---

---

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON D.C. 20549

FORM 10-Q

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

FOR THE QUARTER ENDED APRIL 30, 2002

Commission file number 1-13026

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

|DELAWARE                                                       |  | 36-2984916                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer
Identification No.)
|One East Weaver Street, Greenwich, Connecticut                 |  | 06831                            
|(Address of principal executive offices)                       |  | (Zip Code)                       

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

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

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý    No o

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

46,348,041 Common Shares as of May 31, 2002

---

---

---



BLYTH, INC.

INDEX

|                                  |                                                                                                  |                                                 |       | Page
|--------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------------------- | ----- | ----
|Form 10-Q Cover Page              |                                                                                                  | 1                                              
|Form 10-Q Index                   |                                                                                                  | 2                                              
|Part I.    Financial Information: |                                                                                                  |                                                
|                                  | Item 1.    Financial Statements:                                                                 |                                                 |      
|                                  |                                                                                                  | Consolidated Balance Sheets                     |       | 3   
|                                  |                                                                                                  | Consolidated Statements of Earnings             |       | 4   
|                                  |                                                                                                  | Consolidated Statements of Stockholders' Equity |       | 5   
|                                  |                                                                                                  | Consolidated Statements of Cash Flows           |       | 6   
|                                  |                                                                                                  | Notes to Consolidated Financial Statements      |       | 7-11
|                                  | Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                 | 12-16
|                                  | Item 3.    Quantitative and Qualitative Disclosures About Market Risk                            |                                                 | 17   
|Part II.    Other Information     |                                                                                                  |                                                
|                                  | Item 1.    Legal Proceedings                                                                     |                                                 | 18   
|                                  | Item 2.    Changes in Securities                                                                 |                                                 | 18   
|                                  | Item 3.    Defaults upon Senior Securities                                                       |                                                 | 18   
|                                  | Item 4.    Submission of Matters to a Vote of Security Holders                                   |                                                 | 18   
|                                  | Item 5.    Other Information                                                                     |                                                 | 18-20
|                                  | Item 6.    Exhibits and Reports on Form 8-K                                                      |                                                 | 20   
|Signatures                        |                                                                                                  | 22                                             

2

---



Part    I. FINANCIAL INFORMATION

Item I. FINANCIAL STATEMENTS

BLYTH, INC. AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS

|                                                                                                                                             |                                                                      | April 30,
2002                             |         | January 31,
2002 |        
|-------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------------------ | ------- | ---------------- | -------
|
|
|ASSETS                                                                                                                                       |                                                                      |                                            |         |                  |        
|Current assets:                                                                                                                              |                                                                      |                                            |         |                  |        
|Cash and cash equivalents                                                                                                                    |                                                                      | $                                          | 155,134 |                  | $      
|Accounts receivable, less allowance for doubtful receivables of $2,659 and $2,804, respectively                                              |                                                                      |                                            | 75,261  |                  |        
|Inventories                                                                                                                                  |                                                                      |                                            | 178,875 |                  |        
|Prepaid and other                                                                                                                            |                                                                      |                                            | 13,703  |                  |        
|Deferred income taxes                                                                                                                        |                                                                      |                                            | 20,939  |                  |        
|                                                                                                                                             |                                                                      |                                            |         |                  |        
|                                                                                                                                             |                                                                      | Total current assets                       |         |                  | 443,912
|                                                                                                                                             |                                                                      |                                            |         |                  |        
|Property, plant and equipment, at cost:                                                                                                      |                                                                      |                                            |         |                  |        
|                                                                                                                                             | Less accumulated depreciation of $165,215 and $157,666, respectively |                                            |         | 234,615          |        
|Other assets:                                                                                                                                |                                                                      |                                            |         |                  |        
|Investment                                                                                                                                   |                                                                      |                                            | 3,600   |                  |        
|Excess of cost over fair value of assets acquired                                                                                            |                                                                      |                                            | 104,314 |                  |        
|Deposits and other assets                                                                                                                    |                                                                      |                                            | 12,297  |                  |        
|                                                                                                                                             |                                                                      |                                            |         |                  |        
|                                                                                                                                             |                                                                      |                                            | 120,211 |                  |        
|                                                                                                                                             |                                                                      |                                            |         |                  |        
|                                                                                                                                             |                                                                      | Total assets                               |         | $                | 798,738
|                                                                                                                                             |                                                                      |                                            |         |                  |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                         |                                                                      |                                            |         |                  |        
|Current liabilities:                                                                                                                         |                                                                      |                                            |         |                  |        
|Bank lines of credit                                                                                                                         |                                                                      | $                                          | 17,011  |                  | $      
|Current maturities of long-term debt                                                                                                         |                                                                      |                                            | 18,609  |                  |        
|Accounts payable                                                                                                                             |                                                                      |                                            | 56,526  |                  |        
|Accrued expenses                                                                                                                             |                                                                      |                                            | 44,014  |                  |        
|Dividend payable                                                                                                                             |                                                                      |                                            | 5,098   |                  |        
|Income taxes                                                                                                                                 |                                                                      |                                            | 8,040   |                  |        
|                                                                                                                                             |                                                                      |                                            |         |                  |        
|                                                                                                                                             |                                                                      | Total current liabilities                  |         |                  | 149,298
|                                                                                                                                             |                                                                      |                                            |         |                  |        
|Deferred income taxes                                                                                                                        |                                                                      |                                            | 23,270  |                  |        
|Long-term debt,less current maturities                                                                                                       |                                                                      |                                            | 159,561 |                  |        
|Minority interest and other                                                                                                                  |                                                                      |                                            | 5,565   |                  |        
|Commitments and contingencies                                                                                                                |                                                                      |                                            |        |                  |        
|Stockholders' equity:                                                                                                                        |                                                                      |                                            |         |                  |        
|Preferred stockauthorized 10,000,000 shares of $0.01 par value; no shares issued and outstanding                                            |                                                                      |                                            |        |                  |        
|Common stockauthorized 100,000,000 shares of $0.02 par value; issued and outstanding, 49,614,841 shares and 49,509,776 shares, respectively |                                                                      |                                            | 992     |                  |        
|Additional contributed capital                                                                                                               |                                                                      |                                            | 99,712  |                  |        
|Retained earnings                                                                                                                            |                                                                      |                                            | 456,729 |                  |        
|Accumulated other comprehensive loss                                                                                                         |                                                                      |                                            | (19,779 | )                |        
|Treasury stock, at cost, 3,269,600 shares and 2,630,900 shares, respectively                                                                 |                                                                      |                                            | (76,610 | )                |        
|                                                                                                                                             |                                                                      |                                            |         |                  |        
|                                                                                                                                             |                                                                      | Total stockholders' equity                 |         |                  | 461,044
|                                                                                                                                             |                                                                      |                                            |         |                  |        
|                                                                                                                                             |                                                                      | Total liabilities and stockholders' equity |         | $                | 798,738
|                                                                                                                                             |                                                                      |                                            |         |                  |        

