References throughout this document to the "Company" include Party City Holdco
Inc. and its subsidiaries. In this document the words "we," "our," "ours" and
"us" refer only to the Company and its subsidiaries and not to any other person.

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. As of
September 30, 2020, the Company's retail operations include 829 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 and others.

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 over 40,000 retail outlets worldwide, including independent
party supply stores, mass merchants, grocery retailers, e-commerce merchandisers
and dollar stores. Our products are available 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 "Financial Measures - Adjusted EBITDA," "Financial
Measures - Adjusted Net Income (Loss)" and "Financial Measures - Adjusted Net
Income (Loss) Per Common Share - Diluted" below.

Segments

We have two reporting segments: Retail and Wholesale.



Our retail segment generates revenue primarily through the sale of our party
supplies, which are sold under the Amscan, Designware, Anagram and Costumes USA
brand names through Party City, Halloween City and PartyCity.com. For the nine
months ended September 30, 2020, 81.4% of the product that was sold by our
retail segment was supplied by our wholesale segment and 30.2% 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.

                                       23

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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 include stores that were temporarily closed in
2020 due to COVID-19 but 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. 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, including
rent at distribution facilities, 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 expenses, 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.

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, stock and
equity-based compensation and data-processing costs. These expenses generally do
not vary proportionally with net sales.

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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.

Development Stage Expenses. Development stage expenses represent start-up activities related to Kazzam, LLC ("Kazzam").



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.

Results of Operations

Impact of the COVID-19 Pandemic



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. In response to COVID-19, to safeguard the
health and safety of its team members and customers, the Company temporarily
closed all of its corporate retail stores as of March 18, 2020. During the
temporary store closures, the Company offered curbside pickup and the
Company's 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 the Company
provides 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.

The Company 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. But
our business, operations, financial condition and liquidity have been and may
continue to be materially and adversely affected. 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 the
Company recognizing non-cash pre-tax impairment charges for the nine months
ended September 30, 2020.

As described in Note 16 - Current and Long-Term Obligations of Item 1, "Condensed Consolidated Financial Statements (Unaudited)" in this Quarterly Report on Form 10-Q, the Company recognized a gain on debt refinancing transactions.


                                       25

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Three Months Ended September 30, 2020 Compared To Three Months Ended September 30, 2019



The following table sets forth the Company's operating results and operating
results as a percentage of total revenues for the three months ended
September 30, 2020 and 2019.



                                                       Three Months Ended September 30,
                                                    2020                             2019
                                                            (Dollars in thousands)
Revenues:
Net sales                                 $  532,053          99.7   %   $  538,345          99.7   %
Royalties and franchise fees                   1,722           0.3            1,886           0.3
Total revenues                               533,775         100.0          540,231         100.0
Expenses:
Cost of sales                                355,923          66.7          373,413          69.1
Wholesale selling expenses                    11,950           2.2           16,084           3.0
Retail operating expenses                     97,100          18.2          111,595          20.7
Franchise expenses                             2,795           0.5            3,274           0.6
General and administrative expenses           42,191           7.9           43,062           8.0
Art and development costs                      4,257           0.8            5,927           1.1
Development stage expenses                         -           0.0            2,728           0.5
Store impairment and restructuring
charges                                        1,926           0.4            2,574           0.5
Goodwill, intangibles and long-lived
assets impairment                             44,732           8.4          259,100          48.0
Total expenses                               560,874         105.1          817,757         151.4
(Loss) from operations                       (27,099 )        (5.1 )       (277,526 )       (51.4 )
Interest expense, net                         13,422           2.5           29,424           5.4
Other (income) expense, net                   (2,873 )        (0.5 )          2,047           0.4
(Gain) on debt refinancing                  (273,149 )       (51.2 )              -           0.0
Income (loss) before income taxes            235,501          44.1         (308,997 )       (57.2 )
Income tax (benefit)                          (4,164 )        (0.8 )        (27,252 )        (5.0 )
Net income (loss)                            239,665          44.9         (281,745 )       (52.2 )
Less: Net (loss) attributable to
noncontrolling interests                         (42 )           -             (212 )           -
Net income (loss) attributable to
common shareholders of Party City
Holdco Inc.                               $  239,707          44.9   %   $ (281,533 )       (52.1 ) %
Net income (loss) per share
attributable to common shareholders of
Party City Holdco Inc.-Basic              $     2.25                     $    (3.02 )
Net income (loss) per share
attributable to common shareholders of
Party City Holdco Inc.-Diluted            $     2.24                     $    (3.02 )




Revenues

Total revenues for the third quarter of 2020 were $533.8 million and were
$6.4 million, or 1.2%, lower than the third quarter of 2019. The following table
sets forth the Company's total revenues for the three months ended September 30,
2020 and 2019.



                                                            Three Months Ended September 30,
                                                      2020                                  2019
                                          Dollars in        Percentage of     Dollars in        Percentage of
                                           Thousands       Total Revenues      Thousands       Total Revenues
Net Sales:
Wholesale                                 $   346,621             64.9    %   $   383,425             71.0    %
Eliminations                                 (179,049 )          (33.5 )         (214,547 )          (39.7 )
Net wholesale                                 167,572             31.4            168,878             31.3
Retail                                        364,481             68.3            369,467             68.4
Total net sales                               532,053             99.7            538,345             99.7
Royalties and franchise fees                    1,722              0.3              1,886              0.3
Total revenues                            $   533,775            100.0    %   $   540,231            100.0    %




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Retail



Retail net sales during the third quarter of 2020 were $364.5 million and were
$5.0 million, or 1.3%, lower than during the third quarter of 2019. Retail net
sales at our North American Party City stores totaled $329.9 million and were
$3.5 million, or 1.1% higher than in the third quarter of 2019. Growth in
same-store sales for the Party City brand was partially offset by lower non-comp
sales from the divestiture of 65 Canadian Party City stores in October 2019 and
the closure of 55 and 21 stores in conjunction with the 2019 and 2020 store
optimization programs, respectively. In addition, store sales increased due to
the acquisition of two franchise stores and the opening of two new stores during
the twelve months ended September 30, 2020. Global retail e-commerce sales
totaled $32.9 million during the third quarter of 2020 and were $4.6 million, or
12.2% lower than during the corresponding quarter of 2019. Sales at the
temporary Halloween City stores totaled $0.7 million and were $3.8 million lower
than in the third quarter of 2019 due to opening 25 Halloween City stores in
2020 compared to 256 stores in 2019. Sales at other store formats totaled $1.0
million during the third quarter of 2020.

Same-store sales for the Party City brand (including North American retail e-commerce sales) increased by 8.3% during the third quarter of 2020, principally due to growth in everyday sales particularly in the balloon, birthday, and entertaining categories.



Our North American retail e-commerce sales, which include our Amazon marketplace
sales, decreased by 28.7% compared to the third quarter of 2019 and, when
adjusting for the impact of our "buy online, pick-up in store" program which
includes our curbside pickup and delivery (such sales are included in our store
sales), increased by 36.0%.

Excluding the impact of e-commerce, same-store sales increased by 4.5%.

Same-store sales percentages were not affected by foreign currency as such percentages are calculated in local currency.

