BLYTH INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

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FOR THE FISCAL YEAR ENDED
JANUARY 31, 2002 COMMISSION FILE NO. 1-13026

BLYTH, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2984916
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE EAST WEAVER STREET
GREENWICH, CONNECTICUT 06831
(Address of principal executive offices) (Zip Code)

Registrant's telephone number including area code (203) 661-1926

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of exchange on which registered
------------------- ------------------------------------
Common Stock, $0.02 par value New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

As of April 8, 2002, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $1.301 billion based on the
closing price of the registrant's Common Stock on the New York Stock Exchange on
such date and based on the assumption, for purposes of this computation only,
that all of the registrant's directors and executive officers are affiliates.

As of April 8, 2002, there were 46,285,741 outstanding shares of Common
Stock, $0.02 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2002 Proxy Statement for the Annual Meeting of Shareholders
to be held on June 6, 2002 (Incorporated into Part III).

TABLE OF CONTENTS

PART I

Item 1. Business.................................................................................. 3-13

Item 2. Properties...................................................................................14

Item 3. Legal Proceedings............................................................................15

Item 4. Submission of Matters to a Vote of Security Holders..........................................15

PART II

Item 5. Market for Company's Common Equity and Related Stockholder Matters...........................15

Item 6. Selected Consolidated Financial Data.........................................................16

Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations...............................................................................17-27

Item 7A. Quantitative and Qualitative Disclosures about Market Risk...................................28

Item 8. Financial Statements and Supplementary Data...............................................30-49

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................................50

PART III

Item 10. Directors and Executive Officers of the Registrant...........................................50

Item 11. Executive Compensation.......................................................................50

Item 12. Security Ownership of Certain Beneficial Owners and Management...............................50

Item 13. Certain Relationships and Related Transactions...............................................50

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..............................50

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PART I

ITEM 1. BUSINESS

(a) GENERAL DEVELOPMENT OF THE BUSINESS

Blyth, Inc. (together with its subsidiaries, the "Company", which may be
referred to as "we", "us" or "our") designs, manufactures, markets and
distributes an extensive line of Candles & Home Fragrance products; seasonal
decorative and home decor products ("Creative Expressions"); and food service
products ("Foodservice"). The Company has operations within and outside the
United States and sells its products worldwide.

Since becoming a public company, our net sales have grown substantially.
Internal growth and acquisitions have contributed to such growth. Internal
growth has been generated primarily by (a) increased sales of Candles & Home
Fragrance products and Creative Expressions & Foodservice products to consumers
worldwide, (b) the introduction of new products and product line extensions, and
(c) geographic expansion. We have successfully integrated numerous acquisitions
and investments into our operations since the Company's formation in 1977.

You can learn more about us by visiting our website at www.blythinc.com. The
information therein, however, is not incorporated herein by reference and is not
a part of this Annual Report on Form 10-K.

(b) DESCRIPTION OF AND FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS

The Company operates in two business segments: Candles & Home Fragrance
products, and Creative Expressions & Foodservice products(1), which accounted
for approximately 83% and 17%, respectively, of consolidated net sales for the
fiscal year ended January 31, 2002. The financial information relating to these
business segments for each of the years in the periods ended January 31, 2002,
2001 and 2000 appearing in Note 13 to the Company's consolidated financial
statements in this Annual Report on Form 10-K is incorporated herein by
reference. Further description of each business segment is provided below:

CANDLES & HOME FRAGRANCE PRODUCTS

The Candles & Home Fragrance products designed, manufactured, marketed and
distributed by the Company primarily include scented and unscented candles,
aromatherapy candles, potpourri and environmental fragrance products (including
air fresheners, filters and sprays), and a broad range of candle accessories.
These products are sold under various brand names through a wide variety of
distribution channels. In managing our day to day business in the Candles & Home
Fragrance segment, as well as evaluating strategic opportunities, the Company is
focused on the worldwide consumer market for Candles & Home

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Fragrance products and related accessories.

Within the worldwide consumer market for Candles & Home Fragrance products, we
focus on two primary areas: the consumer market in the United States and markets
outside the United States.

UNITED STATES CONSUMER MARKET

With respect to the consumer market in the United States, we market our Candles
& Home Fragrance products through a variety of distribution channels, including
the activities of PartyLite Gifts, Inc., Candle Corporation of America and Endar
Corporation. We tailor our products, designs, packaging and prices to satisfy
the varying demands of customers within each distribution channel.

Specifically, we sell our Candles & Home Fragrance products and candle
accessories direct to the consumer through a network of independent sales
consultants and to department and gift stores, specialty chains, food and drug
stores, and mass merchandisers through independent sales representatives and
Company sales managers. We support all of the above by providing our sales force
with comprehensive product catalogs and samples to market our everyday,
promotional and seasonal product lines.

Our direct selling activities reach consumers by utilizing a network of
independent sales consultants to sell our Candles & Home Fragrance products and
candle accessories through the home party plan method of direct selling. Our
independent sales consultants receive their earnings based on sales of our
Candles & Home Fragrance products and candle accessories at home parties
organized by them, as well as through home parties organized by other
consultants recruited by them. Over 35,000 independent sales consultants were
selling our Candles & Home Fragrance products and candle accessories in the
United States in fiscal year 2002; and, we were represented by independent sales
consultants in all 50 states. Sales from our direct selling activities fell
approximately 7% in fiscal year 2002.

We believe that certain advantages arise from having a broad mix of distribution
channels. For example, successful new ideas and research can be shared across
channels among our marketing groups. We believe that our competitive position in
all markets is enhanced by our ability to respond quickly to new orders and our
ability to assist customers through inventory management and control and to
satisfy delivery requirements through on-line ordering, which is available to
all PartyLite US and Canadian independent sales consultants, as well as to
independent sales representatives for Candle Corporation of America.

MARKETS OUTSIDE THE UNITED STATES

We continue to focus on becoming a worldwide home fragrance company built mainly
around candles, but also including related products. We market our Candles &
Home Fragrance products outside (as well as inside) the United States direct to
the consumer through a network of independent sales consultants, as well as to
department and gift stores, specialty chains, and mass merchandisers through
independent sales representatives, and Company sales managers. During fiscal
year 2002, the Company had independent direct selling sales consultants
exclusively selling its PartyLite -Registered Trademark- brand products in the
following geographical areas outside the United States: Austria, England,

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Finland, France, Germany, Italy, Luxembourg, Mexico, Northern Ireland,
Switzerland, and Canada. The Company has a total of over 50,000 active selling
independent consultants worldwide (including the United States).

The Company is also the leading manufacturer and marketer of fragranced candles
and related products to mass merchants, department and gift stores in Europe
through the activities of the Colony Group, the Gies Group and Wax Lyrical,
Ltd., our specialty retailer in the United Kingdom. Our Ambria -TM-,
Asp-Holmblad -Registered Trademark- (2), Carolina -Registered Trademark-, Colony
- -Registered Trademark-(2)(3), Gies -Registered Trademark- (2), Liljeholmens
- -Registered Trademark- (2), and Wax Lyrical -Registered Trademark- (2) brand
products are sold through retailers and have their highest market shares in the
United Kingdom, Germany, Sweden and Denmark. In fiscal year 2002, the Colony
Group began the transition from the Colony -Registered Trademark- brand name to
the Colonial -TM- brand name. The Colonial -TM- brand has been a successful
premium channel brand sold in North America since 1909. This transition is the
first step in making the Colonial -TM- brand our global premium brand available
at retail in Europe. We believe that the quality heritage of the Colonial -TM-
brand name and its solid, double digit North American growth indicate its
potential as a premium brand in the underdeveloped European market for
fragranced candles. We have also accelerated our introduction of the very
successful Colonial at HOME -Registered Trademark- brand product line,
previously available only in the United States, to our customers across Europe.

We believe that international markets offer the Company significant potential
for growth. In fiscal year 2002, approximately 26% of our total sales were
outside of the United States and our international sales growth rate was
approximately 3%.

Our international operations also include exports of products sold through
Company sales managers and independent sales representatives, which compete in
the markets of Canada, Europe, Latin America and the Pacific Rim, to independent
distributors, department and gift stores, mass merchandisers and foodservice
distributors. We currently plan to continue to expand internationally through
the establishment of foreign-based marketing and distribution operations.

More detailed information regarding geographic area data is set forth in Note 13
to the Company's consolidated financial statements.

In fiscal year 2003, we plan to grow the Candles & Home Fragrance segment of our
business for the most part organically, both domestically and internationally,
through possible line extensions into new product segments within our existing
business and with the possibility of some smaller acquisition-related growth.

CREATIVE EXPRESSIONS & FOODSERVICE PRODUCTS

The Company designs, manufactures, markets and distributes a broad range of
Creative Expressions & Foodservice products, including decorative gift bags and
tags, seasonal decorations and home decor products under the brand names
Jeanmarie -Registered Trademark-, JMC Impact -TM- and Midwest of Cannon Falls
- -Registered Trademark-. We are also a producer of portable heating fuel,
tabletop illumination products and other institutional products sold under
various

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brand names, including Sterno -Registered Trademark- and HandyFuel -Registered
Trademark-. We sell these products, both domestically and internationally,
through independent sales representatives and distributors.

In April 2001, we purchased Midwest of Cannon Falls, Inc., a market leader in
premium, holiday giftware with a growing market position in premium home accents
and garden products. Its products are sold by more than 17,000 retailers,
including specialty gift shops, department stores, catalog and E-tailers,
hardware/home and garden centers and mass merchants.

Through the activities of JMC Impact, Inc., we market our decorative gift bags,
tags and seasonal decorations primarily to the mass market and tailor our
Creative Expressions products, designs and packaging to meet the varying demands
of customers within this channel.

The Company also services, through The Sterno Group -TM-, a division of Candle
Corporation of America, the foodservice market where we are a supplier of
foodservice products to restaurants, hotels and other institutional customers.
We sell these products through independent sales representatives, independent
foodservice distributors, and Company sales managers. Sales of The Sterno
Group -TM- fell approximately 8.4% in fiscal year 2002, primarily due to the
general slowdown in the hotel, restaurant and catering businesses following the
events of September 11th.

Institutional sales in fiscal year 2002 were less than ten percent of the
Company's total sales. In fiscal year 2003, we plan to continue our growth in
the Creative Expressions & Foodservice segment through internal sales growth, as
well as through acquisitions.

The Company continues to pursue actively strategic acquisitions in the following
areas: paper-related and seasonal decorative products and foodservice products,
mirroring businesses in which the Company is already engaged, as well as
giftware and home decor products, which are closely related to current
established product lines.

PRODUCT BRAND NAMES

The key brand names under which our Candles & Home Fragrance products are sold,
in alphabetical order, are:

Ambria-TM-
Asp-Holmblad -Registered Trademark- (2)
Canterbury -Registered Trademark-
Carolina -Registered Trademark-
Carolina Designs -Registered Trademark-
Colonial -TM-
Colonial Candle of Cape Cod -Registered Trademark-
Colonial at HOME -Registered Trademark-
Colony -Registered Trademark- (2) (3)
Endar -TM-
Florasense -Registered Trademark-
Gies -Registered Trademark- (2)
Indulgences -Registered Trademark-
Kate's -TM-
Liljeholmens -Registered Trademark- (2)
PartyLite -Registered Trademark-
Wax Lyrical -Registered Trademark- (2)

The key brand names for our Creative Expressions & Foodservice products, in
alphabetical order, are:

Canned Heat -TM-
HandyFuel -Registered Trademark-
Jeanmarie -Registered Trademark-
JMC Impact -TM-
Midwest of Cannon Falls -Registered Trademark-

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Sterno -Registered Trademark-

NEW PRODUCT DEVELOPMENT

Each year we develop and introduce new products for the Candles & Home Fragrance
segment and Creative Expressions & Foodservice segment to satisfy changing
consumer tastes. The new product development process is coordinated by the
Company on a worldwide basis by teams comprised of brand managers, product
managers, designers, global sourcing personnel, research and development
laboratory technicians, manufacturing engineers and sales managers.

New product concepts are directed to our marketing departments from all areas
within the Company, as well as from the Company's independent sales
representatives. The new product development process, including technical
research, fragrance studies, market research, comparative analysis, engineering
specifications, feasibility studies, safety assessments, testing and evaluation
can generally require from 3 to 18 months to complete. In total, new products
have typically accounted for at least 15% of our net sales in the first full
year following introduction.

The Company's focus on new product development and product line extensions
specific to each channel of distribution and segment has been an important
element of its efforts to become a leading Candles & Home Fragrance products and
Creative Expressions & Foodservice products company. With continual introduction
of new designs, new forms, new shapes, new fragrances, and innovative packaging,
the Company satisfies the varying demands of customers within each distribution
channel. In fiscal year 2002 the Company continued to have success with the
Colonial at HOME -Registered Trademark- and Indulgences -Registered Trademark-
brand product lines and introduced new products such as the Father Christmas
Tealight Globe, the Snowbell Tealight Holder -TM- and Summer Spectacular -TM-
product lines by Partylite Gifts, Inc. and the Halloween Glow Bag by JMC Impact,
Inc., to name a few.

MANUFACTURING, SOURCING AND DISTRIBUTION

In both our business segments, we are continuously attempting to reduce our
costs through more efficient worldwide production, sourcing and distribution
methods, technological advancements and consolidating and rationalizing acquired
equipment and facilities. Following our 1994 initial public offering, we
invested over $250 million in new facilities and more advanced equipment in
order to lower manufacturing costs, improve product quality and significantly
increase manufacturing capacity in order to meet expected future sales growth,
as well as to improve the time from product development to market entry.
However, in fiscal year 2002, following our aggressive European restructuring
efforts in fiscal year 2001, and the significant decline in production
requirements over the past two years following our exiting of the citronella
candle business, we took steps to close one of our North American manufacturing
facilities.(4) We believe that this closing will permit us to reposition our
consumer wholesale businesses more effectively for growth and profitability in
fiscal year 2003.