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

3

---



BLYTH, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF EARNINGS        (Unaudited)

|                                                                            |                                                                                      | Three months ended April 30 |        
|--------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | --------------------------- | -------
|
|
|Net sales                                                                   |                                                                                      | $                           | 277,896
|Cost of goods sold                                                          |                                                                                      |                             | 132,888
|                                                                            |                                                                                      |                             |        
|                                                                            | Gross profit                                                                         |                             |        
|                                                                            |                                                                                      |                             |        
|Selling                                                                     |                                                                                      |                             | 88,407 
|Administrative                                                              |                                                                                      |                             | 25,693 
|Amortization of goodwill                                                    |                                                                                      |                             |       
|                                                                            |                                                                                      |                             |        
|                                                                            |                                                                                      |                             | 114,100
|                                                                            |                                                                                      |                             |        
|                                                                            | Operating profit                                                                     |                             |        
|Other expense (income):                                                     |                                                                                      |                             |        
|                                                                            | Interest expense                                                                     |                             |        
|                                                                            | Interest income and other                                                            |                             |        
|                                                                            | Equity in (earnings)loss of investee                                                 |                             |        
|                                                                            |                                                                                      |                             |        
|                                                                            |                                                                                      |                             | 3,354  
|                                                                            |                                                                                      |                             |        
|                                                                            | Earnings before income taxes and cumulative effect of change in accounting principle |                             |        
|Income tax expense                                                          |                                                                                      |                             | 10,250 
|                                                                            |                                                                                      |                             |        
|                                                                            | Earnings before cumulative effect of change in accounting principle                  |                             |        
|Cumulative effect of change in accounting principle, net of taxes of $2,887 |                                                                                      |                             | (4,515 
|                                                                            |                                                                                      |                             |        
|                                                                            | Net earnings                                                                         |                             | $      
|                                                                            |                                                                                      |                             |        
|Basic:                                                                      |                                                                                      |                             |        
|                                                                            | Earnings per common share before cumulative effect of change in accounting principle |                             | $      
|                                                                            | Cumulative effect of change in accounting principle                                  |                             |        
|                                                                            |                                                                                      |                             |        
|                                                                            |                                                                                      | $                           | 0.28   
|                                                                            | Weighted average number of shares outstanding                                        |                             |        
|                                                                            |                                                                                      |                             |        
|Diluted:                                                                    |                                                                                      |                             |        
|                                                                            | Earnings per common share before cumulative effect of change in accounting principle |                             | $      
|                                                                            | Cumulative effect of change in accounting principle                                  |                             |        
|                                                                            |                                                                                      |                             |        
|                                                                            |                                                                                      | $                           | 0.28   
|                                                                            | Weighted average number of shares outstanding                                        |                             |        
|                                                                            |                                                                                      |                             |        

---

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

4

---



BLYTH, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        (Unaudited)

|                                                                     |  | Common stock |  |   |     |  |   | Treasury stock |  | Accumulated
other
comprehensive
income (loss) |         |   |           
|-------------------------------------------------------------------- |  | ------------ |  | - | --- |  | - | -------------- |  | --------------------------------------------- | ------- | - | ----------
|
|
|
|For the three months ended
April 30, 2001:                           |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Balance, January 31, 2001                                            |  | 49,431,576   |  | $ | 989 |  | $ | 96,912         |  | $                                             | 390,447 |   | (2,356,800
|Net earnings for the period                                          |  |              |  |   |     |  |   |                |  |                                               | 15,674  |   |           
|Foreign currency translation adjustments                             |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Unrealized holding gains on certain investments (net of tax of $140) |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Net loss on cash flow hedging instruments (net of tax of $37)        |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|                                                                     |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Comprehensive income                                                 |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Common stock issued in connection with exercise of stock options     |  | 16,800       |  |   |    |  |   | 166            |  |                                               |         |   |           
|Dividends declared                                                   |  |              |  |   |    |  |   |                |  |                                               | (4,707  | ) |           
|Treasury stock purchases                                             |  |             |  |   |     |  |   |                |  |                                               |         |   | (26,800   
|                                                                     |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Balance, April 30, 2001                                              |  | 49,448,376   |  | $ | 989 |  | $ | 97,078         |  | $                                             | 401,414 |   | (2,383,600
|                                                                     |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|For the three months ended April 30, 2002:                           |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Balance, January 31, 2002                                            |  | 49,509,776   |  | $ | 990 |  | $ | 97,879         |  | $                                             | 449,038 |   | (2,630,900
|Net earnings for the period                                          |  |              |  |   |     |  |   |                |  |                                               | 12,789  |   |           
|Foreign currency translation adjustments                             |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Unrealized holding gains on certain investments (net of tax of $27)  |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Net loss on cash flow hedging instruments (net of tax of $9)         |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|                                                                     |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Comprehensive income                                                 |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Common stock issued in connection with exercise of stock options     |  | 105,065      |  |   | 2   |  |   | 1,709          |  |                                               |         |   |           
|Tax benefit from stock options                                       |  |              |  |   |     |  |   | 124            |  |                                               |         |   |           
|Dividends declared                                                   |  |              |  |   |     |  |   |                |  |                                               | (5,098  | ) |           
|Treasury stock purchases                                             |  |              |  |   |     |  |   |                |  |                                               |         |   | (638,700  
|                                                                     |  |              |  |   |     |  |   |                |  |                                               |         |   |           
|Balance, April 30, 2002                                              |  | 49,614,841   |  | $ | 992 |  | $ | 99,712         |  | $                                             | 456,729 |   | (3,269,600
|                                                                     |  |              |  |   |     |  |   |                |  |                                               |         |   |           

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

5

---



BLYTH, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        (Unaudited)

