LOS ANGELES, Aug. 15, 2011 (GLOBE NEWSWIRE) -- Motorcar Parts of America, Inc. (Nasdaq:MPAA) today reported results for its fiscal 2012 first quarter ended June 30, 2011 -- reflecting solid performance in its base business and the impact of the Fenco acquisition, which includes expensing of acquisition-related costs and the amortization during the period of certain fair value amounts recorded in the opening balance sheet on May 6, 2011 in accordance with purchase accounting for acquisitions.
Net sales for the fiscal 2012 first quarter increased 97 percent to $71.3 million from $36.2 million a year earlier. For the same period, due to the acquisition of Fenco, the impact of purchase accounting and the inclusion of its operating results effective May 6, 2011, the company reported a net loss of $2.4 million, or $0.19 per share, compared with net income of $2.5 million, or $0.21 per diluted share, for the comparable quarter a year earlier. Net income before acquisition-related costs and higher income tax expense for the first quarter would have been $0.15 per diluted share. Excluding Fenco operating results since the acquisition and certain other expenses highlighted below, earnings per share would have been $0.23 per diluted share.
Operating results for the first quarter were impacted by a loss from Fenco's operations of $0.07 per share and certain acquisition- related costs expensed during the quarter. These adjustments include the effects of fair value purchase accounting on Fenco's opening balance sheet for inventory step-up adjustment of approximately $2.7 million, or $0.22 per share. This expense was recognized as cost of goods sold during the quarter. Additional adjustments include acquisition-related general and administrative expenses of $1.1 million, or $0.06 per share; bank refinancing fees of $260,000, or $0.02 per share; and other professional fees related to the Fenco acquisition of $404,000, or $0.02 per share. Income tax expense reflects an additional 5.4 percent tax in the first quarter due to certain non-deductible acquisition costs of $216,000, or $0.02 per share.
Gross profit for the fiscal 2012 first quarter was $13.1 million compared with $11.5 million for the same period a year ago. Gross profit as a percentage of net sales for the fiscal 2012 first quarter was 18.4 percent compared with 31.9 percent in the same quarter a year ago, reflecting lower margin Fenco business. The company anticipates significant savings from synergies to be realized in the future. Gross margin was impacted by 3.8 percent due to the effects of purchase accounting on Fenco's inventory fair value step-up adjustment of approximately $2.7 million recognized as cost of goods sold during the quarter, as noted above. The gross margin in the rotating electrical segment increased to 32.1 percent for the first quarter due primarily to lower per unit manufacturing costs.
"Results for the quarter and expectations moving forward reflect continued strength in both rotating electrical and under-the-car product offerings, with significant opportunities for growth and synergistic cost-savings from the company's Fenco acquisition. All of our products are non-discretionary and the current economic environment is expected to further enhance demand. The Fenco acquisition represents an exciting opportunity to grow sales and realize at least $20 million of synergies within a two-year period. This would result in incremental earnings of approximately $1.00 per share from the acquisition," said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts.
EBITDA does not reflect the impact of a number of items that affect the company's net income, including financing and acquisition-related costs. EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income or income from operations as a measure of performance, nor as alternative to net cash from operating activities as a measure of liquidity. EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of the company's results as reported under GAAP. For a reconciliation of net income (loss) attributable to common shareholders to EBITDA, see the financial tables included in this press release.
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 for the first quarter of fiscal year 2012. The call will be open to all interested investors either through a live audio Web broadcast at www.motorcarparts.com or live by calling (877)-776-4016 (domestic) or (973)-638-3231 (international). For those who are not available to listen to the live broadcast, the call will be archived for seven days on Motorcar Parts of America's website. A telephone playback of the conference call will also be available from approximately 1:00 p.m. Pacific time on Monday, August 15, 2011 through 11:59 p.m. Pacific time on Monday, August 22, 2011 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 88027195.
