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 June 30, 2002


[ ]  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
          -------           -------



As of August 14, 2002,  1,233.27 shares of Registrant's  common stock, par value
$0.10 ("Common Stock"), were outstanding.


<PAGE>


                              AMSCAN HOLDINGS, INC.
                                    FORM 10-Q

                                  June 30, 2002

                                Table of Contents



                                   Part I                                  Page

 Item 1     Financial Statements  (Unaudited)

            Consolidated Balance Sheets at June 30, 2002 and
                December 31, 2001........................................    3

            Consolidated Statements of Income for the Three and Six
                Months Ended June 30, 2002 and 2001......................    4

            Consolidated Statement of Stockholders' Deficit for the
                Six Months Ended June 30, 2002...........................    5

            Consolidated Statements of Cash Flows for the Six
                Months Ended June 30, 2002 and 2001......................    6

            Notes to Consolidated Financial Statements...................    7

 Item 2     Management's Discussion and Analysis of Financial
                Condition and Results of Operations......................   23

 Item 3     Quantitative and Qualitative Disclosures About
                Market Risk .............................................   28

                                                 Part II

 Item 1     Legal Proceedings.............................................  29

 Item 6     Exhibits and Reports on Form 8-K..............................  29

 Signature  ..............................................................  30



                                       2
<PAGE>


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

<CAPTION>
                                                                             June 30,     December 31,
                                                                               2002           2001
                                                                           ------------   ------------
                                                                            (Unaudited)     (Note)
                                                                           ------------   ------------
                                      ASSETS
<S>                                                                         <C>            <C>
Current assets:
    Cash and cash equivalents .........................................     $   2,200      $   1,016
    Accounts receivable, net of allowances ............................        73,659         65,039
    Inventories, net of allowances ....................................        85,637         72,582
    Prepaid expenses and other current assets .........................        17,384         13,659
                                                                            ---------      ---------
         Total current assets .........................................       178,880        152,296
Property, plant and equipment, net ....................................        97,977         94,589
Goodwill, net .........................................................        76,413         55,985
Other assets, net .....................................................         9,083          7,604
                                                                            ---------      ---------
         Total assets .................................................     $ 362,353      $ 310,474
                                                                            =========      =========
        LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED AND COMMON STOCK
                              AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Short-term obligations ............................................     $  14,000      $     700
    Accounts payable ..................................................        39,562         33,083
    Accrued expenses ..................................................        20,119         16,047
    Income taxes payable ..............................................         3,693          2,298
    Current portion of long-term obligations ..........................        15,925          3,455
                                                                            ---------      ---------
         Total current liabilities ....................................        93,299         55,583
Long-term obligations, excluding current portion ......................       264,257        278,443
Deferred income tax liabilities .......................................        17,960         15,181
Other .................................................................         2,277          2,353
                                                                            ---------      ---------
         Total liabilities ............................................       377,793        351,560

Redeemable convertible preferred stock ($0.10 par value; 43.04 shares
    authorized; 42.4 and 40.0 shares issued and outstanding) ..........         6,455          6,270
Redeemable Common Stock ...............................................        30,523         29,949

Commitments and Contingencies

Stockholders' deficit:
    Common Stock ($0.10 par value; 3,000.00 shares authorized;
        1,233.27 and 1,133.49 shares issued and outstanding) ..........          --             --
    Additional paid-in capital ........................................        15,764            299
    Unamortized restricted Common Stock awards, net ...................          (441)           (94)
    Notes receivable from stockholders ................................          (620)          (601)
    Deficit ...........................................................       (64,604)       (74,016)
    Accumulated other comprehensive loss ..............................        (2,517)        (2,893)
                                                                            ---------      ---------
         Total stockholders' deficit ..................................       (52,418)       (77,305)
                                                                            ---------      ---------
         Total liabilities, redeemable convertible preferred and Common
           Stock and stockholders' deficit ............................     $ 362,353      $ 310,474
                                                                            =========      =========
</TABLE>

          Note: The balance sheet at December 31, 2001 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           Six Months Ended
                                                            June 30,                     June 30,
                                                    -----------------------      ------------------------
                                                       2002          2001          2002           2001
                                                    ---------     ---------      ---------      ---------
<S>                                                 <C>           <C>            <C>            <C>
Net sales .....................................     $  94,129     $  82,839      $ 190,037      $ 169,744
Cost of sales .................................        61,979        54,526        123,655        109,843
                                                    ---------     ---------      ---------      ---------
         Gross profit .........................        32,150        28,313         66,382         59,901

Operating expenses:
   Selling expenses ...........................         8,647         7,672         16,826         15,567
   General and administrative expenses ........         8,770         8,611         16,921         17,136
   Art and development costs ..................         2,700         2,257          4,976          4,342
   Restructuring charges ......................           186          --              186           --
                                                    ---------     ---------      ---------      ---------
         Total operating expenses .............        20,303        18,540         38,909         37,045
                                                    ---------     ---------      ---------      ---------
         Income from operations ...............        11,847         9,773         27,473         22,856

Interest expense, net .........................         5,268         6,190         10,758         12,765
Other expense (income), net ...................            48           (67)           (22)            44
                                                    ---------     ---------      ---------      ---------
         Income before income taxes and
            minority interests ................         6,531         3,650         16,737         10,047

Income tax expense ............................         2,580         1,442          6,611          3,969
Minority interests ............................            11            (1)           (45)            (6)
                                                    ---------     ---------      ---------      ---------
         Net income ...........................         3,940         2,209         10,171          6,084
         Dividend requirement on redeemable
           convertible preferred stock ........            95            90            185             90
                                                    ---------     ---------      ---------      ---------
         Net income applicable to common shares     $   3,845     $   2,119      $   9,986      $   5,994
                                                    =========     =========      =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       4
<PAGE>


<TABLE>
                              AMSCAN HOLDINGS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                         Six Months Ended June 30, 2002
                             (Dollars in thousands)
                                   (Unaudited)

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

<S>                                     <C>     <C>           <C>        <C>         <C>         <C>         <C>         <C>
Balance at December 31, 2001 .....      1,133   $      --     $    299   $    (94)   $   (601)   $(74,016)   $ (2,893)   $(77,305)

  Net income .....................       --            --         --         --          --        10,171        --        10,171
  Net change in cumulative
    translation adjustment .......       --            --         --         --          --          --           955         955
  Change in fair value of interest
    rate swap and foreign
    exchange contracts, net of
    taxes (see Note 5) ...........       --            --         --         --          --          --          (579)       (579)
                                                                                                                         --------
      Comprehensive income .......       --            --         --         --          --          --          --        10,547
  Issuance of Common Stock in
    connection with acquisition ..         97          --       15,000       --          --          --          --        15,000
  Grant of restricted Common
    Stock award ..................          3          --          465       (465)       --          --          --          --
  Redeemable convertible
    preferred stock dividends ....       --            --         --         --          --          (185)       --          (185)
  Amortization of restricted
    Common Stock awards ..........       --            --         --          118        --          --          --           118
  Accrual of interest income
    on notes receivable from
    stockholders..................       --            --         --         --           (19)       --          --           (19)
  Increase in redeemable
    Common Stock due to vesting
    of restricted Common Stock
    award ........................       --            --         --         --          --          (574)       --          (574)
                                     --------   -----------   --------   --------    --------    --------    --------    --------

Balance at June 30, 2002 .........      1,233   $      --     $ 15,764   $   (441)   $   (620)   $(64,604)   $ (2,517)   $(52,418)
                                     ========   ===========   ========   ========    ========    ========    ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>


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

<CAPTION>
                                                                                       Six Months Ended June 30,
                                                                                           2002          2001
                                                                                         --------      --------
<S>                                                                                      <C>           <C>
Cash flows from operating activities:
   Net income ......................................................................     $ 10,171      $  6,084
   Adjustments to reconcile net income to net cash provided by operating activities:
      Depreciation and amortization ................................................        6,598         7,719
      Amortization of deferred financing costs .....................................          536           499
      Amortization of restricted Common Stock awards ...............................          118            30
      Provision for doubtful accounts ..............................................        1,115           987
      Deferred income tax expense ..................................................        3,227           231
      Changes in operating assets and liabilities, net of acquisition:
         Increase in accounts receivable ...........................................       (5,703)       (3,610)
         (Increase) decrease in inventories ........................................       (6,979)          156
         Increase in prepaid expenses and other current assets .....................       (4,069)       (1,601)
         Increase in accounts payable, accrued expenses and income taxes payable ...        6,690         3,161
      Other, net ...................................................................       (1,115)       (1,713)
                                                                                         --------      --------
         Net cash provided by operating activities .................................       10,589        11,943

