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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

Commission file number 0-21630

ACTION PERFORMANCE COMPANIES, INC.

(Exact Name of Registrant as Specified in Its Charter)


|                                 |  |                                                
|-------------------------------- |  | -----------------------------------------------
|ARIZONA
(State of Incorporation) |  | 86-0704792
(I.R.S. Employer Identification No.)

4707 E. Baseline Road
Phoenix, AZ 85042

---

(Address, including zip code, of principal executive offices)


(602) 337-3700

---

(Registrants telephone number, including area code)


Indicate by check mark 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    X    No

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes    X    No

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.

|                                    |  |                                               
|----------------------------------- |  | ----------------------------------------------
|CLASS
Common Stock, $0.01 Par Value |  | OUTSTANDING AT JULY 18, 2003
17,886,414 Shares





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TABLE OF CONTENTS



|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I- FINANCIAL INFORMATION
|                              | ITEM 1. Financial Statements                                                                 
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                              | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II - OTHER INFORMATION  
|                              | ITEM 1. Legal Proceedings                                                                    
|                              | ITEM 2. Changes in Securities and Use of Proceeds                                            
|                              | ITEM 3. Defaults Upon Senior Securities                                                      
|                              | ITEM 4. Submissions of Matters to a Vote of Security Holders                                 
|                              | ITEM 5. Other Information                                                                    
|                              | ITEM 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|EXHIBIT INDEX                
|EX-31.1                      
|EX-31.2                      
|EX-32.1                      
|EX-32.2                      



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PART I- FINANCIAL INFORMATION




ITEM 1. Financial Statements

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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Balance Sheets
June 30, 2003 and September 30, 2002
(in thousands, except per share data)

|                                     |                                                                                         |                             |         |          |         |               |         |         |         | 
|------------------------------------ | --------------------------------------------------------------------------------------- | --------------------------- | ------- | -------- | ------- | ------------- | ------- | ------- | ------- | 
|                                     |                                                                                         |                             |         | June 30, |         | September 30,
|                                     |                                                                                         |                             |         | 2003     |         | 2002         
|                                     |                                                                                         |                             |         |          |         |              
|ASSETS                               |                                                                                         |                             |         |          |         |               |         |        
|Current Assets:                      |                                                                                         |                             |         |          |         |               |         |        
|                                     | Cash and cash equivalents                                                               |                             | $       | 60,559   |         |               | $       | 69,585  |        
|                                     | Accounts receivable, net                                                                |                             |         | 50,129   |         |               |         | 61,313  |        
|                                     | Inventories                                                                             |                             |         | 38,390   |         |               |         | 33,467  |        
|                                     | Prepaid royalties                                                                       |                             |         | 7,564    |         |               |         | 6,938   |        
|                                     | Deferred taxes                                                                          |                             |         | 3,272    |         |               |         | 3,155   |        
|                                     | Prepaid expenses and other                                                              |                             |         | 5,866    |         |               |         | 2,397   |        
|                                     |                                                                                         |                             |         |          |         |               |         |         |        
|                                     |                                                                                         | Total Current Assets        |         |          | 165,780 |               |         |         | 176,855 | 
|Property and Equipment, net          |                                                                                         |                             | 60,220  |          |         |               | 46,378  |        
|Goodwill                             |                                                                                         |                             | 87,214  |          |         |               | 84,514  |        
|Licenses and Other Intangibles, net  |                                                                                         |                             | 22,368  |          |         |               | 24,000  |        
|Other Assets                         |                                                                                         |                             | 4,212   |          |         |               | 6,169   |        
|                                     |                                                                                         |                             |         |          |         |               |         |         |        
|                                     |                                                                                         | $                           | 339,794 |          |         | $             | 337,916 |        
|                                     |                                                                                         |                             |         |          |         |               |         |         |        
|LIABILITIES AND SHAREHOLDERS EQUITY |                                                                                         |                             |         |          |         |               |         |        
|Current Liabilities:                 |                                                                                         |                             |         |          |         |               |         |        
|                                     | Accounts payable                                                                        |                             | $       | 21,095   |         |               | $       | 28,958  |        
|                                     | Accrued royalties                                                                       |                             |         | 10,766   |         |               |         | 15,146  |        
|                                     | Accrued expenses                                                                        |                             |         | 6,318    |         |               |         | 10,545  |        
|                                     | Income taxes payable                                                                    |                             |         | 4,913    |         |               |         | 4,265   |        
|                                     | Current portion of long-term debt                                                       |                             |         | 529      |         |               |         | 423     |        
|                                     |                                                                                         |                             |         |          |         |               |         |         |        
|                                     |                                                                                         | Total Current Liabilities   |         |          | 43,621  |               |         |         | 59,337  | 
|                                     |                                                                                         |                             |         |          |         |               |         |         |        
|Long-Term Liabilities:               |                                                                                         |                             |         |          |         |               |         |        
|                                     | Long-term debt                                                                          |                             |         | 34,486   |         |               |         | 40,360  |        
|                                     | Deferred taxes and other                                                                |                             |         | 8,451    |         |               |         | 5,696   |        
|                                     |                                                                                         |                             |         |          |         |               |         |         |        
|                                     |                                                                                         | Total Long-Term Liabilities |         |          | 42,937  |               |         |         | 46,056  | 
|                                     |                                                                                         |                             |         |          |         |               |         |         |        
|Commitments and Contingencies        |                                                                                         |                             |         |          |         |               |         |        
|Minority Interests                   |                                                                                         |                             | 3,026   |          |         |               | 3,135   |        
|Shareholders Equity:                |                                                                                         |                             |         |          |         |               |         |        
|                                     | Common stock, $.01 par value, 62,500 shares authorized,
18,076 and 17,948 shares issued |                             |         | 181      |         |               |         | 179     |        
|                                     | Additional paid-in capital                                                              |                             |         | 147,802  |         |               |         | 146,545 |        
|                                     | Treasury stock, at cost, 190 and 80 shares                                              |                             |         | (3,999   | )       |               |         | (1,975  | )      
|                                     | Accumulated other comprehensive loss                                                    |                             |         | (2,585   | )       |               |         | (4,606  | )      
|                                     | Retained earnings                                                                       |                             |         | 108,811  |         |               |         | 89,245  |        
|                                     |                                                                                         |                             |         |          |         |               |         |         |        
|                                     |                                                                                         | Total Shareholders Equity  |         |          | 250,210 |               |         |         | 229,388 | 
|                                     |                                                                                         |                             |         |          |         |               |         |         |        
|                                     |                                                                                         | $                           | 339,794 |          |         | $             | 337,916 |        
|                                     |                                                                                         |                             |         |          |         |               |         |         |        

The accompanying notes are an integral part of these consolidated financial statements.

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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income
Three and Nine Months Ended June 30, 2003 and 2002
(in thousands, except per share data)

