Action Performance Fiscal 2002 Results Highlighted by Substantial Annual Growth
PHOENIX--Nov. 7, 2002--Fourth Quarter and 12 Months Meet Expectations; Company Initiates
Guidance for the Fiscal First Quarter Ended December 31, 2002 and
Affirms Outlook for Fiscal Year Ended September 30, 2003
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 fiscal year ended September 30.
Fourth quarter revenues increased $2.1 million, or 1.9%, to $110.5 million from $108.4 million in the same period last year. Income before extraordinary items for the three months ended September 30 was $13.0 million, or 6.1% higher than the $12.3 million recorded in the fourth quarter of fiscal 2001. On a per share basis, income before extraordinary items was $0.70 in the fourth quarter of fiscal 2002 compared to $0.67 in the same period last year. Net income, including extraordinary gains on the extinguishment of debt, was $0.70 per share in the fourth quarter of 2002 and $0.71 per share in the fourth quarter of 2001.
Revenues for the quarter are consistent with company guidance, updated last month due to the negative impact of the widely publicized work slowdown and lockout at major West Coast ports.
Fiscal 2002 revenues increased $83.5 million, or 25.8%, to $406.9 million from $323.4 million in the year prior. Income before extraordinary items for the fiscal year ended September 30 increased $22.8 million, or 99.0%, to $45.8 million from $23.0 million in fiscal 2001. On a per share basis, income before extraordinary items rose to $2.46 in fiscal 2002 from $1.37 in 2001, an increase of 79.6%. Net income, after extraordinary items, rose to $2.41 per share in fiscal 2002 from $1.90 in 2001.
"We've dramatically increased Action's die-cast, apparel and collectibles revenues from mass-market retailers, expanded our wholesale distribution channels and strengthened our marketing programs and services," Action Chairman and Chief Executive Officer Fred Wagenhals said. "The company's 25.8% increase in revenue and 99.0% increase in earnings during fiscal 2002 are indicative of our ongoing commitment to aggressive and profitable growth."
The company's EBITDA increased $34.0 million, or 50.9%, to $100.7 million in 2002 from $66.7 million in 2001.
In addition to driving top-line growth in 2002, Action's strict controls on cost of sales and expenses increased gross margin to 38.4% from 35.6%, operating margin to 18.7% from 12.2% and income before extraordinary items to 11.3% from 7.1% of revenue.
As Action reported last month, September revenues were reduced by about $5.7 million due to longshoremen work slowdowns, and a subsequent lockout by port authorities, at the nation's major West Coast ports.
Inventory turned during the quarter 8.2 times compared to 10.9 times in the prior year quarter. For the fourth quarters of fiscal 2001 and 2002, DSO for continuing wholesale distribution channels increased from 34 to 39 days; DSO for mass-market retail channels increased from 71 to 77 days; and newly acquired specialty channel DSO was 56 days, resulting in an overall DSO increase from 36 to 51 days.
"The port lockout, coupled with the inventories of Action's three acquisitions and large mass retail apparel orders staged in September for shipment in early October, resulted in an increase in inventories to $33.5 million at September 30, 2002, from $25.1 million at September 30, 2001," Chief Financial Officer David Martin noted. "In addition, the accounts receivable of acquired companies, as well as Action's rapidly expanding sales to mass-market retailers, resulted in an increase in receivables to $61.3 million at September 30, 2002, from $40.7 million at September 30, 2001. Of the $20.6 million increase, $16.2 million arose from increases in mass-market retailer receivables, of which $10.8 were represented by letters of credit."
First-time Guidance for Quarter Ended December 31, 2002
For the first time, Action issued guidance on the fiscal first quarter, ended December 31, 2002.
"We estimate earnings of $0.44 to $0.49 per share and revenue of $87 million to $90 million for the fiscal first quarter," Martin said.
Chevrolet's recently redesigned Monte Carlo body and Pontiac's similar redesign require new tooling, in order to produce diecast cars. This will delay availability of these cars. Those redesigns and the paint scheme changes, required by the shift of one team from Ford to Dodge, will result in $13 million to $15 million in revenue being booked in the second or third quarter of fiscal 2003, rather than the quarter ended December 31.
"Because these revenues are expected in future quarters, we continue to anticipate double-digit growth in revenues, earnings and cash flow for the fiscal year, and affirm our earnings guidance of $3.15 to $3.25 per share and our revenue estimate of $500 million for the 12 months ended September 30, 2003," Martin said.
He added that Action expects fiscal 2003 EBITDA to be approximately $115 million to $125 million.
About Action Performance:
Action Performance Companies Inc. is the leader in the design, promotion, marketing and distribution of licensed motorsports merchandise. The Company's products include a broad range of motorsports-related die-cast replica collectibles, apparel, souvenirs and other memorabilia. Action Performance markets and distributes products through a variety of channels including the Action Racing Collectables network of wholesale distributors, the Racing Collectables Club of America, QVC, goracing.com, trackside at racing events, direct corporate promotions, mass retail and department stores, specialty dealers. Additional information about Action Performance can be found at www.action-performance.com.
This press release contains forward-looking statements regarding expectations for revenues, EBITDA, net income, cash flow and capital and other funding needs, growth strategy, operational plans, and guidance for future periods. 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 of the Company to successfully execute its business plan, 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 September 30, 2001, on file with the U.S. Securities and Exchange Commission.