Cash flows from investing activities:
   Cash paid in connection with the acquisition ....................................      (13,547)
   Capital expenditures ............................................................       (7,610)      (15,110)
   Proceeds from disposal of property and equipment ................................           34          --
                                                                                         --------      --------
         Net cash used in investing activities .....................................      (21,123)      (15,110)

Cash flows from financing activities:
   Proceeds from issuance of redeemable convertible preferred stock ................                      6,000
   Proceeds from short-term obligations ............................................       13,300
   Repayment of loans, notes payable and long-term obligations .....................       (1,675)       (2,629)
   Other ...........................................................................         --              (5)
                                                                                         --------      --------
         Net cash provided by financing activities .................................       11,625         3,366
Effect of exchange rate changes on cash and cash equivalents .......................           93          (540)
                                                                                         --------      --------
         Net increase (decrease) in cash and cash equivalents ......................        1,184          (341)
Cash and cash equivalents at beginning of period ...................................        1,016         1,469
                                                                                         --------      --------
Cash and cash equivalents at end of period .........................................     $  2,200      $  1,128
                                                                                         ========      ========
Supplemental Disclosures:
         Interest paid .............................................................     $ 10,030      $ 12,875
         Income taxes paid .........................................................     $  1,619      $  1,235
</TABLE>

Supplemental information on non-cash activities:

    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.

    In February 2002, the Company issued 96.774 shares of its Common Stock, at a
    value of $155 per share,  to American  Greetings  Corporation  in connection
    with the  acquisition  of M&D Balloons Inc. See Note 10 to the  consolidated
    financial statements.

          See accompanying notes to consolidated financial statements.

                                       6
<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,  "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 decorative party goods, metallic balloons, stationery and gift items
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  subsidiaries.  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 six  months  ended  June 30,  2002 are not
necessarily  indicative  of the  results  to be  expected  for the  year  ending
December 31, 2002. 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,  2001 as  filed  with  the  Securities  and  Exchange
Commission.

         In November  2001,  the  Emerging  Issues Task Force issued EITF 01-09,
"Accounting for  Consideration  Given by a Vendor to a Customer or a Reseller of
the  Vendor's  Product."  EITF 01-09 was  effective  for Amscan as of January 1,
2002. EITF 01-09 clarifies the income statement classification of costs incurred
by a vendor in  connection  with the  reseller's  purchase or  promotion  of the
vendor's products,  resulting in certain advertising and product placement costs
previously  classified  as selling  expenses to be  reflected  as a reduction of
revenues  earned  from that  activity.  The new  guidance  requires  retroactive
restatement of all periods presented to reflect the new accounting provision. As
a result of applying the  provisions of EITF 01-09,  the Company's  revenues and
costs were each reduced by $524,000 and  $1,125,000 for the three and six months
ended June 30, 2001, respectively.

Note 3 - Inventories

         Inventories consisted of the following (dollars in thousands):

                                                        June 30,    December 31,
                                                          2002          2001
                                                        --------    -----------

Finished goods .....................................    $ 76,633      $ 65,376
Raw materials ......................................       7,019         5,992
Work-in-process ....................................       5,318         4,520
                                                        --------      --------
                                                          88,970        75,888
Less: reserve for slow moving and obsolete inventory      (3,333)       (3,306)
                                                        --------      --------
                                                        $ 85,637      $ 72,582
                                                        ========      ========

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


                                       7
<PAGE>


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

Note 4 - Income Taxes

         The consolidated  income tax expense for the three and six months ended
June 30, 2002 and 2001 was  determined  based upon  estimates  of the  Company's
consolidated  effective  income tax rates for the years ending December 31, 2002
and 2001,  respectively.  The  differences  between the  consolidated  effective
income tax rate and the U.S. Federal  statutory rate are primarily  attributable
to state income taxes and the effects of foreign operations.

Note 5 - Comprehensive Income (Loss)

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

<TABLE>
<CAPTION>
                                                                    Three Months Ended           Six Months Ended
                                                                          June 30,                    June 30,
                                                                 ------------------------     -----------------------
                                                                     2002         2001           2002          2001
                                                                     ----         ----           ----          ----
<S>                                                               <C>           <C>           <C>           <C>
Net income ..................................................     $  3,940      $  2,209      $ 10,171      $  6,084
Net change in cumulative translation adjustment .............        1,168            26           955          (778)
Cumulative effect of a change in accounting principle to
   recognize the fair value of the Company's interest rate
   swap contracts, net of taxes of $(148) ...................         --            --            --            (227)
Change in fair value of the Company's interest rate swap
   contracts, net of taxes of $(146), $(57), $(190) and $3,
   respectively .............................................         (224)          (88)         (291)            5
Change in fair value of the Company's foreign exchange
   contracts, net of taxes of $(275) and $(188), respectively         (422)                       (288)
                                                                  --------      --------      --------      --------
                                                                  $  4,462      $  2,147      $ 10,547      $  5,084
                                                                  ========      ========      ========      ========
</TABLE>

         Accumulated  other   comprehensive  loss  consisted  of  the  following
(dollars in thousands):

                                                       June 30,   December 31,
                                                        2002          2001
                                                      ---------   ------------
Cumulative translation adjustment ................     $(1,824)     $(2,779)
Interest rate swap contract qualifying as a hedge,
  net of taxes of $(190) .........................        (291)
Foreign exchange contracts qualifying as hedges,
  net of taxes of $(262) and $(76), respectively .        (402)        (114)
                                                       -------      -------
                                                       $(2,517)     $(2,893)

                                                       =======      =======
Note 6 - Capital Stock

         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.  Such dividends
payable on or prior to March 30, 2004, shall be 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 shall be payable, at the option
of the  Company,  either in cash or  additional  shares  of Series A  Redeemable
Convertible  Preferred Stock. As of June 30, 2002, accrued dividends  aggregated
$95,000  and are  included  in  redeemable  convertible  preferred  stock on the
consolidated balance sheet.


                                       8
<PAGE>


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

         At June 30, 2002 and December 31, 2001, 42.40 and 40.0 shares of Series
A  Redeemable  Convertible  Preferred  Stock,  respectively,   were  issued  and
outstanding.

         Each share of the Series A Redeemable  Convertible  Preferred  Stock is
convertible at the option of the holder at any time, into shares of Common Stock
at a  conversion  price equal to the fair value of the Common  Stock at the date
the redeemable convertible preferred stock was issued, subject to adjustment for
the effects of subsequent  common stock splits or stock  dividends.  At June 30,
2002,  the redeemable  convertible  preferred  stock is convertible  into Common
Stock at a price of $150,000 per common share.  As of June 30, 2002,  there were
43.04 shares of Common Stock reserved for such conversion.

         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.

         On January 1, 2002, the Company issued 3.0 shares of restricted  Common
Stock with an  aggregate  value of $465,000  to its  Executive  Vice  President,
subject to the vesting provisions of an employment agreement.

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

         At June 30,  2002,  of the  1,233.27  shares of Common Stock issued and
outstanding,  203.3 shares of redeemable Common Stock were held by employees, of
which 6.38 shares (the "Restricted Stock") are subject to the vesting provisions
of certain employment agreements with the President and Executive Vice President
of the Company.  The  President's  shares of Restricted  Stock will vest in June
2003 and the Executive Vice President's  shares of Restricted Stock will vest in
December 2004. During the three months ended June 30, 2002 and 2001, the Company
recorded  the   amortization  of  Restricted   Stock  of  $59,000  and  $18,000,
respectively,  as  compensation  expense,  which  is  included  in  general  and
administrative  expenses in the  Company's  consolidated  statements  of income.
During the six months  ended June 30, 2002 and 2001,  the Company  recorded  the
amortization  of  Restricted  Stock of $118,000  and $30,000,  respectively.

         In September  1998,  the Company  issued  warrants to purchase  100,000
shares of Common Stock at $125,000 per share in connection  with the acquisition
of all the capital  stock of Anagram  International,  Inc.  and certain  related
companies ("Anagram").  The warrants,  which were valued at $225,000, were fully
exercisable upon issuance and expire on September 17, 2008.

