PRTY
$7.14
Party City Holdco
($.67)
(8.58%)
Earnings Details
2nd Quarter June 2021
Thursday, August 5, 2021 6:50:00 AM
Tweet Share Watch
Summary

Party City Guides Revenue In-line

Party City Holdco (PRTY) reported 2nd Quarter June 2021 earnings of $0.29 per share on revenue of $535.7 million. The consensus earnings estimate was $0.16 per share on revenue of $483.1 million. Revenue grew 110.4% on a year-over-year basis.

The company said it expects third quarter revenue of $490.0 million to $515.0 million. The current consensus revenue estimate is $496.50 million for the quarter ending September 30, 2021.

Party City Holdco Inc. is the leading party goods company by revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally by revenue.

Results
Reported Earnings
$0.29
Earnings Whisper
-
Consensus Estimate
$0.16
Reported Revenue
$535.7 Mil
Revenue Estimate
$483.1 Mil
Growth
Earnings Growth
Revenue Growth
Guidance
Power Rating
Grade
Earnings Release

Party City Reports Second Quarter 2021 Results and Provides Third Quarter 2021 Business Outlook

Total Sales increased 110.4% versus prior year; Comparable Sales increased 118.3% versus prior year and 19.1% versus Q2 2019 driven by strength in core categories

GAAP Net Income of $29.8 million versus a Net Loss of $130.0 million in Q2 2020

Adjusted EBITDA of $85.8 million versus a $42.8 million Adjusted EBITDA Loss in Q2 2020

ELMSFORD, N.Y., Aug. 05, 2021 (GLOBE NEWSWIRE) -- Party City Holdco Inc. (the “Company” or “PRTY”; NYSE:PRTY) today announced financial results for the quarter ended June 30, 2021.

Brad Weston, Chief Executive Officer of Party City, stated, “We are very pleased with our strong second quarter results that exceeded our expectations. We saw sequential acceleration of the business as the economy opened up and restrictions subsided, driving increased consumer ability to celebrate. The quarter was highlighted by robust trends at Retail with the recovery at Wholesale underway, as expected. The strength in performance was broad based, particularly across our core everyday business, along with improved results in our seasonal categories. The consistent strength that we have demonstrated in our core everyday performance is a testament to the disciplined execution of our strategic initiatives and meaningful progress against our transformation strategy, with the resulting relevancy strides positioning us to capitalize on the near and long-term growth opportunities.”

Mr. Weston added, “As we look to the back half of the year, the environment remains dynamic but we are well positioned for continued growth. We are excited about our refined marketing, improved store experience and elevated omni channel capabilities, as we continue to deliver on our mission of inspiring joy and making it easy to create unforgettable memories.”

Second Quarter Summary*:

  • Total revenues were $535.7 million, an increase of 110.4% compared to the second quarter 2020 driven by a strong rebound of retail sales, partially offset by the divestiture of a significant portion of our international operations in the first quarter of 2021.
  • Total retail sales increased 138.9% on a reported and constant currency basis versus second quarter 2020 driven by a strong comparable sales increase in core categories versus prior year.
  • The total number of corporate Party City stores was 749 as of June 30, 2021 compared to 757 in the prior year period.
  • Brand comparable sales increased 118.3% in the second quarter versus the 13 weeks ended June 27, 2020 and increased 19.1% compared to the 13 weeks ended June 29, 2019.
  • Net third-party wholesale revenues increased 33.4% compared to the second quarter of 2020 principally due to the COVID-19 impact in the prior year period, partially offset by the divestiture of a significant portion of our international operations in the first quarter of 2021.
  • Total gross profit margin increased 3,390 basis points to 40.5% of net sales. Excluding certain items not indicative of core operating performance, gross profit margin improved 2,120 basis points to 41.0% of net sales, primarily due to fixed cost deleverage in 2020 caused by COVID-19 shutdowns. Gross profit margin improvement was also driven by fewer promotions and favorable product mix.
  • Operating expenses totaled $155.3 million or $11.7 million higher than the second quarter of 2020 primarily due to higher retail operating expenses offset by decreased general and administrative expenses. Excluding certain items not indicative of core operating performance, operating expenses totaled $150.6 million, or 28.1% of net sales, a 1,730-basis point improvement versus prior-year period primarily driven by leverage on higher sales.
  • Interest expense was $23.1 million during the second quarter of 2021, compared to $25.4 million during the second quarter of 2020 mainly due to lower amounts of debt outstanding.
  • Reported GAAP net income was $29.8 million, or earnings of $0.26 per diluted share.
  • Adjusted net income was $34.1 million, or earnings of $0.29 per diluted share, compared to adjusted net loss of $61.3 million, or a loss of $0.66 per share, in the second quarter of 2020. (See “Non-GAAP Information”)
  • Adjusted EBITDA was $85.8 million, versus a loss of $42.8 million during the second quarter of 2020. (See “Non-GAAP Information”).
  • The effective tax rate for the second quarter of 2021 was 25.5%.

