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 May 31, 2003
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 .
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 126-2 of the Act). Yes X No _.
The number of outstanding shares of Common Stock as of July 3, 2003 was
40,708,851.
THE TOPPS COMPANY, INC.
AND SUBSIDIARIES
--------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
--------------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
Index Page
Condensed Consolidated Balance Sheets as of
May 31, 2003 and March 1, 2003 3
Condensed Consolidated Statements of Operations
for the thirteen weeks ended May 31, 2003
and June 1, 2002 4
Condensed Consolidated Statements of Comprehensive
Income for the thirteen weeks ended May 31, 2003
and June 1, 2002 5
Condensed Consolidated Statements of Cash Flows
or the thirteen weeks ended May 31, 2003
and June 1, 2002 6
Notes to Condensed Consolidated Financial Statements 7
Report of Independent Public Accountants 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14
ITEM 3. DISCLOSURES ABOUT MARKET RISK 17
ITEM 4. CONTROLS AND PROCEDURES 18
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PART II - OTHER INFORMATION
--------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 20
2
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
May March
31, 2003 1, 2003
-------- -------
ASSETS (amounts in thousands)
------
CURRENT ASSETS:
Cash and cash equivalents ........................... $ 113,910 $114,259
Accounts receivable - net ........................... 25,068 25,205
Inventories ......................................... 30,887 28,681
Income tax receivable ............................... 846 2,029
Deferred tax assets ................................. 3,479 3,267
Prepaid expenses and other current assets ........... 10,761 10,302
--------- ---------
TOTAL CURRENT ASSETS ............................ 184,951 183,743
--------- ---------
PROPERTY, PLANT & EQUIPMENT ........................... 29,802 28,941
Less: accumulated depreciation and amortization .... 15,337 14,335
--------- ---------
NET PROPERTY, PLANT & EQUIPMENT ................. 14,465 14,606
--------- ---------
GOODWILL .............................................. 48,839 48,839
INTANGIBLE ASSETS, net of accumulated amortization of
$31,959 and $31,669 as of May 31, 2003 and March 1,
2003, respectively .................................. 5,996 6,041
OTHER ASSETS .......................................... 8,989 8,399
--------- ---------
TOTAL ASSETS .................................... $ 263,240 $ 261,628
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable .................................... $ 8,729 $ 9,074
Accrued expenses and other liabilities .............. 24,189 29,243
Income taxes payable ................................ 4,402 3,942
--------- ---------
TOTAL CURRENT LIABILITIES ....................... 37,320 42,259
OTHER LIABILITIES ..................................... 23,077 22,601
--------- ---------
TOTAL LIABILITIES ............................... 60,397 64,860
--------- ---------
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 49,244,000 shares as of
May 31, 2003 and March 1, 2003 .................... 492 492
Additional paid-in capital .......................... 27,475 27,344
Treasury stock, 8,540,000 shares and 8,564,000 shares
as of May 31, 2003 and March 1, 2003, respectively . (80,678) (80,791)
Retained earnings ................................... 266,398 262,877
Accumulated other comprehensive loss, net of income
taxes ............................................. (10,844) (13,154)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ........................... 202,843 196,768
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...... $ 263,240 $ 261,628
========= ==========
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
May June
31, 2003 1, 2002
-------- -------
Net sales $ 76,112 $ 87,751
Cost of sales 47,771 55,104
-------- --------
Gross profit on sales $ 28,341 $ 32,647
Other income (expense) 398 ( 66)
-------- --------
28,739 32,581
Selling, general and administrative expenses 24,356 21,916
-------- --------
Income from operations 4,383 10,665
Interest income, net 1,034 632
-------- --------
Income before provision for income taxes 5,417 11,297
Provision for income taxes 1,896 3,956
-------- --------
Net income $ 3,521 $ 7,341
======== ========
Net income per share - basic $0.09 $0.17
- diluted 0.08 0.17
Weighted average shares outstanding - basic 40,694,000 42,000,000
- diluted 41,480,000 42,960,000
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
May June
31, 2003 1, 2002
-------- -------
(amounts in thousands)
Net Income $ 3,521 $ 7,341
Currency translation adjustment 2,310 859
------- -------
Comprehensive income $ 5,831 $ 8,200
======= =======
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
May June
31, 2003 1, 2002
-------- -------
(amounts in thousands)
Cash flows from operating activities:
Net income ........................................ $ 3,521 $ 7,341
Add/(subtract) non-cash items included in net income:
Depreciation and amortization ..................... 1,279 1,160
Deferred income taxes ............................. (212) 1,715
Change in operating assets and liabilities:
Accounts receivable ............................. 137 (15,799)
Inventories ..................................... (2,206) (1,340)
Income tax receivable ........................... 1,644 2,356
