EXHIBIT 99.1
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| | FOR MORE INFORMATION CONTACT: |
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| | David Riddiford Chief Financial Officer Action Performance Companies 602-337-3999 |
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| | or |
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| | Jeffrey Schoenborn |
| | Burson-Marsteller |
| | 212-614-4792 |
| | jeffrey_schoenborn@nyc.bm.com |
ACTION PERFORMANCE REPORTS FISCAL FOURTH QUARTER
AND FISCAL YEAR 2004 FINANCIAL RESULTS
PHOENIX — November 15, 2004 — 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 fourth quarter and fiscal year ended September 30, 2004.
Action also announced the company’s board elected one of its independent members, Herbert M. Baum, to serve as lead director.
The company reported revenues of $97.4 million for the fourth quarter, a decline of $8.5 million, or 8.0%, from revenues of $105.8 million for the same period last year. Revenues for the fourth quarter included $12.0 million from Funline, which was acquired in September of 2003 and contributed $0.5 million in the prior year quarter. Excluding the impact of the Funline acquisition, revenues were down $20.0 million, or 19.0% from the same period last year.
For the quarter, the company had a net loss of $2.9 million, or $0.16 per share (fully diluted), which was down from income of $2.7 million, or $0.15 per share (fully diluted) for the fourth quarter of 2003.
Included in the results for the fourth quarter of 2004 was a $4.0 million (pre-tax) expense for a reserve for distributor accounts receivable, a $2.2 million (pre-tax) expense to write inventory and accounts receivable for the Jeff Hamilton business down to estimated net realizable value, and an $0.8 million (pre-tax) expense for settlement of litigation with New Hampshire International Speedway. Action looks forward to continuing its relationship with the New Hampshire track during the 2005 race season.
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For the full 2004 fiscal year, revenues were $344.3 million, a decline of $25.1 million, or 6.8%, from the 2003 fiscal year. Revenues for the year included $42.1 million from Funline, which was acquired in 2003 and contributed $0.5 million in that year. Excluding the impact of the Funline acquisition, revenues were down $66.8 million, or 18.1% from last year.
For 2004, the company had net income of $0.5 million, or $0.03 per share (fully diluted), which was down from $24.2 million, or $1.33 per share (fully diluted), for 2003.
“This ends what has been a challenging and disappointing year for Action Performance,” Chief Executive Officer Fred Wagenhals said. “At the same time, I believe that we recognize the problems we face, have the right team to address them, and have begun to make the changes necessary to bring Action back to the level of performance our shareholders deserve.”
Specifically, Wagenhals explained that the company needs to provide a more focused product line, and that product line needs to be delivered to the market in a manner that meets our consumers’ expectations. In addition, the company needs to further penetrate more traditional retail outlets. Action intends to provide more detailed turnaround plans later in the first half of fiscal 2005.
Wagenhals concluded, “Most importantly of all, in 2005 Action will be a profit focused company, determined to create value for our shareholders.”
Another measure to further strengthen the company and position it for turnaround was the board’s naming of a lead director, reflecting a growing corporate governance trend among U.S. public companies. Baum, who first became an Action director in 2000, was elected lead director by the company’s board during its regular November meeting. Baum is president and chief executive officer of The Dial Corporation, and is one of seven independent directors on Action’s 10-member board.
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, department stores, and specialty dealers. Additional information about Action Performance can be found at www.action-performance.com.
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This press release may contain forward-looking statements regarding the company’s expectations performance and prospects. 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.
