Generated Higher Operating Cash Flow in 2020
Versus Prior-Year Period Despite COVID-19 Impacts
Fourth Quarter Results Driven by Strength in Core Categories and Strong
New Year’s Comparable Sales
With Completion of Recent Debt Financing, Company has Significant Runway
to Further Advance Strategic Priorities
ELMSFORD, N.Y., March 11, 2021 (GLOBE NEWSWIRE) -- Party City Holdco Inc. (the “Company” or “PRTY”; NYSE:PRTY) today announced financial results for the quarter and year ended December 31, 2020.
Brad Weston, Chief Executive Officer of Party City, stated, “We are very pleased with how our organization navigated 2020, swiftly pivoting to meet the evolving needs of our customers, all while prioritizing the health and safety of both our associates and our customers during this pandemic. Throughout the year, we made important strides on our five strategic initiatives, innovating and elevating our customer experience while also significantly improving our financial position and flexibility with our actions to reduce debt and extend maturities. I am extremely proud of all that has been accomplished thus far and the hard work and commitment demonstrated by the entire team as we continue to transform the business.”
Mr. Weston continued, “We enter 2021 in a substantially stronger position, armed with greater consumer insights and a solid foundation to build upon as we further our mission to deliver The Party Platform by advancing the building blocks that we put in place in 2020. We remain intensely focused on our customer and more effectively operating and leveraging our unique North American vertical model as we continue our transformation and further strengthen our industry leadership position.”
Fourth Quarter Summary:
- Total revenues were $648.2 million, a decrease of 11.4% on a reported basis and 11.7% on a constant currency basis
- Total Retail sales decreased 8.2% on a reported and 8.3% constant currency basis, impacted by closures related to our store optimization program and the impact of COVID-19, offset partially by the benefit from the 53rd week
- The total number of corporate Party City stores was 746 as of December 31, 2020 compared to 777 a year ago.
- Brand comparable sales for the 14 weeks ended January 2, 2021 versus 14 weeks ended January 4, 2020 decreased 5.9% due to the impact of COVID-19, especially on seasonal celebrations.
- The Company’s Retail segment included a 53rd week of operations in the fourth quarter and full year, which contributed approximately $40 million to revenue, approximately $12 million to Adjusted EBITDA and approximately $0.08 to adjusted diluted earnings per share (See "Non-GAAP Financial Information").
- North American digitally enabled sales increased 27.1% including BOPIS, curbside pickup, and delivery.
- Net third-party Wholesale revenues decreased 23.0% or a decrease of 24.0% in constant currency, driven by lower third-party sales including softer franchise store performance, and the impact of international COVID-related restrictions.
- Total gross profit margin decreased 1,454 basis points to 25.7% of net sales driven primarily by a year-end seasonal inventory disposal of $88.3 million, which aligned inventories to the Company’s new seasonal assortment strategy of targeting higher in-season sell-through of merchandise and reducing annual inventory carry-over. Excluding certain items not indicative of core operating performance, gross profit margin decreased 50 basis points to 39.7% of net sales mainly due to deleverage on occupancy costs.
- Operating expenses totaled $281.1 million or $242.4 million lower than the fourth quarter of 2019. Excluding certain items not indicative of core operating performance, operating expenses totaled $200.5 million, or 31.1% of revenue, a reduction of $4.8 million compared to the fourth quarter of 2019, primarily driven by cost management to reflect lower revenues and reduced retail store count.
- Interest expense was $13.1 million during the fourth quarter of 2020, compared to $26.0 million during the fourth quarter of 2019 mainly due to lower amount of debt outstanding.
- Reported GAAP net loss was $96.4 million, or a loss of $(0.88) per diluted share.
- Adjusted net income was $27.5 million, or $0.25 per diluted share, compared to adjusted net income of $47.8 million, or $0.51 per share, in the fourth quarter of 2019. (See “Non-GAAP Financial Information”)
- Adjusted EBITDA was $77.3 million, versus $119.5 million during the fourth quarter of 2019. (See “Non-GAAP Financial Information”)
Full Year Summary:
- Total revenues were $1.851 billion, a decrease of 21.2% on a reported basis and a decrease of 21.3% on a constant currency basis
- Total Retail sales decreased 21.1% on both a reported and constant currency basis, due to the COVID-19 pandemic, with a brand comparable sales decline of 16.5%
- 2nd half 2020 Brand comparable sales decreased 0.5%
- North American digitally enabled sales increased 35.4% including BOPIS, curbside pickup, and delivery
- Net third-party Wholesale revenues decreased 21.6% on a reported basis and 21.7% on a constant currency basis.
- Total gross profit margin decreased 1,017 basis points to 25.7% of net sales. Excluding certain items not indicative of core operating performance, gross profit margin decreased 290 basis points to 34.2% of net sales mainly due to deleverage on occupancy costs.
- Operating expenses totaled $1.358 billion. Excluding certain items not indicative of core operating performance, operating expenses totaled $616.4 million, or 33.4% of revenue, a reduction of $82.0 million compared to 2019, primarily due to lower retail operating expenses as a result of the lower store count, lower Wholesale selling expenses and the temporary benefits from cost cutting related to the pandemic.
- Interest expense was $77.0 million during 2020, compared to $114.9 million during the 2019.
- Reported GAAP net loss was $528.5 million, or $(5.24) per share.
- Adjusted net loss was $49.2 million, or a loss of $0.49 per diluted share compared to adjusted net income of $43.4 million, or $0.46 per share, in 2019. (See “Non-GAAP Financial Information”)
- Adjusted EBITDA was $95.5 million, versus $269.2 million during 2019. (See “Non-GAAP Financial Information”)
Balance Sheet Highlights:
As of the end of 2020, the Company had $119.5 million in cash and approximately $176.5 million of availability under the ABL Facility, for total liquidity of $296.1 million.
