##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 
 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
 Securities Registered Pursuant to Section 12(b) of the Act: None
 Securities Registered Pursuant to Section 12(g) of the Act: None
 o þ
 þ o
 þ o
 þ o
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  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



AMSCAN HOLDINGS, INC.
FORM 10-K
 December 31, 2008
 TABLE OF CONTENTS
 PagePART IItem 1 Business
    
    
    3Item 1A Risk Factors
    
    
    13Item 1B Unresolved Staff Comments
    
    
    15Item 2 Properties
    
    
    16Item 3 Legal Proceedings
    
    
    19Item 4 Submission of Matters to a Vote of Security Holders
    
    
    19PART IIItem 5 Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    19Item 6 Selected Consolidated Financial Data
    
    
    21Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 7A Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 8 Financial Statements and Supplementary Data
    
    
    39Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    39Item 9A Controls and Procedures
    
    
    39Item 9B Other Information
    
    
    40PART IIIItem 10 Directors and Executive Officers of the Registrant
    
    
    41Item 11 Executive Compensation
    
    
    43Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    51Item 13 Certain Relationships and Related Transactions
    
    
    52Item 14 Principal Accountant Fees and Services
    
    
    53PART IVItem 15 Exhibits and Financial Statement Schedules
    
    
    53Signatures
    
    
    56EX-11EX-23EX-31.1EX-31.2EX-32
   http://www.sec.gov.
 2




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##### Table of Contents



PART I
 
 Item 1.
    
    Business
  Wholesale Operations
   Recent Wholesale Acquisition
   3




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##### Table of Contents



Retail Operations
      Recent Retail Acquisitions
    4




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Summary Financial Information about the Company
   Wholesale Operations
  Retail Operations
   Our Business Strategy
  Wholesale Operations
 
    
    Build upon our Position as a Leading Provider to Party
Goods Retailers.We will continue to offer convenient
one-stop shopping for both large party goods superstores
and smaller, independent party goods retailers. We will
seek to grow our sales to existing stores by increasing
our share of sales volume and shelf space, continuing to
develop innovative new products and helping retailers
promote coordinated ensembles that increase average
purchase volume per consumer through add-on or impulse
purchases.
    
    Expand International Presence.We believe there is an
opportunity to expand our international business, which
represented approximately 13% of our net sales at
wholesale in each of the years in the three-year period
ended December 31, 2009. We currently have a presence in
Europe, Mexico, Canada, Asia and Australia. We have our
own sales force in the United Kingdom, Mexico and Canada,
and operate through third-party sales representatives
elsewhere. The market for decorative party goods outside
the U.S. is less mature due to lower consumer awareness of
party products and less developed retail distribution
channels. Our strategies include broadening our
distribution network, increasing accessorization and
customization of our products to local tastes and holidays
and continuing to deepen retail penetration.
    
    Capitalize on Investments in Infrastructure.We intend
to increase our net sales and profitability by leveraging
the significant investments we have made in our
infrastructure. We believe that our state-of-the-art
896,000 square foot distribution facility provides us with
warehousing and distribution capabilities to serve
anticipated future growth.
    
    Continued Growth Through Targeted Acquisitions.We
believe that there will be, from time to time,
opportunities to make acquisitions of complementary
businesses. Through such businesses, we can leverage our
existing marketing, distribution and production
capabilities, expand our presence in the various retail
distribution channels, further broaden and deepen our
product lines and increase our penetration in
international markets.
 5




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##### Table of Contents



Retail Operations
 
    
    Offer a Broad Selection of Merchandise.We will continue
to provide customers with convenient one-stop shopping for
party supplies by offering what we believe is one of the
most extensive selections of party supplies available. The
typical retail store offers a broad selection of Amscan
and other brand merchandise consisting of more than 20,000
active SKUs.
    
    Maintain Value Price Position.We will continue to use
the aggregate buying power of over 800 company-owned and
franchise party good stores, which allows us to offer a
broad line of high quality merchandise at low prices. We
believe we reinforce customers expectations of value
through our advertising and marketing campaigns.
    
    Store Layout and Product Selection.We have a
standardized product assortment and continually evaluate
our aisle layouts, where appropriate, to allow customers
to navigate the store more easily, and to provide
increased availability of Amscan and other desired
products.
    
    Expand Network of Convenient Store Locations.Although
we believe that our stores typically are destination
shopping locations, we seek to maximize customer traffic
and quickly build the visibility of new stores by
situating our stores in high traffic areas. Site selection
criteria include: population density, demographics,
traffic counts, location of complementary retailers,
storefront visibility and presence (either in a
stand-alone building or in dominant strip shopping
centers), competition, lease rates and accessible parking.
We believe there are an extensive number of suitable
domestic locations available for future stores, and we
plan to open approximately 15 new company-owned retail
stores and anticipate that our franchisees will open
between five and ten franchise stores during 2010. In
addition, based on the strong performance of our temporary
Halloween stores, subject to the availability of suitable,
short-term lease locations, we plan to open more than 100
additional temporary stores in 2010.
    
    Provide Excellent Customer Service.We view the quality
of our customers shopping experience as critical to our
continued success, and we are committed to making shopping
in our stores an enjoyable experience. For example, at
Halloween, our most important selling season, each store
significantly increases the number of sales associates
available to assist customers. We hire and train qualified
store managers and other personnel committed to serving
our customers and compensate them based on specific
performance measures in order to ensure a customer-service
oriented culture in our stores.
    
    Information Systems.In recent years, our retail segment
upgraded a number of its information systems which will
allow us to continue to use technology to enhance our
business practices. During 2010, we plan to implement
software systems that will align the POS systems of
Halloween USA stores with those of our party goods
superstores, to further automate its merchandise
forecasting and planning functions.
 Innovative Product Development and Design Capabilities
  6




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Product Lines
  Party Goods and Stationery
    
    Metallic Balloons
    
    GiftDecorative and Solid Color Tableware
    
    Baby and Wedding Memory Books
    
    Bouquets
    
    Ceramic GiftwareCandles
    
    Decorative Tissues
    
    Standard 18 Inch
    
    Decorative CandlesCascades and Centerpieces
    
    Gift Wrap, Bows and Bags
    
    Sing-A-Tune SuperShapes
    
    Decorative FramesCrepe
    
    Invitations, Notes and Stationery
    
    Weights
    
    MugsCutouts
    
    Photograph AlbumsFlags and Banners
    
    Stickers and ConfettiLatex Balloons
    
    Serveware, DrinkwareNovelty Gifts
    
    GamesParty Favors
    
    Costumes, Costume AccessoriesPiñatasScene SettersWearables
  2009
    
    2008
    
    2007Party Goods and Stationery
    
    
    78
    %
    
    
    77
    %
    
    
    77
    %Metallic Balloons
    
    
    18
    
    
    
    20
    
    
    
    19Gift
    
    
    4
    
    
    
    3
    
    
    
    4100
    %
    
    
    100
    %
    
    
    100
    %
  Seasonal
    
    Themes
    
    EverydayNew Years
    
    Bachelorette
    
    BirthdaysValentines Day
    
    Casino
    
    AnniversariesSt. Patricks Day
    
    Card Party
    
    Bar MitzvahsEaster
    
    Chinatown
    
    Bridal/Baby ShowersPassover
    
    Cocktail Party
    
    ChristeningsFourth of July
    
    Disco
    
    ConfirmationsHalloween
    
    Fiesta
    
    First CommunionsFall
    
    Fifties Rock and Roll
    
    GraduationsThanksgiving
    
    Hawaiian Luau
    
    WeddingsHanukkah
    
    HollywoodChristmas
    
    Mardi GrasMasqueradePatrioticRetirementSportsSummer Barbeque
Western
 7




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##### Table of Contents



Manufactured Products
 i.e
 Purchased Products
  Raw Materials
  Wholesale Sales and Marketing
    Wholesale Distribution and Systems
  8




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Wholesale Customers
   Competition at Wholesale
   Retail Merchandising
    9




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##### Table of Contents



Retailer Suppliers
    Retail Advertising and Marketing
   Franchise Operations
   10




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##### Table of Contents



® ® ®
    Competition at Retail
   Government Regulation
    11




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##### Table of Contents



Copyrights and Trademarks
   Information Systems
  Employees
  12




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##### Table of Contents



Item 1A.
    
    Risk Factors
 Consumer Demands and Preferences
  
    
    we are unable to identify and respond to emerging trends;
    
    we miscalculate either the market for the merchandise in our stores or our customers purchasing habits; or
    
    consumer demand dramatically shifts away from disposable party supplies;
  Competition
   Raw Material and Production Costs
   Interest Rates
  13




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Exchange Rates
  Economic Downturn
  Key Vendors
   Franchise Program
   Additional Capital Requirements
  14




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Seasonal and Quarterly Fluctuations
  Key Personnel
   
 Item 1B.
    
    Unresolved Staff Comments
  15




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Item 2.
    
    Properties
  Owned or Leased(WithPrincipal
    
    Square
    
    ExpirationLocation
    
    Activity
    
    Feet
    
    Date)Elmsford, New York
    
    Executive offices, show
rooms, design and art
production for party
products
    
    119,525 square feet
    
    Leased (expiration date: December 31, 2014)Harriman, New York
    
    Manufacture of paper napkins
    
    74,400 square feet
    
    Leased (expiration
date: March 31,
2011)Newburgh, New York
    
    Manufacture of paper napkins
and cups
    
    53,000 square feet
    
    Leased (expiration
date: May 31, 2012)Narragansett, Rhode Island
    
    Manufacture and distribution
of plastic plates, cups and bowls
    
    277,689 square feet
    
    Leased (expiration
date: April 26, 2011)Louisville, Kentucky
    
    Manufacture and distribution
of paper plates
    
    189,175 square feet
    
    Leased (expiration
date: March 31, 2013)Eden Prairie, Minnesota
    
    Manufacture of metallic
balloons and accessories
    
    115,600 square feet
    
    OwnedEden Prairie, Minnesota
    
    Manufacture of retail, trade
show and showroom fixtures
    
    15,324 square feet
    
    Leased (expiration
date: July 31, 2012)Tijuana, Mexico
    
    Manufacture and distribution
of party products
    
    100,000 square feet
    
    Leased (expiration
date: August 15, 2015)Chester, New York (1)
    
    Distribution of party and
gift products
    
    896,000 square feet
    
    OwnedMilton Keynes, 
Buckinghamshire, England
    
    Distribution of party
products throughout Europe
    
    110,000 square feet
    
    Leased (expiration
date: June 30, 2017)Dorval, Canada
    
    Distribution of party and
gift products
    
    19,330 square feet
    
    Leased (expiration
date: March 31, 2012)Edina, Minnesota
    
    Distribution of metallic
balloons and accessories
    
    122,312 square feet
    
    Leased (expiration
date: December 31, 2015)Rockaway, New Jersey
    
    Party City corporate offices
    
    106,000 square feet
    
    Leased (expiration
date: July 31, 2017)Naperville, Illinois
    
    Office and distribution of
party goods for internet sales
    
    340,000 square-foot
    
    Leased (expiration
date: December 31, 2018)Atlanta, Georgia
    
    Office and storage facilities
    
    13,918 square foot
    
    Leased (expiration
date: November 30, 2011)
 
 (1)
    
    Property is subject to a lien mortgage note in the original
principal amount of $10.0 million with the New York State Job
Development Authority. The lien mortgage note was amended on
December 18, 2009. The amended mortgage note for $5.6 million
was extended for a period of 60 months and requires fixed monthly
payments of principal and interest. At December 31, 2009, the
lien mortgage note bears interest at a rate of 2.45%, subject to
adjustments semi annually.  16




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##### Table of Contents



2009
    
    2008
    
    2007Company-owned:Stores open at beginning of year
    
    
    643
    
    
    
    673
    
    
    
    630Stores opened
    
    
    6
    
    
    
    19
    
    
    
    6Stores acquired
    
    
    3
    
    
    
    6
    
    
    
    65Stores closed / sold
    
    
    (51
    )
    
    
    (55
    )
    
    
    (28
    )Stores open at end of year
    
    
    601
    
    
    
    643
    
    
    
    673Franchise:Stores open at beginning of year
    
    
    273
    
    
    
    283
    
    
    
    324Stores opened
    
    
    1
    
    
    
    13
    
    
    
    22Stores acquired
    
    
    2
    
    
    
    7
    
    
    
    7Stores closed, sold or converted to independent
    
    
    (28
    )
    
    
    (30
    )
    
    
    (70
    )Stores open at end of year
    
    
    248
    
    
    
    273
    
    
    
    283Total company-owned and franchise stores
    
    
    849
    
    
    
    916
    
    
    
    956
 17




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##### Table of Contents



State
    
    Company-owned
    
    Franchise
    
    Chain-wideAlabama
    
    
    3
    
    
    
    8
    
    
    
    11Arizona
    
    
    1
    
    
    
    21
    
    
    
    22Arkansas
    
    
    1
    
    
    
    3
    
    
    
    4California
    
    
    86
    
    
    
    20
    
    
    
    106Colorado
    
    
    14
    
    
    
    1
    
    
    
    15Connecticut
    
    
    5
    
    
    
    3
    
    
    
    8Delaware
    
    
    1
    
    
    
    1
    
    
    
    2Florida
    
    
    56
    
    
    
    11
    
    
    
    67Georgia
    
    
    26
    
    
    
    1
    
    
    
    27Hawaii
    
    
    0
    
    
    
    1
    
    
    
    1Illinois
    
    
    63
    
    
    
    0
    
    
    
    63Indiana
    
    
    27
    
    
    
    0
    
    
    
    27Iowa
    
    
    9
    
    
    
    1
    
    
    
    10Kansas
    
    
    3
    
    
    
    4
    
    
    
    7Kentucky
    
    
    7
    
    
    
    0
    
    
    
    7Louisiana
    
    
    3
    
    
    
    8
    
    
    
    11Maryland
    
    
    14
    
    
    
    12
    
    
    
    26Michigan
    
    
    34
    
    
    
    0
    
    
    
    34Minnesota
    
    
    0
    
    
    
    21
    
    
    
    21Mississippi
    
    
    2
    
    
    
    3
    
    
    
    5Missouri
    
    
    22
    
    
    
    3
    
    
    
    25Montana
    
    
    0
    
    
    
    1
    
    
    
    1Nebraska
    
    
    6
    
    
    
    0
    
    
    
    6Nevada
    
    
    6
    
    
    
    0
    
    
    
    6New Hampshire
    
    
    1
    
    
    
    0
    
    
    
    1New Jersey
    
    
    14
    
    
    
    14
    
    
    
    28New Mexico
    
    
    0
    
    
    
    3
    
    
    
    3New York
    
    
    42
    
    
    
    14
    
    
    
    56North Carolina
    
    
    3
    
    
    
    19
    
    
    
    22North Dakota
    
    
    0
    
    
    
    3
    
    
    
    3Ohio
    
    
    31
    
    
    
    0
    
    
    
    31Oklahoma
    
    
    3
    
    
    
    0
    
    
    
    3Oregon
    
    
    2
    
    
    
    5
    
    
    
    7Pennsylvania
    
    
    20
    
    
    
    11
    
    
    
    31Puerto Rico
    
    
    0
    
    
    
    5
    
    
    
    5South Carolina
    
    
    2
    
    
    
    6
    
    
    
    8Tennessee
    
    
    8
    
    
    
    10
    
    
    
    18Texas
    
    
    38
    
    
    
    24
    
    
    
    62Virginia
    
    
    11
    
    
    
    9
    
    
    
    20Washington
    
    
    16
    
    
    
    2
    
    
    
    18West Virginia
    
    
    2
    
    
    
    0
    
    
    
    2Wisconsin
    
    
    19
    
    
    
    0
    
    
    
    19Total
    
    
    601
    
    
    
    248
    
    
    
    849
   18




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Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5.
    
    Market for Registrants Common Equity and Related
Stockholder Matters and Issuer Purchases of Equity
Securities
   Dividends
  Issuer Purchases of Equity Securities
  19




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##### Table of Contents



Equity Compensation Plan Information
  (a)
    
    (b)
    
    (c)Number of
    
    
    
    
    
    Number of SecuritiesSecurities to be
    
    
    
    
    
    Remaining AvailableIssued Upon
    
    Weighted-Average
    
    for Future IssuanceExercise of
    
    Exercise Price of
    
    Under EquityOutstanding
    
    Outstanding
    
    Compensation PlansOptions, Warrants
    
    Options, Warrants
    
    (Excluding Securitiesand Rights
    
    and Rights
    
    Reflected in Column (a))Equity compensation plans approved by security holders
    
    
    2,933.03
    
    
    $
    13,462
    
    
    
    48.04Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,933.03
    
    
    $
    13,462
    
    
    
    48.04
 
 (1)
    
    See Note 15 to our consolidated financial statements included herein for a description of our equity incentive plan. 20




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##### Table of Contents



Item 6.
    
