##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended:      June 28, 2003

Commission File Number:      001-15023

THE YANKEE CANDLE COMPANY, INC.




(Exact name of registrant as specified in its charter)


|                                |  |                                     
|------------------------------- |  | ------------------------------------
|MASSACHUSETTS                   |  | 04 259 1416                         
|                                |  |                                     
|(State or other jurisdiction of |  | (I.R.S. Employer Identification No.)
|incorporation or organization)  |  |                                     

16 YANKEE CANDLE WAY
SOUTH DEERFIELD, MASSACHUSETTS 01373
(Address of principal executive office and zip code)

(413) 665-8306
(Registrants telephone number, including area code)

Indicate by check mark whether 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 o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2). Yes x No o

The registrant had 53,396,458 shares of Common Stock, par value $0.01,
outstanding as of August 11, 2003.





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TABLE OF CONTENTS



|                                                |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. Financial Information                  
|                                                | Item 1. Condensed Consolidated Financial Statements                                          
|                                                |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                                                |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                                |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                                | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                                | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                     
|                                                | Item 1. Legal Proceedings                                                                    
|                                                | Item 2. Changes in Securities and Use of Proceeds                                            
|                                                | Item 3. Defaults Upon Senior Securities                                                      
|                                                | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                | Item 5. Other Information                                                                    
|                                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                     
|EX-31.1 CERTIFICATION OF CRAIG W. RYDIN        
|EX-31.2 CERTIFICATION OF ROBERT R. SPELLMAN    
|EX-32.1 906 CERTIFICATION OF CRAIG W. RYDIN    
|EX-32.2 906 CERTIFICATION OF ROBERT R. SPELLMAN



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THE YANKEE CANDLE COMPANY, INC.

FORM 10-Q  Quarter Ended June 28, 2003

This Quarterly Report on Form 10-Q contains a number of forward-looking
statements. Any statements contained herein, including without limitation
statements to the effect that The Yankee Candle Company, Inc. and its
subsidiaries (Yankee Candle, the Company, we, and us) or its management
believes, expects, anticipates, plans and similar expressions that
relate to prospective events or developments should be considered
forward-looking statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date the
statement was made. There are a number of important factors that could cause
our actual results to differ materially from those indicated by such
forward-looking statements. These factors include, without limitation, those
set forth below in Managements Discussion and Analysis of Financial Condition
and Results of Operations - Future Operating Results. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.

Table of Contents

|           |  |                                                                                                                             |  |     
|---------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | ----
|Item       |  |                                                                                                                             |  | Page
|           |  |                                                                                                                             |  |     
|PART I.    |  | Financial Information                                                                                                       |  |     
|Item 1.    |  | Condensed Consolidated Financial Statements                                                                                 |  |     
|           |  | Condensed Consolidated Balance Sheets
as of June 28, 2003 and December 28, 2002                                             |  | 3   
|           |  | Condensed Consolidated Statements of Operations
for the Thirteen and Twenty-Six Weeks Ended June 28, 2003 and June 29,
2002 |  | 4   
|           |  | Condensed Consolidated Statements of Cash Flows for the
Twenty-Six Weeks Ended June 28, 2003 and June 29, 2002              |  | 5   
|           |  | Notes to the Condensed Consolidated Financial Statements                                                                    |  | 6   
|Item 2.    |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations                                       |  | 10  
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                                  |  | 16  
|Item 4.    |  | Controls and Procedures                                                                                                     |  | 17  
|PART II.   |  | Other Information                                                                                                           |  |     
|Item 1.    |  | Legal Proceedings                                                                                                           |  | 17  
|Item 2.    |  | Changes in Securities and Use of Proceeds                                                                                   |  | 17  
|Item 3.    |  | Defaults Upon Senior Securities                                                                                             |  | 17  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                                         |  | 17  
|Item 5.    |  | Other Information                                                                                                           |  | 17  
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                                            |  | 17  
|Signatures |  | 18                                                                                                                         

2



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PART I. Financial Information




Item 1. Condensed Consolidated Financial Statements

THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)


|                                           |                                                                                    |   |             |          |              |   |         |          |  
|------------------------------------------ | ---------------------------------------------------------------------------------- | - | ----------- | -------- | ------------ | - | ------- | -------- | -
|                                           |                                                                                    |   | June 28,    |          | December 28,
|                                           |                                                                                    |   | 2003        |          | 2002        
|                                           |                                                                                    |   |             |          |             
|                                           |                                                                                    |   | (Unaudited) |          |              |   |        
|ASSETS                                     |                                                                                    |   |             |          |              |   |         |         
|CURRENT ASSETS:                            |                                                                                    |   |             |          |              |   |         |         
|                                           | Cash and cash equivalents                                                          |   | $           | 8,443    |              |   | $       | 43,689   |  
|                                           | Accounts receivable, less allowance of $325 at June 28, 2003
and December 28, 2002 |   |             | 22,370   |              |   |         | 25,356   |  
|                                           | Inventory                                                                          |   |             | 44,351   |              |   |         | 34,529   |  
|                                           | Prepaid expenses and other current assets                                          |   |             | 12,106   |              |   |         | 6,584    |  
|                                           | Deferred tax assets                                                                |   |             | 2,434    |              |   |         | 2,434    |  
|                                           |                                                                                    |   |             |          |              |   |         |         
|TOTAL CURRENT ASSETS                       |                                                                                    |   | 89,704      |          |              |   | 112,592 |         
|PROPERTY, PLANT AND EQUIPMENT-NET          |                                                                                    |   | 112,859     |          |              |   | 111,761 |         
|MARKETABLE SECURITIES                      |                                                                                    |   | 1,326       |          |              |   | 955     |         
|DEFERRED FINANCING COSTS                   |                                                                                    |   | 1,144       |          |              |   | 1,701   |         
|DEFERRED TAX ASSETS                        |                                                                                    |   | 107,144     |          |              |   | 113,144 |         
|OTHER ASSETS                               |                                                                                    |   | 479         |          |              |   | 490     |         
|                                           |                                                                                    |   |             |          |              |   |         |         
|TOTAL ASSETS                               |                                                                                    | $ | 312,656     |          |              | $ | 340,643 |         
|                                           |                                                                                    |   |             |          |              |   |         |         
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                                                                    |   |             |          |              |   |         |         
|CURRENT LIABILITIES:                       |                                                                                    |   |             |          |              |   |         |         
|                                           | Accounts payable                                                                   |   | $           | 19,577   |              |   | $       | 20,601   |  
|                                           | Accrued payroll                                                                    |   |             | 9,374    |              |   |         | 12,335   |  
|                                           | Accrued income taxes                                                               |   |             |         |              |   |         | 18,014   |  
|                                           | Other accrued liabilities                                                          |   |             | 10,094   |              |   |         | 12,460   |  
|                                           | Current portion of long-term debt                                                  |   |             | 35,000   |              |   |         | 32,000   |  
|                                           |                                                                                    |   |             |          |              |   |         |         
|TOTAL CURRENT LIABILITIES                  |                                                                                    |   | 74,045      |          |              |   | 95,410  |         
|DEFERRED COMPENSATION OBLIGATION           |                                                                                    |   | 1,225       |          |              |   | 901     |         
|LONG TERM DEBT  Less current portion      |                                                                                    |   | 14,057      |          |              |   | 28,600  |         
|DEFERRED RENT                              |                                                                                    |   | 3,433       |          |              |   | 2,820   |         
|STOCKHOLDERS EQUITY:                      |                                                                                    |   |             |          |              |   |         |         
|                                           | Common stock                                                                       |   |             | 1,043    |              |   |         | 1,042    |  
|                                           | Additional paid-in capital                                                         |   |             | 225,112  |              |   |         | 224,815  |  
|                                           | Treasury stock                                                                     |   |             | (223,648 | )            |   |         | (213,883 | )
|                                           | Retained earnings                                                                  |   |             | 217,186  |              |   |         | 201,004  |  
|                                           | Unearned stock compensation                                                        |   |             | (45      | )            |   |         | (88      | )
|                                           | Accumulated other comprehensive income                                             |   |             | 248      |              |   |         | 22       |  
|                                           |                                                                                    |   |             |          |              |   |         |         
|TOTAL STOCKHOLDERS EQUITY                 |                                                                                    |   | 219,896     |          |              |   | 212,912 |         
|                                           |                                                                                    |   |             |          |              |   |         |         
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                    | $ | 312,656     |          |              | $ | 340,643 |         
|                                           |                                                                                    |   |             |          |              |   |         |         

