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


                                 F O R M 10 - Q



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

For the Quarterly Period Ended September 30, 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
          -----      -----

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

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


As of November 14, 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

                               September 30, 2002

                                Table of Contents



                                     Part I                                 Page

Item 1     Financial Statements  (Unaudited)

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

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

           Consolidated Statement of Stockholders' Deficit for the
              Nine Months Ended September 30, 2002........................... 5

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

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

Item 2     Management's Discussion and Analysis of Financial Condition
              and Results of Operations..................................... 24

Item 3     Quantitative and Qualitative Disclosures About Market Risk....... 29

Item 4     Controls and Procedures.......................................... 30


                                     Part II

Item 6     Exhibits and Reports on Form 8-K................................. 30

Signature  ................................................................. 31

Certification by Chief Executive Officer.................................... 32

Certification by Chief Financial Officer.................................... 33




                                       2
<PAGE>


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

<CAPTION>
                                                                           September 30,  December 31,
                                                                                2002          2001
                                                                           -------------  ------------
                                                                            (Unaudited)      (Note)
<S>                                                                         <C>            <C>
                                     ASSETS
Current assets:
    Cash and cash equivalents .........................................     $   1,952      $   1,016
    Accounts receivable, net of allowances ............................        81,139         65,039
    Inventories, net of allowances ....................................        87,969         72,582
    Prepaid expenses and other current assets .........................        15,726         13,659
                                                                            ---------      ---------
         Total current assets .........................................       186,786        152,296
Property, plant and equipment, net ....................................        98,021         94,589
Goodwill, net .........................................................        76,419         55,985
Notes receivable from officers ........................................         1,915          1,577
Other assets, net .....................................................         8,159          6,027
                                                                            ---------      ---------
         Total assets .................................................     $ 371,300      $ 310,474
                                                                            =========      =========

         LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED AND COMMON STOCK
                          AND STOCKHOLDERS' DEFICIT
Current liabilities:
    Short-term obligations ............................................     $  17,000      $     700
    Accounts payable ..................................................        39,252         33,083
    Accrued expenses ..................................................        22,845         16,047
    Income taxes payable ..............................................         1,552          2,298
    Current portion of long-term obligations ..........................        34,026          3,455
                                                                            ---------      ---------
         Total current liabilities ....................................       114,675         55,583
Long-term obligations, excluding current portion ......................       245,268        278,443
Deferred income tax liabilities .......................................        19,225         15,181
Other .................................................................         2,312          2,353
                                                                            ---------      ---------
         Total liabilities ............................................       381,480        351,560

Redeemable convertible preferred stock ($0.10 par value; 43.67
    shares authorized; 42.4 and 40.0 shares issued and
    outstanding) ......................................................         6,550          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 ........................................        14,910            299
    Unamortized restricted Common Stock awards, net ...................          (382)           (94)
    Notes receivable from stockholders ................................          (629)          (601)
    Deficit ...........................................................       (58,409)       (74,016)
    Accumulated other comprehensive loss ..............................        (2,743)        (2,893)
                                                                            ---------      ---------
         Total stockholders' deficit ..................................       (47,253)       (77,305)
                                                                            ---------      ---------
         Total liabilities, redeemable convertible preferred and Common
           Stock and stockholders' deficit ............................     $ 371,300      $ 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             Nine Months Ended
                                                          September 30,                 September 30,
                                                          -------------                 -------------
                                                       2002           2001           2002           2001
                                                       ----           ----           ----           ----

<S>                                                 <C>            <C>            <C>            <C>
Net sales .....................................     $ 100,226      $  87,699      $ 290,263      $ 257,443
Cost of sales .................................        65,761         57,416        189,416        167,259
                                                    ---------      ---------      ---------      ---------
         Gross profit .........................        34,465         30,283        100,847         90,184

Operating expenses:
   Selling expenses ...........................         8,984          8,337         25,810         23,904
   General and administrative expenses ........         8,248          9,830         25,169         26,966
   Art and development costs ..................         2,486          2,139          7,462          6,481
   Restructuring charges ......................           610                           796
                                                    ---------      ---------      ---------      ---------
         Total operating expenses .............        20,328         20,306         59,237         57,351
                                                    ---------      ---------      ---------      ---------
         Income from operations ...............        14,137          9,977         41,610         32,833

Interest expense, net .........................         5,430          6,001         16,188         18,766
Other (income) expense, net ...................          (364)           (24)          (386)            20
                                                    ---------      ---------      ---------      ---------
         Income before income taxes and
            minority interests ................         9,071          4,000         25,808         14,047

Income tax expense ............................         3,583          1,580         10,194          5,549
Minority interests ............................            52             29              7             23
                                                    ---------      ---------      ---------      ---------
         Net income ...........................         5,436          2,391         15,607          8,475
         Dividend requirement on redeemable
            convertible preferred stock .......            95             90            280            180
                                                    ---------      ---------      ---------      ---------
         Net income applicable to common shares     $   5,341      $   2,301      $  15,327      $   8,295
                                                    =========      =========      =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>


<TABLE>
                              AMSCAN HOLDINGS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                      Nine Months Ended September 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 .....................                                                                15,607                  15,607
Net change in cumulative
  translation adjustment .......                                                                               945         945
Change in fair value of interest
   rate swap and foreign
  exchange contracts, net of
  taxes (see Note 5) ...........                                                                              (795)       (795)
                                                                                                                      --------
    Comprehensive income .......                                                                                        15,757
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 ....                              (280)                                                       (280)
Amortization of restricted
  Common Stock awards ..........                                           177                                             177
Accretion of interest income on
  notes receivable from
  stockholders .................                                                       (28)                                (28)


   Increase in redeemable Common
   Stock due to vesting of
   restricted Common Stock
     award .....................                              (574)                                                       (574)
                                   --------   ---------   --------    --------    --------    --------    --------    --------

Balance at September 30, 2002 ..      1,233   $     --    $ 14,910    $   (382)   $   (629)   $(58,409)   $ (2,743)   $(47,253)
                                   ========   =========   ========    ========    ========    ========    ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       5
<PAGE>


