SBD/Issue 204/Finance

Motorsports Authentics To Re-Emerge As Trimmed Down Company

Motorsports Authentics has completed its restructuring and will emerge as a trimmed-down company that specializes in trackside retail at racing events, meaning it has shed a portion of its licensing business and all of its collectible diecast car division. The company said it has settled the millions in licensing guarantees it owed several NASCAR teams and could turn a profit this year. "We'll make money this year," MA GM Jim Morris said. "We're coming out of this as a smaller company, but we'll be more efficient and MA will become stronger than it's ever been." Rival track owners ISC and SMI entered into a joint venture to acquire MA for $247.5M in '05, but the company turned a profit just once in its first four years. Both owners eventually wrote down the value of MA to zero and began looking for ways to prevent its bankruptcy. Expensive multi-million dollar licensing guarantees to several teams became a cash drain as retail sales dropped dramatically; MA eventually stopped paying the teams any unearned royalties. Through more than 15 months of negotiations, MA got relief from that debt and has restructured into a company that will focus on trackside retail with 150 employees, well down from the 400-plus that used to work there. "It won't be the company it once was, but it's cash-flowing itself and we think it will get profitable," ISC President John Saunders said on a Q2 earnings call this morning. As part of the restructuring, MA has signed an agreement with the new NASCAR Teams Licensing Trust to run its trackside retail at NASCAR events. MA will also continue to produce licensed jackets, hats and T-shirts under its Chase brand, which will be available through its trackside retail trailers,, race team shops and smaller specialty dealers. It will not engage in mass retail distribution, Morris said. MA's trackside trailers will also carry merchandise from other licensees.

ISC UPDATE: ISC this morning also updated analysts on Q2 earnings. Revenue was down from $152.4M to $142.2M year over year and operating income dropped from $31.7M to $21.3M. ISC has one Sprint Cup entitlement left to sell this year ­-- the September 11 race at Richmond. Officials said that Cup races are running at 80-81% of capacity, which is down slightly from last year and well down from the mid-90% range of 3-4 years ago.

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