Prepaid expenses and other current assets ....... (460) 1,153
Payables and other current liabilities .......... (5,399) (2,090)
Other assets and liabilities .................... 326 (1,840)
--------- ---------
Cash used in operating activities ............. (1,370) (7,344)
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment ....... ( 861) (1,249)
--------- ---------
Cash used in investing activities ............. ( 861) (1,249)
--------- ---------
Cash flows from financing activities:
Purchase of treasury stock and exercise of
stock options ................................. 245 (2,065)
--------- ---------
Cash provided by (used in) financing activities ..... 245 (2,065)
--------- ---------
Effect of exchange rates on cash and cash equivalents 1,637 (1,048)
Net decrease in cash and cash equivalents ........... $ (349) $(11,706)
======== =========
Cash and cash equivalents at beginning of period .... 114,259 121,057
Cash and cash equivalents at end of period .......... $113,910 $109,351
Supplemental disclosure of cash flow information:
Interest paid ..................................... $ 4 $ 23
Income taxes paid ................................. $ 1,906 $ 1,256
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 May 31, 2003
1. Summary of Significant Accounting Policies
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 May 31, 2003 are not necessarily indicative
of the results that may be expected for the year ending February 28, 2004. For
further information refer to the consolidated financial statements and notes
thereto in the Company's annual report for the year ended March 1, 2003.
Employee Stock Options: The Company accounts for stock-based employee
compensation based on the intrinsic value of stock options granted in accordance
with the provisions APB 25 "Accounting for Stock Issued to Employees."
Information relating to stock-based employee compensation, including the pro
forma effects had the Company accounted for stock-based employee compensation
based on the fair value of stock options granted in accordance SFAS 123,
"Accounting for Stock-Based Compensation," is shown below:
(In thousands of dollars, except share data)
As reported Pro forma As reported Pro forma
------------------------------------------- ----------------------
2004 2003
--------------------- ----------------------
Net Income $ 3,521 $ 3,321 $ 7,341 $ 7,004
Earnings per share $ 0.08 $ 0.07 $ 0.17 $ 0.16
------------------------------------------- ----------------------
Options typically vest over a three-year period. In determining the preceding
pro forma amounts under SFAS 123, the fair value of each option grant is
estimated as of the date of grant using the Black-Scholes option-pricing model
with the following assumptions: no dividend yield in any year; risk free
interest rate, estimated volatility and expected life, as follows: fiscal 2003 -
4.5%, 35% and 6.5 years, respectively; fiscal 2002 - 5.7%, 59% and 6.7 years,
respectively; and fiscal 2001- 6.5%, 56% and 6.6 years, respectively.
2. Quarterly Comparison
Management believes that quarter-to-quarter comparisons of sales and operating
results are affected by a number of factors, including, but not limited to, the
timing of sports and entertainment releases, new product introductions, seasonal
products, the timing of various expenses such as advertising and variations in
shipping and factory scheduling requirements. Thus, quarterly results may vary.
3. Accounts Receivable
(Unaudited)
May March
31, 2003 1, 2003
-------- -------
(amounts in thousands)
Gross receivables ................ $ 48,751 $ 43,250
Reserve for returns .............. (21,823) (16,443)
Reserve for discounts and bad debt (1,860) (1,602)
-------- --------
Net ............................ $ 25,068 $ 25,205
======== ========
7
4. Inventories
(Unaudited)
May March
31, 2003 1, 2003
-------- -------
(amounts in thousands)
Raw materials .................... $ 7,295 $ 6,162
Work in process .................. 1,810 2,229
Finished product ................. 21,782 20,290
------- -------
Total .......................... $30,887 $28,681
======= =======
5. Segment Information
Following is the breakdown of industry segments as required by SFAS No. 131
"Disclosures About Segments of an Enterprise and Related Information." The
Company has two reportable business segments: Confectionery and Entertainment.
Consistent with Topps organizational structure and product line similarities,
Entertainment now combines the former Sports and Entertainment segments into
one.
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 licensed
confections including Pokemon and Yu-Gi-Oh! products.
The Entertainment segment primarily consists of cards and sticker album products
featuring sports and non-sports licenses. Trading cards feature players from
Major League Baseball, the National Basketball Association, the National
Football League, and the National Hockey League, as well as characters from
popular films, television shows and other entertainment properties. Sticker
album products feature players from English Premier League and certain other
European soccer teams, as well as characters from entertainment properties
including Pokemon and Yu-Gi-Oh! This segment also includes results from thePit,
etopps and Topps Vault.
The Company's management regularly 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 (expense), net interest and income
taxes.
