Action Performance Reports First Quarter 2004 Results; Industry Continues To Be Impacted by Cautious Retail Environment; Action Secures Three New NASCAR Driver Contracts.

Business Editors

PHOENIX--(BUSINESS WIRE)--Feb. 2, 2004

Funline Unit Makes Strong Contribution in its First Quarter as an

Action Company

Action Performance Companies, Inc. (NYSE:ATN), the leader in the design, marketing, promotion, and distribution of licensed motorsports merchandise, today reported financial results for the fiscal first quarter.

The company reported revenues of $71.4 million for the quarter ended December 31, 2003, compared to $85.8 million during the same period last year. The company incurred a net loss for the fiscal first quarter of 2004 of $1.7 million, or $0.09 cents per share, compared to net income of $8.0 million, or $0.44 cents per share for the first three months of fiscal 2003.

Results for this quarter reflect a previously reported aggregate charge of $1.5 million, or $0.05 per share, for settlement of litigation with Dover International Speedway and the write-off of Pontiac NASCAR tooling. In addition, die-cast margins were adversely impacted by product cost issues related to smaller production runs and the ratable amortization of annual tooling depreciation in a low-revenue quarter. However, first quarter results benefited from apparel margins that have returned to historic levels, following a one-time reduction of apparel inventories in fourth quarter of fiscal 2003.

"Timing issues surrounding the finalization of sponsor relationships and promotional strategies, compounded by cautious orders by both wholesale distributors and mass retailers, will continue to impact revenues through the fiscal second quarter," Action Chief Executive Officer Fred Wagenhals said. "These factors led to reduced die-cast order quantities for individual programs and delayed our ability to produce and ship the product and will impact the second quarter of fiscal year 2004 as well."

Action also announced that it instituted a price increase for motorsports die-cast products to reflect increases in production and program costs. "We have tried to manage increased product costs arising from product enhancements and program cost increases. However, we now must offset continued increases in costs," Action Chief Financial Officer R. David Martin said.

At the same time, Action is strengthening its position in NASCAR-related product lines by securing two new exclusive driver licensing contracts with Brendan Gaughan and Ricky Craven. Brendan Gaughan will drive the new Kodak car owned by the Penske racing team. Ricky Craven drives the Tide car, which is one of NASCAR's most popular vehicles. In addition, Action obtained a non-exclusive license for Ward Burton, a seasoned Daytona 500 champion and popular driver.

The company reported strong first-quarter performance from its Funline Merchandise Co. acquisition and its Action-McFarlane NASCAR figurine joint venture. Funline contributed $13.2 million in revenue in this quarter and was solidly profitable. Action does not consolidate Action-McFarlane revenues, but recorded $564 thousand in joint venture income in this quarter.

"Funline is performing very well, primarily due to the continued strength of its West Coast Chopper product lines and the successful introduction of the new Muscle Machine and Muscle Tooner models," Martin said. "We expect that Funline will continue this robust momentum throughout 2004, which will also include the introduction of its Monster Garage product line."

Action reported distribution channel revenues at December 31, 2003 and 2002, in thousands:

                                              First           First
                                             Quarter         Quarter
                                               2003            2002

Domestic Die-cast:
  Wholesale distribution and promotion    $    11,885     $    20,980
  Wholesale to mass-merchant retailers         17,836          13,205
  Retail through collector's catalogue
   club                                         3,904           6,223
Foreign Die-Cast - wholesale distribution
 and promotion                                  9,437           9,152
                                          ------------    ------------
     Total die-cast                            43,062          49,560
                                          ------------    ------------

Domestic Apparel and Other Memorabilia:
  Wholesale distribution and promotion         13,253          16,619
  Wholesale to mass-merchant retailers          8,468          12,585
                                          ------------    ------------
     Total apparel and other memorabilia:      21,721          29,204
Retail at Trackside                             6,096           6,436
Royalties and Other                               560             599
                                          ------------    ------------

Net Sales
                                          $    71,439     $    85,799
                                          ============    ============
Net Sales from Business Acquired in Fiscal
 2003                                     $    13,190     $        --
                                          ============    ============

Action's December 31, 2003 cash balance fell to $35.8 million from $49.5 million at September 30, 2003, primarily due to a reduction in current liabilities of $15.7 million, a $9.2 million increase in inventories, and capital expenditures of $7.7 million. Working capital was $111.3 million at December 31, 2003, compared to $113.6 million at September 30, 2003.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter was $5.3 million compared to $19.6 million in the prior year's quarter. We supplement our consolidated financial statements under generally accepted accounting principles with the presentation of EBITDA, a non-GAAP financial measure. We consider EBITDA to be an important indicator of our operating margin. EBITDA should be considered an addition to, not a substitute for, the Company's other measures of financial performance reported in the consolidated financial statements in accordance with GAAP. A reconciliation of EBITDA to GAAP reporting is attached following the unaudited consolidated financial statements.

