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The Topps Company, Inc. Reports Fiscal 2006 Second Quarter Results

The Topps Company, Inc. (TOPP) today reported financial results for the fiscal 2006 second quarter ended August 27, 2005.

Net sales in the fiscal 2006 second quarter increased 9.4% to $75.3 million compared to $68.8 million last year. Income from operations was $3.3 million compared to $4.8 million last year. Profitability for the period was impacted by higher marketing-related expenses. Net income in the fiscal 2006 second quarter was $4.8 million, or $0.12 per diluted share, versus $3.7 million, or $0.09 per diluted share, last year. Net income in the recent period benefited from a one-time, non-cash reversal of income tax reserves which added approximately $1.6 million.

For the six months ended August 27, 2005, net sales were $154.1 million compared to $156.9 million last year. Stronger foreign currencies versus the prior year contributed $1.6 million to 2006 first half sales. Income from operations was $3.7 million compared to $10.5 million last year. Net income was $5.7 million, or $0.14 per diluted share, versus $7.8 million, or $0.19 per diluted share, last year.

Fiscal 2005 results included a one-time charge of $1.9 million, or approximately $0.05 per diluted share, incurred in the first quarter related to a European Commission fine. Results for the first half of fiscal 2006 included the second quarter tax benefit of approximately $1.6 million.

Confectionery net sales increased 5.7% to $42.2 million in the fiscal 2006 second quarter compared to $40.0 million in last year's second quarter. The sales gain resulted from the improved performance of domestic Confectionery products due, in part, to increased advertising, consistent with our strategy. Strong sales of Ring Pop, Push Pop, and Baby Bottle Pop, broadened distribution of Juicy Drop Pop, and the rollout in Japan and Latin America of Mega Mouth Spray all contributed to the quarter's results.

Entertainment net sales increased 14.7% to $33.0 million in the fiscal 2006 second quarter from $28.8 million in the prior-year period. U.S. sports cards recorded year-over-year double-digit gains driven by strong football sales. The growth in the Company's football line is largely attributable to an effective marketing campaign based on Topps 50th anniversary of selling football cards, an exciting rookie class, and the absence of a long-time competitor which ceased operations and liquidated its assets.

In addition, the Company is pleased to report progress regarding its efforts to reduce product proliferation in the sports card category.

During the quarter, the Major League Baseball Players' Association and Major League Baseball Properties each announced its intention to reduce the number of licensees from four to two companies -- Topps and Upper Deck -- to market baseball cards for the next four years beginning February 2006. As part of this realignment, the Company will be increasing its financial and marketing commitments to its licensing partners and views the overall reduction of product releases by more than 50% as a positive development for the business.

Non-sports publishing products, including World Wrestling Entertainment in Italy, Wacky Packages in the U.S., and Star Wars in the U.S. and Europe also added to sales increases in the period. WizKids Pirates strategy games enjoyed cross-over success in the quarter beyond traditional gaming stores into mass retail outlets. The Company will apply this constructible game format in a new direction with the launch of a NASCAR product during the third quarter.

Arthur T. Shorin, Chairman and CEO commented, "We are pleased to report improved sales performance during the period in both our Confectionery and Entertainment segments. Additionally, we have completed the comprehensive strategic review with outside consultants and have already taken action. A restructuring program was recently announced which will separate our Confectionery and Entertainment businesses and will streamline the organizational structure through headcount reductions. We expect the changes to generate annual savings of approximately $2.5 million. This amount includes $3.4 million of headcount reductions, less $900,000 in targeted additions to support top-line growth initiatives.

"As part of the restructuring, the Company will incur a charge of approximately $2.4 million, 50% of which will be in the third quarter and the balance in the fourth quarter. In addition, as part of our overall review of the business, we have decided to exit one of our Internet operations,, through either sale or closure, and will record an after-tax charge of approximately $5 million in the third quarter. Excluding these charges, we expect to realize our financial objectives for this fiscal year, as previously stated."

Mr. Shorin concluded, "Beyond taking actions to improve performance, the Company's Board of Directors has approved an additional 3.4 million share buyback that increases the total outstanding authorization to 5.0 million shares. The Board has also approved the immediate implementation of a 10b5-1 program that will further facilitate the Company's repurchase of shares."

During the first quarter, the Company paid its regular quarterly cash dividend to shareholders of $0.04 per share. At August 27, 2005, the Company had $96.9 million in cash and short-term investments 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 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

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.

                  (amounts in thousands, except share data)

                                    (Unaudited)             (Unaudited)
                                Thirteen weeks ended    Twenty Six weeks ended
                                  August      August      August      August
                                 27, 2005    28, 2004    27, 2005    28, 2004

    Net sales                     $75,277     $68,781    $154,143    $156,870
    Cost of sales                  46,857      42,501      98,049      96,791

          Gross profit on
           sales                   28,420      26,280      56,094      60,079

    Other income                      195         411       1,147         844
    Selling, general and
     administrative expenses       25,330      21,879     $53,559      50,472
          Income from
           operations               3,285       4,812       3,682      10,451

    Interest income, net              798         557       1,537       1,041
    Income before provision
     for income taxes               4,083       5,369       5,219      11,492

    (Benefit)/provision for
     income taxes                    (754)      1,714        (515)      3,735
          Net income               $4,837      $3,655      $5,734      $7,757

     Basic net income per
      share                          0.12        0.09        0.14        0.19
     Diluted net income per
      share                          0.12        0.09        0.14        0.19

    Weighted average shares
     outstanding -- Basic      40,512,000  40,459,000  40,484,000  40,513,000
    Weighted average shares
     outstanding -- Diluted    41,547,000  41,511,000  41,429,000  41,565,000

                           THE TOPPS COMPANY, INC.
                            (amounts in thousands)

                                                As of            As of
                                           August 27, 2005 February 26, 2005

    Cash and Equivalents                           $32,180           $36,442
    Investments                                     64,754            69,955
    Working Capital                                138,655           138,146
    Net Property, Plant and Equipment               12,378            12,553
    Total Assets                                   284,104           290,411
    Shareholders' Equity                           219,919           219,189

                             SEGMENT INFORMATION
                            (amounts in thousands)

                                          Quarter ended     Six Months ended
                                         August   August    August     August
                                        27, 2005 28, 2004  27, 2005   28, 2004
    Net Sales
    Confectionery                        $42,248  $39,982   $86,287   $84,189
    Entertainment Products                33,029   28,799    67,856    72,681
    Total                                $75,277  $68,781  $154,143  $156,870

    Contributed Margin
    Confectionery                        $14,067  $15,777   $25,907   $28,779
    Entertainment Products                10,046    8,998    18,327    22,426
    Total                                $24,113  $24,775   $44,234   $51,205

    Reconciliation of Contributed Margin
      to Income Before Provision for

    Total Contributed Margin             $24,113  $24,775   $44,234   $51,205
    Unallocated General and
      Expenses and Manufacturing
      Overhead                           (19,602) (18,805)  (38,847)  (38,437)
    Depreciation & Amortization           (1,421)  (1,569)   (2,852)   (3,161)
    Other Income                             195      411     1,147       844
    Income from Operations                 3,285    4,812     3,682    10,451
    Interest Income, Net                     798      557     1,537     1,041
    Income before Provision for
      Income Taxes                        $4,083   $5,369    $5,219   $11,492

Source: The Topps Company, Inc.
Date: September 28, 2005

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