    Selected Consolidated Financial Data
  Year Ended December 31,2009
    
    2008
    
    2007(1)
    
    2006(2)
    
    2005(3)(Dollars in thousands)Income Statement Data:Revenues:Net sales
    
    $
    1,467,324
    
    
    $
    1,537,641
    
    
    $
    1,221,516
    
    
    $
    993,342
    
    
    $
    417,226Royalties and franchise fees
    
    
    19,494
    
    
    
    22,020
    
    
    
    25,888
    
    
    
    21,746
    
    
    
    509Total revenues
    
    
    1,486,818
    
    
    
    1,559,661
    
    
    
    1,247,404
    
    
    
    1,015,088
    
    
    
    417,735Expenses:Cost of sales
    
    
    899,041
    
    
    
    966,426
    
    
    
    777,586
    
    
    
    676,527
    
    
    
    281,632Selling expenses
    
    
    39,786
    
    
    
    41,894
    
    
    
    41,899
    
    
    
    39,449
    
    
    
    36,181Retail operating expenses
    
    
    261,691
    
    
    
    273,627
    
    
    
    191,423
    
    
    
    126,224
    
    
    
    1,824Franchise expenses
    
    
    11,991
    
    
    
    13,686
    
    
    
    12,883
    
    
    
    13,009
    
    
    
    779General and administrative expenses
    
    
    119,193
    
    
    
    120,272
    
    
    
    105,707
    
    
    
    84,836
    
    
    
    36,026Art and development costs
    
    
    13,243
    
    
    
    12,462
    
    
    
    12,149
    
    
    
    10,338
    
    
    
    8,941Impairment of trade name(4)
    
    
    
    
    
    
    17,376
    
    
    
    
    
    
    
    
    
    
    
    Income from operations
    
    
    141,873
    
    
    
    113,918
    
    
    
    105,757
    
    
    
    64,705
    
    
    
    52,352Interest expense, net
    
    
    41,481
    
    
    
    50,915
    
    
    
    54,590
    
    
    
    54,887
    
    
    
    31,907Other (income) expense, net (5)(6)
    
    
    (32
    )
    
    
    (818
    )
    
    
    18,214
    
    
    
    (1,000
    )
    
    
    3,224Income before income taxes
    
    
    100,424
    
    
    
    63,821
    
    
    
    32,953
    
    
    
    10,818
    
    
    
    17,221Income tax expense
    
    
    37,673
    
    
    
    24,188
    
    
    
    13,246
    
    
    
    4,295
    
    
    
    4,940Net income
    
    
    62,751
    
    
    
    39,633
    
    
    
    19,707
    
    
    
    6,523
    
    
    
    12,281Less: net income (loss) attributable to noncontrolling
interests
    
    
    198
    
    
    
    (877
    )
    
    
    446
    
    
    
    83
    
    
    
    21Net income attributable to Amscan Holdings, Inc.
    
    $
    62,553
    
    
    $
    40,510
    
    
    $
    19,261
    
    
    $
    6,440
    
    
    $
    12,260Other Financial Data:Capital expenditures, including assets under capital leases
    
    
    26,254
    
    
    
    53,701
    
    
    
    36,648
    
    
    
    40,376
    
    
    
    17,051Depreciation and amortization
    
    
    44,382
    
    
    
    47,278
    
    
    
    38,093
    
    
    
    38,619
    
    
    
    18,602Ratio of earnings to fixed charges(7)
    
    
    2.2
    x
    
    
    1.6
    x
    
    
    1.4
    x
    
    
    1.1
    x
    
    
    1.5
    x
 21




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##### Table of Contents



At December 31,2009
    
    2008
    
    2007
    
    2006
    
    2005(Dollars in thousands)Balance Sheet Data:Working capital
    
    $
    173,065
    
    
    $
    87,726
    
    
    $
    108,374
    
    
    $
    167,561
    
    
    $
    157,139Total assets(8)(9)
    
    
    1,480,501
    
    
    
    1,507,977
    
    
    
    1,498,845
    
    
    
    1,217,371
    
    
    
    1,118,947Short-term obligations(10)
    
    $
    112,541
    
    
    $
    170,880
    
    
    $
    161,790
    
    
    $
    8,633
    
    
    $
    2,643Long-term obligations(8)(9)
    
    
    538,892
    
    
    
    550,755
    
    
    
    584,336
    
    
    
    558,372
    
    
    
    561,567Total obligations
    
    $
    651,433
    
    
    $
    721,635
    
    
    $
    746,126
    
    
    $
    567,005
    
    
    $
    564,210Redeemable common
securities(11)
    
    $
    18,389
    
    
    $
    18,171
    
    
    $
    33,782
    
    
    $
    9,343
    
    
    $
    6,821AHI stockholders
Equity(8) (9) (11)
    
    $
    476,985
    
    
    $
    410,228
    
    
    $
    375,586
    
    
    $
    359,839
    
    
    $
    320,810Non controlling interest
    
    
    2,137
    
    
    
    1,889
    
    
    
    2,488
    
    
    
    2,052
    
    
    
    1,985Total equity
    
    $
    479,122
    
    
    $
    412,117
    
    
    $
    378,074
    
    
    $
    361,891
    
    
    $
    322,795
 
 (1)
    
    FCPO and PCFG are included in the balance sheet data as of
December 31, 2007, and the statement of operations and other
financial data from Party City Franchise Group Transaction Date
(November 2, 2007) and the Factory Card & Party Outlet Acquisition
Date (November 16, 2007), respectively.(2)
    
    Party America is included in the balance sheet data beginning with
December 31, 2006, and the statement of operations and other
financial data from the Party America Acquisition Date
(September 29, 2006).(3)
    
    Party City is included in the balance sheet data beginning with
December 31, 2005 and the statement of operations and other
financial data from the Party City Acquisition Date (December 23,
2005).(4)
    
    During the fourth quarter of 2008, the Company instituted a
program to convert its company-owned and franchised Party America
stores to Party City stores and recorded a $17.4 million charge
for the impairment of the Party America trade name(5)
    
    In connection with the refinancing of debt in May 2007, the
Company recorded non-recurring expenses of $16.2 million,
including $6.2 million of debt retirement costs, $6.3 million
write off of deferred finance costs, and a $3.7 million write-off
of original issue discount associated with the repayment of debt.(6)
    
    In connection with the Party City Acquisition in December 2005,
the Company recorded non-recurring expenses for the write-off of
$4.0 million of deferred financing costs associated with the
repayment of the then outstanding debt.(7)
    
    For purposes of determining the ratio of earnings to fixed
charges, earnings are defined as earnings before income taxes and
minority interests plus fixed charges. Fixed charges consist of
interest expense on all obligations, amortization of deferred
financing costs and an estimate of the rental expense on operating
leases representing that portion of rental expense deemed by the
Company to be attributable to interest.(8)
    
    Common stock issued to consummate the Party America Acquisition
totaled $29.7 million. Cash also paid to consummate the
acquisition included $1.1 million for transaction costs, and
$12.6 million to repay Party America senior debt.(9)
    
    Cash paid to consummate the Party City Acquisition totaled
$567.0 million. Financing for the acquisition, including the
repayment of borrowings under the Companys 2004 Senior Secured
Credit Facility, was provided by: (i) the $166.4 million Equity
Investment in the Companys parent, AAH, (ii) the $325 million
First Term Loan (net of an original issue discount of
$3.25 million), (iii) the $60 million Second Term Loan (net of an
original issue discount of $1.5 million) and (iv) cash on-hand of
$20.4 million.(10)
    
    Short-term obligations consist primarily of borrowings under bank
lines of credit and the current portion of long-term debt. At
December 31, 2008, the current portion of long-term debt includes
$27.5 million of PCFG term debt that has been classified as
current due to the PCFGs noncompliance with the loan agreements
financial covenants. See Liquidity and Capital Resources.(11)
    
    Under the terms of the AAH stockholders agreement dated April 30,
2004, we have an option to purchase all of the shares of common
stock held by former management stockholders, as defined, and,
under certain circumstances, including death and disability,
former management stockholders can require us to purchase all of
the shares held by the former associates. The purchase price as
prescribed in the stockholders agreements 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 us to all management
stockholders, based on fully paid and vested shares, is classified
as redeemable common securities. 22




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##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
 e.g. e.g. e.g.
 Results of Operations
 Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Percentage of Total Revenues
 Year Ended December 31,2009
    
    2008Revenues:Net sales
    
    
    98.7
    %
    
    
    98.6
    %Royalties and franchise fees
    
    
    1.3
    
    
    
    1.4Total revenues
    
    
    100.0
    
    
    
    100.0Expenses:Cost of sales
    
    
    60.5
    
    
    
    62.0Selling expenses
    
    
    2.7
    
    
    
    2.7Retail operating expenses
    
    
    17.6
    
    
    
    17.5Franchise expenses
    
    
    0.8
    
    
    
    0.9General and administrative expenses
    
    
    8.0
    
    
    
    7.7Art and development costs
    
    
    0.9
    
    
    
    0.8Impairment of trade name
    
    
    0.0
    
    
    
    1.1Total expenses
    
    
    90.5
    
    
    
    92.7Income from operations
    
    
    9.5
    
    
    
    7.3Interest expense, net
    
    
    2.8
    
    
    
    3.3Other income, net
    
    
    0.0
    
    
    
    (0.1
    )Income before income taxes
    
    
    6.7
    
    
    
    4.1Income tax expense
    
    
    2.5
    
    
    
    1.6Net income
    
    
    4.2
    
    
    
    2.5Less net income (loss) attributable to noncontrolling interests
    
    
    0.0
    
    
    
    (0.1
    )Net income attributable to Amscan Holdings, Inc.
    
    
    4.2
    %
    
    
    2.6
    %
 23




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##### Table of Contents



Total Revenues
  Year Ended December 31,2009
    
    2008Dollars in
    
    Percentage of
    
    Dollars in
    
    Percentage ofThousands
    
    Total Revenue
    
    Thousands
    
    Total RevenueRevenues:Sales:Wholesale
    
    $
    633,006
    
    
    
    42.6
    %
    
    $
    653,403
    
    
    
    41.9
    %Eliminations
    
    
    (221,647
    )
    
    
    (14.9
    )
    
    
    (214,898
    )
    
    
    (13.8
    )Net wholesale
    
    
    411,359
    
    
    
    27.7
    
    
    
    438,505
    
    
    
    28.1Retail
    
    
    1,055,965
    
    
    
    71.0
    
    
    
    1,099,136
    
    
    
    70.5Total net sales
    
    
    1,467,324
    
    
    
    98.7
    
    
    
    1,537,641
    
    
    
    98.6Franchise related
    
    
    19,494
    
    
    
    1.3
    
    
    
    22,020
    
    
    
    1.4Total revenues
    
    $
    1,486,818
    
    
    
    100.0
    %
    
    $
    1,559,661
    
    
    
    100.0
    %
 Wholesale
   Retail
 rd i.e
 24




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##### Table of Contents



Royalties and franchise fees
  Gross Profit
  Year Ended December 31,2009
    
    
    2008Dollars in
    
    
    Percentage of
    
    
    Dollars in
    
    
    Percentage ofThousands
    
    
    Total Revenue
    
    
    Thousands
    
    
    Total RevenueWholesale
    
    $
    148,424
    
    
    
    36.1
    %
    
    $
    142,438
    
    
    
    32.5
    %Retail
    
    
    419,859
    
    
    
    39.8
    %
    
    
    428,777
    
    
    
    39.0
    %Total
    
    $
    568,283
    
    
    
    38.7
    %
    
    $
    571,215
    
    
    
    37.1
    %
   Operating expenses
     Interest expense, net
  25




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##### Table of Contents



Other income, net
  Income tax expense
  Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
 Percentage of Total Revenues
 Year EndedDecember 31,2008
    
    
    2007Revenues:Net sales
    
    
    98.6
    %
    
    
    97.9
    %Royalties and franchise fees
    
    
    1.4
    
    
    
    2.1Total revenues
    
    
    100.0
    
    
    
    100.0Expenses:Cost of sales
    
    
    62.0
    
    
    
    62.3Selling expenses
    
    
    2.7
    
    
    
    3.4Retail operating expenses
    
    
    17.5
    
    
    
    15.3Franchise expenses
    
    
    0.9
    
    
    
    1.0General and administrative expenses
    
    
    7.7
    
    
    
    8.5Art and development costs
    
    
    0.8
    
    
    
    1.0Impairment of trade name
    
    
    1.1
    
    
    
    Total expenses
    
    
    92.7
    
    
    
    91.5Income from operations
    
    
    7.3
    
    
    
    8.5Interest expense, net
    
    
    3.3
    
    
    
    4.4Other (income) expense, net
    
    
    (0.1
    )
    
    
    1.5Income before income taxes
    
    
    4.1
    
    
    
    2.6Income tax expense
    
    
    1.6
    
    
    
    1.1Net income
    
    
    2.5
    
    
    
    1.5Less net (loss) income attributable to noncontrolling interests
    
    
    (0.1
    )
    
    
    0.0Net income attributable to Amscan Holdings, Inc.
    
    
    2.6
    %
    
    
    1.5
    %
 26




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##### Table of Contents



Total Revenues
  Year Ended December 31,2008
    
    2007Dollars in
    
    Percentage of
    
    Dollars in
    
    Percentage ofthousands
    
    Total Revenue
    
    thousands
    
    Total RevenueRevenues:Sales:Wholesale
    
    $
    653,403
    
    
    
    41.9
    %
    
    $
    626,476
    
    
    
    50.2
    %Eliminations
    
    
    (214,898
    )
    
    
    (13.8
    )
    
    
    (173,143
    )
    
    
    (13.9
    )Net wholesale
    
    
    438,505
    
    
    
    28.1
    
    
    
    453,333
    
    
    
    36.3Retail
    
    
    1,099,136
    
    
    
    70.5
    
    
    
    768,183
    
    
    
    61.6Total net sales
    
    
    1,537,641
    
    
    
    98.6
    
    
    
    1,221,516
    
    
    
    97.9Franchise related
    
    
    22,020
    
    
    
    1.4
    
    
    
    25,888
    
    
    
    2.1Total revenues
    
    $
    1,559,661
    
    
    
    100.0
    %
    
    $
    1,247,404
    
    
    
    100.0
    %
 Wholesale
   Retail
  i.e rd
 Royalties and franchise fees
  27




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##### Table of Contents



Gross Profit
  Year Ended December 31,2008
    
    2007Dollars in
    
    
    % of associated
    
    
    Dollars in
    
    
    % of associatedthousands
    
    
    sales
    
    
    thousands
    
    
    salesNet Wholesale
    
    $
    142,438
    
    
    
    32.5
    %
    
    $
    131,674
    
    
    
    29.0
    %Net Retail
    
    
    428,777
    
    
    
    39.0
    %
    
    
    312,256
    
    
    
    40.6
    %Total Gross Profit
    
    $
    571,215
    
    
    
    37.1
    %
    
    $
    443,930
    
    
    
    36.3
    %
   Operating expenses
      Interest expense, net
  28




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##### Table of Contents



Other (income) expense, net
  Income tax expense
  Liquidity and Capital Resources
 Capital Structure
  Term Loan Credit Agreement
         29




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##### Table of Contents



ABL Credit Agreement
           Unrestricted Subsidiary Credit Agreement
    30




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##### Table of Contents



Other Credit Agreements
         31




---



##### Table of Contents



Cash Flow Data  Year Ended December 31, 2009 Compared to Year Ended
December 31, 2008
    Cash Flow Data  Year Ended December 31, 2008 Compared to Year Ended December 31,
2007
    32




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##### Table of Contents



Tabular Disclosure of Contractual Obligations
  Total
    
    2010
    
    2011
    
    2012
    
    2013
    
    2014
    
    ThereafterLong-term debt obligations (a)
    
    $
    568,288
    
    
    $
    38,819
    
    
    $
    8,845
    
    
    $
    19,870
    
    
    $
    324,583
    
    
    $
    176,171
    
    
    $
    Capital lease obligations (a)
    