See notes to Condensed Consolidated Financial Statements

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THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)


|                                         |         |   |                              |        |                                |   |               |        |               |   |         |        |  |   |         |        | 
|---------------------------------------- | ------- | - | ---------------------------- | ------ | ------------------------------ | - | ------------- | ------ | ------------- | - | ------- | ------ |  | - | ------- | ------ | 
|                                         |         |   | For the Thirteen Weeks Ended |        | For the Twenty-Six Weeks Ended
|                                         |         |   |                              |        |                               
|                                         |         |   | June 28, 2003                |        | June 29, 2002                  |   | June 28, 2003 |        | June 29, 2002
|                                         |         |   |                              |        |                                |   |               |        |              
|Sales                                    |         | $ | 92,393                       |        |                                | $ | 81,296        |        |               | $ | 189,446 |        |  | $ | 169,480 |       
|Cost of goods sold                       |         |   | 41,218                       |        |                                |   | 37,739        |        |               |   | 85,297  |        |  |   | 79,848  |       
|                                         |         |   |                              |        |                                |   |               |        |               |   |         |        |  |   |         |       
|Gross profit                             |         |   | 51,175                       |        |                                |   | 43,557        |        |               |   | 104,149 |        |  |   | 89,632  |       
|Selling expenses                         |         |   | 26,839                       |        |                                |   | 22,452        |        |               |   | 51,540  |        |  |   | 43,672  |       
|General and administrative expenses      |         |   | 11,679                       |        |                                |   | 10,371        |        |               |   | 24,126  |        |  |   | 21,565  |       
|                                         |         |   |                              |        |                                |   |               |        |               |   |         |        |  |   |         |       
|Income from operations                   |         |   | 12,657                       |        |                                |   | 10,734        |        |               |   | 28,483  |        |  |   | 24,395  |       
|Interest income                          |         |   | (24                          | )      |                                |   | (3            | )      |               |   | (27     | )      |  |   | (18     | )     
|Interest expense                         |         |   | 815                          |        |                                |   | 1,157         |        |               |   | 1,600   |        |  |   | 2,466   |       
|Other (income) expense                   |         |   | 37                           |        |                                |   | (54           | )      |               |   | 163     |        |  |   | 5       |       
|                                         |         |   |                              |        |                                |   |               |        |               |   |         |        |  |   |         |       
|Income before provision for income taxes |         |   | 11,829                       |        |                                |   | 9,634         |        |               |   | 26,747  |        |  |   | 21,942  |       
|Provision for income taxes               |         |   | 4,672                        |        |                                |   | 3,757         |        |               |   | 10,565  |        |  |   | 8,557   |       
|                                         |         |   |                              |        |                                |   |               |        |               |   |         |        |  |   |         |       
|Net income                               |         | $ | 7,157                        |        |                                | $ | 5,877         |        |               | $ | 16,182  |        |  | $ | 13,385  |       
|                                         |         |   |                              |        |                                |   |               |        |               |   |         |        |  |   |         |       
|Basic earnings per share                 |         | $ | 0.13                         |        |                                | $ | 0.11          |        |               | $ | 0.30    |        |  | $ | 0.25    |       
|                                         |         |   |                              |        |                                |   |               |        |               |   |         |        |  |   |         |       
|Diluted earnings per share               |         | $ | 0.13                         |        |                                | $ | 0.11          |        |               | $ | 0.30    |        |  | $ | 0.24    |       
|                                         |         |   |                              |        |                                |   |               |        |               |   |         |        |  |   |         |       
|Weighted average shares:                 |         |   |                              |        |                                |   |               |        |               |   |         |        |  |   |         |       
|                                         | Basic   |   |                              | 54,304 |                                |   |               | 53,874 |               |   |         | 54,249 |  |   |         | 53,756 | 
|                                         |         |   |                              |        |                                |   |               |        |               |   |         |        |  |   |         |       
|                                         | Diluted |   |                              | 54,650 |                                |   |               | 54,835 |               |   |         | 54,609 |  |   |         | 54,760 | 
|                                         |         |   |                              |        |                                |   |               |        |               |   |         |        |  |   |         |       

See notes to Condensed Consolidated Financial Statements

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THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |        |         |  
|------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------------------------ | ------- | ------------------------------ | ------- | -------- | ------- | ------ | ------- | -
|                                                                                            |                                                      |                                                                    |         | For the Twenty-Six Weeks Ended
|                                                                                            |                                                      |                                                                    |         |                               
|                                                                                            |                                                      |                                                                    |         | June 28,                       |         | June 29,
|                                                                                            |                                                      |                                                                    |         | 2003                           |         | 2002    
|                                                                                            |                                                      |                                                                    |         |                                |         |         
|CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:                                      |                                                      |                                                                    |         |                                |         |          |         |       
|Net income                                                                                  |                                                      | $                                                                  | 16,182  |                                |         | $        | 13,385  |       
|Adjustments to reconcile net income to net cash provided by (used in)
operating activities: |                                                      |                                                                    |         |                                |         |          |         |       
|Depreciation and amortization                                                               |                                                      |                                                                    | 9,139   |                                |         |          | 8,258   |       
|Unrealized (gain) loss on marketable securities                                             |                                                      |                                                                    | (139    | )                              |         |          | 14      |       
|Non-cash stock compensation                                                                 |                                                      |                                                                    | 43      |                                |         |          | 258     |       
|Deferred taxes                                                                              |                                                      |                                                                    | 6,000   |                                |         |          | 6,000   |       
|Loss (gain) on disposal of fixed assets and classic vehicles                                |                                                      |                                                                    | 122     |                                |         |          | (176    | )     
|Changes in assets and liabilities:                                                          |                                                      |                                                                    |         |                                |         |          |         |       
|                                                                                            |                                                      | Accounts receivable, net                                           |         |                                | 3,050   |          |         |        | 6,122   |  
|                                                                                            |                                                      | Inventory                                                          |         |                                | (9,723  | )        |         |        | (16,364 | )
|                                                                                            |                                                      | Prepaid expenses and other assets                                  |         |                                | (5,604  | )        |         |        | (5,324  | )
|                                                                                            |                                                      | Accounts payable                                                   |         |                                | (1,032  | )        |         |        | 3,019   |  
|                                                                                            |                                                      | Accrued expenses and other liabilities                             |         |                                | (22,409 | )        |         |        | (15,781 | )
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|NET CASH USED IN OPERATING ACTIVITIES                                                       |                                                      |                                                                    | (4,371  | )                              |         |          | (589    | )     
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES:                                      |                                                      |                                                                    |         |                                |         |          |         |       
|                                                                                            |                                                      | Purchase of property and equipment                                 |         |                                | (9,745  | )        |         |        | (13,146 | )
|                                                                                            |                                                      | Investments in marketable securities                               |         |                                | (233    | )        |         |        | (298    | )
|                                                                                            |                                                      | Proceeds from sale of property & equipment                         |         |                                | 63      |          |         |        | 1,519   |  
|                                                                                            |                                                      | Proceeds from sale of marketable securities                        |         |                                |        |          |         |        | 263     |  
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|NET CASH USED IN INVESTING ACTIVITIES                                                       |                                                      |                                                                    | (9,915  | )                              |         |          | (11,662 | )     
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:                                      |                                                      |                                                                    |         |                                |         |          |         |       
|                                                                                            |                                                      | Net (repayments) borrowings under bank credit agreements and other |         |                                | 4,487   |          |         |        | 3,980   |  
|                                                                                            |                                                      | Principal payments on long-term debt                               |         |                                | (16,000 | )        |         |        | (15,500 | )
|                                                                                            |                                                      | Payments for redemption of common stock                            |         |                                | (9,765  | )        |         |        |        |  
|                                                                                            |                                                      | Proceeds from the sale of common stock (net of fees and expenses)  |         |                                | 298     |          |         |        | 695     |  
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|NET CASH USED IN FINANCING ACTIVITIES                                                       |                                                      |                                                                    | (20,980 | )                              |         |          | (10,825 | )     
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                     |                                                      |                                                                    | 20      |                                |         |          | 42      |       
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                   |                                                      |                                                                    | (35,246 | )                              |         |          | (23,034 | )     
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                              |                                                      |                                                                    | 43,689  |                                |         |          | 30,531  |       
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                    |                                                      | $                                                                  | 8,443   |                                |         | $        | 7,497   |       
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                          |                                                      |                                                                    |         |                                |         |          |         |       
|Cash paid during the period for:                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|                                                                                            | Interest                                             |                                                                    | $       | 811                            |         |          | $       | 2,296  |        
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|                                                                                            | Income taxes                                         |                                                                    | $       | 27,505                         |         |          | $       | 21,287 |        
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       
|                                                                                            | Purchase of equipment by assumption of capital lease |                                                                    | $       | 57                             |         |          | $       | 144    |        
|                                                                                            |                                                      |                                                                    |         |                                |         |          |         |       

