**United States Securities and Exchange Commission**

**Washington, D.C. 20549**

**FORM 10-Q**

**(Mark One)**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934.

**Forthe Quarterly Period Ended June 30, 2004**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934.

**Forthe Transition period from                 to                 **

**CommissionFile Number:  001-14843**

**The Boyds Collection, Ltd.**

(Exact Name of Registrantas Specified in its Charter)

| **Maryland**                                                                   | **52-1418730**                        |
|--------------------------------------------------------------------------------|---------------------------------------|
| (State or Other Jurisdiction  of Incorporation or  Organization)               | (I.R.S. Employer  Identification No.) |
| **350 South Street, McSherrystown, Pennsylvania,  Attn.: Joseph E. Macharsky** | **17344**                             |
| (Address of  Principal Executive Offices)                                      | (Zip Code)                            |
| **(717) 633-9898**                                                             |
| (Registrant’s  Telephone Number, Including Area Code)                     |

 

Indicate by check mark whether the Registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes  x  No  o

Indicate by check mark whether the Registrant is anaccelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes  o  No  x

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date:

| **Common Stock, par value $.0001 per share** | **59,004,202**                           |
|----------------------------------------------|------------------------------------------|
| (Class)                                      | (Outstanding as  of August 6, 2004) |

 

 

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**THE BOYDSCOLLECTION, LTD.TABLE OF CONTENTS**
|                 | ** ** | ** **                                                                                                  | ** ** | **Page** | ** ** |
|-----------------|------------|-------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| *PART I.*  |       | *FINANCIAL INFORMATION*                                                                                     |       |     |       |
| **Item 1.**     | ** ** | **Financial  Statements:**                                                                                  |       |     |       |
|            |       | Condensed Consolidated  Balance Sheets as of December 31, 2003 and June 30, 2004             |       | 3        |       |
|            |       | Condensed Consolidated Statements  of Income for the Three and Six Months Ended June 30, 2003 and 2004 |       | 4        |       |
|            |       | Condensed Consolidated Statement  of Stockholders’ Equity for the Six Months Ended June 30, 2004  |       | 5        |       |
|            |       | Condensed Consolidated  Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2004       |       | 6        |       |
|            |       | Notes to Condensed Consolidated  Financial Statements                                                       |       | 7        |       |
| **Item 2.**     | ** ** | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations**             |       | 12       |       |
| **Item 3.**     | ** ** | **Quantitative  and Qualitative Disclosures About Market Risk**                                             |       | 22       |       |
| **Item 4.**     | ** ** | **Disclosure  Controls and Procedures**                                                                     |       | 22       |       |
| *PART II.* |       | *OTHER  INFORMATION*                                                                                        |       |     |       |
| **Item 1.**     | ** ** | **Legal  Proceedings**                                                                                      |       | 23       |       |
| **Item  2.**    | ** ** | **Changes in Securities  and Use of Proceeds**                                                              |       | 23       |       |
| **Item  3.**    | ** ** | **Defaults Upon Senior  Securities**                                                                        |       | 23       |       |
| **Item  4.**    | ** ** | **Submission of Matters  to a Vote of Security Holders**                                                    |       | 23       |       |
| **Item 5.**     | ** ** | **Other  Information**                                                                                      |       | 23       |       |
| **Item  6.**    | ** ** | **Exhibits and Reports  on Form 8-K**                                                                  |       | 23       |       |
|            |       | Signatures                                                                                                  |       | 24       |       |
|            |       | Index to Exhibits                                                                                           |       | 25       |       |

 

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**PART I**FINANCIALINFORMATION

**Item 1.**   Financial Statements.

**THE BOYDS COLLECTION, LTD.**CONDENSEDCONSOLIDATED BALANCE SHEETSAs ofDecember 31, 2003 and June 30, 2004(Unaudited)
| ** **                                                                                                                                             | ** ** | **December 31,**   | ** ** | **June 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-------------------|------------|
| ** **                                                                                                                                             | ** ** | **2003**                | ** ** | **2004**          | ** ** |
| ** **                                                                                                                                             | ** ** | **(in thousands)** | ** ** |
| **ASSETS**                                                                                                                                             |       |                    |       |              |       |   |   |
| **CURRENT ASSETS:**                                                                                                                                    |       |                    |       |              |       |   |   |
| Cash and cash  equivalents                                                                                                                             |       |                    | $          | 4,173             |       |   | $ | 739 |   |
| Accounts  receivable, less allowances of $2,189 at December 31, 2003, and $2,068  at June 30, 2004                                           |       |                    | 8,174      |              |       | 12,781 |   |
| Inventory—primarily  finished goods, less allowance for obsolete inventory of $2,855 at  December 31, 2003, and $3,308 at June 30, 2004 |       |                    | 9,404      |              |       | 12,243 |   |
| Inventory in  transit                                                                                                                                  |       |                    | 3,653      |              |       | 350 |   |
| Other current  assets                                                                                                                                  |       |                    | 932        |              |       | 1,141 |   |
| Income taxes  receivable                                                                                                                               |       |                    | 1,964      |              |       | 922 |   |
| Deferred income  taxes                                                                                                                                 |       |                    | 21,047     |              |       | 21,047 |   |
| Total current  assets                                                                                                                                  |       |                    | 49,347     |              |       | 49,223 |   |
| **PROPERTY  AND EQUIPMENT**—**NET**(Note 4)                                                                                                       |       |                    | 21,726     |              |       | 25,152 |   |
| **OTHER ASSETS:**                                                                                                                                      |       |                    |       |              |       |   |   |
| Deferred debt  issuance costs                                                                                                                          |       |                    | 961        |              |       | 796 |   |
| Deferred tax asset                                                                                                                                     |       |                    | 147,997    |              |       | 145,609 |   |
| Other assets                                                                                                                                           |       |                    | 2,923      |              |       | 2,881 |   |
| Total other assets                                                                                                                                     |       |                    | 151,881    |              |       | 149,286 |   |
| **TOTAL  ASSETS**                                                                                                                                      |       |                    | $          | 222,954           |       |   | $ | 223,661 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                          |       |                    |       |              |       |   |   |
| **CURRENT LIABILITIES:**                                                                                                                               |       |                    |       |              |       |   |   |
| Accounts payable                                                                                                                                       |       |                    | $          | 2,514             |       |   | $ | 3,604 |   |
| Accrued expenses                                                                                                                                       |       |                    | 5,452      |              |       | 5,750 |   |
| Interest payable                                                                                                                                       |       |                    | 626        |              |       | 601 |   |
| Current portion of  long-term debt (Note 5)                                                                                                            |       |                    | 14,000     |              |       | 38,000 |   |
| Total current  liabilities                                                                                                                             |       |                    | 22,592     |              |       | 47,955 |   |
| **LONG-TERM  DEBT**(Note 5)                                                                                                                            |       |                    | 62,392     |              |       | 34,392 |   |
| **COMMITMENTS AND CONTINGENCIES**(Notes 2 and 9)                                                                                                       |       |                    |       |              |       |   |   |
| **STOCKHOLDERS’ EQUITY:**                                                                                                                         |       |                    |       |              |       |   |   |
| Common stock  (61,838 shares issued at December 31, 2003, and June 30, 2004,  respectively) and paid-in capital in excess of par             |       |                    | (41,221    | )                 |       | (41,221 | ) |
| Other comprehensive  income:                                                                                                                           |       |                    |       |              |       |   |   |
| Accumulated other  comprehensive loss                                                                                                                  |       |                    | (244       | )                 |       | (221 | ) |
| Retained earnings                                                                                                                                      |       |                    | 206,873    |              |       | 210,194 |   |
| Less: Treasury  shares at cost (2,834 at December 31, 2003, and at June 30, 2004,  respectively)                                             |       |                    | (27,438    | )                 |       | (27,438 | ) |
| Total  stockholders’ equity                                                                                                                       |       |                    | 137,970    |              |       | 141,314 |   |
| **TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                   |       |                    | $          | 222,954           |       |   | $ | 223,661 |   |

 

See notes to condensed consolidated financial statements.

3

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**THE BOYDSCOLLECTION, LTD.CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Three Months and Six Months Ended June 30, 2003 and 2004(Unaudited)**
| ** **                                              | ** ** | **Three Months Ended  June 30,**                       | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                              | ** ** | **2003**                                                              | ** ** | **2004**                                      | ** ** | **2003** | ** ** | **2004** | ** ** |
| ** **                                              | ** ** | **(in thousands, except per share amounts)** | ** ** |
| **NET SALES**                                           |       | $                                                                     | 24,465     |                                          | $          | 22,626 |   | $ | 59,567 |   | $ | 48,963 |   |
| **COST OF  GOODS SOLD**                                 |       | 8,621                                                                 |       | 8,728                                         |       | 21,370 |   | 19,182 |   |
| **GROSS PROFIT**                                        |       | 15,844                                                                |       | 13,898                                        |       | 38,197 |   | 29,781 |   |
| **SELLING,  GENERAL AND ADMINISTRATIVE EXPENSES**       |       | 10,409                                                                |       | 11,765                                        |       | 18,658 |   | 21,691 |   |
| **INCOME  FROM OPERATIONS**                             |       | 5,435                                                                 |       | 2,133                                         |       | 19,539 |   | 8,090 |   |
| **OTHER  EXPENSE**                                      |       | (68                                                                   | )          | (17                                           | )          | (27 | ) | (96 | ) |
| **INTEREST EXPENSE:**                                   |       |                                                                  |       |                                          |       |   |   |   |   |
| Interest expense                                        |       | 1,249                                                                 |       | 1,008                                         |       | 2,660 |   | 2,022 |   |
| Amortization of deferred debt issuance costs            |       | 234                                                                   |       | 86                                            |       | 352 |   | 165 |   |
| **TOTAL INTEREST  EXPENSE**                             |       | 1,483                                                                 |       | 1,094                                         |       | 3,012 |   | 2,187 |   |
| **INCOME BEFORE PROVISION FOR INCOME TAXES**            |       | 3,884                                                                 |       | 1,022                                         |       | 16,500 |   | 5,807 |   |
| **PROVISION  FOR INCOME TAXES**(Note 8)                 |       | 1,706                                                                 |       | 495                                           |       | 6,347 |   | 2,486 |   |
| **NET  INCOME**                                         |       | $                                                                     | 2,178      |                                          | $          | 527 |   | $ | 10,153 |   | $ | 3,321 |   |
| **EARNINGS  PER SHARE:**                                |       |                                                                  |       |                                          |       |   |   |   |   |
| Basic and  Dilutive Earnings Per Share—Net  Income |       | $                                                                     | 0.04       |                                          | $          | 0.01 |   | $ | 0.17 |   | $ | 0.06 |   |

 

See notes to condensed consolidated financial statements.

