Racing Champions Reports Record 1998 Q3 Results
27 October 1998
Racing Champions Reports Record 1998 Third Quarter Results
GLEN ELLYN, Ill.--Oct. 27, 1998--Racing Champions Corporation , today reported record sales and earnings for the third quarter and nine months ended September 30, 1998.Net sales for the third quarter of $50.6 million more than doubled net sales of $24.3 million for the same quarter in 1997. Net income for the quarter was up over 80% to $5.8 million, or $0.35 diluted earnings per share, from $3.2 million or $0.20 diluted earnings per share for last year's third quarter.
The Company's results for the first nine months of 1998 are reported on a pro forma basis, excluding one-time charges incurred during this year's second quarter related to the acquisition of Wheels Sports Group, Inc. (renamed Racing Champions South) and assuming that the acquisition occurred on January 1, 1998.
For the nine months ended September 30, 1998, net sales were $121.9 million, an 84% increase over net sales for the comparable period a year ago. The Company reported pro forma income for the nine months year to date of $13.3 million, or $0.81 diluted earnings per share, almost tripling last year's net income of $4.6 million, or $0.34 diluted earnings per share.
Bob Dods, Chairman and Chief Executive Officer, said, "During the third quarter, Racing Champions continued to deliver outstanding results with sell-thru at retail remaining strong and orders growing at record levels. New products continued to perform well, surpassing our expectations. These include NASCAR 24 Karat Gold Series, Hot Country Steel, and the World Champion Wrestling (WCW) die-cast collectibles. We will begin shipping in the fourth quarter a full line of WCW merchandise to mass retail, grocery and convenience store chains. In 1999, our relationship with WCW will continue to broaden as we introduce a new WCW trackside program in connection with their move to the NASCAR Winston Cup series. Also, during the third quarter, Racing Champions began shipping Authentics, our high end NASCAR die-cast product line."
Dods continued, "The Company's direct marketing initiatives continue to be well ahead of plan, led by the roll-out of new programs across print, the Internet, and to our mailing list of more than 100,000 collectors. Our investment spending to support these programs has been significant and we expect next year to see increased sales and profits attributable to direct marketing."
Dods continued, "Progress continues at Racing Champions South where we have integrated sales and marketing activities with those of the parent and organized our entire business along product lines. We now have one sales and marketing team selling Racing Champions' broad line of NASCAR die-cast replicas, custom and classic replicas, NASCAR and other licensed merchandise. This integration has enabled us to consolidate certain activities, increasing efficiencies and resulting in the elimination of approximately 1/3 of Racing Champions South's payroll costs."
Dods concluded, "1998 has been an outstanding year for Racing Champions, providing us with a solid foundation for future growth. The response to our 1999 product line has been excellent and more importantly, early bookings continue to be at significantly higher levels than in prior years. With expanded distribution capabilities, new products and licensing programs, we believe that 1999 will be a highly successful 10th anniversary year for Racing Champions."
Founded in 1989, Racing Champions Corporation is a leading producer and marketer of adult collectibles, available at over 20,000 retail outlets throughout North America, including Wal-Mart, Kmart, Toys 'R Us and Target. The company is best known for its extensive line of officially licensed die-cast replicas from the five most popular racing series, including NASCAR.
Forward looking statements in this release are subject to many uncertainties in the Company's operations and business environment. These uncertainties include general economic conditions, demand for the Company's products, competition, availability of certain licensed properties and costs of operations. Such uncertainties and other operational matters are discussed further in the Company's quarterly and annual filings with the Securities and Exchange Commission.
RACING CHAMPIONS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
------------------- -----------------------------
1998 1997 1998 1998 1997
Actual Actual Actual Pro forma Actual
(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Net sales $ 50,604 $ 24,291 $121,936 $121,936 $ 66,436
Cost of sales 23,351 10,761 54,602 54,602 29,657
Gross profit 27,253 13,530 67,334 67,334 36,779
Selling,
general
and
admini-
strative
expenses 16,260 7,497 41,253 40,995 20,488
Amortization
of
intangible
assets 666 554 1,998 1,998 1,666
Merger-related
costs -- -- 5,525 -- --
Operating income 10,327 5,479 18,558 24,341 14,625
Interest expense 625 303 2,159 1,793 4,854
Other expense 71 65 223 223 150
Income before
income taxes 9,631 5,111 16,176 22,325 9,621
Income tax
expense 3,856 1,897 6,566 9,060 3,970
Income from
continuing
operations 5,775 3,214 9,610 13,265 5,651
Discontinued
operations,
net of tax
benefit of
$428 -- -- -- -- 1,032
Income before
extraordinary
item 5,775 3,214 9,610 13,265 4,619
Extraordinary
charge for
early
extinguishment
of debt,
net of tax
benefit of
$1,188 -- -- 1,782 -- --
Net income $ 5,775 $ 3,214 $ 7,828 $ 13,265 $ 4,619
EBITDA $ 11,768 $ 6,535 $ 22,775 $ 28,558 $ 17,777
EPS:
Income from
continuing
operations
available to
common
stockholders
Basic $ 0.36 $ 0.21 $ 0.60 $ 0.83 $ 0.44
Diluted $ 0.35 $ 0.20 $ 0.59 $ 0.81 $ 0.42
Net income
available to
common
stockholders
Basic $ 0.36 $ 0.21 $ 0.49 $ 0.83 $ 0.35
Diluted $ 0.35 $ 0.20 $ 0.48 $ 0.81 $ 0.34
Weighted
average
shares
outstanding
Basic 15,971 15,388 15,964 15,964 11,852
Diluted 16,430 15,811 16,396 16,396 12,215
Selected Consolidated Balance Sheet Data
September 30, June 30, December 31,
1998 1998 1997
(Unaudited) (Unaudited) (Unaudited)
Cash and cash equivalents $ 8,737 $ 5,279 $ 6,903
Accounts receivable, net 23,619 20,468 12,180
Inventory 13,727 10,439 4,412
Accounts payable and accrued
expenses 28,736 24,372 15,976
Line of credit 9,100 7,631 7,230
Bank term loans 23,068 24,177 21,946