UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 1997
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, including zip code)
(212) 376-0300
(Registrant's telephone number, including area code)
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 .
The number of outstanding shares of Common Stock as of July 9, 1997 was
46,400,010.
<PAGE>
THE TOPPS COMPANY, INC.
- -------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
Index Page
Condensed Consolidated Balance Sheets as of
May 31, 1997 and March 1, 1997 3
Condensed Consolidated Statements of Operations
for the thirteen weeks ended May 31, 1997 and
June 1, 1996 4
Condensed Consolidated Statements of Cash Flows
for the thirteen weeks ended May 31, 1997 and
June 1, 1996 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
- -------------------------------------------------------------------------------
PART II - OTHER INFORMATION
- -------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
The condensed consolidated financial statements for the thirteen weeks ended May
31, 1997 included herein have been reviewed by Deloitte & Touche LLP independent
public accountants, in accordance with established professional standards for
such a review. The report of Deloitte & Touche LLP is included on page 7.
2
<PAGE>
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
May March
31,1997 1, 1997
---------- -------
(amounts in thousands
except share data)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 24,569 $ 24,199
Accounts receivable - net 47,646 59,776
Inventories 14,509 19,181
Income tax receivable 3,328 2,901
Deferred tax assets 3,268 3,489
Prepaid expenses and other current assets 7,993 9,012
--------- ---------
TOTAL CURRENT ASSETS 101,313 118,558
--------- ---------
PROPERTY, PLANT, & EQUIPMENT 16,822 16,340
Less: accumulated depreciation 3,705 3,440
--------- ---------
NET PROPERTY, PLANT & EQUIPMENT 13,117 12,900
--------- ---------
INTANGIBLE ASSETS, net of accumulated
amortization of $36,110 (1998) and $35,457 (1997) 64,812 65,456
OTHER ASSETS 4,616 4,264
--------- ---------
TOTAL ASSETS $ 183,858 $201,178
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 19,475 $ 35,150
Accrued expenses and other liabilities 53,885 52,701
Current portion of long-term debt 7,500 7,500
Income taxes payable 4,247 4,491
--------- ---------
TOTAL CURRENT LIABILITIES 85,107 99,842
LONG-TERM DEBT, less current portion 24,950 27,450
DEFERRED INCOME TAXES 568 379
OTHER LIABILITIES 5,687 5,455
--------- ---------
TOTAL LIABILITIES 116,312 133,126
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share authorized
10,000,000 shares, none issued
Common stock, par value $.01 per share, authorized
100,000,000 shares; issued 47,502,510 shares,
less 1,102,500 shares in Treasury 475 475
Stock
Additional paid-in capital 16,812 16,812
Treasury stock, 1,102,500 shares (1998) and 967,500
(1997) at cost (8,881) (8,358)
Retained earnings 59,598 58,776
Cumulative foreign currency adjustment (458) 347
---------- ---------
TOTAL STOCKHOLDERS' EQUITY 67,546 68,052
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 183,858 $201,178
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements and Accountants'
Review Report.
3
<PAGE>
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
Thirteen weeks ended
May June
31,1997 1, 1996
------- -------
(amounts in thousands,
except share data)
<S> <C> <C>
Net sales $ 60,177 $ 79,261
Cost of sales 37,714 53,087
--------- ---------
Gross profit on sales 22,463 26,174
Royalties and other income 448 583
--------- --------
22,911 26,757
Selling, general and administrative expenses 20,900 19,394
--------- --------
Income from operations 2,011 7,363
Interest income (expense), net (544) (563)
--------- --------
Income before provision for income taxes 1,467 6,800
Provision for income taxes 645 3,060
--------- ---------
Net income $ 822 $ 3,740
========= =========
Net income per share $ .02 $ .08
Weighted average shares outstanding 46,485,175 47,047,510
</TABLE>
See Notes to Condensed Consolidated Financial Statements and Accountants'
Review Report.
