Amscan Holdings, Inc.

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Amscan Holdings, Inc.

80 Grasslands Road
Elmsford, New York 10523
U.S.A.
Telephone: (914) 345-2020
Toll Free: (800) 284-4333
Fax: (914) 345-2056
Web site: http://www.amscan.com

Private Company
Incorporated: 1996
Employees: 2,000
Sales: $385.6 million (2002)
NAIC: 422130 Industrial and Personal Service Paper Wholesalers

Based in Elmsford, New York, Amscan Holdings, Inc. designs, manufactures, and distributes a wide variety of party items. Party goods include tableware, centerpieces, candles, cutouts, crepe, flags and banners, party hats, pinñatas, and latex balloons. Amscan's stationery items include invitations, notes, and stationery; decorative tissues; gift wrap, bows, and bags; ribbons; photograph albums; baby and wedding memory books; and stickers and confetti. The privately owned company offers close to 400 product ensembles, intended for seasonal events such as New Year's, Valentine's Day, St. Patrick's Day, Easter, Passover, Fourth of July, Halloween, Thanksgiving, Hanukkah, and Christmas, as well as everyday occasions such as birthdays, showers, christenings, graduations, anniversaries, retirements, first communions, bar mitzvahs, confirmations, summer picnics and barbecues, and theme parties such as Mardi Gras, Hawaiian luaus, and 1950s nostalgia. Each ensemble features from 30 to 150 coordinating items. In recent years the company has added home, baby, and wedding giftware, including plush toys, ceramic items, mugs, decorative candles, and picture frames. It manufactures more than 60 percent of its products, outsourcing labor-intensive items to other manufacturers, located mostly in Asia. Amscan sells to more than 20,000 retailers around the world, maintaining factories and distribution centers in the United States, Canada, Mexico, the United Kingdom, France, Germany, Spain, and Japan.

Company Started in 1947

Amscan was founded in 1947 by Elvera Svenningsen, the mother of the company's longtime chief executive officer and chairman, John A. Svenningsen. With just $1,000 and operating out of her family garage in Bronxville, New York, she began to import and distribute such party items as honeycomb decorations—expandable turkeys, clowns, and the like. In 1948 she incorporated the business as Amscan Inc. and within a few years was showing modest success, generating some $60,000 in annual sales. After graduating from Swarthmore College in 1953 John Svenningsen joined the company, eager to grow the business, confident that the party goods industry, dominated at the time by Dennison Manufacturing Company, held great potential. He became president and chief executive officer in 1958.

Under John Svenningsen's leadership, Amscan moved to a new 600-square-foot facility in Tuckahoe, New York, in 1960 and began to increase the variety of party goods the company had to offer. In just four years, Amscan outgrew this space, relocated to a larger facility in New Rochelle, New York, and then in 1968 moved yet again, this time to Harrison, New York. Over the next 20 years the company enjoyed steady growth, due in large part to the leadership of Svenningsen. A self-acclaimed amateur psychologist, he gave a great deal of credit for the company's success to the people he hired and nurtured. In a 1993 profile of Amscan by Party & Paper Retailers, he explained, "I'm blessed with the ability to recognize people's strengths and place them in a job that will suit those strengths. Respect your employees—bring them in on decisions—and they will be stimulated to do a better job. Here, we run completely by committee—everybody can learn from everybody else." In addition, Svenningsen paid a great deal of attention to his customers, no matter how large. He said, "I've always tried to put the customer's hat on and think like him. … We have a great synergy with our customers. We offer them quality, price, and we know what will sell for them." Over the years, many of those customers became large retailers dedicated solely to the sale of party goods. In 1986, for instance, Party City was founded as a single 4,000-square-foot store in New Jersey. Other Party City outlets would soon follow and other party goods retailing chains were also launched, looking to take advantage of a growing penchant of baby boomers' to attempt to outdo one another when it came to holding parties for their children and themselves. (Party City would ultimately emerge as Amscan's largest customer, accounting for approximately 10 percent of all sales.) The resulting increase in retail sales fueled the steady growth of Amscan, which saw revenues reach $64 million in 1989, $68.5 million in 1990, and $75.5 million in 1991. Also during the late 1980s, the company looked overseas. In 1987 Amscan began to test the market in the United Kingdom, bringing out tableware and plastic cutlery in specially selected colors. British consumers, like their American counterparts, were also becoming more affluent and increasingly engaged in hosting parties and barbecues.

In the early 1990s Amscan remained privately owned. Elvera Svenningsen passed away, leaving John Svenningsen as the last link to the founding of the company. He did not urge his children to become involved in the company, allowing them to pursue their own careers. Annual revenues topped the $100 million mark in 1993 ($108.9 million). The company enjoyed even stronger growth over the next two years, with revenues totaling $132 million in 1994 and $167.4 million in 1995. Moreover, net income jumped from nearly $10 million in 1994 to more than $17.4 million in 1995.

Svenningsen Diagnosed with Cancer in 1996

John Svenningsen was diagnosed with lymphoma in the first quarter of 1996. In April of that year Gerald C. Rittenberg was promoted to the position of president of the company. Svenningsen remained CEO and chairman and, as he underwent treatment for his condition, continued to play a major role in running the company. In truth, others in the organization had taken on an increasing level of responsibility. Rittenberg, for instance, was a key player. Trained as a printer, he headed product development since 1990. Another key executive was William S. Wilkey, senior vice-president in charge of sales.

