UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10 - Q
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the Quarterly Period Ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
-------------------- --------------------
Commission file number 000-21827
---------------------
AMSCAN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3911462
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) Number)
80 Grasslands Road
Elmsford, New York 10523
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 345-2020
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
As of May 12, 1998, 1,010 shares of Registrants' Common Stock, par value $0.10,
were outstanding.
1
<PAGE>
AMSCAN HOLDINGS, INC.
FORM 10-Q
MARCH 31, 1998
TABLE OF CONTENTS
PART I PAGE
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets at March 31, 1998 and
December 31, 1997.................................................. 3
Consolidated Statements of Income for the Three Months
Ended March 31, 1998 and 1997...................................... 4
Consolidated Statement of Stockholders' Deficit for the
Three Months Ended March 31, 1998.................................. 5
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997...................................... 6
Notes to Consolidated Financial Statements......................... 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................... 10
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ........ 13
PART II
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K................................... 13
SIGNATURE.................................................................. 15
2
<PAGE>
AMSCAN HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ --------------
(Unaudited) (Note)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents.................................. $15,140 $ 111,539
Accounts receivable, net of allowances .................... 53,988 44,838
Inventories................................................ 46,803 51,742
Prepaid expenses and other current assets.................. 7,576 8,073
----------- ---------
Total current assets..................................... 123,507 216,192
Property, plant and equipment, net............................ 38,337 38,860
Intangible assets, net........................................ 7,681 7,762
Other assets, net ........................................... 7,264 6,462
----------- -----------
Total assets............................................. $176,789 $269,276
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable.............................................. $ 111 $ 424
Due to stockholders........................................ 512 93,243
Accounts payable........................................... 8,016 12,152
Accrued expenses........................................... 12,009 10,502
Income taxes payable....................................... 1,547 167
Current portion of long-term obligations................... 2,912 2,911
---------- ---------
Total current liabilities................................ 25,107 119,399
Long-term obligations, excluding current portion.............. 233,620 234,422
Deferred tax liabilities...................................... 7,224 6,893
Other......................................................... 3,736 3,781
---------- ----------
Total liabilities........................................ 269,687 364,495
Stockholders' deficit:
Common Stock............................................... - -
Unamortized restricted Common Stock award, net............. (770) (835)
Notes receivable from officers............................. (750) (750)
Accumulated Deficit........................................ (90,641) (92,912)
Accumulated other comprehensive income..................... (737) (722)
----------- -------------
Total stockholders' deficit.............................. (92,898) (95,219)
--------- -----------
Total liabilities and stockholders' deficit.............. $176,789 $269,276
======== ========
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
consolidated financial statements at that date.
See accompanying notes to consolidated financial statements.
3
<PAGE>
AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
----------- ---------
<S> <C> <C>
Net sales............................................................... $55,561 $53,176
Cost of sales........................................................... 35,989 34,410
------- -------
Gross profit...................................................... 19,572 18,766
Operating expenses:
Selling expenses..................................................... 3,626 3,099
General and administrative expenses.................................. 5,091 4,364
Art and development costs............................................ 1,620 1,274
-------- -------
Total operating expenses.......................................... 10,337 8,737
------- -------
Income from operations............................................ 9,235 10,029
Interest expense, net................................................... 5,265 984
Other income, net....................................................... (40) (27)
---------- --------
Income before income taxes and minority interests................. 4,010 9,072
Income tax expense...................................................... 1,664 3,728
Minority interests...................................................... 75 42
--------- --------
Net income........................................................ $ 2,271 $ 5,302
======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
UNAMORTIZED
RESTRICTED NOTES ACCUMULATED
COMMON RECEIVABLE OTHER
COMMON STOCK AWARD, FROM ACCUMULATED COMPREHENSIVE
STOCK NET OFFICERS DEFICIT INCOME TOTAL
------ ----------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1997........... $ - $ (835) $ (750) $ (92,912) $ (722) $(95,219)
Net income................................ 2,271 2,271