The manufacture of the Company's Candles & Home Fragrance products and Creative
Expressions & Foodservice products involves the use of various

7

highly automated processes and technologies, as well as certain hand crafting
and finishing. During recent years, we have invested in new automated machinery
and process control systems that we believe have resulted and will continue to
result in significant cost savings and capacity expansion. Since many of our
products, especially our candle accessories and Creative Expressions products,
are manufactured by others based on our design specifications, our global supply
chain approach is very important to our new product development process, as well
as to managing product quality and cost. To maximize distribution efficiencies,
we have also consolidated and built a network of stand-alone highly automated
distribution facilities in our core markets. In addition, we opened a new
distribution center located in Memphis, Tennessee to improve service to our mass
market customers.

In fiscal year 2002, we formally consolidated our corporate-wide operating
functions into a Global Services group. By capitalizing on our core functional
competencies, Global Services offers critical leverage across each of our
business units, improving operating efficiencies and customer service while
realizing significant annual savings.

TECHNOLOGICAL ADVANCEMENTS

Over the last several years, we have invested substantial sums in
technological initiatives, including Internet-based technology, and we have
seen and continue to see the benefits. The PartyLite Extranet, an
internet-based order entry and business management system, was made available
to all independent sales consultants selling PartyLite -Registered Trademark-
brand products in North America. Usage of the Extranet continued to grow
during fiscal year 2002. By fiscal year-end 2002, nearly half of U.S. show
orders were placed via the Extranet, as were more than 65% of Canadian show
orders. Also, the Extranet was introduced to independent sales consultants
selling PartyLite -Registered Trademark- brand products in Germany in fiscal
year 2002. We believe that the Extranet's automated order entry system
eliminates most common errors and speeds orders through faster processing and
delivery, improving customer service. Furthermore, by easing the
administrative workload and providing tools with which to track sales and
programs, the Extranet has helped independent sales consultants selling
PartyLite -Registered Trademark- brand products build their businesses more
effectively. And, as an added benefit, the improved accuracy of an automated
order entry system should result in administrative cost savings for the
Company.

Also, during fiscal year 2002, Candle Corporation of America launched the first
phase of a sales force automation project with an Internet-based software
application. The new software allows sales representatives to expedite the
order-writing process, improving efficiency and decreasing the waiting time
customers typically face at the semi-annual gift shows when placing their
orders. Order accuracy and productivity are also improved, as the system is
capable of scanning product bar codes, processing multiple delivery destinations
and dates and including applicable incentive purchase programs. The web-based
application automatically delivers the completed order to our internal
fulfillment systems.

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CUSTOMERS

Throughout the world, customers for our Candles & Home Fragrance products and
Creative Expressions & Foodservice products include individual consumers (served
by independent sales consultants selling PartyLite -Registered Trademark- brand
products through the home party plan method), department and gift stores, and
mass merchandisers including specialty chains and food and drug stores. Our
institutional customers are primarily major hotel and restaurant chains and
distributors servicing the institutional foodservice market. No single customer
accounts for 10% or more of our sales of Candles & Home Fragrance products or
Creative Expressions & Foodservice products.

COMPETITION

Both of our business segments are highly competitive. The principal competitive
factors are new product introductions, product quality, delivery time and
reliability, customer service and price. The domestic and international markets
for Candles & Home Fragrance products, as well as for Creative Expressions &
Foodservice products, are highly fragmented. Numerous suppliers service these
markets. Because there are relatively low barriers to entry, the Company may
face future competition from other consumer product companies, which may have
substantially greater financial and marketing resources than those available to
the Company.

EMPLOYEES

As of January 31, 2002, the Company had approximately 4,800 full-time employees.
Of those, approximately 3,700 are non-salaried, of which approximately 35% are
outside the United States. Approximately 50 workers for the Gies Group are
represented by the IG Chemie union in our facility in Germany. One of the
contracts with this union expired in April 2002 and the other contract has
terminated, and new negotiations began in April 2002. The remaining employees,
approximately 1,100, are salaried and non-salaried, non-unionized employees. We
believe that our relations with our employees are good. Since its formation in
1977, the Company has never experienced a work stoppage.

RAW MATERIALS

All of the raw materials used by the Company for its Candles & Home Fragrance
products and foodservice products, principally petroleum based wax, fragrance
and glass containers for our Candles & Home Fragrance segment have historically
been available in adequate supply from multiple sources.

TRADEMARKS AND PATENTS

The Company owns numerous United States trademark registrations and has
trademark applications pending in the United States Patent and Trademark Office
with respect to certain Candles & Home Fragrance products and Creative
Expressions & Foodservice products. In addition, we register certain trademarks
in certain foreign countries. All of our United States trademark registrations
can be maintained and renewed provided that the trademarks are still in use for
the goods and services covered by such registrations. We regard these trademarks
as valuable assets for our Candles & Home Fragrance and Creative Expressions &
Foodservice business segments. Although we own certain patents used primarily in
the Creative

9

Expressions & Foodservice segment that we consider valuable, our total business
is not dependent upon any single patent or group of patents.

ENVIRONMENTAL LAW COMPLIANCE

Most of our manufacturing and distribution and certain research operations are
affected by federal, state and local environmental laws and international
environmental laws. These laws relate to the discharge of materials or otherwise
with respect to the protection of the environment. We have made and intend to
continue to make necessary expenditures for compliance with applicable laws. We
do not believe these expenditures will have any material effect on our capital
expenditures, earnings or competitive position.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

OUR DISCLOSURE AND ANALYSIS IN THIS REPORT AND IN OUR 2002 ANNUAL REPORT TO
SHAREHOLDERS CONTAIN SOME FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS
GIVE OUR CURRENT EXPECTATIONS OR FORECASTS OF FUTURE EVENTS. YOU CAN USUALLY
IDENTIFY THESE STATEMENTS BY THE FACT THAT THEY DO NOT RELATE STRICTLY TO
HISTORICAL OR CURRENT FACTS. THEY OFTEN USE WORDS SUCH AS "ANTICIPATE",
"ESTIMATE", "EXPECT", "PROJECT", "INTEND", "PLAN", "BELIEVE," AND OTHER WORDS
AND TERMS OF SIMILAR MEANING IN CONNECTION WITH ANY DISCUSSION OF FUTURE
OPERATING OR FINANCIAL PERFORMANCE. IN PARTICULAR, THESE INCLUDE STATEMENTS
RELATING TO FUTURE ACTIONS, PROSPECTIVE PRODUCTS OR PRODUCT APPROVALS, FUTURE
PERFORMANCE OR RESULTS OF CURRENT AND ANTICIPATED PRODUCTS, SALES EFFORTS,
EXPENSES, THE OUTCOME OF CONTINGENCIES SUCH AS LEGAL PROCEEDINGS, AND FINANCIAL
RESULTS. FROM TIME TO TIME, WE ALSO MAY PROVIDE ORAL OR WRITTEN FORWARD-LOOKING
STATEMENTS IN OTHER MATERIALS WE RELEASE TO THE PUBLIC.

ANY OR ALL OF OUR FORWARD-LOOKING STATEMENTS IN THIS REPORT, IN OUR 2002 ANNUAL
REPORT TO SHAREHOLDERS AND IN ANY OTHER PUBLIC STATEMENTS WE MAKE MAY TURN OUT
TO BE WRONG. THEY CAN BE AFFECTED BY INACCURATE ASSUMPTIONS WE MIGHT MAKE OR BY
KNOWN OR UNKNOWN RISKS AND UNCERTAINTIES. MANY FACTORS MENTIONED IN THIS
DISCUSSION, FOR EXAMPLE, PRODUCT COMPETITION AND THE COMPETITIVE ENVIRONMENT,
WILL BE IMPORTANT IN DETERMINING FUTURE RESULTS. CONSEQUENTLY, NO
FORWARD-LOOKING STATEMENT CAN BE GUARANTEED. ACTUAL FUTURE RESULTS MAY VARY
MATERIALLY.

WE UNDERTAKE NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENT,
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. YOU ARE
ADVISED, HOWEVER, TO CONSULT ANY FURTHER DISCLOSURES WE MAKE ON RELATED SUBJECTS
IN OUR 10-Q, 8-K AND 10-K REPORTS TO THE SEC. ALSO NOTE THAT WE PROVIDE THE
FOLLOWING CAUTIONARY DISCUSSION OF RISKS, UNCERTAINTIES AND POSSIBLY INACCURATE
ASSUMPTIONS RELEVANT TO OUR BUSINESS. THESE ARE SOME OF THE FACTORS THAT WE
THINK COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM EXPECTED AND
HISTORICAL RESULTS. OTHER FACTORS BESIDES THOSE LISTED HERE COULD ALSO ADVERSELY
AFFECT THE COMPANY. THIS DISCUSSION IS PROVIDED AS PERMITTED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.

- - RISK OF INABILITY TO MAINTAIN GROWTH RATE

The Company has grown substantially in past years. While we expect continued
growth, we expect that our future rate of

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growth will be less than our historical growth rate. We expect that our future
growth will be generated in part by growth in sales to the worldwide consumer
market for Candles & Home Fragrance products, and in part by growth in the
Creative Expressions & Foodservice segment. The market for our foodservice
products has grown more slowly than the market for our Creative Expressions
products, and we expect it will continue to do so. Our ability to continue to
grow depends on several factors, including market acceptance of existing
products, the successful introduction of new products, our ability to recruit
new independent sales consultants, effective sourcing of raw materials, and
increases or decreases in production and distribution capacity to meet demand.
The Candles & Home Fragrance and Creative Expressions industries are driven by
consumer tastes. Accordingly, there can be no assurance that our existing or
future products will maintain or achieve market acceptance. Our sales and
earnings results have recently been impacted negatively by a slowing of the
United States economy as a whole and by a drop in consumer confidence at both
the individual and retailer levels. In recent months, the events of September
11th have compounded the impact of this slowing of the US economy and drop in
consumer confidence. In addition, our sales and earnings results have been
impacted by the loss of several mass channel customers due to bankruptcies.
There can be no assurance that our sales and earnings results will not be
materially adversely affected by these factors in the future. If the United
States economy continues to slow and/or consumer confidence continues to drop,
our operating results may be materially adversely affected. Recently, we have
incurred certain one-time expenses in connection with the restructuring of our
US and European consumer wholesale operations and our exit from certain lower
margin products lines. While we expect these actions to position us more
effectively for continued growth and profitability, there can be no assurance
that we will achieve these results. Our past growth in both the Candles & Home
Fragrance segment and the Creative Expressions & Foodservice segment has been
due, in part, to acquisitions. We expect our future growth in the Candles & Home
Fragrance segment to be primarily organic, with the possibility of selective
acquisitions and we continue to pursue strategic acquisitions in certain areas
of the Creative Expressions & Foodservice segment. 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 integrate successfully acquired operations. In the future,
acquisitions may contribute more or less to the overall Company's sales growth
rate than historically.

- - 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 recent years. In addition, we source a portion of our candles,
accessories, seasonal and home decor products 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

11

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. In particular, during fiscal year 2002, declining European currencies
had a modestly negative impact on our reported international sales results. If
European currencies remain weak or decline further, our operating results may be
materially adversely affected.

- - ABILITY TO RESPOND TO INCREASED PRODUCT DEMAND

In the past, our internal growth has required increases in personnel, expansion
of production and distribution facilities, and enhancement of management
information systems. More recently, we have eliminated one of our facilities to
address manufacturing over-capacity. Our ability to respond appropriately to
future changes in demand for Candles & Home Fragrance products and Creative
Expressions & Foodservice products may be dependent upon success in one or more
of the following: (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 and respond to changes
in anticipated product demand. If we are unable to respond to changes in future
demand for products in a timely and efficient manner, our operating results
could be materially adversely affected.

- - 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 except for Mr. Goergen, nor do we maintain any key person life
insurance policies. Also, certain of our senior executives have assumed new
positions recently. The loss of any of the key management personnel or the
inability of executives to perform their new positions could have a material
adverse effect on the Company.

- - COMPETITION

Our business is highly competitive, both in terms of price and new product
introductions. The worldwide market for Candles & Home Fragrance products, as
well as for Creative Expressions & Foodservice 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
Candles & Home Fragrance and Creative Expressions & Foodservice industries, we
may face

12

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 compete with
companies offering candles manufactured in foreign countries, particularly
China. In addition, certain competitors focus on a particular geographic or
single-product market and attempt to gain or maintain market share solely on the
basis of price.

- --------
(1) Effective for fiscal year 2003 and thereafter, foodservice products will be
included and reported as part of the Candles & Home Fragrance segment.
(2) Registered and sold only outside the United States.
(3) The Colony -Registered Trademark- trademark is registered to Colony Gifts
Corporation Limited, a subsidiary of Blyth, in the United Kingdom and other
countries outside of the United States. In the United States, the Colony
-Registered Trademark- trademark is registered to a company which is not an
affiliate or subsidiary of Blyth, Inc.
(4) The Company closed this facility on January 31, 2002.

13

ITEM 2. PROPERTIES

The following table sets forth the location and approximate square footage
of the Company's major manufacturing and distribution facilities:

The Company's executive offices, administrative offices and outlet stores
are generally located in leased space (except for certain offices located in
owned space). Most of the Company's properties are currently being utilized for
their intended purpose except as discussed in the footnotes below.

