**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington D.C. 20549**

 

**FORM 10-Q/A**

**(**Amendment No. 2)

** **

**(MarkOne)**

 
| **ý** | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934**                                                                                                                                                                                                                             |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                     |
| ** ** | ** ** | **For the quarterly period ended April 30, 2004**                                                                                                                                                                                                                                                                         |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                     |
| **or**     |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                     |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934**                                                                                                                                                                                                                            |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                     |
| ** ** | ** ** | **For the transition period from                           to                         ** |

 

**Commission file number 1-13026**

 

**BLYTH, INC.**

(Exact name of registrant as specified in its charter)

 
| **DELAWARE**                                                                                               | ** ** | **36-2984916**                    |
|------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|
| (State or other jurisdiction of incorporation or  organization)                                            |       | (IRS Employer Identification No.) |
|                                                                                                       |       |                              |
| **One East Weaver Street, Greenwich, Connecticut  06831**                                                  |
| (Address of principal  executive offices)         (Zip  Code) |
|                                                                                                       |       |                              |
| **(203) 661-1926**                                                                                         |
| (Registrant’s telephone number, including area code)                                                  |
|                                                                                                       |
| **Not Applicable**                                                                                         |
| (Former name, former address and former fiscal year,  if changed since last report)                        |

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.

Yes ý     Noo

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Exchange Act Rule12b-2).

Yes ý     Noo

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.

 

**45,678,927 Common Shares as of June 4,2004**

 

 

----

 

### **ExplanatoryNote**

### ** **

In our filing on Form10-Q/A Amendment No. 1 for the quarter ended April 30, 2004 filed with theSecurities and Exchange Commission on December 16, 2004 we disclosed thatthe interim financial statements for the three-month period ended April 30,2003 included therein had not been reviewed by an independent registered publicaccounting firm, as required by Section 10-01(d) of Regulation S-X.  This Form 10-Q/A Amendment No. 2 is beingfiled to remedy that deficiency.  Thisamended quarterly report has not required any change to the ConsolidatedFinancial Statements included in Amendment No. 1 except for corrections oftypographical errors in the fiscal 2004 Consolidated Statement of Cash Flowsand the Employee Stock Options table in Footnote 1 and to replace the April 30,2003Identifiable Assets with the January 31, 2003 Identifiable Assets in the SegmentInformation in Footnote 6.

 

2

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**INDEX**

#### ** **

| Form 10-Q  Cover Page                                              |                     |
|--------------------------------------------------------------------|--------------------------|
|                                                               |                     |
| Explanatory  Note                                                  |                     |
|                                                               |                     |
| Form 10-Q Index                                                    |                     |
|                                                               |                     |
| Part  I.      Financial Information: |                     |
|                                                               |                     |   |
| Item 1.                                                            | Financial Statements:    |   |
|                                                               |                     | Consolidated Balance Sheets |   |
|                                                               |                     |   |   |
|                                                               |                     | Consolidated  Statements of Earnings |   |
|                                                               |                     |   |   |
|                                                               |                     | Consolidated  Statements of Stockholders’ Equity |   |
|                                                               |                     |   |   |
|                                                               |                     | Consolidated  Statements of Cash Flows |   |
|                                                               |                     |   |   |
|                                                               |                     | Notes to  Consolidated Financial Statements |   |
|                                                               |                     |   |   |
| Item 4.                                                            | Controls and  Procedures |   |
|                                                               |                     |   |
| Part  II.     Other Information           |                     |
|                                                               |                     |   |
| Item 5.                                                            | Other Information        |   |
|                                                               |                     |   |
| Item 6.                                                            | Exhibits                 |   |
|                                                               |                     |
| Signatures                                                         |                     |
|                                                                    |                          |  |  |  |

 

3

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Part I.   FINANCIAL  INFORMATION

Item 1.  FINANCIAL STATEMENTS

 

**BLYTH, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

 
| **(In thousands, except share and per share data)**                                                                            | ** ** | **April 30,  2004** | ** ** | **January 31,  2004** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|----------------------------|------------|
| ** **                                                                                                                     | ** ** | **(Unaudited)**          | ** ** | ** **                 | ** ** |
| **ASSETS**                                                                                                                     | ** ** | ** **               | ** ** | ** **                 | ** ** |
| **Current assets:**                                                                                                            |       |                     |       |                       |       |
| Cash and cash equivalents                                                                                                      |       | $                        | 232,267    |                       | $          | 229,726 |   |
| Accounts receivable, less allowance for doubtful  receivables of $3,879 and $4,470 respectively                                |       | 101,533                  |       | 104,502                    |       |
| Inventories                                                                                                                    |       | 212,388                  |       | 208,581                    |       |
| Prepaid and other                                                                                                              |       | 45,271                   |       | 40,302                     |       |
| Short-term investment                                                                                                          |       | 10,000                   |       | —                     |       |
| Assets held for sale                                                                                                           |       | 1,085                    |       | 9,437                      |       |
| Deferred income taxes                                                                                                          |       | 13,649                   |       | 14,191                     |       |
| Total current assets                                                                                                           |       | 616,193                  |       | 606,739                    |       |
| **Property, plant and equipment, at cost:**                                                                                    |       |                     |       |                       |       |
| Less accumulated depreciation of $217,623 and  $210,961, respectively                                                          |       | 254,431                  |       | 260,497                    |       |
| **Other assets:**                                                                                                              |       |                     |       |                       |       |
| Investments                                                                                                                    |       | 12,487                   |       | 3,510                      |       |
| Goodwill                                                                                                                       |       | 207,120                  |       | 204,093                    |       |
| Other intangible assets, net of accumulated  amortization of $2,075 and $1,500, respectively                                   |       | 41,025                   |       | 41,600                     |       |
| Deposits and other assets                                                                                                      |       | 11,754                   |       | 11,524                     |       |
|                                                                                                                           |       | 272,386                  |       | 260,727                    |       |
| Total assets                                                                                                                   |       | $                        | 1,143,010  |                       | $          | 1,127,963 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                  |       |                     |       |                       |       |
| **Current liabilities:**                                                                                                       |       |                     |       |                       |       |
| Bank lines of credit                                                                                                           |       | $                        | 20,727     |                       | $          | 13,621 |   |
| Current maturities of long-term debt                                                                                           |       | 4,476                    |       | 4,522                      |       |
| Accounts payable                                                                                                               |       | 58,220                   |       | 78,407                     |       |
| Accrued expenses                                                                                                               |       | 103,048                  |       | 97,395                     |       |
| Dividend payable                                                                                                               |       | 7,757                    |       | —                     |       |
| Liability associated with assets held for sale                                                                                 |       | —                   |       | 508                        |       |
| Income taxes                                                                                                                   |       | 17,689                   |       | 11,746                     |       |
| Total current liabilities                                                                                                      |       | 211,917                  |       | 206,199                    |       |
| **Deferred income taxes**                                                                                                      |       | 35,393                   |       | 33,773                     |       |
| **Long-term debt,****less current maturities**                                                                                 |       | 275,409                  |       | 275,743                    |       |
| **Minority interest and other**                                                                                                |       | 23,542                   |       | 23,278                     |       |
| **Commitments and contingencies**                                                                                              |       | —                   |       | —                     |       |
| **Stockholders’ equity:**                                                                                                 |       |                     |       |                       |       |
| Preferred stock - authorized 10,000,000 shares of  $0.01 par value; no shares issued                                           |       | —                   |       | —                     |       |
| Common stock - authorized 100,000,000 shares of  $0.02 par value; issued 50,180,027 shares and 49,975,502 shares, respectively |       | 1,004                    |       | 999                        |       |
| Additional contributed capital                                                                                                 |       | 113,486                  |       | 107,965                    |       |
| Retained earnings                                                                                                              |       | 580,089                  |       | 570,171                    |       |
| Accumulated other comprehensive income                                                                                         |       | 14,216                   |       | 15,224                     |       |
| Treasury stock, at cost, 4,546,800 shares and  4,345,100 shares, respectively                                                  |       | (112,046                 | )          | (105,389                   | )          |
| Total stockholders’ equity                                                                                                |       | 596,749                  |       | 588,970                    |       |
| Total liabilities and stockholders’ equity                                                                                |       | $                        | 1,143,010  |                       | $          | 1,127,963 |   |

