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


                                 F O R M 10 - Q


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

For the Quarterly Period Ended September 30, 2003


[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the transition period from ____________________ to ____________________

Commission file number 000-21827
                      -----------


                              AMSCAN HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)

                   Delaware                                13-3911462
(State or other jurisdiction of incorporation    (I.R.S. Employer Identification
               or organization)                              Number)


         80 Grasslands Road
          Elmsford, New York                                  10523
(Address of principal executive offices)                    (Zip Code)


Registrant's telephone number, including area code:       (914) 345-2020


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.


    Yes  X       No
       -----       -----

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

    Yes          No  X
       -----       -----

As of November 14, 2003, 1,217.92 shares of Registrant's common stock, par value
$0.10 ("Common Stock"), were outstanding.


<PAGE>


                              AMSCAN HOLDINGS, INC.
                                    FORM 10-Q

                               September 30, 2003

                                Table of Contents



                                       PART I                               PAGE


 ITEM 1      FINANCIAL STATEMENTS  (UNAUDITED)

             Consolidated Balance Sheets at September 30, 2003
                 and December 31, 2002..................................      3

             Consolidated Statements of Income for the Three and
                 Nine Months Ended September 30, 2003 and 2002..........      4

             Consolidated Statement of Stockholders' Deficit for
                 the Nine Months Ended September 30, 2003...............      5

             Consolidated Statements of Cash Flows for the
                  Nine Months Ended September 30, 2003 and 2002.........      6

             Notes to Consolidated Financial Statements.................      8

 ITEM 2      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS....................     25

 ITEM 3      QUANTITATIVE AND QUALITATIVE DISCLOSURES
                 ABOUT MARKET RISK......................................     31

 ITEM 4      CONTROLS AND PROCEDURES....................................     32


                                     PART II


 ITEM 6      EXHIBITS AND REPORTS ON FORM 8-K...........................     33

 Signature..............................................................     34


                                       2
<PAGE>


<TABLE>
                              AMSCAN HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS
                (Dollars in thousands, except per share amounts )

<CAPTION>
                                                                                September 30,    December 31,
                                                                                    2003             2002
                                                                                 ---------        ---------
                                                                                (Unaudited)         (Note)
<S>                                                                             <C>               <C>
                           ASSETS
Current assets:
     Cash and cash equivalents ...........................................       $   9,419        $   2,400
     Accounts receivable, net of allowances ..............................          86,858           74,247
     Inventories, net of allowances ......................................          84,834           93,890
     Prepaid expenses and other current assets ...........................          12,413           15,233
                                                                                 ---------        ---------
            Total current assets .........................................         193,524          185,770
Property, plant and equipment, net .......................................          98,105          100,304
Goodwill, net ............................................................          72,281           74,251
Notes receivable from officers ...........................................                            1,942
Other assets, net ........................................................           9,965           10,230
                                                                                 ---------        ---------
            Total assets .................................................       $ 373,875        $ 372,497
                                                                                 =========        =========

   LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED AND COMMON STOCK
                     AND STOCKHOLDERS' DEFICIT
Current liabilities:
     Accounts payable ....................................................       $  30,120        $  39,245
     Accrued expenses ....................................................          23,241           21,524
     Income taxes payable ................................................           3,803            2,525
     Current portion of long-term obligations ............................           3,133            3,220
                                                                                 ---------        ---------
            Total current liabilities ....................................          60,297           66,514
Long-term obligations, excluding current portion .........................         293,082          295,420
Deferred income tax liabilities ..........................................          16,534           17,360
Other ....................................................................           2,332            2,317
                                                                                 ---------        ---------
            Total liabilities ............................................         372,245          381,611

Redeemable convertible preferred stock ($0.10 par value; 100.00 shares
     authorized; 44.94 and 42.40 shares issued and outstanding) ..........           6,945            6,646
Redeemable Common Stock ..................................................           8,745           30,523

Commitments and Contingencies

Stockholders' deficit:
    Common Stock ($0.10 par value; 3,000.00 shares authorized;
        1,217.92 and 1,233.27 shares issued and outstanding, respectively)            --               --
     Additional paid-in capital ..........................................          27,535           14,814
     Unamortized restricted Common Stock awards ..........................            (194)            (323)
     Notes receivable from stockholders ..................................            (669)            (638)
     Deficit .............................................................         (39,789)         (57,551)
     Accumulated other comprehensive loss ................................            (943)          (2,585)
                                                                                 ---------        ---------
            Total stockholders' deficit ..................................         (14,060)         (46,283)
                                                                                 ---------        ---------
            Total liabilities, redeemable convertible preferred and Common
              Stock and stockholders' deficit ............................       $ 373,875        $ 372,497
                                                                                 =========        =========
</TABLE>

Note:  The balance  sheet at December 31, 2002 has been derived from the audited
consolidated  financial  statements  at that  date.

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>


<TABLE>
                              AMSCAN HOLDINGS, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                             (Dollars in thousands)
                                   (Unaudited)

<CAPTION>
                                                        Three Months Ended            Nine Months Ended
                                                           September 30,                September 30,
                                                    ------------------------      ------------------------
                                                       2003           2002           2003           2002
                                                    ---------      ---------      ---------      ---------

<S>                                                 <C>            <C>            <C>            <C>
Net sales .....................................     $ 103,220      $ 100,226      $ 304,060      $ 290,263
Cost of sales .................................        68,242         65,761        204,161        189,416
                                                    ---------      ---------      ---------      ---------
         Gross profit .........................        34,978         34,465         99,899        100,847

Operating expenses:
   Selling expenses ...........................         9,206          8,984         27,322         25,810
   General and administrative expenses ........         8,067          7,901         23,896         23,707
   Art and development costs ..................         2,322          2,486          7,145          7,462
   Provision for doubtful accounts ............           772            347          2,761          1,462
   Restructuring charges ......................           233            610          1,007            796
                                                    ---------      ---------      ---------      ---------
         Total operating expenses .............        20,600         20,328         62,131         59,237
                                                    ---------      ---------      ---------      ---------
         Income from operations ...............        14,378         14,137         37,768         41,610

Interest expense, net .........................         6,681          5,430         19,877         16,188
Gain on sale of available-for-sale securities .        (1,022)                       (1,022)
Other expense (income), net ...................            12           (364)           (45)          (386)
                                                    ---------      ---------      ---------      ---------
         Income before income taxes and
            minority interests ................         8,707          9,071         18,958         25,808

Income tax expense ............................         3,439          3,583          7,488         10,194
Minority interests ............................            42             52             76              7
                                                    ---------      ---------      ---------      ---------
         Net income ...........................         5,226          5,436         11,394         15,607
         Dividend on redeemable convertible
            preferred stock ...................           102             95            299            280
                                                    ---------      ---------      ---------      ---------
         Net income applicable to common shares     $   5,124      $   5,341      $  11,095      $  15,327
                                                    =========      =========      =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>


<TABLE>
                              AMSCAN HOLDINGS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                      Nine Months Ended September 30, 2003
                             (Dollars in thousands)
                                   (Unaudited)



<CAPTION>
                                                                       Unamortized
                                                   Common               Restricted    Notes               Accumulated
                                                   Stock    Additional    Common   Receivable                Other
                                       Common       Par      Paid-in      Stock       from               Comprehensive
                                       Shares      Value     Capital      Awards  Stockholders   Deficit      Loss        Total
                                       ------      -----     -------      ------  ------------   -------      ----        -----

<S>                                   <C>        <C>        <C>          <C>        <C>         <C>         <C>         <C>
Balance at December 31, 2002 ......   1,233.27   $    --    $ 14,814     $ (323)    $ (638)     $ (57,551)  $(2,585)    $(46,283)

Net income ........................                                                                11,394                 11,394
Net change in cumulative
     translation adjustment .......                                                                           1,232        1,232
Change in fair value of
     available-for-sale securities,
     net of income taxes ..........                                                                             912          912
Reclassification adjustment for
    available-for-sale securities
    sold during the period, net of
    income taxes ..................                                                                            (618)        (618)
Change in fair value of interest
     rate swap and foreign
     exchange contracts, net of
     income taxes .................                                                                             116          116
                                                                                                                        --------
        Comprehensive income ......                                                                                       13,036

Exercise of stock options,
     including tax
     benefits of $79 ..............       6.65                   910                                                         910
Amortization of restricted
     Common Stock awards ..........                                         129                                              129
Increase in redeemable Common
     Stock due to exercise of stock
     options and vesting of
     restricted Common Stock
     award ........................                           (1,537)                                                     (1,537)
Decrease in redeemable Common
     Stock due to expiration of
     redemption feature ...........                           13,597                                6,000                 19,597
Decrease in redeemable Common
     Stock due to change in market
     value of Common Stock ........                               50                                  368                    418
Purchase and retirement of
     Common Stock held by
     officers .....................      (22.0)
Redeemable convertible
     preferred stock dividend .....                             (299)                                                       (299)
Accretion of interest income on
     notes receivable from
     stockholders .................                                         (31)                                (31)
                                      --------   ---------  --------     ------     ------      ---------   -------     --------

Balance at September 30, 2003 .....   1,217.92   $    --    $ 27,535     $ (194)    $ (669)     $ (39,789)  $  (943)    $(14,060)
                                      ========   =========  ========     ======     ======      =========   =======     ========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       5
<PAGE>


<TABLE>
                              AMSCAN HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (Unaudited)

<CAPTION>
                                                                                             Nine Months Ended
                                                                                             -----------------
                                                                                               September 30,
                                                                                               -------------
                                                                                            2003          2002
                                                                                            ----          ----
<S>                                                                                       <C>           <C>
Cash flows from operating activities:
   Net income .......................................................................     $ 11,394      $ 15,607
   Adjustments to reconcile net income to net cash provided by operating activities:
       Depreciation and amortization ................................................       12,033         9,852
       Amortization of deferred financing costs .....................................        1,570           843
       Amortization of restricted Common Stock awards ...............................          129           177
       Provision for doubtful accounts ..............................................        2,761         1,462
       Deferred income tax expense ..................................................        2,444         4,462
       Gain on sale of available-for-sale securities ................................       (1,022)
       Loss (gain) on disposal of property and equipment ............................          118          (311)
       Non-cash restructuring charges ...............................................          104
       Changes in operating assets and liabilities, net of acquisition:
           Increase in accounts receivable ..........................................      (15,372)      (13,530)
           Decrease (increase) in inventories .......................................        9,056        (9,311)
           Decrease (increase) in prepaid expenses and other current assets .........          970        (2,390)
           (Decrease) increase in accounts payable, accrued expenses and income taxes
                 payable ............................................................       (6,112)        7,028
           Other, net ...............................................................         (297)       (2,042)
                                                                                          --------      --------
           Net cash provided by operating activities ................................       17,776        11,847

Cash flows from investing activities:
   Cash paid in connection with acquisition .........................................                    (13,547)
   Capital expenditures .............................................................      (10,081)      (11,396)
   Proceeds from sale of available-for-sale securities ..............................        1,443
   Proceeds from disposal of property and equipment .................................          198           515
                                                                                          --------      --------
           Net cash used in investing activities ....................................       (8,440)      (24,428)

Cash flows from financing activities:
   Proceeds from short-term obligations .............................................                     16,300
   Repayment of loans, notes payable and long-term obligations ......................       (2,788)       (2,535)
   Proceeds from exercise of stock options ..........................................          831
   Purchase of Common Stock from officers ...........................................       (3,300)
   Repayment of notes receivable from officers ......................................        1,990
                                                                                          --------      --------
           Net cash (used in) provided by financing activities ......................       (3,267)       13,765
Effect of exchange rate changes on cash and cash equivalents ........................          950          (248)
                                                                                          --------      --------
           Net increase in cash and cash equivalents ................................        7,019           936
Cash and cash equivalents at beginning of period ....................................        2,400         1,016
                                                                                          --------      --------
Cash and cash equivalents at end of period ..........................................     $  9,419      $  1,952
                                                                                          ========      ========
Supplemental Disclosures:
           Interest paid ............................................................     $ 14,451      $ 12,487
           Income taxes paid ........................................................     $  4,013      $  5,851
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       6
<PAGE>


                              AMSCAN HOLDINGS, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                             (Dollars in thousands)
                                   (Unaudited)


Supplemental information on non-cash activities:

   In July  2003,  the  Company  purchased  6 shares  of Common  Stock  from its
   President at a price of $150 per share,  for an aggregate cash purchase price
   of  $900.  The  President  used  a  portion  of the  proceeds  to  repay  his
   outstanding  loan balance of $402. The Company retired the 6 shares of Common
   Stock.

