All You Need Is Cash

Well, here's the last of the Topps Annual Reports that were dispatched to me last year by Friend o'the Archive David Eskenazi, covering 1983 (with a very interesting addendum).

1983 looked a lot like 1982, report-wise.  The cover is minimalist, yet effective:

The Nature of Business Statement expanded by a paragraph from 1982:

I'm not sure why these had to be so specific as the annual reports usually had enough detail to get the point of the various business ventures across.  To wit, here is page one of the Shareholders letter, bearing a lot of good news:

Thanks to BFF o'the Archive Jeff Shepherd, we can see what the Sweet 'N Low sell sheet looked like:

I'm not sure the product sold all that well as there seems to be a lack of surviving examples.

Otherwise, things were steadily moving onward and upward:

A number of accounting method changes litter the rest of the 1983 report, which is chock-a-block with tables.  I'm not sure if those changes had anything to do with this...

...but check these figures out. You can see why the Board of Directors was in favor of the merger (with itself!), as it was gonna make most of 'em all a lot richer:

Driving all of this seems to be a surge in the common stock price, which really took off after a two-for-one split in April of 1983:

Here's some quick math on the shares going to the BOD, using a pricing of 25 dollars per share.  Arthur T. Shorin's 850,000 shares would be worth a cool $21,250,000 once the deal closed. How about Sy Berger?  His 250,000 shares would bring $6,250,000 and he wasn't even on the Board! And this is in 1984 dollars. Multiply it out to 2024 and it's almost three times as much. Whew! You can see why this notice ran almost 80 pages as there was a lot of verbiage about how wonderful the merger would be for all shareholders. You can also see how valuable Sy Berger was to Topps.

Coming back to earth, we get a nice snapshot of the various Topps properties held at the time of the Special Meeting:

Proxy Statement Note 3 mentions it cost Topps $414,000 a year to lease the Duryea Plant but that title would pass to Topps once the lease expired in 1986, assuming the remaining payments were made. In other words, Lease-to-Buy.

The 1980's were a heady time for Topps, although the bubble would eventually burst (sorry, had to do it.)

Gum Kind Of Wonderful

This will be the penultimate look at the four annual reports sent to me last year by Friend o'the Archive David Eskenazi.  The numbers can get pretty tedious with these things so I'll focus more on developments at the company and its business this time out.

The fiscal year ending on February 27, 1982 was a good one for Topps and its investors, a very good one in fact, as competition from Fleer and Donruss focused a lot of media attention on baseball cards.  The cover of the 1982 annual report continued the austere look of the past two years, although a significant upgrade in paper quality signaled prosperity was just around the bend:

For the second year in a row, Topps ran this little blurb on the table of contents page:

The technology described is non-specific but over the ensuing decades Topps would develop things for their own use then market them to the world at large as the nature oi their business evolved.

The 1982 Shareholder's Letter had all sorts of good news to share.  Sales had increased by seven percent over the year prior and there was a massive jump in working capital:

One of those new products mentioned would be the 1981 Baseball Stickers, which were followed by  a gridiron version in the fall. Leading off page two we see the Fleer anti-trust suit against Topps had run its course and that Topps had ultimately prevailed, sort of.  What this meant was that competitors could not sell their cards with confections in the packs.  This may not seem like a big deal but I'm wondering if it meant companies like Fleer and Donruss lost access to the traditional tobacco/confectionery jobbers that distributed a large portion of their cards.

Here's a little more on the Fleer suit and their  unsuccessful appeal to SCOTUS:

Fleer responded by pulling the gum and adding stickers to their packs:

While Donruss went with puzzles instead of the sticky stuff:

Here's the crunched numbers-the cost of sales at 67.3 percent was, if I'm not mistaken, pretty swank:

$2.79 Million in net income was an excellent result. The explosion in popularity of baseball cards was real and Topps was positioned better than any other company to take advantage, as we will see next time out.

In Competition For the First Time

Continuing our look at the Topps Annual reports received from Friend o'the Archive David Eskenazi we come to the pivotal year of 1981.  The specter of competition is imminent (their fiscal year ended just around the time the first wave of  Fleer and Donruss cards started flooding stores) and there are some severe economic headwinds affecting the company but, as we shall see, the results were a little better than the dire financials from fiscal year 1979-80.

