1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For fiscal year ended September 30, 1998
Commission file number 0-21630
--------------------
ACTION PERFORMANCE COMPANIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
ARIZONA 86-0704792
(State of Incorporation) (I.R.S. Employer Identification No.)
4707 E. Baseline Road
Phoenix, Arizona 85040
(602) 337-3700
(Address, including zip code, and telephone number, including area code, of
principal executive offices)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Common Stock held by nonaffiliates of the
registrant (14,495,355 shares) based on the closing price of the registrant's
Common Stock as reported on the Nasdaq National Market on December 15, 1998, was
$510,055,304. For purposes of this computation, all officers, directors and 10%
beneficial owners of the registrant are deemed to be affiliates. Such
determination should not be deemed to be an admission that such officers,
directors or 10% beneficial owners are, in fact, affiliates of the registrant.
As of December 15, 1998, there were outstanding 16,657,632 shares of
registrant's Common Stock, par value $.01 per share.
Documents incorporated by reference: Portions of the registrant's definitive
Proxy Statement for the 1999 Annual Meeting of Shareholders are incorporated by
reference into Part III of this Report.
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EXPLANATORY NOTE REGARDING AMENDMENT TO FORM 10-K
Action Performance Companies, Inc. hereby amends its report on Form
10-K for the year ended September 30, 1998, in order to correct a typographical
error in the Report of Independent Public Accountants. No other changes have
been made to the financial statements for the year ended September 30, 1998.
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements, the notes thereto, and
report thereon, commencing at page F-1 of this Report, which financial
statements, notes, and report are incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(1) Financial Statements are listed in the Index to Consolidated
Financial Statements on page F-1 of this Report.
(2) No Financial Statement Schedules are included because such
schedules are not applicable, are not required, or because
required information is included in the Consolidated Financial
Statements or Notes thereto.
(b) REPORTS ON FORM 8-K
Not applicable.
(c) EXHIBITS
Exhibit
Number Exhibit
- ------ -------
1.0 Form of Underwriting Agreement (1)
3.1 First Amended and Restated Articles of Incorporation of Registrant(2)
3.2 Amended and Restated Bylaws of Registrant(2)
4.1 Form of Certificate of Common Stock(3)
4.2 Indenture dated as of March 24, 1998, between Action Performance
Companies, Inc. and First Union National Bank, as Trustee, including
forms of Notes(4)
10.4.2 1993 Stock Option Plan, as amended and restated through January 16,
1997(5)
10.8 Form of Indemnification Agreement entered into with the Directors of
the Registrant(3)
10.21 Lease between the Company and F.W. Investments dated January 1, 1994(6)
10.27 Manufacturing Agreement between the Company and Early Light
International (Holdings) Ltd. dated December 5, 1994(7)
10.33 Asset Purchase Agreement dated as of November 7, 1996, among Action
Performance Companies, Inc., SII Acquisition, Inc., Sports Image, Inc.,
and R. Dale Earnhardt and Teresa H. Earnhardt(8)
10.34 Promissory Note dated November 7, 1996, in the principal amount of
$24,000,000 issued by SII Acquisition, Inc., as Maker, to Sports Image,
Inc., as Payee, together with Guarantee of Action Performance
Companies, Inc.(8)
10.35 Security Agreement dated November 7, 1996, between Sports Image, Inc.
and SII Acquisition, Inc.(8)
10.36 Registration Agreement dated as of November 7, 1996, among Action
Performance Companies, Inc., Sports Image, Inc., and R. Dale Earnhardt
and Teresa H. Earnhardt(8)
10.37 License Agreement dated as of November 7, 1996, among SII Acquisition,
Inc., Dale Earnhardt, and Action Performance Companies, Inc.(8)
10.39 Asset Purchase Agreement dated as of January 1, 1997, among Action
Performance Companies, Inc., MTL Acquisition, Inc., Motorsport
Traditions Limited Partnership, Midland Leasing, Inc., and Motorsports
By Mail, Inc.(9)
10.40 Exchange Agreement dated as of January 1, 1997, among Action
Performance Companies, Inc., Kenneth R. Barbee, and Jeffery M.
Gordon(9)
10.41 Promissory Note dated January 1, 1997, in the principal amount of
$1,600,000 issued by MTL Acquisition, Inc., as Maker, to Motorsport
Traditions Limited Partnership, as Payee, together with Guarantee of
Action Performance Companies, Inc.(9)
10.42 Note Purchase Agreement dated as of January 2, 1997, among Action
Performance Companies, Inc., Jefferson-Pilot Life Insurance Company,
Alexander Hamilton Life Insurance Company of America,
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and First Alexander Hamilton Life Insurance Company, together with form
of Note, form of Subsidiary Guaranty, and form of Subsidiary Joinder(9)
10.42A First Amendment dated as of March 18, 1998 to Note Purchase Agreement
dated as of January 2, 1997, among Action Performance Companies, Inc.,
Jefferson-Pilot Life Insurance Company, Alexander Hamilton Life
Insurance Company of America, and First Alexander Hamilton Life
Insurance Company(4)
10.43 Credit Agreement dated as of January 2, 1997, among Action Performance
Companies, Inc., Sports Image, Inc., MTL Acquisition, Inc., and First
Union National Bank of North Carolina(9)
10.43A Amendment and Consent to Credit Agreement dated March 18, 1998, by and
among Action Performance Companies, Inc., various subsidiary
guarantees, and First Union National Bank of North Carolina(4)
10.43B Amended and Restated Credit Agreement dated as of August 5, 1998, among
Action Performance Companies, Inc., certain subsidiaries and
affiliates, as guarantors, and First Union National Bank.*
10.44 Registration Agreement dated as of January 1, 1997, among Action
Performance Companies, Inc., Motorsport Traditions Limited Partnership,
Midland Leasing, Inc., and Motorsports By Mail, Inc.(9)
10.45 Registration Agreement dated as of January 1, 1997, among Action
Performance Companies, Inc., Kenneth R. Barbee, and Jeffery M.
Gordon(9)
10.46 Employment Agreement dated as of January 1, 1997, between Action
Performance Companies, Inc. and Kenneth R. Barbee(9)
10.47 Consulting Agreement dated as of January 1, 1997, between Action
Performance Companies, Inc. and John Bickford(9)
10.48 Common Stock Purchase Agreement dated January 16, 1997, between Hasbro,
Inc. and Action Performance Companies, Inc.(10)
10.49 Standard Form Industrial Lease dated April 8, 1997, between
Hewson/Breckner-Baseline, L.L.C. and Action Performance Companies,
Inc.(11)
10.50 Lease Agreement dated July 9, 1997, by and between Performance Park
Partners, LLC and Sports Image, Inc.(11)
10.51 Asset Purchase Agreement dated as of December 19, 1997, between Action
Performance Companies, Inc. and Revell-Monogram, Inc.(12)
10.52 1998 Non-qualified Stock Option Plan(4)
10.53 Purchase Agreement dated March 18, 1998 among Action Performance
Companies, Inc., NationsBanc Montgomery Securities LLC, CIBC
Oppenheimer Corp., EVEREN Securities, Inc. and Piper Jaffray Inc.(4)
10.54 Registration Rights Agreement dated March 24, 1998, by and among Action
Performance Companies, Inc., NationsBanc Montgomery Securities LLC,
CIBC Oppenheimer Corp., EVEREN Securities, Inc., and Piper Jaffray
Inc.(4)
11.1 Computation of Primary Earnings Per Share*
11.2 Computation of Fully Diluted Earnings Per Share*
12.1 Computation of Ratio of Earnings to Fixed Charges*
21.1 List of Subsidiaries of Action Performance Companies, Inc.*
23.1 Consent of Arthur Andersen LLP
25.1 Statement of Eligibility of Trustee under the Trust Indenture Act of
1939 on Form T-1(13)
27.1 Financial Data Schedule*
- --------------------
* Previously filed.
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 and Amendment No. 1 thereto (Registration No. 333-27485).
(2) Incorporated by reference to the Registrant's Form 10-QSB for the
quarter ended March 31, 1996, as filed with the Securities and Exchange
Commission on May 2, 1996.
(3) Incorporated by reference to the Registrant's Registration Statement on
Form SB-2 and amendments thereto (Registration No. 33-57414-LA).
(4) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended March 31, 1998, as filed with the Securities and Exchange
Commission on May 15, 1998.
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(5) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended March 31, 1997, as filed with the Securities and Exchange
Commission on May 15, 1997.
(6) Incorporated by reference to the Registrant's Form 10-QSB for the
quarter ended March 31, 1994, as filed with the Securities and Exchange
Commission on May 16, 1994.
