Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Motorcar Parts of America's Fiscal 2015 Second Quarter Results Call. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to host. Mr. Gary Maier. Sir you may begin.

Thank you, Eric. Thanks everyone for joining us today for the call. Before I 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'd like to remind everyone of the Safe Harbor statements included in today's press release. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor 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 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 Company. Actual results may differ from those projected in these forward-looking statements. 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. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of some of the ongoing risks and uncertainties of the Company's business, I refer you to the various filings with the Securities and Exchange Commission. I would now like to begin the call and turn it over to Selwyn Joffe.

Thanks Gary, I appreciate you joining us today. The first half of 2015 was an exciting period for the company reflecting growth and continued momentum in our base rotating electrical business further success in expanding wheel hubs and initial partial quarterly sales contributions from our newly launched brake master cylinder business. On an adjusted basis, net sales for the quarter climbed 21.7% to 81.4 million from 66.9 million a year ago. The adjustment primarily reflects the cost of lifting previous supply inventory relating to the new business that the company began shipping in the second quarter. Our net income on an adjusted basis almost doubled to $10.2 million from $5.3 million. Even with the 14.4% increase in the diluted weighted average shares outstanding our diluted earnings per share increased to $0.60 per share from $0.30 per share a year earlier representing a 67% increase. Current economic conditions along with the continued aging of the car fleets continue to provide strong demand for our products. Pressure from fuel prices on miles driven should also diminish as fuel prices come down. As I’ve highlighted on previous calls, data from Polk shows the average age of vehicles is 11.4 years. In addition, as a number of cars in the 12 plus year old category continues to grow, the replacement rates for these vehicles increased significantly. Current expectations are that the average age of light vehicles will increase and this should be a long term trend. This continues to board well for us. We began shipping brake master cylinders in late July, which represents our second product line expansion following the introduction of wheel hubs in June of 2013. We expect initial revenues from our newest product on an annual run rate basis to be approximately 8 million to 10 million and further ramp…

Thank you, Selwyn. We are pleased to announce record results for the fiscal 2015 second quarter, adjusting for customer allowances associated with inventory purchases related to new business gains. As Selwyn briefly mentioned, adjusted net sales for the fiscal second quarter were 81.4 million, a 14.5 million or 21.7% increase compared with the prior year second quarter. Adjusted earnings per share for the second quarter were $0.60 which is up 67% over the prior year’s comparative quarter after reflecting a 14.4% increase in the fully diluted shares outstanding and adjusted EBITDA was approximately 20.6 million which is up 51.5% over the prior year’s comparative quarter. On a comparative basis, second quarter results benefited from the introduction of the new brake master cylinder’s product line in late July 2014. Additionally, second quarter results were impacted by various factors including customer allowances associated with inventory purchases related to new product lines and additional business which I will discuss further when I review the financial results. Let me now review the financial results for the second quarter. Net sales were 70.8 million for the second quarter compared with 66.2 million for the prior year comparative quarter. As previously mentioned, second quarter results were negatively impacted by customer allowances associated with inventory purchases and returns related to new product lines and additional business. During the second quarter net sales were reduced by 10.5 million in connection within purchase of inventories which are onetime charges in connection with being awarded additional business for new and existing product lines. For the prior year second quarter net sales were impacted by 700,000 in returns and customer allowances in connection with introducing the wheel hubs product line. After adjusting for the impact of customer allowances associated with the inventory purchase and returns related to new product line and…

Thank you David. Exciting results. I wanted to take this opportunity to thank the MPA team. We’re relentlessly pursuing making our customers do better than our competitor’s customers. The team continues to be passionate about building shareholder value, and as the second half of the fiscal year evolves we will continue to focus on growing our business and working with our customers to grow their businesses through superior product quality and value added customer service. In addition to growing our existing business we will continue to look for additional product line opportunities. We remain optimistic about our existing business and excited about new business that we have received in each of our product lines. We’ll now open the call to questions.

(Operator Instructions). And our first question comes from Steve Dyer of Craig-Hallum. Pelase go ahead.

