June 14, 2016

Motorcar Parts of America Reports Fiscal 2016 Fourth Quarter and Year-End Results

Net Sales Up 22.3% for Year; Business Outlook Remains Favorable

LOS ANGELES, June 14, 2016 (GLOBE NEWSWIRE) -- Motorcar Parts of America, Inc. (Nasdaq:MPAA) today reported results for its fiscal 2016 fourth quarter and year ended March 31, 2016 - reflecting record sales for a fourth quarter and year, supported by strong growth across all product categories.

Net sales for the fiscal 2016 fourth quarter increased to $97.4 million from $83.9 million for the same period a year earlier. The company's sales performance for the fiscal 2016 fourth quarter reflects continued strength of its rotating electrical and wheel hub business, as well as increased contributions from the company's emerging master cylinder product line.

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 fourth quarter increased to $100.9 million from $90.9 million a year earlier.

Net income for the fiscal 2016 fourth quarter was $2.3 million, or $0.12 per diluted share, compared with net income of $3.1 million, or $0.16 per diluted share, a year ago.

Adjusted net income for the fiscal 2016 fourth quarter was $9.5 million, or $0.50 per diluted share, compared with $9.9 million, or $0.53 per diluted share, in the same period a year earlier.

Gross profit for the fiscal 2016 fourth quarter increased to $24.2 million from $20.9 million a year earlier.  Gross profit as a percentage of sales for the fiscal 2016 fourth quarter was 24.8 percent compared with 24.9 percent a year earlier.

Adjusted gross profit increased to $29.8 million from $28.2 million a year ago.  Adjusted gross profit as a percentage of sales for the three months was 29.6 percent compared with 31.1 percent a year earlier, impacted by product mix and lower metal prices resulting in lower scrap revenue.

Net sales for fiscal 2016 increased to $369.0 million from $301.7 million for the same period a year earlier.  The same period a year earlier included the benefits of recognizing net core revenue of $12.6 million in the third quarter that was previously deferred.

Adjusted net sales for fiscal 2016 increased to $383.3 million from $320.7 million a year earlier.  

Net income for fiscal 2016 was $10.6 million, or $0.55 per diluted share, compared with net income of $11.5 million, or $0.65 per diluted share, a year ago.  

Adjusted net income for fiscal 2016 was $39.6 million, or $2.08 per diluted share, compared with $32.9 million, or $1.87 per diluted share, in the same period a year earlier.

Gross profit for fiscal 2016 increased to $100.9 million from $81.6 million a year ago. Gross profit as a percentage of sales for the same period was 27.4 percent compared with 27.0 percent a year earlier.

Adjusted gross profit increased to $117.7 million from $101.2 million last year.  Adjusted gross profit as a percentage of sales was 30.7 percent compared with 31.5 percent a year earlier, impacted by product mix and lower metal prices resulting in lower scrap revenue.

"Results for fiscal 2016 reflect continued strength across all product lines - supported by an aging vehicle population, increased miles driven and related factors, all of which continue to contribute to overall growth in the aftermarket industry," said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.

Joffe noted that the company achieved solid market share gains in rotating electrical for the year. "Equally important, we realized strong growth from our wheel hub and brake master cylinder product offerings which impacted product mix and therefore gross margins," Joffe said.

He noted that results for the year reflect new investments for innovation, growth and acquisitions, as well as the company's value-added customer service programs - including Motorcar Parts of America's industry-leading customer service, training and quality assurance initiatives.

"These investments position the company for even further success and growth.  As always, we thank our entire team for their daily commitment to excellence, customer service 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 6:30 a.m. Pacific time to discuss the company's financial results and operations.

The call 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 9:30 a.m. Pacific time today through 8:59 p.m. Pacific time on Tuesday, June 21, 2016 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 16866345.