(7) Incorporated by reference to the Registrant's Form 10-KSB for the year
ended September 30, 1994, as filed with the Securities and Exchange
Commission on December 22, 1994.
(8) Incorporated by reference to the Registrant's Form 8-K filed with the
Securities and Exchange Commission on November 22, 1996, as amended by
Form 8-K/A filed on January 13, 1997.
(9) Incorporated by reference to the Registrant's Form 8-K filed with the
Securities and Exchange Commission on January 23, 1997, as amended by
Form 8-K/A filed on February 24, 1997.
(10) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (Registration No. 333-22943).
(11) Incorporated by reference to the Registrant's Form 10-K for the year
ended September 30, 1997, as filed with the Securities and Exchange
Commission on December 22, 1997.
(12) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (Registration No. 333-45991).
(13) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (Registration No. 333-53413).
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ACTION PERFORMANCE COMPANIES, INC.
Date: January 6, 1999 /s/ Fred W. Wagenhals
----------------------------------------------
Fred W. Wagenhals, Chairman of the Board,
President, and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Capacity Date
- --------- -------- ----
/s/ Fred W. Wagenhals Chairman of the Board, President, and Chief January 6, 1999
- ------------------------------------ Executive Officer (Principal Executive Officer)
Fred W. Wagenhals
/s/ Tod J. Wagenhals Executive Vice President, and Director January 6, 1999
- ------------------------------------
Tod J. Wagenhals
/s/ Christopher S. Besing Vice President, Chief Financial Officer, Treasurer, January 6, 1999
- ------------------------------------ and Director (Principal Financial Officer)
Christopher S. Besing
/s/ David A. Husband Vice President and Chief Accounting Officer January 6, 1999
- ------------------------------------ (Principal Accounting Officer)
David A. Husband
/s/ Melodee L. Volosin Vice President - Wholesale Division and Director January 6, 1999
- ------------------------------------
Melodee L. Volosin
/s/ John S. Bickford Vice President - Strategic Alliances and Director January 6, 1999
- ------------------------------------
John S. Bickford
Director January --, 1999
- ------------------------------------
Jack M. Lloyd
Director January --, 1999
- ------------------------------------
Robert H. Manschot
- ------------------------------------ Director January --, 1999
Donald G. Hawk, Jr.
/s/ Edward J. Bauman Director January 6, 1999
- ------------------------------------
Edward J. Bauman
/s/ Paul G. Lang Managing Director of MiniChamps and Director January 6, 1999
- ------------------------------------
Paul G. Lang
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ACTION PERFORMANCE COMPANIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants........................... F-2
Consolidated Balance Sheets as of September 30, 1998 and 1997...... F-3
Consolidated Statements of Operations for the Years
Ended September 30, 1998, 1997, and 1996.................... F-4
Consolidated Statements of Shareholders' Equity for the Years
Ended September 30, 1998, 1997, and 1996.................... F-5
Consolidated Statements of Cash Flows for the Years
Ended September 30, 1998, 1997, and 1996.................... F-6
Notes to Consolidated Financial Statements......................... F-7
F-1
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ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Action Performance Companies, Inc.:
We have audited the accompanying consolidated balance sheets of ACTION
PERFORMANCE COMPANIES, INC. (an Arizona corporation) and subsidiaries as of
September 30, 1998 and 1997, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended September 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Action Performance Companies,
Inc. and subsidiaries as of September 30, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1998, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Phoenix, Arizona,
November 13, 1998, except with respect
to matters discussed in Note 12 as to
which the date is December 1, 1998.
F-2
9
ACTION PERFORMANCE COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS 1998 1997
- ------ ---- ----
CURRENT ASSETS:
Cash and cash equivalents .......................... $ 60,867 $ 29,318
Accounts receivable, net of allowance for
doubtful accounts of $986 and $837,
respectively ...................................... 36,314 17,802
Inventories ........................................ 35,790 17,855
Prepaid royalties .................................. 5,745 4,967
Prepaid expenses and other assets .................. 4,961 2,603
-------- --------
Total current assets ............................. 143,677 72,545
PROPERTY AND EQUIPMENT, net .......................... 46,053 20,017
GOODWILL AND OTHER INTANGIBLES, net .................. 106,146 46,409
OTHER ASSETS, net .................................... 10,058 2,354
-------- --------
$305,934 $141,325
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................... $ 11,430 $ 6,680
Accrued royalties .................................. 10,589 5,098
Accrued expenses and other ......................... 10,973 2,318
Current portion of long-term debt .................. 23,746 1,474
-------- --------
Total current liabilities ........................ 56,738 15,570
-------- --------
LONG-TERM DEBT:
Convertible subordinated notes ..................... 100,000 --
Other long-term debt ............................... 11,850 22,586
-------- --------
Total long-term debt ............................. 111,850 22,586
-------- --------
MINORITY INTEREST .................................... 914 --
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 5,000,000 shares
authorized, no shares issued and outstanding ...... -- --
Common stock, $.01 par value, 25,000,000 shares
authorized; 16,423,238 and 15,952,083 shares
issued and outstanding, respectively .............. 164 160
Additional paid-in capital ......................... 91,974 84,984
Cumulative translation adjustment .................. 1,682 --
Retained earnings .................................. 42,612 18,025
-------- --------
Total shareholders' equity ....................... 136,432 103,169
-------- --------
$305,934 $141,325
======== ========
The accompanying notes are an integral part of these consolidated balance sheets
F-3
10
ACTION PERFORMANCE COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1998 1997 1996
---- ---- ----
Sales:
Collectibles ............................ $ 129,348 $ 63,846 $ 40,904
Apparel and souvenirs ................. 106,712 60,430 1,961
Other ................................. 15,817 6,104 1,351
--------- --------- ---------
Net sales ........................... 251,877 130,380 44,216
Cost of sales ........................... 157,079 80,995 25,296
--------- --------- ---------
Gross profit ............................ 94,798 49,385 18,920
--------- --------- ---------
Operating expenses:
Selling, general and
administrative expenses ............. 45,344 24,564 9,262
Settlement costs ...................... 950 5,400 --
Amortization of goodwill and
other intangibles ................... 4,392 1,286 4
--------- --------- ---------
Total operating expenses ............ 50,686 31,250 9,266
--------- --------- ---------
Income from operations .................. 44,112 18,135 9,654
--------- --------- ---------
Other income (expense):
Interest income and other, net ........ 2,588 796 296
Interest expense ...................... (5,533) (2,021) (80)
--------- --------- ---------
Total other income (expense) ........ (2,945) (1,225) 216
--------- --------- ---------
Income before provision for
income taxes .......................... 41,167 16,910 9,870
Provision for income taxes .............. 16,391 6,764 3,917
Minority interest in earnings ........... 189 -- --
--------- --------- ---------
NET INCOME .............................. $ 24,587 $ 10,146 $ 5,953
========= ========= =========
NET INCOME PER COMMON SHARE:
Basic ................................. $ 1.52 $ 0.72 $ 0.50
========= ========= =========
Diluted ............................... $ 1.48 $ 0.69 $ 0.46
========= ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ................................. 16,135 14,047 11,789
========= ========= =========
Diluted ............................... 16,647 14,624 13,028
========= ========= =========
The accompanying notes are an integral
part of these consolidated
financial statements.