Net change in foreign currency
translation adjustment.................. (15) (15)
Amortization of restricted
Common Stock award...................... 65 65
------ ----------- ---------- ------------ ------------- ---------
Balance as of March 31, 1998.............. $ - $ (770) $ (750) $ (90,641) $ (737) $(92,898)
====== =========== ========== ============ ============= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
---------- ------------
Cash flows from operating activities:
<S> <C> <C>
Net income..................................................................... $ 2,271 $ 5,302
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization................................................ 1,723 1,477
Amortization of deferred financing costs..................................... 162 7
Amortization of restricted Common Stock award................................ 65
Provision for doubtful accounts.............................................. 772 327
Deferred income tax (benefit) provision...................................... (135) 1,007
Changes in operating assets and liabilities:
Increase in accounts receivable............................................ (9,938) (13,767)
Decrease in inventories.................................................... 4,939 5,742
Decrease in prepaid expenses and other current assets...................... 963 2,094
(Decrease) increase in accounts payable, accrued expenses and income
taxes payable........................................................... (1,249) 565
Other, net................................................................. (966) (582)
--------- -------
Net cash (used in) provided by operating activities................. (1,393) 2,172
Cash flows from investing activities:
Capital expenditures........................................................... (1,072) (2,283)
Proceeds from disposal of property and equipment............................... 17
--------- -------
Net cash used in investing activities.................................. (1,055) (2,283)
Cash flows from financing activities:
Payments to acquire Common Stock in Merger..................................... (92,731)
Net proceeds from sale of Common Stock......................................... 4,539
Proceeds from loans, notes payable and long-term obligations................... 825
Repayment of loans, notes payable and long-term obligations.................... (1,116) (4,830)
Repayment of subordinated and other indebtedness due to stockholders........... (157)
----------- -----------
Net cash (used in) provided by financing activities.................... (93,847) 377
Effect of exchange rate changes on cash and cash equivalents................... (104) 263
--------- ------------
Net (decrease) increase in cash and cash equivalents........................... (96,399) 529
Cash and cash equivalents at beginning of period............................... 111,539 1,589
-------- -----------
Cash and cash equivalents at end of period..................................... $ 15,140 $ 2,118
======== ==========
Supplemental Disclosures:
Interest paid.......................................................... $2,839 $1,019
Taxes paid............................................................. $188 $ 532
</TABLE>
There were no capital lease obligations incurred during the three months ended
March 31, 1998. Capital lease obligations of $59 were incurred during the three
months ended March 31, 1997.
See accompanying notes to consolidated financial statements.
6
<PAGE>
AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS
Amscan Holdings, Inc. ("Amscan Holdings" and, together with its
subsidiaries, the "Company") was incorporated on October 3, 1996 for the purpose
of becoming the holding company for Amscan Inc. and certain affiliated entities
in connection with an initial public offering of common stock.
On August 10, 1997, Amscan Holdings and Confetti Acquisition, Inc.
("Confetti"), a newly formed Delaware corporation affiliated with GS Capital
Partners II, L.P. and certain other private investment funds managed by Goldman,
Sachs & Co. (collectively, "GSCP"), entered into an Agreement and Plan of Merger
(the "Merger Agreement") providing for a recapitalization of Amscan Holdings in
which Confetti would be merged with and into Amscan Holdings (the "Merger"),
with Amscan Holdings as the surviving corporation.
On December 19, 1997 (the "Effective Time"), the Merger was consummated
pursuant to the Merger Agreement. At the Effective Time, each share of the
Common Stock, par value $0.10 per share, of the Company (the "Company Common
Stock"), issued and outstanding immediately prior to the Effective Time (other
than shares of Company Common Stock owned, directly or indirectly, by the
Company or by Confetti) was converted, at the election of each of the Company's
stockholders, into the right to receive from the Company either (a) $16.50 in
cash or (b) $9.33 in cash plus a retained interest in the Company equal to one
share of Company Common Stock for every 150,000 shares held by such stockholder,
with fractional shares of Company Common Stock paid in cash. Also pursuant to
the Merger Agreement, at the Effective Time each outstanding share of Common
Stock, par value $0.10 per share, of Confetti ("Confetti Common Stock"), was
converted into an equal number of shares of Company Common Stock as the
surviving corporation in the Merger. The Merger was financed with an equity
contribution of approximately $67.5 million (including contributions of Company
Common Stock by certain employee stockholders and including issuances of
restricted stock), $117 million from a senior term loan and $110 million from
the issuance of senior subordinated notes. The Merger was accounted for as a
recapitalization and, accordingly, the historical basis of the Company's assets
and liabilities were not affected by the Merger.
