**UNITEDSTATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WashingtonD.C. 20549**

**FORM 10-Q**
| (Mark One)                                        |
|---------------------------------------------------|
|                                              |
| **x**                                             | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                        | ** ** |
| **For the  quarterly period ended July 31, 2007** |
| ** **                                        |
| **or**                                            |
|                                              |
| **o**                                             | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For thetransition period from                    to                     **

**CommissionFile Number 1-13026**

**BLYTH,INC.**

(Exact name ofregistrant 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’stelephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

Yes  x         No  o

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Checkone):

 

| Large accelerated  filer o |   | Accelerated filer x |   | Non-Accelerated  filer o |
|---------------------------------|--------|--------------------------|--------|-------------------------------|

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).

Yes  o         No  x

Indicate the number of shares outstanding of each ofthe issuer’s classes of common stock, as of the latest practicable date.

**39,480,662Common Shares as of August 31, 2007**

 

----

**BLYTH,INC.**

#### **INDEX**

|                                                                                                                 | ** ** | **Page** |
|-----------------------------------------------------------------------------------------------------------------|------------|----------|
|                                                                                                            |       |     |
| Part  I.   Financial  Information                                                                     |       |
|                                                                                                            |       |
| Item  1.   Financial  Statements (Unaudited):                                                         |       |
|                                                                                                            |       |
| Condensed Consolidated Balance Sheets                                                                           | 3          |
|                                                                                                            |       |
| Condensed Consolidated Statements of Earnings (Loss)                                                            | 4-5        |
|                                                                                                            |       |
| Condensed Consolidated Statements of Stockholders’ Equity                                                  | 6          |
|                                                                                                            |       |
| Condensed Consolidated Statements of Cash Flows                                                                 | 7          |
|                                                                                                            |       |
| Notes to Condensed Consolidated Financial Statements                                                            | 8-18       |
|                                                                                                            |       |
| Item 2.   Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 19-27      |
|                                                                                                            |       |
| Item 3.   Quantitative and  Qualitative Disclosures About Market Risk                                 | 28-29      |
|                                                                                                            |       |
| Item 4.   Controls and  Procedures                                                                    | 30         |
|                                                                                                            |       |
| Part  II.   Other  Information                                                                        |       |
|                                                                                                            |       |
| Item  1.   Legal  Proceedings                                                                         | 31         |
|                                                                                                            |       |
| Item  1A.   Risk  Factors                                                                             | 31         |
|                                                                                                            |       |
| Item 2.   Unregistered  Sales of Equity Securities and Use of Proceeds                                | 32         |
|                                                                                                            |       |
| Item 3.   Defaults upon  Senior Securities                                                            | 32         |
|                                                                                                            |       |
| Item 4.   Submission of  Matters to a Vote of Security Holders                                        | 33         |
|                                                                                                            |       |
| Item  5.   Other  Information                                                                         | 33         |
|                                                                                                            |       |
| Item 6.   Exhibits                                                                                    | 34         |
|                                                                                                            |       |
| Signatures                                                                                                      | 35         |

 

2

----

Part I.   FINANCIAL INFORMATION

Item I.   FINANCIAL STATEMENTS

**BLYTH, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCESHEETS**

**(Unaudited)**
| ** **                                                                                                                      | ** ** | **July 31,** | ** ** | **January 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|----------------------|------------|
| **(In thousands, except share and per share data)**                                          | ** ** | **2007**          | ** ** | **2007**             | ** ** |
| **ASSETS**                                                                                                                      |       |              |       |                 |       |
| Current assets:                                                                                                                 | ** ** | ** **        |       |                 |       |
| Cash and cash  equivalents                                                                                                      |       | $                 | 90,833     |                 | $          | 103,808 |   |
| Short-term investments                                                                                                          |       | 125,985           |       | 129,725              |       |
| Accounts receivable,  less allowance for doubtful receivables of $1,782 and $1,533, respectively                                |       | 56,822            |       | 35,040               |       |
| Inventories                                                                                                                     |       | 143,652           |       | 148,321              |       |
| Prepaid and other                                                                                                               |       | 45,166            |       | 33,317               |       |
| Deferred income taxes                                                                                                           |       | 21,800            |       | 29,707               |       |
| Total current  assets                                                                                                           |       | 484,258           |       | 479,918              |       |
| Property, plant and  equipment, at cost:                                                                                        |       |              |       |                 |       |
| Less accumulated  depreciation of $219,769 and $209,160, respectively                                                           |       | 149,368           |       | 159,484              |       |
| Other assets:                                                                                                                   |       |              |       |                 |       |
| Investment                                                                                                                      |       | 3,644             |       | 3,610                |       |
| Goodwill                                                                                                                        |       | 78,682            |       | 78,682               |       |
| Other intangible  assets, net of accumulated amortization of $8,500 and $7,750, respectively                                    |       | 34,600            |       | 35,350               |       |
| Deposits and other  assets                                                                                                      |       | 18,092            |       | 17,594               |       |
| Total  non-current assets                                                                                                       |       | 135,018           |       | 135,236              |       |
| Total assets                                                                                                                    |       | $                 | 768,644    |                 | $          | 774,638 |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                  |       |              |       |                 |       |
| Current liabilities:                                                                                                            |       |              |       |                 |       |
| Current maturities of  long-term debt                                                                                           |       | 1,022             |       | 987                  |       |
| Accounts payable                                                                                                                |       | 48,562            |       | 56,450               |       |
| Accrued expenses                                                                                                                |       | 67,829            |       | 77,738               |       |
| Income taxes payable                                                                                                            |       | 3,698             |       | 4,925                |       |
| Total current  liabilities                                                                                                      |       | 121,111           |       | 140,100              |       |
| Deferred income taxes                                                                                                           |       | 33,085            |       | 35,002               |       |
| Long-term debt, less  current maturities                                                                                        |       | 210,575           |       | 214,792              |       |
| Other liabilities                                                                                                               |       | 32,260            |       | 21,051               |       |
| Commitments and  contingencies                                                                                                  |       | —            |       | —               |       |
| Stockholders’ equity:                                                                                                      |       |              |       |                 |       |
| Preferred stock -  authorized 10,000,000 shares of $0.01 par value; no shares issued                                            |       | —            |       | —               |       |
| Common stock -  authorized 100,000,000 shares of $0.02 par value; issued 50,916,460 shares  and 50,637,060 shares, respectively |       | 1,018             |       | 1,013                |       |
| Additional contributed  capital                                                                                                 |       | 137,295           |       | 129,367              |       |
| Retained earnings                                                                                                               |       | 536,401           |       | 534,897              |       |
| Accumulated other  comprehensive income                                                                                         |       | 23,313            |       | 22,130               |       |
| Treasury stock, at  cost, 11,435,798 shares and 11,335,798 shares, respectively                                                 |       | (326,414          | )          | (323,714             | )          |
| Total stockholders’  equity                                                                                                |       | 371,613           |       | 363,693              |       |
| Total liabilities and  stockholders’ equity                                                                                |       | $                 | 768,644    |                 | $          | 774,638 |   |

 

***The accompanying notes are an integral partof these financial statements.***

3

----

 

**BLYTH,INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)**

**(Unaudited)**
| **Six months ended July 31 (In thousands, except per share data)** | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Net sales                                                                                                            |       | $        | 505,238    |     | $          | 542,864 |   |
| Cost of goods  sold                                                                                                  |       | 242,164  |       | 273,484  |       |
| Gross profit                                                                                                         |       | 263,074  |       | 269,380  |       |
| Selling                                                                                                              |       | 172,645  |       | 183,856  |       |
| Administrative  and other                                                                                            |       | 66,103   |       | 62,417   |       |
| Goodwill  impairment                                                                                                 |       | —   |       | 36,769   |       |
| Total operating expense                                                                                              |       | 238,748  |       | 283,042  |       |
| Operating profit (loss)                                                                                              |       | 24,326   |       | (13,662  | )          |
| Other expense  (income):                                                                                             |       |     |       |     |       |
| Interest expense                                                                                                     |       | 7,346    |       | 9,989    |       |
| Interest income                                                                                                      |       | (4,050   | )          | (3,533   | )          |
| Foreign exchange and other                                                                                           |       | (151     | )          | (592     | )          |
| Total other expense                                                                                                  |       | 3,145    |       | 5,864    |       |
| Earnings (loss) from continuing operations before  income taxes and minority interest                                |       | 21,181   |       | (19,526  | )          |
| Income tax  expense (benefit)                                                                                        |       | 6,223    |       | (6,975   | )          |
| Earnings (loss) from continuing operations before  minority interest                                                 |       | 14,958   |       | (12,551  | )          |
| Minority  interest                                                                                                   |       | 54       |       | 74       |       |
| Earnings (loss) from continuing operations                                                                           |       | 14,904   |       | (12,625  | )          |
| Loss from  discontinued operations, net of income tax benefit of $1,041 in 2006                                      |       | —   |       | (107,351 | )          |
| Net earnings  (loss)                                                                                                 |       | $        | 14,904     |     | $          | (119,976 | ) |
| Basic:                                                                                                               |       |     |       |     |       |
| Earnings (loss) from continuing operations per  common share                                                         |       | $        | 0.38       |     | $          | (0.31 | ) |
| Loss from discontinued operations per common share                                                                   |       | —   |       | (2.66    | )          |
| Net earnings (loss) per common share                                                                                 |       | $        | 0.38       |     | $          | (2.98 | ) |
| Weighted average number of shares outstanding                                                                        |       | 39,400   |       | 40,312   |       |
| Diluted:                                                                                                             |       |     |       |     |       |
| Earnings (loss) from continuing operations per  common share                                                         |       | $        | 0.37       |     | $          | (0.31 | ) |
| Loss from discontinued operations per common share                                                                   |       | —   |       | (2.66    | )          |
| Net earnings (loss) per common share                                                                                 |       | $        | 0.37       |     | $          | (2.98 | ) |
| Weighted average  number of shares outstanding                                                                       |       | 39,751   |       | 40,312   |       |

 

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

4

----

**BLYTH,INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF EARNINGS (LOSS)**

**(Unaudited)**

** **
| **Three months ended July 31 (In thousands, except per share data)** | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Net sales                                                                                                              |       | $        | 234,871    |     | $          | 262,617 |   |
| Cost of goods sold                                                                                                     |       | 113,501  |       | 134,571  |       |
| Gross profit                                                                                                           |       | 121,370  |       | 128,046  |       |
| Selling                                                                                                                |       | 78,996   |       | 86,744   |       |
| Administrative and  other                                                                                              |       | 34,704   |       | 32,258   |       |
| Goodwill impairment                                                                                                    |       | —   |       | 36,769   |       |
| Total operating  expense                                                                                               |       | 113,700  |       | 155,771  |       |
| Operating profit  (loss)                                                                                               |       | 7,670    |       | (27,725  | )          |
| Other expense (income):                                                                                                |       |     |       |     |       |
| Interest expense                                                                                                       |       | 3,625    |       | 5,288    |       |
| Interest income                                                                                                        |       | (2,061   | )          | (1,747   | )          |
| Foreign exchange  and other                                                                                            |       | 397      |       | (103     | )          |
| Total other  expense                                                                                                   |       | 1,961    |       | 3,438    |       |
| Earnings (loss)  from continuing operations before income taxes and minority interest                                  |       | 5,709    |       | (31,163  | )          |
| Income tax expense (benefit)                                                                                           |       | 2,510    |       | (10,434  | )          |
| Earnings (loss)  from continuing operations before minority interest                                                   |       | 3,199    |       | (20,729  | )          |
| Minority interest                                                                                                      |       | 27       |       | 40       |       |
| Earnings (loss)  from continuing operations                                                                            |       | 3,172    |       | (20,769  | )          |
| Loss from discontinued  operations, net of income tax benefit of $892 in 2006                                          |       | —   |       | (68,598  | )          |
| Net earnings (loss)                                                                                                    |       | $        | 3,172      |     | $          | (89,367 | ) |
| Basic:                                                                                                                 |       |     |       |     |       |
| Earnings (loss)  from continuing operations per common share                                                           |       | $        | 0.08       |     | $          | (0.52 | ) |
| Loss from  discontinued operations per common share                                                                    |       | —   |       | (1.72    | )          |
| Net earnings (loss)  per common share                                                                                  |       | $        | 0.08       |     | $          | (2.24 | ) |
| Weighted average  number of shares outstanding                                                                         |       | 39,488   |       | 39,821   |       |
| Diluted:                                                                                                               |       |     |       |     |       |
| Earnings (loss)  from continuing operations per common share                                                           |       | $        | 0.08       |     | $          | (0.52 | ) |
| Loss from  discontinued operations per common share                                                                    |       | —   |       | (1.72    | )          |
| Net earnings  (loss) per common share                                                                                  |       | $        | 0.08       |     | $          | (2.24 | ) |
| Weighted average number  of shares outstanding                                                                         |       | 39,835   |       | 39,821   |       |

