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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 December 31, 2002

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
(602) 337-3700

(Address, including zip code, and telephone number, including area code, of principal executive offices)

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                         |  | OUTSTANDING AT JANUARY 15, 2003
|                              |  |                                
|Common Stock, $0.01 par value |  | 17,840,409 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                   
|CERTIFICATION                
|EX-99.1                      
|EX-99.2                      



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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
December 31, 2002 and September 30, 2002
(in thousands, except per share data)

|                                     |                          |                                                                                         |                             |        |              |         |               |        |         |         | 
|------------------------------------ | ------------------------ | --------------------------------------------------------------------------------------- | --------------------------- | ------ | ------------ | ------- | ------------- | ------ | ------- | ------- | 
|                                     |                          |                                                                                         |                             |        | December 31, |         | September 30,
|                                     |                          |                                                                                         |                             |        | 2002         |         | 2002         
|                                     |                          |                                                                                         |                             |        |              |         |              
|ASSETS                               |                          |                                                                                         |                             |        |              |         |               |       
|Current Assets:                      |                          |                                                                                         |                             |        |              |         |               |       
|                                     |                          | Cash and cash equivalents                                                               |                             | $      | 79,623       |         |               | $      | 69,585  |        
|                                     |                          | Accounts receivable, net                                                                |                             |        | 44,041       |         |               |        | 61,313  |        
|                                     |                          | Inventories                                                                             |                             |        | 33,519       |         |               |        | 33,467  |        
|                                     |                          | Prepaid royalties                                                                       |                             |        | 7,238        |         |               |        | 6,938   |        
|                                     |                          | Deferred taxes                                                                          |                             |        | 3,201        |         |               |        | 3,155   |        
|                                     |                          | Prepaid expenses and other                                                              |                             |        | 4,074        |         |               |        | 2,397   |        
|                                     |                          |                                                                                         |                             |        |              |         |               |       
|                                     |                          |                                                                                         | Total current assets        |        |              | 171,696 |               |        |         | 176,855 | 
|Property and Equipment, net          |                          |                                                                                         | 53,813                      |        |              |         | 46,378        |       
|Goodwill                             |                          |                                                                                         | 85,577                      |        |              |         | 84,514        |       
|Licenses and Other Intangibles, net  |                          |                                                                                         | 23,489                      |        |              |         | 24,000        |       
|Other Assets                         |                          |                                                                                         | 5,824                       |        |              |         | 6,169         |       
|                                     |                          |                                                                                         |                             |        |              |         |               |       
|                                     |                          | $                                                                                       | 340,399                     |        |              | $       | 337,916       |       
|                                     |                          |                                                                                         |                             |        |              |         |               |       
|LIABILITIES AND SHAREHOLDERS EQUITY |                          |                                                                                         |                             |        |              |         |               |       
|Current Liabilities:                 |                          |                                                                                         |                             |        |              |         |               |       
|                                     |                          | Accounts payable                                                                        |                             | $      | 24,305       |         |               | $      | 28,958  |        
|                                     |                          | Accrued royalties                                                                       |                             |        | 11,088       |         |               |        | 15,146  |        
|                                     |                          | Accrued expenses                                                                        |                             |        | 7,197        |         |               |        | 10,545  |        
|                                     |                          | Income taxes payable                                                                    |                             |        | 8,233        |         |               |        | 4,265   |        
|                                     |                          | Current portion of long-term debt                                                       |                             |        | 434          |         |               |        | 423     |        
|                                     |                          |                                                                                         |                             |        |              |         |               |       
|                                     |                          |                                                                                         | Total current liabilities   |        |              | 51,257  |               |        |         | 59,337  | 
|                                     |                          |                                                                                         |                             |        |              |         |               |       
|Long-Term Liabilities:               |                          |                                                                                         |                             |        |              |         |               |       
|                                     | Long-term debt           |                                                                                         |                             | 43,273 |              |         |               | 40,360 |        
|                                     | Deferred taxes and other |                                                                                         |                             | 6,419  |              |         |               | 5,696  |        
|                                     |                          |                                                                                         |                             |        |              |         |               |       
|                                     |                          |                                                                                         | Total long-term liabilities |        |              | 49,692  |               |        |         | 46,056  | 
|                                     |                          |                                                                                         |                             |        |              |         |               |       
|Commitments and Contingencies        |                          |                                                                                         |                             |        |              |         |               |       
|Minority Interests                   |                          |                                                                                         | 3,213                       |        |              |         | 3,135         |       
|Shareholders Equity:                |                          |                                                                                         |                             |        |              |         |               |       
|                                     |                          | Common stock, $.01 par value: 62,500 shares authorized; 18,020
and 17,948 shares issued |                             |        | 180          |         |               |        | 179     |        
|                                     |                          | Additional paid-in capital                                                              |                             |        | 147,202      |         |               |        | 146,545 |        
|                                     |                          | Treasury stock, at cost, 190 and 80 shares                                              |                             |        | (3,999       | )       |               |        | (1,975  | )      
|                                     |                          | Accumulated other comprehensive loss                                                    |                             |        | (3,823       | )       |               |        | (4,606  | )      
|                                     |                          | Retained earnings                                                                       |                             |        | 96,677       |         |               |        | 89,245  |        
|                                     |                          |                                                                                         |                             |        |              |         |               |       
|                                     |                          |                                                                                         | Total shareholders equity  |        |              | 236,237 |               |        |         | 229,388 | 
|                                     |                          |                                                                                         |                             |        |              |         |               |       
|                                     |                          | $                                                                                       | 340,399                     |        |              | $       | 337,916       |       
|                                     |                          |                                                                                         |                             |        |              |         |               |       

