Please note that the first bullet under the First
Quarter 2016 Highlights section of the release should
read "increased by 4%" not "increased by 10%" as previously
stated.
Fenix Parts, Inc. (Nasdaq:FENX), a leading recycler and reseller of
original equipment manufacturer (“OEM”) automotive products, today
announced first quarter 2016 results.
Consolidated net revenues of Fenix Parts were
$32.8 million for the first quarter of 2016 compared to $30.2
million in the fourth quarter of 2015 and $31.4 million on a
combined pro forma basis in the first quarter of 2015. Sales of
recycled OEM products were $28.8 million for the first quarter of
2016, up from $26.7 million for the fourth quarter of 2015 and
$27.3 million in the first quarter of 2015, including sales
contributed by Ocean County, Butler and Tri-City during both
periods. Sales from other ancillary activities, which include the
sale of commodities, were approximately $4.0 million in the first
quarter of 2016 compared to $3.5 million in the fourth quarter of
2015 and $4.1 million in the first quarter of 2015. While commodity
prices improved slightly during the first quarter of 2016 as
compared to the fourth quarter of 2015, they are still
substantially lower than the first quarter of 2015. Sales from the
Company’s Canadian operations were $3.1 million in the first
quarter of 2016 compared to $3.7 million for the fourth quarter of
2015 and $3.4 million in the first quarter of 2015. The first
quarter 2016 reduction compared to each period was a result of the
Company’s change in sourcing strategy, which limits its foreign
exchange exposure to parts procured in the US and sold in
Canada.
The following table provides a breakdown of net
revenues to show the impact of parts sales, foreign operations,
recent acquisitions and commodities for the first quarter of 2016
compared to the fourth quarter of 2015 and combined pro forma
revenue for the first quarter of 2015:
|
|
| Fenix Parts Revenue Summary (in $US,
millions) |
|
|
| |
|
First Quarter (Unaudited) |
|
Fourth Quarter (Unaudited) |
|
First Quarter (Unaudited) |
| |
|
2016 Reported |
|
2015 Reported |
|
2015 Pro Forma |
| Recycled
OE parts and related products |
|
|
|
|
|
|
| US locations – Founding
Companies |
|
$ |
22.4 |
|
|
$ |
21.0 |
|
|
$ |
21.3 |
|
| Canadian locations |
|
3.1 |
|
|
3.7 |
|
|
3.4 |
|
| Subsequently acquired US
locations |
|
7.1 |
|
|
6.2 |
|
|
6.5 |
|
| Gross parts revenue |
|
32.6 |
|
|
30.9 |
|
|
31.2 |
|
| Other
ancillary services |
|
4.0 |
|
|
3.5 |
|
|
4.1 |
|
|
Intercompany sales eliminations |
|
(3.8 |
) |
|
(4.2 |
) |
|
(3.9 |
) |
| Net revenue |
|
$ |
32.8 |
|
|
$ |
30.2 |
|
|
$ |
31.4 |
|
| |
Reported Operating Loss for the first quarter of
2016 was $44.2 million. Reported Net Loss, after a $3.3 million
benefit for income taxes, was $41.0 million. After factoring in net
adjustments of $43.5 million during the period, Adjusted Operating
Loss was $0.7 million for the first quarter of 2016. The
adjustments included the following:
- The amortization of the fair market value adjustment of
acquired inventory was $0.9 million during the first quarter;
- Depreciation and amortization expense was $1.5 million during
the first quarter, including $0.3 million allocated to Cost of
Goods Sold;
- Share-based compensation attributable to equity awards was $1.3
million for the first quarter of 2016;
- A reduction in the expected payout of contingent consideration
was $2.5 million in the first quarter;
- A change in indemnification receivable related to a reduction
in uncertain tax positions of $2.1 million in the first
quarter;
- The non-cash portion of rent expense was $0.2 million for the
first quarter, primarily due to the straight lining of rent
expense;
- A reduction of $3.4 million in cost of goods sold related to a
retrospective inventory adjustment based on refinements to
management estimates of the opening fair market value of acquired
inventory during the one-year measurement period, which included
the following:
- A $1.3 million change in estimate of inventory related to the
refinement to the inputs used in the Company’s retail inventory
method calculation that relates to periods prior to December 31,
2015
- A reduction in the inventory mark-up to fair value of $2.1
million related to the opening balance sheet
- Goodwill impairment charge of approximately $43.3 million,
initially triggered by a decline in the Company’s stock price of
32% during the quarter ended March 31, 2016. This forced a
revaluation of historic operating results through March 31, 2016
and an update in the Company’s future operating projections, risk
premiums and other assumptions about enterprise value, which also
contributed to the impairment charge.
