4707 E. Baseline Road
Action Performance Companies, Inc. is the leader in the design, marketing and distribution of licensed motorsports-related apparel, souvenirs, die cast car replica collectibles and other memorabilia.
Action Performance Companies, Inc. is one of the United States' leading corporations manufacturing and distributing souvenirs and apparel related to motor racing. The company runs a variety of racing-related enterprises. Its main business is producing die-cast miniature race car replicas. These are sold through a collectors' club, at racing events, and through other mainstream distribution channels. Action also manufactures other racing souvenirs, such as miniature replica drivers' helmets, and sells racing-style clothing for children and adults. In addition, it handles licensing agreements for prominent stock car drivers through its Action Sports Marketing Division. Under contract with the company are many of the most popular and successful drivers in the country. The company's enormous growth in the 1990s came as interest in stock car racing soared in the United States. Few other companies were serving this niche market, and Action Performance rode the wave of racing popularity to admirable financial reward.
Action Performance was founded by Fred Wagenhals, an inventor and former race car driver. Wagenhals attended college for two years, intending to become an engineer, but his real love was car racing, and he left school in order to drive. He raced for the next five years, and then began working for himself as a designer and inventor. Wagenhals had many ideas, and he claimed in a 1997 interview with Chain Store Age Executive that many of them failed. Nevertheless, he held eight patents by the time he was 21, and had made a million dollars by the time he was 30. Wagenhals pioneered a two-man jet-pumped boat, which was eventually manufactured by Ski-Doo, and he created a computerized motor for a mechanical bull featured in the movie Urban Cowboy. Wagenhals also made gas-powered one-third scale cars used in the film Smokey and the Bandit and in the television show Fantasy Island.
In the 1980s Wagenhals was in business with two partners in Tempe, Arizona, to sell these minicars. Wagenhals and his partners Joe Hrudka and Ed Fochtman incorporated in 1986 as Action Products, Inc. This company sold the gas-powered cars as well as pedal cars, electric cars, radio-controlled cars, and something called the "Funder Wheels Go Kart." Action Products was able to sell its minicars to such substantial clients as Coca-Cola, Pennzoil, Dial Corp., and Quaker State. These customers used the cars in promotional events. Action Products also sold a significant number of miniature cars patterned after the vehicle shown in the movie Back to the Future II. Despite the small company's promising sales, with revenues just under $5 million in 1987 and up to $6 million in 1988, cash flow problems plagued it, and Action Products operated at a loss. The company went public in 1989, hoping to raise close to $3 million in its initial stock offering.
While he was doing business as Action Products, Wagenhals got an idea for a new venture. In 1989 he came across an article on the baseball card collectibles market, and decided it might be lucrative to sell stock car racing collectibles. Because of his familiarity with the racing world, he was in a good position to know it had not been done before. The popular miniature cars that children collected, such as Hot Wheels and Matchbox, offered race cars, but they were not modeled on specific vehicles. Wagenhals decided to make premium collectible miniatures with a wealth of detail, and to market them directly to members of a racing club.
To get the rights to reproduce one well-known car, driver Dale Earnhardt's black number three, Wagenhals paid Earnhardt $300,000. It seemed a big investment at the time, yet Wagenhals knew that he had a corner on what could be a burgeoning market. He proceeded to produce die-cast miniatures of Earnhardt's car and sold them through a Georgia-based fan club called the Racing Collectables Club of America. Interested consumers paid a membership fee to join the club, and then were offered Wagenhals' collectibles as well as other merchandise licensed from the National Association of Stock Car Automobile Racing (NASCAR). Even though he was still president of Action Products, Wagenhals ran this new venture through another company he formed with different partners, called Racing Champions. This new company took off, while Action Products continued to flounder. With some acrimonious jostling among the partners, Action Products went out of business in 1992, Wagenhals took his share of the assets, and formed a new company, Action Performance. (His former partners in Action Products sued Wagenhals, and the breach of contract suit was settled in 1997 for $4.9 million.)
Growth of the New Company
Because of Wagenhals' extensive contacts with NASCAR drivers and team owners, he was able to wangle many prime licensing deals to duplicate cars and use drivers' images and endorsements. Action Performance began selling its products directly to racing enthusiasts, bringing a trailer to racing events across the country. The company also bought up the Racing Collectables Club of America, Inc. and Racing Collectables Inc. These were two enterprises owned by brothers Andrew and Stan Gill in Atlanta. Racing Collectables Inc. made model cars, and the club was founded in May 1991. By mid-1993, the Racing Collectables Club had some 24,000 members, and the number continued to go up. Action Performance manufactured over 50 different collectible cars by 1993, including models it bought when it took over Racing Collectables Inc. Manufacturing was done in China, and with the growing club membership and interest in stock car racing, the company was soon producing hundreds of thousands of miniatures each month. These were sold not only through the collectors club but through some 8000 retail outlets as well. The model cars were built to 1/64th size, and sold for just under $2 to around $6. But the company also produced limited edition models for the collectors club, and these were quite pricey. After paying close to $30 to join, club members then might shell out over $70 for a limited edition model race car.
Meanwhile, Action Performance continued the sell the one-third scale minicars that had been the prime product of the old Action Products. It also acquired Race Z, Inc. in May 1992, a company that specialized in staging Grand Prix-type races for minicars. Action Performance began to have an extremely integrated business. It sold minicars to companies that wanted to stage races as fundraisers, and conducted the races. Its minicar customers also often bought the collectible models, as gifts or premiums for their clients.
