BOYDS COLLECTION LTD - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
COMMISSION FILE NUMBER 001-14843
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THE BOYDS COLLECTION, LTD.

(Exact Name of Registrant as Specified in its Charter)

MARYLAND 52-1418730
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

350 SOUTH STREET, MCSHERRYSTOWN, PENNSYLVANIA 17344
(Address of Principal Executive Office) (Zip Code)

(717) 633-9898
(Registrant's Telephone Number, Including Area Code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

The aggregate market value of the Registrant's Common Stock held by
non-affiliates (assuming solely for the purpose of this calculation that
directors and officers are affiliates) of the Registrant, based on the reported
last sale price of such stock on the New York Stock Exchange on March 21, 2002,
was approximately $102,438,760.

As of March 21, 2002, the number of shares of the Registrant's Common Stock
outstanding was 59,061,560.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement relating to the Registrant's
2002 Annual Meeting of Stockholders which is expected to be filed within
120 days following the end of the fiscal year covered by this report, are
incorporated by reference into Part III hereof.

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TABLE OF CONTENTS

PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

The Boyds Collection, Ltd. ("Boyds") is a leading designer, importer and
distributor of high-quality, hand-crafted collectibles and other specialty
giftware products. Boyds sells its products through an extensive network of
approximately 18,000 accounts comprised of independent gift and collectibles
retailers, premier department stores, selected catalogue retailers and other
electronic and retail channels. Boyds imports substantially all of its products
from manufacturers in China through buying agencies.

HISTORY

Boyds was founded in 1979 by Gary and Justina Lowenthal as a small antique
business in Boyds, Maryland. By 1984, Boyds had begun to reproduce and sell
miniature houses, duck decoys and merino wool teddy bears to selected retail
outlets. In 1984, Boyds also introduced its first major plush product, a unique,
fully-jointed wool teddy bear named MATTHEW-TM-, and the GNOMES HOMES-TM-, a
small collection of hand-sculpted miniature cast resin houses. Boyds relocated
from Maryland to southern Pennsylvania in 1987 and its product line was expanded
to include other plush animals and related accessories including miniature
clothes, furniture and ornaments. Boyds began distributing its plush animal
lines to department stores and gift retailers, opting against selling to mass
merchandisers, major discount stores and toy chains. In 1993, Boyds began
selling cast resin figurines with the introduction of its BEARSTONES-TM- line.
More recent introductions of products include porcelain dolls in 1997 and the
resin villages in 2000. In 1998, Boyds acquired H.C. Accents, a home decor
company and in 2001, J & T Designs, a Christmas gift company. In 2001, Boyds
began construction of a museum and store facility in Gettysburg, Pennsylvania.
The facility, which is scheduled to be placed in operation by September 2002,
will serve as a tourist attraction that will help expand brand awareness. In
addition, the facility will function as a sales channel for visitors.

BUSINESS SEGMENTS

Boyds has determined that it operates in one segment, collectibles and
giftware. In addition, less than 3% of total revenue is derived from customers
outside the United States and almost all long lived assets are located in the
United States. No customer represents more than 10% of total revenue.

PRODUCT LINES

Since 1982, Boyds' product lines have expanded from plush bears to include
other plush animals such as hares, moose and cats, as well as resin figurines,
resin houses, porcelain dolls and boxes and related clothing and accessories, as
described below.

PLUSH ANIMALS

Boyds began selling its plush animals in 1982. The plush animal category
consists of both dressed and non-dressed animals, most of which are fully
jointed with sewn-in joints for arms, legs and heads. Today, the plush animal
category has grown to encompass over 400 different items ranging from 2 1/2"
miniatures to 40" large animals.

Boyds' non-dressed plush animal lines include the HUGGLE-FLUFFS-TM-, the
ARTISAN SERIES-TM-, THE MOHAIR BEARS-TM-, J.B. BEAN & ASSOCIATES-TM-, the
ARCHIVE COLLECTION-TM- and ANGELS AND FRIENDS-TM- ornaments. The largest
revenue-generating line in this plush category is Boyds' J.B. BEAN &
ASSOCIATES-TM-, featuring fully-jointed bears, hares, moose, lambs and other
animals.

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Introduced in 1992, the popularity of Boyds' T.J.'S BEST DRESSED-TM-, line,
characterized by fully jointed bears, cats, moose and other animals dressed in
stylish, hand-sewn outfits, has helped create additional brand awareness for
Boyds.

Retail prices for the plush animals generally range from $4 to $95. Animals
in the plush animal category are made of various materials with outer coverings
ranging from acrylic plush to custom-dyed chenille and wool and interiors filled
with plastic pellets for the beanbag animals and 100% acrylic fiberfill for the
other animals.

RESIN FIGURINES

Boyds' resin figurine category currently consists of the main collection,
BEARSTONES-TM-, and sub-collections, FOLKSTONES-TM-, DOLLSTONES-TM-, CHARMING
ANGELS-TM-, SHOEBOX BEARS-TM- and WEE FOLKSTONES-TM-. Together, these
categories include over 300 styles of finely detailed, hand-painted miniature
cast resin bears, other animals and people.

Boyds introduced the BEARSTONES-TM- in 1993 with ten different styles. Since
its introduction, Boyds has expanded the offerings to include additional
figurines, resin jewelry, ornaments, waterballs, SHOEBOX BEARS-TM-, votive
holders, ceramics, picture frames, and desk accessories.

The FOLKSTONES-TM- line of products, introduced in 1994, includes
non-traditional, whimsical figurines of traditional folk art themes, other
figurines, jewelry, ornaments, waterballs, WEE FOLKSTONES-TM- and votive
holders.

The DOLLSTONES-TM- line of products, introduced in 1995, is based on
nostalgic themes and includes figurines of children depicted with animals,
waterballs, votive holders and musicals.

Pieces in the resin figurine category are generally priced between $9 and
$60 at retail. Each figurine is inscribed with Boyds' distinctive symbol of
authenticity, a hidden bear paw, and a bottom stamp indicating the name, edition
and piece number. Many figurines contain famous quotes which help the customers
identify with the piece. The items are packaged individually with a certificate
of authenticity describing the product.

DOLLS

In the fall of 1997, Boyds introduced limited edition porcelain dolls which
Boyds continues to expand. The dolls range in size from 12 inches to 16 inches
in height and are generally priced from $15 to $80 at retail.

VILLAGES

In 2000, Boyds introduced its first village, Boydstown, which has been
followed by Kringles Village and Boydsenbeary Acres. The villages are made from
resin and are whimsical reproductions of houses and other buildings. They are
generally priced between $20 and $40 at retail.

OTHER PRODUCTS

In 1998 Boyds acquired H. C. Accents, a home decor giftware company, and in
2001, Boyds acquired J&T Designs, a designer and distributor of Christmas gift
products, expanding both its customer base and product offerings. Boyds sells
over 300 additional items ranging from miniature furniture, wooden accessories
and glasses, through cast iron products, resin accessories, to home decor.
Various printed and promotional materials are sold to support Boyds product
lines. Boyds also sells products to its collectors club members (FRIENDS OF
BOYDS).

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NEW PRODUCT INTRODUCTIONS

Boyds continually evaluates new product ideas and regularly introduces new
product lines that maintain Boyds' whimsical and "Folksy with Attitude" themes.
During fiscal 2001, Boyds concentrated on broadening the giftability of its core
resin figurine and plush animal products. Boyds also introduced the following
new lines:

- HUGGLE-FLUFFS-TM-, a new line of soft, fluffy plush pals for the young'nz
that feature embroidered bibs and internal rattles.

- THE CHARMING ANGELS COLLECTION-TM-, a line of renaissance-inspired resin
angels with their own 24-karat-gold-plated charms.

- J&T IMAGINATIONS-TM-, a new line of whimsical Santas with resin faces,
resulting from the 2001 acquisition of J&T Designs.

- WILLS CREEK-TM-, a new line of resin men's gifts.