| |
| Fenix Parts
Inc. |
| Non-GAAP
Reconciliation (in $US, millions) |
| |
| |
|
2016 Reported |
|
Operating loss |
|
$ |
(44.2 |
) |
| Amortization of inventory fair
value |
|
0.9 |
|
| Depreciation and amortization |
|
1.5 |
|
| Share-based compensation
expense |
|
1.3 |
|
| Non-cash rent expense |
|
0.2 |
|
| Change in fair value of contingent
consideration liabilities |
|
(2.5 |
) |
| Reduction in indemnification
receivable |
|
2.1 |
|
| Goodwill impairment |
|
43.3 |
|
| Retrospective inventory
adjustment |
|
(3.4 |
) |
| Deferred warranty |
|
0.1 |
|
| Adjusted operating loss |
|
$ |
(0.7 |
) |
| |
While included in non-cash items on the
Company’s statement of cash flows for the current period, several
items related to contingent consideration, deferred warranty and
straight lining of rent could have a cash flow impact in the
future.
In addition, the Company’s reported results were
impacted by audit, legal and other professional service fees of
approximately $2.2 million for the first quarter of 2016.
For additional information regarding the items
mentioned above, please see the MD&A section of the Company’s
Form 10-Q filing for the quarter ended March 31, 2016.
Kent Robertson, CEO of Fenix Parts, said, “We
were pleased with our first quarter revenue growth as favorable
industry dynamics and the continued execution of our growth
initiatives drove sales of recycled OEM parts at nearly all of our
facilities - including at the three locations we acquired in the
back half of 2015.”
Mr. Robertson added, “We will remain focused on
capturing organic growth opportunities and realizing synergies. As
a result of these efforts, the continued strength in our OEM parts
business and the recent stabilization in the commodity market,
Fenix Parts is better positioned for the future.”
Conference Call
Company management will hold a conference call
on Wednesday, June 29, 2016 at 9:00 a.m. Eastern Time. The
conference call can be directly accessed from the U.S. and Canada
at (877) 312-8825, internationally at (330) 863-3331, or through
the investor relations section of the company's website at
www.fenixparts.com.
For those unable to participate in the live
conference call or webcast, a replay will be available from June
29, 2016 at 12:00 p.m. ET until July 6, 2016 at 12:00 p.m. ET. To
access the replay, dial (855) 859-2056 or (404) 537-3406 and refer
to the confirmation code 19652862. The replay will
also be available on the company’s website.
About Fenix Parts
Fenix Parts is a leading recycler and reseller
of original equipment manufacturer (“OEM”) automotive
products. The company’s primary business is auto recycling,
which is the recovery and resale of OEM parts, components and
systems reclaimed from damaged, totaled or low value
vehicles. Customers include collision repair shops (body
shops), mechanical repair shops, auto dealerships and individual
retail customers. Fenix provides its customers with high-quality
recycled OEM products, extensive inventory and product
availability, responsive customer service and fast delivery.
Fenix was founded in 2014 to create a network
that offers sales, fulfillment and distribution in key regional
markets in the United States and Canada. The Fenix companies
have been in business an average of more than 25 years and
currently operate from 16 locations throughout the Eastern U.S. and
in Ontario, Canada.
