Party City Announces Fourth Quarter and Full Year 2015 Results
Revenue increase of 4%1 on a constant
currency basis to a record $2.29 billion for fiscal year 2015
Adjusted Net Income increase of 32% in fiscal year 2015; Adjusted EPS
of $1.01
ELMSFORD, N.Y.–(BUSINESS WIRE)–Party City Holdco Inc. (“the Company” or “Party City”) (NYSE:PRTY) today
announced financial results for the quarter and year ended December 31,
2015.
James M. Harrison, Chief Executive Officer, stated: “We are very pleased
to have ended 2015 with a strong fourth quarter and to have delivered
total sales and earnings performance for the year within the original
guidance ranges we set for ourselves early in 2015. Our performance
demonstrates the strength of our vertical model, which allows us to
drive profits through our wholesale and retail businesses, as well as
execution of our strategic initiatives.”
During the year, the Company achieved a number of milestones in
executing its growth strategy:
-
Strengthened our vertical model by completing the acquisitions of
Travis Designs and ACIM - Increased our share of shelf2 to 75% from 70% in 2014
-
Increased our international presence by entering into a master
franchise agreement in Mexico and by increasing international third
party wholesale sales 15% on a constant currency basis -
Expanded our store base by opening/acquiring 33 new stores (19 net of
closures) in the U.S. and Canada -
Reduced leverage3 from 5.7 times to 4.6 times adjusted
EBITDA -
Generated cash interest savings of approximately $27 million in 2015
as a result of the application of our IPO proceeds towards debt
reduction and a refinancing of our debt in August; Expect an
additional $28 million of cash interest savings in 2016 based upon
current interest rates
Mr. Harrison added, “In 2016, we have many exciting opportunities to
expand our business such as tapping into new customer markets like B2B,
increasing our international penetration, expanding our store base and
driving e-commerce growth. We remain focused on our multiple growth
strategies and are committed to successfully integrating the
acquisitions of ACIM and Travis, as well as continuing to seek new
opportunities to deepen our vertical model to fuel further margin
expansion by manufacturing more of what we sell.”
Fourth quarter summary:
-
Total revenues of $782 million were up 4.4%1 on a constant
currency basis. On a reported basis, given the extra week in the prior
year quarter and negative currency impacts, total revenues declined
2.8%.-
Retail sales increased 5.4%1 on a constant currency
basis excluding the 14th week impact, driven by 19 net new Party
City stores added in the past twelve months, 20 additional
Halloween City stores and higher brand comparable sales (noted
below). On a reported basis retail sales decreased 3.0% to $618
million. -
Brand comparable sales increased 2.8% driven by a strong Halloween
season which resulted in a 3.3% increase in brand comparable sales
for fiscal October. -
Net third-party wholesale revenues increased 1.0% on a constant
currency basis driven by stronger international sales, offset by
lower sales to domestic party good retailers. On a reported basis,
net third-party wholesale revenues decreased 2.1% to $156 million.
-
Wholesale selling expenses declined 18.9% due to foreign currency
translation, cost savings related to a reorganization of our sales
and marketing groups, and lower intangible asset amortization. -
Retail operating expenses decreased 1.9% due to the extra week in
fiscal 2014 (explained below), offset by higher payroll costs
associated with new stores and a greater number of Halloween City
stores (335 vs. 315 in 2014). -
General and administrative expenses increased 2.3% as higher
inflationary costs and costs of acquired companies were offset in
part by the impact of the 14th week in 2014 (described
below) and foreign currency translation.
Full year summary
-
Total revenues of $2.29 billion, up 4.1%1 on a constant
currency basis, excluding the impact of the 53rd week in 2014. On a
reported basis, total revenues increased 1.0%.-
Retail sales increased 3.8%1 on a constant currency
basis, driven by 19 net new Party City stores added in the past
twelve months, 20 additional Halloween City stores and higher
brand comparable sales noted below. On a reported basis retail
sales increased 1.0% to $1,622 million. - Brand comparable sales increased by 1.5%.