|                                                 |                                                                                               | Three months ended April 30,                                    |                                                     
|------------------------------------------------ | --------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ----------------------------------------------------
|
|
|Cash flows from operating activities:            |                                                                                               |                                                                 |                                                     
|                                                 | Net earnings                                                                                  |                                                                 | $                                                   
|                                                 | Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |                                                                 |                                                     
|                                                 |                                                                                               | Cumulative effect of change in accounting principle, net of tax |                                                     
|                                                 |                                                                                               | Depreciation and amortization                                   |                                                     
|                                                 |                                                                                               | Tax benefit from stock options                                  |                                                     
|                                                 |                                                                                               | Deferred income taxes                                           |                                                     
|                                                 |                                                                                               | Equity in earnings of investees                                 |                                                     
|                                                 | Changes in operating assets and liabilities, net of effect of business acquisitions:          |                                                                 |                                                     
|                                                 |                                                                                               | Accounts receivable                                             |                                                     
|                                                 |                                                                                               | Inventories                                                     |                                                     
|                                                 |                                                                                               | Prepaid and other                                               |                                                     
|                                                 |                                                                                               | Deposits and other assets                                       |                                                     
|                                                 |                                                                                               | Accounts payable                                                |                                                     
|                                                 |                                                                                               | Accrued expenses                                                |                                                     
|                                                 |                                                                                               | Other liabilities                                               |                                                     
|                                                 |                                                                                               | Income taxes                                                    |                                                     
|                                                 |                                                                                               |                                                                 |                                                     
|                                                 |                                                                                               |                                                                 | Total adjustments                                   
|                                                 |                                                                                               |                                                                 |                                                     
|                                                 |                                                                                               |                                                                 | Net cash provided by (used in) operating activities 
|                                                 |                                                                                               |                                                                 |                                                     
|Cash flows from investing activities:            |                                                                                               |                                                                 |                                                     
|                                                 | Purchases of property, plant and equipment, net                                               |                                                                 |                                                     
|                                                 | Proceeds from sale of long-term investment                                                    |                                                                 |                                                     
|                                                 | Purchase of businesses, net of cash acquired                                                  |                                                                 |                                                     
|                                                 |                                                                                               |                                                                 |                                                     
|                                                 |                                                                                               |                                                                 | Net cash used in investing activities               
|                                                 |                                                                                               |                                                                 |                                                     
|Cash flows from financing activities:            |                                                                                               |                                                                 |                                                     
|                                                 | Proceeds from issuance of common stock                                                        |                                                                 |                                                     
|                                                 | Purchase of treasury stock                                                                    |                                                                 |                                                     
|                                                 | Borrowings from bank line of credit                                                           |                                                                 |                                                     
|                                                 | Repayments on bank line of credit                                                             |                                                                 |                                                     
|                                                 | Borrowings on long-term debt                                                                  |                                                                 |                                                     
|                                                 | Repayments on long-term debt                                                                  |                                                                 |                                                     
|                                                 |                                                                                               |                                                                 |                                                     
|                                                 |                                                                                               |                                                                 | Net cash (used in) provided by financing activities 
|                                                 |                                                                                               |                                                                 |                                                     
|                                                 |                                                                                               |                                                                 | Net increase (decrease) in cash and cash equivalents
|Cash and cash equivalents at beginning of period |                                                                                               |                                                                 | 130,633                                             
|                                                 |                                                                                               |                                                                 |                                                     
|Cash and cash equivalents at end of period       |                                                                                               | $                                                               | 155,134                                             
|                                                 |                                                                                               |                                                                 |                                                     
|Non-cash financing activities:                   |                                                                                               |                                                                 |                                                     
|                                                 | Cash dividend declared, $0.11 per share in 2002 and $0.10 in 2001                             |                                                                 | $                                                   

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

6

---



BLYTH, INC. AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (Unaudited)

1.    Basis of Presentation

The Company operates in two business segmentsthe Candles & Home Fragrance segment and the Creative Expressions segment (formerly Creative
Expressions and Foodservice). The Company has operations both inside and outside of the United States and sells its products in both segments worldwide.

The
Candles & Home Fragrance segment designs, manufactures and markets an extensive line of products including scented candles, potpourri and other fragranced products, as well as
tabletop illumination products and portable heating fuel and markets a broad range of related candle accessories. These products are sold direct to the consumer under the PartyLite® brand,
to retailers in the mid-tier and premium retail channels under the Carolina®, Colonial Candle of Cape Cod®, Colonial at HOME, and Kate's brands, in the
mass retail channel under the Ambria, FilterMate® and Florasense® brands and to the Foodservice industry under the Ambria, HandyFuel® and
Sterno® brand names. In Europe, these products are also sold under the Ambria, Carolina Designs, Colonial, Colony, Gies, Liljeholmens, and Wax Lyrical brands.

The
Creative Expressions segment designs, manufactures or sources and markets a broad range of complementary specialty products for the consumer market, including home
décor and giftware products under the CBK brand, seasonal products under the Impact® and Midwest of Cannon Falls® brand names, and paper-related products under
the Jeanmarie® brand.

The
consolidated financial statements include the accounts of the Company, and its direct and indirect subsidiaries. All significant intercompany accounts and transactions have been
eliminated. Investments in companies which are not majority owned or controlled are reported using the equity method and are recorded in other assets. Certain of the Company's subsidiaries operate on
a 52 or 53 week fiscal year ending on the Saturday closest to January 31. European operations maintain a calendar year accounting period, which is consolidated with the Company's fiscal period.
In the opinion of management, the accompanying unaudited consolidated financial statements include all accruals necessary for fair presentation of the Company's consolidated financial position at
April 30, 2002 and the consolidated results of its operations and cash flows for the three-month periods ended April 30, 2002 and 2001. These interim statements should be read in
conjunction with the Company's consolidated financial statements for the year ended January 31, 2002, as set forth in the Company's Annual Report on Form 10-K. Operating
results for the three months ended April 30, 2002 are not necessarily indicative of the results that may be expected for the year ending January 31, 2003.

2.    New Accounting Pronouncements

In November 2001, the Emerging Issues Task Force issued EITF Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a
Customer/Reseller", which addresses the accounting for consideration given by a vendor to a customer including both a reseller of the vendor's products and an entity that purchases the vendor's
products from a reseller. EITF 01-09 also codifies and reconciles related guidance issued by the EITF including EITF Issue No. 00-25, "Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendor's Products", and EITF Issue No. 00-14, "Accounting for Certain Sales Incentives". Effective February 1,
2002, the company adopted EITF 01-09, EITF 00-14 and EITF 00-25. These statements require that the Company classify certain sales incentives as a reduction of net
sales rather than selling expense. Prior year amounts have been reclassified to conform with the current year presentation. The effect of the adoption of these issues

7

---

reduced both net sales and operating expenses in the quarter ended April 30, 2001 by $3.7 million. The adoption of such requirements had no impact on net earnings.

In
June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets". Under SFAS No. 142, goodwill is no longer subject to amortization; however,
goodwill is subject to an assessment for impairment using a two-step fair value based test, the first step of which must be performed at least annually, or more frequently if events or
circumstances indicate that goodwill might be impaired. The first step compares the fair value of a reporting unit to its carrying amount, including goodwill. If the carrying amount of the reporting
unit exceeds its fair value, the second step is performed. The second step compares the carrying amount of the goodwill to the fairvalue of the goodwill. If the fair value of goodwill is less than the
carrying amount, an impairment loss is reported as a reduction to goodwill and a charge to operating expense, except at the transition date, when the loss is reflected as a cumulative effect of a
change in accounting principle.

