Exhibit 99.1
Action Performance Reports Second Quarter 2005 Results
PHOENIX—(BUSINESS WIRE)—May 9, 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 second quarter ended March 31, 2005. For the quarter, the company reported revenues of $75.3 million compared with $83.6 million in the prior year, a decrease of 9.9%. The decrease in revenue in the quarter resulted primarily from lower sales of die-cast products to mass merchandisers and, to a lesser extent, lower apparel sales to wholesale channels.
The Company reported a net loss of $2.9 million, or $0.16 per share, compared with net income of $1.3 million, or $0.07 in second quarter of 2004.
For the six months ended March 31, 2005, the company reported revenues of $151.4 million, compared with revenues of $154.8 million in the prior year, a decrease of 2.2%. The company reported a net loss of $6.5 million, or $0.35 per share, compared with a net loss of $0.4 million, or $0.02 per share in the prior year.
Fred Wagenhals, Chief Executive Officer, commented “We continue to refine the restructuring plan that was announced last quarter. Improving our distribution model is the cornerstone of that plan. After an exhaustive review of our options, management concluded that Action’s existing Concord, North Carolina facility provided the best combination of cost, access to the customer, control of product to the retail market and ease of implementation. We believe that having Action employees talk directly to our retail customers to understand their needs will help us restore growth to the collector die-cast market.”
Mr. Wagenhals stated further “Although there is much work ahead, we have implemented a number of initiatives that we believe will improve long term profitability at Action Performance. During the quarter, we consolidated the Jeff Hamilton apparel business, reduced headcount and improved our accounts receivable. Overall, I am pleased with the progress that the Company is making and with the commitment that the employees of Action Performance have made to the turnaround plan.”
Business Outlook
While Action Performance refrains from giving specific revenue and earnings guidance, the Company expects fiscal third quarter 2005 sales to be sequentially higher compared to the second quarter, but below year ago levels. Further, it expects wholesale sales of die cast to be down year-on-year reflecting uncertainties associated with the termination of its distributor relationships as the Company transitions to a direct distribution model.
Dividend Policy
The Board of Directors has decided not to declare the quarterly dividend of $0.05 per share. The Board believes that it is prudent to take this action coincident with the restructuring initiatives in place. The evaluation of paying a dividend will be made on a quarter-by-quarter basis.
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/.
This press release contains forward-looking statements, including statements regarding the benefits of our restructuring plan and sales guidance for the remainder of fiscal 2005. 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, under the caption “Business-Risk Factors” and in Exhibit 99.1 to the Company’s Form 10-Q dated December 31, 2004, each of which is on file with the U.S. Securities and Exchange Commission.
CONTACT: Action
Performance, Inc.
David Riddiford
Chief Financial Officer
602/337-3999
or
Integrated Corporate Relations, Inc.
Hayley Kissel
ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Balance Sheets
March 31, 2005 and September 30, 2004
(in thousands)
| March 31, | September 30, | |||||||
| 2005 | 2004 | |||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 6,414 | $ | 12,580 | ||||
Accounts receivable, net |
39,444 | 51,769 | ||||||
Inventories |
56,095 | 56,947 | ||||||
Prepaid royalties |
6,126 | 2,834 | ||||||
Taxes receivable |
3,908 | 2,126 | ||||||
Deferred income taxes |
8,772 | 8,766 | ||||||
Prepaid expenses and other |
4,159 | 5,920 | ||||||
Total current assets |
124,918 | 140,942 | ||||||
Long-Term Assets: |
||||||||
Property and equipment, net |
63,072 | 64,878 | ||||||
Goodwill |
89,399 | 88,653 | ||||||
Licenses and other intangibles, net |
58,549 | 56,614 | ||||||
Other |
2,885 | 3,196 | ||||||
Total long-term assets |
213,905 | 213,341 | ||||||
| $ | 338,823 | $ | 354,283 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 17,455 | $ | 28,778 | ||||
Accrued royalties |
9,981 | 10,702 | ||||||
Accrued expenses |
6,476 | 8,757 | ||||||
Taxes payable |
2,277 | 1,742 | ||||||
Line-of-credit
and term loans |
13,343 | — | ||||||
Current portion of long-term debt |
395 | 4,009 | ||||||
Total current liabilities |
49,927 | 53,988 | ||||||
Long-Term Liabilities: |
||||||||
Long-term debt |
4,279 | 11,882 | ||||||
Deferred income taxes |
26,402 | 24,979 | ||||||
Other |
260 | 298 | ||||||
Total long-term liabilities |
30,941 | 37,159 | ||||||
Commitments and Contingencies |
||||||||
Minority Interests |
2,301 | 2,509 | ||||||
Shareholders’ Equity |
255,654 | 260,627 | ||||||
| $ | 338,823 | $ | 354,283 | |||||
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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
Three and Six Months Ended March 31, 2005 and 2004
