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 26, 2005
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)
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 prusuant to Item
405 of regulations 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. _X_
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 $378,535,000.
The number of outstanding shares of Common Stock as of May 9, 2004 was
40,457,117.
Documents incorporated by reference Part
----------------------------------- ----
Annual Report to Stockholders for the Year Ended February 26, 2005 I, II, IV
Proxy Statement for the 2005 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.
There are two principle segments of the business, Confectionery and
Entertainment. In the Confectionery segment, Topps markets premium confectionery
brands including lollipops such as Push Pop, Baby Bottle Pop and Juicy Drop Pop,
Bazooka brand bubble gum and certain licensed candy items. The Company also
manufactures and markets Ring Pop lollipops. In the Entertainment segment, the
Company markets branded products including trading cards and sticker album
collections featuring professional athletes and popular television, movie and
other licensed characters. The Company also markets branded 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,
Topps changed its corporate name to Topps Europe Ltd. ("Topps Europe") in March
1997. In July 2003, Topps acquired Wizkids, LLC ("WizKids"), a designer and
marketer of collectible strategy games.
Headquartered in New York, N.Y., Topps 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 lollipop brands and other non-chocolate
confectionery products in the United States, Canada, Europe and parts of Asia,
Latin America, New Zealand 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 powder, candy juice, or crunchy candies and topped with a candy
nipple) and Juicy Drop Pop (a lollipop in a plastic case which also contains
candy juice to be squirted onto the pop for boosting its flavor).
================================================================================
Trademarks of The Topps Company, Inc. and subsidiaries appearing in this report:
Baby Bottle Pop, Bazooka, Bazooka Joe, Bowman, etopps, Garbage Pail Kids,
Heroclix, Juicy Drop Pop, Mage Knight, Mars Attacks, MechWarrior, 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 also markets Bazooka brand bubble gum originally introduced in
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 (regular and
sugarless) which are designed for distribution across all major trade channels.
Licensed confectionery products include containers replicating the Pokemon
ball with candy and a decorated Pokemon figure inside. Sales of Pokemon
confectionery products began in fiscal 2000 and continue today, though at lesser
volumes. 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 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.
Going forward, the Company believes that distribution, advertising, and new
products represent viable sources of growth and is directing its focus
accordingly. Overseas, the primary emphasis is on delivering innovative products
to the marketplace and securing new listings in key retailers. Over the last
couple of years, confectionery distribution in Europe has been expanded to
include Norgen Gruppen and Narvisson in Norway; ICA and Co-op in Sweden;
Internarche in France; Coop, Kiosk, and Volg in Switzerland; and Inex in
Finland.
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 strategy games created by WizKids, acquired by Topps in July 2003.
In the U.S. and Canada, publishing products are generally sold in the form
of 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, including player and team statistics, biographical
material and, in certain cases, pieces of memorabilia and/or players'
autographs. Sports card products have historically featured professional sports
figures from Major League Baseball, NFL Football, NBA Basketball and NHL Hockey,
while sports sticker album products have featured athletes from English Premier
League Football (soccer). The Company did not produce any NHL Hockey products
for the most recent season which was cancelled due to labor/management issues.
Additionally, in fiscal 2005 the Company sold sticker album products associated
with the European Football Championship which occurs every four years. The
Company also markets bubble gum with mini stickers and albums featuring Italy's
professional soccer league (Calcio).
The Company distributes sports card products in North America under brand
names including, but not limited to, 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 sticker album collections under the Merlin and Topps
brands.
The Company has also marketed 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, Michael
Jackson, E.T.: The Extra-Terrestrial, Indiana Jones, Batman, Teenage Mutant
Ninja Turtles, Jurassic Park, Pokemon and Yu-Gi-Oh!. From time to time, the
Company has also sold cards and stickers featuring self-created entertainment
properties such as Wacky Packages, Garbage Pail Kids and Mars Attacks. During
the fiscal 2000 to 2003 period, the Company distributed Pokemon products in over
44 countries and 25 languages.
