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Motorcar Parts of America Reports Record First Quarter Sales

Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2023 first quarter ended June 30, 2022 – reflecting strong demand after a modest start, with momentum building in May and June.

Fiscal 2023 First Quarter Highlights

  • Net sales reached a fiscal first quarter record of $164.0 million, an increase of $15.0 million, or 10.0 percent year over year.
  • Gross profit was $30.3 million, an increase of $6.7 million, or 28.6 percent year over year.
  • Operating expenses were impacted by non-cash foreign currency exchange fluctuations of approximately $820,000 compared with the prior year.
  • Results were impacted by $3.0 million of increased interest expenses, primarily due to higher interest rates related to participation in the accounts receivable discount programs offered by customers.
  • Results were also impacted by $0.22 per share of non-cash items, and $0.15 per share of other items, primarily due to continuing, though diminishing, transitory costs related to supply chain disruptions.
  • EBITDA (defined below) was $10.5 million, which was impacted by $5.5 million of non-cash items and $3.7 million of other items, primarily due to transitory costs.

Fiscal 2023 Considerations

  • Future margin expansion expected from additional price increases in the fiscal second quarter; anticipated improved operating efficiencies as brake-related product volume increases and fixed cost leveraging opportunities are enhanced.
  • Cash flow improvement expected as the new fiscal year gains momentum; strategic inventory build in fiscal 2022 is expected to benefit from previously announced top-line sales targets across all product lines.

“We reported record sales for a fiscal first quarter, which supports our optimism as we start a new fiscal year – supported by strong demand for replacement parts and tailwinds from an aging car fleet. Our emerging brake-related products – including brake calipers and in particular pads and rotors, which we formally launched this quarter, are experiencing strong demand. Our investments are bearing fruit and we are well-positioned to capitalize on the company’s leadership position within the retail and traditional markets,” said Selwyn Joffe, chairman, president, and chief executive officer.

Net sales for the fiscal 2023 first quarter increased $15.0 million, or 10.0 percent, to $164.0 million from $149.0 million in the prior-year period.

Net loss for the fiscal 2023 first quarter was $175,000, or $0.01 per share, compared with net income of $861,000, or $0.04 per diluted share, a year ago – impacted by approximately $4.2 million, or $0.22 per share, of non-cash items, including a non-cash loss of $678,000, or $0.04 per share on a pre-tax basis, for the foreign exchange impact of lease liabilities and forward contracts, as detailed in Exhibit 1. The company also was impacted by approximately $2.8 million, or $0.15 per share, of other costs, primarily transitory costs related to supply chain disruptions. Results for the fiscal first quarter were also impacted by $3.0 million of higher interest expenses compared with the prior year.

Prior-year net income of $861,000, or $0.04 per diluted share, was impacted by approximately $2.0 million, or $0.10 per diluted share, of non-cash items, including a non-cash gain of $2.5 million, or $0.13 per diluted share on a pre-tax basis, for the foreign exchange impact of lease liabilities and forward contracts, as detailed in Exhibit 1. The company also was impacted by approximately $5.6 million, or $0.29 per share, of other costs, primarily transitory costs related to supply chain disruptions for the prior year.

Gross profit for the fiscal 2023 first quarter increased $6.7 million, or 28.6 percent, to $30.3 million from $23.6 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2023 first quarter was 18.5 percent compared with 15.8 percent a year earlier. Gross margin for the fiscal 2023 first quarter was impacted by 2.2 percent by the aforementioned non-cash items and 1.6 percent by the transitory supply chain disruptions, as detailed in Exhibit 2. In addition to the items mentioned above, gross margin for the fiscal first quarter was further impacted by inflationary costs and new product line growth initiatives.

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 definition and reconciliation of EBITDA to net income, its corresponding GAAP measure, 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 this measure.

Earnings Conference Call and Webcast

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 webcast at www.motorcarparts.com or live by calling (888)-440-5584 (domestic) or (646)-960-0457 (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 August 9, 2022 through 8:59 p.m. Pacific time on August 16, 2022 by calling (800)-770-2030 (domestic) or (647)-362-9199 (international) and using access code: 1545314.

