☑ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
New York
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11-2153962
|
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
|
incorporation or organization)
|
Identification No.)
|
|
2929 California Street, Torrance, California
|
90503
|
|
(Address of principal executive offices)
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Zip Code
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Title of each class
|
Trading symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $0.01 per share
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MPAA
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The Nasdaq Global Select Market
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Large accelerated filer ☐
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Accelerated filer ☑
|
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Non-accelerated filer ☐
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Smaller reporting company ☐
|
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Emerging growth company ☐
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PART I
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5
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11
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19
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19
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19
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19
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PART II
|
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20
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22
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23
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41
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41
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41
|
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41
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43
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PART III
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44
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44
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44
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44
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44
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PART IV
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45
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50
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51
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Item 1. |
Business
|
• |
Grow our current product lines both with existing and potential new customers. We continue to develop and offer current and new sales programs to ensure that we are doing
all we can to support our customers’ businesses. We remain dedicated to managing growth and continuing to focus on enhancements to our infrastructure and making investments in resources to support our customers. We have globally positioned
manufacturing and distribution centers to support our continuous growth.
|
• |
Introduction of new product lines. We continue to strive to expand our business by exploring new product lines, including working with our customers to identify potential
new product opportunities.
|
• |
Creating value for our customers. A core part of our strategy is ensuring that we add meaningful value for our customers. We
consistently support and pilot our customers’ supply management initiatives in addition to providing demand analytics, inventory management services, online training guides, and market share and retail store layout information to our customers.
|
• |
Technological innovation. We continue to expand our research and development teams as we further develop in-house technologies and advanced testing methods. This elevated
level of technology aims to deliver our customers the highest quality products and support services that can be offered.
|
• |
We provide industry-leading diagnostic equipment to both the original equipment and aftermarket. We are continuously upgrading our equipment to accommodate testing for the
latest alternator and starter technology for both existing and new customers. These software and hardware upgrades are also available for existing products that the customer is using. In addition, we provide industry leading maintenance and
service support for our testing equipment to provide a better end-user experience and value to our customers.
|
• |
Introduction of new product lines. We have recently added new products, including alternator and starter testers for retail automotive chains and professional repair
shops.
|
• |
Market and grow our new product lines on a global basis. We offer products and services that cater to automotive diagnostics for inverter and electric motors for both
development and production. In addition, we provide power supply hardware and emulation software diagnostic products. Our strategy is to market these products on a global basis to OE manufacturers as well as suppliers to the OE manufacturers
for development and production of electric vehicles. We believe this is a rapidly emerging business, and see the opportunity for accelerating growth rates. In addition, we are well-positioned to supply diagnostic equipment to the aerospace
industry to support its shift to electric power driven control systems in airplanes.
|
Item 1A. |
Risk Factors
|
• |
respond more quickly than we can to new or emerging technologies and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive aftermarket products;
|
• |
engage in more extensive research and development; and
|
• |
spend more money and resources on marketing and promotion.
|
• |
exchange controls and currency restrictions;
|
• |
currency fluctuations and devaluations;
|
• |
changes in local economic conditions;
|
• |
repatriation restrictions (including the imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries);
|
• |
global sovereign uncertainty and hyperinflation in certain foreign countries;
|
• |
laws and regulations relating to export and import restrictions;
|
• |
exposure to government actions;
|
• |
increased required employment related costs; and
|
• |
exposure to local political or social unrest including resultant acts of war, terrorism or similar events.
|
• |
the difficulty in integrating newly-acquired businesses and operations in an efficient and effective manner;
|
• |
the challenges in achieving strategic objectives, cost savings and other benefits from acquisitions;
|
• |
the potential loss of key employees of the acquired businesses;
|
• |
the risk of diverting the attention of senior management from our operations;
|
• |
risks associated with integrating financial reporting and internal control systems;
|
• |
difficulties in expanding information technology systems and other business processes to accommodate the acquired businesses; and
|
• |
future impairments of any goodwill of an acquired business.
|
• |
significant delays in the delivery of cargo due to port security considerations;
|
• |
imposition of duties, taxes, tariffs or other charges on imports;
|
• |
imposition of new legislation relating to import quotas or other restrictions that may limit the quantity of our product that may be imported into the U.S. from countries or regions where we do business;
|
• |
financial or political instability in any of the countries in which our product is manufactured;
|
• |
potential recalls or cancellations of orders for any product that does not meet our quality standards;
|
• |
disruption of imports by labor disputes or strikes and local business practices;
|
• |
political or military conflict involving the U.S., which could cause a delay in the transportation of our products and an increase in transportation costs;
|
• |
heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods;
|
• |
natural disasters, disease epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected
areas;
|
• |
inability of our non-U.S. suppliers to obtain adequate credit or access liquidity to finance their operations; and
|
• |
our ability to enforce any agreements with our foreign suppliers.
|
• |
raw material shortages;
|
• |
work stoppages;
|
• |
strikes and political unrest;
|
• |
problems with oceanic shipping, including shipping container shortages;
|
• |
increased customs inspections of import shipments or other factors causing delays in shipments;
|
• |
economic crises;
|
• |
international disputes and wars;
|
• |
loss of “most favored nation” trading status by the U. S. in relations to a particular foreign country;
|
• |
import duties;
|
• |
import quotas and other trade sanctions; and
|
• |
increases in shipping rates.
|
Item 1B. |
Unresolved Staff Comments
|
Item 2. |
Properties
|
Location
|
Type of Facility
|
Approx.
Square
|
Leased
or
|
Expiration
|
||||
Torrance, CA
|
Remanufacturing, Warehouse, Administrative, and Office
|
231,000
|
Leased
|
March 2022
|
||||
Tijuana, Mexico
|
Remanufacturing, Warehouse, and Office
|
312,000
|
Leased
|
August 2033
|
||||
Tijuana, Mexico
|
Distribution Center and Office
|
410,000
|
Leased
|
December 2032
|
||||
Tijuana, Mexico
|
Remanufacturing
|
199,000
|
Leased
|
December 2032
|
||||
Tijuana, Mexico
|
Core Induction and Warehouse
|
173,000
|
Leased
|
December 2032
|
||||
Tijuana, Mexico
|
Warehouse
|
72,000
|
Leased
|
July 2021
|
||||
Ontario, Canada
|
Remanufacturing, Warehouse, and Office
|
157,000
|
Leased
|
May 2023
|
||||
Ontario, Canada
|
Manufacturing, Warehouse, and Office
|
35,000
|
Leased
|
December 2022
|
||||
Singapore & Malaysia
|
Remanufacturing, Warehouse, and Office
|
90,000
|
Leased
|
Various through December 2022
|
||||
Shanghai, China
|
Warehouse and Office
|
27,000
|
Leased
|
March 2021
|
Item 3. |
Legal Proceedings
|
Item 4. |
Mine Safety Disclosures
|
Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
Periods
|
Total Number of
Shares Purchased
|
Average Price
Paid Per Share
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
|
Approximate
Dollar Value of
Shares That May
Yet Be Purchased
Under the Plans or
Programs (1)
|
||||||||||||
January 1 - January 31, 2020:
|
||||||||||||||||
Open market and privately negotiated purchases
|
-
|
$
|
-
|
-
|
$
|
21,308,000
|
||||||||||
February 1 - February 29, 2020:
|
||||||||||||||||
Open market and privately negotiated purchases
|
-
|
$
|
-
|
-
|
21,308,000
|
|||||||||||
March 1 - March 31, 2020:
|
||||||||||||||||
Open market and privately negotiated purchases
|
-
|
$
|
-
|
-
|
21,308,000
|
|||||||||||
Total
|
0
|
0
|
$
|
21,308,000
|
(1) |
As of March 31, 2020, $15,692,000 of the $37,000,000 had been utilized and $21,308,000 remained available to repurchase shares under the authorized share repurchase program, subject to the limit in our Amended Credit Facility. We retired the
675,561 shares repurchased under this program through March 31, 2020. Our share repurchase program does not obligate us to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market
transactions.
|
Plan Category
|
Number of securities to
be issued upon
exercise of outstanding
options, warrants and
rights
(a)
|
Weighted-average
exercise price of
outstanding options
warrants and rights
(b)
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c )
|
|||||||||
|
||||||||||||
Equity compensation plans approved by security holders
|
1,738,106(1
|
)
|
$
|
18.18(2
|
)
|
773,732(3
|
)
|
|||||
Equity compensation plans not approved by security holders
|
N/A
|
N/A
|
N/A
|
|||||||||
Total
|
1,738,106
|
$
|
18.18
|
773,732
|
(1) |
Consists of (i) stock options issued under the 2004 Non-Employee Director Stock Option Plan, (ii) restricted stock units and restricted stock (collectively “RSUs”) and stock options issued under the Third Amended and Restated 2010 Incentive
Award Plan (the “2010 Plan”), and (iii) RSUs issued under our 2014 Non-Employee Director Incentive Award Plan (the “2014 Plan”).
|
(2) |
The weighted average exercise price does not reflect the shares that will be issued in connection with the settlement of RSUs, since RSUs have no exercise price.
|
(3) |
Consists of shares available for future issuance under our 2010 Plan and 2014 Plan.
|
Item 6. |
Selected Financial Data
|
• |
Upon adoption of ASC 842, Leases, on April 1, 2019, right-of-use operating assets and operating lease liabilities were recorded on the consolidated balance sheet at March
31, 2020.
|
• |
Prior to the retrospective adoption of ASC 606, Revenue from Contract with Customers, on April 1, 2018, we reported our core inventory as
a long-term asset in our consolidated balance sheets.
|
• |
We acquired certain assets and assumed certain liabilities of Mechanical Power Conversion, LLC in December 2018. We also completed the acquisitions of all of the equity interests of D&V
Electronics Ltd. in July 2017 and Dixie Electric, Ltd. in January 2019.