Amscan Holdings and its subsidiaries design, manufacture, contract for
manufacture and distribute party and novelty goods principally in the United
States, Canada and Europe.
NOTE 2: BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Amscan
Holdings and its majority-owned subsidiaries. Investments in less than
majority-owned subsidiaries are accounted for on an equity basis.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles 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-month period ended March 31, 1998
are not necessarily indicative of the results that may be expected for the year
ending December 31,
7
<PAGE>
AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
1998. 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 financial statements and footnotes thereto included
in the Amscan Holdings Annual Report on Form 10-K for the year ended December
31, 1997.
NOTE 3: INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Finished goods ................................................ $43,103 $47,704
Raw materials ................................................. 3,108 3,570
Work-in-process ............................................... 1,792 1,630
------- --------
48,003 52,904
Less: reserve for slow moving and obsolete inventory........... (1,200) (1,162)
------- --------
$46,803 $51,742
======= =======
</TABLE>
Inventories are valued at the lower of cost, determined on a first in -
first out basis, or market.
NOTE 4: INCOME TAXES
The consolidated income tax provisions for the three months ended March
31, 1998 and 1997 were determined based upon estimates of the Company's
consolidated effective income tax rates for the years ending December 31, 1998
and 1997, respectively. The differences between the consolidated effective
income tax rate and the U.S. Federal statutory rate are primarily attributable
to state income taxes and the effects of foreign operations.
NOTE 5: COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting
Standards ("SFAS") No. 130, Reporting Comprehensive Income. SFAS No. 130
established new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this statement had no impact on the
Company's net income or stockholders' deficit. SFAS No. 130 requires the
Company's foreign currency translation adjustment, which prior to adoption were
reported separately in stockholders' deficit to be included in other
comprehensive income. Amounts reported in prior year financial statements have
been reclassified to conform to the requirements of SFAS No. 130.
During the first quarter of 1998 and 1997, total comprehensive income
amounted to $2,256,000 and $5,493,000 consisting of net income of $2,271,000 and
$5,302,000, and foreign currency translation adjustment of $(15,000) and
$191,000, respectively. Accumulated other comprehensive income at March 31, 1998
and December 31, 1997 consisted solely of the Company's foreign currency
translation adjustment.
8
<PAGE>
AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
NOTE 6: CAPITAL STOCK
At March 31, 1998 and December 31, 1997, respectively, the Company's
authorized capital stock consisted of 5,000,000 shares of preferred stock, $0.10
par value, of which no shares were issued or outstanding, and 50,000,000 shares
of common stock, $0.10 par value, of which 1,010 shares were issued and
outstanding.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
PERCENTAGE OF NET SALES
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
---------- ----------
Net sales................................... 100.0% 100.0%
Cost of sales............................... 64.8 64.7
---- ----
Gross profit........................ 35.2 35.3
Operating expenses:
Selling expenses......................... 6.5 5.8
General and administrative expenses...... 9.2 8.2
Art and development costs................ 2.9 2.4
----- -----
Total operating expenses............ 18.6 16.4
---- ----
Income from operations.............. 16.6 18.9
Interest expense, net....................... 9.5 1.9
Other income, net........................... (0.1) (0.1)
---- ----
Income before income taxes
and minority interests......... 7.2 17.1
Income taxes................................ 3.0 7.0
Minority interests.......................... 0.1 0.1
---- -----
Net income.......................... 4.1% 10.0%
==== ====
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Net sales for the three months ended March 31, 1998 were $55.6 million,
as compared to $53.2 million for the three months ended March 31, 1997. The
increase in net sales for the three months ended March 31, 1998 of 4.5% is
attributable to growth in sales to party superstores and international customers
which more than offset the reduction in sales attributable to the recent
bankruptcies of two national accounts.
