________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 28, 2004
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) (Zip Code)
(212) 376-0300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $.01
(Title of class)
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 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 the 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 [ ].
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 126-2 of the Act). Yes _X_ No ___.
The aggregate market value of Common Stock held by non-affiliates as of the
last business day of the most recently completed fiscal second quarter was
approximately $362,188,000.
The number of outstanding shares of Common Stock as of May 4, 2004 was
40,605,981.
Documents incorporated by reference Part
----------------------------------- ----
Annual Report to Stockholders for the Year Ended February 28, 2004 I,II,IV
Proxy Statement for the 2004 Annual Meeting of Stockholders III
________________________________________________________________________________
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT
The Topps Company, Inc. was incorporated in Delaware on February 24, 1987.
The Company is the successor to Topps Chewing Gum, Inc., which was established
as a partnership in 1938 and was incorporated under the laws of New York in
1947. All references in this Annual Report on Form 10-K to "Topps" or the
"Company" are to The Topps Company, Inc. and its subsidiaries.
Topps is a marketer of premium-branded confectionery products including
lollipops such as Ring Pop, Push Pop and Baby Bottle Pop, chewy products,
specifically Juicy Drop Chews and Juicy Bugs, Bazooka brand bubble gum and
certain licensed candy items. The Company also markets collectible entertainment
products including trading cards and sticker album collections featuring
professional athletes and popular television, movie and other licensed
characters, and collectible strategy games.
In 1995, the Company acquired Merlin Publishing International Limited
("Merlin"), a U.K.-based marketer of licensed collectibles, primarily sticker
album collections. While continuing to market products under the Merlin brand
name, Merlin changed its corporate name to Topps Europe Ltd. ("Topps Europe") in
March 1997. In August 2001, the Company acquired thePit.com, Inc. which operates
an Internet-based sports card exchange. In July 2003, the Company acquired
WizKids, LLC ("WizKids"), a designer and marketer of collectible strategy games.
The Company, which is headquartered in New York, N.Y., also has offices in
Pennsylvania, Delaware, the state of Washington, Canada, the U.K., Ireland,
Italy and Argentina and distributes its products in many countries around the
world.
PRODUCTS
Confectionery
The Company markets premium-quality lollipops and other non-chocolate
confectionery products throughout the United States, Canada, Europe and parts of
Asia, Latin America, and Australia. Branded lollipops include Ring Pop (candy
molded into the form of an exaggerated precious gem stone and anchored to a
plastic ring), Push Pop (a cylinder-shaped lollipop packaged in a plastic
container with a removable cap, designed to enable consumers to eat a portion of
the pop and save the rest for later), Baby Bottle Pop (a miniature baby bottle
filled with fruit-flavored powder or candy juice and topped with a candy nipple)
and Juicy Drop Pop (a lollipop with a separate container of candy juice to be
squirted onto the pop.)
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Trademarks of The Topps Company, Inc. and subsidiaries appearing in this report:
Baby Bottle Pop, Bazooka, Bazooka Joe, Big Mouth Candy Spray, Bowman, etopps,
etopps.com, Garbage Pail Kids, Juicy Bugs, Juicy Drop Chews, Juicy Drop Pop,
Mars Attacks, Merlin, Push Pop, Ring Pop, thePit.com, Topps, Topps Chrome, Topps
Finest, Topps Heritage, Topps Pristine, Wacky Packages and WizKids.
Unless otherwise indicated, all date references refer to fiscal years.
The Company has marketed Bazooka brand bubble gum since 1947. Traditional
chunk Bazooka bubble gum is produced in individually-wrapped rectangular pieces
in a variety of flavors and sold generally at a suggested retail price of five
cents a piece. Individual pieces of Bazooka brand bubble gum include a comic
featuring Bazooka Joe, a copyrighted cartoon character, which celebrated its
fiftieth anniversary in 2003. In addition to individual pieces, the Company
sells multiple-piece packs of Bazooka which are designed for distribution across
all major trade channels.
Licensed confectionery products have included containers replicating the
Pokemon ball with candy and a decorated Pokemon figure inside as well as Pokemon
lollipops. Sales of Pokemon confectionery products began in fiscal 2000 and
peaked in 2001. In 2003, the Company introduced Yu-Gi-Oh! lollipops and
containers.
In the U.S., the Company's confectionery focus is on providing children
with compelling high-quality products, expanding product availability
(distribution points and in-store location) and advertising certain products on
children's television. Over the last few years, the Company has experienced
solid progress in terms of its U.S. retail distribution and brand and
advertising awareness. Near term, the Company expects to place greater emphasis
on new products as a source of growth and will direct its focus accordingly.
Overseas, the primary emphasis is on delivering innovative products to the
marketplace and securing new listings in key retailers. In 2004, confectionery
distribution in Europe was expanded to include Co-op and Norgen Gruppen in
Norway, ICA and Co-op in Sweden, Intermarche in France, and a number of grocery
retailers in Germany.
In fiscal 2004, the Company realized a key strategic objective by expanding
its product line beyond lollipops and bubble gum to include Juicy Drop Chews,
Juicy Bugs (chewy candies with gel centers) and Big Mouth Candy Spray (liquid
candy in a spray container). In addition, Juicy Drop Pop was introduced in
fiscal 2004.
Entertainment
The Entertainment segment consists of publishing products in the form of
trading cards and sticker album collections featuring sports and non-sports
licenses, and the WizKids line of collectible strategy games acquired in July
2003.
In the U.S. and Canada, publishing products are generally sold in the form
of picture cards, while in the rest of the world publishing products are
typically sold in the form of sticker album collections. The Company markets
cards in various size packages for distribution through a variety of trade
channels. Sticker album products are designed so that stickers, which are sold
in packages, can be placed in an associated album that contains detailed
information on the subject.