4
<PAGE>
TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Thirteen weeks ended
May June
31,1997 1, 1996
------- -------
(amounts in thousands)
Cash provided by (used for) operations:
<S> <C> <C>
Net income $ 822 $ 3,740
Add(subtract) non-cash items included in net income:
Depreciation and amortization 992 1,757
Deferred income taxes 409 (4,776)
Change in assets and liabilities:
Receivables 12,129 (11,647)
Inventories 4,671 3,423
Income tax receivable (427) 1,158
Prepaid expenses and other current assets 1,020 4
Other assets (375) (244)
Payables and other current liabilities (14,734) 17,621
Other liabilities (662) 1
--------- --------
Cash provided by operations 3,845 11,037
--------- --------
Cash used for investing activities:
Additions to property, plant and equipment (453) (279)
--------- --------
Cash used for financing activities:
Reduction of debt (2,500) (4,300)
Purchase of treasury stock (522) -
--------- ---------
Cash used for financing activities (3,022) (4,300)
--------- ---------
Net increase in cash 370 6,458
Cash at beginning of quarter 24,199 24,154
Cash at end of quarter $ 24,569 $ 30,612
========= ========
Interest paid $ 708 $ 307
Income taxes paid $ 649 $ 1,732
</TABLE>
See Notes to Condensed Consolidated Financial Statements and Accountants'
Review Report.
5
<PAGE>
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED MAY 31, 1997
1. Basis of Presentation
The accompanying unaudited condensed interim consolidated financial
statements have been prepared by The Topps Company, Inc. and
subsidiaries (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission and reflect all adjustments,
which are, in the opinion of management, considered necessary for a
fair presentation. These statements do not include all information
required by generally accepted accounting principles to be included in
a full set of financial statements. Operating results for the thirteen
weeks ended May 31, 1997 and June 1, 1996 are not necessarily
indicative of the results that may be expected for the year ending
February 28, 1998. For further information refer to the consolidated
financial statements and notes thereto in the Company's annual report
for the year ended March 1, 1997.
Certain items in the prior year's financial statements have been
reclassified to conform with the current year's presentation.
2. Quarterly Comparison
Management believes that quarter-to-quarter comparisons of sales and
operating results are affected by a number of factors, including the
timing of product introductions and variations in shipping and factory
scheduling requirements. Thus, annual sales and earnings amounts are
unlikely to consist of equal quarterly portions.
3. Inventories
(Unaudited)
May March
31, 1997 1, 1997
-------- -------
(amounts in thousands)
Raw materials $ 3,756 $ 6,236
Work in process 1,491 1,874
Finished products 9,262 11,071
-------- -------
Total $14,509 $19,181
======= =======
4. Implementation of New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per
Share, which establishes new standards for computing and presenting
net income per share. The statement is effective for periods ending
after December 15, 1997. Accordingly, the Company will adopt the
standard beginning with its fourth quarter of fiscal 1998. For the
first quarter of fiscal 1998, there would have been no material effect
on net income per share, if this new standard had been in effect.
6
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
The Topps Company, Inc.
We have made a review of the accompanying condensed consolidated balance sheet
of The Topps Company, Inc. and subsidiaries as of May 31, 1997, and the related
condensed consolidated statements of operations and cash flows for the thirteen
week periods ended May 31, 1997 and June 1, 1996, in accordance with the
standards established by the American Institute of Certified Public Accountants.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical procedures to financial data and of making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Topps Company, Inc. and
subsidiaries as of March 1, 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated April 1, 1997, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of March 1, 1997 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
June 24, 1997
New York, New York
7
<PAGE>
ITEM 2. Management's Discussion And Analysis Of Financial Condition and Results
Of Operations
Net sales for the first quarter of fiscal 1998 decreased 24.1% to $60,177,000
from $79,261,000 for the same period last year. This decrease resulted from
lower sales of sports cards, principally baseball which, in fiscal 1997 had
featured a highly popular tribute to Mickey Mantle and, to a lesser extent, the
Company's decision not to renew its hockey licenses. Revenues versus a year
ago were also affected by the timing of certain product releases of Topps
Europe, Ltd. (formerly Merlin) and by lower lollipop sales internationally,
which benefited last year from highly successful Ring Pop launches in France
and Germany.