The Company does not allocate assets between its business segments and therefore
does not include a breakdown of assets or depreciation and amortization by
segment.
Thirteen weeks ended
May June
31, 2003 1, 2002
-------- -------
(amounts in thousands)
Net Sales
Confectionery .............................. $ 45,589 $ 43,092
Entertainment .............................. 30,523 44,659
-------- --------
Total ...................................... $ 76,112 $ 87,751
======== ========
Contributed Margin
Confectionery .............................. $ 13,769 $ 16,032
Entertainment .............................. 7,123 11,603
-------- --------
$ 20,892 $ 27,635
======== ========
Reconciliation of Contributed Margin to
Income Before Provision for Income Taxes:
Total Contributed Margin ................... $ 20,892 $ 27,635
Unallocated General and Administrative
Expenses and Manufacturing Overhead ...... (15,628) (15,744)
Depreciation & Amortization ................ (1,279) (1,160)
Other Income (Expense) ..................... 398 (66)
-------- --------
Income from Operations ..................... 4,383 10,665
Interest Income, Net ....................... 1,034 632
-------- --------
Income Before Provision for Income Taxes ... $ 5,417 $ 11,297
======== ========
8
6. Dividends
On June 26, 2003, the Board of Directors of the Company declared a quarterly
cash dividend of $0.04 per share, payable on August 1, 2003 to shareholders of
record on July 18, 2003.
7. 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. On June 1, 2002, the credit agreement was amended
to provide for an increase in the number of shares of Topps common stock
permitted to be repurchased. The Company has obtained a waiver to its agreement
with respect to the payment of dividends on August 1, 2003. There was no debt
outstanding as of May 31, 2003.
8. Reclassifications
Effective March 3, 2002, the Company adopted the EITF Issue No. 00-14
"Accounting for Sales Incentives" which requires certain trade promotion
expenses, such as slotting fees, to be presented as a reduction in sales. As a
result, trade promotion expenses for the thirteen weeks ended May 31, 2003 and
June 1, 2002 of $407,000 and $798,000, respectively, have been reported as a
reduction of net sales rather than as marketing expense. These changes did not
impact reported earnings in either period.
9. Intangible Assets
On March 3, 2002, the Company adopted SFAS 141 "Business Combinations" and SFAS
142 "Goodwill and Other Intangible Assets" which require the Company to
prospectively cease amortization of goodwill and instead conduct periodic tests
of goodwill for impairment.
SFAS 142 prescribes an annual two-phase process for impairment testing of
goodwill. The first phase, completed on May 31, 2003, screens for impairment;
while the second phase (if necessary), required to be completed by November 30,
2003, measures the impairment. The Company has completed the first phase and
concluded that no impairment of goodwill exists. Therefore, completion of phase
two is not necessary.
9
For the thirteen weeks ended May 31, 2003, no goodwill or other intangibles were
acquired, impaired or disposed. Intangible assets consisted of the following as
of May 31, 2003 and March 1, 2003:
(amounts in thousands)
May 31, 2003 March 1, 2003
(Unaudited)
Gross ' Gross
Carrying Accumulated ' Carrying Accumulated
Value Amortization Net ' Value Amortization Net
--------------------------------'-----------------------------------
Licenses & Contracts ........ $21,879 $16,813 $5,066 ' $21,879 $16,594 $5,285
Intellectual Property ....... 12,584 12,512 72 ' 12,584 12,473 111
Software & Other ............ 2,953 2,634 319 ' 2,953 2,602 351
Minimum Pension Liability ... 539 -- 539 ' 294 -- 294
------- ------- ------ ' ------- ------- ------
Total Intangibles ........... $37,955 $31,959 $5,996 ' $37,710 $31,669 $6,041
======= ======= ====== ' ======= ======= ======
Over the next five years the Company estimates annual amortization of the
intangible assets detailed above to be as follows:
Fiscal Year Amount
----------- ------
(in thousands)
2004 $1,060
2005 $ 826
2006 $ 826
2007 $ 748
2008 $ 670
In addition to the amortization of intangibles listed above, reported
amortization expense, which was $321,000 for the three months ended May 31,
2003, included amortization of deferred financing fees.
