☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2019
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware 46-0539758
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, Par Value: $0.01/share | PRTY | New York Stock Exchange |
Large accelerated filer | ☒ | Accelerated filer ☐ | Non-accelerated filer | ☐ | ||||||
Smaller reporting company | ☐ | |||||||||
Emerging growth company | ||||||||||
☐ |
Page | |||||
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Item 1. Condensed Consolidated Financial Statements (Unaudited) | |||||
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4 | |||||
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8 | |||||
9 | |||||
June 30, 2018 | December 31, 2017 | |||||||
(Note 2) (Unaudited) | (Note 2) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 51,461 | $ | 54,291 | ||||
Accounts receivable, net | 130,067 | 140,980 | ||||||
Inventories, net | 673,676 | 604,066 | ||||||
Prepaid expenses and other current assets | 86,043 | 77,816 | ||||||
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Total current assets | 941,247 | 877,153 | ||||||
Property, plant and equipment, net | 311,572 | 301,141 | ||||||
Goodwill | 1,627,851 | 1,619,253 | ||||||
Trade names | 568,422 | 568,681 | ||||||
Other intangible assets, net | 71,587 | 75,704 | ||||||
Other assets, net | 11,705 | 12,824 | ||||||
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Total assets | $ | 3,532,384 | $ | 3,454,756 | ||||
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LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Loans and notes payable | $ | 379,519 | $ | 286,291 | ||||
Accounts payable | 175,449 | 160,994 | ||||||
Accrued expenses | 164,043 | 176,609 | ||||||
Income taxes payable | 6,541 | 45,568 | ||||||
Current portion of long-term obligations | 13,049 | 13,059 | ||||||
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Total current liabilities | 738,601 | 682,521 | ||||||
Long-term obligations, excluding current portion | 1,528,263 | 1,532,090 | ||||||
Deferred income tax liabilities | 177,891 | 175,836 | ||||||
Deferred rent and other long-term liabilities | 89,742 | 91,929 | ||||||
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Total liabilities | 2,534,497 | 2,482,376 | ||||||
Redeemable securities | 3,219 | 3,590 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock (96,474,228 and 96,380,102 shares outstanding and 119,853,795 and 119,759,669 shares issued at June 30, 2018 and December 31, 2017, respectively) | 1,199 | 1,198 | ||||||
Additionalpaid-in capital | 919,845 | 917,192 | ||||||
Retained earnings | 399,872 | 372,596 | ||||||
Accumulated other comprehensive loss | (39,797 | ) | (35,818 | ) | ||||
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Total Party City Holdco Inc. stockholders’ equity before common stock held in treasury | 1,281,119 | 1,255,168 | ||||||
Less: Common stock held in treasury, at cost (23,379,567 shares at June 30, 2018 and December 31, 2017) | (286,733 | ) | (286,733 | ) | ||||
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Total Party City Holdco Inc. stockholders’ equity | 994,386 | 968,435 | ||||||
Noncontrolling interests | 282 | 355 | ||||||
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Total stockholders’ equity | 994,668 | 968,790 | ||||||
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Total liabilities, redeemable securities and stockholders’ equity | $ | 3,532,384 | $ | 3,454,756 | ||||
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June 30, 2019 | December 31, 2018 | |||||||
(Note 2) (Unaudited) | (Note 2) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 47,131 | $ | 58,909 | ||||
Accounts receivable, net | 140,070 | 146,983 | ||||||
Inventories, net | 788,097 | 756,038 | ||||||
Prepaid expenses and other current assets | 66,707 | 61,905 | ||||||
Total current assets | 1,042,005 | 1,023,835 | ||||||
Property, plant and equipment, net | 257,395 | 321,044 | ||||||
Operating lease asset | 869,345 | — | ||||||
Goodwill | 1,659,653 | 1,656,950 | ||||||
Trade names | 568,014 | 568,031 | ||||||
Other intangible assets, net | 49,663 | 60,164 | ||||||
Other assets, net | 12,894 | 12,323 | ||||||
Total assets | $ | 4,458,969 | $ | 3,642,347 | ||||
LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Loans and notes payable | $ | 307,379 | $ | 302,751 | ||||
Accounts payable | 159,515 | 208,149 | ||||||
Accrued expenses | 151,459 | 161,228 | ||||||
Current portion of operating lease liability | 145,472 | — | ||||||
Income taxes payable | 10,279 | 25,993 | ||||||
Current portion of long-term obligations | 76,251 | 13,316 | ||||||
Total current liabilities | 850,355 | 711,437 | ||||||
Long-term obligations, excluding current portion | 1,565,315 | 1,621,963 | ||||||
Long-term portion of operating lease liability | 793,976 | — | ||||||
Deferred income tax liabilities, net | 163,657 | 174,427 | ||||||
Other long-term liabilities | 13,228 | 87,548 | ||||||
Total liabilities | 3,386,531 | 2,595,375 | ||||||
Redeemable securities | 3,351 | 3,351 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock (94,501,055 and 93,622,934 shares outstanding and 121,681,959 and 120,788,159 shares issued at June 30, 2019 and December 31, 2018, respectively) | 1,210 | 1,208 | ||||||
Additional paid-in capital | 926,838 | 922,476 | ||||||
Retained earnings | 513,130 | 495,777 | ||||||
Accumulated other comprehensive loss | (45,216 | ) | (49,201 | ) | ||||
Total Party City Holdco Inc. stockholders’ equity before common stock held in treasury | 1,395,962 | 1,370,260 | ||||||
Less: Common stock held in treasury, at cost (27,180,904 and 27,165,225 shares at June 30, 2019 and December 31, 2018) | (327,086 | ) | (326,930 | ) | ||||
Total Party City Holdco Inc. stockholders’ equity | 1,068,876 | 1,043,330 | ||||||
Noncontrolling interests | 211 | 291 | ||||||
Total stockholders’ equity | 1,069,087 | 1,043,621 | ||||||
Total liabilities, redeemable securities and stockholders’ equity | $ | 4,458,969 | $ | 3,642,347 | ||||
Three Months Ended June 30, | ||||||||
2018 | 2017 | |||||||
Revenues: | ||||||||
Net sales | $ | 558,101 | $ | 541,653 | ||||
Royalties and franchise fees | 2,910 | 3,225 | ||||||
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Total revenues | 561,011 | 544,878 | ||||||
Expenses: | ||||||||
Cost of sales | 329,477 | 321,900 | ||||||
Wholesale selling expenses | 17,256 | 16,045 | ||||||
Retail operating expenses | 92,094 | 90,512 | ||||||
Franchise expenses | 3,980 | 3,713 | ||||||
General and administrative expenses | 45,326 | 39,655 | ||||||
Art and development costs | 5,732 | 5,942 | ||||||
Development stage expenses | 1,695 | 6,412 | ||||||
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Total expenses | 495,560 | 484,179 | ||||||
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Income from operations | 65,451 | 60,699 | ||||||
Interest expense, net | 25,501 | 21,294 | ||||||
Other expense (income), net | 2,532 | (895 | ) | |||||
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Income before income taxes | 37,418 | 40,300 | ||||||
Income tax expense | 9,370 | 15,318 | ||||||
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Net income | 28,048 | 24,982 | ||||||
Add: Net income attributable to redeemable securities holder | 410 | — | ||||||
Less: Net loss attributable to noncontrolling interests | (29 | ) | — | |||||
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Net income attributable to common shareholders of Party City Holdco Inc. | $ | 28,487 | $ | 24,982 | ||||
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Net income per share attributable to common shareholders of Party City Holdco Inc.—Basic | $ | 0.30 | $ | 0.21 | ||||
Net income per share attributable to common shareholders of Party City Holdco Inc.—Diluted | $ | 0.29 | $ | 0.21 | ||||
Weighted-average number of common shares-Basic | 96,453,884 | 119,528,147 | ||||||
Weighted-average number of common shares-Diluted | 97,688,233 | 120,943,745 | ||||||
Dividends declared per share | $ | 0.00 | $ | 0.00 | ||||
Comprehensive income | $ | 18,825 | $ | 31,985 | ||||
Add: Comprehensive income attributable to redeemable securities holder | 410 | — | ||||||
Less: Comprehensive loss attributable to noncontrolling interests | (55 | ) | — | |||||
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Comprehensive income attributable to common shareholders of Party City Holdco Inc. | $ | 19,290 | $ | 31,985 | ||||
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Three Months Ended June 30, | ||||||||
2019 | 2018 | |||||||
Revenues: | ||||||||
Net sales | $ | 561,702 | $ | 558,101 | ||||
Royalties and franchise fees | 2,189 | 2,910 | ||||||
Total revenues | 563,891 | 561,011 | ||||||
Cost of sales | 353,056 | 329,477 | ||||||
Wholesale selling expenses | 16,884 | 17,256 | ||||||
Retail operating expenses | 96,143 | 92,094 | ||||||
Franchise expenses | 3,236 | 3,980 | ||||||
General and administrative expenses | 41,510 | 45,326 | ||||||
Art and development costs | 5,712 | 5,732 | ||||||
Development stage expenses | 3,012 | 1,695 | ||||||
Gain on sale/leaseback transaction | (58,381 | ) | — | |||||
Store impairment and restructuring charges | 5,234 | — | ||||||
466,406 | 495,560 | |||||||
Income from operations | 97,485 | 65,451 | ||||||
Interest expense, net | 30,176 | 25,501 | ||||||
Other expense, net | 3,342 | 2,532 | ||||||
Income before income taxes | 63,967 | 37,418 | ||||||
Income tax expense | 15,962 | 9,370 | ||||||
Net income | 48,005 | 28,048 | ||||||
Add: Net income attributable to redeemable securities holder | — | 410 | ||||||
Less: Net loss attributable to noncontrolling interests | (69 | ) | (29 | ) | ||||
Net income attributable to common shareholders of Party City Holdco Inc. | $ | 48,074 | $ | 28,487 | ||||
Net income per share attributable to common shareholders of Party City Holdco Inc.–Basic | $ | 0.52 | $ | 0.30 | ||||
Net income per share attributable to common shareholders of Party City Holdco Inc.–Diluted | $ | 0.51 | $ | 0.29 | ||||
Weighted-average number of common shares-Basic | 93,293,176 | 96,453,884 | ||||||
Weighted-average number of common shares-Diluted | 93,703,546 | 97,688,233 | ||||||
Dividends declared per share | $ | 0.00 | $ | 0.00 | ||||
Comprehensive income | $ | 48,327 | $ | 18,825 | ||||
Add: Comprehensive income attributable to redeemable securities holder | — | 410 | ||||||
Less: Comprehensive loss attributable to noncontrolling interests | (89 | ) | (55 | ) | ||||
Comprehensive income attributable to common shareholders of Party City Holdco Inc. | $ | 48,416 | $ | 19,290 | ||||
PARTY CITY HOLDCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except share and per share data)
Six Months Ended June 30, | ||||||||
2018 | 2017 | |||||||
Revenues: | ||||||||
Net sales | $ | 1,063,209 | $ | 1,015,616 | ||||
Royalties and franchise fees | 5,626 | 6,261 | ||||||
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Total revenues | 1,068,835 | 1,021,877 | ||||||
Expenses: | ||||||||
Cost of sales | 646,443 | 620,619 | ||||||
Wholesale selling expenses | 36,043 | 31,672 | ||||||
Retail operating expenses | 181,186 | 181,242 | ||||||
Franchise expenses | 7,762 | 7,030 | ||||||
General and administrative expenses | 93,991 | 87,792 | ||||||
Art and development costs | 11,705 | 11,740 | ||||||
Development stage expenses | 3,998 | 6,412 | ||||||
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Total expenses | 981,128 | �� | 946,507 | |||||
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Income from operations | 87,707 | 75,370 | ||||||
Interest expense, net | 48,776 | 41,986 | ||||||
Other expense, net | 3,380 | 267 | ||||||
