2020 ANNUAL REPORT
PARTYCITY.COM
2020
NAVIGATING.
PIVOTING.
EVOLVING.
PRIORITIZING.
INNOVATING.
ELEVATING.
TRANSFORMING.
CORPORATE INFO
B OAR D OF DI RECTOR S
as of April 26, 2021
Norman S. Matthews
Jennifer Fleiss
Non-Executive Chairman
Director
John A. Frascotti
Director
James M. Harrison
Steven J. Collins
Director & Vice Chairman
James G. Conroy
Director
Lisa K. Klinger
William S. Creekmuir
Director
Michelle Millstone-Shroff
& Director
Joel Alsfine
Director
Director
Director
Director
Director
Sarah Dodds-Brown
Chief Executive Officer & Director
STOCK
Bradley M. Weston
EXEC UT IV E M AN AGEMENT
Bradley M. Weston
Chief Executive Officer & Director
Todd E. Vogensen
Chief Financial Officer
Sean C. Thompson
Chief Commercial Officer
Denise M. Kulikowsky
Chief Human Resources Officer
CORPORATE OFFICES
80 Grasslands Road
Elmsford, NY 10523
ANNUAL MEETING
The Annual Meeting of
Shareholders of Party City
Holdco Inc. will be held
on Thursday, June 10, 2021,
at 8:30 a.m. (eastern time)
via an online Virtual
Shareholder Meeting
TRANSFER AGENT
AND REGISTRAR
ComputerShare
Since the Company’s initial
public offering on April 16,
2015, shares of Party City
have been quoted on the
NYSE, and currently trade
under the symbol “PRTY”
INDEPENDENT
REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
New York, New York
INVESTOR RELATIONS
InvestorRelations@partycity.com
MAKING JOY EASY.
1
FROM OUR CEO
Dear Shareholders, Customers and Employees:
I write this annual letter after completing my first year as CEO
of Party City Holdco. I am very encouraged by all that we have
accomplished during my first year at the helm and look forward
to the next phase of our transformation.
AT PARTY CITY, OUR PURPOSE IS TO
INSPIRE JOY BY MAKING IT EASY TO
CREATE UNFORGETTABLE MEMORIES.
Despite the pandemic-impacted backdrop in 2020, we remained
more committed to this mission than ever.
To that end, I am very pleased with how our organization navigated
the year, swiftly pivoting to meet the evolving needs of our customers,
all while prioritizing the health and safety of our associates and
customers during the pandemic. Throughout the year, we made
important strides on our strategic initiatives, innovating and elevating
our customer experience while also significantly improving our
financial position and flexibility.
2020 was certainly a year without precedent. Our full-year
results reflect the significant impact of the pandemic to the business,
including three months where we operated in a closed store
environment or with limited stores opened.
Operationally, we made important progress on our five strategic
priorities of 1) developing a more relevant in-store experience,
2) winning in balloons, 3) addressing value perception in key
categories, 4) improving in-store customer engagement, and
5) building on our omni-channel platform. These strategies are having
a demonstrable impact on our business, and we will build on this
progress going forward as we continue to stabilize our retail business.
Key Financial
Highlights of 2020
Total revenues decreased
21.2% on a reported basis
and 21.3% on a constant
currency* basis
North American digitally-
enabled sales increased
by 35.4% when including
Buy Online Pick-Up In Store,
curbside pickup and delivery
Adjusted EBITDA* was
$95.5 million and Adjusted
Loss Per Share* was $0.49
Debt was reduced by
$430 million as we successfully
completed our debt exchange
offering in July 2020
The sale of a substantial portion
of our Amscan International
business, reflected a continued
rationalization of the business
to narrow our focus on our core
North American vertical model
Despite COVID-19 impacts on
our business, generated higher
operating cash flow in 2020
versus prior-year period
*The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in the 2020 Form 10-K
We enter 2021 in a substantially stronger position, armed with greater consumer insights and a solid
foundation to build upon as we further our mission to deliver The Party Platform. We remain intensely
focused on our customer and more effectively operating and leveraging our unique North American
vertical model as we continue our transformation and further strengthen our industry leadership position.
Our primary operational focus in 2021 will be on advancing our fundamental building blocks of: product
innovation, in-store experience, being celebration obsessed and continuing to leverage our vertical model.
Additionally, we see continued market expansion opportunities as we further evolve our omni-channel
capabilities and extend our leadership position in key categories further and deeper across channels.
Financially, we are focused on continuing to enhance our balance sheet position. Subsequent
to year-end, in February we completed the refinancing of our term loan that was to mature
in 2022 through a new Senior Secured Notes offering, which is another step to strengthen our
financial health and flexibility.
In closing, I want to express my deepest gratitude to the entire PCHI team for their hard work and contributions
throughout the year. I could not be more proud of all that they accomplished in 2020, rising to the challenges
presented by the global pandemic and positioning us to win, despite the environment. Their grit and
determination allowed us to maintain continuity of our retail and wholesale operations, while continuing
to meet the changing needs of our customers who look to continue celebrating in unique and different ways.
Finally, on behalf of our board and the entire Party City team, I want to thank you, our shareholders,
for your ongoing support as we continue to navigate the current environment and advance our
evolution and transformation.
STAY SAFE, STAY HEALTHY, AND FIND JOY, EVERY SINGLE DAY.
Sincerely,
Brad Weston
3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission File Number: 001-37344
Party City Holdco Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
46-0539758
(I.R.S. Employer
Identification No.)
80 Grasslands Road
Elmsford, NY 10523
(Address of Principal Executive Offices)
(914) 345-2020
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Common Stock $0.01 par value
Trading Symbol(s)
PRTY
Name of each exchange on which registered
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☑ No ☐
Indicate by a check mark whether the registrant has submitted electronically and posted on its corporate website every Interactive Data File
required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files.) Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☑
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of common stock held by non-affiliates as of June 30, 2020 was $140,692,691. As of February 26, 2021, there were
110,733,170 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement relating to its 2021 annual meeting of stockholders, to be held on June 10, 2021, are
incorporated by reference in Part III.
[This page intentionally left blank]
Business
Item 1
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Item 4
Properties
Legal Proceedings
Mine Safety Disclosures
FORM 10-K
TABLE OF CONTENTS
PART I
PART II
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Consolidated Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 6
Item 7
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8
Item 9
Item 9A Controls and Procedures
Item 9B Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
PART III
Item 10 Directors, Executive Officers and Corporate Governance
Item 11
Item 12
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Party Transactions and Director Independence
Principal Accountant Fees and Services
Item 13
Item 14
Item 15
Item 16
Exhibits and Financial Statement Schedules
Form 10-K Summary
PART IV
Page
1
10
28
29
31
31
32
34
42
66
67
123
123
124
125
125
125
125
125
126
130
[This page intentionally left blank]
Forward-Looking Statements
PART I
This Annual Report on Form 10-K, including the section “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7, contains information that may constitute
forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans
and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts,
such as statements regarding our future financial condition or results of operations, our prospects and strategies for
future growth and the development and introduction of new products. In many cases you can identify forward-
looking statements by terms such as “believes,” “anticipates,” “expects,” “targets,” “estimates,” “intends,”
“will,” “may” or “plans” and similar expressions. These forward-looking statements reflect our current
expectations and are based upon data available to us at the time the statements were made.
Such statements are subject to certain risks and uncertainties that could cause actual results to differ
materially from expectations. These risks, as well as other risks and uncertainties, are detailed in the section
Item 1A. “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks
emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking statements we may make. In light of these risks,
uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report on
Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied
in the forward-looking statements. All forward-looking statements are qualified by these cautionary statements and
are made only as of the date of this Annual Report on Form 10-K. Any such forward-looking statements should be
considered in context with the various disclosures made by us about our business. Unless required by law, we
undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or
future events or otherwise. You should, however, review the factors and risks we describe in the reports we will file
from time to time with the Securities and Exchange Commission (the “SEC”) after the date of the filing of this
Annual Report on Form 10-K.
In this Annual Report on Form 10-K references to “Party City Holdco,” “Party City,” the “Company,”
“we,” “our,” “ours” and “us” refer to Party City Holdco Inc. and its consolidated subsidiaries unless stated or the
context otherwise requires.
Item 1.
Business
Overview
Party City Holdco is a Delaware corporation formed in 2012. It has no operating assets or operations. Party
City Holdco owns 100% of PC Nextco Holdings, LLC (“PC Nextco”), which owns 100% of PC Intermediate
Holdings, Inc. (“PC Intermediate”). PC Intermediate owns 100% of Party City Holdings Inc. (“PCHI”). PCHI or its
direct or indirect subsidiaries conduct most of our operations. The Company’s principal executive offices are located
at 80 Grasslands Road, Elmsford, New York 10523.
We are the leading party goods company by revenue in North America and, we believe, the largest vertically
integrated supplier of decorated party goods globally by revenue. The Company is a popular one-stop shopping
destination for party supplies, balloons, and costumes. In addition to being a great retail brand, the Company is a
global, world-class organization that combines state-of-the-art manufacturing and sourcing operations, and
sophisticated wholesale operations complemented by a multi-channel retailing strategy and e-commerce retail
operations. The Company is a leading player in its category and vertically integrated in its breadth and depth. The
Company designs, manufactures, sources and distributes party goods, including paper and plastic tableware, metallic
and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery throughout the world.
The Company’s retail operations include 831 specialty retail party supply stores (including franchise stores)
throughout the United States and Mexico operating under the names Party City and Halloween City, and e-
commerce websites, including through the domain name PartyCity.com.
1
In addition to our retail operations, we are also one of the largest global designers, manufacturers and
distributors of decorated consumer party products, with items found in retail outlets worldwide, including
independent party supply stores, mass merchants, grocery retailers, e-commerce merchandisers and dollar stores.
Our products are available or licensed in over 100 countries with the United Kingdom (“U.K.”), Canada, Germany,
Mexico and Australia among the largest end markets for our products outside of the United States.
Industry Overview
We operate in the broadly defined retail party goods industry and Halloween market. The party goods industry
includes decorative paper and plastic tableware, costumes, decorations, accessories and balloons, all of which are
supported by a range of suppliers from commodity paper goods producers to party goods manufacturers. The retail
landscape for decorated party goods is comprised primarily of party superstores, mass merchants, e-commerce
merchandisers, craft stores, grocery retailers, and dollar stores. Sales of party goods are fueled by everyday events
such as birthdays, baby showers, weddings and anniversaries, as well as seasonal events such as holidays and other
special occasions.
Segments
We have two reporting segments: Retail and Wholesale. In 2020, we generated 74.5% of our total revenues
from our retail segment and 25.5% of our total revenues from our wholesale segment.
Our retail operations generate revenue primarily through the sale of our party supplies, which are sold under
the Amscan and Anagram brand names, through our Party City stores, Halloween City stores and PartyCity.com.
Our wholesale revenues are generated from the sale of decorated party goods for all occasions, including
paper and plastic tableware, accessories and novelties, costumes, metallic and latex balloons and stationery. Our
products are sold at wholesale to party goods superstores (including our franchise stores), other party goods retailers,
mass merchants, independent card and gift stores, dollar stores and e-commerce merchandisers.
Financial information about our industry segments and geographic segments is provided in Note 19, Segment
Information, to our consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary
Data,” in this Annual Report on Form 10-K.
Product Lines
Our product line spans a wide variety of ways to celebrate everyday events including from birthdays to theme
parties to sporting events. Additionally, we offer seasonal products throughout the year to decorate and dress up for
holidays such as Halloween, New Year’s Eve and Mardi Gras. Our product offering is designed to provide
everything needed to throw an amazing event and capture life’s special moments including a wide range of décor,
tabletop, balloons and wearable product formats.
Category
Tableware
Costumes & Accessories
Decorations
Items
Plastic Plates, Paper Plates, Plastic Cups, Paper Cups, Paper Napkins,
Plastic Cutlery, Table Covers
Costumes, Other Wearables, Wigs
Latex Balloons, Piñatas, Crepes, Flags & Banners, Decorative Tissues,
Stickers and Confetti, Scene Setters, Garland, Centerpieces
Metallic Balloons
Favors, Stationery & Other
Bouquets, Standard 18 Inch Sing-A-Tune, SuperShapes, Weights
Party Favors, Gift Bags, Gift Wrap, Invitations, Bows, Stationery
2
Retail Operations
Overview
After opening its first company-owned store in 1986, Party City has grown to become what we believe is the
largest operator of owned and franchised party superstores by revenue in the United States. Our websites, including
PartyCity.com, offer a convenient, user-friendly and secure online shopping option for our customers. In addition to
the ability to order products, our websites provide a substantial amount of content about our party products, party
planning ideas and promotional offers. The websites are also one of our key marketing vehicles, specifically as they
relate to social media marketing initiatives. We have franchised stores throughout the United States, Mexico and
Puerto Rico run by franchisees utilizing our format, design specifications, methods, standards, operating procedures,
systems and trademarks. Our wholesale sales to franchised stores generally mirror, with respect to relative size, mix
and category, those to our company-owned stores. We are not currently marketing, nor do we plan to market, new
franchise territories in the United States.
The following table shows the change in our company-owned Party City store network over the past three
years:
Stores open at beginning of year
Stores opened
Stores acquired from franchisees/others
Stores closed and sold
Stores open at end of year
2020
2019
2018
777
5
6
(42 )
746
866
5
6
(100 )
777
803
15
58
(10 )
866
The following table shows the change in our franchise-owned store network over the past three years:
Stores open at beginning of year
Stores opened/acquired by existing
franchisees
Stores sold to the Company
Stores closed or converted to independent
stores
Stores open at end of year
2020
2019
2018
98
96
148
—
(6)
(7)
85
2
—
—
98
1
(50 )
(3 )
96
We receive revenue from our franchisees, consisting of an initial one-time fee and ongoing royalty fees
generally ranging from 4% to 6% of net sales. In exchange for these franchise fees, franchisees principally receive
brand value and company support with respect to planograms. Each franchisee has a mandated advertising budget,
which consists of a minimum initial store opening promotion and ongoing local advertising and promotions.
Additionally, franchisees must pay 1% to 2.25% of net sales to a group advertising fund to cover common
advertising materials. Our franchise agreements provide us with a right of first refusal should any franchisee look to
dispose of its operations.
Current franchise agreements provide for an assigned area or territory that typically equals a three or four-mile
radius from the franchisee’s store location and the right to use the Party City® logo and trademark. In addition,
certain agreements with our franchisees and other business partners contain geographic limitations on opening new
stores. For most stores, the franchisee or the majority owner of a corporate franchisee devotes full time to the
management, operation and on-premises supervision of the stores or groups of stores.
Retail Seasonality
Our retail operations are subject to significant seasonal variations. Historically, this segment has realized a
significant portion of its revenues, cash flow and net income in the fourth quarter of the year, principally due to our
Halloween sales in October and, to a lesser extent, year-end holiday sales. Halloween business represents
approximately 20% of our total domestic retail sales. To maximize our seasonal opportunity, we operate a chain of
temporary Halloween stores, under the Halloween City banner, during the months of September and October of each
year.
3
Wholesale Operations
Overview
We currently offer over 400 party goods ensembles, which range from approximately five to 50 design-
coordinated items spanning tableware, accessories, novelties, balloons and decorations. The breadth of these
ensembles enables our retail stores and third – party retailers to promote additional sales of related products for
every occasion. To enhance our customers’ celebrations of life’s important events, we market party goods ensembles
for a wide variety of occasions, including seasonal and religious holidays, special events and themed celebrations.
Our Amscan and Anagram branded products are offered in retail outlets worldwide, ranging from party goods
superstores (including our franchise stores), other party goods retailers, mass merchants, independent card and gift
stores, dollar stores and e-commerce merchandisers. We have long-term relationships with many of our wholesale
customers.
The table below shows the breakdown of our total wholesale sales by channel for the year ended
December 31, 2020:
Channel
Owned stores and e-commerce
Party City franchised stores and other domestic retailers
Domestic balloon distributors/retailers
International balloon distributors
Other international
Total wholesale sales
Wholesale Manufactured Products
Sales
(dollars in millions)
$
$
472
174
73
20
201
940
We manufacture items representing approximately 43% of our net sales at wholesale (including sales to our
retail operations). Generally, our manufacturing facilities are highly automated and produce paper and plastic plates
and cups, paper napkins, metallic and latex balloons, injection molded product, costumes, pinatas and other party
and novelty items at globally competitive costs. State-of-the-art printing, forming, folding and packaging equipment
support most of these manufacturing operations. Given our size and sales volume, we are generally able to operate
our manufacturing equipment on the basis of at least two shifts per day, thus lowering production costs per unit. In
select cases, we use available capacity to manufacture products for third parties, which allows us to maintain a
satisfactory level of equipment utilization.
The company’s facilities and the products produced at each location is listed in Item 2. “Properties” in this
Annual Report on Form 10-K.
Complementing our manufacturing facilities, we have a diverse global network of third-party suppliers that
supports our strategy of consistently offering a broad selection of high quality, innovative and competitively priced
product. We have relationships that exceed twenty years with many of our vendors and often represent a significant
portion of their overall business. They generally produce items designed by and created for us, are located in Asia,
and are managed by our sourcing office in Hong Kong. We actively work with our third-party suppliers to ensure
product cost, quality and safety.
The principal raw materials used in manufacturing our products are paper, petroleum-based resin and cotton.
While we currently purchase such raw material from a relatively small number of sources, paper, resin and cotton
are available from numerous sources. Therefore, we believe our current suppliers could be replaced without
adversely affecting our manufacturing operations in any material respect.
Wholesale Product Safety and Quality Assurance
We are subject to regulatory requirements in the United States and internationally, and we believe that all
products that we manufacture and source comply with the requirements in the markets in which they are sold. Third-
party manufactured products are tested both at the manufacturing site and upon arrival at our distribution centers.
We have a full-time staff of professionals in the United States, Asia and Europe dedicated to product safety and
quality assurance.
4
Wholesale Distribution and Systems
We ship our products directly to retailers and distributors throughout the world from our distribution facilities,
as well as directly from our domestic and international factories. Our electronic order entry and information systems
allow us to manage our inventory.
Our main distribution facility for domestic party customers is located in Chester, New York, with nearly
900,000 square feet under one roof. This state-of-the-art facility serves as the main point of distribution for our
Amscan-branded products and utilizes a paperless, pick-by-light system, a Goods-To-Person (OSR) picking system,
offering superior inventory management and turnaround times as short as 48 hours. Refer to Item 2. “Properties” in
this Annual Report on Form 10-K for additional information on other distribution centers that support our US and
international customers.
Wholesale Customers
We have a diverse third-party customer base at wholesale. During 2020, no individual third-party customer
accounted for more than 10% of our total third-party sales at wholesale.
Competitive Strengths
We believe we are well positioned to continue to attract customers who celebrate life’s memorable events as a
result of the following competitive strengths:
• Category defining multi-channel retailer. We believe we are the premier decorated party supplies retailer,
providing a one-stop fun and engaging shopping experience with a broad and deep selection of products offered at a
compelling value seamlessly through our retail stores and our e-commerce platform. We keep our assortment current
by frequently introducing new products, and we organize our stores by events and themes to make it easy to shop
while consistently presenting customers with additional product ideas that will enhance their events and our sales.
With our extensive product selection, convenient locations, consistently high in-stock positions and compelling
value proposition, we believe customers associate Party City with successful celebrations, and, as a result, our
physical and online stores will continue to be seen as the favored destination for party supplies and innovative ideas.
• Leading market position. Based on our revenues, we are the largest retailer of decorated party supplies in
the U.S. and Canada, and we believe we are the only party supply retailer with a national store footprint. In addition
to our leading retail presence, we believe that our integrated wholesale business is the largest global designer,
manufacturer and distributor of decorated consumer party products, by revenue, with over 45,000 SKUs found in
retail outlets worldwide. Through our category-leading brands, Party City and Amscan, we offer what we believe is
the broadest selection of continuously updated and innovative merchandise at a compelling value. We believe that
our scale, brand recognition and value proposition underscore our credibility as the destination of choice for party
supplies in any channel.
• Unique vertically integrated operating model. We manufacture, source and distribute decorated consumer
party products, acting as a one-stop shop for both retail and wholesale customers. Our vertically integrated model
provides us with a number of advantages, including the ability to (i) enhance our profitability as we realize the full
manufacturing-to-retail margin on a significant portion of our retail sales, (ii) leverage a global sourcing network to
reinforce our position as a low-cost provider of quality party supplies and (iii) effectively respond to changes in
consumer trends through our in-house design and innovation team.
• Broad and innovative product offering. We offer a broad and deep product assortment with an average of
25,000 SKUs offered at any one time in our Party City superstores, supported by the approximately 40,000 SKUs
offered online. Our extensive selection offers customers a single source for all of their party needs. Our in-house
design team introduces approximately 6,000 products annually, driving innovation in our licensed and unlicensed
product offering and supporting increased sales across our channels.
• Highly efficient global sourcing and distribution capabilities. Over the past 70 years, we have developed a
global network of owned and third-party manufacturers that we believe optimizes speed to market, quality and cost.
We also have warehousing and distribution facilities throughout North America and have opened sourcing, quality
control and testing offices throughout Asia, with offices located in China, Vietnam, India, Indonesia and Hong
Kong. Our global sourcing and distribution capabilities offer our customers best-in-class service levels, rapid
fulfillment and competitive prices, and have capacity for continued growth with our business.
5
• World-Class Management Team with a Proven Track Record. Our senior management team averages 20
years of industry experience and possesses a unique combination of management skills and experience in the party
goods sector. Our team has successfully grown our sales and profits during various economic cycles and through
several business transformations. Additionally, our team has a strong track record of successful acquisitions and
integrations, which continue to be an important part of our overall strategy.
Growth Strategy
The Company continues to advance its strategic initiatives that underpin efforts to grow our business and
expand on our purpose of creating joy by making it easy to create unforgettable memories.
• Develop a more relevant in-store experience. We continue to make progress on our next generation store
prototype, as we test changes to provide a better shopping experience for our customers. We found that our
traditional store formats could be overwhelming to some customers and time-consuming to navigate, which provides
a natural opportunity for us to simplify the shopping experience. The material changes to our stores include a new
shop-in-shop store layout with improved product adjacencies, edited and more curated product assortments, reduced
inventory, as well as new services and experiences. A new balloon shop and customer engagement center are now
the focal point of the store and add significant theater to the entire experience. Balloon sales growth in our next-gen
stores are significantly higher than the trend in the balance of the chain. Customers have also told us that they
appreciate the decluttering of the stores due to the lower sightlines and the more curated assortment.
• Win in balloons. For manufacturing and wholesale, all the way through to Party City retail, balloons are a
focal point of our growth strategy. With the recent helium shortage behind us, we began 2020 focusing on balloons
as a key driver of our differentiated brand experience. As the leader in the global balloon business with an
unmatched breadth of balloon assortment, we continue to bring innovation in products, do-it-yourself options and
how-to guidelines, along with greater access points to balloons through new digital engagement and additional
fulfillment options through curbside pickup and delivery. Buying balloons online with the ability to pick them up in
store, at curbside or have them delivered the same day is increasing balloon demand. As part of our balloon
business, Anagram designs, manufactures and markets foil balloons and inflated décor. See “—Anagram.” Winning
in the balloon category remains a top strategic priority across our enterprise growth initiatives and business
disciplines.
• Address price value perception in key categories. Customer behavior and insights have told us we were
overpriced on some key value indicator items across our assortment. To address this and sharpen our price value
perception, since fall of 2019, we have reduced prices on approximately 30% of our total active SKU count. The
customer has noticed and has responded favorably with their feedback and the unit sales volume increases we
intended. As projected, these reductions in price across product categories have driven increased enterprise margin
dollars and increased retail margin rate when coupled with the reduction of previously ineffective promotional
offers. We continue to monitor and react to price-related customer insights and price elasticity data on a regular
basis. Rebuilding trust with the customer on price is critical to our broad efforts to gain relevancy with consumers,
and we are pleased with our progress to date.
• Improve our customer engagement selling culture. Improving customer engagement across our marketing
messages, our product and merchandising approach, as well as digital experiences with our brand is also critical to
driving greater relevancy. Our dramatic shift in digital content, including new, more relevant content formats,
carefully curated product assortments and new technology has driven growth in consumer engagement as well as
online conversion rates. In 2020, we launched digital workshops and live video formats across our social platforms
for the first time, which have garnered hundreds of thousands of views and reached millions of consumers.
• Our customers are also increasingly looking to create a complete party experience, and we are transforming
our company to do more than selling party supplies. We believe there is a clear opportunity to play more of a party
planner role with customers who are shopping our stores for party supplies. In order to successfully capitalize on this
growing trend, we are focused on improving in-store customer engagement. We are pivoting from a store operations
and maintenance culture to a customer engagement and selling culture. This pivot is driven by leading, hiring and
training store management and associates with a higher level of accountability for sales and customer engagement
metrics. In addition, as we reduce our SKU count in inventory levels, this frees up time for our sales associates to
focus on customer engagement.
6
• Build on our omni-channel platform. Key components of increasing our omnichannel capabilities, such as
buy online, pick-up in store, curbside and same-day delivery, are now core to our customer experience. We continue
to optimize and add to these experiences as we focus on the customer experience with our brand and seek new and
innovative ways to make it easy to create celebrations. In the third quarter of 2020, we rolled out an enhanced
curbside delivery experience in all of our stores allowing customers to communicate their expected pick-up time,
arrival and vehicle information, all via text message, which creates a more intuitive and efficient experience for our
customers. As customers seek same-day delivery options, we remain focused on improving the customer experience
with improved speed and reliability. We are investing in improved technology to enable more proficient
orchestration of delivery process and have expanded our last-mile delivery partner network.
• Continue to grow our wholesale business. We are transforming our wholesale business from a transactional
product selling organization into a strategic category partner via improved consumer insights, assortment,
merchandising and promotional strategies, all enabled by world-class service and supply chain capabilities.
Additionally, we are focused on driving stronger margins through increased manufacturing and distribution
efficiencies with strategic investments in automation, technology, new equipment and process improvement while
also improving our inventory management capabilities.
COVID-19 Update
Our business, operations, financial condition and liquidity have been and may continue to be materially and
adversely affected by COVID-19. Further, the disruption to the global economy and to our business, along with the
decline in our stock price, may negatively impact the carrying value of certain assets, including inventories, accounts
receivable, intangibles and goodwill. The full extent to which COVID-19 and the measures to contain it will impact
our business, operations, financial condition and liquidity will depend on the severity and duration of the COVID-19
outbreak and other future developments related to the response to the virus, all of which are highly uncertain, and we
expect this uncertainty to continue in 2021. Our results of operations may be affected by the uncertainty surrounding
the impact of the COVID-19 pandemic, and we will continue to actively monitor the impact of the COVID-19
pandemic on our expected losses.
We have proactively managed our liquidity profile throughout the last fiscal year and expect to continue to do
so going forward. We expect to rely on cash on hand, cash generated by operation and borrowing available under
our New ABL Facility to meet our working capital needs.
However, if the duration of the COVID-19 outbreak continues longer than we expect or the severity worsens,
we may need to access other sources of financing, including incurring additional indebtedness, selling our assets and
raising additional equity capital. These alternatives may not be available to us on satisfactory terms or at all, which
could have a material adverse effect on our business.
Information Systems
We continually evaluate and upgrade our information systems to enhance the quantity, quality and timeliness
of information available to management and to improve the efficiency of our manufacturing and distribution
facilities, as well as our service at the store level. We have implemented merchandise replenishment software to
complement our distribution, planning and allocation processes. The system enhances the store replenishment
function by improving in-stock positions, leveraging our distribution infrastructure and allowing us to become more
effective in our use of store labor. We have implemented a Point of Sale system and upgraded merchandising
systems to standardize technology across all of our domestic retail temporary and permanent superstores.
Human Capital Disclosure
As of December 31, 2020, the Company had approximately 8,370 full-time employees and 8,928 part-time
employees, none of whom is covered by a collective bargaining agreement. We consider our relationship with our
employees to be good.
7
Our employees are critical to delivering our company Purpose - inspiring joy to make it easy for our
customers to create unforgettable memories. Our employees live by our four company values: Customer First, It Can
Be Done, People Matter and Celebrate, and this, along with our focus on key priorities, is driving our
transformation.
The health and safety of our employees and customers is a top priority. We are laser focused on designing and
implementing CDC-compliant COVID protocols and practices and convened an enterprise-wide COVID Task Force
to continually evolve our approach as the guidelines shift and evolve. Early on in the pandemic, we were focused on
supporting our employees from a mental, emotional and physical wellness perspective, and launched PCHI Cares, a
series of communications with resources and information for employees and their families to maintain their own
wellness.
In 2020, we announced our commitment to Diversity & Inclusion and launched an enterprise-wide assessment
which enabled us to develop our 2021 Diversity, Equity, Inclusion & Belonging strategy built on awareness,
education and infrastructure. We believe deeply that diversity creates a high level of employee engagement and
drives game-changing innovation.
Intellectual Property
We own the copyrights in the designs we create and use on our products and various trademarks and service
marks used on or in connection with our products. It is our practice to register our copyrights with the United States
Copyright Office and our trademarks and service marks with the United States Patent and Trademark Office, or with
other foreign jurisdictions, to the extent we deem necessary. In addition, we rely on unregistered common law
trademark rights and unregistered copyrights under applicable U.S. law to distinguish and/or protect our products,
services and branding. We do not believe that the loss of copyrights or trademarks with respect to any particular
product or products would have a material adverse effect on our business. We hold numerous intellectual property
licenses from third parties, allowing us to use various third-party cartoon and other characters and designs on our
products, and the images on our metallic balloons and costumes are principally covered by these licenses. None of
these licenses is individually material to our aggregate business. We also own patents relating to display racks and
balloon weights, none of which are individually material to our aggregate business.
We permit our franchisees to use a number of our trademarks and service marks, including Party City, The
Discount Party Super Store, Party America, Oh, It’s On, Nobody has More Party for Less, and Halloween City.
Government Regulation
As a franchisor, we must comply with regulations adopted by the Federal Trade Commission, such as the
Trade Regulation Rule on Franchising, which requires us, among other things, to furnish prospective franchisees
with a franchise offering circular. We also must comply with a number of state laws that regulate the offer and sale
of our franchises and certain substantive aspects of franchisor-franchisee relationships. These laws vary in their
application and in their regulatory requirements. State laws that regulate the offer and sale of franchises typically
require us to, among other things, register before the offer and sale of a franchise can be made in that state and to
provide a franchise offering circular to prospective franchisees.
State laws that regulate the franchisor-franchisee relationship presently exist in a substantial number of states.
Those laws regulate the franchise relationship, for example, by restricting a franchisor’s rights with regard to the
termination, transfer and renewal of a franchise agreement (for example, by requiring “good cause” to exist as a
basis for the termination and the franchisor’s decision to refuse to permit the franchisee to exercise its transfer or
renewal rights), by requiring the franchisor to give advance notice to the franchisee of the termination and give the
franchisee an opportunity to cure most defaults. To date, those laws have not precluded us from seeking franchisees
in any given area and have not had a material adverse effect on our operations.
8
Our wholesale and retail segments must also comply with applicable regulations adopted by federal agencies,
including product safety regulations, and with licensing and other regulations enforced by state and local health,
sanitation, safety, fire and other departments. Difficulties or failures in obtaining the required licenses or approvals
can delay and sometimes prevent the opening of a new store or the shutting down of an existing store.
Our manufacturing operations, stores and other facilities must comply with applicable environmental, health
and safety regulations, although the cost of complying with these regulations to date has not been material. More
stringent and varied requirements of local governmental bodies with respect to zoning, land use, and environmental
factors can delay, and sometimes prevent, development of new stores in particular locations. Our stores must comply
with the Fair Labor Standards Act and various state laws governing various matters such as minimum wages,
overtime and other working conditions. Our stores must also comply with the provisions of the Americans with
Disabilities Act, which requires that employers provide reasonable accommodation for employees with disabilities
and that stores must be accessible to customers with disabilities.
Available Information
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and in accordance therewith, we file reports, proxy and information statements and other
information with the SEC. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and other information to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act are available through the investor relations section of our website at www.partycity.com or
investor.partycity.com. Reports are available free of charge as soon as reasonably practicable after we electronically
file them with, or furnish them to, the SEC. The information contained on our website is not incorporated by
reference into this Annual Report on Form 10-K. The SEC maintains an Internet site that contains our reports, proxy
and information statements, and other information that we file electronically with the SEC at www.sec.gov.
9
Item 1A.
Risk Factors
The following risk factors may be important to understanding any statement in this Annual Report on Form
10-K or elsewhere. Our business, financial condition and operating results can be affected by a number of factors,
whether currently known or unknown, including but not limited to those described below. Any one or more of such
factors could directly or indirectly cause our actual results of operations and financial condition to vary materially
from past or anticipated future results of operations and financial condition. Any of these factors, in whole or in
part, could materially and adversely affect our business, financial condition, results of operations and stock price.
Summary of Risk Factors
Below is a summary of the principal risks that apply to Party City or our securities. This summary does not address
all of the risks that we face. Additional discussion of the risks summarized here, and other risks that we face, can be
found immediately below this summary.
Our business, operations, financial condition and liquidity have been and may continue to be materially
and adversely affected by the outbreak of COVID-19.
We face risks related to our balloon business [including our use of helium gas and changes in consumer
preferences].
We operate in a competitive industry, and our failure to compete effectively could cause us to lose our
market share, revenues and growth prospects.
Because we rely heavily on our own manufacturing operations and those of our suppliers, disruptions at
manufacturing facilities could adversely affect our business, results of operations, cash flows and
financial performance.
A decrease in our Halloween sales could have a material adverse effect on our operating results for the
year.
Our failure to appropriately respond to changing merchandise trends and consumer preferences could
significantly harm our customer relationships and financial performance.
Our business may be adversely affected by material fluctuations in commodity prices.
Product recalls and/or product liability may adversely impact our business, merchandise offerings,
reputation, results of operations, cash flow and financial performance.
Our business is sensitive to consumer spending and general economic conditions, and other factors
beyond our control, including adverse weather conditions or the outbreak of disease, and an economic
slowdown could adversely affect our financial performance.
Our business may be adversely affected by the loss or actions of our third-party vendors.
Our international operations subject us to additional risks, which risks and related costs may differ in each
country in which we do business and may cause our profitability to decline.
We may require additional capital to fund our business, which may not be available to us on satisfactory
terms or at all.
Our business could be harmed if our existing franchisees do not conduct their business in accordance with
agreed upon standards.
Our intellectual property rights may be inadequate to protect our business.
Our substantial indebtedness and lease obligations could adversely affect our financial flexibility and our
competitive position.
10
The market price of our common stock could decline due to the large number of outstanding shares of our
common stock eligible for future sale.
Anti-takeover provisions in our charter documents and Delaware law might discourage, delay or prevent a
change in control of our company.
Our amended and restated certificate of incorporation designates courts in the State of Delaware as the
sole and exclusive forum for certain types of actions and proceedings that may be initiated by our
stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes
with us or our directors, officers or employees.
Risks Related to Our Business
Our business, operations, financial condition and liquidity have been and may continue to be materially and
adversely affected by the outbreak of COVID-19.
In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental
authorities around the world have implemented measures to reduce the spread of the virus. The global spread of
COVID-19 and the measures to contain it have negatively impacted the global economy, disrupted global supply
chains, and created significant volatility and disruption in financial markets. Quarantines, stay-at-home orders and
related measures have significantly reduced consumer spending as well as customer demand for our products. In
response to COVID-19, to safeguard the health and safety of its team members and customers, we temporarily
closed all of our corporate retail stores as of March 18, 2020. During the temporary store closures, we offered
curbside pickup and our e-commerce site, www.partycity.com, remained fully operational. This led to a temporary
furlough of approximately 90% of store employees and 70% of wholesale, manufacturing and corporate employees
for whom we provide health benefits. In addition, there were non-payroll expense reductions, including advertising
and other store operating expenses, as well as professional and consulting fees, and cancellation of orders and
negotiated receipt delays to manage inventory levels. We began reopening stores on May 1, 2020, in accordance
with state and local health ordinances, and by June 22, 2020, all stores were re-opened. However, although all of our
stores have reopened, these restrictions and other dislocations caused by the outbreak have disrupted our planning,
branding and administrative functions, as well as that of our suppliers, transporters and customers. As a result, our
business, operations, financial condition and liquidity have been and may continue to be materially and adversely
affected. Further, the disruption to the global economy and to our business, the sustained decline in market
capitalization, and reduced fair value of certain intangibles and long-lived assets, resulted in our recognizing non-
cash pre-tax impairment charges for the nine months ended September 30, 2020.
COVID-19 has subjected our business, operations and financial condition to a number of risks, including, but
not limited to, those discussed below:
Risks relating to our revenues and profitability. In general, our retail sales, and the retail sales of our
business partners to whom we sell, represent discretionary spending by our customers and our business
partners’ customers. Discretionary spending is affected by many factors, such as general business
conditions, interest rates, availability of consumer credit, unemployment levels, public health crises,
including COVID-19, and consumer confidence in future economic conditions. Our customers’ purchases
and our business partners’ customers’ purchases of discretionary items, including our products, often
decline during periods when disposable income is lower or during periods of actual or perceived
unfavorable economic conditions or as a result of geopolitical events or widespread health emergencies,
and we have experienced significant declines due to COVID-19. The COVID-19 pandemic led to store
closures during parts of 2020 and has decreased traffic in our stores and caused consumers to decide not
to host or attend gatherings or other events. In addition, our retail business realizes a significant portion of
its revenues, net income and cash flows in September and October, principally due to Halloween sales.
Because of COVID-19 and related restrictions, we opened significantly fewer Halloween City stores in
the fourth quarter of 2020 than in prior years. As a result, our revenues and profitability have been
materially and adversely affected. In addition, although we have taken actions in the fourth quarter of
2020 to rationalize our in-store SKU count and dispose of certain inventory, the COVID-19 pandemic and
the related economic downturn make it difficult for us to accurately forecast future demand trends, which
could cause us to purchase excess inventories, resulting in increases in our inventory carrying cost, or
11
insufficient inventories, resulting in our inability to satisfy our customer demand and potential loss of
market share.
Risks relating to our operations. In 2020, COVID-19 and related quarantines and work and travel
restrictions in China and other countries disrupted, and may continue to disrupt, production for certain of
our suppliers and our own manufacturing operations, and the extent to which these events will affect our
results of operations and financial position remains uncertain. For our own manufacturing operations, the
interruption in supply of certain key raw materials essential to the manufacturing of our products and
significant changes in commodity prices had an adverse impact, and may continue to have an adverse
impact on our and our suppliers’ abilities to manufacture the products necessary to maintain our existing
customer relationships. COVID-19 has also at times disrupted, and may in the future disrupt, the
transportation system we rely on and could increase product lead times due primarily to ocean shipping
congestion from Asia, which may impact the timing of product availability on some SKUs.
Risks relating to impairment of our long-lived and intangible assets. During the first and third quarters of
2020, we identified impairment indicators associated with our market capitalization and significantly
reduced customer demand for our products due to COVID-19. As a result, we performed interim
impairment tests on the goodwill at its retail and wholesale reporting units. As a result, we recorded a
$581.4 million goodwill, intangibles and long-lived assets impairment charge. Should actual results differ
from certain key assumptions used in the interim impairment test, including revenue and EBITDA
growth, which are both impacted by economic conditions, or should other key assumptions change,
including discount rates and market multiples, in subsequent periods, we could record additional
impairment charges for the goodwill of such reporting units.
Risks relating to our financial condition and liquidity. During the third quarter of 2020, we undertook the
exchange offers as previously announced in order to reduce our overall indebtedness and extend the
weighted average maturity of our indebtedness. However, we continue to have a substantial level of
indebtedness. We expect rely on cash on hand, cash generated by operations and borrowings available
under our New ABL Facility to meet our working capital needs. However, if the duration of the COVID-
19 outbreak continues longer than we expect or the severity worsens, we may need to access other
sources of financing, including incurring additional indebtedness, selling our assets and raising additional
equity capital. These alternatives may not be available to us on satisfactory terms or at all, which could
have a material adverse effect on our business.
The full extent to which COVID-19 and the measures to contain it will impact our business, operations financial
condition and liquidity will depend on the severity and duration of the COVID-19 outbreak and other future
developments related to the response to the virus, all of which are highly uncertain and we expect this uncertainty to
continue in 2021. As a result, we cannot predict the ultimate impact of COVID-19 on the Company and its
operational and financial performance. Our results of operations may be affected by the uncertainty surrounding the
impact of the COVID-19 pandemic, and we will continue to actively monitor the impact of the COVID-19 pandemic
on expected losses.
We face risks related to our balloon business including our use of helium gas and changes in consumer
preferences.
Balloons are a focal point of our growth strategy and are a key driver of our differentiated brand experience.
The ongoing success of our balloon business may be affected by a number of factors. For example, some state and
local governments have implemented or considered implementing rules, ordinances or regulations governing the
sale of metallic balloons. As part of our balloon business, Anagram designs, manufactures and markets foil balloons.
If widespread adoption of such rules, ordinances or regulations significantly restricts or discourages the sale of
metallic balloons, it would have a material adverse effect on our business, results of operations, and financial
condition, including those of Anagram.
In addition, helium gas is currently used to inflate the majority of our metallic balloons and a portion of our
latex balloons. Helium shortages and pricing can adversely impact the financial performance of our retail and
wholesale operations.
12
Changing consumer preferences, whether we are able to anticipate, identify and respond to them or not, could
adversely impact our sales. Inventory levels for certain balloon styles no longer considered to be “on trend” may
increase, leading to higher markdowns to sell through excess inventory and, therefore, lower than planned margins.
Conversely, if we underestimate consumer demand for our balloons, or if we fail to supply quality products in a
timely manner, we may experience inventory shortages, which may negatively impact customer relationships,
diminish brand loyalty and result in lost sales.
We operate in a competitive industry, and our failure to compete effectively could cause us to lose our market
share, revenues and growth prospects.
Our wholesale segment competes with many other manufacturers and distributors, including smaller,
independent manufacturers and distributors and divisions or subsidiaries of larger companies with greater financial
and other resources than we have. Some of our competitors control licenses for widely recognized images and have
broader access to mass market retailers that could provide them with a competitive advantage.
The party goods retail industry is large and highly fragmented. Our retail stores compete with a variety of
smaller and larger retailers including, but not limited to, independent party goods supply stores, specialty stores,
warehouse/merchandise clubs, drug stores, dollar stores, mass merchants and e-commerce merchants. We face
competition from internet-based retailers in addition to store-based retailers. These internet-based retailers may have
a significant collective online presence and may be able to offer similar products to those that we sell, which may
result in increased price competition. We compete, among other ways, on the basis of product mix and availability,
customer convenience, quality, price and, with respect to our retail stores, location and store layout. We may not be
able to continue to compete successfully against existing or future competitors in the retail space. Expansion into
markets served by our competitors and entry of new competitors or expansion of existing competitors into our
markets could materially adversely affect our business, results of operations, cash flows and financial performance.
We must remain competitive in the areas of quality, price, breadth of selection, customer service and
convenience. Competing effectively may require us to reduce our prices or increase our costs, which could lower our
margins and adversely affect our revenues and growth prospects.
Because we rely heavily on our own manufacturing operations and those of our suppliers, disruptions at
manufacturing facilities could adversely affect our business, results of operations, cash flows and financial
performance.
Any significant disruption in manufacturing facilities, in the United States or abroad, for any reason, including
regulatory requirements, unstable labor relations, public health crises, including the occurrence of a contagious
disease or illness, such as the flu or COVID-19, the loss of certifications, power interruptions, fires, hurricanes, war
or other forces of nature, could disrupt our supply of products, adversely affecting our business, results of
operations, cash flows and financial performance. For example, the recent spread of the COVID-19 and related
quarantines and work and travel restrictions in China and other countries has disrupted, and may continue to disrupt,
production for certain of our suppliers and our own manufacturing operations, and the extent to which these events
will affect our results of operations and financial position remains uncertain. The occurrence of one or more natural
disasters, or other disruptive geo-political events, could also result in increases in fuel (or other energy) prices or a
fuel shortage, the temporary or permanent closure of one or more of manufacturing or distribution centers, the
temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of
products from some local and overseas suppliers, the temporary disruption in the transport of goods from overseas
or delays in the delivery of goods to our distribution centers or stores or to third parties who purchase from us. If one
or more of these events occurred, our revenues and profitability would be reduced.
13
A change in our competitive environment, including a decrease in our Halloween sales, could have a material
adverse effect on our operating results for the year.
Our retail business currently realizes a significant portion of its revenues, net income and cash flows in
September and October, principally due to Halloween sales. We have also seen an increased demand in some of our
other products, such as balloons. Any unanticipated decrease in demand for our products could require us to
maintain excess inventory or sell excess inventory at substantial markdowns, which could have a material adverse
effect on our business, profitability, ability to repay any indebtedness and our brand image. Failure to have proper
lease space and adequate personnel could hurt our business, financial conditions and results of operations. In
addition, our competitors could divert our sales during the Halloween season or if we are unable to hire qualified
temporary personnel to adequately staff our stores and our distribution facility during the Halloween season,
whether due to labor market conditions or a failure in our internal recruiting and staffing processes or otherwise.
Our failure to appropriately respond to changing merchandise trends and consumer preferences could
significantly harm our customer relationships and financial performance.
As a manufacturer, distributor and retailer of consumer goods, our products must appeal to a broad range of
consumers whose preferences are constantly changing. We also sell certain licensed products, with images such as
cartoon or motion picture characters, which are in great demand for short time periods, making it difficult to project
our inventory needs for these products. In addition, we may not be able to obtain the licenses for certain popular
characters and could lose market share to competitors who are able to obtain those licenses. Additionally, if
consumers’ demand for single-use, disposable party goods were to diminish in favor of reusable products for
environmental or other reasons, our sales could decline.
The success of our business depends upon many factors, such as our ability to accurately predict the market
for our products and our customers’ purchasing habits, to identify product and merchandise trends, to innovate and
develop new products, to manufacture and deliver our products in sufficient volumes and in a timely manner and to
differentiate our product offerings from those of our competitors. We may not be able to continue to offer
assortments of products that appeal to our customers or respond appropriately to consumer demands. We could
misinterpret or fail to identify trends on a timely basis. Our failure to anticipate, identify or react appropriately to
changes in consumer tastes could, among other things, lead to excess inventories and significant markdowns or a
shortage of products and lost sales. Our failure to do so could harm our customer relationships and financial
performance.
Our business may be adversely affected by material fluctuations in commodity prices.
The costs of our key raw materials (paper, petroleum-based resin and cotton) fluctuate. In general, we absorb
movements in raw material costs that we consider temporary or insignificant. However, cost increases that are
considered other than temporary may require us to increase our prices to maintain our margins. Raw material prices
may increase in the future and we may not be able to pass on these increases to our customers. A significant increase
in the price of raw materials that we cannot pass on to customers could have a material adverse effect on our results
of operations and financial performance. In addition, the interruption in supply of certain key raw materials essential
to the manufacturing of our products may have an adverse impact on our and our suppliers’ abilities to manufacture
the products necessary to maintain our existing customer relationships. As a result, significant changes in
commodity prices, foreign currency exchange rates, the imposition of tariffs on imported products or interest rates,
and effects from public health crises, including the occurrence of a contagious disease or illness, such as COVID-19,
could have a substantial adverse effect on our financial condition or results of operations.