|                            |                                                |         |                          |        |                    |        |                   |        |      |        |         |        |      |        |         |        |      |        | 
|--------------------------- | ---------------------------------------------- | ------- | ------------------------ | ------ | ------------------ | ------ | ----------------- | ------ | ---- | ------ | ------- | ------ | ---- | ------ | ------- | ------ | ---- | ------ | 
|                            |                                                |         |                          |        | Three Months Ended |        | Nine Months Ended
|                            |                                                |         |                          |        |                    |        |                  
|                            |                                                |         |                          |        | 2003               |        | 2002              |        | 2003 |        | 2002   
|                            |                                                |         |                          |        |                    |        |                   |        |      |        |        
|Net sales                   |                                                | $       | 87,617                   |        |                    | $      | 112,085           |        |      | $      | 264,472 |        |      | $      | 296,406 |       
|Cost of sales               |                                                |         | 56,558                   |        |                    |        | 68,347            |        |      |        | 170,840 |        |      |        | 181,960 |       
|                            |                                                |         |                          |        |                    |        |                   |        |      |        |         |        |      |        |         |       
|Gross profit                |                                                |         | 31,059                   |        |                    |        | 43,738            |        |      |        | 93,632  |        |      |        | 114,446 |       
|                            |                                                |         |                          |        |                    |        |                   |        |      |        |         |        |      |        |         |       
|Operating expenses:         |                                                |         |                          |        |                    |        |                   |        |      |        |         |        |      |        |         |       
|                            | Selling, general and administrative            |         |                          | 20,402 |                    |        |                   | 20,225 |      |        |         | 57,563 |      |        |         | 56,326 |     
|                            | Amortization of licenses and other intangibles |         |                          | 840    |                    |        |                   | 679    |      |        |         | 2,575  |      |        |         | 1,766  |     
|                            |                                                |         |                          |        |                    |        |                   |        |      |        |         |        |      |        |         |       
|                            |                                                |         | Total operating expenses |        |                    | 21,242 |                   |        |      | 20,904 |         |        |      | 60,138 |         |        |      | 58,092 | 
|                            |                                                |         |                          |        |                    |        |                   |        |      |        |         |        |      |        |         |       
|Income from operations      |                                                |         | 9,817                    |        |                    |        | 22,834            |        |      |        | 33,494  |        |      |        | 56,354  |       
|Interest expense            |                                                |         | (539                     | )      |                    |        | (666              | )      |      |        | (1,728  | )      |      |        | (2,372  | )     
|Other income (expense), net |                                                |         | 804                      |        |                    |        | (1,631            | )      |      |        | 2,629   |        |      |        | (1,767  | )     
|                            |                                                |         |                          |        |                    |        |                   |        |      |        |         |        |      |        |         |       
|Income before income taxes  |                                                |         | 10,082                   |        |                    |        | 20,537            |        |      |        | 34,395  |        |      |        | 52,215  |       
|Income taxes                |                                                |         | 3,771                    |        |                    |        | 7,993             |        |      |        | 12,864  |        |      |        | 20,280  |       
|                            |                                                |         |                          |        |                    |        |                   |        |      |        |         |        |      |        |         |       
|Net income                  |                                                |         | 6,311                    |        |                    |        | 12,544            |        |      |        | 21,531  |        |      |        | 31,935  |       
|                            | Other comprehensive income                     |         |                          | 1,047  |                    |        |                   | 3,814  |      |        |         | 2,021  |      |        |         | 2,941  |     
|                            |                                                |         |                          |        |                    |        |                   |        |      |        |         |        |      |        |         |       
|                            | Comprehensive income                           |         | $                        | 7,358  |                    |        | $                 | 16,358 |      |        | $       | 23,552 |      |        | $       | 34,876 |     
|                            |                                                |         |                          |        |                    |        |                   |        |      |        |         |        |      |        |         |       
|Earnings Per Common Share:  |                                                |         |                          |        |                    |        |                   |        |      |        |         |        |      |        |         |       
|                            |                                                | Basic   |                          | $      | 0.35               |        |                   | $      | 0.70 |        |         | $      | 1.21 |        |         | $      | 1.83 |       
|                            |                                                | Diluted |                          | $      | 0.35               |        |                   | $      | 0.66 |        |         | $      | 1.18 |        |         | $      | 1.72 |       

The accompanying notes are an integral part of these consolidated financial statements.

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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Nine Months Ended June 30, 2003 and 2002
(in thousands)

|                                                      |                                                                     |                                           |        |                            |         |      |        |         |         |  
|----------------------------------------------------- | ------------------------------------------------------------------- | ----------------------------------------- | ------ | -------------------------- | ------- | ---- | ------ | ------- | ------- | -
|                                                      |                                                                     |                                           |        | Nine Months Ended June 30,
|                                                      |                                                                     |                                           |        |                           
|                                                      |                                                                     |                                           |        | 2003                       |         | 2002
|                                                      |                                                                     |                                           |        |                            |         |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                 |                                                                     |                                           |        |                            |         |      |        |        
|                                                      | Net income                                                          |                                           | $      | 21,531                     |         |      | $      | 31,935  |        
|                                                      | Adjustments to reconcile net income to cash provided by operations- |                                           |        |                            |         |      |        |         |        
|                                                      |                                                                     | Depreciation and amortization             |        |                            | 19,593  |      |        |         | 17,346  |  
|                                                      |                                                                     | Stock option tax benefits                 |        |                            | 594     |      |        |         | 3,610   |  
|                                                      |                                                                     | (Gain) loss on extinguishment of debt     |        |                            | (34     | )    |        |         | 1,361   |  
|                                                      |                                                                     | Other                                     |        |                            | 2,985   |      |        |         | 3,362   |  
|                                                      | Changes in assets and liabilities, net-                             |                                           |        |                            |         |      |        |         |        
|                                                      |                                                                     | Accounts receivable, net                  |        |                            | 11,696  |      |        |         | (9,068  | )
|                                                      |                                                                     | Inventories                               |        |                            | (4,443  | )    |        |         | 1,328   |  
|                                                      |                                                                     | Prepaid royalties and accrued royalties   |        |                            | (5,397  | )    |        |         | (1,629  | )
|                                                      |                                                                     | Accounts payable and accrued expenses     |        |                            | (13,230 | )    |        |         | (3,168  | )
|                                                      |                                                                     | Income taxes payable                      |        |                            | 620     |      |        |         | (5,226  | )
|                                                      |                                                                     | Other                                     |        |                            | (5,932  | )    |        |         | (1,399  | )
|                                                      |                                                                     |                                           |        |                            |         |      |        |         |        
|                                                      |                                                                     | Net cash provided by operating activities |        |                            | 27,983  |      |        |         | 38,452  |  
|                                                      |                                                                     |                                           |        |                            |         |      |        |         |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                 |                                                                     |                                           |        |                            |         |      |        |        
|                                                      | Capital expenditures, net                                           |                                           |        | (26,854                    | )       |      |        | (18,011 | )      
|                                                      | Other                                                               |                                           |        | (688                       | )       |      |        | (6,359  | )      
|                                                      |                                                                     |                                           |        |                            |         |      |        |         |        
|                                                      |                                                                     | Net cash used in investing activities     |        |                            | (27,542 | )    |        |         | (24,370 | )
|                                                      |                                                                     |                                           |        |                            |         |      |        |         |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                 |                                                                     |                                           |        |                            |         |      |        |        
|                                                      | Long-term debt borrowings  German mortgage                         |                                           |        | 3,001                      |         |      |        |        |        
|                                                      | Long-term debt repayments                                           |                                           |        | (9,355                     | )       |      |        | (7,384  | )      
|                                                      | Common stock purchases for treasury                                 |                                           |        | (2,024                     | )       |      |        |        |        
|                                                      | Dividends paid to common shareholders                               |                                           |        | (1,605                     | )       |      |        |        |        
|                                                      | Distributions to minority interest shareholders                     |                                           |        | (878                       | )       |      |        | (1,140  | )      
|                                                      | Stock option exercise proceeds                                      |                                           |        | 665                        |         |      |        | 6,150   |        
|                                                      |                                                                     |                                           |        |                            |         |      |        |         |        
|                                                      |                                                                     | Net cash used in financing activities     |        |                            | (10,196 | )    |        |         | (2,374  | )
|                                                      |                                                                     |                                           |        |                            |         |      |        |         |        
|Effect of exchange rates on cash and cash equivalents |                                                                     |                                           | 729    |                            |         |      | 343    |        
|                                                      |                                                                     |                                           |        |                            |         |      |        |         |        
|Net change in cash and cash equivalents               |                                                                     |                                           | (9,026 | )                          |         |      | 12,051 |        
|Cash and cash equivalents, beginning of period        |                                                                     |                                           | 69,585 |                            |         |      | 64,514 |        
|                                                      |                                                                     |                                           |        |                            |         |      |        |         |        
|Cash and cash equivalents, end of period              |                                                                     | $                                         | 60,559 |                            |         | $    | 76,565 |        
|                                                      |                                                                     |                                           |        |                            |         |      |        |         |        
|Supplemental Disclosures:                             |                                                                     |                                           |        |                            |         |      |        |        
|                                                      | Interest paid                                                       |                                           | $      | 2,089                      |         |      | $      | 2,650   |        
|                                                      | Income taxes paid, net                                              |                                           |        | 9,405                      |         |      |        | 19,349  |        

The accompanying notes are an integral part of these consolidated financial statements.

