Motorcar Parts of America, Inc. Announces Second Quarter Fiscal Year 2006 Results
LOS ANGELES, Nov. 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 second quarter of fiscal 2006.
Revenues for the quarter ending September 30, 2005 were $29.7 million, up 18.8% from $25.0 million in the same quarter last year. Gross profit and gross margin were $8.5 million and 28.7%, respectively, versus $7.0 million and 27.9% in the second quarter of fiscal 2005. The improvement in gross margin reflects decreased direct labor costs in the most recent quarter.
Operating income for the second quarter of fiscal 2006 was $3.4 million, down 10.5% from $3.8 million in the same quarter last year. Operating expenses in the quarter reflected higher outside professional and consulting fees associated with the SEC's review of our regulatory filings and the related restatement of our financial statements, expenses related to our new facilities in Nashville and Mexico, consulting fees to comply with the Sarbanes-Oxley Act of 2002 and additional sales, marketing, general and administrative expenses to support the new business we have received. Net income in the second quarter of fiscal 2006 was $1.7 million, or $0.19 per diluted share, compared to $2.1 million, or $0.25 per diluted share for the same quarter last fiscal year.
Selwyn Joffe, MPA's Chairman, President and CEO, said, "The second quarter of fiscal 2006 was a productive one for MPA. We had strong revenue growth and returned to profitability. Equally as important, we continued to make progress executing our strategic initiatives. Our offshore production is growing according to plan. In addition, our entry in the professional installer market was enhanced by the opening of our fee-based distribution facility in New Jersey in October."
For the six months ended September 30, 2005, revenues were $50.7 million, up 9.7% from the first half of fiscal 2005. Gross profit was $12.0 million, up from $11.2 million in the first half of last year. Operating income was $1.8 million, versus $4.6 million in the first half of last year. Net income was $340,000, or $0.04 per diluted share, compared to $2.4 million, or $0.28 cents per diluted share.
Financial Condition
As of September 30, 2005, the Company reported cash and short term investments of $1.9 million and working capital of $40.6 million. The Company had outstanding bank debt of $6.8 million and shareholders' equity was $47.7 million.
Mervyn McCulloch, who replaced Charles Yeagley as MPA's Chief Financial Officer in October 2005, noted that "during the second quarter, we completed our inventory build-up to support our new business and made the majority of the expenditures estimated to be required in connection with our new remanufacturing facility in Mexico. We have returned to profitability and since quarter-end, we have secured an additional $4.1 million in financing."
Business Outlook
"Overall, I am pleased with our execution to date. Our strategies of building strong customer relationships, lowering our costs through overseas production and extending our reach into the professional installer market allow us to grow in a competitive environment. We are on plan and steadily making progress in achieving our goals, but realize there is still a lot of work ahead of us," said Mr. Joffe. "Looking forward to the third quarter, early indications of revenue growth are positive. While the company still has expenses associated with our revenue growth which will affect our near term results, we expect our initiatives will result in improved future financial results."
Restatement of Financial Statements
The financial statements for the three and six months ended September 30, 2004 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. As previously disclosed, the Company's prior method of valuing unreturned cores was based upon the cost of the cores in its total inventory. The Company has concluded that the valuation should instead be based upon the 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 in Mexico, Singapore and Malaysia. The Company websites are located at www.motorcarparts.com and www.quality-built.com.