PRODUCT DESIGN AND DEVELOPMENT

Boyds' creative design team works with its manufacturers, primarily in the
People's Republic of China, to create prototypes and refine the product's
appearance for review by Boyds. Boyds also works with its buying agencies and
manufacturers in order to ensure the product can be produced at an acceptable
cost per unit, without compromising quality, given a certain level of
production.

INTELLECTUAL PROPERTY

TRADEMARKS.

Boyds has obtained 16 United States trademark registrations for trademarks
and logos related to its resin figurines and plush animals. These registrations
allow Boyds to use on an exclusive basis these trademarks and logos in the
United States in connection with its products. If Boyds continues to use such
trademarks and logos and makes timely filings with, and pays all required fees
to, the United States Patent and Trademark Office, its trademark registrations
can exist in perpetuity. Boyds also has common-law trademark rights to the
extent it uses unregistered names and logos on its various products. The
strength and scope of these rights is determined by the geographic extent and
duration of their use. Additionally, to the extent that the packaging and
overall visual impact of Boyds' products is inherently distinctive or has
acquired distinctiveness through sales in the marketplace, Boyds has proprietary
rights in such "trade dress" of its products.

COPYRIGHTS.

Boyds has secured more than 600 copyright registrations for its products
with the United States Copyright Office. Boyds may enforce these rights in
United States courts with regard to infringements occurring in the United States
and also, to varying extents, in foreign jurisdictions with regard to
infringements occurring outside the United States. In addition, Boyds has
copyrights in the original expression contained in other products that it has
created, whether or not those copyrights have been registered. In all events,
Boyds' copyright in its products is limited in scope to the original, creative
expression embodied in them and does not extend to elements drawn from public
sources or to functional elements. For all products created by or on behalf of
Boyds since its founding date, the U.S. copyright currently runs for a term of
95 years from the date of their creation.

LICENSES.

Boyds licenses its product designs to other companies for products including
home textiles, infant clothing and wallpaper. The licensing contracts range from
2 to 5 years in duration. Boyds believes such

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licensing arrangements provide a significant benefit to Boyds business by
generating royalty income and increasing consumer awareness of Boyds' designs
and brand image.

Boyds protects its intellectual property rights, both through policing any
potential infringement by third parties and registering such rights, when
appropriate, with applicable government authorities. Boyds believes that its
trademarks and other proprietary rights are material to its success and
competitive position.

SOURCING OF PRODUCTS

Boyds coordinates its production and cooperative development efforts
primarily through two buying agencies with whom it has established long-term
business relationships. These buying agencies perform a number of functions for
Boyds, including collaborating in its product design and development process,
identifying suitable manufacturers for its products and supervising its
manufacturers to assure the proper quality and timing of Boyds' orders.

Boyds does not own or operate any manufacturing facilities and imports most
of its products from manufacturers in the Pacific Rim, primarily The People's
Republic of China. Boyds' ability to import products and thereby satisfy
customer orders is affected by the availability of, and demand for, quality
production capacity abroad. Boyds competes with other importers of collectibles
for the limited number of foreign manufacturing sources which can produce
detailed, high-quality products at affordable prices. Boyds is subject to the
following risks inherent in foreign manufacturing: the laws and policies of the
United States affecting the importation of goods (including duties, quotas and
taxes); restrictive actions by foreign governments; fluctuations in currency
exchange rates; nationalizations; and foreign trade and tax laws.

Substantially all of Boyds' products are subject to customs duties and
regulations pertaining to the importation of goods, including requirements for
the marking of certain information regarding the country of origin on Boyds'
products. The United States and the foreign countries in which Boyds' products
are manufactured may, from time to time, impose new quotas, duties, tariffs or
other charges or restrictions, or adjust presently prevailing quotas, duty or
tariff levels, which could adversely affect Boyds' financial condition or
results of operations or its ability to continue to import products at current
or increased levels. Boyds cannot predict what regulatory changes may occur or
the type or amount of any possible financial impact on Boyds in the future.

Although Boyds believes that the loss of either of its two primary buying
agencies would have a short-term material adverse effect on its financial
condition and results of operations, it believes that alternative buying
agencies would be available in the long-term and such alternative buying
agencies would be able to work directly with Boyds' manufacturers.

Boyds' domestic products are shipped by ocean freight to the United States
and then by truck to Boyds' 209,000 square-foot distribution center in
McSherrystown, Pennsylvania. Boyds ships the majority of its products to its
nationwide retailer network via United Parcel Service.

DISTRIBUTION NETWORK AND CUSTOMERS

Boyds has a large national distribution network, which includes
approximately 18,000 independent retail gift and collectibles accounts, high-end
department stores and selected catalogue retailers, representing approximately
24,000 individual retail outlets. Boyds' resin figurine product line is sold
through a network of authorized dealers consisting of approximately 7,300
accounts, selected primarily from Boyds' plush-only dealers. The top ten
accounts comprised approximately 16.6% of net sales during fiscal 2001.

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Boyds believes it has very low annual customer account turnover among its
resin dealers and normal turnover for its other dealers. Turnover among
non-resin dealers occurs primarily in small accounts, which become inactive due
to ownership changes, poor credit or lack of commitment to Boyds' products.
Accounts which became inactive during fiscal 2001 represented approximately 5.4%
of Boyds' fiscal 2000 net sales. Boyds generally does not offer dating terms or
volume discounts.

SALES & MARKETING OF PRODUCTS

Boyds sends catalogues and promotional mailings to all retailers at least
twice a year for its spring and fall product offerings. Boyds generates its
order volume through its team of telemarketers and internal sales personnel,
catalogue mailings to its retailers and from trade show sales. Boyds leases
showroom space in Atlanta and Dallas. Approximately 40% of orders are taken
between November and April, while approximately 60% of orders are placed between
May and October in anticipation of the holiday season.

Each major component of Boyds' account base, including resin figurine
dealers, department stores, catalogue retailers and general accounts, is managed
by a different group of sales professionals.

COMPETITION WITH PRODUCERS OF COLLECTIBLES AND GIFTWARE PRODUCTS

Boyds competes generally for the disposable income of consumers and, in
particular, with other producers of fine quality collectibles, specialty
giftware and home decorative accessory products. The collectibles area, in
particular, is affected by changing consumer tastes and interests. The giftware
and collectibles industries are highly competitive, with a large number of both
large and small participants. Boyds' competitors distribute their products
through independent gift retailers, department stores, mass merchandisers and
catalogue retailers or through direct response marketing. Boyds believes the
principal elements of competition in the giftware and collectibles industries
are product design and quality, product and brand name loyalty, product display
and price. Boyds believes its competitive position is enhanced by a variety of
factors, including the innovativeness, quality and enduring themes of Boyds'
products, its reputation among retailers and consumers, its in-house design
expertise, its sourcing and marketing capabilities and the pricing of its
products. Some of Boyds' competitors, however, are part of large, diversified
companies having greater financial resources and a wider range of products than
Boyds. In addition, this industry is subject to intense competition from small
and large companies, each having the ability to create unique, appealing
products at relatively low entry cost.

EMPLOYEES

Boyds currently employs a total of 269 full time individuals, 239 of whom
are located in McSherrystown, Pennsylvania. None of these employees are
represented by labor unions. Boyds also uses contract labor to work at the
various trade shows around the nation.

ITEM 2. PROPERTIES

SHOWROOMS, WAREHOUSING, DISTRIBUTION FACILITIES AND MUSEUM

Boyds leases approximately 209,000 square feet of distribution and warehouse
space in McSherrystown, Pennsylvania. Boyds' existing distribution center
includes two loading docks, two automated conveyor systems and 180,000 square
feet of storage area, which are in good operating condition. Boyds' lease
expires in 2009. Boyds completed the building of an additional 54,000 square
feet of leased warehouse space during fiscal 1999. Attached to the warehouse
area is Boyds' 24,000 square-foot corporate headquarters which is subject to the
same lease provisions. Boyds also leases office space in Illinois and showroom
space in Atlanta and Dallas. Management believes that its current facilities are
suitable and adequate for Boyds' planned growth needs for the next several
years, and vacant land is available on-site for additional expansion should it
be necessary.

