Party City Holdco Inc. (the “Company” or “PRTY”; NYSE:PRTY) today
announced financial results for the quarter ended March 31, 2022.
Brad Weston, Chief Executive Officer of Party
City, stated, “We are pleased to deliver another quarter of topline
growth with a sales increase of 1.4% and brand comp sales growth of
2.1%, despite a difficult consumer backdrop with the Omicron
variant earlier in the quarter. As expected, our bottom line
results were impacted by elevated costs, including greater than
anticipated freight and commodity cost pressures that ramped later
in the quarter. Amidst this choppy macro environment, our teams are
doing a good job executing against our strategic priorities of
ongoing enhancements to customer engagement as well as digital, IT
and supply chain, in support of our purpose to inspire joy and make
it easy to create unforgettable memories.”
Mr. Weston added, “As we look to the remainder
of 2022, we expect supply chain and inflationary headwinds to
continue, which is reflected in our updated outlook. While we
navigate this near-term turbulence in costs, we are being very
thoughtful with our mitigating actions on the pricing front, along
with delivering an improved customer experience. To that end, we
remain focused on executing against our strategic priorities, which
we are confident will even better position Party City to drive long
term growth and shareholder value.”
First Quarter Summary:
- Total net sales were $433.0
million, an increase of 1.4% compared to the first quarter 2021
primarily driven by higher retail and North American Wholesale
sales partially offset by the divestiture of a significant portion
of our international operations in the first quarter of 2021.
- Total retail sales increased 2.3%
versus first quarter 2021 primarily driven by strong comparable
sales increases in seasonal categories.
- The total number of corporate Party
City stores was 759 as of March 31, 2022 compared to 751 in the
prior year period.
- Brand comparable sales increased
2.1% in the 13 weeks ended April 2, 2022 versus the 13 weeks ended
April 3, 2021.
- Net third-party wholesale sales
decreased 1.6% compared to the first quarter of 2021 principally
due to the prior year divestiture of a significant portion of our
international operations, partially offset by higher sales to
franchise and independent customers as well as strong Anagram sales
growth in the first quarter of 2022. Excluding the impact of the
divestiture, wholesale sales increased 14.5%. a
- Total gross profit margin decreased
380 basis points to 31.9% of net sales. Excluding certain items not
indicative of core operating performance, gross profit margin
decreased approximately 350 basis points to 32.5% of net sales
primarily driven by higher input costs from supply chain, raw
materials, sourced merchandise, and labor. a
- Operating expenses totaled $158.1
million or $9.0 million higher than the first quarter of 2021.
Excluding certain items not indicative of core operating
performance, expenses totaled $152.2 million, or 35.1% of net
sales, a 260-basis point increase versus prior-year period due to
higher store and corporate labor costs and the international
divestiture. a b
- Interest expense was $23.4 million
during the first quarter of 2022, compared to $17.2 million during
the first quarter of 2021. The increase primarily reflects the
higher cost of debt associated with the first quarter of 2021 debt
refinancing.
- Reported GAAP net loss was $26.9
million, or loss of $0.24 per diluted share.
- Adjusted net loss was $24.7
million, or a loss of $0.22 per diluted share, compared to adjusted
net loss of $5.4 million, or a loss of $0.05 per share, in the
first quarter of 2021. a
- Adjusted EBITDA decreased to $4.6
million, versus $32.4 million during the first quarter of 2021
driven primarily by higher freight, material and labor costs,
partially offset by higher net sales in the period. a
a Refer to Reconciliation of Adjusted EBITDA for
GAAP to Non-GAAP reconciliation. See “Non-GAAP Financial
Information” for further description.b Operating expenses refer to
selling, general and administrative expenses.
Balance Sheet and Cash Flow
Highlights:
As of the end of the first quarter 2022, the
Company had total liquidity of $122.2 million consisting of $32.6
million in cash and approximately $75.2 million of availability
under the PCHI ABL Facility and approximately $14.4 million of
availability under the Anagram ABL Facility.