 

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

5

----

**BLYTH, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**

**(Unaudited)**

 
| **(In thousands)**                                             | ** ** | ** ** | ** ** | ** **      | ** ** | ** **   | ** ** | ** **   | ** ** | ** **       | ** ** | ** **             | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------|------------|------------|------------|-----------------|------------|--------------|------------|--------------|------------|------------------|------------|------------------------|------------|------------|------------|
| ** **                                                          | ** ** | ** ** | ** ** | ** **      | ** ** | ** **   | ** ** | ** **   | ** ** | ** **       | ** ** | **Accumulated**        | ** ** | ** ** | ** ** |
| ** **                                                          | ** ** | ** ** | ** ** | **Additional**  | ** ** | ** **   | ** ** | ** **   | ** ** | ** **       | ** ** | **Other**              | ** ** | ** ** | ** ** |
| ** **                                                          | ** ** | **Common** | ** ** | **Contributed** | ** ** | **Retained** | ** ** | **Treasury** | ** ** | **Unearned**     | ** ** | **Comprehensive**      | ** ** | ** ** | ** ** |
| ** **                                                          | ** ** | **Stock**  | ** ** | **Capital**     | ** ** | **Earnings** | ** ** | **Stock**    | ** ** | **Compensation** | ** ** | **Income (Loss)** | ** ** | **Total**  | ** ** |
| For the six  months ended July 31, 2006:                            | ** ** | ** ** | ** ** | ** **      | ** ** | ** **   | ** ** | ** **   | ** ** | ** **       | ** ** | ** **             | ** ** | ** ** | ** ** |
| Balance, February  1, 2006                                          |       | $          | 1,010      |            | $          | 127,580      |       | $            | 657,983    |             | $          | (287,744               | )          | $          | (3,070     | ) | $ | (1,935 | ) | $ | 493,824 |   |
| Net loss for the  period                                            |       |       |       |            |       | (119,976     | )          |         |       |             |       |                   |       | (119,976   | )          |
| Foreign currency  translation adjustments                           |       |       |       |            |       |         |       |         |       |             |       | 14,288                 |       | 14,288     |       |
| Unrealized gain  on certain investments (net of tax $4)             |       |       |       |            |       |         |       |         |       |             |       | 6                      |       | 6          |       |
| Net loss on cash  flow hedging instruments (net of tax of $33)      |       |       |       |            |       |         |       |         |       |             |       | (62                    | )          | (62        | )          |
| Reclassification  of unearned compensation                          |       |       |       | (3,070          | )          |         |       |         |       | 3,070            |       |                   |       | —     |       |
| Comprehensive loss                                                  |       |       |       |            |       |         |       |         |       |             |       |                   |       | (105,744   | )          |
| Cancellation of  restricted stock                                   |       |       |       | 438             |       |         |       | (438         | )          |             |       |                   |       | —     |       |
| Amortization of  unearned compensation                              |       |       |       | 450             |       |         |       |         |       |             |       |                   |       | 450        |       |
| Dividends                                                           |       |       |       |            |       | (9,302       | )          |         |       |             |       |                   |       | (9,302     | )          |
| Treasury stock  purchases                                           |       |       |       |            |       |         |       | (34,987      | )          |             |       |                   |       | (34,987    | )          |
| Balance, July 31,  2006                                             |       | $          | 1,010      |            | $          | 125,398      |       | $            | 528,705    |             | $          | (323,169               | )          | $          | —     |   | $ | 12,297 |   | $ | 344,241 |   |
| For the six  months ended July 31, 2007:                            | ** ** | ** ** | ** ** | ** **      | ** ** | ** **   | ** ** | ** **   | ** ** | ** **       | ** ** | ** **             | ** ** | ** ** | ** ** |
| Balance, February  1, 2007                                          |       | $          | 1,013      |            | $          | 129,367      |       | $            | 534,897    |             | $          | (323,714               | )          | $          | —     |   | $ | 22,130 |   | $ | 363,693 |   |
| FIN 48 adoption  adjustment                                         |       |       |       |            |       | (2,769       | )          |         |       |             |       |                   |       | (2,769     | )          |
| Adjusted Balance,  February 1, 2007:                                |       | $          | 1,013      |            | $          | 129,367      |       | $            | 532,128    |             | $          | (323,714               | )          | $          | —     |   | $ | 22,130 |   | $ | 360,924 |   |
| Net earnings for  the period                                        |       |       |       |            |       | 14,904       |       |         |       |             |       |                   |       | 14,904     |       |
| Foreign currency  translation adjustments                           |       |       |       |            |       |         |       |         |       |             |       | 1,746                  |       | 1,746      |       |
| Unrealized gain  on certain investments (net of tax $51)            |       |       |       |            |       |         |       |         |       |             |       | 84                     |       | 84         |       |
| Net loss on cash  flow hedging instruments (net of tax of $348)     |       |       |       |            |       |         |       |         |       |             |       | (647                   | )          | (647       | )          |
| Comprehensive income                                                |       |       |       |            |       |         |       |         |       |             |       |                   |       | 16,087     |       |
| Common stock  issued in connection with long-term incentive plan    |       | 6          |       | 7,073           |       |         |       |         |       |             |       |                   |       | 7,079      |       |
| Common stock  cancelled in connection with long-term incentive plan |       | (1         | )          |            |       |         |       |         |       |             |       |                   |       | (1         | )          |
| Tax benefit from  stock options                                     |       |       |       | 303             |       |         |       |         |       |             |       |                   |       | 303        |       |
| Amortization of  unearned stock compensation                        |       |       |       | 552             |       |         |       |         |       |             |       |                   |       | 552        |       |
| Dividends                                                           |       |       |       |            |       | (10,631      | )          |         |       |             |       |                   |       | (10,631    | )          |
| Treasury stock  purchases                                           |       |       |       |            |       |         |       | (2,700       | )          |             |       |                   |       | (2,700     | )          |
| Balance, July 31, 2007                                              |       | $          | 1,018      |            | $          | 137,295      |       | $            | 536,401    |             | $          | (326,414               | )          | $          | —     |   | $ | 23,313 |   | $ | 371,613 |   |

 

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

 

6

----

 

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**
| **Six months ended July 31 (In thousands)**                               | ** ** | **2007**   | ** ** | **2006** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|------------|------------|----------|------------|
| Cash flows from  operating activities:                                                                  |       |       |       |     |       |
| Net earnings  (loss)                                                                                    |       | $          | 14,904     |     | $          | (119,976 | ) |
| Adjustments to  reconcile net earnings (loss) to net cash provided by (used in) operating  activities:  |       |       |       |     |       |
| Loss on sale of  discontinued operations, net of tax                                                    |       | —     |       | 92,897   |       |
| Depreciation and  amortization                                                                          |       | 14,435     |       | 17,234   |       |
| Loss on  disposition of fixed assets                                                                    |       | 39         |       | 1,144    |       |
| Gain on sale of  assets                                                                                 |       | (594       | )          | —   |       |
| Stock-based  compensation expense                                                                       |       | 983        |       | 450      |       |
| Deferred income  taxes                                                                                  |       | 8,247      |       | (10,094  | )          |
| Equity (income)  loss of investee                                                                       |       | (34        | )          | 60       |       |
| Minority  interest                                                                                      |       | 15         |       | (45      | )          |
| Goodwill  impairment                                                                                    |       | —     |       | 36,769   |       |
| Loss on sale of  assets held for sale                                                                   |       | —     |       | 79       |       |
| Changes in operating  assets and liabilities, net of effect of business acquisitions and  divestitures: |       |       |       |     |       |
| Accounts  receivable                                                                                    |       | (29,007    | )          | 16,253   |       |
| Inventories                                                                                             |       | (11,145    | )          | (24,030  | )          |
| Prepaid and  other                                                                                      |       | (12,394    | )          | (12,724  | )          |
| Other long-term  assets                                                                                 |       | 2,406      |       | 1,067    |       |
| Accounts payable                                                                                        |       | (7,344     | )          | (6,449   | )          |
| Accrued expenses                                                                                        |       | (9,647     | )          | (14,392  | )          |
| Other  liabilities                                                                                      |       | 1,607      |       | (1,945   | )          |
| Income taxes                                                                                            |       | (1,337     | )          | (10,990  | )          |
| Net cash used in  operating activities                                                                  |       | (28,866    | )          | (34,692  | )          |
| Cash flows from  investing activities:                                                                  |       |       |       |     |       |
| Purchases of  property, plant and equipment                                                             |       | (4,034     | )          | (8,743   | )          |
| Purchases of  short-term investments                                                                    |       | (1,167,030 | )          | (744,341 | )          |
| Proceeds from  sales of short-term investments                                                          |       | 1,170,770  |       | 671,206  |       |
| Proceeds from  sale of assets                                                                           |       | 25,423     |       | 5,458    |       |
| Proceeds from  the sales of businesses, net of cash disposed                                            |       | 514        |       | 69,208   |       |
| Purchase of  businesses, net of cash acquired                                                           |       | —     |       | (6,654   | )          |
| Net cash  provided by (used in) investing activities                                                    |       | 25,643     |       | (13,866  | )          |
| Cash flows from  financing activities:                                                                  |       |       |       |     |       |
| Proceeds from  issuance of common stock                                                                 |       | 7,079      |       | —   |       |
| Tax benefit from  stock options                                                                         |       | 303        |       | —   |       |
| Purchases of  treasury stock                                                                            |       | (2,700     | )          | (34,987  | )          |
| Borrowings from  bank lines of credit                                                                   |       | —     |       | 32,903   |       |
| Repayments on  bank lines of credit                                                                     |       | —     |       | (26,664  | )          |
| Repayments of  long-term debt                                                                           |       | (3,995     | )          | (72,607  | )          |
| Payments on  capital lease obligations                                                                  |       | (217       | )          | —   |       |
| Dividends paid                                                                                          |       | (10,631    | )          | (9,302   | )          |
| Net cash used in  financing activities                                                                  |       | (10,161    | )          | (110,657 | )          |
| Effect of exchange rate  changes on cash                                                                |       | 409        |       | 3,661    |       |
| Net decrease in  cash and cash equivalents                                                              |       | (12,975    | )          | (155,554 | )          |
| Less: cash and cash  equivalents of discontinued operations at end of period                            |       |       |       | 2,928    |       |
| Cash and cash  equivalents at beginning of period                                                       |       | 103,808    |       | 242,068  |       |
| Cash and cash equivalents at end of period                                                              |       | $          | 90,833     |     | $          | 83,586 |   |

 

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

7

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**BLYTH, INC. ANDSUBSIDIARIES**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**1.**                                     Basis of Presentation

The condensedconsolidated financial statements include the accounts of the Company and itssubsidiaries.  All intercompany accountsand transactions have been eliminated. Our investment in a company that is not majority owned or controlled isreported using the equity method and is recorded as an investment.  Certain of the Company’s subsidiaries operateon a 52 or 53 week fiscal year ending on the Saturday closest to January31.  European operations maintain acalendar year accounting period, which is consolidated with the Company’sfiscal period.  In the opinion ofmanagement, the accompanying unaudited condensed consolidated financialstatements include all adjustments necessary for fair presentation of theCompany’s consolidated financial position as of July 31, 2007 and theconsolidated results of its operations and cash flows for the six-month periodsended July 31, 2007 and 2006.  Theseinterim statements should be read in conjunction with the Company’sconsolidated financial statements for the fiscal year ended January 31, 2007,as set forth in the Company’s Annual Report on Form 10-K.  Operating results for the three and sixmonths ended July 31, 2007 are not necessarily indicative of the results thatmay be expected for the fiscal year ending January 31, 2008.

