Motorcar Parts of America, Inc.
Feb 9, 2017

Motorcar Parts of America Reports Record Fiscal 2017 Third Quarter Results

Product Line Expansion Enhances Growth Opportunities; Nine-Month Net Income Up Sharply Over Prior Year

LOS ANGELES, Feb. 09, 2017 (GLOBE NEWSWIRE) -- Motorcar Parts of America, Inc. (Nasdaq:MPAA) today reported results for its fiscal 2017 third quarter -- reflecting record profitability on a reported and adjusted basis.

Net sales for the fiscal 2017 third quarter were $112.6 million compared with $94.0 million for the same period a year earlier. The company's sales performance for the fiscal 2017 third quarter reflects continued strength of its rotating electrical business, as well as contributions from its other product lines -- including the company's emerging brake power boosters, which began shipping in August. The increase in sales also benefitted from $9.3 million due to a change in estimate in the accrual for anticipated stock adjustment returns.  Additional details are included in the attached financial tables.

All results labeled as "adjusted" in this press release are non-GAAP measures as discussed more fully below under the heading "Use of Non-GAAP Measures."

Adjusted net sales for the fiscal 2017 third quarter were $112.9 million compared with $94.0 million a year earlier.

Net income for the fiscal 2017 third quarter was $11.1 million, or $0.57 per diluted share, compared with $7.7 million, or $0.41 per share, a year ago.

Adjusted net income for the fiscal 2017 third quarter was $11.7 million, or $0.60 per diluted share, compared with $9.9 million, or $0.52 per diluted share, in the same period a year earlier.

Gross profit for the fiscal 2017 third quarter was $32.4 million compared with $28.9 million a year earlier.  Gross profit as a percentage of net sales for the fiscal 2017 third quarter was 28.7 percent compared with 30.7 percent a year earlier, impacted by volume and stock update discounts for rotating electrical products and customer allowances related to new business.

Adjusted gross profit for the fiscal 2017 third quarter was $33.9 million compared with $29.7 million a year ago.  Adjusted gross profit as a percentage of adjusted net sales for the three months was 30.1 percent compared with 31.5 percent a year earlier.

Net sales for the fiscal 2017 nine-month period were $306.8 million compared with $271.5 million a year earlier.

Adjusted net sales for the nine-month period were $319.1 million compared with $282.4 million last year.

Net income for the nine-month period was $27.8 million, or $1.43 per diluted share, compared with $8.3 million, or $0.44 per diluted share, in fiscal 2016.

Adjusted net income for the fiscal 2017 nine-month period was $34.3 million, or $1.77 per diluted share, compared with $30.1 million, or $1.59 per diluted share, in fiscal 2016.

Gross profit for the fiscal 2017 nine-month period was $83.4 million compared with $76.7 million a year earlier.  Gross profit as a percentage of net sales for the same period was 27.2 percent compared with 28.3 percent a year earlier, impacted by customer allowances and initial return accruals related to new business.

Adjusted gross profit for the fiscal 2017 nine-month period was $98.7 million compared with $87.8 million a year ago.  Adjusted gross profit as a percentage of adjusted net sales for the nine months was 30.9 percent compared with 31.1 percent a year earlier.

"As we approach the end of fiscal 2017, we are well-positioned within a $116 billion aftermarket hard parts industry.  We anticipate continued growth in all of our product lines, and we are encouraged by the additional opportunities we are seeing.  Our adjusted double-digit sales growth over the last five years highlights the company's success and we remain optimistic about the future," said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.

"The company is poised for further growth as we harness our distribution relationships and leverage our scale, global footprint and financial strength to deliver growth and profits to shareholders.  Our positive outlook is supported by an aging vehicle population, increased miles driven and related factors, all of which should continue to contribute to overall growth in the aftermarket industry.  As always, we thank our entire team for their day-in and day-out commitment to excellence and our company," Joffe said.