10
10. Legal Proceedings
In November 2000, the Commission of the European Communities ("the Commission")
began an investigation into whether Topps Europe's distribution arrangements for
its licensed products comply with European law ("the EU investigation"). The
Commission is seeking information as to whether Topps Europe has engaged in the
prevention of parallel trade between the member states of the European Union
and/or European Economic Area, in infringement of Article 81 of the EC Treaty
and/or Article 54 of the EEA Treaty. Topps Europe filed a response to the
Commission's inquiry on November 29, 2000, and provided further information to
the Commission on February 2, 2001, pursuant to its request. The Commission
continued its investigation by submitting new requests for documents and
information in early 2003 and Topps Europe continues to fully cooperate. On June
17, 2003, the Commission took the first formal step in the investigation and
filed a Statement of Objections, therein coming to a preliminary conclusion that
Topps and its European subsidiaries infringed Article 81 of the EC treaty during
2000. Topps and Topps Europe will formally respond to the Statement of
Objections within the time allowed by the Commission, at which point the parties
will proceed to a hearing in front of the European Commission Tribunal. If the
Commission were to levy a fine that is ultimately upheld, it could be
substantial. The maximum amount of the fine that could be levied against Topps
and Topps Europe is 10% of annual revenues.
On February 17, 2000, Telepresence, Inc. sued Topps and nine other manufacturers
of trading cards (the "Defendants") in the Federal District Court for the
Central District of California for infringement of U.S. Patent No. 5,803,501
which was issued on September 8, 1998 ("the 501 Patent"). In its suit,
Telepresence contended that the patent covers all types of "relic" cards that
contain an authentic piece of equipment, i.e., a sporting implement or jersey.
Topps received an opinion of counsel that its relic cards did not infringe the
501 Patent. After initial discovery, on November 15, 2000 the Defendants jointly
moved for summary judgement on the grounds that the named Plaintiff
(Telepresence, Inc.) did not have standing to sue for infringement of the 501
Patent. The motion was granted and the Telepresence litigation was dismissed
with prejudice on March 28, 2001.
After the dismissal, the 501 Patent was assigned to a company called Media
Technologies, Inc. Media Technologies is under the control of the same person
(the inventor, Adrian Gluck) who orchestrated the Telepresence action. On
November 19, 2001, Media Technologies sued essentially the same group of
defendants in the same court for infringement of the 501 Patent. On March 13,
2002, the Defendants again moved for summary judgment based on the fact that the
Telepresence action was dismissed with prejudice. That motion was granted by the
District Court on April 22, 2002. Plaintiff (Media Technologies, Inc.) appealed
on May 2, 2002. That appeal is presently pending before the Court of Appeals for
the Federal Circuit. Oral argument was held on April 9, 2003 and a decision is
expected in the near future. If the dismissal is overturned, the parties will
then engage in discovery on the substantive issues of the case. An adverse
outcome in the litigation could result in a substantial liability for the
Company.
The Company is a defendant in several other civil actions. In management's
opinion, after consultation with legal counsel, these other actions will not
have a material adverse effect on the Company's financial condition or results
of operations.
11
11. Acquisition of Wizkids, LLC
On July 9, 2003, the Company acquired Wizkids, LLC ("WizKids") for a cash
purchase price of approximately $29.5 million. WizKids, a designer and marketer
of collectible strategy games, is headquartered in Bellevue, Washington, and
generated net revenues in 2002 of approximately $33 million, principally in the
U.S.
12. Recently Issued Accounting Pronouncements
In April 2003, SFAS No. 149, "Amendment of Statement 133 on Derivative Financial
Instruments and Hedging Activities," was issued and is effective for contracts
entered into or modified after June 30, 2003, except as stated below and for
hedging relationships designated after June 30, 2003. The changes in this
Statement improve financial reporting by requiring that contracts with
comparable characteristics be accounted for similarly. In particular, this
Statement (1) clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative discussed in paragraph 6(b)
of Statement 133, (2) clarifies when a derivative contains a financing
component, (3) amends the definition of an underlying guarantee to conform it to
language used in FASB Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" and (4) amends certain other existing pronouncements.
The Company does not believe this Statement will have a material effect on its
consolidated results of operations or financial position.
In May 2003, SFAS No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity," was issued and is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003, except for mandatory redeemable financial instruments of nonpublic
entities. This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. The Company does not
believe this Statement will have a material effect on its consolidated results
of operations or financial position.
In January of 2003, FASB Interpretation No. (FIN) 46, "Consolidation of Variable
Interest Entities and Interpretation of ARB No. 51," was issued and applies
immediately to variable interest entities created after January 31, 2003, and to
variable interest entities in which an enterprise obtains an interest after that
date. It applies in the first fiscal year or interim period beginning after June
15, 2003 to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. This Interpretation clarifies
the application of ARB No. 51, Consolidated Financial Statements, to certain
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The Company does not believe this Statement will
have a material effect on its consolidated results of operations or financial
position.