|
Fiscal Years Ended March 31,
|
||||||||||||||||||||
Income Statement Data
|
2020
|
2019
|
2018
|
2017
|
2016
|
|||||||||||||||
Net sales
|
$
|
535,831,000
|
$
|
472,797,000
|
$
|
427,548,000
|
$
|
422,058,000
|
$
|
369,670,000
|
||||||||||
Operating income
|
16,738,000
|
15,646,000
|
50,834,000
|
69,815,000
|
38,286,000
|
|||||||||||||||
Net (loss) income
|
(7,290,000
|
)
|
(7,849,000
|
)
|
19,264,000
|
38,735,000
|
10,269,000
|
|||||||||||||
Basic net (loss) income per share
|
$
|
(0.39
|
)
|
$
|
(0.42
|
)
|
$
|
1.02
|
$
|
2.08
|
$
|
0.56
|
||||||||
Diluted net (loss) income per share
|
$
|
(0.39
|
)
|
$
|
(0.42
|
)
|
$
|
0.99
|
$
|
1.99
|
$
|
0.54
|
March 31,
|
||||||||||||||||||||
Balance Sheet Data
|
2020
|
2019
|
2018
|
2017
|
2016
|
|||||||||||||||
Total assets
|
$
|
777,029,000
|
$
|
632,362,000
|
$
|
552,427,000
|
$
|
445,090,000
|
$
|
425,647,000
|
||||||||||
Working capital (1)
|
90,624,000
|
73,528,000
|
90,287,000
|
(17,710,000
|
)
|
11,391,000
|
||||||||||||||
Revolving loan
|
152,000,000
|
110,400,000
|
54,000,000
|
11,000,000
|
7,000,000
|
|||||||||||||||
Term loan
|
24,140,000
|
27,872,000
|
16,981,000
|
19,999,000
|
23,047,000
|
|||||||||||||||
Finance lease liabilities
|
5,964,000
|
4,508,000
|
5,084,000
|
2,512,000
|
2,608,000
|
|||||||||||||||
Operating lease liabilities
|
66,529,000
|
-
|
-
|
-
|
-
|
|||||||||||||||
Other long term liabilities
|
97,225,000
|
44,558,000
|
49,282,000
|
25,986,000
|
35,066,000
|
|||||||||||||||
Shareholders’ equity
|
275,520,000
|
279,755,000
|
286,880,000
|
257,333,000
|
218,257,000
|
(1) |
Our working capital is calculated as current assets less current liabilities.
|
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
• |
Net realizable value for finished goods by customer by product line are determined based on the agreed upon selling price with the customer for a product in the trailing 12 months. We compare the average selling price, including any
discounts and allowances, to the finished goods cost of on-hand inventory less any reserve for excess and obsolete inventory. Any reduction of value is recorded as cost of goods sold in the period in which the revaluation is identified.
|
• |
Net realizable value for Used Cores are determined based on current core purchase prices from core brokers to the extent that core purchases in the trailing 12 months are significant. Remanufacturing consumes, on average, more than one Used
Core for each remanufactured unit produced since not all Used Cores are reusable. The yield rates depend upon both the product and customer specifications. We purchase Used Cores from core brokers to supplement our yield rates and Used Cores
not returned under the core exchange program. We also consider the net selling price our customers have agreed to pay for Used Cores that are not returned under our core exchange program to assess whether Used Core cost exceeds Used Core net
realizable value on a by customer by product line basis. Any reduction of core cost is recorded as cost of goods sold in the period in which the revaluation is identified.
|
• |
We record an allowance for potentially excess and obsolete inventory based upon recent sales history, the quantity of inventory on-hand, and a forecast of potential use of the inventory. We periodically review inventory to identify excess
quantities and part numbers that are experiencing a reduction in demand. Any part numbers with quantities identified during this process are reserved for at rates based upon our judgment, historical rates, and consideration of possible scrap
and liquidation values which may be as high as 100% of cost if no liquidation market exists for the part. As a result of this process, we recorded reserves for excess and obsolete inventory of $13,208,000 and $11,899,000 at March 31, 2020 and
2019, respectively. The increase in the reserve for excess and obsolete inventory was primarily driven by our acquisition of Dixie.
|
Fiscal Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Gross profit percentage
|
22.1
|
%
|
18.9
|
%
|
25.0
|
%
|
||||||
Cash flows provided by (used in) operations
|
$
|
18,795,000
|
$
|
(40,328,000
|
)
|
$
|
(13,944,000
|
)
|
||||
Finished goods turnover (1)
|
3.0
|
3.3
|
3.9
|
(1) |
Finished goods turnover is calculated by dividing the cost of goods sold for the year by the average between beginning and ending finished goods inventory values, for each fiscal year. We believe that this provides a useful measure of our
ability to turn our inventory into revenues.
|
Fiscal Years Ended March 31,
|
||||||||
2020
|
2019
|
|||||||
Net sales
|
$
|
535,831,000
|
$
|
472,797,000
|
||||
Cost of goods sold
|
417,431,000
|
383,623,000
|
||||||
Gross profit
|
118,400,000
|
89,174,000
|
||||||
Gross profit percentage
|
22.1
|
%
|
18.9
|
%
|
Fiscal Years Ended March 31,
|
||||||||
2020
|
2019
|
|||||||
General and administrative
|
$
|
71,425,000
|
$
|
45,972,000
|
||||
Sales and marketing
|
21,037,000
|
19,542,000
|
||||||
Research and development
|
9,200,000
|
8,014,000
|
||||||
Percent of net sales
|
||||||||
General and administrative
|
13.3
|
%
|
9.7
|
%
|
||||
Sales and marketing
|
3.9
|
%
|
4.1
|
%
|
||||
Research and development
|
1.7
|
%
|
1.7
|
%
|
Fiscal Years Ended March 31,
|
||||||||
2019
|
2018
|
|||||||
Net sales
|
$
|
472,797,000
|
$
|
427,548,000
|
||||
Cost of goods sold
|
383,623,000
|
320,515,000
|
||||||
Gross profit
|
89,174,000
|
107,033,000
|
||||||
Gross profit percentage
|
18.9
|
%
|
25.0
|
%
|
Fiscal Years Ended March 31,
|
||||||||
2019
|
2018
|
|||||||
General and administrative
|
$
|
45,972,000
|
$
|
35,477,000
|
||||
Sales and marketing
|
19,542,000
|
15,030,000
|
||||||
Research and development
|
8,014,000
|
5,692,000
|
||||||
Percent of net sales
|
||||||||
General and administrative
|
9.7
|
%
|
8.3
|
%
|
||||
Sales and marketing
|
4.1
|
%
|
3.5
|
%
|
||||
Research and development
|
1.7
|
%
|
1.3
|
%
|
Fiscal Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Cash provided by (used in):
|
||||||||||||
Operating activities
|
$
|
18,795,000
|
$
|
(40,328,000
|
)
|
$
|
(13,944,000
|
)
|
||||
Investing activities
|
(11,594,000
|
)
|
(22,610,000
|
)
|
(15,278,000
|
)
|
||||||
Financing activities
|
32,153,000
|
59,936,000
|
33,142,000
|
|||||||||
Effect of exchange rates on cash and cash equivalents
|
351,000
|
(136,000
|
)
|
100,000
|
||||||||
Net increase (decrease) in cash and cash equivalents
|
$
|
39,705,000
|
$
|
(3,138,000
|
)
|
$
|
4,020,000
|
|||||
Additional selected cash flow data:
|
||||||||||||
Depreciation and amortization
|
$
|
9,561,000
|
$
|
7,329,000
|
$
|
4,508,000
|
||||||
Capital expenditures
|
14,156,000
|
11,149,000
|
9,933,000
|
Financial covenants
required per the Credit
Facility
|
Calculation as of
March 31, 2020 |
|||||||
Maximum senior leverage ratio
|
3.00
|
2.23
|
||||||
Minimum fixed charge coverage ratio
|
1.10
|
1.44
|
Years Ended March 31,
|
||||||||
2020
|
2019
|
|||||||
Receivables discounted
|
$
|
461,484,000
|
$
|
396,650,000
|
||||
Weighted average days
|
346
|
341
|
||||||
Weighted average discount rate
|
3.3
|
%
|
4.2
|
%
|
||||
Amount of discount as interest expense
|
$
|
14,780,000
|
$
|
15,867,000
|
Payments Due by Period
|
||||||||||||||||||||
Contractual Obligations
|
Total
|
Less than
1 year
|
2 to 3
years
|
4 to 5
years
|
More than 5
years
|
|||||||||||||||
Finance lease obligations (1)
|
$
|
6,425,000
|
$
|
2,292,000
|
$
|
3,280,000
|
$
|
853,000
|
-
|
|||||||||||
Operating lease obligations (2)
|
117,097,000
|
11,427,000
|
21,002,000
|
16,745,000
|
$
|
67,923,000
|
||||||||||||||
Revolving loan (3)
|
152,000,000
|
-
|
-
|
152,000,000
|
-
|
|||||||||||||||
Term loan (4)
|
26,893,000
|
4,720,000
|
8,944,000
|
13,229,000
|
-
|
|||||||||||||||
Accrued core payment (5)
|
14,787,000
|
8,486,000
|
6,301,000
|
-
|
-
|
|||||||||||||||
Core bank liability (6)
|
11,163,000
|
874,000
|
2,332,000
|
2,332,000
|
5,625,000
|
|||||||||||||||
Unrecognized tax benefits (7)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Other long-term obligations (8)
|
44,013,000
|
25,896,000
|
10,539,000
|
4,911,000
|
2,667,000
|
|||||||||||||||
Total
|
$
|
372,378,000
|
$
|
53,695,000
|
$
|
52,398,000
|
$
|
190,070,000
|
$
|
76,215,000
|
(1) |
Finance lease obligations represent amounts due under finance leases for various types of equipment.
|
(2) |
Operating lease obligations represent amounts due for rent under our leases for all our facilities (including one new building leases entered in connection with the expansion of our operations in Mexico and the renewal of one building lease
in Canada), certain equipment, and our Company automobile.
|
(3) |
Our revolving loan obligations are under our current Credit Facility that matures on June 5, 2023. This debt is classified as a short term liability on our balance sheet as we expect to use our working capital to repay the amounts
outstanding under our revolving loan.
|
(4) |
Term loan obligations represent the amounts due for principal payments as well as interest payments to be made. Interest payments were calculated based upon the interest rate for our term loan using the LIBOR option at March 31, 2020, which
was 4.34%.
|
(5) |
Accrued core payment represents the amounts due for principal of $14,124,000 and interest payments of $663,000 to be made in connection with the purchases of Remanufactured Cores from our customers, which are held by these customers and
remain on their premises.
|
(6) |
The core bank liability represents the amounts due for principal of $8,084,000 and interest payments of $3,079,000 to be made in connection with the return of Used Cores from our customers.
|
(7) |
We are unable to reliably estimate the timing of future payments related to uncertain tax position liabilities at March 31, 2020; therefore, future tax payment accruals related to uncertain tax positions in the amount of $1,011,000 have been
excluded from the table above.
|
(8) |
Other long-term obligations represent commitments we have with certain customers to provide marketing allowances in consideration for multi-year customer agreements to provide products over a defined period. We are not obligated to provide
these marketing allowances should our business relationships end with these customers.
|
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk
|
Item 8. |
Financial Statements and Supplementary Data
|
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A. |
Controls and Procedures
|
1. |
Management hired additional finance and accounting personnel with the requisite experience and skill levels, supplemented by third-party technical accounting resources to enable the proper and timely review of
accounting analyses and memos in various technical areas.
|
2. |
Management formalized the assessment and documentation of the Company’s accounting and financial reporting policies and procedures and enhance controls over the monitoring of compliance with these accounting
policies and procedures.
|
3. |
Management enhanced the accounting and internal control training program provided to new and existing subsidiaries. Management enhanced its internal control processes to continuously monitor the subsidiaries’
compliance with and documentation of the Company’s accounting and financial reporting policies and procedures, including internal control over financial reporting.
