UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2008

OR

o 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 (State or Other Jurisdiction of Incorporation or Organization)	13-3911462 (I.R.S. Employer Identification No.)
80 Grasslands Road Elmsford, NY (Address of Principal Executive Offices)	10523 (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 þ No o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer þ
(Do not check if a smaller reporting company) Smaller reporting company o

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

     As of May 15, 2008, 1,000.00 shares of Registrant’s common stock were outstanding.

AMSCAN HOLDINGS, INC.
FORM 10-Q

March 31, 2008

TABLE OF CONTENTS

	Page
PART I
Item 1 Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at March 31, 2008 and December 31, 2007		3
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2008 and 2007		4
Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2008		5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007		6
Notes to Condensed Consolidated Financial Statements		7
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3 Quantitative and Qualitative Disclosures About Market Risk		22
Item 4 Controls and Procedures		22
PART II
Item 5 Other Information		23
Item 6 Exhibits		23
Signature		24
EX-31.1 Section 302 Certification of CEO
EX-31.2 Section 302 Certification of CFO
EX-32 Section 906 Certification of CEO and CFO

          References throughout this document to “Amscan,” “AHI,” and the “Company” include Amscan Holdings, Inc. and its wholly owned subsidiaries. In this document the words “we,” “our,” “ours” and “us” refer only to the Company and its majority owned subsidiaries and not to any other person.

          You may read and copy any materials we file with the Securities and Exchange Commission (“SEC”) at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including us, at http://www.sec.gov.

2

AMSCAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

	March 31,		December 31,
	2008		2007
	(unaudited)		(Note 3)
ASSETS
Current assets:
Cash and cash equivalents	$	14,892	$	17,274
Accounts receivable, net of allowances		99,070		98,425
Inventories, net of allowances		335,950		319,621
Prepaid expenses and other current assets		54,299		62,046
Total current assets		504,211		497,366
Property, plant and equipment, net		173,271		174,198
Goodwill		549,061		558,943
Trade names		172,883		186,187
Other intangible assets, net		68,740		42,526
Other assets, net		33,226		39,625
Total assets	$	1,501,392	$	1,498,845
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	192,798	$	153,170
Accounts payable		110,032		120,293
Accrued expenses		84,233		94,328
Income taxes payable		5,952		12,581
Current portion of long-term obligations		8,660		8,620
Total current liabilities		401,675		388,992
Long-term obligations, excluding current portion		582,169		584,336
Deferred income tax liabilities		99,280		94,360
Deferred rent and other long-term liabilities		11,220		21,789
Total liabilities		1,094,344		1,089,477
Redeemable common securities		35,359		33,782
Commitments and contingencies
Stockholders’ equity:
Common Stock ($0.01 par value; 40,000.00 shares authorized; 30,436.96 shares issued and outstanding at March 31, 2008 and December 31, 2007)		—		—
Additional paid-in capital		325,763		326,741
Retained earnings		43,957		46,494
Accumulated other comprehensive income		1,969		2,351
Total stockholders’ equity		371,689		375,586
Total liabilities, redeemable common securities and stockholders’ equity	$	1,501,392	$	1,498,845

See accompanying notes to unaudited condensed consolidated financial statements.

3

AMSCAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)

(Unaudited)

	Three Months Ended March 31,
	2008			2007
Revenues:
Net sales	$	325,032		$	243,529
Royalties and franchise fees		5,342			4,895
Total revenues		330,374			248,424
Expenses:
Cost of sales		214,685			165,823
Selling expenses		10,749			10,480
Retail operating expenses		57,926			34,883
Franchise expenses		3,631			3,350
General and administrative expenses		31,503			24,132
Art and development costs		3,102			2,919
Total expenses		321,596			241,587
Income from operations		8,778			6,837
Interest expense, net		14,308			14,075
Other (income) expense, net		(486	)		(138	)
Income (loss) before income taxes and minority interests		(5,044	)		(7,100	)
Income tax expense (benefit)		(1,912	)		(2,706	)
Minority interests		(595	)		8
Net income (loss)	$	(2,537	)	$	(4,402	)

See accompanying notes to unaudited condensed consolidated financial statements.

4

AMSCAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2008

(Dollars in thousands)

(Unaudited)

											Accumulated
					Additional						Other
	Common		Common		Paid-in			Retained			Comprehensive
	Shares		Stock		Capital			Earnings			Income / (Loss)			Total
Balance at December 31, 2007		30,436.96	$	—	$	326,741		$	46,494		$	2,351		$	375,586
Net income (loss)									(2,537	)					(2,537	)
Net change in cumulative translation adjustment												115			115
Change in fair value of interest rate swap contracts, net of income tax benefit												(407	)		(407	)
Change in fair value of foreign exchange contracts, net of income tax benefit												(90	)		(90	)
Comprehensive income (loss)															(2,919	)
Revaluation of redeemable common securities						(1,576	)								(1,576	)
Equity based compensation expense						598									598
Balance at March 31, 2008		30,436.96	$	—	$	325,763		$	43,957		$	1,969		$	371,689

See accompanying notes to unaudited condensed consolidated financial statements.