The carrying value of the Company's debt as of
March 31, 2022 was $1,556.8 million. The principal balance of debt
net of cash on March 31, 2022 was $1,430.7 million versus $1,303.0
million in the prior-year period. The principal balance of debt is
used for the purpose of all leverage ratio calculations under our
debt agreements. The following table reflects both principal
amounts as well as net carrying amounts of debt across the
Company’s debt instruments:
|
|
|
|
|
Party City Credit Group |
|
|
Anagram Holdings, LLC |
|
|
PCHI Consolidated |
|
|
|
March 31, 2022 |
|
(in Thousands) |
|
Principal Amount |
|
|
Net Carrying Amount |
|
|
Net Carrying Amount |
|
|
Net Carrying Amount |
|
Loans and notes payable* |
|
$ |
211,829 |
|
|
$ |
209,112 |
|
|
$ |
- |
|
|
$ |
209,112 |
|
8.75% Senior Secured First Lien
Notes – due 2026 |
|
|
750,000 |
|
|
|
733,815 |
|
|
|
- |
|
|
|
733,815 |
|
6.125% Senior Notes – due
2023 |
|
|
22,924 |
|
|
|
22,848 |
|
|
|
- |
|
|
|
22,848 |
|
6.625% Senior Notes – due
2026 |
|
|
92,254 |
|
|
|
91,627 |
|
|
|
- |
|
|
|
91,627 |
|
First Lien Party City Notes –
due 2025 |
|
|
161,669 |
|
|
|
193,501 |
|
|
|
- |
|
|
|
193,501 |
|
First Lien Anagram Notes – due
2025 |
|
|
118,699 |
|
|
|
- |
|
|
|
148,831 |
|
|
|
148,831 |
|
Second Lien Anagram Notes – due
2026 |
|
|
93,613 |
|
|
|
- |
|
|
|
144,625 |
|
|
|
144,625 |
|
Finance lease obligations |
|
|
12,405 |
|
|
|
12,405 |
|
|
|
- |
|
|
|
12,405 |
|
Total debt |
|
|
1,463,393 |
|
|
|
1,263,308 |
|
|
|
293,456 |
|
|
|
1,556,764 |
|
Less: Cash |
|
|
(32,645 |
) |
|
|
(20,766 |
) |
|
|
(11,879 |
) |
|
|
(32,645 |
) |
Total debt net of cash |
|
$ |
1,430,748 |
|
|
$ |
1,242,542 |
|
|
$ |
281,577 |
|
|
$ |
1,524,119 |
|
*Balance consists of ABL Facility.
Net cash used in operating activities in the
first three months of 2022 was $116.8 million, compared to net cash
used in operating activities of $48.8 million in the prior year
period. The increase in cash used in operating activities is
primarily attributable to increased inventory purchases to support
higher anticipated sales and increased inventory cost due to
freight. The increase in cash used is also due to timing of
payments related to accounts payable and accrued expenses and a
higher net loss, partially offset by lower lease payments as the
prior year reflected payment of COVID deferrals. Free cash flowa in
the first three months of 2022 was $(14.0) million compared to
$10.2 million in the prior year period, with the decrease driven by
lower Adjusted EBITDA, partially offset by lower capital
expenditures.
a Free cash flow defined as Adjusted EBITDA less
capital expenditures (See “Non-GAAP Financial Information”).
Outlook:
The Company is providing the following updated
2022 outlook.
- Net sales of $2.225 billion to
$2.300 billion or an increase of approximately 2.5% to 6.0% versus
2021;
- Brand comp sales change of
approximately -1% to 2%;
- GAAP net income of approximately
$30 million to $48 million, assuming a full-year tax rate of
38%;
- Adjusted EBITDA of approximately
$235 million to $265 million;
- Capital Expenditures of
approximately $110 to $120 million*.
*CAPEX spend includes capital associated with
the new headquarters building which will be partially offset by
tenant improvement allowances and state tax incentives.
The table below sets forth a reconciliation from
our 2022 forecasted GAAP Net Income to our Adjusted EBITDA.
|
|
|
(in thousands) |
|
Low |
|
High |
GAAP Net Income |
|
$ |
29,800 |
|
$ |
48,400 |
Income tax |
|
|
18,200 |
|
|
29,600 |
Interest expense |
|
|
96,000 |
|
|
96,000 |
Depreciation and Amortization Expense |
|
|
70,000 |
|
|
70,000 |
GAAP EBITDA |
|
$ |
214,000 |
|
$ |
244,000 |
EBITDA
Add-Backs |
|
|
21,000 |
|
|
21,000 |
Adjusted EBITDA |
|
$ |
235,000 |
|
$ |
265,000 |
|
|
|
|
|
|
|
Conference Call Information
A conference call to discuss the first quarter
2022 financial results is scheduled for today, May 9, 2022, at 8:30
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 844-200-6205, access code 069731 (international callers please
dial 929-526-1599) 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 Net Third-Party Wholesale Sales, Adjusted Total
Gross Profit Margin, Adjusted Selling, General and Administrative
Expenses, 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.