The cover was even sparser than the one from 1980 but they slightly upgraded to a semi-glossy stock for it, although the interior pages were still uncoated.  This is all it showed:

It took some ten weeks after the end of the fiscal year for the report to be compiled, printed and distributed; these days the lag is closer to three or four weeks and it's all digital. This letter led things off and offered some semi-good news but dig those last two paragraphs:

The plant in Ireland was vexing Topps and we will revisit that in a minute. The news regarding the "baseball card litigation" continued on the next page and we all know how that turned out:

The history of litigation between Fleer and Topps was a lengthy one but Topps had bought out some 4,000 Fleer ballplayer contracts in 1966 after the sole count of a Federal Trade Commission complaint that went against them was overturned. In 1967, Marvin Miller, unimpressed with the grip of Topps on his constituency, tried to steer the player's union to Fleer but they were not (yet) interested and it's worth pointing out the terms were quite risky for them.  By 1975 their outlook had changed significantly and as seen above, they made it to market with a set in 1981, as did Donruss. The market, and hobby, would never be the same.

Here's some numbers to crunch on:

Sales and profit were actually down form the year before but Topps was quite effectively controlling costs, as earnings per share turned positive again, although the planned sale of their Irish plant did not occur.

Here's some more on the Fleer litigation; it would seesaw back and forth for years; Topps was never shy about getting lawyers involved in their business disputes:

Donruss really just piggybacked on Fleer but that's how the bubble gum crumbles!  We'll take a look at how the competition affected the Topps bottom line next time out.

Posterity For Austerity

Friend o'the Archive David Eskenazi, who has been sending me various care packages of Topps corporate goodies from time to time, recently sent another batch my way.  This time, the fully stuffed mailer was loaded up with Topps Annual and Board Reports, covering the fiscal years 1980 to 1983, a very tumultuous time for the company and the hobby at large. I've looked at the 1973-1976 Annual Reports previously, and since I have none from 1977 to 1979, let's look at 1980 today.  

For the fiscal year ending March 1, 1980 Topps laid a very giant egg!  You can tell things were off just by looking at the cover:

Yeah, that's not good.....let's let Arthur and Joel Shorin explain:

That's an excellent soft-soap job, I must say.  Lead with the bad news, then pile up some good news and sprinkle in some rosy projections!

As mentioned, I don't have annual reports (yet) covering fiscal years 1977-1979 but the 1980 Summary of Sales and Earnings recaps those years as part of its look back.  It's clear the prior years were all profitable, especially the one just prior:

Things were not looking good for the stock price as 1980 dragged on-dig that downward trend!  It looks like inflation took a big bite out of earnings:

I might have to rethink my previous snarky comments about Bubble Fudge! Reading on we see the  relationship between sales and operating expenses really affected things, which is no surprise. The Irish subsidiary mentioned below will loom larger as the Eighties progress but for now, all was hunky-dory across the pond:

I'll spare you most of the tables, but this one caught my eye as it mentions inventories presently on premises at the end of the fiscal year. Let's look at these figures:

Topps had a lot of raw materials on hand, given the amount of wax wrappers, cardboard and various confectionery ingredients required for manufacturing and production.  I assume these figures relate to the wholesale prices of Finished Products and Work-in-Process, which was usually a tad under 60% of retail. There was, of course gum in the wax and cello packs, and also on its own, plus football and hockey cards, non-sports cards and other things like Ring Pops, foreign sales, and on and on. With no breakdowns by product line available, pricing all over the place and a far-flung enterprise, it's a WAG on what that inventory number truly represents in terms of actual products but it looks like there was about $5.5 Million in retail sitting in various Topps warehouses on March 1, 1980 using my admittedly amateurish calculations.

If half of that was trading cards, then it's $2.75 Million in retail, or roughly $1.65 Million wholesale, or a whole lot of cases!

Signing off on this mess, we see some old familiar names and some new ones, changing, as BOD's do, as the years pass:

I'll get into the 1981 report next time out-things really start to get interesting in that one.

