Action Performance Reports Fourth Quarter and Year-end Results
4 December 2000
Action Performance Reports Fourth Quarter and Year-end Results, Restructuring Completed
PHOENIX--Dec. 4, 2000--Action Performance Companies Inc. (Company) , the leader in the design, marketing, promotion and distribution of licensed motorsports merchandise, today reported results for its fourth quarter and fiscal year ended Sept. 30, 2000, including non-recurring charges arising from its restructuring related to achieving cost reductions and other strategic corporate decisions.Fourth-quarter revenues were $55.8 million compared to $90.4 million in 1999. Lower revenues were attributed to reduced promotional activity and marketing programs, delays in product deliveries and reduced product availability due to a refocus on the Company's core products.
The Company incurred a fourth-quarter loss before taxes of $41.1 million, which included $32.2 million of special, principally non-cash charges related to restructuring and a decision to refocus on its core drivers and core programs. A tax benefit of $12.8 million resulted in a net loss of $28.3 million, or $1.73 per share, compared to net income of $5.4 million, or 31 cents a share, for the fourth quarter of 1999.
Revenues for fiscal year 2000 were $254.7 million, compared to $342.4 million in fiscal 1999. Sales for the year were also negatively affected by industry conditions, reduced promotions and fewer marketing programs.
For the year, the Company incurred losses before taxes of $82.7 million, which included $62.4 million of special, principally non-cash charges. Due to tax benefits of $24.6 million, the net loss for the year was $58.1 million, or $3.52 per share, versus net income of $28.4 million, or $1.65 per share, for fiscal 1999.
Special charges in the fourth quarter include:
| -- | Additional reserves for sales returns, excess inventories and doubtful receivables of $10.5 million, reflecting higher inventory turnover and receivable collection goals. |
| -- | Tooling write-downs of $7.6 million arising from reduced depreciation lives and the write off of obsolete items. |
| -- | Write downs of prepaid royalties and sponsorship fees of $7.0 million, reflecting, in part, the Company's decision to concentrate future production on core drivers and core programs. |
| -- | Losses related to the sale of Fantasysports.com ($0.3 million) and write downs of the former headquarters building, remaining GoRacing assets, the investment in Silicon Entertainment, and the Simpson Helmet intangible ($3.2 million). |
| -- | One-time balance sheet adjustments in the U.K. operations of $1.4 million. |
| -- | Fourth-quarter severance costs of $0.7 million. |
| -- | Other charges totaling $1.5 million. |
Commented Action Performance CFO David Martin: "As indicated in our third-quarter release, we continued the restructuring of the Company in the fourth quarter of fiscal 2000 in order to return the Company to profitability and analyzed the Company's balance sheet based upon the Company's strategic direction and development of our fiscal 2001 operating plan.
"On a positive note, in November the Company received $4.2 million in cash from the sale of Fantasysports. The company also expects to generate approximately $2 million from the sale of the former headquarters building, which is currently in escrow, $5 million from reduced inventory and receivable levels, and $14 million from refunds of taxes paid in prior years. In addition, we believe that the fiscal 2000 loss will also substantially eliminate taxes that otherwise would be payable upon our return to profitability in fiscal 2001.
"We are now proceeding with a streamlined operating infrastructure for fiscal 2001 that will focus on the core activities that have historically produced strong sales and profits," Martin continued. "Additional cash generated will give us flexibility to execute our going-forward strategy. We intend to move toward historical gross margins and reduce our inventory risk, which, in part, reduces our receivables risk. In addition, we will continue to evaluate our business in order to determine that the Company receives an adequate return on capital invested.
"Newly launched sales and marketing campaigns will leverage our brand name in die-cast in traditional channels, while we build our new relationship with QVC. Trackside operations should continue to produce relatively stable sales. And with Dodge reentering NASCAR, the advent of several new events, and increased TV coverage of racing events, we also anticipate excellent opportunities to increase Action's brand recognition and grow our sales base.
"We also believe investors will be able to better evaluate the Company's operating results as it progresses with its strategic plan," Martin said. "Our operating plan anticipates net earnings for fiscal 2001. Assuming relative stability in the economy and in the continuing popularity of NASCAR racing events, we expect to achieve these results with flat to slight growth in core business revenues, higher gross margins reflecting lower die-cast costs already negotiated and additional cost controls intended to reduce freight and other product costs, lower operating expenses arising from reductions already in place and improved budget controls."
ACTION PERFORMANCE COMPANIES INC.
Summary Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Fiscal Year Ended
September 30, September 30,
2000 1999 2000 1999
Sales:
Collectibles $ 39,251 $ 58,316 $ 149,032 $ 214,429
Apparel and souvenirs 15,578 30,059 99,322 119,922
Other 959 2,052 6,339 8,094
Net sales 55,788 90,427 254,693 342,445
Cost of sales 59,836 55,316 205,690 210,768
Gross margin (4,048) 35,111 49,003 131,677
Operating expenses:
Selling, general and
administrative 34,896 22,659 111,040 71,636
Amortization of goodwill
and other intangibles 1,212 2,257 14,655 6,818
Total operating
expenses 36,108 24,916 125,695 78,454
Income (loss) from
operations (40,156) 10,195 (76,692) 53,223
Other income (expense):
Minority interest in
earnings (15) (672) (298) (1,930)
Interest and other, net 449 631 1,131 2,531
Interest expense (1,355) (1,587) (6,820) (6,929)
Total other
expense, net (921) (1,629) (5,987) (6,328)
Income (loss) before
provision (benefit) for
income taxes (41,077) 8,566 (82,679) 46,895
Provision for (benefit
from) income taxes (12,827) 3,194 (24,592) 18,526
Net income (loss) $ (28,250) $ 5,372 $ (58,087) $ 28,369
Net income (loss) per
common share:
Basic ($1.73) $0.32 ($3.52) $1.69
Diluted ($1.73) $0.31 ($3.52) $1.65
Weighted average shares
outstanding:
Basic 16,366 16,820 16,514 16,789
Diluted 16,366 17,137 16,514 19,179
ACTION PERFORMANCE COMPANIES INC.
Summary Consolidated Balance Sheets
(In thousands)
September 30,
2000 1999
Current Assets:
Cash $ 22,758 $ 58,523
Accounts receivable, net 27,264 44,988
Inventories 27,654 45,310
Prepaid royalties 7,262 7,271
Estimated income tax receivable 14,000 -
Deferred tax asset 7,328 -
Other assets 1,942 4,852
Total Current Assets 108,208 160,944
Property and equipment, net 48,204 56,162
Goodwill and other intangibles, net 94,894 111,634
Other assets 4,611 8,906
$ 255,917 $ 337,646
Current Liabilities:
Accounts payable $ 16,510 $ 20,127
Accrued royalties 9,998 13,519
Accrued expenses 14,164 14,889
Deferred tax liability - 1,899
Current portion of long term-debt 1,324 2,713
Total Current Liabilities 41,996 53,147
Long-term liabilities 107,484 109,208
Minority interest in subsidiaries 2,111 2,300
Shareholders' Equity 104,326 172,991
$ 255,917 $ 337,646