-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KQihH/xKyykceUDUELBjB9y5Vnbkbz9YNzEDsGUyedmK85q7LjMaDrYXQnMBnGG0 Tn4h+ml/MkumuYhfAH1RdQ== 0000913355-98-000046.txt : 19980518 0000913355-98-000046.hdr.sgml : 19980518 ACCESSION NUMBER: 0000913355-98-000046 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMSCAN HOLDINGS INC CENTRAL INDEX KEY: 0001024729 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PAPER AND PAPER PRODUCTS [5110] IRS NUMBER: 133911462 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 333-45457 FILM NUMBER: 98626451 BUSINESS ADDRESS: STREET 1: 80 GRASSLANDS ROAD CITY: ELMSFORD STATE: NY ZIP: 10523 BUSINESS PHONE: 9143452020 MAIL ADDRESS: STREET 1: 80 GRASSLANDS ROAD CITY: ELMSFORD STATE: NY ZIP: 10523 424B3 1 SUPPLEMENT NO. 3 TO PROSPECTUS AMSCAN HOLDINGS, INC. Filed pursuant to Rule 424(b)(3) Registration No. 333-45457 Supplement No. 3 to Prospectus dated February 24, 1998, as supplemented by Supplement No. 1 dated March 31, 1998, and Supplement No. 2 dated April 29, 1998 The date of this supplement No. 3 is May 15, 1998 On May 15, 1998, Amscan Holdings, Inc. filed the attached report on Form 10-Q for the quarterly period ended March 31, 1998. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 F O R M 10 - Q [ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1998 [ ] 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 000-21827 --------------------- AMSCAN HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 13-3911462 (State or other jurisdiction of incorporation (I.R.S. Employer Identification or organization) Number) 80 Grasslands Road Elmsford, New York 10523 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (914) 345-2020 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 X No ------ ------ As of May 12, 1998, 1,010 shares of Registrants' Common Stock, par value $0.10, were outstanding. 1 AMSCAN HOLDINGS, INC. FORM 10-Q MARCH 31, 1998 TABLE OF CONTENTS PART I PAGE ITEM 1 FINANCIAL STATEMENTS (UNAUDITED) Consolidated Balance Sheets at March 31, 1998 and December 31, 1997.................................................. 3 Consolidated Statements of Income for the Three Months Ended March 31, 1998 and 1997...................................... 4 Consolidated Statement of Stockholders' Deficit for the Three Months Ended March 31, 1998.................................. 5 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1997...................................... 6 Notes to Consolidated Financial Statements......................... 7 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................................... 10 ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ........ 13 PART II ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K................................... 13 SIGNATURE.................................................................. 15 2 AMSCAN HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
MARCH 31, DECEMBER 31, 1998 1997 ------------ -------------- (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents.................................. $15,140 $ 111,539 Accounts receivable, net of allowances .................... 53,988 44,838 Inventories................................................ 46,803 51,742 Prepaid expenses and other current assets.................. 7,576 8,073 ----------- --------- Total current assets..................................... 123,507 216,192 Property, plant and equipment, net............................ 38,337 38,860 Intangible assets, net........................................ 7,681 7,762 Other assets, net ........................................... 7,264 6,462 ----------- ----------- Total assets............................................. $176,789 $269,276 ======== ======== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Notes payable.............................................. $ 111 $ 424 Due to stockholders........................................ 512 93,243 Accounts payable........................................... 8,016 12,152 Accrued expenses........................................... 12,009 10,502 Income taxes payable....................................... 1,547 167 Current portion of long-term obligations................... 2,912 2,911 ---------- --------- Total current liabilities................................ 25,107 119,399 Long-term obligations, excluding current portion.............. 233,620 234,422 Deferred tax liabilities...................................... 7,224 6,893 Other......................................................... 3,736 3,781 ---------- ---------- Total liabilities........................................ 269,687 364,495 Stockholders' deficit: Common Stock............................................... - - Unamortized restricted Common Stock award, net............. (770) (835) Notes receivable from officers............................. (750) (750) Accumulated Deficit........................................ (90,641) (92,912) Accumulated other comprehensive income..................... (737) (722) ----------- ------------- Total stockholders' deficit.............................. (92,898) (95,219) --------- ----------- Total liabilities and stockholders' deficit.............. $176,789 $269,276 ======== ========