**2.**                                     Discontinued Operations and Divestitures

On April 12, 2006, the Companysold its European seasonal decorations business, Kaemingk B.V. (“Kaemingk”), inthe Wholesale segment to an entity controlled by the management ofKaemingk.  On June 16, 2006, the Companysold its European everyday home, garden and seasonal business, Edelman B.V. (“Edelman”),and its European gift and florist products business, Euro-Decor B.V. (“Euro-Decor”),both in the Wholesale segment to an entity with which members of the managementof Edelman and Euro-Decor are affiliated. On August 17, 2006, the Company sold its European mass candle business,Gies, which was part of the Wholesale segment. On December 20, 2006, the Company sold its European premium candlebusiness, Colony, which was part of the Wholesale segment.  Accordingly, these businesses have all beenreported as discontinued operations for all periods presented in the CondensedConsolidated Statements of Earnings (Loss).

Included in the earnings (loss)from discontinued operations in the Condensed Consolidated Statements ofEarnings (Loss) for the three and six months ended July 31, 2007 and 2006 arethe following:
|                                                      | ** ** | **Three months ended July 31,** | ** ** | **Six months ended July 31,** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| **(In thousands)**                              | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net Sales                                            |       | $                                                   | —     |                                              | $          | 27,379 |   | $ | — |   | $ | 86,625 |   |
| Loss from discontinued  operations, net of tax       |       | —                                              |       | (10,791                                           | )          | — |   | (14,454 | ) |
| Loss on sale of  discontinued operations, net of tax |       | —                                              |       | (57,807                                           | )          | — |   | (92,897 | ) |
|                                                      |            |                                                     |            |                                                   |            |  |  |  |  |  |  |  |  |

 

Included in the net lossfrom discontinued operations were operating losses related to Kaemingk of $0.0million and $0.3 million, respectively, for the three and six months ended July31, 2006. In the first quarter of fiscal 2007 the Company recorded a non-taxdeductible loss from discontinued operations of $18.4 million related to thesale of Kaemingk.

Included in the net lossfrom discontinued operations were net operating losses related to Edelman andEuro-Decor of $1.9 million and $2.2 million for the three and six months endedJuly 31, 2006, respectively. In the first quarter of fiscal 2007, the Companyrecorded a non-tax deductible goodwill impairment charge of $16.7 millionrelated to these businesses, which has been included in the net loss fromdiscontinued operations. In the quarter ended July 31, 2006, the net loss fromdiscontinued operations includes a non-taxable gain on the sale of Edelman andEuro-Decor of $1.9 million.

8

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Includedin the net loss from discontinued operations were net operating losses relatedto Gies and Colony for the three and six months ended July 31, 2006, of $8.9million and $11.9 million, respectively.  Also included in the net lossfrom discontinued operations for the three and six months ended July 31, 2006were non-tax deductible charges for the impairment of the Gies and Colonybusinesses of $31.1 million and $28.6 million, respectively.

Thesecharges reflected the amount by which the carrying value of the net assets soldexceeded the estimated fair value of the businesses.

On April 27, 2007, theCompany sold certain assets and liabilities of its Blyth HomeScentsInternational North American mass channel candle business (“BHI NA”), which waspart of the Wholesale segment.  The netassets were sold for $25.1 million, inclusive of proceeds from the sale ofoverstock inventory of $1.1 million. Of this amount, $21.8 million was receivedat closing and $3.3 million was received in the second quarter of fiscal2008.  The sale, including the proceedsreceived in the second quarter, resulted in a pre-tax gain of $0.6 million, andis recorded as Administrative and other expenses in the Condensed ConsolidatedStatements of Earnings (Loss).

Included in the sale wereworking capital net assets, as well as fixed assets and leases related to theMemphis, Tennessee distribution facility and Bentonville, Arkansasoperations.  The Company retained allother offices and its Elkin, North Carolina manufacturing and distributionfacilities, which produce the Company’s premium wholesale Colonial Candle brandproduct, and continue to manufacture and distribute candles under a transitionservices agreement for the buyer. The net assets sold were comprised primarilyof customer relationships, accounts receivable of $7.4 million, inventory of$16.6 million and distribution equipment of $1.1 million, less liabilitiesassumed of $1.7 million.

In addition, the Companyentered into an overstock inventory agreement with the buyer that provides forrevenue sharing in future sales of excess and obsolete inventory, transferredto the buyer as part of the sale of certain assets and liabilities of BHI NA.  The Company is entitled to receive a portionof the proceeds from the sale of the overstock inventory by the buyer. For thethree and six months ended July 31, 2007, the Company received $1.1 million ofproceeds from this agreement, which were included as part of the pre-tax gainon sale of $0.6 million, described above.

Revenue and costs relatedto operating the retained facilities and certain agreed upon transitionalsupport services will continue to be reported in continuing operations in theCondensed Consolidated Statements of Earnings (Loss).

**3.**                                     Restructuring

During the third and fourthquarters of fiscal 2007 the Company recorded restructuring charges related tothe restructuring plan for our North American mass channel home fragrancebusiness, the major components of which were the closing of our Tijuana, Mexicomanufacturing facility, the elimination of less profitable customers, thestreamlining of the stock keeping unit (“SKU”) base of the mass business, theoutsourcing of certain products currently being manufactured and head countreductions.  These charges included $1.4million of severance costs associated with the termination of 149 employees.

Also, during the fourthquarter of fiscal 2007, the Company recorded charges related to therestructuring of the North American operations of our Direct Selling segment inrecognition of the recent decline in sales in this channel.  These costs were comprised of $1.5 million ofseverance costs associated with the termination of 91 employees and $0.5million of lease termination costs.

9

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As of January 31, 2007, theCompany had an accrual for approximately $2.5 million for restructuring chargesin the Condensed Consolidated Balance Sheet, which related to theaforementioned severance liabilities and lease obligations. For the six monthperiod ending July 31, 2007, an additional $0.5 million of lease terminationcharges were recorded in cost of goods sold and $0.8 million in severancecharges were recorded in administrative and other expense.  As a result of payments made during the sixmonth period ending July 31, 2007 approximately $0.9 million of severanceliabilities and $0.6 million of lease obligations were remaining on the balancesheet at July 31, 2007.  The remainingseverance liability and lease obligations will be paid within the next twelvemonths.

The following tablerepresents the restructuring activity incurred for the above described programsrecorded during the six month period ended July 31, 2007:
|                                 | ** ** | **Wholesale  Segment**   | ** ** | **Direct Selling  Segment** | ** ** | ** **               | ** ** |
|---------------------------------|------------|--------------------------|------------|----------------------------------|------------|--------------------------|------------|
| **(In thousands)**         | ** ** | **Severance Costs** | ** ** | **Lease Obligation**        | ** ** | **Severance Costs** | ** ** | **Total** | ** ** |
| Balance at  January 31, 2007    |       | $                        | 469        |                             | $          | 450                      |       | $ | 1,541 |   | $ | 2,460 |   |
| Charges incurred in fiscal 2008 |       | 769                      |       | 541                              |       | —                   |       | $ | 1,310 |   |
| Payments made in fiscal 2008    |       | (509                     | )          | (391                             | )          | (1,374                   | )          | (2,274 | ) |
| Balance at July 31,  2007       |       | $                        | 729        |                             | $          | 600                      |       | $ | 167 |   | $ | 1,496 |   |

 

**4.**                                     Short-Term Investments

**The Company accounts for its short-term investments inaccordance with Statement of Financial Accounting Standards No. 115, “Accountingfor Certain Investments in Debt and Equity Securities.”  The Company’s short-term investments consistof auction rate securities and variable rate demand obligations classified asavailable-for-sale securities.  Ourshort-term investments in these securities are recorded at cost, whichapproximates fair market value due to their variable interest rates, whichtypically reset every 7 to 49 days. Despite the long-term nature of their stated contractual maturities, theCompany generally has the ability to liquidate these securities in 49 days orless.  Management’s intent is to holdthese securities as liquid assets convertible to cash for applicableoperational needs as they may arise.**

**As of July 31, 2007 and January 31, 2007, theCompany held $126.0 million and $129.7 million, respectively, of short-terminvestments, which consist of auction rate securities and variable rate demandobligations classified as available-for-sale securities.**

**Short-term investments by contractual maturity areas follows:**
| (In thousands)            | ** ** | **July 31, 2007** | ** ** | **January 31, 2007** | ** ** |
|--------------------------------|------------|-----------------------------|------------|--------------------------------|------------|
| Due within one  year           |       | $                           | 4,000      |                           | $          | 7,000 |   |
| Due between one  and ten years |       | 3,750                       |       | —                         |       |
| Due after ten  years           |       | 118,235                     |       | 122,725                        |       |
| Total                          |       | $                           | 125,985    |                           | $          | 129,725 |   |

 

There were no cumulativegross unrealized holding gains (losses) or gross realized gains (losses) fromour short-term investments.  All incomegenerated from these short-term investments was recorded as interestincome.  Actual maturities may differfrom contractual maturities should the borrower have the right to call certainobligations.

10

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**5.****                                     ****Inventories**

The components ofinventory are as follows:
| (In thousands) | ** ** | **July 31, 2007** | ** ** | **January 31, 2007** | ** ** |
|---------------------|------------|-----------------------------|------------|--------------------------------|------------|
| Raw materials       |       | $                           | 13,109     |                           | $          | 22,462 |   |
| Work in process     |       | 548                         |       | 90                             |       |
| Finished goods      |       | 129,995                     |       | 125,769                        |       |
| Total               |       | $                           | 143,652    |                           | $          | 148,321 |   |

 

**6.****                                     ****Goodwill and Other Intangibles**

**Goodwilland other indefinite lived intangibles are subject to an assessment forimpairment using a two-step fair value-based test and other intangibles arealso subject to impairment reviews, which must be performed at least annuallyor more frequently if events or circumstances indicate that goodwill or otherindefinite lived intangibles might be impaired.**

The Company performs itsannual assessment of impairment as of January 31, which is our fiscal year-enddate.  For goodwill, the first step is toidentify whether a potential impairment exists. This is done by comparing thefair value of a reporting unit to its carrying amount, including goodwill.  Fair value for each of our reporting units isestimated utilizing a combination of valuation techniques, namely thediscounted cash flow methodology and the market multiple methodology.  The discounted cash flow methodology assumesthe fair value of an asset can be****estimatedby the economic benefit or net cash flows the asset will generate over the lifeof the asset, discounted to its present value. The discounting processuses a rate of return that accounts for both the time value of money andinvestment risk factors.  The marketmultiple methodology estimates fair value based on what other participants inthe market have recently paid for reasonably similar assets. Adjustments aremade to compensate for differences between the reasonably similar assets andthe assets being valued. The fair value of the reporting units is derived bycalculating the average of the outcomes of the two valuation techniquesdescribed above. If the fair value of the reporting unit exceeds the carryingvalue, no further analysis is necessary. If the carrying amount of the reporting unit exceeds its fair value, thesecond step is performed. The second step compares the carrying amount of thegoodwill to the estimated fair value of the goodwill. If fair value is lessthan the carrying amount, an impairment loss is reported as a reduction to the goodwilland a charge to operating expense.