We may not be able to successfully implement our growth strategy.
Our ability to increase our sales depends on many factors including, among others, our ability to:
Develop a more-relevant in-store experience;
Win in balloons;
Address price value perception in key categories;
14
Improve our customer engagement selling culture, including our in-store customer engagement;
Build on our omni-channel platform; and
Continue to grow our wholesale business.
Implement new retail programs that could include but are not limited to loyalty rewards, new formats for
existing stores, fewer skus and less inventory;
Obtain or maintain adequate capital resources on acceptable terms;
Manufacture and source sufficient levels of inventory at acceptable costs;
Hire, train and retain an expanded workforce of store managers and other store-level personnel, many of
whom are in entry-level or part-time positions with historically high rates of turnover;
Successfully integrate new stores/e-commerce operations into our existing control structure and
operations, including information system integration;
Maintain adequate manufacturing and distribution facilities, information system and other operational
system capabilities;
Identify and satisfy the merchandise and other preferences of our customers; and
Gain brand recognition and acceptance in new markets.
Unexpected or unfavorable consumer responses to our promotional or merchandising programs could materially
adversely affect our business, results of operations, cash flows and financial performance.
Brand recognition, quality and price have a significant influence on consumers’ choices among competing
products and brands. Advertising, promotion, merchandising and the cadence of new product introductions also have
a significant impact on consumers’ buying decisions. If we misjudge consumer responses to our existing or future
promotional activities, this could have a material adverse impact on our business, results of operations, cash flow
and financial performance.
Our marketing programs, e-commerce initiatives and use of consumer information are governed by an evolving
set of laws and enforcement trends and unfavorable changes in those laws or trends, or our failure to comply
with existing or future laws, could substantially harm our business and results of operations.
We collect, maintain and use data provided to us through our online activities and other customer interactions
in our business. Our current and future marketing programs depend on our ability to collect, maintain and use this
information, and our ability to do so is subject to certain contractual restrictions in third-party contracts as well as
evolving international, federal and state laws and enforcement trends. We strive to comply with all applicable laws
and other legal obligations relating to privacy, data protection and consumer protection, including those relating to
the use of data for marketing purposes. It is possible, however, that these requirements may be interpreted and
applied in a manner that is inconsistent from one jurisdiction to another, may conflict with other rules or may
conflict with our practices. If so, we may suffer damage to our reputation and be subject to proceedings or actions
against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to
spend significant amounts to defend our practices, distract our management, increase our costs of doing business and
result in monetary liability.
In addition, as data privacy and marketing laws change, we may incur additional costs to ensure we remain in
compliance with such laws. If applicable data privacy and marketing laws become more restrictive at the federal or
state level, our compliance costs may increase, our ability to effectively engage customers via personalized
marketing may decrease, our investment in our e-commerce platform may not be fully realized, our opportunities for
growth may be curtailed by our compliance capabilities or reputational harm and our potential liability for security
breaches may increase.
15
For example, in 2018 California enacted the California Consumer Privacy Act (“CCPA”), which broadly
regulates the sale of the consumer information of California residents and grants California residents certain rights
to, among other things, access and delete data about them in certain circumstances. CCPA went into effect on
January 1, 2020, and compliance with the CCPA may increase the cost to us of operating in California. Other states
are considering similar proposals. Such attempts by the states to regulate have the potential to create a patchwork of
differing and/or conflicting state regulations.
Disruption to the transportation system or increases in transportation costs may negatively affect our operating
results.
We rely upon various means of transportation, including shipments by air, sea, rail and truck, to deliver
products to our distribution centers from vendors and manufacturers and from other distribution centers to our
stores, as well as for direct shipments from vendors to stores and sales to third-party customers. Independent third
parties with whom we conduct business may employ personnel represented by labor unions. Labor stoppages,
shortages or capacity constraints in the transportation industry, disruptions to the national and international
transportation infrastructure, public health crises, fuel shortages or transportation cost increases could adversely
affect our business, results of operations, cash flows and financial performance. In particular, if the current COVID-
19 outbreak continues and results in a prolonged period of travel restrictions, we could experience global supply
disruptions. If we experience supply disruptions, we may not be able to develop alternate sourcing quickly, which
could adversely affect our operations.
Product recalls and/or product liability may adversely impact our business, merchandise offerings, reputation,
results of operations, cash flow and financial performance.
We may be subject to product recalls if any of the products that we manufacture or sell are believed to cause
injury or illness. In addition, as a retailer of products manufactured by third parties, we may also be liable for
various product liability claims for products we do not manufacture. Indemnification provisions that we may enter
into are typically limited by their terms and depend on the creditworthiness of the indemnifying party and its insurer
and the absence of significant defenses. We may be unable to obtain full recovery from the insurer or any
indemnifying third party in respect of any claims against us in connection with products manufactured by such third
party. In addition, if our vendors fail to manufacture or import merchandise that adheres to our quality control
standards or standards established by applicable law, our reputation and brands could be damaged, potentially
leading to an increase in customer litigation against us. Furthermore, to the extent we are unable to replace any
recalled products, we may have to reduce our merchandise offerings, resulting in a decrease in sales, especially if a
recall occurs near or during a peak seasonal period. If our vendors are unable or unwilling to recall products failing
to meet our quality standards, we may be required to recall those products at a substantial cost to us.
Our business is sensitive to consumer spending and general economic conditions, and other factors beyond our
control, including adverse weather conditions or the outbreak of disease, and an economic slowdown could
adversely affect our financial performance
In general, our retail sales, and the retail sales of our business partners to whom we sell, represent
discretionary spending by our customers and our business partners’ customers. Discretionary spending is affected by
many factors, such as general business conditions, interest rates, availability of consumer credit, unemployment
levels, taxation, weather, hurricanes, public health crises, including the occurrence of a contagious disease or illness,
such as the flu or COVID-19, and consumer confidence in future economic conditions. Our customers’ purchases
and our business partners’ customers’ purchases of discretionary items, including our products, often decline during
periods when disposable income is lower or during periods of actual or perceived unfavorable economic conditions
or as a result of geopolitical events or widespread health emergencies. Geopolitical events, such as the threat of
terrorism or cyber-attacks, and widespread health emergencies, such as COVID-19 or other pandemics or epidemics,
could cause people to avoid our stores or decide not to host or attend gatherings or other events. If this occurs, our
revenues and profitability will decline. In addition, economic downturns may make it difficult for us to accurately
forecast future demand trends, which could cause us to purchase excess inventories, resulting in increases in our
inventory carrying cost, or insufficient inventories, resulting in our inability to satisfy our customer demand and
potential loss of market share.
16
Our business may be adversely affected by the loss or actions of our third-party vendors.
Our ability to find new qualified vendors who meet our standards and supply products in a timely and efficient
manner can be a significant challenge, especially for goods sourced from outside the United States. Many of our
vendors currently provide us with incentives such as volume purchasing allowances and trade discounts. If our
vendors were to reduce or discontinue these incentives, costs would increase. Should we be unable to pass cost
increases to consumers, our profitability would be reduced.
Our business and results of operations may be harmed if our suppliers or third-party manufacturers fail to follow
acceptable labor practices or to comply with other applicable laws and guidelines.
Many of the products sold in our stores and on our websites are manufactured outside of the United States,
which may increase the risk that the labor, manufacturing safety and other practices followed by the manufacturers
of these products may differ from those generally accepted in the United States as well as those with which we are
required to comply under many of our image or character licenses. Although we require each of our vendors to sign
a purchase order and vendor agreement that requires adherence to accepted labor practices and compliance with
labor, manufacturing safety and other laws and we test merchandise for product safety standards, we do not
supervise, control or audit our vendors or the manufacturers that produce the merchandise we sell to our customers.
The violation of labor, manufacturing safety or other laws by any of our vendors or manufacturers, or the divergence
of the labor practices followed by any of our vendors or manufacturers from those generally accepted in the United
States could interrupt or otherwise disrupt the shipment of finished products to us, damage our brand image, subject
us to boycotts by our customers or activist groups or cause some of our licensors of popular images to terminate
their licenses to us. Our future operations and performance will be subject to these factors, which are beyond our
control and could materially hurt our business, financial condition and results of operations or require us to modify
our current business practices or incur increased costs.
Changes in regulations or enforcement, or our failure to comply with existing or future regulations, may
adversely impact our business.
We are subject to federal, state and local regulations with respect to our operations in the United States.
Additionally, we are subject to regulations in the foreign countries in which we operate and such regulations are
increasingly distinct from those in the United States. Further, we may be subject to greater international regulation if
we expand our business internationally. There are a number of legislative and regulatory initiatives that could
adversely impact our business if they are enacted or enforced. Those initiatives include increased or new tariffs on
imported products, wage or workforce issues (such as minimum-wage requirements, overtime and other working
conditions and citizenship requirements), collective bargaining matters, environmental regulation, price and
promotion regulation, trade regulations, data and privacy protection and others.
Proposed changes in tax regulations may also change our effective tax rate as our business is subject to a
combination of applicable tax rates in the various countries, states and other jurisdictions in which we operate. New
accounting pronouncements and interpretations of existing accounting rules and practices have occurred and may
occur in the future. A change in accounting standards or practices can have a significant effect on our reported
results of operations. Failure to comply with legal requirements could result in, among other things, increased
litigation risk that could affect us adversely by subjecting us to significant monetary damages and other remedies or
by increasing our litigation expenses, administrative enforcement actions, fines and civil and criminal liability. If
such issues become more expensive to address, or if new issues arise, they could increase our expenses, generate
negative publicity, or otherwise adversely affect us.
Certain aspects of recent U.S. federal income tax reform could negatively affect us.
The Tax Cuts and Jobs Act of 2017 (the “TCJA”) resulted in an overall benefit to us because it reduced our
marginal U.S. federal income rate to 21% and generally allowed us to immediately deduct 100% of the cost of
tangible, depreciable property that we acquire and place into service on or before January 1, 2023 for federal income
tax purposes. President Biden has proposed raising the highest U.S. federal income tax rate applicable to
corporations to 28%. If this proposal were enacted into law, the benefit to us from the TCJA’s reduction in our
marginal U.S. federal income tax rate to 21% would be reversed in part.
17
Certain aspects of the TCJA, however, could negatively affect us. For example, under the TCJA, we generally
cannot deduct our business interest expense to the extent that it exceeds 30% of our Adjusted Taxable Income
through our 2021 tax year or 30% of our EBIT thereafter. However, any such non-deductible interest is available for
an indefinite carryforward.
Additionally, under the TCJA, we became subject to a tax on global intangible low-taxed income (“GILTI”).
President Biden has proposed doubling the U.S. federal income tax rate on GILTI. Under the TCJA, we are required
to pay a one-time transition tax on the previously untaxed deferred foreign earnings that our foreign subsidiaries
have accrued since 1986 at a rate of 15.5% for cash and cash-equivalent profits and 8% on other reinvested foreign
earnings (the “Transition Tax”). We elected to pay and are paying this Transition Tax over eight annual installments
without interest.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (“the CARES Act”)
was signed into law. The CARES Act is a $2 trillion legislative package intended to provide economic relief to
companies impacted by the COVID-19 pandemic, and it enacted a number of Internal Revenue Code modifications
which are of particular benefit to us, including: (1) 5-year net operating loss carryback, (2) temporary relaxation of
the limitation on interest deductions by raising for 2019 and 2020 the business interest expense limitation from 30%
to 50% of our Adjusted Taxable Income, and by allowing for the option to use the higher 2019 Adjusted Taxable
Income to compute the 2020 limitation, (3) qualified improvement property eligible for 100% bonus depreciation,
(4) employee retention tax credits, and (5) the deferral of the payment of most of the employer share of social
security payroll tax incurred in 2020 until 2021 (50%) and 2022 (50%).
Our international operations subject us to additional risks, which risks and related costs may differ in each
country in which we do business and may cause our profitability to decline.
We source certain products in a number of foreign countries, including contracting with manufacturers and
suppliers located outside of the United States, many of which are located in Asia. Our operations and financial
condition may be adversely affected if the markets in which we compete or source our products are affected by
changes in political, economic or other factors. These factors, over which we have no control, may include:
Recessionary or expansive trends in international markets;
Changes in foreign currency exchange rates, principally fluctuations in the British Pound Sterling, the
Canadian Dollar, the Euro, the Malaysian Ringgit, the Mexican Peso and the Australian Dollar;
Hyperinflation or deflation in the foreign countries in which we operate;
Work stoppages or other employee rights issues;
The imposition of restrictions on currency conversion or the transfer of funds;
Transportation delays and interruptions;
Increases in the taxes we pay and other changes in applicable tax laws;
Difficulty enforcing our intellectual property and competition against counterfeit goods;
Public health crises, including the occurrence of a contagious disease or illness such as the COVID-19
outbreak;
18
Legal and regulatory changes and the burdens and costs of our compliance with a variety of laws,
including new or additional trade restrictions, tariffs and changes in environmental regulations; and
political and economic instability.
International trade disputes and the U.S. government’s trade policy could adversely affect our business.
International trade disputes could result in tariffs and other protectionist measures that could adversely affect
our business. Tariffs could increase the cost of our products and the components and raw materials that go into
making them and could further increase the costs of importing or exporting products from one jurisdiction into
another. These increased costs could adversely impact the gross margin that we earn on our products. Countries may
also adopt other protectionist measures that could limit our ability to offer our products and services, including, but
not limited to, tariffs on China and China’s retaliatory tariffs on certain products from the U.S. Political uncertainty
surrounding international trade disputes and protectionist measures could also have a negative effect on consumer
confidence and spending, which could adversely affect our business.
To the extent that significant additional tariffs are imposed, depending on the extent of such tariffs, they could
have a material impact on our operating results in the future.
In response to the U.S. government’s actions, certain foreign governments have imposed retaliatory tariffs on
goods that their countries import from the United States. Changes in U.S. trade policy could result in one or more
foreign governments adopting responsive trade policies that, depending on the scope of the policies, could make it
more difficult or costly for us to do business in those countries.
We cannot predict the extent to which the United States or other countries will impose quotas, duties, tariffs,
taxes or other similar restrictions upon the import or export of our products in the future, nor can we predict future
trade policy or the terms of any renegotiated trade agreements and their impact on our business. The adoption and
expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade
agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our
suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, operating
results and financial condition.
We may face risks associated with litigation and claims.
From time to time, we may become involved in other legal proceedings relating to the conduct of our
business, including but not limited to, employee-related and consumer matters. Additionally, as a retailer and
manufacturer of decorated party goods, we have been and may continue to be subject to product liability claims if
the use of our products, whether manufactured by us or third party manufacturers, is alleged to have resulted in
injury or if our products include inadequate instructions or warnings. Such matters can be time-consuming, divert
management’s attention and resources and cause us to incur significant expenses. Due to the uncertainties of
litigation, we can give no assurance that we will prevail on all claims made against us in the lawsuits that we
currently face or that additional claims will not be made against us in the future. Furthermore, because litigation is
inherently uncertain, there can be no assurance that the results of any of these actions will not have a material
adverse effect on our business, results of operations or financial condition.
We may require additional capital to fund our business, which may not be available to us on satisfactory terms or
at all.
We currently rely on cash generated by operations and borrowings available under the credit facilities to meet
our working capital needs. However, if we are unable to generate sufficient cash from operations or if borrowings
available under the credit facilities are insufficient, we may be required to adopt one or more alternatives to raise
cash, such as incurring additional indebtedness, selling our assets, seeking to raise additional equity capital or
restructuring, which alternatives may not be available to us on satisfactory terms or at all. Any of the foregoing
could have a material adverse effect on our business.
19
Our success depends, in large part, on our senior management team.
The success of our business depends, to a large extent, on the continued service of our senior management
team and the ability to integrate new senior management. We may not be able to adequately mitigate the negative
impact on our business and competitive position that a change of senior leadership could have, as we may not be
able to find management personnel internally or externally with similar experience and industry knowledge to
replace the individual on a timely basis. We do not maintain key life insurance on any of our senior officers.
Our supply of qualified personnel and our labor costs depend in part on factors outside of our control.
As our business expands, we believe that our future success will depend greatly on our continued ability to
attract, motivate and retain qualified personnel who are able to successfully meet the needs of our business.
Although we generally have been able to meet our staffing requirements in the past, our ability to meet our labor
needs while controlling costs is subject to external factors, such as unemployment levels, labor market conditions,
minimum wage legislation and changing demographics. Recently, various legislative movements have sought to
increase the federal minimum wage in the United States, as well as the minimum wage in a number of individual
states. As federal or state minimum wage rates increase, we may need to increase not only the wage rates of our
minimum wage employees, but also the wages paid to our other hourly employees as well. Our inability to meet our
staffing requirements in the future at costs that are favorable to us, or at all, could impair our ability to increase
revenue, and our customers could experience lower levels of customer service.
We are subject to risks associated with leasing substantial amounts of space.
We lease all of our company-owned stores, our corporate headquarters and most of our distribution facilities.
Payments under our leases account for a significant portion of our operating expenses and we expect payment
obligations under our leases to account for a significant portion of our future operating expenses. The majority of
our store leases contain provisions for base rent and a small number of store leases contain provisions for base rent,
plus percentage rent based on sales in excess of an agreed upon minimum annual sales level. Our continued growth
and success depends in part on our ability to renew leases for successful stores and negotiate leases for new stores,
including temporary leases for our Halloween City stores. There is no assurance that we will be able to negotiate
leases at similar or favorable terms, and we may decide not to enter a market or be forced to exit a market if a
favorable arrangement cannot be made. If an existing or future store is not profitable and we decide to close it, we
may nonetheless be committed to perform our obligations under the applicable lease, including, among other things,
paying the base rent for the balance of the lease term. Moreover, even if a lease has an early cancellation clause, we
may not satisfy the contractual requirements for early cancellation under the lease.
Our business could be harmed if our existing franchisees do not conduct their business in accordance with
agreed upon standards.
Our success depends, in part, upon the ability of our franchisees to operate their stores and promote and
develop our store concept. Although our franchise agreements include certain operating standards, all franchisees
operate independently and their employees are not our employees. We provide certain training and support to our
franchisees, but the quality of franchise store operations may be diminished by any number of factors beyond our
control. Consequently, franchisees may not successfully operate stores in a manner consistent with our standards and
requirements, or may not hire and train qualified managers and other store personnel. If they do not, our image,
brand and reputation could suffer.
Our information systems, order fulfillment and distribution facilities may prove inadequate or may be disrupted.
We depend on our management information systems for many aspects of our business. We will be materially
adversely affected if our management information systems are disrupted or we are unable to improve, upgrade,
maintain and expand our systems. In particular, we believe our perpetual inventory, automated replenishment and
stock ledger systems are necessary to properly forecast, manage and analyze our inventory levels, margins and
merchandise ordering quantities. We may fail to properly optimize the effectiveness of these systems, or to
adequately support and maintain the systems. Moreover, we may not be successful in developing or acquiring
technology that is competitive and responsive to our customers and might lack sufficient resources to make the
necessary investments in technology needs and to compete with our competitors, which could have a material
adverse impact on our business, results of operations, cash flows and financial performance.
20
In addition, we may not be able to prevent a significant interruption in the operation of our electronic order
entry and information systems, e-commerce platforms or manufacturing and distribution facilities due to natural
disasters, accidents, systems failures or other events. Any significant interruption in the operation of these facilities,
including an interruption caused by our failure to successfully expand or upgrade our systems or manage our
transition to utilizing the expansions or upgrades, could reduce our ability to receive and process orders and provide
products and services to our stores, third-party stores, and other customers, which could result in lost sales, cancelled
sales and a loss of loyalty to our brand.
Historically we have had merger, acquisition, investment and divestiture (M&A) activity, and we may have
similar M&A activity in the future as part of our growth strategy. Future M&A activity could disrupt our ongoing
business, distract management and employees, increase our expenses and adversely affect our business. In
addition, we may not be able to identify suitable acquisition, merger or investment candidates.
Should future M&A activity occur, this requires significant capital resources and can divert management’s
attention from our existing business. This also entails an inherent risk that we could become subject to contingent or
other liabilities, including liabilities arising from events or conduct predating the activity, that were not known to us
at the time of the transaction. We may also incur significantly greater expenditures in integrating an acquired
business or investment or divesting a business than we had anticipated at the time, which could impair our ability to
achieve anticipated cost savings and synergies. M&A activity may also have unanticipated tax and accounting
ramifications. Furthermore, this might consume a significant portion of our senior management team’s time and
efforts with issues unrelated to advancing our core business strategies and operation issues. Our failure to
successfully identify and consummate, manage M&A activity could have a material adverse effect on our business,
financial condition or results of operations.
In addition, we may not be able to:
Identify suitable acquisition, merger or investment candidates
Consummate M&A activity on acceptable terms
Successfully integrate any acquired business into our operations or successfully manage the operations of
any acquired business, or
Retain an acquired company’s significant customer relationships, goodwill and key personnel or
otherwise realize the intended benefits of an acquisition.
In the event that the operations of an acquired business or investment do not meet our performance
expectations, we have in the past and may in the future restructure the acquired business or write-off the value of
some or all of the assets of the acquired business or investment.
Risks Related to Our Intellectual Property
Our intellectual property rights may be inadequate to protect our business.
We hold a variety of United States trademarks, service marks, patents, copyrights, and registrations and
applications therefor, as well as a number of foreign counterparts thereto and/or independent foreign intellectual
property asset registrations. In some cases, we rely solely on unregistered common law trademark rights and
unregistered copyrights under applicable United States law to distinguish and/or protect our products, services and
branding from the products, services and branding of our competitors. We cannot assure you that no one will
challenge our intellectual property rights in the future. In the event that our intellectual property rights are
successfully challenged by a third party, we could be forced to re-brand, re-design or discontinue the sale of certain
of our products or services, which could result in loss of brand recognition and/or sales and could require us to
devote resources to advertising and marketing new branding or re-designing our products. Further, we cannot assure
you that competitors will not infringe our intellectual property rights, or that we will have adequate resources to
enforce these rights. We also permit our franchisees to use a number of our trademarks and service marks, including
Party City, The Discount Party Super Store, Nobody Has More Party for Less, Party America and Halloween City.
Our failure to properly control our franchisees’ use of such trademarks could adversely affect our ability to enforce
21
them against third parties. A loss of any of our material intellectual property rights could have a material adverse
effect on our business, financial condition, and results of operations.
We license from many third parties and do not own the intellectual property rights necessary to sell products
capturing many popular images, such as cartoon or motion picture characters. While none of these licenses is
individually material to our aggregate business, a large portion of our business depends on the continued ability to
license the intellectual property rights to these images in the aggregate and on the marketplace demand for these
licensed properties, which could in turn lead to a decrease in licensed costume sales. Any injury to our reputation or
our inability to comply with, in many cases, stringent licensing guidelines in these agreements may adversely affect
our ability to maintain these relationships. A termination of any of our significant intellectual property licenses, or
any other similarly material limitation on our ability to use certain licensed material may prevent us from
manufacturing and distributing certain licensed products and could cause our customers to purchase these products
from our competitors. In addition, we may be unable to renew some of our significant intellectual property licenses
on terms favorable to us or at all. A large aggregate loss of our right to use intellectual property under our license
agreements, or significant reduction in demand for product bearing the intellectual property of third parties, could
have a material adverse effect on our business, financial condition and results of operations.
We also face the risk of claims that we have infringed third parties’ intellectual property rights, which could
be expensive and time consuming to defend, cause us to cease using certain intellectual property rights, redesign
certain products or packaging or cease selling certain products or services, result in our being required to pay
significant damages or require us to enter into costly royalty or licensing agreements in order to obtain the rights to
use third parties’ intellectual property rights, which royalty or licensing agreements may not be available at all, any
of which could have a negative impact on our operating profits and harm our future prospects.
Risks Related to Our Indebtedness
Our substantial indebtedness and lease obligations could adversely affect our financial flexibility and our
competitive position.
As of December 31, 2020, we had total indebtedness of $1,519.1 million, net of deferred financing costs,
capitalized call premiums and original issue discounts. Additionally, we had $176.5 million of borrowing capacity
available under our asset-based revolving credit facility (“ABL Facility”).
As of December 31, 2020, we had outstanding approximately $355.9 million in aggregate principal amount of
indebtedness under the Senior Credit Facilities, net of deferred financing costs, capitalized call premiums and
original issue discounts. Such indebtedness bears interest at a floating rate.
We also have, and will continue to have, significant lease obligations. As of December 31, 2020, our
minimum aggregate rental obligation under operating leases for fiscal 2021 through 2025 totaled $816.6 million. See
Note 26 to the consolidated financial statements in Item 8 for further discussion.
Our substantial level of indebtedness increases the possibility that we may be unable to generate cash
sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness. For
example, it could:
Make it more difficult for us to satisfy our obligations with respect to our indebtedness and any failure to
comply with the obligations under any of our debt instruments, including restrictive covenants, could
result in an event of default under the agreements governing such other indebtedness;
Require us to dedicate a substantial portion of our cash flow from operations to payments on our
indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions,
selling and marketing efforts, product development and other purposes;
Increase our vulnerability to adverse economic and industry conditions, which could place us at a
competitive disadvantage compared to our competitors that have relatively less indebtedness;
Limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we
operate;
22
Expose us to the risk of increasing rates as certain of our borrowings, including under the Senior Credit
Facilities, will be at variable interest rates;
Restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; and
Limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working
capital, capital expenditures, acquisitions, product development and other corporate purposes.
The occurrence of any one of these events could have an adverse effect on our business, financial condition,
results of operations, prospects and ability to satisfy our obligations under our indebtedness.
Restrictions under our existing and future indebtedness may prevent us from taking actions that we believe would
be in the best interest of our business.
The agreements governing our existing indebtedness contain and the agreements governing our future
indebtedness will likely contain customary restrictions on us or our subsidiaries, including covenants that, among
other things and subject to certain exceptions, restrict us or our subsidiaries, as the case may be, from:
Incurring additional indebtedness or issuing disqualified stock;
Paying dividends or distributions on, redeeming, repurchasing or retiring our capital stock;
Making payments on, or redeeming, repurchasing or retiring indebtedness;
Making investments, loans, advances or acquisitions;
Entering into sale and leaseback transactions;
Engaging in transactions with affiliates;
Creating liens;
Transferring or selling assets;
Guaranteeing indebtedness;
Creating restrictions on the payment of dividends or other amounts to us from our subsidiaries; and
Consolidating, merging or transferring all or substantially all of our assets and the assets of our
subsidiaries.
In addition, the ABL Facility requires us to comply, under specific circumstances, including certain types of
acquisitions, with a minimum fixed charge coverage ratio covenant of 1.00 to 1.00. Our ability to comply with this
covenant can be affected by events beyond our control and we may not be able to satisfy them. A breach of this
covenant would be an event of default. If an event of a default occurs under the ABL Facility, the ABL Facility
lenders could elect to declare all amounts outstanding under the ABL Facility to be immediately due and payable or
terminate their commitments to lend additional money, which would also lead to an event of default under the senior
secured term loan facility (“the Term Loan Credit Agreement”) and would lead to an event of default under our
senior notes if any of the Senior Credit Facilities were accelerated. If the indebtedness under the Senior Credit
Facilities or our other indebtedness were to be accelerated, our assets may not be sufficient to repay such
indebtedness in full. We have pledged a significant portion of our assets as collateral under the Senior Credit
Facilities.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other
actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial
condition and operating performance, which is subject to prevailing economic and competitive conditions and to
certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash
flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our
indebtedness.
23
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced
to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or
refinance our indebtedness. Our ability to restructure or refinance our debt will depend on the condition of the
capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates
and may require us to comply with more onerous covenants, which could further restrict our business operations.
The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In
addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis
would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness.
In the absence of such operating results and resources, we could face substantial liquidity problems and might be
required to dispose of material assets or operations to meet our debt service and other obligations. The Senior Credit
Facilities and the indentures governing the senior notes restrict our ability to dispose of assets and use the proceeds
from the disposition. We may not be able to consummate those dispositions or obtain the proceeds that we could
realize from them and the proceeds may not be adequate to meet any debt service obligations then due. These
alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.
Our ability to repay our debt is affected by the cash flow generated by our subsidiaries.
Our subsidiaries own substantially all of our assets and conduct substantially all of our operations.
Accordingly, repayment of our indebtedness will be dependent on the generation of cash flow by our subsidiaries
and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Our subsidiaries may
not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our
indebtedness. Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual
restrictions may limit our ability to obtain cash from our subsidiaries. While the indentures governing the senior
notes limit the ability of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make
other intercompany payments to us, these limitations are subject to certain qualifications and exceptions.
In addition, under certain circumstances, legal restrictions may limit our ability to obtain cash from our
subsidiaries. Under the Delaware General Corporation Law (the “DGCL”), our subsidiaries organized in the State of
Delaware may only make dividends (i) out of their “surplus” as defined in the DGCL or (ii) if there is no such
surplus, out of their net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.
Under fraudulent transfer laws, certain of our subsidiaries may not pay dividends if the relevant entity is insolvent or
is rendered insolvent thereby. The measures of insolvency for purposes of these fraudulent transfer laws vary
depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred.
Generally, however, an entity would be considered insolvent if:
the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its
assets;
the present fair saleable value of its assets was less than the amount that would be required to pay its
probable liability on its existing debts, including contingent liabilities, as they become absolute and
mature; or
it could not pay its debts as they became due.
While we believe that we and our relevant subsidiaries currently have surplus and are not insolvent, there can
otherwise be no assurance that we and these subsidiaries will not become insolvent or will be permitted to make
dividends in the future in compliance with these restrictions in amounts needed to service our indebtedness.
Our unrestricted subsidiaries under the Term Loan Credit Agreement, the ABL Facility credit agreement and the
indenture governing the First Lien Party City Notes are not subject to any of the covenants under such
agreements and do not guarantee the Term Loan Credit Agreement, the ABL Facility and the First Lien Party
City Notes, and we may not be able to rely on the cash flow or assets of those unrestricted subsidiaries to pay
certain of our debt, including the Term Loan Credit Agreement, the ABL Facility and the First Lien Party City
Notes.
Our unrestricted subsidiaries under the Term Loan Credit Agreement, the ABL Facility credit agreement
and the indenture governing the Senior Secured First Lien Floating Rate Notes due 2025 (the “First Lien Party City
24
Notes”) are not subject to the covenants under such agreements and do not guarantee or pledge assets to secure the
Term Loan Credit Agreement, the ABL Facility and the First Lien Party City Notes or any future indebtedness not
incurred by such unrestricted subsidiaries. As of the date of this report on Form 10-K, Anagram Holdings and
Anagram International (together, the “Anagram Issuers”) and their subsidiaries were unrestricted subsidiaries.
Subject to compliance with the covenants contained in the Term Loan Credit Agreement, the ABL Facility credit
agreement and the indenture governing the First Lien Party City Notes, we will be permitted to designate further
subsidiaries as unrestricted subsidiaries. The creditors of the Anagram Issuers and their subsidiaries, including under
the 15.00% PIK/Cash Senior Securred First Lien Notes due 2025 (the “First Lien Anagram Notes”) and the “10.00%
PIK/Cash Senior Secured Sec and Lien Notes due 2026 (the “Second Lien Anagram Notes”) will generally be
entitled to payment of their claims from the assets of the Anagram Issuers and their subsidiaries before those assets
would be available for distribution to us. In addition, the indentures governing the First Lien Anagram Notes and the
Second Lien Anagram Notes limit the Anagram Issuers and their subsidiaries’ ability to make loans or other
payments to fund payments in respect of the Term Loan Credit Agreement, the ABL Facility and the First Lien
Party City Notes and the indenture governing the First Lien Anagram Notes requires the maintenance of certain
minimum liquidity. As a result, the cash flow or assets of the Anagram Issuers and their subsidiaries may not be
available to pay any of our debt other than debt incurred by the Anagram Issuers and their subsidiaries.
Significant interest rate changes could affect our profitability and financial performance.
Our earnings are affected by changes in interest rates as a result of our variable rate indebtedness under the
ABL Facility and the Term Loan Credit Agreement. The interest rate swap agreements that we use to manage the
risk associated with fluctuations in interest rates (if any) may not be able to fully eliminate our exposure to these
changes.
The transition away from LIBOR may adversely affect our cost to obtain financing.
On July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or
compelling banks to submit LIBOR rates after 2021. As a result, LIBOR may be discontinued. While there is no
consensus on what rate or rates may become accepted alternatives to LIBOR, the Alternative Reference Rates
Committee, a steering committee comprised of U.S. financial market participants selected and the Federal Reserve
Bank of New York started in May 2018 to publish the Secured Overnight Finance Rate (“SOFR”) as an alternative
to LIBOR. SOFR is a broad measure of the cost of borrowing cash in the overnight U.S. treasury repo market. At
this time, it is not possible to predict whether the SOFR or another reference rate will become an accepted
alternative to LIBOR. The manner and impact of this transition may materially adversely affect the trading market
for LIBOR-based loans, including our Term Loan Credit Agreement, as well as the applicable interest rate on and
the amount of interest paid on our current or future debt obligations, including our Senior Credit Facilities.
Risks Related to Our Common Stock
The market price of our common stock could decline due to the large number of outstanding shares of our
common stock eligible for future sale.
Sales of substantial amounts of our common stock in the public market in future offerings, or the perception
that these sales could occur, could cause the market price of our common stock to decline. These sales could also
make it more difficult for us to sell equity or equity-related securities in the future, at a time and price that we deem
appropriate. In addition, the additional sale of our common stock by our officers, directors or significant
shareholders in the public market, or the perception that these sales may occur, could cause the market price of our
common stock to decline.
We may issue shares of our common stock or other securities from time to time as consideration for, or to
finance, future acquisitions and investments or for other capital needs. We cannot predict the size of future issuances
of our shares or the effect, if any, that future sales and issuances of shares would have on the market price of our
common stock. If any such acquisition or investment is significant, the number of shares of common stock or the
number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be
substantial and may result in additional dilution to our stockholders. We may also grant registration rights covering
shares of our common stock or other securities that we may issue in connection with any such acquisitions and
investments.
25
To the extent that any of us, our executive officers or our directors sell, or indicate an intent to sell, substantial
amounts of our common stock in the public market, the trading price of our common stock could decline
significantly.
Anti-takeover provisions in our charter documents and Delaware law might discourage, delay or prevent a
change in control of our company.
Our amended and restated certificate of incorporation or bylaws contain provisions that may make the
acquisition of our company more difficult without the approval of our board of directors. These provisions include:
advance notice requirements for stockholder proposals and director nominations;
the sole ability of the board of directors to fill a vacancy created by the expansion of the board of
directors;
the required approval of holders of at least 75% of our outstanding shares of capital stock entitled to vote
generally at an election of the directors to remove directors only for cause;
the required approval of holders of at least 662∕3% of our outstanding shares of capital stock entitled to
vote at an election of directors to adopt, amend or repeal our bylaws, or amend or repeal certain
provisions of our amended and restated certificate of incorporation;
limitations on the ability of stockholders to call special meetings and take action by written consent; and
provisions that reproduce much of the provisions that limit the ability of “interested stockholders” from
engaging in specified business combinations with us absent prior approval of the board of directors or
holders of 662∕3% of our voting stock.
The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might
be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our
company, thereby reducing the likelihood that you could receive a premium for your common stock in the
acquisition.
Our amended and restated certificate of incorporation designates courts in the State of Delaware as the sole and
exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which
could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors,
officers or employees.
Our amended and restated certificate of incorporation provides that, subject to limited exceptions, the Court of
Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding
brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors,
officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to
any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated
bylaws or (iv) any other action asserting a claim against us that is governed by the internal affairs doctrine (each, a
“Covered Proceeding”). In addition, our amended and restated certificate of incorporation provides that if any action
the subject matter of which is a Covered Proceeding is filed in a court other than the specified Delaware courts
without the approval of our board of directors (each, a “Foreign Action”), the claiming party will be deemed to have
consented to (i) the personal jurisdiction of the specified Delaware courts in connection with any action brought in
any such courts to enforce the exclusive forum provision described above and (ii) having service of process made
upon such claiming party in any such enforcement action by service upon such claiming party’s counsel in the
Foreign Action as agent for such claiming party. Any person or entity purchasing or otherwise acquiring any interest
in shares of our capital stock shall be deemed to have notice of and to have consented to these provisions. These
provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes
with us or our directors, officers or other employees, which may discourage such lawsuits against us and our
directors, officers and employees. Alternatively, if a court were to find these provisions of our amended and restated
certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of
actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions,
which could adversely affect our business and financial condition.
26
Because we have no current plans to pay cash dividends on our common stock for the foreseeable future, you
may not receive any return on investment unless you sell your common stock for a price greater than you paid.
We plan to retain future earnings, if any, for future operation, expansion and debt repayment and have no
current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends in the
future will be made at the discretion of our board of directors and will depend on, among other things, our results of
operations, financial condition, cash requirements, contractual restrictions and other factors that our board of
directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing
and future outstanding indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an
investment in our common stock unless you sell our common stock for a price greater than you paid.
General Risk Factors
Maintaining and improving our financial controls and the requirements of being a public company may strain
our resources, divert management’s attention and affect our ability to attract and retain qualified board
members.
As a public company, we are subject to the reporting and other requirements of the Exchange Act, the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 and the New York Stock Exchange (the “NYSE”) rules. The requirements of these rules and
regulations have increased and will continue to significantly increase our legal and financial compliance costs,
including costs associated with the hiring of additional personnel, making some activities more difficult, time-
consuming, or costly, and may also place undue strain on our personnel, systems and resources. The Exchange Act
requires, among other things, that we file annual, quarterly, and current reports with respect to our business and
financial condition.
The Sarbanes-Oxley Act requires, among other things, that we maintain disclosure controls and procedures
and internal control over financial reporting. Ensuring that we have adequate internal financial and accounting
controls and procedures in place is a costly and time-consuming effort that needs to be re-evaluated frequently. We
test our internal controls in order to comply with the requirements of Section 404 of the Sarbanes-Oxley Act
(“Section 404”). Section 404 requires that we evaluate our internal control over financial reporting to enable
management to report on, and our independent auditors to audit, the effectiveness of those controls. Both we and our
independent registered public accounting firm test our internal controls in connection with the Section 404
requirements and could, as part of that testing, identify material weaknesses, significant deficiencies or other areas
for further attention or improvement.
Implementing any appropriate changes to our internal controls may require specific compliance training for
our directors, officers and employees, require the hiring of additional finance, accounting and other personnel, entail
substantial costs to modify our existing accounting systems, and take a significant period of time to complete. These
changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to
maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could
increase our operating costs and could materially impair our ability to operate our business. Moreover, adequate
internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. As
a result, our failure to satisfy the requirements of Section 404 on a timely basis could result in the loss of investor
confidence in the reliability of our financial statements, which in turn could cause the market value of our common
stock to decline.
Various rules and regulations applicable to public companies make it more difficult and more expensive for us
to maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur
substantially higher costs to maintain coverage. If we are unable to maintain adequate directors’ and officers’
liability insurance, our ability to recruit and retain qualified officers and directors, especially those directors who
may be deemed independent for purposes of the NYSE rules, will be significantly curtailed.
27
We may fail to adequately maintain the security of our electronic and other confidential information.
We have become increasingly centralized and dependent upon automated information technology processes.
In addition, a portion of our business operations is conducted over the internet. We could experience operational
problems with our information systems and e-commerce platforms as a result of system failures, viruses, computer
“hackers” or other causes. Any material disruption or slowdown of our systems could cause information, including
data related to customer orders, to be lost or delayed, which could—especially if the disruption or slowdown
occurred during a peak sales season—result in delays in the delivery of merchandise to our stores and customers or
lost sales, which could reduce demand for our merchandise and cause our sales to decline.
In addition, in the ordinary course of our business, we collect and store certain personal information from
individuals, such as our customers and suppliers, and our employees, and we process customer payment card and
check information, including via our e-commerce platforms. Computer hackers may attempt to penetrate our
computer system, payment card terminals or other payment systems and, if successful, misappropriate personal
information, payment card or check information or confidential Company business information. In particular, the
techniques used by criminals to obtain unauthorized access to sensitive data change frequently and often are not
recognized until launched against a target; accordingly, we may be unable to anticipate these techniques or
implement adequate preventative measures. In addition, a Company employee, contractor or other third party with
whom we do business may attempt to circumvent our security measures in order to obtain such information and may
purposefully or inadvertently cause a breach involving such information. Any failure to maintain the security of our
customers’ confidential information, or data belonging to us or our suppliers, could put us at a competitive
disadvantage, result in deterioration in our customers’ confidence in us, subject us to potential litigation and liability,
and fines and penalties, resulting in a possible material adverse impact on our business, results of operations, cash
flows and financial performance. While we maintain insurance coverage that may, subject to policy terms and
conditions, cover certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses and
would not remedy damage to our reputation. There can be no assurance that we will not suffer a criminal attack in
the future, that unauthorized parties will not gain access to personal information, or that any such incident will be
discovered in a timely manner.
Item 1B.
Unresolved Staff Comments
Not applicable.
28
Item 2.
Properties
The Company maintains the following facilities for its corporate and retail headquarters and to conduct its
principal design, manufacturing and distribution operations:
Square Feet
146,346 square feet
Owned or Leased
(With Expiration Date)
Leased (1)
Location
Elmsford, New York
Rockaway, New Jersey
Principal Activity
Executive and other corporate offices,
showrooms, design and art production for
party products
Retail corporate offices
106,000 square feet
Antananarivo, Madagascar
Manufacture of costumes
41,000 square feet
Dallas, Texas
East Providence, Rhode Island
Eden Prairie, Minnesota
Los Lunas, New Mexico
Manufacture/personalization of cups and
napkins
Manufacture and distribution of plastic
plates, cups and bowls
Manufacture of metallic balloons and
accessories
Manufacture of injection molded plastics
54,413 square feet
229,230 square feet
(2)
115,600 square feet
85,055 square feet
Louisville, Kentucky
Manufacture and distribution of paper plates
213,958 square feet
Monterrey, Mexico
Newburgh, New York
Tijuana, Mexico
Chester, New York
Edina, Minnesota
Naperville, Illinois
Manufacture and distribution of party
products ( Stickers, gift wrap, bags and
invites)
Manufacture of paper napkins and cups
355,500 square feet
248,000 square feet
Manufacture and distribution of plates and
other party products
Distribution of party products
135,000 square feet
896,000 square feet
Distribution of metallic balloons and
accessories
Distribution of party goods for e-commerce
sales
122,300 square feet
440,343 square feet
Leased (expiration date:
July 31, 2022)
Leased (expiration date:
December 31, 2023)
Leased (expiration date:
October 31, 2022)
Leased (expiration date:
February 28, 2033)
Leased (expiration date:
June 30, 2039)
Leased (expiration date:
6/30/2039)
Leased (expiration date:
March 31, 2025)
Leased (expiration date:
March 3, 2027)
Leased (expiration date:
July 31, 2027)
Leased (3)
Leased (expiration date:
June 30, 2039)
Leased (expiration date:
June 30, 2026)
Leased (expiration date:
December 31, 2033)
*Excludes locations that were sold as part of the Company’s sale of a substantial portion of its international operations. See Note 6, Disposition
of Assets and Assets and Liabilities Held for Sale, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on
Form 10-K for further discussion.
(1) Property is comprised of two buildings with various lease expiration dates through December 31, 2027.
(2) This figure represents an industrial park, which includes a 48,455 square foot office and warehouse.
(3) Property is comprised of two buildings with various lease expiration dates through March 31, 2022.
In addition to the facilities listed above, we maintain a smaller distribution facility in the United Kingdom,
smaller manufacturing facilities in Minnesota, small administrative offices in California, Australia, and the United
Kingdom, and sourcing offices in China, Hong Kong, India, Indonesia and Vietnam. We also maintain warehouses
in Colorado, Florida, Georgia, Michigan, Minnesota, New Jersey and New York and showrooms in Georgia,
Nevada, and the United Kingdom.
29
As of December 31, 2020, Company-owned and franchised permanent stores were located in the following
states and Puerto Rico:
State
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
District of Columbia
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Puerto Rico
Total
Company- owned
Franchise
Chain- wide
—
—
3
15
—
—
—
—
3
1
2
—
—
—
—
—
—
—
—
1
—
—
—
2
1
1
—
—
—
1
—
11
—
—
—
—
1
1
—
1
—
6
13
—
—
8
1
—
—
—
5
77
9
1
14
3
104
13
12
—
1
67
30
2
—
42
19
7
7
9
11
2
22
21
26
12
3
18
1
3
6
4
27
3
61
16
4
28
11
3
28
2
10
—
16
87
—
1
20
17
4
11
—
5
823
9
1
14
—
89
13
12
—
1
64
29
—
—
42
19
7
7
9
11
2
21
21
26
12
1
17
—
3
6
4
26
3
50
16
4
28
11
2
27
2
9
—
10
74
—
1
12
16
4
11
—
—
746
30
Additionally, at December 31, 2020, there were eight franchise stores in Mexico.
In 2020, we operated 25 temporary stores in the U.S., principally under the Halloween City banner, and
approximately 25 temporary stores in the U.K. and Ireland. We operate such stores under short-term leases with
terms of approximately four to six months.
We lease the property for all of our company-operated stores, which generally range in size from 10,000
square feet to 15,000 square feet. We do not believe that any individual store property is material to our financial
condition or results of operations. Of the leases for the company-owned stores at December 31, 2020, 27 expire in
2021, 76 expire in 2022, 134 expire in 2023, 96 expire in 2024, 104 expire in 2025 and the balance expire in 2026 or
thereafter. We have options to extend many of these leases for a minimum of five years.
We believe that our properties have been adequately maintained, are in generally good condition and are
suitable for our business as presently conducted. We believe our existing manufacturing facilities provide sufficient
production capacity for our present needs and for our anticipated needs in the foreseeable future. To the extent such
capacity is not needed for the manufacture of our products, we generally use such capacity for the manufacture of
products for others pursuant to terminable agreements. All manufacturing and distribution facilities generally are
used on a basis of two shifts per day. We also believe that, upon the expiration of our current leases, we will be able
either to secure renewal terms or to enter into leases for alternative locations at market terms.
Item 3.
Legal Proceedings
From time to time, we are subject to various legal proceedings and claims that arise in the ordinary course of
our business activities. The Company does not believe that any pending proceedings of which it is aware will result,
individually or in the aggregate, in a material adverse effect upon its financial condition or future results of
operations.
Item 4.
Mine Safety Disclosures
Not applicable.
31
PART II
Item 5.
Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer
Purchases of Equity Securities
The Company’s common stock is listed on the NYSE under the symbol “PRTY”.
As of the close of business on February 26, 2021, there were 183 holders of record of the Company’s common
stock, which does not reflect those shares held beneficially or those shares held in “street” name. Accordingly, the
number of beneficial owners of our common stock exceeds this number.
Dividend Policy
Most of the Company’s indebtedness contains restrictions on the Company’s activities, including paying
dividends on its capital stock and restricting dividends or other payments to the Company. See Note 12, Long-Term
Obligations, of Item 8, “Financial Statements and Supplementary Data,” in this Annual Report on Form 10-K for
further discussion. The Company currently intends to retain all of its future earnings, if any, to finance operations,
development and growth of its business and repay indebtedness. Any future determination relating to our dividend
policy will be made at the discretion of the Company’s board of directors and will depend on a number of factors,
including future earnings, capital requirements, financial conditions, future prospects, contractual restrictions and
covenants and other factors that the board of directors may deem relevant.
