• Adjusted earnings per share of $0.04 vs. $0.03 loss in Q1 2015
• Vertical integration strategy continues with acquisition of costume manufacturer
• 19 franchise stores in Southwest acquired
• 2016 outlook reiterated

ELMSFORD, N.Y.--(BUSINESS WIRE)-- Party City Holdco Inc. ("the Company" or "Party City") (NYSE: PRTY) today announced its financial results for the quarter ended March 31, 2016.

“We are pleased with our first quarter results, which were generally in line with our expectations,” said James M. Harrison, Chief Executive Officer. “Our share of shelf exceeded 75%; our total gross margin expanded 90 basis points and we continued to make progress executing against our growth strategies. Earlier this year, we announced the acquisition of Festival, a costume manufacturer located in Madagascar, which expands our vertical model and will help fuel margin expansion. We also saw positive momentum in international markets where wholesale revenues grew 6% on a constant currency basis and we continued to gain traction with new wholesale customers outside the party supply channel. Finally, we recently acquired 19 franchise locations in the quarter, broadening our corporate-owned territory and increasing our owned store base to 731. Given these factors and our solid first quarter results, we are reiterating our full-year guidance for 2016.”

Highlights for the first quarter:

• Total revenues of $458 million were flat on a constant currency basis, or down 0.9% on a reported basis.
  • Retail sales increased 2.6% on a constant currency basis (2.0% on a reported basis) driven by 38 net new Party City stores added in the past twelve months, offset in part by lower brand comparable sales in line with our expectations (noted below).
  • Brand comparable sales decreased 1.5% as anticipated due primarily to Easter Sunday (a day on which our stores are closed) moving from Q2 2015 into Q1 2016, as well as the continued lapping of strong sales of product related to Disney’s Frozen in Q1 2015.
  • Net third-party wholesale revenues decreased 5.4% on a constant currency basis (7% on a reported basis) principally due to the impact of the acquisition of 23 franchise stores in Dec ‘15/Jan ‘16 (resulting in the elimination of previously reported third party sales), lower sales of Grasslands Road gift products associated with the de-emphasis and reorganization of this division and lower wholesale sales of Frozen related product to mass market and other retailers.
• Wholesale share of shelf (the percentage of retail product cost of sales supplied by our wholesale operations) increased to 75.4% from 71.6% in the prior year quarter.
• Total gross profit margin increased 90 basis points to 36.7% of net sales compared to 35.8% of net sales in the first quarter of fiscal 2015, primarily due to higher share of shelf.

• Operating expenses increased 4.6% to $150.4 million, driven primarily by retail operating expenses resulting from the higher store count and additional advertising spend. Wholesale selling expenses declined 7.5% due to cost savings related to a reorganization of our gift sales group and foreign currency translation.
• Adjusted EBITDA decreased to $46.5 million compared to $49.5 million in the first quarter of fiscal 2015 in line with expectations.
• Adjusted net income improved to $4.8 million, compared to a loss of $2.9 million for the first quarter of fiscal 2015. The current quarter net income includes interest savings of $15.8 million resulting from debt reduction and refinancing during 2015. Adjusted diluted income per share improved to $0.04 compared to a loss of $0.03 in the first quarter of fiscal 2015.
• During the quarter, the Company opened two new stores, acquired 19 franchise stores and closed two stores. At March 31, 2016, there were 731 corporate stores and 181 franchise stores for a total store count of 912, as compared to 693 corporate stores and 205 franchise stores for a total store count of 898 at March 31, 2015.

Balance sheet highlights as of March 31, 2016:

The Company ended the first quarter with $1,806 million in debt (net of cash) resulting in net debt leverage of 4.8 times and approximately $297 million in availability under its asset-based revolving credit facility.

Fiscal 2016 Outlook:

Party City anticipates full year 2016 total revenue of $2.35 to $2.42 billion, and brand comparable sales to range between flat to slightly positive. Adjusted EBITDA guidance is in the range of $390 to $405 million, adjusted net income expectations are in the range of $140 to $150 million, and adjusted diluted net income per share between $1.17 to $1.25. Additionally the Company is targeting net debt leverage to be below 4 times by the end of 2016.

