Party City Holdco Inc. - FORM 8-K - EX-99.1

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8-K - 8-K - Party City Holdco Inc.	prty-8k_20210510.htm

Exhibit 99.1

PARTY CITY REPORTS FIRST QUARTER 2021 RESULTS AND PROVIDES

Q2 2021 BUSINESS OUTLOOK

Total Sales increased 3.1% versus prior year; Comparable Sales Increased 35.9% versus

prior year and 0.4% versus Q1 2019

GAAP Net Loss per Share of $0.13 versus a Net Loss of $5.80 in Q1 2020; Adjusted EBITDA of $32.4 million vs $11.9 million in Q1 2020

Cash from Operations Improved $25.2 million versus Q1 2020

ELMSFORD, N.Y.- May 10, 2021 - Party City Holdco Inc. (the “Company” or “PRTY”; NYSE:PRTY) today announced financial results for the quarter ended March 31, 2021.

Brad Weston, Chief Executive Officer of Party City, stated, “We delivered continued strong core category performance and better than expected results in seasonal categories in the first quarter, fueling top and bottom line performance that exceeded expectations. Despite operating in a pandemic impacted environment with fewer in-person celebrations, brand comparable sales increased 0.4% versus 2019. While social gatherings were suppressed for a significant portion of the quarter, we were very encouraged by first quarter results and sales momentum which continued into April. Importantly, we made good progress advancing our strategic building blocks that are improving our relevancy as we continue to inspire joy by making it easy to create unforgettable memories.”

Mr. Weston added, “As we look to the second quarter, we are confident in our overall positioning heading into the summer and graduation season. We are focused on the right priorities to fortify our industry leadership and are poised to capitalize on the opportunities that lie ahead as life begins to return to normal and celebrations gradually resume.”

First Quarter Summary:

•

Total revenues were $426.8 million, an increase of 3.1% on a reported basis and 2.7% on a constant currency basis, compared to the first quarter 2020. As the Company closed the previously disclosed sale of a substantial portion of its international operations at the end of January 2021, first quarter 2021 performance included one month of international results versus three months in the prior year period.

•

Total Retail sales increased 10.0% on a reported and constant currency basis driven by a 49.3% comparable sales increase in core categories versus the 13 weeks ended April 4, 2020, partially offset by the divestiture of the international retail business and timing of New Year’s Eve.

•

The total number of corporate Party City stores was 751 as of March 31, 2021 compared to 757 in the prior year period.

•

Brand comparable sales increased 35.9% in the first quarter versus the 13 weeks ended April 4, 2020 and increased 0.4% compared to the 13 weeks ended April 6, 2019.

•

Net third-party Wholesale revenues decreased 15.8% on a reported basis or 16.8% in constant currency, driven predominately by the divestiture of a significant portion of our international operations.

•

Total gross profit margin increased 735 basis points to 35.7% of net sales. Excluding certain items not indicative of core operating performance, gross profit margin improved 200 basis points to 36.0% of net sales mainly due to favorable product mix and fewer retail sales promotions, partially offset by increased costs for helium and delivery service.

•

Operating expenses totaled $152.2 million or $576.5 million lower than the first quarter of 2020. Excluding certain items not indicative of core operating performance, operating expenses totaled $138.8 million, or 32.5% of net sales, a 320-basis point improvement versus prior-year period primarily driven by disciplined expense management and leverage on higher sales.

•

Interest expense was $17.2 million during the first quarter of 2021, compared to $25.1 million during the first quarter of 2020 mainly due to lower amounts of debt outstanding.

•

Reported GAAP net loss was $14.1 million, or a loss of $0.13 per diluted share.

•

Adjusted net loss was $5.4 million, or a loss of $0.05 per diluted share, compared to adjusted net loss of $26.4 million, or a loss of $0.28 per share, in the first quarter of 2020. (See “Non-GAAP Information”)

•

Adjusted EBITDA was $32.4 million, versus $11.9 million during the first quarter of 2020. (See “Non-GAAP Information”)

Balance Sheet and Cash Flow Highlights:

As of the end of the first quarter 2021, the Company had $83.8 million in cash and approximately $129.3 million of availability under the ABL Facility, for total liquidity of $213.1 million.