Gross profit as a percentage of net sales for the first quarter of fiscal 1998
increased to 37.3% as compared with 33.0% for the same period last year. Gross
profit margins were positively impacted by the reduction in manufacturing
expenses resulting from the fiscal 1997 closure of the Company's plant in
Duryea, Pennsylvania. Absence of minimum guarantee shortfall payments to
certain of the Company's licensors and reduced inventory obsolescence also
contributed to the higher gross profit percentages.
Selling, general and administrative expenses increased as a percentage of net
sales from 24.5% to 34.7% in the first quarter of fiscal 1998. This percentage
increase was largely the result of lower sales in fiscal 1998 as well as a shift
in the timing of domestic confectionery advertising charges and one-time costs
associated with the outsourcing of Bazooka bubble gum products.
The effective tax rate for the first quarter of fiscal 1998 was 44.0% versus an
effective rate of 45.0% for the same period a year ago.
Net income for the first quarter of fiscal 1998 was $822,000, or $0.02 per
share, as compared with $3,740,000, or $0.08 per share, for the same period
last year.
On June 30, 1995, the Company entered into a $65 million credit agreement ( the
"Credit Agreement") with a syndicate of banks which consisted of a $50 million
term loan to finance the Merlin acquisition, a $2 million letter of credit
facility and a $13 million revolving credit facility to be used for working
capital and general corporate purposes. The Credit Agreementis secured by a
pledge of 65% of the stock of Merlin. Beginning April 1996, interest rates on
half of the outstanding principal of the loan were variable and a function of
short-term indices and the Company's consolidated leverage ratio, while interest
rates on the balance of the outstanding loan were fixed for two years as a
result of interest rate swap agreements and were, therefore, a function of
interest rates at the commencement of the swap transactions and the Company's
consolidated leverage ratio. The Credit Agreement contains restrictions and
prohibitions of a nature generally found in loan agreements of this type and
requires the Company, among other things, to comply with certain financial
covenants, limits the Company's ability to sell or acquire assets or borrow
additional money (other than through the revolving facility), and prohibits the
payment of dividends. On June 13, 1997, the Credit Agreement was amended to
reduce the required Fixed Charge Ratio for the fiscal years of 1998 and 1999 in
exchange for certain additional restrictions on the Company's ability to
repurchase stock and establishment of a cash balance minimum requirement of
$11,500,000.
On June 27, 1996, the Company announced that its Board of Directors had
authorized the repurchase of up to 2,000,000 shares of its common stock. The
total number of shares to be repurchased and the price the Company will pay will
depend on a variety of factors, including prevailing market conditions. As of
July 11, 1997, the Company had repurchased 647,500 shares pursuant to this
authorization at an average per share price of $4.26.
As of May 31, 1997, the Company had $24,569,000 in cash and $32,450,000 in debt
as a result of the Merlin acquisition. Management believes, in light of the
Company's borrowing capacity and cash on hand at May 31, 1997, that the Company
has adequate means to meet its working capital, capital expenditure, interest
and principal repayment requirements for the foreseeable future.
8
<PAGE>
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. Among the factors that could cause the Company's actual results to
differ materially from those indicated in any such forward-statements are: (i)
the failure of certain of the Company's principal products, particularly sports
cards and sticker and album collections, to achieve expected sales levels during
the third and fourth quarters of fiscal 1998; (ii) the Company's inability to
resolve existing Bazooka gum production problems; (iii) significant and
unexpected changes in the costs related to closure of the Duryea plant and the
outsourcing of Bazooka gum and trading card production; (iv) the result of the
labor charge filed by the Union representing employees that were terminated as
a result of the closure of the Duryea plant; (v) quarterly fluctuations in
results; (vi) the Company's loss of important licensing and supply
arrangements with third parties including, without limitation, its agreement
for the manufacture of Bazooka bubble gum; (vii) the effect of changes in trade
terms with certain of the Company's key customers; (viii) difficulties in the
Company's attempts to penetrate new international markets for its products;
(ix) further prolonged and material contraction in the trading card industry;
(x) excessive returns of the Company's products; and (xi) the effect of
restrictions and financial covenants imposed by the Company's Bank Loan
Agreement, as well as other risks detailed from time to time in the Company's
reports and registration statements filed with the Securities and Exchange
Commission.
