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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
                                                 =========  =========