As
of January 31, 2002, Blyth's Consolidated Balance Sheets reflected approximately $112.3 million in goodwill net of accumulated amortization, including
$31.4 million related to the Candles & Home Fragrance segment businesses, other than The Sterno Group, $38.7 million related to the Creative
Expressions segment businesses and $42.2 million related to The Sterno Group business. The company adopted SFAS 142, effective February 1, 2002. In accordance with the new
standard, Blyth ceased amortization of goodwill and performed an assessment for impairment of its goodwill. As a result of the impairment review, Blyth reduced the carrying value of the goodwill
related to its acquisition of The Sterno brand in 1997 by $7.4 million. The fair value of The Sterno Group was determined through an independent valuation utilizing market comparable analysis
as well as discounted cash flow models reflecting the expected range of future cash flow outcomes over the life of the model. These cash flows were discounted to 2002 using a risk-adjusted
discount rate. The impairment of The Sterno Group's goodwill, which was recorded as a cumulative effect of a change in accounting principle, had the effect of reducing net income by
$4.5 million (after tax) or $0.10 per share. The carrying amount of goodwill on the Company's Consolidated Balance Sheet decreased approximately $8.0 million from $112.3 million
at January 31, 2002 to $104.3 million at April 30, 2002. Such decrease is a result of the previously discussed goodwill impairment charge of $7.4 million and foreign
currency translation adjustments of goodwill, which approximated $0.6 million. The following table sets forth Blyth's net income and earnings per share for the three months ended
April 30, 2002 and 2001, respectively, and is adjusted to exclude 2001 amortization expense related to goodwill that is no longer being amortized

8

---

and to reflect the cumulative effect of a change in accounting principle related to the adoption of SFAS 142.

|                                                                         |                                                                      | April 30,
2002 |        | April 30,
2001
|------------------------------------------------------------------------ | -------------------------------------------------------------------- | -------------- | ------ | --------------
|Earnings before cumulative effect of change in accounting principle      |                                                                      | $              | 17,304 |               
|Goodwill amortization, net of taxes of $368                              |                                                                      |                |       |               
|Cumulative effect of change in accounting principle, net of taxes $2,887 |                                                                      |                | (4,515 | )             
|                                                                         |                                                                      |                |        |               
|Adjusted net income                                                      |                                                                      | $              | 12,789 |               
|                                                                         |                                                                      |                |        |               
|Basic earnings per common share:                                         |                                                                      |                |        |               
|                                                                         | Earnings before cumulative effect of change in accounting principle  |                | $      | 0.37          
|                                                                         | Goodwill amortization, net of taxes                                  |                |        |              
|                                                                         | Cumulative effect of change in accounting principle, net of taxes    |                |        | (0.10         
|                                                                         |                                                                      |                |        |               
|                                                                         | Adjusted net income (1)                                              |                | $      | 0.28          
|                                                                         |                                                                      |                |        |               
|Diluted earnings per common share:                                       |                                                                      |                |        |               
|                                                                         | Earnings before cumulative effect of change in accounting principle  |                | $      | 0.37          
|                                                                         | Goodwill amortization, net of taxes of                               |                |        |              
|                                                                         | Cumulative effect of change in accounting principle, net of taxes of |                |        | (0.10         
|                                                                         |                                                                      |                |        |               
|                                                                         | Adjusted net income (1)                                              |                | $      | 0.28          
|                                                                         |                                                                      |                |        |               

---

3.    Business Acquisitions

On April 11, 2001, the Company acquired Midwest of Cannon Falls, Inc., a leading creative expressions company in the decorative products and
giftware industry for approximately $61.0 million in cash. The excess of the purchase price over the estimated fair value of the net assets acquired approximated $25.4 million.
Amortization ceased on February 1, 2002, upon adoption of the new goodwill accounting rules under SFAS 142 as described in Note 2.

On
May 10, 2002, the Company purchased the interests in CBK, Ltd., LLC ("CBK"), a designer and marketer of premium everyday giftware and home décor, for
approximately $49.5 million in cash. The acquisition will be accounted for as a purchase when recorded in the Company's second quarter of fiscal 2003. The acquisition of CBK did not have an
effect on the Company's first quarter results.

9

---

4.    Inventories

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

April 30, 2002

January 31, 2002Raw materials

$
35,870

$
35,142Work in process


2,246


1,994Finished goods


140,759


144,704$
178,875

$
181,840


5.    Earnings per Share

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

Three months ended
April 30,2002

2001Net earnings

$
12,789

$
15,674Weighted average number of common shares outstanding:Basic


46,290


47,086Dilutive effect of stock options


184


178Weighted average number of common shares outstanding:Diluted


46,474


47,264


As
of April 30, 2002 and 2001, options to purchase 95,004 and 218,975 shares of common stock, respectively, are not included in the computation of earnings per share because the
effect would be anti-dilutive.

6.    Unusual Charges

At January 31, 2002, the Company had approximately $3.2 million of restructuring charges included in the Consolidated Balance Sheet, of which
$1.5 million related to lease obligations and $1.7 million related to severance costs. As a result of payments made during the quarter ended April 30, 2002 approximately
$1.2 million of lease obligations and $0.9 million of severance costs were remaining on the balance sheet at April 30, 2002. The lease obligation continues through the third
quarter of fiscal 2004 and the remaining severance costs will be paid by the end of fiscal 2003.

7.    Segment Information

The Company operates in two business segmentsthe Candles & Home Fragrance segment and the Creative Expressions segment (formerly Creative
Expressions and Foodservice). Effective February 1, 2002 the Foodservice business, represented by The Sterno Group, is now reported as part of the Candles & Home Fragrance segment to
which it is more closely aligned. All periods presented have been restated to reflect this change in reporting. The Company has operations both inside and outside of the United States and sells its
products in the Candles & Home Fragrance segment worldwide. The majority of sales in the Creative Expressions segment are domestically based.

10

---

Earnings
represent net sales less operating expenses directly related to the business segments and corporate expenses allocated to the business segments. Other income (expense) includes
interest expense, interest income and equity in earnings of investee, which are not allocated to the business segments.

|                                                                                     |                          | Three months ended
April 30, |        
|------------------------------------------------------------------------------------ | ------------------------ | ---------------------------- | -------
|
|
|Net Sales                                                                            |                          |                              |        
|                                                                                     | Candles & Home Fragrance |                              | $      
|                                                                                     | Creative Expressions     |                              |        
|                                                                                     |                          |                              |        
|Total                                                                                |                          | $                            | 277,896
|Earnings                                                                             |                          |                              |        
|                                                                                     | Candles & Home Fragrance |                              | $      
|                                                                                     | Creative Expressions     |                              |        
|                                                                                     |                          |                              |        
|                                                                                     |                          |                              | 30,908 
|                                                                                     | Other expense            |                              |        
|                                                                                     |                          |                              |        
|Earnings before income taxes and cumulative effect of change in accounting principle |                          | $                            | 27,554 
|                                                                                     |                          |                              |        