- ----------
(1) The number shown does not include 32,000 square feet of Research &
Development space used for office and laboratories.
(2) The Company closed this facility on January 31, 2002.
(3) On March 5, 2002 this facility was destroyed by fire. A new facility of
approximately 77,000 square feet replaced it on or about March 18, 2002.

14

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in litigation arising in the ordinary course of its
business. In the opinion of the Company's management, existing litigation will
not have a material adverse effect on the Company's financial position or
results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's 2002 annual meeting of stockholders will be held on June 6,
2002. No matter was submitted to a vote of security holders in the fourth
quarter of the fiscal year ended January 31, 2002.

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The price range for the Company's Common Stock on the New York Stock Exchange as
reported by the New York Stock Exchange was as follows:

As of April 8, 2002, there were 1,992 registered holders of record of the
Company's Common Stock. On April 4, 2002, the Company's Board of Directors
declared a regular semi-annual cash dividend in the amount of $0.11 per share of
Common Stock payable in the second quarter of fiscal year 2003.

15

ITEM 6.

SELECTED CONSOLIDATED FINANCIAL DATA

Set forth below are selected summary consolidated financial and operating data
of the Company for fiscal years 1998 through 2002, which have been derived from
the Company's audited financial statements for those years. The information
presented below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Annual Report to Shareholders on Form 10-K.

(1) Restated for a June, 1997 three-for-two split, which was affected as a
stock dividend. Earnings per common share for all periods give effect
to the issuance of 1,900,786 shares of Common Stock in connection with the
acquisition of Endar Corp. in May 1997. Earnings include the results of
operations for periods subsequent to the respective purchase acquisitions
of the December 1997 acquisition of Sterno -Registered Trademark- and
HandyFuel -Registered Trademark- assets, the remaining 50% of Colony Gift
Corporation, Limited in May 1999, which was previously included as an
equity investment and Midwest of Cannon Falls, Inc. acquired April 2001,
none of which had a material effect on the Company's results of operations
in the period during which they occurred, or thereafter. The Company's
earnings for all periods have been restated to include the historical
results of operations of Endar Corp., which was acquired through a pooling
of interests in May 1997. As a result of the acquisitions of Liljeholmens
Stearinfabriks AB ("Liljeholmens") Class A and Class B common stock in
December 1998 and June 1999, balance sheet amounts beginning in January
1999 include the balances of Liljeholmens and results of operations include
Liljeholmens beginning in February 1999.

(2) Fiscal 2001 pre-tax earnings include restructuring and impairment charges
of approximately $7.7 million related to realignment of the Company's
European operations and US consumer wholesale organization, decisions to
exit certain product lines, and changes impacting its specialty retail
business. Fiscal 2001 pre-tax earnings also include approximately $9.0
million of unusual charges to cost of sales for adjustments to carrying
values of inventory connected with these initiatives, as well as $2.3
million of unexpected bad debt expenses associated with certain customer
bankruptcy filings. Fiscal 2002 pre-tax earnings include restructuring and
impairment charges of approximately $14.1 million related to closure of the
Company's 62nd Street Chicago facility, other rationalization of the North
American consumer wholesale business and certain changes in the European
sector. Fiscal 2002 pre-tax earnings also include approximately $6.3
million and $5.0 million in unusual charges to cost of sales for inventory
revaluations related to the US mass market and other marketplace conditions
impacting realizable value of obsolete inventory.

(3) The Company recorded a one-time cumulative effect of accounting change in
January 2001 to reflect the adoption of Staff Accounting Bulletin ("SAB")
101, "Revenue Recognition in Financial Statements". (See Note 1 to the
Consolidated Financial Statements, "Revenue Recognition").

16

ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
relationship to net sales and the percentage increase of certain items included
in the Company's consolidated statements of earnings:

FISCAL 2002 COMPARED TO FISCAL 2001

Net sales increased $1.3 million, or 0.1%, from $1,197.2 million in fiscal 2001
to $1,198.5 million in fiscal 2002. Excluding Midwest of Cannon Falls, Inc.
("Midwest"), which was acquired in April 2001, and the citronella and religious
candle businesses, which were discontinued in fiscal 2001, net sales in fiscal
2002 decreased approximately 4% when compared to last year. There were several
key factors that we believe affected sales during fiscal 2002. First, the
general economic slowdown worldwide made wholesalers, retailers and customers
quite cautious, which negatively affected the overall sales performance for
fiscal 2002. Second, sales of our PartyLite direct selling business were
negatively impacted by weak new products and catalogs in the first half of the
fiscal year, although there were signs of improvement towards the end of the
year. Third, the weakness of European currencies versus the US dollar, which had
a negative impact on fiscal 2002 sales growth equal to 1 full percentage point.
Finally, the tragic events of September 11th had a temporary negative impact on
most of our businesses, and our foodservice business continues to feel the
effects of the related slowdown in the travel and hospitality industries.

Net sales in the Candles and Home Fragrance segment, which represented
approximately 83% of total sales in fiscal 2002, decreased $64.2 million, or
6.0%, from $1,063.4 million in fiscal 2001 to $999.2 million in fiscal 2002. The
Candles and Home Fragrance segment was affected by many of the factors discussed
above with the most significant of these factors being the decrease in sales in
our direct selling channel, the general economic slowdown worldwide, and the
negative impact of weak foreign currencies on reported sales. Throughout fiscal
2002 we saw a continuation of the effects of the general economic slowdown that
began in the second half of fiscal 2001. This slowdown, which was exacerbated by
the events of September 11th, made wholesalers, retailers and customers cautious
and made wholesalers and retailers reluctant to stock significant amounts of
inventory.

PartyLite, our direct selling unit, experienced a decrease in net sales of
approximately 7% in fiscal 2002 when compared to the prior year. PartyLite sales
in North America, including Canada, decreased approximately 10% in fiscal 2002
compared to the prior year, while sales in PartyLite's European markets
increased approximately 12% in fiscal 2002 compared to the prior year. Although
we do believe that PartyLite was negatively impacted by general economic
conditions, we feel that much of this year's sales decline was related to weak
new product offerings and catalogs. PartyLite made improvements in its 2001
Holiday catalog and product offerings, which helped to drive a

17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

FISCAL 2002 COMPARED TO FISCAL 2001 (CONTINUED)

7% sales increase in the fourth quarter of fiscal 2002 when compared to last
year. In addition to the changes in the Holiday catalog, PartyLite launched its
Everyday 2002 catalog in December, which includes new products and an improved
layout for which we have received very positive feedback from PartyLite
consultants. We remain optimistic that these recent product and catalog changes,
strong hostess programs and income opportunities for consultants, along with
certain management changes within PartyLite, will translate to positive sales
results for our direct selling business.

The wholesale channel of the Candles and Home Fragrance segment in North America
experienced a sales decline of approximately 12% during fiscal 2002 compared to
last year. Excluding the sales of the citronella and religious candle businesses
discontinued in fiscal 2001, sales decreased approximately 4.5%. The mass market
channel of this segment felt the effects not only of the weakened economy but
also of a shrinking customer base due to bankruptcies and consolidation,
resulting in a sales decrease of approximately 5% in fiscal 2002 versus fiscal
2001. Although the premium channel business fared better than the mass channel
in North America, the full year sales results were below those of the prior year
by approximately 3%.

Sales of the wholesale and retail channels of the Candles and Home Fragrance
segment in Europe increased approximately 2% in fiscal 2002 versus fiscal 2001.
Our premium channel business in the UK posted an 8% increase in full year sales
for fiscal 2002 versus the prior year following last year's management changes
and strong new product development efforts, including the launch of the Colonial
at HOME -Registered Trademark- brand product during the fourtH quarter of fiscal
2002. In the European mass channel, full year sales increased 3% in fiscal 2002
compared to the prior year. The introduction of fragranced candles in this
channel continues to show positive growth but still accounts for less than 15%
of the total sales of the mass channel. Sales of our UK retailer decreased more
than 10% due to weak holiday sales in fiscal 2002 versus fiscal 2001.

Net sales in the Creative Expressions and Foodservice segment accounted for
approximately 17% of Blyth's total net sales in fiscal 2002 compared to 11% in
fiscal 2001. Net sales in the Creative Expressions and Foodservice segment
increased $65.6 million, or 49.0%, from $133.8 million in fiscal 2001 to $199.4
million in fiscal 2002. This increase is primarily due to the inclusion of sales
from Midwest, which was acquired in April 2001. Excluding Midwest, fiscal year
2002 sales in this segment were down approximately 3.5% versus the prior year.
Midwest, which represents the premium channel in this segment, has increased net
sales since its acquisition in April 2001 by more than 2% versus the same period
a year earlier. Our mass market business in this segment, JMC Impact, Inc.,
increased net sales in fiscal 2002 by almost 2% when compared to fiscal 2001
despite the weak economy and customers lost due to bankruptcies and
consolidations as described earlier. The foodservice channel, represented by the
Sterno Group -TM-, had a very difficult year with sales below last year by
approximately 8%. THe weak economy that affected the hotel, restaurant and
catering industries, coupled with the sharp decline in business following
September 11th, has provided a significant challenge in this channel. Although
sales for the Sterno Group -TM- were down in the fourth quarter of fiscal 2002
versus the prior year, there was improvement ovEr the third quarter's
comparative results, and we believe that this improvement will continue.

Gross profit decreased $18.6 million, or 3.0%, from $625.7 million in fiscal
2001 to $607.1 million in fiscal 2002. Gross profit margin decreased from 52.3%
for fiscal 2001 to 50.7% for fiscal 2002. The key factors that we believe
negatively impacted the gross profit margin were a shift in sales mix among our
business units, weak margins being experienced in the mass channel, the full
year decline in PartyLite sales of 7%, and an increase in sales of obsolete
inventory at little or no margin. Also, in the second and fourth quarters of
fiscal 2002, the Company recorded additional inventory reserves of $6.3 million
and $5.0 million respectively, to lower the carrying value of mass market
inventory in North America. Partially offsetting these negative margin impacts
were cost savings following our investments in global sourcing, R&D and
technology. In the fourth quarter of fiscal 2001, the Company recorded unusual
inventory valuation adjustments of $9.0 million in connection with restructuring
and business initiatives as discussed in Note 4 to the Consolidated Financial
Statements.

18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

FISCAL 2002 COMPARED TO FISCAL 2001 (CONTINUED)

Selling expense decreased $6.9 million, or 1.9%, from $371.2 million in fiscal
2001 to $364.3 million in fiscal 2002. Selling expense as a percentage of net
sales decreased from 31.0% in fiscal 2001 to 30.4% in fiscal 2002. The reduction
in selling expense was primarily due to cost containment programs that are in
place at each of our business units and, to a lesser extent, to the mix shift
towards mass channel sales, for which selling expenses are relatively lower.

Administrative expenses increased $5.9 million, or 6.1%, from $97.4 million in
fiscal 2001 to $103.3 million in fiscal 2002. Excluding the administrative
expenses of Midwest, acquired in April 2001, administrative expenses in fiscal
2002 decreased approximately 1% versus the prior year even though the Company
continues to invest in R&D and E-Business initiatives, including the PartyLite
Extranet, an internet-based order entry and business building system, and sales
force automation of our North American premium wholesale channel.

The Company recorded restructuring and impairment charges of approximately $14.1
million reported as a component of operating expenses in fiscal 2002, (further
described in Note 4 to the Consolidated Financial Statements, "Unusual
Charges"), which reduced the operating profit margin by 1.2%, compared to
charges of $7.7 million recorded in fiscal 2001, which reduced operating profit
by 0.6%.

Amortization of goodwill increased $0.5 million, or 11.9%, from $4.2 million in
fiscal 2001 to $4.7 million in fiscal 2002. This increase is due to the
additional amortization recorded related to the acquisition of Midwest.
Amortization of goodwill will cease on February 1, 2002, upon adoption of the
new goodwill rules under SFAS 142 as described in Note 2 to the Consolidated
Financial Statements.

Earnings of the Candles and Home Fragrance segment decreased $25.6 million, or
19.8%, from $129.0 million in fiscal 2001 to $103.4 million in fiscal 2002. The
decrease in earnings was due to the same factors that affected sales and gross
profit. Earnings of this segment were also impacted by $13.4 million of the
restructuring and impairment charges recorded in fiscal 2002 compared to $7.7
million of fiscal 2001 restructuring and impairment charges and $2.3 million of
unexpected bad debt expenses.

Earnings in the Creative Expressions and Foodservice segment increased $1.1
million, or 6.8%, from $16.2 million in fiscal 2001 to $17.3 million in fiscal
2002. The key factors affecting earnings in this segment were the acquisition of
Midwest in April 2001, which was offset by a weak economy and a sharp decline in
our foodservice business following a downturn in the hotel, restaurant and
catering industries after September 11th.

Interest expense increased $1.5 million, or 9.4%, from $15.9 million in fiscal
2001 to $17.4 million in fiscal 2002. The higher interest was primarily a result
of higher short-term borrowing in the first half of the fiscal year including
the borrowing to fund the acquisition of Midwest in April 2001.

Interest income and other increased $3.0 million, from $2.0 million in fiscal
2001 to $5.0 million in fiscal 2002. This increase was primarily due to gains on
sales of long-term investments.

Income tax expense decreased $9.7 million, or 19.4%, from $50.0 million in
fiscal 2001 to $40.3 million in fiscal 2002. The reduction in income tax expense
is attributable to the reduction of the effective tax rate from 38.2% in fiscal
2001 to 37.2% in fiscal 2002 and the decrease in pre-tax earnings.