         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 7 - Segment Information

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


                                       9
<PAGE>


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

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 is as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                      Domestic       Foreign    Eliminations   Consolidated
                                                      --------       -------    ------------   ------------

<S>                                                   <C>           <C>           <C>            <C>
Three Months Ended June 30, 2002
Sales to unaffiliated customers .................     $  81,040     $  13,089                    $  94,129

Sales between geographic areas ..................         6,003                   $  (6,003)          --
                                                      ---------     ---------     ---------      ---------
Net sales .......................................     $  87,043     $  13,089     $  (6,003)     $  94,129
                                                      =========     =========     =========      =========

Income from operations ..........................     $  11,270     $     577                    $  11,847
                                                      =========     =========
Interest expense, net ...........................                                                    5,268
Other expense, net ..............................                                                       48
                                                                                                 ---------
Income before income taxes and minority interests                                                $   6,531
                                                                                                 =========

Long-lived assets, net at June 30, 2002 .........     $ 176,723     $   6,750                    $ 183,473
                                                      =========     =========                    =========


<CAPTION>
                                                      Domestic       Foreign    Eliminations   Consolidated
                                                      --------       -------    ------------   ------------

<S>                                                   <C>           <C>           <C>            <C>
Three Months Ended June 30, 2001
Sales to unaffiliated customers .................     $  71,901     $  10,938                    $  82,839
Sales between geographic areas ..................         5,700                   $  (5,700)          --
                                                      ---------     ---------     ---------      ---------
Net sales .......................................     $  77,601     $  10,938     $  (5,700)     $  82,839
                                                      =========     =========     =========      =========

Income from operations ..........................     $   9,204     $     569                    $   9,773
                                                      =========     =========
Interest expense, net ...........................                                                    6,190
Other income, net ...............................                                                      (67)
                                                                                                 ---------
Income before income taxes and minority interests                                                $   3,650
                                                                                                 =========

Long-lived assets, net at June 30, 2001 .........     $ 137,163     $   6,731                    $ 143,894
                                                      =========     =========                    =========


<CAPTION>
                                                      Domestic       Foreign    Eliminations   Consolidated
                                                      --------       -------    ------------   ------------

<S>                                                   <C>           <C>           <C>            <C>
Six Months Ended June 30, 2002
Sales to unaffiliated customers .................     $ 164,832     $  25,205                    $ 190,037
Sales between geographic areas ..................        11,285                   $ (11,285)          --
                                                      ---------     ---------     ---------      ---------
Net sales .......................................     $ 176,117     $  25,205     $ (11,285)     $ 190,037
                                                      =========     =========     =========      =========

Income from operations ..........................     $  26,930     $     543                    $  27,473
                                                      =========     =========
Interest expense, net ...........................                                                   10,758
Other income, net ...............................                                                      (22)
                                                                                                 ---------
Income before income taxes and minority interests                                                $  16,737
                                                                                                 =========


<CAPTION>
                                                      Domestic       Foreign    Eliminations   Consolidated
                                                      --------       -------    ------------   ------------

<S>                                                   <C>           <C>           <C>            <C>
Six Months Ended June 30, 2001
Sales to unaffiliated customers .................     $ 147,774     $  21,970                    $ 169,744
Sales between geographic areas ..................        12,265                   $ (12,265)          --
                                                      ---------     ---------     ---------      ---------
Net sales .......................................     $ 160,039     $  21,970     $ (12,265)     $ 169,744
                                                      =========     =========     =========      =========

Income from operations ..........................     $  21,435     $   1,421                    $  22,856
                                                      =========     =========
Interest expense, net ...........................                                                   12,765
Other expense, net ..............................                                                       44
                                                                                                 ---------
Income before income taxes and minority interests                                                $  10,047
                                                                                                 =========
</TABLE>
                                       10
<PAGE>


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

Note 8 - 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.


Note 9 - Recently Adopted Accounting Pronouncements

         Effective  January 1, 2002, the Company adopted  Statement of Financial
Accounting  Standards  No. 141,  "Business  Combinations"  ("SFAS No.  141") and
Statement  of  Financial  Accounting  Standards  No.  142,  "Goodwill  and Other
Intangible Assets" ("SFAS No 142"). SFAS No 141 revises the accounting treatment
for business combinations to require the use of purchase accounting and prohibit
the  use  of  the   pooling-of-interests   method  of  accounting  for  business
combinations  initiated  after June 30, 2001. SFAS No 142 revises the accounting
for  goodwill  to  eliminate  the   amortization  of  goodwill  on  transactions
consummated after June 30, 2001 and of all other goodwill as of January 1, 2002.
Other  intangible  assets will continue to be amortized over their useful lives.
SFAS No. 142 also requires  goodwill and other intangible  assets to be assessed
for  impairment  each  year and more  frequently  if  circumstances  indicate  a
possible  impairment.  During the second quarter of 2002, the Company  completed
the initial  impairment  test as of January 1, 2002 and no impairment was noted.
Had SFAS No. 142 been  effective in fiscal year 2001, net income would have been
reported as the following amounts (dollars in thousands):

<TABLE>
<CAPTION>
                                                   Three Months             Six Months
                                                      Ended                   Ended
                                                     June 30,                 June 30,
                                                 -------------------     -------------------
                                                   2002        2001        2002        2001
                                                 -------     -------     -------     -------
<S>                                              <C>         <C>         <C>         <C>
Reported net income ........................     $ 3,940     $ 2,209     $10,171     $ 6,084
Add back goodwill amortization, net of taxes        --           387        --           782
                                                 -------     -------     -------     -------
Adjusted net income ........................     $ 3,940     $ 2,596     $10,171     $ 6,866
                                                 =======     =======     =======     =======
</TABLE>


         Intangible  assets,  net of amortization,  of $915,000 at June 30, 2002
were  comprised  of licensing  agreements  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).  Intangible  assets at December 31, 2001 were fully
amortized  and  were comprised  of  patents  which  were  amortized   using  the
straight-line method over three years.  Accumulated  amortization was $3,155,000
and   $3,000,000  at  June  30,  2002  and  December  31,  2001,   respectively.
Amortization  of  intangible  assets for the three and six months ended June 30,
2002 was $114,000 and $155,000, respectively.  Amortization of intangible assets
for the three and six months  ended June 30, 2001,  was  $249,000 and  $498,000,
respectively.  Estimated amortization  expense for the years ending December 31,
2002, 2003, and 2004 was $383,000, $456,000 and $231,000, respectively.

         Effective  January 1, 2002, the Company adopted  Statement of Financial
Accounting  Standards  No. 144,  "Accounting  for the  Impairment or Disposal of
Long-Lived  Assets"  ("SFAS No  144").  SFAS No.  144  supercedes  Statement  of
Financial  Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets  and  for  Long-Lived  Assets  to be  Disposed  of,"  and the
accounting  and  reporting  provisions of  Accounting  Principles  Board No. 30,
"Reporting  the Results of  Operations - Reporting  the Effects of Disposal of a
Segment of a Business,  and  Extraordinary,  Unusual and Infrequently  Occurring
Events and Transactions."  SFAS No. 144 provides updated guidance concerning the
recognition  and  measurement  of  an  impairment  loss  for  certain  types  of
long-lived assets


                                       11
<PAGE>



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

and expands the scope of a  discontinued  operation to include a component of an
entity.  The  adoption  of SFAS No.  144 on  January  1, 2002 did not impact the
Company's financial position or results of operations.

         In July 2002,  the FASB  issued  SFAS No.  146,  "Accounting  for Costs
Associated With Exit or Disposal  Activities," SFAS No. 146 addresses accounting
and  reporting  for  costs  associated  with  exit or  disposal  activities  and
nullifies  Emerging  Issues  Task Force,  or EITF,  Issue 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 Issue 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.


Note 10-Acquisition

         On February  19, 2002,  the Company  purchased  all of the  outstanding
common stock of M&D Balloons, Inc. ("M&D Balloons"),  a Manteno,  Illinois-based
manufacturer  of  metallic  and  plastic  balloons,   from  American   Greetings
Corporation  ("American  Greetings") for $27,500,000  plus certain other related
costs of $1,047,000.  The Company believes that this acquisition will supplement
its  existing  balloon  operations.  The Company  financed  the  acquisition  by
borrowing  $13,547,000  under its revolving  credit  facility and issuing 96.774
shares of its  Common  Stock to  American  Greetings.  American  Greetings  will
continue 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
Balloons have been included in the Company's  consolidated  financial statements
since the date of acquisition.

