MOTORCAR PARTS OF AMERICA INC - Quarter Report: 2022 June (Form 10-Q)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| ☑ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022
| ☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR THE TRANSITION PERIOD FROM TO
Commission File No. 001-33861
(Exact name of registrant as specified in its charter)
|
New York
|
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11-2153962
|
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(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
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2929 California Street, Torrance, California
|
|
90503
|
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (310)
212-7910
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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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
|
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large accelerated filer ☐
|
Accelerated filer ☑
|
|
Non-accelerated filer ☐
|
Smaller reporting company ☐
|
|
|
Emerging growth company ☐
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
There were 19,227,146 shares of Common Stock
outstanding at August 2, 2022.
MOTORCAR PARTS OF AMERICA, INC.
|
PART I — FINANCIAL INFORMATION
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4
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9
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27 |
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27 |
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PART II — OTHER INFORMATION
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29 |
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32 | |
MOTORCAR PARTS OF AMERICA, INC.
GLOSSARY
The following terms are frequently used in the text of this report and have the meanings indicated below.
“Used Core” — An automobile part which has previously been used in the operation of a vehicle. Generally, the Used Core is an original equipment (“OE”)
automobile part installed by the vehicle manufacturer and subsequently removed for replacement. Used Cores contain salvageable parts, which are an important raw material in the remanufacturing process. We obtain most Used Cores by providing credits
to our customers for Used Cores returned to us under our core exchange programs. Our customers receive these Used Cores from consumers who deliver a Used Core to obtain credit from our customers upon the purchase of a newly remanufactured automobile
part. When sufficient Used Cores are not available from our customers, we purchase Used Cores from core brokers, who are in the business of buying and selling Used Cores. The Used Cores purchased from core brokers or returned to us by our customers
under the core exchange programs, and which have been physically received by us, are part of our raw material and work-in-process inventory. Used Cores returned by consumers to our customers but not yet returned to us are classified as contract
assets until we physically receive these Used Cores.
“Remanufactured Core” — The Used Core underlying an automobile part that has gone through the remanufacturing process and through that process has become part
of a newly remanufactured automobile part. The remanufacturing process takes a Used Core, breaks it down into its component parts, replaces those components that cannot be reused and reassembles the salvageable components of the Used Core and
additional new components into a remanufactured automobile part. Remanufactured Cores held for sale at our customer locations are included in long-term contract assets. The Remanufactured Core portion of stock adjustment returns are classified as
contract assets until we physically receive them.
PART I — FINANCIAL INFORMATION
| Item 1. |
Financial Statements
|
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
|
June 30, 2022
|
March 31, 2022
|
|||||||
|
ASSETS
|
(Unaudited)
|
|||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
9,217,000
|
$
|
23,016,000
|
||||
|
Short-term investments
|
1,995,000
|
2,202,000
|
||||||
|
Accounts receivable — net
|
73,030,000
|
85,075,000
|
||||||
|
Inventory
|
405,205,000
|
385,504,000
|
||||||
|
Contract assets
|
27,783,000
|
27,500,000
|
||||||
|
Prepaid expenses and other current assets
|
11,705,000
|
13,688,000
|
||||||
|
Total current assets
|
528,935,000
|
536,985,000
|
||||||
|
Plant and equipment — net
|
49,384,000
|
51,062,000
|
||||||
|
Operating lease assets
|
80,157,000
|
81,997,000
|
||||||
|
Long-term deferred income taxes
|
27,046,000
|
26,982,000
|
||||||
|
Long-term contract assets
|
306,953,000
|
310,255,000
|
||||||
|
Goodwill and intangible assets — net
|
6,548,000
|
7,004,000
|
||||||
|
Other assets
|
1,403,000
|
1,413,000
|
||||||
|
TOTAL ASSETS
|
$
|
1,000,426,000
|
$
|
1,015,698,000
|
||||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable and accrued liabilities
|
$
|
173,818,000
|
$
|
168,435,000
|
||||
|
Customer finished goods returns accrual
|
28,793,000
|
38,086,000
|
||||||
|
Contract liabilities
|
43,645,000
|
42,496,000
|
||||||
|
Revolving loan
|
146,000,000
|
155,000,000
|
||||||
|
Other current liabilities
|
11,279,000
|
11,930,000
|
||||||
|
Operating lease liabilities
|
6,653,000
|
6,788,000
|
||||||
|
Current portion of term loan
|
3,670,000
|
3,670,000
|
||||||
|
Total current liabilities
|
413,858,000
|
426,405,000
|
||||||
|
Term loan, less current portion
|
12,097,000
|
13,024,000
|
||||||
|
Long-term contract liabilities
|
173,045,000
|
172,764,000
|
||||||
|
Long-term deferred income taxes
|
121,000
|
126,000
|
||||||
|
Long-term operating lease liabilities
|
79,552,000
|
80,803,000
|
||||||
|
Other liabilities
|
6,987,000
|
7,313,000
|
||||||
|
Total liabilities
|
685,660,000
|
700,435,000
|
||||||
|
Commitments and contingencies
|
|
|
||||||
|
Shareholders’ equity:
|
||||||||
|
Preferred stock; par value $0.01 per share, 5,000,000 shares authorized; none issued
|
-
|
-
|
||||||
|
Series A junior participating preferred stock; par value $0.01 per share, 20,000 shares authorized; none issued
|
-
|
-
|
||||||
|
Common stock; par value $0.01 per share, 50,000,000 shares authorized; 19,214,978 and 19,104,751
shares issued and outstanding at June 30, 2022 and March 31, 2022, respectively
|
192,000
|
191,000
|
||||||
|
Additional paid-in capital
|
227,729,000
|
227,184,000
|
||||||
|
Retained earnings
|
92,779,000
|
92,954,000
|
||||||
|
Accumulated other comprehensive loss
|
(5,934,000
|
)
|
(5,066,000
|
)
|
||||
|
Total shareholders’ equity
|
314,766,000
|
315,263,000
|
||||||
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
1,000,426,000
|
$
|
1,015,698,000
|
||||
The accompanying notes to condensed consolidated financial statements are an integral part hereof.