4

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**THE BOYDSCOLLECTION, LTD.CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITYFor the Six Months Ended June 30, 2004(Unaudited)**
| ** **                        | ** ** | **Common Stock**   | ** ** | **Common Stock** | ** ** | ** **                  | ** ** | **Accumulated** | ** ** | ** **        | ** ** | ** **   | ** ** | ** **        | ** ** |
|-----------------------------------|------------|-------------------------|------------|-----------------------|------------|-----------------------------|------------|-----------------|------------|-------------------|------------|--------------|------------|-------------------|------------|
| ** **                        | ** ** | **Shares**              | ** ** | ** **            | ** ** | **and Paid-in**        | ** ** | ** **      | ** ** | **Other**         | ** ** | ** **   | ** ** | **Other**         | ** ** | **Total** | ** ** |
| ** **                        | ** ** | **Issued And**     | ** ** | **Treasury**          | ** ** | **Capital in**         | ** ** | **Treasury**    | ** ** | **Comprehensive** | ** ** | **Retained** | ** ** | **Comprehensive** | ** ** | **Stockholders’** | ** ** |
| ** **                        | ** ** | **Outstanding**         | ** ** | **Stock**             | ** ** | **Excess of Par** | ** ** | **Stock**       | ** ** | **Income/(Loss)** | ** ** | **Earnings** | ** ** | **Income**        | ** ** | **Equity** | ** ** |
| ** **                        | ** ** | **(in thousands)** | ** ** |
| **BALANCE, JANUARY 1, 2004** |       |                    | 61,838     |                  |       |                        | 2,834      |            |       |              | $          | (41,221      | )          |              | $          | (27,438 | ) |   | $ | (244 | ) |   | $ | 206,873 |   |   |   |   |   |   | $ | 137,970 |   |   |
| Other  comprehensive income:      |       |                    |       |                  |       |                        |       |            |       |              |       |         |       |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation      |       |                    | —     |                  |       |                        | —     |            |       |              | —     |         |       | —            |       |   | 23 |   |   | — |   |   | $ | 23 |   |   |   | 23 |   |   |
| Net income                        |       |                    | —     |                  |       |                        | —     |            |       |              | —     |         |       | —            |       |   | . |   |   | 3,321 |   |   | 3,321 |   |   |   | 3,321 |   |   |
| Comprehensive income              |       |                    | —     |                  |       |                        | —     |            |       |              | —     |         |       | —            |       |   | — |   |   | — |   |   | $ | 3,344 |   |   |   | — |   |   |
| **BALANCE, June 30, 2004**   |       |                    | 61,838     |                  |       |                        | 2,834      |            |       |              | $          | (41,221      | )          |              | (27,438    | ) |   | $ | (221 | ) |   | $ | 210,194 |   |   |   |   |   |   | $ | 141,314 |   |   |
|                                   |            |                         |            |                       |            |                             |            |                 |            |                   |            |              |            |                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

See notes to condensed consolidated financial statements.

5

 

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**THE BOYDSCOLLECTION, LTD.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Six Months Ended June 30, 2003 and 2004(Unaudited)**
| ** **                                                                         | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                         | ** ** | **2003**                                      | ** ** | **2004** | ** ** |
| ** **                                                                         | ** ** | **(in thousands)**                       | ** ** |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                         |       |                                          |       |   |   |
| Net income                                                                         |       | $                                             | 10,153     |   | $ | 3,321 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                          |       |   |   |
| Depreciation and amortization                                                      |       | 1,096                                         |       | 944 |   |
| Amortization and write off of deferred debt issuance  costs                        |       | 352                                           |       | 165 |   |
| Loss on sale of equipment                                                          |       | (2                                            | )          | (3 | ) |
| Deferred taxes                                                                     |       | 8,863                                         |       | 2,388 |   |
| Changes in assets  and liabilities:                                                |       |                                          |       |   |   |
| Accounts receivable—net                                                       |       | (2,110                                        | )          | (4,607 | ) |
| Inventory—net                                                                 |       | (3,105                                        | )          | (2,839 | ) |
| Inventory in transit                                                               |       | 2,074                                         |       | 3,303 |   |
| Other current assets                                                               |       | 55                                            |       | (209 | ) |
| Other assets                                                                       |       | (20                                           | )          | (14 | ) |
| Accounts payable                                                                   |       | (1,355                                        | )          | 1,090 |   |
| Accrued taxes/Income taxes receivable                                              |       | (1,232                                        | )          | 1,042 |   |
| Accrued expenses                                                                   |       | (275                                          | )          | 297 |   |
| Interest payable                                                                   |       | (90                                           | )          | (25 | ) |
| Net cash provided by operating activities                                          |       | 14,404                                        |       | 4,853 |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES:**                                         |       |                                          |       |   |   |
| Purchase of property and equipment                                                 |       | (763                                          | )          | (4,310 | ) |
| Net cash used in investing activities                                              |       | (763                                          | )          | (4,310 | ) |
| **CASH  FLOWS FROM FINANCING ACTIVITIES:**                                         |       |                                          |       |   |   |
| Repayment of debt                                                                  |       | (11,297                                       | )          | (14,000 | ) |
| Net borrowings under revolving credit agreement                                    |       | —                                        |       | 10,000 |   |
| Net cash used in financing activities                                              |       | (11,297                                       | )          | (4,000 | ) |
| Effect of exchange rate changes on cash                                            |       | (8                                            | )          | 23 |   |
| **NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS**                          |       | 2,336                                         |       | (3,434 | ) |
| **CASH  AND CASH EQUIVALENTS, BEGINNING OF PERIOD**                                |       | 5,875                                         |       | 4,173 |   |
| **CASH  AND CASH EQUIVALENTS, END OF PERIOD**                                      |       | $                                             | 8,211      |   | $ | 739 |   |
| **CASH  PAID DURING THE PERIOD FOR INTEREST**                                      |       | $                                             | 2,749      |   | $ | 2,047 |   |
| **CASH RECEIVED DURING THE PERIOD  FOR INCOME TAXES**                              |       | $                                             | (1,284     | ) | $ | (969 | ) |

 

See notes to condensed consolidated financial statements.

6

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**THE BOYDSCOLLECTION, LTD.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except share and per share amounts)(Unaudited)**

**1.**   INTERIM FINANCIALSTATEMENTS

The Boyds Collection, Ltd. (“Boyds” or the “Company”)operates in two segments, which consist of the Company’s wholesale giftbusiness and the Company’s retail gift/entertainment business. In September 2002,Boyds Bear CountryTM store opened in Gettysburg, Pennsylvania. The Companyexpects to open its second retail store in Pigeon Forge, Tennessee in mid-November of2004, its third in Myrtle Beach, South Carolina, in mid-2005, and the Companyhas entered into a letter of intent for its fourth location in Branson,Missouri. These retail stores are being used to generate income and expand thebrand awareness and image of Boyds. Substantially all of the Company’s productsare sourced from foreign manufacturers in China through buying agencies.

The condensed consolidated balance sheet as of June 30,2004, the condensed consolidated statements of income for the three and sixmonths ended June 30, 2003 and 2004, the condensed consolidated statementof stockholders’ equity for the six months ended June 30, 2004 and thecondensed consolidated statements of cash flows for the six months ended June 30,2003 and 2004 are unaudited. In the opinion of management, all adjustments,consisting only of normal recurring adjustments, necessary for a fairpresentation of such interim financial statements have been included. Theresults of operations for the six months ended June 30, 2004 are notnecessarily indicative of the results to be expected for the full year. Thesefinancial statements should be read in conjunction with the financialstatements and notes included in Boyds’ Annual Report on Form 10-K filedwith the Securities and Exchange Commission on March 29, 2004.

In November 2002, the FASB issued Interpretation No. 45,“Guarantors Accounting and Disclosure Requirements for Guarantees.”  The disclosure requirements are effective forfinancial statements issued after December 15, 2002, and therecognition/measurement requirements are effective on a prospective basis forguarantees issued or modified after December 31, 2003. The adoption ofthis statement did not have a material impact on the financial position,results of operations or cash flow of Boyds.

In January 2003, the FASB issued Interpretation No. 46,“Consolidation of Variable Interest Entities”, which provides guidance on whento consolidate variable interest entities. In December 2003, the FASBrevised FIN 46 with FIN 46R. In addition to conforming to previously issuedFASB Staff Positions, FIN 46R deferred the implementation date for certainvariable interest entities. The Interpretation applies immediately to variableinterest entities created after December 31, 2003. The adoption of thisstandard did not have a material impact on the financial position, results ofoperations or cash flow of Boyds.

