**United States Securities and Exchange Commission****Washington, D.C. 20549**

 

**FORM 10-Q**

 
| **(Mark One)**                                                                                                                                                |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                          |
| **ý**                                                                                                                                                    | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934.** |
|                                                                                                                                                          |
| **For the Quarterly Period Ended September 30, 2002**                                                                                                         |
|                                                                                                                                                          |
| **OR**                                                                                                                                                        |
|                                                                                                                                                          |
| o                                                                                                                                                             | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934.** |
|                                                                                                                                                          |
| **For the Transition period  from          to          ** |
|                                                                                                                                                          |
| **Commission File Number:  001-14843**                                                                                                                   |

 

**The Boyds Collection, Ltd.**

(Exact Name of Registrant as 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) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

Yes ý No o

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practicable date:

 
| **Common Stock, par value $.0001 per share** |   | **59,111,452**                       |
|----------------------------------------------|--------|--------------------------------------|
| (Class)                                      |   | (Outstanding as of November 8, 2002) |

 

 

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**THE BOYDS COLLECTION, LTD.**

 

**TABLE OF CONTENTS**

 
| PART I.      | FINANCIAL INFORMATION                                                                                                |
|--------------|----------------------------------------------------------------------------------------------------------------------|
|         |                                                                                                                 |
| **Item 1.**  | **Financial Statements:**                                                                                            |
|         |                                                                                                                 |
|         | Condensed  Consolidated Balance Sheets as of December 31, 2001 and September 30, 2002                                |
|         |                                                                                                                 |
|         | Condensed  Consolidated Statements of Income for the Three Months and Nine Months Ended  September 30, 2001 and 2002 |
|         |                                                                                                                 |
|         | Condensed  Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September  30, 2002         |
|         |                                                                                                                 |
|         | Condensed  Consolidated Statements of Cash Flows for the Nine Months Ended September 30,  2001 and 2002              |
|         |                                                                                                                 |
|         | Notes  to Condensed Consolidated Financial Statements                                                                |
|         |                                                                                                                 |
| **Item  2.** | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations**                      |
|         |                                                                                                                 |
| **Item  3.** | **Quantitative  and Qualitative Disclosures About Market Risk**                                                      |
|         |                                                                                                                 |
| **Item 4.**  | **Controls  and Procedures**                                                                                         |
|         |                                                                                                                 |
| PART  II.    | OTHER  INFORMATION                                                                                                   |
|         |                                                                                                                 |
| **Item 1.**  | **Legal Proceedings**                                                                                                |
|         |                                                                                                                 |
| **Item  2.** | **Changes  in Securities and Use of Proceeds**                                                                       |
|         |                                                                                                                 |
| **Item 3.**  | **Defaults Upon  Senior Securities**                                                                                 |
|         |                                                                                                                 |
| **Item  4.** | **Submission  of Matters to a Vote of Security Holders**                                                             |
|         |                                                                                                                 |
| **Item  5.** | **Other  Information**                                                                                               |
|         |                                                                                                                 |
| **Item 6.**  | **Exhibits and  Reports on Form 8-K**                                                                                |
|         |                                                                                                                 |
|         | Signatures                                                                                                           |
|         |                                                                                                                 |
|         | Certifications                                                                                                       |
|         |                                                                                                                 |
|         | Index to Exhibits                                                                                                    |

 

2

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**PART I**

**FINANCIAL INFORMATION**

 

**Item 1.    FinancialStatements.**

 

**THE BOYDSCOLLECTION, LTD.CONDENSED CONSOLIDATED BALANCESHEETSAs of December 31, 2001 (Audited) and September 30, 2002 (Unaudited)**

 
|                                                                                                                                      |   | **December  31,  2001** |       | **September  30,  2002** |       |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|--------------------------|------------|
|                                                                                                                                      |   | **(in  thousands)**     |       |
| **ASSETS**                                                                                                                                |   |                    | ** ** |                     | ** ** |
|                                                                                                                                      |   |                    | ** ** |                     | ** ** |
| **CURRENT ASSETS:**                                                                                                                       |   |                    |       |                     |       |
| Cash  and cash equivalents                                                                                                                |   | $                       | 815        |                     | $          | 2,234 |   |
| Accounts  receivable, less allowances of  $3,107  at Dec 31, 2001, and $2,533 at Sept 30, 2002                                  |   | 13,497                  |       | 22,207                   |       |
| Inventory  — primarily finished goods, less allowance for obsolete inventory of $6,031  at Dec 31, 2001, and $7,351 at Sept 30, 2002 |   | 7,710                   |       | 10,852                   |       |
| Inventory  in transit                                                                                                                     |   | 2,924                   |       | 3,067                    |       |
| Other  current assets                                                                                                                     |   | 788                     |       | 846                      |       |
| Income  taxes receivable                                                                                                                  |   | 6,830                   |       | 1,530                    |       |
| Deferred  income taxes                                                                                                                    |   | 21,590                  |       | 21,590                   |       |
| Total  current assets                                                                                                                     |   | 54,154                  |       | 62,326                   |       |
|                                                                                                                                      |   |                    |       |                     |       |
| **PROPERTY AND EQUIPMENT - NET **(Notes 3 and 4)                                                                                     |   | 7,878                   |       | 17,658                   |       |
|                                                                                                                                      |   |                    |       |                     |       |
| **OTHER ASSETS:**                                                                                                                         |   |                    |       |                     |       |
| Deferred  debt issuance costs                                                                                                             |   | 2,218                   |       | 1,830                    |       |
| Deferred  tax asset                                                                                                                       |   | 177,581                 |       | 166,883                  |       |
| Other  assets                                                                                                                             |   | 2,671                   |       | 2,687                    |       |
| Total  other assets                                                                                                                       |   | 182,470                 |       | 171,400                  |       |
| **TOTAL ASSETS**                                                                                                                          |   | $                       | 244,502    |                     | $          | 251,384 |   |
|                                                                                                                                      |   |                    |       |                     |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                             |   |                    |       |                     |       |
|                                                                                                                                      |   |                    |       |                     |       |
| **CURRENT LIABILITIES:**                                                                                                                  |   |                    |       |                     |       |
| Accounts  payable                                                                                                                         |   | $                       | 2,886      |                     | $          | 3,213 |   |
| Accrued  expenses                                                                                                                         |   | 3,905                   |       | 3,460                    |       |
| Interest  payable                                                                                                                         |   | 1,010                   |       | 1,964                    |       |
| Current  portion of long-term debt (Note 5)                                                                                               |   | 14,000                  |       | 17,000                   |       |
| Total  current liabilities                                                                                                                |   | 21,801                  |       | 25,637                   |       |
|                                                                                                                                      |   |                    |       |                     |       |
| **LONG-TERM DEBT**(Note  5)                                                                                                               |   | 126,189                 |       | 102,189                  |       |
|                                                                                                                                      |   |                    |       |                     |       |
| **COMMITMENTS AND CONTINGENCIES** (Notes 2 and 7)                                                                                         |   |                    |       |                     |       |
|                                                                                                                                      |   |                    |       |                     |       |
| **OTHER LIABILITIES**                                                                                                                     |   | 130                     |       | 113                      |       |
|                                                                                                                                      |   |                    |       |                     |       |
| **STOCKHOLDERS’ EQUITY:**                                                                                                            |   |                    |       |                     |       |
| Common  stock (61,838 shares issued at Dec 31, 2001, and Sept 30, 2002, respectively)  and paid-in capital in excess of par               |   | (41,221                 | )          | (41,221                  | )          |
| Other  comprehensive income:                                                                                                              |   |                    |       |                     |       |
| Accumulated  other comprehensive loss                                                                                                     |   | (16                     | )          | (27                      | )          |
| Retained  earnings                                                                                                                        |   | 164,586                 |       | 191,632                  |       |
| Less:  Treasury shares at cost (2,777 at December 31, 2001, and September 30, 2002,  respectively)                                        |   | (26,967                 | )          | (26,939                  | )          |
| Total  stockholders’ equity                                                                                                          |   | 96,382                  |       | 123,445                  |       |
|                                                                                                                                      |   |                    |       |                     |       |
| **TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                       |   | $                       | 244,502    |                     | $          | 251,384 |   |

 

See notes to condensed consolidated financialstatements.