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 pads, brake rotors, 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 2022 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

June 30,

2022

 

2021

 
Net sales

$

163,985,000

 

$

149,034,000

 

Cost of goods sold

 

133,683,000

 

 

125,463,000

 

Gross profit

 

30,302,000

 

 

23,571,000

 

Operating expenses:
General and administrative

 

13,634,000

 

 

12,486,000

 

Sales and marketing

 

5,542,000

 

 

5,368,000

 

Research and development

 

3,113,000

 

 

2,501,000

 

Foreign exchange impact of lease liabilities and forward contracts

 

678,000

 

 

(2,533,000

)

Total operating expenses

 

22,967,000

 

 

17,822,000

 

Operating income

 

7,335,000

 

 

5,749,000

 

Interest expense, net

 

6,921,000

 

 

3,941,000

 

Income before income tax expense

 

414,000

 

 

1,808,000

 

Income tax expense

 

589,000

 

 

947,000

 

Net (loss) income

$

(175,000

)

$

861,000

 

Basic net (loss) income per share

$

(0.01

)

$

0.05

 

Diluted net (loss) income per share

$

(0.01

)

$

0.04

 

Weighted average number of shares outstanding:
Basic

 

19,123,354

 

 

19,054,481

 

Diluted

 

19,123,354

 

 

19,659,057

 

 

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 
June 30, 2022 March 31, 2022
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents

$

9,217,000

 

$

23,016,000

 

Short-term investments

 

1,995,000

 

 

2,202,000

 

Accounts receivable — net

 

73,030,000

 

 

85,075,000

 

Inventory

 

405,205,000

 

 

385,504,000

 

Contract assets

 

27,783,000

 

 

27,500,000

 

Prepaid expenses and other current assets

 

11,705,000

 

 

13,688,000

 

Total current assets

 

528,935,000

 

 

536,985,000

 

Plant and equipment — net

 

49,384,000

 

 

51,062,000

 

Operating lease assets

 

80,157,000

 

 

81,997,000

 

Long-term deferred income taxes

 

27,046,000

 

 

26,982,000

 

Long-term contract assets

 

306,953,000

 

 

310,255,000

 

Goodwill and intangible assets — net

 

6,548,000

 

 

7,004,000

 

Other assets

 

1,403,000

 

 

1,413,000

 

TOTAL ASSETS

$

1,000,426,000

 

$

1,015,698,000

 

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities

$

173,818,000

 

$

168,435,000

 

Customer finished goods returns accrual

 

28,793,000

 

 

38,086,000

 

Contract liabilities

 

43,645,000

 

 

42,496,000

 

Revolving loan

 

146,000,000

 

 

155,000,000

 

Other current liabilities

 

11,279,000

 

 

11,930,000

 

Operating lease liabilities

 

6,653,000

 

 

6,788,000

 

Current portion of term loan

 

3,670,000

 

 

3,670,000

 

Total current liabilities

 

413,858,000

 

 

426,405,000

 

Term loan, less current portion

 

12,097,000

 

 

13,024,000

 

Long-term contract liabilities

 

173,045,000

 

 

172,764,000

 

Long-term deferred income taxes

 

121,000

 

 

126,000

 

Long-term operating lease liabilities

 

79,552,000

 

 

80,803,000

 

Other liabilities

 

6,987,000

 

 

7,313,000

 

Total liabilities

 

685,660,000

 

 

700,435,000

 

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; 19,214,978 and 19,104,751 shares issued and outstanding at June 30, 2022 and March 31, 2022, respectively

 

192,000

 

 

191,000

 

Additional paid-in capital

 

227,729,000

 

 

227,184,000

 

Retained earnings

 

92,779,000

 

 

92,954,000

 

Accumulated other comprehensive loss

 

(5,934,000

)

 

(5,066,000

)

Total shareholders' equity

 

314,766,000

 

 

315,263,000

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,000,426,000

 

$

1,015,698,000

 

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 months ended June 30, 2022 and 2021. 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 June 30, 2022 and 2021

Exhibit 1

 

Three Months Ended June 30,

2022

 

2021

$

 

Per Share

 

$

 

Per Share

GAAP net (loss) income

$

(175,000

)

$

(0.01

)

$

861,000

 

$

0.04

 

 
Non-cash items impacting net (loss) income
Core and finished goods premium amortization

