Motorcar Parts of America, Inc. Announces First Quarter FY 2005 Results
LOS ANGELES--Aug. 1, 20047, 2004--Motorcar Parts of America, Inc. ("MPA") (OTC:MPAA), a leading provider of remanufactured starters and alternators for the automotive aftermarket, today reported financial and operating results for the first quarter of its Fiscal Year 2005 ended June 30, 2004.Financial Highlights:
-- Q1 revenues increase to $41.1 million, 11% over Q1 of FY04 revenue
-- Q1 net income of $91,000, or $0.01, versus $680,000, or $0.08, in Q1 of FY04
-- Operating cash flow of $6 million in Q1 FY05
-- Debt free balance sheet as of June 30, 2004
"In the first quarter of fiscal 2005, we continued to make significant strides in executing on our financial, strategic and operational objectives, and the momentum in our business continues to build," declared Selwyn Joffe, Chairman and CEO. "While our first quarter results were negatively impacted by the transition costs we incurred to implement the ramp up for our new business with a major customer, we remain confident about our ability to produce very positive results from our new sales and operating initiatives."
Q1 FY05 Results
First quarter revenues increased by 10.9% to $41.1 million, compared to $37.1 million in the first quarter of fiscal 2004.
Gross margin decreased to $3.7 million, or 8.9% of sales, from $4.1 million, or 11% of sales, in the first quarter of the prior fiscal year. Gross margin was negatively impacted by a number of transition expenses associated with the implementation of new business, including the pay-on-scan (POS) program. These expenses included approximately $700,000 of overtime costs incurred to ramp-up our production, approximately $460,000 of costs incurred to purchase cores as part of the expanded relationship and approximately $200,000 of costs to ship products that are being sold on a POS basis and, as a result, were not recorded as sales during our first fiscal quarter. In addition, stock adjustments we provided to our customers reduced our gross margin by $1,753,000, an amount that exceeds our currently anticipated quarterly stock adjustments by approximately $550,000. These costs reduced our gross margin percentage by 4.6%.
In connection with the stock adjustments we accepted, we received an approximately $13,000,000 of update orders, substantially all of which is expected to be shipped on a POS basis by the end of the second quarter of fiscal 2005. First quarter unit shipments were up approximately 22% over the equivalent period last fiscal year, and shipments during the month of July were up by 46% from prior year levels. We are also seeing strong interest in the professional installer market segment from new customers for our Quality Built(TM) product line for professional installers.
General and administrative expense was $2.4 million for the first quarter of FY05, as compared to $2.4 million in the prior year. Sales and marketing expense increased by 112% to $622,000 in the first quarter, from $293,000 in the prior year quarter. Spending on research & development increased by 24% to $179,000, from $144,000 in the first quarter of FY04.
Operating income was $493,000, or 1.2% of sales, in the first quarter, as compared to $1.3 million, or 3.5% of sales, in the first quarter of FY04.
Net income for the first quarter was $91,000, or $0.01 per basic and diluted share, compared to $680,000, or $0.08 per basic and diluted share, in the same period in fiscal 2004.
Q1 Operating Highlights
MPA's accomplishments for the first quarter of FY 2005 included:
-- Ramped up production under the expanded relationship with MPA's largest customer, which designated MPA as the primary supplier of import alternators and starters in the U.S.
-- Signed first major supply agreement and began shipment of the Quality Built(TM) line of alternators and starters targeted to the traditional aftermarket
-- Went live with new on-line diagnostic system, web-based catalog, and a distribution portal for the Quality-Built(TM) line
Financial Condition
During the quarter ended June 30, 2004, the Company generated $6 million in cash from operating activities, compared with $6.5 million in the first quarter of fiscal 2004.
Mr. Joffe commented, "As of June 30, 2004, the Company had $10.3 million in cash, $40.6 million in working capital, with no debt, and shareholders' equity of $43.8 million. This strong financial condition provides us with the flexibility to execute our strategic growth initiatives."
Business Outlook
"The second quarter is off to a strong start, with record unit shipments during the month of July. We anticipate that the combination of growing share with our existing customers and our entry into the professional installer market with our Quality-Built(TM) brand will drive double-digit revenue growth for the full year 2005. In addition, as we move through the transition expenses associated with the ramp up of our new distribution opportunities, we expect our gross margins to improve," concluded Mr. Joffe.
Conference call
MPA will host a conference call at 6:30 a.m. PDT (9:30 a.m. EDT) today Tuesday, August 17, 2004, to discuss results for the first quarter Fiscal 2005. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 800-399-7496. International callers should dial 706-634-6508. There is no pass code required for this call. If you are unable to participate in the call at this time, a replay will be available on Tuesday, August 17, at 11:00 a.m. PDT, through Tuesday, August 24, at 9:00 p.m. PDT. To access the replay dial 800-642-1687 and enter the conference ID number 9377722. This conference call will be broadcast live over the Internet and can be accessed by all interested parties on the MPA website at www.motorcarparts.com. To listen to the live call, please go to the MPA website at least fifteen minutes prior to the start of the call to register, download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available shortly after the call on MPA's website for 90 days.
