-- Record Sales and Profitability with
Continuing Positive Cash Flow From Operations --
Motorcar Parts of America, Inc. (Nasdaq: MPAA) today
reported results for its fiscal 2021 second quarter ended September
30, 2020 -- reflecting continued favorable sales momentum with
increased profitability and positive cash flow from operations.
Net sales for the fiscal 2021
second quarter were $154.7 million compared with $150.4 million for
the same period a year earlier. Net sales for the quarter include
$12.8 million in core revenue due to a realignment of inventory at
two customer distribution centers with expected future sales
benefits as product mix changes.
Net income for the fiscal 2021
second quarter was $15.2 million, or $0.78 per diluted share,
compared with net income of $6.2 million, or $0.32 per diluted
share, a year ago. Additional details of items impacting net income
are shown in Exhibit 1.
“Notwithstanding the continued impact of global pandemic
challenges, we reported solid results for the quarter and six-month
period. The company’s strategic growth initiatives are proceeding
as planned – including the launch of our brake caliper production
facility, as detailed in a recent announcement – and we are
well-positioned in the industry,” said Selwyn Joffe, chairman,
president and chief executive officer of Motorcar Parts of
America.
“In today’s COVID environment, the automobile, more than ever,
is the preferable mode of transportation for activities such as
work, shopping, appointments, and family vacations. As a
consequence, maintenance and repair activities are even more
essential. The products we provide are critical to the automobile
and the demand for our offerings continue to expand,” Joffe
added.
Results for the fiscal second quarter were impacted by
approximately $2.0 million on a pre-tax basis, or $0.08 per share
on a tax-effected basis, for cost of goods sold and operating
expenses related to safety and health initiatives associated with
COVID-19. Approximately $1.3 million of the $2.0 million relates to
incremental bonuses and wages paid to the company’s dedicated
operating employees on the front line. The balance relates to
personal protection equipment (PPE) and social distancing
initiatives.
Cash generated from operating activities was $16.9 million for
the fiscal 2021 second quarter and bank debt less cash for the same
period was reduced by $12.3 million to $95.4 million at September
30, 2020.
Gross profit for the fiscal 2021
second quarter was $39.7 million compared with $36.6 million a year
earlier. Gross profit as a percentage of net sales for the fiscal
2021 second quarter was 25.7 percent compared with 24.3 percent a
year earlier. Additional details of items impacting gross profit
are shown in Exhibit 3.
Six-Month Results
Net sales for the fiscal 2021
six-month period were $250.1 million compared with $259.5 million a
year earlier. Net sales for the six months ended September 30, 2020
benefited by $12.8 million due to a realignment of inventory at two
customer distribution centers with expected future sales benefits
as product mix changes, as noted in the quarterly sales
discussion.
Net income for the fiscal 2021
six-month period was $12.2 million, or $0.63 per diluted share,
compared with net income of $38,000, or $0.00 per diluted share, a
year ago. Additional details of items impacting net income are
shown in Exhibit 2.
Cash generated from operating activities was $39.3 million
during the six months ended September 30, 2020, and bank debt less
cash was reduced by $31.1 million.
Gross profit for the fiscal 2021
six-month period was $53.1 million compared with $54.2 million a
year earlier. Gross profit as a percentage of net sales for the
fiscal 2021 six-month period was 21.2 percent compared with 20.9
percent a year earlier. Additional details of items impacting gross
profit are shown in Exhibit 4.
FISCAL 2021 OUTLOOK
“Despite strong performance for the quarter, and continued
favorable sales momentum, the company believes it is still not
prudent to provide annual sales and gross margin guidance for
fiscal 2021.
“As I stated in our 2020 fiscal year-end release, our industry
is resilient, and we are continuing to execute our strategic plans
for growth and profitability. We are guardedly optimistic about the
near- and long-term opportunities as an essential supplier in the
$125 billion hard parts industry and look forward to a recovery
from this global crisis. In fact, we are resuming our stock
buy-back program subject to market conditions, with current
availability of $21.3 million under our existing authorization,”
Joffe said.
Use of Non-GAAP Measure
This press release includes the following non-GAAP measure -
EBITDA, which is not a measure of financial performance under GAAP
and should not be considered as an alternative to net income (loss)
as a measure of financial performance. The company believes this
non-GAAP measure, when considered together with the corresponding
GAAP measures, provides useful information to investors and
management regarding financial and business trends relating to the
company’s results of operations. However, this non-GAAP measure has
significant limitations in that it does not reflect all the costs
and other items associated with the operation of the company’s
business as determined in accordance with GAAP. In addition, the
company’s non-GAAP measures may be calculated differently and are
therefore not comparable to similar measures by other companies.