Securities Authorized for Issuance Under Equity Compensation Plans
(a)
(b)
(c)
Number of
securities
remaining
available for future
issuance under
equity
compensation plans
(excluding
securities reflected
in column (a))
Number of securities to
be issued upon exercise
of outstanding options,
warrants, and rights
Weighted-average
exercise price of
outstanding
options, warrants
and rights
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
3,760,001 (1)
6.68 (1)
8,204,182
1,000,000
4,760,001
15.60
8.56
254,000
8,458,182
(1) Column (a) includes 3,291,175 outstanding stock options and 468,826 restricted stock units. The restricted stock units amount assumes that
the maximum number of shares ultimately vest for awards that are performance-based. Additionally, the stock options amount assumes that
all performance-based stock options vest. The weighted-average exercise price in column (b) takes into account the restricted stock units,
which have no exercise price. The weighted average exercise price solely with respect to stock options outstanding under the approved
plans is $7.63.
32
Stock Performance Graph
The line graph below compares the cumulative total stockholder return on the Company’s common stock with
the S&P 500 Index and the Dow Jones U.S. Specialty Retailers Index for the period from the completion of our
initial public offering on April 16, 2015 through December 31, 2020. The graph assumes an investment of $100
made at the closing of trading on April 16, 2015 in (i) the Company’s common stock, (ii) the stocks comprising the
S&P 500 Index and (iii) the stocks comprising the Dow Jones U.S. Specialty Retailers Index. All values assume
reinvestment of the full amount of all dividends, if any, into additional shares of the same class of equity securities
at the frequency with which dividends were paid on such securities during the applicable time period. The stock
price performance included in the line graph below is not necessarily indicative of future stock price performance.
The stock performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such
information be incorporated by reference into any future filing by us under the Securities Act or the Exchange Act,
except to the extent that we specifically incorporate the graph by reference in such filing.
33
Item 6.
Selected Consolidated Financial Data
The following table sets forth selected historical consolidated financial data for the periods and as of the dates
indicated below. Our selected historical consolidated financial data as of December 31, 2019 and December 31,
2020 and for the years ended December 31, 2018, December 31, 2019 and December 31, 2020 presented in this
table has been derived from our historical audited consolidated financial statements included elsewhere in this
Annual Report on Form 10-K. Our selected historical consolidated financial data for the years ended December 31,
2015 and December 31, 2016 were derived from our audited consolidated financial statements that are not included
in this Annual Report on Form 10-K.
The historical results presented below are not necessarily indicative of the results to be expected for any future
period. The following information should be read in conjunction with Item 7, “Management’s Discussion and
34
Analysis of Financial Condition and Results of Operations,” and our financial statements and the notes thereto
contained in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
Income Statement Data:
Revenues:
Net sales
Royalties and franchise fees
Total revenues
Expenses:
Cost of sales
Wholesale selling expenses
Retail operating expenses
Franchise expenses
General and administrative expenses
Art and development costs
Development stage expenses (1)
Gain on sale/leaseback transaction
Store impairment and restructuring charges
Loss on assets held for sale
Goodwill and intangibles impairment
Income (loss) from operations
Interest expense, net
Other (income) expense, net
(Gain) on debt refinancing
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Less: net loss attributable to noncontrolling interests
Net income (loss) attributable to common shareholders of
Party City Holdco Inc.
Statement of Cash Flow Data:
Net cash provided by (used in)
Operating activities
Investing activities
Financing activities
Per Share Data:
Basic
Diluted
Weighted Average
Outstanding basic
Diluted
Cash dividend per common share
Other Financial Data:
Adjusted EBITDA (2)
Adjusted net income (2)
Adjusted net income per common share—diluted (2)
Number of company-owned Party City stores
Capital expenditures
Party City brand comp sales (3)
Wholesale Share of shelf (4)
Balance Sheet Data (at end of period):
Cash and cash equivalents
Working capital
Total assets
Total debt
Redeemable common securities
Total equity
$
Fiscal Year Ended December 31,
2020 (2)
2019 (1)
2,339,510 $
9,279
2,348,789
1,500,633
67,103
440,395
13,152
177,672
23,203
10,736
(58,381 )
29,038
—
562,631
(417,393 )
114,899
1,871
—
(534,163 )
(1,305 )
(532,858 )
(363 )
1,843,444
7,246
1,850,690
1,369,935
50,121
387,398
12,146
210,244
17,638
2,932
—
22,449
73,948
581,380
(877,501 )
77,043
3,715
(273,149 )
(685,110 )
(156,653 )
(528,457 )
(219 )
$
(532,495 ) $
(528,238 )
$
$
$
$
$
$
$
$
(65,617 ) $
246,286
(414 )
(5.71 ) $
(5.71 ) $
28,002
162
(20,348 )
(5.24 )
(5.24 )
93,295,692
93,295,692
—
100,804,944
100,804,944
—
269,189 $
43,414 $
0.46 $
777
61,733 $
3.0 %
79.6 %
34,917 $
199,203
3,595,319
1,704,317
3,351
529,721
95,534
(44,865 )
(0.45 )
746
51,128
(16.5 ) %
82.1 %
119,532
95,383
2,806,455
1,519,091
—
50,521
(1)
In 2017, the Company and Ampology, a subsidiary of Trivergence, reached an agreement to form a new legal entity (Kazzam, LLC) for the
purpose of designing, developing and launching an online exchange platform for party-related services. During 2019 and 2020, Kazzam
incurred expenses, respectively, which are recorded in development stage expenses in the Company’s consolidated statement of operations
and comprehensive (loss) income. See Note 25 — Kazzam, LLC, of Item 8, Financial Statements and Supplementary Data in this Annual
Report on Form 10-K for further discussion.
35
(2) The Company presents adjusted EBITDA, adjusted net income and adjusted net income per common share—diluted as supplemental
measures of its operating performance. The Company defines EBITDA as net income (loss) before interest expense, net, income taxes,
depreciation and amortization and defines adjusted EBITDA as EBITDA, as further adjusted to eliminate the impact of certain items that
the Company does not consider indicative of our core operating performance. These further adjustments are itemized below. Adjusted net
income represents the Company’s net income (loss) adjusted for, among other items, intangible asset amortization, non-cash purchase
accounting adjustments, amortization of deferred financing costs and original issue discounts, refinancing charges, equity-based
compensation, and impairment charges. Adjusted net income per common share—diluted represents adjusted net income 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
or non-recurring items. The Company presents the measures because the Company believes they assist investors in comparing the
Company’s performance across reporting periods on a consistent basis by eliminating items that the Company does not believe are
indicative of its core operating performance. In addition, the Company uses adjusted EBITDA: (i) as a factor in determining incentive
compensation, (ii) to evaluate the effectiveness of its business strategies and (iii) because its credit facilities use adjusted EBITDA to
measure compliance with certain covenants. The Company also believes that adjusted net income and adjusted net income per common
share—diluted are helpful benchmarks to evaluate its operating performance.
Adjusted EBITDA, adjusted net income, and adjusted net income per common share—diluted have limitations as analytical tools. Some of
these limitations are:
they do not reflect the Company’s cash expenditures or future requirements for capital expenditures or contractual commitments;
they do not reflect changes in, or cash requirements for, the Company’s working capital needs;
adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal
payments, on the Company’s indebtedness;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be
replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements;
non-cash compensation is and will remain a key element of the Company’s overall long-term incentive compensation package,
although the Company excludes it as an expense when evaluating its core operating performance for a particular period;
they do not reflect the impact of certain cash charges resulting from matters the Company considers not to be indicative of its
ongoing operations; and
other companies in the Company’s industry may calculate adjusted EBITDA, adjusted net income and adjusted net income per
common share differently than the Company does, limiting its usefulness as a comparative measure.
(3) Party City brand comp sales include North American e-commerce sales.
(4) Represents the percentage of product costs included in cost of goods sold by our Party City stores and North American retail e - commerce
operations which relate to products supplied by our wholesale operations.
36
Because of these limitations, adjusted EBITDA, adjusted net income, and adjusted net income per common
share—diluted should not be considered in isolation or as substitutes for performance measures calculated in
accordance with GAAP. The Company compensates for these limitations by relying primarily on its GAAP results
and using the metrics only on a supplemental basis. The reconciliations from net income (loss) to adjusted EBITDA
and adjusted net income for the periods presented follow (dollars in thousands, except per share amounts):
Fiscal Year Ended December 31,
$
2019
(532,858 )
114,899
(1,305 )
81,116
(338,148 )
3,000
$
$
2020
(528,457 )
77,043
(156,653 )
76,506
(531,561 )
—
—
39,323 (c)
581,380 (o)
12,104 (b)
—
(3,147 )
7,197 (e)
(1,058 )
3,858 (f)
8,643 (g)
1,033 (h)
2,071 (i)
1,460 (i)
—
7,843 (k)
(273,149 ) (j)
—
73,948 (p)
88,358 (c)
73,843 (q)
3,388
95,534
(58,381 ) (a)
58,778 (c)
562,631 (o)
6,460 (b)
36
(1,796 ) (d)
14,208 (e)
421
4,445 (f)
1,319 (g)
515 (h)
2,033 (i)
—
(472 )
8,548 (k)
—
5,074 (s)
—
—
—
518
269,189
Net income (loss)
Interest expense, net
Income taxes
Depreciation and amortization
EBITDA
Non-cash purchase accounting adjustments
Gain on sale/leaseback transaction
Store impairment and restructuring charges
Goodwill and intangibles impairment
Other restructuring, retention and severance
Refinancing charges
Deferred rent
Corporate development expenses
Foreign currency losses (gains)
Closed store expense
Stock option expense
Non-employee equity based compensation
Restricted stock units expense—time based
Restricted stock units expense—performance based
Undistributed loss (income) in equity method
investments
Non-recurring legal settlements/costs
(Gain) on debt refinancing
(Gain) loss on sale of assets
Loss on held for sale
Inventory disposal and reserve for future disposal
COVID - 19
Other
Adjusted EBITDA
$
37
r
e
b
m
e
c
e
D
,
1
3
0
2
0
2
-
n
o
N
P
A
A
G
s
i
s
a
b
4
4
4
,
3
4
8
,
1
$
6
4
2
,
7
0
9
6
,
0
5
8
,
1
2
1
7
,
3
1
2
,
1
8
5
6
,
7
4
4
7
4
,
1
1
9
3
7
,
8
6
3
8
3
6
,
7
1
6
1
9
,
0
7
1
—
—
—
—
)
8
8
3
,
3
(
)
8
4
9
,
3
7
(
)
8
2
3
,
1
1
(
)
2
0
3
(
)
7
6
6
,
7
(
6
9
1
)
4
7
1
,
2
1
(
)
3
4
8
,
7
(
)
0
1
2
(
)
3
2
6
(
)
2
5
9
,
2
4
(
)
2
7
6
(
)
8
6
2
,
8
1
(
)
6
5
5
,
3
(
)
7
3
4
,
4
(
)
4
1
2
(
5
6
1
,
3
)
0
4
8
,
1
(
)
2
3
2
,
5
0
1
(
)
2
3
9
,
2
(
)
9
4
4
,
2
2
(
s
t
n
e
m
t
s
u
j
d
A
A
D
T
I
B
E
0
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
E
s
h
t
n
o
M
e
v
l
e
w
T
r
e
h
t
O
)
p
(
n
g
i
e
r
o
F
y
c
n
e
r
r
u
c
s
e
s
s
o
l
-
D
I
V
O
C
)
q
(
9
1
d
e
s
o
l
C
e
r
o
t
s
e
s
n
e
p
x
e
)
f
(
)
e
(
r
e
h
t
O
,
g
n
i
r
u
t
c
u
r
t
s
e
r
d
n
a
n
o
i
t
n
e
t
e
r
)
b
(
e
c
n
a
r
e
v
e
s
d
e
r
r
e
f
e
D
)
d
(
t
n
e
R
n
o
i
t
p
O
k
c
o
t
S
-
n
o
N
/
e
s
n
e
p
x
E
y
t
i
u
q
E
e
e
y
o
l
p
m
E
/
n
o
i
t
a
s
n
e
p
m
o
C
d
e
t
c
i
r
t
s
e
R
s
t
i
n
u
k
c
o
t
s
)
n
(
)
i
(
)
h
(
)
g
(
)
k
(
l
a
g
e
L
e
t
a
r
o
p
r
o
C
t
n
e
m
p
o
l
e
v
e
d
)
e
(
s
e
s
n
e
p
x
e
n
o
n
i
a
G
t
b
e
d
g
n
i
c
n
a
n
i
f
e
r
)
i
(
e
r
o
t
S
t
n
e
m
r
i
a
p
m
i
d
n
a
g
n
i
r
u
t
c
u
r
t
s
e
r
,
s
e
g
r
a
h
c
g
n
i
d
u
l
c
n
i
y
r
o
t
n
e
v
n
i
)
c
(
l
a
s
o
p
s
i
d
,
l
l
i
w
d
o
o
G
s
e
l
b
i
g
n
a
t
n
i
-
g
n
o
l
d
n
a
s
t
e
s
s
a
d
e
v
i
l
t
n
e
m
r
i
a
p
m
i
)
c
(
—
3
5
5
,
0
2
3
4
0
,
7
7
5
2
5
,
1
)
5
1
0
,
8
5
(
3
4
0
,
7
7
—
6
0
5
,
6
7
4
3
5
,
5
9
)
6
3
3
,
7
7
(
4
3
5
,
5
9
$
)
6
3
3
,
7
7
(
$
8
5
0
,
1
)
3
3
0
,
1
(
)
5
1
2
,
2
(
9
4
1
,
3
7
2
8
5
0
,
1
8
5
0
,
1
)
3
4
8
,
3
7
(
)
8
5
8
,
3
(
)
4
0
1
,
2
1
(
$
)
3
4
8
,
3
7
(
$
)
8
5
8
,
3
(
$
)
4
0
1
,
2
1
(
$
7
4
1
,
3
7
4
1
,
3
$
)
7
0
2
,
3
1
(
)
7
0
2
,
3
1
(
)
3
4
8
,
7
(
)
7
9
1
,
7
(
$
)
3
4
8
,
7
(
$
)
7
9
1
,
7
(
$
9
4
1
,
3
7
2
9
4
1
,
3
7
2
7
3
1
,
0
3
8
,
1
)
6
3
3
,
7
7
(
—
)
3
4
8
,
3
7
(
)
8
5
8
,
3
(
)
4
0
1
,
2
1
(
7
4
1
,
3
)
4
7
1
,
2
1
(
)
3
4
8
,
7
(
)
2
8
9
,
4
(
—
)
1
8
6
,
7
2
1
(
)
0
8
3
,
1
8
5
(
)
0
8
3
,
1
8
5
(
r
e
b
m
e
c
e
D
0
2
0
2
,
1
3
P
A
A
G
s
a
(
s
i
s
a
B
)
d
e
t
r
o
p
e
r
4
4
4
,
3
4
8
,
1
$
6
4
2
,
7
0
9
6
,
0
5
8
,
1
5
3
9
,
9
6
3
,
1
1
2
1
,
0
5
8
9
3
,
7
8
3
6
4
1
,
2
1
2
3
9
,
2
8
3
6
,
7
1
4
4
2
,
0
1
2
9
4
4
,
2
2
8
4
9
,
3
7
0
8
3
,
1
8
5
1
9
1
,
8
2
7
,
2
)
1
0
5
,
7
7
8
(
5
1
7
,
3
3
4
0
,
7
7
)
9
4
1
,
3
7
2
(
)
0
1
1
,
5
8
6
(
3
4
0
,
7
7
6
0
5
,
6
7
)
1
6
5
,
1
3
5
(
5
9
0
,
7
2
6
e
s
i
h
c
n
a
r
f
d
n
a
s
e
i
t
l
a
y
o
R
s
e
e
f
s
e
u
n
e
v
e
r
l
a
t
o
T
s
e
s
n
e
p
x
e
g
n
i
l
l
e
s
e
l
a
s
e
l
o
h
W
s
e
s
n
e
p
x
e
g
n
i
t
a
r
e
p
o
l
i
a
t
e
R
e
v
i
t
a
r
t
s
i
n
i
m
d
a
d
n
a
l
a
r
e
n
e
G
s
e
s
n
e
p
x
e
e
s
i
h
c
n
a
r
F
s
e
l
a
s
f
o
t
s
o
C
s
e
s
n
e
p
x
e
s
e
s
n
e
p
x
e
e
g
a
t
s
t
n
e
m
p
o
l
e
v
e
D
s
t
s
o
c
t
n
e
m
p
o
l
e
v
e
d
d
n
a
t
r
A
d
n
a
t
n
e
m
r
i
a
p
m
i
e
r
o
t
S
s
e
g
r
a
h
c
g
n
i
r
u
t
c
u
r
t
s
e
r
t
n
e
m
r
i
a
p
m
i
s
t
e
s
s
a
d
e
v
i
l
-
g
n
o
l
d
n
a
s
e
l
b
i
g
n
a
t
n
i
,
l
l
i
w
d
o
o
G
e
l
a
s
r
o
f
d
l
e
h
s
t
e
s
s
a
n
o
s
s
o
L
e
s
n
e
p
x
e
l
a
t
o
T
t
e
n
,
e
s
n
e
p
x
e
t
s
e
r
e
t
n
I
t
e
n
,
e
s
n
e
p
x
e
r
e
h
t
O
s
n
o
i
t
a
r
e
p
o
m
o
r
f
)
s
s
o
L
(
g
n
i
c
n
a
n
i
f
e
r
t
b
e
d
n
o
)
n
i
a
G
(
s
e
x
a
t
e
m
o
c
n
i
e
r
o
f
e
b
)
s
s
o
L
(
t
e
n
,
e
s
n
e
p
x
e
t
s
e
r
e
t
n
I
d
n
a
n
o
i
t
a
i
c
e
r
p
e
D
n
o
i
t
a
z
i
t
r
o
m
a
A
D
T
I
B
E
o
t
s
t
n
e
m
t
s
u
j
d
A
A
D
T
I
B
E
s
e
l
a
s
t
e
N
:
s
e
u
n
e
v
e
R
38
)
1
8
6
,
7
2
1
(
)
0
8
3
,
1
8
5
(
$
)
1
8
6
,
7
2
1
(
$
)
0
8
3
,
1
8
5
(
$
4
3
5
,
5
9
$
A
D
T
I
B
E
d
e
t
s
u
j
d
A
r
e
b
m
e
c
e
D
,
1
3
9
1
0
2
-
n
o
N
P
A
A
G
s
i
s
a
b
0
1
5
,
9
3
3
,
2
$
9
7
2
,
9
9
8
7
,
8
4
3
,
2
7
2
4
,
2
7
4
,
1
3
0
1
,
7
6
2
5
1
,
3
1
8
1
4
,
6
3
4
0
9
5
,
8
5
1
3
0
2
,
3
2
—
—
—
—
s
t
n
e
m
t
s
u
j
d
A
A
D
T
I
B
E
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
E
s
h
t
n
o
M
e
v
l
e
w
T
r
e
h
t
O
)
s
(
)
r
(
n
g
i
e
r
o
F
y
c
n
e
r
r
u
c
s
n
i
a
g
h
s
a
C
-
n
o
N
e
s
a
h
c
r
u
P
g
n
i
t
n
u
o
c
c
A
s
t
n
e
m
t
s
u
j
d
A
d
e
s
o
l
C
e
r
o
t
s
e
s
n
e
p
x
e
)
f
(
r
e
h
t
O
,
g
n
i
r
u
t
c
u
r
t
s
e
r
d
n
a
n
o
i
t
n
e
t
e
r
)
b
(
e
c
n
a
r
e
v
e
s
d
e
r
r
e
f
e
D
)
d
(
t
n
e
R
n
o
i
t
p
O
k
c
o
t
S
-
n
o
N
/
e
s
n
e
p
x
E
y
t
i
u
q
E
e
e
y
o
l
p
m
E
/
n
o
i
t
a
s
n
e
p
m
o
C
d
e
t
c
i
r
t
s
e
R
s
t
i
n
u
k
c
o
t
s
)
m
(
)
i
(
)
h
(
)
g
(
)
k
(
l
a
g
e
L
e
t
a
r
o
p
r
o
C
t
n
e
m
p
o
l
e
v
e
d
)
e
(
s
e
s
n
e
p
x
e
k
c
a
b
e
s
a
e
l
/
e
l
a
s
d
n
a
n
o
i
t
c
a
s
n
a
r
t
g
n
i
r
u
t
c
u
r
t
s
e
r
n
o
n
i
a
G
t
n
e
m
r
i
a
p
m
i
e
r
o
t
S
,
l
l
i
w
d
o
o
G
s
e
l
b
i
g
n
a
t
n
i
-
g
n
o
l
d
n
a
s
t
e
s
s
a
d
e
v
i
l
t
n
e
m
r
i
a
p
m
i
)
a
(
)
c
(
s
e
g
r
a
h
c
)
o
(
)
6
4
9
,
3
(
)
1
3
(
)
0
0
5
(
)
9
2
4
,
6
(
2
6
2
)
7
6
8
,
3
(
)
8
4
5
,
8
(
4
3
5
,
1
)
0
4
7
,
9
2
(
)
6
3
7
,
0
1
(
1
8
3
,
8
5
)
8
3
0
,
9
2
(
r
e
b
m
e
c
e
D
9
1
0
2
,
1
3
P
A
A
G
s
a
(
s
i
s
a
B
)
d
e
t
r
o
p
e
r
0
1
5
,
9
3
3
,
2
$
9
7
2
,
9
$
9
8
7
,
8
4
3
,
2
3
3
6
,
0
0
5
,
1
3
0
1
,
7
6
2
5
1
,
3
1
5
9
3
,
0
4
4
2
7
6
,
7
7
1
3
0
2
,
3
2
6
3
7
,
0
1
)
1
8
3
,
8
5
(
8
3
0
,
9
2
)
1
3
6
,
2
6
5
(
1
3
6
,
2
6
5
3
9
8
,
0
7
1
,
2
—
—
—
)
6
4
4
,
4
(
)
0
6
4
,
6
(
6
9
7
,
1
)
7
6
8
,
3
(
)
8
4
5
,
8
(
)
6
3
7
,
0
1
(
1
8
3
,
8
5
)
8
7
7
,
8
5
(
)
1
3
6
,
2
6
5
(
2
8
1
,
6
6
7
,
2
6
9
8
,
7
7
1
9
9
8
,
4
1
1
)
7
7
1
,
0
1
(
4
7
1
,
3
7
9
9
8
,
4
1
1
6
1
1
,
1
8
9
8
1
,
9
6
2
)
5
5
1
,
5
(
)
1
2
4
(
)
1
0
0
,
3
(
)
1
7
4
,
3
(
—
)
5
5
1
,
5
(
)
1
2
4
(
9
8
1
,
9
6
2
$
)
5
5
1
,
5
(
$
)
1
2
4
(
$
)
1
0
0
,
3
(
)
1
0
0
,
3
(
$
)
6
4
4
,
4
(
$
)
6
4
4
,
4
(
)
0
6
4
,
6
(
)
0
6
4
,
6
(
$
6
9
7
,
1
6
9
7
,
1
$
)
7
6
8
,
3
(
)
7
6
8
,
3
(
)
8
4
5
,
8
(
)
7
0
2
,
4
1
(
$
)
8
4
5
,
8
(
$
)
7
0
2
,
4
1
(
$
1
8
3
,
8
5
1
8
3
,
8
5
)
8
7
7
,
8
5
(
)
1
3
6
,
2
6
5
(
7
3
3
,
7
0
6
1
7
8
,
1
)
3
9
3
,
7
1
4
(
9
9
8
,
4
1
1
)
3
6
1
,
4
3
5
(
9
9
8
,
4
1
1
6
1
1
,
1
8
)
8
4
1
,
8
3
3
(
s
e
u
n
e
v
e
r
l
a
t
o
T
d
n
a
s
e
i
t
l
a
y
o
R
s
e
e
f
e
s
i
h
c
n
a
r
f
s
e
l
a
s
t
e
N
g
n
i
l
l
e
s
e
l
a
s
e
l
o
h
W
s
e
l
a
s
f
o
t
s
o
C
g
n
i
t
a
r
e
p
o
l
i
a
t
e
R
s
e
s
n
e
p
x
e
s
e
s
n
e
p
x
e
s
e
s
n
e
p
x
e
e
s
i
h
c
n
a
r
F
e
v
i
t
a
r
t
s
i
n
i
m
d
a
d
n
a
l
a
r
e
n
e
G
s
e
s
n
e
p
x
e
:
s
e
u
n
e
v
e
R
t
n
e
m
p
o
l
e
v
e
d
d
n
a
t
r
A
s
t
s
o
c
k
c
a
b
e
s
a
e
l
/
e
l
a
s
n
o
n
i
a
G
e
g
a
t
s
t
n
e
m
p
o
l
e
v
e
D
s
e
s
n
e
p
x
e
n
o
i
t
c
a
s
n
a
r
t
d
n
a
t
n
e
m
r
i
a
p
m
i
e
r
o
t
S
s
e
g
r
a
h
c
g
n
i
r
u
t
c
u
r
t
s
e
r
s
e
l
b
i
g
n
a
t
n
i
,
l
l
i
w
d
o
o
G
s
t
e
s
s
a
d
e
v
i
l
-
g
n
o
l
d
n
a
t
n
e
m
r
i
a
p
m
i
s
e
s
n
e
p
x
e
l
a
t
o
T
t
e
n
,
e
s
n
e
p
x
e
t
s
e
r
e
t
n
I
t
e
n
,
e
s
n
e
p
x
e
r
e
h
t
O
e
m
o
c
n
i
e
r
o
f
e
b
)
s
s
o
L
(
s
e
x
a
t
m
o
r
f
e
m
o
c
n
I
s
n
o
i
t
a
r
e
p
o
t
e
n
,
e
s
n
e
p
x
e
n
o
i
t
a
i
c
e
r
p
e
D
t
s
e
r
e
t
n
I
n
o
i
t
a
z
i
t
r
o
m
a
d
n
a
s
t
n
e
m
t
s
u
j
d
A
A
D
T
I
B
E
o
t
A
D
T
I
B
E
39
$
)
8
7
7
,
8
5
(
$
)
1
3
6
,
2
6
5
(
$
9
8
1
,
9
6
2
$
A
D
T
I
B
E
d
e
t
s
u
j
d
A
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
E
r
a
e
Y
l
a
c
s
i
F
)
m
(
8
9
1
,
4
—
)
l
(
2
6
3
,
1
1
)
0
1
1
,
5
8
6
(
0
2
0
2
)
c
(
)
o
(
)
g
(
)
h
(
)
b
(
)
p
(
)
c
(
)
q
(
)
n
(
3
1
8
,
0
3
0
8
3
,
1
8
5
—
3
4
6
,
8
0
6
4
,
1
3
3
0
,
1
—
4
9
0
,
7
9
3
1
,
0
1
—
8
4
9
,
3
7
8
5
3
,
8
8
1
6
6
,
3
7
)
0
7
1
,
6
6
(
)
0
4
9
,
6
1
(
)
0
3
2
,
9
4
(
)
9
4
.
0
(
)
9
4
1
,
3
7
2
(
$
$
$
)
l
(
0
0
1
,
4
1
)
3
6
1
,
4
3
5
(
9
1
0
2
)
m
(
)
c
(
)
o
(
6
3
2
0
2
,
4
2
2
7
,
4
8
7
7
,
8
5
1
3
6
,
2
6
5
)
g
(
9
1
3
,
1
)
h
(
)
b
(
—
5
1
5
1
1
2
,
3
0
0
5
,
6
)
a
(
)
1
8
3
,
8
5
(
)
r
(
)
3
7
8
,
2
(
—
)
n
(
—
—
—
7
9
5
,
0
6
3
8
1
,
7
1
4
1
4
,
3
4
6
4
.
0
$
$
$
s
t
n
u
o
c
s
i
d
e
c
n
a
u
s
s
i
l
a
n
i
g
i
r
o
d
n
a
s
t
s
o
c
g
n
i
c
n
a
n
i
f
d
e
r
r
e
f
e
d
f
o
n
o
i
t
a
z
i
t
r
o
m
A
s
t
n
e
m
t
s
u
j
d
a
g
n
i
t
n
u
o
c
c
a
e
s
a
h
c
r
u
p
h
s
a
c
-
n
o
N
n
o
i
t
a
z
i
t
r
o
m
a
t
e
s
s
a
e
l
b
i
g
n
a
t
n
I
s
e
x
a
t
e
m
o
c
n
i
e
r
o
f
e
b
s
s
o
L
d
e
s
a
b
e
c
n
a
m
r
o
f
r
e
p
—
e
s
n
e
p
x
e
s
t
i
n
u
k
c
o
t
s
d
e
t
c
i
r
t
s
e
R
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
y
t
i
u
q
e
e
e
y
o
l
p
m
e
-
n
o
N
s
e
g
r
a
h
c
g
n
i
r
u
t
c
u
r
t
s
e
r
d
n
a
t
n
e
m
r
i
a
p
m
i
e
r
o
t
S
t
n
e
m
r
i
a
p
m
i
s
e
l
b
i
g
n
a
t
n
i
d
n
a
l
l
i
w
d
o
o
G
s
e
g
r
a
h
c
g
n
i
c
n
a
n
i
f
e
R
e
s
n
e
p
x
e
n
o
i
t
p
o
k
c
o
t
S
s
t
s
o
c
/
s
t
n
e
m
e
l
t
t
e
s
l
a
g
e
l
g
n
i
r
r
u
c
e
r
-
n
o
N
s
e
g
r
a
h
c
g
n
i
r
u
t
c
u
r
t
s
e
r
r
e
h
t
O
s
t
e
s
s
a
l
i
a
t
e
r
a
d
a
n
a
C
f
o
e
l
a
s
n
o
)
n
i
a
G
(
e
l
a
s
r
o
f
d
l
e
h
s
t
e
s
s
a
n
o
s
s
o
L
g
n
i
c
n
a
n
i
f
e
r
t
b
e
d
n
o
)
n
i
a
G
(
k
c
a
b
e
s
a
e
l
-
e
l
a
s
n
o
)
n
i
a
G
(
d
e
t
u
l
i
d
—
e
r
a
h
s
n
o
m
m
o
c
r
e
p
)
s
s
o
l
(
e
m
o
c
n
i
t
e
n
d
e
t
s
u
j
d
A
l
a
s
o
p
s
i
d
e
r
u
t
u
f
r
o
f
e
v
r
e
s
e
r
d
n
a
l
a
s
o
p
s
i
d
y
r
o
t
n
e
v
n
I
9
1
-
I
D
V
O
C
s
e
x
a
t
e
m
o
c
n
i
e
r
o
f
e
b
e
m
o
c
n
i
d
e
t
s
u
j
d
A
e
s
n
e
p
x
e
)
t
i
f
e
n
e
b
(
s
e
x
a
t
e
m
o
c
n
i
d
e
t
s
u
j
d
A
)
s
s
o
l
(
e
m
o
c
n
i
t
e
n
d
e
t
s
u
j
d
A
40
y
t
i
l
i
c
a
f
g
n
i
r
u
t
c
a
f
u
n
a
m
s
n
o
o
l
l
a
b
c
i
l
l
a
t
e
m
s
t
i
d
n
a
k
r
o
Y
w
e
N
,
r
e
t
s
e
h
C
n
i
r
e
t
n
e
c
n
o
i
t
u
b
i
r
t
s
i
d
n
i
a
m
s
t
i
f
o
k
c
a
b
e
s
a
e
l
d
n
a
e
l
a
s
e
h
t
m
o
r
f
n
i
a
g
n
o
i
l
l
i
m
4
.
8
5
$
a
d
e
t
r
o
p
e
r
y
n
a
p
m
o
C
e
h
t
,
9
1
0
2
e
n
u
J
g
n
i
r
u
D
)
a
(
e
h
t
f
o
h
c
a
e
r
o
f
s
e
s
a
e
l
r
a
e
y
-
y
t
n
e
w
t
o
t
n
i
d
e
r
e
t
n
e
y
n
a
p
m
o
C
e
h
t
,
e
l
a
s
e
h
t
h
t
i
w
s
u
o
e
n
a
t
l
u
m
i
S
.
n
o
i
l
l
i
m
0
.
8
2
1
$
s
a
w
s
e
i
t
r
e
p
o
r
p
e
e
r
h
t
e
h
t
r
o
f
e
c
i
r
p
e
l
a
s
e
t
a
g
e
r
g
g
a
e
h
T
.
a
t
o
s
e
n
n
i
M
,
e
i
r
i
a
r
P
n
e
d
E
n
i
s
e
i
t
i
l
i
c
a
f
.
s
t
e
k
r
a
m
d
e
v
r
e
s
r
e
d
n
u
o
t
n
i
d
n
a
p
x
e
o
t
y
t
i
l
i
b
i
x
e
l
f
l
a
t
i
p
a
c
h
t
i
w
y
n
a
p
m
o
C
e
h
t
e
d
i
v
o
r
p
d
l
u
o
h
s
s
g
n
i
s
o
l
c
e
s
e
h
T
.
r
e
t
r
a
u
q
d
r
i
h
t
e
h
t
n
i
d
e
s
o
l
c
e
r
e
w
d
n
a
0
2
0
2
f
o
r
e
t
r
a
u
q
t
s
r
i
f
e
h
t
n
i
e
r
u
s
o
l
c
r
o
f
d
e
i
f
i
t
n
e
d
i
s
e
r
o
t
s
1
2
,
0
2
0
2
n
I
.
0
2
0
2
y
r
a
u
n
a
J
n
i
d
e
s
o
l
c
e
r
e
w
s
e
r
o
t
s
0
2
d
n
a
9
1
0
2
n
i
d
e
s
o
l
c
e
r
e
w
s
e
r
o
t
s
5
3
h
c
i
h
w
f
o
t
u
o
,
e
r
u
s
o
l
c
r
o
f
d
e
i
f
i
t
n
e
d
i
e
r
e
w
s
e
r
o
t
s
5
5
,
9
1
0
2
n
I
.
o
i
l
o
f
t
r
o
p
e
r
o
t
s
s
t
i
f
o
n
o
i
t
a
z
i
m
i
t
p
o
e
h
t
e
t
a
r
e
l
e
c
c
a
m
a
r
g
o
r
p
n
o
i
t
a
z
i
m
i
t
p
o
e
r
o
t
s
e
h
t
h
t
i
w
n
o
i
t
c
n
u
j
n
o
c
n
I
.
9
1
-
D
V
O
C
I
,
o
t
s
e
s
n
o
p
s
e
r
l
a
t
n
e
m
n
r
e
v
o
g
l
a
r
e
d
e
f
d
n
a
e
t
a
t
s
,
l
a
c
o
l
d
n
a
,
f
o
k
a
e
r
b
t
u
o
e
h
t
o
t
e
u
d
d
e
t
c
e
f
f
a
e
r
e
w
s
e
l
a
s
e
r
e
h
w
s
e
r
o
t
s
n
e
p
o
r
o
f
t
n
e
m
p
i
u
q
e
d
n
a
t
n
a
l
p
,
y
t
r
e
p
o
r
p
d
n
a
t
e
s
s
a
e
s
a
e
l
g
n
i
t
a
r
e
p
o
e
h
t
h
t
i
w
d
e
t
a
i
c
o
s
s
a
e
g
r
a
h
c
t
n
e
m
r
i
a
p
m
i
n
a
d
e
d
r
o
c
e
r
d
n
a
s
e
r
o
t
s
n
e
p
o
e
h
t
t
a
s
t
e
s
s
a
d
e
v
i
l
-
g
n
o
l
f
o
y
t
i
l
i
b
a
r
e
v
o
c
e
r
e
h
t
d
e
t
a
u
l
a
v
e
y
n
a
p
m
o
C
e
h
t
,
n
o
i
t
i
d
d
a
n
I
o
t
n
o
i
s
i
c
e
d
e
h
t
e
d
a
m
y
n
a
p
m
o
C
e
h
t
,
s
n
o
i
t
a
c
o
l
e
r
o
t
s
e
h
t
f
o
n
o
i
t
a
u
l
a
v
e
d
n
a
n
o
i
t
a
r
e
d
i
s
n
o
c
l
u
f
e
r
a
c
r
e
t
f
a
,
d
n
a
)
”
m
a
r
g
o
r
p
n
o
i
t
a
z
i
m
i
t
p
o
e
r
o
t
s
“
(
s
n
o
i
t
a
c
o
l
h
c
u
s
f
o
y
t
i
v
i
t
c
u
d
o
r
p
l
l
a
r
e
v
o
e
h
t
g
n
i
v
o
r
p
m
i
t
a
,
8
m
e
t
I
f
o
,
s
e
g
r
a
h
C
g
n
i
r
u
t
c
u
r
t
s
e
R
d
n
a
t
n
e
m
r
i
a
p
m
I
e
r
o
t
S
–
3
e
t
o
N
n
i
d
e
l
i
a
t
e
d
s
a
s
e
g
r
a
h
c
d
e
d
r
o
c
e
r
y
n
a
p
m
o
C
e
h
t
,
9
1
0
2
d
n
a
0
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
s
r
a
e
y
e
h
t
g
n
i
r
u
d
,
t
n
e
m
r
i
a
p
m
i
e
r
o
t
s
d
n
a
d
e
m
i
a
s
n
o
i
t
a
c
o
l
e
r
o
t
s
s
t
i
f
o
w
e
i
v
e
r
e
v
i
s
n
e
h
e
r
p
m
o
c
a
d
e
m
r
o
f
r
e
p
y
n
a
p
m
o
C
e
h
t
,
9
1
0
2
d
n
a
0
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
s
r
a
e
y
e
h
t
g
n
i
r
u
D
)
c
(
.
K
-
0
1
m
r
o
F
n
o
t
r
o
p
e
R
l
a
u
n
n
A
s
i
h
t
n
i
”
a
t
a
D
y
r
a
t
n
e
m
e
l
p
p
u
S
d
n
a
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
“
f
o
f
f
o
-
e
t
i
r
w
e
h
t
d
n
a
e
c
n
a
r
e
v
e
s
e
v
i
t
u
c
e
x
e
o
t
e
t
a
l
e
r
y
l
l
a
p
i
c
n
i
r
p
9
1
0
2
g
n
i
r
u
d
d
e
s
n
e
p
x
e
s
t
n
u
o
m
A
.
s
e
g
n
a
h
c
l
a
n
o
i
t
a
z
i
n
a
g
r
o
o
t
e
u
d
e
c
n
a
r
e
v
e
s
o
t
e
t
a
l
e
r
y
l
l
a
p
i
c
n
i
r
p
0
2
0
2
g
n
i
r
u
d
d
e
s
n
e
p
x
e
s
t
n
u
o
m
A
)
b
(
.
d
e
r
u
t
c
u
r
t
s
e
r
e
r
e
w
t
a
h
t
s
e
r
o
t
s
y
t
i
C
y
t
r
a
P
s
’
y
n
a
p
m
o
C
e
h
t
f
o
n
o
i
t
c
e
s
a
r
o
f
y
r
o
t
n
e
v
n
i
s
t
i
d
e
t
a
d
p
u
s
a
h
y
n
a
p
m
o
C
e
h
t
,
y
t
i
c
o
l
e
v
l
a
t
i
p
a
c
g
n
i
k
r
o
w
g
n
i
v
o
r
p
m
i
d
n
a
t
n
u
o
c
U
K
S
e
r
o
t
s
-
n
i
g
n
i
z
i
l
a
n
o
i
t
a
r
f
o
y
g
e
t
a
r
t
s
e
h
t
h
t
i
w
t
n
e
t
s
i
s
n
o
C
.
k
r
o
w
t
e
n
n
o
i
t
u
b
i
r
t
s
i
d
d
n
a
s
e
r
o
t
s
s
t
i
s
s
o
r
c
a
s
l
e
v
e
l
y
r
o
t
n
e
v
n
i
g
n
i
v
o
r
p
m
i
n
i
s
s
e
r
g
o
r
p
e
k
a
m
o
t
d
e
u
n
i
t
n
o
c
y
n
a
p
m
o
C
e
h
t
,
0
2
0
2
f
o
r
e
t
r
a
u
q
h
t
r
u
o
f
e
h
t
g
n
i
r
u
d
”
,
a
t
a
D
y
r
a
t
n
e
m
e
l
p
p
u
S
d
n
a
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
“
,
8
m
e
t
I
f
o
,
t
e
N
,
s
e
i
r
o
t
n
e
v
n
I
–
7
e
t
o
N
n
i
d
e
t
a
c
i
d
n
i
s
A
e
h
t
e
v
o
r
p
m
i
o
t
d
e
t
c
e
p
x
e
e
r
a
s
t
n
e
m
t
r
o
s
s
a
d
e
t
a
r
u
c
d
n
a
d
e
t
i
d
e
e
r
o
m
e
h
T
.
r
e
v
o
-
y
r
r
a
c
y
r
o
t
n
e
v
n
i
l
a
u
n
n
a
e
c
u
d
e
r
d
n
a
e
s
i
d
n
a
h
c
r
e
m
f
o
h
g
u
o
r
h
t
-
l
l
e
s
n
o
s
a
e
s
-
n
i
r
e
h
g
i
h
t
e
g
r
a
t
o
t
y
g
e
t
a
r
t
s
t
n
e
m
t
r
o
s
s
a
l
a
n
o
s
a
e
s
g
n
i
k
r
o
w
g
n
i
c
u
d
e
r
d
n
a
t
n
e
m
e
g
a
n
a
m
y
r
o
t
n
e
v
n
i
f
o
y
c
n
e
i
c
i
f
f
e
e
h
t
g
n
i
v
o
r
p
m
i
o
s
l
a
e
l
i
h
w
,
s
r
e
m
u
s
n
o
c
o
t
t
n
a
v
e
l
e
r
e
r
o
m
s
n
o
i
t
c
e
l
e
s
t
c
u
d
o
r
p
d
n
a
p
o
h
s
o
t
r
e
i
s
a
e
s
e
r
o
t
s
g
n
i
k
a
m
y
b
e
c
n
e
i
r
e
p
x
e
r
e
m
o
t
s
u
c
.
s
n
o
s
a
e
s
e
r
u
t
u
f
n
i
d
e
r
i
u
q
e
r
e
b
t
o
n
l
l
i
w
t
a
h
t
0
2
0
2
f
o
r
e
t
r
a
u
q
h
t
r
u
o
f
e
h
t
g
n
i
r
u
d
y
r
o
t
n
e
v
n
i
n
i
8
5
3
,
8
8
$
f
o
d
e
s
o
p
s
i
d
y
n
a
p
m
o
C
e
h
t
,
t
l
u
s
e
r
a
s
A
.
s
d
e
e
n
l
a
t
i
p
a
c
l
a
i
c
n
a
n
i
F
“
,
8
m
e
t
I
f
o
,
.
C
L
L
m
a
z
z
a
K
,
5
2
e
t
o
N
e
e
s
(
m
a
z
z
a
K
r
o
f
s
t
s
o
c
p
u
-
t
r
a
t
s
e
d
u
l
c
n
i
0
2
0
2
d
n
a
9
1
0
2
,
y
l
l
a
n
o
i
t
i
d
d
A
.
s
t
n
e
m
e
e
r
g
a
t
i
d
e
r
c
s
’
y
n
a
p
m
o
C
e
h
t
n
i
s
t
n
a
n
e
v
o
c
n
i
a
t
r
e
c
r
o
f
d
e
z
i
l
i
t
u
s
i
t
a
h
t
”
A
D
T
I
B
E
d
e
t
s
u
j
d
A
d
e
t
a
d
i
l
o
s
n
o
C
“
f
o
n
o
i
t
i
n
i
f
e
d
e
h
t
m
o
r
f
d
e
d
u
l
c
x
e
e
r
a
s
t
s
o
c
h
c
u
S
.
)
s
e
e
f
e
c
n
e
g
i
l
i
d
d
n
a
s
e
s
n
e
p
x
e
l
a
g
e
l
y
l
i
r
a
m
i
r
p
(
s
n
o
i
t
i
s
i
u
q
c
a
o
t
d
e
t
a
l
e
r
s
t
s
o
c
y
t
r
a
p
-
d
r
i
h
t
s
t
n
e
s
e
r
p
e
r
y
l
l
a
p
i
c
n
i
r
P
)
e
(
.
)
n
o
i
s
s
u
c
s
i
d
r
e
h
t
r
u
f
r
o
f
K
-
0
1
m
r
o
F
n
o
t
r
o
p
e
R
l
a
u
n
n
A
s
i
h
t
n
i
”
a
t
a
D
y
r
a
t
n
e
m
e
l
p
p
u
S
d
n
a
s
t
n
e
m
e
t
a
t
S
.
s
m
e
t
i
h
c
u
s
r
o
f
y
a
l
t
u
o
h
s
a
c
l
a
u
t
c
a
s
’
y
n
a
p
m
o
C
e
h
t
d
n
a
P
A
A
G
h
t
i
w
e
c
n
a
d
r
o
c
c
a
n
i
s
e
v
i
t
n
e
c
n
i
d
r
o
l
d
n
a
l
d
n
a
t
n
e
r
r
o
f
g
n
i
t
n
u
o
c
c
a
n
e
e
w
t
e
b
e
c
n
e
r
e
f
f
i
d
e
h
t
s
t
c
e
l
f
e
r
t
n
e
m
t
s
u
j
d
a
t
n
e
r
d
e
r
r
e
f
e
d
e
h
T
)
d
(
y
r
a
t
n
e
m
e
l
p
p
u
S
d
n
a
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
“
,
8
m
e
t
I
f
o
,
.
