UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 2, 2005
     ACTION PERFORMANCE COMPANIES, INC.     
(Exact Name of Registrant as Specified in its Charter)
         
Arizona   0-21630   86-0704792
         
(State or Other   (Commission File Number)   (IRS Employer
Jurisdiction of Incorporation)       Identification No.)
     
1480 South Hohokam Drive, Tempe, Arizona 85281
               (Address of Principal Executive Office) (Zip Code)               
Registrant’s telephone number, including area code: (602) 337-3700
     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

 

Item 2.01   Completion of Acquisition of Disposition of Assets.
     During the quarter ended June 30, 2005, Action Performance Companies, Inc. (Action), decided to divest of its McArthur Towel & Sports business and decided to discontinue the Jeff Hamilton apparel and Castaway collectibles businesses. On July 28, 2005, the board of directors of Action ratified a restructuring plan that provides for Action to discontinue its McArthur Towel & Sports, Jeff Hamilton apparel and Castaway collectibles businesses. On August 2, 2005, Action publicly announced this plan. Action sold substantially all of the assets of the McArthur Towel & Sports business in the fourth quarter of fiscal 2005 (as announced in a Form 8-K filed on September 7, 2005). Action expects that most of the inventory relating to the Jeff Hamilton and Castaway businesses will be sold by the end of the first quarter of fiscal 2006.
Item 9.01.   Financial Statements and Exhibits
b) Pro Forma Financial Information
The following unaudited pro forma financial statements give effect to the discontinuance of the McArthur Towel & Sports, Jeff Hamilton apparel and Castaway collectible businesses as if it occurred on March 31, 2005 with respect to the unaudited condensed pro forma consolidated balance sheet and on October 1, 2001 with respect to the unaudited condensed pro forma consolidated statements of operations.
The unaudited pro forma consolidated financial statements presented below are based on the assumptions and adjustments described in the accompanying notes and do not reflect any adjustments for non-recurring items or changes in operating strategies arising as a result of the disposition. The unaudited pro forma consolidated statements of operations are presented for illustrative purposes and do not purport to represent what results of operations would have been if the events described above had occurred as of the dates indicated or what such results would be for any future periods. The unaudited pro forma consolidated financial statements, and the accompanying notes, should be read in conjunction with the company’s historical consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the fiscal year ended as of September 30, 2004 and Quarterly Report on Form 10-Q as of March 31, 2005.

 

 

ATION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Pro Forma Consolidated Balance Sheet
March 31, 2005
(in thousands)
                                 
    March 31, 2005  
    As     Pro Forma Adjustments     Pro  
    Reported     Hamilton (a)     Other (b)     Forma  
ASSETS
                                
Current Assets:
                                
Cash and cash equivalents
   $ 6,414     $ —     $ —     $ 6,414  
Accounts receivable, net
     39,444       (953 )     (1,388 )     37,103  
Inventories
     56,095       (1,807 )     (4,237 )     50,051  
Prepaid royalties
     6,126       (53 )     (33 )     6,040  
Taxes receivable
     3,908       (1,104 )     (108 )     2,696  
Deferred income taxes
     8,772       (1,605 )     (154 )     7,013  
Prepaid expenses and other
     4,159       (96 )     (160 )     3,903  
     
Total current assets
     124,918       (5,618 )     (6,080 )     113,220  
     
Long-Term Assets:
                                
Property and equipment, net
     63,072       —       (96 )     62,976  
Goodwill
     89,399       —       (1,889 )     87,510  
Licenses and other intangibles, net
     58,549       (4,283 )     (21 )     54,245  
Other
     2,885       —       —       2,885  
     
Total long-term assets
     213,905       (4,283 )     (2,006 )     207,616  
     
 
   $ 338,823     $ (9,901 )   $ (8,086 )   $ 320,836  
     
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                
Current Liabilities:
                                
Accounts payable
   $ 17,455     $ (73 )   $ (581 )   $ 16,801  
Accrued royalties
     9,981       (463 )     (111 )     9,407  
Accrued expenses
     6,476       (22 )     (244 )     6,210  
Taxes payable
     2,277       —       —       2,277  
Line-of-credit and term loans
     13,343       —       —       13,343  
Current portion of long-term debt
     395       —       —       395  
     
Total current liabilities
     49,927       (558 )     (936 )     48,433  
     
Long-Term Liabilities:
                                
Long-term debt
     4,279       —       —       4,279  
Deferred income taxes
     26,402       —       —       26,402  
Other
     260       —       —       260  
     
Total long-term liabilities
     30,941       —       —       30,941  
     
Commitments and Contingencies
                                
Minority Interests
     2,301       —       51       2,352  
Shareholders’ Equity:
                                
Common stock, $.01 par value, 62,500 shares authorized, 18,764 and 18,560 shares issued
     188       —       —       188  
Additional paid-in capital
     160,000       —       —       160,000  
Treasury stock, at cost, 190 and 190 shares
     (3,999 )     —       —       (3,999 )
Accumulated other comprehensive loss
     (625 )     —       —       (625 )
Retained earnings
     100,090       (9,343 )     (7,201 )     83,546  
     
