BLYTH INC - FORM 8-K - EX-99.2 - EXHIBIT - September 8, 2014

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Exhibit 99.2


EXHIBIT-99.2. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION AND ACCOMPANYING NOTES

Blyth, Inc. - Unaudited Pro Forma Consolidated Financial Information



The accompanying unaudited pro forma consolidated financial information is based
on our historical financial statements for the six months ended June 30, 2014, for each of the years ended December 31, 2013 and 2012, and for the eleven months ended December 31, 2011, in each case as adjusted to reflect the disposition of ViSalus (as described in Item 1.01 of our Current Report on Form 8-K dated September 5, 2014). The accompanying unaudited pro forma consolidated financial information is based on, and should be read in conjunction with, the historical consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K for the year ended December 31, 2013 and the unaudited consolidated financial statements and notes thereto appearing in our Quarterly Report on Form 10-Q for the period ended June 30, 2014. The unaudited pro forma consolidated statements of earnings give effect to the disposition as if it had occurred on February 1, 2011, the beginning of the earliest period presented. The unaudited pro forma consolidated balance sheet gives effect to the disposition as if it had occurred as of June 30, 2014, our latest balance sheet date. The unaudited pro forma consolidated financial information is based upon available information and assumptions that we believe are reasonable under the circumstances and are prepared to illustrate the estimated effects of the transaction.

The unaudited pro forma consolidated financial information has been provided for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been achieved had the transaction occurred as of or for the periods presented, nor are they necessarily indicative of our future operating results or financial position.

Reported
 
The Reported column reflects our historical financial statements for the periods presented and does not reflect any adjustments related to our disposition of ViSalus. The reported consolidated balance sheet as of June 30, 2014 and the consolidated statement of earnings for the six months ended June 30, 2014 were derived from our unaudited interim consolidated financial statements appearing in our Quarterly Report on Form 10-Q for the period ended June 30, 2014. The reported consolidated statements of earnings for each of the years ended December 31, 2013 and 2012 and for the eleven months ended December 31, 2011 were derived from our audited consolidated financial statements appearing in our Annual Report on Form 10-K for the years ended December 31, 2013 and 2012 and for the eleven months ended December 31, 2011. In accordance with Regulation S-X, the pro forma statements of earnings only disclose earnings from continuing operations, and therefore exclude reported earnings related to the discontinued operations of Sterno (which we divested in 2012) and Midwest-CBK (which we divested in 2011).


We will incur one-time expenses in connection with the disposition of ViSalus, which will include a prepayment premium of $3.0 million related to the early retirement of the $50.0 million aggregate principal amount of 6.00% Senior Notes, originally due in June 2017, to the earlier of March 4, 2015 or the date, if any, that we consummate a new financing in an amount of at least $50.0 million. In addition, we estimate that we will incur one-time expenses for legal and other miscellaneous fees of approximately $1.2 million in




the third and/or fourth quarter of 2014. The one-time expenses have not been included in the unaudited pro forma financial information.


ViSalus

The ViSalus column reflects ViSalus’s historical financial statements for the periods presented. ViSalus’s historical results were included in our unaudited interim financial statements for the period ended June 30, 2014 and in our audited financial statements for the years ended December 31, 2013 and 2012 and for the eleven months ended December 31, 2011. There were no adjustments to the ViSalus reported results included in the ViSalus column.


Adjustments

The unaudited pro forma consolidated balance sheet as of June 30, 2014 reflects adjustments related to the disposition of ViSalus. A description of these adjustments is provided in the Notes to Pro Forma Consolidated Financial Information included herein. There were no adjustments to the unaudited pro forma consolidated statements of earnings.






Blyth, Inc.
 