About Motorcar Parts of America
Motorcar Parts of America, Inc. is a remanufacturer of alternators and starters utilized in imported and domestic passenger vehicles, light trucks and heavy duty applications. Through its wholly owned subsidiary Fenco Automotive Products, the company also offers a broad line of under-the-car products – including brake, steering and clutch components. Motorcar Parts of America's products are sold to automotive retail outlets and the professional repair market throughout the United States and Canada, with remanufacturing facilities located in California, Mexico and Malaysia, and administrative offices located in California, Tennessee, Mexico, Canada, Singapore and Malaysia. 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 2011 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, | ||
| 2011 | 2010 | |
| Net sales | $ 71,262,000 | $ 36,234,000 |
| Cost of goods sold | 58,136,000 | 24,689,000 |
| Gross profit | 13,126,000 | 11,545,000 |
| Operating expenses: | ||
| General and administrative | 8,510,000 | 4,024,000 |
| Sales and marketing | 2,398,000 | 1,740,000 |
| Research and development | 416,000 | 366,000 |
| Acquisition costs | 404,000 | -- |
| Total operating expenses | 11,728,000 | 6,130,000 |
| Operating income | 1,398,000 | 5,415,000 |
| Interest expense | 1,932,000 | 1,602,000 |
| (Loss) income before income tax expense | (534,000) | 3,813,000 |
| Income tax expense | 1,842,000 | 1,293,000 |
| Net (loss) income | $ (2,376,000) | $ 2,520,000 |
| Basic net (loss) income per share | $ (0.19) | $ 0.21 |
| Diluted net (loss) income per share | $ (0.19) | $ 0.21 |
| Weighted average number of shares outstanding: | ||
| Basic | 12,281,530 | 12,049,057 |
| Diluted | 12,281,530 | 12,204,319 |
| MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES | ||
| Consolidated Balance Sheets | ||
| June 30, 2011 | March 31, 2011 | |
| ASSETS | (Unaudited) | |
| Current assets: | ||
| Cash | $ 1,275,000 | $ 2,477,000 |
| Short-term investments | 311,000 | 304,000 |
| Accounts receivable — net | 34,963,000 | 10,635,000 |
| Inventory — net | 108,540,000 | 29,733,000 |
| Inventory unreturned | 12,149,000 | 5,031,000 |
| Deferred income taxes | 5,715,000 | 5,658,000 |
| Prepaid expenses and other current assets | 5,216,000 | 6,299,000 |
| Total current assets | 168,169,000 | 60,137,000 |
| Plant and equipment — net | 17,149,000 | 11,663,000 |
| Long-term core inventory — net | 184,138,000 | 80,558,000 |
| Long-term core inventory deposit | 26,248,000 | 25,984,000 |
| Long-term deferred income taxes | 1,368,000 | 1,346,000 |
| Long-term note receivable | -- | 4,863,000 |
| Goodwill | 4,214,000 | -- |
| Intangible assets — net | 45,983,000 | 5,530,000 |
| Other assets | 1,839,000 | 1,784,000 |
| TOTAL ASSETS | $ 449,108,000 | $ 191,865,000 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 99,620,000 | $ 38,973,000 |
| Accrued liabilities | 110,504,000 | 7,318,000 |
| Customer finished goods returns accrual | 24,533,000 | 9,161,000 |
| Income tax payable | 147,000 | 322,000 |
| Revolving loan | 18,500,000 | -- |
| Deferred income taxes | 137,000 | 136,000 |
| Other current liabilities | 490,000 | 460,000 |
| Current portion of term loan | 2,000,000 | 2,000,000 |
| Current portion of capital lease obligations | 749,000 | 372,000 |
| Total current liabilities | 256,680,000 | 58,742,000 |
| Term loan, less current portion | 15,000,000 | 5,500,000 |
| Revolving loan | 47,630,000 | -- |