 

***Theaccompanying notes are an integral part of these financial statements.***

 

4

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**BLYTH, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF EARNINGS**

 
| **Three months ended April 30,****(Unaudited,  in thousands, except per share data)** | ** ** | **2004**   | ** ** | **2003**   | ** ** |
|--------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                                                                  |       | $          | 358,980    |       | $          | 311,991 |   |
| Cost of goods sold                                                                         |       | 175,969    |       | 150,595    |       |
| Gross profit                                                                               |       | 183,011    |       | 161,396    |       |
| Selling                                                                                    |       | 115,075    |       | 97,069     |       |
| Administrative                                                                             |       | 33,675     |       | 30,069     |       |
|                                                                                       |       | 148,750    |       | 127,138    |       |
| Operating profit                                                                           |       | 34,261     |       | 34,258     |       |
| Other expense (income):                                                                    |       |       |       |       |       |
| Interest expense                                                                           |       | 5,209      |       | 3,590      |       |
| Interest income and other                                                                  |       | (891       | )          | (591       | )          |
| Equity in loss of investee                                                                 |       | 23         |       | 135        |       |
|                                                                                       |       | 4,341      |       | 3,134      |       |
| Earnings before income taxes and minority interest                                         |       | 29,920     |       | 31,124     |       |
| Income tax expense                                                                         |       | 12,195     |       | 11,453     |       |
| Earnings before minority interest                                                          |       | 17,725     |       | 19,671     |       |
| Minority interest                                                                          |       | (50        | )          | (44        | )          |
| Net earnings                                                                               |       | $          | 17,675     |       | $          | 19,627 |   |
| Basic:                                                                                     |       |       |       |       |       |
| Net earnings per common share                                                              |       | $          | 0.39       |       | $          | 0.43 |   |
| Weighted average number of shares outstanding                                              |       | 45,665     |       | 46,080     |       |
| Diluted:                                                                                   |       |       |       |       |       |
| Net earnings per common share                                                              |       | $          | 0.38       |       | $          | 0.42 |   |
| Weighted average number of shares outstanding                                              |       | 46,105     |       | 46,208     |       |

 

***Theaccompanying notes are an integral part of these financial statements.***

 

5

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**BLYTH, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**

 
| ** **                                                          | ** ** | **Common stock** | ** ** | **Additional  contributed** | ** ** | **Retained** | ** ** | **Treasury stock** | ** ** | **Accumulated  other  comprehensive** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------|------------|------------------|------------|-----------------------------|------------|--------------|------------|--------------------|------------|---------------------------------------|------------|------------|------------|
| **(Unaudited, in thousands, except share  data)**                   | ** ** | **Shares**       | ** ** | **Amount**                  | ** ** | **capital**  | ** ** | **earnings**       | ** ** | **Shares**                            | ** ** | **Amount** | ** ** | **income (loss)** | ** ** | **Total** | ** ** |
| ** **                                                          | ** ** | ** **       | ** ** | ** **                  | ** ** | ** **   | ** ** | ** **         | ** ** | ** **                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **For the three months ended April 30, 2003:**                 |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| Balance,  January 31, 2003                                     |       | 49,703,682       |       | $                           | 994        |         | $          | 101,567            |       | $                                     | 496,627    |       | (3,644,100 | ) | $ | (86,585 | ) | $ | (4,751 | ) | $ | 507,852 |   |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| Net  earnings for the period                                        |       |             |       |                        |       |         |       | 19,627             |       |                                  |       |       |       |   |   | 19,627 |   |
| Foreign  currency translation adjustments                           |       |             |       |                        |       |         |       |               |       |                                  |       |       |       | (544 | ) | (544 | ) |
| Unrealized holding gain on certain investments (net  of tax of $31) |       |             |       |                        |       |         |       |               |       |                                  |       |       |       | 52 |   | 52 |   |
| Net loss on cash flow hedging instruments (net of tax  of $217)     |       |             |       |                        |       |         |       |               |       |                                  |       |       |       | (373 | ) | (373 | ) |
| Comprehensive income                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   | 18,762 |   |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| Common stock issued in connection with exercise of  stock options   |       | 29,545           |       | 1                           |       | 334          |       |               |       |                                  |       |       |       |   |   | 335 |   |
| Tax  benefit from stock options                                     |       |             |       |                        |       | 5            |       |               |       |                                  |       |       |       |   |   | 5 |   |
| Dividends  declared                                                 |       |             |       | —                      |       |         |       | (5,979             | )          |                                  |       |       |       |   |   | (5,979 | ) |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| Treasury  stock purchases                                           |       | —           |       |                        |       |         |       |               |       | (111,800                              | )          | (2,828     | )          |   |   | (2,828 | ) |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| Balance,  April 30, 2003                                       |       | 49,733,227       |       | $                           | 995        |         | $          | 101,906            |       | $                                     | 510,275    |       | (3,755,900 | ) | $ | (89,413 | ) | $ | (5,616 | ) | $ | 518,147 |   |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| **For the three months ended April 30, 2004:**                 | ** ** | ** **       | ** ** | ** **                  | ** ** | ** **   | ** ** | ** **         | ** ** | ** **                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                          | ** ** | ** **       | ** ** | ** **                  | ** ** | ** **   | ** ** | ** **         | ** ** | ** **                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Balance,  January 31, 2004                                     |       | 49,975,502       |       | $                           | 999        |         | $          | 107,965            |       | $                                     | 570,171    |       | (4,345,100 | ) | $ | (105,389 | ) | $ | 15,224 |   | $ | 588,970 |   |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| Net  earnings for the period                                        |       |             |       |                        |       |         |       | 17,675             |       |                                  |       |       |       |   |   | 17,675 |   |
| Foreign  currency translation adjustments                           |       |             |       |                        |       |         |       |               |       |                                  |       |       |       | (1,192 | ) | (1,192 | ) |
| Unrealized holding loss on certain investments (net  of tax of $13) |       |             |       |                        |       |         |       |               |       |                                  |       |       |       | (24 | ) | (24 | ) |
| Net gain on cash flow hedging instruments (net of tax  of $117)     |       |             |       |                        |       |         |       |               |       |                                  |       |       |       | 208 |   | 208 |   |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| Comprehensive income                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   | 16,667 |   |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| Common stock issued in connection with exercise of  stock options   |       | 204,525          |       | 5                           |       | 5,385        |       |               |       |                                  |       |       |       |   |   | 5,390 |   |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| Tax  benefit from stock options                                     |       |             |       |                        |       | 136          |       |               |       |                                  |       |       |       |   |   | 136 |   |
| Dividends  declared                                                 |       |             |       |                        |       | —       |       | (7,757             | )          |                                  |       |       |       |   |   | (7,757 | ) |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| Treasury  stock purchases                                           |       |             |       |                        |       |         |       | —             |       | (201,700                              | )          | (6,657     | )          |   |   | (6,657 | ) |
|                                                                |       |             |       |                        |       |         |       |               |       |                                  |       |       |       |   |   |   |   |
| Balance,  April 30, 2004                                       |       | 50,180,027       |       | $                           | 1,004      |         | $          | 113,486            |       | $                                     | 580,089    |       | (4,546,800 | ) | $ | (112,046 | ) | $ | 14,216 |   | $ | 596,749 |   |
|                                                                     |            |                  |            |                             |            |              |            |                    |            |                                       |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

