Action Performance Reports First Quarter 2005 Results;
Announces New Distribution Model
PHOENIX—(BUSINESS WIRE) February 8 , 2005— Action Performance Companies, Inc. (NYSE:ATN - News), the leader in the design, marketing, promotion, and distribution of licensed motorsports merchandise, today announced financial results for the fiscal first quarter ended December 31, 2004. For the quarter, the company reported revenues of $76.1 million compared with $71.2 million in the prior year, an increase of 6.8%. Revenue growth in the quarter reflected improvements in trackside retail sales resulting from an additional race, as well as improved consumer demand at the racetracks. Apparel sales to wholesale and mass merchants also contributed to the growth in revenues.
The Company reported a net loss of $3.5 million, or $0.19 per share, compared with a net loss of $1.7 million, or $0.09 in first quarter of 2004. Included in the net loss for the first quarter of 2005 is an after-tax charge of $1.5 million for an allowance for uncollectible distributor receivables, an after-tax loss of $1.3 million from the Jeff Hamilton subsidiary and an after-tax charge of $0.3 million in severance expense. The net loss in the comparable period included after-tax charges of $1.0 million.
After a thorough review of Action’s business that was initiated in the fiscal fourth quarter of 2004, the Company concluded that it is necessary to restructure its channels of distribution for its domestic wholesale die-cast business. To that end, the Company intends to change from a network of distributors that it currently uses and distribute directly to retail dealers utilizing one or two fulfillment partners. While the process will take 8-12 months to fully complete, we believe it will afford the Company greater margin opportunities and visibility into its business.
Fred Wagenhals, Chief Executive Officer stated, “We are committed to restoring improved profitability at Action Performance. Streamlining our distribution is critical to executing successfully on the Company’s turnaround plans. The sale of our products direct to retail should enable Action to produce a more focused product line, increase our distribution and better control inventory and costs resulting in improved profitability and return on investment. ”
About Action Performance
Action Performance Companies Inc. (NYSE:ATN — News) 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, department stores, and specialty dealers. Additional information about Action Performance can be found at http://www.action-performance.com/.
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This press release contains forward-looking statements regarding expectations for revenues, net income, 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, general economic conditions, and other risks discussed in the Company’s Form 10-K, dated September 30, 2004, on file with the U.S. Securities and Exchange Commission.
| CONTACT: | Action Performance, Inc. David Riddiford Chief Financial Officer 602/337-3999 |
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or |
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Integrated Corporate Relations, Inc. Hayley Kissel 203/682-8223 |
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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Balance Sheets
December 31, 2004 and September 30, 2004
(in thousands)
| December 31, | September 30, | |||||||
| 2004 | 2004 | |||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 12,795 | $ | 12,580 | ||||
Accounts receivable, net |
43,738 | 51,769 | ||||||
Inventories |
53,407 | 56,947 | ||||||
Prepaid royalties |
3,678 | 2,834 | ||||||
Taxes receivable |
3,174 | 2,126 | ||||||
Deferred income taxes |
8,784 | 8,766 | ||||||
Prepaid expenses and other |
4,443 | 5,920 | ||||||
Total Current Assets |
130,019 | 140,942 | ||||||
Long-Term Assets: |
||||||||
Property and equipment, net |
67,571 | 64,878 | ||||||
Goodwill |
90,536 | 88,653 | ||||||
Licenses and other intangibles, net |
59,213 | 56,614 | ||||||
Other |
3,229 | 3,196 | ||||||
Total Long-Term Assets |
220,549 | 213,341 | ||||||
| $ | 350,568 | $ | 354,283 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 27,091 | $ | 28,778 | ||||
Accrued royalties |
9,081 | 10,702 | ||||||
Accrued expenses |
7,485 | 8,757 | ||||||
Taxes payable |
2,612 | 1,742 | ||||||
Current portion of long-term debt |
4,041 | 4,009 | ||||||
Total Current Liabilities |
50,310 | 53,988 | ||||||
Long-Term Liabilities: |
||||||||
Long-term debt |
10,934 | 11,882 | ||||||
Deferred income taxes and other |
27,015 | 25,277 | ||||||
