

 

 

 

34,917

 

 

 

34,572

 

Principal balance of debt net of cash

 

$

1,148,988

 

 

$

174,476

 

 

$

1,323,464

 

 

$

1,669,400

 

 

$

2,004,041

 

Outlook:

The Company is providing the following fiscal Q4 2020 outlook. This outlook is subject to potential consumer and marketplace volatility due to the COVID-19 pandemic:

  • Total revenue of $675 to $695 million

  • Brand comparable sales flat to down a low single digit percentage

  • GAAP net income of $30 to $37 million

  • GAAP diluted EPS of $0.28 to $0.35

  • Adjusted EBITDA of $80 to $90 million

  • Adjusted net income of $33 to $40 million

  • Adjusted diluted EPS of $0.31 to $0.37

  • Interest expense of approximately $15 million, with cash interest payments of approximately $9 million

  • Ending corporate store count is expected to be approximately 740 stores

  • Capital expenditures of approximately $13 to $18 million in Q4 2020 and approximately $45 to $50 million for the full year

  • D&A of approximately $19 million in Q4 2020 and approximately $76 million for the full year.

  • Principal balance of debt, net of cash at end of year of approximately $1.3 billion

  • Fiscal 2020 will contain an additional, non-comparable 53 rd week in the fourth quarter. The 53rd week is expected to contribute approximately $35 million in sales, approximately $7 million in adjusted EBITDA, and approximately $0.05 in adjusted diluted EPS.

Conference Call Information :

A conference call to discuss the third quarter 2020 financial results is scheduled for today, November 9, 2020, at 8:00 a.m. Eastern Time, and the Company has posted certain supplemental presentation materials to its investor relations website. Investors and analysts interested in participating in the call are invited to dial 866-270-1533 (U.S. domestic) or 412-317-0797 (international) approximately 10 minutes prior to the start of the call. The conference call will also be webcast at http://investor.partycity.com/. To listen to the live call, please go to the website at least 15 minutes early to register and download any necessary audio software. The webcast will be accessible for one year after the call.

Website Information

We routinely post important information for investors on the Investor Relations section of our website, http://investor.partycity.com/. We intend to use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Non-GAAP Information

This press release includes non-GAAP measures including Adjusted EBITDA and Adjusted Net Income/Loss and Adjusted Earnings per Share. We present these non-GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by eliminating items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA: (i) as a factor in determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because our credit facilities use Adjusted EBITDA to measure compliance with certain covenants. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in tables accompanying this release. We also evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period exchange rates and comparing these adjusted amounts to our current period reported results. We also provide free cash flow, defined as Adjusted EBITDA less capital expenditures, and net debt leverage, which is calculated by adding Loans and Notes Payable, Current Portion of Long Term Obligations and Long Term Obligations, Excluding Current Portion, subtracting Cash and Cash Equivalents and dividing by Adjusted EBITDA for the trailing twelve month period. Adjusted Earnings per Share is calculated by dividing Adjusted Net Income by the Weighted Average Number of Common Shares-Diluted. We believe providing these non-GAAP measures provides valuable supplemental information regarding our results of operations and leverage, consistent with how we evaluate our performance. In evaluating these non-GAAP financial measures, investors should be aware that in the future the Company may incur expenses or be involved in transactions that are the same as or similar to some of the adjustments in this presentation. The Company's presentation of non-GAAP financial measures should not be construed to imply that its future results will be unaffected by any such adjustments. The Company has provided this information as a means to evaluate the results of its core operations. Other companies in the Company's industry may calculate these items differently than it does. Each of these measures is not a measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

