Action Performance Companies, Inc. reported first quarter revenues for the first quarter ended December 31, 2002 increased $1.7 million, or 2.0%, to $85.8 million from $84.1 million in the same period last year. Net income for the three months ended December 31, 2002 was $8.0 million, compared to $8.2 million in the first quarter of fiscal 2002. On a per share basis, net income was $0.44 in first quarter of fiscal 2003 compared to $0.46 in the same period last year. First quarter 2003 net income includes $0.04 per share from foreign currency translation gains. First quarter 2002 net income includes $0.01 per share arising from a gain on extinguishment of debt, which was previously reported as an extraordinary item and has been reclassified in accordance with SFAS No. 145, effective October 1, 2002.
Action also reported EBITDA of $19.6 million in the fiscal first quarter of 2003, compared to $20.1 million in the same period the year prior.
“Considering the challenging economic backdrop, were pleased to have delivered sound EPS, weathering what is clearly the worst business conditions the nation has experienced in a decade,” Action Chairman and Chief Executive Officer Fred Wagenhals said. “With an economic model characterized by substantial operating income, as well as our rock-solid balance sheet, we believe Action will successfully ride out this recession, remain highly profitable, and deliver double-digit growth in fiscal 2003.”
First quarter sales, including $6.9 million from companies acquired in 2002, were impacted by a decline in wholesale die-cast sales, arising from the lack of product availability due to the previously announced delays in production of die-cast models of newly redesigned Chevrolet Monte Carlo and Pontiac NASCAR vehicles. These retooling efforts are now substantially complete. First quarter 2003 revenues also reflected an 80% increase in die-cast and apparel sales to mass merchandisers. Trackside and wholesale apparel sales declined, compared to strong sales in the prior year.
Action’s balance sheet grew stronger for the period ended December 31, 2002. Cash balances grew to $79.6 million from $69.6 million at September 30, 2002. Cash increased in part due to significant receivable collections of $17.3 million, including the collection of accounts of mass retailers, which had increased as of September 30, 2002, due to the timing of holiday shipments. Days sales outstanding were 47 days compared to 51 at September 30, 2002 and 42 days at December 31, 2001. The increase in DSOs from December 31, 2001 reflects Action’s increased mass-retail revenues, which have a longer DSO.
As part of the company’s long-stated policy of repurchasing common stock when opportunistic conditions present themselves, the company used its substantial cash position to purchase $2.0 million in Action shares on the open market.
“We continue to believe that our stock buyback program is important to effect capital management and complements the $0.03 dividend we introduced in September,” Chief Financial Officer David Martin noted. “Yet our stock repurchase program will remain conservative, in order to maintain our balance sheet strength.”
Action anticipates that fiscal 2003 capital expenditures will be comparable to the $25.8 million reported for the 12 months of fiscal 2002, but frontloaded in the earlier part of this year. Capital expenditures were $11.1 million in the first quarter of fiscal 2003, compared to $5.5 million in the same period last year. The increase in first quarter capital expenditures was primarily for retooling requirements to accommodate the recent NASCAR vehicle redesigns by Chevrolet and Pontiac.
For the second quarter ending March 31, 2003 management expects to realize revenues in the range of $90 million to $100 million, and EPS of $0.44 to $0.56. This guidance continues to reflect a decline in die-cast sales due to delayed product availability, arising from the timing of the completion of retooling and the related production issues. For the fiscal year ending September 30, 2003 Action anticipates revenues of $460 million to $485 million, EPS of $2.85 to $3.00 and EBITDA of $112 million to $117 million.
“In spite of a recessionary environment that is likely to extend well into 2003, we believe Action is well positioned to deliver double-digit growth this year,” Martin explained. “If consumer spending recovers in the second half of the year and general economic conditions begin to recover, we believe that Action can achieve the higher end of our guidance range. Our full-year revenue estimate reflects a recovery of die-cast sales in our third and fourth quarter, when we will have adequate die-cast product available.”
ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended December 31, 2002 and 2001
(in thousands, except per share data)
2002 2001
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Net sales $85,799 $84,136
Cost of sales 55,277 52,285
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Gross profit 30,522 31,851
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Operating expenses:
Selling, general and administrative 17,362 17,172
Amortization of licenses and
other intangibles 900 506
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Total operating expense 18,262 17,678
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Income from operations 12,260 14,173
Interest expense (579) (845)
Other 1,126 113
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Income before income taxes 12,807 13,441
Income taxes 4,841 5,211
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Net Income $ 7,966 $ 8,230
