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The Topps Company, Inc. Reports Fiscal 2007 First Quarter Earnings

Posted on: Thursday, 29 June 2006, 09:00 CDT

NEW YORK, June 29 /PRNewswire-FirstCall/ -- The Topps Company, Inc. today reported financial results for the fiscal 2007 first quarter ended May 27, 2006.

Net sales in the fiscal 2007 first quarter were $81.0 million compared to $78.6 million last year. Weaker foreign currencies versus the prior year reduced 2007 first quarter sales by $1.0 million. Income from operations was $1.6 million compared to $507,000 in last year's first quarter. Net income in the fiscal 2007 first quarter was $1.6 million, or $0.04 per diluted share, versus $897,000, or $0.02 per diluted share, last year.

Net sales of the Entertainment segment increased 10.8% to $38.3 million in the fiscal 2007 first quarter from $34.5 million in the prior-year period. Both U.S. sports cards and European sports product sales were up significantly in the quarter. Company-driven initiatives to reduce product proliferation and create a strong product line up contributed to a dramatic increase in first quarter sales of U.S. sports cards. World Cup-related sticker products along with other collections featuring Pokemon, WWE, and Superman also contributed to Entertainment sales in the quarter. As expected, WizKids' comparative results continued to be affected by industry-wide softness in the gaming category.

Arthur T. Shorin, Chairman and CEO of Topps, noted, "The strategic importance of our new agreement with the Major League Baseball Players' Association and Major League Baseball Properties was evidenced by a 27% increase in first quarter sales within the baseball category alone. In addition to addressing the product proliferation issue, under the new agreement Topps has entered into a joint national advertising program aimed at bringing kids back into the market and is promoting its brand through 30 in- stadium baseball promotions."

Confectionery net sales were $42.7 million in the fiscal 2007 first quarter, a 3.0% decline compared to $44.0 million in last year's first quarter. Net sales in the period benefited from a successful Baby Bottle Pop line extension called 2DMax, the seasonal impact of a later Easter, and higher sales of Pokemon candy in Europe. Sales of Bazooka brand declined however, as the Company transitioned to its new supplier and began rolling out its revamped product line. Shipments of Grand Slam pre-packs, which pair confectionery items with baseball cards, were delayed to the second quarter, consistent with the new baseball agreement.

On June 1, 2006, Ms. Sherry Schultz joined Topps as Vice President and General Manager of the Company's Confectionery business. Ms. Shultz has over 25 years of marketing related experience as an executive in the confectionery industry, most recently as Vice President, Global Business Development at Adams.

Further commenting on the quarter, Mr. Shorin said, "We are also progressing against our strategic goals in the Confectionery segment. We have implemented a more disciplined new product development process, re-launched Bazooka, introduced new merchandising vehicles to broaden in-store distribution, and placed renewed emphasis on cost controls as can be seen through improved margins."

The Company recently implemented a headcount reduction program, which on an annualized basis, is expected to generate cost savings of approximately $3.3 million. The Company will take a one-time charge estimated at $1.7 million for severance and related costs in the second quarter of fiscal 2007. This is in addition to the $2.5 million in annualized savings resulting from the headcount reduction taken in September of 2005.

At May 27, 2006, the Company had $79.6 million in cash and marketable securities and no debt. In the first quarter, Topps paid its regular quarterly cash dividend to shareholders of $0.04 per share. The Company repurchased 574,979 shares of common stock at an average price of $8.47 per share during the period.

Outlook

Topps is executing on its strategic plans for both the entertainment and confectionery businesses. Based on currently available information, the Company expects to achieve solid mid-single digit revenue growth in fiscal 2007 and significant margin improvement. Current expectations call for Topps to generate earnings of approximately $0.25 to $0.30 per diluted share in fiscal 2007.

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 http://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 and per share data) (Unaudited) Thirteen weeks ended May May 27, 2006 28, 2005 Net sales $80,971 $78,584 Cost of sales 53,043 50,940 Gross profit on sales 27,928 27,644 Selling, general and administrative expenses 26,288 27,137 Income from operations 1,640 507 Interest income, net 757 740 Income before provision for income taxes 2,397 1,247 Provision for income taxes 760 285 Net income from continuing operations 1,637 962 Loss from discontinued operations - net of tax (32) (65) Net income $1,605 $897 Basic net income per share: - From continuing operations $0.04 $0.02 - From discontinued operations 0.00 0.00 Basic net income per share $0.04 $0.02 Diluted net income per share: - From continuing operations $0.04 $0.02 - From discontinued operations 0.00 0.00 Diluted net income per share: $0.04 $0.02 Weighted average shares outstanding - Basic 39,499,000 40,455,000 - Diluted 40,356,000 41,255,000 THE TOPPS COMPANY, INC. CONSOLIDATED BALANCE SHEET HIGHLIGHTS (Amounts in Thousands) As of As of May 27, 2006 February 25, 2006 Cash and Equivalents $27,545 $28,174 Short-term Investments 52,071 53,269 Working Capital 128,296 127,713 Net Property, Plant and Equipment 10,854 11,028 Total Assets 275,828 268,638 Shareholders' Equity $203,707 $204,636 SEGMENT INFORMATION (Amounts in Thousands) (Unaudited) Thirteen Weeks Ended May 27, 2006 May 28, 2005 Net Sales Confectionery $42,709 $44,039 Entertainment Products 38,262 34,545 Total $80,971 $78,584 Operating Profit Net of Direct Overhead Confectionery $7,533 $5,600 Entertainment Products 1,650 2,502 Total $9,183 $8,102 Reconciliation of Operating Profit to Income Before Provision for Income Taxes: Total operating profit, net of direct overhead $9,183 $8,102 Indirect overhead (6,418) (7,283) Other income, net 240 1,058 Depreciation & amortization (1,365) (1,370) Income from operations 1,640 507 Interest income, net 757 740 Income before provision for income taxes $2,397 $1,247

The Topps Company, Inc.

CONTACT: Cathy Jessup, CFO of The Topps Company, Inc., +1-212-376-0466;or Betsy Brod for The Topps Company, Inc., +1-212-750-5800

Web site: http://www.topps.com/

Source: PRNewswire-FirstCall

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