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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37344

Party City Holdco Inc.

(Exact Name of Registrant as Specified in Its Charter)

    Delaware

    46-0539758

    (State or Other Jurisdiction of
Incorporation or Organization)

    (I.R.S. Employer
Identification No.)

80 Grasslands Road


100 Tice Blvd. Woodcliff Lake, NJ		07677
(Address of Principal Executive Offices)		(Zip Code)

~~Elmsford,~~(973) NY453-8601 ~~10523~~

(Address of Principal Executive Offices)

(914) 345-2020

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock $0.01 par value		PRTY		New York Stock Exchange


Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑☐ No ☐☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑☐ No ☐☑

Indicate by a check mark whether the registrant has submitted electronically ~~and posted on its corporate website~~ every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑☐ Accelerated filer ☐☑ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

~~The~~Indicate ~~aggregate~~by ~~market~~check ~~value~~mark ofwhether ~~common~~the ~~stock~~registrant ~~held~~has byfiled ~~non-affiliates~~all asdocuments ofand ~~June~~reports ~~30,~~required ~~2021~~to ~~was~~be $1filed by Section 12,~~036,696,578.~~ As13 or 15(d) of ~~February~~the ~~17,~~Securities ~~2022,~~Exchange ~~there~~Act ~~were~~of ~~112,451,912~~1934 ~~shares~~subsequent ofto the ~~registrant’s~~distribution ~~common~~of ~~stock~~securities ~~outstanding~~under a plan confirmed by a court. ☐ Yes ☑ No

~~DOCUMENTS~~The ~~INCORPORATED~~aggregate BYmarket ~~REFERENCE~~value of common stock held by non-affiliates as of June 30, 2022 was $149,147,731. As of March 28, 2024, there were no shares of the registrant’s common stock outstanding that are publicly traded.

Portions of the registrant’s definitive proxy statement relating to its 2022 annual meeting of stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K.

FORM 10-K

TABLE OF CONTENTS

		Page
	PART I
Item 1	Business	3
Item 1A	Risk Factors	1117
Item 1B	Unresolved Staff Comments	2231
Item 2	Properties	2332
Item 3	Legal Proceedings	2534
Item 4	Mine Safety Disclosures	2534
	PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2635
Item 6	[Reserved]	2736
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2837
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	4253
Item 8	Financial Statements and Supplementary Data	4454
Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	~~101~~112
Item 9A	Controls and Procedures	~~101~~112
Item 9B	Other Information	~~102~~114
Item 9C	Disclosure Regarding Foreign Jurisdiction that Prevent Inspections	~~102~~114
	PART III
Item 10	Directors, Executive Officers and Corporate Governance	~~103~~115
Item 11	Executive Compensation	~~103~~115
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~103~~137
Item 13	Certain Relationships and Related Party Transactions and Director Independence	~~103~~137
Item 14	Principal Accountant Fees and Services	~~104~~139
	PART IV
Item 15	Exhibits and Financial Statement Schedules	~~105~~140
Item 16	Form 10-K Summary	~~110~~146

PART I

Forward-Looking Statements

This Annual Report on Form 10-K, contains information that may constitute forward-looking statements. Forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts and are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. Many factors could cause actual results to differ materially from the Company’s forward-looking statements, such as the impact of the COVID-19 pandemic and other current macroeconomic conditions, our prospects and strategies for future growth and the development and introduction of new products. In many cases you can identify forward-looking statements by terms such as “believes,” “anticipates,” “expects,” “targets,” “estimates,” “intends,” “will,” “may” or “plans” and similar expressions.

Such statements are subject to certain risks and uncertainties, some of which are beyond our control, and assumptions that could cause actual results of operations or performance to differ materially from expectations. These risks and uncertainties, are detailed in the “Risk Factors” section in Part I, Item 1A and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk” sections in Part II, Item 7 and Item 7A of this Annual Report on Form 10-K. We could also be affected by additional factors that apply to all companies operating globally and in the U.S., as well as other risks that are not presently known to the Company or that the Company currently considers to be immaterial. In addition, from time to time, we have entered into business combinations, acquisitions, divestitures, strategic investments and other significant transactions. Such forward-looking statements do not include the potential impact of any such transactions that may be completed after the date hereof, each of which may present material risks to the Company’s business and financial results. All forward-looking statements are qualified by these cautionary statements, reflect our current expectations and are based upon data available to us at the time the statements were made, and are made only as of the date of this Annual Report on Form 10-K. Any such forward-looking statements should be considered in context with the various disclosures made by us about our business. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission (the “SEC”) after the date of the filing of this Annual Report on Form 10-K.

In this Annual Report on Form 10-K references to “Party City Holdco,” “Party City,” the “Company,” “we,” “our,” “ours” and “us” refer to Party City Holdco Inc. (“PCH”), a Delaware corporation formed in 2012, and its consolidated subsidiaries unless stated or the context otherwise requires.

Item 1. Business

Overview

We are a ~~leading~~global ~~party~~leader ~~goods~~in ~~company~~the bycelebrations ~~revenue~~industry, inwith ~~North~~offerings ~~America~~spanning ~~and,~~more wethan 70 countries around the world. We believe, we are the largest vertically integrated ~~supplier~~designer, ofmanufacturer, ~~decorated~~distributor, and retailer of party goods ~~globally~~in byNorth ~~revenue~~America. ~~With~~PCH ~~hundreds~~operates ofacross ~~retail~~multiple ~~stores~~businesses ~~filled~~within ~~with~~its ~~thousands~~Retail ofDivision ~~products~~and ~~across~~Consumer ~~the~~Products ~~United~~(Wholesale) ~~States,~~Division. weOur ~~make~~retail itdivision ~~easy~~is ~~for~~the ~~our~~leading ~~customers~~omnichannel toretailer ~~find~~in the ~~perfect~~celebrations ~~party~~category, ~~solution~~operating ~~through~~approximately ~~our~~800 ~~assortment~~company-operated ofand franchise specialty retail party ~~products,~~supply ~~balloons~~stores operating under the names Party City (partycity.com), ~~and~~as ~~costumes~~well ~~for~~as ~~their~~Halloween ~~celebration~~City ~~aided~~(halloweencity.com), bywhich ~~the~~offer ~~support~~traditional ofin-store ~~our~~shopping, ~~party~~rapid, ~~experts~~contactless, ~~both~~and same-day in-store and ~~online~~curbside pickup and same-day shipping options. Our ~~retail~~Consumer ~~operations~~Products ~~include~~(Wholesale) ~~approximately~~Division ~~830~~includes ~~specialty~~Amscan, an industry leader in designing and manufacturing celebration décor, tableware, costumes, and accessories, with items found in retail outlets worldwide, including independent party supply stores, ~~(including~~mass ~~franchise~~merchants, ~~stores)~~grocery ~~throughout~~retailers, ~~North~~and ~~America~~e-commerce ~~operating~~merchandisers. ~~under~~We combine state-of-the-art ~~names~~manufacturing ~~Party~~and ~~City~~sourcing ~~and~~operations, ~~Halloween~~sophisticated ~~City~~wholesale operations, and multi-channel retail and e-commerce ~~websites~~retail ~~which~~operations ~~offer~~to ~~rapid~~design, ~~contactless~~manufacture, source, and ~~same~~distribute ~~day~~party ~~shipping~~goods, ~~options (~~including ~~in-store~~paper and atplastic ~~curbside)~~tableware, ~~principally~~metallic ~~through~~and ~~the~~latex ~~domain~~balloons, ~~name~~Halloween ~~PartyCity~~and other costumes, accessories, novelties, gifts, and stationery throughout the world.~~com.~~

In addition to our retail operations, we are also one of the largest global designers, manufacturers and distributors of decorated consumer party products, with items found in retail outlets worldwide, including independent party supply stores, mass merchants, grocery retailers, e-commerce merchandisers and dollar stores. We combine state-of-the-art manufacturing and sourcing operations, sophisticated wholesale operations and multi-channel retail and e-commerce retail operations to design, manufacture, source and distribute party goods, including

~~paper~~Chapter ~~and~~11 plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery throughout the world. Our products are available or licensed in over 100 countries with the United Kingdom, Canada, Germany, Mexico and Australia among the largest end markets for our products outside of the United States. Cases

On January 17, 2023 (the “PCHI Petition Date”), the Company and certain of its domestic subsidiaries (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The Company’s Anagram Holdings, LLC, (“Anagram”) subsidiary, Anagram’s subsidiaries (together with Anagram, the “Anagram Entities”), and the Company’s foreign subsidiaries were not included in the Chapter 11 Cases and continued to operate in the ordinary course of business throughout the duration of the Chapter 11 Cases. On January 18, 2023, the Bankruptcy Court granted the Debtors’ motion to jointly administer the Chapter 11 Cases for procedural purposes only under the caption In re: Party City Holdco Inc., et. al. (Case No. 23-90005). To ensure its ability to continue operating in the ordinary course of business, the Debtors also filed with the Bankruptcy Court a variety of motions seeking “first-day” relief, which were approved by the Bankruptcy Court and permitted the Debtors to operate in the ordinary course during the Chapter 11 Cases and included the interim approval of a debtor-in-possession term loan facility (the “DIP Facility”) as described below. The Debtors continued to operate their business and manage their properties as “debtors-in-possession” in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court throughout the duration of the Chapter 11 Cases.

On the PCHI Petition Date, the Debtors entered into a Restructuring Support Agreement (along with subsequent amendments made throughout the Chapter 11 Cases, the “RSA”) with certain holders (collectively, the “Initial Consenting Noteholders”) of the Secured Floating Rate 2025 Notes (as defined herein) and the Secured Fixed Rate 2026 Notes (as defined herein). Capitalized terms used in “Item 1. Business” but not otherwise defined herein shall have the meaning given to such terms in the RSA. The RSA contemplates a restructuring (the “Restructuring”) of the Debtors pursuant to a joint plan of reorganization (the “Plan,” as further described below). Among other things, the RSA provided for:

•

The entry into the DIP Facility, which was fully backstopped by the Initial Consenting Noteholders in the amount of $150 million, which was approved by the Bankruptcy Court on an interim basis on January 18, 2023 and on a final basis on March 3, 2023, as discussed below;

•

The (a) equitization of the Secured Notes in exchange for the equity of the reorganized Company, subject to dilution by any Reorganized Securities issued pursuant to the Rights Offering to be consummated at emergence from the Chapter 11 Cases, the Management Incentive Plan, and, to the extent applicable, the Reorganized Securities issued to lenders who provide backstop commitments under the DIP Facility in consideration for their backstop commitments, as a result of the DIP Equitization or (b) such other treatment of the Secured Notes as agreed by the Initial Consenting Noteholders;

•

Either repayment in cash upon emergence of the amounts outstanding under the Company’s ABL Facility and its FILO Facility (each as defined below) with proceeds from a third-party financing or, with the agreement of the holders thereof, the rolling of such outstanding amounts into a new asset-based lending exit facility, in each case as acceptable to the Debtors and the Initial Consenting Noteholders;

•

The treatment of general unsecured claims to be governed by the terms of the Plan and to be acceptable to the Debtors and the Initial Consenting Noteholders; and

•

The cancellation, extinguishment, and discharge of the existing common stock of the Company and any other equity securities of the Company, with existing equity in the Company receiving no recovery or distribution.

On January 18, 2023, the Bankruptcy Court approved the Debtors’ proposed $150 million senior secured super priority priming DIP Facility on an interim basis. On January 19, 2023, certain of the Debtors entered into the credit agreement governing the DIP Facility along with certain financial institutions party thereto as lenders and Ankura Trust Company, LLC (the “DIP Credit Agreement”), as the administrative agent and collateral agent, and the closing of the DIP Facility occurred on the same day.

expenses of the Chapter 11 Cases and the DIP Facility and (ii) fund general corporate purposes. A second draw of $75 million was made following the Bankruptcy Court’s entry of the order approving the DIP Facility on a final basis on March 3, 2023. The second draw of borrowings for $75 million was used for the same purposes as the first draw.

The DIP Facility was secured by perfected senior security interests and liens having the priorities set forth in the DIP Credit Agreement on substantially all assets of the Debtors.

The DIP Facility terminated on October 12, 2023 as part of the Debtors' emergence from the Chapter 11 Cases, as discussed in more detail below.

The filing of the Chapter 11 Cases constituted an event of default that accelerated the Company’s following debt obligations: i) its asset-based revolving credit facility (the “Prepetition ABL Facility”); ii) its asset-based first-in, last-out revolving tranche (the “FILO Facility”); iii) its senior secured first lien floating rate notes due 2025 (the “Secured Floating Rate 2025 Notes”); iv) its 8.750% senior secured first lien notes due 2026 (the “Secured Fixed Rate 2026 Notes”); v) its 6.125% senior notes due 2023; and vi) its 6.625% senior notes due 2026. Any efforts to enforce payment obligations on the Debtors’ debt agreements were automatically stayed as a result of the filing of the Chapter 11 Cases and the holders’ rights of enforcement in respect of the Debtors’ debt agreements were subject to the applicable provisions of the Bankruptcy Code.

On April 4, 2023, the Company filed the initial version of its Plan and a related proposed form of Disclosure Statement (the “Disclosure Statement”) with the Bankruptcy Court. The Plan was since amended four times, with the last amendment of the Plan filed on August 31, 2023. The Plan intended to implement the previously disclosed Restructuring contemplated by the RSA. The Plan and the related Disclosure Statement describe, among other things, the Plan; the Restructuring contemplated by the RSA; the events leading to the Chapter 11 Cases; certain events that have occurred or were anticipated to occur during the Chapter 11 Cases, including the anticipated solicitation of votes to approve the Plan from certain of the Debtors’ creditors and certain other aspects of the Restructuring.

Subsequent Event - Emergence from Chapter 11 Cases

On September 6, 2023, the Bankruptcy Court entered an order confirming the Plan (the “Confirmation Order”).

On October 12, 2023 (the “Effective Date”), the Plan became effective in accordance with its terms, and the Debtors emerged from the Chapter 11 Cases. The emergence events discussed below occurred subsequent to the December 31, 2022 date of the condensed consolidated balance sheet presented in this report and are, therefore, not reflected in the financial statements presented in this report.

On the Effective Date, in connection with the effectiveness of, and pursuant to the terms of, the Plan and the Confirmation Order, the Company’s common stock outstanding immediately before the Effective Date was canceled and is of no further force or effect, and the new organizational documents of the Company became effective, authorizing the issuance of shares of common stock representing 100% of the equity interests in the Company (the “New PCHI Shares”). In accordance with the foregoing, on the Effective Date, the Company, as reorganized on the Effective Date in accordance with the Plan, issued 13,374,519 New PCHI Shares and the 12.00% Senior Secured Second Lien PIK Toggle Notes (the “Second Lien Notes” and together with the New PCHI Shares, the “New Securities”). The New Securities issued pursuant to the Plan, including the New Securities issued upon the exercise of the Subscription Rights (as defined in the backstop commitment agreement (as amended, supplemented, or modified from time to time, together with all exhibits and schedules thereto, the “Backstop Agreement”) with the commitment parties thereto (collectively, the “Commitment Parties”)) in connection with the rights offering (the “Rights Offering”), consisting of a purchase price of $75 million aggregate principal amount (a portion of the $232.4 million aggregate principal amount of the Company’s Second Lien Notes) and 3,634,614 New PCHI Shares), all New Securities issued to the Commitment Parties in respect of their commitments under the Backstop Agreement and in connection with the Rights Offering was issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) provided by section 1145 of the Bankruptcy Code and, to the extent such exemption was unavailable, was issued in reliance on the exemption provided by section 4(a)(2) under the Securities Act or another applicable exemption.

Equity Interests

On the Effective Date, all interests in the Company that existed immediately prior to the Effective Date were cancelled, and the Company issued or caused to be issued the New PCHI Shares in accordance with the terms of the Plan. Pursuant to the Plan, each holder of an Allowed Secured Notes Claim (as defined in the Plan) received, among other things, its pro rata share of 100% of the New PCHI Shares, subject to dilution by the New PCHI Shares issued as DIP Reorganized Securities (as defined in the Plan), the New PCHI Shares issued in connection with the Rights Offering (including in partial satisfaction of the Backstop Commitment Premium (as defined in the Plan)), and the MIP Equity Pool (as defined in the Plan). 100% of the New PCHI Shares is less than 1% of all shares issued at emergence post-dilution. See “Unregistered Sales of Equity Securities” section later in this footnote.

Claims Treatment Under the Plan

In accordance with the Plan, holders of claims against and interests in the Debtors received (or shall receive, as soon as reasonably practicable following the date such holder’s claim or interest becomes an Allowed Claim or Interest (each as defined in the Plan)) the following treatment (capitalized terms used but not defined in this section have the meanings ascribed to them in the Plan):

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Prepetition ABL Revolver Claims. Each holder of an Allowed Prepetition ABL Revolver Claim voted to accept the Plan and elected to participate in the ABL Exit Facility, and the ABL Exit Facility Trigger occurred, such that (i) each such holder’s Allowed Prepetition ABL Revolver Claims was deemed repaid and refinanced in full by such holder’s extension and receipt of its Pro Rata share of ABL Revolving Credit Loans and (ii) such holder assumed a commitment with respect to the ABL Exit Facility equal to its (or its predecessor in interest’s) commitment under the Prepetition ABL Facility immediately prior to the PCHI Petition Date.

•

Prepetition ABL FILO Claims. Each holder of an Allowed Prepetition ABL FILO Claim voted to accept the Plan and elected to participate in its Pro Rata share of the ABL Exit Facility, and the ABL Exit Facility Trigger occurred, such that each such holder’s Allowed Prepetition ABL FILO Claims was deemed repaid and refinanced in full by such holder’s extension and receipt of its Pro Rata share of ABL FILO Loans.

•

Secured Notes Claims. Each holder of an Allowed Secured Notes Claim received (i) its Pro Rata share of the New PCHI Shares issued on the Effective Date on account of the Allowed Secured Notes Claims, representing 100% of the New PCHI Shares outstanding on the Effective Date, subject to dilution by the New PCHI Shares issued as DIP Reorganized Securities, the New PCHI Shares issued in connection with the Rights Offering (including in partial satisfaction of the Backstop Commitment Premium), and the MIP Equity Pool and (ii) subscription rights to purchase up to its Pro Rata share of the securities comprising the Investment Package for an aggregate purchase price of $75 million offered in the Rights Offering in accordance with the Rights Offering Procedures.

•

General Unsecured Claims. Each holder of an Allowed General Unsecured Claim received its Pro Rata share of the General Unsecured Claim Recovery Pool.

•

Interests in the Company. Holders of Interests in the Company, including the Company’s common stock prior to emergence, received no recovery or distribution on account of such Interests, and upon emergence from Chapter 11, all such Interests in the Company were canceled, released, extinguished, and discharged, and are of no further force or effect.

Debt Securities and Agreements

Except for the purpose of evidencing a right to a distribution under the Plan or as otherwise provided in the Plan, on the Effective Date, the obligations of the Debtors under the Prepetition ABL Facility, the Secured Notes Indentures (as defined in the Plan), the Unsecured Notes Indentures (as defined the Plan), stock certificates, book entries, and any other certificate, share, note, bond, indenture, purchase right, option, warrant, or other instrument or document, directly or indirectly, evidencing or creating any indebtedness or obligation of or ownership interest in the Debtors giving rise to any claim or interest (except such certificates, notes or other instruments or documents evidencing indebtedness or obligations of, or interests in, the Debtors that are specifically reinstated pursuant to the Plan) were cancelled, and the duties and obligations of all parties thereto were deemed satisfied in full, canceled, released, discharged, and of no force or effect.

New ABL Credit Agreement

On the Effective Date, pursuant to the terms of the Plan, the Company and certain of its subsidiaries entered into an ABL credit agreement (the “New ABL Credit Agreement”), by and among the Company, as a parent guarantor, Party City Holdings Inc., a Delaware corporation, as the parent borrower (the “Parent Borrower”), Party City Corporation, a Delaware corporation, and each other subsidiary of the Borrowers party thereto as a subsidiary borrower from time to time (collectively with the Parent Borrower, the “Borrowers”), PC Intermediate Holdings, Inc. a Delaware corporation, as a parent guarantor (“Holdings”), the other subsidiaries of the Borrowers party thereto from time to time as subsidiary guarantors, the lenders party thereto from time to time, and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (in such capacities, the “New ABL Agent”). The New ABL Credit Agreement provides for a $545 million senior secured asset-based revolving loan facility (with a $60 million sublimit for the issuance of letters of credit thereunder) (the “New ABL Revolving Facility” and the loans outstanding thereunder, the “New ABL Revolving Loans”) and a $17.1 million senior secured asset-based first-in last-out loan facility (the “New FILO Facility” and the loans outstanding thereunder, the “New FILO Loans”; the New FILO Facility together with the New ABL Revolving Facility, the “New ABL Facility”). The New ABL Facility is scheduled to mature on October 12, 2028.

All obligations of the Borrowers under the New ABL Credit Agreement, certain banking services obligations, and certain hedging obligations are unconditionally guaranteed, on a joint and several basis, by the Borrowers, Holdings, the Company, and the material domestic direct and indirect restricted subsidiaries of the Company, subject to certain exceptions and limitations described in the New ABL Credit Agreement (each a “New Loan Party” and collectively, the “New Loan Parties”). All such obligations, including the guarantees of the New ABL Facility, are secured by (i) first priority liens on substantially all assets of the New Loan Parties, and (ii) the equity interests in the New Loan Parties other than the Company, in each case, subject to certain exceptions and limitations described in the New ABL Credit Agreement.

The New ABL Revolving Loans and the New FILO Loans bear interest at a rate per annum equal to the applicable margin plus, at the Borrowers’ option, either: (i) an adjusted term SOFR rate, subject to a floor of 0.00% or (ii) a base rate, subject to a floor of 0.00%, determined as the greatest of (x) the prime loan rate as published in The Wall Street Journal, (y) the federal funds effective rate plus 0.50%, and (z) adjusted term SOFR rate for a one-month tenor plus 1.00%. The margin applicable to the loans bearing interest based on the adjusted term SOFR rate equals to: (i) with respect to the New ABL Revolving Loans, 4.00% and (ii) with respect to the New FILO Loans, 6.00%. The margin applicable to the loans bearing interest based on the base rate equals to: (i) with respect to the New ABL Revolving Loans, 3.00% and (ii) with respect to the New FILO Loans, 5.00%. The applicable margins are subject to a 0.50% increase on March 31, 2024 and an incremental 0.50% increase on June 30, 2024 if the Parent Borrower has, as of such date, not yet delivered to the New ABL Agent an audited consolidated balance sheet and related statements of income, stockholders' equity, and cash flows of the Company and its subsidiaries as of the end of the fiscal year ended December 31, 2022. The Borrowers are required to pay interest on overdue principal or interest at the rate equal to 2.00% per annum in excess of the applicable interest rate under the New ABL Facility to the extent lawful.

Outstanding loans under the New ABL Credit Agreement are subject to an intercreditor agreement by and among the New ABL Agent, as the First Priority Representative for the First Priority Secured Parties and Wilmington Savings Fund Society, FSB, as the Second Priority Representative for the Second Priority Secured Parties (in each case, as defined therein) (the “Intercreditor Agreement”). The Intercreditor Agreement provides, among other things, that the liens securing the obligations under the Second Lien Notes rank junior in priority to the liens securing the obligations under the New ABL Credit Agreement.

The Borrowers are required to pay a quarterly commitment fee to each ABL Revolving Lender (as defined in the New ABL Credit Agreement), which accrues at a rate per annum equal to 0.50% on the average daily unused portion of such ABL Revolving Lender’s commitments under the New ABL Revolving Facility. The Borrowers are also required to pay participation fees and fronting fees with respect to letters of credit participation and issuance.

Borrowings under the New ABL Credit Agreement may be used to (i) refinance indebtedness under the prepetition asset-based revolving credit facility and (ii) finance the working capital needs and other general corporate purposes of the Parent Borrower and its subsidiaries. Availability of borrowings of New ABL Revolving Loans under the New ABL Credit Agreement is subject to the satisfaction of certain conditions, including, after giving effect to any such borrowings, aggregate credit exposure of lenders under the New ABL Credit Agreement

not exceeding the lesser of the aggregate unblocked commitments and the borrowing base at such time. Borrowings of the New FILO Loans are only available on the Effective Date and if repaid or prepaid may not be reborrowed.

Under the New ABL Credit Agreement, the borrowing base at any time equals (a) a percentage of eligible inventory, plus (b) a percentage of eligible trade receivables, plus (c) a percentage of eligible credit card receivables, less (d) certain reserves.

Mandatory prepayment of loans under the New ABL Credit Agreement is required if the aggregate credit exposure of lenders under the New ABL Credit Agreement exceeds the borrowing base at such time. Such a mandatory prepayment would be applied to eliminate the availability shortfall as follows: first, to prepay the New ABL Revolving Loans or cash collateralize, backstop or replace letters of credit under the New ABL Facility; and second, to prepay the New FILO Loans. The loans under the New ABL Facility may be voluntarily prepaid without premium or penalty, other than customary breakage costs. Voluntary prepayments of loans under the New ABL Credit Agreement are applied to satisfy New FILO Loan obligations only after other outstanding loan obligations and letter of credit reimbursement obligations under the New ABL Credit Agreement are satisfied. Voluntary prepayments of New FILO Loans are additionally subject to the satisfaction of the Payment Conditions discussed below.

The New ABL Credit Agreement requires the Borrowers to maintain, at all times, Excess Unadjusted Availability (as defined in the New ABL Credit Agreement) of at least the greater of (i) 10.0% of the Total Line Cap (as defined in the New ABL Credit Agreement) and (ii) $46 million.

The New ABL Credit Agreement contains negative covenants that limit, among other things, the Borrowers’ ability and the ability of their restricted subsidiaries to: (i) incur, assume, or guarantee additional indebtedness; (ii) create, incur, or assume liens; (iii) make investments; (iv) merge or consolidate with or into any other person or undergo certain other fundamental changes; (v) transfer or sell assets; (vi) pay dividends or distributions on capital stock or redeem or repurchase capital stock; (vii) enter into transactions with certain affiliates; (viii) repay or redeem certain indebtedness; (ix) sell stock of its subsidiaries; or (x) enter into certain burdensome agreements. These negative covenants are subject to a number of important limitations and exceptions. The Borrowers and their restricted subsidiaries can make certain acquisitions, restrictive payments, payments of certain indebtedness and investments if, after giving pro forma effect to such transactions, the “Payment Conditions” (as defined in the New ABL Credit Agreement) are met, which include, among other things: (i) 90-Day Excess Availability and Excess Availability (each as defined in the New ABL Credit Agreement) are equal to or greater than the greater of (x) 25.0% of the Total Line Cap and (y) $120 million and (ii) the Fixed Charge Coverage Ratio (as defined in the New ABL Credit Agreement) is at least 1.00 to 1.00.

Additionally, the New ABL Credit Agreement contains other covenants, representations and warranties, and events of default that are customary for a financing of this type. Events of default include, among other things, nonpayment of principal or interest, breach of covenants, breach of representations and warranties, failure to pay final judgments in excess of a specified threshold, failure of a guarantee to remain in effect, failure of a collateral document to create an effective security interest in collateral, bankruptcy and insolvency events, cross-default to other material indebtedness, and a change of control. The occurrence of any event of default under the ABL Credit Agreement would permit all obligations under the New ABL Facility to be declared due and payable immediately and all commitments thereunder to be terminated.

Second Lien Notes

On the Effective Date, PCHI issued $232.4 million in aggregate principal amount of Second Lien Notes. The Second Lien Notes are scheduled to mature on January 11, 2029. Interest on the Second Lien Notes accrues at a rate of 12.00% per annum, payable, at the Company’s option, either in cash or by increasing the amount of the Second Lien Notes outstanding, on February 15, May 15, August 15, and November 15 of each year, commencing February 15, 2024.

The Second Lien Notes were issued pursuant to an indenture (the “Second Lien Notes Indenture”), by and among the Company, the guarantors party thereto, and Wilmington Savings Fund Society, FSB, as trustee, collateral agent, paying agent, and registrar.

liens on the assets subject to liens securing the New ABL Facility, including the equity interests of each guarantor of the Second Lien Notes, all assets owned by the Company as of the Effective Date or acquired thereafter, certain assets related thereto, and substantially all other assets of the Company and such guarantors, in each case, subject to certain exceptions and limitations. The outstanding Second Lien Notes are subject to the Intercreditor Agreement. The following is a brief description of the material provisions of the Second Lien Notes Indenture and the Second Lien Notes.

On or after April 11, 2025, the Company may redeem all of the Second Lien Notes at 100% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Company may also redeem the Second Lien Notes, in whole or in part, at any time and from time to time prior to April 11, 2025 at a redemption price equal to 100% of the principal amount, plus the Applicable Premium (as defined in the Second Lien Notes Indenture), plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. Notwithstanding the foregoing, if a Change of Control (as defined in the Second Lien Notes Indenture) occurs, then, within 60 days of such Change of Control, the Company must offer to purchase all outstanding Second Lien Notes at a redemption price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the date of purchase.

The Second Lien Notes Indenture contains covenants that limit, among other things, the ability of the Company and certain of its subsidiaries to: (i) incur, assume, or guarantee additional indebtedness; (ii) pay dividends or distributions on capital stock or redeem or repurchase capital stock; (iii) make investments; (iv) repay or redeem junior debt; (v) sell stock of its subsidiaries; (vi) transfer or sell assets; (vii) create, incur, or assume liens; or (viii) enter into transactions with certain affiliates. These covenants are subject to a number of important limitations and exceptions.

The Second Lien Notes Indenture also provides for certain customary events of default, including, among other things, nonpayment of principal or interest, breach of covenants, failure to pay final judgments in excess of a specified threshold, failure of a guarantee to remain in effect, failure of a security document to create an effective security interest in collateral, bankruptcy and insolvency events, and cross acceleration, which would permit the principal, premium, if any, interest, and other monetary obligations on all the then outstanding Second Lien Notes to be declared due and payable immediately.

Registration Rights Agreement

On the Effective Date, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with certain parties who received New PCHI Shares under the Plan (“RRA Shareholders”). Pursuant to the Registration Rights Agreement, following the completion of an initial public offering (as defined in the Registration Rights Agreement, an “IPO”), the Company will file a shelf registration statement promptly, no later than a date that is 30 days following the later of the IPO and the date of the expiration of the lockup agreement with the underwriters in such IPO. However, the Company is not required to file the shelf registration statement unless RRA Shareholders request the inclusion of Registrable Securities (as defined in the Registration Rights Agreement) constituting at least 25% of all Registrable Securities.

The RRA Shareholders also have demand registration rights, provided that such RRA Shareholders request the inclusion of Registrable Securities constituting at least 25% of all Registrable Securities or the gross proceeds of the offering are expected to be at least $50 million, and customary piggyback registration rights.

The Company will generally pay all registration expenses in connection with its obligations under the Registration Rights Agreement, regardless of whether a registration statement is filed or becomes effective. The registration rights granted in the Registration Rights Agreement are subject to customary indemnification and contribution provisions, as well as customary restrictions such as blackout periods.

Stockholders’ Agreement

On the Effective Date, the Company entered into a stockholders agreement (the “Stockholders Agreement”) with holders of common stock of the Company (the “Stockholders”), pursuant to which each of the Stockholders agreed to certain restrictions on the transfer of the common stock of the Company and the Company agreed (i) to provide to certain Stockholders the right to designate directors of the board, subject to certain limitations, (ii) to certain limitations and obligations on its operations without Stockholder approval and (iii) to provide certain information to the Stockholders. Pursuant to the Plan, each holder of common stock of the Company on the

Effective Date was deemed to be a party to, and bound by, the Stockholders Agreement, regardless of whether such holder executed a signature page thereto.

Unregistered Sales of Equity Securities

On the Effective Date, pursuant to the Plan:

•

36,879 New PCHI Shares were issued pro rata to holders of Secured Notes Claims in partial exchange for the cancellation of the Secured Notes (as defined in the Plan), representing 0.3% of all shares issued at emergence;

•

3,516,079 New PCHI Shares were issued to holders of Secured Notes Claims (or their designees) in exchange for exercising Subscription Rights under the Rights Offering, representing 26.3% of all shares issued at emergence;

•

118,535 New PCHI Shares were issued to certain holders of Secured Notes Claims that purchased in connection with their Backstop Commitments (as defined in the Backstop Agreement), the New PCHI Shares that were offered in the Rights Offering and not properly subscribed for, representing 0.9% of all shares issued at emergence;

•

363,462 New PCHI Shares were issued to certain holders of Secured Notes Claims in exchange for providing $75 million of Backstop Commitments to the Debtors in connection with the Rights Offering, representing 2.7% of all shares issued at emergence; and

•

9,339,564 New PCHI Shares were issued to holders of Allowed DIP Claims on account of such holders’ DIP Loans (each as defined in the Plan), representing 69.8% of all shares issued at emergence.

Subsequent Event - Anagram Bankruptcy

On November 8, 2023 (the “Anagram Petition Date”), the Anagram Entities (collectively, the “Anagram Debtors”) filed voluntary petitions (the “Anagram Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Anagram Bankruptcy Court”) seeking relief under the Bankruptcy Code. The Company and certain of its domestic subsidiaries were not included in the Anagram Chapter 11 Cases and continue to operate in the ordinary course of business throughout the duration of the Anagram Chapter 11 Cases. On November 8, 2023, the Anagram Bankruptcy Court granted the Anagram Debtors’ motion to jointly administer the Anagram Chapter 11 Cases for procedural purposes only under the caption In re: Anagram Holdings, LLC, et. al. (Case No. 23-90901). To ensure its ability to continue operating in the ordinary course of business, the Anagram Debtors also filed with the Anagram Bankruptcy Court a variety of motions seeking “first-day” relief, which were approved by the Anagram Bankruptcy Court and permitted the Anagram Debtors to operate in the ordinary course during the Anagram Chapter 11 Cases and included the interim approval of a debtor-in-possession ABL facility (the “Anagram DIP ABL Facility”) and a debtor-in-possession note purchase agreement and notes indenture (the facility issued thereunder, the “Anagram DIP Notes Facility”). The Anagram Debtors continue to operate their business and manage their properties as “debtors-in-possession” in accordance with the applicable provisions of the Bankruptcy Code and orders of the Anagram Bankruptcy Court throughout the duration of the Anagram Chapter 11 Cases.

The Anagram Entities subsequently received final approval from the Anagram Bankruptcy Court for the Anagram DIP Notes ($22 million new money commitment), with the commitments coming from a group of their existing secured lenders, and the Anagram DIP ABL Facility ($15 million gradual roll-up of the Anagram Entities’ prepetition asset-based lending facility).

On November 8, 2023, the Anagram Entities filed certain documents with the Anagram Bankruptcy Court disclosing that an agreement was reached with a group of their lenders as the “Stalking Horse” bidder to acquire substantially all of Anagram’s assets through a credit bid with a value of at least $175 million in a Section 363 transaction under the Bankruptcy Code, subject to higher or otherwise better offers and court approval. As part of this agreement, the “Stalking Horse” bidder committed to hire all Anagram employees and assume all pre and post-petition trade payables. No other bids were received other than the Stalking Horse bid prior to the bid deadline of December 15, 2023. The sale hearing was held on December 22, 2023, during which the Anagram Bankruptcy Court approved the sale to the Stalking Horse bidder. The sale formally closed on December 29, 2023.

The Anagram Chapter 11 Cases was a reconsideration event for PCHI to reevaluate whether consolidation of Anagram continues to be appropriate. We have concluded that the power to make material decisions for Anagram has been transferred to the Bankruptcy Court, and, therefore, PCHI no longer controls Anagram as of the Anagram Petition Date (November 8, 2023). Accordingly, we concluded that PCHI should deconsolidate Anagram effective on the Anagram Petition Date. As such, amounts presented in the Company’s future financial statements and notes thereto will exclude the operating results, cash flows, assets, liabilities, and equity of Anagram subsequent to November 8, 2023.

Industry Overview

We operate in the broadly defined celebrations industry, which includes the retail party goods industry and the Halloween market. The party goods industry includes decorative paper and plastic tableware, costumes, decorations, accessories, and balloons, all of which are supported by a range of vendors from commodity paper goods producers to party goods manufacturers. The retail landscape for decorated party goods is comprised primarily of party superstores, mass merchants, e-commerce merchandisers, craft stores, grocery retailers, and dollar stores. Sales of party goods are fueled by everyday events such as backyard BBQs, graduations, birthdays, baby showers, weddings, and anniversaries, as well as seasonal events such as holidays and other special occasions.

Segments

We have two ~~reporting~~reportable segments: retail and wholesale. In ~~2021~~2022, we generated 81.58% of our total revenues from our retail segment and 18.52% of our total revenues from our wholesale segment.

Our retail segment generates revenue primarily through the sale of our party supplies, ~~which are sold under the Amscan, Anagram and Costumes USA brand names,~~ through our Party City stores, Halloween City stores, and ~~PartyCity~~partycity.com.

Our wholesale segment revenues are generated from the sale of decorated party goods, balloons, and costumes for all occasions. Our products are sold at wholesale to party superstores (including our ~~owned~~company-operated retail stores, and franchised stores operating principally as "“Party City"” and “Halloween City”), and unaffiliated specialty retailers, mass merchants, e-commerce merchandisers, craft stores, grocery retailers, drug, and ~~dollar stores~~convenience. Wholesale revenues are generated primarily by our Amscan business.

Financial information about our industry segments and geographic segments is provided in Note 1916 —of ~~Segment Information, to~~ our consolidated financial statements in Part II, Item 8, ~~“Financial~~for ~~Statements~~additional ~~and Supplementary Data,” in this Annual Report on Form 10-K~~details.

Product Lines

Our enterprise-wide product lines span a wide variety of ways to celebrate everyday events including from birthdays to theme parties to sporting events. Additionally, we offer seasonal products throughout the year to decorate and dress up for holidays such as Halloween, Christmas, New Year’s Eve, and Mardi Gras. Our product offering is designed to provide everything needed to throw an amazing event and capture life’s special moments including a wide range of décor, tabletop, balloons, and wearable product formats.