Note: The balance sheet at December 31, 1997 has been derived from the audited consolidated financial statements at that date. See accompanying notes to consolidated financial statements. 3 AMSCAN HOLDINGS, INC. CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ---------------------------- 1998 1997 ----------- --------- Net sales............................................................... $55,561 $53,176 Cost of sales........................................................... 35,989 34,410 ------- ------- Gross profit...................................................... 19,572 18,766 Operating expenses: Selling expenses..................................................... 3,626 3,099 General and administrative expenses.................................. 5,091 4,364 Art and development costs............................................ 1,620 1,274 -------- ------- Total operating expenses.......................................... 10,337 8,737 ------- ------- Income from operations............................................ 9,235 10,029 Interest expense, net................................................... 5,265 984 Other income, net....................................................... (40) (27) ---------- -------- Income before income taxes and minority interests................. 4,010 9,072 Income tax expense...................................................... 1,664 3,728 Minority interests...................................................... 75 42 --------- -------- Net income........................................................ $ 2,271 $ 5,302 ======= ========
See accompanying notes to consolidated financial statements. 4 AMSCAN HOLDINGS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE THREE MONTHS ENDED MARCH 31, 1998 (DOLLARS IN THOUSANDS) (UNAUDITED)
UNAMORTIZED RESTRICTED NOTES ACCUMULATED COMMON RECEIVABLE OTHER COMMON STOCK AWARD, FROM ACCUMULATED COMPREHENSIVE STOCK NET OFFICERS DEFICIT INCOME TOTAL ------ ----------- ---------- ----------- ------------- --------- Balance as of December 31, 1997........... $ - $ (835) $ (750) $ (92,912) $ (722) $(95,219) Net income................................ 2,271 2,271 Net change in foreign currency translation adjustment.................. (15) (15) Amortization of restricted Common Stock award...................... 65 65 ------ ----------- ---------- ------------ ------------- --------- Balance as of March 31, 1998.............. $ - $ (770) $ (750) $ (90,641) $ (737) $(92,898) ====== =========== ========== ============ ============= =========
See accompanying notes to consolidated financial statements. 5 AMSCAN HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ---------------------------- 1998 1997 ---------- ------------ Cash flows from operating activities: Net income..................................................................... $ 2,271 $ 5,302 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization................................................ 1,723 1,477 Amortization of deferred financing costs..................................... 162 7 Amortization of restricted Common Stock award................................ 65 Provision for doubtful accounts.............................................. 772 327 Deferred income tax (benefit) provision...................................... (135) 1,007 Changes in operating assets and liabilities: Increase in accounts receivable............................................ (9,938) (13,767) Decrease in inventories.................................................... 4,939 5,742 Decrease in prepaid expenses and other current assets...................... 963 2,094 (Decrease) increase in accounts payable, accrued expenses and income taxes payable........................................................... (1,249) 565 Other, net................................................................. (966) (582) --------- ------- Net cash (used in) provided by operating activities................. (1,393) 2,172 Cash flows from investing activities: Capital expenditures........................................................... (1,072) (2,283) Proceeds from disposal of property and equipment............................... 17 --------- ------- Net cash used in investing activities.................................. (1,055) (2,283) Cash flows from financing activities: Payments to acquire Common Stock in Merger..................................... (92,731) Net proceeds from sale of Common Stock......................................... 4,539 Proceeds from loans, notes payable and long-term obligations................... 825 Repayment of loans, notes payable and long-term obligations.................... (1,116) (4,830) Repayment of subordinated and other indebtedness due to stockholders........... (157) ----------- ----------- Net cash (used in) provided by financing activities.................... (93,847) 377 Effect of exchange rate changes on cash and cash equivalents................... (104) 263 --------- ------------ Net (decrease) increase in cash and cash equivalents........................... (96,399) 529 Cash and cash equivalents at beginning of period............................... 111,539 1,589 -------- ----------- Cash and cash equivalents at end of period..................................... $ 15,140 $ 2,118 ======== ========== Supplemental Disclosures: Interest paid.......................................................... $2,839 $1,019 Taxes paid............................................................. $188 $ 532
