________________________________________________________________________________
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 March 1, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15817
THE TOPPS COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2849283
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Whitehall Street, New York, NY 10004
(Address of principal executive offices) (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. [ 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 $331,150,000.
The number of outstanding shares of Common Stock as of May 15, 2003 was
40,700,151.
Documents incorporated by reference Part
----------------------------------- ----
Annual Report to Stockholders for the Year Ended March 1, 2003 I, II, IV
Proxy Statement for the 2003 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, Bazooka brand bubble
gum and certain novelty candy products. The Company also markets collectible
entertainment products featuring professional athletes and popular television,
movie and other licensed characters. Entertainment product formats include,
among other things, trading cards, sticker albums, tattoos and toys.
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.
The Company, which is headquartered in New York, N.Y., also has offices in
Pennsylvania, Delaware, Canada, the U.K., Ireland, Italy and Argentina and
distributes its products in numerous countries around the world.
PRODUCTS
Confectionery
- -------------
The Company markets premium quality lollipops throughout the United States,
Canada, Europe and parts of Latin America, Asia and Australia. Branded lollipops
include Ring Pop (made of 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) and Baby
Bottle Pop (a miniature baby bottle filled with fruit-flavored powder and topped
with a candy nipple).
================================================================================
Trademarks of The Topps Company, Inc. and Subsidiaries appearing in this report:
Baby Bottle Pop, Baby Bottle Pop Candy Juice, Bazooka, Bazooka Joe, Bowman, Cool
Junk, etopps, etopps.com, Flip N`Dip Push Pop, Garbage Pail Kids, Juicy Drop
Pop, Mars Attacks, Merlin, Push Pop, Ring Pop, Topps, Topps Chrome, Topps
Finest, Topps Gallery, Topps Gold Label, Topps Heritage, Topps Pristine, Topps
Stadium Club, Twisted Fruit Baby Bottle Pop, Twisted Fruit Triple Power Push Pop
and Wacky Packages.
Unless otherwise indicated, all date references refer to calendar years.
2
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 created by the Company in
1953. In addition to individual pieces, the Company sells multiple piece packs
of Bazooka which are designed for distribution across all major trade channels.
In the U.S., the Company is focused on a three-pronged strategy --
providing children with compelling high quality products, expanding product
availability (distribution and in-store location) and advertising on national
children's television programs. As a result, the Company has experienced solid
progress in terms of its U.S. competitive share position, retail distribution
and brand and advertising awareness. Overseas, the primary emphasis has been on
delivering innovative products to the marketplace and securing new listings in
key retailers. In 2003, confectionery distribution in Europe was expanded to
include Tesco and Safeway in the U.K., Albert Heine in Holland (part of the
Ahold group), and Carrefour in France.
Beginning in fiscal 2000 and peaking in fiscal 2001, the Company marketed a
line of Pokemon candy products which included lollipops as well as a plastic
container replica of the Pokemon ball with candy and a decorated Pokemon figure
inside. In fiscal 2002, the Company introduced a seasonal products line focused
on the Christmas, Valentine's Day and Easter holidays.
In fiscal 2003, the Company launched Flip N' Dip Push Pop (a Push Pop with
a container of fruit-flavored powder), Baby Bottle Pop Candy Juice (liquid candy
in a Baby Bottle Pop container), Juicy Drop Pop (a pop with a separate container
of candy juice to be squirted onto the pop) and Yu-Gi-Oh! sticker pops.
Additionally, the Company introduced line extensions such as Twisted Fruit Baby
Bottle Pop and Twisted Fruit Triple Power Push Pop (two flavors of candy swirled
together in each pop).
Entertainment
- -------------
Effective with the fourth quarter of 2003, the Company combined the Sports
and Entertainment segments into a single segment, Entertainment, consistent with
Topps organizational structure and product line similarities. The Entertainment
segment primarily consists of trading cards and sticker album picture products
featuring both sports and non-sports licenses.
In the U.S. and Canada, picture products are generally sold in the form of
cards, while in the rest of the world picture products are typically sold in the
form of sticker albums. 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 which contains more detailed information on the subject.
Internationally, the Company distributes sticker album collections under the
Merlin and Topps brands. These products are sold to consumers through retail
channels as well as over the Internet.