|
4. |
Management enhanced and will continue to enhance the risk assessment process and design of internal control over financial reporting at D&V Electronics Ltd. (D&V). This includes implementation of
compensating controls, enhanced and revised design of existing transaction level and financial reporting controls at D&V, and enhancements in the documentation of transaction-level controls being performed at D&V.
|
Item 9B. |
Other Information
|
Item 10. |
Directors, Executive Officers and Corporate Governance
|
Item 11. |
Executive Compensation
|
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Item 13. |
Certain Relationships and Related Transactions, and Director Independence
|
Item 14. |
Principal Accountant Fees and Services
|
Item 15. |
Exhibits, Financial Statement Schedules
|
a. |
Documents filed as part of this report:
|
(1) |
Index to Consolidated Financial Statements:
|
Reports of Independent Registered Public Accounting Firm
|
53
|
Consolidated Balance Sheets
|
F-1
|
Consolidated Statements of Operations
|
F-2
|
Consolidated Statements of Comprehensive (Loss) Income
|
F-3
|
Consolidated Statements of Shareholders’ Equity
|
F-4
|
Consolidated Statements of Cash Flows
|
F-5
|
Notes to Consolidated Financial Statements
|
F-6
|
(2)
|
Schedules.
|
Schedule II — Valuation and Qualifying Accounts
|
S-1
|
(3) |
Exhibits:
|
Number
|
Description of Exhibit
|
Method of Filing
|
||
3.1
|
Certificate of Incorporation of the Company
|
Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2 declared effective on March 22, 1994 (the “1994 Registration Statement”).
|
||
3.2
|
Amendment to Certificate of Incorporation of the Company
|
Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (No. 33-97498) declared effective on November 14, 1995 (the “1995 Registration Statement”).
|
||
Amendment to Certificate of Incorporation of the Company
|
Incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1997.
|
|||
Amendment to Certificate of Incorporation of the Company
|
Incorporated by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1998 (the “1998 Form 10-K”).
|
|||
Amendment to Certificate of Incorporation of the Company
|
Incorporated by reference to Exhibit C to the Company’s proxy statement on Schedule 14A filed with the SEC on November 25, 2003.
|
|||
Amended and Restated By-Laws of the Company
|
Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on August 24, 2010.
|
|||
Certificate of Amendment of the Certificate of Incorporation of the Company
|
Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on April 17, 2014.
|
|||
Amendment to the Amended and Restated By-Laws of the Company
|
Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on June 14, 2016.
|
Number
|
Description of Exhibit
|
Method of Filing
|
||
Amendment to the Amended and Restated By-Laws of the Company
|
Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on February 22, 2017.
|
|||
2004 Non-Employee Director Stock Option Plan
|
Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A for the 2004 Annual Shareholders Meeting.
|
|||
2010 Incentive Award Plan
|
Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on December 15, 2010.
|
|||
Amended and Restated 2010 Incentive Award Plan
|
Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on March 5, 2013.
|
|||
Second Amended and Restated 2010 Incentive Award Plan
|
Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on March 3, 2014.
|
|||
2014 Non-Employee Director Incentive Award Plan
|
Incorporated by reference to Appendix B to the Proxy Statement on Schedule 14A filed on March 3, 2014.
|
|||
Third Amended and Restated 2010 Incentive Award Plan
|
Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on November 20, 2017.
|
|||
10.1
|
Amendment to Lease, dated October 3, 1996, by and between the Company and Golkar Enterprises, Ltd. relating to additional property in Torrance, California
|
Incorporated by reference to Exhibit 10.17 to the December 31, 1996 Form 10-Q.
|
||
10.2
|
Lease Agreement, dated September 19, 1995, by and between Golkar Enterprises, Ltd. and the Company relating to the Company’s facility located in Torrance, California
|
Incorporated by reference to Exhibit 10.18 to the 1995 Registration Statement.
|
||
Form of Indemnification Agreement for officers and directors
|
Incorporated by reference to Exhibit 10.25 to the 1997 Registration Statement.
|
|||
Second Amendment to Lease, dated March 15, 2002, between Golkar Enterprises, Ltd. and the Company relating to property in Torrance, California
|
Incorporated by reference to Exhibit 10.44 to the 2003 10-K.
|
|||
Form of Standard Industrial/Commercial Multi-Tenant Lease, dated May 25, 2004, between the Company and Golkar Enterprises, Ltd for property located at 530 Maple Avenue, Torrance, California
|
Incorporated by reference to Exhibit 10.18 to the 2004 10-K.
|
Number
|
Description of Exhibit
|
Method of Filing
|
||
Build to Suit Lease Agreement, dated October 28, 2004, among Motorcar Parts de Mexico, S.A. de CV, the Company and Beatrix Flourie Geoffroy
|
Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K filed on November 2, 2004.
|
|||
Lease Agreement Amendment, dated October 12, 2006, between the Company and Beatrix Flourie Geoffroy
|
Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K filed on October 20, 2006.
|
|||
Third Amendment to Lease Agreement, dated as of November 20, 2006, between Motorcar Parts of America, Inc. and Golkar Enterprises, Ltd.
|
Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K filed on November 27, 2006.
|
|||
Amended and Restated Employment Agreement, dated as of December 31, 2008, by and between the Company and Selwyn Joffe
|
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed January 7, 2009.
|
|||
Fifth Amendment, dated as of November 17, 2011, to that certain Standard Industrial Commercial Single Tenant Lease-Gross, dated as of September 19, 1995, between Golkar Enterprises, Ltd and Motorcar Parts of America, Inc., as amended
|
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on November 25, 2011.
|
|||
Employment Agreement, dated as of May 18, 2012, between Motorcar Parts of America, Inc., and Selwyn Joffe
|
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on May 24, 2012.
|
|||
Form of Stock Option Notice for use in connection with stock options granted to Selwyn Joffe pursuant to the Motorcar Parts of America, Inc. 2010 Incentive Award Plan
|
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 12, 2013.
|
|||
Form of Stock Option Agreement for use in connection with stock options granted to Selwyn Joffe pursuant to the Motorcar Parts of America, Inc. 2010 Incentive Award Plan
|
Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on August 12, 2013.
|
|||
Revolving Credit, Term Loan and Security Agreement, dated as of June 3, 2015, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent
|
Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 8, 2015.
|
Number
|
Description of Exhibit
|
Method of Filing
|
||
First Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of November 5, 2015, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative
agent
|
Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on November 9, 2015.
|
|||
Consent and Second Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of May 19, 2016, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as
administrative agent
|
Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed on August 9, 2016.
|
|||
Third Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of March 24, 2017, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative
agent
|
Incorporated by reference to Exhibit 10.38 to Annual Report on Form 10-K filed on June 14, 2017.
|
|||
Fourth Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of April 24, 2017, among Motorcar Parts of America, Inc., each lender from time to time party thereto and PNC Bank, National Association, as administrative
agent
|
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 27, 2017.
|
|||
Fifth Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of July 18, 2017, among Motorcar Parts of America, Inc., each lender from time to time party thereto and PNC Bank, National Association, as administrative agent
|
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on July 24, 2017.
|
|||
Amended and Restated Credit Facility, dated as of June 5, 2018, among Motorcar Parts of America, Inc., each lender from time to time party thereto and PNC Bank, National Association, as administrative agent
|
Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on August 9, 2018.
|
|||
First Amendment to Amended and Restated Loan Agreement, dated as of November 14, 2018, among Motorcar Parts of America, Inc., D & V Electronics Ltd., each lender from time to time party thereto, and PNC Bank, National Association, as
administrative agent
|
Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 20, 2018.
|
Number
|
Description of Exhibit
|
Method of Filing
|
||
Amendment No. 2 to Employment Agreement, dated as of February 5, 2019, between Motorcar Parts of America, Inc., and Selwyn Joffe
|
Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed on February 11, 2019.
|
|||
Second Amendment to Amended and Restated Loan Agreement, dated as of June 4, 2019, among Motorcar Parts of America, Inc., D&V Electronics Ltd., Dixie Electric Ltd., Dixie Electric Inc., each lender from time to time party thereto, and
PNC Bank, National Association, as administrative agent
|
Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 7, 2019.
|
|||
Amendment No. 3 to Employment Agreement, dated as of March 30, 2020, between Motorcar Parts of America, Inc., and Selwyn Joffe
|
Filed herewith.
|
|||
Motorcar Parts of America, Inc., Code of Business Conduct and Ethics, as amended, effective January 15, 2015
|
Incorporated by reference to Exhibit 14.1 to Current Report on Form 8-K filed on January 20, 2015.
|
|||
List of Subsidiaries
|
Filed herewith.
|
|||
Consent of Independent Registered Public Accounting Firm Ernst & Young LLP
|
Filed herewith.
|
|||
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
|
Filed herewith.
|
|||
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
|
Filed herewith.
|
|||
Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
|
Filed herewith.
|
|||
Certifications of Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002
|
Filed herewith.
|
|||
101.INS
|
XBRL Instance Document
|
Filed herewith.
|
||
101.SCM
|
XBRL Taxonomy Extension Schema Document
|
Filed herewith.
|
||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
Filed herewith.
|
||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
Filed herewith.
|
||
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
Filed herewith.
|
||
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
Filed herewith.
|
*
|
Portions of this exhibit have been granted confidential treatment by the SEC.
|
Item 16. |
Form 10-K Summary
|
MOTORCAR PARTS OF AMERICA, INC.
|
|||
Dated: June 15, 2020
|
By:
|
/s/ David Lee
|
|
David Lee
|
|||
Chief Financial Officer
|
|||
Dated: June 15, 2020
|
By:
|
/s/ Kamlesh Shah
|
|
Kamlesh Shah
|
|||
Chief Accounting Officer
|
/s/ Selwyn Joffe
|
Chief Executive Officer and Director
|
June 15, 2020
|
Selwyn Joffe
|
(Principal Executive Officer)
|
|
/s/ David Lee
|
Chief Financial Officer
|
|
David Lee
|
(Principal Financial Officer)
|
June 15, 2020
|
/s/ Kamlesh Shah
|
Chief Accounting Officer
|
|
Kamlesh Shah
|
(Principal Accounting Officer)
|
June 15, 2020
|
/s/ Scott Adelson
|
||
Scott Adelson
|
Director
|
June 15, 2020
|
/s/ Rudolph Borneo
|
||
Rudolph Borneo
|
Director
|
June 15, 2020
|
/s/ Philip Gay
|
||
Philip Gay
|
Director
|
June 15, 2020
|
/s/ Duane Miller
|
||
Duane Miller
|
Director
|
June 15, 2020
|
/s/ Jeffrey Mirvis
|
||
Jeffrey Mirvis
|
Director
|
June 15, 2020
|
/s/ David Bryan
|
||
David Bryan
|
Director
|
June 15, 2020
|
/s/ Joseph Ferguson
|
||
Joseph Ferguson
|
Director
|
June 15, 2020
|
/s/ Barbara Whittaker
|
||
Barbara Whittaker
|
Director
|
June 15, 2020
|
Page
|
|
Reports of Independent Registered Public Accounting Firm
|
53
|
Consolidated Balance Sheets
|
F-1
|
Consolidated Statements of Operations
|
F-2
|
Consolidated Statements of Comprehensive (Loss) Income
|
F-3
|
Consolidated Statements of Shareholders’ Equity
|
F-4
|
Consolidated Statements of Cash Flows
|
F-5
|
Notes to Consolidated Financial Statements
|
F-6
|
Schedule II — Valuation and Qualifying Accounts
|
S-1
|
/s/ Ernst & Young LLP
|
|
Los Angeles, California
|
|
June 15, 2020
|
/s/ Ernst & Young LLP
|
|
We have served as the Company’s auditor since 2007.
