UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended June 2, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from_________________to___________________
Commission File Number: 0-15817
THE TOPPS COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2849283
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Whitehall Street, New York, NY 10004
(Address of principal executive offices, including zip code)
(212) 376-0300
(Registrant's telephone number, including area code)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
The number of outstanding shares of Common Stock as of July 16, 2001 was
43,687,000.
THE TOPPS COMPANY, INC.
AND SUBSIDIARIES
--------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
--------------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
Index Page
----- ----
Condensed Consolidated Balance Sheets as of June 2, 2001
and March 3, 2001 3
Condensed Consolidated Statements of Operations for the
thirteen weeks ended June 2, 2001 and May 27, 2000 4
Condensed Consolidated Statements of Comprehensive Income
for the thirteen weeks ended June 2, 2001 and May 27, 2000 5
Condensed Consolidated Statements of Cash Flows for the
thirteen weeks ended June 2, 2001 and May 27, 2000 6
Notes to Condensed Consolidated Financial Statements 7
Report of Independent Public Accountants 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3. DISCLOSURES ABOUT MARKET RISK 15
--------------------------------------------------------------------------------
PART II - OTHER INFORMATION
--------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
2
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June March
2, 2001 3, 2001
------- -------
(amounts in thousands
except share data)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents ............................ $ 144,222 $ 158,741
Accounts receivable - net ............................ 21,585 10,770
Inventories .......................................... 26,790 22,926
Income tax receivable ................................ 7,088 11,570
Deferred tax assets .................................. 2,010 2,444
Prepaid expenses and other current assets ............ 3,940 4,328
------- -------
TOTAL CURRENT ASSETS ............................. 205,635 210,779
------- -------
PROPERTY, PLANT, & EQUIPMENT ............................. 20,469 19,136
Less: accumulated depreciation and amortization ..... 8,425 7,955
------ ------
NET PROPERTY, PLANT & EQUIPMENT .................. 12,044 11,181
------ ------
INTANGIBLE ASSETS, net of accumulated
amortization of $46,586 and $45,931 as of June 2,
2001 and March 3, 2001, respectively ................. 54,315 54,970
OTHER ASSETS ............................................. 4,081 3,342
------- -------
TOTAL ASSETS ..................................... $ 276,075 $ 280,272
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable ..................................... $ 11,391 $ 13,705
Accrued expenses and other liabilities ............... 36,600 36,969
Income taxes payable ................................. 19,027 22,026
------ ------
TOTAL CURRENT LIABILITIES ........................ 67,018 72,700
DEFERRED INCOME TAXES .................................... 784 1,344
OTHER LIABILITIES ........................................ 9,918 9,686
------ ------
TOTAL LIABILITIES ................................ 77,720 83,730
------ ------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share
authorized 10,000,000 shares, none issued .......... -- --
Common stock, par value $.01 per share, authorized
100,000,000 shares; issued and outstanding
48,554,300 shares and 48,421,000 shares as of
June 2, 2001 and March 3, 2001, respectively ....... 486 484
Additional paid-in capital ............................... 22,545 21,758
Treasury stock, 5,022,000 shares and 4,329,000 shares
as of June 2, 2001 and March 3, 2001, respectively .... (44,662) (38,051)
Retained earnings ........................................ 229,108 217,479
Accumulated other comprehensive loss ..................... (9,122) (5,128)
------- -------
TOTAL STOCKHOLDERS' EQUITY ...................... 198,355 196,542
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......... $ 276,075 $ 280,272
======= =======
See Notes to Condensed Consolidated Financial Statements and Accountants' Review
Report.