In addition, 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 present free cash flow, which we define 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
revenues, Brand Comparable or Same-Store Sales, net income,
Adjusted EBITDA and the related adjustments, and capital
expenditures. 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; successful
implementation of our store growth strategy; decreases in our
Halloween sales; product recalls or product liability; continuing
changes in general economic conditions, and the impact on consumer
confidence and consumer spending, including inflationary pressures;
the continuing impact of COVID-19 on our global supply chain,
retail store operations and customer demand; labor and material
shortages and investments; disruption to the transportation system
or increases in transportation costs; the impact of inflation on
consumer spending; new interpretations of or changes to current
accounting rules; our ability to anticipate consumer preferences
and buying trends; dependence on timely introduction and customer
acceptance of our merchandise; changes in consumer spending based
on weather, political, competitive and other conditions beyond our
control; delays in store openings; competition from companies with
concepts or products similar to ours; timely and effective sourcing
of merchandise from our foreign and domestic vendors and delivery
of merchandise through our supply chain to our stores and
customers; loss or actions of third party vendors and loss of the
right to use licensed material; disruptions at our manufacturing
facilities; effective inventory management; our ability to manage
customer returns; successful catalog management, including timing,
sizing and merchandising; uncertainties in e-marketing,
infrastructure and regulation; multi-channel and multi-brand
complexities; our ability to introduce new brands and brand
extensions; challenges associated with our increasing global
presence; dependence on external funding sources for operating
capital; disruptions in the financial markets; our ability to
control employment, occupancy and other operating costs; our
ability to improve our systems and processes; changes to our
information technology infrastructure; general political, economic
and market conditions and events, including war, conflict or acts
of terrorism; the impact of tariffs and our ability to mitigate
impacts; 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, 2021 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 a leading party goods
company by revenue in North America and, we believe, the largest
vertically integrated supplier of decorated party goods globally by
revenue. With hundreds of retail stores filled with thousands of
products across the United States, we make it easy for our
customers to find the perfect party solution through our assortment
of party products, balloons, and costumes for their celebration
aided by the support of our party experts both in-store and online.
Our 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 which offer rapid, contactless, and same
day shipping options (including in-store and at curbside),
principally through the domain name PartyCity.com. In addition to
our retail operations, we are also one of the largest global
designers, manufacturers and distributors of decorated consumer
party products, with items found in retail outlets worldwide,
including independent party supply stores, mass merchants, grocery
retailers, e-commerce merchandisers and dollar stores. We combine
state-of-the-art manufacturing and sourcing operations,
sophisticated wholesale operations and multi-channel retail and
e-commerce retail operations to design, manufacture, source and
distribute party goods, including paper and plastic tableware,
metallic and latex balloons, Halloween and other costumes,
accessories, novelties, gifts and stationery throughout the
world.
Source: Party City Holdco Inc.
PARTY CITY HOLDCO
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands, except share data,
unaudited)
|
|
March 31,2022 |
|
|
December 31,2021 |
|
|
March 31,2021 |
|
|
|
(Unaudited) |
|
|
|
|
|