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Income before income taxes | 35,551 | 33,117 | ||||||
Income tax expense | 8,666 | 12,818 | ||||||
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Net income | 26,885 | 20,299 | ||||||
Add: Net income attributable to redeemable securities holder | 410 | — | ||||||
Less: Net loss attributable to noncontrolling interests | (59 | ) | — | |||||
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Net income attributable to common shareholders of Party City Holdco Inc. | $ | 27,354 | $ | 20,299 | ||||
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Net income per share attributable to common shareholders of Party City Holdco Inc.—Basic | $ | 0.28 | $ | 0.17 | ||||
Net income per share attributable to common shareholders of Party City Holdco Inc.—Diluted | $ | 0.28 | $ | 0.17 | ||||
Weighted-average number of common shares-Basic | 96,426,235 | 119,526,007 | ||||||
Weighted-average number of common shares-Diluted | 97,669,309 | 120,903,032 | ||||||
Dividends declared per share | $ | 0.00 | $ | 0.00 | ||||
Comprehensive income | $ | 22,892 | $ | 30,510 | ||||
Add: Comprehensive income attributable to redeemable securities holder | 410 | — | ||||||
Less: Comprehensive loss attributable to noncontrolling interests | (73 | ) | — | |||||
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Comprehensive income attributable to common shareholders of Party City Holdco Inc. | $ | 23,375 | $ | 30,510 | ||||
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OPERATIONS AND COMPREHENSIVE INCOME
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Party City Holdco Inc. Stockholders’ Equity Before Common Stock Held In Treasury | Common Stock Held In Treasury | Total Party City Holdco Inc. Stockholders’ Equity | Non- Controlling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
Balance at December 31, 2017 | $ | 1,198 | $ | 917,192 | $ | 372,596 | $ | (35,818 | ) | $ | 1,255,168 | $ | (286,733 | ) | $ | 968,435 | $ | 355 | $ | 968,790 | ||||||||||||||||
Cumulative effect of change in accounting principle, net (see Note 2) | (78 | ) | (78 | ) | (78 | ) | (78 | ) | ||||||||||||||||||||||||||||
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Balance at December 31, 2017, as adjusted | $ | 1,198 | $ | 917,192 | $ | 372,518 | $ | (35,818 | ) | $ | 1,255,090 | $ | (286,733 | ) | $ | 968,357 | $ | 355 | $ | 968,712 | ||||||||||||||||
Net income | 26,944 | 26,944 | 26,944 | (59 | ) | 26,885 | ||||||||||||||||||||||||||||||
Net income attributable to redeemable securities holder | 410 | 410 | 410 | 410 | ||||||||||||||||||||||||||||||||
Stock option expense | 942 | 942 | 942 | 942 | ||||||||||||||||||||||||||||||||
Restricted stock units – time-based | 252 | 252 | 252 | 252 | ||||||||||||||||||||||||||||||||
Restricted stock units –performance-based | 593 | 593 | 593 | 593 | ||||||||||||||||||||||||||||||||
Director –non-cash compensation | 59 | 59 | 59 | 59 | ||||||||||||||||||||||||||||||||
Warrant expense | 326 | 326 | 326 | 326 | ||||||||||||||||||||||||||||||||
Exercise of stock options | 1 | 481 | 482 | 482 | 482 | |||||||||||||||||||||||||||||||
Foreign currency adjustments | (5,307 | ) | (5,307 | ) | (5,307 | ) | (14 | ) | (5,321 | ) | ||||||||||||||||||||||||||
Impact of foreign exchange contracts, net | 1,328 | 1,328 | 1,328 | 1,328 | ||||||||||||||||||||||||||||||||
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Balance at June 30, 2018 | $ | 1,199 | $ | 919,845 | $ | 399,872 | $ | (39,797 | ) | $ | 1,281,119 | $ | (286,733 | ) | $ | 994,386 | $ | 282 | $ | 994,668 | ||||||||||||||||
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thousands, except share and per share data)
Six Months Ended June 30, | ||||||||
2019 | 2018 | |||||||
Revenues: | ||||||||
Net sales | $ | 1,072,804 | $ | 1,063,209 | ||||
Royalties and franchise fees | 4,203 | 5,626 | ||||||
Total revenues | 1,077,007 | 1,068,835 | ||||||
Cost of sales | 692,098 | 646,443 | ||||||
Wholesale selling expenses | 34,845 | 36,043 | ||||||
Retail operating expenses | 191,161 | 181,186 | ||||||
Franchise expenses | 6,539 | 7,762 | ||||||
General and administrative expenses | 83,435 | 93,991 | ||||||
Art and development costs | 11,641 | 11,705 | ||||||
Development stage expenses | 5,238 | 3,998 | ||||||
Gain on sale/leaseback transaction | (58,381 | ) | — | |||||
Store impairment and restructuring charges | 23,243 | — | ||||||
989,819 | 981,128 | |||||||
Income from operations | 87,188 | 87,707 | ||||||
Interest expense, net | 59,433 | 48,776 | ||||||
Other expense, net | 4,596 | 3,380 | ||||||
Income before income taxes | 23,159 | 35,551 | ||||||
Income tax expense | 5,443 | 8,666 | ||||||
Net income | 17,716 | 26,885 | ||||||
Add: Net income attributable to redeemable securities holder | — | 410 | ||||||
Less: Net loss attributable to noncontrolling interests | (140 | ) | (59 | ) | ||||
Net income attributable to common shareholders of Party City Holdco Inc. | $ | 17,856 | $ | 27,354 | ||||
Net income per share attributable to common shareholders of Party City Holdco Inc. –Basic | $ | 0.19 | $ | 0.28 | ||||
Net income per share attributable to common shareholders of Party City Holdco Inc. –Diluted | $ | 0.19 | $ | 0.28 | ||||
Weighted-average number of common shares-Basic | 93,233,865 | 96,426,235 | ||||||
Weighted-average number of common shares-Diluted | 93,791,763 | 97,669,309 | ||||||
Dividends declared per share | $ | 0.00 | $ | 0.00 | ||||
Comprehensive income | $ | 21,690 | $ | 22,892 | ||||
Add: Comprehensive income attributable to redeemable securities holder | — | 410 | ||||||
Less: Comprehensive loss attributable to noncontrolling interests | (151 | ) | (73 | ) | ||||
Comprehensive income attributable to common shareholders of Party City Holdco Inc. | $ | 21,841 | $ | 23,375 | ||||
STOCKHOLDERS’ EQUITY
Six Months Ended June 30, | ||||||||
2018 | 2017 (Adjusted, see Note 2) | |||||||
Cash flows (used in) provided by operating activities: | ||||||||
Net income | $ | 26,885 | $ | 20,299 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization expense | 40,812 | 41,825 | ||||||
Amortization of deferred financing costs and original issuance discounts | 2,766 | 2,459 | ||||||
Provision for doubtful accounts | 304 | 419 | ||||||
Deferred income tax expense | 1,443 | 1,713 | ||||||
Deferred rent | 1,155 | 2,915 | ||||||
Undistributed income in unconsolidated joint ventures | (301 | ) | (226 | ) | ||||
Loss on disposal of assets | 24 | 528 | ||||||
Non-employee equity based compensation | 365 | 3,265 | ||||||
Stock option expense | 942 | 3,222 | ||||||
Restricted stock units—time-based | 252 | — | ||||||
Restricted stock units—performance-based | 593 | — | ||||||
Director—non-cash compensation | 59 | — | ||||||
Changes in operating assets and liabilities, net of effects of acquired businesses: | ||||||||
Decrease in accounts receivable | 8,791 | 20,823 | ||||||
Increase in inventories | (68,741 | ) | (5,328 | ) | ||||
(Increase) decrease in prepaid expenses and other current assets | (9,137 | ) | 866 | |||||
Decrease in accounts payable, accrued expenses and income taxes payable | (29,220 | ) | (40,462 | ) | ||||
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Net cash (used in) provided by operating activities | (23,008 | ) | 52,318 | |||||
Cash flows used in investing activities: | ||||||||
Cash paid in connection with acquisitions, net of cash acquired | (21,325 | ) | (70,547 | ) | ||||
Capital expenditures | (44,406 | ) | (30,854 | ) | ||||
Proceeds from disposal of property and equipment | 21 | 5 | ||||||
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Net cash used in investing activities | (65,710 | ) | (101,396 | ) | ||||
Cash flows provided by financing activities: | ||||||||
Repayment of loans, notes payable and long-term obligations | (26,062 | ) | (76,978 | ) | ||||
Proceeds from loans, notes payable and long-term obligations | 112,293 | 128,140 | ||||||
Exercise of stock options | 482 | 67 | ||||||
Debt issuance costs | (56 | ) | — | |||||
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Net cash provided by financing activities | 86,657 | 51,229 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (780 | ) | 2,208 | |||||
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Net (decrease) increase in cash and cash equivalents and restricted cash | (2,841 | ) | 4,359 | |||||
Cash and cash equivalents and restricted cash at beginning of period | 54,408 | 64,765 | ||||||
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Cash and cash equivalents and restricted cash at end of period | $ | 51,567 | $ | 69,124 | ||||
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Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period | ||||||||
Interest | $ | 49,489 | $ | 34,770 | ||||
Income taxes, net of refunds | $ | 46,617 | $ | 49,588 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Party City Holdco Inc. Stockholders’ Equity Before Common Stock Held In Treasury | Common Stock Held In Treasury | Total Party City Holdco Inc. Stockholders’ Equity | Non- Controlling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
Balance at March 31, 2019 | $ | 1,210 | $ | 925,233 | $ | 465,056 | $ | (45,558 | ) | $ | 1,345,941 | $ | (327,086 | ) | $ | 1,018,855 | $ | 300 | $ | 1,019,155 | ||||||||||||||||
Net income (loss) | — | — | 48,074 | — | 48,074 | — | 48,074 | (69 | ) | 48,005 | ||||||||||||||||||||||||||
Stock option expense | — | 371 | — | — | 371 | — | 371 | — | 371 | |||||||||||||||||||||||||||
Restricted stock units – time-based | — | 541 | — | — | 541 | — | 541 | — | 541 | |||||||||||||||||||||||||||
Restricted stock units – performance-based | — | 476 | — | — | 476 | — | 476 | — | 476 | |||||||||||||||||||||||||||
Director – non-cash compensation | — | 88 | — | — | 88 | — | 88 | — | 88 | |||||||||||||||||||||||||||
Warrant expense | — | 129 | — | — | 129 | — | 129 | — | 129 | |||||||||||||||||||||||||||
Foreign currency adjustments | — | — | — | 556 | 556 | — | 556 | (20 | ) | 536 | ||||||||||||||||||||||||||
Impact of foreign exchange contracts, net | — | — | — | (214 | ) | (214 | ) | — | (214 | ) | — | (214 | ) | |||||||||||||||||||||||
Balance at June 30, 2019 | $ | 1,210 | $ | 926,838 | $ | 513,130 | $ | (45,216 | ) | $ | 1,395,962 | $ | (327,086 | ) | $ | 1,068,876 | $ | 211 | $ | 1,069,087 | ||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Party City Holdco Inc. Stockholders’ Equity Before Common Stock Held In Treasury | Common Stock Held In Treasury | Total Party City Holdco Inc. Stockholders’ Equity | Non- Controlling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
Balance at March 31, 2018 | $ | 1,198 | $ | 918,205 | $ | 371,385 | $ | (30,600 | ) | $ | 1,260,188 | $ | (286,733 | ) | $ | 973,455 | $ | 337 | $ | 973,792 | ||||||||||||||||
Net income (loss) | — | — | 28,077 | — | 28,077 | — | 28,077 | (29 | ) | 28,048 | ||||||||||||||||||||||||||
Net income attributable to redeemable securities holder | — | — | 410 | — | 410 | — | 410 | — | 410 | |||||||||||||||||||||||||||
Stock option expense | — | 482 | — | — | 482 | — | 482 | — | 482 | |||||||||||||||||||||||||||
Restricted stock units – time-based | — | 252 | — | — | 252 | — | 252 | — | 252 | |||||||||||||||||||||||||||
Restricted stock units – performance-based | — | 593 | — | — | 593 | — | 593 | — | 593 | |||||||||||||||||||||||||||
Director – non-cash compensation | — | 59 | — | — | 59 | — | 59 | — | 59 | |||||||||||||||||||||||||||
Warrant expense | — | 65 | — | — | 65 | — | 65 | — | 65 | |||||||||||||||||||||||||||
Exercise of stock options | 1 | 189 | — | — | 190 | — | 190 | — | 190 | |||||||||||||||||||||||||||