In addition, the principal balance of debt net of cash on December 31, 2020 was $1,253.6 million versus $1,684.8 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 shows the bridge from the balance sheet debt to the principal balance of debt:
| Party City Credit Group | Anagram Holdings, LLC | PCHI Consolidated | |||||||||||||
| December 31, 2020 | |||||||||||||||
| Principal Amount | Net Carrying Amount | Net Carrying Amount | Net Carrying Amount | ||||||||||||
| Term Loan Credit Agreement | $ | 694,220 | $ | 690,165 | $ | - | $ | 690,165 | |||||||
| 6.125% Senior Notes – due 2023 | 22,924 | 22,779 | - | 22,779 | |||||||||||
| 6.625% Senior Notes – due 2026 | 107,254 | 106,315 | - | 106,315 | |||||||||||
| First Lien Party City Notes | 161,669 | 206,775 | - | 206,775 | |||||||||||
| First Lien Anagram Notes | 110,000 | - | 151,335 | 151,335 | |||||||||||
| Second Lien Anagram Notes | 84,687 | - | 152,032 | 152,032 | |||||||||||
| Finance lease obligations | 13,983 | 13,983 | - | 13,983 | |||||||||||
| Total long-term obligations | 1,194,737 | 1,040,017 | 303,367 | 1,343,384 | |||||||||||
| Less: current portion | N/A | (13,576 | ) | - | (13,576 | ) | |||||||||
| Long-term obligations, excluding current portion | $ | 1,194,737 | $ | 1,026,441 | $ | 303,367 | $ | 1,329,808 | |||||||
| Loans and notes payable | 178,436 | 178,436 | - | 178,436 | |||||||||||
| Less: Cash | (119,532 | ) | (95,201 | ) | (24,331 | ) | (119,532 | ) | |||||||
| Principal balance net of cash | $ | 1,253,641 | $ | 1,109,676 | $ | 279,036 | $ | 1,388,712 | |||||||
Subsequent Events:
As previously announced, subsequent to year end, the Company completed an offering by its wholly-owned subsidiary Party City Holdings Inc. (“PCHI”) of $750 million aggregate principal amount of 8.75% senior secured notes due 2026 (the “Notes”).
The Company intends to use the net proceeds from the offering to repay all outstanding borrowings under its term loan facility maturing 2022, to pay related fees and expenses and for general corporate purposes, which may include debt repurchases. As a result, the Company’s next material debt maturities are in July 2025.
In January 2021, the Company closed the previously disclosed sale of a substantial portion of its international operations.
Outlook:
Due to the continued uncertainty regarding the ongoing impacts of the COVID-19 pandemic and the associated complexity of forecasting, the Company is providing select annual 2021 guidance for financial measures that it believes it can reasonably forecast including interest expense, capital expenditures and store openings and closures.
- FY 2021 Interest expense of approximately $90 to $100 million
- FY 2021 Capital expenditures of approximately $70 to $80 million
- FY 2021 10 Net new stores (15 new openings and 5 closures)
The Company is providing the following fiscal first quarter 2021 outlook. This outlook is subject to potential consumer and marketplace volatility due to the COVID-19 pandemic:
- Total revenue of $397 to $410 million
- Brand comparable sales increase of 26% to 31% compared to first quarter 2020*
- GAAP net loss of $24 to $16 million with an assumed Q1 tax rate of 25%
- Adjusted EBITDA of $10 to $17 million
* Represents comparable sales for the 13 weeks ended April 3, 2021 compared to the 13 weeks ended April 4, 2020. On a fiscal or unshifted basis, brand comparable sales for the 13 weeks ended April 3, 2021 compared to last year’s fiscal quarter ended March 28th is expected to increase in the range of 9 – 14%.
Conference Call Information
A conference call to discuss the fourth quarter 2020 financial results is scheduled for today, March 11, 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 a 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 approximately 830 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.
| PARTY CITY HOLDCO INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands, except share data, unaudited) | ||||||||
| December 31, 2020 | December 31, 2019 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 119,532 | $ | 34,917 | ||||
| Accounts receivable, net | 90,879 | 149,109 | ||||||
| Inventories, net | 412,285 | 658,419 | ||||||
| Prepaid expenses and other current assets | 45,905 | 51,685 | ||||||
| Income tax receivable | 57,549 | — | ||||||
| Assets held for sale, net | 83,110 | — | ||||||
| Total current assets | 809,260 | 894,130 | ||||||
| Property, plant and equipment, net | 209,412 | 243,572 | ||||||
| Operating lease asset | 700,087 | 802,634 | ||||||
| Goodwill | 661,251 | 1,072,330 | ||||||
| Trade names | 384,428 | 530,320 | ||||||
| Other intangible assets, net | 32,134 | 45,060 | ||||||
| Other assets, net | 9,883 | 7,273 | ||||||
| Total assets | $ | 2,806,455 | $ | 3,595,319 | ||||
| LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Loans and notes payable | $ | 175,707 | $ | 128,806 | ||||
| Accounts payable | 118,928 | 152,300 | ||||||
| Accrued expenses | 160,605 | 150,921 | ||||||
| Liabilities held for sale | 68,492 | — | ||||||
| Current portion of operating lease liability | 176,045 | 155,471 | ||||||
| Income taxes payable | 524 | 35,905 | ||||||
| Current portion of long-term obligations | 13,576 | 71,524 | ||||||
| Total current liabilities | 713,877 | 694,927 | ||||||
| Long-term obligations, excluding current portion | 1,329,808 | 1,503,987 | ||||||
| Long-term portion of operating lease liability | 654,729 | 720,735 | ||||||
| Deferred income tax liabilities | 34,705 | 126,081 | ||||||
| Other long-term liabilities | 22,815 | 16,517 | ||||||
| Total liabilities | 2,755,934 | 3,062,247 | ||||||
| Redeemable securities | — | 3,351 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock (110,781,613 and 94,461,576 shares outstanding and 122,061,711 and 121,662,540 shares issued at December 31, 2020 and December 31, 2019, respectively) | 1,373 | 1,211 | ||||||
| Additional paid-in capital | 971,972 | 928,573 | ||||||