In December 2002, the FASB issued Statement ofFinancial Accounting Standards (“SFAS”) No. 148, “Accounting forStock-Based Compensation—Transition and Disclosure.”  This statement amends SFAS No. 123 “Accountingfor Stock-Based Compensation,” to provide alternative methods of transition fora voluntary change to the fair value based method of accounting for stock-basedemployee compensation. In addition, this statement amends the disclosurerequirements of SFAS No. 123 to require prominent disclosures in bothannual and interim financial statements about the method of accounting forstock-based compensation and the effect of the method used on reportingresults. The disclosure provisions of this standard are effective for fiscalyears ended after December 15, 2002 and have been incorporated into thesecondensed consolidated financial statements and accompanying notes (see Note7).

7

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In April 2003, the FASB issued SFAS No. 149,“Amendment of Statement 133 on Derivative Instruments and Hedging Activities.”  This statement amends and clarifies financialaccounting and reporting for derivative instruments, including certainderivative instruments embedded in other contracts and for hedging activitiesunder SFAS No. 133, “Accounting for Derivative Instruments and HedgingActivities.”** **In general, this statement is effective for contracts enteredinto or modified after September 30, 2003, and for hedging relationshipsdesignated after September 30, 2003. The adoption of this statement didnot have a material impact on the financial position, results of operations orcash flow of Boyds.

In May 2003, the FASBissued SFAS No. 150, “Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity.”  This statement establishes standards for theclassification and measurement in an issuer’s statement of financial positionof certain financial instruments that embody obligations for the issuer thatare required to be classified as liabilities. This statement is effective forfinancial instruments entered into or modified after May 31, 2003, andotherwise shall be effective at the beginning of the first interim periodbeginning after June 15, 2003. The provisions of the statement did nothave a material impact on the financial position, results of operations or cashflow of Boyds.

**2.**   FINANCIALINSTRUMENTS WITH OFF-BALANCE SHEET RISK

At December 31, 2003and at June 30, 2004, Boyds had letters of credit outstanding under itsbank credit agreement amounting to $3.1 million and $5.2 million, respectively.These letters of credit represent Boyds’ commitment to purchase inventory whichis to be produced and/or shipped.

**3.**   RELATED PARTYTRANSACTIONS

Kohlberg, Kravis Roberts &Co., L.P. (“KKR”) is a 59% shareholder of Boyds. For each of the second quarterand six months ended June 30, 2003 and June 30, 2004, Boyds paid toKKR approximately $0.1 million and $0.2 million for management fees and relatedexpenses.

**4**.   PROPERTY ANDEQUIPMENT

Thecomponents of property and equipment at December 31, 2003 and June 30,2004 were, as follows:
| ** **                                       | ** ** | **December 31,** | ** ** | **June, 30,** | ** ** |
|--------------------------------------------------|------------|-----------------------|------------|--------------------|------------|
| ** **                                       | ** ** | **2003**              | ** ** | **2004**           | ** ** |
| Land and building                                |       |                  | $          | 18,713             |       |   | $ | 18,887 |   |
| Construction in  progress                        |       |                  | 1,050      |               |       | 5,023 |   |
| Equipment                                        |       |                  | 4,673      |               |       | 4,767 |   |
| Software  development costs                      |       |                  | 2,372      |               |       | 2,408 |   |
| Leasehold  improvements                          |       |                  | 1,924      |               |       | 1,942 |   |
| Furniture and  fixtures                          |       |                  | 398        |               |       | 399 |   |
| Total                                            |       |                  | 29,130     |               |       | 33,426 |   |
| Less: accumulated  depreciation and amortization |       |                  | (7,404     | )                  |       | (8,274 | ) |
| Total                                            |       |                  | $          | 21,726             |       |   | $ | 25,152 |   |

 

8

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**5.**   LONG-TERM DEBT

Long-termdebt is summarized as follows:
| ** **                                         | ** ** | **December 31,** | ** ** | **June 30,** | ** ** |
|----------------------------------------------------|------------|-----------------------|------------|-------------------|------------|
| ** **                                         | ** ** | **2003**              | ** ** | **2004**          | ** ** |
| 9% Senior Subordinated Notes due May 15, 2008 |       |                  | $          | 34,392            |       |   | $ | 34,392 |   |
| Credit Agreement:                                  |       |                  |       |              |       |   |   |
| Revolver                                           |       |                  | —     |              |       | 10,000 |   |
| Secured Tranche A  Term Loans due April 2005. |       |                  |       |              |       |   |   |
| Interest based on LIBOR or base rate as defined    |       |                  | 42,000     |              |       | 28,000 |   |
| Sub-Total                                          |       |                  | 76,392     |              |       | 72,392 |   |
| Less: Current portion of long-term debt            |       |                  | (14,000    | )                 |       | (38,000 | ) |
|                                               |       |                  | $          | 62,392            |       |   | $ | 34,392 |   |

 

The Senior Subordinated Notes have an optional redemptionfeature exercisable by Boyds any time on or after May 15, 2003 at 104.5%of face value. Each year thereafter, the rate decreases by 1.5% until 2006.Interest on the Notes is payable semi-annually on May 15 and November 15.

At June 30, 2003 and 2004, the weighted averageinterest rates in effect for the Tranche A Term Loan were 1.853% and 2.027%,respectively. In addition, the Tranche A Term Loan has predetermined annualpayments through April 2005. The weighted average interest rate in effectfor the Revolver at June 30, 2004 was 1.938%. The Company had no amountoutstanding on the Revolver at June 30, 2003.

The Credit Agreement contains certain covenants,including the requirement of a minimum interest coverage ratio as defined inthe agreement and substantial restrictions as to dividends and distributions.Boyds is in compliance with all applicable covenants as of June 30, 2004.The Company believes that it will also be in compliance with all of its debtcovenants based on its expected future earnings. The Credit Agreement alsoprovides that the Term Loan and Senior secured revolving credit facility becollateralized by the capital stock of Boyds’ current and future subsidiaries.In addition, the Term Loan is subject to mandatory prepayment with the proceedsof certain asset sales and a portion of Boyds’ excess cash flow as defined inthe Credit Agreement. The Credit Agreement expires in April of 2005. TheCompany expects to refinance its existing debt and plans to have a new debtstructure in place by the end of 2004.

Thescheduled maturities of the long-term debt, including current portion of$38.0 million due in April 2005, are as follows:
| 2005   |   | 38,000 |   |
|--------|--------|--------|--------|
| 2006   |   | — |   |
| 2007   |   | — |   |
| 2008   |   | 34,392 |   |
|   |   | $      | 72,392 |   |
|        |        |        |        |  |

 

**6.**   SEGMENTS OF THECOMPANY AND RELATED INFORMATION

The Company operates in two segments which consist ofthe Company’s wholesale gift business and the Company’s retailgift/entertainment business. These segments are evaluated regularly by theCompany’s Chief Executive Officer in deciding how to assess performance andallocate resources. Prior to the retail operations becoming a significantportion of the Company’s performance, the Company had only one reportablesegment. As a result, the Company has reclassified the prior year’s singlesegment information to be consistent with the current period’s presentation.

9

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TheCompany’s wholesale business designs, imports, and distributes resin figurinesand plush animals via a global network of independent retailers and distributors.The Company’s retail operation sells resin figurines, plush animals and aunique entertainment experience directly to the end consumer at its Gettysburg,Pennsylvania flagship location. Additional retail stores are planned, with thesecond to open in Pigeon Forge, Tennessee in mid-November of 2004, thethird to open in Myrtle Beach, South Carolina in mid-2005. The Company hasentered into a letter of intent to open its fourth store in Branson, Missouri.
| ** **              | ** ** | **For the Three Months Ended, June 30,** | ** ** |
|-------------------------|------------|------------------------------------------------------------------------|------------|
| ** **              | ** ** | **2003**                                                               | ** ** | **2004** | ** ** |
| ** **              | ** ** | ** Wholesale **                                              | ** ** | **Retail** | ** ** | **Consolidated** | ** ** | ** Wholesale ** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
| Sales                   |       |                                                                   | $          | 20,694 |   |   | $ | 3,771 |   |   | $ | 24,465 |   |   |   | $ | 19,044 |   |   | $ | 3,582 |   |   | $ | 22,626 |   |   |
| Gross Profit            |       |                                                                   | 12,998     |   |   | 2,846 |   |   | 15,844 |   |   |   | 11,169 |   |   | 2,729 |   |   | 13,898 |   |   |
| SG&A                |       |                                                                   | 8,782      |   |   | 1,627 |   |   | 10,409 |   |   |   | 9,684 |   |   | 2,081 |   |   | 11,765 |   |   |
| Income from  Operations |       |                                                                   | 4,216      |   |   | 1,219 |   |   | 5,435 |   |   |   | 1,485 |   |   | 648 |   |   | 2,133 |   |   |
|                         |            |                                                                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **              | ** ** | **For the Six Months Ended, June 30,** | ** ** |
|-------------------------|------------|----------------------------------------------------------------------|------------|
| ** **              | ** ** | **2003**                                                             | ** ** | **2004** | ** ** |
| ** **              | ** ** | **Wholesale**                                                        | ** ** | **Retail** | ** ** | **Consolidated** | ** ** | **Wholesale** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
| Sales                   |       | $                                                                    | 53,611     |   | $ | 5,956 |   |   | $ | 59,567 |   |   | $ | 43,312 |   | $ | 5,651 |   |   | $ | 48,963 |   |   |
| Gross Profit            |       | 33,620                                                               |       | 4,577 |   |   | 38,197 |   |   | 25,526 |   | 4,255 |   |   | 29,781 |   |   |
| SG&A                |       | 15,562                                                               |       | 3,096 |   |   | 18,658 |   |   | 17,750 |   | 3,941 |   |   | 21,691 |   |   |
| Income from  Operations |       | 18,058                                                               |       | 1,481 |   |   | 19,539 |   |   | 7,776 |   | 314 |   |   | 8,090 |   |   |
| Total Assets            |       | $                                                                    | 208,955    |   | $ | 13,999 |   |   | $ | 222,954 |   |   | $ | 203,341 |   | $ | 20,320 |   |   | $ | 223,661 |   |   |