Basic earnings per share based upon the weighted average number of shares
outstanding were $1.45 for fiscal 2002 compared to $1.67 for the same period the
prior year. Diluted earnings per share, based upon the potential dilution that
could occur if options to issue common stock were exercised, were $1.44 for
fiscal 2002 compared to $1.66 for the same period the prior year.

19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

FISCAL 2001 COMPARED TO FISCAL 2000

Net sales increased $47.2 million, or 4.1%, from $1,150.0 million in fiscal 2000
to $1,197.2 million in fiscal 2001. This increase was attributable to sales
growth both in the Candles and Home Fragrance and the Creative Expressions and
Foodservice segments, as well as the inclusion of sales from businesses
acquired. The continued weakness of European currencies versus the US dollar had
a negative impact on the overall sales growth rate of the Company. Excluding the
negative effect of the deterioration of European currencies, net sales increased
approximately 6.8% in fiscal 2001 when compared to prior year. International
sales represented approximately 26% of total net sales in fiscal 2001, which is
approximately the same percentage as in the prior year despite the deterioration
of foreign currencies. Net sales in the US market increased approximately 5%
when compared to prior year.

Net sales of the Candles and Home Fragrance segment increased $10.0 million, or
0.9%, from $1,053.4 million in fiscal 2000 to $1,063.4 million in fiscal 2001
inclusive of the sales of Wax Lyrical, a UK retailer that became a consolidated
subsidiary in April 2000. The continued weakness of European currencies against
the US dollar had a negative impact on the net sales growth rate as discussed
above. International sales accounted for approximately 27.5% of total net sales
in the Candles and Home Fragrance segment for fiscal 2001. In the US market, the
Candles and Home Fragrance segment experienced a modest overall sales increase
versus a year ago. This modest sales increase for the year, driven by strong
first half net sales, occurred despite the impact of the overall weakening of
the economy in the second half of fiscal 2001, particularly the fourth quarter.

Net sales of the Creative Expressions and Foodservice segment increased $37.2
million, or 38.5%, from $96.6 million in fiscal 2000 to $133.8 million in fiscal
2001. This sales growth was primarily due to the acquisition of Impact Plastics
Advertising, Inc., which occurred at the end of fiscal 2000. The deterioration
in the US economy in the latter part of the 2001 fiscal year adversely affected
the overall sales growth of the Creative Expressions and Foodservice segment.

Gross profit increased $28.1 million, or 4.7%, from $597.6 million in fiscal
2000 to $625.7 million in fiscal 2001. Gross profit margin increased from 52.0%
for fiscal 2000 to 52.3% for fiscal 2001. A key factor that favorably impacted
the gross margin was the relatively higher sales growth of premium priced
products. The Company recorded one-time charges in cost of goods sold of
approximately $9.0 million in fiscal 2001, related to inventory revaluation
adjustments, which reduced the gross profit margin by 0.8%. (See Note 4 to the
Consolidated Financial Statements). Excluding these one-time charges gross
profit margin increased 1.1% compared to fiscal 2000.

Selling expense increased $29.3 million, or 8.5%, from $341.9 million in fiscal
2000 to $371.2 million in fiscal 2001. Selling expense as a percentage of net
sales increased in fiscal 2001 when compared to fiscal 2000 primarily due to the
higher percentage of sales of premium priced products for which selling expenses
are relatively higher. Unexpected bad debt expenses (discussed in Note 4 to the
Consolidated Financial Statements) of approximately $2.3 million also
contributed to the increase in selling expenses.

Administrative expenses increased $8.7 million, or 9.8%, from $88.7 million in
fiscal 2000 to $97.4 million in fiscal 2001. The increase in administrative
expense in fiscal 2001 versus the prior year was due to investments in product
development, E-Business initiatives and to the overall growth of the Company.

The Company recorded restructuring and impairment charges of approximately $7.7
million reported as a component of operating expenses in fiscal 2001, which
reduced the operating profit margin by 0.6%. (See Note 4 to the Consolidated
Financial Statements).

Earnings of the Candles and Home Fragrance segment decreased $24.8 million, or
16.1%, from $153.8 million in fiscal 2000 to $129.0 million in fiscal 2001. The
decrease in earnings was largely attributable to the

20

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

FISCAL 2001 COMPARED TO FISCAL 2000 (CONTINUED)

unusual charges, which included restructuring and impairment charges, inventory
valuation adjustments, and unexpected bad debt expenses totaling approximately
$19.0 million, and the further deterioration in foreign currency exchange rates
versus the US dollar.

Earnings of the Creative Expressions and Foodservice segment increased $6.0
million, or 58.8%, from $10.2 million in fiscal 2000 to $16.2 million in fiscal
2001. This increase was primarily due to the acquisition of Impact Plastics
Advertising, Inc., acquired in December 1999.

The Company, for strategic reasons, decided during fiscal 2001 to exit certain
lower margin product lines, including the religious and citronella product
lines. Expenses related to this activity included fixed asset write-offs and
severance payments made to employees, which were recorded as restructuring and
impairment charges and inventory valuation adjustments included in cost of sales
as discussed above. The following table sets forth net sales and operating
profit data for these discontinued product lines for fiscal 2001 and fiscal
2000. These amounts were reported as part of the Candles and Home Fragrance
segment in Note 13 to the Consolidated Financial Statements, "Segment
Information".

Year ended January 31, (In thousands)

Interest expense increased $3.8 million, or 31.4%, from $12.1 million in fiscal
2000 to $15.9 million in fiscal 2001. The increase in interest expense was
primarily attributable to borrowing under the Company's public debt offering
which was in effect for the full 2001 fiscal year and to increases in short-term
interest rates.

Income tax expense decreased $7.5 million, or 13.0%, from $57.5 million in
fiscal 2000 to $50.0 million in fiscal 2001. The reduction in income tax expense
was primarily attributable to the decrease in earnings subject to income tax.
The Company's effective tax rate remained at approximately 38.2% during fiscal
2001.

The Company recorded a one-time charge of $1.2 million, which was reflected as a
cumulative effect of accounting change, in fiscal 2001, as a result of adopting
Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements".

As a result of the foregoing, net earnings decreased $12.8 million, or 13.9%,
from $92.4 million in fiscal 2000 to $79.6 million in fiscal 2001.

Basic earnings per share before the cumulative effect of accounting change,
based upon the weighted average number of shares outstanding, were $1.69 in
fiscal 2001 compared to $1.91 for the same period the prior year. The cumulative
effect of accounting change, previously discussed, had an effect on basic
earnings per share equal to $.02. Basic earnings per share after the cumulative
effect of accounting change, based on the weighted average number of shares
outstanding, were $1.67 in fiscal 2001 compared to $1.91 for the same period the
prior year. Diluted earnings per share before the cumulative effect of
accounting change, based upon the potential dilution that could occur if options
to issue common stock were exercised, were $1.69 in fiscal 2001 compared to
$1.89 for the same period the prior year. The cumulative effect of accounting
change on diluted earnings per share equaled $.02. Diluted earnings per share
after the cumulative effect of accounting change, based upon the potential
dilution that could occur if options to issue common stock were exercised, were
$1.66 in fiscal 2001 compared to $1.89 for the same period the prior year.

21

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

SEASONALITY

Approximately 43% of the Company's annual net sales typically occur in the first
and second fiscal quarters of the fiscal year, with the larger balance
experienced in the third and fourth fiscal quarters, generally due to consumer
buying patterns. The Company's net sales are strongest in the third and fourth
fiscal quarters due to increased shipments to meet year-end holiday season
demand for the Company's products. Operating profit largely follows these
patterns, although a somewhat larger portion of the Company's annual operating
profit is earned in the second half of the fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents increased $37.6 million, or 40.4% from $93.0 million
at January 31, 2001 to $130.6 million at January 31, 2002 primarily due to
strong cash flow in the fourth quarter as a result of strong sales and reduced
inventory levels. Inventory decreased $19.3 million from $201.1 million at
January 31, 2001 to $181.8 million at January 31, 2002. Excluding Midwest,
inventory at January 31, 2002 decreased by $29.9 million. This decrease in
inventory is primarily attributable to a corporate-wide focus on inventory
control and reduction but also to additional inventory reserves recorded during
fiscal 2002. Accounts receivable increased $16.8 million from $67.0 million at
the end of fiscal 2001 to $83.8 million at the end of fiscal 2002. A portion of
this increase, approximately $8.1 million, is a result of the acquisition of
Midwest, with the remaining increase due primarily to strong fourth quarter
sales in our mass market channels in North America and Europe. Despite the
uncertain retail environment, the Company has carefully avoided significant
write-offs of bad debts. However, we did record a bad debt provision of $350
thousand related to K-Mart's bankruptcy filing. Accounts payable and accrued
expenses increased $1.8 million from $102.3 million at the end of fiscal 2001 to
$104.1 million at the end of fiscal 2002. Excluding the balances related to
Midwest, accounts payable and accrued expenses decreased $5.4 million at the end
of fiscal 2002 when compared to the prior year. Such decrease is reflective of
the reduced inventory levels of the Company and normal seasonal spending
patterns.

Capital expenditures for property, plant and equipment were approximately $11.9
million in fiscal 2002 down from $25.3 million in fiscal 2001. This decrease is
primarily due to lower spending for capacity expansion. The Company anticipates
total capital spending of approximately $20.0 million for fiscal 2003, which
will be used primarily for upgrades to machinery and equipment in existing
facilities, and information technology.

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. In the future, acquisitions may contribute more to the Company's
overall sales growth rate than historically. We expect our future growth in the
Candles and Home Fragrance segment to be primarily organic, with the possibility
of selective acquisitions. In the Creative Expressions and Foodservice segment a
significant portion of future growth may come through acquisitions. We continue
to pursue strategic acquisitions in the following areas: paper-related and
seasonal decorative products and Foodservice products, mirroring businesses in
which the Company is already engaged, as well as giftware and home decor
products, both of which are closely related to current established product
lines.

Pursuant to the Company's revolving credit facility ("Credit Facility"), as
amended on September 14, 1999, which matures on October 17, 2002, 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 $135.0
million. The Company has the ability to increase the Credit Facility, under
certain circumstances, by an additional $33.8 million. Amounts outstanding under
the Credit Facility bear interest, at the Company's option, at Bank of America's
prime rate (4.75% at January 31, 2002) or at the eurocurrency rate plus a credit
spread ranging from 0.25% to 0.50%, based on a pre-defined financial ratio. At
January 31, 2002, $14.6 million (including $3.3 million of outstanding Letters
of

22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Credit) was outstanding under the Credit Facility. The Credit Facility contains,
among other provisions, requirements for maintaining certain financial ratios
and limitations on certain payments. At January 31, 2002, the Company was in
compliance with such covenants. The Company is currently in the process of
establishing a new revolving credit facility and expects to do so before the
maturity date of the current Credit Facility.

As of January 31, 2002, the Company had a total of $35.0 million available under
uncommitted bank lines of credit. Amounts outstanding under the lines of credit
bear interest at short-term fixed rates. No amounts were outstanding under the
uncommitted lines of credit at January 31, 2002.

At December 31, 2001, the Company's subsidiary, the Gies Group (formerly
Liljeholmens), had various long-term debt agreements in multiple European
currencies maturing in December 2002. The total amount outstanding as of
December 31, 2001 under the loan agreements was approximately $2.7 million at an
interest rate of 5.0%, of which all relates to current maturities. The loans are
collateralized by certain of Gies' real estate.

As of December 31, 2001, the Gies Group had available lines of credit of
approximately $32.8 million of which approximately $0.8 million was outstanding.
The amounts outstanding under the lines of credit bear interest at a weighted
average rate of 4.19% at December 31, 2001. The lines of credit are renewed
annually.

Colony Gift Corporation Limited ("Colony"), another subsidiary, has a short-term
revolving credit facility with Barclays Bank ("Barclays"), which matures on June
30, 2002, pursuant to which Barclays has agreed to provide a revolving credit
facility in an amount of up to approximately $22.0 million, collateralized by
certain of Colony's assets. As of December 31, 2001, Colony had borrowings
outstanding under the credit facility of approximately $12.4 million, at a
weighted average interest rate of 4.83%.

In July 1995, the Company privately placed $25.0 million aggregate principal
amount of 7.54% Senior Notes due in 2005. Such senior notes contain, among other
provisions, requirements for maintaining certain financial ratios and net worth.
At January 31, 2002, the Company was in compliance with such covenants. Payment
on the notes commenced in June 1999 and annual installments of principal and
interest are required through June 2005.

In May 1999, the Company filed a shelf registration statement for up to $250.0
million in debt securities with the Securities and Exchange Commission ("SEC").
On September 24, 1999, the Company issued $150.0 million of 7.90% Senior Notes
due October 1, 2009 at a discount of approximately $1.0 million, which is being
amortized over the life of the notes. Such notes contain, among other
provisions, restrictions on liens of principal property or stock issued to
collateralize debt. At January 31, 2002, the Company was in compliance with such
covenants. Interest is payable semi-annually on April 1 and October 1. The
proceeds of the offering were used to repay substantially all of the Company's
outstanding debt under its revolving and uncommitted lines of credit in the
United States. On March 1, 2002, the Company entered into an interest rate swap
agreement which matures on October 1, 2009, in relation to $50.0 million of our
outstanding 7.90% Senior Notes. The interest rate under the swap agreement is
equal to the six month LIBOR rate plus 2.65% (4.7% at March 1, 2002), with
interest payable semi-annually on April 1 and October 1.