 
 
 
 
 
 
Unaudited Pro Forma Consolidated Balance Sheet
 
 
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
As of June 30, 2014
 
 
 
Reported
ViSalus
Adjustments
 
Pro forma
 
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
76,631

$
9,220

$
(3,000
)
 (c)
$
64,411

 
Short-term investments
 
24,034

 
 
 
24,034

 
Accounts receivable, less allowance for doubtful receivables $5,199
 
13,218

563

 
 
12,655

 
Inventories
 
75,211

17,782

 
 
57,429

 
Prepaid assets
 
16,390

1,099

 
 
15,291

 
Deferred income taxes
 
3,959

1,470

 
 
2,489

 
Other current assets
 
8,726

1,617

3,000

 (c)
10,109

 
 
 
 
 
 
 
—

 
Total current assets
 
218,169

31,751

—

 
186,418

 
 
 
 
 
 
 
 
 
Property, plant and equipment
 
87,049

12,664

 
 
74,385

 
 
 
 
 
 
 
 
 
Investments
 
2,025

924

9,750

 (a)
10,851

 
Goodwill
 
2,924

626

 
 
2,298

 
Other intangible assets, net of accumulated amortization of $15,317
 
8,677

2,028

 
 
6,649

 
Deferred income taxes
 
9,397

5,434

 
 
3,963

 
Other assets
 
7,358

165

 
 
7,193

 
 
 
 
 
 
 
 
 
Total other assets
 
30,381

9,177

9,750

 
30,954

 
Total assets
 
$
335,599

$
53,592

$
9,750

 
$
291,757

 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Current maturities of long-term debt
 
891

 
50,000

 (d)
50,891

 
Accounts payable
 
23,292

3,448

 
 
19,844

 
Accrued expenses
 
53,656

16,039

 
 
37,617

 
Income taxes payable
 
778

79

 
 
699

 
Deferred income taxes
 
509

 
 
 
509

 
Other current liabilities
 
3,629

 
 
 
3,629

 
 
 
 
 
 
 
—

 
Total current liabilities
 
82,755

19,566

50,000

 
113,189

 
 
 
 
 
 
 
 
 
Deferred income taxes
 
 
 
 
 
 
 
Long-term debt, less current maturities
 
54,885

 
(50,000
)
 (d)
4,885

 
Other liabilities
 
13,071

1,009

 
 
12,062

 
Commitments and contingencies
 
 
 
 
 
—

 
ViSalus redeemable preferred stock
 
146,667

146,667

 
 
—

 




Redeemable noncontrolling interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholders' equity:
 
 
 
 
 
 
 
Preferred stock - authorized 10,000,000 shares of $0.01 par value; no shares issued
 
 
 
 
 
 
 
Common stock - authorized 50,000,000 shares of $0.02 par value; issued 26,625,576 shares
 
533

 
 
 
533

 
Additional contributed capital
 
169,457

—

 
 
169,457

 
Retained earnings
 
303,072

(113,374
)
9,750

 (a)
426,196

(b)
Accumulated other comprehensive income
 
16,834

(276
)
 
 
17,110

 
Treasury stock, at cost, 10,571,419 shares
 
(452,166
)
 
 
 
(452,166
)
 
Total stockholders' equity
 
37,730

(113,650
)
9,750

 
161,130

 
Noncontrolling interest
 
491

 
 
 
491

 
Total equity
 
38,221

(113,650
)
9,750

 
161,621

 
Total liabilities and equity
 
$
335,599

$
53,592

$
9,750

 
$
291,757

 
 
 
 
 
 
 
 
 
                                                       See accompanying notes to the unaudited pro forma consolidated financial information
 






Blyth, Inc.
 
 
 
 
Unaudited Pro Forma Consolidated Statement of Earnings (loss)
 
For the six months ended
(In thousands, except per share data)
 
June 30, 2014
 
 
Reported
ViSalus
Pro forma
Net sales
 
$
333,462

$
110,991

$
222,471

Cost of goods sold
 
118,653

34,490

84,163

Gross profit
 
214,809

76,501

138,308

 
 
 
 
 
Selling
 
148,062

45,821

102,241

Administrative and other expense
 
72,192

33,857

38,335

Total operating expense
 
220,254

79,678

140,576

 
 
 
 
 
Operating profit (loss)
 
(5,445
)
(3,177
)
(2,268
)
 
 
 
 
 
Other expense (income):
 
 
 
 
Interest expense
 
1,991

 
1,991

Interest income
 
(135
)
(1
)
(134
)
Foreign exchange and other, net
 
100

12

88

Total other expense
 
1,956

11

1,945

 
 
 
 
 
Earnings (loss) from continuing operations before income taxes & noncontrolling interest
(7,401
)
(3,188
)
(4,213
)
Income tax expense
 
520

1,488

(968
)
Earnings (loss) from continuing operations before non-controlling interest
 
(7,921
)
(4,676
)
(3,245
)
 
 
 
 
 
Less: Net earnings (loss) attributable to noncontrolling interests
 
(719
)
(894
)
175

Earnings (loss) from continuing operations
 
(7,202
)
(3,782
)
(3,420
)
 
 
 
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
Net earnings (loss) from continuing operations attributable to Blyth, Inc.
 
