Motorcar Parts of America, Inc.
Nov 9, 2016
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Motorcar Parts of America Reports Record Fiscal 2017 Second Quarter Results

Product Line Expansion Enhances Growth Opportunities

LOS ANGELES, Nov. 09, 2016 (GLOBE NEWSWIRE) -- Motorcar Parts of America, Inc. (Nasdaq:MPAA) today reported results for its fiscal 2017 second quarter -- reflecting record profitability on both a reported and adjusted basis.

Net sales for the fiscal 2017 second quarter were $108.8 million compared with $91.7 million for the same period a year earlier. The company's sales performance for the fiscal 2017 second quarter reflects continued strength of its rotating electrical and wheel hub business, as well as contributions from its other product lines -- including the company's emerging brake power boosters, which commenced in August.  Sales were 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 second quarter were $112.4 million compared with $101.7 million a year earlier.

Net income for the fiscal 2017 second quarter was $9.1 million, or $0.47 per diluted share, compared with a net loss of $1.4 million, or $0.08 per share, a year ago.

Adjusted net income for the fiscal 2017 second quarter was $12.4 million, or $0.64 per diluted share, compared with $11.8 million, or $0.62 per diluted share, in the same period a year earlier.

Gross profit for the fiscal 2017 second quarter was $30.7 million compared with $21.8 million a year earlier.  Gross profit as a percentage of net sales for the fiscal 2017 second quarter was 28.2 percent compared with 23.8 percent a year earlier, primarily due to customer allowances related to new business.

Adjusted gross profit for the fiscal 2017 second quarter was $34.5 million compared with $31.4 million a year ago.  Adjusted gross profit as a percentage of adjusted net sales for the three months was 30.7 percent compared with 30.9 percent a year earlier.

Net sales for the fiscal 2017 six-month period were $194.2 million compared with $177.5 million a year earlier.

Adjusted net sales for the six-month period were $206.2 million compared with $188.4 million last year.

Net income for the six-month period was $16.7 million, or $0.86 per diluted share, compared with $518,000, or $0.03 per diluted share, in fiscal 2016.

Adjusted net income for the first half of fiscal 2017 was $22.5 million, or $1.16 per diluted share, compared with $20.1 million, or $1.07 per diluted share, in fiscal 2016.

Gross profit for the fiscal 2017 six-month period was $51.0 million compared with $47.8 million a year earlier.  Gross profit as a percentage of net sales for the fiscal 2017 first half was 26.3 percent compared with 26.9 percent a year earlier, primarily due to customer allowances related to new business.

Adjusted gross profit for the fiscal 2017 the six-month period was $64.8 million compared with $58.2 million a year ago.  Adjusted gross profit as a percentage of adjusted net sales for the six months was 31.4 percent compared with 30.9 percent a year earlier.

"As we commence the second half of fiscal 2017, we are well-positioned within the aftermarket industry.  We anticipate solid growth in all of our product lines, and we are encouraged by the numerous additional opportunities we are seeing," said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.

"Results for the quarter reflect continued strength of our business - 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.  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 November 9, 2016 through 8:59 p.m. Pacific time on Wednesday, November 16, 2016 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 5599020.

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 Six Months Ended
  September 30,  September 30, 
   2016   2015   2016   2015 
         
Net sales $  108,836,000  $  91,670,000  $  194,248,000  $  177,505,000 
Cost of goods sold    78,178,000     69,850,000     143,199,000     129,694,000 
Gross profit    30,658,000     21,820,000     51,049,000     47,811,000 
Operating expenses:       
General and administrative    9,869,000      18,219,000     13,494,000     29,579,000 
Sales and marketing    2,707,000     2,632,000     5,341,000     4,912,000 
Research and development    905,000     646,000     1,774,000     1,382,000 
Total operating expenses    13,481,000     21,497,000     20,609,000     35,873,000 
Operating income    17,177,000     323,000     30,440,000     11,938,000 
Interest expense, net    3,189,000     2,613,000     6,008,000     11,050,000 
Income (loss) before income tax expense (benefit)    13,988,000     (2,290,000)    24,432,000     888,000 
Income tax expense (benefit)    4,845,000     (898,000)    7,781,000     370,000 
         
Net income (loss) $  9,143,000  $  (1,392,000) $  16,651,000  $  518,000 
         
Basic net income (loss) per share $  0.49  $  (0.08) $  0.90  $  0.03 
         
Diluted net income (loss) per share$  0.47  $  (0.08) $  0.86  $  0.03 
         
Weighted average number of shares outstanding:     
      
Basic  18,641,324   18,215,783   18,544,118   18,109,912 
         
Diluted  19,429,390   18,215,783   19,384,668   18,887,153 
         


 