Sports card and sticker album products contain photographs of athletes as
well as other features which may include player and team statistics,
biographical material and, in certain instances, pieces of memorabilia and/or
players' autographs. Sports card products feature professional sports figures
from Major League Baseball, NFL Football, NBA Basketball and NHL Hockey, while
sports sticker album products feature European Football (soccer) players. In the
U.K. these collections feature players of the English Premier League. The
Company also markets bubble gum with mini stickers and associated albums
featuring Italy's professional soccer league (Calcio). Additionally, in fiscal
2003 the Company marketed sticker album products associated with the World Cup
soccer tournament, which occurs every four years, and is presently selling
products featuring European Cup players in fiscal 2005.
The Company distributes sports card products in North America under brand
names including Topps, Topps Heritage, Topps Finest, Topps Chrome, Topps
Pristine and Bowman. The Company attempts to ensure that each brand of sports
cards has its own unique positioning in the marketplace. For example, Topps
Heritage, a retro brand with bubble gum in every pack, addresses a perceived
consumer demand for nostalgia-based products and capitalizes on Topps' heritage
and history in the sports collectible industry. Internationally, the Company
distributes its sticker album collections under the Merlin and Topps brands.
The Company has marketed various non-sports trading cards and sticker album
products since the 1950's, featuring some of the dominant entertainment
properties of all time, including The Beatles, Elvis Presley, Star Wars, E.T.:
The Extra-Terrestrial, Hopalong Cassidy, Batman, Teenage Mutant Ninja Turtles,
Jurassic Park, Pokemon and Yu-Gi-Oh!. During the fiscal 2000 to 2003 period, the
Company distributed Pokemon products in over 44 countries and 25 languages. From
time to time, the Company has also marketed cards and stickers featuring
self-created entertainment properties such as Wacky Packages, Garbage Pail Kids
and Mars Attacks.
In fiscal 2004, the Company marketed licensed non-sports trading card and
sticker album products featuring The Lord of the Rings: Return of the King,
Hamtaro, Yu-Gi-Oh! (sticker albums only), SpongeBob SquarePants, Marvel
characters and Pokemon. The Company also re-introduced a new line of Garbage
Pail Kids stickers and will market a new line of Wacky Packages stickers in
fiscal 2005. Over the years, entertainment cards and sticker album products have
experienced peaks and valleys in terms of consumer interest, which has prompted
the Company to be highly selective in determining which entertainment licenses
to pursue.
All card and sticker album products are of high quality, showcasing various
technologies and state-of-the-art reproduction techniques. Cards may include
printing features such as foil stamping, film lamination, autographs and/or
small pieces of memorabilia. The Company is continuously updating the features
of its cards and sticker album products and seeking new ideas and printing
technologies. Card prices generally range from a suggested retail price of $0.99
to $7.00 per pack, while overseas sticker pack prices are generally the
equivalent of approximately fifty cents. The Company also sells certain sports
products in pack configurations at prices exceeding $30 per pack and in box
configurations that are offered to the consumer at a suggested retail price of
$100 or more.
In August 2001, the Company acquired thePit.com for $5.7 million in cash.
ThePit.com makes a market in certain sports cards and provides a means by which
collectors can buy and sell cards in real time over the Internet.
In October 2001, the Company launched etopps, a trading card brand sold
exclusively on the Internet at www.etopps.com. Each week on the etopps website,
a limited number of cards featuring distinguished athletes are offered for sale.
In April 2004, additional features were added to the etopps website enabling
card holders to play a variety of fantasy-style games and to trade their etopps
cards more easily. The Company also markets memorabilia over the Internet
through the ToppsVault.com.
In July 2003, the Company acquired WizKids for a cash purchase price of
approximately $28.4 million. WizKids, headquartered in Bellevue, Washington, is
a designer and marketer of collectible strategy games. Games are played with
miniature figurines on bases containing game-specific information. Core products
are sold under the MechWarrior, Mage Knight and HeroClix brand names and are
marketed primarily through the hobby channel. In February, the Company
introduced SportsClix, a strategy game featuring Major League Baseball players.
For a schedule of net sales by key business segment for the past three
fiscal years, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on page 5 of the Company's Annual Report to
Stockholders for the year ended February 28, 2004 (the "Annual Report"), which
is hereby incorporated by reference.
DISTRIBUTION AND MARKETING
Sales and Distribution
In the U.S. and Canada, internal and field sales employees handle sales of
confectionery products to national accounts. Confectionery sales to other
channels are handled by a nationwide network of broker organizations managed by
Topps employees. Topps Confectionery products reach thousands of retail outlets
including supermarkets, drugstores, convenience stores, mass merchandisers,
warehouse clubs, dollar stores, video outlets and other specialty accounts. The
Company's employees also handle U.S. sales of entertainment card products to
approximately 1,700 hobby stores, hobby distributors, national accounts and
category managers who service major retail outlets.
In most of Europe, as well as in Latin America, Japan and Australia, sales
are generated primarily through distributors serviced by Topps employees. In the
U.K., sales of both confectionery and entertainment products are handled by a
dedicated field sales force augmented by wholesalers selling to independent
retailers. These wholesalers reach approximately 30,000 retail news and
confectionery outlets.
WizKids' products are sold primarily to gaming stores via distributors.
Post acquisition, Topps sales force has assisted WizKids in reaching mass
retailers. WizKids uses a network of 4,000 volunteers to run approximately
10,000 in-store tournaments a month for its customers.
