Business Wire | Aug 9, 2021 08:00AM EDT

Motorcar Parts of America Reports Strong Fiscal 2022 First Quarter

Aug. 09, 2021

LOS ANGELES--(BUSINESS WIRE)--Aug. 09, 2021--Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2022 first quarter ended June 30, 2021 - reflecting record sales for a fiscal first quarter.

Net sales for the fiscal 2022 first quarter increased 56.3 percent to $149.0 million from $95.4 million a year ago, and 36.5 percent from the pre-COVID fiscal first quarter two years ago.

Net income for the fiscal 2022 first quarter was $861,000, or $0.04 per diluted share, compared with a net loss of $3.0 million, or $0.16 per share, a year ago. Details of items impacting net income are shown in Exhibit 1.

"Net sales and profitability for the fiscal first quarter benefitted, despite global supply chain-related disruptions, from continued strong demand for non-discretionary aftermarket parts -- enhanced by the success of our multi-year strategic footprint expansion, including brake-related product line growth," said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.

Joffe noted that the first quarter benefitted from the opening up of the economy and stimulus payments. He added that customers purchased products earlier than normal to accommodate the anticipated stronger demand. "The success of the brake caliper program, which is seasonally stronger in the fiscal first quarter, contributed to solid growth early in our fiscal year," Joffe emphasized.

"In addition, our presence in the electric vehicle market continued to gain momentum driven by increasing demand for battery power emulation, testing and development of inverters, electric motors, and high-speed battery-charging station applications offered by our wholly owned D&V subsidiary," Joffe added.

Gross profit and operating expenses for the fiscal first quarter were impacted by COVID-19 expenses related to safety, health initiatives, inefficiencies in the supply chain and incrementally higher freight costs of approximately $5.3 million on a pre-tax basis, or $0.20 per share on a tax-effected basis.

Net cash used in operating activities was $4.7 million for the fiscal 2022 first quarter and net debt was $97.6 million at June 30, 2021 compared with $88.9 million at March 31, 2021, reflecting working capital requirements to support the record first quarter sales and inventory increases for anticipated business growth in fiscal 2022.

Gross profit for the fiscal 2022 first quarter was $23.6 million compared with $13.4 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2022 first quarter was 15.8 percent compared with 14.0 percent a year earlier. Gross margin was primarily impacted by higher costs related to COVID-19; brake caliper start-up costs and other product relocation expenses related to the expansion in Mexico, both of which are now nearing completion; and other items, including non-cash and non-economic expenses totaling 7.0 percent, as detailed in Exhibit 2 of the press release. In addition to the above items, gross profit was further impacted by growth initiatives in connection with the expansion of our new product lines, and inflationary costs related to the global pandemic, especially disruptions with worldwide supply chain and logistics services.

"We are encouraged by the strong demand for automotive replacement parts, despite the global challenges related to the pandemic. Our product line expansion strategy continues to gain momentum and we remain focused on sales growth and opportunities to achieve further operating efficiencies, and enhanced profitability," Joffe said.

Use of Non-GAAP Measure

This press release includes the following non-GAAP measure - EBITDA, which is not a measure of financial performance under GAAP and should not be considered as an alternative to net income as a measure of financial performance. The company believes this non-GAAP measure, when considered together with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to the company's results of operations. However, this non-GAAP measure has significant limitations in that it does not reflect all the costs and other items associated with the operation of the company's business as determined in accordance with GAAP. In addition, the company's non-GAAP measures may be calculated differently and are therefore not comparable to similar measures by other companies. Therefore, investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, measures of financial performance in accordance with GAAP. For a reconciliation of EBITDA to its corresponding GAAP measures, see the financial tables included in this press release. Also, refer to our Form 8-K to which this release is attached, and other filings we make with the SEC, for further information regarding these measures.

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.

The call will be open to all interested investors either through a live audio Web broadcast at www.motorcarparts.com or live by calling (833)-968-1924 (domestic) or (825)-312-2355 (international). For those who are not available to listen to the live broadcast, the call will be archived on Motorcar Parts of America's website www.motorcarparts.com. A telephone playback of the conference call will also be available from approximately 1:00 p.m. Pacific time on August 9, 2021 through 8:59 p.m. Pacific time on August 16, 2021 by calling (800)-585-8367 (domestic) or (416)-621-4642 (international) and using access code: 4699341.

About Motorcar Parts of America, Inc.

