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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
____________
For the Fiscal Year Ended
January 31, 1997 Commission File No. 1-13026
BLYTH INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2984916
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Field Point Road
Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 661-1926
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
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Common Stock, $0.02 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
As of April 14, 1997, the aggregate market value of the voting stock held
by non-affiliates of the registrant was approximately $640,305,138, based on the
closing price of the registrant's Common Stock on the New York Stock Exchange on
such date and based on the assumption, for purposes of this computation only,
that all of the registrant's directors and executive officers are affiliates.
As of April 14, 1997, there were outstanding 31,420,168 shares of Common
Stock, $0.02 par value.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's annual report to shareholders for the
year ended January 31, 1997 (Incorporated into Part II)
(2) Portions of the registrant's definitive proxy statement issued in
connection with the annual meeting of shareholders to be held on
June 4, 1997 (Incorporated into Part III)
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TABLE OF CONTENTS
PART I
Item 1. Business....................................................... 1
Item 2. Properties..................................................... 12
Item 3. Legal Proceedings.............................................. 13
Item 4. Submission of Matters to a Vote of Security Holders............. 13
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................ 13
Item 6. Selected Financial Data......................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 14
Item 8. Financial Statements and Supplementary Data..................... 14
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure....................................... 14
PART III
Item 10. Directors and Executive Officers of the Registrant............... 15
Item 11. Executive Compensation........................................... 15
Item 12. Security Ownership of Certain Beneficial Owners and Management... 15
Item 13. Certain Relationships and Related Transactions................... 15
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K........................................................ 16
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PART I
Item 1. Business
Blyth Industries, Inc. designs, manufactures and markets an extensive
line of candles and home fragrance products, including scented candles,
outdoor citronella candles, potpourri and other home and auto fragrance
products, and markets a broad range of related accessories and decorative
gift bags. These products are sold under various brand names, including the
names Ambria-TM-, Aromatic's-TM-, Candle Corporation of America-Registered
Trademark-, Canterbury-TM-, Carolina Designs-TM-, Colonial Candle of Cape
Cod-Registered Trademark-, Eternalux-Registered Trademark-, FilterMate-TM-,
Jeanmarie Creations-Registered Trademark-, L'Aroma-Registered Trademark-,
Mrs. Baker's Original Recipe-Registered Trademark-, and PartyLite
Gifts-Registered Trademark-. The Company markets its products through a wide
variety of distribution channels, including a network of sales
representatives and home party plan consultants serving the consumer market
and distributors serving the food service market and the religious market.
Consumable products, which include candles, scented candles, outdoor
citronella candles, potpourri, other fragrance products and decorative gift
bags, account for approximately 65% of the Company's net sales and candle
accessories account for the balance of net sales. The Company believes that
it is a leading supplier in the candle industry based on net sales and the
breadth of distribution channels served.
The Company's net sales have grown substantially in the last 5 years, with
internal growth and acquisitions contributing approximately 90% and 10%,
respectively, to such growth. Internal growth has been generated by increased
sales to the consumer market (including increased sales of acquired product
lines), the introduction of new products and product line extensions and
geographic expansion.
The Company has completed numerous acquisitions and investments since its
formation in 1977, and has successfully integrated the acquired businesses and
product lines into the Company's operations. In February 1996, the Company
entered into a strategic partnering arrangement with Hallmark Cards,
Incorporated, pursuant to which the Company acquired the Canterbury candle
product line and related manufacturing equipment and agreed to provide candles
and candle accessories to certain Hallmark stores and other accounts. In
December 1996, the Company acquired New Ideas International, Inc., a
manufacturer of home and auto fragrance products, including FilterMate, a
scented accessory for home heating and air conditioning systems. In recent
years, the Company has also increased its equity ownership of 2 European candle
manufacturers, Colony Gifts and Eclipse Candles, to 50% and 75%, respectively,
and has certain rights to acquire the remaining equity. Finally, on March 25,
1997, the Company entered into an agreement to acquire Endar Corp., a
manufacturer of potpourri, scented candles and other fragrance products. The
Company expects to issue between 1,100,000 and 1,500,000 shares of its Common
Stock in the transaction. The transaction is subject to satisfaction of certain
conditions and is anticipated to be consummated prior to the end of June 1997.
The business strategy of the Company has evolved into a strategy focusing
on the broad category of home fragrance and candle products. This strategy
flows from the Company's belief that customers "wardrobe" their homes through
the use of candles, potpourri and other fragrance products in different
fragrances, colors and forms. As a result of this, the Company believes that
candles and potpourri are replacing scented air-freshener products. The
Company's strategy is to sell high-quality fragrance and candle products,
with a primary focus on the United States and international consumer markets,
which provides greater opportunities for growth and product differentiation
and higher profit margins than do other markets for fragrance and candle
products. The Company believes that increased expenditures on the home and
garden, increased emphasis on home entertaining and home fragrance and the
gain in popularity of traditional, natural -- and now scented -- products
have resulted in growth in demand for candles and related products and,
recently, scented products. The Company's operating
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strategy has been, and will continue to be, to focus on the consumer market,
to grow through new product development and geographic expansion, to market
its products through all major domestic distribution channels with product
offerings tailored to the requirements of each channel, to emphasize customer
service, to realize efficiencies and cost improvements in manufacturing and
distribution and to grow through international expansion and acquisitions.
The Company has been successful in identifying new product opportunities to
balance its sales and operating results throughout the fiscal year. The
Company has identified international expansion as a key opportunity for
future growth.
Strategy
Consumer Market Focus
The Company focuses on the consumer market, which provides greater
opportunities for growth and product differentiation and higher profit margins
than do other markets for the Company's products. Sales to the consumer market
represented approximately 95% of the Company's net sales for fiscal 1997. The
Company expects that, as in recent years, its future growth will be generated
primarily by sales of products sold into the faster growing consumer market in
North America and Europe, rather than the domestic food service and religious
markets, which have grown more slowly and which the Company expects will
continue to do so.
Growth Through New Product Development and Acquisitions
The Company continuously introduces new products to satisfy changing
consumer tastes. The Company introduces new product offerings each year, which
new products have typically accounted for at least 15% of the Company's net
sales in the first full year following introduction. Examples of new products
successfully introduced by the Company include Ambria, a coordinated line of
candles, accessories and home fragrances, on the one hand, and new candle
accessories and new candle fragrances and colors, on the other hand.
Marketing Presence in All Major Domestic Distribution Channels
The Company markets its products in the consumer market through sales to
department and gift stores, specialty chains and mass merchandisers and direct
sales to consumers through its home party plan. The Company also markets its
products to distributors and retailers serving the food service and religious
markets. The Company tailors its products, designs, packaging and price to
satisfy the varying demands of its customers within each distribution channel.
The Company believes that its presence in all major distribution channels
provides a competitive advantage with respect to the successful introduction of
new products that appeal to customers in more than 1 distribution channel. The
Company plans to increase penetration of distribution channels in those
geographic areas in North America where it believes opportunities exist. For
example, the Company's recent strategic partnering arrangement with Hallmark
Cards, Incorporated has allowed the Company to market several of the Company's
key brands through many of the various stores that carry Hallmark products.
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Emphasis on Customer Service
The Company has developed systems to insure that the desired finished
products are available for timely shipment to its wide variety of customers with
different product needs and purchasing patterns. The Company seeks to maintain
its inventory at levels sufficient to fill completely all customer orders. For
its department and gift store and specialty chain customers, the Company has
developed a pick and pack system that allows it to ship small shipments
containing a variety of products to a large number of customers, allowing such
customers to reduce their carried inventory. For its mass merchant and
institutional customers, the Company offers just-in-time delivery through an
interactive electronic data interchange program, and has developed programs and
standards to improve and measure customer service. For home party plan
customers, the Company has focused on timely and complete shipments of
individual customer orders. Daily and monthly measures of turnaround time,
percent on-time delivery and percent of product back ordered are monitored in
order to continuously improve customer service.
Efficiencies and Cost Improvements in Manufacturing and Distribution
The Company is continuously engaged in efforts to reduce its costs through
more efficient production and distribution methods and technological
advancements. The Company has consolidated and rationalized acquired equipment
and facilities and invested in new, more advanced equipment in order to lower
manufacturing costs, improve product quality and significantly increase
manufacturing capacity to meet sales growth. To this end, the Company has more
than doubled its manufacturing and distribution capacity in the last 2 years.
Acquired manufacturing operations have historically been integrated into the
Company's existing operations based on manufacturing process. The Company
recently has commenced construction of a 100,000 square foot manufacturing
facility in Cumbria, England, which is expected to be completed in December
1997. The Company has also commenced construction of a 400,000 square foot
distribution facility in Elkin, North Carolina, which is expected to be
completed in June 1997.
Growth Through International Expansion
Since 1990, the Company's international business has grown at a faster rate
than sales in the United States, and international net sales (excluding sales by
Colony Gifts, which is not a consolidated subsidiary) now represent
approximately 15% of the Company's net sales. The international operations of
the Company include (1) exports of branded products sold through Company sales
managers and independent sales agents, competing in the candle markets of
Canada, Europe, Latin America and the Pacific Rim, to distributors, department
and gift stores, mass merchandisers and food service distributors, (2) sales by
PartyLite sales consultants of branded products directly to consumers in Canada
and certain European countries, and (3) sales by Colony Gifts and Eclipse
Candles throughout Europe and elsewhere. The Company currently plans to
continue to expand internationally through the establishment of foreign-based
marketing and distribution operations and through continued expansion of its
home party plan activities. In particular, the Company's home party plan
activities have been successful in gaining entry in selected countries. As
noted above, in order to further support its international sales, the Company
has begun construction of a 100,000 square foot manufacturing facility in
Cumbria, England. Also, in fiscal 1997, the Company increased its ownership of
Eclipse Candles to 75%.
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Growth Through Acquisitions
The Company regularly evaluates acquisition opportunities in light of the
anticipated impact on current new products, the Company's planned growth rate
and the complementary nature of the prospective acquired business. The Company
expects to consummate 1 or more acquisitions in the next 12 months. There can
be no assurance that the Company will be able to continue to identify suitable
acquisition candidates, to consummate acquisitions on terms favorable to the
Company, to finance acquisitions or successfully to integrate acquired
operations. In February 1996, the Company acquired the Canterbury candle
product line and related equipment from Hallmark Cards, Incorporated, and has
entered into a strategic partnering arrangement with Hallmark. In December
1997, the Company acquired New Ideas International, Inc., including its
FilterMate brand and its new FanMate brand of scented accessories for ceiling
fans. On March 25, 1997, the Company entered into an agreement to acquire Endar
Corp., a manufacturer of potpourri, scented candles and other fragrance
products. The Company expects to issue between 1,100,000 and 1,500,000 shares
of its Common Stock in the transaction. The transaction is subject to
satisfaction of certain conditions and is anticipated to be consummated prior
to the end of June 1997.
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Products
Below is a summary of the Company's principal products, the channels
through which they are marketed, the brand names under which they are sold and
the sales methods utilized.
<TABLE>
<CAPTION>
Channel Brands Products Sales Method
<S> <C> <C> <C>
Consumer Market
Department and Gift Stores and Colonial Candle of Candles and scented Independent sales
Specialty Chains Cape Cod candles, pillars, representatives and
Carolina Designs, Ltd. tapers, classics, Company sales managers
Colony (Europe) votives, filled
Eclipse (Europe) containers, decorative
candles and accessories
Mrs. Baker's Filled-glass scented
Original Recipe candles, candles, candle
accessories and
potpourri
Direct Sales PartyLite Gifts Candles and scented Independent sales
Colonial Candle of candles, pillars, consultants
Cape Cod tapers, classics,
votives, filled
containers, decorative
candles and accessories
Mass Merchandisers, Discount Ambria Candles and scented Independent sales
Stores and Food and Drug Chains L'Aroma candles, outdoor representatives and
Canterbury citronella candles, Company sales managers
Aromatic's pillars, tapers, filled
containers, votives,
liquid wax lamps,
potpourri and
accessories
Jeanmarie Creations Decorative gift bags
New Ideas (FilterMate) Home and auto fragrance
products, including
FanMate
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Food Service and Religious
Markets
Food Service Candle Corporation of Tapers, filled-glass Independent food service
America candles, tealights, food distributors and Company
warmers and liquid wax sales managers
lamps and replacement
cartridges for such
lamps
Religious Eternalux Votives and filled-glass Distributors,
containers independent sales
representatives and
Company sales managers
</TABLE>
The Company markets its products through a variety of distribution
channels, and tailors its products, designs, packaging and prices to satisfy the
varying demands of its customers within each distribution channel. The
Company's consumer products consist of products for everyday use and products
for seasonal use. The Company currently offers over 8,000 stock keeping units.