Foreign currency adjustments | — | — | — | (10,713 | ) | (10,713 | ) | — | (10,713 | ) | (26 | ) | (10,739 | ) | ||||||||||||||||||||||
Impact of foreign exchange contracts, net | — | — | — | 1,516 | 1,516 | — | 1,516 | — | 1,516 | |||||||||||||||||||||||||||
Balance at June 30, 2018 | $ | 1,199 | $ | 919,845 | $ | 399,872 | $ | (39,797 | ) | $ | 1,281,119 | $ | (286,733 | ) | $ | 994,386 | $ | 282 | $ | 994,668 | ||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Party City Holdco Inc. Stockholders’ Equity Before Common Stock Held In Treasury | Common Stock Held In Treasury | Total Party City Holdco Inc. Stockholders’ Equity | Non- Controlling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
Balance at December 31, 2018 | $ | 1,208 | $ | 922,476 | $ | 495,777 | $ | (49,201 | ) | $ | 1,370,260 | $ | (326,930 | ) | $ | 1,043,330 | $ | 291 | $ | 1,043,621 | ||||||||||||||||
Cumulative effect of change in accounting principle, net (see Note 2) | — | 662 | (503 | ) | — | 159 | — | 159 | — | 159 | ||||||||||||||||||||||||||
Balance at December 31, 2018, as adjusted | $ | 1,208 | $ | 923,138 | $ | 495,274 | $ | (49,201 | ) | $ | 1,370,419 | $ | (326,930 | ) | $ | 1,043,489 | $ | 291 | $ | 1,043,780 | ||||||||||||||||
Net income (loss) | — | ��� | 17,856 | — | 17,856 | — | 17,856 | (140 | ) | 17,716 | ||||||||||||||||||||||||||
Stock option expense | — | 741 | — | — | 741 | — | 741 | — | 741 | |||||||||||||||||||||||||||
Restricted stock units – time-based | — | 933 | — | — | 933 | — | 933 | — | 933 | |||||||||||||||||||||||||||
Restricted stock units – performance-based | — | 476 | — | — | 476 | — | 476 | — | 476 | |||||||||||||||||||||||||||
Director – non-cash compensation | — | 165 | — | — | 165 | — | 165 | — | 165 | |||||||||||||||||||||||||||
Warrant expense | — | 258 | — | — | 258 | — | 258 | — | 258 | |||||||||||||||||||||||||||
Exercise of stock options | 2 | 1,086 | — | — | 1,088 | — | 1,088 | — | 1,088 | |||||||||||||||||||||||||||
Acquired non-controlling interest | — | 41 | — | — | 41 | — | 41 | 71 | 112 | |||||||||||||||||||||||||||
Treasury stock purchases | — | — | — | — | — | (156 | ) | (156 | ) | — | (156 | ) | ||||||||||||||||||||||||
Foreign currency adjustments | — | — | — | 4,712 | 4,712 | — | 4,712 | (11 | ) | 4,701 | ||||||||||||||||||||||||||
Impact of foreign exchange contracts, net | — | — | — | (727 | ) | (727 | ) | — | (727 | ) | — | (727 | ) | |||||||||||||||||||||||
Balance at June 30, 2019 | $ | 1,210 | $ | 926,838 | $ | 513,130 | $ | (45,216 | ) | $ | 1,395,962 | $ | (327,086 | ) | $ | 1,068,876 | $ | 211 | $ | 1,069,087 | ||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Party City Holdco Inc. Stockholders’ Equity Before Common Stock Held In Treasury | Common Stock Held In Treasury | Total Party City Holdco Inc. Stockholders’ Equity | Non- Controlling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
Balance at December 31, 2017 | $ | 1,198 | $ | 917,192 | $ | 372,596 | $ | (35,818 | ) | $ | 1,255,168 | $ | (286,733 | ) | $ | 968,435 | $ | 355 | $ | 968,790 | ||||||||||||||||
Cumulative effect of change in accounting principle, net | — | — | (78 | ) | — | (78 | ) | — | (78 | ) | — | (78 | ) | |||||||||||||||||||||||
Balance at December 31, 2017, as adjusted | $ | 1,198 | $ | 917,192 | $ | 372,518 | $ | (35,818 | ) | $ | 1,255,090 | $ | (286,733 | ) | $ | 968,357 | $ | 355 | $ | 968,712 | ||||||||||||||||
Net income | — | — | 26,944 | — | 26,944 | — | 26,944 | (59 | ) | 26,885 | ||||||||||||||||||||||||||
Net income attributable to redeemable securities holder | — | — | 410 | — | 410 | — | 410 | — | 410 | |||||||||||||||||||||||||||
Stock option expense | — | 942 | — | — | 942 | — | 942 | — | 942 | |||||||||||||||||||||||||||
Restricted stock units – time-based | — | 252 | — | — | 252 | — | 252 | — | 252 | |||||||||||||||||||||||||||
Restricted stock units – performance-based | — | 593 | — | — | 593 | — | 593 | — | 593 | |||||||||||||||||||||||||||
Director – non-cash compensation | — | 59 | — | — | 59 | — | 59 | — | 59 | |||||||||||||||||||||||||||
Warrant expense | — | 326 | — | — | 326 | — | 326 | — | 326 | |||||||||||||||||||||||||||
Exercise of stock options | 1 | 481 | — | — | 482 | — | 482 | — | 482 | |||||||||||||||||||||||||||
Foreign currency adjustments | — | — | — | (5,307 | ) | (5,307 | ) | — | (5,307 | ) | (14 | ) | (5,321 | ) | ||||||||||||||||||||||
Impact of foreign exchange contracts, net | — | — | — | 1,328 | 1,328 | — | 1,328 | — | 1,328 | |||||||||||||||||||||||||||
Balance at June 30, 2018 | $ | 1,199 | $ | 919,845 | $ | 399,872 | $ | (39,797 | ) | $ | 1,281,119 | $ | (286,733 | ) | $ | 994,386 | $ | 282 | $ | 994,668 | ||||||||||||||||
Six Months Ended June 30, | ||||||||
2019 | 2018 | |||||||
Cash flows used in operating activities: | ||||||||
Net income | $ | 17,716 | $ | 26,885 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Depreciation and amortization expense | 43,225 | 40,812 | ||||||
Amortization of deferred financing costs and original issuance discounts | 2,289 | 2,766 | ||||||
Provision for doubtful accounts | 596 | 304 | ||||||
Deferred income tax (benefit) expense | (10,779 | ) | 1,443 | |||||
Deferred rent | — | 1,155 | ||||||
Change in operating lease liability/asset | (21,406 | ) | — | |||||
Undistributed income in equity method investments | (202 | ) | (301 | ) | ||||
(Gain) loss on disposal of assets | (59,087 | ) | 24 | |||||
Store impairment and restructuring charges | 19,490 | — | ||||||
Non-employee equity based compensation | 258 | 365 | ||||||
Stock option expense | 741 | 942 | ||||||
Restricted stock units expense – time-based | 933 | 252 | ||||||
Restricted stock units expense – performance-based | 476 | 593 | ||||||
Directors – non-cash compensation | 165 | 59 | ||||||
Changes in operating assets and liabilities, net of effects of acquired businesses: | ||||||||
Decrease in accounts receivable | 6,588 | 8,791 | ||||||
Increase in inventories | (31,145 | ) | (68,741 | ) | ||||
Increase in prepaid expenses and other current assets | (4,333 | ) | (9,137 | ) | ||||
Decrease in accounts payable, accrued expenses and income taxes payable | (71,438 | ) | (29,220 | ) | ||||
Net cash used in operating activities | (105,913 | ) | (23,008 | ) | ||||
Cash flows provided by (used in) investing activities: | ||||||||
Cash paid in connection with acquisitions, net of cash acquired | (545 | ) | (21,325 | ) | ||||
Capital expenditures | (31,098 | ) | (44,406 | ) | ||||
Proceeds from disposal of property and equipment | 113,799 | 21 | ||||||
Net cash provided by (used in) investing activities | 82,156 | (65,710 | ) | |||||
Cash flows provided by financing activities: | ||||||||
Repayment of loans, notes payable and long-term obligations | (148,526 | ) | (26,062 | ) | ||||
Proceeds from loans, notes payable and long-term obligations | 157,440 | 112,293 | ||||||
Stock repurchases | (156 | ) | — | |||||
Exercise of stock options | 1,088 | 482 | ||||||
Debt issuance costs | (343 | ) | (56 | ) | ||||
Net cash provided by financing activities | 9,503 | 86,657 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 2,166 | (780 | ) | |||||
Net decrease in cash and cash equivalents and restricted cash | (12,088 | ) | (2,841 | ) | ||||
Cash and cash equivalents and restricted cash at beginning of period | 59,219 | 54,408 | ||||||
Cash and cash equivalents and restricted cash at end of period | $ | 47,131 | $ | 51,567 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for interest | $ | 57,503 | $ | 49,489 | ||||
Cash paid during the period for income taxes, net of refunds | $ | 31,924 | $ | 46,617 |
Company decreased retained earnings by $503. Additionally, the Company increased additional
In November 2016, the FASB issued ASU2016-18, “Statement of Cash Flows: Restricted Cash”. The pronouncement requires companies to show changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The Company adopted the pronouncement, which requires retrospective application, during the first quarter of 2018. The impact of such adoption was immaterial to the Company’s consolidated financial statements. See Note 15 for further discussion.
In August 2016, the FASB issued ASU2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”. The pronouncement clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. The Company adopted the pronouncement during the first quarter of 2018 and such adoption did not have a material impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU “Leases” on their balance sheets assets and liabilities for the rights and obligations created by the companies’ leases. The updateCompany’s lease portfolio is effective forprimarily comprised of store leases, manufacturing and distribution facility leases, warehouse leases and office leases. Most of the leases are operating leases. The Company’s finance leases are not material to its consolidated financial statements.
balance sheet, such accounts reduce the operating lease asset. Additionally, in the Company’s December 31, 2018 consolidated balance sheet, other intangible assets, net, includes a $3,904 intangible asset related to favorable leases and prepaid expenses and other current assets includes a $2,552 asset related to capitalized broker costs. In January 2016, the FASB issued ASU2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”. Company’s June 30, 2019 consolidated balance sheet, such assets are included in the operating lease asset.
statement of operations and comprehensive income (loss) and it did not impact the Company’s compliance with its debt covenants. Additionally, the standard requires companies to make certain disclosures. See Note 17.
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||
Inventory reserves | $ | 3,656 | $ | 21,285 | ||||
Operating lease asset impairment | 940 | 14,149 | ||||||
Property, plant and equipment impairment | 541 | 4,680 | ||||||
Labor and other costs incurred closing stores | 3,753 | 3,753 | ||||||
Severance | — | 661 | ||||||
Total | $ | 8,890 | $ | 44,528 | ||||
Note 35 – Inventories
June 30, 2018 | December 31, 2017 | |||||||
Finished goods | $ | 628,823 | $ | 562,809 | ||||
Raw materials | 32,315 | 30,346 | ||||||
Work in process | 12,538 | 10,911 | ||||||
|
|
|
| |||||
$ | 673,676 | $ | 604,066 | |||||
|
|
|
|
June 30, 2019 | December 31, 2018 | |||||||
Finished goods | $ | 738,404 | $ | 706,327 | ||||
Raw materials | 33,030 | 33,423 | ||||||
Work in process | 16,663 | 16,288 | ||||||
$ | 788,097 | $ | 756,038 | |||||
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“the Act”) was signed into law. The Act significantly changed U.S. tax law, including lowering the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018, and implementing aone-time “deemed repatriation” tax on unremitted earnings accumulated innon-U.S. jurisdictions since 1986 (the “Transition Tax”). Due to the complexities of accounting for the Act, the SEC issued Staff Accounting Bulletin (“SAB”) No. 118 which allows entities to include a provisional estimate of the impact of the Act in its financial statements. Therefore, based on currently available information, during the fourth quarter of 2017, the Company recorded a provisional estimate of the impact of the Act, which included an income
tax benefit of $90,965 related to the remeasurement of its domestic net deferred tax liabilities and deferred tax assets due to the lower U.S. corporate tax rate. Additionally, during the fourth quarter of 2017, the Company recorded a net income tax expense of $1,132 as its provisional estimate of the Transition Tax related to the deemed repatriation of unremitted earnings of foreign subsidiaries. The Company did not adjust these estimates during the first six months of 2018.