In fiscal 2005, the Company marketed non-sports trading card and sticker
album products featuring licenses including Star Wars, Lord of the Rings,
Hamtaro, Barbie, Yu-Gi-Oh! (sticker albums only), SpongeBob SquarePants and
Pokemon. The Company also reintroduced new editions of Garbage Pail Kids and
Wacky Packages stickers during the year. Entertainment cards and sticker album
collections have experienced peaks and valleys of consumer interest, a fact
which has prompted the Company to be highly selective in determining which
entertainment licenses to pursue.
Card and sticker album collections are prepared with care and often use
special technologies and reproduction techniques. Cards may include features
such as foil stamping, film lamination, autographs and/or small pieces of
memorabilia. The Company continuously strives to update the features of its
cards and sticker album collections and seeks new ideas and printing
technologies. Suggested retail prices for cards generally range from $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 consumers at variety of suggested retail price points.
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, current events, and
other features 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 ToppsVault.com and makes a
market in certain sports cards via thePit.com.
In July 2003, the Company acquired WizKids for a cash purchase price of
approximately $28.4 million. Headquartered in Bellevue, Washington, WizKids is a
designer and marketer of collectible and constructible strategy games. Some
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
2005, WizKids broadened its product line to include constructible strategy
games, introducing products under the Pirates and Football Flix names.
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 7 of the Company's Annual Report to
Stockholders for the year ended February 26, 2005 (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 broker organizations managed by Topps employees. In
fiscal 2005, Topps consolidated much of its broker network, joining forces with
a strong national organization which will provide greater retail coverage and
increased focus, particularly on the convenience channel. Topps Confectionery
products reach tens of 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 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. Together, the sales force and wholesalers reach approximately 30,000
retail news and confectionery outlets.
WizKids' products have traditionally been sold primarily to gaming stores
via distributors. Topps' sales force is also assisting WizKids in reaching mass
retailers in the U.S. and Europe. WizKids uses a network of 3,500 volunteers to
run approximately 10,000 in-store tournaments a month for its customers.
Advertising and Promotion
-------------------------
The Company utilizes a variety of marketing techniques, 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 $23,336,000 in fiscal 2005, $23,820,000 in
fiscal 2004 and $20,145,000 in fiscal 2003.
Approximately 74% of the Company's fiscal 2005 sales, 75% of fiscal 2004
sales, and 80% of fiscal 2003 sales were made on a returnable basis. Reductions
in the percentage starting in fiscal 2004 are due to the acquisition of WizKids,
whose sales historically have been largely not returnable. As WizKids begins to
sell more products to the mass market channel, its return rates will likely
increase. 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 net return provisions as a percentage of gross sales for
the fiscal years ended 2005, 2004 and 2003 were 6.5%, 5.1%, and 6.7%,
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. Raw materials required for the
manufacture of these products are generally available to the Company. Ring Pop
lollipops for sale in international markets as well as all Push Pops, Baby
Bottle Pops, Juicy Drop 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. 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 until the Company could make other arrangements.
Bazooka bubble gum is produced for Topps by the Hershey Foods Corporation
("Hershey") under a contract that is renewable annually for a five-year term.
This contract contains a number of conditions and requires the Company to source
certain of its U.S. Bazooka production needs from Hershey, provided Hershey can
fulfill the orders on a timely basis and can meet Topps' quality specifications.
Failure by Hershey to supply the Company with quality product 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 free-lance
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 cut into individual
cards, collated, wrapped in a variety of package configurations, and shipped to
customers by these same outside printers or by contract packers.
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 strategy games are manufactured by suppliers in China and
Taiwan. 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.