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Boyds also owns 128.2 acres in Cumberland Township, Adams County, PA.
Construction is currently underway on an approximately 100,000 square foot
museum and store facility scheduled to open in September, 2002.

DEVELOPMENT AND UPGRADES OF MANAGEMENT INFORMATION SYSTEMS

Boyds' management information systems have been developed through the
modification of off-the-shelf software programs to serve Boyds' current needs.
Boyds launched its official company website on November 15, 1999 at
WWW.BOYDSSTUFF.COM. which, among other things, permits interested collectors to
sign-up for club membership online. On February 14, 2001, Boyds implemented its
B2B website which permits Boyds' dealers to place their orders, review order
status, check their accounts and conduct other related matters via a
"business-to-business" link.

During 2001, Boyds invested in the implementation of a sales interface
system that was expected to improve sales force efficiency and effectiveness.
Due to implementation difficulties during the fourth quarter of 2001, the system
was reduced to its net realizable value.

ITEM 3. LEGAL PROCEEDINGS

Boyds is involved in various legal proceedings, claims and governmental
audits in the ordinary course of business. In the opinion of management, the
ultimate disposition of these proceedings, claims and audits will not have a
material adverse effect on the financial position or results of operations of
Boyds.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Since Boyds' initial public offering of 16,000,000 shares of its common
stock, par value $.0001 per share ("Common Stock") on March 4, 1999, Boyds'
Common Stock has been listed on the New York Stock Exchange ("NYSE") under the
symbol "FOB". To date, the NYSE has been the principal market for the exchange
of the freely tradable shares of Boyds' Common Stock. The following table shows,
on a per share basis, the high and low prices for the Boyds' Common Stock for
the periods indicated as reported on the New York Stock Exchange:

As of March 21, 2002, the approximate number of holders of record of Boyds'
Common Stock 588. Since its initial public offering in 1999, Boyds has not paid
cash dividends on its Common Stock; however, Boyds may consider paying cash
dividends in the future. Boyds intends to retain its earnings to finance the
development and growth of its business and to service company debt. Currently
Boyds is subject to substantial restrictions that limit its ability to declare
and pay cash dividends on its Common Stock under certain covenants contained in
Boyds' debt agreements.

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ITEM 6. SELECTED FINANCIAL DATA
FIVE YEAR FINANCIAL SUMMARY

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Note: Certain reclassifications have been made to the prior years' amounts to
conform to the fiscal 2001 presentation.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis of the results of operations for the
three fiscal years ended December 31, 1999, 2000, and 2001, respectively, has
been derived from and should be read in conjunction with the consolidated
financial statements, including the notes thereto.

GENERAL

Boyds is a leading domestic designer, importer and distributor of branded,
high-quality, hand-crafted collectibles and other specialty giftware products.
Boyds sells its products through an extensive network of approximately 18,000
accounts comprised of independent gift and collectibles retailers, premier
department stores, selected catalogue retailers and other electronic and retail
channels.

Boyds' products include plush animals, resin figurines, porcelain dolls,
villages and others. The following table sets forth Boyds' plush animals, resin
figurines, dolls, villages and other product sales and their percentage of
Boyds' net sales:

The most important categories within the plush are the dressed animals in
the T. J'S. BEST DRESSED-TM- collection, introduced in 1992, and the other
custom-designed plush animals. Boyds began selling non-dressed plush animals in
1982 and has since introduced product collections which currently include BEARS
IN THE ATTIC-TM-, J. B. BEAN & ASSOCIATES-TM-, the ARCHIVE COLLECTION-TM-,
MOHAIR BEARS-TM- AND HUGGLE-FLUFFS-TM-.

The major figurine product line within the resin figurine category is
BEARSTONES-TM- which Boyds introduced in late 1993. In early 1994, Boyds
introduced another resin figurine line known as FOLKSTONES-TM-, followed by
DOLLSTONES-TM- in late 1995. Boyds also established a network of dealers in
1994, selected primarily from Boyds' plush-only dealers, that were authorized to
carry Boyds' resin figurine product lines. These dealers currently number 7245
accounts.

The porcelain doll line was launched in the fall of 1997. This category has
now expanded and offers a range of dolls from 12 inches to 16 inches.

The village line was launched in January 2000 and consists of resin houses
and related "village" accessories.

Included in other sales are collectors club sales which are generated from
annual dues collected directly from consumers who become members of Boyds'
collectors club, THE LOYAL ORDER OF FRIENDS OF BOYDS, which began in July 1996
and currently has approximately 45,000 paying members. This category also
includes sales from H. C. Accents, a home decor company acquired by Boyds in
October, 1998, and royalty income generated by licensing contracts.

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Unlike many of its competitors, Boyds does not utilize a network of internal
or independent commissioned sales personnel, but relies instead on an in-house
team of non-commissioned telemarketing and sales professionals. In addition,
Boyds exhibits its products at many national and regional tradeshows where
orders are taken by Boyds' employees. Boyds operates almost exclusively out of a
leased office/distribution facility in McSherrystown, Pennsylvania which it
believes provides attractive labor and rental costs.

CRITICAL ACCOUNTING POLICIES

Preparing the financial statements in conformity with generally accepted
accounting principles requires that management make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Predicating future events is inherently an imprecise activity and as such
requires the use of judgment. Actual results may vary from estimates in amounts
that may be material to the financial statements. Management believes that the
estimates and assumptions used in connection with the amounts reported in Boyds'
financial statements and related disclosures are reasonable and made in good
faith.

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

- Sales revenue, net of returns and discounts, is recognized upon shipment
of the items, when title passes to the customer. The most significant
financial statement line item, net sales, represents transactions
consistent with Boyds' primary business focus and meet the criteria of
Staff Accounting Bulletin No. 101, including the transfer of title,
probable collectability, identified customer and no recourse.

- Accounts receivable are presented at estimated net realizable value. Boyds
uses estimates in determining the collectibility of its accounts
receivable and must rely on its evaluation of historical bad debts,
customer credit ratings, current economic trends and changes in customer
payment terms to arrive at appropriate reserves. Material differences may
result in the amount and timing of earnings if actual experience differs
significantly from management estimates.

- Inventories are stated at the lower of cost or market. Cost is determined
under the first-in, first-out method of accounting. Boyds records
adjustments to the value of this inventory in situations where it appears
that Boyds will not be able to recover the cost of the product. This lower
of cost or market analysis is based on Boyds' estimate of forecasted
demand by customer by product. A decrease in product demand due to
changing customer tastes, consumer buying patterns or loss of shelf space
to competitors could significantly impact Boyds' evaluation of its excess
and obsolete inventories.

- Under the requirements of Statement of Financial Accounting Standards
(SFAS) No. 121, Boyds assessed the potential impairment of identifiable
intangibles, long-lived assets and acquired goodwill whenever events or
changes in circumstances indicated that the carrying value may not be
recoverable. In performing this evaluation, the Company evaluated current
and future economic and business trends to develop business forecasts of
future performance and related cash flows. Such estimates require the use
of judgment and numerous subjective assumptions. On January 1, 2002, Boyds
adopted SFAS No. 142, "Goodwill and Other Intangible Assets," and

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will be required to analyze its goodwill for impairment using a new
methodology, during the first six months of fiscal 2002, and on a periodic
basis thereafter.

Boyds' accounting policies are more fully described in Item 8--Financial
Statements and Supplementary Data, Notes to the Consolidated Financial
Statements, Note 2.

FACTORS WHICH AFFECT BOYDS' RESULTS OF OPERATIONS

SEASONALITY

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

FOREIGN EXCHANGE

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

Boyds imports most of its products from manufacturers in China. Boyds' costs
could be adversely affected on a short-term basis if the Chinese renminbi
appreciates significantly relative to the United States dollar. Conversely, its
costs would be favorably affected on a short-term basis if the Chinese renminbi
depreciates significantly relative to the United States dollar. Although Boyds
generally pays for its products in United States dollars, the cost of such
products fluctuates with the value of the Chinese renminbi. In the future, Boyds
may, from time to time, enter into foreign exchange contracts or prepay
inventory purchases as a partial hedge against currency fluctuations.
Differences between the amounts of such contracts and costs of specific material
purchases are included in inventory and cost of sales. Boyds intends to manage
foreign exchange risks to the extent appropriate.