   In June 2003, the Company  purchased 16 shares of Common Stock from the Chief
   Executive  Officer  at a price  of $150  per  share,  for an  aggregate  cash
   purchase  price  $2,400.  The Chief  Executive  Officer used a portion of the
   proceeds to repay his outstanding loan balance of $1,588. The Company retired
   the 16 shares of Common Stock.

   In April 2003,  a former  officer's  right to put 120 shares of Common  Stock
   back to the Company expired and, as a result, the Company recorded a decrease
   in redeemable Common Stock and a decrease in stockholders' deficit of $18,600
   (a $12,600  increase in additional  paid-in  capital and a $6,000 decrease in
   accumulated  deficit).  The former officer's right to put an additional 6.648
   shares back to the Company expired in July 2003 and, as a result, the Company
   recorded a decrease in redeemable  Common Stock and an increase in additional
   paid-in capital of $997.

   In February 2002, the Company issued 96.774 shares of its Common Stock,  at a
   value  of $155  per  share,  to  American  Greetings  Corporation  ("American
   Greetings")  in connection  with the  acquisition  of M&D  Industries,  Inc.,
   formerly known as M&D Balloons, Inc. ("M&D Industries") (see Note 10).

   In January 2002, 3.0 shares of restricted  Common Stock aggregating $465 were
   issued to an officer of the Company, subject to future vesting provisions.




          See accompanying notes to consolidated financial statements.

                                       7
<PAGE>


                              AMSCAN HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

     Amscan  Holdings,   Inc.   ("Amscan   Holdings"  and,   together  with  its
subsidiaries,  "Amscan," "AHI" or the "Company") was  incorporated on October 3,
1996 for the purpose of becoming the holding company for Amscan Inc. and certain
affiliated entities.  AHI designs,  manufactures,  contracts for manufacture and
distributes  party goods,  including  metallic  balloons,  gifts and stationery,
principally in North America, South America, Europe, Asia and Australia.

NOTE 2 - BASIS OF PRESENTATION

     The accompanying  unaudited  consolidated  financial statements include the
accounts of Amscan Holdings and its majority-owned and controlled entities.  All
material   intercompany  balances  and  transactions  have  been  eliminated  in
consolidation.   The  unaudited  consolidated  financial  statements  have  been
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States  for  interim  financial  information.  Accordingly,  they do not
include all of the information and footnotes  required by accounting  principles
generally  accepted in the United States for complete financial  statements.  In
the opinion of  management,  all  adjustments  (consisting  of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating results for the three and nine months ended September 30, 2003 are not
necessarily  indicative  of the  results  to be  expected  for the  year  ending
December 31, 2003. The results of operations may be affected by seasonal factors
such as the timing of  holidays or  industry  factors  that may be specific to a
particular  period,  such as movement in and the general  level of raw  material
costs. For further  information,  see the consolidated  financial statements and
notes thereto  included in Amscan  Holdings'  Annual Report on Form 10-K for the
year  ended  December  31,  2002 as  filed  with  the  Securities  and  Exchange
Commission.


NOTE 3 - INVENTORIES

     Inventories consisted of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                       September 30,  December 31,
                                                           2003          2002
                                                         --------      --------
<S>                                                      <C>           <C>
Finished goods .....................................     $ 72,443      $ 80,783
Raw materials ......................................        9,061         8,763
Work-in-process ....................................        6,365         7,722
                                                         --------      --------
                                                           87,869        97,268
Less: reserve for slow moving and obsolete inventory       (3,035)       (3,378)
                                                         --------      --------
                                                         $ 84,834      $ 93,890
                                                         ========      ========
</TABLE>

     Inventories  are  valued at the lower of cost,  determined  on a  first-in,
first-out basis, or market.


NOTE 4 - INCOME TAXES

     The  consolidated  income tax expense  for the three and nine months  ended
September 30, 2003 and 2002 was determined based upon estimates of the Company's
consolidated  effective  income tax rates for the years ending December 31, 2003
and 2002,  respectively.  The  differences  between the  consolidated  effective
income tax rates and the U.S. Federal statutory rate are primarily  attributable
to state income taxes and the effects of foreign operations.


                                       8
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)

NOTE 5 - COMPREHENSIVE INCOME (LOSS)

     Comprehensive income consisted of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                                           Three Months Ended         Nine Months Ended
                                                                              September 30,             September 30,
                                                                              -------------             -------------
                                                                           2003         2002          2003          2002
                                                                           ----         ----          ----          ----
<S>                                                                      <C>          <C>           <C>           <C>
Net income .........................................................     $ 5,226      $  5,436      $ 11,394      $ 15,607
Net change in cumulative translation adjustment ....................         (44)          (10)        1,232           945
Change in fair value of available-for-sale securities, net of income
   taxes of $558 and $596, respectively ............................         854                         912
Reclassification adjustment for available-for-sale securities sold
   during the period, net of income taxes of $(404) ................        (618)                       (618)
Change in fair value of the Company's interest rate swap
   contract, net of income taxes of $90, $(225), $36 and $(415),
   respectively ....................................................         138          (345)           55          (636)
Change in fair value of the Company's foreign exchange
   contracts, net of income taxes of $173, $84, $40 and
   $(104), respectively ............................................         264           129            61          (159)
                                                                         -------      --------      --------      --------
                                                                         $ 5,820      $  5,210      $ 13,036      $ 15,757
                                                                         =======      ========      ========      ========
</TABLE>

           Accumulated  other  comprehensive  loss  consisted  of the  following
(dollars in thousands):
<TABLE>
<CAPTION>
                                                                                  September 30,   December 31,
                                                                                      2003            2002
                                                                                    -------         -------
<S>                                                                                 <C>             <C>
Cumulative translation adjustment ...........................................       $  (243)        $(1,475)
Unrealized gain on available-for-sale securities, net of income taxes of $192           294
Interest rate swap contract qualifying as a hedge, net of income taxes of
   $(385) and $(421), respectively ..........................................          (589)           (644)
Foreign exchange contracts qualifying as hedges, net of income taxes
   of $(265) and $(305), respectively .......................................          (405)           (466)
                                                                                    -------         -------
                                                                                    $  (943)        $(2,585)
                                                                                    =======         =======
</TABLE>


NOTE 6 - GAIN ON SALE OF AVAILABLE-FOR-SALE SECURITIES

     During the three  months  ended  September  30,  2003,  the Company  sold a
portion of the common stock of a customer  which it had  received in  connection
with the  customer's  reorganization  in  bankruptcy.  The Company  received net
proceeds of  approximately  $1.4 million and recognized a gain of  approximately
$1.0 million.


NOTE 7 - CAPITAL STOCK

     Under the terms of its stockholders' agreement ("Stockholders' Agreement"),
the Company  can be  required to purchase  all of the shares held by an employee
stockholder for a period of one year after the employee's  death or three months
after his disability,  at a price  determined by a market  valuation,  and for a
period of three months  following  termination of employment by the Company,  at
the lower of the share's cost, as defined, or the market valuation. At September
30,  2003  and  December  31,  2002,   there  were  58.30  and  196.92   shares,
respectively,  of  fully  paid  and  vested  Common  Stock  subject  to such put
provisions.  The  shares are  recorded  as  redeemable  Common  Stock,  at their
estimated  market  value,  with  a  corresponding  adjustment  to  stockholders'
deficit.


                                       9
<PAGE>



                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)

     On January 10, 2003, an executive officer of a wholly-owned  subsidiary and
stockholder  terminated his  employment  with the Company and, on April 9, 2003,
exercised  options to purchase  6.648  shares of the  Company's  Common Stock at
$125,000  per share or for  $831,000.  On April 10, 2003,  the former  officer's
right to put 120 shares of Common  Stock back to the Company  expired  and, as a
result,  the  Company  recorded  a decrease  in  redeemable  Common  Stock and a
decrease in  stockholders'  deficit of $18,600,000  (a  $12,600,000  increase in
additional  6.648  shares  back to the  Company  expired  in July  2003 and as a
result,  the  Company  recorded a decrease  in  redeemable  Common  Stock and an
increase in additional paid-in capital of $997,000.

     At September  30, 2003 and December 31, 2002,  officers of the Company held
3.00 and 6.38  shares of Common  Stock,  respectively,  subject  to the  vesting
provisions of their  employment  agreements (the "Restricted  Stock").  The 3.00
shares of  Restricted  Stock  outstanding  at  September  30,  2003 will vest in
December  2004.  During the three and nine months ended  September  30, 2003 and
2002,  the Company  recorded the  amortization  of Restricted  Stock of $39,000,
$129,000, $59,000, and $177,000 respectively,  as compensation expense, which is
included in general and  administrative  expenses in the Company's  consolidated
statements of income.

     At  September  30, 2003 and  December  31,  2002,  the  Company  held notes
receivable  from a former and current  officer  totaling  $669,000 and $638,000,
respectively.  These notes arose in  connection  with the  issuance of shares of
Common Stock to the  officers.  The notes bear  interest at 6.65% and LIBOR plus
2%, respectively,  and mature in March 2009 and January 2004, respectively.  The
notes receivable are shown on the consolidated  balance sheets as an increase in
stockholders' deficit.

     In July  2003,  the  Company  purchased  6 shares of Common  Stock from its
President at a price of $150,000 per share,  for an aggregate  cost of $900,000.
The  President  used a portion of the  proceeds  to repay his  outstanding  loan
balance of $402,000. The Company retired the 6 shares of Common Stock.

     In June 2003,  the  Company  purchased  16 shares of Common  Stock from its
Chief Executive  Officer at a price of $150,000 per share, for an aggregate cost
of  $2,400,000.  The Chief  Executive  Officer used a portion of the proceeds to
repay his  outstanding  loan balance of $1,588,000.  The Company  retired the 16
shares of Common Stock.

     In June  2003,  the  Stock  Incentive  Plan  was  amended  by the  Board of
Directors  increasing  the total number of shares of Common  Stock  reserved and
available for grant from 150 to 200. In June 2003, the Chief  Executive  Officer
and the  President  were each  granted  options to  purchase 25 shares of Common
Stock at $150,000 per share.

     In February  2002,  the Company  issued  96.774 shares of its Common Stock,
valued at $155,000 per share, or a total of $15,000,000,  to American  Greetings
Corporation  ("American  Greetings") in connection  with the  acquisition of M&D
Industries (see Note 10).