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
(Unaudited)
|
Three Months Ended
June 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Net sales
|
$
|
163,985,000
|
$
|
149,034,000
|
||||
|
Cost of goods sold
|
133,683,000
|
125,463,000
|
||||||
|
Gross profit
|
30,302,000
|
23,571,000
|
||||||
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Operating expenses:
|
||||||||
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General and administrative
|
13,634,000
|
12,486,000
|
||||||
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Sales and marketing
|
5,542,000
|
5,368,000
|
||||||
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Research and development
|
3,113,000
|
2,501,000
|
||||||
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Foreign exchange impact of lease liabilities and forward contracts
|
678,000
|
(2,533,000
|
)
|
|||||
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Total operating expenses
|
22,967,000
|
17,822,000
|
||||||
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Operating income
|
7,335,000
|
5,749,000
|
||||||
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Interest expense, net
|
6,921,000
|
3,941,000
|
||||||
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Income before income tax expense
|
414,000
|
1,808,000
|
||||||
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Income tax expense
|
589,000
|
947,000
|
||||||
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Net (loss) income
|
$
|
(175,000
|
)
|
$
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861,000
|
|||
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Basic net (loss) income per share
|
$
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(0.01
|
)
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$
|
0.05
|
|||
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Diluted net (loss) income per share
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$
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(0.01
|
)
|
$
|
0.04
|
|||
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Weighted average number of shares outstanding:
|
||||||||
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Basic
|
19,123,354
|
19,054,481
|
||||||
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Diluted
|
19,123,354
|
19,659,057
|
||||||
The accompanying notes to condensed consolidated financial statements are an integral part hereof.
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
(Unaudited)
|
Three Months Ended
June 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Net (loss) income
|
$
|
(175,000
|
)
|
$
|
861,000
|
|||
|
Other comprehensive (loss) income, net of tax:
|
||||||||
|
Foreign currency translation (loss) gain
|
(868,000
|
)
|
1,833,000
|
|||||
|
Total other comprehensive (loss) income, net of tax
|
(868,000
|
)
|
1,833,000
|
|||||
|
Comprehensive (loss) income
|
$
|
(1,043,000
|
)
|
$
|
2,694,000
|
|||
The accompanying notes to condensed consolidated financial statements are an integral part hereof.
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
(Unaudited)
|
Common Stock
|
||||||||||||||||||||||||
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
(Loss) Income
|
Total
|
|||||||||||||||||||
|
Balance at March 31, 2022
|
19,104,751
|
$
|
191,000
|
$
|
227,184,000
|
$
|
92,954,000
|
$
|
(5,066,000
|
)
|
$
|
315,263,000
|
||||||||||||
|
Compensation recognized under employee stock plans
|
-
|
-
|
1,249,000
|
-
|
-
|
1,249,000
|
||||||||||||||||||
|
Exercise of stock options, net of shares withheld for employee taxes
|
25,543
|
-
|
191,000
|
-
|
-
|
191,000
|
||||||||||||||||||
|
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes
|
84,684
|
1,000
|
(895,000
|
)
|
-
|
-
|
(894,000
|
)
|
||||||||||||||||
|
Foreign currency translation
|
-
|
-
|
-
|
-
|
(868,000
|
)
|
(868,000
|
)
|
||||||||||||||||
|
Net loss
|
-
|
-
|
-
|
(175,000
|
)
|
-
|
(175,000
|
)
|
||||||||||||||||
|
Balance at June 30, 2022
|
19,214,978
|
$
|
192,000
|
$
|
227,729,000
|
$
|
92,779,000
|
$
|
(5,934,000
|
)
|
$
|
314,766,000
|
||||||||||||
|
Common Stock
|
||||||||||||||||||||||||
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
(Loss) Income
|
Total
|
|||||||||||||||||||
|
Balance at March 31,2021
|
19,045,386
|
$
|
190,000
|
$
|
223,058,000
|
$
|
85,593,000
|
$
|
(7,696,000
|
)
|
$
|
301,145,000
|
||||||||||||
|
Compensation recognized under employee stock plans
|
-
|
-
|
1,576,000
|
-
|
-
|
1,576,000
|
||||||||||||||||||
|
Exercise of stock options, net of shares withheld for employee taxes
|
19,837
|
-
|
354,000
|
-
|
-
|
354,000
|
||||||||||||||||||
|
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes
|
35,869
|
1,000
|
(543,000
|
)
|
-
|
-
|
(542,000
|
)
|
||||||||||||||||
|
Foreign currency translation
|
-
|
-
|
-
|
-
|
1,833,000
|
1,833,000
|
||||||||||||||||||
|
Net income
|
-
|
-
|
-
|
861,000
|
-
|
861,000
|
||||||||||||||||||
|
Balance at June 30, 2021
|
19,101,092
|
$
|
191,000
|
$
|
224,445,000
|
$
|
86,454,000
|
$
|
(5,863,000
|
)
|
$
|
305,227,000
|
||||||||||||
The accompanying notes to condensed consolidated financial statements are an integral part hereof.