Financial Reporting Release No. 61, recently issued by the SEC, requires all
registrants to discuss liquidity and capital resources, trading activities
involving non-exchange traded contracts and relationships and transactions with
related parties that derive benefit from their non-independent relationships
with the registrant.

23

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

The following table summarizes the maturity dates of the financial obligations
and commitments of the Company:

The Company does not utilize derivatives for trading purposes.

The Company leases certain office and warehouse space used in its businesses in
the Creative Expressions and Foodservice segment from related parties. Under the
terms of the leases the Company is responsible for all real estate taxes,
maintenance and insurance costs. The lease rates were determined based on market
rates for comparable property at the time of entering into the contract.

Net cash provided by operating activities amounted to a record $123.6 million in
fiscal 2002 compared to $112.7 million in fiscal 2001, an increase of $10.9
million or 9.7%. The key factors contributing to the record cash flow from
operations were net earnings of $68.0 million, depreciation and amortization of
$36.2 million and inventory reduction of $35.6 million. Fourth quarter cash flow
from operations was particularly strong, providing a source of cash of $162.6
million, which is reflective of strong seasonal sales, reduced inventory levels
and receivable collections.

On April 4, 2002, the Company's Board of Directors authorized the Company to
repurchase up to 2,000,000 additional shares of its common stock bringing the
total authorization to 6,000,000 shares. During fiscal 2002, a total of 274,100
shares were repurchased for a total cost of approximately $6.0 million. Since
January 31, 2002, the Company has purchased an additional 638,700 shares on the
open market for a total cost of $13.7 million. As of March 31, 2002, the Company
had cumulatively purchased on the open market 3,269,600 common shares for a
total cost of approximately $76.6 million. The acquired shares are held as
common stock in treasury at cost.

On April 4, 2002, the Company announced that it has declared a cash dividend of
$0.11 per share of the Company's common stock for the six months ended January
31, 2002. The dividend, authorized at the Company's April 4, 2002 Board of
Directors meeting, will be payable to shareholders of record as of May 1, 2002,
and will be paid on May 15, 2002.

The Company's primary capital requirements are for working capital to fund the
necessary levels of inventory and accounts receivable to sustain the Company's
sales growth, and for capital expenditures and acquisitions. The Company
believes that cash on hand, cash from operations and available borrowings under
the current Credit Facility and new Credit Facility the Company is considering
entering into, lines of credit and the shelf registration previously described
will be sufficient to fund its operating requirements, capital expenditures,
stock repurchase program, dividends and all other obligations for fiscal 2003
and fiscal 2004.

24

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates, including those
related to bad debts, inventories, intangible assets, income taxes,
restructuring, and contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

Financial Reporting Release No. 60, which was recently released by the SEC,
requires all companies to include a discussion of critical accounting policies
or methods used in the preparation of financial statements. Note 1 to the
Consolidated Financial Statements, included elsewhere in this Form 10-K,
includes a summary of the significant accounting policies and methods used in
the preparation of our Consolidated Financial Statements. The following is a
brief discussion of the more significant accounting policies and methods used by
us.

Revenue recognition - Revenue is recognized upon delivery, when both title and
risk of loss transfer to the customer. The Company records estimated reductions
to revenue for customer programs, which may include special pricing agreements,
volume incentives and other promotions. Should market conditions decline the
Company may take actions to increase customer incentives possibly resulting in
an incremental reduction of revenue at the time the incentive is offered. The
Company also records estimated reductions to revenue, based primarily on
historical experience, for customer returns and chargebacks that may arise as a
result of shipping errors, product damage in transit or other reasons that
become known subsequent to recognizing the revenue. If the amount of actual
customer returns and chargebacks should increase significantly from the
estimated amount, revisions to the estimated allowance would be required. The
Company receives payment in advance of product shipments primarily related to
our direct selling channel, which is recorded as deferred revenue. Upon delivery
of the product shipments the related deferred revenue is reclassified to
revenue. The Company has established an allowance for doubtful accounts for its
trade and note receivables. The allowance is determined based on the Company's
evaluation of known requirements, aging of receivables, historical experience
and the current economic environment. While the Company believes it has
appropriately considered known or expected outcomes, its customers' ability to
pay their obligations, including those to the Company, could be adversely
affected by declining sales at retail resulting from such factors as contraction
in the economy or a general decline in consumer spending. Some of the Company's
business units offer seasonal dating programs whereby customers that qualify for
the programs are offered extended payment terms for seasonal product shipments.
If product sales by our customers during the seasonal selling period should fall
significantly below expectations, the risk of not collecting these seasonal
dating receivables may increase, which could result in additional charges to bad
debts.

Inventory valuation - Inventories are valued at the lower of cost or market.
Cost is determined by the first-in, first-out method. The Company writes down
its inventory for estimated obsolescence or unmarketable inventory equal to the
difference between the cost of inventory and the estimated market value based
upon assumptions about future demand, market conditions, customer planograms and
sales forecasts. If market acceptance of our existing products or the successful
introduction of new products should significantly decrease, additional inventory
write-downs could be required. Potential additional inventory write-downs could
result from unanticipated additional quantities of obsolete finished goods and
raw materials, and/or from lower disposition values offered by the parties who
normally purchase surplus inventories.

25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (CONTINUED)

CRITICAL ACCOUNTING POLICIES (CONTINUED)

Unusual Charges - In response to changing market conditions and competition the
Company's management regularly updates its business model and market strategies,
including the evaluation of facilities, personnel and products. Future adverse
changes in economic and market conditions could result in additional
organizational changes and possibly additional restructuring, impairment and
unusual charges. In both fiscal 2002 and in fiscal 2001, the Company recorded
unusual charges related to asset impairments, product line discontinuances,
severance payments to employees, lease write-offs, bad debt write-offs and
inventory write-downs. (See Note 4 to the Consolidated Financial Statements).
The most significant single charge of $7.3 million related to the closing of one
of the Company's manufacturing facilities in North America in the fourth quarter
of fiscal 2002, with most of this amount related to asset impairments of
$6.7 million. The closing of this facility, located in Chicago, Illinois, was
effected to address overall manufacturing over-capacity in North America.
Historically, the Company has reviewed long-lived assets, including property,
plant and equipment and goodwill for impairment periodically and whenever events
or changes in circumstances indicated that the carrying amount of such an asset
might not be recoverable. Management determines whether there has been a
permanent impairment on such assets held for use in the business by comparing
anticipated undiscounted future cash flow from operating activities involving
the asset, or group of assets to the carrying value. The amount of any resulting
impairment is calculated using the present value of the same cash flows.
Long-lived assets to be disposed of are valued at the lower of carrying amount
or net realizable value. See below for discussion on the impact of new
accounting pronouncements in fiscal 2003.

IMPACT OF ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS

In February 2001, the Emerging Issues Task Force ("EITF") issued EITF
Issue No. 00-22, "Accounting for 'Points' and Certain Other Time-Based or
Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to
Be Delivered in the Future". EITF No. 00-22 addresses a vendor's accounting for
an offer to a customer (reseller or end-consumer) to rebate or refund a
specified amount of cash that is redeemable only if the customer completes a
specified cumulative level of revenue transactions or remains a customer for a
specified time period. EITF No. 00-22 became effective in the second quarter of
fiscal 2002 and did not have an effect on net earnings of the Company.

In April 2001, the EITF issued EITF Issue No. 00-25, "Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendor's Products".
This issue requires the classification of certain advertising program
incentives, paid to the Company's customers, as a reduction of sales. EITF 00-25
becomes effective for annual or interim periods beginning after
December 15, 2001.

In May 2000, the EITF issued EITF Issue No. 00-14, "Accounting for Certain Sales
Incentives". EITF 00-14 addresses the recognition, measurement and statement of
earnings classification of various sales incentives such as discounts, coupons,
rebates and free products. EITF 00-14 becomes effective for annual or interim
periods beginning after December 15, 2001.

In November 2001, the EITF issued EITF Issue No. 01-09, "Accounting for
Consideration Given by a Vendor to a Customer/Reseller", which addresses the
accounting for consideration given by a vendor to a customer including both a
reseller of the vendor's products and an entity that purchases the vendor's
products from a reseller. EITF 01-09 also codifies and reconciles related
guidance issued by the EITF including EITF Issue No. 00-25, "Vendor Income
Statement Characterization of Consideration Paid to a Reseller of the Vendor's
Products", and EITF Issue No. 00-14, "Accounting for Certain Sales Incentives".
Although there will be no impact on net earnings these changes will result in
the reclassification of certain sales promotion expenses in our Consolidated
Statements of Earnings. The approximate effect of these reclassifications on
fiscal 2002 will be to lower gross margin as a percent of sales by 1.0 point,
lower selling expense as a percent of sales by 1.0 point, and increase operating
income as a percent of sales by 0.1 point.

26

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

IMPACT OF ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)

In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations". This standard prohibits the use of the
pooling-of-interest method of accounting for business combinations initiated
after June 30, 2001 and applies to all business combinations accounted for under
the purchase method that are completed after June 30, 2001. The standard also
requires that identifiable intangible assets shall be recognized as assets apart
from goodwill. We do not expect that implementation of this standard will have a
significant impact on our financial statements.

Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets". This standard eliminates the amortization of goodwill and
indefinite-lived intangibles, and requires goodwill and indefinite-lived assets
to be reviewed annually for impairment. This standard also requires the useful
lives of previously recognized intangible assets to be reassessed and the
remaining amortization periods to be adjusted accordingly. New disclosures are
required for goodwill and other intangible assets including information about
the changes in carrying amounts from period to period. This standard is
effective for fiscal years beginning after December 15, 2001, for all goodwill
and other intangible assets recognized on our balance sheet at that date,
regardless of when the assets were initially recognized. The Company is in the
process of reviewing the goodwill on its balance sheet at January 31, 2002 for
possible impairment under the rules set forth in SFAS No. 142. If there is any
impairment of goodwill, it will be included in the first quarter results of
fiscal 2003 as a cumulative effect of an accounting change.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". This standard is effective for fiscal years
beginning after December 15, 2001 and addresses financial accounting and
reporting for the impairment of long-lived assets. We do not expect that
implementation of this standard will have a significant impact on our financial
statements.

EUROPEAN MONETARY UNION - EURO

On January 1, 1999, several member countries of the European Union ("EU")
established fixed conversion rates between their existing sovereign currencies,
and adopted the euro as their new common legal currency. Since that date, the
euro has been traded on currency exchanges while at the same time the legacy
currencies remained legal tender in the participating countries during a
transition period from January 1, 1999 through January 1, 2002.

During the transition period, cashless payments could be made in the euro, and
parties could elect to pay for goods and services and transact business using
either the euro or a legacy currency.

Between January 1, 2002 and July 1, 2002, the participating countries are
introducing euro notes and coins and will withdraw all legacy currencies so that
they will no longer be available.

The Company's EU member businesses have successfully transitioned their business
and financial systems to the euro. There were no significant problems during the
transition and the conversion has not had a material adverse effect on the
Company's business, results of operations, cash flows or financial condition.

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

Certain statements contained in this Annual Report on Form 10-K may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve a number of risks,
uncertainties and other factors that could cause actual results to differ
materially, as discussed more fully elsewhere in this Annual Report on Form 10-K
and in the Company's previous filings with the Securities and Exchange
Commission.

27

ITEM 7A.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK

The Company has operations outside of the United States and sells its products
worldwide. The Company's activities expose it to a variety of market risks,
including the effects of changes in foreign currency exchange rates, interest
rates and commodity prices. These financial exposures are actively monitored
and, where considered appropriate, managed by the Company.

INTEREST RATE RISK

As of January 31, 2002 the Company is subject to interest rate risk on
approximately $24.6 million of variable rate debt, including debt attributable
to the Gies Group and Colony. Each 1.00% increase in the interest rate would
impact pre-tax earnings by approximately $246,000 if applied to the total.

On March 1, 2002, the Company entered into an interest rate swap agreement which
matures on October 1, 2009, in relation to $50.0 million of our outstanding
7.90% Senior Notes. The interest rate under the swap agreement is equal to the
six-month LIBOR rate plus 2.65% (4.7% at March 1, 2002), with interest payable
semi-annually on April 1 and October 1.

FOREIGN CURRENCY RISK

The Company uses forward foreign exchange contracts to hedge the impact of
foreign currency fluctuations on certain committed capital expenditures, certain
inventory purchases, Canadian intercompany purchases and on certain intercompany
loans. The Company does not hold or issue derivative financial instruments for
trading purposes.

With regard to commitments for machinery and equipment and inventory in foreign
currencies, the gain or loss is deferred in accumulated other comprehensive
income(loss) ("OCI") and, 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 purchases, gain or loss on such
hedges is deferred in OCI and recognized in earnings in the period in which the
underlying hedged transaction occurs. Gains or losses on foreign currency
forward contracts related to intercompany loans are currently recognized through
income and generally offset the transaction gains or losses in the foreign
currency cash flows that they are intended to hedge. 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 immediately. 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. (See Note 1 to the Consolidated Financial
Statements).

The following table provides information about the Company's foreign exchange
forward contracts at January 31, 2002.

The foreign exchange contracts outstanding as of January 31, 2002 had maturity
dates ranging from February 2002 through January 2003.

28

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Blyth, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Blyth, Inc. and
Subsidiaries (the "Company") at January 31, 2002 and January 31, 2001, and the
results of their operations and their cash flows for each of the three years in
the period ended January 31, 2002 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for revenue recognition in fiscal 2001. As
discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for derivative instruments and hedging
activities in fiscal 2002.

