The broad U.S. wholesale party goods market represented total sales of approximately $6.4 billion in 2000. Industry growth has been driven by manufacturers and retailers increasing the breadth and availability of party merchandise, which now includes party goods and gifts to celebrate a greater number of events, holidays and occasions. Due to their low per-item prices and consumable nature,

party goods have continued to sell well during the current economic downturn. Party goods are sold through a variety of different retail channels including party superstores, other party goods retailers, card and gift stores and other independent retailers, food and drug stores and mass market retailers.

Party superstores have evolved into the one-stop shopping destination for all of a consumer's party goods needs and generally offer prices that are more competitive than those of similar products sold in other channels. Party superstores and specialty party stores offer an extensive selection of designed ensembles which typically include between 15 to 60 design coordinated items. By displaying an array of integrated and related merchandise in an attractive format, these retailers seek to encourage consumers to increase the number of items they purchase during each shopping experience. There are approximately 1,600 specialty party stores in the United States today, of which approximately 1,375 are considered party superstores with 8,000 to 10,000 square feet of retail selling space.

Drug and grocery stores at one time were principal outlets for party goods. As the number of products available to the consumer has increased, the importance of these channels to the industry has declined. While they remain significant outlets for certain product categories they are unable to offer the wide assortment found in party superstores.

The Company is the leading supplier to the party superstore distribution channel in the United States, which represented approximately 41% of its net sales in 2003. The Company manufactured items representing approximately 65% of its net sales in 2003 and purchased the remainder from third-party manufacturers, many of whom are located in Asia.

The Company designs, manufactures and markets party goods for a wide variety of occasions including seasonal and religious holidays, special events and themed celebrations. The Company’s seasonal ensembles enhance holiday celebrations throughout the year including New Year’s, Valentine’s Day, St. Patrick’s Day, Easter, Passover, Fourth of July, Halloween, Thanksgiving, Hanukkah and Christmas. The Company’s special event ensembles include birthdays, christenings, first communions, bar mitzvahs, confirmations, graduations, bridal and baby showers and anniversaries. The Company’s theme-oriented ensembles include Bachelorette, Card Night, Hawaiian Luaus, Mardi Gras, Fifties Rock-and-Roll Parties, Summer Fun, Patriotic and Western.

With approximately 40,000 SKU's, the Company offers one of the broadest and deepest product lines in the industry and allow convenient "one-stop shopping" for both large superstores and smaller retailers. The Company’s product lines include party goods,

metallic balloons, stationery and gift items. The Company’s product offering also includes over 375 party ensembles, which generally contain 30 to 150 design-coordinated items spanning tableware, accessories, novelties, decorations and gifts. The breadth of these ensembles enables party superstores to encourage consumers to buy additional items for a single occasion. The Company’s products span a wide range of lifestyle events from age-specific birthdays to theme parties and sporting events, as well as holidays such as

Halloween and New Year's.

Gross profit margin for the six months ended June 30, 2004 was 33.1% or 80 basis points higher than for the comparable period in 2003.

Selling expenses of $18.4 million for the six months ended June 30, 2004 were $0.3 million higher than for the six months ended June 30, 2003, primarily due to increased showroom expenses.

Art and development costs of $5.1 million for the six months ended June 30, 2004 were $0.3 million higher as compared to 2003.

Interest expense, net, of $13.1 million for the six months ended June 30, 2004 was $0.1 million lower than for the six months ended June 30, 2003, .