OREANDA-NEWS. Motorcar Parts of America, Inc. (Nasdaq:MPAA) today reported results for its fiscal 2017 first quarter, reflecting record profitability.  Subsequent to the end of the quarter, the company announced the launch of its new brake power booster product line and the acquisition of a turbocharger business.

Net sales for the fiscal 2017 first quarter were $85.4 million compared with $85.8 million for the same period a year earlier. The company’s sales performance for the fiscal 2017 first quarter reflects continued strength of its rotating electrical and wheel hub business, as well as increased contributions from the company’s emerging master cylinder product line – 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 first quarter were $93.8 million compared with $86.6 million a year earlier.

Net income for the fiscal 2017 first quarter was $7.5 million, or $0.39 per diluted share, compared with net income of $1.9 million, or $0.10 per diluted share, a year ago.

Adjusted net income for the fiscal 2017 first quarter was $10.1 million, or $0.52 per diluted share, compared with $8.4 million, or $0.44 per diluted share, in the same period a year earlier.

Gross profit for the fiscal 2017 first quarter was $20.4 million compared with $26.0 million a year earlier.  Gross profit as a percentage of sales for the fiscal 2017 first quarter was 23.9 percent compared with 30.3 percent a year earlier, primarily due to customer allowances related to new business.

Adjusted gross profit for the fiscal first quarter was $30.3 million compared with $26.8 million a year ago.  Adjusted gross profit as a percentage of sales for the three months was 32.3 percent compared with 30.9 percent a year earlier.

“Results for the quarter reflect continued strength across all product lines – 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,” said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.

“Our position within the aftermarket industry continues to grow – which we expect will be enhanced by our new brake power booster product line and our future turbocharger launch, as well as additional opportunities to introduce other complementary non-discretionary parts.  As always, we thank our entire team for their daily commitment to excellence, customer service 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.

 

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
    June 30,
      2016       2015  
         
Net sales   $   85,412,000     $   85,835,000  
Cost of goods sold       65,021,000         59,844,000  
Gross profit       20,391,000         25,991,000  
Operating expenses:        
General and administrative       3,625,000         11,360,000  
Sales and marketing       2,634,000         2,280,000  
Research and development       869,000         736,000  
Total operating expenses       7,128,000         14,376,000  
Operating income       13,263,000         11,615,000  
Interest expense, net       2,819,000         8,437,000  
Income before income tax expense       10,444,000         3,178,000  
Income tax expense       2,936,000         1,268,000  
         
Net income   $   7,508,000     $   1,910,000  
         
Basic net income per share   $   0.40     $   0.11  
         
Diluted net income per share   $   0.39     $   0.10  
         
Weighted average number of shares outstanding:        
         
Basic     18,545,621       18,002,877  
                 
Diluted     19,484,938       18,888,013  
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
 
    June 30, 2016   March 31, 2016
ASSETS   (Unaudited)    
Current assets:        
Cash and cash equivalents   $   19,717,000     $   21,897,000  
Short-term investments       1,982,000         1,813,000  
Accounts receivable — net       11,148,000         8,548,000  
Inventory— net       73,341,000         58,060,000  
Inventory unreturned       10,399,000         10,520,000  
Deferred income taxes       34,281,000         33,347,000  
Prepaid expenses and other current assets       8,188,000         5,900,000  
Total current assets       159,056,000         140,085,000  
Plant and equipment — net       16,805,000         16,099,000  
Long-term core inventory — net       243,822,000         241,100,000  
Long-term core inventory deposits       5,569,000         5,569,000  
Long-term deferred income taxes       463,000         236,000  
Goodwill       2,053,000         2,053,000  
Intangible assets — net       4,428,000         4,573,000  
Other assets       8,587,000         3,657,000  
TOTAL ASSETS   $   440,783,000     $   413,372,000  
LIABILITIES AND SHAREHOLDERS'  EQUITY      
Current liabilities:      
Accounts payable   $   81,982,000     $   72,152,000  
Accrued liabilities       7,206,000         9,101,000  
Customer finished goods returns accrual       23,546,000         26,376,000  
Accrued core payment       9,906,000         8,989,000  
Revolving loan       21,000,000         7,000,000  
Other current liabilities       9,175,000         4,698,000  
Current portion of term loan       3,064,000         3,067,000  
Total current liabilities       155,879,000         131,383,000  
Term loan, less current portion       19,203,000         19,980,000  
Long-term accrued core payment       18,462,000         17,550,000  
Long-term deferred income taxes       13,682,000         14,315,000  
Other liabilities       13,496,000         19,336,000  
Total liabilities       220,722,000         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;      
18,630,444 and 18,531,751 shares issued and outstanding at June 30, 2016 and        
March 31, 2016, respectively       186,000         185,000  
Additional paid-in capital       205,015,000         203,650,000  
Retained earnings       20,225,000         11,825,000  
Accumulated other comprehensive loss       (5,365,000 )       (4,852,000 )
Total shareholders' equity       220,061,000         210,808,000  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $   440,783,000     $   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 months ended June 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 months ended June 30, 2016 and 2015 are as follows:                                                                           