12
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders of
The Topps Company, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of The
Topps Company, Inc. and subsidiaries (the "Company") as of May 31, 2003, and the
related condensed consolidated statements of operations and cash flows for the
thirteen weeks ended May 31, 2003 and June 1, 2002. 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 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 accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of the
Company as of March 1, 2003, 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, 2003 we expressed an
unqualified opinion (and included an explanatory paragraph with respect to the
adoption of the non-amortization provisions for goodwill and other indefinite
lived intangible assets, as discussed in Note 6 to the consolidated financial
statements) on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of March 1, 2003 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 23, 2003
New York, New York
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
First Quarter Fiscal Year 2004 (thirteen weeks ended May 31, 2003) versus First
Quarter Fiscal Year 2003 (thirteen weeks ended June 1, 2002)
The following table sets forth, for the periods indicated, net sales by key
business segment:
Thirteen weeks ended
May June
31, 2003 1, 2002
-------- -------
(amounts in thousands)
Net Sales
---------
Confectionery ........ $ 45,589 $ 43,092
Entertainment ........ 30,523 44,659
-------- --------
Total ................ $ 76,112 $ 87,751
======== ========
Net sales for the first quarter of fiscal 2004 decreased 13.3% to $76.1 million
from $87.8 million for the same period last year. Stronger foreign currencies
versus the dollar in the fiscal 2004 first quarter increased sales by $3.0
million.
Net sales of confectionery products, which include, among other things, Bazooka
brand bubble gum and Ring Pop, Push Pop, Baby Bottle Pop and licensed candy
products, increased 5.8% in the first quarter of this year to $45.6 million from
$43.1 million in fiscal 2003. Sales of Baby Bottle Pop in the U.S. grew 40%.
Additionally, the introduction of Juicy Drop Pop in the U.K., sales of Pokemon
and Yu-Gi-Oh! licensed confectionery products, and strong seasonal Easter sales
in the U.S. contributed to growth and helped offset lower U.S. sales of both
Ring Pop and Push Pop.
Net sales of entertainment products, which consist of cards, sticker albums and
Internet activities, decreased 31.7% to $30.5 million in the first quarter of
fiscal 2004 from $44.7 million in the same period last year. Sales of
traditional sports card products decreased just over 30%. In late fiscal 2003
the Company decided to reduce the number of products offered due to continued
weakness in the industry. Sales of non-sports licensed products also decreased
due to strong sales of Star Wars and Marvel last year versus the roll-out of
Yu-Gi-Oh! products this year. Third, although this has been a strong season for
European sports products, sales in the quarter were below last year due to the
absence of products associated with the World Cup soccer tournament, which
occurs every four years, and to the timing of English Premier League sticker
album sales. Finally, while reported Internet sales in the quarter were above
last year, this increase was driven by a deferral of certain fourth quarter
revenues into the first quarter, as required by GAAP.
Gross profit as a percentage of net sales for the first quarter of fiscal 2004
was flat with last year at 37.2%. This was primarily a function of higher
material costs in the U.S. and an increase in obsolescence expense, offset by
the favorable impact of lower royalty expense due to the reduced percentage of
sports and publishing products this year.
Other income was $398,000 this year versus a $66,000 expense last year. This
favorability was primarily the result of a shift of mark-to-market adjustments
on foreign currency contracts to the revenue and cost of goods sold lines this
year, where there is a better match with the items being hedged, from the other
income (expense) line last year.
14
SG&A as a percentage of net sales was 32.0% in the first quarter of fiscal 2004
versus 25.0% a year ago, and SG&A dollar spending increased to $24.4 million
from $21.9 million. The dollar increase was largely the result of higher
marketing costs related to new product introductions in Europe and the timing of
TV commercial production in the U.S.
Net interest income in the quarter was $1.0 million in fiscal 2004 versus
$632,000 in fiscal 2003, with the increase in fiscal 2004 due to interest from
the IRS on a tax refund received in the first quarter this year.
The effective tax rate reflects provisions for federal, state and local income
taxes in accordance with statutory income tax rates. The Company's tax rate was
35.0% in both years.
Net income for the first quarter of fiscal 2004 was $3.5 million, or $0.08 per
diluted share, compared with $7.3 million, or $0.17 per diluted share last year.
Liquidity and Capital Resources
-------------------------------
Management believes that the Company has adequate means to meet its liquidity
and capital resource needs over the foreseeable future as a result of the
combination of cash on hand, anticipated cash from operations and credit line
availability.
At May 31, 2003, the Company had $113.9 million in cash and cash equivalents.
Subsequently, the Company disbursed approximately $31 million for the purchase
price and costs associated with the acquisition of the Wizkids, LLC.
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. On June 1, 2002, the credit agreement was amended
to provide for an increase in the number of shares of Topps common stock
permitted to be repurchased. The Company has obtained a waiver to its agreement
with respect to the payment of dividends on August 1, 2003. There was no debt
outstanding as of May 31, 2003.