-
Net third-party wholesale revenues increased 5.0% on a constant
currency basis driven by stronger international sales offset by
the elimination of now intercompany U.S. Balloon sales. On a
reported basis net third-party wholesale revenues increased 1.1%
to $654 million.
-
Wholesale selling expenses declined 13.1% from the prior year due
to cost savings related to a reorganization of our sales and
marketing groups and the impact of foreign currency translation. -
Retail operating expenses increased 1.0% due to higher payroll
costs associated with new stores and a greater number of Halloween
City stores this season, partially offset by the extra week in
fiscal 2014. -
General and administrative expenses increased 2.3% year over year
as higher inflationary costs were offset by the 53rd week impact
described below and foreign currency translation.
Balance sheet highlights as of December 31, 2015:
The Company ended the fourth quarter with $1,744 million in debt (net of
cash) and approximately $349.1 million in availability under its
asset-based revolving credit facility.Fiscal 2016 Outlook:
The Company expects fiscal 2016 total revenues of $2.35 to $2.42
billion, and brand comparable sales to range between flat to up
slightly. Adjusted EBITDA guidance is in the range of $390 to $405
million, adjusted net income expectations are in the range of $140 to
$150 million, and adjusted diluted net income per share is expected to
be $1.17 to $1.25 based upon estimated weighted average common shares
outstanding of approximately 120.5 million.The adjusted effective tax rate for the full fiscal year 2016 is
expected to be approximately 38.5%.53/52 Week Fiscal Year:
The Company’s Retail business operates and reports using a 52/53 week
fiscal year ending on the Saturday closest to December 31 of each year
and, as a result, a 53rd week is added every five or six years. Fiscal
2014 included a 53rd week. Similarly, while fiscal quarters normally
consist of 13-week periods, the fourth quarter of 2014 included a 14th
week. For comparability between 2015 and 2014 financial results, certain
amounts referenced herein exclude the impact of the 53rd week of
full-year 2014 and the 14th week of fourth quarter 2014,
which added $29 million and $46 million to net sales, respectively.__________________________
1 Adjusted for foreign currency and 53rd week
impact (refer to “53/52 Week Fiscal Year” paragraph)2 The percentage of our retail product cost of sales
supplied by our wholesale operations3 Defined as net debt to adjusted EBITDA Conference Call Information:
A conference call to discuss fourth quarter and full year fiscal 2015
financial results is scheduled for today, March 10, 2016, at 8:00 a.m.
Eastern Time. Investors and analysts interested in participating in the
call are invited to dial 877-201-0168 (U.S. domestic) and 647-788-4901
(international), and enter conference ID# 24121650, approximately
10 minutes prior to the start of the call. The conference call will also
be webcast at http://investor.partycity.com/.
To listen to the live call, please go to the website at least 15 minutes
early to register and download any necessary audio software. The webcast
will be accessible for one year after the call.The Company has also posted supplemental fourth quarter and full year
2015 earnings slides that are available on the website at http://investor.partycity.com.Website Information
We routinely post important information for investors on the Investor
Relations section of our website, http://investor.partycity.com/.
