Things are looking very positive for Motorcar Parts of America, Inc. as its Fenco transition draws closer to completion.
It fiscal 2012 third quarter and nine months ended December 31, 2011 reflects consolidated sales growth of more than 100 percent and incremental progress with its under-the-car product line segment integration strategy.
Net sales for the fiscal 2012 third quarter more than doubled to $84.1 million from $41.3 million a year earlier. The company reported a net loss of $23.0 million, or $1.84 per share, compared with net income of $3.8 million, or $0.30 per diluted share, for the comparable quarter a year earlier due primarily to the operating losses of the company’s under-the-car product segment as the transition strategy progresses for the Fenco business acquired in May 2011.
All figures in U.S. dollars.
Excluding certain Fenco-related and non-cash expenses noted in the Reconciliation of Non-GAAP Financial Measures tables below, results for the 2012 fiscal third quarter on a consolidated basis would have been a loss of $0.83 per share.
Earnings for the rotating electrical segment would have been $2.5 million, or $0.20 per diluted share, compared with $0.27 per diluted share a year earlier adjusted for a stand-alone tax rate and foreign exchange gains.
Net sales for the nine months more than doubled to $262.2 million from $118.5 million a year ago. For the nine-month period, the company reported a net loss of $34.9 million, or $2.81 per share, compared with net income of $9.8 million, or $0.80 per diluted share, a year earlier, due primarily to operating losses of the company’s under-the-car product segment as the transition strategy progresses for the acquired Fenco business.
Excluding certain Fenco-related and non-cash expenses noted in the Reconciliation of Non-GAAP Financial Measures tables below, results for the fiscal 2012 nine-month period on a consolidated basis would have been a loss of $0.61 per share. Earnings for the rotating electrical segment for the nine months would have been $9.3 million, or $0.75 per diluted share, compared with $0.77 per diluted share a year earlier adjusted for a stand-alone tax rate and a foreign exchange loss.
Consolidated results for the quarter were significantly affected by operating losses and certain legacy costs associated with its Fenco subsidiary. The company has made significant progress in cutting costs and realigning its product offering subsequent to the end of the fiscal 2012 third quarter.
The company’s rotating electrical business continues to be strong for fiscal 2012 which ended March 31, and anticipates reporting record sales and earnings for its rotating electrical segment.
The company reported negative gross profit for the fiscal 2012 third quarter of $2.4 million compared with gross profit of $13.2 million for the same period a year ago.
Gross profit for the company’s rotating electrical segment as a percentage of net sales for the fiscal 2012 third quarter was 30.0 percent compared with 31.9 percent in the same quarter a year ago, reflecting primarily the timing of customer purchases and return patterns partially offset by lower manufacturing costs.
The company reported negative gross profit for the quarter for its under-the-car product line segment of $15.0 million, or a negative 35.5 as a percentage of sales — reflecting, in part, higher returns as a percentage of sales following strong sales in the second fiscal quarter; too aggressive product pricing; and, higher customer allowances being provided and higher manufacturing costs due, in part, to an increase in the under-absorption of overhead on lower production levels.
The company is addressing future product pricing and improving manufacturing efficiency, as well as implementing cost savings initiatives for production, warehousing and distribution as part of its turnaround strategy for Fenco.
The company emphasized it has made significant progress in its transition initiatives since the close of this reporting period, and anticipates improved results moving forward.
Gross profit was also affected by the company’s decision to close Fenco’s CV axle production facility, resulting in substantially reduced sales during the quarter. The company has successfully transitioned its customers for this product line to new suppliers and is in the process of liquidating the remaining inventory.
Gross profit for the fiscal 2012 nine-month period was $22.2 million compared with $37.4 million for the same period a year ago. Gross profit as a percentage of sales for the same period was 8.5 percent compared with 31.6 percent a year earlier. Gross profit for the company’s rotating electrical segment as a percentage of net sales for the fiscal 2012 nine months was 31.5 percent compared with 31.6 percent in the same period a year ago.
Negative gross profit for the nine-month period for the company’s under-the-car product line segment was $18.2 million, or 13.5 percent as a percentage of sales, primarily due to the items noted above for the quarter.
“Notwithstanding results for the quarter and nine months, our transition initiatives related to the Fenco acquisition are progressing. Since our acquisition of Fenco, we have focused considerable time and resources on improving product fill rates for the under-the-car product line, closing and restructuring various product lines for this business segment and improving its capital resources. We have made solid progress and remain dedicated to customer satisfaction, increasing sales, reducing further costs and achieving a rational cost-structure for a business segment with strong growth potential,” said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts.
Joffe noted that the company expects to report record sales and profits for its fiscal 2012 fourth quarter ended March 31, 2012 for its rotating electrical segment. On a consolidated basis, the company expects fiscal 2012 fourth quarter net sales will exceed $90 million, with net sales for the fiscal year of more than $350 million.
The company has significantly enhanced its liquidity and is well positioned to implement further initiatives to complete the Fenco transition plan. Under the current financial structure, the company is permitted to invest up to $20 million of additional capital into its Fenco subsidiary.