Wholesale



Wholesale net sales during the third quarter of 2020 totaled $167.6 million and
were $1.3 million, or 0.8%, lower than the third quarter of 2019. Net sales to
domestic party goods retailers and distributors (including our franchisee
network) totaled $57.9 million and were $8.0 million, or 12.1% lower than during
2019 principally due to lower demand from independent third party customers
partially offset by growth in Party City franchise stores and mass channel
business. Net sales of metallic balloons to domestic distributors and retailers
(including our franchisee network) totaled $21.5 million during the third
quarter of 2020 and were $4.7 million, or 27.9%, higher than during the
corresponding quarter of 2019 principally due to demand growth in domestic
distributor and value channels. Our international sales (which include U.S.
export sales and exclude U.S. import sales from foreign subsidiaries) totaled
$88.2 million and were $2.0 million, or 2.3%, higher than in 2019. Foreign
currency translation positively impacted sales by approximately $1.5 million.

Intercompany sales to our retail affiliates totaled $179.0 million during the
third quarter of 2020 and were $35.5 million lower than during the corresponding
quarter of 2019. Intercompany sales represented 51.7% of total wholesale sales
during the third quarter of 2020 and were 16.5% lower than during the third
quarter of 2019, principally due to a planned reduction in purchases as part of
the initiative to reduce the overall product assortment as well as the impact of
fewer Party City Corporate stores due to the sale of 65 Canadian Party City
stores in October 2019 and the closure of 55 and 21 stores in conjunction with
the 2019 and 2020 store optimization programs, respectively. The intercompany
sales of our wholesale segment are eliminated against the intercompany purchases
of our retail segment in the consolidated financial statements.

Royalties and franchise fees



Royalties and franchise fees for the third quarter of 2020 totaled $1.7 million
and were $0.2 million lower than during the third quarter of 2019 primarily due
to the acquisition of 2 franchise stores and closure of 6 franchise stores
during the twelve months ended September 30, 2020.

                                       27

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Gross Profit

The following table sets forth the Company's gross profit for the three months ended September 30, 2020 and 2019.





                                         Three Months Ended September 30,
                                  2020                                    2019
                      Dollars in        Percentage          Dollars in     

Percentage


                      Thousands        of Net Sales         Thousands        of Net Sales
Retail               $    133,817               36.7   %   $    128,692               34.8   %
Wholesale                  42,313               25.3             36,240               21.5
Total Gross Profit   $    176,130               33.1   %   $    164,932               30.6   %




The gross profit margin on net sales at retail during the third quarter of 2020
was 36.7% or 190 basis points higher than during the corresponding quarter of
2019. The increase was primarily due to lower sales promotions, favorable share
of shelf gains, and lower year over year markdowns in conjunction with the
Company's "store optimization program" (see "operating expenses" below for
further discussion) partially offset by increased costs of freight and
helium. Our manufacturing share of shelf (i.e., the percentage of our retail
product cost of sales manufactured by our wholesale segment) of 29.6% during the
third quarter of 2020 was 4.2% higher as compared to the third quarter of 2019.
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 81.1% during the quarter or 2.8%
higher than during the third quarter of 2019.

The gross profit margin on net sales at wholesale during the third quarters of
2020 and 2019 was 25.3% and 21.5%, respectively. The increase was principally
due to favorable product mix including increased sale of metallic balloons and
favorable customer mix.

Operating expenses

Wholesale selling expenses were $12.0 million during the third quarter of 2020
and were $4.1 million lower than during the corresponding quarter of 2019,
largely due to lower payroll costs as well as lower travel, marketing, merchant
and commission expenses. Wholesale selling expenses were 7.1% and 9.5% of net
wholesale sales during the third quarters of 2020 and 2019, respectively.

Retail operating expenses during the third quarter of 2020 were $97.1 million
and were $14.5 million lower than the corresponding quarter of 2019. The
decrease was primarily due to the divestiture of 65 Canada Retail stores in
October 2019, lower advertising spend, and lower payroll and occupancy costs due
to the closure of 55 and 21 stores in conjunction with the 2019 and 2020 store
optimization programs, respectively. These lower expenses were partially offset
by higher costs associated with the acquisition of Livario and Webdots in
November of 2019. Retail operating expenses were 26.6% and 30.2% of retail sales
during the third quarters of 2020 and 2019, respectively.

Franchise expenses during the third quarter of 2020 and 2019 were $2.8 million and $3.3 million, respectively.



General and administrative expenses during the third quarters of 2020 totaled
$42.2 million and were $0.9 million, or 2.0%, lower than in the third quarter of
2019 principally due to lower travel expenses, employee payroll costs, and stock
compensation (see Note 10 - Capital Stock, of Item 1, "Condensed Consolidated
Financial Statements (Unaudited)" in this Quarterly Report on Form 10-Q),
partially offset by higher bad debt, depreciation, and insurance expenses.
General and administrative expenses as a percentage of total revenues were 7.9%
and 8.0% during the third quarters of 2020 and 2019, respectively.

Art and development costs were $4.3 million and $5.9 million during the third quarters of 2020 and 2019, respectively.



Development stage expenses represent third quarter 2019 costs related to Kazzam
which are zero in the third quarter of 2020 due to the acquisition of Ampology's
interest in Kazzam, LLC in an equity transaction in March of 2020. See Note 19 -
Kazzam, LLC in Item 1 for further discussion.

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During the three months ended March 31, 2020, 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 in the first quarter of 2020 to accelerate the optimization of its
store portfolio with the closure of approximately 21 stores in the third quarter
of 2020. Closed stores were primarily located in close proximity to other Party
City stores. An additional $3.1 million expense was recorded for the stores
during the three months ended September 30, 2020. These closings should provide
the Company with capital flexibility to expand into underserved markets. In
addition, for the three months ended March 31, 2020 the Company estimated lease
impairment for open stores where sales were affected due to the outbreak of, and
local, state and federal governmental responses to, COVID-19.

Interest expense, net



Interest expense, net, totaled $13.4 million during the third quarter of 2020,
compared to $29.4 million during the third quarter of 2019. The decrease in
interest principally reflects forgiveness of interest as part of the debt
refinancing in the third quarter of 2020. Refer to Note 16 - Current and
Long-Term Obligations of Item 1, "Condensed Consolidated Financial Statements
(Unaudited)" in this Quarterly Report on Form 10-Q for further discussion.

Other (income) expense, net

For the third quarters of 2020 and 2019, other (income) expense, net, totaled $(2.9) million and $2.0 million, respectively. The change is mostly due to termination of Punchbowl "put" and "call" options during 2019.

(Gain) on debt refinancing

As described in Note 16 - Current and Long-Term Obligations of Item 1, "Condensed Consolidated Financial Statements (Unaudited)" in this Quarterly Report on Form 10-Q, the Company recognized a gain of $273,149 on debt refinancing transactions.

Income tax benefit



The effective income tax rate for the three months ended September 30, 2020,
(1.8)% is different from the statutory rate primarily due the excludable portion
of the cancellation of debt income, state taxes, and a rate benefit related to
the carryback of a net operating loss to years when the statutory income tax
rate was 35.0%.