In addition, the principal balance of debt net of cash on March 31, 2021 was $1,303.0 million versus $1,760.4 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
	March 31, 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		$	730,508		$	-		$	730,508
6.125% Senior Notes – due 2023		22,924			22,792			-			22,792
6.625% Senior Notes – due 2026		92,254			91,483			-			91,483
First Lien Party City Notes – due 2025		161,669			202,657			-			202,657
First Lien Anagram Notes – due 2025		112,979			-			150,568			150,568
Second Lien Anagram Notes – due 2026		86,981			-			148,159			148,159
Finance lease obligations		13,687			13,687			-			13,687
Total long-term obligations		1,240,494			1,061,127			298,727			1,359,854
Less: current portion	N/A				(1,359	)		-			(1,359	)
Long-term obligations, excluding current portion	$	1,240,494		$	1,059,768		$	298,727		$	1,358,495
Loans and notes payable		146,275			146,275			-			146,275
Less: Cash		(83,806	)		(66,796	)		(17,010	)		(83,806	)
Principal balance net of cash	$	1,302,963		$	1,139,247		$	281,717		$	1,420,964

Net cash used in operating activities in the first three months of 2021 was $48.8 million, compared to $74.0 million in the prior-year period, driven primarily by higher net sales, improved operating income and favorable

working capital changes. Free cash flow^a in the first three months of 2020 was $10.2 million compared to $1.1 million in the prior-year period, driven by higher Adjusted EBITDA, 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 second quarter 2021 outlook. This outlook is subject to potential consumer and marketplace volatility due to the COVID-19 pandemic:

•

Total revenue of $475 to $490 million

•

Brand comparable sales increase of 92% to 97% compared to second quarter 2020

•

Brand comparable sales increase of mid to high single digits compared to second quarter 2019

•

GAAP net income of $10 to $20 million with an assumed Q2 tax rate of 27%

•

Adjusted EBITDA of $60 to $70 million

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

	Q2 2021		Q2 2021
(in thousands)	High		Low
Net Income	$	19,929	$	10,439
Provision for Income Taxes		7,371		3,861
Interest Expense		23,600		24,600
Depreciation and Amortization Expense		16,200		17,200
EBITDA	$	67,100	$	56,100
EBITDA Add-Backs		2,900		3,900
Adjusted EBITDA	$	70,000	$	60,000

Conference Call Information

A conference call to discuss the second quarter 2021 financial results is scheduled for today, May 10, 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. 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 net debt leverage, 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 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 833 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)

	March 31, 2021			December 31, 2020			March 31, 2020
	(Note 2) (Unaudited)			(Note 2)			(Note 2) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	83,806		$	119,532		$	194,433
Accounts receivable, net		81,658			90,879			116,223
Inventories, net		428,316			412,285			629,875
Prepaid expenses and other current assets		47,803			45,905			76,698
Income tax receivable		68,632			57,549			—
Assets held for sale, net		—			83,110			—
Total current assets		710,215			809,260			1,017,229
Property, plant and equipment, net		214,698			209,412			235,577
Operating lease asset		687,214			700,087			773,775
Goodwill		659,865			661,251			665,129
Trade names		383,733			384,428			394,221
Other intangible assets, net		29,912			32,134			41,960
Other assets, net		9,832			9,883			6,904
Total assets	$	2,695,469		$	2,806,455		$	3,134,795
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	142,859		$	175,707		$	381,422
Accounts payable		127,812			118,928			96,383
Accrued expenses		146,742			160,605			154,847
Liabilities held for sale		—			68,492			—
Current portion of operating lease liability		150,860			176,045			153,614
Income taxes payable		—			524			—
Current portion of long-term obligations		1,359			13,576			98,588
Total current liabilities		569,632			713,877			884,854
Long-term obligations, excluding current portion		1,358,495			1,329,808			1,474,854
Long-term portion of operating lease liability		628,217			654,729			707,734
Deferred income tax liabilities, net		31,036			34,705			70,943
Other long-term liabilities		33,195			22,815			16,036
Total liabilities		2,620,575			2,755,934			3,154,421
Commitments and contingencies
Stockholders’ equity:
Common stock (111,258,890, 110,781,613 and 94,491,352 shares outstanding and 122,573,377, 122,061,711 and 121,708,422 shares issued at March 31, 2021, December 31, 2020, March 31, 2020 respectively)		1,383			1,373			1,211
Additional paid-in capital		976,037			971,972			933,174
Accumulated deficit		(579,486	)		(565,457	)		(578,732	)
Accumulated other comprehensive income (loss)		5,134			(29,916	)		(47,947	)
Total Party City Holdco Inc. stockholders’ equity before common stock held in treasury		403,068			377,972			307,706
Less: Common stock held in treasury, at cost (11,314,487, 11,280,098 and 27,217,070 shares at March 31, 2021, December 31, 2020, March 31, 2020, respectively)		(327,388	)		(327,182	)		(327,170	)
Total Party City Holdco Inc. stockholders’ equity		75,680			50,790			(19,464	)
Noncontrolling interests		(786	)		(269	)		(162	)
Total stockholders’ equity		74,894			50,521			(19,626	)
Total liabilities and stockholders’ equity	$	2,695,469		$	2,806,455		$	3,134,795