Paperboard, packaging materials, foil stamping and UV coating for cards,
and other raw materials required to manufacture the Company's total line of
entertainment products are generally available to the Company. The Company
relies on single producers for several of these materials 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 and/or their players'
associations, as well as under the licensing bodies of the professional sports
leagues. These agreements cover the following sports: Major League Baseball, NBA
Basketball and NFL Football. Because of the labor dispute in hockey during the
2004 season, the Company did not renew its NHL agreement when it expired in June
2004. The absence of hockey products did not have a material adverse effect on
the Company's sales or earnings in fiscal 2005. The Company also has a contract
with Premier League Soccer in England and with players and teams with regard to
soccer in Italy, Denmark, and Spain. The Company's inability to renew, or
continue to operate under licenses relating to Major League Baseball or England
Premier League soccer, and its inability 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 to it. 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 2005, 2004 and 2003
was $24,916,000, $23,912,000 and $25,344,000, respectively. See Note 21 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. In fiscal 2005, the Company expanded the program to include
seventeen licensees, including manufacturers of apparel, children's cosmetics,
footwear and collectibles. Additionally, WizKids licenses out its trademarks,
primarily Mech-Warrior, for fantasy books.
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 generally seasonally
stronger in the first two fiscal quarters of each year. However, sales can be
significantly 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, spanning the three major sports seasons in which the
Company currently participates, i.e. baseball, football, and basketball.
Generally, Topps Europe's sales of sports sticker album products are driven by
shipments of Premier League Soccer products, with much of the sales activity
occurring in the fourth fiscal quarter. 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. Hence, quarterly
results may vary. (See footnote 20 "Quarterly Results of Operations" in the
Company's Annual Report.)
DEPENDENCE ON CERTAIN CUSTOMERS
McLane Distribution Services, Inc. accounted for approximately 12% of
consolidated net sales in fiscal 2005. McLane 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 485 people in fiscal 2005.
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 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 products. The inability of the Company to produce planned
products could materially adversely affect its future plans and results.
4. Returns. Approximately 74% of the Company's fiscal 2005 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. 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.
8. 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
June 30, 2005 ("2005 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
---- --------------------------------------
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 53 years of age.
Edward P. Camp Vice President of the Company since April 1997 and
President-Hobby Division since October 1995. Previously,
Mr. Camp held a number of sales-related positions within
the Company. Mr. Camp is 58 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 50
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 68 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 51
years of age.
Warren Friss Vice President-General Counsel and General Manager
Sports. Mr. Friss was General Manager - Sports of the
the Company since February 2005, Vice President and
Internet Business General Manager since June 2001, and
General Counsel of the Company since February 2000. Mr.
Friss joined the Company as Deputy General Counsel in
May 1995. Mr. Friss is 41 years of age.
Position with the Company and business
Name experience during the past five years
---- --------------------------------------
Catherine K. Jessup Vice President-Chief Financial Officer and Treasurer.
Ms. Jessup was Treasurer of the Company since July 2004
and 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 49 years
of age.
Michael K. Murray Vice President - Confectionery Sales of the Company
since October 2004. Prior to joining the Company, Mr.
Murray was Vice President - Regional Director of Sales
North America for Reckitt Benckiser PLC. Mr Murray is
47 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 56 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 48 years of age.
Christopher Rodman Vice President - Topps Europe of the Company since
October 2004. Previously, Mr. Rodman was Managing
Director, Topps Europe since November 1997. Mr. Rodman
joined the Company in July 1995 with the acquisition of
Merlin Publishing. Mr. Rodman is 48 years of age.
Scott Silverstein President of the Company and Chief Operating Officer
since August 2004. Previously, Mr. Silverstien was
Executive Vice President of the Company since February
2000. Prior thereto, Mr. Silverstein ran the Pokemon
business for Topps since 1999 and was 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 and Chief Executive
Officer. Mr. Silverstein is 43 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
Milan, Italy*** Office 7,000 Leased; 2008
The Company also leases offices in Delaware, Canada and Argentina.
The Company believes that its active facilities are in good repair and are
suitable for its needs for the foreseeable future.
* Serves confectionery segment.