The gross margin in particular was exceptional and I know you’ve kind of always talked about that 27% to 30% range. But pretty consistently are well above that including this quarter. How do you think about that in general going forward?

That’s a good question Steve. I think the things the key things that effect the gross margin are, No. 1, overhead absorption and certainly with the amount of new business and volume that we continue to take on. We have scalable capacity and so the improved overhead absorption is certainly helping our margins and I expect that to continue as long as our business continues to grow in our core categories that we’re in right now. The other thing that affected us positively for the quarter was really the product mix. And generally late model applications are generally more profitable than the early model applications. Many of the early model applications are just no profit at all in, but you have to offer a full line. So on the flow we did well, that mix can vary dramatically quarter-by-quarter. And so while I think the long-term outlook is that the professional installer market has significant growth ahead of it and generally the professional installer market calls for later model applications and our customers are all focused on growing in the commercial professional installer market as well as DIY, but they are growing incrementally in the professional installers side. I think that will bode us well, but I think assuming that these margins of constant is not -- would not be accurate. I think the six month average is probably a more accurate margin to operate off. And I do think we’ll see some big margin quarters but I think you’ll see some that have lower margins. I think we’ve also stated in the past really, return on invested capital is where we focused. We believe we’ve been successful in really generating over 45% return on invested capital. We certainly -- we look at a threshold of around 35%, but really to the extent we can accomplish those returns. We’re little less focused on gross margins just because there are so many product lines, we’re expecting to launch traditional product lines and those margins fluctuate fairly significantly between product lines. So that’s a bit of a long winded answer, but hopefully that gets you something.

Yes. Thank you. That’s very helpful. And thank you David for explaining the basically the contra revenue for the core purchases. Would you anticipate the December quarter to have a material impact as well or does this quarter a pretty much cover it?

Let me clarify that as well. I don’t -- to answer your question firstly is that, we don’t anticipate much in the third quarter. And the other reason, the reason that it was actually relatively high compared to any other product acquisition costs we’ve had in the past, is there is a differentiation in what type of business you get. To the extent that we pick up a competitor’s product line that was a branded line in our competitors and we convert that line into a house line brand, we would have to look all of that competitive branded inventory. And so that happens. And so that was a little bit of an extraordinary situation. Normally, if it’s a -- if they’re both house brands, the lift is much more insignificant it’s more cleaning up the inventory rather than switching out the inventory. And so I think that negative affected us for the quarter. In addition to that, as part of some of our growth in rotating electrical we had to expense some cold buyback and that expense actually if we have a losing business we get that money back. So it’s like a long term deposit. But that will continue on. But I think the significant branded inventory pick will probably will be reduced as we go forward.

Great, helpful. Thank you. A couple more, as you look at kind of for the December quarter and I know you don’t provide guidance. But halfway or so through the quarter now are you sort of seeing the normal seasonality there where December ends up being down a bit from September?

We expect third quarter is always a lighter quarter than the second. Relative to the third quarter it’s a good quarter. But we certainly don’t expect to see the same revenues in the third quarter. The fourth quarter we expect to see significant revenue growth. We have very significant new business starting in the fourth quarter. But the third quarter is a strong quarter relative to third quarters, but certainly not relative to the second quarter.

Okay. And then you talked over time and I know a significant component of the growth story here is new product lines. And hate to be talking about the next one, because you just launched brake master cylinder. But how do you think about timing on the next one? I am sure it’s a 2015 event. But any color around first half year, second half year, et cetera.

I wish I could give you more color on that. I mean we’re optimistic we have a couple of new product lines that we’re excited about. How fast roll they are going to out I am really not sure. I do believe that we should have something in this fiscal year. I think we probably at least six months away from that.

Okay, sounds good. Thanks. Congrats again guys.

Our next question comes from Matt Koranda from Roth Capital. Please go ahead.

Thanks for taking my questions. Just on the inventory piece can you just talk about how that flows through the financial statements going forward or do you anticipate selling off the inventory that you’ve repurchased and how does it hit the financial statements on a go forward basis?