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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Balance Sheets
September 30, 2004 and 2003
(in thousands)
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| | 2004
| | 2003
|
ASSETS | | | | | | | | |
Current Assets: | | | | | | | | |
Cash and cash equivalents | | $ | 12,580 | | | $ | 49,462 | |
Accounts receivable, net | | | 51,769 | | | | 69,890 | |
Inventories | | | 56,947 | | | | 43,232 | |
Prepaid royalties | | | 2,834 | | | | 4,470 | |
Taxes receivable | | | 2,126 | | | | — | |
Deferred income taxes | | | 8,766 | | | | 5,291 | |
Prepaid expenses and other | | | 5,920 | | | | 3,161 | |
| | | | | | | | |
Total Current Assets | | | 140,942 | | | | 175,506 | |
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Long-Term Assets: | | | | | | | | |
Property and equipment, net | | | 64,878 | | | | 62,951 | |
Goodwill | | | 88,653 | | | | 87,448 | |
Licenses and other intangibles, net | | | 56,614 | | | | 44,426 | |
Other | | | 3,196 | | | | 2,357 | |
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Total Long-Term Assets | | | 213,341 | | | | 197,182 | |
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| | $ | 354,283 | | | $ | 372,688 | |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
Current Liabilities: | | | | | | | | |
Accounts payable | | $ | 28,778 | | | $ | 36,734 | |
Accrued royalties | | | 10,702 | | | | 9,692 | |
Accrued expenses | | | 8,757 | | | | 11,764 | |
Taxes payable | | | 1,742 | | | | 3,156 | |
Current portion of long-term debt | | | 4,009 | | | | 567 | |
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Total Current Liabilities | | | 53,988 | | | | 61,913 | |
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Long-Term Liabilities: | | | | | | | | |
Long-term debt | | | 11,882 | | | | 34,425 | |
Deferred income taxes and other | | | 25,277 | | | | 11,816 | |
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Total Long-Term Liabilities | | | 37,159 | | | | 46,241 | |
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Commitments and Contingencies | | | | | | | | |
Minority Interests | | | 2,509 | | | | 2,941 | |
Shareholders’ Equity | | | 260,627 | | | | 261,593 | |
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| | $ | 354,283 | | | $ | 372,688 | |
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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 Operations and Comprehensive Income (Loss)
Three and Twelve Months Ended September 30, 2004 and 2003
(in thousands, except per share data)
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| | Three Months Ended
| | Twelve Months Ended
|
| | 2004
| | 2003
| | 2004
| | 2003
|
Net sales | | $ | 97,377 | | | $ | 105,843 | | | $ | 344,330 | | | $ | 369,458 | |
Cost of sales | | | 71,695 | | | | 75,039 | | | | 247,959 | | | | 245,879 | |
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Gross profit | | | 25,682 | | | | 30,804 | | | | 96,371 | | | | 123,579 | |
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Operating expenses: | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 28,747 | | | | 25,892 | | | | 90,713 | | | | 82,598 | |
Amortization of licenses and other intangibles | | | 928 | | | | 841 | | | | 3,802 | | | | 3,416 | |
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Total operating expenses | | | 29,675 | | | | 26,733 | | | | 94,515 | | | | 86,014 | |
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Income (loss) from operations | | | (3,993 | ) | | | 4,071 | | | | 1,856 | | | | 37,565 | |
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Interest expense | | | (462 | ) | | | (357 | ) | | | (1,832 | ) | | | (2,085 | ) |
Gain (loss) on extinguishment of debt | | | (322 | ) | | | — | | | | (322 | ) | | | 34 | |
Foreign currency gains | | | 588 | | | | 467 | | | | 1,545 | | | | 3,574 | |
Earnings from joint venture | | | 404 | | | | 62 | | | | 1,370 | | | | 62 | |
Other income | | | 89 | | | | 111 | | | | 204 | | | | 485 | |
Other expense | | | (261 | ) | | | (1,023 | ) | | | (1,215 | ) | | | (1,909 | ) |
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Income (loss) before income taxes | | | (3,957 | ) | | | 3,331 | | | | 1,606 | | | | 37,726 | |
Income taxes | | | (1,081 | ) | | | 635 | | | | 1,066 | | | | 13,499 | |
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Net income (loss) | | | (2,876 | ) | | | 2,696 | | | | 540 | | | | 24,227 | |
Other comprehensive income | | | 414 | | | | 97 | | | | 1,032 | | | | 2,118 | |
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Comprehensive income (loss) | | $ | (2,462 | ) | | $ | 2,793 | | | $ | 1,572 | | | $ | 26,345 | |
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Earnings (Loss) Per Common Share: | | | | | | | | | | | | | | | | |
Basic | | $ | (0.16 | ) | | $ | 0.15 | | | $ | 0.03 | | | $ | 1.36 | |
Diluted | | $ | (0.16 | ) | | $ | 0.15 | | | $ | 0.03 | | | $ | 1.33 | |