While these amounts represent the Company’s best estimates of the impacts of the reduction in the federal corporate income tax rate and the deemed repatriation Transition Tax, the final impacts of the Act may differ from the Company’s estimates due to, among other things, changes in the Company’s interpretations and assumptions, additional guidance to be issued by the IRS, and actions the Company may take. As provided in SAB 118, any adjustments to these provisional amounts will be recorded as they are identified during the measurement period, which ends no later than December 22, 2018.
Additionally, the Act subjects a U.S. shareholder to current tax on “global intangiblelow-taxed income” (“GILTI”) of its controlled foreign corporations. GILTI is based on the excess of the aggregate of a U.S. shareholder’s pro rata share of net income of its controlled foreign corporations over a specified return. Given the complexity of the GILTI provisions, the Company is still evaluating the effects of the provisions and has not yet determined its accounting policy. Therefore, during the six months ended June 30, 2018, the Company has included an estimate of the tax on GILTI as a period cost in its full-year estimated effective income tax rate and it has not accounted for any tax on GILTI in its deferred balances.
Three Months Ended June 30, 2018 | ||||||||||||
Foreign Currency Adjustments | Impact of Foreign Exchange Contracts, Net of Taxes | Total, Net of Taxes | ||||||||||
Balance at March 31, 2018 | $ | (30,204 | ) | $ | (396 | ) | $ | (30,600 | ) | |||
Other comprehensive (loss) income before reclassifications | (10,713 | ) | 1,398 | (9,315 | ) | |||||||
Amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income | — | 118 | 118 | |||||||||
|
|
|
|
|
| |||||||
Net current-period other comprehensive (loss) income | (10,713 | ) | 1,516 | (9,197 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at June 30, 2018 | $ | (40,917 | ) | $ | 1,120 | $ | (39,797 | ) | ||||
|
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|
|
|
|
Three Months Ended June 30, 2017 | ||||||||||||
Foreign Currency Adjustments | Impact of Foreign Exchange Contracts, Net of Taxes | Total, Net of Taxes | ||||||||||
Balance at March 31, 2017 | $ | (49,352 | ) | $ | 321 | $ | (49,031 | ) | ||||
Other comprehensive income (loss) before reclassifications | 7,702 | (509 | ) | 7,193 | ||||||||
Amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income | 0 | (190 | ) | (190 | ) | |||||||
|
|
|
|
|
| |||||||
Net current-period other comprehensive income (loss) | 7,702 | (699 | ) | 7,003 | ||||||||
|
|
|
|
|
| |||||||
Balance at June 30, 2017 | $ | (41,650 | ) | $ | (378 | ) | $ | (42,028 | ) | |||
|
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|
|
|
|
Three Months Ended June 30, 2019 | ||||||||||||
Foreign Currency Adjustments | Impact of Foreign Exchange Contracts, Net of Taxes | Total, Net of Taxes | ||||||||||
Balance at March 31, 2019 | $ | (45,900 | ) | $ | 342 | $ | (45,558 | ) | ||||
Other comprehensive income (loss) before reclassifications, net of tax | 556 | (3 | ) | 553 | ||||||||
Gains reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income, net of income tax | — | (211 | ) | (211 | ) | |||||||
Net current-period other comprehensive income (loss) | 556 | (214 | ) | 342 | ||||||||
Balance at June 30, 2019 | $ | (45,344 | ) | $ | 128 | $ | (45,216 | ) | ||||
Six Months Ended June 30, 2018 | ||||||||||||
Foreign Currency Adjustments | Impact of Foreign Exchange Contracts, Net of Taxes | Total, Net of Taxes | ||||||||||
Balance at December 31, 2017 | $ | (35,610 | ) | $ | (208 | ) | $ | (35,818 | ) | |||
Other comprehensive (loss) income before reclassifications, net of income tax | (5,307 | ) | 971 | (4,336 | ) | |||||||
Amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income, net of income tax | — | 357 | 357 | |||||||||
|
|
|
|
|
| |||||||
Net current-period other comprehensive (loss) income | (5,307 | ) | 1,328 | (3,979 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at June 30, 2018 | $ | (40,917 | ) | $ | 1,120 | $ | (39,797 | ) | ||||
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|
|
Six Months Ended June 30, 2017 | ||||||||||||
Foreign Currency Adjustments | Impact of Foreign Exchange Contracts, Net of Taxes | Total, Net of Taxes | ||||||||||
Balance at December 31, 2016 | $ | (53,171 | ) | $ | 932 | $ | (52,239 | ) | ||||
Other comprehensive income (loss) before reclassifications, net of income tax | 11,521 | (796 | ) | 10,725 | ||||||||
Amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income, net of income tax | 0 | (514 | ) | (514 | ) | |||||||
|
|
|
|
|
| |||||||
Net current-period other comprehensive income (loss) | 11,521 | (1,310 | ) | 10,211 | ||||||||
|
|
|
|
|
| |||||||
Balance at June 30, 2017 | $ | (41,650 | ) | $ | (378 | ) | $ | (42,028 | ) | |||
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|
|
Three Months Ended June 30, 2018 | ||||||||||||
Foreign Currency Adjustments | Impact of Foreign Exchange Contracts, Net of Taxes | Total, Net of Taxes | ||||||||||
Balance at March 31, 2018 | $ | (30,204 | ) | $ | (396 | ) | $ | (30,600 | ) | |||
Other comprehensive (loss) income before reclassifications | (10,713 | ) | 1,398 | (9,315 | ) | |||||||
Loss reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income | — | 118 | 118 | |||||||||
Net current-period other comprehensive (loss) income | (10,713 | ) | 1,516 | (9,197 | ) | |||||||
Balance at June 30, 2018 | $ | (40,917 | ) | $ | 1,120 | $ | (39,797 | ) | ||||
Six Months Ended June 30, 2019 | ||||||||||||
Foreign Currency Adjustments | Impact of Foreign Exchange Contracts, Net of Taxes | Total, Net of Taxes | ||||||||||
Balance at December 31, 2018 | $ | (50,056 | ) | $ | 855 | $ | (49,201 | ) | ||||
Other comprehensive income before reclassifications, net of tax | 4,712 | 60 | 4,772 | |||||||||
Gains reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income, net of income tax | — | (787 | ) | (787 | ) | |||||||
Net current-period other comprehensive income (loss) | 4,712 | (727 | ) | 3,985 | ||||||||
Balance at June 30, 2019 | $ | (45,344 | ) | $ | 128 | $ | (45,216 | ) | ||||
Six Months Ended June 30, 2018 | ||||||||||||
Foreign Currency Adjustments | Impact of Foreign Exchange Contracts, Net of Taxes | Total, Net of Taxes | ||||||||||
Balance at December 31, 2017 | $ | (35,610 | ) | $ | (208 | ) | $ | (35,818 | ) | |||
Other comprehensive (loss) income before reclassifications, net of income tax | (5,307 | ) | 971 | (4,336 | ) | |||||||
Loss reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income, net of income tax | — | 357 | 357 | |||||||||
Net current-period other comprehensive (loss) income | (5,307 | ) | 1,328 | (3,979 | ) | |||||||
Balance at June 30, 2018 | $ | (40,917 | ) | $ | 1,120 | $ | (39,797 | ) | ||||
During the six months ended June 30, 2018, 90,420 shares of common stock were issued due to stock option exercises and 3,706 shares were issued to directors of the Company.
Wholesale | Retail | Consolidated | ||||||||||
Three Months Ended June 30, 2018 | ||||||||||||
Revenues: | ||||||||||||
Net sales | $ | 285,733 | $ | 411,353 | $ | 697,086 | ||||||
Royalties and franchise fees | — | 2,910 | 2,910 | |||||||||
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|
|
| |||||||
Total revenues | 285,733 | 414,263 | 699,996 | |||||||||
Eliminations | (138,985 | ) | — | (138,985 | ) | |||||||
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|
|
|
| |||||||
Net revenues | $ | 146,748 | $ | 414,263 | $ | 561,011 | ||||||
|
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|
|
|
| |||||||
Income from operations | $ | 11,148 | $ | 54,303 | $ | 65,451 | ||||||
|
|
|
| |||||||||
Interest expense, net | 25,501 | |||||||||||
Other expense, net | 2,532 | |||||||||||
|
| |||||||||||
Income before income taxes | $ | 37,418 | ||||||||||
|
| |||||||||||
Wholesale | Retail | Consolidated | ||||||||||
Three Months Ended June 30, 2017 | ||||||||||||
Revenues: | ||||||||||||
Net sales | $ | 276,705 | $ | 399,801 | $ | 676,506 | ||||||
Royalties and franchise fees | 0 | 3,225 | 3,225 | |||||||||
|
|
|
|
|
| |||||||
Total revenues | 276,705 | 403,026 | 679,731 | |||||||||
Eliminations | (134,853 | ) | 0 | (134,853 | ) | |||||||
|
|
|
|
|
| |||||||
Net revenues | $ | 141,852 | $ | 403,026 | $ | 544,878 | ||||||
|
|
|
|
|
| |||||||
Income from operations | $ | 16,034 | $ | 44,665 | $ | 60,699 | ||||||
|
|
|
| |||||||||
Interest expense, net | 21,294 | |||||||||||
Other income, net | (895 | ) | ||||||||||
|
| |||||||||||
Income before income taxes | $ | 40,300 | ||||||||||
|
|
During June 2019, the Company’s Wholesale segment sold its main distribution center in Chester, New York, its metallic balloons manufacturing facility in Eden Prairie, Minnesota and its injection molded plastics manufacturing facility in Los Lunas, New Mexico. The aggregate sale price was $
Wholesale | Retail | Consolidated | ||||||||||
Three Months Ended June 30, 2019 | ||||||||||||
Revenues: | ||||||||||||
Net sales | $ | 289,067 | $ | 423,157 | $ | 712,224 | ||||||
Royalties and franchise fees | — | 2,189 | 2,189 | |||||||||
Total revenues | 289,067 | 425,346 | 714,413 | |||||||||
Eliminations | (150,522 | ) | — | (150,522 | ) | |||||||
Net revenues | $ | 138,545 | $ | 425,346 | $ | 563,891 | ||||||
Income from operations | $ | 60,297 | $ | 37,188 | $ | 97,485 | ||||||
Interest expense, net | 30,176 | |||||||||||
Other expense, net | 3,342 | |||||||||||
Income before income taxes | $ | 63,967 | ||||||||||
Wholesale | Retail | Consolidated | ||||||||||
Three Months Ended June 30, 2018 | ||||||||||||
Revenues: | ||||||||||||
Net sales | $ | 285,733 | $ | 411,353 | $ | 697,086 | ||||||
Royalties and franchise fees | — | 2,910 | 2,910 | |||||||||
Total revenues | 285,733 | 414,263 | 699,996 | |||||||||
Eliminations | (138,985 | ) | — | (138,985 | ||||||||
Net revenues | $ | 146,748 | $ | 414,263 | $ | 561,011 | ||||||
Income from operations | $ | 11,148 | $ | 54,303 | $ | 65,451 | ||||||
Interest expense, net | 25,501 | |||||||||||
Other expense, net | 2,532 | |||||||||||
Income before income taxes | $ | 37,418 | ||||||||||
Wholesale | Retail | Consolidated | ||||||||||
Six Months Ended June 30, 2018 | ||||||||||||
Revenues: | ||||||||||||
Net sales | $ | 563,560 | $ | 774,929 | $ | 1,338,489 | ||||||
Royalties and franchise fees | — | 5,626 | 5,626 | |||||||||
|
|
|
|
|
| |||||||
Total revenues | 563,560 | 780,555 | 1,344,115 | |||||||||
Eliminations | (275,280 | ) | — | (275,280 | ) | |||||||
|
|
|
|
|
| |||||||
Net revenues | $ | 288,280 | $ | 780,555 | $ | 1,068,835 | ||||||
|
|
|
|
|
| |||||||
Income from operations | $ | 16,496 | $ | 71,211 | $ | 87,707 | ||||||
|
|
|
| |||||||||
Interest expense, net | 48,776 | |||||||||||
Other expense, net | 3,380 | |||||||||||
|
| |||||||||||
Income before income taxes | $ | 35,551 | ||||||||||
|
| |||||||||||
Wholesale | Retail | Consolidated | ||||||||||
Six Months Ended June 30, 2017 | ||||||||||||
Revenues: | ||||||||||||
Net sales | $ | 547,397 | $ | 739,070 | $ | 1,286,467 | ||||||
Royalties and franchise fees | 0 | 6,261 | 6,261 | |||||||||
|
|
|
|
|
| |||||||
Total revenues | 547,397 | 745,331 | 1,292,728 | |||||||||
Eliminations | (270,851 | ) | 0 | (270,851 | ) | |||||||
|
|
|
|
|
| |||||||
Net revenues | $ | 276,546 | $ | 745,331 | $ | 1,021,877 | ||||||
|
|
|
|
|
| |||||||
Income from operations | $ | 26,450 | $ | 48,920 | $ | 75,370 | ||||||
|
|
|
| |||||||||
Interest expense, net | 41,986 | |||||||||||
Other expense, net | 267 | |||||||||||
|
| |||||||||||
Income before income taxes | $ | 33,117 | ||||||||||
|
|
Wholesale | Retail | Consolidated | ||||||||||
Six Months Ended June 30, 2019 | ||||||||||||
Revenues: | ||||||||||||
Net sales | $ | 579,368 | $ | 801,310 | $ | 1,380,678 | ||||||
Royalties and franchise fees | — | 4,203 | 4,203 | |||||||||
Total revenues | 579,368 | 805,513 | 1,384,881 | |||||||||
Eliminations | (307,874 | ) | — | (307,874 | ) | |||||||
Net revenues | $ | 271,494 | $ | 805,513 | $ | 1,077,007 | ||||||
Income from operations | $ | 62,520 | $ | 24,668 | $ | 87,188 | ||||||
Interest expense, net | 59,433 | |||||||||||
Other expense, net | 4,596 | |||||||||||
Income before income taxes | $ | 23,159 | ||||||||||
Wholesale | Retail | Consolidated | ||||||||||
Six Months Ended June 30, 2018 | ||||||||||||
Revenues: | ||||||||||||
Net sales | $ | 563,560 | $ | 774,929 | $ | 1,338,489 | ||||||
Royalties and franchise fees | — | 5,626 | 5,626 | |||||||||
Total revenues | 563,560 | 780,555 | 1,344,115 | |||||||||
Eliminations | (275,280 | ) | — | (275,280 | ) | |||||||
Net revenues | $ | 288,280 | $ | 780,555 | $ | 1,068,835 | ||||||
Income from operations | $ | 16,496 | $ | 71,211 | $ | 87,707 | ||||||
Interest expense, net | 48,776 | |||||||||||
Other expense, net | 3,380 | |||||||||||
Income before income taxes | $ | 35,551 | ||||||||||
On April 5, 2016, a derivative complaint was filed in the Supreme Court for the State of New York, naming certain directors and executives as defendants, and naming the Company as a nominal defendant. The complaint seeks unspecified damages and costs, and corporate governance reforms, for alleged injury to the Company in connection with public filings related to the Company’s April 2015 IPO, compensation paid to executives, and the termination of the management agreement disclosed in the initial public offering-related public filings. The Company intends to vigorously defend itself against this action. The Company is unable, at this time, to determine whether the outcome of the litigation would have a material impact on its results of operations, financial condition or cash flows.
