UNITED STATES
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, 2010
 
 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
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   DOCUMENTS INCORPORATED BY REFERENCE




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AMSCAN HOLDINGS, INC.  FORM 10-K
 December 31, 2010
 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 [Removed and reserved by the SEC]
    
    
    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
    
    
    53Item 14 Principal Accountant Fees and Services
    
    
    53PART IVItem 15 Exhibits and Financial Statement Schedules
    
    
    53Signatures
    
    
    56
   http://www.sec.gov.
 2




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




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Retail Operations
       Recent Retail Acquisitions
  Summary Financial Information about the Company
  4




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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, including costumes and
other garments, and helping retailers promote coordinated
ensembles that increase average purchase volume per
consumer through add-on or impulse purchases.
    
    Expand our Presence and our Brand Internationally.We
intend to begin to introduce the Party City retail concept
internationally. We believe that the potential to do so,
especially in English speaking markets is significant. We
also believe there is an opportunity to expand our
international wholesale business which represented
approximately 14% of our net sales at wholesale in the
three-year period ended December 31, 2010. With the
acquisition on January 1, 2011 of Riethmuller, we currently
have a commercial presence in the UK, Germany, Poland
Mexico, Canada, Asia and Australia. We have our own sales
force in the United Kingdom, Germany, 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 through both organic and acquisitive
growth, increasing accessorization and customization of our
products to local tastes and holidays and continuing to
deepen retail penetration.
    
    Increase the Amscan share of shelf at Company Owned and
Franchised Retail Stores.As we integrate the Christys
Group acquisition into our business model we will produce
costumes and accessories for distribution into our vertical
retail distribution. We will also make these products
available for our broader distribution as well. We will
continue to explore other product categories which will
further advance our vertical retail distribution.
    
    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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Retail Operations
 
    
    Continue to build the Party City Brand and Consumer
Awareness. In 2010 we significantly altered our Party
City brand advertising programs reducing our dependence on
free standing newspaper inserts (FSIs), and substantially
increased our use of television and radio advertising to
improve brand awareness and drive consumer traffic. We
anticipate continuing and expanding upon what has proven to
be a successful strategy
    
    Offer a Broad Selection of Merchandise.We will continue
to provide customers with convenient one-stop shopping for
party goods by offering what we believe is one of the most
extensive selections of party supplies available. Our
typical retail store offers a broad selection of Amscan and
other brand merchandise consisting of more than 20,000
active SKUs.
    
    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 our own and other desired products. During
2010 the Company began converting its FCPO stores from a
party goods and social expressions supply format to the
party goods supply format of Party City, which included
rebranding the stores as Party City.
    
    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 20 to 25 new
company-owned retail stores and anticipate that our
franchisees will open between three and five franchise
stores during 2011. In addition, based on the performance
of our temporary Halloween stores, subject to the
availability of suitable, short-term lease locations, we
plan to open at least 400 temporary stores for the 2011 and
subsequent Halloween seasons.
    
    Expansion of our E-Commerce Store.We believe our
addition of a Party City e-commerce website and the
integration of our existing Factory Card & Party and Party
America websites during 2009 will continue to generate
significant revenue growth. Our website is a
cost-effective medium designed to offer a convenient,
highly visual, user-friendly, and secure online shopping
option for new and existing customers. In addition to the
ability to order products, our website gives customers
information regarding products, party ideas and promotional
offers.
    
    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. All retail units now use the same
merchandising, POS, and financial systems.
 6




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Innovative Product Development and Design Capabilities
  Product Lines
  Party Goods
    
    Metallic Balloons
    
    GiftDecorative and Solid Color Tableware
    
    Baby and Wedding Memory Books
    
    Bouquets
    
    Ceramic GiftwareCandles
    
    Decorative Tissues
    
    Standard 18 Inch
    
    Decorative CandlesCascades and Centerpieces
    
    Drink and Serveware
    
    Sing-A-Tune
    
    Decorative FramesCostumes and Other Wearables
    
    Games
    
    SuperShapes
    
    MugsCrepe
    
    Gift Wrap, Bows and Bags
    
    WeightsCutouts
    
    Invitations, Notes and StationeryFlags and Banners
    
    Photograph AlbumsLatex Balloons
    
    Stickers and ConfettiNovelty GiftsParty FavorsPiñatasScene Setters
  2010
    
    2009
    
    2008Party Goods
    
    
    81
    %
    
    
    78
    %
    
    
    77
    %Metallic Balloons
    
    
    16
    
    
    
    18
    
    
    
    20Gift
    
    
    3
    
    
    
    4
    
    
    
    3100
    %
    
    
    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 Communions
 7




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Seasonal
    
    Themes
    
    EverydayFall
    
    Fifties Rock and Roll
    
    GraduationsThanksgiving
    
    Hawaiian Luau
    
    WeddingsHanukkah
    
    HollywoodChristmas
    
    Mardi GrasMasqueradePatrioticRetirementSportsSummer BarbequeWestern
 Manufactured Products
 i.e
  Purchased Products
   Raw Materials
   Wholesale Sales and Marketing
  8




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Wholesale Distribution and Systems
    Wholesale Customers
    Competition at Wholesale
   9




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Retail Merchandising
       Retailer Suppliers
   10




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Retail Advertising and Marketing
   Franchise Operations
   ® ®
    Competition at Retail
  11




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Government Regulation
      Copyrights and Trademarks
   Information Systems
  12




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Employees
  
 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
   13




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Interest Rates
  Exchange Rates
  Economic Downturn
  Key Vendors
   Additional Capital Requirements
  Seasonal and Quarterly Fluctuations
  14




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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 and other
corporate offices, show
rooms, design and art
production for party
products
    
    119,525 square feet
    
    Leased (expiration
date: December 31, 2014)Rockaway, New Jersey
    
    Party City corporate offices
    
    106,000 square feet
    
    Leased (expiration
date: July 31, 2017)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)Harriman, New York
    
    Manufacture of paper napkins
    
    74,400 square feet
    
    Leased (expiration
date: March 31, 2016)Louisville, Kentucky
    
    Manufacture and distribution
of paper plates
    
    189,175 square feet
    
    Leased (expiration
date: March 31, 2013)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)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
    
    OwnedDorval, 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)Milton Keynes, 
Buckinghamshire, England
    
    Distribution of party
products throughout Europe
    
    130,858 square feet
    
    Leased (expiration
date: June 30, 2017)Naperville, Illinois
    
    Distribution of party goods
for e-commerce sales
    
    440,343 square-foot
    
    Leased (expiration
date: December 31,
2018)San Bernadino, California
    
    Distribution of party goods
for Halloween City
    
    244,000 square foot
    
    Leased (month to month)Atlanta, Georgia
    
    Office and storage facilities
    
    15,012 square foot
    
    Leased (expiration
date: April 30, 2013)Livonia, Michigan
    
    Office and distribution of
party goods for Halloween
City
    
    89,780 square foot
    
    Leased (expiration
date: May 31, 2013)Pleasanton, California
    
    Office for e-commerce sales
    
    11,278 square-foot
    
    Leased (expiration
date: June 18, 2015)
 
 (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, 2010, the
lien mortgage note bears interest at a rate of 2.22%, subject to
semi-annual adjustments. 16




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2010
    
    2009
    
    2008Company-owned:Stores open at beginning of year
    
    
    601
    
    
    
    643
    
    
    
    673Stores opened
    
    
    13
    
    
    
    6
    
    
    
    19Stores acquired
    
    
    20
    
    
    
    3
    
    
    
    6Stores closed / sold
    
    
    (38
    )
    
    
    (51
    )
    
    
    (55
    )Stores open at end of year
    
    
    596
    
    
    
    601
    
    
    
    643Franchise:Stores open at beginning of year
    
    
    248
    
    
    
    273
    
    
    
    283Stores opened
    
    
    4
    
    
    
    1
    
    
    
    13Stores acquired
    
    
    5
    
    
    
    2
    
    
    
    7Stores closed, sold or converted to independent
    
    
    (25
    )
    
    
    (28
    )
    
    
    (30
    )Stores open at end of year
    
    
    232
    
    
    
    248
    
    
    
    273Total company-owned and franchise stores
    
    
    828
    
    
    
    849
    
    
    
    916
 17




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State
    
    Company-owned
    
    Franchise
    
    Chain-wideAlabama
    
    
    2
    
    
    
    8
    
    
    
    10Arizona
    
    
    1
    
    
    
    20
    
    
    
    21Arkansas
    
    
    1
    
    
    
    3
    
    
    
    4California
    
    
    86
    
    
    
    18
    
    
    
    104Colorado
    
    
    14
    
    
    
    1
    
    
    
    15Connecticut
    
    
    4
    
    
    
    2
    
    
    
    6Delaware
    
    
    1
    
    
    
    1
    
    
    
    2Florida
    
    
    54
    
    
    
    10
    
    
    
    64Georgia
    
    
    26
    
    
    
    1
    
    
    
    27Hawaii
    
    
    0
    
    
    
    2
    
    
    
    2Illinois
    
    
    61
    
    
    
    0
    
    
    
    61Indiana
    
    
    27
    
    
    
    0
    
    
    
    27Iowa
    
    
    9
    
    
    
    1
    
    
    
    10Kansas
    
    
    3
    
    
    
    4
    
    
    
    7Kentucky
    
    
    7
    
    
    
    0
    
    
    
    7Louisiana
    
    
    3
    
    
    
    8
    
    
    
    11Maryland
    
    
    14
    
    
    
    12
    
    
    
    26Michigan
    
    
    31
    
    
    
    0
    
    
    
    31Minnesota
    
    
    0
    
    
    
    21
    
    
    
    21Mississippi
    
    
    1
    
    
    
    3
    
    
    
    4Missouri
    
    
    19
    
    
    
    3
    
    
    
    22Montana
    
    
    0
    
    
    
    1
    
    
    
    1Nebraska
    
    
    5
    
    
    
    0
    
    
    
    5Nevada
    
    
    6
    
    
    
    0
    
    
    
    6New Hampshire
    
    
    1
    
    
    
    0
    
    
    
    1New Jersey
    
    
    26
    
    
    
    2
    
    
    
    28New Mexico
    
    
    0
    
    
    
    3
    
    
    
    3New York
    
    
    45
    
    
    
    14
    
    
    
    59North Carolina
    
    
    2
    
    
    
    19
    
    
    
    21North Dakota
    
    
    0
    
    
    
    3
    
    
    
    3Ohio
    
    
    31
    
    
    
    0
    
    
    
    31Oklahoma
    
    
    2
    
    
    
    0
    
    
    
    2Oregon
    
    
    2
    
    
    
    5
    
    
    
    7Pennsylvania
    
    
    17
    
    
    
    14
    
    
    
    31Puerto Rico
    
    
    0
    
    
    
    5
    
    
    
    5South Carolina
    
    
    2
    
    
    
    6
    
    
    
    8Tennessee
    
    
    7
    
    
    
    10
    
    
    
    17Texas
    
    
    41
    
    
    
    21
    
    
    
    62Virginia
    
    
    10
    
    
    
    9
    
    
    
    19Washington
    
    
    15
    
    
    
    2
    
    
    
    17West Virginia
    
    
    2
    
    
    
    0
    
    
    
    2Wisconsin
    
    
    18
    
    
    
    0
    
    
    
    18Total
    
    
    596
    
    
    
    232
    
    
    
    828
   18




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Item 3.
    