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
(Unaudited)
|
Three Months
Ended
June 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net (loss) income
|
$
|
(175,000
|
)
|
$
|
861,000
|
|||
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
||||||||
|
Depreciation and amortization
|
3,124,000
|
3,145,000
|
||||||
|
Amortization of interest
|
306,000
|
414,000
|
||||||
|
Amortization of core premiums paid to customers
|
2,863,000
|
2,531,000
|
||||||
|
Amortization of finished goods premiums paid to customers
|
181,000
|
146,000
|
||||||
|
Noncash lease expense
|
1,939,000
|
1,791,000
|
||||||
|
Gain due to the change in the fair value of the contingent consideration
|
-
|
(60,000
|
)
|
|||||
|
Foreign exchange impact of lease liabilities and forward contracts
|
678,000
|
(2,533,000
|
)
|
|||||
|
Loss (gain) on short-term investments
|
294,000
|
(5,000
|
)
|
|||||
|
Net provision for inventory reserves
|
3,942,000
|
3,141,000
|
||||||
|
Net provision for customer payment discrepancies and credit losses
|
300,000
|
229,000
|
||||||
|
Deferred income taxes
|
(62,000
|
)
|
358,000
|
|||||
|
Share-based compensation expense
|
1,249,000
|
1,576,000
|
||||||
|
Loss on disposal of plant and equipment
|
9,000
|
33,000
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
11,427,000
|
9,020,000
|
||||||
|
Inventory
|
(24,252,000
|
)
|
(20,625,000
|
)
|
||||
|
Prepaid expenses and other current assets
|
1,122,000
|
281,000
|
||||||
|
Other assets
|
6,000
|
297,000
|
||||||
|
Accounts payable and accrued liabilities
|
5,898,000
|
(10,183,000
|
)
|
|||||
|
Customer finished goods returns accrual
|
(9,289,000
|
)
|
3,698,000
|
|||||
|
Contract assets, net
|
(37,000
|
)
|
(24,857,000
|
)
|
||||
|
Contract liabilities, net
|
1,384,000
|
27,880,000
|
||||||
|
Operating lease liabilities
|
(1,446,000
|
)
|
(1,259,000
|
)
|
||||
|
Other liabilities
|
(443,000
|
)
|
(618,000
|
)
|
||||
|
Net cash used in operating activities
|
(982,000
|
)
|
(4,739,000
|
)
|
||||
|
Cash flows from investing activities:
|
||||||||
|
Purchase of plant and equipment
|
(1,375,000
|
)
|
(1,922,000
|
)
|
||||
|
Purchase of short-term investments
|
(86,000
|
)
|
(167,000
|
)
|
||||
|
Net cash used in investing activities
|
(1,461,000
|
)
|
(2,089,000
|
)
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Borrowings under revolving loan
|
13,000,000
|
32,000,000
|
||||||
|
Repayments of revolving loan
|
(22,000,000
|
)
|
(13,000,000
|
)
|
||||
|
Repayments of term loan
|
(938,000
|
)
|
(938,000
|
)
|
||||
|
Payments for debt issuance costs
|
(21,000
|
)
|
(1,102,000
|
)
|
||||
|
Payments on finance lease obligations
|
(604,000
|
)
|
(678,000
|
)
|
||||
|
Exercise of stock options
|
191,000
|
354,000
|
||||||
|
Cash used to net share settle equity awards
|
(894,000
|
)
|
(542,000
|
)
|
||||
|
Net cash (used in) provided by financing activities
|
(11,266,000
|
)
|
16,094,000
|
|||||
|
Effect of exchange rate changes on cash and cash equivalents
|
(90,000
|
)
|
94,000
|
|||||
|
Net (decrease) increase in cash and cash equivalents
|
(13,799,000
|
)
|
9,360,000
|
|||||
|
Cash and cash equivalents — Beginning of period
|
23,016,000
|
15,523,000
|
||||||
|
Cash and cash equivalents — End of period
|
$
|
9,217,000
|
$
|
24,883,000
|
||||
|
Supplemental disclosures of cash flow information:
|
||||||||
|
Cash paid for interest, net
|
$
|
6,548,000
|
$
|
3,521,000
|
||||
|
Cash paid for income taxes, net of refunds
|
712,000
|
1,550,000
|
||||||
|
Cash paid for operating leases
|
2,647,000
|
2,472,000
|
||||||
|
Cash paid for finance leases
|
672,000
|
775,000
|
||||||
|
Plant and equipment acquired under finance leases
|
75,000
|
230,000
|
||||||
|
Assets acquired under operating leases
|
144,000
|
15,718,000
|
||||||
|
Non-cash capital expenditures
|
401,000
|
206,000
|
||||||
The accompanying notes to condensed consolidated financial statements are an integral part hereof.