|
|
Los Angeles, California
|
|
June 15, 2020
|
March 31, 2020
|
March 31, 2019
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
49,616,000
|
$
|
9,911,000
|
||||
Short-term investments
|
850,000
|
3,273,000
|
||||||
Accounts receivable — net
|
91,748,000
|
56,015,000
|
||||||
Inventory — net
|
225,659,000
|
233,726,000
|
||||||
Inventory unreturned
|
9,021,000
|
8,469,000
|
||||||
Contract assets
|
20,332,000
|
22,183,000
|
||||||
Income tax receivable
|
3,282,000
|
10,009,000
|
||||||
Prepaid expenses and other current assets
|
8,608,000
|
9,296,000
|
||||||
Total current assets
|
409,116,000
|
352,882,000
|
||||||
Plant and equipment — net
|
44,957,000
|
35,151,000
|
||||||
Operating lease assets
|
53,029,000
|
-
|
||||||
Long-term deferred income taxes
|
18,950,000
|
9,746,000
|
||||||
Long-term contract assets
|
239,540,000
|
221,876,000
|
||||||
Goodwill
|
3,205,000
|
3,205,000
|
||||||
Intangible assets — net
|
6,393,000
|
8,431,000
|
||||||
Other assets
|
1,839,000
|
1,071,000
|
||||||
TOTAL ASSETS
|
$
|
777,029,000
|
$
|
632,362,000
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
78,664,000
|
$
|
92,461,000
|
||||
Accrued liabilities
|
16,419,000
|
14,604,000
|
||||||
Customer finished goods returns accrual
|
25,326,000
|
22,615,000
|
||||||
Contract liabilities
|
27,911,000
|
30,599,000
|
||||||
Revolving loan
|
152,000,000
|
110,400,000
|
||||||
Other current liabilities
|
9,390,000
|
4,990,000
|
||||||
Operating lease liabilities
|
5,104,000
|
-
|
||||||
Current portion of term loan
|
3,678,000
|
3,685,000
|
||||||
Total current liabilities
|
318,492,000
|
279,354,000
|
||||||
Term loan, less current portion
|
20,462,000
|
24,187,000
|
||||||
Long-term contract liabilities
|
92,101,000
|
40,889,000
|
||||||
Long-term deferred income taxes
|
79,000
|
257,000
|
||||||
Long-term operating lease liabilities
|
61,425,000
|
-
|
||||||
Other liabilities
|
8,950,000
|
7,920,000
|
||||||
Total liabilities
|
501,509,000
|
352,607,000
|
||||||
Commitments and contingencies
|
||||||||
Shareholders' equity:
|
||||||||
Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued
|
-
|
-
|
||||||
Series A junior participating preferred stock; par value $.01 per share, 20,000 shares authorized; none issued
|
-
|
-
|
||||||
Common stock; par value $.01 per share, 50,000,000 shares authorized; 18,969,380 and 18,817,400 shares issued and outstanding at March 31, 2020 and 2019, respectively
|
190,000
|
188,000
|
||||||
Additional paid-in capital
|
218,581,000
|
215,047,000
|
||||||
Retained earnings
|
64,117,000
|
71,407,000
|
||||||
Accumulated other comprehensive loss
|
(7,368,000
|
)
|
(6,887,000
|
)
|
||||
Total shareholders' equity
|
275,520,000
|
279,755,000
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
777,029,000
|
$
|
632,362,000
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Net sales
|
$
|
535,831,000
|
$
|
472,797,000
|
$
|
427,548,000
|
||||||
Cost of goods sold
|
417,431,000
|
383,623,000
|
320,515,000
|
|||||||||
Gross profit
|
118,400,000
|
89,174,000
|
107,033,000
|
|||||||||
Operating expenses:
|
||||||||||||
General and administrative
|
71,425,000
|
45,972,000
|
35,477,000
|
|||||||||
Sales and marketing
|
21,037,000
|
19,542,000
|
15,030,000
|
|||||||||
Research and development
|
9,200,000
|
8,014,000
|
5,692,000
|
|||||||||
Total operating expenses
|
101,662,000
|
73,528,000
|
56,199,000
|
|||||||||
Operating income
|
16,738,000
|
15,646,000
|
50,834,000
|
|||||||||
Interest expense, net
|
25,039,000
|
23,227,000
|
15,445,000
|
|||||||||
(Loss) income before income tax (benefit) expense
|
(8,301,000
|
)
|
(7,581,000
|
)
|
35,389,000
|
|||||||
Income tax (benefit) expense
|
(1,011,000
|
)
|
268,000
|
16,125,000
|
||||||||
Net (loss) income
|
$
|
(7,290,000
|
)
|
$
|
(7,849,000
|
)
|
$
|
19,264,000
|
||||
Basic net (loss) income per share
|
$
|
(0.39
|
)
|
$
|
(0.42
|
)
|
$
|
1.02
|
||||
Diluted net (loss) income per share
|
$
|
(0.39
|
)
|
$
|
(0.42
|
)
|
$
|
0.99
|
||||
Weighted average number of shares outstanding:
|
||||||||||||
Basic
|
18,913,788
|
18,849,909
|
18,854,993
|
|||||||||
Diluted
|
18,913,788
|
18,849,909
|
19,514,775
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Net (loss) income
|
$
|
(7,290,000
|
)
|
$
|
(7,849,000
|
)
|
$
|
19,264,000
|
||||
Other comprehensive (loss) income, net of tax:
|
||||||||||||
Unrealized gain on short-term investments (net of tax of $0, $0, and $118,000, respectively)
|
-
|
-
|
218,000
|
|||||||||
Foreign currency translation (loss) gain
|
(481,000
|
)
|
(713,000
|
)
|
1,795,000
|
|||||||
Total other comprehensive (loss) income, net of tax
|
(481,000
|
)
|
(713,000
|
)
|
2,013,000
|
|||||||
Comprehensive (loss) income
|
$
|
(7,771,000
|
)
|
$
|
(8,562,000
|
)
|
$
|
21,277,000
|
Common Stock
|
||||||||||||||||||||||||
Shares
|
Amount
|
Additional Paid-in
Capital Common
Stock
|
Retained Earnings
|
Accumulated Other
Comprehensive (Loss)
Income |
Total
|
|||||||||||||||||||
Balance at March 31, 2017
|
18,648,854
|
$
|
186,000
|
$
|
205,646,000
|
$
|
59,246,000
|
$
|
(7,441,000
|
)
|
$
|
257,637,000
|
||||||||||||
Compensation recognized under employee stock plans
|
-
|
-
|
3,766,000
|
-
|
-
|
3,766,000
|
||||||||||||||||||
Exercise of stock options
|
55,351
|
1,000
|
480,000
|
-
|
-
|
481,000
|
||||||||||||||||||
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes
|
47,508
|
1,000
|
(597,000
|
)
|
-
|
-
|
(596,000
|
)
|
||||||||||||||||
Repurchase and cancellation of treasury stock, including fees
|
(374,740
|
)
|
(4,000
|
)
|
(9,247,000
|
)
|
-
|
-
|
(9,251,000
|
)
|
||||||||||||||
Exercise of warrant for shares of common stock
|
516,129
|
5,000
|
13,561,000
|
-
|
-
|
13,566,000
|
||||||||||||||||||
Unrealized gain on investments, net of tax
|
-
|
-
|
-
|
-
|
218,000
|
218,000
|
||||||||||||||||||
Foreign currency translation
|
-
|
-
|
-
|
-
|
1,795,000
|
1,795,000
|
||||||||||||||||||
Net income
|
-
|
-
|
-
|
19,264,000
|
-
|
19,264,000
|
||||||||||||||||||
Balance at March 31, 2018
|
18,893,102
|
$
|
189,000
|
$
|
213,609,000
|
$
|
78,510,000
|
$
|
(5,428,000
|
)
|
$
|
286,880,000
|
||||||||||||
Cumulative-effect adjustment for the adoption of ASU 2016-01
|
-
|
-
|
-
|
746,000
|
(746,000
|
)
|
-
|
|||||||||||||||||
Balance at April 1, 2018
|
18,893,102
|
$
|
189,000
|
$
|
213,609,000
|
$
|
79,256,000
|
$
|
(6,174,000
|
)
|
$
|
286,880,000
|
||||||||||||
Compensation recognized under employee stock plans
|
-
|
-
|
5,564,000
|
-
|
-
|
5,564,000
|
||||||||||||||||||
Exercise of stock options
|
42,032
|
1,000
|
256,000
|
-
|
-
|
257,000
|
||||||||||||||||||
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes
|
46,081
|
-
|
(322,000
|
)
|
-
|
-
|
(322,000
|
)
|
||||||||||||||||
Repurchase and cancellation of treasury stock, including fees
|
(163,815
|
)
|
(2,000
|
)
|
(4,060,000
|
)
|
-
|
-
|
(4,062,000
|
)
|
||||||||||||||
Foreign currency translation
|
-
|
-
|
-
|
-
|
(713,000
|
)
|
(713,000
|
)
|
||||||||||||||||
Net loss
|
-
|
-
|
-
|
(7,849,000
|
)
|
-
|
(7,849,000
|
)
|
||||||||||||||||
Balance at March 31, 2019
|
18,817,400
|
$
|
188,000
|
$
|
215,047,000
|
$
|
71,407,000
|
$
|
(6,887,000
|
)
|
$
|
279,755,000
|
||||||||||||
Compensation recognized under employee stock plans
|
-
|
-
|
4,141,000
|
-
|
-
|
4,141,000
|
||||||||||||||||||
Exercise of stock options
|
59,600
|
1,000
|
456,000
|
-
|
-
|
457,000
|
||||||||||||||||||
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes
|
92,380
|
1,000
|
(1,063,000
|
)
|
-
|
-
|
(1,062,000
|
)
|
||||||||||||||||
Foreign currency translation
|
-
|
-
|
-
|
-
|
(481,000
|
)
|
(481,000
|
)
|
||||||||||||||||
Net loss
|
-
|
-
|
-
|
(7,290,000
|
)
|
-
|
(7,290,000
|
)
|
||||||||||||||||
Balance at March 31, 2020
|
18,969,380
|
$
|
190,000
|
$
|
218,581,000
|
$
|
64,117,000
|
$
|
(7,368,000
|
)
|
$
