LOS ANGELES — Motorcar Parts of America, Inc. (MPA) has announced financial results for the quarter ended June 30.
"Our financial performance in the first quarter of fiscal 2008 was very strong. We achieved a 270 basis point improvement in gross margin and after eliminating the effect of reducing our general and administrative expenses for indemnification reimbursement in the first quarter of fiscal 2007, we achieved adjusted EBITDA growth of 42 percent," said MPA’s Chairman, President and CEO, Selwyn Joffe. "We are encouraged by our operating results this quarter and look forward to additional improvements as we get more efficiencies from our offshore production and complete the transition of our core receiving and sorting operations. Our latest quarterly results were strong despite being negatively affected by first-year SOX implementation costs and severance expenses incurred in connection with our offshore initiative."
Net sales were $35.4 million, up 29.2 percent from $27.4 million in the same quarter last year. Gross profit and gross margin were $10.2 million and 28.8 percent, respectively, as compared to $7.2 million and 26.1 percent, respectively, in the first quarter of fiscal 2007.
Operating income in the first quarter of fiscal 2008 was $4.2 million, up 21.8 percent from operating income of $3.5 million in the same quarter of the prior year. Operating expenses increased 61.5 percent in the quarter, driven primarily by an increase in consulting and professional fees incurred in connection with Sarbanes-Oxley compliance of $0.4 million, an increase in FAS 123R stock option compensation expenses of $0.2 million from $0.1 million in the first quarter of the prior fiscal year to $0.3 million in the first quarter of fiscal 2008, severance costs related to headcount reductions at the company’s Torrance facilities of $0.4 million and an increase in audit fees of $0.3 million from $0.3 million in the first quarter of the prior fiscal year to $0.6 million in the first quarter of fiscal 2008. Operating expenses in the first quarter of the previous fiscal year were favorably impacted by the recording of a shareholder note receivable for the reimbursement of indemnification costs, which reduced general and administrative expenses by $0.7 million.
EBITDA in the first quarter of fiscal 2008 was $4.7 million, up 17.9 percent from $4 million in the same quarter of the prior year and increased 42 percent after eliminating the effect of indemnification reimbursement in first quarter of fiscal 2007. Interest expense increased in the first quarter of fiscal 2008 due to greater use of receivables factoring agreements and an increase in the average number of days the receivables were factored. In addition, the company had a higher average outstanding bank loan balance prior to repaying it in full in May 2007. Net income in the first quarter of fiscal 2008 was $1.6 million, or 16 cents per diluted share, compared to $1.6 million, or 18 cents per diluted share for the same quarter last fiscal year. Diluted earnings per share reflect 1,603,868 in additional diluted weighted average shares outstanding from the same quarter of the prior year, due to the private placement transaction in May 2007.
"Despite these increases in operating expenses, our results are very encouraging," said Joffe. "We believe we can continue to increase profitability by increasing efficiencies in our newly ramped up offshore production facilities and by completing the core sorting and logistics transition."
At June 30, the company had cash and equivalents of $2 million, working capital of $11 million and total assets of $130.9 million. In addition, the company had no debt outstanding on its credit facility and capital lease obligations totaled $4.8 million. Shareholders’ equity stood at $87.1 million and cash used in operating activities totaled $11.8 million. The company generated $3.8 million of cash flow from operations after excluding a reduction of accounts payable. In May 2007, the company raised $40.1 million of capital through a private placement.
"During the quarter, we used the proceeds from our private placement financing to pay down our credit facility and reduce accounts payable," said Mervyn McCulloch, MPA’s chief financial officer. "Our working capital position has improved significantly, and we believe that our credit facility, cash on hand and ongoing operations will generate the cash necessary to support our working capital and planned capital expenditures in fiscal 2008."
"We began our new fiscal year with excellent financial results," said Joffe. "We are in the final stages of transitioning remanufacturing to our facilities abroad and are making solid progress in relocating core receiving and sorting activities to our state-of-the-art facility in Mexico."