| Deferred core revenue | 8,930,000 | 8,729,000 |
| Other liabilities | 1,690,000 | 1,255,000 |
| Capital lease obligations, less current portion | 372,000 | 462,000 |
| Total liabilities | 330,302,000 | 74,688,000 |
| 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, 20,000,000 shares authorized; | ||
| 12,441,971 and 12,078,271 shares issued; 12,427,571 and 12,063,871 outstanding | ||
| at June 30, 2011 and March 31, 2011, respectively | 124,000 | 121,000 |
| Treasury stock, at cost, 14,400 shares of common stock at June 30, 2011 and | ||
| March 31, 2011, respectively | (89,000) | (89,000) |
| Additional paid-in capital | 98,139,000 | 93,140,000 |
| Additional paid-in capital-warrant | 1,879,000 | 1,879,000 |
| Accumulated other comprehensive loss | (1,346,000) | (349,000) |
| Retained earnings | 20,099,000 | 22,475,000 |
| Total shareholders' equity | 118,806,000 | 117,177,000 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 449,108,000 | $ 191,865,000 |
Segment Information
Beginning with this quarter of fiscal year 2012, the company will provide segment information. The two segments are defined as rotating electrical and the recently acquired Fenco products now referred to as the under-the-car segment. Currently all corporate expenses are included under the rotating electrical segment. The results of operations of Fenco have been included from the date of acquisition on May 6, 2011. Income statement information relating to the Company's reportable segments for the three months ended June 30, 2011 is as follows:
| Three months ended June 30, 2011 (Unaudited) | ||||||||||||||||
| Rotating | Under-the-Car | Tax-Effected EPS | ||||||||||||||
| Income statement | Electrical | Product Line | (2) | Eliminations | Consolidated | Impact | (4) | |||||||||
| Net sales (excluding intersegment revenue) | $ 39,016,000 | $ 32,246,000 | $ -- | $ 71,262,000 | ||||||||||||
| Intersegment revenue, net of cost of goods sold | (A) | 776,000 | (776,000) | -- | ||||||||||||
| Net sales total | 39,792,000 | 32,246,000 | (776,000) | 71,262,000 | ||||||||||||
| Cost of goods sold (before inventory step-up adjustment) | 27,036,000 | 28,172,000 | 55,208,000 | |||||||||||||
| Intersegment profit | (B) | 776,000 | (776,000) | -- | ||||||||||||
| Intersegment profit in inventory | (B) | 226,000 | 226,000 | |||||||||||||
| Inventory step-up adjustment | (B) | 2,702,000 | (3) | 2,702,000 | $ 0.22 | (4) | ||||||||||
| Cost of goods sold total | 27,036,000 | 31,650,000 | (550,000) | 58,136,000 | ||||||||||||
| Gross profit | 12,756,000 | 596,000 | (226,000) | 13,126,000 | ||||||||||||
| Gross margin | 32.1% | 1.8% | 18.4% | |||||||||||||
| Gross margin (excluding inventory step-up adjustment) | 32.1% | 10.2% | 22.2% | |||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 4,222,000 | 2,889,000 | 7,111,000 | |||||||||||||
| General and administrative - acquisition related | (B) | 1,088,000 | 51,000 | 1,139,000 | $ 0.06 | (4) | ||||||||||
| General and administrative - bank financing fees | (B) | 260,000 | 260,000 | $ 0.02 | (4) | |||||||||||
| Sales and marketing | 1,834,000 | 564,000 | 2,398,000 | |||||||||||||
| Research and development | 416,000 | 416,000 | ||||||||||||||
| Acquisition costs | (B) | 404,000 | 404,000 | $ 0.02 | (4) | |||||||||||
| Total operating expenses | 7,964,000 | 3,764,000 | -- | 11,728,000 | ||||||||||||
| Operating income (loss) | (C) | 4,792,000 | (3,168,000) | (226,000) | 1,398,000 | |||||||||||
| Other expense: | ||||||||||||||||
