Blyth (BTH)

Recent Developments

In September 2005, we announced our proposed intention to spin off the Wholesale segment. We requested and received from the Internal Revenue Service a ruling on the tax-free status for the transaction. In March 2006, we announced our intention to evaluate additional strategic alternatives that had been identified since the announcement of the spin off, which would likely focus on one or more of our European Wholesale businesses, believing that substantial upside opportunities exist in the North American Wholesale businesses despite challenging market conditions impacting the Home Expressions industry.

In accordance with this intention to explore strategic alternatives with respect to our European Wholesale businesses, (a) on April 12, 2006, we sold Kaemingk B.V. (“Kaemingk”) to an entity controlled by the management of this business, (b) on June 16, 2006, we sold Edelman B.V. (“Edelman”) and Euro-Decor B. V. (“Euro-Decor”) to an entity with which members of the management of Edelman and Euro-Decor are affiliated, (c) on August 17, 2006, we sold the Gies Group and (d) on December 20, 2006, we sold Colony Gifts Corporation Ltd. (“Colony”). Accordingly, the results of operations for Kaemingk, Edelman, Euro-Decor, Gies and Colony have been classified as discontinued operations for all periods presented.

On April 27, 2007, the Company sold certain assets and liabilities of its BHI NA mass channel candle business, which was part of the Wholesale segment. The net assets were sold for $25.1 million, inclusive of proceeds from the sale of overstock inventory of $1.1 million. Of this amount, $21.8 million was received at closing and $3.3 million was received in the second quarter of fiscal 2008. The sale, including the proceeds received in the second quarter, resulted in a pre-tax gain of $0.6 million, and is recorded in Administrative and other expenses in the Condensed Consolidated Statements of Earnings (Loss).

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Recent Developments

In September 2005, we announced our proposed intention to spin off the Wholesale segment.  We requested and received from the Internal Revenue Service a ruling on the tax-free status for the transaction.  In March 2006, we announced our intention to evaluate additional strategic alternatives that had been identified since the announcement of the spin off, which would likely focus on one or more of our European Wholesale businesses, believing that substantial upside opportunities exist in the North American Wholesale businesses despite challenging market conditions impacting the Home Expressions industry.

In accordance with this intention to explore strategic alternatives with respect to our European Wholesale businesses, (a) on April 12, 2006, we sold Kaemingk B.V. (“Kaemingk”) to an entity controlled by the management of this business, (b) on June 16, 2006, we sold Edelman B.V. (“Edelman”) and Euro-Decor B. V. (“Euro-Decor”) to an entity with which members of the management of Edelman and Euro-Decor are affiliated, (c) on August 17, 2006, we sold the Gies Group and (d) on December 20, 2006, we sold Colony Gifts Corporation Ltd. (“Colony”). Accordingly, the results of operations for Kaemingk, Edelman, Euro-Decor, Gies and Colony have been classified as discontinued operations for all periods presented.

On April 27, 2007, the Company sold certain assets and liabilities of its BHI NA mass channel candle business, which was part of the Wholesale segment.  The net assets were sold for $25.1 million, inclusive of proceeds from the sale of overstock inventory of $1.1 million. Of this amount, $21.8 million was received at closing and $3.3 million was received in the second quarter of fiscal 2008.  The sale, including the proceeds received in the second quarter, resulted in a pre-tax gain of $0.6 million, and is recorded as Administrative and other expenses in the Condensed Consolidated Statements of Earnings (Loss).

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Recent Developments

In September 2005, we announced our proposed intention to spin off the Wholesale segment.  We requested and received from the Internal Revenue Service a ruling on the tax-free status for the transaction.  In March 2006, we announced our intention to evaluate additional strategic alternatives that had been identified since the announcement of the spin off, which would likely focus on one or more of our European Wholesale businesses, believing that substantial upside opportunities exist in the North American Wholesale businesses despite challenging market conditions impacting the Home Expressions industry.

In accordance with this intention to explore strategic alternatives with respect to our European Wholesale businesses, (a) on April 12, 2006, we sold Kaemingk B.V. (“Kaemingk”) to an entity controlled by the management of this business, (b) on June 16, 2006, we sold Edelman B.V. (“Edelman”) and Euro-Decor B. V. (“Euro-Decor”) to an entity with which members of the management of Edelman and Euro-Decor are affiliated, (c) on August 17, 2006, we sold the Gies Group and (d) on December 20, 2006, we sold Colony Gifts Corporation Ltd. (“Colony”). Accordingly, the results of operations for Kaemingk, Edelman, Euro-Decor, Gies and Colony have been reclassified as discontinued operations for all periods presented.

On April 27, 2007, we sold certain assets and liabilities of our Blyth HomeScents International (“BHI”) North American mass channel candle business, which was part of the Wholesale segment.  The business was sold for $24.0 million of which $21.8 million was received at closing and the remaining $2.2 million, which is based on a working capital adjustment, is expected to be received in the second quarter of fiscal 2008.  As stated in the asset sale agreement, the buyer has the right to review and challenge the working capital adjustment as calculated by the Company.  The sale resulted in a pre-tax loss of $0.5 million, which is recorded on the Administrative and other line in the Condensed Consolidated Statements of Earnings (Loss).