See notes to Condensed Consolidated Financial Statements

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THE YANKEE CANDLE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(Unaudited)

1.     BASIS OF PRESENTATION

The unaudited interim condensed consolidated financial statements of The Yankee
Candle Company, Inc. and its subsidiaries (the Company) have been prepared in
accordance with accounting principles generally accepted in the United States
of America (generally accepted accounting principles). The financial
information included herein is unaudited; however, in the opinion of management
such information reflects all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of financial position, results of
operations, cash flows and comprehensive income for such periods. All
intercompany transactions and balances have been eliminated. The results of
operations for the interim periods are not necessarily indicative of the
results to be expected for the full fiscal year ending January 3, 2004.

Certain information and disclosures normally included in the notes to
consolidated financial statements have been condensed or omitted as permitted
by the rules and regulations of the Securities and Exchange Commission. The
accompanying unaudited condensed financial statements should be read in
conjunction with the audited consolidated financial statements of the Company
for the year ended December 28, 2002 included in the Companys Annual Report on
Form 10-K.

2.     INVENTORIES

The components of inventory were as follows:

|                            |  |          |        |              |  |   |        |  
|--------------------------- |  | -------- | ------ | ------------ |  | - | ------ | -
|                            |  | June 28, |        | December 28,
|                            |  | 2003     |        | 2002        
|                            |  |          |        |             
|Finished goods              |  | $        | 40,315 |              |  | $ | 30,273 |  
|Work-in-process             |  |          | 648    |              |  |   | 641    |  
|Raw materials and packaging |  |          | 4,060  |              |  |   | 4,287  |  
|                            |  |          |        |              |  |   |        |  
|                            |  |          | 45,023 |              |  |   | 35,201 |  
|Less LIFO adjustment        |  |          | (672   | )            |  |   | (672   | )
|                            |  |          |        |              |  |   |        |  
|                            |  | $        | 44,351 |              |  | $ | 34,529 |  
|                            |  |          |        |              |  |   |        |  

3.     INCOME TAXES

The Companys effective tax rate was 39.5% for both the thirteen and twenty-six
weeks ended June 28, 2003 and 39.0% for both the thirteen and twenty-six weeks
ended June 29, 2002. The Company provides for income taxes at the end of each
interim period based on the estimated effective tax rate for a full fiscal
year. Management re-evaluates the Companys effective tax rate on a quarterly
basis.

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4.     EARNINGS PER SHARE

SFAS No. 128, Earnings Per Share, requires two presentations of earnings per
share, basic and diluted. Basic earnings per share is computed by dividing
income available to common stockholders (the numerator) by the weighted-average
number of common shares outstanding (the denominator) for the period.
The computation of diluted earnings per share is similar to basic earnings per
share, except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potentially
dilutive common shares had been issued. For both the thirteen and twenty-six
weeks ended June 28, 2003, 458 potential common shares which could dilute basic
earnings per share in the future were excluded since their inclusion would have
been antidilutive. There were no antidilutive securities for the thirteen or
twenty-six weeks ended June 29, 2002. The following summarizes the effects of
the assumed issuance of dilutive securities on weighted-average shares.

|                                                                                   |  |                      |        |                        |  |               |        |               |  |  |        |  |  |  |        | 
|---------------------------------------------------------------------------------- |  | -------------------- | ------ | ---------------------- |  | ------------- | ------ | ------------- |  |  | ------ |  |  |  | ------ | 
|                                                                                   |  | Thirteen Weeks Ended |        | Twenty-Six Weeks Ended
|                                                                                   |  |                      |        |                       
|                                                                                   |  | June 28, 2003        |        | June 29, 2002          |  | June 28, 2003 |        | June 29, 2002
|                                                                                   |  |                      |        |                        |  |               |        |              
|Weighted average
basic shares
outstanding                                          |  |                      | 54,304 |                        |  |               | 53,874 |               |  |  | 54,249 |  |  |  | 53,756 | 
|Contingently
returnable shares
and shares issuable
pursuant to stock
option grants |  |                      | 346    |                        |  |               | 961    |               |  |  | 360    |  |  |  | 1,004  | 
|                                                                                   |  |                      |        |                        |  |               |        |               |  |  |        |  |  |  |        | 
|Weighted average
diluted shares
outstanding                                        |  |                      | 54,650 |                        |  |               | 54,835 |               |  |  | 54,609 |  |  |  | 54,760 | 
|                                                                                   |  |                      |        |                        |  |               |        |               |  |  |        |  |  |  |        | 

5.     STOCK BASED COMPENSATION

The Company accounts for employee options or share awards under the
intrinsic-value method prescribed by Accounting Principles Board Opinion No. 25
Accounting for Stock Issued to Employees with pro forma disclosures of net
earnings and earnings per share, as if the fair value method of accounting
defined in SFAS No. 123 Accounting for Stock Based Compensation had been
applied. SFAS No. 123 establishes a fair value based method of accounting for
stock based employee compensation plans. Under the fair value method,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
Under SFAS No. 123, the Companys net income and net income per share would
have decreased as reflected in the following pro forma amounts.

|                                                                                                                                            |                     |   |                      |      |                        |   |          |      |          |   |        |      |  |   |        |      | 
|------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | - | -------------------- | ---- | ---------------------- | - | -------- | ---- | -------- | - | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                                                            |                     |   | Thirteen Weeks Ended |      | Twenty-Six Weeks Ended
|                                                                                                                                            |                     |   |                      |      |                       
|                                                                                                                                            |                     |   | June 28,             |      | June 29,               |   | June 28, |      | June 29,
|                                                                                                                                            |                     |   | 2003                 |      | 2002                   |   | 2003     |      | 2002    
|                                                                                                                                            |                     |   |                      |      |                        |   |          |      |         
|Net income, as reported                                                                                                                     |                     | $ | 7,157                |      |                        | $ | 5,877    |      |          | $ | 16,182 |      |  | $ | 13,385 |     
|Deduct: Total stock
based employee
compensation expense
determined under fair
value based method for
all awards, net of
related tax effects |                     |   | 617                  |      |                        |   | 232      |      |          |   | 898    |      |  |   | 487    |     
|                                                                                                                                            |                     |   |                      |      |                        |   |          |      |          |   |        |      |  |   |        |     
|Pro forma net income                                                                                                                        |                     | $ | 6,540                |      |                        | $ | 5,645    |      |          | $ | 15,284 |      |  | $ | 12,898 |     
|                                                                                                                                            |                     |   |                      |      |                        |   |          |      |          |   |        |      |  |   |        |     
|Earnings per share:                                                                                                                         |                     |   |                      |      |                        |   |          |      |          |   |        |      |  |   |        |     
|                                                                                                                                            | Basic-as reported   |   | $                    | 0.13 |                        |   | $        | 0.11 |          |   | $      | 0.30 |  |   | $      | 0.25 | 
|                                                                                                                                            | Basic-pro forma     |   | $                    | 0.12 |                        |   | $        | 0.10 |          |   | $      | 0.28 |  |   | $      | 0.24 | 
|                                                                                                                                            | Diluted-as reported |   | $                    | 0.13 |                        |   | $        | 0.11 |          |   | $      | 0.30 |  |   | $      | 0.24 | 
|                                                                                                                                            | Diluted-pro forma   |   | $                    | 0.12 |                        |   | $        | 0.10 |          |   | $      | 0.28 |  |   | $      | 0.24 | 

