10-Q 1 prty-20220331.htm 10-Q 10-Q
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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, 2022

OR

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 April 28, 2022, 112,492,976 shares of the Registrant’s common stock were outstanding.

 

 


PARTY CITY HOLDCO INC.

Form 10-Q

March 31, 2022

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I

 

 

 

 

 

Item 1. Condensed Consolidated Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2022, December 31, 2021 and March 31, 2021

 

3

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended March 31, 2022 and March 31, 2021

 

4

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and March 31, 2021

 

5

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and March 31, 2021

 

6

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

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

 

15

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

24

 

 

 

Item 4. Controls and Procedures

 

24

 

 

 

PART II

 

 

 

 

 

Item 1. Legal Proceedings

 

25

 

 

 

Item 1A. Risk Factors

 

25

 

 

 

Item 6. Exhibits

 

26

 

 

 

Signature

 

27

 

2


PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

March 31,
2022

 

 

December 31,
2021

 

 

March 31,
2021

 

 

 

(Unaudited)

 

 

 

 

 

(Unaudited)

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

32,645

 

 

$

47,914

 

 

$

83,806

 

Accounts receivable, net

 

 

85,280

 

 

 

93,301

 

 

 

81,658

 

Inventories, net

 

 

517,459

 

 

 

443,295

 

 

 

428,316

 

Prepaid expenses and other current assets

 

 

69,668

 

 

 

57,656

 

 

 

47,803

 

Income tax receivable

 

 

55,614

 

 

 

56,317

 

 

 

68,632

 

Total current assets

 

 

760,666

 

 

 

698,483

 

 

 

710,215

 

Property, plant and equipment, net

 

 

224,134

 

 

 

221,870

 

 

 

214,698

 

Operating lease asset

 

 

729,587

 

 

 

693,875

 

 

 

687,214

 

Goodwill

 

 

664,943

 

 

 

664,296

 

 

 

659,865

 

Trade names

 

 

383,761

 

 

 

383,737

 

 

 

383,733

 

Other intangible assets, net

 

 

22,319

 

 

 

23,687

 

 

 

29,912

 

Other assets, net

 

 

25,425

 

 

 

25,952

 

 

 

9,832

 

Total assets

 

$

2,810,835

 

 

$

2,711,900

 

 

$

2,695,469

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Loans and notes payable

 

$

209,112

 

 

$

84,181

 

 

$

142,859

 

Accounts payable

 

 

188,842

 

 

 

161,736

 

 

 

127,812

 

Accrued expenses

 

 

144,397

 

 

 

195,531

 

 

 

146,742

 

Current portion of operating lease liability

 

 

119,384

 

 

 

116,437

 

 

 

150,860

 

Income taxes payable

 

 

10,409

 

 

 

10,801

 

 

 

 

Current portion of long-term obligations

 

 

928

 

 

 

1,373

 

 

 

1,359

 

Total current liabilities

 

 

673,072

 

 

 

570,059

 

 

 

569,632

 

Long-term obligations, excluding current portion

 

 

1,346,724

 

 

 

1,351,189

 

 

 

1,358,495

 

Long-term portion of operating lease liability

 

 

681,949

 

 

 

655,875

 

 

 

628,217

 

Deferred income tax liabilities, net

 

 

28,067

 

 

 

29,195

 

 

 

31,036

 

Other long-term liabilities

 

 

23,266

 

 

 

22,868

 

 

 

33,195

 

Total liabilities

 

 

2,753,078

 

 

 

2,629,186

 

 

 

2,620,575

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

Common stock (112,463,647, 112,170,944 and 111,258,890 shares outstanding and 124,607,064, 124,157,500 and 122,573,377 shares issued at March 31, 2022, December 31, 2021, and March 31, 2021, respectively)

 

 

1,384

 

 

 

1,384

 

 

 

1,383

 

Additional paid-in capital

 

 

984,060

 

 

 

982,307

 

 

 

976,037

 

Accumulated deficit

 

 

(598,874

)

 

 

(571,985

)

 

 

(579,486

)

Accumulated other comprehensive income

 

 

4,473

 

 

 

3,541

 

 

 

5,134

 

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

 

 

391,043

 

 

 

415,247

 

 

 

403,068

 