 

3

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**THE BOYDSCOLLECTION, LTD.CONDENSED CONSOLIDATED STATEMENTSOF INCOME For the Three Months and the Nine Months Ended September 30, 2001 and 2002(Unaudited)**

 
|                                                                                                                                                                                        |   | **Three Months Ended  September 30,**        |       | **Nine Months Ended  September 30,** |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|------------|--------------------------------------|------------|
|                                                                                                                                                                                        |   | **2001**                                     |       | **2002**                             |       | **2001** |   | **2002** |   |
|                                                                                                                                                                                        |   | **(in thousands, except per share amounts)** |       |
|                                                                                                                                                                                        |   |                                         | ** ** |                                 | ** ** |   | ** ** |   | ** ** |
| **NET SALES**                                                                                                                                                                               |   | $                                            | 47,549     |                                 | $          | 38,092 |   | $ | 125,274 |   | $ | 102,914 |   |
| **COST OF GOODS SOLD**                                                                                                                                                                      |   | 17,895                                       |       | 13,801                               |       | 45,616 |   | 37,088 |   |
| **GROSS PROFIT**                                                                                                                                                                            |   | 29,654                                       |       | 24,291                               |       | 79,658 |   | 65,826 |   |
| **SELLING, GENERAL AND ADMINISTRATIVE EXPENSES** (Note 3)                                                                                                                                   |   | 7,173                                        |       | 7,353                                |       | 18,102 |   | 18,711 |   |
| **INCOME FROM OPERATIONS**                                                                                                                                                                  |   | 22,481                                       |       | 16,938                               |       | 61,556 |   | 47,115 |   |
| **OTHER INCOME**                                                                                                                                                                            |   | 61                                           |       | 10                                   |       | 39 |   | 62 |   |
| **INTEREST EXPENSE:**                                                                                                                                                                       |   |                                         |       |                                 |       |   |   |   |   |
| Interest expense                                                                                                                                                                            |   | 2,841                                        |       | 1,634                                |       | 9,603 |   | 4,978 |   |
| Amortization of deferred debt issuance  costs                                                                                                                                               |   | 157                                          |       | 126                                  |       | 475 |   | 388 |   |
| **TOTAL INTEREST EXPENSE**                                                                                                                                                                  |   | 2,998                                        |       | 1,760                                |       | 10,078 |   | 5,366 |   |
| **INCOME BEFORE PROVISION FOR INCOME TAXES AND EXTRAORDINARY  ITEM**                                                                                                                        |   | 19,544                                       |       | 15,188                               |       | 51,517 |   | 41,811 |   |
| **PROVISION FOR INCOME TAXES**(Note 6)                                                                                                                                                      |   | 6,517                                        |       | 3,576                                |       | 18,689 |   | 14,765 |   |
| **INCOME BEFORE  EXTRAORDINARY ITEM**                                                                                                                                                       |   | 13,027                                       |       | 11,612                               |       | 32,828 |   | 27,046 |   |
| **EXTRAORDINARY ITEM****—**                                                                                                                                                            |   |                                         |       |                                 |       |   |   |   |   |
| **WRITE OFF OF DEFERRED DEBT ISSUANCE COSTS (NET OF $40 AND  $54 TAX BENEFITS FOR THE THREE MONTHS ENDED SEPT 30, 2001, AND THE NINE  MONTHS ENDED SEPT 30, 2001, RESPECTIVELY)** |   | 71                                           |       | —                               |       | 96 |   | — |   |
|                                                                                                                                                                                        |   |                                         |       |                                 |       |   |   |   |   |
| **NET INCOME**                                                                                                                                                                              |   | $                                            | 12,956     |                                 | $          | 11,612 |   | $ | 32,732 |   | $ | 27,046 |   |
|                                                                                                                                                                                        |   |                                         |       |                                 |       |   |   |   |   |
| **EARNINGS PER SHARE:**                                                                                                                                                                     |   |                                         |       |                                 |       |   |   |   |   |
| Basic Earnings Per Share                                                                                                                                                                    |   |                                         |       |                                 |       |   |   |   |   |
| Income Before Extraordinary Item                                                                                                                                                            |   | $                                            | 0.22       |                                 | $          | 0.20 |   | $ | 0.56 |   | $ | 0.46 |   |
| Extraordinary Item — Write Off of Deferred Debt Issuance Costs                                                                                                                         |   | —                                       |       | —                               |       | — |   | — |   |
| Net Income                                                                                                                                                                                  |   | $                                            | 0.22       |                                 | $          | 0.20 |   | $ | 0.56 |   | $ | 0.46 |   |
|                                                                                                                                                                                        |   |                                         |       |                                 |       |   |   |   |   |
| Diluted Earnings Per Share                                                                                                                                                                  |   |                                         |       |                                 |       |   |   |   |   |
| Income Before Extraordinary Item                                                                                                                                                            |   | $                                            | 0.22       |                                 | $          | 0.20 |   | $ | 0.55 |   | $ | 0.46 |   |
| Extraordinary Item — Write Off of Deferred Debt Issuance Costs                                                                                                                         |   | —                                       |       | —                               |       | — |   | — |   |
| Net Income                                                                                                                                                                                  |   | $                                            | 0.22       |                                 | $          | 0.20 |   | $ | 0.55 |   | $ | 0.46 |   |

 

Seenotes to condensed consolidated financial statements.

 

4

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THE BOYDS COLLECTION, LTD.CONDENSED CONSOLIDATED STATEMENTOF STOCKHOLDER'S EQUITYFor the Nine Months Ended September 30, 2002(Unaudited)

 
|                                  |   |                                   |   | **Common Stock  and Paid-in  Capital in  Excess of Par** |   | **Treasury  Stock** |          | **Accumulated  Other  Comprehensive  Income/(Loss)** |    | **Retained  Earnings** |   | **Other  Comprehensive  Income** |      | **Total  Stockholders’  Equity** |          |
|---------------------------------------|--------|----------------------------------------|--------|----------------------------------------------------------|--------|---------------------|---------------|------------------------------------------------------|---------|------------------------|--------|----------------------------------|-----------|---------------------------------------|---------------|
|                                  |   |                                   |   |                                                     |   |                |          |                                                 |    |                   |   |
|                                  |   | **Common Stock**                       |   |                                                     |   |                |          |                                                 |    |
|                                  |   | **Shares****Issued  And  Outstanding** |   | **Treasury  Stock**                                      |   |                |          |                                                 |    |                   |   |
|                                  |   | **(in  thousands)**                    |   |
|                                  |   |                                   |   |                                                     |   |                |          |                                                 |    |                   |   |                             |      |
| **BALANCE,  JANUARY 1, 2002**    |   | 61,838                                 |   | 2,777                                                    |   | $                   |  (41,221 | )                                                    | $       |  (26,967          | )      | $                                |  (16 | )                                     | $             |  164,586 |   |   |   | $ |  96,382 |   |
| Repurchase of common stock            |   |                                   |   |                                                     |   |                |          | 28                                                   |    |                   |   |                             |      |                                  |          | 28 |   |
| Other comprehensive  income:          |   |                                   |   |                                                     |   |                |          |                                                 |    |                   |   |                             |      |                                  |          |   |   |
| Foreign currency  translation         |   | —                                 |   | —                                                   |   | —              |          | —                                               |    | (11                    | )      | —                           |      | $                                     |  (11     | ) | (11 | ) |
| Net income                            |   | —                                 |   | —                                                   |   | —              |          | —                                               |    | —                 |   | 27,046                           |      | 27,046                                |          | 27,046 |   |   |
| Comprehensive income                  |   | —                                 |   | —                                                   |   | —              |          | —                                               |    | (11                    | )      | —                           |      | $                                     |  27,035  |   | — |   |
|                                  |   |                                   |   |                                                     |   |                |          |                                                 |    |                   |   |                             |      |                                  |          |   |   |   |
| **BALANCE,  SEPTEMBER 30, 2002** |   | 61,838                                 |   | 2,777                                                    |   | $                   |  (41,221 | )                                                    | (26,939 | )                      | $      |  (27                        | )         | $                                     |  191,632 |   |   |   | $ |  123,445 |   |
|                                       |        |                                        |        |                                                          |        |                     |               |                                                      |         |                        |        |                                  |           |                                       |               |  |  |  |  |  |  |  |  |  |  |  |

 

See notes to condensedconsolidated financial statements.