We intend to use this website as a means of disclosing material,
non-public information and for complying with our disclosure obligations
under Regulation FD. Accordingly, investors should monitor the Investor
Relations section of our website, in addition to following our press
releases, SEC filings, public conference calls, presentations and
webcasts. The information contained on, or that may be accessed through,
our website is not incorporated by reference into, and is not a part of,
this document.Non-GAAP Information:
This press release includes non-GAAP measures including Adjusted EBITDA
and Adjusted Net Income/Loss and Adjusted Earnings per Share. We present
these non-GAAP financial measures because we believe they assist
investors and analysts in comparing our performance across reporting
periods on a consistent basis by excluding items that we do not believe
are indicative of our core operating performance. In addition, we use
Adjusted EBITDA: (i) as a factor in determining incentive compensation,
(ii) to evaluate the effectiveness of our business strategies and
(iii) because the credit facilities use Adjusted EBITDA to measure
compliance with certain covenants. The Company has reconciled these
non-GAAP financial measures with the most directly comparable GAAP
financial measures in a table accompanying this release. In evaluating
these non-GAAP financial measures, investors should be aware that in the
future the Company may incur expenses or be involved in transactions
that are the same as or similar to some of the adjustments in this
presentation. The Company’s presentation of non-GAAP financial measures
should not be construed to imply that its future results will be
unaffected by any such adjustments. The Company has provided this
information as a means to evaluate the results of its ongoing
operations. Other companies in the Company’s industry may calculate
these items differently than it does. Each of these measures is not a
measure of performance under GAAP and should not be considered as a
substitute for the most directly comparable financial measures prepared
in accordance with GAAP. Non-GAAP financial measures have limitations as
analytical tools, and investors should not consider them in isolation or
as a substitute for analysis of the Company’s results as reported under
GAAP.Forward-Looking Statements:
This press release contains forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements give current expectations or
forecasts of future events or our future financial or operating
performance, and include Party City’s expectations regarding revenues,
brand comparable sales, Adjusted EBITDA, Adjusted net income/loss,
adjusted diluted earnings per share, average common shares outstanding
and the effective tax rate. The forward-looking statements contained in
this press release are based on management’s good-faith belief and
reasonable judgment based on current information, and these statements
are qualified by important risks and uncertainties, many of which are
beyond our control, that could cause our actual results to differ
materially from those forecasted or indicated by such forward-looking
statements. These risks and uncertainties include: our ability to
compete effectively in a competitive industry; fluctuations in commodity
prices; our ability to appropriately respond to changing merchandise
trends and consumer preferences; successful implementation of our store
growth strategy; decreases in our Halloween sales; disruption to the
transportation system or increases in transportation costs; product
recalls or product liability; economic slowdown affecting consumer
spending and general economic conditions; loss or actions of third party
vendors and loss of the right to use licensed material; disruptions at
our manufacturing facilities; and the additional risks and uncertainties
set forth in “Risk Factors” in Party City’s prospectus dated April 15,
2015 and in subsequent reports filed with or furnished to the Securities
and Exchange Commission. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot
guarantee future events, outlook, guidance, results, actions, levels of
activity, performance or achievements. Readers are cautioned not to
place undue reliance on these forward looking statements. Except as may
be required by any applicable laws, Party City assumes no obligation to
publicly update or revise such forward-looking statements, which are
made as of the date hereof or the earlier date specified herein, whether
as a result of new information, future developments or otherwise.About Party City
Party City Holdco Inc. (the “Company” or “Party City Holdco”) is the
leading party goods company by revenue in North America and, we believe,
the largest vertically integrated supplier of decorated party goods
globally by revenue. The Company is a popular one-stop shopping
destination for party supplies, balloons, and costumes. In addition to
being a great retail brand, the Company is a global, world-class
organization that combines state-of-the-art manufacturing and sourcing
operations, and sophisticated wholesale operations complemented by a
multi-channel retailing strategy and e-commerce retail operations. The
Company is the leading player in its category, vertically integrated and
unique in its breadth and depth. Party City Holdco designs,