Less: Common stock held in treasury, at cost (12,143,417, 11,986,556 and 11,314,487 shares at March 31, 2022, December 31, 2021, and March 31, 2021, respectively)

 

 

(333,286

)

 

 

(332,533

)

 

 

(327,388

)

Total Party City Holdco Inc. stockholders’ equity

 

 

57,757

 

 

 

82,714

 

 

 

75,680

 

Noncontrolling interests

 

 

 

 

 

 

 

 

(786

)

Total stockholders’ equity

 

 

57,757

 

 

 

82,714

 

 

 

74,894

 

Total liabilities and stockholders’ equity

 

$

2,810,835

 

 

$

2,711,900

 

 

$

2,695,469

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3


PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Net sales

 

$

432,976

 

 

$

426,807

 

Cost of sales

 

 

294,968

 

 

 

274,521

 

Gross profit

 

 

138,008

 

 

 

152,286

 

Selling, general and administrative expenses**

 

 

158,060

 

 

 

149,021

 

Loss on disposal of assets in international operations

 

 

 

 

 

3,211

 

(Loss) income from operations

 

 

(20,052

)

 

 

54

 

Interest expense, net

 

 

23,395

 

 

 

17,214

 

Other (income) expense, net

 

 

(203

)

 

 

427

 

(Loss) before income taxes

 

 

(43,244

)

 

 

(17,587

)

Income tax (benefit)

 

 

(16,355

)

 

 

(3,469

)

Net (loss)

 

 

(26,889

)

 

 

(14,118

)

Less: Net (loss) attributable to noncontrolling interests

 

 

 

 

 

(54

)

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

 

$

(26,889

)

 

$

(14,064

)

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

 

$

(0.24

)

 

$

(0.13

)

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

 

$

(0.24

)

 

$

(0.13

)

Weighted-average number of common shares-Basic

 

 

112,407,040

 

 

 

110,917,349

 

Weighted-average number of common shares-Diluted

 

 

112,407,040

 

 

 

110,917,349

 

Dividends declared per share

 

$

 

 

$

 

Comprehensive (loss) income

 

$

(25,937

)

 

$

20,937

 

Less: Comprehensive (loss) attributable to noncontrolling interests

 

 

 

 

 

(84

)

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

 

$

(25,937

)

 

$

21,021

 

** Consists of wholesale selling expenses, retail operating expenses, art and development costs and general and administrative expenses, which were reported separately in the prior year.

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

 

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Accumulated
Deficit

 

 

Accumulated
Other
Comprehensive Income

 

 

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, 2021

 

$

1,384

 

 

$

982,307

 

 

$

(571,985

)

 

$

3,541

 

 

$

415,247

 

 

$

(332,533

)

 

$

82,714

 

 

$

 

 

$

82,714

 

Net (loss)

 

 

 

 

 

 

 

 

(26,889

)

 

 

 

 

 

(26,889

)

 

 

 

 

 

(26,889

)

 

 

 

 

 

(26,889

)

Stock-based compensation**

 

 

 

 

 

1,733

 

 

 

 

 

 

 

 

 

1,733

 

 

 

 

 

 

1,733

 

 

 

 

 

 

1,733

 

Treasury stock purchases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(753

)

 

 

(753

)

 

 

 

 

 

(753

)

Foreign currency adjustments

 

 

 

 

 

20

 

 

 

 

 

 

932

 

 

 

952

 

 

 

 

 

 

952

 

 

 

 

 

 

952

 

Balance at March 31, 2022

 

$

1,384

 

 

$

984,060

 

 

$

(598,874

)

 

$

4,473

 

 

$

391,043

 

 

$

(333,286

)

 

$

57,757

 

 

$

 

 

$

57,757

 

 

 

 

 

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 December 31, 2020

 

$

1,373

 

 

$

971,972

 

 

$

(565,457

)

 

$

(29,916

)

 

$

377,972

 

 

$

(327,182

)

 

$

50,790

 

 

$

(269

)

 

$

50,521

 

Net (loss)

 

 

 

 

 

 

 

 

(14,064

)

 

 

 

 

 

(14,064

)

 

 

 

 

 

(14,064

)

 

 

(54

)

 

 

(14,118

)

Stock-based compensation**

 

 

 

 

 

1,230

 

 

 