Sports card and sticker album products contain photographs of athletes as
well as other features, including player and team statistics, biographical
material and occasionally, 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 athletes from English Premier League Football (soccer).
The Company also has rights to market bubble gum with mini-stickers featuring
Italy's Serie A soccer league. Additionally, in fiscal 2003, the Company
marketed Team England and Team Ireland sticker album products associated with
the World Cup soccer tournament, which occurs once every four years.
3
The Company distributes sports card products in North America under brand
names including, but not limited to, Topps, Topps Heritage, Topps Finest, Topps
Gallery, Topps Stadium Club, Topps Gold Label, 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.
Non-sports cards and sticker album products feature licenses from popular
films, television shows and other properties. The Company has 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 and Pokemon.
Occasionally, the Company has also created cards and stickers featuring its own
entertainment properties such as Wacky Packages, Garbage Pail Kids and Mars
Attacks, as well as cards detailing events of national interest such as Desert
Storm and Enduring Freedom. During the fiscal 2000 to 2003 period, the Company
distributed Pokemon products in over 44 countries and 25 languages.
In fiscal 2003 the Company marketed non-sports trading card and sticker
album products featuring licenses including Star Wars Episode II: Attack of the
Clones, Lord of the Rings: The Two Towers, Spider-Man, Yu-Gi-Oh! (sticker albums
only), and The Simpsons. 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 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
per pack 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 at a suggested retail price of $100 or more.
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 veteran and rookie players are
offered for sale via "Initial Player Offerings", or IPOs. Upon assuming
ownership, a customer may take delivery of cards, each of which come in a
special sealed protective case, or elect to have Topps hold the cards in a
secure warehouse. Cards held by the Company can be tracked via personal on-line
portfolios and traded on an exclusive etopps trading floor on eBay. All etopps
cards adhere to high-quality printing and manufacturing standards and have
pre-numbered stickers in order to assure authenticity.
In August 2001, the Company acquired all the outstanding common stock in
thePit.com, Inc. for $5.7 million in cash. ThePit.com makes a market in sports
cards and provides a means by which collectors can buy and sell cards in real
time over the Internet. The Company also markets memorabilia over the Internet
through ToppsVault.com.
From time to time the Company has explored opportunities within the toy and
game arena which leverage its marketing and distribution strengths. In February
2003, the Company launched a series of collectible Cool Junk toy products which
were marketed through toy retailers in the U.S.
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 March 1, 2003 (the "Annual Report"), which is
hereby incorporated by reference.
4
DISTRIBUTION AND MARKETING
Sales and Distribution
- ----------------------
The Company's products are sold throughout the United States, Canada and
Europe, as well as in parts of Latin America, Asia and Australia.
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 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 own employees also handle U.S. sales of entertainment
card products to approximately 2,100 hobby stores, hobby distributors and
category managers who service major retail outlets.
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. Elsewhere in Europe,
as well as in Latin America, Japan and Australia, sales are generated primarily
through distributors.
Advertising and Promotion
- -------------------------
The Company utilizes a variety of marketing techniques, including
television, radio and print advertising campaigns, sweepstakes and promotions
designed to create consumer awareness and stimulate retail sales of its
products. Advertising and marketing expenses (which encompass media spending and
consumer promotions) included in selling, general, and administrative expenses
amounted to $20,145,000 in fiscal 2003, $18,790,000 in fiscal 2002 and
$21,514,000 in fiscal 2001.
Approximately 85% of the Company's fiscal 2003 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
gross sales for the fiscal years ended 2003, 2002 and 2001 were 6.7%, 4.4%, and
7.5%, respectively. Returns significantly in excess of the Company's returns
provisions 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 most of the
Company's other lollipop products are manufactured by a single supplier in
factories located in Taiwan, Thailand and China. Sticker pops and licensed
bubble gum products are manufactured by a single supplier in Brazil. 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 which is renewed annually for a five-year term. This contract requires
the Company to source all of its current 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.
5
Confectionery raw materials 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.
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 stamp 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.
TRADEMARKS AND LICENSE AGREEMENTS
The Company considers its trademarks and license agreements to be of
material importance to its business. 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 all 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. The Company's inability to renew, or continue to operate under,
licenses relating to Major League Baseball or U.K. Premiere League soccer, and
its ability to market products in these sports, could have a material adverse
effect on the Company.