Category		Items
Tableware		Plastic ~~Plates~~plates, ~~Paper~~paper ~~Plates~~plates, ~~Plastic~~plastic ~~Cups~~cups, ~~Paper~~paper ~~Cups~~cups, ~~Paper~~paper ~~Napkins~~napkins, ~~Plastic~~plastic ~~Cutlery~~cutlery, ~~Table~~table ~~Covers~~covers
Costumes & Accessories		Costumes, Other Wearables, Wigs
Costumes & accessories		Costumes, other wearables, wigs
Decorations		Latex ~~Balloons~~balloons, ~~Piñatas~~piñatas, ~~Crepes~~crepes, ~~Flags~~flags &and ~~Banners~~banners, ~~Decorative~~decorative ~~Tissues~~tissues, ~~Stickers~~stickers and ~~Confetti~~confetti, ~~Scene~~scene ~~Setters~~setters, ~~Garland~~garland, ~~Centerpieces~~centerpieces
Metallic Balloons		Bouquets, Standard 18 Inch Sing-A-Tune, SuperShapes, Weights
Balloons		Foil and latex, bouquets, standard 18-inch Sing-A-Tune, SuperShape, air-filled decorative, weights, accessories
Favors, Stationery & Other		Party Favors, Gift Bags, Gift Wrap, Invitations, Bows, Stationery
Favors, stationery & other		Party favors, gift bags, gift wrap, invitations, bows, stationery

Retail Operations

Overview

Party City has grown to become what we believe is the largest operator of ~~owned~~company-operated and franchised party superstores by revenue in the United States. We provide a broad and deep product assortment at a compelling value with an average of 25,000 SKUs offered at any one time through our retail stores and 40,000 SKUs offered online through our e-commerce platform. We keep our assortment current by frequently introducing new products~~, and we organize our stores by events and themes to make it easy to shop while consistently presenting customers with additional product ideas that will enhance their events and our sales~~. With our product selection and convenient locations, we believe customers associate Party City with successful celebrations, and as a result, we believe our physical and online stores will continue to be seen as the favored destination for party supplies and related innovative ideas.

Our websites, including PartyCity.com, offer a convenient, user-friendly and secure online shopping option for our customers. In addition to the ability to order products, our websites provide a substantial amount of content about our party products, party planning ideas and promotional offers. The websites are also one of our key marketing vehicles, specifically as they relate to social media marketing initiatives. 11

~~Our~~We ~~Company-owned~~organize our stores ~~are~~by ~~located~~events ~~entirely~~and inthemes ~~the~~to ~~United~~facilitate ~~States.~~customer Weshopping ~~have~~while ~~franchised~~consistently ~~stores~~presenting ~~throughout~~customers ~~the~~with ~~United~~additional ~~States,~~product ~~Mexico~~ideas ~~and~~that ~~Puerto~~will ~~Rico~~enhance ~~run~~their byevents ~~franchisees~~and ~~utilizing~~ our ~~format,~~sales. ~~design~~With ~~specifications,~~our ~~methods,~~product ~~standards,~~selection ~~operating procedures, systems~~ and ~~trademarks.~~convenient ~~Our~~locations, ~~wholesale~~we ~~sales~~believe tocustomers ~~franchised~~associate ~~stores~~Party ~~generally~~City ~~mirror,~~ with ~~respect~~successful ~~to relative size~~celebrations, ~~mix~~ and ~~category~~as a result, ~~sales~~we tobelieve our ~~company-owned~~physical and online stores. Wewill ~~are~~continue ~~not~~to ~~currently~~be ~~marketing,~~seen ~~nor~~as dothe wefavored ~~plan~~destination tofor ~~market,~~party ~~franchises~~supplies inand ~~the~~related ~~United~~innovative ~~States~~ideas.

~~The~~Our ~~following~~websites, ~~table~~including ~~shows~~partycity.com ~~the~~and ~~change~~halloweencity.com, inoffer ~~our~~a ~~company~~convenient, user-~~owned~~friendly, ~~Party~~and ~~City~~secure online shopping option for our customers. In support of our website sales, we offer rapid, contactless, and same-day in-store ~~network~~and ~~over~~curbside pickup and same-day shipping options. In addition to the ~~past~~ability ~~three~~to ~~years:~~order products, our websites provide a substantial amount of content about our party products, party planning ideas, and promotional offers. The websites are also one of our key marketing vehicles, specifically as they relate to social media marketing initiatives.

	2021			2020			2019
Stores open at beginning of year		746			777			866
Stores opened		10			5			5
Stores acquired from franchisees/others		10			6			6
Stores closed and sold		(7	)		(42	)		(100	)
Stores open at end of year		759			746			777

Our Company-operated stores are located entirely in the United States. We have franchised stores throughout the United States and Puerto Rico, which are operated by franchisees utilizing our format, design specifications, methods, standards, operating procedures, systems, and trademarks. Our wholesale sales to franchised stores generally mirror, with respect to relative size, mix, and category, sales to our company-operated stores. We are not currently marketing, nor do we plan to market, franchises in the United States.

The following table (which excludes temporary Halloween City locations) shows the change in our ~~franchise~~company-~~owned~~operated Party City store network over the past three years:

	2021			2020			2019
	2022			2021			2020
Stores open at beginning of year		85759			98746			96777
Stores opened/acquired by existing franchisees		—			—			2
Stores opened		11			10			5
Stores sold to the Company		(10	)		(6	)		—
Stores acquired from franchisees/others		11			10			6
Stores closed or converted to independent stores		(3	)		(7	)		—
Stores closed		(6	)		(7	)		(42	)
Stores open at end of year		72775			85759			98746

WeThe ~~receive~~following ~~revenue~~table ~~from~~shows ~~our~~the ~~franchisees,~~change ~~consisting~~in ofour ~~an initial one~~franchise-~~time~~operated fee and ongoing royalty fees, generally ranging from 4% to 6% of net sales. In exchange for these franchise fees, franchisees principally receive brand value and merchandising support with respect to planograms. Each franchisee has a mandated advertising budget, which consists of a minimum initial store ~~opening~~network ~~promotion~~over ~~and~~the ~~ongoing~~past ~~local~~three ~~advertising~~years: and promotions. Additionally, franchisees must pay 1% to 2.25% of net sales to a group advertising fund to cover common advertising materials. Our franchise agreements provide us with a right of first refusal should any franchisee wish to dispose of its operations.

Current franchise agreements provide for an assigned area or territory that typically equals a three or four-mile radius from the franchisee’s store location and the right to use the Party City® logo and trademark. In addition, certain agreements with our franchisees and other business partners contain geographic limitations on opening new stores. For most stores, the franchisee or the majority owner of a corporate franchisee devotes full time to the management, operation and on-premises supervision of the stores or groups of stores.


	2022			2021			2020
Stores open at beginning of year		72			85			98
Stores sold to the Company		(11	)		(10	)		(6	)
Stores closed		(2	)		(3	)		(7	)
Stores open at end of year		59			72			85

5For a discussion regarding store lease negotiations as part of the Company’s bankruptcy reorganization plan, see Part I, Item 2, Properties below.

We receive revenue from our franchisees, consisting of an initial one-time fee and ongoing royalty fees, generally ranging from 4% to 6% of net sales. In exchange for these franchise fees, franchisees principally receive brand value and merchandising support with respect to planograms. Each franchisee has a mandated advertising budget, which consists of a minimum initial store opening promotion and ongoing local advertising and promotions. Additionally, franchisees must pay 2.25% of net sales to a group advertising fund to cover common advertising materials. Our franchise agreements provide us with a right of first refusal should any franchisee wish to dispose of its operations.

Current franchise agreements provide for an assigned area or territory that typically equals a three or four-mile radius from the franchisee’s store location and the right to use the Party City® logo and trademark. In addition, certain agreements with our franchisees and other business partners contain geographic limitations on opening new stores. For most stores, the franchisee or the majority owner of a corporate franchisee devotes full time to the management, operation, and on-premises supervision of the stores or groups of stores.

The number of franchisee stores have declined in recent years due in large part to strategic acquisitions of franchisee stores.

Retail Seasonality

Our retail operations are subject to significant seasonal variations. Historically, this segment has realized a significant portion of its revenues, cash flow, and net income in the fourth quarter of the year, principally due to our Halloween sales in October and, to a lesser extent, year-end holiday sales. To maximize our seasonal opportunity, we operate a chain of temporary Halloween stores, under the Halloween City brand, during the months of September and October of each year. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in Part III, Item 7 of this Annual Report on Form 10-K for more information about our seasonality.

Halloween sales in October and, to a lesser extent, year-end holiday sales. To maximize our seasonal opportunity, we may operate a chain of temporary Halloween stores or Halloween store-within-store concepts, under the Halloween City brand, from August through October of each year. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in Part III, Item 7 of this Annual Report on Form 10-K for more information about our seasonality.

Wholesale Operations

Overview

We currently offer ~~nearly~~a ~~400~~wide ~~ensembles,~~array ~~which~~of ~~range~~products ~~from approximately five to 40 design-coordinated items~~ spanning tableware, accessories, novelties, balloons, decorations, and ~~decorations~~costumes. Our in-house design team introduces ~~approximately~~several ~~6,000~~thousand products annually, driving innovation in our licensed and unlicensed product offering and supporting increased sales across our channels. From time to time, we rationalize our existing product offerings to stay on trend. The breadth of these ~~ensembles~~offerings enables our retail stores and third-party retailers to promote additional sales of related products for every occasion. To enhance our customers’ celebrations of life’s important events, we market party goods ~~ensembles~~ for a wide variety of occasions, including seasonal and religious holidays, special events, and themed celebrations. Our Amscan ~~and Anagram~~ branded products are offered in retail outlets worldwide, ranging from party goods superstores (including our company-operated and franchise stores), other party goods retailers, mass merchants, independent card and gift stores, ~~dollar stores,~~ grocery and drug stores, and e-commerce merchandisers. We have long-term relationships with many of our wholesale customers.

The table below shows the breakdown of our total wholesale sales by channel for the year ended December 31, ~~2021~~2022:

Channel	Sales
	(dollars in millions)
	(Dollars in millions)
Owned stores and e-commerce	$	590
Company-operated stores and e-commerce	$	789
Party City franchised stores and other domestic retailers		~~171~~173
Domestic balloon distributors/retailers		9282
International		~~138~~139
Total wholesale sales	$	~~991~~1,183

Wholesale Manufactured Products

Our manufacturing facilities are highly automated and produce paper and plastic plates and cups, paper napkins, ~~metallic and latex balloons,~~ injection molded product, costumes, pinatas, and other party and novelty items at globally competitive costs. ~~State-of-the-art printing~~Printing, forming, folding, and packaging equipment support most of these manufacturing operations. ~~Given our size and sales volume, we are generally able to operate our manufacturing equipment on the basis of at least two shifts per day, thus lowering production costs per unit.~~ In select cases, we use available capacity to manufacture products for third parties~~, which allows us to maintain a satisfactory level of equipment utilization~~.

Complementing our manufacturing facilities, we have a diverse global network of third-party vendors that support our strategy of consistently offering a broad selection of high quality, innovative, and competitively priced ~~product~~products. We have relationships ~~that exceed twenty years~~ with many of our third-party vendors that exceed twenty years and often, ~~represent~~our business represents a significant portion of their overall business. ~~They~~These ~~generally~~third-party ~~produce~~vendors ~~items designed by and created for us,~~ are located in Asia, and are managed by our sourcing office in Hong Kong. They generally produce items designed by and created specifically for us. We actively work with our third-party vendors to ensure product cost, quality, and safety.

The principal raw materials in our products or in manufacturing our products are cotton, paper, films, and petroleum-based resin. While we currently purchase raw materials from preferred vendors, we continue to evaluate the marketplace to expand our sources. We’re continuously looking at innovation and evolving market conditions and working on plans to mitigate any potential headwinds.

Wholesale Product Safety and Quality Assurance

We are subject to regulatory requirements in the United States and internationally, and we believe that all products that we manufacture and source comply with the requirements in the markets in which they are sold. Third-party manufactured products are tested in accordance with our testing policies and procedures, both at the manufacturing site and upon arrival at our distribution centers. We have a full-time staff of professionals in the United States, ~~Asia~~ and ~~Europe~~Asia dedicated to product safety and quality assurance.

Wholesale Distribution and Systems

We ship our products directly to retailers and distributors throughout the world from our distribution facilities, as well as directly from our factories. Our electronic order entry and information systems allow us to manage our inventory. 13

~~Our~~We ~~main~~ship ~~distribution~~our ~~facility~~products ~~for~~directly ~~domestic~~to ~~party~~retailers ~~customers~~and isdistributors ~~located~~throughout inthe ~~Chester,~~world ~~New~~from ~~York,~~our ~~which~~main isdistribution ~~nearly 900~~facility,~~000~~ ~~square~~as ~~feet.~~well ~~This state-of-the-art facility serves~~ as ~~the~~directly ~~main~~from ~~point~~our offactories. ~~distribution~~Our ~~for~~electronic ~~our~~order ~~products~~entry and ~~utilizes~~information asystems ~~paperless,~~allow ~~pick-by-light~~us ~~system, a Goods-To-Person (OSR) picking system, offering what we believe~~ to bemanage ~~superior~~our inventory ~~management and turnaround times~~.

Our main distribution facility for domestic party customers is located in Chester, New York, which is nearly 900,000 square feet. This facility serves as the main point of distribution for our products and utilizes a paperless, pick-by-light system, and a Goods-To-Person (OSR) picking system.

Wholesale Customers

We have a fairly diverse third-party customer base in our wholesale segment. ~~and~~In ~~are~~2022, ~~not~~one ~~materially~~customer ~~dependent~~accounted onfor ~~one~~approximately or12% aof ~~few~~total ~~major~~wholesale ~~customers~~revenues.

Strategic Initiatives

We continue to advance our strategic initiatives that underpin efforts to grow our retail and wholesale businesses and expand on our purpose of creating joy by making it easy to create unforgettable memories.

• Product Innovation. InWe ~~2021, we~~ continued to leverage consumer insights and sales data to drive review of our wholesale product offerings and retail assortment decisions ~~which accelerated overall sales growth in important categories~~. During ~~the year~~2021, we reset: Party Favors, Girl’s Birthday, Boy’s Birthday, Candy, and Solid Tableware and approximately 1,000 new products driven by consumer-led innovation. In 2022, we ~~will~~ reset ~~the~~several ~~remaining~~other categories in our portfolio and will launch a similar number of innovative items as well as significant quality improvements to ~~compliment~~complement the work in innovation.

• Enhance the in-store ~~experience~~experiences. We ~~remodeled~~continued to remodel or ~~opened~~open "“next generation"” or NXTGEN stores, all of which are Company-~~owned~~operated, bringing our total to 95172 as of ~~year-end~~December ~~2021~~31, 2022. The material changes to our stores include a new shop-in-shop store layout with improved product adjacencies, edited and more curated product assortments~~, which result in reduced carrying inventory, as well as new services and experiences~~. A balloon shop and customer engagement center are the focal point of the store and add significant theater to the entire experience. Balloon sales growth in our NXTGEN stores ~~are~~is higher than the trend in the balance of our stores. We continue to be pleased with the customer feedback we are receiving on the NXTGEN stores as we enhance and refine the prototype. Customers have told us that they appreciate the decluttering of the stores due to the lower sightlines and the more curated assortment.

• Being celebration occasion-obsessed. In 2021, we were focused on our core categories and therefore, ~~growing~~grew our relevancy with consumers asto we build trust and become their destination for all things celebrations. ~~We believe this focus paid off due to our strong core metrics that are a testament to our improved relevancy.~~ Additionally, our seasonal categories are generating improved sell-throughs resulting in improved inventory turns and gross margin returns on inventory. In 2022, we ~~will~~continued ~~continue~~ to focus on improvements in our core and seasonal categories, driven by greater focus on current trends, key items, and more curated assortments, which we believe will improve the shopping experience for the consumer and efficiency for store associates.

• Focus on the North America vertical model. Our North American vertical model remains a key competitive advantage for us and in 2021 we continued to leverage this unique attribute. Namely, we made investments in our leadership, infrastructure and resources throughout the supply chain network in North America. We have increased our capacity in our manufacturing plants as we strengthen our domestic capabilities and execution. As a result, we believe we have navigated supply chain challenges well and our teams have done an excellent job of navigating a difficult environment.

Information Systems

Our information systems are integral in supporting our long-term strategies, are key capabilities necessary to help support all levers of growth, and help us implement informed, data-driven decision making throughout our organization. We are continually working on enhancing our digital technology platforms and elevating our e-commerce capabilities through new functionalities to our retail and wholesale channels. In ~~fiscal 2021~~2022, we ~~successfully~~continued ~~completed~~to implement key security enhancements ~~which~~and ~~will~~completed ~~serve~~information assecurity ~~the~~projects ~~backbone~~on ofthe ~~our~~ ongoing IT roadmap. ~~and~~We ~~commenced~~also ~~cloud-based~~completed ~~technology~~the ~~infrastructure~~planned ~~projects~~migration toof bemultiple ~~completed~~systems into ~~fiscal~~cloud-based ~~2022~~technology infrastructure.

We also maintain entity-wide information security and privacy compliance programs, comprised of risk management policies and procedures surrounding our information systems, cybersecurity practices, and protection of consumer and employee personal data and confidential information. Our Board of Directors (the "“Board"”) has ultimate oversight of our risk management policies and procedures and has delegated primary responsibility for monitoring the risks and programs in this area to the Audit Committee,. ~~which~~The Audit Committee receives regular updates on information security and privacy risk and compliance from management. The Board also receives periodic updates on these topics. As part of our compliance programs, all global employees are required to take annual training on information security, including cybersecurity, global data privacy requirements, and compliance measures. We also conduct periodic internal and third-party assessments to test our cybersecurity controls, perform cyber simulations, and continually evaluate our privacy notices, policies, and procedures surrounding our handling and control of personal data and the systems we have in place to help protect us from cybersecurity or personal data breaches. Additionally, we maintain network security and cyber liability insurance in order to provide a level of financial protection in the event of certain covered cyber losses and data breaches.

~~Refer to Part I, Item 1A. "Risk Factors," for further information as it relates to our Information Systems.~~14

and control of personal data and the systems we have in place to help protect us from cybersecurity or personal data breaches. Additionally, we maintain network security and cyber liability insurance in order to provide a level of financial protection in the event of certain covered cyber losses and data breaches.

Refer to Part I, Item 1A. “Risk Factors,” for further information as it relates to our Information Systems.

Intellectual Property

We own the copyrights in the designs we create and use on our products and various trademarks and service marks used on or in connection with our products. At our discretion, we may permit franchisees, licensees, and other parties to use our trademarks and service marks. It is our practice to register our copyrights with the United States Copyright Office and our trademarks and service marks with the United States Patent and Trademark Office, or with other foreign jurisdictions, to the extent we deem necessary. In addition, we rely on unregistered common law trademark rights and unregistered copyrights under applicable U.S. law to distinguish and/or protect our products, services, and branding. From time to time, we attain patent protection for novel inventions. We do not believe that the loss of any copyrights, trademarks, or patents with respect to any particular product or products would have a material adverse effect on our business. We hold numerous intellectual property licenses from third parties, allowing us to use various third-party cartoon and other characters and designs on our products, and the images on our metallic balloons and costumes are principally covered by these licenses. None of these license relationships are individually material to our aggregate business.

Competition

Our segment of the retail industry is highly competitive, and we expect competition to increase in the future. We operate in the party goods retail sector, which is currently and is expected to continue to be highly competitive with respect to price, store location, merchandise quality, assortment and presentation, and customer service, including merchandise delivery and checkout options. We believe we differentiate ourselves from other retailers by providing high-value, high-quality, low-cost merchandise in conveniently located stores. Our sales and profits could be reduced by increases in competition. There are no significant economic barriers for others to enter our retail sector.

be reduced by increases in competition. There are no significant economic barriers for others to enter our retail sector.

Government Regulation

We are subject to extensive federal, state, and local laws and regulations affecting our business, including product safety, consumer protection, privacy, truth-in-advertising, accessibility, customs, wage and hour laws and regulations, and zoning and occupancy ordinances that regulate manufacturers and retailers generally and govern the promotion and sale of merchandise and the operation of manufacturing facilities, distribution centers, retail stores, and e-commerce. We also are subject to similar international laws and regulations affecting our business. The Company maintains an internal global trade, customs, and product compliance organization to help manage its import/export compliance activities. Several state and local governments have been successful in regulating or prohibiting the sale of balloons filled with lighter than air gas and single-use plastic products. We have sought partnership with legislators and regulators to help protect and steward environmental goals and promote the responsible use of our products.

As a franchisor, we must comply with regulations adopted by the Federal Trade Commission, such as the Trade Regulation Rule on Franchising, which requires us, among other things, to furnish prospective franchisees with a franchise offering circular. We also must comply with several state laws that regulate the offer and sale of our franchises and certain substantive aspects of franchisor-franchisee relationships. These laws vary in their application and in their regulatory requirements.

Human Capital Disclosure

People matter at Party City. In ~~2021~~2022, we employed approximately 65,~~400~~700 full -time and 109,~~100~~500 part -time team members, toand an additional 14,500 seasonal team members, who play a critical role in delivering our company ~~purpose~~Purpose - to inspire ~~and~~joy ~~make~~by making it easy for our customers to create unforgettable memories. We seek to embed this ~~purpose~~Purpose and the principles that guide us in how we work every day (what we call our Promises) – Customer First, People Matter, It Can Be Done, and Celebrate – into the culture through enterprise-wide ~~change~~programs and initiatives, grounded in the retention and engagement of our team members.

Attracting and Engaging Employees. We endeavor to make it easy to be a successful employee at Party City. We offer a comprehensive on-boarding programs as well as a variety of leadership, technical and compliance training that enables our employees to contribute to the company’s most important initiatives. Our leaders also participate in training focused specifically on leading in a hybrid environment. We have advanced engagement by fostering two-way dialogues via employee surveys and communication forums as well as enhanced and simplified technology-enabled people operations support and access to employee information. We have an "open door" policy for employees to report concerns and we also provide an anonymous reporting hotline available in multiple languages and managed by an independent third party. 15

~~Diversity,~~Attracting ~~Equity,~~and ~~Inclusion,~~Engaging ~~and~~Employees. ~~Belonging~~We endeavor to make it easy to be a successful employee at Party City. We ~~designed~~offer ~~our~~comprehensive ~~diversity,~~onboarding ~~equity~~programs as well as a variety of leadership, ~~inclusion~~technical, and ~~belonging~~compliance ~~(D,~~training E,that Ienables &our B)team ~~strategy~~members into ~~2020~~contribute ~~and~~to wethe Company’s most important initiatives. We have ~~continued~~advanced ~~that~~engagement ~~work~~by ~~with~~fostering ~~the~~two-way ~~implementation~~dialogue ofvia anemployee ~~Enterprise~~surveys ~~Belonging~~and ~~Council~~communication forums as well as aenhanced ~~Diversity~~and ~~Review~~simplified ~~Committee,~~technology-enabled ~~both~~people ~~fueled~~operations bysupport ~~employee~~and ~~participation~~access ~~and~~to ~~leadership~~employee ~~commitment~~information. We ~~endeavor~~have toan ~~weave~~“open ~~the~~door” ~~key~~policy ~~tenants~~for ofteam ~~our~~members D,to Ereport concerns, Iand &we Balso ~~strategy~~provide ~~into~~an ~~the~~anonymous ~~fabric~~reporting ofhotline ~~our~~available ~~transformation~~in multiple languages and ~~people~~managed ~~programs~~by ~~and~~an ~~processes~~independent third-party.

~~Total~~Diversity, ~~Rewards.~~Equity, ~~Our~~Inclusion, ~~total rewards~~ and ~~benefits~~Belonging. ~~programs~~Our ~~have~~diversity, ~~been~~equity, ~~harmonized~~inclusion, ~~across the enterprise to maximize effectiveness~~ and tobelonging ~~accelerate~~(DEI&B) ~~eligibility~~strategy ~~for~~continues ~~participation.~~with Wethe ~~offer~~work ~~comprehensive~~of ~~benefits~~an ~~including~~Enterprise ~~medical,~~Belonging ~~dental~~Council ~~and vision,~~ as well as a ~~healthcare~~Diversity ~~concierge~~Review ~~that~~Committee, ~~partners~~our ~~with~~business ~~employees~~resource togroups ~~more~~that ~~effectively~~are ~~and~~both ~~efficiently~~fueled ~~navigate~~by ~~the~~employee ~~healthcare~~participation ~~system. We have implemented~~ and ~~expanded~~leadership ~~reward~~commitment. ~~programs~~We ~~tied~~endeavor to ~~short~~weave ~~and~~the ~~long-term~~key ~~priorities~~tenants ~~and~~of ~~performance.~~our WeDEI&B ~~believe~~strategy ~~that~~into ~~offering~~the ~~our~~fabric ~~team~~of ~~members~~our ~~access~~transformation toand ~~comprehensive~~people ~~total rewards~~ programs ~~are important steps to drive employee retention~~ and ~~positive employee relations~~processes. ~~We have also~~

9Total Rewards. Our total rewards and benefits programs have been harmonized across the enterprise to maximize effectiveness and accelerate eligibility for participation. We provide comprehensive benefits including medical, dental, and vision, as well as a healthcare concierge that partners with team members to more effectively and efficiently navigate the healthcare system. We offer reward programs tied to short and long-term priorities and performance. We believe that offering our team members access to comprehensive total rewards programs are important steps to drive employee retention and positive employee relations.

~~improved~~Talent ~~market~~Attraction. ~~competitiveness~~Our bytalent ~~making~~attraction ~~significant~~and ~~investments~~succession inmanagement ~~compensation~~approach from the top down improves implementation of key strategies to ~~attract,~~address ~~retain~~localized ~~and~~market ~~engage~~conditions. ~~our~~We ~~talent~~believe inthese ~~our~~targeted ~~retail~~efforts ~~stores~~meet immediate and ~~throughout~~long-term ~~our~~staffing ~~manufacturing~~needs ~~plants~~ and inbuild capability to deliver our ~~distribution~~overall ~~centers~~business strategy.

~~Talent Attraction~~Safety. WeSafety ~~have~~is ~~redesigned~~a ~~our~~priority, ~~talent attraction~~ and ~~succession management approach from the top down, which~~ we ~~believe~~have ~~will~~invested ~~improve~~in ~~our~~training ~~implementation~~and ofawareness ~~key~~campaigns ~~strategies~~ to ~~address~~promote ~~localized~~safe ~~market~~operating ~~conditions.~~practices Wein ~~believe~~our ~~these~~manufacturing ~~targeted~~plants ~~efforts to meet immediate~~ and ~~long-term~~distribution ~~staffing~~centers, ~~needs~~stores, and ~~build~~corporate ~~capability to deliver our overall business strategy~~offices.

Safety. Safety is a priority and we have invested in training and awareness campaigns to promote safe operating practices in our manufacturing plants and distribution centers, stores and corporate offices. We maintained a rigorous focus on protocols and safety practices including masking, social distancing, temperature checks and sanitizing and we continue to invest in resources to track and manage COVID-19 cases.

Environmental, Social and Governance Matters

At the board level, our Nominating and ESG Committee (the “NESG Committee”) oversees our environmental, social, and governance (“ESG”) programs, policies, and practices. The NESG Committee’s duties include monitoring and evaluating the Company’s programs, policies, and practices relating to ESG issues and making recommendations to the Board regarding the Company’s overall ESG strategy. In ~~2022,~~Managing weand ~~continued~~executing tothat ~~advance our~~ ESG strategy byis ~~establishing~~ a cross functional, management-level ESG Steering Committee, which isfocuses ~~comprised~~on: ~~of senior leaders and cross-functional members from major business functions. The purpose of the ESG Steering Committee is to~~ (i) ~~establish~~establishment of programs, policies, and practices relating to ESG matters: and (ii) ~~assist~~assisting the NESG Committee in fulfilling its oversight responsibilities with respect to ESG matters. We ~~have~~Our ~~conducted~~ESG efforts are guided by an ESG Priority Assessment that we completed in January 2022 to identify the ESG topics that are most relevant for our business and shareholders, as well as customers, business partners, ~~employees~~team members, and communities. In an effort to enhance long-term value, ~~and~~we intend to use the results of ~~this~~the ~~assessment~~ESG Priority Assessment to guide our efforts as we further develop and advance our ESG strategy,. inIn an2022, ~~effort~~we tosuccessfully ~~enhance~~published our ~~long-term~~inaugural ~~value~~ESG Report for the year ending December 31, 2021. We believe our approach to ESG management ~~helps~~will tohelp enable us to create long-term value for our stockholders, through advancing interests of our other stakeholders.

Available Information

WeOur ~~are~~principal ~~subject~~executive tooffices ~~the~~are ~~informational~~located ~~requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and~~ in ~~accordance~~Woodcliff ~~therewith~~Lake, ~~we file reports, proxy and information statements and other information with the SEC~~NJ. Our ~~Annual~~website ~~Report~~address onis ~~Form~~www.partycity.com. ~~10-K,~~Information ~~Quarterly~~contained ~~Reports on Form 10-Q~~in, ~~Current Reports on Form 8-K,~~ and ~~other~~that ~~information~~can tobe ~~those~~accessed ~~reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available~~ through ~~the investor relations section of~~ our website atis ~~www.partcity.com~~not orincorporated ~~investor.partcity.com.~~into Weand ~~also~~does ~~use~~not ~~our~~form ~~website as~~ a ~~tool~~part ~~to disclose important information about the company and comply with our disclosure obligations under Regulation Fair Disclosure. Reports are available free~~ of ~~charge as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. The information contained on our website is not incorporated by reference into~~ this Annual Report on Form 10-K. ~~The SEC maintains an Internet site that contains our reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov.~~

While subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith, we have filed reports, proxy and information statements, and other information with the SEC. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other information to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available at www.sec.gov.

Item 1A. Risk Factors

The following risk factors may be important to understanding any statement in this Annual Report on Form 10-K or elsewhere. Our business, financial condition, operating results, and liquidity can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below and elsewhere in this report. Any one or more of such factors could directly or indirectly materially and adversely affect our business, financial condition, results of operations, liquidity, and stock price.

~~COVID-19~~Risk Factor Summary

~~Our~~Risks ~~business,~~Related ~~operations, financial condition and liquidity have been and may continue~~ to beBankruptcy ~~materially and adversely affected by COVID-19. and the related macroeconomic impacts, including supply chain inflation, labor shortages and transportation.~~ Proceedings

•

InWe ~~general,~~are ~~our~~subject ~~retail sales, and the retail sales of our business partners~~ to ~~whom~~risks ~~we sell, represent discretionary spending by customers of us~~ and ~~our~~uncertainties ~~business~~associated ~~partners. Discretionary~~with spending is affected by many factors, including geopolitical events or widespread health emergencies. COVID-19 and the measures to contain it, including the related macroeconomic impacts, have, and may continue to, materially and adversely impact our ~~business,~~recent ~~operations, financial results, liquidity and stock price~~bankruptcy. Specifically, the pandemic and the measures to contain it by governments, businesses and individuals have materially and adversely impacted the global economy and consumer spending, disrupted global supply chains, have resulted in labor shortages and wage pressures, and created significant volatility and disruption in various industries.

•

InAs ~~2020, many of our stores were shut down for~~ a ~~number of months and as a~~ result, ~~our business, financial performance, liquidity and stock price were materially and adversely impacted. While all~~ of our ~~stores have since reopened~~bankruptcy, our results of operations were further impacted by the continued effects of COVID-19, including resurgences and variants of the virus. In 2021, COVID-19 has, among other things, adversely impacted the purchasing behavior of our customers, led to significant supply chain challenges resulting in increased transportation and distribution costs, and increased labor costs, all of which adversely impacted our operations and financial ~~performance,~~results ~~including~~may ~~our~~be ~~profitability. For~~volatile ~~additional information on COVID-19~~ and ~~its~~may ~~adverse~~not ~~impacts~~reflect onhistorical ~~us, see Part II, Item 7 – Management’s Discussion and Analysis – "COVID-19 Update" in this Annual Report on Form 10-K~~trends.

•

InWe ~~addition, future economic downturns resulting from the impact of COVID-19~~ may ~~make~~be itsubject ~~difficult for us~~ to ~~accurately~~claims ~~forecast~~that ~~future~~were ~~demand~~not ~~trends,~~discharged ~~which could cause us to purchase excess inventories, resulting~~ in ~~increases in our inventory carrying cost, or insufficient inventories, resulting in our inability to satisfy our customer demand and potential loss of market share. Further,~~ the ~~disruption~~bankruptcy ~~to the global economy and to our business~~proceedings, along with the decline in our stock price, may negatively impact the carrying value of certain assets, including inventories, accounts receivable, intangibles and goodwill. Additionally, if the duration of the COVID-19 pandemic continues longer than we expect or the severity worsens, we may need to access other sources of financing, including incurring additional indebtedness, selling our assets and raising additional equity capital. These alternatives may not be available to us on satisfactory terms or at all, which could have a material adverse effect on our ~~business,~~financial ~~liquidity~~condition and ~~stock~~results ~~price~~of operations.

•

~~The~~Matters ~~full~~relating ~~extent~~ to ~~which COVID-19 and the measures to contain it will impact~~ our ~~business,~~bankruptcy ~~operations,~~consumed ~~financial~~a ~~condition~~substantial ~~and~~portion ~~liquidity~~of ~~will depend on~~ the ~~severity~~time and ~~duration~~attention of ~~the~~our ~~COVID-19 pandemic~~management, ~~its variants and other future developments related to virus response, all of~~ which ~~are~~may ~~highly~~have ~~uncertain,~~an ~~and~~adverse weeffect ~~expect~~on ~~this uncertainty to continue in 2022 and likely beyond. To the extent COVID-19 continues to adversely affect~~ our business, ~~operations, financial results~~ and ~~liquidity,~~we it may ~~also~~experience ~~have~~increased ~~the~~levels ~~effect~~ of ~~significantly~~employee ~~heightening many of the other risks noted in this report, including in ways that we cannot predict~~attrition.

•

The plan of reorganization that we are implementing is based in large part upon assumptions and analyses developed by us. If these assumptions and analyses prove to be incorrect, our plan may be unsuccessful in its execution.

•

We face significant risks and uncertainties associated with the bankruptcy filing of our Anagram subsidiaries.

Risks Related to our Business

•

We face risks related to our balloon sales and margins, including regulatory restrictions and prohibitions, potential shortages of helium gas, and changes in consumer preferences.

•

The loss of, or disruption to, one of our distribution centers and other factors affecting the distribution of merchandise and our reliance on third parties for shipping could materially adversely affect our business.

•

We operate in a competitive industry, and our failure to compete effectively could cause us to lose market share, revenues, and growth prospects.

•

If we are unable to effectively manage our e-commerce business and digital marketing efforts, our reputation and operating results may be harmed.

•

Our marketing programs, e-commerce initiatives, and use of consumer information are governed by an evolving set of laws and enforcement trends and unfavorable changes in those laws or trends, or our failure to comply with existing or future laws, could substantially harm our business and results of operations.

•

Unanticipated impacts to Halloween and seasonal sales for our retail business may adversely impact operating results.

•

Our failure to appropriately respond to changing merchandise trends and consumer preferences, including regarding licensed and single-use products, could significantly harm our customer relationships and financial performance.

•

Product recalls and/or product liability claims may adversely impact our business, merchandise offerings, reputation, results of operations, cash flows, and financial performance.

•

Our business is sensitive to consumer spending and general economic conditions and other factors beyond our control.

•

Our business could be harmed if our existing franchisees do not conduct their business in accordance with agreed upon standards.

•

Labor, product, supply, and inflationary risks have had and may continue to have an adverse effect on our operating results.

Risks Related to our Supply Chain and Third Parties

•

Our business is dependent on maintaining an appropriate source of raw materials, and disruption to the transportation system or increases in the costs of raw materials or transportation may negatively affect our operating results.

•

Our business may be adversely affected by the loss or actions of our third-party vendors.

•

We depend on vendors for timely and effective sourcing of our merchandise, and we may not be able to acquire products in sufficient quantities and at acceptable prices to meet our needs, which could impact our operations and financial results.

Information Security Risks

•

Our information systems, order fulfillment, and distribution facilities may prove inadequate or may be disrupted.

•

We may fail to adequately maintain the security of our electronic and other confidential information.

Talent

•

Talent acquisition and retention could involve increases to labor costs, and if we are unable to attract and retain the talent required for our business, which depends in part on factors outside of our control, our operating results could suffer.

Risks Related to Our Intellectual Property

•

Our intellectual property rights may be inadequate to protect our business.

Risks Related to Our Indebtedness

•

Our substantial indebtedness and lease obligations could adversely affect our financial flexibility and our competitive position, and we may not be able to generate or distribute sufficient cash to service all our indebtedness.

•

We may require additional capital to fund our business, which may not be available to us on satisfactory terms or at all.

•

Significant interest rate changes could affect our profitability and financial performance.

•

Our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time

Risks Related to Material Weaknesses

•

We have identified material weaknesses in our internal controls over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

General Risk Factors

•

Changes in laws, policies, or regulations related to taxes could adversely affect our business, financial condition, and results of operations.

•

We may face risks associated with litigation and claims.

Risk Related to Bankruptcy Proceedings

We are subject to risks and uncertainties associated with our recent bankruptcy.

On January 17, 2023, the Company and certain of its domestic subsidiaries filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas. On September 6, the bankruptcy court confirmed our plan of reorganization, and on October 12, 2023, the plan became effective in accordance with its terms, and we emerged from bankruptcy. Even with the approval of our plan of reorganization, we will continue to face a number of risks associated with our bankruptcy, including risks related to our ability to reduce expenses, implement any strategic initiatives, and generally maintain favorable relationships with, and secure the confidence of, our counterparties. For the duration of the bankruptcy proceedings, our senior management was required to spend a significant amount of time and effort dealing with the reorganization instead of focusing exclusively on our longer-term business operations. In addition, our operating results may be adversely affected by the possible reluctance of prospective lenders and other counterparties to do business with a company that recently emerged from bankruptcy.

As a result of our bankruptcy, our financial results may be volatile and may not reflect historical trends.

During the pendency of the bankruptcy proceedings, our financial results were volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments will significantly impact our consolidated financial statements. Upon our emergence from Chapter 11, the amounts reported in subsequent consolidated financial statements may have materially changed relative to historical consolidated financial statements, including as a result of revisions to our operating plans pursuant to a plan of reorganization. We are also required to adopt fresh-start reporting, at the emergence date, with our assets and liabilities being recorded at fair value as of the fresh-start reporting date, which may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets. Our financial results after the application of fresh-start reporting also may be different from historical trends.

We may be subject to claims that were not discharged in the bankruptcy proceedings, which could have a material adverse effect on our financial condition and results of operations.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation. With few exceptions, all claims that arose prior to January 17, 2023, were subject to compromise and/or treatment under the plan of reorganization and/or discharged in accordance with the terms of the plan of reorganization. Any claims not discharged through the plan of reorganization could be asserted against the reorganized entities and may have a material adverse effect on our business, operational results, financial position, and cash flows on a post-reorganization basis.

Matters relating to our bankruptcy consumed a substantial portion of the time and attention of our management, which may have an adverse effect on our business, and we may experience increased levels of employee attrition.

For the duration of the bankruptcy proceedings, our management was required to spend a significant amount of time and effort focusing on the cases. This diversion of attention may have a material adverse effect on business, operational results, financial position, and cash flows. Additionally, as a result of our bankruptcy, we may experience increased levels of employee attrition, and our employees likely faced considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. Our ability to engage, motivate, and retain key employees or take other measures intended to motivate and incentivize key employees to remain with us through the pendency of the bankruptcy proceedings was limited by restrictions on implementation of incentive programs under the Bankruptcy Code. The loss of services of members of our senior management team or material erosion of employee morale could impair our ability to execute our strategy and implement operational initiatives, which would be likely to have a material adverse effect on business, financial position, cash flows, and results of operations. The failure to retain or attract members of our management team and other key personnel could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our results of operations.

