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Motorcar Parts of America Reports Fiscal 2020 Second Quarter Results

November 12, 2019

LOS ANGELES--(BUSINESS WIRE)--Nov 12, 2019--

Motorcar Parts of America, Inc. ( Nasdaq: MPAA ) today reported results for its fiscal 2020 second quarter ended September 30, 2019 -- reflecting strong profitability and record sales for the quarter.

Net sales for the fiscal 2020 second quarter increased 17.5 percent to $150.4 million from $127.9 million for the same period a year earlier, reflecting sales increases for both hard parts and diagnostic products.

Adjusted net sales for the fiscal 2020 second quarter increased 16.4 percent to $151.4 million from $130.2 million a year earlier.

“Our strong profitability and record sales for the quarter underscore the progress we are making in the execution of our strategic growth initiatives. We are on target to complete the majority of our expansion in Mexico and Malaysia by fiscal year end, which should further enhance our financial performance and strengthen our position within the non-discretionary hard parts aftermarket.

“Equally exciting, our emerging diagnostic and testing equipment business, which includes applications for rotating electrical, electric vehicles and aerospace, continues to gain traction,” said Selwyn Joffe, chairman, president and chief executive officer.

He noted the company’s highly regarded customer service and expanding operating footprint position the company for growth and value creation.

Net income for the fiscal 2020 second quarter was $6.2 million, or $0.32 per diluted share, compared with net income of $3.5 million, or $0.18 per diluted share, a year ago.

Adjusted net income for the fiscal 2020 second quarter was $13.0 million, or $0.68 per diluted share, compared with $11.5 million, or $0.60 per diluted share, a year earlier.

Gross profit for the fiscal 2020 second quarter was $36.6 million compared with $25.7 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2020 second quarter was 24.3 percent compared with 20.1 percent a year earlier.

Adjusted gross profit for the fiscal 2020 second quarter was $42.9 million compared with $36.0 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the three months was 28.3 percent compared with 27.6 percent a year earlier.

The results for the quarter and gross margin were primarily impacted by two items totaling $6.3 million.

Six-Month Results

Net sales for the fiscal 2020 six-month period increased 18.2 percent to $259.5 million from $219.6 million a year earlier.

Adjusted net sales for the fiscal 2020 six-month period increased 16.1 percent to $260.0 million from $224.0 million last year.

Net income for the fiscal 2020 six-month period was $38,000, or $0.00 per share, compared with net loss of $2.0 million, or $0.10 loss per share, in fiscal 2019.

Adjusted net income for the fiscal 2020 six-month period was $14.7 million, or $0.76 per diluted share, compared with $14.6 million, or $0.75 per diluted share, in fiscal 2019.

Gross profit for the fiscal 2020 six-month period was $54.2 million compared with $42.1 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2020 first half was 20.9 percent compared with 19.2 percent a year earlier.

Adjusted gross profit for the fiscal 2020 six-month period was $69.1 million compared with $58.9 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the six months was 26.6 percent compared with 26.3 percent a year earlier.

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), 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 November 12, 2019 through 8:59 p.m. Pacific time on November 19, 2019 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 6560267.

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 calipers, brake master cylinders, brake power boosters, rotors, brake pads and turbochargers utilized in imported and domestic passenger vehicles, light trucks and heavy-duty applications. In addition, the company designs and manufactures test solutions for performance, endurance and production testing of electric motors, inverters, alternators, starters, and belt starter generators for the OE, aerospace 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 New York, California, Mexico, Malaysia, China and India, 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 2019 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.