Use of Non-GAAP Measures

This press release includes the following non-GAAP measures - adjusted net sales, adjusted net income (loss), adjusted EBITDA, adjusted gross profit and adjusted gross margin, which are not measures of financial performance under GAAP, and should not be considered as alternatives to net sales, net income (loss), EBITDA, income from operations, gross profit or gross profit margin as a measure of financial performance.  The Company believes these non-GAAP measures, when considered together with the corresponding GAAP measures, provide useful information to investors and management regarding financial and business trends relating to the company's results of operations.  However, these non-GAAP measures have significant limitations in that they do not reflect all of the costs associated with the operations of the company's business as determined in accordance with GAAP.  Therefore, investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, measures of financial performance in accordance with GAAP.  For a reconciliation of adjusted net sales, adjusted net income (loss), adjusted EBITDA, adjusted gross profit and adjusted gross margin to their corresponding GAAP measures, see the financial tables included in this press release.  Also, refer to our Form 8-K to which this release is attached, and other filings we make with the SEC, for further information regarding these adjustments.

Teleconference and Web Cast

Selwyn Joffe, chairman, president and chief executive officer, and David Lee, chief financial officer, will host an investor conference call today at 10:00 a.m. Pacific time to discuss the company's financial results and operations.

The call this morning will be open to all interested investors either through a live audio Web broadcast at www.motorcarparts.com or live by calling (877)-776-4016 (domestic) or (973)-638-3231 (international).  For those who are not available to listen to the live broadcast, the call will be archived for seven days on Motorcar Parts of America's website www.motorcarparts.com.  A telephone playback of the conference call will also be available from approximately 1:00 p.m. Pacific time on February 9, 2017 through 8:59 p.m. Pacific time on Thursday, February 16, 2017 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 64192462.

About Motorcar Parts of America, Inc.

Motorcar Parts of America is a remanufacturer, manufacturer and distributor of automotive aftermarket parts -- including alternators, starters, wheel hub assembly products, brake master cylinders, brake power boosters and turbochargers utilized in imported and domestic passenger vehicles, light trucks and heavy duty applications. Motorcar Parts of America's products are sold to automotive retail outlets and the professional repair market throughout the United States and Canada, with facilities located in California, Mexico, Malaysia and China, and administrative offices located in California, Tennessee, Virginia, Mexico, Singapore, Malaysia and Toronto.  Additional information is available at www.motorcarparts.com.

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. The statements contained in this press release that are not historical facts are forward-looking statements based on the company's current expectations and beliefs concerning future developments and their potential effects on the company. These forward-looking statements involve significant risks and uncertainties (some of which are beyond the control of the company) and are subject to change based upon various factors.  Reference is also made to the Risk Factors set forth in the company's Form 10-K Annual Report filed with the Securities and Exchange Commission (SEC) in June 2016 and in its Forms 10-Q filed with the SEC for additional risks and uncertainties facing the company. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

(Financial tables follow)


MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
 
  Three Months Ended Nine Months Ended
  December 31,  December 31, 
   2016  2015  2016  2015
         
Net sales $112,595,000 $94,022,000 $306,843,000 $271,527,000
Cost of goods sold  80,225,000  65,123,000  223,424,000  194,817,000
Gross profit  32,370,000  28,899,000  83,419,000  76,710,000
Operating expenses:        
General and administrative  7,952,000  8,802,000  21,446,000  38,381,000
Sales and marketing  3,234,000  2,671,000  8,575,000  7,583,000
Research and development  1,039,000  711,000  2,813,000  2,093,000
Total operating expenses  12,225,000  12,184,000  32,834,000  48,057,000
Operating income  20,145,000  16,715,000  50,585,000   28,653,000
Interest expense, net  3,357,000   2,516,000  9,365,000  13,566,000
Income before income tax expense  16,788,000  14,199,000  41,220,000  15,087,000
Income tax expense  5,678,000  6,451,000  13,459,000  6,821,000
         
Net income $11,110,000 $7,748,000 $27,761,000 $8,266,000
         
Basic net income per share $0.59 $0.42 $1.49 $0.45
          
Diluted net income per share $0.57 $0.41 $1.43 $0.44
         
Weighted average number of shares outstanding:        
         