                                       29

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Nine Months Ended September 30, 2020 Compared To Nine Months Ended September 30, 2019



The following table sets forth the Company's operating results and operating
results as a percentage of total revenues for the nine months ended
September 30, 2020 and 2019.



                                                        Nine Months Ended September 30,
                                                   2020                              2019
                                                             (Dollars in thousands)
Revenues:
Net sales                                $ 1,198,160          99.6   %    $ 1,611,149          99.6   %
Royalties and franchise fees                   4,349           0.4              6,089           0.4
Total revenues                             1,202,509         100.0          1,617,238         100.0
Expenses:
Cost of sales                                890,587          74.1          1,065,511          65.9
Wholesale selling expenses                    37,115           3.1             50,929           3.1
Retail operating expenses                    250,502          20.8            302,756          18.7
Franchise expenses                             9,225           0.8              9,813           0.6

General and administrative expenses 162,118 13.5


  126,497           7.8
Art and development costs                     13,095           1.1             17,568           1.1
Development stage expenses                     2,932           0.2              7,966           0.5
Gain on sale/leaseback transaction                 -           0.0            (58,381 )        (3.6 )
Store impairment and restructuring
charges                                       20,818           1.7             25,817           1.6

Goodwill and intangibles impairment 581,380 48.3


  259,100            16
Total expenses                             1,967,772         163.6          1,807,576         111.8
(Loss) from operations                      (765,263 )       (63.6 )         (190,338 )       (11.8 )
Interest expense, net                         63,954           5.3             88,857           5.5
Other expense, net                             4,287           0.4              6,643           0.4
(Gain) on debt refinancing                  (273,149 )       (22.7 )                -           0.0
(Loss) before income taxes                  (560,355 )       (46.6 )         (285,838 )       (17.7 )
Income tax (benefit)                        (128,293 )       (10.7 )          (21,809 )        (1.3 )
Net (loss)                                  (432,062 )       (35.9 )         (264,029 )       (16.3 )
Less: Net (loss) attributable to
noncontrolling interests                        (241 )           -               (352 )           -
Net (loss) attributable to common
shareholders of Party City Holdco Inc.   $  (431,821 )       (35.9 ) %    $  (263,677 )       (16.3 ) %
Net (loss) per share attributable to
common shareholders of Party City
Holdco
  Inc.-Basic                             $     (4.41 )                    $     (2.83 )
Net (loss) per share attributable to
common shareholders of Party City
Holdco
  Inc.-Diluted                           $     (4.41 )                    $     (2.83 )




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Revenues

Total revenues for the first nine months of 2020 were $1,202.5 million and were $414.7 million, or 25.6%, lower than the first nine months of 2019. The following table sets forth the Company's total revenues for the nine months ended September 30, 2020 and 2019.





                                                Nine Months Ended September 30,
                                           2020                                2019
                                                                                     Percentage
                               Dollars in        Percentage of     Dollars in         of Total
                                Thousands       Total Revenues      Thousands         Revenues
Net Sales:
Wholesale                      $   692,715             57.6    %   $   962,793           59.5   %
Eliminations                      (345,167 )          (28.7 )         (522,421 )        (32.3 )
Net wholesale                      347,548             28.9            440,372           27.2
Retail                             850,612             70.7          1,170,777           72.4
Total net sales                  1,198,160             99.6          1,611,149           99.6
Royalties and franchise fees         4,349              0.4              6,089            0.4
Total revenues                 $ 1,202,509            100.0    %   $ 1,617,238          100.0   %




Retail

Retail net sales during the first nine months of 2020 were $850.6 million and
were $320.2 million, or 27.3%, lower than during the first nine months of 2019.
Retail net sales at our North American Party City stores totaled $737.5 million
and were $323.0 million, or 30.5% lower than in the first nine months of 2019
principally due to the temporary closure of all Party City stores in response to
the COVID-19 pandemic starting on March 18, 2020 with all stores reopened by
June 22, 2020. Additional factors impacting the sales decline included the
divestiture of 65 Canadian Party City stores in October 2019, and the closure of
55 and 21 Party City stores in conjunction with the 2019 and 2020 store
optimization programs, respectively. These negative factors affecting sales were
partially offset by the acquisition of two franchise stores and the opening of
two new stores during the twelve months ended September 30, 2020. Global retail
e-commerce sales totaled $110.5 million during the first nine months of 2020 and
were $6.5 million, or 6.3% higher than the first nine months of 2019. Sales at
the temporary Halloween City stores totaled $0.7 million and were $3.8 million
lower than in the first nine months of 2019 due to opening 25 Halloween City
stores in 2020 compared to 256 stores in 2019. Sales at other store formats
totaled $1.9 million during the first nine months of 2020.

Same-store sales for the Party City brand (including North American retail e-commerce sales) decreased by 21.8% during the first nine months of 2020, principally due to the impact of the temporary closure of all Party City stores in response to the COVID-19 pandemic.



Our North American retail e-commerce sales, which include our Amazon marketplace
sales, decreased by 13.9% compared to the first nine months of 2019 and, when
adjusting for the impact of our "buy online, pick-up in store" program which
includes our curbside pickup and delivery launched on March 25, 2020 (such sales
are included in our store sales), increased by 40.1%.

Excluding the impact of e-commerce, same-store sales decreased by 29.3%.

Same-store sales percentages were not affected by foreign currency as such percentages are calculated in local currency.

Wholesale



Wholesale net sales during the first nine months of 2020 totaled $347.5 million
and were $92.9 million, or 21.1%, lower than the first nine months of 2019. Net
sales to domestic party goods retailers and distributors (including our
franchisee network) totaled $126.2 million and were $50.3 million, or 28.5%,
lower than during 2019 principally due to lower distributor demand and closed
franchise and independent party goods stores as a result of the COVID-19
pandemic. Net sales of metallic balloons to domestic distributors and retailers
(including our franchisee network) totaled $51.1 million during the first nine
months of 2020 and were $3.7 million, or 6.7%, lower than during the
corresponding period of 2019 principally due to the negative impact of the
COVID-19 pandemic earlier in the year partially offset by demand recovery in the
domestic distributer and value channels later in the year. Our international
sales (which include U.S. export sales and exclude U.S. import sales from
foreign subsidiaries) totaled $170.3 million and were $38.8 million, or 18.6%,
lower than in 2019. Foreign currency translation negatively impacted sales by
approximately $0.7 million.

                                       31

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Intercompany sales to our retail affiliates totaled $345.2 million during the
first nine months of 2020 and were $177.2 million lower than during the first
nine months of 2019. Intercompany sales represented 49.8% of total wholesale
sales during the first nine months of 2020 and were 33.9% lower than during the
first nine months of 2019, principally reflecting the impact of the Party City
store closures related to the COVID-19 pandemic. The intercompany sales of our
wholesale segment are eliminated against the intercompany purchases of our
retail segment in the consolidated financial statements.

Royalties and franchise fees



Royalties and franchise fees for the first nine months of 2020 totaled
$4.3 million and were $1.8 million lower than during the first nine months of
2019 primarily due to lower sales as a result of store closures resulting from
the COVID-19 pandemic.

Gross Profit

The following table sets forth the Company's gross profit for the nine months ended September 30, 2020 and 2019.