 

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

 

Three Months Ended

Six Months Ended

September 30,

September 30,

2019

2018

2019

2018

 
Net sales

$

150,374,000

$

127,939,000

$

259,522,000

$

219,607,000

 

Cost of goods sold

 

113,801,000

 

102,228,000

 

205,366,000

 

177,544,000

 

Gross profit

 

36,573,000

 

25,711,000

 

54,156,000

 

42,063,000

 

Operating expenses:
General and administrative

 

14,285,000

 

8,997,000

 

26,285,000

 

21,088,000

 

Sales and marketing

 

5,448,000

 

4,537,000

 

10,367,000

 

8,929,000

 

Research and development

 

2,148,000

 

1,784,000

 

4,520,000

 

3,520,000

 

Total operating expenses

 

21,881,000

 

15,318,000

 

41,172,000

 

33,537,000

 

Operating income

 

14,692,000

 

10,393,000

 

12,984,000

 

8,526,000

 

Interest expense, net

 

6,523,000

 

5,699,000

 

12,696,000

 

10,774,000

 

Income (loss) before income tax expense (benefit)

 

8,169,000

 

4,694,000

 

288,000

 

(2,248,000

)

Income tax expense (benefit)

 

1,980,000

 

1,181,000

 

250,000

 

(266,000

)

Net income (loss)

$

6,189,000

$

3,513,000

$

38,000

$

(1,982,000

)

Basic net income (loss) per share

$

0.33

$

0.19

$

0.00

$

(0.10

)

Diluted net income (loss) per share

$

0.32

$

0.18

$

0.00

$

(0.10

)

Weighted average number of shares outstanding:
Basic

 

18,903,182

 

18,878,674

 

18,862,901

 

18,887,214

 

Diluted

 

19,217,327

 

19,319,465

 

19,246,599

 

18,887,214

 

Note: The Company revised its financial statements for each of the three years in the period ended March 31, 2018 and for the three months ended June 30, 2018. As of June 30, 2018, the cumulative error for all periods previously reported was an understatement of net income of $2,938,000. Additional information is available in the company’s September 30, 2018 Form 10-Q.

 

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 

September 30, 2019

March 31, 2019

ASSETS

(Unaudited)

Current assets:
Cash and cash equivalents

$

6,455,000

 

$

9,911,000

 

Short-term investments

 

2,192,000

 

 

3,273,000

 

Accounts receivable — net

 

69,914,000

 

 

56,015,000

 

Inventory— net

 

250,667,000

 

 

233,726,000

 

Inventory unreturned

 

8,684,000

 

 

8,469,000

 

Contract assets

 

19,471,000

 

 

22,183,000

 

Income tax receivable

 

10,205,000

 

 

10,009,000

 

Prepaid expenses and other current assets

 

8,846,000

 

 

9,296,000

 

Total current assets

 

376,434,000

 

 

352,882,000

 

Plant and equipment — net

 

40,723,000

 

 

35,151,000

 

Operating lease assets

 

49,262,000

 

 

-

 

Long-term deferred income taxes

 

10,237,000

 

 

9,746,000

 

Long-term contract assets

 

224,329,000

 

 

221,876,000

 

Goodwill

 

3,205,000

 

 

3,205,000

 

Intangible assets — net

 

7,493,000

 

 

8,431,000

 

Other assets

 

875,000

 

 

1,071,000

 

TOTAL ASSETS

$

712,558,000

 

$

632,362,000

 

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

85,307,000

 

$

92,461,000

 

Accrued liabilities

 

14,318,000

 

 

14,604,000

 

Customer finished goods returns accrual

 

23,621,000

 

 

22,615,000

 

Contract liabilities

 

24,064,000

 

 

30,599,000

 

Revolving loan

 

144,000,000

 

 

110,400,000

 

Other current liabilities

 

4,852,000

 

 

4,990,000

 

Operating lease liabilities

 

4,487,000

 

 

-

 

Current portion of term loan

 

3,678,000

 

 

3,685,000

 

Total current liabilities

 

304,327,000

 

 

279,354,000

 

Term loan, less current portion

 

22,299,000

 

 

24,187,000

 

Long-term contract liabilities

 

49,327,000

 

 

40,889,000

 

Long-term deferred income taxes

 

130,000

 

 

257,000

 

Long-term operating lease liabilities

 

47,925,000

 

 

-

 

Other liabilities

 

7,205,000

 

 

7,920,000

 

Total liabilities

 

431,213,000

 

 

352,607,000

 

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; 18,944,886 and 18,817,400 shares issued and outstanding at September 30, 2019 and March 31, 2019, respectively

 

189,000

 

 