Advertising and Promotion
The Company utilizes a variety of marketing vehicles, including television,
radio and print advertising campaigns, sweepstakes, on-line ads and promotions
designed to create consumer awareness and stimulate retail sales of its
products. Advertising and marketing expenses (which encompass media spending,
consumer promotions and research) included in selling, general and
administrative expenses amounted to $23,820,000 in fiscal 2004, $20,145,000 in
fiscal 2003 and $18,790,000 in fiscal 2002.
Approximately 75% of the Company's fiscal 2004 sales, and approximately 80%
of both fiscal 2003 and 2002 sales, were made on a returnable basis. Industry
practice requires that the Company provide the right to return on sales of
trading card products (excluding those to certain channels of distribution), on
confectionery products and on sales of most sticker album products. Consolidated
return provisions net of reversals as a percentage of net sales for the fiscal
years ended 2004, 2003 and 2002 were 5.9%, 7.7%, and 4.9%, respectively. Returns
significantly in excess of the Company's returns reserve could have a material
adverse effect on the Company.
PRODUCTION
Confectionery
Ring Pop lollipops for sale in North America are manufactured at the
Company's Scranton, Pennsylvania factory. Ring Pop lollipops for sale in
international markets as well as all Push Pops, Baby Bottle Pops and many of the
Company's other lollipop products are manufactured by a single independent
supplier in factories located in Taiwan, Thailand and China. Juicy Drop Chews
and Juicy Bugs are manufactured by single independent suppliers in Brazil and
England, respectively. The loss of production at one or more of these facilities
due to civil unrest or for any other reason could have a material adverse effect
on the Company.
Bazooka bubble gum is produced by the Hershey Foods Corporation under a
contract that is renewed annually for a five-year term. This contract requires
the Company to source certain of its U.S. Bazooka production needs from Hershey,
provided it can fulfill the orders on a timely basis. Failure by Hershey to
supply the Company on a timely basis could have a material adverse effect on
sales of Bazooka until the Company could make other arrangements.
Entertainment
In the U.S., photographs of athletes are generally taken by freelance
photographers on special assignment with the Company. In addition, certain
photography is provided by the organizations representing the leagues and their
member teams. Pictures of non-sports entertainment subjects are generally
furnished by the respective licensor or created by artists retained by the
Company. Computerized graphic artwork and design development for all of the
Company's products is done by staff artists and through independent design
agencies under the Company's direction. The Company's Graphic Services
Department also utilizes computerized technology to enhance and color-correct
photography and computer imaging to create interesting and unusual backgrounds
and visual effects.
High-quality substrates (paperboard, foilboard) are sent directly to
outside printers by the Company's suppliers. Pictures are printed utilizing a
variety of techniques and sometimes include foil stamping and UV (ultra violet)
coating. Cards that require specialized printing and the combination of various
substrates like plastic, polystyrene and holographic foils are purchased in full
sheet form from specialty printers. Full sheets are then delivered to contract
packers where they are cut into individual cards, collated and wrapped in a
variety of package configurations.
Sticker production in Europe is subcontracted and coordinated by a single
supplier in Italy, and album production is subcontracted to three suppliers in
Italy. Adhesive material and packaging are sourced and printed by various
subcontractors in Italy. The Company believes that there are other suitable
sources available to meet its requirements if the current suppliers were unable
to meet the Company's needs.
Collectible miniature strategy games are manufactured by a single supplier
in China. Collectible figures are designed by the Company, and the tooling
manufacture is subcontracted to a variety of tool and die manufacturers in China
and Taiwan.
Raw materials for confectionery products and paperboard, packaging
materials, foil stamping and UV coating for cards, among other things, are
required to manufacture the Company's total line of confectionery and
entertainment products and are generally available to the Company. The Company
relies on single producers for several of these ingredients or processes,
although alternative suppliers are generally available. If any of these single
sources were no longer available to the Company, some adjustment in product
specification would probably be required.
TRADEMARKS AND LICENSE AGREEMENTS
The Company considers its trademarks and license agreements to be of
material importance to its business. Most of the Company's principal trademarks
have been registered in the United States and many foreign countries where its
products are sold. Sports picture products marketed in the U.S. are generally
produced under license agreements with individual athletes or their players'
associations, as well as the licensing bodies of the professional sports
leagues. These agreements cover the following sports: Major League Baseball, NBA
Basketball, NFL Football and NHL Hockey. The Company also has a contract with
Premier League Soccer in England and with players and teams with regard to
soccer in Italy. Given the possibility of labor disruption in hockey during the
2004 season, the Company does not intend to renew its NHL hockey agreement when
it expires in June 2004. The absence of hockey products is not expected to have
a material adverse effect on the Company's sales or earnings in fiscal 2005. The
Company's inability to renew, or continue to operate under licenses relating to
Major League Baseball or U.K. Premier League soccer, and its ability to market
products in these sports, could have a material adverse effect on the Company.
The Company has an individual license agreement with virtually every Major
League Baseball player. Each baseball player's license agreement is initially
for four major league baseball seasons and may be extended for additional
seasons as rights are used, if the player and the Company agree. Typically,
these agreements are extended annually. Among the rights the Company receives
are rights to use a player's name, picture, facsimile signature and biographical
description in the form of two- or three- dimensional pictures, trading cards,
postcards, stickers, stamps, transfers, decals, medallions or coins, each within
certain size limitations. The licenses granted to the Company by athletes permit
the athlete to grant others rights to the use of his name, picture and facsimile
signature on other products, including collectible picture cards sold alone or
with products other than gum and (with certain exceptions) candy. The Company
conducts a related active licensing program with minor league baseball players
and continuously seeks to supplement its relationship with the baseball
community by personal visits and corporate identification. The Company considers
such relationships to be good and to be of great importance. However, should an
appreciable number of Major League Baseball players refuse to sign the Company's
license agreement, it could have a material adverse effect on the Company.