Consumer Market
Sales to the consumer market accounted for approximately 95% of the
Company's net sales in fiscal 1997. The Company segments the consumer market by
marketing different products and different brand names at different price points
to department and gift stores and specialty chains than it does to mass
merchants.
The Company believes that it is the leading candle supplier to department
and gift stores and specialty chains. The Company offers various brands of
products in this distribution channel, Colonial Candle of Cape Cod, Mrs. Baker's
Original Recipe, Carolina Designs, Ltd. and, in Europe, Colony and Eclipse. The
Company believes that its leading position in this distribution channel, which
is served by a large number of small to mid-size companies, is the result of the
breadth of its high-quality product offerings, the regular introduction of new
products and a dedication to customer service. The Company believes that its
strategic partnering arrangement with Hallmark will enhance its position.
The Company sells its candles and candle accessories directly to consumers
in the United States and Canada and certain European countries through its
PartyLite Gifts subsidiaries, which distribute the Colonial Candle of Cape Cod
brand of candles. While other direct selling organizations include candles and
related accessories as part of their product offerings, PartyLite Gifts focuses
its entire effort on this product category. The Company believes that its
success with direct selling is the result of a complete line of high-quality
candles and candle accessories in a variety of shapes, sizes and scents, strong
promotional programs, timely product delivery and attractive financial
incentives available to sales consultants.
The Company believes that it is a major supplier of candles and fragrance
products to mass merchandisers, discount stores and food and drug chains in the
United States. The Company sells its
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products in this distribution channel under the brand names Ambria,
Aromatic's, Canterbury and L'Aroma, as well as trademarks for seasonal
outdoor products such as Bug-O-Bucket, a citronella candle purchased by
consumers for outdoor use. The Company's broad product line enables it to
target mass merchandisers' differing needs based upon price, product design
and packaging, as well as focus on the individual characteristics of each of
its customers. The Company believes that its success in the mass market,
which is served by a relatively small number of large candle suppliers and
several greeting card companies, is also the result of the perceived value of
its products and brand name recognition, as well as product innovations and
the availability of open stock items, made-to-order designs and custom
packaging. The Company also markets its Jeanmarie Creations brand decorative
gift bags and, since January 1997, its New Ideas line of home and auto
fragrance products, including FilterMate, to mass merchandisers. The Company
believes that Jeanmarie Creations is noted for its innovative seasonal
designs, competitive and broad product offerings, and its reputation for
dependable customer service. The Company believes that the line of home and
auto fragrance products offered by New Ideas is well-suited for this channel.
Food Service and Religious Markets
The Company believes that it is a leading supplier of tapers, filled-glass
candles, tealights, food warmers and liquid wax lamps and replacement cartridges
for such lamps to the domestic food service industry, which includes restaurants
and institutional customers. The Company's products for the food service
industry are sold under the brand name Candle Corporation of America.
The Company sells various candles, including votives and filled-glass
containers for devotional use in the home, to the religious market in the United
States and Puerto Rico. The Company offers Eternalux as a brand name for its
devotional candle product line. The Company competes with a number of highly
focused national and local competitors, particularly in Florida, the New York
City region, southern California and Texas. Because of this localized
competition, the Company has located manufacturing and distribution facilities
to serve these regions, including Brooklyn, New York, Hialeah, Florida, Carson,
California and Chicago, Illinois. The Company believes that its geographically
dispersed glass-filling operations provide it with a competitive advantage in
this market.
New Product Development
The Company continuously develops and introduces new products to satisfy
changing consumer tastes. The new product development process is managed on a
Company-wide basis by a team comprised of brand managers, product managers,
designers, foreign sourcing personnel, laboratory technicians, manufacturing
engineers and sales managers. New product concepts are directed to the marketing
departments from all areas within the Company and from the Company's independent
sales representatives. The new product development process, including market
research, comparative analysis, engineering specifications, feasibility studies,
testing and evaluation, can require from 3 to 18 months to complete. The
concept development, test marketing and eventual introduction in February 1996
of Ambria brand candles, candle accessories and fragrance products is an example
of the Company's new product development process.
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Sales and Marketing
The Company has 8 sales offices located throughout the United States,
with 38 full-time sales and sales training managers who call on customers,
independent sales representative organizations and distributors. The Company
also has marketing staffs located in Des Plaines, Illinois, Plymouth,
Massachusetts, Fontana, California, Thomasville, Georgia, Tulsa, Oklahoma and
Oshkosh, Wisconsin engaged in developing strategies relating to new product
development, pricing, distribution, advertising and sales promotion. The
Company's marketing staff is organized around product brands.
Consumer Market
The Company markets its products to department and gift stores and
specialty chains through a network of independent sales representatives and
Company sales managers. The Company supports these independent sales
representatives by providing them with comprehensive product catalogues to
market the Company's products. Each brand has its own dedicated product
catalogue, which is newly developed each year, together with seasonal
supplements. The Company's sales personnel assist in the training of independent
sales representatives and work closely with the representatives to promote the
Company's products and to provide assistance to department and gift stores and
specialty chains in determining their candle and candle accessory needs.
The Company sells its products through a network of over 12,000 active
independent sales consultants through the home party plan method of selling. The
PartyLite sales consultants identify hostesses for parties, who invite their
friends to attend, and the hostess, in return, receives gifts of Company
merchandise. The sales consultants receive a profit based on sales of the
Company's products at parties organized by them. No products are inventoried by
independent sales consultants, other than samples that are not for resale. Since
many of the Company's home party plan sales are seasonal or tied to promotional
programs, the demand for these products varies by the strength of the season and
the programs, with October, November and December typically being the highest
selling months.
The Company markets its products directly to mass merchandisers through a
network of independent sales representatives and Company sales managers. The
independent sales representatives utilize the Company's product catalogues and
samples to market the Company's regular and seasonal product lines. Mass market
buyers tend to make larger purchase decisions than do many of the Company's
other customers, and such decisions are made on the basis of a variety of
product characteristics, including product quality and design features, service
and price. The Company believes that its competitive position in the mass market
is enhanced by its ability to respond quickly to new orders and its ability to
assist customers through inventory management and control and to satisfy
delivery requirements through on-line ordering. The Company has effectively
utilized just-in-time product delivery, through an interactive electronic data
interchange ("EDI") program implemented with many mass market customers. EDI
allows the Company to track and respond to certain customers' direct orders on a
continuous basis.
In order to increase its sales to the consumer market, the Company develops
comprehensive merchandising programs for department and gift stores and
specialty chains and mass merchandisers. The Company develops merchandising
programs targeted to specific chains, including in-store display fixtures,
cooperative advertising programs and planograms for improving turnover of the
Company's
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products. The Company also affixes tags, tickets, bar codes and other
merchandising aids to products to certain customers' specifications.
Food Service and Religious Markets
A significant majority of the Company's sales to the domestic food
service market are made through a network of over 500 independent food
service dealers. The dealers, in turn, sell to a wide variety of food service
establishments, including national and regional hotel chains, national
restaurant chains and individually-owned hotels and restaurants. The
Company's dealer network sells the Company's products to food service
establishments utilizing the Company's comprehensive product catalogue.
Company sales managers assist in the training of dealers and work closely
with the dealers to promote the Company's products and provide direct
assistance to food service establishments in determining their wax and liquid
wax product needs. Certain of the Company's food service sales are made
directly by Company salespersons to major users of candles and liquid wax
lamps, such as restaurant and hotel chains.
Food service customers require timely delivery of a broad range of items,
and the Company believes that its leading position in the food service
distribution channel is the result, in part, of the breadth of its product
offerings, its strategically located manufacturing facilities and related
full-line distribution centers and its close working relationship with dealers.
In order to encourage food service dealers to carry a larger number of Company
products, the Company utilizes program selling, which involves unit sales of set
groups of products. The Company believes that its installed base of products at
food service establishments provides the Company with a competitive advantage in
this market.
The Company sells its products to over 600 distributors and retailers
serving the market for devotional candles for use in the home. These
distributors, in turn, sell to a wide variety of retail establishments,
including national and regional food store chains and independent local stores.
The Eternalux brand name is supported with product catalogues and other
promotional programs. Some of the Company's sales are made directly to
retailers.
Many of the Company's independent sales representative organizations
maintain showrooms in which the Company's products are displayed and
merchandized. In addition, the Company operates 8 outlet stores in which
primarily discontinued products and seconds are sold.
Customers
The customers for the Company's products include over 20,000 department and
gift stores and specialty chains, over 800 mass merchandisers and over 1,100
distributors serving the food service and religious markets. In addition,
PartyLite Gifts sold directly to over 3 million individual consumers in the
United States, Canada and certain European countries during fiscal 1997. No
single customer accounts for 10% or more of the Company's sales.
The Company's department and gift store and specialty chain accounts
include Bloomingdale's, Fred Meyer, Inc., Mervyn's Inc., J.C. Penney Company,
Inc., Linens 'N Things Inc. and Luxury Linens Inc. Each of the Company's 5
largest department store and specialty chain accounts in the United States has
been a customer of the Company for at least 5 years. Of the approximately 100
largest
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retailers in the mass market, the Company sells to over 80, including
The Home Depot, Inc., Kmart Corporation, Lowe's Companies, Inc., Target Stores,
Venture Stores Inc., Waccamaw Corp., Walgreen Co. and Wal-Mart Stores, Inc.,
most of which have been customers of the Company for over 5 years. The
Company's food service customers include Sysco Corporation, Edward Don &
Company, Alliant (formerly Kraft General Foods, Inc.), and S.E. Rykoff & Co.
Each of the Company's 5 largest food service distributor accounts in the United
States has been a customer of the Company for at least 5 years. Each of the
Company's 5 largest distributors serving the religious market has been a Company
account for at least 10 years.
Manufacturing and Distribution
The Company manufactures virtually all of its candle and fragrance
products. The Company's candle products are generally produced using 1 of 4
manufacturing methods. A significant portion of the Company's votives, tapers,
pillars, classics and colonnades are produced by pouring melted liquid wax into
a mold and are known as "molded" products. The second method used for tapers and
columns is the extrusion process wherein granular wax is pressed into or through
a die. Such products are known as "extruded" products. The third method, used to
make "compressed" products, involves pressing granules of wax into a mold under
high pressure. Votives, columns and food warmers may be produced in this manner.
Generally, molded candles, which burn more slowly and have a finer finish, are
higher quality and retail at a higher price than extruded and compressed
candles. The Company's "filled" products are manufactured by pouring liquid wax
into a glass or other type of container. This manufacturing process is used for
filled-glass products, tealights and certain outdoor citronella products. In
addition, the Company produces liquid wax products for sale to food service and
mass market customers. The Company purchases some novelty candles from
independent manufacturers.
The Company's fragrance products are generally produced using 1 of 3
manufacturing methods. Potpourri is produced by mixing parts of flowers and
other botanical items, wood chips, spices and perfumes in varying combinations.
Liquid fragrance products are produced by mixing various perfumes, dyes and
oils. New Ideas' line of fragrance products are produced by applying varying
fragrances to the relevant product.
The Company sources candle accessories and its decorative gift bags from
independent third parties in the Pacific Rim, Europe and Mexico, as well as in
the United States, and maintains purchasing offices in Hong Kong and Taiwan for
Pacific Rim sourcing.
The Company is continuously engaged in efforts to reduce its manufacturing
costs and to improve quality through more efficient production methods and
technological advancements. The Company employs industrial engineers whose
responsibilities include improving and upgrading the Company's manufacturing
facilities, equipment and processes, as well as engineering new products and
implementing the large number of changes continuously being made to the
Company's product designs, sizes and shapes. The manufacture of the Company's
products involves the use of various highly automated processes and
technologies, as well as certain hand crafting and finishing. During the last 5
fiscal years, the Company has invested in new automated machinery that the
Company believes has resulted, and will continue to result, in significant cost
savings and capacity expansion. The Company anticipates adding substantial
additional distribution facilities and production equipment in fiscal 1998 to
meet current and anticipated volume levels. For example, the Company has
commenced construction of a 100,000 square foot, manufacturing facility in
Cumbria, England to support the Company's
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European operations. This facility is expected to be completed in December
1997. See "Business--Properties."
To maximize distribution efficiencies, the Company operates 8 stand-alone
distribution facilities in addition to distribution facilities in its
manufacturing plants. The Company has expanded its manufacturing and
distribution capabilities in order to support its anticipated growth,
including constructing the new 400,000 square foot distribution center in
Elkin, North Carolina, which is expected to be completed in June, 1997. The
Company also coordinates certain distribution to Hallmark stores and accounts
through Hallmark.
