-- Strong Profitability Despite Order
Delays; Solid Cash Flow of $33.2 Million from Operations and
Continued Net Debt Reduction of $27.8 Million --
Motorcar Parts of America, Inc. (Nasdaq: MPAA) today
reported results for its fiscal 2021 third quarter ended December
31, 2020 -- reflecting increased profitability, positive cash flow
from operations and continued debt reduction.
Net sales for the fiscal 2021 third
quarter were $122.6 million compared with $125.6 million for the
same period a year earlier, impacted by continued COVID-19 related
challenges.
Net income for the fiscal 2021
third quarter was $8.5 million, or $0.44 per diluted share,
compared with net income of $865,000, or $0.04 per diluted share, a
year ago. Additional details of items impacting net income are
shown in Exhibit 1.
“We continued to experience solid product demand for the third
quarter, which was impacted by supply chain challenges due to the
global pandemic -- resulting in order delays of approximately $17
million, which are expected to be realized between the current
fiscal fourth quarter and the first quarter of the new fiscal year.
Notwithstanding, we reported significant increases in profitability
for the quarter and nine-month period on a year-over-year basis,
with strong positive cash flow while building inventory for
increasing demand,” said Selwyn Joffe, chairman, president and
chief executive officer of Motorcar Parts of America.
“As vaccination programs gain momentum across the country, and
life returns to more normal patterns, we expect further increased
demand for our products,” Joffe added.
Results for the fiscal third quarter were impacted by
approximately $1.6 million on a pre-tax basis, or $0.06 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 $723,000 of the $1.6 million relates to
incremental bonuses and wages paid to the company’s dedicated
operating employees on the front line. The balance relates to the
costs of personal protection equipment (PPE) and social distancing
initiatives.
Cash generated from operating activities was $33.2 million for
the fiscal 2021 third quarter and net debt for the same period was
reduced by 29.1 percent, or $27.8 million, to $67.6 million at
December 31, 2020 from $95.4 million at September 30, 2020.
Gross profit for the fiscal 2021
third quarter was $24.2 million compared with $27.7 million a year
earlier. Gross profit as a percentage of net sales for the fiscal
2021 third quarter was 19.8 percent compared with 22.0 percent a
year earlier – reflecting in part the impact of supply chain
challenges due to the global pandemic mentioned above, including
higher freight and handling costs. Additional factors impacting
gross profit are shown in Exhibit 3.
Nine-Month Results
Net sales for the fiscal 2021
nine-month period were $372.7 million compared with $385.1 million
a year earlier, impacted by the sharp drop in demand in April due
to the global pandemic. In addition, net sales were impacted by
current pandemic supply chain challenges in the third quarter,
resulting in order delays of approximately $17 million. This was
partially offset by the benefit of $12.8 million 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
nine-month period was $20.6 million, or $1.07 per diluted share,
compared with net income of $903,000, or $0.05 per diluted share, a
year ago. Additional details of items impacting net income are
shown in Exhibit 2.
Cash generated from operating activities was $72.5 million
during the nine months ended December 31, 2020, and net debt was
reduced by 46.6 percent, or $58.9 million, to $67.6 million at
December 31, 2020 from $126.5 million at March 31, 2020.
Gross profit for the fiscal 2021
nine-month period was $77.4 million compared with $81.8 million a
year earlier. Gross profit as a percentage of net sales for the
fiscal 2021 nine-month period was 20.8 percent compared with 21.2
percent a year earlier – reflecting in part the impact of supply
chain challenges due to the global pandemic mentioned above,
including higher freight and handling costs. Additional factors
impacting gross profit are shown in Exhibit 4.
FISCAL 2021 OUTLOOK
“Given the ongoing global pandemic and near-term related
considerations, the company believes it is still not prudent to
provide annual sales and gross margin guidance for fiscal 2021.
However, we are encouraged by continued strong customer demand for
our aftermarket parts – notwithstanding the near-term impact to
sales by supply chain and other challenges related to COVID-19.