    Legal Proceedings
  
 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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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
    
    
    3,122.25
    
    
    $
    14,350
    
    
    
    138.68Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,122.25
    
    
    $
    14,350
    
    
    
    138.68
 
 (1)
    
    See Note 15 to our consolidated financial statements included herein for a description of our equity incentive plan. 20




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Item 6.
    
    Selected Consolidated Financial Data
  Year Ended December 31,2010(1)
    
    2009
    
    2008
    
    2007(2)
    
    2006(3)(Dollars in thousands)Income Statement Data:Revenues:Net sales
    
    $
    1,579,677
    
    
    $
    1,467,324
    
    
    $
    1,537,641
    
    
    $
    1,221,516
    
    
    $
    993,342Royalties and franchise fees
    
    
    19,417
    
    
    
    19,494
    
    
    
    22,020
    
    
    
    25,888
    
    
    
    21,746Total revenues
    
    
    1,599,094
    
    
    
    1,486,818
    
    
    
    1,559,661
    
    
    
    1,247,404
    
    
    
    1,015,088Expenses:Cost of sales
    
    
    943,058
    
    
    
    899,041
    
    
    
    966,426
    
    
    
    777,586
    
    
    
    676,527Selling expenses
    
    
    42,725
    
    
    
    39,786
    
    
    
    41,894
    
    
    
    41,899
    
    
    
    39,449Retail operating expenses
    
    
    296,891
    
    
    
    261,691
    
    
    
    273,627
    
    
    
    191,423
    
    
    
    126,224Franchise expenses
    
    
    12,269
    
    
    
    11,991
    
    
    
    13,686
    
    
    
    12,883
    
    
    
    13,009General and administrative expenses
    
    
    134,392
    
    
    
    119,193
    
    
    
    120,272
    
    
    
    105,707
    
    
    
    84,836Art and development costs
    
    
    14,923
    
    
    
    13,243
    
    
    
    12,462
    
    
    
    12,149
    
    
    
    10,338Impairment of trade name (4)
    
    
    27,400
    
    
    
    
    
    
    
    17,376
    
    
    
    
    
    
    
    Income from operations
    
    
    127,436
    
    
    
    141,873
    
    
    
    113,918
    
    
    
    105,757
    
    
    
    64,705Interest expense, net
    
    
    40,850
    
    
    
    41,481
    
    
    
    50,915
    
    
    
    54,590
    
    
    
    54,887Other expense (income), net (5) (6)
    
    
    4,208
    
    
    
    (32
    )
    
    
    (818
    )
    
    
    18,214
    
    
    
    (1,000
    )Income before income taxes
    
    
    82,378
    
    
    
    100,424
    
    
    
    63,821
    
    
    
    32,953
    
    
    
    10,818Income tax expense
    
    
    32,945
    
    
    
    37,673
    
    
    
    24,188
    
    
    
    13,246
    
    
    
    4,295Net income
    
    
    49,433
    
    
    
    62,751
    
    
    
    39,633
    
    
    
    19,707
    
    
    
    6,523Less: net income (loss) attributable
to noncontrolling interests
    
    
    114
    
    
    
    198
    
    
    
    (877
    )
    
    
    446
    
    
    
    83Net income attributable to Amscan
Holdings, Inc.
    
    $
    49,319
    
    
    $
    62,553
    
    
    $
    40,510
    
    
    $
    19,261
    
    
    $
    6,440Other Financial Data:Capital expenditures, including
assets under capital leases
    
    
    53,967
    
    
    
    26,254
    
    
    
    53,701
    
    
    
    36,648
    
    
    
    40,376Depreciation and amortization
    
    
    49,418
    
    
    
    44,382
    
    
    
    47,278
    
    
    
    38,093
    
    
    
    38,619Ratio of earnings to fixed charges (7)
    
    
    1.9
    x
    
    
    2.2
    x
    
    
    1.6
    x
    
    
    1.4
    x
    
    
    1.1
    x
 21




---



##### 



At December 31,2010
    
    2009
    
    2008
    
    2007
    
    2006(Dollars in thousands)Balance Sheet Data:Working capital
    
    $
    189,993
    
    
    $
    162,243
    
    
    $
    76,904
    
    
    $
    99,543
    
    
    $
    158,730Total assets (8) (9) (10)
    
    
    1,653,151
    
    
    
    1,480,501
    
    
    
    1,507,977
    
    
    
    1,498,845
    
    
    
    1,217,371Short-term obligations
(8) (9) (10) (11)
    
    
    159,144
    
    
    $
    112,541
    
    
    $
    170,880
    
    
    $
    161,790
    
    
    $
    8,633Long-term obligations
    
    
    841,112
    
    
    
    538,892
    
    
    
    550,755
    
    
    
    584,336
    
    
    
    558,372Total obligations
    
    $
    1,000,256
    
    
    $
    651,433
    
    
    $
    721,635
    
    
    $
    746,126
    
    
    $
    567,005Redeemable common
securities (12) (13)
    
    $
    18,089
    
    
    $
    18,389
    
    
    $
    18,171
    
    
    $
    33,782
    
    
    $
    9,343AHI stockholders Equity
(8) (10) (13)
    
    
    254,110
    
    
    
    476,985
    
    
    
    410,228
    
    
    
    375,586
    
    
    
    359,839Non controlling interest
    
    
    2,312
    
    
    
    2,137
    
    
    
    1,889
    
    
    
    2,488
    
    
    
    2,052Total equity
    
    $
    256,422
    
    
    $
    479,122
    
    
    $
    412,117
    
    
    $
    378,074
    
    
    $
    361,891
 
 (1)
    
    The Designware Acquisition and the Christys Group Acquisition are included in the balance sheet data as of December 31, 2010, and
the statement of operations and other financial data from the Designware Acquisition Date (March 1, 2010) and the Christys Group
Acquisition Date (September 30, 2010), respectively.(2)
    
    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.(3)
    
    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).(4)
    
    During 2010 and 2008, the Company implemented plans to convert and rebrand its FCPO stores and its company-owned and franchised Party
America stores to Party City stores, respectively. As a result, the Company recorded charges for the impairment of the Factory Card
& Party Outlet trade name and the Party America trade name of $27.4 million and $17.4 million in the fourth quarters of 2010 and
2008, respectively.(5)
    
    In connection with the refinancing of debt in August and
December 2010, the Company recorded non-recurring expenses of
$2.4 million to write
off deferred finance costs.(6)
    
    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.(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)
    
    In 2010 the Company issued Common Stock warrants valued at
$21.0 million and paid cash of $24.9 million to consummate the Designware
Acquisition. The cash paid was financed using the Companys revolving credit facility.(9)
    
    In 2010 the Company paid cash of $30.4 million to consummate the Christys Group Acquisition. The cash paid was financed using the
Companys revolving credit facility.(10)
    
    In 2006, 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.(11)
    
    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 had been classified as current
due to the PCFGs noncompliance with the loan agreements financial covenants.(12)
    
    In 2007, the Company used redeemable common stock warrants valued at $15.4 million to acquire the remaining minority interest in PCFG.(13)
    
    Under the terms of the AAH stockholders agreement dated April 30, 2004, the Company has 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 the Company 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 the Company to all
management stockholders, based on fully paid and vested shares, is classified as redeemable common securities. 22




---



##### 



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
 e.g. e.g. e.g.
 i.e
 Results of Operations
 Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
 Percentage of Total Revenues
 Year Ended December 31,2010
    
    2009Revenues:Net sales
    
    
    98.8
    %
    
    
    98.7
    %Royalties and franchise fees
    
    
    1.2
    
    
    
    1.3Total revenues
    
    
    100.0
    
    
    
    100.0Expenses:Cost of sales
    
    
    58.9
    
    
    
    60.5Selling expenses
    
    
    2.7
    
    
    
    2.7Retail operating expenses
    
    
    18.6
    
    
    
    17.6Franchise expenses
    
    
    0.8
    
    
    
    0.8General and administrative expenses
    
    
    8.4
    
    
    
    8.0Art and development costs
    
    
    0.9
    
    
    
    0.9Impairment of trade name
    
    
    1.7
    
    
    
    0.0Total expenses
    
    
    92.0
    
    
    
    90.5Income from operations
    
    
    8.0
    
    
    
    9.5Interest expense, net
    
    
    2.6
    
    
    
    2.8Other expense, net
    
    
    0.3
    
    
    
    Income before income taxes
    
    
    5.1
    
    
    
    6.7Income tax expense
    
    
    2.0
    
    
    
    2.5Net income
    
    
    3.1
    
    
    
    4.2Less net income attributable to noncontrolling
interests
    
    
    
    
    
    
    Net income attributable to Amscan Holdings, Inc.
    
    
    3.1
    %
    
    
    4.2
    %
 23




---



##### 



Total Revenues
  Year Ended December 31,2010
    
    2009Dollars in
    
    Percentage of
    
    Dollars in
    
    Percentage ofThousands
    
    Total Revenue
    
    Thousands
    
    Total RevenueRevenues:Sales:Wholesale
    
    $
    769,247
    
    
    
    48.1
    %
    
    $
    633,006
    
    
    
    42.6
    %Eliminations
    
    
    (298,355
    )
    
    
    (18.7
    )
    
    
    (221,647
    )
    
    
    (14.9
    )Net wholesale
    
    
    470,892
    
    
    
    29.4
    
    
    
    411,359
    
    
    
    27.7Retail
    
    
    1,108,785
    
    
    
    69.3
    
    
    
    1,055,965
    
    
    
    71.0Total net sales
    
    
    1,579,677
    
    
    
    98.8
    
    
    
    1,467,324
    
    
    
    98.7Franchise related
    
    
    19,417
    
    
    
    1.2
    
    
    
    19,494
    
    
    
    1.3Total revenues
    
    $
    1,599,094
    
    
    
    100.0
    %
    
    $
    1,486,818
    
    
    
    100.0
    %
 Wholesale
   Retail
  24




---



##### 



Royalties and franchise fees
  Gross Profit
  Year Ended December 31,2010
    
    2009Dollars in
    
    
    Percentage of
    
    
    Dollars in
    
    
    Percentage ofThousands
    
    
    Associated Sales
    
    
    Thousands
    
    
    Associated SalesWholesale
    
    $
    174,507
    
    
    
    37.1
    %
    
    $
    148,424
    
    
    
    36.1
    %Retail
    
    
    462,112
    
    
    
    41.7
    %
    
    
    419,859
    
    
    
    39.8
    %Total
    
    $
    636,619
    
    
    
    40.3
    %
    
    $
    568,283
    
    
    
    38.7
    %
  i.e.
 Operating expenses
      25




---



##### 



Interest expense, net
  Other expense, net
  Income tax expense
  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) expense, 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 (loss) income attributable to
noncontrolling interests
    
    
    0.0
    
    
    
    (0.1
    )Net income attributable to Amscan Holdings, Inc.
    