Basic  18,675,125  18,319,531  18,587,946  18,180,039
             
Diluted  19,441,265   19,095,704  19,399,857  18,981,421
         


 

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
 
  December 31, 2016 March 31, 2016
ASSETS (Unaudited)  
Current assets:    
Cash and cash equivalents $3,941,000  $21,897,000 
Short-term investments  1,966,000   1,813,000 
Accounts receivable — net  22,667,000   8,548,000 
Inventory— net  71,340,000   58,060,000 
Inventory unreturned  5,098,000   10,520,000 
Deferred income taxes  34,723,000   33,347,000 
Prepaid expenses and other current assets  7,478,000   5,900,000 
Total current assets  147,213,000   140,085,000 
Plant and equipment — net  18,243,000   16,099,000 
Long-term core inventory — net  257,198,000   241,100,000 
Long-term core inventory deposits  5,569,000   5,569,000 
Long-term deferred income taxes  456,000   236,000 
Goodwill   2,551,000   2,053,000 
Intangible assets — net  4,150,000    4,573,000 
Other assets  7,649,000   3,657,000 
TOTAL ASSETS $443,029,000  $413,372,000 
LIABILITIES AND SHAREHOLDERS'  EQUITY    
Current liabilities:    
Accounts payable $77,552,000  $72,152,000 
Accrued liabilities  8,716,000   9,101,000 
Customer finished goods returns accrual  12,567,000   26,376,000 
Accrued core payment  11,791,000   8,989,000 
Revolving loan  18,001,000   7,000,000 
Other current liabilities  11,579,000   4,698,000 
Current portion of term loan  3,064,000   3,067,000 
Total current liabilities  143,270,000   131,383,000 
Term loan, less current portion  17,691,000   19,980,000 
Long-term accrued core payment  15,181,000   17,550,000 
Long-term deferred income taxes  13,577,000   14,315,000 
Other liabilities  13,374,000   19,336,000 
Total liabilities  203,093,000   202,564,000 
Commitments and contingencies    
Shareholders' equity:     
Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued  -   - 
Series A junior participating preferred stock; par value $.01 per share,    
20,000 shares authorized; none issued  -   - 
Common stock; par value $.01 per share, 50,000,000 shares authorized;    
18,693,779 and 18,531,751 shares issued and outstanding at December 31, 2016 and    
March 31, 2016, respectively  187,000   185,000 
Additional paid-in capital  206,619,000   203,650,000 
Retained earnings  40,478,000   11,825,000 
Accumulated other comprehensive loss  (7,348,000)  (4,852,000)
Total shareholders' equity  239,936,000   210,808,000 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $443,029,000  $413,372,000 
     

Reconciliation of Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company has included the following non-GAAP adjusted financial measures in this press release and in the webcast to discuss the Company's financial results for the three and nine months ended December 31, 2016 and 2015. Each of these non-GAAP adjusted financial measures is adjusted from results based on GAAP to exclude certain expenses and gains.  Among other things, the Company uses such non-GAAP adjusted financial measures in addition to and in conjunction with corresponding GAAP measures to help analyze the performance of its business. 

These non-GAAP adjusted financial measures reflect an additional way of viewing aspects of the Company's operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company's results of operations and the factors and trends affecting the Company's business. However, these non-GAAP adjusted financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

Income statement information for the three and nine months ended December 31, 2016 and 2015 are as follows:


Reconciliation of Non-GAAP Financial Measures      Exhibit 1
    
   Three Months Ended December 31,   Nine Months Ended December 31,
  2016   2015   2016   2015 
GAAP Results:       
Net sales$112,595,000  $94,022,000  $306,843,000  $271,527,000 
Net income 11,110,000   7,748,000   27,761,000    8,266,000 
Diluted income per share (EPS) 0.57   0.41   1.43   0.44 
Gross margin 28.7%  30.7%  27.2%  28.3%
Non-GAAP Adjusted Results:       
Non-GAAP adjusted net sales$112,853,000  $94,022,000  $319,058,000  $282,390,000 
Non-GAAP adjusted net income 11,744,000   9,942,000   34,260,000   30,086,000 
Non-GAAP adjusted diluted earnings per share (EPS) 0.60   0.52   1.77   1.59 
Non-GAAP adjusted gross margin 30.1%  31.5%  30.9%   31.1%
Non-GAAP adjusted EBITDA$23,558,000  $19,596,000  $68,247,000  $59,992,000 
        
Note: Results for the three and nine months ended December 31, 2016 include revenue due to the change in estimate in the accrual for anticipated stock adjustment returns of $9,261,000 (which had a $4,066,000 gross profit and EBITDA impact, $2,551,000 net income impact and $0.13 earnings per diluted share impact).  The change in estimate also had a 1.3% and 0.5% gross margin impact for the three and nine months ended December 31, 2016, respectively.
        

 

Reconciliation of Non-GAAP Financial Measures      Exhibit 2
     
    Three Months Ended December 31,   Nine Months Ended December 31,
   2016  2015  2016  2015
GAAP net sales $112,595,000 $94,022,000 $306,843,000 $271,527,000
Adjustments:        
Net sales        
Initial return and stock adjustment accruals related to new business  -  -  3,168,000  -
Customer allowances related to new business  258,000  -  9,047,000  10,863,000
Adjusted net sales $112,853,000 $94,022,000 $319,058,000 $282,390,000
         

 

Reconciliation of Non-GAAP Financial Measures          Exhibit 3
 
    
   Three Months Ended December 31, 
    2016     2015  
  $ Per Diluted
Share
  $  Per Diluted
Share
GAAP net income $11,110,000  $0.57  $7,748,000  $0.41 
Adjustments:        
Net sales       
Customer allowances related to new business 258,000  $0.01   -  $ - 
Cost of goods sold       
Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization 1,295,000  $0.07   752,000  $0.04 
Operating expenses       
Legal, severance, acquisition, financing, transition and other costs 92,000  $0.00   873,000  $0.05 
Payment received in connection with the settlement of litigation related to discontinued subsidiaries -  $-   (5,800,000) $(0.30)
Bad debt expense (recovery) resulting from the bankruptcy filing by a customer -  $-   4,451,000  $0.23 
Share-based compensation expenses 818,000  $0.04   753,000  $0.04 
Mark-to-market losses (gains) 2,000   $0.00   1,070,000  $0.06 
Tax effected at 39% tax rate (a) (1,831,000) $(0.09)  95,000  $0.00 
Adjusted net income $11,744,000  $0.60  $9,942,000  $0.52 
 
(a) Adjusted net income is calculated by applying an income tax rate of 39%; this rate may differ from the period's actual income tax rate

 

Reconciliation of Non-GAAP Financial Measures           Exhibit 4
 
   
   Nine Months Ended December 31, 
    2016     2015  
  $ Per Diluted
Share
 $ Per Diluted
Share
GAAP net income $27,761,000  $1.43  $8,266,000  $0.44 
Adjustments:        
Net sales       
Initial return and stock adjustment accruals related to new business 3,168,000  $0.16   -  $- 
Customer allowances related to new business 9,047,000  $0.47   10,863,000  $0.57 
Cost of goods sold       
New product line start-up costs 140,000  $0.01   -  $- 
Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization 3,488,000  $0.18   1,078,000  $0.06 
Cost of customer allowances and stock adjustment accruals related to new business (568,000) $(0.03)  (809,000) $(0.04)
Operating expenses       
Legal, severance, acquisition, financing, transition and other costs 707,000  $0.04   5,126,000   $0.27 
Payment received in connection with the settlement of litigation related to discontinued subsidiaries -  $-   (5,800,000) $(0.31)
Bad debt expense resulting from the bankruptcy filing by a customer -  $-   4,451,000  $0.23 
Payment made in connection with the settlement of litigation, net of insurance recoveries, related to discontinued subsidiaries -  $-   9,250,000   $0.49 
Share-based compensation expenses 2,555,000  $0.13   1,786,000  $0.09 
Mark-to-market losses (gains) (3,593,000) $(0.19)  3,181,000  $0.17 
Interest       
Write-off of prior deferred loan fees -  $-    5,108,000  $0.27 
Tax effected at 39% tax rate (a) (8,445,000) $(0.44)  (12,414,000) $(0.65)
Adjusted net income $34,260,000  $1.77  $30,086,000  $1.59 
 