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

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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income
Three Months Ended December 31, 2002 and 2001
(in thousands, except per share data)

|                           |                                                |   |                          |        |      |        |        |        |  |        | 
|-------------------------- | ---------------------------------------------- | - | ------------------------ | ------ | ---- | ------ | ------ | ------ |  | ------ | 
|                           |                                                |   |                          |        | 2002 |        | 2001  
|                           |                                                |   |                          |        |      |        |       
|Net sales                  |                                                | $ | 85,799                   |        |      | $      | 84,136 |       
|Cost of sales              |                                                |   | 55,277                   |        |      |        | 52,285 |       
|                           |                                                |   |                          |        |      |        |        |       
|Gross profit               |                                                |   | 30,522                   |        |      |        | 31,851 |       
|                           |                                                |   |                          |        |      |        |        |       
|Operating expenses:        |                                                |   |                          |        |      |        |        |       
|                           | Selling, general, and administrative           |   |                          | 17,362 |      |        |        | 17,172 | 
|                           | Amortization of licenses and other intangibles |   |                          | 900    |      |        |        | 506    | 
|                           |                                                |   |                          |        |      |        |        |       
|                           |                                                |   | Total operating expenses |        |      | 18,262 |        |        |  | 17,678 | 
|                           |                                                |   |                          |        |      |        |        |       
|Income from operations     |                                                |   | 12,260                   |        |      |        | 14,173 |       
|                           |                                                |   |                          |        |      |        |        |       
|Interest expense           |                                                |   | (579                     | )      |      |        | (845   | )     
|Other income               |                                                |   | 1,126                    |        |      |        | 113    |       
|                           |                                                |   |                          |        |      |        |        |       
|Income before income taxes |                                                |   | 12,807                   |        |      |        | 13,441 |       
|Income taxes               |                                                |   | 4,841                    |        |      |        | 5,211  |       
|                           |                                                |   |                          |        |      |        |        |       
|Net Income                 |                                                |   | 7,966                    |        |      |        | 8,230  |       
|                           |                                                |   |                          |        |      |        |        |       
|                           | Other comprehensive income                     |   |                          | 783    |      |        |        | 356    | 
|                           |                                                |   |                          |        |      |        |        |       
|                           | Comprehensive income                           |   | $                        | 8,749  |      |        | $      | 8,586  | 
|                           |                                                |   |                          |        |      |        |        |       
|Earnings Per Common Share: |                                                |   |                          |        |      |        |        |       
|                           | Basic                                          |   | $                        | 0.45   |      |        | $      | 0.48   | 
|                           | Diluted                                        |   | $                        | 0.44   |      |        | $      | 0.46   | 