** Serves entertainment segment.
*** Serves both business segments.
ITEM 3. LEGAL PROCEEDINGS
In November 2000, the Commission of the European Communities (the
"Commission") began an investigation into whether Topps Europe's past
distribution arrangements for the sale of Pokemon products complied with
European law (the "EU investigation"). On June 17, 2003, the Commission filed a
Statement of Objections against The Topps Company, Inc. and its European
subsidiaries, therein coming to a preliminary conclusion that these entities
infringed Article 81 of the EC treaty during 2000 by preventing parallel trade
between member states of the European Union. A hearing in front of the European
Commission Tribunal took place on October 23, 2003, and on May 27, 2004, the
Commission found The Topps Company, Inc. and its European subsidiaries jointly
and severally liable for infringement of Article 81(1) of the EC treaty. The
Commission imposed a total fine of 1.6 million euros ($1.9 million) which was
paid during fiscal 2005.
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 piece of sporting equipment or
jersey. The court awarded summary judgment to the Defendants 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 litigation was
dismissed with prejudice on March 28, 2001.
After the dismissal, the 501 Patent was assigned to Media Technologies,
Inc. which is under the control of the same person (the inventor, Adrian Gluck)
who brought 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. The court once again granted summary judgment and dismissed
the case with prejudice. The Court of Appeals for the Federal Circuit reversed
the judgment on July 11, 2003, and the case was returned to Judge Stotler in the
Central District of California for trial. On October 16, 2003, Media
Technologies amended its complaint by alleging that Defendants' sale of relic
cards additionally infringed U.S. Patent No. 6,142,532 (the "532 Patent") which
was issued on November 7, 2000 and is similar to the 501 Patent.
On March 17, 2004, Topps filed a motion for summary judgment based on
non-infringement while other defendants filed a motion for summary judgment
based on patent invalidity because of prior art. Both motions were denied on
July 26, 2004. On September 15, 2004, defendant Upper Deck Company, LLC ("Upper
Deck") moved for a separate trial on the issues of infringement, damages,
willfulness and counterclaims, a motion the other defendants subsequently
joined. On October 26, 2004, the court ruled that the patent validity issues
would be tried first, before those of infringement. The court otherwise refused
to bifurcate the trial.
On October 4, 2004, Defendants petitioned the United States Patent &
Trademark Office (the "PTO") to reexamine the patentability of both the 501
Patent and the 532 Patent. On October 25, 2004, Defendants also filed a motion
with the district court requesting a stay of the proceedings pending the
petition with the PTO. On December 2, 2004, the court denied the motion for the
stay. In mid-December, the PTO granted the petition for reexamination of the 501
and 532 Patents. Plaintiffs have petitioned the PTO to vacate the reexaminations
and have also filed papers requesting the PTO, in the event it decides to
proceed with the reexamination, to hold its claims patentable.
On December 29, 2004, Defendants once again filed a motion with the
district court requesting a stay of the proceedings while the PTO reexamines the
patentability of the 501 Patent and the 532 Patent. That motion was denied on
February 28, 2005, along with another motion to dismiss the case based on lack
of standing. The pretrial conference was held on March 21, 2005. Both parties
requested that the judge construe Plaintiff's issued patent claims, and
Defendants once again asked that the damages and infringement issues be tried
separately as to each party.
The trial was initially scheduled for February 2005 but was adjourned to
June 2005. An adverse outcome in the litigation could result in a substantial
liability for the Company and could have a material impact on the Company's
consolidated financial statements. Plaintiff argues it is entitled to a royalty
on all sales of all product releases containing relic cards since issuance of
the patent, treble damages, and is also seeking to enjoin us from future
distribution of relic cards. It is not possible to determine the likelihood of
any damages or equitable relief , or to estimate the range of loss, if any.
Accordingly, no provision has been recorded for this matter in the accompanying
consolidated financial statements.