 

5

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**THE BOYDSCOLLECTION, LTD.CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWSFor the Nine Months Ended September 30, 2001 and 2002(Unaudited)**

** **
|                                                                               |   | **Nine Months Ended  September** |   |
|------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                               |   | **2001**                         |   | **2002** |   |
|                                                                               |   | **(in thousands)**               |   |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                         |   |                             |   |   |   |
| Net income                                                                         |   | $                                | 32,732 |   | $ | 27,046 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |   |                             |   |   |   |
| Depreciation and amortization                                                      |   | 1,320                            |   | 1,204 |   |
| Amortization and write off of deferred debt  issuance costs                        |   | 624                              |   | 388 |   |
| Gain on sale of equipment                                                          |   | 83                               |   | 3 |   |
| Deferred taxes                                                                     |   | 9,031                            |   | 10,698 |   |
| Asset impairment charge                                                            |   |                             |   | 254 |   |
| Changes in assets and liabilities:                                                 |   |                             |   |   |   |
| Accounts receivable - net                                                          |   | (8,061                           | )      | (8,710 | ) |
| Inventory— net                                                                |   | (344                             | )      | (3,142 | ) |
| Inventory in transit                                                               |   | 709                              |   | (143 | ) |
| Other current assets                                                               |   | 110                              |   | (58 | ) |
| Other assets                                                                       |   | 21                               |   | (16 | ) |
| Accounts payable                                                                   |   | (1,110                           | )      | 327 |   |
| Accrued taxes/Income taxes receivable                                              |   | 4,152                            |   | 5,300 |   |
| Accrued expenses                                                                   |   | (715                             | )      | (445 | ) |
| Interest payable                                                                   |   | 1,336                            |   | 954 |   |
| Other liabilities                                                                  |   | —                           |   | (18 | ) |
| Net cash provided by operating activities                                          |   | 39,888                           |   | 33,642 |   |
|                                                                               |   |                             |   |   |   |
| **CASH FLOWS FROM INVESTING  ACTIVITIES:**                                         |   |                             |   |   |   |
| Acquisition, net of cash acquired                                                  |   | (531                             | )      |   |   |
| Purchase of property and equipment                                                 |   | (3,185                           | )      | (11,240 | ) |
| Net cash used in investing activities                                              |   | (3,716                           | )      | (11,240 | ) |
|                                                                               |   |                             |   |   |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                          |   |                             |   |   |   |
| Repayment of debt                                                                  |   | (33,554                          | )      | (21,000 | ) |
| Exercise of stock options                                                          |   | 160                              |   | 25 |   |
| Repurchase of common stock                                                         |   | (480                             | )      | 3 |   |
| Net cash used in financing activities                                              |   | (33,874                          | )      | (20,972 | ) |
|                                                                               |   |                             |   |   |   |
| Effect of exchange rate changes on cash                                            |   | (12                              | )      | (11 | ) |
|                                                                               |   |                             |   |   |   |
| **NET INCREASE IN CASH AND  CASH EQUIVALENTS**                                     |   | 2,286                            |   | 1,419 |   |
| **CASH AND CASH EQUIVALENTS,  BEGINNING OF PERIOD**                                |   | 3,191                            |   | 815 |   |
| **CASH AND CASH EQUIVALENTS,  END OF PERIOD**                                      |   | $                                | 5,477  |   | $ | 2,234 |   |
| **CASH PAID DURING THE  PERIOD FOR INTEREST**                                      |   | $                                | 8,268  |   | $ | 4,024 |   |
| **CASH PAID(RECEIVED) DURING  THE PERIOD FOR INCOME TAXES**                        |   | $                                | 5,506  |   | $ | (1,233 | ) |

 

See notes tocondensed consolidated financial statements.

 

6

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**THE BOYDSCOLLECTION, LTD.********NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS********(Amountsin thousands, except share and per share amounts)(Unaudited)**

 

**1.****            ****INTERIM FINANCIAL STATEMENTS**

 

TheBoyds Collection, Ltd. (“Boyds” or “Company”) is primarily a wholesaler andimporter of resin figurines and plush animals that are distributed to retailoperations primarily throughout the United States. In September, Boyds BearCountryä store openedin Gettysburg, Pennsylvania. This retail store will be used to generate incomeand expand the brand awareness and image of Boyds.  Substantially all of its products are sourced from foreignmanufacturers in China through buying agencies.

 

Thecondensed consolidated balance sheet, as of September 30, 2002, the condensedconsolidated statements of income for the nine and three months ended September30, 2001 and 2002, the condensed consolidated statement of stockholders’ equityfor the nine months ended September 30, 2002 and the condensedconsolidated statements of cash flows for the nine months ended September 30,2001 and 2002 are unaudited.  In theopinion of management, all adjustments, consisting only of normal recurringadjustments, necessary for a fair presentation of such interim financialstatements have been included.  Theresults of operations for the nine and three months ended September 30, 2002are not necessarily indicative of the results to be expected for the fullyear.  These financial statements shouldbe read in conjunction with the financial statements and notes included in Boyds’Annual Report on Form 10-K filed with the Securities and Exchange Commission onMarch 28, 2002.

 

InJuly 2001, the Financial Accounting Standards Board (“FASB”) issued Statementof Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and OtherIntangible Assets”, which is effective January 1, 2002. SFAS 142 requires,among other things, the discontinuance of goodwill amortization. In addition,the standard includes provisions for the reclassification of certain existingrecognized intangibles as goodwill, reassessment of the useful lives ofexisting recognized intangibles, reclassification of certain intangibles out ofpreviously reported goodwill and the identification of reporting units forpurposes of assessing potential future impairments of goodwill. SFAS 142 alsorequired the Company to complete a transitional goodwill impairment test sixmonths from the date of adoption.****The result of this impairment testidentified that as of January 1, 2002 there were no impairments ofgoodwill or intangible assets to be recorded. Boyds will continue to conductimpairment tests annually in the first quarter of each fiscal year. As of January 1,2002, Boyds discontinued the amortization of all goodwill. Amortization for thenine months ended September 30, 2001 was $103.

 

In October 2001, the FASB issued SFAS No. 144 (“SFAS144”), “Accounting for the Impairment of Long-Lived Assets” which supersedesSFAS No. 121 (“SFAS 121”), “Accounting for the Impairment of Long-Lived Assetsand for  Long-Lived Assets to be Disposed of” and the accounting and reportingprovisions of APB No. 30, “Reporting the Results of Operations – Reporting andEffects of Disposal of a Segment of a Business, and Extraordinary, Unusual andInfrequently Occurring Events and Transactions” for the disposal of a segmentof business. This statement is effective for fiscal years beginning afterDecember 15, 2001. SFAS 144 retains many of the provisions of SFAS 121, butaddresses certain implementation issues associated with that Statement. Boyds adopted this standard on January 1,2002 and has determined that the adoption did not have a significant impact onthe financial position, results of operations or cash flows of Boyds.

 

7

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During the first quarter of 2002, Boydsreduced capitalized software costs to its net realizable value through animpairment charge totaling $0.3 million, recorded in selling, general andadministrative expenses on the condensed consolidated statement of income.  The software costs were associated with asales interface system that was expected to improve sales force efficiency andeffectiveness.

 

In April 2002, the FASB issued SFAS No. 145 (“SFAS 145”), “Rescissionof FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, andTechnical Corrections.”  This statementis effective for fiscal years beginning after May 15, 2002.  SFAS 145 requires, among other things,eliminating the extraordinary item treatment of debt extinguishments used aspart of the Boyds’ debt management strategy.

 

In June 2002, the FASB issued SFAS No. 146 (“SFAS 146”), “Accountingfor Costs Associated with Exit or Disposal Activities.”  This statement requires recording costsassociated with exit or disposal activities at their fair values when aliability has been incurred.  Underprevious guidance, certain exit costs were accrued upon management’s commitmentto an exit plan, which is generally before an actual liability has beenincurred.  Adoption of this statement isrequired at the beginning of fiscal year 2003. Management does not expect that adoption of this pronouncement will havea material effect on the financial position, results of operations or cash flowof Boyds.

 

 

**2.****            ****FINANCIAL INSTRUMENTS WITHOFF-BALANCE SHEET RISK**

 

At December 31, 2001 and at September 30, 2002, Boyds had letters ofcredit outstanding under its bank credit agreement amounting to $6.3 millionand $1.6 million, respectively.  Theseletters of credit represent Boyds’ commitment to purchase inventory, which isto be produced and/or shipped.

 

**3.****            ****RELATED PARTY TRANSACTIONS**

 

Kohlberg, Kravis Roberts & Co. L.P. (“KKR”) represents a 59%shareholder of Boyds. For the third quarter and first nine months endedSeptember 30, 2001 Boyds paid to KKR approximately $115 and $309 respectivelyfor management fees, recruitment fees and related expenses. For the thirdquarter and first nine months ended September 30, 2002 Boyds paid to KKRapproximately $95 and $282 respectively for management fees, recruitment feesand related expenses.

 

Duringthe first quarter of 2001, Boyds purchased approximately 111 acres of land fromNew Farm Operating, Inc., whose sole stockholder is Justina Lowenthal, wife ofdirector and Chairman Emeritus, Gary Lowenthal. The purchase price was $0.5million. This land is being used for the site of Boyds Bear Countryä, a store anda museum displaying Boyds’ products that opened in September 2002, which isincluded in property and equipment.  Inthe opinion of management, this transaction was executed on terms comparable toan arms length transaction.