***The accompanying notes are an integral part of thesefinancial statements.***

 

6

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**BLYTH,INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

 
| **Three months ended April 30, (Unaudited, in thousands)**                       | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Cash flows from operating activities:                                                 |       |     |       |     |       |
| Net earnings                                                                          |       | $        | 17,675     |     | $          | 19,627 |   |
| Adjustments to reconcile net earnings to net cash  provided by operating activities:  |       |     |       |     |       |
| Depreciation and amortization                                                         |       | 9,048    |       | 7,872    |       |
| Tax benefit from stock options                                                        |       | 136      |       | 5        |       |
| Deferred income taxes                                                                 |       | 2,357    |       | (598     | )          |
| Equity in earnings of investee                                                        |       | 23       |       | 135      |       |
| Minority interest                                                                     |       | (13      | )          | 150      |       |
| Gain on sale of assets held for sale                                                  |       | (364     | )          | —   |       |
| Changes in operating assets and liabilities, net of  effect of business acquisitions: |       |     |       |     |       |
| Accounts receivable                                                                   |       | 2,452    |       | 569      |       |
| Inventories                                                                           |       | (4,518   | )          | (1,370   | )          |
| Prepaid and other                                                                     |       | (1,234   | )          | (4,584   | )          |
| Deposits and other assets                                                             |       | (240     | )          | (305     | )          |
| Goodwill disposed of due to sale of assets held for  sale                             |       | (3,621   | )          | —   |       |
| Accounts payable                                                                      |       | (18,859  | )          | (3,651   | )          |
| Accrued expenses                                                                      |       | 6,156    |       | (7,889   | )          |
| Other liabilities                                                                     |       | 628      |       | 1,109    |       |
| Income taxes                                                                          |       | 6,124    |       | 10,606   |       |
| Total adjustments                                                                     |       | (1,925   | )          | 2,049    |       |
| Net cash provided by operating activities                                             |       | 15,750   |       | 21,676   |       |
| Cash flows from investing activities:                                                 |       |     |       |     |       |
| Purchases of property, plant and equipment                                            |       | (2,953   | )          | (2,875   | )          |
| Purchases of investments                                                              |       | (19,000  | )          | —   |       |
| Purchases of long-term investment                                                     |       | —   |       | (360     | )          |
| Proceeds from sale of assets held for sale                                            |       | 9,752    |       | —   |       |
| Purchase of businesses, net of cash acquired                                          |       | (6,565   | )          | (65,974  | )          |
| Net cash used in investing activities                                                 |       | (18,766  | )          | (69,209  | )          |
| Cash flows from financing activities:                                                 |       |     |       |     |       |
| Proceeds from issuance of common stock                                                |       | 5,390    |       | 335      |       |
| Purchase of treasury stock                                                            |       | (6,657   | )          | (2,828   | )          |
| Borrowings from bank line of credit                                                   |       | 13,816   |       | 11,643   |       |
| Repayments on bank line of credit                                                     |       | (6,716   | )          | (3,663   | )          |
| Repayments on long-term debt                                                          |       | (188     | )          | (114     | )          |
| Net cash provided by financing activities                                             |       | 5,645    |       | 5,373    |       |
| Effect of exchange rate changes on cash                                               |       | (88      | )          | (4,045   | )          |
| Net increase (decrease) in cash and cash equivalents                                  |       | 2,541    |       | (46,205  | )          |
| Cash and cash equivalents at beginning of period                                      |       | 229,726  |       | 168,596  |       |
| Cash and cash equivalents at end of period                                            |       | $        | 232,267    |     | $          | 122,391 |   |
| Non-cash financing activities:                                                        |       |     |       |     |       |
| Cash dividend declared, $0.17 per share in 2004 and  $0.13 in 2003                    |       | $        | 7,757      |     | $          | 5,979 |   |

 

***Theaccompanying notes are an integral part of these financial statements.***

 

7

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**BLYTH, INC. ANDSUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

** **

**1.****                                     ****Basis of Presentation**

 

Blythis a global competitor in the gift and decorative accessories market, which theCompany calls the Home Expressions industry.  At January 31, 2004 theCompany reported its financial results in five segments: Direct Selling,Wholesale Home Fragrance, Wholesale Creative Expressions, Catalog &Internet and All Other. As a result of certain organizational changes we haveimplemented, we have reevaluated our reporting segments pursuant to FASBStatement No. 131, “Disclosures about Segments of an Enterprise and RelatedInformation”, and determined to report financial information with respect tothree segments beginning with the period ended April 30, 2004. These newreporting segments are as follows - the Direct Selling segment, the Wholesalesegment, and the Catalog & Internet segment.  The Company’s reportable segments arebased on similarities in distribution channels, customers and managementoversight.