On a go forward basis if we sell that inventory it’s recorded as a sale, like any other normal sale.

This is inventory we’ve lifted, so we don’t anticipate a big pickup. I mean obviously we would not written it off, if we didn’t think it had no value. So, I don’t anticipate that you’re going to have a big pickup from the inventory, I wouldn’t assume that. As far as the way it hits the P&L, I am going to turn it over to David, how we’d account for the return.

So we’ve already -- in the September number we’ve already accrued for what we believe the value is. So, going forward if we stay on the normal course, whatever sold is recorded to sales and cost is cost of the sale.

Okay. So any reason to anticipate the margin profile would be substantially different from any of your core business?

This is inventory, then again we’ve written it off because that’s what we believe the value is and there is not -- we don’t anticipate the pickup from it.

Okay, all right great. And then on the brake master cylinders it looks likes nice revenue there. Could you talk about how many customers contributed to that 2.7 million in revenues for the quarter? And then are there additional customers you anticipate adding by year end of fiscal ’15 and what run rate do you think would be reasonable to exit the year?

I think again generally we try not be granular on the customers, just because I don’t think it’s fair to our customers. I mean that is a launch to one customer, but we expect to have multiple customers in this product line. I don’t know what that revenue number is, it’s very early I mean we just launched -- probably a couple of months ago now, what is it the --. So a little early to tell I will tell you that the interest in our product line is very high. And so in terms of giving you guidance on what that will do, I think we said about 8 million to 10 million in our first year we expect to pick up our run rate that we expect to be significantly higher than that for the end of the year.

Okay, great. That’s helpful. And then one more break master cylinder, I think you had mentioned in the past potential for [remans] activity. If you could talk just about you’re thinking around that?

We continue -- in the end it implies to every product line, we continue to evaluate, build versus purchase and so we would look, we have coverage. I would tell you with the new products we’d probably have coverage for 98% of the line, so 98% certainly of the volume. So the need for [remans] probably not critical, but if it makes sense then we we’ll [reman], if not we won’t. We don't have a definitive answer at this point on that.

Our next question comes from Jimmy Baker of B. Riley & Co. Please go ahead.

Thanks for taking my question. This is actually [indiscernible] in for Jimmy and congratulations on the quarter guys.

Thank you, I was going to say it didn’t sound like Jimmy Baker.

So to go to my first question. One of your competitors recently disclose that it intends to walk away from about of 80 million of annuals business that are larger aftermarket customer. And BBB indicated at 120 million of new business and its presentation to vendors. Can you confirm you were awarded the balance of that?

Again I don't like to get into specific customers. I mean we have significant new business. I don't -- they didn't mention they customer bonding, I would assume that's the business we've gotten, but we really don't go into the details on a per customer basis. I would tell you we picked up north of $50 million of new business and so the arithmetic probably ads up, but I am not -- I can't comment on any customer specific stuff.

Okay. But I suppose with regards to a typical seasonality in Calendar year '15, do we think about any type of seasonality or any type of unusual ramp for that piece of business?

Well we expect to begin I think we've mentioned this. We expect to start shipping over $50 million of new business in our fourth quarter. It just happens to be when it came in I don't think that has anything to do with seasonality. So we are going to see a big pump in our fourth quarter revenues and big increases in ramp up in our production and then with everything related to that. The business continues to be less seasonal than where it has been, although the third quarter, the December quarter, journey is a little softer there’s a lot of holidays in there. There are lot of days that people won't work from there [depot], because of weather and family events. So the third quarter generally is lower for us. But we expect to see a solid third quarter related to third quarters and certainly a much enhanced fourth quarter. I don't know if I am answering your questions but does that deal with your question?

Yes, that's generally helpful and I guess if we can speak to maybe the product lines for that business piece and perhaps the length of the supply agreement?

The supply agreement, we don't comment on supply agreements. I mean generally that our supply agreement relates if we do the job right and we are competitively price and we take care of our customers' needs, that's our supply agreement. It's forever if you don't do that, it allows for the [indiscernible]. So I mean the supply agreements are not what we’re focused on, its customer service. So all about supply agreements are filed publically that we have, but really the truth of the matter is the length of the supply agreement to us is irrelevant, I mean it's really the quality of the service we provide that we believe makes us viable for our customers.