Forward-Looking Statements

This press release and the commentary in the conference call to be held today each contains forward-looking statements. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance, including Party Citys expectations regarding its ability to maximize the potential of its plans to open and close stores, plans to invest capital expenditures, and anticipated interest expense and depreciation and amortization expense for fiscal year 2020. The forward-looking statements contained in this press release are based on management's good-faith belief and reasonable judgment based on current information, and these statements are qualified by important risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those forecasted or indicated by such forward-looking statements. These risks and uncertainties include: potential risks and uncertainties relating to the ultimate geographic spread of COVID-19; the severity of the COVID-19 pandemic; the duration of the COVID-19 pandemic; actions that may be taken by governmental authorities to contain the COVID-19 pandemic or to treat its impact; the potential negative impacts of COVID-19 on the global economy and foreign sourcing; the impacts of COVID-19 on our financial condition and business operation; our ability to compete effectively in a competitive industry; fluctuations in commodity prices; our ability to appropriately respond to changing merchandise trends and consumer preferences; successful implementation of our store growth strategy; decreases in our Halloween sales; the impact of helium shortages on our financial performance; disruption to the transportation system or increases in transportation costs; product recalls or product liability; economic slowdown affecting consumer spending and general economic conditions, including as a result of the COVID-19 pandemic; loss or actions of third party vendors and loss of the right to use licensed material; disruptions at our manufacturing facilities; and the additional risks and uncertainties set forth in Risk Factors in Party Citys Annual Report on Form 10-K for the year ended December 31, 2019 and in subsequent reports filed with or furnished to the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward looking statements. Except as may be required by any applicable laws, Party City assumes no obligation to publicly update or revise such forward-looking statements, which are made as of the date hereof or the earlier date specified herein, whether as a result of new information, future developments or otherwise.

About Party City

Party City Holdco Inc. is the leading party goods company by revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally by revenue. The Company is a popular one-stop shopping destination for party supplies, balloons, and costumes. In addition to being a great retail brand, the Company is a global, world-class organization that combines state-of-the-art manufacturing and sourcing operations, and sophisticated wholesale operations complemented by a multi-channel retailing strategy and e-commerce retail operations. The Company is the leading player in its category, vertically integrated and unique in its breadth and depth. The Company designs, manufactures, sources and distributes party goods, including paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery throughout the world. The Companys retail operations include approximately 830 specialty retail party supply stores (including franchise stores) throughout North America operating under the names Party City and Halloween City, and e-commerce websites, principally through the domain name PartyCity.com.



PARTY CITY HOLDCO INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data , unaudited )

 

 

September   30,
2020

 

 

December   31,
2019

 

 

 

(Note 2)
(Unaudited)

 

 

(Note 2)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

170,562

 

 

$

34,917

 

Accounts receivable, net

 

 

149,825

 

 

 

149,109

 

Inventories, net

 

 

630,357

 

 

 

658,419

 

Prepaid expenses and other current assets

 

 

112,038

 

 

 

51,685

 

Total current assets

 

 

1,062,782

 

 

 

894,130

 

Property, plant and equipment, net

 

 

206,447

 

 

 

243,572

 

Operating lease asset

 

 

741,524

 

 

 

802,634

 

Goodwill

 

 

669,564

 

 

 

1,072,330

 

Trade names

 

 

383,666

 

 

 

530,320

 

Other intangible assets, net

 

 

34,505

 

 

 

45,060

 

Other assets, net

 

 

9,521

 

 

 

7,273

 

Total assets

 

$

3,108,009

 

 

$

3,595,319

 

LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Loans and notes payable

 

$

303,894

 

 

$

128,806

 

Accounts payable

 

 

179,938

 

 

 

152,300

 

Accrued expenses

 

 

202,636

 

 

 

150,921

 

Current portion of operating lease liability

 

 

194,476

 

 

 

155,471

 

Income taxes payable

 

 

 

 

 

35,905

 

Current portion of long-term obligations

 

 

14,342

 

 

 

71,524

 

Total current liabilities

 

 

895,286

 

 

 

694,927

 

Long-term obligations, excluding current portion

 

 

1,334,338

 

 

 

1,503,987

 

Long-term portion of operating lease liability

 

 

677,183

 

 

 

720,735

 

Deferred income tax liabilities, net

 

 

49,508

 

 

 

126,081

 

Other long-term liabilities

 

