Action Performance Reports Fourth-Quarter and Year-End Results; Quarterly Revenues, Net Income Hit Record Levels.

Business Editors and Sports Writers 

PHOENIX--(BUSINESS WIRE)--Nov. 7, 2001

Action Performance Companies, Inc. (Company) (Nasdaq:ACTN), the leader in the design, marketing, promotion, and distribution of licensed motorsports merchandise, today reported financial results for the fourth-quarter and twelve-month period ended Sept. 30, 2001, including record quarterly revenues and net income, the highest for any quarter in the Company's history.

Fourth-quarter revenues rose 93% to $108.4 million from $56.3 million in the comparable quarter of last year and exceeded the Company's previous quarterly record of $103.1 million in the third quarter of fiscal 1999. Revenue growth was reported from all distribution channels, on a year-over-year basis, including record diecast sales for fourth quarter, 2001, of $61.2 million, compared to $31.2 million in the fourth quarter of 2000.

Net income before extraordinary gains was $12.3 million, or 67 cents per share, which exceeded the previous record quarterly net of 64 cents per share in the third quarter of 1999. Including the extraordinary gain of $.9 million arising from debt repurchases during the quarter, net income was $13.1 million, or 71 cents per share, compared to last year's fourth-quarter losses of $28.3 million, which included restructuring charges of $32.2 million. EBITDA for fourth quarter, 2001, was $24.8 million.

Revenues for fiscal 2001 rose 25% to $323.4 million from $258.1 million in fiscal 2000. Strong sales growth was achieved in diecast, apparel and trackside distribution channels, including record diecast sales totaling $164.4 million for the year, compared to $139.7 million in fiscal 2000.

Net income before extraordinary gains for fiscal 2001 was $23.0 million, or $1.37 per share. Including the extraordinary gain of $8.9 million arising from debt repurchases during the fiscal year, income for 2001 was $31.9 million, or $1.90 per share, compared to losses in fiscal 2000 of $58.1 million, or $3.52 per share, which included $64.8 million of restructuring charges. EBITDA for fiscal 2001 was $66.7 million.

The Company's United Kingdom (UK) operation accounted for $3.1 million in revenues for the fourth quarter but produced pre-tax losses of $1.7 million due to operating losses of $1 million and $.7 million of additional losses related to the earlier-announced closure of that operation. However, this effect on pre-tax income for the quarter was substantially offset by a tax benefit of $1.5 million, which also reduced the Company's effective tax rate for fiscal 2001 from 35% to 31%. For fiscal 2001, pre-tax operating losses from the UK operation, excluding closure costs, totaled approximately $2 million on $11.1 million in revenues.

From fiscal-year end, 2000, to fiscal-year end, 2001, working capital increased $25.8 million to $90.3 million, total outstanding debt fell $51.7 million to $57.6 million, and shareholders' equity increased $57.1 million to $159.8 million.

The Company also reported that, effective October 1, 2001, it intends to adopt FASB 142, which changes the accounting for intangibles. This new accounting standard establishes new guidelines for determining the accounting value of goodwill and other intangibles and eliminates the amortization requirement for goodwill. The Company is currently evaluating its intangibles in accordance with FASB 142 and expects to complete its evaluation in the second quarter of fiscal 2002. The Company does not anticipate making adjustments, but should any adjustments be necessary, they would be recorded as a "cumulative effect of a change in accounting principles." As of October 1, 2001, the Company discontinued amortizing goodwill, which otherwise would have amounted to approximately $1.0 million per quarter.

Fred Wagenhals, Action Performance chairman, president and CEO, remarked: "Closing this fiscal year on such a strong note confirms the success of the Company's turnaround strategy. Furthermore, the continuing growth of NASCAR popularity and increasing coverage of racing events is providing a solid base for Action's continued growth. Our promotions and specials, including the highly successful Looney Tunes program, have established a strong track record and, therefore, will serve as the basis for future programs. We also anticipate further expansion of our marketing efforts and licensing agreements with the top participants in NASCAR and other major racing venues."

"The last 12 months was a test of our refocused core strategy and ability to execute according to our business plan, and we feel we succeeded, and even surpassed our basic objectives," Wagenhals added. "The restructuring and related challenges were difficult, but we successfully overcame them with the support of our employees, directors and shareholders."

Action Performance CFO David Martin commented: "Action's dramatic financial turnaround reflects the efficiency of the Company's business model, including control over product margins and costs and expenses at all levels.

"From a top-line view, the increasing popularity of NASCAR in 2001 allowed us to leverage our valuable licensing portfolio, broaden distribution channels, and continue to improve our operating results," Martin said. "Continuing strong product demand is reflected in inventories that are $6.9 million lower than last year, and by Action's distributors reporting minimal inventories on hand.

"Cash balances of $64.5 million now exceed outstanding debt, and we believe our ability to generate $66.7 million of EBITDA for fiscal 2001 confirms the quality of reported earnings," added Martin. "Finally, we believe that, as a result of the $51.7 million reduction of debt and $57.1 million increase in shareholders' equity, our capital structure is sound and will enable us to maximize our continuing business opportunities."

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 diecast car replica collectibles, apparel, souvenirs, and other memorabilia. The Company markets and distributes products through a variety of channels, including the Racing Collectables Club of America (RCCA), goracing.com, trackside at racing events, mass retail department stores, and a worldwide network of wholesale distributors and specialty dealers.

This news release contains forward-looking statements regarding future growth, marketing, licensing, business opportunities, FASB 142 evaluation, and the effect of the new accounting standards on intangibles. The Company's actual results could differ materially from those set forth in the forward-looking statements. Factors that might cause such differences include, among others, competitive pressures, acceptance of the Company's products and services in the marketplace, the success of new marketing programs, and other risks discussed in the Company's Form 10-K dated Sept. 30, 2000, on file with the U.S. Securities and Exchange Commission.