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

                                                                                            Nine Months Ended
                                                                                              September 30,
                                                                                           2002          2001
                                                                                           ----          ----
<S>                                                                                      <C>           <C>
Cash flows from operating activities:
   Net income ......................................................................     $ 15,607      $  8,475
   Adjustments to reconcile net income to net cash provided by operating activities:
      Depreciation and amortization ................................................        9,852        11,722
      Amortization of deferred financing costs .....................................          843           748
      Amortization of restricted Common Stock awards ...............................          177           222
      Provision for doubtful accounts ..............................................        1,462         3,100
      Deferred income tax expense ..................................................        4,462           481
      Gain on disposal of equipment ................................................         (311)
      Changes in operating assets and liabilities, net of acquisition:
         Increase in accounts receivable ...........................................      (13,530)      (11,757)
         Increase in inventories ...................................................       (9,311)       (2,162)
         Increase in prepaid expenses and other current assets .....................       (2,390)       (2,010)
         Increase in accounts payable, accrued expenses and income taxes payable ...        7,028         4,363
      Other, net ...................................................................       (2,042)       (3,551)
                                                                                         --------      --------
         Net cash provided by operating activities .................................       11,847         9,631

Cash flows from investing activities:
   Cash paid in connection with acquisition ........................................      (13,547)
   Capital expenditures ............................................................      (11,396)      (27,157)
   Proceeds from disposal of property and equipment ................................          515
                                                                                         --------      --------
         Net cash used in investing activities .....................................      (24,428)      (27,157)

Cash flows from financing activities:
   Proceeds from issuance of redeemable convertible preferred stock ................                      6,000
   Proceeds from short-term obligations ............................................       16,300        14,665
   Repayment of loans, notes payable and long-term obligations .....................       (2,535)       (3,138)
   Proceeds from the exercise of common stock options ..............................                         41
   Payments received on notes receivable from stockholders .........................                          9
                                                                                         --------      --------
         Net cash provided by financing activities .................................       13,765        17,577
Effect of exchange rate changes on cash and cash equivalents .......................         (248)         (557)
                                                                                         --------      --------
         Net increase (decrease) in cash and cash equivalents ......................          936          (506)
Cash and cash equivalents at beginning of period ...................................        1,016         1,469
                                                                                         --------      --------
Cash and cash equivalents at end of period .........................................     $  1,952      $    963
                                                                                         ========      ========
Supplemental Disclosures:
         Interest paid .............................................................     $ 12,487      $ 16,301
         Income taxes paid .........................................................     $  5,851      $  5,056
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       6
<PAGE>


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


Supplemental information on non-cash activities:

    In 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.

    There were no capital  lease  obligations  recorded  during the nine  months
    ended  September 30, 2002.  Capital lease  obligations of $144 were recorded
    during the nine months ended September 30, 2001.




          See accompanying notes to consolidated financial statements.

                                       7
<PAGE>


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

Note 1 - Organization and Description of Business

         Amscan  Holdings,  Inc.  ("Amscan  Holdings"  and,  together  with  its
subsidiaries,  "Amscan," "AHI" or the "Company") was  incorporated on October 3,
1996 for the purpose of becoming the holding company for Amscan Inc. and certain
affiliated entities.  AHI designs,  manufactures,  contracts for manufacture and
distributes 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 nine months ended September 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
selling  expenses were each reduced by $311,000 and $1,436,000 for the three and
nine months ended September 30, 2001, respectively.

Note 3 - Inventories

         Inventories consisted of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                         September 30,   December 31,
                                                             2002            2001
                                                             ----            ----

<S>                                                        <C>             <C>
Finished goods .....................................       $ 73,976        $ 65,376
Raw materials ......................................          8,931           5,992
Work-in-process ....................................          8,285           4,520
                                                           --------        --------
                                                             91,192          75,888
Less: reserve for slow moving and obsolete inventory         (3,223)         (3,306)
                                                           --------        --------
                                                           $ 87,969        $ 72,582
                                                           ========        ========
</TABLE>

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


                                       8
<PAGE>


                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (Unaudited)
Note 4 - Income Taxes

         The consolidated income tax expense for the three and nine months ended
September 30, 2002 and 2001 was determined based upon estimates of the Company's
consolidated  effective  income tax rates for the year ending  December 31, 2002
and the year ended December 31, 2001. 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         Nine Months Ended
                                                                    September 30,              September 30,
                                                                 2002          2001         2002          2001
                                                               --------      --------     --------      --------
<S>                                                            <C>           <C>          <C>           <C>
Net income ...............................................     $  5,436      $  2,391     $ 15,607      $  8,475
Net change in cumulative translation adjustment ..........          (10)          116          945          (662)
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 $(225), $87, $(415) and $90,
   respectively ..........................................         (345)          133         (636)          138
Change in fair value of the Company's foreign exchange
   contracts, net of taxes of $84 and $(104), respectively          129                       (159)
                                                               --------      --------     --------      --------
                                                               $  5,210      $  2,640     $ 15,757      $  7,724
                                                               ========      ========     ========      ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                            September 30,   December 31,
                                                                2002            2001
                                                               -------        -------
<S>                                                            <C>            <C>
Cumulative translation adjustment ......................       $(1,834)       $(2,779)
Interest rate swap contract qualifying as a hedge,
  net of taxes of $(415) ...............................          (636)
Foreign exchange contracts qualifying as hedges,
  net of taxes of $(178) and $(76), respectively .......          (273)          (114)
                                                               -------        -------
                                                               $(2,743)       $(2,893)
                                                               =======        =======
</TABLE>

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  September  30,  2002,  accrued  dividends
aggregated $190,000 and are included in redeemable  convertible  preferred stock
on the consolidated balance sheet.

         At September  30, 2002 and December 31, 2001,  42.40 and 40.0 shares of
Series A Redeemable Convertible

                                       9
<PAGE>


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

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 Series A  Redeemable  Convertible  Preferred  Stock was  issued,  subject to
adjustment for the effects of subsequent common stock splits or stock dividends.
At September 30, 2002, the Series A Redeemable  Convertible  Preferred  Stock is
convertible  into Common  Stock at a price of $150,000 per common  share.  As of
September  30, 2002,  there were 43.67 shares of Common Stock  reserved for such
conversion.