| Retained (deficit) earnings | (565,457 | ) | (37,219 | ) | ||||
| Accumulated other comprehensive loss | (29,916 | ) | (35,734 | ) | ||||
| Total Party City Holdco Inc. stockholders’ equity before common stock held in treasury | 377,972 | 856,831 | ||||||
| Less: Common stock held in treasury, at cost (11,280,098 and 27,200,964 shares at December 31, 2020 and December 31, 2019, respectively) | (327,182 | ) | (327,086 | ) | ||||
| Total Party City Holdco Inc. stockholders’ equity | 50,790 | 529,745 | ||||||
| Noncontrolling interests | (269 | ) | (24 | ) | ||||
| Total stockholders’ equity | 50,521 | 529,721 | ||||||
| Total liabilities, redeemable securities and stockholders’ equity | $ | 2,806,455 | $ | 3,595,319 | ||||
| PARTY CITY HOLDCO INC. | |||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | |||||||||||||||
| (In thousands, except share and per share data, unaudited) | |||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Revenues: | |||||||||||||||
| Net sales | $ | 645,284 | $ | 728,361 | $ | 1,843,444 | $ | 2,339,510 | |||||||
| Royalties and franchise fees | 2,897 | 3,190 | 7,246 | 9,279 | |||||||||||
| Total revenues | 648,181 | 731,551 | 1,850,690 | 2,348,789 | |||||||||||
| Cost of sales | 479,348 | 435,122 | 1,369,935 | 1,500,633 | |||||||||||
| Wholesale selling expenses | 13,006 | 16,174 | 50,121 | 67,103 | |||||||||||
| Retail operating expenses | 136,896 | 137,639 | 387,398 | 440,395 | |||||||||||
| Franchise expenses | 2,921 | 3,339 | 12,146 | 13,152 | |||||||||||
| General and administrative expenses | 48,126 | 51,175 | 210,244 | 177,672 | |||||||||||
| Art and development costs | 4,543 | 5,635 | 17,638 | 23,203 | |||||||||||
| Development stage expenses | — | 2,770 | 2,932 | 10,736 | |||||||||||
| Gain on sale/leaseback transaction | — | — | — | (58,381 | ) | ||||||||||
| Store impairment and restructuring charges | 1,631 | 3,221 | 22,449 | 29,038 | |||||||||||
| Loss on assets held for sale | 73,948 | — | 73,948 | — | |||||||||||
| Goodwill, intangibles and long-lived assets impairment | — | 303,531 | 581,380 | 562,631 | |||||||||||
| Total expenses | 760,419 | 958,606 | 2,728,191 | 2,766,182 | |||||||||||
| Loss from operations | (112,238 | ) | (227,055 | ) | (877,501 | ) | (417,393 | ) | |||||||
| Interest expense, net | 13,089 | 26,042 | 77,043 | 114,899 | |||||||||||
| Other (income) expense, net | (572 | ) | (4,772 | ) | 3,715 | 1,871 | |||||||||
| (Gain) on debt refinancing | — | — | (273,149 | ) | — | ||||||||||
| Loss before income taxes | (124,755 | ) | (248,325 | ) | (685,110 | ) | (534,163 | ) | |||||||
| Income tax (benefit) expense | (28,360 | ) | 20,504 | (156,653 | ) | (1,305 | ) | ||||||||
| Net (loss) | (96,395 | ) | (268,829 | ) | (528,457 | ) | (532,858 | ) | |||||||
| Less: Net income (loss) attributable to noncontrolling interests | 22 | (11 | ) | (219 | ) | (363 | ) | ||||||||
| Net (loss) attributable to common shareholders of Party City Holdco Inc. | $ | (96,417 | ) | $ | (268,818 | ) | $ | (528,238 | ) | $ | (532,495 | ) | |||
| Net (loss) per share attributable to common shareholders of Party City Holdco Inc.–Basic | $ | (0.88 | ) | $ | (2.88 | ) | $ | (5.24 | ) | $ | (5.71 | ) | |||
| Net (loss) per share attributable to common shareholders of Party City Holdco Inc.–Diluted | $ | (0.88 | ) | $ | (2.88 | ) | $ | (5.24 | ) | $ | (5.71 | ) | |||
| Weighted-average number of common shares-Basic | 109,603,253 | 93,372,232 | 100,804,944 | 93,295,692 | |||||||||||
| Weighted-average number of common shares-Diluted | 109,603,253 | 93,372,232 | 100,804,944 | 93,295,692 | |||||||||||
| PARTY CITY HOLDCO INC. | |||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| (In thousands) | |||||||||||
| Fiscal Year Ended December 31, | |||||||||||
| 2020 | 2019 | 2018 | |||||||||
| Cash flows provided by operating activities: | |||||||||||
| Net (loss) income | $ | (528,457 | ) | $ | (532,858 | ) | $ | 122,819 | |||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization expense | 76,506 | 81,116 | 78,575 | ||||||||
| Amortization of deferred financing costs and original issuance discounts | 4,198 | 4,722 | 10,989 | ||||||||
| Provision for doubtful accounts | 6,321 | 2,323 | 1,213 | ||||||||
| Deferred income tax (benefit) expense | (95,085 | ) | (47,366 | ) | 4,573 | ||||||
| Deferred rent | — | — | 5,351 | ||||||||
| Undistributed income in equity method investments | 333 | (472 | ) | (369 | ) | ||||||
| Change in operating lease liability/asset | 30,981 | (9,942 | ) | — | |||||||
| Loss (gain) on disposal of assets | 70 | (59,786 | ) | 3 | |||||||
| Loss on assets held for sale | 73,948 | — | — | ||||||||
| Non-cash adjustment for store impairment and restructuring | 17,585 | 20,236 | — | ||||||||
| Goodwill, intangibles and long-lived assets impairment | 581,380 | 562,631 | — | ||||||||
| Non-employee equity based compensation (see Note 25 – Kazzam, LLC) | 1,033 | 515 | 81 | ||||||||
| Stock option expense – time – based | 796 | 1,319 | 1,744 | ||||||||
| Stock option expense – performance – based | 7,847 | — | — | ||||||||
| Restricted stock unit and restricted cash awards expense – performance-based | 1,329 | — | — | ||||||||
| Restricted stock units expense—time-based | 2,071 | 2,033 | 1,174 | ||||||||
| Directors—non-cash compensation | 337 | 313 | 196 | ||||||||
| (Gain) on debt refinancing | (273,149 | ) | — | — | |||||||
| Changes in operating assets and liabilities, net of effects of acquired businesses: | |||||||||||
| Decrease (increase) in accounts receivable | 22,396 | (2,600 | ) | (10,431 | ) | ||||||
| Decrease (increase) in inventories | 184,924 | 72,385 | (142,866 | ) | |||||||
| (Increase) decrease in prepaid expenses and other current assets, net | (66,166 | ) | 14,741 | 16,666 | |||||||
| (Increase) decrease in accounts payable, accrued expenses and income taxes payable | 28,002 | (65,617 | ) | 12,138 | |||||||
| Net cash provided by operating activities | 77,200 | 43,693 | 101,856 | ||||||||