5

AMSCAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	Three Months Ended March 31,
	2008			2007
Cash flows provided by (used in) operating activities:
Net income (loss)	$	(2,537	)	$	(4,402	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense		11,173			9,940
Amortization of deferred financing costs		493			663
Provision for doubtful accounts		440			448
Deferred income tax expense (benefit)		(2,186	)		(1,046	)
Deferred rent		350			593
Undistributed (income) loss in unconsolidated joint venture		(514	)		51
Loss (gain) on disposal of equipment		20			45
Equity based compensation		598			367
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		596			(319	)
(Increase) decrease in inventories		(16,329	)		(7,615	)
(Increase) decrease in prepaid expenses and other current assets		5,132			(2,034	)
(Decrease) increase in accounts payable, accrued expenses and income taxes payable		(25,488	)		(38,035	)
Other, net		—			5
Net cash provided by (used in) operating activities		(28,252	)		(41,339	)
Cash flows provided by (used in) investing activities:
Cash paid in connection with acquisitions		—			(350	)
Capital expenditures		(11,493	)		(3,799	)
Proceeds from disposal of property and equipment		59			—
Net cash provided by (used in) investing activities		(11,434	)		(4,149	)
Cash flows provided by (used in) financing activities:
Repayment of loans, notes payable and long-term obligations		(1,437	)		(125	)
Proceeds from loans, notes payable and long-term obligations, net of debt issuance costs		38,646			43,835
Capital contributions and proceeds from issuance of common stock and exercise of options, net of retirements		—			28
Net cash provided by (used in) financing activities		37,209			43,738
Effect of exchange rate changes on cash and cash equivalents		95			134
Net increase (decrease) in cash and cash equivalents		(2,382	)		(1,616	)
Cash and cash equivalents at beginning of period		17,274			4,966
Cash and cash equivalents at end of period	$	14,892		$	3,350

See accompanying notes to unaudited condensed consolidated financial statements.

6

AMSCAN HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Note 1 – Description of Business

          Amscan Holdings, Inc. (“Amscan”, “AHI” or the “Company”) designs, manufactures, contracts for manufacture and distributes party goods, including paper and plastic tableware, metallic balloons, accessories, novelties, gifts and stationery throughout the world, including in North America, South America, Europe, Asia and Australia. In addition, the Company operates specialty retail party supply stores in the United States, and franchises both individual stores and franchise areas throughout the United States and Puerto Rico, under the names Party City, Party America, The Paper Factory and Halloween USA. The Company also operates specialty retail party and social expressions supply stores under the name Factory Card & Party Outlet. 

Note 2 – Acquisitions

Party City Franchise Group Transaction

     Party City completed the acquisition of 55 stores from franchisees in a series of transactions involving Party City, Party City Franchise Group Holdings, LLC (“Party City Holdings”), a majority owned subsidiary of Party City, and Party City Franchise Group, LLC (“PCFG”), a wholly-owned subsidiary of Party City Holdings on November 2, 2007. PCFG operates the acquired 55 stores together with 11 previously owned stores in the Florida and Georgia regions.

     PCFG and Party City Holdings are unrestricted subsidiaries under the Company’s existing credit facilities and the new PCFG credit facility is a stand alone facility which is not guaranteed by the Company or its other subsidiaries. As part of an ongoing review of purchase price allocation, during the first quarter 2008 the Company re-allocated $28,429 of the purchase price to other intangible assets, representing franchise rights. Trade names were reduced by $13,305 and deferred tax liability was increased by $5,550. As a result, goodwill decreased by $9,574.

The Factory Card & Party Outlet Acquisition

     The Company completed its merger with Factory Card & Party Outlet Corp. (“FCPO”), on November 16, 2007.

Note 3 – Basis of Presentation

          The accompanying unaudited condensed consolidated financial statements as of March 31, 2008 and for the three months ended March 31, 2008 and 2007, and the audited balance sheet as of December 31, 2007, include the accounts of the Company and its majority-owned and controlled entities. All material intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items and reclassification of prior year amounts to conform to current year presentation) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results to be expected for the year ending December 31, 2008. Our business is subject to substantial seasonal variations, as our retail segment has realized a significant portion of its net sales, cash flow and net income in the fourth quarter of each year, principally due to its Halloween season sales in October and, to a lesser extent, other holiday season sales at the end of the calendar year. We expect that this general pattern will continue. Our results of operations may also be affected by 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 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission.

Note 4 – Inventories

          Inventories consisted of the following:

	March 31,		December 31,
	2008		2007
Finished goods	$	315,836	$	299,436
Raw materials		12,535		13,690
Work in process		7,579		6,495
	$	335,950	$	319,621

7

  AMSCAN HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(Unaudited)

     Inventories are valued at the lower of cost or market. The Company determines the cost of inventory at its retail stores using either the weighted average or retail inventory method, which approximate the first-in, first-out method. All other inventory cost is determined using the first-in, first-out method.

Note 5 – Income Taxes

          The consolidated income tax expense (benefit) for the three months ended March 31, 2008 and 2007 were determined based upon estimates of the Company’s consolidated effective income tax rates for the years ending December 31, 2008 and 2007, 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 available domestic manufacturing deductions.

Note 6 — Restructuring

     In connection with the acquisition of Party America in 2006, $4,100 has been accrued related to plans to restructure Party America’s administrative operations and involuntarily terminate a limited number of Party America personnel. To date the Company has incurred $2,115 in restructuring and exit costs, including $115 in the first quarter of 2008 with the balance to be incurred during 2008. The Company also incurred $1,700 in employee retention expense to date.

     In connection with the Factory Card and Party Outlet Acquisition in 2007, $3,800 has been accrued related to plans to restructure Factory Card and Party Outlet’s merchandising assortment and administrative operations and involuntarily terminate a limited number of Factory Card and Party Outlet personnel. Charges of $422 were taken against this reserve in the first quarter of 2008.

     In connection with the Party City Franchise Group Transaction in 2007, $1,000 has been accrued related to plans to restructure PCFG’s merchandising assortment and administrative operations and involuntarily terminate a limited number of PCFG personnel.  We anticipate fully utilizing this reserve during 2008.