The Company has a related agreement with the Major League Baseball Players
Association, which governs certain terms of the individual player contracts. The
Company also has an agreement with Major League Baseball Properties, Inc.,
which, among other things, covers the use of the names and insignias of the
baseball teams and leagues in connection with its baseball picture products.
The Company also enters into license agreements with non-sports
entertainment companies to produce certain products. The terms of these
contracts depend on a variety of factors.
Total royalty expense under the Company's sports and non-sports
entertainment licensing contracts for the fiscal years ended 2004, 2003 and 2002
was $23,912,000, $25,344,000 and $25,669,000 respectively. See Note 22 of Notes
to Consolidated Financial Statements in the Annual Report, which is incorporated
herein by reference, for a description of minimum guarantee payments required
under the Company's existing sports and non-sports entertainment contracts.
In fiscal 2004, the Company initiated a program of licensing its own
Bazooka, Bazooka Joe, Ring Pop, Push Pop, and Baby Bottle Pop trademarks to
third parties. Licensees include manufacturers of apparel, childrens' cosmetics,
footwear and collectibles.
COMPETITION
The Company competes for sales as well as counter and shelf space with
large corporations in the food, candy, publishing, toy and other industries.
Many of these corporations have substantially greater resources than the
Company. More narrowly, the Company competes with other companies, large and
small, which market gum, candy, trading cards, sticker albums and strategy games
for the spending money of children and adult collectors. The Company believes
that the industries in which it operates are highly competitive.
SEASONALITY
The Company's sales of Confectionery products are seasonally stronger in
the first two fiscal quarters of each year, but are also impacted by the
introduction of new products and line extensions as well as by advertising and
consumer and trade support programs. In the Entertainment segment, sales of U.S.
sports card products are sold throughout the year and span the four major sports
seasons in which the Company currently participates, i.e., baseball, football,
basketball and hockey. Topps Europe's sales of sports sticker album products are
driven largely by shipments of Premier League Soccer products, with much of the
sales activity occurring in December through April. Sales of non-sports cards,
sticker albums and games tend to be driven by the timing of product
introductions and the property on which they are based, often peaking with the
release of a movie or the rise in popularity of a particular licensed property.
DEPENDENCE ON CERTAIN CUSTOMERS
The Company has one customer, McLane Distribution Services, Inc. that
accounted for approximately 10% of consolidated net sales in fiscal 2004. This
customer purchases primarily confectionery products from the Company and
distributes them to Wal-Mart, Sam's Club, Southland Corp., and convenience
stores in the U.S. The loss of this customer could have a material adverse
effect on the Company's plans and results.
ENVIRONMENT
The Company believes that it is in compliance in all material respects with
existing federal, state and local regulations relating to the protection of the
environment. Such environmental regulations have not had a material impact on
the Company's capital expenditures, earnings or competitive position.
EMPLOYEES
The Company employed approximately 500 people in fiscal 2004, 70 of which
were added as a result of the acquisition of WizKids.
All of the production employees at the Company's factory in Scranton,
Pennsylvania are represented by a union. The current union agreement expires in
February 2008.
The Company considers relations with its employees to be good.
AVAILABILITY OF THIS REPORT
The Company's financial information, including the information contained in
this report filed on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and any amendments to the above mentioned reports may be viewed on
the Internet at www.topps.com. Copies are also available, without charge, from
the Company. Alternatively, reports filed with the Securities and Exchange
Commission (the "SEC") may be viewed or obtained at the SEC Public Reference
Room in Washington, D.C., or at the SEC's Internet site at www.sec.gov.
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. The Company wishes to ensure that any forward-looking statements are
accompanied by meaningful cautionary statements in order to maximize to the
fullest extent possible the protections of the safe harbor established in the
Reform Act. Accordingly, any such statements are qualified in their entirety by
reference to, and are accompanied by, the following important factors, among
others, that could cause the Company's actual results to differ materially from
those projected in forward-looking statements of the Company:
1. Dependence on Licenses. The Company's trading card and sticker album
businesses are highly dependent upon licensing arrangements with third parties.
These licenses, which have varying expiration dates, are obtained from the
various professional sports leagues, players associations and, in certain
instances, the players themselves as well as from non-sports entertainment
companies. The Company's inability to renew or retain certain of these licenses,
or the lack of vitality of these licenses, could materially adversely affect its
future plans and results.
2. Contraction in Sports Card Industry. The Company believes that the
sports card industry as a whole has contracted significantly over at least the
last ten years. Further prolonged and material contraction in the sports card
industry, whether caused by labor strife or otherwise, could materially
adversely affect the Company's future plans and results.
3. New Products. The Company may be unable to produce timely, or at all,
certain new planned confectionery products. The inability of the Company to
produce planned confectionery products could materially adversely affect its
future plans and results.
4. Returns. Approximately 75% of the Company's fiscal 2004 sales were made
on a returnable basis. Although the Company maintains returns provisions,
returns considerably in excess of the Company's provisions could materially
adversely affect its future plans and results.
5. Suppliers. The Company has a single source of supply for most of its
lollipop products. The loss of this supplier due to civil unrest or for any
other reason could materially adversely affect the Company's future plans and
results.
6. Customers. The Company has several large customers, some of which are
serviced by single distributors. The loss of any of these customers or
distributors could materially adversely affect the Company's future plans and
results.
7. Internet. The Company is continuing to invest in an Internet strategy.
There is no guarantee that the strategy will be successful. The failure of the
Company's Internet business to achieve expected levels of success could
materially adversely affect the Company's future plans and results.