6
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.
Although the written agreement expired at the end of 2000, the parties have
agreed to continue to operate under its terms. The parties are currently
negotiating the final terms of a new written agreement. However, the inability
of the parties to execute a new written agreement could have a material adverse
effect on the Company.
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 2003, 2002 and 2001
was $25,344,000, $25,669,000 and $46,727,000 respectively. See Note 18 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.
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 and candy, and with a number of picture product
companies 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 impacted by the
introduction of new products and line extensions as well as by advertising, and
consumer and trade support programs. U.S. sports card products are sold
throughout the year, spanning 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, with much of the sales activity occurring in December
through April. Sales of non-sports cards and sticker albums tend to be driven by
the property on which they are based, often peaking with the release of a movie
or the rise in popularity of a television program or particular licensed
property.
7
DEPENDENCE ON CERTAIN CUSTOMERS
The Company has one customer, McLane Distribution Services, Inc. that
accounted for 11.4% of the Company's net sales in fiscal 2003. This customer
purchases primarily confectionery products from the Company and distributes
these products 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 450 people in fiscal 2003.
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.
8
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 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 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 85% of the Company's sales are 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 make a significant investment 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 14 of the Notes to Consolidated Financial Statements included in the Annual
Report is hereby incorporated by reference.
9
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 26, 2003 ("2003 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 51 years of age.
Edward P. Camp Vice President of the Company since April 1997 and
President of the Hobby Division since October 1995. Mr.
Camp held a number of sales-related positions within
the Company prior thereto. Mr. Camp is 56 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 48 years of age.
Michael J. Drewniak Vice President - Manufacturing of the Company since
March 1991. Mr. Drewniak held the position of General
Manager - Manufacturing Operations prior thereto. Mr.
Drewniak is 66 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 49 years
of age.
10
Position with the Company and business
Name experience during the past five years
- ---- --------------------------------------
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 39 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
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 54 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 46 years of age.
Scott Silverstein Executive Vice President of the Company since February
2000. Prior thereto, 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.
Prior to joining the Company, Mr. Silverstein was an
attorney with the law firm of Ingram Yuzek Gainen
Carroll & Bertolotti from April 1990 until July 1993.
Prior thereto, he was an attorney with the law firm of
Shea & Gould. 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 41
years of age.
11
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
Cork, Ireland** Office 8,000 Leased; 2006
New York, NY* Executive offices 60,000 Leased; 2009
Milton Keynes, United Kingdom* Office and warehouse 10,000 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.
12
ITEM 3. LEGAL PROCEEDINGS
In November 1998, the Company was named as a defendant in a purported class
action commenced in the United States District Court for the Southern District
of California (the "California Court") entitled Rodriquez, et. al. v. The Topps
Company, Inc., No. CV 2121-B (AJB) (S.D. Cal.) (the "California Federal
Action"). The California Federal Action alleged that the Company violated the
Racketeer Influenced and Corrupt Organizations Act ("RICO") and the California
Unfair Business Practices Act, by its practice of selling sports and
entertainment trading cards with randomly-inserted "insert" cards, allegedly in
violation of state and federal anti-gambling laws. The California Federal Action
sought treble damages and attorneys' fees on behalf of all individuals who
purchased packs of cards at least in part to obtain an "insert" card over a
four-year period. On January 22, 1999, plaintiffs moved to consolidate the
California Federal Action with similar class actions pending against several of
the Company's principal competitors and licensors in the California Court. On
January 25, 1999, the Company moved to dismiss the complaint, or, alternatively,
to transfer the California Federal Action to the Eastern District of New York or
stay the California Federal Action pending the outcome of the Declaratory
Judgment Action pending in the Eastern District of New York. By orders dated May
14, 1999, the California Court denied the Company's motions to dismiss or
transfer the California Federal Action but granted the Company's motion to stay
the California Federal Action pending the outcome of the Declaratory Judgment
Action. The California Court also denied plaintiffs' motion to consolidate the
California Federal Action with similar purported class actions. On April 18,
2000, the California Court entered an order requiring plaintiffs in the
California Federal Action as well as in the other purported class actions to
show cause why all such actions should not be dismissed. By order dated June 21,
2000, the California Court vacated its May 14, 2000 order denying the Company's
motion to dismiss the Class, dismissed the RICO claim in the California Federal
Action with prejudice and without leave to replead, and dismissed the pendent
state law claims without prejudice. Plaintiffs filed a notice of appeal of the
California Court's decision to the United States Court of Appeals for the Ninth
Circuit on July 21, 2000. On August 20, 2002 the Ninth Circuit affirmed the
dismissal of the RICO claims. Plaintiffs' time to seek review of the Ninth
Circuit's decision has now expired, and the dismissal of the California Federal
Action has now become final.
