Motorcar Parts of America Inc. (MPA) has reported results for its fiscal 2021 first quarter ended June 30, 2020 – reflecting the impact of industry softness in April with subsequent month-over-month increases in sales for the quarter, and extending into July.
Net sales for the fiscal 2021 first quarter were $95.4 million compared with $109.1 million for the same period a year earlier.
Net loss for the fiscal 2021 first quarter was $3.0 million, or $0.16 per share, compared with a net loss of $6.2 million, or $0.33 per share, a year ago. Results for the fiscal 2021 first quarter were impacted by expenses of approximately $9.8 million consisting primarily of non-cash expenses totaling $3.7 million for revaluation of cores on customer’s shelves, core buy-back premium amortization, and share-based compensation, transition expenses of $3.6 million related to the expansion of the company’s footprint in Mexico, and COVID-related expenses of $2.3 million further explained below. These expenses were partially offset by $4.8 million of gains in connection with the re-measurement of the company’s Mexico lease liabilities and forward foreign exchange contracts due to the strengthening of the Mexican Peso, resulting in a net negative impact of $5.0 million on a pre-tax basis, or $0.20 per share on a tax-effected basis.
The net loss for the prior-year period was impacted by items totaling approximately $10.1 million on a pre-tax basis, or $0.41 per share on a tax-effected basis, as detailed in Exhibit 1. As previously announced, the company has decided to eliminate its reporting of certain non-GAAP financial measures.
“Notwithstanding the sharp drop in demand in April due to the global pandemic, the rebound of demand for our products for the balance of the quarter was better than expected – reflecting sequential gains in monthly sales, with June exceeding the prior year,” said Selwyn Joffe, chairman, president and CEO of Motorcar Parts of America.
In addition to the extraordinary decline in April sales, he emphasized results for the fiscal first quarter also were impacted by increases for cost of goods sold and operating expenses related to safety and health initiatives associated with COVID-19 – including incremental costs for personal protection equipment (PPE), increased disinfecting procedures, extraordinary payroll expenses, special work bonuses and non-work payments to vulnerable personnel. These items impacted results for the quarter by approximately $2.3 million on a pre-tax basis, or $0.09 per share on a tax-effected basis. In addition, results for the first fiscal quarter were further impacted by higher costs of production due to lower production volumes.
Gross profit for the fiscal 2021 first quarter was $13.4 million compared with $17.6 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2021 first quarter was 14 percent compared with 16.1 percent a year earlier.
Adjusted gross profit for the fiscal 2021 first quarter was $17.5 million compared with $22.6 million a year ago. Adjusted gross profit as a percentage of net sales for the three months was 18.4 percent compared with 20.7 percent a year earlier.
Gross profit and adjusted gross profit as a percentage of net sales for the fiscal 2021 first quarter were further negatively impacted by 3.5 percent, comprised of COVID-19-related expenses impacting cost of goods sold of $1.8 million or 1.9 percent as described above, and 1.6 percent due to non-cash core buyback premium amortization and return accruals related to new business as detailed in Exhibit 2. Additionally, gross profit and adjusted gross profit for the fiscal 2021 first quarter were impacted by higher costs of production due to lower production volumes.
Gross profit and adjusted gross profit as a percentage of net sales for the prior-year period were also impacted by several items as detailed in Exhibit 2, totaling 2.5 percent.
FISCAL 2021 OUTLOOK
After record sales and a strong end to fiscal 2020, April brought a sharp decrease in demand, as home sheltering took effect across the country. As previously reported, the company implemented a variety of safety and cost-savings initiatives commencing in March to proactively address the crisis without compromising its position when demand resumed.
“Despite strong sales activity in June and July, and favorable industry reports indicating that sales of hard parts are gaining momentum, the company believes it is still not prudent to provide annual sales and gross margin guidance for fiscal 2021.
“As I stated in our fiscal year-end release, our industry is resilient, and we are continuing to execute our strategic plans for growth and profitability. We are guardedly optimistic about the near- and long-term opportunities as an essential supplier in the $125 billion hard parts industry and look forward to a recovery from this global crisis,” Joffe said.
