Record Sales Expected for the Balance of Fiscal Year; Annual Gross Margin Guidance Reaffirmed
LOS ANGELES, Aug. 09, 2018 (GLOBE NEWSWIRE) -- Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2019 first quarter ended June 30, 2018.
Net sales for the fiscal 2019 first quarter were $92.6 million compared with $95.5 million for the same period a year earlier -- reflecting various industry factors discussed below and during the fiscal year-end conference call, as well as additional factors highlighted below.
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 2019 first quarter were $93.8 million compared with $95.5 million a year earlier.
“Notwithstanding weak results for the quarter, particularly in the month of April, we are encouraged by the industry regaining momentum and we expect a solid sales recovery in the quarters ahead,” said Selwyn Joffe, chairman, president and chief executive officer.
“The company has reached a positive inflection point for future growth, with the sales and profitability outlook for the short and long term very encouraging,” Joffe said. He emphasized that sales for the quarter were impacted by customer allowances related to new business, customer stock adjustment accruals in connection with future update orders and the transition to the company’s new distribution center.
He indicated the company expects replenishment, update orders and new business to gain momentum throughout the fiscal year, with the company on track to report annual adjusted net sales at the upper end of its previously issued guidance of 6.5 percent to 8.5 percent revenue growth.
Net loss for the fiscal 2019 first quarter was $5.0 million, or $0.27 per share, compared with net income of $8.2 million, or $0.42 per diluted share, a year ago.
Adjusted net income for the fiscal 2019 first quarter was $2.8 million, or $0.15 per diluted share, compared with $8.3 million, or $0.43 per diluted share, a year earlier. The current quarter net loss was impacted by a variety of factors, including non-cash expenses of $6.5 million and expenses related to future growth of $3.5 million, adjusted in the aggregate to $7.8 million after-tax, or $0.42 per diluted share, as further detailed in attached Exhibit 3.
In addition, the following items negatively impacted adjusted net income that have not been adjusted for: (1) customer stock adjustment accruals in connection with future update orders, (2) the impact to sales related to the transition to the company’s new distribution center, (3) lower overhead cost absorption, which is expected to reverse as sales increase, and (4) increased freight expenses related to external market rates. The impact of the first three items is expected to diminish and have a positive impact in future quarters. The above four items resulted in a combined negative impact of $0.15 per diluted share.
Gross profit for the fiscal 2019 first quarter was $17.3 million compared with $26.7 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2019 first quarter was 18.6 percent compared with 27.9 percent a year earlier.
Adjusted gross profit for the fiscal 2019 first quarter was $22.8 million compared with $28.0 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the three months was 24.4 percent compared with 29.3 percent a year earlier. Adjusted gross profit as a percentage of adjusted net sales for the quarter was further negatively impacted by the unadjusted items noted above. These items resulted in a combined negative impact of 2.7 percent to the adjusted gross profit margin.
The company expects adjusted gross margins to sequentially improve through the fiscal year and the company reiterates its previously issued annual guidance of between 27 percent to 30 percent.
Increased Stock Repurchase Authorization
Under the authorized share repurchase program, as of June 30, 2018, $11.6 million of the $20.0 million common stock authorization has been purchased and $8.4 million is available to repurchase shares. Subsequently, its board of directors increased the company’s share repurchase program authorization to $37.0 million from $20.0 million. Thus, $25.4 million is available to repurchase shares in the open market and private transactions. Motorcar Parts of America currently has 18.9 million shares outstanding.
Revenue Recognition
Effective April 1, 2018, the company adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, ("ASC 606") using the full retrospective transition method. As a result, the prior year three months ended June 30, 2017 were revised to reflect the adoption of the new revenue recognition accounting standards. The effects of the adoption were an increase to previously reported revenues for the three months ended June 30, 2017 of $456,000. The revenue changes were accompanied by related changes to cost of goods sold - a decrease to previously reported cost of goods sold for the three months ended June 30, 2017 of $381,000.
Also, as a result of the adoption of ASC 606 and the resultant changes in company policy, the effect of the adoption on the consolidated balance sheets was to create contract asset and contract liability accounts to document those balance sheet items being impacted by the new revenue recognition requirements. Additional information will be available in the company’s Form 10-Q filing later today.
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 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 August 9, 2018 through 8:59 p.m. Pacific time on August 16, 2018 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 1974404.
About Motorcar Parts of America, Inc.