C
L
L
m
a
z
z
a
K
,
5
2
e
t
o
N
e
e
S
.
s
e
c
i
v
r
e
s
s
’
y
g
o
l
o
p
m
A
r
o
f
n
o
i
t
a
s
n
e
p
m
o
c
s
a
y
g
o
l
o
p
m
A
o
t
d
e
d
r
a
w
a
m
a
z
z
a
K
f
o
s
e
r
a
h
s
s
t
n
e
s
e
r
p
e
r
y
l
l
a
p
i
c
n
i
r
P
.
n
o
i
s
s
u
c
s
i
d
r
e
h
t
r
u
f
r
o
f
K
-
0
1
m
r
o
F
n
o
t
r
o
p
e
R
l
a
u
n
n
A
s
i
h
t
n
i
”
a
t
a
D
f
o
n
i
a
g
a
d
e
z
i
n
g
o
c
e
r
y
n
a
p
m
o
C
e
h
t
,
K
-
0
1
m
r
o
F
n
o
t
r
o
p
e
R
l
a
u
n
n
A
s
i
h
t
n
i
”
a
t
a
D
y
r
a
t
n
e
m
e
l
p
p
u
S
d
n
a
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
“
,
8
m
e
t
I
f
o
s
n
o
i
t
a
g
i
l
b
O
m
r
e
T
-
g
n
o
L
—
2
1
e
t
o
N
n
i
d
e
b
i
r
c
s
e
d
s
A
.
s
n
o
i
t
i
d
n
o
c
e
c
n
a
m
r
o
f
r
e
p
d
n
a
e
c
i
v
r
e
s
n
o
d
e
s
a
b
t
s
e
v
t
a
h
t
s
t
i
n
u
k
c
o
t
s
d
e
t
c
i
r
t
s
e
r
e
c
n
a
m
r
o
f
r
e
p
d
n
a
s
n
o
i
t
i
d
n
o
c
e
c
i
v
r
e
s
n
o
d
e
s
a
b
t
s
e
v
t
a
h
t
s
t
i
n
u
k
c
o
t
s
d
e
t
c
i
r
t
s
e
r
r
o
f
s
e
g
r
a
h
c
h
s
a
c
-
n
o
N
.
s
e
r
o
t
s
g
n
i
m
r
o
f
r
e
p
r
e
d
n
u
g
n
i
s
o
l
c
o
t
d
e
t
a
l
e
r
d
e
r
r
u
c
n
i
s
e
g
r
a
h
c
y
l
l
a
p
i
c
n
i
r
P
.
s
n
o
i
t
p
o
k
c
o
t
s
o
t
d
e
t
a
l
e
r
s
e
g
r
a
h
c
h
s
a
c
-
n
o
n
s
t
n
e
s
e
r
p
e
R
)
f
(
)
g
(
)
h
(
)
i
(
)
j
(
.
s
t
e
s
s
a
e
l
b
i
g
n
a
t
n
i
f
o
n
o
i
t
a
z
i
t
r
o
m
a
h
s
a
c
-
n
o
n
e
h
t
s
t
n
e
s
e
r
p
e
R
)
l
(
.
s
n
o
i
t
c
a
s
n
a
r
t
g
n
i
c
n
a
n
i
f
e
r
t
b
e
d
n
o
9
4
1
,
3
7
2
$
.
s
t
s
o
c
/
s
t
n
e
m
e
l
t
t
e
s
l
a
g
e
l
g
n
i
r
r
u
c
e
r
-
n
o
N
)
k
(
r
e
h
t
o
d
n
a
y
c
n
a
p
u
c
c
o
,
g
n
i
s
i
t
r
e
v
d
a
g
n
i
d
u
l
c
n
i
s
e
s
n
e
p
x
e
l
l
o
r
y
a
p
-
n
o
n
;
s
t
i
f
e
n
e
b
h
t
l
a
e
h
s
e
d
i
v
o
r
p
y
n
a
p
m
o
C
e
h
t
m
o
h
w
r
o
f
h
g
u
o
l
r
u
f
y
r
a
r
o
p
m
e
t
n
o
s
e
e
y
o
l
p
m
e
r
o
f
s
e
s
n
e
p
x
e
I
9
1
-
D
V
O
C
s
t
n
e
s
e
r
p
e
R
)
q
(
f
o
s
A
.
s
n
o
i
t
a
r
e
p
o
l
a
n
o
i
t
a
n
r
e
t
n
i
s
t
i
f
o
n
o
i
t
r
o
p
l
a
i
t
n
a
t
s
b
u
s
a
f
o
e
l
a
s
d
e
s
o
l
c
s
i
d
y
l
s
u
o
i
v
e
r
p
e
h
t
d
e
s
o
l
c
y
n
a
p
m
o
C
e
h
t
,
e
l
a
S
r
o
f
d
l
e
H
s
e
i
t
i
l
i
b
a
i
L
d
n
a
s
t
e
s
s
A
d
n
a
s
t
e
s
s
A
f
o
n
o
i
t
i
s
o
p
s
i
D
–
6
e
t
o
N
)
p
(
s
t
e
s
s
a
t
e
n
e
h
t
t
s
n
i
a
g
a
8
4
9
,
3
7
$
f
o
e
v
r
e
s
e
r
s
s
o
l
a
d
e
d
r
o
c
e
r
d
n
a
e
l
a
s
r
o
f
d
l
e
h
s
a
s
n
o
i
t
a
r
e
p
o
l
a
n
o
i
t
a
n
r
e
t
n
i
e
h
t
f
o
s
e
i
t
i
l
i
b
a
i
l
d
n
a
s
t
e
s
s
a
e
h
t
d
e
t
r
o
p
e
r
y
n
a
p
m
o
C
e
h
t
,
0
2
0
2
,
1
3
r
e
b
m
e
c
e
D
s
e
s
n
e
p
x
e
e
r
o
t
s
n
o
t
r
o
p
e
R
l
a
u
n
n
A
s
i
h
t
n
i
”
a
t
a
D
y
r
a
t
n
e
m
e
l
p
p
u
S
d
n
a
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
“
,
8
m
e
t
I
f
o
,
s
t
n
e
m
e
r
u
s
a
e
M
e
u
l
a
V
r
i
a
F
,
1
2
e
t
o
N
e
e
s
(
l
w
o
b
h
c
n
u
P
n
i
t
s
e
r
e
t
n
i
p
i
h
s
r
e
n
w
o
f
o
e
l
a
s
n
o
s
s
o
l
a
s
t
n
e
s
e
r
p
e
R
)
s
(
s
e
r
o
t
s
y
t
i
C
y
t
r
a
P
d
e
s
a
b
-
n
a
i
d
a
n
a
C
s
t
i
f
o
e
l
a
s
s
’
y
n
a
p
m
o
C
e
h
t
o
t
d
e
t
a
l
e
r
l
l
i
w
d
o
o
g
f
o
f
f
o
-
e
t
i
r
w
a
d
n
a
,
t
n
e
m
p
i
u
q
e
d
n
a
t
n
a
l
p
,
y
t
r
e
p
o
r
p
n
i
a
t
r
e
c
d
n
a
)
n
o
i
s
s
u
c
s
i
d
r
e
h
t
r
u
f
r
o
f
K
-
0
1
m
r
o
F
d
n
a
s
n
o
i
t
a
r
e
p
O
f
o
t
n
e
m
e
t
a
t
S
d
e
t
a
d
i
l
o
s
n
o
C
e
h
t
n
o
t
e
n
,
e
s
n
e
p
x
e
r
e
h
t
O
n
i
d
e
t
r
o
p
e
r
s
i
h
c
i
h
w
,
s
e
r
o
t
s
y
t
i
C
y
t
r
a
P
d
e
s
a
b
-
n
a
i
d
a
n
a
C
s
t
i
f
o
e
l
a
s
n
o
n
i
a
g
n
o
i
l
l
i
m
9
.
2
$
a
d
e
d
r
o
c
e
r
y
n
a
p
m
o
C
e
h
T
)
r
(
e
m
o
c
n
I
)
s
s
o
L
(
e
v
i
s
n
e
h
e
r
p
m
o
C
g
n
i
y
l
p
p
a
y
b
d
e
n
i
m
r
e
t
e
d
e
r
e
w
s
t
n
e
m
t
s
u
j
d
a
e
h
t
f
o
h
c
a
e
r
o
f
s
t
c
a
p
m
i
x
a
t
e
h
T
.
s
t
n
e
m
t
s
u
j
d
a
x
a
t
-
e
r
p
e
h
t
f
o
h
c
a
e
r
o
f
s
t
c
a
p
m
i
x
a
t
c
i
f
i
c
e
p
s
e
h
t
g
n
i
d
u
l
c
x
e
r
e
t
f
a
t
i
f
e
n
e
b
/
e
s
n
e
p
x
e
x
a
t
e
m
o
c
n
i
s
t
n
e
s
e
r
p
e
R
)
n
(
.
d
e
d
r
o
c
e
r
e
r
e
w
s
t
n
e
m
t
s
u
j
d
a
e
h
t
h
c
i
h
w
n
i
s
e
i
t
i
t
n
e
l
a
g
e
l
c
i
f
i
c
e
p
s
e
h
t
r
o
f
s
e
t
a
r
x
a
t
e
m
o
c
n
i
e
v
i
t
c
e
f
f
e
e
h
t
s
t
n
e
m
t
s
u
j
d
a
x
a
t
-
e
r
p
e
h
t
o
t
t
b
e
d
o
t
d
e
t
a
l
e
r
s
e
g
r
a
h
c
e
d
u
l
c
n
i
s
r
a
e
y
n
i
a
t
r
e
c
,
y
l
l
a
n
o
i
t
i
d
d
A
.
s
m
u
i
m
e
r
p
l
l
a
c
d
e
z
i
l
a
t
i
p
a
c
d
n
a
s
t
n
u
o
c
s
i
d
e
c
n
a
u
s
s
i
l
a
n
i
g
i
r
o
,
s
t
s
o
c
g
n
i
c
n
a
n
i
f
d
e
r
r
e
f
e
d
f
o
n
o
i
t
a
z
i
t
r
o
m
a
h
s
a
c
-
n
o
n
e
h
t
s
e
d
u
l
c
n
I
)
m
(
.
n
o
i
s
s
u
c
s
i
d
r
e
h
t
r
u
f
r
o
f
)
c
(
e
t
o
n
e
e
S
.
s
g
n
i
c
n
a
n
i
f
e
r
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
r
a
e
y
e
h
t
g
n
i
r
u
d
s
e
g
r
a
h
c
t
n
e
m
r
i
a
p
m
i
s
e
l
b
i
g
n
a
t
n
i
d
n
a
l
l
i
w
d
o
o
g
x
a
t
-
e
r
p
h
s
a
c
-
n
o
n
a
d
e
z
i
n
g
o
c
e
r
y
n
a
p
m
o
C
e
h
t
,
n
o
i
t
a
z
i
l
a
t
i
p
a
c
t
e
k
r
a
m
n
i
e
n
i
l
c
e
d
d
e
n
i
a
t
s
u
s
a
f
o
t
l
u
s
e
r
a
s
A
)
o
(
.
)
n
o
i
s
s
u
c
s
i
d
r
e
h
t
r
u
f
r
o
f
K
-
0
1
m
r
o
F
n
o
t
r
o
p
e
R
l
a
u
n
n
A
s
i
h
t
n
i
”
a
t
a
D
y
r
a
t
n
e
m
e
l
p
p
u
S
d
n
a
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
“
,
8
m
e
t
I
f
o
,
l
l
i
w
d
o
o
G
,
4
e
t
o
N
e
e
s
(
.
y
l
e
v
i
t
c
e
p
s
e
r
,
0
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
n
a
41
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
Our Company
We are the leading party goods company by revenue in North America and, we believe, the largest vertically
integrated supplier of decorated party goods globally by revenue. The Company is a popular one-stop shopping
destination for party supplies, balloons, and costumes. In addition to being a great retail brand, the Company is a
global, world-class organization that combines state-of-the-art manufacturing and sourcing operations, and
sophisticated wholesale operations complemented by a multi-channel retailing strategy and e-commerce retail
operations. The Company is a leading player in its category and vertically integrated in its breadth and depth. The
Company designs, manufactures, sources and distributes party goods, including paper and plastic tableware, metallic
and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery throughout the world.
The Company’s retail operations include 831 specialty retail party supply stores (including franchise stores)
throughout the United States and Mexico operating under the names Party City and Halloween City, and e-
commerce websites, including through the domain name PartyCity.com.
In addition to our retail operations, we are also one of the largest global designers, manufacturers and
distributors of decorated consumer party products, with items found in retail outlets worldwide, including
independent party supply stores, mass merchants, grocery retailers, e-commerce merchandisers and dollar stores.
Our products are available or licensed in over 100 countries with the United Kingdom (“U.K.”), Canada, Germany,
Mexico and Australia among the largest end markets for our products outside of the United States.
How We Assess the Performance of Our Company
In assessing the performance of our company, we consider a variety of performance and financial measures
for our two operating segments, Retail and Wholesale. These key measures include revenues and gross profit,
comparable retail same-store sales and operating expenses. We also review other metrics such as adjusted net
income (loss), adjusted net income (loss) per common share – diluted, and adjusted EBITDA. For a discussion of
our use of these measures and a reconciliation of adjusted net income (loss) and adjusted EBITDA to net income
(loss), please refer to Item 6, “Selected Consolidated Financial Data.”
Segments
Our retail segment generates revenue primarily through the sale of our party supplies, which are sold under the
Amscan and Anagram brand names through Party City, Halloween City and PartyCity.com. During 2020, 82% of
the product that was sold by our retail segment was supplied by our wholesale segment and 26% of the product that
was sold by our retail segment was self-manufactured.
Our wholesale revenues are generated from the sale of decorated party goods for all occasions, including
paper and plastic tableware, accessories and novelties, costumes, metallic and latex balloons and stationery. Our
products are sold at wholesale to party goods superstores (including our franchise stores), other party goods retailers,
mass merchants, independent card and gift stores, dollar stores and e-commerce merchandisers.
Intercompany sales between the Wholesale and the Retail segment are eliminated, and the wholesale profits
on intercompany sales are deferred and realized at the time the merchandise is sold to the retail consumer. For
segment reporting purposes, certain general and administrative expenses and art and development costs are allocated
based on total revenues.
Financial Measures
Revenues. 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. Retail e-commerce sales are recognized when the consumer receives the
product as control transfers upon delivery. We estimate future retail sales returns and record a provision in the
period in which the related sales are recorded based on historical information. Retail sales are reported net of taxes
collected.
42
Under the terms of our agreements with our franchisees, we provide 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.
For most of our wholesale sales, control transfers upon the shipment of the product as: 1) legal title transfers
on such date and 2) we have a present right to payment at such time. Wholesale sales returns are not significant as
we generally only accept the return of goods that were shipped to the customer in error or that were damaged when
received by the customer. Additionally, due to our extensive history operating as a leading party goods wholesaler,
we have sufficient history with which to estimate future sales returns and we use the expected value method to
estimate such activity.
Intercompany sales from our wholesale operations to our retail stores are eliminated in our consolidated total
revenues.
Comparable Retail Same-Store Sales. The growth in same-store sales represents the percentage change in
same-store sales in the period presented compared to the prior year. Same-store sales exclude the net sales of a store
for any period if the store was not open during the same period of the prior year. Acquired stores are excluded from
same-store sales until they are converted to the Party City format and included in our sales for the comparable period
of the prior year. Comparable sales are calculated based upon stores that were open at least thirteen full months as of
the end of the applicable reporting period and do not exclude stores closed due to state regulations regarding
COVID-19. When a store is reconfigured or relocated within the same general territory, the store continues to be
treated as the same store. If, during the period presented, a store was closed, sales from that store up to and including
the closing day are included as same-store sales as long as the store was open during the same period of the prior
year. Same-store sales for the Party City brand include North American retail e-commerce sales.
Cost of Sales. Cost of sales at wholesale reflects the production costs (i.e., raw materials, labor and overhead)
of manufactured goods and the direct cost of purchased goods, inventory shrinkage, inventory adjustments, inbound
freight to our manufacturing and distribution facilities, distribution costs and outbound freight to get goods to our
wholesale customers. At retail, cost of sales reflects the direct cost of goods purchased from third parties and the
production or purchase costs of goods acquired from our wholesale segment. Retail cost of sales also includes
inventory shrinkage, inventory adjustments, inbound freight, occupancy costs related to store operations (such as
rent and common area maintenance, utilities and depreciation on assets) and all logistics costs associated with our
retail e-commerce business.
Our cost of sales increases in higher volume periods as the direct costs of manufactured and purchased goods,
inventory shrinkage and freight are generally tied to net sales. However, other costs are largely fixed or vary based
on other factors and do not necessarily increase as sales volume increases. Changes in the mix of our products may
also impact our overall cost of sales. The direct costs of manufactured and purchased goods are influenced by raw
material costs (principally paper, petroleum-based resins and cotton), domestic and international labor costs in the
countries where our goods are purchased or manufactured and logistics costs associated with transporting our goods.
We monitor our inventory levels on an on-going basis in order to identify slow-moving goods.
Cost of sales related to sales from our wholesale segment to our retail segment are eliminated in our
consolidated financial statements.
Wholesale Selling Expenses. Wholesale selling expenses include the costs associated with our wholesale sales
and marketing efforts, including merchandising and customer service. Costs include the salaries and benefits of the
related work force, including sales-based bonuses and commissions. Other costs include catalogues, showroom rent,
travel and other operating costs. Certain selling expenses, such as sales-based bonuses and commissions, vary in
proportion to sales, while other costs vary based on other factors, such as our marketing efforts, or are largely fixed
and do not necessarily increase as sales volumes increase.
Retail Operating Expenses. Retail operating expenses include all of the costs associated with retail store
operations, excluding occupancy-related costs included in cost of sales. Costs include store payroll and benefits,
advertising, supplies and credit card costs. Retail expenses are largely variable but do not necessarily vary in
proportion to net sales.
43
Franchise Expenses. Franchise expenses include the costs associated with operating our franchise network,
including salaries and benefits of the administrative work force and other administrative costs. These expenses
generally do not vary proportionally with royalties and franchise fees.
General and Administrative Expenses. General and administrative expenses include all operating costs not
included elsewhere in the statement of operations and comprehensive (loss) income. These expenses include payroll
and other expenses related to operations at our corporate offices, including occupancy costs, related depreciation and
amortization, legal and professional fees.. These expenses generally do not vary proportionally with net sales.
Art and Development Costs. Art and development costs include the costs associated with art production,
creative development and product management. Costs include the salaries and benefits of the related work force.
These expenses generally do not vary proportionally with net sales.
Adjusted EBITDA. We define EBITDA as net income (loss) before interest expense, net, income taxes,
depreciation and amortization. We define Adjusted EBITDA as EBITDA, as further adjusted to eliminate the impact
of certain items that we do not consider indicative of our core operating performance. We caution investors that
amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar
measures disclosed by other issuers, because not all issuers calculate Adjusted EBITDA in the same manner. We
believe that Adjusted EBITDA is an appropriate measure of operating performance in addition to EBITDA because
we believe it assists investors in comparing our performance across reporting periods on a consistent basis by
eliminating the impact of items that we do not believe are indicative of our core operating performance. In addition,
we use Adjusted EBITDA: (i) as a factor in determining incentive compensation, (ii) to evaluate the effectiveness of
our business strategies, and (iii) because the credit facilities use Adjusted EBITDA to measure compliance with
certain covenants.
Adjusted Net Income (Loss). Adjusted net income (loss) represents our net income (loss), adjusted for, among
other items, intangible asset amortization, non-cash purchase accounting adjustments, amortization of deferred
financing costs and original issue discounts, equity-based compensation and impairment charges. We present
adjusted net income because we believe it assists investors in comparing our performance across reporting periods
on a consistent basis by eliminating the impact of items that we do not believe are indicative of our core operating
performance.
Adjusted Net Income (Loss) Per Common Share – Diluted. Adjusted net income (loss) per common share –
diluted represents adjusted net income (loss) divided by the Company’s diluted weighted average common shares
outstanding. We present the metric because we believe it assists investors in comparing our per share performance
across reporting periods on a consistent basis by eliminating the impact of items that we do not believe are indicative
of our core operating performance.
Factors Affecting Our Results
Important events that have impacted or will impact the results presented in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” include:
Inventory Disposal. During the fourth quarter of 2020, the Company continued to make progress in
improving inventory levels across its stores and distribution network. Consistent with the strategy of rationalizing
in-store SKU count and improving working capital velocity, the Company has updated its seasonal assortment
strategy to target higher in-season sell-through of merchandise and reduce annual inventory carry-over. The more
edited and curated assortments are expected to improve the customer experience by making stores easier to shop and
product selections more relevant to consumers, while also improving the efficiency of inventory management and
reducing working capital needs. As a result, the Company disposed of $88,358 in inventory during the fourth quarter
of 2020 that will not be required in future seasons.
44
Sale of International Operations. In January 2021, the Company closed the previously disclosed sale of a
substantial portion of its international operations. The announced sale had a total transaction value of approximately
$50.6 million. As of December 31, 2020, the assets and liabilities of the international operations are considered held
for sale. As a result, the company recorded a loss reserve of $73,948.
Store Impairment and Restructuring Charges. During the years ended December 31, 2020 and 2019, the
Company performed a comprehensive review of its store locations aimed at improving the overall productivity of
such locations (“store optimization program”) and, after careful consideration and evaluation of the store locations,
the Company made the decision to accelerate the optimization of its store portfolio. In 2019, 55 stores were
identified for closure, out of which 35 stores were closed in 2019 and 20 stores were closed in January 2020. In
2020, 21 stores identified for closure in the first quarter of 2020 and were closed in the third quarter. These closings
should provide the Company with capital flexibility to expand into underserved markets. In addition, the Company
evaluated the recoverability of long-lived assets at the open stores and recorded an impairment charge associated
with the operating lease asset and property, plant and equipment for open stores where sales were affected due to the
outbreak of, and local, state and federal governmental responses to, COVID-19. In conjunction with the store
optimization program and store impairment, during the years ended December 31, 2020 and 2019, the Company
recorded charges as detailed in Note 3 – Store Impairment and Restructuring Charges, of Item 8, “Financial
Statements and Supplementary Data” in this Annual Report on Form 10-K.
COVID-19. Our business, operations, financial condition and liquidity have been and may continue to be
materially and adversely affected by COVID-19. Further, the disruption to the global economy and to our business,
along with the decline in our stock price, may negatively impact the carrying value of certain assets, including
inventories, accounts receivable, intangibles and goodwill. The full extent to which COVID-19 and the measures to
contain it will impact our business, operations, financial condition and liquidity will depend on the severity and
duration of the COVID-19 outbreak and other future developments related to the response to the virus, all of which
are highly uncertain, and we expect this uncertainty to continue in 2021. Our results of operations may be affected
by the uncertainty surrounding the impact of the COVID-19 pandemic, and we will continue to actively monitor the
impact of the COVID-19 pandemic on our expected losses. We have proactively managed our liquidity profile
throughout the fiscal year and expect to continue to do so going forward. We expect to rely on cash on hand, cash
generated by operations and borrowings available under our New ABL Facility to meet our working capital needs.
Goodwill and Intangibles Impairment. During the three months ended March 31, 2020, the Company
identified intangible assets’ impairment indicators associated with its market capitalization and significantly reduced
customer demand for its products due to COVID-19. As a result, the Company performed interim impairment tests
on the goodwill at its retail and wholesale reporting units and its other indefinite lived intangible assets as of March
31, 2020. The interim impairment tests were performed using an income approach. The Company recognized non-
cash pre-tax goodwill impairment charges at March 31, 2020 of $253,110 and $148,326 against the goodwill
associated with its retail and wholesale reporting units, respectively. In addition, during the three months ended
March 31, 2020, the Company recorded an impairment charge of $131,287 and $3,925 on its Party City and
Halloween City tradenames, respectively. During the three months ended September 30, 2020 the Company has
determined that the fair value of certain indefinite-lived intangible assets is lower than the related book values.
Additionally, for certain long-lived assets it is more likely than not that those long-lived assets will be disposed
significantly before the end of their previously estimated useful lives. As a result, impairment charges of $11,032,
$2,423 and $31,277 were recorded in the third quarter on its business indefinite-lived trade name intangibles, finite-
lived intangibles and tangible assets, respectively. During the three months ended December 31, 2020, there was no
goodwill or intangibles impairment.
During the three months ended September 30, 2019, and the three months ended December 31, 2019, the
Company identified an impairment indicator associated with its market capitalization and performed impairment
tests on the goodwill at its wholesale and retail reporting units and its other indefinite lived intangible assets as of
September 30, 2019 and December 31, 2019. The Company recognized non-cash pre-tax goodwill impairment
charges at September 30, 2019 of $224,100 and $35,000 and at December 31, 2019, of $271,500 and $25,400,
against the goodwill associated with its retail and wholesale reporting units, respectively. During 2019, there was no
impairment on the Party City trade name and the Company recorded a Halloween City trade name impairment
charge of $6,575.
45
Sale/Leaseback Transaction. In June 2019, the Company 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. Simultaneously, the Company entered into twenty-year leases
for each of the facilities. The aggregate sale price was $128.0 million and, during the year ended December 31,
2019, the Company recorded a $58.4 million gain on the sale, net of transaction costs, in the Company’s condensed
consolidated statement of operations and comprehensive loss.
Sale of Canadian-based Party City Stores. On October 1, 2019, the Company sold its Canadian-based Party
City stores to a Canadian-based retailer for $131.7 million and entered into a 10-year supply agreement under which
the acquirer agreed to purchase product from the Company for such Party City stores, as well as the acquirer’s other
stores. The Company used the net proceeds to paydown debt.
Loans and Long-Term Obligations. As referenced in Note 11 – Loans and Notes Payable of Item 8, “Financial
Statements and Supplementary Data” in this Annual Report on Form 10-K during April 2019, the Company
amended the ABL Facility. Such amendment removed the seasonal component and made the ABL Facility a $640
million facility with no seasonal modification component. The Company further reduced the ABL revolving
commitments and prepaid the outstanding ABL revolving loans, in an aggregate principal amount equal to $44,000
in accordance with the ABL Facility credit agreement.
As detailed in Note 12 – Long-Term Obligations, during August 2018, the Company executed a refinancing of
its debt portfolio and issued $500 million of new senior notes at an interest rate of 6.625%. The notes will mature in
August 2026. The Company used the proceeds from the notes to: (i) reduce the outstanding balance under its
existing ABL Facility by $90 million and (ii) voluntarily prepay $400 million of the outstanding balance under its
existing Term Loan Credit Agreement. Additionally, as part of the refinancing, the Company extended the maturity
of the ABL Facility to August 2023.
Further, in July 2020, the Company and certain of its direct or indirect subsidiaries, including PCHI, Anagram
Holdings, LLC, a Delaware limited liability company and wholly owned direct subsidiary of PCHI (“Anagram
Holdings”), and Anagram International, Inc., a Minnesota corporation and wholly owned direct subsidiary of
Anagram Holdings, completed certain refinancing transactions, including, among other things: (i) the exchange of
$327,076 of 6.125% Senior Notes due 2023 (the “2023 Notes”) and $392,746 of 6.625% Senior Notes due 2026 (the
“2026 Notes” and, together with the 2023 Notes, the “Existing Notes”) issued by PCHI, in each case tendered in the
Company’s offers to exchange pursuant to the terms described in a confidential offering memorandum, for (A)
$156,669 of Senior Secured First Lien Floating Rate Notes due 2025 (the “First Lien Party City Notes”) issued by
PCHI; (B) $84,687 of 10.00% PIK/Cash Senior Secured Second Lien Notes due 2026 (the “Second Lien Anagram
Notes”) issued by Anagram Holdings and Anagram International (together, the “Anagram Issuers”); and (C)
15,942,551 shares of the Company’s common stock, $0.01 par value per share (the “Common Stock”); (ii) the
issuance of $110,000 in the aggregate of 15.00% PIK/Cash Senior Secured First Lien Notes due 2025 (the “First
Lien Anagram Notes”) by the Anagram Issuers and an additional $5,000 of First Lien Party City Notes in
connection with a rights offering and a private placement, as applicable; and (iii) the solicitations of certain consents
with respect to the indentures governing Existing Notes.
Acquisitions. During 2018, we acquired 58 franchise and independent stores. The acquisitions increased net
sales for our retail segment by approximately $67 million versus 2017. Additionally, these acquisitions decreased
our third-party wholesale sales by $20 million as post-acquisition wholesale sales to such stores are now eliminated
as intercompany sales.
Tax. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (“the CARES
Act”) was signed into law. The CARES Act is a $2 trillion legislative package intended to provide economic relief
to companies impacted by the COVID-19 pandemic, and it enacted a number of Internal Revenue Code
modifications which are of particular benefit to us, including: (1) 5-year net operating loss carryback, (2) temporary
relaxation of the limitation on interest deductions by raising for 2019 and 2020 the business interest expense
limitation from 30% to 50% of our Adjusted Taxable Income, and by allowing for the option to use the higher 2019
Adjusted Taxable Income to compute the 2020 limitation, (3) qualified improvement property eligible for 100%
bonus depreciation, (4) employee retention tax credits, and (5) the deferral of the payment of most of the employer
share of social security payroll tax incurred in 2020 until 2021 (50%) and 2022 (50%).
46
Results of Operations
The following tables set forth our operating results and operating results as a percentage of total revenues for
the years ended December 31, 2020 and 2019.
Fiscal Year Ended December 31,
2020
2019
(Dollars in thousands, except per share data)
$ 1,843,444 99.6 % $ 2,339,510 99.6 %
7,246 0.4
9,279 0.4
1,850,690 100.0 2,348,789 100.0
50,121 2.7
387,398 20.9
12,146 0.7
210,244 11.4
17,638 1.0
2,932 0.2
— 0.0
22,449 1.2
73,948 4.0
581,380 31.4
1,369,935 74.0 1,500,633 63.9
67,103 2.9
440,395 18.7
13,152 0.6
177,672 7.6
23,203 1.0
10,736 0.5
(58,381 ) (2.5 )
29,038 1.2
— 0.0
562,631 24.0
2,728,191 147.4 2,766,182 117.8
(417,393 ) (17.8 )
114,899 4.9
1,871 0.1
— 0.0
(534,163 ) (22.7 )
(1,305 ) (0.1 )
(532,858 ) (22.7 ) %
(877,501 ) (47.4 )
77,043 4.2
3,715 0.2
(273,149 ) (14.8 )
(685,110 ) (37.0 )
(156,653 ) (8.5 )
(528,457 ) (28.6 ) %
(219 ) —
(363 ) —
$
(528,238 ) (28.5 ) % $
(532,495 ) (22.7 ) %
$
$
(5.24 )
$
(5.71 )
(5.24 )
$
(5.71 )
Revenues:
Net sales
Royalties and franchise fees
Total revenues
Expenses:
Cost of sales
Wholesale selling expenses
Retail operating expenses
Franchise expenses
General and administrative expenses
Art and development costs
Development stage expenses
Gain on sale/leaseback transaction
Store impairment and restructuring charges
Loss on assets held for sale
Goodwill, intangibles and long-lived assets impairment
Total expenses
(Loss) income from operations
Interest expense, net
Other expense, net
(Gain) on debt refinancing
(Loss) income before income taxes
Income tax (benefit) expense
Net (loss) income
Less: Net loss attributable to noncontrolling interests
Net (loss) income attributable to common
shareholders of
Party City Holdco Inc.
Net (loss) income per share attributable to common
shareholders of Party City Holdco Inc.—basic
Net (loss) income per share attributable to common
shareholders of Party City Holdco Inc.—diluted
47
Revenues
Total revenues for 2020 were $1,850.7 million and were $498.1 million, or 21.2% lower than 2019. The
following table sets forth the Company’s total revenues for the years ended December 31, 2020 and 2019.
Net Sales:
Wholesale
Eliminations
Net wholesale
Retail
Total net sales
Royalties and franchise fees
Total revenues
Fiscal Year Ended December 31,
2020
2019
Dollars in
Thousands
Percentage of
Total
Revenues
Dollars in
Thousands
Percentage of
Total
Revenues
$ 940,228
(471,863 )
468,365
1,375,07
50.8 % $1,240,026
(642,652 )
(25.5 )
597,374
25.3
52.8 %
(27.4 )
25.4
9
74.3
1,742,136
74.2
1,843,44
4
7,246
1,850,69
99.6
0.4
2,339,510
9,279
99.6
0.4
$
0
100.0 % $2,348,789
100.0 %
Retail
Retail net sales during 2020 were $1,375.1 million and decreased $367.1 million, or 21.1%, compared to
2019. Retail net sales at our Party City stores totaled $1,367.4 million and were $324.1 million, or 19.2%, lower
than 2019 primarily due to the unfavorable impact of COVID-19 in the second quarter of 2020 as stores were closed
due to state mandated restrictions, the sale of our 65 Canadian retail stores prior to the Halloween season, the impact
of reduced sales from 77 stores identified for closure in conjunction with our 2019 store optimization program, and
impact from reduced sales from temporary Halloween City stores. Sales at our temporary Halloween stores
(principally Halloween City) totaled $6.3 million and were $40.9 million lower than 2019, primarily due to
reduction in store count (25 in 2020 versus 256 in 2019) During 2020, sales at other store formats totaled $1.4
million.
Same-store sales for the Party City brand decreased by 17.0% during 2020. Same-store sales percentages were
not affected by foreign currency as such percentages are calculated in local currency.
Wholesale
Wholesale net sales during 2020 totaled $468.4 million and were $129.0 million, or 21.6 %, lower than 2019.
Net sales to third parties totaled $165.8 million and were $66.0 million, or 28.5%, lower than during 2019. The
decrease is primarily due to the unfavorable impact of COVID-19 as business closures due to state mandated
restrictions as well as reduced social activities negatively impacted sales. Results also reflects closures and
acquisitions of franchise stores throughout 2020. Net sales of metallic balloons to domestic distributors and retailers
(including our franchisee network) totaled $78.3 million during 2020 and were $9.2 million, or 10.6%, lower than
during 2019 primarily due to interruption of manufacturing operations related to COVID-19 restrictions and other
business closures.
Intercompany sales to our retail affiliates totaled $471.9 million during 2020 and were $170.8 million lower
than during the prior year. The decrease in 2020 intercompany sales principally reflects a lower store count
compared to 2019 and a reduction in purchases impacted by COVID-19 temporary store closures, an initiative to
reduce the overall product assortment, the sale of stores to Canadian tire, and the closure of retail stores in 2019 and
2020. The intercompany sales of our wholesale segment are eliminated against the intercompany purchases of our
retail segment in the consolidated financial statements. Intercompany sales represented 51.8% of total wholesale
sales during 2020, compared to 51.8% during 2019. The intercompany sales of our wholesale segment are
eliminated against the intercompany purchases of our retail segment in the consolidated financial statements.
48
Royalties and franchise fees
Royalties and franchise fees during 2020 totaled $7.2 million and were $2.0 million lower than during 2019,
reflecting the decreasing franchise store count as a result of our franchise store acquisitions, along with lower sales
at franchise stores.
Gross Profit
The following table sets forth the Company’s gross profit for the years ended December 31, 2020 and
December 31, 2019.
Fiscal Year Ended December 31,
2019
2020
Retail
Wholesale
Total
Dollars in
Thousands
$ 400,738
74,256
$ 474,994
Percentage
of Net Sales
Dollars in
Thousands
29.1 % $ 696,439
15.9
142,438
25.7 % $ 838,877
Percentage
of Net Sales
40.0 %
23.8
35.9 %
The gross profit margin on net sales at retail during 2020 was 29.1% or 1,083 basis points lower than 40.0% during
2019. The decrease is primarily attributable to year-end inventory disposal, deleverage of store occupancy costs,
along with markdowns related to the Company’s “store optimization program”, partially offset by reduction of
spend on promotions. The manufacturing share of shelf at retail (i.e., the percentage of our retail product cost of
sales manufactured by our wholesale segment) increased from 23.5% in 2019 to 26.0% during 2020, driven by the
increased balloon production in our wholesale business. Our wholesale share of shelf at our Party City stores and our
North American retail e-commerce operations (i.e., the percentage of our retail product cost of sales supplied by our
wholesale segment) was 82.1% during 2020 compared to 79.6% during 2019.
The gross profit on net sales at wholesale during 2020 and 2019 was 15.9% and 23.8%, respectively. The
decrease in comparison to 2019 is primarily due to inventory write-downs attributable to discontinuation of the gift
line and the updated assortment strategy at our retail stores, as well as deleverage of distribution and manufacturing
costs on the lower sales volumes.
Operating expenses
Wholesale selling expenses totaled $50.1 million during 2020 compared to $67.1 million during 2019. The
decrease of $17.0 million, or 30.0%, was largely due to lower payroll costs as well as lower travel, trade show and
commission expenses.
Retail operating expenses during 2020 were $387.4 million and were $53.0 million, or 13.7%, lower than in
2019. The decrease was principally due to disciplined cost controls, with lower advertising expense, lower store
payroll due to lower store count from the 2019 store optimization, along with lower variable costs related to reduced
sales impacted by COVID-19 temporary store closures. Retail operating expenses were 28.2% and 25.3% of net
retail sales during 2020 and 2019, respectively.
Franchise expenses during 2020 and 2019 were $12.1 million and $13.2 million respectively.
General and administrative expenses during 2020 totaled $210.2 million and were $32.6 million, or 18.3%,
higher than in 2019. The increase for 2020 was principally due to higher professional fees, increased depreciation,
stock compensation, higher bad debt expense, and new executive leadership compensation partially offset by lower
employee payroll from furloughs associated with the COVID-19 pandemic and less travel. General and
administrative expenses as a percentage of total revenues were 11.4% and 7.6% during 2020 and 2019, respectively.
49
Art and development costs were consistent at $17.6 million and $23.2 million during 2020 and 2019,
respectively, consistent at 1.0% of total revenue. The decrease in 2020 was mainly due to lower employee payroll
from furloughs, lower freelance spending and reductions related to the discontinuation of the gift line.
Development stage expenses represent start-up costs related to Kazzam (see Note 25, Kazzam LLC., of Item
8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion).
Interest expense, net
Interest expense, net, totaled $77.0 million during 2020, compared to $114.9 million during 2019. The
decrease in interest principally reflects lower amounts of debt outstanding as a result of the Company’s July 2020
refinancing (see Note — 11, Loans and Notes Payable, and Note 12 — Long-Term Obligations, of Item 8,
“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion) as well
as 2020 paydown of debt from proceeds from the 2019 sale of Canadian stores.
Other expense, net
Other expense, net, totaled $3.7 million during 2020 and $1.9 million during 2019.
(Gain) on debt refinancing
As described in Note 12 — Long-Term Obligations, of Item 8, “Financial Statements and Supplementary Data” in
this Annual Report on Form 10-K, the Company recognized a gain of $273.1 million on debt refinancing
transactions.
Income tax expense
The effective income tax rate for the year ended December 31, 2020, 22.9%, is different from the statutory rate,
21%, primarily due to the goodwill impairment charge of $401.4 million, offset by the CODI of $283.5 million
excluded from taxable income, and the benefit from the CARES Act 5-year NOL carryback. See Note 17, Income
Tax, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further
discussion.
Gain on sale/leaseback transaction
In June 2019, the Company reported a $58.4 million gain from the sale and leaseback of its main distribution
center in Chester, New York and its metallic balloons manufacturing facility in Eden Prairie, Minnesota. The
aggregate sale price for the three properties was $128.0 million. Simultaneous with the sale, the Company entered
into twenty-year leases for each of the facilities.
Store impairment and restructuring charges
During the years ended December 31, 2020 and 2019, the Company performed a comprehensive review of its
store locations aimed at improving the overall productivity of such locations (“store optimization program”) and,
after careful consideration and evaluation of the store locations, the Company made the decision to accelerate the
optimization of its store portfolio. In 2019, 55 stores were identified for closure, out of which 35 stores were closed
in 2019 and 20 stores were closed in January 2020. In 2020, 21 stores identified for closure in the first quarter of
2020 and were closed in the third quarter. These closings provided the Company with capital flexibility to expand
into underserved markets. In addition, the Company evaluated the recoverability of long lived assets at the open
stores and recorded an impairment charge associated with the operating lease asset and property, plant and
equipment for open stores where sales were affected due to the outbreak of, and local, state and federal
governmental responses to, COVID-19. In conjunction with the store optimization program, during the 2020 and
2019, the Company recorded a$15.5 and a $14.9 million impairment charges for its operating lease asset, a $2.1 and
a $4.7 million impairment charges for property, plant and equipment and a $4.9 and a $8.7 million of labor and
other costs related to closing the stores, respectively. See Note 3, Store Impairment and Restructuring Charges, of
Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion.
50
Impairment of goodwill and intangible assets
In both 2020 and 2019, the Company recorded non-cash pre-tax goodwill and intangibles impairment charges
were the result of a sustained decline in the Company's market capitalization and, in early 2020, due to significantly
reduced customer demand for its products due to COVID-19. The improved market capitalization later in 2020
resulted in the decrease of impairment versus 2019.
The following tables set forth our operating results and operating results as a percentage of total revenues for
the years ended December 31, 2019 and 2018:
Revenues:
Net sales
Royalties and franchise fees
Total revenues
Expenses:
Cost of sales
Wholesale selling expenses
Retail operating expenses
Franchise expenses
General and administrative expenses
Art and development costs
Development stage expenses
Gain on sale/leaseback transaction
Store impairment and restructuring charges
Goodwill and intangibles impairment
Total expenses
Income from operations
Interest expense, net
Other expense, net
Income before income taxes
Income tax expense(benefit)
Net income
Add: Net income attributable to redeemable
securities holder
Less: Net loss attributable to noncontrolling
interests
Net income attributable to common
shareholders of Party City Holdco Inc.
Fiscal Year Ended December 31,
2018
2019
(Dollars in thousands, except per share data)
$ 2,339,510
9,279
2,348,789
99.6 % $ 2,416,442 99.5 %
0.4
100.0
11,073 0.5
2,427,515 100.0
1,500,633
67,103
440,395
13,152
177,672
23,203
10,736
(58,381 )
29,038
562,631
2,766,182
(417,393 )
114,899
1,871
(534,163 )
(1,305 )
(532,858 )
1,435,358 59.1
63.9
71,502 2.9
2.9
425,996 17.5
18.7
13,214 0.5
0.6
172,764 7.1
7.6
23,388 1.0
1.0
7,008 0.3
0.5
— —
(2.5 )
— —
1.2
— —
24.0
2,149,230 88.5
117.8
278,285 11.5
(17.8 )
105,706 4.4
4.9
10,982 0.5
0.0
161,597 6.7
(22.7 )
38,778 1.6
(0.1 )
(22.7 ) 122,819 5.1
—
—
409 —
(363 )
—
(31 ) —
$ (532,495 )
(22.7 ) % $ 123,259 5.1 %
Net income per share attributable to common
shareholders of Party City Holdco Inc.—basic
Net income per share attributable to common
shareholders of Party City Holdco Inc.—diluted
$
$
(5.71 )
$
1.28
(5.71 )
$
1.27
51
Revenues
Total revenues for 2019 were $2,348.8 million and were $78.7 million, or 3.2%, lower than 2018. The
following table sets forth the Company’s total revenues for the years ended December 31, 2019 and 2018.
Fiscal Year Ended December 31,
2019
2018
Dollars in
Thousands
Percentage of
Total
Revenues
Dollars in
Thousands
Percentage of
Total
Revenues
$ 1,240,026
(642,652 )
597,374
1,742,136
2,339,510
9,279
$ 2,348,789
52.8 % $ 1,325,490
(711,882 )
(27.4 )
613,608
25.4
1,802,834
74.1
2,416,442
99.6
11,073
0.4
100.0 % $ 2,427,515
54.6 %
(29.3 )
25.3
74.3
99.5
0.5
100.0 %
Net Sales:
Wholesale
Eliminations
Net wholesale
Retail
Total net sales
Royalties and franchise fees
Total revenues
Retail
Retail net sales during 2019 were $1,742.1 million and decreased $60.7 million, or 3.4%, compared to 2018.
Retail net sales at our Party City stores totaled $1,527.5 million and were $55.7 million, or 3.5%, lower than 2018
principally due to the negative impact of helium shortages, the sale of our 65 Canadian retail stores prior to the
Halloween season, the impact of reduced sales from 55 stores identified for closure in conjunction with our 2019
store optimization program, and soft Halloween sales at both our Party City and temporary Halloween stores. Global
retail e-commerce sales totaled $162.4 million during 2019 and were $8.0 million, or 5.2%, higher than during 2018.
Sales at our temporary Halloween stores (principally Halloween City) totaled $47.4 million and were $15.1 million
lower than 2018. During 2019, sales at other store formats totaled $4.7 million.
Same-store sales for the Party City brand (including North American retail e-commerce sales) decreased by
3.0% during 2019. Excluding the impact of e-commerce, same-store sales decreased by 3.5%. Same-store sales
percentages were not affected by foreign currency as such percentages are calculated in local currency.
Wholesale
Wholesale net sales during 2019 totaled $597.4 million and were $16.2 million, or 2.6%, lower than 2018. Net
sales to domestic party goods retailers and distributors (including our franchisee network) totaled $231.7 million and
were $8.7 million, or 3.6%, lower than during 2018. The decrease reflects our acquisition of franchise and
independent stores throughout 2019; as post-acquisition sales to such stores in 2019 (approximately $13.7 million
during the corresponding periods of 2018) were eliminated as intercompany sales. Net sales of metallic balloons to
domestic distributors and retailers (including our franchisee network) totaled $78.3 million during 2019 and were
$9.2 million, or 10.6%, lower than during 2018 principally due to the ongoing helium shortage. Our international
sales (which include U.S. export sales and exclude U.S. import sales from foreign subsidiaries) totaled $287.4
million and were $1.7 million, or 0.6%, higher than in 2018 as sales growth of $12.3 million in constant currency
was offset by a negative foreign currency impact of $10.6 million.
Intercompany sales to our retail affiliates totaled $642.7 million during 2019 and were $69.2 million lower
than during the prior year. The decrease in 2019 intercompany sales principally reflects a lower store count
compared to 2018 and a general reduction in retail purchases, in consideration of higher carryover inventory levels
from the previous Halloween selling season. Intercompany sales represented 51.8% of total wholesale sales during
2019, compared to 53.7% during 2018. The intercompany sales of our wholesale segment are eliminated against the
intercompany purchases of our retail segment in the consolidated financial statements.
52
Royalties and franchise fees
Royalties and franchise fees during 2019 totaled $9.3 million and were $1.8 million lower than during 2018,
reflecting the decreasing franchise store count as a result of our franchise store acquisitions.
Gross Profit
The following table sets forth the Company’s gross profit for the years ended December 31, 2019 and
December 31, 2018.
Fiscal Year Ended December 31,
2019
2018
Retail
Wholesale
Total
Dollars in
Thousands
$ 696,439
142,438
$ 838,877
Percentage
of Net Sales
Dollars in
Thousands
40.0 % $ 801,349
23.8 179,735
35.9 % $ 981,084
Percentage
of Net Sales
44.4 %
29.3
40.6 %
The gross profit margin on net sales at retail during 2019 was 40.0% or 440 basis points lower than during
2018. The decrease reflects a combination of markdowns in conjunction with the Company’s “store optimization
program” and provisions against inventory recorded in conjunction with such program (see “operating expenses”
below for further discussion), the impact of an aggressive coupon program during the second half of 2019, the
impact of the helium shortage on costs and sales mix, and a flow through of higher freight and distribution costs
during the first three quarters of 2019, related to product acquired from the Company’s wholesale operations during
the second half of 2018, as the China tariffs caused non-recurring logistical challenges. The manufacturing share of
shelf at retail (i.e., the percentage of our retail product cost of sales manufactured by our wholesale segment)
increased from 22.9% during 2018 to 23.5% during 2019, driven by the scaling up of recent acquisitions in our
wholesale business. Our wholesale share of shelf at our Party City stores and our North American retail e-commerce
operations (i.e., the percentage of our retail product cost of sales supplied by our wholesale segment) was 79.6%
during 2019 compared to 78.9% during 2018.
The gross profit on net sales at wholesale during 2019 and 2018 was 23.8% and 29.3%, respectively. The
decrease in comparison to 2018 principally reflects a decrease in high-margin sales of metallic balloons and higher
margin sales to franchisees (due to the store acquisitions noted above) as well as, the deleveraging of distribution
and manufacturing costs and the impact of foreign currency.
Operating expenses
Wholesale selling expenses totaled $67.1 million during 2019 compared to $71.5 million during 2018. The
decrease of $4.4 million, or 6.2%, was due partially to the impact of foreign currency translation.