The popularity of stock car racing climbed in the mid-1990s, and Action Performance prospered. By 1996, more people were watching professional auto racing than any other sport in the U.S., and industries associated with racing were pulling in a combined $1 billion. Action Performance's growth rocketed, as its sales climbed and it acquired more related companies. The company also shed some businesses, getting rid of its race-staging business in 1994 and selling off its minicar manufacturing division in 1995. Then in 1996, Action Performance started a new division, Action Sports Management. The company hired Bill Seaborn, Jr., to head the new enterprise. He had worked for NASCAR, the stock car racing association, for 14 years, ultimately heading their licensing program. Action Performance hired Seaborn to market their licensed clients, hoping to turn stock car drivers into the kind of ubiquitous presences of many of the top basketball, football, and baseball stars. The new marketing division's first coup was to sign up the single biggest star of drag racing, John Force, a six-time Winston Cup champion. Merchandise with Force's image already made up over 40 percent of racing souvenir stand sales.
Action Performance also forged an alliance with giant toymaker Hasbro in 1996. In a joint agreement, the two companies planned to develop a line of racing toys called Winner's Circle. Action Performance also bought up a marketing and distribution firm called Sports Image Inc., owned by former NASCAR champion Dale Earnhardt (whose car had been Action's first miniature collectible). Sales for 1996 were stellar, rising to just over $44 million from $26 million the previous year. This huge increase in sales was accompanied by a doubling of net income.
The company continued to buy up related businesses. In 1997 it acquired a marketing and promotions firm owned by another former NASCAR champion driver, Jeff Gordon, and his partners. Action Performance put down more than $5 million in cash for Gordon's concerns. Then in July 1997 the company spent another $4.25 million for a Georgia firm, Image Works, Inc. Image Works marketed racing-related apparel. Then in August the company bought up the collectibles business of one of its competitors, Simpson Race Products. Action Performance then quickly initiated a deal to buy the die-cast collectibles unit of another competitor, Revell-Monogram Inc. Revell-Monogram had three lines of die-cast race cars, in addition to a huge business in plastic model kits. It sold primarily to hobby shops, where it had significant brand recognition. Action Performance paid $25 million for Revell's motor die-cast unit, hoping for an in with the hobby shop consumer. The acquisition gave Action Performance an estimated 50 to 60 percent share of the total die-cast collectible race car market. And this one acquisition alone was expected to bring in over $20 million in new sales for the company.
As sales and earnings multiplied for the company, Action Performance dubbed itself "the Franklin Mint of auto racing." Between 1993 and 1997, sales grew more than eightfold, from around $15 million to over $130 million. Stock car racing was the fastest growing sport in the United States, with attendance at the Winston Cup finals rising more than 65 percent from 1990 to 1996. More than six million fans showed up for the Winston Cup in 1997, while 123 million watched the race on television. Action Performance had plenty of money to spend, and it continued to buy up smaller companies. Around the time the company announced its major purchase of Revell-Monogram's motor die-cast unit, Action also paid $8 million for the licensing and merchandising firm Rusty Wallace Merchandising Inc. The company also acquired a small Wisconsin collectibles firm called Brookfield Collectors Guild, Inc.
In 1998 the firm expanded into the European market for the first time. It bought an 80 percent interest in Minichamps, a company that designed and sold die-cast miniatures of Formula 1 racers. It also had licensing agreements with European drivers and racing teams, including Michael Schumacher, Jacques Villeneueve, Ferrari, and McClaren. Action Performance acquired a controlling interest in the firm, and also agreed to let Minichamps manage Action's European business. Then, expanding in a different direction, Action went into cyberspace, buying Tech 2000 Worldwide Inc. in November 1998. This privately held company ran racing related Internet sites. After spending $4.27 million for the company, Action Performance announced it would use Tech 2000 to develop a motor sports on-line shopping mall and information site, to be called www.goracing.com.
By 1998, Action had positioned itself as one of the major toy makers in the United States. NASCAR toys were said to be the third bestselling item in the entire toy industry, and Action Performance had some 50 to 60 percent of the NASCAR niche. Action continued to plan more acquisitions for the end of the 1990s and into the next century, and also claimed it would follow up on its European expansion. One possible brake to Action's growth though was the slowdown in new members of its collectibles club. In 1995, for example, the club grew by over 80 percent. The number of new members in 1998 however was up only 22 percent over the previous year. The company was predicated on the continuing boom in racing's popularity, and any downturn would presumably effect Action's sales. But the company itself worked assiduously to make racing interesting, sponsoring special paint jobs for its drivers, for example, coming up with Elvis cars at the Las Vegas Winston Cup Gala, and fostering a promotional tie-in with its cars in the movie Small Soldiers. The company seemed to have tireless marketing strength. Wagenhals himself saw stock car racing as still with its best years ahead in the late 1990s. In an interview with Stock Car Racing in November 1998, he declared that "NASCAR is very similar today to where baseball was in the early '60s," and he predicted more tremendous growth in the sport over the next five years. Since the company and the sport were so closely tied, that would mean more growth in Action's future, too.
Principal Subsidiaries: Race Z, Inc.; Action Products, Inc.; Racing Collectables Inc.; Mini Wheels West; Racing Collectables Club of America Inc.; Fan Fueler, Inc.
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