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

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ACTION PERFORMANCE COMPANIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended December 31, 2002 and 2001
(in thousands)

|                                      |                                                                     |                                           |   |         |         |      |   |        |        |  
|------------------------------------- | ------------------------------------------------------------------- | ----------------------------------------- | - | ------- | ------- | ---- | - | ------ | ------ | -
|                                      |                                                                     |                                           |   | 2002    |         | 2001
|                                      |                                                                     |                                           |   |         |         |     
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                                     |                                           |   |         |         |      |   |       
|                                      | Net income                                                          |                                           | $ | 7,966   |         |      | $ | 8,230  |       
|                                      | Adjustments to reconcile net income to cash provided by operations- |                                           |   |         |         |      |   |        |       
|                                      |                                                                     | Depreciation and amortization             |   |         | 6,249   |      |   |        | 5,862  |  
|                                      |                                                                     | Stock option tax benefits                 |   |         | 407     |      |   |        | 1,226  |  
|                                      |                                                                     | Gain on extinguishment of debt            |   |         |        |      |   |        | (239   | )
|                                      |                                                                     | Other                                     |   |         | (123    | )    |   |        | (123   | )
|                                      | Changes in assets and liabilities, net-                             |                                           |   |         |         |      |   |        |       
|                                      |                                                                     | Accounts receivable, net                  |   |         | 17,465  |      |   |        | 1,941  |  
|                                      |                                                                     | Accounts payable                          |   |         | (4,939  | )    |   |        | (4,426 | )
|                                      |                                                                     | Income taxes payable                      |   |         | 3,833   |      |   |        | (1,110 | )
|                                      |                                                                     | Inventories                               |   |         | 170     |      |   |        | 957    |  
|                                      |                                                                     | Prepaid royalties and accrued royalties   |   |         | (4,358  | )    |   |        | (3,457 | )
|                                      |                                                                     | Other                                     |   |         | (6,333  | )    |   |        | (5,102 | )
|                                      |                                                                     |                                           |   |         |         |      |   |       
|                                      |                                                                     | Net cash provided by operating activities |   |         | 20,337  |      |   |        | 3,759  |  
|                                      |                                                                     |                                           |   |         |         |      |   |       
|CASH FLOWS FROM INVESTING ACTIVITIES: |                                                                     |                                           |   |         |         |      |   |       
|                                      | Capital expenditures, net                                           |                                           |   | (11,135 | )       |      |   | (5,533 | )     
|                                      | Other                                                               |                                           |   | (407    | )       |      |   | (238   | )     
|                                      |                                                                     |                                           |   |         |         |      |   |       
|                                      |                                                                     | Net cash used in investing activities     |   |         | (11,542 | )    |   |        | (5,771 | )
|                                      |                                                                     |                                           |   |         |         |      |   |       
|CASH FLOWS FROM FINANCING ACTIVITIES: |                                                                     |                                           |   |         |         |      |   |       
|                                      | Long-term debt borrowings  German mortgage                         |                                           |   | 3,001   |         |      |   |       |       
|                                      | Long-term debt repayments, net                                      |                                           |   | (365    | )       |      |   | (198   | )     
|                                      | Common stock purchases for treasury                                 |                                           |   | (2,024  | )       |      |   |       |       
|                                      | Stock option exercise proceeds                                      |                                           |   | 251     |         |      |   | 2,139  |       
|                                      |                                                                     |                                           |   |         |         |      |   |       
|                                      |                                                                     | Net cash provided by financing activities |   |         | 863     |      |   |        | 1,941  |  
|                                      |                                                                     |                                           |   |         |         |      |   |       
|                                      | Effect of exchange rates on cash and cash equivalents               |                                           |   | 380     |         |      |   | (91    | )     
|                                      |                                                                     |                                           |   |         |         |      |   |       
|                                      | Net change in cash and cash equivalents                             |                                           |   | 10,038  |         |      |   | (162   | )     
|                                      | Cash and cash equivalents, beginning of period                      |                                           |   | 69,585  |         |      |   | 64,514 |       
|                                      |                                                                     |                                           |   |         |         |      |   |       
|                                      | Cash and cash equivalents, end of period                            |                                           | $ | 79,623  |         |      | $ | 64,352 |       
|                                      |                                                                     |                                           |   |         |         |      |   |       
|Supplemental Disclosures:             |                                                                     |                                           |   |         |         |      |   |       
|                                      | Interest paid                                                       |                                           | $ | 990     |         |      | $ | 1,346  |       
|                                      | Income taxes paid, net                                              |                                           |   | 303     |         |      |   | 4,814  |       