In October 1999, the Board of Directors authorized the Company to purchase up to
5 million shares of its stock. In October 2001, purchases against this
authorization were completed, and the Board of Directors authorized the purchase
of up to an additional 5 million shares of stock. During the first quarter of
fiscal 2004, the Company did not purchase any shares. As of May 31, 2003, the
Company had repurchased a total of 1.6 million shares at an average price per
share of $9.01 under the second authorization.
In the quarter ended May 31, 2003, the Company's net decrease in cash and cash
equivalents was $349,000 versus a decrease of $11.7 million in the comparable
period of fiscal 2003. Cash used by operating activities in the quarter this
year was $1.4 million versus $7.3 million last year, largely due to an increase
in accounts receivable resulting primarily from a decrease in the return reserve
for sports and entertainment products in the quarter last year. Additionally
this year, inventories were higher, and payables were lower due to disbursements
for sports royalty payments, a legal settlement and employee incentive payments
in fiscal 2004.
Cash used in investing activities, which reflects the Company's capital
spending, was $861,000 in the first quarter this year versus $1.2 million last
year due to lower spending on computer systems and software. Cash provided by
financing activities was a positive $245,000 in fiscal 2004, reflecting the
exercise of stock options and no treasury stock purchases, versus a use of $2.1
million in fiscal 2003 primarily for the purchase of treasury stock.
15
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) the Company's inability to produce timely, or at
all, certain new planned confectionery products; (iii) quarterly fluctuations in
results; (iv) the Company's loss of important licensing arrangements; (v) the
failure of etopps, the Company's on-line trading card 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) excessive returns of the Company's
products; (x) civil unrest, currency devaluation, health-related issues, or
political upheaval in certain foreign countries in which the Company conducts
business; (xi) an adverse outcome in the EU investigation, 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.
Critical Accounting Policies
----------------------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires Topps management to
make estimates and assumptions that affect the reported amounts of revenue,
expenses, assets, liabilities and the disclosure of contingent assets and
liabilities.
On an on-going basis, Topps management evaluates its estimates and judgments,
including those related to revenue recognition, intangible assets, and reserves,
based on historical experience and on various other factors that are believed to
be reasonable under the circumstances. Actual results may differ from these
estimates. Note 1 to the Company's Annual Report "Summary of Significant
Accounting Policies" summarizes each of its significant accounting policies.
Additionally, Topps management believes the following critical accounting
policies, among others, affect its more significant judgments and estimates used
in the preparation of its consolidated financial statements.
Revenue Recognition: Revenue related to sales of the Company's products is
generally recognized when products are shipped, the title and risk of loss has
passed to the customer, the sales price is fixed or determinable and
collectibility is reasonably assured. Sales made on a returnable basis are
recorded net of a provision for estimated returns. These estimates are revised,
as necessary, to reflect actual experience and market conditions.
Intangible Assets: Intangible assets include trademarks and the value of sports,
entertainment and proprietary product rights. Amortization is by the
straight-line method over estimated lives of up to twenty years. Management
evaluates the recoverability of intangible assets under the provisions of SFAS
144, based on undiscounted projections of future cash flows attributable to the
individual assets.
Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires Topps management to make estimates and
assumptions which affect the reporting of assets and liabilities as of the dates
of the financial statements and revenues and expenses during the reporting
period. These estimates primarily relate to the provision for sales returns,
allowance for doubtful accounts, inventory obsolescence and asset valuations.
Actual results could differ from these estimates.
16
ITEM 3. DISCLOSURES ABOUT MARKET RISK
The Company's exposure 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 outstanding and does not
engage in any commodity-related derivative transactions. As of May 31, 2003, 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, primarily due to the weakening of the U.S. dollar, resulted in an
unfavorable mark-to-market adjustment in the quarter.
17
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Based on their evaluation as of a date within 90 days of the filing date of this
Quarterly Report on Form 10-Q, the Company's Chief Executive Officer and Chief
Financial Officer have concluded that the Company's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934 (the "Exchange Act")) are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
(b) Changes in internal controls.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation. There were no significant deficiencies or material weaknesses,
and therefore there were no corrective actions taken.
18
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 26, 2003
for the following purposes:
1. To elect three directors;
2. To ratify the appointment of auditors.
The results of the matters voted on are as follows:
For Withheld
---------- ----------
1. Election of Directors
Arthur T. Shorin 27,242,432 7,596,448
Edward D. Miller 34,398,451 440,429
Stanley Tulchin 34,388,684 450,195
For Withheld Against
---------- ---------- -------
2. Ratification of appointment
of auditors 34,600,409 223,328 15,142
19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits as required by Item 601 of Regulation S-K filed herewith:
10.22 Letter of Intent between the Company and the National Football League
Properties, Inc., dated May 9, 2003.