9
<PAGE>
THE TOPPS COMPANY, INC.
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company took place on June 25, 1997
for the following purposes:
1. To elect two directors;
2. To ratify the appointment of auditors;
3. To consider a stockholder proposal regarding the classification of
the Board of Directors;
4. To consider a stockholder proposal regarding the form of
compensation to be paid to non- employee Directors;
5. To consider a stockholder proposal regarding the retention of an
investment bank to explore alternatives to enhance the value of
the Company.
The results of the matters voted on are as follows:
<TABLE>
<CAPTION>
Broker
For Against Abstentions Non-Votes
----------- ------------ ------------- -----------
1. Election of Directors
<S> <C> <C> <C>
Arthur T. Shorin 41,421,883 281,556 1,367,119
Wm. B. Little 41,541,241 162,198 1,367,119
2. Ratification of auditors 42,646,974 227,432 196,152
3. Stockholder proposal
regarding classification
of the Board of Directors 22,386,823 10,271,054 376,195 10,036,486
4. Stockholder proposal
regarding the form of
compensation to be paid
to non-employee Directors 6,833,342 25,813,784 386,946 10,036,486
5. Stockholder proposal
regarding the retention of
an investment bank 10,784,169 19,358,177 2,891,726 10,036,486
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits as required by Item 601 of Regulation S-K
10.30 - Amendment Number 3 to Credit Agreement
10
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
THE TOPPS COMPANY, INC.
-------------------------
REGISTRANT
/s/ Catherine Jessup
--------------------------
Vice President-Chief Financial
Officer
July 15, 1997
11
AMENDMENT NO. 3 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT (this "Agreement") is made and
entered into as of this 20th day of June, 1997 among THE TOPPS COMPANY, INC., a
Delaware corporation ("Borrower"), NATIONSBANK, N.A., a national banking
association formerly known as NationsBank, N.A. (Carolinas), each other lender
signatory hereto (each individually, a "Lender" and collectively, the
"Lenders"), and NATIONSBANK, N.A., a national banking association formerly known
as NationsBank, N.A. (Carolinas), in its capacity as agent for the Lenders (in
such capacity, the "Agent");
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Agent have entered into a
Credit Agreement dated as of June 30, 1995, as amended pursuant to that certain
Amendment No. 1 to Credit Agreement dated as of June 5, 1996, and as further
amended pursuant to that certain Amendment No. 2 to Credit Agreement dated as of
December 6, 1996 (as amended hereby and as from time to time further amended,
supplemented or replaced, the "Credit Agreement"), pursuant to which the Lenders
agreed to make certain revolving credit, term loan and letter of credit
facilities available to the Borrower; and
WHEREAS, the Borrower, the Lenders and the Agent have entered into a
letter agreement dated as of March 26, 1997 (the "Letter Agreement"), which
Letter Agreement temporarily modifies certain terms and conditions of the Credit
Agreement up to and including its date of expiration, June 30, 1997 (the
"Expiration Date"); and
WHEREAS, the Borrower has requested that the Credit Agreement be
amended in the manner set forth herein and the Agent and the Lenders are willing
to agree to such amendment;
NOW, THEREFORE, in consideration of the mutual covenants and the
fulfillment of the conditions set forth herein, the parties hereto do hereby
agree as follows:
1. Definitions. Any capitalized terms used herein without
definition shall have the meaning set forth in the Credit Agreement.
1
<PAGE>
2. Amendment of Definitions. Subject to the terms and conditions
set forth herein, Section 1.1 of the Credit Agreement is hereby amended by
inserting the following new definition:
"Consolidated Capital Stock Repurchase Ratio" means,
with respect to the Borrower and its Subsidiaries for any
Four-Quarter Period ending on the date of computation thereof,
the ratio of (i) Consolidated EBITDA for such period less
(without duplication) Capital Expenditures for such period
less all income taxes accrued during such period to (ii) the
sum of, without duplication, (y) Consolidated Fixed Charges
for such period and (z) Share Repurchase Expenditures.