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
June 30, 2022
(Unaudited)
1. Company Background and Organization
Motorcar Parts of America, Inc. and its subsidiaries (the “Company”, or “MPA”) is a leading supplier of automotive aftermarket non-discretionary replacement
parts, and test solutions and diagnostic equipment. These replacement parts are primarily sold to automotive retail chain stores and warehouse distributors throughout North America and to major automobile manufacturers for both their aftermarket
programs and warranty replacement programs (“OES”). The Company’s test solutions and diagnostic equipment primarily serves the global automotive component and powertrain testing market. The Company’s products include (i) rotating electrical products
such as alternators and starters, (ii) wheel hub assemblies and bearings, (iii) brake-related products, which include brake calipers, brake boosters, brake rotors, brake pads, and brake master cylinders, and (iv) other products, which include (a)
turbochargers and (b) test solutions and diagnostic equipment used for electric vehicle powertrain development and manufacturing including electric motor test systems, e-axle test systems, advanced power emulators, charging unit test systems, test
systems for alternators and starters, belt starter generators, bench-top testers, and specialized test services for electric vehicle inverters.
Pursuant to the guidance provided under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for segment reporting, the
Company has identified its chief operating decision maker (“CODM”), reviewed the documents used by the CODM, and understands how such documents are used by the CODM to make financial and operating decisions. The Company has determined through this
review process that its business comprises three separate operating segments. The operating segments meet all the criteria to be
aggregated and are presented as such.
Impact of the Novel Coronavirus (“COVID-19”)
The outbreak of the COVID-19 pandemic continues to adversely impact the U.S. and global economies – creating uncertainty regarding the potential effects on
the Company’s employees, supply chain, operations, and customer demand. The COVID-19 pandemic could impact the Company’s operations and the operations of its customers, suppliers, and vendors because of quarantines, facility closures, travel, and
logistics restrictions. The extent to which the COVID-19 pandemic impacts the Company will depend on numerous factors and future developments, which are highly uncertain and cannot be predicted, including, but not limited to: (i) the severity of the
virus, (ii) the occurrence and duration of additional spikes in infections, (iii) the effects of the pandemic on customers, suppliers, and vendors, (iv) the remedial actions and stimulus measures adopted by local, state and federal governments, (v)
the availability and acceptance of vaccines, and (vi) the extent to which normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business
because of an economic recession or depression that has occurred or may occur in the future.
2. Basis of Presentation and New Accounting Pronouncements
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 2022 are not necessarily indicative of the results that may be expected for
the fiscal year ending March 31, 2023. This report should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2022, which are included in the Company’s Annual
Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 14, 2022.
The accompanying condensed consolidated financial statements have been prepared
on a consistent basis with, and there have been no material changes to the accounting policies described in Note 2, Summary of Significant Accounting Policies, to
the consolidated financial statements that are presented in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
3. Accounts Receivable — Net
The Company has trade accounts receivable that result from the sale of goods and services. Accounts receivable — net includes offset accounts related to
allowances for credit losses, customer payment discrepancies, and returned goods authorizations (“RGAs”) issued for in-transit unit returns. The Company believes its credit risk with respect to trade accounts receivable is limited due to its credit
evaluation process and the long-term nature of its relationships with its largest customers. The Company utilizes a historical loss rate method, adjusted for any changes in economic conditions or risk characteristics, to estimate its expected credit
losses each period. When developing an estimate of expected credit losses, the Company considers all available relevant information regarding the collectability of cash flows, including historical information, current conditions, and reasonable and
supportable forecasts of future economic conditions over the contractual life of the receivable. The historical loss rate method considers past write-offs of trade accounts receivable over a period commensurate with the initial term of the Company’s
contracts with its customers. The Company recognizes the allowance for credit losses at inception and reassesses quarterly based on management’s expectation of the asset’s collectability. The Company’s accounts receivable are short-term in nature and
written off only when all collection attempts have failed. The Company uses receivable discount programs with certain customers and their respective banks (see Note 10).