    
    4.2
    %
    
    
    2.6
    %
 26




---



##### 



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
 27




---



##### 



Royalties and franchise fees
  Gross Profit
  Year Ended December 31,2009

    
    2008Dollars in
    
    Percentage of
    
    Dollars in
    
    Percentage ofThousands
    
    Associated Sales
    
    Thousands
    
    Associated SalesNet Wholesale
    
    $
    148,424
    
    
    
    36.1
    %
    
    $
    142,438
    
    
    
    32.5
    %Net Retail
    
    
    419,859
    
    
    
    39.8
    %
    
    
    428,777
    
    
    
    39.0
    %Total Gross Profit
    
    $
    568,283
    
    
    
    38.7
    %
    
    $
    571,215
    
    
    
    37.1
    %
   Operating expenses
     Interest expense, net
  28




---



##### 



Other income, net
  Income tax expense
  Liquidity and Capital Resources
 Capital Structure
    New ABL Facility
    29




---



##### 




    
    incur additional indebtedness;
    
    pay dividends or distributions on capital stock (except the Dividend)
or redeem, repurchase or retire capital stock of the Company, the parent or any
restricted subsidiary or make payments on, or redeem, repurchase or retire any
subordinated indebtedness;
    
    make certain investments, loans, advances and acquisitions;
    
    enter into sale and leaseback transactions;
    
    engage in transactions with affiliates;
    
    create liens;
    
    transfer or sell assets;
    
    guarantee debt;
    
    create restrictions on the payment of dividends or other amounts to us from our
restricted subsidiaries;
    
    consolidate, merge or transfer all or substantially all of our assets and the
assets of our subsidiaries; and
    
    engage in unrelated businesses.
    New Term Loan Credit Agreement
   30




---



##### 



Other Credit Agreements
    31




---



##### 




    
    incur additional indebtedness or issue preferred stock;
    
    pay dividends or distributions on capital stock (except the Dividend,
as defined below), or redeem, repurchase or retire capital stock of the Company
or any restricted subsidiary or make payments on, or redeem, repurchase or
retire any subordinated indebtedness;
    
    make certain investments, loans, advances and acquisitions;
    
    enter into sale and leaseback transactions;
    
    engage in transactions with affiliates;
    
    create liens;
    
    transfer or sell assets;
    
    guarantee debt;
    
    create restrictions on the payment of dividends or other amounts to us from our
restricted subsidiaries;
    
    consolidate, merge or transfer all or substantially all of our assets and the
assets of our subsidiaries; and
    
    engage in unrelated businesses.
  Year
    
    Percentage2011
    
    
    101.458
    %2012 and thereafter
    
    
    100.000
    %
    Restructuring costs
  32




---



##### 



Other
    Cash Flow Data  Year Ended December 31, 2010 Compared to Year Ended December 31,
2009
    Cash Flow Data  Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
   33




---



##### 



Tabular Disclosure of Contractual Obligations
  Total
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    ThereafterLong-term debt obligations
(a)
    
    $
    846,183
    
    
    $
    6,810
    
    
    $
    6,835
    
    
    $
    6,860
    
    
    $
    181,982
    
    
    $
    5,737
    
    
    $
    637,959Capital lease obligations (a)
    
    
    3,976
    
    
    
    2,236
    
    
    
    1,446
    
    
    
    147
    
    
    
    131
    
    
    
    16
    
    
    
    Operating lease obligations
(b)
    
    
    425,164
    
    
    
    112,172
    
    
    
    95,026
    
    
    
    67,314
    
    
    
    45,510
    
    
    
    33,369
    
    
    
    71,773Merchandise purchase
commitments (c)
    
    
    81,600
    
    
    
    26,700
    
    
    
    27,200
    
    
    
    27,700
    
    
    
    
    
    
    
    
    
    
    
    Minimum product royalty
obligations
    
    
    19,765
    
    
    
    8,271
    
    
    
    7,320
    
    
    
    1,724
    
    
    
    800
    
    
    
    550
    
    
    
    1,100Total contractual obligations
    
    $
    1,376,688
    
    
    $
    156,189
    
    
    $
    137,827
    
    
    $
    103,745
    
    
    $
    228,423
    
    
    $
    39,672
    
    
    $
    710,832
 
 (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
sixteen stores
sold to franchisees that expire through 2016. 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, 2010, the maximum amount of the assigned lease
obligations was approximately $7.4 million and is not included in the table
above.      Off-Balance Sheet Arrangements
  34




---



##### 



Effects of Inflation
  Critical Accounting Policies and Estimates
   Revenue Recognition
   Store Closure Costs
  Product Royalty Agreements
  Doubtful Accounts
  Inventories
  35




---



##### 



Long-Lived and Intangible Assets
     Insurance Accruals
  Income Taxes
  Income Taxes.
 36




---



##### 



Stock-Based Compensation
   Legal Proceedings
  Recently Issued Accounting Pronouncements
    Safe Harbor Statement under Private Securities Litigation Reform Act of 1995
  37




---



##### 



Quarterly Results (Unaudited)
   For the Three Months Ended,March 31,
    
    June 30,
    
    September 30,
    
    December 31,(Dollars in thousands)2010Revenues:Net sales
    
    $
    304,379
    
    
    $
    352,705
    
    
    $
    358,772
    
    
    $
    563,821Royalties and franchise fees
    
    
    3,844
    
    
    
    4,453
    
    
    
    4,035
    
    
    
    7,085Gross profit
    
    
    104,479
    
    
    
    141,840
    
    
    
    132,437
    
    
    
    257,863Income from operations
    
    
    8,288
    
    
    
    35,367
    
    
    
    17,963
    
    
    
    65,818
    (a)Net (loss) income
attributable to Amscan
Holdings, Inc.
    
    
    (412
    )
    
    
    16,460
    
    
    
    4,603
    
    
    
    28,668
    (a)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
    
    
    
    46,119
 
 (a)
    
    During the 4th Quarter 2010, the Company recorded a charge of
$27,400 to write off the Factory Card & Party Outlet trade name. 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
  38




---



##### 



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
        39




---



##### 




    
    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.
    
 Item 9B. Other Information
  40




---



##### 



PART III
 
 Item 10. Directors and Executive Officers of the Registrant
  Name
    
    Age
    
    PositionGerald C. Rittenberg
    
    
    59
    
    
    Chief Executive Officer and DirectorJames M. Harrison
    
    
    59
    
    
    President, Chief Operating Officer and DirectorMichael A. Correale
    
    
    53
    
    
    Chief Financial OfficerGregg A Melnick
    
    
    41
    
    
    President, Party City Retail GroupRobert J. Small
    
    
    44
    
    
    Chairman of the Board of DirectorsSteven J. Collins
    
    
    42
    
    
    DirectorMichael F. Cronin
    
    
    57
    
    
    DirectorKevin M. Hayes
    
    
    42
    
    
    DirectorJordan A. Kahn
    
    
    69
    
    
    DirectorWilliam A. Kussell
    
    
    51
    
    
    DirectorRichard K. Lubin
    
    
    64
    
    
    DirectorCarol M. Meyrowitz
    
    
    57
    
    
    DirectorDavid M. Mussafer
    
    
    47
    
    
    Director
         41




---



##### 



Board of Directors
   Board Leadership Structure
  Risk Oversight
  42




---



##### 



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




---



##### 



Compensation Committee
   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
  44




---



##### 



Components of Compensation
   Base Salary
  Annual Cash Bonus Plan
   45




---



##### 



Stock-based Incentive Program
     Special stock option distribution
  46




---



##### 



Other Compensation
    Accounting and Tax Treatment
 Accounting Treatment
 Share-based Payment Awards,
  Tax Treatment
  47




---



##### 



Incentive stock options.
 Non-qualified stock options.
 Restricted Stock.
 Report of Compensation Committee on Executive Compensation
   48




---



##### 



49




---



##### 



Summary of Compensation Table
 OtherOption
    
    CompensationName and Principal Position
    
    Year
    
    Salary (a)
    
    Bonus (b)
    
    Awards (c)
    
    (d) (e)
    
    TotalGerald C, Rittenberg
    
    
    2010
    
    
    $
    1,102,500
    
    
    $
    1,798,900
    
    
    $
    
    
    
    $
    2,261,042
    
    
    $
    5,162,442Chief Executive Officer
    
    
    2009
    
    
    
    1,050,000
    
    
    
    1,367,000
    
    
    
    
    
    
    
    21,400
    
    
    
    2,438,4002008
    
    
    
    1,000,000
    
    
    
    1,066,000
    
    
    
    595,300
    
    
    
    21,400
    
    
    
    2,682,700James M. Harrison
    
    
    2010
    
    
    $
    937,125
    
    
    $
    1,481,600
    
    
    $
    
    
    
    $
    1,537,814
    
    
    $
    3,956,539President and
    
    
    2009
    
    
    
    892,500
    
    
    
    1,114,500
    
    
    
    
    
    
    
    20,600
    
    
    
    2,027,600Chief Operating Officer
    
    
    2008
    
    
    
    850,000
    
    
    
    858,600
    
    
    
    446,500
    
    
    
    19,800
    
    
    
    2,174,900Michael D. Heller
    
    
    2009
    
    
    $
    507,800
    
    
    $
    270,100
    
    
    $
    
    
    
    $
    700
    
    
    $
    778,600Executive Vice President 
Retail Operations
    
    
    2008
    
    
    
    507,800
    
    
    
    
    
    
    
    331,000
    
    
    
    700
    
    
    
    839,500Michael A. Correale
    
    
    2010
    
    
    $
    345,000
    
    
    $
    226,700
    
    
    $
    
    
    
    $
    258,804
    
    
    $
    830,504Chief Financial Officer
    
    
    2009
    
    
    
    333,125
    
    
    
    129,100
    
    
    
    
    
    
    
    40,400
    
    
    
    502,6252008
    
    
    
    325,000
    
    
    
    93,100
    
    
    
    
    
    
    
    37,400
    
    
    
    455,500Gregg A Melnick
    
    
    2010
    
    
    $
    525,000
    
    
    $
    344,991
    
    
    $
    232,530
    
    
    $
    262,600
    
    
    $
    1,365,121President, Party City Retail
Group
 
 (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 2010, 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. 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)
    
    Includes a special stock option distribution of $9,400 per vested option
described earlier to the following named executive officers in the amounts
after their names: Mr. Rittenberg ($2,232,442), Mr. Harrison ($1,517,714), Mr.
 Correale ($217,704) and Mr. Melnick ($253,800).(e)
    
    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. 50




---



##### 



Grants of Plan Based Awards
  Potential Payments upon Change in Control
  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
    
    
    
    3/6/201840.40
    
    
    
    127.20
    
    
    
    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
    
    
    
    3/6/201838.16
    
    
    
    114.48
    
    
    
    12,000
    
    
    
    4/1/2016103.01
    
    
    
    108.58
    
    
    