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 EBITDA to its 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 measures.
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 (833)-968-1924 (domestic) or (825)-312-2355
(international). For those who are not available to listen to the
live broadcast, the call will be archived 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, 2020 through 8:59 p.m. Pacific
time on November 16, 2020 by calling (800)-585-8367 (domestic) or
(416)-621-4642 (international) and using access code: 1475489.
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, Canada and
Mexico, with facilities located in California, New York, 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 2020 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,
2020
2019
2020
2019
Net sales
$ 154,730,000
$ 150,374,000
$ 250,086,000
$ 259,522,000
Cost of goods sold
115,004,000
113,801,000
196,973,000
205,366,000
Gross profit
39,726,000
36,573,000
53,113,000
54,156,000
Operating expenses: General and administrative
12,518,000
12,483,000
24,205,000
25,020,000
Sales and marketing
4,326,000
5,448,000
8,526,000
10,367,000
Research and development
1,972,000
2,148,000
3,914,000
4,520,000
Foreign exchange impact of lease liabilities and forward contracts
(3,985,000)
1,802,000
(8,802,000)
1,265,000
Total operating expenses
14,831,000
21,881,000
27,843,000
41,172,000
Operating income
24,895,000
14,692,000
25,270,000
12,984,000
Interest expense, net
3,614,000
6,523,000
8,023,000
12,696,000
Income before income tax expense
21,281,000
8,169,000
17,247,000
288,000
Income tax expense
6,097,000
1,980,000
5,075,000
250,000
Net income
$ 15,184,000
$ 6,189,000
$ 12,172,000
$ 38,000
Basic net income per share
$ 0.80
$ 0.33
$ 0.64
$ 0.00
Diluted net income per share
$ 0.78
$ 0.32
$ 0.63
$ 0.00
Weighted average number of shares outstanding: Basic
19,022,414
18,903,182
18,999,461
18,862,901
Diluted
19,345,311
19,217,327
19,289,765
19,246,599
MOTORCAR PARTS OF AMERICA,
INC. AND SUBSIDIARIES
Consolidated Balance
Sheets
September 30, 2020
March 31, 2020
ASSETS
(Unaudited)
Current assets: Cash and cash equivalents
$ 20,887,000
$ 49,616,000
Short-term investments
1,237,000
850,000
Accounts receivable — net
91,088,000
91,748,000
Inventory
240,018,000
234,680,000
Contract assets
33,309,000
20,332,000
Prepaid expenses and other current assets
10,463,000
11,890,000
Total current assets
397,002,000
409,116,000
Plant and equipment — net
49,893,000
44,957,000
Operating lease assets
68,530,000
53,029,000
Long-term deferred income taxes
18,706,000
18,950,000
Long-term contract assets
234,590,000
239,540,000
Goodwill and intangible assets — net
9,077,000
9,598,000
Other assets
1,638,000
1,839,000
TOTAL ASSETS
$ 779,436,000
$ 777,029,000
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable and accrued liabilities
$ 121,550,000
$ 95,083,000
Customer finished goods returns accrual
27,561,000
25,326,000
Contract liabilities
44,657,000
27,911,000
Revolving loan
94,000,000
152,000,000
Other current liabilities
5,154,000
9,390,000
Operating lease liabilities
6,228,000
5,104,000
Current portion of term loan
3,678,000
3,678,000
Total current liabilities
302,828,000
318,492,000
Term loan, less current portion
18,624,000
20,462,000
Long-term contract liabilities
90,223,000
92,101,000
Long-term deferred income taxes
75,000
79,000
Long-term operating lease liabilities
72,959,000
61,425,000
Other liabilities
6,732,000
8,950,000
Total liabilities
491,441,000
501,509,000
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; 19,026,587 and 18,969,380 shares issued and outstanding
at September 30, 2020 and March 31, 2020, respectively
190,000
190,000
Additional paid-in capital
220,588,000
218,581,000
Retained earnings
76,289,000
64,117,000
Accumulated other comprehensive loss
(9,072,000)
(7,368,000)
Total shareholders' equity
287,995,000
275,520,000
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
$ 779,436,000
$ 777,029,000
Additional Information and 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 additional
information and non-GAAP financial measures for the three and six
months ended September 30, 2020 and 2019. Among other things, the
company uses such additional information and non-GAAP adjusted
financial measures in addition to and together with corresponding
GAAP measures to help analyze the performance of its business.