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ACTION PERFORMANCE COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003

INTERIM FINANCIAL REPORTING

The accompanying condensed consolidated financial statements for Action
Performance Companies, Inc. and subsidiaries have been prepared without audit
by independent auditors pursuant to the rules and regulations of the Securities
and Exchange Commission. In our opinion, all normal and recurring adjustments
necessary for a fair statement of financial position and results of operations
for the interim periods included herein have been made. Certain information
and note disclosures normally included in the financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted from these statements pursuant to such rules and
regulations. Accordingly, these financial statements should be read in
conjunction with our Form 10-K for the fiscal year ended September 30, 2002.
The results of operations for the interim periods are not necessarily
indicative of the operating results that may be expected for the fiscal year
ending September 30, 2003.

Certain prior period amounts have been reclassified to conform to the current
year presentation.

RECENT ACCOUNTING PRONOUNCEMENTS

SFAS No. 145, Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS 13, and
Technical Corrections as of April 2002 changes the classification of all gains
and losses from extinguishment of debt, which under FASB Statement No. 4 were
required to be classified as an extraordinary item, net of related income tax
effect. Under SFAS No. 145, gains and losses from extinguishment of debt are
now classified as a component of operations. We adopted SFAS No. 145 effective
October 1, 2002. We have classified gains and losses from extinguishment of
debt in all periods presented as a component of other income and adjusted
income taxes accordingly. There was no net impact on net income previously
reported.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. The interpretation requires a guarantor
to recognize, at the inception of a guarantee, a liability for the fair value
of the obligation undertaken in issuing the guarantee and expands the
disclosures required. Initial recognition and measurement provisions of FIN
No. 45 are applicable on a prospective basis to guarantees issued or modified
after December 31, 2002. The adoption of FIN No. 45 had no effect on our
financial position, results of operations, or cash flows.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133. SFAS No. 149 is effective for certain
contracts entered into or modified by the Company after June 30, 2003. We are
currently evaluating SFAS No. 149 to determine its impact on our financial
position, results of operations, and cash flows.

SEGMENT INFORMATION

Reportable segments are based on divisions operating geographically, domestic
and abroad, and specializing in either die-cast or apparel and memorabilia.
The domestic die-cast operation is based in Phoenix, Arizona. The domestic
apparel and memorabilia operation is based in Charlotte, North Carolina, with a
mass-market retail distribution center in Atlanta, Georgia, and warehouse and
distribution facilities in Charlotte, North Carolina, Baraboo, Wisconsin, and
Los Angeles, California. Trackside operations are included in the domestic
apparel and memorabilia segment. The foreign die-cast operation is based in
Aachen, Germany.

We evaluate performance and allocate resources based on segment operating
income (loss). The accounting policies of the reportable segments are the same
as those used in the consolidated financial statements. Domestic licensing
costs and certain other management and shared costs are not allocated to the
domestic operating segments and are included in corporate and other.
Intangible licenses are included in corporate and other assets. Each domestic
segment is allocated royalty expense based on the incremental royalty due on
that segments sales. Domestic

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royalty guarantees advanced and unearned are allocated as an expense of the
domestic segments. Financial information for the reportable segments follows
(in thousands):

|          |                                  |                                             |   |                             |         |          |   |              |   |              |   |           |       |  |   |        |        | 
|--------- | -------------------------------- | ------------------------------------------- | - | --------------------------- | ------- | -------- | - | ------------ | - | ------------ | - | --------- | ----- |  | - | ------ | ------ | 
|          |                                  |                                             |   | Three Months Ended June 30,
|          |                                  |                                             |   |                            
|          |                                  |                                             |   |                             |         |          |   | Inter-       |   | Depreciation |   | Operating
|          |                                  |                                             |   | External                    |         | segment  |   | and          |   | Income      
|          |                                  |                                             |   | Revenues                    |         | Revenues |   | Amortization |   | (Loss)      
|          |                                  |                                             |   |                             |         |          |   |              |   |             
|2003:     |                                  |                                             |   |                             |         |          |   |              |   |              |   |           |       |  |   |       
|          | Domestic die-cast                |                                             | $ | 40,325                      |         |          | $ | 1,600        |   |              | $ | 2,846     |       |  | $ | 10,558 |       
|          | Domestic apparel and memorabilia |                                             |   | 38,541                      |         |          |   | 171          |   |              |   | 796       |       |  |   | 4,885  |       
|          | Foreign die-cast                 |                                             |   | 8,208                       |         |          |   |             |   |              |   | 1,718     |       |  |   | 1,355  |       
|          | Corporate and other              |                                             |   | 543                         |         |          |   | 542          |   |              |   | 1,291     |       |  |   | (7,274 | )     
|          | Eliminations                     |                                             |   |                            |         |          |   | (2,313       | ) |              |   |          |       |  |   | 293    |       
|          |                                  |                                             |   |                             |         |          |   |              |   |              |   |           |       |  |   |        |       
|          |                                  | Total per consolidated
financial statements |   | $                           | 87,617  |          |   | $            |  |              |   | $         | 6,651 |  |   | $      | 9,817  | 
|          |                                  |                                             |   |                             |         |          |   |              |   |              |   |           |       |  |   |        |       
|2002 (c): |                                  |                                             |   |                             |         |          |   |              |   |              |   |           |       |  |   |       
|          | Domestic die-cast                |                                             | $ | 57,202                      |         |          | $ | 2,962        |   |              | $ | 2,418     |       |  | $ | 20,034 |       
|          | Domestic apparel and memorabilia |                                             |   | 47,160                      |         |          |   |             |   |              |   | 647       |       |  |   | 9,700  |       
|          | Foreign die-cast                 |                                             |   | 6,777                       |         |          |   |             |   |              |   | 1,085     |       |  |   | 1,157  |       
|          | Corporate and other              |                                             |   | 946                         |         |          |   | 276          |   |              |   | 1,607     |       |  |   | (7,996 | )     
|          | Eliminations                     |                                             |   |                            |         |          |   | (3,238       | ) |              |   |          |       |  |   | (61    | )     
|          |                                  |                                             |   |                             |         |          |   |              |   |              |   |           |       |  |   |        |       
|          |                                  | Total per consolidated
financial statements |   | $                           | 112,085 |          |   | $            |  |              |   | $         | 5,757 |  |   | $      | 22,834 | 
|          |                                  |                                             |   |                             |         |          |   |              |   |              |   |           |       |  |   |        |       

