Motorsports Authentics losses top $20 million in 2009
Motorsports Authentics, the primary provider of NASCAR-related merchandise, has lost $20.1 million in the first nine months of 2009, Speedway Motorsports Inc. reported in a filing with the Securities and Exchange Commission today.
SMI owns half of Motorsports Authentics with track operating rival International Speedway Corp.
The $20.1 million in losses this year does not include the $111.2 million write-down of the worth of the company. SMI estimates its half is worth $14.9 million. It cost ISC and SMI $247.5 million to purchase Action Performance and Team Caliber to form Motorsports Authentics in 2005.
For the first nine months of 2008, Motorsports Authentics made nearly $10 million but couldn’t stay in the black for 2009. The company warned the situation might not get better and that bankruptcy is a possibility.
“MA continues to have a material amount of inventory,” the company stated in its detailed financial filing of overall third-quarter results. “Although lower than 2008, a significant portion of MA’s 2009 revenues and gross profits relate to sales of Dale Earnhardt, Jr. licensed merchandise, which may or may not continue at current levels.
“Lower 2009 revenues have resulted, and may continue to result in, reduced profitability and increased exposure to excess product levels.”
In the last four months, Motorsports Authentics has stopped paying guaranteed royalties due licensors. It only is paying royalties on what is actually sold.
Motorsports Authentics currently has guarantees on some of its contracts that last through 2015.
“Certain licensors have not granted extended cure periods, although no licensor has yet terminated their license agreement,” SMI states. “MA is attempting to renegotiate its license agreements with essentially all present significant licensors of NASCAR merchandising on terms that allow MA reasonable future opportunities to operate profitably.
“Should such negotiations not be successful, should MA management decide to allow license defaults to remain uncured or should licensors not grant extended cure periods and exercise their rights under the agreements, MA’s business and its ability to continue operating could be severely impacted.”
If Motorsports Authentics ceases operations, SMI reported it could be required to fund part or all of associated contingent guarantee obligations of up to approximately $11.6 million.