On August 21, 2000, the Company was named as a defendant in a purported
class action commenced in the Superior Court of the State of California for the
County of Alameda (the "California State Court") entitled Chaset, et al. v. The
Upper Deck Company, et al., No. 830257-9 (the "California State Action"). The
California Class Action alleged that the Company and other manufacturers and
licensors of sports and entertainment trading cards committed unlawful, unfair
and fraudulent business acts under the California Unfair Business Practices Act
(CUBPA) and the California Consumer Legal Remedies Act (CLRA) by the practice of
selling trading cards with randomly-inserted "insert" cards allegedly in
violation of state and federal anti-gambling laws and state consumer laws.
On March 4, 2003, the parties reached a settlement of the California State
Action in which the manufacturer defendants agreed to offer a No Purchase
Necessary alternative by which consumers could have an opportunity of obtaining
"insert" cards. In addition, the defendants collectively, without admitting
liability, made a payment of approximately $6.0 million toward the cost and
attorneys' fees incurred by plaintiffs. Topps' share of this payment was
slightly in excess of $1.6 million.
13
In November 2000, the Commission of the European Communities began an
investigation into whether Topps Europe's distribution arrangements for its
licensed products comply with European law. The Commission is seeking
information as to whether Topps Europe has engaged in the prevention of parallel
trade between the member states of the European Union and/or European Economic
Area, in infringement of Article 81 of the EC Treaty and/or Article 54 of the
EEA Treaty. Topps Europe filed a response to the Commission's inquiry on
November 29, 2000, and provided further information to the Commission on
February 2, 2001, pursuant to its request. The Commission has continued its
investigation by submitting new requests for documents and information in early
2003 and Topps Europe continues to fully cooperate. An adverse outcome in the
Commission's findings could result in a substantial fine.
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 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 had 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 judgment on the grounds that the named Plaintiff (Telepresence,
Inc.) did not have standing to sue for infringement of the 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 had orchestrated the Telepresence action. On
November 19, 2001, Media Technologies sued essentially the same group of
defendants in the same court for infringement of the `501 patent. On March 13,
2002, the Defendants again moved for summary judgment based on the fact that the
Telepresence action was dismissed with prejudice. That motion was granted by the
District Court on April 22, 2002. Plaintiff (Media Technologies, Inc.) appealed
on May 2, 2002. That appeal is presently pending before the Court of Appeals for
the Federal Circuit. Oral argument was held on April 9, 2003 and a decision is
expected in the near future. If the dismissal is overturned, the parties will
then engage in discovery on the substantive issues of the case. An adverse
outcome in this 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 March 1, 2003.
14
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Reference is made to the data appearing on page 31 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 2003 Proxy.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Reference is made to the data appearing on page 32 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 5 through 10 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 9 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 11 through 30 and to the
Report of Independent Public Accountants appearing on page 31 of the Annual
Report which are hereby incorporated by reference.
ITEM 9. CHANGES IN ACCOUNTANTS AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
15
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 2003 Proxy
Statement and is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item appears in the 2003 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 2003 Proxy Statement and
is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item appears in the 2003 Proxy Statement and
is hereby incorporated by reference.
ITEM 14. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Based on their evaluation as of a date within 90 days of the filing date of this
Annual Report on Form 10-K, the Company's Chief Executive Officer and Chief
Financial Officer have concluded that the Company's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934 (the "Exchange Act")) are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
(b) Changes in internal controls.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation. There were no significant deficiencies or material weaknesses,
and therefore there were no corrective actions taken.
Critical Accounting Policies
- ----------------------------
Refer to the Company's Annual Report for the year ended March 1, 2003 for
details.
16
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1&2) Financial Statements and Financial Statement Schedules
See index on page 21.
