<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JULY 31, 1999
Commission file number 1-13026
BLYTH INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-2984916
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100 FIELD POINT ROAD, GREENWICH, CONNECTICUT 06830
(Address of principal executive offices) (Zip Code)
(203) 661-1926
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
48,489,332 COMMON SHARES AS OF AUGUST 31, 1999.
<PAGE>
BLYTH INDUSTRIES, INC.
INDEX
PAGE
----
Form 10-Q Cover Page.................................................. 1
Form 10-Q Index....................................................... 2
Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets...................... 3
Consolidated Statements of Earnings.............. 4-5
Consolidated Statements of Stockholders' Equity.. 6
Consolidated Statements of Cash Flows............ 7
Notes to Consolidated Financial Statements....... 8-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations... 11-17
Part II. Other Information
Item 1. Legal Proceedings.................................. 18
Item 2. Changes in Securities.............................. 18
Item 3. Defaults upon Senior Securities.................... 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information................................. 18-20
Item 6. Exhibits and Reports on Form 8-K.................. 20
Signatures.......................................................... 21
PAGE 2 OF 21
<PAGE>
Part I. FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
JULY 31, JANUARY 31,
(In thousands, except share data) 1999 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 20,172 $ 18,571
Accounts receivable, less allowance for doubtful receivables
of $2,143 and $1,404, respectively 75,081 60,810
Inventories 234,093 169,749
Prepaid expenses 4,481 2,831
Deferred income taxes 755 600
- -------------------------------------------------------------------------------------------------------------
Total current assets 334,582 252,561
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Less accumulated depreciation of $69,994 and $58,184, respectively 252,317 236,273
OTHER ASSETS:
Investments 9,214 18,914
Excess of cost over fair value of assets acquired, net of
accumulated amortization of $5,781 and $4,446, respectively 92,614 67,534
Deposits 2,358 1,501
- -------------------------------------------------------------------------------------------------------------
Total assets $691,085 $576,783
- -------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank lines of credit $ 52,523 $ 3,455
Current maturities of long-term debt 13,162 9,339
Accounts payable 48,237 51,336
Accrued expenses 39,780 44,074
Income taxes 119 1,197
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 153,821 109,401
DEFERRED INCOME TAXES 22,362 18,978
LONG-TERM DEBT, less current maturities 178,422 114,246
EXCESS OF FAIR VALUE OVER COST OF ASSETS ACQUIRED, net of
accumulated amortization of $871 and $811, respectively 533 593
MINORITY INTEREST 822 11,533
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock - authorized 10,000,000 shares of $0.01
par value; no shares issued and outstanding - -
Common stock - authorized 100,000,000 shares of $0.02
par value; issued, 49,221,632 and 49,200,474, respectively 984 984
Additional contributed capital 93,557 93,281
Retained earnings 262,962 227,995
Treasury stock, at cost, 734,700 shares and 10,000 shares, respectively (17,449) (228)
Accumulated other comprehensive loss (4,929) -
- -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 335,125 322,032
- -------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $691,085 $576,783
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 3 OF 21
<PAGE>
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JULY 31 (In thousands, except per share data)
1999 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $474,136 $382,041
Cost of goods sold 201,991 158,842
- -------------------------------------------------------------------------------------------------------------
Gross profit 272,145 223,199
Selling and shipping 163,790 135,132
Administrative 44,399 38,748
Amortization of goodwill 1,275 1,018
- -------------------------------------------------------------------------------------------------------------
209,464 174,898
- -------------------------------------------------------------------------------------------------------------
Operating profit 62,681 48,301
Other expense (income):
Interest expense 4,376 3,368
Interest income (184) (124)
Equity in earnings of investees 1,276 202
- -------------------------------------------------------------------------------------------------------------
5,468 3,446
- -------------------------------------------------------------------------------------------------------------
Earnings before income taxes and minority interest 57,213 44,855
Income tax expense 21,970 17,623
- -------------------------------------------------------------------------------------------------------------
Earnings before minority interest 35,243 27,232
Minority interest 276 (165)
- -------------------------------------------------------------------------------------------------------------
Net earnings $ 34,967 $ 27,397
- -------------------------------------------------------------------------------------------------------------
Basic: Net earnings per common share $ 0.72 $ 0.56
Weighted average number of shares outstanding 48,714 49,144
- -------------------------------------------------------------------------------------------------------------
Diluted: Net earnings per common share $ 0.71 $ 0.55
Weighted average number of shares outstanding 49,076 49,643
- -------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
PAGE 4 OF 21
<PAGE>
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED JULY 31 (In thousands, except per share data)
1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $229,863 $ 181,011
Cost of goods sold 98,198 76,235
- ----------------------------------------------------------------------------------------------------------------------------
Gross profit 131,665 104,776
Selling and shipping 78,405 62,768
Administrative 22,535 18,906
Amortization of goodwill 639 511
- ----------------------------------------------------------------------------------------------------------------------------
101,579 82,185
- ----------------------------------------------------------------------------------------------------------------------------
Operating profit 30,086 22,591
Other expense (income):
Interest expense 2,492 1,645
Interest income (64) (68)
Equity in earnings of investees 863 162
- ----------------------------------------------------------------------------------------------------------------------------
3,291 1,739
- ----------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and minority interest 26,795 20,852
Income tax expense 10,287 8,195
- ----------------------------------------------------------------------------------------------------------------------------
Earnings before minority interest 16,508 12,657
Minority interest 78 (68)
- ----------------------------------------------------------------------------------------------------------------------------
Net earnings $ 16,430 $ 12,725
- ----------------------------------------------------------------------------------------------------------------------------
Basic: Net earnings per common share $ 0.34 $ 0.26
Weighted average number of shares outstanding 48,488 49,173
- ----------------------------------------------------------------------------------------------------------------------------
Diluted: Net earnings per common share $ 0.34 $ 0.26
Weighted average number of shares outstanding 48,893 49,653
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 5 of 21
<PAGE>
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
JULY 31, (In thousands, except share data)
- -----------------------------------------------------------------------------------------------------------------------
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
------------------- CONTRIBUTED RETAINED TREASURY COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS STOCK LOSS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JULY 31, 1998
Balance, January 31, 1998 49,100,953 $ 982 $ 92,357 $ 153,493 $ - $ - $ 246,832
Net earnings for the period - - - 27,397 - - 27,397
Common stock issued in connection with
exercise of stock options 82,323 2 575 - - - 577
---------------------------------------------------------------------------------------
Balance, July 31, 1998 49,183,276 $ 984 $ 92,932 $ 180,890 $ - $ - $ 274,806
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JULY 31, 1999:
Balance, January 31, 1999 49,190,474 $ 984 $ 93,281 $ 227,995 $ (228) $ - $ 322,032
Net earnings for the period - - - 34,967 - - 34,967
Foreign currency translation adjustments - - - - - (4,929) (4,929)
---------------------
Comprehensive income (4,929) 30,038
Common stock issued in connection with
exercise of stock options 21,158 - 276 - - - 276
Treasury stock purchase (724,700) - - - (17,221) - (17,221)
----------------------------------------------------------------------------------------
Balance, July 31, 1999 48,486,932 $ 984 $ 93,557 $ 262,962 $(17,449) $ (4,929) $ 335,125
- ------------------------------------------------------------------------------------------------------------------------------------
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 6 of 21
<PAGE>
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JULY 31 (In thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 34,967 $ 27,397
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 13,085 9,614
Deferred income taxes 201 1,997
Equity in earnings of investees 1,276 202
Minority interest 276 (165)
Changes in operating assets and liabilities, net of effect of business
acquisitions:
Accounts receivable (5,785) 3,520
Inventories (47,625) (26,035)
Prepaid expenses (704) (306)
Deposits 235 (3)
Accounts payable (9,499) (1,529)
Accrued expenses (9,545) (2,159)
Income taxes (1,145) (1,015)
- ------------------------------------------------------------------------------------------------------------------------------------
Total adjustments (59,230) (15,879)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (24,263) 11,518
Cash flows from investing activities:
Purchases of property, plant and equipment (11,225) (14,624)
Net decrease in long term investments 674 -
Purchase of businesses, net of cash acquired (38,922) (788)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (49,473) (15,412)
Cash flows from financing activities:
Proceeds from issuance of common stock 276 577
Purchase of treasury stock (17,221) -
Borrowings from bank line of credit 287,356 212,600
Repayments on bank line of credit (255,000) (218,810)
Borrowings on long-term debt 59,926 453
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 75,337 (5,180)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,601 (9,074)
Cash and cash equivalents at beginning of period 18,571 21,273
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 20,172 $ 12,199
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 7 of 21
<PAGE>
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The Company, which operates in a single category, home fragrance
products, designs, manufactures, markets and distributes an extensive
line of home fragrance products including scented candles, outdoor
citronella candles, potpourri and environmental fragrance products and
markets a broad range of related candle accessories and decorative gift
bags and tags.
