10-Q

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 September 30, 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	13-3911462
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
80 Grasslands Road Elmsford, NY	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 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 December 4, 2008, 1,000.00 shares of Registrant’s common stock were outstanding.

AMSCAN HOLDINGS, INC.
FORM 10-Q

September 30, 2008

TABLE OF CONTENTS

	Page
PART I
Item 1 Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at September 30, 2008 and December 31, 2007		3
Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2008 and 2007		4
Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 2008 and 2007		5
Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2008		6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007		7
Notes to Condensed Consolidated Financial Statements		8
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3 Quantitative and Qualitative Disclosures About Market Risk		29
Item 4 Controls and Procedures		29
PART II
Item 6 Exhibits		30
Signature		31
EX-31.1: CERTIFICATION
EX-31.2: CERTIFCATION
EX-32: CERTIFICATION

     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)

	September 30,		December 31,
	2008		2007
	(unaudited)		(Note 3)
ASSETS
Current assets:
Cash and cash equivalents	$	29,724	$	17,274
Accounts receivable, net of allowances		109,339		98,425
Inventories, net of allowances		438,534		319,621
Prepaid expenses and other current assets		42,175		62,046
Total current assets		619,772		497,366
Property, plant and equipment, net		182,779		174,198
Goodwill		551,761		558,943
Trade names		172,883		186,187
Other intangible assets, net		65,433		42,526
Other assets, net		42,598		39,625
Total assets	$	1,635,226	$	1,498,845
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	202,254	$	153,170
Accounts payable		204,813		120,293
Accrued expenses		95,474		94,328
Income taxes payable		2,913		12,581
Current portion of long-term obligations		8,758		8,620
Total current liabilities		514,212		388,992
Long-term obligations, excluding current portion		578,035		584,336
Deferred income tax liabilities		98,757		94,360
Deferred rent and other long-term liabilities		11,634		21,789
Total liabilities		1,202,638		1,089,477
Redeemable common securities (including 585.15 and 893.79 common shares issued and outstanding at September 30, 2008 and December 31, 2007 respectively)		34,115		33,782
Commitments and contingencies
Stockholders’ equity:
Common Stock ($0.01 par value; 40,000.00 shares authorized; 30,226.50 and 29,543.16 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively)		—		—
Additional paid-in capital		334,824		326,741
Retained earnings		63,189		46,494
Accumulated other comprehensive income		460		2,351
Total stockholders’ equity		398,473		375,586
Total liabilities, redeemable common securities and stockholders’ equity	$	1,635,226	$	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 September 30,
	2008			2007
Revenues:
Net sales	$	356,231		$	277,564
Royalties and franchise fees		5,863			5,783
Total revenues		362,094			283,347
Expenses:
Cost of sales		230,920			180,781
Selling expenses		11,064			10,473
Retail operating expenses		64,644			44,931
Franchise expenses		3,077			3,234
General and administrative expenses		30,333			26,500
Art and development costs		3,483			2,928
Total expenses		343,521			268,847
Income from operations		18,573			14,500
Interest expense, net		12,245			12,936
Other (income) expense, net		(389	)		209
Income before income taxes and minority interests		6,717			1,355
Income tax expense		2,518			927
Minority interests		(364	)		4
Net income	$	4,563		$	424

See accompanying notes to unaudited condensed consolidated financial statements.

4

AMSCAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2008			2007
Revenues:
Net sales	$	1,046,437		$	794,517
Royalties and franchise fees		17,555			16,425
Total revenues		1,063,992			810,942
Expenses:
Cost of sales		671,365			521,629
Selling expenses		32,532			31,439
Retail operating expenses		185,135			116,373
Franchise expenses		10,100			9,640
General and administrative expenses		91,823			75,755
Art and development costs		10,176			8,882
Total expenses		1,001,131			763,718
Income from operations		62,861			47,224
Interest expense, net		38,581			40,918
Other (income) expense, net		(1,112	)		15,916
Income (loss) before income taxes and minority interests		25,392			(9,610	)
Income tax expense (benefit)		9,595			(3,238	)
Minority interests		(898	)		68
Net income (loss)	$	16,695		$	(6,440	)

See accompanying notes to unaudited condensed consolidated financial statements.

5

AMSCAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Nine Months Ended September 30, 2008
(Dollars in thousands, except per share amounts)
(Unaudited)

										Accumulated
						Additional				Other
	Common			Common		Paid-in		Retained		Comprehensive
	Shares			Stock		Capital		Earnings		Income			Total
Balance at December 31, 2007		29,543.16		$	—	$	326,741	$	46,494	$	2,351		$	375,586
Net income									16,695					16,695
Net change in cumulative translation adjustment											(2,731	)		(2,731	)
Change in fair value of interest rate swap contracts, net of income tax benefit											(411	)		(411	)
Change in fair value of foreign exchange contracts, net of income tax											1,251			1,251
Comprehensive income														14,804
Purchase and revaluation of redeemable common securities		308.6					2,168							2,168
Equity based compensation expense							4,092							4,092
Tax benefit on exercised options		397.3					1,823							1,823
Other		(22.6	)											0
Balance at September 30, 2008		30,226.50		$	—	$	334,824	$	63,189	$	460		$	398,473

See accompanying notes to unaudited condensed consolidated financial statements.