 

Withinthe Direct Selling segment, the Company designs, manufactures or sources,markets and distributes an extensive line of products including scentedcandles, related accessories, fragranced bath gels and body lotions and otherfragranced products.  These products are sold direct to the consumer underthe PartyLite® brand in North America, Europe and Australia through a networkof more than 52,000 independent sales consultants.

 

Withinthe Wholesale segment, the Company designs, manufactures or sources, marketsand distributes an extensive line of home fragrance, home décor, seasonaldecorations and Away From Home products. Products in this segment are sold worldwide to retailers in thepremium and specialty retail channels under the Colonial®(1), Colonial Candle of Cape Cod®, Colonial at HOME®, Carolina®,CBK®, Holiday365TM, Kaemingk®(1)and Seasons of Cannon FallsTMbrands and to retailers in the mass retail and foodservice channel under theAmbria®, FilterMate®, Florasense®, Gies®(1), Liljeholmens®, and Sterno®brands.

 

Within the Catalog& Internet segment, the Company designs, sources, markets and distributes abroad range of household convenience items, premium photo albums, frames,holiday cards and gifts sold direct to the consumer under the Miles Kimball®,Exposures®, Walter Drake®, Home Marketplace® and Directions...The Path To BetterHealth® brands.  These products are sold primarily in North America.

 

The consolidated financial statements include the accounts of theCompany, and its direct and indirect subsidiaries.  All significant intercompany accounts andtransactions have been eliminated. Investments in companies that are not majority owned or controlled arereported using the equity method and are recorded in investments.  Certain of the Company’s subsidiaries operateon a 52 or 53-week fiscal year ending on the Saturday closest to January 31.  European operations maintain a calendar yearaccounting period, which is consolidated with the Company’s fiscal period.  In the opinion of management, theaccompanying unaudited consolidated financial statements include all normalrecurring accruals necessary for fair presentation of the Company’sconsolidated financial position at April 30, 2004 and the consolidatedresults of its operations and cash flows for the three-month periods ended April 30,2004 and 2003. These interim statements should be read in conjunction with theCompany’s consolidated financial statements for the year ended January 31,2004, as set forth in the Company’s Annual Report on Form 10-K.  Operating results for the three months ended April 30,2004 are not necessarily indicative of the results that may be expected for theyear ending January 31, 2005.

 

**Reclassifications**

** **

Certain reclassifications have been made in prior years’ financialstatements to conform to classifications used in the current year.

 

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(1) Colonial, Gies and Kaemingk trademarks areregistered and sold only outside the United States.

 

8

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**Employee Stock Options**

** **

The Company has elected to adopt the disclosure only provisions ofStatement of Financial Accounting Standards (SFAS) No. 148, “Accounting forStock-Based Compensation – Transition and Disclosure,” and continues to followAccounting Principles Board (APB) opinion No. 25, “Accounting for Stock Issuedto Employees” and related interpretations in accounting for stock optionsgranted to its employees and directors under the intrinsic value method.  Accordingly, no compensation expense isrecorded for the stock options issued to employees unless the option price isbelow market at the measurement date. The Company does not at this time, issue stock options below marketvalue, therefore no compensation expense has been recorded in the financialstatements.  Had compensation expense forthe Company’s stock options been determined in accordance with the fair valuemethod in SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS No.148, the Company’s reported net income and earnings per share would have beenadjusted to the pro forma amounts indicated below:

 
| **Three months ended (In thousands, except per share data)**                                                | ** ** | **April 30,  2004** | ** ** | **April 30,  2003** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|
| Net earnings:                                                                                               |       |                     |       |                     |       |
| As reported                                                                                                 |       | $                        | 17,675     |                     | $          | 19,627 |   |
| Stock-based employee compensation expense determined  under SFAS No. 123 for all awards, net of related tax |       | 439                      |       | 927                      |       |
| Pro forma                                                                                                   |       | $                        | 17,236     |                     | $          | 18,700 |   |
| Net earnings per common share:                                                                              |       |                     |       |                     |       |
|                                                                                                        |       |                     |       |                     |       |
| As reported:                                                                                                |       |                     |       |                     |       |
| Basic                                                                                                       |       | $                        | 0.39       |                     | $          | 0.43 |   |
| Diluted                                                                                                     |       | 0.38                     |       | 0.42                     |       |
| Pro forma:                                                                                                  |       |                     |       |                     |       |
| Basic                                                                                                       |       | $                        | 0.38       |                     | $          | 0.41 |   |
| Diluted                                                                                                     |       | 0.36                     |       | 0.39                     |       |

 

**2.**                          Business Acquisitions

** **

On April 1, 2003, the Company acquired 100% of the Miles KimballCompany (“Miles Kimball”), a direct marketer of giftware, home décor andhousehold convenience items, premium photo albums, frames and holiday cardsunder the Miles Kimball® and Exposures® catalog titles for approximately $66.2million in cash.  The acquisition ofMiles Kimball aligns with one component of the Company’s overall growthstrategy, which is to grow through selected acquisitions.  The excess of the purchase price over theestimated fair value of the net assets acquired approximated $46.0 million,which will not be deductible for income tax purposes.  The other intangibles acquired consist of$16.1 million of trade names and trademarks, which are deemed to have anindefinite life and will not be amortized, plus $9.0 million of customer lists,which will be amortized on an accelerated basis over 12 years.  Amortization expense recorded in fiscal 2004totaled $1.4 million.  Estimatedamortization expense for the next 5 fiscal years is as follows:  $1.5 million, $1.5 million, $1.2 million,$0.9 million and $0.9 million.  Theresults of operations of Miles Kimball are included in the ConsolidatedStatements of Earnings of the Company since April 2, 2003.  For segment reporting purposes, Miles Kimballis included in the Catalog & Internet segment.

 

9

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On June 20, 2003, the Company acquired a 100% interest in KaemingkB.V. (“Kaemingk”), a designer and marketer of a wide range of premium seasonaldecorations. Kaemingk’s product lines feature Christmas décor, includingornaments, lighting, trim, glassware, candles and plush animals, as well asspring and summer decorative accents. The acquisition of Kaemingk aligns with one component of the Company’soverall growth strategy, which is to grow through selected acquisitions.  The cash purchase price was approximately$36.2 million less cash acquired of $7.7 million resulting in net cash paid of$28.5 million.  Approximately $30.6million of the cash purchase price was borrowed under the Company’s $200million unsecured revolving credit facility. The Company also assumed Kaemingk’s long-term debt of approximately$14.4 million.  The excess of thepurchase price over the estimated fair value of the net assets acquiredapproximated $17.6 million, which will not be deductible for income taxpurposes.  During the quarter ended October 31,2003, an adjustment was recorded to reflect the final appraised value of theacquired property, plant and equipment. In addition to the fixed purchase price, there is contingentconsideration payable in the form of a three-year earn out provision based on apre-defined formula related to a multiple of earnings before interest andincome taxes. A $3.4 million liability for the first annual earn out paymentwas recorded in the quarter ended April 30, 2004. The results ofoperations of Kaemingk are included in the Consolidated Statements of Earningsof the Company since June 21, 2003. For segment reporting purposes, Kaemingk is included in the Wholesalesegment.

