Party City Earnings 2020-06-30

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

prty-10q_20200630.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 June 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 July 29, 2020, 94,602,386 shares of the Registrant’s common stock were outstanding.

PARTY CITY HOLDCO INC.

Form 10-Q

June 30, 2020

TABLE OF CONTENTS

		Page

PART I

Item 1. Condensed Consolidated Financial Statements (Unaudited)

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

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

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

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

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

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and June 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		44

Item 4. Controls and Procedures		44

PART II

Item 1. Legal Proceedings		45

Item 1A. Risk Factors		45

Item 6. Exhibits		46

Signature		47

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	June 30, 2020			December 31, 2019
	(Note 2) (Unaudited)			(Note 2)
ASSETS
Current assets:
Cash and cash equivalents	$	154,133		$	34,917
Accounts receivable, net		85,081			149,109
Inventories, net		635,014			658,419
Prepaid expenses and other current assets		94,710			51,685
Total current assets		968,938			894,130
Property, plant and equipment, net		223,433			243,572
Operating lease asset		755,288			802,634
Goodwill		666,084			1,072,330
Trade names		394,203			530,320
Other intangible assets, net		39,402			45,060
Other assets, net		9,435			7,273
Total assets	$	3,056,783		$	3,595,319
LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	325,754		$	128,806
Accounts payable		144,849			152,300
Accrued expenses		179,159			150,921
Current portion of operating lease liability		202,971			155,471
Income taxes payable		—			35,905
Current portion of long-term obligations		13,810			71,524
Total current liabilities		866,543			694,927
Long-term obligations, excluding current portion		1,557,576			1,503,987
Long-term portion of operating lease liability		685,290			720,735
Deferred income tax liabilities, net		67,458			126,081
Other long-term liabilities		16,932			16,517
Total liabilities		3,193,799			3,062,247
Redeemable securities		—			3,351
Commitments and contingencies
Stockholders’ equity:
Common stock (94,602,386 and 94,461,576 shares outstanding and 121,819,456 and 121,662,540 shares issued at June 30, 2020 and December 31, 2019, respectively)		1,211			1,211
Additional paid-in capital		941,745			928,573
Accumulated deficit		(708,747	)		(37,219	)
Accumulated other comprehensive loss		(43,849	)		(35,734	)
Total Party City Holdco Inc. stockholders’ equity before common stock held in treasury		190,360			856,831
Less: Common stock held in treasury, at cost (27,217,070 and 27,200,964 shares at June 30, 2020 and December 31, 2019, respectively)		(327,170	)		(327,086	)
Total Party City Holdco Inc. stockholders’ equity		(136,810	)		529,745
Noncontrolling interests		(206	)		(24	)
Total stockholders’ equity		(137,016	)		529,721
Total liabilities, redeemable securities and stockholders’ equity	$	3,056,783		$	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 June 30,
	2020			2019
Revenues:
Net sales	$	253,646		$	561,702
Royalties and franchise fees		1,045			2,189
Total revenues		254,691			563,891
Cost of sales		237,907			353,056
Wholesale selling expenses		9,707			16,884
Retail operating expenses		65,236			96,143
Franchise expenses		3,121			3,236
General and administrative expenses		59,931			41,510
Art and development costs		3,516			5,712
Development stage expenses		903			3,012
Gain on sale/leaseback transaction		—			(58,381	)
Store impairment and restructuring charges		1,164			5,234
Total expenses		381,485			466,406
(Loss) income from operations		(126,794	)		97,485
Interest expense, net		25,412			30,176
Other expense, net		1,484			3,342
(Loss) income before income taxes		(153,690	)		63,967
Income tax (benefit) expense		(23,631	)		15,962
Net (loss) income		(130,059	)		48,005
Less: Net loss attributable to noncontrolling interests		(44	)		(69	)
Net (loss) income attributable to common shareholders of Party City Holdco Inc.	$	(130,015	)	$	48,074
Net (loss) income per share attributable to common shareholders of Party City Holdco Inc.–Basic	$	(1.39	)	$	0.52
Net (loss) income per share attributable to common shareholders of Party City Holdco Inc.–Diluted	$	(1.39	)	$	0.51
Weighted-average number of common shares-Basic		93,419,078			93,293,176
Weighted-average number of common shares-Diluted		93,419,078			93,703,546
Dividends declared per share	$	—		$	—
Comprehensive (loss) income	$	(125,961	)	$	48,327
Less: Comprehensive loss attributable to noncontrolling interests		(44	)		(89	)
Comprehensive (loss) income attributable to common shareholders of Party City Holdco Inc.	$	(125,917	)	$	48,416