3. Amendment of Definitions. Subject to the terms and conditions
set forth herein, Section 1.1 of the Credit Agreement is hereby amended by
inserting the following new definition:
"Share Repurchase Expenditures" means, with respect
to the Borrower and its Subsidiaries for any Four-Quarter Period
ending on the date of computation thereof, the aggregate purchase
price of all repurchases of the Borrower's common capital stock
made by the Borrower during such Four-Quarter Period, and made
pursuant to Section 10.16 hereof, but in no event to include
any such repurchases made prior to March 1, 1997.
4. Amendment of Affirmative Covenant of Financial Reports, Etc.
Subject to the terms and conditions set forth herein, Section 9.1(a) of the
Credit Agreement is hereby deleted in its entirety and replaced by the
following:
(a) As soon as practical and in any event within 95
days after the end of each Fiscal Year of the Borrower, deliver
or cause to be delivered to the Agent and each Lender (i)
consolidated balance sheets of the Borrower and its Subsidiaries,
and the notes thereto, consolidating balance sheets of the Borrower
and its Principal Subsidiaries, and the notes thereto, the related
consolidated and consolidating statements of operations,
stockholders' equity and cash flows, and the respective notes
thereto, for such Fiscal Year, setting forth in the case of the
statements comparative
2
<PAGE>
financial statements for the preceding Fiscal Year (except with
respect to the Fiscal Year ended February 25, 1995), all prepared
in accordance with Generally Accepted Accounting Principles applied
on a consistent basis and showing the results of operations of eac
product segment and containing, with respect to the consolidated
financial reports, opinions of Deloitte & Touche, L.L.P., or other
such independent certified public accountants selected by the
Borrower and approved by the Agent which approval shall not be
unreasonably withheld or delayed and shall be deemed given as to
any "big six" accounting firm, which are unqualified as to the
scope of the audit performed and as to the "going concern"
status of the Borrower and without any exception not acceptable
to the Lenders, (ii) a certificate of an Authorized Representative
demonstrating compliance with Sections 10.1, 10.2, 10.3 and 10.4
hereof, which certificate shall be in the form of Exhibit K hereto,
and (iii) a certificate of an Authorized Representative
demonstrating the Consolidated Capital Stock Repurchase Ratio
and the maximum value of repurchases of the Borrower's common
capital stock that the Borrower and its Subsidiaries may make in
the next upcoming fiscal quarter under the conditions of
Section 10.16 hereof;
5. Amendment of Affirmative Covenant of Financial Reports, Etc.
Subject to the terms and conditions set forth herein, Section 9.1(b) of the
Credit Agreement is hereby deleted in its entirety and replaced by the
following:
(b) as soon as practical and in any event within 45
days after the end of each fiscal quarter (except the last
fiscal quarter of the Fiscal Year), deliver to the Agent
and each Lender (i) consolidated balance sheets of the Borrower
and its Subsidiaries and consolidating balance sheets of the
Borrower and its Principal Subsidiaries, each as of the end of
such fiscal quarter, and the related consolidated and
consolidating statements of operations, stockholders' equity
and cash flows for such fiscal quarter and for the period from
the beginning of the Fiscal Year through the end of such
reporting period, and showing the results of operations of each
product segment and accompanied by a certificate of an Authorized
3
<PAGE>
Representative to the effect that such financial statements
present fairly the financial position of the Borrower and its
Subsidiaries as of the end of such fiscal period and the
results of their operations and the changes in their financial
position for such fiscal period, in conformity with the standards
set fort in Section 8.6(a) hereof with respect to interim
financials, (ii) a certificate of an Authorized Representative
containing the computations for such quarter comparable to that
required pursuant to Section 9.1(a)(ii) hereof, (iii) a certificate