The consolidated financial statements include the accounts of the
Company, and its direct and indirect subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Investments in companies which are not majority owned or controlled are
reported using the equity method and are recorded in other assets.
European operations maintain a calendar year accounting period which is
consolidated with the Company's fiscal period. In the opinion of the
Management, the accompanying unaudited consolidated financial
statements include all accruals (consisting only of normal recurring
accruals) necessary for fair presentation of the Company's consolidated
financial position at July 31, 1999 and the consolidated results of its
operations and cash flows for the six month period ended July 31, 1999
and 1998. These interim statements should be read in conjunction with
the Company's consolidated financial statements for the year ended
January 31, 1999, as set forth in the Company's Annual Report on Form
10-K. Operating results for the six months ended July 31, 1999 are not
necessarily indicative of the results that may be expected for the year
ending January 31, 2000.
2. BUSINESS ACQUISITIONS
In May 1999, the Company acquired the remaining 50% of Colony Gift
Corporation Ltd., a U.K. candle manufacturer, for approximately $10.0
million in cash. The excess of the purchase price over the estimated
fair value of assets acquired approximated $8.0 million and is being
amortized over 15 years.
In June 1999, the Company acquired additional Class A and Class B
common shares of Liljeholmens Stearinfabriks AB ("Liljeholmens"),
through a tender offer for approximately $28.3 million in cash. As a
result, the Company has increased its economic ownership percentage in
Liljeholmens to approximately 99% from approximately 39%. The Company
is currently in the process of acquiring the remaining 1% economic
interest in Liljeholmens through a compulsory purchase procedure
pursuant to Swedish law. The excess of the purchase price over the
estimated fair value of assets acquired from this additional investment
approximated $15.9 million and is being amortized over 40 years.
3. INVENTORIES
The components of inventory consist of the following (in thousands):
<TABLE>
<CAPTION>
JULY 31, 1999 JANUARY 31, 1999
- ---------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 40,809 $ 34,807
Work in process 4,632 2,658
Finished goods 188,652 132,284
- ---------------------------------------------------------------------------
$234,093 $169,749
- ---------------------------------------------------------------------------
</TABLE>
PAGE 8 OF 21
<PAGE>
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. EARNINGS PER SHARE
The components of basic and diluted earnings per share are as follows
(in thousands):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS THREE MONTHS SIX MONTHS
ENDED JULY 31, ENDED JULY 31, ENDED JULY 31, ENDED JULY 31,
1999 1999 1998 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings $ 16,430 $ 34,967 $ 12,725 $ 27,397
- ---------------------------------------------------------------------------------------------------------------------
Weighted average number of common
shares outstanding:
Basic 48,488 48,714 49,173 49,144
Dilutive effect of stock options 405 362 480 499
- ---------------------------------------------------------------------------------------------------------------------
Weighted average number of common
shares outstanding:
Diluted 48,893 49,076 49,653 49,643
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
5. STOCK REPURCHASE PLAN
On September 10, 1998, the Company's Board of Directors authorized the
Company to repurchase up to 1,000,000 shares of its common stock and on
June 8, 1999 it authorized the repurchase of up to an additional
1,000,000 shares. As of August 31, 1999, the Company had purchased on
the open market 734,700 common shares for a total cost of approximately
$17.5 million. The acquired shares are held as common stock in
treasury.
6. SEGMENT INFORMATION
The Company operates in a single category, home fragrance products. The
Company designs, manufactures, markets and distributes an extensive
line of home fragrance products including scented candles, outdoor
citronella candles, potpourri and environmental fragrance products.
Closely complementing these products are a broad range of candle
accessories and decorative gift bags and tags. The Company has
operations outside of the United States and sells its products
worldwide.
PAGE 9 of 21
<PAGE>
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. SEGMENT INFORMATION (CONTINUED)
The following geographic area data include trade net sales and net
earnings based on product shipment destination and long-lived assets
(which consist of fixed assets, goodwill and long term investments)
based on physical location. This data is presented in accordance with
FASB No. 131 "Disclosures about Segments of an Enterprise and Related
Information," which the Company has adopted for all periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31, SIX MONTHS ENDED JULY 31,
----------------------------------- ----------------------------------
(In thousands) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales:
United States $ 181,924 $ 147,779 $ 363,697 $ 314,048
International(1)(2) 47,939 33,232 110,439 67,993
- --------------------------------------------------------------------------------------------------------------------
Total $ 229,863 $ 181,011 $ 474,136 $ 382,041
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31, SIX MONTHS ENDED JULY 31,
----------------------------------- ----------------------------------
(In thousands) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Earnings:
United States $ 14,081 $ 10,913 $ 29,563 $ 23,911
International(1)(2) 2,349 1,812 5,404 3,486
- --------------------------------------------------------------------------------------------------------------------
Total $ 16,430 $ 12,725 $ 34,967 $ 27,397
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
(In thousands) 1999 1999
- ---------------------------------------------------------------------------
<S> <C> <C>
Long-Lived Assets:
United States $ 257,870 $ 240,251
International(2) 96,273 82,470
- ---------------------------------------------------------------------------
Total $ 354,143 $ 322,721
- ---------------------------------------------------------------------------
</TABLE>
(1) Due to the purchase of approximately 79% of the voting interest and 39%
economic interest of Liljeholmens in December 1998, the current year's net
sales include 100% of Liljeholmens' sales while the current year's net
earnings include only 39% of Liljeholmens' earnings.
(2) No individual country repesents a material amount of net sales, net earnings
or long-lived assets.
PAGE 10 of 21
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
NET SALES
Net sales increased $92.1 million, or 24.1%, to $474.1 million in the
first six months of fiscal 2000 from $382.0 million in the first six
months of fiscal 1999. Net sales in the second quarter ended July 31,
1999, increased $48.9 million, or 27.0%, to $229.9 million compared
with $181.0 million a year earlier. Most all of this increase was
attributable to unit sales growth in sales of the Company's everyday
products, particularly scented candles and candle accessories, which
was primarily a result of strong sales of new products introduced in
the last fiscal year and growth of the Company's direct selling channel
worldwide. The inclusion of Liljeholmens' sales since the beginning of
the fiscal year has also contributed to the increase in sales (when
compared to the same period in the prior year), by approximately 8.7%
for the first six months.
GROSS PROFIT
Gross profit increased $48.9 million, or 21.9%, from $223.2 million in
the first six months of fiscal 1999 to $272.1 million in the first six
months of fiscal 2000. Gross profit margin decreased from 58.4% for the
first six months of fiscal 1999 to 57.4% for the first six months of
fiscal 2000. Gross profit in the second quarter ended July 31, 1999
increased $26.9 million, or 25.7%, from $104.8 million for the quarter
ended July 31, 1998 to $131.7 million. Gross profit margin decreased
from 57.9% for the quarter ended July 31, 1998 to 57.3% for the quarter
ended July 31, 1999. The gross profit as a percentage of net sales was
negatively impacted by the inclusion of Liljeholmens, which has a lower
gross profit percentage than the rest of the Company. Before including
Liljeholmens, gross profit as a percentage of net sales in the second
quarter increased compared to the same period a year ago. The increase
in gross profits before the inclusion of Liljeholmens in the second
quarter of fiscal 2000 resulted from a relatively higher sales growth
of premium priced products in the United States. In addition, the
Company continues to benefit from the capital investments made over the
last several years in manufacturing and distribution, as well as cost
savings in product sourcing.