Receivables at December 31, 2003 were $54.0 million compared to $44.0 million at December 31, 2002 and 69.9 million at September 30, 2003. The entire net increase from 2002 was attributable to the addition of $10.1 million in Funline receivables. Receivables from all channels except Funline and Winner's Circle die-cast decreased from September 30, 2003 amounts. Wholesale die-cast receivables were comparable to amounts at December 31, 2002 in spite of a quarter revenue decrease due to the timing of 2003 shipments at the end of the quarter.

Inventories at December 31, 2003 increased $9.2 million over amounts at September 30, 2003. Of this increase, $3.8 million was attributable to Funline, which must build inventories each December in anticipation of annual January production shut downs for Chinese New Year. The remaining increase was primarily due to in-transit inventories, inventory for mass retail shipments delayed until 2004, and an increase in Jeff Hamilton Collection inventories.

Inventories were as follows, in thousands:

                                             Dec. 31,       Sept. 30,
                                               2003            2003
Die-Cast:
  Motorsports Related:
    United States                         $     7,045     $     5,031
    Germany                                     4,469           3,797
  Funline                                      12,324           8,496
                                          ------------    ------------
      Total Die-Cast                           23,838          17,324
                                          ------------    ------------

Apparel and Other:
  Motorsports Related                          19,912          19,240
  Other                                         8,715           6,668
                                          ------------    ------------
      Total Apparel and Other                  28,627          25,908
                                          ------------    ------------
      Total Inventories                   $    52,465     $    43,232
                                          ============    ============

Fiscal 2004 Guidance

Action left its fiscal 2004 revenue expectations unchanged at $400 million to $425 million, while lowering its 12-month guidance for fully diluted earnings per share to a range of $1.50 to $1.75. Management will reassess its 2004 forecasts each quarter, based on the success of the wholesale die-cast price increase, the realization of less-cautious ordering patterns for licensed NASCAR merchandise from distributors, and the continuation of a return to more normalized mass retail revenue levels.

About Action Performance

Action Performance Companies Inc. (NYSE:ATN) 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 and department stores, specialty dealers. Additional information about Action Performance can be found at www.action-performance.com.

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, 2003, on file with the U.S. Securities and Exchange Commission.

                  ACTION PERFORMANCE COMPANIES, INC.
            Unaudited Condensed Consolidated Balance Sheets
               December 31, 2003 and September 30, 2003
                            (in thousands)

                                            Dec. 31,       Sept. 30,
                                              2003            2003
                                          ------------    ------------

ASSETS
Current Assets:
   Cash and cash equivalents              $    35,751     $    49,462
   Accounts receivable, net                    54,015          69,890
   Inventories                                 52,465          43,232
   Prepaid royalties                            6,805           6,540
   Taxes receivable                             1,014               -
   Deferred income taxes                        5,295           5,291
   Prepaid expenses and other                   4,259           3,161
                                          ------------    ------------
       Total Current Assets                   159,604         177,576

Long-Term Assets
   Property and equipment, net                 65,583          62,951
   Goodwill                                    88,877          87,448
   Licenses and other intangibles, net         41,675          44,426
   Other                                        2,804           2,357
                                          ------------    ------------
       Total Long-Term Assets                 198,939         197,182
                                          ------------    ------------
                                          $   358,543     $   374,758
                                          ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                       $    34,687     $    36,734
   Accrued royalties                            5,186          11,762
   Accrued expenses                             8,062          11,764
   Taxes payable                                    -           3,156
   Current portion of long-term debt              328             567
                                          ------------    ------------
       Total Current Liabilities               48,263          63,983
                                          ------------    ------------
Long-Term Liabilities:
   Long-term debt                              34,715          34,425
   Deferred income taxes and other             12,094          11,816
                                          ------------    ------------
       Total Long-Term Liabilities             46,809          46,241
                                          ------------    ------------
Commitments and Contingencies
Minority Interests                              2,371           2,941
Shareholders' Equity                          261,100         261,593
                                          ------------    ------------
                                          $   358,543     $   374,758
                                          ============    ============

                  ACTION PERFORMANCE COMPANIES, INC.
     Unaudited Condensed Consolidated Statements of Operations and
                      Comprehensive Income (Loss)
             Three Months Ended December 31, 2003 and 2002
                 (in thousands, except per share data)