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 and brake master cylinders 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, 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
 
  Three Months Ended Years Ended
  March 31,  March 31, 
   2016   2015   2016   2015 
  (Unaudited)    
         
Net sales $97,443,000  $83,904,000  $368,970,000  $301,711,000 
Cost of goods sold  73,229,000   62,995,000   268,046,000   220,138,000 
Gross profit   24,214,000   20,909,000   100,924,000   81,573,000 
Operating expenses:        
General and administrative  11,284,000   10,031,000    49,665,000   37,863,000 
Sales and marketing  2,382,000   1,907,000   9,965,000   7,851,000 
Research and development  915,000   611,000    3,008,000   2,273,000 
Total operating expenses  14,581,000   12,549,000    62,638,000   47,987,000 
Operating income  9,633,000   8,360,000   38,286,000   33,586,000 
Interest expense, net  2,678,000   3,148,000   16,244,000   13,065,000 
Income before income tax expense  6,955,000   5,212,000   22,042,000   20,521,000 
Income tax expense  4,658,000   2,110,000   11,479,000   9,068,000 
         
Net income $2,297,000  $3,102,000  $10,563,000  $11,453,000 
Basic net income per share $0.12  $0.17  $0.58  $0.68 
Diluted net income per share $0.12  $0.16  $0.55  $0.65 
                 
Weighted average number of shares outstanding:        
Basic  18,393,154   17,967,060   18,233,163   16,734,539 
Diluted  19,165,334   18,815,858   19,066,093   17,605,940 
 


MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31,
 
   2016   2015 
ASSETS    
Current assets:    
Cash and cash equivalents $21,897,000  $61,230,000 
Short-term investments  1,813,000    699,000 
Accounts receivable — net  8,548,000   24,799,000 
Inventory— net  58,060,000   56,829,000 
Inventory unreturned  10,520,000   7,833,000 
Deferred income taxes  33,347,000   22,998,000 
Prepaid expenses and other current assets  5,900,000   7,407,000 
Total current assets  140,085,000   181,795,000 
Plant and equipment — net  16,099,000   12,535,000 
Long-term core inventory — net  241,100,000   188,950,000 
Long-term core inventory deposits  5,569,000    31,571,000 
Long-term deferred income taxes  236,000   261,000 
Goodwill  2,053,000   - 
Intangible assets — net  4,573,000   2,574,000 
Other assets  3,657,000   3,195,000 
TOTAL ASSETS $413,372,000  $420,881,000 
LIABILITIES AND SHAREHOLDERS'  EQUITY    
Current liabilities:    
Accounts payable $72,152,000  $61,893,000 
Accrued liabilities  9,101,000   10,096,000 
Customer finished goods returns accrual  26,376,000   19,678,000 
Accrued core payment  8,989,000   13,190,000 
Revolving loan  7,000,000    - 
Other current liabilities  4,698,000   2,471,000 
Current portion of term loan  3,067,000   7,733,000 
Total current liabilities  131,383,000   115,061,000 
Term loan, less current portion  19,980,000   71,489,000 
Long-term accrued core payment  17,550,000   23,880,000 
Long-term deferred income taxes  14,315,000   7,803,000 
Other liabilities  19,336,000   12,445,000 
Total liabilities  202,564,000   230,678,000 
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; 18,531,751 and 17,974,598 shares issued and outstanding at March 31, 2016 and 2015, respectively  185,000   180,000 
Additional paid-in capital  203,650,000   191,279,000 
Retained earnings  11,825,000   1,262,000 
Accumulated other comprehensive loss  (4,852,000)  (2,518,000)
Total shareholders' equity  210,808,000   190,203,000 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $413,372,000  $420,881,000 
 

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 twelve months ended March 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 twelve months ended March 31, 2016 and 2015 are as follows:

Reconciliation of Non-GAAP Financial Measures Exhibit 1
   
   Three Months Ended March 31,   Twelve Months Ended March 31,
  2016   2015   2016   2015 
GAAP Results:        
Net sales$97,443,000  $83,904,000  $368,970,000  $301,711,000 
Net income 2,297,000   3,102,000   10,563,000   11,453,000 
Diluted income per share (EPS) 0.12   0.16   0.55   0.65 
Gross margin 24.8%  24.9%  27.4%  27.0%
Non-GAAP Adjusted Results:        
Non-GAAP adjusted net sales$100,944,000  $90,899,000  $383,334,000  $320,748,000 
Non-GAAP adjusted net income 9,544,000   9,919,000   39,630,000   32,858,000 
Non-GAAP adjusted diluted earnings per share (EPS) 0.50   0.53   2.08   1.87 
Non-GAAP adjusted gross margin  29.6%  31.1%  30.7%  31.5%
Non-GAAP adjusted EBITDA 19,047,000   20,066,000   79,039,000   69,453,000 
        
Note: Results for the fiscal year ended March 31, 2015 include net sales related to cores of $12,625,000, which was previously deferred. 
This amount had a $3,892,000 gross profit and Adjusted EBITDA impact.
 