3
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Thirteen weeks ended
June May
2, 2001 27, 2000
------- --------
(amounts in thousands,
except share data)
Net sales .............................. $ 87,451 $144,332
Cost of sales .......................... 49,190 75,922
------ -------
Gross profit on sales ............... 38,261 68,410
Other income ........................... 728 647
------ -------
38,989 69,057
Selling, general and administrative
expenses 21,996 23,047
------ ------
Income from operations .............. 16,993 46,010
Interest income, net ................... 1,465 811
------ ------
Income before provision for income taxes 18,458 46,821
Provision for income taxes ............. 6,829 17,792
------ ------
Net income .......................... $ 11,629 $ 29,029
====== ======
Net income per share - basic ................... $ .27 $ .64
Net income per share - diluted ................. $ .26 $ .62
Weighted average shares outstanding - basic 43,854,000 45,581,000
Weighted average shares outstanding - diluted 45,049,000 46,789,000
See Notes to Condensed Consolidated Financial Statements and Accountants' Review
Report.
4
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(Unaudited)
Thirteen weeks ended
June May
2, 2001 27, 2000
------- --------
(amounts in thousands,
except share data)
Net income $ 11,629 $ 29,029
Currency translation adjustment (3,994) (1,318)
------ ------
Comprehensive income $ 7,635 $ 27,711
====== ======
See Notes to Condensed Consolidated Financial Statements and Accountants' Review
Report.
5
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirteen weeks ended
June May
2, 2001 27, 2000
------- --------
(amounts in thousands,
except share data)
Cash flows from operating activities:
Net income ................................................ $ 11,629 $ 29,029
Add/(subtract) non-cash items included in net income:
Depreciation and amortization ........................ 1,203 983
Deferred income taxes ................................ (126) 1,141
Change in operating assets and liabilities:
Accounts receivable .................................. (10,815) (32,042)
Inventories .......................................... (3,864) 469
Income tax receivable ................................ 4,482 (221)
Prepaid expenses and other current assets ............ 388 758
Payables and other current liabilities ............... (5,682) 17,305
Currency translation adjustment and other liabilities (4,565) (1,113)
------- ------
Cash (used) in/provided by operating activities (7,350) 16,309
------- ------
Cash flows from investing activities:
Additions to property, plant and equipment ........... (1,333) (818)
------- ------
Cash used in investing activities ............. (1,333) (818)
------- ------
Cash flows from financing activities:
Exercise of stock options ............................. 782 485
Repurchase of common stock ............................ (6,618) (4,456)
------- ------
Cash used in financing activities ............ (5,836) (3,971)
------- ------
Net(decrease)/increase in cash and cash equivalents ......... (14,519) 11,520
Cash and cash equivalents at beginning of quarter ........... 158,741 75,853
------- ------
Cash and cash equivalents at end of quarter ................. $ 144,222 $ 87,373
======= ======
Supplemental disclosures of cash flow information:
Interest paid ................................................ $ 19 $ 26
Income taxes paid ............................................ $ 3,645 $ 3,610
See Notes to Condensed Consolidated Financial Statements and Accountants' Review
Report.
6
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED JUNE 2, 2001
1. Basis of Presentation
The accompanying unaudited condensed interim consolidated financial
statements have been prepared by The Topps Company, Inc. and its
subsidiaries (the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission and reflect all adjustments which are,
in the opinion of management, considered necessary for a fair presentation.
Operating results for the thirteen weeks ended June 2, 2001 are not
necessarily indicative of the results that may be expected for the year
ending March 2, 2002. For further information refer to the consolidated
financial statements and notes thereto in the Company's annual report for
the year ended March 3, 2001.
2. Quarterly Comparison
Management believes that quarter-to-quarter comparisons of sales and
operating results are affected by a number of factors, including the timing
of product introductions and variations in shipping and factory scheduling
requirements. Thus, annual sales and earnings amounts are unlikely to
consist of equal quarterly portions.
3. Inventories
(Unaudited)
June March
2, 2001 3, 2001
------- -------
(amounts in thousands)
Raw materials $ 4,040 $ 2,804
Work in process 2,470 805
Finished products 20,280 19,317
------ ------
Total $ 26,790 $ 22,926
====== ======
4. Segment Information
The Company has three reportable business segments: Confectionery,
Collectible Sports Products and Entertainment Products.