(Unaudited) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
32,645 |
|
|
$ |
47,914 |
|
|
$ |
83,806 |
|
Accounts receivable, net |
|
|
85,280 |
|
|
|
93,301 |
|
|
|
81,658 |
|
Inventories, net |
|
|
517,459 |
|
|
|
443,295 |
|
|
|
428,316 |
|
Prepaid expenses and other current assets |
|
|
69,668 |
|
|
|
57,656 |
|
|
|
47,803 |
|
Income tax receivable |
|
|
55,614 |
|
|
|
56,317 |
|
|
|
68,632 |
|
Total current assets |
|
|
760,666 |
|
|
|
698,483 |
|
|
|
710,215 |
|
Property, plant and equipment,
net |
|
|
224,134 |
|
|
|
221,870 |
|
|
|
214,698 |
|
Operating lease asset |
|
|
729,587 |
|
|
|
693,875 |
|
|
|
687,214 |
|
Goodwill |
|
|
664,943 |
|
|
|
664,296 |
|
|
|
659,865 |
|
Trade names |
|
|
383,761 |
|
|
|
383,737 |
|
|
|
383,733 |
|
Other intangible assets, net |
|
|
22,319 |
|
|
|
23,687 |
|
|
|
29,912 |
|
Other assets, net |
|
|
25,425 |
|
|
|
25,952 |
|
|
|
9,832 |
|
Total assets |
|
$ |
2,810,835 |
|
|
$ |
2,711,900 |
|
|
$ |
2,695,469 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Loans and notes payable |
|
$ |
209,112 |
|
|
$ |
84,181 |
|
|
$ |
142,859 |
|
Accounts payable |
|
|
188,842 |
|
|
|
161,736 |
|
|
|
127,812 |
|
Accrued expenses |
|
|
144,397 |
|
|
|
195,531 |
|
|
|
146,742 |
|
Current portion of operating lease liability |
|
|
119,384 |
|
|
|
116,437 |
|
|
|
150,860 |
|
Income taxes payable |
|
|
10,409 |
|
|
|
10,801 |
|
|
|
— |
|
Current portion of long-term obligations |
|
|
928 |
|
|
|
1,373 |
|
|
|
1,359 |
|
Total current liabilities |
|
|
673,072 |
|
|
|
570,059 |
|
|
|
569,632 |
|
Long-term obligations, excluding
current portion |
|
|
1,346,724 |
|
|
|
1,351,189 |
|
|
|
1,358,495 |
|
Long-term portion of operating
lease liability |
|
|
681,949 |
|
|
|
655,875 |
|
|
|
628,217 |
|
Deferred income tax liabilities,
net |
|
|
28,067 |
|
|
|
29,195 |
|
|
|
31,036 |
|
Other long-term liabilities |
|
|
23,266 |
|
|
|
22,868 |
|
|
|
33,195 |
|
Total liabilities |
|
|
2,753,078 |
|
|
|
2,629,186 |
|
|
|
2,620,575 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
Common stock (112,463,647, 112,170,944 and 111,258,890 shares
outstanding and 124,607,064, 124,157,500 and 122,573,377 shares
issued at March 31, 2022, December 31, 2021, and March
31, 2021, respectively) |
|
|
1,384 |
|
|
|
1,384 |
|
|
|
1,383 |
|
Additional paid-in capital |
|
|
984,060 |
|
|
|
982,307 |
|
|
|
976,037 |
|
Accumulated deficit |
|
|
(598,874 |
) |
|
|
(571,985 |
) |
|
|
(579,486 |
) |
Accumulated other comprehensive income |
|
|
4,473 |
|
|
|
3,541 |
|
|
|
5,134 |
|
Total Party City Holdco Inc. stockholders’ equity before common
stock held in treasury |
|
|
391,043 |
|
|
|
415,247 |
|
|
|
403,068 |
|
Less: Common stock held in treasury, at cost (12,143,417,
11,986,556 and 11,314,487 shares at March 31, 2022,
December 31, 2021, and March 31, 2021, respectively) |
|
|
(333,286 |
) |
|
|
(332,533 |
) |
|
|
(327,388 |
) |
Total Party City Holdco Inc. stockholders’ equity |
|
|
57,757 |
|
|
|
82,714 |
|
|
|
75,680 |
|
Noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
(786 |
) |
Total stockholders’ equity |
|
|
57,757 |
|
|
|
82,714 |
|
|
|
74,894 |
|
Total liabilities and stockholders’ equity |
|
$ |
2,810,835 |
|
|
$ |
2,711,900 |
|
|
$ |
2,695,469 |
|
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, |
|
|
|
2022 |
|
|
2021 |
|
Net sales |
|
$ |
432,976 |
|
|
$ |
426,807 |
|
Cost of sales |
|
|
294,968 |
|
|
|
274,521 |
|
Gross profit |
|
|
138,008 |
|
|
|
152,286 |
|
Selling, general and
administrative expenses** |
|
|
158,060 |
|
|
|
149,021 |
|
Loss on disposal of assets in
international operations |
|
|
— |
|
|
|
3,211 |
|
(Loss) income from operations |
|
|
(20,052 |
) |
|
|
54 |
|
Interest expense, net |
|
|
23,395 |
|
|
|
17,214 |
|
Other (income) expense, net |
|
|
(203 |
) |
|
|
427 |
|
(Loss) before income taxes |
|
|
(43,244 |
) |
|
|
(17,587 |
) |
Income tax (benefit) |
|
|
(16,355 |
) |
|
|
(3,469 |
) |
Net (loss) |
|
|
(26,889 |
) |
|
|
(14,118 |
) |
Less: Net (loss) attributable to
noncontrolling interests |
|
|
— |
|
|
|
(54 |
) |
Net (loss) attributable to common shareholders of Party City Holdco
Inc. |
|
$ |
(26,889 |
) |
|
$ |
(14,064 |
) |