The Company maintained a consistent gross profit margin of
approximately 35% between the first quarters of 1998 and 1997 reflecting its
effective management of product and distribution costs.
Selling expenses of $3.6 million for the three months ended March 31,
1998 were $0.5 million higher than those of the corresponding quarter in 1997.
Selling expenses increased as a percentage of net sales from 5.8% to 6.5%
principally due to the expansion of the Company's sales and customer service
workforce and the addition of a new seasonal catalogue.
General and administrative expenses of $5.1 million increased by $0.7
million for the three months ended March 31, 1998 as compared to the
corresponding quarter in 1997 principally due to an increase in the Company's
provision for bad debts of $0.8 million. as a percentage of net sales, General
and administrative expenses increased as a percentage of net sales from 8.2% to
9.2%.
Art and development costs of $1.6 million for the three months ended
March 31, 1998 increased by $0.3 million compared to the corresponding quarter
in 1997. As a percentage of net sales, art and development costs increased from
2.4% to 2.9%. The continued investment in art and development expenditures in
1998 reflects the Company's strategy to remain a leader in product quality and
development.
10
<PAGE>
Interest expense of $5.3 million for the three months ended March 31,
1998 increased by $4.3 million as compared to the corresponding period in 1997
due to the Company's increased borrowings in connection with the Merger (see
"Liquidity and Capital Resources").
Income taxes for the three months ended March 31, 1998 and 1997 were
based upon estimated consolidated effective income tax rates of 41.5% and 40.5%
for the years ending December 31, 1998 and 1997, respectively. The higher
effective income tax rate for the year ending December 31, 1998 is attributable
to an increase in estimated state income taxes.
Minority interests represent the portion of income of the Company's
subsidiaries attributable to equity ownership not held by Amscan Holdings.
LIQUIDITY AND CAPITAL RESOURCES
On December 19, 1997 the Company and Confetti consummated the Merger,
providing for a recapitalization of Amscan Holdings in which Confetti was merged
with and into Amscan Holdings with Amscan Holdings as the surviving corporation.
Upon consummation of the Merger, the Company's then existing loan arrangements
were repaid and terminated and 90% of its then outstanding Common Stock was
converted into the right to receive cash. The Merger was financed with an equity
contribution of approximately $67.5 million (including contributions of Company
Common Stock by certain employee stockholders and including issuances of
restricted stock), $117 million from a senior term loan (the "Term Loan")
provided under a bank credit agreement (the "Bank Credit Facilities") and $110
million from the issuance of 9 7/8% senior subordinated notes (the "Exchange
Notes") (collectively, the "Merger Financings"). The Merger has been accounted
for as a recapitalization and, accordingly, the historical basis of the
Company's assets and liabilities has not been affected by the Merger.
In addition to the Term Loan, the Bank Credit Facilities provide for
revolving loan borrowings of up to $50 million (the "Revolving Credit
Facility"). The Revolving Credit Facility has a term of five years and bears
interest, at the option of the Company, at the lenders' customary base rate plus
1.25% per annum or at the lenders' customary reserve adjusted Eurodollar rate
plus 2.25% per annum. Interest on balances outstanding under the Revolving
Credit Facility are subject to adjustment in the future based on the Company's
performance. At March 31, 1998, the entire $50 million was available to the
Company under the Revolving Credit Facility.
As a result of the recapitalization, the Company had $236.6 million of
consolidated indebtedness and $92.9 million of consolidated stockholders'
deficit at March 31, 1998. Based upon the current level of operations and
anticipated growth, the Company anticipates that its operating cash flow,
together with available borrowings under the Revolving Credit Facility, will be
adequate to meet its anticipated future requirements for working capital and
operating expenses, to permit potential acquisitions and to service its debt
requirements as they become due. However, the Company's ability to make
scheduled payments of principal on, or to pay interest on, or to refinance its
indebtedness (including the Exchange Notes) and to satisfy its other obligations
will depend upon its future performance, which, to a certain extent, will be
subject to general economic, financial, competitive, business and other factors
beyond its control.