Motorcar Parts of America, Inc. is a remanufacturer, manufacturer, and distributor of automotive aftermarket parts -- including alternators, starters, wheel bearings and hub assemblies, brake calipers, brake master cylinders, brake power boosters, turbochargers, and diagnostic testing equipment utilized in imported and domestic passenger vehicles, light trucks, and heavy-duty applications. Its products are sold to automotive retail outlets and the professional repair market throughout the United States, Canada, and Mexico, with facilities located in California, New York, Mexico, Malaysia, China and India, and administrative offices located in California, Tennessee, Mexico, Singapore, Malaysia, and Canada. In addition, the company's electrical vehicle subsidiary designs and manufactures testing solutions for performance, endurance, and production of multiple components in the electric power train - providing simulation, emulation, and production applications for the electrification of both automotive and aerospace industries, including electric vehicle charging systems. 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 2021 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.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)



Three Months Ended

June 30,

2021 2020

Net sales $ 149,034,000 $ 95,356,000

Cost of goods sold 125,463,000 81,969,000

Gross profit 23,571,000 13,387,000

Operating expenses:General and administrative 12,486,000 11,687,000

Sales and marketing 5,368,000 4,200,000

Research and development 2,501,000 1,942,000

Foreign exchange impact of lease liabilities (2,533,000 ) (4,817,000 )and forward contractsTotal operating expenses 17,822,000 13,012,000

Operating income 5,749,000 375,000

Interest expense, net 3,941,000 4,409,000

Income (loss) before income tax expense 1,808,000 (4,034,000 )(benefit)Income tax expense (benefit) 947,000 (1,022,000 )

Net income (loss) $ 861,000 $ (3,012,000 )

Basic net income (loss) per share $ 0.05 $ (0.16 )

Diluted net income (loss) per share $ 0.04 $ (0.16 )

Weighted average number of sharesoutstanding:Basic 19,054,481 18,976,178

Diluted 19,659,057 18,976,178

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

June 30, 2021

March 31, 2021

ASSETS(Unaudited)Current assets:Cash and cash equivalents$

24,883,000

$

15,523,000

Short-term investments1,823,000

1,652,000

Accounts receivable - net54,019,000

63,122,000

Inventory320,685,000

302,913,000

Contract assets26,264,000

26,940,000

Prepaid expenses and other current assets13,307,000

12,706,000

Total current assets440,981,000

422,856,000

Plant and equipment - net53,287,000

53,854,000

Operating lease assets87,924,000

71,513,000

Long-term deferred income taxes19,150,000

19,381,000

Long-term contract assets293,158,000

270,213,000

Goodwill and intangible assets - net8,194,000

8,534,000

Other assets1,246,000

1,531,000

TOTAL ASSETS$

903,940,000

$

847,882,000

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued liabilities$

141,451,000

$

152,735,000

Customer finished goods returns accrual35,261,000

31,524,000

Contract liabilities40,988,000

41,072,000

Revolving loan103,000,000

84,000,000

Other current liabilities5,774,000

6,683,000

Operating lease liabilities5,434,000

6,439,000

Current portion of term loan3,670,000

3,678,000

Total current liabilities335,578,000

326,131,000

Term loan, less current portion15,804,000

16,786,000

Long-term contract liabilities153,504,000

125,223,000

Long-term deferred income taxes76,000

73,000

Long-term operating lease liabilities85,889,000

70,551,000

Other liabilities7,862,000

7,973,000

Total liabilities598,713,000

546,737,000

Commitments and contingenciesShareholders' 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, 50,000,000 shares authorized;19,101,092 and 19,045,386 shares issued and outstanding at June 30, 2021 andMarch 31, 2021, respectively191,000

190,000

Additional paid-in capital224,445,000

223,058,000

Retained earnings86,454,000

85,593,000

Accumulated other comprehensive loss(5,863,000

)

(7,696,000

)

Total shareholders' equity305,227,000

301,145,000

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$

903,940,000

$

847,882,000

Additional Information and Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the company has included the following additional information and non-GAAP financial measures for the three months ended June 30, 2021 and 2020. Among other things, the company uses such additional information and non-GAAP adjusted financial measures in addition to and together with corresponding GAAP measures to help analyze the performance of its business.

The company believes this information helps provide a more complete understanding of the company's results of operations and the factors and trends affecting the company's business. However, this information should be considered as a supplement to, and not as a substitute for, or superior to, information contained in the company's financial statements prepared in accordance with GAAP. In addition, the company's non-GAAP measures may be calculated differently and are therefore not comparable to similar measures by other companies.