ACQUISITION

On April 25, 2001, Boyds acquired all of the issued and outstanding shares
of capital stock of J & T Design ("J & T"). J & T is a designer and distributor
of Christmas gift products. J & T's results from operations are included in
Boyds' consolidated statement of income subsequent to April 25, 2001. The
aggregate purchase price was approximately $0.5 million paid in cash. The
purchase price was assigned to the acquired assets, primarily inventory and
accounts receivable, based on their fair market values. In addition, Boyds has
recorded goodwill of approximately $0.5 million, included in other assets,
related to the excess of the purchase price over the fair value of assets
acquired which is being amortized using the straight line method over 20 years
until the implementation of SFAS 142. The inclusion of this acquisition within
the consolidated statements presented had an immaterial impact on Boyds' pro
forma results.

RESULTS OF OPERATIONS

Net sales consist of sales of our products, net of sales discounts, product
returns and allowances, collectors club sales generated from members of Boyds'
collectors club and royalty income from licenses held by Boyds. Sales are
primarily made on a purchase order basis. Revenue associated with sales is
recognized when products are shipped to the customer.

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

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

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The following table sets forth the components of net income as a percentage
of net sales for the periods indicated:

FISCAL YEAR ENDED DECEMBER 31, 2001 VS. FISCAL YEAR ENDED DECEMBER 31, 2000

NET SALES--Net sales declined $30.6 million, or 16.6%, to $153.5 million in
2001 from $184.0 million for 2000. Net sales of Boyds' plush products decreased
$10.4 million, or 11.5%, resin product sales decreased $13.5 million, or 23.9%,
doll product sales decreased $4.6 million, or 48.7%, village product sales
decreased $0.1 million, or 2.1%, and other product sales decreased
$2.0 million, or 8.8%. The sales decrease for the year ended December 31, 2001
was primarily due to the continuing reduction in order volume from our
retailers. During 2001, our retailers have faced an increasingly challenging
environment that has resulted in conservative product purchases. In addition, we
have strategically eliminated certain resin product categories. These decreases
were only partially offset by the launch of our stationery product line and the
growth of our home decor product line.

GROSS PROFIT--Gross profit declined $22.9 million, or 20.2%, to
$90.4 million in 2001 from $113.3 million for 2000. Gross profit as a percent of
sales declined to 58.9% for 2001 from 61.6% for 2000. The dollar decline was
primarily attributable to the respective declines in sales volume and to a
provision for slow moving inventory of $6.0 million, representing 3.9% of
current year sales, taken in the fourth quarter as a result of weakening
economic conditions, causing retailers to reduce inventory levels.

SELLING, GENERAL & ADMINISTRATIVE EXPENSES (SG&A)--SG&A increased
$2.6 million, or 9.9%, to $28.5 million in 2001 from $25.9 million for 2000.
SG&A as a percent of sales increased to 18.5% for 2001 from 14.1% for the same
period in 2000. The dollar increase for the year was primarily due to the
impairment of assets of $2.1 million during the fourth quarter and increased
expenditure on new product development, whose sales impact will not be felt
until 2002. The increase in the percent of sales was primarily due to the
decrease in sales and the impairment of assets.

INCOME FROM OPERATIONS--Income from operations declined $23.4 million, or
26.8%, to $64.0 million in 2001 from $87.4 million for 2000. Income from
operations as a percent of sales declined to 41.7% for the year from 47.5% for
the same period in 2000. The dollar decline and the decline in the percent of
sales were primarily attributable to the decline in sales volume and the
$6.0 million charge for slow moving inventory in the fourth quarter as a result
of weakening economic conditions, causing retailers to reduce inventory levels.

TOTAL INTEREST EXPENSE--Total interest expense declined $7.0 million, or
36.0%, to $12.5 million in 2001 from $19.5 million for 2000. Total interest
expense as a percent of sales declined to 8.1% for the

11

year from 10.6% for 2000. The dollar decline and the decline in the percent of
sales were due to the reduction of debt from excess cash and a decline in
interest rates.

INCOME TAXES--Income taxes declined $14.0 million, or 53.6%, to
$12.2 million in 2001 from $26.2 million for 2000. Income taxes as a percent of
sales declined to 7.9% for the year from 14.2% for the same period in 2000. The
dollar decline and the decline in the percent of sales were due primarily to the
decline in sales volume and to the impact of a change in the Pennsylvania State
Corporation Income Tax regulations, which resulted in an increase in the
company's deferred tax asset and a reduction in income tax expense.

EXTRAORDINARY ITEMS--The $0.7 million charge, net of tax, relates to the
write-off of deferred debt issuance costs arising from the early paydown of long
term debt. The $0.9 million loss, net of tax, relates to the repurchase of
Boyds' bonds above par.

FISCAL YEAR ENDED DECEMBER 31, 2000 VS. FISCAL YEAR ENDED DECEMBER 31, 1999

NET SALES--Net sales decreased $27.1 million, or 12.8%, to $184.0 million in
2000 from $211.1 million in 1999. Sales of Boyds' plush products decreased
$20.2 million, or 18.3%, to $90.5 million in 2000 from $110.7 million in 1999;
sales of the Company's resin products decreased $15.7 million, or 21.8%, to
$56.4 million in 2000 from $72.1 million in 1999; sales of the Company's doll
products, increased $2.8 million, or 41.8%, to $9.5 million in 2000 from
$6.7 million in 1999; and sales of village products produced sales of
$6.1 million. The overall sales shortfall resulted from the weakness in the
retail marketplace that persisted over the year 2000, while the increase in
sales of the Company's doll products is primarily attributable to new product
introductions and expanded distribution.

GROSS PROFIT--Gross profit decreased $25.3 million, or 18.3%, to
$113.3 million in 2000 from $138.6 million in 1999. Gross profit as a percentage
of sales decreased to 62.0% in 2000 from 65.7% in 1999. The dollar decrease in
gross profit was primarily attributable to the decrease in sales volume. The
decrease in gross profit as a percentage of sales was primarily attributable to
increased freight costs, a provision for retired inventory of approximately
$3.0 million and lower gross margins on key product lines in the first six
months of 2000.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A)--SG&A expenses increased
$5.6 million, or 27.6%, to $25.9 million in 2000 from $20.3 million in 1999.
SG&A expenses as a percentage of sales increased to 14.1% in 2000 from 9.7% in
1999. The increase in dollars and percentage of sales is primarily attributable
to increased wages arising from the annualized impact of additional personnel,
additional marketing costs and a provision of $2.0 million for doubtful
accounts. This increase was partially offset by a provision of $4.4 million for
a legal settlement recorded in 1999.

INCOME FROM OPERATIONS--Income from operations decreased $31.0 million, or
26.1%, to $87.4 million in 2000 from $118.4 million in 1999. The operating
income margin decreased to 47.5% in 2000 from 56.1% in 1999. The decrease in
dollars and operating margin is primarily attributable to the sales shortfall,
the decrease in gross profit margin and the increase in SG&A expenses.

TOTAL INTEREST EXPENSE--Total interest expense decreased $4.4 million, or
18.6%, to $19.5 million in 2000 from $23.9 million in 1999. Total interest
expense as a percentage of sales decreased to 10.6% in 2000 from 11.3% in 1999.
The decrease in total interest expense in both dollars and as a percentage of
sales is primarily attributable to the reduction of debt through the application
of excess cash and reduction of interest rates due to the deleveraging of Boyds.

INCOME TAXES--Income taxes decreased $8.5 million, or 24.5%, to
$26.2 million in 2000 from $34.7 million in 1999. This decrease is attributable
to the decline in sales and gross margin, and the growth in SG&A expenses.

12

EXTRAORDINARY ITEMS--The $1.1 million charge, net of tax, relates to the
write-off of deferred debt issuance costs arising from the early paydown of long
term debt. The $0.5 million gain, net of tax, relates to the repurchase of
company bonds below par.