Note 7 – Comprehensive Income (Loss)

          Comprehensive income (loss) consisted of the following:

	Three months ended March 31,
	2008			2007
Net income (loss)	$	(2,537	)	$	(4,402	)
Net change in cumulative translation adjustment		114			179
Change in fair value of interest rate swap contracts, net of income tax expense (benefit) of $(239), $(85)		(407	)		(144	)
Change in fair value of foreign exchange contracts, net of income tax expense (benefit) of $(53), $(81)		(90	)		(139	)
Comprehensive income (loss)	$	(2,920	)	$	(4,506	)

8

AMSCAN HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

Note 8 – Capital Stock

          At March 31, 2008 and December 31, 2007, the Company’s authorized capital stock consisted of 10,000.00 shares of preferred stock, $0.01 par value, of which no shares were issued or outstanding and 40,000.00 shares of common stock, $0.01 par value, of which 30,436.96 were issued and outstanding.

          Certain employee stockholders owned 893.79 shares of AAH common stock at both March 31, 2008 and December 31, 2007. Under the terms of the AAH stockholders’ agreement dated April 30, 2004, as amended, the Company has an option to purchase all of the shares of common stock held by former employees and, under certain circumstances, former employee stockholders can require the Company to purchase all of their shares held by the former employee. The purchase price as prescribed in the stockholders’ agreement is to be determined through a market valuation of the minority-held shares or, under certain circumstances, based on cost, as defined therein. The aggregate amount that may be payable by the Company to certain employee stockholders based on the estimated fair market value of fully paid and vested common securities is classified as redeemable common securities on the consolidated balance sheet, with a corresponding adjustment to stockholders’ equity. As there is no active market for the Company’s common stock, the Company estimated the fair value of its common stock based on a valuation calculated using a multiple of earnings.

          At March 31, 2008 and December 31, 2007, the aggregate amount that may be payable by the Company to employee stockholders and option holders, based on the estimated market value, was approximately $21,915 and $20,338, respectively.

          Certain employee shareholders of PCFG owned 13,444 shares of PCFG common stock. Under certain circumstances if those shareholders become former employees, they can require PCFG to repurchase all their shares.

           At March 31, 2008 and December 31, 2007, the aggregate amount that may be payable to employee stockholders, based on the estimated market value, was approximately $13,444.

Note 9 – Segment Information

Industry Segments

          The Company has two identifiable business segments. The Wholesale segment includes the design, manufacture, contract for manufacture and wholesale distribution of party goods, including paper and plastic tableware, metallic balloons, accessories, novelties, gifts and stationery. The Retail segment includes the operation of company-owned retail party supply superstores in the United States and the sale of franchises on an individual store and franchise area basis throughout the United States and Puerto Rico.

          The Company’s industry segment data for the three months ended March 31, 2008 and March 31, 2007 is as follows:

	Wholesale			Retail			Consolidated
Three Months Ended March 31, 2008
Revenues:
Net sales	$	164,319		$	214,157		$	378,476
Royalties and franchise fees					5,342			5,342
Total revenues		164,319			219,499			383,818
Eliminations		(53,444	)					(53,444	)
Net revenues	$	110,875		$	219,499		$	330,374
Income from operations	$	11,735		$	(2,956	)	$	8,779
Interest expense, net								14,308
Other (income) expense, net								(486	)
Income (loss) before income taxes and minority interests							$	(5,043	)
Long-lived assets	$	416,447		$	574,982		$	991,429

	Wholesale			Retail			Consolidated
Three Months Ended March 31, 2007
Revenues:
Net sales	$	139,993		$	135,409		$	275,402
Royalties and franchise fees					4,895			4,895
Total revenues		139,993			140,304			280,297
Eliminations		(31,873	)					(31,873	)
Net revenues	$	108,120		$	140,304		$	248,424
Income from operations	$	7,894		$	(1,057	)	$	6,837
Interest expense, net								14,075
Other (income) expense, net								(138	)
Income (loss) before income tax benefit and minority interests							$	(7,100	)
Long-lived assets	$	452,732		$	393,913		$	846,645

9

AMSCAN HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

Geographic Segments

          The Company’s export sales, other than inter-company sales between geographic areas, are not material. Inter-company sales between geographic areas primarily consist of sales of finished goods for distribution in foreign markets, and are made at cost plus a share of operating profit. No single foreign operation is significant to the Company’s consolidated operations.

Note 10 – Legal Proceedings

          The Company is a party to certain claims and litigation in the ordinary course of business. The Company does not believe these proceedings will result, individually or in the aggregate, in a material adverse effect on its financial condition or future results of operations.

Note 11 – Stock Option Plan

          The Company recorded $598 and $367 of stock-based compensation in general and administrative expenses during the three months ended March 31, 2008 and 2007, respectively.

          There were no options exercised during the three-month period ended March 31, 2008. There are options to purchase 3,572.1448 shares of common stock outstanding at March 31, 2008.

Note 12 — Long Term Obligations

          On May 25, 2007, the Company and its parent company, AAH Holdings, Inc., entered into (i) a Term Loan Credit Agreement (the “Term Loan Credit Agreement”), and (ii) an ABL Credit Agreement (the “ABL Credit Agreement”).

Term Loan Credit Agreement

          The Term Loan Credit Agreement consists of a $375,000 term loan, the proceeds of which were used to refinance certain existing indebtedness and to pay transactions costs.

          The Company is required to repay the term loan in quarterly installments of 0.25% of their funded total principal amount, beginning March 31, 2008 and ending March 31, 2013, with the remaining amount payable on the maturity date of May 25, 2013.