The plan of reorganization we are implementing affects both our capital structure and ownership structure and operation of our businesses and will reflect assumptions and analyses based on our experience and perception of historical trends, current conditions, and expected future developments, as well as other factors that we consider

appropriate under the circumstances. Whether actual future results and developments will be consistent with our expectations and assumptions depends on a number of factors, including but not limited to: (i) our ability to implement changes to our capital structure; (ii) our ability to obtain adequate liquidity and financing sources; (iii) our ability to maintain customers’ confidence in our viability as a continuing entity and to attract and retain sufficient business from them; (iv) our ability to obtain merchandise, including from non-debtor affiliates; (v) our ability to retain key employees; and (vi) the overall strength and stability of general economic conditions. Any failure to adequately meet or account for any of these factors could materially adversely affect the successful reorganization of our businesses.

In addition, our plan of reorganization relies upon financial projections, including with respect to revenues, EBITDA, capital expenditures, debt service, and cash flow. Financial forecasts are necessarily speculative, and it is likely that one or more of the assumptions and estimates that are the basis of these financial forecasts will not be accurate. In our case, the forecasts will be even more speculative than normal, because they may involve fundamental changes in the nature of our capital structure. Accordingly, we expect that our actual financial condition and results of operations will differ, perhaps materially, from what we have anticipated. Consequently, there can be no assurance that the results or developments contemplated by any plan of reorganization we may implement will occur or, even if they do occur, that they will have the anticipated effects on us and our subsidiaries or our businesses or operations. The failure of any such results or developments to materialize as anticipated could materially adversely affect the successful execution of any plan of reorganization.

We face significant risks and uncertainties associated with the bankruptcy filing of our Anagram subsidiaries.

On November 8, 2023, the Anagram Entities filed certain documents with the Anagram Bankruptcy Court disclosing that an agreement was reached with a group of their lenders as the “Stalking Horse” bidder to acquire substantially all of Anagram’s assets through a credit bit with a value of at least $175 million in a Section 363 transaction under the Bankruptcy Code, subject to higher or otherwise better offers and court approval. As part of this agreement, the “Stalking Horse” bidder committed to hire all Anagram employees and assume all pre and post-petition trade payables. No other bids were received other than the Stalking Horse bid prior to the bid deadline of December 15, 2023. The sale hearing was held on December 22, 2023, during which the Anagram Bankruptcy Court approved the sale to the Stalking Horse bidder. The sale formally closed on December 29, 2023.

PCHI plans to continue business with Anagram subsequent to the sale, including purchasing balloons for sale in PCHI’s retail stores, and any interruption of the business relationship between PCHI and Anagram, or its other subsidiaries, could have a material adverse effect on the Company.

Risks Related to Our Business

We face risks related to our balloon ~~business~~sales and margins, including regulatory restrictions and prohibitions, potential shortages of helium gas, and changes in consumer preferences.

Balloons are a focal point of our growth strategy and are a key driver of our differentiated brand experience. ~~The~~Our ~~ongoing~~margins ~~success~~on ~~of our~~ balloon ~~business~~sales may be affected by several factors. For example, some local governments have implemented or considered implementing rules, ordinances, or regulations prohibiting the sale of balloons filled with a gas lighter than air. We sell latex and foil balloons in our retail stores. Widespread adoption of such prohibitions would have a material adverse effect on our business, results of operations, and financial condition.

1120

~~governments~~We ~~have~~use ~~implemented~~helium orgas, ~~considered~~a ~~implementing~~natural ~~rules~~resource, ~~ordinances~~to orinflate ~~regulations~~most ~~prohibiting~~of the ~~sale~~foil of balloons ~~filled~~and ~~with~~ a ~~gas~~portion ~~lighter~~of ~~than~~the ~~air.~~latex Weballoons ~~design~~we ~~and~~sell ~~manufacture~~to ~~foil~~consumers ~~balloons~~ through our ~~Anagram~~retail ~~business~~stores and ~~sell~~online. ~~latex~~The ~~and~~float ~~foil~~of ~~balloons~~a inhelium ~~our~~filled ~~retail~~balloon ~~stores. Widespread~~is ~~adoption~~particularly ofattractive ~~such~~to ~~prohibitions~~many ~~would~~consumers ~~have~~and acontributes ~~material~~to ~~adverse effect on~~ our ~~business,~~ability ~~results~~to ofsell ~~operations, and financial condition~~balloons.

We use helium gas, a natural resource, to inflate most of the foil balloons and a portion of the latex balloons we sell to consumers through our retail stores and online. The float of a helium filled balloon is particularly attractive to many consumers and contributes to our ability to sell balloons. Although we believe we have taken appropriate steps to maintain enough helium to keep pace with the demand, we cannot offer assurance that events beyond our control, such as a global shortage of helium or supply chain disruptions impacting the ability of helium refineries, distributors, or resellers to provide us or our ~~Anagram~~balloon customers with enough helium gas to satisfy demand, will not impact our ability to maintain sales levels of balloons. We have experienced, are operating within an environment that currently experiences, and expect to continue to experience, periodic helium shortages and such other helium disruptions in the past, which have resulted in, higher prices for such gas, and failure to fulfill consumer demand for helium inflated balloons~~, and failure to fulfill business demand for Anagram balloons~~. These shortages and disruptions have adversely impacted the financial performance of our retail and wholesale operations in the past, and may have similar impacts in the future.

Changing consumer preferences, including with respect to environmental matters, whether we can anticipate, identify, and respond to them or not, could adversely impact our sales. Inventory levels for certain balloon styles no longer considered to be “on trend” may increase, leading to higher markdowns to sell through excess inventory and, therefore, lower than planned margins. Conversely, if we underestimate consumer demand for our balloons, or if we fail to supply quality products in a timely manner, we may experience inventory shortages, which may negatively impact customer relationships, diminish brand loyalty, and result in lost sales. In addition, our position or perceived lack of position on environmental, public policy, or other sensitive issues relating to our balloon business, and any perceived lack of transparency about those matters, could harm our reputation.

The loss of, or disruption in, ~~one of~~ our distribution ~~centers~~center and other factors affecting the distribution of merchandise and our reliance on third parties for shipping could materially adversely affect our business.

We rely heavily on our distribution ~~centers~~center to manage the volume associated with a significant amount of our products. Most of our operations’ inventory ~~are~~is shipped directly from vendors to our distribution ~~centers~~center where the inventory is then processed, sorted, and shipped to our stores, to our wholesale customers, or to our e-commerce customers. We depend on the orderly operation of this receiving and distribution process, which depends, in turn, on adherence to shipping schedules and effective management of the distribution ~~centers~~center. We may not anticipate all of the changing demands that our expanding operations will impose on our receiving and distribution system, and events that we may not fully control, such as disruptions in operations due to fire or other catastrophic events, labor disagreements, or shipping problems (whether in our own or in our third party vendors’ or carriers’ businesses), may result in delays in the delivery of merchandise to our stores or to our wholesale customers or e-commerce/retail customers. Delays in receiving merchandise may also lead to incremental charges for shipping that are not contemplated in our normal operations. In addition, to the extent we need to add capacity to our distribution ~~centers~~center by either leasing or building a new distribution ~~centers~~center or adding capacity at our existing ~~centers~~center or make changes in our distribution processes to improve efficiency and maximize capacity, such changes may result in significant capital expenditures as well as unanticipated delays or interruptions in distribution.

We also depend upon third parties for shipment of a significant amount of merchandise. Interruptions in the services provided by third parties may occasionally result from damage or destruction to our distribution ~~centers~~center, weather-related events, natural disasters, pandemics (including COVID-19), trade policy changes or restrictions, tariffs or import-related taxes, third-party labor disruptions, shipping capacity constraints, third-party contract disputes, military conflicts, acts of terrorism, or other factors beyond our control. An interruption in service by third parties for any reason could cause temporary disruptions in our business, a loss of sales and profits, and other material adverse effects.

We operate in a competitive industry, and our failure to compete effectively could cause us to lose market share, revenues, and growth prospects.

Our wholesale segment competes with many other manufacturers and distributors, including smaller, independent manufacturers and distributors and divisions or subsidiaries of larger companies with greater financial and other resources than we have. Some of our competitors control licenses for widely recognized images and have broader access to mass market retailers that could provide them with a competitive advantage.

12Our retail stores compete with a variety of smaller and larger retailers including, but not limited to, independent party goods retailers, mass merchants, e-commerce merchandisers, craft stores, grocery retailers, and dollar stores. There are no significant economic barriers for others to enter our retail sector. Internet-based retailers

and other resources than we have. Some of our competitors control licenses for widely recognized images and have broader access to mass market retailers that could provide them with a competitive advantage. 21

Our retail stores compete with a variety of smaller and larger retailers including, but not limited to, independent party goods retailers, mass merchants, e-commerce merchandisers, craft stores, grocery retailers, and dollar stores. There are no significant economic barriers for others to enter our retail sector. Internet-based retailers may have a significant collective online presence and may be able to offer similar products to those that we sell, which may result in increased price competition, and consumers may respond more positively to a competitor’s internet-based shopping experience compared to our e-commerce experience. We may not be able to continue to compete successfully against existing or future competitors in the retail space or do so without substantial capital expenditures. Expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into our markets could materially adversely affect our business, results of operations, cash flows, and financial performance. We believe remaining competitive in the areas of quality, price, breadth of selection, customer service, and convenience is critical to our success. Competing effectively may require us to reduce our prices or increase our costs, which could lower our margins and adversely affect our revenues and growth prospects. For more information about the competition in our industry, see Part I, Item 1, “Business - Competition” in this Annual Report on Form 10-K.

If we are unable to effectively manage our e-commerce business and digital marketing efforts, our reputation and operating results may be harmed.

Our e-commerce channel has been critical to our growth, particularly during the COVID-19 pandemic. The success of our e-commerce business depends, in part, on third parties and factors over which we have limited control. There are certain critical risks and uncertainties associated with our e-commerce and mobile websites and digital marketing efforts, including: changes in required technology interfaces; website downtime and other technical failures,; internet connectivity issues,; costs and technical issues as we upgrade our website software,; computer viruses,; vendor reliability,; changes in applicable federal and state regulations, including the California Consumer Privacy Act ("“CCPA"”) and the California Privacy Rights Act of 2020 (“CPRA”); and other state privacy laws, related compliance costs, and security breaches. We must keep up to date with competitive technology trends and opportunities that are emerging throughout the retail environment, including the use of new or improved technology, evolving creative user interfaces, and other e-commerce marketing trends as the proliferation of mobile usage continues. While we have operational safeguards in place and endeavor to predict and invest in technology that is most relevant and beneficial to our company, our initiatives may not prove to be successful, may increase our costs, or may not succeed in driving sales or attracting customers. Our failure to successfully respond to these risks and uncertainties ~~might~~may adversely affect the sales or margin in our e-commerce business, require us to impair certain assets, and damage our reputation and brands.

The successful operation of our online business as well as our ability to provide a positive shopping experience at our brick-and-mortar stores depend on efficient and uninterrupted operation of our order-taking and fulfillment operations as well as the success of our marketing programs. In furtherance thereof, we collect, maintain, and use data provided to us through our online activities and other customer interactions in our business. Our current and future marketing programs depend on our ability to collect, maintain, and use this information, and our ability to do so is subject to certain contractual restrictions in third-party contracts as well as evolving international, federal, and state laws and enforcement trends. We are subject to a variety of continuously evolving and developing laws and regulations in the U.S. regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.

Likewise, we are subject to the Payment Card Industry Data Security Standards (“PCI-DSS”), which isare mandated by the card brands and administered through the Payment Card industry Security Standards Council. Failure to meet requirements and maintain compliance could result in a loss of credibility or reputation, and our inability to continue to accept credit cards as a tender type may materially ~~impacting~~impact our ability to sell our products. Failure to comply with these standards could lead to recurring and accumulating fines, and we may need to make significant investments to strengthen our PCI controls should we ever be deemed to be non-compliant.

13We strive to comply with all applicable laws and other related legal obligations. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, may conflict with other rules, or may conflict with our practices. If so, we may suffer damage to our reputation and be subject to proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts to defend our practices, distract our management, increase our costs of doing business, and result in monetary liability, all of which could substantially harm our

Failure to comply with these standards could lead to recurring and accumulating fines and we may need to make significant investments to strengthen our PCI controls should we ever be deemed to be non-compliant.22

We strive to comply with all applicable laws and other related legal obligations. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, may conflict with other rules or may conflict with our practices. If so, we may suffer damage to our reputation and be subject to proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts to defend our practices, distract our management, increase our costs of doing business and ~~result in monetary liability, all of which could substantially harm our business and~~ results of operations.

Unanticipated impacts to Halloween and seasonal sales for our retail business may adversely impact operating results.

Our retail business realizes a significant portion of its revenues, net income, and cash flows from holiday selling seasons, in particular, Halloween, as well as, New Year'’s Eve, Valentine’s Day, Easter, Christmas, and from major celebratory seasons, such as graduation. In anticipation of increased seasonal sales activity, we incur certain significant incremental expenses prior to and during peak selling seasons, including costs associated with hiring a substantial number of temporary employees to supplement our existing workforce. Any unanticipated decrease in demand for our products, ~~due to COVID-19 resurgence during such periods or otherwise,~~ could have a material adverse effect on our business and profitability. Failure to have lease suitable commercial space, on permanent or temporary bases, and adequately staff our retail stores could hurt our business, financial ~~conditions~~condition, and results of operations. For more information about how seasonality affects our results of operations, see Part I, Item 1, “Business” in this Annual Report on Form 10-K.

Our products must appeal to a broad range of consumers whose preferences are constantly changing. In addition to products we manufacture, we also sell certain licensed products, with images such as cartoon or motion picture characters, which are in great demand for short time periods, making it difficult to project our inventory needs for these products. We may not be able to obtain the licenses for certain popular characters and could lose market share to competitors who are able to obtain those licenses. Additionally, if consumers’ demand for single-use, disposable party goods were to diminish in favor of reusable products for environmental or other reasons, our sales could decline.

The success of our business depends upon many factors, such as our ability to accurately predict the market for our products and our customers’ purchasing habits, to identify product and merchandise trends, to innovate and develop new products, to manufacture and deliver our products in sufficient volumes and in a timely manner, and to differentiate our product offerings from those of our competitors. We may not be able to continue to offer assortments of products that appeal to our customers or respond appropriately to consumer demands. We could misinterpret or fail to identify trends on a timely basis. Our failure to anticipate, identify, or react appropriately to changes in consumer tastes could, among other things, lead to excess inventories and significant markdowns or a shortage of products and lost sales. Our failure to do so could harm our customer relationships and financial performance.

14Product recalls and/or product liability claims may adversely impact our business, merchandise offerings, reputation, results of operations, cash flows, and financial performance.

~~Product~~We may be subject to product recalls ~~and/~~if any of the products that we manufacture or sell are believed to cause injury or illness. In addition, as a retailer of products manufactured by third parties, we may also be liable for various product liability claims for products we do not manufacture. Indemnification provisions that we may enter into are typically limited by their terms and depend on the creditworthiness of the indemnifying party and its insurer and the absence of significant defenses. We may be unable to obtain full recovery from the insurer or any indemnifying third-party in respect of any claims against us in connection with products manufactured by such third-party. Moreover, even if a product liability claim is unsuccessful, has no merit, or is not pursued, the negative publicity surrounding assertions against the products we sell could materially and adversely ~~impact~~affect our business, reputation, and profitability. In addition, if our vendors fail to manufacture or import merchandise ~~offerings~~that adheres to our quality control standards or standards established by applicable law, our reputation and brands could be damaged, ~~results~~potentially ofleading ~~operations~~to an increase in customer litigation against us. Furthermore, ~~cash~~to ~~flow~~the ~~and~~extent ~~financial~~we ~~performance~~are unable to replace any recalled products, we may have to reduce our merchandise offerings, resulting in a decrease in sales, especially if a recall occurs near or during a peak seasonal period. If our vendors are unable or unwilling to recall products failing to meet our quality standards, we may be required to recall those products at a substantial cost to us.

We may be subject to product recalls if any of the products that we manufacture or sell are believed to cause injury or illness. In addition, as a retailer of products manufactured by third parties, we may also be liable for various product liability claims for products we do not manufacture. Indemnification provisions that we may enter into are typically limited by their terms and depend on the creditworthiness of the indemnifying party and its insurer and the absence of significant defenses. We may be unable to obtain full recovery from the insurer or any indemnifying third party in respect of any claims against us in connection with products manufactured by such third party. Moreover, even if a product liability claim is unsuccessful, has no merit or is not pursued, the negative publicity surrounding assertions against the products we sell could materially and adversely affect our business, reputation and profitability. In addition, if our vendors fail to manufacture or import merchandise that adheres to our quality control standards or standards established by applicable law, our reputation and brands could be damaged, potentially leading to an increase in customer litigation against us. Furthermore, to the extent we are unable to replace any recalled products, we may have to reduce our merchandise offerings, resulting in a decrease in sales, especially if a recall occurs near or during a peak seasonal period. If our vendors are unable or unwilling to recall products failing to meet our quality standards, we may be required to recall those products at a substantial cost to us. 23

Our business is sensitive to consumer spending and general economic conditions, and other factors beyond our control.

In general, our retail sales, and the retail sales of our business partners to whom we sell, represent discretionary spending by our customers and our business partners’ customers. Discretionary spending is affected by many factors, such as general business conditions, inflation, interest rates, availability of consumer credit, unemployment levels, taxation, public health crises, including the occurrence of a contagious disease or illness, such as the flu or COVID-19, and consumer confidence in future economic conditions. Our customers’ purchases and our business partners’ customers’ purchases of discretionary items, including our products, often decline during periods when disposable income is lower or during periods of actual or perceived unfavorable economic conditions or because of geopolitical events or widespread health emergencies. In such events, our revenues and profitability are at risk ~~for~~of decline. In addition, economic downturns may make it difficult for us to accurately forecast future demand trends, which could cause us to purchase excess inventories, resulting in increases in our inventory carrying cost, or insufficient inventories, resulting in our inability to satisfy our customer demand and potential loss of market share.

Moreover, our business is susceptible to extreme weather conditions like hurricanes, flooding, wildfires, or significant snow events, and customer demand, consumer traffic, and shopping habits may become negatively impacted for periods extending beyond the individualized weather event itself. The occurrence of one or more natural disasters, or other disruptive ~~geo-political~~geopolitical events, could also result in increases in fuel (or other energy) prices or a fuel shortage, the temporary or permanent closure of one or more of our manufacturing or distribution centers, the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of products from some local and overseas vendors, the temporary disruption in the transport of goods from overseas, or delays in the delivery of goods to our distribution centers or stores or to third parties who purchase from us. In addition, broader term changes in climate could cause significant changes in weather patterns where we doconduct business and an increase in the frequency and severity of such extreme weather conditions. Public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation, and raw material costs, and may require us to make additional investments in facilities and equipment. As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations.

Our business could be harmed if our existing franchisees do not conduct their business in accordance with agreed upon standards.

Our success depends, in part, upon the ability of our franchisees to operate their stores and promote and develop our store concept. Although our franchise agreements include certain operating standards, all franchisees operate independently, and their employees are not our employees. We provide certain training and support to our franchisees, but the quality of franchise store operations may be diminished by any number of factors beyond our control. Consequently, if franchisees ~~may~~do not successfully operate stores in a manner consistent with our standards and requirements or do not hire and train qualified managers and other store personnel, our image, brand, and reputation could suffer.

15Labor, product, supply, and inflationary risks have had and may continue to have an adverse effect on our operating results.

~~requirements~~We have experienced, orand ~~may~~expect ~~not~~to ~~hire~~continue to experience, inflationary pressures, logistics constraints, and ~~train~~supply ~~qualified~~chain ~~managers~~disruptions, including increased key raw material and ~~other~~helium ~~store~~costs, ~~personnel.~~increased Iffreight, ~~they~~shipping doand ~~not~~transportation costs, ~~our~~increased ~~image~~labor wages, ~~brand~~labor shortages, and ~~reputation~~delivery ~~could~~delays ~~suffer~~and associated charges. Failure to effectively manage these risks has and may continue to adversely impact our operating results.

Risks Related to Our Supply Chain and Third Parties

~~The~~Freight costs and the costs of our key raw materials (by way of example, paper or petroleum-based resin) fluctuate. In general, we absorb movements in freight and raw material costs that we consider temporary or insignificant. However, costs that we determine to not be temporary or insignificant may require that we increase prices to customers in an attempt to offset such cost increases. A significant increase in the freight costs and the price of raw materials that we cannot pass on to customers ~~could~~has ~~have~~had a material adverse effect on our results of operations and financial performance.

Moreover, because we rely heavily on our own manufacturing operations and those of our vendors, disruptions at manufacturing facilities in the United States or abroad, for any reason, including regulatory requirements, unstable labor relations, public health crises, including the occurrence of a contagious disease or illness, such as the flu or COVID-19, the loss of certifications, power interruptions, fires, hurricanes, war or other forces of nature, could disrupt our supply of products, adversely affecting our business, results of operations, cash flows and financial performance. 24

Moreover, because we rely heavily on our own manufacturing operations and those of our vendors, disruptions at manufacturing facilities in the United States or abroad, for any reason, including regulatory requirements, unstable labor relations, public health crises, including the occurrence of a contagious disease or illness, such as the flu or COVID-19, the loss of certifications, power interruptions, fires, hurricanes, war, or other forces of nature, could disrupt our supply of products, adversely affecting our business, results of operations, cash flows, and financial performance.

Our business may be adversely affected by the loss or actions of our third-party vendors.

Our ability to find new qualified vendors who meet our standards and supply products in a timely and efficient manner can be a significant challenge, especially for goods sourced from outside the United States. Many of our vendors currently provide us with incentives such as volume purchasing allowances and trade discounts. If our vendors were to reduce or discontinue these incentives, costs would increase.

Further, we rely on our vendors’ representations of product quality, safety, and compliance with applicable laws and standards. If our vendors violate our agreements, applicable laws or regulations, or implement practices regarded as unethical, unsafe, or hazardous to the environment, it could damage our reputation and negatively affect our operating results. Further, concerns regarding the safety and quality of products provided by our vendors could cause our customers to avoid purchasing those products from us, or avoid purchasing products from us altogether, even if the basis for the concern is outside our control. As such, any issue, or perceived issue, regarding the quality and safety of any items we sell, regardless of the cause, could adversely affect our brand, reputation, operations, and financial results.

We also are unable to predict whether any of the countries in which our vendors’ products are currently manufactured or may be manufactured in the future will be subject to new, different, or additional trade restrictions imposed by the U.S. or foreign governments or the likelihood, type, or effect of any such restrictions. Any event causing a disruption or delay of imports from vendors with international manufacturing operations, including the imposition of additional import restrictions, restrictions on the transfer of funds, or increased tariffs or quotas, could increase the cost or reduce the supply of merchandise available to our customers and materially adversely affect our financial performance as well as our reputation and brand. Furthermore, some or all of our vendors’ foreign operations may be adversely affected by political and financial instability, resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds, or other trade disruptions.

In addition, our business with foreign vendors, particularly with respect to our international sites, may be affected by changes in the value of the U.S. dollar relative to other foreign currencies. For example, any movement by any other foreign currency against the U.S. dollar may result in higher costs ~~to us~~ for those goods. Declines in foreign currencies and currency exchange rates ~~might~~may negatively affect the profitability and business prospects of one or more of our foreign vendors. This, in turn, ~~might~~may cause such foreign vendors to demand higher prices for merchandise in their effort to offset any lost profits associated with any currency devaluation, delay merchandise shipments, or discontinue selling to us altogether, any of which could ultimately reduce our sales or increase our costs.

16We source certain products in several foreign countries, including contracting with manufacturers and suppliers located outside of the United States. The labor, manufacturing safety, and other practices followed by the manufacturers of these products may differ from those generally accepted in the United States, as well as those with which we are required to comply under many of our image or character licenses. Although we require each of our vendors to sign a vendor agreement that requires adherence to accepted labor practices and compliance with labor, manufacturing safety, and other laws and we test merchandise for product safety standards, we do not supervise or control our vendors or the manufacturers that produce the merchandise we sell to our customers.

costs.

We source certain products in several foreign countries, including contracting with manufacturers and suppliers located outside of the United States. The labor, manufacturing safety and other practices followed by the manufacturers of these products may differ from those generally accepted in the United States as well as those with which we are required to comply under many of our image or character licenses. Although we require each of our vendors to sign a vendor agreement that requires adherence to accepted labor practices and compliance with labor, manufacturing safety and other laws and we test merchandise for product safety standards, we do not supervise, or control our vendors or the manufacturers that produce the merchandise we sell to our customers.

Moreover, we operate in a highly regulated environment in the U.S. and elsewhere. U.S. federal, state, and local governmental entities, and foreign governments regulate many aspects of our business, including products and the importation and exportation of thereof, and these laws and regulations can change frequently. The steps we take to comply with these laws and policies or regulations do not ensure that we will comply in the future.

We depend on foreign vendors for timely and effective sourcing of our merchandise, and we may not be able to acquire products in sufficient quantities and at acceptable prices to meet our needs, which would impact our operations and financial results.25

~~Our~~We ~~performance~~depend ~~depends, in part,~~ on ~~our ability to purchase our merchandise in sufficient quantities at competitive prices. We purchase our merchandise from numerous~~ foreign ~~and~~vendors ~~domestic~~for ~~manufacturers~~timely and ~~importers.~~effective Wesourcing ~~generally have no contractual assurances~~ of ~~continued~~our ~~supply~~merchandise, ~~pricing or access to new products,~~ and ~~any~~we ~~vendor~~may ~~could~~not ~~change~~be ~~the~~able ~~terms upon which it sells~~ to ~~us,~~acquire ~~discontinue~~products ~~selling~~in tosufficient ~~us,~~quantities orand ~~go out of business~~ at ~~any~~acceptable ~~time.~~prices ~~We may not be able~~ to ~~acquire~~meet ~~desired~~our ~~merchandise~~needs, inwhich ~~sufficient~~could ~~quantities~~impact onour ~~terms~~operations ~~acceptable~~and tofinancial usresults.

Our performance depends, in part, on our ability to purchase our merchandise in sufficient quantities at competitive prices. We purchase our merchandise from numerous foreign and domestic manufacturers and importers. We generally have no contractual assurances of continued supply, pricing, or access to new products, and any vendor could change the terms upon which it sells to us, discontinue selling to us, or go out of business at any time. We may not be able to acquire desired merchandise in sufficient quantities on terms acceptable to us.

Any inability to acquire suitable merchandise on acceptable terms or the loss of one or more of our foreign vendors or third-party agents could have a negative effect on our business and operating results because we would be missing products that we felt were important to our assortment, unless and until alternative supply arrangements are secured. We may not be able to develop relationships with new vendors or third-party agents, and products from alternative sources, if any, may be of a lesser quality and/or more expensive than those we currently purchase.

In addition, we are subject to certain risks that could limit our vendors’ ability to provide us with quality merchandise on a timely basis and at prices that are commercially acceptable, including risks related to the availability of raw materials, labor disputes, work disruptions or stoppages, union organizing activities, vendor financial liquidity, inclement weather, natural disasters, public health issues, general economic and political conditions, and regulations to address climate change.

Information Security Risks

Our information systems, order fulfillment, and distribution facilities may prove inadequate or may be disrupted.

We depend on our management information systems for many aspects of our business. We ~~will~~may be materially adversely affected if our management information systems are disrupted, or we are unable to improve, upgrade, maintain, and expand our systems. We believe our perpetual inventory, automated replenishment, and stock ledger systems are necessary to properly forecast, manage, and analyze our inventory levels, margins, and merchandise ordering quantities. We may fail to properly optimize the effectiveness of these systems, or to adequately support and maintain the systems. Moreover, we may not be successful in developing or acquiring technology that is competitive and responsive to our customers and might lack sufficient resources to make the necessary investments in technology needs and to compete with our competitors, which could have a material adverse impact on our business, results of operations, cash flows, and financial performance.

In addition, we may not be able to prevent a significant interruption in the operation of our electronic order entry and information systems, e-commerce platforms, or manufacturing and distribution facilities due to natural disasters, accidents, systems failures, or other events. Any significant interruption in the operation of these facilities, including an interruption caused by our failure to successfully expand or upgrade our systems or manage our transition to utilizing the expansions or upgrades, could reduce our ability to receive and process orders and provide products and services to our stores, third-party stores, and other customers, which could result in lost sales, cancelled sales, and a loss of loyalty to our brand.

transition to utilizing the expansions or upgrades, could reduce our ability to receive and process orders and provide products and services to our stores, third-party stores, and other customers, which could result in lost sales, cancelled sales and a loss of loyalty to our brand.

We may fail to adequately maintain the security of our electronic and other confidential information.

We have become increasingly centralized and dependent upon automated information technology processes. In addition, a portion of our business operations is conducted over the internet. We could experience operational problems with our information systems and e-commerce platforms because of system failures, viruses, computer hackers, or other causes. Any material disruption or slowdown of our systems could cause information, including data related to customer orders, to be lost or delayed, which could—especially if the disruption or slowdown occurred during a peak sales season—result in delays in the delivery of merchandise to our stores and customers or lost sales, which could reduce demand for our merchandise and cause our sales to decline.

In addition, in the ordinary course of our business, we collect and store certain personal information from individuals, such as our customers and vendors, and our employees, and we process customer payment card and check information, including via our e-commerce platforms. Computer hackers may attempt to penetrate our computer system, payment card terminals, or other payment systems and, if successful, misappropriate personal information, payment card, or check information or confidential Company business information. In particular, the techniques used by criminals to obtain unauthorized access to sensitive data change frequently and often are not recognized until launched against a target; accordingly, we may be unable to anticipate these techniques or implement adequate preventative measures. Any person who circumvents our security measures could destroy or steal valuable information or disrupt our operations. In addition, an employee, contractor or other third party with whom we do business may attempt to circumvent our security measures to obtain such information and may purposefully or inadvertently cause a breach involving such information. Any failure to maintain the security of our customers’ confidential information, or data belonging to us or our vendors, could put us at a competitive disadvantage, result in deterioration in our customers’ confidence in us, subject us to potential litigation and liability, and fines and penalties, resulting in a possible material adverse impact on our business, results of operations, cash flows and financial performance. While we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses and would not remedy damage to our reputation. There can be no assurance that we will not suffer a criminal attack in the future, that unauthorized parties will not gain access to personal information, or that any such incident will be discovered in a timely manner.

~~ESG Risks~~26

~~Our~~implement ~~aspirations~~adequate preventative measures. Any person who circumvents our security measures could destroy or steal valuable information or disrupt our operations. In addition, ~~goals~~an employee, contractor, or other third-party with whom we do business may attempt to circumvent our security measures to obtain such information and ~~disclosures~~may ~~related~~purposefully or inadvertently cause a breach involving such information. Any failure to ~~ESG~~maintain ~~matters~~the security of our customers’ confidential information, or data belonging to ~~the~~us ~~extent~~or ~~undertaken~~our vendors, ~~will expose~~could put us at a competitive disadvantage, result in deterioration in our customers’ confidence in us, subject us to ~~numerous~~potential ~~risks~~litigation and liability, ~~including~~and fines and penalties, resulting in a possible material adverse impact on our business, results of operations, cash flows, and financial performance. While we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses and would not remedy damage to our reputation. ~~and~~There ~~stock~~can ~~price~~be no assurance that we will not suffer a criminal attack in the future, that unauthorized parties will not gain access to personal information, or that any such incident will be discovered in a timely manner.

InTalent response to evolving consumer and investor sentiment around ESG, we may establish goals which address ESG matters, and establish new and more robust disclosures associated therewith. In furtherance of such goals, we may determine that material investments in machinery or technology are necessary. We may update the mix of products which we offer to sell to consumers, or we may make commitments to waste reductions which increase costs until efficiencies can be realized. Such goals may not be received positively by consumers and our ability to achieve any goal or objective, including with respect to environmental and diversity initiatives, is subject to numerous risks, many of which are outside of our control. We may not be able to achieve our ESG goals within the timelines we establish for those goals or at all.Risks

~~Failure~~Talent toacquisition ~~implement~~and ~~ESG~~retention ~~practices~~could ~~successfully,~~involve ~~achieve~~increases ~~our~~to ~~related~~labor ~~goals~~costs, orand toif ~~focus~~we ~~on goals that~~ are ~~not~~unable ~~perceived~~ to beattract ~~valuable~~and toretain ~~consumers,~~the ~~regulators,~~talent orrequired ~~investors,~~for ~~could damage~~ our ~~reputation~~business, ~~causing~~which ~~our~~depends ~~investors~~in orpart ~~consumers~~on tofactors ~~lose~~outside ~~confidence~~of ~~in us and~~ our ~~brands~~control, ~~and negatively impact~~ our ~~operations.~~operating Weresults could also incur additional significant costs and require additional resources to implement ESG practices in furtherance of our ESG goals and to report regarding any progress made by the Company with respect to such ESG goals related to environmental matterssuffer.

18As our business expands, we believe that our future success will depend greatly on our continued ability to attract, motivate, and retain qualified personnel who are able to successfully meet the needs of our business. Although we generally have been able to meet our staffing requirements in the past, our ability to meet our labor needs while controlling costs is subject to external factors, such as unemployment levels, labor market conditions, minimum wage legislation, wage inflation, and changing demographics. Recently, various legislative movements have sought to increase the federal minimum wage in the United States, as well as the minimum wage in several individual states.

~~Talent~~As ~~acquisition~~federal ~~and~~or ~~retention~~state ~~could~~minimum ~~involve~~wage ~~increases~~rates toincrease, or as labor ~~costs~~market ~~and~~conditions ifrequire, we ~~are~~may ~~unable~~need to ~~attract~~increase ~~and~~the ~~retain~~wage rates of our hourly employees. Our inability to meet our staffing requirements in the ~~talent~~future ~~required~~at ~~for~~costs that are favorable to us, or at all, could impair our ~~business~~ability to increase revenue, ~~which~~and ~~depend~~our incustomers ~~part~~could onexperience ~~factors~~lower ~~outside~~levels of ~~our~~customer ~~control~~service. In addition, ~~our~~if ~~operating~~we ~~results~~fail to comply with applicable laws and regulations, including wage and hour laws, we could ~~suffer.~~be subject to legal risk, including government enforcement action and class action civil litigation, which could adversely affect our results of operations.

AsIn ~~our~~addition ~~business~~to ~~expands,~~minimum wewage ~~believe~~increases, ~~that~~other ~~our~~changes ~~future success will depend greatly on our continued ability~~ to ~~attract,~~employment ~~motivate~~ and ~~retain~~healthcare ~~qualified~~laws ~~personnel~~may ~~who~~increase ~~are able to successfully meet the needs of~~ our ~~business~~operating expenses. ~~Although~~These weincreased ~~generally~~costs could have ~~been~~a ~~able~~material toadverse ~~meet~~effect ~~our~~on ~~staffing requirements in the past,~~ our ~~ability to meet our labor needs while controlling costs is subject to external factors~~business, ~~such~~results asof ~~unemployment levels~~operations, ~~labor~~and ~~market~~financial ~~conditions, minimum wage legislation~~ and ~~changing~~competitive ~~demographics~~position. ~~Recently, various legislative movements have sought to increase the federal minimum wage in the United States, as well as the minimum wage in several individual states.~~

AsOur ~~federal~~future orperformance ~~state~~may ~~minimum~~depend ~~wage~~on ~~rates~~our ~~increase,~~ability orto asattract, ~~labor~~retain, ~~market~~and ~~conditions~~motivate ~~require~~qualified employees, weincluding ~~may~~store ~~need~~personnel toand ~~increase~~field ~~the~~management. ~~wage~~If ~~rates~~we ofare ~~our~~unable ~~minimum~~to ~~wage~~do ~~employee~~so, ~~and~~ our ~~other~~ability ~~hourly employees. Our inability~~ to meet our ~~staffing~~operating ~~requirements~~goals inmay ~~the~~be ~~future~~compromised. atIf ~~costs~~we ~~that~~ are ~~favorable to us~~, orfor atany ~~all~~reason, ~~could~~unable ~~impair our ability~~ to ~~increase~~maintain ~~revenue,~~appropriate ~~and~~controls ~~our~~on ~~customers~~store ~~could~~operations ~~experience~~due ~~lower~~to ~~levels~~turnover ofor ~~customer~~other ~~service. In addition~~reasons, ifour wesales ~~fail~~and tooperating ~~comply~~margins ~~with~~may ~~applicable~~be ~~laws~~adversely ~~and~~affected. ~~regulations,~~There ~~including~~can ~~wage~~be ~~and~~no ~~hour~~assurance ~~laws,~~that we ~~could~~will be ~~subject~~able to ~~legal~~attract ~~risk, including government enforcement action~~ and ~~class~~retain ~~action~~the ~~civil~~personnel ~~litigation,~~we ~~which~~need ~~could~~in ~~adversely~~the ~~affect our results of operations~~future.

In addition to minimum wage increases, other changes to employment and healthcare laws may increase our operating expenses. These increased costs could have a material adverse effect on our business, results of operations and financial and competitive position.

Our future performance may depend on our ability to attract, retain and motivate qualified employees, including store personnel and field management. If we are unable to do so, our ability to meet our operating goals may be compromised. If we are for any reason unable to maintain appropriate controls on store operations due to turnover or other reasons, our sales and operating margins may be adversely affected. There can be no assurance that we will be able to attract and retain the personnel we need in the future

Risks Related to Our Intellectual Property

Our intellectual property rights may be inadequate to protect our business.

We hold a variety of United States trademarks, service marks, patents, copyrights, and registrations and applications therefor, as well as several foreign counterparts thereto and/or independent foreign intellectual property asset registrations. In some cases, we rely solely on unregistered common law trademark rights and unregistered copyrights under applicable United States law to distinguish and/or protect our products, services, and branding from the products, services, and branding of our competitors. If our intellectual property rights are successfully challenged, we could be forced to re-brand, re-design, or discontinue the sale of certain of our products or services, which could result in loss of brand recognition and/or sales and could require us to devote resources to advertising and marketing new branding or re-designing our products. Further, we cannot assure you that competitors will not infringe our intellectual property rights, or that we will have adequate resources to enforce these rights. We also permit our franchisees to use several of our trademarks and service marks, including Party City and Halloween City. Our failure to properly control our franchisees’ use of such trademarks could adversely affect our ability to enforce them against third parties. A loss of any of our material intellectual property rights could have a material adverse effect on our business, financial condition, and results of operations.

