The Topps Company, Inc. Announces Fiscal 2003 Second Quarter Financial Results; etopps Continues to Gain Momentum on Marketing Campaign; Company Buys Back Approximately 715,000 Shares

Business Wire, Oct 1, 2002

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 1, 2002

The Topps Company, Inc. (Nasdaq: TOPP) today announced financial results for the fiscal 2003 second quarter and six months ended August 31, 2002.

For the second quarter of fiscal 2003, net sales were $70.0 million, compared with $81.2 million for the same period last year. Pokemon sales, which include entertainment and confectionery products, were $1.7 million in the quarter, as compared to $8.7 million last year. Income from operations in the second quarter was $6.3 million, compared with $12.3 million in the second quarter last year. Net income was $4.7 million, or $0.11 per diluted share, compared with $8.9 million, or $0.20 per diluted share, in the same period last year.

For the six months ended August 31, 2002, net sales were $157.7 million, as compared to $168.1 million in the same period last year. Pokemon sales were $3.7 million, compared with $18.8 million in the comparable year ago period. Income from operations in the six-month period was $17.0 million, as compared to $29.3 million in the same period last year. Net income was $12.0 million, or $0.28 per diluted share, as compared to $20.5 million, or $0.46 per diluted share last year.

During the second quarter, the Company repurchased 716,500 shares of its stock at an average price of $9.13 per share. Since October 1999, the Company has repurchased approximately 7.0 million shares. As of August 31, 2002, the Company had $118.5 million in cash and no debt.

Arthur T. Shorin, Topps' Chairman and CEO, commented, "Second quarter results were slightly above our expectations. Moreover, we continue to focus on strategic initiatives directed toward making Topps stronger and more successful long term. These include building on existing brands, developing new sports-oriented products, advancing the Internet business and creating, among other candy items, a new non-lollipop brand."

Mr. Shorin continued, "Net sales of Topps' branded (non-Pokemon) confectionery products were $41.8 million in the second quarter, as compared to $41.2 million for the same period last year. This reflects high single-digit growth of Ring Pop and Push Pop in the U.S. and the introduction of Pro Flip Pop in Japan, which offset lower sales of Baby Bottle Pop. Efforts to invigorate Baby Bottle Pop continued with the launch of Twisted Baby Bottle Pop and a new television commercial. A line extension -- Baby Bottle Pop Candy Juice -- is scheduled to hit shelves in the fourth quarter. Lollipops featuring the `Yu-Gi-Oh!' entertainment property will ship in the third quarter."

Mr. Shorin added, "Consolidated net sales of collectible sports products were $24.4 million in the second quarter this year, as compared to $28.7 million in the same period last year. These results include sales from the Internet business which increased from $222,000 last year to $2.7 million this year based on the launch of etopps and the acquisition of thePit.com, both of which occurred during last fiscal year."

Mr. Shorin continued, "The traditional sports card business, which continues to experience downward pressure on sales and margins, was impacted by lower sales of football products and the prospect of a baseball strike. On the other hand, etopps' performance exceeded expectations in the quarter, driven by strong consumer response to the targeted multi-media marketing campaign. We are encouraged by these results, and continue to reinvest to build our customer base. In the third quarter we plan to air television advertising in support of our etopps football cards."

Mr. Shorin concluded, "Net sales of the Company's entertainment products in the second quarter were $3.4 million. This included $1.3 million from Pokemon, most of which resulted from a reversal of the Pokemon returns provision. By comparison, entertainment sales in the second quarter last year were $8.0 million, $5.4 million of which were Pokemon related. The Company plans to release cards featuring the upcoming film, `Lord of the Rings: The Two Towers,' and sticker products featuring `Yu-Gi-Oh!' over the balance of the year."

As previously announced, the Company adopted two accounting standards effective March 3, 2002 which resulted in new accounting treatment for certain trade promotion expenses, such as slotting fees, as well as the elimination of goodwill amortization. As a result, trade promotion expenses for fiscal 2003 of $868,000 for the second quarter and $1,666,000 for the six months have been reported as a reduction of net sales rather than as marketing expense. Last year's financials have also been reclassified to reflect similar treatment of these expenses which totaled $445,000 for the second quarter of fiscal 2002 and $1,004,000 for the six months. In addition, goodwill amortization totaling $392,000 in the second quarter and $784,000 in the six months has been eliminated in fiscal 2003 in accordance with SFAS 142, resulting in an increase in EPS of $0.01 for the quarter and $0.02 for the half.