Net (loss) per share attributable
to common shareholders of Party City Holdco Inc.–Basic |
|
$ |
(0.24 |
) |
|
$ |
(0.13 |
) |
Net (loss) per share attributable
to common shareholders of Party City Holdco Inc.–Diluted |
|
$ |
(0.24 |
) |
|
$ |
(0.13 |
) |
Weighted-average number of common
shares-Basic |
|
|
112,407,040 |
|
|
|
110,917,349 |
|
Weighted-average number of common
shares-Diluted |
|
|
112,407,040 |
|
|
|
110,917,349 |
|
Dividends declared per share |
|
$ |
— |
|
|
$ |
— |
|
Comprehensive (loss) income |
|
$ |
(25,937 |
) |
|
$ |
20,937 |
|
Less: Comprehensive (loss)
attributable to noncontrolling interests |
|
|
— |
|
|
|
(84 |
) |
Comprehensive (loss) income
attributable to common shareholders of Party City Holdco Inc. |
|
$ |
(25,937 |
) |
|
$ |
21,021 |
|
** Consists of
wholesale selling expenses, retail operating expenses, art and
development costs and general and administrative expenses, which
were reported separately in the prior year. |
|
PARTY CITY HOLDCO INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands, unaudited)
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Cash flows (used in) operating
activities: |
|
|
|
|
|
|
Net (loss) |
|
$ |
(26,889 |
) |
|
$ |
(14,118 |
) |
Adjustments to reconcile net (loss) to net cash (used in) operating
activities: |
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
15,860 |
|
|
|
17,944 |
|
Amortization of deferred financing costs and original issuance
discounts |
|
|
1,271 |
|
|
|
863 |
|
Provision for doubtful accounts |
|
|
945 |
|
|
|
696 |
|
Deferred income tax expense (benefit) |
|
|
(1,135 |
) |
|
|
(3,386 |
) |
Change in operating lease liability/asset |
|
|
(6,723 |
) |
|
|
(37,556 |
) |
Undistributed loss in equity method investments |
|
|
310 |
|
|
|
336 |
|
Loss on disposal of assets |
|
|
153 |
|
|
|
110 |
|
Loss on disposal of assets in international operations |
|
|
— |
|
|
|
3,211 |
|
Goodwill, intangibles and long-lived assets impairment |
|
|
2,154 |
|
|
|
— |
|
Stock-based compensation** |
|
|
1,733 |
|
|
|
1,230 |
|
Loss on debt refinancing |
|
|
— |
|
|
|
226 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Decrease in accounts receivable |
|
|
7,255 |
|
|
|
2,952 |
|
Increase in inventories |
|
|
(75,596 |
) |
|
|
(17,565 |
) |
Increase in prepaid expenses and other current assets |
|
|
(11,205 |
) |
|
|
(8,768 |
) |
(Decrease) increase in accounts payable, accrued expenses
and income taxes payable |
|
|
(24,958 |
) |
|
|
5,014 |
|
Net cash (used in) operating
activities |
|
|
(116,825 |
) |
|
|
(48,811 |
) |
Cash flows (used in) investing
activities: |
|
|
|
|
|
|
Cash paid in connection with acquisitions, net of cash
acquired |
|
|
(7 |
) |
|
|
— |
|
Capital expenditures |
|
|
(18,620 |
) |
|
|
(22,184 |
) |
Proceeds from disposal of property and equipment |
|
|
1,610 |
|
|
|
— |
|
Proceeds from sale of international operations, net of cash
disposed |
|
|
— |
|
|
|
20,556 |
|
Net cash (used in) investing
activities |
|
|
(17,017 |
) |
|
|
(1,628 |
) |
Cash flows provided by (used in)
financing activities: |
|
|
|
|
|
|
Repayment of loans, notes payable and long-term obligations |
|
|
(5,518 |
) |
|
|
(792,849 |
) |
Proceeds from loans, notes payable and long-term obligations |
|
|
124,759 |
|
|
|
794,750 |
|
Treasury stock purchases |
|
|
(753 |
) |
|
|
(206 |
) |
Exercise of stock options |
|
|
— |
|
|
|
2,855 |
|
Debt issuance costs |
|
|
— |
|
|
|
(21,437 |
) |
Net cash provided by (used in) financing
activities |
|
|
118,488 |
|
|
|
(16,887 |
) |
Effect of exchange rate changes
on cash and cash equivalents |
|
|
85 |
|
|
|
(177 |
) |
Net (decrease) in cash and cash
equivalents and restricted cash |
|
|
(15,269 |
) |
|
|
(67,503 |
) |
Change in cash classified within
current assets held for sale |
|
|
— |
|
|
|
31,628 |
|
Cash and cash equivalents and
restricted cash at beginning of period* |
|
|
48,914 |
|
|
|
119,681 |
|
Cash and cash equivalents and
restricted cash at end of period* |
|
$ |
33,645 |
|
|
$ |
83,806 |
|
Supplemental disclosure of cash
flow information: |
|
|
|
|
|
|
Cash paid during the period for interest expense |
|
$ |
41,173 |
|
|
$ |
20,309 |
|