There were no capital lease obligations incurred during the three months ended March 31, 1998. Capital lease obligations of $59 were incurred during the three months ended March 31, 1997. See accompanying notes to consolidated financial statements. 6 AMSCAN HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS Amscan Holdings, Inc. ("Amscan Holdings" and, together with its subsidiaries, the "Company") was incorporated on October 3, 1996 for the purpose of becoming the holding company for Amscan Inc. and certain affiliated entities in connection with an initial public offering of common stock. On August 10, 1997, Amscan Holdings and Confetti Acquisition, Inc. ("Confetti"), a newly formed Delaware corporation affiliated with GS Capital Partners II, L.P. and certain other private investment funds managed by Goldman, Sachs & Co. (collectively, "GSCP"), entered into an Agreement and Plan of Merger (the "Merger Agreement") providing for a recapitalization of Amscan Holdings in which Confetti would be merged with and into Amscan Holdings (the "Merger"), with Amscan Holdings as the surviving corporation. On December 19, 1997 (the "Effective Time"), the Merger was consummated pursuant to the Merger Agreement. At the Effective Time, each share of the Common Stock, par value $0.10 per share, of the Company (the "Company Common Stock"), issued and outstanding immediately prior to the Effective Time (other than shares of Company Common Stock owned, directly or indirectly, by the Company or by Confetti) was converted, at the election of each of the Company's stockholders, into the right to receive from the Company either (a) $16.50 in cash or (b) $9.33 in cash plus a retained interest in the Company equal to one share of Company Common Stock for every 150,000 shares held by such stockholder, with fractional shares of Company Common Stock paid in cash. Also pursuant to the Merger Agreement, at the Effective Time each outstanding share of Common Stock, par value $0.10 per share, of Confetti ("Confetti Common Stock"), was converted into an equal number of shares of Company Common Stock as the surviving corporation in the Merger. The Merger was financed with an equity contribution of approximately $67.5 million (including contributions of Company Common Stock by certain employee stockholders and including issuances of restricted stock), $117 million from a senior term loan and $110 million from the issuance of senior subordinated notes. The Merger was accounted for as a recapitalization and, accordingly, the historical basis of the Company's assets and liabilities were not affected by the Merger. Amscan Holdings and its subsidiaries design, manufacture, contract for manufacture and distribute party and novelty goods principally in the United States, Canada and Europe. NOTE 2: BASIS OF PRESENTATION The consolidated financial statements include the accounts of Amscan Holdings and its majority-owned subsidiaries. Investments in less than majority-owned subsidiaries are accounted for on an equity basis. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 7 AMSCAN HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (UNAUDITED) 1998. The results of operations may be affected by seasonal factors such as the timing of holidays or industry factors that may be specific to a particular period, such as movement in and the general level of raw material costs. For further information, see the financial statements and footnotes thereto included in the Amscan Holdings Annual Report on Form 10-K for the year ended December 31, 1997. NOTE 3: INVENTORIES Inventories consisted of the following:
MARCH 31, DECEMBER 31, 1998 1997 --------- ------------ (IN THOUSANDS) Finished goods ................................................ $43,103 $47,704 Raw materials ................................................. 3,108 3,570 Work-in-process ............................................... 1,792 1,630 ------- -------- 48,003 52,904 Less: reserve for slow moving and obsolete inventory........... (1,200) (1,162) ------- -------- $46,803 $51,742 ======= =======