    
    5,510
    
    
    
    2,087
    
    
    
    2,065
    
    
    
    1,346
    
    
    
    12
    
    
    
    
    
    
    
    Operating lease obligations (b)
    
    
    408,567
    
    
    
    108,719
    
    
    
    91,906
    
    
    
    75,845
    
    
    
    49,607
    
    
    
    28,736
    
    
    
    53,754Merchandise purchase commitments (c)
    
    
    9,950
    
    
    
    4,422
    
    
    
    4,422
    
    
    
    1,106
    
    
    
    
    
    
    
    
    
    
    
    Minimum product royalty obligations
    
    
    11,575
    
    
    
    3,292
    
    
    
    5,077
    
    
    
    2,289
    
    
    
    451
    
    
    
    466
    
    
    
    Total contractual obligations
    
    $
    1,003,890
    
    
    $
    157,339
    
    
    $
    112,315
    
    
    $
    100,456
    
    
    $
    374,653
    
    
    $
    205,373
    
    
    $
    53,754
 
 (a)
    
    See Note 8 to our Consolidated Financial Statements which are included in
this report beginning on page F-2.(b)
    
    We are also an assignor with continuing lease liability for seven stores sold
to franchisees that expire through 2014. The assigned lease obligations
continue until the applicable leases expire. The maximum amount of the assigned
lease obligations may vary, but is limited to the sum of the total amount due
under the lease. At December 31, 2009, the maximum amount of the assigned lease
obligations was approximately $4.2 million and is not included in the table
above.The operating lease obligations included above do not include contingent
rent based upon sales volume (which represented less than 1% of minimum
lease obligations in 2009), or other variable costs such as maintenance,
insurance and taxes. See Note 17 to our Consolidated Financial Statements
which are included in this report beginning on page F-2.(c)
    
    The Company has certain purchase commitments with vendors requiring minimum
purchase commitments through 2012.    Off-Balance Sheet Arrangements
  Effects of Inflation
  33




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##### Table of Contents



Critical Accounting Policies and Estimates
   Revenue Recognition
   Store Closure Costs
  Product Royalty Agreements
  Doubtful Accounts
  Inventories
  34




---



##### Table of Contents



Long-Lived and Intangible Assets
    Insurance accruals
  Income Taxes
   Stock-Based Compensation
  35




---



##### Table of Contents



Legal Proceedings
  Recently Issued Accounting Standards
 Implemented:
 Generally Accepted Accounting
Standards
 Consolidation
 Subsequent Events
  Business Combinations
 
    
    Acquired in-process research and development, which was previously expensed at
acquisition, is now accounted for as an asset, with the cost recognized as the research and
development is realized or abandoned.
    
    Contingent consideration, which was previously accounted for as a subsequent adjustment
to purchase price, is now recorded at fair value as an element of purchase price with
subsequent adjustments recognized in operations.
    
    Subsequent decreases in valuation allowances on acquired deferred tax assets are
recognized in operations after the measurement period. Such changes were previously
considered to be subsequent changes in consideration and were recorded as decreases in
goodwill.
    
    Transaction costs, which were previously treated as costs of the acquisition, are now
expensed.
    
    Upon gaining control of an entity in which the equity method or cost basis investment
was held, the carrying value of that investment is adjusted to fair value with the related
gain or loss recorded in earnings. Previously, this fair value adjustment would not have
been made.
    
    Effective January 1, 2009, the Company retrospectively adopted an amendment to ASC 805
released in April 2009. The amendment requires pre-acquisition contingencies to be
recognized at fair value, if fair value can be determined or reasonably estimated during
the measurement period. If fair value cannot be determined or reasonably estimated, the
standard requires measurement based on the recognition and measurement criteria of ASC 450
Contingencies.
 Fair Value Measurement and Disclosure
 Not Yet Implemented:
  36




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##### Table of Contents



Safe Harbor Statement under Private Securities Litigation Reform Act of 1995
  Quarterly Results (Unaudited)
  37




---



##### Table of Contents



For the Three Months Ended,March 31,
    
    June 30,
    
    September 30,
    
    December 31,(Dollars in thousands)2009Revenues:Net sales
    
    $
    309,046
    
    
    $
    337,536
    
    
    $
    336,944
    
    
    $
    483,798Royalties and franchise fees
    
    
    3,694
    
    
    
    4,536
    
    
    
    4,164
    
    
    
    7,100Gross profit
    
    
    103,629
    
    
    
    128,425
    
    
    
    121,453
    
    
    
    214,776Income from operations
    
    
    12,201
    
    
    
    27,818
    
    
    
    14,937
    
    
    
    86,917Net income
attributable to Amscan Holdings, Inc.
    
    
    2,403
    
    
    
    10,952
    
    
    
    3,079
    
    
    
    46,1192008Revenues:Net sales
    
    $
    325,032
    
    
    $
    365,174
    
    
    $
    356,231
    
    
    $
    491,204Royalties and franchise fees
    
    
    5,342
    
    
    
    6,350
    
    
    
    5,863
    
    
    
    4,465Gross profit
    
    
    110,347
    
    
    
    139,414
    
    
    
    125,311
    
    
    
    196,143Income from operations
    
    
    8,778
    
    
    
    35,511
    
    
    
    18,573
    
    
    
    51,056
    (a)Net income
(loss) attributable to Amscan Holdings, Inc.
    
    
    (2,537
    )
    
    
    14,669
    
    
    
    4,563
    
    
    
    23,815
    (a)
 
 (a)
    
    During the fourth quarter of 2008, the Company instituted a program to
convert its company-owned and franchised Party America stores to Party City
stores and recorded a $17.4 million charge for the impairment of the Party
America trade name. 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
   38




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
        
    
    Pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of Amscan;
    
    Provide reasonable assurance that transactions are recorded as necessary
to permit preparation of the consolidated financial statements in accordance
with generally accepted accounting principles, and that receipts and
expenditures of Amscan are being made only in accordance with authorizations
of management and directors of Amscan; and
    
    Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of Amscans assets that could
have a material effect on the consolidated financial statements.
  39




---



##### Table of Contents



Item 9 (A) (T)
  
 Item 9B. Other Information
  40




---



##### Table of Contents



PART III
 
 Item 10. Directors and Executive Officers of the Registrant
  Name
    
    Age
    
    PositionGerald C. Rittenberg
    
    
    58
    
    
    Chief Executive Officer and DirectorJames M. Harrison
    
    
    58
    
    
    President, Chief Operating Officer and DirectorMichael D. Heller
    
    
    54
    
    
    Executive Vice President  Retail OperationsMichael A. Correale
    
    
    52
    
    
    Chief Financial OfficerRobert J. Small
    
    
    43
    
    
    Chairman of the Board of DirectorsSteven J. Collins
    
    
    41
    
    
    DirectorMichael F. Cronin
    
    
    56
    
    
    DirectorKevin M. Hayes
    
    
    41
    
    
    DirectorJordan A. Kahn
    
    
    68
    
    
    DirectorRichard K. Lubin
    
    
    63
    
    
    DirectorCarol M. Meyrowitz
    
    
    56
    
    
    DirectorDavid M. Mussafer
    
    
    46
    
    
    Director
        41




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##### Table of Contents



Board of Directors
   Board Leadership Structure
  Risk Oversight
  Audit Committee
 42




---



##### Table of Contents



Compensation Committee
  Code of Ethics
  Section 16(a) Beneficial Ownership Reporting Compliance
  
 Item 11. Executive Compensation
 Compensation Discussion and Analysis
  Compensation Committee
  43




---



##### Table of Contents



Compensation Philosophy
  
    
    linking pay to performance to create incentives to perform;
    
    ensuring compensation levels and components are actively managed; and
    
    using equity compensation to align employees long-term interests with those of the stockholders.
 Compensation
    Components of Compensation
   Base Salary
  44




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##### Table of Contents



Annual Cash Bonus Plan
  Stock-based Incentive Program
      45




---



##### Table of Contents



Other Compensation
    Accounting and Tax Treatment
 Accounting Treatment
 Share-based Payment Awards,
  Tax Treatment
   Incentive stock-options.
 46




---



##### Table of Contents



Non-qualified stock-options.
 Restricted Stock.
 Report of Compensation Committee on Executive Compensation
   
  47




---



##### Table of Contents



Summary of Compensation Table
 Option
    
    OtherName and Principal Position
    
    Year
    
    Salary (a)
    
    Bonus (b)
    
    Awards (c)
    
    Compensation (d)
    
    TotalGerald C, Rittenberg
    
    
    2009
    
    
    $
    1,050,000
    
    
    $
    1,367,000
    
    
    $
    
    
    
    $
    21,400
    
    
    $
    2,438,400Chief Executive Officer
    
    
    2008
    
    
    
    1,000,000
    
    
    
    1,066,000
    
    
    
    595,300
    
    
    
    21,400
    
    
    
    2,682,7002007
    
    
    
    825,000
    
    
    
    879,000
    
    
    
    
    
    
    
    27,100
    
    
    
    1,731,000James M. Harrison
    
    
    2009
    
    
    $
    892,500
    
    
    $
    1,114,500
    
    
    $
    
    
    
    $
    20,600
    
    
    $
    2,027,600President and
    
    
    2008
    
    
    
    850,000
    
    
    
    858,600
    
    
    
    446,500
    
    
    
    19,800
    
    
    
    2,174,900Chief Operating Officer
    
    
    2007
    
    
    
    742,500
    
    
    
    791,100
    
    
    
    
    
    
    
    24,700
    
    
    
    1,558,300Michael D. Heller
    
    
    2009
    
    
    $
    507,800
    
    
    
    270,100
    
    
    
    
    
    
    
    700
    
    
    
    778,600Executive Vice President
 Retail Operations
    
    
    2008
    
    
    
    507,800
    
    
    
    
    
    
    
    331,000
    
    
    
    700
    
    
    
    839,500Michael A. Correale
    
    
    2009
    
    
    $
    333,125
    
    
    $
    129,100
    
    
    $
    
    
    
    $
    40,400
    
    
    $
    502,625Chief Financial Officer
    
    
    2008
    
    
    
    325,000
    
    
    
    93,100
    
    
    
    
    
    
    
    37,400
    
    
    
    455,5002007
    
    
    
    300,000
    
    
    
    128,000
    
    
    
    
    
    
    
    33,300
    
    
    
    461,300
 
 (a)
    
    Amounts include executives contribution to profit sharing plans(b)
    
    Represents annual bonuses earned with respect to the years
indicated, whether paid or accrued, and, in 2009 and 2008, annual
deferred compensation for Messrs. Rittenberg and Harrison of
$350,000 and $250,000, respectively.(c)
    
    The dollar values shown reflect the aggregate grant date fair
value of equity awards granted within the year in accordance with
the Financial Accounting Standards Board (FASB) Accounting
Standards Codification Topic 718 for stock-based compensation
(formerly SFAS No. 123(R)). These amounts reflect the total
grant date expense for these awards and do not correspond to the
actual cash value that will be recognized by each individual when
received.(d)
    
    Represents contributions by the Company under a profit sharing
and savings plan, insurance premiums paid by the Company with
respect to term life insurance for the benefit of the named
executive officer and automobile-related compensation. Grants of Plan Based Awards
  Potential Payments upon Change in Control
  48




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##### Table of Contents



Options Exercised
  Outstanding Equity Awards
  Number of Securities
    
    Option
    
    OptionUnderlying Unexercised Options
    
    Exercise
    
    ExpirationName
    
    No. Exercisable
    
    No. Unexercisable
    
    Price ($/Share)
    
    DateGerald C. Rittenberg
    
    
    
    
    
    
    100.00
    
    
    
    22,340
    
    
    
    3/6/201832.40
    
    
    
    137.20
    
    
    
    12,000
    
    
    
    4/1/2016154.51
    
    
    
    162.86
    
    
    
    10,000
    
    
    
    4/1/201540.58
    
    
    
    
    
    
    
    2,500
    
    
    
    4/30/2014James M. Harrison
    
    
    
    
    
    
    75.00
    
    
    
    22,340
    
    
    
    3/6/201829.16
    
    
    
    123.48
    
    
    
    12,000
    
    
    
    4/1/2016103.01
    
    
    
    108.58
    
    
    
    10,000
    
    
    
    4/1/201520.29
    
    
    
    
    
    
    
    2,500
    
    
    
    4/30/2014Michael D. Heller
    
    
    4.53
    
    
    
    53.42
    
    
    
    28,350
    
    
    
    12/30/2018Michael A. Correale
    
    
    9.72
    
    
    
    28.44
    
    
    
    12,000
    
    
    
    4/1/201610.44
    
    
    
    17.40
    
    
    
    10,000
    
    
    
    4/1/2015
 Director Compensation
 Annual Compensation
   Fees Earned or
    
    OptionName
    
    Paid in Cash
    
    Awards(a)
    
    TotalJordan A. Kahn
    
    $
    26,000
    
    
    $
    
    
    
    $
    26,000Carol M. Meyrowitz
    
    
    26,000
    
    
    
    
    
    
    $
    26,000
   49




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##### Table of Contents



Compensation Committee Interlocks and Insider Participation
  Employment Arrangements
 Employment Agreement with Gerald C. Rittenberg.
   Employment Agreement with James M. Harrison.
 Employment Agreement with Michael D. Heller.
 50




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
   Shares of Company
    
    PercentageCommon Stock
    
    of ClassName of Beneficial Owner
    
    Beneficially Owned
    
    OutstandingAdvent International(1)
    
    
    11,918.71
    
    
    
    38.67
    %Berkshire Partners LLC(2)
    
    
    11,210.31
    
    
    
    36.37
    %Weston Presidio (3)
    
    
    5,605.16
    
    
    
    18.19
    %GB Holdings I LLC
    
    
    1,118.01
    
    
    
    3.63
    %Steven J. Collins(4)
    
    
    11,918.71
    
    
    
    38.67
    %Michael A. Correale(5)
    
    
    33.66
    
    
    
    *Michael F. Cronin(6)
    
    
    5,605.16
    
    
    
    18.19
    %James M. Harrison(7), 
    
    
    228.31
    
    
    
    *Kevin M. Hayes(6)
    
    
    5,605.16
    
    
    
    18.19
    %Michael D. Heller(8)
    
    
    4.53
    
    
    
    *Jordan A. Kahn(9) 
    
    
    59.33
    
    
    
    *Richard K. Lubin(10)
    
    
    11,210.31
    
    
    
    36.37
    %Carol M. Meyrowitz(11) 
    
    
    26.95
    
    
    
    *David M. Mussafer (4) 
    
    
    11,918.71
    
    
    
    38.67
    %Gerald C. Rittenberg(12), 
    
    
    388.69
    
    
    
    1.25
    %Robert J. Small(10)
    
    
    11,210.31
    
    
    
    36.37
    %All directors and executive officers as a group (12 persons)
    
    
    29,475.66
    
    
    
    94.39
    %
 
 *
    
    Less than 1%
    
    Director
    
    Named Executive Officer(1)
    
    Consists of 11,918.71 shares held by Advent-Amscan Acquisition LLC(2)
    
    Consists of (i) 2,553.36 shares of common stock owned by Berkshire Fund V, Limited Partnership, (ii)
8,290.22 shares of common stock owned by Berkshire Fund VI, Limited Partnership, (iii) 19.51 shares of
common stock owned by Berkshire Investors III LLC and (iv) 347.22 shares of common stock owned by
Berkshire Investors LLC. The address of Berkshire Partners LLC is the John Hancock Tower, 200 Clarendon
Street, Boston, Massachusetts 02116-5021. 51




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##### Table of Contents



(3)
    
    Consists of (i) 5,517.82 shares of common stock owned by Weston Presidio Capital IV, L.P. and (ii) 87.34
shares owned by WPC Entrepreneur Fund II, L.P.(4)
    
    Mr. Collins is a Managing Director of Advent International and Mr. Mussafer is a Managing Partner of
Advent International. Mr. Collins and Mr. Mussafer each disclaims beneficial ownership of the shares
held by Advent International, except to the extent of his pecuniary interest therein. Their addresses
are 75 State Street, Boston, Massachusetts 02109.(5)
    
    Includes 20.16 shares which could be acquired by Mr. Correale within 60 days upon exercise of options.(6)
    
