Action Performance Companies 8-K Action Performance Reports Third Quarter 2003 Results

EXHIBIT 99

	FOR MORE INFORMATION CONTACT:
	R. David Martin
	Chief Financial Officer
	Action Performance Companies
	602-337-3636
	or
	Jeff Schoenborn
	Burson-Marsteller
	212-614-4792
	jeffrey_schoenborn@nyc.bm.com

Action Performance Reports Third Quarter 2003 Results

     PHOENIX – July 23, 2003 – 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 third quarter and nine months ended June 30, 2003.

     Revenues were $87.6 million in the third quarter of 2003, compared to $112.1 million in the same period last year. Net income was $6.3 million, or $0.35 per share, for the three months ended June 30, 2003, compared to $12.5 million, or $0.66 per share, in the third quarter of fiscal 2002.

     For the nine-month period ended June 30, 2003, sales were $264.5 million compared with $296.4 million for the same period the prior year. Net income was $21.5 million, or $1.18 per share, for the nine months ended June 30, 2003, compared to $31.9 million, or $1.72 per share, for the same period last year.

     The company’s top-line results for the quarter were impacted by continued weakness in the nation’s retail sector and by the timing of the Texas race, the trackside revenue of which were recorded in the second quarter. As previously indicated, die-cast sales to mass retailers declined to $0.6 million in the third quarter of 2003, compared with $9.3 million in the prior year period. The company is also seeing very cautious ordering patterns from die-cast distributors, as hobby and specialty store retailers manage their inventory risk. Under Action Performance’s own conservative inventory management policies, die-cast products sold to mass retailers and distributors are manufactured only upon receipt of confirmed orders. Also, as previously indicated, results for the quarter were negatively impacted by a decline in the “special paint scheme programs” produced in this quarter compared to the same quarter a year ago. This decline resulted in reduced revenues and gross margins.

     “Action’s business model, which generated substantial cash and solid profits in the face of this tough economy, allowed us to continue to invest in the business and take important steps to further strengthen the company during the quarter,” Action Chairman and Chief Executive Officer Fred Wagenhals explained. “We are addressing issues that we can control,” Wagenhals continued. “As a result of recent discussions, we are confident that mass retail die-cast orders will resume in the fourth quarter and substantially increase in the first quarter of fiscal 2004. In addition, we are completing the consolidation of our marketing function in Phoenix and, in September, we will have a new information technology system in place to support the coordination and completion of ‘special paint scheme programs’”.

     “We have been careful not to produce die-cast product in excess of demand, thereby maintaining our solid profitability and a strong balance sheet in spite of an adverse economic climate,” stated Chief Financial Officer David Martin. “During the quarter, we repurchased $9 million of convertible notes, reducing future interest expense. Shareholders equity increased to $250.2 million or $13.99 per share.”

     The company also made planned capital expenditures totaling $6.5 million during the third quarter, investing in die-cast tooling, facility expansions at Action’s German subsidiary, and new information technology systems. Capital expenditures for the nine months ended June 30, 2003 amounted to $26.9 million, and are expected to total approximately $30 million for fiscal 2003.

     Action’s June 30, 2003 cash balance was $60.6 million, in spite of the above noted debt retirement and capital expenditures during the third quarter. Working capital, as measured by the current ratio, improved to 3.8 times at June 30, 2003, from 3.0 times at September 30, 2002.

     Days sales outstanding were 52 days at June 30, 2003, compared to 51 days at September 30, 2002. DSO would have been only 49 days, had one large, past-due receivable been paid as expected in June. This receivable will be paid during July and management expects this account to remain current in the future.

     At June 30, 2003, inventories increased $2.2 million over amounts at March 31, 2003, $4.9 million over amounts at September 30, 2002, and $14.3 million over amounts at June 30, 2002. However, die-cast inventories declined $0.3 million from amounts at March 31, 2003, declined $1.5 million from amounts at September 30, 2002, and increased $1.2 million from amounts at June 30, 2002. Apparel and other inventories increased in each period due to companies acquired subsequent to June 30, 2002, seasonal fluctuations, and delayed mass retail shipments.