                                          Nine Months Ended September 30,
                                  2020                                   2019
                      Dollars in        Percentage          Dollars in     

Percentage


                      Thousands        of Net Sales         Thousands        of Net Sales
Retail               $    257,035               30.2   %   $    436,761               37.3   %
Wholesale                  50,538               14.5            108,877               24.7
Total Gross Profit   $    307,573               25.7   %   $    545,638               33.9   %




The gross profit margin on net sales at retail during the first nine months of
2020 was 30.2% or 710 basis points lower than during the corresponding nine
months of 2019. The decrease was mainly due to sales deleverage from the
temporary closure of all the Company's retail stores in response to the COVID-19
pandemic starting on March 18, 2020 with all stores reopened by June 22,
2020. In addition, the increased costs of freight and helium contributed to the
margin decline. The declines in margin were partially offset by margin increases
due to favorable share of shelf gains and lower year over year markdowns in
conjunction with the Company's "store optimization program" (see "operating
expenses" below for further discussion). Our manufacturing share of shelf (i.e.,
the percentage of our retail product cost of sales manufactured by our wholesale
segment) of 30.2% during the first nine months of 2020 was 350 bps higher as
compared to the first nine months of 2019. 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 81.4% during the first nine months of 2020 or 340 bps higher than
during the first nine months of 2019.

The gross profit margin on net sales at wholesale during the first nine months
of 2020 and 2019 was 14.5% and 24.7%, respectively. The decrease was principally
due to the deleveraging of distribution and manufacturing costs from lower sales
to closed franchise and independent party stores due to the COVID-19 pandemic as
well as increased rent associated with the sale leaseback transaction.

Operating expenses



Wholesale selling expenses were $37.1 million during the first nine months of
2020 and were $13.8 million lower than during the corresponding nine months of
2019 principally due to lower payroll costs as well as lower travel, marketing,
merchant and commission expenses. Wholesale selling expenses were 10.7% and
11.6% of net wholesale sales during the first nine months of 2020 and 2019,
respectively.

Retail operating expenses during the first nine months of 2020 were
$250.5 million and were $52.3 million lower than the corresponding nine months
of 2019. The decrease was mainly due to the COVID-19 pandemic impact on costs
including employee payroll from furloughs and lower advertising and credit card
fees. In addition, retail operating expenses were lower due to the sale of the
65 Canada Retail stores, and the closing of 55 US stores in conjunction with the
store optimization program partially offset by higher costs associated with the
acquisition of Livario and Webdots in November of 2019. Retail operating
expenses were 29.4% and 25.9% of retail sales during the first nine months of
2020 and 2019, respectively.

Franchise expenses during the first nine months of 2020 and 2019 were $9.2 million and $9.8 million, respectively.


                                       32

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General and administrative expenses during the first nine months of 2020 totaled
$162.1 million and were $35.6 million, or 28.2%, higher than in the first nine
months of 2019 mainly due to higher professional fees, increased depreciation,
stock compensation (see Note 10 - Capital Stock, of Item 1, "Condensed
Consolidated Financial Statements (Unaudited)" in this Quarterly Report on Form
10-Q), 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 13.5% and 7.8% during the first nine months of
2020 and 2019, respectively.

Art and development costs were $13.1 million and $17.6 million during the first nine months of 2020 and 2019, respectively.

Development stage expenses represent costs related to Kazzam.



During 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.

During the first nine months of 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 with the closure
of approximately 21 and 55 stores in the first nine months of 2020 and 2019,
respectively. Closed stores were primarily located in close proximity to other
Party City stores. These closings should provide the Company with capital
flexibility to expand into underserved markets. In addition, the Company
estimated lease impairment for open stores where sales were affected due to the
outbreak of, and local, state and federal governmental responses to, COVID-19.

Goodwill, intangibles and long-lived assets impairment charges for the nine
months ended September 30, 2020 were $581.4 million. The non-cash pre-tax
impairment charges were the result of a sustained decline in the Company's
market capitalization, significantly reduced customer demand for its products
due to COVID-19 and reduced fair value of certain intangibles and long-lived
assets. See Note 4 - Goodwill, Intangibles and Long-Lived Assets Impairment, of
Item 1, "Condensed Consolidated Financial Statements (Unaudited)" in this
Quarterly Report on Form 10-Q for further discussion.

Interest expense, net



Interest expense, net, totaled $64.0 million during the first nine months of
2020, compared to $88.9 million during the first nine months of 2019. The
decrease in interest principally reflects lower debt following a debt
refinancing in the third quarter of 2020. Refer to Note 16 - Current and
Long-Term Obligations of Item 1, "Condensed Consolidated Financial Statements
(Unaudited)" in this Quarterly Report on Form 10-Q for further discussion.

Other expense, net

For the first nine months of 2020 and 2019, other expense, net, totaled $4.3 million and $6.6 million, respectively. The change is primarily due the termination of Punchbowl "put" and "call" options in 2019.

(Gain) on debt refinancing

As described in Note 16 - Current and Long-Term Obligations of Item 1, "Condensed Consolidated Financial Statements (Unaudited)" in this Quarterly Report on Form 10-Q, the Company recognized a gain of $273,149 on debt refinancing transactions.

Income tax benefit



The effective income tax rate for the nine months ended September 30, 2020,
22.9%, is different from the statutory rate primarily due the non-deductible
portions of the goodwill impairment charges noted above, the excludable portion
of the cancellation of debt income, state taxes, and a rate benefit related to
the carryback of a net operating loss to years when the statutory income tax
rate was 35.0%.

                                       33

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Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per Common Share - Diluted



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, 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.




                                       34

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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. We
compensate for these limitations by relying primarily on our GAAP results and
using adjusted EBITDA, adjusted net income and adjusted net income per common
share - diluted only on a supplemental basis. The reconciliations from net
income (loss) to adjusted EBITDA and income (loss) before income taxes to
adjusted net income (loss) for the periods presented are as follows:



                                              Three Months Ended September 30,             Nine Months Ended September 30,
                                                 2020                   2019                 2020                   2019
(Dollars in thousands)
Net (loss) income                          $        239,665       $       

(281,745 ) $ (432,062 ) $ (264,029 ) Interest expense, net

                                13,422                 29,424               63,954                 88,857
Income tax (benefit)                                 (4,164 )              (27,252 )           (128,293 )              (21,809 )
Depreciation and amortization                        17,278                 19,155               57,796                 62,380
EBITDA                                              266,201               (260,418 )           (438,605 )             (134,601 )
Non-cash purchase accounting adjustments                  -                      -                    -                  2,757
Store impairment and restructuring
charges (a)                                           6,763                  8,694               36,285                 54,960
Other restructuring, retention and
severance (b)                                         2,957                    (73 )             11,701                  5,248
Goodwill, intangibles and long-lived
assets impairment (c)                                44,732                259,100              581,380                259,100
Deferred rent (d)                                       254                    446               (2,618 )               (1,042 )
Closed store expense (e)                              1,247                  2,326                2,882                  3,424
Foreign currency losses/(gains), net                 (3,312 )                  646                  955                    486
Stock option expense - time - based (f)                 111                    409                  671                  1,150
Stock option expense
- performance - based (n)                                 -                      -                7,847                      -
Restricted stock unit and restricted
cash awards expense - performance-based                 510                      -                  510                      -
Non-employee equity-based compensation
(g)                                                       -                    128                1,033                    386
Undistributed income (loss) in equity
method
  investments                                           (59 )                    7                  356                   (195 )
Corporate development expenses (h)                      581                  4,588                6,193                 11,782
Restricted stock units - time-based (i)                 429                    610                1,568                  1,543
Restricted stock unit expense -
performance-based (m)                                     -                    560                    -                  1,036
Non-recurring legal settlements/costs                   661                    194                7,170                  1,795
(Gain) on debt refinancing (p)                     (273,149 )                    -             (273,149 )                    -
Gain on sale/leaseback transaction (o)                    -                      -                    -                (58,381 )
COVID - 19 (l)                                          679                      -               71,059                      -
Other                                                   546                    (75 )              3,034                    217
Adjusted EBITDA                            $         49,151       $         17,142     $         18,272       $        149,665