Total shareholders’ equity
     255,654       (9,343 )     (7,201 )     239,110  
     
 
   $ 338,823     $ (9,901 )   $ (8,086 )   $ 320,836  
     

 

 

ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Pro Forma Consolidated Statements of Operations
Six Months Ended March 31, 2005
(in thousands, except per share data)
                                 
    Six Months Ended March 31, 2005
    As     Pro Forma Adjustments     Pro  
    Reported     Hamilton (c)     Other (d)     Forma  
Net sales
   $ 151,380     $ (2,022 )   $ (6,001 )   $ 143,357  
Cost of sales
     114,700       (4,365 )     (4,919 )     105,416  
 
                        
Gross profit
     36,680       2,343       (1,082 )     37,941  
 
                        
Operating expenses:
                                
Selling, general, and administrative
     43,553       (687 )     (1,414 )     41,452  
Amortization of licenses and other intangibles
     1,757       —       (9 )     1,748  
 
                        
Total operating expenses
     45,310       (687 )     (1,423 )     43,200  
 
                        
Operating loss
     (8,630 )     3,030       341       (5,259 )
 
                        
Interest expense
     (697 )     —       —       (697 )
Foreign exchange gains
     908       —       —       908  
Earnings from joint venture
     402       —       —       402  
Other income
     81       —       —       81  
Other expense
     (725 )     —       (44 )     (769 )
 
                        
Total other expense
     (31 )     —       (44 )     (75 )
 
                        
Loss from continuing operations before income taxes
     (8,661 )     3,030       297       (5,334 )
Income taxes
     (2,208 )     1,103       107       (998 )
 
                        
Loss from continuing operations
   $ (6,453 )   $ 1,927     $ 190     $ (4,336 )
 
                        
Loss per common share:
                                
Basic
   $ (0.35 )                   $ (0.23 )
Diluted
   $ (0.35 )                   $ (0.23 )
Weighted Average Shares Outstanding
                                
Basic
     18,487                       18,487  
Diluted
     18,487                       18,487  

 

 

ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Pro Forma Consolidated Statements of Operations
Year Ended September 30, 2004
(in thousands, except per share data)
                                 
    Year Ended September 30, 2004
    As     Pro Forma Adjustments     Pro  
    Reported     Hamilton (c)     Other (d)     Forma  
Net sales
   $ 344,330     $ (5,404 )   $ (14,242 )   $ 324,684  
Cost of sales
     247,959       (7,387 )     (10,993 )     229,579  
 
                        
Gross profit
     96,371       1,983       (3,249 )     95,105  
 
                        
Operating expenses:
                                
Selling, general, and administrative
     90,713       (3,490 )     (2,836 )     84,387  
Amortization of licenses and other intangibles
     3,802       (40 )     (143 )     3,619  
 
                        
Total operating expenses
     94,515       (3,530 )     (2,979 )     88,006  
 
                        
Operating income
     1,856       5,513       (270 )     7,099  
 
                        
Interest expense
     (1,832 )     —       60       (1,772 )
Loss on extinguishment of debt
     (322 )     —       —       (322 )
Foreign exchange gains
     1,545       —       —       1,545  
Earnings from joint venture
     1,370       —       —       1,370  
Other income
     204       —       —       204  
Other expense
     (1,215 )     —       (101 )     (1,316 )
 
                        
Total other expense
     (250 )     —       (41 )     (291 )
 
                        
Income from continuing operations before income taxes
     1,606       5,513       (311 )     6,808  
Income taxes
     1,066       1,930       (109 )     2,887  
 
                        
Income from continuing operations
   $ 540     $ 3,583     $ (202 )   $ 3,921  
 
                        
Earnings per common share:
                                
Basic
   $ 0.03                     $ 0.21  
Diluted
   $ 0.03                     $ 0.21  
Weighted Average Shares Outstanding
                                
Basic
     18,328                       18,328  
Diluted
     18,600                       18,600  

 

 

ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Pro Forma Consolidated Statements of Operations
Year Ended September 30, 2003
(in thousands, except per share data)
                                 
    Year Ended September 30, 2003
    As     Pro Forma Adjustments     Pro  
    Reported     Hamilton (c)     Other (d)     Forma  
Net sales
   $ 369,458     $ (13,144 )   $ (13,009 )   $ 343,305  
Cost of sales
     245,879       (8,084 )     (9,477 )     228,318  
 
                        
Gross profit
     123,579       (5,060 )     (3,532 )     114,987  
 
                        
Operating expenses:
                                
Selling, general, and administrative
     82,598       (3,327 )     (2,805 )     76,466  
Amortization of licenses and other intangibles
     3,416       (230 )     (269 )     2,917  
 