     On March  30,  2001,  the  Board of  Directors  authorized  500  shares  of
preferred  stock,  $0.10  par  value,  and  designated  100  shares  as Series A
Redeemable   Convertible  Preferred  Stock  ("Series  A  Redeemable  Convertible
Preferred  Stock").  Also on March 30,  2001,  the  Company  issued 40 shares of
Series A Redeemable  Convertible Preferred Stock to GS Capital Partners II, L.P.
and certain  other  private  investment  funds  managed by Goldman,  Sachs & Co.
(collectively,  "GSCP") for proceeds of $6,000,000. Dividends are cumulative and
payable  annually,  at 6% per  annum.  On March 30,  2003 and 2002,  the  annual
dividend was distributed in additional shares of Series A Redeemable Convertible
Preferred Stock. Dividends payable on or prior to March 30, 2004, are payable in
additional shares of Series A Redeemable Convertible Preferred Stock. Subsequent
to March 30, 2004,  dividends are payable, at the option of the Company,  either
in cash or additional shares of Series A Redeemable Convertible


                                       10
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)


Preferred Stock.

     Each  share  of  Series  A  Redeemable   Convertible   Preferred  Stock  is
convertible at the option of the holder,  at any time,  into one share of Common
Stock of the Company,  $0.10 par value, subject to adjustment for the effects of
subsequent Common Stock splits or stock dividends.

     The Series A Redeemable Convertible Preferred Stock is not redeemable on or
prior to March 30,  2004.  To the extent the  Company  shall have funds  legally
available to redeem these shares,  the Company may redeem these shares, in whole
or, with the consent of the  holders of a majority of the  outstanding  Series A
Redeemable  Convertible  Preferred  Stock,  in part,  at a  redemption  price of
$150,000 per share, in cash, together with accrued and unpaid dividends.  To the
extent the Company shall have funds legally  available to redeem these shares on
March 30,  2008,  the Company is required  to redeem all  outstanding  shares of
Series A Redeemable  Convertible Preferred Stock at a redemption price per share
equal to $150,000 in cash,  together  with  accrued  and unpaid  dividends.  The
holders of the Series A Redeemable  Convertible Preferred Stock have liquidation
rights equal to their original investment plus accrued but unpaid dividends.

     The Company  has not paid any  dividends  on its Common  Stock and does not
anticipate  paying  cash  dividends  in  the  foreseeable  future.  The  Company
currently  intends to retain its  earnings  for working  capital,  repayment  of
indebtedness,  capital expenditures and general corporate purposes. In addition,
the Company's  current  credit  facility and the  indenture  governing its notes
contain  restrictive  covenants  which have the effect of limiting the Company's
ability to pay dividends or distributions to its stockholders.


NOTE 8 - SEGMENT INFORMATION

Industry Segment
----------------
     The Company  manages its operations as one industry  segment which involves
the design,  manufacture,  contract for  manufacture  and  distribution of party
goods, including metallic balloons, gifts and stationery.

Geographic Segments
-------------------
     The Company's export sales,  other than those  intercompany  sales reported
below as  sales  between  geographic  areas,  are not  material.  Sales  between
geographic  areas primarily  consist of sales of finished goods for distribution
in foreign markets.  No single foreign operation is significant to the Company's
consolidated operations.  Sales between geographic areas are made at cost plus a
share of operating profit.

     The Company's geographic area data are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                         Domestic          Foreign      Eliminations   Consolidated
                                                         --------          -------      ------------   ------------
<S>                                                     <C>              <C>              <C>            <C>
THREE MONTHS ENDED SEPTEMBER 30, 2003
Sales to unaffiliated customers .................       $   87,431       $   15,789                      $ 103,220
Sales between geographic areas ..................            5,450                        $ (5,450)           --
                                                        ----------       ----------       --------       ---------
Net sales .......................................       $   92,881       $   15,789       $ (5,450)      $ 103,220
                                                        ==========       ==========       ========       =========

Income from operations ..........................       $   12,566       $    1,546       $    266       $  14,378
                                                        ==========       ==========       ========
Interest expense, net ...........................                                                            6,681
Gain on sale of available-for-sale securities ...                                                           (1,022)
Other expense, net ..............................                                                               12
                                                                                                         ---------
Income before income taxes and minority interests                                                        $   8,707
                                                                                                         =========

Long-lived assets, net at September 30, 2003 ....       $  172,013       $    8,338                      $ 180,351
                                                        ==========       ==========                      =========
</TABLE>

                                       11
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                         Domestic       Foreign       Eliminations    Consolidated
                                                         --------       -------       ------------    ------------
<S>                                                     <C>             <C>            <C>              <C>
THREE MONTHS ENDED SEPTEMBER 30, 2002
Sales to unaffiliated customers .................       $  85,574       $ 14,652                        $ 100,226
Sales between geographic areas ..................           6,489                      $   (6,489)           --
                                                        ---------       --------       ----------       ---------
Net sales .......................................       $  92,063       $ 14,652       $   (6,489)      $ 100,226
                                                        =========       ========       ==========       =========

Income from operations ..........................       $  12,847       $  1,137       $      153       $  14,137
                                                        =========      =========       ==========
Interest expense, net ...........................                                                           5,430
Other income, net ...............................                                                            (364)
                                                                                                        ---------
Income before income taxes and minority interests                                                       $   9,071
                                                                                                        =========

Long-lived assets, net at September 30, 2002 ....       $ 177,693       $  6,746                        $ 184,439
                                                        =========       ========                        =========

<CAPTION>
                                                         Domestic       Foreign       Eliminations    Consolidated
                                                         --------       -------       ------------    ------------
<S>                                                     <C>             <C>            <C>              <C>
NINE MONTHS ENDED SEPTEMBER 30, 2003
Sales to unaffiliated customers .................       $ 262,031       $ 42,029                        $ 304,060
Sales between geographic areas ..................          15,063                      $  (15,063)           --
                                                        ---------       --------       ----------       ---------
Net sales .......................................       $ 277,094       $ 42,029       $  (15,063)      $ 304,060
                                                        =========       ========       ==========       =========

Income from operations ..........................       $  34,525       $  2,326       $      917       $  37,768
                                                        =========       ========       ==========
Interest expense, net ...........................                                                          19,877
Gain on sale of available-for-sale securities ...                                                          (1,022)
Other income, net ...............................                                                             (45)
                                                                                                        ---------
Income before income taxes and minority interests                                                       $  18,958
                                                                                                        =========

<CAPTION>
                                                         Domestic       Foreign       Eliminations    Consolidated
                                                         --------       -------       ------------    ------------
<S>                                                     <C>             <C>            <C>              <C>
NINE MONTHS ENDED SEPTEMBER 30, 2002
Sales to unaffiliated customers .................       $ 250,406       $ 39,857                        $ 290,263
Sales between geographic areas ..................          17,774                      $  (17,774)           --
                                                        ---------       --------       ----------       ---------
Net sales .......................................       $ 268,180       $ 39,857       $  (17,774)      $ 290,263
                                                        =========       ========       ==========       =========

Income from operations ..........................       $  39,310       $  1,680       $      620       $  41,610
                                                        =========       ========       ==========
Interest expense, net ...........................                                                          16,188
Other income, net ...............................                                                            (386)
                                                                                                        ---------
Income before income taxes and minority interests                                                       $  25,808
                                                                                                        =========
</TABLE>


NOTE 9 - LEGAL PROCEEDINGS

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

                                       12
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)


NOTE 10 - RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

     In July 2002, Statement of Financial Accounting Standards ("SFAS") No. 146,
"Accounting for Costs  Associated With Exit or Disposal  Activities"  ("SFAS No.
146"),  was issued.  SFAS No. 146 addresses  accounting  and reporting for costs
associated with exit or disposal  activities and nullifies  Emerging Issues Task
Force Issue No.  94-3  ("EITF No.  94-3"),  "Liability  Recognition  for Certain
Employee  Termination  Benefits  and Other Costs to Exit an Activity  (including
Certain  Costs  Incurred  in a  Restructuring)."  SFAS No. 146  requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
when the  liability  is incurred.  Under EITF No. 94-3, a liability  for an exit
cost was  recognized  at the  date an  entity  committed  to an exit  plan.  The
provisions of SFAS No. 146 are effective  for exit or disposal  activities  that
are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have
a material effect on the Company's consolidated financial statements.

     In January 2003, the Financial  Accounting  Standards Board ("FASB") issued
Interpretation  No.  46,   "Consolidation  of  Variable  Interest  Entities,  an
interpretation  of ARB 51" ("FIN No. 46").  FIN No. 46 provides  guidance on the
identification  of entities for which  control is achieved  through  means other
than  through  voting  rights  ("VIE's")  and how to  determine  when and  which
business enterprise should consolidate the VIE. This new model for consolidation
applies to an entity in which  either (1) the equity  investors  (if any) do not
have a controlling  financial  interest or (2) the equity  investment at risk is
insufficient to finance that entity's  activities  without receiving  additional
subordinated financial support from other parties. The consolidation  provisions
of FIN No. 46 apply  immediately  to variable  interests in VIE's  created after
January 31, 2003. For variable  interest  entities  created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for fiscal years that
begin after June 15, 2003.  The Company is currently  evaluating  the effect the
adoption of the  provisions  of FIN 46 will have on its  consolidated  financial
condition or results of operations.

     Other pronouncements  issued by the FASB or other authoritative  accounting
standards  groups with future  effective  dates are either not applicable or not
significant to the consolidated financial statements of the Company.


NOTE 11-ACQUISITION

     On February 19, 2002, the Company  purchased all of the outstanding  common
stock of M&D Industries, a Manteno,  Illinois-based manufacturer of metallic and
plastic  balloons,  from American  Greetings for $27,500,000  plus certain other
related costs of $1,048,000.  The Company  financed the acquisition by borrowing
$13,289,000  in the first  quarter of 2002 (and an  additional  $258,000  in the
second quarter of 2002) under its revolving  credit  facility and issuing 96.774
shares of its Common  Stock to American  Greetings.  The Company  purchased  M&D
Industries to supplement its existing  balloon  operations.  American  Greetings
continues to distribute  metallic  balloons  under a supply  agreement  with the
Company. The acquisition has been accounted for under the provisions of SFAS No.
141, "Business  Combinations,"  and,  accordingly,  the operating results of M&D
Industries have been included in the Company's consolidated financial statements
since the date of acquisition.

     The purchase price has been  allocated  based upon the estimated fair value
of net assets acquired at the date of acquisition.  Such  allocations were based
on studies and  valuations.  The excess of the purchase  price over tangible net
assets acquired has been allocated to intangible  assets consisting of licensing
agreements  in the amount of  $1,070,000,  which are being  amortized  using the
straight-line method over the lives of the contracts (one to three years with an
average life of 2.7 years), and goodwill in the amount of $15,606,000,  which is
not being amortized.

     The following  unaudited pro forma  information  assumes the M&D Industries
acquisition had occurred on

                                       13
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)


January  1,  2002.  The  pro  forma  information,  as  presented  below,  is not
necessarily  indicative  of the results  that would have been  obtained  had the
transaction occurred on January 1, 2002, nor is it necessarily indicative of the
Company's future results (dollars in thousands):

                                                    Nine Months
                                                 Ended September 30,
                                                 -------------------
                                                        2002
                                                        ----
            Net sales................                 $294,370
            Net income...............                 $ 16,000

     The net income  amount  reflects  adjustments  for  interest  expense  from
additional  borrowings  necessary to finance the acquisition and amortization of
other intangible  assets and income tax effects based upon a pro forma effective
tax  rate  of  39.5%.  The  pro  forma  information  gives  effect  only  to the
adjustments  described above and does not reflect  management's  estimate of any
anticipated cost savings or other benefits as a result of the acquisition.