6

AMSCAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

	Nine Months Ended September 30,
	2008			2007
Cash flows provided by (used in) operating activities:
Net income (loss)	$	16,695		$	(6,440	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense		32,482			27,946
Amortization of deferred financing costs		1,664			1,586
Provision for doubtful accounts		1,272			966
Deferred income tax benefit		(5,107	)		1,007
Deferred rent		1,089			526
Undistributed income in unconsolidated joint venture		(561	)		(184	)
(Gain) loss on disposal of equipment		(1,678	)		1,192
Equity based compensation		4,092			1,350
Tax benefit on exercised options		(1,823	)		—
Debt retirement costs		—			3,781
Write-off of deferred financing costs		—			6,333
Changes in operating assets and liabilities:
Increase in accounts receivable		(12,041	)		(9,434	)
Increase in inventories		(122,579	)		(51,510	)
Decrease (increase) in prepaid expenses and other current assets		19,871			(26,228	)
Increase in accounts payable, accrued expenses and income taxes payable		75,998			39,406
Other, net		—			11
Net cash provided by (used in) operating activities		9,374			(9,692	)
Cash flows used in investing activities:
Cash paid in connection with acquisitions		(573	)		(8,685	)
Capital expenditures		(39,343	)		(17,753	)
Proceeds from disposal of property and equipment		2,917			1,738
Net cash used in investing activities		(36,999	)		(24,700	)
Cash flows provided by financing activities:
Repayment of loans, notes payable and long-term obligations		(6,774	)		(385,067	)
Proceeds from loans, notes payable and long-term obligations, net of debt issuance costs		44,789			418,507
Tax benefit on exercised options		1,823			—
Sale of additional interest to minority shareholder		2,500
Capital contributions and proceeds from issuance of common stock and exercise of options, net of retirements					4,700
Net cash provided by financing activities		42,338			38,140
Effect of exchange rate changes on cash and cash equivalents		(2,263	)		1,532
Net increase in cash and cash equivalents		12,450			5,280
Cash and cash equivalents at beginning of period		17,274			4,966
Cash and cash equivalents at end of period	$	29,724		$	10,246

See accompanying notes to unaudited condensed consolidated financial statements.

7

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 stores previously owned by Party City in the Florida and Georgia regions.

     PCFG and Party City Holdings are unrestricted subsidiaries under the Company’s existing credit facilities and PCFG’s credit facility (see Note 12) 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 of 2008, the Company re-allocated $28,429 of the purchase price to other intangible assets, representing franchise rights. In addition, trade names were reduced by $13,305 and deferred tax liability was increased by $5,550. As a result, goodwill decreased by $9,574. During the third quarter of 2008, the Company reduced its inventory value by $837 as of the acquisition date, which increased goodwill by $511 and deferred tax assets by $326.

The Factory Card & Party Outlet Acquisition

     The Company completed its acquisition of Factory Card & Party Outlet Corp. (“FCPO”), on November 16, 2007. As part of an ongoing review of purchase price allocation, during the third quarter of 2008, the Company re-allocated $1,374 of the purchase price to other intangible assets, representing lease revaluations. Deferred tax liability was increased by $509. As a result, goodwill decreased by $865. In addition, during the first and third quarters, the Company increased reserves by $648 and $3,370, respectively, for future store closings, severance and legal costs as of the acquisition date, which increased deferred tax assets and goodwill accordingly.

Note 3 — Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements as of September 30, 2008 and for the three and nine months ended September 30, 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 and nine months ended September 30, 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.

8

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

Note 4 — Inventories

     Inventories consisted of the following:

	September 30,		December 31,
	2008		2007
Finished goods	$	418,190	$	299,436
Raw Materials		13,502		13,690
Work in Process		6,842		6,495
	$	438,534	$	319,621

     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 and nine months ended September 30, 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 had 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 $3,947 in restructuring and exit costs, including $1,947 in the nine months ended September 30, 2008, with the balance expected to be incurred during the fourth quarter of 2008. The Company also incurred $1,700 in employee retention expense to date.

     In connection with the Factory Card & Party Outlet Acquisition in 2007, $8,121 had been accrued related to plans to restructure Factory Card & Party Outlet’s merchandising assortment and administrative operations and involuntarily terminate a limited number of Factory Card & Party Outlet personnel. In the first nine months of 2008, charges of $1,626 were taken against these reserves.

     In connection with the Party City Franchise Group Transaction in 2007, $1,000 had been accrued related to plans to restructure PCFG’s merchandising assortment and administrative operations and involuntarily terminate a limited number of PCFG personnel. In the third quarter of 2008, an additional $837 was reserved for merchandising assortment. We anticipate utilizing this reserve principally during the fourth quarter of 2008 and first quarter of 2009.

9

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

Note 7 — Comprehensive Income (Loss)

     Comprehensive income (loss) consisted of the following:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
Net income (loss)	$	4,563		$	424		$	16,695		$	(6,440	)
Cumulative change from adoption of FIN 48				$	—					$	(31	)
Net change in cumulative translation adjustment		(2,831	)		895			(2,731	)		1,710
Change in fair value of interest rate swap contracts, net of income tax benefit of $(201), $(192), $(241), and $(158)		(343	)		(328	)		(411	)		(269	)
Change in fair value of foreign exchange contracts, net of income tax expense (benefit) of $724, $(184), $735, and $(289)		1,232			(313	)		1,251			(491	)
Comprehensive income (loss)	$	2,621		$	678		$	14,804		$	(5,521	)

Note 8 — Capital Stock

     At September 30, 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 30,811.65 and 30,436.96 were issued and outstanding at September 30, 2008 and December 31, 2007, respectively, including redeemable shares.

     Certain employee stockholders owned 585.15 shares of AAH common stock at September 30, 2008 and 893.79 shares at 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. 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 estimates the fair value of its common stock based on a valuation calculated using a multiple of earnings or recent private equity transactions.

     At September 30, 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 $18,171 and $20,338, respectively.

     Certain employee equity holders of PCFG owned 15,944 and 13,444 PCFG equity units at September 30, 2008 and December 31, 2007, respectively. Under certain circumstances, if those equity holders are terminated, they can require PCFG to repurchase all of their equity units.