 

On December 22, 2003, the Companyacquired 100% of Walter Drake, a direct marketer of value-priced householdproducts including household gifts, gadgets and convenience products,personalized merchandise, home décor and holiday cards under the Walter Drakeand Home Marketplace catalog titles, for approximately $53.8 million incash.  The acquisition of Walter Drake aligns with the onecomponent of the Company’s overall growth strategy, which is to grow throughselected acquisitions.  The excess ofthe purchase price over the estimated fair value of the net assets acquiredapproximated $25.4 million, which will be deductible for income taxpurposes.  During the quarter ended April 30,2004, the Company recorded an adjustment to record additional liabilitiesprimarily related to severance of employees of the Colorado Springs facility asof the acquisition date.  Theseadditional costs relate to the integration of the Walter Drake business intoMiles Kimball, which is expected to be completed by the end of the thirdquarter of fiscal 2005.  Theseadjustments increased the goodwill by approximately $3.1 million to $28.5million.  The other intangibles acquired consist ofapproximately $12.0 million of trade names and trademarks, which are deemed tohave an indefinite life and will not be amortized, plus approximately $6.0million of customer lists, which will be amortized on an accelerated basis over10 years. Estimated amortization expense for the next 5 fiscal years is asfollows:  $0.9 million, $0.9 million,$0.9 million, $0.6 million and $0.6 million. The results of operations of Walter Drake are included in theConsolidated Statements of Earnings of the Company since December 23,2003.  For segment reporting purposes,Walter Drake is included in the Catalog & Internet segment.

 

The following provides an allocation of the purchase price of WalterDrake (in thousands)

 
| Cash Purchase Price                   |   | $      | 54,195 |   |
|---------------------------------------|--------|--------|--------|--------|
| Less: Assets acquired                 |   |   |   |
|                                  |   |   |   |
| Accounts receivable                   |   | 539    |   |
| Inventories                           |   | 6,010  |   |
| Prepaid and other                     |   | 5,743  |   |
| Property, plant and equipment         |   | 4,667  |   |
| Intangible assets                     |   | 18,000 |   |
|                                  |   | 34,959 |   |
| Plus: Liabilities assumed             |   |   |   |
|                                  |   |   |   |
| Cash overdraft                        |   | 580    |   |
| Accounts payable                      |   | 3,442  |   |
| Accrued expenses                      |   | 5,057  |   |
| Other                                 |   | 189    |   |
|                                  |   | 9,268  |   |
| Unallocated purchase price (goodwill) |   | 28,504 |   |

 

10

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The following unaudited pro forma summary financial informationsummarizes the estimated combined results of operations of the Company, MilesKimball, Kaemingk and Walter Drake assuming that the acquisitions of MilesKimball, Kaemingk and Walter Drake had taken place on February 1,2003.  The unaudited pro forma combinedresults of operations were prepared on the basis of information provided to theCompany by the former management of Miles Kimball, Kaemingk and Walter Drakeand no representation is made by the Company with respect to the accuracy ofsuch information.  The pro forma combinedresults of operations reflect adjustments for interest income, additionaldepreciation based on the fair market value of Miles Kimball’s and Walter Drake’sproperty, plant, and equipment, amortization of identifiable intangibles ofMiles Kimball and Walter Drake and income tax expense.

 
| ** **                               | ** ** | **Three months ended April 30,** | ** ** |
|------------------------------------------|------------|---------------------------------------|------------|
| **(In thousands except per share data)** | ** ** | **2004**                              | ** ** | **2003** | ** ** |
| Net sales                                |       | $                                     | 358,980    |   | $ | 355,418 |   |
| Net earnings                             |       | 17,675                                |       | 18,214 |   |
| Basic:                                   |       |                                  |       |   |   |
| Net earnings per common share            |       | $                                     | 0.39       |   | $ | 0.40 |   |
| Diluted:                                 |       |                                  |       |   |   |
| Net earnings per common share            |       | $                                     | 0.38       |   | $ | 0.39 |   |

 

The unaudited pro forma combined results of operations are notnecessarily indicative of, and do not purport to represent, what the Company’sresults of operations or financial condition actually would have been had theacquisitions been made as of February 1, 2003.

 

The following table shows changes in thecarrying amount of goodwill for the quarter ended April 30, 2004, byoperating segment:

 
| ** **                                                            | ** ** | **Wholesale** | ** ** | **Catalog &  Internet** | ** ** | **Total** | ** ** |
|-----------------------------------------------------------------------|------------|---------------|------------|-----------------------------|------------|-----------|------------|
| Goodwill at January 31, 2004                                     |       | $             | 133.0      |                        | $          | 71.1      |       | $ | 204.1 |   |
| Increase related to acquisitions:                                     |       |          |       |                        |       |      |       |
| Kaemingk earn out payment                                             |       | 3.4           |       | —                      |       | 3.4       |       |
| Walter Drake integration costs                                        |       | —        |       | 3.1                         |       | 3.1       |       |
| Total increase related to acquisitions                                |       | 3.4           |       | 3.1                         |       | 6.5       |       |
| Goodwill disposed of related to sale of Jeanmarie  Creations          |       | (3.6          | )          | —                      |       | (3.6      | )          |
| Miles Kimball pension liability adjustment                            |       | —        |       | 0.4                         |       | 0.4       |       |
| Foreign currency translation adjustment related to  Kaemingk goodwill |       | (0.3          | )          | —                      |       | (0.3      | )          |
| Total adjustments                                                     |       | (0.5          | )          | 3.5                         |       | 3.0       |       |
| Goodwill at April 30, 2004                                       |       | $             | 132.5      |                        | $          | 74.6      |       | $ | 207.1 |   |

 

11

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**3.**                                      Inventories

** **

The components of inventory consist of the following (in thousands):

 
| ** **      | ** ** | **April 30, 2004** | ** ** | **January 31, 2004** | ** ** |
|-----------------|------------|-------------------------|------------|---------------------------|------------|
| Raw materials   |       | $                       | 27,412     |                      | $          | 25,104 |   |
| Work in process |       | 1,508                   |       | 915                       |       |
| Finished goods  |       | 183,468                 |       | 182,562                   |       |
|            |       | $                       | 212,388    |                      | $          | 208,581 |   |

 

**4.**                                      Earnings per Share

** **

The components of basic and diluted earnings per share are as follows(in thousands):

 
| **Three months ended April 30,**                  | ** ** | **2004** | ** ** | **2003** | ** ** |
|--------------------------------------------------------|------------|----------|------------|----------|------------|
| Net earnings                                           |       | $        | 17,675     |     | $          | 19,627 |   |
| Weighted average number of common shares  outstanding: |       |     |       |     |       |
| Basic                                                  |       | 45,665   |       | 46,080   |       |
| Dilutive effect of stock options                       |       | 440      |       | 128      |       |
| Weighted average number of common shares  outstanding: |       |     |       |     |       |
| Diluted                                                |       | 46,105   |       | 46,208   |       |
|                                                        |            |          |            |          |            |  |  |

 

As of April 30, 2004 and 2003, options to purchase 645 and 102,754shares of common stock, respectively, are not included in the computation ofearnings per share because the effect would be anti-dilutive.

