Audit Paper

The Topps Company, among other things discussed later, is in the business of manufacturing chewing gum and confections. According to the Business and Company Resource Center, the Topps is involved in ten different industry categories. They are listed here with their respective SIC/NAICS codes: Commercial Printing (2759), Chewing Gum (2067), Candy and Other Confectionary products (2064), Periodicals Publishing and Printing (2721), Dolls and Stuffed Toys (3942), other Commercial Printing (323119), Confectionary Manufacturing from Purchased Chocolate (311330), Non-Chocolate Confectionary Manufacturing (311340), Doll and Stuffed Toy Manufacturing (339931), and Periodical Publishers (511120). All of these product industries allowed Topps to accumulate sales of $302.9 million in fiscal year 2002.

Topps primarily manufactures sticker collections, confections, comic books, and collectible trading cards. These are the company's most popular and principally produced products within its international market. Most of Topps' success has come from the production of the confections and trading cards. These two aspects of their overall industry are by far the most important and beneficial to the company as a whole.

With all of the products that Topps produces, there are of course many raw materials that contribute to each entertainment product. In fiscal year 2002, Topps spent $6,395 on their raw materials as compared to $2,860 spent in 2001. The company's sports cards are the most popular and require a few materials. Film must be on hand constantly, as photographs must be taken of each athlete before computerized technology adds graphic designs to be put on the cards. Other materials needed for their collectible trading cards include large sheets of paperboard for the photos to be printed on, and plastic coating or foil lining to add additional interest to each card. These substrates are purchased in sheet form from specialty printers and are added to the paperboard before being placed on a pressing machine that cuts the paperboard into the individual cards. Raw materials for their confectionary products include many different types of sugars and both natural and artificial flavorings to be mixed in large vats before being processed through another pressing machine which cuts the candy into individual pieces. Eventually, each confectionary product is wrapped in paper or plastic to secure freshness. Paper and adhesives are the primary materials used for the sticker collections produced by Topps. Inks and dyes are used on all products in some shape or form whether it be on a wrapper or on the collectible trading cards being printed up. Plastics are also used for confectionary containers issued to the public. Paper is by far the most used raw material for the Topps Company.

The Topps Company is a large organization that stretches around the world. Although the hub of production is within the United States, Topps also has many different offices and distribution centers outside the U.S. in nations like the United Kingdom, Italy, Ireland, Argentina, and Brazil. The Company enjoyed another successful fiscal year in 2002; although a the interest in their Pokemon products fell short of predictions and expectations based on 2001 sales, the companies staple products continued to do well in the overall marketplace. Total sales for 2002 amounted to more than $302.9 million. Pokemon sales declined about $155.5 million from 2001and when excluding those numbers; Topps still had a very positive year as compared with last year's total sales of $439.3 million. There was a $19.1 million increase in sales in 2002 with the decrease in Pokemon interests worldwide. Topps still held strong assets in 2002 amounting to $258.0 million although they were down from the 2001 numbers due to the Pokemon slump. The employee base was as strong as it had ever been for Topps in 2002, as the company employed a high of 455 employees during the fiscal year. Employees have been involved in every aspect of the game when it came to running the company. Most of them handled U.S. sales of sports and entertainment collectibles to around 2,100 category managers, hobby distributors, and hobby shops. Other U.S. employees manage a nationwide network of broker organizations to distribute confectionary products. Elsewhere around the world, employees are handling confectionary and trading card products to national accounts in Canada, the United Kingdom, Latin America, and most Asian markets. All together, Topps' sales force and wholesalers interact with almost 30,000 confectionary outlets and retail outlets around the globe.

The Topps Company was founded in 1938 in Brooklyn, New York, first as a chewing gum manufacturer. Now Topps operates and is based out of New York City, New York, in a 60,000 square foot, leased facility where the executive offices are located. Other offices and warehouse distribution centers are located in Duryea, PA, Scranton, PA, Cork, Ireland, and Milton Keynes in Britain. The Company also leases offices in Canada, Brazil, Argentina, and Italy.

Being a large international organization, Topps has many relationships with many other organizations and companies. Most companies that Topps is involved with are subsidiaries of the company itself, but others are providers of materials and the like. In 1995, Topps acquired Merlin Publishing International Limited, which is a marketer of licensed sticker album collectibles based in the United Kingdom. Products are still sold under the Merlin name while Topps is the corporate parent. Topps also acquired thePit.com, Inc. in fiscal year 2001, which is an internet based sports card exchange. An agreement with Nintendo of America allowed Topps to obtain the rights to market products involving the Pokemon characters. Through its international offices, Tops distributed their products in 25 dialects and in 44 nations around the world. The confectionary department created an association with another United States household brand name. The Hershey Food Corporation under a contract renewed annually for a five-year term manufactures Topps' Bazooka bubble gum. Topps is required, by contract, to source all of its U.S. Bazooka production supplies from Hershey.

The annual report for Topps represents a positive attitude directed towards a younger generation of clientele. Most all of their products are designed for child entertainment. The annual report suggests a positive and organized outlook on the past year and for the future years to come. From the Topps Company annual report, one would gather that the company itself is moving in the right direction for all future endeavors.

The annual report begins with an open letter to stockholders in the company. The letter explains how successful the year had been for Topps, along with any financial information that stockholders need to know about, like