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 March 31,
	2021			2020
Net sales*	$	426,807		$	414,043
Cost of sales		274,521			296,757
Gross Profit		152,286			117,286
Wholesale selling expenses		9,116			15,458
Retail operating expenses		88,896			88,166
General and administrative expenses		46,038			65,334
Art and development costs		4,971			5,322
Store impairment and restructuring charges		—			17,728
Loss on disposal of assets in international operations		3,211			—
Goodwill, intangibles and long-lived assets impairment		—			536,648
Income (loss) from operations		54			(611,370	)
Interest expense, net		17,214			25,120
Other expense, net		427			5,676
(Loss) before income taxes		(17,587	)		(642,166	)
Income tax (benefit)		(3,469	)		(100,498	)
Net (loss)		(14,118	)		(541,668	)
Less: Net (loss) attributable to noncontrolling interests		(54	)		(155	)
Net (loss) attributable to common shareholders of Party City Holdco Inc.	$	(14,064	)	$	(541,513	)
Net (loss) per share attributable to common shareholders of Party City Holdco Inc.–Basic	$	(0.13	)	$	(5.80	)
Net (loss) per share attributable to common shareholders of Party City Holdco Inc.–Diluted	$	(0.13	)	$	(5.80	)
Weighted-average number of common shares-Basic		110,917,349			93,395,609
Weighted-average number of common shares-Diluted		110,917,349			93,395,609
Dividends declared per share	$	—		$	—
Comprehensive income (loss)	$	20,937		$	(553,881	)
Less: Comprehensive (loss) attributable to noncontrolling interests		(84	)		(155	)
Comprehensive income (loss) attributable to common shareholders of Party City Holdco Inc.	$	21,021		$	(553,726	)

*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)

	Three Months Ended March 31,
	2021			2020
Cash flows used in operating activities:
Net (loss)	$	(14,118	)	$	(541,668	)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Depreciation and amortization expense		17,944			17,752
Amortization of deferred financing costs and original issuance discounts		863			1,202
Provision for doubtful accounts		696			1,119
Deferred income tax benefit		(3,386	)		(54,991	)
Change in operating lease liability/asset		(37,556	)		(389	)
Undistributed loss (income) in equity method investments		336			(144	)
Loss on disposal of assets		110			40
Loss on disposal of assets in international operations		3,211			—
Non-cash adjustment for store impairment and restructuring charges		—			16,277
Goodwill, intangibles and long-lived assets impairment		—			536,648
Non-employee equity-based compensation**		—			1,033
Stock option expense – time – based		113			354
Restricted stock unit expense – time-based		352			621
Restricted stock unit – performance-based		708			—
Directors – non-cash compensation		57			75
Net loss on debt repayment		226			—
Changes in operating assets and liabilities:
Decrease in accounts receivable		2,952			27,635
(Increase) decrease in inventories		(17,565	)		23,205
(Increase) in prepaid expenses and other current assets		(8,768	)		(26,661	)
Increase (decrease) in accounts payable, accrued expenses and income taxes payable		5,014			(76,138	)
Net cash (used in) operating activities		(48,811	)		(74,030	)
Cash flows (used in) investing activities:
Capital expenditures		(22,184	)		(10,726	)
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		(1,628	)		(10,719	)
Cash flows (used in) provided by financing activities:
Repayment of loans, notes payable and long-term obligations		(792,849	)		(3,932	)
Proceeds from loans, notes payable and long-term obligations		794,750			253,030
Treasury stock purchases		(206	)		(85	)
Exercise of stock options		2,855			—
Debt issuance costs		(21,437	)		—
Net cash (used in) provided by financing activities		(16,887	)		249,013
Effect of exchange rate changes on cash and cash equivalents		(177	)		(4,863	)
Net (decrease) increase in cash and cash equivalents and restricted cash		(67,503	)		159,401
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*	$	83,806		$	194,577
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	20,309		$	35,927
Cash paid during the period for income taxes, net of refunds	$	127		$	11,368

*Includes $144 of restricted cash for the three months ended March 31, 2020. There was no restricted cash as of March 31, 2021. The Company records restricted cash in prepaid expenses and other current asset as presented in the consolidated balance sheets at December 31, 2020 and March 31, 2020.