188,000

 

Additional paid-in capital

 

216,430,000

 

 

215,047,000

 

Retained earnings

 

71,445,000

 

 

71,407,000

 

Accumulated other comprehensive loss

 

(6,719,000

)

 

(6,887,000

)

Total shareholders' equity

 

281,345,000

 

 

279,755,000

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

712,558,000

 

$

632,362,000

 

 

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, 2019 and 2018. 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, 2019 and 2018 are as follows:

 

Reconciliation of Non-GAAP Financial Measures

Exhibit 1

 

Three Months Ended September 30,

Six Months Ended September 30,

2019

2018

2019

2018

GAAP Results:
Net sales

$

150,374,000

 

$

127,939,000

 

$

259,522,000

 

$

219,607,000

 

Net income (loss)

 

6,189,000

 

 

3,513,000

 

 

38,000

 

 

(1,982,000

)

Income (loss) per share (EPS)

 

0.32

 

 

0.18

 

 

0.00

 

 

(0.10

)

Gross margin

 

24.3

%

 

20.1

%

 

20.9

%

 

19.2

%

Non-GAAP Adjusted Results:
Non-GAAP adjusted net sales

$

151,432,000

 

$

130,152,000

 

$

259,993,000

 

$

223,962,000

 

Non-GAAP adjusted net income

 

13,001,000

 

 

11,540,000

 

 

14,677,000

 

 

14,557,000

 

Non-GAAP adjusted diluted earnings per share (EPS)

 

0.68

 

 

0.60

 

 

0.76

 

 

0.75

 

Non-GAAP adjusted gross margin

 

28.3

%

 

27.6

%

 

26.6

%

 

26.3

%

Non-GAAP adjusted EBITDA

$

26,025,000

 

$

22,534,000

 

$

36,747,000

 

$

32,771,000

 

Note: The Company had revised its financial statements for each of the three years in the period ended March 31, 2018 and for the three months ended June 30, 2018. As of June 30, 2018, the cumulative error for all periods previously reported was an understatement of net income of $2,938,000. For further information, please see the Company’s September 30, 2018 Form 10-Q. As of June 30, 2018, the cumulative impact to non-GAAP adjusted net income for all periods previously reported was an understatement of $1,220,000.

 
Reconciliation of Non-GAAP Financial Measures

Exhibit 2

 

Three Months Ended September 30,

Six Months Ended September 30,

2019

2018

2019

2018

 
GAAP net sales

$

150,374,000

 

$

127,939,000

$

259,522,000

 

$

219,607,000

Adjustments:
Net sales
Return and stock adjustment accruals related to new business

 

-

 

 

-

 

159,000

 

 

-

Customer allowances related to new business

 

1,351,000

 

 

2,213,000

 

2,459,000

 

 

4,355,000

Impact of sales price increases related to tariffs

 

-

 

 

-

 

(2,280,000

)

 

-

(Recovery) cost in connection with a cancelled contract

 

(293,000

)

 

-

 

133,000

 

 

-

Adjusted net sales

$

151,432,000

 

$

130,152,000

$

259,993,000

 

$

223,962,000

 
 

Reconciliation of Non-GAAP Financial Measures

Exhibit 3

 

Three Months Ended September 30,

2019

2018

 

$

Per Diluted
Share

$

Per Diluted
Share

GAAP net income

$

6,189,000

 

$

0.32

 

$

3,513,000

 

$

0.18

 

Adjustments:
Net sales
Customer allowances related to new business

 

1,351,000

 

$

0.07

 

 

2,213,000

 

$

0.11

 

Cost recovery in connection with a cancelled contract

 

(293,000

)

$

(0.02

)

 

-

 

$

-

 

Cost of goods sold
New product line start-up and ramp-up costs, and transition expenses

 

2,327,000

 

$

0.12

 

 

1,833,000

 

$

0.09

 

Revaluation - cores on customers' shelves

 

2,908,000

 

$

0.15

 

 

6,221,000

 

$

0.32

 

Operating expenses
Acquisition, financing, transition, severance, new business, earn-out accruals from acquisitions, restatement-related fees and other costs