 

**7.**   STOCK-BASEDCOMPENSATION

At June 30,2004, Boyds has various stock-based employee compensation plans. The Companyaccounts for those plans under the recognition and measurement principles ofAccounting Principles Board (“APB”) Opinion No. 25, “Accounting for StockIssued to Employees*”*, and relatedInterpretations. Under this method, compensation cost is the excess, if any, ofthe quoted market price of the stock at the grant date or other measurementdate over the amount an employee must pay to acquire the stock. No stock-basedemployee compensation cost is reflected in net income, as all options grantedunder those plans had an exercise price equal to the market value of theunderlying common stock on the date of grant. The following table illustratesthe effect on net income and earnings per share if Boyds had applied the fairvalue recognition method of accounting provisions of SFAS No. 123, “Accountingfor Stock-Based Compensation”, to stock-based employee compensation.
| ** **                                                                                                                                    | ** ** | **Quarter Ended** | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|--------------------------------|------------|
| ** **                                                                                                                                    | ** ** | **June 30,**      | ** ** | **June 30**               | ** ** |
| ** **                                                                                                                                    | ** ** | **2003**               | ** ** | **2004**                       | ** ** | **2003** | ** ** | **2004** | ** ** |
| Net income, as reported                                                                                                                       |       | $                      | 2,178      |                           | $          | 527 |   | $ | 10,153 |   | $ | 3,321 |   |
| Deduct: Total stock-based employee compensation  expense determined under fair value based method for all awards, net of  related tax effects |       | 588                    |       | 582                            |       | 588 |   | 968 |   |
| Pro forma net income(loss)                                                                                                                    |       | $                      | 1,590      |                           | $          | (55 | ) | $ | 9,565 |   | $ | 2,353 |   |
| Earnings per  share:                                                                                                                          |       |                   |       |                           |       |   |   |   |   |
| Basic—as  reported                                                                                                                       |       | $                      | 0.04       |                           | $          | 0.01 |   | $ | 0.17 |   | $ | 0.06 |   |
| Basic—pro  forma                                                                                                                         |       | $                      | 0.03       |                           | $          | 0.00 |   | $ | 0.16 |   | $ | 0.04 |   |
| Diluted—as  reported                                                                                                                     |       | $                      | 0.04       |                           | $          | 0.01 |   | $ | 0.17 |   | $ | 0.06 |   |
| Diluted—pro forma                                                                                                                        |       | $                      | 0.03       |                           | $          | 0.00 |   | $ | 0.16 |   | $ | 0.04 |   |

 

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**8.**   PROVISION FORINCOME TAXES

For federal income taxpurposes, Boyds has elected to treat the Recapitalization and Stock Purchasethat occurred in April 1998 as an asset acquisition by making an InternalRevenue Code Section 338 (h)(10) election. As a result, there isa difference between the financial reporting and tax basis of Boyds’ assets.The difference creates deductible goodwill for income tax purposes, and adeferred tax asset for financial reporting purposes. The deductible goodwill isamortized over a period of fifteen years. In the opinion of management, Boydsbelieves it will have sufficient profits in the future to realize the deferredtax asset.

**9.**   CONTINGENCIES

Boyds is involved invarious legal proceedings, claims and governmental audits in the ordinarycourse of business. In the opinion of management, the ultimate disposition ofthese matters will not have a material adverse effect on the financialposition, results of operations and cash flows of Boyds.

**10.**   EARNINGS PER SHARE

Thefollowing is a reconciliation of the numerators and denominators of the basicand diluted earnings per share computations for the net income available tocommon stockholders:
| ** **                                                                         | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                                         | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                                                         | ** ** | **2003**                         | ** ** | **2004**                       | ** ** | **2003** | ** ** | **2004** | ** ** |
| Numerator for  basic and diluted earnings per share:                               |       |                             |       |                           |       |   |   |   |   |
| Net income                                                                         |       | $                                | 2,178      |                           | $          | 527 |   | $ | 10,153 |   | $ | 3,321 |   |
| Denominator:                                                                       |       |                             |       |                           |       |   |   |   |   |
| Denominator for basic earnings per share—weighted  average shares             |       | 59,111                           |       | 59,004                         |       | 59,111 |   | 59,004 |   |
| Effect of dilutive  securities:                                                    |       |                             |       |                           |       |   |   |   |   |
| Effect of shares issuable under stock option plans based  on treasury stock method |       | 33                               |       | 5                              |       | 55 |   | 6 |   |
| Denominator for  diluted earnings per share—weighted  average shares          |       | 59,144                           |       | 59,009                         |       | 59,166 |   | 59,010 |   |
| EPS—Basic                                                                     |       | $                                | 0.04       |                           | $          | 0.01 |   | $ | 0.17 |   | $ | 0.06 |   |
| EPS—Diluted                                                                   |       | $                                | 0.04       |                           | $          | 0.01 |   | $ | 0.17 |   | $ | 0.06 |   |

 

**11.**   SUBSEQUENT EVENTS

During July 2004, the Company drew on itsrevolver in the amount of $2.5 million to fund its continuing operations.

On July 13, 2004,Dennis Brando, Vice President of Merchandising, left the Company. The Companywill incur approximately $0.1 million in expenses associated with hisdeparture.

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**Item 2.**   Management’sDiscussion and Analysis of Financial Condition and Results of Operations

**GENERAL**

The Company operates in two segments which consist ofthe Company’s wholesale gift business and the Company’s retailgift/entertainment business. Boyds is a leading designer, importer anddistributor of branded, high-quality, hand crafted collectibles and otherspecialty giftware products. Boyds sells its products through an extensivenetwork of approximately 14,000 accounts comprised of independent gift andcollectibles retailers, premier department stores, selected catalogue retailersand other electronic and retail channels. This network of retailers is beingserviced by a national sales force that was created in 2002. In September 2002,the Boyds Bear CountryTM store opened in Gettysburg, Pennsylvania. The Companyis expecting to open its second retail location in Pigeon Forge, Tennessee inmid-November of 2004. The third retail location is expected to open inmid-2005 in Myrtle Beach, South Carolina. The Company has entered into a Letterof Intent for its fourth retail location in Branson, Missouri. The Companyplans to continue opening two stores per year.

Boyds’ sales consist of plush animals, resinfigurines, and other products. Other products include home décor, stationary,accessories and collectors club sales, which are generated from annual duescollected directly from consumers who become members of Boyds’ collectors club,*The Loyal Order of Friends of Boyds*,which began in July 1996 and currently has approximately 35,000 payingmembers, and related accessories.

Boyds licenses its product designs to other companiesfor products including home textiles, infant clothing and wallpaper. Boydsbelieves such licensing, in addition to providing royalty income, helps toincrease consumer awareness of Boyds’ designs and brand image. Boyds reportsroyalty income in net sales.

Boyds exhibits itsproducts at many national and regional tradeshows where orders are taken byBoyds’ employees. Boyds operates almost exclusively out of a leasedoffice/distribution facility and owned retail store in the general vicinity ofGettysburg, Pennsylvania. Boyds also leases warehouse space in Dunkeswell,United Kingdom, and Dordrecht, The Netherlands.

**SEGMENTS**

The Company operates in two segments which consist ofthe Company’s wholesale gift business and the Company’s retailgift/entertainment business. These segments are evaluated regularly by theCompany’s Chief Executive Officer in deciding how to assess performance andallocate resources. Prior to the retail operations becoming a significantportion of the Company’s performance, the Company had only one reportablesegment. As a result, the Company has reclassified the prior year’s singlesegment information to be consistent with the current period’s presentation.

The Company’s wholesalebusiness designs, imports, and distributes resin figurines and plush animalsvia a global network of independent retailers and distributors. The Company’sretail operation sells resin figurines, plush animals and a uniqueentertainment experience directly to the end consumer currently at itsGettysburg, Pennsylvania flagship location. The Company plans for one store tobe added in 2004 and then two additional stores per year beginning in 2005.

**CRITICAL ACCOUNTING POLICIES**

Preparing the financial statements in conformity withaccounting principles generally accepted in the United States of Americarequires that management make estimates and assumptions that affect the amountsreported in the financial statements and accompanying notes. Predicting futureevents is inherently an imprecise activity and as such requires the use ofjudgment. Actual results may vary from estimates in amounts that may bematerial to the financial statements. Management believes that the 

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estimates and assumptionsused in connection with the amounts reported in Boyds’ financial statements andrelated disclosures are reasonable and made in good faith.

The mostsignificant accounting estimates inherent in the preparation of Boyds’financial statements include estimates related to the valuation of the deferredtax assets, determining the ultimate collectability of accounts receivable andthe realizable value of inventory.  Theprocess of determining estimates is based on several factors, includinghistorical experience, current and anticipated economic conditions and customerprofiles. Boyds continually reevaluates these key factors and makes adjustmentsto estimates where appropriate. The following are Boyds’ critical accounting policies,some of which require the application of significant estimates and assumptions.

