Motorcar Parts of America, Inc.
Aug 9, 2016
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Motorcar Parts of America Reports Fiscal 2017 First Quarter Results

Product Line Expansion Supports Future Growth Opportunities

LOS ANGELES, Aug. 09, 2016 (GLOBE NEWSWIRE) -- Motorcar Parts of America, Inc. (Nasdaq:MPAA) today reported results for its fiscal 2017 first quarter, reflecting record profitability.  Subsequent to the end of the quarter, the company announced the launch of its new brake power booster product line and the acquisition of a turbocharger business.

Net sales for the fiscal 2017 first quarter were $85.4 million compared with $85.8 million for the same period a year earlier. The company's sales performance for the fiscal 2017 first 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 - partially offset by certain customer allowances and return accruals related to new business.

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 first quarter were $93.8 million compared with $86.6 million a year earlier.

Net income for the fiscal 2017 first quarter was $7.5 million, or $0.39 per diluted share, compared with net income of $1.9 million, or $0.10 per diluted share, a year ago.

Adjusted net income for the fiscal 2017 first quarter was $10.1 million, or $0.52 per diluted share, compared with $8.4 million, or $0.44 per diluted share, in the same period a year earlier.

Gross profit for the fiscal 2017 first quarter was $20.4 million compared with $26.0 million a year earlier.  Gross profit as a percentage of sales for the fiscal 2017 first quarter was 23.9 percent compared with 30.3 percent a year earlier, primarily due to customer allowances related to new business.

Adjusted gross profit for the fiscal first quarter was $30.3 million compared with $26.8 million a year ago.  Adjusted gross profit as a percentage of sales for the three months was 32.3 percent compared with 30.9 percent a year earlier.

"Results for the quarter 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.

"Our position within the aftermarket industry continues to grow - which we expect will be enhanced by our new brake power booster product line and our future turbocharger launch, as well as additional opportunities to introduce other complementary non-discretionary parts.  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, August 16, 2016 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 57661820.

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, 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
  June 30,
   2016   2015 
     
Net sales $  85,412,000  $  85,835,000 
Cost of goods sold    65,021,000     59,844,000 
Gross profit    20,391,000     25,991,000 
Operating expenses:    
General and administrative    3,625,000     11,360,000 
Sales and marketing    2,634,000     2,280,000 
Research and development    869,000     736,000 
Total operating expenses    7,128,000     14,376,000 
Operating income    13,263,000     11,615,000 
Interest expense, net    2,819,000     8,437,000 
Income before income tax expense    10,444,000     3,178,000 
Income tax expense    2,936,000     1,268,000 
     
Net income $  7,508,000  $  1,910,000 
     
Basic net income per share $  0.40  $  0.11 
     
Diluted net income per share $  0.39  $  0.10 
     
Weighted average number of shares outstanding:    
     
Basic  18,545,621   18,002,877 
         
Diluted  19,484,938   18,888,013 


MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
 
  June 30, 2016 March 31, 2016
ASSETS (Unaudited)  
Current assets:    
Cash and cash equivalents $  19,717,000  $  21,897,000 
Short-term investments    1,982,000     1,813,000 
Accounts receivable — net    11,148,000     8,548,000 
Inventory— net    73,341,000     58,060,000 
Inventory unreturned    10,399,000     10,520,000 
Deferred income taxes    34,281,000     33,347,000 
Prepaid expenses and other current assets    8,188,000     5,900,000 
Total current assets    159,056,000     140,085,000 
Plant and equipment — net    16,805,000     16,099,000 
Long-term core inventory — net    243,822,000     241,100,000 
Long-term core inventory deposits    5,569,000     5,569,000 
Long-term deferred income taxes    463,000     236,000 
Goodwill    2,053,000     2,053,000 
Intangible assets — net    4,428,000     4,573,000 
Other assets    8,587,000     3,657,000 
TOTAL ASSETS $  440,783,000  $  413,372,000 
LIABILITIES AND SHAREHOLDERS'  EQUITY   
Current liabilities:   
Accounts payable $  81,982,000  $  72,152,000 
Accrued liabilities    7,206,000     9,101,000 
Customer finished goods returns accrual    23,546,000     26,376,000 
Accrued core payment    9,906,000     8,989,000 
Revolving loan    21,000,000     7,000,000 
Other current liabilities    9,175,000     4,698,000 
Current portion of term loan    3,064,000     3,067,000 
Total current liabilities    155,879,000     131,383,000 
Term loan, less current portion    19,203,000     19,980,000 
Long-term accrued core payment    18,462,000     17,550,000 
Long-term deferred income taxes    13,682,000     14,315,000 
Other liabilities    13,496,000     19,336,000 
Total liabilities    220,722,000      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;   
18,630,444 and 18,531,751 shares issued and outstanding at June 30, 2016 and    
March 31, 2016, respectively    186,000     185,000 
Additional paid-in capital    205,015,000     203,650,000 
Retained earnings    20,225,000     11,825,000 
Accumulated other comprehensive loss    (5,365,000)    (4,852,000)
Total shareholders' equity    220,061,000     210,808,000 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $  440,783,000  $  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 months ended June 30, 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 months ended June 30, 2016 and 2015 are as follows:                                                                           