2018.
2020.
Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||||||||||
Balance Sheet Line | Fair Value | Balance Sheet Line | Fair Value | Balance Sheet Line | Fair Value | Balance Sheet Line | Fair Value | |||||||||||||||||||||||||
Derivative Instrument | June 30, 2018 | December 31, 2017 | June 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||||||
Foreign Exchange Contracts | (a | ) PP | $ | 1,233 | (a | ) PP | $ | 95 | (b | ) AE | $ | — | (b | ) AE | $ | 99 | ||||||||||||||||
|
|
|
|
|
|
|
|
Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||||||||||
Balance Sheet Line | Fair Value | Balance Sheet Line | Fair Value | Balance Sheet Line | Fair Value | Balance Sheet Line | Fair Value | |||||||||||||||||||||||||
Derivative Instrument | June 30, 2019 | December 31, 2018 | June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||||||||
Foreign Exchange Contracts | (a | ) PP | $ | 58 | (a | ) PP | $ | 115 | (b | ) AE | $ | 7 | (b | ) AE | $ | — | ||||||||||||||||
(a) | PP = Prepaid expenses and other current assets |
(b) | AE = Accrued expenses |
Derivative Instrument | June 30, 2018 | December 31, 2017 | ||||||
Foreign Exchange Contracts | $ | 23,586 | $ | 21,672 | ||||
|
|
|
|
Derivative Instrument | June 30, 2019 | December 31, 2018 | ||||||
Foreign Exchange Contracts | $ | 6,200 | $ | 10,942 | ||||
Level 1 — Quoted prices in active markets for identical assets or liabilities.
at the time at which the ownership interest was issued (adjusted for any subsequent changes in the ownership interest percentage). As of both June 30, 2019 and December 31, 2018, the original value was greater and, therefore, the liabilities are not included in the table below.
Level 1 | Level 2 | Level 3 | Total as of June 30, 2018 | |||||||||||||
Derivative assets | $ | — | $ | 1,233 | $ | — | $ | 1,233 | ||||||||
Derivative liabilities | — | 0 | — | 0 | ||||||||||||
Kazzam liability | — | — | 3,219 | 3,219 | ||||||||||||
Punchbowl put liability | — | — | 268 | 268 |
Level 1 | Level 2 | Level 3 | Total as of June 30, 2019 | |||||||||||||
Derivative assets | $ | — | $ | 58 | $ | — | $ | 58 | ||||||||
Derivative liabilities | — | 7 | — | 7 |
Level 1 | Level 2 | Level 3 | Total as of December 31, 2017 | |||||||||||||
Derivative assets | $ | — | $ | 95 | $ | — | $ | 95 | ||||||||
Derivative liabilities | — | 99 | — | 99 | ||||||||||||
Kazzam liability | — | — | 3,590 | 3,590 | ||||||||||||
Punchbowl put liability | — | — | 2,122 | 2,122 |
Level 1 | Level 2 | Level 3 | Total as of December 31, 2018 | |||||||||||||
Derivative assets | $ | — | $ | 115 | $ | — | $ | 115 | ||||||||
Derivative liabilities | — | — | — | — | ||||||||||||
Punchbowl put liability | — | — | 316 | 316 |
June 30, 2018 | ||||||||
Carrying Amount | Fair Value | |||||||
Term Loan Credit Agreement | $ | 1,192,253 | $ | 1,203,242 | ||||
Senior Notes | 345,780 | 351,750 |
June 30, 2019 | ||||||||
Carrying Amount | Fair Value | |||||||
Term Loan Credit Agreement | $ | 784,994 | $ | 787,913 | ||||
6.125% Senior Notes – due 2023 | 346,603 | 352,625 | ||||||
6.625% Senior Notes – due 2026 | 494,524 | 485,000 |
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2018 | Six Months Ended June 30, 2017 | |||||||||||||
Net income attributable to common shareholders of Party City Holdco Inc. | $ | 28,487 | $ | 24,982 | $ | 27,354 | $ | 20,299 | ||||||||
Weighted average shares - Basic | 96,453,884 | 119,528,147 | 96,426,235 | 119,526,007 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Warrants | — | — | — | — | ||||||||||||
Restricted stock units | — | — | — | — | ||||||||||||
Stock options | 1,234,350 | 1,415,598 | 1,243,074 | 1,377,025 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average shares - Diluted | 97,688,233 | 120,943,745 | 97,669,309 | 120,903,032 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. - Basic | $ | 0.30 | $ | 0.21 | $ | 0.28 | $ | 0.17 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. - Diluted | $ | 0.29 | $ | 0.21 | $ | 0.28 | $ | 0.17 | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | |||||||||||||
Net income attributable to common shareholders of Party City Holdco Inc. | $ | 48,074 | $ | 28,487 | $ | 17,856 | $ | 27,354 | ||||||||
Weighted average shares - Basic | 93,293,176 | 96,453,884 | 93,233,865 | 96,426,235 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Warrants | — | — | — | — | ||||||||||||
Restricted stock units | 19,228 | — | 23,628 | — | ||||||||||||
Stock options | 391,142 | 1,234,350 | 534,270 | 1,243,074 | ||||||||||||
Weighted average shares - Diluted | 93,703,546 | 97,688,233 | 93,791,763 | 97,669,309 | ||||||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. - Basic | $ | 0.52 | $ | 0.30 | $ | 0.19 | $ | 0.28 | ||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. - Diluted | $ | 0.51 | $ | 0.29 | $ | 0.19 | $ | 0.28 | ||||||||
June 30, 2018 | December 31, 2017 | |||||||
Term Loan Credit Agreement | $ | 1,192,253 | $ | 1,196,505 | ||||
Capital lease obligations | 3,279 | 3,276 | ||||||
Senior Notes | 345,780 | 345,368 | ||||||
|
|
|
| |||||
Total long-term obligations | 1,541,312 | 1,545,149 | ||||||
Less: current portion | (13,049 | ) | (13,059 | ) | ||||
|
|
|
| |||||
Long-term obligations, excluding current portion | $ | 1,528,263 | $ | 1,532,090 | ||||
|
|
|
|
Term Loan Credit Agreement
June 30, 2019 | December 31, 2018 | |||||||
Term Loan Credit Agreement | $ | 784,994 | $ | 791,135 | ||||
6.125% Senior Notes – due 2023 | 346,603 | 346,191 | ||||||
6.625% Senior Notes – due 2026 | 494,524 | 494,138 | ||||||
Finance lease obligations | 15,445 | 3,815 | ||||||
Total long-term obligations | 1,641,566 | 1,635,279 | ||||||
Less: current portion | (76,251 | ) | (13,316 | ) | ||||
Long-term obligations, excluding current portion | $ | 1,565,315 | $ | 1,621,963 | ||||
As the Term Loan Credit Agreementfinanced its Los Lunas, New Mexico facility via a finance lease, which is a loan syndication, the Company assessed, on acreditor-by-creditor basis, whether the refinancing should be accounted for as an extinguishment for each creditor and, during the first quarter of 2018, the Companywrote-off $186 of existing deferred financing costs, a $102 capitalized original issue discount and $58 of capitalized call premium. The write-offs were recorded in other expenseincluded in the Company’s consolidated statement of income and comprehensive income. The remaining deferred financing costs, original issue discount and capitalized call premium will continue to be amortized over the life of the Term Loan Credit Agreement, using the effective interest method. Additionally, in conjunction with the amendment, the Company incurred $856 of banker and legal fees, $800 of which were recorded in other expense during the first quarter of 2018. The rest of the costs are being amortized over the life of the debt. The write-offs of the deferred financing costs, original issuance discount and call premium were included in amortization of deferred financing costs and original issuance discount in the Company’s consolidated statement of cash flows.
table above. See Note 13 – Acquisitions
During March 2018, the Company acquired 11 franchise stores, which are located in Maryland,4 for total consideration of approximately $14,000. The Company is in the process of finalizing purchase accounting.
Additionally, during March 2018, the Company entered into an agreement to acquire 11 independent stores, which are located in Texas, for total consideration of approximately $6,000. The Company will take control of the stores one at a time over a period of approximately one year. The Company is in the process of finalizing purchase accounting for the stores for which it has already taken control.
During 2017, the Company acquired 85% of the common stock of Granmark, S.A. de C.V., a Mexican manufacturer and wholesaler of party goods. Based on the terms of the acquisition agreement, the Company is required to acquire the remaining 15% interest over the next five years and it has recorded a liability for the estimated purchase price of such interest, $2,840 at June 30, 2018.
During 2017, the Company acquired 60% of Print Appeal, Inc. Based on the terms of the acquisition agreement, the Company will acquire the remaining 40% interest in Print Appeal over the next five years and the Company’s liability for the estimated purchase price of such interest was $3,021 at June 30, 2018.