    10,000
    
    
    
    4/1/201520.29
    
    
    
    
    
    
    
    2,500
    
    
    
    4/30/2014Michael D. Heller
    
    
    13.58
    
    
    
    44.37
    
    
    
    28,350
    
    
    
    12/30/2018Michael A. Correale
    
    
    12.72
    
    
    
    25.44
    
    
    
    12,000
    
    
    
    4/1/201610.44
    
    
    
    17.40
    
    
    
    10,000
    
    
    
    4/1/2015Gregg A. Melnick
    
    
    
    
    
    
    46.00
    
    
    
    28,350
    
    
    
    3/10/20202.00
    
    
    
    13.00
    
    
    
    22,340
    
    
    
    2/25/201825.00
    
    
    
    50.00
    
    
    
    12,000
    
    
    
    4/1/2016
 Director Compensation
 Annual Compensation
 51




---



##### 



Fees Earned or
    
    OptionName
    
    Paid in Cash
    
    Awards
    
    TotalJordan A. Kahn
    
    $
    26,000
    
    
    $
    
    
    
    $
    26,000William A. Kussell
    
    
    19,500
    
    
    
    14,000
    
    
    
    33,500Carol M. Meyrowitz
    
    
    26,000
    
    
    
    
    
    
    $
    26,000
   Compensation Committee Interlocks and Insider Participation
  Employment Arrangements
 Employment Agreement with Gerald C. Rittenberg.
  52




---



##### 



Employment Agreement with James M. Harrison.
 53




---



##### 



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)
    
    
    36.66
    
    
    
    *Michael F. Cronin(6)
    
    
    5,605.16
    
    
    
    18.19
    %James M. Harrison(7), 
    
    
    237.31
    
    
    
    *Kevin M. Hayes(6)
    
    
    5,605.16
    
    
    
    18.19
    %Jordan A. Kahn(8) 
    
    
    59.33
    
    
    
    *William A. Kussell
    
    
    
    
    
    
    *Richard K. Lubin(9)
    
    
    11,210.31
    
    
    
    36.37
    %Gregg A. Melnick(10)
    
    
    67.00
    
    
    
    *Carol M. Meyrowitz(11) 
    
    
    27.45
    
    
    
    *David M. Mussafer (4) 
    
    
    11,918.71
    
    
    
    38.67
    %Gerald C. Rittenberg(12), 
    
    
    398.69
    
    
    
    1.25
    %Robert J. Small(10)
    
    
    11,210.31
    
    
    
    36.37
    %All directors and executive officers as a group (12 persons)
    
    
    29,560.63
    
    
    
    94.39
    %
 
 *
    
    Less than 1%
    
    Director
    
    Named Executive Officer 54




---



##### 



(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.(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 23.16 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 161.46 shares which could be acquired by Mr. Harrison within 60 days upon exercise of options.(8)
    
    Includes 2.5 shares which could be acquired by Mr. Kahn within 60 days upon exercise of options.(9)
    
    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.(10)
    
    Includes 27.00 shares which could be acquired by Mr. Melnick within 60 days upon exercise of options.(11)
    
    Includes 1.62 shares which could be acquired by Ms. Meyrowitz within 60 days upon exercise of options.(12)
    
    Includes 237.49 shares which could be acquired by Mr. Rittenberg within 60 days upon exercise of options. Stockholders Agreement
 (
 55




---



##### 



Item 13. Certain Relationships and Related Transactions
  
 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))
 56




---



##### 



ExhibitNumber
    
    Description3(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))3(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))4(3)
    
    ABL Credit Agreement dated as of August 13, 2010, by and among Amscan Holdings, Inc., AAH Holdings Corporation,
the subsidiaries of Amscan Holdings, Inc., from time to time party hereto, the Lenders, Wells Fargo Retail Finance, LLC, as
administrative agent and collateral agent for the Lenders, Bank of America, N.A., as syndication agent for the Lenders and RBS
Business Capital, TD Bank, N.A. and SunTrust Bank, as co-documentation agents. (incorporated by reference to Exhibit 4.3 to
the Registrants Current Report on Form 8-K dated December 2, 2010 (Commission File No. 000-21827))4(4)
    
    Pledge and Security Agreement dated as of August 13, 2010 by and among Amscan Inc., Anagram International, Inc.,
Am-Source, LLC, Factory Card Outlet of America Ltd., Gags and Games, Inc., PA Acquisition Corp., Party City Corporation, and Party
City Franchise Group, LLC, each a Borrower and collectively, Borrowers, Amscan Holdings, Inc., AAH Holdings Corporation, the
Subsidiary Parties from time to time party hereto, and Wells Fargo Retail Finance, LLC, as administrative and collateral agent for the
lenders party to the Credit Agreement. (incorporated by reference to Exhibit 4.4 to the Registrants Current Report on Form 8-K dated
December 2, 2010 (Commission File No. 000-21827))4(5)
    
    Amendment No. 1 to ABL Credit Agreement, dated as of December 2, 2010 (this Amendment No.1),
is by and among Wells Fargo Bank, National Association successor by merger to Wells Fargo Retail
Finance, LLC, in its capacity as administrative and collateral agent for the Lenders (as
hereinafter defined) pursuant to the Credit Agreement defined below (in such capacity,
Administrative Agent), the parties to the Credit Agreement as lenders (individually, each a
Lender and collectively, Lenders), Amscan Inc., a New York corporation (Amscan Inc.), Anagram
International, Inc., a Minnesota corporation (International), Am-Source, LLC, a Rhode Island
limited liability company (Am-Source), Factory Card Outlet of America Ltd., an Illinois
corporation (Factory), Gags and Games, Inc., a Michigan corporation (Gags and Games), PA
Acquisition Corp., a Delaware corporation (PA Acquisition), Party City Corporation, a Delaware
corporation (Party City), Party City Franchise Group, LLC, a Delaware limited liability company
(PCFG and together with Amscan Inc., International, Am-Source, Factory, Gags and Games, PA
Acquisition and Party City, each individually a Borrower and collectively, Borrowers), AAH
Holdings Corporation, a Delaware corporation (Holdings), Amscan Holdings, Inc., a Delaware
corporation (Amscan), JCS Packaging, Inc., a New York corporation (JCS), M&D Industries, Inc.,
a Delaware corporation (M&D), SSY Realty Corp., a New York corporation (SSY), Trisar, Inc., a
California corporation (Trisar), Anagram Eden Prairie Property Holdings LLC, a Delaware limited
liability company (Eden Prairie), Anagram International, LLC, a Nevada limited liability company
(AIL), Anagram International Holdings, Inc., a Minnesota corporation (AIHI), Factory Card &
Party Outlet Corp., a Delaware corporation (Outlet), Party America Franchising, Inc., a Minnesota
corporation (Franchising), Party City Franchise Group Holdings, LLC, a Delaware limited liability
company (PCFG Holdings and, together with Holdings, Amscan, JCS, M&D, SSY, Trisar, Eden Prairie,
AIL, AIHI, Outlet and Franchising, each individually a Guarantor and collectively, Guarantors).4(6)
    
    Term Loan Credit Agreement and Related Exhibits dated as of December 2, 2010
among AAH Holdings Corporation, AMSCAN Holdings, Inc., the subsidiaries of AMSCAN Holdings, Inc. from time to time party hereto,
the financial institutions party hereto as the Lenders, and Credit Suisse AG, as Administrative Agent and Collateral Agent,
Credit Suisse Securities (USA) LLC and Goldman Sachs Lending Partners LLC as Joint Lead Arrangers;
Credit Suisse Securities (USA) LLC, Goldman Sachs Lending Partners LLC, Barclays Capital, Deutsche Bank Securities Inc. and
Wells Fargo Securities, LLC as Joint Bookrunners; Goldman Sachs Lending Partners LLC and Wells Fargo Securities, LLC
as Co-Syndication Agents; Barclays Capital and Deutsche Bank Securities Inc. as Co-Documentation Agents.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))
 57




---



##### 



ExhibitNumber
    
    Description10(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))21
    
    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)
 58




---



##### 



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. CorrealeMichael A. CorrealeChief Financial Officer
(on behalf of the Company and
as principal financial officer)   Signature
    
    Title
    
    Date/s/ Robert J. Small
    
    Chairman of the Board of Directors
    
    April 13, 2011Robert J. Small/s/ Steven J. Collins
    
    Director
    
    April 13, 2011Steven J. Collins/s/ Michael F. Cronin
    
    Director
    
    April 13, 2011Michael F. Cronin/s/ Kevin M. Hayes
    
    Director
    
    April 13, 2011Kevin M. Hayes/s/ Jordan A. Kahn
    
    Director
    
    April 13, 2011Jordan A. Kahn/s/ William A Kussell
    
    Director
    
    April 13, 2011William A. Kussell/s/ Richard K. Lubin
    
    Director
    
    April 13, 2011Richard K. Lubin/s/ Carol M. Meyrowitz
    
    Director
    
    April 13, 2011Carol M. Meyrowitz/s/ David M. Mussafer
    
    Director
    
    April 13, 2011David M. Mussafer/s/ Gerald C. Rittenberg
    
    Chief Executive Officer and Director
    
    April 13, 2011Gerald C. Rittenberg/s/ James M. Harrison
    
    President, Chief Operating Officer and
    
    April 13, 2011James M. Harrison
    
    Director
 59




---



##### 



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, 2010 and 2009
    
    
    F-3Consolidated Statements of Income for the Years Ended December 31, 2010, 2009 and 2008
    
    
    F-4Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2010, 2009 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7Financial Statement Schedule for the Years Ended December 31, 2010, 2009 and 2008:Schedule II  Valuation and Qualifying Accounts
    
    
    F-46
  F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 F-2




---



##### 



AMSCAN HOLDINGS, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except per share amounts)
 December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    20,454
    
    
    $
    15,420Accounts receivable, net of allowances
    
    
    107,331
    
    
    
    82,781Inventories, net of allowances
    
    
    424,317
    
    
    
    335,950Prepaid expenses and other current assets
    
    
    65,672
    
    
    
    58,719Total current assets
    
    
    617,774
    
    
    
    492,870Property, plant and equipment, net
    
    
    190,729
    
    
    
    174,994Goodwill
    
    
    630,492
    
    
    
    559,261Trade names
    
    
    129,954
    
    
    
    157,283Other intangible assets, net
    
    
    55,362
    
    
    
    54,669Other assets, net
    
    
    28,840
    
    
    
    41,424Total assets
    
    $
    1,653,151
    
    
    $
    1,480,501LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Loans and notes payable
    
    $
    150,098
    
    
    $
    77,635Accounts payable
    
    
    108,172
    
    
    
    76,901Accrued expenses
    
    
    111,054
    
    
    
    93,680Income taxes payable
    
    
    34,325
    
    
    
    32,061Redeemable warrants
    
    
    15,086
    
    
    
    15,444Current portion of long-term obligations
    
    
    9,046
    
    
    
    34,906Total current liabilities
    
    
    427,781
    
    
    
    330,627Long-term obligations, excluding current portion
    
    
    841,112
    
    
    