“As I stated last quarter, 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 an evolving supplier to the
fast-growing electric vehicle and aerospace market,” 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 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 February 9, 2021 through 8:59 p.m. Pacific
time on February 16, 2021 by calling (800)-585-8367 (domestic) or
(416)-621-4642 (international) and using access code: 1652414.
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 bearings and hub assemblies,
brake calipers, brake master cylinders, brake power boosters,
turbochargers, and diagnostic testing equipment utilized in
imported and domestic passenger vehicles, light trucks, and
heavy-duty applications. Its 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. In addition, the company’s electrical vehicle
subsidiary designs and manufactures testing solutions for
performance, endurance, and production of multiple components in
the electric power train – providing simulation, emulation, and
production applications for the electrification of both automotive
and aerospace industries, including electric vehicle charging
systems. 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
Nine Months Ended
December 31,
December 31,
2020
2019
2020
2019
Net sales
$
122,568,000
$
125,574,000
$
372,654,000
$
385,096,000
Cost of goods sold
98,327,000
97,913,000
295,300,000
303,279,000
Gross profit
24,241,000
27,661,000
77,354,000
81,817,000
Operating expenses: General and administrative
14,005,000
14,390,000
38,210,000
39,410,000
Sales and marketing
4,698,000
5,623,000
13,224,000
15,990,000
Research and development
2,100,000
2,174,000
6,014,000
6,694,000
Foreign exchange impact of lease liabilities and forward contracts
(12,455,000
)
(3,772,000
)
(21,257,000
)
(2,507,000
)
Total operating expenses
8,348,000
18,415,000
36,191,000
59,587,000
Operating income
15,893,000
9,246,000
41,163,000
22,230,000
Interest expense, net
4,051,000
6,879,000
12,074,000
19,575,000
Income before income tax expense
11,842,000
2,367,000
29,089,000
2,655,000
Income tax expense
3,373,000
1,502,000
8,448,000
1,752,000
Net income
$
8,469,000
$
865,000
$
20,641,000
$
903,000
Basic net income per share
$
0.44
$
0.05
$
1.09
$
0.05
Diluted net income per share
$
0.44
$
0.04
$
1.07
$
0.05
Weighted average number of shares outstanding: Basic
19,053,232
18,961,517
19,016,302
18,895,893
Diluted
19,436,793
19,305,805
19,333,758
19,263,114
MOTORCAR PARTS OF AMERICA,
INC. AND SUBSIDIARIES
Consolidated Balance
Sheets
December 31, 2020 March 31, 2020 ASSETS
(Unaudited) Current assets: Cash and cash equivalents
$
12,800,000
$
49,616,000
Short-term investments
1,508,000
850,000
Accounts receivable — net
45,271,000
91,748,000
Inventory
296,281,000
234,680,000
Contract assets
25,382,000
20,332,000
Prepaid expenses and other current assets
13,866,000
11,890,000
Total current assets
395,108,000
409,116,000
Plant and equipment — net
54,464,000
44,957,000
Operating lease assets
74,685,000
53,029,000
Long-term deferred income taxes
16,603,000
18,950,000
Long-term contract assets
248,544,000
239,540,000
Goodwill and intangible assets — net
8,876,000
9,598,000
Other assets
956,000
1,839,000
TOTAL ASSETS
$
799,236,000
$
777,029,000
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable and accrued liabilities
$
146,073,000
$
95,083,000
Customer finished goods returns accrual
34,267,000
25,326,000
Contract liabilities
44,778,000
27,911,000
Revolving loan
59,000,000
152,000,000
Other current liabilities
4,798,000
9,390,000
Operating lease liabilities
6,232,000
5,104,000
Current portion of term loan
3,678,000
3,678,000
Total current liabilities
298,826,000
318,492,000
Term loan, less current portion
17,705,000
20,462,000
Long-term contract liabilities
104,583,000
92,101,000
Long-term deferred income taxes
73,000
79,000
Long-term operating lease liabilities
71,569,000