                     At March 31, 2008, the balance of the Term Loan was $371,250.

ABL Credit Agreement

          The Company has a committed revolving credit facility in an aggregate principal amount of up to $250,000 (as amended) for working capital, general corporate purposes and the issuance of letters of credit. The ABL Credit Agreement provides for (a) extension of credit in the form of revolving loans at any time and from time to time during the period ended May 25, 2012 (the “Availability Period”), in an aggregate principal amount at any time outstanding not in excess of $250,000, subject to the borrowing base described below, (b) commitments to obtain credit, at any time and from time to time during the Availability Period, in the form of swing line loans, in an aggregate principal amount at any time outstanding not in excess of $10,000 and (c) the ability to utilize letters of credit, in an aggregate face amount at any time outstanding not in excess of $25,000 to support payment obligations incurred in the ordinary course of business by the Company and its subsidiaries.

          The ABL Credit Agreement also contains certain customary affirmative covenants and events of default.

          Borrowings under the ABL Credit Agreement were $186,797, and outstanding standby letters of credit under the ABL Credit Agreement totaled $12,872 at March 31, 2008.

PCFG Credit Agreement

     On November 2, 2007, PCFG entered into a credit agreement (the “PCFG Credit Agreement”), among PCFG, CIT Group/Business Credit, Inc., as Administrative Agent and Collateral Agent, Newstar Financial, Inc., as Syndication Agent, CIT Capital Securities LLC, as Sole Arranger, and the Lenders party thereto. PCFG and Party City Franchise Group Holdings, LLC (“Party City Holdings”), the sole member of PCFG and an indirect majority owned subsidiary of the Company, have been designated by the Board of Directors of the Company as “Unrestricted Subsidiaries” pursuant to the Company’s existing ABL Credit Agreement, and the indenture governing its 8.75% Senior Subordinated Notes and neither PCFG nor Party City Holdings is a guarantor of the Company’s existing credit facilities or indenture.

10

AMSCAN HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

In addition, PCFG’s credit facility is a stand alone facility for PCFG and is not guaranteed by the Company or its other subsidiaries.

At March 31, 2008, the balance of the PCFG Term Loan was $29,000. Borrowings under the PCFG Revolver were $6,001, and there were no outstanding standby letters of credit.

Note 13 – Recently Issued Accounting Standards

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations and SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements – an amendment of Accounting Research Bulletin No. 51. SFAS No. 141(R) will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS No. 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. SFAS No. 141(R) and SFAS No. 160 are effective for fiscal years beginning after December 15, 2008. Early adoption is not permitted. The Company is currently evaluating the impact, if any, that the adoption of SFAS No. 141(R) and SFAS No. 160 would have on its financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115. SFAS No. 159 allows an entity to choose to measure many financial instruments and certain other items at fair value. The objective of SFAS No. 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The provisions of SFAS No. 159 are effective for fiscal years beginning after November 15, 2007. The Company did not elect to measure any additional assets or liabilities at fair value that are not already measured at fair value under existing standards. Therefore, the adoption of SFAS No. 159 had no impact to the consolidated financial statements of the Company.

          In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 provides a common fair value hierarchy for companies to follow in determining fair value measurements in the preparation of financial statements and expands disclosure requirements relating to how such fair value measurements were developed. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions that the marketplace would use when pricing an asset or liability, rather than company-specific data. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. However, on February 12, 2008, the FASB issued Staff Position 157-2 which delays the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. For items within its scope, this Staff Position defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008. The Company does not believe that the adoption of SFAS No. 157 for its non-financial assets and liabilities, effective January 1, 2009, will have a material impact to the consolidated financial statements. The Company adopted SFAS No. 157 effective January 1, 2008 for its financial assets and liabilities and this adoption did not have a material impact to the condensed consolidated financial statements.

Note 14 – Condensed Consolidating Financial Information

          Borrowings under the Term Loan Credit Agreement, the ABL Credit Agreement and the Company’s 8.75% $175,000 senior subordinated notes are guaranteed jointly and severally, fully and unconditionally, by the following wholly-owned domestic subsidiaries of the Company (the “Guarantors”):

•	Amscan Inc.
•	Am-Source, LLC
•	Anagram Eden Prairie Property Holdings LLC
•	Anagram International, Inc.
•	Anagram International Holdings, Inc.
•	Anagram International, LLC
•	Gags & Games, Inc.
•	JCS Packaging Inc. (formerly JCS Realty Corp.)
•	M&D Industries, Inc.
•	Party City Corporation
•	PA Acquisition Corporation
•	SSY Realty Corp.
•	Trisar, Inc.
•	Factory Card & Party Outlet Corp.
	Non-guarantor subsidiaries (“Non-guarantors”) include the following:
•	Amscan (Asia-Pacific) Pty. Ltd.

11

AMSCAN HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

• Amscan de Mexico, S.A. de C.V.

• Amscan Distributors (Canada) Ltd.

• Anagram Espana, S.A.

• Anagram France S.C.S.

• Amscan Holdings Limited

• Anagram International (Japan) Co., Ltd.

• Amscan Partyartikel GmbH

• JCS Hong Kong Ltd.

• Party City Franchise Group Holdings, LLC

         The following information presents condensed consolidating balance sheets at March 31, 2008 and December 31, 2007, and the condensed consolidating statements of operations for the three months ended March 31, 2008 and 2007, and the related condensed consolidating statements of cash flows for the three months ended March 31, 2008 and 2007, for the combined Guarantors and the combined Non-guarantors, together with the elimination entries necessary to consolidate the entities comprising the combined companies.

