BEAR Vermont Teddy Bear (MM)

Vermont Teddy Bear Co.(R) Reports Q3 Earnings: Successful third quarter proves Men Really Do Buy Teddy Bears SHELBURNE, Vt., May 17 /PRNewswire-FirstCall/ -- The Vermont Teddy Bear Company(R) today reported net revenues for the three months ended March 31, 2004 of $20.1 million, an increase of approximately 38% as compared to net revenues of $14.5 million reported for the three months ended March 31, 2003. The revenue increase in the quarter is primarily attributable to the $3.6 million of revenue contributed by the addition of the Calyx & Corolla floral delivery segment acquired August 29, 2003. Revenues in the BearGram segment and the PajamaGram segment also increased $.9 million and $.8 million respectively as the result of a successful Valentine's Day selling season. Net income available to common stockholders for this third quarter was $1.4 million, or $.22 per diluted common share, as compared to net income available to common stockholders of $971,000, or $.18 per diluted share, for the same quarter last year. (Photo: http://www.newscom.com/cgi-bin/prnh/20040517/NEM047 ) "At Valentine's Day our success is linked to our unique ability to market and sell teddy bear BearGrams to grown men as the creative alternative to flowers," said Vermont Teddy Bear President and CEO Elisabeth Robert. "To that end we focus our advertising for this male driven holiday on radio programming targeting men, such as Howard Stern. Additionally, this year we teamed up with Adam Carolla, formerly of The Man Show, to expand our national TV advertising campaign. While our PajamaGram, TastyGram and Calyx & Corolla gift segments do represent a Valentine's Day selling opportunity to men looking for a gift for their wife or sweetheart, they really are more targeted at the woman gift buyer at Christmas, Mother's Day and other times of the year." Revenues in the first nine months of the fiscal year increased approximately 33% to $38.5 million from $28.9 million in the same period last year due primarily to the revenues associated with the newly acquired floral delivery business Calyx & Corolla and growth in the Company's PajamaGram gift segment. Calyx & Corolla added $9.8 million in the period while the PajamaGram segment grew by 45% to $4.6 million in the nine months ended March 31, 2004 from $3.2 million in the same nine months of 2003. The growth in these segments is partially offset by a decrease of $1.5 million in Bear-Gram revenues for the period. The Company reported net income available to common stockholders in the first nine months of $1,577,000, or .27 per diluted common share, as compared to $966,000, or $.16 per diluted common share, for the first nine months of last year. Consolidated gross margin in the three months ended March 31, 2004 increased to approximately $11.9 million from $9.1 million in the comparable period last year. In the third quarter, the gross margin dollar contribution from the Calyx segment, BearGram and Corporate/Wholesale segments resulted in higher margins due to increased revenues. Gross margin as a percentage of net revenues decreased to approximately 59.2% from 62.9% last year. While the Company achieved a gross margin percentage point increase of 7.1 points in the PajamaGram segment as a result of better unit gross margins and changes to the product mix, the increase was offset by a decrease of 2.5 percentage points in the TastyGram segment, 2.3 percentage points in the Corporate/Wholesale segment resulting from lower margins on a large volume order of teddy bears shipped in the period and a 2.1 percentage point decrease in the BearGram margin attributed to higher unit overhead costs associated with reduced bear production. The 46.5 percent gross margin in the newly acquired Calyx & Corolla segment, which is significantly less than the Company's overall gross margin, also contributed to the decrease in the Company's consolidated gross margin as a percentage of net revenues in the quarter. Marketing and selling expenses increased to $7.5 million for the quarter from $5.8 million for the same quarter last year. The increases are primarily due to the addition of marketing and selling expenses associated with the new Calyx segment. During the period the Company also increased spending on PajamaGram radio advertising and launched a national cable network television advertising campaign for the BearGram segment. As a result, marketing and selling costs as a percentage of net revenues decreased to 37.4 percent in the third quarter of fiscal 2004 from 40.1 percent in the quarter last year. General and administrative expenses for the third quarter increased to $1.8 million from $1.5 million primarily due to the general and administrative cost associated with the Calyx & Corolla gift segment. However, general and administrative expenses decreased to 8.8% from 10.3% in the same period last year. The foregoing can be interpreted as including forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested by the statements above. Contact: Nicole L'Huillier 802-985-1362 THE VERMONT TEDDY BEAR CO., INC. Condensed Consolidated Statements of Income For the Three and Nine Months Ended March 31, 2004 and 2003 (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, March 31, March 31, 2004 2003 2004 2003 Net Revenues $20,078,040 $14,528,266 $38,468,011 $28,902,301 Cost of Goods Sold 8,186,536 5,393,461 16,150,569 10,960,968 Gross Profit 11,891,504 9,134,805 22,317,442 17,941,333 Operating Expenses: Marketing and Selling Expenses 7,504,129 5,822,239 14,503,747 11,993,269 General and Administrative Expenses 1,757,745 1,489,422 4,314,726 3,818,743 9,261,874 7,311,661 18,818,473 15,812,012 Operating Income 2,629,630 1,823,144 3,498,969 2,129,321 Interest Income 10,348 20,716 28,108 104,561 Interest Expense (167,193) (168,122) (504,498) (445,598) Other Income 251 0 2,493 5,729 Income Before Income Taxes 2,473,036 1,675,738 3,025,072 1,794,013 Income Tax Provision (1,034,890) (670,295) (1,296,563) (717,605) Net Income 1,438,146 1,005,443 1,728,509 1,076,408 Preferred Stock Dividends (50,214) (20,709) (133,073) (69,786) Accretion of Original Issue Discount 0 (13,623) (18,153) (40,869) Net Income Available to Common Stockholders $1,387,932 $971,111 $1,577,283 $965,753 Basic Net Income Per Common Share $0.28 $0.20 $0.32 $0.17 Diluted Net Income Per Common Share $0.22 $0.18 $0.27 $0.16 Weighted Average Number of Shares Outstanding 4,973,906 4,853,372 4,913,569 5,665,789 Weighted Average Number of Diluted Common Shares Outstanding 6,323,312 5,477,490 6,093,384 6,501,398 Condensed Consolidated Balance Sheet Information March 31, June 30, March 31, 2004 2003 2003 (unaudited) (unaudited) Cash and Cash Equivalents $8,354,500 $5,168,177 $5,542,637 Current Assets 16,296,977 12,338,471 12,861,135 Total Assets 30,397,521 21,022,425 21,741,499 Current Liabilities 11,075,023 6,109,936 7,330,938 Long Term Debt 6,745,365 6,613,847 6,856,783 Total Liabilities 18,041,471 12,861,127 14,392,815 Series C Preferred 93,042 164,889 151,266 Series D Preferred 2,510,274 0 0 Stockholders' Equity 9,752,734 7,996,409 7,197,418 http://www.newscom.com/cgi-bin/prnh/20040517/NEM047 http://photoarchive.ap.org/ DATASOURCE: The Vermont Teddy Bear Company CONTACT: Nicole L'Huillier of The Vermont Teddy Bear Company, +1-802-985- 1362, Web site: http://www.vermontteddybear.com/

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