Retail operating expenses during 2019 were $440.4 million and were $14.4 million, or 3.4%, higher than in
2018. The increase was principally due to higher advertising, ecommerce and information technology related
expenses compared to 2018. Retail operating expenses were 25.3% and 23.6% of net retail sales during 2019 and
2018, respectively.
Franchise expenses during both 2019 and 2018 were $13.2 million.
General and administrative expenses during 2019 totaled $177.7 million and were $4.9 million, or 2.8%,
higher than in 2018. The increase for 2019 was principally due to increase legal and settlement costs. General and
administrative expenses as a percentage of total revenues were 7.6% and 7.1% during 2019 and 2018, respectively.
Art and development costs were consistent at $23.2 million and $23.4 million during 2019 and 2018,
respectively.
53
Development stage expenses represent start-up costs related to Kazzam (see Note 25 - Kazzam LLC., of Item
8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion).
Interest expense, net
Interest expense, net, totaled $114.9 million during 2019, compared to $105.7 million during 2018. The
increase in interest principally reflects the full year impact of the Company’s August 2018 refinancing as well as the
impact of average borrowings and average rates under our ABL credit facility and Term Loan (see Note 11 - Loans
and Notes Payable, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K
for further discussion).
Other expense, net
Other expense, net, totaled $1.9 million during 2019 and $11.0 million during 2018. The net decrease was
principally due to non-recurring costs in 2018 associated with the Company’s August 2018 debt refinancing,
including the write-off of $2.8 million of existing capitalized deferred finance costs and original issue discounts and
the incurrence of $2.3 million in related third-party fees.
Income tax expense
The effective income tax rate for the year ended December 31, 2019, 0.2%, is different from the statutory rate,
21%, primarily due to the goodwill impairment charge of $556.1 million, and the tax effects of the sale of the
Canada Party City stores. See Note 17-Income Tax, of Item 8, “Financial Statements and Supplementary Data” in
this Annual Report on Form 10-K for further discussion.
Liquidity and Capital Resources
ABL Facility
Prior to April 2019, the Company had a $540,000 asset-based revolving credit facility (with a seasonal
increase to $640,000 during a certain period of each calendar year) (“ABL Facility”), which matures during August
2023 (subject to a springing maturity at an earlier date if the maturity date of certain of the Company’s other debt
has not been extended or refinanced). It provides for (a) revolving loans, subject to a borrowing base described
below, and (b) letters of credit, in an aggregate face amount at any time outstanding not to exceed $50,000. During
April 2019, the Company amended the ABL Facility. Such amendment removed the seasonal component and made
the ABL Facility a $640,000 facility with no seasonal modification component.
Under the ABL Facility, the borrowing base at any time equals (a) a percentage of eligible trade receivables,
plus (b) a percentage of eligible inventory, plus (c) a percentage of eligible credit card receivables, less (d) certain
reserves.
The ABL Facility generally provides for two pricing options: (i) an alternate base interest rate (“ABR”) equal
to the greater of (a) the prime rate, (b) the federal funds rate plus 0.5% or (c) the LIBOR rate plus 1%, in each case,
on the date of such borrowing or (ii) a LIBOR based interest rate, in each case plus an applicable margin. The
applicable margin ranges from 0.25% to 0.50% with respect to ABR borrowings and from 1.25% to 1.50% with
respect to LIBOR borrowings.
In addition to paying interest on outstanding principal, the Company is required to pay a commitment fee of
0.25% per annum in respect of unutilized commitments. The Company must also pay customary letter of credit fees.
All obligations under the ABL Facility are jointly and severally guaranteed by PC Intermediate, PCHI and
each existing and future domestic subsidiary of PCHI. PCHI and each guarantor has secured its obligations, subject
to certain exceptions and limitations, including obligations under its guaranty, as applicable, by a first-priority lien
on its accounts receivable, inventory, cash and certain related assets and a second-priority lien on substantially all of
its other assets.
54
The facility contains negative covenants that, among other things and subject to certain exceptions, restrict the
ability of PCHI to:
incur additional indebtedness;
pay dividends on capital stock or redeem, repurchase or retire capital stock;
make certain investments, loans, advances and acquisitions;
engage in transactions with affiliates;
create liens; and
transfer or sell certain assets.
In addition, PCHI must comply with a fixed charge coverage ratio if excess availability under the ABL
Facility on any day is less than the greater of: (a) 10% of the lesser of the aggregate commitments and the then
borrowing base under the ABL Facility and (b) $40,000. The fixed charge coverage ratio is the ratio of (i) Adjusted
EBITDA (as defined in the facility) minus maintenance-related capital expenditures (as defined in the facility) to
(ii) fixed charges (as defined in the facility).
The ABL Facility also contains certain customary affirmative covenants and events of default.
Senior secured term loan facility (“Term Loan Credit Agreement”)
The Term Loan Credit Agreement, as amended, provides for two pricing options for outstanding loans: (i) an
ABR for any day, a rate per annum equal to the greater of (a) the prime rate in effect on such day, (b) the federal
funds effective rate in effect on such day plus 0.5%, (c) the adjusted LIBOR rate plus 1% and (d) 1.75% or (ii) the
LIBOR rate, with a LIBOR floor of 0.75%, in each case plus an applicable margin. The applicable margin for ABR
and LIBOR borrowings are 1.75% and 2.75%, respectively, and will drop to 1.50% and 2.50%, respectively, if
PCHI’s Senior Secured Leverage Ratio, as defined by the agreement, falls below 3.2 to 1.0.
The term loans under the Term Loan Credit Agreement mature on August 19, 2022. The Company is required
to repay installments on the loans in quarterly principal amounts of 0.25%, with the remaining amount payable on
the maturity date.
Additionally, outstanding term loans are subject to mandatory prepayment, subject to certain exceptions, with
(i) 100% of net proceeds above a threshold amount of certain asset sales/insurance proceeds, subject to reinvestment
rights and certain other exceptions, (ii) 100% of the net cash proceeds of any incurrence of debt other than debt
permitted under the Term Loan Credit Agreement, and (iii) 50% of Excess Cash Flow, as defined in the agreement,
if any (reduced to 25% if PCHI’s first lien leverage ratio (as defined in the agreement) is less than 3.50 to 1.00, but
greater than 2.50 to 1.00, and 0% if PCHI’s first lien leverage ratio is less than 2.50 to 1.00).
The term loans may be voluntarily prepaid at any time without premium or penalty, other than customary
breakage costs with respect to loans based on the LIBOR rate.
All obligations under the agreement are jointly and severally guaranteed by PC Intermediate, PCHI and each
existing and future domestic subsidiary of PCHI. PCHI and each guarantor has secured its obligations, subject to
certain exceptions and limitations, by a first-priority lien on substantially all of its assets (other than accounts
receivable, inventory, cash and certain related assets), including a pledge of all of the capital stock held by PC
Intermediate, PCHI and each guarantor, and a second-priority lien on its accounts receivable, inventory, cash and
certain related assets.
55
The Term Loan Credit Agreement contains certain customary affirmative covenants and events of default.
Additionally, it contains negative covenants which, among other things and subject to certain exceptions, restrict the
ability of PCHI to:
•
•
incur additional indebtedness;
pay dividends on capital stock or redeem, repurchase or retire capital stock;
• make certain investments, loans, advances and acquisitions;
•
•
•
engage in transactions with affiliates;
create liens; and
transfer or sell certain assets.
6.125% Senior Notes — Due 2023 (“6.125% Senior Notes”)
The 6.125% Senior Notes mature on August 15, 2023. Interest on the notes is payable semi-annually in arrears
on February 15 and August 15 of each year.
The notes are guaranteed, jointly and severally, on a senior basis by each of PCHI’s existing and future
wholly-owned domestic subsidiaries. The notes and the guarantees are general unsecured senior obligations and are
effectively subordinated to all other secured debt to the extent of the assets securing such secured debt.
The indenture governing the 6.125% Senior Notes contains certain covenants limiting, among other things and
subject to certain exceptions, PCHI’s ability to:
•
•
•
•
•
•
•
incur additional indebtedness or issue certain disqualified stock and preferred stock;
pay dividends or distributions, redeem or repurchase equity;
prepay subordinated debt or make certain investments;
engage in transactions with affiliates;
consolidate, merge or transfer all or substantially all of PCHI’s assets;
create liens; and
transfer or sell certain assets.
The indenture governing the notes also contains certain customary affirmative covenants and events of default.
The Company may redeem the 6.125% Senior Notes, in whole or in part, at par.
Also, if the Company experiences certain types of change in control, as defined, the Company may be
required to offer to repurchase the 6.125% Senior Notes at 101% of their principal amount.
In connection with issuing the 6.125% Senior Notes, the Company incurred and capitalized third-party costs.
Capitalized costs are being amortized over the life of the debt and are included in long-term obligations, excluding
current portion, in the Company’s consolidated balance sheet.
6.625% Senior Notes — Due 2026 (“6.625% Senior Notes”)
The 6.625% Senior Notes mature on August 1, 2026. Interest on the notes is payable semi-annually in arrears
on February 1st and August 1st of each year.
The notes are guaranteed, jointly and severally, on a senior basis by each of PCHI’s existing and future
wholly-owned domestic subsidiaries. The notes and the guarantees are general unsecured senior obligations and are
effectively subordinated to all other secured debt to the extent of the assets securing such secured debt.
56
The indenture governing the notes contains certain covenants limiting, among other things and subject to
certain exceptions, PCHI’s ability to:
•
•
•
•
•
•
•
incur additional indebtedness or issue certain disqualified stock and preferred stock;
pay dividends or distributions, redeem or repurchase equity;
prepay subordinated debt or make certain investments;
engage in transactions with affiliates;
consolidate, merge or transfer all or substantially all of PCHI’s assets;
create liens; and
transfer or sell certain assets.
The indenture governing the notes also contains certain customary affirmative covenants and events of default.
On or after August 1, 2021, the Company may redeem the notes, in whole or in part, at the following
(expressed as a percentage of the principal amount to be redeemed):
Twelve-month period beginning on August 1,
2021
2022
2023 and thereafter
Percentage
103.313 %
101.656 %
100.000 %
In addition, the Company may redeem up to 40% of the aggregate principal amount outstanding on or before
August 1, 2021 with the cash proceeds from certain equity offerings at a redemption price of 106.625% of the
principal amount. The Company may also redeem some or all of the notes before August 1, 2021 at a redemption
price of 100% of the principal amount plus a premium that is defined in the indenture governing the 6.625% Senior
Notes.
Also, if the Company experiences certain types of change in control, as defined, the Company may be
required to offer to repurchase the notes at 101% of their principal amount.
8.75% Senior Secured Notes — Due 2026 (“8.75% Senior Notes”)
Refer to Note 27 — Subsequent Events for additional information regarding the 8.75% Senior Notes.
In accordance with the 8.75% Senior Notes, the Company is required to provide quarterly and annual
disclosure of certain financial metrics for Anagram Holdings, LLC and its subsidiary (“Anagram”). For the quarter
ended December 31, 2020, Anagram reported:
• Revenue of $50.6 million, including net sales to Party City affiliates of approximately $23.6 million
• Operating income of $11.5 million
• Adjusted EBITDA of $13.0 million
For the year ended December 31, 2020, Anagram reported
• Revenue of $ 157.1 million, including net sales to Party City affiliates of approximately $68.6 million
• Operating income of $25.8 million
• Adjusted EBITDA of $33.2 million
57
At December 31, 2020, Anagram had total assets of $219 million, including affiliate accounts receivable of
$7.4 million
At December 31, 2020, Anagram had total assets of $219 million, including affiliate accounts receivable of
$7.4 million
First Lien Party City Notes, First Lien Anagram Notes, Second Lien Anagram Notes
On July 30, 2020 (the “Settlement Date”), the Company and certain of its direct or indirect subsidiaries,
including PCHI, Anagram Holdings, LLC, a Delaware limited liability company and wholly owned direct subsidiary
of PCHI (“Anagram Holdings”), and Anagram International, Inc., a Minnesota corporation and wholly owned direct
subsidiary of Anagram Holdings, completed certain refinancing transactions, including, among other things: (i) the
exchange of $327,076 of 6.125% Senior Notes due 2023 (the “2023 Notes”) and $392,746 of 6.625% Senior Notes
due 2026 (the “2026 Notes” and, together with the 2023 Notes, the “Existing Notes”) issued by PCHI, in each case
tendered in the Company’s offers to exchange pursuant to the terms described in a confidential offering
memorandum, for (A) $156,669 of Senior Secured First Lien Floating Rate Notes due 2025 (the “First Lien Party
City Notes”) issued by PCHI; (B) $84,687 of 10.00% PIK/Cash Senior Secured Second Lien Notes due 2026 (the
“Second Lien Anagram Notes”) issued by Anagram Holdings and Anagram International (together, the “Anagram
Issuers”); and (C) 15,942,551 shares of the Company’s common stock, $0.01 par value per share (the “Common
Stock”); (ii) the issuance of $110,000 in the aggregate of 15.00% PIK/Cash Senior Secured First Lien Notes due
2025 (the “First Lien Anagram Notes”) by the Anagram Issuers and an additional $5,000 of First Lien Party City
Notes in connection with a rights offering and a private placement, as applicable; and (iii) the solicitations of certain
consents with respect to the indentures governing Existing Notes.
The First Lien Party City Notes were issued pursuant to an indenture, dated as of the Settlement Date, among
PCHI, as issuer, certain guarantors party thereto (the “Party City Guarantors”) and Ankura Trust Company, LLC
(“Ankura”), as trustee and collateral trustee. The First Lien Party City Notes were issued in an aggregate amount of
$161,669 and will mature on July 15, 2025. Interest on the First Lien Party City Notes accrues from the Settlement
Date at a floating rate equal to the 6-month London Inter-Bank Offered Rate plus 500 basis points (with a floor of 75
basis points) per annum, payable semi-annually in arrears on January 15 and July 15 of each year, commencing
January 15, 2021. The First Lien Party City Notes are senior secured obligations of PCHI and the Party City
Guarantors. The First Lien Party City Notes are pari passu in right of payment with all of PCHI’s other senior
indebtedness, including the existing senior secured term loan facility and the ABL Facility, and are structurally
subordinated to the First Lien Anagram Notes and the Second Lien Anagram Notes, to the extent of the value of the
Anagram Collateral (as defined below). The First Lien Party City Notes are secured by a first priority lien on
collateral that includes liens on substantially all assets (other than certain accounts, inventory, deposit accounts,
securities accounts, related assets and general intangibles) of the Party City Guarantors, in each case subject to
certain exceptions and permitted liens.
The First Lien Anagram Notes were issued pursuant to an indenture, dated as of the Settlement Date, among
Anagram Holdings, as issuer, Anagram International, as co-issuer, certain guarantors party thereto (the “Anagram
Guarantors”) and Ankura, as trustee and collateral trustee. The First Lien Anagram Notes were issued in an
aggregate amount of $110,000 and will mature on August 15, 2025. Interest on the First Lien Anagram Notes
accrues from the Settlement Date at (i) a rate of 10.00% per annum, payable in cash; and (ii) a rate of 5.00% per
annum payable by increasing the principal amount of the outstanding First Lien Anagram Notes or issuing
additional First Lien Anagram Notes, as the case may be, in each case payable semi-annually in arrears on February
15 and August 15 of each year, commencing February 15, 2021. The First Lien Anagram Notes are senior secured
obligations of the Anagram Issuers and are pari passu in right of payment with all of the Anagram Issuers’ other
senior indebtedness. The First Lien Anagram Notes are secured by a first priority lien on collateral that consists of
substantially all assets and properties of the Anagram Issuers and the Anagram Guarantors, subject to certain
exceptions and permitted liens (the “Anagram Collateral”). Such security interests are senior in priority to the
security interests in such assets that secure the Second Lien Anagram Notes.
The Second Lien Anagram Notes were issued pursuant to an indenture, dated as of the Settlement Date,
among Anagram Holdings, as issuer, Anagram International, as co-issuer, the Anagram Guarantors and Ankura, as
trustee and collateral trustee. The Second Lien Anagram Notes were issued in an aggregate amount of $84,687 and
will mature on August 15, 2026. Interest on the Second Lien Anagram Notes accrues from the Settlement Date at (i)
58
a rate of 5.00% per annum, payable, at the Anagram Issuers’ option, entirely in cash or entirely by increasing the
principal amount of the outstanding Second Lien Anagram Notes or issuing additional Second Lien Anagram Notes,
as the case may be; and (ii) a rate of 5.00% per annum payable by increasing the principal amount of the outstanding
Second Lien Anagram Notes or issuing additional Second Lien Anagram Notes, as the case may be, in each case
payable semi-annually in arrears on February 15 and August 15 of each year, commencing February 15, 2021;
provided, however, that on August 15, 2025, interest will be required to be paid by increasing the principal amount
of the Second Lien Anagram Notes or issuing the principal amount of the Second Lien Anagram Notes or issuing
additional Second Lien Anagram Notes. On February 15, 2026, the Anagram Issuers will prepay in cash a portion of
the Second Lien Anagram Notes then outstanding in an amount necessary such that the Second Lien Anagram Notes
are not treated as “applicable high yield discount obligations” within the meaning of Section 163(i) of the Internal
Revenue Code of 1986, as amended. The Second Lien Anagram Notes are senior secured obligations of the
Anagram Issuers and are pari passu in right of payment with all of the Anagram Issuers’ other senior indebtedness.
The Second Lien Anagram Notes are secured by a second priority lien on the Anagram Collateral. Such security
interests are junior to the security interests in such assets that secure the First Lien Anagram Notes.
The Company evaluated the refinancing transaction in accordance with ASC 470-60 Troubled Debt
Restructuring. The exchange of the 2023 Notes and 2026 Notes for the First Lien Party City Notes, Second Lien
Anagram Notes and shares of Company Common Stock, as well as the concurrent purchase by the participants in the
exchange of First Lien Anagram Notes represents a troubled debt restructuring (“TDR”). As the future undiscounted
cash flows of the restructured debt were less than the net carrying value of the Existing Notes (including accrued
interest and unamortized discount) adjusted for Common Stock issued to the participants in the exchange and such
participants’ purchase of and lenders’ participation in the First Lien Anagram Notes, the Company recognized a gain
of $273,149 which reflects $18,902 of third-party fees incurred, and $27,007 of Common Stock issued in the
exchange. The Company received $39,544 of cash from the participants in the exchange related to $44,500 of
principal amount of First Lien Anagram Notes with an undiscounted value of $82,160, which includes interest
expense. Interest expense is not currently recognized for this portion of the restructured debt.
Another portion of the restructured debt related to one holder of Existing Notes did not result in gain
recognition as the undiscounted cash flows of the restructured debt was higher than the carrying value of the existing
debt. The carrying amount of this portion of the restructured debt is $32,328 and the interest expense will be
recognized prospectively at a 3.5% effective interest rate. Amounts attributed to purchasers of the First Lien
Anagram Notes who were not participants in the exchange (principal balance of $50,500) are recognized at
consideration received less allocated transaction costs (netting to $45,678) and the effective interest method will be
used to recognize interest expense prospectively.
Other Credit Agreements
At December 31, 2020 and December 31, 2019, borrowings under the foreign facilities totaled $1.3 million
and $1.4 million, respectively.
Other Indebtedness
Additionally, we have entered into various finance leases for machinery and equipment. At December 31,
2020 and December 31, 2019 the balances of such leases in our consolidated balance sheets were $15.0million and
$14.9 million, respectively. We also have numerous non-cancelable operating leases for retail store sites, as well as
leases for offices, distribution facilities and manufacturing facilities. These leases generally contain renewal options
and require us to pay real estate taxes, utilities and related insurance costs.
Liquidity
We expect that cash generated from operating activities and availability under our credit agreements will be
our principal sources of liquidity. Based on our current level of operations, we believe that these sources will be
adequate to meet our liquidity needs for at least the next 12 months. We cannot assure you, however, that our
business will generate sufficient cash flow from operations or that future borrowings will be available to us under
the ABL Facility, the Term Loan Credit Agreement and Notes described earlier and in amounts sufficient to enable
us to repay our indebtedness or to fund our other liquidity needs. Refer to Note 11 – Loans and Notes Payable and
Note 12 – Long-Term Obligations of Item 8, “Financial Statements and Supplementary Data” and Company’s
“Risks Related to Our Indebtedness” in Item 1A of this Annual Report for additional information.
59
Cash Flow Data – Year Ended December 31, 2020, Compared to Year Ended December 31, 2019
Net cash provided by operating activities totaled $77.2 million during 2020, essentially flat to net cash
provided by operating activities totaled $43.7 million during 2019.
Net cash used in investing activities totaled $54.3 million during 2020, as compared to $163.7 million
provided by 2019 investing activities. Capital expenditures during 2020 and 2019 were $51.1 million and $61.7
million, respectively. Retail capital expenditures totaled $28.9 million during 2020 and were related to initiatives in
technology and investments in our Next Gen store conversions. Wholesale capital expenditures during 2020 totaled
$22.1 million and primarily related to printing plates and dyes, as well as machinery and equipment at the
Company’s manufacturing operations and main distribution center. In addition, in 2019 our cash flow includes
proceeds from disposal of assets of $246.3 million.
Net cash provided by financing activities was $93.7 million during 2020 due to proceeds from the Company’s
debt refinancing in the third quarter of 2020. Net cash used in financing activities was $237.7 million during 2019.
Cash Flow Data – Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
Net cash provided by operating activities totaled $43.7 million during 2019. Net cash provided by operating
activities totaled $101.9 million during 2018. Net cash flows provided by operating activities before changes in
operating assets and liabilities were $24.8 million during 2019, compared to $226.4 million during 2018. Changes in
operating assets and liabilities during 2020 resulted in a source of cash of $18.9 million. Changes in operating assets
and liabilities during 2018 resulted in a use of cash of $124.5 million (see Note 2, Summary of Significant
Accounting Policies and Note 27, Restricted Cash, of Item 8, “Financial Statements and Supplementary Data” in this
Annual Report on Form 10-K for further discussion). The operating assets and liabilities year over year change was
principally due to a reduction in inventory offset by a reduction in accounts payable.
Net cash provided by investing activities totaled $163.7 million during 2019, as compared to $150.9 million
used in 2018. Investing activities during 2019 included $18.1 million paid in connection with acquisitions of foreign
online retailers and franchise stores (see Note 9, Acquisitions, of Item 8, “Financial Statements and Supplementary
Data” in this Annual Report on Form 10-K for further discussion). Capital expenditures during 2019 and 2018 were
$61.7 million and $85.7 million, respectively. In addition, in 2019 our cash flow includes proceeds from disposal of
assets of $246.3 million. Retail capital expenditures totaled $32.2 million during 2019 and principally related to
initiatives for improving store performance, web re-platforming, investments in new stores and spending on store
conversions. Wholesale capital expenditures during 2019 totaled $29.5 million and primarily related to printing
plates and dyes, as well as machinery and equipment at the Company’s manufacturing operations and main
distribution center.
Net cash used in financing activities was $237.7 million during 2019. Net cash provided by financing
activities was $56.2 million during 2018. The change in net cash used in financing activities was due to a paydown
of debt using the net proceeds received from the Sale/Leaseback Transaction (see Note 5, Sale/Leaseback
Transaction, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for
further discussion) and the sale of Canadian-based Party City stores (see Note 6, Disposition of Assets and
Liabilities Held for Sale, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form
10-K for further discussion).
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Effects of Inflation
Although we expect that our operating results will be influenced by general economic conditions, we do not
believe that inflation has had a material effect on our results of operations during the periods presented. However,
there can be no assurance that our business will not be affected by inflation in the future.
60
Critical Accounting Policies and Procedures
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires the appropriate application of certain accounting policies, many of which require
estimates and assumptions about future events and their impact on amounts reported in the financial statements and
related notes. Since future events and their impact cannot be determined with certainty, the actual results will
inevitably differ from our estimates. Such differences could be material to the consolidated financial statements
included herein.
We believe our application of accounting policies, and the estimates inherently required by these policies, are
reasonable. These accounting policies and estimates are constantly re-evaluated and adjustments are made when
facts and circumstances dictate a change. Historically, we have found the application of accounting policies to be
reasonable, and actual results generally do not differ materially from those determined using necessary estimates.
Revenue Recognition
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. Retail e-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 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 on e-commerce sales, the Company records such
amounts in revenue. The Company excludes 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 a one-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 the one-time fee are recorded in royalties and franchise fees in the Company’s consolidated statement of
operations and comprehensive (loss) income.
Revenue Transactions – Wholesale
For most of the Company’s wholesale sales, control transfers upon the Company’s shipment of the product.
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.
In most cases, the determination of the transaction price is fixed based on the contract and/or purchase order.
To the extent that the Company charges customers for freight costs, the Company records such amounts in revenue.
The Company excludes 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 does not adjust the consideration for the effects of a significant financing component.
61
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. Due to its extensive
history operating as a leading party goods retailer, the Company has sufficient history with which to estimate such
amounts.
Product Royalty Agreements
We enter into product royalty agreements that allow us to use licensed designs on certain of our products.
These contracts require us to pay royalties, generally based on the sales of such product and may require guaranteed
minimum royalties, a portion of which may be paid in advance. We match royalty expense with revenue by
recording royalties at the time of sale, at the greater of the contractual rate or an effective rate calculated based on
the guaranteed minimum royalty and our estimate of sales during the contract period. Guaranteed minimum royalties
paid in advance are recorded in the consolidated balance sheets in either prepaid expenses and other current assets or
other assets, depending on the nature of the royalties.
Allowance for Doubtful Accounts
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our
customers and franchisees to make required payments. Judgment is required in assessing the ultimate realization of
these receivables, including consideration of our history of receivable write-offs, the level of past due accounts and
the economic status of our customers. In an effort to identify adverse trends relative to customer economic status, we
assess the financial health of the markets we operate in and perform periodic credit evaluations of our customers and
ongoing reviews of account balances and aging of receivables. Amounts are considered past due when payment has
not been received within the time frame of the credit terms extended. Write-offs are charged directly against the
allowance for doubtful accounts and occur only after all collection efforts have been exhausted. Because we cannot
predict future changes in economic conditions and in the financial stability of our customers, actual future losses
from uncollectible accounts may differ from our estimates and could impact our allowance for doubtful accounts.
Inventories
Inventories are valued at the lower of cost and net realizable value. In assessing the ultimate realization of
inventories, we are required to make judgments regarding, among other things, future demand and market
conditions, current inventory levels and the impact of the possible discontinuation of product designs.
We principally determine the cost of inventory using the weighted average method.
We estimate retail inventory shrinkage for the period between physical inventory dates on a store-by-store
basis. Our inventory shrinkage estimate can be affected by changes in merchandise mix and changes in actual
shortage trends. The shrinkage rate from the most recent physical inventory, in combination with historical
experience, is the basis for estimating shrinkage.
Long-Lived and Intangible Assets (including Goodwill)
We review the recoverability of our long-lived assets, including finite-lived intangible assets, whenever facts
and circumstances indicate that the carrying amount may not be fully recoverable. For purposes of recognizing and
measuring impairment, we evaluate long-lived assets/asset groups, other than goodwill, based upon the lowest level
of independent cash flows ascertainable to evaluate impairment. If an impairment indicator exists, we compare the
undiscounted future cash flows of the asset/asset group to the carrying value of the asset/asset group. If the sum of
the undiscounted future cash flows is less than the carrying value of the asset/asset group, we would calculate
discounted future cash flows based on market participant assumptions. If the sum of discounted cash flows is less
than the carrying value of the asset/asset group, we would recognize an impairment loss. The impairment related to
62
long-lived assets is measured as the amount by which the carrying amount of the asset(s) exceeds the fair value of
the asset(s). When fair values are not readily available, we estimate fair values using discounted expected future
cash flows. Such estimates of fair value require significant judgment, and actual fair value could differ due to
changes in the expectations of cash flows or other assumptions, including discount rates.
In the evaluation of the fair value and future benefits of finite long-lived assets attached to retail stores, we
perform our cash flow analysis generally on a store-by-store basis. Various factors including future sales growth and
profit margins are included in this analysis. To the extent these future projections or strategies change, the
conclusion regarding impairment may differ from the current estimates.
Goodwill is reviewed for potential impairment on an annual basis or more frequently if circumstances indicate a
possible impairment. The Company performed annual impairment test on its wholesale and retail reporting units,
respectively. In the analysis performed for the wholesale reporting unit, there was less than 10% excess fair value
over carrying value. Should actual result differ from certain key assumptions used in impairment tests, including
revenue and EDITDA growth, which are both impacted by economic conditions, or should other key assumptions
change, including discount rates and market multiples, in subsequent periods the Company could record impairment
change for goodwill.
For purposes of testing goodwill for impairment, reporting units are determined by identifying individual
operating segments within our organization which constitute a business for which discrete financial information is
available and is reviewed by management. Components within an operating segment are aggregated to the extent
that they have similar economic characteristics. Based on this evaluation, we have determined that our operating
segments, wholesale and retail, represent our reporting units for the purposes of our goodwill impairment test.
If it is concluded that it is more likely than not that the fair value of a reporting unit is less than its carrying
value, we estimate the fair value of the reporting unit using a combination of a market approach and an income
approach. If such carrying value exceeds the fair value, an impairment loss will be recognized in an amount equal to
such excess. The fair value of a reporting unit refers to the amount at which the unit as a whole could be sold in a
current transaction between willing parties. The determination of such fair value is subjective, and actual fair value
could differ due to changes in the expectations of cash flows or other assumptions including discount rates.
Income Taxes
Temporary differences arising from differing treatment of income and expense items for tax and financial
reporting purposes result in deferred tax assets and liabilities that are recorded on the balance sheet. These balances,
as well as income tax expense, are determined through management’s estimations, interpretation of tax law for
multiple jurisdictions and tax planning. However, inherent in the measurement of deferred balances are certain
judgments and interpretations of enacted tax laws and published guidance with respect to applicability to our
operations. If our actual results differ from estimated results due to changes in tax laws or tax planning, our effective
tax rate and tax balances could be affected. As such, these estimates may require adjustment in the future as
additional facts become known or as circumstances change. A valuation allowance is established against deferred
tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
During the ordinary course of business, there are many transactions and calculations for which the ultimate tax
determination is uncertain. Accounting Standards Codification Topic 740 prescribes a comprehensive model of how
a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the
company has taken or expects to take on a tax return. In accordance with these requirements, we recognize a tax
benefit when a tax position is more-likely-than-not to be sustained upon examination, based solely on its technical
merits. We measure the recognized tax benefit as the largest amount of tax benefit that has greater than a 50%
likelihood of being realized upon the ultimate settlement with a taxing authority. We reverse previously recognized
tax benefits if we determine that the tax position no longer meets the more-likely-than-not threshold of being
sustained. We accrue interest and penalties related to unrecognized tax benefits in income tax expense.
Stock-Based Compensation
Accounting for stock-based compensation requires measurement of compensation cost for all stock-based
awards at fair value on the date of grant and recognition of compensation expense over the service period for awards
which are expected to vest.
63
The value of our stock-based awards is recognized as expense over the service period, net of estimated
forfeitures. The estimation of stock awards that will ultimately vest requires judgment and to the extent that actual
results or updated estimates differ from our current estimates such revisions will be recorded as cumulative
adjustments in the periods during which the estimates are revised. Actual results and future estimates may differ
significantly from our current estimates.
The Company grants restricted stock units which vest if certain cash flow and earnings per share targets are
met. We recognize compensation expense for such awards if it is probable that the awards will vest. Determining
whether it is probable that such awards will vest requires judgment and to the extent that actual results, or revised
estimates, differ from our current estimates, such revisions will be recorded as cumulative adjustments in the periods
during which the estimates are changed. Actual results and future estimates may differ significantly from our current
estimates.
Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2020-04, which provides guidance providing optional expedients and exceptions for applying U.S. generally
accepted accounting principles to contracts, hedging relationships, and other transactions affected by the
discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be
discontinued. Additionally, in January 2021, the FASB issued ASU 2021-01, which allows entities to elect certain
optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships
affected by changes in the interest rates. These ASUs are effective as of March 12, 2020 through December 31,
2022. The Company is currently evaluating the impact of this guidance on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820) – Disclosure
Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. The new guidance improves
and clarifies the fair value measurement disclosure requirements of ASC 820. The new disclosure requirements
include the disclosure of the changes in unrealized gains or losses included in other comprehensive (loss) income for
recurring Level 3 fair value measurements held at the end of the reporting period and the explicit requirement to
disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value
measurements. The other provisions of ASU 2018-13 also include eliminated and modified disclosure requirements.
The guidance was effective for fiscal years beginning after December 15, 2019. The Company has adopted this
guidance effective January 1, 2020, prospectively and the adoption and application of this standard did not have a
material impact to the consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, “Compensation — Stock Compensation: Improvements to
Nonemployee Share-Based Payment Accounting”. The ASU simplifies the accounting for non-employee share-
based payments. The Company adopted the update during the first quarter of 2019. The pronouncement requires
companies to record the impact of adoption, if any, as a cumulative-effect adjustment to retained earnings as of the
adoption date. Therefore, on January 1, 2019, the Company decreased retained earnings by $503. Additionally, the
Company increased additional paid-in capital by $662 and recorded a $159 deferred income tax asset.
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging: Targeted Improvements to Accounting
for Hedging Activities”. The pronouncement amends the existing hedge accounting model in order to enable entities
to better portray the economics of their risk management activities in their financial statements. The Company
adopted the update during the first quarter of 2019 and such adoption had no impact on the Company’s consolidated
financial statements.
In January 2017 the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying
the Test for Goodwill Impairment”, which eliminates the requirement to measure a goodwill impairment loss by
comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the
amendments in ASU 2017-04, an entity will perform its annual, or interim, goodwill impairment test by comparing
the fair value of a reporting unit with its carrying amount. An entity will recognize an impairment charge for the
amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized will not
exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity will consider income tax
effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill
impairment loss, if applicable. The Company adopted ASU No. 2017-04 during the first quarter of 2019. See Note 4
– Goodwill.
64
In November 2016, the FASB issued ASU 2016-18, “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 27 – Restricted Cash, for further discussion.
In August 2016, the FASB issued ASU 2016-15, “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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses”. The ASU changes how
entities will account for credit losses for most financial assets and certain other instruments that are not measured at
fair value through net income. The ASU requires that an entity measure and recognize expected credit losses at the
time the asset is recorded, while considering a broader range of information to estimate credit losses including
macroeconomic conditions that correlate with historical loss experience, delinquency trends and aging behavior of
receivables, among others. The Company has adopted this guidance effective January 1, 2020, prospectively, with
respect to its receivables, and the adoption and application of this standard did not have a material impact to the
consolidated financial statements during the year ended 2020.
In February 2016, the FASB issued ASU 2016-02, “Leases”. The ASU requires that companies recognize assets
and liabilities for the rights and obligations created by companies’ leases. The Company’s lease portfolio is
primarily comprised of store leases, manufacturing and distribution facility leases, warehouse leases and office
leases. Most of the leases are operating leases.
The Company adopted the new lease standard during the first quarter of 2019 and, to the extent required by the
pronouncement, recognized a right of use asset and liability for its operating lease arrangements with terms of
greater than twelve months. See the Company’s December 31, 2019 consolidated balance sheet for the impact of
such adoption.
The pronouncement had no impact on the Company’s consolidated statement of operations and comprehensive 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 26 – Leases.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The
pronouncement contains a five-step model which replaces most existing revenue recognition guidance. The new
standard became effective for the Company on January 1, 2018. The Company adopted the pronouncement using the
modified retrospective approach. Therefore, on January 1, 2018, the Company adjusted its accounting for certain
discounts which are related to the timing of payments by customers of its wholesale business and the Company
recorded a cumulative-effect adjustment which reduced retained earnings by $46. Additionally, as of such date, the
Company modified its accounting for certain metallic balloon sales of its wholesale segment and started to defer the
recognition of revenue on such sales, and the related costs, until the balloons have been filled with helium. As a
result, the Company recorded a cumulative-effect adjustment which increased retained earnings by $8. Finally, as of
such date, the Company adjusted its accounting for certain discounts on wholesale sales of seasonal product and the
Company recorded a cumulative-effect adjustment which reduced retained earnings by $40. See Note 24 – Revenue
from Contracts with Customers, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report
on Form 10-K for further discussion of the adoption of the pronouncement and the Company’s revenue recognition
policy.
65
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
As a result of our variable rate ABL Facility and Term Loan Credit Agreement, our earnings are affected by
changes in interest rates.
The Term Loan Credit Agreement provides for two pricing options for outstanding loans: (i) an ABR for any
day, a rate per annum equal to the greater of (a) the prime rate in effect on such day, (b) the federal funds effective
rate in effect on such day plus 0.5%, (c) the adjusted LIBOR rate plus 1% and (d) 1.75% or (ii) the LIBOR rate, with
a LIBOR floor of 0.75%, in each case plus an applicable margin.
If market interest rates for our variable rate indebtedness had averaged 2% more than the actual market
interest rates during the year ended December 31, 2020, our interest expense for the year would have increased by
$19.8 million.
This amount is determined by considering the impact of the hypothetical interest rates on our borrowings. This
analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an
environment. Further, in the event of a change of such magnitude, management could potentially take action to
mitigate our exposure to the change. However, due to the uncertainty of the specific actions that we would take and
their possible effects, the sensitivity analysis assumes no changes in our financial structure.
Foreign Currency Risk
As a result of the sale of our products in foreign markets, our earnings are affected by fluctuations in the value
of the U.S. Dollar (“USD”) when compared to the values of foreign currencies.
Prior to the sale of a substantial portion of its international operations per Note 6, Disposition of Assets and
Assets and Liabilities Held for Sale, of Item 8, “Financial Statements and Supplementary Data”, certain foreign
subsidiaries purchased product or raw materials in U.S. Dollars and sold such product in their local currencies.
Certain foreign subsidiaries also sold product in U.S. Dollars and manufactured/purchased such product in their
local currencies. To the extent that the subsidiaries could not adjust their local currency selling prices to reflect the
strengthening or weakening of the U.S. Dollar, the subsidiaries’ gross margins were negatively impacted when the
related product is sold. As a result, the previously owned foreign subsidiaries entered into foreign currency forward
contracts to hedge against a portion of the earnings impact of the risks. See Note 22, Derivative Financial
Instruments, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for
further detail of our existing contracts.
Additionally, the financial statements of foreign subsidiaries with functional currencies other than the U.S.
Dollar are translated into U.S. Dollars during our financial statement close process. To the extent that the U.S.
Dollar fluctuates versus such functional currencies, our consolidated financial statements are impacted. Based on the
loss from operations for such subsidiaries for the year ended December 31, 2020, a uniform 10% change in such
exchange rates versus the U.S. Dollar would have impacted our consolidated (loss) gain from operations for the year
by approximately $1.4 million.
66
Item 8.
Financial Statements and Supplementary Data
PARTY CITY HOLDCO INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2020 and December 31, 2019
Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended
December 31, 2020, December 31, 2019 and December 31, 2018
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, December 31, 2019
and December 31, 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, December 31, 2019 and
December 31, 2018
Notes to Consolidated Financial Statements
Financial Statement Schedules for the years ended December 31, 2020, December 31, 2019 and December 31,
2018:
Schedule I—Condensed Financial Information
Schedule II—Valuation and Qualifying Accounts
68
72
73
74
75
76
118
122
All other schedules for which provision is made in the applicable accounting regulations of the Securities and
Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been
omitted.
67
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Party City Holdco Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Party City Holdco Inc. and subsidiaries (the
Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive
(loss) income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2020,
and the related notes and financial statement schedules listed in the index at item 15 (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) and our report dated March 11, 2021 expressed an unqualified
opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 2 and Note 26 to the consolidated financial statements, effective January 1, 2019 the
Company changed its method of accounting for leases due to the adoption of ASU No. 2016-02, Leases and associated
amendments (Topic 842).
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the
financial statements that were communicated or required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or
disclosures to which they relate.
68
Valuation of Indefinite-lived Intangible Assets, including Goodwill
Description of
the Matter
At December 31, 2020, the Company’s goodwill and trade names were $661 million and $384
million, respectively. As discussed in Note 2 to the consolidated financial statements, goodwill
and trade names are tested for impairment annually or more frequently if certain indicators
arise. For purposes of testing goodwill for impairment, the Company identified two reporting
units which are the wholesale and the retail reporting units. In 2020, the Company recorded
wholesale and retail goodwill impairment charges of $148 million and $253 million,
respectively, and an impairment charge associated with its trade names of $146 million.
Auditing management’s impairment tests associated with its goodwill and trade names
included especially subjective judgements due to the estimation required in determining the
fair value of the reporting units and the value of the other indefinite lived intangibles. In
particular, the fair value estimates were dependent on significant assumptions, such as the
weighted average cost of capital, revenue and earnings before interest, taxes, depreciation, and
amortization (“EBITDA”) margin growth rates, royalty rates and projected cash flow terminal
growth rates that are affected by expected future market or economic conditions.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
internal controls over the Company's impairment assessments, including management's review
controls over the determination of the significant assumptions described above and the data
underlying these assumptions.
To test the estimated fair value of the Company’s reporting units and trade names, we
performed audit procedures that included, among others, assessing the valuation
methodologies used and testing management’s significant assumptions, discussed above, by
comparing them to current industry and economic trends, trends in customer demands and
other external factors. We assessed the historical accuracy of management’s estimates and
performed sensitivity analyses of significant assumptions to evaluate the changes in the fair
value of the reporting units and trade names that would result from changes in the
assumptions. We involved our valuation specialists to assist in reviewing the valuation
methodology, the weighted average cost of capital and other significant assumptions. In
addition, as part of our auditing of goodwill, we reviewed the reconciliation of the fair value of
the reporting units to the overall market capitalization of the Company.
Retail Inventory Reserves
Description of
the Matter
The Company's inventories, net of reserves totaled $412 million as of December 31, 2020. As
described in Note 2 to the consolidated financial statements, inventories are valued at the
lower of cost and net realizable value.
Auditing management's estimates of the net realizable value of its inventory and reserves for
excess and obsolete inventory, involved especially subjective auditor judgment as such
estimates are based on various factors that are affected by market and economic conditions. In
particular, the net realizable value, obsolete and excess inventory reserve calculations are
sensitive to certain significant assumptions, including expected sales demand, manufacturing
schedules, pricing strategies, and the effect of the possible discontinuation of product designs.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
internal controls over the Company's inventory reserve process, including management's
review controls over the determination of the significant assumptions and the data underlying
the calculations of the net realizable value of inventory and the excess and obsolete inventory
reserves.
Our procedures included, among others, evaluating the significant assumptions, identified
above, and testing the accuracy and completeness of the underlying data used in management's
69
inventory reserve calculation. We recalculated the reserve using management’s methodology
and evaluated the methodology and the significant assumptions for reasonableness. We also
evaluated management’s retrospective analysis to assess the historical accuracy of the
inventory reserves and performed sensitivity analyses over the significant assumptions to
evaluate whether changes to these assumptions may result in material changes in the calculated
inventory reserves.
Troubled Debt Restructuring
Description of
the Matter
As more fully described in Note 12 to the consolidated financial statements, on July 30, 2020
the Company completed a debt restructuring transaction whereby a portion of its existing
6.125% Senior Notes due 2023 and 6.625% Senior Notes due 2026, were exchanged for a
variety of new notes as well as common stock. The debt restructuring transaction was
accounted for as troubled debt restructuring (“TDR”). As a result of the transaction, the
Company recognized a pre-tax gain of $273 million and recorded the income tax effects of the
transaction on its current and deferred taxes as described in Note 17.
Auditing the TDR involved especially complex accounting assessment and calculations.
Specifically, the determination that the transaction was a TDR required subjective judgement
and calculations to establish whether the third-party participants in the debt transaction had
made a concession. The recorded gain as a result of the TDR transaction was based on
calculations of the new debt balance inclusive of future interest, consideration of the
participation percentages of each creditor, transaction costs and the fair value of issued
common stock. In addition, significant audit effort was necessary in evaluating the income tax
consequences of the transaction, which required tax technical assessments and calculations in
determining the appropriate tax treatment.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
internal controls over the Company's accounting for the troubled debt restructuring, including
management's review controls over the technical accounting aspects of the transaction and
related calculations described above, including review of the income tax consequences of the
transaction.
Our procedures included, among others, reading the underlying agreements and assessing the
terms in relation to the technical accounting guidance, testing of the completeness and
accuracy of the underlying data and the calculations supporting the TDR accounting.
Specifically, we recalculated the concession assessment, the TDR gain and the fair value of
stock issued using management’s methodology and evaluated the methodology in accordance
with the technical accounting guidance for such transactions. We obtained external
confirmations from a sample of creditors validating the terms of the exchange, vouched cash
received in the transaction, and tested transaction costs for completeness and accuracy on a
sample basis. We also obtained confirmations from legal representatives that there are no side
agreements with the debt exchange participants or other relevant facts to be considered in the
assessment.
With respect to the income tax accounting for the transaction, we evaluated management’s
calculations and tax technical positions. We involved our valuation specialists to assist us in
reviewing tax related valuations used to support the tax technical positions.
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 1998.
New York, New York
March 11, 2021
70
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Party City Holdco Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Party City Holdco Inc. an d subsidiaries’ internal control over financial reporting as of
December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion,
Party City Holdco Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the
related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity and cash flows
for each of the three years in the period ended December 31, 2020, and the related notes and financial statement
schedules listed in the index at Item 15 and our report dated March 11, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
/s/ ERNST & YOUNG LLP
New York, New York
March 11, 2021
71
PARTY CITY HOLDCO INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, 2020
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Prepaid expenses and other current assets
Income tax receivable
Assets held for sale, net
Total current assets
Property, plant and equipment, net
Operating lease asset
Goodwill
Trade names
Other intangible assets, net
Other assets, net
Total assets
$
$
LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
$
Loans and notes payable
Accounts payable
Accrued expenses
Liabilities held for sale
Current portion of operating lease liability
Income taxes payable
Current portion of long-term obligations
Total current liabilities
Long-term obligations, excluding current portion
Long-term portion of operating lease liability
Deferred income tax liabilities
Other long-term liabilities
Total liabilities
Redeemable securities
Commitments and contingencies
Stockholders’ equity:
Common stock (110,781,613 and 94,461,576 shares outstanding and
122,061,711 and 121,662,540 shares issued at December 31, 2020 and
December 31, 2019, respectively)
Additional paid-in capital
Retained (deficit) earnings
Accumulated other comprehensive loss
Total Party City Holdco Inc. stockholders’ equity before common stock
held in treasury
Less: Common stock held in treasury, at cost (11,280,098 and 27,200,964
shares at
December 31, 2020 and December 31, 2019, respectively)
Total Party City Holdco Inc. stockholders’ equity
Noncontrolling interests
Total stockholders’ equity
Total liabilities, redeemable securities and stockholders’ equity
$
119,532 $
90,879
412,285
45,905
57,549
83,110
809,260
209,412
700,087
661,251
384,428
32,134
9,883
2,806,455 $
175,707 $
118,928
160,605
68,492
176,045
524
13,576
713,877
1,329,808
654,729
34,705
22,815
2,755,934
—
1,373
971,972
(565,457 )
(29,916 )
377,972
(327,182 )
50,790
(269 )
50,521
2,806,455 $
34,917
149,109
658,419
51,685
—
—
894,130
243,572
802,634
1,072,330
530,320
45,060
7,273
3,595,319
128,806
152,300
150,921
—
155,471
35,905
71,524
694,927
1,503,987
720,735
126,081
16,517
3,062,247
3,351
1,211
928,573
(37,219 )
(35,734 )
856,831
(327,086 )
529,745
(24 )
529,721
3,595,319
See accompanying notes to consolidated financial statements.