61,425,000
Other liabilities
6,796,000
8,950,000
Total liabilities
499,552,000
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; 19,056,292 and 18,969,380 shares issued and outstanding
at December 31, 2020 and March 31, 2020, respectively
191,000
190,000
Additional paid-in capital
222,193,000
218,581,000
Retained earnings
84,758,000
64,117,000
Accumulated other comprehensive loss
(7,458,000
)
(7,368,000
)
Total shareholders' equity
299,684,000
275,520,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
799,236,000
$
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 nine
months ended December 31, 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 December 31, 2020 and 2019
Exhibit 1
Three Months Ended December
31,
2020
2019
$
Per Share
$
Per Share
GAAP net income
$
8,469,000
$
0.44
$
865,000
$
0.04
Items impacting net income Customer allowances related to
new business
-
-
777,000
0.04
Core buy-back premium amortization impacting net sales
1,528,000
0.08
1,326,000
0.07
Impact of tariffs
(688,000
)
(0.04
)
-
-
New product line start-up costs and transition expenses (a)
4,550,000
0.23
2,815,000
0.15
Revaluation - cores on customers' shelves
1,304,000
0.07
2,395,000
0.12
COVID-related expenses (b)
1,610,000
0.08
-
-
Earn-out accruals and severance
44,000
0.00
310,000
0.02
Share-based compensation expenses
1,498,000
0.08
1,071,000
0.06
Foreign exchange impact of lease liabilities and forward contracts.
(12,455,000
)
(0.64
)
(3,772,000
)
(0.20
)
Tax effect (c)
652,000
0.03
(1,231,000
)
(0.06
)
(a) Consists of $4,217,000 included in cost of goods sold and
$333,000 included in operating expenses for the three months ended
December 31, 2020 and $2,148,000 included in cost of goods sold and
$667,000 included in operating expenses for the three months ended
December 31, 2019. (b) Consists of $1,052,000 included in cost of
goods sold and $558,000 included in operating expenses for the
three months ended December 31, 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 ($320,000) or ($0.02)
per share for three months ended December 31, 2019.
Items Impacting Net Income for the Nine
Months Ended December 31, 2020 and 2019
Exhibit 2
Nine Months Ended December
31,
2020
2019
$
Per Share
$
Per Share
GAAP net income
$
20,641,000
$
1.07
$
903,000
$
0.05
Items impacting net income Customer allowances, return
accruals and changeover costs (a) related to new business, net of
costs
307,000
0.02
1,231,000
0.06
Core buy-back premium amortization impacting net sales
4,269,000
0.22
3,543,000
0.18
Impact of tariffs
(3,535,000
)
(0.18
)
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)
12,564,000
0.65
7,465,000
0.39
Revaluation - cores on customers' shelves, and gain due to
realignment of inventory at two customer distribution centers
(811,000
)
(0.04
)
9,867,000
0.51
COVID-related expenses (c)
5,953,000
0.31
-
-
Acquisition costs, earn-out accruals, severance and
restatement-related fees
19,000
0.00
292,000
0.02
Share-based compensation expenses
3,759,000
0.19
3,112,000
0.16
Foreign exchange impact of lease liabilities and forward contracts
(21,257,000
)
(1.10
)
(2,507,000
)
(0.13
)
Tax effect (d)
(317,000
)
(0.02
)
(6,051,000
)
(0.31
)
(a) Includes changeover costs related to new business of $112,000
recorded in operating expenses for the nine months ended December
31, 2019. (b) Consists of $11,572,000 included in cost of goods
sold and $992,000 included in operating expenses for the nine
months ended December 31, 2020 and $5,829,000 included in cost of
goods sold and $1,636,000 included in operating expenses for the
nine months ended December 31, 2019. (c) Consists of $4,425,000
included in cost of goods sold and $1,528,000 included in operating
expenses for the nine months ended December 31, 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
($4,963,000) or ($0.26) per share for nine months ended December
31, 2019.