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 consolidated financial statements 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 26, 2005.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Reference is made to the data appearing on page 46 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 on page 9 of the 2005 Proxy.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Reference is made to the data appearing on page 46 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 7 through 14 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 14 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 15 through 43 and to the
Report of Independent Registered Public Accounting Firm appearing on page 44 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
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our reports filed pursuant to the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms, and that such
information is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
for timely decisions regarding required disclosure. In designing and evaluating
the disclosure controls and procedures, management recognizes that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
is required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
As of the end of the period covered by this report (the "Evaluation Date"),
we carried out an evaluation, under the supervision and with the participation
of our management, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, we have concluded
that, as of the Evaluation Date, our disclosure controls and procedures were
effective.
(b) Design and Evaluation of Internal Control Over Financial Reporting
Under Section 404 of the Sarbanes-Oxley Act of 2002, we are required to
include in this Annual Report on Form 10-K (i) a report from our management
regarding the Company's internal controls over financial reporting, which report
is required to include, among other things, an assessment and statement as to
the effectiveness of our internal controls over financial reporting as of
February 26, 2005 and (ii) an attestation report from our independent registered
public accounting firm on management's assessment of such internal controls.
On November 30, 2004, the SEC issued an exemptive order (SEC Release No.
50754) which provides a 45-day extension for the filing of the management report
and the related attestation report by eligible companies. We have elected to
rely on this 45-day extension, and therefore, this Annual Report on Form 10-K
does not include such reports. We intend to include such reports in an amendment
to this Annual Report on Form 10-K/A in accordance with the SEC's exemptive
order.
During fiscal 2005, we spent considerable time and internal and external
resources analyzing, documenting and testing our system of internal controls
over financing reporting and have completed our internal evaluation. In
addition, our management has provided our independent registered public
accounting firm with a draft of its report and we are not currently aware of any
material weaknesses in our internal controls over financial reporting.
There can be no assurance, however, that one or more material weaknesses in
our internal controls over financial reporting will not be identified during the
45-day extension period, that management will be able to assert that our
internal controls over financial reporting are effective as of February 26, 2005
or that our independent registered public accounting firm will be able to attest
that management's report is fairly stated or express an unqualified opinion on
the effectiveness of our internal controls.
(c) Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal controls over financial
reporting during the fiscal quarter ended February 26, 2005 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reports.
ITEM 9B. OTHER INFORMATION
Not applicable.
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 2005 Proxy
Statement and is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item appears in the 2005 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 2005 Proxy Statement and
is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item appears in the 2005 Proxy Statement and
is hereby incorporated by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this item appears in the 2005 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 March
1, 2003, February 28, 2004 and February 26, 2005.
Consolidated Balance Sheets February 28, 2004 and February 26, 2005.
Consolidated Statements of Cash Flows For Fiscal Years Ended March 1,
2003, February 28, 2004 and February 26, 2005.
Consolidated Statements of Stockholders' Equity and Comprehensive
Income For Fiscal Years Ended March 1, 2003, February 28, 2004 and
February 26, 2005.
Notes to Consolidated Financial Statements.
Index to Independent Registered Public Accounting
Firm's Report and Financial Statement Schedules
Page No.
Schedule I -- Valuation and Qualifying Accounts -
For Fiscal Years Ended March 1, 2003, February 28, 2004
and February 26, 2005 ............................................S-1
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
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
(Incorporated by reference to Exhibit 3.2 to the Company's Report on
Form 8-K dated April 12, 2005).
10.2 - The Topps Company, Inc. Bonus Plan for Scott Silverstien, effective
August 4, 2004 (Incorporated by reference to Exhibit 10-23 to the
Company Quarterly Report for the quarter ended August 28, 2004 SEC
File Number 000-15817)
10.3 - 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).
10.4 - 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)).
10.5 - 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).
10.6 - 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).
10.7 - 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.)
Index to Exhibits (continued)
10.8 - 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).
10.9 - 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).
10.10- 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).
