Action Performance Posts Results for Fiscal Q3 1998
28 July 1998
Action Performance Announces Record Results for the Fiscal 1998 Third Quarter and Nine-Month Period
PHOENIX--July 28, 1998--Action Performance Companies Inc.(TM) (Nasdaq NM:ACTN) today announced record sales and earnings for its fiscal 1998 third quarter and nine-months ended June 30, 1998.For the fiscal third quarter, sales grew 94% to a record $76.8 million from $39.6 million for the comparable quarter of fiscal 1997. Net income for the third quarter of fiscal 1998 was $8.5 million, or $0.51 per share excluding the dilutive effect of the company's convertible subordinated notes of approximately $0.01 per share. Net income for the third quarter of fiscal 1997 was $4.3 million, or $0.30 per share, excluding the effects of a one-time legal settlement charge of $5.4 million in the 1997 period.
For the fiscal 1998 nine-month period, sales advanced to $172.9 million from $83.1 million during the comparable period of fiscal 1997. Net income for the period reached $16.8 million, or $1.01 per share, compared to $8.3 million, or $0.59 per share, for first nine-months of fiscal 1997, excluding the effects of legal settlement charges of $950,000 in the 1998 period and $5.4 million in the 1997 period. The company's convertible subordinated notes were anti-dilutive for the nine-month period of 1998 and are expected to be anti-dilutive for the fiscal year.
Said Fred W. Wagenhals, Action Chairman, President and CEO, "We are extremely pleased with our operating results for the third quarter. Strong demand for the company's products combined with additional distribution channels and synergies achieved through our acquisition strategy have bolstered sales and earnings to record levels. Action launched a number of successful programs during the quarter including Dale Earnhardt/Goodwrench 'Bass Pro Shops,' Jeff Gordon/Dupont 'ChromaLusion,' Rusty Wallace/Miller Lite 'The Adventures,' and Mike Skinner/Lowes 'Special Olympics,' all driving revenue opportunities for the company and creating value to the drivers, owners and sponsors. With the all-star line-up of drivers and team owners we have under license, the breadth of our distribution channels and products, and the successes of our marketing efforts, we continue to be very positive about the future of Action."
Said Christopher S. Besing, Action Chief Financial Officer, "We are beginning to see the top-line synergies from our recent acquisitions. We are also very pleased with their integration with our existing operations and the impact they have had in the growth of our earnings. With the race season in full swing, we have experienced a significant increase in cash flow from operations despite the increase in SG&A associated with our new state-of-the-art 120,000 square-foot facility in Charlotte and the expansion of our infrastructure to support our expected continuing growth in revenues."
Action Performance Companies Inc. is the leader in the design, marketing and distribution of licensed motorsports merchandise. Its products include a broad range of motorsports-related apparel, souvenirs, die-cast car replica collectibles and other memorabilia. The company markets and distributes products through a variety of channels, including the 138,000-member Racing Collectables Club of America(TM) (RCCA), trackside at racing events, mass retail department stores, and a nationwide wholesale network of approximately 5,000 specialty dealers and distributors.
The statements in this press release regarding sales and earnings growth, expectations regarding the continued popularity of motorsports and growth in the market for licensed motorsports merchandise, market acceptance of new product lines and programs, achievement of a more balanced revenue stream associated with acquisitions and anticipated cost reductions are forward looking statements. These forward looking statements involve risks and uncertainties, many of which are beyond the company's control, including the rate and amount of actual growth in the motorsports merchandise markets, the popularity and market acceptance of new products introduced by the company or its competitors, the company's ability to effectively integrate acquired businesses and to reduce costs and general economic conditions. Other risks and uncertainties are detailed in the company's Securities and Exchange Commission filings. Actual results may differ materially from the expectations expressed in this release.
(financial tables follow)
ACTION PERFORMANCE COMPANIES INC.
Consolidated Balance Sheets
(In thousands)
June 30, Sept. 30,
1998 1997
CURRENT ASSETS:
Cash $86,039 $29,318
Accounts receivable, net 30,463 17,802
Inventories 32,105 17,855
Prepaid royalties 5,202 4,967
Prepaid and other 2,794 2,603
TOTAL CURRENT ASSETS 156,603 72,545
Property and equipment, net 34,234 20,017
Goodwill and other intangibles, net 86,936 46,409
Notes receivable and other assets 8,915 2,354
TOTAL ASSETS $286,688 $141,325
CURRENT LIABILITIES:
Accounts payable $12,359 $6,680
Accrued royalties 9,887 5,098
Accrued expenses & other 9,387 2,442
Current portion of long term debt 23,458 1,350
55,091 15,570
LONG-TERM DEBT:
Convertible subordinated notes 100,000
Other long-term debt 9,716 22,586
109,716 22,586
MINORITY INTEREST 110 -
SHAREHOLDERS' EQUITY:
Common stock 162 160
Additional paid-in capital 87,344 84,984
Retained earnings 34,265 18,025
TOTAL EQUITY 121,771 103,169
TOTAL LIABILITIES AND EQUITY $286,688 $141,325
ACTION PERFORMANCE COMPANIES INC.
Summary Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
Sales:
Collectibles $39,170 $16,677 $85,386 $40,198
Apparel and souvenirs 33,102 21,963 78,727 40,296
Promotional 3,645 842 6,622 2,197
Other 876 150 2,131 418
Net sales 76,793 39,632 172,866 83,109
Cost of sales 47,265 24,948 108,120 51,249
Gross profit 29,528 14,684 64,746 31,860
Operating expenses:
Selling, general and
administrative expenses 13,215 6,597 31,950 15,853
Non recurring charge for
litigation settlement - 5,400 950 5,400
Amortization of goodwill
and other intangibles 1,281 338 2,971 833
Total operating expenses 14,496 12,335 35,871 22,086
Income from operations 15,032 2,349 28,875 9,774
Other income (expense):
Interest income and
other, net 1,231 90 1,695 256
Interest expense (1,928) (609) (3,416) (1,525)
Total other income (expense) (697) (519) (1,721) (1,269)
Income before provision
for income taxes and minority
interest in earnings 14,335 1,830 27,154 8,505
Provision for income taxes (5,699) (732) (10,826) (3,402)
Minority interest in earnings (88) - (88) -
Net Income $8,548 $1,098 $16,240 $5,103
Net income per common share
Basic $0.53 $0.08 $1.01 $0.36
Diluted $0.50 $0.08 $0.98 $0.36
Weighted average shares outstanding
Basic 16,195 14,430 16,093 13,997
Diluted 18,766 14,430 16,627 14,033