We license from many third parties and do not own the intellectual property rights necessary to sell all products capturing many popular images, such as cartoon or motion picture characters. While none of these licenses is individually material to our aggregate business, a large portion of our business depends on the continued ability to license the intellectual property rights to these images in the aggregate and on the marketplace demand for these licensed properties, which could in turn lead to a decrease in licensed costume sales. 27

Wepermit ~~also~~our ~~face~~franchisees ~~the~~to ~~risk~~use several of ~~claims~~our ~~that~~trademarks weand ~~have~~service ~~infringed~~marks, ~~third~~including ~~parties~~Party City and Halloween City. Our failure to properly control our franchisees’ ~~intellectual~~use ~~property~~of ~~rights,~~such ~~which~~trademarks could beadversely ~~expensive~~affect ~~and~~our ~~time~~ability ~~consuming~~ to ~~defend,~~enforce ~~cause~~them usagainst tothird ~~cease~~parties. ~~using~~A ~~certain~~loss of any of our material intellectual property rights could have a material adverse effect on our business, ~~redesign~~financial condition, and results of operations.

19We license from many third parties and do not own the intellectual property rights necessary to sell all products capturing many popular images, such as cartoon or motion picture characters. While none of these licenses is individually material to our aggregate business, a large portion of our business depends on the continued ability to license the intellectual property rights to these images in the aggregate and on the marketplace demand for these licensed properties, which could in turn lead to a decrease in licensed product sales.

We also face the risk of claims that we have infringed third parties’ intellectual property rights, which could be expensive and time consuming to defend, cause us to cease using certain intellectual property rights, redesign certain products or packaging, or cease selling certain products or services, result in our being required to pay significant damages or require us to enter into costly royalty or licensing agreements in order to obtain the rights to use third parties’ intellectual property rights, which royalty or licensing agreements may not be available at all, any of which could have a negative impact on our operating profits and harm our future prospects.

Risks Related to Our Indebtedness

~~Our~~Following ~~subsidiaries own substantially all~~ our ~~assets~~emergence ~~and~~from ~~conduct substantially all our operations. Accordingly~~bankruptcy, ~~repayment~~we ofcontinue ~~our~~to ~~indebtedness~~have ~~will~~a besubstantial ~~dependent~~level ~~on the generation~~ of ~~cash~~indebtedness ~~flow~~(through by our subsidiaries), and ~~their ability to make~~ such ~~cash~~level ~~available~~of ~~to us, by dividend,~~ debt ~~repayment~~may oradversely ~~otherwise.~~impact ~~Each~~our ~~subsidiary~~operations isand afinancial ~~distinct~~results ~~legal entity~~ and, ~~under~~increases ~~certain~~the ~~circumstances,~~possibility ~~legal~~that ~~and~~we ~~contractual restrictions~~ may ~~limit~~be ~~our~~unable ~~ability~~ to ~~obtain~~generate cash ~~from~~sufficient ~~our~~to ~~subsidiaries.~~pay, Aswhen ~~of December 31~~due, ~~2021,~~the weprincipal ~~had $84~~of,~~181~~ ~~loans~~interest ~~and notes payable~~on, ~~$1,373~~or ~~current~~other ~~long-term~~amounts ~~obligations~~due ~~and~~in ~~$1,351,189~~respect ~~long-term~~of ~~obligations~~our ~~outstanding, respectively~~indebtedness. ~~Refer~~Our tosubstantial ~~Part~~indebtedness IIcould, ~~Item~~among 8,other ~~“Financial~~things: ~~Statements and Supplementary Data – Note 11, Loans and Notes Payable and Note 12, Long-Term Obligations in this Annual Report on Form 10-K.~~

•

WeInhibit ~~have~~our aability ~~substantial~~to ~~level~~satisfy ~~of indebtedness (through~~ our ~~subsidiaries),~~obligations ~~and~~with ~~such~~respect ~~level~~to ~~of debt may adversely impact~~ our ~~operations~~indebtedness, ~~financial~~which ~~results~~could ~~and~~result ~~increases~~in ~~the~~an ~~possibility~~event ~~that~~of wedefault ~~may~~under ~~be unable to generate cash sufficient to pay, when due,~~ the ~~principal~~agreements ~~of,~~governing ~~interest~~such ~~on or~~ other ~~amounts due in respect of our~~ indebtedness.; ~~For example, it could:~~

•

~~Make~~Require itus ~~more~~to ~~difficult~~dedicate ~~for~~a ussubstantial toportion ~~satisfy~~of our ~~obligations~~cash ~~with~~flow ~~respect~~from operations to payments on our indebtedness, ~~which~~thereby ~~could~~reducing ~~result~~funds inavailable anfor ~~event~~working ofcapital, ~~default~~capital ~~under~~expenditures, ~~the~~acquisitions, ~~agreements~~selling ~~governing~~and ~~such~~marketing efforts, product development, and other ~~indebtedness~~purposes;

•

Require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, selling and marketing efforts, product development and other purposes;

Increase our vulnerability to adverse economic and industry conditions and limit our flexibility in planning for, or reacting to, changes in our business;

•

Expose us to the risk of increasing interest rates, as certain of our borrowings, including under the New ABL Facility ~~and Senior Secured First Lien Floating Rate Notes due 2025~~, are at variable interest rates; and

•

Restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; and limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, product development, and other corporate purposes.

Moreover, our ability to make scheduled payments on or to refinance such obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business, and other factors beyond our control. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital, or restructure or refinance our indebtedness. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The credit facilities and the indentures governing the ~~senior~~ notes restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or obtain the proceeds that we could realize from them, and the proceeds may not be adequate to meet any debt service obligations then due.

~~Further,~~Our assubsidiaries ~~discussed~~own insubstantially ~~detail~~all inour ~~Note~~assets ~~11 – Loans~~ and ~~Notes~~conduct ~~Payable~~substantially ofall ~~Part~~our ~~II,~~operations. ~~Item 8~~Accordingly, ~~“Financial~~repayment ~~Statements~~of ~~and~~our ~~Supplementary~~indebtedness ~~Data,~~will ~~our~~be ~~unrestricted~~dependent ~~subsidiaries~~on ~~under~~ the ~~Senior~~generation ~~Secured~~of ~~First~~cash ~~Lien~~flow ~~Notes,~~by ~~the~~our ~~ABL~~subsidiaries ~~Facility credit agreement~~ and ~~the~~their ~~indenture~~ability ~~governing the Senior Secured First Lien Floating Rate Notes are not subject~~ to ~~the~~make ~~covenants under~~ such ~~agreements~~cash ~~and~~available ~~do not guarantee or pledge assets~~ to ~~secure~~us, ~~the~~by ~~same~~dividend, ~~and~~debt ~~the creditors of Anagram Holdings and Anagram International (together~~repayment, ~~the~~or ~~“Anagram~~otherwise. ~~Issuers”)~~Each ~~and~~subsidiary ~~their~~is ~~subsidiaries~~a ~~will~~distinct legal

2028

~~generally~~entity, beand, ~~entitled~~under tocertain ~~payment~~circumstances, oflegal ~~their claims from the assets of the Anagram Issuers~~ and ~~their~~contractual ~~subsidiaries~~restrictions ~~before~~may ~~those~~limit ~~assets~~our ~~would~~ability beto ~~available~~obtain ~~for~~cash ~~distribution~~from toour ussubsidiaries.

We and/or any of these subsidiaries could become insolvent or be restricted from making dividends in the future due to compliance with these restrictions from our debt or otherwise, and, therefore, we may be unable to service our indebtedness.

The occurrence of any one of these events could have a material and adverse effect on our business, financial condition, results of operations, prospects, and ability to satisfy our obligations under our indebtedness.

We may require additional capital to fund our business, which may not be available to us on satisfactory terms or at all.

We currently rely on cash generated by operations and borrowings available under our ~~credit~~New ~~facilities~~ABL Facility to meet our working capital needs. However, if we are unable to generate sufficient cash from operations or if borrowings available under the ~~credit~~New ~~facilities~~ABL Facility are insufficient, we may be required to adopt one or more alternatives to raise cash, such as incurring additional indebtedness, selling our assets, seeking to raise additional equity capital, or restructuring, which alternatives may not be available to us on satisfactory terms or at all. Any of the foregoing could have a material adverse effect on our business.

Significant interest rate changes could affect our profitability and financial performance.

Our earnings are affected by changes in interest rates because of our variable rate indebtedness under the ~~Senior~~New ~~Secured First Lien Notes and the~~ ABL Facility. ~~The interest rate swap agreements that we use to manage the risk associated with fluctuations in interest rates (if any) may not be able to fully eliminate our exposure to these changes.~~

~~Risks~~Our ~~Related~~long-term liquidity requirements and the adequacy of our capital resources are difficult to ~~Our~~predict ~~Common~~at ~~Stock~~this time.

Our ~~stock~~liquidity, ~~price~~including ~~has~~our ~~been~~ability ~~volatile~~to ~~over~~meet our ongoing operation obligations, is dependent upon, among other things: (i) our ability to comply with the ~~past~~terms, ~~several~~conditions, ~~years~~and covenants of the New ABL Facility and ~~could~~the ~~decline~~Second inLien Notes; (ii) our ability to maintain adequate cash on hand; and (iii) our ability to generate cash flow from operations. In addition, the ~~future~~New ABL Facility requires us to, ~~resulting~~among inother ~~losses~~things, ~~for~~maintain ~~investors~~certain minimum liquidity requirements. There is no certainty that we will be able to comply with the covenants of the New ABL Facility or that cash on hand and cash flow from operations will be sufficient to continue to fund our operations and allow us to satisfy our short and long-term obligations.

~~Regular~~Because ~~fluctuations~~of in our ~~operating~~financial ~~results~~condition, ~~changes~~we inwill ~~investor~~have orheightened ~~analyst~~exposure ~~perception~~to, ofand ~~our~~less ~~business~~ability to withstand, the operating risks ~~and~~that ~~conditions~~are ofcustomary in our ~~business~~industry, ~~our~~such ~~ability~~as tofluctuations ~~meet~~in orhelium ~~exceed~~and ~~earnings~~other ~~estimates,~~raw ~~general~~material ~~market~~prices ~~volatility,~~and orcurrency exchange rates. These factors could result in the ~~occurrence~~need offor ~~any~~substantial ~~one~~additional orfunding. ~~more~~A number of ~~the~~other ~~events~~factors, ~~highlighted~~including inthe ~~these~~factors ~~risk~~described ~~factors~~herein ~~may~~related ~~impact~~to ~~the~~our ~~price~~bankruptcy ofproceedings, our ~~common~~recent ~~stock.~~financial Aresults, ~~significant~~and ~~drop~~the incompetitive environment we face, could adversely affect the ~~price~~availability and terms of funding that might be available to us subsequent to our ~~stock~~emergence ~~would~~from ~~expose~~bankruptcy. ~~the~~As ~~company~~such, we may not be able to ~~the~~source ~~risk~~post-emergence ofcapital ~~securities~~at ~~class~~rates ~~action~~acceptable ~~lawsuits~~to us, ~~which~~or ~~could~~at ~~result~~all, into ~~substantial~~fund ~~costs~~our ~~and~~current ~~divert~~operations. ~~management’s~~The ~~attention~~inability to obtain necessary additional funding on acceptable terms would have a material adverse impact on us and ~~resources,~~our ~~adversely~~ability ~~affecting~~to sustain our ~~business~~operations.

~~Anti-takeover~~Risks ~~provisions~~Related into ~~our~~Material ~~charter documents and Delaware law might discourage, delay or prevent a change in control of our company.~~Weaknesses

~~Our~~We ~~amended~~have ~~and~~identified ~~restated~~material ~~certificate~~weaknesses ofin ~~incorporation~~our orinternal ~~bylaws~~controls ~~contain~~over ~~provisions~~financial ~~that~~reporting and may ~~make~~identify additional material weaknesses in the ~~acquisition~~future or otherwise fail to maintain an effective system of ~~our~~internal ~~company~~controls, ~~more~~which ~~difficult~~may ~~without~~result ~~the~~in ~~approval~~material misstatements of our ~~board~~consolidated offinancial ~~directors.~~statements ~~These~~or ~~provisions~~cause ~~include:~~us to fail to meet our periodic reporting obligations.

~~advance~~A ~~notice~~material ~~requirements~~weakness ~~for~~is ~~stockholder~~a ~~proposals~~deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. We identified material weaknesses in our internal controls over financial reporting as of December 31, 2022, related to: (i) internal controls in the financial reporting processes, including a lack of segregation of duties within the accounts payable process, lack of effective controls surrounding the proper review and ~~director~~timeliness ~~nominations~~of information used in account reconciliations, journal entry review, and vendor invoice processing; (ii) information technology general controls in the areas of user access

~~the sole ability of the board of directors to fill a vacancy created by the expansion of the board of directors;~~ 29

~~the~~management ~~required~~and ~~approval~~segregation of ~~holders~~duties, ofwithin atcertain ~~least~~systems ~~75%~~supporting ofthe Company's accounting and reporting processes, were not designed or operating effectively; (iii) adequate documentation was not maintained to demonstrate management’s review supporting the assumptions used in our ~~outstanding~~impairment ~~shares~~testing of ~~capital~~indefinite-lived ~~stock~~intangible ~~entitled~~assets and long-lived assets; and (iv) inadequate identification and review procedures over debt covenant requirements and restrictions, which led to ~~vote~~a ~~generally~~failure atto andetect ~~election~~and timely report a covenant violation related to tax payments; and (v) inadequate processes and internal controls relating to management’s analysis under ASC Subtopic 205-40 of whether there were conditions or events giving rise to substantial doubt about the ~~directors~~Company’s ability to ~~remove~~continue ~~directors~~as ~~only~~a going concern within one year after the financial statements were issued, which resulted in a material error in management’s assessment of the Company’s ability to remain a going concern in connection with filing its form 10-Q for ~~cause;~~the third quarter of 2022.

~~the~~Our ~~required~~management, ~~approval~~under ofthe ~~holders~~oversight of atthe ~~least~~Audit ~~662⁄3%~~Committee of our ~~outstanding~~Board ~~shares~~ of ~~capital~~Directors, ~~stock~~has ~~entitled~~begun toevaluating ~~vote~~and atimplementing anmeasures ~~election~~designed ofto ~~directors~~ensure tothat ~~adopt,~~the ~~amend~~control ordeficiencies ~~repeal~~contributing ~~our~~to ~~bylaws,~~the ormaterial ~~amend~~weaknesses orare ~~repeal~~remediated. ~~certain~~In ~~provisions~~particular, ofwe ~~our~~are ~~amended~~taking ~~and~~steps ~~restated~~to ~~certificate~~remediate ofour ~~incorporation;~~material weaknesses by:

•

~~limitations~~Developing onaction ~~the~~plans ~~ability of stockholders~~ to ~~call~~address ~~special~~control ~~meetings~~deficiencies ~~and~~identified ~~take~~within ~~action~~certain bykey ~~written~~financial ~~consent~~processes; ~~and~~

•

21Evaluating a new transactional accounting and enterprise resource planning software on a company-wide basis, which, if implemented, would potentially strengthen our control environment;

•

~~provisions~~Ensuring ~~that~~compliance ~~reproduce~~with ~~much~~policies offor ~~the~~effective ~~provisions~~and ~~that~~timely ~~limit~~review ~~the ability~~ of ~~“interested~~journal ~~stockholders”~~entries ~~from~~and ~~engaging~~account inreconciliations ~~specified~~and ~~business~~other ~~combinations~~financial ~~with~~statement usclose ~~absent~~analyses ~~prior~~and ~~approval~~processes; ~~of the board of directors or holders of 662⁄3% of our voting stock.~~

•

~~The~~Assessing ~~existence of the foregoing provisions~~ and ~~anti-takeover~~implementing ~~measures~~further ~~could~~segregation ~~limit~~of ~~the~~duties ~~price that investors might be willing~~ to ~~pay~~reduce inrisks ~~the future for shares of our common stock and could also deter potential acquirers of our company, thereby reducing the likelihood~~ that ~~you~~ could ~~receive~~present a ~~premium~~reasonable ~~for~~possibility ~~your~~of ~~common~~material ~~stock in the acquisition.~~ misstatements;

•

Updating our quarterly User Access Review and Privileged Access Review procedures to include employees, contractors, and vendor accounts; including warehouse user IDs. Additionally, the quarterly User Access Review and Privileged Access Review will be updated to include a formal lookback of user access including Administrator accounts;

•

Enhancement and retention of the documentation related to timely terminations of temporary distribution center employees;

•

Enhancement of the documentation demonstrating management’s review of key assumptions used in the development of subjective accounting conclusions and re-enforcing the need to maintain and retain such documentation;

•

Improving the effectiveness of the monitoring and review of debt covenants to ensure the timely reporting of any covenant violations and augmenting staff with personnel having the appropriate experience and skill sets to support management’s debt covenant reviews; and

•

Filling key open positions, including the Chief Accounting Officer, Chief Information Security Officer, Global Operations Controller, and Director of External Reporting and Technical Accounting roles.

The material weaknesses will not be considered remediated until management completes the design and implementation of the measures described above and the controls operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. We also may conclude that additional measures may be required to remediate the material weaknesses or determine to modify the remediation plans described above.

While we are designing and implementing new controls and measures to remediate these material weaknesses as noted above, we cannot assure you that the measures we are taking will be sufficient to remediate the material weakness or avoid the identification of additional material weaknesses in the future. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our consolidated financial statements that could result in a restatement of our financial statements and could cause us to fail to meet our periodic reporting obligations, any of which could diminish investor confidence in us.

General Risk Factors

Changes in laws, policies, or regulations related to taxes could adversely affect our business, financial condition, and results of operations.

Laws and regulations associated with taxation requirements, including changes in applicable income tax rates, new tax laws, and revised tax law interpretations, may go through changes which are detrimental to our business, financial condition, or results of operations. In light of recent and potential future changes to the corporate income tax rate and corporate taxation more generally, we continually examine the long-term impact of tax changes at the federal, state, and ~~state~~local levels to our business and results of operations. See Note 1214 --of ~~Long-Term~~our ~~Obligations and Note 17 – Income Taxes to the~~ consolidated financial statements ~~included~~ in Part II, Item 8, ~~of this Annual Report on Form 10-K~~ for more information.

We are also subject to regular reviews, examinations, and audits by the Internal Revenue Service and other taxing authorities with respect to our taxes. There are uncertainties and ambiguities in the application of U.S. tax laws, and it is possible that the IRS could issue subsequent guidance or take positions on ~~audit~~audits that differ from our interpretations and assumptions. There can be no assurance that payment of such additional amounts upon final adjudication of any disputes will not have a material impact on our results of operations and financial position.

We may face risks associated with litigation and claims.

From time to time, we may become involved in other legal proceedings relating to the conduct of our business, including but not limited to, employee-related and consumer matters. Additionally, as a retailer and manufacturer of decorated party goods, we have been and may continue to be subject to product liability claims if the use of our products, whether manufactured by us or third -party manufacturers, is alleged to have resulted in injury or if our products include inadequate instructions or warnings. Such matters can be time-consuming, divert management’s attention and resources, and cause us to incur significant expenses. Due to the uncertainties of litigation, we can give no assurance that we will prevail on all claims made against us in the lawsuits that we currently face or that additional claims will not be made against us in the future. Furthermore, because litigation is inherently uncertain, the results of any current or future litigation, individually or in the aggregate, ~~will~~may ~~not~~ have a material adverse effect on our business, results of operations, or financial condition.

Item 1B. Unresolved Staff Comments

Not applicable.

2231

Item 2. Properties

~~We maintain the following significant locations.~~ The ~~Rockaway,~~table ~~New~~below ~~Jersey~~summarizes ~~and Naperville, Illinois locations relate to~~ our ~~retail~~current ~~segment.~~facilities, ~~The~~which ~~remaining~~in ~~locations~~large ~~are~~part ~~associated~~support ~~with~~ our wholesale segment.:

Location Principal Activity ~~Elmsford~~Woodcliff Lake, New ~~York~~Jersey Executive and other corporate offices, showrooms, design and art production for party products ~~Rockaway, New Jersey Retail corporate offices Dallas, Texas Manufacture/personalization of cups and napkins~~ East Providence, Rhode Island Manufacture and distribution of plastic plates, cups and bowls Eden Prairie, Minnesota Manufacture of metallic balloons and accessories Louisville, Kentucky Manufacture and distribution of paper plates Monterrey, Mexico Manufacture and distribution of party products ( Stickers, gift wrap, bags and invites) Newburgh, New York Manufacture of paper napkins and cups Tijuana, Mexico Manufacture and distribution of plates and other party products Chester, New York Distribution of party products ~~Edina, Minnesota Distribution of metallic balloons and accessories Naperville, Illinois Distribution of party goods for e-commerce sales~~

2332

As of December 31, ~~2021~~2022, Company-~~owned~~operated and franchised permanent stores for our retail operations were located in the following states and Puerto Rico:

State	Company- ~~owned~~Operated		Franchise		Chain- ~~wide~~Wide
Alabama		910		—		910
Alaska		1		—		1
Arizona		14		—		14
Arkansas		—1		3		34
California		8890		17		~~105~~107
Colorado		13		—		13
Connecticut		12		—		12
Delaware		2		—		2
Florida		64		84		7268
Georgia		29		1		30
Iowa		7		—		7
Illinois		42		—		42
Indiana		20		—		20
Kansas		65		—		65
Kentucky		8		—		8
Louisiana		1110		—		1110
Massachusetts		21		—		21
Maryland		2122		1—		22
Maine		2		—		2
Michigan		26		—		26
Minnesota		12		—		12
Missouri		17		1		18
Mississippi		1		2		3
Montana		—		1—		1—
North Carolina		21		—		21
North Dakota		4		—		4
Nebraska		3		—		3
New Hampshire		4		—		4
New Jersey		27		1		28
New Mexico		3		—		3
Nevada		6		—		6
New York		4957		111		6058
Ohio		25		—		25
Puerto Rico		—		4		4
Oklahoma		11		—		11
Ohio		26		—		26
Oregon		2		1		3
Oklahoma		10		—		10
Pennsylvania		27		1		28
Oregon		3		1		4
Pennsylvania		28		—		28
Rhode Island		2		—		2
South Carolina		910		1		1011
Tennessee		14		2		16
Texas		7477		13		8790
Virginia		20		2		22
Vermont		1		—		1
Washington		16		1		17
Wisconsin		11		—		11
West Virginia		43		—		43
Total		~~759~~775		6754		~~826~~829

Additionally, at December 31, ~~2021~~2022, there were five franchise stores in Mexico.

In ~~2021~~2022, we operated 90149 temporary stores in the ~~U.S.~~United States, principally under the Halloween City banner. We operate such stores under short-term leases with terms of approximately ~~four~~three ~~to six~~ months.

We lease the property for all of our company-operated stores, which generally range in size from approximately 10,000 square feet to 1520,000 square feet. We do not believe that any individual store property is material to our financial condition or results of operations. ~~Of the leases for the company-owned stores at December 31, 2021, 27 expire in~~

2433

~~2022,~~As ~~108~~part ~~expire~~of inits ~~2023,~~bankruptcy ~~104~~reorganization ~~expire~~plan, inthe ~~2024,~~Company ~~114~~restructured ~~expire~~the inremaining ~~2025,~~term 88and ~~expire~~economics inof ~~2026~~certain retail and ~~the~~non-retail ~~balance~~properties ~~expire~~within inits ~~2027~~lease orportfolio, ~~thereafter.~~including Wepermanent ~~have~~abandonment ~~options~~of tocertain ~~extend~~leases. ~~many~~In ofparticular, ~~these~~for its retail leases, ~~for~~management attempted to tailor such negotiations to a ~~minimum~~particular ofstore’s ~~five~~current ~~years~~and future performance, location, and size to ensure economic stability and reduce future performance risk.

Ultimately, the actions discussed above resulted in the abandonment of 68 unexpired store leases, as well as the renegotiation of a substantial portion of the Company’s remaining lease portfolio.

Item 3. Legal Proceedings

From time to time, we are subject to various legal proceedings and claims that arise in the ordinary course of our business activities. The Company does not believe that any pending proceedings of which it is aware will result, individually or in the aggregate, in a material adverse effect upon its financial condition or future results of operations and no material legal proceedings were terminated, settled or otherwise resolved during the fourth quarter of the ~~fiscal~~ year ended December 31, ~~2021~~2022.

Item 4. Mine Safety Disclosures

Not applicable.

2534

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

~~Our~~ On January 18, 2023 as a result of the Chapter 11 Cases, the New York Stock Exchange (the “NYSE” or the “Exchange”) commenced proceedings to delist the Company’s common stock from the NYSE. Under NYSE delisting procedures, the Company had the right to appeal this determination but did not exercise its right to do so. On February 3, 2023, the NYSE notified the SEC of its intention to remove the Company’s common stock from listing and registration on the Exchange pursuant to the provisions of Rule 12d2-2(b) beginning on February 14, 2023. In the opinion of the Exchange, the Company’s common stock was no longer suitable for continued listing and trading on the Exchange. Accordingly, as of February 14, 2023, the Company’s common stock is no longer listed on the NYSE. The Company’s common stock began trading on the OTC Pink Open Market on February 14, 2023, under the symbol “~~PRTY~~PRTYQ”. and ceased trading on October 12, 2023 (the Effective Date of the Plan).

As of the close of business on February 17, 2022, there were 110 holders of record of our common stock, which does not reflect those shares held beneficially or those shares held in “street” name. Accordingly, the number of beneficial owners of our common stock exceeds this number.

Dividend Policy

~~Most~~The ofdocuments governing the Company’s indebtedness ~~contains~~contain restrictions on the Company’s activities, including paying dividends on its capital stock and restricting dividends or other payments to the Company. See Note ~~12,~~9 ~~Long-Term~~of ~~Obligations,~~our ofconsolidated financial statements in Part II, Item 8, ~~“Financial Statements and Supplementary Data,” in this Annual Report on Form 10-K~~ for further discussion. WePrior ~~do not expect~~ to ~~pay cash dividends on our common stock in~~ the ~~foreseeable~~cancellation ~~future. The Company currently intends to retain all~~ of ~~its future earnings, if any, to finance operations, development and growth of its business and repay indebtedness. Any future determination relating to our dividend policy will be made at~~ the ~~discretion of the~~ Company’s ~~board~~common ofstock ~~directors and will depend~~ on athe ~~number~~Effective ~~of factors~~Date, ~~including~~the ~~future~~Company ~~earnings,~~did ~~capital~~not ~~requirements,~~pay ~~financial~~any ~~conditions,~~cash ~~future~~dividends ~~prospects,~~in ~~contractual~~2022 ~~restrictions~~or ~~and covenants and other factors that the board of directors may deem relevant~~2023.

2635

Stock Performance Graph

The stock performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing by us under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate the graph by reference in such filing.

The line graph below compares the cumulative total stockholder return on the Company’s common stock with the S&P 500 Index and the Dow Jones U.S. Specialty Retailers Index for the period from the completion of our initial public offering on April 16, 2015 through December 31, ~~2021~~2022. The graph assumes an investment of $100 made at the closing of trading on April 16, 2015 in (i) the Company’s common stock, (ii) the stocks comprising the S&P 500 Index and (iii) the stocks comprising the Dow Jones U.S. Specialty Retailers Index. All values assume reinvestment of the full amount of all dividends, if any, into additional shares of the same class of equity securities at the frequency with which dividends were paid on such securities during the applicable time period. The stock price performance included in the line graph below is not necessarily indicative of future stock price performance. The stock performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing by us under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate the graph by reference in such filing.

Item 6. [Reserved]

2736

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

Our Company

We are ~~the~~a leading party goods company by revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally by revenue. ~~With~~We ~~hundreds~~are ofa ~~retail~~popular ~~stores~~one-stop ~~filled~~shopping ~~with~~destination ~~thousands~~for ofparty ~~products~~supplies, ~~across~~balloons, ~~the~~and ~~United~~costumes. ~~States~~In addition to being a great retail brand, we ~~make~~are ita ~~easy~~global ~~for~~organization ~~our~~that ~~customers~~combines tomanufacturing ~~find~~and ~~the~~sourcing ~~perfect~~operations and wholesale operations with a multi-channel retailing strategy and e-commerce retail operations. We design, manufacture, source and distribute party ~~supplies~~goods, including paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, ~~for~~accessories, ~~their~~novelties, ~~celebration~~gifts and stationery throughout the world. Our retail operations currently include approximately ~~830~~770 specialty retail party supply stores, which includes franchise stores throughout North America operating under the names Party City and Halloween City, and e-commerce websites, which offer rapid, contactless, and same day shipping options (including in store and at curb side), principally through the domain name ~~PartyCity~~partycity.com.

In addition to our retail operations, we are ~~also one of the largest~~ global designers, manufacturers, and distributors of decorated consumer party products, with items found in retail outlets worldwide, including independent party supply stores, mass merchants, grocery retailers, e-commerce merchandisers and dollar stores.

Chapter 11 Cases and Emergence from Bankruptcy

See “Item 1 - Business - Chapter 11 Cases” and “Item 1 - Business - Subsequent Event - Emergence from Chapter 11 Cases” for information regarding the Company’s emergence from the Chapter 11 Cases on October 12, 2023.

Anagram Bankruptcy and Disposition

See “Item 1 - Business - Subsequent Event - Anagram Bankruptcy” for information regarding Anagram’s bankruptcy and disposition.

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 reportable 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 EBITDA. For a discussion of our use of these measures and a reconciliation of adjusted EBITDA to net income (loss), please refer to “Financial Measures – Adjusted EBITDA” and “Results of Operations” below.

Segments

~~Our~~We ~~retail~~have ~~segment~~two ~~generates~~reportable ~~revenue~~operating ~~primarily~~segments: ~~through~~Retail ~~the sale of our party supplies, which are sold under the Amscan~~ and ~~Anagram brand names and Costumes USA brand names through Party City, Halloween City and PartyCity~~Wholesale.~~com. During 2021, 81.1% of the product that was sold by our retail segment was supplied by our wholesale segment and 26.7% of the product that was sold by our retail segment was self-manufactured.~~

Our ~~wholesale~~retail ~~revenues~~segment ~~are~~generates ~~generated~~revenue ~~from~~primarily through the sale of ~~decorated~~our party ~~goods~~supplies ~~for~~through ~~all~~Party ~~occasions~~City, ~~including~~Halloween ~~paper~~City, and ~~plastic~~partycity.com. ~~tableware,~~During ~~accessories and novelties~~2022, ~~costumes,~~79.8% ~~metallic~~of ~~and~~the ~~latex~~product ~~balloons~~that ~~and~~was ~~stationery. Our products are~~ sold atby ~~wholesale~~our toretail ~~party~~segment ~~goods~~was ~~superstores~~supplied ~~(including~~by our ~~franchise~~wholesale ~~stores),~~segment ~~other~~and ~~party~~24.6% ~~goods~~of ~~retailers,~~the ~~mass~~product ~~merchants,~~that ~~independent~~was ~~card~~sold ~~and~~by ~~gift~~our ~~stores,~~retail ~~dollar~~segment ~~stores~~was ~~and e~~self-~~commerce merchandisers~~manufactured.

~~Intercompany~~Our ~~sales~~retail ~~between~~operations ~~the~~are ~~Wholesale~~subject ~~and~~to ~~the~~significant ~~Retail~~seasonal ~~segment~~variations. ~~are eliminated~~Historically, ~~and~~this ~~the~~segment ~~wholesale~~has ~~profits~~realized ona ~~intercompany~~significant ~~sales~~portion ~~are~~of ~~deferred~~its revenues, cash flow and ~~realized~~net atincome in the ~~time~~fourth quarter of the ~~merchandise~~year, isprincipally ~~sold~~due to ~~the~~our ~~retail~~Halloween ~~consumer~~sales in October and, to a lesser extent, year-end holiday sales. ~~For~~To ~~segment~~maximize ~~reporting~~our ~~purposes~~seasonal opportunity, ~~certain~~we ~~general~~operate ~~and~~a ~~administrative~~chain ~~expenses~~of ~~and~~temporary ~~art~~Halloween ~~and~~stores, ~~development~~under ~~costs~~the ~~are~~Halloween ~~allocated~~City ~~based~~banner, onfrom ~~total~~August ~~revenues.~~through October of each year.

~~COVID-19 Update.~~ Our ~~retail and~~ wholesale ~~business~~revenues isare ~~centered~~generated ~~around~~from ~~social~~the ~~gatherings~~sale ~~to celebrate everyday and seasonal events. Larger gatherings generally result in greater breadth~~ of ~~product~~decorated ~~purchases~~party ~~and~~goods ~~increased~~for ~~average~~all ~~order~~occasions, ~~value~~including inpaper ~~basket. COVID-19~~ and ~~the~~plastic ~~evolving~~tableware, ~~measures~~accessories ~~taken to respond continue to impact the global economy~~ and ~~consumer spending and disrupt global supply chains in various industries. The economy has experienced variability due to geography~~novelties, ~~climate~~costumes, ~~local~~metallic and ~~state~~latex ~~variant transmission levels~~balloons, ~~vaccination adoption~~ and ~~regulatory restrictions~~stationery. ~~This~~Our inproducts ~~turn~~are ~~changes~~sold ~~consumer~~at ~~behavior~~wholesale ~~and~~to ~~our~~party ~~results.~~goods ~~For~~superstores ~~example,~~(including our ~~wholesale~~franchise ~~business in Canada was significantly affected in 2021 due to extended government-mandated lockdowns~~stores), ~~where~~other ~~a significant third-~~party ~~customer~~goods ~~base~~retailers, ismass ~~located.~~merchants, Inindependent ~~spite~~card ofand ~~these~~gift ~~challenges~~stores, ~~consumers~~dollar ~~found different ways to celebrate~~stores, and ~~we evolved our offering and go~~e-~~to-market~~commerce ~~approach to meet our customers' needs, enabling them to celebrate life's important milestone in a safe manner~~merchandisers. ~~Improving customer engagement across our marketing~~

2837

~~messages,~~Intercompany ~~our~~sales ~~product~~between the wholesale and ~~merchandising~~the ~~approach~~retail segments are eliminated, asand ~~well~~the aswholesale ~~digital~~profits ~~experiences~~on ~~with~~intercompany ~~our~~sales ~~brand~~are ~~became~~deferred ~~critical~~and realized at the time the merchandise is sold to ~~driving~~the ~~greater~~retail ~~relevancy~~consumer. For operating segment reporting purposes, certain general and administrative expenses and art and development costs are allocated based on total revenues.

~~Entering~~ ~~2021,~~Financial our focus on our core North American party platform resulted in our strategic goal of operating a more effective and customer-led vertical model. This included ongoing improvements to our integrated supply chain, expanded capacity in some of our manufacturing plants and driving new efficiencies in transportation, distribution, and inventory levels. Our logistics team has taken prudent action to ensure the highest possible in-stock rates in a challenging supply chain environment. We applied mitigation activities to address in-stock product availability and delivery and incurred additional transportation and distribution costs in order to ensure we could generally satisfy customer demand. The unique supply chain challenges have resulted in limited benefits from existing contract protections, and therefore we believe all retailers continue to be impacted by these increased costs. We continue to evaluate multiple sources of supply for products in the highest demand, particularly as we focus on quality and innovation within the supply chain, and we have begun to adjust our order timeline throughout the supply chain and continue to find transportation alternatives to mitigate what we expect will be continuing volatility. We also continue to increase capacity in our U.S. manufacturing plants, including Anagram. Measures

We have been able to maintain a reasonable level of staffing in our operations, despite challenges presented by COVID-19 and overall labor shortages in our markets. However, we have been adversely impacted by additional wage pressure in 2021, in addition to continuing impact of state law minimum wage legislation in recent years.

Overall, our pricing power in both the retail and wholesale markets has allowed us to meaningfully mitigate rising costs with appropriate price adjustments, which partially offset the forgoing cost headwinds. We have data at both the category and SKU level that allows us to make strategic pricing decisions that optimize profit and minimize impact to the consumer and our customers. As the category-defining brand, we have the pricing power to effectively mitigate the impact of rising input costs.

2021 Overview. 2021 was an important year of transformation as we advanced the fundamental building blocks of our strategy across product innovation, in-store experience, being celebration occasion obsessed and focusing on our North American vertical model. Despite the continued challenging and volatile economic backdrop, the business performed well as the consumer returned to social gatherings, celebrations and parties, while we continued to implement significant operational and capital structure improvements. We delivered a another strong year of financial and operational results with total sales up 7.7% year over year.

Throughout the year, we continued to remodel or open NXTGEN stores and enhanced the in-store experience for our customers with an increased focus on product quality and innovation. With our transformation initiatives increasing brand relevancy with our consumers, same-store sales growth led to gross margin improvement. We also finalized the sale of our international wholesale operations providing us opportunity to increase our focus on our North American vertical model. Lastly, we strengthened our financial position and liquidity by refinancing our term loan at the beginning of the year.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 reportable segments, Retail and Wholesale. These key measures include revenues and gross profit and comparable retail same-store sales. We also review other metrics such as adjusted net income (loss), adjusted net income (loss) per common share – diluted, and adjusted EBITDA.

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.

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.

29For most of our wholesale sales, control transfers upon the shipment of the product as legal title transfers at that date and at that time we have a present right to payment. 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, we use the expected value method to reasonably estimate future sales returns, which considers our extensive documented historical experience operating as a party goods wholesaler.

~~For~~Intercompany ~~most~~sales offrom our wholesale ~~sales,~~segment ~~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~~our atretail ~~such~~segment ~~time. Wholesale sales returns~~ are ~~not~~eliminated ~~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~~consolidated ~~history~~total ~~operating as a leading party goods wholesaler, we have sufficient history with which to estimate future sales returns~~revenues.

Comparable Retail Same-Store Sales. ~~Same~~The growth or decline in same-store sales ~~exclude~~represents the ~~net~~percentage change in same-store sales ofin athe period presented compared to the prior year. Our presentation of same-store ~~for~~sales ~~any~~excludes ~~period~~the net sales of a store if ~~the~~that store was not open during the same period of the prior year. ~~Acquired~~Additionally, acquired stores are excluded from same-store sales until they are converted to the Party City format and included in our sales for the comparable period of the prior year. Comparable sales are calculated based upon stores that were open at least thirteen full months as of the end of the applicable reporting period and do not exclude stores closed due to state regulations regarding COVID-19. When a store is reconfigured or relocated within the same general territory, the store continues to be treated as the same store. If, during the period presented, a store was closed, sales from that store up to and including the closing day are included as same-store sales, asprovided ~~long as~~ the store was open during the same period of the prior year. Same-store sales for the Party City brand include North American retail e-commerce sales.

Cost of Sales. Cost of sales at wholesale reflects the production costs (i.e., raw materials, labor and overhead) of manufactured goods and the direct cost of purchased goods, inventory shrinkage, inventory adjustments, inbound freight to our manufacturing and distribution facilities, distribution costs, and outbound freight to ~~get~~deliver goods to our wholesale customers. AtRetail ~~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.