In October 1996 Amscan Holdings Inc. was formed as a holding company for Amscan and subsidiaries in preparation for taking the business public. The initial public offering (IPO) was completed in December, underwritten by Goldman, Sachs & Co. and Alex. Brown & Sons Inc. Amscan sold four million shares priced at $14 apiece, netting the company $48 million, which was then used to pay down debt and allow some shareholders, such as Svenningsen, to cash in some of their equity. The stock then began trading on the NASDAQ. The company finished 1996 producing record levels of sales ($192.7 million), although net income dropped to $2.1 million. Amscan's tenure as a public company, however, would be short term. In May 1997, after a 15-month battle with cancer, John Svenningsen died at the age of 66. Rittenberg, the man who succeeded him as CEO (and filled in as chairman on an interim basis), commented at the time, "John was a true innovator and visionary for the party goods industry." By the end of 1997 Amscan was taken private again. GS Capital Partners II L.P., an investment fund managed by Goldman, Sachs & Co., formed Confetti Acquisition Inc. in order to acquire Amscan. Under terms of the $315 million transaction, shareholders were given their choice of tendering their stock for either $16.50 in cash or $9.33 plus a retained interest. At the end of the day, 83 percent of Amscan was now owned by Goldman, Sachs, the estate of John A. Svenningsen owned 10 percent, and the company's current management held a 7 percent stake. (A managing director of Goldman, Sachs, Terrence M. O'Toole, now took over as chairman of the board, while Rittenberg continued to maintain operational control.) Moreover, Amscan was infused with $75 million in capital in order to provide the financial clout the company needed to take advantage of the growing party goods industry, which was now responsible for around $3.5 billion in annual sales and was growing at a 10 percent clip each year. Superstores such as Party City not only continued to prosper, they promoted the celebration of an even larger number of occasions, which in turn greatly enhanced the prospects of Amscan with its well entrenched position in the marketplace. Rittenberg also maintained that the party supplies market was actually "understored." As a result, Amscan was well positioned to enjoy even greater growth in the years to come.

In September 1998 Amscan expanded via external means, paying approximately $87 million for Minneapolis-based Anagram International, Inc., manufacturer and distributor of metallic balloons and other products made from synthetic materials. Anagram was founded in 1977 by Garry Kieves and family members. At the time of the acquisition the company was generating annual revenues in the $70 million range. While Rittenberg portrayed the acquisition as representing "a unique opportunity for Amscan to leverage its distribution in the party superstores," others outside the company were less enthusiastic. As reported by the Westchester County Business Journal, "'The outlook is negative,' according to a Standard & Poor's Rating Services report released six days after the deal was announced. S&P gave Amscan a single B plus corporate rating and single B minus subordinated debt rating. 'Ratings reflect Amscan's weak financial profile, stemming from its high debt leverage, and participation in the fragmented, highly competitive party goods industry,' wrote S&P analyst Nicole Delz Lynch."

With Anagram contributing to the balance sheet for an entire year, Amscan saw its revenues improve from $235.3 million in 1998 to nearly $305 million in 1999. Net income also increased from $6.7 million to $10.2 million. These strong numbers were also the result of some internal changes. The company created a specialty sales force in 1999, targeting card and gift stores and other independent retailers. In addition, Amscan launched a gift line geared towards independents as a way to offer a one-stop shopping possibility. Amscan's balance sheet continue to show improvement in 2000 and 2001, when the company recorded sales of $323.5 million and $345.2 million. The company posted net income of $8.1 million in 2000 and $11 million in 2001.

Company Perspectives:

With Amscan you can offer your customers a full array of coordinating products for entertaining and home decoration, then let them mix and match to their heart's content, as they add on and on and on.

M&D Balloons Acquisition: 2002

Early in 2002, Amscan completed another acquisition, paying $27.5 million in cash and stock for M&D Balloons Inc. to American Greetings Corporation. Based in Manteno, Illinois, M&D manufactured both metallic and plastic balloons. For American Greetings, the deal allowed it to continue a major cost-cutting effort, while retaining the ability to distribute Mylar balloons through its Balloon Zone subsidiary by way of a supply contract with Amscan. The addition of M&D complemented Amscan's prior acquisition of Anagram, which ranked as the largest metallized balloon manufacturer in the world, with some $75 million in annual sales. M&D was second with $25 million, and together they formed a dominant force in the nonlatex party balloon segment. M&D also brought with it a patented film technology, Dynafloat, which enhanced the longevity of metallic balloons. Moreover, M&D possessed an impressive portfolio of licenses, including popular Disney and Nickelodeon characters. Within months, Amscan closed M&D's balloon-making factory, transferring operations to Anagram's more automated plant in Eden Prairie, Minnesota. For years, M&D had been at a competitive disadvantage, relying on its workers to lift, stack, and pack balloons manually.

In June 2002 Amscan took steps to once again become a publicly traded company, filing a registration for a projected $180 million stock offering. The $150 million net was earmarked to pay down debt. The underwriters were Goldman, Sachs, William Blair & Co., CIBC World Markets Corp., and Stephens Inc. This time management planned on a New York Stock Exchange listing. Later in 2002, however, management dropped its plans for an offering, opting instead for a refinancing agreement with Goldman Sachs Credit Partners L.P., which extended the maturity of its senior debt facilities. But this deal did not come to fruition, making the IPO operative once again. Finally, in March 2003 the offering was shelved permanently when Amscan and Goldman Sachs Credit Partners negotiated $200 million in loans.

In 2002 Amscan recorded revenues of $385.6 million and net income of $16 million. Looking to the future, Amscan sought to maintain its leading position of supplier of party goods to superstore clients and other chains, while also making greater inroads into the independent retail distribution channel. Since adding a specialty sales force in 1999, the company saw sales in this segment increase from $15 million to $38 million in 2002. Amscan was also interested in growing international sales, which represented 14 percent of total revenues in 2002. Of special interest were the United Kingdom, Germany, and Australia. As was the case with the purchase of Anagram and M&D, Amscan was open to opportunistic acquisitions that could complement its business.