Motorcar Parts of America, Inc. Announces First Quarter Fiscal Year 2006 Results

LOS ANGELES, Oct. 14, 2005 -- Motorcar Parts of America, Inc. ("MPA") , a leading provider of remanufactured alternators and starters for the automotive aftermarket, announced today financial results for the first quarter of fiscal 2006.

Selwyn Joffe, MPA's Chairman, President and CEO, said, "This quarter has been a significant one in which a number of very important initiatives have been pursued. We have continued to make meaningful progress in addressing and resolving the SEC's inquiry concerning our previously filed public reports and have now filed our most recent current report. In addition, we have launched a new remanufacturing facility in northern Mexico, which presently has approximately 250 employees and is operating at its targeted goals. We also solidified our entry into the professional installer market with our long-term exclusive contract with one of the largest automobile companies. In conjunction with this contract, the Company has further extended its logistic footprint to service the professional market nationally with the opening in the first quarter of a state-of-the-art 'single-pick' distribution facility in Nashville, Tennessee, and the opening this month of a fee-based distribution facility in New Jersey. Importantly, the anticipated revenues from this long- term contract will help diversify our existing customer concentration and secure further market share in our category. Despite the impact on liquidity and reported earnings in the short term, I am confident these initiatives strategically position MPA to be the leader in the industry."

"The correction of our accounting policies and the related restatements of our financial results has been a major undertaking, and we have worked diligently with our independent auditors to resolve our accounting issues," commented Mr. Joffe. "We believe that we have completed this process and are now positioned to devote our full attention to executing our business strategies."

Revenues for the quarter ending June 30, 2005 were $20.9 million, compared to $21.2 million in the same quarter last year. Revenues in the first quarter of fiscal 2006 were adversely impacted by $5.7 million of marketing allowances compared to $3.1 million in the first quarter of the prior year. Gross profit was $3.5 million as compared to $4.2 million in the first quarter of fiscal 2005. Gross profit was negatively impacted by the increase in marketing allowances referred to above and by start up costs associated with the opening of the new distribution center in Nashville, Tennessee and the opening of the Company's new production facility in Mexico.

Operating loss for the first quarter of fiscal 2006 was $1.7 million, compared to operating income of $784,000 in the same quarter last year. Operating expenses in the quarter reflected approximately $850,000 in consulting fees related to the review and the restatement of financial results and indemnification expenses for a former officer of the Company, both of which are expected to decline substantially in the near-term. Net loss and loss per share for the first quarter of fiscal 2006 were $1.3 million and $0.16 per basic share, versus net income and earnings per share of $265,000 and $0.03 per basic and diluted share for the same quarter last fiscal year.

"During this period, we expanded our production significantly to support the contract with one of the largest global automobile manufacturers targeted to the professional installer segment," said Joffe. "The costs to support this new contract negatively impacted our operating income and cash flows during the quarter. We believe that the underlying margins and operating metrics of our business remain very healthy. While this 'all makes, all models' program has not fully launched, we expect to experience increased shipping volume over the balance of fiscal 2006 and see this program as a significant future growth opportunity for MPA."

In June 2005, MPA commenced production at its facility in Mexico and operations continue to ramp up. Production at the Malaysia facility has also increased. During the quarter ended June 30, 2005, units produced outside the United States accounted for 14.8% of total production, compared with 10.7% in the same quarter last year. In total, these facilities are on target to contribute approximately 45% of total production by March 31, 2006.

"We are very pleased with the progress of the new manufacturing facility in Mexico and have been steadily increasing unit output each month. During the first quarter we experienced a negative margin impact due to start-up expenses. However, we expect this facility to have a favorable impact on our cost structure towards the 2006 fiscal year end as we scale up production," said Joffe.

