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Form 8-K MOTORCAR PARTS AMERICA For: Aug 09

August 9, 2022 8:37 AM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K
 
CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 9, 2022

Motorcar Parts of America, Inc.
 (Exact name of registrant as specified in its charter)

New York

001-33861

11-2153962
(State or other jurisdiction of incorporation)

(Commission File Number)

(IRS Employer Identification No.)

2929 California Street, Torrance, CA
  90503
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code: (310) 212-7910

N/A
(Former name, former address and former fiscal year, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 

Soliciting material pursuant to Rule l4a-12 under the Exchange Act (17 CFR 240.l4a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
MPAA
The Nasdaq Global Select Market


graphic

Item 2.02.
Results of Operations and Financial Condition
 
On August 9, 2022, Motorcar Parts of America, Inc. (the "Company") issued a press release announcing its earnings for the fiscal quarter ended June 30, 2022 which is being furnished as Exhibit 99.1. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

graphic

Item 9.01.
Financial Statements and Exhibits.
 
The following exhibit is furnished with this Current Report pursuant to Item 2.02:
 
(d) Exhibits

  Exhibit No.
Description
     
  99.1 Press Release, dated August 9, 2022
     
  104
Cover Page Interactive Data File (embedded within the Inline XBRL document).

graphic

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
MOTORCAR PARTS OF AMERICA, INC.
   
Date: August 9, 2022
/s/ David Lee
 
David Lee
 
Chief Financial Officer

 


Exhibit 99.1

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

MOTORCAR PARTS OF AMERICA REPORTS RECORD FIRST QUARTER SALES

LOS ANGELES, CA – August 9, 2022 Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2023 first quarter ended June 30, 2022 – reflecting strong demand after a modest start, with momentum building in May and June.

Fiscal 2023 First Quarter Highlights


Net sales reached a fiscal first quarter record of $164.0 million, an increase of $15.0 million, or 10.0 percent year over year.


Gross profit was $30.3 million, an increase of $6.7 million, or 28.6 percent year over year.


Operating expenses were impacted by non-cash foreign currency exchange fluctuations of approximately $820,000 compared with the prior year.


Results were impacted by $3.0 million of increased interest expenses, primarily due to higher interest rates related to participation in the accounts receivable discount programs offered by customers.


Results were also impacted by $0.22 per share of non-cash items, and $0.15 per share of other items, primarily due to continuing, though diminishing, transitory costs related to supply chain disruptions.


EBITDA (defined below) was $10.5 million, which was impacted by $5.5 million of non-cash items and $3.7 million of other items, primarily due to transitory costs.

Fiscal 2023 Considerations


Future margin expansion expected from additional price increases in the fiscal second quarter; anticipated improved operating efficiencies as brake-related product volume increases and fixed cost leveraging opportunities are enhanced.


Cash flow improvement expected as the new fiscal year gains momentum; strategic inventory build in fiscal 2022 is expected to benefit from previously announced top-line sales targets across all product lines.

(more)

Motorcar Parts of America, Inc.
2-2-2
“We reported record sales for a fiscal first quarter, which supports our optimism as we start a new fiscal year – supported by strong demand for replacement parts and tailwinds from an aging car fleet.  Our emerging brake-related products -- including brake calipers and in particular pads and rotors, which we formally launched this quarter, are experiencing strong demand. Our investments are bearing fruit and we are well-positioned to capitalize on the company’s leadership position within the retail and traditional markets,” said Selwyn Joffe, chairman, president, and chief executive officer.

Net sales for the fiscal 2023 first quarter increased $15.0 million, or 10.0 percent, to $164.0 million from $149.0 million in the prior-year period.

Net loss for the fiscal 2023 first quarter was $175,000, or $0.01 per share, compared with net income of $861,000, or $0.04 per diluted share, a year ago -- impacted by approximately $4.2 million, or $0.22 per share, of non-cash items, including a non-cash loss of $678,000, or $0.04 per share on a pre-tax basis, for the foreign exchange impact of lease liabilities and forward contracts, as detailed in Exhibit 1. The company also was impacted by approximately $2.8 million, or $0.15 per share, of other costs, primarily transitory costs related to supply chain disruptions.  Results for the fiscal first quarter were also impacted by $3.0 million of higher interest expenses compared with the prior year.

Prior-year net income of $861,000, or $0.04 per diluted share, was impacted by approximately $2.0 million, or $0.10 per diluted share, of non-cash items, including a non-cash gain of $2.5 million, or $0.13 per diluted share on a pre-tax basis, for the foreign exchange impact of lease liabilities and forward contracts, as detailed in Exhibit 1. The company also was impacted by approximately $5.6 million, or $0.29 per share, of other costs, primarily transitory costs related to supply chain disruptions for the prior year.