 

15,559

 

 

 

16,517

 

Total liabilities

 

 

2,971,874

 

 

 

3,062,247

 

Redeemable securities

 

 

 

 

 

3,351

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders equity:

 

 

 

 

 

 

 

 

Common stock (110,573,555 and 94,461,576 shares outstanding and 121,848,074 and 121,662,540 shares issued at September 30, 2020 and December 31, 2019, respectively)

 

 

1,371

 

 

 

1,211

 

Additional paid-in capital

 

 

970,145

 

 

 

928,573

 

Accumulated deficit

 

 

(469,040

)

 

 

(37,219

)

Accumulated other comprehensive loss

 

 

(38,907

)

 

 

(35,734

)

Total Party City Holdco Inc. stockholders equity before common stock held in treasury

 

 

463,569

 

 

 

856,831

 

Less: Common stock held in treasury, at cost (11,274,519 and 27,200,964 shares at September 30, 2020 and December 31, 2019, respectively)

 

 

(327,170

)

 

 

(327,086

)

Total Party City Holdco Inc. stockholders equity

 

 

136,399

 

 

 

529,745

 

Noncontrolling interests

 

 

(264

)

 

 

(24

)

          Total stockholders equity

 

 

136,135

 

 

 

529,721

 

     Total liabilities, redeemable securities and stockholders equity

 

$

3,108,009

 

 

$

3,595,319

 

 

 

PARTY CITY HOLDCO INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except share and per share data, unaudited)

 

 

Three Months Ended
September
  30,

 

 

Nine Months Ended
September
  30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

532,053

 

 

$

538,345

 

 

$

1,198,160

 

 

$

1,611,149

 

Royalties and franchise fees

 

 

1,722

 

 

 

1,886

 

 

 

4,349

 

 

 

6,089

 

Total revenues

 

 

533,775

 

 

 

540,231

 

 

 

1,202,509

 

 

 

1,617,238

 

Cost of sales

 

 

355,923

 

 

 

373,413

 

 

 

890,587

 

 

 

1,065,511

 

Wholesale selling expenses

 

 

11,950

 

 

 

16,084

 

 

 

37,115

 

 

 

50,929

 

Retail operating expenses

 

 

97,100

 

 

 

111,595

 

 

 

250,502

 

 

 

302,756

 

Franchise expenses

 

 

2,795

 

 

 

3,274

 

 

 

9,225

 

 

 

9,813

 

General and administrative expenses

 

 

42,191

 

 

 

43,062

 

 

 

162,118

 

 

 

126,497

 

Art and development costs

 

 

4,257

 

 

 

5,927

 

 

 

13,095

 

 

 

17,568

 

Development stage expenses

 

 

 

 

 

2,728

 

 

 

2,932

 

 

 

7,966

 

Gain on sale/leaseback transaction

 

 

 

 

 

 

 

 

 

 

 

(58,381

)

Store impairment and restructuring charges

 

 

1,926

 

 

 

2,574

 

 

 

20,818

 

 

 

25,817

 

Goodwill, intangibles and long-lived assets impairment

 

 

44,732

 

 

 

259,100

 

 

 

581,380

 

 

 

259,100

 

Total expenses

 

 

560,874

 

 

 

817,757

 

 

 

1,967,772

 

 

 

1,807,576

 

Loss from operations

 

 

(27,099

)

 

 

(277,526

)

 

 

(765,263

)

 

 

(190,338

)

Interest expense, net

 

 

13,422

 

 

 

29,424

 

 

 

63,954

 

 

 

88,857

 

Other (income) expense, net

 

 

(2,873

)

 

 

2,047

 

 

 

4,287

 

 

 

6,643

 

(Gain) on debt refinancing

 

 

(273,149

)

 

 

 

 

 

(273,149

)

 

 

 

Income (loss) before income taxes

 

 

235,501

 

 

 

(308,997

)

 

 

(560,355

)

 

 

(285,838

)

Income tax (benefit)

 

 

(4,164

)

 

 

(27,252

)

 

 

(128,293

)

 

 

(21,809

)

Net income (loss)

 

 

239,665

 

 

 

(281,745

)

 

 

(432,062

)

 

 

(264,029

)

Less: Net (loss) attributable to noncontrolling interests

 

 

(42

)

 

 

(212

)

 

 

(241

)

 

 

(352

)

Net income (loss) attributable to common shareholders of Party City Holdco Inc.