Total Long-Term Liabilities |
37,949 | 37,159 | ||||||
Commitments and Contingencies |
||||||||
Minority Interests |
2,349 | 2,509 | ||||||
Shareholders’ Equity |
259,960 | 260,627 | ||||||
| $ | 350,568 | $ | 354,283 | |||||
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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
Three Months Ended December 31, 2004 and 2003
(in thousands, except per share data)
| Three Months Ended | ||||||||
| 2004 | 2003 | |||||||
Net sales |
$ | 76,054 | $ | 71,207 | ||||
Cost of sales |
59,602 | 54,251 | ||||||
Gross profit |
16,452 | 16,956 | ||||||
Operating expenses: |
||||||||
Selling, general, and administrative |
22,901 | 19,906 | ||||||
Amortization of licenses and other intangibles |
878 | 941 | ||||||
Total operating expenses |
23,779 | 20,847 | ||||||
Loss from operations |
(7,327 | ) | (3,891 | ) | ||||
Interest expense |
(301 | ) | (431 | ) | ||||
Foreign exchange gains |
1,652 | 829 | ||||||
Earnings from joint venture |
293 | 564 | ||||||
Other income |
143 | 621 | ||||||
Other expense |
(260 | ) | (433 | ) | ||||
Loss before income taxes |
(5,800 | ) | (2,741 | ) | ||||
Income taxes |
(2,262 | ) | (1,036 | ) | ||||
Net loss |
(3,538 | ) | (1,705 | ) | ||||
Other comprehensive income |
2,418 | 1,405 | ||||||
Comprehensive loss |
$ | (1,120 | ) | $ | (300 | ) | ||
Loss Per Common Share: |
||||||||
Basic |
$ | (0.19 | ) | $ | (0.09 | ) | ||
Diluted |
$ | (0.19 | ) | $ | (0.09 | ) | ||
Weighted Average Shares Outstanding: |
||||||||
Basic |
18,408 | 18,281 | ||||||
Diluted |
18,408 | 18,281 | ||||||
Certain prior period amounts have been reclassified to conform to the current year presentation.
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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended December 31, 2004 and 2003
(in thousands)
| 2004 | 2003 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net loss |
$ | (3,538 | ) | $ | (1,705 | ) | ||
Adjustments to reconcile net loss to cash provided by operations- |
||||||||
Depreciation and amortization |
7,690 | 7,566 | ||||||
Provision
for doubtful accounts |
2,821 | 204 | ||||||
Other |
195 | (57 | ) | |||||
Changes in assets and liabilities, net of businesses acquired and disposed- |
||||||||
Accounts receivable |
5,427 | 16,007 | ||||||
Accounts payable and accrued expenses |
(4,534 | ) | (3,835 | ) | ||||
Taxes payable and receivable, net |
(405 | ) | (4,264 | ) | ||||
Inventories |
3,910 | (8,081 | ) | |||||
Prepaid royalties and accrued royalties |
(2,528 | ) | (6,841 | ) | ||||
Other |
254 | (2,723 | ) | |||||
Net cash provided by (used in) operating activities |
9,292 | (3,729 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Capital expenditures, net |
(7,114 | ) | (7,703 | ) | ||||
Acquisition of businesses and intangibles, net of costs |
(430 | ) | (251 | ) | ||||
Other |
- | (47 | ) | |||||
Net cash used in investing activities |
(7,544 | ) | (8,001 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Long-term debt repayments |
(1,340 | ) | (320 | ) | ||||
Dividends
paid - common shareholders |
(919 | ) | (915 | ) | ||||
Dividends
paid - minority interest shareholders |
(420 | ) | (1,003 | ) | ||||
Stock option and other exercise proceeds |
712 | 100 | ||||||
Net cash used in financing activities |
(1,967 | ) | (2,138 | ) | ||||
Effect of exchange rates on cash and cash equivalents |
434 | 157 | ||||||
Net change in cash and cash equivalents |
215 | (13,711 | ) | |||||
Cash and cash equivalents, beginning of period |
12,580 | 49,462 | ||||||
Cash and cash equivalents, end of period |
$ | 12,795 | $ | 35,751 | ||||
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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Schedule of Net Sales by Channel
Three Months Ended December 31, 2004 and 2003
(in thousands)
| Three Months Ended | ||||||||
| 2004 | 2003 | |||||||
Domestic Die-cast: |
||||||||
Wholesale distribution and promotion |
$ | 12,308 | $ | 11,831 | ||||
Wholesale to mass-merchant retailers |
17,538 | 17,836 | ||||||
Retail through collector’s catalog club |
3,771 | 3,904 | ||||||
Foreign
die-cast - wholesale distribution and
promotion |
10,333 | 9,437 | ||||||
Total die-cast |
43,950 | 43,008 | ||||||
Domestic Apparel and Memorabilia: |
||||||||
Wholesale distribution and promotion |
13,669 | 13,253 | ||||||
Wholesale to mass-merchant retailers |
9,022 | 8,290 | ||||||
Total apparel and memorabilia |
22,691 | 21,543 | ||||||
Retail at Trackside |
8,619 | 6,096 | ||||||
Royalties and Other |
794 | 560 | ||||||
Net Sales |
$ | 76,054 | $ | 71,207 | ||||
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