**The following table shows thecarrying amount of goodwill, by operating segment, as of July 31, 2007 andJanuary 31, 2007:**
|                         | ** ** | ** **              | ** ** | **Catalog &** | ** ** | ** ** | ** ** |
|-------------------------|------------|-------------------------|------------|------------------------|------------|------------|------------|
| **(In thousands)** | ** ** | **Direct Selling** | ** ** | **Internet**           | ** ** | **Total**  | ** ** |
| Goodwill                |       | $                       | 2,298      |                   | $          | 76,384     |       | $ | 78,682 |   |
|                         |            |                         |            |                        |            |            |            |  |  |  |

** **

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** **

Other intangible assets,all reported in the Catalog & Internet segment, consisted of the following:
|                                              | ** ** | **July 31, 2007** | ** ** | **January 31, 2007** | ** ** |
|----------------------------------------------|------------|-----------------------------|------------|--------------------------------|------------|
| **(In thousands)**                      | ** ** | **Gross**                   | ** ** | **Accumulated  Amortization**  | ** ** | **Net** | ** ** | **Gross** | ** ** | **Accumulated  Amortization** | ** ** | **Net** | ** ** |
| Indefinite-lived  trade names and trademarks |       | $                           | 28,100     |                           | $          | — |   | $ | 28,100 |   | $ | 28,100 |   | $ | — |   | $ | 28,100 |   |
| Customer lists                               |       | 15,000                      |       | 8,500                          |       | 6,500 |   | 15,000 |   | 7,750 |   | 7,250 |   |
| Total                                        |       | $                           | 43,100     |                           | $          | 8,500 |   | $ | 34,600 |   | $ | 43,100 |   | $ | 7,750 |   | $ | 35,350 |   |

 

Amortization expense forother intangible assets for the six month periods ended July 31, 2006 and 2007was $0.9 million and $0.8 million, respectively. The estimated annualamortization expense for fiscal 2008 is $1.5 million.  The estimated amortization expense for thenext five fiscal years beginning with fiscal 2009 is as follows:  $1.5 million, $1.1 million, $1.0 million,$0.8 million and $0.6 million.

**7.****                                     ****Earnings per Share**

The components of basicand diluted earnings per share are as follows:

|                                                         | ** ** | **Three months ended July 31,** | ** ** | **Six months ended July 31,** | ** ** |
|---------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| **(In thousands)**                                 | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net earnings  (loss)                                    |       | $                                                   | 3,172      |                                              | $          | (89,367 | ) | $ | 14,904 |   | $ | (119,976 | ) |
| Weighted average  number of common shares outstanding:  |       |                                                |       |                                              |       |   |   |   |   |
| Basic                                                   |       | 39,488                                              |       | 39,821                                            |       | 39,400 |   | 40,312 |   |
| Dilutive effect of stock options and restricted  shares |       | 347                                                 |       | —                                            |       | 351 |   | — |   |
| Weighted average  number of common shares outstanding:  |       |                                                |       |                                              |       |   |   |   |   |
| Diluted                                                 |       | 39,835                                              |       | 39,821                                            |       | 39,751 |   | 40,312 |   |
|                                                         |            |                                                     |            |                                                   |            |  |  |  |  |  |  |  |  |

 

Forthe three and six-month periods ended July 31, 2007, options to purchase231,200 and 463,400 shares of common stock, respectively, are not included inthe computation of earnings per share because the effect would beanti-dilutive.  Also, for the three and six-month periods ended July 31,2006, options to purchase 1,148,400 shares of common stock are not included inthe computation of earnings per share because the effect would beanti-dilutive.

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**8.****                                     ****Treasury and CommonStock**
| Treasury Stock                                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Changes in Treasury Stock were (In thousands, except shares):** | ** ** | **Shares** | ** ** | **Amount** | ** ** |
| Balance at  February 1, 2006                                                                              |       | 9,533,416  |       | $          | (287,744   | ) |
| Restricted stock  cancellations                                                                           |       | —     |       | (438       | )          |
| Treasury stock  purchases                                                                                 |       | 1,802,382  |       | (34,987    | )          |
| Balance at July  31, 2006                                                                                 |       | 11,335,798 |       | $          | (323,169   | ) |
|                                                                                                      |       |       |       |       |       |
| Balance at  February 1, 2007                                                                              |       | 11,335,798 |       | $          | (323,714   | ) |
| Treasury stock  purchases                                                                                 |       | 100,000    |       | (2,700     | )          |
| Balance at July 31,  2007                                                                                 |       | 11,435,798 |       | $          | (326,414   | ) |

 
| Common Stock                                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Changes in Common Stock were (In thousands, except shares):** | ** ** | **Shares** | ** ** | **Amount** | ** ** |
| Balance at  February 1, 2006                                                                            |       | 50,528,060 |       | $          | 1,010      |   |
| Balance at July  31, 2006                                                                               |       | 50,528,060 |       | $          | 1,010      |   |
|                                                                                                    |       |       |       |       |       |
| Balance at  February 1, 2007                                                                            |       | 50,637,060 |       | $          | 1,013      |   |
| Common stock  issued in connection with long-term incentive plan                                        |       | 283,400    |       | 6          |       |
| Common stock  cancelled in connection with long-term incentive plan                                     |       | (4,000     | )          | (1         | )          |
| Balance at July 31,  2007                                                                               |       | 50,916,460 |       | $          | 1,018      |   |

** **

**9.****                                     ****Bank Lines of Credit**

On October 2, 2006, theCompany executed Amendment No. 1 (the “Amendment”) to its unsecured revolvingcredit facility (“Credit Facility”) dated as of June 2, 2005.  The Amendment (i) reduced the amountavailable for borrowing under the Credit Agreement from $150.0 million to $75.0million, (ii) changed the initial termination date from June 2, 2010 to June 1,2009, (iii) increased the rate of interest applicable to loans under the CreditAgreement and (iv) modified some of the covenants.  The Company has the ability to increase theamount available for borrowing, under certain circumstances, by an additional$50.0 million.  The Credit Facility maybe used for seasonal working capital needs and general corporate purposes,including strategic acquisitions. The Credit Facility contains, among otherprovisions, requirements for maintaining certain financial ratios andlimitations on certain payments.  As ofJuly 31, 2007, the Company was in compliance with such provisions.  Amounts outstanding under the amended CreditFacility bear interest, at the Company’s option, at either the JPMorgan ChaseBank’s prime rate or the Eurocurrency rate plus a spread ranging from 0.80% to1.70% calculated on the basis of the Company’s senior unsecured long-term debt rating. The amount available for borrowing under this facility was approximately$68.5 million as of July 31, 2007, reflecting $6.5 million in outstandingletters of credit.

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**10**.                               **Income Taxes**

The Company adopted theprovisions of Financial Accounting Standards Board (“FASB”) Interpretation No.48, Accounting for Uncertainty in Income Taxes (“FIN 48”), on February 1,2007.  As a result of the adoption of FIN48, the Company recognized an increase of $6.1 million in the liability forunrecognized tax benefits and an asset of $3.3 million.  These amounts were accounted for as a net$2.8 million reduction to the Company’s February 1, 2007 retained earningsbalance.

As of February 1, 2007, thedate of adoption, and July 31, 2007, the Company’s unrecognized tax benefitstotaled $17.1 million and $17.0 million, respectively.  Of the amount of unrecognized benefits atFebruary 1, 2007, $13.1 million, if recognized, would affect our effective taxrate.  Any prospective adjustments to ourreserves for income taxes will be recorded as an increase or decrease to ourprovision for income taxes and would impact our effective tax rate.

The Company will nowrecognize interest and penalties related to unrecognized tax benefits as acomponent of income tax expense. In the past interest and penalties werereflected as part of pre-tax income.  TheCompany has made a change in accounting principle related to interest andpenalties as part of the adoption of FIN 48. During the three and six months ended July 31, 2007, the Companyrecognized $0.1 million and $0.3 million, respectively of interest expenserelated to the unrecognized tax benefits. As of the adoption date, the Company had accrued interest of $2.6million and penalties of $3.3 million in relation to the above unrecognized taxbenefits.  At July 31, the accrual forinterest and penalties was $6.2 million.

Blyth, Inc. files income taxreturns in the U.S. federal jurisdiction, various state and localjurisdictions, and many foreign jurisdictions.  The number of years with open tax audits varies depending on the tax jurisdiction.  Our major taxing jurisdictions include theU.S., including state jurisdictions of Illinois and Massachusetts, Canada,Germany, and Switzerland.  In the U.S, weare not currently under audit by the Internal Revenue Service but we are opento examination for the fiscal years 2005 through 2007.  We are currently under audit in the state ofIllinois for the fiscal years 2002, 2003, and 2004 and are open to examinationfor the fiscal years 2005 through 2007. We are also currently under audit in the state of Massachusetts for thefiscal years 2001, 2002, 2003, and 2004 and are open to examination for thefiscal years 2005 through 2007.  InCanada, we are currently under audit for fiscal years 2005 and 2006 and areopen to examination for 2007.  InGermany, we are currently under examination for the fiscal year 2004 and opento examination for fiscal years 2005 through 2007.  In Switzerland, we are open to examinationfor fiscal year 2007.  We do notanticipate that the resolution of the Illinois, Massachusetts, Canadian andGerman audits will materially impact our financial statements.

Of the $2.8 million net FIN48 retained earnings adjustment, $3.6 million liability relates to a potentialtax adjustment for which correlative relief would be available.  A corresponding tax asset of $3.3 million hasseparately been established on the balance sheet to record the benefit that theCompany would realize upon resolution of this issue through the competentauthority process.  The adjustment toreflect this asset has been recorded as an increase in retained earningsconcurrent with the FIN 48 retained earnings adjustment.

In the first quarter offiscal 2008 the Company recorded a $6.1 million reversal of a previouslyestablished valuation allowance against capital loss carryforwards.  This resulted from a capital gain generatedon the sale of certain assets and liabilities of the BHI NA business.

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**11.****                              ****Stock Based Compensation**

**Summary of Plans**

Asof July 31, 2007, the Company had one active stock-based compensationplan, the 2003 Long-Term Incentive Plan (“2003 Plan”), available to grantfuture awards and two inactive stock-based compensation plans (the Amended andRestated 1994 Employee Stock Option Plan and the Amended and Restated 1994Stock Option Plan for Non-Employee Directors), under which vested andunexercised options remain outstanding. As of July 31, 2007, 6,500,100 shareswere authorized and approximately 3,700,000 shares were available for grantunder these plans.  The Company’s policy is to issue new shares of common stockfor all stock options exercised and restricted stock grants.

The Board of Directors andthe stockholders of the Company have approved the adoption and subsequentamendments of the 2003 Plan. The 2003 Plan provides for grants of incentive andnonqualified stock options, stock appreciation rights, restricted stock,restricted stock units, performance shares, performance units, dividendequivalents and other stock unit awards to officers and employees. The 2003Plan also provides for grants of nonqualified stock options to directors of theCompany who are not, and who have not been during the immediately preceding12-month period, officers or employees of the Company or any of itssubsidiaries. Restricted stock and restricted stock units (“RSUs”) are grantedto certain employees to incent performance and retention. RSUs issued under theplans provide that shares awarded may not be sold or otherwise transferreduntil restrictions have lapsed. The release of RSUs on each of the vestingdates is contingent upon continued active employment by the employee until thevesting dates. At the 2007 Annual Meeting, each non-employee director wasgranted 1,500 RSUs vesting in two equal installments beginning on the firstanniversary of the date of grant.

Thetotal compensation expense related to all stock-based compensation plans forthe three and six-month periods ended July 31, 2007 was approximately $0.1million and $0.5 million, respectively.  The total compensation expenserelated to all stock-based compensation plans for the three and six-monthperiods ended July 31, 2006 was approximately $0.4 million and $0.7 million,respectively.  The tax benefit recognized for the three and six-monthperiods ended July 31, 2007 was approximately $0.0 million and $0.2 million, respectively. The tax benefit recognized for the three and six-month periods ended July 31,2006 was approximately $0.1 million and $0.2 million, respectively.

**Impactof Adoption of 123(R)**

Stock-based compensationexpense recognized during the period is based on the value of the portion ofstock-based payment awards that is ultimately expected to vest during theperiod. Stock-based compensation expense recognized in the Company’s CondensedConsolidated Statements of Earnings (Loss) for the three and six months endedJuly 31, 2007 and 2006 includes compensation expense for restricted stock, RSUsand other stock-based awards granted subsequent to January 31, 2006 basedon the grant date fair value estimated in accordance with the provisions ofSFAS 123(R). The Company recognizes these compensation costs net of aforfeiture rate for only those awards expected to vest, on a straight-linebasis over the requisite service period of the award, which is over periods of3 years for stock options; 2 to 5 years for employee restricted stock and RSUs;and 1 to 2 years for non-employee restricted stock and RSUs. SFAS123(R) requires forfeitures to be estimated at the time of grant andrevised, if necessary, in subsequent periods if actual forfeitures differ fromthose estimates.