ACTION PERFORMANCE COMPANIES, INC. Unaudited Condensed Consolidated Statements of Operations Three and Twelve Months Ended September 30, 2002 and 2001 (in thousands, except per share data) Three Months Ended Twelve Months Ended ------------------ ------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Net sales $ 110,496 $ 108,415 $ 406,902 $ 323,352 Cost of sales 68,850 69,153 250,810 208,375 --------- --------- --------- --------- Gross profit 41,646 39,262 156,092 114,977 --------- --------- --------- --------- Operating expenses: Selling, general and administrative 20,888 20,006 77,214 69,456 Amortization of goodwill - 1,141 - 4,097 Amortization of licenses and other intangibles 1,031 269 2,797 2,060 --------- --------- --------- --------- Total operating expenses 21,919 21,416 80,011 75,613 --------- --------- --------- --------- Income from operations 19,727 17,846 76,081 39,364 Interest expense (657) (947) (3,029) (5,102) Minority interests and other, net 1,268 (345) 862 (1,040) --------- --------- --------- --------- Income before income taxes and extraordinary items 20,338 16,554 73,914 33,222 Income taxes 7,326 4,288 28,113 10,205 --------- --------- --------- --------- Income before extraordinary items 13,012 12,266 45,801 23,017 Extraordinary items, net of tax - 851 (854) 8,919 --------- --------- --------- --------- Net income $ 13,012 $ 13,117 $ 44,947 $ 31,936 ========= ========= ========= ========= EARNINGS PER COMMON SHARE: Basic- Income before extraordinary items $ 0.73 $ 0.72 $ 2.61 $ 1.41 Extraordinary items - 0.05 (0.05) 0.54 --------- --------- --------- --------- Net income $ 0.73 $ 0.77 $ 2.56 $ 1.95 ========= ========= ========= ========= Diluted- Income before extraordinary items $ 0.70 $ 0.67 $ 2.46 $ 1.37 Extraordinary items - 0.04 (0.05) 0.53 --------- --------- --------- --------- Net income $ 0.70 $ 0.71 $ 2.41 $ 1.90 ========= ========= ========= ========= Weighted Average Shares Outstanding- Basic 17,779 17,057 17,565 16,373 Diluted 19,148 19,059 19,231 16,849 ACTION PERFORMANCE COMPANIES, INC. Unaudited Condensed Consolidated Balance Sheets September 30, 2002 and 2001 (in thousands) 2002 2001 ---- ---- Current Assets: Cash and cash equivalents $ 69,585 $ 64,514 Accounts receivable, net 61,313 40,725 Inventories 33,467 25,120 Prepaid royalties 6,938 10,222 Deferred taxes 3,155 2,672 Prepaid expenses and other 2,397 1,392 --------- --------- Total current assets 176,855 144,645 Property and Equipment, net 46,378 40,356 Goodwill 84,514 76,937 Licenses, Trademarks and Other Intangibles 23,840 12,785 Other Assets 6,169 4,230 --------- --------- $ 337,756 $ 278,953 ========= ========= Current Liabilities: Accounts payable $ 28,798 $ 18,371 Accrued royalties 15,146 16,792 Accrued expenses and other 14,810 18,755 Current portion of long-term debt 423 424 --------- --------- Total current liabilities 59,177 54,342 4 3/4% Convertible Subordinated Notes 38,935 54,933 Other Long-term Debt and Liabilities 7,121 6,773 Minority Interests 3,135 3,079 Shareholders' Equity 229,388 159,826 --------- --------- $ 337,756 $ 278,953 ========= ========= ACTION PERFORMANCE COMPANIES, INC. Unaudited Condensed Consolidated Statements of Cash Flows Twelve Months Ended September 30, 2002 and 2001 (in thousands) 2002 2001 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 44,947 $ 31,936 Adjustments to reconcile net income to net cash from operations- Deferred income taxes (133) 8,560 Depreciation and amortization 23,722 28,366 Stock option tax benefits 2,864 1,396 Extraordinary items 1,361 (14,219) Other 623 609 Changes in assets and liabilities, net of businesses acquired or disposed- Accounts receivable, net (18,518) (19,347) Accounts payable 8,365 4,434 Income tax payable and receivable (3,366) 22,337 Inventories (4,522) 5,935 Prepaid royalties and accrued royalties 1,630 4,109 Other (5,761) (2,903) --------- --------- Net cash from operating activities 51,212 71,213 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, net (25,379) (16,520) (Acquisitions) and dispositions, net of costs (19,006) 2,513 Other (238) - --------- --------- Net cash used in investing activities (44,623) (14,007) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Long-term debt repayments (6,397) (17,111) Common stock purchases for treasury (1,975) (1,482) Stock option exercises 6,469 2,989 Other 149 30 --------- --------- Net cash used in financing activities (1,754) (15,574) Effect of exchange rate changes on cash and cash equivalents 236 124 --------- --------- Net change in cash and cash equivalents 5,071 41,756 Cash and cash equivalents, beginning of period 64,514 22,758 --------- --------- Cash and cash equivalents, end of period $ 69,585 $ 64,514 ========= ========= ACTION PERFORMANCE COMPANIES, INC. Unaudited Calculation of EBITDA Twelve Months Ended September 30, 2002 and 2001 (in thousands) 2002 2001 --------- -------- Income Before Income Taxes and Extraordinary Items $ 73,914 $ 33,222 Interest Expense Depreciation and Amortization- 3,029 5,102 Depreciation - cost of sales 14,757 15,828 Depreciation - operating expenses 6,168 6,381 Amortization of goodwill - 4,097 Amortization of licenses and other intangibles 2,797 2,060 --------- --------- Total depreciation and amortization 23,722 28,366 --------- --------- Earnings Before Interest, Taxes, Depreciation and Amortization $ 100,665 $ 66,690 ========= =========