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6.     COMPREHENSIVE INCOME

Comprehensive income includes all changes in equity from non-stockholders
sources during the period. It has two components: net income and other
comprehensive income. Comprehensive income, net of related tax effects, is as
follows:

|                            |                        |   |                      |     |                        |   |               |     |               |   |        |     |  |   |        |     | 
|--------------------------- | ---------------------- | - | -------------------- | --- | ---------------------- | - | ------------- | --- | ------------- | - | ------ | --- |  | - | ------ | --- | 
|                            |                        |   | Thirteen Weeks Ended |     | Twenty-Six Weeks Ended
|                            |                        |   |                      |     |                       
|                            |                        |   | June 28, 2003        |     | June 29, 2002          |   | June 28, 2003 |     | June 29, 2002
|                            |                        |   |                      |     |                        |   |               |     |              
|Net income                  |                        | $ | 7,157                |     |                        | $ | 5,877         |     |               | $ | 16,182 |     |  | $ | 13,385 |    
|Other comprehensive income: |                        |   |                      |     |                        |   |               |     |               |   |        |     |  |   |        |    
|                            | Translation adjustment |   |                      | 353 |                        |   |               | 364 |               |   |        | 226 |  |   |        | 272 | 
|                            |                        |   |                      |     |                        |   |               |     |               |   |        |     |  |   |        |    
|Comprehensive income        |                        | $ | 7,510                |     |                        | $ | 6,241         |     |               | $ | 16,408 |     |  | $ | 13,657 |    
|                            |                        |   |                      |     |                        |   |               |     |               |   |        |     |  |   |        |    

7.     STOCK
REPURCHASE PROGRAM

On May 9, 2003 the Company
announced that the Board of Directors had approved a stock repurchase
program authorizing the Company to repurchase up to
$100.0 million of Yankee Candle common stock. During the fiscal
2003 second quarter the Company repurchased a total of
426,100 shares of common stock for an aggregate purchase price
of $9.8 million. All 426,100 shares were repurchased in
June 2003.

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8.     SEGMENTS OF ENTERPRISE AND RELATED INFORMATION

The Company has segmented its operations in a manner that reflects how its
chief operating decision-maker (the CEO) currently reviews the results of the
Company and its subsidiaries businesses. The Company has two reportable
segments - retail and wholesale. The identification of these segments results
from managements recognition that while the product produced is similar, the
type of customer for the product and services and the methods used to
distribute the product are different.

|                                         |  |        |        |           |  |       |        |            |  |              |         |               |  |             |        |  
|---------------------------------------- |  | ------ | ------ | --------- |  | ----- | ------ | ---------- |  | ------------ | ------- | ------------- |  | ----------- | ------ | -
|                                         |  |        |        |           |  |       |        |            |  |              |         |               |  | Balance per
|                                         |  |        |        |           |  |       |        |            |  |              |         |               |  | Condensed  
|Thirteen Weeks                           |  |        |        |           |  |       |        |            |  | Unallocated/ |         | Consolidated 
|Ended                                    |  |        |        |           |  |       |        |            |  | Corporate/   |         | Statements of
|June 28, 2003                            |  | Retail |        | Wholesale |  | Other |        | Operations
|                                         |  |        |        |           |  |       |        |           
|Sales                                    |  | $      | 45,265 |           |  | $     | 47,128 |            |  | $            |        |               |  | $           | 92,393 |  
|Gross profit                             |  |        | 29,859 |           |  |       | 21,316 |            |  |              |        |               |  |             | 51,175 |  
|Operating margin                         |  |        | 5,784  |           |  |       | 18,552 |            |  |              | (11,679 | )             |  |             | 12,657 |  
|Unallocated costs                        |  |        |       |           |  |       |       |            |  |              | (828    | )             |  |             | (828   | )
|Income before
provision for
income taxes |  |        |       |           |  |       |       |            |  |              |        |               |  |             | 11,829 |  

|                                         |  |        |        |           |  |       |        |            |  |              |         |               |  |             |        |  
|---------------------------------------- |  | ------ | ------ | --------- |  | ----- | ------ | ---------- |  | ------------ | ------- | ------------- |  | ----------- | ------ | -
|                                         |  |        |        |           |  |       |        |            |  |              |         |               |  | Balance per
|                                         |  |        |        |           |  |       |        |            |  |              |         |               |  | Condensed  
|Thirteen Weeks                           |  |        |        |           |  |       |        |            |  | Unallocated/ |         | Consolidated 
|Ended                                    |  |        |        |           |  |       |        |            |  | Corporate/   |         | Statements of
|June 29, 2002                            |  | Retail |        | Wholesale |  | Other |        | Operations
|                                         |  |        |        |           |  |       |        |           
|Sales                                    |  | $      | 41,067 |           |  | $     | 40,229 |            |  | $            |        |               |  | $           | 81,296 |  
|Gross profit                             |  |        | 24,649 |           |  |       | 18,908 |            |  |              |        |               |  |             | 43,557 |  
|Operating margin                         |  |        | 4,744  |           |  |       | 16,361 |            |  |              | (10,371 | )             |  |             | 10,734 |  
|Unallocated costs                        |  |        |       |           |  |       |       |            |  |              | (1,100  | )             |  |             | (1,100 | )
|Income before
provision for
income taxes |  |        |       |           |  |       |       |            |  |              |        |               |  |             | 9,634  |  

|                                         |  |        |        |           |  |       |         |            |  |              |         |               |  |             |         |  
|---------------------------------------- |  | ------ | ------ | --------- |  | ----- | ------- | ---------- |  | ------------ | ------- | ------------- |  | ----------- | ------- | -
|                                         |  |        |        |           |  |       |         |            |  |              |         |               |  | Balance per
|                                         |  |        |        |           |  |       |         |            |  |              |         |               |  | Condensed  
|Twenty-Six Weeks                         |  |        |        |           |  |       |         |            |  | Unallocated/ |         | Consolidated 
|Ended                                    |  |        |        |           |  |       |         |            |  | Corporate/   |         | Statements of
|June 28, 2003                            |  | Retail |        | Wholesale |  | Other |         | Operations
|                                         |  |        |        |           |  |       |         |           
|Sales                                    |  | $      | 89,281 |           |  | $     | 100,165 |            |  | $            |        |               |  | $           | 189,446 |  
|Gross profit                             |  |        | 58,357 |           |  |       | 45,792  |            |  |              |        |               |  |             | 104,149 |  
|Operating margin                         |  |        | 12,088 |           |  |       | 40,521  |            |  |              | (24,126 | )             |  |             | 28,483  |  
|Unallocated costs                        |  |        |       |           |  |       |        |            |  |              | (1,736  | )             |  |             | (1,736  | )
|Income before
provision for
income taxes |  |        |       |           |  |       |        |            |  |              |        |               |  |             | 26,747  |  

|                                         |  |        |        |           |  |       |        |            |  |              |         |               |  |             |         |  
|---------------------------------------- |  | ------ | ------ | --------- |  | ----- | ------ | ---------- |  | ------------ | ------- | ------------- |  | ----------- | ------- | -
|                                         |  |        |        |           |  |       |        |            |  |              |         |               |  | Balance per
|                                         |  |        |        |           |  |       |        |            |  |              |         |               |  | Condensed  
|Twenty-Six Weeks                         |  |        |        |           |  |       |        |            |  | Unallocated/ |         | Consolidated 
|Ended                                    |  |        |        |           |  |       |        |            |  | Corporate/   |         | Statements of
|June 29, 2002                            |  | Retail |        | Wholesale |  | Other |        | Operations
|                                         |  |        |        |           |  |       |        |           
|Sales                                    |  | $      | 83,216 |           |  | $     | 86,264 |            |  | $            |        |               |  | $           | 169,480 |  
|Gross profit                             |  |        | 50,302 |           |  |       | 39,330 |            |  |              |        |               |  |             | 89,632  |  
|Operating margin                         |  |        | 11,865 |           |  |       | 34,095 |            |  |              | (21,565 | )             |  |             | 24,395  |  
|Unallocated costs                        |  |        |       |           |  |       |       |            |  |              | (2,453  | )             |  |             | (2,453  | )
|Income before
provision for
income taxes |  |        |       |           |  |       |       |            |  |              |        |               |  |             | 21,942  |  