|          |                                  |                                             |   |                            |         |          |   |              |   |              |   |           |        |  |   |         |        | 
|--------- | -------------------------------- | ------------------------------------------- | - | -------------------------- | ------- | -------- | - | ------------ | - | ------------ | - | --------- | ------ |  | - | ------- | ------ | 
|          |                                  |                                             |   | Nine Months Ended June 30,
|          |                                  |                                             |   |                           
|          |                                  |                                             |   |                            |         |          |   | Inter-       |   | Depreciation |   | Operating
|          |                                  |                                             |   | External                   |         | segment  |   | and          |   | Income      
|          |                                  |                                             |   | Revenues                   |         | Revenues |   | Amortization |   | (Loss)      
|          |                                  |                                             |   |                            |         |          |   |              |   |             
|2003:     |                                  |                                             |   |                            |         |          |   |              |   |              |   |           |        |  |   |        
|          | Domestic die-cast                |                                             | $ | 115,389                    |         |          | $ | 6,309        |   |              | $ | 8,134     |        |  | $ | 32,560  |       
|          | Domestic apparel and
memorabilia |                                             |   | 121,460                    |         |          |   | 353          |   |              |   | 2,486     |        |  |   | 16,678  |       
|          | Foreign die-cast                 |                                             |   | 25,509                     |         |          |   |             |   |              |   | 4,840     |        |  |   | 4,525   |       
|          | Corporate and other              |                                             |   | 2,114                      |         |          |   | 1,594        |   |              |   | 4,133     |        |  |   | (19,843 | )     
|          | Eliminations                     |                                             |   |                           |         |          |   | (8,256       | ) |              |   |          |        |  |   | (426    | )     
|          |                                  |                                             |   |                            |         |          |   |              |   |              |   |           |        |  |   |         |       
|          |                                  | Total per consolidated
financial statements |   | $                          | 264,472 |          |   | $            |  |              |   | $         | 19,593 |  |   | $       | 33,494 | 
|          |                                  |                                             |   |                            |         |          |   |              |   |              |   |           |        |  |   |         |       
|2002 (c): |                                  |                                             |   |                            |         |          |   |              |   |              |   |           |        |  |   |        
|          | Domestic die-cast                |                                             | $ | 158,289                    |         |          | $ | 9,154        |   |              | $ | 7,996     |        |  | $ | 53,629  |       
|          | Domestic apparel and
memorabilia |                                             |   | 113,927                    |         |          |   |             |   |              |   | 1,653     |        |  |   | 19,428  |       
|          | Foreign die-cast                 |                                             |   | 21,590                     |         |          |   |             |   |              |   | 3,215     |        |  |   | 4,275   |       
|          | Corporate and other              |                                             |   | 2,600                      |         |          |   | 971          |   |              |   | 4,482     |        |  |   | (20,577 | )     
|          | Eliminations                     |                                             |   |                           |         |          |   | (10,125      | ) |              |   |          |        |  |   | (401    | )     
|          |                                  |                                             |   |                            |         |          |   |              |   |              |   |           |        |  |   |         |       
|          |                                  | Total per consolidated
financial statements |   | $                          | 296,406 |          |   | $            |  |              |   | $         | 17,346 |  |   | $       | 56,354 | 
|          |                                  |                                             |   |                            |         |          |   |              |   |              |   |           |        |  |   |         |       

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|                                 |                                             |   |                     |         |                         |   |          |         |           |   |        |        |  |   |        |        | 
|-------------------------------- | ------------------------------------------- | - | ------------------- | ------- | ----------------------- | - | -------- | ------- | --------- | - | ------ | ------ |  | - | ------ | ------ | 
|                                 |                                             |   | Identifiable Assets |         | Goodwill and Trademarks
|                                 |                                             |   |                     |         |                        
|                                 |                                             |   | June 30,            |         | Sept. 30,               |   | June 30, |         | Sept. 30,
|                                 |                                             |   | 2003                |         | 2002                    |   | 2003     |         | 2002     
|                                 |                                             |   |                     |         |                         |   |          |         |          
|Domestic die-cast (a)            |                                             | $ | 62,948              |         |                         | $ | 60,744   |         |           | $ | 14,381 |        |  | $ | 13,769 |       
|Domestic apparel and memorabilia |                                             |   | 123,421             |         |                         |   | 122,775  |         |           |   | 61,852 |        |  |   | 61,841 |       
|Foreign die-cast                 |                                             |   | 57,757              |         |                         |   | 47,660   |         |           |   | 17,998 |        |  |   | 15,334 |       
|Corporate and other (b)          |                                             |   | 103,892             |         |                         |   | 114,369  |         |           |   |       |        |  |   |       |       
|Eliminations                     |                                             |   | (8,224              | )       |                         |   | (7,632   | )       |           |   |       |        |  |   |       |       
|                                 |                                             |   |                     |         |                         |   |          |         |           |   |        |        |  |   |        |       
|                                 | Total per consolidated
financial statements |   | $                   | 339,794 |                         |   | $        | 337,916 |           |   | $      | 94,231 |  |   | $      | 90,944 | 
|                                 |                                             |   |                     |         |                         |   |          |         |           |   |        |        |  |   |        |       



| | (a) |  | Domestic die-cast identifiable assets include the Winners Circle
trademark, purchased from Hasbro in May 2001. As additional
consideration, we pay 3% of the related product sales to Hasbro,
quarterly, through May 2006. The additional consideration is added to
the cost of the trademark quarterly.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Corporate and other identifiable assets includes $55.5 million in
cash and cash equivalents at June 30, 2003, and
$66.3 million in cash and cash equivalents at September 30, 2002.                                                                                                                      
|
| | (c) |  | Certain prior period amounts have been reclassified to conform to
the current year presentation.                                                                                                                                                                                                         

EARNINGS PER COMMON SHARE (EPS)

Reconciliations of the numerators and denominators in the EPS computations for
net income for the periods ended June 30 follows (in thousands):

|                                                                                                        |  |                    |        |                   |  |      |        |      |  |   |        |  |  |   |        | 
|------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                                                                                        |  | Three Months Ended |        | Nine Months Ended
|                                                                                                        |  |                    |        |                  
|                                                                                                        |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                                                                                                        |  |                    |        |                   |  |      |        |     
|NUMERATOR:                                                                                              |  |                    |        |                   |  |      |        |      |  |   |        |  |  |   |        | 
|Basic  net income                                                                                      |  | $                  | 6,311  |                   |  | $    | 12,544 |      |  | $ | 21,531 |  |  | $ | 31,935 | 
|Effect
of dilutive 43⁄4% convertible subordinated
notes, tax effected interest                            |  |                    |       |                   |  |      | 319    |      |  |   |       |  |  |   | 1,173  | 
|                                                                                                        |  |                    |        |                   |  |      |        |      |  |   |        |  |  |   |        | 
|Diluted  adjusted net income before assumed conversions                                                |  | $                  | 6,311  |                   |  | $    | 12,863 |      |  | $ | 21,531 |  |  | $ | 33,108 | 
|                                                                                                        |  |                    |        |                   |  |      |        |      |  |   |        |  |  |   |        | 
|DENOMINATOR:                                                                                            |  |                    |        |                   |  |      |        |      |  |   |        |  |  |   |        | 
|Basic  weighted average shares                                                                         |  |                    | 17,868 |                   |  |      | 17,801 |      |  |   | 17,835 |  |  |   | 17,493 | 
|Effect of dilutive stock options and warrants                                                           |  |                    | 423    |                   |  |      | 777    |      |  |   | 393    |  |  |   | 767    | 
|Effect of dilutive 43⁄4% convertible subordinated notes                                                   |  |                    |       |                   |  |      | 810    |      |  |   |       |  |  |   | 991    | 
|                                                                                                        |  |                    |        |                   |  |      |        |      |  |   |        |  |  |   |        | 
|Diluted  adjusted weighted average shares and assumed
conversion of 43⁄4% convertible subordinated notes |  |                    | 18,291 |                   |  |      | 19,388 |      |  |   | 18,228 |  |  |   | 19,251 | 
|                                                                                                        |  |                    |        |                   |  |      |        |      |  |   |        |  |  |   |        | 

The impact of options and warrants outstanding at June 30, 2003, for the
purchase of 1.2 million shares of common stock, at an average price of $30.36
were not included in the calculation of diluted EPS for the three months ended
June 30, 2003, because to do so would be antidilutive. The impact of options
and warrants outstanding at June 30, 2003, for the purchase of 1.2 million
shares of common stock, at an average price of $30.16 were not included in the
calculation of diluted EPS for the nine months ended June 30, 2003, because to
do so would be antidilutive. The options and warrants had exercise prices
greater than the average market price of the common stock for the
three and nine months
ended June 30, 2003, but could potentially dilute EPS in the future. The
impacts of outstanding 43⁄4% convertible subordinated notes were not included in
the calculation of diluted EPS for the three and nine months ended June 30,
2003 because to do so also would have been antidilutive. The notes
could potentially dilute EPS in the future.