                                               2003            2002
                                          ------------    ------------
Net sales                                 $    71,439     $    85,799
Cost of sales                                  54,251          55,277
                                          ------------    ------------
Gross profit                                   17,188          30,522
                                          ------------    ------------
Operating expenses:
  Selling, general and administrative          20,138          17,362
  Amortization of licenses and other
   intangibles                                    941             900
                                          ------------    ------------
     Total operating expenses                  21,079          18,262
                                          ------------    ------------

Income (loss) from operations                  (3,891)         12,260

Interest expense                                 (431)           (579)
Foreign currency gains and losses, net            829           1,361
Earnings from joint venture                       564               -
Other income (expense), net                       188            (235)
                                          ------------    ------------

Income (loss) before income taxes              (2,741)         12,807
Income taxes                                   (1,036)          4,841
                                          ------------    ------------

Net income (loss)                              (1,705)          7,966

  Other comprehensive income                    1,405             783
                                          ------------    ------------
  Comprehensive income (loss)             $      (300)    $     8,749
                                          ============    ============

Earnings (Loss) Per Common Share:
  Basic                                   $     (0.09)    $      0.45
  Diluted                                 $     (0.09)    $      0.44

Weighted Average Shares Outstanding:
  Basic                                        18,281          17,791
  Diluted                                      18,281          19,003

                  ACTION PERFORMANCE COMPANIES, INC.
       Unaudited Condensed Consolidated Statements of Cash Flows
             Three Months Ended December 31, 2003 and 2002
                            (in thousands)

                                               2003            2002
                                          ------------    ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                       $    (1,705)    $     7,966
  Adjustments to reconcile net income to
   cash provided by (used in) operations-
     Depreciation and amortization              7,566           6,249
     Stock option tax benefits                     74             407
     Earnings from joint venture                 (564)              -
     Other                                        433             226
  Changes in assets and liabilities, net-
     Accounts receivable, net                  16,211          17,465
     Accounts payable and accrued expenses     (3,835)         (8,473)
     Income taxes payable                      (4,264)          3,833
     Inventories                               (8,081)            170
     Prepaid royalties and accrued
      royalties                                (6,841)         (4,358)
     Other                                     (2,723)         (2,267)
                                          ------------    ------------
        Net cash provided by (used in)
         operating activities                  (3,729)         21,218
                                          ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures, net                    (7,703)        (11,135)
  Other                                          (298)           (407)
                                          ------------    ------------
        Net cash used in investing
         activities                            (8,001)        (11,542)
                                          ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Long-term debt borrowings - German
   mortgage                                         -           3,001
  Long-term debt repayments                      (320)           (365)
  Common stock purchases for treasury               -          (2,024)
  Dividends paid - common shareholders           (915)           (532)
  Dividends paid - minority interest
   shareholders                                (1,003)           (349)
  Stock option and other exercise proceeds        100             251
                                          ------------    ------------
        Net cash used in financing
         activities                            (2,138)            (18)
                                          ------------    ------------
Effect of exchange rates on cash and cash
 equivalents                                      157             380
                                          ------------    ------------
Net change in cash and cash equivalents       (13,711)         10,038
Cash and cash equivalents, beginning of
 period                                        49,462          69,585
                                          ------------    ------------
Cash and cash equivalents, end of period  $    35,751     $    79,623
                                          ============    ============

                  ACTION PERFORMANCE COMPANIES, INC.
         Unaudited Reconciliation of EBITDA to GAAP Reporting
             Three Months Ended December 31, 2003 and 2002
                            (in thousands)

                                               2003            2002
                                          ------------    ------------

Income (Loss) Before Income Taxes         $    (2,741)    $    12,807
Interest Expense                                  431             579
Depreciation and Amortization:
  Depreciation - cost of sales                  5,325           3,840
  Depreciation - operating expenses             1,300           1,509
  Amortization of licenses and other
   intangibles                                    941             900
                                          ------------    ------------

     Total depreciation and amortization        7,566           6,249
                                          ------------    ------------
Earnings Before Interest, Taxes,
 Depreciation and Amortization (EBITDA)   $     5,256     $    19,635
                                          ============    ============

The company supplements its consolidated financial statements under generally accepted accounting principles (GAAP) with a presentation of EBITDA, a non-GAAP financial measure. Action Performance considers EBITDA to be an important indicator of its operating margin. EBITDA should be considered an addition to, not a substitute for, the company's other measures of financial performance reported in the consolidated financial statements in accordance with GAAP.