 

$

239,707

 

 

$

(281,533

)

 

$

(431,821

)

 

$

(263,677

)

Net income (loss) per share attributable to common shareholders of Party City Holdco Inc.Basic

 

$

2.25

 

 

$

(3.02

)

 

$

(4.41

)

 

$

(2.83

)

Net income (loss) per share attributable to common shareholders of Party City Holdco Inc.Diluted

 

$

2.24

 

 

$

(3.02

)

 

$

(4.41

)

 

$

(2.83

)

Weighted-average number of common shares-Basic

 

 

106,709,307

 

 

 

93,346,448

 

 

 

97,872,174

 

 

 

93,271,392

 

Weighted-average number of common shares-Diluted

 

 

106,875,631

 

 

 

93,346,448

 

 

 

97,872,174

 

 

 

93,271,392

 

Dividends declared per share

 

$

 

 

$

 

 

$

 

 

$

 

Comprehensive income (loss)

 

$

244,607

 

 

$

(288,573

)

 

$

(435,235

)

 

$

(266,883

)

Less: Comprehensive (loss) attributable to noncontrolling interests

 

 

(42

)

 

 

(213

)

 

 

(241

)

 

 

(364

)

Comprehensive income (loss) attributable to common shareholders of Party City Holdco Inc.

 

$

244,649

 

 

$

(288,360

)

 

$

(434,994

)

 

$

(266,519

)

 

 

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA
(In thousands , unaudited )

 

 

Three Months Ended
September
  30,

 

 

Nine Months Ended
September
  30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

239,665

 

 

$

(281,745

)

 

$

(432,062

)

 

$

(264,029

)

Interest expense, net

 

 

13,422

 

 

 

29,424

 

 

 

63,954

 

 

 

88,857

 

Income tax (benefit)

 

 

(4,164

)

 

 

(27,252

)

 

 

(128,293

)

 

 

(21,809

)

Depreciation and amortization

 

 

17,278

 

 

 

19,155

 

 

 

57,796

 

 

 

62,380

 

EBITDA

 

 

266,201

 

 

 

(260,418

)

 

 

(438,605

)

 

 

(134,601

)

Non-cash purchase accounting adjustments

 

 

 

 

 

 

 

 

 

 

 

2,757

 

Store impairment and restructuring charges (a)

 

 

6,763

 

 

 

8,694

 

 

 

36,285

 

 

 

54,960

 

Other restructuring, retention and severance (b)

 

 

2,957

 

 

 

(73

)

 

 

11,701

 

 

 

5,248

 

Goodwill, intangibles and long-lived assets impairment (c)

 

 

44,732

 

 

 

259,100

 

 

 

581,380

 

 

 

259,100

 

Deferred rent (d)

 

 

254

 

 

 

446

 

 

 

(2,618

)

 

 

(1,042

)

Closed store expense (e)

 

 

1,247

 

 

 

2,326

 

 

 

2,882

 

 

 

3,424

 

Foreign currency losses/(gains), net

 

 

(3,312

)

 

 

646

 

 

 

955

 

 

 

486

 

Stock option expense  time  based (f)

 

 

111

 

 

 

409

 

 

 

671

 

 

 

1,150

 

Stock option expense  performance  based (n)

 

 

 

 

 

 

 

 

7,847

 

 

 

 

Restricted stock unit and restricted cash awards expense performance-based

 

 

510

 

 

 

 

 

 

510

 

 

 

 

Non-employee equity-based compensation (g)

 

 

 

 

 

128

 

 

 

1,033

 

 