* Second quarter results in fiscal year 2020 were negatively impacted by extended store closures and other related impacts due to COVID-19.

Balance Sheet and Cash Flow Highlights:

As of the end of the second quarter 2021, the Company had $84.5 million in cash and approximately $170.2 million of availability under the ABL Facility and approximately $14.6 million of availability under the Anagram ABL Facility, for total liquidity of $269.3 million.

The carrying value of the Company's debt as of June 30, 2021 was $1,460.1 million. The principal balance of debt net of cash on June 30, 2021 was $1,258.9 million versus $1,756.2 million in the prior-year period. The principal balance of debt is used for the purpose of all leverage ratio calculations under our debt agreements. The following table reflects both principal amounts as well as net carrying amounts of debt across the Company’s debt instruments:

     Party City
Credit Group
 Anagram
Holdings, LLC
 PCHI
Consolidated
     June 30, 2021 June 30, 2021
(in Thousands) Principal
Amount
 Net Carrying
Amount
 Net Carrying
Amount
 Net Carrying
Amount
8.75% Senior Secured First Lien Notes – due 2026 $750,000   731,305   -  $731,305 
6.125% Senior Notes – due 2023  22,924   22,806   -   22,806 
6.625% Senior Notes – due 2026  92,254   91,519   -   91,519 
First Lien Party City Notes – due 2025  161,669   202,588   -   202,588 
First Lien Anagram Notes – due 2025  112,979   -   150,451   150,451 
Second Lien Anagram Notes – due 2026  86,981   -   148,114   148,114 
Finance lease obligations  13,398   13,398   -   13,398 
Total long-term obligations  1,240,205   1,061,616   298,565   1,360,181 
Less: current portion N/A   (1,265)  -   (1,265)
Long-term obligations, excluding current portion  1,240,205   1,060,351   298,565   1,358,916 
Loans and notes payable*  103,175   99,933   -   99,933 
Less: Cash  (84,452)  (56,130)  (28,322)  (84,452)
Principal balance net of cash $1,258,928  $1,104,154  $270,243  $1,374,397 

*Balance consists of ABL Facility.

Net cash provided by operating activities in the first six months of 2021 was $13.8 million, compared to net cash used in operating activities of $48.8 million in the prior year period, with the year-over-year improvement driven primarily by higher net sales and improved operating income, partially offset by the change in working capital. Free cash flowa in the first six months of 2021 was $77.8 million compared to $(49.2) million in the prior year period, with the improvement driven by higher Adjusted EBITDA due to improved operating results, partially offset by higher capital expenditures.
aFree cash flow defined as Adjusted EBITDA less capital expenditures (See “Non-GAAP Financial Information”).

Outlook:

The Company is providing the following fiscal third quarter 2021 outlook. This outlook is subject to potential consumer and marketplace volatility due to the COVID-19 pandemic:

  • Total revenue of $490 to $515 million
  • Brand comparable sales percentage increase of high single digits compared to third quarter 2020, or mid-teens compared to third quarter 2019
  • GAAP net loss of $5 million to net income of $4 million with an assumed Q3 tax rate of 27%
  • Adjusted EBITDA of $35 to $45 million

The Company is providing the following updated annual 2021 outlook:

  • FY 2021 Interest expense of approximately $86 to $91 million
  • FY 2021 Capital expenditures of approximately $80 to $90 million

The table below sets forth a reconciliation from our third quarter 2021 forecasted GAAP Net Income to our Adjusted EBITDA.

  Q3 2021 Q3 2021 
(in thousands) High  Low 
Net Income $3,500 $(5,300)
Provision for Income Taxes  1,300  (1,900)
Interest Expense  22,000  23,000 
Depreciation and Amortization Expense  16,200  17,200 
EBITDA $43,000 $33,000 
EBITDA Add-Backs  2,000  2,000 
Adjusted EBITDA $45,000 $35,000 


Conference Call Information

A conference call to discuss the second quarter 2021 financial results is scheduled for today, August 5, 2021, at 8:00 a.m. Eastern Time, and the Company has posted certain supplemental presentation materials to its investor relations website. Investors and analysts interested in participating in the call are invited to dial 844-757-5731 (U.S. domestic) or 412-542-4126 (international) approximately 10 minutes prior to the start of the call. The conference call will also be webcast at http://investor.partycity.com/. To listen to the live call, please go to the website at least 15 minutes early to register and download any necessary audio software. The webcast will be accessible for one year after the call.