10.11- 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).
10.12- 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).
10.13- 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).
10.14- Credit Agreement, dated September 7, 2004, between The Topps
Company, Inc. and The JPMorganChase Bank. (Incorporated by reference
to the Company's Quarterly Report on Form 10-Q for the period year
ended August 28, 2004).
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).
Index to Exhibits (continued)
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).
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 impairment of goodwill. (Incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 2004 SEC File Number 000-15817).
10.22- First Amendment, effective October 11, 2004 to the Amended and
Restated Employment Agreement , by and between The Topps Company, Inc.
and Arthur T. Shorin in which he consented to remove the title of
President of the Corporation. (Incorporated by reference to the
Company's Form 10-Q filed November 27, 2004).
10.23- License Agreement between Topps Europe Ltd., a wholly-owned
subsidiary of The Topps Company, Inc., and The Football Association
Premier League Ltd. Dated September 30, 2003 (Incorporated by
reference to Exhibit 10.25 of the Company's Quarterly Report on Form
10-Q for the period year ended August 28, 2004).
10.24- The Topps Company, Inc. Executive Severance Plan, effective July 1,
2004*
13 Annual Report (except for those portions specifically incorporated by
reference, the 2005 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).
23 Deloitte Consent
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, Chairman and Chief Executive
Officer, 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
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 12, 2005 THE TOPPS COMPANY, INC.
-----------------------
Registrant
/s/Arthur T. Shorin
------------------------
Arthur T. Shorin
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed on the 12th day of May 2005 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 and Chief Executive Vice President-Chief Financial Officer
Officer and Treasurer (Principal Financial
(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
VALUATION AND QUALIFYING ACCOUNTS -- Years Ended Mar 1, 2003, February 28, 2004,
and February 26, 2005
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE I - VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)
Column A Column B Column C Column D Column E
--------------------------------- ------------ --------------------- ------------ -------------
Balance Charged to Charged Balance
at Beginning Costs and Against Additions At End
Description of Period Expenses Sales (Deductions) of Period
----------- ------------ ---------- --------- ------------- ------------
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
-------- ------- -------- --------- --------
$ 48,782 $ 1,160 $ -- $(18,273) $ 31,669
======== ======= ======== ========= ========
Reserve for Estimated Returns $ 15,875 $ -- $ 22,413 $(21,845)(b) $ 16,443
======== ======= ======== ========= ========
Reserve for Doubtful Accounts $ 1,234 $ 456 $ -- $ ( 88)(c) $ 1,602
======== ======= ======== ========= ========
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 February 28, 2004:
-----------------------------
Accumulated 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 $ 1,602 $ (143) $ -- $ (810)(c) $ 649
======== ======= ======== ========= ========
Reserve for Cash Discounts $ 965 -- $ 3,882 $ (3,410)(d) $ 1,437
======== ======= ======== ========= ========
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 February 26, 2005:
-----------------------------
Accumulated Amortization of Other
Intangible Assets $ 33,240 $ 1,797 $ -- $ -- $ 35,037
======== ======= ======== ========= ========
Reserve for Estimated Returns $ 19,516 $ -- $ 22,020 $(20,712)(b) $ 20,824
======== ======= ======== ========= ========
Reserve for Doubtful Accounts $ 649 $ (110) $ -- $ (276)(c) $ 263
======== ======= ======== ========= ========
Reserve for Cash Discounts $ 1,437 $ -- $ 4,692 $ (4,685)(d) $ 1,444
======== ======= ======== ========= ========
Reserve for Customer Deductions $ 1,132 $ -- $ 883 $ (1,132)(e) $ 883
======== ======= ======== ========= ========
Reserve for Obsolete Inventory $ 7,115 $ 4,917 $ -- $ (7,741)(f) $ 4,291
======== ======= ======== ========= ========
======================================================================================================
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) Reclassifed (to)/from goodwill accumulated amotization
in accordance with FAS 142.
S-1