     At September 30, 2008 and December 31, 2007, the aggregate amount that may be payable to PCFG employee equity holders, based on the estimated market value, was approximately $15,944 and $13,444, respectively.

10

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

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 and social expressions 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 September 30, 2008 and September 30, 2007 is as follows:

	Wholesale			Retail		Consolidated
Three Months Ended September 30, 2008
Revenues:
Net sales	$	186,750		$	230,082	$	416,832
Royalties and franchise fees		—			5,863		5,863
Total revenues		186,750			235,945		422,695
Eliminations		(60,601	)		—		(60,601	)
Net Revenues	$	126,149		$	235,945	$	362,094
Income from operations	$	9,643		$	8,930	$	18,573
Interest expense, net							12,245
Other income, net							(389	)
Income before income taxes and minority interests						$	6,717
Long-lived assets	$	409,760		$	605,694	$	1,015,454

	Wholesale			Retail		Consolidated
Three Months Ended September 30, 2007
Revenues:
Net sales	$	169,566		$	153,950	$	323,516
Royalties and franchise fees		—			5,783		5,783
Total revenues		169,566			159,733		329,299
Eliminations		(45,952	)		—		(45,952	)
Net Revenues	$	123,614		$	159,733	$	283,347
Income from operations	$	9,258		$	5,242	$	14,500
Interest expense, net							12,936
Other expense, net							209
Income before income taxes and minority interests						$	1,355
Long-lived assets	$	457,898		$	396,244	$	854,142

11

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

     The Company’s industry segment data for the nine months ended September 30, 2008 and September 30, 2007 is as follows:

	Wholesale			Retail		Consolidated
Nine months ended September 30, 2008
Revenues:
Net sales	$	505,476		$	702,645	$	1,208,121
Royalties and franchise fees		—			17,555		17,555
Total revenues		505,476			720,200		1,225,676
Eliminations		(161,684	)		—		(161,684	)
Net Revenues	$	343,792		$	720,200	$	1,063,992
Income from operations	$	25,107		$	37,754	$	62,861
Interest expense, net							38,581
Other income, net							(1,112	)
Income before income taxes and minority interests						$	25,392
Long-lived assets	$	409,760		$	605,694	$	1,015,454

	Wholesale			Retail		Consolidated
Nine months ended September 30, 2007
Revenues:
Net sales	$	458,329		$	454,268	$	912,597
Royalties and franchise fees		—			16,425		16,425
Total revenues		458,329			470,693		929,022
Eliminations		(118,080	)				(118,080	)
Net Revenues	$	340,249		$	470,693	$	810,942
Income from operations	$	17,840		$	29,384	$	47,224
Interest expense, net							40,918
Other expense, net							15,916
Loss before income taxes and minority interests						$	(9,610	)
Long-lived assets	$	457,898		$	396,244	$	854,142

12

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

     During the third quarter of 2008, a new investor acquired 38% of the outstanding stock held by existing shareholders as well as 37 rollover options, 295 time-based options and 333 performance-based options held by optionholders, at a price of $28,350 per share.

     The performance-based options vest based on three factors which must all be met —
(1) time, (2) an initial public offering or change in control, and (3) achievement of specified returns to the Company’s shareholders.

     Although this transaction did not result in a change in control, the Company’s majority shareholders decided to waive the requirement of change in control, and permitted the time-vested portion of these performance-based options to be exercisable. Additionally, for both performance-based and time-based options employees were permitted to have their net shares exercised settled for cash.

     This waiver did not change the terms of the option plans for any remaining options still outstanding, or obligate the Company to permit any future waiver of the change in control requirement.

     Since the waiver of the change in control requirement resulted in a vesting of the performance-based options that were exercised, the effect of the vesting and settlement must be accounted for currently as stock compensation. The fair value of the performance-based options at exercise required to be charged to earnings is $5,639. However, the Company had accounted for the performance-based options assuming a change in control was probable. Therefore, the Company had estimated the fair value of the performance-based options at the grant date and amortized this value over the expected life. The stock compensation amounts recognized were $153 in 2005, $709 in 2006, $1,140 in 2007, and $717 in the first six months of 2008.

      While a change in control performance condition is not specifically discussed in FAS 123R, it has generally been interpreted that such a condition cannot be assessed to be “probable” before it occurs.

      Since that performance condition cannot be assessed as probable before it occurs, no compensation expense should have been recorded for these options in prior periods.

      As described in all prior relevant Form 10-K’s, in 2004 the Company’s CEO and President exchanged vested options in the predecessor company for 98.18 vested options to purchase common shares (the “rollover options”). These options were accounted for as an equity contribution in the April 2004 transaction, and recorded through equity.

      However, these options have an additional condition whereby they may be put back to the Company at fair market value upon retirement. Because the term of the rollover options could extend beyond the retirement dates of these two executives, any mark to market changes should be expensed as additional stock compensation.

      The Company did not consider this condition, because they considered that a change in control was probable before 2014. However, under the guidance of FIN 44 and EITF 00-23, if a put back to the Company, even if not probable, is within the control of the employee, the award must follow variable accounting and be marked to market.

      Therefore, the Company should have charged pretax earnings for $736 in 2004, $196 in 2005, $221 in 2006, $638 in 2007, and $156 in the first six months of 2008 related to these options. The Company had been marking to market these securities through a debit to equity and a corresponding increase to the redeemable securities, as such the balance sheet was properly stated.

      In the third quarter of 2008, the reduction in liability caused by the exercise of 37 of these options, net of the increase in valuation of the remaining 61.18 options, resulted in a net credit to pretax earnings of $210. No charges or credits related to these options were recorded in any other period presented.