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF OPERATIONS AND
CONSOLIDATED STATEMENTS OF CASH FLOWS FOLLOW
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
September 30, March 31,
2005 2005
ASSETS
Current assets:
Cash and cash equivalents $ 1,257,000 $ 6,211,000
Short term investments 632,000 503,000
Accounts receivable ---- net 11,222,000 11,513,000
Inventory ---- net 59,577,000 48,587,000
Deferred income tax asset 6,156,000 6,378,000
Inventory unreturned 5,168,000 2,409,000
Prepaid expenses and other current assets 1,661,000 1,365,000
Total current assets 85,673,000 76,966,000
Plant and equipment ---- net 8,599,000 5,483,000
Other assets 1,334,000 899,000
TOTAL ASSETS $ 95,606,000 $ 83,348,000
LIABILITIES
Current liabilities:
Accounts payable $ 23,691,000 $ 14,502,000
Accrued liabilities 350,000 1,378,000
Accrued salaries and wages 1,920,000 2,235,000
Accrued workers' compensation claims 2,776,000 2,217,000
Line of credit 6,831,000 --
Income tax payable 177,000 183,000
Deferred compensation 535,000 450,000
Deferred income 133,000 133,000
Other current liabilities 174,000 89,000
Credit due customer 7,746,000 12,543,000
Current portion of capital lease obligations 697,000 416,000
Total current liabilities 45,030,000 34,146,000
Deferred income, less current portion 454,000 521,000
Deferred income tax liability 443,000 519,000
Other liabilities 44,000 --
Capitalized lease obligations, less current
portion 1,940,000 938,000
TOTAL LIABILITIES 47,911,000 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; 8,208,955 and
8,183,955 shares issued and outstanding at
September 30, 2005 and March 31, 2005 82,000 82,000
Additional paid-in capital 53,751,000 53,627,000
Accumulated other comprehensive loss (48,000) (55,000)
Accumulated deficit (6,090,000) (6,430,000)
TOTAL SHAREHOLDERS' EQUITY 47,695,000 47,224,000
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 95,606,000 $ 83,348,000
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
2005 2004 2005 2004
(Restated) (Restated)
Net sales $29,721,000 $24,997,000 $50,656,000 $46,229,000
Cost of goods sold 21,190,000 18,014,000 38,615,000 35,040,000
Gross profit 8,531,000 6,983,000 12,041,000 11,189,000
Operating expenses:
General and
administrative 4,047,000 2,416,000 8,057,000 5,037,000
Sales and marketing 764,000 511,000 1,629,000 1,133,000
Research and development 275,000 209,000 589,000 388,000
Total operating
expenses 5,086,000 3,136,000 10,275,000 6,558,000
Operating income 3,445,000 3,847,000 1,766,000 4,631,000
Interest expense ---- net
of interest income 654,000 449,000 1,202,000 800,000
Income before income tax
expense 2,791,000 3,398,000 564,000 3,831,000
Income tax expense 1,110,000 1,257,000 224,000 1,425,000
Net income $ 1,681,000 $ 2,141,000 $ 340,000 $ 2,406,000
Basic net income per
share $ 0.21 $ 0.26 $ 0.04 $ 0.30
Diluted net income per
share $ 0.19 $ 0.25 $ 0.04 $ 0.28
Weighted average number
of shares outstanding:
---- basic 8,195,640 8,157,172 8,189,829 8,125,982
---- diluted 8,729,235 8,603,916 8,739,232 8,590,254
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
September 30,
2005 2004
(Restated)
Cash flows from operating activities:
Net income $ 340,000 $ 2,406,000
Adjustments to reconcile net income to net
cash (used in) provided by operating
activities:
Depreciation and amortization 988,000 1,006,000
Deferred income taxes 144,000 1,206,000
Tax benefit from employee stock options
exercised 101,000 219,000
Changes in current assets and liabilities:
Accounts receivable 291,000 3,954,000
Inventory (10,986,000) (17,860,000)
Prepaid income tax -- (49,000)
Inventory unreturned (2,759,000) (584,000)
Prepaid expenses and other current assets (304,000) (90,000)
Other current assets (437,000) 5,000
Accounts payable and accrued liabilities 8,392,000 6,824,000
Income tax payable (5,000) --
Deferred compensation 85,000 101,000
Deferred income (67,000) --
Credit due customer (4,797,000) 12,912,000
Other current liabilities 131,000 (82,000)
Net cash (used in) provided by operating
activities (8,883,000) 9,968,000
Cash flows from investing activities:
Purchase of property, plant and equipment (2,532,000) (364,000)
Change in short term investments (95,000) (108,000)
Net cash used in investing activities (2,627,000) (472,000)
Cash flows from financing activities:
Net borrowings (payments) under line of credit 6,831,000 (3,000,000)
Net payments on capital lease obligations (279,000) (212,000)
Exercise of stock options 23,000 241,000
Net cash provided by (used in) financing
activities 6,575,000 (2,971,000)
Effect of exchange rate changes on cash (19,000) (1,000)
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (4,954,000) 6,524,000
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 6,211,000 7,630,000
CASH AND CASH EQUIVALENTS - END OF PERIOD $1,257,000 $ 14,154,000
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $1,216,000 $ 830,000
Income taxes $ -- $ 50,000
Non-cash investing and financing activities:
Property acquired under capital lease $1,562,000 $ --