In accordance with themodified prospective transition method, the Company’s Condensed ConsolidatedFinancial Statements for prior periods have not been restated to reflect, anddo not include, the impact of SFAS 123(R). As a result of the adoption of SFAS123(R), $3.1 million of unearned compensation recorded in stockholders’ equityas of February 1, 2006 was reclassified to and reduced the balance ofadditional contributed capital.

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** **

**Transactions involving restrictedstock and RSUs are summarized as follows:**
|                                                               | ** ** | ** ** | ** ** | ** **                               | ** ** | **Aggregate**            | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------------------------------------|------------|--------------------------|------------|
| ** **                                                    | ** ** | ** ** | ** ** | **Weighted Average**                | ** ** | **Intrinsic Value** | ** ** |
| ** **                                                    | ** ** | **Shares** | ** ** | **Grant date Fair Value** | ** ** | **(In thousands)**  | ** ** |
| Nonvested  restricted stock and RSUs at January 31, 2007 |       | 343,430    |       | $                                        | 24.63      |                     |       |   |
| Granted                                                       |       | 12,000     |       | 27.79                                    |       |                     |       |
| Vested                                                        |       | (19,000    | )          | 25.68                                    |       |                     |       |
| Forfeited                                                     |       | (50,205    | )          | 26.14                                    |       |                     |       |
| Nonvested restricted  stock and RSUs at July 31, 2007    |       | 286,225    |       | $                                        | 24.43      |                     | $          | 6,389 |   |
| Total restricted stock  and RSUs at July 31, 2007        |       | 317,225    |       | $                                        | 24.86      |                     | $          | 7,080 |   |

** **

Compensation expenserelated to restricted stock and RSUs for the three and six-month periodsended July 31, 2007 was approximately $0.1 million and $0.5 million,respectively. Compensation expense related to restricted stock and restrictedstock units for the three and six-month periods ended July 31, 2006 wasapproximately $0.4 million and $0.6 million, respectively. There were 12,000RSUs granted to the Board of Directors in the second quarter of fiscal 2008.

As of July 31, 2007,there was $4.4 million of unearned compensation expense related to non-vestedrestricted stock and RSU awards. This cost is expected to be recognized over aweighted average period of 2.16 years. As of July 31, 2007, approximately 0.3million restricted stock awards with a weighted average grant date fair valueof $24.43 are expected to vest.  Thetotal unrecognized stock-based compensation cost to be recognized in futureperiods as of July 31, 2007 does not consider the effect of stock-based awardsthat may be issued in subsequent periods.

Transactions involving stock options are summarizedas follows:
|                                  | ** ** | ** ** | ** ** | ** **                | ** ** | **Weighted Average** | ** ** | ** **               | ** ** |
|----------------------------------|------------|------------|------------|---------------------------|------------|---------------------------|------------|--------------------------|------------|
| ** **                       | ** ** | **Option** | ** ** | **Weighted Average** | ** ** | **Remaining**             | ** ** | **Aggregate**            | ** ** |
| ** **                       | ** ** | **Shares** | ** ** | **Exercise Price**   | ** ** | **Contractual Life** | ** ** | **Intrinsic Value** | ** ** |
| Outstanding at  January 31, 2007 |       | 877,500    |       | $                         | 26.32      |                      | 4.56       |                     |       |   |
| Options granted                  |       | —     |       | —                    |       |                      |       |                     |       |
| Options exercised                |       | (283,400   | )          | 24.98                     |       |                      |       |                     |       |
| Options forfeited and expired    |       | (64,500    | )          | 24.77                     |       |                      |       |                     |       |
| Outstanding at  July 31, 2007    |       | 529,600    |       | $                         | 27.23      |                      | 4.25       |                     | $          | 31,000 |   |
| Exercisable at July 31,  2007    |       | 524,600    |       | $                         | 27.31      |                      | 4.25       |                     | $          | 15,000 |   |

 

At July 31, 2007 andJanuary 31, 2007, options to purchase 524,600 and 860,000 shares, respectively,were exercisable.  There were no optionsgranted during the current fiscal year.

The compensation expensefor the three and six months ended July 31, 2007 related to stock options wasnot significant. As of July 31, 2007, $20 thousand of total unrecognizedcompensation cost related to stock options is expected to be recognized over aperiod of 1.83 years.  All outstanding stock options at July 31, 2007 areexpected to vest.

Authorized unissuedshares may be used under the stock-based compensation plans. The Companyintends to issue shares of its common stock to meet the stockrequirements of its awards in the future.

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**12.**                               Segment Information

Blyth is a designer andmarketer of home fragrance products and accessories, home décor, seasonaldecorations, household convenience items, personalized gifts and products forthe foodservice trade.  We compete in theglobal Home Expressions industry, and our products can be found throughoutNorth America, Europe and Australia.  Ourfinancial results are reported in three segments - the Direct Selling segment,the Catalog & Internet segment and the Wholesale segment.  These reportable segments are based onsimilarities in distribution channels, customers and management oversight.

Duringfiscal 2007 there was a change in our senior management structure with thedeparture of our Wholesale segment President. Our Catalog & Internet segment President assumed responsibility forthe Wholesale segment in addition to his current responsibilities.  We refer to this new reporting structure asthe Multi-channel Group, which includes our Catalog & Internet andWholesale segments.  For segmentreporting purposes, Blyth continues to report individual segment operatingresults for the Direct Selling, Catalog & Internet and Wholesale segments.

**Within the Direct Sellingsegment, the Company designs, manufactures or sources, markets and distributesan extensive line of products including scented candles, candle-relatedaccessories, fragranced bath gels and body lotions and other fragrancedproducts under the PartyLite® brand.  TheCompany also operates a small Direct Selling business, Two Sisters Gourmet**TM, which is focused on selling gourmet foods.  All direct selling products are sold directlyto the consumer through a network of independent sales consultants using theparty plan method of direct selling. PartyLite® brand products are sold in North America, Europe andAustralia.  Two Sisters GourmetTM brandproducts are sold in North America.

Within the Catalog &Internet segment, the Company designs, sources and markets a broad range ofhousehold convenience items, premium photo albums, frames, holiday cards,personalized gifts, kitchen accessories and gourmet coffee and tea.  These products are sold directly to theconsumer under the Boca JavaTM, Easy ComfortsTM, Exposuresâ,Home Marketplace®, Miles Kimballâ and Walter Drakeâbrands.  These products are sold in NorthAmerica.

Within the Wholesale segment,the Company designs, manufactures or sources, markets and distributes anextensive line of home fragrance products, candle-related accessories, seasonaldecorations such as ornaments and trim and home décor products such as pictureframes, lamps and textiles.  Products inthis segment are sold primarily in North America to retailers in the premiumand specialty channels under the CBK®, Colonial Candle of Cape Cod®, Colonialat HOMEâ and Seasons of Cannon Falls®brands.  In addition, chafing fuel and tabletoplighting products and accessories for the Away From Home or foodservice tradeare sold through this segment under the Ambria®, HandyFuelTM and Sterno® brands.

Operating profit in allsegments represents net sales less operating expenses directly related to thebusiness segments and corporate expenses allocated to the businesssegments.  Other expense includesinterest expense, interest income and equity in earnings of investee, which arenot allocated to the business segments. Identifiable assets for each segment consist of assets used directly inits operations and intangible assets, if any, resulting from purchase businesscombinations.  Unallocated Corporatewithin the identifiable assets include corporate cash and cash equivalents,short-term investments, prepaid income tax, corporate fixed assets, deferredbond costs and other long-term investments, which are not allocated to thebusiness segments.

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|                                                                                           | ** ** | **Three months ended July 31,** | ** ** | **Six months ended July 31,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| **(In thousands)**                                                                   | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Net Sales**                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| Direct Selling                                                                            |       | $                                                   | 130,219    |                                              | $          | 143,999 |   | $ | 290,463 |   | $ | 308,988 |   |
| Multi-channel Group:                                                                      |       |                                                |       |                                              |       |   |   |   |   |
| Catalog &  Internet                                                                   |       | 40,176                                              |       | 38,423                                            |       | 80,072 |   | 74,912 |   |
| Wholesale                                                                                 |       | 64,476                                              |       | 80,195                                            |       | 134,703 |   | 158,964 |   |
| Subtotal Multi-channel  Group                                                             |       | 104,652                                             |       | 118,618                                           |       | 214,775 |   | 233,876 |   |
| **Total**                                                                                 |       | $                                                   | 234,871    |                                              | $          | 262,617 |   | $ | 505,238 |   | $ | 542,864 |   |
| **Operating profit (loss)**                                                               |       |                                                |       |                                              |       |   |   |   |   |
| Direct Selling                                                                            |       | $                                                   | 15,377     |                                              | $          | 14,359 |   | $ | 42,308 |   | $ | 34,914 |   |
| Multi-channel Group:                                                                      |       |                                                |       |                                              |       |   |   |   |   |
| Catalog &  Internet                                                                   |       | (2,903                                              | )          | (2,303                                            | )          | (5,056 | ) | (6,063 | ) |
| Wholesale                                                                                 |       | (4,804                                              | )          | (39,781                                           | )          | (12,926 | ) | (42,513 | ) |
| Subtotal Multi-channel  Group                                                             |       | (7,707                                              | )          | (42,084                                           | )          | (17,982 | ) | (48,576 | ) |
|                                                                                      |       | 7,670                                               |       | (27,725                                           | )          | 24,326 |   | (13,662 | ) |
| Other expense                                                                             |       | (1,961                                              | )          | (3,438                                            | )          | (3,145 | ) | (5,864 | ) |
| **Earnings (loss) from continuing operations  before income taxes and minority interest** |       | $                                                   | 5,709      |                                              | $          | (31,163 | ) | $ | 21,181 |   | $ | (19,526 | ) |

 
| ** **                    | ** ** | **July 31, 2007** | ** ** | ** ** | ** ** | **January 31, 2007** | ** ** | ** ** | ** ** |
|-------------------------------|------------|-----------------------------|------------|------------|------------|--------------------------------|------------|------------|------------|
| **Identifiable  Assets**      |       |                        |       |       |       |                           |       |       |       |
| Direct Selling                |       | $                           | 251,236    |       |       |                           | $          | 238,194    |       |   |   |
| Multi-channel  Group:         |       |                        |       |       |       |                           |       |       |       |
| Catalog &  Internet       |       | 162,279                     |       |       |       | 152,068                        |       |       |       |
| Wholesale                     |       | 173,400                     |       |       |       | 181,384                        |       |       |       |
| Subtotal  Multi-channel Group |       | 335,679                     |       |       |       | 333,452                        |       |       |       |
| Unallocated  Corporate        |       | 181,729                     |       |       |       | 202,992                        |       |       |       |
| **Total**                     |       | $                           | 768,644    |       |       |                           | $          | 774,638    |       |   |   |

 

**13.**                              Contingencies

The Company hascontingent liabilities that have arisen in the ordinary course of its business,including pending litigation.  TheCompany believes the outcome of these matters will not have a material adverseaffect on its consolidated financial position, results of operations or cashflows.

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**Item 2.**          MANAGEMENT’SDISCUSSION AND ANALYSIS OF

**FINANCIALCONDITION AND RESULTS OF OPERATIONS**

**RESULTS OF OPERATIONS:**

**Overview**

Blyth is a designer andmarketer of home fragrance products and accessories, home décor, seasonaldecorations, household convenience items, personalized gifts and products forthe foodservice trade.  We compete in theglobal Home Expressions industry, and our products can be found throughoutNorth America, Europe and Australia.  Ourfinancial results are reported in three segments - the Direct Selling segment,the Catalog & Internet segment and the Wholesale segment.  These reportable segments are based onsimilarities in distribution channels, customers and management oversight.

Today, annualized netsales are comprised of an approximately $700 million Direct Selling business,an approximately $200 million Catalog & Internet business and anapproximately $250 million Wholesale business. Sales and earnings growth differ in each segment depending on geographiclocation, market penetration, our relative market share and product andmarketing execution, among other business factors.  Over the long term, all three segments shouldexperience single-digit growth, most likely within the low to mid-single digitrange, again depending on the business factors previously noted in the Form10-K, for the  fiscal year ended January31, 2007.

