U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission File Number 0-21630
Action Performance Companies, Inc.
----------------------------------
(Exact name of registrant as specified in its charter)
Arizona 86-0704792
------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2401 W. 1st St., Tempe, AZ 85281
--------------------------------
(Address of Principal Executive Offices)
(602) 894-0100
--------------
(Registrant's telephone number, including area code)
Indicate by check 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 xx No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 15,888,335 shares of common
stock (as of August 13, 1997).
<PAGE>
PART I, ITEM 1 FINANCIAL STATEMENTS
ACTION PERFORMANCE COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
As of June 30, 1997 and September 30, 1996
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents............................. $ 49,274,964 $ 4,983,382
Accounts receivable, net of allowance for doubtful
accounts of $936,133 and $256,324, respectively..... 15,694,808 7,496,988
Inventories, net...................................... 15,449,651 5,833,812
Deferred income taxes................................. 1,031,619 1,031,619
Prepaid royalties..................................... 4,730,217 2,295,505
Prepaid expenses and other assets..................... 1,732,996 739,723
------------ -----------
Total current assets................................ 87,914,255 22,381,029
PROPERTY AND EQUIPMENT, net............................. 13,357,671 8,188,441
GOODWILL, net of accumulated amortization of $833,206,
and $9,519, respectively.............................. 32,980,399 56,370
NOTES RECEIVABLE AND OTHER ASSETS....................... 1,285,681 1,022,794
------------ -----------
$135,538,006 $31,648,634
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable...................................... $ 8,342,096 $ 2,188,343
Accrued royalties..................................... 5,264,409 1,180,038
Line of credit........................................ 5,000,000 -
Income taxes payable.................................. - 521,547
Accrued settlement costs.............................. 5,400,000 -
Accrued expenses and other............................ 1,832,583 397,529
------------ -----------
Total current liabilities........................... 25,839,088 4,287,457
LONG-TERM DEBT:
Notes payable......................................... 21,194,342 -
Other long-term debt.................................. 853,726 364,725
------------ -----------
Total long-term debt................................ 22,048,068 364,725
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; 15,525,003 and 12,609,769 shares,
issued and outstanding, respectively.................. 155,250 126,098
Additional paid-in capital............................ 74,513,351 18,991,296
Retained earnings..................................... 12,982,249 7,879,058
------------ -----------
Total shareholders' equity.......................... 87,650,850 26,996,452
------------ -----------
$135,538,006 $31,648,634
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance sheets
2
<PAGE>
ACTION PERFORMANCE COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine and Three Month Periods Ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Sales:
Collectibles........................ $40,198,346 $28,644,790 $16,676,773 $ 11,597,886
Apparel and souvenirs............... 40,296,200 1,410,069 21,962,680 684,741
Promotional......................... 2,196,892 - 842,066 -
Other............................... 417,741 - 149,982 -
----------- ----------- ----------- ------------
Net sales....................... 83,109,179 30,054,859 39,631,501 12,282,627
Cost of sales....................... 51,249,289 17,442,007 24,947,635 6,858,245
----------- ----------- ----------- ------------
Gross profit........................ 31,859,890 12,612,852 14,683,866 5,424,382
Selling, general and
administrative expenses........... 15,852,202 6,449,838 6,596,628 2,485,368
Settlement costs.................... 5,400,000 - 5,400,000 -
Goodwill amortization............... 833,206 3,294 338,318 1,064
----------- ----------- ----------- ------------
Income from operations.............. 9,774,482 6,159,720 2,348,920 2,937,950
Other income (expense):
Interest income and other, net.... 255,844 231,344 89,690 42,920
Interest expense.................. (1,525,009) (67,124) (608,568) (19,717)
----------- ----------- ----------- ------------
Total other income (expense).... (1,269,165) 164,220 (518,878) 23,203
----------- ----------- ----------- ------------
Income before provision for
income taxes...................... 8,505,317 6,323,940 1,830,042 2,961,153
Provision for income taxes.......... 3,402,126 2,529,576 732,016 1,184,461
----------- ----------- ----------- ------------
NET INCOME.......................... $ 5,103,191 $ 3,794,364 $ 1,098,026 $ 1,776,692
=========== =========== =========== ============
NET INCOME PER COMMON SHARE:
Primary........................... $ 0.36 $ 0.29 $ 0.08 $ 0.14
=========== =========== =========== ============
Fully Diluted .................... $ 0.36 $ 0.29 $ 0.08 $ 0.14
=========== =========== =========== ============
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary........................... $13,997,184 12,980,905 14,429,995 13,147,254
=========== ========== ========== ==========
Fully Diluted .................... $14,033,328 13,053,925 14,430,317 13,150,125
=========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE>
ACTION PERFORMANCE COMPANIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Nine Months Ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
-------------------- Additional
Shares Paid-In Retained
Issued Amount Capital Earnings Total
---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, September 30, 1996 12,609,769 $126,098 $18,991,296 $ 7,879,058 $26,996,452
---------- -------- ----------- ----------- -----------
Common stock issued upon
exercise of options....... 211,516 2,115 1,021,875 - 1,023,990
Common stock issued upon
purchase of business...... 746,218 7,462 9,604,636 - 9,612,098
Issuance of common stock.... 187,500 1,875 2,583,632 - 2,585,507
Issuance of common stock