Weighted Average Shares Outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 18,366 | | | | 17,916 | | | | 18,328 | | | | 17,856 | |
Diluted | | | 18,366 | | | | 18,368 | | | | 18,600 | | | | 18,259 | |
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
Twelve Months Ended September 30, 2004 and 2003
(in thousands)
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| | 2004
| | 2003
|
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | |
Net income | | $ | 540 | | | $ | 24,227 | |
Adjustments to reconcile net income to cash provided by operations — | | | | | | | | |
Deferred income taxes | | | (885 | ) | | | 3,354 | |
Depreciation and amortization | | | 30,184 | | | | 26,153 | |
Stock option tax benefits | | | 142 | | | | 623 | |
Gain (loss) on extinguishment of debt | | | 322 | | | | (34 | ) |
Undistributed earnings from joint venture | | | (1,370 | ) | | | (62 | ) |
Other | | | 1,149 | | | | 982 | |
Changes in assets and liabilities, net of businesses acquired and disposed — | | | | | | | | |
Accounts receivable, net | | | 18,456 | | | | (1,865 | ) |
Accounts payable and accrued expenses | | | (9,469 | ) | | | (6,117 | ) |
Income taxes receivable and payable | | | (3,660 | ) | | | (1,851 | ) |
Inventories | | | (13,077 | ) | | | (363 | ) |
Prepaid royalties and accrued royalties | | | 2,539 | | | | (4,226 | ) |
Other | | | (5,058 | ) | | | (1,395 | ) |
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Net cash provided by operating activities | | | 19,813 | | | | 39,426 | |
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CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
Capital expenditures, net | | | (24,856 | ) | | | (33,121 | ) |
Acquisition of businesses | | | (8,142 | ) | | | (15,733 | ) |
Other | | | 615 | | | | — | |
| | | | | | | | |
Net cash used in investing activities | | | (32,383 | ) | | | (48,854 | ) |
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CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
Long-term debt borrowings | | | 11,700 | | | | 3,001 | |
Long-term debt repayments | | | (31,303 | ) | | | (9,429 | ) |
Common stock purchases for treasury | | | — | | | | (2,024 | ) |
Dividends paid — common shareholders | | | (3,663 | ) | | | (2,497 | ) |
Dividends paid — minority interest shareholders | | | (1,609 | ) | | | (1,256 | ) |
Stock option and other exercise proceeds | | | 330 | | | | 871 | |
| | | | | | | | |
Net cash used in financing activities | | | (24,545 | ) | | | (11,334 | ) |
| | | | | | | | |
Effect of exchange rates on cash and cash equivalents | | | 233 | | | | 639 | |
| | | | | | | | |
Net change in cash and cash equivalents | | | (36,882 | ) | | | (20,123 | ) |
Cash and cash equivalents, beginning of period | | | 49,462 | | | | 69,585 | |
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Cash and cash equivalents, end of period | | $ | 12,580 | | | $ | 49,462 | |
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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Schedule of Net Sales by Channel
Three and Twelve Months Ended September 30, 2004 and 2003
(in thousands)
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| | Three Months Ended
| | Twelve Months Ended
|
| | 2004
| | 2003
| | 2004
| | 2003
|
Domestic Die-cast: | | | | | | | | | | | | | | | | |
Wholesale distribution and promotion | | $ | 14,059 | | | $ | 25,494 | | | $ | 63,695 | | | $ | 102,003 | |
Wholesale to mass-merchant retailers | | | 18,262 | | | | 2,350 | | | | 59,146 | | | | 22,140 | |
Retail through collector’s catalog club | | | 5,735 | | | | 5,545 | | | | 19,485 | | | | 24,406 | |
Foreign die-cast — wholesale distribution and promotion | | | 9,768 | | | | 9,122 | | | | 36,903 | | | | 34,631 | |
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Total die-cast | | | 47,824 | | | | 42,511 | | | | 179,229 | | | | 183,180 | |
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Domestic Apparel and Memorabilia: | | | | | | | | | | | | | | | | |
Wholesale distribution and promotion | | | 15,670 | | | | 23,910 | | | | 68,818 | | | | 82,254 | |
Wholesale to mass-merchant retailers | | | 17,057 | | | | 21,082 | | | | 43,519 | | | | 48,587 | |
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Total apparel and memorabilia | | | 32,727 | | | | 44,992 | | | | 112,337 | | | | 130,841 | |
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Retail at Trackside | | | 16,311 | | | | 17,473 | | | | 49,928 | | | | 52,456 | |
Royalties and Other | | | 515 | | | | 867 | | | | 2,836 | | | | 2,981 | |
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Net Sales | | $ | 97,377 | | | $ | 105,843 | | | $ | 344,330 | | | $ | 369,458 | |
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Net Sales from Businesses Acquired in Fiscal 2003 | | $ | 12,000 | | | $ | 480 | | | $ | 42,140 | | | $ | 480 | |
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