of an Authorized Representative containing the computations for
such fiscal quarter comparable to that required pursuant to
Section 9.1(a)(iii) hereof, and (iv) a schedule of licenses,
other than Principal Licenses, which have generated more than
$10,000,000 in sales during the immediately preceding Four-Quarter
Period and listing parties thereto and applicable expiration or
termination dates, such schedule being delivered for informational
purposes only and creating no obligation on the Borrower or its
Subsidiaries to maintain or preserve the license so listed;
6. Amendment of Negative Covenant of Consolidated Fixed Charge
Ratio. Subject to the terms and conditions set forth herein, Section 10.2 of the
Credit Agreement is hereby deleted in its entirety and replaced by the
following:
10.2. Consolidated Fixed Charge Ratio. Permit the
Consolidated Fixed Charge Ratio:
(i) as of the end of the Four Quarter Period ending
May 31, 1997 to be less than 1.00 to 1.00;
(ii) as of the end of the Four Quarter Period ending
August 30, 1997 to be less than 0.85 to 1.00;
(iii) as of the end of the Four Quarter Period ending
November 29, 1997 to be less than 1.00 to 1.00;
(iv) as of the end of the Four Quarter Period ending
February 28, 1998 to be less than 0.85 to 1.00;
4
<PAGE>
(v) as of the end of the Four Quarter Period ending
May 30, 1998 to be less than 1.00 to 1.00;
(vi) as of the end of the Four Quarter Period ending
August 29, 1998 to be less than 1.15 to 1.00;
(vii) as of the end of the Four Quarter Period ending
November 30, 1998 to be less than 1.25 to 1.00;
(viii) as of the end of the Four Quarter Period ending
February 27, 1999 and thereafter to be less than 1.35 to 1.00.
7. Amendment of the Negative Covenant of Cash Balances. Subject to
the terms and conditions set forth herein, Section 10.4 of the Credit
Agreement is hereby deleted in its entirety and replaced by the following:
10.4. Cash Balances. Permit, at the close of any
fiscal quarter, the aggregate amount of cash and cash equivalents
of the Borrower and its Subsidiaries on a consolidated basis, as
evidenced in the balance sheets delivered pursuant to Section
9.1 hereof, to be less than an amount equal to the amount of
any Revolving Loan Outstandings at such time plus $11,500,000
(the "Required Cash Balance"); provided, however, that the Required
Cash Balance will be reduced to any Revolving Loan Outstandings
at such time plus $5,000,000 in the event either (i) the
outstanding principal balance of the Term Loan is less than
$15,000,000 or (ii) the Consolidated Fixed Charge Ratio is at
least 1.35 to 1.00 for two consecutive fiscal quarters, provided,
however, that should the Consolidated Fixed Charge Ratio for any
quarter thereafter be less than 1.00 to 1.00, the terms of this
Section 10.4 shall be in full force and effect as if the
requirements of this Section 10.4(ii) had never been met.
8. Amendment of Negative Covenant of Indebtedness. Subject to the
terms and conditions set forth herein, Section 10.7(h) of the Credit Agreement
is hereby deleted in its entirety and replaced by the following:
5
<PAGE>
(h) Indebtedness of a Subsidiary represented by an
Investment of the Borrower or any Subsidiary in such Subsidiary
permitted under Section 10.9 hereof;
9. Amendment of Negative Covenant of Investments; Acquisitions.
Subject to the terms and conditions set forth herein, Section 10.9(e) of the
Credit Agreement is hereby deleted in its entirety and replaced by the
following:
(e) loans and advances to Subsidiaries who are not
Guarantors by the Borrower or any Guarantor provided (i) the
aggregate outstanding principal amount of such loans and advances
shall not at any time exceed $7,000,000 and (ii) all evidence of
such Indebtedness or equity investment, including any promissory
notes, shall be pledged to the Agent for the benefit of the Lenders.
10. Amendment of Negative Covenant of Investments; Acquisitions.
Subject to the terms and conditions set forth herein, Section 10.9(f) of the
Credit Agreement is hereby deleted in its entirety and replaced by the
following:
(f) other loans, advances and investments in an aggregate
principal amount at any time outstanding not to exceed $7,000,000.