All of the raw materials used by the Company, principally petroleum-based
wax, have historically been available in adequate supply from multiple
sources. However, for certain raw materials, there may be temporary shortages
due to weather or other factors, including disruptions in supply caused by
raw material transportation or production delays. Such shortages have not
previously had, and are not expected to have, a material adverse effect on
the Company's operations.
Competition
The Company's business is highly competitive, with the principal
competitive factors being product quality, delivery time, customer service
and price. The candle and fragrance products industry is highly fragmented,
with numerous suppliers serving 1 or more of the distribution channels served
by the Company. The Company believes that it is the only supplier of candles
serving the breadth of distribution channels that it serves. The Yankee
Candle Company Inc., plus numerous specialty candle manufacturers, are the
principal competitors for department and gift stores and specialty chains.
Candle Lite (a unit of Lancaster Colony Corporation) is the leading supplier
of candles to mass merchants. The Company's potpourri competitors include
Aromatique, Inc., Tsumura International, Inc., Seasons, Inc., Scentex, Inc.
and Endar Corp. (which the Company has agreed to acquire, as described
above). The Company's competitors in the food service and religious markets
are comprised mostly of manufacturers of a special or narrow range of
products. In addition, S. C. Johnson & Son, Inc.'s candles under the Off! and
Glade brand names compete with the Company's citronella and scented candle
products. Similarly, other manufacturers of fragrance products (such as Dial
Corporation's Renuzit line of fragrance products) compete with the Company's
scented candle products, potpourri and home fragrance products. Because
there are relatively low barriers to entry to the candle and fragrance
product industry, the Company may face future competition from other
companies, which may have substantially greater financial and marketing
resources than those available to the Company. From time to time during the
year-end holiday season, the Company experiences competition from candles
manufactured in foreign countries, particularly China. In addition, certain
of the Company's competitors focus on a particular geographic or
single-product market and attempt to gain or maintain market share solely on
the basis of price.
Employees
As of March 31, 1997, the Company had approximately 2,400 full-time
employees. Of those, approximately 1,700 are non-salaried, non-unionized hourly
workers and approximately 300 are non-salaried, hourly workers in the Company's
Chicago, Illinois and Brooklyn, New York manufacturing
- 11 -
<PAGE>
facilities represented by Local 777 of the Teamsters and Local 422-S of the
AFL-CIO, respectively, under contracts that will expire in June 1997 and June
1999, respectively. The Company believes that its employee relations are
good. Since its formation in 1977, the Company has never experienced a work
stoppage.
Trademarks
The Company owns over 60 United States trademark registrations and has over
20 United States trademark applications pending in the United States Patent and
Trademark Office with respect to certain of its products. In addition, the
Company from time to time registers certain of its trademarks in certain foreign
countries. All of the Company's United States trademark registrations can be
maintained and renewed provided that the trademarks are still in use for the
goods and services covered by such registrations. The Company regards its
trademarks as valuable assets. Although the Company owns certain patents which
it considers valuable, its business is not dependent upon any single patent or
group of patents.
Item 2. Properties
The following table sets forth the location and approximate square footage
of the Company's manufacturing and distribution facilities:
<TABLE>
<CAPTION>
Approximate Square Feet
Location Use
------------------------
<S> <C> <C> <C>
OWNED LEASED
Batavia, Illinois....................................... Manufacturing and related
distribution 120,000 --
Brooklyn, New York...................................... Distribution -- 30,000
Carol Stream, Illinois.................................. Distribution -- 135,000
Carson, California...................................... Manufacturing and related
distribution -- 38,000
Chicago, Illinois....................................... Manufacturing and related
distribution 167,900 --
Elkin, North Carolina................................... Manufacturing and related
distribution 290,000 --
Fontana, California..................................... Manufacturing and related
distribution -- 84,700
Heidelberg, Germany..................................... Distribution -- 37,000
Hialeah, Florida........................................ Manufacturing 12,300 --
Hialeah, Florida........................................ Distribution -- 10,000
Hyannis, Massachusetts.................................. Manufacturing 76,100 --
Plymouth, Massachusetts................................. Distribution 93,100 --
Statesville, North Carolina............................. Distribution -- 65,000
Thomasville, Georgia.................................... Manufacturing and related
distribution 30,000 --
Tijuana, Mexico......................................... Manufacturing -- 40,000
Tulsa, Oklahoma......................................... Distribution 98,000 --
West Chicago, Illinois.................................. Distribution -- 180,000
</TABLE>
- 12 -
<PAGE>
The Company's executive offices, administrative offices and outlet stores
are located in leased space. All of the Company's properties are currently
being utilized for their intended purpose. The Company recently has commenced
construction of a 100,000 square foot manufacturing facility in Cumbria,
England, which is expected to be completed in December 1997. The Company also
expects to complete construction of a 400,000 square foot distribution facility
in Elkin, North Carolina in June 1997. In fiscal 1997, the Company purchased
16.25 acres in Plymouth, Massachusetts for future office expansion at this site.
Item 3. Legal Proceedings
The Company is involved in litigation arising in the ordinary course of its
business. In the opinion of the Company's management, existing litigation will
not have a material adverse effect on the Company's financial position or
results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's 1997 annual meeting of stockholders will be held on June 4,
1997. No matter was submitted to a vote of security holders in the fourth
quarter of the fiscal year ended January 31, 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information required by this Item is incorporated herein by reference
to page 1 of the Company's Annual Report to Shareholders for the fiscal year
ended January 31, 1997. The referenced page of such annual report has been
filed as part of Exhibit 13 to this report. Such information is incorporated
herein by reference, pursuant to General Instruction G(2).
During the fourth quarter of the fiscal year ended January 31, 1997, the
Company issued the following securities in transactions that were not registered
under the Securities Act of 1933, as amended (the "Securities Act"):
(1) On December 31, 1996, the Registrant issued an aggregate of
662,497 shares of Common Stock to the 4 shareholders of New Ideas International,
Inc., a Georgia corporation ("New Ideas"), upon consummation of the merger of
New Ideas with and into NII Acquisition Corp., a subsidiary of the Company.
This transaction was effected in reliance upon the exemption from the
registration requirements of the Securities Act afforded by Section 4(2) of the
Securities Act on the basis that such transaction did not involve any public
offering.
(2) As of January 31, 1997, the Company issued an aggregate of 1,744
shares of Common Stock to 872 employees on the basis of 2 shares per eligible
employee as part of a one-time stock bonus program which will be completed in
the first quarter of fiscal 1998. The issuance of Common Stock as part of the
stock bonus was not registered on the basis that the award of stock as a
one-time bonus to employees does not require registration because no "offer" or
"sale" is deemed to occur.
- 13 -
<PAGE>
Item 6. Selected Financial Data
The information required by this Item is incorporated herein by reference
to page 10 of the Company's Annual Report to Shareholders for the fiscal year
ended January 31, 1997. The referenced page of such annual report has been
filed as part of Exhibit 13 to this report. Such information is incorporated
herein by reference, pursuant to General Instruction G(2).
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this Item is incorporated herein by reference
to pages 11 through 17 of the Company's Annual Report to Shareholders for the
fiscal year ended January 31, 1997. The referenced pages of such annual report
have been filed as part of Exhibit 13 to this report. Such information is
incorporated herein by reference, pursuant to General Instruction G(2).
Item 8. Financial Statements and Supplementary Data
The information required by this Item is incorporated herein by reference
to pages 18 through 28 of the Company's Annual Report to Shareholders for the
fiscal year ended January 31, 1997. The referenced pages of such annual report
have been filed as part of Exhibit 13 to this report. Such information is
incorporated herein by reference, pursuant to General Instruction G(2).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On April 8, 1997, the Board of Directors of the Company, acting upon the
recommendation of its Audit Committee, determined not to engage Grant Thornton
LLP ("Grant Thornton") as the primary independent auditors of the Company for
the coming fiscal year ending January 31, 1998. The Board of Directors of the
Company, acting upon the recommendation of its Audit Committee, has appointed
Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as the primary independent
auditors of the Company for the coming fiscal year ending January 31, 1998.
Grant Thornton has been previously engaged to audit the Company's financial
statements for 7 years, including the fiscal year ended January 31, 1997, and
the termination of Grant Thornton's engagement will be effective upon the
effective date of a Registration Statement on Form S-3 with respect to the
resale by certain selling stockholders of approximately 335,000 of the total of
662,497 shares of common stock of the Company which were issued to the former
shareholders of New Ideas International, Inc. in connection with the Company's
December 1996 acquisition of New Ideas International, Inc. The Company expects
to file such Registration Statement on or about the date of the filing of this
Annual Report on Form 10-K.
Grant Thornton's report on the financial statements of the Company for the
fiscal years ended January 31, 1996 and January 31, 1997 did not contain any
adverse opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles. There were no disagreements
with Grant Thornton during the Company's fiscal years ended January 31, 1996 and
January 31, 1997 and through April 29, 1997 on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to
- 14 -
<PAGE>
Grant Thornton's satisfaction, would have caused or will cause Grant Thornton
to make reference to the subject matter of the disagreement(s) in connection
with its reports on the Company's financial statements.
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
The information required by Items 10 through 13 is included in the
Company's definitive proxy statement dated April 29, 1997, on pages 3 through
10. Such information is incorporated herein by reference, pursuant to General
Instruction G(3).
- 15 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1). Financial Statements
The following consolidated financial statements are contained on the
indicated pages of this report:
Page No.
--------
Report of Independent Certified Public Accountants.......... *
Statements:
Consolidated Balance Sheets............................. *
Consolidated Statements of Earnings..................... *
Consolidated Statements of Stockholders' Equity......... *
Consolidated Statements of Cash Flows................... *
Notes to Consolidated Financial Statements.............. *
__________
* Incorporated herein by reference to the appropriate portions of the
Company's Annual Report to Shareholders for the fiscal year ended
January 31, 1997. (See Part II.)
(a)(2). Financial Statement Schedules
The following financial statement schedule is contained on the indicated
pages of this report:
Page No.
--------
Report of Independent Certified Public Accountants.......... S-1
Allowance for Doubtful Receivables.......................... S-2
All other schedules are omitted because they are inapplicable or the
requested information is shown in the consolidated financial statements or
related notes.
(a)(3). Exhibits
Exhibit No. Description of Exhibit
- ------------- ----------------------
3.1* Restated Certificate of Incorporation of the Registrant
3.2* Restated By-laws of the Registrant
4.1*+ 1994 Employee Stock Option Plan of the Registrant
- 16 -
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
4.2*+ Form of Nontransferable Incentive Stock Option Agreement under the 1994 Employee Stock Option
Plan of the Registrant
4.3*+ Form of Nontransferable Non-Qualified Stock Option Agreement under the 1994 Employee Stock Option
Plan of the Registrant
4.4*+ 1994 Stock Option Plan for Non-Employee Directors of the Registrant
4.5*+ Form of Stock Option Agreement under the 1994 Stock Option Plan for Non-Employee Directors of the
Registrant
10.1* Amended and Restated Credit Agreement dated January 31, 1994, as amended, between Candle
Corporation Worldwide, Inc. and Harris Trust and Savings Bank, individually and as agent
10.1(a) Second Amendment, dated September 13, 1994, to Amended and Restated Credit Agreement dated
January 31, 1994, as amended, between Candle Corporation Worldwide, Inc. and Harris Trust and
Savings Bank, individually and as agent, and Bank of America Illinois (incorporated by reference
to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 1994)
10.1(b) Third Amendment, dated as of August 24, 1995, to Amended and Restated Credit Agreement, dated
January 31, 1994, as amended, between Candle Corporation Worldwide, Inc. and Harris Trust and
Savings Bank, individually and as agent, and the Bank of America Illinois (incorporated by
reference to Exhibit 10.1(b) to the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 31, 1995)
10.1(c) Fourth Amendment, dated as of July 18, 1996, to Amended and Restated Credit Agreement, dated
January 31, 1994, as amended, between Candle Corporation Worldwide, Inc. and Harris Trust and
Savings Bank, individually and as agent, and the Bank of America Illinois (incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 31, 1996)
10.2 Note Purchase Agreement, dated July 7, 1995, relating to the 7.54% Senior Notes due June 30,
2005, among Candle Corporation Worldwide, Inc., Candle Corporation of America, and PartyLite
Gifts, Inc., as Issuers, the Registrant, as guarantor, and the Purchasers named therein
(incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended July 31, 1995)
10.3 Master Equipment Lease Agreement between MetLife Capital, Limited Partnership, as lessor, and
Candle Corporation of America, as lessee (incorporated by reference to Exhibit 10.21 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1995)
10.4* Standard Form Industrial Lease dated April 22, 1993, between Carol Point Builders I General
Partnership and PartyLite Gifts, Inc.