8. International Political and Economic Risk. There is an increase in risk
generally associated with operating outside of the U.S. Events such as civil
unrest, currency devaluation, political upheaval and health-related issues could
materially adversely affect the Company's future plans and results.
9. Legal Proceedings. See Item 3: Legal Proceedings for a discussion of
legal matters that could materially adversely affect the Company's future plans
and results.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
The Company operates in two business segments. They are: (i) the marketing
and distribution of confectionery products; (ii) the marketing and distribution
of entertainment products. Segment and geographic area information contained in
Note 16 of the Notes to Consolidated Financial Statements included in the Annual
Report is hereby incorporated by reference.
EXECUTIVE OFFICERS OF THE COMPANY
The information required by this item with respect to the directors of the
Company and those executive officers who are also directors appearing in the
Proxy Statement for the annual meeting of stockholders scheduled to be held on
July 1, 2004 ("2004 Proxy Statement") is hereby incorporated by reference
thereto. Set forth below is information required by this item covering the other
executive officers of the Company.
Position with the Company and business
Name experience during the past five years
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Ronald L. Boyum Vice President-Marketing and Sales and General Manager
Confectionery of the Company since February 2000; Vice
President-Marketing and Sales of the Company since March
1995. Mr. Boyum is 52 years of age.
Edward P. Camp Vice President of the Company since April 1997 and
President-Hobby Division since October 1995. Mr. Camp
held a number of sales-related positions within the
Company prior thereto. Mr. Camp is 57 years of age.
Michael P. Clancy Vice President-International of the Company since
December 1998 and Vice President since February 1995.
Mr.Clancy has been Managing Director Topps International
Ltd. (formerly Topps Ireland) since July 1990 and was
Joint Managing Director Topps Europe Ltd. from January
1997 to December 1998. Mr. Clancy is 49 years of age.
Michael J. Drewniak Vice President-Manufacturing of the Company since March
1991. Mr. Drewniak previously held the position of
General Manager Manufacturing Operations. Mr. Drewniak
is 67 years of age.
Ira Friedman Vice President-Publishing and New Product Development
of the Company since September 1991. Mr. Friedman
joined the Company in October 1988. Mr. Friedman is 50
years of age.
Warren Friss Vice President-Internet Business and General Counsel
since June 2001. Mr. Friss has been General Counsel of
the Company since February 2000. Mr. Friss joined the
Company as Deputy General Counsel in May 1995. Mr. Friss
is 40 years of age.
Catherine K. Jessup Vice President-Chief Financial Officer of the Company
since July 1995. Prior to joining the Company, Ms.
Jessup held a number of positions with PepsiCo (a food
products company) from 1981 to July 1995. Ms. Jessup is
48 years of age.
William G. O'Connor Vice President-Administration of the Company since
September 1991. Mr. O'Connor was an Assistant Secretary
of the Company from June 1982 until June 1994. Mr.
O'Connor is 55 years of age.
John Perillo Vice President-Operations of the Company since April
1995 and Vice President-Controller and Chief Financial
Officer of the Company from April 1990 to July 1995.
Mr. Perillo is 47 years of age.
Scott Silverstein Executive Vice President of the Company since February
2000. Previously, Mr. Silverstein ran the Pokemon
business for Topps since 1999 and was the Vice President
-Business Affairs and General Counsel of the Company
since February 1995. Mr. Silverstein held the position
of General Counsel from July 1993 until February 2000.
Mr. Silverstein is the son-in-law of Mr. Shorin, the
Company's Chairman of the Board, Chief Executive Officer
and President. Mr. Silverstein is 42 years of age.
ITEM 2. PROPERTIES
The location and general description of the principal properties owned or
leased by the Company are as follows:
Owned or Leased,
Area/Facility If Leased,
Location Type of Facility Square Footage Expiration Year
Duryea, Pennsylvania* Office and warehouse 71,000 Leased; 2006
Scranton, Pennsylvania** Manufacturing plant 41,000 Owned
Seattle, Washington Office 19,000 Leased; 2006
Cork, Ireland** Office 8,000 Leased; 2006
New York, New York* Executive offices 60,000 Leased; 2009
Cincinnati, Ohio Warehouse 14,000 Leased; 2006
Milton Keynes, United Kingdom* Office and warehouse 12,000 Leased; 2014
The Company also leases offices in Delaware, Canada, Argentina and Italy.
The Company believes that its active facilities are in good repair and are
suitable for its needs for the foreseeable future.
*Serves both business segments.
**Serves confectionery segment.
ITEM 3. 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 was 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. 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 each
formally responded to the Statement of Objections and a hearing in front of the
European Commission Tribunal took place on October 23, 2003. On April 2, 2004,
the Commission requested further information from Topps Europe regarding both
Topps Europe and The Topps Company, Inc. 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. The Court of Appeals for the Federal Circuit reversed the
judgment on July 11, 2003, and the case has been returned to Judge Stotler in
the Central District of California for trial.
Discovery in the case commenced September 29, 2003. On March 17, 2004,
Topps filed a motion for summary judgment based on noninfringement while the
other defendants filed a motion for summary judgment based on patent invalidity
because of prior art. The trial is now scheduled for February of 2005. 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 which are routine
and incidental to its business. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended February 28, 2004.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Reference is made to the data appearing on page 37 of the Annual Report
under the heading "Market and Dividend Information" which is hereby incorporated
by reference and reference is also made to the Equity Compensation Plan
Information of the 2004 Proxy.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Reference is made to the data appearing on page 38 of the Annual Report
under the heading "Selected Consolidated Financial Data" which is hereby
incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reference is made to the data appearing on pages 6 through 12 of the Annual
Report under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" which is hereby incorporated by reference.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to the data appearing on page 11 of the Annual Report
under the heading "Disclosures about Market Risk" which is hereby incorporated
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the data appearing on pages 13 through 36 and to the
Report of Independent Public Accountants appearing on page 37 of the Annual
Report which are hereby incorporated by reference.