Website Information

We routinely post important information for investors on the Investor Relations section of our website, http://investor.partycity.com/. We intend to use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Non-GAAP Information

This press release includes non-GAAP measures including Adjusted EBITDA and Adjusted Net Income/Loss. We present these non-GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by eliminating items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA: (i) as a factor in determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because our credit facilities use Adjusted EBITDA to measure compliance with certain covenants. We also utilized operating expense excluding certain items not indicative of core operating performance. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in tables accompanying this release. We also evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period exchange rates and comparing these adjusted amounts to our current period reported results. We also provide debt principal net of cash, which is calculated by adding Loans and Notes Payable, Current Portion of Long Term Obligations and Long Term Obligations, Excluding Current Portion, subtracting Cash and Cash Equivalents and dividing by Adjusted EBITDA for the trailing twelve month period. We also define free cash flow as Adjusted EBITDA less capital expenditures. We believe providing these non-GAAP measures provides valuable supplemental information regarding our results of operations and leverage, consistent with how we evaluate our performance. In evaluating these non-GAAP financial measures, investors should be aware that in the future the Company may incur expenses or be involved in transactions that are the same as or similar to some of the adjustments in this presentation. The Company's presentation of non-GAAP financial measures should not be construed to imply that its future results will be unaffected by any such adjustments. The Company has provided this information as means to evaluate the results of its core operations. Other companies in the Company's industry may calculate these items differently than it does. Each of these measures is not a measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

Forward-Looking Statements

This press release and the commentary in the conference call to be held today each contains forward-looking statements. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance and include Party City’s expectations regarding its ability to maximize the potential of its vertical model, the ability to drive long-term growth, revenues, brand comparable sales, net income, Adjusted EBITDA, and Adjusted Net Income. The forward-looking statements contained in this press release are based on management’s good-faith belief and reasonable judgment based on current information, and these statements are qualified by important risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those forecasted or indicated by such forward-looking statements. These risks and uncertainties include: our ability to compete effectively in a competitive industry; fluctuations in commodity prices; our ability to appropriately respond to changing merchandise trends and consumer preferences; successful implementation of our store growth strategy; decreases in our Halloween sales; the impact of COVID-19 on our financial performance; disruption to the transportation system or increases in transportation costs; product recalls or product liability; economic slowdown affecting consumer spending and general economic conditions; loss or actions of third party vendors and loss of the right to use licensed material; disruptions at our manufacturing facilities; and the additional risks and uncertainties set forth in “Risk Factors” in Party City’s Annual Report on Form 10-K for the year ended December 31, 2020 and in subsequent reports filed with or furnished to the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. Except as may be required by any applicable laws, Party City assumes no obligation to publicly update or revise such forward-looking statements, which are made as of the date hereof or the earlier date specified herein, whether as a result of new information, future developments or otherwise.

About Party City

Party City Holdco Inc. is the leading party goods company by revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally by revenue. The Company is a popular one-stop shopping destination for party supplies, balloons, and costumes. In addition to being a great retail brand, the Company is a global, world-class organization that combines state-of-the-art manufacturing and sourcing operations, and sophisticated wholesale operations complemented by a multi-channel retailing strategy and e-commerce retail operations. The Company is the leading player in its category, vertically integrated and unique in its breadth and depth. The Company designs, manufactures, sources and distributes party goods, including paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery throughout the world. The Company’s retail operations include 831 specialty retail party supply stores (including franchise stores) throughout North America operating under the names Party City and Halloween City, and e-commerce websites, principally through the domain name PartyCity.com.

Contact:
ICR
Farah Soi and Rachel Schacter
203-682-8200
InvestorRelations@partycity.com

Source: Party City Holdco Inc.



PARTY CITY HOLDCO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data, unaudited)