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9.     RESTRUCTURING RESERVE

A restructuring charge for $8.0 million was recorded in fiscal 2001 to record

costs associated with the Companys decision to consolidate and restructure
distribution and manufacturing operations. The Company closed its Utah
distribution facility and restructured its distribution and manufacturing
work-force during 2001. Included in the restructuring charge are severance and
other employee related costs, the non-cash write-down of non-recoverable
leasehold improvements, fixture and equipment investments and estimated
continuing occupancy expenses for abandoned facilities, net of anticipated
sub-lease income. An analysis of the activity within the remaining
restructuring reserve is as follows as of June 28, 2003:

|                 |       |   |                              |       |                              |   |                |     |               |   |               |       |  |   |               |     |  |   |     |     | 
|---------------- | ----- | - | ---------------------------- | ----- | ---------------------------- | - | -------------- | --- | ------------- | - | ------------- | ----- |  | - | ------------- | --- |  | - | --- | --- | 
|                 |       |   | For the thirteen weeks ended |       | For the thirteen weeks ended
|                 |       |   | March 29, 2003               |       | June 28, 2003               
|                 |       |   |                              |       |                             
|                 |       |   | Accrued as of                |       |                              |   |                |     | Accrued as of |   |               |       |  |   | Accrued as of
|                 |       |   | December 28, 2002            |       | Costs paid                   |   | March 29, 2003 |     | Costs paid    |   | June 28, 2003
|                 |       |   |                              |       |                              |   |                |     |               |   |              
|Occupancy        |       | $ | 1,107                        |       |                              | $ | 87             |     |               | $ | 1,020         |       |  | $ | 101           |     |  | $ | 919 |    
|Employee related |       |   | 47                           |       |                              |   | 41             |     |               |   | 6             |       |  |   | 6             |     |  |   |    |    
|                 |       |   |                              |       |                              |   |                |     |               |   |               |       |  |   |               |     |  |   |     |    
|                 | Total |   | $                            | 1,154 |                              |   | $              | 128 |               |   | $             | 1,026 |  |   | $             | 107 |  |   | $   | 919 | 
|                 |       |   |                              |       |                              |   |                |     |               |   |               |       |  |   |               |     |  |   |     |    

During the second quarter of fiscal 2002, the Company was successful in
subletting the facility for the remaining lease term. The future sublet income
approximates that originally estimated by the Company; therefore the initial
occupancy reserve remained unchanged after this sublet.




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Managements Discussion and Analysis of Financial Condition and Results of
Operations discusses our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis,
management evaluates its estimates and judgments, including those related to
inventories, restructuring costs, bad debts, intangible assets, income taxes,
debt service and contingencies and litigation. Management bases its estimates
and judgments on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about operating results and the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions. Management believes the following critical accounting policies,
among others, involve its more significant estimates and judgments and are
therefore particularly important to an understanding of our results of
operations and financial position.

REVENUE / RECEIVABLES

As described in the Notes to the Condensed Consolidated Financial Statements,
we sell our products both directly to retail customers and through wholesale
channels. Revenue from the sale of merchandise to retail customers is
recognized at the time of sale, while revenue from wholesale customers is
recognized when shipped and when risk of loss has transferred to the buyer. We
believe that this is the time that persuasive evidence of an agreement exists,
delivery has occurred, the price is fixed and determinable, and collectability
is reasonably assured. Revenue is recognized net of any applicable discounts
and allowances. Customers, be they retail or wholesale, do have the right to
return product to us in certain limited situations. Such rights of return do
not preclude revenue recognition because we have a long history with such
returns, which we use in constructing a reserve. This reserve, however, is
subject to change. In addition to returns, we bear credit risk relative to our
wholesale customers. We have provided a reserve for bad debts in our
financial statements based on our estimates of the creditworthiness of our
customers. However, this reserve is also subject to change. Changes in these
reserves could affect our operating results and cash flows.

INVENTORY

We write down our inventory for estimated obsolescence or unmarketable
inventory in an amount equal to the difference between the cost of inventory
and the estimated market value less costs to sell, based upon assumptions

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about future demand and market conditions. If actual future demand or market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required. In addition, our inventory is stated at
the lower of cost or market on a last-in first-out (LIFO) basis. Cost is
based on standard costs estimated at the beginning of the year. Fluctuations
in production quantities, wage rates and the cost of raw materials could impact
the carrying value of our inventory. Accordingly, we periodically adjust the
standard costs for variances attributable to these fluctuations. Changes in
the carrying value of inventory could affect our operating results and cash
flows.

TAXES

We have a significant deferred tax asset recorded on our financial statements.
This asset arose at the time of our recapitalization in 1998 and is a future
tax deduction for us. The recoverability of this future tax deduction is
dependent upon our future profitability. We have made an assessment that this
asset is likely to be recovered and is appropriately reflected on the balance
sheet. Should we find that we are not able to utilize this deduction in the
future, we would have to record a reserve for all or a part of this asset,
which would adversely affect our operating results and cash flows.

RESTRUCTURING RESERVE

In fiscal 2001, we closed our distribution facility in Utah, recorded a
restructuring charge and established a reserve for future expenses related to
the restructuring. Part of the restructuring charge related to the lease
commitment that we have through 2005. In connection with the restructuring, we
did not record the entire lease commitment as a liability because we believed
we would be able to sublet the facility. During the second quarter of fiscal
2002, we were successful in subletting the facility for the remaining lease
term. If the facility were to be vacated by the current tenant in breach of
its sublease, this would negatively affect our results of operations and cash
flows.

VALUE OF LONG-LIVED ASSETS, INCLUDING INTANGIBLES

Long-lived assets on our balance sheet consist primarily of property, plant and
equipment and trademarks. We periodically review the carrying value of all of
these assets based, in part, upon current estimated market values, and our
projections of anticipated future cash flows. We undertake this review when
facts and circumstances suggest that cash flows emanating from those assets may
be diminished. Any impairment charge that we record reduces our earnings.
While we believe that our future estimates are reasonable, different
assumptions regarding items such as future cash flows and the volatility
inherent in markets which we serve could affect our evaluations and result in
impairment charges against the carrying value of those assets.

PERFORMANCE MEASURES

We measure the performance of our retail and wholesale segments through a
segment margin calculation, which specifically identifies not only gross profit
on the sales of products through the two channels but also costs and expenses
specifically related to each segment.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

We have experienced, and may experience in the future, fluctuations in our
quarterly operating results. There are numerous factors that can contribute to
these fluctuations; however, the principal factors are seasonality and new
store openings.

Seasonality.We have historically realized higher revenues and operating
income in our fourth quarter, particularly in our retail business. We believe
that this has been due primarily to the increase in the number of our retail
stores and to increased sales in the giftware industry during the holiday
season of our fourth quarter.

New Store Openings.The timing of our new store openings may also have an
impact on our quarterly results. First, we incur certain one-time expenses
related to opening each new store. These expenses, which consist primarily of
salaries, supplies and marketing costs, are expensed as incurred. Second, most
store expenses vary proportionately with sales, but there is a fixed cost
component. This typically results in lower store profitability when a new
store opens because new stores generally have lower sales than mature stores.
Due to both of these factors, during periods when new store openings as a
percentage of the base
are higher, operating profit may decline in dollars and/or as a percentage of
sales. As the overall store base matures, the fixed cost component of selling
expenses is spread over an increased level of sales, assuming sales increase as
stores age, resulting in a decrease in selling and other expenses as a
percentage of sales.

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RESULTS OF OPERATIONS  Thirteen and Twenty-six weeks ended June 28, 2003
versus June 29, 2002

SALES

Sales increased 13.7% to $92.4 million for the thirteen weeks ended June 28,
2003 from $81.3 million for the thirteen weeks ended June 29, 2002; and
increased 11.8% to $189.4 million for the twenty-six weeks ended June 28, 2003
from $169.5 million for the twenty-six weeks ended June 29, 2002.

Wholesale sales, including European operations, increased 17.1% to $47.1
million for the thirteen weeks ended June 28, 2003 from $40.2 million for the
thirteen weeks ended June 29, 2002; and increased 16.1% to $100.2 million for
the twenty-six weeks ended June 28, 2003 from $86.3 million for the twenty-six
weeks ended June 29, 2002. This growth was achieved primarily by increasing
sales to existing customers and to a lesser extent by increasing the number of
wholesale locations.