~~Intercompany~~Cost of sales ~~and~~related ~~cost~~to of 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~~General ~~merchandising~~ and ~~customer~~Administrative ~~service~~Expenses (“SG&A”). ~~Costs include the salaries and benefits of the related work force~~Selling, ~~including~~general ~~sales-based bonuses~~ and ~~commissions.~~administrative ~~Other~~expenses ~~costs~~ include ~~catalogues,~~wholesale ~~showroom~~selling ~~rent~~expenses, ~~travel~~retail ~~and other~~ operating ~~costs. Certain selling~~ expenses, ~~such~~art ~~as sales-based bonuses~~ and ~~commissions,~~development ~~vary in proportion to sales, while other~~ costs ~~vary based on other factors~~, ~~such as our marketing efforts, or are largely fixed~~ and doother ~~not~~operating ~~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. 38

~~General and Administrative Expenses~~expenses. ~~General~~Wholesale ~~and~~selling ~~administrative~~ expenses include ~~all~~the ~~operating~~ costs ~~and~~associated ~~franchise~~with ~~expenses~~our ~~not~~wholesale ~~included~~sales ~~elsewhere~~and inmarketing ~~the~~efforts, ~~statement~~including ofmerchandising ~~operations~~ and ~~comprehensive~~customer ~~(loss) income~~service. ~~These~~Such ~~expenses~~costs include ~~payroll~~the salaries and ~~other~~benefits ~~expenses~~of the related towork ~~operations~~force, atincluding ~~our~~sales-based ~~corporate~~bonuses ~~offices~~and commissions, ~~including~~as ~~occupancy~~well ~~costs,~~as ~~related~~catalog ~~depreciation~~ and ~~amortization~~showroom expenses, ~~legal~~travel, and ~~professional~~other ~~fees~~operating costs. Certain selling expenses, ~~stock~~such ~~and~~as ~~equity~~sales-based ~~compensation~~bonuses and ~~data-processing~~commissions, vary in proportion to sales, while other costs. ~~These~~vary ~~expenses~~based ~~generally~~on other factors, such as our marketing efforts, or are largely fixed and do not ~~vary~~necessarily ~~proportionally~~increase ~~with~~as ~~net~~ sales volumes increase.

30Retail 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.

Art and ~~Development Costs. Art and~~ development costs include the costs associated with art production, creative development, and product management. Costs include the salaries and benefits of the related work force. These expenses generally do not vary proportionally with net sales.

~~Adjusted~~SG&A ~~EBITDA.~~expenses Wealso ~~define~~include ~~EBITDA~~all asoperating ~~net~~costs ~~income (loss) before interest expense, net, income taxes, depreciation~~ and ~~amortization.~~franchise Weexpenses ~~define Adjusted EBITDA as EBITDA, as further adjusted to eliminate the impact of certain items that we do~~ not ~~consider~~included ~~indicative~~elsewhere ~~of our core operating performance. We caution investors that amounts presented~~ in ~~accordance~~the ~~with~~consolidated ~~our~~statements ~~definition~~ of ~~Adjusted~~operations ~~EBITDA~~and ~~may~~comprehensive ~~not~~(loss) beincome. ~~comparable~~These toexpenses ~~similar~~include ~~measures~~payroll ~~disclosed~~and by other ~~issuers,~~expenses ~~because~~related ~~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~~operations ~~because~~at ~~we believe it assists investors in comparing~~ our ~~performance~~corporate ~~across~~offices, ~~reporting~~including ~~periods~~occupancy oncosts, arelated ~~consistent~~depreciation ~~basis~~and byamortization, ~~eliminating~~legal ~~the~~and ~~impact~~professional ~~of items that we do not believe are indicative of our core operating performance. In addition~~fees, westock ~~use~~and ~~Adjusted~~equity-based ~~EBITDA: (i) as a factor in determining incentive~~ compensation, ~~(ii) to evaluate the effectiveness of our business strategies,~~ and ~~(iii)~~data-processing ~~because~~costs. ~~the~~These ~~credit~~expenses ~~facilities~~generally ~~use~~do ~~Adjusted~~not ~~EBITDA~~vary toproportionally ~~measure compliance~~ with ~~certain~~net ~~covenants~~sales.

~~Adjusted~~Store ~~Net~~and ~~Income~~Other ~~(Loss).~~Long-Lived ~~Adjusted~~Asset ~~net~~Impairments. ~~income~~Store ~~(loss)~~and ~~represents our net income (loss), adjusted for, among~~ other ~~items,~~long-lived ~~intangible~~ asset ~~amortization,~~impairments ~~non-cash~~include ~~purchase~~impairment ~~accounting~~charges ~~adjustments,~~for ~~amortization~~vacated ofretail ~~deferred~~stores ~~financing costs~~ and ~~original~~office ~~issue discounts~~space, ~~refinancing~~as ~~charges,~~well ~~equity-based~~as ~~compensation and~~ impairment charges. Wefor ~~present~~active ~~adjusted~~stores ~~net~~for ~~income~~which ~~because~~the wecarrying ~~believe~~value itof ~~assists~~store ~~investors~~assets inexceed ~~comparing~~its ~~our~~projected ~~performance~~discounted ~~across~~cash ~~reporting~~flows. ~~periods~~In onaddition, ain ~~consistent~~2022, ~~basis~~Store byand ~~eliminating~~Other ~~the~~Long-Lived ~~impact~~Asset ofImpairments ~~items~~also ~~that~~include weimpairment docharges ~~not~~related ~~believe~~to ~~are~~abandoned ~~indicative~~information ofsystem ~~our core operating performance~~projects.

~~Adjusted~~In ~~Net~~2021 ~~Income~~and ~~(Loss)~~2020, ~~Per~~Store ~~Common~~and ~~Share~~Other –Long-Lived ~~Diluted~~Asset ~~represents~~Impairments ~~adjusted~~included ~~net~~impairment ~~income~~and ~~(loss)~~other ~~divided~~charges byrelated to the ~~Company’s~~facility ~~diluted~~closures ~~weighted~~and ~~average common shares outstanding. We present~~ the ~~metric~~Company’s ~~because~~store weoptimization ~~believe~~program, itrespectively, ~~assists~~as ~~investors~~discussed in ~~comparing~~more ~~our~~detail ~~per~~in ~~share~~Note ~~performance~~3 ~~across reporting periods on a consistent basis by eliminating the impact~~ of ~~items~~our ~~that~~consolidated wefinancial dostatements ~~not~~in ~~believe~~Part ~~are~~II, ~~indicative~~Item ~~of our core operating performance~~8.

~~The~~Goodwill ~~Company~~and ~~presents~~Intangible ~~the~~Assets ~~measures~~Impairments. ofGoodwill ~~adjusted~~impairment ~~EBITDA,~~is ~~adjusted~~recognized ~~net~~when ~~income~~the ~~(loss)~~carrying ~~and~~value ~~adjusted~~of ~~net~~a ~~income~~reporting ~~(loss)~~unit ~~per~~exceeds ~~common share - Diluted as supplemental non-GAAP measures of~~ its ~~operating~~fair ~~performance~~value. ~~You~~Impairment ~~are~~is ~~encouraged~~recognized ~~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’s ~~may~~indefinite-lived ~~incur~~trade ~~expenses~~names ~~that~~when ~~are~~ the ~~same~~estimated ~~as,~~fair orvalue ~~similar to, some~~ of the ~~adjustments~~trade inname ~~this~~is ~~presentation.~~less ~~The~~than ~~Company’s~~its ~~presentation~~carrying ofamount. ~~adjusted~~Impairment ~~EBITDA,~~for ~~adjusted~~finite-lived ~~net~~intangible ~~income~~assets ~~and~~is ~~adjusted~~recognized ~~net~~when ~~income~~is ~~per~~more ~~common~~likely ~~share—diluted~~than ~~should~~ not ~~be construed as an inference~~ that ~~the~~those ~~Company’s~~long-lived ~~future~~assets ~~results~~ will be ~~unaffected~~disposed byof ~~unusual~~significantly orbefore ~~non-recurring items. The Company presents~~ the ~~measures~~end 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~~their ~~core~~previously ~~operating~~estimated ~~performance.~~useful ~~The~~lives 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. Because of these limitations, adjusted EBITDA, adjusted net income, and adjusted net income per common share—diluted should not be considered in isolation or aswhen ~~substitutes~~events ~~for~~occur ~~performance~~that ~~measures~~indicate ~~calculated in accordance with GAAP. The Company compensates for these limitations by relying primarily on its GAAP results and using~~ the ~~metrics~~asset ~~only~~is onnot ~~a supplemental basis and reconciliations from GAAP to non-GAAP measures are provided~~recoverable. ~~Some of the limitations of non-GAAP measures are:~~

~~they~~Loss doon ~~not~~Disposal ~~reflect~~of Assets in International Operations. In January 2021, the Company’s ~~cash~~sold ~~expenditures~~a orsubstantial ~~future~~portion ~~requirements~~of its international operations. As of December 31, 2020, the assets and liabilities of the international operations were considered held for ~~capital~~sale, ~~expenditures~~and orthe ~~contractual~~loss ~~commitments;~~reserve on the assets was recorded to this line item in the Company’s consolidated statements of operations and comprehensive (loss) income.

~~they~~Adjusted EBITDA. We define EBITDA as net income (loss) before interest expense, net, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA, further adjusted to eliminate the impact of certain items that we do not ~~reflect~~consider ~~changes~~indicative of our core operating performance. 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, orwe ~~cash~~use ~~requirements~~Adjusted ~~for~~EBITDA: (i) as a factor in determining incentive compensation, (ii) to evaluate the ~~Company’s~~effectiveness ~~working~~of ~~capital~~our ~~needs;~~business strategies, and (iii) because the credit facilities use Adjusted EBITDA to measure compliance with certain covenants.

~~adjusted~~The Company presents Adjusted EBITDA ~~does~~as ~~not~~a ~~reflect~~supplemental non-GAAP measure of its operating performance. You are encouraged to evaluate Adjusted EBITDA and the ~~significant~~reasons ~~interest~~the ~~expense~~Company considers it appropriate for supplemental analysis. In evaluating Adjusted EBITDA, oryou should be aware that in the ~~cash~~future, ~~requirements~~the ~~necessary~~Company tomay ~~service~~incur ~~interest~~expenses that are the same as, or ~~principal~~similar ~~payments~~to, onsome of the adjustments in this presentation. The Company’s ~~indebtedness;~~presentation of Adjusted EBITDA should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. Adjusted EBITDA has limitations as an analytical tool. Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. The Company compensates for these limitations by

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; 39

31relying primarily on its GAAP results and using Adjusted EBITDA on a supplemental basis, and a reconciliation of the most comparable GAAP financial measure to Adjusted EBITDA is provided. Some of the limitations of these Adjusted EBITDA are:

•

~~non-cash~~it ~~compensation~~does isnot ~~and~~reflect ~~will remain a key element of~~ the Company’s ~~overall~~cash ~~long-term~~expenditures ~~incentive~~or ~~compensation~~future ~~package,~~requirements ~~although~~for ~~the~~capital ~~Company~~expenditures ~~excludes~~or itcontractual ~~as an expense when evaluating its core operating performance for a particular period~~commitments;

•

~~they~~it dodoes not reflect ~~the~~changes ~~impact~~in, ofor ~~certain~~ cash ~~charges~~requirements ~~resulting~~for, ~~from matters~~ the Company’s ~~considers~~working ~~not~~capital ~~to be indicative of its ongoing operations~~needs; ~~and~~

•

~~other~~it ~~companies~~does innot reflect the ~~Company’s~~significant ~~industry~~interest ~~may calculate adjusted EBITDA~~expense, ~~adjusted~~or ~~net~~the ~~income~~cash ~~and~~requirements ~~adjusted~~necessary ~~net~~to ~~income~~service ~~per~~interest ~~common~~or ~~share~~principal ~~differently~~payments, ~~than~~on the Company’s ~~does, limiting its usefulness as a comparative measure.~~ 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 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;

•

it does 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 differently than the Company does, which could limit its usefulness as a comparative measure.

Results of Operations

The following tables set forth selected historical consolidated financial data for the periods and as of the dates indicated below. The tables include our operating results and operating results as a percentage of total revenues for the years ended December 31, 2021 and 2020. Overview

~~For~~Impact ~~a detailed discussion~~ of ~~our~~Macro ~~consolidated results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019, see Part II, Item 7 “Management’s Discussion~~ and ~~Analysis~~Consumer ofEnvironment ~~Financial Condition and Results of Operation” under “Results of Operations” in our annual report~~ on ~~Form~~Our ~~10-K for the year ended December 31, 2020.~~Business

	Fiscal Year Ended December 31,
	2021						2020
	(Dollars in thousands, except per share data)
Net sales	$	2,171,060		100.0		%	$	1,850,690		100.0		%
Cost of sales		1,403,004		64.6				1,369,935		74.0
Gross profit		768,056		35.4				480,755		26.0
Wholesale selling expenses		30,762		1.4				50,121		2.7
Retail operating expenses		432,531		19.9				387,398		20.9
General and administrative expenses		186,698		8.6				225,322		12.2
Art and development costs		21,174		1.0				17,638		1.0
Store impairment and restructuring charges		—		-				22,449		1.2
Loss on disposal of assets in international operations		3,211		0.1				73,948		4.0
Goodwill, intangibles and long-lived assets impairment		9,048		0.4				581,380		31.4
Income (loss) from operations		84,632		3.9				(877,501	)	(47.4	)
Interest expense, net		87,226		4.0				77,043		4.2
Other (income) expense, net		(614	)	-				3,715		0.2
Gain on debt repayment/refinancing		(1,106	)	(0.1	)			(273,149	)	(14.8	)
Loss before income taxes		(874	)	-				(685,110	)	(37.0	)
Income tax expense (benefit)		5,708		0.3				(156,653	)	(8.5	)
Net loss		(6,582	)	(0.3	)	%		(528,457	)	(28.6	)	%
Less: Net loss attributable to noncontrolling interests		(54	)	-				(219	)	-
Net loss attributable to common shareholders of Party City Holdco Inc.	$	(6,528	)	(0.3	)	%	$	(528,238	)	(28.5	)	%
Net loss per share attributable to common shareholders of Party City Holdco Inc.—basic	$	(0.06	)				$	(5.24	)
Net loss per share attributable to common shareholders of Party City Holdco Inc.—diluted	$	(0.06	)				$	(5.24	)

In recent years, our business was impacted by many of the macroeconomic inflationary headwinds affecting other businesses, which have resulted in higher input costs including higher costs associated with: (i) freight and transportation; (ii) commodities such as helium; (iii) raw materials and finished goods; and (iv) wage rates for talent. These factors and the Company’s responses to them, including raising product prices, have impacted consumer discretionary spending and purchasing behavior, leading to continued pressure on margins and overall profitability, and some of these headwinds have continued into 2023 while some have abated. As such, our forward-looking projections of revenues, earnings, and cash flow may be adversely impacted if the macroeconomic environment continues or further deteriorates.

32While we navigate this near-term turbulence in costs, we are being thoughtful with our mitigating actions on pricing and are reassessing all vendor relationships. Further, given the continued broader macro pressures, we are operating the business with even more discipline from an expense and capital standpoint. We are also continuing to focus on our strategic priorities of enhancements to customer engagement as well as digital, information technology, and supply chain.

	Fiscal Year Ended December 31,
	2021				2020
Statement of Cash Flow Data:
Net cash provided by (used in)
Operating activities	$	51,935			$	77,200
Investing activities		(65,395	)			(54,271	)
Financing activities		(89,125	)			93,704
Per Share Data:
Basic	$	(0.06	)		$	(5.24	)
Diluted	$	(0.06	)		$	(5.24	)
Weighted Average
Outstanding basic		110,980,934				100,804,944
Diluted		110,980,934				100,804,944
Cash dividend per common share		—				—
Other Financial Data:
Adjusted EBITDA	$	266,294			$	95,534
Adjusted net income	$	78,251			$	(49,230	)
Adjusted net income per common share—diluted	$	0.68			$	(0.45	)
Number of company-owned Party City stores		759				746
Capital expenditures	$	79,222			$	51,128
Party City brand comp sales		34.2		%		(16.5	)	%
Wholesale Share of shelf (a)		81.1		%		82.1		%
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	47,914			$	119,532
Working capital		128,424				95,383
Total assets		2,711,900				2,806,455
Total debt		1,436,743				1,519,091
Redeemable common securities		—				—
Total equity		82,714				50,521

We will continue on the path of progressing our transformation strategy, focusing on fewer initiatives, addressing structural costs (including workforce reductions already enacted), and increasing operating efficiencies given the challenging environment. Also, as part the reorganization we are undertaking as a result of the Chapter 11 Cases, we are assessing further cost savings opportunities for 2023 and beyond.

~~Represents~~Freight ~~the percentage of product costs included in cost of goods sold by our Party City stores~~ and ~~North American retail e - commerce operations which relate to products supplied by our wholesale operations.~~Transportation

	Fiscal Year Ended December 31,
	2021				2020
Net loss	$	(6,582	)		$	(528,457	)
Interest expense, net		87,226				77,043
Income taxes		5,708				(156,653	)
Depreciation and amortization		65,611				76,506
EBITDA		151,963				(531,561	)
Store impairment and restructuring charges		—				39,323		(a)
Inventory restructuring and early lease terminations		7,157		(b)
Goodwill, intangibles, long-lived assets impairment		11,974		(c)		581,380		(c)
Other restructuring, retention and severance		2,346				12,104
Deferred rent		3,325		(d)		(3,147	)	(d)
Corporate development expenses		—				7,197		(e)
Foreign currency losses (gains)		(1,090	)			(1,058	)
Closed store expense		4,743		(f)		3,858		(f)
Stock option expense		397		(g)		8,643		(g)
Non-employee equity based compensation		—				1,033		(h)
Restricted stock units expense—time based		2,557		(i)		2,071		(i)
Restricted stock units expense—performance based		3,773		(i)		1,460		(i)
Undistributed loss (income) in equity method investments		(220	)			—
Non-recurring legal settlements/costs		—				7,843
(Gain) on debt repayment/refinancing		(1,106	)	(j)		(273,149	)	(j)
Loss on disposal of property, plant and equipment		2,784				—
Loss on sale of business		3,211		(k)		73,948		(k)
Inventory disposal reserve		68,707		(l)		88,358		(l)
COVID - 19		1,270		(m)		73,843		(m)
Other		4,502				3,388
Adjusted EBITDA	$	266,294			$	95,534

While we saw freight and transportation costs increase in 2021 and 2022 as a result of global supply chain bottlenecks and elevated energy price pressures, such cost increases have eased in 2023, and we have experienced lower freight and transportation costs.

33Talent Constraints

	Fiscal Year Ended December 31,
	2021				2020
Loss before income taxes	$	(874	)		$	(685,110	)
Intangible asset amortization		9,075				11,362
Amortization of deferred financing costs and original issuance discounts		4,516				4,198
Store impairment and restructuring charges		—				30,813		(a)
Goodwill and intangibles impairment		11,974		(c)		581,380		(c)
Stock option expense		397		(g)		8,643		(g)
Restricted stock units expense—performance based		3,773		(i)		1,460		(i)
Non-employee equity based compensation		—				1,033		(h)
Other restructuring charges		1,967				10,139
Non-recurring legal settlements		—				7,094
(Gain) on debt refinancing		—				(273,149	)
(Gain) on sale of Canada retail assets		—				—
Loss on sale of assets		2,642
Inventory disposal reserve		69,632		(l)		88,358		(l)
Loss on sale of business		3,211		(k)		73,948		(k)
COVID - 19		1,270		(m)		73,661		(m)
Adjusted income (loss) before income taxes		107,583				(66,170	)
Adjusted income tax expense (benefit)		29,332		(n)		(16,940	)	(n)
Adjusted net income (loss)	$	78,251			$	(49,225	)
Adjusted net income (loss) per common share—diluted	$	0.68			$	(0.49	)

In recent years prior to 2023, our operations were impacted by labor availability and, in response, we increased wage rates throughout 2021 and 2022 to attract and retain talent at our retail stores and in our distribution facilities. However, management has enacted certain store staffing initiatives in an attempt to mitigate rising labor

During the years ended December 31, 2020 and 2019, the Company performed a comprehensive review of its store locations aimed at improving the overall productivity of such locations (“store optimization program”) and, after careful consideration and evaluation of the store locations, the Company made the decision to accelerate the optimization of its store portfolio. In January 2020, 20 stores were closed. In the first quarter of 2020, 21 additional stores identified for closure and were closed in the third quarter. These closings provided the Company with capital flexibility to expand into underserved markets. In addition, the Company evaluated the recoverability of long-lived assets at the open stores and recorded an impairment charge associated with the operating lease asset and property, plant and equipment for open stores where sales were affected due to the outbreak of, and local, state and federal governmental responses to, COVID-19. Refer to Note 3 – Store Impairment and Restructuring Charges, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further detail.40

~~Costs~~costs ~~incurred for early lease terminations~~ and aminimum ~~merchandise~~wage ~~transformation~~increases ~~project~~anticipated toin ~~transition~~certain state and ~~optimize~~local ~~stores~~municipalities toin ~~the reduced SKU assortment levels~~2024.

InHelium December 2021, the Company announced the closure of a manufacturing facility in New Mexico that will cease operations in February 2022. As a result, the Company recorded charges consisting primarily of equipment and inventory impairments, severance and other costs (see Note 6, Disposition of Assets and Assets and Liabilities Held for Sale of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion). During the year ended December 31, 2020, as a result of a sustained decline in market capitalization, the Company recognized non-cash pre-tax goodwill and intangibles impairment charges. (see Note 4, Goodwill, of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K).Constraints

~~The~~Beginning ~~deferred~~in ~~rent~~late ~~adjustment~~2021 ~~reflects~~and ~~the~~continuing ~~difference~~into ~~between~~2022, ~~accounting~~we ~~for~~saw ~~rent~~both supply limitations and ~~landlord~~price ~~incentives~~increases infor ~~accordance~~helium, ~~with~~which ~~GAAP~~impacted consumer demand for balloons, pressuring both our retail and wholesale business segments. In response, the Company’s ~~actual~~diversified ~~cash~~its ~~outlay~~base ~~for~~of suppliers that provide products and materials to our retail stores, sought direct sourcing of helium, and refined retail pricing. Further, as a reaction to such ~~items~~market conditions, we have seen pressure on third-party wholesale balloon purchases. Although the industry continues to face increased costs, which impact consumer demand, we believe that our mitigation measures have significantly offset the pressures faced due to global helium capacity constraints. From a cost perspective, our Retail segment experienced material increases in the cost of helium in 2022, with costs holding relatively consistent in 2023. We are continuing to diversify our source base of suppliers to mitigate future supply constraints.

~~The~~For ~~acquisition~~additional ~~of Ampology’s interest in Kazzam~~details, ~~LLC~~see inPart ~~an equity transaction. See Note 17 – Kazzam~~I, ~~LLC in~~ Item 11A, ~~for~~“Risk ~~further discussion~~Factors.”

~~Principally~~OPERATING ~~charges incurred related to closing underperforming stores.~~ METRICS

~~Represents~~We ~~non-cash~~believe ~~charges~~our ~~related~~financial results and growth model will continue to ~~stock~~be ~~options~~driven by store count, wholesale share of shelf, manufacturing share of shelf management, and comparable sales. We believe these key operating metrics shown below as of and for the year ended December 31, 2022 and 2021 are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies.

Amounts for 2020 principally represents shares of Kazzam awarded to Ampology as compensation for Ampology’s services. See Note 25, Kazzam LLC., of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion.


	Year ended December 31,
	2022			2021
Store Count
Corporate Stores:
Beginning of period		759			746
New stores opened		11			10
Acquired		11			10
Closed		(6	)		(7	)
End of period		775			759
Franchise Stores:
Beginning of period		72			85
Sold to Party City		(11	)		(10	)
Closed		(2	)		(3	)
End of period		59			72
Grand Total		834			831

Non-cash charges for restricted stock units that vest based on service conditions and performance restricted stock units that vest based on service and performance conditions.


	Year ended December 31,
	2022	2021
Wholesale Share of Shelf (a)	79.8%	81.1%
Manufacturing Share of Shelf (b)	24.6%	26.7%
	Year ended December 31,
	2022	2021
Brand comparable sales (c)	-1.4%	34.2%

(a)

~~The~~Wholesale ~~Company~~share ~~recognized~~of ~~net~~shelf ~~gain~~represents ~~on debt repayment in 2021. In 2020,~~ the ~~Company~~percentage ~~recognized~~of aour ~~gain~~retail onproduct ~~debt~~cost ~~refinancing transactions as described in Note 12 — Long-Term Obligations~~ of ~~Item~~sales 8,supplied ~~“Financial~~by ~~Statements~~our ~~and~~wholesale ~~Supplementary Data” in this Annual Report on Form 10-K~~operations.

(b)

~~The~~Manufacturing ~~Company~~share ~~sold a substantial portion~~ of ~~its~~shelf ~~international~~represents ~~operations. Related to~~ the ~~sale,~~percentage ~~the Company recorded a loss reserve in 2020 and an additional loss in 2021. (see Note 6, Disposition~~ of ~~Assets~~our ~~and~~retail ~~Assets~~product ~~and~~cost ~~Liabilities Held for Sale~~ of ~~Item~~sales 8,manufactured ~~“Financial~~by ~~Statements~~the ~~and Supplementary Data” in this Annual Report on Form 10-K for further discussion)~~Company.

(c)

AsParty ~~indicated~~City inbrand ~~Note~~comparable 7sales –include ~~Inventories,~~North ~~Net,~~American ofe-commerce ~~Item~~sales. 8,Comparable ~~“Financial~~store ~~Statements~~sales ~~and~~growth ~~Supplementary~~represents ~~Data,” in this Annual Report on Form 10-K,~~ the ~~Company~~percentage ~~continued~~change toin ~~make~~sales ~~progress~~ in ~~improving~~one ~~inventory~~period ~~levels~~from ~~across~~the ~~its~~same ~~stores~~prior ~~and~~year ~~distribution~~period ~~network.~~for ~~Consistent with the strategy of rationalizing in~~Company-~~store~~operated ~~SKU~~stores ~~count~~open ~~and~~for ~~improving~~13 ~~working~~months ~~capital~~or ~~velocity, the Company has~~ longer.

34Year Ended December 31, 2022 Compared To Year Ended December 31, 2021

~~updated~~The ~~its~~following ~~seasonal~~tables ~~assortment~~set ~~strategy~~forth toselected ~~target~~historical ~~higher~~consolidated ~~in-season~~financial ~~sell-through~~data offor ~~merchandise~~the periods and ~~reduce~~as ~~annual~~of ~~inventory~~the ~~carry-over~~dates indicated below. AsThe atables ~~result,~~include ~~for~~our ~~inventory~~operating ~~not~~results ~~required~~and ~~for~~operating ~~future~~results ~~seasons,~~as ~~the~~a ~~Company~~percentage ~~recorded~~of atotal ~~reserve~~revenues for ~~future~~the ~~disposals~~years inended ~~2021~~December ~~and~~31, ~~disposed~~2022 of and ~~recorded a reserve for future disposals in 2020~~2021.

~~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.~~41

~~Represents~~For ~~income~~a ~~tax~~detailed ~~expense/benefit~~discussion ~~after~~of ~~excluding~~our ~~the~~consolidated ~~specific~~results ~~tax~~of ~~impacts~~operations for ~~each~~the ofyear ~~the~~ended ~~pre-tax~~December ~~adjustments.~~31, ~~The~~2021 ~~tax~~compared ~~impacts~~to ~~for~~the ~~each~~year ofended ~~the~~December ~~adjustments~~31, ~~were~~2020, ~~determined~~see byPart ~~applying~~II, toItem ~~the~~7 ~~pre-tax~~“Management’s ~~adjustments~~Discussion ~~the~~and ~~effective~~Analysis ~~income~~of ~~tax~~Financial ~~rates~~Condition ~~for~~and ~~the~~Results ~~specific~~of ~~legal~~Operation” ~~entities~~under “Results of Operations” in ~~which~~our annual report on Form 10-K for the ~~adjustments~~year ~~were~~ended ~~recorded.~~December 31, 2021.


	Year ended December 31,
	2022						2021
	(Dollars in thousands, except per share data)
Net sales	$	2,169,878		100.0		%	$	2,171,060		100.0		%
Cost of sales		1,437,077		66.2				1,403,004		64.6
Gross profit		732,801		33.8				768,056		35.4
Selling, general and administrative expenses		707,246		32.6				671,165		30.9
Store and other long-lived asset impairments		23,277		1.1				9,048		0.4
Loss on disposal of assets in international operations		—		—				3,211		0.1
Goodwill and intangible asset impairments		862,544		39.8				—		—
(Loss) income from operations		(860,266	)	(39.6	)			84,632		3.9
Interest expense, net		102,647		4.7				87,226		4.0
Other (income) expense, net		(3,789	)	(0.2	)			(614	)	—
Gain on debt repayment/refinancing		—		—				(1,106	)	(0.1	)
Loss before income taxes		(959,124	)	(44.2	)			(874	)	—
Income tax (benefit) expense		(16,494	)	(0.8	)			5,708		0.3
Net loss		(942,630	)	(43.4	)	%		(6,582	)	(0.3	)	%
Less: Net loss attributable to noncontrolling interests		—		—				(54	)	—
Net loss attributable to common shareholders of Party City Holdco Inc.	$	(942,630	)	(43.4	)	%	$	(6,528	)	(0.3	)	%
Net loss per share attributable to common shareholders of Party City Holdco Inc.—basic and diluted	$	(8.35	)				$	(0.06	)


	Year ended December 31,
	2022				2021
Statement of Cash Flow Data:
Net cash (used in) provided by
Operating activities	$	(151,935	)		$	51,935
Investing activities		(96,062	)			(65,395	)
Financing activities		259,538				(89,125	)
Per Share Data:
Basic and diluted	$	(8.35	)		$	(0.06	)
Weighted Average
Outstanding basic and diluted		112,911,368				110,980,934
Other Financial Data:
Adjusted EBITDA	$	127,652			$	185,981
Number of company-operated Party City stores		775				759
Capital expenditures	$	97,539			$	79,222
Party City brand comp sales		(1.4	)	%		34.2		%
Wholesale Share of shelf (a)		79.8		%		81.1		%
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	59,421			$	47,914
Working capital		(1,318,211	)			128,424
Total assets		2,019,997				2,711,900
Total debt		1,702,882				1,436,743
Total equity		(857,827	)			82,714

(a)

Represents the percentage of product costs included in cost of goods sold by our Party City stores and North American retail e-commerce operations which relate to products supplied by our wholesale operations.

Revenues

Total revenues for ~~2021~~2022 were $2,~~171~~169.19 million, ana ~~increase~~decrease of $~~320~~1.42 million, or 170.31% ~~higher~~lower than ~~2020~~2021. The following table sets forth the Company’s total revenues for the years ended December 31, ~~2021~~2022 and ~~2020~~2021.

	Fiscal Year Ended December 31,
	Year ended December 31,
	2021							2020
	2022							2021
	Dollars in Thousands			Percentage of Total Revenues				Dollars in Thousands			Percentage of Total Revenues
Net Sales:
Wholesale	$	~~990~~1,~~636~~182,917			4554.65		%	$	~~940~~990,~~228~~636			5045.86		%
Eliminations		(~~589~~788,~~562~~665	)		(2736.23	)			(~~471~~589,~~863~~562	)		(2527.52	)
Net wholesale		~~401~~394,~~074~~252			18.52				~~468~~401,~~365~~074			2518.35
Retail		1,~~769~~775,~~986~~626			81.58				1,~~382~~769,~~325~~986			7481.75
Total revenues	$	2,~~171~~169,~~060~~878			100.0		%	$	12,~~850~~171,~~690~~060			100.0		%

Retail

Retail net sales during ~~2021~~2022 were $1,~~770~~775.06 million, an increase of $~~387~~5.76 million, or ~~28.~~0.3%, compared to ~~2020~~2021. ~~Retail~~The ~~net~~increase ~~sales~~was atprimarily driven by our temporary Halloween stores (principally Halloween City), partially offset by our Party City stores. Sales at our temporary Halloween stores totaled $~~1,734~~51.36 million and were $~~359~~15.69 million, or ~~26.2~~44%, higher than ~~2020.~~2021 ~~Growth~~due into ~~same-store~~an ~~sales~~increase ~~for~~in ~~the~~temporary ~~Party~~store ~~City~~locations ~~brand,~~(149 ~~and~~stores ~~higher~~in ~~Halloween~~2022 ~~City~~vs. ~~store~~90 ~~count~~stores ~~and~~in ~~sales~~2021). ~~this~~Retail ~~year~~net ~~was~~sales ~~partially~~at ~~offset~~our byParty ~~the~~City ~~divestiture~~stores oftotaled ~~international retail operations. In addition~~$1,724 ~~store~~million ~~sales~~and were ~~impacted~~$10.2 bymillion, ~~store~~or ~~openings~~1%, ~~and~~lower ~~franchise~~than ~~acquisitions during the year~~ 2021. Same-store sales for the Party City brand ~~increased~~(including North America retail e-commerce sales) decreased by 371.64% during ~~2021~~2022. ~~Sales~~The atdecrease ~~our~~was ~~temporary~~primarily ~~Halloween~~due ~~stores~~to ~~(principally~~lower ~~Halloween~~sales ~~City)~~of ~~totaled~~core ~~$35.7~~products ~~million~~in ~~and~~everyday ~~were~~categories, ~~$28.1~~partially ~~million~~offset by higher ~~than~~sales ~~2020~~in ~~due~~our toseasonal ~~increased demand and store count~~categories.

Wholesale

Wholesale net sales during ~~2021~~2022 totaled $~~401~~394.13 million and were $676.38 million, or 141.4 7%, lower than ~~2020~~2021. ~~The~~This ~~total wholesale net sales~~ decrease is ~~primarily~~principally due to a decline in Anagram sales and the prior year divestiture of a significant portion of our international operations, partially offset by ~~increased~~higher sales ~~across~~within our ~~wholesale~~Canadian ~~customer~~business ~~base.~~and ~~Net sales~~ to ~~domestic~~franchise ~~party goods retailers~~ and ~~distributors~~independent ~~(including our franchisee network) totaled $171~~customers.8 ~~million~~Excluding ~~and~~the ~~were~~impact ~~$6.0~~of ~~million,~~the ~~or 3.6%~~divestiture, ~~higher~~wholesale ~~than during 2020. Wholesale net~~ sales ~~excluding~~increased ~~divested~~by ~~international operations were $387~~1.~~0 and $308.9 in 2021 and 2020, representing a year over year sale increase of 25.3~~6%.

~~Net~~Intercompany sales ~~of metallic balloons~~ to ~~domestic distributors and retailers (including~~ our ~~franchisee~~retail ~~network)~~affiliates totaled $91788.97 million during ~~2021~~2022 and were $18199.81 million, orhigher 25than during the prior year. Intercompany sales represented 66.7%, ~~higher~~of ~~than~~total Wholesale sales during ~~2020~~2022, ~~primarily~~compared to 59.5% in 2021. The increase in 2022 intercompany sales was principally due to higher ~~post-COVID~~Halloween ~~demand~~sales to stores as well as easing of supply chain constraints as we replenished store inventory. Intercompany sales from our wholesale segment to our retail segment are eliminated in our consolidated total revenues. Likewise, cost of sales related to sales from our wholesale segment to our retail segment are eliminated in our consolidated financial statements.

Intercompany sales to our retail affiliates totaled $589.6 million during 2021and were $117.7 million higher than during the prior year. The increase in 2021 intercompany sales principally reflects a higher store count compared to 2020 and an increase in purchases due to higher demand, partially offset by the impact of divestiture of international affiliates. The intercompany sales of our wholesale segment were eliminated against the intercompany purchases of our retail segment in the consolidated financial statements. Intercompany sales represented 59.5% of total wholesale sales during 2021, compared to 50.2% during 2020.

Gross Profit

The following table sets forth the Company’s gross profit for the years ended December 31, ~~2021~~2022 and December 31, ~~2020~~2021.

	Fiscal Year Ended December 31,
	Year ended December 31,
	2021					2020
	2022					2021
	Dollars inThousands		Percentageof Net Sales			Dollars inThousands		Percentageof Net Sales
Retail Gross Profit	$	~~694~~647,~~557~~553		3936.25	%	$	~~406~~694,~~499~~557		2939.42	%
Wholesale Gross Profit		7385,~~499~~248		1821.36	%		7473,~~256~~499		1518.93	%
Total Gross Profit	$	~~768~~732,~~056~~801		3533.48	%	$	~~480~~768,~~755~~056		2635.04	%

The gross profit margin on net sales at retail during ~~2021~~2022 was 3936.25% or ~~980~~270 basis points ~~higher~~lower than 2939.12% during ~~2020~~2021. The ~~increase~~change iswas primarily ~~attributable~~driven toby ~~stronger~~higher infreight, ~~store~~raw ~~sales~~materials, ~~leverage~~helium, onand occupancy ~~expense~~costs and lower year over year inventory write-offs and markdowns in conjunction with the Company's 2020 store optimization program. The manufacturing share of shelf at retail (i.e., the percentage of our retail product cost of sales manufactured by our wholesale segment) increased to 26.7% during ~~2021 from 26.0% in 2020, driven by~~ the ~~increased balloon production in our wholesale business~~period. 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 8179.18% during ~~2021~~2022 compared to 8281.1% during ~~2020~~2021.

The gross profit on net sales at wholesale during ~~2021~~2022 and ~~2020~~2021 was 1821.36% and 1518.93%, respectively. ~~This~~The ~~improvement~~comparison isof ~~primarily~~wholesale ~~due~~gross profit to the ~~deleverage caused by the COVID-19 shutdowns in the~~ prior ~~period,~~year ~~the~~is ~~divestiture~~significantly ofimpacted ~~lower margin international operations partially offset~~ by a ~~portion~~$68.7 ofmillion ~~the~~ inventory disposal ~~reserve in 2021, and higher freight, material and labor costs.~~

As indicated in Note 7 – Inventories, Net, of Item 8, “Financial Statements and Supplementary Data,” in this Annual Report on Form 10-K, the Company continued to make progress in improving inventory levels across its stores and distribution network. Consistent with the strategy of rationalizing in-store SKU count and improving working capital velocity, the Company has updated its seasonal assortment strategy to target higher in-season sell-through of merchandise and reduce annual inventory carry-over. As a result, for inventory not required for future seasons, the Company recorded a reserve for future disposals in 2021 and a reserve for future disposals and disposed of inventory in 2020. Such amounts are included in cost of sales. 43

reserve recorded in the prior year, which was partially offset by higher freight, material, and labor costs in the current year.

Operating expenses

~~Wholesale~~Selling, ~~selling~~general and administrative expenses during 2022 totaled $30707.82 million ~~during~~and ~~2021~~were ~~compared to~~ $5036.1 million, ~~during~~or ~~2020~~5.4%, ~~The~~higher ~~decrease~~than ofin ~~$19~~2021.4 ~~million~~The increase was primarily driven by higher employee-related costs resulting from an increase in wages, orpredominately 38within our retail stores and corporate reorganization professional fees incurred in 2022 for which there were no comparable costs in the prior year.~~7%,~~ isThese ~~primarily~~were ~~due~~partially tooffset by lower incentive compensation in the current year and the international divestiture discussed above. Selling, general and administrative expenses as a percentage of total revenues were 32.6% and 30.9% during 2022 and 2021, respectively.

