Action Performance Reports Fiscal 2001 Third-Quarter, Nine-Month Results; Sales Growth and Profit Turnaround Continues
PHOENIX--July 25, 2001--Action Performance Cos. Inc. (company) , the leader in the design, marketing, promotion and distribution of licensed motorsports merchandise, today reported results for fiscal 2001 third-quarter and nine-month periods ended June 30, 2001, including higher sales and continuing profitability, compared with year-ago losses.Sales for the third quarter rose 21 percent to $92.1 million from $76.1 million in the third quarter of 2000. Net income before extraordinary gains from note repurchases was $8.2 million, or 48 cents a share, vs. a net loss of $23.6 million, or $1.44 per share, in the year-earlier quarter. Prior-year losses included $15.2 million in charges related to goracing.com and $15.0 million of asset write-downs and impairments.
Including extraordinary after-tax gains of $2.0 million, or 10 cents per share, resulting from the repurchase of $21.1 million of the company's 4-3/4 percent convertible subordinated notes during the quarter, net income for the third quarter of 2001 was $10.2 million, or 58 cents per share. Third-quarter EBITDA, excluding the extraordinary gains, was $21.0 million.
Third-quarter sales growth was attributed to higher sales of apparel and die cast, primarily due to heightened consumer awareness and increased popularity of NASCAR racing. The company attributed its stronger margins and profitability to higher sales and effective control over production costs and operating expenses. In addition, the company's effective tax rate was 34 percent for the quarter, approximating the estimated effective tax rate for the year.
For the nine-month period, sales were $213.1 million, vs. $198.9 million in 2000. Net income before extraordinary gains was $10.8 million, or 66 cents per share, compared with a net loss of $29.8 million, or $1.80 per share, for the prior-year period, which also included $17.5 million of charges related to goracing.com and $15.0 million of other special charges.
Including extraordinary after-tax gains for the period totaling $8.1 million, or 49 cents per share, net income for the fiscal 2001 nine-month period was $18.8 million, or $1.15 per share. EBITDA for the nine-month period, excluding extraordinary gains, was $41.9 million.
Fred Wagenhals, Action Performance chairman, president and chief executive officer, stated: "We are obviously pleased with these results, which reflect the strength of our exclusive, long-term licenses, expanding distribution network, and the resulting ability to capitalize on the increased popularity of NASCAR racing. We are also pleased with the enthusiasm of high-visibility companies like Warner Bros. in being associated with NASCAR.
"With their well-established, highly recognized brands and trademarks, endorsement and support, Action can create high-quality special programs like the previously announced Looney Tunes commemorative event scheduled this fall. We feel these one-of-a-kind special events will be important contributors to the company's continued growth."
David Martin, Action Performance chief financial officer, also commented: "We are very pleased with our increased revenues and our continuing ability to increase operating margins through effective control over cost of goods sold and operating expenses. Our ability to continue to manage expenditures at all levels will be an important factor in sustaining this level of profitability."
Martin also stated: "We are particularly pleased with the continued improvement of Action's balance sheet, including the reduction in convertible notes outstanding during the quarter by an additional $21.1 million to $60.8 million.
"As previously reported, the $21.1 million in notes were retired by payments totaling $1.3 million cash and 704,000 treasury shares of common stock valued at $16.2 million. Our cash position of $40.4 million, in a period during which we make substantial working capital investments, is indicative of Action's growing profitability and free cash flow.
"Additionally, just after the end of the quarter, we paid $4.0 million in cash to settle a long-term obligation, extending through 2007 and valued at $4.8 million, which remained from the 1997 acquisition of Revell's die cast business," Martin continued.
"The settlement also eliminated future contingent royalty payments by Action, for trademark usage, through 2007. The $800,000 benefit from the settlement will be recorded as an extraordinary gain in the fourth quarter."
About Action Performance
Action Performance Cos. Inc. is the leader in the design, marketing, promotion and distribution of licensed motorsports merchandise. Its products include a broad range of motorsports-related die-cast car replica collectibles, apparel, souvenirs and other memorabilia.