Financial Condition

As of June 30, 2005, the Company reported cash used in operating activities of $4.0 million. The cash balance totaled $645,000 and working capital was $40.1 million. Shareholders' equity was $45.9 million. While the Company had no bank debt outstanding at quarter end, it did have outstanding bank debt of $6.8 million at September 30, 2005.

"The significant growth in inventory to support our expanded customer relationships, combined with increased marketing allowances, the launch of new remanufacturing and warehouse facilities, contributed to a reduction in our cash balance during the period. We expect to return to positive cash flow from operations in the second half of fiscal 2006, as we complete the inventory build to support our expanded business. We believe our available line of credit will provide sufficient financial resources to finance our growth and meet our working capital needs over the next twelve months," Joffe commented.

Business Outlook

"While the industry experienced softer than expected demand during the first quarter, we were able to continue to grow our share in an extremely competitive market. We expect to achieve another year of revenue growth during Fiscal 2006, following the 19% revenue growth reported in Fiscal 2005," Mr. Joffe concluded.

Restatement of Financial Statements

The financial statements contained in this release have been restated to correct an error in the calculation of core costs for purposes of determining the value of unreturned cores. The Company's prior method of valuing unreturned cores was based upon the weighted average cost of the cores in its total inventory. The Company has concluded that the valuation should instead be based upon the current standard cost for the cores being invoiced and returned during the preceding twelve months.

About MPA

Motorcar Parts of America, Inc. is a leading remanufacturer of replacement alternators and starters for imported and domestic cars and light trucks in the United States and Canada. MPA has facilities in the United States in Torrance, California, Nashville, Tennessee, and Charlotte, North Carolina, as well as overseas in Mexico, Singapore and Malaysia. The Company websites are located at www.motorcarparts.com and www.quality-built.com.

             MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
                       Consolidated Balance Sheets

                                          June 30, 2005     March 31, 2005
             ASSETS                        (Unaudited)
   Current Assets:
     Cash and cash equivalents               $645,000         $6,211,000
     Short term investments                   537,000            503,000
     Accounts receivable, net               8,577,000         11,513,000
     Inventory -- net                      56,979,000         48,587,000
     Deferred income tax asset              7,231,000          6,378,000
     Inventory unreturned                   2,998,000          2,409,000
     Prepaid expenses and
      other current assets                  1,779,000          1,365,000
       Total current assets                78,746,000         76,966,000
   Plant and equipment -- net               7,342,000          5,483,000
   Other assets                             1,149,000            899,000
     TOTAL ASSETS                         $87,237,000        $83,348,000

   LIABILITIES AND SHAREHOLDERS' EQUITY
   Current Liabilities:
     Accounts payable                     $21,002,000        $14,502,000
     Accrued liabilities                      419,000          1,378,000
     Accrued salaries and wages             3,267,000          2,235,000
     Accrued workers' compensation claims   2,257,000          2,217,000
     Income tax payable                       177,000            183,000
     Deferred compensation                    469,000            450,000
     Deferred income                          133,000            133,000
     Other current liabilities                 99,000             89,000
     Credit due customer                   10,340,000         12,543,000
     Current portion of capital
      lease obligations                       524,000            416,000
       Total current liabilities           38,687,000         34,146,000
   Deferred income, less current portion      488,000            521,000
   Deferred income tax liability              491,000            519,000
   Other liabilities                           43,000                 --
   Capitalized lease obligations,
    less current portion                    1,624,000            938,000
       Total Liabilities                  $41,333,000        $36,124,000

   Shareholders' Equity:
   Preferred stock; par value $.01
    per share, 5,000,000 shares
    authorized; none issued                        --                 --
   Series A junior participating
    preferred stock; no par value,
    20,000 shares authorized;
    None Issued                                    --                 --
   Common stock; par value $.01
    per share, 20,000,000 shares
    authorized; 8,183,955 shares
    issued and outstanding at
    June 30, 2005 and March 31, 2005           82,000             82,000
   Additional paid-in capital              53,627,000         53,627,000
   Accumulated other comprehensive loss       (34,000)           (55,000)
   Accumulated deficit                     (7,771,000)        (6,430,000)
       Total shareholders' equity          45,904,000         47,224,000
     TOTAL LIABILITIES &
      SHAREHOLDERS' EQUITY                $87,237,000        $83,348,000

             MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
                  Consolidated Statements of Operations
                               (Unaudited)
                                             Three Months Ended June 30,
                                              2005               2004
                                                              (Restated)

   Net sales                              $20,935,000        $21,232,000
   Cost of goods sold                      17,425,000         17,026,000
     Gross profit                           3,510,000          4,206,000
   Operating expenses:
     General and administrative             4,010,000          2,621,000
     Sales and marketing                      865,000            622,000
     Research and development                 314,000            179,000
     Total operating expenses               5,189,000          3,422,000
   Operating (loss) income                 (1,679,000)           784,000
   Interest expense, net of
    interest income                           548,000            351,000
   (Loss) income before income tax
    benefit (expense)                      (2,227,000)           433,000
   Income tax benefit (expense)               886,000           (168,000)
   Net (loss) income                       (1,341,000)           265,000
   Basic net (loss) income per share           $(0.16)             $0.03
   Diluted net (loss) income per share         $(0.16)             $0.03
   Weighted average number of
    shares outstanding:
     -- Basic                               8,183,955          8,094,450
     -- Diluted                             8,183,955          8,575,210

             MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
                  Consolidated Statements of Cash Flows
                               (Unaudited)

                                             Three Months Ended June 30,
                                               2005               2004
                                                               (Restated)
   Cash flows from operating activities:
   Net (loss) income                      $(1,341,000)          $265,000
   Adjustments to reconcile net (loss)
    income to net cash (used in)
    provided by operating activities:
   Depreciation and amortization              498,000            578,000
   Deferred income taxes                     (881,000)            93,000
   Tax benefit from employee
    stock options exercised                        --             75,000
   Changes in current assets
    and liabilities:
     Accounts receivable                    2,936,000          1,336,000
     Inventory                             (8,367,000)       (10,015,000)
     Inventory unreturned                    (588,000)        (1,087,000)
     Prepaid expenses and
      other current assets                   (443,000)           (77,000)
     Other current assets                    (252,000)             7,000
     Accounts payable and
      accrued liabilities                   6,629,000          8,237,000
     Income tax payable                        (5,000)                --
     Deferred compensation                     18,000             76,000
     Deferred income                          (33,000)                --
     Credit due customer                   (2,203,000)         6,529,000
     Other current liabilities                 54,000             47,000
       Net cash provided by operating
        activities                         (3,978,000)         6,064,000
   Cash flows from investing activities:
     Purchase of property, plant and
      equipment                            (1,437,000)          (231,000)
     Change in short term investments         (28,000)           (83,000)
       Net cash used in investing
        activities                         (1,465,000)          (314,000)
   Cash flows from financing activities
     Net (payments) borrowings
      under line of credit                         --         (3,000,000)
     Net payments on capital lease
      obligations                            (122,000)          (117,000)
     Exercise of stock options                     --             70,000
       Net cash used in financing
        activities                           (122,000)        (3,047,000)
   Effect of exchange rate changes on cash     (1,000)            (1,000)
   NET (DECREASE) INCREASE IN CASH AND
    CASH EQUIVALENTS                       (5,566,000)         2,702,000
   CASH AND CASH EQUIVALENTS - BEGINNING
    OF PERIOD                               6,211,000          7,630,000
   CASH AND CASH EQUIVALENTS - END OF
    PERIOD                                   $645,000        $10,332,000
   Supplemental disclosures of
    cash flow information:
     Cash paid during the period for:
       Interest                              $557,000           $351,000
       Income taxes                               $--            $50,000
     Non-cash investing and
      financing activities:
       Property acquired under
        capital lease                        $916,000                $--