·       Salesrevenue, net of returns and discounts, is recognized upon shipment of theitems, when title passes to the customer, or completion of a retail sale. Themost significant financial statement line item, net sales, representstransactions consistent with Boyds’ primary business focus and meets thecriteria of Staff Accounting Bulletin No. 101, including the transfer oftitle, probable collectability, identified customer and no recourse.

·       As of June 30, 2004,the Company has net deferred tax assets of approximately $160 million orapproximately 72% of total assets. Deferred income taxes arise because ofdifferences in the treatment of income and expense items for financialreporting and income tax purposes. The recovery of deferred income tax assetsis contingent upon applicable tax laws and management’s assessment of futureoperating results. In situations which management believes the probability ofbenefiting from deferred tax assets is less likely than not, a valuationallowance is established for the amount that is less likely than not to beutilized. The Company will need to generate approximately $400 million oftaxable income over the next 30 years to fully realize the federal net deferredtax assets. In addition, the Company will need to generate approximately $20million of taxable income in each of the next 10 years to fully realize thestate net deferred tax assets.

·       Accounts receivable are presented at estimated net realizable value.Boyds uses estimates in determining the collectability of its accountsreceivable and must rely on its evaluation of historical bad debts, customercredit ratings, current economic trends and changes in customer payment terms toarrive at appropriate reserves.

·       Inventories are stated at the lower of cost ormarket. Cost is determined under the first-in, first-out method of accounting.Boyds records adjustments to the value of this inventory in situations where itappears that Boyds will not be able to recover the cost of the product. Thislower of cost or market analysis is based on Boyds’ estimate of forecasteddemand by customer by product. A decrease in product demand due to changingcustomer tastes, consumer buying patterns or loss of shelf space to competitorscould significantly impact Boyds’ evaluation of its excess and obsoleteinventories.

·       Underthe requirements of SFAS No.142, “Goodwill and Other Intangible Assets”, andSFAS No.144, “Accounting for the Impairment or Disposal of Long-Lived Assets”,Boyds assesses the potential impairment of identifiable intangibles, long-livedassets and acquired goodwill whenever events or changes in circumstancesindicate that the carrying value may not be recoverable. In performing thisevaluation, the Company evaluates current and future economic and businesstrends to develop business forecasts of future performance and related cashflows. Such estimates require the use of judgment and numerous subjectiveassumptions. Based on Boyds’ evaluation as of January 1, 2004, there wasno impairment of goodwill, identifiable intangibles or long-lived assets.

·       Boydshas various stock-based employee compensation plans. The Company accounts forthose plans under the recognition and measurement principles of APB Opinion No. 25,“Accounting for Stock Issued to Employees”, and related Interpretations. Underthis method, compensation cost is 

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the excess, if any,of the quoted market price of the stock at the grant date or other measurementdate over the amount an employee must pay to acquire the stock. No stock-basedemployee compensation cost is reflected in net income, as all options grantedunder those plans had an exercise price equal to the market value of theunderlying common stock on the date of grant.

**FACTORS WHICH AFFECT BOYDS’ RESULTS OF OPERATIONS**

***Seasonality***

Boyds receives ordersthroughout the year and generally ships merchandise out on a first-in,first-out basis. In anticipation of the holiday season, 60% of orders areplaced between May and October. The remaining 40% of orders are placedbetween November and April. Boyds does not have the significant seasonalvariation in its orders that it believes is experienced by many other giftwareand collectibles companies. Boyds does not build a large receivables balancerelative to sales because it typically does not offer its customers longpayment terms or dating programs.

***Foreign Exchange***

The dollar value of Boyds’ assets located abroad isnot significant. Boyds’ sales are primarily denominated in United Statesdollars and, as a result, are not subject to changes in exchange rates.

Boyds generally pays for its products in United Statesdollars. However, Boyds’ cost of such products fluctuates with the value of theChinese renminbi because Boyds imports most of its products from manufacturersin China. Boyds’ costs could be adversely affected on a short-term basis if theChinese renminbi appreciates significantly relative to the United Statesdollar. Conversely, its costs would be favorably affected on a short-term basisif the Chinese renminbi depreciates significantly relative to the United Statesdollar. While Boyds does not do so now, in the future, Boyds may, from time totime, enter into foreign exchange contracts or prepay inventory purchases as apartial hedge against currency fluctuations. Differences between the amounts ofsuch contracts and costs of specific material purchases are included ininventory and cost of sales. Boyds intends to manage foreign exchange risks tothe extent appropriate.

Boyds has growing salesoperations based in Europe and Canada, but at this time Boyds does not expectany significant impact due to fluctuations in the Euro, the British Pound orthe Canadian dollar.

**RESULTS OF OPERATIONS**

Net sales consist of wholesale and retail sales of ourproducts, net of sales discounts, product returns and allowances, collectorsclub sales generated from Boyds’ collectors club and royalty income fromlicenses held by Boyds. Wholesale sales are primarily made on a purchase orderbasis. Revenue associated with sales is recognized when title transfers to thecustomer, or upon completion of a retail transaction.

Cost of goods sold consists of product costs, freightand warehousing costs. Selling, general and administrative expenses includeoverhead, selling and marketing costs, administration and professional fees.

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Thefollowing table sets forth the components of net income as a percentage of netsales for the periods indicated:
| ** **                                    | ** ** | **Quarter**       | ** ** | **Six months** | ** ** |
|-----------------------------------------------|------------|-------------------|------------|---------------------|------------|
| ** **                                    | ** ** | **Ended**         | ** ** | **Ended**           | ** ** |
| ** **                                    | ** ** | **June 30,** | ** ** | **June 30,**   | ** ** |
| ** **                                    | ** ** | **2003**          | ** ** | **2004**            | ** ** | **2003** | ** ** | **2004** | ** ** |
| Net sales                                     |       | 100.0             | %          | 100.0               | %          | 100.0 | % | 100.0 | % |
| Gross profit                                  |       | 64.8              | %          | 61.4                | %          | 64.1 | % | 60.8 | % |
| Selling, general  and administrative expenses |       | 42.5              | %          | 52.0                | %          | 31.3 | % | 44.3 | % |
| Income from operations                        |       | 22.2              | %          | 9.4                 | %          | 32.8 | % | 16.5 | % |
| Other expense,  net                           |       | 0.0               | %          | (0.1                | )%         | 0.0 | % | (0.1 | )% |
| Interest expense                              |       | 6.1               | %          | 4.8                 | %          | 5.1 | % | 4.5 | % |
| Provision for  income taxes                   |       | 7.0               | %          | 2.2                 | %          | 10.7 | % | 5.1 | % |
| Net income                                    |       | 8.9               | %          | 2.3                 | %          | 17.0 | % | 6.8 | % |

 

***Executive Summary***

In the second quarter of 2004, the Company’s net salesdeclined by 8%, which was primarily attributed to the wholesale segment. Whilethe Company is not pleased with this decline, it is appreciably better than thenegative trend the Company experienced through 2003 and into the first quarterof 2004, which was a decline of approximately 25%. Key to impacting thisnegative trend was the release of several new product lines that the Companybegan shipping in the second quarter, most notably our NASCARTM plush line. TheCompany’s bookings (cancelable orders) for the second quarter are down 10-12%,which is better than the 2003 trends that the Company experienced, but lowerthan the trend we saw in the first quarter of 2004. This slowing can beattributed to the timing of product introduction on several product lines thatwas delayed to coincide with our participation in the July Atlanta GiftShow. We continue to see opportunities in the giftable business and we havebeen expanding our presence in retail locations with this giftable profile. Inan effort to bolster our “collectible” stores we are rolling out our Boyds HomeReunionTM (home party)program, which allows retailers to extend their store-fronts into the homes oftheir customers. This program is currently targeted at our larger retailers.The Company’s retail store experienced a decline in net sales of 5%, comparedto the same period for 2003, due to a decline in customer traffic.

The Company’s net income for the second quarterdecreased from 2003 by $1.7 million to $0.5 million. This decrease was causedby the reduction in sales, increased licensed product royalties, increasedSG&A costs associated with fully staffing the national sales force, theretirement package for the Company’s Chief Operating Officer and additionalmanagement overhead costs in the retail segment.

Cash provided byoperations in the first six months of 2004 was approximately $4.9 million. Inthe first six months of 2004, the Company utilized its existing cash, cashgenerated from operations and borrowings under the Revolving Credit Agreementto repay approximately $14.0 million of debt and invested approximately $4.3million of cash in property and equipment. The Company is actively working torefinance its existing debt and plans to have a new debt structure in place by December 31,2004.

***Three Months Ended June 30, 2004 vs. Three MonthsEnded June 30, 2003***

Net sales decreased $1.9 million, or 8%, to $22.6million in the second quarter of 2004 from $24.5 million for the second quarterof 2003. Sales of Boyds’ plush products increased $0.4 million, or 4%, resinproduct sales decreased $1.8 million, or 22%, and other product sales decreased$0.5 million, or 14%. As a percentage of net sales for the quarter, plushproducts represented 58%, resin products represented 28%, and other productsrepresented 14%.

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Wholesale net sales declined $1.7 million in the quarter,or 8%, to $19.0 million in 2004 from $20.7 million in 2003. Retail net salesdeclined $0.2 million to $3.6 million in 2004 from $3.8 million in 2003.Wholesale revenues were impacted by the reduced sales of the Company’s resinlines, specifically its BearstoneTM and TeaberrieTM lines, and in its corefashion family plush lines. These reduced sales were partially offset by strongplush sales in our newly offered NASCARTM line and from our custom plush. Retailsales were impacted by the continued slowness of customer traffic to theGettysburg store.