     During the three and nine months ended September 30, 2003, the Company sold
$2,387,000 and  $4,636,000  respectively,  of metallic  balloons and other party
goods to American  Greetings.  During the three and nine months ended  September
30, 2002, the Company sold $978,000 and  $4,494,000,  respectively,  of metallic
balloons and other party goods to American Greetings.  Trade accounts receivable
from  American  Greetings  at  September  30,  2003 and  December  31, 2002 were
$2,104,000 and $2,632,000, respectively.


NOTE 12 - RESTRUCTURING CHARGES

     During the three and nine months  ended  September  30, 2003 and 2002,  the
Company  incurred  charges  of  $233,000,  $1,007,000,  $610,000  and  $796,000,
respectively,  resulting from the  consolidation of certain domestic and foreign
distribution  operations and the  integration of M&D Industries into its balloon
operations.

     The  consolidation  of our domestic  distribution  operations may result in
additional restructuring charges in subsequent periods.


NOTE 13 - STOCK OPTION PLAN

     The  Company  accounts  for  stock  based  awards  in  accordance  with the
provisions  of Statement of Financial  Accounting  Standards  No. 123 ("SFAS No.
123"), "Accounting for Stock-Based  Compensation." SFAS No. 123 permits entities
to  recognize  as  expense,  over the  vesting  period,  the  fair  value of all
stock-based  awards on the date of grant.  Alternatively,  SFAS No.  123  allows
entities to apply the provisions of Accounting  Principles Board Opinion ("APB")
No.  25,  "Accounting  for  Stock  Issued  to  Employees,"  which  requires  the
recognition  of  compensation  expense at the date of grant only if the  current
market price of the underlying  stock exceeds the exercise price, and to provide
pro forma net income  disclosures  for employee  stock  option  grants as if the
fair-value-based  method  defined in SFAS No. 123 had been applied.  The Company
has elected to continue to apply the  intrinsic  value  method of APB No. 25 for
awards granted under its stock-based compensation plans and has provided the pro
forma disclosures  required by SFAS No. 123.  Accordingly,  no compensation cost
has been recognized in

                                       14
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)


connection  with the issuance of options under the 1997 Stock  Incentive Plan as
all options were granted with exercise prices equal to the estimated fair market
value of the Common Stock on the date of grant.

     Had the Company determined stock-based compensation based on the fair value
of the options granted at the grant date,  consistent with the method prescribed
under SFAS No. 123, the  Company's net income would have been reduced to amounts
indicated below (dollars in thousands):

<TABLE>
<CAPTION>
                                                                   Three Months                Nine Months
                                                               Ended September 30,         Ended September 30,
                                                               -------------------         -------------------
                                                               2003           2002         2003           2002
                                                               ----           ----         ----           ----
<S>                                                           <C>           <C>           <C>           <C>
Net income:
     As reported ......................................       $ 5,226       $ 5,436       $11,394       $15,607
     Less: Total stock-based employee compensation
         expense determined under the fair value based
         method for all awards, net of tax of $69, $84,
           $139, and $253, respectively ...............           106           129           213           388
                                                              -------       -------       -------       -------
        SFAS No. 123 pro forma net income .............       $ 5,120       $ 5,307       $11,181       $15,219
                                                              =======       =======       =======       =======
</TABLE>


NOTE 14 - PROVISION FOR DOUBTFUL ACCOUNTS

     During the second  quarter of 2003, a customer  filed a voluntary  petition
for relief under Chapter 11 of the United States  Bankruptcy Code. This customer
accounted  for  approximately  1.5% and 2.6% of the Company's  consolidated  net
sales for the three and nine months ended September 30, 2003, respectively,  and
at September 30, 2003, the pre-petition,  gross account  receivable  balance due
from this customer totaled approximately  $4,200,000.  The Company has charged a
total  of  $3.3  million  to the  provision  for  doubtful  accounts,  of  which
approximately $1,500,000, $1,600,000 and $200,000 were charged during the fourth
quarter of 2002 and the second and third  quarters  of 2003,  respectively.  The
Company  does not  believe  the  potential  loss of this  customer  will  have a
material  adverse  effect on the Company's  future  results of operations or its
financial condition.


NOTE 15 - CONDENSED CONSOLIDATING FINANCIAL INFORMATION

     On December 20, 2002,  Amscan amended and restated its credit facility with
various lenders (the "Lenders"),  and with Goldman Sachs Credit Partners L.P. as
sole lead arranger,  sole bookrunner and syndication  agent.  Under the terms of
the Second  Amended and  Restated  Credit and  Guaranty  Agreement  (the "Credit
Agreement"), the Lenders agreed to amend and restate the Company's then existing
bank credit  agreements (the "Bank Credit  Facilities") in their entirety and to
provide a $200,000,000 senior secured facility consisting of a $170,000,000 term
loan (the  "Term  Loan") and up to  $30,000,000  aggregate  principal  amount of
revolving  loans (the  "Revolver").  The  proceeds of the Term Loan were used to
redesignate  and replace the  Company's  AXEL term loan and revolver  borrowings
existing under the Bank Credit Facilities at the closing date and to pay certain
fees and expenses associated with the refinancing.

     On December  19,  1997,  the Company  also  issued  $110,000,000  aggregate
principal  amount of 9.875%  senior  subordinated  notes  (the  `Notes")  due in
December 2007.

                                       15
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)


     The repayment of the  borrowings  under the Credit  Agreement and Notes are
guaranteed jointly and severally,  fully and  unconditionally,  by the following
wholly-owned domestic subsidiaries of the Company (the "Guarantors"):

     o    Amscan Inc.
     o    Am-Source, LLC
     o    Anagram Eden Prairie Property Holdings LLC
     o    Anagram International Holdings, Inc.
     o    Anagram International, Inc.
     o    Anagram International, LLC
     o    JCS Realty Corp.
     o    M&D Industries, Inc.
     o    SSY Realty Corp.
     o    Trisar, Inc.

     Non-guarantor subsidiaries ("Non-guarantors") include the following:

     o    Amscan Distributors (Canada) Ltd.
     o    Amscan de Mexico, S.A. de C.V.
     o    Amscan Holdings Limited
     o    Amscan Partyartikel GmbH
     o    Amscan (Asia-Pacific) Pty. Ltd.
     o    Amscan Svenska AB
     o    Anagram Espana, S.A.
     o    Anagram France S.C.S.
     o    Anagram International (Japan) Co., Ltd.
     o    Anagram Mexico S. de R.L. de C.V.

     The  following  information  presents  consolidating  balance  sheets as of
September  30,  2003  and  December  31,  2002,  and the  related  consolidating
statements  of income for the three and nine months ended June 30, 2003 and 2002
and  consolidating  statements of cash flows for the nine months ended September
30, 2003 and 2002 for the combined  Guarantors  and the combined  Non-guarantors
and elimination  entries  necessary to consolidate  the entities  comprising the
combined companies.

                                       16
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)

<TABLE>
                           CONSOLIDATING BALANCE SHEET

                               September 30, 2003
                             (Dollars in thousands)

<CAPTION>
                                                                    Amscan
                                                                 Holdings and     Combined
                                                                   Combined         Non-
                                                                  Guarantors     Guarantors     Eliminations  Consolidated
                                                                  ----------     ----------     ------------  ------------
<S>                                                                <C>            <C>            <C>            <C>
ASSETS
Current assets:
   Cash and cash equivalents .................................     $   8,970      $     449                     $   9,419
   Accounts receivable, net of allowances ....................        71,014         15,844                        86,858
   Inventories, net of allowances ............................        74,076         11,648      $    (890)        84,834
   Prepaid expenses and other current assets .................        10,624          2,000           (211)        12,413
                                                                   ---------      ---------      ---------      ---------
      Total current assets ...................................       164,684         29,941         (1,101)       193,524
Property, plant and equipment, net ...........................        96,482          1,623                        98,105
Goodwill, net ................................................        66,454          5,827                        72,281
Other assets, net ............................................        37,417          1,287        (28,739)         9,965
                                                                   ---------      ---------      ---------      ---------
      Total assets ...........................................     $ 365,037      $  38,678      $ (29,840)     $ 373,875
                                                                   =========      =========      =========      =========

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED AND COMMON STOCK
    AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
   Accounts payable ..........................................     $  28,310      $   1,810                     $  30,120
   Accrued expenses ..........................................        16,455          6,786                        23,241
   Income taxes payable ......................................         4,007                     $    (204)         3,803
   Current portion of long-term obligations ..................         3,016            117                         3,133
                                                                   ---------      ---------      ---------      ---------
      Total current liabilities ..............................        51,788          8,713           (204)        60,297
Long-term obligations, excluding current portion .............       292,969            113                       293,082
Deferred income tax liabilities ..............................        16,534                                       16,534
Other ........................................................         1,219         17,279        (16,166)         2,332
                                                                   ---------      ---------      ---------      ---------
      Total liabilities ......................................       362,510         26,105        (16,370)       372,245

Redeemable convertible preferred stock .......................         6,945                                        6,945
Redeemable Common Stock ......................................         8,745                                        8,745

Commitments and Contingencies

Stockholders' (deficit) equity:
   Common Stock ..............................................                          339           (339)          --
   Additional paid-in capital ................................        27,535            658           (658)        27,535
   Unamortized restricted Common Stock
      awards .................................................          (194)                                        (194)
   Notes receivable from stockholders ........................          (669)                                        (669)
   (Deficit) retained earnings ...............................       (38,892)        12,161        (13,058)       (39,789)
   Accumulated other comprehensive loss ......................          (943)          (585)           585           (943)
                                                                   ---------      ---------      ---------      ---------
           Total stockholders' (deficit) equity ..............       (13,163)        12,573        (13,470)       (14,060)
                                                                   ---------      ---------      ---------      ---------
           Total liabilities, redeemable convertible
               preferred and Common Stock and
               stockholders' (deficit) equity ................     $ 365,037      $  38,678      $ (29,840)     $ 373,875
                                                                   =========      =========      =========      =========
</TABLE>

                                       17
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)

<TABLE>
                           CONSOLIDATING BALANCE SHEET

                                December 31, 2002
                             (Dollars in thousands)

<CAPTION>
                                                                    Amscan
                                                                 Holdings and     Combined
                                                                   Combined         Non-
                                                                  Guarantors     Guarantors     Eliminations   Consolidated
                                                                  ----------     ----------     ------------   ------------
<S>                                                                <C>            <C>            <C>             <C>
ASSETS
Current assets:
   Cash and cash equivalents .................................     $   1,483      $     917                      $   2,400
   Accounts receivable, net of allowances ....................        62,520         11,727                         74,247
   Inventories, net of allowances ............................        83,659         11,138      $     (907)        93,890
   Prepaid expenses and other current assets .................        13,411          2,280            (458)        15,233
                                                                   ---------      ---------      ----------      ---------
      Total current assets ...................................       161,073         26,062          (1,365)       185,770
Property, plant and equipment, net ...........................        98,951          1,353                        100,304
Goodwill, net ................................................        68,611          5,640                         74,251
Notes receivable from officers ...............................         1,942                                         1,942
Other assets, net ............................................        34,788            627         (25,185)        10,230
                                                                   ---------      ---------      ----------      ---------
      Total assets ...........................................     $ 365,365      $  33,682      $  (26,550)     $ 372,497
                                                                   =========      =========      ==========      =========