F-4
11
ACTION PERFORMANCE COMPANIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
CONVERTIBLE ADDITIONAL CUMULATIVE
COMMON STOCK PREFERRED STOCK PAID-IN RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT
------ ------ ------ ------ ------- -------- ----------
BALANCE, SEPTEMBER 30, 1995 ....... 11,221,408 $ 112 500 $ -- $ 16,852 $ 1,926 $ --
Common stock issued upon conversion
of convertible preferred stock .. 1,000,000 10 (500) -- (10) -- --
Common stock issued upon exercise
of options ...................... 239,247 2 -- -- 801 -- --
Tax benefit from stock options .... -- -- -- -- 838 -- --
Common stock issued upon exercise
of warrants ...................... 149,114 2 -- -- 510 -- --
Net income ........................ -- -- -- -- -- 5,953 --
---------- ---------- ---------- ------ ---------- ---------- ----------
BALANCE, SEPTEMBER 30, 1996 ....... 12,609,769 $ 126 -- $ -- $ 18,991 $ 7,879 $ --
Common stock issued in conjunction
with purchase of businesses ...... 765,542 8 -- -- 10,041 -- --
Common stock issued upon exercise
of options ...................... 296,092 3 -- -- 1,708 -- --
Common stock issued in
public offering ................. 2,085,000 21 -- -- 49,822 -- --
Tax benefit from stock options .... -- -- -- -- 1,651 -- --
Issuance of common stock in
private placements ............... 195,680 2 -- -- 2,771 -- --
Net income ........................ -- -- -- -- -- 10,146 --
---------- ---------- ---------- ------ ---------- ---------- ----------
BALANCE, SEPTEMBER 30, 1997 ....... 15,952,083 $ 160 -- $ -- $ 84,984 $ 18,025 $ --
Common stock issued upon exercise
of options ...................... 426,315 4 -- -- 1,633 -- --
Tax benefit from stock options .... -- -- -- -- 4,100 -- --
Issuance of common stock in
private placements .............. 44,840 -- -- -- 1,257 -- --
Cumulative translation adjustment . -- -- -- -- -- -- 1,682
Net income ........................ -- -- -- -- -- 24,587 --
---------- ---------- ---------- ------ ---------- ---------- ----------
BALANCE, SEPTEMBER 30, 1998 ....... 16,423,238 $ 164 -- $ -- $ 91,974 $ 42,612 $ 1,682
========== ========== ========== ====== ========== ========== ==========
TOTAL
-----
BALANCE, SEPTEMBER 30, 1995 ....... $ 18,890
Common stock issued upon conversion
of convertible preferred stock .. --
Common stock issued upon exercise
of options ...................... 803
Tax benefit from stock options .... 838
Common stock issued upon exercise
of warrants ...................... 512
Net income ........................ 5,953
----------
BALANCE, SEPTEMBER 30, 1996 ....... $ 26,996
Common stock issued in conjunction
with purchase of businesses ...... 10,049
Common stock issued upon exercise
of options ...................... 1,711
Common stock issued in
public offering ................. 49,843
Tax benefit from stock options .... 1,651
Issuance of common stock in
private placements ............... 2,773
Net income ........................ 10,146
----------
BALANCE, SEPTEMBER 30, 1997 ....... $ 103,169
Common stock issued upon exercise
of options ...................... 1,637
Tax benefit from stock options .... 4,100
Issuance of common stock in
private placements .............. 1,257
Cumulative translation adjustment . 1,682
Net income ........................ 24,587
----------
BALANCE, SEPTEMBER 30, 1998 ....... $ 136,432
==========
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
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ACTION PERFORMANCE COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996
(IN THOUSANDS)
1998 1997 1996
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................... $ 24,587 $ 10,146 $ 5,953
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization .............. 11,839 4,477 1,692
Undistributed earnings to minority
shareholders ............................. 189 -- --
Change in assets and liabilities, net of
businesses acquired:
Accounts receivable ...................... (12,937) (3,623) (3,440)
Inventories .............................. (14,406) (5,009) (3,143)
Prepaid royalties ........................ (120) (2,672) (1,186)
Prepaid expenses and other assets ........ (1,233) (665) 922
Accounts payable ......................... (373) (1,633) 565
Accrued royalties ........................ 4,106 2,395 320
Accrued expenses and other ............... 6,004 917 (823)
--------- --------- ---------
Net cash provided by operating activities 17,656 4,333 860
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ........ (21,687) (11,192) (3,879)
Proceeds from sale of equipment ............ 383 321 --
Acquisition of businesses and other
intangibles, less cash acquired ........... (55,885) (11,082) --
--------- --------- ---------
Net cash used in investing activities .... (77,189) (21,953) (3,879)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit ............... 9,600 4,879 5,222
Payments on line of credit ................. (9,600) (10,279) (5,222)
Net proceeds from issuance of
common stock .............................. 1,637 54,327 1,315
Issuance of convertible subordinated notes . 100,000 -- --
Payments for offering-related expenses ..... (3,500) -- --
Payments on long-term debt, net ............ (7,096) (6,972) (105)
Issuance of note receivable ................ (150) -- --
Collections on notes receivable ............ 135 -- 32
--------- --------- ---------
Net cash provided by financing
activities ............................... 91,026 41,955 1,242
--------- --------- ---------
Effect of exchange rate changes on
cash and cash equivalents ................ 56 -- --
--------- --------- ---------
Net change in cash and cash equivalents .... 31,549 24,335 (1,777)
Cash and cash equivalents,
beginning of year ......................... 29,318 4,983 6,760
--------- --------- ---------
Cash and cash equivalents, end of year ..... $ 60,867 $ 29,318 $ 4,983
========= ========= =========
The accompanying notes are an integral
part of these consolidated financial
statements.
F-6
13
ACTION PERFORMANCE COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997, and 1996
(1) THE COMPANY
OPERATIONS
Action Performance Companies, Inc., an Arizona corporation, (the "Company")
designs and markets licensed motorsports products, including die-cast scaled
replicas of motorsports vehicles, apparel, and souvenirs. The Company also
develops promotional programs for sponsors of motorsports that feature the
Company's die-cast replicas or other products and that are intended to increase
brand awareness of the products or services of the corporate sponsors. In
addition, the Company represents popular race car drivers in a broad range of
licensing and other revenue-producing opportunities, including product licenses,
corporate sponsorships, endorsement contracts, and speaking engagements. The
Company's motorsports collectibles, which are primarily produced in China, and
most of the Company's apparel and souvenirs are manufactured by third parties,
generally utilizing the Company's designs, tools, and dies. The Company screen
prints and embroiders a portion of the licensed motorsports apparel that it
sells.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The consolidated financial statements include the accounts of the Company and
its wholly owned and majority owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Certain reclassifications have been made in prior period financial statements to
conform to the current presentation.
REVENUE RECOGNITION
The Company recognizes revenue upon shipment. Customer deposits received in
advance of delivery are deferred and recognized when the related product is
shipped.
CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of cash and accounts receivable. The Company
places its cash with federally insured institutions and limits the amount of
credit exposure to any one institution. Concentrations of credit risk with
respect to accounts receivable are limited due to the large number of customers
comprising the Company's credit base and the geographical dispersion of the
customers.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
14
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, and accounts payable
approximate fair value because of the short maturity of these financial
instruments. Except for the Convertible Subordinated Notes, the carrying amounts
of long-term debt approximate fair value based on current market prices for
similar debt instruments. The fair value of the Company's Convertible
Subordinated Notes on September 30, 1998 was $78.1 million based on current
market information. Fair value estimates are made at a specific point in time,
based on relevant market information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect these estimates.
FOREIGN CURRENCY TRANSLATION
Financial information relating to the Company's foreign subsidiaries is reported
in accordance with FAS No. 52 "Foreign Currency Translation." The financial
statements of non-U.S. subsidiaries are measured using the local currency as the
functional currency. Assets and liabilities of these non-U.S. subsidiaries are
translated at exchange rates in effect as of the end of each balance sheet date,
and related revenues and expenses are translated at average exchange rates in
effect during the period.
CASH AND CASH EQUIVALENTS
The Company classifies as cash equivalents all highly liquid investments with
original maturities of three months or less. Cash equivalents principally
consist of commercial paper and United States Treasury securities.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market, and consist of the following at September 30, 1998 and 1997 (in
thousands):
1998 1997
---- ----
Purchased components....................... $ 3,252 $ 2,418
Finished goods............................. 32,538 15,437
-------- -------
$ 35,790 $17,855
======== =======
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets,
which range from one to ten years.
Property and equipment consist of the following at September 30, 1998 and 1997
(in thousands):
1998 1997
-------- -------
Building and land.......................... $ 6,207 $ -
Tooling and molds.......................... 30,217 15,237
Furniture, fixtures and equipment.......... 15,099 6,667
Autos and trucks........................... 3,158 2,578
Leasehold improvements..................... 2,984 2,066
-------- -------
57,665 26,548
Less - accumulated depreciation............ (11,612) (6,531)
-------- -------
$ 46,053 $20,017
======== =======
Maintenance and repairs of approximately $697,000, $277,000, and $64,000 for the
years ended September 30, 1998, 1997, and 1996, respectively, were charged to
expense as incurred. The cost of renewals and betterments that materially extend
the useful lives of assets or increase their productivity are capitalized.
F-8
15
GOODWILL AND OTHER INTANGIBLES
Goodwill represents the cost in excess of the fair value of net assets acquired
in business combinations and is amortized using the straight-line method over
periods ranging from fifteen to twenty-five years. Other intangibles are
amortized using the straight-line method over their estimated useful lives,
which ranges from three to fifteen years. Amortization expense of $4.4 million,
$1.3 million, and $4,000 is included in the accompanying financial statements
for the years ended September 30, 1998, 1997, and 1996, respectively. The
following table sets forth the components of goodwill and other intangibles as
of September 30, 1998 and 1997, respectively (in thousands).