    538,892Deferred income tax liabilities
    
    
    94,981
    
    
    
    101,570Deferred rent and other long-term liabilities
    
    
    14,766
    
    
    
    11,901Total liabilities
    
    
    1,378,640
    
    
    
    982,990Redeemable common securities (including 597.52 and 592.84 common shares issued and
outstanding at December 31, 2010 and December 31, 2009 )
    
    
    18,089
    
    
    
    18,389Commitments and contingenciesStockholders equity:Common Stock ($0.01 par value; 40,000.00 shares authorized; 30,226.50
shares issued and outstanding at December 31, 2010 and December 31, 2009, )
    
    
    
    
    
    
    Additional paid-in capital
    
    
    287,583
    
    
    
    335,823Retained (deficit) earnings
    
    
    (27,558
    )
    
    
    149,557Accumulated other comprehensive loss
    
    
    (5,915
    )
    
    
    (8,395
    )Amscan Holdings, Inc. stockholders equity
    
    
    254,110
    
    
    
    476,985Noncontrolling interests
    
    
    2,312
    
    
    
    2,137Total stockholdersequity
    
    
    256,422
    
    
    
    479,122Total liabilities, redeemable common securities and stockholders equity
    
    $
    1,653,151
    
    
    $
    1,480,501
  F-3




---



##### 



AMSCAN HOLDINGS, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands)
 Year Ended December 31,2010
    
    2009
    
    2008Revenues:Net sales
    
    $
    1,579,677
    
    
    $
    1,467,324
    
    
    $
    1,537,641Royalties and franchise fees
    
    
    19,417
    
    
    
    19,494
    
    
    
    22,020Total revenues
    
    
    1,599,094
    
    
    
    1,486,818
    
    
    
    1,559,661Expenses:Cost of sales
    
    
    943,058
    
    
    
    899,041
    
    
    
    966,426Selling expenses
    
    
    42,725
    
    
    
    39,786
    
    
    
    41,894Retail operating expenses
    
    
    296,891
    
    
    
    261,691
    
    
    
    273,627Franchise expenses
    
    
    12,269
    
    
    
    11,991
    
    
    
    13,686General and administrative expenses
    
    
    134,392
    
    
    
    119,193
    
    
    
    120,272Art and development costs
    
    
    14,923
    
    
    
    13,243
    
    
    
    12,462Impairment of trade name
    
    
    27,400
    
    
    
    
    
    
    
    17,376Total expenses
    
    
    1,471,658
    
    
    
    1,344,945
    
    
    
    1,455,743Income from operations
    
    
    127,436
    
    
    
    141,873
    
    
    
    113,918Interest expense, net
    
    
    40,850
    
    
    
    41,481
    
    
    
    50,915Other expense (income), net
    
    
    4,208
    
    
    
    (32
    )
    
    
    (818
    )Income before income taxes
    
    
    82,378
    
    
    
    100,424
    
    
    
    63,821Income tax expense
    
    
    32,945
    
    
    
    37,673
    
    
    
    24,188Net income
    
    
    49,433
    
    
    
    62,751
    
    
    
    39,633Less: net income (loss) attributable to noncontrolling interest
    
    
    114
    
    
    
    198
    
    
    
    (877
    )Net income attributable to Amscan Holdings, Inc.
    
    $
    49,319
    
    
    $
    62,553
    
    
    $
    40,510
  F-4




---



##### 



AMSCAN HOLDINGS, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 For the Years Ended December 31, 2008, 2009 and 2010
 (Dollars in thousands)
 Accumulated
    
    AmscanAdditional
    
    Retained
    
    Other
    
    Holdings Inc.
    
    Non-Common
    
    Common
    
    Paid-in
    
    (Deficit)
    
    Comprehensive
    
    Stockholders
    
    controllingShares
    
    Stock
    
    Capital
    
    Earnings
    
    Income (Loss)
    
    Equity
    
    Interests
    
    TotalBalance 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
    
    
    $
    479,122Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,319
    
    
    
    
    
    
    
    49,319
    
    
    
    114
    
    
    
    49,433Net change in cumulative translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (376
    )
    
    
    (376
    )
    
    
    61
    
    
    
    (315
    )Change in fair value of interest
rate swap contracts, net of income
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,563
    
    
    
    2,563
    
    
    
    
    
    
    
    2,563Change in fair value of foreign
exchange contracts, net of income
tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    293
    
    
    
    293
    
    
    
    
    
    
    
    293Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,799
    
    
    
    175
    
    
    
    51,974Revaluation of
redeemable common securities
    
    
    
    
    
    
    
    
    
    
    (5,305
    )
    
    
    
    
    
    
    
    
    
    
    (5,305
    )
    
    
    
    
    
    
    (5,305
    )Issuance of non-redeemable warrants
    
    
    
    
    
    
    
    
    
    
    21,000
    
    
    
    
    
    
    
    
    
    
    
    21,000
    
    
    
    
    
    
    
    21,000Dividend distribution
    
    
    
    
    
    
    
    
    
    
    (64,658
    )
    
    
    (226,434
    )
    
    
    
    
    
    
    (291,092
    )
    
    
    
    
    
    
    (291,092
    )Equity based compensation expense
    
    
    
    
    
    
    
    
    
    
    723
    
    
    
    
    
    
    
    
    
    
    
    723
    
    
    
    
    
    
    
    723Balance at December 31, 2010
    
    
    30,226.50
    
    
    $
    
    
    
    $
    287,583
    
    
    $
    (27,558
    )
    
    $
    (5,915
    )
    
    $
    254,110
    
    
    $
    2,312
    
    
    $
    256,422
  F-5




---



##### 



AMSCAN HOLDINGS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Cash flows provided by operating activities:Net income
    
    $
    49,433
    
    
    $
    62,751
    
    
    $
    39,633Less: net income (loss) attributable to noncontrolling interest
    
    
    114
    
    
    
    198
    
    
    
    (877
    )Net income attributable to Amscan Holdings, Inc.
    
    
    49,319
    
    
    
    62,553
    
    
    
    40,510Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization expense
    
    
    49,418
    
    
    
    44,382
    
    
    
    47,278Amortization of deferred financing costs
    
    
    2,475
    
    
    
    2,163
    
    
    
    2,221Provision for doubtful accounts
    
    
    637
    
    
    
    3,982
    
    
    
    1,092Deferred income tax (benefit) expense
    
    
    (8,942
    )
    
    
    8,803
    
    
    
    (7,885
    )Deferred rent
    
    
    4,500
    
    
    
    1,763
    
    
    
    1,202Undistributed income in unconsolidated joint venture
    
    
    (678
    )
    
    
    (632
    )
    
    
    (538
    )Impairment of trade names
    
    
    27,400
    
    
    
    
    
    
    
    17,376Impairment of fixed assets
    
    
    597
    
    
    
    156
    
    
    
    Loss (gain) on disposal of equipment
    
    
    191
    
    
    
    122
    
    
    
    (1,195
    )Equity based compensation
    
    
    6,018
    
    
    
    876
    
    
    
    4,357Tax benefit on exercised options
    
    
    
    
    
    
    
    
    
    
    (1,823
    )Debt retirement costs
    
    
    2,448
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (6,507
    )
    
    
    6,337
    
    
    
    8,237(Increase) decrease in inventories
    
    
    (85,767
    )
    
    
    30,933
    
    
    
    (52,347
    )(Increase) decrease in prepaid expenses and other current assets
    
    
    (22,993
    )
    
    
    (21,173
    )
    
    
    31,240Increase (decrease) in accounts payable, accrued expenses and
income taxes payable
    
    
    43,052
    
    
    
    (16,323
    )
    
    
    (9,796
    )Net cash provided by operating activities
    
    
    61,168
    
    
    
    123,942
    
    
    
    79,929Cash flows used in investing activities:Cash paid in connection with acquisitions
    
    
    (53,348
    )
    
    
    (3,378
    )
    
    
    (1,616
    )Cash held in escrow in connection with acquisitions
    
    
    
    
    
    
    (24,881
    )
    
    
    Capital expenditures
    
    
    (49,623
    )
    
    
    (26,195
    )
    
    
    (53,001
    )Proceeds from disposal of property and equipment
    
    
    205
    
    
    
    96
    
    
    
    3,418Net cash used in investing activities
    
    
    (102,766
    )
    
    
    (54,358
    )
    
    
    (51,199
    )Cash flows provided by (used in) financing activities:Repayment of loans, notes payable and long-term obligations
    
    
    (393,289
    )
    
    
    (70,247
    )
    
    
    (26,842
    )Proceeds from loans, notes payable and long-term obligations, net of
debt issuance costs
    
    
    742,153
    
    
    
    
    
    
    
    Tax benefit on exercised options
    
    
    
    
    
    
    
    
    
    
    1,823Sale of additional interest to minority shareholder
    
    
    
    
    
    
    
    
    
    
    2,500Payments
related to redeemable common stock and rollover options
    
    
    (572
    )
    
    
    
    
    
    
    (514
    )Dividend distribution
    
    
    (301,829
    )
    
    
    
    
    
    
    Proceeds from issuance of common stock and exercise of options,
net of retirements
    
    
    52
    
    
    
    90
    
    
    
    Net cash provided by (used in) financing activities
    
    
    46,515
    
    
    
    (70,157
    )
    
    
    (23,033
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    117
    
    
    
    2,935
    
    
    
    (9,913
    )Net increase (decrease) in cash and cash equivalents
    
    
    5,034
    
    
    
    2,362
    
    
    
    (4,216
    )Cash and cash equivalents at beginning of period
    
    
    15,420
    
    
    
    13,058
    
    
    
    17,274Cash and cash equivalents at end of period
    
    $
    20,454
    
    
    $
    15,420
    
    
    $
    13,058Supplemental disclosure of cash flow information:Cash paid during the periodInterest
    
    $
    38,363
    
    
    $
    40,207
    
    
    $
    52,511Income Tax
    
    $
    39,743
    
    
    $
    22,297
    
    
    $
    14,832
    F-6




---



##### 



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
   Reclassification
of prior year amounts
  Cash Equivalents
  Inventories
   Allowance for Doubtful Accounts
  F-7




---



##### 



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
   F-8




---



##### 



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
  Advertising
  Art and Development Costs
  Derivative Financial Instruments
  i.e i.e
 F-9




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Income Taxes
  Stock-Based Compensation
   Accumulated Other Comprehensive Loss
  Foreign Currency Transactions and Translation
  Recently Issued Accounting Pronouncements
   F-10




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Note 3  Inventories
  December 31,2010
    
    
    2009Finished goods
    
    $
    416,831
    
    
    $
    325,421Raw materials
    
    
    11,879
    
    
    
    12,650Work in process
    
    
    6,112
    
    
    
    6,431434,822
    
    
    
    344,502Less: reserve for slow moving and obsolete inventory
    
    
    (10,505
    )
    
    
    (8,552
    )$
    424,317
    
    
    $
    335,950
 Note 4  Property, Plant and Equipment, Net
 Property, plant and equipment, net consisted of the following:
 December 31,2010
    
