The Boyds Collection Reports Financial Results for 2005 First Quarter
12 Maggio 2005 - 1:45PM
Business Wire
The Boyds Collection, Ltd. (NYSE: FOB) today announced its
financial results for the first quarter, ended March 31, 2005, and
reported the impact of two non-cash charges. First Quarter Results
In the first quarter of 2005, net sales were $18.5 million compared
to $26.3 million in the first quarter of 2004. This 30% decline was
attributable to a decline in wholesale net sales to $15.2 million
in the first quarter of 2005, a 37% decrease from $24.2 million in
the first quarter of 2004. The decline in the wholesale net sales
can be primarily attributed to the 44% decline in wholesale
bookings (cancelable orders) in the fourth quarter of 2004 due to
continued gift and specialty sector weakness and the restructuring
of the Company's sales force in late October of 2004. At the end of
the first quarter, the bookings were down 22% compared to the
year-ago period. Jan L. Murley, Chief Executive Officer, said, "The
trends we are seeing in the business support the rationale of our
comprehensive sales force restructuring, which is designed to best
match our resources with the opportunities in the various tiers of
retailers in our industry. Specifically, as we have implemented the
sales force transition, we have achieved growth in bookings in our
medium-size and larger field accounts and ordering capacity for
smaller accounts has continued to decline. We were, however,
disappointed that certain of our National Accounts struggled in the
first quarter, as weakness they experienced in the 2004 holiday
season caused them to reduce early spring season buy-ins. "Despite
the difficult environment, there were certain bright spots in the
early part of the year, including our recently announced licensing
agreement under which Boyds will create M&M'S(R) Brand
Characters in both plush and resin products. Building on our
successful licensing agreement with NASCAR, this agreement marks an
exciting next step in our efforts to align Boyds with premier
brands in order to broaden our consumer appeal and retail
presence." The Company expects to begin delivering M&M/Boyds
products to stores late in the year. Net sales in the retail
segment increased to $3.3 million, or 57%, in the first quarter of
2005 from $2.1 million in the first quarter of 2004. Sales in the
first quarter of 2005 include the contribution of the second Boyds
Bear Country(TM) in Pigeon Forge, Tennessee, which opened in
November 2004. On a comparable store basis, retail sales declined
10% versus the year-ago quarter, reflecting the impact of poor
weather and lower tourist traffic in Gettysburg. Ms. Murley
continued, "We continue to focus on improving sales performance
from our Gettysburg store and in both locations we have increased
exclusive product offerings and family and collector-focused
marketing programs and events in order to maximize both tourist and
local traffic. The first quarter represents approximately only 10%
of annual retail sales, so we will intensify these efforts as the
year progresses to capitalize on retail opportunities in the higher
retail sales quarters." The Company reported a net loss of $77.3
million, or a loss of $1.31 per diluted share, in the first quarter
of 2005 compared to net income of $2.8 million, or $0.05 per
diluted share, in the comparable 2004 period. The decline in net
income was due primarily to the $74.2 million impact of two
non-cash charges discussed below, lower sales, a $1.4 million
increase in the charge for inventory obsolescence, $1.1 million in
increased interest charges and amortization of deferred financing
costs, and $0.3 million of costs associated with the operation of
the Pigeon Forge store. Excluding the impact of the two non-cash
charges described below, net loss would have been $3.1 million.
Cash used in operating activities in the three months of 2005 was
approximately $5.9 million compared to $5.4 million in cash
provided by operations in the year-ago period. In the three months
of 2005, the Company had a net increase of approximately $12.5
million of debt and invested approximately $0.4 million of cash in
property and equipment. In the three months of 2004, the Company
repaid approximately $3.5 million of debt and invested
approximately $1.9 of cash, of which $1.6 million related to the
building of Boyds Bear Country(TM)-Pigeon Forge. Ms. Murley
concluded, "Our focus at Boyds is to most effectively utilize our
resources in order to expand both our wholesale business and the
sales performance in our stores, while maintaining vigilant
attention to our cost structure. In this first quarter, we have
initiated plans which we would expect to result in an additional
reduction of approximately $4 million of costs in the calendar year
2005." Non-Cash Charges The Company also announced today that it
has recorded the impacts of two non-cash charges totaling $74.2
million. These charges include an increase in the Company's
valuation allowance against its deferred tax assets of
approximately $71.6 million and a $2.6 million write down of
goodwill. Before the additional valuation allowance, the Company
had deferred tax assets of approximately $164.9 million as of March
31, 2005, consisting of tax carryforwards that will expire from
2023 until the end of 2033. The recovery of the deferred income tax
assets is contingent upon applicable tax laws and future taxable
income. In the first quarter of 2005, the Company recorded tax
expense of $71.6 million as a result of recording an additional
valuation allowance against its deferred tax assets. This valuation
allowance results from reduced estimates by management of future
taxable income in each of the federal, state and foreign tax
jurisdictions during the carry forward period and the conclusion by
management that it is no longer more likely than not that this
amount of deferred tax assets will be realized under the criteria
of SFAS No. 109, Accounting for Income Taxes. The Company will
continue to evaluate the need for further valuation allowances
under this criteria. The amount of the deferred tax asset
considered realizable could be reduced in the near term if
estimates of future taxable income in each of the federal, state,
and foreign tax jurisdictions, during the carry forward period are
further reduced. Such further adjustments could be significant. As
a result of the Company's annual impairment test completed in the
first quarter of 2005, as required by SFAS No. 142, Goodwill and
Other Intangible Assets, the Company recorded an impairment loss of
$2.6 million to reduce the carrying value of its goodwill to zero.