$
(0.45
)
 
$
(0.21
)
Weighted average number of shares outstanding
 
16,096

 
16,096

 
 
 
 
 
Diluted earnings per share:
 
 
 
 
Net earnings (loss) from continuing operations attributable to Blyth, Inc.
 
$
(0.45
)
 
$
(0.21
)
Weighted average number of shares outstanding
 
16,096

 
16,096

 
 
 
 
 
                                                       See accompanying notes to the unaudited pro forma consolidated financial information





Blyth, Inc.
 
 
 
 
Unaudited Pro Forma Consolidated Statement of Earnings (loss)
 
For the year ended
(In thousands, except per share data)
 
December 31, 2013
 
 
Reported
ViSalus
Pro forma
Net sales
 
$
885,450

$
351,187

$
534,263

Cost of goods sold
 
312,859

113,273

199,586

Gross profit
 
572,591

237,914

334,677

 
 
 
 
 
Selling
 
387,960

147,017

240,943

Administrative and other expense
 
164,980

83,137

81,843

Total operating expense
 
552,940

230,154

322,786

 
 
 
 
 
Operating profit (loss)
 
19,651

7,760

11,891

 
 
 
 
 
Other expense (income):
 
 
 
 
Interest expense
 
6,042

 
6,042

Interest income
 
(635
)
(19
)
(616
)
Foreign exchange and other, net
 
(386
)
(314
)
(72
)
Total other expense
 
5,021

(333
)
5,354

 
 
 
 
 
Earnings (loss) from continuing operations before income taxes & noncontrolling interest
14,630

8,093

6,537

Income tax expense
 
11,194

4,457

6,737

Earnings (loss) from continuing operations before non-controlling interest
 
3,436

3,636

(200
)
 
 
 
 
 
Less: Net earnings (loss) attributable to noncontrolling interests
 
1,003

690

313

Earnings (loss) from continuing operations
 
2,433

2,946

(513
)
 
 
 
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
Net earnings (loss) from continuing operations attributable to Blyth, Inc.
 
$
0.15

 
$
(0.03
)
Weighted average number of shares outstanding
 
16,196

 
16,196

 
 
 
 
 
Diluted earnings per share:
 
 
 
 
Net earnings (loss) from continuing operations attributable to Blyth, Inc.
 
$
0.15

 
$
(0.03
)
Weighted average number of shares outstanding
 
16,196

 
16,196

 
 
 
 
 
                                                       See accompanying notes to the unaudited pro forma consolidated financial information





Blyth, Inc.
 
 
 
 
Unaudited Pro Forma Consolidated Statement of Earnings (loss)
 
For the year ended
(In thousands, except per share data)
 
December 31, 2012
 
 
Reported
ViSalus
Pro forma
Net sales
 
$
1,179,514

$
623,533

$
555,981

Cost of goods sold
 
391,994

179,316

212,678

Gross profit
 
787,520

444,217

343,303

 
 
 
 
 
Selling
 
516,419

267,188

249,231

Administrative and other expense
 
186,535

96,079

90,456

Total operating expense
 
702,954

363,267

339,687

 
 
 
 
 
Operating profit (loss)
 
84,566

80,950

3,616

 
 
 
 
 
Other expense (income):
 
 
 
 
Interest expense
 
6,057

(6
)
6,063

Interest income
 
(1,724
)
(16
)
(1,708
)
Foreign exchange and other, net
 
(909
)
(217
)
(692
)
Total other expense
 
3,424

(239
)
3,663

 
 
 
 
 
Earnings (loss) from continuing operations before income taxes & noncontrolling interest
81,142

81,189

(47
)
Income tax expense
 
31,635

34,285

(2,650
)
Earnings (loss) from continuing operations before non-controlling interest
 
49,507

46,904

2,603

 
 
 
 
 
Less: Net earnings (loss) attributable to noncontrolling interests
 
13,242

12,961

281

Earnings (loss) from continuing operations
 
36,265

33,943

2,322

 
 
 
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
Net earnings (loss) from continuing operations attributable to Blyth, Inc.
 