| Cash flows (used in) provided by investing activities: | |||||||||||
| Cash paid in connection with acquisitions, net of cash acquired | (3,305 | ) | (20,878 | ) | (65,301 | ) | |||||
| Capital expenditures | (51,128 | ) | (61,733 | ) | (85,661 | ) | |||||
| Proceeds from disposal of property and equipment | 162 | 246,286 | 55 | ||||||||
| Net cash (used in) provided by investing activities | (54,271 | ) | 163,675 | (150,907 | ) | ||||||
| Cash flows provided by (used in) financing activities: | |||||||||||
| Repayment of loans, notes payable and long-term obligations | (254,438 | ) | (441,632 | ) | (547,695 | ) | |||||
| Proceeds from loans, notes payable and long-term obligations | 368,439 | 203,344 | 652,087 | ||||||||
| Exercise of stock options | 147 | 1,148 | 2,269 | ||||||||
| Treasury stock purchases | (96 | ) | (156 | ) | (40,197 | ) | |||||
| Debt issuance and modification costs | (20,348 | ) | (414 | ) | (10,294 | ) | |||||
| Net cash provided by (used in) financing activities | 93,704 | (237,710 | ) | 56,170 | |||||||
| Effect of exchange rate changes on cash and cash equivalents | (500 | ) | 6,299 | (2,308 | ) | ||||||
| Net increase(decrease) in cash and cash equivalents and restricted cash | 116,133 | (24,043 | ) | 4,811 | |||||||
| Less: net (decrease) in cash classified within current assets held for sale | (31,628 | ) | — | — | |||||||
| Cash and cash equivalents and restricted cash at beginning of period | 35,176 | 59,219 | 54,408 | ||||||||
| Cash and cash equivalents and restricted cash at end of period* | $ | 119,681 | $ | 35,176 | $ | 59,219 | |||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid during the period: | |||||||||||
| Interest | $ | 68,396 | $ | 108,561 | $ | 94,472 | |||||
| Income taxes, net of refunds | $ | 26,867 | $ | 36,093 | $ | 59,156 | |||||
| PARTY CITY HOLDCO INC. | |||||||||||||||
| RECONCILIATION OF ADJUSTED EBITDA, Continued | |||||||||||||||
| (In thousands, unaudited) | |||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| (Dollars in thousands) | |||||||||||||||
| Net (loss) | $ | (96,395 | ) | $ | (268,829 | ) | $ | (528,457 | ) | $ | (532,858 | ) | |||
| Interest expense, net | $ | 13,089 | 26,042 | 77,043 | 114,899 | ||||||||||
| Income tax (benefit) expense | $ | (28,360 | ) | 20,504 | (156,653 | ) | (1,305 | ) | |||||||
| Depreciation and amortization | 18,710 | 18,736 | 76,506 | 81,116 | |||||||||||
| EBITDA | (92,956 | ) | (203,547 | ) | (531,561 | ) | (338,148 | ) | |||||||
| Non-cash purchase accounting adjustments | — | 243 | — | 3,000 | |||||||||||
| Store impairment and restructuring charges (c) | 3,038 | 3,818 | 39,323 | 58,778 | |||||||||||
| Other restructuring, retention and severance (b) | 403 | 1,212 | 12,104 | 6,460 | |||||||||||
| Goodwill, intangibles and long-lived assets impairment (c) | — | 303,531 | 581,380 | 562,631 | |||||||||||
| Deferred rent (d) | (529 | ) | (754 | ) | (3,147 | ) | (1,796 | ) | |||||||
| Closed store expense (e) | 976 | 1,021 | 3,858 | 4,445 | |||||||||||
| Foreign currency (gains) losses, net | (2,013 | ) | (65 | ) | (1,058 | ) | 421 | ||||||||
| Stock option expense – time – based (f) | 125 | 169 | 796 | 1,319 | |||||||||||
| Stock option expense – performance – based (n) | — | — | 7,847 | — | |||||||||||
| Non-employee equity-based compensation (g) | — | 129 | 1,033 | 515 | |||||||||||
| Undistributed (loss) in equity method investments | (356 | ) | (277 | ) | — | (472 | ) | ||||||||
| Corporate development expenses (h) | 1,004 | 2,426 | 7,197 | 14,208 | |||||||||||
| Refinancing charges (j) | — | 36 | — | 36 | |||||||||||
| Restricted stock units – time-based (i) | 503 | 490 | 2,071 | 2,033 | |||||||||||
| Restricted stock unit and restricted cash awards expense – performance-based | 950 | (1,036 | ) | 1,460 | — | ||||||||||
| Non-recurring legal settlements/costs | 673 | 6,753 | 7,843 | 8,548 | |||||||||||
| (Gain) on debt refinancing (j) | — | — | (273,149 | ) | — | ||||||||||
| Gain on sale/leaseback transaction (o) | — | — | — | (58,381 | ) | ||||||||||
| (Gain) loss on sale of assets (o) | — | 5,074 | — | 5,074 | |||||||||||
| Inventory disposal (c) | 88,358 | — | 88,358 | — | |||||||||||
| Loss on held for sale (p) | 73,948 | — | 73,948 | ||||||||||||
| COVID - 19 (l) | 2,784 | — | 73,843 | — | |||||||||||
| Other | 354 | 301 | 3,388 | 518 | |||||||||||
| Adjusted EBITDA | $ | 77,262 | $ | 119,524 | $ | 95,534 | $ | 269,189 | |||||||
| Adjusted EBITDA margin | 45.8 | % | 40.3 | % | 19.9 | % | 31.7 | % | |||||||
| PARTY CITY HOLDCO INC. | ||||||||||||||||||||||||||||||||||||||||||||||||
| RECONCILIATION OF ADJUSTED EBITDA, Continued | ||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended December 31, 2020 EBITDA Adjustments | ||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2020 GAAP Basis (as reported) | Store impairment and restructuring charges (c) | Corporate development expenses (h) | Legal | Stock Option Expense/Non- Employee Equity Compensation/ Restricted stock units – time-based (f)(g)(i)(n) | Deferred Rent (d) | Other restructuring, retention and severance (b) | Closed store expense (e) | COVID- 19 (l) | Foreign currency losses | Other (p) | December 31, 2020 Non-GAAP basis | |||||||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 645,284 | $ | 645,284 | ||||||||||||||||||||||||||||||||||||||||||||
| Royalties and franchise fees | 2,897 | 2,897 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | 648,181 | 648,181 | ||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 479,348 | (89,765 | ) | (506 | ) | 389,077 | ||||||||||||||||||||||||||||||||||||||||||
| Wholesale selling expenses | 13,006 | 13,006 | ||||||||||||||||||||||||||||||||||||||||||||||
| Retail operating expenses | 136,896 | 480 | (823 | ) | (1,956 | ) | 134,597 | |||||||||||||||||||||||||||||||||||||||||