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

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ACTION PERFORMANCE COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002

INTERIM FINANCIAL REPORTING

The accompanying condensed consolidated financial statements for Action
Performance Companies, Inc. and subsidiaries have been prepared without audit
by independent public accountants pursuant to the rules and regulations of the
Securities and Exchange Commission. In our opinion, all normal 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 (SFAS 145), 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.

SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure  an amendment of FASB Statement No. 123 (SFAS 148) amends SFAS No.
123 to provide alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee compensation.
In addition, SFAS 148 amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect on the method used on reported results. The disclosure requirements
apply to all companies for fiscal years ending after December 15, 2002. We
have adopted the disclosure requirements for SFAS 148 for the quarter ending
December 31, 2002 as presented below under the Shareholders Equity Note.

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

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|          |                                  |                                             |   |                                 |        |               |   |                  |   |                  |   |       |       |     |   |        |        | 
|--------- | -------------------------------- | ------------------------------------------- | - | ------------------------------- | ------ | ------------- | - | ---------------- | - | ---------------- | - | ----- | ----- | --- | - | ------ | ------ | 
|          |                                  |                                             |   | Three Months Ended December 31,
|          |                                  |                                             |   |                                
|          |                                  |                                             |   | External                        |        | Inter-segment |   | Depreciation and |   | Operating Income
|          |                                  |                                             |   | Revenues                        |        | Revenues      |   | Amortization     |   | (Loss)          
|          |                                  |                                             |   |                                 |        |               |   |                  |   |                 
|          |                                  |                                             |   |                                 |        |               |   |                  |   |                  |   | (a)   |       | (a)
|2002:     |                                  |                                             |   |                                 |        |               |   |                  |   |                  |   |       |       |     |   |       
|          | Domestic die-cast                |                                             | $ | 40,408                          |        |               | $ | 2,070            |   |                  | $ | 2,454 |       |     | $ | 12,412 |       
|          | Domestic apparel and memorabilia |                                             |   | 35,640                          |        |               |   |                 |   |                  |   | 870   |       |     |   | 4,402  |       
|          | Foreign die-cast                 |                                             |   | 9,152                           |        |               |   |                 |   |                  |   | 1,467 |       |     |   | 1,638  |       
|          | Corporate and other              |                                             |   | 599                             |        |               |   | 519              |   |                  |   | 1,458 |       |     |   | (6,163 | )     
|          | Eliminations                     |                                             |   |                                |        |               |   | (2,589           | ) |                  |   |      |       |     |   | (29    | )     
|          |                                  |                                             |   |                                 |        |               |   |                  |   |                  |   |       |       |     |   |        |       
|          |                                  | Total per consolidated
financial statements |   | $                               | 85,799 |               |   | $                |  |                  |   | $     | 6,249 |     |   | $      | 12,260 | 
|          |                                  |                                             |   |                                 |        |               |   |                  |   |                  |   |       |       |     |   |        |       
|2001 (c): |                                  |                                             |   |                                 |        |               |   |                  |   |                  |   |       |       |     |   |       
|          | Domestic die-cast                |                                             | $ | 47,659                          |        |               | $ | 2,571            |   |                  | $ | 2,920 |       |     | $ | 16,172 |       
|          | Domestic apparel and memorabilia |                                             |   | 28,026                          |        |               |   |                 |   |                  |   | 493   |       |     |   | 1,722  |       
|          | Foreign die-cast                 |                                             |   | 7,462                           |        |               |   |                 |   |                  |   | 1,012 |       |     |   | 1,557  |       
|          | Corporate and other              |                                             |   | 989                             |        |               |   | 238              |   |                  |   | 1,437 |       |     |   | (5,583 | )     
|          | Eliminations                     |                                             |   |                                |        |               |   | (2,809           | ) |                  |   |      |       |     |   | 305    |       
|          |                                  |                                             |   |                                 |        |               |   |                  |   |                  |   |       |       |     |   |        |       
|          |                                  | Total per consolidated
financial statements |   | $                               | 84,136 |               |   | $                |  |                  |   | $     | 5,862 |     |   | $      | 14,173 | 
|          |                                  |                                             |   |                                 |        |               |   |                  |   |                  |   |       |       |     |   |        |       