Boom Goes Bust

In my recent series of posts concerning the finances of Topps Chewing Gum from the late 60's into the mid 70's and in my earlier work putting together my book, it was pretty clear they had experienced phenomenal sales growth for the better part of two decades. However, the youngest baby boomers had basically turned into teenagers by the time 1977 rolled around, which means the tidal wave of adolescents buying their products had pretty much washed ashore. Like many other companies, Topps got caught up in this, as an article from the August 22, 1977 issue of Sports Collectors News reveals:

You will note "Tops"sales had decreased just a hair from fiscal 1976 but the other big story was a seven week strike at the Duryea plant by one of their unions.  I didn't scan it but a prior issue of SCN had detailed that the strike affected shipments to their jobbers, leading to a delay in both Basketball and Hockey for the 1976-77 selling season. As it turns out, there were two unions that did the shipping, one for jobbers and one for retailer accounts like Woolworth's and 7-11.

A lot of capital investments wore on the bottom line as well but the top line was starting to shrink. I also find it amusing they were marketing a gum called Scents.

One way to combat this problem was raising prices and that's exactly what happened:

I have to say I'm impressed by the cases of 1972 Topps Baseball in the picture!  I assume that came from Larry Fristch, who was tight with SCN's publisher Mike Bondarenko. Oh, for a time machine...

Spirit Of 76 Trombones?

1976 was a big year for the United States as its 200th birthday was celebrated in a yearlong expression of patriotism, red white and blue themed events, and bad mid-70's design.  For some reason Topps, which traced its paternal lineage back to the American Leaf Tobacco Company and American Gas Stations, elected to ignore all of this in designing their 1976 Annual Report.  Instead, they went with a theme that reminds me of Meredith Wilson's The Music Man:

As in 1975, the back cover was a copy of the front cover. The 1976 report continued a trend toward less photography and content and more straight up financial analysis. Once again the big news was on the international front as plans were announced for a new 50,000 square foot facility in Ireland, to serve as a center of manufacturing for their UK and European operations:

A nice start but compare this with the 400,000 square foot Duryea, Pennsylvania plant:

Topps also added a 33,000 square foot plant in Scranton, PA for candy manufacturing, a real "back to the future" move for them.

Another bit of financial news is intriguing:

These royalties were steadily increasing but seem like a bargain compared to today.  The report also notes that Bazooka was still their most profitable item.

Sy Berger finally got a little love as top level executives were also added to the annual pictures of the Board of Directors, which was still a Shorin family juggernaut:

Net sales increased yet again, by 11.2% to $55.748 million. Price increases in all product lines were helping tremendously. The quarterly dividend was also increased from 5 to 7 cents, a sure sign of growth.

I'm going to stop here in terms of acquiring their annul reports I think.  There seems to be less and less detail as the years pass from the 1972 IPO.

International Intrigue

Our look at the mid 1970's Annual Reports of Topps Chewing Gum continues, today it's the 1975 edition, issued as Topps was celebrating 25 years of issuing baseball cards.  The cover is oh-so 70's:

The back cover was identical; not sure if it was to save costs but it seems possible.  

1974 saw Topps pay tribute yet again to an iconic baseball player.  This time it was the new (and still rightful IMHO) all-time home run king Hank Aaron getting the full Sy Berger treatment and a nice presentation of his Topps cards:

The board of directors is still an austere bunch, featuring some progression of the Shorin family. Manuel Yellen, who was on the Board from its 1972 inception, was the retired CEO of Lorillard Tobacco.  He started there in 1933 and would have been a longtime business associate of the Shorin family from the American Leaf Tobacco Company days.  His is not the father of  current Federal Reserve head honcho Janet Yellen though.



The big trend in fiscal year 1975 was more international expansion and conquest for Topps. Manufacturing operations had begun in Halle Germany as August Storck began making Bazooka under license.  Topps was so impressed with them that they used a nice shot of their plant in the annual report

Of further note was the kickoff of Nigerian operations and the killing off of A&BC Chewing Gum in England.  I plan to take an in depth look at the Topps/A&BC relationship at some point but it's interesting that once the A&BC takeover occurred, Topps moved manufacturing to the US on a temporary basis.

In fact, the report mentions that "Throughout fiscal 1975, Topps finished products continued to be sold to distributors in international markets not served by licensees. Most of the merchandise was manufactured at the Topps Duryea plant, and we also purchased some products for these markets from our licensees."