| Franchise expenses | 2,921 | 2,921 | ||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 48,126 | 360 | (673 | ) | (1,578 | ) | 49 | (403 | ) | (153 | ) | (322 | ) | 45,406 | ||||||||||||||||||||||||||||||||||
| Art and development costs | 4,543 | 4,543 | ||||||||||||||||||||||||||||||||||||||||||||||
| Store impairment and restructuring charges | 1,631 | (1,631 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Loss on assets held for sale | 73,948 | (73,948 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Total expenses | 760,419 | (91,396 | ) | 360 | (673 | ) | (1,578 | ) | 529 | (403 | ) | (976 | ) | (2,784 | ) | — | (73,948 | ) | 589,550 | |||||||||||||||||||||||||||||
| (Loss) from operations | (112,238 | ) | 58,631 | |||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 13,089 | 13,089 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other (income) expense, net | (572 | ) | (1,364 | ) | 2,013 | 2 | 79 | |||||||||||||||||||||||||||||||||||||||||
| (Gain) on debt refinancing | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | (124,755 | ) | 45,463 | |||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 13,089 | 13,089 | ||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 18,710 | 18,710 | ||||||||||||||||||||||||||||||||||||||||||||||
| EBITDA | (92,956 | ) | 77,262 | |||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to EBITDA | 170,218 | (91,396 | ) | (1,004 | ) | (673 | ) | (1,578 | ) | 529 | (403 | ) | (976 | ) | (2,784 | ) | 2,013 | (73,946 | ) | — | ||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 77,262 | $ | (91,396 | ) | $ | (1,004 | ) | $ | (673 | ) | $ | (1,578 | ) | $ | 529 | $ | (403 | ) | $ | (976 | ) | $ | (2,784 | ) | $ | 2,013 | $ | (73,946 | ) | $ | 77,262 | ||||||||||||||||
| PARTY CITY HOLDCO INC. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| RECONCILIATION OF ADJUSTED EBITDA, Continued | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended December 31, 2019 EBITDA Adjustments | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2019 GAAP Basis (as reported) | Goodwill, intangibles and long-lived assets impairment (c) | Store impairment and restructuring charges (a) | Gain on sale/leaseback transaction (o) | Corporate development expenses (h) | Legal | Stock Option Expense/Non- Employee Equity Compensation/ Restricted stock units – time-based (f)(g)(i)(m) | Deferred Rent (d) | Other restructuring, retention and severance (b) | Closed store expense (e) | Foreign currency gains | Other | December 31, 2019 Non-GAAP basis | ||||||||||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 728,361 | $ | 728,361 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Royalties and franchise fees | 3,190 | 3,190 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | 731,551 | 731,551 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 435,122 | (597 | ) | 703 | 435,228 | |||||||||||||||||||||||||||||||||||||||||||||||
| Wholesale selling expenses | 16,174 | 16,174 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail operating expenses | 137,639 | (835 | ) | 136,804 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise expenses | 3,339 | 3,339 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 51,175 | (6,753 | ) | 247 | 51 | (1,212 | ) | (186 | ) | 43,322 | ||||||||||||||||||||||||||||||||||||||||||
| Art and development costs | 5,635 | 5,635 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Development stage expenses | 2,770 | (2,772 | ) | (2 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Store impairment and restructuring charges | 3,221 | (3,221 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill, intangibles and long-lived assets impairment | 303,531 | (303,531 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total expenses | 958,606 | (303,531 | ) | (3,818 | ) | — | (2,772 | ) | (6,753 | ) | 247 | 754 | (1,212 | ) | (1,021 | ) | — | — | 640,500 | |||||||||||||||||||||||||||||||||
| Income from operations | (227,055 | ) | 91,051 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 26,042 | 26,042 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expense, net | (4,772 | ) | 345 | 65 | (5,375 | ) | (9,737 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | (248,325 | ) | 74,746 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 26,042 | 26,042 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 18,736 | 18,736 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| EBITDA | (203,547 | ) | 119,524 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to EBITDA | 323,071 | (303,531 | ) | (3,818 | ) | — | (2,427 | ) | (6,753 | ) | 247 | 754 | (1,212 | ) | (1,021 | ) | 65 | (5,375 | ) | — | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 119,524 | $ | (303,531 | ) | $ | (3,818 | ) | $ | — | $ | (2,427 | ) | $ | (6,753 | ) | $ | 247 | $ | 754 | $ | (1,212 | ) | $ | (1,021 | ) | $ | 65 | $ | (5,375 | ) | $ | 119,524 | |||||||||||||||||||
| PARTY CITY HOLDCO INC. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RECONCILIATION OF ADJUSTED EBITDA, Continued | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Twelve Months Ended December 31, 2020 EBITDA Adjustments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2020 GAAP Basis (as reported) | Goodwill, intangibles and long-lived assets impairment (c) | Store impairment and restructuring charges , including inventory disposal (c) | Gain on debt refinancing (i) | Corporate development expenses (e) | Legal(k) | Stock Option Expense/Non- Employee Equity Compensation/ Restricted stock units (g)(h)(i)(n) | Deferred Rent (d) | Other restructuring, retention and severance (b) | Closed store expense (e)(f) | COVID- 19 (q) | Foreign currency losses | Other (p) | December 31, 2020 Non-GAAP basis | |||||||||||||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 1,843,444 | $ | 1,843,444 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Royalties and franchise fees | 7,246 | 7,246 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | 1,850,690 | 1,850,690 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 1,369,935 | (105,232 | ) | (214 | ) | (4,437 | ) | (42,952 | ) | (3,388 | ) | 1,213,712 | ||||||||||||||||||||||||||||||||||||||||||||