 

8

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4.             **PROPERTY AND EQUIPMENT**

 

The components of property and equipment at December 31, 2001 andSeptember 30, 2002 were, as follows:

 
|                                             |   | **December 31,  2001** |   | **September 30,  2002** |   |
|--------------------------------------------------|--------|------------------------|--------|-------------------------|--------|
|                                             |   | **(in thousands)**     |   |
|                                             |   |                   |   |                    |   |
| Land                                             |   | $                      | 851    |                    | $      | 851 |   |
| Construction in progress                         |   | 2,289                  |   | 0                       |   |
| Building                                         |   | 0                      |   | 13,042                  |   |
| Equipment                                        |   | 3,657                  |   | 4,119                   |   |
| Software development  costs                      |   | 2,625                  |   | 2,372                   |   |
| Leasehold improvements                           |   | 1,896                  |   | 1,896                   |   |
| Furniture and fixtures                           |   | 374                    |   | 376                     |   |
| Total                                            |   | 11,692                 |   | 22,656                  |   |
| Less: accumulated  depreciation and amortization |   | (3,814                 | )      | (4,998                  | )      |
| Total                                            |   | $                      | 7,878  |                    | $      | 17,658 |   |

 

**5.             LONG-TERMDEBT**

 

Long-term debt issummarized as follows:

 
|                                            |   | **December 31,  2001** |       | **September 30,  2002** |       |
|-------------------------------------------------|--------|------------------------|------------|-------------------------|------------|
|                                            |   |                   | ** ** |                    | ** ** |
| 9% Senior Subordinated Notes due May 15, 2008   |   | $                      | 46,689     |                    | $          | 46,689 |   |
|                                            |   |                   |       |                    |       |
| Credit Agreement:                               |   |                   |       |                    |       |
| Secured Tranche A Term Loans due April 2005.    |   |                   |       |                    |       |
| Interest based on LIBOR or base rate as defined |   | 82,000                 |       | 68,000                  |       |
| Secured revolving loan due April 2005.          |   |                   |       |                    |       |
| Interest based on LIBOR or base rate as defined |   | 11,500                 |       | 4,500                   |       |
|                                            |   |                   |       |                    |       |
| Sub-Total                                       |   | 140,189                |       | 119,189                 |       |
|                                            |   |                   |       |                    |       |
| Less: Current portion of long-term debt         |   | (14,000                | )          | (17,000                 | )          |
|                                            |   | $                      | 126,189    |                    | $          | 102,189 |   |

 

The SeniorSubordinated Notes have an optional redemption feature exercisable by Boyds anytime on or after May 15, 2003 at 104.5% of face value. Each yearthereafter, the rate decreases by 1.5%. Interest on the Notes is payablesemi-annually on May 15 and November 15.

 

At September 30, 2001and 2002, the weighted average interest rates in effect for the Tranche A TermLoan was 4.2% and 2.4%, respectively. At September 30, 2002, the weighted average interest rate in effect forthe revolving loan was 3.7%.  Inaddition, the Tranche A Term Loan has predetermined annual payments throughApril 2005.

 

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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 September 30, 2002.The agreement also provides that the Term Loan and revolving loan commitment besecured by the capital stock of Boyds’ current and future subsidiaries. Inaddition, the Term Loan is subject to mandatory prepayment with the proceeds ofcertain asset sales and a portion of Boyds’ excess cash flow as defined in theCredit Agreement. Boyds has the option of selecting its own interest period atone, two, three, six, nine or twelve month periods.

 

Thescheduled maturities of the long-term debt, including current portion, are asfollows:

 
| 2002       |   | $      | 0       |   |
|------------|--------|--------|---------|--------|
| 2003       |   | 17,000 |    |
| 2004       |   | 23,000 |    |
| 2005       |   | 32,500 |    |
| 2006       |   | — |    |
| Thereafter |   | 46,689 |    |
|       |   | $      | 119,189 |   |

 

**6.****            ****PROVISION FOR INCOME TAXES**

 

Forfederal income tax purposes, Boyds has elected to treat the recapitalizationand stock purchase that occurred in April 1998 as an asset acquisition bymaking an Internal Revenue Code Section 338 (h)(10) election.  As a result, there is a difference betweenthe financial reporting and tax basis of Boyds’ assets.  The difference creates deductible goodwillfor tax purposes, and a deferred tax asset for financial reporting purposes.  The deferred tax asset will be realized asthe goodwill is amortized over a period of fifteen years.  In the opinion of management, Boyds believesit will have sufficient profits in the future to realize the deferred taxasset.

 

Boyds’ effective tax rate, excluding the impact offranchise taxes, has increased to 32.2% from the prior year’s rate ofapproximately 24.6%.  This increase isdue to the fact that Boyds’ effective state income tax rate increased during2001.  In 2001, Boyds recorded a benefitfor the increase in the value of the deferred tax asset of $8.7 million whichresulted in a decrease to its overall effective income tax rate for 2001.  The rate change was caused by a Pennsylvaniatax law change that subjected Boyds Collection, Ltd. LP (“Boyds LP”) toPennsylvania income tax.  The tax lawchange was retroactive to January 1, 2001.

 

During the third quarterof 2002, a subsidiary of Boyds elected to change its tax status from acorporation to a partnership. This election will allow Boyds to more likelythan not utilize previously fully reserved net operating losses assuming nofuture changes in the current applicable tax law.  Also, effective July 1, 2002, Pennsylvania changed its taxlaw to extend the time to utilize net operating losses from ten to twenty yearsassuming no future changes in the current applicable tax law.  The change in tax law also increased theamount of net operating losses that can be utilized in a year from $0.5 millionto $2 million. As a result of both the tax law change and the tax status election,Boyds recognized a $2.6 million non-operating tax benefit as a result of thereversal of previous deferred tax asset valuation allowance reserves.

 

Theeffective tax rate, excluding $2.6 million third quarter benefit, for the ninemonths ended September 30, 2001 was 33.6% and for September 30, 2002 was38.7%.  Thisincrease is due to the fact that Boyds’ effective state income tax rateincreased during 2002.

 

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**7.****            ****CONTINGENCIES**

 

Boydsis involved in various legal proceedings, claims and governmental audits in theordinary course of business. In the opinion of management, the ultimatedisposition of these matters will not have a material adverse effect on thefinancial position or results of operations of Boyds.

 

**8.****            ****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  September 30,** |   | **Nine Months Ended  September 30,** |   |
|------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
|                                                                               |   | **2001**                              |   | **2002**                             |   | **2001** |   | **2002** |   |
|                                                                               |   | **(in thousands)**                    |   | **(in thousands)**                   |   |
|                                                                               |   |                                  |   |                                 |   |   |   |   |   |
| Numerator for basic and diluted earnings per share:                                |   |                                  |   |                                 |   |   |   |   |   |
| Net income                                                                         |   | $                                     | 12,956 |                                 | $      | 11,612 |   | $ | 32,733 |   | $ | 27,046 |   |
| Denominator:                                                                       |   |                                  |   |                                 |   |   |   |   |   |
| Denominator for basic earnings  per share — weighted average shares           |   | 59,099                                |   | 59,066                               |   | 59,119 |   | 59,064 |   |
| Effect of dilutive securities:                                                     |   |                                  |   |                                 |   |   |   |   |   |
| Effect of shares issuable  under stock option plans based on treasury stock method |   | 364                                   |   | 74                                   |   | 329 |   | 108 |   |
| Denominator for diluted  earnings per share — weighted average shares         |   | 59,463                                |   | 59,140                               |   | 59,448 |   | 59,172 |   |
|                                                                               |   |                                  |   |                                 |   |   |   |   |   |
| EPS — Basic                                                                   |   | 0.22                                  |   | 0.20                                 |   | 0.56 |   | 0.46 |   |
|                                                                               |   |                                  |   |                                 |   |   |   |   |   |
| EPS — Diluted                                                                 |   | 0.22                                  |   | 0.20                                 |   | 0.55 |   | 0.46 |   |
|                                                                                    |        |                                       |        |                                      |        |  |  |  |  |  |  |  |  |

 

 

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

 

##### ***GENERAL***

 

Boyds is a leading designer, importer and distributor of branded,high-quality, hand crafted collectibles and other specialty giftwareproducts.  Boyds sells its productsthrough an extensive network of approximately 18,000 accounts comprised ofindependent gift and collectibles retailers, premier department stores,selected catalogue retailers and other electronic and retail channels. Thisnetwork of retailers is being serviced by a newly created outside sales force.In September, Boyds Bear Countryä store opened inGettysburg, Pennsylvania. This retail store will be used to generate income andexpand the brand awareness and image of Boyds.

 

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Boyds’ sales consist of plush animals, resin figurines, dolls, villages,home décor and other products. Other products include collectors club sales,which are generated from annual dues collected directly from consumers whobecome members of Boyds’ collectors club, *The Loyal Order of Friends of Boyds*, whichbegan in July 1996 and currently has approximately 45,000 paying members;international sales; and related accessories.

