Motorcar Parts of America, Inc. Announces First Quarter of Fiscal 2007 Results
MPA Reports Record Sales and Operating Income for First Quarter
LOS ANGELES, Aug. 14 -- Motorcar Parts of America, Inc. ("MPA") , a leading remanufacturer of alternators and starters for the automotive aftermarket, announced today financial results for it's first quarter fiscal 2007 ended June 30, 2006.
Net sales for the quarter ending June 30, 2006 were $27.2 million, up 27.5% from $21.4 million in the same quarter last year. Gross profit and gross margin were $7.0 million and 25.9%, respectively, as compared to $3.4 million and 15.9%, respectively, in the first quarter of fiscal 2006. Sales and gross profit in last year's comparable period were negatively impacted by marketing allowances of $5.7 million compared to $4.5 million for the quarter ended June 30, 2006.
Operating income for the first quarter of fiscal 2007 was $2.7 million, compared to an operating loss of $1.8 million in the same quarter of the prior year. Operating expenses declined 15.3% in the quarter, principally due to lower general and administrative expenses. The prior year period includes the impact of outside professional and consulting fees related to the SEC's review and the subsequent restatement of the company's financial statements. These expenses declined significantly in the first quarter of fiscal 2007. This decline was partially offset by higher sales, marketing and research and development costs incurred in connection with new business awarded, sales efforts in the professional installer marketplace, the company's initial recognition of equity-based compensation expense as well as the company's commitment to value-added customer service. Interest expense increased in the first quarter of fiscal 2007 due to greater utilization of the line of credit and increases in interest rates. Net income in the first quarter of fiscal 2007 was $1.1 million, or $0.13 per diluted share, compared to a net loss of $1.4 million, or $(0.17) per diluted share in the first quarter of fiscal 2006.
Selwyn Joffe, MPA's Chairman, President and CEO, said, "This was a solid quarter for MPA. We delivered 13.8% growth in our top line and improved the gross margin by 100 basis points, after adjusting for front loaded marketing allowances in the first quarter of last year. This increase in gross margin reflects well on the progress of our offshore initiatives. Production at our offshore facilities accounted for almost 60% of total production during the quarter, and we are on track to produce 95% of our total production needs outside the U.S. by the end of the current fiscal year."
Financial Condition
As of June 30, 2006, the company had cash and equivalents of $97,000, working capital of $46.2 million and total assets of $110.9 million. Debt and capital lease obligations totaled $20.9 million and shareholders' equity was $52.8 million. Cash used in operations was $7.1 million in the first quarter of fiscal 2007, compared to $4.0 million in the same period last year. In August 2006, the company increased its credit facility to $35.0 million from $25.0 million.
Mervyn J. McCulloch, MPA's Chief Financial Officer, commented, "During the first quarter, we issued the final credit under our pay-on scan arrangement with our largest customer, which had a negative impact on our operating cash flow. Although our working capital requirements remain high, we believe our recently expanded credit agreement will provide us with sufficient liquidity to meet our currently anticipated needs."
Business Outlook
"Despite some industry softness in sales during the first quarter of fiscal 2007, we are off to a great start, with solid revenue growth and profitability. We continue to execute our strategies, and the results are encouraging. Not only have we continued to improve our cost structure, but our commitment to quality and excellent customer service allowed us to gain valuable new customers. Going forward, we expect continued revenue growth from our existing customers and expect to see additional revenue contributions from our new customer agreements sometime in the second quarter. As we continue to transition production to our offshore facilities, we expect our production costs to continue to decline, but we expect to experience some additional cost inefficiencies until our Torrance production and related support operations are fully relocated. MPA is on the right path, and we are beginning to see the strength of our business model and strategic initiatives," said Mr. Joffe.
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, and Nashville, Tennessee, as well as in Mexico, Singapore and Malaysia. MPA's websites are located at www.motorcarparts.com and www.quality-built.com.