LIQUIDITY AND CAPITAL RESOURCES

Boyds' primary sources of liquidity are cash flow from operations and
borrowings under its credit agreement, which includes a revolving credit
facility. Boyds' primary uses of cash are to fund working capital and to service
debt. Cash balances declined $2.4 million during 2001. Net cash used in
investing activities and financing activities exceeded cash provided by
operating activities primarily due to a paydown of debt under a bond repurchase
program.

OPERATING ACTIVITIES

Cash provided by operating activities increased $6.3 million, or 12.2%, to
$57.8 million in 2001 from $51.5 million in 2000. The cash flow increase was
primarily attributable to the decrease in accounts receivable and inventory,
partially offset by a decrease in net income.

INVESTING ACTIVITIES

Capital and investment expenditures totaled $6.3 million in 2001. Boyds is
currently constructing a store and museum expected to be placed into service
during the third quarter of 2002. During 2001, Boyds incurred approximately
$3.0 million in capital expenditures related to the store and museum, with an
additional $13.0 million expected in 2002. Other than the museum, Boyds does not
expect to incur significant capital expenditures for the foreseeable future, due
to its sourcing arrangements with suppliers.

FINANCING ACTIVITIES

In connection with the recapitalization in 1998, Boyds issued 9% Senior
Subordinated Notes due 2008 in an amount of $165.0 million and entered into a
credit agreement providing for a $325.0 million senior secured term loan,
consisting of tranche A and tranche B, and a senior secured revolving credit
facility providing for borrowings up to $40.0 million. On April 12, 1999, Boyds
repaid $66.0 million of the notes, and has subsequently repaid a further
$52.3 million, leaving a balance outstanding of $46.7 million. Boyds has repaid
$243.0 million of the term loans under the credit agreement, leaving a balance
outstanding of $82.0 million at December 31, 2001.

The revolving credit facility provides loans in an aggregate amount of up to
$40.0 million. Boyds had borrowed $11.5 million under the revolving credit
facility at December 31, 2001. Thus, the unused balance available under the
revolving credit facility will be available to fund the working capital
requirements of Boyds. Borrowings under the credit agreement bear interest at a
rate per annum, equal to a margin over either a base rate or LIBOR, at Boyds'
option. The revolving credit facility commitment will terminate on April 21,
2005. Effective April 21, 2000, the tranche A term loan is amortizing over six
years. The credit agreement contains customary covenants and events of default,

13

including substantial restrictions on Boyds' ability to declare dividends or
make distributions. The term loans are subject to mandatory prepayment with the
proceeds of certain asset sales and a portion of Boyds' excess cash flow, as
defined in the credit agreement. As of December 31, 2000, the tranche B term
loan had been fully repaid.

On May 28, 1999, Boyds' Board of Directors approved the repurchase of up to
3.0 million shares of Boyds' common stock. As of December 31, 2001, Boyds had
repurchased 2,954,200 shares of common stock pursuant to this stock repurchase
program for an aggregate amount of approximately $29.9 million, thus completing
the program. These repurchases were financed out of operating cash flow and
approximately $4.0 million of borrowings under the revolving credit facility
which were repaid.

On February 17, 2000, Boyds announced that its Board of Directors had
approved the repurchase of an additional 3.0 million shares of Boyds' common
stock. As of December 31, 2001, Boyds had repurchased 132,480 shares of common
stock pursuant to this stock repurchase program for an aggregate amount of
approximately $1.0 million. These repurchases were financed out of operating
cash flow. Any future repurchases under this program are expected to be financed
similarly or by utilizing borrowings under the revolving credit facility.

On July 27, 2000, Boyds announced that its Board of Directors had approved a
repurchase program for its outstanding 9% Series B Senior Subordinated Notes due
2008. As of December 31, 2001, Boyds had repurchased $52.3 million of its notes
pursuant to this note repurchase program. These repurchases were financed out of
operating cash flow and the revolving credit facility. Any future repurchases
under this program are expected to be financed similarly or by utilizing
borrowings under the revolving credit facility. Boyds plans to make such
purchases from time to time in the open market or in private transactions.

Management believes that cash flow from operations and availability under
the revolving credit facility will provide adequate funds for Boyds' foreseeable
working capital needs, planned capital expenditures, debt service obligations,
the common stock repurchase program and the bond repurchase program. Any future
acquisitions, joint ventures or other similar transactions may require
additional capital and there can be no assurance that any such capital will be
available to Boyds on acceptable terms or at all. Boyds' ability to fund its
working capital needs, planned capital expenditures and scheduled debt payments,
to refinance indebtedness and to comply with all of the financial covenants
under its debt agreements, depends on its future operating performance and cash
flow, which in turn are subject to prevailing economic conditions and to
financial, business and other factors, some of which are beyond Boyds' control.

RISK FACTORS THAT MAY AFFECT FUTURE PERFORMANCE

DEPENDENCE ON TWO INDEPENDENT BUYING AGENCIES. Substantially all of the
products that Boyds sells are purchased through two independent buying agencies.
One buying agency is located in Hong Kong, and the other buying agency is
located in the United States. These two buying agencies, which contract with a
total of 19 independent manufacturers, account for approximately 90% of Boyds'
total imports. These two buying agencies also perform a number of functions for
Boyds, including collaborating in Boyds' product design and development process.
As a result, Boyds is substantially dependent on these buying agencies and the
manufacturers with which they contract. Boyds does not have long-term contracts
with either of its primary buying agencies. Boyds believes that the loss of
either of its primary buying agencies would (1) have a material adverse effect
on its financial condition and results of operations, (2) cause disruptions in
its orders, (3) affect the quality of its products, and (4) possibly require it
to select alternative manufacturers.

POTENTIAL ECONOMIC AND POLITICAL RISKS OF CHINA. All of Boyds' significant
manufacturers are located in China. Although Boyds has identified alternate
manufacturers which could meet its quality and reliability standards at similar
costs in China and in other countries, the loss of any one or more of its

14

manufacturers could have a material adverse effect on its business. Because
Boyds relies primarily on Chinese manufacturers, it is subject to the following
risks that could restrict its manufacturers' ability to make its products or
increase its manufacturing costs: (1) economic and political instability in
China; (2) transportation delays; (3) restrictive actions by the Chinese
government; (4) the laws and policies 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 the Chinese renminbi
appreciates significantly relative to the United States dollar due to the cost
of its products fluctuating with the value of the Chinese renminbi.

POTENTIAL ADVERSE TRADE REGULATIONS AND RESTRICTIONS. Boyds does not own or
operate any manufacturing facilities. Instead, Boyds imports substantially all
of its retail products from independent foreign manufacturers, primarily in
China. As a result, substantially all of its products are subject to United
States Customs Service duties and regulations. These regulations include
requirements that Boyds disclose information regarding the country of origin on
its products, such as "Handmade in China." Within its discretion, the United
States Customs Service may also set new regulations regarding the amount of duty
to be paid, the value of merchandise to be reported or other customs regulations
relating to Boyds' imported products. Failure to comply with these regulations
may result in the imposition of additional duties or penalties or forfeiture of
merchandise.

The countries in which Boyds' products are manufactured may impose new
quotas, duties, tariffs or other charges or restrictions. This could adversely
affect Boyds' financial condition, results of operations or its ability to
continue to import products at current or increased levels. In particular,
Boyds' costs could increase, or the mix of countries from which Boyds imports
its products may be changed, if the Generalized System of Preferences program is
not renewed or extended each year. The Generalized System of Preferences program
allows selected products of beneficiary countries to enter the United States
duty free. In addition, if countries that are currently accorded "Most Favored
Nation" status by the United States, such as China, cease to have such status,
Boyds could be adversely affected. Boyds cannot predict what regulatory changes
may occur or the type or amount of any financial impact these changes may have
on it in the future.