 

386

 

Undistributed income (loss) in equity method investments

 

 

(59

)

 

 

7

 

 

 

356

 

 

 

(195

)

Corporate development expenses (h)

 

 

581

 

 

 

4,588

 

 

 

6,193

 

 

 

11,782

 

Restricted stock units time-based (i)

 

 

429

 

 

 

610

 

 

 

1,568

 

 

 

1,543

 

Restricted stock unit expense performance-based (m)

 

 

 

 

 

560

 

 

 

 

 

 

1,036

 

Non-recurring legal settlements/costs

 

 

661

 

 

 

194

 

 

 

7,170

 

 

 

1,795

 

(Gain) on debt refinancing (p)

 

 

(273,149

)

 

 

 

 

 

(273,149

)

 

 

 

Gain on sale/leaseback transaction (o)

 

 

 

 

 

 

 

 

 

 

 

(58,381

)

COVID - 19 (l)

 

 

679

 

 

 

 

 

 

71,059

 

 

 

 

Other

 

 

546

 

 

 

(75

)

 

 

3,034

 

 

 

217

 

Adjusted EBITDA

 

$

49,151

 

 

$

17,142

 

 

$

18,272

 

 

$

149,665

 

 

 

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued
(In thousands, unaudited)

 

 

 

 

 

Three Months Ended September 30, 2020 EBITDA Adjustments

 

 

 

 

 

 

September 30, 2020
GAAP
Basis (as
reported)

 

 

Goodwill, intangibles and long-lived assets impairment (c)

 

 

Store
impairment
and
restructuring
charges (a)

 

 

Gain on debt refinancing (p)

 

Corporate
development
expenses (h)

 

 

Legal

 

 

Stock
Option

Expense/Non-
Employee  
Equity
Compensation/
Restricted
stock units
time-
based

(f)(g)( i )(n)

 

 

Deferred
Rent
(d)

 

 

Other
restructuring,
retention
and

severance
(b)

 

 

Closed
store
expense
(e)

 

 

COVID-
19
(l)

 

 

Foreign
currency
losses

 

Other

 

 

September 30,
2020
Non-GAAP
basis

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

532,053

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

532,053

Royalties and franchise fees

 

 

1,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,722

Total revenues

 

 

533,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

533,775

Cost of sales

 

 

355,923

 

 

 

 

 

 

 

(4,837

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(80

)

 

 

 

 

 

 

 

 

 

 

(1,266

)

 

 

 

 

 

(469

)

 

 

349,271

Wholesale selling expenses

 

 

11,950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,950

Retail operating expenses

 

 

97,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(224

)

 

 

 

 

 

 

(1,225

)

 

 

(1,745

)

 

 

 

 

 

 

 

 

 

93,906

Franchise expenses

 

 

2,795

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,795

General and administrative expenses

 

 

42,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(370

)

 

 

(661

)

 

 

(1,050

)

 

 

50

 

 

 

(2,957

)

 

 

(22

)

 

 

2,332

 

 

 

 

 

 

 

 

 

 

39,513

Art and development costs

 

 

4,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,257

Store impairment and restructuring charges

 

 

1,926

 

 

 

 

 

 

 

(1,926

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill, intangibles and long-lived assets impairment

 

 

44,732

 

 

 

(44,732

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses

 

 

560,874

 

 

 

(44,732

)

 

 

(6,763

)

 

 

 

 

(370

)

 

 

(661

)

 

 

(1,050

)

 

 

(254

)

 

 

(2,957

)

 

 

(1,247

)

 

 

(679

)

 

 

 

 

(469

)

 

 

501,692

(Loss) from operations

 

 

(27,099

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,083

Interest expense, net

 

 

13,422

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,422

Other (income) expense, net

 

 

(2,873

)

 

 

 

 

 

 

 

 

 

 

 

 

 

(211

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,312

 

 

(18

)

 

 

210

(Gain) on debt refinancing

 

 

(273,149

)

 

 

 

 

 

 

 