         The Series A Redeemable  Convertible  Preferred Stock is not redeemable
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 September  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  employment  agreements  with the  President  and  Executive  Vice
President  of the  Company.  The  Restricted  Stock  held by the  President  and
Executive Vice President will vest in June 2003 and December 2004, respectively.
During the three and nine months ended  September 30, 2002 and 2001, the Company
recorded the  amortization  of  Restricted  Stock of $59,000 and  $177,000,  and
$192,000 and $222,000,  respectively, as compensation expense, which is included
in general and administrative  expenses in the Company's consolidated statements
of income.

         In September 1998, the Company issued warrants to purchase 10 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,


                                       10
<PAGE>


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

contract for manufacture and  distribution of decorative  party goods,  metallic
balloons, stationery and gift items.

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 September 30, 2002
Sales to unaffiliated customers .................     $  85,574     $  14,652                    $ 100,226

Sales between geographic areas ..................         8,996                   $  (8,996)           --
                                                      ---------     ---------     ---------      ---------
Net sales .......................................     $  94,570     $  14,652     $  (8,996)     $ 100,226
                                                      =========     =========     =========      =========

Income from operations ..........................     $  13,000     $   1,137                    $  14,137
                                                      =========     =========
Interest expense, net ...........................                                                    5,430
Other income, net ...............................                                                     (364)
                                                                                                 ---------
Income before income taxes and minority interests                                                $   9,071
                                                                                                 =========

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

<CAPTION>
                                                       Domestic      Foreign     Eliminations   Consolidated
                                                       --------      -------     ------------   ------------
<S>                                                   <C>           <C>           <C>            <C>
Three Months Ended September 30, 2001
Sales to unaffiliated customers .................     $  74,735     $  12,964                    $  87,699
Sales between geographic areas ..................         7,071                   $  (7,071)           --
                                                      ---------     ---------     ---------      ---------
Net sales .......................................     $  81,806     $  12,964     $  (7,071)     $  87,699
                                                      =========     =========     =========      =========

Income from operations ..........................     $   8,636     $   1,341                    $   9,977
                                                      =========     =========
Interest expense, net ...........................                                                    6,001
Other income, net ...............................                                                      (24)
                                                                                                 ---------
Income before income taxes and minority interests                                                $   4,000
                                                                                                 =========

Long-lived assets, net at September 30, 2001 ....     $ 146,814     $   7,021                    $ 153,835
                                                      =========     =========                    =========

<CAPTION>
                                                       Domestic      Foreign     Eliminations   Consolidated
                                                       --------      -------     ------------   ------------
<S>                                                   <C>           <C>           <C>            <C>
Nine Months Ended September 30, 2002
Sales to unaffiliated customers .................     $ 250,406     $  39,857                    $ 290,263
Sales between geographic areas ..................        20,281                   $ (20,281)           --
                                                      ---------     ---------     ---------      ---------
Net sales .......................................     $ 270,687     $  39,857     $ (20,281)     $ 290,263
                                                      =========     =========     =========      =========

Income from operations ..........................     $  39,930     $   1,680                    $  41,610
                                                      =========     =========
Interest expense, net ...........................                                                   16,188
Other income, net ...............................                                                     (386)
                                                                                                 ---------
Income before income taxes and minority interests                                                $  25,808
                                                                                                 =========

<CAPTION>
                                                       Domestic      Foreign     Eliminations   Consolidated
                                                       --------      -------     ------------   ------------
<S>                                                   <C>           <C>           <C>            <C>
Nine Months Ended September 30, 2001
Sales to unaffiliated customers .................     $ 222,509     $  34,934                    $ 257,443
Sales between geographic areas ..................        19,336                   $ (19,336)           --
                                                      ---------     ---------     ---------      ---------
Net sales .......................................     $ 241,845     $  34,934     $ (19,336)     $ 257,443
                                                      =========     =========     =========      =========

Income from operations ..........................     $  30,071     $   2,762                    $  32,833
                                                      =========     =========
Interest expense, net ...........................                                                   18,766
Other expense, net ..............................                                                       20
                                                                                                 ---------
Income before income taxes and minority interests                                                $  14,047
                                                                                                 =========
</TABLE>


                                       11
<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          Nine Months
                                                         Ended                 Ended
                                                     September 30,          September 30,
                                                 -------------------     -------------------
                                                   2002        2001        2002        2001
                                                   ----        ----        ----        ----
<S>                                              <C>         <C>         <C>         <C>
Reported net income ........................     $ 5,436     $ 2,391     $15,607     $ 8,475
Add back goodwill amoritzation, net of taxes                     391                   1,173
                                                 -------     -------     -------     -------
Adjusted net income ........................     $ 5,436     $ 2,782     $15,607     $ 9,648
                                                 =======     =======     =======     =======
</TABLE>

         Other intangible assets, net of amortization,  of $807,000 at September
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). Other 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
$3,263,000  and  $3,000,000  at  September  30,  2002  and  December  31,  2001,
respectively.  Amortization  of other  intangible  assets for the three and nine
months  ended  September  30,  2002 was  $108,000  and  $263,000,  respectively.
Amortization  of other  intangible  assets for the three and nine  months  ended
September  30,  2001,  was  $207,000  and  $705,000,   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


                                       12
<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 continues
to distribute  metallic balloons under a supply agreement with the Company.  The
acquisition  has been  accounted  for  under  the  provisions  of SFAS No.  141,
"Business Combinations," and, accordingly, the operating results of M&D 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  $20,233,000,  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, 2001.  The pro forma  information,  as
presented  below, is not  necessarily  indicative of the results that would have
been  obtained  had the  transaction  occurred  on January  1,  2001,  nor is it
necessarily indicative of the Company's future results (dollars in thousands):

                                   Three Months Ended         Nine Months
                                      September 30,       Ended September 30,
                                          2001             2002         2001
                                          ----             ----         ----
Net sales......................          $93,620         $294,370     $274,184
Net income.....................            2,398           16,000        9,029

         The net income amounts reflect  adjustments  for interest  expense from
additional  borrowings  necessary to finance the acquisition and amortization of
other  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.


                                       13
<PAGE>


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


         During the three and nine months ended  September 30, 2002, the Company
sold $978,000 and $4,494,000, respectively, of metallic balloons and other party
goods to American  Greetings.  Trade accounts receivable from American Greetings
at September 30, 2002 were $1,669,000.