12

AMSCAN HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET
March 31, 2008

	AHI and		Combined
	Combined		Non-
	Guarantors		Guarantors			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	5,662	$	9,230		$	—		$	14,892
Accounts receivable, net of allowances		80,023		19,047			—			99,070
Inventories, net of allowances		298,593		38,245			(888	)		335,950
Prepaid expenses and other current assets		50,534		3,765			—			54,299
Total current assets		434,812		70,287			(888	)		504,211
Property, plant and equipment, net		166,796		6,475			—			173,271
Goodwill		516,233		32,828			—			549,061
Trade names		172,883		—						172,883
Other intangible assets, net		41,131		27,609			—			68,740
Other assets, net		103,638		(21,022	)		(49,390	)		33,226
Total assets	$	1,435,493	$	116,177		$	(50,278	)	$	1,501,392
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable		186,797		6,001			—			192,798
Accounts payable		93,385		16,647			—			110,032
Accrued expenses		74,591		9,642			—			84,233
Income taxes payable		6,550		(471	)		(127	)		5,952
Current portion of long-term obligations		6,596		2,064			—			8,660
Total current liabilities		367,919		33,883			(127	)		401,675
Long-term obligations, excluding current portion		555,156		27,013			—			582,169
Deferred income tax liabilities		98,566		714			—			99,280
Other		17,902		42,863			(49,545	)		11,220
Total liabilities		1,039,543		104,473			(49,672	)		1,094,344
Redeemable common securities		21,915		13,444			—			35,359
Commitments and contingencies
Stockholders’ equity:
Common Stock		—		339			(339	)		—
Additional paid-in capital		325,716		47			—			325,763
Retained earnings		46,351		(2,046	)		(347	)		43,958
Accumulated other comprehensive income (loss)		1,968		(80	)		80			1,968
Total stockholders’ equity		374,035		(1,740	)		(606	)		371,689
Total liabilities, redeemable common securities and stockholders’ equity	$	1,435,493	$	116,177		$	(50,278	)	$	1,501,392

13

AMSCAN HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2007

	AHI and
	Combined		Combined
	Guarantors		Non-Guarantors			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	8,391	$	8,883		$	—		$	17,274
Accounts receivable, net of allowances		81,057		17,368			—			98,425
Inventories, net of allowances		282,954		37,368			(701	)		319,621
Prepaid expenses and other current assets		54,810		7,236			—			62,046
Total current assets		427,212		70,856			(701	)		497,366
Property, plant and equipment, net		168,033		6,165			—			174,198
Goodwill		509,114		49,829			—			558,943
Trade names		172,883		13,304						186,187
Other intangible assets, net		42,526		—			—			42,526
Other assets, net		111,428		(20,137	)		(51,666	)		39,625
Total assets	$	1,431,195	$	120,017		$	(52,367	)	$	1,498,845
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable		152,670		500			—			153,170
Accounts payable		100,467		19,826			—			120,293
Accrued expenses		81,600		12,728			—			94,328
Income taxes payable		12,958		(319	)		(58	)		12,581
Current portion of long-term obligations		6,524		2,096			—			8,620
Total current liabilities		354,219		34,831			(58	)		388,992
Long-term obligations, excluding current portion		556,817		27,519			—			584,336
Deferred income tax liabilities		93,523		837			—			94,360
Other		30,327		43,258			(51,796	)		21,789
Total liabilities		1,034,886		106,445			(51,854	)		1,089,477
Redeemable common securities		20,338		13,444			—			33,782
Commitments and contingencies
Stockholders’ equity:
Common Stock		—		339			(339	)		—
Additional paid-in capital		326,695		46			—			326,741
Retained earnings		46,925		(178	)		(254	)		46,494
Accumulated other comprehensive income (loss)		2,351		(80	)		80			2,351
Total stockholders’ equity		375,971		128			(514	)		375,586
Total liabilities, redeemable common securities and stockholders’ equity	$	1,431,195	$	120,017		$	(52,367	)	$	1,498,845

14

AMSCAN HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2008

	AHI and
	Combined			Combined Non-
	Guarantors			Guarantors			Eliminations			Consolidated
Revenues:
Net sales	$	286,760		$	43,873		$	(5,601	)	$	325,032
Royalties and franchise fees		5,342			—			—			5,342
Total revenues		292,102			43,873			(5,601	)		330,374
Expenses:
Cost of sales		192,850			27,092			(5,257	)		214,685
Selling expenses		8,188			2,561			—			10,749
Retail operating expenses		47,904			10,022			—			57,926
Franchise expenses		3,631			—			—			3,631
General and administrative expenses		27,305			4,528			(330	)		31,503
Art and development costs		3,102			—			—			3,102
Total expenses		282,980			44,203			(5,587	)		321,596
Income (loss) from operations		9,122			(330	)		(14	)		8,778
Interest expense, net		13,354			954			—			14,308
Other (income) expense, net		(1,637	)		22			1,129			(486	)
Income (loss) before income taxes and minority interests		(2,595	)		(1,306	)		(1,143	)		(5,044	)
Income tax expense (benefit)		(2,116	)		331			(127	)		(1,912	)
Minority interests		—			(595	)		—			(595	)
Net income (loss)	$	(479	)	$	(1,042	)	$	(1,016	)	$	(2,537	)