 

 

 

273,149

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

235,501

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,451

Interest expense, net

 

 

13,422

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,422

Depreciation and amortization

 

 

17,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,278

EBITDA

 

 

266,201

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49,151

Adjustments to EBITDA

 

 

(217,050

)

 

 

(44,732

)

 

 

(6,763

)

 

 

273,149

 

 

(581

)

 

 

(661

)

 

 

(1,050

)

 

 

(254

)

 

 

(2,957

)

 

 

(1,247

)

 

 

(679

)

 

 

3,312

 

 

(487

)

 

 

Adjusted EBITDA

 

$

49,151

 

 

$

(44,732

)

 

$

(6,763

)

 

$

273,149

 

$

(581

)

 

$

(661

)

 

$

(1,050

)

 

$

(254

)

 

$

(2,957

)

 

$

(1,247

)

 

$

(679

)

 

$

3,312

 

$

(487

)

 

$

49,151

 

 

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued
(In thousands, unaudited)

 

 

 

 

 

 

Three Months Ended September 30, 2019 EBITDA Adjustments

 

 

 

 

 

 

September 30,
2019

GAAP
Basis
(as

reported)

 

 

Goodwill, intangibles and
long-
lived assets impairment (c)

 

 

Store
impairment
and
restructuring
charges
(a)

 

 

Gain
on sale/
leaseback
transaction

(o)

 

Corporate
development
expenses
(h)

 

 

Legal

 

 

Stock
Option

Expense/Non-
Employee  
Equity
Compensation/
Restricted
stock
units

time-
based

(f)(g)( i )(m)

 

 

Deferred
Rent
(d)

 

 

Other
restructuring,
retention
and

severance
(b)

 

Closed
store
expense
(e)

 

 

Foreign
currency
gains

 

 

Other

 

September 30,
2019
Non-GAAP
basis

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

538,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

538,345

 

Royalties and franchise fees

 

 

1,886

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,886

 

Total revenues

 

 

540,231

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

540,231

 

Cost of sales

 

 

373,413

 

 

 

 

 

 

 

(6,120

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(656

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

366,637

 

Wholesale selling expenses

 

 

16,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,084

 

Retail operating expenses

 

 

111,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,240

)

 

 

 

 

 

 

 

 

 

109,355

 

Franchise expenses

 

 

3,274

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,274

 

General and administrative expenses

 

 

43,062

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(194

)

 

 

(1,707

)

 

 

210

 

 

 

73

 

 

(86

)

 

 

 

 

 

 

 

 

 

41,358

 

Art and development costs

 

 

5,927

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,927

 

Development stage expenses

 

 

2,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,728

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Store impairment and restructuring charges

 

 

2,574

 

 

 

 

 

 

 

(2,574

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill, intangibles and long-lived assets impairment

 

 

259,100

 

 

 

(259,100

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses

 

 

817,757

 

 

 

(259,100

)

 

 

(8,694

)

 

 

 

 

(2,728

)

 

 

(194

)

 

 

(1,707

)

 

 

(446

)

 

 

73

 

 

(2,326

)

 

 

 

 

 

 

 

542,635

 

Income from operations

 

 

(277,526

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,404

)

Interest expense, net

 

 

29,424

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,424

 

Other expense, net

 

 

2,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,860

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(646

)

 

 

68

 

 

(391

)

Income before income taxes

 

 

(308,997

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,437

)

Interest expense, net

 

 

29,424

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,424

 

Depreciation and amortization

 

 

19,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,155

 

EBITDA

 

 

(260,418

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,142

 

Adjustments to EBITDA

 

 

277,560

 

 

 

(259,100

)

 

 

(8,694

)

 

 

 

 

(4,588

)

 

 

(194

)

 

 

(1,707

)

 

 

(446

)

 

 

73

 

 

(2,326

)

 

 

(646

)

 

 

68

 

 

 

Adjusted EBITDA

 

$

17,142

 

 

$

(259,100

)

 

$

(8,694

)