/s/ PricewaterhouseCoopers LLP
------------------------------
PRICEWATERHOUSECOOPERS LLP

Stamford, Connecticut
March 12, 2002, except for Notes 12 and 14,
as to which the date is April 4, 2002

29

ITEM 8.
BLYTH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.

30

BLYTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.

31

BLYTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except share data)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.

32

BLYTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.

33

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Blyth, Inc. and
its direct and indirect subsidiaries, (the "Company"). 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. Certain of the Company's
subsidiaries operate on a 52 or 53-week fiscal year ending on the Saturday
nearest to January 31. European operations maintain a calendar year accounting
period which is consolidated with the Company's fiscal period.

ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Areas in the financial
statements involving significant estimates include inventory reserves, bad debt
reserves, chargeback reserves and impairment charges.

CREDIT CONCENTRATION

The Company's credit sales are principally to department and gift stores, mass
merchandisers and distributors that purchase the Company's products for resale.
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral. The Company makes provisions for estimated credit
losses.

FOREIGN CURRENCY TRANSLATION

The Company's international subsidiaries use their local currency as their
functional currency. Therefore all balance sheet accounts of international
subsidiaries are translated into US dollars at the year-end rate of exchange,
and statement of earnings items are translated at the weighted average exchange
rates for the period. Resulting translation adjustments are included in
accumulated other comprehensive income(loss). Gains and losses on foreign
currency transactions, which are included in income, were not material.

RECLASSIFICATIONS

Certain reclassifications have been made in prior years' financial statements to
conform to classifications used in the current year.

INVESTMENTS

The Company makes investments from time to time in the ordinary course of its
business which may include selected assets and product lines, long-term
investments and/or joint ventures that either complement or expand its existing
business. The equity method of accounting is used to account for investments in
common stock where the Company has the ability to exercise significant influence
over the operating and financial policies of the investee.

DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

Effective February 1, 2001, the Company adopted the provisions of Financial
Accounting Standards Board Statement No. 133 (SFAS 133), "Accounting for
Derivative and Hedging Activities" and its corresponding amendment under SFAS
138. These statements establish the accounting and reporting standards for
derivative instruments and hedging activities and require that all derivative
instruments be recorded on the balance sheet at fair

34

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)

value. The Company uses forward foreign exchange contracts to hedge the impact
of foreign currency fluctuations on certain committed capital expenditures,
certain inventory purchases, Canadian intercompany payables and certain
intercompany loans. The Company does not hold or issue derivative financial
instruments for trading purposes. The adoption of SFAS 133 and 138 did not have
a material impact on our results of operations.

The Company has designated its forward exchange contracts on Canadian
intercompany purchases and forecasted future purchase commitments as cash flow
hedges, and as such, as long as the hedge remains effective and the underlying
transaction remains probable, the effective portion of the changes in the fair
value of these contracts will be recorded in accumulated other comprehensive
income(loss) ("OCI") until earnings are affected by the variability of the cash
flows being hedged. With regard to commitments for machinery and equipment and
inventory purchases, upon payment of each commitment, the underlying forward
contract is closed and the corresponding gain or loss is transferred from
accumulated OCI and is included in the measurement cost of the acquired asset.
If a hedging instrument is sold or terminated prior to maturity, gains and
losses are deferred in accumulated OCI 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 immediately.
Approximately $107,000 of derivative gains are included in accumulated OCI at
January 31, 2002, and are expected to be transferred into earnings within the
next twelve months.

The Company has designated its foreign currency forward contracts related to
intercompany loans as fair value hedges. The gains or losses on the fair value
hedges are recognized into earnings and generally offset the transaction gains
or losses in the foreign denominated loans, which they are intended to hedge.

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.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include accounts receivable, accounts
payable, short-term and long-term debt. Management believes the carrying value
of these items approximates their estimated fair values, except for long-term
debt, as discussed in Note 8 to the Consolidated Financial Statements.

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.

INVENTORIES

Inventories are valued at the lower of cost or market. Cost is determined by the
first-in, first-out method. The elements of cost are material, labor and
overhead.

SHIPPING AND HANDLING

The Company classifies shipping and handling fees billed to customers in revenue
and shipping and handling costs are classified as cost of goods sold.

35

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are provided principally by use
of the straight-line method for financial reporting purposes. Leasehold
improvements are amortized over the lives of the respective leases or the
service lives of the improvements, whichever is shorter.

The principal estimated lives used in determining depreciation and amortization
are as follows:

Buildings 27 to 40 years
Leasehold improvements 5 to 10 years
Machinery and equipment 5 to 12 years
Office furniture, data processing equipment and software 3 to 7 years

EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED

The excess of costs of acquisitions over the fair value of identifiable net
assets acquired less liabilities assumed ("goodwill") is being amortized on a
straight-line basis over the estimated lives ranging from 15-40 years. On an
ongoing basis, management reviews the valuation of goodwill to determine
possible impairment by comparing the carrying value to the undiscounted future
cash flows of the related businesses. Amortization of goodwill will cease on
February 1, 2002, upon adoption of the new goodwill rules under SFAS 142 as
described in Note 2.

IMPAIRMENT OF LONG-LIVED ASSETS

We review long-lived assets, including property, plant and equipment for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such an asset may not be recoverable. Management will
determine whether there has been a permanent impairment on such assets held for
use in the business by comparing anticipated undiscounted future cash flows from
operating activities involving the asset, or group of assets to the carrying
value. The amount of any resulting impairment will be calculated using the
present value of the same cash flows. Long-lived assets to be disposed of are
valued at the lower of carrying amount or net realizable value.

COMPREHENSIVE INCOME

Comprehensive income(loss) includes net income(loss) and other comprehensive
income(loss). Other comprehensive income(loss) is classified separately into
foreign currency items, unrealized gains and losses on certain investments in
debt and equity securities and the net gains and losses on cash flow hedging
instruments. The Company reports, by major components and as a single total, the
change in comprehensive income(loss) during the period as part of the
Consolidated Statements of Stockholders' Equity.

INCOME TAXES

Income tax expense is based on pre-tax financial accounting income. Deferred tax
assets and liabilities are recognized for the expected tax consequences of
temporary differences between the tax basis of assets and liabilities and their
reported amounts.

REVENUE RECOGNITION

Revenues consist of sales to customers, net of returns and allowances. The
Company records estimated reductions to revenue for customer programs, which may
include special pricing agreements, volume incentives and other promotions. The
Company also records estimated reductions to revenue, based primarily on
historical experience, for customer returns and chargebacks that may arise as a
result of shipping errors, product damage in transit or other

36

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

reasons that become known subsequent to recognizing the revenue. The Company
receives payment in advance of product shipments primarily related to our direct
selling channel, which is recorded as deferred revenue. Upon delivery of the
product shipments the related deferred revenue is reclassified to revenue. Some
of the Company's business units offer seasonal dating programs whereby customers
that qualify for the programs are offered extended payment terms for seasonal
product shipments. Prior to fiscal 2001, the Company recognized revenue upon
shipment. For the fiscal year ended January 31, 2001, the Company adopted the
newly-effective Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in
Financial Statements". As a result of adopting SAB 101, the Company changed its
revenue recognition policy to recognize revenue upon delivery, when both title
and risk of loss are transferred to the customer. In accordance with the
provisions of SAB 101, the Company recorded a one-time charge in fiscal 2001 of
$1.2 million, net of tax, which is reflected as a cumulative effect of an
accounting change in the Consolidated Statement of Earnings. This one-time
charge had an effect equal to $.02 Diluted Earnings Per Share. The change in
accounting method would not have had a material effect on the Consolidated
Statements of Earnings in fiscal 2000 or 1999 if adopted in these periods.

EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE

Earnings per common and common equivalent share are computed based upon the
weighted average number of shares outstanding during the period, which includes
outstanding options for common stock, when dilutive.

NOTE 2: ACCOUNTING CHANGES

In February 2001, the Emerging Issues Task Force ("EITF") issued EITF Issue No.
00-22, "Accounting for 'Points' and Certain Other Time-Based or Volume-Based
Sales Incentive Offers, and Offers for Free Products or Services to Be Delivered
in the Future". EITF No. 00-22 addresses a vendor's accounting for an offer to a
customer (reseller or end-consumer) to rebate or refund a specified amount of
cash that is redeemable only if the customer completes a specified cumulative
level of revenue transactions or remains a customer for a specified time period.
EITF No. 00-22 became effective in the second quarter of fiscal 2002 and did not
have an effect on net earnings of the Company.

In April 2001, the EITF issued EITF Issue No. 00-25, "Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendor's Products".
This issue requires the classification of certain advertising program
incentives, paid to the Company's customers, as a reduction of sales. EITF 00-25
becomes effective for annual or interim periods beginning after December 15,
2001.

In May 2000, the EITF issued EITF Issue No. 00-14, "Accounting for Certain Sales
Incentives". EITF 00-14 addresses the recognition, measurement and statement of
earnings classification of various sales incentives such as discounts, coupons,
rebates and free products. EITF 00-14 becomes effective for annual or interim
periods beginning after December 15, 2001.

In November 2001, the EITF issued EITF Issue No. 01-09, "Accounting for
Consideration Given by a Vendor to a Customer/Reseller", which addresses the
accounting for consideration given by a vendor to a customer including both a
reseller of the vendor's products and an entity that purchases the vendor's
products from a reseller. EITF 01-09 also codifies and reconciles related
guidance issued by the EITF including EITF Issue No. 00-25, "Vendor Income
Statement Characterization of Consideration Paid to a Reseller of the Vendor's
Products", and EITF Issue No. 00-14, "Accounting for Certain Sales Incentives".
Although there is no impact on net earnings these changes will result in the
reclassification of certain sales promotion expenses in our Consolidated
Statements of Earnings. The approximate effect of these reclassifications on
fiscal 2002 will be to lower gross margin as a percent of sales by 1.0 point,
lower selling expense as a percent of sales by 1.0 point, and increase operating
income as a percent of sales by 0.1 point.

37

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2: ACCOUNTING CHANGES (CONTINUED)

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations". This standard prohibits the use of the
pooling-of-interest method of accounting for business combinations initiated
after June 30, 2001 and applies to all business combinations accounted for under
the purchase method that are completed after June 30, 2001. The standard also
requires that identifiable intangible assets shall be recognized as assets apart
from goodwill. We do not expect that implementation of this standard will have a
significant impact on our financial statements.

Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets". This standard eliminates the amortization of goodwill and
indefinite-lived intangibles, and requires goodwill and indefinite-lived assets
to be reviewed periodically for impairment. This standard also requires the
useful lives of previously recognized intangible assets to be reassessed and the
remaining amortization periods to be adjusted accordingly. New disclosures are
required for goodwill and other intangible assets including information about
the changes in carrying amounts from period to period. This standard is
effective for fiscal years beginning after December 15, 2001, for all goodwill
and other intangible assets recognized on our balance sheet at that date,
regardless of when the assets were initially recognized. The Company is in the
process of reviewing the goodwill on the balance sheet at January 31, 2002 for
possible impairment under the rules set forth in SFAS No. 142. If there is any
impairment of goodwill, it will be included in the first quarter results of
fiscal 2003 as a cumulative effect of an accounting change.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". This standard is effective for fiscal years
beginning after December 15, 2001 and addresses financial accounting and
reporting for the impairment of long-lived assets. We do not expect that
implementation of this standard will have a significant impact on our financial
statements.

NOTE 3: BUSINESS ACQUISITIONS

In December 1998, the Company acquired 9,431,000 shares of Class A voting common
stock of Liljeholmens, a leading European candle manufacturer, in a private
sale. In June 1999, the Company acquired the remaining outstanding Class A and
Class B common stock of Liljeholmens through a tender offer. After the total
purchase price of approximately $51.2 million was applied to the fair value of
assets acquired and liabilities assumed, goodwill of approximately $28.2 million
was generated and is being amortized over 40 years.

In May 1999, the Company acquired the remaining 50% interest in Colony Gift
Corporation, Limited. ("Colony") for approximately $10.0 million in cash. The
excess of the purchase price over the estimated fair value of the net assets
acquired approximated $7.2 million and is being amortized over 15 years.

In January 2000, the Company acquired the net assets of Impact Plastics
Advertising, Inc., a seasonal decorative products company, as a product line
extension of Jeanmarie Creations, Inc., for approximately $19.8 million in cash.
The excess of the purchase price over the estimated fair value of the net assets
acquired approximated $13.3 million and is being amortized over 20 years

On April 11, 2001, the Company acquired Midwest of Cannon Falls, Inc., a leading
creative expressions company in the decorative products and giftware industry
for approximately $61.0 million in cash. The excess of the purchase price over
the estimated fair value of the net assets acquired approximated $25.4 million
and is being amortized over 20 years.

Amortization of goodwill will cease on February 1, 2002, upon adoption of the
new goodwill rules under SFAS 142 as described in Note 2.

38

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4: UNUSUAL CHARGES

During the fourth quarter of fiscal 2002, the Company recorded restructuring and
impairment charges of approximately $14.1 million pre-tax. The following
summarizes the components of these charges:

The Company recorded a charge of approximately $7.3 million pre-tax related to
the closure of the Company's 62nd Street Chicago facility effected to address
overall manufacturing over-capacity. This charge includes asset impairments of
facilities and equipment totaling $6.7 million and severance payments to
employees of $0.6 million.

Charges of $5.2 million pre-tax were recorded relating primarily to other
rationalization within Blyth's North American consumer wholesale businesses and
include severance payments following several changes in management of $2.0
million, lease write-offs of $1.6 million and asset impairments of $1.6 million.