 

**5.**                                      Restructuring Charges

** **

During the third and fourth quarters of fiscal 2004 the Companyrecorded severance payments to employees of $0.5 million pre-tax related to theclosure of its Hyannis, manufacturing facility. In conjunction with theclosing, the Company eliminated 43 jobs, comprised of manufacturing andmanagement positions. This manufacturing facility, which was the Company’ssmallest, is located in a busy downtown area of Cape Cod, making transportationof raw materials and finished products to and from the location challenging.Operations are being consolidated into Blyth’s manufacturing facility inBatavia, Illinois.

 

During the fourth quarter of fiscal 2004, the Company recordedadditional pre-tax restructuring charges. These charges consist of $2.1 million related to severance costsprimarily associated with the restructuring of Blyth HomeScents International –North America and the consolidation of the Company’s Temecula, Californiapotpourri operations, and $0.9 million of lease termination costs associatedwith the closure of five of the Company’s candle outlet stores.  As a result of these restructuringactivities, the Company eliminated 40 jobs, comprised of administrative andmanagement positions.

 

At January 31, 2004, the Company had approximately $3.3 million ofrestructuring charges included in the Consolidated Balance Sheet, which relatedto the aforementioned severance liabilities and lease obligations.  As a result of payments made during thequarter ended April 30, 2004 approximately $1.3 million of severanceliabilities and $0.6 million of lease obligations were remaining on the balancesheet at April 30, 2004.  Theremaining severance liability and lease obligations will be paid within thenext twelve months.

 

12

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The following is a tabular roll forward of the charges described abovethat were recorded on the balance sheet of the Company:

 
| **(In thousands)**                 | ** ** | **Lease  Obligations** | ** ** | **Severence  Costs** | ** ** | **Total** | ** ** |
|------------------------------------|------------|------------------------|------------|----------------------|------------|-----------|------------|
|                               |       |                   |       |                 |       |      |       |
| Balance at January 31, 2004   |       | $                      | 905        |                 | $          | 2,395     |       | $ | 3,300 |   |
| Payments made against 2004 charges |       | (321                   | )          | (1,045               | )          | (1,366    | )          |
| Balance at April 30, 2004     |       | $                      | 584        |                 | $          | 1,350     |       | $ | 1,934 |   |

 

**6.**                                      Segment Information

** **

Blythis a global competitor in the gift and decorative accessories market, which theCompany calls the home expressions industry.  At January 31, 2004 theCompany reported its financial results in five segments: Direct Selling,Wholesale Home Fragrance, Wholesale Creative Expressions, Catalog &Internet and All Other. As a result of certain organizational changes we haveimplemented, we have reevaluated our reporting segments pursuant to FASB StatementNo. 131, “Disclosures about Segments of an Enterprise and Related Information”,and determined to report financial information with respect to three segmentsbeginning with the period ended April 30, 2004. These new reportingsegments are as follows - the Direct Selling segment, the Wholesale segment,and the Catalog & Internet segment. As required by FASB Statement No.131, we have restated the correspondinginformation for the prior year to report in the current composition of ourreportable segments.  The Company’sreportable segments are based on similarities in distribution channels,customers and management oversight. Revenues are not reported by product or group of similar products, as itis impractical to do so.

 

Withinthe Direct Selling segment, the Company designs, manufactures or sources,markets and distributes an extensive line of products including scentedcandles, related accessories, fragranced bath gels and body lotions and otherfragranced products.  These products are sold direct to the consumer underthe PartyLite® brand in North America, Europe and Australia through a networkof more than 52,000 independent sales consultants.

 

Withinthe Wholesale segment, the Company designs, manufactures or sources, marketsand distributes an extensive line of home fragrance, home décor, seasonaldecorations and Away From Home products. Products in this segment are sold worldwide to retailers in thepremium and specialty retail channels under the Colonial®(1), Colonial Candle of Cape Cod®, Colonial at HOME®, Carolina®,CBK®, Holiday365TM, Kaemingk®(1), and Seasons of Cannon FallsTM brandsand to retailers in the mass retail and foodservice channel under the Ambria®,FilterMate®, Florasense®, Gies®(1), Liljeholmens®, and Sterno®brands.

 

Withinthe Catalog & Internet segment, the Company designs, sources, markets anddistributes a broad range of household convenience items, premium photo albums,frames, holiday cards and gifts sold direct to the consumer under the MilesKimball®, Exposures®, Walter Drake®, Home Marketplace® and Directions...The PathTo Better Health® brands.  These products are sold primarily in NorthAmerica.

 

----

(1) Colonial, Gies andKaemingk trademarks are registered and sold only outside the United States.

 

13

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Earnings in all segments represent net sales less operating expensesdirectly related to the business segments and corporate expenses allocated tothe business segments.  Other income(expense) includes interest expense, interest income and equity in earnings ofinvestees, which are not allocated to the business segments.  Identifiable assets for each segment consistof assets used directly in its operations and intangible assets, if any, resultingfrom purchase business combinations. Unallocated Corporate within the identifiable assets include corporatecash and cash equivalents, deferred bond costs and other long-term investments,which are not allocated to the business segments.

