Motorcar Parts of America, Inc., a remanufacturer of starters and alternators, has reported profitable results for its 2010 fiscal third quarter, reflecting new customer sales, gross profit improvement and a strengthened balance sheet.
Net income for the fiscal 2010 third quarter ended December 31, 2009 was $2.1 million, or $0.18 per diluted share, compared with a net loss of $314,000, or $0.03 loss per share, a year ago. All figures in U.S. dollars.
Net sales for the fiscal 2010 third quarter increased to $36.5 million compared with $35.8 million for the same period last year. This increase was primarily due to sales to new customers acquired in the recent acquisition of Reliance Automotive. Sales to certain existing customers were positively impacted in the comparable quarter a year ago by the timing of update orders.
The company generated cash from operations of $13.1 million for the fiscal third quarter compared with $5.9 million in the same period a year earlier. Liquidity was enhanced by the availability of additional customer factoring, which, together with profitability, enabled Motorcar Parts of America to reduce its bank obligations by $13.0 million during this period.
Gross profit for the fiscal 2010 third quarter was $10.9 million compared with $10.1 million for the same period a year ago. Gross profit as a percentage of net sales for the third quarter was 29.8 percent compared with 28.3 percent in the same quarter a year ago and 27.4 percent in the fiscal 2010 second quarter. Gross margin for the third quarter benefited from lower manufacturing costs and increased revenue from scrap metal prices, which were partially offset by an increase in packaging costs associated with new customers compared with the same period a year earlier.
For the fiscal 2010 nine-month period, net income climbed 34.5 percent to $6.8 million, or $0.56 per diluted share, from $5.0 million, or $0.42 per diluted share, a year earlier. Net sales for the nine-month period were $108.6 million compared with $104.9 million a year ago.
Gross profit for the fiscal 2010 nine-month period was $28.9 million compared with $33.5 million for the same period a year ago. Gross profit as a percentage of net sales for the fiscal 2010 nine-month period was 26.6 percent compared with 31.9 percent a year ago. The nine-month period a year ago benefited from the reversal of a $1.3 million accrual related to customs duty claims; higher scrap metal revenues; lower packaging costs; and a lower provision for inventory reserves. In addition, gross profit for the fiscal 2009 nine-month period was positively impacted by an acceleration of promotional allowances in the fourth quarter of fiscal 2008, caused by an amendment to a customer agreement, which otherwise would have been earned by the customer during fiscal 2009 of $1.5 million.
“Results for the quarter highlight the company’s continued strategic focus on both organic growth and growth from acquisitions, supported by operating leverage and increased usage of available capacity. In addition, the company’s significant cash flow improvement for the quarter allows us to pursue appropriate initiatives to enhance shareholder value and we look forward to continued strong growth supported by favorable trends within our sector of the automotive aftermarket industry,” said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.
He highlighted the signing of a ten-year renewal of a primary supplier contract for remanufactured alternators and starters with a major automotive retailer subsequent to the end of the fiscal third quarter, as well as the company’s ongoing success in attracting a high-quality customer base.