UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact Name of Registrant as Specified in Its Charter)
|
||
(State or Other Jurisdiction of Incorporation or Organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
||
(Address of Principal Executive Offices) |
|
(Zip Code) |
Registrant’s telephone number, including area code:
(
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 |
|
|
|
|
|
|
|
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.
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).
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.
☒ |
|
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
As of April 28, 2022,
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 |
|
|
|
|
4 |
|
|
|
|
|
5 |
|
|
|
|
|
6 |
|
|
|
|
|
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 |
|
|
|
|
24 |
|
|
|
|
PART II |
|
|
|
|
|
|
25 |
|
|
|
|
|
25 |
|
|
|
|
|
26 |
|
|
|
|
|
27 |
2
PARTY CITY HOLDCO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
|
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|||
|
|
(Unaudited) |
|
|
|
|
|
(Unaudited) |
|
|||
ASSETS |
|
|
|
|
|
|
|
|
|
|||
Current assets: |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
|||
Inventories, net |
|
|
|
|
|
|
|
|
|
|||
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
|||
Income tax receivable |
|
|
|
|
|
|
|
|
|
|||
Total current assets |
|
|
|
|
|
|
|
|
|
|||
Property, plant and equipment, net |
|
|
|
|
|
|
|
|
|
|||
Operating lease asset |
|
|
|
|
|
|
|
|
|
|||
Goodwill |
|
|
|
|
|
|
|
|
|
|||
Trade names |
|
|
|
|
|
|
|
|
|
|||
Other intangible assets, net |
|
|
|
|
|
|
|
|
|
|||
Other assets, net |
|
|
|
|
|
|
|
|
|
|||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|||
Loans and notes payable |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accounts payable |
|
|
|
|
|
|
|
|
|
|||
Accrued expenses |
|
|
|
|
|
|
|
|
|
|||
Current portion of operating lease liability |
|
|
|
|
|
|
|
|
|
|||
Income taxes payable |
|
|
|
|
|
|
|
|
|
|||
Current portion of long-term obligations |
|
|
|
|
|
|
|
|
|
|||
Total current liabilities |
|
|
|
|
|
|
|
|
|
|||
Long-term obligations, excluding current portion |
|
|
|
|
|
|
|
|
|
|||
Long-term portion of operating lease liability |
|
|
|
|
|
|
|
|
|
|||
Deferred income tax liabilities, net |
|
|
|
|
|
|
|
|
|
|||
Other long-term liabilities |
|
|
|
|
|
|
|
|
|
|||
Total liabilities |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
||||
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|||
Common stock ( |
|
|
|
|
|
|
|
|
|
|||
Additional paid-in capital |
|
|
|
|
|
|
|
|
|
|||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive income |
|
|
|
|
|
|
|
|
|
|||
Total Party City Holdco Inc. stockholders’ equity before common stock held in |
|
|
|
|
|
|
|
|
|
|||
Less: Common stock held in treasury, at cost ( |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total Party City Holdco Inc. stockholders’ equity |
|
|
|
|
|
|
|
|
|
|||
Noncontrolling interests |
|
|
|
|
|
|
|
|
( |
) |
||
Total stockholders’ equity |
|
|
|
|
|
|
|
|
|
|||
Total liabilities and stockholders’ equity |
|
$ |
|
|
$ |
|
|
$ |
|
|||
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 |
|
$ |
|
|
$ |
|
||
Cost of sales |
|
|
|
|
|
|
||
Gross profit |
|
|
|
|
|
|
||
Selling, general and administrative expenses** |
|
|
|
|
|
|
||
Loss on disposal of assets in international operations |
|
|
|
|
|
|
||
(Loss) income from operations |
|
|
( |
) |
|
|
|
|
Interest expense, net |
|
|
|
|
|
|
||
Other (income) expense, net |
|
|
( |
) |
|
|
|
|
(Loss) before income taxes |
|
|
( |
) |
|
|
( |
) |
Income tax (benefit) |
|
|
( |
) |
|
|
( |
) |
Net (loss) |
|
|
( |
) |
|
|
( |
) |
Less: Net (loss) attributable to noncontrolling interests |
|
|
|
|
|
( |
) |
|
Net (loss) attributable to common shareholders of Party City Holdco Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
Net (loss) per share attributable to common shareholders of Party City Holdco Inc.–Basic |
|
$ |
( |
) |
|
$ |
( |
) |
Net (loss) per share attributable to common shareholders of Party City Holdco Inc.–Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average number of common shares-Basic |
|
|
|
|
|
|
||
Weighted-average number of common shares-Diluted |
|
|
|
|
|
|
||
Dividends declared per share |
|
$ |
|
|
$ |
|
||
Comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
|
|
Less: Comprehensive (loss) attributable to noncontrolling interests |
|
|
|
|
|
( |
) |
|
Comprehensive (loss) income attributable to common shareholders of Party City Holdco Inc. |
|
$ |
( |
) |
|
$ |
|
|
** 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 |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total Party City |
|
|
Common |
|
|
Total Party City |
|
|
Non- |
|
|
Total |
|
|||||||||
Balance at December 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Stock-based compensation** |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Treasury stock purchases |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Foreign currency adjustments |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Balance at March 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total Party City |
|
|
Common |
|
|
Total Party City |
|
|
Non- |
|
|
Total |
|
|||||||||
Balance at December 31, 2020 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net (loss) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Stock-based compensation** |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Warrant expense (see Note 15 – Kazzam, LLC) |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Disposed non-controlling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Treasury stock purchases |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Exercise of stock options |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Foreign currency adjustments |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||||
Impact of foreign exchange contracts, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at March 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
** 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) |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net (loss) to net cash (used in) operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization expense |
|
|
|
|
|
|
||
Amortization of deferred financing costs and original issuance discounts |
|
|
|
|
|
|
||
Provision for doubtful accounts |
|
|
|
|
|
|
||
Deferred income tax (benefit) |
|
|
( |
) |
|
|
( |
) |
Change in operating lease liability/asset |
|
|
( |
) |
|
|
( |
) |
Undistributed loss in equity method investments |
|
|
|
|
|
|
||
Loss on disposal of assets |
|
|
|
|
|
|
||
Loss on disposal of assets in international operations |
|
|
|
|
|
|
||
Goodwill, intangibles and long-lived assets impairment |
|
|
|
|
|
|
||
Stock-based compensation** |
|
|
|
|
|
|
||
Loss on debt refinancing |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Decrease in accounts receivable |
|
|
|
|
|
|
||
Increase in inventories |
|
|
( |
) |
|
|
( |
) |
Increase in prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
(Decrease) increase in accounts payable, accrued expenses and income taxes payable |
|
|
( |
) |
|
|
|
|
Net cash (used in) operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows (used in) investing activities: |
|
|
|
|
|
|
||
Cash paid in connection with acquisitions, net of cash acquired |
|
|
( |
) |
|
|
|
|
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Proceeds from disposal of property and equipment |
|
|
|
|
|
|
||
Proceeds from sale of international operations, net of cash disposed |
|
|
|
|
|
|
||
Net cash (used in) investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows provided by (used in) financing activities: |
|
|
|
|
|
|
||
Repayment of loans, notes payable and long-term obligations |
|
|
( |
) |
|
|
( |
) |
Proceeds from loans, notes payable and long-term obligations |
|
|
|
|
|
|
||
Treasury stock purchases |
|
|
( |
) |
|
|
( |
) |
Exercise of stock options |
|
|
|
|
|
|
||
Debt issuance costs |
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Net (decrease) in cash and cash equivalents and restricted cash |
|
|
( |
) |
|
|
( | |