Gross profit decreased $1.9 million, or 12%, to $13.9million in the second quarter of 2004 from $15.8 million for the second quarterof 2003. Gross profit as a percentage of net sales decreased to 61% for thequarter from 65% for the same period in 2003. The dollar decrease andpercentage decrease is attributed to the decrease in sales, a decrease in theamount of costs capitalized in inventory, higher transportation costs, andcosts associated with NASCARTM royalties. The Company’s NASCARTM product line hasa lower gross margin compared to its other product lines due to the additionalroyalties that are paid on these product lines. Wholesale gross profitdecreased by $1.8 million, or 14%, to $11.2 million in 2004 from $13.0 millionin 2003. Retail gross profit decreased by $0.1 million, or 4%, to $2.7 millionin 2004 from $2.8 million in 2003.

SG&A expense increased $1.4 million, or 13%, to$11.8 million in the second quarter of 2004 from $10.4 million for the secondquarter of 2003. SG&A as a percent of net sales increased to 52% for thequarter from 43% for the same period in 2003. The dollar increases can beattributed to the costs associated with fully staffing the national salesforce, the retirement package for the Company’s Chief Operating Officer andincreased management overhead costs in the retail segment. Additionally, thedecline in sales along with the previously mentioned SG&A dollar increases,are the causes in the percentage increase to SG&A expense.

Income from operations declined $3.3 million, or 61%,to $2.1 million in the second quarter of 2004 from $5.4 million for the secondquarter of 2003. Income from operations as a percentage of net sales declinedto 9% for the quarter from 22% for the same period in 2003. The dollar declineand the decline in the percentage of net sales was primarily attributable tothe decline in sales, increased licensed product royalties, operational costsassociated with fully staffing the national sales force, the retirement packagefor the Company’s Chief Operating Officer and increased management overheadcosts in the retail segment.

Total interest expense declined $0.4 million, or 27%,to $1.1 million in the second quarter of 2004 from $1.5 million for the secondquarter of 2003. Total interest expense as a percentage of net sales decreasedto 5% for the second quarter of 2004 from 6% for the same period in 2003. Thedollar decline was due to the lower amount of outstanding debt for the period.

Provision for income taxes decreased $1.2 million, or71%, from $1.7 million for the second quarter of 2003 to $0.5 million in thesecond quarter of 2004. The dollar decline was due to decreased sales,increased licensed product royalties, increased operational costs associatedwith fully staffing the national sales force and increased management overheadcosts in the retail segment.

Net income declined $1.7million, or 77%, to $0.5 million in the second quarter of 2004 from $2.2million for the second quarter of 2003. Net income as a percent of salesdecreased to 2% for the quarter from 9% for the same period in 2003. The dollardecline and the decline in the percentage of net sales was primarily due to thedecline in sales, increased licensed product royalties, increased costsassociated with fully staffing the national sales force, and increasedmanagement overhead costs in the retail segment.

***Six Months Ended June 30, 2004 vs. Six MonthsEnded June 30, 2003***

Net sales decreased $10.6 million, or 18%, to $49.0million in the first six months of 2004 from $59.6 million for the first sixmonths of 2003. Sales of Boyds’ plush products decreased $6.6 million, or 19%,resin product sales decreased $3.0 million, or 17%, and other product salesdecreased $1.0 million, or 13%. 

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As a percentage of netsales for the first six months, plush products represented 56%, resin productsrepresented 30%, and other products represented 14%.

Wholesale net sales declined $10.3 million in thefirst six months, or 19%, to $43.3 million in 2004 from $53.6 million in 2003.Retail net sales declined $0.3 million to $5.7 million in 2004 from $6.0million in 2003. Wholesale net sales were impacted by the decline in plushproduct from the first quarter, which were partially offset by the increases inthe giftable plush, as described above, which was experienced in the secondquarter, particularly in the new NASCARTM line. Resin products continue tostruggle specifically the Company’s more collectible BearstoneTM line. While thecustomer traffic slowdown at the retail store in Gettysburg continues, in thesecond quarter the Company did see a slowing of the negative trend. The slowingof the trend is attributed to promotional events held in May and June of2004.

Gross profit decreased $8.4 million, or 22%, to $29.8million in the first six months of 2004 from $38.2 million for the first sixmonths of 2003. Gross profit as a percentage of net sales decreased to 61% forthe first six months from 64% for the same period in 2003. The dollar decreaseand the percentage decrease can be attributed to the decrease in sales, adecrease in the amount of costs capitalized in inventory, higher transportationcosts, and costs associated with NASCARTM royalties. Wholesale gross profitdecreased by $8.1 million, or 24%, to $25.5 million in 2004 from $33.6 millionin 2003. Retail gross profit decreased by $0.3 million, or 7%, to $4.3 millionin 2004 from $4.6 million in 2003.

SG&A expense increased $3.0 million, or 16%, to$21.7 million in the first six months of 2004, from $18.7 million for the fistsix months of 2003. SG&A as a percent of net sales increased to 44% for thefirst six months from 31% for the same period in 2003. The dollar increase inSG&A expenses was a result of fully staffing the national sales force, theretirement package for the Company’s Chief Operating Officer, a reduction inthe benefit received from the reversal of bad debt expense, and increasedmanagement overhead costs in the retail segment. Additionally, the decline insales along with the previously mentioned SG&A dollar increases, are thecause in the percentage increase to SG&A expense.

Income from operations declined $11.4 million, or 58%,to $8.1 million in the first six months of 2004 from $19.5 million for thefirst six months of 2003. Income from operations as a percentage of net salesdeclined to 17% for the quarter from 33% for the same period in 2003. Thedollar decline and the decline in the percentage of net sales was primarilyattributable to the decline in sales, increased licensed product royalties,operational costs associated with fully staffing the national sales force andincreased management overhead costs in the retail segment.

Total interest expense declined $0.8 million, or 27%,to $2.2 million in the first six months of 2004 from $3.0 million for the firstsix months of 2003. Total interest expense as a percentage of net salesdecreased to 4% for the first six months of 2004 from 5% for the same period in2003. The dollar decline was due to the lower amount of outstanding debt for theperiod.

Provision for income taxes decreased $3.8 million, or60%, to $2.5 million in the first six months of 2004 from $6.3 million for thesix months of 2003. The dollar decline was due to decreased sales, increasedlicensed product royalties, increased operational costs associated with fullystaffing the national sales force and increased management overhead costs inthe retail segment. These were partially offset by a settlement notice from theState of Pennsylvania received in the first quarter of 2003 regarding afranchise tax benefit of approximately $0.9 million relating to the tax year2000.

Net income declined $6.9million, or 68%, to $3.3 million in the first six months of 2004 from $10.2million for the first six months of 2003. Net income as a percent of salesdecreased to 7% for the year from 17% for the same period in 2003. The dollardecline and the decline in the percentage of net sales was due primarily to thedecline in sales, increased licensed product royalties, the increased costs associatedwith fully staffing the national sales force, and increased management overheadcosts in the retail segment.

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***Liquidity and Capital Resources***

Boyds’ primary sources ofliquidity are cash flow from operations and borrowings under its creditagreement, which includes a revolving credit facility. Boyds’ primary uses ofcash are to fund working capital requirements and to service debt. Cashbalances decreased to $0.7 million in the first six months of 2004 as comparedto $4.2 million at December 31, 2003.

***Operating Activities***

Cash provided by operatingactivities decreased $9.5 million, or 66%, to $4.9 million in the first sixmonths of 2004 from $14.4 million for the first six months of 2003. The cashflow decrease was primarily attributable to the decrease in sales and theadditional costs associated with the national sales force and an increase inaccounts receivable caused by new dating programs for select customers.

***Investing Activities***

Capital and investmentexpenditures totaled $4.3 million in the first six months of 2004 as comparedto $0.8 million in the first six months of 2003. This increase in expenditureswas a result of construction costs of $3.5 million on Boyds Bear CountryTM—PigeonForge, Tennessee.

***Financing Activities***

In connection with the recapitalization in 1998, Boydsissued 9% Senior Subordinated Notes due 2008 in an amount of $165.0 million andentered into a credit agreement providing for a $325.0 million senior secured term loan, consisting of trancheA and tranche B, and a senior secured revolving credit facility providing forborrowings up to $40.0 million. As of June 30, 2004, Boyds hasrepaid $130.6 million of the notes, leaving a balance outstanding of $34.4 million.Boyds has repaid $297.0 million of the term loans under the credit agreement,leaving a balance outstanding of $28.0 million as of June 30, 2004. Boydshas reduced its total debt by $20.0 million in the past twelve months.

The revolving credit facility provides loans in anaggregate amount of up to $40.0 million. The Company has borrowed $10.0 millionunder this agreement as of June 30, 2004. The revolving credit facilitywill be available to fund the working capital needs of Boyds. Borrowings under thecredit agreement bear interest at a rate per annum equal to a margin overeither a base rate or LIBOR, at Boyds’ option. The revolving credit facilitycommitment will terminate on April 21, 2005. Effective April 21,2000, the tranche A term loan is being amortized over six years. The creditagreement contains customary covenants and events of default, includingsubstantial restrictions on Boyds’ ability to declare dividends or makedistributions. Boyds is in compliance withall applicable covenants as of June 30, 2004 and the Company believes thatbased on its future earnings it will also be in compliance with all of its debtcovenants. The term loans are subject to mandatory prepayment with theproceeds of certain asset sales and a portion of Boyds’ excess cash flow, asdefined in the credit agreement.