     As a result of the Company’s errors noted above, reported pretax earnings were overstated by $736 in 2004 and $43 in 2005, and were understated by $488 in 2006, $502 in 2007, and $561 in the first six months of 2008. The Company determined that the net errors in previously reported pretax earnings were not material to any prior year or interim period presented in either the 2007 or 2008 financial statements. Therefore, prior years and interim periods were not restated.

     In total, the Company recorded $2,920 and $216 in stock-based compensation related to performance-based options in general and administrative expenses during the three month periods ended September 30, 2008 and 2007, respectively, and $3,637 and $578 during the nine-month periods ended September 30, 2008 and 2007, respectively.

     The Company recorded $201 and $176 of stock-based compensation related to time-based options in general and administrative expenses during the three month periods ended September 30, 2008 and 2007, respectively, and $665 and $468 during the nine-month periods ended September 30, 2008 and 2007 respectively.

     The tax benefit for the 295 exercised time-based options exceeded the net deferred tax assets recognized on the stock compensation charged to earnings since the options were granted by $1,823. This benefit has been reflected in additional paid-in capital.

     There are options to purchase 2,885.66 shares of common stock outstanding at September 30, 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, each quarter until March 31, 2013, with the remaining amount payable on the maturity date of May 25, 2013.

     At September 30, 2008, the balance of the Term Loan was $369,375.

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 ending 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 $189,083, and outstanding standby letters of credit under the ABL Credit Agreement totaled $14,742 at September 30, 2008.

13

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

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. Neither PCFG nor Party City Holdings is a guarantor of the Company’s existing credit facilities or indenture. 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 September 30, 2008, the balance of the PCFG Term Loan was $28,000. Borrowings under the PCFG Revolver were $13,171, 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 on 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 on 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 on the condensed consolidated financial statements.

14

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

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 issued in April 30, 2004 and due in April 30, 2014 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
•	Factory Card & Party Outlet Corp.
•	Gags & Games, Inc.
•	JCS Packaging Inc.
•	M&D Industries, Inc.
•	Party City Corporation
•	PA Acquisition Corporation
•	SSY Realty Corp.
•	Trisar, Inc.
	Non-guarantor subsidiaries (“Non-guarantors”) include the following:

• Amscan (Asia-Pacific) Pty. Ltd.

• 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 September 30, 2008 and December 31, 2007, and the condensed consolidating statements of operations for the three and nine months ended September 30, 2008 and 2007, and the related condensed consolidating statements of cash flows for the nine months ended September 30, 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.

15

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

CONDENSED CONSOLIDATING BALANCE SHEET
September 30, 2008

	AHI and
	Combined		Combined
	Guarantors		Non-Guarantors			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	25,430	$	4,294		$	—		$	29,724
Accounts receivable, net of allowances		90,172		19,167			—			109,339
Inventories, net of allowances		387,417		51,965			(848	)		438,534
Prepaid expenses and other current assets		38,090		4,085			—			42,175
Total current assets		541,109		79,511			(848	)		619,772
Property, plant and equipment, net		172,098		10,681			—			182,779
Goodwill		509,028		42,733			—			551,761
Trade names		172,883		—						172,883
Other intangible assets, net		38,809		26,624			—			65,433
Other assets, net		113,504		(18,144	)		(52,762	)		42,598
Total assets	$	1,547,431	$	141,405		$	(53,610	)	$	1,635,226
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	189,083	$	13,171		$	—		$	202,254
Accounts payable		184,814		19,999			—			204,813
Accrued expenses		84,205		11,269			—			95,474
Income taxes payable		2,601		424			(112	)		2,913
Current portion of long-term obligations		6,726		2,032			—			8,758
Total current liabilities		467,429		46,895			(112	)		514,212
Long-term obligations, excluding current portion		552,035		26,000			—			578,035
Deferred income tax liabilities		87,160		11,597			—			98,757
Other		19,293		44,994			(52,653	)		11,634
Total liabilities		1,125,917		129,486			(52,765	)		1,202,638
Redeemable common securities		18,171		15,944			—			34,115
Stockholders’ equity:
Common Stock		—		339			(339	)		—
Additional paid-in capital		334,777		47			—			334,824
Retained earnings		68,106		(4,412	)		(505	)		63,189
Accumulated other comprehensive income (loss)		460		1			(1	)		460
Total stockholders’ equity		403,343		(4,025	)		(845	)		398,473
Total liabilities, redeemable common securities and stockholders’ equity	$	1,547,431	$	141,405		$	(53,610	)	$	1,635,226

16

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		70,855			(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	$	1,431,196	$	120,016		$	(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		46,926		(178	)		(254	)		46,494
Accumulated other comprehensive income (loss)		2,351		(80	)		80			2,351
Total stockholders’ equity		375,972		127			(513	)		375,586
Total liabilities, redeemable common securities and stockholders’ equity	$	1,431,196	$	120,016		$	(52,367	)	$	1,498,845

17

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 September 30, 2008

	AHI and
	Combined			Combined
	Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenues:
Net sales	$	320,473		$	47,237		$	(11,479	)	$	356,231
Royalties and franchise fees		5,863			—			—			5,863
Total revenues		326,336			47,237			(11,479	)		362,094
Expenses:
Cost of sales		213,855			28,631			(11,566	)		230,920
Selling expenses		8,526			2,538			—			11,064
Retail operating expenses		54,417			10,227			—			64,644
Franchise expenses		3,077			—			—			3,077
General and administrative expenses		26,280			4,383			(330	)		30,333
Art and development costs		3,483			—			—			3,483
Total expenses		309,638			45,779			(11,896	)		343,521
Income from operations		16,698			1,458			417			18,573
Interest expense, net		11,427			818			—			12,245
Other (income) expense, net		(2,999	)		18			2,592			(389	)
Income before income taxes and minority interests		8,270			622			(2,175	)		6,717
Income tax expense		1,849			636			33			2,518
Minority interests		—			(364	)		—			(364	)
Net income	$	6,421		$	350		$	(2,208	)	$	4,563