(3) Listing of Exhibits
See index on pages 22-24.
(c) Reports on Form 8-K
On April 8, 2003, the Company filed a Current Report on Form 8-K regarding
the historical restatement of its business segment information.
On April 8, 2003, the Company filed a Current Report on Form 8-K reporting
the financial results of the Company for the fiscal fourth quarter and year
ended March 1, 2003.
17
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 30, 2003 THE TOPPS COMPANY, INC.
------------------------
Registrant
/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 31th day of May 2003 by the following persons on
behalf of the Registrant and in the capacities indicated.
/Arthur T. Shorin/ /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)
/Allan A. Feder/ /David Mauer/
----------------- --------------
Allan A. Feder David Mauer
Director Director
/Stephen D. Greenberg/ /Jack H. Nusbaum/
----------------------- ------------------
Stephen D. Greenberg Jack H. Nusbaum
Director Director
/Ann Kirschner/ /Richard Tarlow/
---------------- -----------------
Ann Kirschner Richard Tarlow
Director Director
/Edward Miller/ /Stanley Tulchin/
---------------- ------------------
Edward Miller Stanley Tulchin
Director Director
18
CERTIFICATION
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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared; and
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or person performing the
equivalent function);
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 30, 2003
/s/ Arthur T. Shorin
-------------------------
Chairman, Chief Executive
Officer and President
19
CERTIFICATION
I, Catherine K. Jessup, 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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared; and
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or person performing the
equivalent function);
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 30, 2003
/s/ Catherine K. Jessup
-------------------------
Vice President -
Chief Financial Officer
20
THE TOPPS COMPANY, INC.
FORM 10-K ITEM 14(a)(1), (2) AND (3)
LIST OF FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
(a)(1) 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 -- March 3, 2001, March 2, 2002, and
March 1, 2003.
Consolidated Balance Sheets -- March 2, 2002, and March 1, 2003.
Consolidated Statements of Cash Flows March 3, 2001, March 2, 2002, and
March 1, 2003.
Consolidated Statements of Stockholders' Equity March 3, 2001, March 2,
2002, and March 1, 2003.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
(a)(2) 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 -
Years Ended March 3, 2001, March 2, 2002, and March 1, 2003....... 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.
21
(a)(3) Index to 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 3, 1991).
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 3, 1991).
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).
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).
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).
10.6 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).
10.7 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).
10.8 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).
22
Index to Exhibits (continued)
- -----------------------------
10.9 Agreement for the acquisition of the issued share capital of Merlin
Publishing International plc dated May 17, 1995 (Incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended February 25, 1995).
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).
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).
10.12 Consulting Agreement with Seymour Berger dated December 31, 1997.
(Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended August 29, 1998).
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 Pokemon Merchandise License Agreement - U.S. between the Company and
Nintendo of America, Inc., dated April 16, 1999. (Incorporated by
reference to the Company's Quarterly Report on Form 10Q for the
quarter ended August 28, 1999).
10.15 Pokemon Merchandise License Agreement - U.K. between the Company and
Nintendo of America, Inc., dated June 4, 1999. (Incorporated by
reference to the Company's Quarterly Report on Form 10Q for the
quarter ended August 28, 1999).
10.16 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).
10.17 Amendment Number One to Credit Agreement dated 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).
10.18 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).
23
Index to Exhibits (continued)
- -----------------------------
10.19 Letter of Amendment to Retail Product License Agreement with the Major
League Baseball Properties, Inc., dated September 28, 1995
(Incorporated by reference to Exhibit 10.31 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 30, 1977);
10.20 Memorandum of Agreement between the Company and Major League Baseball
Players' Association dated January 6, 2003.*
10.21 Amended and Restated Employment Agreement (the "Agreement"), effective
as 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").*
13 Annual Report (Except for those portions specifically incorporated by
reference, the 2003 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).
99.1 Certification of Arthur T. Shorin, Chief Executive Officer and
President, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
99.2 Certification of Catherine K. Jessup, Vice-President and Chief
Financial Officer and pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
*filed herewith
24
EXHIBIT 10.1: EXECUTIVE OFFICERS' ANNUAL BONUS PLAN
A fiscal 2004 Executive Officers Incentive Bonus Plan has been established,
with payments to be made after the close of fiscal 2004. 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. Assuming achievement of minimum
target figures for Consolidated Operating Profit and/or strategic objectives in
fiscal 2004, each Executive Officer will be eligible to receive 20% of their
base salary as bonus, increasing to a maximum of 60% of base salary should
Consolidated Operating Profit exceed minimum target figures and strategic
objectives be met.