Gross profit for the fiscal 2023 first quarter increased $6.7 million, or 28.6 percent, to $30.3 million from $23.6 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2023 first quarter was 18.5 percent compared with 15.8 percent a year earlier. Gross margin for the fiscal 2023 first quarter was impacted by 2.2 percent by the aforementioned non-cash items and 1.6 percent by the transitory supply chain disruptions, as detailed in Exhibit 2.  In addition to the items mentioned above, gross margin for the fiscal first quarter was further impacted by inflationary costs and new product line growth initiatives.

(more)

Motorcar Parts of America, Inc.
3-3-3
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 definition and reconciliation of EBITDA to net income, its corresponding GAAP measure, 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 this measure.

Earnings Conference Call and Webcast

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 webcast at www.motorcarparts.com or live by calling (888)-440-5584 (domestic) or (646)-960-0457 (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, 2022 through 8:59 p.m. Pacific time on August 16, 2022 by calling (800)-770-2030 (domestic) or (647)-362-9199 (international) and using access code: 1545314.

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 pads, brake rotors, 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 2022 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.
 
# # #
 
(Financial tables follow)

(more)

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

   
Three Months Ended
 
   
June 30,
 
   
2022
   
2021
 
             
             
Net sales
 
$
163,985,000
   
$
149,034,000
 
Cost of goods sold
   
133,683,000
     
125,463,000
 
Gross profit
   
30,302,000
     
23,571,000
 
Operating expenses:
               
General and administrative
   
13,634,000
     
12,486,000
 
Sales and marketing
   
5,542,000
     
5,368,000
 
Research and development
   
3,113,000
     
2,501,000
 
Foreign exchange impact of lease liabilities and forward contracts
   
678,000
     
(2,533,000
)
Total operating expenses
   
22,967,000
     
17,822,000
 
Operating income
   
7,335,000
     
5,749,000
 
Interest expense, net
   
6,921,000
     
3,941,000
 
Income before income tax expense
   
414,000
     
1,808,000
 
Income tax expense
   
589,000
     
947,000
 
                 
Net (loss) income
 
$
(175,000
)
 
$
861,000
 
Basic net (loss) income per share
 
$
(0.01
)
 
$
0.05
 
Diluted net (loss) income per share
 
$
(0.01
)
 
$
0.04
 
Weighted average number of shares outstanding:
               
Basic
   
19,123,354
     
19,054,481
 
Diluted
   
19,123,354
     
19,659,057
 


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


 
June 30, 2022
   
March 31, 2022
 
ASSETS
 
(Unaudited)
       
Current assets:
           
Cash and cash equivalents
 
$
9,217,000
   
$
23,016,000
 
Short-term investments
   
1,995,000
     
2,202,000
 
Accounts receivable — net
   
73,030,000
     
85,075,000
 
Inventory
   
405,205,000
     
385,504,000
 
Contract assets
   
27,783,000
     
27,500,000
 
Prepaid expenses and other current assets
   
11,705,000
     
13,688,000
 
Total current assets
   
528,935,000
     
536,985,000
 
Plant and equipment — net
   
49,384,000
     
51,062,000
 
Operating lease assets
   
80,157,000
     
81,997,000
 
Long-term deferred income taxes
   
27,046,000
     
26,982,000
 
Long-term contract assets
   
306,953,000
     
310,255,000
 
Goodwill and intangible assets — net
   
6,548,000
     
7,004,000
 
Other assets
   
1,403,000
     
1,413,000
 
TOTAL ASSETS
 
$
1,000,426,000
   
$
1,015,698,000
 
LIABILITIES AND SHAREHOLDERS'  EQUITY
               
Current liabilities:
               
Accounts payable and accrued liabilities
 
$
173,818,000
   
$
168,435,000
 
Customer finished goods returns accrual
   
28,793,000
     
38,086,000
 
Contract liabilities
   
43,645,000
     
42,496,000
 
Revolving loan
   
146,000,000
     
155,000,000
 
Other current liabilities
   
11,279,000
     
11,930,000
 
Operating lease liabilities
   
6,653,000
     
6,788,000
 
Current portion of term loan
   
3,670,000
     
3,670,000
 
Total current liabilities
   
413,858,000
     
426,405,000
 
Term loan, less current portion
   
12,097,000
     
13,024,000
 
Long-term contract liabilities
   
173,045,000
     
172,764,000
 
Long-term deferred income taxes
   
121,000
     
126,000
 
Long-term operating lease liabilities
   
79,552,000
     
80,803,000
 
Other liabilities
   
6,987,000
     
7,313,000
 
Total liabilities
   
685,660,000
     
700,435,000
 
Commitments and contingencies
               
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, 50,000,000 shares authorized; 19,214,978 and 19,104,751 shares issued and outstanding at June 30, 2022 and March 31, 2022, respectively
   
192,000
     
191,000
 
Additional paid-in capital
   
227,729,000
     
227,184,000
 
Retained earnings
   
92,779,000
     
92,954,000
 
Accumulated other comprehensive loss
   
(5,934,000
)
   