 

Boyds licenses its product designs to other companies for productsincluding home textiles, infant clothing and wallpaper. Boyds believes suchlicensing, in addition to providing royalty income, helps to increase consumerawareness of Boyds’ designs and brand image. Boyds reports royalty income innet sales.

 

##### ***Boyds exhibits its products at manynational and regional tradeshows where orders are taken by Boyds’ employees.Boyds operates almost exclusively out of a leased office/distribution facilityand owned retail store in the general vicinity of Gettysburg, Pennsylvaniawhere it believes both labor and rental costs are attractive.***

 

**CRITICALACCOUNTING POLICIES**

 

Preparing the financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires that management make estimates andassumptions that affect the amounts reported in the financial statements andaccompanying notes.  Predicting futureevents is inherently an imprecise activity and as such requires the use ofjudgment.  Actual results may vary fromestimates in amounts that may be material to the financial statements.Management believes that the estimates and assumptions used in connection withthe amounts reported in Boyds’ financial statements and related disclosures arereasonable and made in good faith.

 

Themost significant accounting estimates inherent in the preparation of Boyds’financial statements include estimates related to valuing the ultimatecollectability of accounts receivable and realizable value of inventory.  In addition, a significant amount of judgmentexists in defining deferred tax valuation accounts.  The process of determining estimates is based on several factors,including historical experience, current and anticipated economic conditionsand customer profiles. Boyds continually reevaluates these key factors andmakes adjustments to estimates where appropriate. The following are Boyds’critical accounting policies, some of which require the application ofsignificant estimates and assumptions.

 

•                  Salesrevenue, net of returns and discounts, is recognized upon shipment of theitems, when title passes to the customer. The most significantfinancial statement line item, net sales, represents transactions consistentwith Boyds’ primary business focus and meets the criteria of Staff AccountingBulletin No. 101, including the transfer of title, probable collectability,identified customer and no recourse.

 

•                  Accountsreceivable are presented at estimated net realizable value. Boyds usesestimates in determining the collectability of its accounts receivable and mustrely on its evaluation of historical bad debts, customer credit ratings,current economic trends and changes in customer payment terms to arrive atappropriate reserves. Material differences may result in the amount and timingof earnings if actual experience differs significantly from managementestimates.

 

•                  Inventoriesare stated at the lower of cost or market. Cost is determined under thefirst-in, first-out method of accounting. Boyds records adjustmentsto the value of this inventory in situations where it appears that Boyds willnot be able to recover the cost of the product.  This lower of cost or market analysis is based on Boyds’ estimateof forecasted demand by customer by product. A decrease in product demand due to changing customer tastes, consumerbuying patterns or loss of shelf space to competitors could significantlyimpact Boyds’ evaluation of its excess and obsolete inventories.

 

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•                  Under the requirements ofStatement of Financial Accounting Standards (SFAS) Nos.142 and 144, Boydsassessed the potential impairment of identifiable intangibles, long-livedassets and acquired goodwill whenever events or changes in circumstancesindicated that the carrying value may not be recoverable.  In performing this evaluation, the Companyevaluated current and future economic and business trends to develop businessforecasts of future performance and related cash flows. Such estimates requirethe use of judgment and numerous subjective assumptions. As of January 1, 2002based on Boyds evaluation there was no impairment of goodwill, identifiableintangibles or long-lived assets.

 

•                  Deferred income taxes arise because of differences inthe treatment of income and expense items for financial reporting and incometax purposes.  The recovery of deferredincome tax assets is contingent upon applicable tax laws and management’sassessment of future operating results. In situations which management believes the probability of benefitingfrom deferred tax assets is less likely than not, a valuation allowance isestablished for the amount that is less likely than not to be utilized.

 

**FACTORS WHICH AFFECT BOYDS’ RESULTSOF OPERATIONS**

 

***Seasonality***

 

Boyds does not have the significant seasonal variation in its ordersthat it believes is experienced by many other giftware and collectiblescompanies. Boyds receives orders throughout the year and generally shipsmerchandise out on a first-in, first-out basis. Approximately 40% of orders aretaken between November and April while approximately 60% of orders are placedbetween May and October in anticipation of the holiday season. Boyds does notbuild a large receivables balance relative to sales because it typically doesnot offer its customers long payment terms or dating programs.

 

***ForeignExchange***

 

The dollar value of Boyds’ assets abroad is not significant. Boyds’sales are primarily denominated in United States dollars and, as a result, arenot subject to changes in exchange rates.

 

Boyds imports most of itsproducts from manufacturers in China. Boyds’ costs could be adversely affectedon a short-term basis if the Chinese renminbi appreciates significantlyrelative to the United States dollar. Conversely, its costs would be favorablyaffected on a short-term basis if the Chinese renminbi depreciatessignificantly relative to the United States dollar. Although Boyds generallypays for its products in United States dollars, the cost of such productsfluctuates with the value of the Chinese renminbi. In the future, Boyds may,from time to time, enter into foreign exchange contracts or prepay inventorypurchases as a partial hedge against currency fluctuations. Differences betweenthe amounts of such contracts and costs of specific material purchases areincluded in inventory and cost of sales. Boyds intends to manage foreignexchange risks to the extent appropriate.

 

**RESULTS OF OPERATIONS**

 

Net sales consistof sales of our products, net of sales discounts product returns andallowances, collectors club sales generated from Boyds’ collectors club and royaltyincome from licenses held by Boyds. Sales are primarily made on a purchase order basis.  Revenue associated with sales is recognizedwhen title transfers to the customer.

 

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Cost of goods soldconsists of product costs, freight and warehousing costs. Selling, general andadministrative expenses include overhead, selling and marketing costs,administration and professional fees.

 

Other incomeconsists of interest income and exchange rate gain/loss.

 

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The followingtable sets forth the components of net income as a percentage of net sales forthe periods indicated:

 
|                                         |   | **Three Months  Ended  September 30,** |   | **Nine Months  Ended  September 30,** |   |
|----------------------------------------------|--------|----------------------------------------|--------|---------------------------------------|--------|
|                                         |   | **2001**                               |   | **2002**                              |   | **2001** |   | **2002** |   |
|                                         |   |                                   |   |                                  |   |   |   |   |   |
| Net sales                                    |   | 100.0                                  | %      | 100.0                                 | %      | 100.0 | % | 100.0 | % |
| Gross profit                                 |   | 62.4                                   | %      | 63.8                                  | %      | 63.6 | % | 64.0 | % |
| Selling, general and administrative expenses |   | 15.1                                   | %      | 19.3                                  | %      | 14.5 | % | 18.2 | % |
| Income from operations                       |   | 47.3                                   | %      | 44.5                                  | %      | 49.1 | % | 45.8 | % |
| Other income, net                            |   | 0.1                                    | %      | 0.0                                   | %      | 0.0 | % | 0.0 | % |
| Interest expense                             |   | 6.3                                    | %      | 4.6                                   | %      | 8.0 | % | 5.2 | % |
| Provision for income taxes                   |   | 13.7                                   | %      | 9.4                                   | %      | 14.9 | % | 14.3 | % |
| Income before extraordinary item             |   | 27.4                                   | %      | 30.5                                  | %      | 26.2 | % | 26.3 | % |
| Extraordinary item (net of tax benefits)     |   | 0.2                                    | %      | 0.0                                   | %      | 0.1 | % | 0.0 | % |
| Net income                                   |   | 27.2                                   | %      | 30.5                                  | %      | 26.1 | % | 26.3 | % |

 

## ***Three Months Ended September 30, 2002 vs. Three MonthsEnded September 30, 2001***

 

*NetSales* – Net salesdeclined $9.4 million, or 19.8 %, to $38.1 million in the third quarter of 2002from $47.5 million for the third quarter of 2001.  Sales of Boyds’ plush products decreased $4.1 million, or 16.3%,resin product sales declined $1.1 million, or 9.3%, doll product sales declined$0.8 million, or 65.9%, village product sales decreased $2.2 million, or 81.2%,and home décor product sales declined $0.8 million, or 36.1%.  As a percentage of net sales for thequarter, plush products represented 55%, resin products represented 28%, dollproducts represented 1%, village products represented 1% and home décorproducts represented 4%.

 

The sales shortfall was primarily due to thecontinuing reduction in order volume from our accounts reflecting thechallenging environment that many of our retailers face.

 

*GrossProfit –* Grossprofit declined $5.4 million, or 18.2%, to $24.3 million in the third quarterof 2002 from $29.7 million for the third quarter of 2001.  Gross profit as a percentage of net salesincreased to 63.8% for the quarter from 62.4% for the same period in 2001.  The dollar decline was primarilyattributable to the decline in sales volume. The increase in the percentage of net sales was due to a charge in 2001for obsolete inventory allowance for slower moving product lines and highergross margins from sales at Boyds Bear Countryä.