                                       35

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                                                                                                                           Three Months Ended September 30, 2020 EBITDA Adjustments
                                                                                                                                                Stock Option
                                                        Goodwill,                                                                               Expense/Non-
                                                       intangibles                                                                             Employee Equity
                                       September           and               Store                                                              Compensation/
                                       30, 2020        long-lived         impairment                                                             Restricted                             Other                                                                    September 30,
                                         GAAP            assets               and                                 Corporate                     stock units -                      restructuring,         Closed                       Foreign                       2020
                                       Basis (as       impairment        restructuring       Gain on debt        development                    

time-based Deferred retention and store COVID- currency

                    Non-GAAP
                                       reported)           (c)            charges (a)       refinancing (p)      expenses (h)      Legal        (f)(g)(i)(n)         Rent (d)       severance (b)       expense (e)       19 (l)        losses       Other           basis
Revenues:
Net sales                             $   532,053                                                                                                                                                                                                               $       532,053
Royalties and franchise fees                1,722                                                                                                                                                                                                                         1,722
Total revenues                            533,775                                                                                                                                                                                                                       533,775
Cost of sales                             355,923                                (4,837 )                                                                                  (80 )                                           (1,266 )                    (469 )           349,271
Wholesale selling expenses                 11,950                                                                                                                                                                                                                        11,950
Retail operating expenses                  97,100                                                                                                                         (224 )                              (1,225 )     (1,745 )                                      93,906
Franchise expenses                          2,795                                                                                                                                                                                                                         2,795
General and administrative expenses        42,191                                                                         (370 )     (661 )              (1,050 )           50              (2,957 )             (22 )      2,332                                        39,513
Art and development costs                   4,257                                                                                                                                                                                                                         4,257
Store impairment and restructuring
charges                                     1,926                                (1,926 )                                                                                                                                                                                     -
Goodwill, intangibles and
long-lived assets impairment               44,732           (44,732 )                                                                                                                                                                                                         -
Total expenses                            560,874           (44,732 )            (6,763 )                 -               (370 )     (661 )              (1,050 )         (254 )            (2,957 )          (1,247 )       (679 )            -       (469 )           501,692
(Loss) from operations                    (27,099 )                                                                                                                                                                                                                      32,083
Interest expense, net                      13,422                                                                                                                                                                                                                        13,422
Other (income) expense, net                (2,873 )                                                                       (211 )                                                                                                           3,312        (18 )               210
(Gain) on debt refinancing               (273,149 )                                                 273,149                                                                                                                                                                   -
Income (loss) before income taxes         235,501                                                                                                                                                                                                                        18,451
Interest expense, net                      13,422                                                                                                                                                                                                                        13,422
Depreciation and amortization              17,278                                                                                                                                                                                                                        17,278
EBITDA                                    266,201                                                                                                                                                                                                                        49,151
Adjustments to EBITDA                    (217,050 )         (44,732 )      

     (6,763 )           273,149               (581 )     (661 )              (1,050 )         (254 )            (2,957 )          (1,247 )       (679 )        3,312       (487 )                 -
Adjusted EBITDA                       $    49,151     $     (44,732 )   $        (6,763 )   $       273,149     $         (581 )   $ (661 )   $          (1,050 )   $     (254 )   $        (2,957 )   $      (1,247 )   $   (679 )   $    3,312     $ (487 )   $        49,151


                                       35

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                                                                                                                        Three Months Ended September 30, 2019 EBITDA Adjustments
                                                                                                                                                    Stock Option
                                                                                                                                                    Expense/Non-
                                                                                                                                                   Employee Equity
                                      September                                  Store                                                              Compensation/
                                      30, 2019           Goodwill,            impairment            Gain on                                          Restricted                             Other                                                         September 30,
                                        GAAP          intangibles and             and           sale/leaseback        Corporate                     stock units -                       restructuring,         Closed          Foreign                        2019
                                      Basis (as      long-lived assets       restructuring        transaction        development                     time-based          Deferred       retention and           store          currency                     Non-GAAP
                                      reported)        impairment (c)         charges (a)             (o)            expenses (h)      Legal        (f)(g)(i)(m)         Rent (d)       severance (b)        expense (e)        gains         Other           basis
Revenues:
Net sales                            $   538,345                                                                                                                                                                                                         $       538,345
Royalties and franchise fees               1,886                                                                                                                                                                                                                   1,886
Total revenues                           540,231                                                                                                                                                                                                                 540,231
Cost of sales                            373,413                                     (6,120 )                                                                                 (656 )                                                                             366,637
Wholesale selling expenses                16,084                                                                                                                                                                                                                  16,084
Retail operating expenses                111,595                                                                                                                                                                   (2,240 )                                      109,355
Franchise expenses                         3,274                                                                                                                                                                                                                   3,274
General and administrative
expenses                                  43,062                                                                                         (194 )              (1,707 )          210                   73               (86 )                                       41,358
Art and development costs                  5,927                                                                                                                                                                                                                   5,927
Development stage expenses                 2,728                                                                            (2,728 )                                                                                                                                   -
Store impairment and restructuring
charges                                    2,574                                     (2,574 )                                                                                                                                                                          -
Goodwill, intangibles and
long-lived assets impairment             259,100               (259,100 )                                                                                                                                                                                              -
Total expenses                           817,757               (259,100 )            (8,694 )                 -             (2,728 )     (194 )              (1,707 )         (446 )                 73            (2,326 )        

   -           -             542,635
Income from operations                  (277,526 )                                                                                                                                                                                                                (2,404 )
Interest expense, net                     29,424                                                                                                                                                                                                                  29,424
Other expense, net                         2,047                                                                            (1,860 )                                                                                                (646 )        68                (391 )
Income before income taxes              (308,997 )                                                                                                                                                                                                               (31,437 )
Interest expense, net                     29,424                                                                                                                                                                                                                  29,424
Depreciation and amortization             19,155                                                                                                                                                                                                                  19,155
EBITDA                                  (260,418 )                                                                                                                                                                                                                17,142
Adjustments to EBITDA                    277,560               (259,100 )            (8,694 )                 -             (4,588 )     (194 )              (1,707 )         (446 )                 73            (2,326 )         (646 )        68                   -
Adjusted EBITDA                      $    17,142     $         (259,100 )   $        (8,694 )   $             -     $       (4,588 )   $ (194 )   $          (1,707 )   $     (446 )   $             73     $      (2,326 )   $     (646 )   $    68     $        17,142