Amortization
Period (Years) 1998 1997
-------------- ---- ----
3-5 $ 2,190 $ -
6-10 11,247 -
11-15 11,855 6,263
16-25 86,542 41,431
-------- -------
111,834 47,694
Less accumulated amortization (5,688) (1,285)
-------- -------
$106,146 $46,409
======== =======
LICENSE AGREEMENTS
Royalties paid under various licensing agreements are recorded as expense at the
time the related sales are made.
LONG-LIVED ASSETS
The Company periodically evaluates the carrying value of long-lived assets in
accordance with SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." Under SFAS No. 121, long-lived
assets and certain identifiable intangible assets to be held and used in
operations are reviewed for impairment whenever events or circumstances indicate
that the carrying amount of an asset may not be fully recoverable. An impairment
loss is recognized if the sum of the expected long-term undiscounted cash flows
is less than the carrying amount of the long-lived assets being evaluated.
SUPPLEMENTAL CASH FLOW INFORMATION
The supplemental cash flow disclosures and non-cash transactions for the years
ended September 30, 1998, 1997, and 1996 are as follows (in thousands):
1998 1997 1996
---- ---- ----
Supplemental disclosures:
Interest paid ....................... $ 4,690 $ 1,505 $ 79
Income taxes paid ................... 10,600 5,396 3,992
Non-cash transactions:
Common stock issued in acquisitions . $ -- $10,049 $ --
Debt and liabilities incurred or
assumed in acquisitions ........... 29,002 44,446 --
Acquisition of property and equipment
under notes payable and
capital leases .................... 2,961 1,515 233
Tax benefits on various common
stock options ..................... 4,100 1,651 838
Common stock issued in connection
with licensing and sponsorship
agreements ........................ 1,257 -- --
Sale of equipment for note receivable . 35 446 --
F-9
16
NET INCOME PER COMMON SHARE
Net income per common share is computed based on the weighted average number of
common shares and common share equivalents outstanding using the treasury stock
method, except when common share equivalents have an antidilutive effect. The
Company's Convertible Subordinated Notes (see Note 4) were antidilutive for the
fiscal year ended September 30, 1998. All share amounts and per share data have
been restated to reflect the two-for-one stock split effected as a stock
dividend on May 28, 1996. The calculation of diluted net income per common share
for the years ended September 30, 1998, 1997, and 1996 are as follows (in
thousands, except per share data):
1998 1997 1996
---- ---- ----
Shares:
Weighted average number of common
shares outstanding .................... 16,135 14,047 11,789
Additional shares assuming conversion of:
Stock options ......................... 512 577 539
Warrants .............................. -- -- 33
Preferred stock ....................... -- -- 667
------- ------- -------
Diluted weighted average shares
outstanding ........................... 16,647 14,624 13,028
======= ======= =======
Net income attributable to diluted
weighted average shares outstanding ... $24,587 $10,146 $ 5,953
======= ======= =======
Diluted earnings per share .............. $ 1.48 $ 0.69 $ 0.46
======= ======= =======
ACCOUNTING PRONOUNCEMENTS NOT YET REQUIRED TO BE ADOPTED
In fiscal 1999, the Company will be required to adopt SFAS No. 130, "Reporting
Comprehensive Income," issued by the Financial Accounting Standards Board. The
adoption of SFAS No. 130 is not expected to have a material effect on the
Company's financial position or results of operations.
In fiscal 1999, the Company will be required to adopt SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information", issued by the
Financial Accounting Standards Board. The adoption of SFAS No. 131 is not
expected to have a material effect on the Company's financial position or
results of operations.
In fiscal 2000, the Company will be required to adopt SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," issued by the Financial
Accounting Standards Board. Statement No. 133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. The new statement requires all derivatives to be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The Company believes the adoption of Statement No. 133 will not have any
material impact in the Company's financial position or results of operations.
(3) ACQUISITIONS AND LICENSING AGREEMENTS
ACQUISITION OF SPORTS IMAGE, INC.
In November 1996, the Company purchased substantially all of the assets and
assumed certain liabilities of Sports Image, Inc.("Sports Image"). The purchase
price was approximately $30,000,000, consisting of a $24,000,000 promissory note
due January 2, 1997 and 403,361 shares of the Company's Common Stock valued at
$12.10 per share. On January 2, 1997, the Company repaid the $24,000,000
promissory note with the proceeds from the issuance of senior notes and a
portion of the borrowings under the Company's new credit facility. Sports Image
sells and distributes a variety of licensed motorsports products through
wholesale distributor networks, corporate sponsors, and mobile trackside stores.
In fiscal 1996, the Company derived 16% of its net sales from Sports Image, a
distributor of the Company's die-cast collectible products. Sports Image had
sales of approximately $41.8 million of apparel, die-cast replicas, souvenirs,
and other motorsports consumer products during the period from January 1, 1996
to November 7, 1996 (which includes sales of
F-10
17
die-cast collectibles purchased from the Company at an aggregate cost of
approximately $5.8 million). This transaction was accounted for as a purchase.
ACQUISITIONS OF MOTORSPORT TRADITIONS LIMITED PARTNERSHIP AND CREATIVE MARKETING
& PROMOTIONS, INC.
On January 8, 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of Motorsport Traditions Limited Partnership and
acquired all of the stock of Creative Marketing & Promotions, Inc. (collectively
"Motorsport Traditions"). The effective date of the acquisition of Motorsport
Traditions was January 1, 1997. The purchase price paid by the Company for
Motorsport Traditions consisted of (i) cash in the amount of $5.4 million; (ii)
a promissory note in the principal amount of $1.6 million issued by a wholly
owned subsidiary of the Company; and (iii) an aggregate of 342,857 shares of the
Company's Common Stock valued at $13.80 per share. The promissory note bears
interest at 4% per annum, matures on December 31, 1998, and has been guaranteed
by the Company. Motorsport Traditions sells and distributes licensed motorsports
products through a network of wholesale distributors and mobile trackside
stores. Prior to the acquisitions, Motorsport Traditions generated approximately
$33.0 million in annual revenue from its design, manufacturing, and sales and
distribution activities. This transaction was accounted for as a purchase.
ACQUISITION OF ROBERT YATES PROMOTIONS, INC.
In July 1997, the Company acquired all of the outstanding common stock of Robert
Yates Promotions, Inc. ("RYP") for $5.7 million. RYP sells licensed motorsports
products through trackside trailers and generated approximately $5.0 million in
revenue during calendar year 1996. Concurrent with the acquisition of RYP, the
Company entered into a 15-year license agreement with Robert Yates Racing, Inc.
("Yates Racing"). Pursuant to the license agreement, the Company will pay
royalties for the use of certain trademark rights associated with Yates Racing
Nascar Winston Cup teams. This transaction was accounted for as a purchase. RYP
is a defendant in certain litigation. See Note 10. The purchase price is
preliminary with respect to such litigation.
ACQUISITION OF IMAGE WORKS, INC.
In July 1997, the Company acquired substantially all of the assets and assumed
certain liabilities of Image Works, Inc. ("Image Works"). The Company paid $4.25
million in cash and issued a three-year promissory note for a minimum principal
amount of $750,000, with additional contingent payments of up to an aggregate of
$1.4 million based upon the attainment of certain revenue objectives through
September 30, 2000. The Company paid the $750,000 and $1.4 million contingent
payments in May 1998. Image Works designs and manufactures screen printed and
embroidered motorsports apparel items for distribution through mass retailers
and corporate accounts. Image Works generated approximately $22.0 million in
revenue during calendar year 1996. This transaction was accounted for as a
purchase.
ACQUISITION OF COLLECTIBLE BUSINESS FROM SIMPSON PRODUCTS, INC.
In August 1997, the Company acquired certain assets and assumed certain
liabilities related to the licensed mini-helmet collectible business of Simpson
Products, Inc. ("Simpson"). The consideration paid by the Company for the
purchased assets consisted of approximately $653,000 in cash, with additional
contingent payments of up to an aggregate of $1.5 million based upon the
attainment of certain revenue objectives. In connection with the purchase of the
assets and assumption of liabilities of Simpson, the Company also entered into a
25-year license agreement with respect to certain rights used in connection with
the purchased assets. This transaction was accounted for as a purchase.
F-11
18
LICENSING AGREEMENT WITH RICHARD CHILDRESS RACING ENTERPRISES, INC.
On October 3, 1997, the Company entered into a ten-year license agreement with
Richard Childress Racing Enterprises, Inc. ("RCR") with respect to various
rights used in connection with Dale Earnhardt licensed products. In connection
with this agreement, the Company paid RCR a license fee consisting of cash plus
34,940 shares of the Company's Common Stock. The license agreement also requires
the Company to pay to RCR certain minimum annual royalties during the term of
the agreement, plus royalties based on sales of licensed products in each year
during the term of the agreement.