72
PARTY CITY HOLDCO INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(In thousands, except share and per share data)
2020
Fiscal Year Ended December 31,
2019
2018
Revenues:
Net sales
Royalties and franchise fees
Total revenues
Expenses:
Cost of sales
Wholesale selling expenses
Retail operating expenses
Franchise expenses
General and administrative expenses
Art and development costs
Development stage expenses
Gain on sale/leaseback transaction
Store impairment and restructuring charges
Loss on assets held for sale
Goodwill, intangibles and long-lived assets impairment
Total expenses
(Loss) income from operations
Interest expense, net
Other expense, net
(Gain) on debt refinancing
(Loss) income before income taxes
Income tax expense (benefit)
Net (loss) income
Add: Net income attributable to redeemable securities holder
Less: Net loss attributable to noncontrolling interests
Net (loss) income attributable to common shareholders
of Party City Holdco Inc
$
Net (loss) income per share attributable to common
shareholders of Party City Holdco Inc.—Basic
Net (loss) income per share attributable to common
shareholders of Party City Holdco Inc.—Diluted
Weighted-average number of common shares—Basic
Weighted-average number of common shares—Diluted
Other comprehensive (loss) income, net of tax:
Foreign currency adjustments
Cash flow hedges
Other comprehensive income (loss), net
Comprehensive (loss) income
Add: Comprehensive income attributable to redeemable
securities holder
Less: Comprehensive loss attributable to noncontrolling
interests
$
$
$
$
1,843,444 $
7,246
1,850,690
2,339,510 $
9,279
2,348,789
1,369,935
50,121
387,398
12,146
210,244
17,638
2,932
—
22,449
73,948
581,380
2,728,191
(877,501 )
77,043
3,715
(273,149 )
(685,110 )
(156,653 )
(528,457 )
—
(219 )
1,500,633
67,103
440,395
13,152
177,672
23,203
10,736
(58,381 )
29,038
—
562,631
2,766,182
(417,393 )
114,899
1,871
—
(534,163 )
(1,305 )
(532,858 )
—
(363 )
(528,238 ) $
(532,495 ) $
123,259
(5.24 ) $
(5.71 ) $
1.28
(5.24 ) $
100,804,944
100,804,944
(5.71 ) $
93,295,692
93,295,692
1.27
96,133,144
97,271,050
6,143 $
(352 )
5,791
(522,666 )
12,599 $
845
13,444
(519,414 )
—
—
(246 )
(386 )
2,416,442
11,073
2,427,515
1,435,358
71,502
425,996
13,214
172,764
23,388
7,008
—
—
—
—
2,149,230
278,285
105,706
10,982
—
161,597
38,778
122,819
409
(31 )
(14,479 )
1,063
(13,416 )
109,403
409
(64 )
109,876
Comprehensive (loss) income attributable to common
shareholders of Party City Holdco Inc.
$
See accompanying notes to consolidated financial statements.
(522,420 ) $
(519,028 ) $
73
PARTY CITY HOLDCO INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Years Ended December 31, 2018, December 31, 2019 and December 31, 2020
(In thousands)
Retained
Additional
Earnings
Paid-in
(Deficit)
Capital
$ 1,198 $ 917,192 $ 372,596 $
Common
Stock
(78 )
$ 1,198 $ 917,192 $ 372,518 $
122,850
409
6
1,744
1,168
196
(89 )
4
2,265
Balance at December 31, 2017
Cumulative effect of change in
accounting principle, net
(see Note 2)
Balance at December 31, 2017, adjusted
Net income
Net income attributable to
redeemable securities holder
Stock option expense
Restricted stock units — time-based
Directors — non-cash compensation
Warrant
Adjustment to redeemable securities
Exercise of stock options
Foreign currency adjustments
Treasury stock purchases
Acquired noncontrolling interest
Impact of foreign exchange
contracts
Balance at December 31, 2018
Cumulative effect of change in
accounting principle, net (see Note 2) —
Balance at December 31, 2018, adjusted
$ 1,208 $ 922,476 $ 495,777 $
662
(503 )
$ 1,208 $ 923,138 $ 495,274 $
(532,495 )
Balance at December 31, 2019
2
$ 1,211 $ 928,573 $ (37,219 ) $
(528,238 )
Net (loss)
Stock option expense
Restricted stock units — time-based
Directors — non-cash compensation
Warrant
Exercise of stock options
Acquired non-controlling interest
Foreign currency adjustments
Treasury stock purchases
Impact of foreign exchange
contracts
Net (loss)
Stock option expense – time – based
Stock option expense – performance
– based
Restricted stock unit
expense – performance-based
Restricted stock unit
expense – time-based
Directors — non-cash compensation
Warrant expense (see Note 25 –
Kazzam, LLC)
Exercise of stock options
Acquired non-controlling interest
Issuance of Stock for Debt exchange
including costs
Foreign currency adjustments
(see Note 23)
Treasury stock purchases
Impact of foreign exchange
contracts
1,319
2,033
313
515
1,145
110
3
796
7,847
1,272
2,071
337
1,033
146
2,316
2
160 27,581
Balance at December 31, 2020
$ 1,373 $ 971,972 $ (565,457 ) $
Total Party
City
Holdco Inc.
Stockholders’
Equity Before
Accumulated
Common
Other
Common
Stock Held
Stock Held In
Comprehensive
In Treasury
Treasury
Loss
(35,818 ) $ 1,255,168 $ (286,733 ) $
Total
Party City
Holdco Inc.
Stockholders’
Equity
968,435 $
Non-
Controlling
Interests
355 $
Total
Stockholders’
Equity
968,790
(78 )
(35,818 ) $ 1,255,090 $ (286,733 ) $
122,850
(78 )
968,357 $
122,850
355 $
(31 )
409
1,744
1,174
196
(89 )
—
2,269
(14,446 )
—
—
(40,197 )
409
1,744
1,174
196
(89 )
—
2,269
(14,446 )
(40,197 )
—
(33 )
(14,446 )
(78 )
968,712
122,819
409
1,744
1,174
196
(89 )
—
2,269
(14,479 )
(40,197 )
—
1,063
1,063
(49,201 ) $ 1,370,260 $ (326,930 ) $ 1,043,330 $
1,063
—
—
159
159
(49,201 ) $ 1,370,419 $ (326,930 ) $ 1,043,489 $
(532,495 )
1,319
2,033
313
515
1,148
110
12,622
(156 )
(532,495 )
1,319
2,033
313
515
1,148
110
12,622
—
12,622
(156 )
1,063
291 $ 1,043,621
—
159
291 $ 1,043,780
(532,858 )
(363 )
1,319
2,033
313
515
1,148
181
12,599
(156 )
71
(23 )
845
(35,734 ) $
847
856,831 $ (327,086 ) $
(528,238 )
796
847
529,745 $
(528,238 )
796
(24 ) $
(219 )
847
529,721
(528,457 )
796
7,847
1,272
2,071
337
1,033
148
2,316
27,741
6,170
—
(352 )
(96 )
377,972 $ (327,182 ) $
7,847
1,272
2,071
337
1,033
148
2,316
27,741
6,170
(96 )
(352 )
50,790 $
7,847
1,272
2,071
337
1,033
148
2,317
27,741
6,143
(96 )
(352 )
50,521
1
(27 )
(269 ) $
6,170
(352 )
(29,916 ) $
74
PARTY CITY HOLDCO INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
2020
Fiscal Year Ended December 31,
2019
(Adjusted, see
Note 2)
2018
(Adjusted, see
Note 2)
$
(528,457 ) $
(532,858 ) $
122,819
Cash flows provided by operating activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Depreciation and amortization expense
Amortization of deferred financing costs and original issuance discounts
Provision for doubtful accounts
Deferred income tax (benefit) expense
Deferred rent
Undistributed income in equity method investments
Change in operating lease liability/asset
Loss (gain) on disposal of assets
Loss on assets held for sale
Non-cash adjustment for store impairment and restructuring
Goodwill, intangibles and long-lived assets impairment
Non-employee equity based compensation (see Note 25 – Kazzam, LLC)
Stock option expense – time – based
Stock option expense – performance – based
Restricted stock unit and restricted cash awards expense – performance-based
Restricted stock units expense—time-based
Directors—non-cash compensation
Gain on debt refinancing
Changes in operating assets and liabilities, net of effects of acquired
businesses:
Decrease (increase) in accounts receivable
Decrease (increase) in inventories
(Increase) decrease in prepaid expenses and other current assets, net
Increase (decrease) in accounts payable, accrued expenses and income
taxes payable
Net cash provided by operating activities
Cash flows (used in) provided by investing activities:
Cash paid in connection with acquisitions, net of cash acquired
Capital expenditures
Proceeds from disposal of property and equipment
Net cash (used in) provided investing activities
Cash flows provided by (used in) financing activities:
Repayment of loans, notes payable and long-term obligations
Proceeds from loans, notes payable and long-term obligations
Exercise of stock options
Treasury stock purchases
Debt issuance and modification costs
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents and restricted cash
Less: net increase in cash classified within current assets held for sale
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents and restricted cash at end of period*
Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest
Income taxes, net of refunds
$
$
$
76,506
4,198
6,321
(95,085 )
—
333
30,981
70
73,948
17,585
581,380
1,033
796
7,847
1,329
2,071
337
(273,149 )
81,116
4,722
2,323
(47,366 )
—
(472 )
(9,942 )
(59,786 )
—
20,236
562,631
515
1,319
—
—
2,033
313
—
22,396
184,924
(66,166 )
(2,600 )
72,385
14,741
28,002
77,200
(65,617 )
43,693
(3,305 )
(51,128 )
162
(54,271 )
(254,438 )
368,439
147
(96 )
(20,348 )
93,704
(500 )
116,133
(31,628 )
35,176
119,681 $
(20,878 )
(61,733 )
246,286
163,675
(441,632 )
203,344
1,148
(156 )
(414 )
(237,710 )
6,299
(24,043 )
—
59,219
35,176 $
78,575
10,989
1,213
4,573
5,351
(369 )
—
3
—
—
—
81
1,744
—
—
1,174
196
—
(10,431 )
(142,866 )
16,666
12,138
101,856
(65,301 )
(85,661 )
55
(150,907 )
(547,695 )
652,087
2,269
(40,197 )
(10,294 )
56,170
(2,308 )
4,811
—
54,408
59,219
68,396 $
26,867 $
108,561 $
36,093 $
94,472
59,156
*Includes $149, $259, $310 of restricted cash for the fiscal years ended December 31, 2020, 2019 and 2018 respectively. The Company records
restricted cash in prepaid expenses and other current assets as presented in the consolidated balance sheets at December 31, 2020 and 2019.
See accompanying notes to consolidated financial statements.
75
PARTY CITY HOLDCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share)
Note 1 — Organization, Description of Business and Basis of Presentation
Party City Holdco Inc. (the “Company” or “Party City Holdco”) is the leading party goods company by
revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods
globally by revenue. The Company is a popular one-stop shopping destination for party supplies, balloons, and
costumes. In addition to being a great retail brand, the Company is a global, world-class organization that combines
state-of-the-art manufacturing and sourcing operations, and sophisticated wholesale operations complemented by a
multi-channel retailing strategy and e-commerce retail operations. The Company is a leading player in its category
and vertically integrated in its breadth and depth. The Company designs, manufactures, sources and distributes party
goods, including paper and plastic tableware, metallic and latex balloons, Halloween and other costumes,
accessories, novelties, gifts and stationery throughout the world. The Company’s retail operations include
approximately 831 specialty retail party supply stores (including franchise stores) throughout the United States and
Mexico operating under the names Party City and Halloween City, and e-commerce websites, including through the
domain name PartyCity.com.
Party City Holdco is a holding company with no operating assets or operations. The Company owns 100% of
PC Nextco Holdings, LLC (“PC Nextco”), which owns 100% of PC Intermediate Holdings, Inc. (“PC
Intermediate”). PC Intermediate owns 100% of Party City Holdings Inc. (“PCHI”), which owns most of the
Company’s operating subsidiaries.
Note 2 — Summary of Significant Accounting Policies
Consolidated Financial Statements
The consolidated financial statements of the Company include the accounts of all majority-owned subsidiaries
and controlled entities. All intercompany balances and transactions have been eliminated.
The Company’s retail operations define a fiscal year (“Fiscal Year”) as the 52-week period or 53-week period
ended on the Saturday nearest December 31st of each year and define their fiscal quarters (“Fiscal Quarter”) as the
four interim 13-week periods following the end of the previous Fiscal Year, except in the case of a 53-week Fiscal
Year when the fourth Fiscal Quarter is extended to 14 weeks. Fiscal 2020 was a 53-week year for our retail
operations. The consolidated financial statements of the Company combine the Fiscal Year and Fiscal Quarters of
the Company’s retail operations with the calendar year and calendar quarters of the Company’s wholesale
operations, as the differences are not significant.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual results could differ from those
estimates. Management periodically evaluates estimates used in the preparation of the consolidated financial
statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are made
prospectively based on such periodic evaluations.
Cash Equivalents
Highly liquid investments with a maturity of three months or less when purchased are considered to be cash
equivalents. All credit card transactions that process in less than seven days are classified as cash and cash
equivalents.
76
Inventories
Inventories are valued at the lower of cost and net realizable value. In assessing the ultimate realization of
inventories, the Company makes judgments regarding, among other things, future demand and market conditions,
current inventory levels and the impact of the possible discontinuation of product designs.
The Company principally determines the cost of inventory using the weighted average method.
The Company estimates retail inventory shrinkage for the period between physical inventory dates on a store-
by-store basis. Inventory shrinkage estimates can be affected by changes in merchandise mix and changes in actual
shortage trends. The shrinkage rate from the most recent physical inventory, in combination with historical
experience, is the basis for estimating shrinkage.
Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of
the Company’s customers to make required payments. Judgment is required in assessing the ultimate realization of
these receivables, including consideration of the Company’s history of receivable write-offs, the level of past due
accounts and the economic status of the Company’s customers. In an effort to identify adverse trends relative to
customer economic status, the Company assesses the financial health of the markets it operates in and performs
periodic credit evaluations of its customers and ongoing reviews of account balances and aging of receivables.
Amounts are considered past due when payment has not been received within the time frame of the credit terms
extended. Write-offs are charged directly against the allowance for doubtful accounts and occur only after all
collection efforts have been exhausted. At December 31, 2020 and 2019, the allowance for doubtful accounts was
$7,232 and $4,786, respectively.
Long-Lived and Intangible Assets (including Goodwill)
Property, plant and equipment are stated at cost.
The Company reviews the recoverability of its finite long-lived assets, including finite-lived intangible assets,
whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. For purposes of
recognizing and measuring impairment, the Company evaluates long-lived assets/asset groups, other than goodwill,
based upon the lowest level of independent cash flows ascertainable to evaluate impairment. If an impairment
indicator exists, we compare the undiscounted future cash flows of the asset/asset group to the carrying value of the
asset/asset group. If the sum of the undiscounted future cash flows is less than the carrying value of the asset/asset
group, we would calculate discounted future cash flows based on market participant assumptions. If the sum of
discounted cash flows is less than the carrying value of the asset/asset group, we would recognize an impairment
loss. The impairment related to long-lived assets is measured as the amount by which the carrying amount of the
asset(s) exceeds the fair value of the asset(s).
In the evaluation of the fair value and future benefits of finite long-lived assets attached to retail stores, the
Company performs its cash flow analysis generally on a store-by-store basis. Various factors including future sales
growth and profit margins are included in this analysis.
The Company evaluates the goodwill associated with its acquisitions, and other intangibles with indefinite
lives, for impairment on October 1 based on current and projected performance, or more frequently if circumstances
indicate a possible impairment. For purposes of testing goodwill for impairment, reporting units are determined by
identifying operating segments within the Company’s organization which constitute a business for which discrete
financial information is available and is reviewed by management. Components within an operating segment are
aggregated to the extent that they have similar economic characteristics. Based on this evaluation, the Company has
determined that its operating segments, wholesale and retail, represent reporting units for the purposes of its
goodwill impairment test.
77
If it is concluded that it is more likely than not that the fair value of a reporting unit is less than its carrying
value, the Company estimates the fair value of the reporting unit using a combination of a market approach and an
income approach. If such carrying value exceeds the fair value an impairment loss will be recognized in an amount
equal to such excess. The fair value of a reporting unit refers to the amount at which the unit as a whole could be
sold in a current transaction between willing parties.
Our Trade names are treated as indefinite-lived intangible assets and, therefore are not amortized, but rather
are tested for impairment annually in the fourth fiscal quarter, unless there are events requiring an earlier assessment
or changes in circumstances during an interim period providing impairment indicators are present. When performing
a quantitative impairment assessment of our Trade name indefinite-lived intangible assets, the fair value of the Trade
names is estimated using a discounted cash flow analysis based on the "relief from royalty" method, assuming that a
third party would be willing to pay a royalty in lieu of ownership for this intangible asset. This approach is
dependent on many factors, including estimates of future growth, royalty rates, and discount rates. Actual future
results may differ from these estimates. Impairment loss is recognized when the estimated fair value of the
indefinite-lived intangible asset is less than its carrying amount.
Deferred Financing Costs
Deferred financing costs are netted against amounts outstanding under the related debt instruments. They are
amortized to interest expense over the terms of the instruments using the effective interest method.
Equity Method Investments
The Company has an investment in Convergram Mexico, S. De R.L. De C.V., a joint venture distributing
metallic balloons, principally in Mexico and Latin America. The Company accounts for its 49.9% investment in the
joint venture using the equity method of accounting.
The Company’s investments are included in other assets, net on the consolidated balance sheet and its portion
of the results of the investees’ operations are included in other expense in the consolidated statement of operations
and comprehensive (loss) income (see Note 14, Other Expense, net).
Insurance Accruals
The Company maintains certain self-insured workers’ compensation and general liability insurance plans. The
Company estimates the required liability for claims under such plans based upon various assumptions, which
include, but are not limited to, historical loss experience, projected loss development factors, actual payroll and
other data. The required liability is also subject to adjustment in the future based upon changes in claims experience,
including changes in the number of incidents (frequency) and changes in the ultimate cost per incident (severity).
Revenue Recognition
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. Retail e-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 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 on e-commerce sales, the Company records such
amounts in revenue. The Company excludes all sales taxes and value-added taxes from revenue.
78
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 a one-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 the one-time fee are recorded in royalties and franchise fees in the Company’s consolidated statement of
operations and comprehensive (loss) income.
Wholesale
For most of the Company’s wholesale sales, control transfers upon the Company’s shipment of the product.
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.
In most cases, the determination of the transaction price is fixed based on the contract and/or purchase order.
To the extent that the Company charges customers for freight costs, the Company records such amounts in revenue.
The Company excludes 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 does not adjust the consideration for the effects of a significant financing component.
Cost of Sales
Cost of sales at wholesale reflects the production costs (i.e., raw materials, labor and overhead) of
manufactured goods and the direct cost of purchased goods, inventory shrinkage, inventory adjustments, inbound
freight to the Company’s manufacturing and distribution facilities, distribution costs and outbound freight to transfer
goods to the Company’s wholesale customers. At retail, cost of sales reflects the direct costs of goods purchased
from third parties and the production costs/purchase costs of goods acquired from the Company’s wholesale
operations. Retail cost of sales also includes inventory shrinkage, inventory adjustments, inbound freight, occupancy
costs related to store operations (such as rent, utilities and common area maintenance), depreciation on assets and all
logistics costs (i.e., handling and distribution costs) associated with the Company’s e-commerce business.
Retail Operating Expenses
Retail operating expenses include costs associated with the operation of the Company’s retail stores (with the
exception of occupancy costs, which are included in cost of sales). Retail operating expenses principally consist of
employee compensation and benefits, advertising, supplies expense and credit card fees.
Shipping and Handling
Outbound shipping costs billed to customers are included in net sales. The costs of shipping and handling
incurred by the Company are included in cost of sales.
79
Product Royalty Agreements
The Company enters into product royalty agreements that allow the Company to use licensed designs on
certain of its products. These contracts require the Company to pay royalties, generally based on the sales of such
product, and may require guaranteed minimum royalties, a portion of which may be paid in advance. The Company
matches royalty expense with revenue by recording royalties at the time of sale, at the greater of the contractual rate
or an effective rate calculated based on the guaranteed minimum royalty and the Company’s estimate of sales during
the contract period. If a portion of the guaranteed minimum royalty is determined to be unrecoverable, the
unrecoverable portion is charged to expense at that time. Guaranteed minimum royalties paid in advance are
recorded in the consolidated balance sheets in either prepaid expenses and other current assets or other assets, net,
depending on the nature of the royalties.
Catalog Costs
The Company expenses costs associated with the production of catalogs when incurred.
Advertising
Advertising costs are expensed as incurred. Retail advertising expenses for the years ended December 31,
2020, December 31, 2019, and December 31, 2018 were $61,036, $72,518 and $68,756 respectively.
Variable Interest Entities
When determining whether a legal entity should be consolidated, the Company first determines whether it
has a variable interest in the legal entity. If a variable interest exists, the Company determines whether the legal
entity is a variable interest entity due to either: 1) a lack of sufficient equity to finance its activities, 2) the equity
holders lacking the characteristics of a controlling financial interest, or 3) the legal entity being structured with non-
substantive voting rights. If the Company concludes that the legal entity is a variable interest entity, the Company
next determines whether it is the primary beneficiary due to it possessing both: 1) the power to direct the activities
of a variable interest entity that most significantly impact the variable interest entity’s economic performance, and 2)
the obligation to absorb losses of the variable interest entity that potentially could be significant to the variable
interest entity or the right to receive benefits from the variable interest entity which could be significant to the
variable interest entity. If the Company concludes that it is the primary beneficiary, it consolidates the legal entity.
There are no variable interest entities as of December 31, 2020. Refer to Note 25 – Kazzam, LLC for additional
information.
Art and Development Costs
Art and development costs are primarily internal costs that are not easily associated with specific designs,
some of which may not reach commercial production. Accordingly, the Company expenses these costs as incurred.
Derivative Financial Instruments
ASC Topic 815, “Accounting for Derivative Instruments and Hedging Activities”, requires that all derivative
financial instruments be recognized on the balance sheet at fair value and establishes criteria for both the designation
and effectiveness of hedging activities. The Company uses derivatives in the management of interest rate and
foreign currency exposure. ASC Topic 815 requires the Company to formally document the assets, liabilities or
other transactions the Company designates as hedged items, the risk being hedged and the relationship between the
hedged items and the hedging instruments. The Company must measure the effectiveness of the hedging relationship
at the inception of the hedge and on an on-going basis.
80
If derivative financial instruments qualify as fair value hedges, the gain or loss on the instrument and the
offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in net income during the
period of the change in fair values. For derivative financial instruments that qualify as cash flow hedges (i.e.,
hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective
portion of the gain or loss on the derivative instrument is reported as a component of accumulated other
comprehensive (loss) income and reclassified into net income in the same period or periods during which the hedged
transaction affects earnings. The ineffective portion of a cash flow hedge, if any, is determined based on the dollar-
offset method (i.e., the gain or loss on the derivative financial instrument in excess of the cumulative change in the
present value of future cash flows of the hedged item) and is recognized in net income during the period of change.
As long as hedge effectiveness is maintained, interest rate swap arrangements and foreign currency exchange
agreements qualify for hedge accounting as cash flow hedges. See Note 22– Derivative Financial Instruments.
Income Taxes
Deferred tax assets and liabilities are determined based on the difference between the financial statement and
tax bases of assets and liabilities (and operating loss and tax credit carryforwards) applying enacted statutory tax
rates in effect for the years in which the differences are expected to reverse. Deferred tax assets are reduced by a
valuation allowance when, in the judgment of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Stock-Based Compensation
Accounting for stock-based compensation requires measurement of compensation cost for all stock-based
awards at fair value on the date of grant and recognition of compensation expense over the service period for awards
expected to vest. The Company also granted performance-based restricted stock units ("PRSUs") and Restricted
Cash awards to certain executive officers and other employees. The performance period is three years from the grant
date. The PRSUs and Restricted Cash awards become earned in a given period if the volume weighted average of
the fair market value per share of the Common Stock meets or exceeds $2.50, $5.00, $7.50, and $10.00,
respectively, for a period of not less than 90 consecutive trading days on the New York Stock Exchange and are
subject to up to 2 years service-vesting after the achievement of these thresholds. The PRSUs and Restricted Cash
awards are measured at fair value based on Monte Carlo simulation models. The PRSUs will be settled in Party City
common stock and are accounted for as equity awards and the Restricted Cash will be settled in cash and are
accounted for as liability awards.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consists of the Company’s foreign currency adjustments and the
impact of interest rate swap and foreign exchange contracts that qualify as hedges. See Note 22 – Derivative
Financial Instruments and Note 23 – Changes in Accumulated Other Comprehensive Loss.
Foreign Currency Transactions and Translation
The functional currencies of the Company’s foreign operations are the local currencies in which they operate.
Foreign currency exchange gains or losses resulting from receivables or payables in currencies other than the
functional currencies generally are recognized in the Company’s statement of operations and comprehensive (loss)
income. The balance sheets of foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect on
the balance sheet date. The results of operations of foreign subsidiaries are translated into U.S. dollars at the average
exchange rates effective for the periods presented. The differences from historical exchange rates are recorded as
comprehensive (loss) income and are included as a component of accumulated other comprehensive loss.
Earnings Per Share
Basic earnings per share are computed by dividing net income attributable to common shareholders of Party
City Holdco Inc. by the weighted average number of common shares outstanding for the period. Diluted earnings
per share are calculated based on the weighted average number of outstanding common shares plus the dilutive
effect of stock options and warrants, as if they were exercised, and restricted stock units, as if they vested.
81
A reconciliation between basic and diluted income per share is as follows:
Net (loss) income attributable to common shareholders of
Party City Holdco Inc.:
Weighted average shares — Basic:
Effect of dilutive restricted stock units:
Effect of dilutive stock options:
Weighted average shares — Diluted:
Net (loss) income per share attributable to common
shareholders of Party City Holdco Inc. —
Basic:
Net (loss) income per share attributable to common
shareholders of Party City Holdco Inc. —
Diluted:
Fiscal Year Ended December 31,
2019
2020
2018
$
(528,238 ) $
(532,495 ) $
100,804,944
—
—
100,804,944
93,295,692
—
—
93,295,692
123,259
96,133,144
9,661
1,128,245
97,271,050
$
(5.24 ) $
(5.71 ) $
1.28
$
(5.24 ) $
(5.71 ) $
1.27
During the year ended December 31, 2020, 787,313 restricted stock units, 1,206,723 performance restricted
stock units, 3,240,461 stock options, and 1,000,000 warrants were excluded from the calculation of diluted net loss
per share attributable to common shareholders of Party City Holdco Inc. – diluted as they were anti-dilutive. During
the years ended December 31, 2019, and December 31, 2018, 3,510,317 stock options and 2,394,868 stock options,
respectively, were excluded from the calculations of net income per share attributable to common shareholders of
Party City Holdco Inc. – diluted as they were anti-dilutive. Additionally, during each of the years ended
December 31, 2019, and December 31, 2018, 596,000 warrants were excluded from the calculations of net income
per share attributable to common shareholders of Party City Holdco Inc. – diluted as they were anti-dilutive. Further,
during the years ended December 31, 2019, and December 31, 2018, 413,968 restricted stock units and 141,400
restricted stock units, respectively, were excluded from the calculations of net income per share attributable to
common shareholders of Party City Holdco Inc. – diluted as they were anti-dilutive.
Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2020-04, which provides guidance providing optional expedients and exceptions for applying U.S.
generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by the
discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be
discontinued. Additionally, in January 2021, the FASB issued ASU 2021-01, which allows entities to elect certain
optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships
affected by changes in the interest rates. These ASUs are effective as of March 12, 2020 through December 31,
2022. The Company is currently evaluating the impact of this guidance on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820) – Disclosure
Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. The new guidance improves
and clarifies the fair value measurement disclosure requirements of ASC 820. The new disclosure requirements
include the disclosure of the changes in unrealized gains or losses included in other comprehensive (loss) income for
recurring Level 3 fair value measurements held at the end of the reporting period and the explicit requirement to
disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value
measurements. The other provisions of ASU 2018-13 also include eliminated and modified disclosure requirements.
The guidance was effective for fiscal years beginning after December 15, 2019. The Company has adopted this
guidance effective January 1, 2020, prospectively and the adoption and application of this standard did not have a
material impact to the consolidated financial statements.
82
In June 2018, the FASB issued ASU 2018-07, “Compensation — Stock Compensation: Improvements to
Nonemployee Share-Based Payment Accounting”. The ASU simplifies the accounting for non-employee share-
based payments. The Company adopted the update during the first quarter of 2019. The pronouncement requires
companies to record the impact of adoption, if any, as a cumulative-effect adjustment to retained earnings as of the
adoption date. Therefore, on January 1, 2019, the Company decreased retained earnings by $503. Additionally, the
Company increased additional paid-in capital by $662 and recorded a $159 deferred income tax asset.
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging: Targeted Improvements to
Accounting for Hedging Activities”. The pronouncement amends the existing hedge accounting model in order to
enable entities to better portray the economics of their risk management activities in their financial statements. The
Company adopted the update during the first quarter of 2019 and such adoption had no impact on the Company’s
consolidated financial statements.
In January 2017 the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to measure a goodwill
impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that
goodwill. Under the amendments in ASU 2017-04, an entity will perform its annual, or interim, goodwill
impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity will recognize an
impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however,
the loss recognized will not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an
entity will consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit
when measuring the goodwill impairment loss, if applicable. The Company adopted ASU No. 2017-04 during the
first quarter of 2019. See Note 4 – Goodwill.
In November 2016, the FASB issued ASU 2016-18, “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.
In August 2016, the FASB issued ASU 2016-15, “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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses”. The ASU changes
how entities will account for credit losses for most financial assets and certain other instruments that are not
measured at fair value through net income. The ASU requires that an entity measure and recognize expected credit
losses at the time the asset is recorded, while considering a broader range of information to estimate credit losses
including macroeconomic conditions that correlate with historical loss experience, delinquency trends and aging
behavior of receivables, among others. The Company has adopted this guidance effective January 1, 2020,
prospectively, with respect to its receivables, and the adoption and application of this standard did not have a
material impact to the consolidated financial statements during the year ended 2020.
In February 2016, the FASB issued ASU 2016-02, “Leases”. The ASU requires that companies recognize
assets and liabilities for the rights and obligations created by companies’ leases. The Company’s lease portfolio is
primarily comprised of store leases, manufacturing and distribution facility leases, warehouse leases and office
leases. Most of the leases are operating leases.
The Company adopted the new lease standard during the first quarter of 2019 and, to the extent required by
the pronouncement, recognized a right of use asset and liability for its operating lease arrangements with terms of
greater than twelve months. See the Company’s December 31, 2019 consolidated balance sheet for the impact of
such adoption.
83
The pronouncement had no impact on the Company’s consolidated statement of operations and
comprehensive 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 26 – Leases.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The
pronouncement contains a five-step model which replaces most existing revenue recognition guidance. The new
standard became effective for the Company on January 1, 2018. The Company adopted the pronouncement using the
modified retrospective approach. Therefore, on January 1, 2018, the Company adjusted its accounting for certain
discounts which are related to the timing of payments by customers of its wholesale business and the Company
recorded a cumulative-effect adjustment which reduced retained earnings by $46. Additionally, as of such date, the
Company modified its accounting for certain metallic balloon sales of its wholesale segment and started to defer the
recognition of revenue on such sales, and the related costs, until the balloons have been filled with helium. As a
result, the Company recorded a cumulative-effect adjustment which increased retained earnings by $8. Finally, as of
such date, the Company adjusted its accounting for certain discounts on wholesale sales of seasonal product and the
Company recorded a cumulative-effect adjustment which reduced retained earnings by $40. See Note 24 – Revenue
from Contracts with Customers, for further discussion of the adoption of the pronouncement and the Company’s
revenue recognition policy.
Note 3 — Store Impairment and Restructuring charges
During the years ended December 31, 2020 and 2019, the Company performed a comprehensive review of its
store locations aimed at improving the overall productivity of such locations (“store optimization program”) and,
after careful consideration and evaluation of the store locations, the Company made the decision to accelerate the
optimization of its store portfolio. In 2019, 55 stores were identified for closure, out of which 35 stores were closed
in 2019 and 20 stores were closed in January 2020. In 2020, 21 stores identified for closure in the first quarter of
2020 and were closed in the third quarter. These closings provided the Company with capital flexibility to expand
into underserved markets. In addition, the Company evaluated the recoverability of long lived assets at the open
stores and recorded an impairment charge associated with the operating lease asset and property, plant and
equipment for open stores where sales were affected due to the outbreak of, and local, state and federal
governmental responses to, COVID-19. In conjunction with the store optimization program and store impairment,
during the years ended December 31, 2020 and 2019, the Company recorded the following charges:
Inventory reserves
Operating lease asset impairment
Property, plant and equipment impairment
Labor and other costs incurred closing stores
Severance
Total
December 31,
2020
2019
$
$
12,880 $
15,520
2,065
4,864
—
35,329 $
21,284
14,943
4,680
8,754
661
50,322
As the Company closes the stores, it records charges for common area maintenance, insurance and taxes to be
paid subsequent to such closures in accordance with the stores’ lease agreements. However, such amounts are
immaterial.
The fair values of the operating lease assets and property, plant and equipment were determined based on
estimated future discounted cash flows for such assets using market participant assumptions, including data on the
ability to sub-lease the stores.
The charge for inventory reserves represents inventory that is disposed of following the closures of the stores
and inventory that is sold below cost prior to such closures. The charge for inventory reserves was recorded in cost
of sales in the Company’s statement of operations and comprehensive loss. The other charges were recorded in
Store impairment and restructuring charges in the Company’s statement of operations and comprehensive (loss)
income.
84
The Company cannot guarantee that it will be able to achieve the anticipated benefits from the store
optimization program. If the Company is unable to achieve such benefits, its results of operations and financial
condition could be affected.
$
Note 4 – Goodwill
Wholesale segment:
Beginning balance
Allocation of Goodwill from Retail segment
Goodwill impairment
Foreign currency translation
Goodwill reclassified to held for sale
Ending balance
Retail segment:
Beginning balance
Store acquisitions
Acquisitions
Sale of Canadian-based Party City stores
Allocation of Goodwill to Wholesale segment
Goodwill impairment
Foreign currency translation
Ending balance
Total ending balance, both segments
$
Fiscal Year Ended December 31,
2020
2019
493,432 $
—
(148,326 )
1,483
(13,405 )
333,184
578,898
1,512
—
—
—
(253,110 )
767
328,067
661,251 $
510,490
42,230
(60,427 )
1,139
—
493,432
1,146,460
2,557
15,375
(48,241 )
(42,230 )
(495,629 )
606
578,898
1,072,330
The Company reviews goodwill and other intangibles that have indefinite lives for impairment annually as of
October 1 or when events or changes in circumstances indicate the carrying value of these assets might exceed their
current fair values. Impairment testing is based upon the best information available including estimates of fair value
which incorporate assumptions marketplace participants would use in making their estimates of fair value.
Significant assumptions and estimates are required, including, but not limited to, projecting future cash flows,
determining appropriate discount rates and terminal growth rates, and other assumptions, to estimate the fair value
of goodwill and indefinite lived intangible assets. Although the Company believes the assumptions and estimates
made are reasonable and appropriate, different assumptions and estimates could materially impact its reported
financial results.
During the three months ended March 31, 2020, the Company identified intangible assets’ impairment
indicators associated with its market capitalization and significantly reduced customer demand for its products due
to COVID-19. As a result, the Company performed interim impairment tests on the goodwill at its retail and
wholesale reporting units and its other indefinite lived intangible assets as of March 31, 2020. The interim
impairment tests were performed using an income approach. The Company recognized non-cash pre-tax goodwill
impairment charges at March 31, 2020 of $253,110 and $148,326 against the goodwill associated with its retail and
wholesale reporting units, respectively.
In addition, during the three months ended March 31, 2020, the Company recorded an impairment charge of
$131,287 and $3,925 on its Party City and Halloween City tradenames, respectively.
During the three months ended September 30, 2020 the Company has determined that the fair value of certain
indefinite-lived intangible assets is lower than the related book values. Additionally, for certain long-lived assets it is
more likely than not that those long-lived assets will be disposed significantly before the end of their previously
estimated useful lives. As a result, impairment charges of $11,032, $2,423 and $31,277 were recorded in the third
quarter on its business indefinite-lived trade name intangibles, finite-lived intangibles and tangible assets,
respectively.
85
During the three months ended December 31, 2020, there was no goodwill or intangibles impairment.
During the three months ended September 30, 2019, and the three months ended December 31, 2019, the
Company identified an impairment indicator associated with its market capitalization and performed impairment
tests on the goodwill at its wholesale and retail reporting units and its other indefinite lived intangible assets as of
September 30, 2019 and December 31, 2019. The Company recognized non-cash pre-tax goodwill impairment
charges at September 30, 2019 of $224,100 and $35,000 and at December 31, 2019, of $271,500 and $25,400,
against the goodwill associated with its retail and wholesale reporting units, respectively. During 2019, there was no
impairment on the Party City trade name and the Company recorded a Halloween City trade name impairment
charge of $6,575.
Note 5 – Sale/Leaseback Transaction
In June 2019, the Company 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. Simultaneously, the Company entered into twenty-year leases for each of the facilities. The
aggregate sale price was $128,000 and, during the year ended December 31, 2019, the Company recorded a $58,381
gain on the sale, net of transaction costs, in the Company’s Consolidated Statement of Operations and
Comprehensive (Loss) Income.
Under the terms of the lease agreements, the Company will pay total rent of $8,320 during the first year and
the annual rent will increase by 2% thereafter.
The Chester and Eden Prairie leases are being accounted for as operating leases and the sale of such properties
is included in the gain above.
However, for the Los Lunas property, the present value of the lease payments is greater than substantially all
of the fair value of the assets. Therefore, the lease is a finance lease and sale accounting treatment is prohibited. As
such, the Company accounted for the proceeds as a financing lease. As of December 31, 2019, $11,990 is recorded
in long-term obligations in the Company’s consolidated balance sheet.
In conjunction with the sale/leaseback transaction, the Company amended its Term Loan Credit Agreement.
The amendment required the Company to use half of the proceeds from the transaction, net of costs, to paydown part
of the outstanding balance under such debt agreement. Additionally, the amendment required the Company to pay
an immaterial “consent fee” to the lenders. As the Term Loan Credit Agreement is a loan syndication, the Company
assessed, on a creditor-by-creditor basis, whether the amendment should be accounted for as an extinguishment or a
modification. The Company concluded that, for each creditor, the amendment should be accounted for as a
modification. Therefore, no capitalized deferred financing costs or original issuance discounts were written off in
conjunction with the amendment.
During June 2019, the Company used proceeds from the sale (net of costs) of $125,864 to paydown
outstanding Term Loan debt of $62,770 with the balance used to paydown the ABL. See Note 12 — Long-Term
Obligations.
Note 6 – Disposition of Assets and Assets and Liabilities Held for Sale
In January 2021, the Company closed the previously disclosed sale of a substantial portion of its international
operations. The announced sale had a total transaction value of approximately $50.7 million. The Company will use
the net proceeds to paydown debt.
86
As of December 31, 2020, the Company reported the assets and liabilities of the international operations as
held for sale in its consolidated balance sheet and include the following:
Cash
Accounts receivable, net
Inventories, net
Prepaid expense
Goodwill
Other assets, net
Total assets held for sale
Held for sale reserve
Assets held for sale, net
Loans and notes payable
Accounts payable
Current operating lease liability
Accrued expenses
Income taxes payable and Deferred income tax liabilities
Long term obligations excluding current portion
Other long-term liabilities
Long term operating lease liability
Total, net
Fiscal Year Ended December 31, 2020
Retail
Total
Wholesale
$
25,989 $
31,932
55,574
4,375
13,405
1,891
133,166 $
$
5,639 $
460
10,526
4,419
-
2,848
23,892
$
31,628
32,392
66,100
8,794
13,405
4,739
157,058
(73,948 )
83,110
Wholesale
$
Fiscal Year Ended December 31, 2020
1,311 $
23,364
4,174
16,527
258
40
-
6,167
51,841 $
Retail
Total
— $
2,107
384
6,998
1,976
-
3,354
1,832
16,651 $
1,311
25,471
4,558
23,525
2,234
40
3,354
7,999
68,492
$
Additionally, the company recorded a loss reserve of $73,948 against the net assets.
On October 1, 2019, the Company sold its Canadian-based Party City stores to a Canadian-based retailer for
$131,711 and entered into a 10-year supply agreement under which the acquirer agreed to purchase product from the
Company for such Party City stores, as well as the acquirer’s other stores. The Company will use the net proceeds
to paydown debt. For the years ended December 31, 2019, 2018, and 2017, the Canadian-based Party City stores had
pre-tax income of $2,631, $10,737, and $8,947 respectively. The Company recorded a $2,873 gain on sale of assets,
which is reported in Other expense, net on the Consolidated Statement of Operations and Comprehensive (Loss)
Income.
Note 7 — Inventories, Net
Inventories consisted of the following:
Finished goods
Raw materials
Work in process
December 31,
2020
2019
$ 367,275 $ 606,036
34,259
18,124
$ 412,285 $ 658,419
27,111
17,899
87
During the fourth quarter of 2020, the Company continued to make progress in improving inventory levels
across its stores and distribution network. Consistent with the strategy of rationalizing in-store SKU count and
improving working capital velocity, the Company has updated its seasonal assortment strategy to target higher in-
season sell-through of merchandise and reduce annual inventory carry-over. The more edited and curated
assortments are expected to improve the customer experience by making stores easier to shop and product selections
more relevant to consumers, while also improving the efficiency of inventory management and reducing working
capital needs. As a result, during the fourth quarter of 2020 the Company disposed of and recorded a reserve for
future disposals of a total $88,358 in inventory that will not be required in future seasons.
See Note 2 — Summary of Significant Accounting Policies, for a discussion of the Company’s accounting
policies for inventories.
Note 8 — Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following:
Machinery and equipment
Buildings
Data processing equipment
Leasehold improvements
Furniture and fixtures
Land
Less: accumulated depreciation
December 31,
2020
Useful lives
2019
$ 247,255 $ 255,908 3-15 years
9,838 40 years
9,982
129,988
92,257 3-5 years
176,389 117,894 1-10 years
218,452 168,296 5-10 years
8,359
7,047
790,425 651,240
(581,013 ) (407,668 )
$ 209,412 $ 243,572
Depreciation expense related to property, plant and equipment, including assets under finance leases, was
$65,144, $67,016, and $66,304, for the years ended December 31, 2020, December 31, 2019, and December 31,
2018, respectively. Assets under finance leases are principally included in buildings and machinery and equipment
in the table above. See Note 3 for detail regarding property, plant and equipment impairment.
Note 9 — Acquisitions
During March 2018, the Company acquired 11 franchise stores, which are located in Maryland, for total
consideration (including non-cash consideration) of approximately $17,000. The following summarizes the fair
values of the major classes of assets acquired and liabilities assumed: inventories of $3,500, property, plant and
equipment of $200, a reacquired right intangible asset in the amount of $4,000, and an asset in the amount of $100
due to leases that are favorable when compared to market rates.
Also, during July 2018, the Company acquired an additional 16 franchise stores, which are located in
Pennsylvania, for total consideration (including non-cash consideration) of approximately $20,500. The following
summarizes the fair values of the major classes of assets acquired and liabilities assumed: inventories of $4,200,
property, plant and equipment of $500, a reacquired right intangible asset in the amount of $3,400, and an asset in
the amount of $500 due to leases that are favorable when compared to market rates.
Additionally, during September 2018, the Company acquired 21 franchise stores, which are located in
Minnesota, North Dakota and Texas, for total consideration (including non-cash consideration) of approximately
$26,300. The following summarizes the fair values of the major classes of assets acquired and liabilities assumed:
inventories of $7,500, property, plant and equipment of $500, a reacquired right intangible asset in the amount of
$7,300, and an asset in the amount of $200 due to leases that are favorable when compared to market rates.
88
The allocation of the purchase price for the business combinations was based on the Company’s estimate of
the fair value of the assets acquired and liabilities assumed. Goodwill, which is tax-deductible, arose due to
numerous factors, including the wholesale profit generated via the sale of product from the Company’s wholesale
operations through the acquired stores. Goodwill also arose due to: the value to the Company of customers knowing
that there are party stores in the locations (when the Company opens a new store, sales are initially lower than those
of mature stores and increase over time), the Company’s ability to run the stores more efficiently than the franchisee
based on the Company’s experience with its corporate-owned stores and the assembled workforce at the acquired
stores.
Also, during 2018, the Company entered into an agreement to acquire 11 independent stores, which are
located in Texas. The Company will take control of the stores one at a time over a period of approximately two
years. During 2018, the Company took control of eight of the 11 stores, for total business combination consideration
of approximately $4,400. The allocation of the purchase price was based on the Company’s estimate of the fair
value of the assets acquired and liabilities assumed. Goodwill, which is tax-deductible, arose due to numerous
factors, including the wholesale profit generated via the sale of product from the Company’s wholesale operations
through the stores. Due to the fact that the stores were independent stores and, therefore, possessed a relatively small
percentage of inventory that came from the Company’s wholesale operations, going forward the Company will
significantly increase such percentage. Additionally, goodwill arose due to: the value to the Company of customers
knowing that there are party stores in the locations, the Company’s ability to run the stores more efficiently than the
current operator based on the Company’s experience with its corporate-owned stores and the assembled workforce
at the eight stores. In 2019 the Company acquired the remainder of the 11 stores.
In November 2019 the Company acquired all of the stock of two European-based online retailers, Livario
GmbH and Webdots GmbH, for total cash consideration of approximately $9 million.
Pro forma financial information has not been presented because the impact of the acquisitions individually,
and in the aggregate, is not material to the Company’s consolidated financial results.
Note 10 — Intangible Assets
The Company had the following other identifiable finite-lived intangible assets:
Franchise-related intangible assets
Customer lists and relationships
Copyrights and designs
Total
Franchise-related intangible assets
Customer lists and relationships
Copyrights and designs
Non-compete agreements
Total
December 31, 2020
Net
Carrying
Value
Accumulated
Amortization
Cost
$ 77,377 $
62,002
29,030
Useful lives
57,524 $ 19,853 4-19 years
12,263 2-20 years
49,739
18 5-7 years
29,012
$ 168,409 $ 136,275 $ 32,134
December 31, 2019
Net
Carrying
Value
Accumulated
Amortization
Cost
$ 77,377 $
62,144
31,453
500
Useful lives
50,658 $ 26,719 4-19 years
16,204 2-20 years
45,940
2,037 5-7 years
29,416
100 5 years
400
$ 171,473 $ 126,413 $ 45,060
89
The Company is amortizing the majority of its intangible assets utilizing accelerated patterns based on the
discounted cash flows that were used to value such assets. The amortization expense for finite-lived intangible assets
for the years ended December 31, 2020, December 31, 2019, and December 31, 2018 was 11,362, $14,100, and
$12,271, respectively. Estimated amortization expense for each of the next five years will be approximately $8,265,
$5,444, $4,126, $3,510, and $2,920 respectively.