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED AND COMMON STOCK
    AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
   Accounts payable ..........................................     $  37,813      $   1,432                      $  39,245
   Accrued expenses ..........................................        15,937          5,587                         21,524
   Income taxes payable ......................................         3,037                     $     (512)         2,525
   Current portion of long-term obligations ..................         3,052            168                          3,220
                                                                   ---------      ---------      ----------      ---------
      Total current liabilities ..............................        59,839          7,187            (512)        66,514
Long-term obligations, excluding current portion .............       295,274            146                        295,420
Deferred income tax liabilities ..............................        17,360                                        17,360
Other ........................................................         1,153         16,052         (14,888)         2,317
                                                                   ---------      ---------      ----------      ---------
Total liabilities ............................................       373,626         23,385         (15,400)       381,611

Redeemable convertible preferred stock .......................         6,646                                         6,646
Redeemable Common Stock ......................................        30,523                                        30,523

Commitments and Contingencies

Stockholders' (deficit) equity:
   Common Stock ..............................................                          339            (339)          --
   Additional paid-in capital ................................        14,814            658            (658)        14,814
   Unamortized restricted Common Stock
      awards .................................................          (323)                                         (323)
   Notes receivable from stockholders ........................          (638)                                         (638)
   (Deficit) retained earnings ...............................       (56,698)        11,198         (12,051)       (57,551)
   Accumulated other comprehensive loss ......................        (2,585)        (1,898)          1,898         (2,585)
                                                                   ---------      ---------      ----------      ---------
           Total stockholders' (deficit) equity ..............       (45,430)        10,297         (11,150)       (46,283)
                                                                   ---------      ---------      ----------      ---------
           Total liabilities, redeemable convertible
               preferred and Common Stock and
               stockholders' (deficit) equity ................     $ 365,365      $  33,682      $  (26,550)     $ 372,497
                                                                   =========      =========      ==========      =========
</TABLE>

                                       18
<PAGE>

                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)

<TABLE>
                        CONSOLIDATING STATEMENT OF INCOME
                  For the Three Months Ended September 30, 2003
                             (Dollars in thousands)


<CAPTION>
                                                      Amscan
                                                   Holdings and    Combined
                                                     Combined        Non-
                                                    Guarantors    Guarantors    Eliminations   Consolidated
                                                    ----------    ----------    ------------   ------------

<S>                                                 <C>            <C>            <C>            <C>
Net sales .....................................     $  92,881      $  15,789      $  (5,450)     $ 103,220
Cost of sales .................................        62,861         10,797         (5,416)        68,242
                                                    ---------      ---------      ---------      ---------
         Gross profit .........................        30,020          4,992            (34)        34,978
Operating expenses:
    Selling expenses ..........................         7,578          1,628                         9,206
    General and administrative expenses .......         6,729          1,638           (300)         8,067
    Art and development costs .................         2,322                                        2,322
    Provision for doubtful accounts ...........           592            180                           772
    Restructuring charges .....................           233                                          233
                                                    ---------      ---------      ---------      ---------
         Total operating expenses .............        17,454          3,446           (300)        20,600
                                                    ---------      ---------      ---------      ---------
         Income from operations ...............        12,566          1,546            266         14,378
Interest expense, net .........................         6,494            187                         6,681
Gain on sale of available-for-sale securities .        (1,022)                                      (1,022)
Other (income) expense, net ...................        (1,082)           (23)         1,117             12
                                                    ---------      ---------      ---------      ---------
         Income before income taxes and
           minority interests .................         8,176          1,382           (851)         8,707
Income tax expense ............................         2,929            523            (13)         3,439
Minority interests ............................                           42                            42
                                                    ---------      ---------      ---------      ---------
         Net income ...........................         5,247            817           (838)         5,226
         Dividend on redeemable convertible
            preferred stock ...................           102                                          102
                                                    ---------      ---------      ---------      ---------
         Net income applicable to common shares     $   5,145      $     817      $    (838)     $   5,124
                                                    =========      =========      =========      =========
</TABLE>


                                       19
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)

<TABLE>
                        CONSOLIDATING STATEMENT OF INCOME
                  For the Three Months Ended September 30, 2002
                             (Dollars in thousands)

<CAPTION>
                                                      Amscan
                                                   Holdings and    Combined
                                                     Combined        Non-
                                                    Guarantors    Guarantors    Eliminations   Consolidated
                                                    ----------    ----------    ------------   ------------
<S>                                                 <C>            <C>            <C>            <C>
Net sales .....................................     $  92,063      $  14,652      $  (6,489)     $ 100,226
Cost of sales .................................        61,932         10,231         (6,402)        65,761
                                                    ---------      ---------      ---------      ---------
         Gross profit .........................        30,131          4,421            (87)        34,465
Operating expenses:
    Selling expenses ..........................         7,366          1,618                         8,984
    General and administrative expenses .......         6,643          1,498           (240)         7,901
    Art and development costs .................         2,486                                        2,486
    Provision for doubtful accounts ...........           244            103                           347
    Restructuring charges .....................           545             65                           610
                                                    ---------      ---------      ---------      ---------
         Total operating expenses .............        17,284          3,284           (240)        20,328
                                                    ---------      ---------      ---------      ---------
         Income from operations ...............        12,847          1,137            153         14,137
Interest expense, net .........................         5,274            156                         5,430
Other (income) expense, net ...................        (1,199)           (12)           847           (364)
                                                    ---------      ---------      ---------      ---------
         Income before income taxes
           and minority interests .............         8,772            993           (694)         9,071
Income tax expense ............................         3,249            334                         3,583
Minority interests ............................                           52                            52
                                                    ---------      ---------      ---------      ---------
         Net income ...........................         5,523            607           (694)         5,436
         Dividend requirement on redeemable
            convertible preferred stock .......            95                                           95
                                                    ---------      ---------      ---------      ---------
         Net income applicable to common shares     $   5,428      $     607      $    (694)     $   5,341
                                                    =========      =========      =========      =========
</TABLE>

                                       20
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)

<TABLE>
                        CONSOLIDATING STATEMENT OF INCOME
                  For the Nine Months Ended September 30, 2003
                             (Dollars in thousands)



<CAPTION>
                                                      Amscan
                                                   Holdings and    Combined
                                                     Combined        Non-
                                                    Guarantors    Guarantors    Eliminations   Consolidated
                                                    ----------    ----------    ------------   ------------
<S>                                                 <C>            <C>           <C>            <C>

Net sales .....................................     $ 277,094      $  42,029     $ (15,063)     $ 304,060
Cost of sales .................................       189,805         29,436       (15,080)       204,161
                                                    ---------      ---------     ---------      ---------
         Gross profit .........................        87,289         12,593            17         99,899
Operating expenses:
    Selling expenses ..........................        22,649          4,673                       27,322
    General and administrative expenses .......        19,710          5,086          (900)        23,896
    Art and development costs .................         7,145                                       7,145
    Provision for doubtful accounts ...........         2,280            481                        2,761
    Restructuring charges .....................           980             27                        1,007
                                                    ---------      ---------     ---------      ---------
         Total operating expenses .............        52,764         10,267          (900)        62,131
                                                    ---------      ---------     ---------      ---------
         Income from operations ...............        34,525          2,326           917         37,768
Interest expense, net .........................        19,375            502                       19,877
Gain on sale of available-for-sale securities .        (1,022)                                     (1,022)
Other (income) expense, net ...................        (1,912)             4         1,863            (45)
                                                    ---------      ---------     ---------      ---------
         Income before income taxes
           and minority interests .............        18,084          1,820          (946)        18,958
Income tax expense ............................         6,700            781             7          7,488
Minority interests ............................                           76                           76
                                                    ---------      ---------     ---------      ---------
         Net income ...........................        11,384            963          (953)        11,394
         Dividend on redeemable convertible
            preferred stock ...................           299                                         299
                                                    ---------      ---------     ---------      ---------
         Net income applicable to common shares     $  11,085      $     963     $    (953)     $  11,095
                                                    =========      =========     =========      =========
</TABLE>


                                       21
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)

<TABLE>
                        CONSOLIDATING STATEMENT OF INCOME
                  For the Nine Months Ended September 30, 2002
                             (Dollars in thousands)


<CAPTION>
                                                      Amscan
                                                   Holdings and    Combined
                                                     Combined        Non-
                                                    Guarantors    Guarantors    Eliminations   Consolidated
                                                    ----------    ----------    ------------   ------------
<S>                                                 <C>            <C>            <C>            <C>
Net sales .....................................     $ 268,180      $  39,857      $ (17,774)     $ 290,263
Cost of sales .................................       178,791         28,299        (17,674)       189,416
                                                    ---------      ---------      ---------      ---------
         Gross profit .........................        89,389         11,558           (100)       100,847
Operating expenses:
    Selling expenses ..........................        21,300          4,510                        25,810
    General and administrative expenses .......        19,954          4,473           (720)        23,707
    Art and development costs .................         7,462                                        7,462
    Provision for doubtful accounts ...........           725            737                         1,462
    Restructuring charges .....................           638            158                           796
                                                    ---------      ---------      ---------      ---------
         Total operating expenses .............        50,079          9,878           (720)        59,237
                                                    ---------      ---------      ---------      ---------
         Income from operations ...............        39,310          1,680            620         41,610
Interest expense, net .........................        15,716            472                        16,188
Other (income) expense, net ...................        (1,808)           (18)         1,440           (386)
                                                    ---------      ---------      ---------      ---------
         Income before income taxes
           and minority interests .............        25,402          1,226           (820)        25,808
Income tax expense ............................         9,695            499                        10,194
Minority interests ............................                            7                             7
                                                    ---------      ---------      ---------      ---------
         Net income ...........................        15,707            720           (820)        15,607
         Dividend requirement on redeemable
            convertible preferred stock .......           280                                          280
                                                    ---------      ---------      ---------      ---------
         Net income applicable to common shares     $  15,427      $     720      $    (820)     $  15,327
                                                    =========      =========      =========      =========
</TABLE>


                                       22
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)

<TABLE>
                      CONSOLIDATING STATEMENT OF CASH FLOWS
                  For the Nine Months Ended September 30, 2003
                             (Dollars in thousands)



<CAPTION>
                                                                 Amscan Holdings   Combined
                                                                  and Combined       Non-
                                                                   Guarantors     Guarantors  Eliminations Consolidated
                                                                   ----------     ----------  ------------ ------------

<S>                                                                 <C>           <C>           <C>         <C>
Cash flows from operating activities:
   Net income .................................................     $ 11,384      $    963      $  (953)    $ 11,394
   Adjustments to reconcile net income to net
     cash provided by (used in) operating activities:
      Depreciation and amortization ...........................       11,630           403                    12,033
      Amortization of deferred financing costs ................        1,570                                   1,570
      Amortization of restricted Common Stock awards ..........          129                                     129
      Provision for doubtful accounts .........................        2,280           481                     2,761
      Deferred income tax expense .............................        2,444                                   2,444
      Gain on sale of available-for-sale securities ...........       (1,022)                                 (1,022)
      Loss on disposal of property and equipment ..............          110             8                       118
      Non-cash restructuring charges ..........................          104                                     104
   Changes in operating assets and liabilities, net of
      acquisition:
            Increase in accounts receivable ...................      (10,774)       (4,598)                  (15,372)
            Decrease (increase) in inventories ................        9,583          (510)         (17)       9,056
            Decrease in prepaid expenses and other current
               assets .........................................          937            33                       970
            (Decrease) increase in accounts payable, accrued
               expenses and income taxes payable ..............       (8,039)        1,920            7       (6,112)
           Other, net .........................................       (1,830)          570          963         (297)
                                                                    --------      --------      -------     --------
            Net cash provided by (used in) operating activities       18,506          (730)        --         17,776