10.4(a) First Amendment, dated August 21, 1995, between ERI-CP, Inc., a Delaware corporation, as
successor to Carol Point Builders I General Partnership, and PartyLite Gifts, Inc., to Standard
Form Industrial Lease dated April 22, 1993, between Carol Point Builders II General Partnership
and PartyLite Gifts, Inc. (incorporated by reference to Exhibit 10.4(a) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 31, 1996)
10.5* Lease dated February 1, 1994, between M&W Warehouse and Candle Corporation of America
10.6 First Amendment, dated March 1, 1995, to Lease between M&W Warehouse and Candle Corporation of
America (incorporated by reference to Exhibit 10.12(a) to the Registrant's Annual Report on Form
10-K for the fiscal year ended January 31, 1995)
</TABLE>
- 17 -
<PAGE>
<TABLE>
<C> <S>
10.7*+ Form of Indemnity Agreement between the Registrant and each of its directors
10.8 Lease, dated September 9, 1994, between Wegner Land & Development Corp. and Candle Corporation of
America (incorporated by reference to Exhibit 10.19 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 31, 1995)
10.9*+ Amended and Restated Stock Appreciation Unit Agreement originally dated as of September 10, 1992,
between the Registrant and Thomas K. Kreilick
11.** Statement regarding computation of per share earnings
13.** Annual Report to Shareholders for the fiscal year ended January 31, 1997 (Pages 1 and 10 through
28)
21.** List of Subsidiaries
23.** Consent of Grant Thornton LLP, independent certified public accountants
24.1** Power of Attorney
24.2** Certified Resolutions of the Board of Directors of the Registrant
27. Financial Data Schedule
</TABLE>
_________________________
* Included as an exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-77458) and incorporated herein by reference.
** Filed herewith.
+ Management contract or compensatory plan required to be filed by Item 14(c)
of this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended January 31, 1997.
- 18 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 29, 1997
BLYTH INDUSTRIES, INC.
By: /s/ ROBERT B. GOERGEN
--------------------------------------
Robert B. Goergen
Chairman, Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------------------ --------------------------------------- ----------------
<C> <S> <C>
/s/ ROBERT B. GOERGEN Chairman, Chief Executive Officer and
------------------------------------------- President; Director (Principal April 29, 1997
Robert B. Goergen Executive Officer)
/s/ HOWARD E. ROSE Vice President and Chief Financial
------------------------------------------- Officer (Principal Financial and April 29, 1997
Howard E. Rose Accounting Officer)
/s/ ROGER A. ANDERSON
------------------------------------------- Director April 29, 1997
Roger A. Anderson
/s/ JOHN W. BURKHART
------------------------------------------- Director April 29, 1997
John W. Burkhart
/s/ PAMELA M. GOERGEN
------------------------------------------- Director April 29, 1997
Pamela M. Goergen
/s/ NEAL I. GOLDMAN
------------------------------------------- Director April 29, 1997
Neal I. Goldman
/s/ ROGER H. MORLEY
------------------------------------------- Director April 29, 1997
Roger H. Morley
/s/ JOHN E. PRESCHLACK
------------------------------------------- Director April 29, 1997
John E. Preschlack
/s/ FREDERICK H. STEPHENS, JR.
------------------------------------------- Director April 29, 1997
Frederick H. Stephens, Jr.
</TABLE>
- 19-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Blyth Industries, Inc.
In connection with our audit of the consolidated financial statements of Blyth
Industries, Inc. and Subsidiaries referred to in our report dated March 28,
1997, which is included in the Annual Report to the Shareholders and
incorporated by reference in Part IV of this Form 10-K, we have also audited
Schedule II for each of the three years in the period ended January 31, 1997. In
our opinion, this schedule presents fairly, in all material respects the
information required to be set forth therein.
/s/ Grant Thornton LLP
--------------------------------------
Chicago, Illinois GRANT THORNTON LLP
March 28, 1997
S-1
<PAGE>
Blyth Industries, Inc.
SCHEDULE II -- ALLOWANCE FOR DOUBTFUL RECEIVABLES
For the years ended January 31, 1995, 1996 and 1997
(In thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End of
Description of Period Expenses Deductions Period
<S> <C> <C> <C> <C>
1995............................................................. 225 700 525 400
1996............................................................. 400 682 512 570
1997............................................................. 570 1,206 884 892
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page No.
- ------------- --------------------------------------------------------------------------------------- -----------
<C> <S> <C>
3.1* Restated Certificate of Incorporation of the Registrant
3.2* Restated By-laws of the Registrant
4.1*+ 1994 Employee Stock Option Plan of the Registrant
4.2*+ Form of Nontransferable Incentive Stock Option Agreement under the 1994 Employee Stock
Option Plan of the Registrant
4.3*+ Form of Nontransferable Non-Qualified Stock Option Agreement under the 1994 Employee
Stock Option Plan of the Registrant
4.4*+ 1994 Stock Option Plan for Non-Employee Directors of the Registrant
4.5*+ Form of Stock Option Agreement under the 1994 Stock Option Plan for Non-Employee
Directors of the Registrant
10.1* Amended and Restated Credit Agreement dated January 31, 1994, as amended, between
Candle Corporation Worldwide, Inc. and Harris Trust and Savings Bank, individually and
as agent
10.1(a) Second Amendment, dated September 13, 1994, to Amended and Restated Credit Agreement
dated January 31, 1994, as amended, between Candle Corporation Worldwide, Inc. and
Harris Trust and Savings Bank, individually and as agent, and Bank of America Illinois
(incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended October 31, 1994)
10.1(b) Third Amendment, dated as of August 24, 1995, to Amended and Restated Credit Agreement,
dated January 31, 1994, as amended, between Candle Corporation Worldwide, Inc. and
Harris Trust and Savings Bank, individually and as agent, and the Bank of America
Illinois (incorporated by reference to Exhibit 10.1(b) to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended July 31, 1995)
10.1(c) Fourth Amendment, dated as of July 18, 1996, to Amended and Restated Credit Agreement,
dated January 31, 1994, as amended, between Candle Corporation Worldwide, Inc. and
Harris Trust and Savings Bank, individually and as agent, and the Bank of America
Illinois (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended July 31, 1996)
10.2 Note Purchase Agreement, dated July 7, 1995, relating to the 7.54% Senior Notes due
June 30, 2005, among Candle Corporation Worldwide, Inc., Candle Corporation of America,
and PartyLite Gifts, Inc., as Issuers, the Registrant, as guarantor, and the Purchasers
named therein (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended July 31, 1995)
10.3 Master Equipment Lease Agreement between MetLife Capital, Limited Partnership, as
lessor, and Candle Corporation of America, as lessee (incorporated by reference to
Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
January 31, 1995)
10.4* Standard Form Industrial Lease dated April 22, 1993, between Carol Point Builders I
General Partnership and PartyLite Gifts, Inc.
10.4(a) First Amendment, dated August 21, 1995, between ERI-CP, Inc., a Delaware corporation,
as successor to Carol Point Builders I General Partnership, and PartyLite Gifts, Inc.,
to Standard Form Industrial Lease dated April 22, 1993, between Carol Point Builders II
General Partnership and PartyLite Gifts, Inc. (incorporated by reference to Exhibit
10.4(a) to the
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
Registrant's Annual Report on Form 10-K for the fiscal year ended
January 31, 1996)
10.5* Lease dated February 1, 1994, between M&W Warehouse and Candle Corporation of America
10.6 First Amendment, dated March 1, 1995, to Lease between M&W Warehouse and Candle
Corporation of America (incorporated by reference to Exhibit 10.12(a) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1995)
10.7*+ Form of Indemnity Agreement between the Registrant and each of its directors
10.8 Lease, dated September 9, 1994, between Wegner Land & Development Corp. and Candle
Corporation of America (incorporated by reference to Exhibit 10.19 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 31, 1995)
10.9*+ Amended and Restated Stock Appreciation Unit Agreement originally dated as of September
10, 1992, between the Registrant and Thomas K. Kreilick
11.** Statement regarding computation of per share earnings
13.** Annual Report to Shareholders for the fiscal year ended January 31, 1997 (Pages 1 and
10 through 28)
21.** List of Subsidiaries
23.** Consent of Grant Thornton LLP, independent certified public accountants
24.1** Power of Attorney
24.2** Certified Resolutions of the Board of Directors of the Registrant
27. Financial Data Schedule
</TABLE>
- ------------------------
* Included as an exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-77458) and incorporated herein by reference.
** Filed herewith.
+ Management contract or compensatory plan required to be filed by Item 14(c)
of this report.
<PAGE>
Exhibit 11
Blyth Industries, Inc.
Computations of Earnings Per Common Share
(In thousands except per share data)
I. Twelve months ended January 31: 1996 1997
------ ------
Average number of shares outstanding during the
period 28,889 30,788
Common equivalent shares:
Shares issuable under outstanding options
which are dilutive 434 566
Shares which could have been purchased based
upon the market value for the period 243 231
------ ------
191 335
------ ------
Weighted average number of common
and common equivalent shares outstanding 29,080 31,123
Net earnings $24,024 $40,137
Earnings per common and common equivalent share $0.83 $1.29
II. Three months ended January 31:
Average number of shares outstanding during the
period 30,706 30,912
Common equivalent shares:
Shares issuable under outstanding options which
are dilutive 484 619
Shares which could have been purchased based
upon the market value for the period 223 298
------ ------
261 321
------ ------
Weighted average number of common
and common equivalent shares outstanding 30,967 31,233
Net earnings $7,042 $12,027
Earnings per common and common equivalent share $0.23 $0.39
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
Years ended January 31, %
(In thousands, except per share data) 1996 1997 Increase
- --------------------------------------------------------------------------------
Operating Results
Net Sales $331,341 $495,702 50%
Gross Profit 175,382 271,727 55%
Operating Profit 40,620 68,470 69%
Net Earnings 24,024 40,137 67%
Net Earnings Per Common and
Common Equivalent Share (1) $0.83 $1.29 55%
Weighted Average Number of
Shares Outstanding (1) 29,080 31,123
Financial Position
Total Assets $214,722 $287,312
Total Debt 28,018 33,647
Total Stockholders' Equity 143,354 188,074
Market for Common Stock (1)
- --------------------------------------------------------------------------------
The price range for the Company's Common Stock on the New York Stock Exchange as
reported by the New York Stock Exchange was as follows:
Fiscal 1996
(ended January 31, 1996)
High Low
- --------------------------------------------------------------------------------
First Quarter $15 1/8 $13 5/8
Second Quarter $24 1/8 $13 3/4
Third Quarter $25 3/4 $21 3/4
Fourth Quarter $29 3/4 $24 1/2
Fiscal 1997
(ended January 31, 1997)
High Low
- --------------------------------------------------------------------------------
First Quarter $39 3/4 $28 1/8
Second Quarter $49 3/4 $39 3/8
Third Quarter $50 3/4 $37
Fourth Quarter $46 5/8 $33 5/8
Fiscal 1998
(ending January 31, 1998)
High Low
- --------------------------------------------------------------------------------
First Quarter (through March 27, 1997) $38 7/8 $31 5/8
(1) Reflects the two-for-one stock split effected as a stock dividend, declared
by the Board of Directors on December 1, 1995.
Net Sales
(In Millions)
Fiscal 1993 $116.1
Fiscal 1994 157.5
Fiscal 1995 214.8
Fiscal 1996 331.3
Fiscal 1997 495.7
Operating Profit
(In Millions)
Fiscal 1993 $ 11.2
Fiscal 1994 16.3
Fiscal 1995 22.7
Fiscal 1996 40.6
Fiscal 1997 68.5
Net Earnings
(In Millions)
Fiscal 1993 $ 5.9
Fiscal 1994 9.1
Fiscal 1995 13.3
Fiscal 1996 24.0
Fiscal 1997 40.1
1
<PAGE>
Selected Consolidated Financial Data
- --------------------------------------------------------------------------------
Set forth below are selected summary consolidated financial and operating data
of the Company for fiscal years 1993 through 1997, which have been derived from
the Company's audited financial statements for those years. The information
presented below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements, including the notes thereto, appearing
elsewhere in this annual report to shareholders.