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SHAREHOLDERS EQUITY

We account for stock-based compensation plans under APB No. 25, Accounting for
Stock Issued to Employees and related interpretations, under which no
compensation expense has been recognized, as all options have been granted with
an exercise price equal to or exceeding the fair value of the common stock on
the date of grant. For SFAS No. 123, Accounting for Stock-Based Compensation
(SFAS 123), we estimated the fair value of each option grant as of the date of
grant using the Black-Scholes option pricing method with the following
assumptions for the periods ended June 30:

|                         |  |                    |      |                   |     |      |     |         |  |         |      |   |  |  |      |  
|------------------------ |  | ------------------ | ---- | ----------------- | --- | ---- | --- | ------- |  | ------- | ---- | - |  |  | ---- | -
|                         |  | Three Months Ended |      | Nine Months Ended
|                         |  |                    |      |                  
|                         |  | 2003               |      | 2002 (a)          |     | 2003 |     | 2002   
|                         |  |                    |      |                   |     |      |     |        
|Volatility               |  |                    | 42.4 | %                 |     |      | N/A |         |  |         | 55.9 | % |  |  | 57.7 | %
|Risk-free interest rate  |  |                    | 2.1  | %                 |     |      | N/A |         |  |         | 2.1  | % |  |  | 2.6  | %
|Dividend rate            |  |                    | 1.0  | %                 |     |      | N/A |         |  |         | 0.7  | % |  |  | 0.7  | %
|Expected life of options |  | 3 years            |      |                   | N/A |      |     | 3 years |  | 3 years



|(a) |  | There were no options granted during the three months ended June
30, 2002.
|--- |  | --------------------------------------------------------------------------

Options granted to employees generally vest ratably over three years. Options
granted to independent directors generally vest immediately upon grant. Had
compensation costs been determined consistent with SFAS 123, utilizing the
assumptions detailed above and amortizing the resulting fair value of stock
options granted over the respective vesting period of the options, the net
income and per share amounts would have been the following pro forma amounts
for the periods ended June 30 (in thousands, except per share data):

|             |             |  |                    |       |                   |  |      |        |      |  |   |        |  |  |   |        | 
|------------ | ----------- |  | ------------------ | ----- | ----------------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|             |             |  | Three Months Ended |       | Nine Months Ended
|             |             |  |                    |       |                  
|             |             |  | 2003               |       | 2002              |  | 2003 |        | 2002
|             |             |  |                    |       |                   |  |      |        |     
|Net Income:  |             |  |                    |       |                   |  |      |        |      |  |   |        |  |  |   |       
|             | As Reported |  | $                  | 6,311 |                   |  | $    | 12,544 |      |  | $ | 21,531 |  |  | $ | 31,935 | 
|             | Pro Forma   |  | $                  | 5,375 |                   |  | $    | 11,731 |      |  | $ | 18,767 |  |  | $ | 29,652 | 
|Basic EPS:   |             |  |                    |       |                   |  |      |        |      |  |   |        |  |  |   |       
|             | As Reported |  | $                  | 0.35  |                   |  | $    | 0.70   |      |  | $ | 1.21   |  |  | $ | 1.83   | 
|             | Pro Forma   |  | $                  | 0.30  |                   |  | $    | 0.66   |      |  | $ | 1.05   |  |  | $ | 1.70   | 
|Diluted EPS: |             |  |                    |       |                   |  |      |        |      |  |   |        |  |  |   |       
|             | As Reported |  | $                  | 0.35  |                   |  | $    | 0.66   |      |  | $ | 1.18   |  |  | $ | 1.72   | 
|             | Pro Forma   |  | $                  | 0.30  |                   |  | $    | 0.62   |      |  | $ | 1.03   |  |  | $ | 1.60   | 

In July 2002, the Board of Directors approved a one-year program under which we
may purchase up to 1.0 million shares of our common stock in the open market or
in privately negotiated transactions. In October 2002, under this program, we
purchased 110 thousand shares at a price of $18.39 per share. In July 2003,
the Board of Directors approved a one-year extension under which we may
purchase up to 1.0 million shares of our common stock in the open market or in
privately negotiated transactions.

GAIN ON EXTINGUISHMENT OF DEBT

During the three and nine months ended
June 30, 2003, we repurchased 43⁄4%
convertible subordinated notes with a face value of $9.0 million, for cash of
$8.9 million.

During the three and nine months ended June 30, 2002, we repurchased 43⁄4%
convertible subordinated notes with a face value of $10.0 million and $16.0
million respectively, using 145 thousand shares from treasury and 95 thousand
newly issued shares at an average price of $47.60 and using $5.7 million in
cash and 145 thousand shares from treasury and 95 thousand newly issued shares
at an average price of $47.60, respectively.

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ALLIANCES

In November 2002, we entered into a 50/50 joint venture with TMP International,
Inc, the producer of McFarlane Toys, to produce and market a new series of
action figures based on NASCAR drivers. The joint venture, called
Action-McFarlane LLC, will begin production in the fiscal fourth quarter.

COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, we are subject to certain lawsuits and
asserted and unasserted claims. We do not believe that the resolution of any
such matters will have a material adverse effect on our financial position,
results of operations, or cash flows.

One of our sublessees fell in arrears on lease payments during 2002. The
subleases with this party include a building lease, which expires October 2009,
and equipment and furniture leases, which expired October 2002. The building
lease has annual lease payments of $1.0 million. We acquired the equipment and
furniture under the subleases in October 2002. In fiscal 2002, we reserved
$3.0 million, representing our then current estimate of the total potential
loss under the building sublease agreements. In March 2003, we decided to move
our corporate headquarters to this building from our current corporate
headquarters, which is also a leased building. We currently estimate that the
$0.9 million reserve remaining at June 30, 2003, will be adequate to cover
lease payments on the current corporate headquarters building after we move,
until sublet. We plan to move in late summer.




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are the leading designer and marketer of licensed motorsports products
related to NASCAR, including die-cast scaled replicas of motorsports vehicles,
apparel, and memorabilia. We currently have exclusive license agreements with
many of the most recognized names in NASCAR. We also design and sell products
relating to other motorsports, including racing sanctioned by the NHRA, Formula
One, the IRL, and the World of Outlaws. In Germany, we merchandise Formula One
and high-end auto manufacturer die-cast replica vehicles. We work closely with
drivers, team owners, track operators, and sponsors to design and merchandise
our products. Third parties manufacture all of the replica motorsports
vehicles and most apparel and memorabilia, generally utilizing our designs,
tools, and dies. We retain ownership and control over designs and tooling and
have close working relationships with our third-party manufacturers to help
assure product quality.

We have structured our operations to enable us to respond to challenging
business conditions and to service higher levels of sales with limited
increases in operating expenses and capital investments. The principal
elements of this operating structure include the following:



| |  |  | We have the ability to exert a high degree of control over product
pricing.                                                  
| | - |  | -----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Die-cast manufacturing costs are largely fixed as a percentage of
sales due to outsourcing under fixed-price contracts.      
|
| |  |  | Royalties are paid generally as a percentage of sales.                                                                       
|
| |  |  | Due to our agreements with distributors and QVC, incremental volume
does not proportionately increase our operating expenses.
|
| |  |  | Research and development is limited to basic design and engineering.                                                         
|
| |  |  | Capital expenditures are
principally limited to tooling for die-cast.                                                        
|
| |  |  | Functions, such as manufacturing and others outside of our core skills, are generally outsourced.                            

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Revenue

We derive revenue primarily from the sale of our licensed motorsports products.
The popularity and performance of drivers and teams under license, the
popularity of motorsports in general and NASCAR in particular, the general
demand for licensed sports merchandise, and our ability to design, produce, and
distribute our products in a timely manner influence the level of our net
sales.

We distribute our products through a broad range of channels, including a
network of wholesale distributors, leading mass-market retailers, mobile
trackside stores, QVC, and our collectors club catalog. We recognize revenue
when persuasive evidence of an arrangement exists, title passes to the
customer, the fee is fixed or determinable, and collection is probable. Most
distributor sales are recognized when product is shipped to a distributor
because title to the product passes to the distributor at shipment. Sales to
mass-market retailers are recognized when title to product passes to the
retailer, either at time of shipment to the retailer or receipt by the
retailer. Under terms of our consignment agreement with QVC, collectors club
catalog sales are recognized when QVC ships product to the consumer. We
recognize trackside sales when the consumer purchases product at the point of
sale. A portion of the product sold through television programming is
consignment product, for which sales are recognized when QVC ships the product
to the consumer. Internet and other sales are generally recognized when
delivered to the consumer.