SELLING AND SHIPPING EXPENSE
Selling and shipping expense increased $28.7 million, or 21.2%, from
$135.1 million in the first six months of fiscal 1999 (35.4% of net
sales), to $163.8 million in the first six months of fiscal 2000 (34.5%
of net sales). Selling and shipping expense increased $15.6 million, or
24.8%, from $62.8 million in the quarter ended July 31, 1998 (34.7% of
net sales), to $78.4 million in the quarter ended July 31, 1999 (34.1%
of net sales). The decreases in selling and shipping expense as a
percentage of net sales were attributable to the inclusion of
Liljeholmens which incurs relatively lower selling and shipping
expenses as a percentage of net sales, and overall percentage decreases
in other areas of the Company.
ADMINISTRATIVE EXPENSE
Administrative expense increased $5.7 million, or 14.7%, from $38.7
million in the first six months of fiscal 1999 (10.1% of net sales) to
$44.4 million in the first six months of fiscal 2000 (9.4% of net
sales). Administrative expense increased $3.6 million, or 19.0%, from
$18.9 million in the quarter ended July 31, 1998 (10.4% of net sales)
to $22.5 million in the quarter ended July 31, 1999 (9.8% of net
sales). Administrative expenses as a percentage of sales declined
versus the same period last year for two main reasons: the economies of
scale (the ability to spread administrative expense over a larger net
sales base); and the inclusion of Liljeholmens (which experiences
relatively lower administrative expense as a percentage of sales).
PAGE 11 OF 21
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: (CONTINUED)
INTEREST EXPENSE
Interest expense increased $1.0 million, or 29.4%, from $3.4 million in
the first six months of fiscal 1999 to $4.4 million in the first six
months of fiscal 2000. Interest expense increased $.9 million, or
56.3%, from $1.6 million in the quarter ended July 31, 1998 to $2.5
million in the quarter ended July 31, 1999. The increase in interest
expense is primarily attributable to borrowings to fund the
acquisitions of Liljeholmens and Colony Gifts as well as debt assumed
as part of these acquired companies.
INCOME TAXES
Income tax expense increased $4.4 million, or 25.0%, from $17.6 million
in the first six months of fiscal 1999 to $22.0 million in the first
six months of fiscal 2000. Income tax expense increased $2.1 million,
or 25.6%, from $8.2 million in the quarter ended July 31, 1998 to $10.3
million in the quarter ended July 31, 1999. The effective income tax
rate decreased from approximately 39.3% in the quarter ended July 31,
1998 to approximately 38.4% in the quarter ended July 31, 1999 due to
the growth in sales in countries with lower tax rates than the U.S.
NET EARNINGS
As a result of the foregoing, net earnings increased $7.6 million, or
27.7%, from $27.4 million for the six months ended July 31, 1998 to
$35.0 million for the six months ended July 31, 1999. Net earnings
increased $3.7 million, or 29.1%, from $12.7 million in the quarter
ended July 31, 1998 to $16.4 million in the quarter ended July 31,
1999.
Basic earnings per share based upon the weighted average number of
shares outstanding for the six months ended July 31, 1999 increased
$0.16 or 28.6%, to $0.72 compared to $0.56 for the six months ended
July 31, 1998. Basic earnings per share based upon the weighted average
number of shares outstanding for the quarter ended July 31, 1999
increased $0.08, or 30.8%, to $0.34 compared to $0.26 for the quarter
ended July 31, 1998. Diluted earnings per share based upon the
potential dilution that could occur if options to issue Common Stock
were exercised or converted were $0.71 for the six months ended July
31, 1999 compared to $0.55 for the same period last year, an increase
of $0.16, or 29.1%. Diluted earnings per share based upon the potential
dilution that could occur if options to issue Common Stock were
exercised or converted were $0.34 for the quarter ended July 31, 1999
compared to $0.26 for the same period last year, an increase of $0.08
or 30.8%.
LIQUIDITY AND CAPITAL RESOURCES
Inventory increased from $169.7 million at January 31, 1999 to $234.1
million at July 31, 1999. The increase was due primarily to the
inclusion of inventory acquired from Liljeholmens and Colony Gift and
to meet anticipated demand. Accounts receivable increased $14.3
million, or 23.5% from $60.8 million at the end of fiscal 1999 to $75.1
million at July 31, 1999 which reflects the sales growth of the
Company. Accounts receivable also increased due to the inclusion of
Liljeholmens and Colony Gifts. Accounts payable and accrued expenses
decreased $7.4 million, or 7.8%, from $95.4 million at the end of
fiscal 1999 to $88.0 million at July 31, 1999. The decrease in accounts
payable and accrued expenses is attributable to normal payment patterns
of operating expenses.
PAGE 12 of 21
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Capital expenditures for property, plant and equipment were $11.2
million in the six months ended July 31, 1999. Capital expenditures
were primarily investments in a new distribution center in the
Netherlands, new equipment and improvements to existing plant and
equipment. The Company anticipates capital spending of approximately
$55.0 - $60.0 million for fiscal 2000, of which approximately $5.0
million has been used for the new distribution facility, with the
balance to be used primarily for increased manufacturing and
distribution capacity, upgrades to machinery and equipment in existing
facilities, and computer hardware and software.
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 acquisition
opportunities as appropriate. This could be in the form of acquiring
other companies, selected assets and product lines, long term
investments, and/or joint ventures that either complement or expand its
existing business.
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). The Company believes that cash on hand, cash from
operations and available borrowings under the Credit Facility and lines
of credit described below, will be sufficient to fund its operating
requirements, capital expenditures, the Company's stock repurchase
program and all other obligations for the next twelve months.
Pursuant to the Company's revolving credit facility ("Credit
Facility"), which matures on October 17, 2002, the lending institutions
have agreed, subject to certain conditions, to provide an unsecured
revolving credit facility to the Company in an aggregate amount of up
to $140.0 million and to provide, under certain circumstances, an
additional $35.0 million. Amounts outstanding under the Credit Facility
bear interest, at the Company's option, at Bank of America's prime rate
(8.0% at July 31, 1999) or at the Eurocurrency rate plus a credit
spread ranging from 0.25% to 0.50%, based on a pre-defined financial
ratio, for a weighted average interest rate of 5.39% at July 31, 1999.
At July 31, 1999, $138.5 million (including outstanding letters of
credit) was outstanding under the Credit Facility.
In August 1999 and January 1999 the Company entered into agreements
with three banks to provide uncommitted one year lines of credit with
total available borrowing of $70.0 million. Borrowings under the
agreements bear interest, at the Company's option, at short term fixed
rates, at the banks' prime rate (8.0% at July 31, 1999) or at the
Eurocurrency rate plus a credit spread, for a weighted average interest
rate of approximately 5.47% at July 31, 1999. There was $22.9 million
outstanding under the uncommitted lines of credit at July 31, 1999.
Liljeholmens has a line of credit which is renewed annually, with
available borrowing of approximately $31.0 million. As of June 30,
1999, Liljeholmens had borrowings under the line of credit of
approximately $13.4 million. Amounts outstanding under the line of
credit bear interest of 3.59% at June 30, 1999.
PAGE 13 of 21
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
At June 30, 1999, Liljeholmens had various long-term debt agreements in
multiple European currencies maturing at different dates over the next
two to six years. The total amount outstanding as of June 30, 1999
under the loan agreements was approximately $27.1 million with interest
rates ranging from 2.75% to 8.46%, of which $15.9 million relates to
the credit facility. The loans are collateralized by certain of
Liljeholmens' real estate and by a pledge of Liljeholmens' shares in
its subsidiaries.
Colony Gift Corporation Ltd. ("Colony"), has a revolving credit
facility with Barclays Bank ("Barclays"), which matures on May 20,
2000, pursuant to which Barclays has agreed to provide a revolving
credit facility in an amount up to L16.0 million, secured by certain of
Colony's assets. As of June 30, 1999, Colony had borrowings under the
credit facility of L10.2 million ($16.3 million at the June 30, 1999
exchange rate), at a weighted average interest rate of 5.79%.
Net cash used in operating activities amounted to $24.3 million for the
six months ended July 31, 1999 compared to $11.5 million provided by
operating activities for the six months ended July 31, 1998 when timing
fluctuations favorably impacted working capital levels.