Cash (received) paid during the period for income taxes, net of
refunds |
|
$ |
(421 |
) |
|
$ |
127 |
|
|
|
|
|
|
|
|
*Includes $1,000 of
restricted cash at March 31, 2022 and December 31, 2021. There was
no restricted cash as of March 31, 2021. The Company records
restricted cash in other assets, net as presented in the
consolidated balance sheet at March 31, 2022 and December 31,
2021. |
|
** Stock-based
compensation consists of stock-option expense – time-based,
restricted stock units – time-based, restricted stock units –
performance-based and directors – non-cash compensation, which were
shown separately in prior years. |
|
PARTY CITY HOLDCO INC.RECONCILIATION OF
ADJUSTED EBITDA(Unaudited)
|
|
Three months ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
(Dollars in
thousands) |
|
|
|
|
|
|
Net (loss) |
|
$ |
(26,889 |
) |
|
$ |
(14,118 |
) |
Interest expense, net |
|
|
23,395 |
|
|
|
17,214 |
|
Income tax (benefit) |
|
|
(16,355 |
) |
|
|
(3,469 |
) |
Depreciation and amortization |
|
|
15,860 |
|
|
|
17,944 |
|
EBITDA |
|
|
(3,989 |
) |
|
|
17,571 |
|
Inventory restructuring and early lease terminations (f) |
|
|
— |
|
|
|
3,138 |
|
Other restructuring, retention and severance (a) |
|
|
— |
|
|
|
2,051 |
|
Goodwill, intangibles and long-lived assets impairment (b) |
|
|
2,154 |
|
|
— |
|
Deferred rent (c) |
|
|
2,525 |
|
|
|
1,526 |
|
Closed store expense (d) |
|
|
987 |
|
|
|
1,593 |
|
Foreign currency (gains), net |
|
|
(281 |
) |
|
|
(539 |
) |
Stock-based compensation - employee** |
|
|
1,712 |
|
|
|
1,282 |
|
Undistributed loss in equity method investments |
|
|
310 |
|
|
|
336 |
|
Gain on sale of property, plant and equipment |
|
|
(119 |
) |
|
|
— |
|
COVID - 19 (e) |
|
|
— |
|
|
|
615 |
|
Inventory disposal reserve |
|
|
621 |
|
|
|
— |
|
Loss on sale of business |
|
|
— |
|
|
|
3,211 |
|
Net loss on debt repayment (g) |
|
|
— |
|
|
|
226 |
|
Other |
|
|
684 |
|
|
|
1,409 |
|
Adjusted
EBITDA |
|
$ |
4,604 |
|
|
$ |
32,419 |
|
Adjusted EBITDA
Margin |
|
|
1.1 |
% |
|
|
7.6 |
% |
** Stock-based
compensation consists of stock-option expense – time-based,
restricted stock units – time-based and restricted stock units –
performance-based, which were shown separately in prior years. |
|
PARTY CITY HOLDCO INCRECONCILIATION OF
ADJUSTED EBITDA, Continued (In thousands,
unaudited)
|
|
|
|
|
Three Months Ended March 31, 2022 EBITDA
Adjustments |
|
|
|
|
|
|
March 31, 2022GAAPBasis
(asreported) |
|
|
Goodwill, intangibles and long-lived assets impairment
(b) |
|
|
Inventory disposal reserve |
|
|
Gain on sale of property, plant and equipment |
|
|
Stock-based compensation - employee** |
|
|
Deferred rent (c) |
|
|
Closed store expense (d) |
|
|
Foreign currency losses/(gains), net |
|
|
Other |
|
|
March 31,
2022Non-GAAPbasis |
|
Net sales |
|
$ |
432,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
432,976 |
|
Cost of sales |
|
|
294,968 |
|
|
|
|
|
|
(621 |
) |
|
|
|
|
|
|
|
|
(2,017 |
) |
|
|
|
|
|
|
|
|
|
|
|
292,330 |
|
Gross profit |
|
|
138,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140,646 |
|
Selling, General and
administrative expenses** |
|
|
158,060 |
|
|
|
(2,154 |
) |
|
|
|
|
|
119 |
|
|
|
(1,712 |
) |
|
|
(508 |
) |
|
|
(987 |
) |
|
|
|
|
|
(648 |
) |
|
|
152,170 |
|
(Loss) from operations |
|
|
(20,052 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,524 |
) |
Interest expense, net |
|
|
23,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40 |
) |
|
|
23,355 |
|
Other (income) expense,
net |
|
|
(203 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281 |
|
|
|
(306 |
) |
|
|
(228 |
) |
(Loss) before Income Taxes |
|
|
(43,244 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,651 |
) |
Interest expense, net |
|
|
23,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,395 |
|
Depreciation and
amortization |
|
|
15,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,860 |
|
EBITDA |
|
|
(3,989 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,604 |
|
Adjustments to EBITDA |
|
|
8,593 |
|
|
|
(2,154 |
) |
|
|
(621 |
) |
|
|
119 |
|
|
|
(1,712 |
) |
|
|
(2,525 |
) |
|
|
(987 |
) |
|
|
281 |
|
|
|
(994 |
) |
|
|
— |
|
Adjusted
EBITDA |
|
$ |
4,604 |
|
|
$ |
(2,154 |