         The  purchase  price has been  preliminarily  allocated  based upon the
estimated  fair value of net assets  acquired at the date of  acquisition.  Such
allocations are based on studies and valuations that have not yet been completed
and will be subject  to change in future  periods.  The  excess of the  purchase
price over  tangible  net assets  acquired has been  preliminarily  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  $20,292,000,  which is not being  amortized.  The
transaction was structured as a purchase of common stock and,  accordingly,  the
amortization of intangible assets is not deductible for income tax purposes.

         The following  unaudited pro forma information assumes the M&D Balloons
acquisition  had  occurred  on January 1, 2002 and 2001,  respectively.  The pro
forma  information,  as presented  below,  is not indicative of the results that
would have been obtained had the transaction occurred on January 1, 2001, nor is
it indicative of the Company's future results (dollars in thousands):

                                   Three Months              Six Months
                                  Ended June 30,           Ended June 30,
                                  --------------      ------------------------
                                       2001             2002            2001
                                       ----             ----            ----
Net sales ................          $ 88,849          $194,144        $180,564
Net income ...............             2,913            10,564           6,631

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


                                       12
<PAGE>



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


         During the three and six months ended,  June 30, 2002, the Company sold
$2,557,000 and $3,516,000,  respectively,  of metallic  balloons and other party
goods to American  Greetings.  Trade accounts receivable from American Greetings
at June 30, 2002 were $2,197,000.


Note 11 - Restructuring Charges

         During the second  quarter of 2002,  the  Company  incurred  charges of
$93,000 relating to the consolidation of its domestic  distribution  operations,
which began in 1998 and is  scheduled  to be  completed  by the end of 2002.  In
addition, the Company incurred charges of $93,000 relating to the closure of its
distribution facilities in Spain and France which was substantially completed by
June 30, 2002 and has resulted in the elimination of 6 positions.  The continued
consolidation of the Company's distribution  facilities may result in additional
restructuring charges in subsequent periods.


Note 12 - Initial Public Offering

         On June 13, 2002, the Company filed a  registration  statement with the
Securities and Exchange  Commission for an initial public offering of the Common
Stock. The filing has not yet become effective. The Company anticipates that, if
the  offering  is  completed,  it will use the net  proceeds  it receives to pay
existing debt. In addition, the board of directors plans to approve a 10,000 for
one  stock  split  of the  Common  Stock,  effective  immediately  prior  to the
offering.


Note 13 - Subsequent Event

         On July 3, 2002,  the Company  entered into an amended  revolving  loan
credit  agreement which extended the expiration of its revolving credit facility
from December 2002 to December 2003 and reduced the maximum  borrowing  from $50
million to $40 million (the "Revolving Credit  Facility").  The Revolving Credit
Facility  bears  interest,  at the option of the Company,  at the lenders' prime
rate plus,  based on performance,  a range of 1.25% to 3.50% per annum or at the
lenders' reserve adjusted Eurodollar rate plus, based on performance, a range of
1.875% to 4.50% per annum.


Note 14 - Condensed Consolidating Financial Information

         On December 19, 1997, the Company entered into a bank credit  agreement
("Bank Credit  Facilities")  providing for borrowings in the aggregate principal
amount of  approximately  $117,000,000  under a term loan (the "Term  Loan") and
additional  borrowings under the Revolving  Credit  Facility.  The Term Loan was
subsequently  amended in September 1998 to provide for additional  borrowings of
$40,000,000 to partially  finance the  acquisition  of Anagram.  On December 19,
1997, the Company also issued $110,000,000  aggregate principal amount of 9.875%
senior  subordinated notes due in December 2007 (the "Notes").  The repayment of
the Notes and borrowings under the Bank Credit Facilities are guaranteed jointly
and  severally,   fully  and  unconditionally,   by  the  wholly-owned  domestic
subsidiaries of the Company (the "Guarantors").


                                       13
<PAGE>


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

      Guarantor subsidiaries include the following:
     o  Amscan Inc.
     o  Trisar, Inc.
     o  Am-Source, LLC
     o  Anagram International, Inc.
     o  Anagram International Holdings, Inc.
     o  Anagram International, LLC
     o  M&D Balloons, Inc.
     o  SSY Realty Corp.
     o  JCS Realty Corp.
     o  Anagram Eden Prairie Property Holdings LLC

        Non-guarantor subsidiaries ("Non-guarantors") include the following:
     o  Amscan Distributors (Canada) Ltd.
     o  Amscan Holdings Limited
     o  Amscan (Asia-Pacific) Pty. Ltd.
     o  Amscan Partyartikel GmbH
     o  Amscan Svenska AB
     o  Amscan de Mexico, S.A. de C.V.
     o  Anagram International (Japan) Co., Ltd.
     o  Anagram Mexico S. de R.L. de C.V.
     o  Anagram Espana, S.A.
     o  Anagram France S.C.S.

         The following  information presents  consolidating balance sheets as of
June 30, 2002 and December 31, 2001, and the related consolidating statements of
income for the three and six months ended June 30, 2002 and 2001, and cash flows
for  each of the six  months  ended  June 30,  2002  and  2001 for the  combined
Guarantors and the combined  Non-guarantors and elimination entries necessary to
consolidate the entities comprising the combined companies.



                                       14
<PAGE>


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

                           CONSOLIDATING BALANCE SHEET
                                  June 30, 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 ...................       $     780        $   1,420                         $   2,200
     Accounts receivable, net ....................          62,262           11,397                            73,659
     Inventories .................................          75,784           10,637        $    (784)          85,637
     Prepaid expenses and other current assets ...          15,002            2,382                            17,384
                                                         ---------        ---------        ---------        ---------
     Total current assets ........................         153,828           25,836             (784)         178,880
Property, plant and equipment, net ...............          96,533            1,444                            97,977
Intangible assets, net ...........................          71,421            4,992                            76,413
Other assets, net ................................          35,570            2,074          (28,561)           9,083
                                                         ---------        ---------        ---------        ---------
     Total assets ................................       $ 357,352        $  34,346        $ (29,345)       $ 362,353
                                                         =========        =========        =========        =========

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED AND
    COMMON STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
     Loans and notes payable .....................       $  14,000        $    --                           $  14,000
     Accounts payable ............................          38,148            1,414                            39,562
     Accrued expenses ............................          14,847            5,272                            20,119
     Income taxes payable ........................           3,693             -                                3,693
     Current portion of long-term
       obligations ...............................          15,778              147                            15,925
                                                         ---------        ---------        ---------        ---------
     Total current liabilities ...................          86,466            6,833                            93,299
Long-term obligations, excluding
  current portion ................................         264,069              188                           264,257
Deferred income tax liabilities ..................          17,960                                             17,960
Other ............................................           3,513           15,739        $ (16,975)           2,277
                                                         ---------        ---------        ---------        ---------
Total liabilities ................................         372,008           22,760          (16,975)         377,793

Redeemable convertible preferred stock ...........           6,455                                              6,455
Redeemable Common Stock ..........................          30,523                                             30,523

Commitments and Contingencies

Stockholders' (deficit) equity:
     Common Stock ................................                              339             (339)            --
     Additional paid-in capital ..................          15,764              658             (658)          15,764
     Unamortized restricted Common Stock
        award, net ...............................            (441)                                              (441)
     Notes receivable from stockholders ..........            (620)                                              (620)
     (Deficit) retained earnings .................         (63,820)          12,727          (13,511)         (64,604)
     Accumulated other comprehensive loss ........          (2,517)          (2,138)           2,138           (2,517)
                                                         ---------        ---------        ---------        ---------
         Total stockholders' (deficit) equity ....         (51,634)          11,586          (12,370)         (52,418)
                                                         ---------        ---------        ---------        ---------
         Total liabilities, redeemable convertible
             preferred and Common Stock and
             stockholders' (deficit) equity ......       $ 357,352        $  34,346        $ (29,345)       $ 362,353
                                                         =========        =========        =========        =========
</TABLE>