ITEM 9. CHANGES IN ACCOUNTANTS AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9a. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Our management, with the participation of our Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in Rules 13(a)-15(e) and
15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) as of the end of the period covered by this annual report. Based on such
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, our disclosure controls and
procedures are effective in recording, processing, summarizing and reporting, on
a timely basis, information required to be disclosed by us in the reports that
we file or submit under the Exchange Act.
(b) Changes in internal controls.
There have not been any changes in our internal control over financial
reporting (as such term is defined in Rules 13(a)-15(f) and 15(d)-15(f) under
the Exchange Act) during the most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting. There were no significant deficiencies or material
weaknesses, and therefore there were no corrective actions taken.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information required by this item appears in Part I of this Report on Form
10-K under the heading "Executive Officers of the Company" and in the 2004 Proxy
Statement and is hereby incorporated by reference.
The Company has adopted a Code of Business Conduct and Ethics that applies
to its directors and executive officers as well as to all employees of the
Company. The Code of Business Conduct and Ethics is available free of charge on
our website. Amendments to the Code of Business Conduct and Ethics or any grant
of a waiver from a provision of the Code of Ethics requiring disclosure under
applicable SEC rules will also be disclosed on the Company's website.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item appears in the 2004 Proxy Statement and
is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item appears in the 2004 Proxy Statement and
is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item appears in the 2004 Proxy Statement and
is hereby incorporated by reference.
ITEM 14. PRINCIPLE ACCOUNTANT FEES AND SERVICES
Information required by this item appears in the 2004 Proxy Statement and
is hereby incorporated by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1&2) Financial Statements and Financial Statement Schedules
Index to Financial Statements:
The following Consolidated Financial Statements included in the Annual Report
are hereby incorporated by reference to Item 8.
Consolidated Statements of Operations - For Fiscal Years Ended February 28,
2004, March 1, 2003, and March 2, 2002.
Consolidated Balance Sheets -- February 28, 2004 and March 1, 2003.
Consolidated Statements of Cash Flows For Fiscal Years Ended February 28, 2004,
March 1, 2003, and March 2, 2002.
Consolidated Statements of Stockholders' Equity For Fiscal Years Ended February
28, 2004, March 1, 2003, and March 2, 2002.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
Index to Independent Public Accountants' Report
and Financial Statement Schedules
Page No.
Report of Independent Public Accountants ................................ S-1
Schedule VIII -- Valuation and Qualifying Accounts For Fiscal
Years Ended February 28, 2004, March 1, 2003, and March 2, 2002 ......... S-2
Schedules other than those listed above are omitted because they
are either not required or not applicable or the required information
is shown in the Consolidated Financial Statements or Notes thereto.
(3) Listing of Exhibits
2.1 Agreement and Plan of merger dated June 23, 2003 for the purchase of
Wizkids, LLC (Incorporated by reference to Exhibit 2.1 to the
Company's Report on Form 8-K dated July 24, 2003).
3.1 Restated Certificate of Incorporation of the Company (Incorporated by
reference to Exhibit 3.1 to the Company's Report on Form 8-K dated
December 2, 1991 (SEC File Number 000-15817)).
3.2 Restated By-laws of the Company (Incorporated by reference to Exhibit
3.2 to the Company's Report on Form 8-K dated December 2, 1991 (SEC
File Number 000-15817)).
10.1 The Topps Company, Inc. Executive Officers' Annual Bonus Plan *
10.2 Retirement Plan and Trust as amended and restated effective February
28, 1993 (Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended February 26, 1994 (SEC File Number
000-15817)).
10.3 Supplemental Pension Agreement with Arthur T. Shorin (Incorporated by
reference to Exhibit 10.16 to the Company's Registration Statement on
Form S-1(No. 33-130821)).
10.4 Amendment to Supplemental Pension Agreement with Arthur T. Shorin
dated May 18, 1994 (Incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended February 25, 1995 (SEC
File Number 000-15817)).
10.5 License Agreement and Letter Amendment thereto with Major League
Baseball Promotion Corporation (Incorporated by reference to Exhibit
10.12 to the Company's Annual Report on Form 10-K for the fiscal year
ended March 2, 1991 (SEC File Number 000-15817)).
10.6 Letter Amendment effective January 1, 2001 to the License Agreement
dated January 1, 1969 and Letter Amendments thereto between the
Company and Major League Baseball Properties, Inc. Portions have been
redacted subject to an application to the Securities Exchange
Commission for confidential treatment. (Incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report for the quarter ended
November 29, 2003.)
10.7 Stock Option Agreement with Arthur T. Shorin dated March 29, 1995
(Incorporated by reference to Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 25, 1995 (SEC
File Number 000-15817)).
10.8 Agreement of Lease with One Whitehall Company dated February 24, 1994
(Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended February 26, 1994 (SEC File Number
000-15817)).
10.9 Amendment and Restatement of the 1994 Non-Employee Director Stock
Option Plan. (Incorporated by reference to the Company's 1998 Proxy
Statement filed on May 28, 1998 (SEC File Number 000-15817)).
10.10 Corporate Guaranty in favor of the Bank of Scotland (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended November 25, 1995 (SEC File Number 000-15817)).
10.11 1996 Stock Option Plan and form of agreement pursuant to 1996 Stock
Option Plan.(Incorporated by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended March 2, 1996 (SEC File Number
000-15817)).
10.12 Amended and Restated Manufacturing Agreement with Hershey Foods
Corporation, dated March 13, 1998. (Incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended August
29, 1998).
