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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM 10-Q

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

FOR THE QUARTER ENDED JULY 31, 2002

Commission file number 1-13026

BLYTH, INC.
(Exact name of registrant as specified in its charter)

DELAWARE   36-2984916
(State or other jurisdiction of
incorporation or organization)		   (IRS Employer
Identification No.)

One East Weaver Street, Greenwich, Connecticut
 
06831
(Address of principal executive offices)   (Zip Code)

(203) 661-1926
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

        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 ý No o

        Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

46,316,982 Common Shares as of August 31, 2002

BLYTH, INC.

INDEX

 
    
   Page
Form 10-Q Cover Page   1

Form 10-Q Index
 
2

Part I.    Financial Information:
 
 
 
Item 1.    Financial Statements:
 
 

 
 
Consolidated Balance Sheets
 
3

 
 
Consolidated Statements of Earnings
 
4,5

 
 
Consolidated Statements of Stockholders' Equity
 
6

 
 
Consolidated Statements of Cash Flows
 
7

 
 
Notes to Consolidated Financial Statements
 
8-14
 
Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
 
15-20
 
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
 
21
 
Item 4.    Controls and Procedures
 
22

Part II.    Other Information
 
 
 
Item 1.    Legal Proceedings
 
23
 
Item 2.    Changes in Securities
 
23
 
Item 3.    Defaults upon Senior Securities
 
23
 
Item 4.    Submission of Matters to a Vote of Security Holders
 
23
 
Item 5.    Other Information
 
24-25
 
Item 6.    Exhibits and Reports on Form 8-K
 
26

Signatures
 
27

Certifications
 
28

2


Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS


BLYTH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 
   July 31,
2002
   January 31,
2002
  
 
   (In thousands, except share data)

  
 
   (Unaudited)

    
  
ASSETS              
Current assets:              
Cash and cash equivalents   $ 54,972   $ 130,633  
Accounts receivable, less allowance for doubtful receivables of $4,105 and $2,804, respectively     110,296     83,781  
Inventories     229,641     181,840  
Prepaid and other     17,355     9,241  
Deferred income taxes     20,583     18,377  
   
 
 
    Total current assets     432,847     423,872  
   
 
 
Property, plant and equipment, at cost:              
  Less accumulated depreciation of $172,800 and $157,666, respectively     248,818     241,914  
Other assets:              
Investments     3,382     3,551  
Excess of cost over fair value of assets acquired     147,032     112,325  
Deposits and other assets     12,318     12,650  
   
 
 
      162,732     128,526  
   
 
 
    Total assets   $ 844,397   $ 794,312  
   
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY              
Current liabilities:              
Bank lines of credit   $ 40,035   $ 13,226  
Current maturities of long-term debt     7,268     18,245  
Accounts payable     53,509     53,414  
Accrued expenses     46,344     50,680  
Income taxes     1,249     3,082  
   
 
 
    Total current liabilities     148,405     138,647  
   
 
 
Deferred income taxes     24,197     23,066  
Long-term debt, less current maturities     175,488     160,230  
Other liabilities     6,056     4,306  
Stockholders' equity:              
Preferred stock—authorized 10,000,000 shares of $0.01 par value; no shares issued and outstanding     —     —  
Common stock—authorized 100,000,000 shares of $0.02 par value; issued 49,659,482 shares and 49,509,776 shares, respectively     993     990  
Additional contributed capital     100,680     97,879  
Retained earnings     475,535     449,038  
Accumulated other comprehensive loss     (8,298 )   (16,894 )
Treasury stock, at cost, 3,343,000 shares and 2,630,900 shares, respectively     (78,659 )   (62,950 )
   
 
 
    Total stockholders' equity     490,251     468,063  
   
 
 
    Total liabilities and stockholders' equity   $ 844,397   $ 794,312  
   
 
 

The accompanying notes are an integral part of these financial statements.

3


BLYTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 
   Six months ended July 31
  
 
   2002
   2001
  
 
   (In thousands, except per share data)

  
Net sales   $ 545,917   $ 503,111  
Cost of goods sold     263,577     251,638  
   
 
 
  Gross profit     282,340     251,473  
   
 
 
Selling     163,642     152,024  
Administrative     54,133     47,816  
Amortization of goodwill     —     2,011  
   
 
 
      217,775     201,851  
   
 
 
  Operating profit     64,565     49,622  
Other expense (income):              
  Interest expense     7,570     8,034  
  Interest income and other     (695 )   (4,055 )
  Equity in loss of investee     190     175  
   
 
 
      7,065     4,154  
   
 
 
  Earnings before income taxes and cumulative effect of change in accounting principle     57,500     45,468  
Income tax expense     21,390     16,914  
   
 
 
  Earnings before cumulative effect of change in accounting principle     36,110     28,554  
Cumulative effect of change in accounting principle, net of taxes of $2,887     (4,515 )   —  
   
 
 
  Net earnings   $ 31,595   $ 28,554  
   
 
 
Basic:              
  Earnings per common share before cumulative effect of change in accounting principle   $ 0.78   $ 0.61  
  Cumulative effect of change in accounting principle     (0.10 )   —  
   
 
 
    $ 0.68   $ 0.61  
  Weighted average number of shares outstanding     46,310     47,076  
   
 
 
Diluted:              
  Earnings per common share before cumulative effect of change in accounting principle   $ 0.78   $ 0.60  
  Cumulative effect of change in accounting principle     (0.10 )   —  
   
 
 
    $ 0.68   $ 0.60  
  Weighted average number of shares outstanding     46,591     47,265  
   
 
 

The accompanying notes are an integral part of these financial statements.