In addition to the Company’s finite-lived intangible assets, the Company has recorded indefinite-lived
intangible assets for the Party City trade name, the Amscan trade name, the Halloween City trade name, the Christys
trade name, the Granmark trade name, the partycity.com domain name and the partydelights.co.uk domain name.
During the three months ended March 31, 2020, the Company recorded an impairment charges of $131,287 and
$3,925 on its Party City and Halloween City tradenames, respectively. During 2019, the Company recorded a
Halloween City tradename impairment charge of $6,575.
During the three months ended September 30, 2020 the Company has determined that the fair value of certain
indefinite-lived intangible assets is lower than the related book values. Additionally, for certain long-lived assets it is
more likely than not that those long-lived assets will be disposed significantly before the end of their previously
estimated useful lives. As a result, impairment charges of $11,032, $2,423 and $31,277 were recorded in the third
quarter on its business indefinite-lived trade name intangibles, finite-lived intangibles and tangible assets,
respectively.
Note 11 — Loans and Notes Payable
ABL Facility
Prior to April 2019, the Company had a $540,000 asset-based revolving credit facility (with a seasonal
increase to $640,000 during a certain period of each calendar year) (“ABL Facility”), which matures during August
2023 (subject to a springing maturity at an earlier date if the maturity date of certain of the Company’s other debt
has not been extended or refinanced). It provides for (a) revolving loans, subject to a borrowing base described
below, and (b) letters of credit, in an aggregate face amount at any time outstanding not to exceed $50,000. During
April 2019, the Company amended the ABL Facility. Such amendment removed the seasonal component and made
the ABL Facility a $640,000 facility with no seasonal modification component.
Under the ABL Facility, the borrowing base at any time equals (a) a percentage of eligible trade receivables,
plus (b) a percentage of eligible inventory, plus (c) a percentage of eligible credit card receivables, less (d) certain
reserves.
The ABL Facility generally provides for two pricing options: (i) an alternate base interest rate (“ABR”) equal
to the greater of (a) the prime rate, (b) the federal funds rate plus 0.5% or (c) the LIBOR rate plus 1%, in each case,
on the date of such borrowing or (ii) a LIBOR based interest rate, in each case plus an applicable margin. The
applicable margin ranges from 0.25% to 0.50% with respect to ABR borrowings and from 1.25% to 1.50% with
respect to LIBOR borrowings.
In addition to paying interest on outstanding principal, the Company is required to pay a commitment fee of
0.25% per annum in respect of unutilized commitments. The Company must also pay customary letter of credit fees.
All obligations under the ABL Facility are jointly and severally guaranteed by PC Intermediate, PCHI and
each existing and future domestic subsidiary of PCHI. PCHI and each guarantor has secured its obligations, subject
to certain exceptions and limitations, including obligations under its guaranty, as applicable, by a first-priority lien
on its accounts receivable, inventory, cash and certain related assets and a second-priority lien on substantially all of
its other assets.
90
The facility contains negative covenants that, among other things and subject to certain exceptions, restrict the
ability of PCHI to:
incur additional indebtedness;
pay dividends on capital stock or redeem, repurchase or retire capital stock;
make certain investments, loans, advances and acquisitions;
engage in transactions with affiliates;
create liens; and
transfer or sell certain assets.
In addition, PCHI must comply with a fixed charge coverage ratio if excess availability under the ABL
Facility on any day is less than the greater of: (a) 10% of the lesser of the aggregate commitments and the then
borrowing base under the ABL Facility and (b) $40,000. The fixed charge coverage ratio is the ratio of (i) Adjusted
EBITDA (as defined in the facility) minus maintenance-related capital expenditures (as defined in the facility) to
(ii) fixed charges (as defined in the facility).
The ABL Facility also contains certain customary affirmative covenants and events of default.
In connection with entering into and amending the ABL Facility, the Company incurred and capitalized third-
party costs. All capitalized costs are being amortized over the life of the ABL Facility and are included in loans and
notes payable in the Company’s consolidated balance sheet. The balance of related unamortized financing costs at
December 31, 2020 and December 31, 2019 was $1,419 and $1,992, respectively.
Borrowings under the ABL Facility totaled $177,125 at December 31, 2020 and $129,350 at December 31,
2019. The weighted average interest rate for such borrowings was 2.34% at December 31, 2020 and 5.19% at
December 31, 2019. Outstanding standby letters of credit totaled $24,452 at December 31, 2020 and $25,128 at
December 31, 2019. After considering borrowing base restrictions, at December 31, 2020 PCHI had $176,522 of
available borrowing capacity under the terms of the facility and $350,033 at December 31, 2019.
In connection with the issuance of the First Lien Party City Notes, First Lien Anagram Notes, Second Lien
Anagram Notes, referenced in Note 12 – Long Term Obligations, PCHI (1) reduced the ABL revolving
commitments and prepaid the outstanding ABL revolving loans, in each case, in an aggregate principal amount
equal to $44,000 in accordance with the ABL Facility credit agreement, and (2) designated Anagram Holdings and
each of its subsidiaries as an unrestricted subsidiary under the ABL Facility and the Term Loan Credit Agreement.
Refer to Note 27 — Subsequent Events for additional information regarding the ABL Facility.
Other Credit Agreements
The Company’s subsidiaries have also entered into several foreign asset-based and overdraft credit facilities
that provide the Company with additional borrowing capacity. At December 31, 2020 and 2019, there were $1,311
and $1,447 borrowings outstanding under the foreign facilities, respectively. The facilities contain customary
affirmative and negative covenants.
91
Note 12 — Long-Term Obligations
Long-term obligations consisted of the following:
December 31, 2020
Gross
Carrying
Amount
Deferred
Financing
Costs*
Principal
Amount
December 31,
2019
Net Carrying
Amount
Net Carrying
Amount
Senior secured term loan facility (“Term Loan
Credit Agreement”)
6.125% Senior Notes — due 2023
6.625% Senior Notes — due 2026
First Lien Party City Notes
First Lien Anagram Notes
Second Lien Anagram Notes
Finance lease obligations
Total long-term obligations
Less: current portion
$ 694,220 $ 694,220 $
22,924
107,254
161,669
110,000
84,687
13,983
22,924
107,254
206,775
152,301
152,032
13,983
1,194,737 1,349,489
(13,576 )
(13,576 )
Long-term obligations, excluding current portion $ 1,181,161 $ 1,335,913 $
(4,055 ) $ 690,165 $
(145 )
(939 )
—
(966 )
—
—
718,596
347,015
22,779
494,910
106,315
—
206,775
—
151,335
—
152,032
14,990
13,983
1,575,511
(6,105 ) 1,343,384
(71,524 )
(13,576 )
(6,105 ) $ 1,329,808 $ 1,503,987
—
*The Company incurred and capitalized third-party costs as deferred financing, which is being amortized over the life of the debt.
Senior secured term loan facility (“Term Loan Credit Agreement”)
The Term Loan Credit Agreement was amended in February 2018, lowering ABR and LIBOR margins to
their current levels. As the Term Loan Credit Agreement is a loan syndication, the Company assessed, on a creditor-
by-creditor basis, whether the refinancing should be accounted for as an extinguishment or a modification for each
creditor and, during 2018, the Company wrote-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 expense in the
Company’s consolidated statement of operations and comprehensive (loss) 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 2018. The rest of the costs are being amortized over the term of the debt.
During August 2018, the Company executed a refinancing of its debt portfolio and issued $500,000 of new
6.625% senior notes, maturing in 2026. The Company used the proceeds from the notes to: (i) reduce the
outstanding balance under its existing ABL Facility, which is included in loans and notes payable on the Company’s
condensed consolidated balance sheet, by $90,000 and (ii) voluntarily prepay $400,000 of the outstanding principal
under its existing Term Loan Credit Agreement. Additionally, as part of the refinancing, the Company extended the
maturity of the ABL Facility to August 2023 (subject to a springing maturity at an earlier date if the maturity date of
certain of the Company’s other debt has not been extended or refinanced).
As the partial prepayment of the Term Loan Credit Agreement was in accordance with the terms of such
agreement, at the time of such prepayment the Company wrote-off a pro-rata portion of the existing capitalized
deferred financing costs and original issuance discounts, $1,824, for investors who did not participate in the new
notes. Such amount was recorded in other expense in the Company’s consolidated statement of operations and
comprehensive (loss) income.
To the extent that investors in the Term Loan Credit Agreement participated in the new notes, the Company
assessed whether the refinancing should be accounted for as an extinguishment on a creditor-by-creditor basis and
wrote-off $968 of existing deferred financing costs and original issuance discounts. Such amount was recorded in
other expense in the Company’s consolidated statement of operations and comprehensive (loss) income.
Additionally, in conjunction with the issuance of the notes, the Company incurred third-party fees (principally
banker fees). To the extent that such fees related to investors for whom their original debt was not extinguished, the
92
Company expensed the portion of such fees, $2,270 in aggregate, that related to such investors. Such amount was
recorded in other expense in the Company’s consolidated statement of operations and comprehensive (loss) income.
The remainder of the third-party fees, $6,230, have been capitalized and will be amortized over the remaining life of
the debt using the effective interest method.
Further, the Company compared the borrowing capacities of the pre-amendment facility and the post-
amendment facility, on a creditor-by-creditor basis, and concluded that $29 of existing deferred financing costs
should be written-off. Such amount was recorded in other expense in the Company’s consolidated statement of
operations and comprehensive (loss) income. The remaining capitalized costs, and $986 of new third-party costs
incurred in conjunction with the extension, are being amortized over the revised term of the ABL Facility. During
June 2019, in conjunction with a sale/leaseback transaction, the Company amended the Term Loan Credit
Agreement and financed its Los Lunas, New Mexico facility. See Note 5, Sales/Leaseback Transaction, for further
detail. The finance lease obligations above include $11,990 related to the Los Lunas, New Mexico facility.
The Term Loan Credit Agreement, as amended, provides for two pricing options for outstanding loans: (i) an
ABR for any day, a rate per annum equal to the greater of (a) the prime rate in effect on such day, (b) the federal
funds effective rate in effect on such day plus 0.5%, (c) the adjusted LIBOR rate plus 1% and (d) 1.75% or (ii) the
LIBOR rate, with a LIBOR floor of 0.75%, in each case plus an applicable margin. The applicable margin for ABR
and LIBOR borrowings are 1.75% and 2.75%, respectively, and will drop to 1.50% and 2.50%, respectively, if
PCHI’s Senior Secured Leverage Ratio, as defined by the agreement, falls below 3.2 to 1.0.
The term loans under the Term Loan Credit Agreement mature on August 19, 2022. The Company is required
to repay installments on the loans in quarterly principal amounts of 0.25%, with the remaining amount payable on
the maturity date.
Additionally, outstanding term loans are subject to mandatory prepayment, subject to certain exceptions, with
(i) 100% of net proceeds above a threshold amount of certain asset sales/insurance proceeds, subject to reinvestment
rights and certain other exceptions, (ii) 100% of the net cash proceeds of any incurrence of debt other than debt
permitted under the Term Loan Credit Agreement, and (iii) 50% of Excess Cash Flow, as defined in the agreement,
if any (reduced to 25% if PCHI’s first lien leverage ratio (as defined in the agreement) is less than 3.50 to 1.00, but
greater than 2.50 to 1.00, and 0% if PCHI’s first lien leverage ratio is less than 2.50 to 1.00). As indicated in Note 5,
the Company paid down Term Loan debt of $62,770. Additionally, in connection with the 2019 sale leaseback
transaction and the sale of its Canadian retail operations, the Company used the net proceeds that remained
uninvested on the anniversary date of each transaction to pay its term loan principal.
The term loans may be voluntarily prepaid at any time without premium or penalty, other than customary
breakage costs with respect to loans based on the LIBOR rate.
All obligations under the agreement are jointly and severally guaranteed by PC Intermediate, PCHI and each
existing and future domestic subsidiary of PCHI. PCHI and each guarantor has secured its obligations, subject to
certain exceptions and limitations, by a first-priority lien on substantially all of its assets (other than accounts
receivable, inventory, cash and certain related assets), including a pledge of all of the capital stock held by PC
Intermediate, PCHI and each guarantor, and a second-priority lien on its accounts receivable, inventory, cash and
certain related assets.
The Term Loan Credit Agreement contains certain customary affirmative covenants and events of default.
Additionally, it contains negative covenants which, among other things and subject to certain exceptions, restrict the
ability of PCHI to:
•
•
incur additional indebtedness;
pay dividends on capital stock or redeem, repurchase or retire capital stock;
• make certain investments, loans, advances and acquisitions;
•
•
•
engage in transactions with affiliates;
create liens; and
transfer or sell certain assets.
93
At December 31, 2020, all outstanding borrowings were based on LIBOR and were at a weighted average
interest rate of 3.25%.
6.125% Senior Notes — Due 2023 (“6.125% Senior Notes”)
The 6.125% Senior Notes mature on August 15, 2023. Interest on the notes is payable semi-annually in arrears
on February 15 and August 15 of each year.
The notes are guaranteed, jointly and severally, on a senior basis by each of PCHI’s existing and future
wholly-owned domestic subsidiaries. The notes and the guarantees are general unsecured senior obligations and are
effectively subordinated to all other secured debt to the extent of the assets securing such secured debt.
The indenture governing the notes contains certain covenants limiting, among other things and subject to
certain exceptions, PCHI’s ability to:
•
•
•
•
•
•
•
incur additional indebtedness or issue certain disqualified stock and preferred stock;
pay dividends or distributions, redeem or repurchase equity;
prepay subordinated debt or make certain investments;
engage in transactions with affiliates;
consolidate, merge or transfer all or substantially all of PCHI’s assets;
create liens; and
transfer or sell certain assets.
The indenture governing the notes also contains certain customary affirmative covenants and events of default.
The Company may redeem the notes, in whole or in part, at par.
Also, if the Company experiences certain types of change in control, as defined, the Company may be
required to offer to repurchase the Senior Notes at 101% of their principal amount.
In connection with issuing the notes, the Company incurred and capitalized third-party costs. Capitalized costs
are being amortized over the life of the debt and are included in long-term obligations, excluding current portion, in
the Company’s consolidated balance sheet. .
6.625% Senior Notes — Due 2026 (“6.625% Senior Notes”)
The 6.625% Senior Notes mature on August 1, 2026. Interest on the notes is payable semi-annually in arrears
on February 1st and August 1st of each year.
The notes are guaranteed, jointly and severally, on a senior basis by each of PCHI’s existing and future
wholly-owned domestic subsidiaries. The notes and the guarantees are general unsecured senior obligations and are
effectively subordinated to all other secured debt to the extent of the assets securing such secured debt.
The indenture governing the notes contains certain covenants limiting, among other things and subject to
certain exceptions, PCHI’s ability to:
•
•
•
incur additional indebtedness or issue certain disqualified stock and preferred stock;
pay dividends or distributions, redeem or repurchase equity;
prepay subordinated debt or make certain investments;
94
•
•
•
•
engage in transactions with affiliates;
consolidate, merge or transfer all or substantially all of PCHI’s assets;
create liens; and
transfer or sell certain assets.
The indenture governing the notes also contains certain customary affirmative covenants and events of default.
On or after August 1, 2021, the Company may redeem the notes, in whole or in part, at the following
(expressed as a percentage of the principal amount to be redeemed):
Twelve-month period beginning on August 1,
2021
2022
2023 and thereafter
Percentage
103.313 %
101.656 %
100.000 %
In addition, the Company may redeem up to 40% of the aggregate principal amount outstanding on or before
August 1, 2021 with the cash proceeds from certain equity offerings at a redemption price of 106.625% of the
principal amount. The Company may also redeem some or all of the notes before August 1, 2021 at a redemption
price of 100% of the principal amount plus a premium that is defined in the indenture.
Also, if the Company experiences certain types of change in control, as defined, the Company may be
required to offer to repurchase the notes at 101% of their principal amount.
First Lien Party City Notes, First Lien Anagram Notes, Second Lien Anagram Notes
On July 30, 2020 (the “Settlement Date”), the Company and certain of its direct or indirect subsidiaries,
including PCHI, Anagram Holdings, LLC, a Delaware limited liability company and wholly owned direct subsidiary
of PCHI (“Anagram Holdings”), and Anagram International, Inc., a Minnesota corporation and wholly owned direct
subsidiary of Anagram Holdings, completed certain refinancing transactions, including, among other things: (i) the
exchange of $327,076 of 6.125% Senior Notes due 2023 (the “2023 Notes”) and $392,746 of 6.625% Senior Notes
due 2026 (the “2026 Notes” and, together with the 2023 Notes, the “Existing Notes”) issued by PCHI, in each case
tendered in the Company’s offers to exchange pursuant to the terms described in a confidential offering
memorandum, for (A) $156,669 of Senior Secured First Lien Floating Rate Notes due 2025 (the “First Lien Party
City Notes”) issued by PCHI; (B) $84,687 of 10.00% PIK/Cash Senior Secured Second Lien Notes due 2026 (the
“Second Lien Anagram Notes”) issued by Anagram Holdings and Anagram International (together, the “Anagram
Issuers”); and (C) 15,942,551 shares of the Company’s common stock, $0.01 par value per share (the “Common
Stock”); (ii) the issuance of $110,000 in the aggregate of 15.00% PIK/Cash Senior Secured First Lien Notes due
2025 (the “First Lien Anagram Notes”) by the Anagram Issuers and an additional $5,000 of First Lien Party City
Notes in connection with a rights offering and a private placement, as applicable; and (iii) the solicitations of certain
consents with respect to the indentures governing Existing Notes.
The First Lien Party City Notes were issued pursuant to an indenture, dated as of the Settlement Date, among
PCHI, as issuer, certain guarantors party thereto (the “Party City Guarantors”) and Ankura Trust Company, LLC
(“Ankura”), as trustee and collateral trustee. The First Lien Party City Notes were issued in an aggregate amount of
$161,669 and will mature on July 15, 2025. Interest on the First Lien Party City Notes accrues from the Settlement
Date at a floating rate equal to the 6-month London Inter-Bank Offered Rate plus 500 basis points (with a floor of 75
basis points) per annum, payable semi-annually in arrears on January 15 and July 15 of each year, commencing
January 15, 2021. The First Lien Party City Notes are senior secured obligations of PCHI and the Party City
Guarantors. The First Lien Party City Notes are pari passu in right of payment with all of PCHI’s other senior
indebtedness, including the existing senior secured term loan facility and the ABL Facility, and are structurally
subordinated to the First Lien Anagram Notes and the Second Lien Anagram Notes, to the extent of the value of the
Anagram Collateral (as defined below). The First Lien Party City Notes are secured by a first priority lien on
collateral that includes liens on substantially all assets (other than certain accounts, inventory, deposit accounts,
95
securities accounts, related assets and general intangibles) of the Party City Guarantors, in each case subject to
certain exceptions and permitted liens.
The First Lien Anagram Notes were issued pursuant to an indenture, dated as of the Settlement Date, among
Anagram Holdings, as issuer, Anagram International, as co-issuer, certain guarantors party thereto (the “Anagram
Guarantors”) and Ankura, as trustee and collateral trustee. The First Lien Anagram Notes were issued in an
aggregate amount of $110,000 and will mature on August 15, 2025. Interest on the First Lien Anagram Notes
accrues from the Settlement Date at (i) a rate of 10.00% per annum, payable in cash; and (ii) a rate of 5.00% per
annum payable by increasing the principal amount of the outstanding First Lien Anagram Notes or issuing
additional First Lien Anagram Notes, as the case may be, in each case payable semi-annually in arrears on February
15 and August 15 of each year, commencing February 15, 2021. The First Lien Anagram Notes are senior secured
obligations of the Anagram Issuers and are pari passu in right of payment with all of the Anagram Issuers’ other
senior indebtedness. The First Lien Anagram Notes are secured by a first priority lien on collateral that consists of
substantially all assets and properties of the Anagram Issuers and the Anagram Guarantors, subject to certain
exceptions and permitted liens (the “Anagram Collateral”). Such security interests are senior in priority to the
security interests in such assets that secure the Second Lien Anagram Notes.
The Second Lien Anagram Notes were issued pursuant to an indenture, dated as of the Settlement Date,
among Anagram Holdings, as issuer, Anagram International, as co-issuer, the Anagram Guarantors and Ankura, as
trustee and collateral trustee. The Second Lien Anagram Notes were issued in an aggregate amount of $84,687 and
will mature on August 15, 2026. Interest on the Second Lien Anagram Notes accrues from the Settlement Date at (i)
a rate of 5.00% per annum, payable, at the Anagram Issuers’ option, entirely in cash or entirely by increasing the
principal amount of the outstanding Second Lien Anagram Notes or issuing additional Second Lien Anagram Notes,
as the case may be; and (ii) a rate of 5.00% per annum payable by increasing the principal amount of the outstanding
Second Lien Anagram Notes or issuing additional Second Lien Anagram Notes, as the case may be, in each case
payable semi-annually in arrears on February 15 and August 15 of each year, commencing February 15, 2021;
provided, however, that on August 15, 2025, interest will be required to be paid by increasing the principal amount
of the Second Lien Anagram Notes or issuing the principal amount of the Second Lien Anagram Notes or issuing
additional Second Lien Anagram Notes. On February 15, 2026, the Anagram Issuers will prepay in cash a portion of
the Second Lien Anagram Notes then outstanding in an amount necessary such that the Second Lien Anagram Notes
are not treated as “applicable high yield discount obligations” within the meaning of Section 163(i) of the Internal
Revenue Code of 1986, as amended. The Second Lien Anagram Notes are senior secured obligations of the
Anagram Issuers and are pari passu in right of payment with all of the Anagram Issuers’ other senior indebtedness.
The Second Lien Anagram Notes are secured by a second priority lien on the Anagram Collateral. Such security
interests are junior to the security interests in such assets that secure the First Lien Anagram Notes.
The Company evaluated the refinancing transaction in accordance with ASC 470-60 Troubled Debt
Restructuring. The exchange of the 2023 Notes and 2026 Notes for the First Lien Party City Notes, Second Lien
Anagram Notes and shares of Company Common Stock, as well as the concurrent purchase by the participants in the
exchange of First Lien Anagram Notes represents a troubled debt restructuring (“TDR”). As the future undiscounted
cash flows of the restructured debt were less than the net carrying value of the Existing Notes (including accrued
interest and unamortized discount) adjusted for Common Stock issued to the participants in the exchange and such
participants’ purchase of and lenders’ participation in the First Lien Anagram Notes, the Company recognized a gain
of $273,149 which reflects $18,902 of third-party fees incurred, and $27,007 of Common Stock issued in the
exchange. The Company received $39,544 of cash from the participants in the exchange related to $44,500 of
principal amount of First Lien Anagram Notes with an undiscounted value of $82,160, which includes interest
expense. Interest expense is not currently recognized for this portion of the restructured debt.
96
Another portion of the restructured debt related to one holder of Existing Notes did not result in gain
recognition as the undiscounted cash flows of the restructured debt was higher than the carrying value of the existing
debt. The carrying amount of this portion of the restructured debt is $32,328 and the interest expense will be
recognized prospectively at a 3.5% effective interest rate. Amounts attributed to purchasers of the First Lien
Anagram Notes who were not participants in the exchange (principal balance of $50,500) are recognized at
consideration received less allocated transaction costs (netting to $45,678) and the effective interest method will be
used to recognize interest expense prospectively.
Finance Lease Obligations
Additionally, the Company has entered into various finance leases for building, machinery and equipment. At
December 31, 2020 and December 31, 2019 the balances of such leases were $13,983 and $14,990, respectively.
Other
Subject to certain exceptions, PCHI may not make certain payments, including the payment of dividends to its
shareholders (“restricted payments”), unless certain conditions are met under the terms of the indentures governing
the senior notes, the ABL Facility and the Term Loan Credit Agreement. As of December 31, 2020, the most
restrictive of these conditions existed in the Term Loan Credit Agreement, which limited restricted payments based
on PCHI’s consolidated net income and leverage ratios. PCHI’s parent companies, PC Intermediate, PC Nextco and
Party City Holdco, have no assets or operations other than their investments in their subsidiaries and income from
those subsidiaries.
At December 31, 2020, maturities of long-term obligations consisted of the following:
2021
2022
2023
2024
2025
Thereafter
Long-term obligations
Long-Term
Debt Obligations
$
Finance Lease
Obligations
Totals
12,492 $
681,728
22,924
—
359,076
259,286
1,335,506 $
13,576
1,084 $
683,115
1,387
23,355
431
387
387
359,441
365
10,330
269,616
13,983 $ 1,349,489
$
Note 13 — Capital Stock
At December 31, 2020, the Company’s authorized capital stock consisted of 300,000,000 shares of $0.01 par
value common stock and 15,000,000 shares of $0.01 par value preferred stock.
97
The changes in common shares outstanding during the three years ended December 31, 2018, December 31,
2019, and December 31, 2020 were as follows:
Common Shares Outstanding at December 31, 2017
Issuance of restricted shares
Treasury stock purchases
Issuance of shares to directors
Exercise of stock options
Common Shares Outstanding at December 31, 2018
Issuance of restricted stock and restricted stock units
Treasury stock purchases
Vesting of restricted stock and restricted stock units
Exercise of stock options
Common Shares Outstanding at December 31, 2019
Issuance of stock as part of debt refinancing
Issuance of shares to directors
Treasury stock purchases
Vesting of restricted stock and restricted stock units
Exercise of stock options
Common Shares Outstanding at December 31, 2020
96,380,102
589,736
(3,785,658 )
13,249
425,505
93,622,934
564,729
(15,679 )
74,292
215,300
94,461,576
15,942,551
81,843
(21,685 )
203,328
114,000
110,781,613
During the year ended December 31, 2020, the Company purchased 21,685 treasury shares for $96 from its
employees to cover federal and state and other tax withholdings associated with the vesting of restricted stock and
restricted stock units. During the year ended December 31, 2019, the Company purchased 15,679 treasury shares for
$156 from its employees to cover federal and state and other tax withholdings associated with the vesting of
restricted stock and restricted stock units. Additionally, during the year ended December 31, 2018, the Company
acquired 3,785,658 treasury shares for $40,197. The shares are included in “common stock held in treasury” in the
Company’s consolidated balance sheet.
Note 14 — Other Expense, net
Fiscal Year Ended December 31,
2019
2020
2018
Other expense, net consists of the following:
Undistributed loss (income) in equity method
investments
Foreign currency (gain) losses
Debt refinancings (see Note 12)
Corporate development expenses
(Gain) on sale of Canada retail assets
Sale of ownership interest in Punchbowl (see Note 21)
Loss on sale of assets
Other, net
Other expense, net
$
$
333 $
(1,058 )
—
2,185
—
—
95
2,160
3,715 $
(472 ) $
421
36
2,472
(2,873 )
2,169
—
118
1,871 $
(369 )
24
6,237
4,387
—
—
—
703
10,982
Note 15 — Employee Benefit Plans
Certain subsidiaries of the Company maintain defined contribution plans for eligible employees. The plans
require the subsidiaries to match from approximately 11% to 100% of voluntary employee contributions to the
plans, not to exceed a maximum amount of the employee’s annual salary, ranging from 5% to 6%. Expense for the
plans for the years ended December 31, 2020, December 31, 2019, and December 31, 2018 totaled $8,615, $7,944,
and $6,454, respectively.
98
Note 16 — Equity Incentive Plans
Party City Holdco has adopted the Amended and Restated 2012 Omnibus Equity Incentive Plan (the “2012
Plan”) under which it can grant incentive awards in the form of stock appreciation rights, restricted stock, restricted
stock units and common stock options to certain directors, officers, employees and consultants of Party City Holdco
and its affiliates. A committee of Party City Holdco’s Board of Directors, or the Board itself in the absence of a
committee, is authorized to make grants and various other decisions under the 2012 Plan. The maximum number of
shares reserved under the 2012 Plan is 15,316,000 shares.
Time-based options
Party City Holdco grants time-based options to key eligible employees and outside directors. In conjunction
with the options, the Company recorded compensation expense of $796, $1,319, and $1,744 during the years ended
December 31, 2020, December 31, 2019, and December 31, 2018, respectively.
The fair value of time-based options granted during the year ended December 31, 2020 was estimated on the
grant date using a Black-Scholes option valuation model based on the assumptions in the following table:
Expected dividend rate
Risk-free interest rate
Volatility
Expected option term
—%
0.2% to 2.44%
29.06% to 135.74%
1.8 years — 5 years
As Party City Holdco’s stock only recently started trading publicly, the Company determined volatility based
on the average historical volatility of guideline companies. Additionally, as there is not sufficient historical exercise
data to provide a reasonable basis for determining the expected terms of the options, the Company estimated such
expected terms based on the assumption that options will be exercised at the mid-point of the vesting of the options
and the completion of the contractual lives of such options.
The Company has based its estimated forfeiture rate on historical forfeitures for time-based options as the
number of options given to each of the various levels of management is principally consistent with historical grants
and forfeitures are expected to be materially consistent with past experience.
The Company’s time-based options principally vest 20% on each anniversary date. The Company records
compensation expense for such options on a straight-line basis. As of December 31, 2020, there was $849 of
unrecognized compensation cost, which will be recognized over a weighted-average period of approximately
30 months.
Performance-based options
During 2013, Party City Holdco granted performance-based stock options to key employees and independent
directors. For those performance-based options, vesting was contingent on Thomas H. Lee Partners, L.P. (“THL”)
achieving specified investment returns when it sold its entire ownership stake in Party City Holdco. In June 2020,
THL distributed its remaining shares. At the time of the THL distribution, there were 2,539,600 performance options
outstanding with an average grant date fair value of $3.09. None of the performance-based options vested as the
specified investment returns were not attained. The Company recorded compensation expense of $7,847 for the year
ended December 31, 20202020
As Party City Holdco’s stock was not publicly traded when the performance-based options were granted, the
Company determined volatility based on the average historical volatility of guideline companies.
99
The following table summarizes the changes in outstanding stock options for the years ended December 31,
2018, December 31, 2019, and December 31, 2020.
Outstanding at December 31, 2017
Granted
Exercised
Forfeited
Outstanding at December 31, 2018
Granted
Exercised
Forfeited
Outstanding at December 31, 2019
Granted
Exercised
Forfeited
Outstanding at December 31, 2020
Exercisable at December 31, 2020
Expected to vest at December 31, 2020
(excluding performance-based options)
Average Fair
Value of
Time-Based
Options at
Grant Date
Aggregate
Intrinsic
Value
Weighted
Average
Remaining
Contractual
Term
(Years)
Average
Exercise
Price
14.63
5.33
7.84
9.39
6.43
5.33
13.00
8.95
3.67
5.04
5.99
7.63
10.49
4.98
2.16
4,089
5.2
41,784
4.4
5.04
(41,545 )
(28,698 )
3.3
3.8
Options
8,024,761
187,080 $
(425,505 )
(859,162 )
6,927,174
337,000
(215,300 )
(730,157 )
6,318,717
300,000
(114,000 )
(3,216,984 )
3,287,733
2,952,075
329,411 $
8.40
$
(2,346 )
7.7
The intrinsic value of options exercised was $332, $1,254 and $3,351 for the years ended December 31,
2020, December 31, 2019, and December 31, 2018, respectively. The fair value of options vested was $254, $2,118,
and $2,819, during the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively.
Restricted stock and Restricted Stock Units
During 2018, the Company started granting restricted stock and restricted stock units to certain executives,
senior leaders and the Company’s independent directors. To the extent that the awards vest, the participants receive
shares of the Company’s stock.
Of the awards that were granted, 358,506 awards vest solely based on service conditions. To the extent that
such awards vest, one share of stock is issued for each award.
Additionally, the Company granted awards which vest if certain cash flow and earnings per share targets are
met. Depending on the achievement of such targets, a maximum of 2,834,390 shares could be issued due to such
awards.
The service-based awards vested 1/3 on January 1, 2019 and will vest 1/3 each on January 1, 2020 and
January 1, 2021. During the years ended December 31, 2020 and December 31, 2019, the Company recorded $2,071
and $2,033 of compensation expense related to the service-based awards, respectively.
The performance-based awards vest if certain cash flow and earnings per share targets are met for the three-
year period from January 1, 2018 to December 31, 2020. The Company recognizes compensation expense for such
awards if it is probable that the performance conditions will be achieved. Based on the Company’s results for the
year ended December 31, 2019 and December 31, 2018 and its projections for the year ending December 31, 2020,
as of December 31, 2019 the Company concluded that it was not probable that such performance conditions will be
met and, therefore, the Company did not record any compensation expense for the awards during the years ended
December 31, 2019 and December 31, 2018.
100
The Company has based its estimated forfeiture rate for the restricted stock units and restricted stock on
historical forfeitures for the Company’s time-based stock options as the number of awards given to each of the
various levels of management is principally consistent with historical stock option grants and forfeitures are
expected to be materially consistent with past experience.
As of December 31, 2020 and December 31, 2019, there were $1,491 and $2,158 of unrecognized
compensation cost for the service-based awards, respectively.
Performance-based restricted stock units (PRSUs)
On July 18, 2020, 6,448,276 performance-based restricted stock units ("PRSUs") and Restricted Cash awards
were granted to certain executive officers and other employees. The performance period is three years from the grant
date. The PRSUs and Restricted Cash become earned in a given period if the volume weighted average of the fair
market value per share of the Common Stock meets or exceeds $2.50, $5.00, $7.50, and $10.00, respectively, for a
period of not less than 90 consecutive trading days on the New York Stock Exchange and are subject to up to 2
years service-vesting after the achievement of these thresholds. The PRSUs and Restricted Cash awards are
measured at fair value based on Monte Carlo simulation models, based on the assumptions in the table below. The
PRSUs will be settled in Party City common stock and are accounted for as equity awards and the Restricted Cash
will be settled in cash and are accounted for as liability awards.
Expected dividend rate
Risk-free interest rate
Volatility
Weighted average grant date fair value
—%
0.30% to 0.32%
106.31% to 140.02%
1.02
$
At December 31, 2020, there was $6,196 of total unrecognized compensation cost related to unvested PRSUs,
which is expected to be recognized over 3.0 years.
During the year ended December 31, 2020, the Company recorded $1,460 of compensation expense related to
these awards.
Note 17 — Income Taxes
As outlined in Note 12 — Long-Term Obligations, on July 30, 2020, the Company and certain of its direct or
indirect subsidiaries, completed certain refinancing transactions and as a result a substantial amount of the
Company’s debt was extinguished. Absent an exception, a debtor recognizes cancellation of indebtedness income
(CODI) upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted
issue price. Since the Company was considered insolvent for tax purposes immediately before the exchange, CODI
can be excluded from taxable income to the extent that the Company’s liabilities exceeded the fair market value of
its gross assets at the date of the exchange. However, the Company must reduce certain of its tax attributes by the
amount of any CODI excluded from taxable income, as limited by Section 1017(b)(2) of the Internal Revenue Code
of 1986, as amended. The actual reduction in tax attributes occurs after the determination of tax for the year of the
debt discharge and takes effect on the first day of the Company's tax year subsequent to the date of the refinancing
transactions, or January 1, 2021. As a result of the refinancing transactions, the Company realized CODI of
$552,671, of which $500,989 was excluded from taxable income because of the insolvency exception. After
application of the Section 1017(b)(2) limitation, the Company reduced its tax attributes and related deferred taxes by
$217,532 ($47,663, tax effected), with the balance of $283,457 ($59,526, tax effected), treated as a permanent
difference. The Company also has reduced its net operating loss carryforward by $525, and its foreign tax credit
carryforward by $4,101.
101
A summary of domestic and foreign income before income taxes follows:
Domestic
Foreign
Total
2020
Fiscal Year Ended December 31,
2019
$ (542,046 ) $ (572,287 ) $ 132,482
29,115
(143,064 )
$ (685,110 ) $ (534,163 ) $ 161,597
38,124
2018
The income tax expense (benefit) consisted of the following:
Fiscal Year Ended December 31,
2019
2018
2020
Current:
Federal
State
Foreign
Total current expense
Deferred:
Federal
State
Foreign
Total deferred (benefit) expense
Income tax (benefit) expense
$ (61,528 ) $ 28,908 $ 20,609
5,726
7,870
34,205
(1,639 )
1,599
(61,568 )
4,613
12,540
46,061
(70,440 )
(19,252 )
(5,393 )
(95,085 )
$ (156,653 ) $
(37,166 )
(11,207 )
1,007
(47,366 )
6,194
(880 )
(741 )
4,573
(1,305 ) $ 38,778
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
102
Deferred income tax assets and liabilities consisted of the following:
Deferred income tax assets:
Inventory reserves and capitalization
Allowance for doubtful accounts
Accrued liabilities
Equity based compensation
Federal tax loss carryforwards
State tax loss carryforwards
Foreign tax loss carryforwards
Foreign tax credit carryforwards
Debt Exchange basis difference
Section 163(j) Interest Limitation
Lease Liabilities
Outside basis differences in foreign subsidiaries
(APB 23)
Capitalized refinancing and other costs
Other
Deferred income tax assets before valuation
allowances
Less: valuation allowances
Deferred income tax assets, net
Deferred income tax liabilities:
Depreciation
Trade Name
Amortization of goodwill and other assets
Loss Recapture and other differences
Foreign earnings expected to be repatriated
Lease Right of Use Assets
Other
Deferred income tax liabilities
December 31,
2020
2019
$
8,659
9,199 $
1,194
2,020
8,391
16,798
3,998
4,437
525
—
2,703
9,610
15,874
2,839
5,397
—
—
58,270
9,134
—
199,585 224,966
12,800
4,216
3,922
—
3,816
2,231
323,696 286,888
(24,623 )
$ 309,965 $ 262,265
(13,731 )
$
45,984 $
21,211
98,817 135,751
19,927
11,654
—
10,962
1,177
1,072
166,617 208,772
1,488
$ 344,387 $ 388,326
9,281
The Company nets all of its deferred income tax assets and liabilities on a jurisdictional basis and classifies
them as noncurrent on the balance sheet. In the Company’s December 31, 2020 consolidated balance sheet, $283
was included in “other assets, net” and $34,705 was included in deferred income tax liabilities. In addition, $2,628
of net deferred income tax assets are included in “Assets held for sale”. In the Company’s December 31, 2019
consolidated balance sheet, $20 was included in “other assets, net” and $126,081 was included in deferred income
tax liabilities.
Management assesses the available positive and negative evidence to estimate if sufficient taxable income will
be generated to realize existing deferred tax assets. On the basis of this evaluation, a valuation allowance was
recorded to reduce the total deferred tax assets to an amount that will, more-likely-than-not, be realized in the future.
The change in the valuation allowance primarily relates to increases for carryforwards of foreign and state net
operating losses, offset by the reclass of amounts related to entities included in “Assets held for sale,” and foreign
tax credits which expired or were reduced by the tax attributes reduction mentioned above.
As of December 31, 2020, the Company had foreign tax-effected net operating loss carryforwards in Canada
of $284, which have a 20 year carryforward, and Mexico of $2,555, which begin to expire in 2024. In addition, the
U.S. state net operating loss carryforwards begin to expire in 2022, with the majority expiring in 15 to 20 years.
103
The difference between the Company’s effective income tax rate and the U.S. statutory income tax rate is as
follows:
Tax provision at U.S. statutory income tax rate
State income tax, net of federal income tax
Valuation allowances
GILTI and Foreign-Derived Intangible Income
Foreign earnings
U.S. — foreign rate differential
CARES Act: 5-year NOL carryback
Debt exchange – cancellation of debt
Outside basis differences
Effect of the Act on Federal deferred income tax
assets and liabilities
Goodwill Impairment
Uncertain tax positions
Other
Effective income tax rate
Fiscal Year Ended December 31,
2019
21.0 %
2020
21.0 %
2018
21.0 %
2.4
0.6
1.1
0.2
0.4
—
—
—
1.0
(0.4 )
(0.6 )
(1.5 )
(0.6 )
—
—
—
—
(17.9 )
(0.7 )
(0.1 )
0.2 %
(1.3 )
—
—
(0.4 )
24.0 %
2.4
(2.7 )
—
1.3
0.4
2.9
8.7
0.3
—
(10.3 )
(1.4 )
0.3
22.9 %
CARES Act: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (“the
CARES Act”) was signed into law providing economic relief to companies impacted by the COVID-19 pandemic.
One of the provisions of the CARES Act is the 5-year net operating loss carryback, which allows the Company to
carry back its 2020 net operating loss to prior years when the federal statutory rate was 35%, thus resulting in the
2.9% effective rate benefit above.
Cancellation of Debt: As mentioned above, the Company and certain of its direct or indirect subsidiaries,
completed certain refinancing transactions and as a result a substantial amount of the Company’s debt was
extinguished. $59,526 of the cancellation of debt income was excluded from income, which resulted in a tax benefit
of 8.7% on the effective tax rate.
Goodwill Impairment: During the third and fourth quarters of 2019, and the first quarter of 2020, the
Company recognized non-cash goodwill impairment charges totaling $556,056 and $401,436, respectively. No tax
benefit was recognized on $455,689 of the 2019 charge and $336,238 of the 2020 charge, resulting in unfavorable
impacts to the income tax rate of 17.9% and 10.3%, respectively.
Other differences between the effective income tax rate and the federal statutory income tax rate are composed
primarily of reserves for unrecognized tax benefits, non-deductible meals and entertainment expenses, compensation
related items, and the Work Opportunity Tax Credit.
Transition Tax on Unremitted Foreign Earnings: The Tax Cuts and Jobs Act of 2017 (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 a one-time “deemed repatriation” tax on unremitted earnings accumulated in non-U.S.
jurisdictions since 1986 (the “Transition Tax”). At December 31, 2020, $4,205 of the Transition Tax remains
unpaid and is recorded in “Other long-term liabilities” in the Company’s consolidated balance sheet. The Company
has elected to pay the Transition Tax over eight annual installments without interest.
104
The following table summarizes the activity related to the Company’s gross unrecognized tax benefits:
Fiscal Year Ended December 31,
2019
2018
2020
Balance at beginning of year
Increases related to current period tax positions
Increases (decreases) related to prior period tax
positions
Decreases related to settlements
Decreases related to lapsing of statutes of
limitations
Balance at end of year
$
4,891 $
8,186
1,320 $
652
1,061
—
3,030
—
855
40
495
—
(248 )
$ 13,890 $
(111 )
4,891 $
(70 )
1,320
The Company’s total unrecognized tax benefits that, if recognized, would impact the Company’s effective tax
rate were $5,790 and $4,891 at December 31, 2020 and 2019, respectively.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax
expense. The Company has accrued $949 and $618 for the potential payment of interest and penalties at
December 31, 2020 and 2019, respectively. Such amounts are not included in the table above.
The IRS is currently conducting an examination of the year ended December 31, 2015. For U.S. state income
tax purposes, tax years 2016-2020 generally remain open; whereas for non-U.S. income tax purposes, tax years 2015
- 2020 generally remain open.
Note 18 — Commitments, Contingencies and Related Party Transactions
Litigation
The Company is a party to certain claims and litigation in the ordinary course of business. The Company does
not believe that any of these proceedings will result, individually or in the aggregate, in a material adverse effect
upon its financial condition or future results of operations.
Product Royalty Agreements
The Company has entered into product royalty agreements, with various licensors of copyrighted and
trademarked characters and designs, which are used on the Company’s products, which require royalty payments
based on sales of the Company’s products, and, in some cases, include annual minimum royalties.
At December 31, 2020, the Company’s commitment to pay future minimum product royalties was as follows:
2021
2022
2023
Thereafter
Future Minimum
Royalty
Payments
$
$
35,105
13,118
1,445
—
49,668
Product royalty expense for the years ended December 31, 2020, December 31, 2019, and December 31, 2018
was $33,331, $48,170, and $51,002, respectively.
105
Related Party Transactions
In the normal course of business, the Company buys and sells party goods from/to certain equity method
investees. Such activity is immaterial to the Company’s consolidated financial statements.
Note 19 — Segment Information
Industry Segments
The Company has two identifiable business segments. The Wholesale segment designs, manufactures,
contracts for manufacture and distributes party goods, including paper and plastic tableware, metallic and latex
balloons, Halloween and other costumes, accessories, novelties and stationery throughout the world. The Retail
segment operates specialty retail party supply stores in the United States, principally under the names Party City and
Halloween City, and it operates e-commerce websites, principally through the domain name PartyCity.com.
The Company’s industry segment data for the years ended December 31, 2020, December 31, 2019, and
December 31, 2018 are as follows:
Wholesale
Retail
Consolidated
Year Ended December 31, 2020
Revenues:
Net sales
Royalties and franchise fees
Total revenues
Eliminations
Net revenues
(Loss) from operations
Interest expense, net
Other expense, net
Gain on debt refinancing
Loss before income taxes
Depreciation and amortization
Capital expenditures
Total assets
Year Ended December 31, 2019
Revenues:
Net sales
Royalties and franchise fees
Total revenues
Eliminations
Net revenues
Income from operations
Interest expense, net
Other expense, net
Income before income taxes
Depreciation and amortization
Capital expenditures
Total assets
106
—
7,246
$ 940,228 $ 1,375,079 $ 2,315,307
7,246
940,228 1,382,325 2,322,553
(471,863 )
— (471,863 )
468,365 1,382,325 1,850,690
$ (303,663 ) $ (573,838 ) $ (877,501 )
77,043
3,715
(273,149 )
(685,110 )
76,506
(51,128 )
$ 1,123,322 $ 1,683,133 $ 2,806,455
25,813
(22,206 )
50,693
(28,922 )
Wholesale
Retail
Consolidated
—
9,279
$ 1,240,026 $ 1,742,136 $ 2,982,162
9,279
1,240,026 1,751,415 2,991,441
(642,652 )
— (642,652 )
$ 597,374 $ 1,751,415 $ 2,348,789
4,152 $ (421,545 ) $ (417,393 )
$
114,899
1,871
$ (534,163 )
81,116
$
$
61,733
$ 1,912,522 $ 1,682,797 $ 3,595,319
27,845 $
29,480 $
53,271 $
32,253 $
Year Ended December 31, 2018
Revenues:
Net sales
Royalties and franchise fees
Total revenues
Eliminations
Net revenues
Income from operations
Interest expense, net
Other expense, net
Income before income taxes
Depreciation and amortization
Capital expenditures
Wholesale
Retail
Consolidated
—
11,073
$ 1,325,490 $ 1,802,834 $ 3,128,324
11,073
1,325,490 1,813,907 3,139,397
(711,882 )
— (711,882 )
$ 613,608 $ 1,813,907 $ 2,427,515
45,180 $ 233,105 $ 278,285
$
105,706
10,982
$ 161,597
78,575
85,661
28,368 $
33,890 $
50,207 $
51,771 $
$
$
Geographic Regions
Export sales of metallic balloons of $19,847, $22,728, and $23,567 during the years ended December 31,
2020, December 31, 2019, and December 31, 2018, respectively, are included in domestic sales to unaffiliated
customers below. Intercompany sales between geographic areas primarily consist of sales of finished goods and are
generally made at cost plus a share of operating profit.