                                       36

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                                                                                                                        Nine Months Ended September 30, 2020 EBITDA Adjustments
                                                                                                                                             Stock Option
                                                                                                                                             Expense/Non-
                            September                                   Store                                                               Employee Equity
                             30, 2020           Goodwill,            impairment                                                              Compensation/                           Other                                                                        September 30,
                               GAAP          intangibles and             and                                 Corporate                        Restricted                         restructuring,         Closed                        Foreign                         2020
                            Basis (as       long-lived assets       restructuring       Gain on debt        development                       stock units         Deferred       retention and           store          COVID-        currency                      Non-GAAP
                            reported)         impairment (c)         charges (a)       refinancing (p)      expenses (h)       Legal         (f)(g)(i)(n)         Rent (d)       severance (b)        expense (e)       19 (l)         losses        Other            basis
Revenues:
Net sales                  $  1,198,160                                                                                                                                                                                                                          $     1,198,160
Royalties and franchise
fees                              4,349                                                                                                                                                                                                                                    4,349
Total revenues                1,202,509                                                                                                                                                                                                                                1,202,509
Cost of sales                   890,587                                    (15,467 )                                                                                   (214 )             (4,437 )                       (42,446 )                      (898 )           827,125
Wholesale selling
expenses                         37,115                                                                            (1,840 )                                                                                                 (623 )                                        34,652
Retail operating
expenses                        250,502                                                                                                                               2,685                                 (2,733 )     (16,312 )                                       234,142
Franchise expenses                9,225                                                                                                                                                                                     (672 )                                         8,553
General and
administrative expenses         162,118                                                                              (570 )     (7,170 )             (10,596 )          147               (7,264 )            (149 )     (11,006 )                                       125,510
Art and development
costs                            13,095                                                                                                                                                                                                                                   13,095
Development stage
expenses                          2,932                                                                            (2,932 )                                                                                                                                                    -
(Gain) on sale/leaseback
transaction                           -                                                                                                                                                                                                                                        -
Store impairment and
restructuring charges            20,818                                    (20,818 )                                                                                                                                                                                           -
Goodwill, intangibles
and long-lived assets
impairment                      581,380               (581,380 )                                                                                                                                                                                                               -
Total expense                 1,967,772               (581,380 )           (36,285 )                 -             (5,342 )     (7,170 )             (10,596 )        2,618              (11,701 )          (2,882 )     (71,059 )            -         (898 )         1,243,077

(Loss) from operations         (765,263 )                                                                                                                                                                                                                                (40,568 )
Interest expense, net            63,954                                                                                                                                                                                                                                   63,954
Other expense, net                4,287                                                                              (851 )                           (1,033 )                                                                             (955 )     (2,492 )            (1,044 )
(Gain) on debt
refinancing                    (273,149 )                                                      273,149                                                                                                                                                                         -
(Loss) before income
taxes                          (560,355 )                                                                                                                                                                                                                               (103,478 )
Interest expense, net            63,954                                                                                                                                                                                                                                   63,954
Depreciation and
amortization                     57,796                                                                                                                                                                                                                                   57,796
EBITDA                         (438,605 )                                                                                                                                                                                                                                 18,272
Adjustments to EBITDA           456,877               (581,380 )           (36,285 )           273,149             (6,193 )     (7,170 )             (11,629 )        2,618              (11,701 )          (2,882 )     (71,059 )         (955 )     (3,390 )                 -
Adjusted EBITDA            $     18,272     $         (581,380 )   $       

(36,285 ) $ 273,149 $ (6,193 ) $ (7,170 ) $ (11,629 ) $ 2,618 $ (11,701 ) $ (2,882 ) $ (71,059 ) $ (955 ) $ (3,390 ) $ 18,272






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                                                                                                                                    Nine Months Ended

September 30, 2019 EBITDA Adjustments


                                                                                                                                                          Stock Option
                                                                                                                                                          Expense/Non-
                                     September                                   Store                                                                   Employee Equity
                                      30, 2019           Goodwill,            impairment             Gain on                                              Compensation/                            Other                              Non-Cash                                   September 30,
                                        GAAP          intangibles and             and             sale/leaseback         Corporate                         Restricted                         restructuring,         Closed           Purchase         Foreign                       2019
                                     Basis (as       long-lived assets       restructuring         transaction          development                        stock units          Deferred       retention and          store          Accounting        currency                    Non-GAAP
                                     reported)         impairment (c)         charges (a)              (o)              expenses (h)       Legal          (f)(g)(i)(m)          Rent (d)       severance (b)       expense (e)       Adjustments        gains        Other           basis
Revenues:
Net sales                           $  1,611,149                                                                                                                                                                                                                                $     1,611,149
Royalties and franchise fees               6,089                                                                                                                                                                                                                                          6,089
Total revenues                         1,617,238                                                                                                                                                                                                                                      1,617,238
Cost of sales                          1,065,511                                    (29,143 )                                                                                         831                                                                                             1,037,199
Wholesale selling expenses                50,929                                                                                                                                                                                                                                         50,929
Retail operating expenses                302,756                                                                                                                                                          (31 )          (3,111 )                                                       299,614
Franchise expenses                         9,813                                                                                                                                                                                                                                          9,813
General and administrative
expenses                                 126,497                                                                                            (1,795 )                (4,115 )          211              (5,217 )            (313 )                                                       115,268
Art and development costs                 17,568                                                                                                                                                                                                                                         17,568
Development stage expenses                 7,966                                                                               (7,965 )                                                                                                                                                       1
Gain on sale/leaseback
transaction                              (58,381 )                                                          58,381                                                                                                                                                                            -
Store impairment and
restructuring charges                     25,817                                    (25,817 )                                                                                                                                                                                                 -
Goodwill, intangibles and
long-lived assets impairment             259,100               (259,100 )                                                                                                                                                                                                                     -
Total expenses                         1,807,576               (259,100 )           (54,960 )               58,381             (7,965 )     (1,795 )                (4,115 )        1,042              (5,248 )          (3,424 )               -              -          -           1,530,392
Income from operations                  (190,338 )                                                                                                                                                                                                                                       86,846
Interest expense, net                     88,857                                                                                                                                                                                                                                         88,857
Other expense, net                         6,643                                                                               (3,817 )                                                                                                    (2,757 )         (486 )      (22 )              (439 )

(Loss) before income taxes              (285,838 )                                                                                                                                                                                                                                       (1,572 )
Interest expense, net                     88,857                                                                                                                                                                                                                                         88,857
Depreciation and amortization             62,380                                                                                                                                                                                                                                         62,380
EBITDA                                  (134,601 )                                                                                                                                                                                                                                      149,665
Adjustments to EBITDA                    284,266               (259,100 )           (54,960 )               58,381            (11,782 )     (1,795 )                (4,115 )        1,042              (5,248 )          (3,424 )          (2,757 )         (486 )      (22 )                 -
Adjusted EBITDA                     $    149,665     $         (259,100 )   $       (54,960 )   $           58,381     $      (11,782 )   $ (1,795 )   $            (4,115 )   $    1,042     $        (5,248 )   $      (3,424 )   $      (2,757 )   $     (486 )   $  (22 )   $       149,665