<TABLE>
<CAPTION>
Years ended January 31,
- -----------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
(In thousands, except per share and percent data)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Net Sales $116,138 $157,495 $214,826 $331,341 $495,702
Gross profit 52,529 75,276 108,059 175,382 271,727
Operating profit 11,158 16,267 22,701 40,620 68,470
Interest expense 1,436 1,379 736 1,614 2,364
Earnings before
income taxes
and minority interest 9,722 15,027 22,298 40,460 67,552
Earnings before
minority interest 5,982 9,072 13,333 24,401 40,331
Net earnings 5,982 9,072 13,333 24,024 40,137
Earnings per
common share (1) 0.25 0.38 0.50 0.83 1.29
Weighted average number
of common shares
outstanding (1) 24,032 24,146 26,970 29,080 31,123
Operating Data:
Gross profit margin 45.2% 47.8% 50.3% 52.9% 54.8%
Operating profit
margin 9.6% 10.3% 10.6% 12.2% 13.8%
Capital expenditures $ 4,463 $ 6,761 $ 10,315 $ 35,426 $ 49,620
Depreciation and
amortization 1,941 2,440 2,744 4,398 8,479
Balance Sheet Data:
Working capital $ 13,926 $ 14,735 $ 41,630 $ 107,038 $ 107,079
Total assets 49,415 66,047 95,996 214,722 287,312
Total debt 16,861 25,895 2,724 28,018 33,647
Total stockholders'
equity 18,073 19,629 63,822 143,354 188,074
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Restated for December 1995 two-for-one stock split effected as a stock
dividend. Earnings per common share for fiscal 1995 and fiscal 1996 reflects the
issuance of 4,000,000 shares of Common Stock as part of the Company's initial
public offering in May 1994 and the issuance of 2,400,000 shares of Common Stock
in a secondary offering in October 1995, respectively. Earnings per common share
for all periods gives effect to the issuance of 1,999,872 shares of Common Stock
upon conversion of certain convertible notes in April 1994. Earnings per common
share for the applicable periods also includes results of operations of Aromatic
Industries, Inc., which was acquired in March 1992, the Company's equity in
earnings from its investments in Colony Gift Corporation Ltd. in September 1993
and March 1995, results of operations of Jeanmarie Creations, Inc., 84% owned,
of which 80% was acquired in April 1995 and 4% was acquired in May 1996, the
results of operations from the Company's acquisition of 75% ownership in Eclipse
Candles, Ltd. in July 1995 and October 1996, and partial results of operations
of New Ideas International, Inc. which was acquired in December 1996, none of
which had a material effect on the Company's results of operations in the period
during which they occurred, or thereafter.
10
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
Results of Operations
The following table sets forth, for the periods indicated, the percentage
relationship to net sales, and the percentage increase, of certain items
included in the Company's consolidated statements of earnings:
<TABLE>
<CAPTION>
Increase from Prior Period
Percentage of Net Sales ---------------------------
Years Ended January 31, Fiscal 1996 Fiscal 1997
------------------------ Compared to Compared to
1995 1996 1997 Fiscal 1995 Fiscal 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 54.2% 49.6%
Cost of goods sold 49.7 47.1 45.2 46.1 43.6
Gross profit 50.3 52.9 54.8 62.3 54.9
Selling and shipping 30.3 31.7 32.2 61.1 52.3
Administrative 9.4 9.0 8.8 47.4 45.6
Operating profit 10.6 12.2 13.8 78.9 68.6
Net earnings 6.2 7.3 8.1 80.2 67.1
</TABLE>
Fiscal 1997 Compared to Fiscal 1996
Net sales increased $164.4 million, or 49.6%, from $331.3 million in fiscal 1996
to $495.7 million in fiscal 1997. Virtually all of this increase was
attributable to unit growth in sales of the Company's consumer scented candles
and candle accessories in the United States, Canada and Europe. Several factors
contributed to the increase in unit sales. Sales to new customers continued to
represent at least 50% of the net sales increase. The increase in sales to new
domestic customers was attributable to improved penetration of existing channels
of distribution and to geographic expansion in the United States, particularly
by the Company's direct selling activities. In addition, the Company was able to
increase sales to existing customers, particularly mass merchandisers and
specialty chains, and to a lesser extent, department and gift stores.
Sales of Ambria, the Company's new line of coordinated home fragrance and
decorative lighting products, contributed to the increase in sales. This
coordinated line replaced certain single product lines such as Old Harbor and
Aromatic's, while generally increasing sales in the same shelf space. Sales to
Hallmark Gold Crown Stores also contributed, to a lesser extent, to the increase
in domestic sales. In fiscal 1996 the Company did not have a strategic
partnering arrangement with Hallmark Cards, Incorporated. For fiscal 1997,
international net sales (which accounted for 15% of net sales, compared to 11%
in fiscal 1996) continued to grow at a substantially higher rate than domestic
sales.
Sales of scented candles and accessories, which are typically higher gross
profit margin products, also continued to grow at a substantially faster rate
than unscented products. Consumable products (which consist of candles,
citronella candles and potpourri) accounted
11
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
Results of Operations
(continued)
for approximately 65% of the Company's net sales for fiscal 1997, down from 70%
of net sales in fiscal 1996. Candle accessories continued to account for the
balance of net sales.
Gross profit increased $96.3 million, or 54.9%, from $175.4 million in
fiscal 1996 to $271.7 million in fiscal 1997. Gross profit margin increased from
52.9% for fiscal 1996 to 54.8% for fiscal 1997. Such increases were due, in
substantial part, to the continued increased sales of the Company's products to
the consumer market, which products generally carry higher gross profit margins
than the Company's other products, as well as to the continued shift in the mix
of the Company's products for the consumer market to a greater percentage of
higher gross profit margin products, such as scented candles and candle
accessories. As in fiscal 1996, manufacturing efficiencies due to higher unit
volume and process technology improvements continued to have a favorable impact
on gross profit margins.
Selling and shipping expense increased $54.9 million, or 52.3%, from $104.9
million in fiscal 1996 (31.7% of net sales), to $159.8 million in fiscal 1997
(32.2% of net sales). Selling and shipping expense consists of advertising,
sales commissions, printed promotional materials and business development costs,
all of which were higher due to increased sales to the consumer market,
particularly sales through the Company's direct selling activities, in which
sales expenses, as a percentage of sales, are relatively higher. In addition,
the Company's consumer products generally require a higher level of product
development and sales and marketing expense than the Company's food service and
religious products.
Administrative expense increased $13.6 million, or 45.6%, from $29.8 million
in fiscal 1996 (9.0% of net sales) to $43.4 million in fiscal 1997 (8.8% of net
sales). Such increases were a result of increases in personnel (from
approximately 314 administrative employees at January 31, 1996 to approximately
364 administrative employees at January 31, 1997), substantially improved
information and data processing capabilities (including increases in order
processing personnel) and increases in leased and owned office space. In
connection with anticipated growth in its consumer product sales, which
generally require somewhat greater administrative expenditures, the Company
expects further increases in administrative expenses due to expected increases
in the number of employees. The Company also expects additional infrastructure
spending associated with improvements in information and administrative support
systems.
12
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
Results of Operations
(continued)
Interest expense increased $0.8 million, or 50%, from $1.6 million in fiscal
1996 to $2.4 million in fiscal 1997. Interest expense was generally higher as a
result of the issuance by certain of the Company's subsidiaries of $25.0 million
aggregate principal amount of Senior Notes in July 1995. See "--Liquidity and
Capital Resources".
Income tax expense increased $11.1 million, or 68.9%, from $16.1 million in
fiscal 1996 to $27.2 million in fiscal 1997. The effective income tax rate was
approximately 40.0% for fiscal 1996 and fiscal 1997.
As a result of the foregoing, net earnings increased $16.1 million, or
67.1%, from $24.0 million in fiscal 1996 to $40.1 million in fiscal 1997.
Fiscal 1996 Compared to Fiscal 1995
Net sales increased $116.5 million, or 54.2%, from $214.8 million in fiscal 1995
to $331.3 million in fiscal 1996. Substantially all of this increase was
attributable to unit growth in sales of the Company's consumer scented candles
and candle accessories in the United States, Canada and Europe. International
sales, including sales in Canada, grew at a faster rate than the Company as a
whole, and accounted for approximately 18% of the net sales increase, and
international sales accounted for 10.6% of total net sales for fiscal 1996.
Sales of scented candles and candle accessories continued to grow at a
substantially faster rate than unscented products. As in prior years, consumable
products accounted for approximately 70% of the Company's net sales for fiscal
1996. Candle accessories continued to account for the balance of net sales.
Gross profit increased $67.3 million, or 62.3%, from $108.1 million in
fiscal 1995 to $175.4 million in fiscal 1996. Gross profit margin increased from
50.3% for fiscal 1995 to 52.9% for fiscal 1996. Such increases were due, in
substantial part, to the continued increased sales of the Company's products to
the consumer market. Because customer sales demand, particularly demand by
customers purchasing through the Company's home party plan direct selling
activities, was greater than anticipated, additional shipping and distribution
expenses were incurred in the first half of fiscal 1996 in order to fulfill
customer orders, especially orders for candle accessories, in a timely manner.
Gross profit was not materially affected by the acquisition of 80% of the
capital stock of Jeanmarie Creations, Inc. on April 25, 1995.
13
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
Results of Operations
(continued)
Selling and shipping expense increased $39.8 million, or 61.1%, from $65.1
million in fiscal 1995 (30.3% of net sales), to $104.9 million in fiscal 1996
(31.7% of net sales).
Administrative expense increased $9.6 million, or 47.4% from $20.2 million
in fiscal 1995 (9.4% of net sales) to $29.8 million in fiscal 1996 (9.0% of net
sales). Such increases were a result of increases in personnel (from
approximately 185 administrative employees at January 31, 1995 to approximately
314 administrative employees at January 31, 1996), substantially improved
information and data processing capabilities and increases in leased and owned
office space.
Interest expense increased $0.9 million, or 119.3%, from $0.7 million in
fiscal 1995 to $1.6 million in fiscal 1996. See "--Liquidity and Capital
Resources". A portion of the proceeds of the Company's secondary offering of
common stock in October 1995 was used to repay all then-outstanding indebtedness
under the Company's credit facility, resulting in lower interest expense related
to the Company's credit facility in fiscal 1996.
Income tax expense increased $7.1 million, or 79.1%, from $9.0 million in
fiscal 1995 to $16.1 million in fiscal 1996. The effective income tax rate was
approximately 40.0% for fiscal 1995 and fiscal 1996.
- --------------------------------------------------------------------------------
Seasonality
Approximately 40% of the Company's annual net sales typically occur in the first
and second fiscal quarters of the fiscal year, with the larger balance
experienced in the third and fourth fiscal quarters, generally due to consumer
buying patterns. The Company's net sales are strongest in the third and fourth
fiscal quarters due to increased shipments to meet year-end holiday season
demand for the Company's products. In addition, during the third and fourth
fiscal quarters, the mix of products shipped by the Company shifts to a greater
percentage of higher gross profit margin products. Emphasis is placed on sales
of the Company's outdoor citronella candles in the first half of the fiscal
year. In fiscal 1996 and 1997, the majority of the Company's outdoor citronella
candles were shipped in the first and second fiscal quarters. Operating profit
largely follows these patterns, although a somewhat larger portion of the
Company's annual operating profit is earned in the second half of the fiscal
year.
14
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
Liquidity and
Capital Resources
Operating assets and liabilities increased from January 31, 1996 to January 31,
1997 due to the Company's internally generated growth. Inventory increased from
$73.2 million at January 31, 1996 to $103.1 million at January 31, 1997. This
growth was primarily attributable to increases to meet current and anticipated
demand and, to a lesser extent, increases in inventory attributable to the
acquisition of New Ideas International and the addition of Eclipse Candles as a
consolidated subsidiary. However, sales growth in the fourth quarter increased
at a faster rate than growth in inventory. As a result, measured in terms of
number of days' worth of cost of goods sold, inventory decreased from 169 days'
worth of inventory at the end of fiscal 1996 to 166 days' worth of inventory at
the end of fiscal 1997. The Company expects to manage its inventory in the
ordinary course to meet increased demand and to improve customer service.
