*Extra* Party City's CFO Weighs in with His Company's Side of the Story

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From the fair and equal treatment department: Now we hear from

Party City

(PCTY) - Get Report

regarding this column's

item on Monday. At the time, CFO David Lauber hadn't been available to comment, so he was offered an opportunity to refute issues raised by the column. He faxed over a written response "to correct what appear to be some significant misconceptions" regarding the company's strategy.

Let's take them one at a time:

First, "Regarding debt, you say that it has 'nearly tripled,' but do not specify a time frame to give the reader any context. In any event, we are comfortable with our current debt position, which is at planned levels to support our aggressive store growth program." The column mentioned that debt "has nearly tripled." (On April 24 the company replaced an existing $20 million loan agreement with a $60 million revolving bank line of credit. The company's long-term debt, from Dec. 31 through June 30, actually rose to $40 million from $4.3 million.)

Second, regarding inventory: "As you know, we are entering our peak selling season, during which time we traditionally increase inventories appropriately in order to be in a strong in-stock position to capture sales up through Oct. 31, and best serve our customers. Moreover, much of our inventory consists of 'evergreen' items that remain popular year after year. We have very limited exposure to 'faddish' merchandise."

Third, regarding the purchase of franchises at half the annual sales for those franchises, which represents a discount to the stock's valuation: "Buying back franchises is a very small aspect of our growth strategy. The company's franchises are sold according to a formula that is based on generating a fair return for the company and providing a fair level of liquidity to the franchisee. If we were to pay more for franchise stores, we would have to weigh that against the economics of simply opening a new company-owned store. We are pleased to note that we still have 160 franchise stores, indicating that franchisees remain happy with their investment."

At last check the stock, which closed Friday at 16 7/16, was off 1/4 in recent trading at 14.