Accounts receivable — net is comprised of the following:
|
|
June 30, 2022
|
March 31, 2022
|
||||||
|
Accounts receivable — trade
|
$
|
94,087,000
|
$
|
98,734,000
|
||||
|
Allowance for credit losses
|
(231,000
|
)
|
(375,000
|
)
|
||||
|
Customer payment discrepancies
|
(1,418,000
|
)
|
(1,375,000
|
)
|
||||
|
Customer returns RGA issued
|
(19,408,000
|
)
|
(11,909,000
|
)
|
||||
|
Total accounts receivable — net
|
$
|
73,030,000
|
$
|
85,075,000
|
||||
The following table provides a roll-forward of the allowance for credit losses that is deducted from accounts receivable to present the net amount expected to
be collected.
|
Three Months
Ended
June 30,
|
||||||||
|
|
2022
|
2021
|
||||||
|
Balance at beginning of period
|
$
|
375,000
|
$
|
348,000
|
||||
|
Provision for expected credit losses
|
12,000
|
(36,000
|
)
|
|||||
|
Recoveries
|
-
|
-
|
||||||
|
Amounts written off charged against the allowance
|
(156,000
|
)
|
(39,000
|
)
|
||||
|
Balance at end of period
|
$
|
231,000
|
$
|
273,000
|
||||
4. Inventory
Inventory is comprised of the following:
|
|
June 30, 2022
|
March 31, 2022
|
||||||
|
Inventory
|
||||||||
|
Raw materials
|
$
|
146,775,000
|
$
|
150,414,000
|
||||
|
Work-in-process
|
6,357,000
|
6,880,000
|
||||||
|
Finished goods
|
248,332,000
|
226,729,000
|
||||||
|
|
401,464,000
|
384,023,000
|
||||||
|
Less allowance for excess and obsolete inventory
|
(12,704,000
|
)
|
(13,520,000
|
)
|
||||
|
Inventory — net
|
388,760,000
|
370,503,000
|
||||||
|
Inventory unreturned
|
16,445,000
|
15,001,000
|
||||||
|
Total inventory
|
$
|
405,205,000
|
$
|
385,504,000
|
||||
5. Contract Assets
During the three months ended June 30, 2022 and 2021, the Company reduced the
carrying value of Remanufactured Cores held at customers’ locations by $572,000 and $984,000,
respectively.
Contract assets are comprised of the following:
|
|
June 30, 2022
|
March 31, 2022
|
||||||
|
Short-term contract assets
|
||||||||
|
Cores expected to be returned by customers
|
$
|
16,658,000
|
$
|
15,778,000
|
||||
|
Upfront payments to customers
|
460,000
|
517,000
|
||||||
|
Finished goods premiums paid to customers
|
573,000
|
584,000
|
||||||
|
Core premiums paid to customers
|
10,092,000
|
10,621,000
|
||||||
|
Total short-term contract assets
|
$
|
27,783,000
|
$
|
27,500,000
|
||||
|
Remanufactured cores held at customers’ locations
|
$
|
257,379,000
|
$
|
258,376,000
|
||||
|
Upfront payments to customers
|
122,000
|
210,000
|
||||||
|
Finished goods premiums paid to customers
|
2,685,000
|
2,806,000
|
||||||
|
Core premiums paid to customers
|
41,198,000
|
43,294,000
|
||||||
|
Long-term core inventory deposits
|
5,569,000
|
5,569,000
|
||||||
|
Total long-term contract assets
|
$
|
306,953,000
|
$
|
310,255,000
|
||||
6. Significant Customer and Other Information
Significant Customer Concentrations
The largest customers accounted for the following percentage of net sales:
|
|
Three Months Ended
June 30,
|
|||||||
|
|
2022
|
2021
|
||||||
|
Net sales
|
||||||||
|
Customer A
|
37
|
%
|
34
|
%
|
||||
|
Customer B
|
25
|
%
|
20
|
%
|
||||
|
Customer C
|
20
|
%
|
31
|
%
|
||||
The largest customers accounted for the following percentage of accounts receivable – trade:
|
|
June 30, 2022
|
March 31,2022
|
||||||
|
Accounts receivable - trade
|
||||||||
|
Customer A
|
43
|
%
|
42
|
%
|
||||
|
Customer B
|
22
|
%
|
21
|
%
|
||||
|
Customer C
|
-
|
%
|
9
|
%
|
||||
Geographic and Product Information
The Company’s products are sold predominantly in the U.S. and accounted for the following percentages of net sales:
|
|
Three Months Ended
June 30,
|
|||||||
|
|
2022
|
2021
|
||||||
|
Product line
|
||||||||
|
Rotating electrical products
|
67
|
%
|
67
|
%
|
||||
|
Wheel hub products
|
12
|
%
|
14
|
%
|
||||
|
Brake-related products
|
17
|
%
|
16
|
%
|
||||
|
Other products
|
4
|
%
|
3
|
%
|
||||
|
|
100
|
%
|
100
|
%
|
||||
Significant Supplier Concentrations
The Company had no suppliers that accounted for more than 10% of inventory purchases for the three months ended June 30, 2022 and 2021, respectively.