The company believes this information helps provide a more
complete understanding of the company's results of operations and
the factors and trends affecting the company's business. However,
this information should be considered as a supplement to, and not
as a substitute for, or superior to, information contained in the
company’s financial statements prepared in accordance with GAAP. In
addition, the company’s non-GAAP measures may be calculated
differently and are therefore not comparable to similar measures by
other companies.
The company defines EBITDA as earnings before interest, taxes,
depreciation, and amortization. A reconciliation of EBITDA to net
income is provided below along with information regarding such
items.
Items Impacting Net Income for
the Three Months Ended September 30, 2020 and 2019
Exhibit 1
Three Months Ended September
30,
2020
2019
$
Per Share
$
Per Share
GAAP net income
$
15,184,000
$
0.78
$
6,189,000
$
0.32
Items impacting net income Customer allowances related to
new business
-
-
242,000
0.01
Core buy-back premium amortization impacting net sales
1,518,000
0.08
1,109,000
0.06
Impact of tariffs
(2,847,000
)
(0.15
)
-
-
Cost recovery in connection with a cancelled contract
-
-
(293,000
)
(0.02
)
New product line start-up costs and transition expenses (a)
4,428,000
0.23
2,736,000
0.14
Revaluation - cores on customers' shelves, and gain due to
realignment of inventory at two customer distribution centers
(3,499,000
)
(0.18
)
2,908,000
0.15
COVID-related expenses (b) ..
2,048,000
0.11
-
-
Acquisition costs, earn-out accruals, severance and
restatement-related fees
(18,000
)
(0.00
)
(391,000
)
(0.02
)
Acquisition costs, earn-out accruals, severance and
restatement-related fees
1,218,000
0.06
1,053,000
0.05
Acquisition costs, earn-out accruals, severance and
restatement-related fees
(3,985,000
)
(0.21
)
1,802,000
0.09
Tax effect (c)
284,000
0.01
(2,292,000
)
(0.12
)
(a) Consists of $4,054,000 included in cost of goods sold and
$374,000 included in operating expenses for the three months ended
September 30, 2020 and $2,327,000 included in cost of goods sold
and $409,000 included in operating expenses for the three months
ended September 30, 2019. (b) Consists of $1,533,000 included in
cost of goods sold and $515,000 included in operating expenses for
the three months ended September 30, 2020. (c) Tax effect is
calculated by applying an income tax rate of 25.0% to items listed
above; this rate may differ from the period's actual income tax
rate. Historically, the company calculated the tax impact by
applying an income tax rate of 25.0% to adjusted pre-tax income; if
calculated on that basis, the tax effect would have been
($2,354,000) or ($0.12) per share for three months ended September
30, 2019.
Items Impacting Net Income for
the Six Months Ended September 30, 2020 and 2019
Exhibit 2
Six Months Ended September
30,
2020
2019
$
Per Share
$
Per Share
GAAP net income
$
12,172,000
$
0.63
$
38,000
$
0.00
Items impacting net income Customer allowances, return
accruals and changeover costs (a) related to new business, net of
costs
307,000
0.02
454,000
0.02
Core buy-back premium amortization impacting net sales
2,741,000
0.14
2,217,000
0.12
Impact of tariffs
(2,847,000
)
(0.15
)
1,067,000
0.06
Cost in connection with a cancelled contract
-
-
133,000
0.01
New product line start-up costs and transition expenses (b)
8,014,000
0.42
4,650,000
0.24
Revaluation - cores on customers' shelves, and gain due to
realignment of inventory at two customer distribution centers
(2,115,000
)
(0.11
)
7,472,000
0.39
COVID-related expenses (c)
4,343,000
0.23
-
-
Acquisition costs, earn-out accruals, severance and
restatement-related fees
(25,000
)
(0.00
)
(18,000
)
(0.00
)
Share-based compensation expenses .
2,261,000
0.12
2,041,000
0.11
Foreign exchange impact of lease liabilities and forward contracts
.
(8,802,000
)
(0.46
)
1,265,000
0.07
Tax effect (d)
(969,000
)
(0.05
)
(4,820,000
)
(0.25
)
(a) Includes changeover costs related to new business of $112,000
recorded in operating expenses for the six months ended September
30, 2019. (b) Consists of $7,355,000 included in cost of goods sold
and $659,000 included in operating expenses for the six months
ended September 30, 2020 and $3,681,000 included in cost of goods
sold and $969,000 included in operating expenses for the six months
ended September 30, 2019. (c) Consists of $3,373,000 included in
cost of goods sold and $970,000 included in operating expenses for
the six months ended September 30, 2020. (d) Tax effect is
calculated by applying an income tax rate of 25.0% to items listed
above; this rate may differ from the period's actual income tax
rate. Historically, the company calculated the tax impact by
applying an income tax rate of 25.0% to adjusted pre-tax income; if
calculated on that basis, the tax effect would have been
($4,642,000) or ($0.24) per share for six months ended September
30, 2019.
