SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED APRIL 30, 1996
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
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Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
30,715,927 COMMON SHARES AS OF MAY 31, 1996.
PAGE 1 OF 13
BLYTH INDUSTRIES, INC.
INDEX
PAGE
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Form 10-Q Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Form 10-Q Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets. . . . . . . . . . . . . . . 3
Consolidated Statements of Earnings. . . . . . . . . . . 4
Consolidated Statements of Stockholders' Equity. . . . . 5
Consolidated Statements of Cash Flows. . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . .9-11
Part II. Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . .12
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . .12
Item 3. Defaults upon Senior Securities. . . . . . . . . . . . . .12
Item 4. Submission of Matters to a Vote of Security Holders. . . .12
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . .12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . .12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
PAGE 2 OF 13
Part I. FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
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APRIL 30, JANUARY 31,
(In thousands, except share data) 1996 1996
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(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 44,574 $ 46,509
Accounts receivable, less allowance for doubtful receivables
of $712 and $570, respectively 27,855 24,889
Inventories (Note 3) 84,907 73,176
Prepaid expenses 629 288
Deferred income taxes 600 600
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Total current assets 158,565 145,462
PROPERTY, PLANT AND EQUIPMENT
Less accumulated depreciation ($22,830 and $21,030 respectively) 63,694 58,159
OTHER ASSETS
Investments (Note 2) 6,618 6,586
Excess of cost over fair value of assets acquired, net of
accumulated amortization of $395 and $207 respectively 10,772 3,925
Deposits 566 590
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$ 240,215 $ 214,722
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 529 $ 514
Accounts payable 28,584 18,856
Accrued expenses 24,967 18,961
Income taxes 2,314 93
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Total current liabilities 56,394 38,424
DEFERRED INCOME TAXES 3,250 3,000
LONG-TERM DEBT, less current maturities 27,370 27,504
EXCESS OF FAIR VALUE OVER COST OF ASSETS ACQUIRED, NET OF
ACCUMULATED AMORTIZATION OF $481 AND $451 RESPECTIVELY 923 953
MINORITY INTEREST 1,489 1,487
STOCKHOLDERS' EQUITY:
Preferred stock, authorized 10,000,000 shares of $0.01
par value; no shares issued and outstanding - -
Common stock, authorized 100,000,000 shares of $0.02
par value; issued and outstanding, 30,715,876 and
30,707,220, respectively 614 614
Additional contributed capital 86,888 86,701
Retained earnings 63,287 56,039
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150,789 143,354
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$ 240,215 $ 214,722
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 3 OF 13
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
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THREE MONTHS ENDED APRIL 30 (In thousands, except per share data)
1996 1995
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Net sales $ 106,338 $ 68,902
Cost of goods sold 47,863 32,737
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Gross profit 58,475 36,165
Selling and Shipping 36,330 23,595
Administrative 9,953 5,887
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46,283 29,482
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Operating profit 12,192 6,683
Other expense (income)
Interest expense 534 65
Interest income (408) (113)
Equity in earnings of investees (81) (67)
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45 (115)
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Earnings before income tax expense and minority interest 12,147 6,798
Income tax expense 4,897 2,692
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Earnings before minority interest 7,250 4,106
Minority interest 2 -
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NET EARNINGS $ 7,248 $ 4,106
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Net earnings per common and common
equivalent share $ 0.23 $ 0.14
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Weighted average number of shares outstanding 31,024 28,420
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 4 OF 13
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
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APRIL 30, (In thousands, except share data)
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ADDITIONAL TOTAL
COMMON STOCK CONTRIBUTED RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
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FOR THE THREE MONTHS ENDED APRIL 30, 1995:
Balance, February 1, 1995 28,191,412 $ 282 $ 31,218 $ 32,322 $ 63,822
Net earnings for the period - - - 4,106 4,106
Common stock issued in connection with
investment in European candle manufacturer 99,808 1 1,403 - 1,404
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Balance, April 30, 1995 28,291,220 $ 283 $ 32,621 $ 36,428 $ 69,332
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FOR THE THREE MONTHS ENDED APRIL 30, 1996:
Balance, February 1, 1996 30,707,220 $ 614 $ 86,701 $ 56,039 $ 143,354
Net earnings for the period - - - 7,248 7,248
Common stock issued in connection with
exercise of stock options and other 8,656 - 187 - 187
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Balance, April 30, 1996 30,715,876 $ 614 $ 86,888 $ 63,287 $ 150,789
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 5 OF 13