8.    Contingencies

On April 22, 2002, the Company and its wholly-owned subsidiary, Endar Corp., commenced a legal action against Ennio Racinelli and Dynamic Designs, Inc.(a
new corporation that was recently formed by Mr. Racinelli and his wife) and others in the Superior Court of the State of California, in which the Company and Endar have alleged, among other
things, that Mr. Racinelli, the former President of Endar, has breached certain of his contractual and other obligations to the Company by, among other things, engaging in a business
competitive with Endar, soliciting customers and employees of Endar and appropriating confidential information from Endar. In their complaint, the Company and Endar seek, among other things, an award
for compensatory and general damages in excess of $25 million and injunctive relief. As expected, on June 3, 2002, Mr. Racinelli and the other defendants filed an answer, which
denies the Company's and Endar's allegations, and a Cross-Complaint against Endar and the Company. The Cross-Complaint alleges, among other things, that the Company and Endar have breached certain of
their contractual obligations to Mr. Racinelli, have intentionally interfered with the
prospective economic advantage of Mr. Racinelli and Dynamic Designs, have defamed Mr. Racinelli, and have engaged in conduct that is alleged to be violative of the California Business
and Professions Code. In the Cross-Complaint, Mr. Racinelli, Dynamic Designs and the other cross-complainants seek, among other things, an award of damages in an amount of not less than
$50 million, a trebling of such damages pursuant to the California Business and Professions Code, declaratory relief, injunctive relief and punitive damages. The Company believes that it and
Endar have meritorious defenses to all of the claims that have been asserted against them in the Cross-Complaint. The Company is unable to predict the outcome of this case and accordingly, no expense
for this case has been recorded. However, in the opinion of the Company the results of this case will not have a material effect on our results of operations, financial condition or cash flows.

11

---



Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS:

Net Sales

Net
sales in the quarter ended April 30, 2002, increased $20.4 million, or 7.9% to $277.9 million when compared with $257.5 million a year earlier. Sales in
the quarter ended April 30, 2002 were affected by four main factors. First, PartyLite Worldwide posted a 10% increase in net sales when compared to the prior year, which we believe is
attributable to changes made in product offering and catalog presentation over the past year. Second, the favorable impact of the full first quarter net sales of Midwest of Cannon Falls acquired in
April 2001. Third, the unfavorable effect of an earlier than normal Easter holiday on our JMC Impact business. Lastly, the weakness in net sales of our North American premium wholesale candles
and home fragrance business in the first quarter of fiscal 2003. Excluding the effect of Midwest of Cannon Falls and discontinued businesses, net sales in the first quarter ended April 30, 2002
increased approximately 4% when compared to the same period last year.

Net
sales in the Candles & Home Fragrance segment, which now includes our Foodservice business, increased $10.8 million, or 4% to $260.2 million in the first quarter
ended April 30, 2002, compared with $249.4 million in the same period last year. As mentioned above, PartyLite our direct selling channel, increased net sales 10% in the current quarter
when compared to last year. This followed the strong performance by PartyLite in the fourth quarter of fiscal 2002. Net sales of Blyth's North American premium and mass channel businesses in this
segment decreased approximately 15% and 8%, respectively, in the quarter ended April 30, 2002 compared to the prior year period. Net sales of our European wholesale businesses in the first
quarter of fiscal 2003 showed increases of 6% and 17% in
the premium and mass channels respectively when compared to the prior year period. Such increases in the European channels would be 9% and 22%, respectively, in local currencies. Net sales of The
Sterno Group, our foodservice business, decreased approximately 7% in the first quarter of fiscal 2003 versus the same period last year as this industry continues to recover from the events of
September 11th. Although down from the first quarter a year ago, The Sterno Group's performance was slightly better than the industry as a whole, which we believe is attributable
to new product initiatives including the Sterno Smartcan, as well as more aggressive sales initiatives. Our foodservice business led by the Sterno brand, remains the market leader in providing
temperature solutions and tabletop illumination to major hotels and restaurants.

Net
sales in the Creative Expressions segment (formerly the Creative Expressions and Foodservice segment) increased $9.6 million to $17.7 million in the quarter ended
April 30, 2002 compared to $8.1 million in the prior year period. This increase is attributable to the effect of the inclusion of the sales of Midwest of Cannon Falls, acquired in
April 2001, for the full first quarter of fiscal 2003. The mass market channel of this segment experienced an anticipated decrease in net sales in the first quarter of fiscal 2003 due to the
earlier than normal Easter holiday shipments, which were recognized in our fourth quarter of fiscal 2002.

Gross Profit

Gross profit as a percent of sales was 52.2%, in the first quarter of fiscal 2003, which was the same as last year's first quarter. There was a positive mix shift
of sales to PartyLite in the current year quarter, which was offset by lower margins being experienced in the mass-market channel, the impact of an earlier than normal Easter holiday on
the Creative Expressions mass business, and the weakness in our North American premium wholesale candles and accessories business.

12

---

Selling Expense

Selling expense increased $7.0 million, or 8.6%, from $81.4 million in the quarter ended April 30, 2001 to $88.4 million in the
quarter ended April 30, 2002. As a percent of sales, selling expense was 31.8% in the most recent fiscal quarter compared to 31.6% a year earlier primarily due to a shift in sales to PartyLite
and the inclusion of Midwest of Cannon Falls for the full first quarter.

Administrative Expense

Administrative expense increased $0.9 million, or 3.6%, from $24.8 million in the quarter ended April 30, 2001 to $25.7 million in the
quarter ended April 30, 2002. As a percent of sales administrative expense decreased from 9.6% at April 30, 2001 to 9.2% in the current year period, which is a result of expense control
efforts and the economies of scale.

Amortization

Goodwill amortization decreased $1.0 million, to zero, in the first quarter of fiscal 2003 compared to the same period the prior year. This decrease is a
result of the Company's adoption of SFAS No. 142, "Goodwill and Other Intangible Assets", which calls for among other things the cessation of goodwill amortization. See Note 2 to the
Consolidated Financial Statements.

Operating Profit

Operating profit increased $3.6 million, or 13.2%, to $30.9 million in the quarter ended April 30, 2002 compared with $27.3 million a
year earlier. Operating profit as a percent of sales increased from 10.6% for the period ended April 30, 2001 to 11.1% in the first quarter of fiscal 2003. The increase in operating profit in
the three month period ended April 30, 2002 versus the same period in the prior year is primarily a result of the increase in PartyLite's business, the inclusion of Midwest of Cannon Falls for
the full first quarter period of fiscal 2003 and the cessation of goodwill amortization.

Interest Income and Other

Interest income and other decreased approximately $1.7 million in the current fiscal year's first quarter when compared to the prior year due to a gain on
sales of marketable securities held for investment in fiscal 2002 of $1.8 million.

Income Taxes

Income tax expense increased $1.0 million, from $9.3 million in the quarter ended April 30, 2001 to $10.3 million in the quarter ended
April 30, 2002. This increase is due to the increased earnings in the most recent quarter. The effective tax rate remained at approximately 37.2%, the same as the prior year.