) |
|
$ |
(621 |
) |
|
$ |
119 |
|
|
$ |
(1,712 |
) |
|
$ |
(2,525 |
) |
|
$ |
(987 |
) |
|
$ |
281 |
|
|
$ |
(994 |
) |
|
$ |
4,604 |
|
** Consists of
wholesale selling expenses, retail operating expenses, art and
development costs and general and administrative expenses, which
were reported separately in the prior year. |
|
|
|
|
PARTY CITY HOLDCO INC.RECONCILIATION OF
ADJUSTED EBITDA, Continued (In thousands,
unaudited)
|
|
|
|
|
Three Months Ended March 31, 2021 EBITDA
Adjustments |
|
|
|
|
|
|
March 31, 2021GAAPBasis
(asreported) |
|
|
Early lease terminations |
|
|
Net loss on debt repayment (g) |
|
|
Stock-based compensation - employee** |
|
|
Deferred rent (c) |
|
|
Other restructuring, retention and severance
(a) |
|
|
Closed store expense (d) |
|
|
COVID - 19 (e) |
|
|
Foreigncurrencyloss |
|
|
Other |
|
|
March
31,2021Non-GAAPbasis |
|
Net sales |
|
$ |
426,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
426,807 |
|
Cost of sales |
|
|
274,521 |
|
|
|
(1,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124 |
|
|
|
273,263 |
|
Gross profit |
|
|
152,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,544 |
|
Selling, General and
administrative expenses** |
|
|
149,021 |
|
|
|
(1,756 |
) |
|
|
|
|
|
(1,282 |
) |
|
|
(1,526 |
) |
|
|
(2,052 |
) |
|
|
(1,593 |
) |
|
|
(615 |
) |
|
|
|
|
|
(1,367 |
) |
|
|
138,831 |
|
Loss on disposal of assets in
international operations |
|
|
3,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,211 |
) |
|
|
|
Income from operations |
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,713 |
|
Interest expense, net |
|
|
17,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(54 |
) |
|
|
17,160 |
|
Other (income) expense,
net |
|
|
427 |
|
|
|
|
|
|
(226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
539 |
|
|
|
(449 |
) |
|
|
292 |
|
(Loss) before income
taxes |
|
|
(17,587 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,739 |
) |
Interest expense, net |
|
|
17,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,214 |
|
Depreciation and
amortization |
|
|
17,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,944 |
|
EBITDA |
|
|
17,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,419 |
|
Adjustments to EBITDA |
|
|
14,848 |
|
|
|
(3,138 |
) |
|
|
(226 |
) |
|
|
(1,282 |
) |
|
|
(1,526 |
) |
|
|
(2,052 |
) |
|
|
(1,593 |
) |
|
|
(615 |
) |
|
|
539 |
|
|
|
(4,957 |
) |
|
|
(0 |
) |
Adjusted
EBITDA |
|
$ |
32,419 |
|
|
$ |
(3,138 |
) |
|
$ |
(226 |
) |
|
$ |
(1,282 |
) |
|
$ |
(1,526 |
) |
|
$ |
(2,052 |
) |
|
$ |
(1,593 |
) |
|
$ |
(615 |
) |
|
$ |
539 |
|
|
$ |
(4,957 |
) |
|
$ |
32,419 |
|
** Consists of
wholesale selling expenses, retail operating expenses, art and
development costs and general and administrative expenses, which
were reported separately in the prior year. |
|
PARTY CITY HOLDCO INC.RECONCILIATION OF
ADJUSTED NET INCOME(Unaudited)
|
|
Three months ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
(Dollars in thousands,
except per share amounts) |
|
|
|
|
|
|
(Loss) before income taxes |
|
$ |
(43,244 |
) |
|
$ |
(17,587 |
) |
Intangible asset amortization |
|
|
1,544 |
|
|
|
2,477 |
|
Amortization of deferred financing costs and original issuance
discounts |
|
|
1,271 |
|
|
|
863 |
|
Other restructuring, retention and severance (a) |
|
|
— |
|
|
|
1,936 |
|
Goodwill, intangibles and long-lived assets impairment (b) |
|
|
2,154 |
|
|
— |
|
Stock option expense |
|
|
85 |
|
|
|
113 |
|
Restricted stock unit and restricted cash awards expense –
performance-based |
|
|
569 |
|
|
|
817 |
|
COVID - 19 (e) |
|
|
— |
|
|
|
615 |
|
Loss on disposal of assets |
|
|
— |
|
|
|
3,211 |
|
Inventory disposal reserve |
|
|
621 |
|
|
|
764 |
|
Adjusted (loss) before
income taxes |
|
|
(37,000 |
) |
|
|
(6,791 |
) |
Adjusted income tax (benefit) (h) |
|
|
(12,321 |
) |
|
|
(1,382 |
) |
Adjusted net
(loss) |
|
$ |
(24,679 |
) |
|
$ |
(5,409 |
) |
Adjusted net (loss) per
common share – diluted |
|
$ |
(0.22 |
) |
|
$ |
(0.05 |
) |
Weighted-average number of common
shares-diluted |
|
|
112,407,040 |
|
|
|
110,917,349 |
|
(a) Amounts expensed principally relate to severance due to
organizational changes.