                                       15
<PAGE>


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

                           CONSOLIDATING BALANCE SHEET
                                December 31, 2001
                             (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 ...................       $      60        $     956                         $   1,016
     Accounts receivable, net ....................          56,408            8,631                            65,039
     Inventories .................................          65,939            7,414        $    (771)          72,582
     Prepaid expenses and other current assets ...          12,339            1,320                            13,659
                                                         ---------        ---------        ---------        ---------
     Total current assets ........................         134,746           18,321             (771)         152,296
Property, plant and equipment, net ...............          93,420            1,169                            94,589
Intangible assets, net ...........................          51,136            4,849                            55,985
Other assets, net ................................          24,499            4,880          (21,775)           7,604
                                                         ---------        ---------        ---------        ---------
     Total assets ................................       $ 303,801        $  29,219        $ (22,546)       $ 310,474
                                                         =========        =========        =========        =========

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED AND
    COMMON STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
     Loans and notes payable .....................       $     700        $    --                           $     700
     Accounts payable ............................          32,127              956                            33,083
     Accrued expenses ............................          12,178            3,869                            16,047
     Income taxes payable ........................           2,225               73                             2,298
     Current portion of long-term
       obligations ...............................           3,318              137                             3,455
                                                         ---------        ---------        ---------        ---------
     Total current liabilities ...................          50,548            5,035                            55,583
Long-term obligations, excluding
  current portion ................................         278,198              245                           278,443
Deferred income tax liabilities ..................          15,181                                             15,181
Other ............................................             189           14,236        $ (12,072)           2,353
                                                         ---------        ---------        ---------        ---------
Total liabilities ................................         344,116           19,516          (12,072)         351,560

Redeemable convertible preferred stock ...........           6,270                                              6,270
Redeemable Common Stock ..........................          29,949                                             29,949

Commitments and Contingencies

Stockholders' (deficit) equity:
     Common Stock ................................                              339             (339)            --
     Additional paid-in capital ..................             299              658             (658)             299
     Unamortized restricted Common Stock
        award, net ...............................             (94)                                               (94)
     Notes receivable from stockholders ..........            (601)                                              (601)
     (Deficit) retained earnings .................         (73,245)          11,082          (11,853)         (74,016)
     Accumulated other comprehensive loss ........          (2,893)          (2,376)           2,376           (2,893)
                                                         ---------        ---------        ---------        ---------
         Total stockholders' (deficit) equity ....         (76,534)           9,703          (10,474)         (77,305)
                                                         ---------        ---------        ---------        ---------
         Total liabilities, redeemable convertible
             preferred and Common Stock and
             stockholders' (deficit) equity ......       $ 303,801        $  29,219        $ (22,546)       $ 310,474
                                                         =========        =========        =========        =========
</TABLE>

                                       16
<PAGE>


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

                        CONSOLIDATING STATEMENT OF INCOME
                    For the Three Months Ended June 30, 2002
                             (Dollars in thousands)



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

<S>                                                   <C>             <C>             <C>             <C>
Net sales .....................................       $ 84,168        $ 13,089        $ (3,128)       $ 94,129
Cost of sales .................................         55,588           9,436          (3,045)         61,979
                                                      --------        --------        --------        --------
         Gross profit .........................         28,580           3,653             (83)         32,150
Operating expenses:
    Selling expenses ..........................          7,230           1,417                           8,647
    General and administrative expenses .......          7,444           1,566            (240)          8,770
    Art and development costs .................          2,700                                           2,700
    Restructuring charges .....................             93              93                             186
                                                      --------        --------        --------        --------
         Income from operations ...............         11,113             577             157          11,847
Interest expense, net .........................          5,111             157                           5,268
Other (income) expense, net ...................           (426)            (64)            538              48
                                                      --------        --------        --------        --------
         Income before income taxes
           and minority interests .............          6,428             484            (381)          6,531
Income tax expense ............................          2,405             175                           2,580
Minority interests ............................                             11                              11
                                                      --------        --------        --------        --------
         Net income ...........................          4,023             298            (381)          3,940
         Dividend requirement on redeemable
            convertible preferred stock .......             95                                              95
                                                      --------        --------        --------        --------
         Net income applicable to common shares       $  3,928        $    298        $   (381)       $  3,845
                                                      ========        ========        ========        ========
</TABLE>



                                       17
<PAGE>




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

                        CONSOLIDATING STATEMENT OF INCOME
                    For the Three Months Ended June 30, 2001
                             (Dollars in thousands)


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

<S>                                                   <C>             <C>             <C>             <C>
Net sales .....................................       $ 80,499        $ 11,434        $ (9,094)       $ 82,839
Cost of sales .................................         55,129           8,130          (8,733)         54,526
                                                      --------        --------        --------        --------
         Gross profit .........................         25,370           3,304            (361)         28,313
Operating expenses:
    Selling expenses ..........................          6,297           1,375                           7,672
    General and administrative expenses .......          7,261           1,398             (48)          8,611
     Art and development costs ................          2,257                                           2,257
                                                      --------        --------        --------        --------
         Income from operations ...............          9,555             531            (313)          9,773
Interest expense, net .........................          6,018             172                           6,190
Other (income) expense, net ...................           (425)            (17)            375             (67)
                                                      --------        --------        --------        --------
         Income before income taxes
           and minority interests .............          3,962             376            (688)          3,650
Income tax expense ............................          1,392              50                           1,442
Minority interests ............................                             (1)                             (1)
                                                      --------        --------        --------        --------
         Net income ...........................          2,570             327            (688)          2,209
         Dividend requirement on redeemable
            convertible preferred stock .......             90                                              90
                                                      --------        --------        --------        --------
         Net income applicable to common shares       $  2,480        $    327        $   (688)       $  2,119
                                                      ========        ========        ========        ========
</TABLE>



                                       18
<PAGE>



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

                        CONSOLIDATING STATEMENT OF INCOME
                     For the Six Months Ended June 30, 2002
                             (Dollars in thousands)



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

<S>                                                   <C>              <C>              <C>              <C>
Net sales .....................................       $ 176,968        $  25,205        $ (12,136)       $ 190,037
Cost of sales .................................         117,710           18,068          (12,123)         123,655
                                                      ---------        ---------        ---------        ---------
         Gross profit .........................          59,258            7,137              (13)          66,382
Operating expenses:
    Selling expenses ..........................          13,934            2,892                            16,826
    General and administrative expenses .......          13,792            3,609             (480)          16,921
    Art and development costs .................           4,976                                              4,976
    Restructuring charges .....................              93               93                               186
                                                      ---------        ---------        ---------        ---------
         Income from operations ...............          26,463              543              467           27,473
Interest expense, net .........................          10,442              316                            10,758
Other (income) expense, net ...................            (609)              (6)             593              (22)
                                                      ---------        ---------        ---------        ---------
         Income before income taxes
           and minority interests .............          16,630              233             (126)          16,737
Income tax expense ............................           6,446              165                             6,611
Minority interests ............................                              (45)                              (45)
                                                      ---------        ---------        ---------        ---------
         Net income ...........................          10,184              113             (126)          10,171
         Dividend requirement on redeemable
            convertible preferred stock .......             185                                                185
                                                      ---------        ---------        ---------        ---------
         Net income applicable to common shares       $   9,999        $     113        $    (126)       $   9,986
                                                      =========        =========        =========        =========
</TABLE>


                                       19
<PAGE>



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

                        CONSOLIDATING STATEMENT OF INCOME
                     For the Six Months Ended June 30, 2001
                             (Dollars in thousands)


                                                       Amscan
                                                    Holdings and       Combined
                                                      Combined           Non-
                                                     Guarantors       Guarantors       Eliminations    Consolidated
                                                     ----------       ----------       ------------    ------------

<S>                                                   <C>              <C>              <C>              <C>
Net sales .....................................       $ 162,344        $  21,981        $ (14,581)       $ 169,744
Cost of sales .................................         108,882           15,213          (14,252)         109,843
                                                      ---------        ---------        ---------        ---------
         Gross profit .........................          53,462            6,768             (329)          59,901
Operating expenses:
    Selling expenses ..........................          12,897            2,670                            15,567
    General and administrative expenses .......          14,555            2,677              (96)          17,136
     Art and development costs ................           4,342                                              4,342
                                                      ---------        ---------        ---------        ---------
         Income from operations ...............          21,668            1,421             (233)          22,856
Interest expense, net .........................          12,438              327                            12,765
Other (income) expense, net ...................            (841)              47              838               44
                                                      ---------        ---------        ---------        ---------
         Income before income taxes
           and minority interests .............          10,071            1,047           (1,071)          10,047
Income tax expense ............................           3,658              311                             3,969
Minority interests ............................                               (6)                               (6)
                                                      ---------        ---------        ---------        ---------
         Net income ...........................           6,413              742           (1,071)           6,084
         Dividend requirement on redeemable
            convertible preferred stock .......              90                                                 90
                                                      ---------        ---------        ---------        ---------
         Net income applicable to common shares       $   6,323        $     742        $  (1,071)       $   5,994
                                                      =========        =========        =========        =========
</TABLE>