Okay, that's helpful. Thanks. And on to my next question. It's not often that we see a company drive more than 20% sales growth while sales and marketing expense is actually down year-over-year. Can you talk about what you are doing to be more efficient there and also how should we think about operating expenses in general as your business momentum continues to build.

Yes, I think the sales expenses I mean are down. I mean I shouldn't really be down they may fluctuate around this level. But the reality is, is we are leveraging our relationships within a channel and so we are able to have someone who a team of people that are dealing with one product line, that can deal with two product lines. We have an infrastructure that's quite scalable and able to manage significantly more than there have been historically and they have done a great job of scaling their expenses. I think you will see incremental sales cost go up as we grow, but certainly not at the rate that we grow. I mean we have a whole base fundamental team of people that support the specialist across the Board. So that base team is leveraged quite significantly as you grow your revenue. But again we should see some scaling as we develop new products, we've got new product engineering, new product sales specialist, new category management specialist, so we will see some incremental scaling. But not nearly as significant as the growth in revenue.

Okay. And given the dynamics would you care to kind of care to comment on what that incremental growth in that line would be?

Well I don't know. We talked -- it's a tough, that's a tough one as well, I mean we've been experiencing about 20% growth for the first six months. And certainly in our targets would be to trying and continue with that. It just depends on when the new product line entries will able to depend on success of landing new customers. There are quite a lot of variables in that. I think our organic categories are strong, I mean rotating electrical is at 3% to 5% growth within – mass assumed is least that and we think that organic growth in wheels hubs at least 10% to 12%. So I mean that is our base line and anything we can do to enhance that obviously we’re going to try.

Our next question comes from Chris Brown of Aristides. Please go ahead.

I just had a follow up on the customer allowances, I am still trying to understand it. So you come up with a new part and you say to Retailer A, we want to supply you and Retailer A says, great we want you to supply us. Is the situation that they have a branded part basically and so you bought the inventory of that branded parts. And then the delta between what you paid them for that inventory of branded part and what you think its worth, was 9.985 million, is that correct?

That is correct.

Can you say what you actually paid them for the part and what you think the value was?

Well again, I don’t want to get into that, that’s somebody else’s proprietary information, but I could tell you that substantially all of the inventory we wrote off. I mean you take stuff back, it’s not in the same condition as new it’s not in a mix that anybody else wants, it’s just very difficult to liquidate and we’re going to try and liquidate, but it’s very difficult.

10 million of profit seems like a pretty good deal for the retailer. What kind of sales volume do you guys expect that you’re going to get in exchange for having given up that $10 million conception?

I would term, it’ll going to be north of 35% on that investment.

Basically the revenue that you get off of that will be more than 35% a year of the $9.385 million, that’s correct?

Right, it will.

(Operator Instructions). And our next question comes from Andy Kurita from Kettle Hill. Please go ahead.

I still don’t understand this inventory issue, I am sorry maybe a bit -- did in the pro forma sales of 10 million, did you receive any cash or did any product transfer title from you to the customer?

Of the 10 million we received, that’s just a regular sale and then we got it returned and so instead of expensing that as a cost of new business, it’s an expense as an offset to sales, and that’s the differentials. So the 10 million revenue was there, it’s just as a credit for that return of the inventory.

The 10 million, I still don’t understand that. So you booked the sale of the same product?

No, no, we had sales of $81 million, we had real sales of $81 million in connection with the new business that we took. We took a return of approximately 9 point something million dollars and that’s booked as an offset to sales, is completely different inventory. It’s inventory that we will scrap out. And so they aren’t related, just is that when you get a return on inventory it’s a contrary sales, it’s not an expense of new business the way we account for it.

So you book normal business and then the inventory was returned, 9 million worth of inventory. How was that $10 million value of inventory determined?