 

*Selling,General & Administrative Expenses (SG&A) –* SG&A increased $0.2 million, to $7.4million in the third quarter of 2002 from $7.2 million for the third quarter of2001.  SG&A as a percent of netsales increased to 19.3% for the quarter from 15.1% for the same period in2001.  The dollar increase in SG&Aexpenses was a result of implementing a new sales force and the opening ofBoyds Bear Countryä store. The percentage increase can be attributed to the sales decline.

 

*Incomefrom Operations* –Income from operations declined $5.6 million, or 24.9%, to $16.9 million in thethird quarter of 2002 from $22.5 million for the third quarter of 2001.  Income from operations as a

 

15

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percentage of net sales declined to 44.5% for the quarter from 47.3%for the same period in 2001.  The dollardecline and the decline in the percentage of net sales were primarilyattributable to the decline in sales volume.

 

*TotalInterest Expense*– Total interest expense declined $1.2 million, or 40.0% to $1.8 million in thethird quarter of 2002 from $3.0 million for the third quarter of 2001.  Total interest expense as a percentage ofnet sales declined to 4.6% for the quarter from 6.3% for the same period in2001.  The dollar decline and thedecline in the percentage of net sales were due to the reduction of debt fromexcess cash and a decline in interest rates.

 

*Provisionfor Income Taxes –*Provision for income taxes declined $2.9 million, to $3.6 million in the thirdquarter of 2002 from $6.5 million for the third quarter of 2001.   Provision for income taxes as a percentageof net sales decreased to 9.4% for the quarter from 13.7% for the same periodin 2001. The provision was impacted in the third quarter of 2002 by anon-operating tax benefit of $2.6 million, resulting from the combination of achange to the Pennsylvania tax law and a change to the Company’s tax status.

 

*NetIncome* – Netincome declined $1.4 million, or 10.8%, to $11.6 million in the third quarterof 2002 from $13.0 million for the third quarter of 2001.  Net income as a percent of sales increasedto 30.5% for the quarter from 27.2% for the same period in 2001.  Excluding the non-operatingtax benefit discussed above, net income in the third quarter of 2002 was $9.0million. The dollar decline was primarily attributable to the decline in salevolume. The increase in the percent of sales was primarily due to the taxbenefit recognized during the quarter.

 

## ***Nine Months Ended September 30, 2002 vs. Nine MonthsEnded September 30, 2001***

 

*NetSales* – Net salesdeclined $22.4 million, or 17.9 %, to $102.9 million in the first nine monthsof 2002 from $125.3 million for the first nine months of 2001.  Sales of Boyds’ plush products declined $5.9million, or 9.2%, resin product sales declined $8.6 million, or 24.0%, dollproduct sales declined $1.9 million, or 49.8%, village product sales declined$3.4 million, or 65.5%, and home décor product sales declined $1.7 million, or33.7%.  As a percentage of net sales forthe first nine months, plush products represented 56%, resin productsrepresented 27%, doll products represented 2%, village products represented 2%and home décor products represented 3%.

 

The sales shortfall was primarily due to thecontinuing reduction in order volume from our accounts reflecting thechallenging environment that many of our retailers face.

 

*GrossProfit –* Grossprofit declined $13.9 million, or 17.4%, to $65.8 million in the first ninemonths of 2002 from $79.7 million for the first nine months of 2001.  Gross profit as a percentage of net salesincreased to 64.0% for the first nine months from 63.6% for the same period in2001.  The dollar decline was primarilyattributable to the decline in sales volume.

 

*Selling,General & Administrative Expenses (SG&A)* – SG&A increased $0.6 million, to $18.7 millionin the first nine months of 2002 from $18.1 million for the first nine monthsof 2001.  SG&A as a percent of netsales increased to 18.2% for the first nine months from 14.5% for the sameperiod in 2001.  The dollar increase inSG&A expenses was a result of implementing a new sales force and theopening of Boyds Bear Countryä store. The percentage increase wasprimarily attributable to the sales decline.

 

*Incomefrom Operations* –Income from operations declined $14.5 million, or 23.5%, to $47.1 million inthe first nine months of 2002 from $61.6 million for the first nine months of2001.  Income from operations as apercentage of net sales declined to 45.8% for the first nine months from 49.1%for the same period in 2001.  The dollardecline and the decline in the percentage of net sales were primarilyattributable to the decline in sales volume.

 

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*TotalInterest Expense*– Total interest expense declined $4.7 million, or 46.5% to $5.4 million in thefirst nine months of 2002 from $10.1 million for the first nine months of2001.  Total interest expense as apercentage of net sales declined to 5.2% for the first nine months from 8.0%for the same period in 2001.  The dollardecline and the decline in the percentage of net sales were due to thereduction of debt from excess cash and a decline in interest rates.

 

*Provisionfor Income Taxes*– Provision for income taxes declined $3.9 million, or 20.9%, to $14.8 millionin the first nine months of 2002 from $18.7 million for the first nine monthsin 2001.  Provision for income taxes asa percentage of net sales decreased to 14.3% for the first nine months from14.9% for the same period in 2001.  The provisionwas impacted in the third quarter of 2002 by a non-operating tax benefit of$2.6 million, resulting from the combination of a change to the Pennsylvaniatax law and a change to the Company’s tax status.

 

*NetIncome* – Netincome declined $5.7 million, or 17.4%, to $27.0 million in the first ninemonths of 2002 from $32.7 million for the first nine months of 2001.  Net income as a percent of sales increasedto 26.3% for the first nine months from 26.1% for the same period in 2001.  Excluding the non-operatingtax benefit discussed above, net income for the first nine months of 2002 was$24.4 million. The dollar decline was primarily attributable to the decline insale volume.

 

***Liquidity and Capital Resources***

 

Boyds’ primary sources of liquidity are cash flow fromoperations and borrowings under its credit agreement, which includes arevolving credit facility. Boyds’ primary uses of cash are to fund workingcapital and to service debt. Cash balances increased to $2.2 million in thefirst nine months of 2002 from $0.8 million at December 31, 2001.  The increase was a result of a timingdifference on debt reduction.

 

***OperatingActivities***

 

Cashprovided by operating activities decreased $6.1 million, or 15.3%, to $33.7million in the first nine months of 2002 from $39.8 million for the first ninemonths of 2001. The cash flow decrease was primarily attributable to thedecrease in net income.

 

***Investing Activities***

 

Capitaland investment expenditures totaled $11.3 million in the first nine months of2002. Boyds has completed construction of the Boyds Bear Countryä store nearGettysburg, Pennsylvania. The aim of this investment is to generate income andexpand the brand awareness and image of Boyds, by capitalizing on the touristdestination status of the Gettysburg area. During the first nine months of2002, Boyds incurred approximately $10.8 million in capital expendituresrelated to Boyds Bear Countryä, with a remaining balanceof $3.0 million expected to be paid in the fourth quarter of 2002.  The balance of the construction will befunded from excess cash flow.  Boydsdoes not expect to incur any additional debt as a result of building Boyds BearCountryä.   Boyds has spent approximately $13.0 millionon the project as of the end of the third quarter of 2002. Other than BoydsBear Countryä, Boyds doesnot expect to incur significant capital expenditures for the foreseeablefuture.

 

***Financing Activities***

 

In connection with the recapitalization in 1998, Boyds issued 9% SeniorSubordinated Notes due 2008 in an amount of $165.0 million and entered into a creditagreement providing for a $325.0 millionsenior secured term loan, consisting of tranche A and tranche B, and a seniorsecured revolving credit facility providing for borrowings up to $40.0 million.As of September 30, 2002, Boyds has repaid $118.3 million of the notes, leavinga balance outstanding of $46.7 million. Boyds has repaid $257.0 million of the term loans under the

 

17

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credit agreement, leaving a balance outstanding of $68.0 million as of September30, 2002. Boyds has reduced its total debt by $40.7 million in the past twelvemonths.

 

The revolving credit facility provides loans in an aggregate amount upto $40.0 million.  Boyds had borrowed$4.5 million under the revolving credit facility as of September 30, 2002.  Thus, the unused balance under the revolvingcredit facility will be available to fund the working capital needs ofBoyds.  Borrowings under the creditagreement bear interest at a rate per annum, equal to a margin over either a baserate or LIBOR, at Boyds’ option. The revolving credit facility commitment willterminate on April 21, 2005. Effective April 21, 2000, the tranche A term loanis amortizing over six years. The credit agreement contains customary covenantsand events of default, including substantial restrictions on Boyds’ ability todeclare dividends or make distributions. The term loans are subject tomandatory prepayment with the proceeds of certain asset sales and a portion ofBoyds’ excess cash flow, as defined in the credit agreement.

