Action Performance Announces Third Quarter Results.Business Editors PHOENIX--(BUSINESS WIRE)--July 31, 2000 Action Performance Companies, Inc. (Nasdaq:ACTN ACTN Action ACTN Acetone ): 3Q Summary: -- Sales of $76.1 million vs. $101.5 million in year-ago quarter -- Restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other special charges of $29.2 million and losses from goracing.com operations of $2.0 million -- EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become , before special charges and goracing.com losses, of $9.4 million vs. $26.7 million in year-ago quarter -- Net loss of $23.6 million, or $1.44 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share vs. net income of $11.6 million, or $0.64 per diluted share in year-ago quarter -- Executive management changes to refocus Verb 1. refocus - focus once again; The physicist refocused the light beam" focus - cause to converge on or toward a central point; "Focus the light on this image" 2. on core business activities -- Expects to return to profitability in 2001 Action Performance Companies, Inc. (Nasdaq:ACTN) today reported financial results for its third fiscal quarter ended June 30, 2000 and changes in its executive management team. Operating results for the quarter reflect both cash and non-cash restructuring and other special charges of approximately $29.2 million related to the previously announced decision to exit goracing.com, as well as certain inventory and other asset write-downs based on changes in market conditions and management's refocus on core business activities. Quarterly Results Action Performance Companies sales for the third quarter ended June 30, 2000 were $76.1 million, down 25% from $101.5 million recorded in the same quarter of the prior fiscal year. The company's adjusted pre-tax income, which excludes approximately $29.2 million in restructuring and other special charges and approximately $2.0 million in remaining operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for goracing.com, was $0.8 million for the most recent quarter. In the third fiscal quarter of the prior year, the company recorded pre-tax income of $19.3 million. The company's net loss for this year's third fiscal quarter was $23.6 million, or $1.44 per diluted share, compared to net income of $11.6 million, or $0.64 per diluted share for the third quarter of the prior year. Adjusted net income, excluding these charges and remaining goracing.com operating losses, was $0.6 million, or $0.04 per diluted share for the fiscal 2000 quarter. Fiscal 1999 third quarter results did not include any significant restructuring or other special charges. Commenting on the quarter, Fred Wagenhals, chairman, president and chief executive officer, said, "We are disappointed by the quarter's results. In that regard, we are instituting measures to bring overhead more in line with current sales levels and are accelerating a number of marketing programs designed to drive sales growth. We anticipate that these measures will strengthen us during this temporary trough Trough The stage of the economy's business cycle that marks the end of a period of declining business activity and the transition to expansion. in the overall growth in the motorsport industry, which we believe will pick up next year when two new networks begin covering racing events and promotional activity increases." Mr. Wagenhals further noted, "We anticipate a return to profitability in 2001 based in part on the savings in overhead we expect to achieve, our new contract with Evernham Motorsports for apparel, die-cast and souvenirs as Dodge enters NASCAR NASCAR (National Association for Stock Car Auto Racing), organization that sanctions American stock-car races, est. 1948. It held its first race in Daytona Beach, Fla. after many years of absence, and incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. sales related to the two new events in Kansas City Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). and Chicago." Restructuring and Other Special Charges In its press release of May 24, 2000, the company announced plans to exit its Internet business, goracing.com. In the fiscal third quarter of 2000, the company recorded restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of approximately $15.9 million related to the write-off of goodwill, endorsements, sponsorships and employee severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and termination costs. Fiscal third quarter results also include approximately $2.0 million of goracing.com's operating losses. The company does not expect to record any significant goracing.com operating losses in the future. In addition to the goracing.com restructuring charge, Action Performance has recorded a special charge totaling approximately $13.3 million. This special charge is compOsed of a $2.6 million inventory write-down associated with a strategic decision to destroy certain die-cast products in an effort to preserve the after-market value of die-cast collectibles; a $2.6 million write-down for excess apparel inventories primarily based on anticipated sponsorship and livery LIVERY, Engl. law. 1. The delivery of possession of lands to those tenants who hold of the king in capite, or knight's service. 2. Livery was also the name of a writ which lay for the heir of age, to obtain the possession of seisin of his lands at the king's hands. F. N. B. 155. 3. changes that will render the merchandise obsolete OBSOLETE. This term is applied to those laws which have lost their efficacy, without being repealed, 2. A positive statute, unrepealed, can never be repealed by non-user alone. 