The company defines EBITDA as earnings before interest, taxes, depreciation, and amortization. A reconciliation of EBITDA to net income is provided below along with information regarding such items.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets



June 30, 2021 March 31, 2021

ASSETS (Unaudited)Current assets:Cash and cash equivalents $ 24,883,000 $ 15,523,000

Short-term investments 1,823,000 1,652,000

Accounts receivable - net 54,019,000 63,122,000

Inventory 320,685,000 302,913,000

Contract assets 26,264,000 26,940,000

Prepaid expenses and other current assets 13,307,000 12,706,000

Total current assets 440,981,000 422,856,000

Plant and equipment - net 53,287,000 53,854,000

Operating lease assets 87,924,000 71,513,000

Long-term deferred income taxes 19,150,000 19,381,000

Long-term contract assets 293,158,000 270,213,000

Goodwill and intangible assets - net 8,194,000 8,534,000

Other assets 1,246,000 1,531,000

TOTAL ASSETS $ 903,940,000 $ 847,882,000

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued liabilities $ 141,451,000 $ 152,735,000

Customer finished goods returns accrual 35,261,000 31,524,000

Contract liabilities 40,988,000 41,072,000

Revolving loan 103,000,000 84,000,000

Other current liabilities 5,774,000 6,683,000

Operating lease liabilities 5,434,000 6,439,000

Current portion of term loan 3,670,000 3,678,000

Total current liabilities 335,578,000 326,131,000

Term loan, less current portion 15,804,000 16,786,000

Long-term contract liabilities 153,504,000 125,223,000

Long-term deferred income taxes 76,000 73,000

Long-term operating lease liabilities 85,889,000 70,551,000

Other liabilities 7,862,000 7,973,000

Total liabilities 598,713,000 546,737,000

Commitments and contingenciesShareholders' equity:Preferred stock; par value $.01 per share, - - 5,000,000 shares authorized; none issuedSeries A junior participating preferredstock; par value $.01 per share,20,000 shares authorized; none issued - -

Common stock; par value $.01 per share,50,000,000 shares authorized;19,101,092 and 19,045,386 shares issued andoutstanding at June 30, 2021 andMarch 31, 2021, respectively 191,000 190,000

Additional paid-in capital 224,445,000 223,058,000

Retained earnings 86,454,000 85,593,000

Accumulated other comprehensive loss (5,863,000 ) (7,696,000 )

Total shareholders' equity 305,227,000 301,145,000

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 903,940,000 $ 847,882,000

Additional Information and Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the company has included the following additional information and non-GAAP financial measures for the three months ended June 30, 2021 and 2020. Among other things, the company uses such additional information and non-GAAP adjusted financial measures in addition to and together with corresponding GAAP measures to help analyze the performance of its business.

The company believes this information helps provide a more complete understanding of the company's results of operations and the factors and trends affecting the company's business. However, this information should be considered as a supplement to, and not as a substitute for, or superior to, information contained in the company's financial statements prepared in accordance with GAAP. In addition, the company's non-GAAP measures may be calculated differently and are therefore not comparable to similar measures by other companies.

The company defines EBITDA as earnings before interest, taxes, depreciation, and amortization. A reconciliation of EBITDA to net income is provided below along with information regarding such items.

Items Impacting Net Income (Loss) for the Three Months Ended June 30, Exhibit 12021 and 2020

Three Months Ended June 30,

2021 2020

$ Per Share $ Per Share

GAAP net income (loss) $ 861,000 $ 0.04 $ (3,012,000 ) $ (0.16 )

Items impacting netincome (loss)Customer allowances andreturn accruals related $ 146,000 $ 0.01 $ 307,000 $ 0.02 to new business, net ofcostsCore premium 2,531,000 0.13 1,223,000 0.06 amortization impactingnet salesNew product line 2,183,000 0.11 3,586,000 0.19 start-up costs andtransition expenses (a)Revaluation - cores on 984,000 0.05 1,384,000 0.07 customers' shelvesIncreased expenses 5,297,000 0.27 2,295,000 0.12 related to COVID-19 (b)Earn-out accruals and (33,000 ) (0.00 ) (7,000 ) (0.00 )severanceShare-based 1,576,000 0.08 1,043,000 0.05 compensation expensesForeign exchange impact (2,533,000 ) (0.13 ) (4,817,000 ) (0.25 )of lease liabilitiesand forward contractsTax effect (c) (2,538,000 ) (0.13 ) (1,254,000 ) (0.07 )

Total items impacting $ 7,613,000 $ 0.39 $ 3,760,000 $ 0.20 net income (loss)(a)

For the three-months ended June 30, 2021, consists of $1,947,000 included in cost of goods sold and $236,000 included in operating expenses. For the three-months ended June 30, 2020, consists of $3,301,000 included in cost of goods sold and $285,000 included in operating expenses.

(b)

For the three-months ended June 30, 2021, consists of higher expenses due to COVID-19 of $4,761,000 impacting gross profit (primarily related to increased freight costs of $2,990,000) and $536,000 included in operating expenses. For the three-months ended June 30, 2020, consists of higher expenses due to COVID-19 of $1,840,000 impacting gross profit and $455,000 included in operating expenses.

(c)

Tax effect is calculated by applying an income tax rate of 25.0% to items listed above; this rate may differ from the period's actual income tax rate.