Cumulative Effect of Change in Accounting Principle

The Company recorded a one-time charge of $4.5 million, net of income taxes of $2.9 million, on February 1, 2002, which is
reflected as the cumulative effect of a change in accounting principle, as a result of adopting SFAS No. 142, "Goodwill and Other Intangible Assets" (See Note 2 to the Consolidated
Financial Statements).

Net Earnings

As a result of the foregoing, earnings before the cumulative effect of change in accounting principle increased $1.6 million, or 10.2%, from
$15.7 million the quarter ended April 30, 2001 to $17.3 million for the quarter ended April 30, 2002. Net earnings after the cumulative effect of change

13

---

in accounting principle decreased $2.9 million, or 18.5%, from $15.7 million in the first quarter of fiscal 2002 to $12.8 million in the first quarter of fiscal 2003.

Basic
earnings per share before the cumulative effect of change in accounting principle, based upon the weighted average number of shares outstanding for the quarter ended
April 30, 2002, were $0.37 an increase of $0.04, or 12.1% compared to $0.33 for the quarter ended April 30, 2001. Basic earnings per share after the cumulative effect of change in
accounting principle, based upon the weighted average number of shares outstanding for the quarter ended April 30, 2002, were $0.28 a decrease of $0.05 compared to $0.33 for the quarter ended
April 30, 2001. Diluted earnings per share before the cumulative effect of change in accounting principle, based upon the potential dilution that could occur if options to issue common stock
were exercised, were $0.37 compared to $0.33 for the same period the prior year. The cumulative effect of change in accounting principle on diluted earnings per share equaled $0.10. Diluted earnings
per share after the cumulative effect of change in accounting principle, based upon the potential dilution that could occur if options to issue common stock were exercised, were $0.28 compared to
$0.33 for the same period the prior year.

Liquidity and Capital Resources

Inventory decreased from $181.8 million at January 31, 2002 to $178.9 million at April 30, 2002. Inventory decreased
$46.6 million from $225.5 million at April 30, 2001 when compared to the first quarter of this fiscal year. This decrease in inventory is due to continued
corporate-wide focus on inventory control. Accounts receivable decreased $8.5 million from $83.8 million at the end of fiscal 2002 to $75.3 million at April 30,
2002. The decrease in accounts receivable is due to collections, lower sales in the Creative Expressions segment as a result of the early Easter holiday and lower sales in our North American premium
channel business. Accounts payable and accrued expenses decreased $3.6 million from
$104.1 million at the end of fiscal 2002 to $100.5 million at April 30, 2002. The decrease in accounts payable and accrued expenses is attributable to normal patterns of payment
of operating expenses including the semi-annual payment of accrued interest.

Capital
expenditures for property, plant and equipment were $3.0 million in the quarter ended April 30, 2002 compared to $3.3 million in the prior year period.
Capital expenditures consisted primarily of investments in information technology and upgrades of equipment and facilities. The Company expects total capital spending of approximately
$20.0 million for fiscal 2003.

Pursuant
to the Company's revolving credit facility ("Credit Facility"), as amended on September 14, 1999, which matures on October 17, 2002, lending institutions have
agreed, subject to certain conditions, to provide an unsecured revolving credit facility to the Company in an aggregate amount of up to $135.0 million. The Company has the ability to increase
the Credit Facility, under certain circumstances, by an additional $33.8 million. Amounts outstanding under the Credit Facility bear interest, at the Company's option, at Bank of America's
prime rate (4.75% at April 30, 2002) or at the Eurocurrency rate plus a credit spread ranging from 0.25% to 0.50%, based on a pre-defined financial ratio, for a weighted average
interest rate of 2.19% at April 30, 2002. At April 30, 2002, approximately $16.3 million (including $4.5 million of outstanding letters of credit) was outstanding under the
Credit Facility. The Credit Facility contains, among other provisions, requirements for maintaining certain financial ratios and limitations on certain payments. At April 30, 2002, the Company
was in compliance with such covenants. The Company is currently in the process of establishing a new revolving credit facility and expects to do so before the maturity date of the current Credit
Facility.

As
of April 30, 2002, the Company had a total of $20.0 million available under an uncommitted bank line of credit maturing in June 2002. Amounts outstanding under
the line of credit bear interest at short-term fixed rates. No amounts were outstanding under the uncommitted line of credit at April 30, 2002.

14

---

As
of March 31, 2002, The Gies Group ("Gies") had available lines of credit of approximately $29.5 million of which approximately $5.9 million was outstanding. The
amounts outstanding under the lines of credit bear interest at a weighted average rate of 4.43% at March 31, 2002. The lines of credit are renewed annually.

Colony
Gift has a short-term revolving credit facility with Barclays Bank ("Barclays"), which matures on June 30, 2002, pursuant to which Barclays has agreed to
provide a revolving credit facility in an amount of up to $21.4 million, collateralized by certain of Colony's assets. As of March 31, 2002, Colony had borrowings under the credit
facility of approximately $11.1 million, at a weighted average interest rate of 4.65%. Colony Gift is currently finalizing the terms of a new revolving credit facility with Barclays and expects
to do so before the maturity date of the current credit facility.

At
March 31, 2002, Gies had various long-term debt agreements in multiple European currencies maturing in December 2002. The total amount outstanding as of
March 31, 2002 under the loan agreements was approximately $2.7 million with variable interest rates ranging from 5.0% to 5.5%. The loans are collateralized by certain of Gies' real
estate.

Net
cash provided by operating activities amounted to $35.9 million for the three months ended April 30, 2002 compared to $12.3 million used in operating activities
for the three months ended April 30, 2001. The increase in cash flow from operations compared to the prior year is attributable to reductions in inventory and accounts receivable and strong
earnings of $17.3 million before the cumulative effect of change in accounting principle.

On
April 4, 2002, the Company's Board of Directors authorized the Company to repurchase up to 2,000,000 additional shares of its common stock bringing the total authorization to
6,000,000 shares. Since January 31, 2002, the Company has purchased an additional 672,100 shares on the open market for a total cost of $14.6 million, bringing the cumulative total
purchased shares to 3,303,000 as of May 31, 2002 for a total cost of approximately $77.5 million. The acquired shares are held as common stock in treasury at cost.

On
April 4, 2002 the Company declared a cash dividend of $0.11 per share of the Company's common stock for the six months ended January 31, 2002. The dividend was payable
to shareholders of record as of May 1, 2002 and was paid on May 15, 2002 in the amount of $5.1 million.

Critical Accounting Policies

For a discussion of the Company's critical accounting policies see our Annual Report on Form 10-K for the fiscal year ended January 31,
2002.