    
    2009
    
    
    Useful livesMachinery and equipment
    
    $
    128,655
    
    
    $
    117,780
    
    
    3-15 yearsBuildings
    
    
    47,909
    
    
    
    47,840
    
    
    40 yearsData processing
    
    
    67,631
    
    
    
    50,691
    
    
    3-5 yearsLeasehold improvements
    
    
    72,114
    
    
    
    64,617
    
    
    1-20 yearsFurniture and fixtures
    
    
    115,043
    
    
    
    93,870
    
    
    5-10 yearsLand
    
    
    6,059
    
    
    
    6,009437,411
    
    
    
    380,807Less: accumulated depreciation
    
    
    (246,682
    )
    
    
    (205,813
    )$
    190,729
    
    
    $
    174,994
   December 31,2010
    
    
    2009Machinery and equipment under capital leases
    
    $
    10,030
    
    
    $
    9,444Less: accumulated amortization
    
    
    (6,269
    )
    
    
    (4,212
    )$
    3,761
    
    
    $
    5,232
  F-11




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Note 5
 Acquisitions and Transactions
 Wholesale Acquisitions
      Franchise Store Acquisitions
  F-12




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Note 6  Other Intangible Assets, net
  At December 31, 2010Accumulated
    
    Net CarryingCost
    
    Amortization
    
    Value
    
    Useful livesRetail franchise licenses
    
    $
    63,630
    
    
    $
    24,754
    
    
    $
    38,876
    
    
    20 yearsCustomer lists and relationships
    
    
    14,500
    
    
    
    6,444
    
    
    
    8,056
    
    
    15 yearsCopyrights, designs, and other
    
    
    13,710
    
    
    
    13,096
    
    
    
    614
    
    
    2-3 yearsLeasehold and other intangibles
    
    
    2,087
    
    
    
    1,593
    
    
    
    494
    
    
    1-15 yearsAcquired design licenses
    
    
    10,973
    
    
    
    3,651
    
    
    
    7,322
    
    
    1-7 yearsTotal
    
    $
    104,900
    
    
    $
    49,538
    
    
    $
    55,362
 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
    
    $
    93,849
    
    
    $
    39,180
    
    
    $
    54,669
  Note 7  Loans and Notes Payable
   F-13




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 New ABL Facility
          Prior ABL Facility
  F-14




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
     PCFG Credit Facility
   Other Credit Agreements
   F-15




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Note 8  Long-Term Obligations
  December 31,2010
    
    2009First lien term loan due 2017(a)
    
    $
    666,644
    
    
    $
    Term loan (b)
    
    
    
    
    
    
    364,688PCFG term loan (c)
    
    
    
    
    
    
    23,000Mortgage obligation (d)
    
    
    4,539
    
    
    
    5,600Capital lease obligations(e)
    
    
    3,975
    
    
    
    5,5108.75% senior subordinated notes(f)
    
    
    175,000
    
    
    
    175,000Total long-term obligations
    
    $
    850,158
    
    
    $
    573,798Less: current portion
    
    
    (9,046
    )
    
    
    (34,906
    )Long-term obligations, excluding current portion
    
    $
    841,112
    
    
    $
    538,892
 
 New Term Loan Credit Agreement
       F-16




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
     Prior Term Loan Credit Agreements
      Other Long Term Debt Agreements
    F-17




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
Dollars in thousands, except per share)
      Long-term Debt
    
    Capital LeaseObligations
    
    Obligations
    
    Totals2011
    
    $
    6,810
    
    
    $
    2,236
    
    
    $
    9,0462012
    
    
    6,835
    
    
    
    1,446
    
    
    
    8,2812013
    
    
    6,860
    
    
    
    147
    
    
    
    7,0072014
    
    
    181,982
    
    
    
    131
    
    
    
    182,1132015
    
    
    5,737
    
    
    
    15
    
    
    
    5,752Thereafter
    
    
    637,959
    
    
    
    
    
    
    
    637,959Long-term obligations
    
    $
    846,183
    
    
    $
    3,975
    
    
    $
    850,158
 Note 9  Capital Stock
  F-18




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
    2010
    
    2009Redeemable common shares
    
    $
    16,547
    
    
    $
    16,8072004 Rollover Options
    
    
    1,542
    
    
    
    1,582$
    18,089
    
    
    $
    18,389
 Distinguishing Liabilities from Equity
  Note 10  Provision for Doubtful Accounts
  F-19




---



##### 



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 Expense (Income)
 Year Ended December 31,2010
    
    2009
    
    2008Other expense (income) consists of the following:Undistributed income in unconsolidated joint venture
    
    $
    (678
    )
    
    $
    (632
    )
    
    $
    (538
    )Change in fair market value of the interest rate cap
    
    
    
    
    
    
    
    
    
    
    (187
    )Foreign currency loss (gain)
    
    
    354
    
    
    
    670
    
    
    
    (476
    )Write-off of deferred finance charges in connection
with the extinguishment of debt
    
    
    2,448
    
    
    
    
    
    
    
    Other acquisition costs
    
    
    1,607
    
    
    
    
    
    
    
    Royalty amendment fee
    
    
    
    
    
    
    
    
    
    
    400Other, net
    
    
    477
    
    
    
    (70
    )
    
    
    (17
    )Other expense (income), net
    
    $
    4,208
    
    
    $
    (32
    )
    
    $
    (818
    )
 F-20




---



##### 



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
 Goodwill or Gain from Bargain Purchase, Including
Consideration Transferred,
     F-21




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Time-based options
     Options Granted
    
    Exercise Price per Share722.00
    
    $
    10,000489.50
    
    
    12,000187.00
    
    
    14,25020.00
    
    
    17,500122.00
    
    
    20,7505.00
    
    
    22,34095.00
    
    
    28,35057.00
    
    
    27,700
  F-22




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
  Expected dividend rate
    
    
    
    Risk free interest rate
    
    1.76% to 5.08%Price volatility
    
    
    
    15.00Weighted average expected life
    
    
    
    7.5Forfeiture rate
    
    
    
    7.75
   Performance-based options
   Options Granted
    
    Exercise Price per Share760.00
    
    $
    10,000893.50
    
    
    12,000314.00
    
    
    14,25030.00
    
    
    17,500147.00
    
    
    20,750185.00
    
    
    22,340116.00
    
    
    28,35099.00
    
    
    27,700
 F-23




---



##### 



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, 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
    
    
    
    13,462Granted
    
    
    327.00
    
    
    
    28,035
    
    
    
    7,399Exercised
    
    
    (4.68
    )
    
    
    11,090Canceled
    
    
    (133.10
    )
    
    
    21,622Outstanding at December 31, 2010
    
    
    3,122.25
    
    
    
    14,350Exercisable at December 31, 2010
    
    
    996.79
    
    
    
    11,139
 F-24




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
 Note 16  Income Taxes
  Year Ended December 31,2010
    
    2009
    
    2008Domestic
    
    $
    77,537
    
    
    $
    92,364
    
    
    $
    54,701Foreign
    
    
    4,841
    
    
    
    8,060
    
    
    
    9,120Total
    
    $
    82,378
    
    
    $
    100,424
    
    
    $
    63,821
  Year Ended December 31,2010
    
    2009
    
    2008Current:Federal
    
    $
    34,752
    
    
    $
    22,643
    
    
    $
    24,515State
    
    
    5,281
    
    
    
    3,930
    
    
    
    4,817Foreign
    
    
    1,854
    
    
    
    2,297
    
    
    
    2,741Total current provision
    
    
    41,887
    
    
    
    28,870
    
    
    
    32,073Deferred:Federal
    
    
    (7,187
    )
    
    
    7,705
    
    
    
    (6,627
    )State
    
    
    (1,739
    )
    
    
    1,150
    
    
    
    (1,139
    )Foreign
    
    
    (16
    )
    
    
    (52
    )
    
    
    (119
    )Total deferred (benefit) provision
    
    
    (8,942
    )
    
    
    8,803
    
    
    
    (7,885
    )Income tax expense
    
    $
    32,945
    
    
    $
    37,673
    
    
    $
    24,188
  F-25




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
  December 31,2010
    
    2009Current deferred income tax assets:Inventory valuation
    
    $
    17,246
    
    
    $
    16,186Allowance for doubtful accounts
    
    
    1,129
    
    
    
    941Accrued liabilities
    
    
    11,637
    
    
    
    10,733Contribution carryforward
    
    
    107
    
    
    
    56Tax loss carryforward
    
    
    405
    
    
    
    1,761Tax credit carryforward
    
    
    576
    
    
    
    576Current deferred income tax assets (included in
prepaid expenses and other current assets)
    
    $
    31,100
    
    
    $
    30,253Non-current deferred income tax liabilities, net:Property, plant and equipment
    
    $
    12,194
    
    
    $
    11,631Intangible assets
    
    
    59,031
    
    
    
    69,774Amortization of goodwill and other assets
    
    
    22,599
    
    
    
    19,457Other
    
    
    1,157
    
    
    
    708Non-current deferred income tax liabilities, net
    
    $
    94,981
    
    
    $
    101,570
   Year Ended December 31,2010
    
    2009
    
    2008Provision at federal statutory income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income tax, net of federal income tax benefit
    
    
    2.8
    
    
    
    3.1
    
    
    
    4.2Warrant compensation charge not deductible
    
    
    2.0
    
    
    
    
    
    
    
    Domestic manufacturing deductions
    
    
    (3.0
    )
    
    
    (0.8
    )
    
    
    (1.3
    )Adjustments
related to previous acquisitions
    
    
    3.5
    
    
    
    
    
    
    
    Other
    
    
    (0.3
    )
    
    
    0.2
    
    
    
    Effective income tax rate
    
    
    40.0
    %
    
    
    37.5
    
    
    
    37.9
    %
   F-26




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share)
     2010
    
    2009
    
    2008Balance as of January 1,
    
    $
    992
    
    
    $
    2,024
    
    
    $
    2,485Increases related to current year tax positions
    
    
    73
    
    
    
    81
    
    
    
    172Increases related to prior year tax positions
    
    
    505Decrease related to settlements
    
    
    (334
    )
    
    
    (822
    )Decreases related to lapsing of statutes of
limitations
    
    
    (405
    )
    
    
    (291
    )
    
    
    (633
    )Balance as of December 31,
    
    $
    831
    
    
    $
    992
    
    
    $
    2,024
     F-27




---



##### 



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 LeasePayments2011
    
    $
    112,1722012
    
    
    95,0262013
    
    
    67,3142014
    
    
    45,5102015
    
    
    33,369Thereafter
    
    
    71,773$
    425,164
    F-28




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 Product Royalty Agreements
   Future MinimumRoyalty Payments2011
    
    $
    8,2712012
    
    
    7,3202013
    
    
    1,7242014
    
    
    8002015
    
    
    550Thereafter
    
    
    1,100$
    19,765
   Product PurchaseCommitments2011
    
    $
    26,7002012
    
    
    27,2002013
    
    
    27,700$
    81,600
 Legal Proceedings
  Related Party Transactions
  F-29




---



##### 



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, 2010Revenues:Net sales
    
    $
    769,247
    
    
    $
    1,108,785
    
    
    $
    1,878,032Royalties and franchise fees
    
    
    