Retail sales increased 10.2% to $45.3 million for the thirteen weeks ended June
28, 2003 from $41.1 million for the thirteen weeks ended June 29, 2002; and
increased 7.3% to $89.3 million for the twenty-six weeks ended June 28, 2003
from $83.2 million for the twenty-six weeks ended June 29, 2002. The increase
in retail sales for the thirteen and twenty-six week periods ended June 28,
2003, compared to prior year, was due primarily to increased sales attributable
to the 47 stores opened in 2002 (which in 2002 were open for less than a full
year), and to the addition of new stores opened in 2003. The increase for the
thirteen weeks ended June 28, 2003 was partially offset by a decrease in retail
comparable store sales. The increase for the twenty-six weeks ended June 28,
2003 was partially offset by a decrease in retail comparable store and catalog
and Internet sales. In addition, sales were unfavorably impacted for the
twenty-six weeks ended June 28, 2003 by the Presidents Day (February 16-17)
snowstorm which affected most of our store base in the Eastern half of the
United States. Comparable store and catalog and Internet sales decreased 5%
for the thirteen weeks ended June 28, 2003 as compared to the thirteen weeks
ended June 29, 2002 and decreased 8% for the twenty-six weeks ended June 28,
2003 as compared to the twenty-six weeks ended June 29, 2002. Retail
comparable store sales decreased 6% for the thirteen weeks ended June 28, 2003
as compared to the thirteen weeks ended June 29, 2002 and decreased 8% for the
twenty-six weeks ended June 28, 2003 as compared to the twenty-six weeks ended
June 29, 2002. The primary factor which drove the decrease in retail
comparable store sales was a decline in store traffic and mall traffic
generally. Comparable store sales represent a comparison of the sales, during
the corresponding fiscal months of the two fiscal years compared, of the stores
included in our comparable store sales base. A store first enters our
comparable store sales base after completing 13 fiscal months of operation.
There were 210 retail stores included in the comparable store base as of June
28, 2003. There were 269 retail stores open as of June 28, 2003 compared to
218 retail stores open as of June 29, 2002 and 239 retail stores open as of
December 28, 2002.

GROSS PROFIT

Gross profit increased 17.4% to $51.2 million for the thirteen weeks ended June
28, 2003 from $43.6 million for the thirteen weeks ended June 29, 2002; and
increased 16.2% to $104.1 million for the twenty-six weeks ended June 28, 2003
from $89.6 million for the twenty-six weeks ended June 29, 2002. As a
percentage of sales, gross profit increased to 55.4% for the thirteen weeks
ended June 28, 2003 from 53.6% for the thirteen weeks ended June 29, 2002; and
increased to 55.0% for the twenty-six weeks ended June 28, 2003 from 52.9% for
the twenty-six weeks ended June 29, 2002. The improvement in gross profit rate
for the thirteen weeks ended June 28, 2003 compared to the thirteen weeks ended
June 29, 2002 was primarily due to continued productivity improvements in
supply chain operations, both from a manufacturing and logistics standpoint,
and a continued focus on shrink improvement at the retail stores. The
improvement in gross profit rate for the twenty-six weeks ended June 28, 2003
compared to the twenty-six weeks ended June 29, 2002 was primarily attributable
to improvements in supply chain operations and to a lesser extent improvement
in shrink expense at the retail stores. The increase in gross profit dollars
for both the thirteen and twenty-six weeks ended June 28, 2003 compared to the
thirteen and twenty-six weeks ended June 29, 2002 was primarily attributable to
an increase in sales and to a lesser extent improved productivity in supply
chain operations.

SELLING EXPENSES

Selling expenses increased 19.5% to $26.8 million for the thirteen weeks ended
June 28, 2003 from $22.4 million for the thirteen weeks ended June 29, 2002;
and increased 18.0% to $51.5 million for the twenty-six weeks ended June 28,
2003 from $43.7 million for the twenty six weeks ended June 29, 2002. These
expenses are related to both wholesale and retail operations and consist of
payroll, occupancy, advertising and other operating costs, as well as
pre-opening costs, which are expensed as incurred. As a percentage of sales,
selling expenses increased to 29.0% for the thirteen weeks ended June 28, 2003
from 27.6% for the thirteen weeks ended June 29, 2002; and increased to 27.2%
for the twenty-six weeks ended June 28, 2003 from 25.8% for the twenty-six
weeks ended June 29, 2002. The increase in selling expenses in dollars and as
a percentage of sales was primarily related to the continued growth in the
number of retail stores, from 239 as of December 28, 2002 to 269 as of June 28,
2003, the effect of which is an increase in the

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weighting of immature stores. Immature stores are generally stores that are
less than four years old. Immature stores typically generate higher selling
expenses as a percentage of sales than stores that have been open for more than
four years since fixed costs, as a percent of sales, are higher during the
early sales maturation period. The increase in selling expense as a percentage
of sales for 2003 is also explained by the decrease in retail comparable store
sales since the fixed components of labor and occupancy do not decrease with
negative comparable store sales.

SEGMENT PROFITABILITY

Segment profitability is sales less cost of goods sold and selling expenses.
Segment profitability for our wholesale operations, including Europe, was $18.6
million, or 39.4% of wholesale sales for the thirteen weeks ended June 28, 2003
compared to $16.4 million or 40.7% of wholesale sales for the thirteen weeks
ended June 29, 2002. Segment profitability for our retail operations was $5.8
million, or 12.8% of retail sales, for the thirteen weeks ended June 28, 2003
compared to $4.7 million, or 11.6% of retail sales, for the thirteen weeks
ended June 29, 2002. The increase in wholesale segment profitability in
dollars was primarily attributable to increased wholesale sales and improved
productivity in supply chain operations. The decrease in wholesale segment
profitability as a percentage of sales was primarily due to an increase in
sales mix of non-candle products, which generally have lower margins than our
candle products, offset in part by improved productivity in supply chain
operations. The increase in retail segment profitability was primarily
attributable to an increase in sales, improved productivity in supply chain
operations and a decrease in shrink expense offset in part by a decrease in
retail comparable store sales and the impact of our most immature stores, the
2002 and 2003 store classes.

Segment profitability for our wholesale operations, including Europe, was $40.5
million, or 40.4% of wholesale sales for the twenty-six weeks ended June 28,
2003 compared to $34.1 million or 39.5% of wholesale sales for the twenty-six
weeks ended June 29, 2002. Segment profitability for our retail operations was
$12.1 million, or 13.5% of retail sales, for the twenty-six weeks ended June
28, 2003 compared to $11.9 million, or 14.3% of retail sales, for the
twenty-six weeks ended June 29, 2002. The increase in wholesale segment
profitability was primarily attributable to increased wholesale sales and
improved productivity in supply chain operations. The increase in retail
segment profitability in dollars was primarily attributable to an increase in
sales, improved productivity in supply chain operations and a decrease in
shrink expense, offset in part by a decrease in retail comparable store sales.
The decrease in retail segment profitability as a percentage of sales was
primarily due to the decrease in retail comparable store sales and the impact
of our most immature stores, the 2002 and 2003 store classes, offset in part by
improved productivity in supply chain operations.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses, which consist primarily of
personnel-related costs incurred in support functions, increased 12.6% to $11.7
million for the thirteen weeks ended June 28, 2003 from $10.4 million for the
thirteen weeks ended June 29, 2002; and increased 11.9% to $24.1 million for
the twenty-six weeks ended June 28, 2003 from $21.6 million for the twenty-six
weeks ended June 29, 2002. As a percentage of sales, general and
administrative expenses decreased to 12.6% for the thirteen weeks ended June
28, 2003 from 12.8% for the thirteen weeks ended June 29, 2002; and was 12.7%
for both the twenty-six weeks ended June 28, 2003 and June 29, 2002. The
increase in general and administrative expenses in dollars for the thirteen and
twenty-six weeks ended June 28, 2003 compared to June 29, 2002 was primarily
attributable to consulting costs related to a strategic planning project that
began in late February, increased insurance costs associated with the Companys
Directors and Officers insurance policy and to a lesser extent headcount
additions in the latter part of 2002 and in 2003. The decrease in general and
administrative expenses as a percentage of sales for the thirteen weeks ended
June 28, 2003 was primarily attributable to the Companys leveraging of these
expenses over a larger sales base and its continued focus on expense control.