Motorcar Parts of America, Inc. is a remanufacturer, manufacturer and distributor of automotive aftermarket parts -- including alternators, starters, wheel bearing and hub assemblies, brake master cylinders, brake power boosters and turbochargers utilized in imported and domestic passenger vehicles, light trucks and heavy-duty applications. In addition, the company designs and manufactures test equipment for performance, endurance and production testing of alternators, starters, electric motors, inverters and belt starter generators for both the OE and aftermarket. 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 Canada. 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 2018 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, |
| |
|
|
2018 |
|
|
|
2017 |
| |
|
|
|
|
| Net sales |
|
$ |
92,565,000 |
|
|
$ |
95,519,000 |
| Cost of goods sold |
|
|
75,314,000 |
|
|
|
68,843,000 |
| Gross profit |
|
|
17,251,000 |
|
|
|
26,676,000 |
| Operating expenses: |
|
|
|
|
| General and administrative |
|
|
12,340,000 |
|
|
|
6,187,000 |
| Sales and marketing |
|
|
4,392,000 |
|
|
|
3,394,000 |
| Research and development |
|
|
1,736,000 |
|
|
|
1,002,000 |
| Total operating expenses |
|
|
18,468,000 |
|
|
|
10,583,000 |
| Operating (loss) income |
|
|
(1,217,000 |
) |
|
|
16,093,000 |
| Interest expense, net |
|
|
5,075,000 |
|
|
|
3,314,000 |
| (Loss) income before income tax (benefit) expense |
|
|
(6,292,000 |
) |
|
|
12,779,000 |
| Income tax (benefit) expense |
|
|
(1,278,000 |
) |
|
|
4,628,000 |
| |
|
|
|
|
| Net (loss) income |
|
$ |
(5,014,000 |
) |
|
$ |
8,151,000 |
| |
|
|
|
|
| |
|
|
|
|
| Basic net (loss) income per share |
|
$ |
(0.27 |
) |
|
$ |
0.44 |
| |
|
|
|
|
| |
|
|
|
|
| Diluted net (loss) income per share |
|
$ |
(0.27 |
) |
|
$ |
0.42 |
| |
|
|
|
|
| Weighted average number of shares outstanding: |
|
|
|
|
| Basic |
|
|
18,895,847 |
|
|
|
18,655,304 |
| |
|
|
|
|
| Diluted |
|
|
18,895,847 |
|
|
|
19,421,352 |
| |
|
|
|
|
| |
|
|
|
|
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
| |
|
|
|
|
|
| |
|
June 30, 2018 |
|
March 31, 2018 |
|
| ASSETS |
|
(Unaudited) |
|
|
|
| Current assets: |
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
12,242,000 |
|
|
$ |
13,049,000 |
|
|
| Short-term investments |
|
|
3,053,000 |
|
|
|
2,828,000 |
|
|
| Accounts receivable — net |
|
|
40,510,000 |
|
|
|
63,174,000 |
|
|
| Inventory— net |
|
|
187,342,000 |
|
|
|
161,210,000 |
|
|
| Inventory unreturned |
|
|
8,315,000 |
|
|
|
7,508,000 |
|
|
| Contract assets |
|
|
16,542,000 |
|
|
|
15,614,000 |
|
|
| Income tax receivable |
|
|
9,416,000 |
|
|
|
7,796,000 |
|
|
| Prepaid expenses and other current assets |
|
|
13,148,000 |
|
|
|
11,491,000 |
|
|
| Total current assets |
|
|
290,568,000 |
|
|
|
282,670,000 |
|
|
| Plant and equipment — net |
|
|
28,026,000 |
|
|
|
28,322,000 |
|
|
| Long-term core inventory — net |
|
|
- |
|
|
|
- |
|
|
| Long-term core inventory deposits |
|
|
- |
|
|
|
- |
|
|
| Long-term deferred income taxes |
|
|
10,343,000 |
|
|
|
10,317,000 |
|
|
| Long-term contract assets |
|
|
207,792,000 |
|
|
|
205,998,000 |
|
|
| Goodwill |
|
|
2,551,000 |
|
|
|
2,551,000 |
|
|
| Intangible assets — net |
|
|
3,567,000 |
|
|
|
3,766,000 |
|
|
| Other assets |
|
|
6,406,000 |
|
|
|
7,392,000 |
|
|
| TOTAL ASSETS |
|
$ |
549,253,000 |
|
|
$ |
541,016,000 |
|
|
| LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
| Accounts payable |
|
$ |
86,633,000 |
|
|
$ |
73,273,000 |
|
|
| Accrued liabilities |
|
|