18

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 Nine Months Ended September 30, 2008

	AHI and
	Combined			Combined
	Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenues:
Net sales	$	930,125		$	139,993		$	(23,681	)	$	1,046,437
Royalties and franchise fees		17,555			—			—			17,555
Total revenues		947,680			139,993			(23,681	)		1,063,992
Expenses:
Cost of sales		608,752			85,990			(23,377	)		671,365
Selling expenses		24,800			7,732			—			32,532
Retail operating expenses		154,758			30,377			—			185,135
Franchise expenses		10,100			—			—			10,100
General and administrative expenses		79,990			12,823			(990	)		91,823
Art and development costs		10,176			—			—			10,176
Total expenses		888,576			136,922			(24,367	)		1,001,131
Income from operations		59,104			3,071			686			62,861
Interest expense, net		36,336			2,245			—			38,581
Other income, net		(6,723	)		(50	)		5,661			(1,112	)
Income before income taxes and minority interests		29,491			876			(4,975	)		25,392
Income tax expense		8,212			1,495			(112	)		9,595
Minority interests		—			(898	)		—			(898	)
Net income	$	21,279		$	279		$	(4,863	)	$	16,695

19

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 September 30, 2007

	AHI and
	Combined			Combined
	Guarantors			Non-Guarantors		Eliminations			Consolidated
Revenues:
Net sales	$	262,315		$	22,794	$	(7,545	)	$	277,564
Royalties and franchise fees		5,783			—		—			5,783
Total revenues		268,098			22,794		(7,545	)		283,347
Expenses:
Cost of sales		173,323			14,869		(7,411	)		180,781
Selling expenses		7,995			2,478		—			10,473
Retail operating expenses		44,931			—		—			44,931
Franchise expenses		3,234			—		—			3,234
General and administrative expenses		24,606			2,224		(330	)		26,500
Art and development costs		2,928			—		—			2,928
Total expenses		257,017			19,571		(7,741	)		268,847
Income from operations		11,081			3,223		196			14,500
Interest expense, net		12,902			34		—			12,936
Other (income) expense, net		(2,254	)		89		2,374			209
Income before income taxes and minority interests		433			3,100		(2,178	)		1,355
Income tax (benefit) expense		(75	)		1,052		(50	)		927
Minority interests		—			4		—			4
Net income	$	508		$	2,044	$	(2,128	)	$	424

20

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 Nine Months Ended September 30, 2007

	AHI and
	Combined			Combined
	Guarantors			Non-Guarantors		Eliminations			Consolidated
Revenues:
Net sales	$	752,492		$	60,016	$	(17,991	)	$	794,517
Royalties and franchise fees		16,425			—		—			16,425
Total revenues		768,917			60,016		(17,991	)		810,942
Expenses:
Cost of sales		498,961			40,543		(17,875	)		521,629
Selling expenses		24,222			7,217		—			31,439
Retail operating expenses		116,373			—		—			116,373
Franchise expenses		9,640			—		—			9,640
General and administrative expenses		70,176			6,569		(990	)		75,755
Art and development costs		8,882			—		—			8,882
Total expenses		728,254			54,329		(18,865	)		763,718
Income from operations		40,663			5,687		874			47,224
Interest expense, net		40,821			97		—			40,918
Other expense, net		11,264			2		4,650			15,916
(Loss) income before income taxes and minority interests		(11,422	)		5,588		(3,776	)		(9,610	)
Income tax (benefit) expense		(5,057	)		1,862		(43	)		(3,238	)
Minority interests		—			68		—			68
Net (loss) income	$	(6,365	)	$	3,658	$	(3,733	)	$	(6,440	)

21

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 Nine months Ended September 30, 2008

	AHI and
	Combined			Combined
	Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash flows provided by (used in) operating activities:
Net income	$	21,279		$	279		$	(4,863	)	$	16,695
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization expense		29,048			3,434			—			32,482
Amortization of deferred financing costs		1,465			199			—			1,664
Provision for doubtful accounts		1,075			197			—			1,272
Deferred income tax benefit		(5,107	)		—			—			(5,107	)
Deferred rent		1,089			—			—			1,089
Undistributed gain in unconsolidated joint venture		(561	)		—			—			(561	)
Gain on disposal of equipment		(1,678	)		—			—			(1,678	)
Equity based compensation		4,092			—			—			4,092
Tax benefit on exercised options		(1,823	)		—			—			(1,823	)
Changes in operating assets and liabilities:
Increase in accounts receivable		(10,045	)		(1,996	)		—			(12,041	)
Increase in inventories		(107,716	)		(15,167	)		304			(122,579	)
Decrease in prepaid expenses and other current assets		16,918			2,953			—			19,871
Increase in accounts payable, accrued expenses and income taxes payable		68,176			3,263			4,559			75,998
Other, net		—			—			—			—
Net cash provided by (used in) operating activities		16,212			(6,838	)		—			9,374
Cash flows used in investing activities:
Cash paid in connection with acquisitions		(100	)		(473	)		—			(573	)
Capital expenditures		(33,104	)		(6,239	)		—			(39,343	)
Proceeds from disposal of property and equipment		2,867			50			—			2,917
Net cash used in investing activities		(30,337	)		(6,662	)		—			(36,999	)
Cash flows provided by financing activities:
Repayments of loans, notes payable and long-term obligations		(5,200	)		(1,574	)		—			(6,774	)
Proceeds from loans, notes payable and long-term obligations		32,118			12,671			—			44,789
Tax benefit on exercised options		1,823			—			—			1,823
Sale of additional interest to minority shareholder		2,500			—			—			2,500
Net cash provided by financing activities		31,241			11,097			—			42,338
Effect of exchange rate changes on cash and cash equivalents		(77	)		(2,186	)		—			(2,263	)
Net increase (decrease) in cash and cash equivalents		17,039			(4,589	)		—			12,450
Cash and cash equivalents at beginning of period		8,391			8,883			—			17,274
Cash and cash equivalents at end of period	$	25,430		$	4,294		$	—		$	29,724

