Action Performance Announces $10 million Loss for Fiscal 2000 2nd Quarter
25 April 2000
GoRacing.com Subsidiary & Sluggish Sales Helps Drain Company Profits
PHOENIX--April 25, 2000--Action Performance Companies, Inc. (Nasdaq:ACTN), the leader in the design, marketing, promotion and distribution of motorsports merchandise, today announced its operating results for the fiscal 2000 second quarter and the first six months ended March 31, 2000.For the second quarter of 2000, sales declined 26% to $58.1 million from $78.9 million for the comparable quarter of fiscal 1999. The Company reported a net loss for the 2000 second quarter of $4.1 million, or a loss of $0.25 per share, compared to net income of $6.5 million, or $0.38 per share, for the year ago quarter.
Results for the most recent quarter were negatively impacted by the cost of the Company's Internet operations and a decline in the number of special promotional programs, which adversely affected sales. The Company has taken steps to minimize the impact of its goracing.com subsidiary, including subleasing and selling the equipment and facilities used for the Company's Internet operations. As previously announced, the Company also made management changes during the first quarter to address the future development of special promotional programs.
For the fiscal 2000 six-month period ended March 31, 2000, the Company reported sales of $122.9 million compared to $150.5 million during the same period of fiscal 1999. Excluding non-recurring charges of $2.3 million taken in the first fiscal quarter related to its goracing.com Internet business and other management restructuring charges, the Company reported a net loss of $5.0 million, or a loss of $0.30 per share, during the first six months of fiscal 2000 compared to net income of $11.4 million, or $0.67 per share, for the comparable period of fiscal 1999.
"As announced in connection with our first quarter earnings release, a number of management changes were made in an effort to strengthen our core business. Unfortunately, the lead times of our business extend beyond one quarter and therefore the positive effects of those changes were not felt this quarter. Nonetheless, we are excited about the new promotional programs in the pipeline that will kick-in during the third and fourth quarter of the year and into 2001," said Fred W. Wagenhals, Action chairman, president and CEO.
"Sales associated with special marketing and promotional programs in the second quarter were significantly less than the same quarter of fiscal 1999," said David A. Husband, CFO. "However, sales momentum is building in the third quarter with the programs already approved and in production. Our marketing staff is now working on programs far enough in advance it should provide more linearity and predictability to our business."
"Our Internet business cost us approximately $4.0 million in the second quarter. In order to reduce costs going forward, we completed a series of transactions with a third party to sublease and sell the equipment and facilities used for the Internet operations and simultaneously entered into a hosting agreement. We are also currently discussing a transaction with several interested parties that will enable us to further reduce our investment and cost of the Internet business."
Mr. Wagenhals added, "Our trackside sales continue to set new records, which has historically proven to be an accurate gauge for the strength of the market. We are optimistic about the future given the refocus on our core business and the continued strength of the motorsports industry."
&
ACTION PERFORMANCE COMPANIES, INC.
Summary Consolidated Balance Sheets
(In thousands)
March 31, September 30,
2000 1999
--------------------------
Current Assets:
Cash $ 25,468 $ 58,523
Accounts receivable, net 36,381 44,988
Inventories 43,335 45,310
Prepaid royalties 12,824 7,271
Other assets 2,385 2,953
-------- --------
Total Current Assets 120,393 159,045
Property and equipment, net 57,443 56,162
Goodwill and other
intangibles, net 109,356 111,634
Other assets 12,488 8,906
-------- --------
$299,680 $335,747
-------- --------
Current Liabilities:
Accounts payable $ 14,535 $ 20,127
Accrued royalties 6,986 13,519
Accrued expenses and other 7,151 14,889
Current portion of long term-debt 1,565 2,713
-------- --------
Total Current Liabilities 30,237 51,248
Long-term debt 108,723 109,208
Minority interest in subsidiaries 2,291 2,300
Shareholders' Equity 158,429 172,991
-------- --------
$ 299,680 $ 335,747
-------- --------
ACTION PERFORMANCE COMPANIES, INC.
Summary Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
--------- --------- --------- ---------
Sales:
Collectibles $ 31,492 $ 46,439 $ 67,335 $ 92,306
Apparel and souvenirs 24,953 30,092 51,774 54,428
Other 1,624 2,397 3,741 3,759
--------- --------- --------- ---------
Net sales 58,069 78,928 122,850 150,493
Cost of sales 39,904 48,933 84,790 94,764
--------- --------- --------- ---------
Gross profit 18,165 29,995 38,060 55,729
Gross profit percentage 31.3% 38.0% 31.0% 37.0%
Operating expenses:
Selling, general
and administrative 22,351 16,101 40,447 30,701
Other non-recurring
charge -- -- 2,251 --
Amortization of
goodwill and other
intangibles 2,331 1,501 4,227 2,958
--------- --------- --------- ---------
Total operating
expenses 24,682 17,602 46,925 33,659
--------- --------- --------- ---------
Income (loss) from
operations (6,517) 12,393 (8,865) 22,070
Other income (expense):
Minority interest in
earnings (341) (570) (551) (644)
Interest and other, net (845) (983) (1,806) (2,381)
--------- --------- --------- ---------
Total other
expense, net (1,186) (1,553) (2,356) (3,025)
Income (loss) before
provision (benefit)
for income taxes (7,703) 10,840 (11,222) 19,045
Provision for
(benefit from)
income taxes (3,565) 4,336 (4,955) 7,618
--------- --------- --------- ---------
Net income (loss) (4,138) 6,504 (6,267) 11,427
========= ========= ========= =========
Net income (loss) per
common share:
Basic ($0.25) $0.39 ($0.38) $0.69
========= ========= ========= =========
Diluted ($0.25) $0.38 ($0.38) $0.67
========= ========= ========= =========
Weighted average shares
outstanding:
Basic 16,748 16,820 16,666 16,668
========= ========= ========= =========
Diluted 16,748 17,179 16,666 17,025
========= ========= ========= =========