    Mr. Cronin is a Managing Partner of Weston Presidio and Mr. Hayes is a General Partner of Weston
Presidio. Mr. Cronin and Mr. Hayes each disclaims beneficial ownership of the shares held by Weston
Presidio, except to the extent of his pecuniary interest therein. Their addresses are 200 Clarendon
Street, 50th Floor, Boston, Massachusetts 02116.(7)
    
    Includes 152.46 shares which could be acquired by Mr. Harrison within 60 days upon exercise of options.(8)
    
    Includes 4.53 shares which could be acquired by Mr. Heller within 60 days upon exercise of options. Does not include
warrants to purchase 264.55 shares that are exercisable only upon the occurrence of certain events(9)
    
    Includes 2.5 shares which could be acquired by Mr. Kahn within 60 days upon exercise of options.(10)
    
    Mr. Lubin and Mr. Small are Managing Directors of Berkshire Partners LLC. Mr. Lubin and Mr. Small each disclaims
beneficial ownership of the shares held by Berkshire Partners LLC, except to the extent of his pecuniary interest
therein. Their address is the John Hancock Tower, 200 Clarendon Street, Boston, Massachusetts 02116-5021.(11)
    
    Includes 1.12 shares which could be acquired by Ms. Meyrowitz within 60 days upon exercise of options.(12)
    
    Includes 227.49 shares which could be acquired by Mr. Rittenberg within 60 days upon exercise of options. Stockholders Agreement
 (
  
 Item 13. Certain Relationships and Related Transactions
  52




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
 Audit Fees
  Audit-Related Fees
  Tax Fees
  All Other Fees
   
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
     ExhibitNumber
    
    Description2
    
    Party City Acquisition Merger Agreement, dated as of September 26, 2005
(incorporated by reference to Exhibit 2.1 to the Companys Current Report on Form
8-K dated September 27, 2005)3(1)
    
    Certificate of Incorporation of Amscan Holdings, Inc., dated October 3, 1996, as
amended to March 30, 2001 (incorporated by reference to Exhibit 3(a) to the
Registrants Annual Report on Form 10-K for the year ended December 31, 2000
(Commission File No. 000-21827))3(2)
    
    Amended By-Laws of Amscan Holdings, Inc. (incorporated by reference to Exhibit 3.2
to the Registrants Registration Statement on Form S-4 (Registration No.
333-45457))3(3)
    
    Amended Articles of Incorporation of Anagram International, Inc. (incorporated by
reference to Exhibit 3(1) to the Registrants Quarterly Report on Form 10-Q for
the quarter ended June 30, 2004 (Commission File No. 000-21827))3(4)
    
    By-Laws of Anagram
International, Inc.
(incorporated by reference to
Exhibit 3(2) to the
Registrants Quarterly Report
on Form 10-Q for the quarter
ended June 30, 2004 (Commission
File No. 000-21827))3(5)
    
    Articles of Incorporation of
Anagram International Holdings,
Inc. (incorporated by reference
to Exhibit 3(3) to the
Registrants Quarterly Report
on Form 10-Q for the quarter
ended June 30, 2004 (Commission
File No. 000-21827))3(6)
    
    By-Laws of Anagram
International Holdings, Inc.
(incorporated by reference to
Exhibit 3(4) to the
Registrants Quarterly Report
on Form 10-Q for the quarter
ended June 30, 2004 (Commission
File No. 000-21827))3(7)
    
    Articles of Organization of
Anagram International, LLC
(incorporated by reference to
Exhibit 3(5) to the
Registrants Quarterly Report
on Form 10-Q for the quarter
ended June 30, 2004 (Commission
File No. 000-21827))
 53




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##### Table of Contents



ExhibitNumber
    
    Description3(8)
    
    Operating Agreement of Anagram
International, LLC
(incorporated by reference to
Exhibit 3(6) to the
Registrants Quarterly Report
on Form 10-Q for the quarter
ended June 30, 2004 (Commission
File No. 000-21827))3(9)
    
    Certificate of Formation of
Anagram Eden Prairie Property
Holdings LLC (incorporated by
reference to Exhibit 3(7) to
the Registrants Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2004
(Commission File No.
000-21827))3(10)
    
    Plan of Merger of Am-Source,
Inc. into Am-Source, LLC dated
February 28, 2000 and Articles
of Organization of Am-Source,
LLC (incorporated by reference
to Exhibit 3(8) to the
Registrants Quarterly Report
on Form 10-Q for the quarter
ended June 30, 2004 (Commission
File No. 000-21827))3(11)
    
    Operating Agreement of
Am-Source, LLC (incorporated by
reference to Exhibit 3(9) to
the Registrants Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2004
(Commission File No.
000-21827))3(12)
    
    Certificate of Incorporation of
M&D Industries, Inc.
(incorporated by reference to
Exhibit 3(10) to the
Registrants Quarterly Report
on Form 10-Q for the quarter
ended June 30, 2004 (Commission
File No. 000-21827))3(13)
    
    By-Laws of M&D Industries, Inc.
(incorporated by reference to
Exhibit 3(11) to the
Registrants Quarterly Report
on Form 10-Q for the quarter
ended June 30, 2004 (Commission
File No. 000-21827))4(1)
    
    Indenture, dated as of April
30, 2004, by and among the
Company, the Guarantors named
therein and The Bank of New
York with respect to the 8.75%
Senior Subordinated Notes due
2014. (incorporated by
reference to Exhibit 4(1) to
the Registrants Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2004
(Commission File No.
000-21827))4(2)
    
    First Supplemental Indenture,
dated as of June 21, 2004 by
and among the Company, the
Guarantors named therein and
The Bank of New York with
respect to the 8.75% Senior
Subordinated Notes due 2014
(incorporated by reference to
Exhibit 4(2) to the
Registrants Quarterly Report
on Form 10-Q for the quarter
ended June 30, 2004 (Commission
File No. 000-21827))10(1)
    
    Purchase Agreement dated April 27, 2004 by and among AAH Holdings
Corporation, Amscan Holdings, Inc., the Guarantors named therein and
Goldman, Sachs & Co. and Credit Suisse First Boston LLC.
(incorporated by reference to Exhibit 10(3) to the Registrants
Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
(Commission File No. 000-21827))10(2)
    
    Stockholders Agreement of AAH Holdings Corporation dated as of April
30, 2004 (incorporated by reference to Exhibit 10(4) to the
Registrants Quarterly Report on Form 10-Q for the quarter ended June
30, 2004 (Commission File No. 000-21827))10(3)
    
    Amendment No. 1 to the Stockholders Agreement of AAH Holdings
Corporation dated as of May 24, 2004 (incorporated by reference to
Exhibit 10(5) to the Registrants Quarterly Report on Form 10-Q for
the quarter ended June 30, 2004 (Commission File No. 000-21827))10(4)
    
    Amendment No. 2 to the Stockholders Agreement of AAH Holdings
Corporation dated as of December 21, 2005 (incorporated by reference
to Exhibit 10-1 to the Registrants Current Report on Form 8-K dated
October 5, 2006 (Commission File No. 000-21827))10(5)
    
    Amendment No. 3 to the Stockholders Agreement of AAH Holdings
Corporation dated as of September 29, 2006 (incorporated by reference
to Exhibit 10-1 to the Registrants Current Report on Form 8-K dated
October 5, 2006 (Commission File No. 000-21827))10(6)
    
    2004 Equity Incentive Plan of AAH Holdings Corporation (incorporated
by reference to Exhibit 10(6) to the Registrants Quarterly Report on
Form 10-Q for the quarter ended June 30, 2004 (Commission File No.
000-21827))10(7)
    
    The MetLife Capital Corporation Master Lease Purchase Agreement
between MetLife Capital Corporation and Amscan Inc., Deco Paper
Products, Inc., Kookaburra USA Ltd., and Trisar, Inc., dated November
21, 1991, as amended (incorporated by reference to Exhibit 10(n) to
Amendment No. 2 to the Registrants Registration Statement on Form
S-1 (Registration No. 333-14107))10(8)
    
    Form of Indemnification Agreement between the Company and each of the
directors of the Company (incorporated by reference to Exhibit 10(o)
to Amendment No. 2 to the Registrants Registration Statement on Form
S-1 (Registration No. 333-14107))10(9)
    
    Agreement and Plan of Merger, dated as of March 26, 2004, by and
among Amscan Holdings, Inc., AAH Holdings Corporation and AAH
Acquisition Corporation (incorporated by reference to Exhibit 2.1 to
the Registrants Current Report on Form 8-K dated March 29, 2004
(Commission File No. 000-21827))10(10)
    
    Form of Support Agreement, dated as of March 26, 2004, by and among
AAH Holdings Corporation and Stockholder (incorporated by reference
to Exhibit 2.2 to the Registrants Current Report on Form 8-K dated
March 29, 2004 (Commission File No. 000-21827))11
    
    Statement re: computation of ratio of earnings to fixed charges14
    
    Code of Business Conduct (incorporated by reference to Exhibit 14 to
the Registrants Annual Report on Form 10-K for the year ended
December 31, 2003 (Commission File No. 000-21827))
 54




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##### Table of Contents



ExhibitNumber
    
    Description21
    
    Subsidiaries of the Registrant (incorporated by reference to Exhibit
21 to the Registrants Registration Statement on Form S-1
(Registration No. 333-90404))23
    
    Consent of Ernst & Young LLP31.1
    
    Section 302 Certifications31.2
    
    Section 302 Certifications32
    
    Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley
Act of 2002)
 55




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##### Table of Contents



Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act.
  
 SIGNATURES
  AMSCAN HOLDINGS, INC.By:
    
    /s/ Michael A. Correale

Michael A. CorrealeChief Financial Officer(on behalf of the Company andas principal financial officer)Date: March 31, 2010
  Signature
    
    Title
    
    Date/s/ Robert J. Small
Robert J. Small
    
    Chairman of the Board of Directors
    
    March 31, 2010/s/ Steven J. Collins
Steven J. Collins
    
    Director
    
    March 31, 2010/s/ Michael F. Cronin
Michael F. Cronin
    
    Director
    
    March 31, 2010/s/ Kevin M. Hayes
Kevin M. Hayes
    
    Director
    
    March 31, 2010/s/ Jordan A. Kahn
Jordan A. Kahn
    
    Director
    
    March 31, 2010/s/ Richard K. Lubin
Richard K. Lubin
    
    Director
    
    March 31, 2010/s/ Carol M. Meyrowitz
Carol M. Meyrowitz
    
    Director
    
    March 31, 2010/s/ David M. Mussafer
David M. Mussafer
    
    Director
    
    March 31, 2010/s/ Gerald C. Rittenberg
Gerald C. Rittenberg
    
    Chief Executive Officer and Director
    
    March 31, 2010/s/ James M. Harrison
James M. Harrison
    
    President, Chief Operating Officer and
Director
    
    March 31, 2010
 56




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##### Table of Contents



AMSCAN HOLDINGS, INC.
 FORM 10-K
Item 8, Item 15(a) 1 and 2
 AMSCAN HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
 Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets at December 31, 2009 and 2008
    
    F-3Consolidated Statements of Income for the Years Ended December 31, 2009, 2008 and 2007
    
    F-4Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2009, 2008 and 2007
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007
    
    F-6Notes to Consolidated Financial Statements
    
    F-7Financial Statement Schedule for the Years Ended December 31, 2009, 2008 and 2007:Schedule II  Valuation and Qualifying Accounts
    
    F-44
  F1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    /s/ Ernst & Young LLP 
 F2




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##### Table of Contents



AMSCAN HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, except per share amounts)
 December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    15,420
    
    
    $
    13,058Accounts receivable, net of allowances
    
    
    82,781
    
    
    
    89,443Inventories, net of allowances
    
    
    335,950
    
    
    
    366,965Prepaid expenses and other current assets
    
    
    69,541
    
    
    
    47,812Total current assets
    
    
    503,692
    
    
    
    517,278Property, plant and equipment, net
    
    
    174,994
    
    
    
    187,026Goodwill
    
    
    548,439
    
    
    
    543,731Trade names
    
    
    157,283
    
    
    
    157,283Other intangible assets, net
    
    
    54,669
    
    
    
    61,626Other assets, net
    
    
    41,424
    
    
    
    41,033Total assets
    
    $
    1,480,501
    
    
    $
    1,507,977LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Loans and notes payable
    
    $
    77,635
    
    
    $
    136,878Accounts payable
    
    
    76,901
    
    
    
    126,638Accrued expenses
    
    
    93,680
    
    
    
    87,985Income taxes payable
    
    
    32,061
    
    
    
    28,605Redeemable warrants
    
    
    15,444
    
    
    
    15,444Current portion of long-term obligations
    
    
    34,906
    
    
    
    34,002Total current liabilities
    
    
    330,627
    
    
    
    429,552Long-term obligations, excluding current portion
    
    
    538,892
    
    
    
    550,755Deferred income tax liabilities
    
    
    101,570
    
    
    
    87,824Deferred rent and other long-term liabilities
    
    
    11,901
    
    
    
    9,558Total liabilities
    
    
    982,990
    
    
    
    1,077,689Redeemable common securities (including 592.84 and 585.15 common shares issued
and outstanding at December 31, 2009 and 2008)
    
    
    18,389
    
    
    
    18,171Commitments and contingenciesStockholders equity:Common Stock ($0.01 par value; 40,000.00 shares authorized; 30,226.50 shares
issued and outstanding at December 31, 2009 and 2008)
    
    
    
    
    
    
    Additional paid-in capital
    
    
    335,823
    
    
    
    335,076Retained earnings
    
    
    149,557
    
    
    
    87,004Accumulated other comprehensive loss
    
    
    (8,395
    )
    
    
    (11,852
    )Amscan Holdings Inc. stockholders equity
    
    
    476,985
    
    
    
    410,228Noncontrolling interests
    
    
    2,137
    
    
    
    1,889Total equity
    
    
    479,122
    
    
    
    412,117Total liabilities, redeemable common securities and stockholders equity
    
    $
    1,480,501
    
    
    $
    1,507,977
  F3




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##### Table of Contents



AMSCAN HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
 Year Ended December 31,2009
    
    2008
    
    2007Revenues:Net sales
    
    $
    1,467,324
    
    
    $
    1,537,641
    
    
    $
    1,221,516Royalties and franchise fees
    
    
    19,494
    
    
    
    22,020
    
    
    
    25,888Total revenues
    
    
    1,486,818
    
    
    
    1,559,661
    
    
    
    1,247,404Expenses:Cost of sales
    
    
    899,041
    
    
    
    966,426
    
    
    
    777,586Selling expenses
    
    
    39,786
    
    
    
    41,894
    
    
    
    41,899Retail operating expenses
    
    
    261,691
    
    
    
    273,627
    
    
    
    191,423Franchise expenses
    
    
    11,991
    
    
    
    13,686
    
    
    
    12,883General and administrative expenses
    
    
    119,193
    
    
    
    120,272
    
    
    
    105,707Art and development costs
    
    
    13,243
    
    
    
    12,462
    
    
    
    12,149Impairment of trade name
    
    
    
    
    
    
    17,376
    
    
    
    Total expenses
    
    
    1,344,945
    
    
    
    1,455,743
    
    
    
    1,141,647Income from operations
    
    
    141,873
    
    
    
    113,918
    
    
    
    105,757Interest expense, net
    
    
    41,481
    
    
    
    50,915
    
    
    
    54,590Other (income) expense, net
    
    
    (32
    )
    
    
    (818
    )
    
    
    18,214Income before income taxes
    
    
    100,424
    
    
    
    63,821
    
    
    
    32,953Income tax expense
    
    
    37,673
    
    
    
    24,188
    
    
    
    13,246Net income
    
    
    62,751
    
    
    
    39,633
    
    
    
    19,707Less: net income (loss) attributable to noncontrolling interest
    
    
    198
    
    
    
    (877
    )
    
    
    446Net income attributable to Amscan Holdings, Inc.
    
    $
    62,553
    
    
    $
    40,510
    
    
    $
    19,261
  F4




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##### Table of Contents



AMSCAN HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
For the Years Ended December 31, 2007, 2008 and 2009
(Dollars in Thousands)
 Accumulated
    
    AmscanAdditional
    
    
    
    
    
    Other
    
    Holdings Inc.
    