|                                 |                                             |   |                     |         |                         |   |          |         |           |   |        |        |  |   |        |        | 
|-------------------------------- | ------------------------------------------- | - | ------------------- | ------- | ----------------------- | - | -------- | ------- | --------- | - | ------ | ------ |  | - | ------ | ------ | 
|                                 |                                             |   | Identifiable Assets |         | Goodwill and Trademarks
|                                 |                                             |   |                     |         |                        
|                                 |                                             |   | Dec. 31,            |         | Sept. 30,               |   | Dec. 31, |         | Sept. 30,
|                                 |                                             |   | 2002                |         | 2002                    |   | 2002     |         | 2002     
|                                 |                                             |   |                     |         |                         |   |          |         |          
|Domestic die-cast (a)            |                                             | $ | 54,533              |         |                         | $ | 60,744   |         |           | $ | 14,166 |        |  | $ | 13,769 |       
|Domestic apparel and memorabilia |                                             |   | 116,727             |         |                         |   | 122,775  |         |           |   | 61,852 |        |  |   | 61,841 |       
|Foreign die-cast                 |                                             |   | 54,241              |         |                         |   | 47,660   |         |           |   | 16,378 |        |  |   | 15,334 |       
|Corporate and other (b)          |                                             |   | 123,156             |         |                         |   | 114,369  |         |           |   |       |        |  |   |       |       
|Eliminations                     |                                             |   | (8,258              | )       |                         |   | (7,632   | )       |           |   |       |        |  |   |       |       
|                                 |                                             |   |                     |         |                         |   |          |         |           |   |        |        |  |   |        |       
|                                 | Total per consolidated
financial statements |   | $                   | 340,399 |                         |   | $        | 337,916 |           |   | $      | 92,396 |  |   | $      | 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 $73.3 million in
cash at December 31, 2002, and $66.3 million in cash at September 30,
2002.                                                                                                                                                            
|   
|(c) |  | Certain prior period amounts have been reclassified to conform to
the current year presentation.                                                                                                                                                                                                         

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EARNINGS PER COMMON SHARE (EPS)

Reconciliations of the numerators and denominators in the EPS computations for
net income follow (in thousands):

|                                                                                                           |  |                                 |        |      |  |   |        | 
|---------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | ---- |  | - | ------ | 
|                                                                                                           |  | Three Months Ended December 31,
|                                                                                                           |  |                                
|                                                                                                           |  | 2002                            |        | 2001
|                                                                                                           |  |                                 |        |     
|NUMERATOR:                                                                                                 |  |                                 |        |      |  |   |        | 
|Basic  net income                                                                                         |  | $                               | 7,966  |      |  | $ | 8,230  | 
|Effect
of dilutive 4 3/4% convertible subordinated notes, tax effected interest                            |  |                                 | 319    |      |  |   | 449    | 
|                                                                                                           |  |                                 |        |      |  |   |        | 
|Diluted  adjusted net income before assumed conversions                                                   |  | $                               | 8,285  |      |  | $ | 8,679  | 
|                                                                                                           |  |                                 |        |      |  |   |        | 
|DENOMINATOR:                                                                                               |  |                                 |        |      |  |   |        | 
|Basic  weighted average shares                                                                            |  |                                 | 17,791 |      |  |   | 17,245 | 
|Effect of dilutive stock options and warrants                                                              |  |                                 | 404    |      |  |   | 673    | 
|Effect
of dilutive 4 3/4% convertible subordinated notes                                                   |  |                                 | 808    |      |  |   | 1,135  | 
|                                                                                                           |  |                                 |        |      |  |   |        | 
|Diluted
 adjusted weighted average shares and assumed conversion of 4
3/4%
convertible subordinated notes |  |                                 | 19,003 |      |  |   | 19,053 | 
|                                                                                                           |  |                                 |        |      |  |   |        | 

