Action Performance Reports First Quarter 2003 Results
PHOENIX--Jan. 27, 2003--Action Performance Companies, Inc. , the leader in the design, marketing, promotion and distribution of licensed motorsports merchandise, today reported financial results for the first quarter ended December 31, 2002.First quarter revenues increased $1.7 million, or 2.0%, to $85.8 million from $84.1 million in the same period last year. Net income for the three months ended December 31, 2002 was $8.0 million, compared to $8.2 million in the first quarter of fiscal 2002. On a per share basis, net income was $0.44 in first quarter of fiscal 2003 compared to $0.46 in the same period last year. First quarter 2003 net income includes $0.04 per share from foreign currency translation gains. First quarter 2002 net income includes $0.01 per share arising from a gain on extinguishment of debt, which was previously reported as an extraordinary item and has been reclassified in accordance with SFAS No. 145, effective October 1, 2002.
Action also reported EBITDA of $19.6 million in the fiscal first quarter of 2003, compared to $20.1 million in the same period the year prior.
"Considering the challenging economic backdrop, we're pleased to have delivered sound EPS, weathering what is clearly the worst business conditions the nation has experienced in a decade," Action Chairman and Chief Executive Officer Fred Wagenhals said. "With an economic model characterized by substantial operating income, as well as our rock-solid balance sheet, we believe Action will successfully ride out this recession, remain highly profitable, and deliver double-digit growth in fiscal 2003."
First quarter sales, including $6.9 million from companies acquired in 2002, were impacted by a decline in wholesale die-cast sales, arising from the lack of product availability due to the previously announced delays in production of die-cast models of newly redesigned Chevrolet Monte Carlo and Pontiac NASCAR vehicles. These retooling efforts are now substantially complete. First quarter 2003 revenues also reflected an 80% increase in die-cast and apparel sales to mass merchandisers. Trackside and wholesale apparel sales declined, compared to strong sales in the prior year.
Action's balance sheet grew stronger for the period ended December 31, 2002. Cash balances grew to $79.6 million from $69.6 million at September 30, 2002. Cash increased in part due to significant receivable collections of $17.3 million, including the collection of accounts of mass retailers, which had increased as of September 30, 2002, due to the timing of holiday shipments. Days sales outstanding were 47 days compared to 51 at September 30, 2002 and 42 days at December 31, 2001. The increase in DSOs from December 31, 2001 reflects Action's increased mass-retail revenues, which have a longer DSO.
As part of the company's long-stated policy of repurchasing common stock when opportunistic conditions present themselves, the company used its substantial cash position to purchase $2.0 million in Action shares on the open market.
"We continue to believe that our stock buyback program is important to effect capital management and complements the $0.03 dividend we introduced in September," Chief Financial Officer David Martin noted. "Yet our stock repurchase program will remain conservative, in order to maintain our balance sheet strength."
Action anticipates that fiscal 2003 capital expenditures will be comparable to the $25.8 million reported for the 12 months of fiscal 2002, but frontloaded in the earlier part of this year. Capital expenditures were $11.1 million in the first quarter of fiscal 2003, compared to $5.5 million in the same period last year. The increase in first quarter capital expenditures was primarily for retooling requirements to accommodate the recent NASCAR vehicle redesigns by Chevrolet and Pontiac.
Guidance for Second Quarter and 12 Months of Fiscal Year Ending September 30, 2003
For the second quarter ending March 31, 2003 management expects to realize revenues in the range of $90 million to $100 million, and EPS of $0.44 to $0.56. This guidance continues to reflect a decline in die-cast sales due to delayed product availability, arising from the timing of the completion of retooling and the related production issues. For the fiscal year ending September 30, 2003 Action anticipates revenues of $460 million to $485 million, EPS of $2.85 to $3.00 and EBITDA of $112 million to $117 million.
"In spite of a recessionary environment that is likely to extend well into 2003, we believe Action is well positioned to deliver double-digit growth this year," Martin explained. "If consumer spending recovers in the second half of the year and general economic conditions begin to recover, we believe that Action can achieve the higher end of our guidance range. Our full-year revenue estimate reflects a recovery of die-cast sales in our third and fourth quarter, when we will have adequate die-cast product available."
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, 2002, on file with the U.S. Securities and Exchange Commission.
ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Balance Sheets
December 31, 2002 and September 30, 2002
(in thousands, except per share data)
Dec. 31, Sept. 30,
2002 2002
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents $ 79,623 $ 69,585
Accounts receivable, net 44,041 61,313
Inventories 33,519 33,467
Prepaid royalties 7,238 6,938
Deferred taxes 3,201 3,155
Prepaid expenses and other 4,074 2,397
--------- --------
Total current assets 171,696 176,855
Property and Equipment, net 53,813 46,378
Goodwill 85,577 84,514
Licenses and Other Intangibles, net 23,489 24,000
Other Assets 5,824 6,169
-------- --------
$340,399 $337,916
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 24,305 $ 28,958
Accrued royalties 11,088 15,146
Accrued expenses 7,197 10,545
Income taxes payable 8,233 4,265
Current portion of long-term debt 434 423
--------- --------
Total current liabilities 51,257 59,337
--------- --------
Long-Term Liabilities:
Long-term debt 43,273 40,360
Deferred taxes and other 6,419 5,696
--------- --------
Total long-term liabilities 49,692 46,056
--------- --------
Commitments and Contingencies
Minority Interests 3,213 3,135
Shareholders' Equity 236,237 229,388
--------- --------
$340,399 $337,916
========= ========
ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended December 31, 2002 and 2001
(in thousands, except per share data)
2002 2001
--------- --------
Net sales $85,799 $84,136
Cost of sales 55,277 52,285
--------- -------
Gross profit 30,522 31,851
--------- --------
Operating expenses:
Selling, general and administrative 17,362 17,172
Amortization of licenses and
other intangibles 900 506
--------- --------
Total operating expense 18,262 17,678
--------- --------
Income from operations 12,260 14,173
Interest expense (579) (845)
Other 1,126 113
--------- --------
Income before income taxes 12,807 13,441
Income taxes 4,841 5,211
--------- --------
Net Income $ 7,966 $ 8,230
========= ========
Earnings Per Common Share:
Basic $ 0.45 $ 0.48
Diluted $ 0.44 $ 0.46
Weighted Average Shares Outstanding:
Basic 17,791 17,245
Diluted 19,003 19,053
Note: Amounts for 2001 have been adjusted to reflect adoption of
SFAS No.145 effective October 1, 2002. Prior to adoption, gains
on extinguishment of debt were reflected as extraordinary items.
ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended December 31, 2002 and 2001
(in thousands)
2002 2001
--------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,966 $ 8,230
Adjustments to reconcile net income to
cash provided by operations-
Depreciation and amortization 6,249 5,862
Stock option tax benefits 407 1,226
Gain on extinguishment of debt - (239)
Other (123) (123)
Changes in assets and liabilities, net-
Accounts receivable, net 17,465 1,941
Accounts payable (4,939) (4,426)
Income taxes payable 3,833 (1,110)
Inventories 170 957
Prepaid royalties and accrued royalties (4,358) (3,457)
Other (6,333) (5,102)
--------- -------
Net cash from operating activities 20,337 3,759
--------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (11,135) (5,533)
Other (407) (238)
--------- -------
Net cash used in investing activities (11,542) (5,771)
--------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt borrowings - German mortgage 3,001 -
Long-term debt repayments, net (365) (198)
Common stock purchases for treasury (2,024) -
Stock option exercise proceeds 251 2,139
--------- -------
Net cash from financing activities 863 1,941
--------- -------
Effect of exchange rates on cash and cash
equivalents 380 (91)
--------- -------
Net change in cash and cash equivalents 10,038 (162)
Cash and cash equivalents, beginning of
period 69,585 64,514
--------- -------
Cash and cash equivalents, end of period $ 79,623 $64,352
========= =======
ACTION PERFORMANCE COMPANIES, INC.
Unaudited Reconciliation to Consolidated EBITDA
Three Months Ended December 31, 2002 and 2001
(in thousands, except per share data)
2002 2001
--------- -------
Income Before Income Taxes $12,807 $13,441
Interest Expense 579 845
Depreciation and Amortization:
Depreciation - cost of sales 3,840 3,866
Depreciation - operating expenses 1,509 1,490
Amortization of licenses and other
intangibles 900 506
--------- -------
Total depreciation and amortization 6,249 5,862
--------- -------
Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA) $19,635 $20,148
========= =======
Note: Amounts for 2001 have been adjusted to reflect adoption of
SFAS No.145 effective October 1, 2002. Prior to adoption, gains
on extinguishment of debt were reflected as extraordinary items.