    
    
    
    19,417
    
    
    
    19,417Total revenues
    
    
    769,247
    
    
    
    1,128,202
    
    
    
    1,897,449Eliminations
    
    
    (298,355
    )
    
    
    
    
    
    
    (298,355
    )Net revenues
    
    $
    470,892
    
    
    $
    1,128,202
    
    
    $
    1,599,094Income from operations
    
    $
    85,636
    
    
    $
    41,800
    
    
    $
    127,436Interest expense, net
    
    
    
    
    
    
    
    
    
    
    40,850Other expense, net
    
    
    
    
    
    
    
    
    
    
    4,208Income before income taxes
    
    
    
    
    
    
    
    
    
    $
    82,378Depreciation
and amortization
    
    $
    18,979
    
    
    $
    30,439
    
    
    $
    49,418Total assets
    
    $
    948,850
    
    
    $
    704,301
    
    
    $
    1,653,151
 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
    
    
    
    
    
    
    
    
    
    $
    100,424Depreciation
and amortization
    
    $
    14,652
    
    
    $
    29,730
    
    
    $
    44,382Total assets
    
    $
    747,262
    
    
    $
    733,239
    
    
    $
    1,480,501
 F-30




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 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 expense, net
    
    
    
    
    
    
    
    
    
    
    (818
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    $
    63,821Depreciation
and amortization
    
    $
    14,926
    
    
    $
    32,352
    
    
    $
    47,278Total assets
    
    $
    702,938
    
    
    $
    805,039
    
    
    $
    1,507,977
 Geographic Segments
   Domestic
    
    
    Foreign
    
    
    Eliminations
    
    
    ConsolidatedYear Ended December 31, 2010Revenues:Net sales to unaffiliated customers
    
    $
    1,469,533
    
    
    $
    110,144
    
    
    $
    
    
    
    $
    1,579,677Net sales between geographic areas
    
    
    23,570
    
    
    
    
    
    
    
    (23,570
    )
    
    
    Net sales
    
    
    1,493,103
    
    
    
    110,144
    
    
    
    (23,570
    )
    
    
    1,579,677Royalties and franchise fees
    
    
    19,417
    
    
    
    
    
    
    
    
    
    
    
    19,417Total revenues
    
    $
    1,512,520
    
    
    $
    110,144
    
    
    $
    (23,570
    )
    
    $
    1,599,094Income from operations
    
    $
    120,058
    
    
    $
    6,129
    
    
    $
    1,249
    
    
    $
    127,436Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,850Other income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,208Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    82,378Depreciation
and amortization
    
    $
    48,427
    
    
    $
    991
    
    
    
    
    
    
    $
    49,418Total assets
    
    $
    1,645,154
    
    
    $
    108,646
    
    
    $
    (100,649
    )
    
    $
    1,653,151
 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
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    100,424Depreciation and amortization
    
    $
    43,496
    
    
    $
    886
    
    
    
    
    
    
    $
    44,382Total assets
    
    $
    1,478,493
    
    
    $
    82,890
    
    
    $
    (80,882
    )
    
    $
    1,480,501
 F-31




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 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 expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (818
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    63,821Depreciation and amortization
    
    $
    46,328
    
    
    $
    950
    
    
    
    
    
    
    $
    47,278Total assets
    
    $
    1,508,310
    
    
    $
    49,319
    
    
    $
    (49,652
    )
    
    $
    1,507,977
 Note 19  Quarterly Results  (Unaudited)
   For the Three Months Ended,March 31,
    
    June 30,
    
    September 30,
    
    December 31,2010Revenues:Net sales
    
    $
    304,379
    
    
    $
    352,705
    
    
    $
    358,772
    
    
    $
    563,821Royalties and franchise fees
    
    
    3,844
    
    
    
    4,453
    
    
    
    4,035
    
    
    
    7,085Gross profit
    
    
    104,479
    
    
    
    141,840
    
    
    
    132,437
    
    
    
    257,863Income from operations
    
    
    8,288
    
    
    
    35,367
    
    
    
    17,963
    
    
    
    65,818
    (a)Net (loss) income attributable
to Amscan Holdings, Inc.
    
    
    (412
    )
    
    
    16,460
    
    
    
    4,603
    
    
    
    28,668
    (a)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
    
    
    
    46,119
 F-32




---



##### 



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 31,2008Revenues: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)
 
 (a)
    
    During 2010 and 2008, the Company instituted programs to convert its FCPO
stores and its company-owned and franchised Party America stores to Party City
stores and recorded fourth quarter charges of $27,400, and $17,376,
respectively, for the impairment of the Factory Card & Party Outlet and Party
America trade names. 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)
    
    2010Derivative assets
    
    
    
    
    
    $
    241
    
    
    
    
    
    
    $
    241Derivative liabilities
    
    
    
    
    
    
    (2,288
    )
    
    
    
    
    
    
    (2,288
    )
 F-33




---



##### 



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)
    
    2009Derivative assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Derivative liabilities
    
    
    
    
    
    $
    (6,582
    )
    
    
    
    
    
    $
    (6,582
    )
    December 31, 2010
    
    December 31, 2009Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueTerm Loans
    
    $
    666,644
    
    
    $
    674,060
    
    
    $
    364,688
    
    
    $
    331,866$175,000 Senior Subordinated Notes
    
    
    175,000
    
    
    
    176,750
    
    
    
    175,000
    
    
    
    166,250
  Note 21  Derivative Financial Instruments
 Interest Rate Risk Management
     F-34




---



##### 



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
    
    2010
    
    
    2009
    
    
    December 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2010
    
    
    December 31, 2009Interest Rate Hedge
    
    $
    135,374
    
    
    $
    163,441
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    (b) AE
    
    $
    (2,244
    )
    
    (b) AE
    
    $
    (6,313
    )Foreign Exchange
Contracts
    
    
    13,468
    
    
    
    19,200
    
    
    (a) PP
    
    
    241
    
    
    
    
    
    
    $
    
    
    
    (a) AE
    
    
    (44
    )
    
    (a) AE
    
    
    (269
    )Total Hedges
    
    $
    148,842
    
    
    $
    182,641
    
    
    
    
    
    
    $
    241
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    (2,288
    )
    
    
    
    
    
    $
    (6,582
    )
 
 (a)
    
    PP = Prepaid expenses and other current assets(b)
    
    AE = Accrued expenses F-35




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 Note 22  Comprehensive Income
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Net income attributable to Amscan Holdings, Inc.
    
    $
    49,319
    
    
    $
    62,553
    
    
    $
    40,510Net change in cumulative translation adjustment
    
    
    (376
    )
    
    
    4,007
    
    
    
    (11,338
    )Change in fair value of interest rate swap contracts, net
of income taxes of $1,505, $773, and $(2,851)
    
    
    2,563
    
    
    
    1,317
    
    
    
    (4,855
    )Change in fair value of foreign exchange contracts, net
of income tax (benefit) expense of $172, $(1,097),
and $1,169
    
    
    293
    
    
    
    (1,867
    )
    
    
    1,990Comprehensive income attributable to Amscan Holdings, Inc.
    
    $
    51,799
    
    
    $
    66,010
    
    
    $
    26,307
  Year Ended December 31,2010
    
    
    2009Cumulative translation adjustment
    
    $
    (4,625
    )
    
    $
    (4,249
    )Interest rate swap contracts, net of
income tax benefit of $(830) and $(2,336)
    
    
    (1,414
    )
    
    
    (3,977
    )Foreign exchange contracts, net of income
tax expense (benefit) of $73 and $(100)
    
    
    124
    
    
    
    (169
    )Total accumulated other comprehensive income
    
    $
    (5,915
    )
    
    $
    (8,395
    )
 Note 23  Subsequent Events
  F-36




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share)
 Note 24  Condensed Consolidating Financial Information
  
    
    Amscan Inc.
    
    Am-Source, LLC
    
    Anagram Eden Prairie Property Holdings LLC
    
    Anagram International, Inc.
    
    Anagram International Holdings, Inc.
    
    Anagram International, LLC
    
    Gags & Games, Inc.
    
    JCS Packaging Inc.
    
    M&D Industries, Inc.
    
    Party City Corporation
    
    PA Acquisition Corporation
    
    SSY Realty Corp.
    
    Party City Franchise Group Holdings, LLC (PCFG)
    
    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.
    
    Christys Asia, Ltd.
    
    Christys By Design, Ltd.
    
    Christys Dress Up, Ltd.
    
    Christys Garments & Accessories Ltd.
    
    JCS Hong Kong Ltd.
    F-37




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share amounts)
 CONSOLIDATING BALANCE SHEET

December 31, 2010
 AHI and
    
    CombinedCombined
    
    Non-Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    14,198
    
    
    $
    6,256
    
    
    $
    
    
    
    $
    20,454Accounts receivable , net
    
    
    76,699
    
    
    
    30,632
    
    
    
    
    
    
    
    107,331Inventories, net
    
    
    405,452
    
    
    
    19,883
    
    
    
    (1,018
    )
    
    
    424,317Prepaid expenses and other current assets
    
    
    61,211
    
    
    
    4,461
    
    
    
    
    
    
    
    65,672Total current assets
    
    
    557,560
    
    
    
    61,232
    
    
    
    (1,018
    )
    
    
    617,774Property, plant and equipment, net
    
    
    187,574
    
    
    
    3,155
    
    
    
    
    
    
    
    190,729Goodwill
    
    
    600,014
    
    
    
    30,478
    
    
    
    
    
    
    
    630,492Trade names
    
    
    129,954
    
    
    
    
    
    
    
    
    
    
    
    129,954Other intangible assets, net
    
    
    55,362
    
    
    
    
    
    
    
    
    
    
    
    55,362Investment in and advances to
unconsolidated subsidiaries
    
    
    64,485
    
    
    
    
    
    
    
    (64,485
    )
    
    
    Due from affiliates
    
    
    22,148
    
    
    
    12,998
    
    
    
    (35,146
    )
    
    
    Other assets, net
    
    
    28,057
    
    
    
    783
    
    
    
    
    
    
    
    28,840Total assets
    
    
    1,645,154
    
    
    $
    108,646
    
    
    $
    (100,649
    )
    
    
    1,653,151LIABILITIES, REDEEMABLE COMMON SECURITIES AND
STOCKHOLDERS EQUITYCurrent liabilities:Loans and notes payable
    
    
    150,098
    
    
    
    
    
    
    
    
    
    
    
    150,098Accounts payable
    
    
    97,510
    
    
    
    10,662
    
    
    
    
    
    
    
    108,172Accrued expenses
    
    
    102,749
    
    
    
    8,305
    
    
    
    
    
    
    
    111,054Income taxes payable
    
    
    35,706
    
    
    
    (1,355
    )
    
    
    (26
    )
    
    
    34,325Due to affiliates
    
    
    11,593
    
    
    
    23,553
    
    
    