The impact of options and warrants outstanding for the purchases of 1.2 million
shares of common stock at an average price of $30.34 were not included in the
calculation of diluted EPS for the three months ended December 31, 2002,
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
months ended December 31, 2002, but could potentially dilute EPS in the future.

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:

|                         |  |                                 |      |         |     |  |     | 
|------------------------ |  | ------------------------------- | ---- | ------- | --- |  | --- | 
|                         |  | Three Months Ended December 31,
|                         |  |                                
|                         |  | 2002                            |      | 2001(a)
|                         |  |                                 |      |        
|Volatility               |  |                                 | 65.9 | %       |     |  | N/A | 
|Risk-free interest rate  |  |                                 | 2.1  | %       |     |  | N/A | 
|Dividend rate            |  |                                 | 0.7  | %       |     |  | N/A | 
|Expected life of options |  | 3 years                         |      |         | N/A | 

(a)  There were no options granted during the three months ended December 31, 2001.

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
(in thousands, except per share data):

8



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|             |             |  |                                 |       |      |  |   |       | 
|------------ | ----------- |  | ------------------------------- | ----- | ---- |  | - | ----- | 
|             |             |  | Three Months Ended December 31,
|             |             |  |                                
|             |             |  | 2002                            |       | 2001
|             |             |  |                                 |       |     
|Net Income:  |             |  |                                 |       |      |  |   |      
|             | As Reported |  | $                               | 7,966 |      |  | $ | 8,230 | 
|             | Pro Forma   |  | $                               | 7,129 |      |  | $ | 7,770 | 
|Basic EPS:   |             |  |                                 |       |      |  |   |      
|             | As Reported |  | $                               | 0.45  |      |  | $ | 0.48  | 
|             | Pro Forma   |  | $                               | 0.40  |      |  | $ | 0.45  | 
|Diluted EPS: |             |  |                                 |       |      |  |   |      
|             | As Reported |  | $                               | 0.44  |      |  | $ | 0.46  | 
|             | Pro Forma   |  | $                               | 0.39  |      |  | $ | 0.43  | 

In January 2003, we granted additional
options to purchase 582 thousand shares at an exercise price of
$17.62 per share.

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.

GAIN ON EXTINGUISHMENT OF DEBT

During the three months ended
December 31, 2001, we repurchased 4 3/4%
convertible subordinated notes with a face value of $5.0 million, at a gain of
$0.2 million, net of tax. The repurchase traded in December 2001 and settled
in cash in January 2002. We did not repurchase
4 3/4% convertible
subordinated notes during the three months ended December 31, 2002.

ALLIANCES

In November 2002, we entered into a 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 will be constituted as
Action-McFarlane LLC and production is currently expected to begin in late
2003.

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 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 current estimate of the total potential loss
under these sublease agreements.




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.

9



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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.                                                  
| | - |  | -----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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.                            

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 on a purchase order basis 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 without discounting,

10



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| |  |  | 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.

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.

11



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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.

Deferred Tax Assets

We estimate our actual current tax exposure 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 then 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 December 31:

|                                               |  |                    |       |      |  |  |       |  
|---------------------------------------------- |  | ------------------ | ----- | ---- |  |  | ----- | -
|                                               |  | Three Months Ended
|                                               |  |                   
|                                               |  | 2002               |       | 2001
|                                               |  |                    |       |     
|Sales                                          |  |                    | 100.0 | %    |  |  | 100.0 | %
|Cost of sales                                  |  |                    | 64.4  |      |  |  | 62.1  |  
|                                               |  |                    |       |      |  |  |       |  
|Gross profit                                   |  |                    | 35.6  |      |  |  | 37.9  |  
|                                               |  |                    |       |      |  |  |       |  
|Selling, general, and administrative           |  |                    | 20.2  |      |  |  | 20.4  |  
|Amortization of licenses and other intangibles |  |                    | 1.1   |      |  |  | 0.6   |  
|                                               |  |                    |       |      |  |  |       |  
|Income from operations                         |  |                    | 14.3  |      |  |  | 16.9  |  
|Interest expense                               |  |                    | (0.7  | )    |  |  | (1.0  | )
|Other income                                   |  |                    | 1.3   |      |  |  | 0.1   |  
|                                               |  |                    |       |      |  |  |       |  
|Income before income taxes                     |  |                    | 14.9  |      |  |  | 16.0  |  
|Income taxes                                   |  |                    | (5.6  | )    |  |  | (6.2  | )
|                                               |  |                    |       |      |  |  |       |  
|Net income                                     |  |                    | 9.3   | %    |  |  | 9.8   | %
|                                               |  |                    |       |      |  |  |       |  

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Three Months Ended December 31, 2002 Compared with Three Months Ended December 31, 2001

Net sales increased 2.0% to $85.8 million for the three months ended December
31, 2002, from $84.1 million in the prior year quarter. Domestic die-cast
sales decreased $7.3 million, or 15.2%, from the prior year quarter while
foreign die-cast sales increased $1.7 million or 22.7%. The decrease in
domestic die-cast sales resulted from a $13.8 million decline in wholesale
die-cast sales, which was offset by a $5.6 million increase in mass retail
die-cast sales and a $0.9 million increase in collector club sales. Domestic
apparel and memorabilia segment sales, exclusive of trackside, increased $9.2
million, or 45.9%, from the prior year quarter. This increase includes $5.1
million from mass retail, $6.9 million from 2002 acquisitions, and a decrease
of $2.8 million in wholesale apparel sales. Trackside sales decreased 19.6% to
$6.4 million from the very strong revenues of $8.0 million in the prior year
quarter. The decline in wholesale die-cast sales are from the lack of product
availability due to the previously announced delays in production of die-cast
models of newly redesigned Chevrolet Monte Carlo and Pontiac NASCAR vehicles.

Gross profit declined to 35.6% of sales in the first quarter of 2003 from 37.9%
in the comparable fiscal 2002 period. Domestic die-cast margins suffered as a
result of decreased wholesale die-cast volume and close out sales in Germany.
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 $17.4 million, or 20.2% of
sales, in the quarter ended December 31, 2002, comparable to the $17.2 million,
or 20.4% of sales in the prior year quarter.

Interest expense of $0.6 million for the three months ended December 31, 2002,
was $0.3 million lower than interest expense for the prior year period as a
result of the convertible subordinated note repurchases after December 31,
2001.

Other income includes $1.4 million of foreign currency translation gains in the
quarter ended December 31, 2002. The gains resulted from the impact the 7.0%
improvement in the euro-to-U.S. dollar exchange rate had on German advances
payable, which are denominated in U.S. dollars.

The effective tax rate of 37.8% in the first fiscal quarter reflects current
expectations for the effective tax rate for fiscal 2003 and is slightly lower
than the 38.8% effective tax rate on the prior year quarter.

Liquidity and Capital Resources

Working capital improved $2.9 million to $120.4 million at December 31, 2002,
from $117.5 million at September 30, 2002. Cash increased $10.0 million to
$79.6 million at December 31, 2002, from $69.6 million at September 30, 2002.
Cash increased as a result of collection of receivables
($17.5 million), a 3 year, 5.2% mortgage on the building expansion in Germany ($3.0 million), and other
operating activities. The increases in cash were offset by reductions in cash
for net property and equipment expenditures ($11.1 million), common stock
purchases for treasury ($2.0 million), and other operating activities.

Days sales outstanding, calculated on quarterly sales, decreased 7.5% to 47.2
days as of December 31, 2002, compared to 51.0 days as of September 30, 2002
and 42.3 days at December 31, 2001. The increase in DSOs from December 31,
2001, reflects our increased mass-retail revenues, which have a longer DSO.