Forward-Looking Statements
This press release contains forward-looking
statements that are subject to certain risks, trends and
uncertainties that could cause actual results to differ materially
from those projected, expressed, or implied by such forward-looking
statements. In some cases, you can identify forward-looking
statements by use of words such as "may, will, should, anticipates,
believes, expects, plans, future, intends, could, estimate,
predict, projects, targeting, potential or contingent," the
negative of these terms or other similar expressions. Our
actual results could differ materially from those discussed or
implied herein.
We caution that it is very difficult to predict
the impact of known factors, and it is impossible for us to
anticipate all factors that could affect our actual results.
All forward-looking statements are expressly qualified in their
entirety by these cautionary statements. You should evaluate
all forward-looking statements made in this press release in the
context of the risks and uncertainties disclosed in our SEC
filings. These filings are available online at www.sec.gov,
www.fenixparts.com or upon request from Fenix Parts.
We caution you that the important factors
referenced above may not contain all of the factors that are
important to you. In addition, we cannot assure you that we
will realize the results or developments we expect or anticipate
or, even if substantially realized, that they will result in the
consequences we anticipate or affect us or our operations in the
way we expect. The forward-looking statements included in
this press release are made only as of the date hereof. We
undertake no obligation to publicly update or revise any
forward-looking statement as a result of new information, future
events or otherwise, except as otherwise required by law. If
we do update one or more forward-looking statements, no inference
should be made that we will make additional updates with respect to
those or other forward-looking statements. We qualify all of
our forward-looking statements by these cautionary statements.
Use of Non-GAAP Financial
MeasuresFenix Parts, Inc. provides investors with the
non-GAAP financial measure of adjusted operating loss in addition
to the traditional GAAP operating performance measure of operating
income (loss) as part of its overall assessment of its performance.
A reconciliation of operating income (loss) to adjusted operating
loss is included in the table above.
| |
|
Fenix Parts, Inc. |
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS |
| |
| |
|
March 31, 2016 |
|
December 31, 2015 |
|
ASSETS |
|
|
|
|
| Current assets: |
|
|
|
|
| Cash and cash equivalents |
|
$ |
2,222,000 |
|
|
$ |
2,827,000 |
|
| Accounts receivable, net of
allowance |
|
7,390,000 |
|
|
6,834,000 |
|
| Inventories |
|
35,205,000 |
|
|
38,892,000 |
|
| Prepaid expenses and other current
assets |
|
675,000 |
|
|
545,000 |
|
| Total current assets |
|
45,492,000 |
|
|
49,098,000 |
|
| Property and equipment |
|
13,556,000 |
|
|
13,103,000 |
|
| Accumulated depreciation and
amortization |
|
(2,050,000 |
) |
|
(1,494,000 |
) |
| Property and equipment, net |
|
11,506,000 |
|
|
11,609,000 |
|
| Goodwill |
|
37,819,000 |
|
|
76,812,000 |
|
| Intangible assets, net |
|
35,104,000 |
|
|
33,786,000 |
|
| Indemnification receivables |
|
2,990,000 |
|
|
5,078,000 |
|
| Other non-current assets |
|
1,285,000 |
|
|
1,285,000 |
|
| TOTAL ASSETS |
|
$ |
134,196,000 |
|
|
$ |
177,668,000 |
|
| |
|
|
|
|
|
LIABILITIES |
|
|
|
|
| Current liabilities: |
|
|
|
|
| Accounts payable |
|
$ |
3,903,000 |
|
|
$ |
3,456,000 |
