Action Performance reports loss - East Valley Tribune: Business

Action Performance reports loss

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Posted: Wednesday, August 3, 2005 6:57 am | Updated: 9:58 am, Fri Oct 7, 2011.

Tempe-based Action Performance Cos., which reported its fourth consecutive quarterly loss Tuesday, will dump a few losing businesses and focus on its core NASCAR product licenses to fire up its idling engines.

The company, which designs, markets and distributes licensed motor-sport merchandise, reported a loss of $15.5 million or 83 cents per share on sales of $72.7 million, for the three months that ended June 30.

That’s a huge 17 percent slip in sales from the same quarter a year ago.

About $6 million of the loss is from writing down assets of subsidiaries the company is scrapping or selling.

Chief financial officer David Riddiford said Action Performance will sell its McArthur Towels business for $3.8 million in the next quarter, and liquidate Jeff Hamilton Apparel and Castaway Collectibles.

The company also is in the process of executing a plan to eliminate middlemen and sell directly to dealers. That strategy is expected to launch in October and could be partly to blame for slipping sales as distributors stop stocking up, Riddiford said.

In a conference call with analysts, CEO Fred Wagenhals downplayed the company’s downward spiral.

"Although revenue is down year over year, it was consistent with our expectations," he said.

Turnaround master Herb Baum, who has been recruited to get Action Performance back on track, was not as generous about the Tempe company’s past performance.

"Sales less cost equals profitability, and we aren’t doing great on any of those measurements," he said Tuesday. "We’ve got to get our sales up and expenses down, and that will get us profitability."

Baum said he leaped from the board to direct company management to, "get us to profitability, communicate with investors, and, once we are back on track, examine strategic alternatives."

That could include running the company as is, merging with another company, "or any other alternative," he said Tuesday. However, licenses don’t transfer, so retaining the licenses key to the company’s business would be a major factor in considering any potential merger or sale option, he said.

For now, Baum said he will be ruthless in shucking losing lines, a repeat of his strategy to clean up soap maker Dial Corp., his most recent rehab effort. Baum worked a similar comeback for Quaker State Oil.

"If it is not making money and can’t quickly, it’s gone," he said of his plan for fixing Action Performance. Only sidelines that make a few bucks and don’t distract from the company’s core business can stay.

"We are not a toy company. We are not a collectibles company. We are not an apparel company. We are a NASCAR company, and that’s where our emphasis will be," Baum said.

Founder Wagenhals, who retains his CEO title, will be concentrating on the marketing end of the business.

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