15

AMSCAN HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2007

	AHI and
	Combined			Combined Non-
	Guarantors			Guarantors		Eliminations			Consolidated
Revenues:
Net sales	$	230,226		$	17,727	$	(4,424	)	$	243,529
Royalties and franchise fees		4,895			—					4,895
Total revenues		235,121			17,727		(4,424	)		248,424
Expenses:
Cost of sales		158,004			12,372		(4,553	)		165,823
Selling expenses		8,111			2,369					10,480
Retail operating expenses		34,883			—					34,883
Franchise expenses		3,350			—					3,350
General and administrative expenses		22,342			2,120		(330	)		24,132
Art and development costs		2,919			—					2,919
Total expenses		229,609			16,861		(4,883	)		241,587
Income (loss) from operations		5,512			866		459			6,837
Interest expense, net		14,046			29					14,075
Other (income) expense, net		(965	)		83		744			(138	)
Income (loss) before income taxes and minority interests		(7,569	)		754		(285	)		(7,100	)
Income tax expense (benefit)		(3,085	)		331		48			(2,706	)
Minority interests		—			8					8
Net income (loss)	$	(4,484	)	$	415	$	(333	)	$	(4,402	)

16

AMSCAN HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months Ended March 31, 2008

	AHI and			Combined
	Combined			Non-
	Guarantors			Guarantors			Eliminations			Consolidated
Cash flows provided by (used in) operating activities:
Net income (loss)	$	(479	)	$	(1,042	)	$	(1,016	)	$	(2,537	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense		9,756			1,417			—			11,173
Amortization of deferred financing costs		493			—			—			493
Provision for doubtful accounts		380			60			—			440
Deferred income tax expense (benefit)		(2,186	)		—			—			(2,186	)
Deferred rent		350			—			—			350
Undistributed (income) loss  in unconsolidated joint venture		(514	)		—			—			(514	)
Loss (gain) on disposal of equipment		49			(29	)		—			20
Equity based compensation		598			—			—			598
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		2,335			(1,739	)		—			596
(Increase) decrease in inventories		(15,796	)		(877	)		344			(16,329	)
(Increase) decrease in prepaid expenses and other current assets		1,628			3,504			—			5,132
Increase (decrease) in accounts payable, accrued expenses and income taxes payable		(20,902	)		(5,258	)		672			(25,488	)
Other, net		—			—			—			—
Net cash provided by (used in) operating activities		(24,288	)		(3,964	)		—			(28,252	)
Cash flows provided by (used in) investing activities:
Capital expenditures		(10,569	)		(924	)		—			(11,493	)
Proceeds from disposal of property and equipment		—			59			—			59
Net cash provided by (used in) investing activities		(10,569	)		(865	)		—			(11,434	)
Cash flows provided by (used in) financing activities:
Repayments of loans, notes payable and long-term obligations		(937	)		(500	)		—			(1,437	)
Proceeds from loans, notes payable and long-term obligations		33,145			5,501			—			38,646
Net cash provided by (used in) financing activities		32,208			5,001			—			37,209
Effect of exchange rate changes on cash and cash equivalents		(81	)		176			—			95
Net decrease in cash and cash equivalents		(2,730	)		348			—			(2,382	)
Cash and cash equivalents at beginning of period		8,391			8,883			—			17,274
Cash and cash equivalents at end of period	$	5,661		$	9,231		$	—		$	14,892

17

AMSCAN HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2007

	AHI and			Combined
	Combined			Non-
	Guarantors			Guarantors			Eliminations			Consolidated
Cash flows provided by (used in) operating activities:
Net income (loss)	$	(4,483	)	$	415		$	(334	)	$	(4,402	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense		9,705			235			—			9,940
Amortization of deferred financing costs		663			—			—			663
Provision for doubtful accounts		411			37			—			448
Deferred income tax benefit		(1,046	)		—			—			(1,046	)
Deferred rent		593			—			—			593
Undistributed (income) loss in unconsolidated joint venture		51			—			—			51
Loss (gain) on disposal of equipment		45			—			—			45
Equity based compensation		367			—			—			367
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		2,867			(3,186	)		—			(319	)
(Increase) decrease in inventories		(8,753	)		1,267			(129	)		(7,615	)
(Increase) decrease in prepaid expenses and other current assets		(1,415	)		(619	)					(2,034	)
Increase (decrease) in accounts payable, accrued expenses and income taxes payable		(39,894	)		1,811			48			(38,035	)
Other, net		(480	)		70			415			5
Net cash provided by (used in) operating activities		(41,369	)		30			—			(41,339	)
Cash flows provided by (used in) investing activities:
Cash paid in connection with store acquisitions		(350	)								(350	)
Capital expenditures		(3,722	)		(77	)		—			(3,799	)
Net cash provided by (used in) investing activities		(4,072	)		(77	)		—			(4,149	)
Cash flows provided by (used in) financing activities:
Repayment of loans, notes payable and long-term obligations		(73	)		(52	)		—			(125	)
Proceeds from short-term obligations		43,835			—			—			43,835
Proceeds from capital contribution and exercise of options		28			—			—			28
Net cash provided by (used in) financing activities		43,790			(52	)		—			43,738
Effect of exchange rate changes on cash and cash equivalents		(31	)		165			—			134
Net increase (decrease) in cash and cash equivalents		(1,682	)		66			—			(1,616	)
Cash and cash equivalents at beginning of period		4,395			571						4,966
Cash and cash equivalents at end of period	$	2,713		$	637		$			$	3,350

18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     As described in more detail in Note 2, in the fourth quarter of 2007, the Company formed Party City Franchise Group LLC and acquired Factory Card & Party Outlet. Therefore, all comparisons between the first quarters of 2008 and 2007 reflect the facts that (1) sales to these entities by wholesale were eliminated in the first quarter of 2008 but not in the first quarter of 2007, and (2) sales and operating results by these entities are included in retail in the first quarter 2008 but not 2007.