About MPA
Motorcar Parts of America, Inc. (MPA) is a leading manufacturer 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, Calif.; Nashville, Tenn.; and Charlotte, N.C., as well as overseas in 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 Statements of Operations
(Unaudited)
Three Months Ended
June 30,
----------------------
2004 2003
---------- ----------
Net sales $41,128,000 $37,102,000
Cost of goods sold 37,429,000 33,000,000
---------- ----------
Gross Margin 3,699,000 4,102,000
---------- ----------
Operating expenses:
General and administrative 2,405,000 2,362,000
Sales and marketing 622,000 293,000
Research and development 179,000 144,000
---------- ----------
Total operating expenses 3,206,000 2,799,000
---------- ----------
Operating income 493,000 1,303,000
Interest expense -- net 351,000 293,000
---------- ----------
Income before income taxes 142,000 1,010,000
Provision for income taxes 51,000 330,000
---------- ----------
Net income $91,000 $680,000
========== ==========
Basic income per share $.01 $.08
========== ==========
Diluted income per share $.01 $.08
========== ==========
Weighted average number of shares outstanding:
-- basic 8,094,450 8,001,334
-- diluted 8,575,210 8,082,152
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, March 31,
2004 2004
---------- ----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $10,332,000 $7,630,000
Short term investments 371,000 288,000
Accounts receivable -- net 14,726,000 14,626,000
Inventory -- net 38,657,000 28,744,000
Deferred income tax asset 7,974,000 8,124,000
Prepaid Income tax 20,000 172,000
Prepaid expenses and other current assets 910,000 880,000
---------- ----------
Total current assets 73,019,000 60,464,000
---------- ----------
Plant and equipment -- net 4,416,000 4,758,000
Other assets 759,000 774,000
---------- ----------
TOTAL ASSETS $78,165,000 $65,996,000
========== ==========
LIABILITIES
Current liabilities:
Accounts payable $21,733,000 $13,456,000
Accrued liabilities 2,811,000 2,851,000
Line of credit -- 3,000,000
Deferred compensation 336,000 260,000
Other current liabilities 605,000 62,000
Liability to customer 6,529,000 --
Current portion of capital lease obligations 378,000 409,000
---------- ----------
Total current liabilities 32,392,000 20,038,000
Deferred income taxes 714,000 1,016,000
Deferred income 145,000 100,000
Capitalized lease obligations, less current
portion 1,159,000 1, 247,000
---------- ----------
Total liabilities 34,410,000 22,401,000
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; 8,118,455 and
8,085,955 shares issued and outstanding at
June 30, 2004 and March 31, 2004 81,000 81,000
Additional paid-in capital 53,166,000 53,096,000
Accumulated other comprehensive loss (79,000) (78,000)
Accumulated deficit (9,413,000) (9,504,000)
---------- ----------
Total shareholders' equity 43,755,000 43,595,000
---------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $78,194,000 $65,996,000
========== ==========
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
June 30,
--------------------
2004 2003
--------- ---------
Cash flows from operating activities:
Net income $91,000 $680,000
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities
Depreciation and amortization 578,000 604,000
Provision for deferred income taxes 51,000 344,000
(Increase) decrease in:
Accounts receivable (100,000) 1,729,000
Inventory (9,917,000) 1,575,000
Prepaid expenses and other current
assets (77,000) (157,000)
Other assets 7,000 4,000
Increase (decrease) in:
Accounts payable and accrued expenses 8,237,000 1,598,000
Deferred compensation 76,000 (9,000)
Liability to customer 6,529,000 --
Other liabilities 589,000 103,000
--------- ---------
Net cash provided by (used in)
operating activities 6,064,000 6,471,000
--------- ---------
Cash flows from investing activities:
Purchase of plant and equipment (231,000) (593,000)
Change in short term investments (83,000) (43,000)
--------- ---------
Net cash used in investing
activities (314,000) (636,000)
--------- ---------
Cash flows from financing activities:
Net (payments) borrowings under line of
credit (3,000,000)(5,482,000)
Payments on capital lease obligation (117,000) 22,000
Exercise of stock options 70,000 66,000
Repurchase of warrants and stock options -- (713,000)
--------- ---------
Net cash (used in) provided by
financing activities (3,047,000)(6,107,000)
--------- ---------
Effect of exchange rate changes on cash (1,000) (37,000)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,702,000 (309,000)
CASH AND CASH EQUIVALENTS -- BEGINNING OF PERIOD 7,630,000 1,307,000
--------- ---------
CASH AND CASH EQUIVALENTS -- END OF PERIOD $10,332,000 $998,000
========== =========
Supplemental disclosures of cash flow
information:
Cash paid during the quarter for:
Interest $351,000 $293,000
Income taxes $50,000 $1,000
Non-cash investing and financing activities:
Property acquired under capital lease -- $277,000