$
2.11

 
$
0.14

Weighted average number of shares outstanding
 
17,180

 
17,180

 
 
 
 
 
Diluted earnings per share:
 
 
 
 
Net earnings (loss) from continuing operations attributable to Blyth, Inc.
 
$
2.10

 
$
0.13

Weighted average number of shares outstanding
 
17,247

 
17,247

 
 
 
 
 
 
 
 
 
 
                                                       See accompanying notes to the unaudited pro forma consolidated financial information






Blyth, Inc.
 
 
 
 
Unaudited Pro Forma Consolidated Statement of Earnings (loss)
 
For the eleven months ended
(In thousands, except per share data)
 
December 31, 2011
 
 
Reported
ViSalus
Pro forma
Net sales
 
$
827,612

$
225,387

$
602,225

Cost of goods sold
 
291,826

65,179

226,647

Gross profit
 
535,786

160,208

375,578

 
 
 
 
 
Selling
 
361,314

97,877

263,437

Administrative and other expense
 
142,350

55,552

86,798

Total operating expense
 
503,664

153,429

350,235

 
 
 
 
 
Operating profit (loss)
 
32,122

6,779

25,343

 
 
 
 
 
Other expense (income):
 
 
 
 
Interest expense
 
5,705

155

5,550

Interest income
 
(1,301
)
(13
)
(1,288
)
Foreign exchange and other, net
 
200

53

147

Total other expense
 
4,604

195

4,409

 
 
 
 
 
Earnings (loss) from continuing operations before income taxes & noncontrolling interest
27,518

6,584

20,934

Income tax expense
 
7,360

9,365

(2,005
)
Earnings (loss) from continuing operations before non-controlling interest
 
20,158

(2,781
)
22,939

 
 
 
 
 
Less: Net earnings (loss) attributable to noncontrolling interests
 
(971
)
(1,375
)
404

Earnings (loss) from continuing operations
 
21,129

(1,406
)
22,535

 
 
 
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
Net earnings (loss) from continuing operations attributable to Blyth, Inc.
 
$
1.28

 
$
1.36

Weighted average number of shares outstanding
 
16,546

 
16,546

 
 
 
 
 
Diluted earnings per share:
 
 
 
 
Net earnings (loss) from continuing operations attributable to Blyth, Inc.
 
$
1.27

 
$
1.35

Weighted average number of shares outstanding
 
16,656

 
16,656

 
 
 
 
 
                                                       See accompanying notes to the unaudited pro forma consolidated financial information






NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The unaudited pro forma consolidated balance sheet as of June 30, 2014 includes the following adjustments related to the disposition of ViSalus:

(a)
An adjustment of $9.8 million has been made to establish Blyth’s 10% estimated cost investment in ViSalus, since Blyth will have a 10% ownership interest in ViSalus immediately following the completion of the disposition of ViSalus. This amount was estimated based on a valuation obtained from a third party independent appraisal and is based on fair value.

(b)
The retained earnings difference from Reported to Pro Forma includes estimated pro forma adjustments related to the disposition of ViSalus, including the fair value of the retained non-controlling interest in ViSalus. This estimated retained earnings is subject to adjustments.

(c)
In anticipation of the disposition of ViSalus, we provided short-term debt financing of $3.0 million to ViSalus on August 12, 2014. In connection with the disposition of ViSalus, we agreed to enter into a $6.0 million revolving credit facility (amounts borrowed thereunder will bear interest at a rate of 10.0% per annum). The Revolving Credit Facility is described in more detail in Item 1.01 of our Current Report on Form 8-K filed on September 5, 2014.

(d)
In connection with the disposition of ViSalus, Blyth amended the indenture governing its 6.00% Senior Notes due June 2017 to provide for the mandatory redemption of the Senior Notes on the earlier of March 4, 2015 and the date, if any, that Blyth consummates a new financing in an amount of at least $50.0 million.




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