                                       38

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                                             Three Months Ended September 30,          Nine Months Ended September 30,
                                                  2020                  2019               2020                 2019
(Dollars in thousands, except per share
amounts)
Income (loss) before income taxes          $          235,501       $   (308,997 )   $       (560,355 )     $    (285,838 )
Intangible asset amortization                           2,899              3,553                8,444              10,528
Non-cash purchase accounting adjustments                    -                424                    -               4,200
Amortization of deferred financing costs
and original
  issuance discounts (j)                                  875              1,222                3,276               3,511
Store impairment and restructuring
charges (a)                                             1,321              8,694               29,475              54,960
Other restructuring charges (b)                         2,622               (263 )             10,139               2,822
Goodwill, intangibles and long-lived
assets impairment (c)                                  44,732            259,100              581,380             259,100
Non-employee equity-based compensation
(g)                                                         -                128                1,033                 386
Refinancing charges (j)                                     -                  -                    -                  36
Non-recurring legal settlements/costs                     605                  -                7,026                   -
Stock option expense - time - based (f)                   110                409                  671               1,150
Stock option expense
- performance - based (n)                                   -                  -                7,847                   -
Gain on sale/leaseback transaction (o)                      -                  -                    -             (58,381 )
(Gain) on debt refinancing (p)                       (273,149 )                -             (273,149 )                 -
Restricted stock unit expense -
performance-based (m)                                       -                560                    -               1,036
COVID - 19 (l)                                            733                  -               71,113                   -
Adjusted income (loss) before income
taxes                                                  16,249            (35,170 )           (113,100 )            (6,490 )
Adjusted income tax (benefit) expense
(k)                                                     5,234             (9,459 )            (36,416 )            (2,117 )
Adjusted net (loss) income                 $           11,015       $    

(25,711 ) $ (76,684 ) $ (4,373 ) Adjusted net (loss) income per common share - diluted

                            $             0.10       $      (0.28 )   $          (0.78 )     $       (0.05 )
Weighted-average number of common
shares-diluted                                    106,875,631         93,346,448           97,872,174          93,271,392



(a) During the three and nine months ended September 30, 2019, the Company

initiated a store optimization program under which it identified 55 stores

for closure, out of which 35 stores were closed in 2019 and 20 stores were

closed in January 2020. In addition, 21 stores identified for closure in the

first quarter of 2020 were closed in the third quarter. In conjunction with

the program, during the nine months ended September 30, 2020, the Company

recorded the following charges: inventory reserves: $12,880, operating lease

asset impairment: $14,530 (including $6,051 related primarily to its active

stores that were closed in earlier in 2020 due to COVID-19), plant and

equipment impairment: $2,065 and labor and other costs related to closing the

stores: $4,223. During the first nine months ended September 30, 2019, the

Company recorded the following charges related to the store optimization

program: inventory reserves: $21,285, operating lease asset impairment:

$14,149, property, plant and equipment impairment: $4,680, labor and other

costs relates to closing stores: $6,327 and severance: $661. See Note 3 -

Store Impairment and Restructuring Charges in Item 1 for further discussion.

Additionally, during the process of liquidating the inventory in such stores,

the Company lost margin of $5,230.

(b) Amounts expensed during the first nine months of 2020 principally relate to

severance due to organizational changes. Amounts expensed during 2019

principally relate to executive severance and the write-off of inventory for

a section of the Company's Party City stores that were restructured.

(c) As a result of a sustained decline in market capitalization and reduced fair

value of certain intangibles and long-lived assets, the Company recognized

non-cash pre-tax goodwill and intangibles impairment charges for the nine

months ended September 30, 2020 totaling $581.4 million.

(d) The "deferred rent" adjustment reflects the difference between accounting for

rent and landlord incentives in accordance with GAAP and the Company's actual

cash outlay for such items. During the first quarter of 2019, the Company

adopted ASC 842. Under the standard, the difference between accounting for

rent and landlord incentives in accordance with GAAP and the Company's actual

cash outlay for such items is now incorporated in the Company's operating

lease asset.

(e) Charges incurred related to closing and relocating stores in the ordinary

course of business.

(f) Represents non-cash charges related to stock options - time-based and

performance-based.

(g) The acquisition of Ampology's interest in Kazzam, LLC in an equity

transaction. See Note 19 - Kazzam, LLC in Item 1 for further discussion.

(h) Primarily represents costs for Kazzam (see Note 19 - Kazzam, LLC in Item 1

for further discussion) and third-party costs related to acquisitions

(principally legal and diligence expenses).

(i) Non-cash charges for restricted stock units that vest based on service


    conditions.


                                       39

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(j) During February 2018, the Company amended the Term Loan Credit Agreement. In

conjunction with the amendment, the Company wrote-off capitalized deferred

financing costs, original issue discounts and call premiums. The amounts are

included in "Amortization of deferred financing costs and original issuance

discounts" in the adjusted net income table above.

(k) Represents income tax expense/benefit after excluding the specific tax

impacts for each of the pre-tax adjustments. The tax impacts for each of the


    adjustments were determined by applying to the pre-tax adjustments the
    effective income tax rates for the specific legal entities in which the
    adjustments were recorded.

(l) Represents COVID-19 expenses for employees on temporary furlough for whom the

Company provides health benefits; non-payroll expenses including advertising,

occupancy and other store expenses.

(m) Non-cash charges for restricted stock units that vest based on performance

conditions.

(n) Represents non-cash charges related to stock options that vest based on

performance conditions. For the three and nine months ended September 30,

2020, this includes a one-time compensation expense of $7,847 that resulted

from THL not achieving specified investment returns. See Note 10, Capital

Stock of Item 1, "Condensed Consolidated Financial Statements (Unaudited)" in

this Quarterly Report on Form 10-Q.

(o) During June 2019, the Company reported a $58,381 gain from the sale and

leaseback of its main distribution center in Chester, New York and its

metallic balloons manufacturing facility in Eden Prairie, Minnesota. The

aggregate sale price for the three properties was $128,000. Simultaneous with

the sale, the Company entered into twenty-year leases for each of the

facilities.

(p) As described in Note 16 - Current and Long-Term Obligations of Item 1,

"Condensed Consolidated Financial Statements (Unaudited)" in this Quarterly

Report on Form 10-Q, the Company recognized a gain of $273,149 on debt

refinancing transactions.

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 twelve months. We cannot provide
assurance, however, that our business will generate sufficient cash flow from
operations or that future borrowings will be available to us under the ABL
Facility and the Term Loan Credit Agreement in amounts sufficient to enable us
to repay our indebtedness or to fund our other liquidity needs.

Per Note 16, Current and Long-Term Obligations of Item 1, "Condensed
Consolidated Financial Statements (Unaudited)" in this Quarterly Report on Form
10-Q, as of September 30, 2020, the Company's indebtedness principally consisted
of: (i) a senior secured term loan facility ("Term Loan Credit Agreement"), (ii)
6.125% Senior Notes (the "2023 Notes"), (iii) 6.625% Senior Notes, (iv) First
Lien Party City Notes (as defined below), (v) First Lien Anagram Notes (as
defined below), and (vi) Second Lien Anagram Notes (as defined below).
Additionally, the Company had an asset-based revolving credit facility ("ABL
Facility") that it draws down on as necessary.