Cost of Sales

Cost of sales consists primarily of the cost of products procured from
third-party manufacturers, royalty payments to licensors, depreciation of
tooling and dies, and freight charges. Substantial portions of our die-cast
products are manufactured under an exclusive agreement with Early Light, a
third-party manufacturer in China. We obtain substantially all of our apparel
and memorabilia products from several third-party manufacturers and suppliers.

Due to the variable nature of most of the components of our cost of sales, our
gross margin generally does not fluctuate significantly. However, certain
factors do affect our gross margin, including the following:



| |  |  | product mix,                                                                                                                                      
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our ability to control product pricing,                                                                                                           
|
| |  |  | the effect of amortizing the fixed cost components of cost of
sales, primarily depreciation of tooling and dies, over varying levels
of net sales,
|
| |  |  | the type of freight charges, and                                                                                                                  
|
| |  |  | additional charges related to lower than minimum order quantities
and cancellation of specific purchase orders.                                   

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses consist primarily of employee
compensation, advertising and promotion, rent and other facility costs, and
depreciation and amortization. The majority of these costs are fixed and, as a
result, incremental sales volume generally results in a decline in selling,
general, and administrative expenses as a percentage of net sales.

Seasonality

Because the auto-racing season is concentrated between the months of February
and November, the second and third calendar quarters of each year (our third
and fourth fiscal quarters) are historically characterized by higher sales.

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Application of Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with generally accepted accounting principles in the United States. During
preparation of these financial statements, we are required to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenue
and expenses, and related disclosure of contingent assets and liabilities. On
an on-going basis, we evaluate our estimates, including those related to bad
debts, inventories, fixed assets, goodwill and other intangible assets, income
taxes, royalties, contingencies, and litigation. We base our estimates on
historical experience and various other assumptions that we believe are
reasonable under the circumstances. The results form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The following critical accounting policies require us to make significant
judgments and estimates used in the preparation of our financial statements.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments. We determine
the adequacy of this allowance by regularly evaluating individual customer
receivables and considering a customers financial condition, credit history,
and current economic conditions. If the financial condition of our customers
were to deteriorate, additional allowances may be required. Our accounts
receivable are written off once the account is deemed to be uncollectible.
This typically occurs once we have exhausted all efforts to collect the
account, which includes collection attempts by company employees and outside
collection agencies.

Inventory Reserves

We write-down our inventory for estimated obsolescence or unmarketable
inventory in an amount equal to the difference between the cost of inventory
and the estimated market value based upon assumptions about future demand and
market conditions. If actual market conditions prove to be less favorable than
those projected by management, additional inventory write-downs may be
required.

Royalties

Our license agreements generally require payments of royalties to drivers,
sponsors, teams, and other parties on a calendar year basis. Royalties payable
are recognized as cost of sales when the related sale is recognized.
Guarantees advanced under license agreements are carried as prepaid royalties
until earned by the third party or considered to be unrecoverable. We evaluate
prepaid royalties regularly and expense prepaids to cost of sales to the extent
projected to be unrecoverable through sales.

Goodwill and Other Intangibles

We evaluate goodwill and other intangibles for impairment at least annually, in
accordance with SFAS No. 142, Goodwill and Other Intangible Assets. For
goodwill, we first compare the fair value of a reporting unit with its carrying
amount, including goodwill. If the carrying amount of a reporting unit exceeds
the fair value of a reporting unit, additional tests would be used to measure
the amount of impairment loss, if any. We use a present value technique to
measure reporting unit fair value. If the carrying amount of any other
intangible asset exceeds its fair value, we would recognize an impairment loss
for the difference between fair value and the carrying amount. We have not
recognized any impairment losses to date. If events occur and circumstances
change, causing the fair value of a reporting unit to fall below its carrying
amount, impairment losses may be recognized in the future.

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Deferred Tax Assets

We estimate our actual current tax obligations together with the temporary
differences that have resulted from the differing treatment of items dictated
by generally accepted accounting principles versus U.S. and German tax laws.
These temporary differences result in deferred tax assets and liabilities. On
an on-going basis, we assess the likelihood that our deferred tax assets will
be recovered from future taxable income. If we were to believe the recovery
was less than likely, we would establish a valuation allowance against the
deferred tax asset and charge the amount as an income tax expense in the period
in which such a determination was made.

Stock-Based Compensation

We account for employee stock-based compensation in accordance with Accounting
Principles Board Opinion 25, Accounting for Stock Issued to Employees and
related interpretations (APB No. 25). Common stock options issued under our
plans generally do not result in compensation expense because the exercise
price of the stock options equals the market price of the underlying stock on
the date of grant.

Results of Operations

The following table sets forth the percentage of total revenue represented by
certain expense and revenue items for the periods ended June 30:

|                                               |  |                    |       |                   |  |      |       |      |  |  |       |   |  |  |       |  
|---------------------------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ----- | ---- |  |  | ----- | - |  |  | ----- | -
|                                               |  | Three Months Ended |       | Nine Months Ended
|                                               |  |                    |       |                  
|                                               |  | 2003               |       | 2002              |  | 2003 |       | 2002
|                                               |  |                    |       |                   |  |      |       |     
|Net sales                                      |  |                    | 100.0 | %                 |  |      | 100.0 | %    |  |  | 100.0 | % |  |  | 100.0 | %
|Cost of sales                                  |  |                    | 64.5  |                   |  |      | 61.0  |      |  |  | 64.6  |   |  |  | 61.4  |  
|                                               |  |                    |       |                   |  |      |       |      |  |  |       |   |  |  |       |  
|Gross profit                                   |  |                    | 35.5  |                   |  |      | 39.0  |      |  |  | 35.4  |   |  |  | 38.6  |  
|                                               |  |                    |       |                   |  |      |       |      |  |  |       |   |  |  |       |  
|Selling, general and administrative            |  |                    | 23.3  |                   |  |      | 18.0  |      |  |  | 21.8  |   |  |  | 19.0  |  
|Amortization of licenses and other
intangibles |  |                    | 1.0   |                   |  |      | 0.6   |      |  |  | 1.0   |   |  |  | 0.6   |  
|                                               |  |                    |       |                   |  |      |       |      |  |  |       |   |  |  |       |  
|Income from operations                         |  |                    | 11.2  |                   |  |      | 20.4  |      |  |  | 12.6  |   |  |  | 19.0  |  
|Interest expense                               |  |                    | (0.6  | )                 |  |      | (0.6  | )    |  |  | (0.6  | ) |  |  | (0.8  | )
|Other income (expense)                         |  |                    | 0.9   |                   |  |      | (1.5  | )    |  |  | 1.0   |   |  |  | (0.6  | )
|                                               |  |                    |       |                   |  |      |       |      |  |  |       |   |  |  |       |  
|Income before income taxes                     |  |                    | 11.5  |                   |  |      | 18.3  |      |  |  | 13.0  |   |  |  | 17.6  |  
|Income taxes                                   |  |                    | 4.3   |                   |  |      | 7.1   |      |  |  | 4.9   |   |  |  | 6.8   |  
|                                               |  |                    |       |                   |  |      |       |      |  |  |       |   |  |  |       |  
|Net income                                     |  |                    | 7.2   |                   |  |      | 11.2  |      |  |  | 8.1   |   |  |  | 10.8  |  
|                                               |  |                    |       |                   |  |      |       |      |  |  |       |   |  |  |       |  

Three Months Ended June 30, 2003, Compared with Three Months Ended June 30,
2002

Net sales decreased 21.8% to $87.6 million for the three months ended June 30,
2003, from $112.1 million in the prior year quarter. Domestic die-cast sales
decreased $16.9 million, or 29.5%, from the prior year quarter while foreign
die-cast sales increased $1.4 million or 21.1%. The decline in revenue was due
to the $8.6 million decline in mass-merchant retailer sales and an $8.8 million
decline in domestic wholesale distribution and promotion die-cast revenues due,
in part, to a decline in special paint scheme programs. Domestic apparel and
memorabilia segment sales, exclusive of trackside, decreased $3.9 million, or
13.9%, from the prior year quarter. This decrease included $4.8 million from
mass-merchant retailer revenue declines, as retailers deferred shipments
during the third quarter, offset by an increase of $1.0 million in wholesale
distribution and promotion. Domestic apparel and memorabilia segment sales
included revenues of $3.9 million from companies acquired after June 30, 2002.
Trackside sales decreased 24.6% to $14.6 million from $19.3 million in the
prior year quarter. The timing of the Texas race caused $2.9 million of the
decline and the remainder of the decline was due to
adverse weather conditions and a weak economy.