10.13 Credit Agreement, dated June 26, 2000, among The Topps Company, Inc.,
The Chase Manhattan Bank, and LaSalle Bank National Association.
(Incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended March 3, 2001).
10.14 Amendment Number One to Credit Agreement dated June 26, 2000.
(Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the fiscal year ended March 3, 2001).
10.15 2001 Stock Incentive Plan (Incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended March 2, 2002).
10.16 Memorandum of Agreement between the Company and Major League Baseball
Players' Association dated January 6, 2003 (Incorporated by reference
to the Company's Annual Report on Form 10-K for the fiscal year ended
March 1, 2003).
10.17 Amended and Restated Employment Agreement (the "Agreement"),
effective as of the 1st day of June, 2001, by and between The Topps
Company, Inc., a Delaware corporation (the "Company"), and Arthur T.
Shorin, a resident of New York (the "Executive") (Incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended March 1, 2003).
Index to Exhibits (continued)
10.18 Employment Agreement, dated as of July 9, 2003 between WizKids, LLC
and Jordan K. Weisman. (Incorporated by reference to Exhibit 10.1 to
the Company's Form 10-Q filed November 29, 2003).
10.19 First Amendment, effective August 1, 2003, to the Employment
Agreement, dated as of July 9, 2003 between WizKids.LLC and Jordan K.
Weisman. (Incorporated by reference to Exhibit 10.1 to the Company's
Form 10-Q filed November 29, 2003).
10.20 Second Amendment, effective October 1, 2003, to the Employment
Agreement, dated as of July 9, 2003 between WizKids,LLC and Jordan K.
Weisman. (Incorporated by reference to Exhibit 10.1 to the Company's
Form 8-K filed July 24, 2003).
10.21 Preferability Letter from Deloitte & Touche regarding the change in
the measurement date for the goodwill impairment test.*
13 Annual Report (Except for those portions specifically incorporated by
reference, the 2004 Annual Report to Stockholders is furnished for the
information of the Commission and is not to be deemed "filed as part
of this filing.")
21 Significant subsidiaries of the Company (Incorporated by reference in
the Annual Report to Stockholders).
31.1 Certification of Principal Executive Officer pursuant to Rules
13(a)-14(a) and 15(d)-14(a) under the Securities Exchange Act of
1934.*
31.2 Certification of Principal Financial Officer pursuant to Rules
13(a)-14(a) and 15(d)-14(a) under the Securities Exchange Act of
1934.*
32.1 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.*
32.2 Certification of Catherine K. Jessup, Vice-President and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
*filed herewith
(b) Reports on Form 8-K
1. Form 8-K, dated April 6, 2004, with press release, dated April 6,
2004, reporting the Company's fiscal 2004 fourth quarter and full year
financial results.
2. Form 8-K dated, April 7, 2004, with press release, dated April 8,
2004, reporting the Company's fourth quarter dividend declaration.
INDEPENDENT AUDITORS' REPORT
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Report of Independent Public Accountants
The Topps Company, Inc.
We have audited the accompanying consolidated balance sheets of The Topps
Company, Inc. and Subsidiaries as of February 28, 2004 and March 1, 2003, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended February 28, 2004 and have
issued our report therein dated May 6, 2004; such consolidated financial
statements and report are included in your 2004 Annual Report to Stockholders
and are incorporated herein by reference. Our audits also included the
consolidated financial statement schedule of The Topps Company, Inc. and
Subsidiaries listed in Item 15. This consolidated financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statement schedule based on our audits. In
our opinion, such consolidated financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP
New York, New York
May 4, 2004
S-1
VALUATION AND QUALIFYING ACCOUNTS
Years Ended March 2, 2002, March 1, 2003,
and February 28, 2004
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VIII. VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)
Charged to Charged
Beginning Costs and Against Additions/ Ending
Description Balance Expenses Sales (Deductions) Balance
=======================================================================================================
Year Ended February 28, 2004
----------------------------
Amortization of Other
Intangible Assets $ 31,669 $ 2,333 $ - $ (762)(a) $ 33,240
======== ======== ======== ========= ========
Reserve for Estimated Returns $ 16,443 $ - $ 17,404 $(14,331)(b) $ 19,516
======== ======== ======== ========= ========
Reserve for Doubtful Accounts $ 1,311 $ (143) $ - $ (519)(c) $ 649
======== ======== ======== ========= ========
Reserve for Cash Discounts $ 965 $ - $ 3,882 $ (3,410)(d) $ 965
======== ======== ======== ========= ========
Reserve for Customer Deductions $ 528 $ 1,132 $ - $ (528)(e) $ 1,132
======== ======== ======== ========== ========
Reserve for Obsolete Inventory $ 3,527 $ 7,462 $ - $ (3,874)(f) $ 7,115
======== ======== ======== ========== ========
=======================================================================================================
Year Ended March 1, 2003
------------------------
Accumulated Amortization of Sports,
Entertainment and Proprietary
Products $ 36,363 $ - $ - $(36,363)(g) $ -
Accumulated Amortization of Other
Intangible Assets $ 12,419 $ 1,160 $ - $ 18,090 (g) $ 31,669
-------- -------- -------- --------- --------
Total $ 48,782 $ 1,160 $ - $ - $ 31,669
======== ======== ======== ========= ========
Reserve for Estimated Returns $ 15,875 $ - $ 22,413 $(21,845)(b) $ 16,443
======== ======== ======== ========= ========
Reserve for Doubtful Accounts $ 1,234 $ 456 $ - $ (88)(c) $ 1,311
======== ======== ======== ========= ========
Reserve for Cash Discounts $ 415 $ - $ 4,660 $ (4,110)(d) $ 965
======== ======== ======== ========= ========
Reserve for Customer Deductions $ - $ 528 $ - $ - (e) $ 528
======== ======== ======== ========= ========
Reserve for Obsolete Inventory $ 4,525 $ 3,298 $ - $ (4,296)(f) $ 3,527
======== ======== ======== ========= ========