Note 11 - Restructuring Charges

          During the three and nine months ended September 30, 2002, the Company
incurred charges of $504,000 resulting from the consolidation of the fabrication
operations of M&D Balloons  into its existing  balloon  operations.  The Company
also  incurred  charges of $65,000 and $158,000  during the three and nine month
periods  ended  September  30, 2002  relating to the closure of certain  foreign
distribution facilities which has resulted in the elimination of 6 positions. In
addition,  the Company incurred charges of $41,000 and $134,000 during the three
and nine month periods ended September 30, 2002 relating to the consolidation of
its  domestic  distribution  operations.  The  continued  consolidation  of  the
Company's   distribution  and  balloon   operations  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  prior to the  initial  public
offering.


Note 13 - Amended Revolving Loan Credit Agreement

          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
(the  "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


                                       14
<PAGE>


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


of one of its  subsidiaries,  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").

         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
September  30,  2002  and  December  31,  2001,  and the  related  consolidating
statements of income for the three and nine months ended  September 30, 2002 and
2001,  and cash flows for the nine months ended  September 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.


                                       15
<PAGE>


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

<TABLE>
                           CONSOLIDATING BALANCE SHEET
                               September 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 ...................     $   1,206      $     746                     $   1,952
     Accounts receivable, net of allowances ......        68,177         12,962                        81,139
     Inventories, net of allowances ..............        77,602         11,238      $    (871)        87,969
     Prepaid expenses and other current assets ...        13,622          2,104                        15,726
                                                       ---------      ---------      ---------      ---------
     Total current assets ........................       160,607         27,050           (871)       186,786
Property, plant and equipment, net ...............        96,659          1,362                        98,021
Goodwill, net ....................................        71,362          5,057                        76,419
Notes receivable from officers ...................         1,915                                        1,915
Other assets, net ................................        34,656          1,179        (27,676)         8,159
                                                       ---------      ---------      ---------      ---------
     Total assets ................................     $ 365,199      $  34,648      $ (28,547)     $ 371,300
                                                       =========      =========      =========      =========

Current liabilities:
     Short-term obligations ......................     $  17,000      $     --                      $  17,000
     Accounts payable ............................        37,409          1,843                        39,252
     Accrued expenses ............................        17,955          4,890                        22,845
     Income taxes payable ........................         1,448            104                         1,552
     Current portion of long-term
       obligations ...............................        33,876            150                        34,026
                                                       ---------      ---------      ---------      ---------
     Total current liabilities ...................       107,688          6,987                       114,675
Long-term obligations, excluding
  current portion ................................       245,117            151                       245,268
Deferred income tax liabilities ..................        19,225                                       19,225
Other ............................................         2,478         15,218      $ (15,384)         2,312
                                                       ---------      ---------      ---------      ---------
Total liabilities ................................       374,508         22,356        (15,384)       381,480

Redeemable convertible preferred stock ...........         6,550                                        6,550
Redeemable Common Stock ..........................        30,523                                       30,523

Commitments and Contingencies

Stockholders' (deficit) equity:
     Common Stock ................................                          339           (339)           --
     Additional paid-in capital ..................        14,910            658           (658)        14,910
     Unamortized restricted Common Stock
        award, net ...............................          (382)                                        (382)
     Notes receivable from stockholders ..........          (629)                                        (629)
     (Deficit) retained earnings .................       (57,538)        13,334        (14,205)       (58,409)
     Accumulated other comprehensive loss ........        (2,743)        (2,039)         2,039         (2,743)
                                                       ---------      ---------      ---------      ---------
         Total stockholders' (deficit) equity ....       (46,382)        12,292        (13,163)       (47,253)
                                                       ---------      ---------      ---------      ---------
         Total liabilities, redeemable convertible
             preferred and Common Stock and
             stockholders' (deficit) equity ......     $ 365,199      $  34,648      $ (28,547)     $ 371,300
                                                       =========      =========      =========      =========
</TABLE>

                                       16
<PAGE>


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

<TABLE>
                           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 of allowances ......        56,408          8,631                        65,039
     Inventories, net of allowances ..............        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
Goodwill, net ....................................        51,136          4,849                        55,985
Notes receivable from officers ...................         1,577                                        1,577
Other assets, net ................................        22,922          4,880        (21,775)         6,027
                                                       ---------      ---------      ---------      ---------
     Total assets ................................     $ 303,801      $  29,219      $ (22,546)     $ 310,474
                                                       =========      =========      =========      =========

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED AND COMMON STOCK
   AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
     Short-term obligations ......................     $     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>

                                       17
<PAGE>


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

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



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

<S>                                                 <C>            <C>            <C>            <C>
Net sales .....................................     $  89,252      $  14,652      $  (3,678)     $ 100,226
Cost of sales .................................        59,121         10,231         (3,591)        65,761
                                                    ---------      ---------      ---------      ---------
         Gross profit .........................        30,131          4,421            (87)        34,465
Operating expenses:
    Selling expenses ..........................         7,366          1,618                         8,984
    General and administrative expenses .......         6,887          1,601           (240)         8,248
    Art and development costs .................         2,486                                        2,486
    Restructuring charges .....................           545             65                           610
                                                    ---------      ---------      ---------      ---------
         Total operating expenses .............        17,284          3,284           (240)        20,328
                                                    ---------      ---------      ---------      ---------
         Income from operations ...............        12,847          1,137            153         14,137
Interest expense, net .........................         5,274            156                         5,430
Other (income) expense, net ...................        (1,199)           (12)           847           (364)
                                                    ---------      ---------      ---------      ---------
         Income before income taxes
           and minority interests .............         8,772            993           (694)         9,071
Income tax expense ............................         3,249            334                         3,583
Minority interests ............................                           52                            52
                                                    ---------      ---------      ---------      ---------
         Net income ...........................         5,523            607           (694)         5,436
         Dividend requirement on redeemable
            convertible preferred stock .......            95                                           95
                                                    ---------      ---------      ---------      ---------
         Net income applicable to common shares     $   5,428      $     607      $    (694)     $   5,341
                                                    =========      =========      =========      =========
</TABLE>


                                       18
<PAGE>




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

<TABLE>
                        CONSOLIDATING STATEMENT OF INCOME
                  For the Three Months Ended September 30, 2001
                             (Dollars in thousands)