ACQUISITION OF RUSTY WALLACE MERCHANDISE PROGRAM
On December 9, 1997, the Company acquired certain assets and assumed certain
liabilities related to sales of motorsports merchandise licensed by NASCAR
Winston Cup driver Rusty Wallace from an affiliate of Mr. Wallace. The purchase
price consisted of cash of $6.0 million, of which $2.5 million was paid at the
closing and the remaining $3.5 million was paid during fiscal 1998. In
connection with the acquisition of the assets and assumption of the liabilities,
the Company entered into a seven-year license agreement with another affiliate
of Mr. Wallace for the name and likeness of Mr. Wallace and acquired a five-year
sublicense with a wholly owned subsidiary of Penske Motorsports, Inc. The
license agreement and sublicense agreement both contain options that permit the
Company to renew for two additional five-year terms. The license agreement with
the affiliate of Mr. Wallace requires the Company to pay royalties on sales of
licensed products, plus a license fee if sales of licensed products exceed a
specified amount each year during the initial term of the license. This
transaction was accounted for as a purchase.
ACQUISITION OF DIE-CAST DIVISION OF REVELL MONOGRAM, INC.
On December 19, 1997, the Company acquired the assets and assumed certain
liabilities related to the motorsports die-cast collectible product lines of
Revell-Monogram, Inc. ("Revell"). The preliminary price of $24.8 million, which
is subject to certain adjustments, consists of an initial cash payment of $14.8
million and $1.0 million per year for 10 years, which is treated as a note
payable with an imputed interest rate of 8% in the accompanying financial
statements. Revell distributed die-cast collectibles through a network of
wholesale distributors and a collectible club, which together generated die-cast
collectible sales of approximately $20.0 million during 1997. The Company and
Revell also entered into a 10-year license agreement under which the Company has
the right to utilize certain "Revell" trademarks in connection with sales of its
die-cast products. This transaction was accounted for as a purchase.
ACQUISITION OF BROOKFIELD COLLECTORS GUILD, INC.
On January 8, 1998, the Company acquired certain assets and assumed certain
liabilities of Brookfield Collectors Guild, Inc. ("Brookfield"). The purchase
price consisted of (i) approximately $800,000 in cash and (ii) up to 27,397
shares of Common Stock, subject to certain adjustments, to be issued upon
completion of certain purchase price adjustments by the Company and the seller.
Brookfield distributed various motorsports die-cast collectibles and ensembles
as well as various other die-cast replicas. This transaction was accounted for
as a purchase.
ACQUISITION OF MINORITY INTEREST IN LBE TECHNOLOGIES, INC.
On April 20, 1998, the Company made a $1.0 million equity investment in LBE
Technologies, Inc. ("LBET") and entered into a five-year strategic alliance. The
strategic alliance provides the Company with exclusive merchandising rights at
each of LBET's "NASCAR Silicon Motor Speedway" centers.
F-12
19
ACQUISITION OF CONTROLLING INTEREST IN CHASE RACEWEAR, LLC
On May 22, 1998, the Company acquired a controlling interest in Chase Racewear,
L.L.C. ("Chase"), a North Carolina motorsports-related apparel branding and
licensing company. Pursuant to the terms of the acquisition and operating
agreements, the Company acquired an 80% interest in Chase for an aggregate of
$10.0 million in cash. The terms of the acquisition agreement also include a
three-year earn-out payment of up to $4.0 million if certain financial criteria
are met. This transaction was accounted for as a purchase.
ACQUISITION OF CONTROLLING INTEREST IN MINICHAMPS
On August 31, 1998, the Company acquired a majority interest in Paul's Model
Art, GmbH; MiniChamps, GmbH; Lang Miniaturen, GmbH; and Spielwaren Danhausen,
GmbH (collectively referred to as "MiniChamps") by purchasing an 80% interest
for approximately $21.5 million in cash. MiniChamps designs and markets die-cast
scaled replicas of motor vehicles, including models of Formula One and GT race
cars as well as factory production cars. Its products are marketed pursuant to
licensing agreements with race car drivers, team owners, and car manufacturers.
MiniChamps generated revenue of approximately $25.0 million during 1997. This
transaction was accounted for as a purchase.
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS DATA
The following unaudited pro forma combined statements of operations data for the
years ended September 30, 1998 and 1997 present the results of operations of the
Company as if the acquisitions of the businesses acquired during fiscal 1997 and
fiscal 1998 had occurred as of October 1, 1996. Pro forma results are as follows
(in thousands, except per share data):
1998* 1997*
-------- --------
Revenues............................... $283,702 $213,954
Net income............................. 26,728 13,356
Net income per common share, diluted... $ 1.60 $ 0.90
* Excludes charges for legal settlement costs of $950,000, or $0.03 per share,
in fiscal 1998 and $5.4 million, or $0.22 per share, in fiscal 1997.
(4) FINANCING ACTIVITIES
Long-term debt at September 30, 1998 and 1997 consists of the following (in
thousands):
1998 1997
---- ----
Senior notes, interest at 8.05% payable semi-annually, principal payable January
1999, secured by the Company's subsidiaries .................................... $ 20,000 $ 20,000
4 3/4% Convertible Subordinated Notes due 2005 ................................. 100,000 --
Unsecured notes payable, interest ranging
from 4% to 8% .................................................................. 7,458 2,197
Notes payable, interest ranging from 7.9% to 8.5%,
secured by property and equipment .............................................. 7,839 1,409
Obligations under capital leases of vehicles and
equipment, interest from 8.0% to 9.5%, payable monthly ......................... 299 454
--------- ---------
Total .......................................................................... 135,596 24,060
Less: current portion ......................................................... (23,746) (1,474)
--------- ---------
$ 111,850 $ 22,586
========= =========
F-13
20
CONVERTIBLE SUBORDINATED NOTES
On March 24, 1998, the Company sold $100.0 million of 4 3/4% Convertible
Subordinated Notes due 2005 (the "Notes"). The Notes are convertible, at the
option of the holders, into shares of Common Stock at the initial conversion
price of $48.20 per share, subject to adjustments in certain events. The Notes
are general unsecured obligations of the Company, subordinated in right of
payment to all existing and future senior indebtedness of the Company, as
defined in the Notes. The Indenture governing the Notes does not limit or
prohibit the incurrence of additional indebtedness, including senior
indebtedness, by the Company or its subsidiaries. The Company, at its option,
may redeem the Notes in whole or in part at any time on or after April 1, 2001,
at redemption prices set forth in the Indenture governing the Notes. Upon the
occurrence of a "change in control" or a "termination of trading," as defined in
the Indenture, the holders of the Notes will have the right to require the
Company to repurchase all or any part of such holders' Notes at 100% of their
principal amount, plus accrued and unpaid interest. The net proceeds to the
Company from this offering were approximately $96.5 million, after deducting
offering expenses and the Initial Purchasers' discount of 3.0%. The offering
expenses and Initial Purchasers discount are included in other assets in the
accompanying financial statements and are being amortized into interest expense
using the effective interest rate method.
CREDIT FACILITY
On January 2, 1997 the Company entered into a credit facility with First Union
National Bank of North Carolina ("First Union"). On August 5, 1998, the Company
entered into an amended and restated credit agreement with First Union (the
"Credit Facility"). The Credit Facility consists of a revolving line of credit
for up to $20.0 million, which includes up to $5.0 million for standby letters
of credit (the "Line of Credit") and a $30.0 million letter of credit/bankers'
acceptance facility (the "Letter of Credit/BA Facility"). The Company did not
have any outstanding borrowings under the Line of Credit as of September 30,
1998. The Company had outstanding purchase commitments of approximately $3.7
million under the Letter of Credit/BA Facility as of September 30, 1998. The
Line of Credit bears interest, at the Company's option, at a rate equal to (i)
the Alternate Base Rate (as described below) plus an applicable margin as
defined in the credit agreement or (ii) LIBOR plus an applicable margin as
defined in the credit agreement. The "Alternate Base Rate" under the Line of
Credit is the greater of (a) the bank's publicly announced prime rate or (b) the
Federal Funds Effective Rate (as defined) plus 0.5%. The Line of Credit matures
on April 1, 2001 with respect to the revolving line of credit portion of the
Line of Credit, and on April 1, 1999 with respect to the standby letter of
credit portion of the Line of Credit and the Letter of Credit/BA Facility,
subject to extensions by First Union. The Credit Facility is guaranteed by the
Company's subsidiaries.