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, March 31,
2006 2006
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $97,000 $400,000
Short term investments 681,000 660,000
Accounts receivable - net 14,698,000 13,775,000
Due from customer 2,005,000 --
Inventory - net 64,317,000 59,337,000
Deferred income tax asset 5,827,000 5,809,000
Inventory unreturned 7,333,000 7,052,000
Prepaid expenses and other current assets 1,748,000 918,000
Total current assets 96,706,000 87,951,000
Plant and equipment - net 12,766,000 12,164,000
Other assets 1,444,000 1,231,000
TOTAL ASSETS $110,916,000 $101,346,000
LIABILITIES
Current liabilities:
Accounts payable $24,467,000 $21,882,000
Accrued liabilities 1,136,000 1,587,000
Accrued salaries and wages 2,651,000 2,267,000
Accrued workers' compensation claims 3,832,000 3,346,000
Income tax payable 1,086,000 1,094,000
Line of credit 14,900,000 6,300,000
Deferred compensation 521,000 495,000
Deferred income 133,000 133,000
Other current liabilities 266,000 988,000
Credit due customer -- 1,793,000
Current portion of capital lease obligations 1,499,000 1,499,000
Total current liabilities 50,491,000 41,384,000
Deferred income, less current portion 355,000 388,000
Deferred income tax liability 498,000 562,000
Deferred gain on sale-leaseback 2,248,000 2,377,000
Other liabilities 46,000 46,000
Capitalized lease obligations, less current
portion 4,520,000 4,857,000
TOTAL LIABILITIES 58,158,000 49,614,000
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; 8,324,455 and
8,316,105 shares issued and outstanding at
June 30, 2006 and March 31, 2006, respectively 83,000 83,000
Additional paid-in capital 54,498,000 54,326,000
Accumulated other comprehensive (loss) income (155,000) 85,000
Accumulated deficit (1,668,000) (2,762,000)
TOTAL SHAREHOLDERS' EQUITY 52,758,000 51,732,000
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $110,916,000 $101,346,000
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
June 30,
2006 2005
Net sales $27,223,000 $21,351,000
Cost of goods sold 20,177,000 17,965,000
Gross profit 7,046,000 3,386,000
Operating expenses:
General and administrative 3,072,000 4,010,000
Sales and marketing 905,000 865,000
Research and development 416,000 314,000
Total operating expenses 4,393,000 5,189,000
Operating income (loss) 2,653,000 (1,803,000)
Interest expense - net of interest income 822,000 548,000
Income (loss) before income tax expense
(benefit) 1,831,000 (2,351,000)
Income tax expense (benefit) 737,000 (931,000)
Net income (loss) $1,094,000 $(1,420,000)
Basic net income (loss) per share $0.13 $(0.17)
Diluted net income (loss) per share $0.13 $(0.17)
Weighted average number of shares outstanding:
-- basic 8,322,920 8,183,955
-- diluted 8,582,209 8,183,955
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
June 30,
2006 2005
Cash flows from operating activities:
Net income (loss) $1,094,000 $(1,420,000)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 649,000 498,000
Amortization of deferred gain on
sale-leaseback (129,000) --
Provision for (recovery of) inventory
reserves and stock adjustments (267,000) 24,000
Recovery of doubtful accounts (14,000) --
Deferred income taxes (82,000) (881,000)
Share-based compensation expense 115,000 --
Excess tax benefit from employee stock
options exercised (28,000) --
Changes in current assets and liabilities:
Accounts receivable (446,000) 2,498,000
Due from customer (2,005,000) --
Inventory (5,176,000) (8,246,000)
Inventory unreturned (281,000) (171,000)
Prepaid expenses and other current assets (830,000) (443,000)
Other assets (213,000) (252,000)
Accounts payable and accrued liabilities 3,004,000 6,629,000
Income tax payable (8,000) (50,000)
Deferred compensation 26,000 18,000
Deferred income (33,000) (33,000)
Credit due customer (1,793,000) (2,203,000)
Other current liabilities (722,000) 54,000
Net cash used in operating activities (7,139,000) (3,978,000)
Cash flows from investing activities:
Purchase of property, plant and equipment (1,278,000) (1,437,000)
Change in short term investments (21,000) (28,000)
Net cash used in investing activities (1,299,000) (1,465,000)
Cash flows from financing activities:
Net borrowings under line of credit 8,600,000 --
Net payments on capital lease obligations (310,000) (122,000)
Exercise of stock options 57,000 --
Excess tax benefit from employee stock
options exercised 28,000 --
Net cash provided by (used in)
financing activities 8,375,000 (122,000)
Effect of exchange rate changes on cash (240,000) (1,000)
NET DECREASE IN CASH AND CASH EQUIVALENTS (303,000) (5,566,000)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 400,000 6,211,000
CASH AND CASH EQUIVALENTS - END OF PERIOD $97,000 $645,000