     Gross margin was 35.5% for the third quarter of 2003, compared to 39.0% in the same period last year and 35.2% in the second quarter of 2003. The year over year decline in margin was attributable to lower volume of “special paint scheme program” die-cast sales and a program to accelerate the disposition of slow moving inventory. Selling, general and administrative expenses reflect continued strong cost controls and approximated amounts from the prior year in spite of $1.1 million of incremental SG&A from businesses acquired in the fourth quarter of 2002.

     EBITDA was $17.3 million in the third quarter of 2003, compared to $27.0 million in the same period last year. EBITDA was $55.7 million for the first nine months compared to $71.9 million in the prior year. The company supplements its consolidated financial statements under generally accepted accounting principles (GAAP) with the presentation of EBITDA, a non-GAAP financial measure. Action considers 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.

Guidance for Fourth Quarter Ending September 30, 2003

     For the fourth quarter ending September 30, 2003, management expects that reported revenues will range from $100 million to $115 million, while EPS will range from $0.52 to $0.65. Martin commented that, “we are cautious about any improvement in the economy over the next quarter. However, trackside sales are up year over year for the three races since July 1, 2003, compared to a year over year decline of 10.8% through June 30, 2003.” Management will further comment on quarter expectations during the conference call.

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.

Forward-looking Statements

     This press release contains forward-looking statements regarding expectations for revenues, EBITDA, net income, cash flow and capital and other funding needs, growth strategy, 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, and other risks discussed in the Company’s Form 10-K, dated September 30, 2002, on file with the U.S. Securities and Exchange Commission.

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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Balance Sheets
June 30, 2003 and September 30, 2002
(in thousands)

			June 30,		September 30,
			2003		2002
ASSETS
Current Assets:
	Cash and cash equivalents		$	60,559	$	69,585
	Accounts receivable, net			50,129		61,313
	Inventories			38,390		33,467
	Prepaid royalties			7,564		6,938
	Deferred taxes			3,272		3,155
	Prepaid expenses and other			5,866		2,397
		Total Current Assets		165,780		176,855
Property and Equipment, net				60,220		46,378
Goodwill				87,214		84,514
Licenses and Other Intangibles, net				22,368		24,000
Other Assets				4,212		6,169
			$	339,794	$	337,916
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
	Accounts payable		$	21,095	$	28,958
	Accrued royalties			10,766		15,146
	Accrued expenses			6,318		10,545
	Income taxes payable			4,913		4,265
	Current portion of long-term debt			529		423
		Total Current Liabilities		43,621		59,337
Long-Term Liabilities:
	Long-term debt			34,486		40,360
	Deferred taxes and other			8,451		5,696
		Total Long-Term Liabilities		42,937		46,056
Commitments and Contingencies
Minority Interests				3,026		3,135
Shareholders’ Equity				250,210		229,388
			$	339,794	$	337,916

ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income
Three and Nine Months Ended June 30, 2003 and 2002
(in thousands, except per share data)

				Three Months Ended						Nine Months Ended
				2003			2002			2003			2002
Net sales				$	87,617		$	112,085		$	264,472		$	296,406
Cost of sales					56,558			68,347			170,840			181,960
Gross profit					31,059			43,738			93,632			114,446
Operating expenses:
	Selling, general and administrative				20,402			20,225			57,563			56,326
	Amortization of licenses and other intangibles				840			679			2,575			1,766
			Total operating expenses		21,242			20,904			60,138			58,092
Income from operations					9,817			22,834			33,494			56,354
Interest expense					(539	)		(666	)		(1,728	)		(2,372	)
Other income (expense), net					804			(1,631	)		2,629			(1,767	)
Income before income taxes					10,082			20,537			34,395			52,215
Income taxes					3,771			7,993			12,864			20,280
Net income					6,311			12,544			21,531			31,935
	Other comprehensive income				1,047			3,814			2,021			2,941
	Comprehensive income			$	7,358		$	16,358		$	23,552		$	34,876
Earnings Per Common Share:
		Basic		$	0.35		$	0.70		$	1.21		$	1.83
		Diluted		$	0.35		$	0.66		$	1.18		$	1.72
Weighted Average Shares Outstanding:
		Basic			17,868			17,801			17,835			17,493
		Diluted			18,291			19,388			18,228			19,251

Amounts for 2002 have been adjusted to reflect adoption of SFAS No.145 effective October 1, 2002. Prior to adoption, gains and losses on extinguishment of debt were reflected as extraordinary items. Gain and losses on extinguishment of debt are now included in other income (expense).

ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Nine Months Ended June 30, 2003 and 2002
(in thousands)

			Nine Months Ended
			2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income		$	21,531		$	31,935
	Adjustments to reconcile net income to cash provided by operations-
		Depreciation and amortization		19,593			17,346
		Stock option tax benefits		594			3,610
		Gain on extinguishment of debt		(34	)		1,361
		Other		2,985			3,362
	Changes in assets and liabilities, net-
		Accounts receivable, net		11,696			(9,068	)
		Accounts payable and accrued expenses		(12,870	)		(3,168	)
		Income taxes payable		620			(5,226	)
		Inventories		(4,443	)		1,328
		Prepaid royalties and accrued royalties		(5,397	)		(1,629	)
		Other		(5,932	)		(1,399	)
		Net cash provided by operating activities		28,343			38,452
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures, net			(26,854	)		(18,011	)
	Other			(688	)		(6,359	)
		Net cash used in investing activities		(27,542	)		(24,370	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Long-term debt borrowings – German mortgage			3,001			—
	Long-term debt repayments			(9,355	)		(7,384	)
	Common stock purchases for treasury			(2,024	)		—
	Dividends paid — common shareholders			(1,965	)		—
	Dividends paid — minority interest shareholders			(878	)		(1,140	)
	Stock option exercise proceeds			665			6,150
		Net cash used in financing activities		(10,556	)		(2,374	)
Effect of exchange rates on cash and cash equivalents				729			343
Net change in cash and cash equivalents				(9,026	)		12,051
Cash and cash equivalents, beginning of period				69,585			64,514
Cash and cash equivalents, end of period			$	60,559		$	76,565

ACTION PERFORMANCE COMPANIES, INC.
Unaudited Reconciliation of EBITDA to GAAP Reporting
Three and Nine Months Ended June 30, 2003 and 2002
(in thousands)

			Three Months Ended				Nine Months Ended
			2003		2002		2003		2002
Income Before Income Taxes			$	10,082	$	20,537	$	34,395	$	52,215
Interest Expense				539		666		1,728		2,372
Depreciation and Amortization:
	Depreciation — cost of sales			4,478		3,470		12,725		10,975
	Depreciation — operating expenses			1,333		1,608		4,293		4,605
	Amortization of licenses and other intangibles			840		679		2,575		1,766
		Total depreciation and amortization		6,651		5,757		19,593		17,346
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)			$	17,272	$	26,960	$	55,716	$	71,933

Amounts for 2002 have been adjusted to reflect adoption of SFAS No.145 effective October 1, 2002. Prior to adoption, gains and losses on extinguishment of debt were reflected as extraordinary items. Gains and losses on extinguishment of debt are now included in other income (expense).

ACTION PERFORMANCE COMPANIES, INC.
Unaudited Schedule of Net Sales by Channel
Three and Nine Months Ended June 30, 2003 and 2002
(in thousands)

		Three Months Ended				Nine Months Ended
		2003		2002		2003		2002
Die-cast:
	Wholesale distribution and promotion -
	Domestic	$	31,405	$	40,192	$	76,738	$	115,391
	Foreign		8,208		6,777		25,509		21,590
	Wholesale to mass-merchant retailers		643		9,287		19,790		22,568
	Retail through Collector’s Catalogue Club		8,277		7,723		18,861		20,330
	Total die-cast		48,533		63,979		140,898		179,879
Apparel and Other Memorabilia:
	Wholesale distribution and promotion (1)		19,892		18,931		58,344		49,214
	Retail at trackside		14,556		19,301		34,983		39,222
	Wholesale to mass-merchant retailers		4,093		8,928		28,133		25,491
	Total apparel and other memorabilia		38,541		47,160		121,460		113,927
Royalties and Other			543		946		2,114		2,600
Net Sales		$	87,617	$	112,085	$	264,472	$	296,406

(1) Apparel and Other Memorabilia — Wholesale Distribution and Promotion net sales for the three months ended June 30, 2003, and nine months ended June 30, 2003, include $3,888 and $14,212, respectively, from subsidiaries acquired after June 30, 2002.