  June 30,
2021
 December 31,
2020
 June 30,
2020
  (Unaudited)   (Unaudited)
ASSETS         
Current assets:         
Cash and cash equivalents $84,452  $119,532  $154,133 
Accounts receivable, net  86,745   90,879   85,081 
Inventories, net  426,128   412,285   635,014 
Prepaid expenses and other current assets  68,363   45,905   94,710 
Income tax receivable  55,421   57,549    
Assets held for sale, net     83,110    
Total current assets  721,109   809,260   968,938 
Property, plant and equipment, net  218,532   209,412   223,433 
Operating lease asset  684,802   700,087   755,288 
Goodwill  660,597   661,251   666,084 
Trade names  383,761   384,428   394,203 
Other intangible assets, net  27,825   32,134   39,402 
Other assets, net  26,193   9,883   9,435 
Total assets $2,722,819  $2,806,455  $3,056,783 
LIABILITIES AND STOCKHOLDERS’ EQUITY         
Current liabilities:         
Loans and notes payable $99,933  $175,707  $325,754 
Accounts payable  129,802   118,928   144,849 
Accrued expenses  190,347   160,605   179,159 
Liabilities held for sale     68,492    
Current portion of operating lease liability  136,749   176,045   202,971 
Income taxes payable  2,537   524    
Current portion of long-term obligations  1,265   13,576   13,810 
Total current liabilities  560,633   713,877   866,543 
Long-term obligations, excluding current portion  1,358,916   1,329,808   1,557,576 
Long-term portion of operating lease liability  625,157   654,729   685,290 
Deferred income tax liabilities, net  37,052   34,705   67,458 
Other long-term liabilities  33,288   22,815   16,932 
Total liabilities  2,615,046   2,755,934   3,193,799 
Commitments and contingencies         
Stockholders’ equity:         
Common stock (111,476,496, 110,781,613 and 94,602,386 shares outstanding and 122,790,983, 122,061,711 and 121,819,456 shares issued at June 30, 2021, December 31, 2020, and June 30, 2020 respectively)  1,383   1,373   1,211 
Additional paid-in capital  978,167   971,972   941,745 
Accumulated deficit  (549,693)  (565,457)  (708,747)
Accumulated other comprehensive income (loss)  6,096   (29,916)  (43,849)
Total Party City Holdco Inc. stockholders’ equity before common stock held in
treasury
  435,953   377,972   190,360 
Less: Common stock held in treasury, at cost (11,314,487, 11,280,098 and 27,217,070 shares at June 30, 2021, December 31, 2020, and June 30, 2020, respectively)  (327,394)  (327,182)  (327,170)
Total Party City Holdco Inc. stockholders’ equity  108,559   50,790   (136,810)
Noncontrolling interests  (786)  (269)  (206)
      Total stockholders’ equity  107,773   50,521   (137,016)
   Total liabilities and stockholders’ equity $2,722,819  $2,806,455  $3,056,783 


PARTY CITY HOLDCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share and per share data, unaudited)

  Three Months Ended June 30,  Six Months Ended June 30, 
  2021  2020  2021  2020 
Net sales* $535,746  $254,691  $962,553  $668,734 
Cost of sales  318,574   237,907   593,095   534,664 
Gross Profit  217,172   16,784   369,458   134,070 
Wholesale selling expenses  7,358   9,707   16,474   25,165 
Retail operating expenses  97,179   65,236   186,075   153,402 
General and administrative expenses  45,795   63,955   91,833   129,289 
Art and development costs  5,004   3,516   9,975   8,838 
Store impairment and restructuring charges     1,164      18,892 
Loss on disposal of assets in international operations        3,211    
Goodwill, intangibles and long-lived assets impairment           536,648 
Income (loss) from operations  61,836   (126,794)  61,890   (738,164)
Interest expense, net  23,116   25,412   40,330   50,532 
Other (income) expense, net  (1,300)  1,484   (873)  7,160 
Income (loss) before income taxes  40,020   (153,690)  22,433   (795,856)
Income tax expense (benefit)  10,209   (23,631)  6,740   (124,129)
Net income (loss)  29,811   (130,059)  15,693   (671,727)
Less: Net (loss) attributable to noncontrolling interests     (44)  (54)  (199)
Net income (loss) attributable to common shareholders of Party City Holdco Inc. $29,811  $(130,015) $15,747  $(671,528)
Net income (loss) per share attributable to common shareholders of Party City Holdco Inc.–Basic $0.27  $(1.39) $0.14  $(7.19)
Net income (loss) per share attributable to common shareholders of Party City Holdco Inc.–Diluted $0.26  $(1.39) $0.14  $(7.19)
Weighted-average number of common shares-Basic  111,340,295   93,419,078   111,128,822   93,407,344 
Weighted-average number of common shares-Diluted  116,251,151   93,419,078   115,499,304   93,407,344 
Dividends declared per share $  $  $  $ 
Comprehensive income (loss) $30,761  $(125,961) $51,742  $(679,842)
Less: Comprehensive (loss) attributable to noncontrolling interests     (44)  (30)  (199)
Comprehensive income (loss) attributable to common shareholders of Party City Holdco Inc. $30,761  $(125,917) $51,772  $(679,643)

*Includes royalties and franchise fees. Prior year amounts conformed to current year presentation