9,358,000 |
|
|
|
11,799,000 |
|
|
| Customer finished goods returns accrual |
|
|
16,438,000 |
|
|
|
17,805,000 |
|
|
| Accrued core payment |
|
|
- |
|
|
|
- |
|
|
| Contract liabilities |
|
|
32,083,000 |
|
|
|
32,603,000 |
|
|
| Revolving loan |
|
|
45,406,000 |
|
|
|
54,000,000 |
|
|
| Other current liabilities |
|
|
6,159,000 |
|
|
|
4,471,000 |
|
|
| Current portion of term loan |
|
|
2,749,000 |
|
|
|
3,068,000 |
|
|
| Total current liabilities |
|
|
198,826,000 |
|
|
|
197,019,000 |
|
|
| Term loan, less current portion |
|
|
26,954,000 |
|
|
|
13,913,000 |
|
|
| Long-term accrued core payment |
|
|
- |
|
|
|
- |
|
|
| Long-term contract liabilities |
|
|
45,666,000 |
|
|
|
48,183,000 |
|
|
| Long-term deferred income taxes |
|
|
216,000 |
|
|
|
226,000 |
|
|
| Other liabilities |
|
|
6,853,000 |
|
|
|
5,957,000 |
|
|
| Total liabilities |
|
|
278,515,000 |
|
|
|
265,298,000 |
|
|
| 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; |
|
|
|
|
|
| 18,916,108 and 18,893,102 shares issued and outstanding at June 30, 2018 and |
|
|
|
|
|
| March 31, 2018, respectively |
|
|
189,000 |
|
|
|
189,000 |
|
|
| Additional paid-in capital |
|
|
214,358,000 |
|
|
|
213,609,000 |
|
|
| Retained earnings |
|
|
63,080,000 |
|
|
|
67,348,000 |
|
|
| Accumulated other comprehensive loss |
|
|
(6,889,000 |
) |
|
|
(5,428,000 |
) |
|
| Total shareholders' equity |
|
|
270,738,000 |
|
|
|
275,718,000 |
|
|
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
$ |
549,253,000 |
|
|
$ |
541,016,000 |
|
|
| |
|
|
|
|
|
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, 2018 and 2017. 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, 2018 and 2017 are as follows:
Reconciliation of Non-GAAP Financial Measures Exhibit 1
| |
Three Months Ended June 30, |
| |
|
2018 |
|
|
|
2017 |
|
| GAAP Results: |
|
|
|
| Net sales |
$ |
92,565,000 |
|
|
$ |
95,519,000 |
|
| Net income (loss) |
|
(5,014,000 |
) |
|
|
8,151,000 |
|
| Diluted income (loss) per share (EPS) |
|
(0.27 |
) |
|
|
0.42 |
|
| Gross margin |
|
18.6 |
% |
|
|
27.9 |
% |
| Non-GAAP Adjusted Results: |
|
|
|
|
|
|
|
| Non-GAAP adjusted net sales |
$ |
93,772,000 |
|
|
$ |
95,519,000 |
|
| Non-GAAP adjusted net income |
|
2,801,000 |
|
|
|
8,310,000 |
|
| Non-GAAP adjusted diluted earnings per share (EPS) |
|
0.15 |
|
|
|
0.43 |
|
| Non-GAAP adjusted gross margin |
|
24.4 |
% |
|
|
29.3 |
% |
| Non-GAAP adjusted EBITDA |
$ |
10,093,000 |
|
|
$ |
17,236,000 |
|
| |
|
|
|
| Note: Prior year three months ended June 30, 2017 results reflect the adoption of the new |
| revenue recognition accounting standards. Effective April 1, 2018, the Company |
| adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, |
| ("ASC 606") using the full retrospective transition method. For further details, please refer to the |
| Company's June 30, 2018 10-Q filing. |
|
|
|
| |
|
|
|
Reconciliation of Non-GAAP Financial Measures Exhibit 2
| |
|
Three Months Ended June 30, |
| |
|
|
2018 |
|
|
2017 |
| GAAP net sales |
$ |
92,565,000 |
|
$ |
95,519,000 |
| Adjustments: |
|
|
|
| |
Net sales |
|
|
|
| |
Customer allowances related to new business |
|
1,207,000 |
|
|
- |
| Adjusted net sales |
$ |
93,772,000 |
|
$ |
95,519,000 |
| |
|
|
|
|
Reconciliation of Non-GAAP Financial Measures Exhibit 3
| |
|
Three Months Ended June 30, |
| |
|
|
2018 |
|
|
|
2017 |
|
| |
|
$ |
|
Per Diluted
Share |
|
$ |
|
Per Diluted
Share |
| GAAP net income (loss) |
$ |
(5,014,000 |
) |
|
$ |
(0.27 |
) |
|
$ |
8,151,000 |
|
|
$ |
0.42 |
|