In May 1999, the Company filed a shelf registration statement for up to
$250 million in debt securities with the Securities and Exchange
Commission. The proceeds of any offering will be used for general
corporate purposes, including the repayment of existing floating rate
debt, acquisitions, long-term investments, capital expenditures, and
growth-related working capital needs. As of the date hereof, no
issuance has occurred.
On June 8, 1999, the Company's Board of Directors authorized the
Company to repurchase up to an additional 1,000,000 shares of its
common stock bringing the total authorization to 2,000,000 shares. As
of August 31, 1999, the Company had purchased 734,700 shares for a
total cost of approximately $17.5 million.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
As of July 31, 1999, the Company is subject to interest rate risk on
approximately $204.7 million, of variable rate debt, including
Liljeholmens and Colony. The majority of the Company's variable rate
debt, approximately $159.1 million at July 31, 1999, bears interest at
the Bank of America prime rate (8.0% at July 31, 1999) or at the
Eurocurrency rate plus a credit spread ranging from 0.25% to 0.50%.
Each 1.00% increase in the interest rate would impact pre-tax earnings
by approximately $2.05 million if applied to the total.
FOREIGN CURRENCY RISK
The Company uses forward foreign exchange contracts to hedge the impact
of foreign currency fluctuations on certain committed capital
expenditures and Canadian intercompany payables. The Company does not
hold or issue derivative financial instruments for trading purposes.
PAGE 14 of 21
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOREIGN CURRENCY RISK (CONTINUED)
With regard to commitments for machinery and equipment in foreign
currencies, upon payment of each commitment the underlying forward
contract is closed and the corresponding gain or loss is included in
the measurement of the cost of the acquired asset. With regard to
forward exchange contracts used to hedge Canadian intercompany
payables, gain or loss on such hedges is recognized in earnings in the
period in which the underlying hedged transaction occurs. If a hedging
instrument is sold or terminated prior to maturity, gains and losses
are deferred until the hedged item is settled.
However, if the hedged item is no longer likely to occur, the resultant
gain or loss on the terminated hedge is recognized into earnings. For
consolidated financial statement presentation, net cash flows from such
hedges are classified in the categories of the cash flow with the items
being hedged.
The following table provides information about the Company's foreign
exchange forward contracts at July 31, 1999.
<TABLE>
<CAPTION>
U.S. DOLLAR AVERAGE
(In thousands, except average contract rate) NOTIONAL CONTRACT ESTIMATED
AMOUNT RATE FAIR VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Canadian Dollar $ 9,440 1.48 $ 128
Euro 2,607 1.06 44
- ----------------------------------------------------------------------------------------------
$ 12,047 $ 172
- ----------------------------------------------------------------------------------------------
</TABLE>
The foreign exchange contracts outstanding as of July 31, 1999 have
maturity dates ranging from August 1999 through December 1999.
IMPACT OF ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
On June 15, 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities". FASB No. 133 is
effective for all fiscal years beginning after June 15, 2000. FASB No.
133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of transaction. The Company
anticipates that, due to its limited use of derivative instruments, the
adoption of FASB No. 133 will not have a significant effect on the
Company's results of operations or its financial position.
YEAR 2000 COMPLIANCE
The "Year 2000 Issue" is the result of computer programs that were
written using two digits rather than four digits to define the
applicable year. If the Company's computer programs with date-sensitive
functions are not Year 2000 compliant, they may recognize a date using
"00" as the Year 1900 rather than the Year 2000. This could result in
miscalculations, malfunctions or disruptions when attempting to process
information containing dates that fall after December 31, 1999 or other
dates which could cause computer malfunctions.
PAGE 15 of 21
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 COMPLIANCE (CONTINUED)
Recognizing the importance of the "Year 2000 Issue" the Company began
developing a Year 2000 compliance plan in fiscal 1997. The Company's
efforts have been focused on the elements that are believed to be
critical to business operations ("mission critical"), which includes:
(a) an assessment, and where needed, a remediation, of both information
technology ("IT") and non-IT elements of its business information,
computing, telecommunications, and process control systems, (b) an
assessment, and remediation, as necessary, of equipment with embedded
chips, and (c) an evaluation of the Company's relationships with
significant product and services providers and major customers ("key
business partners").
The compliance plan contains five components as follows: (1) Internal
assessment - a detailed evaluation of the potential Year 2000 effects
on the Company's IT and non-IT systems and on its equipment with
embedded computer chips, (2) Remediation - corrective action including
code enhancements, hardware and software upgrades, system replacements,
vendor certification, equipment repair or replacement, and other
associated changes to achieve Year 2000 compliance, (3) Testing - the
verification that remediation actions are effective and that systems
currently deemed compliant in fact are compliant, (4) Third party
evaluation - an evaluation of the Year 2000 readiness of key suppliers
of goods and services and of key customers, and (5) Contingency
planning - the development of detailed procedures to be put in place
should the Company or key business partners experience a significant
Year 2000 problem. Although we believe the above is a sound plan, there
can be no assurances that this process will identify or remediate all
of the existing Year 2000 exposures.
The assessment phase is complete on currently installed products. The
remediation process is complete on critical IT and non-IT systems, and
the Company presently believes that remediation and testing of
remaining systems is complete in all material respects. The testing
phase, which is done in most instances using simulated data, was
completed in all material respects on critical IT and non-IT systems,
as of August 31, 1999.
The third party evaluation phase is underway with the Company having
identified its key business partners. The Company is in the process of
ascertaining their stage of Year 2000 readiness through questionnaires,
interviews, on-site visits, and other available means. However, the
actual readiness of these third parties is beyond the Company's
control; therefore, there can be no assurances that significant
deficiencies do not exist amongst such third parties. The Company
expects that this phase will be complete in all material respects by
September 30, 1999, but it anticipates having to follow-up on
non-compliant responses thereafter.
If needed modifications and conversions of computer systems are not
made on a timely basis by the Company or its key business partners, the
Company could be affected by business disruption, operational problems,
and financial loss, any of which could have a material adverse effect
on the Company's results of operations and consolidated financial
position.
Although not anticipated, the most reasonably likely worst case
scenario of failure by the Company or its key business partners to
resolve the Year 2000 issue would be a short-term slowdown or cessation
of manufacturing operations at one or more of the Company's facilities,
and a short-term inability on the part of the Company to process orders
and billings in a timely manner and to deliver product to customers in
a timely manner.
PAGE 16 of 21
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 COMPLIANCE (CONTINUED)
In addition to the readiness measures described above, the Company
intends to mitigate, through the development of contingency plans as
deemed appropriate, the possible disruption in business operations that
may result from the Year 2000 issue. Contingency plans may include
stockpiling raw materials, increasing finished goods inventory levels,
securing alternate sources of supply, and other appropriate measures.
Once developed, contingency plans and related cost estimates will be
continually refined as additional information becomes available.
Contingency plans currently in development are expected to be completed
in all material respects, by the end of September, 1999.
It is currently estimated that the aggregate cost of the Company's Year
2000 compliance efforts will be approximately $3.0 million, of which
approximately $2.3 million has been spent. These costs are being
expensed as they are incurred except for costs associated with the
replacement of computerized systems, hardware or equipment,
substantially all of which will be capitalized, and are being funded
through operating cash flow. These amounts do not include any costs
associated with the implementation of contingency plans, but such
contingency plan costs are not expected to be significant. The Company
anticipates that substantially all of the costs associated with the
Company's Year 2000 compliance efforts will be expensed. The costs
associated with the Company's Year 2000 compliance efforts are not
expected to be material in relation to the Company's IT budget, and
such efforts are not expected to have a material effect upon the
Company's other IT projects.
While the Company does not expect that it will have any need to obtain
independent verification of its risk or cost estimates, it should be
recognized that the risk and cost estimates herein constitute
forward-looking statements and are based solely on management's best
estimates of future events. The Company's Year 2000 compliance plan is
an ongoing process and the estimates of costs and completion dates for
various components of the Year 2000 compliance plan described above are
subject to change; therefore actual costs could vary significantly from
those currently anticipated and there can be no guarantees regarding
the timing or effectiveness of plan completion.