The Company’s geographic area data follows:
Domestic
Foreign
Eliminations Consolidated
Year Ended December 31, 2020
Revenues:
Net sales to unaffiliated customers
Net sales between geographic areas
Net sales
Royalties and franchise fees
Total revenues
(Loss) from operations
Interest expense, net
Other expense, net/(Gain) on debt refinancing
(Loss) before income taxes
Depreciation and amortization
Total long-lived assets (excluding goodwill,
trade names and other intangible assets, net) $
Total assets
$
$ 1,574,048 $
167,945
1,741,993
7,246
$ 1,749,239 $
(644,338 ) $
$
269,396 $
113,828
383,224
—
383,224 $
14,189 $
—
— $ 1,843,444
(281,773 )
—
(281,773 ) 1,843,444
7,246
(281,773 ) $ 1,850,690
(877,501 )
(247,352 ) $
77,043
(269,434 )
(685,110 )
76,506
$
$
70,586 $
5,920
103,885 $
$ 2,518,490 $
24,746
287,965 $
$
128,631
— $ 2,806,455
107
Year Ended December 31, 2019
Revenues:
Net sales to unaffiliated customers
Net sales between geographic areas
Net sales
Royalties and franchise fees
Total revenues
Income from operations
Interest expense, net
Other expense, net
Income before income taxes
Depreciation and amortization
Total long-lived assets (excluding goodwill, trade
names and other intangible assets, net)
Total assets
Year Ended December 31, 2018
Revenues:
Net sales to unaffiliated customers
Net sales between geographic areas
Net sales
Royalties and franchise fees
Total revenues
Income from operations
Interest expense, net
Other income, net
Income before income taxes
Depreciation and amortization
Domestic
Foreign
Eliminations Consolidated
9,279
$ 1,968,319 $ 371,191 $
57,117 86,811 (143,928 )
— $ 2,339,510
—
2,025,436 458,002 (143,928 ) 2,339,510
9,279
—
$ 2,034,715 $ 458,002 $ (143,928 ) $ 2,348,789
— $ (417,393 )
$ (412,225 ) $
114,899
1,871
$ (534,163 )
81,116
$
72,701 $
(5,168 ) $
8,415
—
$
$ 224,692 $ 26,156
$ 3,317,305 $ 278,014 $
$ 250,848
— $ 3,595,319
Domestic
Foreign
Eliminations Consolidated
11,073
$ 2,015,899 $ 400,543 $
65,416 110,185 (175,601 )
— $ 2,416,442
—
2,081,315 510,728 (175,601 ) 2,416,442
11,073
—
$ 2,092,388 $ 510,728 $ (175,601 ) $ 2,427,515
— $ 278,285
$ 264,440 $ 13,845 $
105,706
10,982
$ 161,597
78,575
$
70,011 $
8,564
—
$
Note 20 — Quarterly Results (Unaudited)
Despite a concentration of holidays in the fourth quarter of the year, as a result of the Company’s expansive
product lines and customer base and increased promotional activities, the impact of seasonality on the quarterly
results of the Company’s wholesale operations has been limited. However, due to Halloween and Christmas, the
inventory balances of the Company’s wholesale operations are slightly higher during the third quarter than during
the remainder of the year. Additionally, the promotional activities of the Company’s wholesale business, including
special dating terms, particularly with respect to Halloween products sold to retailers and other distributors, result in
slightly higher accounts receivable balances during the third quarter. The Company’s retail operations are subject to
significant seasonal variations. Historically, the Company’s retail operations have realized a significant portion of
their revenues, cash flow and net income in the fourth quarter of the year, principally due to Halloween sales in
October and, to a lesser extent, year-end holiday sales.
108
The following table sets forth our historical revenues, gross profit, (loss) income from operations, net (loss)
income, net (loss) income attributable to common shareholders of Party City Holdco Inc., and net (loss) income per
share attributable to common shareholders of Party City Holdco Inc.—Basic and Diluted for each of the following
quarters:
2020
Revenues:
Net sales
Royalties and franchise fees
Gross profit
(Loss) income from operations
Net (loss) income
Net (loss) income attributable to common
shareholders of Party City Holdco Inc.
Net (loss) income per share attributable to
common shareholders of Party City Holdco
Inc.—Basic
Net (loss) income per share attributable to
common shareholders of Party City Holdco
Inc.—Diluted
For the Three Months Ended,
March 31, June 30,
September 30, December 31,
1,582
$ 412,461 $ 253,646 $ 532,053 $ 645,284
2,897
167,421
(112,238 )
(96,395 )
1,045
115,704 15,739
(611,370 ) (126,794 )
(541,668 ) (130,059 )
1,722
176,130
(27,099 )
239,665
(541,513 ) (130,015 )
239,707
(96,417 )
$
(5.80 ) $
(1.39 ) $
2.25 $
(0.88 )
$
(5.80 ) $
(1.39 ) $
2.24 $
(0.88 )
2019:
Revenues:
Net sales
Royalties and franchise fees
Gross profit
(Loss) Income from operations
Net (loss) income
Net (loss) income attributable to common
shareholders of Party City Holdco Inc.
Net (loss) income per share attributable to common
shareholders of Party City Holdco
Inc.—Basic
Net (loss) income per share attributable to common
shareholders of Party City Holdco
Inc.—Diluted
For the Three Months Ended,
March 31, June 30,
September 30, December 31,
2,014
$ 511,102 $ 561,702 $ 538,345 $ 728,361
3,190
293,239
(227,055 )
(268,829 )
2,189
172,060 208,646
(10,297 ) 97,485
(30,289 ) 48,005
1,886
164,932
(277,526 )
(281,745 )
(30,218 ) 48,074
(281,533 )
(268,818 )
$
(0.32 ) $
0.52 $
(3.02 ) $
(2.88 )
$
(0.32 ) $
0.51 $
(3.02 ) $
(2.88 )
Note 21 — Fair Value Measurements
The provisions of ASC Topic 820, “Fair Value Measurement”, define fair value as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants at the measurement date. ASC
Topic 820 established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This
hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.
The three levels of inputs used to measure fair value are as follows:
•
•
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for
similar assets and liabilities in active markets; quoted prices for identical or similar assets and
liabilities in markets that are not active; or other inputs that are observable or can be corroborated by
observable market data.
109
•
Level 3 — Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted
cash flow methodologies and similar techniques that use significant unobservable inputs.
During 2017, the Company acquired a 28% ownership interest in Punchbowl, Inc. (“Punchbowl”), a provider
of digital greeting cards and digital invitations. At such time, the Company provided Punchbowl’s other investors
with the ability to “put” their interest in Punchbowl to the Company at a future date. Additionally, at such time, the
Company received the ability to “call” the interest of the other investors. During the twelve months ended December
31, 2019, the option was terminated, and the Company wrote off its asset related to the call option and reversed its
liability related to the put option. Prior to such time, the Company had been adjusting the put liability to fair value
on a recurring basis. The liability represented a Level 3 fair value measurement as it was based on unobservable
inputs. In November 2019, the Company sold its ownership interest in Punchbowl. The Company recorded a net
charge of $2,169 in other expenses, net for the option termination and the sale of its ownership interest.
During 2017, the Company and Ampology, a subsidiary of Trivergence, reached an agreement to form a new
legal entity, Kazzam, LLC (“Kazzam”), for the purpose of designing, developing and launching an online exchange
platform for party-related services. As part of Ampology’s compensation for designing, developing and launching
the exchange platform, Ampology received an ownership interest in Kazzam. The interest had been recorded as
redeemable securities in the mezzanine of the Company’s consolidated balance sheet as Ampology had the right to
cause the Company to purchase the interest. The liability was adjusted to the greater of the current fair value or the
original fair value at the time at which the ownership interest was issued (adjusted for any subsequent changes in the
ownership interest percentage). On March 23, 2020, the Company agreed to purchase all of Ampology’s interest in
Kazzam. Refer to Note 25 – Kazzam, LLC for further detail. As of December 31, 2019 and December 31, 2018 the
original value was greater than the fair value, thus a table is not provided for December 31, 2019. In addition, the
company has no material derivative assets and liabilities as of December 31, 2019 and no derivative assets and
liabilities as of December 31, 2020.
The majority of the Company’s non-financial instruments, which include goodwill, intangible assets,
inventories and property, plant and equipment, are not required to be carried at fair value on a recurring basis.
However, if certain triggering events occur (or at least annually for goodwill and indefinite-lived intangible assets),
a non-financial instrument is required to be evaluated for impairment. If the Company determines that the non-
financial instrument is impaired, the Company would be required to write down the non-financial instrument to its
fair value. See Note 3 – Store Impairment and Restructuring Charges and Note 4 – Goodwill for further detail.
The carrying amounts for cash and cash equivalents, accounts receivable, prepaid expenses and other current
assets, accounts payable, accrued expenses and other current liabilities approximated fair value at December 31,
2020 because of the short-term maturities of the instruments and/or their variable rates of interest.
The carrying amounts and fair values of borrowings under the Term Loan Credit Agreement and the senior
notes as of December 31, 2020 are as follows:
Senior secured term loan facility (“Term Loan
Credit Agreement”)
6.125% Senior Notes — due 2023
6.625% Senior Notes — due 2026
First Lien Party City Notes
First Lien Anagram Notes
Second Lien Anagram Notes
Carrying Amount Fair Value
$
694,220 $ 643,021
18,397
22,924
107,254
80,441
206,775 181,445
152,301 172,862
152,032 147,471
110
The fair values of the Term Loan Credit Agreement and the senior notes represent Level 2 fair value
measurements as the debt instruments trade in inactive markets. The carrying amounts for other long-term debt
approximated fair value at December 31, 2020 based on the discounted future cash flows of each instrument at rates
currently offered for similar debt instruments of comparable maturity.
Note 22 — Derivative Financial Instruments
The Company is directly and indirectly affected by changes in certain market conditions. These changes in
market conditions may adversely impact the Company’s financial performance and are referred to as market risks.
The Company, when deemed appropriate, uses derivatives as a risk management tool to mitigate the potential
impact of certain market risks. The primary market risks managed through the use of derivative financial
instruments are interest rate risk and foreign currency exchange rate risk.
Foreign Exchange Risk Management
A portion of the Company’s cash flows is derived from transactions denominated in foreign currencies. In
order to reduce the uncertainty of foreign exchange rate movements on transactions denominated in foreign
currencies, including the British Pound Sterling, the Canadian Dollar, the Euro, the Malaysian Ringgit, the
Australian Dollar, and the Mexican Peso, the Company enters into foreign exchange contracts with major
international financial institutions. These forward contracts, which typically mature within one year, are designed to
hedge anticipated foreign currency transactions, primarily inventory purchases and sales. For contracts that qualify
for hedge accounting, the terms of the foreign exchange contracts are such that cash flows from the contracts should
be highly effective in offsetting the expected cash flows from the underlying forecasted transactions.
The foreign currency exchange contracts are reflected in the consolidated balance sheets at fair value. At
December 31, 2020 and 2019, the Company had foreign currency exchange contracts that qualified for hedge
accounting. No components of these agreements were excluded in the measurement of hedge effectiveness. As these
hedges are 100% effective, there is no current impact on earnings due to hedge ineffectiveness. The Company
anticipates that substantially all unrealized gains and losses in accumulated other comprehensive loss related to these
foreign currency exchange contracts will be reclassified into earnings.
The following table displays the fair values of the Company’s derivatives at December 31, 2020 and
December 31, 2019:
Derivative Assets
Derivative Liabilities
December 31, 2020
December 31, 2019
December 31, 2020
December 31, 2019
Balance
Sheet
Fair
Line
Value
(a) PP $ —
Balance
Sheet
Fair
Line
Value
(a) PP $ —
Balance
Sheet
Line
(b) AE $
Fair
Value
303
Balance
Sheet
Fair
Line
Value
(b) AE $ —
Foreign Exchange Contracts
(a) PP = Prepaid expenses and other current assets
(b) AE = Accrued expenses
The following table displays the notional amounts of the Company’s derivatives at December 31, 2020 and
December 31, 2019:
Derivative Instrument
Foreign Exchange Contracts
December 31,
2020
December 31,
2019
$
3,850 $
300
111
Note 23 — Changes in Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss consisted of the following:
Year Ended December 31, 2020
Impact of
Foreign
Exchange
Contracts,
Net of Taxes
Foreign
Currency
Total, Net of
Taxes
Adjustments
$
(37,434 ) $
1,700 $ (35,734 )
6,170
(495 )
5,675
—
6,170
(31,264 ) $
143
143
(352 )
5,818
1,348 $ (29,916 )
$
Year Ended December 31, 2019
Impact of
Foreign
Exchange
Contracts,
Net of Taxes
Foreign
Currency
Adjustments
(50,056 ) $
$
Total, Net
of Taxes
855 $ (49,201 )
5,725
106
5,831
6,897
739
7,636
12,622
(37,434 ) $
$
845
13,467
1,700 $ (35,734 )
Year Ended December 31, 2018
Impact of
Foreign
Exchange
Contracts,
Net of Taxes
Foreign
Currency
Adjustments
(35,610 ) $
$
Total, Net
of Taxes
(208 ) $ (35,818 )
(14,446 )
1,432
(13,014 )
—
(369 )
(369 )
(14,446 )
(50,056 ) $
$
1,063
(13,383 )
855 $ (49,201 )
Balance at December 31, 2019
Other comprehensive income (loss) before
reclassifications, net of income tax
Amounts reclassified from accumulated other
comprehensive loss to the consolidated
statement of operations and comprehensive
income, net of income tax
Net current-period other comprehensive income
Balance at December 31, 2020
Balance at December 31, 2018
Other comprehensive (loss) income before
reclassifications, net of income tax
Amounts reclassified from accumulated other
comprehensive loss to the consolidated
statement of operations and comprehensive
income, net of income tax
Net current-period other comprehensive (loss)
income
Balance at December 31, 2019
Balance at December 31, 2017
Other comprehensive income (loss) before
reclassifications, net of income tax
Amounts reclassified from accumulated other
comprehensive loss to the consolidated
statement of operations and comprehensive
income, net of income tax
Net current-period other comprehensive income
(loss)
Balance at December 31, 2018
112
Note 24 — Revenue from Contracts with Customers
In May 2014, the FASB issued ASU 2014-09, “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. Retail e-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 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 on e-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 a one-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 the one-time fee are recorded in royalties and franchise fees in the Company’s consolidated statement of
operations and comprehensive (loss) income.
Revenue Transactions — Wholesale
For most of the Company’s wholesale sales, control transfers upon the Company’s shipment of the product.
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.
In most cases, the determination of the transaction price is fixed based on the contract and/or purchase order.
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. Due to its extensive
history operating as a leading party goods retailer, the Company has sufficient history with which to estimate such
amounts.
113
Other Revenue Topics
During the years ended December 31, 2020, December 31, 2019, and December 31, 2018, 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 ASC 606-10-50-14 through
ASC 606-10-50-14A.
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
The following table summarizes revenue from contracts with customers for the years ended December 31,
2020, December 31, 2019, and December 31, 2018:
Fiscal Year Ended December 31,
2020
2019
2018
Retail Net Sales:
Party City Stores*
Global E-commerce
Temporary Stores
Total Retail Net Sales
Royalties and Franchise Fees
Total Retail Revenue
Wholesale Net Sales:
Domestic
International
Total Wholesale Net Sales
Total Consolidated Revenue
7,645
$ 1,367,434 $ 1,529,043 $ 1,583,134
— 162,490 154,481
65,219
50,603
$ 1,375,079 $ 1,742,136 $ 1,802,834
11,073
$ 1,382,325 $ 1,751,415 $ 1,813,907
7,246
9,279
$ 238,936 $ 310,042 $ 328,056
229,429 287,332 285,552
$ 468,365 $ 597,374 $ 613,608
$ 1,850,690 $ 2,348,789 $ 2,427,515
* 2020 sales represent in person and online sales of product in stores
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 year
ended December 31, 2018 as it decreased pre-tax income by $22 during the period.
114
Note 25 — Kazzam, LLC
During the first quarter of 2017, the Company and Ampology, a subsidiary of Trivergence, reached an
agreement to form a new legal entity, Kazzam, LLC (“Kazzam”), for the purpose of designing, developing and
launching an online exchange platform for party-related services.
At December 31, 2019, although the Company owned 26% of Kazzam’s equity, Kazzam was a variable
interest entity and the Company consolidated Kazzam into the Company’s financial statements. Further, the
Company was funding all of Kazzam’s start-up activities via a loan to Kazzam and recorded its operating results in
“development stage expenses” in the Company’s consolidated statement of operations and comprehensive (loss)
income. Ampology’s ownership interest in Kazzam had been recorded in redeemable securities in the mezzanine of
the Company’s consolidated balance sheet.
In January 2020, the Company and Ampology terminated certain services agreements and warrants that
Ampology had in the Company stock. The parties concurrently entered into an interim transition agreement for
which expenses are recorded as development stage expenses.
On March 23, 2020, the Company agreed to purchase Ampology’s interest in Kazzam in exchange for a three-
year royalty on net service revenue and a warrant to purchase up to 1,000,000 shares of the Company’s common
stock. The acquisition of Ampology’s interest in Kazzam is an equity transaction and the difference between the fair
value of the consideration transferred and the carrying value of Ampology’s interest in Kazzam is recorded within
the consolidated statement of stockholders’ equity.
Note 26 — Leases
In February 2016, the FASB issued ASU 2016-02, “Leases”. The ASU requires that companies recognize
assets and liabilities for the rights and obligations created by the companies’ leases. The update was effective for the
Company during the first quarter of 2019.
The FASB has provided companies with a transition option under which they can opt to continue to apply the
legacy guidance, including its disclosure requirements, in the comparative periods presented in the year during
which they adopt the new lease standard. Entities that elect the option only make annual disclosures for the
comparative periods as legacy guidance does not require interim disclosures. The Company has elected this
transition option.
Practical Expedients/Policy Elections
Under the new standard, companies may elect the following practical expedients, which must be elected as a
package and applied consistently to all leases:
1. An entity need not reassess whether any expired or existing contracts are or contain leases.
2. An entity need not reassess the lease classification for any expired or existing leases.
3. An entity need not reassess initial direct costs for any existing leases.
The Company elected this package of practical expedients.
Under the new standard, an entity may also elect a practical expedient to use hindsight in determining the
lease term and in assessing impairment of the entity’s right-of-use assets. The Company did not elect this practical
expedient.
Additionally, under the new standard, lessees can make an accounting policy election (by class of underlying
asset to which the right of use relates) to apply accounting similar to legacy accounting to leases that meet the new
115
standard’s definition of a “short-term lease” (a lease that, at the commencement date, has a lease term of twelve
months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to
exercise). The Company has made this election for all classes of underlying assets.
Further, the new standard provides a practical expedient that permits lessees to make an accounting policy
election (by class of underlying asset) to account for each separate lease component of a contract and its associated
non-lease components as a single lease component. The Company has elected this expedient for all asset classes,
with the exception of its real estate.
Lease Population
The Company’s lease portfolio is primarily comprised of real estate leases for its permanent Party City stores.
The Company also leases manufacturing facilities, distribution facilities, warehouse space and office space.
Additionally, the Company enters into short leases (generally less than four months) in order to operate its
temporary stores. Further, the Company enters into leases of equipment, copiers, printers and automobiles.
Substantially all of the Company’s leases are operating leases.
The Company’s finance leases are immaterial. The right-of-use asset for the Company’s finance leases is
included in Property, plant and equipment, net on the Company’s consolidated balance sheet. The liabilities for the
Company’s finance leases are included in Current portion of long-term obligations and Long-term obligations,
excluding current portion, on the Company’s consolidated balance sheet.
The Company’s sub-leases are also immaterial.
Additionally, for most store leases, the Company pays variable taxes and insurance.
Renewal Options
Many of the Company’s store leases, and certain of the Company’s other leases, contain renewal options.
However, the renewal periods are generally not included in the right-of-use assets and lease liabilities for such leases
as exercise of the options is not reasonably certain.
Discount Rates
The Company is unable to determine the discount rates that are implicit in its operating leases. Therefore, for
such leases, the Company is utilizing its incremental borrowing rate.
For leases that existed as of January 1, 2019, the Company determined the applicable incremental borrowing
rates for such leases based on the remaining lease terms for the leases as of such date.
Quantitative Disclosures
During the years ended December 31, 2020 and 2019, the Company’s operating lease cost was $189,924and
$204,466, respectively. Such amount excludes impairment charges recorded in conjunction with the Company’s
store optimization program (see Note 3 - Store Impairment and Restructuring Charges).
The Company’s variable lease cost during the years ended December 31, 2019 and 2020 were $30,817 and
$27,443.
During the years ended December 31, 2020 and 2019, cash paid for amounts included in the measurement of
operating lease liabilities was $140,699 and $ 197,574, respectively.
116
During the years ended December 31, 2020 and 2019, right-of-use assets obtained in exchange for new
operating lease liabilities were $70,460 and $195,687, respectively.
As of December 31, 2020 and 2019, the weighted-average remaining lease term for operating leases was six
years and eight years, respectively, and the weighted-average discount rate for operating leases was 8.6% and 6.7%,
respectively.
As of December 31, 2020, the future cash flows for the Company’s operating leases were:
2021
2022
2023
2024
2025
Thereafter
Total Undiscounted Cash Flows
Less: Interest
Total Operating Lease Liability
Less: Current Operating Lease Liability
Long-Term Operating Lease Liability
$
$
Future Minimum
Operating Lease
Payments
243,250
171,066
155,929
128,406
112,903
336,348
1,147,902
(317,128 )
830,774
(176,045 )
654,729
Note 27 — Subsequent Events
In February 2021, the Company’s wholly-owned subsidiary Party City Holdings Inc. (“PCHI”), issued
$750 million aggregate principal amount of senior secured notes due 2026 (the “8.75 Senior Notes”). The Notes and
the related Notes guarantees were issued in a private offering to persons reasonably believed to be qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and
to non-U.S. persons in accordance with Regulation S under the Securities Act.
The Company intends to use the net proceeds from the offering to repay all outstanding borrowings under
our term loan facility maturing 2022, to pay related fees and expenses and for general corporate purposes, which
may include debt repurchases.
The Notes will be guaranteed by each restricted subsidiary that guarantees PCHI’s senior credit facilities.
The Notes and related guarantees will be secured by a first priority lien on substantially all assets of the issuer and
the guarantors, except for the collateral that secures the senior credit facilities on a first lien basis, with respect to
which the Notes and related guarantees will be secured by a second priority lien.
The Notes and the related Notes guarantees have not been registered under the Securities Act or any state
securities laws. The Notes may not be offered or sold in the United States or to, or for the benefit of, U.S. persons
absent registration under, or an applicable exemption from, the registration requirements of the Securities Act and
applicable state securities laws.
Concurrent with the issuance of the Notes, the Company also reduced its ABL Facility to a maximum of
$475,000 and extended the maturity to 2026.
Refer to Note 6 – Disposition of Assets and Assets and Liabilities Held for Sale regarding the Company’s
sale of a substantial portion of its international operations.
117
SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARTY CITY HOLDCO INC.
(Parent company only)
CONDENSED BALANCE SHEETS
(Dollars in thousands)
ASSETS
Other assets (principally investment in and amounts due from wholly-
owned subsidiaries)
Total assets
LIABILITIES, REDEEMABLE SECURITIES AND
STOCKHOLDERS’ EQUITY
Total liabilities
Redeemable securities
Stockholders’ equity:
Common stock (110,781,613 and 94,461,576 shares outstanding and
122,061,711 and 121,662,540 shares issued at December 31, 2020 and
December 31, 2019, respectively)
Additional paid-in capital
Retained (deficit) earnings
Accumulated other comprehensive loss
Total stockholders’ equity before common stock held in treasury
Less: Common stock held in treasury, at cost (11,280,098 and 27,200,964
shares at
December 31, 2020 and December 31, 2019, respectively)
Total stockholders’ equity
Total liabilities, redeemable securities and stockholders’ equity
$
December 31,
2020
December 31,
2019
$
$
$
50,790 $
50,790 $
533,096
533,096
— $
—
—
3,351
1,373
971,972
(565,457 )
(29,916 )
377,972
1,211
928,573
(37,219 )
(35,734 )
856,831
(327,182 )
50,790
50,790 $
(327,086 )
529,745
533,096
See accompanying notes to these condensed financial statements.
118
PARTY CITY HOLDCO INC.
(Parent company only)
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(Dollars in thousands)
Equity in net income of subsidiaries
Net income
Fiscal Year Ended December 31,
2020
(528,238 ) $
(528,238 ) $
2019
(532,495 ) $
(532,495 ) $
2018
122,850
122,850
$
$
Add: Net income attributable to redeemable securities
holder
Net income attributable to common shareholders of
Party
City Holdco Inc.
$
Other comprehensive (loss) income, net
Comprehensive income
Comprehensive income attributable to redeemable
securities
holder
Comprehensive income attributable to common
shareholders
of Party City Holdco Inc.
—
—
409
(528,238 ) $
5,818
(522,420 )
(532,495 ) $
13,467
(519,028 )
123,259
(13,383 )
109,467
—
—
409
$
(522,420 ) $
(519,028 ) $
109,876
See accompanying notes to these condensed financial statements.
119
PARTY CITY HOLDCO INC.
(Parent company only)
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Fiscal Year Ended December 31,
2020
2019
2018
Cash flows provided by (used in) operating activities:
Net income
$
(528,238 ) $
(532,495 ) $
122,850
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Equity in net income of subsidiaries
Change in due to/from affiliates
Net cash (used in) provided by operating activities
Cash flows (used in) provided by financing activities:
Treasury stock purchases
Exercise of stock options
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
528,238
(49 )
(49 )
532,495
(989 )
(989 )
(122,850 )
37,928
37,928
(97 )
146
49
—
—
— $
(156 )
1,145
989
—
—
— $
(40,197 )
2,269
(37,928 )
—
—
—
$
See accompanying notes to these condensed financial statements.
120
PARTY CITY HOLDCO INC. (Parent company only)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands)
Note 1 — Basis of presentation and description of registrant
Party City Holdco Inc. (“Party City Holdco”) Schedule I, Condensed Financial Information of Registrant,
provides all parent company information that is required to be presented in accordance with the SEC rules and
regulations for financial statement schedules. The consolidated financial statements of Party City Holdco are
included elsewhere. The parent-company financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto.
Party City Holdco does not conduct any separate operations and acts only as a holding company. Its share of
the net income of its unconsolidated subsidiaries is included in its statements of income using the equity method.
Since all material stock requirements, dividends and guarantees of the registrant have been disclosed in the
consolidated financial statements, the information is not required to be repeated in this schedule.
Note 2 — Dividends from subsidiaries
No cash dividends were paid to Party City Holdco by its subsidiaries during the years included in these
financial statements.
121
SCHEDULE II
PARTY CITY HOLDCO INC.
VALUATION AND QUALIFYING ACCOUNTS
The Years Ended December 31, 2018, December 31, 2019, and December 31, 2020
(Dollars in thousands)
Beginning
Balance
Write-Offs
Additions
Ending
Balance
Allowance for Doubtful Accounts:
For the year ended December 31, 2018
For the year ended December 31, 2019
For the year ended December 31, 2020
Sales Returns and Allowances:
For the year ended December 31, 2018
For the year ended December 31, 2019
For the year ended December 31, 2020
$
$
2,971 $
2,933
4,786
480 $
741
676
1,251 $
470
3,875
86,727 $
83,474
61,935
1,213 $
2,323
6,321
86,988 $
83,409
61,935
2,933
4,786
7,232
741
676
676
122
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated
the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020.
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act
of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to
ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the company’s management, including its principal executive
and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of December 31,
2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure
controls and procedures were effective at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d - 15(f) promulgated under
the Exchange Act, as a process designed by, or under the supervision of a company’s chief executive officer and
chief financial officer, or persons performing similar functions, and effected by a company’s board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of the
consolidated financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the consolidated financial
statements.
In designing and evaluating our disclosure controls and procedures, we and our management recognize that
any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and our management necessarily was required to apply its judgment in
evaluating and implementing possible controls and procedures. Our disclosure controls and procedures are designed
to provide reasonable assurance of achieving their stated objectives. We review on an ongoing basis and document
our disclosure controls and procedures, and our internal control over financial reporting, and we may from time to
time make changes in an effort to enhance their effectiveness and ensure that our systems evolve with our business.
123
Under the supervision of our Chief Executive Officer and Chief Financial Officer, management conducted an
evaluation of our internal control over financial reporting based on the framework in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based
on the evaluation performed, management concluded that its internal control over financial reporting, based on the
COSO framework, was effective, at the reasonable assurance level, as of December 31, 2020. Our independent
registered public accounting firm, Ernst & Young LLP, issued an attestation report on the effectiveness of our
internal control over financial reporting. The Ernst & Young LLP report is included in Item 8 of this Annual Report
on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act) during the quarter ended December 31, 2020 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Other Information
None.
124
Item 10.
Directors, Executive Officers and Corporate Governance
Executive Officers of the Registrant
PART III
The information required by this item will be set forth in our proxy statement for our 2021 Annual Meeting of
shareholders (to be filed within 120 days after December 31, 2020) (the “Proxy Statement”), and is incorporated
herein by reference.
Item 11.
Executive Compensation
Information required by this item will be set forth in our Proxy Statement, and is incorporated herein by
reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Information required by this item will be set forth in our Proxy Statement, and is incorporated herein by
reference.
Item 13.
Certain Relationships and Related Party Transactions and Director Independence
Information required by this item will be set forth in our Proxy Statement, and is incorporated herein by
reference.
Item 14.
Principal Accountant Fees and Services
Information required by this item will be set forth in our Proxy Statement, and is incorporated herein by
reference.
125
Item 15.
Exhibits and Financial Statement Schedules
The following documents are filed as part of this report.
PART IV
1. Financial Statements. The financial statements are set forth under Item 8, “Financial Statements and
Supplementary Data,” of this Annual Report on Form 10-K.
2. Financial Statement Schedules. Schedule I, Condensed Financial Information of Registrant, and Schedule
II, Valuation and Qualifying Accounts, is filed as part of this Annual Report on Form 10-K and should be
read in conjunction with the financial statements and notes thereto contained in Item 8, “Financial
Statements and Supplementary Data.”
All other financial statements and financial statement schedules for which provision is made in the applicable
accounting regulations of the SEC are not required under the related instruction, are not material or are not
applicable and, therefore, have been omitted.
3. Exhibits.
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
Exhibit Index
Description
Certificate of Correction to Party City Holdco Inc.’s Second Amended and Restated Certificate of
Incorporation filed on June 6, 2019, dated December 17, 2019 and corrected Second Amended and
Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Party City Holdco
Inc.’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 12,
2020)
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Party City Holdco Inc.’s
Form 8-K dated June 7, 2019)
Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to Party City Holdco Inc.’s
Registration Statement on Form S-1 dated March 26, 2015)
Indenture, dated as of August 19, 2015, among Party City Holdings Inc., as Issuer,and Wilmington Trust,
National Association, as Trustee (incorporated by reference to Exhibit 4.1 of Party City Holdco Inc.’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2015)
First Supplemental Indenture, dated as of August 19, 2015, among the Guarantors named therein and
Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.2 of Party
City Holdco Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
August 21, 2015)
Form of 6.125% Senior Notes due 2023 (incorporated by reference to Exhibit 4.1 of Party City Holdco
Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21,
2015)
Second Amended and Restated Stockholders Agreement among Party City Holdco Inc., THL PC Topco,
L.P., and certain other stockholders of Party City Holdco Inc. (incorporated by reference to Exhibit 4.5
of Party City Holdco Inc.’s Annual Report on Form 10-K filed with the Securities and Exchange
Commission on February 28, 2019)
Amended and Restated Registration Rights Agreement among Party City Holdco Inc., THL PC Topco,
L.P., Advent-Party City Acquisition Limited Partnership and certain other stockholders of Party City
Holdco Inc. (incorporated by reference to Exhibit 4.1 to Party City Holdco Inc.’s Form 8-K dated April
21, 2015)
126
Exhibit
Number
4.7
4.8
4.9
4.10
4.11
Description
Indenture, dated as of August 2, 2018, among Party City Holdings Inc., as Issuer, and Wilmington Trust,
National Association, as Trustee (incorporated by reference to Exhibit 4.1 of Party City Holdco Inc.’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on August 6, 2018)
First Supplemental Indenture, dated as of August 2, 2018, among the Guarantors named therein and
Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.2 of Party
City Holdco Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
August 6, 2018)
Form of 6.625% Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 of Party City Holdco
Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 6,
2018)
Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange
Act of 1934 (incorporated by reference to Exhibit 4.10 of Party City Holdco Inc.’s Annual Report on
Form 10-K filed on March 12, 2020)
Indenture, dated as of July 30, 2020, among Party City Holdings Inc., as issuer, the guarantors party
thereto and Ankura Trust Company, LLC, as trustee and collateral trustee, relating to Senior Secured
First Lien Floating Rate Notes due 2025 (incorporated by reference to Exhibit 4.1 of Party City Holdco
Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 3,
2020)
4.12
Indenture, dated as of July 30, 2020, among Anagram Holdings LLC, as issuer, Anagram International,
Inc., as co-issuer, the guarantors party thereto and Ankura Trust Company, LLC, as trustee and collateral
trustee, relating to 15.00% PIK/Cash Senior Secured First Lien Notes due 2025 (incorporated by
reference to Exhibit 4.3 of Party City Holdco Inc.’s Current Report on Form 8-K filed with the Securities
and Exchange Commission on August 3, 2020)
4.13
Indenture, dated as of July 30, 2020, among Anagram Holdings LLC, as issuer, Anagram International,
Inc., as co-issuer, the guarantors party thereto and Ankura Trust Company, LLC, as trustee and collateral
trustee, relating to 10.00% PIK/Cash Senior Secured Second Lien Notes due 2026 (incorporated by
reference to Exhibit 4.5 of Party City Holdco Inc.’s Current Report on Form 8-K filed with the Securities
and Exchange Commission on August 3, 2020)
4.14
Third Supplemental Indenture, dated as of July 30, 2020, among Party City Holdings Inc., the guarantors
party thereto and Wilmington Trust National Association, as trustee, relating to 6.125% Senior Notes due
2023 (incorporated by reference to Exhibit 4.7 of Party City Holdco Inc.’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on August 3, 2020)
4.15
Second Supplemental Indenture, dated as of July 30, 2020, among Party City Holdings Inc., the
guarantors party thereto and Wilmington Trust National Association, as trustee, relating to 6.625%
Senior Notes due 2026 (incorporated by reference to Exhibit 4.8 of Party City Holdco Inc.’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on August 3, 2020)
4.16*
Fourth Supplemental Indenture, dated as of March 3, 2021, among Amscan Custom Injection Molding,
LLC and Wilmington Trust National Association, as trustee, relating to 6.125% Senior Notes due 2023
4.17*
Third Supplemental Indenture, dated as of March 3, 2021, among Amscan Custom Injection Molding,
LLC and Wilmington Trust National Association, as trustee, relating to 6.625% Senior Notes due 2026
10.3†
Term Loan Credit Agreement, dated as of August 19, 2015, among PC Intermediate Holdings, Inc., Party
City Holdings Inc., Party City Corporation, the subsidiaries of the borrowers from time to time party
thereto, the financial institutions party thereto, as the Lenders, and Deutsche Bank AG New York
Branch, as Administrative Agent (incorporated by reference to Exhibit 10.1 of Party City Holdco Inc.’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2015)
127
Exhibit
Number
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
Description
Pledge and Security Agreement, dated as of August 19, 2015, among Party City Holdings Inc., Party
City Corporation, PC Intermediate Holdings, Inc., the Subsidiary Parties from time to time party thereto
and Deutsche Bank AG New York Branch, in its capacity as administrative agent and collateral agent for
the lenders party to the Term Loan Credit Agreement (incorporated by reference to Exhibit 10.2 of Party
City Holdco Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
August 21, 2015)
First Amendment to Term Loan Credit Agreement, dated as of October 20, 2016, by and among Party
City Holdings Inc., Party City Corporation, PC Intermediate Holdings, Inc., Deutsche Bank AG New
York Branch as administrative agent and the various lenders parties thereto (incorporated by reference to
Exhibit 10.1 of Party City Holdco Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 24, 2016)
Second Amendment to Term Loan Credit Agreement, dated as of February 16, 2018, by and among
Party City Holdings Inc., Party City Corporation, PC Intermediate Holdings, Inc., Deutsche Bank AG
New York Branch as administrative agent and the various lenders parties thereto (incorporated by
reference to Exhibit 10.1 of Party City Holdco Inc.’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on February 20, 2018)
Third Amendment to Term Loan Credit Agreement, dated as of June 28, 2019 (incorporated by reference
to Exhibit 10.3 of Party City Holdco Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 3, 2019)
ABL Credit Agreement, dated as of August 19, 2015, among PC Intermediate Holdings, Inc., Party City
Holdings Inc., Party City Corporation, the subsidiaries of the borrowers from time to time party thereto,
the financial institutions party thereto, as the Lenders, and JPMorgan Chase Bank, N.A., as
Administrative Agent (incorporated by reference to Exhibit 10.3 of Party City Holdco Inc.’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2015)
Pledge and Security Agreement, dated as of August 19, 2015, among Party City Holdings Inc., Party
City Corporation, PC Intermediate Holdings, Inc., the Subsidiary Parties from time to time party thereto
and JPMorgan Chase Bank, N.A., in its capacity as administrative agent and collateral agent for the
lenders party to the ABL Credit Agreement (incorporated by reference to Exhibit 10.4 of Party City
Holdco Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
August 21, 2015)
Intercreditor Agreement, dated as of August 19, 2015, among PC Intermediate Holdings, Inc., Party City
Holdings Inc., Party City Corporation, the other Grantors from time to time party thereto, JPMorgan Chase
Bank, N.A., as ABL Facility Agent, and Deutsche Bank AG New York Branch, as Term Loan Agent
(incorporated by reference to Exhibit 10.5 of Party City Holdco Inc.’s Current Report on Form 8-K filed with
the Securities and Exchange Commission on August 21, 2015)
First Amendment to ABL Credit Agreement, dated as of August 2, 2018, among PC Intermediate
Holdings, Inc., Party City Holdings Inc., Party City Corporation, the subsidiaries of the borrowers from
time to time party thereto, the financial institutions party thereto, as the Lenders, and JPMorgan Chase
Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 of Party City Holdco
Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 6,
2018)
Second Amendment to ABL Credit Agreement, dated as of March 4, 2019, by and among Party City
Holdings Inc., Party City Corporation, PC Intermediate Holdings, Inc., JPMorgan Chase Bank, N.A., as
Administrative Agent, and each of the Persons party thereto as ABL Revolving Lenders (incorporated
by reference to Exhibit 10.1 of Party City Holdco Inc.’s Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on May 9, 2019)
128
Exhibit
Number
10.13
10.14
10.15†
Description
Third Amendment to ABL Credit Agreement, dated as of April 8, 2019, by and among Party City
Holdings Inc., Party City Corporation, PC Intermediate Holdings, Inc., JPMorgan Chase Bank, N.A., as
Administrative Agent, and each of the Persons party thereto as ABL Revolving Lenders (incorporated by
reference to Exhibit 10.1 of Party City Holdco Inc.’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 11, 2019)
Fourth Amendment to ABL Credit Agreement, dated as of June 28, 2019 (incorporated by reference to
Exhibit 10.4 of Party City Holdco Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 3, 2019)
Party City Holdco Amended and Restated 2012 Omnibus Equity Incentive Plan (incorporated by
reference to Exhibit 10.5 to Party City Holdco Inc.’s Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on August 9, 2019)
10.16†
Party City Holdco Inc. Executive Annual Incentive Plan (incorporated by reference to Exhibit 10.21 to
Party City Holdco Inc.’s Registration Statement on Form S-1 dated March 26, 2015)
10.17†
10.18†
10.19†
10.20†
10.21†
10.22†
10.23†
10.24†
Party City Holdco Inc. Non-Employee Director Compensation Program (incorporated by reference to
Exhibit 10.2 of Party City Holdco Inc.’s Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on November 8, 2018)
Form of Nonqualified Stock Option Award Agreement (Non-Employee Directors) under the Party City
Holdco Inc. Amended and Restated 2012 Omnibus Equity Incentive Plan (incorporated by reference to
Exhibit 10.23 to Party City Holdco Inc.’s Registration Statement on Form S-1 dated March 26, 2015)
Form of Nonqualified Stock Option Award Agreement (Employees) under the Party City Holdco Inc.
Amended and Restated 2012 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.24
to Party City Holdco Inc.’s Registration Statement on Form S-1 dated March 26, 2015)
Form of Unrestricted Stock Award Agreement (Non-Employee Directors) under the Party City Holdco
Inc. Amended and Restated 2012 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit
10.18 of Party City Holdco Inc.’s Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 14, 2018)
Form of Restricted Stock Award Agreement (Time and Performance-Based Vesting) under the Party
City Holdco Inc. Amended and Restated 2012 Omnibus Equity Incentive Plan (incorporated by reference
to Exhibit 10.6 of Party City Holdco Inc.’s Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on August 9, 2019)
Form of Restricted Stock Unit Award Agreement (Time and Performance-Based Vesting) under the Party
City Holdco Inc. Amended and Restated 2012 Omnibus Equity Incentive Plan (incorporated by reference to
Exhibit 10.7 of Party City Holdco Inc.’s Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on August 9, 2019)
Form of Non-Employee Director Restricted Stock Unit Agreement under the Party City Holdco Inc.
Amended and Restated 2012 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.8
of Party City Holdco Inc.’s Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on August 9, 2019)
Purchase and Sale Agreement, dated June 28, 2019, by and between Spirit Realty, L.P. and Amscan Inc.,
Anagram Eden Prairie Property Holdings LLC, and Amscan NM Land, LLC (incorporated by reference
to Exhibit 10.1 of Party City Holdco Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 3, 2019)
10.25
Master Lease Agreement, dated June 28, 2019, by and between Spirit Realty, L.P. and Party City
Holdings Inc. (incorporated by reference to Exhibit 10.2 of Party City Holdco Inc.’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on July 3, 2019)
129
Exhibit
Number
10.26†
10.27
10.28†
10.29
Description
Employment Agreement between Party City Holdings Inc., Party City Holdco Inc. and Todd Vogensen,
dated February 3, 2020 (incorporated by reference to Exhibit 10.1 of Party City Holdco Inc.’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on January 9, 2020)
Board Nomination Agreement, dated as of September 11, 2020, between the Company and the
Nominating Parties (incorporated by reference to Exhibit 10.1 of Party City Holdco Inc.’s Current Report
on Form 8-K filed with the Securities and Exchange Commission on September 14, 2020)
Employment Agreement between Party City Holdings Inc., Party City Holdco Inc. and Michael P.
Harrison, dated April 5, 2020 and expired on January 1, 2021 (incorporated by reference to Exhibit 10.1
of Party City Holdco Inc.’s Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on June 12, 2020)
Form of Nonqualified Stock Option Award Agreement (Employees) under the Party City Holdco Inc.
Amended and Restated 2012 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.6
of Party City Holdco Inc.’s Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on June 12, 2020)
10.30† Amended and Restated Employment Agreement between Party City Holdings, Inc., Party City Holdco
Inc. and Brad Weston dated March 11, 2020 (incorporated by reference to Exhibit 10.30 of Party City
Holdco Inc.’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 12, 2020)
10.31*
Consulting Agreement dated March 21, 2019 by and between Party City Holdco Inc. and Michael A.
Correale, effective October 1, 2020
21.1*
List of Subsidiaries of Party City Holdco Inc.
23.1*
Consent of Independent Registered Public Accounting Firm
31.1*
31.2*
32.1*
32.2*
101*
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Interactive Data Files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at
December 31, 2020 and December 31, 2019; (ii) the Consolidated Statements of Operations and
Comprehensive (Loss) Income for the years ended December 31, 2019, 2018 and 2017; (iii) the
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2018 and
2017; (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and
2017; and (v) the Notes to the Consolidated Financial Statements.
104.1*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
† Management contract of compensatory plan or arrangement
* Filed herewith.
Item 16.
Form 10-K Summary
None.
130
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
PARTY CITY HOLDCO INC.
By:
/s/ Todd Vogensen
Todd Vogensen
Chief Financial Officer
Date: March 11, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature
/s/ Brad Weston
Brad Weston
/s/ Todd Vogensen
Todd Vogensen
/s/ Norman S. Matthews
Norman S. Matthews
/s/ James M. Harrison
James M. Harrison
/s/ Joel Alsfine
Joel Alsfine
/s/ Steven J. Collins
Steven J. Collins
/s/ James G. Conroy
James G. Conroy
/s/ William S. Creekmuir
William S. Creekmuir
/s/ Sarah Dodds-Brown
Sarah Dodds-Brown
/s/ Jennifer Fleiss
Jennifer Fleiss
/s/ John A. Frascotti
John A. Frascotti
/s/ Lisa K. Klinger
Lisa K. Klinger
/s/ Michelle Millstone-Shroff
Michelle Millstone-Shroff
Title
Date
Chief Executive Officer and Director
(Principal Executive Officer)
March 11, 2021
Chief Financial Officer
(Principal Financial Officer)
(Principal Accounting Officer)
March 11, 2021
Chairman of the Board and Director
March 11, 2021
Director and Vice Chair
March 11, 2021
Director
Director
March 11, 2021
March 11, 2021
Director
March 11, 2021
Director
March 11, 2021
Director
March 11, 2021
Director
March 11, 2021
Director
March 11, 2021
Director
March 11, 2021
Director
March 11, 2021
131
[This page intentionally left blank]
2020
NAVIGATING.
PIVOTING.
EVOLVING.
PRIORITIZING.
INNOVATING.
ELEVATING.
TRANSFORMING.
CORPORATE INFO
BOAR D OF DIRE CTORS
as of April 26, 2021
Norman S. Matthews
Non-Executive Chairman
& Director
Joel Alsfine
Director
Steven J. Collins
Director
James G. Conroy
Director
William S. Creekmuir
Director
Sarah Dodds-Brown
Director
Jennifer Fleiss
Director
John A. Frascotti
Director
James M. Harrison
Director & Vice Chairman
Lisa K. Klinger
Director
Michelle Millstone-Shroff
Director
Bradley M. Weston
Chief Executive Officer & Director
EXECUTIVE MANAGEME NT
Bradley M. Weston
Chief Executive Officer & Director
Todd E. Vogensen
Chief Financial Officer
Sean C. Thompson
Chief Commercial Officer
Denise M. Kulikowsky
Chief Human Resources Officer
CORPORATE OFFICES
80 Grasslands Road
Elmsford, NY 10523
ANNUAL MEETING
The Annual Meeting of
Shareholders of Party City
Holdco Inc. will be held
on Thursday, June 10, 2021,
at 8:30 a.m. (eastern time)
via an online Virtual
Shareholder Meeting
TRANSFER AGENT
AND REGISTRAR
ComputerShare
STOCK
Since the Company’s initial
public offering on April 16,
2015, shares of Party City
have been quoted on the
NYSE, and currently trade
under the symbol “PRTY”
INDEPENDENT
REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
New York, New York
INVESTOR RELATIONS
InvestorRelations@partycity.com
2020 ANNUAL REPORT
PARTYCITY.COM