(a) Adjusted net income is calculated by applying an income tax rate of 39%; this rate may differ from the period's actual income tax rate

 

Reconciliation of Non-GAAP Financial Measures        Exhibit 5 
           
   Three Months Ended December 31, 
    2016      2015  
  $ Gross Margin  $ Gross Margin 
GAAP gross profit $32,370,000 28.7% $28,899,000 30.7%
Adjustments:        
Net sales       
Customer allowances related to new business 258,000     -  
Cost of goods sold       
Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization  1,295,000    752,000  
Total adjustments  1,553,000 1.4%   752,000 0.8%
Adjusted gross profit $33,923,000 30.1% $29,651,000 31.5%
          

 

Reconciliation of Non-GAAP Financial Measures          Exhibit 6
 
 
   Nine Months Ended December 31, 
   2016   2015 
  $ Gross Margin $ Gross Margin
GAAP gross profit $83,419,000  27.2% $76,710,000  28.3%
Adjustments:        
Net sales       
Initial return and stock adjustment accruals related to new business 3,168,000     -   
Customer allowances related to new business 9,047,000     10,863,000   
Cost of goods sold       
New product line start-up costs 140,000     -   
Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization  3,488,000     1,078,000    
Cost of customer allowances and stock adjustment accruals related to new business (568,000)    (809,000)  
Total adjustments  15,275,000  3.7%  11,132,000  2.8%
Adjusted gross profit $98,694,000  30.9% $87,842,000  31.1%
          

 

Reconciliation of Non-GAAP Financial Measures     Exhibit 7
 
    Three Months Ended December 31,   Nine Months Ended December 31,
   2016  2015   2016   2015 
GAAP net income $11,110,000 $7,748,000  $27,761,000  $8,266,000 
Interest expense, net  3,357,000  2,516,000   9,365,000   13,566,000 
Income tax expense  5,678,000  6,451,000    13,459,000   6,821,000 
Depreciation and amortization  948,000  782,000   2,718,000   2,213,000 
EBITDA $21,093,000 $17,497,000   $53,303,000  $30,866,000 
         
Adjustments:        
Net sales       
Initial return and stock adjustment accruals related to new business -  -   3,168,000   - 
Customer allowances related to new business 258,000  -   9,047,000   10,863,000 
Cost of goods sold     -   
New product line start-up costs -  -   140,000   - 
Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization 1,295,000  752,000   3,488,000   1,078,000 
Cost of customer allowances and stock adjustment accruals related to new business -  -   (568,000)  (809,000)
Operating expenses     -   
Legal, severance, acquisition, financing, transition and other costs 92,000  873,000   707,000   5,126,000 
Payment received in connection with the settlement of litigation related to discontinued subsidiaries -  (5,800,000)  -   (5,800,000)
Bad debt expense (recovery) resulting from the bankruptcy filing by a customer -  4,451,000   -   4,451,000 
Payment made in connection with the settlement of litigation, net of insurance recoveries, related to discontinued subsidiaries -  -   -   9,250,000 
Share-based compensation expenses 818,000  753,000   2,555,000   1,786,000 
Mark-to-market losses (gains) 2,000  1,070,000   (3,593,000)  3,181,000 
Adjusted EBITDA $23,558,000 $19,596,000  $68,247,000  $ 59,992,000 
         
CONTACT:

Gary S. Maier

(310) 471-1288

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Source: Motorcar Parts of America, Inc.

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