    Non-Common
    
    Common
    
    Paid-in
    
    Retained
    
    Comprehensive
    
    Shareholders
    
    controllingShares
    
    Stock
    
    Capital
    
    Earnings
    
    Income (Loss)
    
    Equity
    
    Interests
    
    TotalBalance at December 31, 2006
    
    
    29,526.07
    
    
    $
    
    
    
    $
    331,113
    
    
    $
    27,264
    
    
    $
    1,463
    
    
    $
    359,840
    
    
    
    2,052
    
    
    $
    361,892Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,261
    
    
    
    
    
    
    
    19,261
    
    
    
    446
    
    
    
    19,707Net change in cumulative translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,633
    
    
    
    1,633
    
    
    
    (10
    )
    
    
    1,623Cumulative change from adoption of FIN
48 (see Note 5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31
    )
    
    
    
    
    
    
    (31
    )
    
    
    
    
    
    
    (31
    )Change in fair value of interest rate
swap contracts, net of income tax
benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (514
    )
    
    
    (514
    )
    
    
    
    
    
    
    (514
    )Change in fair value of foreign
exchange contracts, net of income tax
benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (231
    )
    
    
    (231
    )
    
    
    
    
    
    
    (231
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,118
    
    
    
    436
    
    
    
    20,554Issuance of shares of common stock
    
    
    22.71
    
    
    
    
    
    
    
    222
    
    
    
    
    
    
    
    
    
    
    
    222
    
    
    
    
    
    
    
    222Revaluation of common stock
    
    
    
    
    
    
    
    
    
    
    (6,442
    )
    
    
    
    
    
    
    
    
    
    
    (6,442
    )
    
    
    
    
    
    
    (6,442
    )Purchase and retirement of common stock
    
    
    (5.62
    )
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    (80
    )Equity based compensation expense
    
    
    
    
    
    
    
    
    
    
    1,928
    
    
    
    
    
    
    
    
    
    
    
    1,928
    
    
    
    
    
    
    
    1,928Balance at December 31, 2007
    
    
    29,543.16
    
    
    $
    
    
    
    $
    326,741
    
    
    $
    46,494
    
    
    $
    2,351
    
    
    
    375,586
    
    
    
    2,488
    
    
    $
    378,074Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,510
    
    
    
    
    
    
    
    40,510
    
    
    
    (877
    )
    
    
    39,633Net change in cumulative translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,338
    )
    
    
    (11,338
    )
    
    
    (231
    )
    
    
    (11,569
    )Change in fair value of interest rate
swap contracts, net of income tax
benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,855
    )
    
    
    (4,855
    )
    
    
    
    
    
    
    (4,855
    )Change in fair value of foreign
exchange contracts, net of income
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,990
    
    
    
    1,990
    
    
    
    
    
    
    
    1,990Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,307
    
    
    
    (1,108
    )
    
    
    25,199Purchase and revaluation of redeemable
common securities
    
    
    308.64
    
    
    
    
    
    
    
    2,155
    
    
    
    
    
    
    
    
    
    
    
    2,155
    
    
    
    
    
    
    
    2,155Tax benefit on exercised options
    
    
    397.30
    
    
    
    
    
    
    
    1,823
    
    
    
    
    
    
    
    
    
    
    
    1,823
    
    
    
    
    
    
    
    1,823Equity based compensation expense
    
    
    
    
    
    
    
    
    
    
    4,357
    
    
    
    
    
    
    
    
    
    
    
    4,357
    
    
    
    
    
    
    
    4,357Acquisition of PCFG minority
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    509
    
    
    
    509Other
    
    
    22.60
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2008
    
    
    30,226.50
    
    
    $
    
    
    
    $
    335,076
    
    
    $
    87,004
    
    
    $
    (11,852
    )
    
    $
    410,228
    
    
    
    1,889
    
    
    $
    412,117Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,553
    
    
    
    
    
    
    
    62,553
    
    
    
    198
    
    
    
    62,751Net change in cumulative translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,007
    
    
    
    4,007
    
    
    
    50
    
    
    
    4,057Change in fair value of interest rate
swap contracts, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,317
    
    
    
    1,317
    
    
    
    
    
    
    
    1,317Change in fair value of foreign
exchange contracts, net of income tax
benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,867
    )
    
    
    (1,867
    )
    
    
    
    
    
    
    (1,867
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,010
    
    
    
    248
    
    
    
    66,258Purchase of redeemable common
securities
    
    
    
    
    
    
    
    
    
    
    (129
    )
    
    
    
    
    
    
    
    
    
    
    (129
    )
    
    
    
    
    
    
    (129
    )Equity based compensation expense
    
    
    
    
    
    
    
    
    
    
    876
    
    
    
    
    
    
    
    
    
    
    
    876
    
    
    
    
    
    
    
    876Balance at December 31, 2009
    
    
    30,226.50
    
    
    $
    
    
    
    $
    335,823
    
    
    $
    149,557
    
    
    $
    (8,395
    )
    
    
    476,985
    
    
    
    2,137
    
    
    $
    479,122
  F5




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##### Table of Contents



AMSCAN HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Cash flows provided by operating activities:Net income
    
    $
    62,553
    
    
    $
    40,510
    
    
    $
    19,261Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization expense
    
    
    44,382
    
    
    
    47,278
    
    
    
    38,093Amortization of deferred financing costs
    
    
    2,163
    
    
    
    2,221
    
    
    
    2,142Provision for doubtful accounts
    
    
    3,982
    
    
    
    1,092
    
    
    
    1,290Deferred income tax provision
    
    
    8,803
    
    
    
    (7,885
    )
    
    
    (5,973
    )Deferred rent
    
    
    1,763
    
    
    
    1,202
    
    
    
    1,165Undistributed income in unconsolidated joint venture
    
    
    (632
    )
    
    
    (538
    )
    
    
    (628
    )Impairment of intangible assets
    
    
    
    
    
    
    17,376
    
    
    
    2,005Loss (gain) on disposal of equipment
    
    
    278
    
    
    
    (1,195
    )
    
    
    1,452Equity based compensation
    
    
    876
    
    
    
    4,357
    
    
    
    1,928Tax benefit on exercised options
    
    
    
    
    
    
    (1,823
    )
    
    
    Debt retirement costs
    
    
    
    
    
    
    
    
    
    
    3,781Write-off of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    6,333Changes in operating assets and liabilities:Decrease in accounts receivable
    
    
    6,337
    
    
    
    8,237
    
    
    
    1,981Decrease (increase) in inventories
    
    
    30,933
    
    
    
    (52,347
    )
    
    
    (22,914
    )(Increase) decrease in prepaid expenses and other assets
    
    
    (21,173
    )
    
    
    31,240
    
    
    
    (14,219
    )Decrease in accounts payable, accrued expenses and income
taxes payable
    
    
    (16,323
    )
    
    
    (9,796
    )
    
    
    (26,053
    )Net cash provided by operating activities
    
    
    123,942
    
    
    
    79,929
    
    
    
    9,644Cash flows used in investing activities:Cash paid in connection with acquisitions
    
    
    (3,378
    )
    
    
    (1,616
    )
    
    
    (106,123
    )Cash held in escrow in connection with acquisitions
    
    
    (24,881
    )
    
    
    
    
    
    
    Capital expenditures
    
    
    (26,195
    )
    
    
    (53,001
    )
    
    
    (27,445
    )Proceeds from disposal of property and equipment
    
    
    96
    
    
    
    3,418
    
    
    
    162Net cash used in investing activities
    
    
    (54,358
    )
    
    
    (51,199
    )
    
    
    (133,406
    )Cash flows (used in) provided by financing activities:Repayment of loans, notes payable and long-term obligations
    
    
    (70,247
    )
    
    
    (26,842
    )
    
    
    (387,549
    )Proceeds from loans, notes payable and long-term
obligations, net of debt issuance costs
    
    
    
    
    
    
    
    
    
    
    523,609Tax benefit on exercised options
    
    
    
    
    
    
    1,823
    
    
    
    Debt retirement costs
    
    
    
    
    
    
    
    
    
    
    (6,218
    )Sale of additional interest to minority shareholder
    
    
    
    
    
    
    2,500
    
    
    
    Purchase and retirement of redeemable common stock
    
    
    
    
    
    
    (514
    )
    
    
    Proceeds from issuance of common stock and exercise of
options, net of retirements
    
    
    90
    
    
    
    
    
    
    
    4,734Net cash (used in) provided by financing activities
    
    
    (70,157
    )
    
    
    (23,033
    )
    
    
    134,576Effect of exchange rate changes on cash and cash equivalents
    
    
    2,935
    
    
    
    (9,913
    )
    
    
    1,494Net increase (decrease) in cash and cash equivalents
    
    
    2,362
    
    
    
    (4,216
    )
    
    
    12,308Cash and cash equivalents at beginning of period
    
    
    13,058
    
    
    
    17,274
    
    
    
    4,966Cash and cash equivalents at end of period
    
    $
    15,420
    
    
    $
    13,058
    
    
    $
    17,274
    F6




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share)
 Note 1  Organization and Description of Business
  Note 2  Summary of Significant Accounting Policies
 Consolidated Financial Statements
    Use of Estimates
   Cash Equivalents
  Inventories
   Allowance for Doubtful Accounts
  F7




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Long-Lived and Intangible Assets
    Deferred Financing Costs
  Investments
  Insurance Accruals
  Revenue Recognition
   F8




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Shipping and Handling
  Store Closure Costs
  Product Royalty Agreements
  Catalogue Costs
  Art and Development Costs
  Derivative Financial Instruments
  i.e i.e
 F9




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Income Taxes
  Stock-Based Compensation
   Accumulated Other Comprehensive Income (Loss)
  Foreign Currency Transactions and Translation
  Recently Issued Accounting Standards
 Implemented:
 Generally Accepted Accounting
Standards
 Consolidation
 F10




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Subsequent Events
  Business Combinations
 
    
    Acquired in-process research and development, which was previously expensed at
acquisition, is now accounted for as an asset, with the cost recognized as the research and
development is realized or abandoned.
    
    Contingent consideration, which was previously accounted for as a subsequent adjustment
to purchase price, is now recorded at fair value as an element of purchase price with
subsequent adjustments recognized in operations.
    
    Subsequent decreases in valuation allowances on acquired deferred tax assets are
recognized in operations after the measurement period. Such changes were previously
considered to be subsequent changes in consideration and were recorded as decreases in
goodwill.
    
    Transaction costs, which were previously treated as costs of the acquisition, are now
expensed.
    
    Upon gaining control of an entity in which the equity method or cost basis investment
was held, the carrying value of that investment is adjusted to fair value with the related
gain or loss recorded in earnings. Previously, this fair value adjustment would not have
been made.
    
    Effective January 1, 2009, the Company retrospectively adopted an amendment to ASC 805
released in April 2009. The amendment requires pre-acquisition contingencies to be
recognized at fair value, if fair value can be determined or reasonably estimated during
the measurement period. If fair value cannot be determined or reasonably estimated, the
standard requires measurement based on the recognition and measurement criteria of ASC 450
Contingencies.
 Fair Value Measurement and Disclosure
 Not Yet Implemented:
  Note 3  Inventories
  December 31,2009
    
    
    2008Finished goods
    
    $
    325,421
    
    
    $
    353,713Raw materials
    
    
    12,650
    
    
    
    13,756Work in process
    
    
    6,431
    
    
    
    7,814344,502
    
    
    
    375,283Less: reserve for slow moving and obsolete inventory
    
    
    (8,552
    )
    
    
    (8,318
    )$
    335,950
    
    
    $
    366,965
 F11




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Note 4  Property, Plant and Equipment, Net
  December 31,2009
    
    
    2008
    
    
    Useful livesMachinery and equipment
    
    $
    117,780
    
    
    $
    109,841
    
    
    
    3-15 yearsBuildings
    
    
    47,840
    
    
    
    47,809
    
    
    
    40 yearsData processing
    
    
    50,691
    
    
    

    48,555
    
    
    
    3-5 yearsLeasehold improvements
    
    
    64,617
    
    
    
    61,999
    
    
    
    1-20 yearsFurniture and fixtures
    
    
    93,870
    
    
    
    85,586
    
    
    
    5-10 yearsLand
    
    
    6,009
    
    
    
    5,923380,807
    
    
    
    359,713Less: accumulated depreciation
    
    
    (205,813
    )
    
    
    (172,687
    )$
    174,994
    
    
    $
    187,026
   December 31,2009
    
    
    2008Machinery and equipment under capital leases
    
    $
    9,444
    
    
    $
    9,495Less: accumulated amortization
    
    
    (4,212
    )
    
    
    (2,284
    )$
    5,232
    
    
    $
    7,211
  Note 5  Retail Acquisitions and Transactions
 The Factory Card & Party Outlet Acquisition
   F12




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Party City Franchise Group Transaction
     Note 6  Other Intangible Assets, net
  At December 31, 2009Accumulated
    
    Net CarryingCost
    
    Amortization
    
    Value
    
    Useful livesRetail franchise licenses
    
    $
    63,630
    
    
    $
    19,431
    
    
    $
    44,199
    
    
    20 yearsCustomer lists and relationships
    
    
    14,500
    
    
    
    5,477
    
    
    
    9,023
    
    
    15 yearsCopyrights, designs, and other
    
    
    13,632
    
    
    
    12,989
    
    
    
    643
    
    
    2-3 yearsLeasehold and other intangibles
    
    
    2,087
    
    
    
    1,283
    
    
    
    804
    
    
    1-15 yearsTotal Cost
    
    $
    93,849
    
    
    $
    39,180
    
    
    $
    54,669At December 31, 2008Accumulated
    
    Net CarryingCost
    
    Amortization
    
    Value
    
    Useful livesRetail franchise licenses
    
    $
    63,630
    
    
    $
    14,117
    
    
    $
    49,513
    
    
    20 yearsCustomer lists and relationships
    
    
    14,500
    
    
    
    4,511
    
    
    
    9,989
    
    
    15 yearsCopyrights, designs, and other
    
    
    13,880
    
    
    
    13,093
    
    
    
    787
    
    
    2-3 yearsLeasehold and other intangibles
    
    
    2,237
    
    
    
    900
    
    
    
    1,337
    
    
    1-15 yearsTotal Cost
    
    $
    94,247
    
    
    $
    32,621
    
    
    $
    61,626
 F13




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
   Note 7  Loans and Notes Payable
    ABL Credit Agreement 
        F14




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
   PCFG Credit Agreement
     Other Credit Agreements
   F15




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Note 8  Long-Term Obligations
  December 31,2009
    
    2008Term Loan due 2013(a)
    
    $
    364,688
    
    
    $
    368,437PCFG Term Loan due 2012(b)
    
    
    23,000
    
    
    
    27,500Mortgage obligation (c)
    
    
    5,600
    
    
    
    6,285Capital lease obligations(d)
    
    
    5,510
    
    
    
    7,5358.75% senior subordinated notes(e)
    
    
    175,000
    
    
    
    175,000Total long-term obligations
    
    $
    573,798
    
    
    $
    584,757Less: current portion
    
    
    (34,906
    )
    
    
    (34,002
    )Long-term obligations, excluding current portion
    
    $
    538,892
    
    
    $
    550,755
 
          F16




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
       Long-term Debt
    
    Capital LeaseObligations
    
    Obligations
    
    Totals2010
    
    $
    32,819
    
    
    $
    2,087
    
    
    $
    34,9062011
    
    
    8,845
    
    
    
    2,065
    
    
    
    10,9102012
    
    
    19,870
    
    
    
    1,346
    
    
    
    21,2162013
    
    
    330,583
    
    
    
    12
    
    
    
    330,5952014
    
    
    176,171
    
    
    
    0
    
    
    
    176,171Long-term obligations
    
    $
    568,288
    
    
    $
    5,510
    
    
    $
    573,798
 Note 9  Capital Stock
  F17




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
     2009
    
    2008Redeemable common shares
    
    $
    16,807
    
    
    $
    16,5892004 Rollover Options
    
    
    1,582
    
    
    
    1,582$
    18,389
    
    
    $
    18,171
   Note 10  Provision for Doubtful Accounts
  F18




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Note 11  Non-recurring Expenses and Write-off of Deferred Financing Costs
  Note 12  Restructuring Charges
      Note 13  Other (Income) Expense
 Year Ended December 31,2009
    
    2008
    
    2007Other income (expense) consists of the following:Undistributed income in
unconsolidated joint venture
    
    $
    (632
    )
    
    $
    (538
    )
    
    $
    (628
    )Change in fair market value of the
interest rate cap
    
    
    
    
    
    
    (187
    )
    
    
    61Foreign currency loss (gain)
    
    
    670
    
    
    
    (476
    )
    