 

18,000

 

$

0.00

 

 

1,144,000

 

$

0.06

 

Share-based compensation expenses

 

1,053,000

 

$

0.05

 

 

1,180,000

 

$

0.06

 

Mark-to-market losses (gains)

 

1,802,000

 

$

0.09

 

 

(1,898,000

)

$

(0.10

)

Tax effected (a)

 

(2,354,000

)

$

(0.12

)

 

(2,666,000

)

$

(0.14

)

Adjusted net income

$

13,001,000

 

$

0.68

 

$

11,540,000

 

$

0.60

 

(a)Adjusted net income is calculated by applying an income tax rate of 25.0% to adjusted pre-tax income for the three months ended September 30, 2019 and 2018; this rate may differ from the period's actual income tax rate
 

Reconciliation of Non-GAAP Financial Measures

Exhibit 4

 

Six Months Ended September 30,

2019

2018

 

$

Per Diluted
Share

$

Per Diluted
Share

GAAP net income (loss)

$

38,000

 

$

0.00

 

$

(1,982,000

)

$

(0.10

)

Adjustments:
Net sales
Return and stock adjustment accruals related to new business

 

159,000

 

$

0.01

 

 

-

 

$

-

 

Customer allowances related to new business

 

2,459,000

 

$

0.13

 

 

4,355,000

 

$

0.23

 

Impact of sales price increases related to tariffs

 

(2,280,000

)

$

(0.12

)

 

-

 

$

-

 

Cost in connection with a cancelled contract

 

133,000

 

$

0.01

 

 

-

 

$

-

 

Cost of goods sold
New product line start-up and ramp-up costs, and transition expenses

 

3,681,000

 

$

0.19

 

 

3,588,000

 

$

0.19

 

Revaluation - cores on customers' shelves

 

7,472,000

 

$

0.39

 

 

8,847,000

 

$

0.46

 

Cost of stock adjustment accruals related to new business

 

(59,000

)

$

(0.00

)

 

-

 

$

-

 

Tariff costs paid for products sold before price increases were effective

 

3,347,000

 

$

0.17

 

 

-

 

$

-

 

Operating expenses
Acquisition, financing, transition, severance, new business, earn-out accruals from acquisitions, restatement-related fees and other costs

 

1,063,000

 

$

0.06

 

 

1,675,000

 

$

0.09

 

Share-based compensation expenses

 

2,041,000

 

$

0.11

 

 

2,121,000

 

$

0.11

 

Mark-to-market losses (gains)

 

1,265,000

 

$

0.07

 

 

768,000

 

$

0.04

 

Interest
Write-off of debt issuance costs

 

-

 

$

-

 

 

303,000

 

$

0.02

 

Tax effected (a)

 

(4,642,000

)

$

(0.24

)

 

(5,118,000

)

$

(0.27

)

Adjusted net income

$

14,677,000

 

$

0.76

 

$

14,557,000

 

$

0.75

 

(a)Adjusted net income is calculated by applying an income tax rate of 25.0% to adjusted pre-tax income for the six months ended September 30, 2019 and 2018; this rate may differ from the period's actual income tax rate
 
Reconciliation of Non-GAAP Financial Measures

Exhibit 5

 

Three Months Ended September 30,

2019

2018

 

$

Gross Margin

$

Gross Margin

GAAP gross profit

$

36,573,000

 

24.3

%

$

25,711,000

20.1

%

Adjustments:
Net sales
Customer allowances related to new business

 

1,351,000

 

 

2,213,000

Cost recovery in connection with a cancelled contract

 

(293,000

)

 

-

Cost of goods sold
New product line start-up and ramp-up costs, and transition expenses

 

2,327,000

 

 

1,833,000

Revaluation - cores on customers' shelves

 

2,908,000

 

 

6,221,000

Total adjustments

 

6,293,000

 

4.0

%

 

10,267,000

7.5

%

Adjusted gross profit

$

42,866,000

 

28.3

%

$

35,978,000

27.6

%

 
Reconciliation of Non-GAAP Financial Measures

Exhibit 6

 