Our current focus is drivingsales growth of our brands so we may leverage more fully ourinfrastructure.  New product developmentcontinues to be critical to all three segments of our business.  In the Direct Selling segment, monthly salesand productivity incentives are designed to attract, retain and increase theearnings opportunity of independent sales consultants.  In the Catalog & Internet segment,product, merchandising and circulation strategy are designed to drive strongsales growth in newer brands and expand further the sales and customer base ofour flagship brands.  In the Wholesalesegment, sales initiatives are targeted to independent retailers and nationalaccounts.

**RecentDevelopments**

In September 2005, weannounced our proposed intention to spin off the Wholesale segment.  We requested and received from the InternalRevenue Service a ruling on the tax-free status for the transaction.  In March 2006, we announced our intention toevaluate additional strategic alternatives that had been identified since theannouncement of the spin off, which would likely focus on one or more of ourEuropean Wholesale businesses, believing that substantial upside opportunitiesexist in the North American Wholesale businesses despite challenging marketconditions impacting the Home Expressions industry.

In accordance with thisintention to explore strategic alternatives with respect to our EuropeanWholesale businesses, (a) on April 12, 2006, we sold Kaemingk B.V. (“Kaemingk”)to an entity controlled by the management of this business, (b) on June 16,2006, we sold Edelman B.V. (“Edelman”) and Euro-Decor B. V. (“Euro-Decor”) toan entity with which members of the management of Edelman and Euro-Decor areaffiliated, (c) on August 17, 2006, we sold the Gies Group and (d) on December20, 2006, we sold Colony Gifts Corporation Ltd. (“Colony”). Accordingly, theresults of operations for Kaemingk, Edelman, Euro-Decor, Gies and Colony havebeen classified as discontinued operations for all periods presented.

On April 27, 2007, theCompany sold certain assets and liabilities of its BHI NA mass channel candlebusiness, which was part of the Wholesale segment.  The net assets were sold for $25.1 million,inclusive of proceeds from the sale of overstock inventory of $1.1 million. Ofthis amount, $21.8 million was received at closing and $3.3 million wasreceived in the second quarter of fiscal 2008. The sale, including the proceeds received in the second quarter,resulted in a pre-tax gain of $0.6 million, and is recorded as Administrativeand other expenses in the Condensed Consolidated Statements of Earnings (Loss).

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**NetSales**

Netsales in the six months ended July 31, 2007 decreased $37.7million, or approximately 7%, to $505.2 million from $542.9 million in thefirst six months of the comparable prior year period.  The decrease is primarily a result of ashortfall of sales within PartyLite’s domestic market and Wholesale segment,offset by increased sales in the Catalog and Internet segment.

Net sales decreased $27.7million, or 11%, to $234.9 million in the quarter ended July 31, 2007 from$262.6 million in the comparable prior year period, as a result of the impactof the sale of BHI NA, which resulted in a sales decrease of $10.6 million, or 4%, and the sales decline inPartyLite’s domestic market, partially offset by higher sales within theCatalog & Internet segment.

NetSales - Direct Selling Segment

Net sales in the DirectSelling segment for the six months ended July 31, 2007 decreased $18.5 million,or 6%, to $290.5 million from $309.0 million in the comparable prior year period.  PartyLite’s U.S. sales decreasedapproximately 18% compared to the prior year primarily due to a decline in thenumber of active independent sales consultants. PartyLite Canada reported an approximate 3% increase in sales as measuredin U.S. Dollars, a 2% increase in sales in local currency, versus the prioryear.  In PartyLite’s European markets,sales increased approximately 10% in U.S. Dollars, a 1% increase in localcurrency.

Net sales in the DirectSelling segment for the quarter ended July 31, 2007 decreased $13.8 million, or10%, to $130.2 million from $144.0 million in the comparable prior year period. PartyLite’s U.S. sales decreasedapproximately 24% compared to the prior year mainly due to a decline in activeindependent sales consultants. PartyLite Canada reported a 3% decrease in salesas measured in U.S. Dollars, a 6% decrease in sales in local currency, versusthe prior year.  In PartyLite’s Europeanmarkets, sales increased approximately 2% as measured in U.S. Dollars, a decreaseof 5% in sales in local currency, versus the prior year.

Net Sales - Catalog &Internet Segment

Netsales in the Catalog & Internet segment increased $5.2 million, or 7%, to$80.1 million in the six months ended July 31, 2007, from $74.9 million in the comparableprior year period.  Thisincrease was primarily due to increased sales in our Boca Java business as aresult of investment in new club member acquisitions and increased sales in ourcore catalogs of the Miles Kimball company.

Netsales in the Catalog & Internet segment increased $1.8 million, or 5%, to$40.2 million in the quarter ended July 31, 2007, compared with $38.4 millionin the comparable prior year period.  This increase was primarily due to salesgrowth attributable to new club member acquisitions in Boca Java.

Net Sales - Wholesale Segment

**Net sales in the Wholesale segment in the six months endedJuly 31, 2007 decreased $24.3 million, or approximately 15%, to $134.7 millionfrom $159.0 million in the**comparableprior year period. The decrease in sales is primarily due to a planned salesreduction in the mass candle business, the sale of the BHI NA business, as wellas the decline in the overall home décor business, reflecting a softer housingmarket.

**Net sales in the Wholesale segmentin the quarter ended July 31, 2007 decreased $15.7 million, or approximately20% to $64.5 million from $80.2 million in the**comparableprior year period. The decrease in sales is primarily due to a planned salesreduction in the mass candle business, the sale of the BHI NA business, as wellas the decline in the overall home décor business, reflecting a softer housingmarket.

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**GrossProfit**

Gross profit decreased$6.3 million, or 2%, to $263.1 million in the six months ended July 31, 2007from $269.4 million in the comparable prior year period.  The decrease in gross profit is principallyattributable to the impairment and accelerated depreciation of certain fixedassets of $2.6 million, resulting from the sale of the BHI NA business, inaddition to the impact of reduced sales within the Direct Selling and WholesaleSegments. Gross profit margin increased to 52.1% for the six monthsended July 31, 2007 from 49.6% in the comparable prior year period.  The gross profit margin improvement is theresult of price increases, favorable product mix and effective cost controlefforts, partially offset by a continued increase in commodity costs.

Gross profit decreased$6.6 million, or 5%, to $121.4 million in the quarter ended July 31, 2007 from$128.0 million in the comparable prior year period. Thisdecline in gross profit is primarily due to the impairment and accelerateddepreciation of certain fixed assets of $2.1 million, as a result of the saleof the BHI NA business, as well as the impact of reduced sales within theDirect Selling and Wholesale Segments. Gross profit margin increased to51.7% for the quarter ended July 31, 2007 from 48.8% in the comparableprior year period.  The grossprofit margin improvement is the result of price increases, favorable productmix, and effective cost control efforts, partially offset by a continuedincrease in commodity costs.

**SellingExpense**

**Selling expense decreased $11.3 million,or 6%, to $172.6 million in the six months**ended July 31, 2007,from $183.9 million in the comparable prior yearperiod. The decrease in selling expense is primarily due toreduced sales. As a percentage of net sales, selling expense increased to 34.2%of net sales for the six months ended July 31, 2007, compared to 33.9% of netsales during the comparable prior year period.

Selling expense decreased $7.7 million, or 9%, to $79.0 million in thequarter ended July31, 2007, from $86.7 million in the comparable prior year period. The decrease inselling expense is primarily due to the decreased sales in the Direct Sellingand Wholesale segments. As a percentage of net sales, selling expense increasedto 33.6% of net sales for the quarter ended July 31, 2007, compared to 33.0%for the comparable prior year period.

**Administrativeand Other Expense**

**Administrative and other expense increased $3.7million, or 6%, to $66.1 million in the six months ended July 31, 2007 from$62.4 million in the**comparable prior yearperiod.  As apercent of sales, administrative expense was 13.1% in the six months ended July31, 2007 versus 11.5% in the comparable prior yearperiod.  Theincrease in administrative expense includes severance and related benefitsexpense associated with termination of certain employees as a result of thesale of the BHI NA business of $2.9 million and an amendment to an executiveemployment agreement, partially offset by the gain on the sale of the BHI NAbusiness.

**Administrative and other expense increased $2.4million, or 11%, to $34.7 million in the quarter ended July 31, 2007 from $32.3million in the**comparable prior year period.  As a percent of sales,administrative expense was 14.8% for the quarter ended July 31, 2007 and 12.3%for the comparable prior year period.   The increase in administrativeexpense includes severance and related benefits expense associated with thetermination of certain employees as a result of the sale of the BHI NA businessof $ 2.2 million and an amendment to an executive employment agreement,partially offset by the gain on the sale of the BHI NA business.

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**Operating**Profit (Loss)

Operating profit increased$38.0 million to $24.3 million in the six months ended July 31, 2007 from aloss of $13.7 million in the comparable prior year period. This increase wasprimarily due to the non-repeating goodwill impairment charge of $36.8 millionrecorded in the Wholesale segment in the second quarter of the prior year.Excluding the prior year goodwill impairment charge, the Company’s operatingprofit improvement was offset by an increase in operating losses in theWholesale segment as a result of the sale of the BHI NA business.

Operating profit increased$35.4 million to $7.7 million in the quarter ended July 31, 2007 from a loss of$27.7 million in the comparable prior year period.  This increase was dueto the aforementioned goodwill impairment charge of $36.8 million. Excludingthe prior year goodwill impairment charge, the Company’s operating profitimprovement was offset by an increase in operating losses in the Wholesalesegment as a result of the sale of the BHI NA business.

Operating Profit - Direct SellingSegment

Operatingprofit in the Direct Selling segment****for the six months ended July 31, 2007increased $7.3 million, or 21%, to $42.3 million from $35.0 million in comparableprior year period.  The increase is primarilydue to gross margin improvement from a combination of product mix, priceincreases and cost saving initiatives throughout the PartyLite businesses, aswell as improved sales in PartyLite Europe and Canada.

Operatingprofit in the quarter ended July 31, 2007 in the Direct Selling segmentincreased $1.0 million, or 7%, to $15.4 million from $14.4 million in thecomparable prior year period.  This increase was primarily driven by thehigher gross margin due to a combination of product mix, price increases andcost saving initiatives throughout the PartyLite businesses and increased salesin PartyLite Europe.

Operating Loss - Catalog &Internet Segment

Operatingloss in the six months ended July 31, 2007 in the Catalog & Internetsegment improved by $1.0 million, or 17% to $5.1 million compared to a $6.1million loss in the comparable prior year period.  The improvement is related to the increase insales and margin improvements within the Miles Kimball business.

Operating loss in thequarter ended July 31, 2007 in the Catalog & Internet segment increased$0.6 million to $2.9 million versus $2.3 million in the comparable prior yearperiod.  The increase in operating loss over the prior year is primarilydue to the continued investment in Boca Java during the second quarter.

Operating Loss - WholesaleSegment

Operatingloss in the six months ended July 31, 2007 in the Wholesale segment was $12.9million versus a loss of $42.5 million in the comparable prior yearperiod.  Included in the prior year was agoodwill impairment charge of $36.8 million. In fiscal 2008, additionalcosts were incurred due to the sale of the BHI NA business, which includedseverance of $3.2 million, the impairment of certain fixed assets andaccelerated depreciation of $2.6 million.

Operating loss in thequarter ended July 31, 2007 in the Wholesale segment decreased $35.0 million to$4.8 million versus a loss of $39.8 million in the comparable prior yearperiod.  As mentioned above, during the second quarter of fiscal 2007 agoodwill impairment charge of $36.8 million was recorded.  In the currentquarter, additional costs were incurred due to the sale of the BHI NA business,which included severance of $2.5 million, and the impairment of certain fixedasset and accelerated depreciation of $2.1 million.

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**InterestExpense and Interest Income**

Interestexpense decreased approximately $2.7 million, or 27%, to $7.3 million in the six months ended July 31, 2007 from $10.0 million in thecomparable prior year period, due to a decrease in borrowings.

Interest expense decreasedapproximately $1.7 million, or 31% to $3.6 million in the quarter ended July31, 2007 from $5.3 million in the comparable prior year period, due to adecrease in borrowings.