    
    388Early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    16,360Impairment of investment in subsidiary
    
    
    
    
    
    
    
    
    
    
    2,005Royalty agreement amendment fee
    
    
    
    
    
    
    400
    
    
    
    Other, net
    
    
    (70
    )
    
    
    (17
    )
    
    
    28Other (income) expense, net
    
    $
    (32
    )
    
    $
    (818
    )
    
    $
    18,214
 F19




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Note 14  Employee Benefit Plans
  Note 15  Equity Incentive Plan
   Rollover Options
        F20




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Time-based options
      Expected dividend rate
    
    
    Risk free interest rate
    
    1.76% to 5.08%Price volatility
    
    
    15.00Weighted average expected life
    
    
    7.5Forfeiture rate
    
    
    7.75
  F21




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Performance-based options
           Summary
   F22




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
  Average FairAverage
    
    MarketExercise
    
    Value of Options atOptions
    
    Price
    
    Grant DateOutstanding at December 31, 2006
    
    
    2,858.20
    
    
    $
    10,648Granted
    
    
    704.00
    
    
    
    15,929
    
    
    $
    5,341Exercised
    
    
    (14.52
    )
    
    
    14,250Canceled
    
    
    (148.54
    )
    
    
    11,259Outstanding at December 31, 2007
    
    
    3,399.14
    
    
    
    11,700Granted
    
    
    305.90
    
    
    
    24,617
    
    
    
    5,736Exercised
    
    
    (627.90
    )
    
    
    14,283Canceled
    
    
    (144.54
    )
    
    
    10,193Outstanding at December 31, 2008
    
    
    2,932.60
    
    
    
    13,242Granted
    
    
    40.00
    
    
    
    28,350
    
    
    
    5,712Exercised
    
    
    (7.70
    )
    
    
    11,573Canceled
    
    
    (31.87
    )
    
    
    12,459Outstanding at December 31, 2009
    
    
    2,933.03
    
    
    
    13,462Exercisable at December 31, 2009
    
    
    893.50
    
    
    
    10,903
 Note 16  Income Taxes
  Year Ended December 31,2009
    
    2008
    
    2007Domestic
    
    $
    92,364
    
    
    $
    54,701
    
    
    $
    27,444Foreign
    
    
    8,060
    
    
    
    9,120
    
    
    
    5,509Total
    
    $
    100,424
    
    
    $
    63,821
    
    
    $
    32,953
 F23




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
  Year Ended December 31,2009
    
    2008
    
    2007Current:Federal
    
    $
    22,643
    
    
    $
    24,515
    
    
    $
    13,009State
    
    
    3,930
    
    
    
    4,817
    
    
    
    4,074Foreign
    
    
    2,297
    
    
    
    2,741
    
    
    
    2,136Total current provision
    
    
    28,870
    
    
    
    32,073
    
    
    
    19,219Deferred:Federal
    
    
    7,705
    
    
    
    (6,627
    )
    
    
    (5,229
    )State
    
    
    1,150
    
    
    
    (1,139
    )
    
    
    (758
    )Foreign
    
    
    (52
    )
    
    
    (119
    )
    
    
    14Total deferred provision (benefit)
    
    
    8,803
    
    
    
    (7,885
    )
    
    
    (5,973
    )Income tax expense
    
    $
    37,673
    
    
    $
    24,188
    
    
    $
    13,246
  December 31,2009
    
    2008Current deferred income tax assets:Inventory valuation
    
    $
    16,186
    
    
    $
    14,287Allowance for doubtful accounts
    
    
    941
    
    
    
    832Accrued liabilities
    
    
    10,733
    
    
    
    7,519Contribution carryforward
    
    
    56
    
    
    
    Tax loss carryforward
    
    
    1,761
    
    
    
    3,078Tax credit carryforward
    
    
    576
    
    
    
    1,148Current deferred income tax assets (included in
prepaid expenses and other current assets)
    
    $
    30,253
    
    
    $
    26,864Non-current deferred income tax liabilities, net:Property, plant and equipment
    
    $
    11,631
    
    
    $
    2,446Intangible assets
    
    
    69,774
    
    
    
    71,263Amortization of goodwill and other assets
    
    
    19,457
    
    
    
    14,109Other
    
    
    708
    
    
    
    6Non-current deferred income tax liabilities, net
    
    $
    101,570
    
    
    $
    87,824
  F24




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
  Year Ended December 31,2009
    
    2008
    
    2007Provision at federal statutory income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income tax, net of federal income tax benefit
    
    
    3.1
    
    
    
    4.2
    
    
    
    6.6Non-deductible reserve for investment in foreign subsidiary
    
    
    
    
    
    
    
    
    
    
    2.1Domestic manufacturing deductions
    
    
    (0.8
    )
    
    
    (1.3
    )
    
    
    (2.0
    )Other
    
    
    0.2
    
    
    
    
    
    
    
    (1.5
    )Effective income tax rate
    
    
    37.5
    %
    
    
    37.9
    
    
    
    40.2
    %
      2009
    
    2008
    
    2007Balance as of January 1,
    
    $
    2,024
    
    
    $
    2,485
    
    
    $
    2,550Increases related to current year tax positions
    
    
    81
    
    
    
    172
    
    
    
    184Increases related to prior year tax positions
    
    
    
    
    
    
    
    
    
    
    160Decrease related to settlements
    
    
    (822
    )
    
    
    
    
    
    
    (189
    )Decreases related to lapsing of statutes of limitations
    
    
    (291
    )
    
    
    (633
    )
    
    
    (220
    )Balance as of December 31,
    
    $
    992
    
    
    $
    2,024
    
    
    $
    2,485
 F25




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
     Note 17  Commitments, Contingencies and Related Party Transactions
 Lease Agreements
   Future MinimumOperating LeasePayments2010
    
    $
    108,7192011
    
    
    91,9062012
    
    
    75,8452013
    
    
    49,6072014
    
    
    28,736Thereafter
    
    
    53,754$
    408,567
    F26




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 Product Royalty Agreements
   Future MinimumRoyalty Payments2010
    
    $
    3,2922011
    
    
    5,0772012
    
    
    2,2892013
    
    
    4512014
    
    
    466$
    11,575
   Product PurchaseCommitments2010
    
    $
    4,4222011
    
    
    4,4222012
    
    
    1,106$
    9,950
 Legal Proceedings
  Related Party Transactions
  F27




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 Note 18  Segment Information
 Industry Segments
   Wholesale
    
    
    Retail
    
    
    ConsolidatedYear Ended December 31, 2009Revenues:Net sales
    
    $
    633,006
    
    
    $
    1,055,965
    
    
    $
    1,688,971Royalties and franchise fees
    
    
    
    
    
    
    19,494
    
    
    
    19,494Total revenues
    
    
    633,006
    
    
    
    1,075,459
    
    
    
    1,708,465Eliminations
    
    
    (221,647
    )
    
    
    
    
    
    
    (221,647
    )Net revenues
    
    $
    411,359
    
    
    $
    1,075,459
    
    
    $
    1,486,818Income from operations
    
    $
    65,007
    
    
    $
    76,866
    
    
    $
    141,873Interest expense, net
    
    
    
    
    
    
    
    
    
    
    41,481Other income, net
    
    
    
    
    
    
    
    
    
    
    (32
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    $
    100,424Total assets
    
    $
    747,262
    
    
    $
    733,239
    
    
    $
    1,480,501
 Wholesale
    
    
    Retail
    
    
    ConsolidatedYear Ended December 31, 2008Revenues:Net sales
    
    $
    653,403
    
    
    $
    1,099,136
    
    
    $
    1,752,539Royalties and franchise fees
    
    
    
    
    
    
    22,020
    
    
    
    22,020Total revenues
    
    
    653,403
    
    
    
    1,121,156
    
    
    
    1,774,559Eliminations
    
    
    (214,898
    )
    
    
    
    
    
    
    (214,898
    )Net revenues
    
    $
    438,505
    
    
    $
    1,121,156
    
    
    $
    1,559,661Income from operations
    
    $
    58,290
    
    
    $
    55,628
    
    
    $
    113,918Interest expense, net
    
    
    
    
    
    
    
    
    
    
    50,915Other income, net
    
    
    
    
    
    
    
    
    
    
    (818
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    $
    63,821Total assets
    
    $
    702,938
    
    
    $
    805,039
    
    
    $
    1,507,977
 F28




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 Wholesale
    
    
    Retail
    
    
    ConsolidatedYear Ended December 31, 2007Revenues:Net sales
    
    $
    626,476
    
    
    $
    768,183
    
    
    $
    1,394,659Royalties and franchise fees
    
    
    
    
    
    
    25,888
    
    
    
    25,888Total revenues
    
    
    626,476
    
    
    
    794,071
    
    
    
    1,420,547Eliminations
    
    
    (173,143
    )
    
    
    
    
    
    
    (173,143
    )Net revenues
    
    $
    453,333
    
    
    $
    794,071
    
    
    $
    1,247,404Income from operations
    
    $
    45,172
    
    
    $
    60,585
    
    
    $
    105,757Interest expense, net
    
    
    
    
    
    
    
    
    
    
    54,590Other expense, net
    
    
    
    
    
    
    
    
    
    
    18,214Income before income taxes
    
    
    
    
    
    
    
    
    
    $
    32,953Total assets
    
    $
    724,151
    
    
    $
    774,692
    
    
    $
    1,498,843
 Geographic Segments
   Domestic
    
    
    Foreign
    
    
    Eliminations
    
    
    ConsolidatedYear Ended December 31, 2009Revenues:Net sales to unaffiliated customers
    
    $
    1,371,611
    
    
    $
    95,713
    
    
    $
    
    
    
    $
    1,467,324Net sales between geographic areas
    
    
    24,247
    
    
    
    
    
    
    
    (24,247
    )
    
    
    Net sales
    
    
    1,395,858
    
    
    
    95,713
    
    
    
    (24,247
    )
    
    
    1,467,324Royalties and franchise fees
    
    
    19,494
    
    
    $
    0
    
    
    $
    0
    
    
    
    19,494Total revenues
    
    $
    1,415,352
    
    
    $
    95,713
    
    
    $
    (24,247
    )
    
    $
    1,486,818Income from operations
    
    $
    132,115
    
    
    $
    8,686
    
    
    $
    1,072
    
    
    $
    141,873Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,481Other income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    100,424Total assets
    
    $
    1,478,493
    
    
    $
    82,890
    
    
    $
    (80,882
    )
    
    $
    1,480,501
 Domestic
    
    
    Foreign
    
    
    Eliminations
    
    
    ConsolidatedYear Ended December 31, 2008Revenues:Net sales to unaffiliated customers
    
    $
    1,454,145
    
    
    $
    83,496
    
    
    $
    
    
    
    $
    1,537,641Net sales between geographic areas
    
    
    23,194
    
    
    
    
    
    
    
    (23,194
    )
    
    
    Net sales
    
    
    1,477,339
    
    
    
    83,496
    
    
    
    (23,194
    )
    
    
    1,537,641Royalties and franchise fees
    
    
    22,020
    
    
    
    
    
    
    
    
    
    
    
    22,020Total revenues
    
    $
    1,499,359
    
    
    $
    83,496
    
    
    $
    (23,194
    )
    
    $
    1,559,661Income from operations
    
    $
    104,217
    
    
    $
    8,536
    
    
    $
    1,165
    
    
    $
    113,918Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,915Other income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (818
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    63,821Total assets
    
    $
    1,508,310
    
    
    $
    49,319
    
    
    $
    (49,652
    )
    
    $
    1,507,977
 F29




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 Domestic
    
    
    Foreign
    
    
    Eliminations
    
    
    ConsolidatedYear Ended December 31, 2007Revenues:Net sales to unaffiliated customers
    
    $
    1,141,532
    
    
    $
    79,984
    
    
    $
    
    
    
    $
    1,221,516Net sales between geographic areas
    
    
    23,906
    
    
    
    
    
    
    
    (23,906
    )
    
    
    Net sales
    
    
    1,165,438
    
    
    
    79,984
    
    
    
    (23,906
    )
    
    
    1,221,516Royalties and franchise fees
    
    
    25,888
    
    
    
    
    
    
    
    
    
    
    
    25,888Total revenues
    
    $
    1,191,326
    
    
    $
    79,984
    
    
    $
    (23,906
    )
    
    $
    1,247,404Income from operations
    
    $
    97,638
    
    
    $
    6,956
    
    
    $
    1,163
    
    
    $
    105,757Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,590Other expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,214Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    32,953Total assets
    
    $
    1,497,452
    
    
    $
    53,760
    
    
    $
    (52,367

    )
    
    $
    1,498,845
 Note 19  Quarterly Results (Unaudited)
   For the Three Months Ended,March 31,
    
    June 30,
    
    September 30,
    
    December 31,2009Revenues:Net sales
    
    $
    309,046
    
    
    $
    337,536
    
    
    $
    336,944
    
    
    $
    483,798Royalties and franchise fees
    
    
    3,694
    
    
    
    4,536
    
    
    
    4,164
    
    
    
    7,100Gross profit
    
    
    103,629
    
    
    
    128,425
    
    
    
    121,453
    
    
    
    214,776Income from operations
    
    
    12,201
    
    
    
    27,818
    
    
    
    14,937
    
    
    
    86,917Net income
attributable to Amscan Holdings, Inc.
    
    
    2,403
    
    
    
    10,952
    
    
    
    3,079
    
    
    
    46,1192008Revenues:Net sales
    
    $
    325,032
    
    
    $
    365,174
    
    
    $
    356,231
    
    
    $
    491,204Royalties and franchise fees
    
    
    5,342
    
    
    
    6,350
    
    
    
    5,863
    
    
    
    4,465Gross profit
    
    
    110,347
    
    
    
    139,414
    
    
    
    125,311
    
    
    
    196,143Income from operations
    
    
    8,778
    
    
    
    35,511
    
    
    
    18,573
    
    
    
    51,056
    (a)Net
(loss) income attributable to Amscan Holdings, Inc.
    
    
    (2,537
    )
    
    
    14,669
    
    
    
    4,563
    
    
    
    23,815
    (a)
 F30




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 For the Three Months Ended,March 31,
    
    June 30,
    
    September 30,
    
    December 31,2007Revenues:Net sales
    
    $
    243,529
    
    
    $
    273,424
    
    
    $
    277,564
    
    
    $
    426,999
    (b)Royalties and franchise fees
    
    
    4,895
    
    
    
    5,747
    
    
    
    5,783
    
    
    
    9,463
    (b)Gross profit
    
    
    77,706
    
    
    
    98,399
    
    
    
    96,783
    
    
    
    171,042
    (b)Income from operations
    
    
    6,837
    
    
    
    25,887
    
    
    
    14,500
    
    
    
    58,533
    (b)Net (loss) income attributable to Amscan Holdings, Inc.
    