in public offering........ 1,770,000 17,700 42,311,912 - 42,329,612
Net Income................. - - - 5,103,191 5,103,191
---------- -------- ----------- ----------- -----------
BALANCE, June 30, 1997 15,525,003 $155,250 $74,513,351 $12,982,249 $87,650,850
========== ======== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
ACTION PERFORMANCE COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income.................................... $ 5,103,191 $ 3,794,364
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization.............. 3,020,393 1,169,579
Change in assets and liabilities,
net of businesses acquired:
Accounts receivable...................... (2,576,033) (1,927,704)
Inventories.............................. (4,433,692) (2,072,014)
Prepaid royalties........................ (2,434,712) (962,152)
Prepaid expenses and other assets........ (1,104,249) (158,359)
Accounts payable......................... 1,116,339 231,565
Income taxes payable..................... (521,547) (289,507)
Accrued royalties and other.............. 4,057,359 267,742
Accrued settlement costs................. 5,400,000 -
----------- -----------
Net cash provided by
operating activities................... 7,627,049 53,514
Cash Flows from Investing Activities:
Acquisition of property and equipment....... (5,316,772) (2,883,845)
Proceeds from sale of equipment............. 110,781 -
Cash acquired in purchase of business ...... 1,140,363 -
----------- -----------
Net cash used in investing activities..... (4,065,628) (2,883,845)
Cash Flows from Financing Activities:
Borrowings on line of credit................ 4,878,583 5,221,898
Payments on line of credit.................. (5,278,583) (5,221,898)
Proceeds from issuances of common stock..... 48,965,747 1,287,228
Payments for offering costs................. (3,026,638) (17,466)
Payments on notes payable................... (4,623,825) -
Principal payments on capital lease
obligation and other....................... (185,123) (51,141)
----------- -----------
Net cash provided by financing activities. 40,730,161 1,218,621
----------- -----------
Increase (Decrease) in Cash................... 44,291,582 (1,611,710)
Cash, Beginning of Period................... 4,983,382 6,759,984
----------- -----------
Cash, End of Period......................... $49,274,964 $ 5,148,274
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
5
<PAGE>
ACTION PERFORMANCE COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(1) INTERIM FINANCIAL REPORTING
The accompanying unaudited Consolidated Financial Statements for Action
Performance Companies, Inc. (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and the instructions to Form 10-Q. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows for the periods
presented have been made. The results of operations for the nine-month period
ended June 30, 1997 are not necessarily indicative of the operating results that
may be expected for the entire year ending September 30, 1997. Certain prior
period amounts have been reclassified to conform to the June 30, 1997
presentation. These financial statements should be read in conjunction with the
Company's Form 10-KSB for the fiscal year ended September 30, 1996.
(2) SHAREHOLDERS EQUITY
On June 24, 1997, the Company sold 1,770,000 shares of its common stock in
connection with a public offering and an additional 315,000 shares of its common
stock on July 17, 1997 pursuant to the exercise of the underwriters
over-allotment option (collectively referred herein as the "1997 Public
Offering"). The net proceeds to the Company from this offering were $49.9
million, after deducting estimated offering expenses and underwriting discounts
and commissions.
(3) 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. 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.
(4) SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments during the nine months ended June 30, 1997 and 1996 included
interest of $671,698 and $67,124, respectively, and income taxes of $4,556,000
and $2,872,000, respectively.
In November 1996, the Company purchased substantially all of the assets and
assumed certain liabilities of Sports Image, Inc. ("Sports Image") for
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. On January 8,
1997, the Company acquired the business and substantially all of the assets and
assumed specified liabilities of Motorsport Traditions Limited Partnership
("MTL") and acquired all of the capital stock of Creative Marketing &
Promotions, Inc. ("CMP" and, together with MTL, "Motorsport Traditions") for
approximately $13,000,000. The consideration paid for Motorsport Traditions
consisted of (i) cash in the amount of $5,400,000; (ii) a promissory note in the
principal amount of $1,600,000 issued by a wholly owned subsidiary of the
Company; and (iii) an aggregate of 342,857 shares of the Company's Common Stock.
Non-cash financing, investing, and operating activities for the nine months
ended June 30, 1997 include (i) a $9,612,098 increase to common stock issued for
the acquisitions; (ii) a $38,391,771 increase of debt and liabilities incurred
or assumed in the acquisitions; and (iii) a $13,114,948 increase of assets, net
of cash acquired in the acquisitions.
Investing activities for the nine-month period ended June 30, 1997 included the
sale of $556,457 in equipment for cash proceeds of $110,781 and notes receivable
of $445,676.
6
<PAGE>
(5) BUSINESS COMBINATIONS
In November 1996, the Company purchased substantially all of the assets and
assumed certain liabilities of 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. 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. See Note 6. Sports Image sells and distributes a variety of
licensed motorsports products through wholesale distributor networks, corporate
sponsors, and mobile trackside stores. Terms of this acquisition were determined
by arms-length negotiations between representatives of Sports Image and
representatives of the Company. 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 $41,800,000 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
die-cast collectibles purchased from the Company at an aggregate cost of
approximately $5,800,000). This transaction was accounted for as a purchase.