(5,066,000
)
Total shareholders' equity
   
314,766,000
     
315,263,000
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
1,000,426,000
   
$
1,015,698,000
 


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, 2022 and 2021. 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 for the Three Months Ended June 30, 2022 and 2021
Exhibit 1

   
Three Months Ended June 30,
 
   
2022
   
2021
 
   

$
   
Per Share
   

$
   
Per Share
 
GAAP net (loss) income
 
$
(175,000
)
 
$
(0.01
)
 
$
861,000
   
$
0.04
 
                                 
Non-cash items impacting net (loss) income
                               
Core and finished goods premium amortization
 
$
3,044,000
   
$
0.16
   
$
2,677,000
   
$
0.14
 
Revaluation - cores on customers' shelves
   
572,000
     
0.03
     
984,000
     
0.05
 
Share-based compensation expenses and earn-out accruals
   
1,249,000
     
0.07
     
1,543,000
     
0.08
 
Foreign exchange impact of lease liabilities and forward contracts
   
678,000
     
0.04
     
(2,533,000
)
   
(0.13
)
Tax effect (a)
   
(1,386,000
)
   
(0.07
)
   
(668,000
)
   
(0.03
)
Total non-cash items impacting net (loss) income
 
$
4,157,000
   
$
0.22
   
$
2,003,000
   
$
0.10
 
                                 
Cash items impacting net (loss) income
                               
Supply chain disruptions and related costs (b)
 
$
3,094,000
   
$
0.16
   
$
5,297,000
   
$
0.27
 
New product line start-up costs and transition expenses, and severance (c)
   
618,000
     
0.03
     
2,183,000
     
0.11
 
Tax effect (a)
   
(928,000
)
   
(0.05
)
   
(1,870,000
)
   
(0.10
)
Total cash items impacting net (loss) income
 
$
2,784,000
   
$
0.15
   
$
5,610,000
   
$
0.29
 

(a) 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.
(b) For the three-months ended June 30, 2022, consists of $2,548,000 impacting gross profit and $546,000 included in operating expenses.
For the three-months ended June 30, 2021, consists of of $4,761,000 impacting gross profit and $536,000 included in operating expenses.
(c) For the three-months ended June 30, 2022, consists of $618,000 included in operating expenses.
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.


Items Impacting Gross Profit for the Three Months Ended June 30, 2022 and 2021
Exhibit 2

   
Three Months Ended June 30,
 
   
2022
   
2021
 
   

$
   
Gross
Margin
   

$
   
Gross
Margin
 
GAAP gross profit
 
$
30,302,000
     
18.5
%
 
$
23,571,000
     
15.8
%
                                 
Non-cash items impacting gross profit
                               
Core and finished goods premium amortization
 
$
3,044,000
     
1.9
%
 
$
2,677,000
     
1.8
%
Revaluation - cores on customers' shelves
   
572,000
     
0.3
%
   
984,000
     
0.7
%
Total non-cash items impacting gross profit
 
$
3,616,000
     
2.2
%
 
$
3,661,000
     
2.5
%
                                 
Cash items impacting gross profit
                               
Supply chain disruptions and related costs
 
$
2,548,000
     
1.6
%
 
$
4,761,000
     
3.2
%
New product line start-up costs and transition expenses
   
-
     
-
     
1,947,000
     
1.3
%
Total cash items impacting gross profit
 
$
2,548,000
     
1.6
%
 
$
6,708,000
     
4.5
%


Items Impacting EBITDA for the Three Months Ended June 30, 2022 and 2021 Exhibit 3

   
Three Months Ended June 30,
 
   
2022
   
2021
 
GAAP net (loss)  income
 
$
(175,000
)
 
$
861,000
 
Interest expense, net
   
6,921,000
     
3,941,000
 
Income tax expense
   
589,000
     
947,000
 
Depreciation and amortization
   
3,124,000
     
3,145,000
 
EBITDA
 
$
10,459,000
   
$
8,894,000
 
                 
Non-cash items impacting EBITDA
               
Core and finished goods premium amortization
 
$
3,044,000
   
$
2,677,000
 
Revaluation - cores on customers' shelves
   
572,000
     
984,000
 
Share-based compensation expenses and earn-out accruals
   
1,249,000
     
1,543,000
 
Foreign exchange impact of lease liabilities and forward contracts
   
678,000
     
(2,533,000
)
Total non-cash items impacting EBITDA
 
$
5,543,000
   
$
2,671,000
 
                 
Cash items impacting EBITDA
               
Supply chain disruptions and related costs
 
$
3,094,000
   
$
5,297,000
 
New product line start-up costs and transition expenses, and severance (a)
   
618,000
     
2,016,000
 
Total cash items impacting EBITDA
 
$
3,712,000
   
$
7,313,000
 

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





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