** See Note 17 – Kazzam, LLC of Item 1, “Condensed Consolidated Financial Statements (Unaudited)” in the March 31, 2021 Quarterly Report on Form 10-Q 2021.

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA

(Unaudited)

	Three Months Ended March 31,
	2021			2020
(Dollars in thousands)
Net (loss)	$	(14,118	)	$	(541,668	)
Interest expense, net		17,214			25,120
Income tax (benefit)		(3,469	)		(100,498	)
Depreciation and amortization		17,944			17,752
EBITDA		17,571			(599,294	)
Store impairment and restructuring charges (a)		—			27,761
Early lease terminations		3,138			—
Other restructuring, retention and severance (b)		2,051			3,047
Goodwill, intangibles and long-lived assets impairment (c)		—			536,648
Deferred rent (d)		1,526			(1,384	)
Closed store expense (e)		1,593			1,235
Foreign currency losses/(gains), net		(539	)		4,255
Stock option expense – time-based		113			354
Restricted stock unit and restricted cash awards expense – performance-based		817			—
Restricted stock units – time-based		352			621
Non-employee equity-based compensation (f)		—			1,033
Undistributed loss (income) in equity method investments		336			(144	)
Corporate development expenses (g)		—			2,969
Non-recurring legal settlements/costs		—			6,321
COVID - 19 (l)		615			26,180
Loss on disposal of assets		3,211			—
Net loss on debt repayment		226			—
Other		1,409			2,272
Adjusted EBITDA	$	32,419		$	11,874

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued

(In thousands, unaudited)

				Three Months Ended March 31, 2021 EBITDA Adjustments
	March 31, 2021 GAAP Basis (as reported)			Early lease terminations			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 (l)			Foreign currency losses		Other			March 31, 2021 Non-GAAP basis
Net sales	$	426,807																												$	426,807
Cost of sales		274,521			(1,382	)																						124			273,263
Gross Profit		152,286																													153,544
Wholesale selling expenses		9,116																													9,116
Retail operating expenses		88,896			(1,756	)								(1,568	)					(1,562	)		(590	)				(718	)		82,703
General and administrative expenses		46,038									(1,282	)		42			(2,052	)		(31	)		(25	)				(650	)		42,041
Art and development costs		4,971																													4,971
Loss on disposal of assets in international operations		3,211																										(3,211	)		—
Income from operations		54																													14,713
Interest expense, net		17,214																										(54	)		17,160
Other expense, net		427						(226	)																	539		(449	)		292
(Loss) before Income Taxes		(17,587	)																												(2,739	)
Interest expense, net		17,214																													17,214
Depreciation and amortization		17,944																													17,944
EBITDA		17,571																													32,419
Adjustments to EBITDA		14,848			(3,138	)		(226	)		(1,282	)		(1,526	)		(2,052	)		(1,593	)		(615	)		539		(4,957	)		(0	)
Adjusted EBITDA	$	32,419		$	(3,138	)	$	(226	)	$	(1,282	)	$	(1,526	)	$	(2,052	)	$	(1,593	)	$	(615	)	$	539	$	(4,957	)	$	32,419

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued

(In thousands, unaudited)

				Three Months Ended March 31, 2020 EBITDA Adjustments
	March 31, 2020 GAAP Basis (as reported)			Goodwill, intangibles and long-lived assets impairment (c)			Store impairment and restructuring charges (a)			Corporate development expenses (h)			Legal			Stock Option Expense/Non- Employee Equity Compensation/ Restricted stock units (f)(g)(i)(m)			Deferred Rent (d)		Other restructuring, retention and severance (b)			Closed store expense (e)			COVID- 19 (l)			Foreign currency gains			Other			March 31, 2020 Non-GAAP basis
Net sales	$	414,043																																		$	414,043
Cost of sales		296,757						(10,033	)																			(12,804	)					(429	)		273,491
Gross Profit		117,286																																			140,552
Wholesale selling expenses		15,458									(736	)																(114	)								14,608
Retail operating expenses		88,166																		1,336					(1,166	)		(10,178	)								78,158
General and administrative expenses		65,334									(2,129	)		(6,321	)		(975	)		48		(3,047	)		(69	)		(3,084	)								49,757
Art and development costs		5,322																																			5,322
Store impairment and restructuring charges		17,728						(17,728	)																												—
Goodwill, intangibles and long-lived assets impairment		536,648			(536,648	)																															—
(Loss) from operations		(611,370	)																																		(7,293	)
Interest expense, net		25,120																																			25,120
Other expense, net		5,676									(104	)					(1,033	)													(4,255	)		(1,699	)		(1,415	)
(Loss) before income taxes		(642,166	)																																		(30,998	)
Interest expense, net		25,120																																			25,120
Depreciation and amortization		17,752																																			17,752
EBITDA		(599,294	)																																		11,874
Adjustments to EBITDA		611,168			(536,648	)		(27,761	)		(2,969	)		(6,321	)		(2,008	)		1,384		(3,047	)		(1,235	)		(26,180	)		(4,255	)		(2,128	)		—
Adjusted EBITDA	$	11,874		$	(536,648	)	$	(27,761	)	$	(2,969	)	$	(6,321	)	$	(2,008	)	$	1,384	$	(3,047	)	$	(1,235	)	$	(26,180	)	$	(4,255	)	$	(2,128	)	$	11,874