NET OTHER EXPENSE

Net other expense was $0.8 million for the thirteen weeks ended June 28, 2003,
compared to $1.1 million for the thirteen weeks ended June 29, 2002; and $1.7
million for the twenty-six weeks ended June 28, 2003, compared to $2.5 million
for the twenty-six weeks ended June 29, 2002. The primary component of the
expense in each of these periods was interest expense, which was $0.8 million
in the thirteen weeks ended June 28, 2003 compared to $1.2 million in the
thirteen weeks ended June 29, 2002; and $1.6 million in the twenty-six weeks
ended June 28, 2003 compared to $2.5 million for the twenty-six weeks ended
June 29, 2002. Interest expense in the thirteen and twenty-six weeks ended
June 28, 2003 decreased compared to
the thirteen and twenty-six weeks ended June 29, 2002 primarily due to a
reduction in the total debt outstanding from $103.5 million at June 29, 2002 to
$49.0 million at June 28, 2003.

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PROVISION FOR INCOME TAXES

The effective tax rate was 39.5% for both the thirteen and twenty-six weeks
ended June 28, 2003 and 39.0% for both the thirteen and twenty-six weeks ended
June 29, 2002. We are currently providing a valuation allowance against the
net deferred tax asset for our international operations. As a result, it is
anticipated that our effective tax rate for 2003 will be approximately 39.5%.
We re-evaluate our effective tax rate on a quarterly basis.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents at June 28, 2003 decreased by $35.2 million compared
to December 28, 2002. This decrease was partially attributable to cash used in
operating activities of $4.4 million, which includes $27.5 million of corporate
income tax payments for fiscal 2002 and first and second quarter estimates for
fiscal 2003. Capital expenditures for the twenty-six weeks ended June 28, 2003
were $9.7 million, primarily related to the capital requirements to open 29 new
stores and investments in manufacturing and logistics operations. Net cash
used in financing activities was $21.0 million for the twenty-six weeks ended
June 28, 2003 which primarily represents principal payments on long-term debt
of $16.0 million, $9.8 million of payments for the redemption of common stock,
which were offset in part by $4.5 million of borrowings under the credit
facility.

On May 9, 2003 we announced that our Board of Directors had approved a stock
repurchase program authorizing us to repurchase up to $100.0 million of our
common stock. During the fiscal 2003 second quarter we repurchased a total of
426,100 shares of our common stock for an aggregate purchase price of $9.8
million. All 426,100 shares were repurchased in June 2003.

We opened 29 stores, closed two stores and converted three temporary outlet
stores to permanent locations with multi-year leases during the twenty-six
weeks ended June 28, 2003 and we expect to open approximately 17 additional
stores during the last two quarters of fiscal 2003. We expect to meet our cash
requirements through a combination of available cash, operating cash flow and
borrowings under our credit facility.

As of June 28, 2003, we were in compliance with all covenants under our credit
facility. Available borrowings under the revolving credit facility were $136.0
million. See our most recent Annual Report on Form 10-K for a description of
the credit facility. This facility will expire on July 7, 2004. We expect to
have a new credit facility in place before the existing credit facility
expires.

We expect that the principal sources of funding for our planned store openings
and other working capital needs, capital expenditures, debt service obligations
and stock repurchase program will be a combination of our available cash and
cash equivalents, funds generated from operations, and borrowings under our
credit facility. We believe that our current funds and sources of funds will
be sufficient to fund our liquidity needs for at least the next 12 months.
However, there are a number of factors that may negatively impact our available
sources of funds. The amount of cash generated from operations will be
dependent upon factors such as the successful execution of our business plan
and worldwide economic conditions. In addition, borrowings under our credit
facility are dependent upon our continued compliance with the financial and
other covenants contained therein.

FUTURE OPERATING RESULTS

As referenced above, there are a number of factors that might cause our actual
results to differ significantly from the results reflected by the
forward-looking statements contained herein. In addition to factors generally
affecting the political, economic and competitive conditions in the United
States and abroad, such factors include those set forth below.

If we fail to grow our business as planned, our business could suffer and
financial results could decline. As we grow it will be difficult to maintain
our historical growth rates.

We intend to continue to pursue a business strategy of increasing sales and
earnings by expanding our retail and wholesale operations both in the United
States and internationally. Our current plans are to grow internally and not by
acquisition, although from time to time we do consider possible acquisition
candidates. In particular, our retail growth strategy depends in large part on
our ability to open new stores
in both existing and new geographic markets. Since our ability to implement our
growth strategy successfully will be dependent in part on factors beyond our
control, including consumer preferences and the competitive environment, we may
not be able to achieve our planned growth or sustain our financial performance.
Our ability to anticipate changes in the candle and giftware industries, and
identify industry trends, will be critical factors in our ability to remain
competitive.

We expect that, as we grow, it will become more difficult to maintain our
historical growth rate, which could negatively impact our operating margins and
results of operations. New stores typically generate lower operating

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margin contributions than mature stores because fixed costs, as a percentage of
sales, are higher and because pre-opening costs are fully expensed in the year
of opening. In addition, our retail sales generate lower margins than our
wholesale sales. Our wholesale business has grown by increasing sales to
existing customers and by adding new customers. If we are not able to continue
this, our sales growth and profitability could be adversely affected. In
addition, if we do not effectively manage our growth, we may experience
problems such as the supply chain inefficiencies that occurred in 2000 due to
overstaffing in our manufacturing and logistics operations. These
inefficiencies were corrected in 2001 through a workforce reduction and the
closing of our Salt Lake City distribution center, but resulted in a decline in
our gross profit in the last quarter of 2000 and a restructuring charge of $8.0
million in 2001. We cannot assure you that we will continue to grow at a rate
comparable to our historic growth rate or that our historic financial
performance will continue as we grow.

We face significant competition in the giftware industry. This competition
could cause our revenues or margins to fall short of expectations which could
adversely affect our future operating results, financial condition and
liquidity and our ability to continue to grow our business.

We compete generally for the disposable income of consumers with other
producers in the giftware industry. The giftware industry is highly
competitive with a large number of both large and small participants. Our
products compete with other scented and unscented candle and personal care
products and with other gifts within a comparable price range, like boxes of
candy, flowers, wine, fine soap and related merchandise. Our retail stores
compete with franchised candle store chains, specialty candle stores and gift
and houseware retailers. Some of our competitors are part of large,
diversified companies which have greater financial resources and a wider range
of product offerings than we do. This competitive environment could adversely
affect our future revenues and profits, financial condition and liquidity and
our ability to continue to grow our business.

A material decline in consumers discretionary income could cause our sales and
income to decline.

Our results depend on consumer spending, which is influenced by general
economic conditions and the availability of discretionary income. Accordingly,
we may experience declines in sales during economic downturns or during periods
of uncertainty like that which followed the September 11, 2001 terrorist
attacks on the United States or which result from the threat of war or the
possibility of further terrorist attacks. Any material decline in the amount
of discretionary spending could have a material adverse effect on our sales and
income.

Because we are not a diversified company and are effectively dependent upon one
industry, we have less flexibility in reacting to unfavorable consumer trends,
adverse economic conditions or business cycles.

We rely primarily on the sale of premium scented candles and related products
in the giftware industry. In the event that sales of these products decline or
do not meet our expectations, we cannot rely on the sales of other products to
offset such a shortfall. As a significant portion of our expenses is comprised
of fixed costs, such as lease payments, our ability to decrease expenses in
response to adverse business conditions is limited in the short term. As a
result, unfavorable consumer trends, adverse economic conditions or changes in
the business cycle could have a material and adverse impact on our earnings.

If we lose our senior executive officers, our business could be disrupted and
our financial performance could suffer.

Our success is substantially dependent upon the retention of our senior
executive officers. If our senior executive officers become unable or
unwilling to participate in our business, our future business and financial
performance could be materially affected.

Many aspects of our manufacturing and distribution facilities are customized
for our business; as a result, the loss of one of these facilities would
disrupt our operations.