The Confectionery segment consists of a variety of lollipop products
including Ring Pop, Push Pop and Baby Bottle Pop, the Bazooka bubble gum
line and other novelty confectionery products, including Pokemon
confectionery products.
The Collectible Sports Products segment primarily consists of trading cards
featuring players from Major League Baseball, the National Basketball
Association, the National Football League and the National Hockey League as
well as sticker/album products featuring players from certain European
soccer leagues.
7
The Entertainment Products segment consists of trading cards and
sticker/album products featuring licenses from popular films, television
shows and other entertainment properties including Pokemon.
The Company's management evaluates the performance of each segment based
upon its contributed margin, which is profit after cost of goods, product
development, advertising and promotional costs and obsolescence, but before
unallocated general and administrative expenses and manufacturing overhead,
depreciation and amortization, other income, interest and income taxes.
The Company does not allocate assets among its business segments and
therefore does not include a breakdown of assets or depreciation and
amortization by segment.
Thirteen weeks ended
June May
2, 2001 27, 2000
------- --------
(In thousands of dollars)
Net Sales
---------
Confectionery ........................... $ 45,367 $ 52,442
Collectible Sports Products ............. 30,911 29,110
Entertainment Products .................. 11,173 62,780
------ -------
Total ................................... $ 87,451 $ 144,332
====== =======
Contributed Margin
------------------
Confectionery ........................... $ 17,735 $ 17,541
Collectible Sports Products ............. 11,069 12,853
Entertainment Products .................. 5,245 31,570
------ ------
Total ................................... $ 34,049 $ 61,964
====== ======
Reconciliation of contributed margin to
income before provision for income taxes:
------------------------------------------
Total contributed margin ................ $ 34,049 $ 61,964
Unallocated general and administrative
expenses and manufacturing overhead .... (16,581) (15,618)
Depreciation & amortization ............. (1,203) (983)
Other income ............................ 728 647
------- -------
Income from operations .................. 16,993 46,010
Interest income, net .................... 1,465 811
------- -------
Income before provision for income taxes $ 18,458 $ 46,821
======= =======
5. Credit Agreement
On June 26, 2000, the Company entered into a credit agreement with Chase
Manhattan Bank and LaSalle Bank National Association. The agreement
provides for a $35.0 million unsecured facility to cover revolver and
letter of credit needs and expires on June 26, 2004. Interest rates are
variable and are a function of the Company's EBITDA. The credit agreement
contains restrictions and prohibitions of a nature generally found in loan
agreements of this type and requires the Company, among other things, to
comply with certain financial covenants, limits the Company's ability to
repurchase its shares, sell or acquire assets or borrow additional money
and prohibits the payment of dividends. The credit agreement may be
terminated by the Company at any point over the four year term (provided
the Company repays all outstanding amounts thereunder) without penalty.
8
6. Reclassifications
The Company has changed the classification of certain accounts. Prepress,
autograph and relic costs related to future period releases, which
previously had been included in the balance of prepaid expenses and other
current assets, have been reclassified to inventory. The cost of
autographs, relics, and freight related to merchandise sold in the period,
which previously had been included in selling, general and administrative
expenses, has been reclassified to cost of goods sold. This presentation
has been reflected on the condensed and consolidated balance sheets as of
June 2, 2001 and March 3, 2001 and statement of operations for the thirteen
weeks ended June 2, 2001 and May 27, 2000. There is no impact on reported
income from operations, net income or working capital as a result of these
reclassifications.