On February 17, 2000, Boyds announced that itsBoard of Directors had approved the repurchase of 3.0 million shares of theCompany’s common stock. As of June 30, 2004, Boyds had repurchased 344,730shares of common stock pursuant to the Stock Repurchase Program for anaggregate amount of approximately $2 million. These repurchases were financedout of operating cash flow. Any future repurchases under the Stock RepurchaseProgram are expected to be financed similarly or by utilizing borrowings underthe revolving credit facility. Boyds plans to make such purchases from time totime in the open market or in private transactions.

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On July 27, 2000, Boyds announced that its Boardof Directors had approved a repurchase program for its outstanding 9% Series BSenior Subordinated Notes due 2008. As of June 30, 2004, Boyds hadrepurchased $64.6 million of its notes pursuant to the Bond Repurchase Program.These repurchases were funded out of operating cash flow. Any futurerepurchases under the Bond Repurchase Program are expected to be fundedsimilarly or by utilizing borrowings under the revolving credit facility. Boydsplans to make such purchases from time to time in the open market or in privatetransactions.

Management believes thatcash flow from operations and availability under the existing revolving creditfacility, which expires in April 2005, will provide adequate funds for Boyds’foreseeable working capital needs, planned capital expenditures, debt serviceobligations, the Stock Repurchase Programand the Bond Repurchase Program. The Company is actively working torefinance its existing debt and plans to have a new debt structure in place by December 31,2004. Any future acquisitions, joint ventures or other similar transactions mayrequire additional capital and there can be no assurance that any such capitalwill be available to Boyds on acceptable terms, or at all. Boyds’ ability tofund its working capital needs, planned capital expenditures and scheduled debtpayments, to refinance indebtedness and to comply with all of the financialcovenants under its debt agreements depends on its future operating performanceand cash flow, which in turn are subject to prevailing economic conditions andto financial, business and other factors, some of which are beyond Boyds’control.

**RISK FACTORS WHICH MAY AFFECT FUTURE PERFORMANCE**

*Dependenceon two independent buying agencies.**  *Substantiallyall of the products that Boyds sells are purchased through two independentbuying agencies. One buying agency is located in Hong Kong, and the otherbuying agency is located in the United States. These two buying agencies, whichcontract with a total of 19 independent manufacturers, account forapproximately 90% of Boyds’ total imports. These two buying agencies alsoperform a number of functions for Boyds, including collaborating in Boyds’product design and development process. As a result, Boyds is substantiallydependent on these buying agencies and the manufacturers with which theycontract. Boyds does not have long-term contracts with either of its primarybuying agencies. Boyds believes that the loss of either of its primary buyingagencies would (1) have a material adverse effect on its financialcondition and results of operations, (2) cause disruptions in its orders, (3) affectthe quality of its products, and (4) possibly require it to selectalternative manufacturers.

*Potentialeconomic and political risks of China.**  *All of Boyds’significant manufacturers are located in China. Although Boyds has identifiedalternate manufacturers which could meet its quality and reliability standardsat similar costs in China and in other countries, the loss of any one or moreof its manufacturers could have a material adverse effect on its business.Because Boyds relies primarily on Chinese manufacturers, it is subject to thefollowing risks that could restrict its manufacturers’ ability to make itsproducts or increase its manufacturing costs: (1) economic and politicalinstability in China; (2) transportation delays; (3) restrictiveactions by the Chinese government; (4) the laws and policies of the UnitedStates affecting importation of goods, including duties, quotas and taxes; (5) Chinesetrade and tax laws. In addition, Boyds’ business could be adversely affected ifthe Chinese renminbi appreciates significantly relative to the United Statesdollar due to the cost of its products fluctuating with the value of theChinese renminbi.

*Potentialadverse trade regulations and restrictions.**  *Boyds does notown or operate any manufacturing facilities. Instead, Boyds importssubstantially all of its retail products from independent foreignmanufacturers, primarily in China. As a result, substantially all of itsproducts are subject to United States Customs Service duties and regulations.These regulations include requirements that Boyds disclose informationregarding the country of origin on its products, such as “Handmade in China.”Within its discretion, the United States Customs Service may also set newregulations regarding the amount of duty to be paid, the value of merchandiseto be reported or other customs regulations relating to Boyds’ 

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imported products. Failureto comply with these regulations may result in the imposition of additional dutiesor penalties or forfeiture of merchandise.

The countries in which Boyds’ products aremanufactured may impose new quotas, duties, tariffs or other charges orrestrictions. This could adversely affect Boyds’ financial condition, resultsof operations or its ability to continue to import products at current orincreased levels. In particular, Boyds’ costs could increase, or the mix ofcountries from which Boyds imports its products may be changed, if theGeneralized System of Preferences program is not renewed or extended each year.The Generalized System of Preferences program allows selected products ofbeneficiary countries to enter the United States duty free. In addition, ifcountries that are currently accorded “Most Favored Nation” status by the UnitedStates, such as China, cease to have such status, Boyds could be adverselyaffected because the cost of importing from such countries may increase. Boydscannot predict what regulatory changes may occur or the type or amount of anyfinancial impact these changes may have on it in the future.

*Changingconsumer tastes.**  *Thedemand for Boyds’ products may be quickly affected by changing consumer tastesand interests. Boyds’ results of operations depend substantially upon itsability to continue to conceive, design, source and market new pieces and uponcontinuing market acceptance of its existing and future product lines. If Boydsfails or is significantly delayed in introducing new pieces to its existingproduct lines or creating new product line concepts or if its new products donot meet with market acceptance, its results of operations may be impaired. Anumber of companies who participate in the giftware and collectibles industriesare part of large, diversified companies that have greater financial resourcesthan Boyds, offer a wider range of products and may be less affected bychanging consumer tastes.

*Potentialinfringement of Boyds’ intellectual property.**  *Boyds believesthat its trademarks and other proprietary rights are material to its success andcompetitive position. Accordingly, Boyds devotes resources to the establishmentand protection of its intellectual property on a worldwide basis. The actionsBoyds takes to establish and protect its trademarks and other proprietaryrights may not be adequate to protect its intellectual property or to preventimitation of its products by others. Moreover, while Boyds has not experiencedany proprietary license infringements or legal actions that have had a materialimpact on its financial condition or results of operations, other persons have,and will likely in the future, assert rights in, or ownership of, itstrademarks and other proprietary rights. Boyds may not be able to successfullyresolve such conflicts. In addition, the laws of foreign countries may notalways protect intellectual property to the same extent as do the laws of theUnited States.

*Required debt payments.**  *Boydshas significant debt on its balance sheet. If the Company does not refinanceits existing debt and/or does not generate sufficient cash flows, the Companymay have difficulty making its required debt payments in the future.

***EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS***

In November 2002, the FASB issued Interpretation No. 45,“Guarantors Accounting and Disclosure Requirements for Guarantees.”  The disclosure requirements are effective forfinancial statements issued after December 15, 2002, and the recognition/measurementrequirements are effective on a prospective basis for guarantees issued ormodified after December 31, 2003. The adoption of this statement did nothave a material impact on the financial position, results of operations or cashflow of Boyds.

In January 2003, the FASB issued Interpretation No. 46,“Consolidation of Variable Interest Entities”, which provides guidance on whento consolidate variable interest entities. In December 2003, the FASBrevised FIN 46 with FIN 46R. In addition to conforming to previously issuedFASB Staff Positions, FIN 46R deferred the implementation date for certainvariable interest entities. The Interpretation applies immediately to variableinterest entities created after December 31, 2003. The adoption of thisstandard did not have a material impact on the financial position, results ofoperations or cash flow of Boyds.

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In December 2002, the FASB issued SFAS No. 148,“Accounting for Stock-Based Compensation—Transition and Disclosure.” Thisstatement amends SFAS No. 123 “Accounting for Stock-Based Compensation,”to provide alternative methods of transition for a voluntary change to the fairvalue based method of accounting for stock-based employee compensation. Inaddition, this statement amends the disclosure requirements of SFAS No. 123to require prominent disclosures in both annual and interim financialstatements about the method of accounting for stock-based compensation and theeffect of the method used on reporting results. The disclosure provisions ofthis standard are effective for fiscal years ended after December 15, 2002and have been incorporated into these condensed consolidated financialstatements and accompanying notes (see Note 7).

In April 2003, the FASB issued SFAS No. 149,“Amendment of Statement 133 on Derivative Instruments and Hedging Activities.”  This statement amends and clarifies financialaccounting and reporting for derivative instruments, including certainderivative instruments embedded in other contracts and for hedging activitiesunder SFAS No. 133, “Accounting for Derivative Instruments and HedgingActivities.”  In general, this statementis effective for contracts entered into or modified after June 30, 2004,and for hedging relationships designated after June 30, 2004. The adoptionof this statement did not have a material impact on the financial position,results of operations or cash flow of Boyds.

In May 2003, the FASBissued SFAS No. 150, “Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity.”  This statement establishes standards for theclassification and measurement in an issuer’s statement of financial positionof certain financial instruments that embody obligations for the issuer thatare required to be classified as liabilities. This statement is effective forfinancial instruments entered into or modified after May 31, 2003, andotherwise shall be effective at the beginning of the first interim periodbeginning after June 15, 2003. The provisions of the statement did not havea material impact on the financial position, results of operations or cash flowof Boyds.

**RELATED PARTY TRANSACTIONS**

Kohlberg, Kravis Roberts &Co., L.P. (“KKR”) is a 59% shareholder of Boyds. . For each of the secondquarter and six months ended June 30, 2003 and June 30, 2004, Boydspaid to KKR approximately $0.1 million and $0.2 million for management fees andrelated expenses.

