Party City Earnings 2020-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

prty-10q_20200331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37344

Party City Holdco Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		46-0539758
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

80 Grasslands Road Elmsford, NY		10523
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code:

(914) 345-2020

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, Par Value: $0.01/share

PRTY

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 31, 2020, 94,491,352 shares of the Registrant’s common stock were outstanding.

EXPLANATORY NOTE

On May 8, 2020, Party City Holdco Inc. (the “Company” or “Party City Holdco”) filed a Current Report on Form 8-K with the U.S. Securities and Exchange Commission (the “SEC”) indicating its reliance on the SEC’s March 25, 2020 Order (Release No. 34-88465) (the “Order”). The Order allows for the delay of certain filings required under the Securities and Exchange Act of 1934, as amended.

The Company filed the Form 8-K indicating its intension to rely on the Order permitting extensions in filings due to circumstances related to the novel coronavirus (“COVID-19”) pandemic. As stated in the Form 8-K, the Company’s operations and business have experienced disruptions due to the unprecedented conditions surrounding the spread of COVID-19 throughout North America. In particular, COVID-19 and measures implemented to reduce the spread of the virus have limited access to the Company’s facilities and disrupted its normal interactions with its accounting personnel, legal advisors, auditors and others involved in the preparation of the Quarterly Report. Due to the factors listed above, the Company required additional time to finalize its Quarterly Report on Form 10-Q as of and for the quarter ended March 31, 2020, (the “Quarterly Report”) by the original deadline of May 13, 2020.

In light of the impact of the factors described above, the Company was unable to compile and review certain information required in order to permit it to timely file the Quarterly Report by May 13, 2020, the original filing deadline, without unreasonable effort or expense. The Company relied on the Order in furnishing the Form 8-K by the original filing deadline of the Quarterly Report.

PARTY CITY HOLDCO INC.

Form 10-Q

March 31, 2020

TABLE OF CONTENTS

		Page

PART I

Item 1. Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets at March 31, 2020 and December 31, 2019		4

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months ended March 31, 2020 and March 31, 2019		5

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months ended March 31, 2020 and March 31, 2019		6

Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2020 and March 31, 2019		7

Notes to Condensed Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21

Item 3. Quantitative and Qualitative Disclosures about Market Risk		35

Item 4. Controls and Procedures		35

PART II

Item 1. Legal Proceedings		36

Item 1A. Risk Factors		36

Item 5. Other Information		37

Item 6. Exhibits		38

Signature		39

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	March 31, 2020			December 31, 2019
	(Note 2) (Unaudited)			(Note 2)
ASSETS
Current assets:
Cash and cash equivalents	$	194,433		$	34,917
Accounts receivable, net		116,223			149,109
Inventories, net		629,875			658,419
Prepaid expenses and other current assets		76,698			51,685
Total current assets		1,017,229			894,130
Property, plant and equipment, net		235,577			243,572
Operating lease asset		773,775			802,634
Goodwill		665,129			1,072,330
Trade names		394,221			530,320
Other intangible assets, net		41,960			45,060
Other assets, net		6,904			7,273
Total assets	$	3,134,795		$	3,595,319
LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	381,422		$	128,806
Accounts payable		96,383			152,300
Accrued expenses		154,847			150,921
Current portion of operating lease liability		153,614			155,471
Income taxes payable		—			35,905
Current portion of long-term obligations		98,588			71,524
Total current liabilities		884,854			694,927
Long-term obligations, excluding current portion		1,474,854			1,503,987
Long-term portion of operating lease liability		707,734			720,735
Deferred income tax liabilities, net		70,943			126,081
Other long-term liabilities		16,036			16,517
Total liabilities		3,154,421			3,062,247
Redeemable securities		—			3,351
Commitments and contingencies
Stockholders’ equity:
Common stock (94,491,352 and 94,461,576 shares outstanding and 121,708,422 and 121,662,540 shares issued at March 31, 2020 and December 31, 2019, respectively)		1,211			1,211
Additional paid-in capital		933,174			928,573
Retained deficit		(578,732	)		(37,219	)
Accumulated other comprehensive loss		(47,947	)		(35,734	)
Total Party City Holdco Inc. stockholders’ equity before common stock held in treasury		307,706			856,831
Less: Common stock held in treasury, at cost (27,217,070 and 27,200,964 shares at March 31, 2020 and December 31, 2019, respectively)		(327,170	)		(327,086	)
Total Party City Holdco Inc. stockholders’ equity		(19,464	)		529,745
Noncontrolling interests		(162	)		(24	)
Total stockholders’ equity		(19,626	)		529,721
Total liabilities, redeemable securities and stockholders’ equity	$	3,134,795		$	3,595,319

See accompanying notes to unaudited condensed consolidated financial statements.