The goodwill that was carried on the Company's books related to the
acquisitions of J&T Design Imaginations (2002) and HC Accents
(1998). The impairment was due to the wholesale segment's operating
performance. About The Boyds Collection The Boyds Collection, Ltd.
is a leading designer and manufacturer of unique, whimsical and
"Folksy With Attitude(SM)" gifts and collectibles, known for their
high quality and affordable pricing. The Company sells its products
through a large network of retailers, as well as at Boyds Bear
Country(TM) in Gettysburg, Pennsylvania and Pigeon Forge, Tennessee
-- "The world's most humongous teddy bear store." Founded in 1979,
the Company was acquired by Kohlberg Kravis Roberts & Co. (KKR)
in 1998 and is traded on the NYSE under the symbol FOB. Information
about Boyds can be found at www.boydsstuff.com. Any conclusions or
expectations drawn from the statements in this press release
concerning matters that are not historical corporate financial
results are "forward-looking statements" that involve risks and
uncertainties. Sales patterns have historically varied in number,
mix and timing, and there can be no assurance that the sales
estimates will be accurate or that the sales trend year-to-date
will continue. Other factors, including retail inventory levels,
consumer demand, product development efforts, completion of third
party product manufacturing, dealer reorders and order
cancellations, control of operating expenses, corporate cash flow
application, and the industry, general economic, regulatory and
international trade conditions, can significantly impact the
Company's estimated and actual sales and earnings. Actual results
may vary materially from estimates and other forward-looking
statements and the assumptions on which they are based. The Company
undertakes no obligation to update or publish in the future any
forward-looking statements. Webcast Information: The Boyds
Collection has scheduled a live webcast today to discuss its
financial results for the 2005 first quarter. To access the
webcast, please visit the Investor Relations section of
www.boydsstuff.com. The webcast will begin at 9:30 a.m. (ET) today.
A replay of the webcast will be archived on the site through 8:00
pm (ET) on Thursday, May 26, 2005 -- TABLES FOLLOW -- -0- *T THE
BOYDS COLLECTION, LTD. CONDENSED STATEMENT OF OPERATIONS AND
EARNINGS PER SHARE DISCLOSURES (in millions, except per share
amounts) (unaudited) Three Months Ended March 31, 2004 2005 ------
------- Net Sales Wholesale $24.2 $15.2 Retail 2.1 3.3 ------
------- Total 26.3 18.5 Gross Profit 15.9 8.4 Selling, General
& Administrative Expenses 9.9 10.7 Goodwill Impairment - 2.6
------ ------- Income (Loss) from Operations 6.0 (4.9) Other
(Expense) (0.1) (0.1) Interest Expense - Net 1.1 2.2 ------ -------
Income (Loss) before Provision for Income Taxes and Extraordinary
Items 4.8 (7.2) Provision for Income Taxes 2.0 70.1 ------ -------
Net Income (Loss) $2.8 $(77.3) ====== ======= Net Income (Loss) per
Share $0.05 $(1.31) Weighted Average Shares Outstanding 59.0 59.0
Net Income (Loss) per Share, assuming dilution $0.05 $(1.31)
Weighted Average Shares Outstanding, assuming dilution 59.0 59.1 *T
-0- *T THE BOYDS COLLECTION, LTD. CONDENSED CONSOLIDATED BALANCE
SHEETS As of December 31, 2004 and March 31, 2005 (unaudited)
December 31, March 31, 2004 2005 ----------- --------- (in
thousands) ASSETS CURRENT ASSETS: Cash and cash equivalents $354
$3,157 Accounts receivable, net 8,581 9,587 Inventory - primarily
finished goods, net 13,462 15,325 Inventory in transit 2,666 320
Other current assets 854 828 Income taxes receivable - 647 Deferred
income taxes 19,485 19,485 -------- --------- Total current assets
45,402 49,349 PROPERTY AND EQUIPMENT - NET 35,081 34,910 OTHER
ASSETS: Deferred debt issuance costs 645 4,068 Deferred tax asset
145,435 74,314 Other assets 2,997 416 ---------- --------- Total
other assets 149,077 78,798 ----------- --------- TOTAL ASSETS
$229,560 $163,057 =========== ========= LIABILITIES AND
STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $4,420
$2,518 Accrued expenses 5,708 4,669 Income tax payable 474 -
Interest payable 570 2,026 --------- --------- Total current
liabilities 11,172 9,213 LONG-TERM DEBT 75,142 87,592 TOTAL
STOCKHOLDERS' EQUITY 143,246 66,252 ---------- --------- TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY $229,560 $163,057 ===========
========= *T
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