(b) In December 2021, the Company announced the closure of a
manufacturing facility in New Mexico that ceased operations in
February 2022. As a result, the Company recorded related shutdown
charges (see Note 3, Disposition of Assets in Item 1, “Condensed
Consolidated Financial Statements (Unaudited)” in the Quarterly
Report on Form 10-Q).
(c) 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.
(d) Charges incurred related to closing and relocating stores in
the ordinary course of business.
(e) 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.
(f) Costs incurred for early lease terminations and a
merchandise transformation project to transition and optimize
stores to the reduced SKU assortment levels.
(g) The Company recognized net gain on debt repayment in
2021.
(h) Represents income tax expense/benefit after excluding the
specific tax impacts for each of the pre-tax adjustments. The tax
impacts for each of the adjustments were determined by applying to
the pre-tax adjustments the effective income tax rates for the
specific legal entities in which the adjustments were recorded.
PARTY CITY HOLDCO INC.RECONCILIATION OF
ADJUSTED THIRD-PARTY WHOLESALE SALES(In thousands,
except percentages, unaudited)
|
|
Three Months Ended March 31, |
|
|
2022 |
|
|
2021 |
|
|
Percent Variance |
|
Wholesale third-party sales |
|
$ |
92,025 |
|
|
$ |
93,524 |
|
|
|
(1.6 |
)% |
Third-party sales of divested
entities |
|
|
— |
|
|
|
(13,165 |
) |
|
|
|
Adjusted Wholesale third-party
sales |
|
$ |
92,025 |
|
|
$ |
80,360 |
|
|
|
14.5 |
% |
PARTY CITY HOLDCO INC.SEGMENT
INFORMATION(In thousands, except percentages,
unaudited)
|
|
Three months ended March 31, |
|
|
2022 |
2021 |
|
|
Dollars inThousands |
|
|
Percentage ofNet sales |
|
Dollars inThousands |
|
|
Percentage ofNet sales |
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
$ |
239,680 |
|
|
|
55.4 |
% |
|
$ |
212,137 |
|
|
|
49.7 |
% |
Eliminations |
|
|
(147,655 |
) |
|
|
(34.1 |
) |
|
|
(118,612 |
) |
|
|
(27.8 |
) |
Net wholesale |
|
|
92,025 |
|
|
|
21.3 |
|
|
|
93,525 |
|
|
|
21.9 |
|
Retail |
|
|
340,951 |
|
|
|
78.7 |
|
|
|
333,282 |
|
|
|
78.1 |
|
Total net sales |
|
$ |
432,976 |
|
|
|
100.0 |
% |
|
$ |
426,807 |
|
|
|
100.0 |
% |
|
|
Three months ended March 31, |
|
|
2022 |
|
2021 |
|
|
Dollars in Thousands |
|
|
Percentage of Net Sales |
|
|
Dollars in Thousands |
|
|
Percentage of Net Sales |
|
Retail gross profit |
|
$ |
113,366 |
|
|
|
33.2 |
% |
|
$ |
123,178 |
|
|
|
37.0 |
% |
Wholesale gross profit |
|
|
24,642 |
|
|
|
26.8 |
|
|
|
29,108 |
|
|
|
31.1 |
|
Total gross profit |
|
$ |
138,008 |
|
|
|
31.9 |
% |
|
$ |
152,286 |
|
|
|
35.7 |
% |
PARTY CITY HOLDCO INC.OPERATING
METRICS
|
|
Three months ended March 31, |
|
|
Last 12 Months |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store Count |
|
|
|
|
|
|
|
|
|
Corporate Stores: |
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
759 |
|
|
|
746 |
|
|
|
751 |
|
New stores opened |
|
|
2 |
|
|
|
5 |
|
|
|
7 |
|
Acquired |
|
|
— |
|
|
— |
|
|
|
10 |
|
Closed |
|
|
(2 |
) |
|
— |
|
|
|
(9 |
) |
End of period |
|
|
759 |
|
|
|
751 |
|
|
|
759 |
|
Franchise Stores |
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
72 |
|
|
|
85 |
|
|
|
82 |
|
New stores opened |
|
|
— |
|
|
— |
|
|
— |
|
Sold to Party City |
|
|
— |
|
|
— |
|
|
|
(10 |
) |
Closed |
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(1 |
) |
End of period |
|
|
71 |
|
|
|
82 |
|
|
|
71 |
|
Grand Total |
|
|
830 |
|
|
|
833 |
|
|
|
830 |
|
|
|
Three months ended March 31, |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
Wholesale Share of
Shelf (a) |
|
78.6 |
% |
|
81.5 |
% |
Manufacturing Share of
Shelf (b) |
|
31.1 |
% |
|
33.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
Brand comparable sales
(c) |
|
2.1 |
% |
|
35.9 |
% |
(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.
Contact:
ICR
Farah Soi and Rachel Schacter
203-682-8200
InvestorRelations@partycity.com
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