Accounts receivable increased $10.1 million, or 40.6%, from $24.9 million at the
end of fiscal 1996 to $35.0 million at the end of fiscal 1997. Such increase is
due to normal seasonal fluctuation, expanded sales and the inclusion of New
Ideas International and Eclipse Candles. Accounts payable and accrued expenses
increased $19.9 million, or 52.5%, from $37.9 million at the end of fiscal 1996
to $57.8 million at the end of fiscal 1997. The increase in accounts payable and
accrued expenses is attributable to the increases in operating assets and the
Company's overall growth.
Capital expenditures for property, plant and equipment were $49.6 million in
fiscal 1997. Capital expenditures were primarily investments in new plant and
equipment and improvements to existing plant and equipment, including
approximately $15.0 million used for a new 400,000 square foot distribution
facility in Elkin, North Carolina, approximately $20.0 million used for
machinery and equipment, including machinery and equipment for the new
facilities and upgrades to machinery and equipment in existing facilities, and
approximately $7.0 million used for information systems and office expansion.
The Company announced the groundbreaking of its new candle manufacturing
facility in Cumbria, England, for which net capital expenditures are expected to
total approximately $15.0 million, with $5.0 million and $10.0 million of this
spending occurring in fiscal 1997 and fiscal 1998, respectively. In addition,
during fiscal 1998, the Company expects that it will be required to make further
substantial capital expenditures for office expansion, increases in machinery
and equipment, and increased manufacturing and distribution capacity.
15
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
Liquidity and
Capital Resources
(continued)
The Company has grown in part through acquisitions and, as part of its
growth strategy, the Company expects to continue from time to time in the
ordinary course of its business to evaluate and pursue opportunities to acquire
other companies, assets and product lines that either complement or expand its
existing business. The Company expects to effect one or more such acquisitions
in the next twelve months. In 1997, the Company expended an aggregate of $7.4
million (net of cash acquired) in connection with its acquisition of a product
line from Hallmark Cards, Incorporated, the Company's increase in equity
ownership in Eclipse Candles and the December 31, 1996 acquisition of New Ideas
International (a transaction in which the Company issued 662,497 shares of its
Common Stock as consideration). The acquisition of New Ideas International has
been accounted for as a pooling-of-interests. On March 25, 1997, the Company
entered into an agreement to acquire Endar Corp., a manufacturer of potpourri,
scented candles and other fragrance products. The Company expects to issue
shares of its Common Stock in the transaction. The transaction is subject to
satisfaction of certain conditions and is anticipated to be consummated prior to
the end of June 1997.
The Company's primary capital requirements are for working capital to fund
the increased inventory and accounts receivable required to sustain the
Company's sales growth and for capital expenditures (including capital
expenditures related to planned facilities expansion) and expenditures in
connection with its pending acquisition. In fiscal 1997, the Company entered
into a $20.0 million unsecured credit facility in order to finance the
construction and equipment associated with the new Elkin, North Carolina
distribution facility. This credit facility will convert into an amortizing term
loan which will be payable over a seven-year period ending in 2005. In April
1997, the Company entered into a $15.0 million, pound-denominated, unsecured
credit facility in order to finance the construction and equipment associated
with the new U.K. candle manufacturing facility. This credit facility will
convert into an amortizing term loan which will be payable over a seven-year
period ending in 2005.
In July 1996, the Company extended and improved the terms of its credit
facility (the "Credit Facility") with Harris Trust and Savings Bank ("Harris")
and the Bank of America Illinois (together with Harris, the "Banks") through
July 21, 1998. Pursuant to the Credit Facility the Banks have agreed, subject to
certain conditions, to provide an unsecured
16
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
Liquidity and
Capital Resources
(continued)
revolving credit facility to the Company in an aggregate amount of up to $21.0
million to fund ongoing working capital requirements, letter of credit
requirements and general corporate purposes of the Company. Amounts which may be
outstanding under the Credit Facility bear interest, at the Company's option, at
Harris' prime rate (8.25% at January 31, 1997) or at LIBOR plus 0.40%. In
connection with the Credit Facility, the Company pays a commitment fee of 0.125%
per annum on the unused portion of the revolving credit facility. The Credit
Facility contains standard covenants, including maintenance of certain financial
ratios and limitations on certain restricted payments, including dividends. The
Company does not believe that such covenants will have a material adverse effect
on its operations.
Net cash provided by operating activities amounted to $33.3 million in
fiscal 1997, an improvement of $28.7 million when compared to $4.6 million in
fiscal 1996. At January 31, 1997, no principal amount was outstanding under the
Credit Facility, but approximately $1.8 million face amount of letters of credit
were outstanding under the Credit Facility.
The $25.0 million of Senior Notes issued by certain subsidiaries in 1995 are
guaranteed by the Company and substantially all of the Company's subsidiaries.
The Note Purchase Agreement governing the sale of such Senior Notes contains
standard covenants, including maintenance of certain financial ratios. The
Company does not believe that such covenants will have a material adverse effect
on its operations. A significant portion of the proceeds of the Senior Notes was
used to finance a portion of the Company's facilities expansion.
The Company believes that its cash from operations and available borrowings
under the Credit Facility (and any refinancing thereof), and the North Carolina
and U.K. credit facilities, will be sufficient to fund its operating
requirements, capital expenditures and all other obligations for fiscal 1998 and
fiscal 1999.
17
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
January 31, (In thousands, except share data) 1996 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 46,509 $ 27,832
Accounts receivable, less allowance for doubtful receivables
of $570 in 1996 and $892 in 1997 24,889 35,002
Inventories 73,176 103,054
Prepaid expenses 288 237
Deferred income taxes 600 1,000
- -----------------------------------------------------------------------------------------
Total current assets 145,462 167,125
Property, Plant and Equipment - At Cost
Land and buildings 23,484 25,951
Leasehold improvements 2,026 2,797
Machinery and equipment 43,625 66,945
Office furniture and data processing equipment 10,054 17,147
Construction in progress -- 20,300
- -----------------------------------------------------------------------------------------
79,189 133,140
Less accumulated depreciation and amortization 21,030 29,589
- -----------------------------------------------------------------------------------------
58,159 103,551
Other Assets
Investments 6,586 4,991
Excess of cost over fair value of assets acquired, net of
accumulated amortization of $207 in 1996 and $1,493 in 1997 3,925 11,146
Deposits 590 499
- -----------------------------------------------------------------------------------------
11,101 16,636
- -----------------------------------------------------------------------------------------
$214,722 $ 287,312
=========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 514 $ 1,689
Accounts payable 18,856 34,202
Accrued expenses 18,961 23,554
Income taxes 93 601
- -----------------------------------------------------------------------------------------
Total current liabilities 38,424 60,046
Deferred Income Taxes 3,000 4,900
Long-Term Debt, less current maturities 27,504 31,958
Commitments -- --
Excess Of Fair Value Over Cost Of Assets Acquired,
net of accumulated amortization of $451 in 1996
and $571 in 1997 953 833
Minority Interest 1,487 1,501
Stockholders' Equity
Preferred stock - authorized, 10,000,000 shares of $0.01
par value; no shares issued and outstanding -- --
Common stock - authorized, 100,000,000 shares of $0.02
par value; issued and outstanding, 30,707,220 shares in 1996
and 31,419,768 shares in 1997 614 628
Additional contributed capital 86,701 87,338
Retained earnings 56,039 100,108
- -----------------------------------------------------------------------------------------
143,354 188,074
- -----------------------------------------------------------------------------------------
$214,722 $ 287,312
=========================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE>
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
January 31, (In thousands, except per share data) 1995 1996 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $214,826 $331,341 $495,702
Cost of goods sold 106,767 155,959 223,975
- -----------------------------------------------------------------------------------------
Gross profit 108,059 175,382 271,727
Selling and shipping 65,131 104,944 159,846
Administrative 20,227 29,818 43,411
- -----------------------------------------------------------------------------------------
85,358 134,762 203,257
- -----------------------------------------------------------------------------------------
Operating profit 22,701 40,620 68,470
Other expense (income)
Interest expense 736 1,614 2,364
Interest income (73) (805) (872)
Equity in earnings of investees (260) (649) (574)
- -----------------------------------------------------------------------------------------
403 160 918
- -----------------------------------------------------------------------------------------
Earnings before income taxes and minority interest 22,298 40,460 67,552
Income tax expense 8,965 16,059 27,221
- -----------------------------------------------------------------------------------------
Earnings before minority interest 13,333 24,401 40,331
Minority interest -- 377 194
- -----------------------------------------------------------------------------------------
Net earnings $13,333 $24,024 $40,137
=========================================================================================
Net earnings per common and
common equivalent share $ 0.50 $ 0.83 $ 1.29
=========================================================================================
Weighted average number of shares outstanding 26,970 29,080 31,123
=========================================================================================
The accompanying notes are an integral part of these statements.
Consolidated Statements of Stockholders' Equity
<CAPTION>
- -----------------------------------------------------------------------------------------
January 31, (In thousands, except share data)
- -----------------------------------------------------------------------------------------
Common stock Additional
Number contributed Retained
of shares Amount capital earnings Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at February 1, 1994 22,191,540 $222 $ 418 $ 18,989 $ 19,629
Net earnings for the year -- -- -- 13,333 13,333
Common stock issued upon conversion
of convertible subordinated
promissory notes 1,999,872 20 980 -- 1,000
Common stock issued upon completion
of initial public offering 4,000,000 40 29,820 --- 29,860
- -----------------------------------------------------------------------------------------
Balance at January 31, 1995 28,191,412 282 31,218 32,322 63,822
Net earnings for the year -- -- -- 24,024 24,024
Common stock issued
in connection with acquisition 99,808 1 1,403 -- 1,404
Common stock issued in connection
with exercise of stock options 16,000 1 131 -- 132
Common stock issued upon completion
of secondary public offering 2,400,000 23 53,949 -- 53,972
Common stock issued in connection
with 2 for 1 stock split
in the form of a dividend -- 307 -- (307) --
- -----------------------------------------------------------------------------------------
Balance at January 31, 1996 30,707,220 614 86,701 56,039 143,354
Net earnings for the year -- -- -- 40,137 40,137
Common stock issued in connection
with acquisition 662,497 13 -- 3,932 3,945
Common stock issued in connection
with exercise of stock options
and other 50,051 1 637 -- 638
- -----------------------------------------------------------------------------------------
Balance at January 31, 1997 31,419,768 $628 $87,338 $100,108 $ 188,074
=========================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
January 31, (In thousands) 1995 1996 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 13,333 $ 24,024 $ 40,137
Adjustments to reconcile net earnings
to net cash provided
by operating activities:
Depreciation and amortization 2,744 4,398 8,479
Deferred income taxes 400 1,100 1,500
Equity in earnings of investees (260) (649) (574)
Minority interest -- 377 194
Changes in operating assets and liabilities, net
of effect of business
acquisition:
Accounts receivable (7,536) (73) (7,639)
Inventories (6,353) (34,526) (26,023)
Prepaid expenses 67 (181) 53
Other assets (65) (252) 127
Accounts payable 3,331 4,896 12,184
Accrued expenses 5,137 5,943 4,308
Income taxes (24) (463) 549
- -----------------------------------------------------------------------------------------
Total adjustments (2,559) (19,430) (6,842)
- -----------------------------------------------------------------------------------------
Net cash provided by operating activities 10,774 4,594 33,295
Cash flows from investing activities:
Purchases of property, plant and equipment (10,315) (35,426) (49,620)
Investments in investees -- (3,270) --
Purchase of businesses, net of cash acquired -- (7,116) (7,435)
- -----------------------------------------------------------------------------------------
Net cash used in investing activities (10,315) (45,812) (57,055)
Cash flows from financing activities:
Proceeds from issuance of common stock 29,860 54,104 576
Borrowings from bank line of credit 24,000 44,015 28,395
Repayments on bank line of credit (35,600) (44,015) (28,395)
Proceeds from issuance of long-term debt -- 25,000 5,000
Payments on long-term debt (10,571) (458) (493)
- -----------------------------------------------------------------------------------------
Net cash provided by financing activities 7,689 78,646 5,083
- -----------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 8,148 37,428 (18,677)
Cash and cash equivalents at beginning of year 933 9,081 46,509
- -----------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 9,081 $ 46,509 $ 27,832
=========================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 864 $ 1,439 $ 2,123
Income taxes, net of refunds 8,584 15,989 24,968
</TABLE>
See Note B for non-cash investing and financing activities.