                                       20
<PAGE>


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

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                     For the Six Months Ended June 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 .................................................       $ 10,184        $    113        $   (126)       $ 10,171
   Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation and amortization ...........................          6,411             187                           6,598
      Amortization of deferred financing costs ................            536                                             536
      Provision for doubtful accounts .........................            481             634                           1,115
      Amortization of restricted Common Stock award ...........            118                                             118
      Deferred income tax provision ...........................          3,227                                           3,227
      Changes in operating assets and liabilities, net of
         acquisition:
            Increase in accounts receivable ...................         (2,854)         (2,849)                         (5,703)
            (Increase) decrease in inventories ................         (5,676)         (1,316)             13          (6,979)
            Increase in prepaid expenses and other current
               assets, net ....................................         (3,149)           (920)                         (4,069)
            Increase in accounts payable, accrued expenses
               and income taxes payable .......................          5,130           1,560                           6,690
       Other, net .............................................         (4,021)          2,793             113          (1,115)
                                                                      --------        --------        --------        --------
            Net cash provided by operating activities .........         10,387             202            --            10,589

Cash flows from investing activities:
   Cash paid in connection with the acquisition ...............        (13,547)                                        (13,547)
   Capital expenditures .......................................         (7,405)           (205)                         (7,610)
   Proceeds from disposal of property and equipment ...........                             34                              34
                                                                      --------        --------        --------        --------
            Net cash used in investing activities .............        (20,952)           (171)                        (21,123)

Cash flows from financing activities:
   Proceeds from loans, notes payable and
         long-term obligations, ...............................         13,300                                          13,300
   Repayment of loans, notes payable and
         long-term obligations ................................         (1,669)             (6)                         (1,675)
                                                                      --------        --------        --------        --------
            Net cash provided by (used in) financing activities         11,631              (6)           --            11,625
Effect of exchange rate changes on cash .......................           (328)            421                              93
                                                                      --------        --------        --------        --------
            Net increase in cash and cash equivalents .........            738             446                           1,184
Cash and cash equivalents at beginning of period ..............             42             974                           1,016
                                                                      --------        --------        --------        --------
Cash and cash equivalents at end of period ....................       $    780        $  1,420        $   --          $  2,200
                                                                      ========        ========        ========        ========
</TABLE>


                                       21
<PAGE>

<TABLE>

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

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                     For the Six Months Ended June 30, 2001
                             (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 ............................................       $  6,413        $    742        $ (1,071)       $  6,084
   Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation and amortization ......................          7,435             284                           7,719
      Amortization of deferred financing costs ...........            499                                             499
      Provision for doubtful accounts ....................            919              68                             987
      Amortization of restricted Common Stock award ......             30                                              30
      Deferred income tax provision ......................            231                                             231
      Changes in operating assets and liabilities:
            (Increase) decrease in accounts receivable ...         (3,620)             10                          (3,610)
            Decrease (increase) in inventories ...........          3,071          (3,244)            329             156
            Increase in prepaid expenses and other current
               assets, net ...............................         (1,225)           (376)                         (1,601)
            Increase (decrease) in accounts payable,
               accrued expenses and income taxes payable..          3,690            (529)                          3,161
       Other, net ........................................         (6,232)          3,777             742          (1,713)
                                                                 --------        --------        --------        --------
            Net cash provided by operating activities ....         11,211             732            --            11,943

Cash flows from investing activities:
      Capital expenditures ...............................        (14,944)           (166)                        (15,110)
                                                                 --------        --------                        --------
            Net cash used in investing activities ........        (14,944)           (166)                        (15,110)


Cash flows from financing activities:
   Proceeds from issuance of redeemable convertible
        preferred stock ..................................          6,000                                           6,000
   Repayment of loans, notes payable and long-term
       obligations .......................................         (2,556)            (73)                         (2,629)
   Other .................................................           (310)            305                              (5)
                                                                 --------        --------        --------        --------
            Net cash provided by financing activities ....          3,134             232            --             3,366
Effect of exchange rate changes on cash ..................             75            (615)                           (540)
                                                                 --------        --------        --------        --------
            Net (decrease) increase in cash and cash
                        equivalents ......................           (524)            183                            (341)
Cash and cash equivalents at beginning of period .........            559             910                           1,469
                                                                 --------        --------        --------        --------
Cash and cash equivalents at end of period ...............       $     35        $  1,093        $   --          $  1,128
                                                                 ========        ========        ========        ========
</TABLE>

                                       22
<PAGE>



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

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Percentage of Net Sales
<TABLE>
<CAPTION>
                                                             Three Months Ended June 30,
                                                             ---------------------------
                                                                 2002           2001
                                                               -------        -------
<S>                                                              <C>            <C>
Net sales................................................        100.0%         100.0%
Cost of sales............................................         65.8           65.8
                                                               -------        -------
       Gross profit .....................................         34.2           34.2
Operating expenses:
    Selling expenses.....................................          9.2            9.3
    General and administrative expenses..................          9.3           10.4
    Art and development costs............................          2.9            2.7
    Restructuring charges................................          0.2
                                                               -------        -------
       Total operating expenses..........................         21.6           22.4
                                                               -------        -------
       Income from operations............................         12.6           11.8
Interest expense, net....................................          5.6            7.5
Other expense (income), net..............................          0.1           (0.1)
                                                               -------        -------
       Income before income taxes and minority interests           6.9            4.4
Income tax expense.......................................          2.7            1.7
Minority interests.......................................
                                                               -------        -------
       Net income........................................          4.2%           2.7%
                                                               =======        =======
</TABLE>

         Net sales of $94.1  million  for the three  months  ended June 30, 2002
were $11.3  million  higher than net sales for the three  months  ended June 30,
2001.  During  the  second  quarter  of 2002,  the  Company's  sales of  printed
ensembles,  solid  color  tableware  and  other  party  goods  to  the  national
superstore  distribution  channel grew by 3.3%.  The Company's  specialty  sales
force,  which  brings  party  goods and related  gift  products to card and gift
stores and other independent  retailers,  achieved 56.4% sales growth during the
second quarter of 2002,  contributing  $8.3 million to net sales. Net sales from
contract  manufacturing during the second quarter increased by $1.9 million when
compared to the second  quarter of 2001.  In addition,  net sales for the second
quarter  of  2002  included  $5.3  million  as a  result  of the  February  2002
acquisition of M&D Balloons,  Inc. ("M&D  Balloons")  (See Liquidity and Capital
Resources).

         Gross  profit  for the second  quarter of 2002 of 34.2% was  consistent
with that of the second quarter of 2001 as the incremental  margin achieved as a
result of increased sales was offset by lower margin attributable to product mix
and a higher effective rate of sales incentives.

         Selling  expenses of $8.6  million for the three  months ended June 30,
2002  were  $1.0  million  higher  than  in the  corresponding  period  in  2001
principally  due to the inclusion of the  operating  results of M&D Balloons and
the  continued  development  of the  Company's  specialty  sales force.  Selling
expenses, as a percentage of net sales,  decreased from 9.3% to 9.2%, reflecting
the increase in net sales and the maturation of the specialty sales force.

         General  and  administrative  expenses  of $8.8  million  for the three
months ended June 30, 2002  represents a decrease of $0.2 million as compared to
the corresponding period in 2001. The net decrease in general and administrative
expenses  reflects  the  elimination  of goodwill  amortization  in 2002,  which
amortization  totaled $0.6 million during the second quarter of 2001,  partially
offset by the  inclusion  of the  operating  results of M&D  Balloons and higher
employee wages. As a percentage of sales,  general and  administrative  expenses
decreased by 1.1%, to 9.3%.