 
| **Three months ended April 30, (In thousands)**    | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------------------------------------|------------|----------|------------|----------|------------|
| **Net Sales**                                           |       |     |       |     |       |
| Direct Selling                                          |       | $        | 189,863    |     | $          | 191,240 |   |
| Wholesale                                               |       | 127,763  |       | 114,781  |       |
| Catalog & Internet                                  |       | 41,354   |       | 5,970    |       |
| **Total**                                               |       | $        | 358,980    |     | $          | 311,991 |   |
| **Earnings**                                            |       |     |       |     |       |
| Direct Selling                                          |       | $        | 38,002     |     | $          | 37,405 |   |
| Wholesale                                               |       | (2,679   | )          | (2,648   | )          |
| Catalog & Internet                                  |       | (1,062   | )          | (499     | )          |
|                                                    |       | 34,261   |       | 34,258   |       |
| Other expense                                           |       | (4,341   | )          | (3,134   | )          |
| **Earnings before income taxes and minority  interest** |       | $        | 29,920     |     | $          | 31,124 |   |

 
| ** **              | ** ** | **April 30, 2004** | ** ** | **January 31, 2004** | ** ** |
|-------------------------|------------|-------------------------|------------|---------------------------|------------|
| **Identifiable Assets** |       |                    |       |                      |       |
| Direct Selling          |       | $                       | 280,740    |                      | $          | 273,900 |   |
| Wholesale               |       | 513,453                 |       | 519,647                   |       |
| Catalog & Internet  |       | 163,868                 |       | 160,380                   |       |
| Unallocated Corporate   |       | 184,949                 |       | 174,036                   |       |
| **Total**               |       | $                       | 1,143,010  |                      | $          | 1,127,963 |   |

 

**7.**                                      Assets Held for Sale

** **

Duringthe fourth quarter of fiscal 2004, the Company decided to divest of itsdecorative gift bag business, Jeanmarie Creations, in the Wholesale segmentthrough a sale to Jeanmarie’s senior management.  Therefore, the assets of Jeanmarie wereclassified as assets held for sale in the Company’s Consolidated Balance Sheetas of January 31, 2004.  The assetsheld for sale related to Jeanmarie were comprised principally of accountsreceivable of $3.1 million, inventory of $3.4 million and property, plant andequipment of $1.7 million.  The operatingresults related to Jeanmarie were immaterial to the consolidated operatingresults of the Company.  On April 6,2004 the Company sold the business to Jeanmarie’s management and associatedinvestors for $10.0 million in cash.  Thesale resulted in a taxable gain of approximately $4.0 million.  In addition, $3.6 million of goodwillattributable to Jeanmarie, which was not tax deductible, was disposed of.

 

There is an additional $1 million classified as assets held for sale inthe Consolidated Balance Sheet as of January 31, 2004 and April 30,2004 related to the Hyannis, MA manufacturing facility the closure of which isdiscussed in Note 5.

 

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**8.**                                      Contingencies

** **

The Company has contingent liabilities that have arisen in the ordinarycourse of its business, including pending litigation.  The Company believes the outcome of thesematters will not have a material adverse effect on its consolidated financialposition, results of operations, or cash flows.

 

**9.****                                      SubsequentEvent**

 

On June 7, 2004 the Company announced that its Board of Directorsapproved a repurchase of up to 4,000,000 outstanding shares of the Company’scommon stock at a price per share that is not greater than $35.00 nor less than$30.00 through, a Dutch auction cash tender offer.  The tender offer will expire on July 9,2004 unless the Company extends the tender offer.

 

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**Item 4.  Controls andProcedures**

 

(a) Evaluation of disclosure controls and procedures.

 

Our management, with the participation of ourprincipal executive officer and our principal financial officer, evaluated theeffectiveness of our disclosure controls and procedures (as defined inSecurities Exchange Act of 1934 (“Exchange Act”) Rules 13a-15(e) or 15d-15(e))as of the end of the period covered by this quarterly report as required byparagraph (b) of Exchange Act Rules 13a-15 or 15d-15.  Based upon thisevaluation, our principal executive officer and our principal financial officerhave concluded that our disclosure controls and procedures were effective atthe reasonable assurance level as of the end of the period covered by thisquarterly report.

 

(b) Changes in internal control over financialreporting.

 

There was no change in our internal control overfinancial reporting identified in connection with the evaluation required byparagraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during ourlast fiscal quarter, except as noted below, that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

 

In response to the matter discussed in Item 9A. “Controlsand Procedures” in our fiscal 2004 Form 10-K, whereby PricewaterhouseCoopersLLP (“PwC”) had identified an internal control issue which they considered tobe a material weakness, the Company in fiscal 2005 now reviews and evaluatesmore carefully the information that is presented to the Board of Directors andthe chief operating decision maker (“CODM”) on a monthly and quarterly basis,as well as the information that is provided on its website and to investors,with a view toward ensuring that such information is consistent with theCompany’s segment reporting and how the CODM reviews operating results in orderto make decisions about the allocation of resources.  Moreover, the Company believes that, byreason of the Company’s experience in connection with its change in reportingsegments for fiscal 2004, the Company’s financial personnel, as well as itsother members of management, are particularly well informed as to the issuesthat may arise under SFAS 131 and 142 and are sensitive to the need to ensurethat such issues are properly and promptly addressed and resolved.

 

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**PART II.   OTHERINFORMATION**

 

**Item 5.****  Other Information**

 

In our filing on Form 10-Q/A Amendment No. 1 for thequarter ended April 30, 2004 filed with the Securities and ExchangeCommission on December 16, 2004 we disclosed that the interim financialstatements for the three-month period ended April 30, 2003 includedtherein had not been reviewed by an independent registered public accountingfirm, as required by Section 10-01(d) of Regulation S-X.  This Form 10-Q/A Amendment No. 2 is beingfiled to remedy that deficiency.  Thisamended quarterly report has not required any change to the ConsolidatedFinancial Statements included in Amendment No. 1 except for corrections oftypographical errors in the fiscal 2004 Consolidated Statement of Cash Flowsand the Employee Stock Options table in Footnote 1 and to replace the April 30,2003Identifiable Assets with the January 31, 2003 Identifiable Assets in the SegmentInformation in Footnote 6.

 

The staff of the Commission may take the position thatbecause certain information relating to our prior fiscal year in our QuarterlyReports for fiscal 2004 and 2005 had not been reviewed by any independentpublic accountants prior to filing as required by Section 10—01(d) ofRegulation S—X, we would not have been viewed as having made all requiredfilings until the reports were amended to reflect the required review, and eventhen that the filings were not filed timely. Therefore, we could be ineligible to use Forms S—2 and S—3 to registersecurities (or amend an existing registration statement) until all requiredreports under the Exchange Act have been timely filed for the 12 months priorto the filing of the registration statement or amendment. While ineligibilityto use Form S—2 or S—3 would involve additional expense should we need to fileor amend a registration statement, we do not view ineligibility as having amaterial adverse effect on our access to capital resources.