~~Retail~~Store ~~operating expenses during 2021 were $432.5 million~~ and ~~were~~Other ~~$45.1~~Long-Lived ~~million,~~Asset orImpairment 11.7%, higher than in 2020, primarily driven by higher payroll and bank charges related to higher sales, partially offset by the international divestiture. Retail operating expenses were 24.4% and 28.0% of net retail sales during 2021 and 2020, respectively. Charges

~~General~~In ~~and administrative expenses during 2021 totaled $186.7 million and were $38.6 million~~2022, orthe ~~17.1%,~~following ~~lower~~developments ~~than~~led ~~in 2020. The decrease is due~~ to the ~~international~~impairment ~~divestiture and lower legal and professional fees, partially offset by increased payroll costs. General and administrative expenses as a percentage~~ of ~~total~~store-related ~~revenues were 8.6%~~ and ~~12.2%~~other ~~during~~long-lived ~~2021 and 2020, respectively.~~assets:

•

~~Art and development costs were $21.2 million and $17.6 million during 2021 and 2020, respectively, consistent at 1.0% of total revenue.~~ The ~~increase~~Company invacated ~~2021~~certain ~~was~~office ~~mainly~~space ~~due to higher payroll costs, consulting fees~~ and ~~merchandise~~retail ~~sample costs.~~ stores;

•

36As discussed above, the Company and certain of its subsidiaries filed for bankruptcy under Chapter 11 on January 17, 2023, which the Company began to contemplate in the fourth quarter of 2022. In connection with its contemplation of bankruptcy, the Company evaluated the recoverability of certain lease assets and property and equipment as of December 31, 2022; and

•

The Company ceased certain information system projects.

Based on these developments, the Company recorded impairment charges of $23.3 million on lease assets, property, plant, and equipment, and other assets in 2022.

In December 2021, the Company recorded $9.0 million in impairment charges, substantially all of which were attributable to equipment impairment charges related to the closure of a manufacturing facility in New Mexico.

Goodwill and Intangible Assets Impairment Charges

For the year ended December 31, 2022, we recognized total non-cash pre-tax impairment charges related to goodwill, intangibles, and other long-lived assets of $862.5 million as discussed in more detail below:

•

Goodwill impairment charges of $568.6 million

•

Indefinite-lived trade name impairment charges of $289.0 million

•

Finite-lived customer relationship intangible asset impairment charges of $4.9 million

Goodwill Impairment – In the third quarter of 2022 and in preparation for the Company’s annual review of impairment of goodwill and indefinite-lived intangible assets, impairment indicators were identified that suggested the carrying values of the wholesale and retail reporting units could exceed their fair values. Such impairment indicators included the recent performance of the reporting units, revised projections of future cash flows, and a continuing decline in the Company’s market capitalization. To test for potential impairment of goodwill related to our wholesale and retail reporting units, we prepared an estimate of the fair value of these reporting units based on a combination of a market-based valuation technique (utilizing earnings multiples of similarly situated guideline public companies) and an income approach that uses projected discounted cash flows.

Based on the valuation of the wholesale and retail reporting units, the Company recognized a non-cash pre-tax goodwill impairment charge of $288.4 million in the wholesale reporting unit in the third quarter of 2022.

In the fourth quarter of 2022, additional impairment indicators were identified that suggested the carrying values of the wholesale and retail reporting units could exceed their fair values, as the Company reduced its sales projections for 2023, continued to experience a decline in its market capitalization, and, most notably, began to contemplate filing for Chapter 11 bankruptcy. In light of these circumstances, we again tested the goodwill related to our wholesale and retail reporting units for impairment in the fourth quarter of 2022 using the market-based and income-based approaches consistent with the third quarter.

Based on the valuation of the wholesale and retail reporting units, the Company recognized additional non-cash pre-tax goodwill impairment charges of $60.3 million in the wholesale reporting unit and $219.9 million in the retail reporting unit for a total goodwill impairment charge of $280.2 million in the fourth quarter of 2022.

Trade Names Impairment – In light of the bankruptcy contemplation in the fourth quarter and the other fourth quarter developments discussed above, the Company also tested its indefinite-lived trade names for impairment in the fourth quarter of 2022. To test for potential impairment of our trade names, we prepared an estimate of the trade names using a discounted cash flow analysis based on the “relief from royalty” method, assuming that a third-party would be willing to pay a royalty in lieu of ownership for this intangible asset. This approach is dependent on many factors, including estimates of royalty rates and discount rates.

Based on this valuation, the Company recognized non-cash pre-tax trade names impairment charges of $289.0 million in fourth quarter of 2022.

Finite-Lived Customer Relationship Impairment – In addition, the Company concluded that certain customer relationship assets were impaired, and as a result, additional impairment charges of $4.9 million were recorded in the fourth quarter of 2022.

Although the Company believes the assumptions and estimates used in the valuations supporting its impairment tests are reasonable and appropriate, different assumptions and estimates could materially impact its reported financial results. Actual results may ultimately differ from certain key assumptions used in the Company’s impairment tests and certain other key assumptions may change in the future. Accordingly, we continue to closely monitor developments related to our business, as well as other global events and conditions, including continued inflation and rising interest rates. The future magnitude, duration, and effects of these events are difficult to predict at this time, and it is reasonably possible that future developments could have a negative effect on the estimates and assumptions utilized in our goodwill impairment assessments and could result in material impairment charges in future periods.

Loss on disposal of assets in international operations

In January 2021, the Company closed the sale of a substantial portion of its international operations. As a result, the company recorded a loss reserve of $73.9 million in 2020 for the assets that were disposed and an additional $3.2 million loss in 2021. The announced sale had a total transaction value of approximately $50.7 million. Refer to Note 5 of our consolidated financial statements in Part II, Item 8, for additional details.

Interest expense, net

Interest expense, net, totaled $87102.26 million during ~~2021~~2022, compared to $7787.02 million during ~~2020~~2021. The increase primarily ~~reflects~~represents higher ~~cost~~average debt ~~from~~outstanding ~~the~~and ~~refinancing~~an increase in ~~the~~interest ~~first~~rates ~~quarter~~compared ofwith 2021~~, partially offset by lower average amounts of principal debt outstanding in 2021 versus prior year~~.

Other (income) expense, net

Other (income) expense, net, totaled $(03.68) million during ~~2021~~2022 and $3(0.76) million during ~~2020~~2021. The change isprimarily due to higher income from equity method investments and an increase in foreign currency gains.

Loss on disposal of assets in international operations

In January 2021, the Company closed the previously disclosed sale of a substantial portion of its international operations. The announced sale had a total transaction value of approximately $50.6 million. As of December 31, 2020, the assets and liabilities of the international operations are considered held for sale. As a result, the company recorded a loss reserve of $73,948. Refer to Note 6 – Disposition of Assets and Assets and Liabilities Held for Sale of Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Gain on debt repayment/refinancing

In ~~2020~~2021, the Company recognized a gain of $~~273~~1.1 million on debt refinancing transactions. Refer to Note 129 ~~— Long-Term Obligations,~~ of ~~Item~~our 8,consolidated ~~“Financial~~financial ~~Statements~~statements ~~and Supplementary Data”~~ in ~~this~~Part ~~Annual~~II, ~~Report~~Item on8, ~~Form 10-K~~ for further detail.

Income tax expense

The effective income tax rate for the year ended December 31, ~~2021~~2022, isa ~~significantly~~benefit ~~influenced by the relative impact~~ of ~~permanent differences and tax accruals on the lower pretax earnings for the year. The effective income tax rate of (653.~~1).7%, is different from the statutory rate, 21%, primarily due to ~~state~~the ~~income~~impact ~~tax~~of non-cash goodwill impairment charges and ~~uncertain~~the ~~tax~~increase ~~positions. See~~of ~~Note~~the ~~17,~~valuation ~~Income~~allowance ~~Tax,~~against ofour ~~Item~~deferred 8,tax ~~“Financial~~assets. ~~Statements~~See ~~and~~Note ~~Supplementary~~14 ~~Data”~~of inour ~~this~~consolidated ~~Annual~~financial ~~Report~~statements onin ~~Form~~Part ~~10-K~~II, Item 8, for further discussion.

~~Impairment~~Reconciliation of ~~goodwill~~Non-GAAP ~~and~~Financial ~~intangible~~Measures ~~assets~~

~~During~~The ~~the~~tables ~~three~~below ~~months~~provide ~~ended~~a ~~March~~reconciliation ~~31,~~of ~~2020,~~ the Company ~~identified intangible assets~~’s impairment indicators associated with its market capitalization and significantly reduced customer demand for its products due to COVID-19. As a result, the Company performed interim impairment tests on the goodwill at its retail and wholesale reporting units and its other indefinite lived intangible assets as of March 31, 2020. The interim impairment tests were performed using an income approach. The Company recognized non-~~cash~~GAAP ~~pre-tax~~financial ~~goodwill~~measures ~~impairment~~to ~~charges at March 31, 2020 of $253,110 and $148,326 against~~ the ~~goodwill~~most ~~associated~~comparable ~~with~~GAAP ~~its~~financial ~~retail and wholesale reporting units, respectively~~measure. In addition, during the three months ended March 31, 2020, the Company recorded an impairment charge of $131,287 and $3,925 on its Party City and Halloween City tradenames, respectively. During the three months ended September 30, 2020 the Company has determined that the fair value of certain indefinite-lived intangible assets is lower than the related book values. Additionally, for certain long-lived assets it is more likely than not that those long-lived assets will be disposed significantly before the end of their previously estimated useful lives. As a result, impairment charges of $11,032, $2,423 and $31,277 were recorded in the third quarter on its business indefinite-lived trade name intangibles, finite-lived intangibles and tangible assets, respectively. During the twelve months ended December 31, 2021, there was no goodwill or intangibles impairment.

~~Liquidity and Capital Resources and Material Cash Requirements~~45

WeThe ~~have~~following ~~proactively~~is ~~managed~~a ~~our~~reconciliation ~~liquidity~~of ~~profile~~net ~~throughout~~loss ~~the~~attributable ~~fiscal year and expect~~ to ~~continue~~common toshareholders do so going forward. We expect to rely on cash on hand, cash generated by operations and borrowings available under our credit agreements to meet our working capital needs and will be our principal sources of ~~liquidity.~~PCH ~~Based on our current level of operations, we believe that these sources will be adequate~~ to ~~meet~~Adjusted ~~our~~EBITDA ~~liquidity needs~~ for ~~at least~~ the ~~next~~year 12ended ~~months.~~December ~~We are currently not aware of any other trends or demands~~31, ~~commitments,~~2022 ~~events~~and ~~or uncertainties~~ 2021:


	Year ended December 31,
(Dollars in thousands)	2022			2021
Net loss attributable to common shareholders of Party City Holdco Inc.	$	(942,630	)	$	(6,528	)
Interest expense, net		102,647			87,226
Income tax (benefit) expense		(16,494	)		5,708
Depreciation and amortization		63,031			65,611
EBITDA		(793,446	)		152,017
Deferred rent (a)		10,578			3,325
Stock-based compensation - employee		6,112			6,727
Other restructuring, retention, and severance (b)		4,659			2,346
Goodwill, intangible and other long-lived assets impairment (c)		885,821			11,974
Closed store and office expense (d)		7,510			4,743
Loss on sale of property, plant and equipment		—			2,784
Corporate reorganization professional fees (e)		9,069			—
Loss on sale of business		—			3,211
Foreign currency gains, net		(2,040	)		(1,090	)
Net gain on debt repayment		—			(1,106	)
Undistributed earnings from equity method investments		(1,467	)		(220	)
Other (f)		856			1,270
Adjusted EBITDA	$	127,652		$	185,981

(a)

~~that~~The ~~will~~“deferred ~~result~~rent” inadjustment orreflects ~~that~~the ~~are~~difference ~~reasonably~~between ~~likely~~accounting tofor ~~result~~rent inand ~~our~~landlord ~~liquidity~~incentives ~~increasing or decreasing~~ in ~~any~~accordance ~~material~~with ~~way~~GAAP ~~that~~and ~~will impact our capital needs during or beyond~~ the ~~next 12 months. We cannot assure you, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the~~ Company'’s ~~credit~~actual ~~facilities~~cash ~~and~~paid infor ~~amounts sufficient to enable us to repay our indebtedness or to fund our other liquidity needs~~rent.

(b)

~~Our~~Amounts ~~business,~~expensed ~~results~~attributable ~~of operations, financial condition and liquidity have been and may continue~~ to ~~be materially and adversely affected by COVID~~one-~~19.~~time ~~Further,~~organizational ~~the~~changes ~~disruption to the global economy~~ and toprimarily ~~our~~composed ~~business, along with the decline in our stock price, may negatively impact the carrying value~~ of ~~certain~~severance ~~assets, including inventories, accounts receivable, intangibles and goodwill~~charges. Any additional impact to which COVID-19 and the measures to contain it will impact our business, operations, financial condition and liquidity will depend on future severity, duration of COVID-19 and, as applicable any continued response to the virus, all of which are uncertain in 2022. We will continue to actively monitor the impact of COVID-19.

(c)

~~However,~~See ifNote ~~the~~3 ~~duration of the COVID~~-19 ~~pandemic~~Store ~~continues~~and ~~longer~~Other ~~than~~Long-Lived weAsset ~~expect~~Impairment ~~or the severity worsens~~Charges, weNote ~~may~~4 ~~need~~- ~~to access other sources of financing~~Goodwill, ~~including incurring additional indebtedness, selling our assets~~ and ~~raising~~Note ~~additional~~8 ~~equity~~- ~~capital.~~Intangible ~~These~~Assets ~~alternatives~~of ~~may~~our ~~not~~consolidated befinancial ~~available~~statements toin usPart ~~on satisfactory terms or at all~~II, ~~which~~Item ~~could have a material adverse effect on our business~~8.

(d)

~~Sources~~Charges ofincurred ~~Cash~~ related to closing and relocating stores, as we do not undertake such closures or relocations on a predictable cycle and the charges can vary significantly.

(e)

~~Based~~Professional onfees ~~our~~associated ~~current~~with ~~operations~~bankruptcy and ~~planned strategic initiatives (including new store and NXTGEN remodel growth plans and~~ other ~~capital~~reorganization expenditures), we expect to satisfy our short-term and long-term cash requirements through a combination of our existing cash and cash equivalents position, funds generated from operating activities, and the borrowing capacity available under our credit agreementsassistance. If cash generated from our operations and borrowings under our credit agreements are not sufficient or available to meet our liquidity requirements, then we will be required to obtain additional equity or debt financing in the future. There can be no assurance equity or debt financing will be available to us when we need it or, if available, the terms will be satisfactory to us and not dilutive to our then-current stockholders. Additionally, we may seek to take advantage of market opportunities to refinance our existing debt instruments with new debt instruments at interest rates, maturities and terms we deem attractive. We may also, from time to time, in our sole discretion, purchase or retire all or a portion of our existing debt instruments through privately negotiated or open market transactions.

(f)

AsIncludes ofone-time ~~December~~legal ~~31,~~settlement ~~2021,~~of we$0.4 ~~had~~million ~~cash~~ and ~~cash~~note ~~equivalents~~receivable of $470.95 million for the year ended December 31, 2022 and ~~available~~COVID-19 ~~borrowings~~sanitation and cleaning expense of $~~206~~1.93 million for the year ended December 31, 2021.

~~Material~~Liquidity ~~Cash~~and ~~Commitments~~Capital Resources

Debt Obligations, Finance Leases and Interest Payments. As of December 31, 2021, we had $84.1 million in loans and notes payable, $1.4 million current long-term obligations and $1,351 million in long-term obligations outstanding, respectively. Overview

AsThe ~~indicated~~Company inand ~~Item~~certain ~~1A.~~of ~~Risks~~its ~~Related~~subsidiaries tofiled ~~Our~~for ~~Indebtedness,~~bankruptcy ~~repayment~~under ofChapter ~~the~~11 ~~Company~~on ~~debt~~January is17, ~~dependent~~2023 onand ~~our~~emerged ~~subsidiaries~~from ~~ability~~bankruptcy toon ~~make~~October ~~cash~~12, ~~available~~2023. ~~for~~The ~~additional~~discussion ~~information~~below ~~regarding~~provides ~~the~~a ~~company's~~summary ~~debt.~~of ~~Refer~~our toliquidity ~~Part~~and ~~II,~~capital ~~Item~~resources 8before, ~~“Financial~~during, ~~Statements~~ and ~~Supplementary~~after ~~Data~~the –Chapter ~~Note~~ 11, ~~Loans~~Cases. ~~and~~For ~~Notes~~a ~~Payable~~discussion of the Chapter 11 Cases and ~~Note~~our 12bankruptcy proceedings, ~~Long-Term~~see ~~Obligations~~“Item in1 ~~this~~- ~~Annual~~Business ~~Report~~- onChapter ~~Form~~11 ~~10-K~~Cases.” AsSee ~~noted,~~“Item ~~the~~1 ~~Company~~- ~~must~~Business ~~make~~- ~~payments~~Subsequent ~~related~~Event to- ~~interest~~Emergence ~~payments,~~from ~~principal~~Chapter ~~and~~11 ~~fees~~Cases” ~~and~~for ~~the~~information ~~facilities~~regarding ~~contain~~the ~~debt~~Company’s ~~covenants~~emergence ~~that~~from the ~~must~~Chapter be11 ~~met.~~Cases on October 12, 2023.

~~Leases.~~Liquidity AsBefore ofFiling December 31, 2021, we had an operating lease liability of $772.3 million. We have numerous non-cancelable operating leases for retail store sites, as well as leases for offices, distribution facilities and manufacturing facilities. These leases generally contain renewal options and require us to pay real estate taxes, utilities and related insurance costs. Additionally, we had approximately $110 million of future payment obligations related to an executed lease agreement for which the ~~related~~Chapter ~~lease~~11 ~~has not commenced as of December 31, 2021. See~~ Cases

38Historically, our primary sources of liquidity were cash on hand, cash flow from operations, and borrowings under our credit agreements to meet our working capital needs. As of December 31, 2022, we had $59.4 million of

to Note 20 — Leases, of Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for more information regarding the Company's operating leases as well as maturities of lease payments. 46

~~Capital~~cash ~~Expenditures.~~and ~~Cash~~cash ~~commitments~~equivalents ~~are~~on ~~described~~our inconsolidated ~~the~~balance ~~following~~sheets, ~~section~~borrowing onavailability ~~Cash~~of ~~Flow~~$86.8 ~~Data~~million under our credit agreements, and total liquidity of $146.2 million consisting of the following:

8.75% Senior Secured Notes — Due 2026 (“8.75% Senior Notes”)


	Party City Credit Group		Anagram Holdings, LLC		PCH Consolidated
(in Thousands)	As of December 31, 2022
Cash	$	57,499	$	1,922	$	59,421
ABL Availability:
Borrowing Base		475,013		14,427		489,440
Less: Letters of Credit Outstanding		37,920		—		37,920
Less: Borrowings under the ABL Facility		361,684		3,022		364,706
Total ABL Availability		75,409		11,405		86,814
Total Liquidity	$	132,908	$	13,327	$	146,235

InAs ~~accordance~~of ~~with~~December ~~the 8.75% Senior Notes~~31, ~~as disclosed in the notes previously referenced~~2022, ~~the~~we ~~Company~~had is$1.7 ~~required~~billion ~~to provide quarterly and annual disclosure~~ of ~~certain~~consolidated ~~financial metrics for Anagram Holdings~~indebtedness, ~~LLC~~of ~~and~~which ~~its subsidiary (“Anagram”)~~$1.4 ~~For~~billion ~~the~~was ~~quarters~~held ~~ended~~by ~~December~~the ~~31,~~Debtors. ~~2021 and 2020, Anagram reported:~~

~~Revenue~~Cash ofFlow ~~$53.2~~Data ~~million~~– ~~and~~Year ~~$50.6~~Ended ~~million~~December 31, ~~including~~2022, ~~net~~Compared ~~sales~~ to ~~Party~~Year ~~City~~Ended ~~affiliates~~December of31, ~~approximately~~2021 ~~$18.0 million and $23.6 million~~

~~Operating~~Net ~~income~~cash ofused in operating activities totaled $8151.59 million ~~and~~during 2022, as compared to net cash provided by operating activities of $1051.9 million in 2021. The decrease in operating cash performance was due to a significant increase in inventory purchases at higher costs due to freight and raw materials inflation, as well as a decline in operating income in 2022. This was partially offset by a decrease in lease payments in 2022, as the prior year reflected additional lease payments, resulting from the 2020 COVID payment deferrals.

~~Adjusted~~Net ~~EBITDA~~cash ofused in investing activities totaled $1096.1 million ~~and~~during 2022, as compared to $1365.04 million used in 2021. The increase in cash used in investing activities is primarily due to higher capital expenditures in the current year, due in part to the Company’s renovation of the new corporate headquarters which opened in the fourth quarter of 2022, as well as proceeds of $20.6 million from the sale of our international operations in the prior year, for which there was no comparable event in 2022.

AtNet ~~December~~cash ~~31,~~provided ~~2021~~by financing activities was $259.5 million during 2022, ~~total~~as ~~assets~~compared to net cash used in financing activities of $~~201~~89.91 million in 2021. The variance was principally due to higher borrowings under the ABL Facility in the current year and nothe ~~affiliate~~impact ~~accounts~~of ~~receivable~~the prior year debt refinancing transactions as discussed in Note 9 of our consolidated financial statements in Part II, Item 8.

AtLiquidity ~~December~~After ~~31,~~Filing ~~2020,~~the ~~total~~Chapter ~~assets~~11 ofCases ~~$176.2~~and ~~million,~~Before ~~including~~Emergence ~~affiliate~~From ~~accounts~~the ~~receivable~~Chapter of11 ~~$3.7 million~~ Cases

For ~~the~~a ~~years~~discussion ~~ended~~of ~~December~~the ~~31,~~Chapter ~~2021~~11 Cases and ~~2020~~our bankruptcy proceedings, ~~Anagram~~see ~~reported:~~“Item 1 - Business - Chapter 11 Cases.” See “Item 1 - Business - Subsequent Event - Emergence from Chapter 11 Cases” for information regarding the Company’s emergence from the Chapter 11 Cases on October 12, 2023.

~~Revenue~~The filing of ~~$224~~the Chapter 11 Cases constituted an event of default that accelerated the Company’s following debt obligations: i) its Prepetition ABL Facility; ii) its FILO Facility; iii) its 8.3750% ~~million~~senior ~~and~~secured ~~$157~~first lien notes due 2026 (the “Fixed Rate Notes”); iv) its 6.1125% ~~million~~senior notes due 2023; v) its 6.625% senior notes due 2026, ~~including~~and ~~net~~vi) ~~sales~~its senior secured first lien floating rate notes due 2025 (the “Secured Floating Rate 2025 Notes” and, together with the Fixed Rate Notes, the “Secured Notes”). Any efforts to ~~Party~~enforce ~~City~~payment ~~affiliates~~obligations on the Debtors’ debt agreements were automatically stayed as a result of ~~approximately~~the ~~$82.1~~filing ~~million~~of the Chapter 11 Cases and ~~$68~~the holders’ rights of enforcement in respect of the Debtors’ debt agreements were subject to the applicable provisions of the Bankruptcy Code.5 ~~million~~As a result of the Chapter 11 Cases, the remaining capacity under the Prepetition ABL Facility was terminated on January 17, 2023.

~~Operating~~On ~~income~~January of18, 2023, the Bankruptcy Court approved the Debtors’ proposed $46150.40 million ~~and~~senior ~~$12~~secured super priority priming DIP Facility on an interim basis.1 ~~million~~On January 19, 2023, certain of the Debtors entered into the DIP Credit Agreement governing the DIP Facility along with certain financial institutions party thereto as lenders and Ankura Trust Company, LLC, as the administrative agent and collateral agent, and the closing of the DIP Facility occurred on the same day.

~~Adjusted~~An ~~EBITDA~~initial draw of $5275.30 million under the DIP Facility was made on January 19, 2023, and ~~$33~~the proceeds were used in accordance with the DIP Facility budget to, among other things, (i) pay the administrative costs and expenses of the Chapter 11 Cases and the DIP Facility and (ii) fund general corporate purposes.1 ~~million~~A second draw of

~~At December 31, 2021, total assets of $201.9 million and no affiliate accounts receivable~~47

At$75.0 ~~December~~million ~~31,~~was ~~2020,~~made ~~total~~following ~~assets~~the Bankruptcy Court’s entry of ~~$176.2~~the ~~million,~~order ~~including~~approving ~~affiliate~~the ~~accounts~~DIP ~~receivable~~Facility ofon $a final basis on March 3.7, ~~million~~2023 and was used for the same purposes as the first draw.

~~Cash~~The ~~Flow~~DIP ~~Data~~Facility –was ~~Year~~secured ~~Ended~~by ~~December~~perfected ~~31,~~senior ~~2021,~~security ~~Compared~~interests toand ~~Year~~liens ~~Ended~~having ~~December~~the 31priorities set forth in the DIP Orders on substantially all assets of the Debtors, ~~2020~~as further described in the DIP Orders.

~~Net~~On ~~cash~~March ~~provided~~30, by2023, ~~operating~~the ~~activities~~Company ~~totaled~~became ~~$51.9~~aware ~~million~~of ~~during~~the ~~2021,~~Specified ~~versus~~DIP ~~net~~Defaults ~~cash~~under ~~provided~~the bydocuments ~~operating~~governing ~~activities~~the ~~totaled~~DIP ~~$77.2~~Credit ~~million~~Agreement ~~during~~as ~~2020.~~a ~~The~~result ~~year~~of ~~over~~the ~~year~~Company’s ~~operating~~delayed ~~cash~~delivery ~~decrease~~of ~~was~~certain ~~predominantly~~financial ~~driven~~reporting byrequired aunder ~~change~~the inDIP ~~inventory~~Credit ~~and~~Agreement. aOn ~~repayment~~April of5, ~~lease~~2023, ~~costs~~the ~~deferred~~Company ~~from~~and ~~2020,~~the ~~partially~~administrative ~~offset~~agent byunder ~~higher~~the ~~levels~~DIP Facility, at the direction of ~~operating~~the ~~income.~~required ~~Although~~lenders under the ~~Company~~DIP ~~reduced~~Facility ~~inventory~~entered byinto ~~disposal~~the ~~reserves~~DIP ~~taken~~Defaults atWaiver to waive the ~~end~~Specified ofDIP ~~2021~~Defaults, ~~that~~subject ~~reduction~~to ~~was~~certain ~~more~~conditions, ~~than~~including ~~offset~~that bythe ~~higher~~Company ~~in-transit~~deliver ~~inventory~~such ~~and~~financial ~~inflationary~~reporting ~~pressure~~at ~~included~~the times agreed in the ~~inventory~~DIP ~~value~~Default Waiver. The ~~resulting~~Company ~~impact~~was in compliance with the requirements to deliver financial reporting under the DIP Default Waiver until the termination of the of the DIP Facility on ~~accounts~~October ~~payable~~12, 2023 as ~~result~~part of ~~higher~~our emergence from the Chapter 11 Cases, as discussed in “Item 1 -~~transit~~ ~~inventory~~Business ~~led~~- toSubsequent anEvent ~~increase~~- inEmergence ~~accounts~~from ~~payable~~Chapter 11 Cases. ”

~~Net~~During ~~cash~~the ~~used~~pendency inof ~~investing~~the ~~activities~~Chapter ~~totaled~~11 ~~$65.4 million during 2021~~Cases, asthe ~~compared~~Company’s toprincipal ~~$54.3~~sources ~~million~~of ~~used~~liquidity inwere ~~2020.~~limited ~~Capital~~to ~~expenditures~~cash ~~during~~flows ~~2021~~from ~~and~~operations, ~~2020~~cash ~~were~~on ~~$79.2~~hand, ~~million~~ and ~~$51.1~~borrowings ~~million,~~under ~~respectively.~~the ~~Retail~~DIP ~~capital expenditures totaled $56~~Facility.6 ~~million~~Our ~~during~~ability ~~2021 and were related~~ to ~~store~~maintain ~~remodeling,~~adequate ~~initiatives~~liquidity inthrough ~~technology~~the ~~and~~reorganization ~~investments~~process ~~in our NXTGEN store conversions. Wholesale capital expenditures during 2021 totaled $22.6 million~~ and ~~primarily~~beyond ~~related~~was todependent ~~printing~~on ~~plates~~successful ~~and~~operation ~~dyes,~~of asour ~~well~~business ~~as machinery~~ and ~~equipment~~appropriate atmanagement ~~the~~of ~~Company’s~~operating ~~manufacturing~~expenses ~~operations~~ and ~~main~~capital ~~distribution center~~spending. ~~The~~Our ~~increase~~liquidity inneeds ~~capital~~were, ~~expenditures~~and ~~was~~still ~~offset~~are byhighly ~~the~~sensitive ~~net~~to ~~proceeds~~changes ~~from~~in ~~the~~each ~~sale~~ of ~~international~~these ~~operations.~~and other factors.

~~Net~~The ~~cash~~consolidated ~~used~~financial statements included herein in ~~financing~~this ~~activities~~Annual ~~was~~Report ~~$89.1~~on ~~million~~Form ~~during~~10-K ~~2021.~~have ~~Net~~been ~~cash~~prepared ~~provided~~on bya ~~financing~~going ~~activities~~concern ~~was~~basis, ~~$93.7~~which ~~million~~contemplates ~~during~~continuity ~~2020.~~of ~~The~~operations, ~~variance~~realization ~~was~~of ~~principally~~assets, ~~due~~and tosatisfaction ~~higher~~of ~~borrowings~~liabilities ~~under~~in the ~~ABL~~normal ~~Facility~~course inof ~~2020~~business. ~~and~~The consolidated financial statements do not reflect any adjustments that resulted from the ~~impact~~outcome of the ~~debt~~Chapter ~~refinancing~~11 ~~transactions~~Cases, aswhich ~~discussed~~occurred inafter ~~Note~~the 12balance –sheet ~~Long-Term~~date ~~Obligations~~ of ~~Item~~December 831, ~~“Financial~~2022. ~~Statements~~We ~~and~~had ~~Supplementary~~significant ~~Data”~~indebtedness and ~~Company~~reclassified all of the Debtor’s ~~“Risks~~indebtedness ~~Related~~ to ~~Our~~current ~~Indebtedness”~~liabilities inas ~~Item~~of 1ADecember 31, 2022. Our level of ~~this~~indebtedness ~~Annual~~had ~~Report~~adversely impacted our financial condition.

39The Bankruptcy Court set a general Bar Date of April 3, 2023 and a Governmental Bar Date of July 17, 2023 as deadlines for filing proofs of claim against the Debtors. As of December 14, 2023, the Debtors have received approximately 2,500 proofs of claims for an amount of approximately $1.9 billion. The claims will be reconciled to amounts recorded in the Company’s accounting records. Differences in amounts recorded and claims filed by creditors will be investigated and resolved, including through the filing of objections with the Bankruptcy Court, where appropriate. The Company may ask the Bankruptcy Court to disallow claims that the Company believes are duplicative, have been later amended or superseded, are without merit, are overstated, or should be disallowed for other reasons. In addition, as a result of this process, the Company may identify additional liabilities that will need to be recorded. In light of the substantial number of claims filed, and expected to be filed, the claims resolution process may take considerable time to complete and has continued since our emergence from bankruptcy.

Debt Obligations

As of December 31, 2022, we had $1.7 billion of consolidated indebtedness, of which $1.4 billion was held by the Debtors. The filing of the Chapter 11 Cases constituted an event of default with respect to the Debtors obligations. As a result of the filing of the Chapter 11 Cases, all of the indebtedness of the Debtors became immediately due and payable, but any efforts to enforce such payment obligations were automatically stayed as a result of the Chapter 11 Cases. These debt obligations and substantially all pre-petition obligations of the Debtors were ultimately settled under the reorganization plan that was confirmed by the Bankruptcy Court. The Chapter 11 Cases did not trigger any default or event of default under the debt obligations of the Anagram Entities, which held $0.3 billion of debt as of December 31, 2022. However, other events led to the default of Anagram’s debt, as described below.

On or around March 23, 2023, the Company and the Anagram Entities became aware of the Specified Anagram Defaults under the documents governing the Anagram Notes Indentures as a result of, among other things, distributions of tax-related amounts from February 2021 to January 2023 that exceeded the limitations in the Anagram Financing Agreements. On or around March 30, 2023, the Anagram Entities notified the trustees under the Anagram Notes Indentures of the Specified Anagram Defaults by delivery of applicable notices of default.

On April 21, 2023, the Anagram Entities obtained the Anagram Notes Waivers, with the Anagram Notes Waivers being subject to the Anagram Entities obtaining, by May 19, 2023, an agreement on a new contract with a

supplier. Anagram did not enter into a new contract with the supplier prior to filing for bankruptcy on November 8, 2023. Concurrently, with the effectiveness of the Anagram Notes Waivers, the Anagram Entities entered into supplemental indentures pursuant to the Anagram Notes Indentures whereby, among other things, the Anagram Entities were required to make additional payments-in-kind to the holders of Anagram Notes in an amount equal to 0.5% of aggregate principal outstanding and thereby increasing the principal amount of the Anagram Notes. On May 9, 2023, payments in-kind of $0.6 million and $0.5 million were made on the First Lien Anagram Notes and Second Lien Anagram Notes, respectively.

On August 15, 2023, the Anagram Entities elected to not make the interest payment on the First Lien Anagram Notes. As provided in the indenture governing the First Lien Anagram Notes, the Anagram Entities entered the 30-day grace period to make the interest payment. The Anagram Entities did not make this interest payment within the grace period and did not make this interest payment prior to filing for Chapter 11 bankruptcy on November 8, 2023.

For information regarding a subsequent event related to Anagram’s Chapter 11 Cases and the developments related to the Stalking Horse bid to acquire the Anagram Entities, see “Note 1 - Description of Business - Subsequent Event - Anagram Bankruptcy.”

Liquidity After Emergence from the Chapter 11 Cases

For a discussion of the Company’s emergence from bankruptcy, see “Note 1 - Organization, Description of Business, and Basis of Presentation - Subsequent Event - Emergence from Chapter 11 Cases.” As a result of the financial restructuring set forth in its reorganization plan, the Company reduced its long-term debt obligations (excluding credit facility borrowings) from approximately $1.3 billion to $0.2 billion and emerged with a new ABL credit agreement with $562.1 million in borrowing capacity, and $232.4 million of Second Lien Notes (as defined herein). At the emergence date, our common stock shares were cancelled, and the Company issued or caused to be issued the New PCHI Shares in accordance with the terms of the Plan. Pursuant to the Plan, each holder of an Allowed Secured Notes Claim (as defined in the Plan) received, among other things, its pro rata share of 100% of the New PCHI Shares, subject to dilution by the New PCHI Shares issued as DIP Reorganized Securities (as defined in the Plan), the New PCHI Shares issued in connection with the Rights Offering (including in partial satisfaction of the Backstop Commitment Premium (as defined in the Plan)), and the MIP Equity Pool (as defined in the Plan). Net cash proceeds of $75 million were raised through the issuance of the New PCHI Shares at the emergence date.

For information regarding a subsequent event related to Anagram’s Chapter 11 Cases and the developments related to the Stalking Horse bid to acquire the Anagram Entities, see “Note 1 - Organization, Description of Business, and Basis of Presentation - Subsequent Event - Anagram Bankruptcy.”

Post-emergence Debt and Other Obligations

New ABL Credit Agreement

For a description of the New ABL Credit Agreement, see “Note 1 - Organization, Description of Business, and Basis of Presentation - Subsequent Event - Emergence from Chapter 11 Cases - Debt Securities and Agreements - New ABL Credit Agreement.”

Second Lien Notes

For a description of the Second Lien Notes, see “Note 1 - Organization, Description of Business, and Basis of Presentation - Subsequent Event - Emergence from Chapter 11 Cases - Debt Securities and Agreements - Second Lien Notes.”

Leases

As part of its bankruptcy reorganization plan, the Company restructured the remaining term and economics of certain retail and non-retail properties within its lease portfolio, including permanent abandonment of certain leases. In particular, for its retail leases, management attempted to tailor such negotiations to a particular store’s current and future performance, location, and size to ensure economic stability and reduce future performance risk. In addition, on March 28, 2023, the Company executed an amendment to its Naperville, IL (“Naperville”) facility lease as part of a plan to consolidate its party goods distribution activities into its Chester, NY (“Chester”) facility. This amendment became effective upon our emergence from bankruptcy on October 12, 2023 and will allow the Company to exit its e-commerce distribution facility in Naperville by the end of April 2024, with the Chester facility assuming e-commerce distribution activities.

Ultimately, the actions discussed above resulted in the abandonment of 68 unexpired store leases, as well as the renegotiation of a substantial portion of the Company’s remaining lease portfolio, and are expected to result in cash savings of approximately $100 million to be recognized over the next 5 years.

Sources and Uses of Cash

During the pendency of the Chapter 11 Cases, the Company’s principal sources of liquidity were limited to cash flows from operations, cash on hand, and borrowings under the DIP Facility. Subsequent to our emergence from bankruptcy, our primary sources of liquidity are cash flows from operations, cash on hand, and borrowings under our New ABL Facility to meet our working capital needs.

Based on our current operations and planned strategic initiatives (including new store and NXTGEN remodel growth plans and other capital expenditures), we expect to satisfy our short-term and long-term cash requirements through a combination of our existing cash and cash equivalents position, funds generated from operating activities, the borrowing capacity available under our New ABL Facility, and the net cash proceeds raised through the issuance of the New PCHI Shares at the emergence date. If cash generated from our operations and borrowings under our credit agreements are not sufficient or available to meet our liquidity requirements, then we will be required to obtain additional equity or debt financing in the future. There can be no assurance equity or debt financing will be available to us when we need it or, if available, the terms will be satisfactory to us and not dilutive to our then-current stockholders. Additionally, we may seek to take advantage of market opportunities to refinance our existing debt instruments with new debt instruments at interest rates, maturities, and terms we deem attractive.

Critical Accounting Estimates

The preparation of financial statements in conformity with ~~accounting~~GAAP ~~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, are reasonable. These estimates are constantly ~~re-evaluated~~reevaluated and adjustments are made when facts and circumstances dictate. 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.

~~For~~Due ~~further~~to ~~detail~~the ~~refer~~fact tothat ~~Note~~the 2Chapter –11 ~~Summary~~filing occurred after the balance sheet date in this report, the accompanying consolidated financial statements as of ~~Significant~~and ~~Accounting~~for ~~Policies~~the period ending December 31, 2022 have been prepared on a going concern basis, which contemplates the realization of ~~Item~~assets 8and the satisfaction of liabilities in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments to liabilities and assets that resulted from the Bankruptcy Court’s confirmation of our reorganization plan on October 12, ~~“Financial~~2023. ~~Statements~~During the Chapter 11 Cases, the Company’s ability to continue as a going concern was contingent upon the Company’s ability to successfully implement the Company’s reorganization plan, among other factors. As a result of the effectiveness and ~~Supplementary~~ongoing ~~Data”~~implementation of ~~this~~the ~~Annual~~reorganization ~~Report~~plan, management believes there is no longer substantial doubt about the Company’s ability to continue as a going concern.