4 Yeates, Rep. 181; Id. 215; 1 Browne's Rep. Appx. 28; 13 Serg. & Rawle, 447. ; a $3.0 million provision for vendor discounts that the company will not receive due to lower than anticipated volumes; approximately $1.3 million related to the write-off of certain long-term contracts; a $1.0 million write-off of an equity investment in a motorsport company that filed for bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most during the quarter; and $2.8 million in other asset impairments. In determining the amounts of these restructuring and other special charges, the company has made estimates based on currently available information. Future events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or could impact these estimates and result in additional write-offs. Executive Management Changes Action Performance's Board and management outlined measures to address the company's operating performance and future growth. These actions include management changes, planned consolidation of operations and cost reductions, and the development of several marketing initiatives designed to increase revenues and enhance the company's operating performance. David Husband, currently the company's chief financial officer, will play an increasing role in the company's day-to-day operations. The company plans to appoint Mr. Husband as Action Performance's chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . The company will recruit a new chief financial officer. In addition, John Bickford Sr., a vice president and current board member, will serve as the interim general manager of the company's U.S. apparel operations. As part of this move, Tod J. Wagenhals, currently executive vice president and a member of the board of directors, is withdrawing from the company to pursue other interests. "Management and the Board are developing a plan to significantly restructure the company's operations with the objective of restoring Action Performance to profitable growth," Mr. Husband said. "As part of this plan, we are taking a hard look at measures required to improve logistics and other process improvements in all of our operations. Overall, I believe there are a multitude of top line and cost-saving synergies that we can create through the further integration of the various acquisitions we have completed over the past several years." Nine Month Results Action Performance Companies revenues for the nine months ended June 30, 2000 were $198.9 million, down 21% from $252.0 million recorded in the same period of the prior fiscal year. Including the $31.5 million in restructuring and other special charges taken in the first and third quarters of fiscal 2000, the company's net loss was $29.8 million in this nine-month period, or $1.80 per diluted share. In the same period of the prior year, the company recorded net income of $23.0 million, or $1.33 per diluted share. Fiscal 1999 nine month results did not include any significant restructuring or other special charges. Investor Conference Call Action Performance will hold an investor conference call to discuss the company's third quarter results at 11:00 am EST EST electroshock therapy. EST abbr. electroshock therapy on August 1, 2000. Investors will have the opportunity to listen to the conference call over the Internet through Vcall at http://www.vcall.com. To listen to the live call, please go to the web site at least fifteen minutes early to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. , and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call at http://www.vcall.com. About Action Performance Action Performance Companies, Inc. is the leader in the design, marketing, promotion and distribution of licensed motorsports merchandise. Its products include a broad range of motorsports-related die-cast replica Earlier document exchange software from Farallon Communications, Inc. that converted a Windows or Mac document into a proprietary viewing format. The viewer could be distributed separately or embedded within the document itself, turning it into a single-document viewer. collectibles; apparel; souvenirs and other memorabilia mem·o·ra·bil·i·a pl.n. 1. Objects valued for their connection with historical events, culture, or entertainment: posters, publicity photographs, and other movie memorabilia. 2. . The company markets and distributes products through a variety of channels, including the Racing Collectibles Club of America (RCCA RCCA Root Cause and Corrective Action (to prevent the recurrence of a defect by eliminating its cause) RCCA Rural Community College Alliance RCCA Roller Coaster Corporation of America RCCA Rod Cluster Control Assembly ); trackside track·side n. The area near a track, especially a racetrack. at racing events; mass retail department stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. and a worldwide network of wholesale distributors and specialty dealers. Certain statements contained in this document may be deemed to be forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. under federal securities laws, and Action Performance Companies, Inc. intends that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements include, but are not limited to: (i) the commercial potential of Action Performance's collectible collectible An asset of limited supply that is sought for a variety of reasons including, it is hoped, an increase in value. Stamps, antiques, coins, and works of art are among the many things usually classified as collectibles. products; (ii) the company's ability to restore its growth and profitability; (iii) the company's ability to decrease its overhead expenses as a percentage of sales; (iv) the company's ability to accelerate its promotional programs and to generate increased sales from this effort; (v) expectations that the motorsport industry will revitalize re·vi·tal·ize tr.v. re·vi·tal·ized, re·vi·tal·iz·ing, re·vi·tal·iz·es To impart new life or vigor to: plans to revitalize inner-city neighborhoods; tried to revitalize a flagging economy. during the next year; (vi) the company's ability to successfully consolidate its operations; (vii) the company's success in executing its contract with Evernham Motorsports; (viii) the company's ability to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the two new events in Kansas City and Chicago; (ix) the company's expectations that it will not incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. any additional significant goracing.com operating losses in the future; and (x) the company's ability to create top-line and cost-savings synergies from the further integration of the various acquisitions it has completed over the past year. Action Performance Companies cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained herein. Such factors and risks are detailed from time to time in Action Performance Companies' SEC reports, including Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. , Current Reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. and Annual Reports on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. .
