FOR IMMEDIATE RELEASE
THE TOPPS COMPANY, INC. REPORTS
FISCAL 2005 SECOND QUARTER RESULTS
New York, NY, September 23, 2004 - The Topps Company, Inc. (Nasdaq: TOPP) today
reported financial results for the fiscal 2005 second quarter ended August 28,
2004.
Net sales in the fiscal 2005 second quarter were $68.8 million compared to $73.3
million last year. Stronger foreign currencies versus the prior year increased
2005 second quarter sales by $1.3 million. Income from operations was $4.8
million compared to $7.6 million in last year's second quarter. Net income in
the fiscal 2005 second quarter was $3.7 million, or $0.09 per diluted share,
versus $5.3 million, or $0.13 per diluted share, last year.
For the six months ended August 28, 2004, net sales were $156.9 million compared
to $149.3 million in the same period last year. Stronger foreign currencies
versus the prior year increased sales for the first six months of fiscal 2005 by
$4.1 million. Income from operations was $10.5 million compared with $11.9
million in the prior-year period. Net income in the first half of fiscal 2005
was $7.8 million, or $0.19 per diluted share, versus $8.8 million, or $0.21 per
diluted share, last year. Results for the first six months of fiscal 2005
include a one-time charge of $1.9 million, or approximately $0.05 per diluted
share incurred in the first quarter, related to a previously disclosed European
Commission fine.
Confectionery net sales were $40.0 million in the fiscal 2005 second quarter, a
4.8% decrease from the prior-year period. The decline stems from U.S. candy
performance, as the Company works to address the impact of industry trends
including retailer consolidation, increased promotional spending including price
discounting and childhood nutritional concerns.
Entertainment sales in the second quarter were $28.8 million, representing an
8.0% decline from the prior year's quarter. The decrease was largely a function
of the Company's decision not to release hockey cards due to uncertainty
regarding the NHL season and difficult comparisons to last year's basketball
sales, which benefited from a highly anticipated rookie class. Sales of
non-sports Entertainment products were principally driven by Lord of the Rings,
Garbage Pail Kids, Pokemon and Yu-Gi-Oh. These sales, combined with a full
quarter's contribution from WizKids, partially offset the decline in U.S. sports
cards.
Arthur T. Shorin, Chairman and CEO of Topps, commented, "We are actively
addressing the challenges we face in the U.S. confectionery business. For
example, in response to trade consolidation, we are in the final stages of
realigning our sales organization to focus additional resources on accounts and
distribution channels that offer the greatest growth potential. As part of a new
go-to-market strategy, we are reviewing our mix of advertising and trade
spending dollars and will be testing promotional pricing programs. With respect
to nutritional issues, we have been conducting research with children and
parents to determine more precisely their concerns. Additionally, packaging
changes have recently been made to highlight the juice content and lack of fat
in our products."
Mr. Shorin continued, "On the product development side, Juicy Drop Pop, a
relatively new confectionery item for Topps, is demonstrating strength in terms
of consumer takeaway and should benefit from ongoing distribution gains. In
addition, we are continuing our product refreshment and enhancement efforts
across all of our core brands in an effort to support their vitality."
"Turning to the Entertainment segment of our business, we are working to develop
products with greater interactivity that leverage our sports expertise. In
addition, we continue to build upon our successful non-sports franchises,
including Garbage Pail Kids, now in its third series in the U.S. and recently
launched in France, as well as Wacky Packages which was reintroduced last
quarter and will be supported by advertising in the third quarter. Finally,
WizKids which outperformed our expectations for the second quarter, has recently
introduced "Pirates of the Spanish Main," the world's first constructible
strategy game. Pirates is showing good promise among gaming enthusiasts,"
concluded Mr. Shorin.
During the quarter, the Company paid its regular quarterly cash dividend to
shareholders of $0.04 per share. Additionally, the Company repurchased 206,600
shares of stock at an average price of $9.22 per share. At August 28, 2004, the
Company had $110.6 million in cash and no debt.