Well we go out and see what we can scrap it for and where we make an estimate what the value is, we give credit to the customer, that’s the value of their inventory on their books. So we give them a credit for that and then we hope for the value of that inventory at what we estimate we can scrap it out.

There is only a cost of 500,000 on cost of goods against the 10 million of revenue. So what does that 500,000 represent?

That’s hopefully what we can get for that inventory. Now we may be able to get more but we doubt it, because when you get back inventory that’s branded inventory, it’s very difficult for us to resell. We’re not in a business of selling somebody else’s brand. And so we’d scrap it.

But the effect on the non-GAAP numbers is it effectively 95% gross margin and you’re adding back, that’s what I don’t understand, because is 500,000 the cost associated with 10 million of sales, so why is there a $9.5 million add back on the non-GAAP due to the inventory return.

This is David, so I’ll explain a different way. So Selwyn mentioned that and as we’re presenting in our earnings release the regular recurring sales was 81 million for the quarter. During the quarter because of the inventory purchases sales was reduced by approximately $10 million. So in our earnings table as we’re adding back that 10 million to show what is the recurring run rate sales for that quarter. So that purchase of inventory has nothing to do with the 81 million of recurring business sales that is recognized.

And then the color, just a pick up because that’s what that inventory will be valued. So it’s really a hit against sales that you’re adding back.

In the GAAP presentation, you took a $9.5 million -- I just don’t understand why is the 95% incremental gross margin you’re adding back on this non-GAAP number?

This add numbers include the actual cost of the goods sold, that we took back. GAAP numbers [included].

Yes, the non-GAAP, GAAP add back, the cost that it sold. It’s only scrap now.

Okay. All right thank you. I will follow up with you guys later. I am still little confused there. Thanks.

And our next question is a follow up from Chris Brown of Aristides. Please go ahead.

Thank you. I was just wondering in the last few years have you taken other similar charges for these customer allowances that you gave this quarter.

There have been small ones again the reason there is not so significant is we’ve picked up business for premium brands and that’s when we took the return and put in a different brand name into the customer. So this was an unusually large one because we’ve picked up premium business that’s very expensive business and a very expensive inventory that we’ve replaced. So, this is very unusual. I mean there are small ones that go-on on a day to day basis but this one is unusual. And that’s generally the business we’ve picked up is being in sort of house brands. This was a premium branded pieces of business we’ve picked up, that we had to change out the inventory.

Got that and there is small concessions, would they all be available in your annual filings or are they’re typically not reported?

I think they’re all in the filings everything --.

Kevin do you want to comment on that?

Later today the 10-Q for the September quarter will be filed and we’ll have more details in the MD&A discussion regarding these inventory purchases.

And our next question comes from Paul Karos from Whitebox Advisors. Please go ahead.

Is this fair to when you said the 35% return on the 10 million -- that wasn’t revenue, that was actually your -- whatever your return on capital. So that was actually not revenue but that because you were talking about like some of the new business wins bigger now and is it’s really return on capital for the 35% plus?

Return on invested capital is 35%, which mean that your revenues are significantly greater than that.

Yes, okay. I just want to make sure I understood that. That was actually that return of capital not the revenue on that product. So, is one way to think about this new business would be just to say it’s almost like [signal] different company might view like a onetime CapEx what the CapEx was to win the business it’s is not really the way that they -- is that the fair way to look at it?

Yes, that’s one that’s like playing a slotting machine or whatever. It’s just that the cost of getting that business was extremely out to be competitor’s inventory.

Yes, they say look we’ll give you that --

And I would tell you that if you don’t clean it out then what you have is a much slower ramp up you don’t get the revenue quicker, you’re not doing the customers any favor because they got the wrong inventory in there. And so our philosophy is clean out the inventory as soon as possible because that’s some of the value add things that we offer. We understand what inventory needs to be there the customer values are input on what inventories needs to be there and that’s all part of our whole category management process. And so we not big on delaying the hedge we bid on getting it over clean up the inventory get the right inventory and so we can show the customer what we can do to help them

Okay, so I get that. So basically for the retail it’s a great thing to get the clean shelf up for you guys it’s just like in your capital investment decision, what do are we going to make returning capital on this 10 million and that’s what you’re seeing in the 35% -- at least 35% on return. That’s the capital on that 10 million, so that’s other industries that would be it’s a cost of, instead of the cost of goods in lot of cases it’s actually a capital spending number now we’re going to get a return on that over time, assuming that of course you keep it for a long period of time to get that [ROC]?