The accompanying notes are an integral part of these statements.
20
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note A
Summary of Significant Accounting Policies
The Company, which operates in a single industry, designs, manufactures, markets
and distributes an extensive line of candles and home fragrance products
including scented candles, outdoor citronella candles, potpourri and auto
fragrance products and markets a broad range of related candle accessories and
decorative gift bags.
A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows.
Principles of Consolidation
The consolidated financial statements include the accounts of Blyth Industries,
Inc. and its wholly-owned subsidiary, Candle Corporation Worldwide, Inc. and its
direct and indirect subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Credit Concentration
The Company's credit sales are principally to department and gift stores, mass
merchandisers and distributors who purchase the Company's products for resale.
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral. The Company makes provisions for estimated credit
losses.
Foreign Currency Translation
All balance sheet accounts of foreign operations are translated into U.S.
dollars at the year-end rate of exchange, and statement of earnings items are
translated at the weighted average exchange rates for the period. The effect of
the foreign currency translation on the financial statements presented was not
material.
Forward Foreign Exchange Contracts
The Company enters into forward foreign exchange contracts to reduce the impact
of foreign currency fluctuations on committed capital expenditures and on
Canadian operations. The gains and losses on these contracts are included in
earnings in the period in which the contracts are settled.
Fair Value of Financial Instruments
The Company's financial instruments include cash and cash equivalents,
cost-basis investments, and long-term debt. The carrying value of the cash and
cash equivalents and long-term debt approximates their estimated fair values.
Management believes the estimated fair value of the cost-basis investments
approximates their carrying values, although there can be no assurances that
this is the case.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined by the
first-in, first-out method. The elements of cost are material, labor and factory
overhead.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are provided principally by use
of the straight-line method for financial reporting purposes. The straight-line
method and accelerated methods are used for income tax reporting purposes.
Leasehold improvements are amortized over the lives of the respective leases or
the service lives of the improvements, whichever is shorter.
21
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note A
Summary of Significant Accounting Policies
(continued)
The principal estimated lives used in determining depreciation and amortization
are as follows:
Buildings........................................................27 to 40 years
Leasehold improvements............................................5 to 10 years
Machinery and equipment...........................................5 to 12 years
Office furniture and data processing equipment.....................5 to 7 years
Excess of Cost Over Fair Value of Assets Acquired
The excess of costs of the acquisitions over the value of identifiable assets
acquired less liabilities assumed is being amortized on a straight-line basis,
over 15 years. On an ongoing basis, management reviews the valuation and
amortization of the intangible assets to determine possible impairment by
comparing the carrying value to the undiscounted future cash flows of the
related assets.
Excess of Fair Value Over Cost of Assets Acquired
The excess of fair value of assets acquired over their cost is amortized on a
straight-line basis over 12 years.
Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and income tax purposes, based upon enacted tax rates in effect for the
periods the taxes are expected to be recoverable (payable).
Revenue Recognition
Revenue is recognized at the time of shipment of the Company's products.
Earnings per Common and Common Equivalent Share
In connection with the Company's initial public offering, on March 28, 1994
the Board of Directors and shareholders approved a change in the Company's
common stock to increase the authorized shares to 100,000,000 and to effect a
14 for 1 stock split. In December 1995, the Company effected a two-for-one
stock split in the form of a stock dividend. All share quantities, per share
amounts, and option data have been retroactively restated to reflect these
stock splits.
Earnings per common and common equivalent share are computed based upon the
weighted average number of shares outstanding during each year, which includes
outstanding options for common stock, when dilutive.
- --------------------------------------------------------------------------------
Note B
Business Acquisitions
In March 1995, the Company purchased an additional 25% of the issued and
outstanding capital stock of Colony Gift Corporation Ltd., a European candle
manufacturer, for approximately $1,400,000 cash and 99,808 shares of the
Company's common stock. In a prior year, the Company had acquired 25% of this
investee. Under the purchase agreement, the Company has the option to acquire up
to 100% of the stock of this investee in 25% increments, at certain dates
through June 1, 2007, at prices determined pursuant to the agreement. In
addition, the shareholders of the investee have the option to buy back shares
from the Company in the event the Company does not exercise its purchase option.
The investment is recorded under the equity method of accounting. Accordingly,
the Company has recognized its share of earnings in this investee from the dates
of acquisition.
In April, 1995, the Company acquired 80% of the issued and outstanding capital
stock of Jeanmarie Creations, Inc., a decorative gift bag company, for
approximately $7,116,000 (net of cash acquired). During May 1996, the Company
increased its investment by an additional 4%. Under the purchase and sale
agreements, the Company has the option to acquire, and in certain circumstances,
may be required to acquire, the remaining 16% of common stock at prices set
forth in the agreements.
22
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note B
Business Acquisitions
(continued)
In July 1995, the Company acquired 50% of the issued and outstanding
capital stock of Eclipse Candles, Ltd., another European candle manufacturer,
for approximately $1,450,000 cash. In October 1996, the Company increased its
investment by an additional 25%.
In February 1996, the Company purchased from Hallmark Cards, Incorporated the
Canterbury candle product line and related candle manufacturing equipment for
approximately $8,400,000 cash. Under the terms of the purchase agreement, the
Company will work jointly with Hallmark as a preferred vendor in the
merchandising and distribution of the Company's candles and candle accessories
through various outlets which carry Hallmark candles.
The foregoing acquisitions have been recorded under the purchase method of
accounting. The results of operations prior to acquisitions were not material.
In December 1996, the Company issued 662,497 shares of its common stock in
exchange for all of the outstanding capital stock of New Ideas International,
Inc. (New Ideas), a manufacturer of home and auto fragrance products. This
transaction was accounted for as a pooling of interests. Since the aggregated
historical operations of New Ideas prior to the date of combination were not
material to the Company's consolidated results of operations and financial
position, prior period financial statements have not been restated.
- --------------------------------------------------------------------------------
Note C
Geographic Information
Information about the Company's operations in different geographic areas follows
(in thousands):
Years ended January 31, United States International Total
- --------------------------------------------------------------------------------
Net sales
1995 $201,200 $ 13,626 $214,826
1996 296,325 35,016 331,341
1997 421,640 74,062 495,702
Net earnings (loss)
1995 13,915 (582) 13,333
1996 23,361 663 24,024
1997 38,137 2,000 40,137
Identifiable assets
1995 92,955 3,041 95,996
1996 205,413 9,309 214,722
1997 258,479 28,833 287,312
- --------------------------------------------------------------------------------
Note D
Inventories
The major components of inventories are as follows (in thousands):
1996 1997
- --------------------------------------------------------------------------------
Raw materials $10,433 $ 13,170
Work in process 1,803 3,352
Finished goods 60,940 86,532
- --------------------------------------------------------------------------------
$73,176 $ 103,054
================================================================================
23
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note E
Accrued Expenses
Accrued expenses consist of the following (in thousands):
1996 1997
- --------------------------------------------------------------------------------
Compensation and certain benefits $ 5,381 $ 6,959
Deferred revenue 5,646 6,268
Promotional expenses 1,730 3,325
Taxes (other than income) 1,562 4,661
Other 4,642 2,341
- --------------------------------------------------------------------------------
$18,961 $23,554
================================================================================
- --------------------------------------------------------------------------------
Note F
Bank Line of Credit
The bank line of credit is comprised of borrowings under a bank unsecured
revolving credit facility of $21,000,000 expiring July 21, 1998. There were no
borrowings under the bank line of credit at January 31, 1996 and 1997. The terms
of this agreement contain, among other provisions, requirements for maintaining
certain financial ratios and tangible net worth. At January 31, 1997, the
Company was in compliance with such covenants.
- --------------------------------------------------------------------------------
Note G
Long-Term Debt
Long-term debt consists of the following (in thousands):
1996 1997
- --------------------------------------------------------------------------------
Capital lease obligation $ 978 $ 642
7.54% Senior Notes 25,000 25,000
Term loan -- 5,000
Other 2,040 3,005
- --------------------------------------------------------------------------------
28,018 33,647
Less current maturities (514) (1,689)
- --------------------------------------------------------------------------------
$27,504 $31,958
================================================================================
In July 1995, subsidiaries of the Company privately placed $25.0 million
aggregate principal amount of 7.54% Senior Notes Due 2005. Such Senior Notes are
guaranteed by the Company and substantially all of the Company's subsidiaries
and contain, among other provisions, requirements for maintaining certain
financial ratios and tangible net worth. At January 31, 1997, the Company was
in compliance with such covenants. The notes are payable in seven annual
installments beginning June 30, 1999.
In December 1996, the Company entered into a Term Credit Agreement for an
amount up to $20.0 million for the construction of the Elkin, North Carolina
distribution facility and the related purchase of equipment. The loan is payable
in twenty-eight quarterly principal installments beginning May 1, 1998 with
interest payable at the Company's option at the bank's domestic rate, adjusted
LIBOR or the adjusted treasury rate. At January 31, 1997 $5.0 million was
outstanding on the Term Credit Agreement with interest at the rate of 6.10%.
Maturities under debt obligations and future minimum lease payments under the
capital lease obligation are as follows (in thousands):
Capital
Debt Lease
Obligations Obligation
- --------------------------------------------------------------------------------
1998 $ 1,294 $433
1999 726 252
2000 4,974 --
2001 3,904 --
2002 3,904 --
Thereafter 18,203 --
- --------------------------------------------------------------------------------
$ 33,005 685
========
Less amounts representing interest (43)
- --------------------------------------------------------------------------------
Present value of net minimum lease payments $642
================================================================================
24
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note H
Employee Benefit Plan
The Company has a defined contribution employee benefit plan covering
substantially all eligible non-union employees. The Company is required to
contribute $100 annually for each participating employee; additional
contributions are discretionary. Expense related to the plan for the years ended
January 31, 1995, 1996 and 1997 was $640,000, $866,000 and $1,107,000,
respectively.
- --------------------------------------------------------------------------------
Note I
Commitments
The Company utilizes leases for a portion of its operating facilities and
equipment. Generally, the leases provide that the Company pay taxes,
maintenance, insurance and other occupancy expense applicable to leased
premises. Certain leases provide for renewal for various periods at
stipulated rates.
The minimum future rental commitments under operating leases are as follows
(in thousands):
Year ended January 31,
1998 $ 5,744
1999 4,611
2000 3,665
2001 4,395
2002 1,453
Thereafter 582
- --------------------------------------------------------------------------------
Total minimum payments required $20,450
================================================================================
Rent expense for the years ended January 31, 1995, 1996 and 1997 was $2,249,000,
$3,823,000 and $4,735,000, respectively.
- --------------------------------------------------------------------------------
Note J
Income Taxes
<TABLE>
<CAPTION>
Income tax expense consists of the following (in thousands):
1995 1996 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current income tax expense
Federal $6,543 $12,713 $21,863
State 2,022 2,246 3,858
- ----------------------------------------------------------------------------------------
8,565 14,959 25,721
Deferred income tax expense
Federal 340 950 1,275
State 60 150 225
- ----------------------------------------------------------------------------------------
400 1,100 1,500
- ----------------------------------------------------------------------------------------
Total income tax expense $8,965 $16,059 $27,221
========================================================================================
</TABLE>
Significant components of the Company's deferred tax assets and liabilities are
as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Current deferred tax assets
Accrued compensation $ 320 $ 550
Allowance for doubtful receivables 230 330
Accrued expenses 50 120
- ----------------------------------------------------------------------------------------
$ 600 $ 1,000
Non-current deferred tax liabilities
Depreciation $(3,000) $(4,900)
========================================================================================
</TABLE>
A reconciliation of the provision for income taxes to the amounts computed at
the Federal statutory rate is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax provision at statutory rate $7,704 $14,161 $23,643
Tax effect of:
State income taxes, net of Federal tax benefit 1,323 1,741 3,301
Other, net (62) 157 277
- ----------------------------------------------------------------------------------------
Total income tax expense $8,965 $16,059 $27,221
========================================================================================
</TABLE>
25
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note K
Employee Stock Option Plans
At January 31, 1997, the Company had two stock-based compensation plans, which
are described below. In accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
the Company has elected to continue to account for stock-based compensation
under the intrinsic value based method of accounting prescribed by Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees." Under APB No. 25, generally, no cost is recorded for stock options
issued to employees unless the option price is below market at the time options
are granted. The following pro forma net income and earnings per share are
presented for informational purposes and have been computed using the fair value
method of accounting for stock-based compensation as set forth in SFAS No. 123:
<TABLE>
<CAPTION>
1996 1997
- ------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C>
Net earnings
As reported $24,024 $40,137
Pro forma 23,766 39,806
Net earnings per common and common equivalent shares
As reported $ 0.83 $ 1.29
Pro forma 0.82 1.28
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1997, respectively: expected volatility
of 33.8 percent and 42.5 percent, risk-free interest rates at 5.37 to 7.85
percent and 6.14 percent to 6.85 percent; and expected lives of 5 years to 7
years for both years and no dividend payments.