Cash flows from investing activities:
   Capital expenditures .......................................       (9,444)         (637)                  (10,081)
   Proceeds from sale of available-for-sale securities ........        1,443                                   1,443
   Proceeds from disposal of property and equipment ...........          128            70                       198
                                                                    --------      --------      -------     --------
            Net cash used in investing activities .............       (7,873)         (567)        --         (8,440)

Cash flows from financing activities:
   Repayment of loans, notes payable and long-term
       obligations ............................................       (2,655)         (133)                   (2,788)
   Proceeds from exercise of stock options ....................          831                                     831
   Purchase of Common Stock from officers .....................       (3,300)                                 (3,300)
   Repayment of notes receivable from officers ................        1,990                                   1,990
                                                                    --------      --------      -------     --------
            Net cash used in financing activities .............       (3,134)         (133)        --         (3,267)
Effect of exchange rate changes on cash and cash equivalents ..          (12)          962                       950
                                                                    --------      --------      -------     --------
            Net increase (decrease) in cash and cash
                      equivalents .............................        7,487          (468)                    7,019
Cash and cash equivalents at beginning of period ..............        1,483           917                     2,400
                                                                    --------      --------      -------     --------
Cash and cash equivalents at end of period ....................     $  8,970      $    449      $  --       $  9,419
                                                                    ========      ========      =======     ========
</TABLE>


                                       23
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)

<TABLE>
                      CONSOLIDATING STATEMENT OF CASH FLOWS
                  For the Nine Months Ended September 30, 2002
                             (Dollars in thousands)


<CAPTION>
                                                                    Amscan Holdings   Combined
                                                                      and Combined       Non-
                                                                       Guarantors     Guarantors     Eliminations  Consolidated
                                                                       ----------     ----------     ------------  ------------

<S>                                                                    <C>             <C>             <C>           <C>
Cash flows from operating activities:
   Net income ..................................................       $ 15,707        $    720        $  (820)      $ 15,607
   Adjustments to reconcile net income to net
     cash provided by (used in) operating activities:
      Depreciation and amortization ............................          9,557             295                         9,852
      Amortization of deferred financing costs .................            843                                           843
      Amortization of restricted Common Stock awards ...........            177                                           177
      Provision for doubtful accounts ..........................            725             737                         1,462
      Deferred income tax expense ..............................          4,462                                         4,462
      (Gain) loss on disposal of equipment .....................           (346)             35                          (311)
      Changes in operating assets and liabilities, net of
        acquisition:
            Increase in accounts receivable ....................         (9,013)         (4,517)                      (13,530)
            (Increase) decrease in inventories .................         (7,494)         (1,917)           100         (9,311)
            Increase in prepaid expenses and other current
               assets ..........................................         (1,748)           (642)                       (2,390)
            Increase in accounts payable, accrued expenses
               and income taxes payable ........................          5,317           1,711                         7,028
           Other, net ..........................................         (5,952)          3,190            720         (2,042)
                                                                       --------        --------        -------       --------
            Net cash provided by (used in) operating activities          12,235            (388)          --           11,847

Cash flows from investing activities:
   Cash paid in connection with acquisition ....................        (13,547)                                      (13,547)
   Capital expenditures ........................................        (11,129)           (267)                      (11,396)
   Proceeds from disposal of property and equipment ............            481              34                           515
                                                                       --------        --------        -------       --------
            Net cash used in investing activities ..............        (24,195)           (233)          --          (24,428)

Cash flows from financing activities:
   Proceeds from short-term obligations ........................         16,300                                        16,300
   Repayment of loans, notes payable and
         long-term obligations .................................         (2,523)            (12)                       (2,535)
                                                                       --------        --------        -------       --------
            Net cash provided by (used in) financing activities          13,777             (12)          --           13,765
Effect of exchange rate changes on cash and cash equivalents ...           (671)            423                          (248)
                                                                       --------        --------        -------       --------

            Net increase (decrease) in cash and cash equivalents          1,146            (210)                          936
Cash and cash equivalents at beginning of period ...............             60             956                         1,016
                                                                       --------        --------        -------       --------
Cash and cash equivalents at end of period .....................       $  1,206        $    746        $  --         $  1,952
                                                                       ========        ========        =======       ========
</TABLE>


                                       24
<PAGE>



ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

Three Months Ended  September 30, 2003 Compared to Three Months Ended  September
30, 2002

Percentage of Net Sales
-----------------------
<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                     ------------------
                                                                       September 30,
                                                                       -------------
                                                                   2003            2002
                                                                  ------          ------
<S>                                                                <C>             <C>
Net sales...................................................       100.0%          100.0%
Cost of sales...............................................        66.1            65.6
                                                                  ------          ------
       Gross profit.........................................        33.9            34.4
Operating expenses:
    Selling expenses........................................         8.9             9.0
    General and administrative expenses.....................         7.8             7.9
    Art and development costs...............................         2.3             2.5
    Provision for doubtful accounts.........................         0.7             0.3
    Restructuring charges...................................         0.3              0.6
                                                                  ------          ------
       Total operating expenses.............................        20.0            20.3
                                                                  ------          ------
       Income from operations...............................        13.9            14.1
Interest expense, net.......................................         6.5             5.4
Gain on sale of available-for-sale securities...............        (1.0)
Other income, net...........................................                        (0.4)
                                                                  ------          ------
       Income before income taxes and minority interests....         8.4             9.1
Income tax expense..........................................         3.3             3.6
Minority interests..........................................                         0.1
                                                                  ------          ------
       Net income...........................................         5.1%            5.4%
                                                                  ======          ======
</TABLE>

     Net sales of $103.2  million for the quarter ended  September 30, 2003 were
$3.0 million  higher than net sales for the quarter  ended  September  30, 2002.
During the third quarter of 2003,  the Company's  domestic sales of party goods,
including metallic  balloons,  were comparable to sales during the third quarter
of 2002.  Domestic sales performance  during the third quarter of 2003 continued
to be  adversely  affected by general  economic  conditions  resulting in a weak
retail environment. Contract manufacturing during the third quarter increased by
18.3% over the third quarter of 2002.  International  net sales reported for the
three  months  ended  September  30,  2003 were 7.8%  higher as  compared to the
corresponding  period in 2002  primarily  due to an increase in volume  combined
with favorable foreign currency exchange fluctuations.

     Gross profit margin for the quarter ended  September 30, 2003, of 33.9% was
0.5% lower than during the quarter  ended  September  30, 2002.  The decrease in
gross profit  margin  during the third  quarter of 2003 reflects the increase in
contract  manufacturing  and  the  additional  depreciation,   amortization  and
equipment rental costs associated with the new distribution facility that became
operational  in the fourth  quarter of 2002,  partially  offset by the operating
efficiencies from the transition to the new distribution facility.

     Selling  expenses of $9.2 million for the quarter ended  September 30, 2003
were $0.2 million higher than in the corresponding period in 2002. However, as a
percent  of  sales,  selling  expenses  were  8.9%,  or  0.1%  less  than in the
corresponding  period in 2002,  reflecting  the further  leveraging of our sales
infrastructure and the maturation of our specialty sales force.

     General and  administrative  expenses of $8.1 million for the quarter ended
September  30, 2003 were $0.2 million  higher than the  corresponding  period in
2002. As a percentage of sales,  general and  administrative  expenses were 7.8%
for the third quarter of 2003, or 0.1% lower than in the corresponding period in
2002. The net decrease in general and administrative expenses as a percentage of
sales  principally  reflects  synergies  realized from the  consolidation of the
administrative  functions of M&D Industries,  Inc., ("M&D  Industries") into the
Company's  existing  operations,   partially  offset  by  higher  insurance  and
occupancy costs.

                                       25
<PAGE>


     Art and  development  costs of $2.3 million for the quarter ended September
30,  2003  were $0.2  million  lower as  compared  to 2002,  principally  due to
synergies realized from the consolidation of M&D Industries' art and development
departments into the Company's  existing  operations.  As a percentage of sales,
art and  development  costs were 2.3% for the third quarter of 2003 and 2.5% for
the third quarter of 2002.

     During the second  quarter of 2003, a customer  filed a voluntary  petition
for  relief  under  Chapter  11 of the United  States  Bankruptcy  Code and as a
result,  the Company  charged an  additional  $0.2 million to the  provision for
doubtful accounts during the third quarter of 2003. This customer  accounted for
approximately 1.5% of the Company's  consolidated net sales for the three months
ended  September 30, 2003.  The Company does not believe the  potential  loss of
this  customer  will have a  material  adverse  effect on the  Company's  future
results of operations or its financial condition.

     During the three  months  ended  September  30, 2003 and 2002,  the Company
incurred  restructuring charges of $0.2 million and $0.6 million,  respectively,
resulting from the  consolidation of certain  domestic and foreign  distribution
operations,  and during 2003, the ongoing integration of M&D Industries into our
balloon operations.  The consolidation of our domestic  distribution  operations
may result in additional restructuring charges in subsequent periods.

     During the three  months  ended  September  30,  2003,  the Company  sold a
portion of the common stock of a customer  which it had  received in  connection
with the  customer's  reorganization  in  bankruptcy.  The Company  received net
proceeds of  approximately  $1.4 million and recognized a gain of  approximately
$1.0 million.

     Interest expense, net, of $6.7 million for the three months ended September
30, 2003 was $1.3 million  higher than for the three months ended  September 30,
2002,  principally  due to the impact of higher average  borrowings and a higher
average effective interest rate (8.9% in 2003 versus 7.3% in 2002).

     Income  taxes  for the  third  quarter  of 2003 and 2002  were  based  upon
estimated  consolidated effective income tax rates of 39.5% for the years ending
December 31, 2003 and 2002.


                                       26
<PAGE>


Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30,
2002

Percentage of Net Sales
-----------------------
<TABLE>
<CAPTION>
                                                                Nine Months Ended September 30,
                                                                -------------------------------
                                                                    2003             2002
                                                                   ------           ------
<S>                                                                 <C>              <C>
Net sales....................................................       100.0%           100.0%
Cost of sales................................................        67.1             65.3
                                                                   ------           ------
       Gross profit..........................................        32.9             34.7
Operating expenses:
    Selling expenses.........................................         9.0              8.9
    General and administrative expenses......................         7.9              8.1
    Art and development costs................................         2.4              2.6
    Provision for doubtful accounts..........................         0.9              0.5
    Restructuring charges....................................         0.3              0.3
                                                                   ------           ------
       Total operating expenses..............................        20.5             20.4
                                                                   ------           ------
       Income from operations................................        12.4             14.3
Interest expense, net........................................         6.5              5.5
Gain on sale of available-for-sale securities................        (0.3)
Other income, net............................................                         (0.1)
                                                                   ------           ------
       Income before income taxes and minority interests.....         6.2              8.9
Income tax expense...........................................         2.5              3.5
Minority interests...........................................
                                                                   ------           ------
       Net income............................................         3.7%             5.4%
                                                                   ======           ======
</TABLE>


     Net sales of $304.1  million for the nine months ended  September  30, 2003
were $13.8 million higher than net sales for the nine months ended September 30,
2002.  During the nine months ended  September 30, 2003, the Company's  domestic
sales  of  party  goods,  including  metallic  balloons,  grew by 3.6%  over the
corresponding  period in 2002. Domestic sales performance during the nine months
ended September 30, 2003 were adversely affected by general economic  conditions
resulting in a weak retail  environment  and,  during the first quarter of 2003,
severe weather conditions.  Contract  manufacturing during the nine months ended
September  30, 2003  increased by 15.6% over the  corresponding  period in 2002.
International  net sales  reported for the nine months ended  September 30, 2003
increased  by  5.4%,  principally  as a result  of  favorable  foreign  currency
exchange fluctuations partially offset by a small decrease in volume.