In May 2014, the FASB issued ASU2014-09, “Revenue from Contracts with Customers (Topic 606)”. The pronouncement contains a five-step model which replaces most existing revenue recognition guidance. The Company adopted the standard on January 1, 2018 via a modified retrospective approach and recognized the cumulative effect of the adoption as an adjustment to January 1, 2018 retained earnings.
Revenue Transactions - Retail
Revenue from retail store operations is recognized at the point of sale as control of the product is transferred to the customer at such time. Retaile-commerce sales are recognized when the consumer receives the product as control transfers upon delivery. Due to its extensive history operating as the largest party goods retailer in North America, the Company has sufficient history with which to estimate future retail sales returns and it uses the expected value method to estimate such activity.
The transaction price for the overwhelming majority of the Company’s retail sales is based on either: 1) the item’s stated price or 2) the stated price adjusted for the impact of a coupon which can only be applied to such transaction. To the extent that the Company charges customers for freight costs one-commerce sales, the Company records such amounts in revenue. The Company has chosen the pronouncement’s policy election which allows it to exclude all sales taxes and value-added taxes from revenue.
Under the terms of its agreements with its franchisees, the Company provides both: 1) brand value (via significant advertising spend) and 2) support with respect to planograms, in exchange for a royalty fee that ranges from 4% to 6% of the franchisees’ sales. The Company records the royalty fees at the time that the franchisees’ sales are recorded. Additionally, although the Company anticipates that future franchise store openings will be limited, when a franchisee opens a new store, the Company receives and records aone-time fee which is earned by the Company for its assistance with site selection and development of the new location. Both the sales-based royalty fee and theone-time fee are recorded in royalties and franchise fees in the Company’s consolidated statement of operations and comprehensive income.
Revenue Transactions - Wholesale
For most of the Company’s wholesale sales, control transfers upon the Company’s shipment of the product as: 1) legal title transfers on such date and 2) the Company has a present right to payment at such time. Wholesale sales returns are not significant as the Company generally only accepts the return of goods that were shipped to the customer in error or that were damaged when received by the customer. Additionally, due to its extensive history operating as a leading party goods wholesaler, the Company has sufficient history with which to estimate future sales returns and it uses the expected value method to estimate such activity.
In most cases, the determination of the transaction price is straight-forward as it is fixed based on the contract and/or purchase order. However, a limited number of customers receive volume-based rebates. Additionally, certain customers receive small discounts for early payment (generally 1% of the transaction price). Based on the business’ long history as a leading party goods wholesaler, the Company has sufficient history with which to estimate variable consideration for such volume-based rebates and early payment discounts. To the extent that the Company charges customers for freight costs, the Company records such amounts in revenue. The Company has chosen the pronouncement’s policy election which allows it to exclude all sales taxes and value-added taxes from revenue.
The majority of the sales for the Company’s wholesale business are due within 30 to 120 days from the transfer of control of the product and substantially all of the sales are collected within a year from such transfer. For all transactions for which the Company expects to collect the transaction price within a year from the transfer of control, the Company applies one of the pronouncement’s practical expedients and does not adjust the consideration for the effects of a significant financing component.
Judgments
Although most of the Company’s revenue transactions consist of fixed transaction prices and the transfer of control at either the point of sale (for retail) or when the product is shipped (for wholesale), certain transactions involve a limited number of judgments. For transactions for which control transfers to the customer when the freight carrier delivers the product to the customer, the Company estimates the date of such receipt based on historical shipping times. Additionally, the Company utilizes historical data to estimate sales returns, volume-based rebates and discounts for early payments by customers. Due to its extensive history operating as a leading party goods retailer and wholesaler, the Company has sufficient history with which to estimate such amounts.
Other Revenue Topics
During the three and six months ended June 30, 2018 and June 30, 2017, impairment losses recognized on receivables and contract assets arising from the Company’s contracts with customers were immaterial.
As a significant portion of the Company’s revenue is either: 1) part of a contract with an original expected duration of one year or less or 2) related to sales-based royalties promised in exchange for licenses of intellectual property, the Company has elected to apply the optional exemptions in paragraphs ASC606-10-50-14 through ASC606-10-50-14A.
Additionally, the Company has elected to apply the practical expedient which allows companies to recognize the incremental costs of obtaining a contract as an expense if the amortization period of the asset that the entity otherwise would have recognized would have been one year or less.
Disaggregation of Revenue
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2018 | Six Months Ended June 30, 2017 | |||||||||||||
Retail Net Sales: | ||||||||||||||||
Party City Stores | $ | 376,222 | $ | 363,872 | $ | 707,067 | $ | 668,886 | ||||||||
GlobalE-commerce | 35,131 | 35,929 | 67,862 | 70,184 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Retail Net Sales | $ | 411,353 | $ | 399,801 | $ | 774,929 | $ | 739,070 | ||||||||
Royalties and Franchise Fees | 2,910 | 3,225 | 5,626 | 6,261 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Retail Revenue | $ | 414,263 | $ | 403,026 | $ | 780,555 | $ | 745,331 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Wholesale Net Sales: | ||||||||||||||||
Domestic | $ | 79,397 | $ | 81,354 | $ | 158,956 | $ | 165,695 | ||||||||
International | 67,351 | 60,498 | 129,324 | 110,851 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Wholesale Net Sales | $ | 146,748 | $ | 141,852 | $ | 288,280 | $ | 276,546 | ||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
| |||||||||
Total Consolidated Revenue | $ | 561,011 | $ | 544,878 | $ | 1,068,835 | $ | 1,021,877 | ||||||||
|
|
|
|
|
|
|
|
Financial Statement Impact of Adopting the Pronouncement
All of the Company’s revenue is recognized from contracts with customers and, therefore, is subject to the pronouncement.
The Company adopted the pronouncement using a modified retrospective approach and applied the guidance to all contracts as of January 1, 2018. On such date, the Company reduced its retained earnings by $78, reduced its accounts receivable by $141, increased its inventory by $11, reduced its accrued expenses by $26, increased its deferred tax asset by $28 and increased its income taxes payable by $2. The cumulative adjustment principally related to certain discounts within the Company’s wholesale business.
Additionally, the adoption of the pronouncement impacted the Company’s financial statements for the three and six months ended June 30, 2018 as it increasedpre-tax income by $26 during the three month period2019 and increasedpre-tax income by $39 during the six month period.
Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | |||||||||||||
Retail Net Sales: | ||||||||||||||||
North American Party City Stores | $ | 387,308 | $ | 376,222 | $ | 733,448 | $ | 707,067 | ||||||||
Global E-commerce | 35,364 | 35,131 | 67,172 | 67,862 | ||||||||||||
Other | 485 | — | 690 | — | ||||||||||||
Total Retail Net Sales | $ | 423,157 | $ | 411,353 | $ | 801,310 | $ | 774,929 | ||||||||
Royalties and Franchise Fees | 2,189 | 2,910 | 4,203 | 5,626 | ||||||||||||
Total Retail Revenue | $ | 425,346 | $ | 414,263 | $ | 805,513 | $ | 780,555 | ||||||||
Wholesale Net Sales: | ||||||||||||||||
Domestic | $ | 74,766 | $ | 79,397 | $ | 148,587 | $ | 158,956 | ||||||||
International | 63,779 | 67,351 | 122,907 | 129,324 | ||||||||||||
Total Wholesale Net Sales | $ | 138,545 | $ | 146,748 | $ | 271,494 | $ | 288,280 | ||||||||
Total Consolidated Revenue | $ | 563,891 | $ | 561,011 | $ | 1,077,007 | $ | 1,068,835 | ||||||||
In November 2016, the FASB issued ASU2016-18, “Statement of Cash Flows: Restricted Cash”.
As a result, the Company’s statement of cash flows for the six months ended June 30, 2017 has been adjusted to include $155and $310 of restricted cash at December 31, 2016 and $106 of restricted cash at June 30, 2017. The restricted cash, which principally relates to funds that are required to be spent on advertising, is included in “prepaid expenses and other current assets” in the Company’s consolidated balance sheet. Therefore, in the Company’s adjusted consolidated statement of cash flows for the six months ended June 30, 2017, the change in “prepaid expenses and other current assets” has been adjusted from a cash inflow of $915 to a cash inflow of $866.
cash.
Note 16 - Related Party Transactions
InThe ASU requires that companies recognize assets and liabilities for the normal course of business,rights and obligations created by the companies’ leases. The update was effective for the Company buysduring the first quarter of 2019.
Six months ended December 31, 2019 | $ | 89,895 | ||
2020 | 201,578 | |||
2021 | 185,305 | |||
2022 | 165,815 | |||
2023 | 137,724 | |||
Thereafter | 477,022 | |||
Total Undiscounted Cash Flows | $ | 1,257,339 | ||
Less: Interest | (317,891 | ) | ||
Total Operating Lease Liability | 939,448 | |||
Less: Current Portion of Operating Lease Liability | (145,472 | ) | ||
Long-Term Portion of Operating Lease Liability | $ | 793,976 | ||
Event
During August 2018,10
stores.
segment and 23% of the product that was sold by our retail segment was self-manufactured.
2018
Three Months Ended June 30, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Net sales | $ | 558,101 | 99.5 | % | $ | 541,653 | 99.4 | % | ||||||||
Royalties and franchise fees | 2,910 | 0.5 | 3,225 | 0.6 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | 561,011 | 100.0 | 544,878 | 100.0 | ||||||||||||
Expenses: | ||||||||||||||||
Cost of sales | 329,477 | 58.7 | 321,900 | 59.1 | ||||||||||||
Wholesale selling expenses | 17,256 | 3.1 | 16,045 | 2.9 | ||||||||||||
Retail operating expenses | 92,094 | 16.4 | 90,512 | 16.6 | ||||||||||||
Franchise expenses | 3,980 | 0.7 | 3,713 | 0.7 | ||||||||||||
General and administrative expenses | 45,326 | 8.1 | 39,655 | 7.3 | ||||||||||||
Art and development costs | 5,732 | 1.0 | 5,942 | 1.1 | ||||||||||||
Development stage expenses | 1,695 | 0.3 | 6,412 | 1.2 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | 495,560 | 88.3 | 484,179 | 88.9 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income from operations | 65,451 | 11.7 | 60,699 | 11.1 | ||||||||||||
Interest expense, net | 25,501 | 4.5 | 21,294 | 3.9 | ||||||||||||
Other expense (income), net | 2,532 | 0.5 | (895 | ) | (0.2 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Income before income taxes | 37,418 | 6.7 | 40,300 | 7.4 | ||||||||||||
Income tax expense | 9,370 | 1.7 | 15,318 | 2.8 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income | 28,048 | 5.0 | 24,982 | 4.6 | ||||||||||||
Add: Net income attributable to redeemable securities holder | 410 | 0.1 | — | 0.0 | ||||||||||||
Less: Net loss attributable to noncontrolling interests | (29 | ) | (0.0 | ) | — | 0.0 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income attributable to common shareholders of Party City Holdco Inc. | $ | 28,487 | 5.1 | % | $ | 24,982 | 4.6 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. - Basic | $ | 0.30 | $ | 0.21 | ||||||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. - Diluted | $ | 0.29 | $ | 0.21 |
2018.
