Motorcar Parts Of America Reports Record Fiscal 2017 Second Quarter Results

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    
LIABILITIE S 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 Measures Exhibit 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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