Days in inventory, calculated on quarterly cost of sales, increased 24.8% to
55.8 days as of December 31, 2002, compared to 44.7 days as of September 30,
2002, due to inventory requirements of subsidiaries acquired since December 31,
2001, and our growing mass-retail apparel sales. Our backlog at December 31,
2002, was approximately $80 million compared to $90 million at September 30,
2002. This backlog is expected to increase as specials depending on the Monte
Carlo and Pontiac tooling are finalized.

As of December 31, 2002,
4 3/4% convertible subordinated notes with a face
value of $38.9 million remained 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

13



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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 on or after
April 1, 2001, 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 to ongoing investments in tooling and building
additions in Charlotte, North Carolina and Aachen, Germany, totaled $11.1
million for the three months ended December 31, 2002, and included $1.5 million
applicable to foreign operations. Net capital expenditures for 2003 are
expected to approximate $25 million.

Under our loan and security agreement with Bank One, we are required to meet
certain financial tests, principally related to debt coverage, tangible net
worth, and funded indebtedness to EBIDA (earnings before interest,
depreciation, and amortization). We were in compliance with those covenants at
December 31, 2002. Outstanding letters of credit totaled $10.0 million at
December 31, 2002.

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.

On December 2, 2002, we declared a cash dividend payable on our common stock of
$0.03 per share for the first quarter of 2003. The first quarter 2003 dividend
was paid on January 13, 2003, to shareholders of record as of December 23,
2002.

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. We have never used derivative financial instruments to manage or
reduce market risk.

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 this exposure to be minimal. Additionally,
at September 30, 2002, we had $21.0 million in intercompany advances
denominated in dollars for which the exchange rate gain or loss is charged to
results of operations.




ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation, as of a date within 90 days prior to the date of the
filing of this report, of the effectiveness of our disclosure controls and
procedures, our Chief Executive Officer and Chief Financial Officer have each
concluded that our disclosure controls and procedures are effective and
sufficient 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.

14



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Subsequent to the date of their evaluation, there have not been any significant
changes in our internal controls or in other factors that could significantly
affect these controls, including any corrective action with regard to
significant deficiencies and material weaknesses.

15



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##### Table of Contents






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  None                                                                                                                                                        
|   
|    | (1)                                                                                                                                                                     | Exhibit 99.1 Certification of the Chief
Executive Officer of the Registrant, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|   
|    | (2)                                                                                                                                                                     | Exhibit 99.2 Certification of the Chief
Financial Officer of the Registrant, 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 -                                                                                                                                                  
|   
|    | On January 28, 2003, we filed a current report on Form 8-K reporting
under Item 5 that we issued a press release announcing our first quarter
fiscal year 2003 results.

16



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##### Table of Contents






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)    |  | January 31, 2003
|                                       
|                                        |  |                                                                                                |  |                 
|                                       
|/s/ R. David Martin
R. David Martin     |  | Chief Financial Officer, Secretary, and Treasurer
(Principal Financial and Accounting Officer) |  | January 31, 2003

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CERTIFICATION

I, Fred W. Wagenhals, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Action Performance
Companies, Inc.;                                                                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations, and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                  
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                    
|
| | c) |  | Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent function):
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize, and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                         



|6. |  | The registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------
|/s/ Fred W. Wagenhals

Fred W. Wagenhals
Chairman of the Board, President, and Chief Executive Officer
January 31, 2003

18



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##### Table of Contents



CERTIFICATION

I, R. David Martin, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Action Performance
Companies, Inc.;                                                                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations, and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                  
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                    
|
| | c) |  | Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent function):
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize, and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                         



|6. |  | The registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                       
|-------------------------------------------------------------------------------------------------------
|/s/ R. David Martin

R. David Martin
Chief Financial Officer, Secretary, and Treasurer
January 31, 2003

19



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##### Table of Contents



Exhibit Index



|                  |             |                                                                                                                                                                         
|----------------- | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number    | Description
|                  |            
|                 
|(1)  Exhibit 99.1 |             | Certification of the Chief
Executive Officer of the Registrant, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|                 
|(2)  Exhibit 99.2 |             | Certification of the Chief
Financial Officer of the Registrant, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002