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The Topps Company, Inc. Reports Fiscal 2006 First Quarter Results
The Topps Company, Inc. (TOPP) today reported financial results for the fiscal 2006 first quarter
ended May 28, 2005.
Net sales in the fiscal 2006 first quarter were $78.9 million compared to $88.1 million last year.
Stronger foreign currencies versus the prior year contributed $1.5 million to 2006 first quarter
sales. Income from operations was $397,000 compared to $5.6 million last year. Net income in the
fiscal 2006 first quarter was $897,000, or $0.02 per diluted share, versus $4.1 million, or $0.10
per diluted share, last year. Fiscal 2005 first quarter results included a one-time charge of
$1.9 million, or approximately $0.05 per diluted share, related to a European Commission fine.
Profitability for the current period was impacted significantly by softness in U.S. and European
sports, as expected. Professional fees associated with the recently resolved proxy fight, settlement
of the Media Technologies litigation, and strategic business initiatives were also factors.
Confectionery net sales were essentially flat at $44.0 million in the fiscal 2006 first quarter, a
0.4% decline compared to $44.2 million in last year's first quarter. Net sales in the period benefited
from distribution gains of Juicy Drop Pop in the U.S., supported by new packaging and increased
advertising as well as new product introductions. Gains were offset by the timing of the Easter
holiday this year and the discontinuation of Juicy Bugs and Juicy Chews.
Entertainment net sales declined 20.6% to $34.8 million in the fiscal 2006 first quarter from $43.9
million in the prior-year period, reflecting the absence of sales related to the European Cup held once
every four years, lower sales of other European sports products, and continuing softness in U.S. sports
cards. These declines were partially offset by strength in non-sports Entertainment products including
Star Wars in the U.S. and Europe, World Wrestling Entertainment in Italy, and WizKids constructible
strategy games.
Arthur T. Shorin, Chairman and CEO of Topps, commented, "During the first quarter, we rolled out
certain confectionery products to new markets, continued to work at implementing our new go-to-market
strategy for the segment, and began developing an exciting program to build the Bazooka brand that will
be introduced early next year. Sports products declined, as noted, but efforts in connection with product
proliferation issues were actively pursued. As anticipated, sales of non-sports publishing products and
Pirates constructible strategy games fared well in the first quarter."
Mr. Shorin continued, "We remain focused upon doing the right things to improve long-term performance
and build shareholder value. These include completing the final phase of in-depth business reviews with
outside consultants and continuing the exploration of strategic alternatives, previously announced, which
we initiated with Lehman Brothers this past February."
Mr. Shorin concluded, "First quarter results do not diminish our confidence about achieving the full
year plan we outlined at the beginning of fiscal 2006. I anticipate increasingly better performance
from the Confectionery segment during the second half. Further, Entertainment activities, including WizKids
introductions and a national roll out of TV advertising featuring Wacky Packages, are quite
promising."
During the first quarter, the Company paid its regular quarterly cash dividend to shareholders of $0.04 per
share. At May 28, 2005, the Company had $92.9 million in cash and marketable securities and no debt.
The Topps Company, Inc. will host a webcast of its earnings conference call today at 10:00 a.m., Eastern
Time. Investors, analysts, and the media are invited to listen to the call live at http://www.topps.com. A
replay of the webcast will be available on the Company's website for the next 60 days.
Founded in 1938, Topps is a leading creator and marketer of distinctive confectionery and entertainment
products. The Company's confectionery brands include "Ring Pop," "Push Pop,"
"Baby Bottle Pop" and "Juicy Drop Pop" lollipops as well as "Bazooka"
bubble gum. Topps entertainment products include trading cards, sticker album collections, and
collectible games. For additional information, visit www.topps.com.
This release contains forward-looking statements pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Although the Company believes the expectations contained in such
forward-looking statements are reasonable, it can give no assurance that such expectations will prove to
be correct. This information may involve risks and uncertainties that could cause actual results to
differ materially from the forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, factors detailed in the Company's Securities and Exchange
Commission filings.
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share data)
(Unaudited)
Thirteen weeks ended
May 28, May 29,
2005 2004
Net sales $78,866 $88,089
Cost of sales 51,192 54,290
Gross profit on sales 27,674 33,799
Other income 952 433
Selling, general and administrative
expenses 28,229 28,593
Income from operations 397 5,639
Interest income, net 739 484
Income before provision for income taxes 1,136 6,123
Provision for income taxes 239 2,021
Net income $897 $4,102
Basic net income per share 0.02 0.10
Diluted net income per share 0.02 0.10
Weighted average shares outstanding -
Basic 40,455,000 40,567,000
Weighted average shares outstanding -
Diluted 41,255,000 41,372,000
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Amounts in thousands)
As of As of
May 28, 2005 February 26, 2005
Cash and Equivalents $22,048 $36,442
Investments 70,881 69,955
Working Capital 134,645 138,146
Net Property, Plant and Equipment 12,531 12,553
Total Assets 281,878 290,411
Shareholders' Equity 216,702 219,189
SEGMENT INFORMATION
(Amounts in thousands)
Quarter ended
May 28, 2005 May 29, 2004
Net Sales
Confectionery $44,039 $44,207
Entertainment Products 34,827 43,882
Total $78,866 $88,089
Contributed Margin
Confectionery $11,840 $13,002
Entertainment Products 8,281 13,428
Total $20,121 $26,430
Reconciliation of Contributed Margin
to Income Before Provision for
Taxes:
Total Contributed Margin $20,121 $26,430
Unallocated General and
Administrative
Expenses and Manufacturing Overhead (19,245) (19,632)
Depreciation & Amortization (1,431) (1,592)
Other Income 952 433
Income from Operations 397 5,639
Interest Income, Net 739 484
Income before Provision for
Income Taxes $1,136 $6,123
Source: The Topps Company, Inc.
Date: June 28, 2005
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