22

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 Nine Months Ended September 30, 2007

	AHI and			Combined
	Combined			Non-
	Guarantors			Guarantors			Eliminations			Consolidated
Cash flows used in operating activities:
Net (loss) income	$	(6,365	)	$	3,658		$	(3,733	)	$	(6,440	)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization expense		27,252			694			—			27,946
Amortization of deferred financing costs		1,586			—			—			1,586
Provision for doubtful accounts		780			186			—			966
Deferred income tax expense		1,007			—			—			1,007
Deferred rent		526			—			—			526
Undistributed gain in unconsolidated joint venture		(184	)		—			—			(184	)
Loss on disposal of equipment		1,192			—			—			1,192
Equity based compensation		1,350			—			—			1,350
Debt retirement costs		3,781			—			—			3,781
Write-off of deferred financing costs		6,333			—			—			6,333
Changes in operating assets and liabilities:
Increase in accounts receivable		(106	)		(9,328	)		—			(9,434	)
(Increase) decrease in inventories		(51,855	)		229			116			(51,510	)
Increase in prepaid expenses and other current assets		(25,722	)		(508	)		2			(26,228	)
Increase in accounts payable, accrued expenses and income taxes payable		31,256			4,536			3,614			39,406
Other, net		11			—			—			11
Net cash used in operating activities		(9,158	)		(533	)		(1	)		(9,692	)
Cash flows used in investing activities:
Cash paid in connection with store acquisitions		(8,685	)		—			—			(8,685	)
Capital expenditures		(17,250	)		(503	)		—			(17,753	)
Proceeds from disposal of property and equipment		1,738			—			—			1,738
Net cash used in investing activities		(24,197	)		(503	)		—			(24,700	)
Cash flows provided by financing activities:
Repayments of loans, notes payable and long-term obligations		(384,949	)		(118	)		—			(385,067	)
Proceeds from loans, notes payable and long-term obligations		418,507			—			—			418,507
Proceeds from capital contributions and exercise of options		4,700			—			—			4,700
Net cash provided by financing activities		38,258			(118	)		—			38,140
Effect of exchange rate changes on cash and cash equivalents		(15	)		1,547			—			1,532
Net increase in cash and cash equivalents		4,888			393			(1	)		5,280
Cash and cash equivalents at beginning of period		4,395			571			—			4,966
Cash and cash equivalents at end of period	$	9,283		$	964		$	(1	)	$	10,246

23

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

          Management’s discussion will refer to the three-month and nine-month periods ended September 30, 2008 as “2008” and the three-month and nine-month periods ended September 30, 2007 as “2007”.

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

THREE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2007

     The following tables set forth the Company’s operating results as a percentage of total revenues.

	Three Months Ended September 30,
	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		63.8			63.8
Selling expenses		3.1			3.7
Retail operating expenses		17.9			15.9
Franchise expenses		0.8			1.1
General and administrative expenses		8.3			9.4
Art and development costs		1.0			1.0
Total expenses		94.9			94.9
Income from operations		5.1			5.1
Interest expense, net		3.4			4.6
Other (income) expense, net		(0.1	)		0.1
Income before income taxes and minority interests		1.8			0.4
Income tax expense		0.7			0.3
Minority interests		(0.1	)		0.0
Net income		1.2	%		0.1	%

	Three Months Ended September 30,
	2008						2007
	Dollars in			Percentage of			Dollars in			Percentage of
	Thousands			Total Revenue			Thousands			Total Revenue
Revenues
Sales
Wholesale	$	186,750			51.6	%	$	169,566			59.8	%
Eliminations		(60,601	)		(16.7	)		(45,952	)		(16.2	)
Net wholesale		126,149			34.9			123,614			43.6
Retail		230,082			63.5			153,950			54.3
Total net sales		356,231			98.4			277,564			97.9
Franchise related		5,863			1.6			5,783			2.1
Total revenues	$	362,094			100.0	%	$	283,347			100.0	%

24

Wholesale Sales

     Net sales for 2008 of $126.1 million were $2.5 million or 2.1% higher than sales for 2007. Net sales for 2008 reflect the elimination of inter-company sales to PCFG and FCPO as well as the inter-company sales to Party City and Party America. Had the PCFG and FCPO acquisitions occurred January 1, 2007, the Company would have eliminated an additional $8.2 million of inter-company sales during 2007. Accordingly, net sales for 2008 of $126.1 million were $10.7 million or 9.3% higher than adjusted sales for 2007.

     Net sales to party superstores (including our franchisees) and independent party stores totaled $ 37.3 million and were $4.6 million or 14.0% higher than adjusted 2007 sales. The increase in sales principally reflects increased synergy sales to franchisees. International sales totaled $24.0 million and were 5.2 % higher than in 2007, principally due to the strong demand for new party programs at several European national accounts. Net sales of metallic balloons were $ 22.6 million or 5.8% higher than in 2007, primarily due to growth in sales to international balloon distributors and mass merchants. Net sales to other retail channels (including card and gift stores, mass merchant, drug, craft and contract manufacturing) were $ 42.3 million, or 9.5% higher than 2007.