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Recent Developments

In September 2005, we announced our proposed intention to spin off the Wholesale segment to our stockholders. We requested and received from the Internal Revenue Service a ruling on the tax-free status for the transaction. In March 2006, we announced our intention to evaluate additional strategic opportunities that had been identified since the announcement of the spin off, which would likely focus on one or more of our European Wholesale businesses. In fiscal 2007, we sold all of our European Wholesale businesses.

During the third quarter of fiscal 2007, we began the restructuring of our North American mass channel home fragrance business with the announcement that we will be closing our Tijuana, Mexico manufacturing facility. In addition, in fiscal 2007, we commenced the elimination of less profitable customers and streamlining of the Stock Keeping Unit (“SKU”) base of the mass business.

Recent Developments

In September 2005, we announced our proposed intention to spin off the Wholesale segment. We requested and received from the Internal Revenue Service a ruling on the tax-free status for the transaction. In March 2006, we announced our intention to evaluate additional strategic opportunities that had been identified since the announcement of the spin off, which would likely focus on one or more of our European Wholesale businesses, believing that substantial upside opportunities exist in the North American Wholesale businesses despite challenging market conditions impacting the Home Expressions industry.

In accordance with this intention to explore strategic alternatives with respect to our European Wholesale businesses, (a) on April 12, 2006, we sold Kaemingk B.V. (“Kaemingk”) to an entity controlled by the management of this business, (b) on June 16, 2006, we sold Edelman B.V. (“Edelman”) and Euro-Decor B. V. (“Euro-Decor”) to an entity with which members of the management of Edelman and Euro-Decor are affiliated, (c) on August 17, 2006, we sold the Gies Group and (d) on December 20, 2006, we sold Colony Gifts Corporation Ltd. (“Colony”). Accordingly, the results of operations for Kaemingk, Edelman, Euro-Decor, Gies and Colony have been reclassified as discontinued operations for all periods presented.

In the third quarter of fiscal 2007, the Company approved a restructuring plan for its North American mass channel home fragrance business. The major components of the restructuring plan are the closing of our Tijuana, Mexico manufacturing facility, the elimination of less profitable customers, the streamlining

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of the stock keeping unit (“SKU”) base of the mass business, the outsourcing of certain products currently being manufactured and head count reductions. These initial steps of the restructuring project resulted in fiscal 2007 third quarter charges totaling $5.2 million. The charges consisted of inventory write-downs of $3.9 million, equipment impairments of $0.6 million and severance costs of approximately $0.3 million which were charged to cost of goods sold, while the remaining $0.4 million related to severance was charged to administrative expense.

In the fourth quarter of fiscal 2007, the Company recorded an additional $14.9 million of charges related to the restructuring of our North American mass channel home fragrance business. In the fourth quarter, we completed the identification and notification of less profitable customers that would be eliminated. In addition, the remaining SKUs to be discontinued were identified and the determination of realizable value was made in the fourth quarter. As a result of these restructuring steps, a $12.1 million charge was recorded in cost of goods sold to adjust excess and obsolete inventory to its estimated realizable value. The remainder of the fourth quarter charges of $2.8 million consisted primarily of equipment impairments of $2.1 million and severance of $0.7 million charged to cost of goods sold. Employee terminations totaled 149 in fiscal 2007 related to this restructuring.

These restructuring efforts are expected to continue into fiscal 2008, with additional charges related to severance and equipment impairment estimated to be in a range of $6.0 million - $10.0 million.

Also, during the fourth quarter of fiscal 2007, the Company recorded approximately $3.9 million of charges related to the restructuring of the North American operations of our Direct Selling segment in recognition of the recent decline in sales in this channel. These costs were comprised of a $2.4 million charge to cost of goods sold for lease obligations and equipment impairments related to a reduction in seasonal distribution capacity and $1.5 million of severance costs associated with the termination of 91 employees. Of the $1.5 million of severance costs, $0.4 million was recorded in cost of goods sold and $1.1 million was recorded in selling and administrative expense.

Recent Developments

In September 2005, we announced our proposed intention to spin off the Wholesale segment to our stockholders.  We requested and received from the Internal Revenue Service a ruling on the tax-free status for the transaction.  In March 2006, we announced our intention to evaluate additional strategic opportunities that have been identified since the announcement of the spin off, which would likely focus on one or more of our European Wholesale businesses, believing that substantial upside opportunities exist in the North American Wholesale business despite challenging market conditions impacting the Home Expressions industry.