7. Debt
The Company is party to a $268,620,000 senior
secured financing, (as amended from time to time, the “Credit Facility”) with a syndicate of lenders and PNC Bank, National Association, as administrative agent, consisting of (i) a $238,620,000 revolving loan facility, subject to borrowing base restrictions, a $24,000,000
sublimit for borrowings by Canadian borrowers, and a $20,000,000 sublimit for letters of credit (the “Revolving Facility”) and (ii) a $30,000,000 term loan facility (the “Term Loans”). The loans under the Credit Facility mature on May 28, 2026. The Credit Facility currently permits the payment of up to $29,043,000
of dividends and share repurchases for fiscal year 2023, subject to pro forma compliance with financial covenants. In connection with the Credit Facility, the lenders have a security interest in substantially all of the assets of the Company.
The Term Loans require quarterly principal payments of $937,500.
The Credit Facility bears interest at rates equal to either LIBOR plus a margin of 2.25%, 2.50% or 2.75% or a reference rate plus a margin of 1.25%, 1.50% or 1.75%, in each case depending on the senior leverage ratio as of the applicable measurement date. There is also a facility fee of 0.375% to 0.50%, depending on the senior
leverage ratio as of the applicable measurement date. The interest rate on the Company’s Term Loans and Revolving Facility was 3.82% and 4.20% respectively, at June 30, 2022, and 2.99% and 3.13% respectively, at March 31, 2022.
The Credit Facility, among other things, requires the Company to maintain certain financial covenants including a maximum senior leverage ratio and a minimum
fixed charge coverage ratio. The Company was in compliance with all financial covenants at June 30, 2022.
In addition to other covenants, the Credit Facility places limits on the Company’s
ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, redeem, or repurchase capital stock, alter the business conducted by the Company and its subsidiaries,
transact with affiliates, prepay, redeem, or purchase subordinated debt, and amend or otherwise alter debt agreements.
The following summarizes information about the Term Loans:
|
|
June 30, 2022
|
March 31, 2022
|
||||||
|
Principal amount of Term Loans
|
$
|
15,937,000
|
$
|
16,875,000
|
||||
|
Unamortized financing fees
|
(170,000
|
)
|
(181,000
|
)
|
||||
|
Net carrying amount of Term Loans
|
15,767,000
|
16,694,000
|
||||||
|
Less current portion of Term Loans
|
(3,670,000
|
)
|
(3,670,000
|
)
|
||||
|
Long-term portion of Term Loans
|
$
|
12,097,000
|
$
|
13,024,000
|
||||
Future repayments of the Term Loans are as follows:
|
Year Ending March 31,
|
||||
|
2023
- remaining nine months
|
$
|
2,812,000
|
||
|
2024
|
3,750,000
|
|||
|
2025
|
3,750,000
|
|||
|
2026
|
3,750,000
|
|||
|
2027
|
1,875,000
|
|||
|
Total payments
|
$
|
15,937,000
|
||
The Company had $146,000,000 and $155,000,000 outstanding under the Revolving Facility at June 30, 2022 and March 31, 2022, respectively. In addition, $6,370,000 was outstanding for letters of credit at June
30, 2022. At June 30, 2022, after certain contractual adjustments, $86,250,000 was available under the Revolving Facility.
8. Contract Liabilities
Contract liabilities are comprised of the following:
|
|
June 30, 2022
|
March 31, 2022
|
||||||
|
Short-term contract liabilities
|
||||||||
|
Customer core returns accruals
|
$
|
17,533,000
|
$
|
12,322,000
|
||||
|
Customer allowances earned
|
18,698,000
|
22,018,000
|
||||||
|
Customer deposits
|
2,507,000
|
3,306,000
|
||||||
|
Finished goods liabilities
|
1,582,000
|
1,537,000
|
||||||
|
Core bank liability
|
1,647,000
|
1,634,000
|
||||||
|
Accrued core payment
|
1,678,000
|
1,679,000
|
||||||
|
Total short-term contract liabilities
|
$
|
43,645,000
|
$
|
42,496,000
|
||||
|
|
||||||||
|
Long-term contract liabilities
|
||||||||
|
Customer core returns accruals
|
$
|
156,153,000
|
$
|
154,940,000
|
||||
|
Customer allowances earned
|
-
|
41,000
|
||||||
|
Finished goods liabilities
|
1,202,000
|
1,588,000
|
||||||
|
Core bank liability
|
14,851,000
|
15,267,000
|
||||||
|
Accrued core payment
|
839,000
|
928,000
|
||||||
|
Total long-term contract liabilities
|
$
|
173,045,000
|
$
|
172,764,000
|
||||
9. Leases
The Company leases various facilities in North America and Asia under operating
leases expiring through August 2033. The Company has material nonfunctional currency leases that could have a material impact on the Company’s condensed
consolidated statements of operations. As required for other monetary liabilities, lessees remeasure foreign currency-denominated lease liabilities using the exchange rate at each reporting date, but the lease assets are nonmonetary assets measured
at historical rates and are not affected by subsequent changes in the exchange rates.