ACTION PERFORMANCE COMPANIES, INC.
Summary Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Nine Months Ended
June 30, June 30,
2000 1999 2000 1999
Sales:
Collectibles $ 42,445 $ 63,807 $ 109,781 $ 156,113
Apparel and souvenirs 31,970 35,434 83,744 89,863
Other 1,640 2,283 5,380 6,042
Net sales 76,055 101,524 198,905 252,018
Cost of sales
(includes $10,676 of
special charges)(a) 61,993 60,687 146,783 155,452
Gross profit 14,062 40,837 52,122 96,566
Gross profit percentage 18.5% 40.2% 26.2% 38.3%
Operating expenses:
(includes $17,458
of special charges)(a)
Selling, general and
administrative 26,711 18,277 67,159 48,977
Other non-recurring
charges 5,806 -- 8,056 --
Amortization of
goodwill and other
intangibles 9,216 1,603 13,443 4,561
Total operating
expenses 41,733 19,880 88,658 53,538
Income (loss)
from operations (27,671) 20,957 (36,536) 43,028
Other income (expense):
(includes $1,034 of
special charges)(a)
Minority interest
in earnings (62) (613) (613) (1,257)
Interest and
other, net (2,647) (1,060) (4,453) (3,441)
Total other
expense, net (2,709) (1,673) (5,066) (4,698)
Income (loss) before
provision (benefit)
for income taxes (30,380) 19,284 (41,602) 38,330
Provision for
(benefit from)
income taxes (6,809) 7,714 (11,765) 15,332
Net income (loss) $ (23,571) $ 11,570 $ (29,837) $ 22,998
Net income (loss)
per common share:
Basic ($1.44) $0.68 ($1.80) $1.37
Diluted ($1.44) $0.64 ($1.80) $1.33
Weighted average
shares outstanding:
Basic 16,358 16,895 16,563 16,743
Diluted 16,358 19,297 16,563 19,165
(a) Special charges refer to the 3 months ended 6/30/00, in thousands
ACTION PERFORMANCE COMPANIES, INC.
Summary Consolidated Balance Sheets
(In thousands)
June 30, September 30,
2000 1999
Current Assets:
Cash $ 21,910 $ 58,523
Accounts receivable, net 43,066 44,988
Inventories 37,222 45,310
Prepaid royalties 12,770 7,271
Other assets 12,348 2,953
Total Current Assets 127,316 159,045
Property and equipment, net 56,257 56,162
Goodwill and other intangibles, net 100,561 111,634
Other assets 6,364 8,906
$290,498 $335,747
Current Liabilities:
Accounts payable $ 20,667 $ 20,127
Accrued royalties 10,171 13,519
Accrued expenses and other 13,095 14,889
Current portion of long term-debt 1,442 2,713
Total Current Liabilities 45,375 51,248
Long-term debt 108,557 109,208
Minority interest in subsidiaries 2,017 2,300
Shareholders' Equity 134,549 172,991
$290,498 $335,747
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