DEBT COVENANTS
The Company's senior notes and Credit Facility agreements contain certain
provisions that, among other things, require the Company to comply with certain
financial ratios and net worth requirements and will limit the ability of the
Company and its subsidiaries to incur additional indebtedness, pay dividends,
sell assets, or engage in certain mergers or consolidations.
FUTURE MATURITIES OF LONG-TERM DEBT
Aggregate future maturities of long-term debt are as follows (in thousands):
Year Ending
September 30,
-------------
1999 $ 23,746
2000 1,997
2001 1,662
2002 1,941
2003 1,503
Thereafter 104,747
--------
Total $135,596
========
F-14
21
(5) SHAREHOLDERS' EQUITY
All share amounts and per share data have been restated to reflect the
two-for-one stock split effected as a stock dividend on May 28, 1996.
CONVERTIBLE PREFERRED STOCK
In March 1995, the Company completed the sale of 500 shares of Class A
Convertible Preferred Stock (the "Preferred Stock") to an affiliate of its
principal manufacturer of die-cast collectibles, for a purchase price of $2.0
million. The sale was effected primarily as a long-term strategic transaction
intended to align the interests of the manufacturer with those of the Company.
The shares were converted into an aggregate of 1,000,000 shares of Common Stock
during May 1996.
ISSUANCE OF STOCK IN PRIVATE PLACEMENTS
In January 1997, the Company sold 187,500 shares of Common Stock to Hasbro, Inc.
at a price of $14.50 per share, with net proceeds to the Company of
approximately $2.6 million. In August 1997, the Company issued (i) 8,180 shares
of Common Stock valued at $23.02 per share to Dale Jarrett in connection with a
three-year personal services contract, and (ii) 19,324 shares of Common Stock
valued at $22.59 to E.J. Simpson as a portion of the license fee pursuant to a
license agreement. In October 1997, the Company issued 34,940 shares of Common
Stock valued at $28.62 per share to Richard Childress Racing, Inc. See Note (3).
In February 1998, the Company issued 9,900 shares of Common Stock valued at
$26.00 per share in connection with a race car sponsorship.
1997 PUBLIC OFFERING
On June 24, 1997, the Company sold 1,770,000 shares of its Common Stock in
connection with an underwritten public offering. On July 17, 1997, the Company
sold an additional 315,000 shares of its Common Stock pursuant to the exercise
of the underwriters' over-allotment option. The net proceeds to the Company from
this offering were approximately $49.8 million, after deducting offering
expenses and underwriting discounts and commissions.
STOCK OPTIONS
Under the Company's 1993 Stock Option Plan (the "1993 Plan"), the Board of
Directors may from time to time grant to key employees, consultants, and
independent contractors who provide valuable services to the Company (i)
incentive stock options and non-statutory stock options to purchase shares of
the Company's Common Stock, (ii) stock appreciation rights, (iii) shares of the
Company's Common Stock, or (iv) cash awards. The 1993 Plan also includes an
automatic program providing for automatic grants of stock options to
non-employee directors of the Company. The exercise price for all incentive
stock options granted under the 1993 Plan may not be less than the fair market
value of the Company's Common Stock on the date of the grant, except that the
option price may not be less than 110% of the fair market value of the Company's
Common Stock on the date of the grant in the case of incentive stock options
granted to any person possessing more than 10% of the combined voting power of
the Company's Common Stock or any parent or subsidiary corporation. In the case
of non-statutory stock options, the exercise price may not be less than 85% of
the fair market value of the Company's Common Stock on the date of the grant.
Options granted under the 1993 Plan generally have a six-year term. Options that
were granted prior to July 1995 are fully vested and exercisable. The option
agreements for options granted beginning in July 1995 generally provide that
one-third of the options vest and become exercisable on each of the first,
second, and third anniversaries of the date of grant. A total of 2,750,000
shares of Common Stock may be issued pursuant to the 1993 Plan. The 1993 Plan
expires in 2001.
Under the Company's 1998 Non-qualified Stock Option Plan (the "1998 Plan"), the
Board of Directors may from time to time grant to key employees of the Company,
other than directors or executive officers, non-statutory stock options to
purchase shares of the Company's Common Stock. The exercise price, term, vesting
conditions, and other terms for all stock options granted under the 1998 Plan
will be determined at the time of grant by the Board of Directors or a board
committee appointed to administer the 1998 Plan. A total of 500,000 shares of
Common Stock may be issued pursuant to the 1998 Plan. The 1998 Plan expires in
2008.
F-15
22
A summary of the status of the Company's stock option plans at September 30,
1998, 1997, and 1996 and for the years then ended is presented in the table
below:
1998 1997 1996
------------------ ------------------ -------------------
Wtd Wtd
Number Avg Number Avg Number Wtd Avg
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
Outstanding at
beginning of year. 1,032,710 $ 6.58 1,110,053 $ 4.16 1,111,200 $ 2.90
Granted............ 503,500 27.92 220,250 17.76 240,700 9.28
Exercised.......... (425,990) 4.01 (296,092) 5.80 (239,247) 3.45
Canceled........... (179,409) 30.63 (1,501) 9.43 (2,600) 5.25
Outstanding at
end of year....... 930,811 14.61 1,032,710 6.58 1,110,053 4.16
Options exercisable
at end of year.... 563,058 9.79 714,950 3.09 881,774 2.91
Options available
for grant......... 572,860 396,951 365,700
Weighted average
fair value of
options granted... $11.74 $ 7.33 $ 3.77
Options outstanding and exercisable by price range as of September 30, 1998 are
as follows:
Options Outstanding Options Exercisable
--------------------------------------- ----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Options Contractual Exercise Options Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ---- ----- ----------- -----
$ 1.25 - $11.04 447,307 2.32 $ 4.92 407,232 $ 6.22
$11.05 - $22.09 171,169 4.43 18.41 69,825 18.49
$22.10 - $36.81 312,335 6.74 26.40 86,001 28.22
------- ---- ------ ------- ------
$ 1.25 - $36.81 930,811 4.20 $14.61 563,058 $ 9.79
======= ==== ====== ======= ======
The Company accounts for its stock-based compensation plans under APB No. 25,
under which no compensation expense has been recognized, as all options have
been granted with an exercise price equal to the fair value of the Company's
Common Stock on the date of grant. The Company adopted SFAS No. 123 for
disclosure purposes in fiscal 1997. For SFAS No. 123 purposes, the fair value of
each option grant has been estimated as of the date of grant using the
Black-Scholes option pricing model with the following assumptions: risk-free
interest rates ranging between 5.29% and 6.34%; expected life of three years;
dividend rate of 0.0%; and expected volatility of 54.715%. Using these
assumptions, the fair value of the stock options granted, net of cancellations,
is $3,553,957, $1,614,623, and $908,153 for the years ended September 30, 1998,
1997, and 1996, respectively. These amounts would be amortized as compensation
expense over the vesting period of the options. Options generally vest equally
over three years. Had compensation costs been determined consistent with SFAS
No. 123, utilizing the assumptions detailed above, the Company's net income and
earnings per share would have been reduced to the following pro forma amounts:
1998 1997 1996
-------- -------- -------
Net Income:
As Reported............................. $ 24,587 $ 10,146 $ 5,953
Pro Forma............................... $ 22,460 $ 9,305 $ 5,650
Basic EPS:
As Reported............................. $ 1.52 $ 0.72 $ 0.50
Pro Forma............................... $ 1.39 $ 0.66 $ 0.48
Diluted EPS:
As Reported............................. $ 1.48 $ 0.69 $ 0.46
Pro Forma............................... $ 1.35 $ 0.64 $ 0.43
F-16
23
(6) RELATED PARTY TRANSACTIONS
The Company currently leases a building in Tempe, Arizona, containing
approximately 46,000 square feet, which the Company utilized for its corporate,
administrative, sales offices, and warehouse facilities prior to September 1997.
Prior to March 1998, Fred W. Wagenhals, a shareholder, director, and officer of
the Company, owned a one-third interest in F.W. Investments, a partnership that
owned this facility. In March 1998, Mr. Wagenhals became the sole owner of this
facility. The Company paid F.W. Investments or Mr. Wagenhals rent of
approximately $175,000, $183,000, and $177,000 for the years ended September 30,
1998, 1997, and 1996 respectively. During fiscal 1998, the Company made a
refundable deposit of $900,000 to Mr. Wagenhals towards the purchase of the
facility. The Company is currently negotiating the final purchase agreement with
Mr. Wagenhals and intends to either sell or lease the facility to an
unaffiliated third party.