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

	Three Months Ended March 31,
	2020			2019
Revenues:
Net sales	$	412,461		$	511,102
Royalties and franchise fees		1,582			2,014
Total revenues		414,043			513,116
Cost of sales		296,757			339,042
Wholesale selling expenses		15,458			17,961
Retail operating expenses		88,166			95,018
Franchise expenses		3,309			3,303
General and administrative expenses		59,996			41,925
Art and development costs		5,322			5,929
Development stage expenses		2,029			2,226
Store impairment and restructuring charges		17,728			18,009
Goodwill and intangibles impairment		536,648			—
Total expenses		1,025,413			523,413
Loss from operations		(611,370	)		(10,297	)
Interest expense, net		25,120			29,257
Other expense, net		5,676			1,254
Loss before income taxes		(642,166	)		(40,808	)
Income tax benefit		(100,498	)		(10,519	)
Net loss		(541,668	)		(30,289	)
Less: Net loss attributable to noncontrolling interests		(155	)		(71	)
Net loss attributable to common shareholders of Party City Holdco Inc.	$	(541,513	)	$	(30,218	)
Net loss per share attributable to common shareholders of Party City Holdco Inc.–Basic	$	(5.80	)	$	(0.32	)
Net loss per share attributable to common shareholders of Party City Holdco Inc.–Diluted	$	(5.80	)	$	(0.32	)
Weighted-average number of common shares-Basic		93,395,609			93,174,553
Weighted-average number of common shares-Diluted		93,395,609			93,174,553
Dividends declared per share	$	—		$	—
Comprehensive loss	$	(553,881	)	$	(26,637	)
Less: Comprehensive loss attributable to noncontrolling interests		(155	)		(62	)
Comprehensive loss attributable to common shareholders of Party City Holdco Inc.	$	(553,726	)	$	(26,575	)

See accompanying notes to unaudited condensed consolidated financial statements.

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

	Common Stock		Additional Paid-in Capital		Retained Deficit			Accumulated Other Comprehensive Loss			Total Party City Holdco Inc. Stockholders’ Equity Before Common Stock Held In Treasury			Common Stock Held In Treasury			Total Party City Holdco Inc. Stockholders’ Equity			Non- Controlling Interests			Total Stockholders’ Equity
Balance at December 31, 2019	$	1,211	$	928,573	$	(37,219	)	$	(35,734	)	$	856,831		$	(327,086	)	$	529,745		$	(24	)	$	529,721
Net loss		—		—		(541,513	)		—			(541,513	)		—			(541,513	)		(155	)		(541,668	)
Stock option expense		—		354		—			—			354			—			354			—			354
Restricted stock units – time – based		—		621		—			—			621			—			621			—			621
Director – non-cash compensation		—		75		—			—			75			—			75			—			75
Warrant expense (see Note 19 – Kazzam, LLC)		—		1,033		—			—			1,033			—			1,033			—			1,033
Acquired non-controlling interest		—		2,518		—			—			2,518			—			2,518			17			2,535
Treasury Stock purchases		—		—		—			—			—			(84	)		(84	)		—			(84	)
Foreign currency adjustments		—		—		—			(12,201	)		(12,201	)		—			(12,201	)		—			(12,201	)
Impact of foreign exchange contracts, net		—		—		—			(12	)		(12	)		—			(12	)		—			(12	)
Balance at March 31, 2020	$	1,211	$	933,174	$	(578,732	)	$	(47,947	)	$	307,706		$	(327,170	)	$	(19,464	)	$	(162	)	$	(19,626	)