On January 8, 1997, the Company acquired the business and substantially all of
the assets and assumed certain liabilities of Motorsport Traditions from 1995
Nascar Winston Cup Champion driver Jeff Gordon, Kenneth R. Barbee, certain
entities controlled by Mr. Barbee, and certain other persons. The effective date
of the acquisition of Motorsport Traditions is January 1, 1997. The purchase
price paid by the Company for Motorsport Traditions consisted of (i) cash in the
amount of $5,400,000; (ii) a promissory note in the principal amount of
$1,600,000 issued by a wholly owned subsidiary of the Company; and (iii) an
aggregate of 342,857 shares of the Company's common stock. The promissory note
bears interest at 4% per annum, matures on December 31, 1998, and has been
guaranteed by the Company. The terms of the acquisition, including the valuation
of the assets, liabilities, and capital stock acquired by the Company, were
determined by arms-length negotiations between representatives of the sellers
and representatives of the Company. Motorsport Traditions sells and distributes
licensed motorsports products through a network of wholesale distributors and
mobile trackside stores. Prior to the acquisitions, MTL and CMP together
generated approximately $33,000,000 in annual revenues from their design,
manufacturing, and sales and distribution activities. This transaction was
accounted for as a purchase.
Unaudited Pro Forma Income Statement Data
The following unaudited pro forma combined financial information of Action
Performance Companies, Inc. for the nine-month period ended June 30, 1997 and
1996, gives effect to the acquisitions of Sports Image and Motorsport
Traditions, as if they had occurred on October 1, 1995 using the purchase method
of accounting for business combinations. The unaudited pro forma combined
financial information presented herein does not purport to represent what the
Company's actual results of operations would have been had the acquisitions of
Sports Image and Motorsport Traditions occurred on that date or to project the
Company's results of operations for any future period.
Nine Months Ended Nine Months Ended
June 30, 1997 June 30, 1996
----------------- -----------------
(Unaudited) (Unaudited)
Net Sales........................ $94,579,000 $83,720,000
Settlement Costs................ 5,400,000 -
Operating Income................ 9,819,000 11,653,000
Net Income....................... 4,751,000 5,573,000
Net Income Per Common Share.... $0.34 $0.40
7
<PAGE>
(6) FINANCING ACTIVITIES
Credit Facility
On January 2, 1997, the Company entered into a $16.0 million credit facility
(the "Credit Facility") with First Union National Bank of North Carolina. The
Credit Facility consists of a revolving line of credit for up to $10.0 million
through September 30, 1997, and up to $6.0 million from September 30, 1997 to
March 31, 1998 (the "Line of Credit") and a $6.0 million letter of
credit/bankers' acceptances facility (the "Letter of Credit/BA Facility"). The
Line of Credit bears interest, at the Company's option, at a rate equal to
either (i) the greater of (a) the bank's publicly announced prime rate or (b) a
weighted average Federal Funds rate plus 0.5%, or (ii) LIBOR plus 1.9%. The Line
of Credit is guaranteed by Sports Image and Motorsport Traditions. The Company
utilized $4.0 million of the Line of Credit to provide part of the cash portion
of the purchase price for Motorsport Traditions and an additional $4.0 million
of the Line of Credit to repay a portion of the $24.0 million promissory note
issued in connection with the acquisition of Sports Image. The Letter of
Credit/BA facility is available for issuances of letters of credit and eligible
bankers' acceptances in an aggregate amount up to $10.0 million, as amended in
April 1997, to enable the Company to finance purchases of products from its
overseas vendors. The Credit Facility will mature on March 31, 1998. The Credit
Facility contains certain provisions that, among other things, will 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 or to sell assets or engage in certain mergers or consolidations.
Sale of Senior Notes
On January 2, 1997, the Company issued an aggregate of $20.0 million principal
amount of senior notes (the "Senior Notes") to three insurance companies. The
Senior Notes bear interest at the rate of 8.05% per annum, provide for
semi-annual payments of accrued interest, and will mature on January 2, 1999.
The Company may not prepay the Senior Notes prior to maturity, but will be
required to offer to redeem the Senior Notes in the event of a "Change of
Control" of the Company, as defined in the Senior Notes. The Senior Notes
contain certain provisions that, among other things, will 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
or to sell assets or engage in certain mergers or consolidations. The Senior
Notes are guaranteed by Sports Image and Motorsport Traditions. The Company
utilized the proceeds from the Senior Notes to repay the remainder of the
promissory note issued in connection with the acquisition of Sports Image.
(7) COMMITMENTS AND CONTINGENCIES
The Company is subject to certain 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 result of operations.
(8) LEGAL SETTLEMENT
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 financial
statements include a charge of $5.4 million for the API Settlement and related
legal fees. See Part II, Item 1 "Legal Proceedings".
8
<PAGE>
(9) SUBSEQUENT EVENTS
In July 1997, the Company agreed in principal to acquire all of the capital
stock of Robert Yates Promotions, Inc. ("RYP") for $5.7 million. Negotiations
are continuing related to certain contingent liabilities which may be assumed by
the Company. RYP sells licensed motorsports products through trackside trailers,
and generated approximately $3.0 million in revenues during calendar year 1996.
This transaction will be accounted for as a purchase.
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 assumed a three-year note payable of $750,000 as part of the
purchase price. In addition, the Company agreed to an additional contingent
payment of up to $1.4 million based upon the attainment of certain revenue
objectives through September 30, 2000. 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 million in revenues during 1996. Terms of the acquisition were
determined by arms length negotiations between Image Works and the Company. This
transaction will be accounted for as a purchase.