Three Months Ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Net sales | $ | 561,702 | 99.6 | % | $ | 558,101 | 99.5 | % | ||||||||
Royalties and franchise fees | 2,189 | 0.4 | 2,910 | 0.5 | ||||||||||||
Total revenues | 563,891 | 100.0 | 561,011 | 100.0 | ||||||||||||
Cost of sales | 353,056 | 62.6 | 329,477 | 58.7 | ||||||||||||
Wholesale selling expenses | 16,884 | 3.0 | 17,256 | 3.1 | ||||||||||||
Retail operating expenses | 96,143 | 17.0 | 92,094 | 16.4 | ||||||||||||
Franchise expenses | 3,236 | 0.6 | 3,980 | 0.7 | ||||||||||||
General and administrative expenses | 41,510 | 7.4 | 45,326 | 8.1 | ||||||||||||
Art and development costs | 5,712 | 1.0 | 5,732 | 1.0 | ||||||||||||
Development stage expenses | 3,012 | 0.5 | 1,695 | 0.3 | ||||||||||||
Gain on sale/leaseback transaction | (58,381 | ) | (10.4 | ) | — | — | ||||||||||
Store impairment and restructuring charges | 5,234 | 0.9 | — | — | ||||||||||||
466,406 | 82.7 | 495,560 | 88.3 | |||||||||||||
Income from operations | 97,485 | 17.3 | 65,451 | 11.7 | ||||||||||||
Interest expense, net | 30,176 | 5.4 | 25,501 | 4.5 | ||||||||||||
Other expense, net | 3,342 | 0.6 | 2,532 | 0.5 | ||||||||||||
Income before income taxes | 63,967 | 11.3 | 37,418 | 6.7 | ||||||||||||
Income tax expense | 15,962 | 2.8 | 9,370 | 1.7 | ||||||||||||
Net income | 48,005 | 8.5 | 28,048 | 5.0 | ||||||||||||
Add: Net income attributable to redeemable securities holder | — | — | 410 | 0.1 | ||||||||||||
Less: Net loss attributable to noncontrolling interests | (69 | ) | (0.0 | ) | (29 | ) | (0.0 | ) | ||||||||
Net income attributable to common shareholders of Party City Holdco Inc. | $ | 48,074 | 8.5 | % | $ | 28,487 | 5.1 | % | ||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. – Basic | $ | 0.52 | $ | 0.30 | ||||||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. – Diluted | $ | 0.51 | $ | 0.29 |
Three Months Ended June 30, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Dollars in Thousands | Percentage of Total Revenues | Dollars in Thousands | Percentage of Total Revenues | |||||||||||||
Net Sales: | ||||||||||||||||
Wholesale | $ | 285,733 | 50.9 | % | $ | 276,705 | 50.8 | % | ||||||||
Eliminations | (138,985 | ) | (24.8 | )% | (134,853 | ) | (24.8 | )% | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net wholesale | 146,748 | 26.2 | % | 141,852 | 26.0 | % | ||||||||||
Retail | 411,353 | 73.3 | % | 399,801 | 73.4 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total net sales | 558,101 | 99.5 | % | 541,653 | 99.4 | % | ||||||||||
Royalties and franchise fees | 2,910 | 0.5 | % | 3,225 | 0.6 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | $ | 561,011 | 100.0 | % | $ | 544,878 | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
Dollars in Thousands | Percentage of Total Revenues | Dollars in Thousands | Percentage of Total Revenues | |||||||||||||
Net Sales: | ||||||||||||||||
Wholesale | $ | 289,067 | 51.3 | % | $ | 285,733 | 50.9 | % | ||||||||
Eliminations | (150,522 | ) | (26.7 | )% | (138,985 | ) | (24.8 | )% | ||||||||
Net wholesale | 138,545 | 24.6 | % | 146,748 | 26.2 | % | ||||||||||
Retail | 423,157 | 75.0 | % | 411,353 | 73.3 | % | ||||||||||
Total net sales | 561,702 | 99.6 | % | 558,101 | 99.5 | % | ||||||||||
Royalties and franchise fees | 2,189 | 0.4 | % | 2,910 | 0.5 | % | ||||||||||
Total revenues | $ | 563,891 | 100.0 | % | $ | 561,011 | 100.0 | % | ||||||||
Same-store sales for the Party City brand (including North American retaile-commerce sales) increased by 0.1% during the second quarter of 2018 despite headwinds from a shift in the timing of Easter (first quarter 2018 versus second quarter 2017). Excluding the impact ofincreaseddecreased by 0.4%2.1%.
which negatively impacted sales by approximately $2.5 million.
Three Months Ended June 30, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Dollars in Thousands | Percentage of Net Sales | Dollars in Thousands | Percentage of Net Sales | |||||||||||||
Retail | $ | 183,915 | 44.7 | % | $ | 173,872 | 43.5 | % | ||||||||
Wholesale | 44,709 | 30.5 | 45,881 | 32.3 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 228,624 | 41.0 | % | $ | 219,753 | 40.6 | % | ||||||||
|
|
|
|
|
|
|
|
2018.
Three Months Ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
Dollars in Thousands | Percentage of Net Sales | Dollars in Thousands | Percentage of Net Sales | |||||||||||||
Retail | $ | 172,051 | 40.7 | % | $ | 183,915 | 44.7 | % | ||||||||
Wholesale | 36,595 | 26.4 | 44,709 | 30.5 | ||||||||||||
Total | $ | 208,646 | 37.1 | % | $ | 228,624 | 41.0 | % | ||||||||
2018.
2018.
a $0.9 million impairment charge for its operating lease asset, a $0.5 million impairment charge for property, plant and equipment and $3.8 million of labor and other costs related to closing the stores.
the Company’s August 2018 refinancing (see the Company’s 2018 Form
respectively.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“the Act”) was signed into law. The Act significantly changed U.S. tax law, including lowering the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018.
201820182019 Compared To Six Months Ended June 30, 2017
Six Months Ended June 30, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Net sales | $ | 1,063,209 | 99.5 | % | $ | 1,015,616 | 99.4 | % | ||||||||
Royalties and franchise fees | 5,626 | 0.5 | 6,261 | 0.6 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | 1,068,835 | 100.0 | 1,021,877 | 100.0 | ||||||||||||
Expenses: | ||||||||||||||||
Cost of sales | 646,443 | 60.5 | 620,619 | 60.7 | ||||||||||||
Wholesale selling expenses | 36,043 | 3.4 | 31,672 | 3.1 | ||||||||||||
Retail operating expenses | 181,186 | 17.0 | 181,242 | 17.8 | ||||||||||||
Franchise expenses | 7,762 | 0.7 | 7,030 | 0.7 | ||||||||||||
General and administrative expenses | 93,991 | 8.8 | 87,792 | 8.6 | ||||||||||||
Art and development costs | 11,705 | 1.1 | 11,740 | 1.1 | ||||||||||||
Development stage expenses | 3,998 | 0.4 | 6,412 | 0.6 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | 981,128 | 91.8 | 946,507 | 92.6 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income from operations | 87,707 | 8.2 | 75,370 | 7.4 | ||||||||||||
Interest expense, net | 48,776 | 4.6 | 41,986 | 4.1 | ||||||||||||
Other expense, net | 3,380 | 0.3 | 267 | 0.0 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income before income taxes | 35,551 | 3.3 | 33,117 | 3.2 | ||||||||||||
Income tax expense | 8,666 | 0.8 | 12,818 | 1.2 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income | 26,885 | 2.5 | 20,299 | 2.0 | ||||||||||||
Add: Net income attributable to redeemable securities holder | 410 | 0.0 | — | 0.0 | ||||||||||||
Less: Net loss attributable to noncontrolling interests | (59 | ) | (0.0 | ) | — | 0.0 | ||||||||||
|
|
|
|
|
| �� |
|
| ||||||||
Net income attributable to common shareholders of Party City Holdco Inc. | $ | 27,354 | 2.6 | % | $ | 20,299 | 2.0 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. - Basic | $ | 0.28 | $ | 0.17 | ||||||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. - Diluted | $ | 0.28 | $ | 0.17 |
2018.
Six Months Ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Net sales | $ | 1,072,804 | 99.6 | % | $ | 1,063,209 | 99.5 | % | ||||||||
Royalties and franchise fees | 4,203 | 0.4 | 5,626 | 0.5 | ||||||||||||
Total revenues | 1,077,007 | 100.0 | 1,068,835 | 100.0 | ||||||||||||
Cost of sales | 692,098 | 64.3 | 646,443 | 60.5 | ||||||||||||
Wholesale selling expenses | 34,845 | 3.2 | 36,043 | 3.4 | ||||||||||||
Retail operating expenses | 191,161 | 17.7 | 181,186 | 17.0 | ||||||||||||
Franchise expenses | 6,539 | 0.6 | 7,762 | 0.7 | ||||||||||||
General and administrative expenses | 83,435 | 7.7 | 93,991 | 8.8 | ||||||||||||
Art and development costs | 11,641 | 1.1 | 11,705 | 1.1 | ||||||||||||
Development stage expenses | 5,238 | 0.5 | 3,998 | 0.4 | ||||||||||||
Gain on sale/leaseback transaction | (58,381 | ) | (5.4 | ) | — | — | ||||||||||
Store impairment and restructuring charges | 23,243 | 2.2 | — | — | ||||||||||||
989,819 | 91.9 | 981,128 | 91.8 | |||||||||||||
Income from operations | 87,188 | 8.1 | 87,707 | 8.2 | ||||||||||||
Interest expense, net | 59,433 | 5.5 | 48,776 | 4.6 | ||||||||||||
Other expense, net | 4,596 | 0.4 | 3,380 | 0.3 | ||||||||||||
Income before income taxes | 23,159 | 2.2 | 35,551 | 3.3 | ||||||||||||
Income tax expense | 5,443 | 0.5 | 8,666 | 0.8 | ||||||||||||
Net income | 17,716 | 1.6 | 26,885 | 2.5 | ||||||||||||
Add: Net income attributable to redeemable securities holder | — | — | 410 | 0.0 | ||||||||||||
Less: Net loss attributable to noncontrolling interests | (140 | ) | (0.0 | ) | (59 | ) | (0.0 | ) | ||||||||
Net income attributable to common shareholders of Party City Holdco Inc. | $ | 17,856 | 1.7 | % | $ | 27,354 | 2.6 | % | ||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. – Basic | $ | 0.19 | $ | 0.28 | ||||||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. – Diluted | $ | 0.19 | $ | 0.28 |
Six Months Ended June 30, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Dollars in Thousands | Percentage of Total Revenues | Dollars in Thousands | Percentage of Total Revenues | |||||||||||||
Net Sales: | ||||||||||||||||
Wholesale | $ | 563,560 | 52.7 | % | $ | 547,397 | 53.6 | % | ||||||||
Eliminations | (275,280 | ) | (25.8 | )% | (270,851 | ) | (26.5 | )% | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net wholesale | 288,280 | 27.0 | % | 276,546 | 27.1 | % | ||||||||||
Retail | 774,929 | 72.5 | % | 739,070 | 72.3 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total net sales | 1,063,209 | 99.5 | % | 1,015,616 | 99.4 | % | ||||||||||
Royalties and franchise fees | 5,626 | 0.5 | % | 6,261 | 0.6 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | $ | 1,068,835 | 100.0 | % | $ | 1,021,877 | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
2018.
Six Months Ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
Dollars in Thousands | Percentage of Total Revenues | Dollars in Thousands | Percentage of Total Revenues | |||||||||||||
Net Sales: | ||||||||||||||||
Wholesale | $ | 579,368 | 53.8 | % | $ | 563,560 | 52.7 | % | ||||||||
Eliminations | (307,874 | ) | (28.6 | )% | (275,280 | ) | (25.8 | )% | ||||||||
Net wholesale | 271,494 | 25.2 | % | 288,280 | 27.0 | % | ||||||||||
Retail | 801,310 | 74.4 | % | 774,929 | 72.5 | % | ||||||||||
Total net sales | 1,072,804 | 99.6 | % | 1,063,209 | 99.5 | % | ||||||||||
Royalties and franchise fees | 4,203 | 0.4 | % | 5,626 | 0.5 | % | ||||||||||
Total revenues | $ | 1,077,007 | 100.0 | % | $ | 1,068,835 | 100.0 | % | ||||||||
impact of a shift in the calendar related to the timing of certain New Year’s Eve sales, which shifted into the first quarter of fiscal 2018.stores. During the twelve months ended June 30, 2018,2019, we acquired 2444 franchise and independent stores, opened 1316 new stores and closed 129 stores. Global retail$67.9$67.2 million during the first six monthshalf of 20182019 and were $2.3$0.8 million, or 3.3%1.1%, lower than during the corresponding period of 2017.2018. Sales at other store formats totaled $0.7 million during the first six months of 2019.
Same-store sales for the Party City brand (including North American retaile-commerce sales) increased by 1.2% during the first six months of 2018. Excluding the impact ofincreaseddecreased by 1.9%1.8%.
negatively impacting sales by approximately $6 million.