Items Impacting Gross Profit for the
Three Months Ended December 31, 2020 and 2019
Exhibit 3
Three Months Ended December 31,
2020
2019
$
Gross Margin
$
Gross Margin
GAAP gross profit
$
24,241,000
19.8
%
$
27,661,000
22.0
%
Items impacting gross profit Customer allowances related to
new business
-
-
777,000
0.6
%
Core buy-back premium amortization impacting net sales
1,528,000
1.2
%
1,326,000
1.1
%
Impact of tariffs
(688,000
)
-0.6
%
-
-
New product line start-up costs and transition expenses
4,217,000
3.4
%
2,148,000
1.7
%
Revaluation - cores on customers' shelves
1,304,000
1.1
%
2,395,000
1.9
%
COVID-related expenses
1,052,000
0.9
%
-
-
Items Impacting Gross Profit for the
Nine Months Ended December 31, 2020 and 2019
Exhibit 4
Nine Months Ended December
31,
2020
2019
$
Gross Margin
$
Gross Margin
GAAP gross profit
$
77,354,000
20.8
%
$
81,817,000
21.2
%
Items impacting gross profit Customer allowances and return
accruals related to new business, net of costs
307,000
0.1
%
1,119,000
0.3
%
Core buy-back premium amortization impacting net sales
4,269,000
1.1
%
3,543,000
0.9
%
Impact of tariffs
(3,535,000
)
-0.9
%
1,067,000
0.3
%
Cost in connection with a cancelled contract
-
-
133,000
0.0
%
New product line start-up costs and transition expenses
11,572,000
3.1
%
5,829,000
1.5
%
Revaluation - cores on customers' shelves, and gain due to
realignment of inventory at two customer distribution centers (a)
(811,000
)
0.5
%
9,867,000
2.6
%
COVID-related expenses
4,425,000
1.2
%
-
-
(a) Gross profit and gross margin impact to net sales and cost
of goods sold
Items Impacting EBITDA for the Three
and Nine Months Ended December 31, 2020 and 2019
Exhibit 5
Three Months Ended December
31,
Nine Months Ended December
31,
2020
2019
2020
2019
GAAP net income
$
8,469,000
$
865,000
$
20,641,000
$
903,000
Interest expense, net
4,051,000
6,879,000
12,074,000
19,575,000
Income tax expense
3,373,000
1,502,000
8,448,000
1,752,000
Depreciation and amortization
2,857,000
2,400,000
8,090,000
7,019,000
EBITDA
$
18,750,000
$
11,646,000
$
49,253,000
$
29,249,000
Items impacting EBITDA Customer allowances, return accruals
and changeover costs related to new business, net of costs
-
777,000
307,000
1,231,000
Core buy-back premium amortization impacting net sales
1,528,000
1,326,000
4,269,000
3,543,000
Impact of tariffs
(688,000
)
-
(3,535,000
)
1,067,000
Cost in connection with a cancelled contract
-
-
-
133,000
New product line start-up costs and transition expenses (a)
4,421,000
2,733,000
12,235,000
7,246,000
Revaluation - cores on customers' shelves, and gain due to
realignment of inventory at two customer distribution centers
1,304,000
2,395,000
(811,000
)
9,867,000
COVID-related expenses
1,610,000
-
5,953,000
-
Acquisition costs, earn-out accruals, severance and
restatement-related fees
44,000
310,000
19,000
292,000
Share-based compensation expenses
1,498,000
1,071,000
3,759,000
3,112,000
Foreign exchange impact of lease liabilities and forward contracts
(12,455,000
)
(3,772,000
)
(21,257,000
)
(2,507,000
)
(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/20210209005058/en/
Gary S. Maier (310) 972-5124
Motorcar Parts and Assoc... (NASDAQ:MPAA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Motorcar Parts and Assoc... (NASDAQ:MPAA)
Historical Stock Chart
From Apr 2023 to Apr 2024