9
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Overview
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 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 and consumer products are manufactured by
third parties, generally utilizing the Company's designs, tools, and dies.
The Company was incorporated in Arizona in May 1992 and began marketing die-cast
collectibles in July 1992. In August 1994, the Company acquired certain assets
and liabilities of Fan Fueler, Inc. and began marketing licensed motorsports
consumer products. During fiscal 1994, the Company also conducted the business
of staging M-Car(TM) Grand Prix Races for charitable and other organizations, in
which participating sponsors purchased specialized gas-powered, one-third scale
racing vehicles from the Company. In September 1994, the Company sold the assets
and liabilities related to its M-Car(TM) operations and discontinued its
M-Car(TM) Grand Prix Race operations. During fiscal 1994 and the first two
quarters of fiscal 1995, the Company designed and marketed pedal, electric, and
gas-powered mini vehicles, primarily as specialty promotional items. The Company
sold the assets related to its mini vehicle operations in March 1995.
In November 1996, the Company acquired Sports Image and in January 1997 the
Company acquired Motorsport Traditions, both of which market and distribute
licensed motorsports apparel and other souvenir items. Following these
acquisitions, the Company took a number of actions intended to integrate the
operations of the acquired companies with the Company's existing operations and
to reduce overall selling, general, and administrative expenses associated with
the acquired entities. These actions included consolidating the operations of
Motorsport Traditions with Sports Image's existing operations and facility in
Charlotte, North Carolina; reducing the total number of employees in Charlotte;
and integrating the management information systems of the acquired companies.
In addition to the anticipated cost savings described above, the Company also
believes that the acquisitions of Sports Image and Motorsport Traditions provide
the potential for enhanced revenue opportunities as a result of the synergies
created by expanded product offerings and additional distribution channels. For
example, the Company intends to develop new lines of licensed motorsports
apparel and souvenirs for exclusive sales through its collectors' club. The
Company also believes that Sports Image and Motorsport Traditions will provide
opportunities for additional sales growth of the Company's die-cast products
through trackside sales, promotional programs, and fan clubs.
Prior to the acquisitions of Sports Image and Motorsport Traditions, the
Company's revenue consisted primarily of sales of die-cast collectibles, while
the revenue of Sports Image and Motorsport Traditions consisted primarily of
sales of licensed motorsports apparel and souvenirs. The Company believes that
the increased sales of licensed apparel and souvenirs following the acquisitions
of Sports Image and Motorsport Traditions will result in lower overall gross
margins as a result of lower gross margins generally associated with these
acquired product lines. The Company believes, however, that the effect of these
lower gross margins will be mitigated at least to some extent by cost reductions
and other operational efficiencies associated with the combination of the
acquired entities. The Company also believes that gross and net margins will
increase in the future as a result of the license agreement with Hasbro Inc.,
which provides the Company with the opportunity to recognize significant license
royalties without any significant related cost of sales and without committing
substantial capital for manufacturing and marketing activities. In addition, the
Company believes that its new license arrangement with NASCAR will enhance sales
of its existing products as well as provide a number of opportunities for
developing new corporate promotional programs and one or more new fan clubs.
10
<PAGE>
The Company's cost of sales consists primarily of the cost of products procured
from third-party manufacturers, royalty payments to licensors, and depreciation
of tooling and dies. Significant factors affecting the Company's cost of sales
as a percentage of net sales include (i) the overall percentage of net sales
represented by sales of die-cast collectible products, which typically carry
higher gross margins than the Company's other products, (ii) the percentage of
sales of die-cast collectible products represented by sales through the
collectors' club, which typically carry higher gross margins than sales of such
products through wholesale distributors, and (iii) the effect of amortizing the
fixed cost components of cost of sales, primarily depreciation of tooling and
dies, over varying levels of net sales. Selling, general, and administrative
expenses include general corporate expenses as well as goodwill amortization.
The Company recorded goodwill of approximately $33.7 million in connection with
the acquisition of Sports Image and Motorsport Traditions. The goodwill is being
amortized at the rate of $1.4 million per year over 25 years. As described
above, the Company anticipates that it will achieve a significant reduction in
selling, general, and administrative expenses as a percentage of sales as a
result of the cost-reduction efforts taken following the acquisitions of Sports
Image and Motorsport Traditions.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of
total revenue represented by certain expense and revenue items.