 

On February 17, 2000, Boydsannounced that its Board of Directors had approved the repurchase of 3.0million shares of the Company’s common stock. As of September 30, 2002, Boydshad repurchased 132,480 shares of common stock pursuant to this stockrepurchase program for an aggregate amount of approximately $1.0 million. Theserepurchases were financed out of operating cash flow. Any future repurchasesunder this program are expected to be financed similarly or by utilizingborrowings under the revolving credit facility. Boyds plans to make suchpurchases from time to time in the open market or in private transactions.

 

On July 27, 2000, Boyds announced that its Board ofDirectors had approved a repurchase program for its outstanding 9% Series BSenior Subordinated Notes due 2008. As of September 30, 2002, Boyds hadrepurchased $52.3 million of its notes pursuant to this note repurchaseprogram. These repurchases were financed out of operating cash flow. Any futurerepurchases under this program are expected to be financed similarly or byutilizing borrowings under the revolving credit facility. Boyds plans to makesuch purchases from time to time in the open market or in private transactions.

 

Management believes that cash flow from operations and availabilityunder the revolving credit facility will provide adequate funds for Boyds’foreseeable working capital needs, planned capital expenditures, debt serviceobligations, the common stock repurchaseprogram and the bond repurchase program. Any future acquisitions, jointventures or other similar transactions may require additional capital and therecan be no assurance that any such capital will be available to Boyds onacceptable terms or at all. Boyds’ ability to fund its working capital needs,planned capital expenditures and scheduled debt payments, to refinanceindebtedness and to comply with all of the financial covenants under its debtagreements, depends on its future operating performance and cash flow, which inturn are subject to prevailing economic conditions and to financial, businessand other factors, some of which are beyond Boyds’ control.

 

**RISK FACTORS WHICH MAY AFFECT FUTURE PERFORMANCE**

 

*Dependenceon two independent buying agencies. *Substantially all of the products thatBoyds sells are purchased through two independent buying agencies. One buyingagency is located in Hong Kong, and the other buying agency is located in theUnited States. These two buying agencies, which contract with a total of 19independent manufacturers, account for approximately 90% of Boyds’ totalimports. These two buying agencies also perform a number of functions forBoyds, including collaborating in Boyds’ product design and developmentprocess. As a result, Boyds is substantially dependent on these buying agenciesand the manufacturers with which they contract. Boyds does not have long-termcontracts with either of its primary buying agencies. Boyds believes that theloss of either of its primary buying agencies would (1) have a material adverseeffect on its financial condition and results of operations, (2) causedisruptions in its orders, (3) affect the quality of its products, and (4)possibly require it to select alternative manufacturers.

 

*Potentialeconomic and political risks of China. *All of Boyds’ significant manufacturersare located in

 

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China. Although Boyds has identified alternatemanufacturers which could meet its quality and reliability standards at similarcosts in China and in other countries, the loss of any one or more of itsmanufacturers could have a material adverse effect on its business.  Because Boyds relies primarily on Chinesemanufacturers, it is subject to the following risks that could restrict itsmanufacturers’ ability to make its products or increase its manufacturingcosts: (1) economic and political instability in China; (2) transportationdelays; (3) restrictive actions by the Chinese government; (4) the laws andpolicies of the United States affecting importation of goods, including duties,quotas and taxes; (5) Chinese trade and tax laws.  In particular, Boyds’ business could be adversely affected if theChinese renminbi appreciates significantly relative to the United States dollardue to the cost of its products fluctuating with the value of the Chineserenminbi.

 

*Potentialadverse trade regulations and restrictions.*  Boyds doesnot own 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’ importedproducts. Failure to comply with these regulations may result in the impositionof additional duties or 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 theUnited States, such as China, cease to have such status, Boyds could beadversely affected. Boyds cannot predict what regulatory changes may occur orthe type or amount of any financial impact these changes may have on it in thefuture.

 

*Changingconsumer tastes. *The demand for Boyds’ products may bequickly affected by changing consumer tastes and interests. Boyds’ results ofoperations depend substantially upon its ability to continue to conceive,design, source and market new pieces and upon continuing market acceptance ofits existing and future product lines. If Boyds fails or is significantlydelayed in introducing new pieces to its existing product lines or creating newproduct line concepts or if its new products do not meet with marketacceptance, its results of operations may be impaired. A number of companieswho participate in the giftware and collectibles industries are part of large,diversified companies that have greater financial resources than Boyds andoffer a wider range of products and may be less affected by changing consumertastes.

** **

*Potentialinfringement of Boyds’ intellectual property.*  Boydsbelieves that its trademarks and other proprietary rights are material to itssuccess and competitive position. Accordingly, Boyds devotes resources to theestablishment and protection of its intellectual property on a worldwide basis.The actions Boyds takes to establish and protect its trademarks and otherproprietary rights may not be adequate to protect its intellectual property orto prevent imitation of its products by others. Moreover, while Boyds has notexperienced any proprietary license infringements or legal actions that havehad a material impact on its financial condition or results of operations,other persons have and will likely in the future assert rights in, or ownershipof, its trademarks and other proprietary rights. Boyds may not be able tosuccessfully resolve such conflicts. In addition, the laws of foreign countriesmay not always protect intellectual property to the same extent as do the lawsof the United States.

 

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***EFFECTS OF RECENTLY ISSUED ACCOUNTINGSTANDARDS***

 

InJuly 2001, the Financial Accounting Standards Board (“FASB”) issued Statementof Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill andOther Intangible Assets”, which was effective January 1, 2002. SFAS 142requires, among other things, the discontinuance of goodwill amortization. Inaddition, the standard includes provisions for the reclassification of certainexisting recognized intangibles as goodwill, reassessment of the useful livesof existing recognized intangibles, reclassification of certain intangibles outof previously reported goodwill and the identification of reporting units forpurposes of assessing potential future impairments of goodwill. SFAS 142 alsorequired Boyds to complete a transitional goodwill impairment test nine monthsfrom the date of adoption.** **The result of this impairment test identified that asof January 1, 2002 there were no impairments of goodwill or intangible assetsto be recorded.  Boyds will continue toconduct impairment tests as required.****As of January 1,2002, Boyds discontinued the amortization of all goodwill.  Amortization for the nine months endedSeptember 30, 2001 was $103.

 

In October 2001, the FASBissued SFAS No. 144 (“SFAS 144”), “Accounting for the Impairment of Long-LivedAssets” which supersedes SFAS No. 121 (“SFAS 121”), “Accounting for theImpairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of”and the accounting and reporting provisions of APB No. 30, “Reporting theResults of Operations - Reporting and Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions” for the disposal of a segment of business.  This statement is effective for fiscal yearsbeginning after December 15, 2001.  SFAS144 retains many of the provisions of SFAS 121, but addresses certainimplementation issues associated with that Statement.  Boyds adopted this standard on January 1, 2002 and has determinedthat the adoption did not have a significant impact on the financial position,results of operations or cash flows of Boyds.

 

In April 2002, the FASBissued SFAS No. 145 (“SFAS 145”), “Rescission of FASB Statements No. 4, 44, and64, Amendment of FASB Statement No. 13, and Technical Corrections.”  This statement is effective for fiscal yearsbeginning after May 15, 2002.  SFAS 145requires, among other things, eliminating the extraordinary item treatment ofdebt extinguishments used as part of the Boyds’ debt management strategy.

 

In June 2002, theFASB issued SFAS No. 146 (“SFAS 146”), “Accounting for Costs Associated withExit or Disposal Activities.”  Thisstatement requires recording costs associated with exit or disposal activitiesat their fair values when a liability has been incurred.  Under previous guidance, certain exit costswere accrued upon management’s commitment to an exit plan, which is generallybefore an actual liability has been incurred. Adoption of this statement is required at the beginning of fiscal year2003.  Management does not expectthat adoption of this pronouncement will have a material effect on thefinancial position, results of operations or cash flow of Boyds.

 

**RELATED PARTY TRANSACTIONS**

 

Kohlberg, Kravis Roberts& Co. L.P. (“KKR”) represents a 59% shareholder of Boyds. For the thirdquarter and first nine months ended September 30, 2001 Boyds paid to KKRapproximately $115,000 and $309,000 for management fees, recruitment fees andrelated expenses. For the third quarter and first nine months ended September30, 2002 Boyds paid to KKR approximately $95,000 and $282,000 for managementfees, recruitment fees and related expenses.

 

During the first quarter of2001, Boyds purchased approximately 111 acres of land from New Farm Operating,Inc., whose sole stockholder is Justina Lowenthal, wife of director andChairman Emeritus, Gary Lowenthal. The purchase price was $0.5 million. Thisland is being used for the site of Boyds Bear Countryä.  In the opinion of management, thistransaction was executed on terms comparable to an arms length transaction.