PAGE 17 OF 21
<PAGE>
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were voted upon at the Annual Meeting of
Stockholders held on June 8, 1999, and received the votes set forth
below:
1) Each of the following persons nominated was elected to serve as
director and received the number of votes set forth opposite his
name.
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD
- ----------------------- -----------------------------------------------------
<S> <C> <C> <C>
John W. Burkhart 41,450,511 0 204,391
John E. Preschlack 41,459,771 0 195,131
Frederick H. Stephens, Jr. 41,456,171 0 198,731
</TABLE>
2) A proposal to ratify the appointment of PricewaterhouseCoopers LLP
as independent certified public accountants received 41,490,993
votes for, 129,025 votes against, and 34,884 votes withheld.
ITEM 5. OTHER INFORMATION
The Company is including the following cautionary statement in this
Report to make applicable, and to take advantage of, the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 for
any forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance and
underlying assumptions and other statements which are other than
statements of historical facts. From time to time, the Company and its
representatives may publish or otherwise make available forward-looking
statements of this nature. All such forward-looking statements, whether
written or oral, and whether made by or on behalf of the Company, are
expressly qualified by the following cautionary statements.
Forward-looking statements involve risks and uncertainties which could
cause actual results or outcomes to differ materially from those
expressed in the forward-looking statements. Such forward-looking
statements are expected to be based on various assumptions, many of
which are based, in turn, upon further assumptions.
There can be no assurance that management's expectations, beliefs or
projections will occur or be achieved or accomplished. In addition to
other factors and matters discussed elsewhere in this Report and in the
Company's other public filings and statements, the following are
important factors that, in the view of the Company, could cause actual
results to differ materially from those discussed in the Company's
forward-looking statements. The Company disclaims any obligation to
update any forward-looking statements, or the following factors, to
reflect events or circumstances after the date of this Report.
PAGE 18 OF 21
<PAGE>
Part II. OTHER INFORMATION (CONTINUED)
ITEM 5. OTHER INFORMATION (CONTINUED)
Risk of Inability to Maintain Growth Rate
The Company has grown substantially in recent years. We expect that our
future growth will be generated by sales to the faster growing
worldwide consumer market for home fragrance products. The market for
our institutional products has grown, but more slowly, and we expect it
will continue to do so. Our ability to continue to grow depends on the
following: market acceptance of existing products, the successful
introduction of new products, and increases in production and
distribution capacity to meet demand. The home fragrance products
industry is driven by consumer tastes. Accordingly, there can be no
assurance that our existing or future products will maintain or achieve
market acceptance. We expect that, as we grow, our rate of growth will
be less than our historical growth rate. In addition, we have grown in
part through acquisitions and there can be no assurance that we will be
able to continue to identify suitable acquisition candidates, to
consummate acquisitions on terms favorable to the Company, to finance
acquisitions or to successfully integrate acquired operations. In the
future, acquisitions may contribute more to the overall Company's sales
growth rate than historically.
Ability to Respond to Increased Product Demand
Our significant internal growth has required increases in personnel,
expansion of production and distribution facilities, and enhancement of
management information systems. Our ability to meet future demand for
products will be dependent upon success in (1) training, motivating and
managing new employees, (2) bringing new production and distribution
facilities on line in a timely manner, (3) improving management
information systems in order to respond promptly to customer orders and
(4) improving our ability to forecast anticipated product demand in
order to continue to fill customer orders promptly. If we are unable to
meet future demand for products in a timely and efficient manner, our
operating results could be materially adversely affected.
Risks Associated with International Sales and Foreign-Sourced Products
Our international business has grown at a faster rate than sales in the
United States. In addition, we source a portion of our candle
accessories and decorative gift bags from independent manufacturers in
the Pacific Rim, Europe and Mexico. For these reasons we are subject to
the following risks inherent in foreign manufacturing and sales:
fluctuations in currency exchange rates, economic and political
instability, transportation delays, difficulty in maintaining quality
control, restrictive actions by foreign governments, nationalizations,
the laws and policies of the United States affecting importation of
goods (including duties, quotas and taxes) and trade and foreign tax
laws.
Raw Materials
For certain raw materials, there may be temporary shortages due to
weather or other factors, including disruptions in supply caused by raw
material transportation or production delays. Such raw material
shortages have not previously had, and are not expected to have, a
material adverse effect on the Company's operations.
Dependence on Key Management Personnel
Our success depends upon the contributions of key management personnel,
particularly our Chairman, Chief Executive Officer and President, Robert
B. Goergen. We do not have employment contracts with any of our key
management personnel, nor do we maintain any key person life insurance
policies. The loss of any of the key management personnel could have a
material adverse effect on the Company.
PAGE 19 OF 21
<PAGE>
Part II. OTHER INFORMATION (CONTINUED)
ITEM 5. OTHER INFORMATION (CONTINUED)
Competition
Our business is highly competitive, both in terms of price and new
product introductions. The worldwide consumer market for home fragrance
products is highly fragmented, with numerous suppliers serving one or
more of the distribution channels served by the Company. Because there
are relatively low barriers to entry to the home fragrance products
industry, we may face increased future competition from other
companies, some of which may have substantially greater financial and
marketing resources than those available to us. From time to time
during the year-end holiday season, we experience competition from
candles manufactured in foreign countries, particularly China. In
addition, certain of our competitors focus on a particular geographic
or single-product market and attempt to gain or maintain market share
solely on the basis of price.
<TABLE>
<CAPTION>
<S> <S> <C> <C>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
4.1 Amended and Restated 1994 Employee Stock Option Plan of
the Company (to be incorporated by reference into the
Company's Registration Statements on Form S-8, Reg. Nos.
33-91954 and 333-50011, which are hereby amended by the
inclusion of such exhibit).
27. Financial data schedule
</TABLE>
b) Reports on Form 8-K
During the fiscal quarter ended July 31, 1999, the Company filed
the following Current Report on Form 8-K:
The Company filed a Current Report on Form 8-K on May 28,
1999 to file as an exhibit the press release announcing
the Company's results of operations for the fiscal
quarter ended April 30, 1999.
PAGE 20 OF 21
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BLYTH INDUSTRIES, INC.
Date: SEPTEMBER 13, 1999 By: /S/ ROBERT B. GOERGEN
-------------------- -----------------------
Robert B. Goergen
Chief Executive Officer
Date: SEPTEMBER 13, 1999 By: /S/ RICHARD T. BROWNING
-------------------- -----------------------
Richard T. Browning
Chief Financial Officer
</TABLE>
PAGE 21 OF 21
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- --------
<S> <C> <C>
4.1 Amended and Restated 1994 Employee Stock Option Plan N/A
of the Company (to be incorporated by reference into
the Company's Registration Statements on Form S-8,
Reg. Nos. 33-91954 and 333-50011, which are hereby
amended by the inclusion of such exhibit).
27. Financial data schedule N/A
</TABLE>
<PAGE>
Exhibit 4.1
BLYTH INDUSTRIES, INC.
1994 EMPLOYEE STOCK OPTION PLAN
(AMENDED AND RESTATED AS OF SEPTEMBER 8, 1999)
1. PURPOSE OF THE PLAN.
The purpose of the amended and restated BLYTH INDUSTRIES, INC. 1994
EMPLOYEE STOCK OPTION PLAN (the "Plan") is (i) to further the growth and
success of Blyth Industries, Inc., a Delaware corporation (the "Company"),
and its Subsidiaries (as hereinafter defined) by enabling officers and
employees of the Company and any of its Subsidiaries to acquire shares of
Common Stock, $.02 par value (the "Common Stock"), of the Company, thereby
increasing their personal interest in such growth and success, and (ii) to
provide a means of rewarding outstanding performance by such persons to the
Company and/or its Subsidiaries. Options granted under the Plan may be either
"incentive stock options" ("ISOs"), intended to qualify as such under the
provisions of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or non-qualified stock options ("NSOs"). For purposes of the
Plan, the terms "Parent" and "Subsidiary" shall mean "Parent Corporation" and
"Subsidiary Corporation", respectively, as such terms are defined in Sections
424(e) and (f) of the Code. Unless the context otherwise requires, any ISO or
NSO shall hereinafter be referred to as an "Option".