The Company has adopted the Amended and Restated 1994 Employee Stock Option
Plan (the "Employee Option Plan"), which provides for the grant to officers and
employees of both "incentive stock options" and stock options that are
non-qualified for Federal income tax purposes. The total number of shares of
common stock for which options may be granted pursuant to the Employee Option
Plan is 920,000.
The exercise price of incentive stock options granted under the Employee
Option Plan may not be less than 100% of the fair market value of the common
stock at the time of grant, and the term of any option may not exceed 10 years.
Options generally become exercisable over a five-year period. With respect to
any employee who owns stock representing more than 10% of the voting power of
the outstanding capital stock of the Company, the exercise price of any
incentive stock option may not be less than 110% of the fair market value of
such shares at the time of grant, and the term of such option may not exceed
five years.
The Company has also adopted the 1994 Stock Option Plan for Non-Employee
Directors (the "Non-Employee Directors Plan"). A total of 80,000 shares of
common stock may be issued through the exercise of options granted pursuant to
the Non-Employee Directors Plan. No option may be granted under the Non-Employee
Directors Plan after ten years following May 18, 1994.
Each Non-Employee Director who is elected to office for the first time after
March 1, 1994 will, upon such date, automatically be granted an option to
acquire 2,000 shares of common stock. Each Non-Employee Director who is in
office on November 15 of any year thereafter will, on the immediately succeeding
January 1, automatically be granted an option to acquire 1,000 shares of common
stock. The price of shares that may be purchased upon exercise of an option is
the fair market value of the common stock on the date of grant. Options granted
pursuant to the Non-Employee Directors Plan become exercisable in full on the
first anniversary of the date of the grant.
26
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note K
Employee Stock Option Plans
(continued)
Transactions involving stock options are summarized as follows:
Option Weighted Average
Shares Exercise Price
- --------------------------------------------------------------------------------
Outstanding at February 1, 1994 -- $ --
Options granted 296,000 9.20
Options canceled (20,000) 8.25
- --------------------------------------------------------------------------------
Outstanding at January 31, 1995 276,000 9.02
Options granted 264,000 18.42
Options exercised (16,000) 8.25
- --------------------------------------------------------------------------------
Outstanding at January 31, 1996 524,000 13.75
Options granted 183,000 39.26
Options exercised (45,400) 10.48
Options canceled (17,000) 12.70
- --------------------------------------------------------------------------------
Outstanding at January 31, 1997 644,600 28.84
At January 31, 1996 and 1997, options to purchase 49,600 and 113,800 shares,
respectively, were exercisable.
Options outstanding and exercisable as of January 31, 1997, by price range:
<TABLE>
<CAPTION>
Outstanding Exercisable
- ------------------------------------------------------------------------------------------
Weighted Average
Range of Remaining Weighted Average Weighted Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
- --------------- ------ ---------------- -------------- ------ --------------
<C> <C> <C> <C> <C> <C>
$8.25 - $14.25 217,400 7.38 $ 9.23 70,600 $ 9.13
15.00 - 29.38 245,200 8.35 18.52 43,200 20.31
33.88 - 46.00 182,000 9.61 39.76 -- --
</TABLE>
The weighted average fair value of options granted during the years ended
January 31, 1997 and 1996 was $22.22 and $11.74, respectively.
- --------------------------------------------------------------------------------
Note L
Selected Quarterly
Financial Data
(Unaudited)
A summary of selected quarterly information for the years ended January 31 is as
follows:
<TABLE>
<CAPTION>
1996 Quarter Ended
- ----------------------------------------------------------------------------------------
(In thousands, except per share data)
April 30 July 31 October 31 January 31 Total
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $68,902 $66,994 $ 99,014 $96,431 $331,341
Gross profit 36,165 33,455 51,797 53,965 175,382
Net earnings 4,106 3,609 9,267 7,042 24,024
Net earnings per common and
common equivalent share $ 0.14 $ 0.13 $ 0.33 $ 0.23 $ 0.83
========================================================================================
<CAPTION>
1997 Quarter Ended
- ----------------------------------------------------------------------------------------
(In thousands, except per share data)
April 30 July 31 October 31 January 31 Total
- ----------------------------------------------------------------------------------------
Net sales $106,338 $100,490 $139,583 $149,291 $495,702
Gross profit 58,475 55,684 77,358 80,210 271,727
Net earnings 7,248 6,608 14,254 12,027 40,137
Net earnings per common and
common equivalent share $ 0.23 $ 0.21 $ 0.46 $ 0.39 $ 1.29
========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Note M
Subsequent Event
On March 25, 1997, the Company entered into an agreement to acquire Endar Corp.,
a privately held company which manufactures and markets a full line of
environmental home fragrance products and accessories. The transaction is
expected to close prior to the end of June 1997 and is intended to be accounted
for as a pooling of interests.
27
<PAGE>
Report of Independent Certified Public Accountants
- -------------------------------------------------------------------------------
Board of Directors and Stockholders
Blyth Industries, Inc.
We have audited the accompanying consolidated balance sheets of Blyth
Industries, Inc. and Subsidiaries as of January 31, 1996 and 1997, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended January 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Blyth Industries,
Inc. and Subsidiaries as of January 31, 1996 and 1997, and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended January 31, 1997, in conformity with generally
accepted accounting principles.
Chicago, Illinois /s/ GRANT THORNTON LLP
March 28, 1997 GRANT THORNTON LLP
28
<PAGE>
Exhibit 21
SUBSIDIARIES OF BLYTH INDUSTRIES, INC.
Jurisdiction of
Name Organization
----- --------------------
1. Candle Corporation Worldwide, Inc. Delaware
2. PartyLite Gifts, Inc. Delaware
3. Candle Corporation of America New York
4. Aromatic Industries, Inc. California
5. PartyLite Gifts Limited, Canada Ontario
6. Candle Corporation of America Hong Kong Limited Hong Kong
7. PartyLite Ireland, Ltd. Ireland
8. PartyLite GMBH Germany
9. JMC Holdings, Inc. Delaware
10. Jeanmarie Creations, Inc. Oklahoma
11. Blyth Industries, Ltd. Barbados
12. PartyLite Gifts U.K., Ltd. England
13. FVB, Inc. Delaware
14. Fabrica de Velas Borinquen, Inc. Illinois
15. New Ideas International, Inc. Delaware
16. CCW Manufacturing, Ltd. England
17. Eclipse Candles, Ltd. England
18. PartyLite SA Switzerland
19. PartyLite One SA Switzerland
20. PartyLite BV Netherlands
21. PartyLite GESmbH Austria
Blyth Industries, Inc. also owns 50% of the capital stock of Colony Gift
Corporation Limited, a corporation organized under the laws of England.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 28, 1997 accompanying the consolidated
financial statements of Blyth Industries, Inc. and Subsidiaries appearing in the
1997 Annual Report to Shareholders which is incorporated by reference into this
Annual Report on Form 10-K for the year ended January 31, 1997, and our report
dated March 28, 1997 accompanying the schedule included in this Annual Report on
Form 10-K for the year ended January 31, 1997. We consent to the use and the
incorporation by reference into the Registration Statement on Form S-8 (No.
33-91954) of the aforementioned reports.
/s/ Grant Thornton LLP
--------------------------------------
GRANT THORNTON LLP
Chicago, Illinois
April 29, 1997
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
FORM 10-K ANNUAL REPORT FOR FISCAL 1997
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert B. Goergen, Howard E. Rose and Bruce D.
Kreiger, and each of them, until July 31, 1997, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign the Form 10-K Annual Report of Blyth Industries, Inc. for
the fiscal year ended January 31, 1997, and any amendments thereto, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
<C> <S> <C>
/s/ ROBERT B. GOERGEN Chairman, Chief Executive Officer and
------------------------------------------- President, Director (Principal April 8, 1997
Robert B. Goergen Executive Officer)
/s/ HOWARD E. ROSE Vice President and Chief Financial
------------------------------------------- Officer (Principal Financial and April 8, 1997
Howard E. Rose Accounting Officer)
/s/ ROGER A. ANDERSON
------------------------------------------- Director April 8, 1997
Roger A. Anderson
/s/ JOHN W. BURKHART
------------------------------------------- Director April 8, 1997
John W. Burkhart
/s/ PAMELA M. GOERGEN
------------------------------------------- Director April 8, 1997
Pamela M. Goergen
/s/ NEAL I. GOLDMAN
------------------------------------------- Director April 8, 1997
Neal I. Goldman
/s/ ROGER H. MORLEY
------------------------------------------- Director April 8, 1997
Roger H. Morley
/s/ JOHN E. PRESCHLACK
------------------------------------------- Director April 8, 1997
John E. Preschlack
/s/ FREDERICK H. STEPHENS, JR.
------------------------------------------- Director April 8, 1997
Frederick H. Stephens, Jr.
</TABLE>
<PAGE>
Exhibit 24.2
BLYTH INDUSTRIES, INC.
CERTIFICATION
I, the undersigned Secretary of BLYTH INDUSTRIES, INC., a Delaware
corporation, certify that the attached is a true copy of resolutions adopted by
the Board of Directors of Blyth Industries, Inc. on April 8, 1997, at a meeting
throughout which a quorum was present, and that the same is still in full force
and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
Blyth Industries, Inc. this 29 day of April, 1997.
/s/ BRUCE D. KREIGER
------------------------------------
Name: Bruce D. Kreiger
Title: Secretary
BLYTH INDUSTRIES, INC.
Board of Directors Resolution
April 8, 1997
* * *
FORM 10-K ANNUAL REPORT
RESOLVED, that the form, terms, and provisions of the Annual Report on Form
10-K (the "Form 10-K") in substantially the draft form presented to this Board,
are approved and that Robert B. Goergen and Howard E. Rose be, and each of them
with full power to act without the other hereby is, authorized (i) to sign the
Form 10-K on behalf of the Corporation and any amendments thereto as either of
them may approve on behalf of the Corporation, in such form as the officer
executing the Form 10-K or any such amendment may approve, with any changes from
the form presented to this meeting as he may approve, such execution to be
conclusive evidence of such approval, and (ii) to file the Form 10-K with the
Securities and Exchange Commission (the "Commission");
RESOLVED, that each of the directors, the Chairman, President and Chief
Executive Officer, and the Vice President and Chief Financial Officer, of Blyth
Industries, Inc. are each hereby authorized to execute in their respective
capacities, a power of attorney in favor of Robert B. Goergen, Howard E. Rose
and Bruce D. Kreiger designating each of them as the true and lawful
attorneys-in-fact and agents of the signatory with full power and authority to
execute and to cause to be filed with the Securities and Exchange Commission the
Form 10-K Annual Report for fiscal 1997 with all exhibits and other documents in
connection therewith as such attorneys-in-fact, or any one of them, may deem
necessary or desirable; and to do and perform each and every act and thing
necessary or desirable to be done in and about the premises as fully to all
intents and purposes as such officers and directors could do themselves.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at January 31, 1997 and the Consolidated Statement of
Earnings, Stockholders' Equity and Cash Flows for the twelve months ended
January 31, 1997, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 14,523
<SECURITIES> 13,309
<RECEIVABLES> 35,894
<ALLOWANCES> 892
<INVENTORY> 103,054
<CURRENT-ASSETS> 167,125
<PP&E> 133,140
<DEPRECIATION> 29,589
<TOTAL-ASSETS> 287,312
<CURRENT-LIABILITIES> 60,046
<BONDS> 0
0
0
<COMMON> 628
<OTHER-SE> 187,446
<TOTAL-LIABILITY-AND-EQUITY> 287,312
<SALES> 495,702
<TOTAL-REVENUES> 495,702
<CGS> 223,975
<TOTAL-COSTS> 223,975
<OTHER-EXPENSES> 202,130
<LOSS-PROVISION> 1,127
<INTEREST-EXPENSE> 2,364
<INCOME-PRETAX> 67,552
<INCOME-TAX> 27,221
<INCOME-CONTINUING> 40,331
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,137
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.29
</TABLE>