For further detail refer to Note 2 of our consolidated financial statements in Part II, Item 8.

Revenue Recognition

Revenue Transactions – Retail

Revenue from retail store operations is recognized at the point of sale as control of the product is transferred to the customer at such time. Retail e-commerce sales are recognized when the consumer receives the product as control transfers upon delivery. The Company has history with which to estimate future retail sales returns and it uses the expected value method to estimate such activity.

The transaction price for the ~~majority of the~~ Company’s retail sales is based on either: the item’s stated price or the stated price adjusted for the impact of a coupon which can only be applied to such transaction. To the extent that the Company charges customers for freight costs on e-commerce sales, the Company records such amounts in revenue. The Company excludes all sales taxes and value-added taxes from revenue.

Revenue Transactions – Wholesale

For most of the Company’s wholesale sales, control transfers upon the Company’s shipment of the product. Wholesale sales returns are not significant as the Company generally only accepts the return of goods that were shipped to the customer in error or that were damaged when received by the customer. The Company has history with which to estimate future sales returns.

In most cases, the determination of the transaction price is fixed based on the contract and/or purchase order. To the extent that the Company charges customers for freight costs, the Company records such amounts in revenue. The Company excludes all sales taxes and value-added taxes from revenue. For the majority of these sales, payment is due within 30 to 120 days from the transfer of control of the product and substantially all of the sales are collected within a year from such transfer.

Judgments

Although most of the Company’s revenue transactions consist of fixed transaction prices and the transfer of control at either the point of sale (for retail) or when the product is shipped (for wholesale), certain transactions involve a limited number of judgments. For transactions for which control transfers to the customer when the freight carrier delivers the product to the customer, the Company estimates the date of such receipt based on historical shipping times. Additionally, the Company utilizes historical data to estimate sales returns. Due to its extensive operating history, the Company has sufficient history with which to estimate such amounts.

Inventories

Inventories are valued at the lower of cost and net realizable value. In assessing the ultimate realization of inventories, we are required to make judgments regarding, among other things, future demand and market conditions, current inventory levels and the impact of the possible discontinuation of product designs. We principally determine the cost of inventory using the weighted average method.

We estimate retail inventory shrinkage for the period between physical inventory dates on a store-by-store basis. Our inventory shrinkage estimate can be affected by changes in merchandise mix and changes in actual shortage trends. The shrinkage rate from the most recent physical inventory, in combination with historical experience, is the basis for estimating shrinkage. Should the actual shrinkage vary from estimates, inventory values may be affected.

Long-Lived and Intangible Assets (including Goodwill and Trade Names)

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 is reviewed for potential impairment annually on anOctober ~~annual~~1st ~~basis~~ or more frequently if ~~circumstances~~events ~~indicate~~or achanges ~~possible~~in ~~impairment.~~circumstances ~~The~~indicate ~~Company~~that ~~performed~~it ~~its~~may ~~annual~~be ~~impairment~~impaired. ~~test~~For onpurposes ~~its~~of ~~wholesale~~testing ~~and~~goodwill ~~retail~~for ~~reporting units~~impairment, ~~respectively. In the analysis performed for the wholesale~~ reporting ~~unit,~~units ~~there~~are ~~was~~determined ~~approximately~~by ~~25%~~identifying ~~excess~~individual ~~fair~~operating ~~value~~segments ~~over~~within ~~carrying~~our ~~value.~~organization ~~Should~~which ~~actual~~constitute ~~results~~a ~~differ~~business ~~from~~for ~~certain~~which ~~key~~discrete ~~assumptions~~financial ~~used~~information inis ~~impairment~~available ~~tests, including revenue~~ and ~~EBITDA~~is ~~growth,~~reviewed ~~which are both impacted~~ by ~~economic~~management. ~~conditions,~~Components orwithin ~~should~~an ~~other~~operating ~~key~~segment ~~assumptions~~are ~~change,~~aggregated ~~including~~to ~~discount~~the ~~rates~~extent ~~and~~that ~~market~~they ~~multiples,~~have insimilar ~~subsequent~~economic ~~periods~~characteristics. ~~the~~Based ~~Company~~on ~~could~~this ~~record an impairment charge for goodwill.~~

4151

For purposes of testing goodwill for impairment, reporting units are determined by identifying individual operating segments within our organization which constitute a business for which discrete financial information is available and is reviewed by management. Components within an operating segment are aggregated to the extent that they have similar economic characteristics. Based on this evaluation, we have determined that our operating segments, wholesale and retail, represent our reporting units for the purposes of our goodwill impairment test.

If it is concluded that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we estimate the fair value of the reporting unit using a combination of a market approach and an income approach. If ~~such~~the carrying value ~~exceeds~~of the reporting unit exceeds its 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.

The fair value of our reporting units is based upon the best information available that incorporates assumptions marketplace participants would use in determining their estimates of fair value. Significant assumptions and estimates are required, including, but not limited to, projecting future cash flows, determining appropriate discount rates and terminal growth rates, market multiples, and other assumptions. To forecast a reporting unit’s future cash flows, the Company takes into consideration current and future economic conditions and trends, management’s and a market participant’s view of revenue and EBITDA growth rates, and risk-adjusted discount rates. Macroeconomic factors such as changes in economies, changes in the competitive landscape, and other changes beyond the Company’s control could have a positive or negative impact on achieving its growth rate targets.

Although the Company believes the assumptions and estimates made are reasonable and appropriate, different assumptions and estimates could materially impact its reported financial results. Actual results may ultimately differ from certain key assumptions used in the Company’s impairment tests, including, among others, revenue and EBITDA growth rates, discount rates, market multiples. Accordingly, we continue to closely monitor developments related to our business, as well as other global events and conditions, including continued inflation and rising interest rates. The future magnitude, duration, and effects of these events are difficult to predict at this time, and it is reasonably possible that future developments could have a negative effect on the estimates and assumptions utilized in our goodwill impairment assessments and could result in material impairment charges in future periods.

Our trade names are treated as indefinite-lived intangible assets and are tested for impairment annually on October 1st or more frequently if circumstances indicate a possible impairment. When performing a quantitative impairment assessment of our trade names, the fair value of the trade names is estimated using a discounted cash flow analysis based on the “relief from royalty” method, assuming that a third-party would be willing to pay a royalty in lieu of ownership for this intangible asset. This approach is primarily dependent on estimates of royalty rates and discount rates. Accordingly, the determination of fair value of our trade names is subjective, and actual fair value may differ from these estimates. An impairment loss is recognized when the estimated fair value of the indefinite-lived intangible asset is less than its carrying amount.

Income Taxes

Temporary differences arising from differing treatment of income and expense items for tax and financial reporting purposes result in deferred tax assets and liabilities that are recorded on the consolidated balance ~~sheet~~sheets. These balances, as well as income tax expense, are determined through management’s estimations, interpretation of tax law for multiple jurisdictions and tax planning. However, inherent in the measurement of deferred balances are certain judgments and interpretations of enacted tax laws and published guidance with respect to applicability to our operations. If our actual results differ from estimated results due to changes in tax laws or tax planning, our effective tax rate and tax balances could be affected. As such, these estimates may require adjustment in the future as additional facts become known or as circumstances change. A valuation allowance is established against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. Accounting Standards Codification Topic 740 prescribes a comprehensive model of how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. In accordance with these requirements, we recognize a tax benefit when a tax position is more-likely-than-not to be sustained upon examination, based solely on its technical merits. We measure the recognized tax benefit as the largest amount of tax benefit that has greater than a 50% likelihood of being realized upon the ultimate settlement with a taxing authority. We reverse previously recognized tax benefits if we determine that the tax position no longer meets the more-likely-than-not threshold of being sustained. We accrue interest and penalties related to unrecognized tax benefits in income tax expense.

Recently Issued Accounting Pronouncements

Refer to Note 2 ~~– Summary~~ of ~~Significant~~our ~~Accounting~~consolidated ~~Policies~~financial ofstatements ~~Item~~in 8Part II, ~~“Financial~~Item ~~Statements and Supplementary Data” of this Annual Report~~8.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

As a result of our variable rate Prepetition ABL Facility, ~~First~~Anagram’s ~~Lien~~ABL ~~Party~~Facility, ~~City~~and ~~Notes~~the ~~and~~First ~~Term~~Lien ~~Loan~~Party ~~Credit~~City ~~Agreement~~Notes, our earnings are affected by changes in interest rates.

The July 2022 ABL ~~Facility~~amendment ~~provides~~replaced ~~for~~the ~~two~~London ~~pricing~~Interbank ~~options~~Offered ~~for~~Rate ~~outstanding~~(“LIBOR”) ~~loans:~~as the interest rate benchmark under the Prepetition ABL Credit Agreement with the forward-looking term rate based on the Secured Overnight Financing Rate, subject to a 0.10% credit spread adjustment (i“Adjusted Term SOFR”). anPursuant ~~ABR~~to ~~for~~the ~~any~~July ~~day~~2022 ABL amendment, outstanding loans under the Prepetition ABL Credit Agreement bear interest at a rate per annum equal to the ~~greater~~applicable ofmargin plus, at the borrowers’ option, either (a) ~~the~~an ~~prime~~alternate base rate in(“ABR”), ~~effect~~which onis ~~such~~the ~~day~~highest of (i) the Administrative Agent’s prime rate, (bii) the federal funds effective rate inplus ~~effect~~0.50%, onand ~~such~~(iii) ~~day~~Adjusted Term SOFR for a one-month tenor plus 01.500%, or (cb) Adjusted Term SOFR for the ~~adjusted~~applicable ~~LIBOR~~interest ~~rate~~period. ~~plus~~Other 1than with respect to borrowings under the FILO Facility, the rates for the applicable margin for borrowings under the Prepetition ABL Facility remain unchanged, ranging from 0.50% to 0.75% with respect to ABR borrowings and ~~(d)~~from 1.50% to 1.75% orwith ~~(ii)~~respect to Adjusted Term SOFR borrowings. The applicable margin for borrowings under the ~~LIBOR~~FILO ~~rate,~~Facility is 1.75% with arespect ~~LIBOR~~to ~~floor~~ABR ofborrowings 0and 2.75%, inwith ~~each~~respect ~~case~~to ~~plus~~Adjusted anTerm ~~applicable~~SOFR ~~margin~~borrowings.

IfAnagram’s ~~market~~ABL Facility generally provided for the following pricing options: All revolving loans will bear interest, ~~rates~~at the Anagram’s election, at a per annum rate equal to either (a) a base rate, which represents for ~~our~~any ~~variable~~day a rate ~~indebtedness~~equal ~~had~~to ~~averaged~~the 2%greater ~~more~~of ~~than~~(i) the ~~actual~~prime ~~market~~rate ~~interest~~on ~~rates~~such ~~during~~day subject to a 0% floor, (ii) the ~~year~~federal ~~ended~~funds ~~December~~rate 31plus 0.5% and (iii) one-half of one percent per annum, ~~2021~~in each case, ~~our~~plus ~~interest~~a ~~expense~~margin ~~for~~of 1.5% or (b) the ~~year~~Daily ~~would~~One ~~have~~Month ~~increased~~LIBOR bysubject ~~$8.1~~to ~~million~~a 0.5% floor, plus a margin of 2.5%.

42If market interest rates for our variable rate indebtedness had averaged 2% more than the actual market interest rates during the year ended December 31, 2022, our interest expense for the year would have increased by $8.5 million.

This amount is determined by considering the impact of the hypothetical interest rates on our borrowings. This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management could potentially take action to mitigate our exposure to the change. However, due to the uncertainty of the specific actions that we would take and their possible effects, the sensitivity analysis assumes no changes in our financial structure.

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Item 8. Financial Statements and Supplementary Data

PARTY CITY HOLDCO INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)	45
Reports of Independent Registered Public Accounting Firm (BDO, USA, P.C. New York, New York - PCAOB ID: 243)	55
Consolidated Balance Sheets at December 31, 2021 and December 31, 2020	50
Reports of Independent Registered Public Accounting Firm (Ernst & Young LLP - PCAOB ID: 42)	59
Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2021, December 31, 2020 and December 31, 2019	51
Consolidated Balance Sheets at December 31, 2022 and December 31, 2021	60
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, December 31, 2020 and December 31, 2019	52
Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2022, December 31, 2021 and December 31, 2020	61
Consolidated Statements of Cash Flows for the years ended December 31, 2020, December 31, 2019 and December 31, 2018	54
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2022, December 31, 2021 and December 31, 2020	62
Notes to Consolidated Financial Statements	56
Consolidated Statements of Cash Flows for the years ended December 31, 2022, December 31, 2021 and December 31, 2020	63
Financial Statement Schedules for the years ended December 31, 2021, December 31, 2020 and December 31, 2019:
Notes to Consolidated Financial Statements	64
Schedule I—Condensed Financial Information	96107
Schedule II—Valuation and Qualifying Accounts	~~100~~111

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.

4454

Report of Independent Registered Public Accounting Firm

ToShareholders ~~the Stockholders~~ and ~~the~~ Board of Directors ~~of Party City Holdco Inc.~~

~~Opinion~~Party onCity ~~the~~Holdco ~~Financial Statements~~ Inc.

WeWoodcliff ~~have audited the accompanying consolidated balance sheets of Party City Holdco Inc. and subsidiaries (the Company) as of December 31~~Lake, 2021 and 2020, the related consolidated statements of operations and comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedules listed in the index at item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.NJ

WeOpinion also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on ~~criteria established in Internal Control-Integrated Framework issued by~~ the ~~Committee~~Consolidated ofFinancial ~~Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2022 expressed an unqualified opinion thereon.~~Statements

We have audited the accompanying consolidated balance sheet of Party City Holdco Inc. (the “Company”) as of December 31, 2022, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 28, 2024 expressed an adverse opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company'’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our ~~audits~~audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our ~~audits~~audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~Critical~~Our ~~Audit~~audit ~~Matters~~included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

~~The~~Critical ~~critical~~Audit audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.Matter

45The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Indefinite-lived Intangible Assets, including Goodwill
Description of the Matter		At December 31, 2021, the Company’s goodwill and trade names were $664 million and $384 million, respectively. As discussed in Note 2 to the consolidated financial statements, goodwill and trade names are tested for impairment annually or more frequently if certain indicators arise. For purposes of testing goodwill for impairment, the Company identified two reporting units which are the wholesale and the retail reporting units. As of December 31, 2021, the Company has not recorded any impairment charges to goodwill or tradenames. Auditing management’s impairment tests associated with its goodwill and trade names included especially subjective judgements due to the estimation required in determining the fair value of the reporting units and the value of the other indefinite lived intangibles. In particular, the fair value estimates were dependent on significant assumptions, such as the weighted average cost of capital, revenue and earnings before interest, taxes, depreciation, and amortization (“EBITDA”) margin growth rates, royalty rates and projected cash flow terminal growth rates that are affected by expected future market or economic conditions.
How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company's impairment assessments, including management's review controls over the determination of the significant assumptions described above and the data underlying these assumptions. To test the estimated fair value of the Company’s reporting units and trade names, we performed audit procedures that included, among others, assessing the valuation methodologies used and testing management’s significant assumptions, discussed above, by comparing them to current industry and economic trends, trends in customer demands and other external factors. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units and trade names that would result from changes in the assumptions. We involved our valuation specialists to assist in reviewing the valuation methodology, the weighted average cost of capital and other significant assumptions. In addition, as part of our auditing of goodwill, we reviewed the reconciliation of the fair value of the reporting units to the overall market capitalization of the Company.
Retail Inventory Reserves
Description of the Matter		The Company's inventories, net of reserves totaled $443 million as of December 31, 2021. As described in Note 2 to the consolidated financial statements, inventories are valued at the lower of cost and net realizable value. Auditing management's estimates of the net realizable value of its inventory and reserves at retail for excess and obsolete inventory, involved especially subjective auditor judgment as such estimates are based on various factors that are affected by market and economic conditions. In particular, the net realizable value, obsolete and excess inventory reserve calculations are sensitive to certain significant assumptions, including expected sales demand, manufacturing schedules, pricing strategies, and the effect of the possible discontinuation of product designs.

Valuation of Goodwill related to the Retail Reporting Unit

46As described in Notes 2 and 4 to the consolidated financial statements, the Company’s goodwill balance related to the retail reporting unit was $100.4 million as of December 31, 2022. The carrying value of goodwill is evaluated for impairment at the reporting unit level annually or more frequently if events or changes in circumstances indicate the carrying value of goodwill might exceed its current fair value. The Company recorded an

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company's inventory reserve process, including management's review controls over the determination of the significant assumptions and the data underlying the calculations of the net realizable value of inventory and the excess and obsolete inventory reserves.Our procedures included, among others, evaluating the significant assumptions, identified above, and testing the accuracy and completeness of the underlying data used in management's inventory reserve calculation. We recalculated the reserve using management’s methodology and evaluated the methodology and the significant assumptions for reasonableness. We also evaluated management’s retrospective analysis to assess the historical accuracy of the inventory reserves and performed sensitivity analyses over the significant assumptions to evaluate whether changes to these assumptions may result in material changes in the calculated inventory reserves.55

~~/s/~~impairment ~~ERNST~~charge &related ~~YOUNG~~to ~~LLP~~ its retail reporting unit of $219.9 million in the fourth quarter of 2022. The fair value of the reporting unit was determined using a combination of income and market approaches. The income-based approach included assumptions such as the amount and timing of projected cash flows and the discount rate.

We ~~have~~identified ~~served~~the revenue, net income (loss) before interest expense, net, income taxes, depreciation, and amortization (“EBITDA”) growth rates and the discount rate used in the valuation of goodwill related to the retail reporting unit as a critical audit matter. The principal considerations for our determination are the ~~Company’s~~significant ~~auditor~~and ~~since~~subjective ~~1998~~judgments made by management to determine revenue and EBITDA growth rates and the discount rate when determining the fair value of the retail reporting unit. Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skills and knowledge needed.

~~New~~The ~~York,~~primary ~~New~~procedures ~~York~~we performed to address this critical audit matter included:

•

~~February~~Obtaining ~~28,~~an ~~2022~~understanding of management's process related to the Company's goodwill impairment assessment and the determination of the fair value related to the retail reporting unit.

•

47Evaluating the reasonableness of revenue and EBITDA growth rates used in the determination of the fair value related to the retail reporting unit by comparing the revenue and EBITDA growth rates against historical financial results, guideline companies, and industry information.

•

Utilizing personnel with specialized knowledge and skills in valuation to evaluate the reasonableness of the discount rate used in the determination of the fair value related to the retail reporting unit.

(Signed BDO USA, P.C.)

We have served as the Company's auditor since 2023.

New York, NY

March 28, 2024

Report of Independent Registered Public Accounting Firm

ToShareholders ~~the Stockholders~~ and ~~the~~ Board of Directors ~~of Party City Holdco Inc.~~

~~Opinion~~Party onCity ~~Internal~~Holdco ~~Control Over Financial Reporting~~ Inc.

WeWoodcliff ~~have audited Party City Holdco Inc. and subsidiaries’ internal control over financial reporting as of December 31~~Lake, ~~2021,~~New based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Party City Holdco Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.Jersey

WeOpinion ~~also~~on ~~have~~Internal ~~audited,~~Control inover ~~accordance~~Financial with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedules listed in the index at Item 15 and our report dated February 28, 2022 expressed an unqualified opinion thereon.Reporting

We have audited Party City Holdco’s (the “Company’s”) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity (deficit), and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as “the financial statements”) and our report dated March 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with ~~the~~ U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

~~Our~~A ~~audit~~material ~~included~~weakness ~~obtaining~~is ana ~~understanding~~deficiency, or a combination of deficiencies, in internal control over financial reporting, ~~assessing~~such ~~the~~that ~~risk~~there is a reasonable possibility that a material ~~weakness~~misstatement ~~exists~~of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses relate to: (i) internal controls in the financial reporting processes, ~~testing~~including ~~and~~a ~~evaluating~~lack of segregation of duties within the ~~design~~accounts payable process, lack of effective controls surrounding the proper review and ~~operating~~timeliness ~~effectiveness~~of information used in account reconciliations, journal entry review, and vendor invoice processing; (ii) information technology general controls in the areas of ~~internal~~user ~~control~~access ~~based~~management onand segregation of duties, within certain systems supporting the ~~assessed~~Company's ~~risk~~accounting and reporting processes, were not designed or operating effectively; (iii) adequate documentation was not maintained to demonstrate management’s review supporting the assumptions used in our impairment testing of indefinite-lived intangible assets and ~~performing~~long-lived ~~such~~assets; ~~other~~(iv) inadequate identification and review procedures over debt covenant requirements and restrictions, which led to a failure to detect and timely report a covenant violation related to tax payments; and (v) inadequate processes and internal controls relating to management’s analysis under ASC Subtopic 205-40 of whether there were conditions or events giving rise to substantial doubt about the Company’s ability to continue as wea ~~considered~~going ~~necessary~~concern within one year after the financial statements were issued, which resulted in a material error in management’s assessment of the ~~circumstances~~Company’s ability to remain a going concern in connection with filing its form 10-Q for the third quarter of 2022. WeThese ~~believe~~material ~~that~~weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit ~~provides~~of athe ~~reasonable~~2022 ~~basis~~financial ~~for~~statements, and this report does not affect our ~~opinion~~report dated March 28, 2024 on those financial statements.

~~Definition and Limitations of Internal Control Over Financial Reporting~~57

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

48(Signed BDO USA, P.C.)

New York, NY

March 28, 2024

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Party City Holdco Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Party City Holdco Inc. and subsidiaries (the Company) as of December 31, 2021, the related consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes and financial statement schedules listed in the index at item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ ERNST & YOUNG LLP

We served as the Company’s auditor from 1998 to 2023.

New York, New York

February 28, 2022

4959

PARTY CITY HOLDCO INC.

CONSOLIDATED BALANCE SHEETS

(~~Dollars~~In in thousands, except share data)

	December 31, 2021			December 31, 2020
	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	4759,~~914~~421		$	~~119~~47,~~532~~914
Accounts receivable, net		9383,~~301~~157			9093,~~879~~301
Inventories, net		~~443~~633,~~295~~360			~~412~~443,~~285~~295
Prepaid expenses and other current assets		5742,~~656~~106			4557,~~905~~656
Income tax receivable		5614,~~317~~464			5756,~~549~~317
Assets held for sale, net		—			83,110
Total current assets		832,508			698,483
Total current assets		698,483			809,260
Property, plant, and equipment, net		255,270			221,870
Property, plant and equipment, net		221,870			209,412
Operating lease asset		707,047			693,875
Operating lease asset		693,875			700,087
Goodwill		100,357			664,296
Goodwill		664,296			661,251
Trade names		94,680			383,737
Trade names		383,737			384,428
Other intangible assets, net		13,304			23,687
Other intangible assets, net		23,687			32,134
Other assets, net		16,831			25,952
Other assets, net		25,952			9,883
Total assets	$	2,019,997		$	2,711,900
Total assets	$	2,711,900		$	2,806,455
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	84360,~~181~~745		$	~~175~~84,~~707~~181
Accounts payable		~~161~~157,~~736~~474			~~118~~161,~~928~~736
Accrued expenses		~~195~~181,~~531~~466			~~160~~195,~~605~~531
Liabilities held for sale		—			68,492
Current portion of operating lease liability		119,605			116,437
Current portion of operating lease liability		116,437			176,045
Income taxes payable		426			10,801
Income taxes payable		10,801			524
Current portion of long-term obligations		1,331,003			1,373
Current portion of long-term obligations		1,373			13,576
Total current liabilities		2,150,719			570,059
Total current liabilities		570,059			713,877
Long-term obligations, excluding current portion		11,134			1,351,189
Long-term obligations, excluding current portion		1,351,189			1,329,808
Long-term portion of operating lease liability		685,120			655,875
Long-term portion of operating lease liability		655,875			654,729
Deferred income tax liabilities		9,128			29,195
Deferred income tax liabilities		29,195			34,705
Other long-term liabilities		21,723			22,868
Other long-term liabilities		22,868			22,815
Total liabilities		2,877,824			2,629,186
Total liabilities		2,629,186			2,755,934
Commitments and contingencies (Note 15)
Redeemable securities		—			—
Stockholders’ (deficit) equity:
Commitments and contingencies
Common stock (Par value $0.01; 113,509,223 and 112,170,944 shares outstanding and 126,787,094 and 124,157,500 shares issued at December 31, 2022 and December 31, 2021, respectively)		1,385			1,384
Stockholders’ equity:
Additional paid-in capital		988,463			982,307
Common stock (112,170,944 and 110,781,613 shares outstanding and 124,157,500 and 121,662,540 shares issued at December 31, 2021 and December 31, 2020, respectively)		1,384			1,373
Accumulated deficit		(1,514,615	)		(571,985	)
Additional paid-in capital		982,307			971,972
Accumulated other comprehensive income		1,855			3,541
Retained (deficit) earnings		(571,985	)		(565,457	)
Total stockholders’ (deficit) equity before common stock held in treasury		(522,912	)		415,247
Accumulated other comprehensive income (loss)		3,541			(29,916	)
Less: Common stock held in treasury, at cost (13,277,871 and 11,986,556 shares at December 31, 2022 and December 31, 2021, respectively)		(334,915	)		(332,533	)
Total Party City Holdco Inc. stockholders’ equity before common stock held in treasury		415,247			377,972
Total stockholders’ (deficit) equity		(857,827	)		82,714
Less: Common stock held in treasury, at cost (11,986,556 and 11,280,098 shares at December 31, 2021 and December 31, 2020, respectively)		(332,533	)		(327,182	)
Total liabilities and stockholders’ (deficit) equity	$	2,019,997		$	2,711,900
Total Party City Holdco Inc. stockholders’ equity		82,714			50,790
Noncontrolling interests		—			(269	)
Total stockholders’ equity		82,714			50,521
Total liabilities, redeemable securities and stockholders’ equity	$	2,711,900		$	2,806,455

See accompanying notes to consolidated financial statements.

5060

PARTY CITY HOLDCO INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE ~~INCOME~~ (LOSS) INCOME

(In thousands, except share and per share data)

	Years Ended December 31,
	Year ended December 31,
	2021			2020			2019
	2022			2021			2020
Net sales	$	2,~~171~~169,~~060~~878		$	12,~~850~~171,~~690~~060		$	21,~~348~~850,~~789~~690
Cost of sales		1,~~403~~437,~~004~~077			1,~~369~~403,~~935~~004			1,~~500~~369,~~633~~935
Gross profit		~~768~~732,~~056~~801			~~480~~768,~~755~~056			~~848~~480,~~156~~755
Wholesale selling expenses		30,762			50,121			67,103
Selling, general and administrative expenses		707,246			671,165			680,479
Retail operating expenses		432,531			387,398			440,395
Store and other long-lived asset impairments		23,277			9,048			22,449
General and administrative expenses		186,698			225,322			201,560
Loss on disposal of assets in international operations		—			3,211			73,948
Art and development costs		21,174			17,638			23,203
Goodwill and intangible asset impairments		862,544			—			581,380
Gain on sale/leaseback transaction		—			—			(58,381	)
(Loss) income from operations		(860,266	)		84,632			(877,501	)
Store impairment and restructuring charges		—			22,449			29,038
Interest expense, net		102,647			87,226			77,043
Loss on disposal of assets in international operations		3,211			73,948			—
Other (income) expense, net		(3,789	)		(614	)		3,715
Goodwill, intangibles and long-lived assets impairment		9,048			581,380			562,631
Gain on debt repayment/refinancing		—			(1,106	)		(273,149	)
Income (loss) from operations		84,632			(877,501	)		(417,393	)
Loss before income taxes		(959,124	)		(874	)		(685,110	)
Interest expense, net		87,226			77,043			114,899
Income tax (benefit) expense		(16,494	)		5,708			(156,653	)
Other (income) expense, net		(614	)		3,715			1,871
Net loss		(942,630	)		(6,582	)		(528,457	)
Gain on debt repayment/refinancing		(1,106	)		(273,149	)		—
Less: Net loss attributable to noncontrolling interests		—			(54	)		(219	)
Loss before income taxes		(874	)		(685,110	)		(534,163	)
Net loss attributable to common shareholders of Party City Holdco Inc.	$	(942,630	)	$	(6,528	)	$	(528,238	)
Income tax expense (benefit)		5,708			(156,653	)		(1,305	)
Net loss per share attributable to common shareholders of Party City Holdco Inc.—basic and diluted	$	(8.35	)	$	(0.06	)	$	(5.24	)
Net loss		(6,582	)		(528,457	)		(532,858	)
Weighted-average number of common shares—basic and diluted		112,911,368			110,980,934			100,804,944
Less: Net loss attributable to noncontrolling interests		(54	)		(219	)		(363	)
Other comprehensive (loss) income, net of tax:
Net loss attributable to common shareholders of Party City Holdco Inc	$	(6,528	)	$	(528,238	)	$	(532,495	)
Foreign currency adjustments	$	(1,686	)	$	35,128		$	6,143
Net loss per share attributable to common shareholders of Party City Holdco Inc.—Basic	$	(0.06	)	$	(5.24	)	$	(5.71	)
Cash flow hedges		—			(1,348	)		(352	)
Net loss per share attributable to common shareholders of Party City Holdco Inc.—Diluted	$	(0.06	)	$	(5.24	)	$	(5.71	)
Other comprehensive (loss) income, net		(1,686	)		33,780			5,791
Weighted-average number of common shares—Basic		110,980,934			100,804,944			93,295,692
Comprehensive (loss) income		(944,316	)		27,198			(522,666	)
Weighted-average number of common shares—Diluted		110,980,934			100,804,944			93,295,692
Less: Comprehensive income (loss) attributable to noncontrolling interests		—			269			(246	)
Other comprehensive income (loss), net of tax:
Comprehensive (loss) income attributable to common shareholders of Party City Holdco Inc.	$	(944,316	)	$	26,929		$	(522,420	)
Foreign currency adjustments	$	35,128		$	6,143		$	12,599
Cash flow hedges		(1,348	)		(352	)		845
Other comprehensive income, net		33,780			5,791			13,444
Comprehensive income (loss)		27,198			(522,666	)		(519,414	)
Less: Comprehensive income (loss) attributable to noncontrolling interests		269			(246	)		(386	)
Comprehensive income (loss) attributable to common shareholders of Party City Holdco Inc.	$	26,929		$	(522,420	)	$	(519,028	)

*Prior year amounts conformed to current year presentation.

See accompanying notes to consolidated financial statements.

5161

PARTY CITY HOLDCO INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the Years Ended December 31, ~~2019~~2020, December 31, ~~2020~~2021, and December 31, ~~2021~~2022

(In thousands)

	CommonStock		AdditionalPaid-inCapital			~~RetainedEarnings(~~Accumulated Deficit)			~~AccumulatedOtherComprehensiveLoss~~AccumulatedOtherComprehensive(Loss) Income			Total PartyCityHoldco Inc.Stockholders’Equity Before CommonStock Held InTreasury			CommonStock HeldIn Treasury			TotalParty CityHoldco Inc.Stockholders’Equity (Deficit)			Non-ControllingInterests			TotalStockholders’Equity
Balance at December 31, 2018	$	1,208	$	922,476		$	495,777		$	(49,201	)	$	1,370,260		$	(326,930	)	$	1,043,330		$	291		$	1,043,621
Cumulative effect of change in accounting principle, net (see Note 2)		—		662			(503	)		—			159			—			159			—			159
Balance at December 31, 2018, adjusted	$	1,208	$	923,138		$	495,274		$	(49,201	)	$	1,370,419		$	(326,930	)	$	1,043,489		$	291		$	1,043,780
Net (loss)							(532,495	)					(532,495	)					(532,495	)		(363	)		(532,858	)
Stock option expense				1,319									1,319						1,319						1,319
Restricted stock units — time-based				2,033									2,033						2,033						2,033
Directors — non-cash compensation				313									313						313						313
Warrant				515									515						515						515
Exercise of stock options		3		1,145									1,148						1,148						1,148
Acquired non-controlling interest				110									110						110			71			181
Foreign currency adjustments										12,622			12,622						12,622			(23	)		12,599
Treasury stock purchases													—			(156	)		(156	)					(156	)
Impact of foreign exchange contracts							2			845			847						847						847
Balance at December 31, 2019	$	1,211	$	928,573		$	(37,219	)	$	(35,734	)	$	856,831		$	(327,086	)	$	529,745		$	(24	)	$	529,721
Net (loss)							(528,238	)					(528,238	)					(528,238	)		(219	)		(528,457	)
Net loss							(528,238	)					(528,238	)					(528,238	)		(219	)		(528,457	)
Stock option expense – time – based				796									796						796						796
Stock-based compensation*				13,356									13,356						13,356						13,356
Stock option expense – performance – based				7,847									7,847						7,847						7,847
Restricted stock unit expense – performance-based				1,272									1,272						1,272						1,272
Restricted stock unit expense – time-based				2,071									2,071						2,071						2,071
Directors — non-cash compensation				337									337						337						337
Warrant expense (see Note 25 – Kazzam, LLC)				1,033									1,033						1,033						1,033
Exercise of stock options		2		146									148						148						148
Acquired non-controlling interest				2,316									2,316						2,316			1			2,317
Issuance of Stock for Debt exchange including costs		160		27,581									27,741						27,741						27,741
Foreign currency adjustments (see Note 23)										6,170			6,170						6,170			(27	)		6,143
Foreign currency adjustments (see Note 19)										6,170			6,170						6,170			(27	)		6,143
Treasury stock purchases													—			(96	)		(96	)					(96	)
Impact of foreign exchange contracts										(352	)		(352	)					(352	)					(352	)
Balance at December 31, 2020	$	1,373	$	971,972		$	(565,457	)	$	(29,916	)	$	377,972		$	(327,182	)	$	50,790		$	(269	)	$	50,521
Net (loss)							(6,528	)					(6,528	)					(6,528	)		(54	)		(6,582	)
Net loss							(6,528	)					(6,528	)					(6,528	)		(54	)		(6,582	)
Stock option expense – time – based				396									396						396						396
Stock-based compensation*				6,685									6,685						6,685						6,685
Restricted stock unit expense – performance-based				3,504									3,504						3,504						3,504
Warrant exercise (see Note 21 – Kazzam, LLC)		4		(4	)								—						—						—
Restricted stock unit expense – time-based				2,557									2,557						2,557						2,557
Exercise of stock options		7		3,673									3,680						3,680						3,680
Acquired non-controlling interest													—						—						—
Issuance of Stock for Debt exchange including costs													—						—						—
Foreign currency adjustments (see Note 19)										34,805			34,805						34,805			323			35,128
Treasury stock purchases													—			(5,351	)		(5,351	)					(5,351	)
Impact of foreign exchange contracts				(19	)					(1,348	)		(1,367	)					(1,367	)					(1,367	)
Balance at December 31, 2021	$	1,384	$	982,307		$	(571,985	)	$	3,541		$	415,247		$	(332,533	)	$	82,714		$	—		$	82,714
Net loss							(942,630	)					(942,630	)					(942,630	)					(942,630	)
Stock-based compensation*		1		6,156									6,157						6,157						6,157
Foreign currency adjustments (see Note 19)										(1,686	)		(1,686	)					(1,686	)					(1,686	)
Treasury stock purchases													—			(2,382	)		(2,382	)					(2,382	)
Balance at December 31, 2022	$	1,385	$	988,463		$	(1,514,615	)	$	1,855		$	(522,912	)	$	(334,915	)	$	(857,827	)	$	—		$	(857,827	)

52* Stock-based compensation consists of stock-option expense – time-based, restricted stock units – time-based, restricted stock units – performance-based, directors – non-cash compensation, warrant expense (see Note 21 - Kazzam, LLC), and other non-employee stock-based compensation, which were shown separately in prior years.

Directors — non-cash compensation				228									228						228					228
Warrant exercise (see Note 25 – Kazzam, LLC)		4		(4	)								—						—					—
Exercise of stock options		7		3,673									3,680						3,680					3,680
Foreign currency adjustments (see Note 23)										34,805			34,805						34,805			323		35,128
Treasury stock purchases													—			(5,351	)		(5,351	)				(5,351	)
Impact of foreign exchange contracts (see Note 23)				(19	)					(1,348	)		(1,367	)					(1,367	)				(1,367	)
Balance at December 31, 2021	$	1,384	$	982,307		$	(571,985	)	$	3,541		$	415,247		$	(332,533	)	$	82,714		$	—	$	82,714

See accompanying notes to consolidated financial statements.