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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THREE MONTHS ENDED APRIL 30 (In thousands) 1996 1995
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Cash flows from operating activities:
Net earnings $ 7,248 $ 4,106
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 2,104 1,047
Deferred income taxes 250 -
Equity in earnings of investees (81) (67)
Minority interest 2 -
Changes in operating assets and liabilities, net of
effect of business acquisition:
Accounts receivable (2,966) (3,374)
Inventories (11,730) (6,342)
Prepaid expenses (342) 29
Other assets 24 2
Accounts payable 9,728 3,904
Accrued expenses 6,006 1,441
Income taxes 2,221 2,408
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Total adjustments 5,216 (952)
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Net cash provided by operating activities 12,464 3,154
Cash flows from investing activities:
Purchases of property, plant, and equipment (6,085) (3,190)
Investments in investees - (1,444)
Purchase of businesses net of cash acquired (8,283) (7,116)
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Net cash used in investing activities (14,368) (11,750)
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Cash flows from financing activities:
Proceeds from issuance of common stock 87 -
Borrowings from bank line of credit - 4,200
Repayments on bank line of credit - (200)
Payments on long-term debt (118) (98)
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Net cash (used in) provided by financing activities (31) 3,902
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Net decrease in cash (1,935) (4,694)
Cash and cash equivalents at beginning of period 46,509 9,081
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Cash and cash equivalents at end of period $ 44,574 $ 4,387
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SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In March, 1995 the Company issued 99,808 shares of its common stock as part of
the purchase of an additional 25% of Colony Gift Corporation, Ltd. The market
value of the stock on the date of issuance was $1,404.
In April, 1995 the Company purchased 80% of the capital stock of Jeanmarie
Creations, Inc. for $7,116 net of cash acquired. In conjunction with the
acquisition, liabilities were assumed as follows:
Fair value of assets acquired $ 8,511
Cash paid for capital stock (7,116)
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Liabilities Assumed $ 1,395
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 6 OF 13
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries and their subsidiaries. All significant
intercompany accounts and transactions have been eliminated. 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 April 30, 1996 and the consolidated
results of its operations and cash flows for the three months period ended
April 30, 1996 and 1995. In December 1995, the Company effected a two-for-
one stock split in the form of a stock dividend. All share quantities per
share amounts and options data have been retroactively restated to reflect
the stock split. These interim statements should be read in conjunction
with the Company's consolidated financial statements for the year ended
January 31, 1996, as set forth in the Company's Form 10-K Annual Report.
Operating results for the three months ended April 30, 1996 are not
necessarily indicative of the results that may be expected for the year
ending January 31, 1997.
2. BUSINESS ACQUISITIONS
On September 24, 1993, the Company acquired 25% of the issued and
outstanding capital stock of Colony Gift Corporation, Ltd. (Colony) for
$1,000,000 cash. Under the purchase agreement, the Company has the option
to acquire up to 100% of the stock of this investee in 25% increments, at
certain dates through June 1, 2007, at prices determined pursuant to the
agreement. In addition, the shareholders of the investee have the option
to buy back shares from the Company in the event the Company does not
exercise its purchase option.
On March 15, 1995, the Company exercised its option to purchase an
additional 25% of the issued and outstanding capital stock of Colony for
approximately $1,400,000 cash and 99,808 shares of the Company's common
stock (which had a market value of approximately $1,400,000 on the date of
purchase). The excess of the Company's investment in Colony over its share
in the related underlying equity in net assets is being amortized on a
straight line basis over a period of 15 years. The remaining unamortized
balance at April 30, 1996 was $2,010,000. The investment is recorded under
the equity method of accounting. Accordingly, the Company has recognized
its share of earnings in this investee from the dates of acquisition.
On April 25, 1995, the Company acquired 80% of the issued and outstanding
capital stock of Jeanmarie Creations, Inc., (Jeanmarie) a decorative gift
bag company, for approximately $7,116,000 net of cash acquired. Under the
purchase and sale agreements, the Company has the option to acquire, and in
certain circumstances, may be required to acquire, the remaining 20% of
common stock of Jeanmarie at prices set forth in the agreements. This
acquisition was recorded under the purchase method of accounting and was
funded through borrowings on the Company's credit facility and through
available cash. The excess of the purchase price over the Company's share
in the related underlying equity in net assets acquired is being amortized
on a straight line basis over a period of 15 years. The remaining
unamortized balance at April 30, 1996 was $3,857,000. The results of
Jeanmarie are not included in the Company's consolidated results for the
first quarter of fiscal 1996 but had this acquisition occurred on February
1, 1995, it would not have had a material effect on the statement of
earnings.