Reconciliation of Non-GAAP Financial Measures  Exhibit 2
    
    Three Months Ended March 31,   Twelve Months Ended March 31,
    2016   2015   2016   2015 
GAAP net sales $97,443,000  $83,904,000  $368,970,000  $301,711,000 
Adjustments:        
Net sales        
Initial return and stock adjustment accruals related to new business  -   2,259,000   -   3,874,000 
Customer allowances related to new business  3,501,000   4,736,000   14,364,000   15,163,000 
Adjusted net sales $100,944,000  $90,899,000   $383,334,000  $320,748,000 
 
Note: Results for the fiscal year ended March 31, 2015 include net sales related to cores of $12,625,000, which was previously deferred.
 


Reconciliation of Non-GAAP Financial MeasuresExhibit 3
  
   Three Months Ended March 31, 
    2016     2015  
  $   Per Diluted
Share
 
 $   Per Diluted
Share
 
GAAP net income$2,297,000  $0.12  $3,102,000  $0.16 
Adjustments:        
Net sales       
Initial return and stock adjustment accruals related to new business -  $-   2,259,000  $0.12 
Customer allowances related to new business 3,501,000  $0.18   4,736,000  $0.25 
Cost of goods sold       
New product line start-up costs 43,000  $0.002   -  $- 
Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization 2,075,000  $0.11   345,000  $0.02 
Operating expenses        
Legal, severance, acquisition, financing and other costs 2,378,000  $0.12   2,967,000  $0.16 
Bad debt expense (recovery) resulting from the bankruptcy filing by a customer (294,000) $(0.02)  -  $- 
Share-based compensation expenses (a) 798,000  $0.04   2,514,000  $0.13 
Mark-to-market losses (gains) 190,000  $0.01   (1,772,000) $(0.09)
Tax effected at 39% tax rate (b) (1,444,000) $(0.08)  (4,232,000) $(0.22)
Adjusted net income$9,544,000  $0.50  $9,919,000  $0.53 
         
(a) Includes cash payments reflecting incentive compensation expense of $2,002,000 for the prior fiscal three months ended March 31, 2015, that were made in lieu of granting restricted stock in 2013
(b) Tax effect at 39% of the income before income tax expense (reflecting the adjustments)
 


Reconciliation of Non-GAAP Financial MeasuresExhibit 4
  
  Twelve Months Ended March 31, 
   2016     2015  
  $   Per Diluted
Share
 
  $   Per Diluted
Share
 
GAAP net income$10,563,000  $0.55  $11,453,000  $0.65 
Adjustments:       
Net sales       
Initial return and stock adjustment accruals related to new business -  $-   3,874,000  $0.22 
Customer allowances related to new business 14,364,000  $0.75   15,163,000  $0.86 
Cost of goods sold       
New product line start-up costs 43,000  $0.002   189,000  $0.01 
Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization 3,153,000  $0.17   1,378,000  $0.08 
Cost of customer allowances and stock adjustment accruals related to new business (809,000) $(0.04)  (983,000) $(0.06)
Operating expenses       
Legal, severance, acquisition, financing and other costs 7,504,000  $0.39   8,020,000  $0.46 
Payment received in connection with the settlement of litigation related to discontinued subsidiaries  (5,800,000) $(0.30)  -  $- 
Bad debt expense resulting from the bankruptcy filing by a customer 4,157,000  $ 0.22   -  $- 
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 (a) 2,584,000  $0.14   4,211,000  $0.24 
Mark-to-market losses (gains) 3,371,000  $0.18    1,493,000  $0.08 
Interest       
Write-off of prior deferred loan fees 5,108,000  $0.27   -  $- 
Tax effected at 39% tax rate (b)  (13,858,000) $(0.73)  (11,940,000 ) $(0.68)
Adjusted net income$39,630,000  $2.08  $32,858,000  $1.87 
        
(a) Includes cash payments reflecting incentive compensation expense of $2,002,000 for the prior fiscal twelve months ended March 31, 2015, that were made in lieu of granting restricted stock in 2013
(b) Tax effect at 39% of the income before income tax expense (reflecting the adjustments)
        
Note: Results for the fiscal year ended March 31, 2015 include net sales related to cores of $12,625,000 which was previously deferred.      
This amount had a $0.12 earnings per share impact.
 