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

<S>                                                 <C>           <C>          <C>           <C>
Net sales .....................................     $ 78,766      $ 12,965     $ (4,032)     $ 87,699
Cost of sales .................................       52,279         9,068       (3,931)       57,416
                                                    --------      --------     --------      --------
         Gross profit .........................       26,487         3,897         (101)       30,283
Operating expenses:
    Selling expenses ..........................        7,018         1,319                      8,337
     General and administrative expenses ......        8,641         1,237          (48)        9,830
    Art and development costs .................        2,139                                    2,139
                                                    --------      --------     --------      --------
         Total operating expenses .............       17,798         2,556          (48)       20,306
                                                    --------      --------     --------      --------
         Income from operations ...............        8,689         1,341          (53)        9,977
Interest expense, net .........................        5,845           156                      6,001
Other (income) expense, net ...................         (830)            4          802           (24)
                                                    --------      --------     --------      --------
         Income before income taxes
           and minority interests .............        3,674         1,181         (855)        4,000
Income tax expense ............................        1,181           399                      1,580
Minority interests ............................                         29                         29
                                                    --------      --------     --------      --------
         Net income ...........................        2,493           753         (855)        2,391
         Dividend requirement on redeemable
            convertible preferred stock .......           90                                       90
                                                    --------      --------     --------      --------
         Net income applicable to common shares     $  2,403      $    753     $   (855)     $  2,301
                                                    ========      ========     ========      ========
</TABLE>


                                       19
<PAGE>



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

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



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

<S>                                                 <C>            <C>            <C>            <C>
Net sales .....................................     $ 266,220      $  39,857      $ (15,814)     $ 290,263
Cost of sales .................................       176,831         28,299        (15,714)       189,416
                                                    ---------      ---------      ---------      ---------
         Gross profit .........................        89,389         11,558           (100)       100,847
Operating expenses:
    Selling expenses ..........................        21,300          4,510                        25,810
    General and administrative expenses .......        20,679          5,210           (720)        25,169
    Art and development costs .................         7,462                                        7,462
    Restructuring charges .....................           638            158                           796
                                                    ---------      ---------      ---------      ---------
         Total operating expenses .............        50,079          9,878           (720)        59,237
                                                    ---------      ---------      ---------      ---------
         Income from operations ...............        39,310          1,680            620         41,610
Interest expense, net .........................        15,716            472                        16,188
Other (income) expense, net ...................        (1,808)           (18)         1,440           (386)
                                                    ---------      ---------      ---------      ---------
         Income before income taxes
           and minority interests .............        25,402          1,226           (820)        25,808
Income tax expense ............................         9,695            499                        10,194
Minority interests ............................                            7                             7
                                                    ---------      ---------      ---------      ---------
         Net income ...........................        15,707            720           (820)        15,607
         Dividend requirement on redeemable
            convertible preferred stock .......           280                                          280
                                                    ---------      ---------      ---------      ---------
         Net income applicable to common shares     $  15,427      $     720      $    (820)     $  15,327
                                                    =========      =========      =========      =========
</TABLE>


                                       20
<PAGE>



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

<TABLE>
                        CONSOLIDATING STATEMENT OF INCOME
                  For the Nine Months Ended September 30, 2001
                             (Dollars in thousands)


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

<S>                                                 <C>            <C>           <C>            <C>
Net sales .....................................     $ 241,110      $  34,946     $ (18,613)     $ 257,443
Cost of sales .................................       161,161         24,281       (18,183)       167,259
                                                    ---------      ---------     ---------      ---------
         Gross profit .........................        79,949         10,665          (430)        90,184
Operating expenses:
    Selling expenses ..........................        19,915          3,989                       23,904
    General and administrative expenses .......        23,196          3,914          (144)        26,966
    Art and development costs .................         6,481                                       6,481
                                                    ---------      ---------     ---------      ---------
         Total operating expenses .............        49,592          7,903          (144)        57,351
                                                    ---------      ---------     ---------      ---------
         Income from operations ...............        30,357          2,762          (286)        32,833
Interest expense, net .........................        18,283            483                       18,766
Other (income) expense, net ...................        (1,671)            51         1,640             20
                                                    ---------      ---------     ---------      ---------
         Income before income taxes
           and minority interests .............        13,745          2,228        (1,926)        14,047
Income tax expense ............................         4,839            710                        5,549
Minority interests ............................                           23                           23
                                                    ---------      ---------     ---------      ---------
         Net income ...........................         8,906          1,495        (1,926)         8,475
         Dividend requirement on redeemable
            convertible preferred stock .......           180                                         180
                                                    ---------      ---------     ---------      ---------
         Net income applicable to common shares     $   8,726      $   1,495     $  (1,926)     $   8,295
                                                    =========      =========     =========      =========
</TABLE>


                                       21
<PAGE>


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

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



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

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

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

Cash flows from financing activities:
     Proceeds from short-term obligations, .....................       16,300                                    16,300
   Repayment of loans, notes payable and
         long-term obligations .................................       (2,523)          (12)                     (2,535)
                                                                     --------      --------      --------      --------
            Net cash provided by (used in) financing activities        13,777           (12)          --         13,765
Effect of exchange rate changes on cash and cash equivalents ...         (671)          423
                                                                     --------      --------      --------      --------
                                                                                                                   (248)
            Net increase (decrease) in cash and cash equivalents        1,146          (210)                        936
Cash and cash equivalents at beginning of period ...............           60           956                       1,016
                                                                     --------      --------      --------      --------
Cash and cash equivalents at end of period .....................     $  1,206      $    746      $    --       $  1,952
                                                                     ========      ========      ========      ========
</TABLE>


                                       22
<PAGE>


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

<TABLE>
                      CONSOLIDATING STATEMENT OF CASH FLOWS
                  For the Nine Months Ended September 30, 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 ..............................................     $  8,906      $  1,495      $ (1,926)     $  8,475
   Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation and amortization ........................       11,292           430                      11,722
      Amortization of deferred financing costs .............          748                                       748
      Provision for doubtful accounts ......................        2,933           167                       3,100
      Amortization of restricted Common Stock award ........          222                                       222
      Deferred income tax expense ..........................          481                                       481
      Changes in operating assets and liabilities:
            Increase in accounts receivable ................       (9,886)       (1,871)                    (11,757)
            Decrease (increase) in inventories .............        1,560        (4,152)          430        (2,162)
            Increase in prepaid expenses and other
               current assets ..............................       (1,748)         (262)                     (2,010)
            Increase in accounts payable, accrued
               expenses and income taxes payable ...........        4,059           304                       4,363
       Other, net ..........................................       (9,594)        4,547         1,496        (3,551)
                                                                 --------      --------      --------      --------
            Net cash provided by operating activities ......        8,973           658           --          9,631