Reconciliation of Non-GAAP Financial Measures Exhibit 1
  
   Three Months Ended June 30,
  2016   2015 
GAAP Results:   
Net sales$  85,412,000  $  85,835,000 
Net income   7,508,000     1,910,000 
Diluted income per share (EPS)   0.39     0.10 
Gross margin 23.9%  30.3%
Non-GAAP Adjusted Results:   
Non-GAAP adjusted net sales$  93,822,000  $  86,623,000 
Non-GAAP adjusted net income   10,089,000     8,354,000 
Non-GAAP adjusted diluted earnings per share (EPS)   0.52     0.44 
Non-GAAP adjusted gross margin 32.3%  30.9%
Non-GAAP adjusted EBITDA   20,219,000     17,715,000 

                     

 Reconciliation of Non-GAAP Financial MeasuresExhibit 2
   
    Three Months Ended June 30,
   2016   2015  
GAAP net sales$  85,412,000  $  85,835,000 
Adjustments:   
 Net sales   
 Initial return and stock adjustment accruals related to new business   1,853,000     -  
 Customer allowances related to new business   6,557,000     788,000 
Adjusted net sales$  93,822,000  $  86,623,000 


 Reconciliation of Non-GAAP Financial Measures                                                                            Exhibit 3
   
   Three Months Ended June 30,
    2016     2015  
  $  Per Diluted
Share
 $  Per Diluted
Share
GAAP net income$  7,508,000  $  0.39  $  1,910,000  $  0.10 
Adjustments:       
 Net sales       
 Initial return and stock adjustment accruals related to new business   1,853,000  $  0.10     -   $  -  
 Customer allowances related to new business   6,557,000  $  0.34     788,000  $  0.04 
 Cost of goods sold       
 New product line start-up costs   124,000  $  0.01     -   $  -  
 Lower of cost or market revaluation - cores on customers' shelves   1,718,000  $  0.09      -   $  -  
 Cost of customer allowances and stock adjustment accruals related to new business   (355,000) $  (0.02)    -   $  -  
 Operating expenses       
 Legal, severance, acquisition, financing and other costs   396,000  $  0.02     3,141,000  $  0.17 
 Share-based compensation expenses   729,000  $  0.04     516,000  $  0.03 
 Mark-to-market losses (gains)   (4,926,000) $  (0.25)    964,000  $  0.05 
 Interest       
 Write-off of prior deferred loan fees   -    $  -      5,108,000  $  0.27 
 Tax effected at 39% tax rate (a)   (3,515,000) $  (0.18)    (4,073,000) $  (0.22)
Adjusted net income$  10,089,000  $  0.52  $  8,354,000  $  0.44 
         
(a) Tax effect at 39% of the income before income tax expense (reflecting the adjustments)      


 Reconciliation of Non-GAAP Financial Measures                                                                           Exhibit 4
   
   Three Months Ended June 30,
    2016     2015  
   $   Gross Margin   $   Gross Margin
GAAP gross profit$  20,391,000   23.9 % $  25,991,000   30.3%
Adjustments:       
 Net sales       
 Initial return and stock adjustment accruals related to new business   1,853,000       -    
 Customer allowances related to new business   6,557,000       788,000   
 Cost of goods sold       
 New product line start-up costs   124,000       -    
 Lower of cost or market revaluation - cores on customers' shelves   1,718,000       -    
 Cost of customer allowances and stock adjustment accruals related to new business   (355,000)      -    
 Total adjustments   9,897,000   8.4%    788,000   0.6%
Adjusted gross profit$  30,288,000   32.3% $  26,779,000   30.9%


 Reconciliation of Non-GAAP Financial Measures                                                                             Exhibit 5
   
    Three Months Ended June 30,
   2016   2015 
GAAP net income$  7,508,000  $  1,910,000 
Interest expense, net   2,819,000     8,437,000 
Income tax expense   2,936,000     1,268,000 
Depreciation and amortization   860,000     691,000 
EBITDA$  14,123,000  $  12,306,000 
     
Adjustments:   
 Net sales   
 Initial return and stock adjustment accruals related to new business   1,853,000     -  
  Customer allowances related to new business   6,557,000     788,000 
 Cost of goods sold   
 New product line start-up costs   124,000     -  
 Lower of cost or market revaluation - cores on customers' shelves   1,718,000     -  
 Cost of customer allowances and stock adjustment accruals related to new business   (355,000)    -  
 Operating expenses   
 Legal, severance, acquisition, financing and other costs   396,000     3,141,000 
 Share-based compensation expenses   729,000     516,000 
 Mark-to-market losses (gains)   (4,926,000)    964,000 
Adjusted EBITDA$  20,219,000  $  17,715,000 


CONTACT:

Gary S. Maier

Maier & Company, Inc.

(310) 471-1288

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Source: Motorcar Parts of America, Inc.

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