Nine Months Ended Three Months Ended
June 30, June 30,
----------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
Sales:
Collectibles sales, net.......... 48.4% 95.3% 42.1% 94.4%
Apparel and souvenir sales, net.. 48.5% 4.7% 55.4% 5.6%
Promotional sales, net........... 2.6% 0.0% 2.1% 0.0%
Other sales, net................. .5% 0.0% .4% 0.0%
----- ----- ----- -----
Net sales...................... 100.0% 100.0% 100.0% 100.0%
Cost of sales............................. 61.7% 58.0% 62.9% 55.9%
----- ----- ----- -----
Gross Profit.............................. 38.3% 42.0% 37.1% 44.1%
Selling, general and administrative
expenses................................. 19.1% 21.5% 16.7% 20.2%
Settlement costs.......................... 6.5% 0.0% 13.6% 0.0%
Goodwill amortization..................... 1.0% 0.0% 0.9% 0.0%
----- ----- ----- -----
Income from operations.................... 11.7% 20.5% 5.9% 23.9%
Interest income (expense) and other,net (1.5%) 0.5% (1.3%) .2%
----- ----- ----- -----
Income before provision for
income taxes............................. 10.2% 21.0% 4.6% 24.1%
Provision for income taxes................ (4.1%) (8.4%) (1.8%) (9.6%)
----- ----- ----- -----
Net income................................ 6.1% 12.6% 2.8% 14.5%
===== ===== ===== =====
Three Months Ended June 30, 1997 Compared with Three Months Ended June 30, 1996
Net sales increased 222.7% to $39.6 million for the three months ended June 30,
1997 from $12.3 million for the three months ended June 30 , 1996. The Company
attributes the improvement in sales during the third quarter of fiscal 1997
primarily to (i) additional revenue streams from Sports Image and Motorsport
Traditions, which were acquired by the Company during the first and second
quarters of fiscal 1997, respectively; (ii) the continued expansion of the
die-cast collectible market and the Company's ability to produce and sell
increased quantities of collectibles; and (iii) an increase in collectors' club
membership. The number of members in the collectors' club increased from
approximately 65,000 members to approximately 90,000 members at June 30, 1996
and June 30, 1997, respectively.
Gross profit increased to $14.7 million for the three months ended June 30,
1997, from $5.4 million for the three months ended June 30, 1996, representing
37.1% and 44.1% of net sales, respectively. The decrease in gross profit
percentage for the three-month period ended June 30, 1997 primarily resulted
from the increased sales of apparel and souvenirs, which typically provide lower
margins than sales of the Company's collectible products.
11
<PAGE>
Selling, general and administrative expenses increased to $6.6 million for the
three-month period ended June 30, 1997 from $2.5 million for the three months
ended June 30, 1996, representing 16.7% and 20.2% of net sales, respectively.
The decrease in such expenses as a percentage of sales resulted primarily from
cost savings achieved with the integration and consolidation of operations for
the acquired entities of Sports Image and Motorsport Traditions. The integration
and consolidation included the relocation of Motorsport Traditions operations
into Sport Image's facility, the integration of management information systems,
and a reduction in excess labor.
Settlement costs of $5.4 million for the three-month period ended June 30, 1997
resulted from the one time charge for the API Settlement and related legal
charges. This settlement represents 13.6% of net sales. See Part II, Item 1
"Legal Proceedings".
Goodwill amortization increased to $338,000 for the three-month period ended
June 30, 1997 from $1,000 for the three months ended June 30, 1996. The increase
in goodwill amortization is related to the acquisitions of Sports Image and
Motorsport Traditions. The Company recorded goodwill of $33.7 million in
connection with the acquisitions that is amortized over a 25 year period.
The change in interest income (expense) and other, net, was primarily
attributable to an increase in interest expense of $589,000 related to debt
incurred in connection with the acquisitions of Sports Image and Motorsport
Traditions.
Nine Months Ended June 30, 1997 Compared with Nine Months Ended June 30, 1996
Net sales increased 176.5% to $83.1 million for the nine months ended June 30,
1997 from $30.1 million for the nine months ended June 30, 1996. The Company
attributes the improvement in sales during the first nine months of fiscal 1997
primarily to (i) additional revenue streams from Sports Image and Motorsport
Traditions, which were acquired by the Company during the first and second
quarters of fiscal 1997, respectively; (ii) the continued expansion of the
die-cast collectible market and the Company's ability to produce and sell
increased quantities of collectibles; and (iii) an increase in collectors' club
membership. The number of members in the collectors' club increased from
approximately 65,000 members to approximately 90,000 members at June 30, 1996
and June 30, 1997, respectively.
Gross profit increased to $31.9 million for the nine months ended June 30, 1997
from $12.6 million for the nine months ended June 30, 1996, representing 38.3%
and 42.0% of net sales, respectively. The decrease in the gross profit as a
percentage of net sales for the nine-month period ended June 30, 1997 resulted
from increased sales of apparel and souvenirs, which typically provide lower
margins than sales of the Company's collectible products.
Selling, general and administrative expenses increased to $15.9 million for the
nine-month period ended June 30, 1997 from $6.4 million for the nine-months
ended June 30, 1996, representing 19.1% and 21.5% of net sales, respectively.
The decrease in such expenses as a percentage of sales resulted primarily from
cost savings achieved with the integration and consolidation of operations for
the acquired entities of Sports Image and Motorsport Traditions. The integration
and consolidation included the relocation of Motorsport Traditions operations
into Sport Image's facility, the integration of management information systems,
and a reduction in excess labor.
Settlement costs of $5.4 million for the nine-month period ended June 30, 1997
resulted from the one time charge for the API Settlement and related legal
charges. This settlement represents 6.5% of net sales. See Part II, Item 1
"Legal Proceedings".
Goodwill amortization increased to $833,000 for the nine-month period ended June
30, 1997 from $3,000 for the nine months ended June 30, 1996. The increase in
goodwill amortization is related to the acquisitions of Sports Image and
Motorsport Traditions. The Company recorded goodwill of $33.7 million in
connection with the acquisitions that is amortized over a 25 year period.
The change in interest income (expense) and other, net, was primarily
attributable to an increase in interest expense of $1,458,000 related to debt
incurred in connection with the acquisitions of Sports Image and Motorsport
Traditions.