Impact of Adoption of Recently Issued Accounting Standards

In November 2001, the Emerging Issues Task Force issued EITF Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a
Customer/Reseller", which addresses the accounting for consideration given by a vendor to a customer including both a reseller of the vendor's products and an entity that purchases the vendor's
products from a reseller. EITF 01-09 also codifies and reconciles related guidance issued by the EITF including EITF Issue No. 00-25, "Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendor's Products", and EITF Issue No. 00-14, "Accounting for Certain Sales Incentives". Effective February 1,
2002, the company adopted EITF 01-09, EITF 00-14 and EITF 00-25. These statements require that the Company classify certain sales incentives as a reduction of net
sales rather than selling expense. Prior year amounts have been
reclassified to conform with the current year presentation. The effect of the adoption of these issues reduced both net sales and operating expenses the first quarter ended April 30, 2001 by
$3.7 million. The adoption of such requirements had no impact on net earnings.

15

---

In
June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets". Under SFAS No. 142, goodwill is no longer subject to amortization; however,
goodwill is subject to an assessment for impairment using a two-step fair value based test, the first step of which must be performed at least annually, or more frequently if events or
circumstances indicate that goodwill might be impaired. The first step compares the fair value of a reporting unit to its carrying amount, including goodwill. If the carrying amount of the reporting
unit exceeds its fair value, the second step is performed. The second step compares the carrying amount of the goodwill to the fair value of the goodwill. If the fair value of goodwill is less than
the carrying amount, an impairment loss is reported as a reduction to goodwill and a charge to operating expense, except at the transition date, when the loss is reflected as a cumulative effect of a
change in accounting principle.

As
of January 31, 2002, Blyth's Consolidated Balance Sheets reflected approximately $112.3 million in goodwill net of accumulated amortization, including
$31.4 million related to the Candles & Home Fragrance segment businesses, other than The Sterno Group, $38.7 million related to the Creative Expressions segment businesses and
$42.2 million related to The Sterno Group business. The company adopted SFAS 142, effective February 1, 2002. In accordance with the new standard, Blyth ceased amortization of
goodwill and performed an assessment for impairment of its goodwill. As a result of the impairment review, Blyth reduced the carrying value of the goodwill related to its acquisition of The Sterno
brand in 1997 by $7.4 million. The fair value of The Sterno Group was determined through an independent valuation utilizing market comparable analysis as well as discounted cash flow models
reflecting the expected range of future cash flow outcomes over the life of the model. These cash flows were discounted to 2002 using a risk-adjusted discount rate. The impairment of The
Sterno Group's goodwill, which was recorded as a cumulative effect of a change in accounting principle, had the effect of reducing net income by $4.5 million (after tax) or $0.10 per share. The
carrying amount of goodwill on the Company's Consolidated Balance Sheet decreased approximately $8.0 million from $112.3 million at January 31, 2002 to $104.3 million at
April 30, 2002. Such decrease is a result of the previously discussed goodwill impairment charge of $7.4 million and foreign currency translation adjustments of goodwill, which
approximated $0.6 million.

16

---



Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Market Risk

The Company has operations both inside and outside of the United States and sells its products worldwide. The Company's activities expose it to a variety of
market risks, including the effects of changes in foreign currency exchange rates, interest rates credit risk and commodity prices. These financial exposures are actively monitored and, where
considered appropriate, managed by the Company.

Interest Rate Risk

As of April 30, 2002 the Company is subject to interest rate risk on approximately $78.8 million of variable rate debt, including the debt of Gies
and Colony Gift. Each 1.00% increase in the interest rate would impact pre-tax earnings by approximately $788,000 if applied to the total.

On
March 1, 2002, the Company entered into an interest rate swap agreement which matures on October 1, 2009, in relation to $50.0 million of our
$150.0 million outstanding 7.90% Senior Notes. The interest rate under the swap agreement is equal to the six-month LIBOR rate plus 2.65% (5.0% at April 1, 2002), with
interest payable semi-annually on April 1 and October 1. As the debt is a qualifying hedged item, the carrying value of the hedged portion was adjusted down by
$0.6 million reflecting the fair market value of the derivative hedge.

Foreign Currency Risk

The Company uses forward foreign exchange contracts to hedge the impact of foreign currency fluctuations on certain committed capital expenditures, certain
inventory purchases, Canadian
intercompany purchases and on certain intercompany loans. The Company does not hold or issue derivative financial instruments for trading purposes.

With
regard to commitments for machinery and equipment and inventory in foreign currencies, the gain or loss is deferred in accumulated other comprehensive income(loss) ("OCI") and, upon
payment of each commitment the underlying forward contract is closed and the corresponding gain or loss is included in the measurement of the cost of the acquired asset. With regard to forward
exchange contracts used to hedge Canadian intercompany purchases, gain or loss on such hedges is deferred in OCI and recognized in earnings in the period in which the underlying hedged transaction
occurs. Gains or losses on foreign currency forward contracts related to intercompany loans are currently recognized through income and generally offset the transaction gains or losses in the foreign
currency cash flows that they are intended to hedge. If a hedging instrument is sold or terminated prior to maturity, gains and losses are deferred until the hedged item is settled. However, if the
hedged item is no longer likely to occur, the resultant gain or loss on the terminated hedge is recognized into earnings immediately. For consolidated financial statement presentation, net cash flows
from such hedges are classified in the categories of the cash flow with the items being hedged.

The
following table provides information about the Company's foreign exchange forward contracts at April 30, 2002.

|                |  | U.S. Dollar
Notional Amount |        | Average
Contract Rate |       | Estimated
Fair Value |  
|--------------- |  | --------------------------- | ------ | --------------------- | ----- | -------------------- | -
|
|Canadian Dollar |  | $                           | 2,408  |                       | 1.577 |                      | $
|Euro            |  |                             | 27,672 |                       | 0.880 |                      |  
|Pound Sterling  |  |                             | 4,492  |                       | 1.404 |                      |  
|                |  |                             |        |                       |       |                      |  
|                |  | $                           | 34,572 |                       |       |                      | $
|                |  |                             |        |                       |       |                      |  

The
foreign exchange contracts outstanding as of April 30, 2002 have maturity dates ranging from May 2002 through January 2003.

17

---



Part II.    OTHER INFORMATION

Item 1.    Legal Proceedings

On April 22, 2002, the Company and its wholly-owned subsidiary, Endar Corp., commenced a legal action against Ennio Racinelli and Dynamic Designs, Inc.(a
new corporation that was recently formed by Mr. Racinelli and his wife) and others in the Superior Court of the State of California, in which the Company and Endar have alleged, among other
things, that Mr. Racinelli, the former President of Endar, has breached certain of his contractual and other obligations to the Company by, among other things, engaging in a business
competitive with Endar, soliciting customers and employees of Endar and appropriating confidential information from Endar. In their complaint, the Company and Endar seek, among other things, an award
for compensatory and general damages in excess of $25 million and injunctive relief. As expected, on June 3, 2002, Mr. Racinelli and the other defendants filed an answer, which
denies the Company's and Endar's allegations, and a Cross-Complaint against Endar and the Company. The Cross-Complaint alleges, among other things, that the Company and Endar have breached certain of
their contractual obligations to Mr. Racinelli, have intentionally interfered with the prospective economic advantage of Mr. Racinelli and Dynamic Designs, have defamed
Mr. Racinelli, and have engaged in conduct that is alleged to be violative of the California Business and Professions Code. In the Cross-Complaint, Mr. Racinelli, Dynamic Designs and the
other cross-complainants seek, among other things, an award of damages in an amount of not less than $50 million, a trebling of such damages pursuant to the California Business and Professions
Code, declaratory relief, injunctive relief and punitive damages. The Company believes that it and Endar have meritorious defenses to all of the claims that have been asserted against them in the
Cross-Complaint. The Company is unable to predict the outcome of this case and accordingly, no expense for this case has been recorded. However, in the opinion of the Company the results of this case
will not have a material effect on our results of operations, financial condition or cash flows.