On February 13, 1996, the Company purchased from Hallmark Cards,
Incorporated the Canterbury candle product line and related candle
manufacturing equipment for approximately $8,400,000. Under the terms of
the purchase agreement, the Company will work jointly with Hallmark as a
preferred vendor in the merchandising and distribution of the Company's
candles and candle accessories through various outlets which carry Hallmark
candles.
PAGE 7 OF 13
BLYTH INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. INVENTORIES
The components of inventory consist of the following (in thousands):
April 30, 1996 January 31, 1996
-----------------------------------
Finished goods $70,583 $60,940
Work in progress 1,847 1,803
Raw materials 12,477 10,433
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$84,907 $73,176
PAGE 8 OF 13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Net Sales
Net sales in the first quarter ended April 30, 1996 rose 54% to
$106,338,000 compared with $68,902,000 a year earlier. Virtually all
of this increase was attributable to unit growth in sales of the
Company's consumer everyday, particularly scented candles and
accessories, and outdoor seasonal products. In particular, three
product areas were among those which experienced the highest growth
rate for the quarter ended April 30, 1996: Ambria, our new brand of
coordinated home fragrance and decorative lighting products; PartyLite
Gifts, our party plan direct seller in the United States; and
International, particularly Europe and Canada.
Gross Profit
Gross profit in the first quarter ended April 30, 1996 increased
$22,310,000, or 62% from $36,165,000 for the quarter ended April 30,
1995 to $58,475,000. Gross profit margin increased from 52.5% for the
quarter ended April 30, 1995 to 55.0% for the quarter ended April 30,
1996. Such increases were substantially due to product mix.
Selling and Shipping Expense
Selling and shipping expense increased $12.7 million, or 54.0%, from
$23.6 million in the quarter ended April 30, 1995 (34.2% of net
sales), to $36.3 million in the quarter ended April 30, 1996 (34.2% of
net sales). The increases were primarily attributable to increased
sales to the consumer market, particularly sales through the Company's
home party plan direct selling activities, in which sales expenses, as
a percentage of sales, are relatively higher. In addition, the
Company benefited from its ability to spread selling and shipping
expense against a larger amount of net sales. Finally, the
Company's consumer products generally require a higher level of
product development and sales and marketing expense than the Company's
food service and religious products.
Administrative Expense
Administrative expense increased $4.1 million, or 69.1%, from $5.9
million in the quarter ended April 30, 1995 (8.5% of net sales) to
$10.0 million in the quarter ended April 30, 1996 (9.4% of net sales).
Such increases were a result of increases in personnel (from
approximately 188 administrative employees at April 30, 1995 to
approximately 325 administrative employees at April 30, 1996,
substantially improved information and data processing capabilities
and increases in leased and owned office space. In connection with
anticipated growth in its consumer product sales, which generally
require somewhat greater administrative expenditures, the Company
expects further increases in administrative expenses due to expected
increases in the number of employees. The Company also expects
additional infrastructure spending associated with improvements in
information and administrative support systems.
Interest Expense
Interest expense for the three months ended April 30, 1996 was
$534,000 compared to $65,000 for the same period in the prior year.
Interest expense was higher due to the issuance of Senior Notes in
July, 1995.
Income Taxes
The effective income tax rate for the quarters ended April 30, 1996
and 1995 was approximately 40.0%.
PAGE 9 OF 13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Net Earnings
As a result of the foregoing, net earnings increased $3,142,000 from
the quarter ended April 30, 1995 to $7,248,000 for the quarter ended
April 30, 1996.
Earnings per share based upon the weighted average number of shares
outstanding for the quarter ended April 30, 1996 were $0.23 compared
to $0.14 for the quarter ended April 30, 1995. Earnings per share
have been restated for a 2 for 1 stock split effected as a stock
dividend in December 1995.
Liquidity and Capital Resources
Operating assets and liabilities increased from January 31, 1996 to
April 30, 1996 due to the Company's internally generated growth.