This was only their third annual report but things were already becoming drier and more businesslike within. Net sales were $50.111 million, a 13.3% increase over the prior year. Other fiscal highlights concerned their ability to borrow money at the prime rate -- no doubt due to to the Shorin family's almost 70 year affiliation with Manufacturers Hanover Bank-- and a big increase in debt (that might be a lowlight). Part of their listed liabilities was an estimate for the cost of premium redemptions from various wholesalers & retailers via their longstanding "prize" certificate offers. In the fiscal year ending 1974 this amount was $630,000 while in FY ending 1975 it was $581,000. I've always wondered about the cost of this program and it is roughly 1% of net sales in the mid-70's.

Next post we'll time trip back to the U.S. Bicentennial.

Wackyland

Last time out I teased about the impact Wacky Packages had on the sales figures for Topps during the initial rollout in 1973. The answers are at hand in the 1974 Topps Annual Report.

This report is probably the most widely known in the hobby due to some picture that have circulated over the years, which show production facilities and PR shots.  I'll spare most of the repetition but here is a great shot, certainly staged, of some confectionery products available in 1974:

Here's a different look at some of the products can you spot a favorite or two?

I see some old line products, specifically Bozo gumballs and Block Busters bubble gum. Bozo was originally a bulk gumball product sold to wholesalers (jobbers).  I am not 100% certain but a reasonably sure it was phased out in the U.S. in the 1950's and moved to Canadian production and distribution, possibly over trademark concerns due to infringements of the Bozo the Clown "brand". It came back packaged in a clear cello sleeve and I certainly remember getting some in my prime trick or treating years in the early 70's. I also remember it being quite tasty!

Block Busters was a Chiclets style gum introduced in the early 1950's, probably since production of the flagship Topps Gum tab had been shifted to an "ammoniated" gum dubbed Clor-Aid, which was similar in form to Clorets (and Chiclets). The results of extensive litigation over Clor-Aid went against Topps and they likely phased out Block Busters as a result, although not before the last remnants of its production were used as the gum for the 1956 Baseball Buttons. It was reintroduced at the end of 1973 but apparently did not catch on.

I mentioned the impact of Wacky Packages on sales in 1973.  Here is a very handy table showing five years worth of financials and the biggest year-to-year change in net sales is from 1973 to 1974:

There might be some clues in there about why Topps went public.  Look at the net income for 1970 and 1971,  1970's net is quite low compared to net sales and even that was a huge increase from 1969. They reduced debt and increased working capital over this span as well, with the latter really jumping after the IPO in 1972.

Here are some other highlights from the report:

• "In March of 1974 2 cent Bazooka was introduced into 40% of the United States and 1 cent Bazooka was withdrawn. It is anticipated that 2 cent Bazooka will be expanded into the remainder of the country during this year."
• "During 1973 a major marketing innovation was tested on Baseball Cards. This involved marketing a single series consisting of all 660 players at the beginning of the season instead of the six traditional series of 132 subjects released sequentially over a four month period. The test was extremely successful..."
• "..."the company successfully tested 15 cent Sports Cards in place of 10 cent cards during the latter part of 1973 and is currently marketing 15 cent baseball in approximately 10% of the United States.  If this effort continues to show positive results, the Company is prepared to move in this direction with its Football cards in the fall of 1974 on a national basis with television support."
• "Promotional Card sales have been particularly successful this year with the introduction of Wacky Packages in March, 1973."
• "Topps new product development area is not only innovative, but also highly skilled in market research and market testing conducted prior to introducing a new product into the line."
• "Through its own sales force, Topps sells its products to approximately 5,000 jobbers, wholesale grocers and direct-buying chains."
• "Topps estimates that its products are sold in over 200,000 small and large retail candy and food stores (7-11 type), variety stores (dime stores) and drug outlets."

It wasn't all boring financial talk though.  In October of 1973 (actually I believe it was Sept. 25th) Sy Berger presented Willie Mays with a special framed edition of all his regular issue Topps cards during Willie Mays night at Shea Stadium:

Let's not forget the Board of Directors, who should definitely get a hand:

Not everyone was happy though, as this article from the August 2, 1974 issue of Sports Collectors News shows:

Sorry Ron but you may have been a little naive when you bought the stock.....