| Adjustments: |
|
|
|
|
|
|
|
| |
Net sales |
|
|
|
|
|
|
|
| |
Customer allowances related to new business |
|
1,207,000 |
|
|
$ |
0.06 |
|
|
|
- |
|
|
$ |
- |
|
| |
Cost of goods sold |
|
|
|
|
|
|
|
| |
New product line start-up and ramp-up costs, and transition expenses |
|
1,755,000 |
|
|
$ |
0.09 |
|
|
|
- |
|
|
$ |
- |
|
| |
Lower of cost or net realizable value revaluation - cores on customers' shelves |
|
2,624,000 |
|
|
$ |
0.14 |
|
|
|
1,350,000 |
|
|
$ |
0.07 |
|
| |
Operating expenses |
|
|
|
|
|
|
|
| |
Acquisition, financing, transition, severance and other costs |
|
531,000 |
|
|
$ |
0.03 |
|
|
|
265,000 |
|
|
$ |
0.01 |
|
| |
Share-based compensation expenses |
|
941,000 |
|
|
$ |
0.05 |
|
|
|
834,000 |
|
|
$ |
0.04 |
|
| |
Mark-to-market losses (gains) |
|
2,666,000 |
|
|
$ |
0.14 |
|
|
|
(2,345,000 |
) |
|
$ |
(0.12 |
) |
| |
Interest |
|
|
|
|
|
|
|
| |
Write-off of debt issuance costs |
|
303,000 |
|
|
$ |
0.02 |
|
|
|
- |
|
|
$ |
- |
|
| |
Tax effected (a) |
|
(2,212,000 |
) |
|
$ |
(0.11 |
) |
|
|
55,000 |
|
|
$ |
0.00 |
|
| Adjusted net income |
$ |
2,801,000 |
|
|
$ |
0.15 |
|
|
$ |
8,310,000 |
|
|
$ |
0.43 |
|
| |
|
|
|
|
|
|
|
|
| |
| (a) Adjusted net income is calculated by applying an income tax rate of 25.0% for the three months ended June 30, 2018 and 35.5% for the three months |
|
|
|
| ended June 30, 2017; this rate may differ from the period's actual income tax rate |
|
|
|
|
|
|
|
Reconciliation of Non-GAAP Financial Measures Exhibit 4
| |
|
Three Months Ended June 30, |
| |
|
2018
|
|
2017
|
| |
|
$ |
|
Gross Margin |
|
$ |
|
Gross Margin |
| GAAP gross profit |
$ |
17,251,000 |
|
18.6 |
% |
|
$ |
26,676,000 |
|
27.9 |
% |
| Adjustments: |
|
|
|
|
|
|
|
| |
Net sales |
|
|
|
|
|
|
|
| |
Customer allowances related to new business |
|
1,207,000 |
|
|
|
|
- |
|
|
| |
Cost of goods sold |
|
|
|
|
|
|
|
| |
New product line start-up and ramp-up costs, and transition expenses |
|
1,755,000 |
|
|
|
|
- |
|
|
| |
Lower of cost or net realizable value revaluation - cores on customers' shelves |
|
2,624,000 |
|
|
|
|
1,350,000 |
|
|
| Total adjustments |
|
5,586,000 |
|
5.8 |
% |
|
|
1,350,000 |
|
1.4 |
% |
| Adjusted gross profit |
$ |
22,837,000 |
|
24.4 |
% |
|
$ |
28,026,000 |
|
29.3 |
% |
| |
|
|
|
|
|
|
|
|
Reconciliation of Non-GAAP Financial Measures Exhibit 5
| |
|
Three Months Ended June 30, |
| |
|
|
2018 |
|
|
|
2017 |
|
| GAAP net income (loss) |
$ |
(5,014,000 |
) |
|
$ |
8,151,000 |
|
| Interest expense, net |
|
5,075,000 |
|
|
|
3,314,000 |
|
| Income tax expense (benefit) |
|
(1,278,000 |
) |
|
|
4,628,000 |
|
| Depreciation and amortization |
|
1,586,000 |
|
|
|
1,039,000 |
|
| EBITDA |
|
$ |
369,000 |
|
|
$ |
17,132,000 |
|
| |
|
|
|
|
| Adjustments: |
|
|
|
| Net sales |
|
|
|
| Customer allowances related to new business |
|
1,207,000 |
|
|
|
- |
|
| Cost of goods sold |
|
|
|
| New product line start-up and ramp-up costs, and transition expenses |
|
1,755,000 |
|
|
|
- |
|
| Lower of cost or net realizable value revaluation - cores on customers' shelves |
|
2,624,000 |
|
|
|
1,350,000 |
|
| Operating expenses |
|
|
|
| Acquisition, financing, transition, severance and other costs |
|
531,000 |
|
|
|
265,000 |
|
| Share-based compensation expenses |
|
941,000 |
|
|
|
834,000 |
|
| Mark-to-market losses (gains) |
|
2,666,000 |
|
|
|
(2,345,000 |
) |
| Adjusted EBITDA |
$ |
10,093,000 |
|
|
$ |
17,236,000 |
|
| |
|
|
|
|
CONTACT:
Gary S. Maier
(310) 471-1288
Source: Motorcar Parts of America, Inc.