                                       23
<PAGE>

         Art and  development  costs of $2.7  million for the second  quarter of
2002 were $0.4 million  higher than in the second  quarter of 2001,  principally
due to an increase of staff and higher wages and the  inclusion of the operating
results of M&D Balloons.

         During the second quarter of 2002, the Company incurred charges of $0.1
million relating to the consolidation of its domestic  distribution  operations,
which began in 1998 and is  scheduled  to be  completed  by the end of 2002.  In
addition,  the Company  incurred charges of $0.1 million relating to the closure
of its  distribution  facilities  in Spain and  France  which was  substantially
completed by June 30, 2002 and has resulted in the  elimination  of 6 positions.
The continued  consolidation of the Company's distribution facilities may result
in additional restructuring charges in subsequent periods.

         Interest  expense,  net, of $5.3 million for the second quarter of 2002
was $0.9 million lower than in the  corresponding  period in 2001 and reflects a
lower average interest rate (6.8% in 2002 versus 8.7% in 2001), partially offset
by the impact of higher average borrowings.

         Income  taxes for the  second  quarter of 2002 and 2001 were based upon
estimated  consolidated effective income tax rates of 39.5% for the years ending
December 31, 2002 and 2001.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Percentage of Net Sales
<TABLE>
<CAPTION>
                                                                  Six Months Ended June 30,
                                                                  -------------------------
                                                                    2002             2001
                                                                  ------           ------
<S>                                                                <C>              <C>
 Net sales ...............................................         100.0%           100.0%
 Cost of sales ...........................................          65.1             64.7
                                                                  ------           ------
        Gross profit .....................................          34.9             35.3
 Operating expenses:
     Selling expenses ....................................           8.8              9.2
     General and administrative expenses .................           8.9             10.1
     Art and development costs ...........................           2.6              2.6
     Restructuring charges ...............................           0.1
                                                                  ------           ------
        Total operating expenses .........................          20.4             21.9
                                                                  ------           ------
        Income from operations ...........................          14.5             13.4
 Interest expense, net ...................................           5.7              7.5
 Other (income) expense, net .............................
                                                                  ------           ------
        Income before income taxes and minority interests            8.8              5.9
 Income tax expense ......................................           3.4              2.3
 Minority interests ......................................
                                                                  ------           ------
        Net income .......................................           5.4%             3.6%
                                                                  ======           ======
</TABLE>

         Net sales of $190.0 million for the six months ended June 30, 2002 were
$20.3  million  higher  than net sales for the six months  ended June 30,  2001.
During  the six months  ended  June 30,  2002,  the  Company's  sales of printed
ensembles,  solid  color  tableware  and  other  party  goods  to  the  national
superstore  distribution  channel grew by 8.2%.  The Company's  specialty  sales
force,  which brings party goods and related  gift  products to the  independent
retail distribution  channel,  achieved 56.1% sales growth during the six months
ended June 30, 2002,  contributing $17.9 million to net sales. Net sales for the
six months  ended June 30, 2002 also  included  $7.5  million as a result of the
February 2002 acquisition of M&D Balloons (See Liquidity and Capital Resources).
These net sales gains were  partially  offset by a decline in net sales to craft
stores and mass merchants.

         Gross  profit for the six months  ended June 30, 2002 of 34.9% was 0.4%
lower than during the first half of 2001 as  incremental  margins  achieved as a
result of higher  sales  were more than  offset by the  impact of  product  mix,
particularly  solid  color  tableware  and a  higher  effective  rate  of  sales
incentives.

                                       24
<PAGE>


         Selling  expenses of $16.8  million  for the six months  ended June 30,
2002  were  $1.3  million  higher  than  in the  corresponding  period  in  2001
principally  due to the inclusion of the  operating  results of M&D Balloons and
the  continued  development  of the  Company's  specialty  sales force.  Selling
expenses, as a percentage of net sales,  decreased from 9.2% to 8.8%, reflecting
the increase in net sales and the maturation of the specialty sales force.

         General and administrative expenses of $16.9 million for the six months
ended June 30, 2002  represents  a decrease  of $0.2  million as compared to the
corresponding  period in 2001.  The net  decrease in general and  administrative
expenses  reflects  the  elimination  of goodwill  amortization  in 2002,  which
amortization  totaled  $1.3  million  during the first  half of 2001,  partially
offset by the  inclusion  of the  operating  results of M&D  Balloons and higher
employee wages. As a percentage of sales,  general and  administrative  expenses
decreased by 1.2% to 8.9%.

         Art and development costs of $5.0 million for the six months ended June
30, 2002 were $0.6  million  higher than in the first half of 2001,  principally
due to an increase in staff and higher  employee  wages and the inclusion of the
operating results of M&D Balloons.

         During the six months ended June 30, 2002, the Company incurred charges
of $0.1  million  relating to the  consolidation  of its  domestic  distribution
operations,  which began in 1998 and is  scheduled to be completed by the end of
2002. In addition,  the Company incurred charges of $0.1 million relating to the
closure  of  its   distribution   facilities  in  Spain  and  France  which  was
substantially  completed by June 30, 2002 and has resulted in the elimination of
6  positions.   The  continued   consolidation  of  the  Company's  distribution
facilities may result in additional restructuring charges in subsequent periods.

         Interest  expense,  net, of $10.8 million for the six months ended June
30,  2002 was 2.0  million  lower than in the  corresponding  period in 2001 and
reflects  a lower  average  interest  rate (6.8% in 2002  versus  8.9% in 2001),
partially offset by the impact of higher average borrowings.

         Income taxes for the six months ended June 30, 2002 and 2001 were based
upon estimated  consolidated  effective  income tax rates of 39.5% for the years
ending December 31, 2002 and 2001.

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

         At June 30, 2002,  the Company had an  outstanding  Term Loan of $148.9
million provided under a bank credit  agreement (the "Bank Credit  Facilities"),
together  with  senior  subordinated  notes  of  $110.0  million  (the  "Notes")
(collectively,  the  "Financings").  The Term Loan matures in December  2004 and
provides for  amortization  (in  quarterly  installments)  of one percent of the
principal  amount  thereof per year for the first five years and 32.3% and 62.7%
of the principal  amount thereof in the sixth and seventh  years,  respectively.
The Term Loan bears  interest,  at the option of the  Company,  at the  lenders'
prime rate plus 1.625% per annum or at the lenders' reserve adjusted  Eurodollar
rate plus 2.625% per annum. At June 30, 2002, the floating  interest rate on the
Term Loan was 4.52%.  The Notes bear  interest at a rate of 9.875% per annum and
mature in December 2007. The Company is required to make prepayments on the Bank
Credit  Facilities  based upon the net proceeds  from certain  asset sales,  the
issuances of certain debt and equity  securities  and insurance or  condemnation
awards, as well as based on annual cash flows, as defined.

         The Bank Credit  Facilities,  as amended on July 3, 2002,  also provide
for  revolving  loan  borrowings  of up to $40 million  (the  "Revolving  Credit
Facility").  The Revolving Credit Facility bears interest,  at the option of the
Company, at the lenders' prime customary base rate plus, based on performance, a
range of 1.25% to 3.50% per annum or at the lenders' reserve adjusted Eurodollar
rate plus,  based on performance,  a range of 1.875% to 4.50% per annum. At June
30, 2002,  the Company had  borrowing  capacity of  approximately  $19.0 million
under the terms of the  Revolving  Credit  Facility,  as amended.  The Revolving
Credit  Facility  requires  the Company to  maintain  certain  financial  ratios
including,  at June 30, 2002,  minimum  consolidated  earnings  before  interest
taxes,

                                       25
<PAGE>


depreciation  and  amortization  ("EBITDA") of  $58,500,000  for the four fiscal
quarters  ended June 30, 2002, a ratio of  consolidated  EBITDA to  consolidated
fixed  charges  (principally includes  capital   expenditures,   scheduled  debt
payments,  cash interest and income tax payments)  equal to or greater than 1.10
to 1.00  for the  four  fiscal  quarters  ended  June  30,  2002  and a ratio of
consolidated  debt to EBITDA  of not more than 4.80 to 1.00 for the four  fiscal
quarters ended June 30, 2002 and making annual capital  expenditures of not more
than  $15,000,000  plus  any  unused  2001  capital  expenditure  limit up to an
additional $7,500,000.