12
<PAGE>
Pro Forma Results of Operations
The Company had pro forma net income for the nine months ended June 30, 1997 of
$4.8 million, or $0.34 per share, compared with actual net income of $5.1
million, or $0.36 per share. The difference in earnings per share on a pro forma
basis for the nine months ended June 30, 1997 is primarily attributable to lower
gross margins as a result of the liquidation of inventory following the end of
the 1996 racing season by the acquired entities prior to the date of
acquisition. The Company intends to improve the management and control of
inventories of the acquired companies in order to reduce the need for seasonal
adjustments to inventory. The pro forma results of operations for the nine
months ended June 30, 1997 and 1996 reflect the amortization of goodwill arising
from the acquisitions of Sports Image and Motorsport Traditions and include
additional interest expense associated with the financing of these acquisitions.
The pro forma results do not account for efficiencies gained upon the
consolidation of operations, including the elimination of duplicative functions
and reduction of salaries expense and other related costs.
Seasonality
Because the auto racing season is concentrated between the months of February
and November, the second and third calendar quarters of each year (the Company's
third and fourth fiscal quarters) generally are characterized by higher sales of
motorsports products. The Company believes, however, that holiday sales of its
products are increasing, which has the effect of reducing seasonal fluctuations
in its sales.
Liquidity and Capital Resources
The Company's working capital position increased to $62.1 million at June 30,
1997 from $18.1 million at September 30, 1996. The increase of $44.0 million is
primarily attributable to the Company's 1997 Public Offering, the working
capital acquired from the purchase of Sports Image and Motorsport Traditions by
the Company, and results from operations.
On June 24, 1997, the Company sold 1,770,000 shares of its common stock in
connection with the 1997 Public Offering and an additional 315,000 shares of its
common stock on July 17, 1997 pursuant to the exercise of the underwriters
over-allotment option. The net proceeds to the Company from this offering were
$49.9 million, after deducting estimated offering expenses and underwriting
discounts and commissions.
Capital expenditures for the nine months ended June 30, 1997 totaled
approximately $5.3 million, of which approximately $4.1 million was utilized for
the Company's continued investment in tooling.
On January 16, 1997, the Company sold an aggregate of 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.
During the nine months ended June 30, 1997, the Company issued 211,516 shares of
common stock upon the exercise of employee stock options, resulting in total
proceeds to the Company of approximately $1.0 million.
In November 1996, the Company purchased substantially all of the assets and
assumed certain liabilities of Sports Image, Inc. The purchase price was
approximately $30.0 million, consisting of a $24.0 million promissory note due
January 2, 1997 and 403,361 shares of the Company's common stock. On January 2,
1997, the Company repaid the promissory note with the proceeds from the issuance
of senior notes and a portion of the borrowings under the credit facility
described below. The terms of this acquisition were determined by arms-length
negotiations between representatives of Sports Image and representatives of the
Company. In fiscal 1996, the Company derived approximately 16% of its net sales
from Sports Image, a distributor of the Company's die-cast collectible products.
In January 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of Motorsport Traditions Limited Partnership and
acquired all of the capital stock of Creative Marketing & Promotions, Inc. for
approximately $13.0 million, consisting of cash in the amount of $5.4 million, a
promissory note in the
13
<PAGE>
principal amount of $1.6 million, and an aggregate of 342,857 shares of the
Company's common stock. The terms of the acquisitions were determined by
arms-length negotiations between representatives of the sellers and
representatives of the Company.
On January 2, 1997, the Company entered into the $16.0 million credit facility
(the "Credit Facility") with First Union National Bank of North Carolina. The
Credit Facility consists of a revolving line of credit (the "Line of Credit")
for up to $10.0 million through September 30, 1997 and up to $6.0 million from
September 30, 1997 to March 31, 1998, and a $6.0 million letter of
credit/bankers' acceptances facility (the "Letter of Credit/BA Facility"). The
Line of Credit bears interest, at the Company's option, at a rate equal to
either (i) the greater of (a) the bank's publicly announced prime rate or (b) a
weighted average Federal Funds rate plus 0.5%, or (ii) LIBOR plus 1.9%. The Line
of Credit is guaranteed by Sports Image and Motorsport Traditions. The Company
utilized $4.0 million of the Line of Credit to provide part of the cash portion
of the purchase price for Motorsport Traditions and an additional $4.0 million
of the Line of Credit to repay a portion of the $24.0 million promissory note
issued in connection with the acquisition of Sports Image. The Letter of
Credit/BA Facility is available for issuances of letters of credit and eligible
bankers' acceptances in an aggregate amount up to $10.0 million, as amended in
April 1997, to enable the Company to finance purchases of products from its
overseas vendors. The Company had outstanding purchase commitments of
approximately $5.3 million under the Letter of Credit/BA Facility as of June 30,
1997. The Credit Facility will mature on March 31, 1998. The Credit Facility
contains certain provisions that, among other things, will 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 or to sell assets or engage in certain mergers or consolidations.
On January 2, 1997, the Company issued an aggregate of $20.0 million principal
amount of senior notes (the "Senior Notes") to three insurance companies. The
Senior Notes bear interest at the rate of 8.05% per annum, provide for
semi-annual payments of accrued interest, and will mature on January 2, 1999.
The Company may not prepay the Senior Notes prior to maturity, but will be
required to offer to redeem the Senior Notes in the event of a "Change of
Control" of the Company, as defined in the Senior Notes. The Senior Notes
contain certain provisions that, among other things, will 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
or to sell assets or engage in certain mergers or consolidations. The Senior
Notes are guaranteed by Sports Image and Motorsport Traditions. The Company
utilized the proceeds from the Senior Notes to repay the remainder of the
promissory note issued in connection with the acquisition of Sports Image.