_______________________________________

Conference Call Information:

A conference call to discuss first quarter fiscal 2016 financial results is scheduled for today, May 12, 2016, at 8:00 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 877-201-0168 (U.S. domestic) and 647-788-4901 (international), and enter conference ID# 3204387, 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 and Adjusted Earnings per Share. We present these non-GAAP financial measures because we believe they assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding 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 a table accompanying this release. 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 ongoing 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 contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 revenues, brand comparable sales, Adjusted EBITDA, Adjusted net income/loss, adjusted diluted earnings per share, average common shares outstanding and the effective tax rate. 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; 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 latest Form 10-K 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. (the “Company” or “Party City Holdco”) 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. Party City Holdco 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 900 specialty retail party supply stores (including approximately 180 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. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
				March 31,				December 31,
					2016				2015
ASSETS				(unaudited)
Current assets:
	Cash and cash equivalents			$	33,157			$	42,919
	Accounts receivable, net				116,512				132,287
	Inventories, net				585,858				564,259
	Prepaid expenses and other current assets				56,533				50,450
		Total current assets			792,060				789,915
	Property, plant and equipment, net				278,201				272,420
	Goodwill				1,584,023				1,562,515
	Trade names				568,342				568,712
	Other intangible assets, net				85,039				89,157
	Other assets, net				6,783				9,684
		Total assets		$	3,314,448			$	3,292,403
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Loans and notes payable			$	181,094			$	126,136
	Accounts payable				97,314				111,616
	Accrued expenses				134,531				146,319
	Income taxes payable				-				8,504
	Current portion of long-term obligations				14,499				14,552
		Total current liabilities			427,438				407,127
	Long-term obligations, excluding current portion				1,643,738				1,646,121
	Deferred income tax liabilities				276,247				276,667
	Deferred rent and other long-term liabilities				51,147				49,471
		Total liabilities			2,398,570				2,379,386
Stockholders’ equity:
	Common stock (119,318,854 and 119,258,374 shares issued andoutstanding at March 31, 2016 and December 31, 2015, respectively)				1,193				1,193
	Additional paid-in capital				905,747				904,425
	Retained earnings				39,795				40,189
	Accumulated other comprehensive loss				(30,857	)			(32,790	)
		Total stockholders’ equity			915,878				913,017
		Total liabilities and stockholders’ equity		$	3,314,448			$	3,292,403

PARTY CITY HOLDCO INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)(In thousands, except share and per share data)UNAUDITED
				Three Months Ended March 31,
					2016				2015
Revenues:
	Net sales			$	454,286			$	458,195
	Royalties and franchise fees				3,454				3,910
		Total revenues			457,740				462,105
Expenses:
	Cost of sales				287,767				294,274
	Wholesale selling expenses				15,842				17,125
	Retail operating expenses				86,709				80,314
	Franchise expenses				3,563				3,459
	General and administrative expenses				38,926				37,652
	Art and development costs				5,377				5,277
		Total expenses			438,184				438,101
		Income from operations			19,556				24,004
	Interest expense, net				22,652				38,479
	Other income, net				(2,978	)			(1,421	)
		Loss before income taxes			(118	)			(13,054	)
	Income tax expense (benefit)				276				(4,529	)
		Net loss			($394	)			($8,525	)
	Comprehensive income (loss)			$	1,539				($20,852	)
	Net loss per common share-Basic				-				($0.09	)
	Net loss per common share-Diluted				-				($0.09	)
	Weighted-average number of common shares-Basic				119,291,974				94,096,525
	Weighted-average number of common shares-Diluted				119,291,974				94,096,525

PARTY CITY HOLDCO INC. RECONCILIATION OF ADJUSTED EBITDA (In thousands) UNAUDITED
			Three Months Ended March 31,
				2016				2015
Net loss				($394	)			($8,525	)
	Interest expense, net			22,652				38,479
	Income taxes			276				(4,529	)
	Depreciation and amortization			20,889				20,151
EBITDA				43,423				45,576
	Non-cash purchase accounting adjustments			1,401				1,818
	Management fee			-				930
	Restructuring, retention and severance			67				640
	Deferred rent			1,983				1,405
	Closed store expense			1,420				261
	Foreign currency (gains) losses			(3,164	)			1,202
	Equity based compensation			948				396
	Undistributed loss (gain) in unconsolidated joint venture			147				(91	)
	Gain on sale of assets			-				(2,660	)
	Other			308				18
Adjusted EBITDA			$	46,533			$	49,495