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
 
  September 30, 2016 March 31, 2016 
ASSETS (Unaudited)   
Current assets:    
 Cash and cash equivalents $  5,452,000  $  21,897,000   
 Short-term investments    2,233,000     1,813,000  
 Accounts receivable — net    16,112,000     8,548,000  
 Inventory — net    72,164,000     58,060,000  
 Inventory unreturned    10,228,000     10,520,000  
 Deferred income taxes    34,414,000     33,347,000  
 Prepaid expenses and other current assets    7,796,000     5,900,000  
 Total current assets    148,399,000     140,085,000  
 Plant and equipment — net    17,227,000     16,099,000  
 Long-term core inventory — net    251,048,000     241,100,000  
 Long-term core inventory deposits    5,569,000     5,569,000  
 Long-term deferred income taxes    457,000     236,000  
 Goodwill    2,476,000     2,053,000  
 Intangible assets — net    4,316,000      4,573,000  
 Other assets    8,176,000     3,657,000  
 TOTAL ASSETS $  437,668,000   $  413,372,000  
LIABILITIES AND SHAREHOLDERS'  EQUITY     
 Current liabilities:      
 Accounts payable $  74,845,000  $  72,152,000  
 Accrued liabilities    6,938,000     9,101,000  
 Customer finished goods returns accrual    19,761,000     26,376,000  
 Accrued core payment    11,174,000     8,989,000  
 Revolving loan    19,000,000     7,000,000  
 Other current liabilities    9,757,000     4,698,000  
 Current portion of term loan    3,064,000     3,067,000  
 Total current liabilities    144,539,000     131,383,000  
 Term loan, less current portion    18,447,000     19,980,000  
 Long-term accrued core payment    17,996,000     17,550,000  
 Long-term deferred income taxes    13,675,000     14,315,000   
 Other liabilities    14,187,000     19,336,000  
 Total liabilities    208,844,000     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;      
 18,665,196 and 18,531,751 shares issued and outstanding at September 30, 2016 and           
 March 31, 2016, respectively    187,000     185,000  
 Additional paid-in capital    205,375,000     203,650,000  
 Retained earnings    29,368,000     11,825,000  
 Accumulated other comprehensive loss    (6,106,000)     (4,852,000) 
 Total shareholders' equity    228,824,000     210,808,000  
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $  437,668,000  $  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 six months ended September 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 and six months ended September 30, 2016 and 2015 are as follows:


Reconciliation of Non-GAAP Financial Measures           Exhibit 1
    
 Three Months Ended September 30, Six Months Ended September 30,
  2016   2015   2016   2015 
GAAP Results:      
Net sales$  108,836,000  $  91,670,000  $  194,248,000  $  177,505,000 
Net income (loss)   9,143,000     (1,392,000)    16,651,000     518,000 
Diluted income (loss) per share (EPS)   0.47     (0.08)    0.86     0.03 
Gross margin 28.2%  23.8%  26.3%  26.9%
Non-GAAP Adjusted Results:     
Non-GAAP adjusted net sales$  112,383,000  $   101,745,000  $  206,205,000  $  188,368,000 
Non-GAAP adjusted net income   12,426,000     11,790,000     22,516,000     20,144,000 
Non-GAAP adjusted diluted earnings per share (EPS)   0.64     0.62     1.16     1.07 
Non-GAAP adjusted gross margin 30.7%  30.9 %  31.4%  30.9%
Non-GAAP adjusted EBITDA   24,470,000     22,681,000     44,689,000      40,396,000 
                


 

Reconciliation of Non-GAAP Financial Measures   Exhibit 2
     
  Three Months Ended September 30, Six Months Ended September 30,
   2016   2015   2016   2015 
GAAP net sales$  108,836,000  $  91,670,000  $  194,248,000  $  177,505,000 
Adjustments:       
 Net sales       
 Initial return and stock adjustment accruals related to new business   1,315,000   -     3,168,000   - 
 Customer allowances related to new business   2,232,000     10,075,000     8,789,000     10,863,000 
Adjusted net sales$  112,383,000  $  101,745,000  $  206,205,000  $  188,368,000 
         


Reconciliation of Non-GAAP Financial MeasuresExhibit 3
   
  Three Months Ended September 30,
   2016    2015 
  $ Per Diluted Share $ Per Diluted Share
GAAP net income (loss)$9,143,000  $0.47  $(1,392,000) $(0.08)
Adjustments:       
 Net sales       
 Initial return and stock adjustment accruals related to new business 1,315,000  $0.07   -  $- 
 Customer allowances related to new business 2,232,000  $0.11   10,075,000  $0.53 
 Cost of goods sold      
 New product line start-up costs 16,000  $0.001   -  $- 
 Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization 475,000  $0.02   326,000  $0.02 
 Cost of customer allowances and stock adjustment accruals related to new business (213,000) $(0.01)  (809,000) $(0.04)
 Operating expenses      
 Legal, severance, acquisition, financing, transition and other costs 219,000  $0.01   1,112,000  $0.06 
 Payment received in connection with the settlement of litigation related to discontinued subsidiaries       
 Bad debt expense (recovery) resulting from the bankruptcy filing by a customer       
 Accrual 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 1,008,000  $0.05   517,000   $0.03 
 Mark-to-market losses (gains) 1,331,000  $0.07   1,147,000  $0.06 
 Tax effected at 39% tax rate (a) (3,100,000) $(0.16)  (8,436,000) $(0.45)
Adjusted net income$12,426,000  $0.64  $11,790,000  $0.62 
 