    (35,146
    )
    
    
    Redeemable warrants
    
    
    15,086
    
    
    
    
    
    
    
    
    
    
    
    15,086Current portion of long-term obligations
    
    
    9,005
    
    
    
    41
    
    
    
    
    
    
    
    9,046Total current liabilities
    
    
    421,747
    
    
    
    41,206
    
    
    
    (35,172
    )
    
    
    427,781Long-term obligations, excluding current portion
    
    
    841,023
    
    
    
    89
    
    
    
    
    
    
    
    841,112Deferred income tax liabilities
    
    
    94,427
    
    
    
    554
    
    
    
    
    
    
    
    94,981Other
    
    
    14,766
    
    
    
    
    
    
    
    
    
    
    
    14,766Total liabilities
    
    
    1,371,963
    
    
    
    41,849
    
    
    
    (35,172
    )
    
    
    1,378,640Redeemable common securities
    
    
    18,089
    
    
    
    
    
    
    
    
    
    
    
    18,089Commitments and contingenciesStockholders equity:Common Stock
    
    
    
    
    
    
    336
    
    
    
    (336
    )
    
    
    Additional paid-in capital
    
    
    287,583
    
    
    
    31,025
    
    
    
    (31,025
    )
    
    
    287,583Retained (deficit)earnings
    
    
    (26,566
    )
    
    
    37,535
    
    
    
    (38,527
    )
    
    
    (27,558
    )Accumulated other comprehensive (loss) income
    
    
    (5,915
    )
    
    
    (4,411
    )
    
    
    4,411
    
    
    
    (5,915
    )Amscan Holdings, Inc. stockholders equity
    
    
    255,102
    
    
    
    64,485
    
    
    
    (65,477
    )
    
    
    254,110Noncontrolling interests
    
    
    
    
    
    
    2,312
    
    
    
    
    
    
    
    2,312Total stockholders equity
    
    
    255,102
    
    
    
    66,797
    
    
    
    (65,477
    )
    
    
    256,422Total liabilities, redeemable common securities and
stockholders equity
    
    $
    1,645,154
    
    
    $
    108,646
    
    
    $
    (100,649
    )
    
    $
    1,653,151
 F-38




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share amounts)
 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
    
    
    52,706
    
    
    
    6,013
    
    
    
    
    
    
    
    58,719Total current assets
    
    
    416,605
    
    
    
    77,212
    
    
    
    (947
    )
    
    
    492,870Property, plant and equipment, net
    
    
    163,999
    
    
    
    10,995
    
    
    
    
    
    
    
    174,994Goodwill
    
    
    521,222
    
    
    
    38,039
    
    
    
    
    
    
    
    559,261Trade 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
 F-39




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share amounts)
 CONSOLIDATING STATEMENT OF INCOME

For The Year Ended December 31, 2010
 AHI andCombined
    
    Combined Non-Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedRevenues:Net sales
    
    $
    1,493,103
    
    
    $
    110,144
    
    
    $
    (23,570
    )
    
    $
    1,579,677Royalties and franchise fees
    
    
    19,417
    
    
    
    
    
    
    
    
    
    
    
    19,417Total revenues
    
    
    1,512,520
    
    
    
    110,144
    
    
    
    (23,570
    )
    
    
    1,599,094Expenses:Cost of sales
    
    
    884,957
    
    
    
    81,600
    
    
    
    (23,499
    )
    
    
    943,058Selling expenses
    
    
    31,379
    
    
    
    11,346
    
    
    
    
    
    
    
    42,725Retail operating expenses
    
    
    296,891
    
    
    
    
    
    
    
    
    
    
    
    296,891Franchise expenses
    
    
    12,269
    
    
    
    
    
    
    
    
    
    
    
    12,269General and administrative expenses
    
    
    124,542
    
    
    
    11,170
    
    
    
    (1,320
    )
    
    
    134,392Art and development costs
    
    
    15,024
    
    
    
    (101
    )
    
    
    
    
    
    
    14,923Impairment of trade name
    
    
    27,400
    
    
    
    
    
    
    
    
    
    
    
    27,400Total expenses
    
    
    1,392,462
    
    
    
    104,015
    
    
    
    (24,819
    )
    
    
    1,471,658Income from operations
    
    
    120,058
    
    
    
    6,129
    
    
    
    1,249
    
    
    
    127,436Interest expense, net
    
    
    40,791
    
    
    
    59
    
    
    
    
    
    
    
    40,850Other (income) expense, net
    
    
    (1,312
    )
    
    
    1,159
    
    
    
    4,361
    
    
    
    4,208Income before income taxes
    
    
    80,579
    
    
    
    4,911
    
    
    
    (3,112
    )
    
    
    82,378Income tax expense
    
    
    31,215
    
    
    
    1,756
    
    
    
    (26
    )
    
    
    32,945Net income
    
    $
    49,364
    
    
    $
    3,155
    
    
    $
    (3,086
    )
    
    $
    49,433Less net income attributable to noncontrolling interests
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    114Net income attributable to Amscan Holdings, Inc.
    
    $
    49,364
    
    
    $
    3,041
    
    
    $
    (3,086
    )
    
    $
    49,319
 F-40




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share amounts)
 CONSOLIDATING STATEMENT OF INCOME
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
 F-41




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share amounts)
 CONSOLIDATING STATEMENT OF INCOME
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
 F-42




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share amounts)
 CONSOLIDATING STATEMENT OF CASH FLOWS

For The Year Ended December 31, 2010
 AHI and
    
    CombinedCombined
    
    Non-Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedCash flows used in operating activities:Net income
    
    
    49,364
    
    
    
    3,155
    
    
    
    (3,086
    )
    
    
    49,433Less: net income attributable to noncontrolling interest
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    114Net income attributable to Amscan Holdings, Inc.
    
    $
    49,364
    
    
    $
    3,041
    
    
    $
    (3,086
    )
    
    $
    49,319Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization expense
    
    
    48,427
    
    
    
    991
    
    
    
    
    
    
    
    49,418Amortization of deferred financing costs
    
    
    2,475
    
    
    
    
    
    
    
    
    
    
    
    2,475Provision for doubtful accounts
    
    
    695
    
    
    
    (58
    )
    
    
    
    
    
    
    637Deferred income tax expense
    
    
    (8,942
    )
    
    
    
    
    
    
    
    
    
    
    (8,942
    )Deferred rent
    
    
    4,500
    
    
    
    
    
    
    
    
    
    
    
    4,500Undistributed gain in unconsolidated joint venture
    
    
    (678
    )
    
    
    
    
    
    
    
    
    
    
    (678
    )Impairment of trade name
    
    
    27,400
    
    
    
    
    
    
    
    
    
    
    
    27,400Impairment of fixed assets
    
    
    597
    
    
    
    
    
    
    
    
    
    
    
    597Loss (gain) on disposal of equipment
    
    
    206
    
    
    
    (15
    )
    
    
    
    
    
    
    191Equity based compensation
    
    
    6,018
    
    
    
    
    
    
    
    
    
    
    
    6,018Write-off of deferred financing costs
    
    
    2,448
    
    
    
    
    
    
    
    
    
    
    
    2,448Changes in operating assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (14,428
    )
    
    
    7,921
    
    
    
    
    
    
    
    (6,507
    )Increase in inventories
    
    
    (84,538
    )
    
    
    (1,300
    )
    
    
    71
    
    
    
    (85,767
    )Increase in prepaid expenses and other current assets
    
    
    (21,711
    )
    
    
    (1,282
    )
    
    
    
    
    
    
    (22,993
    )Increase (decrease) in accounts payable, accrued expenses and
income taxes payable
    
    
    44,254
    
    
    
    (4,217
    )
    
    
    3,015
    
    
    
    43,052Net cash provided by operating activities
    
    
    56,087
    
    
    
    5,081
    
    
    
    
    
    
    
    61,168Cash flows used in investing activities:Cash paid in connection with acquisitions
    
    
    (53,350
    )
    
    
    2
    
    
    
    
    
    
    
    (53,348
    )Capital expenditures
    
    
    (48,558
    )
    
    
    (1,065
    )
    
    
    
    
    
    
    (49,623
    )Proceeds from disposal of property and equipment
    
    
    159
    
    
    
    46
    
    
    
    
    
    
    
    205Net cash used in investing activities
    
    
    (101,749
    )
    
    
    (1,017
    )
    
    
    
    
    
    
    (102,766
    )Cash flows provided by financing activities:Repayments of loans, notes payable and long-term obligations
    
    
    (393,259
    )
    
    
    (30
    )
    
    
    
    
    
    
    (393,289
    )Proceeds from loans, notes payable and long-term obligations
    
    
    742,112
    
    
    
    41
    
    
    
    
    
    
    
    742,153Dividend distribution
    
    
    (301,829
    )
    
    
    
    
    
    
    
    
    
    
    (301,829
    )Payments
related to redeemable  common stock and rollover options
    
    
    (572
    )
    
    
    
    
    
    
    
    
    
    
    (572
    )Proceeds from issuance of common stock
and exercise of options, net of retirements
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    52Net cash provided by financing activities
    
    
    46,504
    
    
    
    11
    
    
    
    
    
    
    
    46,515Effect of exchange rate changes on cash and cash equivalents
    
    
    (243
    )
    
    
    360
    
    
    
    
    
    
    
    117Net increase in cash and cash equivalents
    
    
    599
    
    
    
    4,435
    
    
    
    
    
    
    
    5,034Cash and cash equivalents at beginning of period
    
    
    13,599
    
    
    
    1,821
    
    
    
    
    
    
    
    15,420Cash and cash equivalents at end of period
    
    $
    14,198
    
    
    $
    6,256
    
    
    $
    
    
    
    $
    20,454
 F-43




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share amounts)
 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
    
    
    
    3,773
    
    
    $
    (5,277
    )
    
    $
    62,751Less: net income attributable to noncontrolling interest
    
    
    
    
    
    
    198
    
    
    
    
    
    
    
    198Net income attributable to Amscan Holdings, Inc.
    
    $
    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 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
 F-44




---



##### 



AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Dollars in thousands, except per share amounts)
 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
    
    
    $
    1,232
    
    
    $
    (6,038
    )
    
    $
    39,633Less: net loss attributable to noncontrolling interest
    
    
    
    
    
    
    (877
    )
    
    
    
    
    
    
    (877
    )Net income attributable to Amscan Holdings, Inc.
    
    $
    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
 F-45




---



##### 



SCHEDULE II
 AMSCAN HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2010, 2009 and 2008
 Beginning
    
    
    
    
    
    
    
    
    
    Ending(Dollars in thousands)
    
    Balance
    
    Write-Offs
    
    Additions
    
    BalanceAllowance for Doubtful Accounts:For 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
    
    
    
    2,997For the year ended December 31, 2010
    
    
    2,997
    
    
    
    920
    
    
    
    637
    
    
    
    2,714Inventory Reserves::For 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
    
    
    
    8,552For the year ended December 31, 2010
    
    
    8,552
    
    
    
    2,734
    
    
    
    4,687
    
    
    
    10,505
 F-46