PARTY CITY HOLDCO INC. RECONCILIATION OF ADJUSTED NET INCOME (LOSS) (In thousands) UNAUDITED
			Three Months Ended March 31,
				2016			2015
Loss before income taxes				($118	)		($13,054	)
	Intangible asset amortization			4,145			4,769
	Non-cash purchase accounting adjustments (a)			1,956			2,658
	Amortization of deferred financing costs and original issuance discounts			1,274			3,074
	Management fee			-			930
	Equity based compensation			948			396
	Gain on sale of assets			-			(2,660	)
Adjusted income (loss) before income taxes				8,205			(3,887	)
	Adjusted income tax expense (benefit) (b)			3,446			(1,000	)
Adjusted net income (loss)			$	4,759			($2,887	)
Adjusted net income (loss) per common share - diluted			$	0.04			($0.03	)
Weighted-average number of common shares-diluted				120,141,598			94,096,525

(a) As a result of its acquisition by THL and Advent, the Company applied the acquisition method of accounting and increased the value of certain property, plant and equipment. The impact of such adjustments on depreciation expense increased the Company’s expenses. These property, plant and equipment depreciation amounts are included in “Non-cash purchase accounting adjustments” for purposes of calculating “adjusted net income,” but are excluded from “Non-cash purchase accounting adjustments” for purposes of calculating adjusted EBITDA since they are included in depreciation expense.
(b) Represents the income tax expense/benefit using the rate in effect after considering the adjustments.

PARTY CITY HOLDCO INC. SEGMENT INFORMATION (In thousands) UNAUDITED
	Three Months Ended March 31,
	2016						2015
Total Revenues	Dollars inthousands			Percentage ofTotal Revenues			Dollars inthousands			Percentage ofTotal Revenues
Net Sales:
Wholesale	$	259,821		56.8	%		$	250,716		54.3	%
Eliminations		(125,091	)	(27.3	%)			(105,793	)	(22.9	%)
Net wholesale		134,730		29.4	%			144,923		31.4	%
Retail		319,556		69.8	%			313,272		67.8	%
Total net sales		454,286		99.2	%			458,195		99.2	%
Royalties and franchise fees		3,454		0.8	%			3,910		0.8	%
Total revenues	$	457,740		100.0	%		$	462,105		100.0	%
	Three Months Ended March 31,
	2016						2015
Total Gross Profit	Dollars inthousands			Percentage ofNet Sales			Dollars inthousands			Percentage ofNet Sales
Retail	$	124,026		38.8	%		$	119,476		38.1	%
Wholesale		42,493		31.5	%			44,445		30.7	%
Total	$	166,519		36.7	%		$	163,921		35.8	%

PARTY CITY HOLDCO INC. OPERATING METRICS UNAUDITED
				Three Months Ended March 31,
				2016		2015
Share of Shelf (a)				75.4%		71.6%
Store Count
	Corporate Stores:
		Beginning of period		712		693
		New stores opened		2		3
		Acquired		19		2
		Closed		(2)		(5)
		End of period		731		693
	Franchise Stores:
		Beginning of period		200		208
		Opened		1		-
		Sold to Party City		(19)		(2)
		Closed		(1)		(1)
		End of period		181		205
	Grand Total			912		898
Brand comparable sales (decrease) increase (b)				-1.5%		5.2%

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

View source version on businesswire.com: http://www.businesswire.com/news/home/20160512005175/en/

Party City Holdco Inc.

Deborah Belevan, 914-784-8324

VP of Investor Relations

[email protected]

Source: Party City Holdco Inc.

Press Releases

Morgan Stanley Maintains Equalweight on Party City (PRTY) Following 1Q Report May 13, 2016 11:49 AM Party City (PRTY) Tops Q1 EPS by 1cMay 12, 2016 7:03 AM