CHANGING CONSUMER TASTES. The demand for Boyds' products may be quickly
affected by changing consumer tastes and interests. Boyds' results of operations
depend substantially upon its ability to continue to conceive, design, source
and market new pieces and upon continuing market acceptance of its existing and
future product lines. If Boyds fails or is significantly delayed in introducing
new pieces to its existing product lines or creating new product line concepts
or if its new products do not meet with market acceptance, its results of
operations may be impaired. A number of companies who participate in the
giftware and collectibles industries are part of large, diversified companies
that have greater financial resources than Boyds and offer a wider range of
products and may be less affected by changing consumer tastes.

POTENTIAL INFRINGEMENT OF BOYDS' INTELLECTUAL PROPERTY. Boyds believes that
its trademarks and other proprietary rights are material to its success and
competitive position. Accordingly, Boyds devotes resources to the establishment
and protection of its intellectual property on a worldwide basis. The actions
Boyds takes to establish and protect its trademarks and other proprietary rights
may not be adequate to protect its intellectual property or to prevent imitation
of its products by others. Moreover, while Boyds has not experienced any
proprietary license infringements or legal actions that have had a material
impact on its financial condition or results of operations, other persons have
and will likely in the future assert rights in, or ownership of, its trademarks
and other proprietary rights. Boyds may not be able to successfully resolve such
conflicts. In addition, the laws of foreign countries may not always protect
intellectual property to the same extent as do the laws of the United States.

15

RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and
Other Intangible 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 existing
recognized intangibles as goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the identification of reporting units for
purposes of assessing potential future impairments of goodwill. SFAS 142 also
requires Boyds to complete a transitional goodwill impairment test six months
from the date of adoption. Boyds is currently assessing but has not yet
determined the impact of SFAS 142 on its financial position and results of
operations.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" (SFAS 143). SFAS 143 addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. SFAS 143 is effective for fiscal years
beginning after June 15, 2002. Boyds is in the process of evaluating the impact
of implementing SFAS No. 143.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment of Long-Lived Assets" which supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
and the accounting and reporting provisions of APB No. 30, "Reporting the
Results of Operations--Reporting and Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" for the disposal of a segment of business. This statement is
effective for fiscal years beginning after December 15, 2001. SFAS No. 144
retains many of the provisions of SFAS No. 121, but addresses certain
implementation issues associated with that Statement. Boyds is currently
evaluating the impact of implementing SFAS No. 144.

RELATED PARTY TRANSACTIONS

Kohlberg Kravis Roberts & Co. L.P. ("KKR") represents a 59% stockholder of
Boyd. For the years ended December 31, 1999, 2000 and 2001 Boyds paid to KKR
approximately $0.5 million, $0.4 million and $0.4 million, respectively, for
management fees and related expenses. Amounts payable to KKR at December 31,
2000 and 2001 were $0.1 million.

Boyds purchased approximately 111 acres of land from New Farm Operating,
Inc., whose sole stockholder is Justina Lowenthal, wife of director and Chairman
Emeritus Gary Loventhal. The purchase price was $0.5 million. This land is being
used for the future site of the store and museum which is included in property
and equipment. In the opinion of management, this transaction was executed on
terms comparable to an arms length transaction.

FORWARD LOOKING STATEMENTS

Some of the matters discussed in this report include forward-looking
statements. Statements that are predictive in nature, that depend upon or refer
to future events or conditions or 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 of
assumptions and estimates which are inherently subject to significant
uncertainties and contingencies, many of which are beyond the control of Boyds
and reflect future business decisions that are subject to change. A variety of
factors could cause actual results to differ materially from those anticipated
in Boyds' forward-looking statements, including: the effects of economic
conditions; the inability to grow Boyds' business as

16

planned; the loss of either of Boyds' two independent buying agencies or any of
its manufacturing sources; economic or political instability in the countries
with which Boyds does business; changes to, or the imposition of new,
regulations, duties, taxes or tariffs associated with the import or export of
goods from or to the countries with which Boyds does business; and other risk
factors that are discussed in this report and, from time to time, in other
Securities and Exchange Commission reports and filings. One or more of the
factors discussed above may cause actual results to differ materially from those
expressed in or implied by the statements in this report.

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Boyds faces minimal interest rate risk exposure in relation to its
outstanding debt of $140.2 million at December 31, 2001. Of this amount
$93.5 million, under the Credit Agreement, is subject to interest rate
fluctuations. A hypothetical 1% change in interest rates applied to the fair
value of debt would not have a material impact on earnings or cash flows of
Boyds.

Boyds faces currency risk exposure that arises from translating the results
of its United Kingdom and Germany operations to the U.S. dollar. The currency
risk exposure is not material as the United Kingdom and Germany subsidiary
operations do not have a material impact on Boyds' earnings.

17

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

18

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
The Boyds Collection, Ltd. and Subsidiaries
McSherrystown, Pennsylvania

We have audited the accompanying consolidated balance sheets of The Boyds
Collection, Ltd. and Subsidiaries (the "Company") as of December 31, 2000 and
2001, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
2001. Our audits also included the consolidated financial statement schedule
listed in the Index at Item 14. These consolidated financial statements and
consolidated financial schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and consolidated financial schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company, at December 31,
2000 and 2001, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP

Baltimore, Maryland
February 15, 2002

19

THE BOYDS COLLECTION, LTD.
CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements.

20

THE BOYDS COLLECTION, LTD.

CONSOLIDATED STATEMENTS OF INCOME

See notes to consolidated financial statements.

21

THE BOYDS COLLECTION, LTD.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

See notes to consolidated financial statements.

22

THE BOYDS COLLECTION, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to consolidated financial statements.

23

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

1. GENERAL

The Boyds Collection, Ltd., ("Boyds") is a primary wholesaler and importer
of resin figurines and plush animals that are distributed to retail operations
primarily throughout the United States. Substantially all of its products are
sourced from foreign manufacturers in China through buying agencies.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial
statements include the accounts of Boyds and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.

REVENUE RECOGNITION--Sales revenue, net of returns and discounts, is
recognized upon shipment of the items, when title passes to the customer.

CASH AND CASH EQUIVALENTS--Boyds considers all short-term interest-bearing
investments with original maturities of three months or less to be cash
equivalents.

INVENTORIES--Inventories are stated at the lower of cost or market. Cost is
determined under the first-in, first-out method of accounting. Inventory
in-transit consists of purchases from foreign suppliers for which title has
passed to Boyds.

PROPERTY AND EQUIPMENT--Property and equipment is stated at cost. For assets
acquired prior to January 1, 1999 depreciation is computed using the declining
balance method over the estimated useful lives of the various assets. Beginning
January 1, 1999, all new assets purchased are depreciated using the straight
line method over the estimated useful lives. The estimated useful lives of
furniture and fixtures range from five to seven years and the estimated useful
lives of equipment range from three to seven years. The estimated useful lives
of leasehold improvements is the lesser of the estimated life of the improvement
or the term of the lease.

SOFTWARE DEVELOPMENT COSTS--During 1999, Boyds adopted the AICPA's Statement
of Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use". Accordingly, certain computer software project costs
incurred during the application development stage have been capitalized and are
being amortized on a straight line basis over a period of three years. Such
costs include external direct costs of materials and services consumed in
developing internal-use software and payroll costs for employees who are
directly associated with the internal-use computer software project, and are
included in property and equipment on the consolidated balance sheet.

GOODWILL--Goodwill, which represents the cost in excess of the fair value of
net assets acquired, is amortized on a straight line basis over twenty years. In
July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other
Intangible 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 existing
recognized intangibles as goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the identification of reporting units for
purposes of assessing potential future impairments of goodwill. SFAS 142 also
requires the Company to complete a transitional goodwill impairment test

24

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
six months from the date of adoption. The Company is currently assessing but has
not yet determined the impact of SFAS 142 on its financial position and results
of operations.

DEFERRED DEBT ISSUANCE COSTS--Boyds amortizes deferred debt issuance costs
using the interest method over the life of the debt. Amortization of deferred
debt issuance costs as a result of the prepayment of the related debt is
accelerated to the date of the prepayment and is included as an extraordinary
item in the consolidated statements of income.