Inventories are valued at the lower of cost, determined on a first in - first out basis, or market. NOTE 4: INCOME TAXES The consolidated income tax provisions for the three months ended March 31, 1998 and 1997 were determined based upon estimates of the Company's consolidated effective income tax rates for the years ending December 31, 1998 and 1997, respectively. The differences between the consolidated effective income tax rate and the U.S. Federal statutory rate are primarily attributable to state income taxes and the effects of foreign operations. NOTE 5: COMPREHENSIVE INCOME As of January 1, 1998, the Company adopted Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income. SFAS No. 130 established new rules for the reporting and display of comprehensive income and its components; however, the adoption of this statement had no impact on the Company's net income or stockholders' deficit. SFAS No. 130 requires the Company's foreign currency translation adjustment, which prior to adoption were reported separately in stockholders' deficit to be included in other comprehensive income. Amounts reported in prior year financial statements have been reclassified to conform to the requirements of SFAS No. 130. During the first quarter of 1998 and 1997, total comprehensive income amounted to $2,256,000 and $5,493,000 consisting of net income of $2,271,000 and $5,302,000, and foreign currency translation adjustment of $(15,000) and $191,000, respectively. Accumulated other comprehensive income at March 31, 1998 and December 31, 1997 consisted solely of the Company's foreign currency translation adjustment. 8 AMSCAN HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (UNAUDITED) NOTE 6: CAPITAL STOCK At March 31, 1998 and December 31, 1997, respectively, the Company's authorized capital stock consisted of 5,000,000 shares of preferred stock, $0.10 par value, of which no shares were issued or outstanding, and 50,000,000 shares of common stock, $0.10 par value, of which 1,010 shares were issued and outstanding. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS PERCENTAGE OF NET SALES THREE MONTHS ENDED MARCH 31, ---------------------------- 1998 1997 ---------- ---------- Net sales................................... 100.0% 100.0% Cost of sales............................... 64.8 64.7 ---- ---- Gross profit........................ 35.2 35.3 Operating expenses: Selling expenses......................... 6.5 5.8 General and administrative expenses...... 9.2 8.2 Art and development costs................ 2.9 2.4 ----- ----- Total operating expenses............ 18.6 16.4 ---- ---- Income from operations.............. 16.6 18.9 Interest expense, net....................... 9.5 1.9 Other income, net........................... (0.1) (0.1) ---- ---- Income before income taxes and minority interests......... 7.2 17.1 Income taxes................................ 3.0 7.0 Minority interests.......................... 0.1 0.1 ---- ----- Net income.......................... 4.1% 10.0% ==== ==== THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997 Net sales for the three months ended March 31, 1998 were $55.6 million, as compared to $53.2 million for the three months ended March 31, 1997. The increase in net sales for the three months ended March 31, 1998 of 4.5% is attributable to growth in sales to party superstores and international customers which more than offset the reduction in sales attributable to the recent bankruptcies of two national accounts. The Company maintained a consistent gross profit margin of approximately 35% between the first quarters of 1998 and 1997 reflecting its effective management of product and distribution costs. Selling expenses of $3.6 million for the three months ended March 31, 1998 were $0.5 million higher than those of the corresponding quarter in 1997. Selling expenses increased as a percentage of net sales from 5.8% to 6.5% principally due to the expansion of the Company's sales and customer service workforce and the addition of a new seasonal catalogue. General and administrative expenses of $5.1 million increased by $0.7 million for the three months ended March 31, 1998 as compared to the corresponding quarter in 1997 principally due to an increase in the Company's provision for bad debts of $0.8 million. as a percentage of net sales, General and administrative expenses increased as a percentage of net sales from 8.2% to 9.2%. Art and development costs of $1.6 million for the three months ended March 31, 1998 increased by $0.3 million compared to the corresponding quarter in 1997. As a percentage of net sales, art and development costs increased from 2.4% to 2.9%. The continued investment in art and development expenditures in 1998 reflects the Company's strategy to remain a leader in product quality and development. 