Reconciliation of Non-GAAP Financial Measures  Exhibit 1
   
    Three Months Ended June 30,
    2016       2015  
GAAP Results:      
Net sales $   85,412,000     $   85,835,000  
Net income     7,508,000         1,910,000  
Diluted income per share (EPS)     0.39         0.10  
Gross margin   23.9 %     30.3 %
Non-GAAP Adjusted Results:      
Non-GAAP adjusted net sales $   93,822,000     $   86,623,000  
Non-GAAP adjusted net income     10,089,000         8,354,000  
Non-GAAP adjusted diluted earnings per share (EPS)     0.52         0.44  
Non-GAAP adjusted gross margin   32.3 %     30.9 %
Non-GAAP adjusted EBITDA     20,219,000         17,715,000  

                     

  Reconciliation of Non-GAAP Financial Measures Exhibit 2
     
      Three Months Ended June 30,
      2016       2015  
GAAP net sales $   85,412,000     $   85,835,000  
Adjustments:      
  Net sales      
  Initial return and stock adjustment accruals related to new business     1,853,000         -   
  Customer allowances related to new business     6,557,000         788,000  
Adjusted net sales $   93,822,000     $   86,623,000  
  Reconciliation of Non-GAAP Financial Measures                                                                             Exhibit 3
     
     Three Months Ended June 30,
       2016        2015  
    $   Per Diluted
Share 		  $   Per Diluted
Share
GAAP net income $   7,508,000     $   0.39     $   1,910,000     $   0.10  
Adjustments:              
  Net sales              
  Initial return and stock adjustment accruals related to new business     1,853,000     $   0.10         -      $   -   
  Customer allowances related to new business     6,557,000     $   0.34         788,000     $   0.04  
  Cost of goods sold              
  New product line start-up costs     124,000     $   0.01         -      $   -   
  Lower of cost or market revaluation - cores on customers' shelves     1,718,000     $   0.09         -      $   -   
  Cost of customer allowances and stock adjustment accruals related to new business     (355,000 )   $   (0.02 )       -      $   -   
  Operating expenses              
  Legal, severance, acquisition, financing and other costs     396,000     $   0.02         3,141,000     $   0.17  
  Share-based compensation expenses     729,000     $   0.04         516,000     $   0.03  
  Mark-to-market losses (gains)     (4,926,000 )   $   (0.25 )       964,000     $   0.05  
  Interest              
  Write-off of prior deferred loan fees     -      $   -          5,108,000     $   0.27  
  Tax effected at 39% tax rate (a)     (3,515,000 )   $   (0.18 )       (4,073,000 )   $   (0.22 )
Adjusted net income $   10,089,000     $   0.52     $   8,354,000     $   0.44  
                 
(a) Tax effect at 39% of the income before income tax expense (reflecting the adjustments)            
  Reconciliation of Non-GAAP Financial Measures                                                                            Exhibit 4
     
     Three Months Ended June 30,
       2016        2015  
     $    Gross Margin    $    Gross Margin
GAAP gross profit $   20,391,000       23.9 %   $   25,991,000       30.3 %
Adjustments:              
  Net sales              
  Initial return and stock adjustment accruals related to new business     1,853,000             -       
  Customer allowances related to new business     6,557,000             788,000      
  Cost of goods sold              
  New product line start-up costs     124,000             -       
  Lower of cost or market revaluation - cores on customers' shelves     1,718,000             -       
  Cost of customer allowances and stock adjustment accruals related to new business     (355,000 )           -       
  Total adjustments     9,897,000       8.4 %       788,000       0.6 %
Adjusted gross profit $   30,288,000       32.3 %   $   26,779,000       30.9 %