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) (the "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, 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. In connection with the refinancing transactions
as follows, 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.

In the first nine months of 2020 the Company drew down $269.8 million under the
ABL Facility. At September 30, 2020, $100.1 million was invested in US Treasury
funds with maturities of less than three months. The Company had approximately $
178.5 million of availability under the ABL Facility as of September 30, 2020.

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.

                                       40

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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' 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) 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 Common
Stock, as well as the 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 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. 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
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.

                                       41

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Cash Flow



Net cash used in operating activities totaled $56.8 million and $182.3 million
during the nine months ended September 30, 2020 and 2019, respectively. The
variance principally reflects decrease in accounts receivable due to decreased
sales as well as reduced payments from lower inventory levels partially offset
by increase in prepaid expenses and other current assets. Changes in operating
assets and liabilities during the first nine months of 2020 resulted in cash
provided of $16.2 million and during the first nine months of 2019 resulted in
the cash used of $159.1 million.

Net cash used in investing activities totaled $32.4 million during the nine
months ended September 30, 2020, as compared to $58.6 million provided by
investing activities during the nine months ended September 30, 2019. Capital
expenditures during the nine months ended September 30, 2020 and 2019 were
$32.1 million and $45.8 million, respectively. Retail capital expenditures
totaled $17.7 million during 2020. Wholesale capital expenditures during 2020
totaled $14.4 million.

Net cash provided by financing activities was $227.4 million during the nine
months ended September 30, 2020 and $97.8 million during the nine months ended
September 30, 2019. The variance was principally due to a $100.5 million of
proceeds from the debt refinancing. For more information refer to Note 16,
Current and Long-Term Obligations of Item 1, "Condensed Consolidated Financial
Statements (Unaudited)" in this Quarterly Report on Form 10-Q, as of September
30, 2020.

As of September 30, 2020, the Company had approximately $178.5 million of availability under the ABL Facility.

Critical Accounting Estimates



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.

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 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 and other intangibles that have indefinite lives are reviewed for
potential impairment on an annual basis or more frequently if circumstances
indicate a possible impairment. For purposes of testing 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 a
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.

                                       42

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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.

During the first and thirds quarter of 2020, the Company identified 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. As a result, the Company recorded a $581.4 million goodwill,
intangibles and long-lived assets impairment charge. See Note 4 - Goodwill,
Intangibles and Long-Lived Assets Impairment, of Item 1, "Condensed Consolidated
Financial Statements (Unaudited)" in this Quarterly Report on Form 10-Q for
further discussion. 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 the
Company could record additional impairment charges for the goodwill of such
reporting units.

Contractual Obligations

Other than as described above under "Liquidity", there were no material changes to our future minimum contractual obligations as of December 31, 2019 as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

Off Balance Sheet Arrangements

We had no off-balance sheet arrangements during the three months ended September 30, 2020 and the year ended December 31, 2019.

Seasonality

Wholesale Operations



Despite a concentration of holidays in the fourth quarter of the year, as a
result of our expansive product lines, customer base and increased promotional
activities, the impact of seasonality on the quarterly results of our wholesale
operations has been limited. However, due to Halloween, the inventory balances
of our wholesale operations are slightly higher during the second and third
quarters. Additionally, Halloween products sold to retailers and other
distributors result in slightly higher accounts receivable balances during the
quarter.

Retail Operations

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.

                                       43

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Cautionary Note Regarding Forward-Looking Statements



From time to time, including in this filing and, in particular, the section
captioned "Management's Discussion and Analysis of Financial Condition and
Results of Operations," we make "forward-looking statements" within the meaning
of federal and state securities laws. Disclosures that use words such as the
company "believes," "anticipates," "expects," "estimates," "intends," "will,"
"may" or "plans" and similar expressions are intended to identify
forward-looking statements. These forward-looking statements reflect our current
expectations and are based upon data available to us at the time the statements
were made. An example of a forward-looking statement is our belief that our cash
generated from operating activities and availability under our credit facilities
will be adequate to meet our liquidity needs for at least the next 12 months.
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 titled "Risk Factors"
included in our Annual Report on Form 10-K filed with the SEC on March 12, 2020
and in the "Risk Factors" section of this Quarterly Report on Form 10-Q.
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 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 filing.
Any such forward-looking statements, whether made in this filing or elsewhere,
should be considered in context with the various disclosures made by us about
our business. The following risks related to our business, among others, could
cause actual results to differ materially from those described in the
forward-looking statements:

• potential risks and uncertainties relating to the ultimate geographic


       spread of COVID-19;


    •  economic slowdown affecting consumer spending and general economic
       conditions, including as a result of the COVID-19 pandemic;


  • the severity of the COVID-19 pandemic;


  • the duration of the COVID-19 pandemic;

• actions that may be taken by governmental authorities to contain the

COVID-19 pandemic or to treat its impact;

• the potential negative impacts of COVID-19 on the global economy and

foreign sourcing;

• the impacts of COVID-19 on the Company's financial condition and business


       operation;


  • our ability to compete effectively in a competitive industry;


  • fluctuations in commodity prices;


  • helium shortages;

• our ability to appropriately respond to changing merchandise trends and


       consumer preferences;


  • successful implementation of our business strategy;


  • decreases in our Halloween sales;


    •  unexpected or unfavorable consumer responses to our promotional or
       merchandising programs;

• failure to comply with existing or future laws relating to our marketing

programs, e-commerce initiatives and the use of consumer information;

• 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;

• failure by suppliers or third-party manufacturers to follow acceptable

labor practices or to comply with other applicable laws and guidelines;

• changes in regulations or enforcement, or our failure to comply with


       existing or future regulations;


  • our international operations subjecting us to additional risks;


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  • potential litigation and claims;

• risks related to international trade disputes and the U.S. government's


       trade policy;


  • lack of available additional capital;


  • our inability to retain or hire key personnel;


  • risks associated with leasing substantial amounts of space;

• risks arising from the results of the public referendum held in United

Kingdom and its membership in the European Union;

• failure of existing franchisees to conduct their business in accordance

with agreed upon standards;

• adequacy of our information systems, order fulfillment and distribution

facilities;

• our ability to adequately maintain the security of our electronic and other


       confidential information;


  • our inability to successfully identify and integrate acquisitions;


  • adequacy of our intellectual property rights;

• potential negative effect of certain aspects of recent U.S. federal income


       tax reform;


  • risks related to our substantial indebtedness;


  • risks associated with interest rate changes;

• straining of resources and ability to attract and retain qualified board


       members due to maintaining and improving our financial controls;


    •  decline of our common stock market price due to the large number of
       outstanding shares of our common stock eligible for sale; and

• the other factors set forth under "Risk Factors" in our Annual Report on

Form 10-K, filed with the SEC on March 12, 2020, and in the "Risk Factors"

section of this Quarterly Report on Form 10-Q.

Except as required by law, we undertake no obligation to update publicly any forward-looking statements after the date of this filing to conform these statements to actual results or to changes in our expectations.

You should read this filing with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

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