This amended and restated Plan amends Section 6(b)(i).
2. ADMINISTRATION OF THE PLAN.
(a) STOCK OPTION COMMITTEE.
So long as the Plan shall be required to comply with Rule 16b- 3 ("Rule
16b-3") promulgated by the Securities and Exchange Commission (the "SEC")
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), in
order to permit transactions pursuant to the Plan by officers and employee
directors of the Company to be exempt from the provisions of Section 16(b) of
the 1934 Act, the Plan shall be administered by a committee (the "Committee")
consisting of two or more directors appointed to such Committee from time to
time by the Board of Directors of the Company (the "Board"), and each member
of the Committee, at the effective date of his or her appointment to the
Committee, shall be a "non-employee director" within the meaning of Rule
16b-3. The members of the Committee may be removed at any time either with or
without cause by the Board. Any vacancy on the Committee, whether due to
action of the Board or any other cause, shall be filled by the Board. The
term "Committee" shall, for all purposes of the Plan other than this Section
2, be deemed to refer to the Board if the Board is administering the Plan.
<PAGE>
(b) PROCEDURES.
The Committee shall from time to time select a Chairman from among its
members and shall adopt such rules and regulations as it shall deem
appropriate concerning the holding of meetings and the administration of the
Plan. A majority of the entire Committee shall constitute a quorum and the
actions of a majority of the members of the Committee present at a meeting at
which a quorum is present, or actions approved in writing by all of the
members of the Committee, shall be the actions of the Committee; PROVIDED,
HOWEVER, that if the Committee consists of only two members, both shall be
required to constitute a quorum and to act at a meeting or to approve actions
in writing.
(c) INTERPRETATION.
Except as otherwise expressly provided in the Plan, the Committee shall
have all powers with respect to the administration of the Plan, including,
without limitation, full power and authority to interpret the provisions of
the Plan and any Option Agreement (as defined in Section 5(b)), and to
resolve all questions arising under the Plan. All decisions of the Board or
the Committee, as the case may be, shall be conclusive and binding on all
participants in the Plan.
3. SHARES OF STOCK SUBJECT TO THE PLAN.
(a) NUMBER OF SHARES.
Subject to the provisions of Section 9 (relating to adjustments upon
changes in capital structure and other corporate transactions), the number of
shares of Common Stock subject at any one time to Options granted under the
Plan, plus the number of shares of Common Stock theretofore issued and
delivered pursuant to the exercise of Options granted under the Plan, shall
not exceed 1,880,000 shares. If and to the extent that Options granted under
the Plan terminate, expire or are cancelled without having been fully
exercised, new Options may be granted under the Plan with respect to the
shares of Common Stock covered by the unexercised portion of such terminated,
expired or cancelled Options.
(b) CHARACTER OF SHARES.
The shares of Common Stock issuable upon exercise of an Option granted
under the Plan shall be (i) authorized but unissued shares of Common Stock,
(ii) shares of Common Stock held in the Company's treasury or (iii) a
combination of the foregoing.
<PAGE>
(c) RESERVATION OF SHARES.
The number of shares of Common Stock reserved for issuance under the Plan
shall at no time be less than the maximum number of shares which may be
purchased at any time pursuant to outstanding Options.
4. ELIGIBILITY.
(a) GENERAL.
Options may be granted by the Committee under the Plan only to persons
who are officers or employees (including directors who are officers or
employees) of the Company or any of its Subsidiaries. Options granted under
the Plan shall be, in the discretion of the Committee, either ISOs or NSOs.
Notwithstanding the foregoing, Options may be conditionally granted to
persons who are prospective employees of the Company or any of its
Subsidiaries; PROVIDED, HOWEVER, that any such conditional grant of an ISO to
a prospective employee shall, by its terms, become effective no earlier than
the date on which such person actually becomes an employee.
(b) EXCEPTIONS.
Notwithstanding anything contained in Section 4(a) to the contrary:
(i) no ISO may be granted under the Plan to an
employee who owns, directly or indirectly (within the meaning of
Sections 422(b)(6) and 424(d) of the Code), stock possessing more than
10% of the total combined voting power of all classes of stock of the
Company or of its Parent or Subsidiaries, if any, unless (A) the Option
Price (as defined in Section 6(a)) of the shares of Common Stock
subject to such ISO is fixed at not less than 110% of the Fair Market
Value on the date of grant (as determined in accordance with Section
6(b)) of such shares and (B) such ISO, by its terms, is not exercisable
after the expiration of five years from the date it is granted; and
(ii) no Option may be granted to a person (A) who has
been appointed pursuant to Section 2(a) to serve on the Committee
effective as of a future date at any time during the period from the
date such appointment is made to the date such appointment is to become
effective or (B) who is serving as a member of the Committee.
<PAGE>
5. GRANT OF OPTIONS.
(a) GENERAL.
Options may be granted under the Plan at any time and from time to time
on or prior to the Expiration Date (as defined in Section 12). Subject to the
provisions of the Plan, the Committee shall have plenary authority, in its
discretion, to determine:
(i) the persons (from among the class of persons
eligible to receive Options under the Plan) to whom Options shall be
granted (the "Optionees");
(ii) the time or times at which Options shall be
granted;
(iii) the number of shares subject to each Option;
(iv) the Option Price of the shares subject to each
Option, which price shall be not less than the minimum specified in
Section 4(b)(i) or 6(a) (as applicable); and
(v) the time or times when, or the occurrence of the
event or events upon which, each Option shall become exercisable and
the duration of the exercise period.
(b) OPTION AGREEMENTS.
Each Option granted under the Plan shall be designated as an ISO or an
NSO and shall be subject to the terms and conditions applicable to ISOs
and/or NSOs (as the case may be) set forth in the Plan. In addition, each
Option shall be evidenced by a written agreement (an "Option Agreement"),
containing such terms and conditions and in such form, not inconsistent with
the Plan, as the Committee shall, in its discretion, provide. Each Option
Agreement shall be executed by the Company and the Optionee.
(c) NO EVIDENCE OF EMPLOYMENT.
Nothing contained in the Plan or in any Option Agreement shall confer
upon any Optionee any right with respect to the continuation of his or her
employment by the Company or any of its Subsidiaries or interfere in any way
with the right of the Company or any such Subsidiary (subject to the terms of
any separate agreement to the contrary), at any time to terminate such
employment or to increase or decrease the compensation of the Optionee from
the rate in existence at the time of the grant of an Option.
(d) DATE OF GRANT.
The date of grant of an Option under the Plan shall be the date as of
which the Committee approves the grant; PROVIDED, HOWEVER, that in the case
of an ISO, the date of grant
<PAGE>
shall in no event be earlier than the date as of which the Optionee becomes
an employee of the Company or one of its Subsidiaries.
6. OPTION PRICE.
(a) GENERAL.
Subject to Section 9, the price (the "Option Price") at which each share
of Common Stock subject to an Option granted under the Plan may be purchased
shall be determined by the Committee at the time the Option is granted;
PROVIDED, HOWEVER, that in the case of an ISO (subject to Section 4(b)(i)) or
an NSO, such Option Price shall in no event be less than 100% of the Fair
Market Value on the date of grant (as determined in accordance with Section
6(b)) of such share of Common Stock; and PROVIDED FURTHER, HOWEVER, that, in
the case of an Option granted effective on the Effective Date (as defined in
Section 7(a)), such Option Price shall be the initial public offering price
per share of the Common Stock.
(b) DETERMINATION OF FAIR MARKET VALUE.
Subject to the requirements of Section 422 of the Code, for purposes of
the Plan, the "Fair Market Value" of shares of Common Stock shall be equal to:
(i) if such shares are publicly traded, such price as
may be determined based upon a reasonable method of fair market
valuation using market quotations adopted in good faith by the
Committee for any given grant or set of grants, provided such method of
valuation is permitted by applicable law; or
(ii) if there is no public trading market for such
shares, the fair value of such shares on the date of grant as
determined by the Committee after taking into consideration all factors
which it deems appropriate, including, without limitation, recent sale
and offer prices of the Common Stock in private transactions negotiated
at arms' length.