PARTY CITY HOLDCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

  Six Months Ended June 30, 
  2021  2020 
Cash flows provided by (used in) operating activities:      
Net income (loss) $15,693  $(671,727)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:      
Depreciation and amortization expense  34,860   40,518 
Amortization of deferred financing costs and original issuance discounts  1,937   2,401 
Provision for doubtful accounts  1,171   4,443 
Deferred income tax expense (benefit)  2,622   (58,440)
Change in operating lease liability/asset  (52,315)  44,803 
Undistributed (income) loss in equity method investments  (211)  415 
Loss on disposal of assets  109   93 
Loss on disposal of assets in international operations  3,211    
Non-cash adjustment for store impairment and restructuring charges     16,458 
Goodwill, intangibles and long-lived assets impairment     536,648 
Non-employee equity-based compensation**     1,033 
Stock option expense – time – based  217   560 
Stock option expense – performance – based     7,847 
Restricted stock unit expense – time-based  767   1,139 
Restricted stock unit – performance-based  1,789    
Directors – non-cash compensation  114   75 
Net loss on debt repayment  226    
Changes in operating assets and liabilities:      
(Increase) decrease in accounts receivable  (2,395)  56,315 
(Increase) decrease in inventories  (15,191)  20,055 
(Increase) in prepaid expenses and other current assets  (31,055)  (47,700)
Increase (decrease) in accounts payable, accrued expenses and income taxes
payable
  52,228   (3,717)
   Net cash provided by (used in) operating activities  13,777   (48,781)
Cash flows (used in) investing activities:      
Capital expenditures  (40,452)  (18,332)
Proceeds from disposal of property and equipment     7 
Proceeds from sale of international operations, net of cash disposed  20,556    
   Net cash (used in) investing activities  (19,896)  (18,325)
Cash flows (used in) provided by financing activities:      
Repayment of loans, notes payable and long-term obligations  (836,435)  (79,763)
Proceeds from loans, notes payable and long-term obligations  794,750   269,874 
Treasury stock purchases  (212)  (85)
Exercise of stock options  3,322    
Debt issuance costs  (21,437)   
   Net cash (used in) provided by financing activities  (60,012)  190,026 
Effect of exchange rate changes on cash and cash equivalents  274   (3,945)
   Net (decrease) increase in cash and cash equivalents and restricted cash  (65,857)  118,975 
Change in cash classified within current assets held for sale  31,628    
Cash and cash equivalents and restricted cash at beginning of period  119,681   35,176 
Cash and cash equivalents and restricted cash at end of period* $85,452  $154,151 
Supplemental disclosure of cash flow information:      
Cash paid during the period for interest expense $16,594  $43,402 
Cash paid during the period for income taxes, net of refunds $3,411  $11,854 

*Includes $1,000 and $18 of restricted cash for the six months ended June 30, 2021 and 2020. The Company recorded restricted cash in other assets, net as presented in the consolidated balance sheet at June 30, 2021 and in prepaid expenses and other current assets as presented in the consolidated balance sheets at December 31, 2020 and June 30, 2020.

** See Note 17 – Kazzam, LLC of Item 1, “Condensed Consolidated Financial Statements (Unaudited)” in the June 30, 2021 Quarterly Report on Form 10-Q 2021.


PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA
(Unaudited)

  Three Months Ended June 30,  Six months ended June 30, 
  2021  2020  2021  2020 
(Dollars in thousands)            
Net income (loss) $29,811  $(130,059) $15,693  $(671,727)
Interest expense, net  23,116   25,412   40,330   50,532 
Income tax expense (benefit)  10,209   (23,631)  6,740   (124,129)
Depreciation and amortization  16,916   22,766   34,860   40,518 
EBITDA  80,052   (105,512)  97,623   (704,806)
Store impairment and restructuring charges (a)     1,761      29,522 
Inventory restructuring and early lease terminations (j)  3,499      6,637    
Other restructuring, retention and severance (b)  31   5,697   2,082   8,744 
Goodwill, intangibles and long-lived assets impairment (c)           536,648 
Deferred rent (d)  (398)  (1,488)  1,128   (2,872)
Closed store expense (e)  1,543   400   3,136   1,635 
Foreign currency losses/(gains), net  (772)  12   (1,311)  4,267 
Stock option expense – time-based  104   206   217   560 
Stock option expense – performance – based     7,847      7,847 
Restricted stock unit and restricted cash awards expense – performance-based  1,161      1,978    
Restricted stock units – time-based  415   518   767   1,139 
Non-employee equity-based compensation (f)           1,033 
Undistributed loss (income) in equity method
investments
  (547)  559   (211)  415 
Corporate development expenses (g)     2,643      5,612 
Non-recurring legal settlements/costs     188      6,509 
Gain or loss on sale of property, plant and equipment*     83   111   51 
COVID - 19 (i)  655   44,200   1,270   70,380 
Loss on disposal of assets        3,211    
Net loss on debt repayment        226    
Other*  90   133   1,388   2,437 
Adjusted EBITDA $85,833  $(42,753) $118,252  $(30,879)

* Prior period amounts have been reclassified to conform with current period presentation.


PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued
(In thousands, unaudited)

     Three Months Ended June 30, 2021 EBITDA Adjustments   
  June 30, 2021
GAAP
Basis (as
reported)
 Inventory restructuring and early lease terminations (j) Stock Option
Expense/Non-
Employee Equity
Compensation/
Restricted
stock units
 Deferred
Rent (d)
 Other
restructuring,
retention and
severance (b)
 Closed
store
expense (e)
 COVID-
19 (i)
 Foreign
currency
gains
 Other June 30,
2021
Non-GAAP
basis
Net sales $535,746                          $535,746 
Cost of sales  318,574   (2,312)                       316,262 
Gross Profit  217,172                           219,484 
Wholesale selling expenses  7,358                           7,358 
Retail operating expenses  97,179   (1,187)     356      (1,516)  (463)        94,369 
General and administrative expenses  45,795      (1,680)  42   (31)  (27)  (192)     (39)  43,868 
Art and development costs  5,004                           5,004 
Income from operations  61,836                           68,885 
Interest expense, net  23,116                        (51)  23,065 
Other (income) expense, net  (1,300)                    772   547   19 
Income (loss) before income taxes  40,020                           45,801 
Interest expense, net  23,116                           23,116 
Depreciation and amortization  16,916                           16,916 
EBITDA  80,052                           85,833 
Adjustments to EBITDA  5,781   (3,499)  (1,680)  398   (31)  (1,543)  (655)  772   457    
Adjusted EBITDA $85,833  $(3,499) $(1,680) $398  $(31) $(1,543) $(655) $772  $457  $85,833 


PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued
(In thousands, unaudited)

     Three Months Ended June 30, 2020 EBITDA Adjustments    
  June 30, 2020
GAAP
Basis (as
reported)
 Store
impairment
and
restructuring
charges (a)
 Corporate
development
expenses (g)
 Legal Stock Option
Expense/Non-
Employee Equity
Compensation/
Restricted
stock units –
time-based
 Deferred
Rent (d)
 Other
restructuring,
retention and
severance (b)
 Closed
store
expense (e)
 COVID-
19 (i)
 Foreign
currency
losses
 Other June 30,
2020
Non-GAAP
basis
Net sales $254,691                                $254,691 
Cost of sales  237,907   (597)           (134)  (4,437)     (28,376)        204,363 
Gross Profit  16,784                                 50,328 
Wholesale selling expenses  9,707      (1,104)                 (509)        8,094 
Retail operating expenses  65,236               1,573      (342)  (4,389)        62,078 
General and administrative expenses  63,955      (1,003)  (188)  (8,571)  49   (1,260)  (58)  (10,926)        41,998 
Art and development costs  3,516                                 3,516 
Store impairment and restructuring charges  1,164   (1,164)                              
(Loss) from operations  (126,794)                                (65,358)
Interest expense, net  25,412                                 25,412 
Other (income) expense, net  1,484      (536)                    (12)  (775)  161 
Loss before income taxes  (153,690)                                (90,931)
Interest expense, net  25,412                                 25,412 
Depreciation and amortization  22,766                                 22,766 
EBITDA  (105,512)                                (42,753)
Adjustments to EBITDA  62,759   (1,761)  (2,643)  (188)  (8,571)  1,488   (5,697)  (400)  (44,200)  (12)  (775)   
Adjusted EBITDA $(42,753) $(1,761) $(2,643) $(188) $(8,571) $1,488  $(5,697) $(400) $(44,200) $(12) $(775) $(42,753)


PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued
(In thousands, unaudited)

     Six Months Ended June 30, 2021 EBITDA Adjustments    
  June 30, 2021
GAAP
Basis (as
reported)
 Inventory restructuring and early lease terminations (j) Net loss on debt repayment Stock Option
Expense/Non-
Employee Equity
Compensation/
Restricted
stock units
 Deferred
Rent (d)
 Other
restructuring,
retention and
severance (b)
 Closed
store
expense (e)
 COVID-
19 (i)
 Foreign
currency
gains
 Other June 30,
2021
Non-GAAP
basis
Net sales $962,553                             $962,553 
Cost of sales  593,095   (3,694)                       124   589,525 
Gross Profit  369,458                              373,028 
Wholesale selling expenses  16,474                              16,474 
Retail operating expenses  186,075   (2,943)        (1,212)     (3,078)  (1,053)     (718)  177,071 
General and administrative expenses  91,833         (2,962)  84   (2,082)  (58)  (217)     (689)  85,909 
Art and development costs  9,975                              9,975 
Loss on disposal of assets in international operations  3,211                           (3,211)   
Income from operations  61,890                              83,599 
Interest expense, net  40,330                           (105)  40,225 
Other (income) expense, net  (873)     (226)                 1,311   100   312 
Income before Income Taxes  22,433                              43,062 
Interest expense, net  40,330                              40,330 
Depreciation and amortization  34,860                              34,860 
EBITDA  97,623                              118,252 
Adjustments to EBITDA  20,629   (6,637)  (226)  (2,962)  (1,128)  (2,082)  (3,136)  (1,270)  1,311   (4,499)   
Adjusted EBITDA $118,252  $(6,637) $(226) $(2,962) $(1,128) $(2,082) $(3,136) $(1,270) $1,311  $(4,499) $118,252 


PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued
(In thousands, unaudited)

     Six Months Ended June 30, 2020 EBITDA Adjustments    
  June 30, 2020
GAAP
Basis (as
reported)
  Goodwill, intangibles and long-lived assets impairment (c)  Store
impairment
and
restructuring
charges (a)
  Corporate
development
expenses (g)
  Legal  Stock Option
Expense/Non-
Employee Equity
Compensation/
Restricted
stock units
(f)(g)
  Deferred
Rent (d)
  Other
restructuring,
retention and
severance (b)
  Closed
store
expense (e)
  COVID-
19 (i)
  Foreign
currency
loss
  Other  June 30,
2020
Non-GAAP
basis
 
Net sales $668,734                                   $668,734 
Cost of sales  534,664      (10,630)           (134)  (4,437)     (41,180)     (429)  477,854 
Gross Profit  134,070                                    190,880 
Wholesale selling expenses  25,165         (1,840)                 (623)        22,702 
Retail operating expenses  153,402                  2,909      (1,508)  (14,567)        140,236 
General and administrative expenses  129,289         (3,132)  (6,509)  (9,546)  97   (4,307)  (127)  (14,010)        91,755 
Art and development costs  8,838                                    8,838 
Store impairment and restructuring charges  18,892      (18,892)                              
Goodwill, intangibles and long-lived assets impairment  536,648   (536,648)                                 
(Loss) from operations  (738,164)                                   (72,651)
Interest expense, net  50,532                                    50,532 
Other (income) expense, net  7,160         (640)     (1,033)              (4,267)  (2,474)  (1,254)
(Loss) before income taxes  (795,856)                                   (121,929)
Interest expense, net  50,532                                    50,532 
Depreciation and amortization  40,518                                    40,518 
EBITDA  (704,806)                                   (30,879)
Adjustments to EBITDA  673,927   (536,648)  (29,522)  (5,612)  (6,509)  (10,579)  2,872   (8,744)  (1,635)  (70,380)  (4,267)  (2,903)   
Adjusted EBITDA $(30,879) $(536,648) $(29,522) $(5,612) $(6,509) $(10,579) $2,872  $(8,744) $(1,635) $(70,380) $(4,267) $(2,903) $(30,879)


PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED NET INCOME
(Unaudited)

  Three Months Ended June 30,  Six months ended June 30, 
  2021  2020  2021  2020 
(Dollars in thousands, except per share amounts)            
Income (loss) before income taxes $40,020  $(153,690) $22,433  $(795,856)
Intangible asset amortization  2,354   2,679   4,831   5,545 
Amortization of deferred financing costs and original
issuance discounts
  1,074   1,199   1,937   2,401 
Store impairment and restructuring charges (a)     181      28,154 
Other restructuring charges (b)  31   6,595   1,967   7,517 
Goodwill, intangibles and long-lived assets impairment (c)           536,648 
Non-employee equity-based compensation (f)           1,033 
Non-recurring legal settlements/costs     100      6,421 
Stock option expense – time-based  104   561   217   561 
Stock option expense – performance – based     7,493      7,847 
Restricted stock unit expense – performance-based  1,154      1,971    
COVID - 19 (i)  655   44,200   1,270   70,380 
Loss on disposal of assets        3,211    
Inventory disposals  162      926    
Adjusted income (loss) before income taxes  45,554   (90,682)  38,763   (129,349)
Adjusted income tax (benefit) (h)  11,446   (29,366)  10,064   (41,650)
Adjusted net income (loss) $34,108  $(61,316) $28,699  $(87,699)
Adjusted net income (loss) per common share – diluted $0.29  $(0.66) $0.25  $(0.94)
Weighted-average number of common shares-diluted  116,251,151   93,419,078   115,499,304   93,407,344 
  1. The Company performed a comprehensive review of its store locations aimed at improving the overall productivity of such locations (“store optimization program”). After careful consideration and evaluation of the store locations, the Company made the decision to accelerate the optimization of its store portfolio with the closure of stores, which are primarily located in close proximity to other Party City stores. For further detail, refer to Note 3 – Store Impairment and Restructuring Charges of Item 1, “Condensed Consolidated Financial Statements (Unaudited)” in this Quarterly Report on Form 10-Q 2021.
  2. Amounts expensed principally relate to severance due to organizational changes.
  3. As a result of a sustained decline in market capitalization, the Company recognized a non-cash pre-tax goodwill and intangibles impairment charge at March 31, 2020.
  4. The “deferred rent” adjustment reflects the difference between accounting for rent and landlord incentives in accordance with GAAP and the Company’s actual cash outlay.
  5. Charges incurred related to closing and relocating stores in the ordinary course of business.
  6. The acquisition of Ampology’s interest in Kazzam, LLC in an equity transaction. See Note 17 – Kazzam, LLC of Item 1 in the June 30, 2021 Quarterly Report on Form 10-Q.
  7. Primarily represents costs for Kazzam (See Note 17 – Kazzam, LLC of Item 1 in the June 30, 2021 Quarterly Report on Form 10-Q for further discussion).
  8. Represents income tax expense/benefit after excluding the specific tax impacts for each of the pre-tax adjustments. The tax impacts for each of the adjustments were determined by applying to the pre-tax adjustments the effective income tax rates for the specific legal entities in which the adjustments were recorded.
  9. Represents COVID-19 expenses for employees on temporary furlough for whom the Company provides health benefits; non-payroll expenses including advertising, occupancy and other store expenses.
  10. Costs incurred for early lease terminations and a merchandise transformation project to transition and optimize stores to the reduced SKU assortment levels. 