=======================================================================================================
Year Ended March 2, 2002
------------------------
Accumulated Amortization of Sports,
Entertainment and Proprietary
Products $ 34,466 $ 1,898 $ - $ - $ 36,363
Accumulated Amortization of Other
Intangible Assets $ 11,464 $ 955 $ - $ - $ 12,419
-------- -------- -------- --------- --------
Total $ 45,930 $ 2,852 $ - $ - $ 48,782
======== ======== ======== ========= ========
Reserve for Estimated Returns $ 24,296 $ - $ 14,729 $(23,150)(b) $ 15,875
======== ======== ======== ========= ========
Reserve for Doubtful Accounts $ 1,618 $ (224) $ - $ (160)(c) $ 1,234
======== ======== ======== ========= ========
Reserve for Cash Discounts $ 458 $ - $ 3,513 $ (3,556)(d) $ 415
======== ======== ======== ========= ========
Reserve for Obsolete Inventory $ 5,069 $ 3,538 $ - $ (4,082)(f) $ 4,525
======== ======== ======== ========= ========
=======================================================================================================
a) Write-off of thePit.com marketing agreement
b) Returns charged against provision, net of recoveries
c) Bad debt write-offs
d) Early payment discounts taken by customers
e) Pricing allowance and slotting credits issued to customers
f) Disposals, net of recoveries
g) Reclassified (to)/from goodwill accumulated amortization
in accordance with FAS 142
S-2
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.
Dated: May 13, 2004
THE TOPPS COMPANY, INC.
-----------------------
Registrant
/s/Arthur T. Shorin
------------------------
Arthur T. Shorin
Chairman of the Board,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed on the 15th day of May 2004 by the following persons on
behalf of the Registrant and in the capacities indicated.
/s/Arthur T. Shorin /s/Catherine K. Jessup
------------------- ----------------------
Arthur T. Shorin Catherine K. Jessup
Chairman, Chief Executive Vice President-Chief Financial Officer
Officer and President (Principal Financial and
(Principal Executive Officer) Accounting Officer)
/s/Allan A. Feder /s/David Mauer
----------------- --------------
Allan A. Feder David Mauer
Director Director
/s/Stephen D. Greenberg /s/Jack H. Nusbaum
----------------------- ------------------
Stephen D. Greenberg Jack H. Nusbaum
Director Director
/s/Ann Kirschner /s/Richard Tarlow
---------------- -----------------
Ann Kirschner Richard Tarlow
Director Director
/s/Edward Miller /s/Stanley Tulchin
---------------- ------------------
Edward Miller Stanley Tulchin
Director Director
EXHIBIT 10.1: EXECUTIVE OFFICERS' ANNUAL BONUS PLAN
A fiscal 2005 Executive Officers Incentive Bonus Plan has been established,
with payments to be made after the close of fiscal 2005. Executive Officers
become eligible for bonus payments only upon the Company achieving
pre-established figures for Consolidated Operating Profit (income before
interest, taxes, depreciation and amortization) and/or the achievement of
certain pre-determined strategic objectives. Depending on the Company's
performance against these pre-established earnings and strategic targets in
2005, each Executive Officer will be eligible to receive a maximum of 60% of
base salary as a bonus.
EXHIBIT 10.2: PREFERABILITY LETTER FROM DELOITTE & TOUCHE
We have audited the consolidated financial statements of the Topps Company,
Inc. and subsidiaries as of February 28, 2004 and March 1, 2003, and for each of
the three years in the period ended February 28, 2004, included in your Annual
Report to the Securities Exchange Commission on Form 10-K and have issued our
report therein dated May 4, 2004, which expresses an unqualified opinion and
includes an explanatory paragraph relating to the change in the date of the
annual impairment test of goodwill. Note 6 to such consolidated financial
statements contained a description of your adoption during the year ended
February 28, 2004 of the change in the date of the annual impairment test of
goodwill. In our judgment, such change is to an alternative accounting principle
that is preferable under the circumstances.
/ Deloitte & Touche LLP /
-------------------------
Deloitte & Touche LLP
New York, New York
May 4, 2004
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Arthur T. Shorin, certify that:
1. I have reviewed this annual report on Form 10-K of The Topps Company,
Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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-15(e) and 15d-15(e)) for the
registrant and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this annual report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
annual report based on such evaluation; and
(c) disclosed in this annual report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 13, 2004
/s/ Arthur T. Shorin
-----------------------
Arthur T. Shorin
Chairman, Chief Executive Officer
and President
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Catherine K. Jessup, certify that:
1. I have reviewed this annul report on Form 10-K of The Topps Company,
Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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-15(e) and 15d-15(e)) for the
registrant and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this annual report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
annual report based on such evaluation; and
(c) disclosed in this annual report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
May 13, 2004
/s/ Catherine K. Jessup
------------------------
Catherine K. Jessup
Vice President and Chief
Financial Officer
Exhibit 32.1
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 Annual Report of The Topps Company, Inc. (the "Company")
on Form 10-K for the year ended February 28, 2004 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, as amended; 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
May 13, 2004
Exhibit 32.2
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 Annual Report of The Topps Company, Inc. (the "Company")
on Form 10-K for the year ended February 28, 2004 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, as amended; 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
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Catherine K. Jessup
Vice President and Chief
Financial Officer
May 13, 2004