|
275,520,000
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net (loss) income
|
$
|
(7,290,000
|
)
|
$
|
(7,849,000
|
)
|
$
|
19,264,000
|
||||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
|
||||||||||||
Depreciation and amortization
|
7,791,000
|
6,135,000
|
3,798,000
|
|||||||||
Amortization of intangible assets
|
1,770,000
|
1,194,000
|
710,000
|
|||||||||
Amortization and write-off of debt issuance costs
|
819,000
|
951,000
|
1,060,000
|
|||||||||
Amortization of interest on contract liabilities, net
|
713,000
|
909,000
|
670,000
|
|||||||||
Amortization of core premiums paid to customers
|
4,501,000
|
4,127,000
|
3,588,000
|
|||||||||
Non-cash lease expense
|
5,808,000
|
-
|
-
|
|||||||||
Loss due to the remeasurement of lease liabilities
|
11,710,000
|
-
|
-
|
|||||||||
Foreign currency remeasurement loss
|
818,000
|
-
|
-
|
|||||||||
(Gain) loss due to the change in the fair value of the contingent consideration
|
(98,000
|
)
|
324,000
|
-
|
||||||||
Gain on short-term investments
|
(96,000
|
)
|
(89,000
|
)
|
-
|
|||||||
Gain due to the change in the fair value of the warrant liability
|
-
|
-
|
(2,313,000
|
)
|
||||||||
Net provision for inventory reserves
|
13,372,000
|
11,153,000
|
8,491,000
|
|||||||||
Net provision for customer payment discrepancies
|
1,626,000
|
731,000
|
998,000
|
|||||||||
Net provision for doubtful accounts
|
610,000
|
224,000
|
21,000
|
|||||||||
Deferred income taxes
|
(10,337,000
|
)
|
(3,063,000
|
)
|
1,548,000
|
|||||||
Share-based compensation expense
|
4,141,000
|
5,564,000
|
3,766,000
|
|||||||||
Loss on disposal of plant and equipment
|
15,000
|
41,000
|
161,000
|
|||||||||
Change in operating assets and liabilities, net of effects of acquisitions:
|
||||||||||||
Accounts receivable
|
(38,078,000
|
)
|
10,214,000
|
(3,298,000
|
)
|
|||||||
Inventory
|
(6,112,000
|
)
|
(76,213,000
|
)
|
(33,655,000
|
)
|
||||||
Inventory unreturned
|
(552,000
|
)
|
(961,000
|
)
|
73,000
|
|||||||
Income tax receivable
|
6,753,000
|
(2,039,000
|
)
|
(6,312,000
|
)
|
|||||||
Prepaid expenses and other current assets
|
(416,000
|
)
|
234,000
|
(965,000
|
)
|
|||||||
Other assets
|
(1,109,000
|
)
|
(299,000
|
)
|
(120,000
|
)
|
||||||
Accounts payable and accrued liabilities
|
(11,253,000
|
)
|
16,572,000
|
(11,671,000
|
)
|
|||||||
Customer finished goods returns accrual
|
2,725,000
|
4,588,000
|
138,000
|
|||||||||
Contract assets, net
|
(15,835,000
|
)
|
(2,096,000
|
)
|
(25,028,000
|
)
|
||||||
Contract liabilities, net
|
43,372,000
|
(11,894,000
|
)
|
23,871,000
|
||||||||
Operating lease liabilities
|
(4,726,000
|
)
|
-
|
-
|
||||||||
Other liabilities
|
8,153,000
|
1,214,000
|
1,261,000
|
|||||||||
Net cash provided by (used in) operating activities
|
18,795,000
|
(40,328,000
|
)
|
(13,944,000
|
)
|
|||||||
Cash flows from investing activities:
|
||||||||||||
Purchase of plant and equipment
|
(14,156,000
|
)
|
(11,149,000
|
)
|
(9,933,000
|
)
|
||||||
Purchase of business, net of cash acquired
|
-
|
(11,106,000
|
)
|
(4,993,000
|
)
|
|||||||
Proceeds from sale of plant and equipment
|
43,000
|
-
|
-
|
|||||||||
Redemptions of (payments for) short term investments
|
2,519,000
|
(355,000
|
)
|
(352,000
|
)
|
|||||||
Net cash used in investing activities
|
(11,594,000
|
)
|
(22,610,000
|
)
|
(15,278,000
|
)
|
||||||
Cash flows from financing activities:
|
||||||||||||
Borrowings under revolving loan
|
75,000,000
|
102,900,000
|
84,000,000
|
|||||||||
Repayments under revolving loan
|
(33,400,000
|
)
|
(46,500,000
|
)
|
(41,000,000
|
)
|
||||||
Borrowings under term loan
|
-
|
13,594,000
|
-
|
|||||||||
Repayments of term loan
|
(3,750,000
|
)
|
(2,656,000
|
)
|
(3,125,000
|
)
|
||||||
Payments for debt issuance costs
|
(973,000
|
)
|
(1,815,000
|
)
|
(462,000
|
)
|
||||||
Payments on finance lease obligations
|
(2,164,000
|
)
|
(1,460,000
|
)
|
(905,000
|
)
|
||||||
Payment of contingent consideration
|
(1,955,000
|
)
|
-
|
-
|
||||||||
Exercise of stock options
|
457,000
|
257,000
|
481,000
|
|||||||||
Cash used to net share settle equity awards
|
(1,062,000
|
)
|
(322,000
|
)
|
(596,000
|
)
|
||||||
Repurchase of common stock, including fees
|
-
|
(4,062,000
|
)
|
(9,251,000
|
)
|
|||||||
Exercise of warrant
|
-
|
-
|
4,000,000
|
|||||||||
Net cash provided by financing activities
|
32,153,000
|
59,936,000
|
33,142,000
|
|||||||||
Effect of exchange rate changes on cash and cash equivalents
|
351,000
|
(136,000
|
)
|
100,000
|
||||||||
Net increase (decrease) in cash and cash equivalents
|
39,705,000
|
(3,138,000
|
)
|
4,020,000
|
||||||||
Cash and cash equivalents — Beginning of period
|
9,911,000
|
13,049,000
|
9,029,000
|
|||||||||
Cash and cash equivalents — End of period
|
$
|
49,616,000
|
$
|
9,911,000
|
$
|
13,049,000
|
||||||
Supplemental disclosures of cash flow information:
|
||||||||||||
Cash paid for Interest, net
|
$
|
23,558,000
|
$
|
21,148,000
|
$
|
13,623,000
|
||||||
Cash paid for Income taxes, net of refunds
|
1,500,000
|
3,588,000
|
19,657,000
|
|||||||||
Cash paid for operating leases
|
8,212,000
|
-
|
-
|
|||||||||
Cash paid for finance leases
|
2,445,000
|
-
|
-
|
|||||||||
Plant and equipment acquired under finance lease
|
3,144,000
|
|
902,000
|
|
3,478,000
|
|||||||
Assets acquired under operating leases
|
18,528,000
|
-
|
-
|
|||||||||
Contingent consideration
|
-
|
4,400,000
|
-
|
|||||||||
Non-cash capital expenditures
|
2,211,000
|
-
|
-
|
• |
Net realizable value for finished goods by customer by product line are determined based on the agreed upon selling price with the customer for a product in the trailing 12 months. The Company compares the average selling price, including
any discounts and allowances, to the finished goods cost of on-hand inventory less any reserve for excess and obsolete inventory. Any reduction of value is recorded as cost of goods sold in the period in which the revaluation is identified.
|
• |
Net realizable value for Used Cores are determined based on current core purchase prices from core brokers to the extent that core purchases in the trailing 12 months are significant. Remanufacturing consumes, on average, more than one Used
Core for each remanufactured unit produced since not all Used Cores are resuable. The yield rates depend upon both the product and consumer specifications. The Company purchases Used Cores from core brokers to supplement its yield rates and
Used Cores not returned under the core exchange program. The Company also considers the net selling price its customers have agreed to pay for Used Cores that are not returned under its core exchange program to assess whether Used Core cost
exceeds Used Core net realizable value on a by customer by product line basis. Any reduction of core cost is recorded as cost of goods sold in the period in which the revaluation is identified.
|
• |
The Company records an allowance for potentially excess and obsolete inventory based upon recent sales history, the quantity of inventory on-hand, and a forecast of potential use of the inventory. The Company periodically reviews inventory
to identify excess quantities and part numbers that are experiencing a reduction in demand. Any part numbers with quantities identified during this process are reserved for at rates based upon management’s judgment, historical rates, and
consideration of possible scrap and liquidation values which may be as high as 100% of cost if no liquidation market exists for the part. As a result of this process, the Company recorded reserves for excess and obsolete inventory of
$13,208,000 and $11,899,000 at March 31, 2020 and 2019, respectively. The increase in the reserve for excess and obsolete inventory was primarily driven by the Company’s January 2019 acquisition of Dixie Electric, Ltd. (see Note 3 below).