	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			Total Party City Holdco Inc. Stockholders’ Equity Before Common Stock Held In Treasury			Common Stock Held In Treasury			Total Party City Holdco Inc. Stockholders’ Equity			Non- Controlling Interests			Total Stockholders’ Equity
Balance at December 31, 2018	$	1,208	$	922,476	$	495,777		$	(49,201	)	$	1,370,260		$	(326,930	)	$	1,043,330		$	291		$	1,043,621
Cumulative effect of change in accounting principle, net (see Note 2)		—		662		(503	)		—			159			—			159			—			159
Balance at December 31, 2018, as adjusted	$	1,208	$	923,138	$	495,274		$	(49,201	)	$	1,370,419		$	(326,930	)	$	1,043,489		$	291		$	1,043,780
Net loss		—		—		(30,218	)		—			(30,218	)		—			(30,218	)		(71	)		(30,289	)
Stock option expense		—		370		—			—			370			—			370			—			370
Restricted stock units – time based		—		392		—			—			392			—			392			—			392
Director – non-cash compensation		—		77		—			—			77			—			77			—			77
Warrant expense		—		129		—			—			129			—			129			—			129
Exercise of stock options		2		1,086		—			—			1,088			—			1,088			—			1,088
Acquired non-controlling interest		—		41		—			—			41			—			41			71			112
Treasury Stock purchases		—		—		—			—			—			(156	)		(156	)		—			(156	)
Foreign currency adjustments		—		—		—			4,156			4,156			—			4,156			9			4,165
Impact of foreign exchange contracts, net		—		—		—			(513	)		(513	)		—			(513	)		—			(513	)
Balance at March 31, 2019	$	1,210	$	925,233	$

Price	5.64	EPS	-2
Shares	94	P/E	-3
MCap	533	P/FCF	-3
Net Debt	1,543	EBIT	-84
TEV	2,076	TEV/EBIT	-25
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-03-31	Filed 2020-06-12
10-K	2019-12-31	Filed 2020-03-12
10-Q	2019-09-30	Filed 2019-11-12
10-Q	2019-06-30	Filed 2019-08-09
10-Q	2019-03-31	Filed 2019-05-09
10-K	2018-12-31	Filed 2019-02-28
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-08-09
10-Q	2018-03-31	Filed 2018-05-09
10-K	2017-12-31	Filed 2018-03-14
10-Q	2017-09-30	Filed 2017-11-09
10-Q	2017-06-30	Filed 2017-08-03
10-Q	2017-03-31	Filed 2017-05-09
10-K	2016-12-31	Filed 2017-03-16
10-Q	2016-09-30	Filed 2016-11-10
10-Q	2016-06-30	Filed 2016-08-09
10-Q	2016-03-31	Filed 2016-05-13
10-K	2015-12-31	Filed 2016-03-14
10-Q	2015-09-30	Filed 2015-11-13
10-Q	2015-06-30	Filed 2015-08-14
10-Q	2015-03-31	Filed 2015-05-15

8-K	2020-07-27	Other Events, Exhibits
8-K	2020-07-10	Other Events, Exhibits
8-K	2020-07-02	Officers, Shareholder Vote, Regulation FD, Exhibits
8-K	2020-06-26	Enter Agreement, Regulation FD, Other Events, Exhibits
8-K	2020-06-12
8-K	2020-05-28
8-K	2020-05-08
8-K	2020-04-09
8-K	2020-04-08
8-K	2020-03-27
8-K	2020-03-12
8-K	2020-01-09
8-K	2019-12-17
8-K	2019-11-19
8-K	2019-11-12
8-K	2019-11-07
8-K	2019-09-11
8-K	2019-08-08
8-K	2019-07-17
8-K	2019-06-28
8-K	2019-06-24
8-K	2019-06-06
8-K	2019-05-09
8-K	2019-04-12
8-K	2019-04-08
8-K	2019-02-28
8-K	2019-02-01
8-K	2018-11-08
8-K	2018-08-31
8-K	2018-08-09
8-K	2018-08-06
8-K	2018-08-02
8-K	2018-07-26
8-K	2018-07-23
8-K	2018-06-06
8-K	2018-05-15
8-K	2018-05-09
8-K	2018-04-12
8-K	2018-03-09
8-K	2018-02-16
8-K	2018-02-08
8-K	2018-01-09

EX-10.1	prty-ex101_107.htm
EX-10.2	prty-ex102_83.htm
EX-10.5	prty-ex105_393.htm
EX-10.6	prty-ex106_158.htm
EX-21.1	prty-ex211_109.htm
EX-31.1	prty-ex311_8.htm
EX-31.2	prty-ex312_6.htm
EX-32.1	prty-ex321_7.htm
EX-32.2	prty-ex322_9.htm

PRTY 10Q Quarterly Report

Party City Earnings 2020-03-31