99.1 Certification of Arthur T. Shorin, Chief Executive Officer and President,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
99.2 Certification of Catherine K. Jessup, Vice-President and Chief Financial
Officer and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
1. Form 8-K dated April 8, 2003 with press release dated April 8, 2003
reporting the Company's fiscal 2003 fourth quarter and full year results.
2. Form 8-K dated April 8, 2003 reflecting the historical restatement of the
Company's business segment information.
3. Form 8-K dated June 23, 2003 with press release dated June 23, 2003
reporting the Company's fiscal 2004 first quarter and the acquisition of
the Wizkids, LLC.
20
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 10, 2003
21
CERTIFICATION
I, Arthur T. Shorin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Topps Company,
Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function);
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: July 10, 2003
THE TOPPS COMPANY, INC.
-----------------------
REGISTRANT
/s/ Arthur T. Shorin
-----------------------
Chairman, Chief Executive
Officer and President
22
CERTIFICATION
I, Catherine K. Jessup, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Topps Company,
Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function);
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: July 10, 2003
THE TOPPS COMPANY, INC.
-----------------------
REGISTRANT
/s/ Catherine K. Jessup
-----------------------
Vice President-Chief Financial
Officer
23
Exhibit 10.22
May 9, 2003
Scott Silverstein
The Topps Company, Inc.
One Whitehall Street
New York,NY 10004
Re: Intent to Renew NFL License #1808
--------------- -----------------
Dear Scott:
This letter confirms NFL Properties' intent to grant you a license to
manufacture, distribute and sell the NFL products listed below subject to all of
the terms and conditions of NFL Properties' standard general retail license
agreement.
In addition to these standard terms and conditions, the license will contain the
following terms:
Term: April 1, 2003 - March 31, 2004
Territory: The United States, its territories, possessions
and military bases, Canada, England, Japan,
Europe, Australia, New Zealand and all other
countries throughout the world where NFLP owns
common-law rights or registrations for the Marks
Licensed Products: NFL Player Identified Trading Cards under the
Authorized Brands/Set Names listed below in
Authorized Brands.
Royalty Rate of Net Sales: 9% for net sales between $1 and $11,000,000
8% for net sales between $11,000,001 and $16,000,000
9% for net sales above $16,000,001
Advance Royalty Payment: $200,000
Minimum Royalty Payment: $1,000,000
Authorized Brands: Topps Draft Picks, Topps, All American, Topps
Chrome, Finest, Bowman, Topps Pristine, Bowman's
Best, Bowman Chrome, Topps Complete Set, ETopps,
Topps Total Football
Marketing Program: Memorabilia
Licensed Marks: Team Marks and the following League Marks:
"National Footaball League", "NFL", "National
Football Conference","American Football Conference",
"NFC", "AFC".
Cooperative Fund: Licensee shall be required to spend a minimum of
$250,000 to promote the NFL trading card business.
With the exception of the specific sponsorhip and
event marketing requirements set forth below, such
monies do not have to be paid directly to NFLP.
Licensee will be able to credit retailer co-op fee
and slotting allowances against this amount as well
as related sponsorships.
24
Disbribution Channels: Airport/Hotel, Card/Party/Craft/Hobby Stores,
Catalog, Children's Specialty, Club Level Shops,
Computer Electronics, Licensee Website, Convenience
Stores, Department Stores, Discount Stores,
Distributors, Drug Stores, Fan Shops, Gallery Shops,
Grocery Stores, Home Stores, Jewelry Stores Licensee
Retail Outlets, Mass Merchandisers, Membership Club
Warehouse, Military Bases, National Chain Stores,
National Sporting Goods, Office Supply Stores, Pro
Football Hall of Fame, Regional Chain Stores,
Stadium Shops/Stadium Concessionaires, Television,
Team Internet, Team Sales, Mid Tier, Related
ECommerce, Toy Stores
NFL Sponsorships: 1. Super Bowl XXXVIII Card Show Title Sponsor -
as outlined in sponsorship deck
2. Pro Bowl Experience Title Sponsor -
as outlined in sponsorship
3. Hall of Fame Sponsor
Advertisements: N/A
Liability Insurance: $3,000,000 personal injury per occurrence
$1,000,000 property damage per occurrence
$3,000,000 advertising liability
Quality Control: You must submit all styles of each of the Licensed
Products to NFL Properties for quality control
approval and must receive such approval prior to
any distribution and/or sale of the products.
Promotional Product: Five cases of each release and on complete set
(inserts such as Relics and Autographs included)
of each brand/release.