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Net (loss) income
|
$
|
(7,290,000
|
)
|
$
|
(7,849,000
|
)
|
$
|
19,264,000
|
||||
Basic shares
|
18,913,788
|
18,849,909
|
18,854,993
|
|||||||||
Effect of dilutive stock options and warrants
|
-
|
-
|
659,782
|
|||||||||
Diluted shares
|
18,913,788
|
18,849,909
|
19,514,775
|
|||||||||
Net (loss) income per share:
|
||||||||||||
Basic net (loss) income per share
|
$
|
(0.39
|
)
|
$
|
(0.42
|
)
|
$
|
1.02
|
||||
Diluted net (loss) income per share
|
$
|
(0.39
|
)
|
$
|
(0.42
|
)
|
$
|
0.99
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Weighted average risk free interest rate
|
1.76
|
%
|
2.83
|
%
|
1.92
|
%
|
||||||
Weighted average expected holding period (years)
|
5.70
|
5.94
|
5.82
|
|||||||||
Weighted average expected volatility
|
42.50
|
%
|
43.91
|
%
|
47.28
|
%
|
||||||
Weighted average expected dividend yield
|
-
|
-
|
-
|
|||||||||
Weighted average fair value of options granted
|
$
|
8.27
|
$
|
8.75
|
$
|
12.63
|
Years Ended March 31,
|
||||||||
2020
|
2019
|
|||||||
Balance at beginning of period
|
$
|
3,205,000
|
$
|
2,551,000
|
||||
Goodwill acquired
|
-
|
654,000
|
||||||
Balance at end of period
|
$
|
3,205,000
|
$
|
3,205,000
|
March 31, 2020
|
March 31, 2019
|
|||||||||||||||||
Weighted
Average
Amortization
Period
|
Gross Carrying
Value
|
Accumulated
Amortization
|
Gross Carrying
Value
|
Accumulated
Amortization
|
||||||||||||||
Intangible assets subject to amortization
|
||||||||||||||||||
Trademarks
|
9 years
|
$
|
827,000
|
$
|
435,000
|
$
|
1,007,000
|
$
|
464,000
|
|||||||||
Customer relationships
|
11 years
|
8,453,000
|
4,376,000
|
8,610,000
|
3,547,000
|
|||||||||||||
Order backlog
|
6 months
|
-
|
-
|
325,000
|
180,000
|
|||||||||||||
Developed technology
|
5 years
|
2,817,000
|
893,000
|
2,991,000
|
311,000
|
|||||||||||||
Total
|
9 years
|
$
|
12,097,000
|
$
|
5,704,000
|
$
|
12,933,000
|
$
|
4,502,000
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Amortization expense
|
$
|
1,770,000
|
$
|
1,194,000
|
$
|
710,000
|
March 31, 2020
|
March 31, 2019
|
|||||||
Accounts receivable — trade
|
$
|
109,164,000
|
$
|
75,847,000
|
||||
Allowance for bad debts
|
(4,252,000
|
)
|
(4,100,000
|
)
|
||||
Customer payment discrepancies
|
(1,040,000
|
)
|
(854,000
|
)
|
||||
Customer returns RGA issued
|
(12,124,000
|
)
|
(14,878,000
|
)
|
||||
Less: total accounts receivable offset accounts
|
(17,416,000
|
)
|
(19,832,000
|
)
|
||||
Total accounts receivable — net
|
$
|
91,748,000
|
$
|
56,015,000
|
March 31, 2020
|
March 31, 2019
|
|||||||
Raw materials
|
$
|
99,360,000
|
$
|
95,757,000
|
||||
Work in process
|
3,906,000
|
3,502,000
|
||||||
Finished goods
|
135,601,000
|
146,366,000
|
||||||
|
238,867,000
|
245,625,000
|
||||||
Less allowance for excess and obsolete inventory
|
(13,208,000
|
)
|
(11,899,000
|
)
|
||||
|
||||||||
Total
|
$
|
225,659,000
|
$
|
233,726,000
|
||||
Inventory unreturned
|
$
|
9,021,000
|
$
|
8,469,000
|
March 31, 2020
|
March 31, 2019
|
|||||||
Short-term contract assets
|
||||||||
Cores expected to be returned by customers
|
$
|
12,579,000
|
$
|
14,671,000
|
||||
Upfront payments to customers
|
2,865,000
|
3,101,000
|
||||||
Core premiums paid to customers
|
4,888,000
|
4,411,000
|
||||||
Total short-term contract assets
|
$
|
20,332,000
|
$
|
22,183,000
|
||||
Long-term contract assets
|
||||||||
Remanufactured cores held at customers' locations
|
$
|
217,616,000
|
$
|
196,914,000
|
||||
Upfront payments to customers
|
589,000
|
2,775,000
|
||||||
Core premiums paid to customers
|
15,766,000
|
16,618,000
|
||||||
Long-term core inventory deposits
|
5,569,000
|
5,569,000
|
||||||
Total long-term contract assets
|
$
|
239,540,000
|
$
|
221,876,000
|
March 31, 2020
|
March 31, 2019
|
|||||||
Machinery and equipment
|
$
|
48,424,000
|
$
|
39,953,000
|
||||
Office equipment and fixtures
|
25,541,000
|
20,070,000
|
||||||
Leasehold improvements
|
10,519,000
|
9,451,000
|
||||||
84,484,000
|
69,474,000
|
|||||||
Less accumulated depreciation
|
(39,527,000
|
)
|
(34,323,000
|
)
|
||||
Total
|
$
|
44,957,000
|
$
|
35,151,000
|
March 31, 2020
|
March 31, 2019
|
|||||||
Principal amount of term loan
|
$
|
24,375,000
|
$
|
28,125,000
|
||||
Unamortized financing fees
|
(235,000
|
)
|
(253,000
|
)
|
||||
Net carrying amount of term loan
|
24,140,000
|
27,872,000
|
||||||
Less current portion of term loan
|
(3,678,000
|
)
|
(3,685,000
|
)
|
||||
Long-term portion of term loan
|
$
|
20,462,000
|
$
|
24,187,000
|
March 31, 2020
|
March 31, 2019
|
|||||||
Short-term contract liabilities
|
||||||||
Customer core returns accruals
|
$
|
4,126,000
|
$
|
3,933,000
|
||||
Customer allowances earned
|
13,844,000
|
12,755,000
|
||||||
Customer deposits
|
1,365,000
|
2,674,000
|
||||||
Core bank liability
|
528,000
|
-
|
||||||
Accrued core payment, net
|
8,048,000
|
11,237,000
|
||||||
Total short-term contract liabilities
|
$
|
27,911,000
|
$
|
30,599,000
|
||||
Long-term contract liabilities
|
||||||||
Customer core returns accruals
|
$
|
77,927,000
|
$
|
25,722,000
|
||||
Customer allowances earned
|
542,000
|
-
|
||||||
Core bank liability
|
7,556,000
|
-
|
||||||
Accrued core payment, net
|
6,076,000
|
15,167,000
|
||||||
Total long-term contract liabilities
|
$
|
92,101,000
|
$
|
40,889,000
|
March 31, 2020
|
|||||
Leases
|
Classification
|
||||
Assets:
|
|||||
Operating
|
Operating lease assets
|
$
|
53,029,000
|
||
Finance (1)
|
Plant and equipment
|
6,922,000
|
|||
Total leased assets
|
$
|
59,951,000
|
|||
Liabilities:
|
|||||
Current
|
|||||
Operating
|
Operating lease liabilities
|
$
|
5,104,000
|
||
Finance
|
Other current liabilities
|
2,059,000
|
|||
Long-term
|
|||||
Operating
|
Long-term operating lease liabilities
|
61,425,000
|
|||
Finance
|
Other liabilities
|
3,905,000
|
|||
Total lease liabilities
|
$
|
72,493,000
|
(1) |
The Company had $5,403,000 in capital lease assets included in plant and equipment at March 31, 2019.
|
Year Ended March 31,
|
||||
2020
|
||||
Lease cost
|
||||
Operating lease cost (1)
|
$
|
8,733,000
|
||
Short-term lease cost
|
1,263,000
|
|||
Variable lease cost
|
600,000
|
|||
Finance lease cost:
|
||||
Amortization of finance lease assets
|
1,616,000
|
|||
Interest on finance lease liabilities
|
281,000
|
|||
Total lease cost
|
$
|
12,493,000
|
(1) |
During the years ended March 31, 2019 and 2018, the Company incurred total operating lease expenses of $6,188,000 and $4,362,000, respectively.
|
Maturity of lease liabilities
|
Operating Leases
|
Finance Leases
|
Total
|
|||||||||
2021
|
$
|
9,536,000
|
$
|
2,292,000
|
$
|
11,828,000
|
||||||
2022
|
8,755,000
|
1,955,000
|
10,710,000
|
|||||||||
2023
|
7,503,000
|
1,325,000
|
8,828,000
|
|||||||||
2024
|
7,261,000
|
610,000
|
7,871,000
|
|||||||||
2025
|
7,368,000
|
243,000
|
7,611,000
|
|||||||||
Thereafter
|
59,837,000
|
-
|
59,837,000
|
|||||||||
Total lease payments
|
100,260,000
|
6,425,000
|
106,685,000
|
|||||||||
Less amount representing interest
|
(33,731,000
|
)
|
(461,000
|
)
|
(34,192,000
|
)
|
||||||
Present value of lease liabilities
|
$
|
66,529,000
|
$
|
5,964,000
|
$
|
72,493,000
|
Maturity of lease liabilities
|
Operating Leases
|
Capital Leases
|
Total
|
|||||||||
2020
|
$
|
7,405,000
|
$
|
1,755,000
|
$
|
9,160,000
|
||||||
2021
|
8,206,000
|
1,311,000
|
9,517,000
|
|||||||||
2022
|
7,862,000
|
1,040,000
|
8,902,000
|
|||||||||
2023
|
6,726,000
|
719,000
|
7,445,000
|
|||||||||
2024
|
6,696,000
|
89,000
|
6,785,000
|
|||||||||
Thereafter
|
65,321,000
|
-
|
65,321,000
|
|||||||||
Total lease payments
|
$
|
102,216,000
|
4,914,000
|
107,130,000
|
||||||||
Less amount representing interest
|
(406,000
|
)
|
(406,000
|
)
|
||||||||
|
||||||||||||
Present value of lease liabilities
|
$
|
4,508,000
|
$
|
106,724,000
|
Year Ended March 31,
|
||||
2020
|
||||
Lease term and discount rate
|
||||
Weighted-average remaining lease term (years):
|
||||
Finance leases
|
3.2
|
|||
Operating leases
|
12.0
|
|||
Weighted-average discount rate:
|
||||
Finance leases
|
4.7
|
%
|
||
Operating leases
|
5.6
|
%
|
Years Ended March 31,
|
||||||||
2020
|
2019
|
|||||||
Receivables discounted
|
$
|
461,484,000
|
$
|
396,650,000
|
||||
Weighted average days
|
346
|
341
|
||||||
Weighted average discount rate
|
3.3
|
%
|
4.2
|
%
|
||||
Amount of discount as interest expense
|
$
|
14,780,000
|
$
|
15,867,000
|
Gain (Loss) Recognized within General and Administrative Expenses
|
||||||||||||
Derivatives Not Designated as
|
Years Ended March 31,
|
|||||||||||
Hedging Instruments
|
2020
|
2019
|
2018
|
|||||||||
Forward foreign currency exchange contracts
|
$
|
(6,491,000
|
)
|
$
|
(972,000
|
)
|
$
|
752,000
|
• |
Level 1 — Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
• |
Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the
financial instrument.
|
• |
Level 3 — Valuation is based upon unobservable inputs that are significant to the fair value measurement.