Gross profit declined to 35.5% of sales in the three months ended June 30,
2003, from 39.0% in the comparable fiscal 2002 quarter. The decline in
domestic margin was attributable to die-cast product cost increases, lower
volume of special paint scheme program die-cast sales and a
program to accelerate the disposition of slow moving inventory. German
die-cast margins were lower as a result of higher tooling costs. These
declines in gross margin

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were partially offset by the impact of higher margin apparel sales being a
larger component of total sales this year than last year.

Selling, general, and administrative expenses were $20.4 million compared to
$20.2 million in the prior year quarter. Selling, general, and administrative
expenses increased $0.2 million, despite incremental selling, general, and
administrative expenses arising from companies acquired after June 30, 2002
totaling $1.1 million. We obtained selling, general, and administrative
expense reductions by continued strong cost controls.

Amortization of licenses and intangibles for the three months ended June 30,
2003, includes $0.1 million in incremental expenses arising from companies
acquired in fiscal 2002.

Interest expense of $0.5 million for the three months ended June 30, 2003, was
$0.1 million lower than interest expense for the prior year quarter as a result
of convertible subordinated note repurchases.

Other income (expense) included $0.8 million of foreign currency translation gains in the
three months ended June 30, 2003. The gains resulted from the impact the 5.7%
improvement in the euro-to-U.S. dollar exchange rate had on German advances
payable, which are denominated in U.S. dollars. Other income
(expense) also included gains on extinguishment of debt of
$34 thousand and losses on extinguishment of debt of $1.6 million for the three months ended June 30, 2003
and 2002, respectively.

The effective tax rate of 37.4% in the three months ended June 30, 2003,
reflected current expectations for the effective tax rate for fiscal 2003 and
was slightly lower than the 38.9% effective tax rate in the prior year quarter.

Nine Months Ended June 30, 2003 Compared with Nine Months Ended June 30, 2002

Net sales decreased 10.8% to $264.5 million for the nine months ended June 30,
2003, from $296.4 million in the prior year period. Domestic die-cast sales
decreased $42.9 million, or 27.1%, from the prior year period while foreign
die-cast sales increased $3.9 million, or 18.2%. The decline in revenue was
due to the $2.8 million decline in mass-merchant retailer sales and a $38.7
million decline in domestic wholesale distribution and promotion die-cast
revenues due to a decline in special paint scheme programs and the previously
reported Monte Carlo and Pontiac re-tooling issue. The re-tooling is now
complete. Other products and distribution channels showed strength and
partially offset the decline in die-cast revenues. Domestic apparel and
memorabilia segment sales, exclusive of trackside, increased $11.8 million, or
15.8%, from the prior year period. This increase included $2.6 million from
mass-merchant retailers, and an increase of $9.1 million in wholesale
distribution and promotion. Domestic apparel and memorabilia segment sales
included revenues of $14.2 million from companies acquired after June 30, 2002.
Trackside sales decreased 10.8% to $35.0 million from revenues of $39.2
million in the prior year. The decrease in trackside revenues was due to
adverse weather conditions and a weak economy.

Gross profit declined to 35.4% of sales in the nine months ended June 30, 2003
from 38.6% in the comparable fiscal 2002 period. The decline in domestic
margin was attributable to die-cast product cost increases, lower volume of
special paint scheme program die-cast sales and a program to accelerate the
disposition of slow moving inventory. German die-cast margins were lower as a
result of higher tooling costs. These declines in gross margin were partially
offset by the impact of higher margin apparel sales being a larger component of
total sales this year than last year.

Selling, general, and administrative expenses were $57.6 million in the nine
months ended June 30, 2003, compared to $56.3 million in the prior year period.
Selling, general, and administrative expenses increased only $1.2 million,
despite incremental selling, general, and administrative expenses arising from
companies acquired in fiscal 2002 totaling $4.4 million. We obtained selling,
general, and administrative expense reductions by continued strong cost
controls.

Amortization of licenses and intangibles for the nine months ended June 30,
2003, includes $0.4 million in incremental expenses arising from companies
acquired in fiscal 2002.

Interest expense of $1.7 million for the nine months ended June 30, 2003, was
$0.6 million lower than interest expense for the prior year period as a result
of convertible subordinated note repurchases.

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Other income (expense) included $3.1 million of foreign currency translation gains in the
nine months ended June 30, 2003. The gains resulted from the impact the 17.4%
improvement in the euro-to-U.S. dollar exchange rate had on German advances
payable, which are denominated in U.S. dollars. Other income
(expense) also included $34 thousand in gains on extinguishment of
debt for the nine months ended June 30, 2003 and $1.4 million in
losses on extinguishment of debt in the nine months ended June 30,
2002.

The effective tax rate of 37.4% in the nine months ended June 30, 2003,
reflected current expectations for the effective tax rate for fiscal 2003 and
was slightly lower than the 38.8% effective tax rate in the prior year period.

Liquidity and Capital Resources

Working capital improved $4.7 million to $122.2 million at June 30, 2003, from
$117.5 million at September 30, 2002. Cash decreased $9.0 million to $60.6
million at June 30, 2003, from $69.6 million at September 30, 2002. Cash
decreased due to net property and equipment expenditures ($26.9 million),
repurchase of convertible notes ($8.9 million); common stock purchases for
treasury ($2.0 million), dividends to common shareholders ($1.6 million), and
other activities. The decreases in cash were offset by increases in cash for
collection of receivables ($11.7 million), a 3-year, 5.2% mortgage on the
building expansion in Germany ($3.0 million), and cash generated from
operations.

Days sales outstanding, calculated on quarterly sales, increased to 52.1 days
as of June 30, 2003, compared to 51.0 days as of September 30, 2002, and 41.2
days as of June 30, 2002. The increase in days sales outstanding from June 30,
2002, reflects the overdue balance of one large customer that was collected in
July.

At June 30, 2003, inventories increased $2.2 million over amounts at March 31,
2003, $4.9 million over amounts at September 30, 2002, and $14.3 million over
amounts at June 30, 2002. However, die-cast inventories declined $0.3 million
from amounts at March 31, 2003, declined $1.5 million from amounts at September
30, 2002, and increased $1.2 million from amounts at June 30, 2002. Apparel
and other inventories increased in each period due to companies acquired
subsequent to June 30, 2002, seasonal fluctuations, and delayed mass retail
shipments. Backlog was approximately $80 million at June 30, 2003, and $90
million at September 30, 2002.

As of June 30, 2003, 43⁄4% convertible subordinated notes with a face value
of $29.9 million were outstanding. The subordinated notes are convertible, at
the option of the holders, into shares of common stock at the initial
conversion price of $48.20 per share, subject to adjustments in certain events.
Interest on notes is payable semi-annually on April 1 and October 1 of each
year. The notes mature on April 1, 2005. The notes are general unsecured
obligations of our company, subordinated in right of payment to all existing
and future senior indebtedness, as defined in the notes. The indenture
governing the notes does not limit or prohibit our company or our subsidiaries
from incurring additional debt, including senior indebtedness. We have the
option to redeem the notes in whole or in part at any time, at redemption
prices set forth in the indenture governing the notes. Upon the occurrence of
a change in control or a termination of trading, as defined in the
indenture, the holders of the subordinated notes will have the right to require
us to repurchase all or any part of such holders notes at 100% of their
principal amount, plus accrued and unpaid interest.