Anything contained in the Plan to the contrary notwithstanding, all
determinations pursuant to Section 6(b)(ii) shall be made without regard to
any restriction other than a restriction which, by its terms, will never lapse
(c) REPRICING OF NSOS.
Subsequent to the date of grant of any NSO, the Committee may, at its
discretion and with the consent of the Optionee, establish a new Option Price
for such NSO so as to increase or decrease the Option Price of such NSO.
<PAGE>
7. EXERCISABILITY OF OPTIONS.
(a) COMMITTEE DETERMINATION.
Each Option granted under the Plan shall be exercisable at such time or
times, or upon the occurrence of such event or events, and for such number of
shares subject to the Option, as shall be determined by the Committee and set
forth in the Option Agreement evidencing such Option; PROVIDED, HOWEVER, that
no Option granted under the Plan shall be exercisable during the 180-day
period immediately following the effective date (the "Effective Date") of the
registration statement filed by the Company under the Securities Act of 1933,
as amended (the "Securities Act"), in connection with the initial public
offering of the Common Stock. Subject to the proviso of the immediately
preceding sentence, if an Option is not at the time of grant immediately
exercisable, the Committee may (i) in the Option Agreement evidencing such
Option, provide for the acceleration of the exercise date or dates of the
subject Option upon the occurrence of specified events and/or (ii) at any
time prior to the complete termination of such Option, accelerate the
exercise date or dates of such Option.
(b) AUTOMATIC TERMINATION OF OPTION.
The unexercised portion of any Option granted under the Plan shall
automatically terminate and shall become null and void and be of no further
force or effect upon the first to occur of the following:
(i) the tenth anniversary of the date on which such
Option is granted or, in the case of any ISO granted to a person
described in Section 4(b)(i), the fifth anniversary of the date on
which such ISO is granted;
(ii) the expiration of such period of time or the
occurrence of such event as the Committee in its discretion may provide
in the Option Agreement;
(iii) the effective date of a Corporate Transaction
(as defined in Section 9(b)) to which Section 9(b)(ii) (relating to
assumptions and substitutions of Options) does not apply; PROVIDED,
HOWEVER, that an Optionee's right to exercise any Option outstanding
prior to such effective date shall in all events be suspended during
the period commencing 10 days prior to the proposed effective date of
such Corporate Transaction and ending on either the actual effective
date of such Corporate Transaction or upon receipt of notice from the
Company that such Corporate Transaction will not in fact occur; and
(iv) except to the extent permitted by Section
9(b)(ii), the date on which an Option or any part thereof or right or
privilege relating thereto is transferred (otherwise than by will or
the laws of descent and distribution), assigned, pledged, hypothecated,
attached or otherwise disposed of by the Optionee.
<PAGE>
Anything contained in the Plan to the contrary notwithstanding, unless
otherwise provided in an Option Agreement, no Option granted under the Plan
shall be affected by any change of duties or position of the Optionee
(including a transfer to or from the Company or one of its Subsidiaries), so
long as such Optionee continues to be an officer or employee of the Company
or one of its Subsidiaries.
(c) LIMITATIONS ON EXERCISE.
Anything contained in the Plan to the contrary notwithstanding, an ISO
granted under the Plan to an Optionee shall not be exercisable to the extent
that the aggregate Fair Market Value on the date of grant of such ISO (as
determined in accordance with Section 6(b)) of all stock with respect to
which incentive stock options are exercisable for the first time by such
Optionee during any calendar year (under all plans of the Company and its
Subsidiaries) exceeds $100,000.
8. PROCEDURE FOR EXERCISE.
(a) PAYMENT.
At the time an Option is granted under the Plan, the Committee shall, in
its discretion, specify one or more of the following forms of payment which
may be used by an Optionee upon exercise of his Option:
(i) cash or personal or certified check payable to
the Company in an amount equal to the aggregate Option Price of the
shares with respect to which the Option is being exercised;
(ii) stock certificates (in negotiable form)
representing whole shares of Common Stock having a Fair Market Value on
the date of exercise (as determined in accordance with Section 6(b) as
if the date of exercise were the date of grant) equal to the aggregate
Option Price of the shares with respect to which the Option is being
exercised;
(iii) (x) by arrangements which are acceptable to the
Committee whereby the Optionee delivers irrevocable instructions to a
broker promptly to deliver to the Company the amount of sale proceeds
from the sale of shares subject to the Option as is necessary to pay
the Option Price and, unless otherwise allowed by the Committee, any
applicable tax withholding obligation (provided that, in the case of an
ISO, if this form of payment is approved by the Committee, and if this
form of payment is utilized by the Optionee, a Disqualifying
Disposition (as defined in Section 15 below) will be deemed to have
occurred) or (y) in compliance with any other cashless exercise program
authorized by the Company for use in connection with the Plan at the
time of such exercise (provided that, in the case of an ISO, if this
form of payment is approved by the Committee, and if
<PAGE>
this form of payment is utilized by the Optionee, a Disqualifying
Disposition may be deemed to have occurred); or
(iv) a combination of the methods set forth in
clauses (i) (ii) and (iii);
(b) NOTICE.
An Optionee (or other person, as provided in Section 10(b)) may exercise
an Option granted under the Plan in whole or in part (but for the purchase of
whole shares only), as provided in the Option Agreement evidencing his or her
Option, by delivering a written notice (the "Notice") to the Secretary of the
Company. The Notice shall:
(i) state that the Optionee elects to exercise the
Option;
(ii) state the number of shares with respect to which
the Option is being exercised (the "Optioned Shares");
(iii) state the method of payment for the Optioned
Shares (which method must be available to the Optionee under the terms
of his or her Option Agreement);
(iv) state the date upon which the Optionee desires
to consummate the purchase (which date must be prior to the termination
of such Option and no later than 30 days from the delivery of such
Notice);
(v) include any representations of the Optionee
required pursuant to Section 10(a);
(vi) if the Option is exercised pursuant to Section
10(b) by any person other than the Optionee, include evidence to the
satisfaction of the Committee of the right of such person to exercise
the Option; and
(vii) include such further provisions consistent with
the Plan as the Committee may from time to time require.
The exercise date of an Option shall be the date on which the Company
receives the Notice from the Optionee.
Within 30 days of the exercise of the Option, the Optionee shall deliver
to the Company a copy of any election filed by the Optionee with the Internal
Revenue Service under Section 83(b) of the Code.
(c) ISSUANCE OF CERTIFICATES.
The Company shall issue a stock certificate in the name of the Optionee
(or such other person exercising the Option in accordance with the provisions
of Section 10(b)) for the
<PAGE>
Optioned Shares as soon as practicable after receipt of the Notice and
payment of the aggregate Option Price for such shares. Neither the Optionee
nor any person exercising an Option in accordance with the provisions of
Section 10(b) shall have any privileges as a stockholder of the Company with
respect to any shares of stock subject to an Option granted under the Plan
until the date of issuance of a stock certificate pursuant to this Section
8(c).
9. ADJUSTMENTS.
(a) CHANGES IN CAPITAL STRUCTURE
Subject to Section 9(b), if the Common Stock is changed by reason of a
stock split, reverse stock split, stock dividend or recapitalization, or
converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization, the Committee shall make such adjustments in
the number and class of shares of stock with respect to which Options may be
granted under the Plan as shall be equitable and appropriate in order to make
such Options, as nearly as may be practicable, equivalent to such Options
immediately prior to such change. A corresponding adjustment changing the
number and class of shares allocated to, and the Option Price of, each Option
or portion thereof outstanding at the time of such change shall likewise be
made. Anything contained in the Plan to the contrary notwithstanding, in the
case of ISOs, no adjustment under this Section 9(a) shall be appropriate if
such adjustment (i) would constitute a modification, extension or renewal of
such ISOs within the meaning of Sections 422 and 424 of the Code, and the
regulations promulgated by the Treasury Department thereunder, or (ii) would,
under Section 422 of the Code and the regulations promulgated by the Treasury
Department thereunder, be considered the adoption of a new plan requiring
stockholder approval.
(b) CORPORATE TRANSACTIONS.