Item 2.    Changes in Securities

None

Item 3.    Defaults upon Senior Securities

None

Item 4.    Submission of Matters to a Vote of Security Holders

None

Item 5.    Other Information

The Company is including the following cautionary statement in this Report to make applicable, and to take advantage of, the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 for any 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 and other statements which are other than statements of historical facts. From time to time, the Company and its representatives may
publish or otherwise make available forward-looking statements of this nature. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the Company, are
expressly qualified by the following cautionary statements. Forward-looking statements involve risks and uncertainties which could cause actual results or outcomes to differ materially from those
expressed in the forward-looking statements. Such forward-looking statements are expected to be based on various assumptions, many of which are based, in turn, upon further assumptions.

18

---

There
can be no assurance that management's expectations, beliefs or projections will occur or be achieved or accomplished. In addition to other factors and matters discussed elsewhere
in this Report and in the Company's other public filings and statements, the following are important factors that, in the view of the Company, could cause actual results to differ materially from
those discussed in the Company's forward-looking statements. The Company disclaims any obligation to update any forward-looking statements, or the following factors, to reflect events or circumstances
after the date of this Report.

Risk of Inability to Maintain Growth Rate

The Company has grown substantially in past years. While we expect continued growth, we expect that our future rate of growth will be less than our historical
growth rate. In the Candles & Home Fragrance segment we expect the international market to grow faster than the domestic market. The market for our Foodservice products has grown, but more
slowly, and we expect it will continue to do so. Our ability to continue to grow depends on several factors, including the following: market acceptance of existing products, the successful
introduction of new products, our ability to recruit new independent sales consultants, sourcing of raw materials, and increases in production and distribution capacity to meet demand. The
Candle & Home Fragrance and Creative Expressions industries are driven by consumer tastes. Accordingly, there can be no assurance that our existing or future products will maintain or achieve
market acceptance. Our sales and earnings results have recently been impacted negatively by a slowing of the United States economy as a whole and by a drop in consumer confidence at both the
individual and retailer levels. There can be no assurance that our sales and earnings results will not be materially adversely affected by these factors in the future. If the United States economy
continues to slow and/or consumer confidence continues to drop, our operating results may be materially adversely affected. Recently, we have incurred certain one-time expenses in
connection with the restructuring of our U.S. and European consumer wholesale operations. While we expect these actions to position us more effectively for continued growth and profitability, there
can be no assurance that we will achieve these results. We expect that, as we grow, our rate of growth will be less than our historical growth rate. Our past growth in both the Candle & Home
Fragrance segment and the Creative Expressions segment has been due, in part, to acquisitions. We expect our future growth in the Candle & Home Fragrance segment to be primarily organic, with
the possibility of selective acquisitions, and we continue to pursue strategic acquisitions in certain areas of the Creative Expressions segment. There can be no assurance that we will be able to
continue to identify suitable acquisition candidates, to consummate acquisitions on terms favorable to the Company, to finance acquisitions or to integrate successfully acquired operations. In the
future, acquisitions may contribute more to the overall Company's sales growth rate than historically.

Ability to Respond to Increased Product Demand

In the past, our internal growth has required increases in personnel, expansion of production and distribution facilities, and enhancement of management
information systems. More recently, we have eliminated one of our facilities to address manufacturing over-capacity. Our ability to meet future demand for Candle & Home Fragrance
and Creative Expressions products will be dependent upon success in (1) training, motivating and managing new employees, (2) bringing new production and distribution facilities on line
in a timely manner, (3) improving management information systems in order to respond promptly to customer orders and (4) improving our ability to forecast anticipated product demand in
order to continue to fill customer orders promptly. If we are unable to meet future demand for products in a timely and efficient manner, our operating results could be materially adversely affected.

19

---

Risks Associated with International Sales and Foreign-Sourced Products

Our international business has grown at a faster rate than sales in the United States in recent years. In addition, we source a portion of our candles,
accessories and decorative gift bags and seasonal décor from independent manufacturers in the Pacific Rim, Europe and Mexico. For these reasons we are subject to the following risks
inherent in foreign manufacturing and sales: fluctuations in currency exchange rates, economic and political instability, transportation delays, difficulty in maintaining quality control, restrictive
actions by foreign governments, nationalizations, the laws and policies of the United States affecting importation of goods (including duties, quotas and taxes) and trade and foreign tax laws. In
particular, during fiscal year 2002, declining European currencies had a significant negative impact on our international sales results. If European currencies remain weak or decline further, our
operating results may be materially adversely affected.

Raw Materials

For certain raw materials, there may be temporary shortages due to weather or other factors, including disruptions in supply caused by raw material transportation
or production delays. Such raw material shortages have not previously had, and are not expected to have, a material adverse effect on the Company's operations.

Dependence on Key Management Personnel

Our success depends upon the contributions of key management personnel, particularly our Chairman, Chief Executive Officer and President, Robert B. Goergen. We do
not have employment contracts with any of our key management personnel except for Mr. Goergen, nor do we maintain any key person life insurance policies. Also, certain of our senior executives
have assumed new positions recently. The loss of any of the key management personnel or the inability of executives to perform their new positions could have a material adverse effect on the Company.

Competition

Our business is highly competitive, both in terms of price and new product introductions. The worldwide market for Candle & Home Fragrance, as well as for
Creative Expressions products, is highly fragmented, with numerous suppliers serving one or more of the distribution channels served by the Company. Because there are relatively low barriers to entry
to the Candle & Home Fragrance and Creative Expressions industries, we may face increased future competition from other companies, some of which may have substantially greater financial and
marketing resources than those available to us. From time to time during the year-end holiday season, we compete with companies offering candles manufactured in foreign countries,
particularly China. In addition, certain competitors focus on a
particular geographic or single-product market and attempt to gain or maintain market share solely on the basis of price.

Item 6.    Exhibits and Reports on Form 8-K



20

---





21

---





SIGNATURES

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

|      |               |  | BLYTH, INC.
|----- | ------------- |  | -----------
|Date: | June 14, 2002 |  | By:        
|Date: | June 14, 2002 |  | By:        

22

---

QuickLinks