Cash flows from investing activities:
      Capital expenditures .................................      (26,896)         (261)                    (27,157)
                                                                 --------      --------      --------      --------
            Net cash used in investing activities ..........      (26,896)         (261)          --        (27,157)

Cash flows from financing activities:
   Proceeds from issuance of redeemable convertible
        preferred stock ....................................        6,000                                     6,000
   Proceeds from short-term obligations ....................       14,665                                    14,665
   Repayment  of loans, notes payable and long-term
       obligations .........................................       (3,058)          (80)                     (3,138)
   Proceeds from the exercise of common stock options ......           41                                        41
   Payments received on notes receivable from stockholders
     and other .............................................         (296)          305                           9
                                                                 --------      --------      --------      --------
            Net cash provided by financing activities ......       17,352           225           --         17,577
Effect of exchange rate changes on cash and cash equivalents           63          (620)                       (557)
                                                                 --------      --------      --------      --------
            Net (decrease) increase in cash and cash
                        equivalents ........................         (508)            2                        (506)
Cash and cash equivalents at beginning of period ...........          559           910                       1,469
                                                                 --------      --------      --------      --------
Cash and cash equivalents at end of period .................     $     51      $    912      $    --       $    963
                                                                 ========      ========      ========      ========
</TABLE>

                                       23
<PAGE>



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

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

Percentage of Net Sales
-----------------------
                                                             Three Months Ended
                                                             ------------------
                                                                September 30,
                                                                -------------
                                                              2002       2001
                                                              ----       ----
Net sales ..............................................     100.0%      100.0%
Cost of sales ..........................................      65.6        65.5
                                                             -----       -----
       Gross profit ....................................      34.4        34.5
Operating expenses:
    Selling expenses ...................................       9.0         9.5
    General and administrative expenses ................       8.2        11.2
    Art and development costs ..........................       2.5         2.4
    Restructuring charges ..............................       0.6
                                                             -----       -----
       Total operating expenses ........................      20.3        23.1
                                                             -----       -----
       Income from operations ..........................      14.1        11.4
Interest expense, net ..................................       5.4         6.8
Other income, net ......................................      (0.4)
                                                             -----       -----
       Income before income taxes and minority interests       9.1         4.6
Income tax expense .....................................       3.6         1.9
Minority interests .....................................       0.1
                                                             -----       -----
       Net income ......................................       5.4%        2.7%
                                                             =====       =====

         Net sales of $100.2  million for the three months ended  September  30,
2002 were  $12.5  million  higher  than net sales  for the  three  months  ended
September  30, 2001.  During the third 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 8.9%.  The Company's  specialty  sales
force,  which  brings  party  goods and related  gift  products to card and gift
stores and other independent  retailers,  achieved 42.5% sales growth during the
third  quarter of 2002.  Domestic  net sales of metallic  balloons  and flexible
packaging  during the third  quarter of 2002  increased  by 43.6% over the third
quarter of 2001, principally as a result of the February 2002 acquisition of M&D
Balloons  (see  Liquidity  and Capital  Resources).  In  addition,  net sales to
international customers increased by 9.8%.

         Gross profit for the third quarter of 2002 of 34.4% was 0.1% lower than
the third  quarter of 2001 as the  incremental  margin  achieved  as a result of
increased sales was offset by lower margin attributable to product mix.

         Selling  expenses of $9.0 million for the three months ended  September
30,  2002 were $0.6  million  higher  than in the  corresponding  period in 2001
principally  due to the  inclusion  of the  operating  results of M&D  Balloons.
Selling  expenses,  as a percentage of net sales,  decreased  from 9.5% to 9.0%,
resulting  from  the  leveraging  of  our  sales  infrastructure  and  continued
maturation of our specialty sales force.

         General  and  administrative  expenses  of $8.2  million  for the three
months  ended  September  30, 2002  decreased by $1.6 million as compared to the
corresponding   period  in  2001.  As  a  percentage   of  sales,   general  and
administrative  expenses decreased by 3.0%, to 8.2%. The net decrease in general
and  administrative  expenses is primarily  due to the  elimination  of goodwill
amortization in 2002, which  amortization  totaled $0.6 million during the third
quarter of 2001,  and a decrease in bad debt expense of $1.8 million,  partially
offset by the  inclusion  of the  operating  results of M&D  Balloons and higher
employee  wages.  During  the third  quarter  of 2001,  the  Company  charged an
additional  $1.5 million to the  provision  for doubtful  accounts as one of its
customers  filed a voluntary  petition for relief under Chapter 11 of the United
States Bankruptcy Code.

                                       24
<PAGE>


         Art and development costs of $2.5 million for the third quarter of 2002
were $0.3 million higher than in the third quarter of 2001,  principally  due to
an increase of staff, higher wages and the inclusion of the operating results of
M&D Balloons.

         During  the third  quarter of 2002,  the  Company  incurred  charges of
$504,000  resulting from the consolidation of the fabrication  operations of M&D
Balloons into its existing balloon operations. In addition, the Company incurred
charges of $65,000 during the quarter relating to the closure of certain foreign
distribution  facilities  and  $41,000  relating  to  the  consolidation  of its
domestic distribution  operations.  The continued consolidation of the Company's
distribution  and  balloon  operations  may result in  additional  restructuring
charges in subsequent periods.

         Interest  expense,  net, of $5.4 million for the third  quarter of 2002
was $0.6 million lower than in the  corresponding  period in 2001 and reflects a
lower average interest rate (6.8% in 2002 versus 8.4% in 2001), partially offset
by the impact of higher average borrowings.

