Motorcar Parts of America Inc. (MPA) reported results for its fiscal 2020 fourth quarter and year ended March 31, 2020 – reflecting generation of cash flow from operations of $18.8 million for the fiscal year and gross margin improvement.
Net sales for the fiscal 2020 fourth quarter increased 16.8 percent to a record $150.7 million from $129.1 million for the same period a year earlier.
Net loss for the fiscal 2020 fourth quarter was $8.2 million, or 43 cents per share, compared with a net loss of $2.8 million, or 15 cents per share, a year ago. Results for the fiscal 2020 fourth quarter were impacted by items totaling approximately $25.8 million on a pre-tax basis, or $1.02 per share on a tax-effected basis. The $25.8 million includes non-cash items of $23 million, primarily consisting of the re-measurement of the company’s Mexico lease liabilities and its forward foreign exchange contracts due to the significant devaluation in the Mexican Peso, and transition expenses of $2.8 million related to the expansion of the company’s footprint in Mexico.
The net loss for the prior-year period was impacted by items totaling approximately $17.2 million on a pre-tax basis, or 70 cents per share on a tax-effected basis. The company has decided to eliminate its reporting of certain non-GAAP financial measures.
“Notwithstanding the global pandemic, which began to impact the automotive aftermarket in mid-March, we achieved record sales and generated strong cash flow from operations. While the sharp decline in the value of the Mexican peso US dollar exchange rate resulted in large non-cash expenses, the underlying operating results for the company are strong,” said Selwyn Joffe, chairman, president and CEO of Motorcar Parts of America.
Joffe noted the facilities expansion in Mexico and the company’s brake caliper launch are rapidly nearing completion, and as such the transition costs will be substantially eliminated by the end of this fiscal year.
Gross profit for the fiscal 2020 fourth quarter was $36.6 million compared with $26 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2020 fourth quarter was 24.3 percent compared with 20.1 percent a year earlier.
Adjusted gross profit for the fiscal 2020 fourth quarter was $40.2 million compared with $36.6 million a year ago. Adjusted gross profit as a percentage of net sales for the three months was 26.7 percent compared with 28.3 percent a year earlier.
Twelve-Month Results
Net sales for fiscal 2020 increased 13.3 percent to a record $535.8 million from $472.8 million a year earlier.
Net loss for fiscal 2020 was $7.3 million, or 39 cents per share, compared with a net loss of $7.8 million, or 42 cents per share, a year ago. Results for fiscal 2020 were impacted by approximately $50 million on a pre-tax basis, or $1.99 per share on a tax-effected basis. The $50 million includes non-cash items of $37.7 million – consisting of non-cash, mark-to-market expenses related to the significant devaluation in the Mexican Peso and revaluation of cores on customers’ shelves. In addition, the items totaling $50 million include $12.3 million primarily due to transition expenses related to the expansion of the company’s footprint in Mexico.
The net loss for the prior-year period was impacted by items totaling approximately $51.9 million on a pre-tax basis, or $2.08 per share on a tax-effected basis.
Gross profit for fiscal 2020 was $118.4 million compared with $89.2 million a year earlier. Gross profit as a percentage of net sales for fiscal 2020 was 22.1 percent compared with 18.9 percent a year earlier.
Adjusted gross profit for fiscal 2020 was $135.9 million compared with $117.2 million a year ago. Adjusted gross profit as a percentage of net sales for fiscal 2020 was 25.4 percent compared with 24.8 percent a year earlier.
Gross profit and adjusted gross profit for fiscal 2020 were negatively impacted by core buyback premium amortization, customer allowances and return accruals related to new business, and the impact of tariff costs before being passed through to customers. This negatively affected adjusted gross margins by a combined 1.2 percent.
Joffe emphasized the company’s ongoing commitment to being socially responsible, particularly during this challenging period. He highlighted that one of the company’s many initiatives includes its food programs for employees and members of the community. “We should never lose sight of our individual and collective responsibilities, particularly in times of crisis, and we always strive to nurture this spirit in our day-to-day activities,” Joffe said.
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. The company implemented a variety of safety and cost-savings initiatives to proactively address the crisis, while at the same time remained prepared for an anticipated resumption of demand. Industry reports indicate that sales of hard parts have increased substantially over the past 45 days, indicating that we may have experienced the low point.
Joffe noted it is encouraging that the company’s sales improved significantly in May, and June is trending nicely.
“Our industry has proven to be resilient and we remain committed to our strategic plans for growth and profitability focusing on excellent returns to our shareholders. However, the company believes it is prudent at this time to not provide annual sales and gross margin guidance.
“Clearly the past few months have been a challenging period for our company, our employees and their families. We are tremendously appreciative of everyone’s contributions and the dedicated focus on providing essential automotive aftermarket products under extraordinary circumstances. Our employees have exhibited enormous bravery, commitment and innovation to ensure the safety of our entire team. They have accomplished this without compromising our commitment to our customers that they receive their orders with the quality and promptness they expect from MPA. These people are true heroes and we will continue with our utmost commitment and social responsibility to this team, their families, and our customers.
“We are an essential supplier in the $125 billion hard parts industry and well-positioned for growth in the aftermarket industry, and especially proud to play an important role in keeping vehicles of all kinds on the road,” said Joffe.