IMPAIRMENT ACCOUNTING--Boyds reviews the recoverability of its long-lived
and intangible assets, when events or changes in circumstances occur that
indicate that the carrying value of the assets may not be recoverable. The
measurement of possible impairment is based on Boyds' ability to recover the
carrying value of the asset from the expected future undiscounted cash flows
generated. The measurement of impairment requires management to use estimates of
expected future cash flows. If an impairment loss existed, the amount of the
loss would be recorded in the consolidated statements of income. It is possible
that future events or circumstances could cause these estimates to change.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment of Long-Lived Assets" which supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
and the accounting and reporting provisions of APB No. 30, "Reporting the
Results of Operations--Reporting and Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" for the disposal of a segment of business. This statement is
effective for fiscal years beginning after December 15, 2001. SFAS No. 144
retains many of the provisions of SFAS No. 121, but addresses certain
implementation issues associated with that Statement. The Company is currently
evaluating the impact of implementing SFAS No. 144.

During the fourth quarter of 2001, Boyds reduced capitalized software costs
to its net realizable value through an impairment charge totaling $2.1 million,
recorded in selling, general and administrative expenses on the consolidated
statement of income. The software costs were associated with a sales interface
system that was expected to improve sales force efficiency and effectiveness.
Due to implementation difficulties during the fourth quarter, the system was
reduced to its net realizable value.

FAIR VALUE OF FINANCIAL INSTRUMENTS--Management considers that the carrying
amount of financial instruments, including cash, accounts receivable, accounts
payable and accrued expenses, approximates fair value. Interest on long-term
bank debt, except for the 9% senior subordinated notes ("Notes"), is payable at
variable rates which approximates fair market value. The fair value of the
Notes, face value of $46.7 million, was $48.8 million at December 31, 2001.

FOREIGN CURRENCY TRANSLATION--Assets and liabilities of Boyds foreign
subsidiaries are translated at year-end exchange rates while revenue and
expenses are translated at weighted average rates prevailing during the year.
Foreign currency translation adjustments are reported as a separate component of
other comprehensive income/(loss) in the consolidated statement of stockholders'
equity.

INCOME TAXES--Effective April 21, 1998, Boyds accounts for income taxes in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109,
ACCOUNTING FOR INCOME TAXES, which requires an asset and liability approach to
accounting for income taxes. Deferred income tax assets and

25

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
liabilities are computed annually for differences between the financial
statement and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future, based on enacted tax laws and rates applicable
to periods in which the differences are expected to affect taxable income.
Income taxes/benefit is the tax payable/receivable for the period plus or minus
the change during the period in deferred income tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will be realized.

STOCK-BASED COMPENSATION--Boyds has adopted SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION. SFAS 123 establishes a fair value based method of
accounting for stock-based employee compensation plans; however, it also allows
an entity to continue to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by Accounting Principles
Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. Under
the fair value method, compensation cost is measured at the grant date based on
the value of the award and is recognized over the service period, which is
usually the vesting period. Under the intrinsic value based method, compensation
cost is the excess, if any, of the quoted market price of the stock at the grant
date or other measurement date over the amount an employee must pay to acquire
the stock. Boyds has elected to continue to account for its employee
compensation plans under APB Opinion No. 25 with pro forma disclosures of net
earnings and earnings per share, as if the fair value based method of accounting
defined in SFAS No. 123 had been applied.

SEGMENT REPORTING--SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE
AND RELATED INFORMATION requires enterprises to report certain information about
products and services, activities in different geographic areas and reliance on
major customers and to disclose certain segment information in their financial
statements. The basis for determining an enterprise's operating segments is the
manner in which financial information is used internally by the enterprise's
chief operating decision maker. Boyds has determined that it operates in one
segment, collectibles. In addition, less than 3% of total revenue is derived
from customers outside the United States and substantially all long lived assets
are located in the United States. No customer represents more than 10% of total
revenue.

USE OF ESTIMATES--The preparation of financial statements, in conformity
with generally accepted accounting principles, requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

RECLASSIFICATIONS--Certain amounts in the 1999 and 2000 financial statements
have been reclassified to conform to the 2001 presentation.

OTHER RECENTLY ISSUED ACCOUNTING STANDARDS--In June 2001, the FASB issued
SFAS No. 143 (SFAS 143), "Accounting for Asset Retirement Obligations".
SFAS 143 addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. SFAS 143 is effective for fiscal years beginning after
June 15, 2002. The Company is in the process of evaluating the impact of
implementing SFAS No. 143.

26

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

3. PROPERTY AND EQUIPMENT

The components of property and equipment at December 31, 2000 and 2001 were,
as follows:

Depreciation expense on property and equipment was $0.7 million,
$1.1 million and $ 1.4 million in 1999, 2000 and 2001, respectively.

4. ACQUISITION

On April 25, 2001, Boyds acquired all of the issued and outstanding shares
of capital stock of J & T Design ("J & T"). J & T is a designer and
distributor of Christmas gift products. J & T's results from operations are
included in Boyds' consolidated statement of income subsequent to April 25,
2001. The aggregate purchase price was approximately $0.5 million paid in cash.
The purchase price was assigned to the acquired assets, primarily inventory and
accounts receivable, based on their fair market values. In addition, Boyds has
recorded goodwill of approximately $0.5 million, included in other assets,
related to the excess of the purchase price over the fair value of assets
acquired which is being amortized using the straight line method over 20 years
until the implementation of SFAS 142. The inclusion of this acquisition within
the consolidated financial statements presented had a immaterial impact on
Boyds' pro forma results.

5. CONCENTRATION OF CREDIT RISK

Boyds maintains cash balances at several financial institutions located in
Pennsylvania. Accounts at each institution are secured by the Federal Deposit
Insurance Corporation up to $100,000. Uninsured balances aggregated
$2.8 million and $0.5 million at December 31, 2000 and 2001, respectively. At
December 31, 2001, no customer accounted for more than 10% of accounts
receivable. At December 31, 2000, one customer accounted for approximately 12%
of accounts receivable.

6. LEASE COMMITMENTS

Boyds leases certain office, warehouse and showroom facilities under
non-cancellable operating leases. Rent expense amounted to $1.2 million,
$1.6 million and $1.6 million for the years ended

27

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

6. LEASE COMMITMENTS (CONTINUED)
December 31, 1999, 2000 and 2001, respectively. At December 31, 2001, the future
minimum lease commitments for the non-cancellable operating leases are as
follows:

7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

At December 31, 2000 and 2001, Boyds had letters of credit outstanding under
bank credit agreements amounting to $8.2 million and $6.3 million, respectively.
These letters of credit represent Boyds' commitment to purchase inventory which
is to be produced and/or shipped.

8. RELATED PARTY TRANSACTIONS

Kohlberg Kravis Roberts & Co. L.P. ("KKR") represents a 59% stockholder of
Boyds. For the years ended December 31, 1999, 2000 and 2001 Boyds paid to KKR
approximately $0.5 million, $0.4 million and $0.4 million, respectively, for
management fees and related expenses. Amounts payable to KKR at December 31,
2000 and 2001 were $0.1 million.

Boyds purchased approximately 111 acres of land from New Farm
Operating, Inc., whose sole stockholder is Justina Lowenthal, wife of director
and Chairman Emeritus Gary Lowenthal. The purchase price was $0.5 million. This
land is being used for the future site of the store and museum which is included
in property and equipment. In the opinion of management, this transaction was
executed on terms comparable to an arms length transaction.

9. LONG-TERM DEBT

Long-term debt is summarized as follows:

28

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

9. LONG-TERM DEBT (CONTINUED)

The Notes have an optional redemption feature exercisable by Boyds any time
on or after May 15, 2003. Interest on the Notes is payable semiannually on
May 15 and November 15.

For the years ended December 31, 2000 and 2001, the weighted average
interest rates in effect for the Term Loan was 7.358% and 2.917%, respectively.
For the years ended December 31, 2000 and 2001, the weighted average interest
rates in effect for the revolving loan was 7.297% and 3.247%. In addition, the
term loan has predetermined annual payments through April 2005.