Items Impacting Gross Profit for the Three Months
Ended September 30, 2020 and 2019
Exhibit 3
Three Months Ended September
30,
2020
2019
$
Gross Margin
$
Gross Margin
GAAP gross profit
$
39,726,000
25.7
%
$
36,573,000
24.3
%
Items impacting gross profit Customer allowances related to
new business
-
-
242,000
0.2
%
Core buy-back premium amortization impacting net sales
1,518,000
1.0
%
1,109,000
0.7
%
Impact of tariffs
(2,847,000
)
-1.8
%
-
-
Cost recovery in connection with a cancelled contract
-
-
(293,000
)
-0.2
%
New product line start-up costs and transition expenses
4,054,000
2.6
%
2,327,000
1.5
%
Revaluation - cores on customers' shelves, and gain due to
realignment of inventory at two customer distribution centers (a)
(3,499,000
)
-0.2
%
2,908,000
1.9
%
COVID-related expenses
1,533,000
1.0
%
-
-
(a)
gross margin reflecting impact to net
sales and cost of goods sold
Items Impacting Gross Profit for the Six Months Ended September
30, 2020 and 2019
Exhibit 4
Six Months Ended September
30,
2020
2019
$
Gross Margin
$
Gross Margin
GAAP gross profit
$
53,113,000
21.2
%
$
54,156,000
20.9
%
Items impacting gross profit Customer allowances and return
accruals related to new business, net of costs
307,000
0.1
%
342,000
0.1
%
Core buy-back premium amortization impacting net sales
2,741,000
1.1
%
2,217,000
0.9
%
Impact of tariffs
(2,847,000
)
-1.1
%
1,067,000
0.4
%
Cost in connection with a cancelled contract
-
-
133,000
0.1
%
New product line start-up costs and transition expenses
7,355,000
2.9
%
3,681,000
1.4
%
Revaluation - cores on customers' shelves, and gain due to
realignment of inventory at two customer distribution centers (a)
(2,115,000
)
0.2
%
7,472,000
2.9
%
COVID-related expenses
3,373,000
1.3
%
-
-
(a)
gross margin reflecting impact to net
sales and cost of goods sold
Items Impacting EBITDA for the Three and Six Months Ended
September 30, 2020 and 2019
Exhibit 5
Three Months Ended September
30,
Six Months Ended September
30,
2020
2019
2020
2019
GAAP net income
$
15,184,000
$
6,189,000
$
12,172,000
$
38,000
Interest expense, net
3,614,000
6,523,000
8,023,000
12,696,000
Income tax expense
6,097,000
1,980,000
5,075,000
250,000
Depreciation and amortization
2,682,000
2,240,000
5,233,000
4,619,000
EBITDA
$
27,577,000
$
16,932,000
$
30,503,000
$
17,603,000
Items impacting EBITDA Customer allowances, return accruals
and changeover costs related to new business, net of costs
-
242,000
307,000
454,000
Core buy-back premium amortization impacting net sales
1,518,000
1,109,000
2,741,000
2,217,000
Impact of tariffs
(2,847,000
)
-
(2,847,000
)
1,067,000
(Recovery) cost in connection with a cancelled contract
-
(293,000
)
-
133,000
New product line start-up costs and transition expenses (a)
4,318,000
2,663,000
7,814,000
4,513,000
Revaluation - cores on customers' shelves, and gain due to
realignment of inventory at two customer distribution centers
(3,499,000
)
2,908,000
(2,115,000
)
7,472,000
COVID-related expenses
2,048,000
-
4,343,000
-
Acquisition costs, earn-out accruals, severance and
restatement-related fees
(18,000
)
(391,000
)
(25,000
)
(18,000
)
Acquisition costs, earn-out accruals, severance and
restatement-related fees
1,218,000
1,053,000
2,261,000
2,041,000
Acquisition costs, earn-out accruals, severance and
restatement-related fees
(3,985,000
)
1,802,000
(8,802,000
)
1,265,000
(a)
Excludes depreciation, which is included
in the depreciation and amortization line item.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201109005200/en/
Gary S. Maier (310) 972-5124
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