11. Amendment of Negative Covenant of Investments; Acquisitions.
Subject to the terms and conditions set forth herein, the Credit Agreement
is hereby amended by inserting the following Section 10.9(g):
(g) loans, advances to and investments in (i) the Borrower
or any Guarantor by the Borrower or any Subsidiary, without
limitation and (ii) any Subsidiary who is not a Guarantor by
any Subsidiary who is not a Guarantor, without limitation.
12. Amendment of Negative Covenant of Restricted Payments. Subject
to the terms and conditions set forth herein, Section 10.16 of the Credit
Agreement is hereby deleted in its entirety and replaced by the following:
10.16. Restricted Payments. Make any
6
<PAGE>
Restricted Payments or apply or set apart any of their assets
therefore or agree to do any of the foregoing, other than each
of the following, providing that at the time thereof and
immediately after giving thereto no Default or Event of Default
shall exist or occur and be continuing: (i) the negotiated or
open market repurchase by the Borrower of shares of its common
capital stock for an aggregate purchase price not to exceed
$8,500,000 ("Permitted Stock Repurchases"), provided that cash
balances (other than those derived from proceeds of Loans) are
available to fund such purchases, and (ii) additional negotiated
or open market repurchase by the Borrower of its common capital
stock for an aggregate purchase price in any Fiscal Year not to
exceed the positive difference, if any, resulting from subtracting
from Excess Cash Flow in the immediately preceding Fiscal Year the
amount thereof required to be applied to prepayment of the Term
Loan pursuant to Section 2.7(d) ("Remaining Excess Cash Flow");
amounts of Remaining Excess Cash Flow not so expended for such
additional stock repurchases in any Fiscal Year (the "Carryover
Fiscal Year") may only be so expended in the immediately subsequent
Fiscal Year (the "Subsequent Carryover Fiscal Year") to the extent
that (y) at the time of such subsequent expenditure, the Borrower
has cash and cash equivalents, as evidenced on the balance sheet
delivered pursuant to Section 9.1(a) hereof for the Carryover
Fiscal Year, in an amount equal to the Excess Cash Flow for the
Carryover Fiscal Year, net of Revolving Loan Outstandings as shown
on such balance sheet, plus the amount of Remaining Excess Cash
Flow to be so expended for such additional stock repurchases in the
Subsequent Carryover Fiscal Year and (z) no violation of Section
10.4 hereof will occur as a result of expending such Remaining
Excess Cash Flow; provided, however, that at any time the
Consolidated Fixed Charge Ratio was less than 1.35 to 1.00 for
either of the two immediately previous fiscal quarters, in addition
to the foregoing limitations, the following conditions must be met:
(A) a purchase of the Borrower's common capital stock may be
undertaken only if at the time of such repurchase the Consolidated
Capital Stock Repurchase Ratio reported in the most recently
delivered certificate prepared pursuant to Sections 9.1(a)(iii) and
7
<PAGE>
9.1(b)(iii) is at least 1.00 to 1.00, and (B) the total aggregate
repurchase allowed in any fiscal quarter is limited to 100,000
shares not to exceed an aggregate purchase price of $400,000.
13. Effectiveness. This Agreement shall become effective as of the
date hereof upon receipt by the Agent of (a) twelve (12) fully executed
copies of this Agreement (which may be signed in counterparts) and (b) an
amendment fee in the amount of $59,312.50 paid in immediately available funds
and to be distributed by the Agent to the Lenders based on their Applicable
Commitment Percentages.