The Merger Financings may affect the Company's ability to make future
capital expenditures. However, management believes that additions to plant and
equipment during the past three years provide adequate capacity to support its
operations for at least the next 12 months. As of March 31, 1998, the Company
did not have material commitments for capital expenditures.
11
<PAGE>
CASH FLOW DATA - THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1997
During the three months ended March 31, 1998, the Company used $1.4
million of net cash for operating activities as compared to $2.2 million of net
cash provided by operating activities during the same quarter in 1997. The net
cash used in operating activities during the first quarter of 1998 results
principally from increased interest expense and corresponding lower net income,
lower levels of accounts payable, and increased accounts receivable due to
extended terms given to customers in association with new promotions, offset by
decreased inventories, reflecting the shipment of "everyday" goods which are
built-up towards the end of the year in preparation for the introduction of the
new "everyday" line for the upcoming year. During the comparable quarter in
1997, net cash provided by operating activities consisted of net income offset
by an increase in net operating assets.
Net cash used in investing activities during the first quarter of 1998
of $1.1 million decreased by $1.2 million from 1997 reflecting lower levels of
capital expenditures.
During the first quarter of 1998, net cash used in financing activities
of $93.8 million consisted principally of payments of cash in connection with
Common Stock converted into the right to receive cash in connection with the
Merger. During the comparable period in 1997, net cash provided by financing
activities of $0.4 million included net proceeds of $4.5 million from the
issuance of Common Stock to cover the overallotments provided for in the
underwriting agreement relating to the Company's initial public offering, and
proceeds of $0.8 million from borrowings, offset by repayments of indebtedness
to stockholders and third parties totaling $5.0 million.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures
About Segments of an Enterprise and Related Information. SFAS No. 131
establishes standards for disclosure about operating segments in annual
financial statements and requires disclosure of selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. This statement supersedes SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise. The new standard becomes effective for the
Company's fiscal year 1998 and requires that comparative information from
earlier years be restated to conform to the requirements of this standard. The
Company does not believe any substantial changes to its disclosures will be made
at the time SFAS No. 131 is adopted.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits. The Statement supercedes the
disclosure requirements in SFAS No. 87, Employers' Accounting for Pensions, SFAS
No. 88, Accounting for Settlements and Curtailments of Defined Benefit Pension
Plans and for Termination Benefits, and SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions. SFAS No. 132 addresses disclosure
issues only and does not change the measurement or recognition provisions
specified in those Statements. SFAS No. 132 is effective for fiscal years
beginning after December 15, 1997.
Other pronouncements issued by the FASB or other authoritative
accounting standards groups with future effective dates are either not
applicable or not significant to the financial statements of the Company.
"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
12
<PAGE>
report that address activities, events or developments that the Company expects
or anticipates will or may occur in the future, including 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) the introduction of new
products by the Company's competitors, (5) the inability of the Company to
increase prices to recover fully future increases in raw material prices,
especially increases in paper prices, (6) the loss of key employees, (7) changes
in general business conditions, (8) other factors which might be described from
time to time in the Company's filings with the Securities and Exchange
Commission, and (9) 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 there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will 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
The Company has interest rate risk associated with variable rate
indebtedness. The Company utilizes off-balance sheet financial instruments to
manage the market risk associated with fluctuations in interest rates. It is the
Company's policy to use derivative financial instruments to protect against
market risk arising in the normal course of business. Company policies prohibit
the use of derivative instruments for the purpose of trading for profit on price
fluctuations or contracts which intentionally increase the Company's underlying
exposure.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number DESCRIPTION
------ -----------
27 Financial Data Schedule
13
<PAGE>
(b) Reports on Form 8 - K
A Current Report on Form 8-K dated April 29, 1998 was filed
regarding the change in the Company's independent auditors
responding to Item 4 of Form 8-K.
14
<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
Controller
(on behalf of the registrant and as principal
Date: May 15, 1998 accounting officer)
-----------------
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Amscan Holdings, Inc. as of March 31, 1998 and for the
three months then ended and is qualified in its entirety by reference to such
statements.
</LEGEND>
<CIK> 0001024729
<NAME> AMSCAN HOLDINGS
<MULTIPLIER> 1,000
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
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0
0
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</TABLE>