 

$

 

$

(4,588

)

 

$

(194

)

 

$

(1,707

)

 

$

(446

)

 

$

73

 

$

(2,326

)

 

$

(646

)

 

$

68

 

$

17,142

 

 

 

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued
(In thousands, unaudited)

 

 

 

 

 

 

Nine Months Ended September 30, 2020 EBITDA Adjustments

 

 

 

 

 

 

 

September 30,
2020

GAAP
Basis
(as

reported)

 

 

Goodwill, intangibles and
long-
lived assets impairment (c)

 

 

Store
impairment
and
restructuring
charges
(a)

 

 

Gain on debt refinancing (p)

 

Corporate
development
expenses
(h)

 

 

Legal

 

 

Stock
Option

Expense/Non-
Employee  
Equity
Compensation/
Restricted
stock
units

(f)(g)( i )(n)

 

 

Deferred
Rent
(d)

 

 

Other
restructuring,
retention
and

severance
(b)

 

 

Closed
store
expense (e)

 

 

COVID-
19
(l)
Foreign
currency
losses Other September 30,
2020
Non-
GAAP

basis Revenues: Net sales $1,198,160 $1,198,160 Royalties and franchise fees 4,349 4,349 Total revenues 1,202,509 1,202,509 Cost of sales 890,587 (15,467) (214) (4,437) (42,446) (898) 827,125 Wholesale selling expenses 37,115 (1,840) (623) 34,652 Retail operating expenses 250,502 2,685 (2,733) (16,312) 234,142 Franchise expenses 9,225 (672) 8,553 General and administrative expenses 162,118 (570) (7,170) (10,596) 147 (7,264) (149) (11,006) 125,510 Art and development costs 13,095 13,095 Development stage expenses 2,932 (2,932) — (Gain) on sale/leaseback transaction — — Store impairment and restructuring charges 20,818 (20,818) — Goodwill, intangibles and long-lived assets impairment 581,380 (581,380) — Total expense 1,967,772 (581,380) (36,285) — (5,342) (7,170) (10,596) 2,618 (11,701) (2,882) (71,059) — (898) 1,243,077 (Loss) from operations (765,263) (40,568)Interest expense, net 63,954 63,954 Other expense, net 4,287 (851) (1,033) (955) (2,492) (1,044)(Gain) on debt refinancing (273,149) 273,149 — (Loss) before income taxes (560,355) (103,478)Interest expense, net 63,954 63,954 Depreciation and amortization 57,796 57,796 EBITDA (438,605) 18,272 Adjustments to EBITDA 456,877 (581,380) (36,285) 273,149 (6,193) (7,170) (11,629) 2,618 (11,701) (2,882) (71,059) (955) (3,390) — Adjusted EBITDA $18,272 $(581,380) $(36,285) $273,149 $(6,193) $(7,170) $(11,629) $2,618 $(11,701) $(2,882) $(71,059) $(955) $(3,390) $18,272

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued
(In thousands, unaudited)

Nine Months Ended September 30, 2019 EBITDA Adjustments

September 30,
2019

GAAP
Basis (as
reported)

Goodwill, intangibles
and long-
lived
assets impairment
(c)

Store
impairment
and
restructuring
charges
(a)

Gain on sale
/leaseback transaction

(o)

Corporate
development
expenses
(h)

Legal

Stock
Option

Expense/Non-
Employee
Equity
Compensation/
Restricted
stock
units

(f)(g)(i)(m)

Deferred
Rent
(d)

Other
restructuring,
retention
and

severance
(b)

Closed
store
expense (e)

Non-Cash
Purchase
Accounting
Adjustments

Foreign
currency
gains

Other

September 30,
2019
Non-
GAAP

basis

Revenues:

Net sales

$

1,611,149

$

1,611,149

Royalties and franchise fees

6,089

6,089

Total revenues

1,617,238

1,617,238

Cost of sales

1,065,511

(29,143

)

831

1,037,199

Wholesale selling expenses

50,929

<