         Income  taxes for the third  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.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001

Percentage of Net Sales
-----------------------
                                                             Nine Months Ended
                                                             -----------------
                                                               September 30,
                                                               -------------
                                                              2002       2001
                                                              ----       ----
Net sales ..............................................     100.0%      100.0%
Cost of sales ..........................................      65.3        65.0
                                                             -----       -----
       Gross profit ....................................      34.7        35.0
Operating expenses:
    Selling expenses ...................................       8.9         9.2
    General and administrative expenses ................       8.6        10.5
    Art and development costs ..........................       2.6         2.5
    Restructuring charges ..............................       0.3
                                                             -----       -----
       Total operating expenses ........................      20.4        22.2
                                                             -----       -----
       Income from operations ..........................      14.3        12.8
Interest expense, net ..................................       5.5         7.3
Other income, net ......................................      (0.1)
                                                             -----       -----
       Income before income taxes and minority interests       8.9         5.5
Income tax expense .....................................       3.5         2.2
Minority interests .....................................
                                                             -----       -----
       Net income ......................................       5.4%        3.3%
                                                             =====       =====

         Net sales of $290.3  million for the nine months  ended  September  30,
2002  were  $32.8  million  higher  than net  sales  for the nine  months  ended
September  30,  2001.  During the nine months  ended  September  30,  2002,  the
Company's  sales of printed  ensembles,  solid color  tableware  and other party
goods  to the  national  superstore  distribution  channel  grew  by  5.9%.  The
Company's  specialty  sales  force,  which  brings  party goods and related gift
products to card and gift stores and other independent retailers, achieved 50.5%
sales growth during the nine months ended September 30, 2002. Domestic net sales
of  metallic  balloons  and  flexible  packaging  during the nine  months  ended
September 30, 2002  increased by 37.1% compared to the  corresponding  period in
2001,  principally as a result of the February 2002  acquisition of M&D Balloons
(see Liquidity and Capital Resources).  In addition,  net sales to international
customers increased by 8.0%.


                                       25
<PAGE>


         Gross profit for the nine months ended  September 30, 2002 of 34.7% was
0.3% lower than in the corresponding  period in 2001 due to incremental  margins
achieved as a result of higher sales that were more than offset by the impact of
product mix, particularly solid color tableware.

         Selling  expenses of $25.8 million for the nine months ended  September
30,  2002 were $1.9  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 8.9%, resulting
from the leveraging of our sales  infrastructure and continued maturation of our
specialty sales force.

         General  and  administrative  expenses  of $25.2  million  for the nine
months  ended  September  30,  2002  represents  a decrease  of $1.8  million as
compared to the corresponding  period in 2001. As a percentage of sales, general
and  administrative  expenses  decreased  by 1.9% to 8.6%.  The net  decrease in
general and  administrative  expenses is  primarily  due to the  elimination  of
goodwill  amortization in 2002, which  amortization  totaled $1.9 million during
the nine months ended  September 30, 2001, and a decrease in bad debt expense of
$1.6 million,  partially offset by the inclusion of the operating results of M&D
Balloons  and  higher  employee  wages.  During the third  quarter of 2001,  the
Company  charged an  additional  $1.5  million  to the  provision  for  doubtful
accounts as one of the Company's customers filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code.

         Art and  development  costs of $7.5  million for the nine months  ended
September  30, 2002 were $1.0  million  higher as compared to the  corresponding
period in 2001,  principally due to an increase in staff,  higher employee wages
and the inclusion of the operating results of M&D Balloons.

         During the nine months ended  September 30, 2002, the Company  incurred
charges  of  $504,000  resulting  from  the  consolidation  of  the  fabrication
operations of M&D Balloons into its existing  balloon  operations.  In addition,
the Company  incurred charges of $134,000  relating to the  consolidation of its
domestic distribution operations.  The Company also incurred charges of $158,000
relating to the closure of certain foreign  distribution  facilities,  which has
resulted in the elimination of 6 positions.  The continued  consolidation of the
Company's   distribution  and  balloon   operations  may  result  in  additional
restructuring charges in subsequent periods.

         Interest  expense,  net, of $16.2  million  for the nine  months  ended
September  30, 2002 was $2.6 million lower than in the  corresponding  period in
2001 and  reflects a lower  average  interest  rate (6.8% in 2002 versus 8.8% in
2001), partially offset by the impact of higher average borrowings.

         Income taxes for the nine months ended September 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 September  30,  2002,  the Company had an  outstanding  Term Loan of
$148.5  million  provided  under the Bank Credit  Facilities,  together with 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 2003 and 2004,  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 September 30, 2002,  the floating  interest rate on the Term Loan
was 4.46%.  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.


                                       26
<PAGE>


         The Bank Credit  Facilities,  as amended on July 3, 2002,  also provide
for revolving  loan  borrowings of up to $40 million under 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.  At September  30,
2002, the Company had borrowing  capacity of  approximately  $15.9 million under
the terms of the Revolving  Credit  Facility,  as amended.  The Revolving Credit
Facility requires the Company to maintain certain financial ratios including,  a
ratio of consolidated  earnings before interest income taxes,  depreciation  and
amortizaton  ("EBITDA"),  as defined, to consolidated fixed charges (principally
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 September 30, 2002 and a ratio of consolidated  debt to EBITDA of not more
than 4.70 to 1.00 for the four fiscal  quarters ended  September 30, 2002 and to
limit annual capital  expenditures to not more than  $15,000,000  plus any prior
year capital expenditure carryover up to $7,500,000.

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

         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 September 30, 2002.

         The  Company  financed  the costs to  purchase  property in 2000 and to
construct a new domestic  distribution facility completed in 2001 (total cost of
$30.2 million),  using borrowings  under the  Revolving Credit Facility  and, in
2001,  the proceeds  from the  issuance of the Series A  Redeemable  Convertible
Preferred  Stock  of  $6.0  million  (noted  below)  and  long-term   borrowings
consisting of a first and second lien mortgage note 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%,  and is subject to review and  adjustment
semi-annually   based  on  the  New  York  State  Job  Development   Authority's
confidential  internal  protocols.  Both  notes are for a term of 96 months  and
require monthly payments based on a 180-month  amortization  period with balloon
payments upon maturity in January 2010. The Company has amended and restated the
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  September  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 nine months
ended September 30, 2002,  totaled $2.6 million and $8.0 million,  respectively.
The minimum lease payments  currently  required under  non-cancelable  operating
leases for the year ending December 31, 2002, approximate $11.8 million.


                                       27
<PAGE>


         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 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 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.