Retail Sales

     Net retail sales for company-owned stores for 2008 of $230.1 million were $76.1 million or 49.5% higher than net retail sales for 2007, reflecting the additional sales of FCPO and PCFG of $79.3 million.

     Net retail sales of Party City and Party America company-owned stores decreased by $4.5 million or 3.0% compared to 2007. The decrease reflects a 1.7% decrease in average store count and a 1.3% decrease in same store sales compared to 2007. Same store sales for Party City and Party America “Big Box” stores (i.e., generally greater than 8,000 square feet) decreased 0.7%, while same store sales at our outlet stores decreased by 11.7%.

Gross Profit

     The following table sets forth the Company’s consolidated gross profit on net sales.

	Three Months Ended September 30,
	2008					2007
	Dollars in		Percentage of associated			Dollars in		Percentage of associated
	Thousands		sales			Thousands		sales
Net Wholesale	$	42,878		34.0	%	$	39,749		32.2	%
Net Retail		82,433		35.8	%		57,034		37.0	%
Total Gross Profit	$	125,311		35.2	%	$	96,783		34.9	%

     The gross profit margin on net sales at wholesale for 2008 was 34.0% or 180 basis points higher than in 2007. The increase in gross profit margin principally reflects the elimination of certain low margin full case sales, other changes in product mix and lower distribution costs.

     Retail gross profit margin for 2008 was 35.8% or 120 basis points lower than in 2007, primarily due to changes in product mix and higher occupancy costs as a percentage of sales.

Operating expenses

     Selling expenses of $11.1 million for 2008 were $0.6 million higher than for 2007 principally due to increases in base compensation and employee benefits. As a percent of total revenues, selling expenses were 3.1% for 2008, or 60 basis points lower than for 2007 as a result of the acquisitive growth in sales.

     Retail operating expenses for 2008 totaled $64.6 million, or $19.7 million higher than in the prior year quarter, due to the inclusion of PCFG and FCPO operating expenses of $22.3 million. 2008 retail operating expenses excluding PCFG and FCPO, of $42.3 million, were $2.6 million lower than for 2007 primarily due to the shift of incurred advertising expense to the fourth quarter 2008.

     General and administrative expenses of $30.3 million for 2008 were $3.8 million higher than 2007, due to the inclusion of PCFG and FCPO expenses of $7.5 million. 2008 general and administrative expenses excluding PCFG and FCPO, of $22.9 million, were $2.6 million lower than for 2007, primarily due to the completion of the Party America integration partly offset by higher stock compensation expense related to performance-based options.

25

Interest expense, net

     Interest expense of $12.2 million for 2008 was $0.7 million lower than for 2007, reflecting lower Libo rates.

Other (income) expense, net

     Other income, net, totaled $0.4 million in 2008 and principally consisted of a gain on sale of retail stores to a franchisee, net of a one-time expense to amend a license agreement. In 2007, other expense, net, totaled $0.2 million.

Income tax expense

          Income tax expense for 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 December 31, 2007, respectively. The decrease in the 2008 effective income tax rate is primarily attributable to a lower average state income tax rate.

NINE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2007

     The following tables set forth the Company’s operating results as a percentage of total revenues.

	Nine Months Ended September 30,
	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		63.1			64.3
Selling expenses		3.1			3.9
Retail operating expenses		17.4			14.4
Franchise expenses		0.9			1.2
General and administrative expenses		8.6			9.3
Art and development costs		1.0			1.1
Total expenses		94.1			94.2
Income from operations		5.9			5.8
Interest expense, net		3.6			5.0
Other (income) expense, net		(0.1	)		2.0
Income (loss) before income taxes and minority interests		2.4			(1.2	)
Income tax expense (benefit)		0.9			(0.4	)
Minority interests		(0.1	)		0.0
Net income (loss )		1.6	%		(0.8	)%

	Nine Months Ended September 30,
	2008						2007
	Dollars in			Percentage of			Dollars in			Percentage of
	Thousands			Total Revenue			Thousands			Total Revenue
Revenues
Sales
Wholesale	$	505,476			47.5	%	$	458,329			56.6	%
Eliminations		(161,684	)		(15.2	)		(118,080	)		(14.6	)
Net wholesale		343,792			32.3			340,249			42.0
Retail		702,645			66.0			454,268			56.0
Total net sales		1,046,437			98.3			794,517			98.0
Franchise related		17,555			1.7			16,425			2.0
Total revenues	$	1,063,992			100.0	%	$	810,942			100.0	%

26

Wholesale Sales

     Net sales for 2008 of $343.8 million were $3.5 million or 1.0% higher than sales for 2007. Net sales for 2008 reflect the elimination of inter-company sales to PCFG and FCPO, in addition to the inter-company sales to Party City and Party America. Had the PCFG and FCPO acquisitions occurred January 1, 2007, the Company would have eliminated an additional $24.5 million of inter-company sales during 2007. Accordingly, net sales for 2008 of $343.8 million were $28.2 million or 8.9% higher than adjusted sales for 2007.

     Net sales to party superstores (including our franchisees) and independent party stores totaled $99.5 million and were $7.1 million or 7.7% higher than adjusted 2007 sales. The increase in sales principally reflects synergy sales to our franchisees. International sales totaled 66.7 million and were 11.1 % higher than in 2007, principally due to the strong demand for new party programs at several European national accounts. Net sales of metallic balloons were $73.2 million or 11.6% higher than in 2007, primarily due to the timing of Valentine’s Day sales and growth in sales to international balloon distributors and mass merchants. Net sales to other retail channels (including card and gift stores, mass merchant, drug, craft and contract manufacturing) were $104.4 million, or 7.0% higher than 2007.