 

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***FORWARD LOOKING STATEMENTS***

 

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

 

The forward-looking statements in this report are based on a number ofassumptions and estimates, which are inherently subject to significantuncertainties and contingencies, many of which are beyond the control of Boyds,and reflect future business decisions that are subject to change. A variety offactors could cause actual results to differ materially from those anticipatedin Boyds’ forward-looking statements, including: the effects of economicconditions; the inability to grow Boyds’ business as planned; the loss ofeither of Boyds’ two independent buying agencies or any of its manufacturingsources; economic or political instability in the countries with which Boydsdoes business; changes to, or the imposition of, new regulations, duties, taxesor tariffs associated with the import or export of goods from or to thecountries with which Boyds does business; and other risk factors that arediscussed in this report and, from time to time, in other Securities andExchange Commission reports and filings. One or more of the factors discussedabove may cause actual results to differ materially from those expressed in orimplied by the statements in this report.

 

Readers are cautioned not to place undue reliance on theseforward-looking statements, which speak only as of the date of such statements.Boyds undertakes no obligation to publicly release the results of any revisionsto these forward-looking statements that may be made to reflect events orcircumstances after the date of this report, or the date of such statements, asthe case may be, or to reflect the occurrence of unanticipated events.

 

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

 

Boyds faces minimal interest rate risk exposure in relation to itsoutstanding debt of $119.2 million at September 30, 2002. Of this amount, $72.5million under the Credit Agreement is subject to interest rate fluctuations. Ahypothetical 1% change in interest rates applied to the fair value of debtwould not have a material impact on earnings or cash flows of the Company.

 

Boydsfaces currency risk exposure that arises from translating the results of itsGerman and United Kingdom operations to the U.S. dollar. The currency riskexposure is not material as the German and United Kingdom subsidiary operationsdo not have a material impact on the Company’s earnings.

 

**Item 4.    Disclosure Controls and Procedures**

 

Boyds maintains disclosure controls and proceduresdesigned to ensure that it is able to collect the information it is required todisclose in the reports it files with the Securities and Exchange Commission(SEC), and to process, summarize and disclose this information within the timeperiods specified in the rules of the SEC. Boyds carried out an evaluation ofits disclosure 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 in various legal proceedings, claims and governmentalaudits in the ordinary course of business. In the opinion of management, theultimate disposition of these proceedings, claims and audits will not have amaterial adverse effect on the financial position or results of operations ofBoyds.

 

**Item 2.Changes in Securities and Use of Proceeds****—None**

 

**Item 3.Defaults Upon Senior Securities****—None**

 

**Item 4.Submission of Matters to a Vote of Security Holders****—None**

 

**Item 5.Other Information**

 

**Item 6. Exhibits and Reports on Form8-K.**

 

(a) Exhibits – See Index to Exhibits

 

(b) Reports on Form 8-K

 

No reports on Form 8-K were filed during the period covered by thisreport.

 

#### ** **

#### **SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 
| Date:  | November 12, 2002 |                    | The  Boyds Collection, Ltd. |
|--------|-------------------|-------------------------|-----------------------------|
|   |
|   |
|   | By:               | /s/ Jean-Andre Rougeot  |                        |
|   | Name:             | Jean-Andre Rougeot      |                        |
|   | Title:            | Chief Executive Officer |                        |
|   |
|   |
|   | By:               | /s/ Joseph E. Macharsky |                        |
|   | Name:             | Joseph E. Macharsky     |                        |
|   | Title:            | Chief Financial Officer |                        |
|        |                   |                         |                             |  |  |  |

 

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CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jean-Andre Rougeot, Chief Executive Officer of The Boyds Collection,Ltd. (the “Company”), certify that:

 

1.             I have reviewed this quarterly report onForm 10-Q of The Boyds Collection, Ltd.;

 

2.             Based on my knowledge, this quarterlyreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this Report;

 

3.             Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the Company as of, and for, the periods presentedin this quarterly report;

 

4.             The Company’s other certifying officersand I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Companyand we have:

 

a)             Designed such disclosure controls and procedures toensure that material information relating to the Company, including itsconsolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this quarterly report is beingprepared;

 

b)            Evaluated the effectiveness of the Company’s disclosurecontrols and procedures as of a date within 90 days prior to the filing date ofthis quarterly report (the “Evaluation Date”); and

 

c)             Presented in this quarterly report our conclusions aboutthe effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

 

5.             The Company’s other certifying officersand I have disclosed, based on our most recent evaluation, to the Company’sauditors and the audit committee of the Company’s board of directors (orpersons performing the equivalent functions):

 

a)             All significant deficiencies in the design or operationof internal controls which could adversely affect the Company’s ability torecord, process, summarize and report financial data and have identified forthe Company’s auditors any material weaknesses in internal controls; and

 

b)            Any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the Company’sinternal controls; and

 

6.             The Company’s other certifying officersand I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

 
| /s/ Jean-Andre Rougeot  |   |
|-------------------------|--------|
| Jean-Andre Rougeot      |
| Chief Executive Officer |
| Date: November 12, 2002 |

 

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CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Joseph Macharsky, Chief Financial Officer of The Boyds Collection,Ltd. (the “Company”), certify that:

 

1.             I have reviewed this quarterly report onForm 10-Q of The Boyds Collection, Ltd.;

 

2.             Based on my knowledge, this quarterlyreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this Report;

 

3.             Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the Company as of, and for, the periods presentedin this quarterly report;

 

4.             The Company’s other certifying officersand I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Companyand we have:

 

a)             Designed such disclosure controls and procedures toensure that material information relating to the Company, including itsconsolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this quarterly report is beingprepared;

 

b)            Evaluated the effectiveness of the Company’s disclosurecontrols and procedures as of a date within 90 days prior to the filing date ofthis quarterly report (the “Evaluation Date”); and

 

c)             Presented in this quarterly report our conclusions aboutthe effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

 

5.             The Company’s other certifying officersand I have disclosed, based on our most recent evaluation, to the Company’sauditors and the audit committee of the Company’s board of directors (orpersons performing the equivalent functions):

 

a)             All significant deficiencies in the design or operationof internal controls which could adversely affect the Company’s ability torecord, process, summarize and report financial data and have identified forthe Company’s auditors any material weaknesses in internal controls; and

 

b)            Any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the Company’sinternal controls; and

 

6.             The Company’s other certifying officersand I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

 
| /s/ Joseph E. Macharsky |   |
|-------------------------|--------|
| Joseph E. Macharsky     |
| Chief Financial Officer |
| Date: November 12, 2002 |

 

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Index to Exhibits

 

 

Exhibit   No.           Description

 

3.1                                             Amended andRestated Articles of Incorporation of Boyds (incorporated by reference fromExhibit 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 betweenBoyds and The Bank of New York, as trustee (incorporated by reference fromExhibit 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% SeniorSubordinated Note due 2008 (included in Exhibit 4.1)

4.3                                             Form of 9% Series BSenior Subordinated Note due 2008 (included in Exhibit 4.1)

10.1                                       Credit Agreement, dated as ofApril 21, 1998, among Boyds, the several lenders from time to time partiesthereto, DLJ Capital Funding, Inc., The Fuji Bank, Limited, New York Branch,and Fleet National Bank (incorporated by reference from Exhibit 10.1 ofAmendment No. 3 to Boyds’ Registration Statement on Form S-1, filed on February23, 1999, File No. 333-69535).

10.2                                       Forms of Notesevidencing loans under the Credit Agreement (included in Exhibit 10.1).

10.3                                       1998 Option Planfor Key Employees of Boyds (incorporated by reference from Exhibit 10.3 ofAmendment No. 1 to Boyds’ Registration Statement on Form S-1, filed on February8, 1999, File No. 333-69535).

10.4                                       1999 Option Planfor Key Employees of Boyds (incorporated by reference from Exhibit 4.3 ofBoyds’ Registration Statement on Form S-8, filed on January 18, 2002, File No.333-77022).

10.5                                       2000 Option Planfor Key Employees of Boyds (incorporated by reference from Exhibit 4.4 ofBoyds’ Registration Statement on Form S-8, filed on January 18, 2002, File No.333-77022).

10.6                                       2001 Option Planfor Key Employees of Boyds (incorporated by reference from Exhibit 4.5 ofBoyds’ Registration Statement on Form S-8, filed on January 18, 2002, File No.333-77022).

10.7                                       Lease Agreement forBoyds’ McSherrystown, Pennsylvania facility (incorporated by reference fromExhibit 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                                       EmploymentAgreement dated January 28, 2000 between Jean-Andre Rougeot and Boyds(incorporated by reference from Exhibit 10.8 of Boyds’ Annual Report on Form10-K, filed on March 28, 2002, File No. 001-14843).

99.1                                       CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2002.*

99.2               Certification Pursuant to 18U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.*

 

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*                 Filed herewith

 

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