25
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 March 1, 2003 and March 2, 2002, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended March 1, 2003 and have
issued our report thereon dated April 3, 2003; such consolidated financial
statements and report are included in your 2003 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, present fairly in
all material respects the information set forth therein.
/ Deloitte & Touche LLP /
---------------------------
Deloitte & Touche LLP
New York, New York
April 4, 2003
S-1
26
2001-2003
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VIII. 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 3, 2001:
- ------------------------
Amortization of Sports,
Entertainment and
Proprietary Products $ 32,567 $ 1,898 $ -- $ -- $ 34,465
Amortization of Other
Intangible Assets 10,744 720 -- -- $ 11,464
-------- ------- -------- --------- --------
$ 43,311 $ 2,618 $ -- $ -- $ 45,929
======== ======= ======== ========= ========
Allowance for Estimated
Losses on Sales Returns $ 23,621 $ -- $ 38,018 $(37,343)(a) $ 24,296
======== ======= ======== ========= ========
Allowance for Doubtful Accounts $ 1,415 $ 494 $ -- $ (291) $ 1,618
======== ======= ======== ========= ========
Inventory Valuation Adjustments $ 7,868 $ 3,989 $ -- $ (6,788)(b) $ 5,069
======== ======= ======== ========= ========
======================================================================================================
Year Ended March 2, 2002:
- ------------------------
Amortization of Sports,
Entertainment and
Proprietary Products $ 34,465 $ 1,898 $ -- $ -- $ 36,363
Amortization of Other
Intangible Assets 11,464 955 -- -- $ 12,419
-------- ------- -------- --------- --------
$ 49,929 $ 2,853 $ -- $ -- $ 48,782
======== ======= ======== ========= ========
Allowance for Estimated
Losses on Sales Returns $ 24,296 $ -- $ 11,681 $(20,102)(a) $ 15,875
======== ======= ======== ========= ========
Allowance for Doubtful Accounts $ 1,618 $ (224) $ -- $ (160) $ 1,234
======== ======= ======== ========= ========
Inventory Valuation Adjustments $ 5,069 $ 2,461 $ -- $ (3,005)(b) $ 4,525
======== ======= ======== ========= ========
======================================================================================================
Year Ended March 1, 2003:
- ------------------------
Amortization of Sports,
Entertainment and
Proprietary Products $ 36,363 $ -- $ -- $(36,363)(c) $ --
Amortization of Other
Intangible Assets 12,419 1,160 -- 18,090 (c) $ 31,669
-------- ------- -------- --------- --------
$ 48,782 $ 1,160 $ -- $(18,273) $ 31,669
======== ======= ======== ========= ========
Allowance for Estimated
Losses on Sales Returns $ 15,875 $ -- $ 21,845 $(21,277)(a) $ 16,443
======== ======= ======== ========= ========
Allowance for Doubtful Accounts $ 1,234 $ 456 $ -- $ ( 88) $ 1,602
======== ======= ======== ========= ========
Inventory Valuation Adjustments $ 4,525 $ 3,298 $ -- $ (4,296)(b) $ 3,527
======== ======= ======== ========= ========
======================================================================================================
(a) Returns charged against provision, net of recoveries.
(b) Disposals, net of recoveries.
(c) Reclassified (to)/from goodwill accumulated amortization
in accordance with FAS 142.
S-2
27
Exhitbit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Topps Company, Inc. (the "Company")
on Form 10-K for the period ended March 1, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Arthur T. Shorin,
Chairman, Chief Executive Officer and President of the Company, certify,
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Arthur T. Shorin
Arthur T. Shorin
Chairman, Chief Executive
Officer and President
May 30, 2003
28
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Topps Company, Inc. (the "Company")
on Form 10-K for the period ended March 1, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Catherine K. Jessup,
Vice President and Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Catherine K. Jessup
Catherine K. Jessup
Vice President -
Chief Financial Officer
May 30, 2003
29