|
March 31, 2020
|
March 31, 2019
|
|||||||||||||||||||||||||||||||
Fair Value Measurements
Using Inputs Considered as
|
Fair Value Measurements
Using Inputs Considered as
|
|||||||||||||||||||||||||||||||
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||||||||||
Short-term investments Mutual funds
|
$
|
850,000
|
$
|
850,000
|
$
|
-
|
$
|
-
|
$
|
3,273,000
|
$
|
3,273,000
|
$
|
-
|
$
|
-
|
||||||||||||||||
Prepaid expenses and other current assets
|
||||||||||||||||||||||||||||||||
Forward foreign currency exchange contracts
|
-
|
-
|
-
|
-
|
207,000
|
-
|
207,000
|
-
|
||||||||||||||||||||||||
Liabilities
|
||||||||||||||||||||||||||||||||
Accrued liabilities
|
||||||||||||||||||||||||||||||||
Short-term contingent consideration
|
2,190,000
|
-
|
-
|
2,190,000
|
2,816,000
|
-
|
-
|
2,816,000
|
||||||||||||||||||||||||
Other current liabilities
|
||||||||||||||||||||||||||||||||
Deferred compensation
|
850,000
|
850,000
|
-
|
-
|
3,273,000
|
3,273,000
|
-
|
-
|
||||||||||||||||||||||||
Forward foreign currency exchange contracts
|
6,284,000
|
-
|
6,284,000
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||
Other liabilities
|
||||||||||||||||||||||||||||||||
Long-term contingent consideration
|
463,000
|
-
|
-
|
463,000
|
1,905,000
|
-
|
-
|
1,905,000
|
March 31, 2020
|
||||
Risk free interest rate
|
0.16
|
%
|
||
Counter party rate
|
12.16
|
%
|
||
Probability
|
100.00
|
%
|
March 31, 2020
|
March 31, 2019
|
|||||||
Risk free interest rate
|
0.22
|
%
|
2.23
|
%
|
||||
Counter party rate
|
12.22
|
%
|
6.23
|
%
|
||||
Expected volatility
|
31.00
|
%
|
29.00
|
%
|
||||
Weighted average cost of capital
|
13.75
|
%
|
16.00
|
%
|
March 31, 2020
|
March 31, 2019
|
|||||||
Risk free interest rate
|
0.16
|
%
|
2.58
|
%
|
||||
Counter party rate
|
15.16
|
%
|
5.03
|
%
|
||||
Revenue discount rate
|
2.50
|
%
|
6.50
|
%
|
||||
Expected volatility
|
33.50
|
%
|
29.00
|
%
|
||||
Revenue volatility
|
6.50
|
%
|
8.50
|
%
|
Years Ended March 31,
|
||||||||
2020
|
2019
|
|||||||
Contingent
Consideration
|
Contingent
Consideration
|
|||||||
Beginning balance
|
$
|
4,721,000
|
$
|
-
|
||||
Newly issued
|
-
|
4,400,000
|
||||||
Changes in revaluation of contingent consideration included in earnings
|
(113,000
|
)
|
321,000
|
|||||
Exercises/settlements (1)
|
(1,955,000
|
)
|
-
|
|||||
Ending balance
|
$
|
2,653,000
|
$
|
4,721,000
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Balance at beginning of year
|
$
|
19,475,000
|
$
|
16,646,000
|
$
|
14,286,000
|
||||||
Acquisition (1)
|
-
|
221,000
|
-
|
|||||||||
Charged to expense
|
112,590,000
|
111,321,000
|
105,156,000
|
|||||||||
Amounts processed
|
(113,765,000
|
)
|
(108,713,000
|
)
|
(102,796,000
|
)
|
||||||
Balance at end of year
|
$
|
18,300,000
|
$
|
19,475,000
|
$
|
16,646,000
|
(1) |
Warranty reserve established in the opening balance sheet in connection with the Company’s Dixie acquisition.
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Allowances incurred under long-term customer contracts
|
$
|
26,733,000
|
$
|
29,612,000
|
$
|
24,829,000
|
||||||
Allowances related to a single exchange of product
|
97,408,000
|
92,588,000
|
79,851,000
|
|||||||||
Amortization of core premiums paid to customers
|
4,501,000
|
4,127,000
|
3,588,000
|
|||||||||
Total customer allowances recorded as a reduction of revenues
|
$
|
128,642,000
|
$
|
126,327,000
|
$
|
108,268,000
|
Year Ending March 31,
|
||||
2021
|
$
|
25,896,000
|
||
2022
|
5,838,000
|
|||
2023
|
4,701,000
|
|||
2024
|
2,859,000
|
|||
2025
|
2,052,000
|
|||
Thereafter
|
2,667,000
|
|||
|
||||
Total marketing allowances
|
$
|
44,013,000
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Customer A
|
38
|
%
|
38
|
%
|
41
|
%
|
||||||
Customer B
|
20
|
%
|
22
|
%
|
25
|
%
|
||||||
Customer C
|
26
|
%
|
23
|
%
|
19
|
%
|
March 31, 2020
|
March 31, 2019
|
|||||||
Customer A
|
28
|
%
|
34
|
%
|
||||
Customer B
|
14
|
%
|
18
|
%
|
||||
Customer C
|
33 |
%
|
16
|
%
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Rotating electrical products
|
73
|
%
|
79
|
%
|
78
|
%
|
||||||
Wheel hub products
|
15
|
%
|
15
|
%
|
17
|
%
|
||||||
Brake-related products
|
9
|
%
|
3
|
%
|
3
|
%
|
||||||
Other products
|
3
|
%
|
3
|
%
|
2
|
%
|
||||||
100
|
%
|
100
|
%
|
100
|
%
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Current tax expense
|
||||||||||||
Federal
|
$
|
5,313,000
|
$
|
680,000
|
$
|
12,187,000
|
||||||
State
|
1,454,000
|
647,000
|
1,425,000
|
|||||||||
Foreign
|
1,566,000
|
1,723,000
|
1,194,000
|
|||||||||
Total current tax expense
|
8,333,000
|
3,050,000
|
14,806,000
|
|||||||||
Deferred tax (benefit) expense
|
||||||||||||
Federal
|
(4,516,000
|
)
|
(2,087,000
|
)
|
949,000
|
|||||||
State
|
(1,567,000
|
)
|
(295,000
|
)
|
393,000
|
|||||||
Foreign
|
(3,261,000
|
)
|
(400,000
|
)
|
(23,000
|
)
|
||||||
Total deferred tax (benefit) expense
|
(9,344,000
|
)
|
(2,782,000
|
)
|
1,319,000
|
|||||||
Total income tax (benefit) expense
|
$
|
(1,011,000
|
)
|
$
|
268,000
|
$
|
16,125,000
|
March 31, 2020
|
March 31, 2019
|
|||||||
Assets
|
||||||||
Allowance for bad debts
|
$
|
1,037,000
|
$
|
1,005,000
|
||||
Customer allowances earned
|
3,549,000
|
3,177,000
|
||||||
Allowance for stock adjustment returns
|
1,743,000
|
2,073,000
|
||||||
Inventory adjustments
|
5,567,000
|
3,701,000
|
||||||
Stock options
|
2,427,000
|
2,221,000
|
||||||
Operating lease liabilities (1)
|
19,396,000
|
-
|
||||||
Estimate for returns
|
10,839,000
|
2,107,000
|
||||||
Accrued compensation
|
1,964,000
|
1,578,000
|
||||||
Net operating losses
|
4,091,000
|
2,088,000
|
||||||
Tax credits
|
1,343,000
|
1,495,000
|
||||||
Other
|
1,620,000
|
5,776,000
|
||||||
Total deferred tax assets
|
$
|
53,576,000
|
$
|
25,221,000
|
||||
Liabilities
|
||||||||
Plant and equipment, net
|
(5,175,000
|
)
|
(3,316,000
|
)
|
||||
Intangibles, net
|
(4,700,000
|
)
|
(5,390,000
|
)
|
||||
Operating lease (1)
|
(15,371,000
|
)
|
-
|
|||||
Other
|
(3,966,000
|
)
|
(3,278,000
|
)
|
||||
Total deferred tax liabilities
|
$
|
(29,212,000
|
)
|
$
|
(11,984,000
|
)
|
||
Less valuation allowance
|
$
|
(5,493,000
|
)
|
$
|
(3,748,000
|
)
|
||
Total
|
$
|
18,871,000
|
$
|
9,489,000
|
(1) |
Adoption of the new lease standard as of April 1, 2019 (see Note 2) resulted in the recognition of a deferred tax asset for operating lease liabilities and a deferred tax liability for operating lease assets. These temporary differences will
reverse over the estimated term of the relevant operating leases. As of March 31, 2019, the deferred tax assets associated with operating leases were reported as other deferred tax assets under legacy US GAAP.
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Statutory federal income tax rate
|
21.0
|
%
|
21.0
|
%
|
31.5
|
%
|
||||||
State income tax rate, net of federal benefit
|
(3.7
|
)%
|
(3.7
|
)%
|
3.6
|
%
|
||||||
Excess tax benefit from stock compensation
|
(1.3
|
)%
|
0.7
|
%
|
(0.7
|
)%
|
||||||
Foreign income taxed at different rates
|
13.8
|
%
|
-
|
%
|
(2.6
|
)%
|
||||||
Return to provision adjustments
|
(1.5
|
)%
|
-
|
%
|
-
|
%
|
||||||
Warrants
|
-
|
%
|
-
|
%
|
(2.1
|
)%
|
||||||
Non-deductible executive compensation
|
(4.0
|
)%
|
(7.3
|
)%
|
1.0
|
%
|
||||||
Change in valuation allowance
|
(18.7
|
)%
|
(15.3
|
)%
|
4.8
|
%
|
||||||
Net operating loss carryback
|
4.8
|
%
|
-
|
%
|
-
|
%
|
||||||
Effects of mandatory redeemed repatriation
|
-
|
%
|
-
|
%
|
1.5
|
%
|
||||||
Effects of U.S. tax rate changes
|
-
|
%
|
0.3
|
%
|
8.0
|
%
|
||||||
Uncertain tax positions
|
2.1
|
%
|
1.8
|
%
|
0.6
|
%
|
||||||
Research and development credit
|
1.1
|
%
|
1.3
|
%
|
(0.2
|
)%
|
||||||
Non-deductible transaction costs
|
-
|
%
|
(2.1
|
)%
|
-
|
%
|
||||||
Other income tax
|
(1.4
|
)%
|
(0.2
|
)%
|
0.2
|
%
|
||||||
12.2
|
%
|
(3.5
|
)%
|
45.6
|
%
|
Years Ended March 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Balance at beginning of period
|
$
|
1,083,000
|
$
|
1,219,000
|
$
|
1,092,000
|
||||||
Additions based on tax positions related to the current year
|
362,000
|
91,000
|
234,000
|
|||||||||
Reductions for tax positions of prior year
|
(434,000
|
)
|
(227,000
|
)
|
(107,000
|
)
|
||||||
Balance at end of period
|
$
|
1,011,000
|
$
|
1,083,000
|
$
|
1,219,000
|
Number of
Shares
|
Weighted Average
Exercise Price
|
|||||||
Outstanding at March 31, 2019
|
1,337,165
|
$
|
17.58
|
|||||
Granted
|
302,539
|
$
|
19.72
|
|||||
Exercised
|
(59,600
|
)
|
$