The Credit Agreement contains certain covenants, including the requirement
of a minimum interest coverage ratio as defined in the agreement and substantial
restrictions as to dividends and distributions. Boyds is in compliance with all
applicable covenants as of December 31, 2001. The agreement also provides that
the Term Loan and revolving loan commitment be secured by the capital stock of
Boyds' current and future subsidiaries. In addition, the Term Loan is subject to
mandatory prepayment with the proceeds of certain asset sales and a portion of
Boyds' excess cash flow as defined in the credit agreement. Boyds has the option
of selecting its own interest period at one, two, three, six, nine or twelve
month periods.

The scheduled maturities of the long-term debt are as follows:

10. PROVISION FOR INCOME TAXES

Income tax expense consists of the following:

29

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

10. PROVISION FOR INCOME TAXES (CONTINUED)
During 2001, a Pennsylvania tax law change subjected Boyds to state income
taxes retroactive to January 1, 2001. As a result, Boyds recorded a tax benefit
for the increase in the deferred tax asset value totaling $8.7 million,
contributing to the decrease in effective tax rate from 38.4% in 2000 to 24.6%
in 2001. A reconciliation of the statutory federal income tax rate and the
effective rate of the provision for income taxes consists of the following:

The tax effect of significant items comprising the Company's deferred tax
assets and liabilities are as follows:

For federal income tax purposes, Boyds has elected to treat the
Recapitalization and Stock Purchase as an asset acquisition by making a
Section 338 Section (h)(10) election. As a result, there is a difference between
the financial reporting and tax basis of Boyds' assets. The difference creates
deductible goodwill for tax purposes, and a deferred tax asset for financial
reporting purposes. The deferred tax asset will be realized as the goodwill is
amortized over a period of fifteen years. In the opinion of management, Boyds
believes it will have sufficient profits in the future to realize the deferred
tax asset.

11. CONTINGENCIES

The Company has received from the State of Pennsylvania an assessment to pay
additional franchise taxes of approximately $4.9 million for 1999 which has not
been paid. However, a June 2001 letter issued by the State indicates that Boyds
will ultimately prevail in this matter. In addition, Boyds is involved in
various legal proceedings, claims and governmental audits in the ordinary course
of business. In the opinion of management, the ultimate disposition of these
matters will not have a material adverse effect on the financial position or
results of operations of Boyds.

30

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

12. LEGAL SETTLEMENT

On March 28, 2000, Boyds settled an outstanding lawsuit related to a claim
for royalties. In complete and final resolution of the suit, Boyds agreed to a
settlement of the claim, resulting in a $4.4 million charge ($3.1 million after
tax), which was recorded in selling, general and administrative expenses in the
period ended December 31, 1999, and paid in March, 2000.

13. STOCKHOLDERS' EQUITY

CAPITAL STOCK--As of December 31, 2000 and 2001, Boyds had 100 million
shares of capital stock (par value $0.0001), authorized and 59.2 million and
59.1 million shares outstanding, respectively. The Board of Directors is
authorized to issue the unissued portion of the authorized shares in another
class or series of stock, including preferred stock.

During 1999, Boyds issued and sold 9,250,000 shares of common stock at $18
per share in an initial public offering and listed its stock on the New York
Stock Exchange. On May 28, 1999, Boyds announced a common stock share repurchase
program and, as of December 31, 2001, the Company had repurchased 2,954,200
shares of its common stock under this plan. On February 17, 2000, Boyds
announced a further common stock share repurchase program and, as of
December 31, 2001, the Company had repurchased 132,480 shares of its common
stock under this plan.

14. EMPLOYEE BENEFIT PLANS

EMPLOYEE SAVINGS AND RETIREMENT PLAN--Boyds has a 401(K) Plan that allows
eligible employees to contribute up to $10,500 of their salary.

STOCK OPTION PLAN--Boyds has granted stock options under various incentive
stock option plans (the "Plans") which provide for the granting to certain
employees and directors of options to acquire Boyds' common stock. The option
prices of stock which may be purchased under the Plans are not less than the
fair value of common stock on the dates of the grants.

Outstanding options issued to employees vest and become exercisable over a
five-year period from the date of grant. The outstanding options expire ten
years from the date of grant or upon an employee's retirement or termination
from Boyds, and are contingent upon continued employment during the applicable
five-year period.

31

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

14. EMPLOYEE BENEFIT PLANS (CONTINUED)
Boyds has reserved a total of 5,579,033 shares for issuance under the Plans,
of which 3,029,025 shares remain reserved at December 31, 2001 for future
issuances. The following table summarizes information about fixed stock options
at December 31, 2001:

ACCOUNTING FOR STOCK-BASED COMPENSATION--Boyds has elected to continue to
account for its employee stock-based compensation plans under APB Opinion
No. 25. The pro forma disclosures of net earnings and net earnings per share as
if the fair value based method of accounting defined in SFAS No. 123 had been
applied are shown below. For purposes of the pro forma disclosures, the
estimated fair value of the options is assumed to be amortized to expense over
the options' vesting period.

32

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

14. EMPLOYEE BENEFITS PLAN (CONTINUED)

Pro forma information regarding net income and earnings per common share has
been estimated at the date of grant using the Black-Scholes option pricing model
based on the following assumptions:

The weighted average fair value of options granted during 1999, 2000 and
2001 was $3.0 million, $4.6 million and $3.1 million, respectively.

The following table summarizes information about stock options outstanding
at December 31, 2001:

EARNINGS PER SHARE--Basic EPS excludes dilution and is computed by dividing
earnings available to common stockholders by the weighted average number of
common shares outstanding for the period. Similar to fully diluted EPS, diluted
EPS reflects the potential dilution of securities that could share in the
earnings.

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the income and net income
available to common stockholders:

33

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table shows results of operations for each of the quarters
during fiscal 2000 and 2001:

34

THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)

- ------------------------

(1) Fiscal 2000 income from operations included $3.1 million of inventory write
down on a pretax basis during the fourth quarter.

Fiscal 2001 income from operations included $2.1 million for impairment of
assets and a $6.0 million provision for slow moving inventory on a pretax
basis in the fourth quarter.

(2) The Company's business is seasonal with 61% and 64% of sales occurring in
the first and third fiscal quarters combined for 2000 and 2001,
respectively.

35

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

Information concerning the directors and executive officers of the Company,
their terms of office, the periods during which they have served, their personal
business experience, is included in the Company's definitive Proxy Statement for
its 2002 Annual Meeting of stockholders and is specifically incorporated herein
by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding compensation of the Company's directors and officers
is included in the Company's definitive Proxy Statement for its 2002 Annual
Meeting of stockholders and is specifically incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information with respect to the beneficial ownership of the outstanding
shares of the Company's Common Stock by (i) all persons owning of record, or
beneficially to the knowledge of the Company, more than five percent of the
outstanding shares, (ii) each director and executive officer of the Company
individually, and (iii) all directors and officers of the Company as a group, is
included in the Company's definitive Proxy Statement for its 2002 Annual Meeting
of stockholders and is specifically incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and transactions between the
Company and its directors, director-nominees, executive officers, and the family
members of these individuals is included in the Company's definitive Proxy
Statement for its 2002 Annual Meeting of stockholders and is specifically
incorporated herein by reference.

36

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) 1. CONSOLIDATED FINANCIAL STATEMENTS:

The index for the consolidated financial statements is under Item 8 of
this form 10K.

2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULE:

Schedule of valuation and qualifying accounts

THE BOYDS COLLECTION, LTD.
VALUATION AND QUALIFYING ACCOUNTS

37

(B) EXHIBITS

* Filed herewith.

(C) REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the last quarter of the period
covered by this report.

- ------------------------

38

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
McSherrystown, State of Pennsylvania on the 22nd day of March, 2002.

THE BOYDS COLLECTION, LTD.

By: /s/ CHRISTINE L. BELL
-----------------------------------------
Christine L. Bell
CHIEF OPERATING OFFICER AND SECRETARY

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
indicated on March 22, 2002.