Blyth Reports 3rd Quarter Results, Decreased Profits Of 6%

 

Blyth, Inc. (NYSE: BTH), a direct to consumer company and leading designer and marketer of candles and accessories for the home and health, wellness and beauty products, household convenience items and personalized gifts sold through the direct selling and direct marketing channels, today reported sales and earnings for the third quarter of 2014. 

Net sales for the three months ended September 30, 2014 decreased approximately 6% to $90.8 million from $97.0 million for the comparable prior year period.

Blyth's operating loss for the third quarter was $11.4 million this year versus a loss of $11.5 million last year.  Net Earnings Attributable to Blyth, Inc. were $106.2 million for the three months ended September 30, 2014 compared to a loss of $8.5 million in the prior year period. Diluted Net Earnings per Share Attributable to Blyth, Inc. were $6.57 per share for the three months ended September 30, 2014 compared to a loss of $0.53 per share in the prior year period. 

During the third quarter, the Company recorded after-tax expenses of $0.04 per share related to the refinancing of its 6% Senior Notes and an after-tax profit from discontinued operations for ViSalus of $7.16 per share this year and $0.04 last year.  Normalized earnings from continuing operations were a loss of $9.0 million, or $0.55 per share, in this year's third quarter versus a loss of $9.1 million, or $0.57 per share, in the comparable period last year.

On September 2, 2014, the Company announced that it and the Founders and certain other preferred stockholders of its ViSalus network marketing subsidiary had reached an agreement to exchange all of the Redeemable Convertible Preferred Stock of ViSalus for shares of ViSalus Common Stock.  The transaction reduced the Company's ownership in ViSalus from 80.9% to 10% and increased ViSalus's Founders and other preferred stockholders' ownership from 19.1% to 90%. 

In addition, the transaction extinguished the obligation of ViSalus to redeem the ViSalus Redeemable Convertible Preferred Stock on December 31, 2017 for an aggregate price of $143.2 million.  The transaction was completed on September 4, 2014 and, as such, ViSalus's operating results have been presented as discontinued operations for all periods shown.

Commenting on the third quarter results, Robert B. Goergen, Jr., Chief Executive Officer noted, Our third quarter results were affected by lower sales and profits in PartyLite North America and Europe as a direct result of the decline in Consultants in those markets.  As we move past the ViSalus transaction and into the fourth quarter, which, as a seasonal business is our strongest quarter, we are focusing on initiatives and promotions to grow the Consultant base, expand the geographic footprint and help PartyLite Consultants worldwide grow their businesses.

Mr. Goergen continued, At Silver Star Brands, sales of our health, wellness and beauty products continue to be strong and we expect our recent launch of i.s. INNOVATIVE SOLUTIONS™, a performance line of skincare, to provide women with high quality beauty products as well as expand brand loyalty.

2014 Third Quarter Segment Performance

In the Candles & Home Decor segment, PartyLite sales were $60.7 million in the third quarter versus $67.5 million for the same period last year, a decline of 10%.  This decline reflects the 11% year-over-year decline in Consultants to approximately 38,800.  Australiacontinues to have double digit Consultant growth, which partially offset the lower levels of Consultants in many of the larger, more mature markets.  PartyLite's European sales during the quarter decreased 11% both in U.S. dollars and in local currency.  PartyLite's European active independent sales consultants totaled approximately 21,500 at the end of the third quarter, a 12% decline from the year-earlier period.  PartyLite's North American sales, comprised of the U.S. and Canada, declined 23% versus the prior year period.  Active North American independent sales Consultants totaled approximately 11,900 at the end of the third quarter versus approximately 14,400 at the end of last year's comparable quarter. 

Third quarter operating loss for the Candles & Home Decor segment was $10.6 million versus a loss of $10.8 million in last year's third quarter.  Excluding allocated corporate expenses of $1.8 million this year and $2.5 million last year, PartyLite's operating loss was $8.8 million this year versus $8.3 million last year.

