UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q/A
(Mark One) | (Amendment No. 2) | |
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ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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For the quarterly period ended April 30, 2003 | ||
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to
Commission file number 1-13026
BLYTH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE | 36-2984916 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
One East Weaver Street, Greenwich, Connecticut | 06831 |
(Address of principal executive offices) | (Zip Code) |
(203) 661-1926
(Registrant’s telephone number, including area code)
(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 o No ý See Item 5 of Part II.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes ý No o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
45,946,727 Common Shares as of May 31, 2003
Explanatory Note
As of January 31, 2004, we revised our reporting segments based on Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information”. This revision of segments had the related effect of requiring changes in our reporting units for purposes of goodwill impairment reviews under Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), retroactive to the February 1, 2002 adoption date. This resulted in the need to perform impairment reviews of several additional reporting units as of February 1, 2002 and each subsequent year–end balance sheet date. These impairment reviews indicated the need to record additional impairment charges as of the February 1, 2002 adoption of SFAS 142.
On August 4, 2004, we filed amendments on Form 10–Q/A restating our Consolidated Financial Statements for the interim periods ended April 30, July 31, and October 31, 2003 to reflect these changes. Our predecessor independent public accountants had performed the reviews that we were required to have performed by Section 10–01(d) of Regulation S–X of our Consolidated Financial Statements as included in our Quarterly Reports on Form 10–Q as initially filed for the interim periods ended April 30, July 31, and October 31, 2003. The amendments filed on Form 10-Q/A were filed after our termination of our predecessor independent public accountants. The Consolidated Financial Statements included in our amended quarterly reports were not reviewed by any independent public accountant, and such amended quarterly reports are therefore not considered fully compliant with the requirements of the Exchange Act and the rules and regulations of the Commission. We have had preliminary discussions with and plan to re-engage our predecessor independent public accountants to perform such a review, and we presently expect those reviews to be completed by our predecessor independent public accountants prior to January 31, 2005, although there can be no assurance that they will be able to do so. We do not expect that the reviews of our amended quarterly reports will require any change to the Consolidated Financial Statements.
We are filing this amendment to our fiscal 2004 10-Q/A filing for the period ended April 30, 2003 to reflect the fact that the financial information included in this report was not reviewed by any independent public accountant. At the appropriate time, we intend to file an additional amendment to this amended report to reflect the completion of the review.
The staff of the Commission may take the position that because certain information relating to our Quarterly Reports for fiscal 2004 has not been reviewed by any independent public accountants prior to filing as required by Section 10–01(d) of Regulation S–X, we would not be viewed as having made all required filings until the reports are amended to reflect the required review, and even then that the filings were not filed timely. If so, we would be ineligible to use Forms S–2 and S–3 to register securities (or amend an existing registration statement) until all required reports under the Exchange Act have been timely filed for the 12 months prior to the filing of the registration statement or amendment. While ineligibility to use Form S–2 or S–3 would involve additional expense should we need to file or amend a registration statement, we do not view ineligibility as having a material adverse effect on our access to capital resources. Second, the safe harbor from registration contained in Rule 144 under the Securities Act of 1933 may be unavailable to our executive officers, directors and other affiliates wishing to sell our securities. We have instructed such persons not to resell securities in reliance upon Rule 144 until otherwise advised. As a precautionary matter, to be consistent with these instructions, on the cover page of this filing, we have checked the box that indicates that we have not made all filings required in the last 90 days.
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Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 (“Exchange Act”) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this quarterly report as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15. Based upon this evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this quarterly report, except for the matters set forth in the Explanatory Note to this quarterly report and Item 5 of Part II of this quarterly report.
(b) Changes in internal control over financial reporting.
There was no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 5. Other Information
As of January 31, 2004, we revised our reporting segments based on Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information”. This revision of segments had the related effect of requiring changes in our reporting units for purposes of goodwill impairment reviews under Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), retroactive to the February 1, 2002 adoption date. This resulted in the need to perform impairment reviews of several additional reporting units as of February 1, 2002 and each subsequent year–end balance sheet date. These impairment reviews indicated the need to record additional impairment charges as of the February 1, 2002 adoption of SFAS 142.
On August 4, 2004, we filed amendments on Form 10–Q/A restating our Consolidated Financial Statements for the interim periods ended April 30, July 31, and October 31, 2003 to reflect these changes. Our predecessor independent public accountants had performed the reviews that we were required to have performed by Section 10–01(d) of Regulation S–X of our Consolidated Financial Statements as included in our Quarterly Reports on Form 10–Q as initially filed for the interim periods ended April 30, July 31, and October 31, 2003. The amendments filed on Form 10-Q/A were filed after our termination of our predecessor independent public accountants. The Consolidated Financial Statements included in our amended quarterly reports were not reviewed by any independent public accountant, and such amended quarterly reports are therefore not considered fully compliant with the requirements of the Exchange Act and the rules and regulations of the Commission. We have had preliminary discussions with and plan to re-engage our predecessor independent public accountants to perform such a review, and we presently expect those reviews to be completed by our predecessor independent public accountants prior to January 31, 2005, although there can be no assurance that they will be able to do so. We do not expect that the reviews of our amended quarterly reports will require any change to the Consolidated Financial Statements.
We are filing this amendment to our fiscal 2004 10-Q/A filing for the period ended April 30, 2003 to reflect the fact that the financial information included in this report was not reviewed by any independent public accountant. At the appropriate time, we intend to file an additional amendment to this amended report to reflect the completion of the review.