THREE MONTHS ENDED MARCH 31, 2008 COMPARED TO THREE MONTHS ENDED MARCH 31, 2007

     The following tables set forth the Company’s operating results as a percentage of total revenues and total revenues, for the three months ended March 31, 2008 and 2007.

	Three Months Ended March 31,
	2008			2007
Revenues:
Net sales		98.4	%		98.0	%
Royalties and franchise fees		1.6			2.0
Total revenues		100.0			100.0
Expenses:
Cost of sales		65.0			66.8
Selling expenses		3.3			4.2
Retail operating expenses		17.5			14.0
Franchise expenses		1.1			1.3
General and administrative expenses		9.5			9.7
Art and development costs		0.9			1.2
Total expenses		97.3			97.2
Income from operations		2.7			2.8
Interest expense, net		4.3			5.7
Other (income) expense, net		(0.1	)		(0.1	)
Income (loss) before income taxes and minority interests		(1.5	)		(2.9	)
Income tax expense (benefit)		(0.6	)		(1.1	)
Minority interests		(0.2	)		0.0
Net income (loss )		(0.8	%)		(1.8	%)

	Three Months Ended March 31,
	2008						2007
	Dollars in			Percentage of			Dollars in			Percentage of
	Thousands			Total Revenue			Thousands			Total Revenue
Revenues
Sales
Wholesale	$	164,319			49.7	%	$	139,993			56.4	%
Eliminations		(53,444	)		(16.2	)		(31,873	)		(12.8	)
Net wholesale		110,875			33.6			108,120			43.5
Retail		214,157			64.8			135,409			54.5
Total net sales		325,032			98.4			243,529			98.0
Franchise related		5,342			1.6			4,895			2.0
Total revenues	$	330,374			100.0	%	$	248,424			100.0	%

19

Wholesale

     Net sales, at wholesale, for the quarter ended March 31, 2008 of $110.9 million were $2.8 million or 2.6% higher than sales for the quarter ended March 31, 2007. Net sales for the quarter ended March 31, 2008 reflect the elimination of inter-company sales to PCFG and FCPO. Had the PCFG and FCPO acquisitions occurred January 1, 2007, the Company would have eliminated $10.5 million of sales during the quarter ended March 31, 2007. Accordingly, net sales for the quarter ended March 31, 2008, at wholesale of $110.9 million were $13.3 million or 13.6% higher than adjusted sales for the quarter ended March 31, 2007.

     Net sales to party superstores, including sales to our retail franchisees, totaled $ 37.5 million and were 16.1% higher than the adjusted 2007 sales to party superstores. International sales totaled $ 20.4 million and were 15.1 % higher than in 2007, principally due to the strong demand for our party goods at European national accounts. Net sales of metallic balloons were $ 25.5 million or 17.9% higher than in 2007, primarily due to higher Valentine’s Day sales. Net sales to other retail channels (principally mass merchant, drug, craft and contract manufacturing) were $ 27.2 million,or 1.7% higher than 2007.

Retail

     Net retail sales for company-owned stores for the quarter ended March 31, 2008 of $214.1 million were $78.7 million or 58.2% higher than net retail sales for the quarter ended March 31, 2007, reflecting the additional sales of $79.4 million of FCPO and PCFG.

     Net retail sales of Party City and Party America company-owned stores decreased by $0.8 million or 0.6% compared to 2007. The decrease was caused by a 3.0% decrease in average store count compared to 2007, partly offset by a 2.4% increase in same store sales.

Gross Profit

     The following table sets forth the Company’s consolidated gross profit on net sales for the three months ended March 31, 2008 and 2007.

	Three Months Ended March 31,
	2008					2007
	Dollars in		% of associated			Dollars in		% of associated
Net Wholesale	$	37,240		33.6	%	$	32,566		30.1	%
Net Retail		73,107		34.1	%		45,140		33.3	%
Total Gross Profit	$	110,347		33.9	%	$	77,706		31.9	%

     The gross profit margin on net sales at wholesale for the quarter ended March 31, 2008 was 33.6% or 400 basis points higher than in 2007. The increase in gross profit margin principally reflects reduced emphasis on full case sales, which had lower margins, and other changes in product mix.

     Retail gross profit margin for the quarter ended March 31, 2008 was 34.1%, or 80 basis points higher than in the quarter ended March 31, 2007, primarily due to changes in product mix.

Operating expenses

     Selling expenses of $10.7 million for the quarter-ended March 31, 2008 were $0.2 million higher than for the quarter ended March 31, 2007 principally due to increases in base compensation and employee benefits. As a percent of total revenues, selling expenses were 3.3% for the quarter ended March 31, 2008, or 90 basis points lower than for the quarter ended March 31, 2007 as a result of increased sales.

     Retail operating expenses for the quarter ended March 31, 2008 totaled $57.9 million, or $23.1 million higher than in the prior year quarter, principally due to the inclusion of PCFG and FCPO operating expenses of $22.8 million.

     General and administrative expenses of $31.5 million for the quarter ended March 31, 2008 were $7.4 million higher than the prior year quarter, primarily due to the inclusion of PCFG and FCPO expenses of $6.8 million.

Interest expense, net

     Interest expense of $14.3 million for the three months ended March 31, 2008 was $0.2 million higher than for the three months ended March 31, 2007, reflecting higher average borrowings due to the acquisitions made during the fourth quarter of 2007, partially offset by lower Libo rates and lower margin rates resulting from our May 2007 debt refinancing.

Other (income) expense, net

     Other (income) expense, net of $0.5 million principally consists of our share of income from an unconsolidated balloon distribution joint venture located in Mexico.