In July 1997, the Company agreed in principal to acquire all of the capital
stock of Robert Yates Promotions, Inc. ("RYP") for $5.7 million. Negotiations
are continuing related to certain contingent liabilities which may be assumed by
the Company. RYP sells licensed motorsports products through trackside trailers,
and generated approximately $3.0 million in revenues during calendar year 1996.
This transaction will be accounted for as a purchase.
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 assumed a three-year note payable of $750,000 as part of the
purchase price. In addition, the Company agreed to an additional contingent
payment of up to $1.4 million based upon the attainment of certain revenue
objectives through September 30, 2000. 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 million in revenues during 1996. Terms of the acquisition were
determined by arms length negotiations between Image Works and the Company. This
transaction will be accounted for as a purchase.
14
<PAGE>
The Company is a defendant in various lawsuits. The Company has made no
provision in its financial statements with respect to these matters with the
exception of the API Settlement. The imposition of damages in one or more of the
cases against the Company could have a material adverse effect on the Company's
financial position.
The Company believes that its current cash resources, the Credit Facility, and
expected cash flow from operations will be sufficient to fund the Company's
capital needs during the next 12 months at its current level of operations,
apart from capital needs resulting from any additional acquisitions. However,
the Company may be required to obtain additional capital to fund its planned
growth during the next 12 months and beyond. Potential sources of any such
capital may include the proceeds from the exercise of outstanding options, bank
financing, strategic alliances, and additional offerings of the Company's equity
or debt securities. There can be no assurance that such capital will be
available from these or other potential sources, and the lack of such capital
could have a material adverse affect on the Company's business.
This report contains forward-looking statements, including statements regarding
the Company's business strategies, the Company's business, and the industry in
which the Company operates. These forward-looking statements are based primarily
on the Company's expectations and are subject to a number of risks and
uncertainties, some of which are beyond the Company's control. Actual results
could differ materially from the forward-looking statements as a result of
numerous factors, including those set forth in the Company's Form 10-KSB for the
year ended September 30, 1996, as filed with the Securities and Exchange
Commission.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Litigation and Environmental Matters
A lawsuit, purportedly on behalf of Action Products, Inc. ("API"), a
dissolved Arizona corporation, was instituted on December 22, 1995, against
the Company, Fred W. Wagenhals, and others, in the United States District
Court for the District of Arizona. The complaint requested damages,
including punitive and treble damages, in an unspecified amount. The
complaint alleged that the Company, Mr. Wagenhals and others breached
contractual and other duties to API, appropriated certain business
opportunities of API and additionally claimed that these activities were
part of a fraudulent scheme. In June 1997 the Company, Mr. Wagenhals, and
other defendants, and the plaintiff reached an agreement to settle the
lawsuit. The settlement agreement was signed, and approved by the Court, in
July 1997. Pursuant to this settlement agreement, the Company made a
payment of $4.9 million to the plaintiff, and all parties executed mutual
releases. In connection with the settlement, Mr. Wagenhals waived any
claims he may have had to the settlement proceeds as an approximately 20%
shareholder of API.
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 (Civil Action Nos. 1:97-CV-0569-RCF
and 1:97-CV-0570-RCF). 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 of
action 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. 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. The Company intends to vigorously defend the claims asserted in
the amended and consolidated complaint.
On June 4, 1997, Petty Enterprises, Inc. Licensing Division filed a lawsuit
against the Company and Fred W. Wagenhals in the General Court of Justice
for Randolph County, North Carolina (Case No. 97 CVS 1070). The complaint
alleges that the Company engaged in activities that resulted in trademark
infringement, fraud, unfair competition, marketing unlicensed products,
misappropriation of business opportunities, breach of contract, unjust
enrichment, conversion, and violations of the North Carolina Unfair and
Deceptive Trade Practices Act and the Lanham Act. In particular, the
plaintiff alleges that the Company manufactured and sold products in
quantities greater than the amounts permitted under certain license
agreements, manufactured and sold certain products for which it did not
have licenses, misrepresented the number of licensed products actually
manufactured and sold, and underpaid royalties to the licensors. The
complaint also alleges that these acts constitute a pattern of improper
activity. The complaint requests an unspecified amount of actual damages
plus treble an punitive damages, as well as injunctive relief. The Company
has now removed the litigation from the General Court of Justice for
Randolph County to the United States District Court for the Middle District
of North Carolina. In the United
16
<PAGE>
States District Court, the Company has filed an answer and counterclaim, as
well as a motion to dismiss or strike plaintiff's fraud claim, or in the
alternative, to require more definite statement. Further, the Company has
filed a third party complaint in the litigation against Brett Nelson, an
officer and/or agent for Petty Enterprises, Inc. alleging defamation and
damage to reputation, tortious interference with actual and perspective
business relations, and violations of the North Carolina Unfair and
Deceptive Trade Practices Act. The Company intends to vigorously defend and
prosecute this litigation.
On June 4, 1997, Kellogg Company filed a lawsuit against Fred W. Wagenhals
and the Company in the United States District Court for the Western
District of Michigan (Civil Action No. 4:97CV78; Judge Wendell A. Miles).