     Gross profit margin for the nine months ended  September 30, 2003, of 32.9%
was 1.8% lower than during the nine  months  ended  September  30,  2002.  Gross
profit  margin for the nine months ended  September 30, 2003 reflects the impact
of product  sales and  customer  mix  (particularly  solid color  tableware  and
contract   manufacturing)  and  additional  depreciation  and  amortization  and
equipment rental costs associated with the new distribution facility that became
operational  in the fourth  quarter of 2002.  Gross  profit  margin for the nine
months  ended  September  30, 2003 also  reflects  additional  production  costs
incurred  during the first and second  quarters of 2003 in  connection  with the
integration  of the  M&D  Industries  into  the  Company's  balloon  operations,
additional  distribution costs incurred as a result of severe weather conditions
during the first quarter of 2003 and redundant  costs arising from the Company's
transition  from four to three east  coast  distribution  facilities,  partially
offset  by  operating  efficiencies  from  the  transition  to new  distribution
facility.

     Selling  expenses of $27.3 million for the nine months ended  September 30,
2003  were  $1.5  million  higher  than  in the  corresponding  period  in  2002
principally due to the inclusion of the operating  results of M&D Industries for
two  additional  months in 2003 and the continued  development  of the Company's
specialty sales force. Selling expenses, as a percentage of net sales, increased
from 8.9% to 9.0%.

     General and  administrative  expenses of $23.9  million for the nine months
ended  September  30, 2003 were  relatively  consistent  with the  corresponding
period in 2002 as increased insurance and occupancy costs were offset


                                       27
<PAGE>


by synergies  realized from the consolidation of M&D Industries'  administrative
functions  into the  Company's  existing  operations.  As a percentage of sales,
general and administrative expenses decreased by 0.2% to 7.9%.

     Art and  development  costs  of $7.1  million  for the  nine  months  ended
September 30, 2003 were $0.3 million lower than for the corresponding  period in
2002,  principally  due  to  synergies  realized  from  the  integration  of M&D
Industries'  art  and  development   departments  into  the  Company's  existing
operations.  As a percentage of sales,  art and development  costs were 2.4% for
the nine months ended September 30, 2003 and 2.6% for the  corresponding  period
in 2002.

     During the second  quarter of 2003, a customer  filed a voluntary  petition
for  relief  under  Chapter  11 of the United  States  Bankruptcy  Code and as a
result,  the Company charged $1.8 million to the provision for doubtful accounts
during the nine months ended  September 30, 2003.  This  customer  accounted for
approximately  2.6% of the Company's  consolidated net sales for the nine months
ended  September 30, 2003.  The Company does not believe the  potential  loss of
this  customer  will have a  material  adverse  effect on the  Company's  future
results of operations or its financial condition.

     During the nine  months  ended  September  30,  2003 and 2002,  the Company
incurred  restructuring charges of $1.0 million and $0.8 million,  respectively,
resulting from the  consolidation of certain  domestic and foreign  distribution
operations,  and during 2003, the ongoing integration of M&D Industries into our
balloon operations.  The consolidation of our domestic  distribution  operations
may result in additional restructuring charges in subsequent periods.

     During the nine months ended September 30, 2003, the Company sold a portion
of the common stock of a customer  which it had received in connection  with the
customer's  reorganization  in bankruptcy.  The Company received net proceeds of
approximately $1.4 million and recognized a gain of $1.0 million.

     Interest expense, net, of $19.9 million for the nine months ended September
30, 2003 was $3.7 million  higher than in the  corresponding  period in 2002 and
reflects the impact of higher average  borrowings and a higher average effective
interest rate (8.7% in 2003 versus 7.3% in 2002).

     Income  taxes for the nine months  ended  September  30, 2003 and 2002 were
based upon estimated  consolidated  effective  income tax rates of 39.5% for the
years ending December 31, 2003 and 2002.

Liquidity and Capital Resources
-------------------------------

     On December 20, 2002, we amended and restated our existing  credit facility
with various lenders (the "Lenders"), with Goldman Sachs Credit Partners L.P. as
sole lead arranger,  sole bookrunner and syndication  agent.  Under the terms of
the Second  Amended and  Restated  Credit and  Guaranty  Agreement  (the "Credit
Agreement"), the Lenders agreed to amend and restate the Company's existing bank
credit agreements in their entirety and to provide a $200,000,000 senior secured
facility  consisting  of a  $170,000,000  term loan (the "Term  Loan") and up to
$30,000,000 aggregate principal amount of revolving loans (the "Revolver").  The
proceeds of the Term Loan were used to  redesignate  and  replace the  Company's
AXEL  term loan of $148.5  million  and  revolver  borrowings  of $16.0  million
existing at the closing  date and to pay certain  fees and  expenses  associated
with the refinancing.

     The Term Loan was funded at a 1.0% original issue discount and provides for
amortization  (in  quarterly  installments)  of 1.0% per annum  through June 15,
2006, and will then amortize in equal quarterly  payments through June 15, 2007.
The Term Loan bears  interest,  at the option of the Company,  at the index rate
plus 3.50% per annum or at LIBOR plus  4.50% per  annum,  with a LIBOR  floor of
2.0%. At September 30, 2003,  the Term Loan, net of  unamortized  discount,  was
$167,347,000  and the  floating  interest  rate on the Term Loan was 6.50%.  The
Company is required to make  prepayments  under the Credit  Agreement based upon
the net proceeds from certain asset sales and insurance or condemnation  awards,
the  issuances of certain debt and equity  securities,  and based on annual cash
flows, as defined.


                                       28
<PAGE>


     The Revolver expires on June 15, 2007, and bears interest, at the option of
the Company, at the index rate plus, based on performance, a margin ranging from
2.00% to 3.50% per  annum,  or at LIBOR  plus,  based on  performance,  a margin
ranging from 3.00% to 4.50% per annum,  with a LIBOR floor of 2.0%. At September
30, 2003, the Company had no borrowings  under the Revolver.  Standby letters of
credit  totaling  $6.9 million were  outstanding  and the Company had  borrowing
capacity  of  approximately  $23.1  million  under the terms of the  Revolver at
September 30, 2003.

     The Term Loan and  borrowings  under the  Revolver  are  secured by a first
priority lien on substantially all of the Company's assets and are guaranteed by
the Company's domestic subsidiaries. The Company is required to maintain certain
financial ratios during the term of the Credit Agreement, including leverage and
interest coverage ratios.

     At September 30, 2003, the Company had $110,000,000 of senior  subordinated
notes (the "Notes") outstanding. The Notes bear interest at a rate of 9.875% per
annum and mature in December 2007. Interest is payable  semi-annually on June 15
and  December  15 of each year.  The Notes are  redeemable  at the option of the
Company,  in whole or in part,  at  redemption  prices  ranging from 104.937% to
100%,  plus  accrued  and unpaid  interest to the date of  redemption.  Upon the
occurrence of a Change of Control, as defined in the note indenture, the Company
will be obligated  to make an offer to purchase the Notes,  in whole or in part,
at a price equal to 101% of the aggregate  principal  amount of the Notes,  plus
accrued and unpaid  interest,  if any, to the date of  purchase.  If a Change of
Control were to occur, the Company may not have the financial resources to repay
all of its obligations  under the Credit  Agreement,  the note indenture and the
other  indebtedness that would become payable upon the occurrence of such Change
of Control.

     In addition to the  Revolver,  the  Company has a 400,000  Canadian  dollar
denominated revolving credit facility which bears interest at the Canadian prime
rate plus 0.6% and  expires  on April 30,  2004,  a 1.0  million  British  Pound
Sterling denominated  revolving credit facility which bears interest at the U.K.
base rate plus 1.75% and  expires on June 1, 2004 and a $1.0  million  revolving
credit  facility which bears interest at LIBOR plus 1.0% and expires on December
31, 2003. We expect to renew these revolving credit  facilities upon expiration.
No  borrowings  were  outstanding  under these  revolving  credit  facilities at
September 30, 2003.

     The Company financed the cost to purchase property in 2000 and to construct
a new  domestic  distribution  facility  completed  in 2001 (total cost of $30.2
million) using borrowings under the then existing revolving credit facility and,
in 2001,  the proceeds from the issuance of the Series A Redeemable  Convertible
Preferred  Stock  of  $6.0  million  (noted  below)  and  long-term   borrowings
consisting of a first and second lien  mortgage  note in the original  principal
amount of $10.0 million each with a financial institution and the New York State
Job  Development  Authority,  respectively.  The first lien  mortgage note bears
interest at LIBOR plus 2.75%. However, the Company has utilized an interest rate
swap  agreement  to  effectively  fix the loan rate at 8.40% for the term of the
loan. The second lien mortgage note bears interest at the rate of 3.31%,  and is
subject to review and adjustment  semi-annually  based on the New York State Job
Development  Authority's  confidential internal protocols.  Both notes are for a
term of 96 months and require monthly payments based on a 180-month amortization
period with balloon payments upon maturity in January 2010.

     On March  30,  2001,  the  Board of  Directors  authorized  500  shares  of
preferred  stock,  $0.10  par  value,  and  designated  100  shares  as Series A
Redeemable  Convertible  Preferred  Stock.  Also on March 30, 2001,  the Company
issued  40  shares  of Series A  Redeemable  Convertible  Preferred  Stock to GS
Capital Partners II, L.P. and certain other private  investment funds managed by
Goldman,  Sachs & Co.  (collectively,  "GSCP")  for  proceeds  of $6.0  million.
Dividends are cumulative and payable annually at 6% per annum. Dividends payable
on or prior to March 30,  2004,  are  payable in  additional  shares of Series A
Redeemable  Convertible  Preferred Stock based on a value of $150,000 per share.
Subsequent  to March 30,  2004,  dividends  are  payable,  at the  option of the
Company,  either in cash or additional shares of Series A Redeemable Convertible
Preferred  Stock.  On March 30, 2003,  the annual  dividend was  distributed  in
additional  shares  of  Series A  Redeemable  Convertible  Preferred  Stock.  At
September 30, 2003,  44.94 shares of Series A Redeemable  Convertible  Preferred
Stock were issued and outstanding.

                                       29
<PAGE>


     On February 19, 2002, the Company  purchased all of the outstanding  Common
Stock of M&D Industries, a Manteno,  Illinois-based manufacturer of metallic and
plastic balloons, from American Greetings Corporation ("American Greetings") for
$27.5  million plus related  costs.  The Company  financed  the  acquisition  by
borrowing  $13.5 million under its then existing  revolving  credit facility and
issuing 96.774 shares of its Common Stock to American  Greetings,  at a value of
$155,000 per share. American Greetings continues to distribute metallic balloons
under a supply agreement with the Company.

     The Company has several  non-cancelable  operating  leases  principally for
office,  distribution  and  manufacturing  facilities,  showrooms  and warehouse
equipment.  These leases  expire on various  dates  through  2017 and  generally
contain  renewal  options and  require  the  Company to pay real  estate  taxes,
utilities and related  insurance  costs.  Rent expense for the nine months ended
September   30,  2003  and  2002,   totaled  $9.3  million  and  $8.0   million,
respectively. The minimum lease payments currently required under non-cancelable
operating  leases for the year  ending  December  31,  2003,  approximate  $12.9
million.

