BEAR Vermont Teddy Bear (MM)

Vermont Teddy Bear Co.(R) Reports Q1 Results: Relocates certain operations of Calyx & Corolla(R) to Vermont SHELBURNE, Vt., Nov. 14 /PRNewswire-FirstCall/ -- The Vermont Teddy Bear Company(R) today reported net revenues of approximately $5.0 million for the three months ended September 30, 2003, the first quarter of its fiscal year 2004. Net revenues were approximately $5.1 million for the three months ended September 30, 2002. The Company also reported a net loss available to common stockholders for the quarter of $183,000, or $.04 per diluted common share, as compared to a net loss available to common stockholders of $87,000, or $.01 per diluted share, for the same quarter last year. The revenue decrease of approximately $100,000 in the first quarter of the fiscal year is attributed to decreases in the Bear-Gram(R) and Retail segments, which were partially offset by revenue increases in the PajamaGram(R), TastyGram(SM), Calyx & Corolla and Corporate/Wholesale segments. The Company completed the acquisition of certain of the net assets and the business of Calyx & Corolla, a direct marketer of premium, direct- from-the-grower flowers and plants, on August 29, 2003. Net revenues in the Bear-Gram segment decreased by $773,000 as a result of the elimination of $366,000 in Bear-Gram advertising costs in the first quarter, the Company's only quarter that does not include a major gift giving holiday. Revenues in the Retail segment decreased by $228,000 as fewer tourists visited the Company's factory store this past summer as compared to the prior year. From the date of acquisition, Calyx & Corolla contributed approximately $643,000 of net revenues. The PajamaGram, TastyGram and Corporate/Wholesale segments together contributed $254,000 of additional revenues compared to the same period last year, albeit as marketing and selling costs in each of these segments decreased year over year. "As we add new sources of revenue such as the PajamaGram and Calyx & Corolla segments, we are reallocating our advertising expenditures between segments and seek to shift more of our ad dollars to holiday periods," said CEO Liz Robert. "Our objective with this strategy is to improve the overall return on our investment in marketing and selling and we have noted some success already. While revenues declined slightly in the first quarter, overall marketing and selling costs as a percentage of net revenues improved to 35.8% from 40.5% in the first quarter of last year." The Company has completed the first phase of its plan to integrate certain operations of Calyx & Corolla into its operations in Shelburne, VT. All of Calyx's California operations were eliminated in September when inventory and order processing and fulfillment operations, and related information technology and equipment were relocated to Vermont. Also in September, the Company terminated Calyx's contract with a third party call center facility and moved all call center operations to the Company's existing call center facilities in Vermont. Since September, the Company has successfully transitioned Calyx's Florida based information technology, accounting and finance, and human resources functions to Vermont, leaving only the merchandising and brand related marketing functions in the downsized Vero Beach, Florida offices. The expenses reported for the relocation of Calyx operations in September total approximately $130,000. "Our extraordinary team of people have worked long hours over the past several months to effectively relocate and transition the operations of our newly acquired floral delivery business to Vermont," continued Robert. "As expected many of these operations fit seamlessly into our existing infrastructure, providing us the opportunity to achieve significant cost savings as we move into our upcoming holiday season." Consolidated gross margin in the first quarter decreased $370,000 to approximately $2.8 million, or 55.5% of net revenues in the three month period ended September 30, 2003, as compared to $3.1 million, or 61.6% in the same period last year. Contributing to lower gross margins were lower net revenues in the Bear-Gram segment and an increase in bear unit manufacturing costs as domestic bear production volume was adjusted to lower Bear-Gram revenues. These decreases were partially offset by improvements to gross margins in the PajamaGram and TastyGram segments due to higher net revenues, higher unit gross margins and improved product mix in these segments. The Company's overall gross margin percent also decreased with the addition of the new Calyx & Corolla segment which reported gross margin for the period at 41.8%. Calyx's gross margin was negatively impacted by $62,000 of expenses attributed to relocating the inventory and fulfillment operations to the Company's Shelburne, VT location. Marketing and selling expenses decreased to approximately $1.8 million, or 35.8% of net revenues for the quarter, from approximately $2.1 million, or 40.5% of net revenues for the same quarter last year. Reductions to advertising costs, call center and customer service costs, PajamaGram and TastyGram merchandising costs, Corporate/Wholesale marketing and selling costs, and retail store operating costs totaled $527,000. These reductions were partially offset by $251,000 of marketing and selling costs added with the new Calyx & Corolla segment, which included $49,000 of relocation expenses. General and administrative expenses for the first quarter increased to 21.5% from 21.3% in the same period last year, primarily due to $19,000 of expenses related to the relocation of Calyx & Corolla's information technology operations to Shelburne, VT. "We are transitioning our Company from being a one-note song with just Vermont Teddy Bear Bear-Grams distributed via direct response radio, to being a symphony with proliferating products sold under multiple brands through multiple distribution channels," continued Robert. "As our vision of becoming the premier gift company takes form, we seek to differentiate ourselves from our competitors by 'delivering only premium gifts with premium service'(SM). We derive focus from our mission of providing the best possible service in an industry highly charged with emotion and requiring the highest degree of personal, caring attention to the smallest of details. Our people consistently go the extra mile with intimate knowledge of how important is the expression of human caring to make sure each customer feels like his or her order is the only order of the day." 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. Contact: Nicole L'Huillier 802-985-1362 THE VERMONT TEDDY BEAR CO., INC. Condensed Consolidated Statements of Income For the Three Months Ended September 30, 2003 and 2002 (Unaudited) Sept 30, 2003 Sept 30, 2002 Net Revenues $4,979,652 $5,083,937 Cost of Goods Sold 2,217,527 1,952,256 Gross Profit 2,762,125 3,131,681 Operating Expenses: Marketing and Selling Expenses 1,780,864 2,056,812 General and Administrative Expenses 1,072,930 1,081,350 2,853,794 3,138,162 Operating Loss (91,669) (6,481) Interest Income 12,025 63,462 Interest Expense (153,236) (134,291) Other Income 488 925 Loss Before Income Taxes (232,392) (76,385) Income Tax Provision 94,531 30,554 Net Loss (137,861) (45,831) Preferred Stock Dividends (31,043) (27,074) Accretion of Original Issue Discount (13,623) (13,623) Net Loss Available to Common Stockholders $(182,527) $(86,528) Basic Net Loss Per Common Share ($0.04) ($0.01) Diluted Net Loss Per Common Share ($0.04) ($0.01) Weighted Average Number of Shares Outstanding 4,864,555 6,859,599 Weighted Average Number of Diluted Common Shares Outstanding 4,864,555 6,859,599 Condensed Consolidated Balance Sheet Information September 30, June 30, September 30, 2003 2003 2002 (unaudited) (unaudited) (unaudited) Cash and Cash Equivalents $1,897,104 $5,168,177 $9,373,498 Current Assets 10,493,544 12,338,471 17,151,144 Total Assets 24,854,263 21,022,425 26,212,179 Current Liabilities 7,028,987 6,109,936 3,619,990 Long Term Debt 7,169,788 6,613,847 5,066,159 Total Liabilities 14,336,119 12,861,127 8,891,243 Series C Preferred 178,512 164,889 630,978 Series D Preferred 2,500,000 0 0 Stockholders' Equity 7,839,632 7,996,409 16,689,958 DATASOURCE: The Vermont Teddy Bear Company CONTACT: Nicole L'Huillier of The Vermont Teddy Bear Company, +1-802- 985-1362, Web site: http://www.vermontteddybear.com/

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