                        
Total operating expenses
     86,014       (3,557 )     (3,074 )     79,383  
 
                        
Operating income
     37,565       (1,503 )     (458 )     35,604  
 
                        
Interest expense
     (2,085 )     —       32       (2,053 )
Gain on extinguishment of debt
     34       —       —       34  
Foreign exchange gains
     3,574       —       —       3,574  
Earnings from joint venture
     62       —       —       62  
Other income
     485       —       (4 )     481  
Other expense
     (1,909 )     —       (33 )     (1,942 )
 
                        
Total other expense
     161       —       (5 )     156  
 
                        
Income from continuing operations before income taxes
     37,726       (1,503 )     (463 )     35,760  
Income taxes
     13,499       (526 )     (162 )     12,811  
 
                        
Income from continuing operations
   $ 24,227     $ (977 )   $ (301 )   $ 22,949  
 
                        
Earnings per common share:
                                
Basic
   $ 1.36                     $ 1.29  
Diluted
   $ 1.33                     $ 1.26  
Weighted Average Shares Outstanding
                                
Basic
     17,856                       17,856  
Diluted
     18,259                       18,259  

 

 

ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Pro Forma Consolidated Statements of Operations
Year Ended September 30, 2002
(in thousands, except per share data)
                                 
    Year Ended September 30, 2002
    As     Pro Forma Adjustments     Pro  
    Reported     Hamilton (c)     Other (d)     Forma  
Net sales
   $ 406,558     $ (834 )   $ (3,740 )   $ 401,984  
Cost of sales
     250,810       (464 )     (2,525 )     247,821  
 
                        
Gross profit
     155,748       (370 )     (1,215 )     154,163  
 
                        
Operating expenses:
                                
Selling, general, and administrative
     76,870       (187 )     (838 )     75,845  
Amortization of licenses and other intangibles
     2,797       —       (138 )     2,659  
 
                        
Total operating expenses
     79,667       (187 )     (976 )     78,504  
 
                        
Operating income
     76,081       (183 )     (239 )     75,659  
 
                        
Interest expense
     (3,029 )     —       —       (3,029 )
Loss on extinguishment of debt
     (1,361 )     —       —       (1,361 )
Foreign exchange gains
     1,500       —       —       1,500  
Earnings from joint venture
     —       —       —       —  
Other income
     773       —       —       773  
Other expense
     (1,411 )     —       (46 )     (1,457 )
 
                        
Total other expense
     (3,528 )     —       (46 )     (3,574 )
 
                        
Income from continuing operations before income taxes
     72,553       (183 )     (285 )     72,085  
Income taxes
     27,606       (64 )     (100 )     27,442  
 
                        
Income from continuing operations
   $ 44,947     $ (119 )   $ (185 )   $ 44,643  
 
                        
Earnings per common share:
                                
Basic
   $ 2.56                     $ 2.54  
Diluted
   $ 2.41                     $ 2.40  
Weighted Average Shares Outstanding
                                
Basic
     17,565                       17,565  
Diluted
     19,231                       19,231  

 

 

ACTION PERFORMANCE COMPANIES, INC.
Notes to the Unaudited Pro Forma Condensed Consolidated
Financial Statements
1. Basis of Pro Forma Presentation
These unaudited pro forma consolidated statements of operations for the six months ended March 31, 2005, and for the years ended September 30, 2004, 2003, and 2002, are based on the historical consolidated statements of operations, and give effect to the discontinuance of the McArthur Towel & Sports, Jeff Hamilton apparel, and Castaway collectible businesses as if it had occurred at the beginning of the earliest period presented. The unaudited pro forma consolidated balance sheet is based on the historical balance sheet as of March 31, 2005, and gives effect to the disposition transaction as if it had occurred on March 31, 2005.
These unaudited pro forma consolidated financial statements are based on the assumptions and adjustments described in the accompanying notes and do not reflect any adjustments for non-recurring items or changes in operating strategies arising as a result of the disposition. The unaudited pro forma consolidated statements of operations are presented for illustrative purposes and do not purport to represent what our results of operations actually would have been if the events described above had occurred as of the dates indicated or what such results would be for any future periods. The unaudited pro forma consolidated financial statements, and the accompanying notes, should be read in conjunction with the company’s historical consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the fiscal year ended as of September 30, 2004 and Quarterly Report on Form 10-Q for the period ended as of March 31, 2005.
2. Pro Forma Adjustments
Pro forma adjustments to the consolidated statements of operations and consolidated balance sheet are as follows:
  (a)   Removal of Jeff Hamilton-related assets and liabilities from reported amounts.
 
  (b)   Removal of McArthur Towel & Sports and Castaway collectible-related assets and liabilities from reported amounts.
 
  (c)   Removal of Jeff Hamilton-related income statement balances from reported amounts.
 
  (d)   Removal of McArthur Towel & Sports and Castaway collectible-related income statement balances from reported amounts.

 

 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
Date: October 10, 2005  Action Performance Companies, Inc.
 		  
  By:   /s/ David Riddiford    
    Title: Chief Financial Officer, Secretary   
    and Treasurer