     On June 13,  2002,  the Company  filed a  registration  statement  with the
Commission for an IPO of its Common Stock. However, during the fourth quarter of
2002,  the  Company  decided  not to pursue the IPO,  which  resulted  in a $0.8
million write-off of costs associated with the offering.  On March 12, 2003, the
Company filed a Form RW with the Securities and Exchange Commission  withdrawing
its registration statement for the IPO.

     The Credit Agreement and the Notes may affect the Company's ability to make
future capital  expenditures  and potential  acquisitions.  However,  management
believes  that current  asset levels  provide  adequate  capacity to support its
operations  for at least the next 12 months.  At September 30, 2003, the Company
did  not  have  material   commitments   for  capital   expenditures   or  other
acquisitions. Based upon the current level of operations and anticipated growth,
the Company  anticipates  that its operating cash flow,  together with available
borrowings  under the  Revolver  will be  adequate  to meet  anticipated  future
requirements for working capital and operating expenses for at least the next 12
months.  However,  the Company's ability to make scheduled payments of principal
of, or to pay interest on, or to refinance its  indebtedness  and to satisfy its
other obligations will depend upon its future  performance,  which, to a certain
extent, will be subject to general economic,  financial,  competitive,  business
and other factors beyond its control.

Cash Flow Data - Nine Months Ended  September  30, 2003  Compared to Nine Months
Ended September 30, 2002
--------------------------------------------------------------------------------

     Net cash  provided by  operating  activities  during the nine months  ended
September  30,  2003  and  2002,   totaled  $17.8  million  and  $11.8  million,
respectively.  Net cash flow provided by operating  activities before changes in
operating  assets and  liabilities  for the nine months ended September 30, 2003
and 2002,  was  $29.6  million  and  $32.1  million,  respectively.  Changes  in
operating assets and  liabilities,  net of acquisition for the nine months ended
September  30, 2003 and 2002,  resulted in the use of cash of $11.8  million and
$20.3  million,  respectively.  The  reduction  in  the  use  of  cash  in  2003
principally  reflects the Company's  efforts to reduce its investment in working
capital.

     Net  cash  used in  investing  activities  during  the  nine  months  ended
September  30,  2003  of  $8.4  million  consisted   principally  of  additional
investments  in  distribution  and  manufacturing  equipment  and other  assets,
partially  offset by proceeds  received  from the disposal of equipment  and the
sale of a portion of the Company's  investment in the common stock of a customer
received in connection  with the customer's  reorganization  in bankruptcy.  Net
cash used in investing  activities  during the nine months ended  September  30,
2002 of $24.4 million  consisted of $13.5 million relating to the acquisition of
M&D  Balloons  and  $11.4  million  of costs  associated  with the new  domestic
distribution  facility as well as additional  investments in data processing and
manufacturing equipment,  partially offset by proceeds from disposal of property
and equipment.

     During the nine months ended September 30, 2003, net cash used in financing
activities of $3.3 million consisted of the scheduled  payments on the Term Loan
and other  long-term  obligations and the purchase of Common Stock from both the
Company's Chief Executive  Officer and President,  partially  offset by proceeds
from the exercise of stock options and the repayment of the notes  receivable by
both the Chief Executive Officer and

                                       30
<PAGE>


President.  During the comparable period in 2002, net cash provided by financing
activities of $13.8 million  consisted of proceeds from  short-term  borrowings,
including  $13.5  million  used to  finance  the  acquisition  of M&D  Balloons,
partially offset by the scheduled  payments of the Term Loan and other long-term
obligations.

Legal Proceedings
-----------------

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

"Safe Harbor" Statement under Private Securities Litigation Reform Act of 1995
------------------------------------------------------------------------------

     This report  includes  "forward-looking  statements"  within the meaning of
various provisions of the Private Securities  Litigation Reform Act of 1995. All
statements,  other than statements of historical facts,  included in this report
that address  activities,  events or  developments  that the Company  expects or
anticipates  will  or may  occur  in the  future,  future  capital  expenditures
(including  the amount and nature  thereof),  business  strategy and measures to
implement strategy,  including any changes to operations,  goals,  expansion and
growth of the Company's  business and  operations,  plans,  references to future
success and other such matters are forward-looking statements.  These statements
are based on certain  assumptions  and analyses  made by the Company in light of
its experience and its perception of historical  trends,  current conditions and
expected  future   developments  as  well  as  other  factors  it  believes  are
appropriate  in the  circumstances.  Actual results may differ  materially  from
those discussed.  Whether actual results and developments  will conform with the
Company's  expectations  and  predictions  is  subject  to a number of risks and
uncertainties,  including,  but not limited to (1) the concentration of sales by
the Company to party goods  superstores  where the  reduction  of purchases by a
small  number of  customers  could  materially  reduce the  Company's  sales and
profitability, (2) the concentration of the Company's credit risk in party goods
superstores,  several of which are privately  held and have expanded  rapidly in
recent years, (3) the failure by the Company to anticipate changes in tastes and
preferences of party goods  retailers and  consumers,  (4)  introduction  of new
product  lines by the  Company,  (5) the  introduction  of new  products  by the
Company's  competitors,  (6) the inability of the Company to increase  prices to
recover fully future increases in raw material prices,  especially  increases in
paper prices,  (7) the loss of key  employees,  (8) changes in general  business
conditions,  (9) other factors which might be described from time to time in the
Company's  filings with the  Commission  and (10) other factors which are beyond
the control of the Company.  Consequently, all of the forward-looking statements
made in this report are qualified by these cautionary statements, and the actual
results or developments  anticipated by the Company may not be realized or, even
if substantially  realized, may not have the expected consequences to or effects
on the Company or its business or operations. Although the Company believes that
it has the  product  offerings  and  resources  needed for  continued  growth in
revenues  and  margins,  future  revenue  and margin  trends  cannot be reliably
predicted. Changes in such trends may cause the Company to adjust its operations
in the future. Because of the foregoing and other factors,  recent trends should
not be considered  reliable indicators of future financial results. In addition,
the highly leveraged nature of the Company may impair its ability to finance its
future  operations and capital needs and its  flexibility to respond to changing
business and economic conditions and business opportunities.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our earnings  are affected by changes in interest  rates as a result of our
variable rate indebtedness. However, we utilize interest rate swap agreements to
manage the market risk associated with fluctuations in interest rates. If market
interest  rates for our  variable  rate  indebtedness  averaged 2% more than the
interest rate  actually  paid for the three months ended  September 30, 2003 and
2002, our interest  expense,  after considering the effects of our interest rate
swap  agreements,  would have  increased,  and income  before  income  taxes and
minority interest would have decreased,  by $0.9 million in each of the periods.
If market  interest  rates for our variable rate  indebtedness  averaged 2% more
than the interest  rate  actually  paid for the nine months ended  September 30,
2003 and 2002,  our  interest  expense,  after  considering  the  effects of our
interest rate swap  agreements,  would have increased,  and income before income
taxes and  minority  interest  would have  decreased,  by $2.6  million and $2.5
million, respectively. These amounts are determined by considering the impact of
the hypothetical interest rates on our borrowings and interest


                                       31
<PAGE>


rate swap agreements. This analysis does not consider the effects of the reduced
level of overall  economic  activity  that could  exist in such an  environment.
Further,  in the event of a change of such  magnitude,  management  would likely
take actions to further mitigate our exposure to the change. However, due to the
uncertainty  of the  specific  actions  that we would  take and  their  possible
effects, the sensitivity analysis assumes no changes in our financial structure.

     Our earnings  are also  affected by  fluctuations  in the value of the U.S.
dollar as compared to foreign  currencies,  predominately in European countries,
as a result  of the  sales of our  products  in  foreign  markets.  Although  we
periodically  enter into foreign currency forward contracts to hedge against the
earnings  effects of such  fluctuations,  we may not be able to hedge such risks
completely or permanently.  A uniform 10% strengthening in the value of the U.S.
dollar  relative to the  currencies in which our foreign  sales are  denominated
would have  resulted  in a decrease  in gross  profit of $0.5  million  and $0.4
million, for the three months ended September 30, 2003 and 2002, respectively. A
uniform  10%  strengthening  in the  value of the U.S.  dollar  relative  to the
currencies in which our foreign sales are  denominated  would have resulted in a
decrease in gross  profit of $1.3  million and $1.2  million for the nine months
ended September 30, 2003 and 2002, respectively.  These calculations assume that
each  exchange  rate would  change in the same  direction  relative  to the U.S.
dollar.  In addition to the direct effects of changes in exchange  rates,  which
could change the U.S. dollar value of the resulting  sales,  changes in exchange
rates may also affect the volume of sales or the foreign currency sales price as
competitors'  products become more or less attractive.  Our sensitivity analysis
of the effects of changes in foreign currency  exchange rates does not factor in
a potential change in sales levels or local currency prices.


ITEM 4. CONTROLS AND PROCEDURES

     Based on an evaluation  of the  effectiveness  of the Company's  disclosure
controls  and  procedures  performed  by  the  Company's  management,  with  the
participation  of the Company's Chief Executive  Officer and its Chief Financial
Officer, as of the end of the period covered by this report, the Company's Chief
Executive  Officer and its Chief Financial  Officer concluded that the Company's
disclosure controls and procedures have been effective.

     As used herein,  "disclosure  controls and  procedures"  means controls and
other  procedures  of the Company that are  designed to ensure that  information
required to be  disclosed by the Company in the reports that it files or submits
under  the  Securities  Exchange  Act is  recorded,  processed,  summarized  and
reported, within the time periods specified in the Commission's rules and forms.
Disclosure  controls and procedures include,  without  limitation,  controls and
procedures  designed to ensure that information  required to be disclosed by the
Company in the reports that it files or submits  under the  Securities  Exchange
Act is accumulated and communicated to the Company's  management,  including its
principal  executive and principal  financial  officers,  or persons  performing
similar functions,  as appropriate to allow timely decisions  regarding required
disclosure.

     There were no changes in the  Company's  internal  control  over  financial
reporting  identified  in  connection  with  the  evaluation  described  in  the
preceding  paragraph  that occurred  during the Company's  fiscal  quarter ended
September 30, 2003 that have  materially  affected,  or is reasonably  likely to
materially affect, the Company's internal control over financial reporting.


                                       32
<PAGE>


                                     PART II
                                     -------


ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

        a)  Exhibits

   10 (a)   Amscan Holdings, Inc. 1997 Stock Incentive Plan, as amended to June
            2003.

   10 (b)   Employment Agreement, dated as of June 19, 2003, by and among the
            Company and Gerald C. Rittenberg.

   10 (c)   Employment Agreement, dated as of June 19, 2003, by and among the
            Company and James M. Harrison.

   31(1)    Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive Officer.

   31(2)    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

   32       Section 1350 Certification.

        b)  Reports on Form 8-K

            None.


                                       33
<PAGE>


                                    SIGNATURE

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                    AMSCAN HOLDINGS, INC.

                                      By:  /s/ Michael A. Correale
                                           -----------------------
                                           Michael A. Correale
                                           Chief Financial Officer
                                           (on behalf of the registrant and as
Date: November 14, 2003                    principal financial and accounting
      -----------------                    officer)



<PAGE>


                                 EXHIBIT INDEX

     No.                                Description
     ---                                -----------

   10 (a)   Amscan Holdings, Inc. 1997 Stock Incentive Plan, as amended to June
            2003.

   10 (b)   Employment Agreement, dated as of June 19, 2003, by and among the
            Company and Gerald C. Rittenberg.

   10 (c)   Employment Agreement, dated as of June 19, 2003, by and among the
            Company and James M. Harrison.

   31(1)    Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive Officer.

   31(2)    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

   32       Section 1350 Certification.