7. Legal Proceedings
On August 21, 2000, the Company was named as a defendant in a purported
class action commenced in the Superior Court of the State of California for
the County of Alameda (the "California State Court") entitled Chase et. al.
v. The Upper Deck Company, et. al. No. 830257-9 (the "California Class
Action"). The California Class Action alleges that the Company and other
manufacturers and licensors of sports and entertainment trading cards
committed unlawful, unfair and fraudulent business acts under the
California Unfair Business Practices Act (CUBPA) and the California
Consumer Legal Remedies Act by the practice of selling trading cards with
randomly-inserted "insert" cards allegedly in violation of state and
federal anti-gambling laws and state consumer laws. The California Class
Action asserts three claims for relief and seeks declaratory, equitable and
injunctive relief and attorneys' fees on behalf of a purported nationwide
class of trading card purchasers. Plaintiff filed an amended complaint on
October 13, 2000, including an amendment to demand compensatory and
punitive damages and restitution. On December 14, 2000, plaintiff moved for
summary judgment on one of his CUBPA claims. On December 15, 2000, all
defendants filed a motion to dismiss two of the claims for failure to state
a claim upon which relief can be granted; a motion for summary judgment
dismissing the remaining claim; and a motion to strike all allegations of
fraudulent or deceptive representations and all references to plaintiff's
prayer for monetary relief. On March 29, 2001, the Court issued a tentative
ruling granting defendants' motion for summary judgment on the grounds that
the defendants' practices do not constitute illegal gambling as a matter of
law, but denying the demurrer to the extent that the remaining two claims
allege false or misleading advertising practices unrelated to the gambling
issue. On March 30, 2001, in accordance with the California State practice,
the Court heard oral argument on whether or not its tentative ruling should
stand as a final ruling. Thereafter, the court issued a tentative ruling
denying the motion for summary adjudication and demurrer and set a hearing
for June 1, 2001 to hear additional argument on the motion. On June 12,
2001 the Court entered an order denying defendants' motion for summary
judgment. At a case management conference held on June 29, 2001, the Court
stayed discovery pending defendants' appeal of the summary judgment
decision and ruled that, if the appeal is denied, the parties are to
address issues relating to the certification of a class before proceeding
to merits discovery. An adverse outcome in the California Class Action
could materially adversely affect the Company's future plans and results.
9
On March 16, 2001, the Major League Baseball Players Association ("MLBPA")
served a notice of intention to arbitrate upon the Company, contending that
the Company has no valid license from the Major League baseball players
authorizing it to manufacture and sell trading cards containing game-used
items, such as jerseys and bats. The MLBPA alleges that absent a specific
license from the Major League baseball players, the Company should not be
permitted to manufacture and sell such trading cards. The MLBPA seeks
injunctive and declaratory relief and an unspecified monetary award. The
Company believes that the Major League baseball players have authorized it
to manufacture and sell trading cards containing memorabilia pursuant to
the grant of a license contained in the standard Baseball Players Picture
License Agreement ("BPPLA") between Topps and the ballplayers. On March 28,
2001, pursuant to the arbitration clause of the BPPLA, the Company
designated David G. Ebert, Esq. and the MLBPA designated Steven Fehr as
their respective partisan arbitrators. Messrs. Ebert and Fehr have selected
Frank H. Wohl, Esq. as the neutral arbitrator. The parties, however,
reached a settlement in principle in this matter, subject to the execution
of a definitive agreement.
In all the above matters, the Company's management believes that it has
meritorious defenses and intends to vigorously defend against these claims.
The Company is a defendant in several other civil actions which are routine
and incidental to its business. In management's opinion, after consultation
with legal counsel, these actions will not have a material adverse effect
on the Company's financial condition or results of operations.
10
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
Board of Directors and Stockholders
The Topps Company, Inc.