10 Interest expense of $5.3 million for the three months ended March 31, 1998 increased by $4.3 million as compared to the corresponding period in 1997 due to the Company's increased borrowings in connection with the Merger (see "Liquidity and Capital Resources"). Income taxes for the three months ended March 31, 1998 and 1997 were based upon estimated consolidated effective income tax rates of 41.5% and 40.5% for the years ending December 31, 1998 and 1997, respectively. The higher effective income tax rate for the year ending December 31, 1998 is attributable to an increase in estimated state income taxes. Minority interests represent the portion of income of the Company's subsidiaries attributable to equity ownership not held by Amscan Holdings. LIQUIDITY AND CAPITAL RESOURCES On December 19, 1997 the Company and Confetti consummated the Merger, providing for a recapitalization of Amscan Holdings in which Confetti was merged with and into Amscan Holdings with Amscan Holdings as the surviving corporation. Upon consummation of the Merger, the Company's then existing loan arrangements were repaid and terminated and 90% of its then outstanding Common Stock was converted into the right to receive cash. The Merger was financed with an equity contribution of approximately $67.5 million (including contributions of Company Common Stock by certain employee stockholders and including issuances of restricted stock), $117 million from a senior term loan (the "Term Loan") provided under a bank credit agreement (the "Bank Credit Facilities") and $110 million from the issuance of 9 7/8% senior subordinated notes (the "Exchange Notes") (collectively, the "Merger Financings"). The Merger has been accounted for as a recapitalization and, accordingly, the historical basis of the Company's assets and liabilities has not been affected by the Merger. In addition to the Term Loan, the Bank Credit Facilities provide for revolving loan borrowings of up to $50 million (the "Revolving Credit Facility"). The Revolving Credit Facility has a term of five years and bears interest, at the option of the Company, at the lenders' customary base rate plus 1.25% per annum or at the lenders' customary reserve adjusted Eurodollar rate plus 2.25% per annum. Interest on balances outstanding under the Revolving Credit Facility are subject to adjustment in the future based on the Company's performance. At March 31, 1998, the entire $50 million was available to the Company under the Revolving Credit Facility. As a result of the recapitalization, the Company had $236.6 million of consolidated indebtedness and $92.9 million of consolidated stockholders' deficit at March 31, 1998. Based upon the current level of operations and anticipated growth, the Company anticipates that its operating cash flow, together with available borrowings under the Revolving Credit Facility, will be adequate to meet its anticipated future requirements for working capital and operating expenses, to permit potential acquisitions and to service its debt requirements as they become due. However, the Company's ability to make scheduled payments of principal on, or to pay interest on, or to refinance its indebtedness (including the Exchange Notes) and to satisfy its other obligations will depend upon its future performance, which, to a certain extent, will be subject to general economic, financial, competitive, business and other factors beyond its control. The Merger Financings may affect the Company's ability to make future capital expenditures. However, management believes that additions to plant and equipment during the past three years provide adequate capacity to support its operations for at least the next 12 months. As of March 31, 1998, the Company did not have material commitments for capital expenditures. 11 CASH FLOW DATA - THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997 During the three months ended March 31, 1998, the Company used $1.4 million of net cash for operating activities as compared to $2.2 million of net cash provided by operating activities during the same quarter in 1997. The net cash used in operating activities during the first quarter of 1998 results principally from increased interest expense and corresponding lower net income, lower levels of accounts payable, and increased accounts receivable due to extended terms given to customers in association with new promotions, offset by decreased inventories, reflecting the shipment of "everyday" goods which are built-up towards the end of the year in preparation for the introduction of the new "everyday" line for the upcoming year. During the comparable quarter in 1997, net cash provided by operating activities consisted of net income offset by an increase in net operating assets. Net cash used in investing activities during the first quarter of 1998 of $1.1 million decreased by $1.2 million from 1997 reflecting lower levels of capital expenditures. During the first quarter of 1998, net cash used in financing activities of $93.8 million consisted principally of payments of cash in connection with Common Stock converted into the right to receive cash in connection with the Merger. During the comparable period in 1997, net cash provided by financing activities of $0.4 million included net proceeds of $4.5 million from the issuance of Common Stock to cover the overallotments provided for in the underwriting agreement relating to the Company's initial public offering, and proceeds of $0.8 million from borrowings, offset by repayments of indebtedness to stockholders and third parties totaling $5.0 million. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures About Segments of an Enterprise and Related Information. SFAS No. 131 establishes standards for disclosure about operating segments in annual financial statements and requires disclosure of selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas and major customers. This statement supersedes SFAS No. 14, Financial Reporting for Segments of a Business Enterprise. The new standard becomes effective for the Company's fiscal year 1998 and requires that comparative information from earlier years be restated to conform to the requirements of this standard. The Company does not believe any substantial changes to its disclosures will be made at the time SFAS No. 131 is adopted. In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits. The Statement supercedes the disclosure requirements in SFAS No. 87, Employers' Accounting for Pensions, SFAS No. 88, Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. SFAS No. 132 addresses disclosure issues only and does not change the measurement or recognition provisions specified in those Statements. SFAS No. 132 is effective for fiscal years beginning after December 15, 1997. Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or not significant to the financial statements of the Company. "SAFE HARBOR" STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This report includes "forward-looking statements" within the meaning of various provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this 12 report that address activities, events or developments that the Company expects or anticipates will or may occur in the future, including future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, including any changes to operations, goals, expansion and growth of the Company's business and operations, plans, references to future success and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. Actual results may differ materially from those discussed. Whether actual results and developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, including, but not limited to, (1) the concentration of sales by the Company to party goods superstores where the reduction of purchases by a small number of customers could materially reduce the Company's sales and profitability, (2) the concentration of the Company's credit risk in party goods superstores, several of which are privately held and have expanded rapidly in recent years, (3) the failure by the Company to anticipate changes in tastes and preferences of party goods retailers and consumers, (4) the introduction of new products by the Company's competitors, (5) the inability of the Company to increase prices to recover fully future increases in raw material prices, especially increases in paper prices, (6) the loss of key employees, (7) changes in general business conditions, (8) other factors which might be described from time to time in the Company's filings with the Securities and Exchange Commission, and (9) other factors which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business or operations. Although the Company believes that it has the product offerings and resources needed for continued growth in revenues and margins, future revenue and margin trends cannot be reliably predicted. Changes in such trends may cause the Company to adjust its operations in the future. Because of the foregoing and other factors, recent trends should not be considered reliable indicators of future financial results. In addition, the highly leveraged nature of the Company may impair its ability to finance its future operations and capital needs and its flexibility to respond to changing business and economic conditions and business opportunities. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has interest rate risk associated with variable rate indebtedness. The Company utilizes off-balance sheet financial instruments to manage the market risk associated with fluctuations in interest rates. It is the Company's policy to use derivative financial instruments to protect against market risk arising in the normal course of business. Company policies prohibit the use of derivative instruments for the purpose of trading for profit on price fluctuations or contracts which intentionally increase the Company's underlying exposure. PART II ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number DESCRIPTION ------ ----------- 27 Financial Data Schedule 13 (b) Reports on Form 8 - K A Current Report on Form 8-K dated April 29, 1998 was filed regarding the change in the Company's independent auditors responding to Item 4 of Form 8-K. 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMSCAN HOLDINGS, INC. By: /s/ Michael A. Correale ---------------------------------- Michael A. Correale Controller (on behalf of the registrant and as principal Date: May 15, 1998 accounting officer) ----------------- 15 -----END PRIVACY-ENHANCED MESSAGE-----