    
    (4,402
    )
    
    
    (2,458
    )
    
    
    424
    
    
    
    25,697
    (b)
 
 (a)
    
    During the fourth quarter of 2008, the Company instituted a program to
convert its company-owned and franchised Party America stores to Party City
stores and recorded a $17,376 charge for the impairment of the Party America
trade name.(b)
    
    The results of operations for 2007 include the results of FCPO for the
period from the Factory Card & Party Outlet Acquisition Date (November 16,
2007) through December 29, 2007, and the results of PCFG for the period from
the Party City Franchise Transaction Date (November 2, 2007) through December
31, 2007. Note 20  Fair Value Measurements
      SignificantQuoted Prices in
    
    OtherActive Markets for
    
    Observable
    
    Unobservable
    
    Total as ofIdentical Assets or
    
    Inputs
    
    Inputs
    
    December 31,Liabilities (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    2009Derivative assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Derivative liabilities
    
    
    
    
    
    $
    (6,582
    )
    
    
    
    
    
    $
    (6,582
    )
 F31




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
  SignificantQuoted Prices in
    
    OtherActive Markets for
    
    Observable
    
    Unobservable
    
    Total as ofIdentical Assets or
    
    Inputs
    
    Inputs
    
    December 31,Liabilities (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    2008Derivative assets
    
    
    
    
    
    $
    3,365
    
    
    
    
    
    
    $
    3,365Derivative liabilities
    
    
    
    
    
    
    (9,073
    )
    
    
    
    
    
    
    (9,073
    )
    December 31, 2009
    December 31, 2008Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueTerm Loan
    
    $
    364,688
    
    
    $
    331,866
    
    
    $
    368,437
    
    
    $
    247,000$175,000 Senior Subordinated Notes
    
    
    175,000
    
    
    
    166,250
    
    
    
    175,000
    
    
    
    107,000
  Note 21  Derivative Financial Instruments
 Interest Rate Risk Management
      F32




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 Foreign Exchange Risk Management
   Notional Amounts
    
    
    Derivative Assets
    
    
    Derivative LiabilitiesBalance
    
    
    
    
    
    Balance
    
    
    
    
    
    Balance
    
    
    
    
    
    BalanceSheet
    
    Fair
    
    
    Sheet
    
    Fair
    
    
    Sheet
    
    Fair
    
    
    Sheet
    
    FairDecember 31,
    
    
    December 31,
    
    
    Line
    
    Value
    
    
    Line
    
    Value
    
    
    Line
    
    Value
    
    
    Line
    
    ValueDerivative Instrument
    
    2009
    
    
    2008
    
    
    December 31, 2009
    
    
    December 31, 2008

    
    
    December 31, 2009
    
    
    December 31, 2008Interest Rate Hedge
    
    $
    163,441
    
    
    $
    175,505
    
    
    
    
    $
    
    
    
    
    
    $
    
    
    
    (b) AE
    
    $
    (6,313
    )
    
    (b) AE
    
    $
    (8,403
    )Foreign Exchange Contracts
    
    
    19,200
    
    
    
    18,560
    
    
    (a) PP
    
    $
    
    
    
    (a) PP
    
    
    3,365
    
    
    (a) PP
    
    
    (269
    )
    
    (a) PP
    
    
    (670
    )Total Hedges
    
    $
    182,641
    
    
    $
    194,065
    
    
    
    
    $
    
    
    
    
    
    $
    3,365
    
    
    
    
    $
    (6,582
    )
    
    
    
    $
    (9,073
    )
 
 (a)
    
    PP = Prepaid expenses and other current assets(b)
    
    AE = Accrued expenses F33




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 Note 22  Comprehensive Income
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Net income
    
    $
    62,553
    
    
    $
    40,510
    
    
    $
    19,261Cumulative change from adoption of FIN 48 (see Note 5)
    
    
    
    
    
    
    
    
    
    
    (31
    )Net change in cumulative translation adjustment
    
    
    4,007
    
    
    
    (11,338
    )
    
    
    1,633Change in fair value of interest rate swap contracts,
net of income taxes of $773, $(2,851), $(302)
    
    
    1,317
    
    
    
    (4,855
    )
    
    
    (514
    )Change in fair value of foreign exchange contracts,
net of income tax (benefit) expense of $(1,097),
$1,169, $(136)
    
    
    (1,867
    )
    
    
    1,990
    
    
    
    (231
    )Comprehensive income
    
    $
    66,010
    
    
    $
    26,307
    
    
    $
    20,118
  Year Ended Dec 31,2009
    
    
    2008Cumulative translation adjustment
    
    $
    (4,249
    )
    
    $
    (8,256
    )Interest rate swap contracts, net of
income tax (benefit) expense of $(2,336),
and $(3,109)
    
    
    (3,977
    )
    
    
    (5,294
    )Foreign exchange contracts, net of
income tax (benefit) expense of $(100),
and $997
    
    
    (169
    )
    
    
    1,698Total accumulated other comprehensive income
    
    $
    (8,395
    )
    
    $
    (11,852
    )
 Note 23  Subsequent Events
   Note 24  Condensed Consolidating Financial Information
  F34




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
  
    
    Amscan Inc.
    
    Am-Source, LLC
    
    Anagram International, Inc.
    
    Anagram International Holdings, Inc.
    
    Anagram International, LLC
    
    M&D Industries, Inc.
    
    Party City Corporation
    
    PA Acquisition Corporation
    
    SSY Realty Corp.
    
    JCS Packaging Inc.
    
    Anagram Eden Prairie Property Holdings LLC
    
    Trisar, Inc.
  
    
    Amscan Distributors (Canada) Ltd.
    
    Amscan Holdings Limited
    
    Amscan (Asia-Pacific) Pty. Ltd.
    
    Amscan de Mexico, S.A. de C.V.
    
    Anagram International (Japan) Co., Ltd.
    
    JCS Hong Kong Ltd.
    
    Party City Franchise Group, LLC
  F35




---



##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 CONSOLIDATING BALANCE SHEET
December 31, 2009
 AHI andCombined
    
    Combined Non-Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    8,240
    
    
    $
    7,180
    
    
    $
    
    
    
    $
    15,420Accounts receivable, net of allowances
    
    
    60,655
    
    
    
    22,126
    
    
    
    
    
    
    
    82,781Inventories, net of allowances
    
    
    295,004
    
    
    
    41,893
    
    
    
    (947
    )
    
    
    335,950Prepaid expenses and other current assets
    
    
    63,528
    
    
    
    6,013
    
    
    
    
    
    
    
    69,541Total current assets
    
    
    427,427
    
    
    
    77,212
    
    
    
    (947
    )
    
    
    503,692Property, plant and equipment, net
    
    
    163,999
    
    
    
    10,995
    
    
    
    
    
    
    
    174,994Goodwill
    
    
    510,400
    
    
    
    38,039
    
    
    
    
    
    
    
    548,439Trade names
    
    
    157,283
    
    
    
    
    
    
    
    
    
    
    
    157,283Other intangible assets, net
    
    
    29,948
    
    
    
    24,721
    
    
    
    
    
    
    
    54,669Other assets, net
    
    
    160,401
    
    
    
    7,033
    
    
    
    (126,010
    )
    
    
    41,424Total assets
    
    $
    1,449,458
    
    
    $
    158,000
    
    
    $
    (126,957
    )
    
    $
    1,480,501LIABILITIES, REDEEMABLE COMMON SECURITIES
AND STOCKHOLDERS EQUITYCurrent liabilities:Loans and notes payable
    
    $
    76,990
    
    
    $
    645
    
    
    $
    
    
    
    $
    77,635Accounts payable
    
    
    67,235
    
    
    
    9,666
    
    
    
    
    
    
    
    76,901Accrued expenses
    
    
    83,430
    
    
    
    10,250
    
    
    
    
    
    
    
    93,680Income taxes payable
    
    
    32,969
    
    
    
    (817
    )
    
    
    (91
    )
    
    
    32,061Redeemable warrants
    
    
    15,444
    
    
    
    
    
    
    
    
    
    
    
    15,444Current portion of long-term obligations
    
    
    28,406
    
    
    
    6,500
    
    
    
    
    
    
    
    34,906Total current liabilities
    
    
    304,474
    
    
    
    26,244
    
    
    
    (91
    )
    
    
    330,627Long-term obligations, excluding current portion
    
    
    522,392
    
    
    
    16,500
    
    
    
    
    
    
    
    538,892Deferred income tax liabilities
    
    
    101,000
    
    
    
    570
    
    
    
    
    
    
    
    101,570Other
    
    
    20,288
    
    
    
    71,569
    
    
    
    (79,956
    )
    
    
    11,901Total liabilities
    
    
    948,154
    
    
    
    114,883
    
    
    
    (80,047
    )
    
    
    982,990Redeemable common securities
    
    
    18,389
    
    
    
    
    
    
    
    
    
    
    
    18,389Commitments and contingenciesStockholders equity:Common Stock
    
    
    
    
    
    
    339
    
    
    
    (339
    )
    
    
    Additional paid-in capital
    
    
    335,731
    
    
    
    46,167
    
    
    
    (46,075
    )
    
    
    335,823Retained earnings
    
    
    155,579
    
    
    
    (5,476
    )
    
    
    (546
    )
    
    
    149,557Accumulated other comprehensive loss
    
    
    (8,395
    )
    
    
    (50
    )
    
    
    50
    
    
    
    (8,395
    )Amscan Holdings Inc. stockholders equity
    
    
    482,915
    
    
    
    40,980
    
    
    
    (46,910
    )
    
    
    476,985Noncontrolling interests
    
    
    
    
    
    
    2,137
    
    
    
    
    
    
    
    2,137Total stockholders equity
    
    
    482,915
    
    
    
    43,117
    
    
    
    (46,910
    )
    
    
    479,122Total liabilities, redeemable common
securities and stockholders equity
    
    $
    1,449,458
    
    
    $
    158,000
    
    
    $
    (126,957
    )
    
    $
    1,480,501
 F36




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 CONSOLIDATING BALANCE SHEET
December 31, 2008
 AHI and
    
    CombinedCombined
    
    Non-Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    8,544
    
    
    $
    4,514
    
    
    $
    
    
    
    $
    13,058Accounts receivable, net of allowances
    
    
    73,932
    
    
    
    15,511
    
    
    
    
    
    
    
    89,443Inventories, net of allowances
    
    
    331,059
    
    
    
    36,605
    
    
    
    (699
    )
    
    
    366,965Prepaid expenses and other current assets
    
    
    42,033
    
    
    
    5,779
    
    
    
    
    
    
    
    47,812Total current assets
    
    
    455,568
    
    
    
    62,409
    
    
    
    (699
    )
    
    
    517,278Property, plant and equipment, net
    
    
    175,532
    
    
    
    11,494
    
    
    
    
    
    
    
    187,026Goodwill
    
    
    497,197
    
    
    
    46,534
    
    
    
    
    
    
    
    543,731Trade names
    
    
    157,283
    
    
    
    
    
    
    
    
    
    
    
    157,283Other intangible assets, net
    
    
    35,496
    
    
    
    26,130
    
    
    
    
    
    
    
    61,626Other assets, net
    
    
    123,315
    
    
    
    12,207
    
    
    
    (94,489
    )
    
    
    41,033Total assets
    
    $
    1,444,391
    
    
    $
    158,774
    
    
    $
    (95,188
    )
    
    $
    1,507,977LIABILITIES, REDEEMABLE COMMON SECURITIES AND
STOCKHOLDERS EQUITYCurrent liabilities:Loans and notes payable
    
    $
    136,878
    
    
    $
    
    
    
    $
    
    
    
    $
    136,878Accounts payable
    
    
    98,636
    
    
    
    28,002
    
    
    
    
    
    
    
    126,638Accrued expenses
    
    
    77,470
    
    
    
    10,515
    
    
    
    
    
    
    
    87,985Income taxes payable
    
    
    27,802
    
    
    
    860
    
    
    
    (57
    )
    
    
    28,605Redeemable warrants
    
    
    15,444
    
    
    
    
    
    
    
    
    
    
    
    15,444Current portion of long-term obligations
    
    
    6,488
    
    
    
    27,514
    
    
    
    
    
    
    
    34,002Total current liabilities
    
    
    362,718
    
    
    
    66,891
    
    
    
    (57
    )
    
    
    429,552Long-term obligations, excluding current portion
    
    
    550,755
    
    
    
    
    
    
    
    
    
    
    
    550,755Deferred income tax liabilities
    
    
    76,360
    
    
    
    11,464
    
    
    
    
    
    
    
    87,824Other
    
    
    21,988
    
    
    
    36,107
    
    
    
    (48,537
    )
    
    
    9,558Total liabilities
    
    
    1,011,821
    
    
    
    114,462
    
    
    
    (48,594
    )
    
    
    1,077,689Redeemable common securities
    
    
    18,171
    
    
    
    
    
    
    
    
    
    
    
    18,171Commitments and contingenciesStockholders equity:Common Stock
    
    
    
    
    
    
    339
    
    
    
    (339
    )
    
    
    Additional paid-in capital
    
    
    334,983
    
    
    
    45,629
    
    
    
    (45,536
    )
    
    
    335,076Retained earnings
    
    
    91,268
    
    
    
    (3,776
    )
    
    
    (488
    )
    
    
    87,004Accumulated other comprehensive (loss) income
    
    
    (11,852
    )
    
    
    231
    
    
    
    (231
    )
    
    
    (11,852
    )Amscan Holdings Inc. stockholders equity
    
    
    414,399
    
    
    
    42,423
    
    
    
    (46,594
    )
    
    
    410,228Noncontrolling interests
    
    
    
    
    
    
    1,889
    
    
    
    
    
    
    
    1,889Total stockholders equity
    
    
    414,399
    
    
    
    44,312
    
    
    
    (46,594
    )
    
    
    412,117Total liabilities, redeemable common securities and stockholders equity
    
    $
    1,444,391
    
    
    $
    158,774

    
    
    $
    (95,188
    )
    
    $
    1,507,977
 F37




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 CONSOLIDATING STATEMENT OF OPERATIONS
For The Year Ended December 31, 2009
 AHI andCombined
    
    Combined Non-Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedRevenues:Net sales
    
    $
    1,291,848
    
    
    $
    199,723
    
    
    $
    (24,247
    )
    
    $
    1,467,324Royalties and franchise fees
    
    
    19,494
    
    
    
    
    
    
    
    
    
    
    
    19,494Total revenues
    
    
    1,311,342
    
    
    
    199,723
    
    
    
    (24,247
    )
    
    
    1,486,818Expenses:Cost of sales
    
    
    794,363
    
    
    
    128,677
    
    
    
    (23,999
    )
    
    
    899,041Selling expenses
    
    
    29,580
    
    
    
    10,206
    
    
    
    
    
    
    
    39,786Retail operating expenses
    
    
    226,159
    
    
    
    35,532
    
    
    
    
    
    
    
    261,691Franchise expenses
    
    
    11,991
    
    
    
    
    
    
    
    
    
    
    
    11,991General and administrative expenses
    
    
    104,072
    
    
    
    16,441
    
    
    
    (1,320
    )
    
    
    119,193Art and development costs
    
    
    13,324
    
    
    
    (81
    )
    
    
    
    
    
    
    13,243Total expenses
    
    
    1,179,489
    
    
    
    190,775
    
    
    
    (25,319
    )
    
    
    1,344,945Income from operations
    
    
    131,853
    
    
    
    8,948
    
    
    
    1,072
    
    
    
    141,873Interest expense, net
    
    
    38,785
    
    
    
    2,696
    
    
    
    
    
    
    
    41,481Other (income) expense, net
    
    
    (7,818
    )
    
    
    1,346
    
    
    
    6,440
    
    
    
    (32
    )Income before income taxes
    
    
    100,886
    
    
    
    4,906
    
    
    
    (5,368
    )
    
    
    100,424Income tax expense
    
    
    36,631
    
    
    
    1,133
    
    
    
    (91
    )
    
    
    37,673Net income
    
    
    64,255
    
    
    
    3,773
    
    
    
    (5,277
    )
    
    
    62,751Less net income attributable to noncontrolling interests
    
    
    
    
    
    
    198
    
    
    
    
    
    
    
    198Net income attributable to Amscan Holdings Inc.
    
    $
    64,255
    
    
    $
    3,575
    
    
    $
    (5,277
    )
    
    $
    62,553
 F38




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 CONSOLIDATING STATEMENT OF OPERATIONS
For Year Ended December 31, 2008
 AHI andCombined
    
    Combined Non-Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedRevenues:Net sales
    
    $
    1,359,780
    
    
    $
    201,055
    
    
    $
    (23,194
    )
    
    $
    1,537,641Royalties and franchise fees
    
    
    22,020
    
    
    
    
    
    
    
    
    
    
    
    22,020Total revenues
    
    
    1,381,800
    
    
    
    201,055
    
    
    
    (23,194
    )
    
    
    1,559,661Expenses:Cost of sales
    
    
    861,368
    
    
    
    128,097
    
    
    
    (23,039
    )
    
    
    966,426Selling expenses
    
    
    32,172
    
    
    
    9,722
    
    
    
    
    
    
    
    41,894Retail operating expenses
    
    
    233,348
    
    
    
    40,279
    
    
    
    
    
    
    
    273,627Franchise expenses
    
    
    13,686
    
    
    
    
    
    
    
    
    
    
    
    13,686General and administrative expenses
    
    
    104,445
    
    
    
    17,147
    
    
    
    (1,320
    )
    
    
    120,272Art and development costs
    
    
    12,462
    
    
    
    
    
    
    
    
    
    
    
    12,462Impairment of trade name
    
    
    17,376
    
    
    
    
    
    
    
    
    
    
    
    17,376Total expenses
    
    
    1,274,857
    
    
    
    195,245
    
    
    
    (24,359
    )
    
    
    1,445,743Income from operations
    
    
    106,943
    
    
    
    5,810
    
    
    
    1,165
    
    
    
    113,918Interest expense, net
    
    
    48,130
    
    
    
    2,785
    
    
    
    
    
    
    
    50,915Other income, net
    
    
    (7,526
    )
    
    
    (552
    )
    
    
    7,260
    
    
    
    (818
    )Income before income taxes
    
    
    66,339
    
    
    
    3,577
    
    
    
    (6,095
    )
    
    
    63,821Income tax expense
    
    
    21,900
    
    
    
    2,345
    
    
    
    (57
    )
    
    
    24,188Net income
    
    
    44,439
    
    
    
    1,232
    
    
    
    (6,038
    )
    
    
    39,633Less net loss attributable to noncontrolling interests
    
    
    
    
    
    
    (877
    )
    
    
    
    
    
    
    (877
    )Net income attributable to Amscan Holdings Inc.
    