PARTY CITY HOLDCO INC.
SEGMENT INFORMATION
(In thousands, except percentages, unaudited)

  Three Months Ended June 30,
  2021 2020
  Dollars in
Thousands
  Percentage of
Total Revenues
 Dollars in
Thousands
  Percentage of
Total Revenues
Net Sales:              
Wholesale $230,961   43.1 % $131,296   51.6 %
Eliminations  (139,027)  (26.0)   (62,387)  (24.5) 
Net wholesale  91,934   17.2    68,909   27.1  
Retail*  443,812   82.8    185,782   72.9  
Total revenues $535,746   100.0 % $254,691   100.0 %

*Retail revenues include royalties and franchise fees. Prior year amount conformed to current year presentation.

  Six months ended June 30,
  2021  2020
  Dollars in
Thousands
  Percentage of
Total Revenues
 Dollars in
Thousands
  Percentage of
Total 
Revenues
Net Sales:              
Wholesale $443,098   46.0 % $346,094   51.8 %
Eliminations  (257,639)  (26.8)   (166,118)  (24.8) 
Net wholesale  185,459   19.3    179,976   26.9  
Retail*  777,094   80.7    488,758   73.1  
Total revenues $962,553   100.0 % $668,734   100.0 %

*Retail revenues include royalties and franchise fees. Prior year amount conformed to current year presentation.

  Three Months Ended June 30,
  2021   2020
  Dollars in
Thousands
  Percentage
of Net Sales
   Dollars in
Thousands
  Percentage
of Net Sales
  
Retail Gross Profit* $193,565   43.6 % $29,902   16.1 %
Wholesale Gross Profit  23,607   25.7    (13,118)  (19.0) 
Total Gross Profit $217,172   40.5 % $16,784   6.6 %

*Retail Gross Profit include royalties and franchise fees. Prior year amount conformed to current year presentation.

  Six months ended June 30,
  2021   2020
  Dollars in
Thousands
  Percentage
of Net Sales
   Dollars in
Thousands
  Percentage
of Net Sales
  
Retail Gross Profit* $316,743   40.8 % $125,845   25.7 %
Wholesale Gross Profit  52,715   28.4    8,225   4.6  
Total Gross Profit $369,458   38.4 % $134,070   20.0 %

*Retail Gross Profit include royalties and franchise fees. Prior year amount conformed to current year presentation.


PARTY CITY HOLDCO INC.
OPERATING METRICS

  Three months ended June 30, LTM
  2021 2020 2021
          
Store Count         
Corporate Stores:         
Beginning of period  746   757   757 
New stores opened  5   1   10 
Acquired       5 
Closed  (2)  (1)  (23)
End of period  749   757   749 
Franchise Stores         
Beginning of period  85   97   96 
Sold to Party City       (5)
Closed  (3)     (9)
End of period  82   97   82 
Grand Total  831   854   831 


  Three months ended June 30, Six months ended June 30,
  2021 2020 2021 2020
         
Wholesale Share of Shelf (a) 81.0% 82.3% 81.2% 81.7%
Manufacturing Share of Shelf (b) 30.7% 33.5% 31.4% 30.7%
         
         
         
  Three months ended June 30, Six months ended June 30,
  2021 2020 2021 2020
         
Brand comparable sales (c) 118.3% -52.4% 73.4% -35.6%

(a)        Wholesale share of shelf represents the percentage of our retail product cost of sales supplied by our wholesale operations.
(b)        Manufacturing share of shelf represents the percentage of our retail product cost of sales manufactured by the company.
(c)        Party City brand comparable sales include North American e-commerce sales.


Primary Logo

Source: Party City Holdco Inc.