Six Months Ended June 30, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Dollars in Thousands | Percentage of Net Sales | Dollars in Thousands | Percentage of Net Sales | |||||||||||||
Retail | $ | 330,750 | 42.7 | % | $ | 306,453 | 41.5 | % | ||||||||
Wholesale | 86,016 | 29.8 | % | 88,544 | 32.0 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 416,766 | 39.2 | % | $ | 394,997 | 38.9 | % | ||||||||
|
|
|
|
|
|
|
|
2018.
Six Months Ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
Dollars in Thousands | Percentage of Net Sales | Dollars in Thousands | Percentage of Net Sales | |||||||||||||
Retail | $ | 308,069 | 38.4 | % | $ | 330,750 | 42.7 | % | ||||||||
Wholesale | 72,637 | 26.8 | 86,016 | 29.8 | ||||||||||||
Total | $ | 380,706 | 35.5 | % | $ | 416,766 | 39.2 | % | ||||||||
franchisees (due to the store acquisitions discussed above), as well as the impact of foreign currency on product costs.
The decrease was principally due to the franchise acquisitions discussed above.
respectively.
a $14.1 million impairment charge for its operating lease asset, a $4.7 million impairment charge for property, plant and equipment, $3.8 million of labor and other costs related to closing the stores and $0.7 million of severance.
the Company’s August 2018 refinancing (see the Company’s 2018 Form
million, respectively.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“the Act”) was signed into law. The Act significantly changed U.S. tax law, including lowering the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018.
divided by diluted weighted average common shares outstanding. The Company presents these measures as supplemental measures of its operating performance. You are encouraged to evaluate these adjustments and the reasons the Company considers them appropriate for supplemental analysis. In evaluating the measures, you should be aware that in the future the Company may incur expenses that are the same as, or similar to, some of the adjustments in this presentation. The Company’s presentation of adjusted EBITDA, adjusted net income and adjusted net income per common share-diluted should not be construed as an inference that the Company’s future results will be unaffected by unusual orshare—share - diluted are helpful benchmarks to evaluate its operating performance.
•
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2018 | Six Months Ended June 30, 2017 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net income | $ | 28,048 | $ | 24,982 | $ | 26,885 | $ | 20,299 | ||||||||
Interest expense, net | 25,501 | 21,294 | 48,776 | 41,986 | ||||||||||||
Income taxes | 9,370 | 15,318 | 8,666 | 12,818 | ||||||||||||
Depreciation and amortization | 20,255 | 21,124 | 40,812 | 41,825 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
EBITDA | 83,174 | 82,718 | 125,139 | 116,928 | ||||||||||||
Non-cash purchase accounting adjustments | 1,098 | 3,000 | 542 | 4,850 | ||||||||||||
Restructuring, retention and severance (a) | (457 | ) | 813 | 2,154 | 8,627 | |||||||||||
Deferred rent (b) | 787 | 2,552 | 1,155 | 2,915 | ||||||||||||
Closed store expense (c) | 793 | 1,512 | 2,605 | 2,879 | ||||||||||||
Foreign currency losses (gains), net | 505 | (1,183 | ) | 442 | (1,720 | ) | ||||||||||
Stock option expense (d) | 482 | 824 | 942 | 3,222 | ||||||||||||
Restricted stock units expense—time-based (e) | 252 | — | 252 | — | ||||||||||||
Restricted stock units expense—performance-based (f) | 593 | — | 593 | — | ||||||||||||
Non-employee equity based compensation (g) | 104 | 3,265 | 365 | 3,265 | ||||||||||||
Undistributed income in unconsolidated joint ventures | (90 | ) | (942 | ) | (301 | ) | (226 | ) | ||||||||
Corporate development (h) | 2,778 | 3,721 | 5,352 | 4,444 | ||||||||||||
Non-recurring consulting charges (i) | 6,869 | — | 11,619 | — | ||||||||||||
Refinancing charges (j) | — | — | 1,146 | — | ||||||||||||
Other | (282 | ) | 260 | (251 | ) | 478 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted EBITDA | $ | 96,606 | $ | 96,540 | $ | 151,754 | $ | 145,662 | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2018 | Six Months Ended June 30, 2017 | |||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||
Income before income taxes | $ | 37,418 | $ | 40,300 | $ | 35,551 | $ | 33,117 | ||||||||
Intangible asset amortization | 3,705 | 4,112 | 7,368 | 7,825 | ||||||||||||
Non-cash purchase accounting adjustments | 1,668 | 3,920 | 963 | 5,924 | ||||||||||||
Amortization of deferred financing costs and original issuance discounts (j) | 1,210 | 1,226 | 2,766 | 2,459 | ||||||||||||
Restructuring, retention and severance (a) | — | — | — | 7,814 | ||||||||||||
Non-employee equity based compensation (g) | 104 | 3,265 | 365 | 3,265 | ||||||||||||
Refinancing charges (j) | — | — | 800 | — | ||||||||||||
Non-recurring consulting charges (i) | 6,869 | — | 11,619 | — | ||||||||||||
Stock option expense (d) | 482 | 824 | 942 | 3,222 | ||||||||||||
Restricted stock units expense—performance-based (f) | 593 | — | 593 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted income before income taxes | 52,049 | 53,647 | 60,967 | 63,626 | ||||||||||||
Adjusted income tax expense (k) | 12,813 | 20,318 | 14,849 | 24,246 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted net income | $ | 39,236 | $ | 33,329 | $ | 46,118 | $ | 39,380 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted net income per common share – diluted | $ | 0.40 | $ | 0.28 | $ | 0.47 | $ | 0.33 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted-average number of common shares-diluted | 97,688,233 | 120,943,745 | 97,669,309 | 120,903,032 |
Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net income | $ | 48,005 | $ | 28,048 | $ | 17,716 | $ | 26,885 | ||||||||
Interest expense, net | 30,176 | 25,501 | 59,433 | 48,776 | ||||||||||||
Income taxes | 15,962 | 9,370 | 5,443 | 8,666 | ||||||||||||
Depreciation and amortization | 21,884 | 20,255 | 43,225 | 40,812 | ||||||||||||
EBITDA | 116,027 | 83,174 | 125,817 | 125,139 | ||||||||||||
Non-cash purchase accounting adjustments | 1,756 | 1,098 | 2,757 | 542 | ||||||||||||
Store impairment and restructuring charges (a) | 10,628 | — | 46,266 | — | ||||||||||||
Other restructuring, retention and severance (b) | 3,933 | (457 | ) | 5,321 | 2,154 | |||||||||||
Deferred rent (c) | (338 | ) | 787 | (1,488 | ) | 1,155 | ||||||||||
Closed store expense (d) | 507 | 793 | 1,098 | 2,605 | ||||||||||||
Foreign currency losses/(gains), net | 133 | 505 | (160 | ) | 442 | |||||||||||
Stock option expense (e) | 371 | 482 | 741 | 942 | ||||||||||||
Non-employee equity based compensation (f) | 129 | 104 | 258 | 365 | ||||||||||||
Undistributed income in equity method investments | (4 | ) | (90 | ) | (202 | ) | (301 | ) | ||||||||
Corporate development expenses (g) | 4,349 | 2,778 | 7,194 | 5,352 | ||||||||||||
Non-recurring consulting charges (h) | — | 6,869 | — | 11,619 | ||||||||||||
Refinancing charges (i) | — | — | — | 1,146 | ||||||||||||
Restricted stock units – time-based (j) | 541 | 252 | 933 | 252 | ||||||||||||
Restricted stock units – performance-based (k) | 476 | 593 | 476 | 593 | ||||||||||||
Non-recurring legal settlements/costs | 869 | — | 1,601 | — | ||||||||||||
Gain on sale/leaseback transaction (l) | (58,381 | ) | — | (58,381 | ) | — | ||||||||||
Other | 44 | (282 | ) | 291 | (251 | ) | ||||||||||
Adjusted EBITDA | $ | 81,040 | $ | 96,606 | $ | 132,522 | $ | 151,754 | ||||||||
Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | |||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||
Income before income taxes | $ | 63,967 | $ | 37,418 | $ | 23,159 | $ | 35,551 | ||||||||
Intangible asset amortization | 3,546 | 3,705 | 6,975 | 7,368 | ||||||||||||
Non-cash purchase accounting adjustments | 2,459 | 1,668 | 3,776 | 963 | ||||||||||||
Amortization of deferred financing costs and original issuance discounts (i) | 1,146 | 1,210 | 2,289 | 2,766 | ||||||||||||
Store impairment and restructuring charges (a) | 10,628 | — | 46,266 | — | ||||||||||||
Other restructuring charges (b) | 3,085 | — | 3,085 | — | ||||||||||||
Non-employee equity based compensation (f) | 129 | 104 | 258 | 365 | ||||||||||||
Refinancing charges (i) | 36 | — | 36 | 800 | ||||||||||||
Non-recurring consulting charges (h) | — | 6,869 | — | 11,619 | ||||||||||||
Stock option expense (e) | 371 | 482 | 741 | 942 | ||||||||||||
Gain on sale/leaseback transaction (l) | (58,381 | ) | — | (58,381 | ) | — | ||||||||||
Restricted stock units - performance-based (k) | 476 | 593 | 476 | 593 | ||||||||||||
Adjusted income before income taxes | 27,462 | 52,049 | 28,680 | 60,967 | ||||||||||||
Adjusted income tax expense (m) | 7,227 | 12,813 | 7,342 | 14,849 | ||||||||||||
Adjusted net income | $ | 20,235 | $ | 39,236 | $ | 21,338 | $ | 46,118 | ||||||||
Adjusted net income per common share – diluted | $ | 0.22 | $ | 0.40 | $ | 0.23 | $ | 0.47 | ||||||||
Weighted-average number of common shares-diluted | 93,703,546 | 97,688,233 | 93,791,763 | 97,669,309 |
(a) |
|
(b) | Amounts expensed during 2019 principally relate to executive severance and the write-off of inventory for a |
The |
|
Represents |
|
(f) |
|
Principally represents shares of Kazzam awarded to Ampology as compensation for Ampology’s services. See the |
Primarily represents |
Non-recurring consulting charges related to the Company’s retail operations. |
During February 2018, the Company amended the Term Loan Credit Agreement. In conjunction with the amendment, the Company |
(j) | Non-cash charges for restricted stock units that vest based on service conditions. |
(k) | Non-cash charges for restricted stock units that vest based on performance conditions. |
(l) | During June 2019, the Company reported a $58,381 gain from the sale and leaseback of its main distribution center in Chester, New York and its metallic balloons manufacturing facility in Eden Prairie, Minnesota. The aggregate sale price for the three properties was $128,000. Simultaneous with the sale, the Company entered into twenty year leases for each of the facilities. |
(m) | 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 thepre-tax adjustments the effective income tax rates for the specific legal entities in which the adjustments were recorded. |
$14.0 million.
At June 30, 2018,2019, the Company had approximately $111$296 million of availability under itsthe ABL Facility, after considering borrowing base restrictions.
2018.
2018.
Concentration of ownership by investment funds affiliated with Thomas H. Lee Partners, L.P. (“THL”) could limit other stockholders’ ability to influence the outcome of key transactions, including a change of control.
THL beneficially owns approximately 47% of our outstanding common stock as of July 25, 2018. As a result, THL will be able to exert a significant degree of influence over our business and affairs, including any determinations with respect to mergers or other business combinations, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional common stock or other equity securities, the repurchase or redemption of common stock and the payment of dividends. Similarly, THL may effectively control matters submitted to a vote of our stockholders without the consent of our other stockholders, may have the power to prevent a change in our control and could take other actions that might be favorable to them.
3.1 | ||
3.2 | ||
10.1 | ||
10.2 | ||
10.3 | ||
10.4 | ||
10.5 †* | ||
10.6 †* | ||
10.7 †* | ||
10.8 †* | ||
31.1* | ||
31.2* | ||
32.1* | ||
32.2* | ||
101.INS* | XBRL Instance Document - the instance document does not appear in the Interactive Data | |
101.SCH* | XBRL Taxonomy Extension Schema Document. | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document. |
† | Management contract of compensatory plan or arrangement |
* | Filed herewith. |
PARTY CITY HOLDCO INC. | ||||||
By: | /s/ | |||||
Michael A. Correale | ||||||
Interim Chief Financial Officer (on behalf of the Registrant and as Principal Financial Officer) |
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