(a) Tax effect at 39% of the income before income tax expense (reflecting the adjustments)  
   


Reconciliation of Non-GAAP Financial Measures  Exhibit 4
    
  Six Months Ended September 30,
   2016   2015 
  $ Per Diluted Share  $ Per Diluted Share
GAAP net income$  16,651,000  $  0.86  $  518,000  $  0.03 
Adjustments:       
 Net sales       
 Initial return and stock adjustment accruals related to new business   3,168,000  $  0.16   -  $- 
 Customer allowances related to new business   8,789,000  $  0.45     10,863,000  $  0.58 
 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   2,193,000  $  0.11     326,000  $  0.02 
 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   615,000  $  0.03     4,253,000  $  0.23 
 Accrual 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    1,737,000  $  0.09     1,033,000   $  0.05 
 Mark-to-market losses (gains)   (3,595,000)  $  (0.19)    2,111,000  $  0.11  
 Interest       
 Write-off of prior deferred loan fees -  $-     5,108,000  $  0.27 
 Tax effected at 39% tax rate (a)   (6,614,000) $  (0.34)    (12,509,000) $  (0.66)
Adjusted net income$  22,516,000  $  1.16  $  20,144,000  $  1.07 
         
(a) Tax effect at 39% of the income before income tax expense (reflecting the adjustments)  
   


Reconciliation of Non-GAAP Financial Measures Exhibit 5
   
   Three Months Ended September 30, 
   2016    2015 
  $ Gross Margin $ Gross Margin
GAAP gross profit$  30,658,000   28.2% $  21,820,000   23.8%
Adjustments:       
 Net sales       
 Initial return and stock adjustment accruals related to new business   1,315,000     -   
 Customer allowances related to new business   2,232,000     10,075,000   
 Cost of goods sold      
 New product line start-up costs   16,000     -   
 Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization   475,000       326,000   
 Cost of customer allowances and stock adjustment accruals related to new business   (213,000)      (809,000)  
 Total adjustments   3,825,000   2.5%    9,592,000   7.1%
Adjusted gross profit$  34,483,000   30.7% $  31,412,000   30.9%
         


Reconciliation of Non-GAAP Financial Measures  Exhibit 6
   
   Six Months Ended September 30, 
    2016   2015 
  $ Gross Margin $ Gross Margin
GAAP gross profit$  51,049,000   26.3% $  47,811,000   26.9%
Adjustments:       
 Net sales       
 Initial return and stock adjustment accruals related to new business   3,168,000     -   
 Customer allowances related to new business   8,789,000     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   2,193,000       326,000   
 Cost of customer allowances and stock adjustment accruals related to new business   (568,000)      (809,000)  
 Total adjustments   13,722,000   5.1%     10,380,000   4.0%
Adjusted gross profit$  64,771,000   31.4% $  58,191,000   30.9%
         


Reconciliation of Non-GAAP Financial Measures  Exhibit 7
    
  Three Months Ended September 30, Six Months Ended September 30,
   2016   2015   2016   2015 
GAAP net income (loss)$9,143,000  $  (1,392,000) $  16,651,000  $  518,000 
Interest expense, net  3,189,000     2,613,000     6,008,000      11,050,000 
Income tax expense (benefit) 4,845,000     (898,000)    7,781,000     370,000 
Depreciation and amortization 910,000     740,000     1,770,000     1,431,000 
EBITDA
$18,087,000  $  1,063,000  $  32,210,000  $  13,369,000 
         
Adjustments:       
 Net sales       
 Initial return and stock adjustment accruals related to new business 1,315,000   -   3,168,000   - 
 Customer allowances related to new business 2,232,000   10,075,000   8,789,000   10,863,000 
 Cost of goods sold    -   
 New product line start-up costs  16,000   -   140,000   - 
 Lower of cost or market revaluation - cores on customers' shelves and inventory step-up amortization 475,000     326,000     2,193,000     326,000 
 Cost of customer allowances and stock adjustment accruals related to new business (213,000)    (809,000)    (568,000)    (809,000)
 Operating expenses    -   
 Legal, severance, acquisition, financing, transition and other costs 219,000   1,112,000   615,000     4,253,000 
 Accrual made in connection with the settlement of litigation, net of insurance recoveries, related to discontinued subsidiaries -   9,250,000   -     9,250,000 
 Share-based compensation expenses 1,008,000     517,000     1,737,000     1,033,000 
 Mark-to-market losses (gains) 1,331,000     1,147,000     (3,595,000)    2,111,000 
Adjusted EBITDA$24,470,000  $  22,681,000  $  44,689,000  $  40,396,000 
         

 

CONTACT:

Gary S. Maier

(310) 471-1288

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Source: Motorcar Parts of America, Inc.

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