Interest income increasedapproximately $0.5 million to $4.0 million in the six months ended July 31,2007 from $3.5 million in the comparable prior year period, due to higher cashand short-term investment balances and an increase in interest rates.

Interest income increasedapproximately $0.4 million to $2.1 million in the second quarter ended July 31,2007, from $1.7 million in the comparable prior year period, due to higher cashand short-term investment balances and an increase in interest rates.

**IncomeTaxes**

Incometax expense (benefit) increased $13.2 million, to $6.2 million in the six months ended July 31, 2007 from a benefit of $7.0million in the same period in the prior fiscal year.  The effective tax rate for the six monthsended July 31, 2007 was approximately 29.4% compared to a benefit of 35.7% inthe prior year.  The effective tax ratefor the first six months of fiscal 2008 was favorably impacted by the reversalof a previously established valuation allowance against capital losscarryforwards which was partially offset by taxes on unremitted foreignearnings. The valuation allowance was reversed as a result of a capital gaingenerated on the sale of certain assets and liabilities of the BHI NAbusiness.  The tax benefit in the prior year was a result of$10.6 million of tax benefit related to $28.0 million of the goodwillimpairment charge.

Income tax expense (benefit)increased $12.9 million to an expense of $2.5 million in the three months endedJuly 31, 2007 from a benefit of $10.4 million in the three months ended July31, 2006. The tax benefit was a result of the $10.6 million benefit discussedabove.  The effective tax rate for the three months ended July 31, 2007was an expense of 43.9% compared to a benefit of 33.5% in the prior year*.*The increase in the effective tax rate for the current quarter, versus thecomparable prior year’s period, is due in part to the increase in taxes onunremitted foreign earnings.

**Earnings(Loss) from Continuing Operations**

Earningsfrom continuing operations increased $27.5 million to $14.9 million, or $0.37per diluted share, in the six months ended July 31,2007 from a loss of $12.6 million, or $0.31 per diluted share, for thecomparable prior year period.  Theimprovement is primarily the result of the goodwill impairment charges recordedin the prior year, offset by costs incurred with the sale of the BHI NAbusiness, as mentioned previously.

Earningsfrom continuing operations for three months ended July 31, 2007 were $3.2million, or $0.08 per diluted share, an increase of $24.0 million, compared toloss of $20.8 million, or $0.52 per diluted share, for the comparable prioryear period. The improvement is primarily the result of previously mentionedimpairment charges taken in the prior year, offset by costs incurred with thesale of the BHI NA business, as mentioned previously.

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**Lossfrom Discontinued Operations**

**The loss from discontinuedoperations, net of tax, for the six months ended July 31, 2006 was $107.4million, or $2.66 per diluted share.  Theloss includes a non-tax deductible loss of $18.4 million on the sale ofKaemingk and a loss on sale of $14.7 million for the Edelman and Euro-Decorbusinesses, which includes a goodwill impairment charge of $16.7 million. **The lossfrom discontinued operations also includes non-tax deductible impairment chargesof $31.1 million for the Gies business and $28.6 million for the Colonybusiness. Also, the loss includesoperating losses for the businesses of $14.5 million for the six months endedJuly 31, 2006. There was no income or loss from discontinued operations for thesix months ended July 31, 2007.

Loss from discontinued operations, net oftax, for the three months ended July 31, 2006 was $68.6 million, or $1.72per diluted share.  The loss includes non-tax deductible impairmentcharges of $31.1 million for the Gies****business and$28.6 million for the Colony business and a gain on the sale of Edelman andEuro-Decor of $1.9 million.  Also,the loss includes operating losses for the businesses of $10.8 million for thequarter ended****July 31, 2006**.**There was no income or loss fromdiscontinued operations for the three months ended July 31, 2007.

**Liquidityand Capital Resources**

Cash and cash equivalentsdecreased $13.0 million to $90.8 million at July 31, 2007 from $103.8 millionat January 31, 2007.

Net cash used byoperations was $28.9 million for the six months ended July 31, 2007 compared to$34.7 million in the comparable prior year period. The Company had earnings fromoperations of $14.9 million during the six months ended July 31, 2007. Cashused in operating assets and liabilities, net of the deferred income tax assetof $8.2 million, was $58.6 million.  Alsoincluded in earnings from continuing operations were non-cash charges fordepreciation and amortization of $14.4 million and amortization of unearnedcompensation of $1.0 million.

Net cash provided byinvesting activities was $25.6 million. Capital expenditures for property,plant and equipment were $4.0 million for the six months ended July 31, 2007compared to $8.7 million in the prior year period.  In the comparable prior year period, the capital expenditures included theexpansion of PartyLite’s European distribution center.  The Company received proceeds from the saleof certain assets and liabilities of the BHI NA business of $25.1 million andproceeds from the sale of one of our European Wholesale discontinued operationsof $0.5 million in the six months ended July 31, 2007.

Net cash used infinancing activities was $10.2 million. This was primarily due to the Company’s dividend payment of $10.6million, the reduction of long-term debt and capital lease obligations of $4.2million, and a purchase of Treasury Stock of $2.7 million.  This was partially offset by the proceedsfrom the issuance of the Company’s common stock upon exercise of stock optionsof $7.1 million.

The Company anticipatestotal capital spending of approximately $13.0 million for fiscal 2008 orapproximately $5.0 million less than fiscal year 2007 due to the reducedspending requirements on the Company’s manufacturing facilities. The Companyhas grown in part through acquisitions and, as part of its growth strategy, theCompany expects to continue from time to time in the ordinary course of itsbusiness to evaluate and pursue acquisition opportunities as appropriate.  The Company believes our financing needs inthe short and long term can be met from cash generated internally and throughour borrowing capacity from our existing credit agreements.

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On October 2, 2006, theCompany executed Amendment No. 1 (the “Amendment”) to its unsecured revolvingcredit facility (“Credit Facility”) dated as of June 2, 2005.  The Amendment (i) reduced the amountavailable for borrowing under the Credit Agreement from $150.0 million to $75.0million, (ii) changed the initial termination date from June 2, 2010 to June 1,2009, (iii) increased the rate of interest applicable to loans under the CreditAgreement and (iv) modified some of the covenants.  The Company has the ability to increase theamount available for borrowing, under certain circumstances, by an additional$50.0 million.  The Credit Facility maybe used for seasonal working capital needs and general corporate purposes,including strategic acquisitions. The Credit Facility contains, among otherprovisions, requirements for maintaining certain financial ratios andlimitations on certain payments.  As ofJuly 31, 2007, the Company was in compliance with such provisions.  Amounts outstanding under the amended CreditFacility bear interest, at the Company’s option, at either the JPMorgan ChaseBank’s prime rate or the Eurocurrency rate plus a spread ranging from 0.80% to1.70% calculated on the basis of the Company’s senior unsecured long-term debtrating.  Amounts available for borrowingunder this facility were approximately $68.5 million as of July 31, 2007,reflecting $6.5 million in outstanding letters of credit.

As of July 31, 2007, theCompany had a total of $2.0 million available under an uncommitted facilitywith LaSalle Bank National Association, to be used for letters of creditthrough November 30, 2007.  As of July31, 2007, approximately $0.5 million of letters of credit were outstandingunder this facility.

As of July 31, 2007, theCompany had a total of $2.0 million available under an uncommitted facilitywith Bank of America, to be used for letters of credit through January 31,2008.  As of July 31, 2007, no letters ofcredit were outstanding under this facility.

In May 1999, the Companyfiled a shelf registration statement for issuance of up to $250.0 million indebt securities with the Securities and Exchange Commission.  On September 24, 1999, the Company issued$150.0 million of 7.90% Senior Notes due October 1, 2009 at a discount ofapproximately $1.4 million, which is being amortized over the life of thenotes. In fiscal 2007, the Company repurchased $52.1 million of thesenotes.  Such notes contain, among otherprovisions, restrictions on liens on principal property or stock issued tocollateralize debt.  At July 31, 2007,the Company was in compliance with such provisions.  Interest is payable semi-annually in arrearson April 1 and October 1.  On October 20,2003, the Company issued $100.0 million of 5.50% Senior Notes due on November1, 2013 at a discount of approximately $0.2 million, which is being amortizedover the life of the notes.  Such notescontain provisions and restrictions similar to those in the 7.90% Senior Notes.  At July 31, 2007, the Company was incompliance with such provisions. Interest is payable semi-annually in arrears on May 1 and November1.  The notes may be redeemed in whole orin part at any time at a specified redemption price.  The proceeds of the debt issuances were usedfor general corporate purposes.

As of July 31, 2007,Miles Kimball had approximately $8.8 million of long-term debt outstandingunder a real estate mortgage note payable to John Hancock Life InsuranceCompany, which matures June 1, 2020. Under the terms of the note, payments of principal and interest arerequired monthly at a fixed interest rate of 7.89%.

As of July 31, 2007, CBKhad $4.2 million of long-term debt outstanding under an Industrial Revenue Bond(“IRB”), which matures on January 1, 2025. The bond is backed by an irrevocable letter of credit issued by LaSalleBank National Association.  The loan iscollateralized by certain of CBK’s assets. The amount outstanding under the IRB bears interest at short-term floatingrates, which equaled a weighted average interest rate of 5.4% at July 31,2007.  Payments of principal are requiredannually and interest payments are required monthly under the terms of thebond.

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On June 7, 2006, theCompany’s Board of Directors amended the stock repurchase program and increasedthe number of shares of common stock authorized to be repurchased by 6,000,000shares to 12,000,000 shares.  The Companyrepurchased 100,000 shares during the six months ended July 31, 2007.As of July 31, 2007, the Company has purchased a cumulative total of 6,529,182shares for approximately $152.3 million. Additionally, 4,906,616 shares were repurchased in fiscal 2005, througha Dutch auction cash tender offer for an aggregate purchase price of $172.6million, including fees and expenses. The acquired shares are held as common stock in treasury at cost.

On September 6, 2007 theCompany announced that it had declared a cash dividend of $0.27 per share ofcommon stock for the six months ended July 31, 2007.  The dividend,authorized at the Company’s September 6, 2007 Board of Directors meeting, willbe payable to shareholders of record as of November 1, 2007, and will be paidon November 15, 2007.

**Critical Accounting Policies**

There were no changes toour critical accounting policies in the second quarter of fiscal 2008.  For a discussion of the Company’s criticalaccounting policies see our Annual Report on Form 10-K for the fiscal yearended January 31, 2007.

**Recent Accounting Pronouncements**

During the first quarter of fiscal 2007, theFASB issued Statements of Financial Accounting Standards No. 155, “Accountingfor Certain Hybrid Financial Instruments — an amendment of FASB Statements No.133 and 140” (“SFAS No. 155”) and SFAS No. 156, “Accounting forServicing of Financial Instruments — an amendment of FASB Statement No. 140”(“SFAS No. 156”). SFAS No. 155 requires that interests in securitizedfinancial assets be evaluated to determine whether they contain embeddedderivatives, and permits the accounting for any such hybrid financialinstruments as single financial instruments at fair value with changes in fairvalue recognized directly in earnings. SFAS No. 156 specifies thatservicing assets or liabilities recognized upon the sale of financial assetsmust be initially measured at fair value, and subsequently either measured atfair value or amortized in proportion to and over the period of estimated netservicing income or loss. The Company adopted both standards onFebruary 1, 2007 and there was no impact on the Company’s consolidated financial position, annual resultsof operations or cash flows.

In July 2006, the FASBissued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” This Interpretation requires that a recorded tax benefit must be more likelythan not to be sustained upon examination by tax authorities based upon itstechnical merits.  The amount of benefit recorded is the largest amount ofbenefit that is greater than 50 percent likely of being realized upon ultimatesettlement.  Upon adoption, any adjustment will be recorded directly tobeginning retained earnings. The Company adopted the Interpretation as ofFebruary 1, 2007 and the effect on the financial statements is disclosed inNote 10 to the Condensed Consolidated Financial Statements.

InSeptember 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFASNo. 157”).  SFAS No. 157 defines fairvalue, establishes a framework for measuring fair value in generally acceptedaccounting principles, and expands disclosures regarding fair valuemeasurements.  SFAS No. 157 applies underother accounting pronouncements that require or permit fair valuemeasurements.  Accordingly, SFAS No. 157does not require any new fair value measurements.  SFAS No. 157 is effective for fiscal yearsbeginning after November 15, 2007.   TheCompany has not yet adopted the standard and the effect, if any, on the Company’sconsolidated financial position, annual results of operations or cash flows hasnot been determined.