(7) EMPLOYEE BENEFIT PLANS
In October 1994, the Company established a defined contribution plan that
qualifies as a cash or deferred profit sharing plan under Sections 401(a) and
401(k) of the Internal Revenue Code. The plan is available to substantially all
domestic employees. Under the plan, participating employees may defer from 1% to
15% of their pre-tax compensation. The Company contributes fifty cents for each
dollar contributed by the employee, with a maximum contribution of 2% of the
employee's defined compensation. In addition, the plan provides for an annual
employer profit sharing contribution in such amounts as the Board of Directors
may determine. The Company expensed approximately $141,000, $41,000, and $26,000
under the plan for the years ended September 30, 1998, 1997, and 1996
respectively.
The Company has no other programs that require payment by the Company of
post-employment benefits to current or retired employees.
(8) INCOME TAXES
The Company provides for income taxes under SFAS No. 109, "Accounting for Income
Taxes." SFAS No. 109 requires the use of an asset and liability approach in
accounting for income taxes. Deferred tax assets and liabilities are recorded
based on the differences between the financial statement and tax bases of assets
and liabilities and the tax rates in effect when these differences are expected
to reverse. The principal differences arise as a result of the use of
accelerated depreciation and amortization methods for federal income tax
reporting purposes, certain inventory costs required to be capitalized for tax
purposes, and certain reserves expensed currently for financial reporting
purposes.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. The
ultimate realization of this deferred tax asset depends on the Company's ability
to generate sufficient taxable income in the future. A valuation allowance has
not been recorded as of September 30, 1998 or 1997.
The provision for income taxes consists of the following for the years ended
September 30 (in thousands):
1998 1997 1996
------- ------ -------
Current:
Federal..................... $15,300 $ 5,828 $ 3,258
State....................... 2,181 822 753
------- ------- -------
17,481 6,650 4,011
Deferred income taxes........... (1,090) 114 (94)
------- ------- -------
Provision for income taxes...... $16,391 $ 6,764 $ 3,917
======= ======= =======
F-17
24
Reconciliation of the federal income tax rate to the Company's effective rate
for the years ended September 30 are as follows:
1998 1997 1996
------ ------ ------
Statutory federal rate..................35.00% 35.00% 34.00%
State taxes, net of federal benefit
and other............................. 5.00 5.00 5.69
------ ------ ------
40.00% 40.00% 39.69%
====== ====== =======
The components of deferred taxes are as follows at September 30 (in thousands):
1998 1997
------ -------
Deferred tax assets (liabilities):
Accelerated tax depreciation........ $ (438) $ (391)
Accelerated tax amortization........ (675) (306)
Inventory cost capitalization....... 1,179 547
Valuation reserves and accruals..... 1,902 821
Deferred compensation............... 40 247
------ ------
Net deferred tax asset............ $2,008 $ 918
====== ======
(9) LEGAL SETTLEMENTS
In June 1997, the Company agreed to settle a breach of contract suit with Action
Products, Inc. for $4.9 million (the "API Settlement"). Pursuant to the API
Settlement, in July 1997 the Company made a payment of $4.9 million to the
plaintiff, and all parties executed mutual releases. The accompanying 1997
financial statements include a charge of $5.4 million for the API Settlement and
related legal fees.
In March 1998, the Company agreed to settle a lawsuit with Petty Enterprises,
Inc. and an affiliate of Petty Enterprises, Inc. Under the financial terms of
the settlement, the Company will pay a total of approximately $700,000 to Petty
Enterprises, Inc. as payment in full for royalties and other fees in connection
with licenses for future sales of licensed products. The settlement is subject
to the execution of definitive settlement agreements. The accompanying 1998
financial statements include a charge of $950,000 incurred as a result of this
settlement and related charges.
In March 1998, the Company and other defendants settled an environmental lawsuit
with the State of Arizona. Under the agreement, the former shareholders of F.W.
& Associates, Inc., including Fred W. Wagenhals, the Company's Chairman of the
Board, President, and Chief Executive Officer, paid an aggregate of $800,000 to
the state and certain parties seeking indemnity from the Company. The Company
did not incur any costs in connection with this settlement.
(10) COMMITMENTS AND CONTINGENCIES
On March 4, 1997, two class action lawsuits were filed against the Company and
approximately 28 other defendants in the United States District Court for the
Northern District of Georgia. The lawsuits allege that the defendants engaged in
price fixing and other anti-competitive activities in violation of federal
anti-trust laws. The Company was named as a defendant based upon actions alleged
to have been taken by Sports Image, Inc., a North Carolina corporation ("Sports
Image N.C.") and Creative Marketing & Promotions, Inc. ("CMP") prior to the
Company's acquisitions of the assets and capital stock, respectively, of those
entities. The actions were subsequently consolidated by order of the court. The
caption of the consolidated action is "In re Motorsports Merchandise Antitrust
Litigation" and the files are maintained under Master File No. 1-97-CV-0569-CC.
On May 30, 1997, a consolidated amended complaint was filed, which deleted the
Company as a defendant with respect to claims based upon actions alleged to have
been taken by Sports Image N.C. and named the Company's wholly owned subsidiary,
Sports Image, Inc., an Arizona corporation ("Sports Image AZ"), as a defendant
with respect to those claims. The Company remains a defendant with respect to
claims based upon actions alleged to have been taken by CMP. On July 31, 1997,
the Company acquired all of the outstanding capital stock of RYP, which is
another defendant in this matter. Accordingly, the Company has assumed the
defense of this matter with respect to claims based upon actions alleged to have
been taken by RYP and has agreed to be responsible for and to pay any costs,
fees, expenses, damages, payments, credits,
F-18
25
rebates, and penalties, if any, arising out of this matter with respect to RYP.
The seller of RYP has agreed to be responsible for amounts, if any, in excess of
$400,000 (the "$400,000 Cap"). The $400,000 Cap excludes attorneys fees and
certain other costs and expenses that the Company may incur in defending or
settling this matter. The plaintiffs have requested injunctive relief and
monetary damages of three times an unspecified amount of damages that the
plaintiffs claim to have actually suffered. On August 1, 1997, answers were
filed on behalf of the Company and Sports Image AZ denying the allegations of
the complaint. Pursuant to an agreement between the plaintiffs and Sports Image
AZ to toll the running of the statute of limitations with respect to any claims
against Sports Image AZ, on November 17, 1997 the plaintiffs filed a motion to
dismiss Sports Image AZ from the case without prejudice. The court granted the
motion on March 20, 1998. On March 2, 1998, the plaintiffs filed, pursuant to a
court order, a second consolidated amended complaint intended to set forth
certain allegations with greater specificity. The Company intends to vigorously
defend the claims asserted in this lawsuit.
The Company leases certain equipment and office space under noncancellable
operating leases. Rent expense related to these lease agreements totaled
approximately $ 3.1 million, $935,000, and $437,000 for the fiscal years ended
September 30, 1998, 1997, and 1996 respectively.
Future lease payments under the noncancellable operating leases are
approximately as follows (in thousands):
Year Ending
September 30,
1999 $ 3,299
2000 2,933
2001 2,441
2002 2,115
2003 1,872
Thereafter 23,782
-------
Total $36,442
=======
Certain of the Company's licensing agreements require the Company to make
minimum annual guaranteed royalty payments through the term of the agreements.
To date, the Company has recovered all such minimum annual guaranteed royalty
payments through normal product sales. There can be no assurance, however, that
the Company will generate sufficient product sales in the future to recover such
payments.
The Company is subject to certain other asserted and unasserted claims
encountered in the normal course of business. In the opinion of management, the
resolution of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
(11) SUBSEQUENT EVENTS
On October 27, 1998, the Company acquired all of the outstanding stock of
Intellectual Properties Group, Inc. ("IPG") in exchange for 35,000 shares of the
Company's restricted common stock. IPG creates and develops promotional programs
for corporate sponsors of motorsports. The transaction will be accounted for as
a pooling-of-interests. Prior period financial statements will not be restated
because IPG's historical operating results and financial position are not
material in relation to the Company's operating results and financial position.
(12) EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT
On November 23, 1998, the Company acquired Tech 2000 Worldwide, Inc. ("Tech
2000"), a privately held Massachusetts-based Internet company, through a merger
of Tech 2000 and Action Interactive, Inc., a wholly owned subsidiary of the
Company. Under the terms of the merger agreement, the Company issued 137,925
shares of its restricted common stock in exchange for all of the issued and
outstanding common stock of Tech 2000. The transaction will be accounted for as
a pooling-of-interests. Prior period financial statements will not be restated
because Tech 2000's historical operating results and financial position are not
material in relation to the Company's operating results and financial position.
