Party City Holdco Earnings 2019-06-30

PRTY 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

10-Q

Table of Contents

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, 2019

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

For the transition period from

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

☒

☐

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 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. (Check one):

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

☐

☒

As of July 25, 2019, 94,437,133 shares of the Registrant’s common stock were outstanding.

Table of Contents

PARTY CITY HOLDCO INC.

Form 10-Q

June 30, 2019

TABLE OF CONTENTS


	Page

PART I

Item 1. Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets at June 30, 2019 and December 31, 2018		3
Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months ended June 30, 2019 and June 30, 2018		4
Condensed Consolidated Statements of Operations and Comprehensive Income for the Six Months ended June 30, 2019 and June 30, 2018		5
Condensed Consolidated Statements of Stockholders’ Equity for the Three Months ended June 30, 2019 and June 30, 2018		6
Condensed Consolidated Statements of Stockholders’ Equity for the Six Months ended June 30, 2019 and June 30, 2018		7
Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2019 and June 30, 2018		8
Notes to Condensed Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosures about Market Risk		36
Item 4. Controls and Procedures		36

PART II

Item 1. Legal Proceedings		37
Item 1A. Risk Factors		37
Item 6. Exhibits		37
Signature		38

Table of Contents

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	June 30, 2019			December 31, 2018
	(Note 2) (Unaudited)			(Note 2)
ASSETS
Current assets:
Cash and cash equivalents	$	47,131		$	58,909
Accounts receivable, net		140,070			146,983
Inventories, net		788,097			756,038
Prepaid expenses and other current assets		66,707			61,905

Total current assets		1,042,005			1,023,835
Property, plant and equipment, net		257,395			321,044
Operating lease asset		869,345			—
Goodwill		1,659,653			1,656,950
Trade names		568,014			568,031
Other intangible assets, net		49,663			60,164
Other assets, net		12,894			12,323

Total assets	$	4,458,969		$	3,642,347

LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	307,379		$	302,751
Accounts payable		159,515			208,149
Accrued expenses		151,459			161,228
Current portion of operating lease liability		145,472			—
Income taxes payable		10,279			25,993
Current portion of long-term obligations		76,251			13,316

Total current liabilities		850,355			711,437
Long-term obligations, excluding current portion		1,565,315			1,621,963
Long-term portion of operating lease liability		793,976			—
Deferred income tax liabilities, net		163,657			174,427
Other long-term liabilities		13,228			87,548

Total liabilities		3,386,531			2,595,375

Redeemable securities		3,351			3,351
Commitments and contingencies
Stockholders’ equity:
Common stock (94,501,055 and 93,622,934 shares outstanding and 121,681,959 and 120,788,159 shares issued at June 30, 2019 and December 31, 2018, respectively)		1,210			1,208
Additional paid-in capital		926,838			922,476
Retained earnings		513,130			495,777
Accumulated other comprehensive loss		(45,216	)		(49,201	)

Total Party City Holdco Inc. stockholders’ equity before common stock held in treasury		1,395,962			1,370,260
Less: Common stock held in treasury, at cost (27,180,904 and 27,165,225 shares at June 30, 2019 and December 31, 2018)		(327,086	)		(326,930	)

Total Party City Holdco Inc. stockholders’ equity		1,068,876			1,043,330
Noncontrolling interests		211			291

Total stockholders’ equity		1,069,087			1,043,621

Total liabilities, redeemable securities and stockholders’ equity	$	4,458,969		$	3,642,347

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended June 30,
	2019			2018
Revenues:
Net sales	$	561,702		$	558,101
Royalties and franchise fees		2,189			2,910

Total revenues		563,891			561,011

Cost of sales		353,056			329,477
Wholesale selling expenses		16,884			17,256
Retail operating expenses		96,143			92,094
Franchise expenses		3,236			3,980
General and administrative expenses		41,510			45,326
Art and development costs		5,712			5,732
Development stage expenses		3,012			1,695
Gain on sale/leaseback transaction		(58,381	)		—
Store impairment and restructuring charges		5,234			—

		466,406			495,560

Income from operations		97,485			65,451
Interest expense, net		30,176			25,501
Other expense, net		3,342			2,532

Income before income taxes		63,967			37,418
Income tax expense		15,962			9,370

Net income		48,005			28,048
Add: Net income attributable to redeemable securities holder		—			410
Less: Net loss attributable to noncontrolling interests		(69	)		(29	)

Net income attributable to common shareholders of Party City Holdco Inc.	$	48,074		$	28,487

Net income per share attributable to common shareholders of Party City Holdco Inc.–Basic	$	0.52		$	0.30
Net income per share attributable to common shareholders of Party City Holdco Inc.–Diluted	$	0.51		$	0.29
Weighted-average number of common shares-Basic		93,293,176			96,453,884
Weighted-average number of common shares-Diluted		93,703,546			97,688,233
Dividends declared per share	$	0.00		$	0.00

Comprehensive income	$	48,327		$	18,825
Add: Comprehensive income attributable to redeemable securities holder		—			410
Less: Comprehensive loss attributable to noncontrolling interests		(89	)		(55	)

Comprehensive income attributable to common shareholders of Party City Holdco Inc.	$	48,416		$	19,290

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(In thousands, except share and per share data)


	Six Months Ended June 30,
	2019			2018
Revenues:
Net sales	$	1,072,804		$	1,063,209
Royalties and franchise fees		4,203			5,626

Total revenues		1,077,007			1,068,835

Cost of sales		692,098			646,443
Wholesale selling expenses		34,845			36,043
Retail operating expenses		191,161			181,186
Franchise expenses		6,539			7,762
General and administrative expenses		83,435			93,991
Art and development costs		11,641			11,705
Development stage expenses		5,238			3,998
Gain on sale/leaseback transaction		(58,381	)		—
Store impairment and restructuring charges		23,243			—