The remainder of the fourth quarter charges of approximately $1.6 million were
associated with the Company's European activities, including an asset impairment
charge of $1.0 million on property held for sale at one of our Gies Group units
and redundancy payments made to employees and lease exit costs at our Colony
Group in the UK.

Of the amounts recorded as restructuring charges during fiscal 2002,
approximately $3.2 million of accrued liabilities are included in the
Consolidated Balance Sheet at January 31, 2002, of which $1.5 million relates to
lease obligations and $1.7 million relates to severance costs.

Fiscal 2002 results also include $5.0 million in cost of sales charges in the
fourth quarter, reflecting the impact of marketplace conditions on the
realizable value of obsolete inventory.

In addition to the fourth quarter charges the Company recorded a $6.3 million
pre-tax unusual charge to cost of sales in the second quarter of fiscal 2002
relating to the revaluation of US mass market inventory, due in large part to
the Wal-Mart change to a private label candle program.

During the fourth quarter of fiscal 2001, the Company recorded restructuring and
impairment charges of approximately $7.7 million pre-tax. The following
summarizes the components of these charges:

Pre-tax expenses associated with the restructuring of the Company's European
activities, including $0.5 million of asset write-offs and $0.7 million in
severance payments made to employees, were incurred in (a) its Fragrant Memories
and Eclipse Candles units (part of the Colony Group), (b) its Nordic and Becker
units (part of the Gies Group), and (c) Wax Lyrical, its UK-based specialty
retailer. The Company had evaluated its European consumer activities and closed
or vacated four production and warehousing facilities in order to reposition
these units more effectively for growth and profitability in fiscal 2002.

The Company, for strategic reasons, chose to exit certain lower margin product
lines, including the religious and citronella product lines. Expenses associated
with this activity included $0.7 million in asset write-offs and $0.2 million in
severance payments made to employees.

The restructuring of the Company's US consumer wholesale organizations began in
early fiscal 2001 and concluded late in the second quarter of fiscal 2001. This
initiative included the consolidation of several facilities to improve customer
service, increase margins and enhance future profitability. The associated
actions resulted in one-time charges, including the write-off of lease
obligations of $1.2 million, severance payments made of $0.2 million and
equipment write-offs of $0.2 million.

The Company also recorded a non-cash impairment charge of approximately $4.0
million related to Wax Lyrical, its specialty retailer in the Candles and Home
Fragrance segment, for a write-off of goodwill of approximately $3.0 million and
a write-down of fixed assets of approximately $1.0 million. The impairment
charge was calculated by comparing the present value of the expected cash flows
associated with these assets to the carrying value of the assets.

39

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4: UNUSUAL CHARGES (CONTINUED)

Of the above amounts recorded as restructuring charges during fourth quarter of
fiscal 2001, approximately $1.4 million of accrued liabilities was included in
the Consolidated Balance Sheet at January 31, 2001, relating entirely to lease
obligations. As of January 31, 2002, none of the $1.4 million of fiscal 2001
restructuring charges remained on the balance sheet. Approximately $0.7 million
was paid while the remaining $0.7 million was reversed to income due to a
favorable lease settlement.

In addition to these restructuring and impairment charges, the fiscal 2001
initiatives described above entailed $9.0 million in adjustments to the carrying
values of inventory which were charged to cost of sales in the fourth quarter of
fiscal 2001.

The fourth quarter and full year results for fiscal 2001 also included $2.3
million of unexpected bad debt expenses associated with customer bankruptcy
filings by Home Place (formerly Waccamaw Pottery), Bradlees, Montgomery Ward,
Frank's Nursery and Spoils, a UK retailer.

NOTE 5: INVENTORIES

The major components of inventories are as follows (in thousands):

NOTE 6: ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

NOTE 7: BANK LINES OF CREDIT

As of January 31, 2002, Blyth, Inc. had a total of $35.0 million available under
uncommitted bank lines of credit. Amounts outstanding under the lines of credit
bear interest at short-term fixed rates. No amounts were outstanding under the
uncommitted lines of credit at January 31, 2002.

As of December 31, 2001, the Company's subsidiary, the Gies Group had available
lines of credit of approximately $32.8 million on which borrowings of
approximately $0.8 million were outstanding. The amounts outstanding under the
lines of credit bear interest at a weighted average rate of 4.19% at December
31, 2001. The lines of credit are renewed annually.

40

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7: BANK LINES OF CREDIT (CONTINUED)

Colony, another subsidiary, has a short-term revolving credit facility with
Barclays Bank ("Barclays"), which matures on June 30, 2002, pursuant to which
Barclays has agreed to provide a revolving credit facility in an amount of up to
approximately $22.0 million, collateralized by certain of Colony's assets. As of
December 31, 2001, Colony had borrowings outstanding under the credit facility
of approximately $12.4 million, at a weighted average interest rate of 4.83%.

NOTE 8: LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

In July 1995, the Company privately placed $25.0 million aggregate principal
amount of 7.54% Senior Notes due 2005. Such senior notes contain, among other
provisions, requirements for maintaining certain financial ratios and net worth.
At January 31, 2002, the Company was in compliance with such covenants. Payment
on the notes commenced in June 1999 and annual installments of principal and
interest are required through June 2005.

In May 1999, the Company filed a shelf registration statement for issuance of up
to $250.0 million in debt securities with the Securities and Exchange
Commission. On September 24, 1999, the Company issued $150.0 million of 7.90%
Senior Notes due October 1, 2009 at a discount of approximately $1.0 million,
which is being amortized over the life of the notes. Such notes contain, among
other provisions, restrictions on liens of principal property or stock issued to
collateralize debt. At January 31, 2002, the Company was in compliance with such
covenants. Interest is payable semi-annually on April 1 and October 1. The
proceeds of the offering were used to repay substantially all of the Company's
outstanding debt under its revolving and uncommitted lines of credit in the
United States. On March 1, 2002, the Company entered into an interest rate swap
contract which matures on October 1, 2009, in relation to $50.0 million of our
outstanding 7.90% Senior Notes. The interest rate under the swap agreement is
equal to the six month LIBOR rate plus 2.65% (4.7% at March 1, 2002), with
interest payable semi-annually on April 1 and October 1.

Pursuant to the Company's revolving credit facility ("Credit Facility"), as
amended on September 14, 1999, which matures on October 17, 2002, 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 $135.0
million. The Company has the ability to increase the Credit Facility, under
certain circumstances, by an additional $33.8 million. Amounts outstanding under
the Credit Facility bear interest, at the Company's option, at Bank of America's
prime rate (4.75% at January 31, 2002) or at the eurocurrency rate plus a credit
spread ranging from 0.25% to 0.50%, based on a pre-defined financial ratio. At
January 31, 2002, $14.6 million (including $3.3 million of outstanding letters
of credit) was outstanding under the Credit Facility. The Credit Facility
contains, among other provisions, requirements for maintaining certain financial
ratios and limitations on certain payments. At January 31, 2002, the Company was
in compliance with such covenants. Borrowings under the Credit Facility are
classified as current liabilities on the balance sheet at January 31, 2002,
since the maturity date falls within the next twelve months. The Company is
currently in the process of establishing new revolving credit facility and
expects to do so prior to the maturity date of the current Credit Facility.

41

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8: LONG-TERM DEBT (CONTINUED)

At December 31, 2001, Gies Group had various long-term debt agreements in
multiple European currencies maturing in December of 2002. The total amount
outstanding as of December 31, 2001 under the loan agreements was approximately
$2.7 million at an interest rate of 5.0%, of which all relate to current
maturities. The loans are collateralized by certain of Gies' real estate.

Maturities under debt obligations are as follows (in thousands):

================================================================================

For the years ending January 31,
2003 $ 18,245
2004 3,823
2005 3,600
2006 3,573
Thereafter 149,234
- --------------------------------------------------------------------------------
$ 178,475
================================================================================

The estimated fair value of the Company's $178.5 million and $172.7 million
total long-term debt (including current portion) at January 31, 2002 and 2001
was approximately $189.4 million and $172.7 million, respectively. The fair
value is determined by quoted market prices, where available, and from
investment bankers using current interest rates considering credit ratings and
the remaining terms to maturity.

NOTE 9: EMPLOYEE BENEFIT PLANS

The Company has defined contribution employee benefit plans in both the United
States and certain of its foreign locations, covering substantially all eligible
non-union employees. Contributions to all such plans are principally at the
Company's discretion. The Gies Group contributes to a Swedish government
sponsored retirement system, which provides retirement benefits to certain of
its employees. One of the Company's subsidiaries has a supplemental employee
retirement plan agreement, which covers certain key executives. The Company has
a supplemental pension benefit agreement with one of its key executives.
Benefits pursuant to the agreement will be provided by a purchased annuity
insurance policy. Total expense related to all plans for the years ended January
31, 2000, 2001 and 2002 was $3.0 million, $3.5 million and $3.8 million,
respectively.

NOTE 10: COMMITMENTS

The Company utilizes operating leases for a portion of its facilities and
equipment. Generally, the leases provide that the Company pay real estate taxes,
maintenance, insurance and other occupancy expenses applicable to leased
premises. Certain leases provide for renewal for various periods at stipulated
rates.

The minimum future rental commitments under operating leases are as follows (in
thousands):

================================================================================

For the years ending January 31,
2003 $ 20,619
2004 18,399
2005 16,427
2006 14,509
2007 13,211
Thereafter 39,539
- --------------------------------------------------------------------------------
Total minimum payments required $ 122,704
================================================================================

Rent expense for the years ended January 31, 2000, 2001 and 2002 was $14.6
million, $19.6 million and $21.6 million, respectively.

42

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11: INCOME TAXES

Earnings before provision for income taxes (in thousands):

Income tax expense consists of the following (in thousands):

Significant components of the Company's deferred tax assets and liabilities are
as follows (in thousands):

The valuation allowance relates principally to certain non-US tax loss
carryforwards, as the Company believes that due to various limitations in these
foreign jurisdictions, it is more likely than not that such benefits will not be
realized.

As of January 31, 2002, undistributed earnings of foreign subsidiaries
considered permanently invested for which deferred income taxes have not been
provided were approximately $19.1 million.

43

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11: INCOME TAXES (CONTINUED)

A reconciliation of the provision for income taxes to the amount computed at the
federal statutory rate is as follows (in thousands):

NOTE 12: EMPLOYEE STOCK OPTION PLANS

At January 31, 2002, the Company had two stock-based compensation plans, which
are described below.

The Company accounts for stock-based compensation under the intrinsic value
based method of accounting, whereby no compensation expense is recorded for
stock options issued to employees unless the option price is below market at the
time options are granted. The following pro forma net earnings and net earnings
per common share data are presented for informational purposes only and have
been computed using the fair value method of accounting for stock-based
compensation:

The fair value of each option is estimated on the date of grant, using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 2000, 2001 and 2002, respectively: expected
volatility was 43.3% for 2000, 44.2% for 2001 and 39.5% for 2002; risk-free
interest rates at 4.89% to 6.63% for 2000, 5.11% to 6.70% for 2001 and 4.17% to
5.33% for 2002; expected life of 7 years for all years and an expected dividend
yield of .94%.

The Company has adopted the Amended and Restated 1994 Employee Stock Option Plan
(the "Employee Option Plan"), which provides for the grant to officers and
employees of both "incentive stock options" and stock options that are
non-qualified for Federal income tax purposes. The total number of shares of
common stock for which options may be granted pursuant to the Employee Option
Plan shall not exceed the sum of 2,880,000 shares plus an additional number of
shares, which are to be added on February 1, 2001, and each anniversary thereof
during the term of Employee Option Plan, equal to the lesser of (x) 0.75% of the
total outstanding shares of common stock of the Company on the applicable
anniversary date and (y) 600,000 shares.

44

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12: EMPLOYEE STOCK OPTION PLANS (CONTINUED)

The exercise price of incentive stock options granted under the Employee Option
Plan may not be less than 100% of the fair market value of the common stock at
the time of grant, and the term of any option may not exceed 10 years. Options
generally become exercisable over a five-year period. With respect to any
employee who owns stock representing more than 10% of the voting power of the
outstanding capital stock of the Company, the exercise price of any incentive
stock option may not be less than 110% of the fair market value of such shares
at the time of grant, and the term of such option may not exceed five years.

The Company has also adopted the 1994 Stock Option Plan for Non-Employee
Directors (the "Non-Employee Director Plan"). A total of 120,000 shares of
common stock may be issued through the exercise of options granted pursuant to
the Non-Employee Director Plan. On April 4, 2002, subject to shareholder
approval, the Board of Directors approved an increase of 150,000 shares to the
total number of shares available for grant. No option may be granted under the
Non-Employee Director Plan after May 18, 2004.

Each non-employee director who is elected to office for the first time after
March 1, 1994 will, upon such date, automatically be granted an option to
acquire 3,000 shares of common stock. Each non-employee director who is in
office on November 15 of any year thereafter will, on the immediately succeeding
January 1, automatically be granted an option to acquire 1,500 shares of common
Stock. On April 4, 2002, subject to shareholder approval, the Board of Directors
approved a revision to the Non-Employee Director Plan whereby each non-employee
director who is elected to office for the first time will, upon such date,
automatically be granted an option to acquire 10,000 shares of common stock
("Initial Grant"). Each non-employee director who is in office with at least six
months of service receives, on the date of the Annual Meeting of Shareholders of
Blyth beginning in June 2003 and thereafter, an option to acquire 5,000 shares
of common stock ("Annual Grant"). The price of shares that may be purchased upon
exercise of an option is the fair market value of the common stock on the date
of grant.