         In  addition  to the  Revolving  Credit  Facility,  the  Company  has a
$400,000  Canadian  dollar  denominated  revolving  credit  facility which bears
interest at the Canadian prime rate and expires on June 15, 2003, 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, 2003 and a $1.0
million  revolving  credit  facility which bears interest at LIBOR plus 1.0% and
expires  on January  31,  2003.  No  borrowings  were  outstanding  under  these
revolving credit facilities at June 30, 2002.

         The Company financed the costs to purchase property and construct a new
domestic  distribution  facility with a total cost of $30.1  million  during the
fourth quarter of 2001,  using  borrowings  under its Revolving Credit Facility,
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 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 a rate 4.75%, subject to change under certain conditions. 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.  The
Company has amended and  restated  its Bank Credit  Facilities  to provide  for,
among other things, the additional  borrowings and capital  expenditures for the
construction of the facility.

         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 GSCP for
proceeds of $6.0 million.  Dividends are cumulative  and payable  annually at 6%
per annum. Such dividends payable on or prior to March 30, 2004 shall be 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 shall be
payable  at the option of the  Company  either in cash or  additional  shares of
Series  A  Redeemable   Convertible   Preferred  Stock.  Annual  dividends  were
distributed in additional  shares of Series A Redeemable  Convertible  Preferred
Stock on March 30, 2002.  At June 30, 2002,  42.40 shares of Series A Redeemable
Convertible Preferred Stock were issued and outstanding.

         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. Rent expense for the three and six months ended
June 30, 2002, totaled $2.4 million and $5.4 million,  respectively. The minimum
lease payments currently required under non-cancelable  operating leases for the
year ending December 31, 2002, approximate $11.8 million.

         On February  19, 2002,  the Company  purchased  all of the  outstanding
common stock of M&D Balloons, 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 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 will continue to distribute metallic balloons under a
supply agreement with the Company.

         On June 13, 2002, the Company filed a  registration  statement with the
Securities and Exchange  Commission for an initial public offering of the Common
Stock. The filing has not yet become effective. The Company anticipates


                                       26
<PAGE>


that, if the offering is completed,  it will use the net proceeds it receives to
pay existing debt. In addition, the board of directors plans to approve a 10,000
for one stock  split of the Common  Stock,  effective  immediately  prior to the
offering.

         Based upon the current level of operations and anticipated  growth, the
Company  anticipates  that its  operating  cash flow,  together  with  available
borrowings  under the  Revolving  Credit  Facility  will be adequate to meet its
anticipated  future  requirements for working capital and operating expenses for
at least  the next 12  months.  Scheduled  debt  payments  for the  years  ended
December 31, 2002 and 2003 total $3.5 million and $52.3  million,  respectively,
with increasing amounts thereafter. The Company is exploring a number of options
to repay or refinance these debt maturities.  The Company has had good access to
capital  markets and expects to repay or refinance these debt maturities as they
become  due.  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 several  factors  including the
volatility of capital markets and the Company's future performance,  which, to a
certain extent,  will be subject to general  economic,  financial,  competitive,
business and other factors beyond its control.

         The Financings 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 June 30, 2002,  the Company did not have  material
commitments for capital expenditures or other acquisitions.

Cash Flow Data - Six Months  Ended June 30, 2002  Compared Six Months Ended June
30, 2001

         Net cash provided by operating  activities  during the six months ended
June 30, 2002 and 2001,  totaled $10.6 million and $11.9 million,  respectively.
Net cash flow  provided by  operating  activities  before  changes in  operating
assets and  liabilities  for the six months  ended June 30,  2002 and 2001,  was
$21.8 million and $15.6 million,  respectively.  Changes in operating assets and
liabilities for the six months ended June 30, 2002 and 2001, resulted in the use
of cash of  $11.2  million  and  $3.7  million,  respectively.  The  changes  in
operating  assets and  liabilities  principally  reflect an increase in accounts
receivable and inventories, net of a corresponding increase in accounts payable,
consistent with the growth in operations.  In addition,  the increase in prepaid
expenses  and other  current  assets for the six months  ended June 30, 2002 was
higher than the prior  period's  figure  primarily  due to deposits on equipment
relating  to the  outfitting  of the  newly  constructed  domestic  distribution
facility.

         Net cash used in investing  activities during the six months ended June
30, 2002 of $21.1 million consisted of $13.5 million relating to the acquisition
of M&D  Balloons  and $7.6  million of costs  associated  with the new  domestic
distribution  facility as well as additional  investments in data processing and
manufacturing  equipment.  During the six months ended June 30,  2001,  net cash
used in investing activities of $15.1 million included payments of $10.5 million
associated with the construction of the new domestic  distribution  facility and
additional investments primarily in manufacturing equipment.

         During  the six  months  ended  June 30,  2002,  net cash  provided  by
financing   activities  of  $11.6  million  included  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.  During the comparable period in 2001, net cash provided
by financing  activities  was $3.4 million and  primarily  consisted of proceeds
from  the  issuance  of the  Series A  Redeemable  Convertible  Preferred  Stock
totaling  $6.0 million  partially  offset by payments made against 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.


                                       27
<PAGE>


"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 June 30,
2002 and 2001,  our  interest  expense,  after  considering  the  effects of our
interest rate swap  agreements,  would have increased,  and income before income
taxes would have decreased, by $0.8 million and $0.4 million,  respectively.  If
market interest rates for our variable rate  indebtedness  averaged 2% more than
the interest rate actually paid for the six months ended June 30, 2002 and 2001,
our interest  expense,  after  considering the effects of our interest rate swap
agreements,  would have  increased,  and income  before  income taxes would have
decreased,  by $1.7 million and $0.9  million,  respectively.  These amounts are
determined by considering the impact of the  hypothetical  interest rates on our
borrowings  and interest rate swap  agreements.  This analysis does not consider
the effects of the reduced level of overall  economic  activity that could exist
in such an  environment.  Further,  in the event of a change of such  magnitude,
management  would  likely take  actions to further  mitigate our exposure to the
change.  However,  due to the uncertainty of the specific  actions that we would
take and their possible effects,  the sensitivity analysis assumes no changes in
our financial structure.

         Our earnings are also affected by fluctuations in the value of the U.S.
dollar as compared to foreign  currencies,  predominately in European countries,
as a result  of the  sales of our  products  in  foreign  markets.  Although  we
periodically  enter into foreign currency forward contracts to hedge against the
earnings  effects of such  fluctuations,  we may not be able to hedge such risks
completely  or  permanently.  A uniform  10%  strengthening  in

                                       28
<PAGE>


the value of the dollar  relative to the  currencies  in which our foreign sales
are  denominated  would  have  resulted  in a decrease  in gross  profit of $0.4
million  and $0.3  million  for the three  months  ended June 30, 2002 and 2001,
respectively. A uniform 10% strengthening in the value of the dollar relative to
the currencies in which our foreign sales are denominated would have resulted in
a decrease  in gross  profit of $0.7  million  in each of the six month  periods
ended June 30, 2002 and 2001, 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.



                                     Part II

Item 1.     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.


Item 6.     Exhibits and Reports on Form 8-K

         a)  Exhibits

     4(i)  Third  Amendment  to  Amended  and  Restated  Revolving  Loan  Credit
           Agreement, dated as of July 3, 2002, by and among the Registrant, the
           financial   institutions  parties  thereto,   Goldman,  Sachs  Credit
           Partners L.P., as arranger and syndication  agent, and Fleet National
           Bank, as administrative agent.

     99    Certification of Chief Executive  Officer and Chief Financial Officer
           Pursuant to 18 U.S.C.  Section 1350,  as Adopted  Pursuant to Section
           906 of the Sarbanes-Oxley Act of 2002.



         b)   Reports on Form 8-K

A Current Report on Form 8-K dated May 24, 2002, was filed responding to Item 5.
On May 24, 2002,  Amscan  issued a press  release  announcing  that it had begun
reviewing options available to it to effect a recapitalization of the Company.

A Current Report on Form 8-K dated June 13, 2002,  was filed  responding to Item
5. On June 13, 2002, Amscan issued a press release  announcing that it had filed
a registration  statement  with the  Securities  and Exchange  Commission for an
underwritten public offering of shares of its common stock.



                                       29
<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
                                          Vice President
                                          (on behalf of the registrant and
Date: August 14, 2002                     as principal financial and accounting
      ---------------                     officer)








                                       30