    $
    44,439
    
    
    $
    2,109
    
    
    $
    (6,038
    )
    
    $
    40,510
 F39




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 CONSOLIDATING STATEMENT OF OPERATIONS
For Year Ended December 31, 2007
 AHI andCombined
    
    Combined Non-Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedRevenues:Net sales
    
    $
    1,146,791
    
    
    $
    98,631
    
    
    $
    (23,906
    )
    
    $
    1,221,516Royalties and franchise fees
    
    
    25,888
    
    
    
    
    
    
    
    
    
    
    
    25,888Total revenues
    
    
    1,172,679
    
    
    
    98,631
    
    
    
    (23,906
    )
    
    
    1,247,404Expenses:Cost of sales
    
    
    735,670
    
    
    
    65,665
    
    
    
    (23,749
    )
    
    
    777,586Selling expenses
    
    
    32,292
    
    
    
    9,607
    
    
    
    
    
    
    
    41,899Retail operating expenses
    
    
    184,768
    
    
    
    6,655
    
    
    
    
    
    
    
    191,423Franchise expenses
    
    
    12,883
    
    
    
    
    
    
    
    
    
    
    
    12,883General and administrative expenses
    
    
    97,564
    
    
    
    9,463
    
    
    
    (1,320
    )
    
    
    105,707Art and development costs
    
    
    12,149
    
    
    
    
    
    
    
    
    
    
    
    12,149Total expenses
    
    
    1,075,326
    
    
    
    91,390
    
    
    
    (25,069
    )
    
    
    1,141,647Income from operations
    
    
    97,353
    
    
    
    7,241
    
    
    
    1,163
    
    
    
    105,757Interest expense, net
    
    
    54,393
    
    
    
    197
    
    
    
    
    
    
    
    54,590Other expense, net
    
    
    12,136
    
    
    
    319
    
    
    
    5,759
    
    
    
    18,214Income before income taxes
    
    
    30,824
    
    
    
    6,725
    
    
    
    (4,596
    )
    
    
    32,953Income tax expense
    
    
    11,646
    
    
    
    1,658
    
    
    
    (58
    )
    
    
    13,246Net income
    
    
    19,178
    
    
    
    5,067
    
    
    
    (4,538
    )
    
    
    19,707Less net income attributable to noncontrolling
interests
    
    
    
    
    
    
    446
    
    
    
    
    
    
    
    446Net income attributable to Amscan Holdings Inc.
    
    $
    19,178
    
    
    $
    4,621
    
    
    $
    (4,538
    )
    
    $
    19,261
 F40




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 CONSOLIDATING STATEMENT OF CASH FLOWS
For The Year Ended December 31, 2009
 AHI and
    
    CombinedCombined
    
    Non-Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedCash flows provided by operating activities:Net income
    
    $
    64,255
    
    
    $
    3,575
    
    
    $
    (5,277
    )
    
    $
    62,553Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization expense
    
    
    39,885
    
    
    
    4,497
    
    
    
    

    
    
    
    44,382Amortization of deferred financing costs
    
    
    1,888
    
    
    
    275
    
    
    
    
    
    
    
    2,163Provision for doubtful accounts
    
    
    2,444
    
    
    
    1,538
    
    
    
    
    
    
    
    3,982Deferred income tax expense
    
    
    8,803
    
    
    
    
    
    
    
    
    
    
    
    8,803Deferred rent
    
    
    977
    
    
    
    786
    
    
    
    
    
    
    
    1,763Undistributed gain in unconsolidated joint venture
    
    
    (632
    )
    
    
    
    
    
    
    
    
    
    
    (632
    )Loss on disposal of equipment
    
    
    61
    
    
    
    217
    
    
    
    
    
    
    
    278Equity based compensation
    
    
    876
    
    
    
    
    
    
    
    
    
    
    
    876Changes in operating assets and liabilities:Decrease (increase) in accounts receivable
    
    
    11,498
    
    
    
    (5,161
    )
    
    
    
    
    
    
    6,337Decrease (increase) in inventories
    
    
    35,824
    
    
    
    (5,139
    )
    
    
    248
    
    
    
    30,933Increase in prepaid expenses and other assets
    
    
    (20,408
    )
    
    
    (765
    )
    
    
    
    
    
    
    (21,173
    )(Decrease) increase in accounts payable, accrued
expenses and income taxes payable
    
    
    (30,528
    )
    
    
    9,176
    
    
    
    5,029
    
    
    
    (16,323
    )Net cash provided by operating activities
    
    
    114,943
    
    
    
    8,999
    
    
    
    
    
    
    
    123,942Cash flows used in investing activities:Cash paid in connection with acquisitions
    
    
    (726
    )
    
    
    (2,652
    )
    
    
    
    
    
    
    (3,378
    )Cash in escrow in connection with acquisitions
    
    
    (24,881
    )
    
    
    
    
    
    
    
    
    
    
    (24,881
    )Capital expenditures
    
    
    (23,860
    )
    
    
    (2,335
    )
    
    
    
    
    
    
    (26,195
    )Proceeds from disposal of property and equipment
    
    
    77
    
    
    
    19
    
    
    
    
    
    
    
    96Net cash used in investing activities
    
    
    (49,390
    )
    
    
    (4,968
    )
    
    
    
    
    
    
    (54,358
    )Cash flows used in financing activitiesRepayments of loans, notes payable and long-term obligations
    
    
    (66,392
    )
    
    
    (3,855
    )
    
    
    
    
    
    
    (70,247
    )Proceeds from loans, notes payable and long-term obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital contributions and proceeds from issuance of common
stock and exercise of options, net of retirements
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    90Net cash used in financing activities
    
    
    (66,302
    )
    
    
    (3,855
    )
    
    
    
    
    
    
    (70,157
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    488
    
    
    
    2,447
    
    
    
    
    
    
    
    2,935Net (decrease) increase in cash and cash equivalents
    
    
    (261
    )
    
    
    2,623
    
    
    
    
    
    
    
    2,362Cash and cash equivalents at beginning of period
    
    
    8,501
    
    
    
    4,557
    
    
    
    
    
    
    
    13,058Cash and cash equivalents at end of period
    
    $
    8,240
    
    
    $
    7,180
    
    
    $
    
    
    
    $
    15,420
 F41




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 CONSOLIDATING STATEMENT OF CASH FLOWS
For Year Ended December 31, 2008
 AHI and
    
    CombinedCombined
    
    Non-Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedCash flows provided by operating activities:Net income
    
    $
    44,439
    
    
    $
    2,109
    
    
    $
    (6,038
    )
    
    $
    40,510Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization expense
    
    
    42,406
    
    
    
    4,872
    
    
    
    
    
    
    
    47,278Amortization of deferred financing costs
    
    
    1,956
    
    
    
    265
    
    
    
    
    
    
    
    2,221Provision for doubtful accounts
    
    
    945
    
    
    
    147
    
    
    
    
    
    
    
    1,092Deferred income tax benefit
    
    
    (7,885
    )
    
    
    
    
    
    
    
    
    
    
    (7,885
    )Deferred rent
    
    
    1,202
    
    
    
    
    
    
    
    
    
    
    
    1,202Undistributed gain in unconsolidated joint venture
    
    
    (538
    )
    
    
    
    
    
    
    
    
    
    
    (538
    )Impairment of trade name
    
    
    17,376
    
    
    
    
    
    
    
    
    
    
    
    17,376(Gain) loss on disposal of equipment
    
    
    (1,198
    )
    
    
    3
    
    
    
    
    
    
    
    (1,195
    )Equity based compensation
    
    
    4,311
    
    
    
    46
    
    
    
    
    
    
    
    4,357Tax benefit on exercised options
    
    
    (1,823
    )
    
    
    
    
    
    
    
    
    
    
    (1,823
    )Changes in operating assets and liabilities:Decrease in accounts receivable
    
    
    6,526
    
    
    
    1,711
    
    
    
    
    
    
    
    8,237Increase in inventories
    
    
    (51,358
    )
    
    
    (1,144
    )
    
    
    155
    
    
    
    (52,347
    )Decrease in prepaid expenses and other current assets
    
    
    29,595
    
    
    
    1,645
    
    
    
    
    
    
    
    31,240(Decrease) increase in accounts payable, accrued expenses and
income taxes payable
    
    
    (22,075
    )
    
    
    6,396
    
    
    
    5,883
    
    
    
    (9,796
    )Net cash provided by operating activities
    
    
    63,879
    
    
    
    16,050
    
    
    
    
    
    
    
    79,929Cash flows used in investing activities:Cash paid in connection with acquisitions
    
    
    (1,143
    )
    
    
    (473
    )
    
    
    
    
    
    
    (1,616
    )Capital expenditures
    
    
    (44,457
    )
    
    
    (8,544
    )
    
    
    
    
    
    
    (53,001
    )Proceeds from disposal of property and equipment
    
    
    3,390
    
    
    
    28
    
    
    
    
    
    
    
    3,418Net cash used in investing activities
    
    
    (42,210
    )
    
    
    (8,989
    )
    
    
    
    
    
    
    (51,199
    )Cash flows used in financing activities:Repayments of loans, notes payable and long-term obligations
    
    
    (24,250
    )
    
    
    (2,592
    )
    
    
    
    
    
    
    (26,842
    )Tax benefit on exercised options
    
    
    1,823
    
    
    
    
    
    
    
    
    
    
    
    1,823Sale of additional interest to minority shareholder
    
    
    2,500
    
    
    
    
    
    
    
    
    
    
    
    2,500Purchase and retirement of redeemable common stock
    
    
    (514
    )
    
    
    
    
    
    
    
    
    
    
    (514
    )Net cash used in financing activities
    
    
    (20,441
    )
    
    
    (2,592
    )
    
    
    
    
    
    
    (23,033
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (1,075
    )
    
    
    (8,838
    )
    
    
    
    
    
    
    (9,913
    )Net increase (decrease) in cash and cash equivalents
    
    
    153
    
    
    
    (4,369
    )
    
    
    
    
    
    
    (4,216
    )Cash and cash equivalents at beginning of period
    
    
    8,391
    
    
    
    8,883
    
    
    
    
    
    
    
    17,274Cash and cash equivalents at end of period
    
    $
    8,544
    
    
    $
    4,514
    
    
    $
    
    
    
    $
    13,058
 F42




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##### Table of Contents



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 CONSOLIDATING STATEMENT OF CASH FLOWS
For Year Ended December 31, 2007
 AHI and
    
    CombinedCombined
    
    Non-Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedCash flows provided by (used in) operating activities:Net income
    
    $
    19,178
    
    
    $
    4,621
    
    
    $
    (4,538
    )
    
    $
    19,261Adjustments to reconcile net income to net cash provided by (used in)
operating activities:Depreciation and amortization expense
    
    
    37,076
    
    
    
    1,017
    
    
    
    
    
    
    
    38,093Amortization of deferred financing costs
    
    
    2,142
    
    
    
    
    
    
    
    
    
    
    
    2,142Provision for doubtful accounts
    
    
    1,045
    
    
    
    245
    
    
    
    
    
    
    
    1,290Deferred income tax benefit
    
    
    (5,973
    )
    
    
    
    
    
    
    
    
    
    
    (5,973
    )Deferred rent
    
    
    744
    
    
    
    421
    
    
    
    
    
    
    
    1,165Undistributed gain in unconsolidated joint venture
    
    
    (628
    )
    
    
    
    
    
    
    
    
    
    
    (628
    )Impairment of investment in subsidiary
    
    
    2,005
    
    
    
    
    
    
    
    
    
    
    
    2,005Loss on disposal of equipment
    
    
    1,442
    
    
    
    10
    
    
    
    
    
    
    
    1,452Equity based compensation
    
    
    1,882
    
    
    
    46
    
    
    
    
    
    
    
    1,928Debt retirement costs
    
    
    3,781
    
    
    
    
    
    
    
    
    
    
    
    3,781Write-off of deferred financing costs
    
    
    6,333
    
    
    
    
    
    
    
    
    
    
    
    6,333Changes in operating assets and liabilities:Decrease (increase) in accounts receivable
    
    
    9,036
    
    
    
    (7,055
    )
    
    
    
    
    
    
    1,981Increase in inventories
    
    
    (19,572
    )
    
    
    (3,499
    )
    
    
    157
    
    
    
    (22,914
    )Increase in prepaid expenses and other current assets
    
    
    (13,627
    )
    
    
    (592
    )
    
    
    
    
    
    
    (14,219
    )Decrease in accounts payable, accrued expenses and income taxes payable
    
    
    (19,481
    )
    
    
    (10,953
    )
    
    
    4,381
    
    
    
    (26,053
    )Net cash provided by (used in) operating activities
    
    
    25,383
    
    
    
    (15,739
    )
    
    
    
    
    
    
    9,644Cash flows (used in) provided by in investing activities:Cash paid in connection with store acquisitions
    
    
    (132,262
    )
    
    
    26,139
    
    
    
    
    
    
    
    (106,123
    )Capital expenditures
    
    
    (25,988
    )
    
    
    (1,457
    )
    
    
    
    
    
    
    (27,445
    )Proceeds from disposal of property and equipment
    
    
    162
    
    
    
    
    
    
    
    
    
    
    
    162Net cash (used in) provided by investing activities
    
    
    (158,088
    )
    
    
    24,682
    
    
    
    
    
    
    
    (133,406
    )Cash flows provided by (used in) financing activities:Repayments of loans, notes payable and long-term obligations
    
    
    (385,438
    )
    
    
    (2,111
    )
    
    
    
    
    
    
    (387,549
    )Proceeds from loans, notes payable and long-term obligations
    
    
    523,609
    
    
    
    
    
    
    
    
    
    
    
    523,609Debt retirement costs
    
    
    (6,218
    )
    
    
    
    
    
    
    
    
    
    
    (6,218
    )Capital contributions and proceeds from issuance of common stock and
exercise of options, net of retirements
    
    
    4,734
    
    
    
    
    
    
    
    
    
    
    
    4,734Net cash provided by (used in) financing activities
    
    
    136,687
    
    
    
    (2,111
    )
    
    
    
    
    
    
    134,576Effect of exchange rate changes on cash and cash equivalents
    
    
    14
    
    
    
    1,480
    
    
    
    
    
    
    
    1,494Net increase in cash and cash equivalents
    
    
    3,996
    
    
    
    8,312
    
    
    
    
    
    
    
    12,308Cash and cash equivalents at beginning of period
    
    
    4,395
    
    
    
    571
    
    
    
    
    
    
    
    4,966Cash and cash equivalents at end of period
    
    $
    8,391
    
    
    $
    8,883
    
    
    $
    
    
    
    $
    17,274
 F43




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##### Table of Contents



SCHEDULE II
 AMSCAN HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2009, 2008 and 2007
 Beginning
    
    
    
    
    
    
    
    
    
    Ending(Dollars in thousands)
    
    Balance
    
    Write-Offs
    
    Additions
    
    BalanceAllowance for Doubtful Accounts:For the year ended December 31, 2007
    
    $
    2,151
    
    
    $
    804
    
    
    $
    1,290
    
    
    $
    2,637For the year ended December 31, 2008
    
    
    2,637
    
    
    
    1,546
    
    
    
    1,092
    
    
    
    2,183For the year ended December 31, 2009
    
    
    2,183
    
    
    
    3,168
    
    
    
    3,982
    
    
    
    2,997Inventory Reserves::For the year ended December 31, 2007
    
    $
    5,303
    
    
    $
    1,459
    
    
    $
    6,572
    
    
    $
    10,416For the year ended December 31, 2008
    
    
    10,416
    
    
    
    5,128
    
    
    
    3,030
    
    
    
    8,318For the year ended December 31, 2009
    
    
    8,318
    
    
    
    2,755
    
    
    
    2,989
    
    
    
    8,552
 F44