The Topps Company, Inc. will host a webcast of its earnings conference call
today at 10:00 a.m., Eastern Time. Investors, analysts, and the media are
invited to listen to the call live at www.topps.com. A replay of the webcast
will be available on the Company's website for the next 60 days.
Founded in 1938, Topps is a leading creator and marketer of distinctive
confectionery and entertainment products. The Company's confectionery brands
include "Ring Pop," "Push Pop," "Baby Bottle Pop" and "Juicy Drop Pop" lollipops
as well as "Bazooka" bubble gum. Topps entertainment products include trading
cards, sticker album collections, and collectible games. For additional
information, visit www.topps.com.
This release contains forward-looking statements pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Although the
Company believes the expectations contained in such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to be
correct. This information may involve risks and uncertainties that could cause
actual results to differ materially from the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, factors detailed in the Company's Securities and Exchange Commission
filings. (Tables Follow)
(Tables Follow)
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share data)
(Unaudited) (Unaudited)
Thirteen weeks ended Twenty six weeks ended
August August August August
28, 2004 30, 2003 28, 2004 30, 2003
-------- -------- -------- -------
Net Sales $ 68,781 $ 73,319 $ 156,870 $ 149,311
Cost of sales 42,501 44,560 96,791 92,428
-------- -------- -------- --------
Gross Profit on sales 26,280 28,759 60,079 56,883
Other income (expense) 411 342 844 944
Selling, general and administrative expenses 21,879 21,543 50,472 45,886
-------- -------- -------- --------
Income from operations 4,812 7,558 10,451 11,941
Interest income, net 557 450 1,041 1,484
-------- -------- -------- --------
Income before provision for income taxes 5,369 8,008 11,492 13,425
Provision for income taxes 1,714 2,736 3,735 4,632
-------- -------- -------- --------
Net Income $ 3,655 $ 5,272 $ 7,757 $ 8,793
======== ======== ======== ========
Basic net income per share 0.09 0.13 0.19 0.22
Diluted net income per share 0.09 0.13 0.19 0.21
Weighted average shares outstanding - Basic 40,459,000 40,605,000 40,513,000 40,650,000
Weighted average shares outstanding - Diluted 41,511,000 41,386,000 41,565,000 41,433,000
THE TOPPS COMPANY, INC.
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Amounts in Thousands)
As of As of
August 28, 2004 February 28, 2004
--------------- -----------------
Cash and Equivalents $ 110,599 $ 93,837
Working Capital 135,620 133,299
Net Property, Plant and Equipment 13,022 13,786
Total Assets 274,168 275,463
Shareholders' Equity 211,604 211,277
SEGMENT INFORMATION
(Amounts in Thousands)
Thirteen weeks ended Twenty six weeks ended
August August August August
28, 2004 30, 2003 28, 2004 30, 2003
-------- -------- -------- --------
Net Sales
---------
Confectionery $ 39,982 $ 42,008 $ 84,189 $ 87,538
Entertainment Products 28,799 31,311 72,681 61,773
-------- -------- -------- --------
Total $ 68,781 $ 73,319 $ 156,870 $ 149,311
======== ======== ======== ========
Contributed Margin
------------------
Confectionery $ 15,777 $ 15,491 $ 28,779 $ 29,260
Entertainment Products 8,998 10,276 22,426 17,399
-------- -------- -------- --------
Total $ 24,775 $ 25,767 $ 51,205 $ 46,659
======== ======== ======== ========
Reconciliation of Contributed Margin
to Income Before Provision for Taxes:
-------------------------------------
Total Contributed Margin $ 24,775 $ 25,767 $ 51,205 $ 46,659
Unallocated General and Administrative
Expenses and Manufacturing Overhead (18,805) (16,986) (38,437) (32,818)
Depreciation & Amortization ( 1,569) ( 1,565) ( 3,161) ( 2,844)
Other Income (Expense) 411 342 844 944
-------- -------- -------- --------
Income form Operations 4,812 7,558 10,451 11,941
Interest Income, Net 557 450 1,041 1,484
-------- -------- -------- --------
Income before Provision for Income Taxes $ 5,369 8,008 11,492 13,425
======== ======== ======== ========