                  ACTION PERFORMANCE COMPANIES, INC.
            Condensed Consolidated Statements of Operations
       Three and Twelve Months Ended September 30, 2001 and 2000
                 (in thousands, except per share data)

                           Three Months             Twelve Months
                         2001        2000         2001         2000

Sales                 $ 108,415   $   56,280    $ 323,352   $ 258,105
Cost of sales            69,153       60,328      208,375     209,102
Gross profit             39,262       (4,048)     114,977      49,003
Operating expenses:
 Selling, general and
  administrative         20,006       31,798       69,456     107,942
 Amortization of
  intangibles             1,410        3,310        6,157      16,753
    Total operating
     expenses            21,416       35,108       75,613     124,695
Income (loss) from
 operations              17,846      (39,156)      39,364     (75,692)

Other income (expense):
 Minority interests        (695)         (15)      (1,974)       (298)
 Interest and other, net    350       (1,080)         934        (398)
 Interest expense          (947)        (826)      (5,102)     (6,291)
    Total other expense,
     net                 (1,292)      (1,921)      (6,142)     (6,987)
Income (loss) before
 income taxes and
 extraordinary gain      16,554      (41,077)      33,222     (82,679)

Income tax provision
 (benefit)                4,288      (12,827)      10,205     (24,592)

Income (loss) before
 extraordinary gain      12,266      (28,250)      23,017     (58,087)
Extraordinary gain,
 net of tax                 851           -         8,919          -
Net income (loss)    $   13,117   $  (28,250)  $   31,936  $  (58,087)

EARNINGS PER COMMON SHARE:
Income (Loss) Before
 Extraordinary Gain
  Basic                $   0.72   $    (1.73)   $    1.41  $    (3.52)
  Diluted              $   0.67   $    (1.73)   $    1.37  $    (3.52)

Extraordinary Gain-
  Basic                $   0.05   $       -     $    0.54   $      -
  Diluted              $   0.04   $       -     $    0.53   $      -

Net Income (Loss) -
  Basic                $   0.77   $    (1.73)   $    1.95   $   (3.52)
  Diluted              $   0.71   $    (1.73)   $    1.90   $   (3.52)

Weighted Average
 Shares Outstanding-
  Basic                  17,057       16,366       16,373      16,515
  Diluted                19,059       16,366       16,849      16,515



                  ACTION PERFORMANCE COMPANIES, INC.
                 Condensed Consolidated Balance Sheets
                      September 30, 2001 and 2000
                            (in thousands)

                                                   2001          2000
                                                  ------        ------
Current Assets:
 Cash                                            $ 64,514     $ 22,758
 Accounts receivable, net                          40,725       22,901
 Inventories                                       25,120       32,017
 Prepaid royalties                                 10,222        7,262
 Estimated income tax receivable                       -        14,000
 Deferred taxes                                     2,672        5,905
 Prepaid expenses and other                         1,392        1,942
    Total Current Assets                          144,645      106,785

Property and Equipment, net                        40,356       46,066

Goodwill and Other Intangibles, net                89,722       94,894

Deferred Taxes                                         -         1,423

Other Assets                                        4,230        6,749

                                                 $278,953     $255,917

Current Liabilities:
 Accounts payable                                $ 18,371     $ 16,510
 Accrued royalties                                 16,792        9,998
 Accrued expenses and other                        18,755       14,250
 Current portion of long-term debt                    424        1,503
    Total Current Liabilities                      54,342       42,261


Deferred Taxes                                      3,968           -

4 3/4% Convertible Subordinated Notes              54,933      100,000

Other Long-Term Debt and Liabilities                2,805        8,340

Minority Interests                                  3,079        2,598

Shareholders' Equity                              159,826      102,718

                                                 $278,953     $255,917


                  ACTION PERFORMANCE COMPANIES, INC.
            Condensed Consolidated Statements of Cash Flows
                Years Ended September 30, 2001 and 2000
                            (in thousands)

                                                  2001         2000
                                                  ----         ----

CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net Income                                      $ 31,936    $ (58,087)
 Adjustments to reconcile net income
  to net cash from (used in) operations-
   Deferred income taxes                           8,560       (9,227)
   Depreciation and amortization                  28,367       25,111
   Gain on extinguishment of debt                (14,219)          -
   Non-cash restructuring and special charges         -        58,988
   Other                                           2,696          141
 Changes in assets and liabilities,
  net of businesses acquired or disposed-
   Accounts receivable                           (19,348)      10,920
   Income tax receivable                          17,819      (14,000)
   Inventories                                     5,935         (561)
   Prepaid royalties and accrued royalties         4,109      (11,273)
   Other                                           5,389      (10,453)
       Net cash from (used in) operations         71,244       (8,441)

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
   Capital expenditures, net                     (16,519)     (15,399)
   Acquisition of Winner's Circle, net of costs   (1,335)          -
   (Acquisition) disposition of
     Fantasy Sports, net of costs                  3,847       (3,063)
       Net cash used in investing activities     (14,007)     (18,462)

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
   Long-term debt repayments, net                (17,112)      (2,015)
   Treasury stock repurchases                     (1,488)      (6,520)
   Stock option exercises                          2,995          240
       Net cash used in financing activities     (15,605)      (8,295)
 Effect of exchange rate changes on
  cash and cash equivalents                          124         (567)
 Net change in cash and cash equivalents          41,756      (35,765)
 Cash and cash equivalents,
  beginning of period                             22,758       58,523
 Cash and cash equivalents, end of period    $    64,514  $    22,758