In accordance with this intention to explore strategic alternatives with respect to our European Wholesale business, (a) on April 12, 2006, we sold Kaemingk B.V. (“Kaemingk”) to an entity controlled by the management of this business, (b) on June 16, 2006, we sold Edelman B.V. (“Edelman”) and Euro-Decor B. V. (“Euro-Decor”) to an entity with which members of the management of Edelman and Euro-Decor are affiliated, and (c) on August 17, 2006, we sold the Gies Group. Accordingly, the results of operations for Kaemingk, Edelman, Euro-Decor and Gies have been reclassified as discontinued operations for all periods presented.  The remaining European Wholesale business, Colony, is classified as held for sale as of October 31, 2006. Similarly, the results of operations for Colony have been reclassified as discontinued operations for all periods presented.  The assets and liabilities of the business to be sold have been classified as assets of discontinued operations and liabilities of discontinued operations, respectively, in the Company’s Condensed Consolidated Balance Sheets.

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During the third quarter of fiscal 2007, we began the restructuring of our North American mass channel home fragrance business with the announcement that we will be closing our Tijuana, Mexico manufacturing facility.  In addition, we plan to eliminate unprofitable customers and streamline the SKU base of the mass business.

The initial steps of this restructuring project resulted in fiscal 2007 third quarter charges totaling $5.2 million.  Inventory write-downs and equipment impairments of $4.5 million and severance costs of approximately $0.3 million were charged to cost of goods sold, while the remaining $0.4 million related to severance was charged to general and administrative expenses.  These restructuring efforts are expected to continue into fiscal 2008, with additional charges related to severance and equipment impairment estimated to be approximately $13 million.  In addition, we will continue to evaluate our SKU base and customer relationships.  As a result of these evaluations there may be additional inventory write-downs related to the elimination of customers that are not as profitable as we desire and/or the further reduction of the SKU base of the mass business.

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Recent Developments

In September 2005, we announced our proposed intention to spin off the Wholesale segment to our stockholders.  We requested and received from the Internal Revenue Service a ruling on the tax-free status for the transaction.  In March 2006, we announced our intention to evaluate additional strategic opportunities that have been identified since the announcement of the spin off, which would likely focus on one or more of our European Wholesale businesses, believing that substantial upside opportunities exist in the North American Wholesale business despite challenging market conditions impacting the Home Expressions industry.

In accordance with this intention to explore strategic alternatives with respect to our European Wholesale business, on April 12, 2006, we sold Kaemingk B.V. (“Kaemingk”) pursuant to a Share Sale and Purchase Agreement to an entity controlled by the management of this business, and on June 16, 2006, we sold Edelman B.V. (“Edelman”) and Euro-Decor B. V. (“Euro-Decor”) pursuant to a Share Sale and Purchase Agreement to an entity with which members of the management of Edelman and Euro-Decor are affiliated. Accordingly, the results of operations for Kaemingk, Edelman and Euro-Decor have been reclassified as discontinued operations for all periods presented.  The two remaining European Wholesale businesses, Gies and Colony, are classified as held for sale as of July 31, 2006. The Gies business was sold on August 17, 2006. Similarly, the results of operations for Gies and Colony have been reclassified as discontinued operations for all periods presented.  The assets and liabilities of these businesses to be sold have been classified as assets of discontinued operations and liabilities of discontinued operations, respectively, in the Company’s Condensed Consolidated Balance Sheet.

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Recent Developments

In September 2005, we announced our proposed intention to spin off the Wholesale segment to our stockholders. We requested and received from the Internal Revenue Service a ruling on the tax-free status for the transaction. We intend to evaluate additional strategic opportunities that have been identified since the announcement of the spin off. We have engaged outside consultants to advise us on potential opportunities within the Wholesale segment, and we will likely focus on one or more of our European Wholesale businesses. Believing that substantial upside opportunities exist in the North American Wholesale business and having made significant investments in sales force integration and productivity, as well as new product development, we remain committed to the success of these and other initiatives despite challenging market conditions impacting the Home Expressions industry.

In accordance with this intention to explore strategic alternatives with respect to our European Wholesale business, on April 12, 2006, we sold Kaemingk B.V. (“Kaemingk”) pursuant to a Share Sale and Purchase Agreement to an entity controlled by the management of Kaemingk. Accordingly, the results of operations for Kaemingk have been reclassified as discontinued operations for all periods presented.

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In September 2005, the Company announced its proposed intention to spin off the Wholesale segment to its stockholders. The Company requested and received from the Internal Revenue Service a ruling on the tax-free status for the transaction. Management intends to evaluate additional strategic opportunities that have been identified since the announcement of the spin off, has engaged outside consultants to advise it on strategic alternatives within the Wholesale segment and will likely focus on one or more of its European Wholesale businesses, believing that substantial upside opportunities exist in the North American Wholesale business despite challenging market conditions impacting the Home Expressions industry.

Recent Developments

In September 2005, the Company announced its proposed intention to spin off the Wholesale segment to its stockholders.  The Company expects to receive a ruling from the Internal Revenue Service relating to certain aspects of the proposed tax-free spin off prior to the end of the calendar year.  Management intends to evaluate additional strategic opportunities that have been identified since the announcement of the spin off.  Initiatives intended to separate the Wholesale segment continue, though management has paused in its immediate efforts to complete the spin off.

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