$

3,044,000

 

$

0.16

 

$

2,677,000

 

$

0.14

 

Revaluation - cores on customers' shelves

 

572,000

 

 

0.03

 

 

984,000

 

 

0.05

 

Share-based compensation expenses and earn-out accruals

 

1,249,000

 

 

0.07

 

 

1,543,000

 

 

0.08

 

Foreign exchange impact of lease liabilities and forward contracts

 

678,000

 

 

0.04

 

 

(2,533,000

)

 

(0.13

)

Tax effect (a)

 

(1,386,000

)

 

(0.07

)

 

(668,000

)

 

(0.03

)

Total non-cash items impacting net (loss) income

$

4,157,000

 

$

0.22

 

$

2,003,000

 

$

0.10

 

 
Cash items impacting net (loss) income
Supply chain disruptions and related costs (b)

$

3,094,000

 

$

0.16

 

$

5,297,000

 

$

0.27

 

New product line start-up costs and transition expenses, and severance (c)

 

618,000

 

 

0.03

 

 

2,183,000

 

 

0.11

 

Tax effect (a)

 

(928,000

)

 

(0.05

)

 

(1,870,000

)

 

(0.10

)

Total cash items impacting net (loss) income

$

2,784,000

 

$

0.15

 

$

5,610,000

 

$

0.29

 

 
(a) 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.
(b) For the three-months ended June 30, 2022, consists of $2,548,000 impacting gross profit and $546,000 included in operating expenses.
For the three-months ended June 30, 2021, consists of $4,761,000 impacting gross profit and $536,000 included in operating expenses.
(c) For the three-months ended June 30, 2022, consists of $618,000 included in operating expenses.
For the three-months ended June 30, 2021, consists of $1,947,000 included in cost of goods sold and $236,000 included in operating expenses.
 

Items Impacting Gross Profit for the Three Months Ended June 30, 2022 and 2021

Exhibit 2

 
Three Months Ended June 30,

2022

2021

$ Gross Margin $ Gross Margin
GAAP gross profit

$

30,302,000

18.5

%

$

23,571,000

15.8

%

 
Non-cash items impacting gross profit
Core and finished goods premium amortization

$

3,044,000

1.9

%

$

2,677,000

1.8

%

Revaluation - cores on customers' shelves

 

572,000

0.3

%

 

984,000

0.7

%

Total non-cash items impacting gross profit

$

3,616,000

2.2

%

$

3,661,000

2.5

%

 
Cash items impacting gross profit
Supply chain disruptions and related costs

$

2,548,000

1.6

%

$

4,761,000

3.2

%

New product line start-up costs and transition expenses

 

-

-

 

 

1,947,000

1.3

%

Total cash items impacting gross profit

$

2,548,000

1.6

%

$

6,708,000

4.5

%

 

Items Impacting EBITDA for the Three Months Ended June 30, 2022 and 2021

Exhibit 3

 

Three Months Ended June 30,

2022

2021

GAAP net (loss) income

$

(175,000

)

$

861,000

 

Interest expense, net

 

6,921,000

 

 

3,941,000

 

Income tax expense

 

589,000

 

 

947,000

 

Depreciation and amortization

 

3,124,000

 

 

3,145,000

 

EBITDA

$

10,459,000

 

$

8,894,000

 

 
Non-cash items impacting EBITDA
Core and finished goods premium amortization

$

3,044,000

 

$

2,677,000

 

Revaluation - cores on customers' shelves

 

572,000

 

 

984,000

 

Share-based compensation expenses and earn-out accruals

 

1,249,000

 

 

1,543,000

 

Foreign exchange impact of lease liabilities and forward contracts

 

678,000

 

 

(2,533,000

)

Total non-cash items impacting EBITDA

$

5,543,000

 

$

2,671,000

 

 
Cash items impacting EBITDA
Supply chain disruptions and related costs

$

3,094,000

 

$

5,297,000

 

New product line start-up costs and transition expenses, and severance (a)

 

618,000

 

 

2,016,000

 

Total cash items impacting EBITDA

$

3,712,000

 

$

7,313,000

 

 

(a) Excludes depreciation, which is included in the depreciation and amortization line item.

 

Contacts

Gary S. Maier

(310) 972-5124

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