| Wholesale selling expenses | 50,121 | (1,840 | ) | (623 | ) | 47,658 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail operating expenses | 387,398 | 3,165 | (3,556 | ) | (18,268 | ) | 368,739 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise expenses | 12,146 | (672 | ) | 11,474 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 210,244 | (210 | ) | (7,843 | ) | (12,174 | ) | 196 | (7,667 | ) | (302 | ) | (11,328 | ) | 170,916 | |||||||||||||||||||||||||||||||||||||||||
| Art and development costs | 17,638 | 17,638 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Development stage expenses | 2,932 | (2,932 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Store impairment and restructuring charges | 22,449 | (22,449 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on assets held for sale | 73,948 | (73,948 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill, intangibles and long-lived assets impairment | 581,380 | (581,380 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total expense | 2,728,191 | (581,380 | ) | (127,681 | ) | — | (4,982 | ) | (7,843 | ) | (12,174 | ) | 3,147 | (12,104 | ) | (3,858 | ) | (73,843 | ) | — | (77,336 | ) | 1,830,137 | |||||||||||||||||||||||||||||||||
| (Loss) income from operations | (877,501 | ) | 20,553 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 77,043 | 77,043 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expense, net | 3,715 | (2,215 | ) | (1,033 | ) | 1,058 | 1,525 | |||||||||||||||||||||||||||||||||||||||||||||||||
| (Gain) on debt refinancing | (273,149 | ) | 273,149 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Loss) before income taxes | (685,110 | ) | (58,015 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 77,043 | 77,043 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 76,506 | 76,506 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EBITDA | (531,561 | ) | 95,534 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to EBITDA | 627,095 | (581,380 | ) | (127,681 | ) | 273,149 | (7,197 | ) | (7,843 | ) | (13,207 | ) | 3,147 | (12,104 | ) | (3,858 | ) | (73,843 | ) | 1,058 | (77,336 | ) | — | |||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 95,534 | $ | (581,380 | ) | $ | (127,681 | ) | $ | 273,149 | $ | (7,197 | ) | $ | (7,843 | ) | $ | (13,207 | ) | $ | 3,147 | $ | (12,104 | ) | $ | (3,858 | ) | $ | (73,843 | ) | $ | 1,058 | $ | (77,336 | ) | $ | 95,534 | |||||||||||||||||||
| PARTY CITY HOLDCO INC. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RECONCILIATION OF ADJUSTED EBITDA, Continued | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Twelve Months Ended December 31, 2019 EBITDA Adjustments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2019 GAAP Basis (as reported) | Goodwill, intangibles and long-lived assets impairment (o) | Store impairment and restructuring charges (c) | Gain on sale/leaseback transaction (a) | Corporate development expenses (e) | Legal(k) | Stock Option Expense/Non- Employee Equity Compensation /Restricted stock units (g)(h)(i)(m) | Deferred Rent (d) | Other restructuring, retention and severance (b) | Closed store expense (f) | Non-Cash Purchase Accounting Adjustments | Foreign currency gains | Other (r)(s) | December 31, 2019 Non-GAAP basis | |||||||||||||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 2,339,510 | $ | 2,339,510 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Royalties and franchise fees | $ | 9,279 | 9,279 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | 2,348,789 | 2,348,789 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 1,500,633 | (29,740 | ) | 1,534 | 1,472,427 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Wholesale selling expenses | 67,103 | 67,103 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail operating expenses | 440,395 | (31 | ) | (3,946 | ) | 436,418 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise expenses | 13,152 | 13,152 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 177,672 | (8,548 | ) | (3,867 | ) | 262 | (6,429 | ) | (500 | ) | 158,590 | |||||||||||||||||||||||||||||||||||||||||||||
| Art and development costs | 23,203 | 23,203 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Development stage expenses | 10,736 | (10,736 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on sale/leaseback transaction | (58,381 | ) | 58,381 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Store impairment and restructuring charges | 29,038 | (29,038 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill, intangibles and long-lived assets impairment | 562,631 | (562,631 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total expenses | 2,766,182 | (562,631 | ) | (58,778 | ) | 58,381 | (10,736 | ) | (8,548 | ) | (3,867 | ) | 1,796 | (6,460 | ) | (4,446 | ) | — | — | — | 2,170,893 | |||||||||||||||||||||||||||||||||||
| (Loss) income from operations | (417,393 | ) | 177,896 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 114,899 | 114,899 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expense, net | 1,871 | (3,471 | ) | (3,001 | ) | (421 | ) | (5,155 | ) | (10,177 | ) | |||||||||||||||||||||||||||||||||||||||||||||
| (Loss) income before income taxes | (534,163 | ) | 73,174 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 114,899 | 114,899 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 81,116 | 81,116 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EBITDA | (338,148 | ) | 269,189 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to EBITDA | 607,337 | (562,631 | ) | (58,778 | ) | 58,381 | (14,207 | ) | (8,548 | ) | (3,867 | ) | 1,796 | (6,460 | ) | (4,446 | ) | (3,001 | ) | (421 | ) | (5,155 | ) | — | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 269,189 | $ | (562,631 | ) | $ | (58,778 | ) | $ | 58,381 | $ | (14,207 | ) | $ | (8,548 | ) | $ | (3,867 | ) | $ | 1,796 | $ | (6,460 | ) | $ | (4,446 | ) | $ | (3,001 | ) | $ | (421 | ) | $ | (5,155 | ) | $ | 269,189 | ||||||||||||||||||