Right, that’s exactly what it is --.

I get it, and I just want to make sure I understand that. Thank you.

Our next question is a follow up from Matt Koranda from Roth Capital. Please go ahead.

Two quick follows up, was winning the new business was it predicated on buying back the inventory or was that part of -- was that like your preference?

I mean some of the new business was predicated on taking this inventory out. I think the customer could have sold it through. But again and I think what I’ve said we -- our philosophy is if you bring us on as a supplier we want to make sure you got the right inventory that’s part of what we offer. And so if it doesn’t make economic sense for us to pull the inventory and get it right we wouldn’t do a deal. And the reality is if you get that deal we don’t to be stuck to somebody else’s legacy performance on retail sales for the shelf because every day POS is critical to our customers and to us as category managers. So you will see that generally immediately when we get new business, we make sure we evaluate what inventory levels, what the type of inventory is in there where it’s located, what the movement is on that inventory, what the price points are on the inventory, what is the brand recognition on that inventory, what is the key selling points to that inventory, how does it apply to DIY versus DIFM and on and on and on. And to the extent it doesn’t meet MPAs criteria what of we think is best for the customer and the customer agrees with that we will lift the inventory. To the extent we can’t afford to do it we would not take the business.

Okay, that’s helpful. And then you mentioned maybe a small impact in going forward for the remainder of fiscal ’15. Anyway you could kind of help us think about the magnitude of the impact in the future of Q3 and Q4.

It’s not going to be nearly as significant as this, it’s much smaller, the amount of inventory.

And our next question is a follow up from Andy Kurita from Kettle Hill. Please go ahead.

Like I understand the little better, so you shift the new product that was 10 million and in exchange you received all this inventory back.

No, Andy, we separate that, the sales are 81 million in our regular course of business. It’s got nothing to do with switching this inventory. The only thing that happens here is that we’ve taken back the inventory and that offset to sales, but nothing to do with equivalent inventory. So we shifting the regular course of business $81 million, it doesn’t include -- it may include some inventory that replaces it or may not, it’s not a substitute of inventory, it’s a list of the inventory to clean out shelves so that when the program comes in they will be able to at the right inventory mix on the shelves.

Okay. So, if 10 million of inventory that you are taking back, and that’s the cost that they held on their books for?

That was the price they sold it back us yes, and we assume that’s what they paid for it.

Okay. So you paid 10 million of cash? I just want to understand if you paid 10 million of cash.

Yes, we paid 10 million of cash, absolutely.

Okay. So what was the 500,000 cost of goods?

It will be the cost assigned to that 10 million.

That’s the recovery amount that we think we can scrap the inventory for. So it’s a reduction of cost -- that’s the value of the square.

Okay.

So that’s what we think that 10 million is worth 500 grand in terms of value of inventory to us. Now we say its premium inventory -- its good inventory, but we’re not in the business to selling that inventory and that’s a fix mix and so if we can get more halleluiah, but when we estimate what is with us, that’s what is with us.

Okay. So you took inventory off your shelf, did you shift the inventory to replace it within this quarter.

It’s ongoing -- not one for one, no, not at all. No, this wouldn’t help us going forward.

Okay.

We first not get the inventory after shelves, before we can put the inventory on the shelf.

Okay. Thank you.

And I’m showing no further questions at this time. I’d like to turn it back to management for closing remarks.

Okay. We appreciate your continued support and thank you again for joining us for the call. And we look forward to speaking with you when we host third quarter call in February. And hopefully we’ll be at various conferences in interim and certainly we’re always available for questions. And we thank everybody for their interest.

Ladies and gentlemen, this does conclude today’s conference. Thank you for your attendance. You may now disconnect. Everyone have a great day.