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Action Performance Reports First Quarter 2005 Results; Announces New Distribution Model

Action Performance Companies, Inc. (NYSE:ATN - News), the leader in the design, marketing, promotion, and distribution of licensed motorsports merchandise, today announced financial results for the fiscal first quarter ended December 31, 2004. For the quarter, the company reported revenues of $76.1 million compared with $71.2 million in the prior year, an increase of 6.8%. Revenue growth in the quarter reflected improvements in trackside retail sales resulting from an additional race, as well as improved consumer demand at the racetracks. Apparel sales to wholesale and mass merchants also contributed to the growth in revenues.

The Company reported a net loss of $3.5 million, or $0.19 per share, compared with a net loss of $1.7 million, or $0.09 in first quarter of 2004. Included in the net loss for the first quarter of 2005 is an after-tax charge of $1.5 million for an allowance for uncollectible distributor receivables, an after-tax loss of $1.3 million from the Jeff Hamilton subsidiary and an after-tax charge of $0.3 million in severance expense. The net loss in the comparable period included after-tax charges of $1.0 million.

After a thorough review of Action´s business that was initiated in the fiscal fourth quarter of 2004, the Company concluded that it is necessary to restructure its channels of distribution for its domestic wholesale die-cast business. To that end, the Company intends to change from a network of distributors that it currently uses and distribute directly to retail dealers utilizing one or two fulfillment partners. While the process will take 8-12 months to fully complete, we believe it will afford the Company greater margin opportunities and visibility into its business.

Fred Wagenhals, Chief Executive Officer stated, "We are committed to restoring improved profitability at Action Performance. Streamlining our distribution is critical to executing successfully on the Company´s turnaround plans. The sale of our products direct to retail should enable Action to produce a more focused product line, increase our distribution and better control inventory and costs resulting in improved profitability and return on investment."

Click here for financial results.

Source: Action Performance Companies Inc.
Date: February 8, 2005

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