Party City Earnings 2020-09-30

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

prty-10q_20200930.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 September 30, 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 October 30, 2020, 110,646,150 shares of the Registrant’s common stock were outstanding.

PARTY CITY HOLDCO INC.

Form 10-Q

September 30, 2020

TABLE OF CONTENTS

		Page

PART I

Item 1. Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019		3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended September 30, 2020 and September 30, 2019		4

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Nine Months Ended September 30, 2020 and September 30, 2019		5

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months ended September 30, 2020 and September 30, 2019		6

Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2020 and September 30, 2019		7

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and September 30, 2019		8

Notes to Condensed Consolidated Financial Statements		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23

Item 3. Quantitative and Qualitative Disclosures about Market Risk		45

Item 4. Controls and Procedures		45

PART II

Item 1. Legal Proceedings		46

Item 1A. Risk Factors		46

Item 6. Exhibits		47

Signature		48

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	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

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 September 30,
	2020			2019
Revenues:
Net sales	$	532,053		$	538,345
Royalties and franchise fees		1,722			1,886
Total revenues		533,775			540,231
Cost of sales		355,923			373,413
Wholesale selling expenses		11,950			16,084
Retail operating expenses		97,100			111,595
Franchise expenses		2,795			3,274
General and administrative expenses		42,191			43,062
Art and development costs		4,257			5,927
Development stage expenses		—			2,728
Store impairment and restructuring charges		1,926			2,574
Goodwill, intangibles and long-lived assets impairment		44,732			259,100
Total expenses		560,874			817,757
(Loss) from operations		(27,099	)		(277,526	)
Interest expense, net		13,422			29,424
Other (income) expense, net		(2,873	)		2,047
(Gain) on debt refinancing		(273,149	)		—
Income (loss) before income taxes		235,501			(308,997	)
Income tax (benefit)		(4,164	)		(27,252	)
Net income (loss)		239,665			(281,745	)
Less: Net (loss) attributable to noncontrolling interests		(42	)		(212	)
Net income (loss) attributable to common shareholders of Party City Holdco Inc.	$	239,707		$	(281,533	)
Net income (loss) per share attributable to common shareholders of Party City Holdco Inc.–Basic	$	2.25		$	(3.02	)
Net income (loss) per share attributable to common shareholders of Party City Holdco Inc.–Diluted	$	2.24		$	(3.02	)
Weighted-average number of common shares-Basic		106,709,307			93,346,448
Weighted-average number of common shares-Diluted		106,875,631			93,346,448
Dividends declared per share	$	—		$	—
Comprehensive income (loss)	$	244,607		$	(288,573	)
Less: Comprehensive (loss) attributable to noncontrolling interests		(42	)		(213	)
Comprehensive income (loss) attributable to common shareholders of Party City Holdco Inc.	$	244,649		$	(288,360	)

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)

	Nine Months Ended September 30,
	2020			2019
Revenues:
Net sales	$	1,198,160		$	1,611,149
Royalties and franchise fees		4,349			6,089
Total revenues		1,202,509			1,617,238
Cost of sales		890,587			1,065,511
Wholesale selling expenses		37,115			50,929
Retail operating expenses		250,502			302,756
Franchise expenses		9,225			9,813
General and administrative expenses		162,118			126,497
Art and development costs		13,095			17,568
Development stage expenses		2,932			7,966
(Gain) on sale/leaseback transaction		—			(58,381	)
Store impairment and restructuring charges		20,818			25,817
Goodwill, intangibles and long-lived assets impairment		581,380			259,100
Total expense		1,967,772			1,807,576
(Loss) from operations		(765,263	)		(190,338	)
Interest expense, net		63,954			88,857
Other expense, net		4,287			6,643
(Gain) on debt refinancing		(273,149	)		—
(Loss) before income taxes		(560,355	)		(285,838	)
Income tax (benefit)		(128,293	)		(21,809	)
Net (loss)		(432,062	)		(264,029	)
Less: Net (loss) attributable to noncontrolling interests		(241	)		(352	)
Net (loss) attributable to common shareholders of Party City Holdco Inc.	$	(431,821	)	$	(263,677	)
Net (loss) per share attributable to common shareholders of Party City Holdco Inc.–Basic	$	(4.41	)	$	(2.83	)
Net (loss) per share attributable to common shareholders of Party City Holdco Inc.–Diluted	$	(4.41	)	$	(2.83	)
Weighted-average number of common shares-Basic		97,872,174			93,271,392
Weighted-average number of common shares-Diluted		97,872,174			93,271,392
Dividends declared per share	$	—		$	—
Comprehensive (loss)	$	(435,235	)	$	(266,883	)
Less: Comprehensive (loss) attributable to noncontrolling interests		(241	)		(364	)
Comprehensive (loss) attributable to common shareholders of Party City Holdco Inc.	$	(434,994	)	$	(266,519	)

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			Accumulated 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 June 30, 2020	$	1,211	$	941,745		$	(708,747	)	$	(43,849	)	$	190,360		$	(327,170	)	$	(136,810	)	$	(206	)	$	(137,016	)
Net income (loss)		—		—			239,707			—			239,707			—			239,707			(42	)		239,665
Stock option expense – time – based		—		111			—			—			111			—			111			—			111
Restricted stock units – time-based		—		429			—			—			429			—			429			—			429
Restricted stock unit expense – performance-based		—		481			—			—			481			—			481			—			481
Acquired non-controlling interest		—		(202	)		—			—			(202	)		—			(202	)		(16	)		(218	)
Issuance of Stock for New Debt		160		27,581			—			—			27,741			—			27,741			—			27,741
Foreign currency adjustments		—		—			—			5,076			5,076			—			5,076			—			5,076
Impact of foreign exchange contracts, net		—		—			—			(134	)		(134	)		—			(134	)		—			(134	)
Balance at September 30, 2020	$	1,371	$	970,145

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	2020-09-30	Filed 2020-11-09
10-Q	2020-06-30	Filed 2020-08-07
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	2020-11-09
8-K	2020-10-15
8-K	2020-09-30
8-K	2020-09-11
8-K	2020-08-06
8-K	2020-07-30
8-K	2020-07-27
8-K	2020-07-10
8-K	2020-07-02
8-K	2020-06-26
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-31.1	prty-ex311_6.htm
EX-31.2	prty-ex312_7.htm
EX-32.1	prty-ex321_9.htm
EX-32.2	prty-ex322_8.htm

PRTY 10Q Quarterly Report

Party City Earnings 2020-09-30