5362

PARTY CITY HOLDCO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years Ended December 31,
	Year ended December 31,
	2021			2020			2019
	2022			2021			2020
							(Adjusted, see Note 2)
Cash flows (used in) provided by operating activities:
Cash flows provided by operating activities:
Net loss	$	(942,630	)	$	(6,582	)	$	(528,457	)
Net (loss) income	$	(6,582	)	$	(528,457	)	$	(532,858	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization expense		63,031			65,610			76,506
Depreciation and amortization expense		65,610			76,506			81,116
Amortization of deferred financing costs and original issuance discounts		5,504			4,516			4,198
Amortization of deferred financing costs and original issuance discounts		4,516			4,198			4,722
Provision for doubtful accounts		3,659			2,569			6,321
Provision for doubtful accounts		2,569			6,321			2,323
Deferred income tax benefit		(19,593	)		(5,155	)		(95,085	)
Deferred income tax (benefit) expense		(5,155	)		(95,085	)		(47,366	)
Undistributed (income) loss in equity method investments		(1,467	)		(220	)		333
Undistributed (income) loss in equity method investments		(220	)		333			(472	)
Change in operating lease liability/asset		5,545			(51,326	)		30,981
Change in operating lease liability/asset		(51,326	)		30,981			(9,942	)
Loss on disposal of assets		192			2,781			70
Loss (gain) on disposal of assets		2,781			70			(59,786	)
Loss on disposal of assets in international operations		—			3,211			73,948
Loss on disposal of assets in international operations		3,211			73,948			—
Store and other long-lived asset impairment		23,277			—			17,585
Non-cash adjustment for store impairment and restructuring		—			17,585			20,236
Goodwill and intangible asset impairments		862,544			11,974			581,380
Goodwill, intangibles and long-lived assets impairment		11,974			581,380			562,631
Stock-based compensation*		6,156			6,685			13,413
Non-employee equity based compensation (see Note 25 – Kazzam, LLC)		—			1,033			515
Gain on debt repayment/refinancing		—			(1,106	)		(273,149	)
Stock option expense – time-based		396			796			1,319
Stock option expense – performance-based		—			7,847			—
Restricted stock unit – performance-based		3,504			1,329			—
Restricted stock units expense – time-based		2,557			2,071			2,033
Directors – non-cash compensation		228			337			313
Gain on debt repayment/refinancing		(1,106	)		(273,149	)		—
Changes in operating assets and liabilities, net of effects of acquired businesses:
(Increase) decrease in accounts receivable		(10,673	)		22,396			(2,600	)
Decrease (increase) in accounts receivable		(806	)		(10,673	)		22,396
(Increase) decrease in inventories		(34188,~~236~~634	)		~~184~~(34,~~924~~236	)		72184,~~385~~924
(Increase) decrease in prepaid expenses and other current assets, net		(21,419	)		(66,166	)		14,741
Decrease (increase) in prepaid expenses and other current assets, net		62,733			(21,419	)		(66,166	)
Increase (decrease) in accounts payable, accrued expenses and income taxes payable		85,306			28,002			(65,617	)
(Decrease) increase in accounts payable, accrued expenses and income taxes payable		(31,446	)		85,306			28,002
Net cash provided by operating activities		51,935			77,200			43,693
Net cash (used in) provided by operating activities		(151,935	)		51,935			77,200
Cash flows provided by (used in) provided by investing activities:
Cash flows used in investing activities:
Cash paid in connection with acquisitions, net of cash acquired		(~~6,954~~157	)		(36,~~305~~954	)		(203,~~878~~305	)
Capital expenditures		(7997,~~222~~539	)		(5179,~~128~~222	)		(6151,~~733~~128	)
Proceeds from disposal of property and equipment		~~225~~1,634			~~162~~225			~~246,286~~162
Proceeds from sale of international operations, net of cash disposed		~~20,556~~—			—20,556			—
Net cash (used in) provided by investing activities		(65,395	)		(54,271	)		163,675
Net cash used in investing activities		(96,062	)		(65,395	)		(54,271	)
Cash flows (used in) provided by financing activities:
Cash flows provided by (used in) financing activities:
Repayment of loans, notes payable and long-term obligations		(~~949~~135,~~907~~312	)		(~~254~~949,~~438~~907	)		(~~441~~254,~~632~~438	)
Proceeds from loans, notes payable and long-term obligations		~~883~~401,~~890~~202			~~368~~883,~~439~~890			~~203~~368,~~344~~439
Exercise of stock options		~~3,680~~—			~~147~~3,680			~~1,148~~147
Treasury stock purchases		(52,~~351~~382	)		(965,351	)		(~~156~~96	)
Debt issuance and modification costs		(213,~~437~~970	)		(2021,~~348~~437	)		(~~414~~20,348	)
Net cash (used in) provided by financing activities		(89,125	)		93,704			(237,710	)
Net cash provided by (used in) financing activities		259,538			(89,125	)		93,704
Effect of exchange rate changes on cash and cash equivalents		~~190~~(34	)		~~(500~~190	)		~~6,299~~(500	)
Net (decrease) increase in cash and cash equivalents and restricted cash		(102,395	)		116,133			(24,043	)
Net increase (decrease) in cash and cash equivalents and restricted cash		11,507			(102,395	)		116,133
Less: net increase/decrease in cash classified within current assets held for sale		~~31,628~~—			(31,628	)		—(31,628	)
Cash and cash equivalents and restricted cash at beginning of period		~~119~~48,~~681~~914			35119,~~176~~681			5935,~~219~~176
Cash and cash equivalents and restricted cash at end of period*	$	48,914		$	119,681		$	35,176
Cash and cash equivalents and restricted cash at end of period**	$	60,421		$	48,914		$	119,681
Supplemental disclosure of cash flow information:
Cash paid during the period:
Cash (paid) received during the period:
Interest	$	57(89,~~971~~639	)	$	68(57,~~396~~971	)	$	~~108~~(68,~~561~~396	)
Income taxes, net of refunds	$	540,~~413~~190		$	26(5,~~867~~413	)	$	36(26,~~093~~867	)

54* Stock-based compensation consists of stock-option expense – time-based, restricted stock units – time-based, restricted stock units – performance-based, directors – non-cash compensation, warrant expense (see Note 21 - Kazzam, LLC), and other non-employee stock-based compensation, which were shown separately in prior years.

**Includes $1.0 million,~~000,~~ $~~149~~1.0 million, and $~~259~~0.1 million of restricted cash for the ~~fiscal~~ years ended December 31, 2022, 2021, ~~2020~~ and ~~2019~~2020, respectively. The Company recorded restricted cash in Other assets, net as presented in the consolidated balance ~~sheet~~sheets at December 31, ~~2021 and in Prepaid expenses and other current assets as presented in the consolidated balance sheets at December 31~~2022, ~~2020~~ and ~~2019~~2021.

For additional information regarding Goodwill, intangibles and long-lived assets impairment ~~for 2021~~, refer to Note 64 – Goodwill, Note 5 – Disposition of Assets, and ~~Assets~~Note ~~and~~8 ~~Liabilities~~– ~~Held~~Intangible ~~for Sale~~Assets.

See accompanying notes to consolidated financial statements.

5563

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share)

Note 1 — Organization, Description of Business, and Basis of Presentation

Party City Holdco Inc. (the “Company,” or “Party City Holdco” or “PCH”) is a leading party goods company by revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally by revenue. With hundreds of retail stores ~~filled with thousands of products~~ across the United States, we make it easy for our customers to find the perfect party solution through our assortment of party products, balloons, and costumes for their celebration aided by the support of our party experts both in-store and online. Our retail operations include approximately ~~830~~770 specialty retail party supply stores (including franchise stores) throughout North America operating under the names Party City and Halloween City, and e-commerce websites which offer rapid, contactless, and same day shipping options (including in-store and at curbside), principally through the domain name ~~PartyCity~~partycity.com. In addition to our retail operations, we are also a global designer, manufacturer, and distributor of decorated consumer party products, with items found in retail outlets worldwide, including independent party supply stores, mass merchants, grocery retailers, e-commerce merchandisers and dollar stores.

Party City Holdco is a holding company with no operating assets or operations. The Company owns 100% of PC Nextco Holdings, LLC (“PC Nextco”), which owns 100% of PC Intermediate Holdings, Inc. (“PC Intermediate”). PC Intermediate owns 100% of Party City Holdings Inc. (“PCHI”), which owns most of the Company’s operating subsidiaries.

Chapter 11 Cases

On the PCHI Petition Date, the Debtors entered into a Restructuring Support Agreement (along with subsequent amendments made throughout the Chapter 11 Cases, the “RSA”) with certain holders (collectively, the “Initial Consenting Noteholders”) of the Secured Floating Rate 2025 Notes (as defined herein) and the Secured Fixed Rate 2026 Notes (as defined herein). The RSA contemplates a restructuring (the “Restructuring”) of the Debtors pursuant to a joint plan of reorganization (the “Plan,” as further described below). Among other things, the RSA provided for:

•

The treatment of general unsecured claims to be governed by the terms of the Plan and to be acceptable to the Debtors and the Initial Consenting Noteholders; and

•

An initial draw of $75 million under the DIP Facility was made on January 19, 2023, and the proceeds were used in accordance with the DIP Facility budget to, among other things, (i) pay the administrative costs and expenses of the Chapter 11 Cases and the DIP Facility and (ii) fund general corporate purposes. A second draw of $75 million was made following the Bankruptcy Court’s entry of the order approving the DIP Facility on a final basis on March 3, 2023. The second draw of borrowings for $75 million was used for the same purposes as the first draw.

The DIP Facility was secured by perfected senior security interests and liens having the priorities set forth in the DIP Credit Agreement on substantially all assets of the Debtors.

The DIP Facility terminated on October 12, 2023 as part of the Debtors' emergence from the Chapter 11 Cases, as discussed in more detail below.

Subsequent Event - Emergence from Chapter 11 Cases

On September 6, 2023, the Bankruptcy Court entered an order confirming the Plan (the “Confirmation Order”).

On October 12, 2023 (the “Effective Date”), the Plan became effective in accordance with its terms, and the Debtors emerged from the Chapter 11 Cases. The emergence events discussed below occurred subsequent to the December 31, 2022 date of the consolidated balance sheet presented in this report and are, therefore, not reflected in the financial statements presented in this report.

On the Effective Date, in connection with the effectiveness of, and pursuant to the terms of, the Plan and the Confirmation Order, the Company’s common stock outstanding immediately before the Effective Date was canceled and is of no further force or effect, and the new organizational documents of the Company became effective, authorizing the issuance of shares of common stock representing 100% of the equity interests in the Company (the “New PCHI Shares”). In accordance with the foregoing, on the Effective Date, the Company, as reorganized on the Effective Date in accordance with the Plan, issued 13,374,519 New PCHI Shares and the 12.00% Senior Secured Second Lien PIK Toggle Notes (the “Second Lien Notes” and together with the New PCHI Shares, the “New Securities”). The New Securities issued pursuant to the Plan, including the New Securities issued upon the exercise of the Subscription Rights (as defined in the backstop commitment agreement (as amended, supplemented, or modified from time to time, together with all exhibits and schedules thereto, the “Backstop Agreement”) with the commitment parties thereto (collectively, the “Commitment Parties”)) in connection with the rights offering ((the “Rights Offering,” consisting of a purchase price of $75 million aggregate principal amount (a portion of the $232.4 million aggregate principal amount of the Company’s Second Lien Notes) and 3,634,614 New PCHI Shares), all New Securities issued to the Commitment Parties in respect of their commitments under the Backstop Agreement and in connection with the Rights Offering was issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) provided by section 1145 of the Bankruptcy Code and, to the extent such exemption was unavailable, was issued in reliance on the exemption provided by section 4(a)(2) under the Securities Act or another applicable exemption.

Equity Interests

Claims Treatment Under the Plan

•

General Unsecured Claims. Each holder of an Allowed General Unsecured Claim received its Pro Rata share of the General Unsecured Claim Recovery Pool.

•

Debt Securities and Agreements

New ABL Credit Agreement

interest at the rate equal to 2.00% per annum in excess of the applicable interest rate under the New ABL Facility to the extent lawful.

document to create an effective security interest in collateral, bankruptcy and insolvency events, cross-default to other material indebtedness, and a change of control. The occurrence of any event of default under the ABL Credit Agreement would permit all obligations under the New ABL Facility to be declared due and payable immediately and all commitments thereunder to be terminated.

Second Lien Notes

The Second Lien Notes are jointly and severally irrevocably and unconditionally guaranteed on a senior secured basis by certain subsidiaries of the Company, including all “New Loan Parties” (other than the Company) under the New ABL Credit Agreement. The Second Lien Notes and such guarantees are secured by second priority liens on the assets subject to liens securing the New ABL Facility, including the equity interests of each guarantor of the Second Lien Notes, all assets owned by the Company as of the Effective Date or acquired thereafter, certain assets related thereto, and substantially all other assets of the Company and such guarantors, in each case, subject to certain exceptions and limitations. The outstanding Second Lien Notes are subject to the Intercreditor Agreement. The following is a brief description of the material provisions of the Second Lien Notes Indenture and the Second Lien Notes.

Registration Rights Agreement

RRA Shareholders request the inclusion of Registrable Securities (as defined in the Registration Rights Agreement) constituting at least 25% of all Registrable Securities.

Stockholders’ Agreement

Unregistered Sales of Equity Securities

On the Effective Date, pursuant to the Plan:

•

9,339,564 New PCHI Shares were issued to holders of Allowed DIP Claims on account of such holders’ DIP Loans (each as defined in the Plan), representing 69.8% of all shares issued at emergence.

Subsequent Event - Anagram Bankruptcy

issued thereunder, the “Anagram DIP Notes Facility”). The Anagram Debtors continue to operate their business and manage their properties as “debtors-in-possession” in accordance with the applicable provisions of the Bankruptcy Code and orders of the Anagram Bankruptcy Court throughout the duration of the Anagram Chapter 11 Cases.

The Anagram Entities subsequently received final approval from the Anagram Bankruptcy Court for the Anagram DIP Notes Facility ($22 million new money commitment) and the Anagram DIP ABL Facility ($15 million gradual roll-up of the Anagram Entities’ prepetition asset-based lending facility).

Note 2 — Summary of Significant Accounting Policies

Consolidated Financial Statements

The consolidated financial statements of the Company include the accounts of all majority-owned subsidiaries and controlled entities. All intercompany balances and transactions have been eliminated.

The Company’s retail operations define a fiscal year (“Fiscal Year”) as the 52-week period or 53-week period ended on the Saturday nearest December 31st of each year and define their fiscal quarters (“Fiscal Quarter”) as the four interim 13-week periods following the end of the previous Fiscal Year, except in the case of a 53-week Fiscal Year when the fourth Fiscal Quarter is extended to 14 weeks. Fiscal ~~2021~~2022 was a 52-week year for our retail operations. The consolidated financial statements of the Company combine the Fiscal Year and Fiscal Quarters of the Company’s retail operations with the calendar year and calendar quarters of the Company’s wholesale operations, as the differences are not significant.

Due to the fact that the Chapter 11 filing occurred after the balance sheet date in this report, the accompanying consolidated financial statements as of and for the period ending December 31, 2022 have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments to liabilities and assets that resulted from the Bankruptcy Court’s confirmation of our reorganization plan on October 12, 2023. During the Chapter 11 Cases, the Company’s ability to continue as a going concern was contingent upon the Company’s ability to successfully implement the Company’s reorganization plan, among other factors. As a result of the effectiveness and ongoing implementation of the reorganization plan, management believes there is no longer substantial doubt about the Company’s ability to continue as a going concern.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Management periodically evaluates estimates used in the preparation of the consolidated financial statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based on such periodic evaluations.

~~Cash Equivalents~~ 71

~~Highly~~Cash liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. All credit card transactions that process in less than seven days are classified as cash and ~~cash~~Cash ~~equivalents.~~Equivalents

56Highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. All credit card transactions that process in less than seven days are classified as cash and cash equivalents. As of December 31, 2022, cash and cash equivalents included credit card receivables of $33.4 million.

The Company maintains the majority of its cash in accounts with major financial institutions within and outside of the United States. Deposits in these institutions may exceed the amounts of insurance provided, or deposits may not be covered by insurance. The Company has not experienced losses on its deposits of cash and cash equivalents.

Inventories

Inventories are valued at the lower of cost and net realizable value. In assessing the ultimate realization of inventories, the Company makes judgments regarding, among other things, future demand and market conditions, current inventory levels, and the impact of the possible discontinuation of product designs.

The Company principally determines the cost of inventory using the weighted average method.

The Company estimates retail inventory shrinkage for the period between physical inventory dates on a store-by-store basis. Inventory shrinkage estimates can be affected by changes in merchandise mix and changes in actual shortage trends. The shrinkage rate from the most recent physical inventory, in combination with historical experience, is the basis for estimating shrinkage.

Allowance for Doubtful Accounts

~~Refer~~See to Note 2420 ~~— Revenue from Contracts with Customers~~ for ~~detail~~details.

Long-Lived and Intangible Assets (including Goodwill and Trade Names)

Property, plant, and equipment are stated at cost less accumulated depreciation. Depreciation for Property, plant, and equipment is recorded using the straight-line method over their estimated useful lives.

The Company reviews the recoverability of its finite long-lived assets, including finite-lived intangible assets, whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. For purposes of recognizing and measuring impairment, the Company evaluates long-lived assets/asset groups, other than goodwill, based upon the lowest level of independent cash flows ascertainable to evaluate impairment. If an impairment indicator exists, we compare the undiscounted future cash flows of the asset/asset group to the carrying value of the asset/asset group. If the sum of the undiscounted future cash flows is less than or approximates the carrying value of the asset/asset group, we would then calculate discounted future cash flows based on market participant assumptions. If the sum of discounted cash flows is less than the carrying value of the asset/asset group, we would recognize an impairment loss. The impairment related to long-lived assets is measured as the amount by which the carrying amount of the asset(s) exceeds the fair value of the asset(s).

In the evaluation of the fair value and future benefits of finite long-lived assets attached to retail stores, the Company performs its cash flow analysis generally on a store-by-store basis. The fair values of store long-lived assets are determined based on estimated future discounted cash flows. Various factors, including future sales growth, ~~and~~ profit margins, and store closure plans are included in this analysis. See Note 3 for further information regarding store and other long-lived asset impairments.

~~The~~Goodwill ~~Company~~is ~~evaluates~~reviewed ~~the~~for ~~goodwill~~potential ~~associated~~impairment ~~with~~annually ~~its~~on ~~acquisitions,~~October ~~and~~1st ~~other~~or ~~intangibles~~more ~~with~~frequently ~~indefinite~~if ~~lives,~~events ~~for~~or ~~impairment~~changes onin ~~October~~circumstances 1indicate ~~based~~the oncarrying ~~current~~value ~~and~~of ~~projected~~goodwill ~~performance,~~might orexceed ~~more~~its ~~frequently~~current iffair ~~circumstances indicate a possible impairment~~value. For purposes of testing goodwill for impairment, reporting units are determined by identifying operating segments within the Company’s organization which constitute a business for which discrete financial information is available and is reviewed by management. Components within an operating segment are aggregated to the extent that they have similar economic characteristics. Based on this evaluation, the Company has determined that its operating segments, wholesale and retail, represent reporting units for the purposes of its goodwill impairment test.

If it is concluded that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company estimates the fair value of the reporting unit using a combination of a market ~~approach~~ and an income ~~approach~~approaches. If ~~such~~the carrying value of a reporting unit exceeds ~~the~~its fair value, an impairment loss will be recognized in an amount equal to such excess. ~~The fair value of a reporting unit refers to the amount at which the unit as a whole could be sold in a current transaction between willing parties.~~

Our Trade names are treated as indefinite-lived intangible assets and, therefore are not amortized, but rather are tested for impairment annually in the fourth fiscal quarter, unless there are events requiring an earlier assessment or changes in circumstances during an interim period providing impairment indicators are present. When performing a quantitative impairment assessment of our Trade name indefinite-lived intangible assets, the fair value of the Trade names is estimated using a discounted cash flow analysis based on the "relief from royalty" method, assuming that a 72

57The fair value of the Company’s reporting units is based upon the best information available that incorporates assumptions marketplace participants would use in their estimates of fair value. Significant assumptions are used in determining appropriate discount rates and terminal growth rates, market multiples, and other assumptions. To forecast a reporting unit’s future cash flows, the Company takes into consideration current and future economic conditions and trends, management’s and a market participant’s view of revenue and EBITDA growth rates, and risk-adjusted discount rates. Macroeconomic factors such as changes in economies, changes in the competitive landscape, and other changes beyond the Company’s control could have a positive or negative impact on achieving its growth rate targets. See Note 4 for further information regarding goodwill impairments recorded in the periods covered by this report.

~~third~~Our trade names are treated as indefinite-lived intangible assets and are tested for impairment annually on October 1st or more frequently if circumstances indicate a possible impairment. When performing a quantitative impairment assessment of our trade name indefinite-lived intangible assets, the fair value of the trade names is estimated using a discounted cash flow analysis based on the “relief from royalty” method, assuming that a third-party would be willing to pay a royalty in lieu of ownership for this intangible asset. This approach is dependent on many factors, including estimates of ~~future growth,~~ royalty rates, and discount rates. Actual future results may differ from these estimates. ~~Impairment~~An impairment loss is recognized when the estimated fair value of the indefinite-lived intangible asset is less than its carrying amount. See Note 8 for further information regarding trade name impairments recorded in the periods covered by this report.

Deferred Financing Costs

Deferred financing costs are netted against amounts outstanding under the related debt instruments. They are amortized to interest expense over the terms of the instruments using the effective interest method.

Equity Method Investments

The Company has aninvestments ~~investment~~ in Convergram Mexico, S. De R.L. De C.V., a joint venture distributing metallic balloons, principally in Mexico and Latin America. ~~The~~and ~~Company~~a ~~accounts~~joint venture for its ~~49.9%~~costume ~~investment~~sourcing and manufacturing business in ~~the~~Asia ~~joint~~that ~~venture~~are accounted for using the equity method of accounting. The Company ~~also~~concluded ~~has~~that anit ~~investment~~is innot athe ~~joint~~primary ~~venture~~beneficiary ~~partnership~~in ~~for~~either ~~its~~of ~~costume~~these ~~sourcing~~joint ventures and ~~manufacturing~~therefore ~~business~~accounts infor ~~Asia~~these ~~which~~investments isunder ~~accounted for using~~ the equity method ~~of accounting~~. See Variable Interest Entities section below for additional information.

The Company’s investments are included in Other assets, net on the consolidated balance ~~sheet~~sheets, and its ~~portion~~share of the results of the investees’ operations are included in Other (income) expense, net, in the consolidated ~~statement~~statements of operations and comprehensive (loss) income. ~~(see~~See Note ~~14, Other Expense, net)~~11.

Insurance Accruals

The Company maintains certain self-insured workers’ compensation and general liability insurance plans. The Company estimates the required liability for claims under such plans based upon various assumptions, which include, but are not limited to, historical loss experience, projected loss development factors, actual payroll, and other data. The required liability is also subject to adjustment in the future based upon changes in claims experience, including changes in the ~~number of incidents (~~frequency) and/or ~~changes~~severity inof ~~the ultimate cost per incident (severity)~~incidents.

Revenue Recognition

Retail

Revenue from retail store operations is recognized at the point of sale as control of the product is transferred to the customer at such time. Retail e-commerce sales are recognized when the consumer receives the product as control transfers upon delivery. Due to its extensive history operating as a party goods retailer in North America, the Company has sufficient history with which to estimate future retail sales returns and it uses the expected value method to estimate such activity.

The transaction price for the ~~majority of the~~ Company’s retail sales is based on either: 1) the item’s stated price or 2) the stated price adjusted for the impact of a coupon which can only be applied to such transaction. To the extent that the Company charges customers for freight costs on e-commerce sales, the Company records such amounts in revenue. The Company excludes all sales taxes and value-added taxes from revenue.

Under the terms of its agreements with its franchisees, the Company provides both: 1) brand value (via significant advertising spend) and 2) support with respect to planograms, in exchange for a royalty fee that ranges from 4% to 6% of the franchisees’ sales. The Company records the royalty fees at the time that the franchisees’ sales are recorded. Additionally, although the Company anticipates that future franchise store openings will be limited, when a franchisee opens a new store, the Company receives and records a one-time fee which is earned by the Company for its assistance with site selection and development of the new location. Both the sales-based royalty fee and the one-time fee are recorded in Net sales in the Company’s consolidated statement of operations and comprehensive (loss) income.

5873

of the franchisees’ sales. The Company records the royalty fees when the franchisees’ sales are recorded. Additionally, when a franchisee opens a new store, the Company receives and records a one-time fee which is earned by the Company for its assistance with site selection and development of the new location, though the Company anticipates that future franchise store openings will be limited. Both the sales-based royalty fee and the one-time fee are recorded in Net sales in the Company’s consolidated statements of operations and comprehensive (loss) income.

Wholesale

For most of the Company’s wholesale sales, control transfers upon the Company’s shipment of the product. Wholesale sales returns are not significant as the Company generally only accepts the return of goods that were shipped to the customer in error or that were damaged when received by the customer. Additionally, due to its extensive history operating as a party goods wholesaler, the Company has sufficient history with which to estimate future sales returns.

The majority of the sales for the Company’s wholesale business are due within 30 to 120 days from the transfer of control of the product, and substantially all ~~of the~~ sales are collected within a year from such transfer. For all transactions for which the Company expects to collect the transaction price within a year from the transfer of control, the Company does not adjust the consideration for the effects of a significant financing component.

Cost of Sales

~~Cost~~Wholesale cost of sales atinclude ~~wholesale reflects~~ the production costs (i.e., raw materials, labor, and overhead) of manufactured goods and the direct cost of purchased goods, inventory shrinkage, inventory adjustments, inbound freight to the Company’s manufacturing and distribution facilities, distribution costs, and outbound freight to transfer goods to the Company’s wholesale customers. AtRetail ~~retail,~~ cost of sales ~~reflects~~include the direct costs of goods purchased from third parties and the production costs/purchase costs of goods acquired from the Company’s wholesale operations. Retail cost of sales also includes inventory shrinkage, inventory adjustments, inbound freight, occupancy costs related to store operations (such as rent, utilities and common area maintenance), depreciation on assets, and all logistics costs (i.e., handling and distribution costs) associated with the Company’s e-commerce business.

~~Retail~~Selling, ~~Operating~~General and Administrative Expenses

~~Retail~~Selling, ~~operating~~general and administrative expenses include ~~costs~~wholesale ~~associated~~selling ~~with~~expenses, ~~the operation of the Company’s~~ retail ~~stores (with the exception of occupancy costs, which are included in cost of sales). Retail~~ operating expenses, ~~principally~~art ~~consist of employee compensation~~ and ~~benefits,~~development ~~advertising~~costs, ~~supplies expense~~ and ~~credit~~other ~~card~~operating ~~fees~~expenses.

Wholesale selling expenses include the costs associated with our wholesale sales and marketing efforts, including merchandising and customer service. Such costs include the salaries and benefits of the related work force, including sales-based bonuses and commissions, as well as catalog and 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 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.

Art and development costs include the costs associated with art production, creative development, and product management, and all operating costs and franchise expenses not included elsewhere in the consolidated statements of operations and comprehensive (loss) income. Costs include the salaries and benefits of the related work force. These expenses generally do not vary proportionally with net sales.

Selling, general and administrative expenses also include all operating costs and franchise expenses not included elsewhere in the consolidated statements 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.

Shipping and Handling

Outbound shipping costs billed to customers are included in net sales. The costs of shipping and handling incurred by the Company are included in cost of sales.

Product Royalty Agreements

The Company enters into product royalty agreements that allow the Company to use licensed designs on certain of its products. These contracts require the Company to pay royalties, generally based on the sales of such ~~product,~~products and may require guaranteed minimum royalties, a portion of which may be paid in advance. The Company matches royalty expense with revenue by recording royalties at the time of sale, at the greater of the contractual rate or an effective rate calculated based on the guaranteed minimum royalty and the Company’s estimate of sales during the contract period. If a portion of the guaranteed minimum royalty is determined to be unrecoverable, the unrecoverable portion is charged to expense at that time. Guaranteed minimum royalties paid in advance are recorded in the consolidated balance sheets in either prepaid expenses and other current assets or other assets, net, depending on the nature of the royalties. Product royalty is recorded within Cost of sales in the consolidated statements of operations and comprehensive (loss) income.

Catalog Costs

The Company expenses costs associated with the production of catalogs when incurred.

Advertising

Advertising costs are expensed as incurred. Retail advertising expenses for the years ended December 31, ~~2021~~2022, December 31, ~~2020~~2021, and December 31, ~~2019~~2020 were $5550.9 million,~~339,~~ $6155.3 million,~~036~~ and $7261.0 million,~~518~~ respectively.

Variable Interest Entities

When determining whether a legal entity should be consolidated, the Company first determines whether it has a variable interest in the legal entity. If a variable interest exists, the Company determines whether the legal entity is a variable interest entity due to either: 1) a lack of sufficient equity to finance its activities,; 2) the equity holders lacking the characteristics of a controlling financial interest,; or 3) the legal entity being structured with non-substantive voting rights. If the Company concludes that the legal entity is a variable interest entity, the Company next determines whether it is the primary beneficiary due to it possessing both: 1) the power to direct the activities of a variable interest entity that most significantly impact the variable interest entity’s economic performance,; and 2) the obligation to absorb losses of the variable interest entity that potentially could be significant to the variable interest entity or the right to receive benefits from the variable interest entity which could be significant to the variable interest entity. If the Company concludes that it is the primary beneficiary, it consolidates the legal entity. See Equity Method Investments section above.

InThere ~~January~~were ~~2021,~~no invariable ~~connection~~interest ~~with~~entities ~~the~~as ~~sale~~ of aDecember ~~substantial~~31, ~~portion~~2022, ~~of its international operations~~2021, ~~the Company formed a joint venture partnership for its costume sourcing~~ and ~~manufacturing business in Asia~~2020. ~~The~~Refer ~~Company~~to ~~concluded~~Note ~~that~~21 it– isKazzam, ~~not~~LLC ~~the joint venture's primary beneficiary and will account~~ for ~~its~~additional ~~investment under the equity method~~information. ~~See Equity Method Investments section above.~~

There were no variable interest entities as of December 31, 2020. Refer to Note 25 – Kazzam, LLC for additional information.

Art and Development Costs

Art and development costs are primarily internal costs that are not easily associated with specific designs, some of which may not reach commercial production. Accordingly, the Company expenses these costs as incurred.

Derivative Financial Instruments

ASC Topic 815, “Accounting for Derivative Instruments and Hedging Activities”,” requires that all derivative financial instruments be recognized on the consolidated balance ~~sheet~~sheets at fair value and establishes criteria for both the designation and effectiveness of hedging activities. The Company uses derivatives in the management of interest rate and foreign currency exposure. ASC Topic 815 requires the Company to formally document the assets, liabilities or other transactions the Company designates as hedged items, the risk being hedged and the relationship between the hedged items and the hedging instruments. The Company must measure the effectiveness of the hedging relationship at the inception of the hedge and on an on-going basis.

If derivative financial instruments qualify as fair value hedges, the gain or loss on the instrument and the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in net income during the period of the change in fair values. For derivative financial instruments that qualify as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive (loss) income and reclassified into net income in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of a cash flow hedge, if any, is determined based on the dollar-offset method (i.e., the gain or loss on the derivative financial instrument in excess of the cumulative change in the present value of future cash flows of the hedged item) and is recognized in net income during the period of change. ~~As long as hedge effectiveness is maintained, foreign currency exchange agreements qualify for hedge accounting as cash flow hedges. See Note 22– Derivative Financial Instruments.~~

As long as hedge effectiveness is maintained, foreign currency exchange agreements qualify for hedge accounting as cash flow hedges.

The company’s derivative financial instruments expired in 2021, and the Company did not enter into any derivative financial instruments in 2022.

Income Taxes

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities (and operating loss and tax credit carryforwards) applying enacted statutory tax rates in effect for the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the judgment of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

rates in effect for the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the judgment of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Stock-Based Compensation

~~Accounting~~The ~~for~~Company ~~stock-based~~measures ~~compensation~~the ~~requires measurement of compensation~~ cost for all stock-based awards at ~~fair value on~~ the grant date offair ~~grant~~value and ~~recognition~~recognizes ofthe related compensation expense over the requisite service period ~~for awards expected to vest. The Company also granted performance-~~based ~~restricted~~on ~~stock units ("PRSUs") and Restricted Cash awards to certain executive officers and other employees. The performance period is three years from~~ the ~~grant~~amount ~~date.~~of ~~The PRSUs and Restricted Cash~~ awards ~~become~~expected ~~earned~~to ~~in a given period if the volume weighted average of the fair market value per share of the Common Stock meets or exceeds $2~~vest.~~50,~~ ~~$5.00, $7.50, and $10.00, respectively, for a period of not less than 90 consecutive trading days on the New York~~ Stock-based ~~Exchange~~compensation ~~and~~expense ~~are~~is ~~subject~~recorded tonet ~~up to 2 years service-vesting after the achievement~~ of ~~these~~estimated ~~thresholds.~~forfeitures ~~The PRSUs and Restricted Cash awards are measured at fair value~~ based on ~~Monte~~historical ~~Carlo simulation models~~experience. ~~The PRSUs will be settled in Party City common stock and are accounted for as equity awards and the Restricted Cash will be settled in cash and are accounted for as liability awards.~~

In 2022, the Company granted performance-based restricted stock units (“PRSUs”) to certain executive officers and other employees that vest only if certain annual and cumulative cash flow and earnings per share targets are met over a 3-year period. For such awards, management must assess the likelihood and extent to which such targets will be met to determine the amount of compensation expense to be recorded each reporting period.

In 2020, the Company granted PRSUs and Restricted Cash awards with market conditions to certain executive officers and other employees. The performance period for such awards is three years from the grant date. The PRSUs and Restricted Cash awards become earned in a given period if the volume weighted average of the fair market value per share of the Common Stock meets or exceeds $2.50, $5.00, $7.50, and $10.00, respectively, for a period of not less than 90 consecutive trading days on the New York Stock Exchange and are subject to up to 2 years of service-vesting after the achievement of these thresholds. The PRSUs and Restricted Cash awards are measured at fair value based on Monte Carlo simulation models. The PRSUs are settled in Party City common stock and are accounted for as equity awards, and the Restricted Cash awards are settled in cash and are accounted for as liability awards.

See Note 13 for further details regarding the Company’s stock-based compensation.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consists of the Company’s foreign currency adjustments ~~and the impact of foreign exchange contracts that qualify as hedges~~. See Note ~~22 – Derivative Financial Instruments and Note 23 – Changes in Accumulated Other Comprehensive Income (Loss)~~19.

Foreign Currency Transactions and Translation

~~The~~For ~~functional currencies of~~ the Company’s foreign operations, ~~are~~the functional currency is the local ~~currencies~~currency in which they operate. Foreign currency exchange gains or losses resulting from receivables or payables in currencies other than the functional currencies generally are recognized in the Company’s ~~statement~~consolidated statements of operations and comprehensive (loss) income. The balance sheets of foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect on the balance sheet date. The results of operations of foreign subsidiaries are translated into U.S. dollars at the average exchange rates effective for the periods presented. The differences from historical exchange rates are recorded as comprehensive (loss) income and are included as a component of accumulated other comprehensive income (loss).

~~Earnings~~Loss Per Share

Basic ~~earnings~~loss per share ~~are~~is computed by dividing net ~~income~~loss attributable to common shareholders of Party City Holdco Inc. by the weighted average number of common shares outstanding for the period. ~~Diluted~~In reporting periods with net income attributable to common shareholders of Party City Holdco Inc., diluted earnings per share are calculated based on the weighted average number of outstanding common shares plus the dilutive effect of stock options and warrants, as if they were exercised, and restricted stock units and PRSU’s, as if they vested.

6176

AThe ~~reconciliation~~calculation ~~between~~of basic and diluted ~~income~~loss per share is as follows:

	Twelve Months Ended December 31,
	Year ended December 31,
	2021			2020			2019
	2022			2021			2020
Net (loss) income attributable to common shareholders of Party City Holdco Inc.:	$	(6,528	)	$	(528,238	)	$	(532,495	)
Net loss attributable to common shareholders of Party City Holdco Inc.:	$	(942,630	)	$	(6,528	)	$	(528,238	)
Weighted average shares — Basic:		110,980,934			100,804,944			93,295,692
Weighted average shares — Basic and Diluted:		112,911,368			110,980,934			100,804,944
Effect of dilutive restricted stock units:		—			—			—
Net loss per share attributable to common shareholders of Party City Holdco Inc. — Basic and Diluted:	$	(8.35	)	$	(0.06	)	$	(5.24	)
Effect of dilutive stock options:		—			—			—
Weighted average shares — Diluted:		110,980,934			100,804,944			93,295,692
Net (loss) income per share attributable to common shareholders of Party City Holdco Inc. — Basic:	$	(0.06	)	$	(5.24	)	$	(5.71	)
Net (loss) income per share attributable to common shareholders of Party City Holdco Inc. — Diluted:	$	(0.06	)	$	(5.24	)	$	(5.71	)

During the year ended December 31, ~~2021~~2022, 13,~~514~~129,~~010~~830 restricted stock units, 43,~~653~~274,~~373~~913 performance restricted stock units and 1885,~~032,219~~862 stock options were excluded from the calculation of diluted net loss per share attributable to common shareholders of Party City Holdco Inc. – diluted as they were anti-dilutive. During the ~~years~~year ended December 31, ~~2020~~2021, ~~and~~1,514,010 ~~December~~restricted ~~31,~~stock ~~2019~~units, 34,~~240~~653,~~461~~373 performance restricted stock ~~options~~units and 31,~~510~~032,~~317~~219 stock options, ~~respectively,~~ were excluded from the ~~calculations~~calculation of diluted net ~~income~~loss per share attributable to common shareholders of Party City Holdco Inc. – diluted as they were anti-dilutive. ~~Additionally,~~During ~~during~~ the ~~years~~year ended December 31, 2020, ~~and~~3,240,461 ~~December~~stock 31options, ~~2019,~~ 1,000,000 ~~and 596,000~~ warrants, respectively, were excluded from the calculations of net income per share attributable to common shareholders of Party City Holdco Inc. – diluted as they were anti-dilutive. Further, during the years ended December 31, 2020, and December 31, 2019, 787,313 restricted stock units, and 413,968 restricted stock units, respectively, were excluded from the calculations of net income per share attributable to common shareholders of Party City Holdco Inc. – diluted as they were anti-dilutive. Also, during the year ended December 31, 2020, 1,206,723 performance restricted stock units were excluded from the calculations of net ~~income~~loss per share attributable to common shareholders of Party City Holdco Inc. – diluted as they were anti-dilutive.

Recently Issued Accounting Pronouncements

In ~~March~~November ~~2020~~2021, the ~~Financial~~FASB ~~Accounting~~issued ~~Standards~~ASU ~~Board~~2021-10, Government Assistance (~~“FASB”~~Topic 832), ~~issued~~Disclosures ~~Accounting~~by ~~Standards~~Business ~~Update~~Entities ~~(“ASU”)~~About ~~2020-04~~Government Assistance, which ~~provides~~requires ~~guidance~~entities ~~providing~~to ~~optional~~provide ~~expedients~~disclosures ~~and~~on ~~exceptions~~material ~~for~~government ~~applying~~assistance ~~U.S.~~transactions ~~generally~~for ~~accepted~~annual ~~accounting~~reporting ~~principles~~periods. toThe ~~contracts,~~disclosures ~~hedging~~include ~~relationships,~~information ~~and~~around ~~other~~the ~~transactions~~nature ~~affected~~of by the ~~discontinuation~~assistance, of the ~~London~~related ~~Interbank~~accounting ~~Offered~~policies ~~Rate~~used ~~(“LIBOR”)~~to oraccount byfor ~~another~~government ~~reference~~assistance, ~~rate~~the ~~expected~~effect toof begovernment ~~discontinued.~~assistance ~~Additionally,~~on inthe ~~January~~entity’s ~~2021~~financial statements, ~~the~~and ~~FASB~~any ~~issued~~significant ~~ASU~~terms ~~2021-01,~~and ~~which~~conditions ~~allows~~of ~~entities~~the toagreements, ~~elect~~including ~~certain~~commitments ~~optional~~and ~~expedients~~contingencies. ~~and~~The ~~exceptions~~new ~~when~~standard ~~accounting~~was effective for ~~derivative~~the ~~contracts~~Company ~~and~~on ~~certain~~January ~~hedging~~1, ~~relationships~~2022 ~~affected~~and byonly ~~changes~~impacts inannual ~~the~~financial ~~interest~~statement ~~rates~~footnote disclosures. The ~~Company~~adoption ~~does~~did not ~~expect~~have anany ~~impact~~effect on our consolidated financial statements.

In ~~November~~January 2021, the FASB issued ASU 2021-1001, ~~Government~~Reference ~~Assistance~~Rate Reform (Topic ~~832~~848): Scope, ~~Disclosures~~which byclarified ~~Business~~the ~~Entities~~scope ~~About~~and ~~Government~~application ~~Assistance~~of ASU 2020-04. In December 2022, ~~which~~the ~~requires~~FASB ~~entities~~issued toASU ~~provide~~2022-06, ~~disclosures~~Reference onRate ~~material~~Reform ~~government~~(Topic ~~assistance~~848): ~~transactions~~Deferral ~~for~~of ~~annual~~the ~~reporting~~Sunset ~~periods.~~Date ~~The~~of ~~disclosures~~Topic ~~include~~848, ~~information~~which ~~around~~defers the ~~nature~~sunset

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