Form 8-K Party City Holdco Inc. For: Aug 05

 

 

Exhibit 99.1

 

PARTY CITY REPORTS SECOND QUARTER 2021 RESULTS AND PROVIDES

THIRD QUARTER 2021 BUSINESS OUTLOOK

 

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

 

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

 

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

 

 

ELMSFORD, N.Y.- August 5, 2021 - Party City Holdco Inc. (the “Company” or “PRTY”; NYSE: PRTY) today announced financial results for the quarter ended June 30, 2021.

 

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

 

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

 

Second Quarter Summary*:

 

 

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

 

Balance Sheet and Cash Flow Highlights:

 

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

 

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

 

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

*Balance consists of ABL Facility.

 

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

aFree cash flow defined as Adjusted EBITDA less capital expenditures (See “Non-GAAP Financial Information”).

 

Outlook:

 

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

 

 

The Company is providing the following updated annual 2021 outlook:

 

 

 

 

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

 

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

 

 

Conference Call Information

 

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

 

Website Information

 

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

 

 

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Non-GAAP Information

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

Forward-Looking Statements

This press release and the commentary in the conference call to be held today each contains forward-looking statements. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance and include Party City’s expectations regarding its ability to maximize the potential of its vertical model, the ability to drive long-term growth, revenues, brand comparable sales, net income, Adjusted EBITDA, and Adjusted Net Income. The forward-looking statements contained in this press release are based on management’s good-faith belief and reasonable judgment based on current information, and these statements are qualified by important risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those forecasted or indicated by such forward-looking statements. These risks and uncertainties include: our ability to compete effectively in a competitive industry; fluctuations in commodity prices; our ability to appropriately respond to changing merchandise trends and consumer preferences; successful implementation of our store growth strategy; decreases in our Halloween sales; the impact of COVID-19 on our financial performance; disruption to the transportation system or increases in transportation costs; product recalls or product liability; economic slowdown affecting consumer spending and general economic conditions; loss or actions of third party vendors and loss of the right to use licensed material; disruptions at our manufacturing facilities; and the additional risks and uncertainties set forth in “Risk Factors” in Party City’s Annual Report on Form 10-K for the year ended December 31, 2020 and in subsequent reports filed with or furnished to the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, results, actions, levels

 

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of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. Except as may be required by any applicable laws, Party City assumes no obligation to publicly update or revise such forward-looking statements, which are made as of the date hereof or the earlier date specified herein, whether as a result of new information, future developments or otherwise.

 

About Party City

 

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

 

Contact:

ICR

Farah Soi and Rachel Schacter

203-682-8200

[email protected]

 

Source: Party City Holdco Inc.

 

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PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data, unaudited)

 

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

 

 

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PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share data, unaudited)

 

 

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

 

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

 

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PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

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

 

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

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

 

 

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PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA

(Unaudited)

 

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

 

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

 

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued

(In thousands, unaudited)

 

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

 

 

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PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued

(In thousands, unaudited)

 

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

 

 

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued

(In thousands, unaudited)

 

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

 

PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA, Continued

(In thousands, unaudited)

 

 

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

 

 

 

 

 

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PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED NET INCOME

(Unaudited)

 

		Three Months Ended June 30,								Six months ended June 30,
		2021				2020				2021				2020
(Dollars in thousands, except per share amounts)
Income (loss) before income taxes		$	40,020			$	(153,690	)		$	22,433			$	(795,856	)
Intangible asset amortization			2,354				2,679				4,831				5,545
Amortization of deferred financing costs and original    issuance discounts			1,074				1,199				1,937				2,401
Store impairment and restructuring charges (a)			—				181				—				28,154
Other restructuring charges (b)			31				6,595				1,967				7,517
Goodwill, intangibles and long-lived assets impairment (c)			—				—				—				536,648
Non-employee equity-based compensation (f)			—				—				—				1,033
Non-recurring legal settlements/costs			—				100				—				6,421
Stock option expense – time-based			104				561				217				561
Stock option expense – performance – based			—				7,493				—				7,847
Restricted stock unit expense – performance-based			1,154				—				1,971				—
COVID - 19 (i)			655				44,200				1,270				70,380
Loss on disposal of assets			—				—				3,211				—
Inventory disposals			162				—				926				—
Adjusted income (loss) before income taxes			45,554				(90,682	)			38,763				(129,349	)
Adjusted income tax (benefit) (h)			11,446				(29,366	)			10,064				(41,650	)
Adjusted net income (loss)		$	34,108			$	(61,316	)		$	28,699			$	(87,699	)
Adjusted net income (loss) per common share – diluted		$	0.29			$	(0.66	)		$	0.25			$	(0.94	)
Weighted-average number of common shares-diluted			116,251,151				93,419,078				115,499,304				93,407,344

 

 

 

 

 

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PARTY CITY HOLDCO INC.
SEGMENT INFORMATION

(In thousands, except percentages, unaudited)

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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PARTY CITY HOLDCO INC.
OPERATING METRICS

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

 

 

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

 

 

(a) Wholesale share of shelf represents the percentage of our retail product cost of sales supplied by our wholesale operations.

(b) Manufacturing share of shelf represents the percentage of our retail product cost of sales manufactured by the company.

(c) Party City brand comparable sales include North American e-commerce sales.

 

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