Options granted pursuant to the Non-Employee Director Plan become exercisable in
full on the first anniversary of the date of the grant. On April 4, 2002,
subject to shareholder approval, the Board of Directors approved a revision to
the vesting, as follows: Initial Grant vests over a two year period at the rate
of 50% on each anniversary of the date of grant; Annual Grant vests in full the
sooner of (x) the first anniversary of the date of the grant or (y) the date of
the next Annual Meeting of Shareholders of Blyth.

Transactions involving stock options are summarized as follows:

At January 31, 2000, 2001 and 2002, options to purchase 668,417, 694,749 and
764,351 shares, respectively, were exercisable.

45

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12: EMPLOYEE STOCK OPTION PLANS (CONTINUED)

Options outstanding and exercisable as of January 31, 2002, by price range:

The weighted average fair value of options granted during the years ended
January 31, 2000, 2001 and 2002 was $14.46, $12.91 and $10.40, respectively

NOTE 13: SEGMENT INFORMATION

The Company operates in two business segments - the Candles and Home Fragrance
segment and the Creative Expressions and Foodservice segment (formerly,
Non-Fragranced Products). The Company's reportable segments are based on
similarities in products and represent the aggregation of operating units for
which financial information is regularly evaluated in determining resource
allocation and assessing performance. The Company has operations outside of the
United States and sells its products in the Candles and Home Fragrance segment
worldwide. The majority of sales in the Creative Expressions and Foodservice
segment are domestically based.

The CANDLES AND HOME FRAGRANCE segment designs, manufactures and markets an
extensive line of products including scented candles, potpourri and other
fragranced products and markets a broad range of complementary candle
accessories. These products are sold direct to the consumer under the PartyLite
- -Registered Trademark- brand, to retailers in the mid-tier and premium retail
channels, under the Colonial Candle of Cape Cod -Registered Trademark-, Kate's
- -TM- and Carolina -Registered Trademark- brands, and in the mass retail channel
under the Ambria -TM-, Florasense -Registered Trademark- and FilterMate
- -Registered Trademark- brands. In Europe, products are sold under the Gies
- -Registered Trademark-, Liljeholmens -Registered Trademark-, Colony -Registered
Trademark-(2), (3), Carolina Design -Registered Trademark- and Wax Lyrical
- -Registered Trademark-(2), brands. These brands are either registered on the
Community Trademark Register or in one of the member countries in the European
Union.

The CREATIVE EXPRESSIONS AND FOODSERVICE segment designs, manufactures or
sources and markets a broad range of complementary specialty products for the
consumer market, including seasonal and home decor products under the Midwest of
Cannon Falls -Registered Trademark- and JMC Impact -TM- brand names,
paper-related products under the Jeanmarie -Registered Trademark- brand, and
tabletop illumination products and portable heating fuel products for the hotel,
restaurant and catering trade, under the Ambria -TM-, Sterno -Registered
Trademark- and HandyFuel -Registered Trademark- brand names.

Earnings in both segments represents net sales less operating expenses directly
related to the business segments and corporate expenses allocated to the
business segments. Other income (expense) includes interest expense, interest
income and equity in earnings of investees which are not allocated to the
business segments. Identifiable assets for each segment consist of assets used
directly in its operations and intangible assets, if any, resulting from
purchase business combinations. Other identifiable assets includes corporate
long-term investments, deferred income taxes and deferred bond costs which are
not allocated to the business segments.

The geographic area data includes net trade sales based on product shipment
destination and long-lived assets (which consists of fixed assets, goodwill and
long-term investments) based on physical location.

46

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13: SEGMENT INFORMATION (CONTINUED)

OPERATING SEGMENT INFORMATION

Year ended January 31, (In thousands)

(1) 2001 Candles and Home Fragrance includes restructuring and impairment
charges of approximately $7.7 million, unusual inventory revaluation
charges of $9.0 million and unexpected bad debt expenses of approximately
$2.3 million (See Note 4 to the Consolidated Financial Statements).

(2) 2002 Candles and Home Fragrance includes restructuring and impairment
charges of approximately $13.4 million and inventory revaluation charges of
$11.3 million, and Creative Expressions and Foodservice includes
restructuring and impairment charges of approximately $0.7 million (See
Note 4 to the Consolidated Financial Statements).

47

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14: STOCK REPURCHASE PLAN

On April 4, 2002, the Company's Board of Directors authorized the Company to
repurchase up to 2,000,000 additional shares of its common stock bringing the
total authorization to 6,000,000 shares. During fiscal 2002, a total of 274,100
shares were repurchased for a total cost of approximately $6.0 million. Since
January 31, 2002, the Company has purchased an additional 638,700 shares on the
open market for a total cost of $13.7 million. As of March 31, 2002, the Company
had cumulatively purchased on the open market 3,269,600 common shares for a
total cost of approximately $76.6 million. The acquired shares are held as
common stock in treasury at cost.

NOTE 15: EARNINGS PER SHARE

The following table presents the components of basic and diluted net earnings
per common share (in thousands):

As of January 31, 2000, 2001 and 2002, options to purchase 78,321, 90,886 and
236,529 shares of common stock, respectively, are not included in the
computation of diluted earnings per share because the effect would be
antidilutive.

48

BLYTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

A summary of selected quarterly information for the years ended January 31 is as
follows:

(1) The sum of per share amounts for the quarters does not necessarily equal
that reported for the year because the computations are made independently.

49

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Items 10 through 13 is included in the Company's
proxy statement dated May 1, 2002 on pages 3 through 13.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1). FINANCIAL STATEMENTS

The following consolidated financial statements are contained on the
indicated pages of this report:

(a)(2). FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is contained on the indicated
pages of this report:

50

All other schedules are omitted because they are inapplicable or the
requested information is shown in the consolidated financial statements or
related notes.

(a)(3). EXHIBITS

EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
3.1* Restated Certificate of Incorporation of the Registrant
3.2* Restated By-laws of the Registrant
4.1+ Amended and Restated 1994 Employee Stock Option Plan of the
Registrant (incorporated by reference to Exhibit 4.1 to the
Registrant's Report on Form 8-K filed April 17, 2000)
4.2+ Form of Nontransferable Incentive Stock Option Agreement under
the Amended and Restated 1994 Employee Stock Option Plan of
the Registrant (incorporated by reference to Exhibit 4.2 to
the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 31, 1996)
4.3+ Form of Nontransferable Non-Qualified Stock Option Agreement
under the Amended and Restated 1994 Employee Stock Option Plan
of the Registrant (incorporated by reference to Exhibit 4.3 to
the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 31, 1996)
4.4+ Amended and Restated 1994 Stock Option Plan for Non-Employee
Directors of the Registrant (incorporated by reference to
Exhibit 4.1 to the Registrant's Report on Form 8-K filed April
19, 2002)
4.5*+ Form of Stock Option Agreement under the 1994 Stock Option
Plan for Non-Employee Directors of the Registrant
4.6(a) Form of Indenture, dated as of May 20, 1999, between the
Registrant and First Union National Bank, as Trustee
(incorporated by reference to the Registrant's Registration
Statement on Form S-3 (Reg. No. 333-77721) filed on May 4,
1999)
4.6(b) Form of First Supplemental Indenture dated as of September 29,
1999 between the Registrant and First Union National Bank,
Trustee (incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K filed on September 28,
1999)
10.1 Credit Agreement, dated as of October 17, 1997, among the
Registrant, the Banks listed therein, Morgan Guaranty Trust
Company of New York, as documentation agent, and Bank of
America National Trust and Savings Association, as
administrative agent (incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 1997)
10.1(a) Amendment No. 1 dated as of May 13, 1999 to the Credit
Agreement (incorporated by reference to Exhibit 10.1(a) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 2001)
10.1(b) Amendment No. 2 dated as of September 14, 1999 to the Credit
Agreement (incorporated by reference to Exhibit 10.1(b) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 2001)

51

10.2 Note Purchase Agreement, dated July 7, 1995 (the "Note
Purchase Agreements"), relating to the 7.54% Senior Notes due
June 30, 2005, among Candle Corporation Worldwide, Inc.,
Candle Corporation of America, and PartyLite Gifts, Inc., as
Issuers, the Registrant, as guarantor, and the Purchasers
named therein (incorporated by reference to Exhibit 10.2 to
the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 31, 1995)
10.2(a) Fourth Amendment, dated as of October 17, 1997, to Note
Purchase Agreements (incorporated by reference to Exhibit 10.2
to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 1997)
10.2(b) Assumption Agreement, dated as of October 17, 1997, of Note
Purchase Agreements, among Candle Corporation Worldwide, Inc.,
Candle Corporation of America, and PartyLite Gifts, Inc., as
assignors, and the Registrant, as assignee (incorporated by
reference to Exhibit 10.3 to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended October 31, 1997)
10.2(c) Guaranty Agreement, dated as of October 17, 1997, by Candle
Corporation Worldwide, Inc. (incorporated by reference to
Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended October 31, 1997)
10.2(d) Form of 7.54% Senior Notes due June 30, 2005 (incorporated by
reference to Exhibit 10.5 to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended October 31, 1997)
10.2(e) Fifth Amendment, dated as of May 17, 1999, to Note Purchase
Agreements (incorporated by reference to Exhibit 10.2(e) to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended January 31, 2000)
10.3* Standard Form Industrial Lease dated April 22, 1993, between
Carol Point Builders I General Partnership and PartyLite
Gifts, Inc.
10.3(a) First Amendment, dated August 21, 1995, between ERI-CP, Inc.,
a Delaware corporation, as successor to Carol Point Builders I
General Partnership, and PartyLite Gifts, Inc., to Standard
Form Industrial Lease dated April 22, 1993, between Carol
Point Builders I General Partnership and PartyLite Gifts, Inc.
(incorporated by reference to Exhibit 10.4(a) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1996)
10.3(b)** Second Amendment, dated August 4, 2000, between Carol Point
LLC, a Massachusetts limited liability company, as successor
landlord to ERI-CP Inc., and PartyLite Gifts, Inc., to
Standard Form Industrial Lease dated April 22, 1993, between
Carol Point Builders I General Partnership and PartyLite
Gifts, Inc. (incorporated by reference to Exhibit 10.4(a) to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended January 31, 1996)
10.3(c)** Third Amendment, dated February 28, 2001, between Carol Point
LLC, a Massachusetts limited liability company, as successor
landlord to ERI-CP

52

Inc., and PartyLite Worldwide, Inc., as tenant, pursuant to
Assignment and Assumption Agreement, dated January 31, 2001,
between PartyLite Gifts, Inc. (assignor) and PartyLite
Worldwide, Inc. (assignee), to Standard Form Industrial Lease
dated April 22, 1993, between Carol Point Builders I General
Partnership and PartyLite Gifts, Inc. (incorporated by
reference to Exhibit 10.4(a) to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 31, 1996)

10.4 Lease Agreement, dated June 25, 1997, between Carol Stream I
Development Company, as landlord, PartyLite Gifts, Inc., as
tenant, and the Registrant, as guarantor (incorporated by
reference to Exhibit 10.5 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended January 31, 1998)
10.4(a)** First Amendment to Lease, dated February 1, 2001, between MP
437 Tower CS, Inc. by RREEF Management Company, as landlord,
as successor to Carol Stream I Development Company, and
PartyLite Worldwide, Inc., as tenant, pursuant to Assignment
and Assumption Agreement, dated January 31, 2001, between
PartyLite Gifts, Inc. (assignor) and PartyLite Worldwide, Inc.
(assignee)
10.5*+ Form of Indemnity Agreement between the Registrant and each of
its directors
10.6+ Blyth Industries, Inc. Non-Qualified Deferred Compensation
Plan (incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K as filed on December
21, 1999)
10.7+ Employment Agreement dated as of August 1, 2000 by and between
the Registrant and Robert B. Goergen (incorporated by
reference to Exhibit 10.10 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended October 31,
2000)
10.8+ Registration Rights Agreement dated as of August 1, 2000 by
and between the Registrant and Robert B. Goergen (incorporated
by reference to Exhibit A to the Employment Agreement filed as
Exhibit 10.10 to Registrant's Annual Report on Form 10-K for
the fiscal year ended January 31, 2001)
21.** List of Subsidiaries
23.** Consent of PricewaterhouseCoopers LLP, independent accountants
24.1** Power of Attorney
24.2** Certified Resolutions of the Board of Directors of the
Registrant

----------
* Included as an exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-77458) and incorporated herein by reference.
** Filed herewith.
+ Management contract or compensatory plan required to be filed by Item 14(c)
of this report.

(b) REPORTS ON FORM 8-K

53

The following reports on Form 8-K were filed during the fourth quarter of
the fiscal year ended January 31, 2002:

Current Report on Form 8-K, filed December 3, 2001, attaching third quarter
sales and earnings and comments on fourth quarter press releases.

Current Report on Form 8-K, filed January 18, 2002, attaching increase in
cash flow estimates press release.

54

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date: May 1, 2002 BLYTH, INC.

By: /s/ Robert B. Goergen
-----------------------------------
Name: Robert B. Goergen
Title: Chairman, Chief Executive Officer and
President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and
Stockholders of Blyth, Inc.:

Our audits of the consolidated financial statements referred to in our report
dated March 12, 2002, except for Notes 12 and 14, as to which the date is April
4, 2002, appearing in the 2002 Annual Report to Stockholders of Blyth, Inc. and
Subsidiaries (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP
------------------------------
PRICEWATERHOUSECOOPERS LLP

Stamford, Connecticut
March 12, 2002

S-1

BLYTH, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years ended January 31 2000, 2001 and 2002
(In thousands)

S-2