Approximately 76% of our sales are generated by products we manufacture at our
manufacturing facility in Whately, Massachusetts and we rely primarily on our
distribution facilities in South Deerfield, Massachusetts to distribute our
products. Because most of our machinery is designed or customized by us to
manufacture our products, and because we have strict quality control standards
for our products, the loss of our manufacturing facility, due to natural
disaster or otherwise, would materially affect our operations. Similarly, our
distribution facilities rely upon customized machinery, systems and operations,
the loss of
which would materially affect our operations. Although our manufacturing and
distribution facilities are adequately insured, we believe it would take up to
twelve months to resume operations at a level equivalent to current operations.

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Seasonal, quarterly and other fluctuations in our business, and general
industry and market conditions, could affect the market for our common stock.

Our sales and operating results vary from quarter to quarter. We have
historically realized higher sales and operating income in our fourth quarter,
particularly in our retail business, which accounts for a larger portion of our
sales. We believe that this has been due primarily to an increase in giftware
industry sales during the holiday season of the fourth quarter. As a result of
this seasonality, we believe that quarter to quarter comparisons of our
operating results are not necessarily meaningful and that these comparisons
cannot be relied upon as indicators of future performance. In addition, we may
also experience quarterly fluctuations in our sales and income depending on
various factors, including, among other things, the number of new retail stores
we open in a particular quarter, changes in the ordering patterns of our
wholesale customers during a particular quarter, and the mix of products sold.
Most of our operating expenses, such as rent expense, advertising and
promotional expense and employee wages and salaries, do not vary directly with
sales and are difficult to adjust in the short term. As a result, if sales
for a particular quarter are below our expectations, we might not be able to
proportionately reduce operating expenses for that quarter, and therefore a
sales shortfall could have a disproportionate effect on our operating results
for that quarter. Further, our comparable store sales from our retail business
in a particular quarter could be adversely affected by competition, economic or
other general conditions or our inability to execute a particular business
strategy. As a result of these factors, we may report in the future sales,
operating results or comparable store sales that do not match the expectations
of market analysts and investors. This could cause the trading price of our
common stock to decline. In addition, broad market and industry fluctuations
may adversely affect the price of our common stock, regardless of our operating
performance.

Public health epidemics such as Severe Acute Respiratory Syndrome may affect
our operating results.

Approximately 12% of our sales in 2002 were generated by products, primarily
accessories, that we purchased overseas. Substantially all of these products
were purchased from East Asia. A sustained interruption of the operations of
our suppliers, as a result of the impact of Severe Acute Respiratory Syndrome
or other similar health epidemics, could have an adverse effect on our ability
to receive timely shipments of certain of our products and could result in
scrutiny or embargoing of goods produced in infected areas.

Provisions in our corporate documents and Massachusetts law could delay or
prevent a change in control of Yankee Candle.

Our Articles of Organization and By-Laws may discourage, delay or prevent a
merger or acquisition involving Yankee Candle that our stockholders may
consider favorable, by:



| |  | authorizing the issuance of preferred stock, the terms of which may be determined at the sole discretion of the board of
directors,                                       
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | providing for a classified board of directors, with staggered three-year terms, and                                                                                       
| 
| |  | establishing advance notice requirements for nominations for election to the board of directors or for proposing matters
that can be acted on by stockholders at meetings.

Massachusetts law may also discourage, delay or prevent someone from acquiring
or merging with us.

We do not currently intend to pay dividends on our capital stock.

We have never paid a cash dividend on our common stock as a public company and
we do not currently intend to pay any cash dividends in the foreseeable future.
Any determination to pay dividends in the future will be at the discretion of
our board of directors and will be dependent upon our results of operations,
our financial condition, contractual and legal restrictions, and other factors
deemed relevant by our board of directors. Under the terms of our existing
credit agreement, we may not declare or pay dividends on our common stock
unless our ratio of consolidated total debt to consolidated EBITDA (as defined
in our credit agreement) is less than or equal to 2:1 or our aggregate
principal amount of loans and letters of credit outstanding is less than $100
million. Although we meet this requirement, we do not currently intend to pay
dividends.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our market risks relate primarily to changes in interest rates. We bear this
risk in our outstanding bank debt. At June 28, 2003, there was $49.0 million
of bank debt outstanding, which consisted of $35.0 million in term loans and
$14.0 million from our revolving credit facility. Because this bank debt
carries a variable interest rate pegged to market indices, our results of
operations and cash flows are exposed to changes in interest rates.

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We buy a variety of raw materials for inclusion in our products. The only raw
material that we consider to be of a commodity nature is wax. Wax is a
petroleum-based product; however, its market price has not historically
fluctuated with the movement of oil prices. Rather, over the past five years
wax prices have moved with inflation.

At this point in time, our operations outside of the United States are
immaterial. Accordingly, we are not exposed to substantial risks arising from
foreign currency exchange rates.




Item 4. Controls and Procedures

Our management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
as of June 28, 2003. Based on this evaluation, our chief executive officer and
chief financial officer concluded that, as of June 28, 2003, our disclosure
controls and procedures were (1) designed to ensure that material information
relating to the Company, including its consolidated subsidiaries, is made known
to our chief executive officer and chief financial officer by others within
those entities, particularly during the period in which this report was being
prepared and (2) effective, in that they provide reasonable assurance that
information that we are required to disclose in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and forms.

No change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal
quarter ended June 28, 2003 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.




PART II. OTHER INFORMATION






|Item 1. |  | Legal Proceedings
|------- |  | -----------------
|       
|        |  | Not Applicable   






|Item 2. |  | Changes in Securities and Use of Proceeds
|------- |  | -----------------------------------------
|       
|        |  | Not Applicable                           






|Item 3. |  | Defaults Upon Senior Securities
|------- |  | -------------------------------
|       
|        |  | Not Applicable                 






|Item 4. |  | Submission of Matters to a Vote of Security Holders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | The Company held its 2003 Annual Meeting of Stockholders (the Annual
Meeting) on June 11, 2003. At the Annual Meeting, the following
matters were submitted to a vote of the stockholders and the
following actions were taken with respect thereto:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        |  | The Stockholders elected Theodore J. Forstmann, Jamie C. Nicholls,
Robert R. Spellman and Michael B. Polk as Class I directors of the
Company, to serve until the 2006 Annual Meeting or until their
successors are duly elected and qualified. According to the report
of the Inspector of Election, holders of at least 98.97 percent of
the votes cast at the Annual Meeting voted in favor of each of the
nominees. Holders of at least 47,744,630 shares of common stock
voted to elect Mr. Forstmann. Holders of at least 47,743,838 shares
of common stock voted to elect Ms. Nicholls. Holders of at least
47,748,010 shares of common stock voted to elect Mr. Spellman.
Holders of at least 22,332,740 shares of common stock voted to elect
Mr. Polk.
|       
|        |  | The stockholders voted to ratify the appointment of Deloitte & Touche
L.L.P. as the Companys independent auditors for the current fiscal
year. Holders of at least 48,198,011 shares of common stock voted in
favor, 33,276 shares of common stock against, and 9,824 shares of
common stock abstained.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       
|        |  | No other matters were submitted to a vote of the stockholders at the
Annual Meeting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            






|Item 5. |  | Other Information
|------- |  | -----------------
|       
|        |  | Not Applicable   






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

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| | (a) | Exhibits                                                                                                                                                  
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     | Exhibit 31.1 Certification of Craig W. Rydin pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.                                                   
|
| |     | Exhibit 31.2 Certification of Robert R. Spellman pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|
| |     | Exhibit 32.1 Certification of Craig W. Rydin pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.    
|
| |     | Exhibit 32.2 Certification of Robert R. Spellman 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                                                                                                                                       
|
| |     | We furnished the following report on Form 8-K
during the three months ended
June 28, 2003:                                                                
|
| |     | Form 8-K, regarding the announcement of our earnings
for the first quarter of fiscal 2003,
furnished to the SEC on April 23, 2003.                        






| |  | SIGNATURES
| |  | ----------

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

|                      |  |                                
|--------------------- |  | -------------------------------
|                      |  | THE YANKEE CANDLE COMPANY, INC.
|                      |  |                                
|                      |  | /s/ Robert R. Spellman         
|                      |  |                                
|Date: August 11, 2003 |  | By: Robert R. Spellman         
|                      |  | Senior Vice President, Finance 
|                      |  | and Chief Financial Officer    
|                      |  | (Principal Financial Officer)  

18