F-19
26
On November 30, 1998, the Company entered into an exclusive licensing agreement
with CART Licensed Products, L.P., the licensing arm of Championship Auto Racing
Teams, Inc. ("CART"). Under the terms of the licensing agreement, the Company
obtained the exclusive rights to the CART series and FedEx Championship Series
logos, as well as exclusive rights to five teams in the CART series, including
Newman/Haas Racing, PacWest Racing Group, Target/Chip Ganassi Racing, Team
Green, Inc., and Team Rahal, Inc. In addition, the Company also obtains the
non-exclusive rights for a minimum of 75% of the other teams and drivers that
participate in CART sanctioned race events. The rights granted under the
agreement allow the Company to create a line of collectible vehicles consistent
with the detail and quality featured in its existing die-cast collectibles and
allow the Company to market or sublicense a broad range of toy products such as
plastic and remote control vehicles, action figures, miniature helmets, board
games, plush toys, and puzzles. The initial term of the agreement is for five
years with a five-year renewal option.
F-20
27
Exhibit
Number Exhibit Index
- ------ -------------
1.0 Form of Underwriting Agreement (1)
3.1 First Amended and Restated Articles of Incorporation of Registrant(2)
3.2 Amended and Restated Bylaws of Registrant(2)
4.1 Form of Certificate of Common Stock(3)
4.2 Indenture dated as of March 24, 1998, between Action Performance
Companies, Inc. and First Union National Bank, as Trustee, including
forms of Notes(4)
10.4.2 1993 Stock Option Plan, as amended and restated through January 16,
1997(5)
10.8 Form of Indemnification Agreement entered into with the Directors of
the Registrant(3)
10.21 Lease between the Company and F.W. Investments dated January 1, 1994(6)
10.27 Manufacturing Agreement between the Company and Early Light
International (Holdings) Ltd. dated December 5, 1994(7)
10.33 Asset Purchase Agreement dated as of November 7, 1996, among Action
Performance Companies, Inc., SII Acquisition, Inc., Sports Image, Inc.,
and R. Dale Earnhardt and Teresa H. Earnhardt(8)
10.34 Promissory Note dated November 7, 1996, in the principal amount of
$24,000,000 issued by SII Acquisition, Inc., as Maker, to Sports Image,
Inc., as Payee, together with Guarantee of Action Performance
Companies, Inc.(8)
10.35 Security Agreement dated November 7, 1996, between Sports Image, Inc.
and SII Acquisition, Inc.(8)
10.36 Registration Agreement dated as of November 7, 1996, among Action
Performance Companies, Inc., Sports Image, Inc., and R. Dale Earnhardt
and Teresa H. Earnhardt(8)
10.37 License Agreement dated as of November 7, 1996, among SII Acquisition,
Inc., Dale Earnhardt, and Action Performance Companies, Inc.(8)
10.39 Asset Purchase Agreement dated as of January 1, 1997, among Action
Performance Companies, Inc., MTL Acquisition, Inc., Motorsport
Traditions Limited Partnership, Midland Leasing, Inc., and Motorsports
By Mail, Inc.(9)
10.40 Exchange Agreement dated as of January 1, 1997, among Action
Performance Companies, Inc., Kenneth R. Barbee, and Jeffery M.
Gordon(9)
10.41 Promissory Note dated January 1, 1997, in the principal amount of
$1,600,000 issued by MTL Acquisition, Inc., as Maker, to Motorsport
Traditions Limited Partnership, as Payee, together with Guarantee of
Action Performance Companies, Inc.(9)
10.42 Note Purchase Agreement dated as of January 2, 1997, among Action
Performance Companies, Inc., Jefferson-Pilot Life Insurance Company,
Alexander Hamilton Life Insurance Company of America,
28
and First Alexander Hamilton Life Insurance Company, together with form
of Note, form of Subsidiary Guaranty, and form of Subsidiary Joinder(9)
10.42A First Amendment dated as of March 18, 1998 to Note Purchase Agreement
dated as of January 2, 1997, among Action Performance Companies, Inc.,
Jefferson-Pilot Life Insurance Company, Alexander Hamilton Life
Insurance Company of America, and First Alexander Hamilton Life
Insurance Company(4)
10.43 Credit Agreement dated as of January 2, 1997, among Action Performance
Companies, Inc., Sports Image, Inc., MTL Acquisition, Inc., and First
Union National Bank of North Carolina(9)
10.43A Amendment and Consent to Credit Agreement dated March 18, 1998, by and
among Action Performance Companies, Inc., various subsidiary
guarantees, and First Union National Bank of North Carolina(4)
10.43B Amended and Restated Credit Agreement dated as of August 5, 1998, among
Action Performance Companies, Inc., certain subsidiaries and
affiliates, as guarantors, and First Union National Bank.*
10.44 Registration Agreement dated as of January 1, 1997, among Action
Performance Companies, Inc., Motorsport Traditions Limited Partnership,
Midland Leasing, Inc., and Motorsports By Mail, Inc.(9)
10.45 Registration Agreement dated as of January 1, 1997, among Action
Performance Companies, Inc., Kenneth R. Barbee, and Jeffery M.
Gordon(9)
10.46 Employment Agreement dated as of January 1, 1997, between Action
Performance Companies, Inc. and Kenneth R. Barbee(9)
10.47 Consulting Agreement dated as of January 1, 1997, between Action
Performance Companies, Inc. and John Bickford(9)
10.48 Common Stock Purchase Agreement dated January 16, 1997, between Hasbro,
Inc. and Action Performance Companies, Inc.(10)
10.49 Standard Form Industrial Lease dated April 8, 1997, between
Hewson/Breckner-Baseline, L.L.C. and Action Performance Companies,
Inc.(11)
10.50 Lease Agreement dated July 9, 1997, by and between Performance Park
Partners, LLC and Sports Image, Inc.(11)
10.51 Asset Purchase Agreement dated as of December 19, 1997, between Action
Performance Companies, Inc. and Revell-Monogram, Inc.(12)
10.52 1998 Non-qualified Stock Option Plan(4)
10.53 Purchase Agreement dated March 18, 1998 among Action Performance
Companies, Inc., NationsBanc Montgomery Securities LLC, CIBC
Oppenheimer Corp., EVEREN Securities, Inc. and Piper Jaffray Inc.(4)
10.54 Registration Rights Agreement dated March 24, 1998, by and among Action
Performance Companies, Inc., NationsBanc Montgomery Securities LLC,
CIBC Oppenheimer Corp., EVEREN Securities, Inc., and Piper Jaffray
Inc.(4)
11.1 Computation of Primary Earnings Per Share*
11.2 Computation of Fully Diluted Earnings Per Share*
12.1 Computation of Ratio of Earnings to Fixed Charges*
21.1 List of Subsidiaries of Action Performance Companies, Inc.*
23.1 Consent of Arthur Andersen LLP
25.1 Statement of Eligibility of Trustee under the Trust Indenture Act of
1939 on Form T-1(13)
27.1 Financial Data Schedule*
- --------------------
* Previously filed.
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 and Amendment No. 1 thereto (Registration No. 333-27485).
(2) Incorporated by reference to the Registrant's Form 10-QSB for the
quarter ended March 31, 1996, as filed with the Securities and Exchange
Commission on May 2, 1996.
(3) Incorporated by reference to the Registrant's Registration Statement on
Form SB-2 and amendments thereto (Registration No. 33-57414-LA).
(4) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended March 31, 1998, as filed with the Securities and Exchange
Commission on May 15, 1998.
29
(5) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended March 31, 1997, as filed with the Securities and Exchange
Commission on May 15, 1997.
(6) Incorporated by reference to the Registrant's Form 10-QSB for the
quarter ended March 31, 1994, as filed with the Securities and Exchange
Commission on May 16, 1994.
(7) Incorporated by reference to the Registrant's Form 10-KSB for the year
ended September 30, 1994, as filed with the Securities and Exchange
Commission on December 22, 1994.
(8) Incorporated by reference to the Registrant's Form 8-K filed with the
Securities and Exchange Commission on November 22, 1996, as amended by
Form 8-K/A filed on January 13, 1997.
(9) Incorporated by reference to the Registrant's Form 8-K filed with the
Securities and Exchange Commission on January 23, 1997, as amended by
Form 8-K/A filed on February 24, 1997.
(10) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (Registration No. 333-22943).
(11) Incorporated by reference to the Registrant's Form 10-K for the year
ended September 30, 1997, as filed with the Securities and Exchange
Commission on December 22, 1997.
(12) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (Registration No. 333-45991).
(13) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (Registration No. 333-53413).