14. Representations and Warranties. In order to induce the Agent and
the Lenders to enter into this Agreement, the Borrower represents and warrants
to the Agent and the Lenders as follows:
(a) There has been no material adverse change in the
condition, financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole, since the date of the most recent
financial reports of the Borrower received by the Agent and the Lenders
under Section 9.1(a) of the Credit Agreement, other than changes in the
ordinary course of business;
(b) The business and properties of the Borrower and its
Subsidiaries, taken as a whole, are not, and since the date of the most
recent financial report of the Borrower and its Subsidiaries received
by the Agent and the Lenders under Section 9.1(a) of the Credit
Agreement, have not been, adversely affected in any substantial way as
the result of any fire, explosion, earthquake, accident, strike,
lockout, combination of workers, flood, embargo, riot, activities of
armed forces, war or acts of God or the public enemy, or cancellation
or loss of any major contracts; and
(c) No event has occurred and is continuing which constitutes,
and no condition exists which upon the consummation of the transaction
contemplated hereby would constitute, a Default or an Event of Default
under the Credit Agreement, either immediately or with the lapse of
time or the giving of notice, or both.
15. Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to
8
<PAGE>
the subject matter hereof and supersedes any prior negotiations and agreements
among the parties relative to such subject matter.
16. Full Force and Effect of Agreement. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.
18. Governing Law. This Agreement shall in all respects be governed
by the laws and judicial decisions of the State of New York.
19. Enforceability. Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable as to one or more of the
parties hereto, all other provisions nevertheless shall remain effective and
binding on the parties hereto.
20. Credit Agreement. All references in any of the Loan Documents to
the Credit Agreement shall mean the Credit Agreement as amended hereby.
21. Effect on Letter Agreement. As of the effective date of this
Agreement, as set forth in paragraph 8 above, the Letter Agreement will expire
immediately and will no longer have any force or effect whatsoever,
notwithstanding the Expiration Date or any other terms or conditions contained
in the Letter Agreement.
[Signature page follows.]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
BORROWER:
THE TOPPS COMPANY, INC.
By:________________________________
Name: _____________________________
Title:_____________________________
AGENT:
NATIONSBANK, N.A., as Agent for the Lenders
By:________________________________
Name:______________________________
Title:_____________________________
LENDERS:
NATIONSBANK, N.A.
By:________________________________
Name:______________________________
Title:_____________________________
CHASE MANHATTAN BANK (as successor in
interest to Chemical Bank)
By: _______________________________
Name:______________________________
Title:_____________________________
[Signature Page 1 of 3]
<PAGE>
FLEET BANK N.A. (formerly known as
Natwest Bank, N.A.)
By:________________________________
Name:______________________________
Title:_____________________________
THE BANK OF NEW YORK
By:________________________________
Name:______________________________
Title:_____________________________
CREDITANSTALT CORPORATE FINANCE, INC.
By:________________________________
Name:______________________________
Title:_____________________________
THE SUMITOMO BANK LIMITED, CHICAGO BRANCH
By:________________________________
Name:______________________________
Title:_____________________________
TORONTO DOMINION (NEW YORK), INC.
By:________________________________
Name:______________________________
Title:_____________________________
[Signature Page 2 of 3]
<PAGE>
THE MITSUBISHI BANK, LIMITED-
NEW YORK BRANCH
By:________________________________
Name:______________________________
Title:_____________________________
[Signature page 3 of 3]
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<CIK> 0000812076
<NAME> EX-27
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Feb-28-1998
<PERIOD-START> Mar-02-1997
<PERIOD-END> May-31-1997
<CASH> 24,569
<SECURITIES> 0
<RECEIVABLES> 47,646
<ALLOWANCES> 1,241
<INVENTORY> 14,509
<CURRENT-ASSETS> 101,313
<PP&E> 16,822
<DEPRECIATION> 3,705
<TOTAL-ASSETS> 183,858
<CURRENT-LIABILITIES> 85,107
<BONDS> 32,450
0
0
<COMMON> 475
<OTHER-SE> 67,071
<TOTAL-LIABILITY-AND-EQUITY> 183,858
<SALES> 60,177
<TOTAL-REVENUES> 60,609
<CGS> 37,714
<TOTAL-COSTS> 58,614
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 112
<INTEREST-EXPENSE> 825
<INCOME-PRETAX> 1,467
<INCOME-TAX> 645
<INCOME-CONTINUING> 822
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<EXTRAORDINARY> 0
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<NET-INCOME> 822
<EPS-PRIMARY> .02
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