manufactures, sources and distributes party goods, including paper and
plastic tableware, metallic and latex balloons, Halloween and other
costumes, accessories, novelties, gifts and stationery throughout the
world. The Company’s retail operations include approximately 900
specialty retail party supply stores (including approximately 180
franchise stores) throughout North America operating under the names
Party City and Halloween City, and e-commerce websites, principally
through the domain name PartyCity.com.PARTY CITY HOLDCO INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31, December 31, 2015 2014 ASSETS Current assets: Cash and cash equivalents $42,919 $47,214 Accounts receivable, net 132,287 140,663 Inventories, net 564,259 582,230 Prepaid expenses and other current assets 50,450 77,232 Total current assets 789,915 847,339 Property, plant and equipment, net 272,420 248,684 Goodwill 1,562,515 1,557,250 Trade names 568,712 569,343 Other intangible assets, net 89,157 107,010 Other assets, net 9,684 6,865 Total assets $3,292,403 $3,336,491 LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Loans and notes payable $126,136 $21,936 Accounts payable 111,616 145,686 Accrued expenses 146,319 165,683 Income taxes payable 8,504 34,670 Current portion of long-term obligations 14,552 12,249 Total current liabilities 407,127 380,224 Long-term obligations, excluding current portion 1,646,121 2,086,611 Deferred income tax liabilities 276,667 309,338 Deferred rent and other long-term liabilities 49,471 38,030 Total liabilities 2,379,386 2,814,203 Redeemable common securities (3,088,630 shares issued and
outstanding at December 31, 2014)– 35,062 Commitments and contingencies Stockholders’ equity: Common stock (119,258,374 and 91,007,894 shares issued and
outstanding at December 31, 2015 and 2014, respectively)1,193 910 Additional paid-in capital 904,425 469,117 Retained earnings 40,189 29,934 Accumulated other comprehensive loss (32,790 ) (12,735 ) Total stockholders’ equity 913,017 487,226 Total liabilities, redeemable common securities and stockholders’
equity$3,292,403 $3,336,491 PARTY CITY HOLDCO INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)(In thousands, except share and per share data)
Three Months Ended December 31, Year Ended December 31, 2015 2014(1)
2015
2014(1)
Revenues: Net sales $774,341 $796,516 $2,275,122 $2,251,589 Royalties and franchise fees 7,160 7,519 19,411 19,668 Total revenues 781,501 804,035 2,294,533 2,271,257 Expenses: Cost of sales 412,217 442,282 1,370,884 1,375,706 Wholesale selling expenses 15,435 19,040 64,260 73,910 Retail operating expenses 133,064 135,586 401,039 397,110 Franchise expenses 3,797 3,948 14,394 14,281 General and administrative expenses 41,049 40,131 151,097 147,718 Art and development costs 5,271 4,895 20,640 19,390 Total expenses 610,833 645,882 2,022,314 2,028,115 Income from operations 170,668 158,153 272,219 243,142 Interest expense, net 21,931 38,814 123,361 155,917 Other expense, net 4,471 1,456 130,990 5,891 Income before income taxes 144,266 117,883 17,868 81,334 Income tax expense 57,743 38,894 7,409 25,211 Net income $86,523 $78,989 $10,459 $56,123 Comprehensive income (loss) $83,384 $68,939 ($9,596 ) $37,980 Net income per common share-Basic $0.73 $0.84 $0.09 $0.60 Net income per common share-Diluted $0.72 $0.83 $0.09 $0.59 Weighted-average number of common shares-Basic 119,258,374 94,085,555 111,917,168 93,996,355 Weighted-average number of common shares-Diluted 120,266,120 94,818,926 112,943,807 94,444,137 1. The fourth quarter and full year ended December 31, 2014,
contain a 14th and 53rd week for our Retail operations,
respectively.PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED EBITDA
(In thousands)
Three Months Ended December 31, Year Ended December 31, 2015 2014 2015 2014 Net income $86,523 $78,989 $10,459 $56,123 Interest expense, net 21,931 38,814 123,361 155,917 Income taxes 57,743 38,894 7,409 25,211 Depreciation and amortization 20,948 21,895 80,515 82,890 EBITDA $187,145 178,592 221,744 320,141 Equity based compensation 948 396 3,042 1,583 Non-cash purchase accounting adjustments (1,509 ) 5,512 4,470 8,868 Management fee (a) – 839 31,627 3,356 Impairment charges 852 1,012 852 1,012 Restructuring, retention and severance 7 832 2,318 3,391 Refinancing charges (b) – – 94,607 4,396 Deferred rent 3,827 2,742 13,407 14,418 Business interruption proceeds, net of costs – 41 – (2,435 ) Corporate development expenses 243 299 1,786 700 Foreign currency losses 1,909 59 3,691 1,447 Closed store expense 998 (74 ) 1,901 1,199 Undistributed loss in unconsolidated joint venture 185 710 562 1,556 Gain on sale of assets – – (2,660 ) – Change-of-control license premium 3,000 –
3,000 –
Other (3 ) 76 (54 ) 2,493 Adjusted EBITDA $197,602 $191,036 $380,293 $362,125 (a) Represents management fees paid to THL and Advent. The management
agreement terminated upon the consummation of the initial public
offering in April 2015 and the Company paid a one-time termination
fee.(b) 2015 represents charges associated with refinancing the Company’s
debt, a prepayment penalty of $7,000 related to the redemption of
the Nextco Notes following the IPO, as well as the write-off of
related capitalized debt issuance costs and original issuance
discounts.PARTY CITY HOLDCO INC.
