Action Performance Reports Fourth-Quarter and Year-End Results
PHOENIX--Nov. 7, 2001--Action Performance Companies, Inc., the leader in the design, marketing, promotion, and distribution of licensed motorsports merchandise, today reported financial results for the fourth-quarter and twelve-month period ended Sept. 30, 2001, including record quarterly revenues and net income, the highest for any quarter in the Company's history.
Fourth-quarter revenues rose 93% to $108.4 million from $56.3 million in the comparable quarter of last year and exceeded the Company's previous quarterly record of $103.1 million in the third quarter of fiscal 1999. Revenue growth was reported from all distribution channels, on a year-over-year basis, including record diecast sales for fourth quarter, 2001, of $61.2 million, compared to $31.2 million in the fourth quarter of 2000.
Net income before extraordinary gains was $12.3 million, or 67 cents per share, which exceeded the previous record quarterly net of 64 cents per share in the third quarter of 1999. Including the extraordinary gain of $.9 million arising from debt repurchases during the quarter, net income was $13.1 million, or 71 cents per share, compared to last year's fourth-quarter losses of $28.3 million, which included restructuring charges of $32.2 million. EBITDA for fourth quarter, 2001, was $24.8 million.
Revenues for fiscal 2001 rose 25% to $323.4 million from $258.1 million in fiscal 2000. Strong sales growth was achieved in diecast, apparel and trackside distribution channels, including record diecast sales totaling $164.4 million for the year, compared to $139.7 million in fiscal 2000.
Net income before extraordinary gains for fiscal 2001 was $23.0 million, or $1.37 per share. Including the extraordinary gain of $8.9 million arising from debt repurchases during the fiscal year, income for 2001 was $31.9 million, or $1.90 per share, compared to losses in fiscal 2000 of $58.1 million, or $3.52 per share, which included $64.8 million of restructuring charges. EBITDA for fiscal 2001 was $66.7 million.
The Company's United Kingdom (UK) operation accounted for $3.1 million in revenues for the fourth quarter but produced pre-tax losses of $1.7 million due to operating losses of $1 million and $.7 million of additional losses related to the earlier-announced closure of that operation. However, this effect on pre-tax income for the quarter was substantially offset by a tax benefit of $1.5 million, which also reduced the Company's effective tax rate for fiscal 2001 from 35% to 31%. For fiscal 2001, pre-tax operating losses from the UK operation, excluding closure costs, totaled approximately $2 million on $11.1 million in revenues.
From fiscal-year end, 2000, to fiscal-year end, 2001, working capital increased $25.8 million to $90.3 million, total outstanding debt fell $51.7 million to $57.6 million, and shareholders' equity increased $57.1 million to $159.8 million.
The Company also reported that, effective October 1, 2001, it intends to adopt FASB 142, which changes the accounting for intangibles. This new accounting standard establishes new guidelines for determining the accounting value of goodwill and other intangibles and eliminates the amortization requirement for goodwill. The Company is currently evaluating its intangibles in accordance with FASB 142 and expects to complete its evaluation in the second quarter of fiscal 2002. The Company does not anticipate making adjustments, but should any adjustments be necessary, they would be recorded as a ``cumulative effect of a change in accounting principles.'' As of October 1, 2001, the Company discontinued amortizing goodwill, which otherwise would have amounted to approximately $1.0 million per quarter.
Fred Wagenhals, Action Performance chairman, president and CEO, remarked: ``Closing this fiscal year on such a strong note confirms the success of the Company's turnaround strategy. Furthermore, the continuing growth of NASCAR popularity and increasing coverage of racing events is providing a solid base for Action's continued growth. Our promotions and specials, including the highly successful Looney Tunes program, have established a strong track record and, therefore, will serve as the basis for future programs. We also anticipate further expansion of our marketing efforts and licensing agreements with the top participants in NASCAR and other major racing venues.''
``The last 12 months was a test of our refocused core strategy and ability to execute according to our business plan, and we feel we succeeded, and even surpassed our basic objectives,'' Wagenhals added. ``The restructuring and related challenges were difficult, but we successfully overcame them with the support of our employees, directors and shareholders.''
Action Performance CFO David Martin commented: ``Action's dramatic financial turnaround reflects the efficiency of the Company's business model, including control over product margins and costs and expenses at all levels.
``From a top-line view, the increasing popularity of NASCAR in 2001 allowed us to leverage our valuable licensing portfolio, broaden distribution channels, and continue to improve our operating results,'' Martin said. ``Continuing strong product demand is reflected in inventories that are $6.9 million lower than last year, and by Action's distributors reporting minimal inventories on hand.
``Cash balances of $64.5 million now exceed outstanding debt, and we believe our ability to generate $66.7 million of EBITDA for fiscal 2001 confirms the quality of reported earnings,'' added Martin. ``Finally, we believe that, as a result of the $51.7 million reduction of debt and $57.1 million increase in shareholders' equity, our capital structure is sound and will enable us to maximize our continuing business opportunities.''
About Action Performance:
Action Performance Companies, Inc. is the leader in the design, marketing, promotion and distribution of licensed motorsports merchandise. Its products include a broad range of motorsports-related diecast car replica collectibles, apparel, souvenirs, and other memorabilia. The Company markets and distributes products through a variety of channels, including the Racing Collectables Club of America (RCCA), goracing.com, trackside at racing events, mass retail department stores, and a worldwide network of wholesale distributors and specialty dealers.