|
7.65
|
||||
Forfeited
|
(43,981
|
)
|
$
|
24.98
|
||||
Outstanding at March 31, 2020
|
1,536,123
|
$
|
18.18
|
Options Outstanding
|
Options Exercisable
|
||||||||||||||||||||||||||||
Range of
Exercise price
|
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Life
In Years
|
Aggregate
Intrinsic
Value
|
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Life
In Years
|
Aggregate
Intrinsic
Value
|
|||||||||||||||||||||
|
|||||||||||||||||||||||||||||
$5.20 to $6.47
|
311,634
|
$
|
6.46
|
2.75
|
311,634
|
$
|
6.46
|
2.75
|
|||||||||||||||||||||
$6.48 to $18.20
|
223,600
|
10.19
|
3.61
|
204,300
|
9.58
|
3.06
|
|||||||||||||||||||||||
$18.21 to $22.83
|
524,251
|
19.56
|
8.77
|
83,183
|
19.17
|
8.23
|
|||||||||||||||||||||||
$22.84 to $28.04
|
216,499
|
26.19
|
6.44
|
163,669
|
25.82
|
6.18
|
|||||||||||||||||||||||
$28.05 to $34.17
|
260,139
|
29.61
|
5.94
|
260,139
|
29.61
|
5.94
|
|||||||||||||||||||||||
1,536,123
|
$
|
18.18
|
5.99
|
$
|
2,567,000 |
1,022,925
|
$
|
17.10
|
4.62
|
$
|
2,567,000 |
Number of
Shares
|
Weighted Average
Grant Date Fair
Value
|
|||||||
Non-vested at March 31, 2019
|
243,134
|
$
|
21.75
|
|||||
Granted
|
113,483
|
$
|
18.61
|
|||||
Vested
|
(151,182
|
)
|
$
|
21.66
|
||||
Forfeited
|
(3,452
|
)
|
$
|
21.10
|
||||
Non-vested at March 31, 2020
|
201,983
|
$
|
20.06
|
March 31, 2020
|
March 31, 2019
|
|||||||||||||||||||
Foreign
Currency
Translation
|
Total
|
Unrealized
Gain
on Short-Term
Investments
|
Foreign
Currency
Translation
|
Total
|
||||||||||||||||
Balance at March 31, 2019 and 2018
|
$
|
(6,887,000
|
)
|
$
|
(6,887,000
|
)
|
$
|
746,000
|
$
|
(6,174,000
|
)
|
$
|
(5,428,000
|
)
|
||||||
Cumulative-effect adjustment
|
-
|
-
|
(746,000
|
)
|
-
|
(746,000
|
)
|
|||||||||||||
Balance at April 1, 2019 and 2018
|
$
|
(6,887,000
|
)
|
$
|
(6,887,000
|
)
|
$
|
-
|
$
|
(6,174,000
|
)
|
$
|
(6,174,000
|
)
|
||||||
Other comprehensive loss, net of tax
|
(481,000
|
)
|
(481,000
|
)
|
-
|
(713,000
|
)
|
(713,000
|
)
|
|||||||||||
Balance at March 31, 2020 and 2019
|
$
|
(7,368,000
|
)
|
$
|
(7,368,000
|
)
|
$
|
-
|
$
|
(6,887,000
|
)
|
$
|
(6,887,000
|
)
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||||||
Net sales
|
$
|
109,148,000
|
$
|
150,374,000
|
$
|
125,574,000
|
$
|
150,735,000
|
||||||||
Cost of goods sold
|
91,565,000
|
113,801,000
|
97,913,000
|
114,152,000
|
||||||||||||
Gross profit
|
17,583,000
|
36,573,000
|
27,661,000
|
36,583,000
|
||||||||||||
Operating expenses:
|
||||||||||||||||
General and administrative
|
12,000,000
|
14,285,000
|
10,618,000
|
34,522,000
|
||||||||||||
Sales and marketing
|
4,919,000
|
5,448,000
|
5,623,000
|
5,047,000
|
||||||||||||
Research and development
|
2,372,000
|
2,148,000
|
2,174,000
|
2,506,000
|
||||||||||||
Total operating expenses
|
19,291,000
|
21,881,000
|
18,415,000
|
42,075,000
|
||||||||||||
Operating (loss) income
|
(1,708,000
|
)
|
14,692,000
|
9,246,000
|
(5,492,000
|
)
|
||||||||||
Other expense:
|
||||||||||||||||
Interest expense, net
|
6,173,000
|
6,523,000
|
6,879,000
|
5,464,000
|
||||||||||||
(Loss) income before income tax (benefit) expense
|
(7,881,000
|
)
|
8,169,000
|
2,367,000
|
(10,956,000
|
)
|
||||||||||
Income tax (benefit) expense
|
(1,730,000
|
)
|
1,980,000
|
1,502,000
|
(2,763,000
|
)
|
||||||||||
Net (loss) income
|
$
|
(6,151,000
|
)
|
$
|
6,189,000
|
$
|
865,000
|
$
|
(8,193,000
|
)
|
||||||
Basic net (loss) income per share
|
$
|
(0.33
|
)
|
$
|
0.33
|
$
|
0.05
|
$
|
(0.43
|
)
|
||||||
Diluted net (loss) income per share
|
$
|
(0.33
|
)
|
$
|
0.32
|
$
|
0.04
|
$
|
(0.43
|
)
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||||||
Net sales
|
$
|
91,668,000
|
$
|
127,939,000
|
$
|
124,113,000
|
$
|
129,077,000
|
||||||||
Cost of goods sold
|
75,316,000
|
102,228,000
|
102,952,000
|
103,127,000
|
||||||||||||
Gross profit
|
16,352,000
|
25,711,000
|
21,161,000
|
25,950,000
|
||||||||||||
Operating expenses:
|
||||||||||||||||
General and administrative
|
12,091,000
|
8,997,000
|
12,331,000
|
12,553,000
|
||||||||||||
Sales and marketing
|
4,392,000
|
4,537,000
|
5,149,000
|
5,464,000
|
||||||||||||
Research and development
|
1,736,000
|
1,784,000
|
2,054,000
|
2,440,000
|
||||||||||||
Total operating expenses
|
18,219,000
|
15,318,000
|
19,534,000
|
20,457,000
|
||||||||||||
Operating (loss) income
|
(1,867,000
|
)
|
10,393,000
|
1,627,000
|
5,493,000
|
|||||||||||
Other expense:
|
||||||||||||||||
Interest expense, net
|
5,075,000
|
5,699,000
|
5,764,000
|
6,689,000
|
||||||||||||
(Loss) income before income tax (benefit) expense
|
(6,942,000
|
)
|
4,694,000
|
(4,137,000
|
)
|
(1,196,000
|
)
|
|||||||||
Income tax (benefit) expense
|
(1,447,000
|
)
|
1,181,000
|
(1,035,000
|
)
|
1,569,000
|
||||||||||
Net (loss) income
|
$
|
(5,495,000
|
)
|
$
|
3,513,000
|
$
|
(3,102,000
|
)
|
$
|
(2,765,000
|
)
|
|||||
Basic net (loss) income per share
|
$
|
(0.29
|
)
|
$
|
0.19
|
$
|
(0.16
|
)
|
$
|
(0.15
|
)
|
|||||
Diluted net (loss) income per share
|
$
|
(0.29
|
)
|
$
|
0.18
|
$
|
(0.16
|
)
|
$
|
(0.15
|
)
|
Years Ended
March 31,
|
Description
|
Balance at
beginning of
year
|
Charge to
bad debts
expense
|
Acquisition
|
Amounts
written off
|
Balance at
end of
year
|
||||||||||||||||
2020
|
Allowance for doubtful accounts
|
$
|
4,100,000
|
$
|
610,000
|
$
|
-
|
$
|
458,000
|
$
|
4,252,000
|
|||||||||||
2019
|
Allowance for doubtful accounts
|
$
|
4,142,000
|
$
|
224,000
|
$
|
63,000
|
(1)
|
$
|
329,000
|
$
|
4,100,000
|
||||||||||
2018
|
Allowance for doubtful accounts
|
$
|
4,140,000
|
$
|
21,000
|
$
|
-
|
$
|
19,000
|
$
|
4,142,000
|
(1) |
Allowance for doubtful accounts established in the opening balance sheet in connection with the Company’s January 2019 acquisition.
|
Years Ended
March 31,
|
Description
|
Balance at
beginning of
yearyear
|
Charge to
discrepancies
expense
|
Acquisition
|
Amounts
Processed
|
Balance at
end of
year
|
||||||||||||||||
2020
|
Allowance for customer-payment discrepancies
|
$
|
854,000
|
$
|
1,626,000
|
$
|
-
|
$
|
1,440,000
|
$
|
1,040,000
|
|||||||||||
2019
|
Allowance for customer-payment discrepancies
|
$
|
1,110,000
|
$
|
731,000
|
$
|
-
|
$
|
987,000
|
$
|
854,000
|
|||||||||||
2018
|
Allowance for customer-payment discrepancies
|
$
|
751,000
|
$
|
998,000
|
$
|
-
|
$
|
639,000
|
$
|
1,110,000
|
Years Ended
March 31,
|
Description
|
Balance at
beginning of
year
|
Provision for
excess and
obsolete
inventory
|
Acquisition
|
Amounts
written off
|
Balance at
end of
year
|
||||||||||||||||
2020
|
Allowance for excess and obsolete inventory
|
$
|
11,899,000
|
$
|
13,372,000
|
$
|
-
|
$
|
12,063,000
|
$
|
13,208,000
|
|||||||||||
2019
|
Allowance for excess and obsolete inventory
|
$
|
6,682,000
|
$
|
11,153,000
|
$
|
-
|
$
|
5,936,000
|
$
|
11,899,000
|
|||||||||||
2018
|
Allowance for excess and obsolete inventory
|
$
|
4,125,000
|
$
|
8,491,000
|
$
|
77,000
|
(2)
|
$
|
6,011,000
|
$
|
6,682,000
|
(2) |
Allowance for excess and obsolete inventory established in the opening balance sheet in connection with the Company’s July 2017 acquisition.
|
THE COMPANY:
|
|||
MOTORCAR PARTS OF AMERICA, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
EXECUTIVE:
|
|||
SELWYN JOFFE
|
|
(1) |
Registration Statement (Form S-8 No. 333-144883) pertaining to the 2004 Non-Employee Director Stock Option Plan,
|
|
(2) |
Registration Statement (Form S-8 No. 333-185691) pertaining to the 2010 Incentive Award Plan,
|
|
(3) |
Registration Statement (Form S-3 No. 333-195585) of Motorcar Parts of America, Inc.,
|
|
(4) |
Registration Statement (Form S-8 No. 333-205910) pertaining to the 2014 Non-Employee Director Incentive Award Plan and Second Amended and Restated 2010 Incentive Award Plan, and
|
|
(5) |
Registration Statement (Form S-8 No. 333-223685) pertaining to the 2014 Non-Employee Director Incentive Award Plan and Third Amended and Restated 2010 Incentive Award Plan.
|
|
/s/ Ernst & Young LLP
|
Los Angeles, CA
|
|
June 15, 2020
|
Date: June 15, 2020
|
/s/ Selwyn Joffe
|
|
Selwyn Joffe
|
||
Chief Executive Officer
|
Date: June 15, 2020
|
/s/ David Lee
|
|
David Lee
|
||
Chief Financial Officer
|
Date: June 15, 2020
|
/s/ Kamlesh Shah
|
|
Kamlesh Shah
|
||
Chief Accounting Officer
|
/s/ Selwyn Joffe
|
||
Selwyn Joffe
|
||
Chief Executive Officer
|
||
June 15, 2020
|
/s/ David Lee
|
||
David Lee
|
||
Chief Financial Officer
|
||
June 15, 2020
|
/s/ Kamlesh Shah
|
||
Kamlesh Shah
|
||
Chief Accounting Officer
|
||
June 15, 2020
|