4


BLYTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 
   Three months ended July 31
  
 
   2002
   2001
  
 
   (In thousands, except per share data)

  
Net sales   $ 268,021   $ 245,621  
Cost of goods sold     130,689     128,654  
   
 
 
  Gross profit     137,332     116,967  
   
 
 
Selling     75,235     70,624  
Administrative     28,440     22,985  
Amortization of goodwill     —     1,021  
   
 
 
      103,675     94,630  
   
 
 
  Operating profit     33,657     22,337  
Other expense (income):              
  Interest expense     3,747     4,008  
  Interest income and other     (254 )   (1,871 )
  Equity in (earnings)loss of investee     218     (310 )
   
 
 
      3,711     1,827  
   
 
 
  Earnings before income taxes     29,946     20,510  
Income tax expense     11,140     7,630  
   
 
 
  Net earnings   $ 18,806   $ 12,880  
   
 
 
Basic:              
  Net earnings per common share   $ 0.41   $ 0.27  
  Weighted average number of shares outstanding     46,330     47,066  
   
 
 
Diluted:              
  Net earnings per common share   $ 0.40   $ 0.27  
  Weighted average number of shares outstanding     46,710     47,272  
   
 
 

The accompanying notes are an integral part of these financial statements.

5


BLYTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

 
   Common stock
    
    
   Treasury stock
   Accumulated
other
comprehensive
income (loss)
    
  
 
   Additional
contributed
capital
   Retained
earnings
    
  
 
   Shares
   Amount
   Shares
   Amount
   Total
  
 
   (In thousands, except share data)

  
For the six months ended
July 31, 2001:		                                              
Balance, January 31, 2001   49,431,576   $ 989   $ 96,912   $ 390,447   (2,356,800 ) $ (56,959 ) $ (9,595 ) $ 421,794  
Net earnings for the period                     28,554                     28,554  
Foreign currency translation adjustments                                     (10,809 )   (10,809 )
Unrealized holding gains on certain investments (net of tax of $17)                                     29     29  
Net gain on cash flow hedging instruments (net of tax of $101)                                     171     171  
                                         
 
Comprehensive income                                           17,945  
Common stock issued in connection with exercise of stock options   21,200           272                           272  
Dividends                     (4,707 )                   (4,707 )
Treasury stock purchases                         (26,800 )   (612 )         (612 )
   
 
 
 
 
 
 
 
 
Balance, July 31, 2001   49,452,776   $ 989   $ 97,184   $ 414,294   (2,383,600 ) $ (57,571 ) $ (20,204 ) $ 434,692  
   
 
 
 
 
 
 
 
 
For the six months ended July 31, 2002:                                              
Balance, January 31, 2002   49,509,776   $ 990   $ 97,879   $ 449,038   (2,630,900 ) $ (62,950 ) $ (16,894 ) $ 468,063  
Net earnings for the period                     31,595                     31,595  
Foreign currency translation adjustments                                     9,057     9,057  
Unrealized holding losses on certain investments (net of tax of $20)                                     (34 )   (34 )
Net loss on cash flow hedging instruments (net of tax of $253)                                     (427 )   (427 )
                                         
 
  Comprehensive income                                           40,191  
Common stock issued in connection with exercise of stock options   149,706     3     2,490                           2,493  
Tax benefit from stock options               311                           311  
Dividends                     (5,098 )                   (5,098 )
Treasury stock purchases                         (712,100 )   (15,709 )         (15,709 )
   
 
 
 
 
 
 
 
 
Balance, July 31, 2002   49,659,482   $ 993   $ 100,680   $ 475,535   (3,343,000 ) $ (78,659 ) $ (8,298 ) $ 490,251  
   
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these financial statements.

6


BLYTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
   Six months ended July 31
  
 
   2002
   2001
  
 
   (In thousands)

  
Cash flows from operating activities:              
  Net earnings   $ 31,595   $ 28,554  
  Adjustments to reconcile net earnings to net cash used in operating activities:              
    Cumulative effect of accounting change, net of tax     4,515     —  
    Depreciation and amortization     15,134     17,455  
    Tax benefit from stock options     311     —  
    Deferred income taxes     1,812     272  
    Equity in loss of investee     190     175  
    Gain on sales of long-term investment     —     (3,812 )
  Changes in operating assets and liabilities, net of effect of business acquisitions:              
    Accounts receivable     (14,593 )   (21,901 )
    Inventories     (31,854 )   (17,616 )
    Prepaid and other     (5,068 )   (859 )
    Deposits and other assets     404     (2,245 )
    Accounts payable     (4,141 )   (20,085 )
    Accrued expenses     (5,658 )   (15,155 )
    Other liabilities     1,463     825  
    Income taxes     (2,020 )   (8,647 )
   
 
 
      Total adjustments     (39,505 )   (71,593 )
   
 
 
      Net cash used in operating activities     (7,910 )   (43,039 )
   
 
 
Cash flows from investing activities:              
  Purchases of property, plant and equipment     (9,624 )   (6,593 )
  Proceeds from sales of long term investment     —     13,465  
  Purchase of businesses, net of cash acquired     (51,010 )   (61,392 )
   
 
 
      Net cash used in investing activities     (60,634 )   (54,520 )
   
 
 
Cash flows from financing activities:              
  Proceeds from issuance of common stock     2,493     272  
  Purchases of treasury stock     (15,709 )   (612 )
  Borrowings from bank line of credit     36,452     23,512  
  Repayments on bank line of credit     (21,892 )   (12,078 )
  Borrowings on long-term debt     517     21,411  
  Repayments of long-term debt     (3,880 )   —  
  Dividends paid     (5,098 )   (4,707 )
   
 
 
      Net cash provided by (used in) financing activities     (7,117 )   27,798