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InFebruary 2007, the FASB issued FASB No. 159, “The Fair Value Option forFinancial Assets and Financial Liabilities, including an amendment of FASBStatements No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose, at specified election dates, tomeasure eligible items at fair value (the “fair value option”).  A business entity shall report unrealizedgains and losses on items for which the fair value option has been elected inearnings at each subsequent reporting period. This accounting standard is effective as of the beginning of an entity’sfirst fiscal year that begins after November 15, 2007.  The effect, if any, of adopting SFAS No. 159on the Company’s consolidated financial position, annual results of operationsor cash flows has not yet been determined.

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**Item 3.**    QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

**Market Risk**

The Company hasoperations outside of the United States and sells its products worldwide.  The Company’s activities expose it to avariety of market risks, including the effects of changes in foreign currencyexchange rates, interest rates and commodity prices.  These financial exposures are activelymonitored and, where considered appropriate, managed by the Company.

**Interest Rate Risk**

TheCompany is subject to interest rate risk on both variable rate debt and itsinvestments in auction rate securities. As of July 31, 2007, the company is subject to interest rate risk onapproximately $4.2 million of variable rate debt.  A 1-percentage point increase in the interestrate would impact pre-tax earnings by approximately $42 thousand if applied tothe total.  As of July 31, 2007, theCompany held $126.0 million of short-term investments, which consist of auctionrate securities and variable rate demand obligations.  A 1-percentage point decrease in the rate ofreturn would impact pre-tax earnings by approximately $1.3 million if appliedto the total.

On July 10, 2003, theCompany terminated the interest rate swap agreement in relation to $50.0million of its outstanding 7.90% Senior Notes, which mature on October 1,2009.  This termination resulted in adeferred gain of approximately $5.0 million, which is being amortized over theremaining term of the notes.  As of July31, 2007, there was $1.7 million remaining to be amortized.

**Foreign Currency Risk**

The Company uses foreignexchange forward and options contracts to hedge the impact of foreign currencyfluctuations on foreign denominated inventory purchases, intercompany payablesand certain foreign denominated loans. The Company does not hold or issuederivative financial instruments for trading purposes.

The Company hasdesignated its forward exchange and options contracts on forecastedintercompany purchases and future purchase commitments as cash flow hedges and,as such, as long as the hedge remains effective and the underlying transactionremains probable, the effective portion of the changes in the fair value ofthese contracts will be recorded in Accumulated Other Comprehensive Income (“OCI”)until earnings are affected by the variability of the cash flows beinghedged.  With regard to commitments forinventory purchases, upon payment of each commitment, the underlying forwardcontract is closed and the corresponding gain or loss is transferred fromaccumulated OCI and is included in the measurement of the cost of the acquiredasset.  If a hedging instrument is soldor terminated prior to maturity, gains and losses are deferred in accumulatedOCI until the hedged item is settled. However, if the hedged item is no longer likely to occur, the resultant gainor loss on the terminated hedge is recognized into earnings immediately.  Amounts included in accumulated OCI at July31, 2007 is an unrealized loss of $0.6 million (net of taxes) and are expectedto be transferred into earnings within the next twelve months upon payment ofthe underlying commitment.

The Company hasdesignated its foreign currency forward contracts related to certain foreigndenominated loans and intercompany payables as fair value hedges.  The gains or losses on the fair value hedgesare recognized into earnings and generally offset the transaction gains orlosses in the foreign denominated loans that they are intended to hedge.

For consolidatedfinancial statement presentation, net cash flows from such hedges areclassified in the categories of the Condensed Consolidated Statement of CashFlows with the items being hedged.

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Thefollowing table provides information about the Company’s foreign exchangeforward and options contracts at July 31, 2007:
|                                                                           | ** ** | **U.S. Dollar**     | ** ** | **Average**            | ** ** | **Estimated**       | ** ** |
|---------------------------------------------------------------------------|------------|--------------------------|------------|------------------------|------------|---------------------|------------|
| **(In thousands, except average contract rate)** | ** ** | **Notional Amount** | ** ** | **Contract Rate** | ** ** | **Fair Value** | ** ** |
| Canadian Dollar                                                           |       | $                        | 13,200     |                   | 0.89       |                | $          | (780 | ) |
| Euro                                                                      |       | 10,750                   |       | 1.35                   |       | (112                | )          |
|                                                                      |       | $                        | 23,950     |                   |       |                | $          | (892 | ) |

 

The foreign exchange contracts outstanding have maturity dates throughMay 2008.

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**Item 4.**    CONTROLSAND PROCEDURES

(a)Evaluation of disclosure controls and procedures.

Ourmanagement, with the participation of our principal executive officer and ourprincipal financial officer, evaluated the effectiveness of our disclosurecontrols and procedures (as defined in Securities Exchange Act of 1934 (“ExchangeAct”) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by thisquarterly report as required by paragraph (b) of Exchange Act Rules 13a-15 or15d-15.  Based upon this evaluation, ourprincipal executive officer and our principal financial officer have concludedthat our disclosure controls and procedures are effective as of July 31, 2007.

(b)Changes in internal control over financial reporting.

Therehave been no changes in our internal control over financial reportingidentified in connection with the evaluation required by paragraph (d) ofExchange Act Rules 13a-15 or 15d-15 that occurred during the second quarter offiscal 2008 that has materially affected, or are reasonably likely tomaterially affect, our internal control over financial reporting.

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**Part II.**             OTHER INFORMATION

**Item 1.**           Legal Proceedings

None.

**Item 1A. Risk Factors**

There have been nochanges to the risks described in the Company’s Annual Report on Form 10-K forthe fiscal year ended January 31, 2007 except as follows:

Dependence on KeyCorporate Management Personnel

Our success depends inpart on the contributions of key corporate management, including our Chairmanand Chief Executive Officer, Robert B. Goergen, as well as members of theOffice of the Chairman:  Robert H.Barghaus, Vice President and Chief Financial Officer; Robert B. Goergen Jr.,Vice President of the Company and President, Multi-Channel Group; and Anne M.Butler, Vice President of the Company and President PartyLite Worldwide.  We do not have employment contracts with anyof our key corporate management personnel, except the Chairman and ChiefExecutive Officer, nor do we maintain any key person life insurancepolicies.  The loss of any of the keycorporate management personnel could have a material adverse effect on us.

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**Item 2.**           Unregistered Sales of Equity Securities and Use ofProceeds

The following table setsforth certain information concerning the repurchase of the Company’s CommonStock made by the Company during the second quarter of the fiscal year endingJanuary 31, 2008.

##### **ISSUER PURCHASES OF EQUITY SECURITIES(1)**

| Period                              | ** ** | **(a) Total  Number of  Shares Purchased** | ** ** | **(b)  Average  Price Paid  per Share** | ** ** | **(c) Total  Number of  Shares  Purchased as  Part of Publicly  Announced  Plans or  Programs** | ** ** | **(d) Maximum Number  (or Approximate  Dollar Value)  of Shares that  May Yet Be  Purchased Under the  Plans or Programs** | ** **       |
|-------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|
| May 1, 2007 –   May 31, 2007   |       | 0                                                         |       | —                                            |       | 0                                                                                                                             |       | 5,570,818 shares                                                                                                                                                                       |             |
| June 1, 2007 –   June 30, 2007 |       | 0                                                         |       | —                                            |       | 0                                                                                                                             |       | 5,570,818 shares                                                                                                                                                                       |             |
| July 1, 2007 –   July 31, 2007 |       | 100,000                                                   |       | $                                                 | 27.00      |                                                                                                                          | 100,000    |                                                                                                                                                                                   | 5,470,818 shares |   |
| Total                               |       | 100,000                                                   |       | $                                                 | 27.00      |                                                                                                                          | 100,000    |                                                                                                                                                                                   | 5,470,818 shares |   |

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(1)On September 10, 1998, the Company’s Board of Directors approved the Company’s sharerepurchase program (the “Repurchase Program”) pursuant to which the Company wasauthorized to repurchase up to 1,000,000 shares of its issued and outstandingCommon Stock in open market transactions. On June 8, 1999, the Company’s Board of Directors amended the RepurchaseProgram and increased the number of shares of Common Stock to be repurchased by1,000,000 shares, from 1,000,000 to 2,000,000 shares.  On March 30, 2000, the Company’s Board ofDirectors further amended the Repurchase Program and increased the number ofshares of Common Stock to be repurchased by 1,000,000 shares, from 2,000,000 to3,000,000 shares.  On December 14, 2000,the Company’s Board of Directors further amended the Repurchase Program andincreased the number of shares of Common Stock to be repurchased by 1,000,000shares, from 3,000,000 to 4,000,000 shares. On April 4, 2002, the Company’s Board of Directors further amended theRepurchase Program and increased the number of shares of Common Stock to berepurchased by 2,000,000 shares, from 4,000,000 to 6,000,000 shares.  On June 7, 2006, the Company’s Board ofDirectors further amended the Repurchase Program and increased the number ofshares of common stock authorized to be repurchased by 6,000,000 shares, from6,000,000 shares to 12,000,000 shares. As of July 31, 2007, the Company has purchased a total of 6,529,182shares of Common Stock under the Repurchase Program.  The Repurchase Program does not have anexpiration date.  The Company intends tomake further purchases under the Repurchase Program from time to time.

**Item 3.**           Defaults upon Senior Securities

None

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**Item 4.**           Submission ofMatters to a Vote of Security Holders

The following matters werevoted upon at the Annual Meeting of Stockholders held on June 6, 2007, and receivedthe votes set forth below:

1) Each of the followingpersons nominated was elected to serve as a director and received the number ofvotes set forth opposite their name.
|                    | ** ** | **For**    | ** ** | **Against** | ** ** | **Withheld** | ** ** | **Abstentions** | ** ** |
|--------------------|------------|------------|------------|-------------|------------|--------------|------------|-----------------|------------|
| Robert B.  Goergen |       | 36,678,008 |       | 0           |       | 289,123      |       | 0               |       |
| Neal I. Goldman    |       | 36,710,239 |       | 0           |       | 256,892      |       | 0               |       |
| Howard E. Rose     |       | 36,778,043 |       | 0           |       | 189,088      |       | 0               |       |

 

In addition to the directors elected at the meeting,the directors of the Company whose terms of office continued after the meetingare: John W. Burkhart, Wilma H. Jordan and James M. McTaggart (terms expiringin 2008) and Roger A. Anderson, Pamela M. Goergen and Carol J. Hochman (termsexpiring in 2009).

2) A proposal to ratify theappointment of Deloitte & Touche LLP as independent auditors received36,949,354 votes for, 11,654 votes against, 0 votes withheld and 6,123abstentions.

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

None

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**Item 6.**           Exhibits
|        | Exhibits |   |                                                                                                                               |
|--------|----------|--------|------------------------------------------------------------------------------------------------------------------------------------|
|   |     |   |                                                                                                                               |
|   | 31.1     |   | Certification of Chairman and Chief Executive  Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.       |
|   |     |   |                                                                                                                               |
|   | 31.2     |   | Certification of Vice President and Chief Financial  Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
|   |     |   |                                                                                                                               |
|   | 32.1     |   | Certification of Chairman and Chief Executive  Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                  |
|   |     |   |                                                                                                                               |
|   | 32.2     |   | Certification of Vice President and Chief Financial  Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            |

 

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.
|        | BLYTH, INC.                                 |   |
|--------|---------------------------------------------|--------|
|   |                                        |   |
|   |                                        |   |
|   |                                        |   |
| Date:  |    September 7, 2007         |   | By: | /s/ Robert B.  Goergen |   |
|   | Robert B. Goergen                           |
|   | Chairman and Chief Executive Officer        |
|   |                                        |
|   |                                        |
|   |                                        |
| Date:  |    September 7, 2007         |   | By: | /s/ Robert H.  Barghaus |   |
|   | Robert H. Barghaus                          |   |
|   | Vice President and Chief  Financial Officer |
|        |                                             |        |  |  |  |  |  |

 

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