The staff of the Commission may take the position that because certain information relating to our Quarterly Reports for fiscal 2004 has not been reviewed by any independent public accountants prior to filing as required by Section 10–01(d) of Regulation S–X, we would not be viewed as having made all required filings until the reports are amended to reflect the required review, and even then that the filings were not filed timely. If so, we would be ineligible to use Forms S–2 and S–3 to register securities (or amend an existing registration statement) until all required reports under the Exchange Act have been timely filed for the 12 months prior to the filing of the registration statement or amendment. While ineligibility to use Form S–2 or S–3 would involve additional expense should we need to file or amend a registration statement, we do not view ineligibility as having a material adverse effect on our access to capital resources. Second, the safe harbor from registration contained in Rule 144 under the Securities Act of 1933 may be unavailable to our executive officers, directors and other affiliates wishing to sell our securities. We have instructed such persons not to resell securities in reliance upon Rule 144 until otherwise advised. As a precautionary matter, to be consistent with these instructions, on the cover page of this filing, we have checked the box that indicates that we have not made all filings required in the last 90 days.
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
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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.
Risk of Inability to Maintain Sales Growth Rate
The Company has experienced significant sales growth in past years. While management expects continued growth, our future growth rate will likely be less than our historical growth rate. The Company expects faster sales growth in its international market versus its United States market, particularly in the Direct Selling and Wholesale segments. The Company’s ability to increase sales depends on numerous factors, including market acceptance of existing products, the successful introduction of new products, the increase in consumers’ discretionary spending, the ability to recruit new independent sales consultants, sourcing of raw materials and demand-driven increases in production and distribution capacity. Business in all of our segments is driven by consumer preferences. Accordingly, there can be no assurances that the Company’s current or future products will maintain or achieve market acceptance. Our sales and earnings results can be negatively impacted by the worldwide economic environment, particularly the Canadian, United States and European economies. There can be no assurances that the Company’s financial results will not be materially adversely affected by these factors in the future. The Company’s historical growth has been due in part to acquisitions and management continues to consider additional strategic acquisitions. There can be no assurances that management will continue to identify suitable acquisition candidates, consummate acquisitions on terms favorable to the Company, finance acquisitions or successfully integrate acquired operations.
Risks Associated with International Sales and Foreign-Sourced Products
Our international sales growth rate has outpaced our United States growth rate in recent years. Moreover, the Company sources a portion of its products in all of its business segments from independent manufacturers in the Pacific Rim, Europe and Mexico. For these reasons, we are subject to the following risks associated with international manufacturing and sales: fluctuations in currency exchange rates, economic or political instability, international public heath crises, transportation costs and delays, difficulty in maintaining quality control, restrictive governmental actions, nationalizations, the laws and policies of the United States, Canada and certain European countries affecting the importation of goods (including duties, quotas and taxes) and the trade and tax laws of other nations.
Ability to Respond to Increased Product Demand
The Company’s ability to meet future product demand in all of its business segments will depend upon its success in (1) bringing new production and distribution capacity on line in a timely manner, (2) improving its ability to forecast product demand and fulfill customer orders promptly, (3) improving customer service-oriented management information systems and (4) training, motivating and managing new employees. The failure of any of the above could result in a material adverse effect on our financial results.
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Risk of Shortages of Raw Materials
Certain raw materials could be in short supply due to capacity, availability, a change in requirements, weather or other factors, including supply disruptions due to production or transportation delays. Such shortages have not had and are not presently expected to have a material adverse effect on the Company’s operations. While the price of crude oil is only one of several factors impacting the price of petroleum wax, it is possible that recent fluctuations in oil prices may have a material adverse affect on the cost of petroleum-based products used in the manufacture or transportation of our products, particularly in the Direct Selling and Wholesale segments.
Dependence on Key Corporate Management Personnel
Our success depends in part on the contributions of key corporate management, including our Chairman and Chief Executive Officer, Robert B. Goergen. The Company does not have employment contracts with any of its key corporate management personnel except Mr. Goergen, nor does it maintain any key person life insurance policies. The loss of any of the key corporate management personnel could have a material adverse effect on the Company.
Risk of Increased Competition
Our business is highly competitive both in terms of pricing and new product introductions. The worldwide market for home expressions products is highly fragmented with numerous suppliers serving one or more of the distribution channels served by the Company. In addition, the Company competes for direct selling consultants with other direct selling companies. Because there are relatively low barriers to entry in all of our business segments, the Company may face increased competition from other companies, some of which may have substantially greater financial or other resources than those available to us. Competition includes companies selling candles manufactured at low cost outside of the United States. Moreover, certain competitors focus on a single geographic or product market and attempt to gain or maintain market share solely on the basis of price.
Our information technology systems are dependent on global communications providers, telephone systems, hardware, software and other aspects of Internet infrastructure that have experienced significant system failures and outages in the past. Our systems are susceptible to outages due to fire, floods, power loss, telecommunications failures, break-ins and similar events. Despite the implementation of network security measures, the Company’s systems are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with Company systems. The occurrence of these or other events could disrupt or damage our information technology systems and inhibit internal operations, the ability to provide customer service or the ability of customers or sales personnel to access the Company’s information systems.
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Item 6. Exhibits
a) Exhibits
| 31.1 |
| Certification of Chairman, and Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
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| 31.2 |
| Certification of Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
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| 32.1 |
| Certification of Chairman and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| 32.2 |
| Certification of Vice President and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| BLYTH, INC. | ||
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Date: | December 16, 2004 |
| By: | /s/ Robert B. Goergen |
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| Robert B. Goergen | ||
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| Chairman and Chief Executive Officer | ||
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Date: | December 16, 2004 |
| By: | /s/ Robert H. Barghaus |
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| Robert H. Barghaus | ||
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| Vice President and Chief Financial Officer | ||
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