20

Income tax expense (benefit)

     Income taxes expense (benefit) for the quarters ended March 31, 2008 and 2007 were based upon the estimated consolidated effective income tax rates of 37.9% and 38.1% for the years ending December 31, 2008 and 2007, respectively. The decrease in the 2008 effective income tax rate is primarily attributable to a lower average state income tax rate.

Liquidity and Capital Resources

     Generally, due to the seasonal nature of the Company’s retail operations, the first quarter combination of lower operating results and building inventory for the later quarters causes a net use of cash in operations.

     Net cash used in operating activities was $28.3 million in the first quarter 2008 compared to $41.3 million in the first quarter 2007.

     Net income, after adjusting for non-cash charges, provided cash of $7.8 million in 2008 compared to $6.7 million in 2007. Changes in working capital resulted in use of cash of $36.1 million in 2008 compared to $48.0 million in 2007 as the result of the increase in inventory to build for spring and summer party events, and the payment of Halloween and other fourth quarter seasonal trade payables following the year-end.

     Investing activities relate to property additions for new stores, store improvements and renovations, and investments in our distribution facilities and computer systems, resulted in cash outlays for capital additions of $11.4 million in the first quarter 2008 compared to $3.8 million in 2007.

     Cash flows from financing activities were $37.2 million in 2008 compared to $43.7 million in 2007. Proceeds from loans under our revolving credit facilities to fund our operating and investing activities noted above were the main sources in both years.

     Required repayments on our term debt for the remainder of the year will be $2.8 million. At March 31, 2008, we had $50.3 million of availability remaining on our primary revolving credit agreement, and PCFG had $14.0 million available under its separate revolving credit agreement.

     We expect that cash generated from operating activities and availability under our credit agreements will be our principal sources of liquidity. Based on our current level of operations, we believe these sources will be adequate to meet our liquidity needs for at least the next twelve 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 our senior secured credit facilities in an amount sufficient to enable us to repay our indebtedness, including the 8.75% senior subordinated notes, or to fund our other liquidity needs.

Legal Proceedings

     The Company is a party to certain claims and litigation in the ordinary course of business. The Company does not believe any of these proceedings will result, individually or in the aggregate, in a material adverse effect on its financial condition or future results of operations.

Seasonality

Wholesale Operations

     Despite a concentration of holidays in the fourth quarter of the year, as a result of our expansive product lines and customer base and increased promotional activities, the impact of seasonality on our quarterly results of wholesale operations has been limited. Promotional activities, including special dating terms, particularly with respect to Halloween and Christmas products sold in the third quarter, and the introduction of our new everyday products and designs during the fourth quarter result in higher accounts receivables and inventory balances and higher interest costs to support these balances.

Retail Operations

     Our retail operations are subject to significant seasonal variations. Historically, this segment has realized a significant portion of its revenues, cash flow and net income in the fourth quarter of the year, principally due to its sales in October for the Halloween season and, to a lesser extent, due to sales for end of year holidays. In addition, the results of retail operations and cash flows may also fluctuate significantly as a result of a variety of other factors, including the timing of new store openings and store closings and the timing of the acquisition and disposition of stores.

Cautionary Note Regarding Forward-Looking Statements

     This quarterly report on Form 10-Q may contain “forward-looking statements.” Forward-looking statements give our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “project” or “continue” or the negative thereof and similar words. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this quarterly report and in any public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Consequently, no forward-looking

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statement can be guaranteed. Actual results may vary materially. Investors are cautioned not to place undue reliance on any forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to: our inability to satisfy our debt obligations, the reduction of volume of purchases by one or more of our large customers, our inability to collect receivables from our customers, the termination of our licenses, our inability to identify and capitalize on changing design trends and customer preferences, changes in the competitive environment, increases in the costs of raw materials and the possible risks and uncertainties that have been noted in reports filed by us with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2007.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Our earnings are affected by changes in interest rates as a result of our variable rate indebtedness. However, we have utilized interest rate swap agreements to manage the market risk associated with fluctuations in interest rates. If market interest rates for our variable rate indebtedness averaged 2% more than the interest rate actually paid for the three months ended March 31, 2008 and 2007, our interest expense, after considering the effects of our interest rate swap agreements, would have increased, and the loss before income taxes and minority interest for the quarters ended March 31, 2008 and 2007 would have increased by $2.5 million and $1.9 million, respectively. These amounts are determined by considering the impact of the hypothetical interest rates on our borrowings and interest rate swap agreements. 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 would likely take actions to further 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.

     Our earnings are also affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominately in European countries, as a result of the sales of our products in foreign markets. Although we periodically enter into foreign currency forward contracts to hedge against the earnings effects of such fluctuations, we may not be able to hedge such risks completely or permanently. A uniform 10% strengthening in the value of the U.S. dollar relative to the currencies in which our foreign sales are denominated would have resulted in a decrease in gross profit and an increase in operating losses of $1.4 million and $1.2 million for the three months ended March 31, 2008 and 2007, respectively. These calculations assume that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which could change the U.S. dollar value of the resulting sales, changes in exchange rates may also affect the volume of sales or the foreign currency sales price as competitors’ products become more or less attractive. Our sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices.

Item 4. Controls and Procedures

We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of October 27, 2007 pursuant to Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms; and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the fiscal quarter ended March 31,2008 identified in connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 5. Other Information

     The Company claims an exemption from registration of the offer and sale of these shares pursuant to Section 4(2) of the Securities Act and Rule 506 thereunder.

Item 6. Exhibits

31(1)	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31(2)	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32	Certification of Chief Executive and Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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
	Chief Financial Officer (on behalf of the registrant and as principal financial and accounting officer)

Date: May 15, 2008

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