Inventory increased from $73.2 million at January 31, 1996 to $84.9
million at April 30, 1996. Measured in terms of number of days' worth
of cost of goods sold inventory decreased from 169 days' worth of
inventory at the end of fiscal 1996 to 160 days' worth of inventory at
April 30, 1996. Accounts receivable increased $3.0 million, or 12.0%
from $24.9 million at the end of fiscal 1996 to $27.0 million at April
30, 1996 due to sales growth. Accounts payable and accrued expenses
increased $15.8 million, or 41.8% from $37.8 million at the end of
fiscal 1996 to $53.6 million at April 30, 1996. The increase in
accounts payable and accrued expenses is attributable to the increases
in operating assets and the Company's overall growth.
Capital expenditures for property, plant and equipment were $6.1
million in the three months ended April 30, 1996. Capital
expenditures were primarily investments in new plant and equipment and
improvements to existing plant and equipment. The Company anticipates
capital spending of approximately $46.0 million for fiscal 1997, of
which approximately $18.0 million will be used for a new distribution
facility in Elkin, North Carolina, approximately $21.0 million will be
used for machinery and equipment and increases in and upgrades to
machinery and equipment in existing facilities, and approximately $7.0
million will be used for information systems and office expansion.
The Company has grown in part through acquisitions and, as part of its
growth strategy, the Company expects to continue from time to time in
the ordinary course of its business to evaluate and pursue
opportunities to acquire other companies, assets and product lines
that either complement or expand its existing business. The Company
expects to effect one or more such acquisitions in the next twelve
months, although the Company currently has no arrangements, agreements
or understandings with respect to any such acquisitions.
On February 13, 1996, the Company purchased from Hallmark Cards,
Incorporated the Canterbury candle product line and related candle
manufacturing equipment for approximately $8.4 million. Under the
terms of the purchase agreement, the Company will work jointly with
Hallmark as a preferred vendor in the merchandising and distribution
of the Company's candles and candle accessories through various
outlets which carry Hallmark candles.
The 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 is building its inventory to meet increased
demand. The Company believes that cash on hand, cash from operations
and available borrowings under the Credit Facility described below,
will be sufficient to fund its operating requirements, capital
expenditures and all other obligations for the next twelve months.
PAGE 10 OF 13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Liquidity and Capital Resources (CONTINUED)
The Company has a Credit Facility with Harris Trust and Savings Bank
("Harris") and Bank of America Illinois (the "Banks") pursuant to
which the Banks have agreed, subject to certain conditions, to provide
an unsecured revolving credit facility to the Company in an aggregate
amount of up to $21.0 million to fund ongoing working capital
requirements, letter of credit requirements and general corporate
purposes of the Company. Amounts outstanding under the Credit
Facility bear interest, at the Company's option, at Harris' prime rate
or at LIBOR plus 0.75%. In connection with the Credit Facility, the
Company pays a commitment fee of 0.25% per annum on the unused portion
of the revolving credit facility. The Credit Facility contains
standard covenants, including maintenance of certain financial ratios
and limitations on certain restricted payments, including dividends.
The Company does not believe that such covenants will have a material
effect on its operations. The Company anticipates refinancing the
Credit Facility at, or prior to, its expiration in July, 1996 to meet
the Company's longer term operating requirements, capital expenditures
and other obligations.
Net cash provided by operating activities amounted to $12.5 million
for the three months ended April 30, 1996 compared to $3.2 million for
the three months ended April 30, 1995. At April 30, 1996, no
indebtedness was outstanding under the Credit Facility and
approximately $2.9 million of letters of credit were outstanding under
the Credit Facility as of April 30, 1996.
PAGE 11 OF 13
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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
11. Statement regarding computation of per share earnings
27. Financial data schedule
b) Reports on Form 8-K
The Registrant filed a Form 8-K, dated April 1, 1996,
reporting the change in the Registrant's principal
executive offices from Two Greenwich Plaza, Greenwich,
Connecticut 06830 to 100 Field Point Road, Greenwich,
Connecticut 06830.
PAGE 12 OF 13
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
BLYTH INDUSTRIES, INC.
Date: June 11, 1996 By: /s/ Robert B. Goergen
------------- --------------------------------
Robert B. Goergen
Chief Executive Officer
Date: June 11, 1996 By: /s/ Howard E. Rose
------------- --------------------------------
Howard E. Rose
Secretary and
Chief Financial Officer
PAGE 13 OF 13
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE NO.
- - ------- ----------- ---------
11. Statement regarding computations of per share earnings N/A
27. Financial data schedule N/A