(in thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Net sales |
$ | 75,326 | $ | 83,596 | $ | 151,380 | $ | 154,803 | ||||||||
Cost of sales |
55,098 | 59,434 | 114,700 | 113,685 | ||||||||||||
Gross profit |
20,228 | 24,162 | 36,680 | 41,118 | ||||||||||||
Operating expenses: |
||||||||||||||||
Selling, general, and administrative |
20,652 | 20,377 | 43,553 | 40,283 | ||||||||||||
Amortization of licenses and other intangibles |
879 | 943 | 1,757 | 1,884 | ||||||||||||
Total operating expenses |
21,531 | 21,320 | 45,310 | 42,167 | ||||||||||||
Income (loss) from operations |
(1,303 | ) | 2,842 | (8,630 | ) | (1,049 | ) | |||||||||
Interest expense |
(396 | ) | (471 | ) | (697 | ) | (902 | ) | ||||||||
Foreign exchange gains (losses) |
(871 | ) | (256 | ) | 908 | 1,153 | ||||||||||
Earnings from joint venture |
109 | 198 | 402 | 762 | ||||||||||||
Other income |
56 | 46 | 81 | 112 | ||||||||||||
Other expense |
(456 | ) | (288 | ) | (725 | ) | (746 | ) | ||||||||
Total other
income (expense) |
(1,558 | ) | (771 | ) | (31 | ) | 379 | |||||||||
Income (loss) before income taxes |
(2,861 | ) | 2,071 | (8,661 | ) | (670 | ) | |||||||||
Income taxes |
54 | 783 | (2,208 | ) | (253 | ) | ||||||||||
Net income (loss) |
(2,915 | ) | 1,288 | (6,453 | ) | (417 | ) | |||||||||
Other comprehensive income (loss) |
(1,587 | ) | (591 | ) | 831 | 814 | ||||||||||
Comprehensive income (loss) |
$ | (4,502 | ) | $ | 697 | $ | (5,622 | ) | $ | 397 | ||||||
Earnings (Loss) Per Common Share: |
||||||||||||||||
Basic |
$ | (0.16 | ) | $ | 0.07 | $ | (0.35 | ) | $ | (0.02 | ) | |||||
Diluted |
$ | (0.16 | ) | $ | 0.07 | $ | (0.35 | ) | $ | (0.02 | ) | |||||
Weighted Average Shares Outstanding: |
||||||||||||||||
Basic |
18,568 | 18,327 | 18,487 | 18,304 | ||||||||||||
Diluted |
18,568 | 18,602 | 18,487 | 18,304 | ||||||||||||
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
Six Months Ended March 31, 2005 and 2004
(in thousands)
| 2005 | 2004 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net loss |
$ | (6,453 | ) | $ | (417 | ) | ||
Adjustments to reconcile net loss to cash provided by operations- |
||||||||
Depreciation and amortization |
16,258 | 14,713 | ||||||
Provision for doubtful accounts |
2,897 | 572 | ||||||
Other |
457 | 40 | ||||||
Changes in assets and liabilities, net of businesses acquired and disposed-
|
||||||||
Accounts receivable |
9,518 | 16,779 | ||||||
Accounts payable and accrued expenses |
(9,525 | ) | (6,276 | ) | ||||
Taxes payable and receivable, net |
(1,306 | ) | (4,934 | ) | ||||
Inventories |
1,003 | (12,144 | ) | |||||
Prepaid royalties and accrued royalties |
(4,029 | ) | (3,320 | ) | ||||
Other |
1,140 | (2,080 | ) | |||||
Net cash provided by operating activities |
9,960 | 2,933 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Capital expenditures, net |
(14,698 | ) | (13,443 | ) | ||||
Acquisition of businesses and intangibles, net of costs |
(2,051 | ) | (2,439 | ) | ||||
Other |
450 | 503 | ||||||
Net cash used in investing activities |
(16,299 | ) | (15,379 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Net borrowings (repayments) under line-of-credit |
4,091 | — | ||||||
Long-term debt repayments |
(2,287 | ) | (403 | ) | ||||
Dividends paid — common shareholders |
(1,842 | ) | (1,829 | ) | ||||
Dividends paid — minority interest shareholders |
(847 | ) | (1,149 | ) | ||||
Stock option and other exercise proceeds |
918 | 145 | ||||||
Net cash provided by (used in) financing activities |
33 | (3,236 | ) | |||||
Effect of exchange rates on cash and cash equivalents |
140 | 180 | ||||||
Net change in cash and cash equivalents |
(6,166 | ) | (15,502 | ) | ||||
Cash and cash equivalents, beginning of period |
12,580 | 49,462 | ||||||
Cash and cash equivalents, end of period |
$ | 6,414 | $ | 33,960 | ||||
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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Schedule of Net Sales by Channel
Three and Six Months Ended March 31, 2005 and 2004
(in thousands)
| Three Months Ended | Six Months Ended | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Domestic Die-cast: |
||||||||||||||||
Wholesale distribution and promotion |
$ | 11,846 | $ | 12,098 | $ | 24,154 | $ | 23,929 | ||||||||
Wholesale to mass-merchant retailers |
7,829 | 13,659 | 25,367 | 31,495 | ||||||||||||
Retail through collector’s catalog club |
4,098 | 4,145 | 7,869 | 8,049 | ||||||||||||
Total domestic die-cast |
23,773 | 29,902 | 57,390 | 63,473 | ||||||||||||
Foreign Die-cast — wholesale
distribution and promotion |
9,767 | 9,000 | 20,100 | 18,437 | ||||||||||||
Total Die-cast |
33,540 | 38,902 | 77,490 | 81,910 | ||||||||||||
Domestic Apparel and Memorabilia: |
||||||||||||||||
Wholesale distribution and promotion |
17,721 | 21,430 | 31,390 | 34,683 | ||||||||||||
Wholesale to mass-merchant retailers |
12,737 | 11,427 | 21,759 | 19,717 | ||||||||||||
Total apparel and memorabilia |
30,458 | 32,857 | 53,149 | 54,400 | ||||||||||||
Retail at Trackside |
10,364 | 10,826 | 18,983 | 16,922 | ||||||||||||
Royalties and Other |
964 | 1,011 | 1,758 | 1,571 | ||||||||||||
Net Sales |
$ | 75,326 | $ | 83,596 | $ | 151,380 | $ | 154,803 | ||||||||
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