Retail Sales

     Net retail sales for company-owned stores for 2008 of $702.6 million were $248.4 million or 54.7% higher than net retail sales for 2007, reflecting the FCPO and PCFG additional sales of $254.6 million.

     Net retail sales of Party City and Party America company-owned stores decreased by $7.2 million or 1.6% compared to 2007. The decrease reflects a 2.0% decrease in average store count compared to 2007, partially offset by a 0.4% increase in same store sales. Same store sales for Party City and Party America “Big Box” stores (i.e., generally greater than 8,000 square feet) increased 1.4% and were partially offset by an 11.7% decrease in same stores sales at our outlet stores.

Gross Profit

     The following table sets forth the Company’s consolidated gross profit on net sales.

	Nine Months Ended September 30,
	2008					2007
	Dollars in		Percentage of associated			Dollars in		Percentage of associated
	Thousands		sales			Thousands		sales
Net Wholesale	$	112,788		32.8	%	$	102,662		30.2	%
Net Retail		262,284		37.3	%		170,226		37.5	%
Total Gross Profit	$	375,072		35.8	%	$	272,888		34.3	%

     The gross profit margin on net sales at wholesale for 2008 was 32.8% or 260 basis points higher than in 2007. The increase in gross profit margin principally reflects the elimination of certain low margin full case sales, other changes in product mix and lower distribution costs.

     Retail gross profit margin for 2008 was 37.3% or 20 basis points lower than in 2007, primarily due to changes in product mix and increased occupancy costs as a percentage of sales.

Operating expenses

     Selling expenses of $32.5 million for 2008 were $1.1 million higher than for 2007. As a percent of total revenues, selling expenses were 3.9% for 2008, or 80 basis points lower than for 2007 as a result of the acquisitive growth in sales.

     Retail operating expenses for 2008 totaled $185.1 million, or $68.8 million higher than in 2007, principally due to the inclusion of PCFG and FCPO operating expenses of $69.2 million.

     General and administrative expenses of $91.8 million for 2008 were $16.1 million higher than the prior year, primarily due to the inclusion of PCFG and FCPO expenses of $21.8 million, and higher stock compensation expense related to performance – based options, offset by lower retail expenses resulting from the completion of the Party America integration. As a percent of total revenues, general and administrative expenses were 8.6% for 2008, or 70 basis points lower than 2007.

Interest expense, net

     Interest expense of $38.6 million for 2008 was $2.3 million lower than for 2007, reflecting lower Libo rates as well as lower margin rates resulting from our May 2007 debt refinancing.

27

Other (income) expense, net

     Other income, net, totaled $1.1 million in 2008, and principally consisted of a gain on sale of retail stores to a franchisee and our share of income from an unconsolidated balloon distribution joint venture located in Mexico, partially offset by a one-time expense to amend a license agreement. In 2007, other expense, net, totaled $15.9 million and principally consisted of financing costs related to the refinancing of our term debt that occurred in May 2007.

Income tax expense (benefit)

     Income taxes expense (benefit) for 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 December 31, 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

          References to 2008 and 2007 in this section refer only to the nine-month periods ended September 30, 2008 and 2007.

     In 2008, net cash of $9.4 million was provided by operating activities compared to 2007 cash used in operating activities of $9.7 million.

     Net income, after adjusting for non-cash charges, provided cash of $48.1 million in 2008 compared to $38.1 million in 2007. Changes in working capital resulted in use of cash of $38.8 million in 2008 compared to $47.8 million in 2007. Cash was used in both years to increase inventory in preparation for Halloween and to pay down suppliers following the prior year end.

     Investing activities principally related 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 $37.0 million in 2008 compared to $24.7 million in 2007.

     Cash flows from financing activities were $42.3 million in 2008 compared to $38.1 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. Additionally, Party City received proceeds of $2.5 million in capital contributions from existing minority owners of PCFG for the purchase of additional equity. Required repayments on our term debt for the remainder of the year will be $0.9 million. At September 30, 2008, we had $46.2 million of availability remaining on our primary revolving credit agreement, and PCFG had $5.5 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 and our capital plans for 2009, 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 the quarterly results of our 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.

28

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 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 September 30, 2008 and 2007, our interest expense, after considering the effects of our interest rate swap agreements, would have increased, and the income before income taxes and minority interest for the quarters ended September 30, 2008 and 2007 would have decreased by $2.5 million and $1.9 million, respectively and the income (loss) before income taxes and minority interest for the nine months ended September 30, 2008 and 2007 would have decreased (increased) by $7.4 million and $5.8 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 a decrease in operating income of $1.6 million and $1.3 million for the three months ended September 30, 2008 and 2007, respectively and $4.5 million and $2.5 million for the nine months ended September 30, 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 September 30, 2008 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 September 30, 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.

29

PART II

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 Officers pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

30

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
Date: December 4, 2008		Chief Financial Officer (on behalf of the registrant and as principal financial and accounting officer)

31

EX-31.1

Exhibit 31.1

Section 302 Certification

I, Gerald C. Rittenberg, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Amscan Holdings, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 4, 2008

/s/ Gerald C. Rittenberg  

Gerald C. Rittenberg 

Chief Executive Officer
(Principal executive officer) 

EX-31.2

Exhibit 31.2

Section 302 Certification

I, Michael A. Correale, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Amsan Holdings Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 4, 2008	/s/ Michael A. Correale
	Michael A. Correale
	Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C.SECTION 1350
AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Amscan Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Gerald C. Rittenberg, Chief Executive Officer and Michael A. Correale, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Gerald C. Rittenberg  

Gerald C. Rittenberg 

Chief Executive Officer 

/s/ Michael A. Correale  

Michael A. Correale 

Chief Financial Officer 

Date: December 4, 2008