We have made a review of the accompanying condensed consolidated balance sheet
of The Topps Company, Inc. and subsidiaries (the "Company") as of June 2, 2001,
and the related condensed consolidated statements of operations and cash flows
for the thirteen week periods ended June 2, 2001 and May 27, 2000. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of obtaining an understanding of the system for
the preparation of interim financial information, applying analytical procedures
to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with auditing standards generally accepted in the United
States of America, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Company as of March 3, 2001,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended (not presented herein); and in our report
dated April 4, 2001 we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of March 3, 2001 is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
DELOITTE & TOUCHE LLP
SIGNATURE
June 22, 2001
New York, New York
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
First Quarter Fiscal Year 2002 versus Fiscal Year 2001
------------------------------------------------------
The following table sets forth, for the periods indicated, net sales by key
business segment:
June May
2, 2001 27, 2000
------- --------
(In thousands of dollars)
Confectionery $ 45,367 $ 52,442
Collectible Sports Products 30,911 29,110
Entertainment Products 11,173 62,780
------ -------
Total $ 87,451 $144,332
====== =======
Net sales for the first quarter of fiscal 2001 decreased 39.4% to $87.5 million
from $144.3 million for the same period last year. This decrease was a function
of a significant reduction in Pokemon sales to $10.2 million in the quarter this
year from $75.4 million last year.
Net sales of confectionery products, which include, among other things, Bazooka
brand bubble gum and Ring Pop, Push Pop, Baby Bottle Pop and Pokemon candies,
decreased 13.5% in the first quarter of this year to $45.4 million from $52.4
million in fiscal 2001. Included in fiscal 2002 sales are $1.5 million of
Pokemon confectionery products versus $12.9 million in fiscal 2001. Topps
branded (non-Pokemon) confectionery sales grew 11.3% in the quarter to $43.9
million, versus $39.5 million last year, with Baby Bottle Pop continuing to show
the largest gains.
Net sales of collectible sports products, which consist of both sports cards and
sports sticker/album products, increased 6.2% to $30.9 million in the first
quarter of fiscal 2002 from $29.1 million in the comparable period last year.
This growth reflects increases in both baseball, where we continue to benefit
from a focus on nostalgia and the Company's 50th anniversary of marketing
baseball cards, as well as in football.
Net sales of entertainment products, which consist of entertainment cards and
the Merlin line of entertainment sticker/album products, decreased to $11.2
million in the first quarter of fiscal 2002 from $62.8 million in fiscal 2001
reflecting lower sales of Pokemon products.
Gross profit for the quarters ended June 2, 2001 and May 27, 2000 includes costs
for autographs, relics and freight which were previously recorded within
selling, general and administrative expenses ("SG&A"). Gross profit as a
percentage of net sales for the first quarter of fiscal 2002 decreased to 43.8%
from 47.4% for the same period last year as a result of an increase in autograph
and relic costs and the reduction in Pokemon sales in the quarter this year.
Other income was $728,000 this year versus $647,000 last year, reflecting
mark-to-market treatment of foreign currency contracts this year and unusually
high levels of prompt payment discounts on European inventory purchases last
year.
SG&A increased as a percentage of net sales to 25.2% in the first quarter of
fiscal 2002 from 16.0% a year ago as a result of lower sales. SG&A dollar
spending decreased to $22.0 million in fiscal 2002 from $23.0 million last year
as a result of the timing of bonus and advertising expenditures as well as the
reversal of a marketing accrual which benefited the quarter this year.
12
Net interest income increased to $1.5 million in fiscal 2002 from $811,000 in
fiscal 2001 due to an increase in cash on hand. The tax rate in the first
quarter of fiscal 2002 was 37% vs. 38% in the first quarter of fiscal 2001.
Net income for the first quarter of fiscal 2002 was $11.6 million, or $0.26 per
diluted share, as compared with $29.0 million, or $0.62 per diluted share last
year.
Liquidity and Capital Resources
-------------------------------
On June 26, 2000, the Company entered into a credit agreement with Chase
Manhattan Bank and LaSalle Bank National Association. The agreement provides for
a $35.0 million unsecured facility to cover revolver and letter of credit needs
and expires on June 26, 2004. Interest rates are variable and are a function of
the Company's EBITDA. The credit agreement contains restrictions and
prohibitions of a nature generally found in loan agreements of this type and
requires the Company, among other things, to comply with certain financial
covenants, limits the Company's ability to repurchase its shares, sell or
acquire assets or borrow additional money and prohibits the payment of
dividends. The credit agreement may be terminated by the Company at any point
over the four year term (provided the Company repays all outstanding amounts
thereunder) without penalty.