 

 

 

 

 

 

1,230

 

 

 

 

 

 

1,230

 

 

 

 

 

 

1,230

 

Warrant expense (see Note 15 – Kazzam, LLC)

 

 

4

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disposed non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(487

)

 

 

(487

)

Treasury stock purchases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(206

)

 

 

(206

)

 

 

 

 

 

(206

)

Exercise of stock options

 

 

6

 

 

 

2,849

 

 

 

 

 

 

 

 

 

2,855

 

 

 

 

 

 

2,855

 

 

 

 

 

 

2,855

 

Foreign currency adjustments

 

 

 

 

 

(10

)

 

 

35

 

 

 

36,398

 

 

 

36,423

 

 

 

 

 

 

36,423

 

 

 

24

 

 

 

36,447

 

Impact of foreign exchange contracts, net

 

 

 

 

 

 

 

 

 

 

 

(1,348

)

 

 

(1,348

)

 

 

 

 

 

(1,348

)

 

 

 

 

 

(1,348

)

Balance at March 31, 2021

 

$

1,383

 

 

$

976,037

 

 

$

(579,486

)

 

$

5,134

 

 

$

403,068

 

 

$

(327,388

)

 

$

75,680

 

 

$

(786

)

 

$

74,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

** Stock-based compensation consists of stock-option expense – time-based, restricted stock units – time-based, restricted stock units – performance-based and directors – non-cash compensation, which were shown separately in prior years.

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

 

 

5


PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows (used in) operating activities:

 

 

 

 

 

 

Net (loss)

 

$

(26,889

)

 

$

(14,118

)

Adjustments to reconcile net (loss) to net cash (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization expense

 

 

15,860

 

 

 

17,944

 

Amortization of deferred financing costs and original issuance discounts

 

 

1,271

 

 

 

863

 

Provision for doubtful accounts

 

 

945

 

 

 

696

 

Deferred income tax (benefit)

 

 

(1,135

)

 

 

(3,386

)

Change in operating lease liability/asset

 

 

(6,723

)

 

 

(37,556

)

Undistributed loss in equity method investments

 

 

310

 

 

 

336

 

Loss on disposal of assets

 

 

153

 

 

 

110

 

Loss on disposal of assets in international operations

 

 

 

 

 

3,211

 

Goodwill, intangibles and long-lived assets impairment

 

 

2,154

 

 

 

 

Stock-based compensation**

 

 

1,733

 

 

 

1,230

 

Loss on debt refinancing

 

 

 

 

 

226

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Decrease in accounts receivable

 

 

7,255

 

 

 

2,952

 

Increase in inventories

 

 

(75,596

)

 

 

(17,565

)

Increase in prepaid expenses and other current assets

 

 

(11,205

)

 

 

(8,768

)

(Decrease) increase in accounts payable, accrued expenses and income taxes payable

 

 

(24,958

)

 

 

5,014

 

Net cash (used in) operating activities

 

 

(116,825

)

 

 

(48,811

)

Cash flows (used in) investing activities:

 

 

 

 

 

 

Cash paid in connection with acquisitions, net of cash acquired

 

 

(7

)

 

 

 

Capital expenditures

 

 

(18,620

)

 

 

(22,184

)

Proceeds from disposal of property and equipment

 

 

1,610

 

 

 

 

Proceeds from sale of international operations, net of cash disposed

 

 

 

 

 

20,556

 

Net cash (used in) investing activities

 

 

(17,017

)

 

 

(1,628

)

Cash flows provided by (used in) financing activities:

 

 

 

 

 

 

Repayment of loans, notes payable and long-term obligations

 

 

(5,518

)

 

 

(792,849

)

Proceeds from loans, notes payable and long-term obligations

 

 

124,759

 

 

 

794,750

 

Treasury stock purchases

 

 

(753

)

 

 

(206

)

Exercise of stock options

 

 

 

 

 

2,855

 

Debt issuance costs

 

 

 

 

 

(21,437

)

Net cash provided by (used in) financing activities

 

 

118,488

 

 

 

(16,887

)

Effect of exchange rate changes on cash and cash equivalents

 

 

85

 

 

 

(177

)

Net (decrease) in cash and cash equivalents and restricted cash

 

 

(15,269

)

 

 

(