In connection with the remeasurement of these leases, the Company recorded gains
of $20,000 and $2,795,000 during the three months ended June 30, 2022 and 2021, respectively. These amounts are included in “foreign exchange impact of lease liabilities and forward contracts” in the condensed consolidated statements of operations.
Balance sheet information for leases is as follows:
|
Leases
|
Classification
|
June 30, 2022
|
March 31, 2022
|
|||||||
|
Assets:
|
|
|||||||||
|
Operating
|
|
$
|
80,157,000
|
$
|
81,997,000
|
|||||
|
Finance
|
|
7,027,000
|
7,470,000
|
|||||||
|
Total leased assets
|
|
$
|
87,184,000
|
$
|
89,467,000
|
|||||
|
|
|
|||||||||
|
Liabilities:
|
|
|||||||||
|
Current
|
|
|||||||||
|
Operating
|
|
$
|
6,653,000
|
$
|
6,788,000
|
|||||
|
Finance
|
|
2,185,000
|
2,330,000
|
|||||||
|
Long-term
|
|
|||||||||
|
Operating
|
|
79,552,000
|
80,803,000
|
|||||||
|
Finance
|
|
3,035,000
|
3,425,000
|
|||||||
|
Total lease liabilities
|
|
$
|
91,425,000
|
$
|
93,346,000
|
|||||
Lease cost recognized in the condensed consolidated statements of operations is as follows:
|
|
Three Months Ended
June 30,
|
|||||||
|
|
2022
|
2021
|
||||||
|
Lease cost
|
||||||||
|
Operating lease cost
|
$
|
3,165,000
|
$
|
3,042,000
|
||||
|
Short-term lease cost
|
454,000
|
376,000
|
||||||
|
Variable lease cost
|
185,000
|
281,000
|
||||||
|
Finance lease cost:
|
||||||||
|
Amortization of finance lease assets
|
539,000
|
499,000
|
||||||
|
Interest on finance lease liabilities
|
68,000
|
97,000
|
||||||
|
Total lease cost
|
$
|
4,411,000
|
$
|
4,295,000
|
||||
Maturities of lease commitments at June 30, 2022
by fiscal year were as follows:
|
Maturity of lease liabilities
|
Operating Leases
|
Finance Leases
|
Total
|
|||||||||
|
2023
- remaining nine months
|
$
|
8,804,000
|
$
|
1,884,000
|
$
|
10,688,000
|
||||||
|
2024
|
10,073,000
|
1,762,000
|
11,835,000
|
|||||||||
|
2025
|
10,143,000
|
1,263,000
|
11,406,000
|
|||||||||
|
2026
|
10,358,000
|
570,000
|
10,928,000
|
|||||||||
|
2027
|
10,496,000
|
106,000
|
10,602,000
|
|||||||||
|
Thereafter
|
64,621,000
|
5,000
|
64,626,000
|
|||||||||
|
Total lease payments
|
114,495,000
|
5,590,000
|
120,085,000
|
|||||||||
|
Less amount representing interest
|
(28,290,000
|
)
|
(370,000
|
)
|
(28,660,000
|
)
|
||||||
|
Present value of lease liabilities
|
$
|
86,205,000
|
$
|
5,220,000
|
$
|
91,425,000
|
||||||
Other information about leases is as follows:
|
|
June 30, 2022
|
March 31, 2022
|
||||||
|
Lease term and discount rate
|
||||||||
|
Weighted-average remaining lease term (years):
|
||||||||
|
Finance leases
|
2.8
|
2.9
|
||||||
|
Operating leases
|
10.2
|
10.4
|
||||||
|
Weighted-average discount rate:
|
||||||||
|
Finance leases
|
5.1
|
%
|
5.1
|
%
|
||||
|
Operating leases
|
5.7
|
%
|
5.7
|
%
|
||||
10. Accounts Receivable Discount Programs
The Company uses receivable discount programs with certain customers and their respective banks. Under these programs, the Company may sell those customers’
receivables to those banks at a discount to be agreed upon at the time the receivables are sold. These discount arrangements allow the Company to accelerate receipt of payment on customers’ receivables.