The following rules shall apply in connection with the dissolution or
liquidation of the Company, a reorganization, merger or consolidation in
which the Company is not the surviving corporation or a sale of all or
substantially all of the assets of the Company to another person or entity (a
"Corporate Transaction"):
(i) each holder of an Option outstanding at such time
shall be given (A) written notice of such Corporate Transaction at
least 20 days prior to its proposed effective date (as specified in
such notice) and (B) an opportunity, during the period commencing with
delivery of such notice and ending 10 days prior to such proposed
effective date, to exercise the Option to the full extent to which such
Option would have been exercisable by the Optionee at the expiration of
such 20-day period; PROVIDED, HOWEVER, that upon the effective date of
a Corporate Transaction, all Options granted under the Plan not so
exercised shall automatically terminate; and
(ii) anything contained in the Plan to the contrary
notwithstanding, Section 9(b)(i) shall not be applicable if provision
shall be made in connection with such Corporate Transaction for the
assumption of outstanding Options by, or the substitution for such
Options of new options covering the stock of, the surviving,
<PAGE>
successor or purchasing corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number, kind and option prices
of shares subject to such options; PROVIDED, HOWEVER, that in the case
of ISOs, the Committee shall, to the extent not inconsistent with the
best interests of the Company or its Subsidiaries (such best interests
to be determined in good faith by the Committee in its sole
discretion), use its best efforts to ensure that any such assumption
or substitution will not constitute a modification, extension or
renewal of the ISOs within the meaning of Section 424(h) of the Code
and the regulations promulgated by the Treasury Department thereunder.
(c) SPECIAL RULES.
The following rules shall apply in connection with Section 9(a)
and (b) above:
(i) no fractional shares shall be issued as a result
of any such adjustment, and any fractional shares resulting from the
computations pursuant to Section 9(a) or (b) shall be eliminated
without consideration from the respective Options;
(ii) no adjustment shall be made for cash dividends
or the issuance to stockholders of rights to subscribe for additional
shares of Common Stock or other securities; and
(iii) any adjustments referred to in Section 9(a) or
(b) shall be made by the Committee in its sole discretion and shall be
conclusive and binding on all persons holding Options granted under the
Plan.
10. RESTRICTIONS ON OPTIONS AND OPTIONED SHARES.
(a) COMPLIANCE WITH SECURITIES LAWS.
No Options shall be granted under the Plan, and no shares of Common Stock
shall be issued and delivered upon the exercise of Options granted under the
Plan, unless and until the Company and/or the Optionee shall have complied
with all applicable Federal or state registration, listing and/or
qualification requirements and all other requirements of law or of any
regulatory agencies having jurisdiction.
The Committee in its discretion may, as a condition to the exercise of
any Option granted under the Plan, require an Optionee (i) to represent in
writing that the shares of Common Stock received upon exercise of an Option
are being acquired for investment and not with a view to distribution and
(ii) to make such other representations and warranties as are deemed
appropriate by counsel to the Company. Stock certificates representing shares
of Common Stock acquired upon the exercise of Options that have not been
registered under the Securities Act shall, if required by the Committee, bear
the following legend:
<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT."
(b) NONASSIGNABILITY OF OPTION RIGHTS.
No Option granted under the Plan shall be assignable or otherwise
transferable by the Optionee except by will or by the laws of descent and
distribution. An Option may be exercised during the lifetime of the Optionee
only by the Optionee. If an Optionee dies, his or her Option shall thereafter
be exercisable, during the period specified in the Option Agreement, by his
or her executors or administrators to the full extent to which such Option
was exercisable by the Optionee at the time of his or her death.
(c) MAXIMUM OPTION GRANT.
The maximum number of shares of Common Stock with respect to which
Options may be granted under this Plan may be made to an employee of the
Company in any calendar year shall not exceed 100,000 shares (subject to
adjustment for stock splits, reverse stock splits, stock dividends and stock
combinations, and the like).
11. EFFECTIVE DATE OF PLAN.
The Plan became effective on the Effective Date. This amendment and
restatement of the Plan is effective as of September 8, 1999, subject to
ratification and approval by the Board no later than the first Board meeting
held after September 8, 1999, provided such ratification and approval is in
accordance with the provisions of its Certificate of Incorporation and
By-laws and the terms of this Plan.
12. EXPIRATION AND TERMINATION OF THE PLAN.
Except with respect to Options then outstanding, the Plan shall expire on
the date (the "Expiration Date") which is the first to occur of (i) the later
of (a) the tenth anniversary of the Effective Date and (b) the tenth
anniversary of the date on which the Plan is approved by the stockholders of
the Company and (ii) the date as of which the Board, in its sole discretion,
determines that the Plan shall terminate. Any Options outstanding as of the
Expiration Date shall remain in effect until they have been exercised or
terminated or have expired by their respective terms. <PAGE>
13. AMENDMENT OF PLAN.
The Board may at any time prior to the Expiration Date modify and amend
the Plan in any respect; PROVIDED, HOWEVER, that the approval of the holders
of a majority of the votes that may be cast by all of the holders of shares
of Common Stock and preferred stock of the Company, if any, entitled to vote
(voting as a single class) shall be obtained prior to any such amendment
becoming effective if such approval is required by law or is necessary to
comply with regulations promulgated by the SEC under Section 16(b) of the
1934 Act or with Section 422 of the Code or the regulations promulgated by
the Treasury Department thereunder.
14. CAPTIONS.
The use of captions in the Plan is for convenience. The captions are not
intended to provide substantive rights.
15. DISQUALIFYING DISPOSITIONS.
If Optioned Shares acquired by exercise of an ISO granted under the Plan
are disposed of within two years following the date of grant of the ISO or
one year following the transfer of the Optioned Shares to the Optionee (a
"Disqualifying Disposition"), the holder of the Optioned Shares shall,
immediately prior to such Disqualifying Disposition, notify the Company in
writing of the date and terms of such Disqualifying Disposition and provide
such other information regarding the Disqualifying Disposition as the Company
may reasonably require.
16. WITHHOLDING TAXES.
Whenever under the Plan shares of Common Stock are to be delivered to an
Optionee upon exercise of an Option, the Company shall be entitled to require
as a condition of delivery that the Optionee remit or, in appropriate cases,
agree to remit when due, an amount sufficient to satisfy all current or
estimated future Federal, state and local withholding tax and employment tax
requirements relating thereto. At the time of a Disqualifying Disposition,
the Optionee shall remit to the Company in cash the amount of any applicable
Federal, state and local withholding taxes and employment taxes. <PAGE>
17. OTHER PROVISIONS.
Each Option granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the
Committee, in its sole discretion. Notwithstanding the foregoing, each ISO
granted under the Plan shall include those terms and conditions which are
necessary to qualify the ISO as an "incentive stock option" within the
meaning of Section 422 of the Code and the regulations thereunder and shall
not include any terms or conditions which are inconsistent therewith.
18. NUMBER AND GENDER.
With respect to words used in the Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, and
vice-versa, as the context requires.
19. GOVERNING LAW.
The validity and construction of the Plan and the instruments evidencing
the Options granted hereunder shall be governed by the laws of the State of
Delaware.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JULY 31, 1999 AND THE CONSOLIDATED STATEMENT OF
EARNINGS, STOCKHOLDERS' EQUITY AND CASH FLOWS FOR THE SIX MONTHS ENDED JULY 31,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL DOCUMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 20,172
<SECURITIES> 0
<RECEIVABLES> 77,224
<ALLOWANCES> 2,143
<INVENTORY> 234,093
<CURRENT-ASSETS> 334,582
<PP&E> 322,311
<DEPRECIATION> 69,994
<TOTAL-ASSETS> 691,085
<CURRENT-LIABILITIES> 153,821
<BONDS> 0
0
0
<COMMON> 984
<OTHER-SE> 334,131
<TOTAL-LIABILITY-AND-EQUITY> 691,085
<SALES> 474,136
<TOTAL-REVENUES> 474,136
<CGS> 201,991
<TOTAL-COSTS> 201,991
<OTHER-EXPENSES> 208,539
<LOSS-PROVISION> 1,105
<INTEREST-EXPENSE> 4,376
<INCOME-PRETAX> 57,213
<INCOME-TAX> 21,970
<INCOME-CONTINUING> 34,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,967
<EPS-BASIC> 0.72
<EPS-DILUTED> 0.71
</TABLE>