| PARTY CITY HOLDCO INC. | |||||||||||||||
| RECONCILIATION OF ADJUSTED NET INCOME | |||||||||||||||
| (In thousands, except share and per share data, unaudited) | |||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| (Dollars in thousands) | |||||||||||||||
| (Loss) before income taxes | $ | (124,755 | ) | $ | (248,325 | ) | $ | (685,110 | ) | $ | (534,163 | ) | |||
| Intangible asset amortization (l) | 2,918 | 3,572 | 11,362 | 14,100 | |||||||||||
| Non-cash purchase accounting adjustments | — | 2 | — | 4,202 | |||||||||||
| Amortization of deferred financing costs and original issuance discounts (m) | 922 | 1,211 | 4,198 | 4,722 | |||||||||||
| Store impairment and restructuring charges (c) | 1,338 | 3,818 | 30,813 | 58,778 | |||||||||||
| Goodwill and intangibles impairment (o) | — | 303,531 | 581,380 | 562,631 | |||||||||||
| Refinancing charges | — | — | — | 36 | |||||||||||
| Stock option expense (g) | 125 | 169 | 8,643 | 1,319 | |||||||||||
| Restricted stock units expense—performance based (i) | 1,460 | (1,036 | ) | 1,460 | — | ||||||||||
| Non-employee equity based compensation (h) | — | 129 | 1,033 | 515 | |||||||||||
| (Gain) on sale-leaseback (a) | — | — | — | (58,381 | ) | ||||||||||
| (Gain) on debt refinancing (j) | — | — | 273,149 | — | |||||||||||
| Other restructuring charges (b) | — | 389 | 10,139 | 3,211 | |||||||||||
| (Gain) on sale of Canada retail assets (r) | — | (2,873 | ) | — | (2,873 | ) | |||||||||
| Non-recurring legal settlements/costs | 68 | 6,500 | 7,094 | 6,500 | |||||||||||
| Loss on assets held for sale (p) | 73,948 | — | 73,948 | — | |||||||||||
| Inventory disposal (c) | 88,358 | — | 88,358 | — | |||||||||||
| COVID – 19 (q) | 2,548 | — | 73,661 | — | |||||||||||
| Adjusted income (loss) before income taxes | $ | 46,930 | $ | 67,087 | $ | (66,170 | ) | $ | 60,597 | ||||||
| Adjusted income tax (benefit) expense (n) | 19,476 | 19,300 | (16,940 | ) | 17,183 | ||||||||||
| Adjusted net income (loss) | $ | 27,454 | $ | 47,787 | $ | (49,230 | ) | $ | 43,414 | ||||||
| Adjusted net income(loss) per common share - diluted | $ | 0.25 | $ | 0.51 | (0.49 | ) | $ | 0.46 | |||||||
| Weighted-average number of common shares-diluted | 111,298,379 | 93,372,232 | 100,804,944 | 93,604,794 | |||||||||||
| (a) | During June 2019, the Company reported a $58.4 million gain from the sale and leaseback of its main distribution center in Chester, New York and its metallic balloons manufacturing facility in Eden Prairie, Minnesota. The aggregate sale price for the three properties was $128.0 million. Simultaneous with the sale, the Company entered into twenty-year leases for each of the facilities |
| (b) | Amounts expensed during 2020 principally related to severance due to organizational changes. Amounts expensed during 2019 principally relate to executive severance and the write-off of inventory for a section of the Company’s Party City stores that were restructured |
| (c) | During the years ended December 31, 2020 and 2019, the Company performed a comprehensive review of its store locations aimed at improving the overall productivity of such locations (“store optimization program”) and, after careful consideration and evaluation of the store locations, the Company made the decision to accelerate the optimization of its store portfolio. In 2019, 55 stores were identified for closure, out of which 35 stores were closed in 2019 and 20 stores were closed in January 2020. In 2020, 21 stores identified for closure in the first quarter of 2020 and were closed in the third quarter. These closings should provide the Company with capital flexibility to expand into underserved markets. In addition, the Company evaluated the recoverability of long-lived assets at the open stores and recorded an impairment charge associated with the operating lease asset and property, plant and equipment for open stores where sales were affected due to the outbreak of, and local, state and federal governmental responses to, COVID-19. In conjunction with the store optimization program and store impairment, during the years ended December 31, 2020 and 2019, the Company recorded charges as detailed in Note 3 – Store Impairment and Restructuring Charges, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. |
| As indicated in Note 7 – Inventories, Net, of Item 8, “Financial Statements and Supplementary Data,” during the fourth quarter of 2020, the Company continued to make progress in improving inventory levels across its stores and distribution network. Consistent with the strategy of rationalizing in-store SKU count and improving working capital velocity, the Company has updated its seasonal assortment strategy to target higher in-season sell-through of merchandise and reduce annual inventory carry-over. The more edited and curated assortments are expected to improve the customer experience by making stores easier to shop and product selections more relevant to consumers, while also improving the efficiency of inventory management and reducing working capital needs. As a result, the Company disposed of $88,358 in inventory during the fourth quarter of 2020 that will not be required in future seasons | |
| (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 for such items. |
| (e) | Principally represents third-party costs related to acquisitions (primarily legal expenses and diligence fees). Such costs are excluded from the definition of “Consolidated Adjusted EBITDA” that is utilized for certain covenants in the Company’s credit agreements. Additionally, 2019 and 2020 include start-up costs for Kazzam (see Note 25, Kazzam LLC., of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion) |
| (f) | Principally charges incurred related to closing underperforming stores |