| Interest expense | 771,000 | 1,161,000 | 1,932,000 | |||||||||||||
| Income (loss) before income tax expense | 4,021,000 | (4,329,000) | (226,000) | (534,000) | ||||||||||||
| Income tax expense (non-deductible acquisition costs) | 216,000 | 216,000 | $ 0.02 | (5) | ||||||||||||
| Income tax expense | 1,579,000 | 47,000 | 1,626,000 | |||||||||||||
| Net income (loss) | $ 2,226,000 | $ (4,376,000) | $ (226,000) | $ (2,376,000) | ||||||||||||
| Diluted net income (loss) per share | $ (0.19) | $ 0.34 | ||||||||||||||
| Weighted average number of shares outstanding: | ||||||||||||||||
| Diluted | 12,281,530 | |||||||||||||||
| Depreciation and amortization | (B) | 888,000 | 1,012,000 | 1,900,000 | ||||||||||||
| Adjusted EBITDA - Sum of (B) and (C) less (A) (1) | $ 6,396,000 | $ 1,633,000 | $ 8,029,000 | |||||||||||||
| (1) Excludes acquisition related and bank financing fees | ||||||||||||||||
| (2) The total of inventory step-up adjustment, intersegment costs, general and administrative related to the acquisition and bank financing fees have an EPS impact of $0.29 | ||||||||||||||||
| (3) The impact of the $2,702,000 inventory step-up adjustment to the Under-the-Car Product Line gross profit margin is 8.4% | ||||||||||||||||
| (4) Tax effected for Rotating Electrical at 39% tax rate and Under-the-Car Product Line at 0% tax rate | ||||||||||||||||
| (5) Represents additional 5.4% tax in the quarter to the rotating electrical segment due to certain non-deductible transaction costs incurred in connection with the Company's acquisition of Fenco | ||||||||||||||||
|
Three months ended June 30, 2011 (Unaudited) |
||||||||
| Rotating | Tax-Effected EPS | |||||||
| Income statement | Electrical | Impact (2) | ||||||
| Net sales (excluding intersegment revenue) | $ 39,016,000 | |||||||
| Intersegment revenue, net of cost of goods sold | (A) | 776,000 | $ (0.04) | (2) | ||||
| Net sales total | 39,792,000 | |||||||
| Cost of goods sold | 27,036,000 | |||||||
| Gross profit | 12,756,000 | |||||||
| Gross margin | 32.1% | |||||||
| Operating expenses: | ||||||||
| General and administrative | 4,222,000 | |||||||
| General and administrative - acquisition related | (B) | 1,088,000 | $ 0.05 | (2) | ||||
| Sales and marketing | 1,834,000 | |||||||
| Research and development | 416,000 | |||||||
| Acquisition costs | (B) | 404,000 | $ 0.02 | (2) | ||||
| Total operating expenses | 7,964,000 | |||||||
| Operating income | (C) | 4,792,000 | ||||||
| Other expense: | ||||||||
| Interest expense | 771,000 | |||||||
| Income before income tax expense | 4,021,000 | |||||||
| Income tax expense (non-deductible acquisition costs) | 216,000 | $ 0.02 | (3) | |||||
| Income tax expense | 1,579,000 | |||||||
| Net income | $ 2,226,000 | |||||||
| Diluted net income per share | $ 0.18 | |||||||
| Weighted average number of shares outstanding: | ||||||||
| Diluted | 12,598,515 | (4) | ||||||
| Depreciation and amortization | (B) | 888,000 | ||||||
| Adjusted EBITDA - Sum of (B) and (C) less (A) (1) | $ 6,396,000 | |||||||
| (1) Excludes acquisition related expenses | ||||||||
| (2) Tax effected for Rotating Electrical at 39% tax rate | ||||||||
| (3) Represents additional 5.4% tax in the quarter due to certain non-deductible transaction costs incurred in connection with the Company's acquisition of Fenco | ||||||||
| (4) Excludes the impact of 217,582 shares in connection with the consideration for the May 6, 2011 Fenco acquisition | ||||||||