Reconciliation of Non-GAAP Financial Measures Exhibit 5
  
  Three Months Ended March 31, 
   2016     2015  
  $  Gross
Margin
 
  $ Gross
Margin
 
GAAP gross profit$24,214,000   24.8% $20,909,000   24.9%
Adjustments:       
Net sales       
Initial return and stock adjustment accruals related to new business -     2,259,000   
Customer allowances related to new business 3,501,000     4,736,000   
Cost of goods sold       
New product line start-up costs 43,000     -   
Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization 2,075,000     345,000   
Total adjustments 5,619,000   4.8%  7,340,000   6.2%
Adjusted gross profit$29,833,000   29.6% $28,249,000   31.1%
 


Reconciliation of Non-GAAP Financial MeasuresExhibit 6
  
  Twelve Months Ended March 31, 
   2016      2015  
  $  Gross
Margin
 
  $  Gross
Margin
 
GAAP gross profit$100,924,000   27.4% $81,573,000   27.0%
Adjustments:       
Net sales       
Initial return and stock adjustment accruals related to new business -     3,874,000   
Customer allowances related to new business 14,364,000     15,163,000   
Cost of goods sold       
New product line start-up costs 43,000     189,000   
Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization 3,153,000     1,378,000   
Cost of customer allowances and stock adjustment accruals related to new business (809,000)    (983,000)  
Total adjustments 16,751,000   3.3%  19,621,000   4.5%
Adjusted gross profit$117,675,000   30.7% $101,194,000   31.5%
        
Note: Results for the fiscal year ended March 31, 2015 include net sales related to cores of $12,625,000, which was previously deferred.
This amount had a $3,892,000 gross profit impact.
 


Reconciliation of Non-GAAP Financial Measures   Exhibit 7
    
   Three Months Ended March 31,   Twelve Months Ended March 31,
  2016   2015    2016   2015 
GAAP net income$2,297,000  $3,102,000  $10,563,000  $11,453,000 
Interest expense, net 2,678,000    3,148,000   16,244,000   13,065,000 
Income tax expense 4,658,000   2,110,000   11,479,000   9,068,000 
Depreciation and amortization 723,000    657,000   2,936,000   2,522,000 
EBITDA$10,356,000  $9,017,000  $41,222,000  $36,108,000 
        
Adjustments:       
Net sales       
Initial return and stock adjustment accruals related to new business  -   2,259,000   -   3,874,000 
Customer allowances related to new business 3,501,000   4,736,000   14,364,000   15,163,000 
Cost of goods sold       
New product line start-up costs 43,000   -   43,000   189,000 
Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization 2,075,000   345,000   3,153,000   1,378,000 
Cost of customer allowances and stock adjustment accruals related to new business -   -   (809,000)  (983,000)
Operating expenses       
Legal, severance, acquisition, financing and other costs 2,378,000   2,967,000   7,504,000   8,020,000 
Payment received in connection with the settlement of litigation related to discontinued subsidiaries -   -   (5,800,000)  - 
Bad debt expense (recovery) resulting from the bankruptcy filing by a customer (294,000)  -   4,157,000   - 
Payment made in connection with the settlement of litigation, net of insurance recoveries, related to discontinued subsidiaries -   -   9,250,000   - 
Share-based compensation expenses (a) 798,000   2,514,000   2,584,000   4,211,000 
Mark-to-market losses (gains) 190,000   (1,772,000)  3,371,000   1,493,000 
Adjusted EBITDA$19,047,000  $20,066,000  $79,039,000  $69,453,000 
        
(a) Includes cash payments reflecting incentive compensation expense of $2,002,000 for the prior fiscal three months and twelve months ended March 31, 2015, that were made in lieu of granting restricted stock in 2013
        
Note: Results for the fiscal year ended March 31, 2015 include net sales related to cores of $12,625,000, which was previously deferred.
This amount had a $3,892,000 Adjusted EBITDA impact.


CONTACT:

Gary S. Maier

Maier & Company, Inc.

(310) 471-1288

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Source: Motorcar Parts of America, Inc.

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