The complaint alleges that after expiration of its 1996 license agreement
with Kellogg, the Company produced 1997 model year products for which it
did not have a valid license. The complaint requests an unspecified amount
of actual damages plus treble damages, punitive damages and attorneys'
fees, an accounting, destruction of all infringing products together with
all means of making the same, as well as injunctive relief. The Company
intends to defend vigorously this lawsuit.
ITEM 2. Changes in Securities
Not applicable
ITEM 3. Defaults Upon Securities
Not applicable
ITEM 4. Submissions of Matters to a Vote of Security Holders
Submissions of Matters to a Vote of Security Holders
The Company's 1997 Annual Meeting of Shareholders was held on April 3,
1997. The following nominees were elected to the Company's Board of
Directors to serve until their successors are elected or have been
qualified, or until their earlier resignation or removal:
Nominee Votes in Favor Withheld
------- -------------- --------
Fred W. Wagenhals 12,149,338 412,290
Tod J. Wagenhals 12,149,438 412,190
Christopher S. Besing 12,149,438 412,190
Joseph M. Mattes 12,148,938 412,690
Melodee L. Volosin 12,149,438 412,190
John S. Bickford 12,149,438 412,190
John M. Lloyd 12,149,438 412,190
Robert H. Manschot 12,149,438 412,190
The following items were voted upon by the Company's shareholders:
Proposal to amend and restate the Company's 1993 Stock Option Plan.
Votes in Favor Opposed Abstained Broker Non-Vote
-------------- ------- --------- ---------------
6,725,827 3,150,414 110,325 0
Proposal to ratify the appointment of Arthur Andersen LLP as the
independent auditors of the Company for the fiscal year ending September
30, 1997.
Votes in Favor Opposed Abstained Broker Non-Vote
-------------- ------- --------- ---------------
12,441,310 14,263 106,055 0
17
<PAGE>
ITEM 5. Other Information
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of Primary Earnings Per Share
11.2 Computation of Fully Diluted Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
18
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Signature Capacity Date
- --------- -------- ----
/s/ Fred W. Wagenhals Chairman of the Board, President, August 13, 1997
- ---------------------- and Chief Executive Officer
Fred W. Wagenhals (Principal Executive Officer)
/s/ Christopher S. Besing Vice President, Chief Financial August 13, 1997
- ------------------------- Officer, Treasurer, and Director
Christopher S. Besing (Principal Financial and Accounting Officer)
19
EXHIBIT 11.1
COMPUTATION OF PRIMARY EARNINGS PER SHARE
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Shares
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 13,439,041 11,516,782 13,845,082 11,868,540
Additional shares assuming
conversion of:
Stock Options 558,143 530,988 584,913 576,160
Warrants -- 44,246 -- 42,554
Preferred Stock -- 888,889 -- 660,000
----------- ----------- ----------- -----------
Weighted average shares outstanding 13,997,184 12,980,905 14,429,995 13,147,254
=========== =========== =========== ===========
Net Income $ 5,103,191 $ 3,794,364 $ 1,098,026 $ 1,776,692
=========== =========== =========== ===========
Primary Earnings Per Share $ 0.36 $ 0.29 $ 0.08 $ 0.14
=========== =========== =========== ===========
</TABLE>
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.
20
EXHIBIT 11.2
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
-------------------------- ------------------------
1997 1996 1997 1996
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares
Weighted average number of common
shares outstanding 13,439,041 11,516,782 13,845,082 11,868,540
Additional shares assuming conversion of:
Stock Options 594,287 595,180 585,235 576,911
Warrants - 53,074 - 44,674
Preferred Stock - 888,889 - 660,000
----------- ---------- ---------- ----------
Weighted average shares
outstanding 14,033,328 13,053,925 14,430,317 13,150,125
=========== ========== ========== ==========
Net Income $ 5,103,191 $3,794,364 $1,098,026 $1,776,692
=========== ========== ========== ==========
Fully Diluted Earnings
Per Share $ 0.36 $ 0.29 $ 0.08 $ 0.14
=========== ========== ========== ==========
</TABLE>
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.
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This exhibit contains smmary financial information extracted from the
Registrant's financial statements for the period ended June 30, 1997,and is
qualified in its entirety by reference to such financial statements. This
exhibit shall not be deemed filed for purposes of Section 11 of the Securities
Act of 1933 and Section 18 of the Securities Exchange Act of 1994, or otherwise
subject to the liability of such Sections, nor shall it be deemed a part of any
other filing which incorporates this report by reference, unless such other
filing expressly incorporates this Exhibit by reference.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 49,275
<SECURITIES> 0
<RECEIVABLES> 16,631
<ALLOWANCES> 936
<INVENTORY> 15,450
<CURRENT-ASSETS> 87,914
<PP&E> 18,917
<DEPRECIATION> 5,559
<TOTAL-ASSETS> 135,538
<CURRENT-LIABILITIES> 25,839
<BONDS> 22,048
0
0
<COMMON> 155
<OTHER-SE> 74,513
<TOTAL-LIABILITY-AND-EQUITY> 135,538
<SALES> 83,109
<TOTAL-REVENUES> 83,109
<CGS> 51,249
<TOTAL-COSTS> 51,249
<OTHER-EXPENSES> 22,085
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,269
<INCOME-PRETAX> 8,505
<INCOME-TAX> 3,402
<INCOME-CONTINUING> 5,103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,103
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