The company markets and distributes products through a variety of sales and distribution channels, including the Racing Collectables Club of America (RCCA), 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 business growth, managing costs and expenses, and profitability. The company's actual results could differ materially from those set forth in these forward-looking statements. Factors that might cause such differences include, among others, the ability to successfully execute the company's business plan, the success of cost-containment efforts, the results of the transition of the company's RCCA business to QVC, competitive pressures, acceptance of the company's products and services in the marketplace, the success of new marketing programs, the company's ability to successfully execute its agreements with other parties, 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.
ACTION PERFORMANCE COS. INC.
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per-share data)
Three months ended Nine months ended
June 30, June 30,
2001 2000 2001 2000
Sales $92,102 $ 76,055 $213,067 $198,905
Cost of sales 58,456 61,064 137,352 145,854
Gross profit 33,646 14,991 75,715 53,051
Operating expenses:
Selling, general and
administrative 17,951 33,446 49,450 76,144
Amortization of
intangibles 1,509 9,216 4,747 13,443
Total operating expenses 19,460 42,662 54,197 89,587
Income (loss) from
operations 14,186 (27,671) 21,518 (36,536)
Other income (expense):
Minority interests (444) (9) (1,279) (283)
Interest income and other,
net (112) (401) 584 682
Interest expense (1,169) (2,299) (4,155) (5,465)
Total other expense, net (1,725) (2,709) (4,850) (5,066)
Income (loss) before
provision for (benefit
from) income taxes and
extraordinary item 12,461 (30,380) 16,668 (41,602)
Provision for (benefit
from) income taxes 4,233 (6,809) 5,917 (11,765)
Income (loss) before
extraordinary item 8,228 (23,571) 10,751 (29,837)
Extraordinary gain, net
of tax 1,981 -- 8,068 --
Net income (loss) $10,209 $(23,571) $ 18,819 $(29,837)
Earnings per common share:
Income (loss) before
extraordinary gain --
Basic $ 0.51 $ (1.44) $ 0.67 $ (1.80)
Diluted $ 0.48 $ (1.44) $ 0.66 $ (1.80)
Extraordinary gain --
Basic $ 0.12 -- $ 0.50 --
Diluted $ 0.10 -- $ 0.49 --
Net income (loss):
Basic $ 0.63 $ (1.44) $ 1.17 $ (1.80)
Diluted $ 0.58 $ (1.44) $ 1.15 $ (1.80)
Weighted average shares
outstanding --
Basic 16,138 16,358 16,142 16,563
Diluted 18,516 16,358 16,425 16,563
ACTION PERFORMANCE COS. INC.
Condensed Consolidated Balance Sheets
June 30, 2001, and Sept. 30, 2000
(In thousands)
June 30, Sept. 30,
2001 2000
(Unaudited)
Current assets:
Cash $ 40,374 $ 22,758
Accounts receivable, net 44,305 22,901
Inventories 27,080 32,017
Prepaid royalties 12,419 7,262
Estimated income tax receivable -- 14,000
Deferred tax asset 3,257 5,905
Prepaid expenses and other assets 2,167 1,942
Total current assets 129,602 106,785
Property and equipment, net 39,540 46,066
Goodwill and other intangibles, net 88,409 94,894
Long-term deferred tax asset -- 1,423
Other assets 4,457 6,749
$262,008 $255,917
Current liabilities:
Accounts payable $ 16,714 $ 16,510
Accrued royalties 16,586 9,998
Accrued expenses and other 15,500 14,250
Current portion of long-term debt 1,278 1,503
Total current liabilities 50,078 42,261
4-3/4% convertible subordinated notes 60,833 100,000
Other long-term debt and liabilities 8,938 8,340
Commitments and contingencies
Minority interests 3,877 2,598
Shareholders' equity 138,282 102,718
$262,008 $255,917