Event/Marketing: Licensee shall pay NFL $75,000 per year to be used
in a mutually agreed upon manner to promote the
NFL trading card business.
Condition of License: If you owe any past dues amounts to NFL Properties
or have failed to fulfill any other obligations to
NFL Properties, you will not be issued a license as
contemplated herein.
Special Terms: 1. Royalty Report Forms are due on or before the
15th day following each Month, but payment is due
on or before the 15th day following each Quarter.
2. This license does not grant Licensee any right to
use the names, likenesses, portraits, picutres,
photographs, voices, signatures, facsimile
signatures and biographical information of any
NFL player. Licensee shall have the sole
responsibility for obtaining such rights at
licensee's expense.
3. Licensee shall have the right to use "Super Bowl"
and "Pro Bowl" in an incidental manner only in
connection with the Licensed Products. Licensee
shall have no right to use "Super Bowl" in any
stand-alone set of the Licensed Products.
4. Licensee shall have the right to credit its cost
for the "Retailing for Success" seminar toward
the Cooperative Fund as well as the costs of all
NFL related sponsorships.
25
5. Licensee shall have the exclusive right to insert
gum into the Licensed Products.
6. Internet Advertising:
Licensee shall place the following language in
any approved advertising in the Team-Internet
and related E-Commerce distribution channels;
"Please visit the National Football League's
web site: www.NFL.com
7. Licensee may subtract its cost of the Riddell
mini helmet that is included along with the
trading cards prior to calculating royalties
due NFLP.
8. Licensee may credit product returns for April
and May against the Advance payment due each
term of the License.
9. Confidentiality
The parties acknowledge that the terms of this
license are confidential and each warrants that
neither shall disclose such terms to any third
party other than the disclosing Party's
accountants, agents or attorneys or as required
by law, without the other Party's prior written
consent. The Party's further represent that
neither will disclose nor use the Confidential
Information of the other party during the Term
or thereafter.
Please have an authorized representative of your company acknowledge your
company's acceptance or these terms by signing a copy of this letter where
indicated below and returning it to me within ten days from the date hereof. IF
WE DO NOT RECEIVE A SIGNED COPY OF THIS LETTER WITHIN TEN DAYS, WE WILL ASSUME
YOU HAVE NO INTEREST IN PROCEEDING WITH THE LICENSE AND OUR INTENT TO GRANT A
LICENSE WILL BE AUTOMATICALLY WITHDRAWN. In such event, your company shall have
no right to manufacture, sell or distribute any of the Licensed Products
utilizing the Licensed Marks and any amounts spent by your company in
anticipation of the license contemplated hereunder shall be the sole
responsibility of your company.
Once we receive a copy of this letter signed on behalf of your company, our
Contracts Administration and Information Management Department will send a
long-form license to you within the next several weeks to sign and return to NFL
Properties. The long-form license will become a binding agreement upon
countersignature by NFL Properties and the terms and conditions of the long-form
license shall supercede the terms of this letter. Until such time as NFL
Properties executes the long form license, this countersigned letter shall serve
as a binding agreement between your company and NFL Properties; provided,
however, that until such time as NFL Properties signs the long-form license, NFL
Properties will have the right to terminate any agreement created hereunder and
to withdraw its intent to grant you a license at any time for any reason or for
no reason and without any liability to NFL Properties.
Sincerely,
NFL PROPERTIES LLC
Pete Quaglierini
Manager - Trading Cards and Memorabilia
Consumer Products
cc: G. Goldberg, D. Weinberg, J. Miano, R. Seidlitz
AGREED TO AND ACCEPTED BY:
Scott Silverstein
June 11
26
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*
In connection with the Quarterly Report of The Topps Company, Inc. (the
"Company") on Form 10-Q for the period ended May 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Arthur
T. Shorin, Chairman, Chief Executive Officer and President of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Arthur T. Shorin
Arthur T. Shorin
Chairman, Chief Executive
Officer and President
July 10, 2003
* A signed original of this written statement required by Section 906, or other
documents authenticating, acknowledging, or otherwise adopting the signature
that appears in typed form within the electronic version of this written
statement required by Section 906, has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission
or its staff upon request.
27
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*
In connection with the Quarterly Report of The Topps Company, Inc. (the
"Company") on Form 10-Q for the period ended May 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I,
Catherine K. Jessup, Vice President and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Catherine K. Jessup
Catherine K. Jessup
Vice President -
Chief Financial Officer
July 10, 2003
*A signed original of this written statement required by Section 906, or other
documents authenticating, acknowledging, or otherwise adopting the signature
that appears in typed form within the electronic version of this written
statement required by Section 906, has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission
or its staff upon request.
28