         Scheduled  debt  payments  for the year ending  December 31, 2003 total
$52.3 million with increasing amounts  thereafter.  In addition to the potential
public offering of its Common Stock,  the Company is exploring a number of other
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.  Based
upon the current  level of  operations  and  anticipated  growth,  assuming  the
Company  can  successfully  repay or  refinance  debt  maturities,  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.


Cash Flow Data - Nine Months Ended September 30, 2002 Compared Nine Months Ended
--------------------------------------------------------------------------------
September 30, 2001
------------------

         Net cash provided by operating  activities during the nine months ended
September   30,  2002  and  2001,   totaled  $11.8  million  and  $9.6  million,
respectively.  Net cash flow provided by operating  activities before changes in
operating  assets and  liabilities  for the nine months ended September 30, 2002
and 2001,  was  $32.1  million  and  $24.7  million,  respectively.  Changes  in
operating assets and  liabilities,  net of acquisition for the nine months ended
September  30, 2002 and 2001,  resulted in the use of cash of $20.3  million and
$15.1 million,  respectively.  The changes in operating  assets and  liabilities
principally  reflect  increased  seasonal working capital  requirements  and, in
2002, increased inventory levels as a result of the Company's planned transition
to its new domestic distribution facility during the fourth quarter.

         Net cash used in  investing  activities  during the nine  months  ended
September 30, 2002 of $24.4 million  consisted of $13.5 million  relating to the
acquisition of M&D Balloons and $11.4 million of costs  associated  with the new
domestic  distribution  facility  as  well  as  additional  investments  in data
processing  and  manufacturing  equipment,  partially  offset by  proceeds  from
disposal of property and equipment.  During the nine months ended  September 30,
2001, net cash used in investing  activities of $27.2 million included  payments
of  $20.4  million   associated  with  the  construction  of  the  new  domestic
distribution  facility and $6.8 million of additional  investments  primarily in
manufacturing equipment.

         During the nine months ended  September 30, 2002,  net cash provided by
financing  activities  of $13.8 million  consisted of proceeds  from  short-term
borrowings,  including  $13.5  million  used to finance the  acquisition  of M&D
Balloons,  partially offset by the scheduled payments of the Term Loan and other
long-term obligations. During the nine months ended September 30, 2001, net cash
provided by financing activities was $17.6 million and consisted  principally of
proceeds from both short-term working capital borrowings and 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.


                                       28
<PAGE>


Legal Proceedings

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


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

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


Item 3.    Quantitative and Qualitative Disclosures About Market Risk

         Our earnings  are affected by changes in interest  rates as a result of
our  variable  rate  indebtedness.   However,  we  utilize  interest  rate  swap
agreements to manage the market risk  associated  with  fluctuations in interest
rates. If market interest rates for our variable rate  indebtedness  averaged 2%
more than the interest rate  actually paid for the three months ended  September
30, 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 $0.9 million and $0.5 million,  respectively.  If
market interest rates for our variable rate  indebtedness  averaged 2% more than
the interest rate actually paid for the nine months ended September 30, 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 $2.5 million and $1.4  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


                                       29
<PAGE>


exposure to the change.  However, due to the uncertainty of the specific actions
that we would take and their possible effects,  the sensitivity analysis assumes
no changes in our financial structure.

         Our earnings are also affected by fluctuations in the value of the U.S.
dollar as compared to foreign  currencies,  predominately in European countries,
as a result  of the  sales of our  products  in  foreign  markets.  Although  we
periodically  enter into foreign currency forward contracts to hedge against the
earnings  effects of such  fluctuations,  we may not be able to hedge such risks
completely  or  permanently.  A uniform  10%  strengthening  in the value of the
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 in each of the
three months ended September 30, 2002 and 2001. 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 $1.2
million and $1.1 million for the nine month periods ended September 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.


Item 4.  Controls and Procedures

         Based  on an  evaluation  of  the  Company's  disclosure  controls  and
procedures  performed by the  Company's  Chief  Executive  Officer and its Chief
Financial  Officer  within 90 days of the filing of this report,  the  Company's
Chief  Executive  Officer and its Chief  Financial  Officer  concluded  that the
Company's disclosure controls and procedures have been effective.

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

         Since  the  date  of the  evaluation  described  above,  there  were no
significant  changes in the Company's internal controls or in other factors that
could significantly affect these controls,  and there were no corrective actions
with regard to significant deficiencies and material weaknesses.


                                     Part II

Item 6.   Exhibits and Reports on Form 8-K

        a) Exhibits

     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

         None.


                                       30
<PAGE>


                                    SIGNATURE

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

                                   AMSCAN HOLDINGS, INC.

                                     By: /s/ Michael A. Correale
                                        ---------------------------
                                         Michael A. Correale
                                         Chief Financial Officer
                                         (on behalf of the registrant and as
Date: November 14, 2002                  principal financial and accounting
      -----------------                  officer)



                                       31
<PAGE>




                                  CERTIFICATION
                           BY CHIEF EXECUTIVE OFFICER
                             PURSUANT TO RULE 13A-14

I, Gerald C. Rittenberg, certify that:

1)   I have reviewed this quarterly report on Form 10-Q of Amscan Holdings, Inc;

2)   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3)   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4)   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a - 14 and 15d - 14) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date.

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

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record  ,  process,  summarize  and  report  financial  data  and have
          identified  for the  registrant's  auditor's any material  weakness in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6)   The  registrant's  other  certifying  officer and I have  indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: November 14, 2002                  /s/ Gerald C. Rittenberg
      -----------------                  --------------------------------------
                                         Gerald C. Rittenberg
                                         Chief Executive Officer
                                         (Principal executive officer)


                                       32
<PAGE>


                                  CERTIFICATION
                           BY CHIEF EXECUTIVE OFFICER
                             PURSUANT TO RULE 13A-14

I, Michael A. Correale, certify that:

1)   I have reviewed this quarterly report on Form 10-Q of Amscan Holdings, Inc;

2)   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3)   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4)   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a - 14 and 15d - 14) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date.

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

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record  ,  process,  summarize  and  report  financial  data  and have
          identified  for the  registrant's  auditor's any material  weakness in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6)   The  registrant's  other  certifying  officer and I have  indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: November 14, 2002                   /s/ Michael A. Correale
      -----------------                   -------------------------------------
                                          Michael A. Correale
                                          Chief Financial Officer
                                          (Principal financial officer)


                                       33