| (g) | Represents non-cash charges related to stock options |
| (h) | Principally represents shares of Kazzam awarded to Ampology as compensation for Ampology’s services. See Note 25, Kazzam LLC., of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion |
| (i) | Non-cash charges for restricted stock units that vest based on service conditions and performance restricted stock units that vest based on service and performance conditions |
| (j) | As described in Note 12 — Long-Term Obligations of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K, the Company recognized a gain of $273,149 on debt refinancing transactions |
| (k) | Non-recurring legal settlements/costs |
| (l) | Represents the non-cash amortization of intangible assets. |
| (m) | Includes the non-cash amortization of deferred financing costs, original issuance discounts and capitalized call premiums. Additionally, certain years include charges related to debt refinancings. See note (c) for further discussion |
| (n) | 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. |
| (o) | As a result of a sustained decline in market capitalization, the Company recognized a non-cash pre-tax goodwill and intangibles impairment charges during the year ended December 31, 2019 and December 31, 2020, respectively. (see Note 4, Goodwill, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion) |
| (p) | Note 6 – Disposition of Assets and Assets and Liabilities Held for Sale, the Company closed the previously disclosed sale of a substantial portion of its international operations. As of December 31, 2020, the Company reported the assets and liabilities of the international operations as held for sale and recorded a loss reserve of $73,948 against the net assets |
| (q) | 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 |
| (r) | The Company recorded a $2.9 million gain on sale of its Canadian-based Party City stores, which is reported in Other expense, net on the Consolidated Statement of Operations and Comprehensive (Loss) Income |
| (s) | Represents a loss on sale of ownership interest in Punchbowl (see Note 21, Fair Value Measurements, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion) and certain property, plant and equipment, and a write-off of goodwill related to the Company’s sale of its Canadian-based Party City stores |
| PARTY CITY HOLDCO INC. | |||||||||||||||
| SEGMENT INFORMATION | |||||||||||||||
| (In thousands, except percentages, unaudited) | |||||||||||||||
| Three Months Ended December 31, | |||||||||||||||
| 2020 | 2019 | ||||||||||||||
| Dollars in Thousands | Percentage of Total Revenues | Dollars in Thousands | Percentage of Total Revenues | ||||||||||||
| Net Sales: | |||||||||||||||
| Wholesale | $ | 247,513 | 38.2 | % | $ | 277,233 | 37.9 | % | |||||||
| Eliminations | (126,697 | ) | (19.5 | ) | (120,231 | ) | (16.4 | ) | |||||||
| Net wholesale | 120,816 | 18.6 | 157,002 | 21.5 | |||||||||||
| Retail | 524,467 | 80.8 | 571,359 | 78.1 | |||||||||||
| Total net sales | 645,283 | 99.6 | 728,361 | 99.6 | |||||||||||
| Royalties and franchise fees | 2,898 | 0.4 | 3,190 | 0.4 | |||||||||||
| Total revenues | $ | 648,181 | 100.0 | % | $ | 731,551 | 100.0 | % | |||||||
| Fiscal Year Ended December 31, | |||||||||||||||
| 2020 | 2019 | ||||||||||||||
| Dollars in Thousands | Percentage of Total Revenues | Dollars in Thousands | Percentage of Total Revenues | ||||||||||||
| Net Sales: | |||||||||||||||
| Wholesale | $ | 940,228 | 50.8 | % | $ | 1,240,026 | 52.8 | % | |||||||
| Eliminations | (471,863 | ) | (25.5 | ) | (642,652 | ) | (27.4 | ) | |||||||
| Net wholesale | 468,365 | 25.3 | 597,374 | 25.4 | |||||||||||
| Retail | 1,375,079 | 74.3 | 1,742,136 | 74.2 | |||||||||||
| Total net sales | 1,843,444 | 99.6 | 2,339,510 | 99.6 | |||||||||||
| Royalties and franchise fees | 7,246 | 0.4 | 9,279 | 0.4 | |||||||||||
| Total revenues | $ | 1,850,690 | 100.0 | % | $ | 2,348,789 | 100.0 | % | |||||||
| Three Months Ended December 31, | |||||||||||||||
| 2020 | 2019 | ||||||||||||||
| Dollars in Thousands | Percentage of Net Sales | Dollars in Thousands | Percentage of Net Sales | ||||||||||||
| Retail | $ | 143,702 | 27.4 | % | $ | 259,678 | 45.4 | % | |||||||
| Wholesale | 23,717 | 19.6 | 33,561 | 21.4 | |||||||||||
| Total gross profit | $ | 167,420 | 25.7 | % | $ | 293,239 | 40.3 | % | |||||||
| Fiscal Year Ended December 31, | |||||||||||||||
| 2020 | 2019 | ||||||||||||||
| Dollars in Thousands | Percentage of Net Sales | Dollars in Thousands | Percentage of Net Sales | ||||||||||||
| Retail | $ | 400,738 | 29.1 | % | $ | 696,439 | 40.0 | % | |||||||
| Wholesale | 74,256 | 15.9 | 142,438 | 23.8 | |||||||||||
| Total gross profit | $ | 474,994 | 25.7 | % | $ | 838,877 | 35.9 | % | |||||||
| PARTY CITY HOLDCO INC. | |||||||||||
| OPERATING METRICS | |||||||||||
| Three Months Ended December 31, | LTM | ||||||||||
| 2020 | 2019 | 2020 | |||||||||
| Store Count | |||||||||||
| Corporate Stores: | |||||||||||
| Beginning of period | 739 | 778 | 777 | ||||||||
| New stores opened | 3 | — | 5 | ||||||||
| Acquired | 4 | — | 6 | ||||||||
| Closed | — | (1 | ) | (42 | ) | ||||||
| End of period | 746 | 777 | 746 | ||||||||
| Franchise Stores | |||||||||||
| Beginning of period | 90 | 98 | 98 | ||||||||
| New stores opened | — | — | — | ||||||||
| Sold to Party City | — | — | (2 | ) | |||||||
| Closed | (5 | ) | — | (11 | ) | ||||||
| End of period | 85 | 98 | 85 | ||||||||
| Grand Total | 831 | 875 | 831 | ||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| Wholesale Share of Shelf (a) | 83.1 | % | 82.8 | % | 82.1 | % | 79.6 | % | |||||||||||
| Manufacturing Share of Shelf (b) | 19.6 | % | 17.2 | % | 26.0 | % | 23.5 | % | |||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| Brand comparable sales (c) | -5.9 | % | -5.1 | % | -16.5 | % | -3.0 | % | |||||||||||
| (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. |