In October 1999, the Board of Directors authorized the Company to repurchase up
to 5 million shares of its stock. As of June 2, 2001, the Company had
repurchased a total of 3.9 million shares at an average price of $9.08. During
the first quarter of fiscal 2002, the Company repurchased 692,500 shares at an
average price of $9.52.
As of June 2, 2001, the Company had $144.2 million in cash and cash equivalents.
During the first quarter of fiscal 2002, the Company's net decrease in cash and
cash equivalents was $14.5 million versus an $11.5 million increase in the first
quarter of fiscal 2001. Cash provided (used) by operating activities in the
first quarter of this year was ($7.4) million versus $16.3 million last year, as
a result of lower net income and a decrease in payables and other current
liabilities related to income tax payments. Cash used in investing activities
reflects $1.3 million in capital expenditures this year compared with $818,000
in capital expenditures last year. Cash used in financing activities reflects
expenditures for the repurchase of Company stock of $6.6 million this year and
$4.5 million last year.
Management believes that the Company has adequate means to meet its liquidity
and capital resource needs over the foreseeable future.
13
Cautionary Statements
---------------------
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby filing
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in any forward-looking
statements of the Company made by or on behalf of the Company, whether oral or
written. Among the factors that could cause the Company's actual results to
differ materially from those indicated in any such forward statements are: (i)
the failure of certain of the Company's principal products, particularly sports
cards, entertainment cards, lollipops and sticker/album collections, to achieve
expected sales levels; (ii) quarterly fluctuations in results; (iii) the
Company's loss of important licensing arrangements; (iv) technological,
production, legal costs or other problems which result in the Company's
inability to launch its Internet initiative; (v) the failure of the Company's
Internet initiative to achieve expected levels of success; (vi) the Company's
loss of important supply arrangements with third parties; (vii) the loss of any
of the Company's key customers or distributors; (viii) further prolonged and
material contraction in the trading card industry as a whole; (ix) further
declines in the sale of U.K. Premier League sticker/album collections; (x)
excessive returns of the Company's products; (xi) civil unrest, currency
devaluation or political upheaval in certain foreign countries in which the
Company conducts business; as well as other risks detailed from time to time in
the Company's reports and registration statements filed with the Securities and
Exchange Commission.
.
14
ITEM 3. DISCLOSURES ABOUT MARKET RISK
The Company's exposures to market risk associated with activities in derivative
financial instruments (e.g., hedging or currency swap agreements), other
financial instruments and derivative commodity instruments is confined to the
impact of mark-to-market changes in foreign currency rates on the Company's
forward contracts and options. The Company has no debt and does not engage in
any commodity-related derivative transactions. As of June 2, 2001, the Company
had contracts and options which were entered into for the purpose of hedging
forecasted receipts and disbursements in various foreign currencies and which,
due to the strengthening of the U.S. dollar, resulted in a favorable
mark-to-market in the quarter.
15
THE TOPPS COMPANY, INC.
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company took place on June 28, 2001
for the following purposes:
1. To elect three directors;
2. To approve the Company's 2001 stock incentive plan;
3. To ratify the appointment of auditors.
The results of the matters voted on are as follows:
For Withheld
---------- ---------
1. Election of Directors
Allan A. Feder 39,773,362 1,172,094
David M. Mauer 38,330,038 2,615,418
Jack H. Nusbaum 39,757,947 1,187,509
For Against Abstentions
---------- --------- -----------
2. Approval of stock incentive
plan 35,213,521 5,073,669 658,266
3. Ratification of appointment
of auditors 40,840,544 55,536 49,376
16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits as required by Item 601 of Regulation S-K
10.24 2001 Stock Incentive Plan
17
SIGNATURE
Pursuant to the requirements 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.
THE TOPPS COMPANY, INC.
-----------------------
REGISTRANT
/s/ Catherine Jessup
-----------------------
Vice President-Chief Financial Officer
July 17, 2001
18