 

The Company is including the following cautionarystatement in this Report to make applicable, and to take advantage of, the safeharbor provisions of the Private Securities Litigation Reform Act of 1995 forany forward-looking statements made by, or on behalf of, the Company. Forward-looking statements include statements concerning plans, objectives,goals, strategies, future events or performance and underlying assumptions andother statements, which are other than statements of historical facts. From time to time, the Company and its representatives may publish or otherwisemake available forward-looking statements of this nature.  All suchforward-looking statements, whether written or oral, and whether made by or onbehalf of the Company, are expressly qualified by the following cautionarystatements.  Forward-looking statements involve risks and uncertainties,which could cause actual results or outcomes to differ materially from thoseexpressed in the forward-looking statements.  Such forward-lookingstatements are expected to be based on various assumptions, many of which arebased, in turn, upon further assumptions.  There can be no assurance thatmanagement’s expectations, beliefs or projections will occur or be achieved oraccomplished.  In addition to other factors and matters discussedelsewhere in this Report and in the Company’s other public filings andstatements, the following are important factors that, in the view of theCompany, could cause actual results to differ materially from those discussedin the Company’s forward-looking statements.  The Company disclaims anyobligation to update any forward-looking statements, or the following factors,to reflect events or circumstances after the date of this Report.

 

**Riskof Inability to Maintain Sales Growth Rate**

** **

The Company has experienced significant sales growthin past years.  While management expects continued growth, our futuregrowth rate will likely be less than our historical growth rate.  TheCompany expects faster sales growth in its international market versus itsUnited States market, particularly in the Direct Selling and Wholesale segments. The Company’s ability to increase sales depends on numerous factors, includingmarket acceptance of existing products, the successful introduction of newproducts, the increase in consumers’ discretionary spending, the ability torecruit new independent sales consultants, sourcing of raw materials and demand-drivenincreases in production and distribution capacity.  Business in all of oursegments is driven by consumer preferences.  Accordingly, there can be noassurances that the Company’s current or future products will maintain orachieve market acceptance.  Our sales and earnings results can benegatively impacted by the worldwide economic environment, particularly theCanadian, United States and European economies. There can be no assurances thatthe Company’s financial results will not be materially adversely affected bythese factors in the future.  The Company’s historical growth has been duein part to acquisitions and management continues to consider additionalstrategic acquisitions.  There can be no assurances that management willcontinue to identify suitable acquisition candidates, consummate acquisitionson terms favorable to the Company, finance acquisitions or successfullyintegrate acquired operations.

 

17

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**RisksAssociated with International Sales and Foreign-Sourced Products**

** **

Our international sales growth rate has outpaced ourUnited States growth rate in recent years.  Moreover, the Company sourcesa portion of its products in all of its business segments from independentmanufacturers in the Pacific Rim, Europe and Mexico.  For these reasons,we are subject to the following risks associated with internationalmanufacturing and sales:  fluctuations in currency exchange rates,economic or political instability, international public heath crises,transportation costs and delays, difficulty in maintaining quality control,restrictive governmental actions, nationalizations, the laws and policies ofthe United States, Canada and certain European countries affecting theimportation of goods (including duties, quotas and taxes) and the trade and taxlaws of other nations.

 

**Abilityto Respond to Increased Product Demand**

** **

The Company’s ability to meet future product demand inall of its business segments will depend upon its success in (1) bringing newproduction and distribution capacity on line in a timely manner, (2) improvingits ability to forecast product demand and fulfill customer orders promptly,(3) improving customer service-oriented management information systems and (4)training, motivating and managing new employees.  The failure of any ofthe above could result in a material adverse effect on our financial results.

 

**Riskof Shortages of Raw Materials**

** **

Certain raw materials could be in short supply due tocapacity, availability, a change in requirements, weather or other factors,including supply disruptions due to production or transportation delays. Such shortages have not had and are not presently expected to have a material adverseeffect on the Company’s operations.  While the price of crude oil is onlyone of several factors impacting the price of petroleum wax, it is possiblethat recent fluctuations in oil prices may have a material adverse affect onthe cost of petroleum-based products used in the manufacture or transportationof our products, particularly in the Direct Selling and Wholesale segments.

 

**Dependenceon Key Corporate Management Personnel**

** **

Our success depends in part on the contributions ofkey corporate management, including our Chairman and Chief Executive Officer,Robert B. Goergen.  The Company does not have employment contracts withany of its key corporate management personnel except Mr. Goergen, nor does itmaintain any key person life insurance policies.  The loss of any of thekey corporate management personnel could have a material adverse effect on theCompany.

 

**Riskof Increased Competition**

** **

Our business is highly competitive both in terms ofpricing and new product introductions.  The worldwide market for homeexpressions products is highly fragmented with numerous suppliers serving oneor more of the distribution channels served by the Company.  In addition,the Company competes for direct selling consultants with other direct sellingcompanies.  Because there are relatively low barriers to entry in all ofour business segments, the Company may face increased competition from othercompanies, some of which may have substantially greater financial or otherresources than those available to us.  Competition includes companiesselling candles manufactured at low cost outside of the United States. Moreover, certain competitors focus on a single geographic or product marketand attempt to gain or maintain market share solely on the basis of price.

 

**Risks Related toInformation Technology Systems**

 

Our information technology systems are dependent onglobal communications providers, telephone systems, hardware, software andother aspects of Internet infrastructure that have experienced significantsystem failures and outages in the past. Our systems are susceptible to outages due to fire, floods, power loss,telecommunications failures, break-ins and similar events.  Despite the implementation of networksecurity measures, the Company’s systems are vulnerable to computer viruses,break-ins and similar disruptions from unauthorized tampering with Companysystems.  The occurrence of these orother events could disrupt or damage our information technology systems andinhibit internal operations, the ability to provide customer service or theability of customers or sales personnel to access the Company’s informationsystems.

 

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**Item  6.  Exhibits**

** **

a)              Exhibits

 
| 31.1   |   | Certification of  Chairman and Chief Executive Officer pursuant to Rule 13a-14(a) under the  Securities Exchange Act of 1934.       |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                |
| 31.2   |   | Certification of Vice  President and Chief Financial Officer pursuant to Rule 13a-14(a) under the  Securities Exchange Act of 1934. |
|   |   |                                                                                                                                |
| 32.1   |   | Certification of Chairman and Chief Executive  Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.              |
|   |   |                                                                                                                                |
| 32.2   |   | Certification of Vice President and Chief Financial  Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.        |

 

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**SIGNATURES**

** **

**Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.**

 

 
|   |                | BLYTH, INC. |
|--------|---------------------|-------------|
|   |                |        |
|   |                |        |
| Date:  | April 14, 2005 |        | By: | /s/Robert B.  Goergen |   |
|   |                |        | Robert B.  Goergen |
|   |                |        | Chairman and  Chief Executive Officer |
|   |                |        |   |
|   |                |        |   |
| Date:  | April 14, 2005 |        | By: | /s/Robert H.  Barghaus |   |
|   |                |        | Robert H.  Barghaus |
|   |                |        | Vice President  and Chief Financial Officer |
|        |                     |             |  |  |  |  |

 

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