Commenting on the performance of the Candles & Home Decor segment, Robert B. Goergen, Jr., Chief Executive Officer of Blyth and President, PartyLite Worldwide said, In Europe, PartyLite Consultants continued to have difficulty booking parties and sponsoring new consultants in the third quarter, as evidenced by the results in our French and Nordic markets which were the largest contributors to the revenue decline. 

That said, we are encouraged by sales growth in our new markets, such as Italy, and continued growth in both sales and Consultants in the more established Australian market.   We are focused on initiatives including email marketing, online sales and social media to establish ourselves as the premier social shopping experience in Europe.

Turning to North America, Mr. Goergen continued, We continue to have a very strong product offering, most notably an exclusive line of products designed in collaboration with Jonathan Adler, the iconic potter-turned-home furnishings designer, as well as new fragrances in our popular Partylite's SmartScents and Brighter World™ candles.  We have implemented a number of initiatives to stabilize the North American business and return to growth.  This stabilization is a work in process and we will continue to invest in tools for our Consultants to recruit and remain engaged in this difficult economic environment.

In the Catalog & Internet segment, third quarter net sales increased 2% to $30.0 million from the prior year's level of $29.5 million.  Sales of health, wellness and beauty products were strong and more than offset lower sales of general merchandise and home decor.  Third quarter operating loss in this segment was $0.8 million this year versus a loss of $0.7 million last year.  Excluding allocated corporate expenses of $0.8 million this year and $0.9 million last year, Silver Star Brands' operating profit was breakeven this year versus a profit of $0.2 million last year.

The sum of the individual and segment amounts may not equal the reported totals for the third quarter and nine months for Blyth overall due to rounding.

The summary reconciliation of unaudited Generally Accepted Accounting Principles (GAAP) earnings and earnings per share to Non-GAAP earnings and earnings per share presented in the attached table and the discussion of segment operating loss excluding certain items are included as additional references to assist investors in analyzing the Company's performance and should be considered in addition to, not as a substitute for, measures of financial performance prepared in accordance with GAAP.  In presenting comparable results, the Company discloses non-GAAP financial measures when it believes such measures will be useful to investors in evaluating the Company's underlying business performance. 

Management internally reviews the results of the Company excluding the impact of certain items as it believes that these non-GAAP financial measures are useful for evaluating the Company's core operating results and facilitating comparison across reporting periods.

First Nine Months Fiscal Performance

Net Sales for the nine months ended September 30, 2014 declined 7% to $313.2 million versus $336.0 million for the comparable prior year period.  Operating Loss for the first nine months was $13.7 million this year versus a loss of $16.0 million last year, the improvement principally driven by operational efficiencies at Silver Star Brands.

Net Earnings Attributable to Blyth, Inc. were $99.0 million for the nine months ended September 30, 2014 compared to a loss of $7.2 million in the prior year period. Diluted Earnings per Share Attributable to Blyth, Inc. were $6.13 for the nine months ended September 30, 2014 compared to a loss of $0.45 in the prior year period.  

For the first nine months, the Company recorded an expense of $0.04 for the aforementioned debt refinancing and an after-tax profit from discontinued operations for ViSalus of $6.93 per share this year and $0.40 per share last year.  Normalized earnings from continuing operations were a loss of $12.4 million, or $0.77per share versus a loss of $13.8 million, or $0.85 per share, in the comparable period last year.

Blyth, Inc., headquartered in Greenwich, CT, USA, is a direct to consumer business focused on the direct selling and direct marketing channels.  It designs and markets candles and accessories for the home and also designs and markets health, wellness and beauty products, household convenience items and personalized gifts through the Catalog/Internet channel.  Its products are sold direct to the consumer under the PartyLite® brand and to consumers in the catalog/Internet channel under the Miles Kimball®, Walter Drake®, Easy Comforts®, As We Change® and Exposures® brands.