		989,819			981,128

Income from operations		87,188			87,707
Interest expense, net		59,433			48,776
Other expense, net		4,596			3,380

Income before income taxes		23,159			35,551
Income tax expense		5,443			8,666

Net income		17,716			26,885
Add: Net income attributable to redeemable securities holder		—			410
Less: Net loss attributable to noncontrolling interests		(140	)		(59	)

Net income attributable to common shareholders of Party City Holdco Inc.	$	17,856		$	27,354

Net income per share attributable to common shareholders of Party City Holdco Inc. – Basic	$	0.19		$	0.28
Net income per share attributable to common shareholders of Party City Holdco Inc. – Diluted	$	0.19		$	0.28
Weighted-average number of common shares-Basic		93,233,865			96,426,235
Weighted-average number of common shares-Diluted		93,791,763			97,669,309
Dividends declared per share	$	0.00		$	0.00

Comprehensive income	$	21,690		$	22,892
Add: Comprehensive income attributable to redeemable securities holder		—			410
Less: Comprehensive loss attributable to noncontrolling interests		(151	)		(73	)

Comprehensive income attributable to common shareholders of Party City Holdco Inc.	$	21,841		$	23,375

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

Three months ended June 30, 2019 and June 30, 2018:


	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	$	925,233	$	465,056	$	(45,558	)	$	1,345,941		$	(327,086	)	$	1,018,855		$	300		$	1,019,155
Net income (loss)		—		—		48,074		—			48,074			—			48,074			(69	)		48,005
Stock option expense		—		371		—		—			371			—			371			—			371
Restricted stock units – time-based		—		541		—		—			541			—			541			—			541
Restricted stock units – performance-based		—		476		—		—			476			—			476			—			476
Director – non-cash compensation		—		88		—		—			88			—			88			—			88
Warrant expense		—		129		—		—			129			—			129			—			129
Foreign currency adjustments		—		—		—		556			556			—			556			(20	)		536
Impact of foreign exchange contracts, net		—		—		—		(214	)		(214	)		—			(214	)		—			(214	)

Balance at June 30, 2019	$	1,210	$	926,838	$	513,130	$	(45,216	)	$	1,395,962		$	(327,086	)	$	1,068,876		$	211		$	1,069,087


	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, 2018	$	1,198	$	918,205	$	371,385	$	(30,600	)	$	1,260,188		$	(286,733	)	$	973,455		$	337		$	973,792
Net income (loss)		—		—		28,077		—			28,077			—			28,077			(29	)		28,048
Net income attributable to redeemable securities holder		—		—		410		—			410			—			410			—			410
Stock option expense		—		482		—		—			482			—			482			—			482
Restricted stock units – time-based		—		252		—		—			252			—			252			—			252
Restricted stock units – performance-based		—		593		—		—			593			—			593			—			593
Director – non-cash compensation		—		59		—		—			59			—			59			—			59
Warrant expense		—		65		—		—			65			—			65			—			65
Exercise of stock options		1		189		—		—			190			—			190			—			190
Foreign currency adjustments		—		—		—		(10,713	)		(10,713	)		—			(10,713	)		(26	)		(10,739	)
Impact of foreign exchange contracts, net		—		—		—		1,516			1,516			—			1,516			—			1,516

Balance at June 30, 2018	$	1,199	$	919,845	$	399,872	$	(39,797	)	$	1,281,119		$	(286,733	)	$	994,386		$	282		$	994,668

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

Six months ended June 30, 2019 and June 30, 2018:


	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 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 income (loss)		—		—		17,856			—			17,856		—			17,856		(140	)		17,716
Stock option expense

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$8.05	94	$755

10-Q	2019-06-30	Quarter: 2019-06-30
10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31

8-K	2019-08-08	Earnings, Exhibits
8-K	2019-07-17	Officers, Regulation FD, Exhibits
8-K	2019-06-28	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-06-24	Officers
8-K	2019-06-06	Amend Bylaw, Shareholder Vote, Exhibits
8-K	2019-05-09	Earnings, Exhibits
8-K	2019-04-12	Officers
8-K	2019-04-08	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-02-01	Officers, Exhibits
8-K	2018-11-08	Earnings, Other Events, Exhibits
8-K	2018-08-31	Officers
8-K	2018-08-09	Other Events, Exhibits
8-K	2018-08-06	Earnings, Officers, Exhibits
8-K	2018-08-02	Enter Agreement, Off-BS Arrangement, Shareholder Rights, Exhibits
8-K	2018-07-26	Other Events, Exhibits
8-K	2018-07-23	Earnings, Regulation FD, Exhibits
8-K	2018-06-06	Officers, Shareholder Vote
8-K	2018-05-15	Other Events, Exhibits
8-K	2018-04-12	Officers
8-K	2018-03-09	Earnings, Exhibits
8-K	2018-02-16	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2018-02-08	Regulation FD
8-K	2018-01-09	Officers

SLB	Schlumberger Limited	55,780
FLS	Flowserve	6,430
SLRC	Solar Capital	902
QNST	Quinstreet	717
SAFE	Safety, Income & Growth	498
NCNA	Nucana	456
NWHM	New Home	90
PIH	1347 Property Insurance Holdings	30
BEL	Belmond	0
ELRE	Yinfu Gold	0

EX-10.5	d743682dex105.htm
EX-10.6	d743682dex106.htm
EX-10.7	d743682dex107.htm
EX-10.8	d743682dex108.htm
EX-31.1	d743682dex311.htm
EX-31.2	d743682dex312.htm
EX-32.1	d743682dex321.htm
EX-32.2	d743682dex322.htm