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)

	Six Months Ended June 30,
	2020			2019
Revenues:
Net sales	$	666,107		$	1,072,804
Royalties and franchise fees		2,627			4,203
Total revenues		668,734			1,077,007
Cost of sales		534,664			692,098
Wholesale selling expenses		25,165			34,845
Retail operating expenses		153,402			191,161
Franchise expenses		6,430			6,539
General and administrative expenses		119,927			83,435
Art and development costs		8,838			11,641
Development stage expenses		2,932			5,238
Gain on sale/leaseback transaction		—			(58,381	)
Store impairment and restructuring charges		18,892			23,243
Goodwill and intangibles impairment		536,648			—
Total expense		1,406,898			989,819
(Loss) income from operations		(738,164	)		87,188
Interest expense, net		50,532			59,433
Other expense, net		7,160			4,596
(Loss) income before income taxes		(795,856	)		23,159
Income tax (benefit) expense		(124,129	)		5,443
Net (loss) income		(671,727	)		17,716
Less: Net loss attributable to noncontrolling interests		(199	)		(140	)
Net (loss) income attributable to common shareholders of Party City Holdco Inc.	$	(671,528	)	$	17,856
Net (loss) income per share attributable to common shareholders of Party City Holdco Inc.–Basic	$	(7.19	)	$	0.19
Net (loss) income per share attributable to common shareholders of Party City Holdco Inc.–Diluted	$	(7.19	)	$	0.19
Weighted-average number of common shares-Basic		93,407,344			93,233,865
Weighted-average number of common shares-Diluted		93,407,344			93,791,763
Dividends declared per share	$	—		$	—
Comprehensive (loss) income	$	(679,842	)	$	21,690
Less: Comprehensive loss attributable to noncontrolling interests		(199	)		(151	)
Comprehensive (loss) income attributable to common shareholders of Party City Holdco Inc.	$	(679,643	)	$	21,841

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 March 31, 2020	$	1,211	$	933,174	$	(578,732	)	$	(47,947	)	$	307,706		$	(327,170	)	$	(19,464	)	$	(162	)	$	(19,626	)
Net loss		—		—		(130,015	)		—			(130,015	)		—			(130,015	)		(44	)		(130,059	)
Stock option expense – time – based		—		206		—			—			206			—			206			—			206
Stock option expense – performance – based		—		7,847		—			—			7,847			—			7,847			—			7,847
Restricted stock units – time-based		—		518		—			—			518			—			518			—			518
Foreign currency adjustments		—		—		—			4,014			4,014			—			4,014			—			4,014
Impact of foreign exchange contracts, net		—		—		—			84			84			—			84			—			84
Balance at June 30, 2020	$	1,211	$	941,745	$	(708,747	)	$	(43,849	)	$	190,360		$	(327,170	)	$	(136,810	)	$	(206	)	$	(137,016	)

Common

Stock

Additional

Paid-in

Capital

Retained

Earnings

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 March 31, 2019

1,210

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	2020-06-30	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	2020-08-06	Earnings, Exhibits
8-K	2020-07-30	Enter Agreement, Off-BS Arrangement, Sale of Shares, Shareholder Rights, Other Events, Exhibits
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-31.1	prty-ex311_9.htm
EX-31.2	prty-ex312_11.htm
EX-32.1	prty-ex321_14.htm
EX-32.2	prty-ex322_12.htm

PRTY 10Q Quarterly Report

Party City Earnings 2020-06-30