|
| Accrued expenses |
|
4,635,000 |
|
|
2,847,000 |
|
| Contingent consideration
liabilities – current |
|
9,046,000 |
|
|
9,345,000 |
|
| Other current liabilities |
|
3,521,000 |
|
|
2,851,000 |
|
| Total current liabilities |
|
21,105,000 |
|
|
18,499,000 |
|
| Deferred warranty revenue, net of
current portion |
|
274,000 |
|
|
227,000 |
|
| Long-term related party
obligations, net of current portion |
|
2,668,000 |
|
|
2,071,000 |
|
| Long-term debt under credit
facility, net of current portion |
|
19,923,000 |
|
|
19,645,000 |
|
| Contingent consideration
liabilities, net of current portion |
|
4,387,000 |
|
|
6,085,000 |
|
| Deferred income tax
liabilities |
|
10,685,000 |
|
|
15,624,000 |
|
| Reserve for uncertain tax
positions |
|
3,503,000 |
|
|
5,733,000 |
|
| Total non-current liabilities |
|
41,440,000 |
|
|
49,385,000 |
|
| TOTAL
LIABILITIES |
|
62,545,000 |
|
|
67,884,000 |
|
| COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
| SHAREHOLDERS’
EQUITY |
|
|
|
|
| Common stock, $0.001 par value;
30,000,000 shares authorized; 19,937,575 and 19,926,868
shares issued and outstanding at March 31, 2016 and December 31,
2015, respectively |
|
20,000 |
|
|
20,000 |
|
| Additional paid-in capital |
|
137,656,000 |
|
|
136,398,000 |
|
| Accumulated other comprehensive
loss |
|
(2,621,000 |
) |
|
(4,247,000 |
) |
| Accumulated deficit |
|
(71,804,000 |
) |
|
(30,787,000 |
) |
| Total Fenix Parts, Inc.
shareholders’ equity before noncontrolling interest |
|
63,251,000 |
|
|
101,384,000 |
|
| Noncontrolling interest |
|
8,400,000 |
|
|
8,400,000 |
|
| Total shareholders’ equity |
|
71,651,000 |
|
|
109,784,000 |
|
| TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
$ |
134,196,000 |
|
|
$ |
177,668,000 |
|
| |
The accompanying notes to the unaudited condensed consolidated
financial statements are an integral part of these statements.
| |
|
Fenix Parts, Inc. |
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS |
| |
| |
|
Three months ended March 31, |
| |
|
2016 |
|
2015 |
| Net revenues |
|
$ |
32,795,000 |
|
|
$ |
— |
|
| Cost of goods sold |
|
18,329,000 |
|
|
— |
|
| Gross profit |
|
14,466,000 |
|
|
— |
|
|
Selling, general and administrative expenses |
|
12,364,000 |
|
|
46,000 |
|
|
Outside service and professional fees |
|
2,185,000 |
|
|
2,452,000 |
|
|
Depreciation and amortization |
|
1,207,000 |
|
|
— |
|
|
Change in fair value of contingent consideration liabilities |
|
(2,505,000 |
) |
|
— |
|
|
Change in indemnification receivable |
|
2,089,000 |
|
|
— |
|
|
Goodwill impairment |
|
43,300,000 |
|
|
— |
|
| Operating loss |
|
(44,174,000 |
) |
|
(2,498,000 |
) |
| |
|
|
|
|
| Interest expense |
|
(255,000 |
) |
|
— |
|
| Other income (expense),
net |
|
92,000 |
|
|
(131,000 |
) |
| Loss before income tax benefit |
|
(44,337,000 |
) |
|
(2,629,000 |
) |
| Benefit for income
taxes |
|
3,320,000 |
|
|
— |
|
| Net loss |
|
(41,017,000 |
) |
|
(2,629,000 |
) |
| Foreign currency translation
adjustment |
|
1,626,000 |
|
|
— |
|
| Net comprehensive loss |
|
$ |
(39,391,000 |
) |
|
$ |
(2,629,000 |
) |
| Loss per share available
to common shareholders |
|
|
|
|
| Basic & Diluted |
|
$ |
(1.97 |
) |
|
$ |
(1.02 |
) |
| Shares used in computing
earnings per share |
|
|
|
|
| Basic & Diluted |
|
19,664,000 |
|
|
2,567,000 |
|
| |
The accompanying notes to the unaudited condensed consolidated
financial statements are an integral part of these statements.
At Fenix Parts:
Scott Pettit
Chief Financial Officer
scottpettit@fenixparts.com
Investor and Media Inquiries:
Chris Kettmann
Clermont Partners
312-690-6002
ckettmann@clermontpartners.com