This news release contains forward-looking statements regarding future growth, marketing, licensing, business opportunities, FASB 142 evaluation, and the effect of the new accounting standards on intangibles. The Company's actual results could differ materially from those set forth in the forward-looking statements. Factors that might cause such differences include, among others, competitive pressures, acceptance of the Company's products and services in the marketplace, the success of new marketing programs, and other risks discussed in the Company's Form 10-K dated Sept. 30, 2000, on file with the U.S. Securities and Exchange Commission.
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ACTION PERFORMANCE COMPANIES, INC.
Condensed Consolidated Statements of Operations
Three and Twelve Months Ended September 30, 2001 and 2000
(in thousands, except per share data)
Three Months Twelve Months
2001 2000 2001 2000
Sales $ 108,415 $ 56,280 $ 323,352 $ 258,105
Cost of sales 69,153 60,328 208,375 209,102
Gross profit 39,262 (4,048) 114,977 49,003
Operating expenses:
Selling, general and
administrative 20,006 31,798 69,456 107,942
Amortization of
intangibles 1,410 3,310 6,157 16,753
Total operating
expenses 21,416 35,108 75,613 124,695
Income (loss) from
operations 17,846 (39,156) 39,364 (75,692)
Other income (expense):
Minority interests (695) (15) (1,974) (298)
Interest and other, net 350 (1,080) 934 (398)
Interest expense (947) (826) (5,102) (6,291)
Total other expense,
net (1,292) (1,921) (6,142) (6,987)
Income (loss) before
income taxes and
extraordinary gain 16,554 (41,077) 33,222 (82,679)
Income tax provision
(benefit) 4,288 (12,827) 10,205 (24,592)
Income (loss) before
extraordinary gain 12,266 (28,250) 23,017 (58,087)
Extraordinary gain,
net of tax 851 - 8,919 -
Net income (loss) $ 13,117 $ (28,250) $ 31,936 $ (58,087)
EARNINGS PER COMMON SHARE:
Income (Loss) Before
Extraordinary Gain
Basic $ 0.72 $ (1.73) $ 1.41 $ (3.52)
Diluted $ 0.67 $ (1.73) $ 1.37 $ (3.52)
Extraordinary Gain-
Basic $ 0.05 $ - $ 0.54 $ -
Diluted $ 0.04 $ - $ 0.53 $ -
Net Income (Loss) -
Basic $ 0.77 $ (1.73) $ 1.95 $ (3.52)
Diluted $ 0.71 $ (1.73) $ 1.90 $ (3.52)
Weighted Average
Shares Outstanding-
Basic 17,057 16,366 16,373 16,515
Diluted 19,059 16,366 16,849 16,515
ACTION PERFORMANCE COMPANIES, INC.
Condensed Consolidated Balance Sheets
September 30, 2001 and 2000
(in thousands)
2001 2000
------ ------
Current Assets:
Cash $ 64,514 $ 22,758
Accounts receivable, net 40,725 22,901
Inventories 25,120 32,017
Prepaid royalties 10,222 7,262
Estimated income tax receivable - 14,000
Deferred taxes 2,672 5,905
Prepaid expenses and other 1,392 1,942
Total Current Assets 144,645 106,785
Property and Equipment, net 40,356 46,066
Goodwill and Other Intangibles, net 89,722 94,894
Deferred Taxes - 1,423
Other Assets 4,230 6,749
$278,953 $255,917
Current Liabilities:
Accounts payable $ 18,371 $ 16,510
Accrued royalties 16,792 9,998
Accrued expenses and other 18,755 14,250
Current portion of long-term debt 424 1,503
Total Current Liabilities 54,342 42,261
Deferred Taxes 3,968 -
4 3/4% Convertible Subordinated Notes 54,933 100,000
Other Long-Term Debt and Liabilities 2,805 8,340
Minority Interests 3,079 2,598
Shareholders' Equity 159,826 102,718
$278,953 $255,917
ACTION PERFORMANCE COMPANIES, INC.
Condensed Consolidated Statements of Cash Flows
Years Ended September 30, 2001 and 2000
(in thousands)
2001 2000
---- ----
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net Income $ 31,936 $ (58,087)
Adjustments to reconcile net income
to net cash from (used in) operations-
Deferred income taxes 8,560 (9,227)
Depreciation and amortization 28,367 25,111
Gain on extinguishment of debt (14,219) -
Non-cash restructuring and special charges - 58,988
Other 2,696 141
Changes in assets and liabilities,
net of businesses acquired or disposed-
Accounts receivable (19,348) 10,920
Income tax receivable 17,819 (14,000)
Inventories 5,935 (561)
Prepaid royalties and accrued royalties 4,109 (11,273)
Other 5,389 (10,453)
Net cash from (used in) operations 71,244 (8,441)
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures, net (16,519) (15,399)
Acquisition of Winner's Circle, net of costs (1,335) -
(Acquisition) disposition of
Fantasy Sports, net of costs 3,847 (3,063)
Net cash used in investing activities (14,007) (18,462)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Long-term debt repayments, net (17,112) (2,015)
Treasury stock repurchases (1,488) (6,520)
Stock option exercises 2,995 240
Net cash used in financing activities (15,605) (8,295)
Effect of exchange rate changes on
cash and cash equivalents 124 (567)
Net change in cash and cash equivalents 41,756 (35,765)
Cash and cash equivalents,
beginning of period 22,758 58,523
Cash and cash equivalents, end of period $ 64,514 $ 22,758