For the three-months ended June 30, 2021, consists of $1,947,000 included(a) in cost of goods sold and $236,000 included in operating expenses. For the three-months ended June 30, 2020, consists of $3,301,000 included in cost of goods sold and $285,000 included in operating expenses.

For the three-months ended June 30, 2021, consists of higher expenses due to COVID-19 of $4,761,000 impacting gross profit (primarily related to(b) increased freight costs of $2,990,000) and $536,000 included in operating expenses. For the three-months ended June 30, 2020, consists of higher expenses due to COVID-19 of $1,840,000 impacting gross profit and $455,000 included in operating expenses.

Tax effect is calculated by applying an income tax rate of 25.0% to items(c) listed above; this rate may differ from the period's actual income tax rate.

Items Impacting Gross Profit for the Three Months Ended June 30, 2021 and 2020

Exhibit 2

Three Months Ended June 30,

2021

2020

$

Gross Margin

$

Gross Margin

GAAP gross profit$

23,571,000

15.8

%

$

13,387,000

14.0

%

Items impacting gross profitCustomer allowances and return accruals related to new business, net of costs$

146,000

0.1

%

$

307,000

0.3

%

Core premium amortization impacting net sales2,531,000

1.7

%

1,223,000

1.3

%

New product line start-up costs and transition expenses1,947,000

1.3

%

3,301,000

3.5

%

Revaluation - cores on customers' shelves984,000

0.7

%

1,384,000

1.5

%

Increased expenses related to COVID-194,761,000

3.2

%

1,840,000

1.9

%

Total items impacting gross profit$

10,369,000

7.0

%

$

8,055,000

8.4

%

Items Impacting Gross Profit for the Three Months Ended June 30, 2021 Exhibitand 2020 2



Three Months Ended June 30,

2021 2020

$ Gross $ Gross Margin Margin

GAAP gross profit $ 23,571,000 15.8 % $ 13,387,000 14.0 %

Items impacting gross profitCustomer allowances and return $ 146,000 0.1 % $ 307,000 0.3 %accruals related to new business,net of costsCore premium amortization 2,531,000 1.7 % 1,223,000 1.3 %impacting net salesNew product line start-up costs 1,947,000 1.3 % 3,301,000 3.5 %and transition expensesRevaluation - cores on customers' 984,000 0.7 % 1,384,000 1.5 %shelvesIncreased expenses related to 4,761,000 3.2 % 1,840,000 1.9 %COVID-19Total items impacting gross profit $ 10,369,000 7.0 % $ 8,055,000 8.4 %

Items Impacting EBITDA for the Three Months Ended June 30, 2021 and 2020

Exhibit 3

Three Months Ended June 30,2021

2020

GAAP net income (loss)$

861,000

$

(3,012,000

)

Interest expense, net3,941,000

4,409,000

Income tax expense (benefit)947,000

(1,022,000

)

Depreciation and amortization3,145,000

2,551,000

EBITDA$

8,894,000

$

2,926,000

Items impacting EBITDACustomer allowances and return accruals related to new business, net of costs$

146,000

$

307,000

Core premium amortization impacting net sales2,531,000

1,223,000

New product line start-up costs and transition expenses (a)2,016,000

3,496,000

Revaluation - cores on customers' shelves984,000

1,384,000

Increased expenses related to COVID-195,297,000

2,295,000

Earn-out accruals and severance(33,000

)

(7,000

)

Share-based compensation expenses1,576,000

1,043,000

Foreign exchange impact of lease liabilities and forward contracts(2,533,000

)

(4,817,000

)

Total items impacting EBITDA$

9,984,000

$

4,924,000

Items Impacting EBITDA for the Three Months Ended June 30, 2021 Exhibit 3and 2020

Three Months Ended June 30, 2021 2020

GAAP net income (loss) $ 861,000 $ (3,012,000 )

Interest expense, net 3,941,000 4,409,000

Income tax expense (benefit) 947,000 (1,022,000 )

Depreciation and amortization 3,145,000 2,551,000

EBITDA $ 8,894,000 $ 2,926,000

Items impacting EBITDACustomer allowances and return accruals related $ 146,000 $ 307,000 to new business, net of costsCore premium amortization impacting net sales 2,531,000 1,223,000

New product line start-up costs and transition 2,016,000 3,496,000 expenses (a)Revaluation - cores on customers' shelves 984,000 1,384,000

Increased expenses related to COVID-19 5,297,000 2,295,000

Earn-out accruals and severance (33,000 ) (7,000 )

Share-based compensation expenses 1,576,000 1,043,000

Foreign exchange impact of lease liabilities (2,533,000 ) (4,817,000 )and forward contractsTotal items impacting EBITDA $ 9,984,000 $ 4,924,000

(a)

Excludes depreciation, which is included in the depreciation and amortization line item.

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CONTACT: Gary S. Maier (310) 972-5124