Note: Due to rounding, certain numbers may not add up precisely to the totals provided.

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED NET INCOME

(Unaudited)

	Three Months Ended March 31,
	2021			2020
(Dollars in thousands, except per share amounts)
(Loss) before income taxes	$	(17,587	)	$	(642,166	)
Intangible asset amortization		2,477			2,866
Amortization of deferred financing costs and original issuance discounts		863			1,202
Store impairment and restructuring charges (a)		—			27,973
Other restructuring charges (b)		1,936			922
Goodwill, intangibles and long-lived assets impairment (c)		—			536,648
Non-employee equity-based compensation (f)		—			1,033
Non-recurring legal settlements/costs		—			6,321
Stock option expense – time-based		113			354
Restricted stock unit expense – performance-based		817			—
COVID - 19 (l)		615			26,180
Loss on disposal of assets		3,211			—
Inventory disposals		764			—
Adjusted (loss) before income taxes		(6,791	)		(38,667	)
Adjusted income tax (benefit) (h)		(1,382	)		(12,284	)
Adjusted net (loss)	$	(5,409	)	$	(26,383	)
Adjusted net (loss) per common share – diluted	$	(0.05	)	$	(0.28	)
Weighted-average number of common shares-diluted		110,917,349			93,395,609

(a)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.

(b) Amounts expensed principally relate to severance due to organizational changes.

goodwill and intangibles impairment charge at March 31, 2020.

(d) 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.

(e) Charges incurred related to closing and relocating stores in the ordinary course of business.

(f) The acquisition of Ampology’s interest in Kazzam, LLC in an equity transaction. See Note

17 – Kazzam, LLC in Item 1 for further discussion.

(g)Primarily represents costs for Kazzam (see Note 17 – Kazzam, LLC in Item 1 for further discussion).

(h)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.

(l)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.

PARTY CITY HOLDCO INC.
SEGMENT INFORMATION

(In thousands, except percentages, unaudited)

	Three Months Ended March 31,
	2021							2020
	Dollars in Thousands			Percentage of Total Revenues				Dollars in Thousands			Percentage of Total Revenues
Net Sales:
Wholesale	$	212,137			49.7		%	$	214,798			51.9		%
Eliminations		(118,612	)		(27.8	)			(103,731	)		(25.1	)
Net wholesale		93,525			21.9				111,067			26.8
Retail*		333,282			78.1				302,976			73.2
Total revenues	$	426,807			100.0		%	$	414,043			100.0		%

	Three Months Ended March 31,
	2021					2020
	Dollars in Thousands		Percentage of Net Sales				Dollars in Thousands		Percentage of Net Sales
Retail Gross Profit	$	123,178		37.0	%		$	95,943		31.7	%
Wholesale Gross Profit		29,108		31.1				21,343		19.2
Total Gross Profit	$	152,286		35.7	%		$	117,286		28.3	%

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

PARTY CITY HOLDCO INC.
OPERATING METRICS

	Three Months Ended March 31,						LTM
	2021			2020			2021

Store Count
Corporate Stores:
Beginning of period		746			777			757
New stores opened		5			—			10
Acquired		—			—			6
Closed		—			(20	)		(22	)
End of period		751			757			751
Franchise Stores
Beginning of period		85			98			98
New stores opened		—			—		—
Sold to Party City		—			—			(6	)
Closed		(3	)		(1	)		(9	)
End of period		82			97			83
Grand Total		833			854			834

	Three Months Ended March 31,
	2021	2020

Wholesale Share of Shelf (a)	81.5%	81.3%
Manufacturing Share of Shelf (b)	33.0%	29.0%

(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.

Party City Holdco Inc. - FORM 8-K - EX-99.1 - May 10, 2021

Attached files

Party City Holdco Inc. Reports