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Motorcar Parts of America, Inc.(MPAA)
F4Q08 Earnings Call
June 16, 2008 2:00 pm ET
Gary S. Maier - Maier & Company, Inc.
Selwyn Joffe - Chairman of the Board, President, Chief Executive Officer
David Lee - Chief Financial Officer
Mitchell Sachs - Grand Slam
Steve Emerson - Emerson Investing Group
Richard Hoss - Roth Capital Partners
Frank Kristina - Micro Capital
» Motorcar Parts of America, Inc. F1Q09 (Qtr End 06/30/08) Earnings Call Transcript
» Navistar International Corporation F4Q09 (Qtr End 10/31/09) Earnings Call Transcript
Gary S. Maier
Thank you very much and thanks everyone for joining us for Motorcar Parts of America fiscal fourth quarter and year-end conference call. Before we begin and I turn the call over to Selwyn Joffe, Chairman, President, and Chief Executive Officer, and David Lee, the company’s Chief Financial Officer, I would like to remind everyone of the Safe Harbor statement included in today’s press release. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements including statements made during the course of today’s conference call. Such forward-looking statements are based on the company’s current expectations and beliefs concerning future developments and their potential effects on the company. There can be no assurance that future developments affecting the company will be those anticipated by Motorcar Parts of America. Actual results may differ from those projected in these forward-looking statements. These forward-looking statements involve significant risks and uncertainties, some of which are beyond the control of the company and are subject to change based upon various factors.
For a more detailed discussion of some of these ongoing risks and uncertainties of the company’s business, I refer you to the company’s various filings with the Securities and Exchange Commission.
With that said, I would now like to begin the call and turn it over to Selwyn Joffe. Selwyn.
Thanks, Gary. Good morning or afternoon, everybody. I appreciate you joining us today for our fiscal 2008 fourth quarter and year-end conference call. As highlighted in today’s financial release, we are on our way to accomplishing our goals. We are continuously focused on increasing top line revenue growth and these efforts have been bearing fruit, as indicated by our solid sales increase for the fourth quarter, with sales climbing more than 14% for the quarter.
In addition to sales growth, we have significantly completed our offshore transition and are now realizing our anticipated savings from this initiative. Our gross profit reached record levels for both the fourth quarter and the year. Gross margin jumped to 31% for the quarter from 11% a year earlier, while gross margin for the year climbed to 28% from 16% in fiscal 2007.
David will discuss the contributing factors in more detail in a few minutes.
In addition to the benefits of the relocation of our manufacturing operations offshore, which are now substantially completed and which should help stabilize future profitability, let me also highlight several other key operating metrics that were noted in today’s press release.
We recorded a $1.5 million inventory write-down of finished goods on hand to reflect our current lower production costs. This will have a positive impact on future gross margins as we sell through that inventory.
Fiscal fourth quarter results also include a non-cash accelerator promotion expenses of $1.5 million to one of our customers. From a cash perspective, these credits are granted evenly over the year.
I would also like to note that full year results reflect the accrual of customs expense for cause of approximately $1.3 million, of which $80,000 was accrued in the fourth quarter. We are hopeful that this expense will be reversed upon a successful resolution of a pending customs review of our position regarding the potential exposure related to the omission of certain cost elements in the appraised value of used alternators and starters, which were remanufactured in Malaysia and returned to the United States since June of 2002.
Aside from the points just noted, fiscal 2008 was a significant year for us in many other respects. We changed our entire operating model to an offshore global one, reducing costs and expanding the company’s global capabilities. This also included a number of other initiatives, including the completion of a $40 million private placement to strengthen the company’s balance sheet and facilitate the company’s successful transition to our offshore manufacturing model.
Our NASDAQ listing was also an important accomplishment in fiscal 2008. In addition, there were various promotions within the company’s senior operating management team, as well as the finance department, which we announced in the third quarter, as well as enhancements in our internal control and board enhancements.
We added Scott Adelson, a senior managing director and global co-head of corporate finance for Houlihan Lokey to our board and recently announced the appointment of Duane Miller, a former senior GM executive, as a director.
We received a clean opinion on our internal controls over financial reporting and in addition, the transition to our new audit firm, Ernst & Young, has gone smoothly. All of these represent important developments in the company’s repositioning for the future with a globally competitive model.
Several other events during the past year are worth highlighting. We successfully extended an exclusive three-year extension of a supply contract for new and remanufactured alternators and starters from a major automotive retailer, with estimated aggregate sales of approximately $50 million. We were also successful in sub-leasing and closing our distribution facility in the national region, with an estimated reduction of future expenses on an annualized basis of approximately $1.6 million.