Six Months Ended September 30,

2019

2018

 

$

Gross Margin

$

Gross Margin

GAAP gross profit

$

54,156,000

 

20.9

%

$

42,063,000

19.2

%

Adjustments:
Net sales
Return and stock adjustment accruals related to new business

 

159,000

 

 

-

Customer allowances related to new business

 

2,459,000

 

 

4,355,000

Impact of sales price increases related to tariffs

 

(2,280,000

)

 

-

Cost in connection with a cancelled contract

 

133,000

 

 

-

Cost of goods sold
New product line start-up and ramp-up costs, and transition expenses

 

3,681,000

 

 

3,588,000

Revaluation - cores on customers' shelves

 

7,472,000

 

 

8,847,000

Cost of stock adjustment accruals related to new business

 

(59,000

)

 

-

Tariff costs paid for products sold before price increases were effective

 

3,347,000

 

 

-

Total adjustments

 

14,912,000

 

5.7

%

 

16,790,000

7.1

%

Adjusted gross profit

$

69,068,000

 

26.6

%

$

58,853,000

26.3

%

 
 

Reconciliation of Non-GAAP Financial Measures

Exhibit 7

 

Three Months Ended September 30,

Six Months Ended September 30,

2019

2018

2019

2018

 
GAAP net income (loss)

$

6,189,000

 

$

3,513,000

 

$

38,000

 

$

(1,982,000

)

Interest expense, net

 

6,523,000

 

 

5,699,000

 

 

12,696,000

 

 

10,774,000

 

Income tax (benefit) expense

 

1,980,000

 

 

1,181,000

 

 

250,000

 

 

(266,000

)

Depreciation and amortization

 

2,240,000

 

 

1,632,000

 

 

4,619,000

 

 

3,218,000

 

EBITDA

$

16,932,000

 

$

12,025,000

 

$

17,603,000

 

$

11,744,000

 

 
Adjustments:
Net sales
Return and stock adjustment accruals related to new business

 

-

 

 

-

 

 

159,000

 

 

-

 

Customer allowances related to new business

 

1,351,000

 

 

2,213,000

 

 

2,459,000

 

 

4,355,000

 

Impact of sales price increases related to tariffs

 

-

 

 

-

 

 

(2,280,000

)

 

-

 

(Recovery) cost in connection with a cancelled contract

 

(293,000

)

 

-

 

 

133,000

 

 

-

 

Cost of goods sold
New product line start-up and ramp-up costs, and transition expenses (a)

 

2,285,000

 

 

1,736,000

 

 

3,607,000

 

 

3,430,000

 

Revaluation - cores on customers' shelves

 

2,908,000

 

 

6,221,000

 

 

7,472,000

 

 

8,847,000

 

Cost of stock adjustment accruals related to new business

 

-

 

 

-

 

 

(59,000

)

 

-

 

Tariff costs paid for products sold before price increases were effective

 

-

 

 

-

 

 

3,347,000

 

 

-

 

Operating expenses
Acquisition, financing, transition (a), severance, new business, earn-out accruals from acquisitions, restatement-related fees and other costs

 

(13,000

)

 

1,057,000

 

 

1,000,000

 

 

1,506,000

 

Share-based compensation expenses

 

1,053,000

 

 

1,180,000

 

 

2,041,000

 

 

2,121,000

 

Mark-to-market losses (gains)

 

1,802,000

 

 

(1,898,000

)

 

1,265,000

 

 

768,000

 

Adjusted EBITDA

$

26,025,000

 

$

22,534,000

 

$

36,747,000

 

$

32,771,000

 

 

(a)

Excludes depreciation

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191112005438/en/

CONTACT: Gary S. Maier

(310) 972-5124

KEYWORD: CALIFORNIA UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: AUTOMOTIVE MANUFACTURING AFTERMARKET MANUFACTURING AUTOMOTIVE

SOURCE: Motorcar Parts of America, Inc.

Copyright Business Wire 2019.

PUB: 11/12/2019 08:00 AM/DISC: 11/12/2019 08:01 AM

http://www.businesswire.com/news/home/20191112005438/en