RECONCILIATION OF ADJUSTED NET INCOME
(In thousands, except per share data)
Three Months Ended December 31, Year Ended December 31, 2015 2014 2015 2014 Income before income taxes $144,266 $117,883 $17,868 $81,334 Intangible asset amortization 4,669 5,450 18,885 22,195 Non-cash purchase accounting adjustments (1,985 ) 6,410 6,445 13,692 Amortization of deferred financing costs and original issuance discounts (a)(b) 1,291 3,173 40,516 15,610 Management fee (c) – 839 31,627 3,356 Refinancing charges (a) – – 65,338 1,407 Equity based compensation 948 396 3,042 1,583 Impairment charges 852 1,012 852 1,012 Gain on sale of assets – – (2,660 ) – Change-of-control license premium 3,000 – 3,000 – Adjusted income before income taxes 153,041 135,163 184,913 140,189 Adjusted income tax expense (d) 62,062 51,111 70,707 53,351 Adjusted net income $90,979 $84,052 $114,206 $86,838 Adjusted net income per common share – diluted $0.76 $0.89 $1.01 $0.92 Weighted-average number of common shares-diluted
120,266,120 94,818,926 112,943,807 94,444,137 Weighted-average common stock issued in IPO(e)
– 25,156,250 – 17,819,010 Pro forma weighted-average number of common shares-diluted
120,266,120 119,975,176 112,943,807 112,263,147 Pro forma adjusted net income per common share – diluted $0.76 $0.70 $1.01 $0.77 (a)
During 3Q15, the Company refinanced its debt and paid $56,350 in
call premiums and other third party costs, as well as wrote off
$22,661 in capitalized debt issuance costs, original issue
discounts and call premiums. Additionally, in 2Q15, the Company
expensed a prepayment penalty of $7,000 related to the redemption
of the Nextco Notes following the April 2015 IPO, and wrote off
$8,596 of capitalized debt issuance costs and original issue
discounts on the Nextco Notes. The write-off of the debt issuance
costs, original issue discounts and call premiums is included in
“Amortization of deferred financing costs and original issuance
discounts” in this table and in the Company’s consolidated
statement of cash flows.(b)
Represents the amortization of deferred financing costs, call
premiums and original issuance discounts related to debt
offerings. Additionally, includes the write-off of deferred
financing costs, net original issuance discounts and unamortized
call premiums discussed in Note (a) above.(c)
Represents management fees paid to THL and Advent. The management
agreement terminated upon the consummation of the initial public
offering in April 2015 and the Company paid a one-time termination
fee.(d)
Represents the income tax expense using the rate in effect after
considering the adjustments.(e)
Reflects the weighted average number of common shares issued in
conjunction with the initial public offering on April 16, 2015
that are included in the corresponding period of 2015.Contacts
Party City Holdco Inc.
Deborah Belevan, 914-784-8324
VP of
Investor Relations
InvestorRelations@partycity.com -
Retail sales increased 3.8%1 on a constant currency
-
Retail sales increased 5.4%1 on a constant currency