Net capital expenditures related principally to ongoing investments in tooling,
investments made to upgrade our IT systems in Charlotte, North Carolina, the
installation of a point-of-sales system in trackside trailers and building
additions in Charlotte, North Carolina and Aachen, Germany. Capital
expenditures totaled $26.9 million for the nine months ended June 30, 2003, and
included $6.0 million applicable to foreign operations. Net capital
expenditures for 2003 are expected to approximate $30 million for the fiscal
year.

On March 12, 2003, we entered into an amendment to the loan and security
agreement with Bank One that increased the revolving credit facility, modified
certain covenants, and extended the term of the agreement through March 31,
2005. The amended agreement provides for a revolving credit facility of $35
million. The agreement provides for borrowings of up to $20 million to support
letters of credit, to the extent not utilized for borrowings. Prior to the
amendment, the revolving credit facility was $20 million. Outstanding letters
of credit totaled $18.1 million at June 30, 2003.

The line of credit bears interest at Bank Ones base rate or LIBOR plus 2.5%.
We pay a commitment fee of 0.5% of the average unused credit facility and a fee
of 1.0% of the average undrawn letters of credit.

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Under the agreement, as amended, we are required to meet certain financial
tests principally related to ratios of debt coverage, total liabilities to
tangible net worth, and funded indebtedness to EBIDA (earnings before interest,
depreciation, and amortization). We were in compliance with those covenants at
June 30, 2003. We have never borrowed under the agreement, originally dated
September 2000.

In July 2002, the Board of Directors approved a one-year program under which we
may purchase up to 1.0 million shares of our common stock in the open market or
in privately negotiated transactions. In October 2002, under this program, we
purchased 110,000 shares at a price of $18.39 per share. In July 2003, the
Board of Directors approved a one-year extension under which we may purchase up
to 1.0 million shares of our common stock in the open market or in privately
negotiated transactions.

In September 2002, we initiated an ongoing quarterly dividend policy with an
initial dividend of $.03 per share. A summary of dividends paid on common stock after
September 30, 2002 follows (in thousands, except per share data):

|       |  |                |      |                  |  |                    |  |                   |  |                  |  |  |  |  |  | 
|------ |  | -------------- | ---- | ---------------- |  | ------------------ |  | ----------------- |  | ---------------- |  |  |  |  |  | 
|Amount |  | Rate Per Share |      | Declaration Date |  | Record Date        |  | Paid             
|       |  |                |      |                  |  |                    |  |                  
|$535   |  | $              | 0.03 |                  |  | September 19, 2002 |  | October 10, 2002  |  | October 28, 2002
|$535   |  | $              | 0.03 |                  |  | December 2, 2002   |  | December 23, 2002 |  | January 13, 2003
|$535   |  | $              | 0.03 |                  |  | March 5, 2003      |  | March 21, 2003    |  | April 14, 2003  
|$894   |  | $              | 0.05 |                  |  | June 2, 2003       |  | June 13, 2003     |  | July 14, 2003   

Dividend accruals are included in accrued expenses.

Cautionary Statement Regarding Forward-Looking Statements

This report contains forward-looking statements, including statements regarding
business strategies, business, and the industry in which we operate. These
forward-looking statements are based primarily on our expectations and are
subject to a number of risks and uncertainties, some of which are beyond our
control. Actual results could differ materially from the forward-looking
statements as a result of numerous factors, including those set forth in our
Form 10-K for the year ended September 30, 2002, as filed with the Securities
and Exchange Commission.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no significant change in our exposure to market risk since
year-end. The risk is limited to interest rate risk associated with credit
instruments and foreign currency exchange rate risk associated with operations
in Germany.

The functional currency for our foreign operation is the euro. As such,
changes in exchange rates between the euro and the U.S. dollar could adversely
affect our future earnings. Given the level of income we currently derive from
our foreign operations, we consider exposure to be minimal. At June 30, 2003,
however, we had $20.8 million in intercompany advances to our German subsidiary
denominated in dollars for which the euro exchange rate gain or loss is
credited or charged to results of operations.

We currently use a derivative as part of our risk management strategy. In June
2003 we entered into a foreign currency forward designed to offset 25% of the
effect changes in the euro exchange rate have on earnings related to the
intercompany advances of our German subsidiaries denominated in dollars. This
forward does not qualify for hedge accounting and is recorded on the balance
sheet at fair value. Changes in fair value are recorded each period in other
income (expense). At June 30, 2003, this forward with a notional
value of 5 million euros ($5.8 million as of June 30,
2003), maturing in November 2003,
remained unsettled. The notional amount does not quantify risk or represent
our liability, but is used in calculation of cash settlements under the
contract. As of June 30, 2003, $35 thousand of net unrealized losses on the
contract were recorded in other income (expense).

We are exposed to credit risk in the event of non-performance by the
counterparty. However, the counterparty to this transaction is a major
financial institution we deem credit worthy. We do not anticipate
non-performance.

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ITEM 4. CONTROLS AND PROCEDURES

We have evaluated, with the participation of our Chief Executive Officer and
Chief Financial Officer, the effectiveness of our disclosure controls and
procedures as of June 30, 2003. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer have each concluded that our disclosure
controls and procedures are effective to ensure that we record, process,
summarize, and report information required to be disclosed by us in our
quarterly reports filed under the Securities Exchange Act within the time
periods specified by the Securities and Exchange Commissions rules and forms.
During the quarterly period covered by this report, there have not been any
changes in our internal controls over financial reporting that have materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

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PART II - OTHER INFORMATION




ITEM 1. Legal Proceedings

Not applicable




ITEM 2. Changes in Securities and Use of Proceeds

Not applicable




ITEM 3. Defaults Upon Senior Securities

Not applicable




ITEM 4. Submissions of Matters to a Vote of Security Holders

Not applicable




ITEM 5. Other Information

Not applicable




ITEM 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits
|--- |  | --------

| |  |  |      |  |  |                                                                                                                                                           
| |  |  | ---- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 31.1 |  |  | Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a), promulgated under the Securities
Exchange Act of 1934, as amended.
| |  |  |      |  |  |                                                                                                                                                           
| |  |  | 31.2 |  |  | Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a), promulgated under the Securities
Exchange Act of 1934, as amended 
| |  |  |      |  |  |                                                                                                                                                           
| |  |  | 32.1 |  |  | Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002         
| |  |  |      |  |  |                                                                                                                                                           
| |  |  | 32.2 |  |  | Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002         



|(b) |  | Reports on Form 8-K
|--- |  | -------------------

| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We filed a current report on Form 8-K, dated April 28, 2003,
reporting that we issued a press release announcing our second
quarter fiscal year 2003 results.

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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

Fred W. Wagenhals |  | Chairman of the Board, President, and
Chief Executive Officer
(Principal Executive Officer)   |  | July 29, 2003
|                                         |  |                                                                                               |  |              
|/s/ R. David Martin

R. David Martin     |  | Chief Financial Officer, Secretary and Treasurer
(Principal Financial and Accounting Officer) |  | July 29, 2003

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EXHIBIT INDEX

| |  |  |      |  |  |                                                                                                                                                           
| |  |  | ---- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 31.1 |  |  | Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a), promulgated under the Securities
Exchange Act of 1934, as amended.
| |  |  |      |  |  |                                                                                                                                                           
| |  |  | 31.2 |  |  | Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a), promulgated under the Securities
Exchange Act of 1934, as amended 
| |  |  |      |  |  |                                                                                                                                                           
| |  |  | 32.1 |  |  | Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002         
| |  |  |      |  |  |                                                                                                                                                           
| |  |  | 32.2 |  |  | Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002