***FORWARD LOOKING STATEMENTS***

Some of the matters discussed in this report includeforward-looking statements. Statements that are predictive in nature,that depend upon or refer to future events or conditions or that include wordssuch as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates”and similar expressions are forward-looking statements.

The forward-looking statements in this reportare based on a number of assumptions and estimates, which are inherentlysubject to significant uncertainties and contingencies, many of which arebeyond the control of Boyds, and reflect future business decisions that are subjectto change. A variety of factors could cause actual results to differ materiallyfrom those anticipated in Boyds’ forward-looking statements, including:the effects of economic conditions; the inability to grow Boyds’ business asplanned; the loss of either of Boyds’ two independent buying agencies or any ofits manufacturing sources; economic or political instability in the countrieswith which Boyds does business; changes to, or the imposition of, newregulations, duties, taxes or tariffs associated with the import or export ofgoods from or to the countries with which Boyds does business; and other riskfactors that are discussed in this report and, from time to time, in otherSecurities and Exchange Commission reports and filings. One or more of the factorsdiscussed above may cause actual results to differ materially from thoseexpressed in or implied by the statements in this report.

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Readers are cautioned notto place undue reliance on these forward-looking statements, which speakonly as of the date of such statements. Boyds undertakes no obligation topublicly release the results of any revisions to these forward-lookingstatements that may be made to reflect events or circumstances after the dateof this report, or the date of such statements, as the case may be, or toreflect the occurrence of unanticipated events.

**Item 3.**   Quantitativeand Qualitative Disclosures About Market Risk.

Boyds faces minimal interest rate risk exposure inrelation to its outstanding debt of $72.4 million at June 30, 2004. Ofthis amount, $38.0 million under the Credit Agreement is subject to interestrate fluctuations. A hypothetical 1% change in interest rates applied to thefair value of debt would not have a material impact on earnings or cash flowsof the Company.

Boyds faces currency risk exposure that arises fromtranslating the results of its European and Canadian operations that aredenominated in the local currency of the Euro, the British Pound and theCanadian dollar, to the U.S. dollar. The currency risk exposure is not materialas the operations of the European and Canadian subsidiaries do not have amaterial impact on the Company’s earnings.

Boyds also faces foreignexchange risks that arise from paying in United States Dollars for productsthat are manufactured in China. While it does not do so now, in the futureBoyds may, from time to time, enter into foreign exchange contracts or prepayinventory purchases as a partial hedge against currency fluctuations.Differences between the amounts of such contracts and costs of specificmaterial purchases are included in inventory and costs of sales. Boyds intendsto manage foreign exchange risks to the extent appropriate.

**Item 4.**   DisclosureControls and Procedures

Boyds maintains disclosure controls and procedures designedto ensure that it is able to collect the information it is required to disclosein the reports it files with the Securities and Exchange Commission (“SEC”),and to process, summarize and disclose this information within the time periodsspecified in the rules of the SEC. Boyds carried out an evaluation of itsdisclosure controls and procedures, under the supervision and with theparticipation of the Chief Executive and Chief Financial Officers, as of a datewithin 90 days of the filing date of this report, and based on such evaluation,Boyds’ Chief Executive and Chief Financial Officers believe that thesedisclosure controls and procedures are effective to ensure that Boyds is ableto collect, process and disclose the information it is required to disclose inthe reports it files with the SEC within the required time periods.

There have been no significant changes in Boyds’internal controls or in other factors that could significantly affect thesecontrols, subsequent to the date Boyds’ Chief Executive and Chief FinancialOfficers completed their evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

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**PART IIOTHER INFORMATION**

**Item 1.**   LegalProceedings.

Boyds is involved invarious legal proceedings, claims and governmental audits in the ordinarycourse of business. In the opinion of management, the ultimate disposition ofthese proceedings, claims and audits will not have a material adverse effect onthe financial position, results of operations, and cash flows of Boyds.

**Item2.**   Changes inSecurities and Use of Proceeds—None

**Item3.**   Defaults UponSenior Securities—None

**Item4.**   Submission ofMatters to a Vote of Security Holders—None

**Item 5.**   OtherInformation

**Item6.**   Exhibits andReports on Form 8-K

(a)   Exhibits—See Index to Exhibits

(b)   Reports on Form 8-K—None

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**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

Date:      August 16,2004
|        | The Boyds Collection, Ltd. |
|--------|----------------------------|
|   |                       |   | By: | /s/  Jan L. Murley |
|   |                       |   | Name: | Jan L. Murley |
|   |                       |   | Title: | *Chief  Executive Officer* |
|   |                       |   | By: | /s/  Joseph E. Macharsky |
|   |                       |   | Name: | Joseph E.  Macharsky |
|   |                       |   | Title: | *Chief  Financial Officer* |

 

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**Index to Exhibits**
| Exhibit No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                           |
|------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1              |       | Amended and Restated  Articles of Incorporation of Boyds (incorporated by reference from  Exhibit 3.1 of Amendment No. 1 to Boyds’ Registration Statement on  Form S-1, filed on February 8, 1999, File No. 333-69535).                                                                                                                                                                     |
| 3.2              |       | Amended and Restated  Bylaws of Boyds (incorporated by reference from Exhibit 3.2 of Amendment  No. 1 to Boyds’ Registration Statement on Form S-1, filed on  February 8, 1999, File No. 333-69535)                                                                                                                                                                                         |
| 4.1              |       | Indenture, dated as of  April 21, 1998 between Boyds and The Bank of New York, as trustee (incorporated  by reference from Exhibit 4.3 of Amendment No. 1 to Boyds’  Registration Statement on Form S-1, filed on February 8,  1999, File No. 333-69535).                                                                                                                              |
| 4.2              |       | Form of 9% Senior  Subordinated Note due 2008 (included in Exhibit 4.1)                                                                                                                                                                                                                                                                                                                                         |
| 4.3              |       | Form of 9%  Series B Senior Subordinated Note due 2008 (included in  Exhibit 4.1)                                                                                                                                                                                                                                                                                                                          |
| 10.1             |       | Credit Agreement, dated  as of April 21, 1998, among Boyds, the several lenders from time to time  parties thereto, DLJ Capital Funding, Inc., The Fuji Bank, Limited, New  York Branch, and Fleet National Bank (incorporated by reference from  Exhibit 10.1 of Amendment No. 3 to Boyds’ Registration Statement on  Form S-1, filed on February 23, 1999, File No. 333-69535). |
| 10.2             |       | Forms of Notes  evidencing loans under the Credit Agreement (included in Exhibit 10.1).                                                                                                                                                                                                                                                                                                                              |
| 10.3             |       | 1998 Option Plan for Key  Employees of Boyds (incorporated by reference from Exhibit 10.3 of  Amendment No. 1 to Boyds’ Registration Statement on Form S-1,  filed on February 8, 1999, File No. 333-69535).                                                                                                                                                                                |
| 10.4             |       | 1999 Option Plan for Key  Employees of Boyds (incorporated by reference from Exhibit 4.3 of Boyds’  Registration Statement on Form S-8, filed on January 18,  2002, File No. 333-77022).                                                                                                                                                                                                         |
| 10.5             |       | 2000 Option Plan for Key  Employees of Boyds (incorporated by reference from Exhibit 4.4 of Boyds’  Registration Statement on Form S-8, filed on January 18,  2002, File No. 333-77022).                                                                                                                                                                                                         |
| 10.6             |       | 2001 Option Plan for Key  Employees of Boyds (incorporated by reference from Exhibit 4.5 of Boyds’  Registration Statement on Form S-8, filed on January 18,  2002, File No. 333-77022).                                                                                                                                                                                                         |
| 10.7             |       | Lease Agreement for  Boyds’ McSherrystown, Pennsylvania facility (incorporated by reference from  Exhibit 10.4 of Amendment No. 3 to Boyds’ Registration Statement on  Form S-1, filed on February 23, 1999, File No. 333-  69535).                                                                                                                                                    |
| 10.8             |       | Employment Agreement  dated January 28, 2000 between Jean-Andre Rougeot and Boyds  (incorporated by reference from Exhibit 10.8 of Boyds’ Annual Report on  Form 10-K, filed on March 28, 2002, File No. 001-14843).                                                                                                                                                                        |
| 10.9             |       | Form of Employment  Agreement dated October 21, 2003 between Jan L. Murley and Boyds (incorporated  by reference from Exhibit 10.9 of Boyds’ Annual Report on Form 10-K,  filed on March 29, 2004, File No. 001-14843).                                                                                                                                                                |
| 31.1             |       | Certification of Chief  Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a)*                                                                                                                                                                                                                                                                                                                             |
| 31.2             |       | Certification of Chief  Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a)*                                                                                                                                                                                                                                                                                                                             |

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| 32.1 |   | Certification of Chief Executive Officer Pursuant to  18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. (This certification is being furnished in  accordance with the Sarbanes-Oxley Act of 2002 and Commission Release  No. 34-47551 and shall not be deemed “filed” with the Commission  for purposes of Section 18 of the Exchange Act, or otherwise subject to  the liability of that section, and shall not be deemed to be incorporated by  reference into any filing under the Securities Act of the Exchange Act,  except to the extent that the Registrant specifically incorporates it by  reference.)* |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 32.2 |   | Certification of Chief Financial Officer Pursuant to  18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. (This certification is being furnished in  accordance with the Sarbanes-Oxley Act of 2002 and Commission Release  No. 34-47551 and shall not be deemed “filed” with the Commission  for purposes of Section 18 of the Exchange Act, or otherwise subject to  the liability of that section, and shall not be deemed to be incorporated by  reference into any filing under the Securities Act of the Exchange Act,  except to the extent that the Registrant specifically incorporates it by  reference.)* |

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*                    Filed herewith

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