BEAR Vermont Teddy Bear (MM)

Vermont Teddy Bear Co.(R) Reports Q3 Earnings: Mother's Day orders increase by 21% SHELBURNE, Vt., May 16 /PRNewswire-FirstCall/ -- The Vermont Teddy Bear Company(R) (NASDAQ:BEAR) today reported net revenues for the three months ended March 31, 2005 of $25.6 million, an increase of approximately 27.4% as compared to net revenues of $20.1 million reported for the three months ended March 31, 2004. The increase to net revenues of approximately $5.5 million in the quarter is primarily attributable to $3.0 million of increased revenue contributed by the PajamaGram gift segment and $2.0 million of increased revenue in the BearGram gift segment and $680,000 of increased revenue in the Calyx & Corolla gift segment as the result of a successful Valentine's Day selling season. The increases to net revenues in the quarter were offset by decreases in Corporate Wholesale, Retail and the TastyGram gift segment. Including a one-time charge to operating expenses of $2.2 million related to the settlement of the New York lease dispute incurred in the quarter ended March 31, 2005, net income available to common stockholders for this third quarter was $221,000, or $.04 per diluted common share, as compared to net income available to common stockholders of $1,389,000 or $.22 per diluted share, for the same quarter last year. In March of 2005, the Company continued its settlement discussions with the Company and on April 27, 2005, the Company entered into final settlement of its litigation relating to a former lease for retail space in New York City. Under the terms of the settlement, the Company paid its former landlord $1.15 million when the settlement agreement was executed, including the release of a $150,000 security deposit previously held by the landlord, and the Company will pay the landlord an additional $1.2 million on or before March 15, 2006, without interest. "I am very pleased with the continued growth in revenues of our Company and the improved profitability for the quarter before taking into account the expense related to the New York lease dispute settlement," said Vermont Teddy Bear President and CEO Elisabeth Robert. "Earnings per share recomputed without the one time charge would have been $.32 per diluted share for the quarter ended March 31 versus $.22 per diluted share for the same quarter last year. The settlement of this dispute, ongoing since December 1998, puts a long-standing litigation finally behind us. This settlement expense is a one time charge that will not affect the future profitability of our Company." Revenues in the first nine months of the fiscal year increased approximately 24.4% to $47.8 million from $38.5 million in the same period last year. The increase is due primarily to the revenues associated with continued growth in the Company's PajamaGram gift segment of $5.2 million in the nine months ended March 31, 2005. The BearGram segment revenues increased by $2.0 million while Calyx & Corolla increased $2.5 million and the TastyGram segment increased $45,000 in the period. The increase in Calyx & Corolla revenues is partially attributed to the fact that the Company realized revenues for Calyx & Corolla during the entire nine months period ending March 31, 2005, whereas during the same nine months period in the prior year, the Company realized Calyx & Corolla revenues only in the seven months of that period that followed the Company's acquisition of Calyx & Corolla on August 29, 2003. The increases were offset by decreases in Corporate Wholesale and Retail. After the one-time charge of $2.2 million related to the settlement of the New York lease dispute, the Company reported net income available to common stockholders in the first nine months of $256,000, or .05 per diluted common share, as compared to $1,571,000, or $.27 per diluted common share, for the first nine months of last year. The Company also reported today a 21% increase to orders booked in the two-week period leading up to Mother's Day. The Company received approximately 134,000 orders for its BearGram, PajamaGram, TastyGram and Calyx & Corolla gift products, as compared to approximately 111,000 orders taken in the same two-week period last year. The additional 23,000 orders included 18,000 or 59% more PajamaGram orders and 6,000 or 15% more BearGram orders. The Company also received approximately 2% fewer Calyx & Corolla orders and 9% fewer TastyGram orders for Mother's Day this year as compared to last. The Vermont Teddy Bear Company's ability to offer consumers personalized last minute gifts continues to set the Company apart from competitors. BearGram orders that included teddy bear outfits personalized with embroidery or artwork and personalized gift tags totaled approximately 33,000 in the two- week period. Consolidated gross margin in the three months ended March 31, 2005 increased to approximately $14.7 million from $11.9 million in the comparable period last year. In the third quarter, the gross margin dollar contribution from the BearGram and PajamaGram segments resulted in higher margins due to increased revenues. Gross margin as a percentage of net revenues decreased to approximately 57.5% from 59.2% last year. Increased shipping and related fuel costs affected the gross margin as a percentage of net revenues in all gift segments. Marketing and selling expenses increased to $8.7 million for the quarter from $7.5 million for the same quarter last year as the Company increased its advertising expenses primarily for the BearGram and PajamaGram segments in the quarter. Marketing and selling costs as a percentage of net revenues, however, decreased to 34.1% percent in the third quarter of fiscal 2005 from 37.5% in the same quarter last year. General and administrative expenses for the third quarter increased to $4.5 million from $1.8 million in the same period last year, including the $2.2 million of one-time expense related to the settlement of the New York lease dispute and $213,000 in related legal fees. General and administrative expenses increased to 17.8% from 8.8% in the same period last year. The New York lease dispute settlement represents 8.4% of net revenues. A Vermont Teddy Bear Company Bear-Gram gift is a popular alternative to sending flowers. Each Bear-Gram gift includes a customized Vermont Teddy Bear accompanied by a personal greeting card and candy treat, all packaged in a colorful gift box with an air hole. Orders are placed by calling 1-800-829- BEAR or by shopping at http://www.vermontteddybear.com/. The PajamaGram Company is a gift delivery service where customers can pamper their loved ones by sending pajamas and spa products in luxurious packaging by calling 1-800-GIVE-PJS or shopping at http://www.pajamagram.com/. The TastyGram Company specializes in the delivery of creatively packaged, deliciously presented gourmet foods and sweets by calling 1-800-82-TASTY or shopping at http://www.tastygram.com/ Calyx & Corolla delivers premium direct-from-the-grower floral gifts through its catalog, by phone at 1-800-800-7788 or online at http://www.calyxandcorolla.com/. The foregoing can be interpreted as including forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested by the statements above. DATASOURCE: Vermont Teddy Bear Company CONTACT: Nicole L'Huillier of Vermont Teddy Bear Company, +1-802-985-1362, Web site: http://www.vermontteddybear.com/ http://www.calyxandcorolla.com/ http://www.tastygram.com/ http://www.pajamagram.com/

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