LOS ANGELES — Motorcar Parts of America (MPA) has reported results for its fiscal 2012 first quarter ended June 30. MPA said the results reflect solid performance in its base business and the impact of the Fenco acquisition, which includes expensing of acquisition-related costs and the amortization during the period of certain fair value amounts recorded in the opening balance sheet on May 6, in accordance with purchase accounting for acquisitions.
Net sales for the fiscal 2012 first quarter increased 97 percent to $71.3 million from $36.2 million a year earlier. For the same period, due to the acquisition of Fenco, the impact of purchase accounting and the inclusion of its operating results effective May 6, the company reported a net loss of $2.4 million, or 19 cents per share, compared with net income of $2.5 million, or 21 cents per diluted share, for the comparable quarter a year earlier.
Net income before acquisition-related costs and higher income tax expense for the first quarter would have been 15 cents per diluted share. Excluding Fenco operating results since the acquisition and certain other expenses highlighted below, earnings per share would have been 23 cents per diluted share.
Operating results for the first quarter were impacted by a loss from Fenco’s operations of 7 cents per share and certain acquisition-related costs expensed during the quarter. These adjustments include the effects of fair value purchase accounting on Fenco’s opening balance sheet for inventory step-up adjustment of approximately $2.7 million, or 22 cents per share. This expense was recognized as cost of goods sold during the quarter. Additional adjustments include acquisition-related general and administrative expenses of $1.1 million, or 6 cents per share; bank refinancing fees of $260,000, or 2 cents per share; and other professional fees related to the Fenco acquisition of $404,000, or 2 cents per share. Income tax expense reflects an additional 5.4 percent tax in the first quarter due to certain non-deductible acquisition costs of $216,000, or 2 cents per share.
Gross profit for the fiscal 2012 first quarter was $13.1 million compared with $11.5 million for the same period a year ago. Gross profit as a percentage of net sales for the fiscal 2012 first quarter was 18.4 percent compared with 31.9 percent in the same quarter a year ago, reflecting lower margin Fenco business. The company anticipates significant savings from synergies to be realized in the future. Gross margin was impacted by 3.8 percent due to the effects of purchase accounting on Fenco’s inventory fair value step-up adjustment of approximately $2.7 million recognized as cost of goods sold during the quarter, as noted above. The gross margin in the rotating electrical segment increased to 32.1 percent for the first quarter due primarily to lower per unit manufacturing costs.
"Results for the quarter and expectations moving forward reflect continued strength in both rotating electrical and under-the-car product offerings, with significant opportunities for growth and synergistic cost-savings from the company’s Fenco acquisition. All of our products are non-discretionary and the current economic environment is expected to further enhance demand. The Fenco acquisition represents an exciting opportunity to grow sales and realize at least $20 million of synergies within a two-year period. This would result in incremental earnings of approximately $1 per share from the acquisition," said Selwyn Joffe, chairman, president and CEO of Motorcar Parts.