The following is a summary of accounts receivable discount programs:
|
|
Three Months
Ended
June 30,
|
|||||||
|
|
2022
|
2021
|
||||||
|
Receivables discounted
|
$
|
142,624,000
|
$
|
146,669,000
|
||||
|
Weighted average days
|
327
|
329
|
||||||
|
Annualized weighted average discount rate
|
3.7
|
%
|
1.8
|
%
|
||||
|
Amount of discount recognized as interest expense
|
$
|
4,874,000
|
$
|
2,473,000
|
||||
11. Net (Loss) Income per Share
Basic net (loss) income per share is computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding during
the period. Diluted net (loss) income per share includes the effect, if any, from the potential exercise or conversion of securities, such as stock options, which
would result in the issuance of incremental shares of common stock to the extent such impact is not anti-dilutive.
The following presents a reconciliation of basic and diluted net (loss) income per share:
|
|
Three Months Ended
June 30,
|
|||||||
|
|
2022
|
2021
|
||||||
|
Net (loss) income
|
$
|
(175,000
|
)
|
$
|
861,000
|
|||
|
Basic shares
|
19,123,354
|
19,054,481
|
||||||
|
Effect of potentially dilutive securities
|
-
|
604,576
|
||||||
|
Diluted shares
|
19,123,354
|
19,659,057
|
||||||
|
Net (loss) income per share:
|
||||||||
|
Basic net (loss) income per share
|
$
|
(0.01
|
)
|
$
|
0.05
|
|||
|
Diluted net (loss) income per share
|
$
|
(0.01
|
)
|
$
|
0.04
|
|||
Potential common shares that would have the effect of increasing diluted net
income per share or decreasing diluted net loss per share are considered to be anti-dilutive and as such, these shares are not included in calculating diluted net (loss) income per share. For the three months ended June 30, 2022 and 2021, there were 2,301,901 and 634,832, respectively, of potential common shares not included in the
calculation of diluted net (loss) income per share because their effect was anti-dilutive.
12. Income Taxes
The Company recorded income tax expense of $589,000,
or an effective tax rate of 142.3%, and $947,000,
or an effective tax rate of 52.4%, for the three months ended June 30, 2022 and 2021, respectively. Effective tax rates are based on
current annual projections and any changes in future periods could result in an effective tax rate that is materially different from the current estimate. The effective tax rate for the three months ended June 30, 2022, was primarily impacted by
(i) specific jurisdictions that the Company does not expect to recognize the benefit of losses, (ii) foreign income taxed at rates that are different from the federal statutory rate, and (iii) non-deductible executive compensation under Internal
Revenue Code Section 162(m).
The Company and its subsidiaries file income tax returns in the U.S. federal, various state, and foreign jurisdictions with varying statutes of limitations.
At June 30, 2022, the Company is not under examination in any jurisdiction, and remain subject to examination from the years ended March 31, 2017. The Company believes no significant changes in the unrecognized tax benefits will occur within the next
12 months.
13. Financial Risk Management and Derivatives
Purchases and expenses denominated in currencies other than the U.S. dollar, which are primarily related to the Company’s overseas facilities, expose the
Company to market risk from material movements in foreign exchange rates between the U.S. dollar and the foreign currencies. The Company’s primary risk exposure is from fluctuations in the value of the Mexican peso and to a lesser extent the Chinese
yuan. To mitigate these risks, the Company enters into forward foreign currency exchange contracts to exchange U.S. dollars for these foreign currencies. The extent to which forward foreign currency exchange contracts are used, is modified
periodically in response to the Company’s estimate of market conditions and the terms and length of anticipated requirements.
The Company enters into forward foreign currency exchange contracts in order to reduce the impact of foreign currency fluctuations and not to engage in
currency speculation. The use of derivative financial instruments allows the Company to reduce its exposure to the risk that the eventual cash outflow resulting from funding the expenses of the foreign operations will be materially affected by
changes in exchange rates between the U.S. dollar and the foreign currencies. The Company does not hold or issue financial instruments for trading purposes. The Company designates forward foreign currency exchange contracts for forecasted expenditure
requirements to fund foreign operations.
The Company had forward foreign currency exchange contracts with a U.S. dollar
equivalent notional value of $46,450,000 and $44,968,000 at June 30, 2022 and March 31, 2022, respectively. These contracts generally have a term of one year or less, at rates agreed at the inception of the contracts. The counterparty to this derivative transaction is a major financial institution with investment grade credit
rating; however, the Company is exposed to credit risk with this institution. The credit risk is limited to the potential unrealized gains (which offset currency fluctuations adverse to the Company) in any such contract should this counterparty
fail to perform as contracted. Any changes in the fair values of forward foreign currency exchange contracts are included in “foreign exchange impact of lease liabilities and forward contracts” in the condensed consolidated statements of
operations.
The following shows the effect of derivative instruments on the condensed consolidated statements of operations:
|
Loss Recognized as Foreign Exchange Impact of Lease Liabilities and Forward Contracts
|
||||||||
|
Three Months Ended
|
||||||||
|
Derivatives Not Designated as
|
June 30,
|
|||||||
|
Hedging Instruments
|
2022
|
2021
|
||||||
|
Forward foreign currency exchange contracts
|
$
|
(698,000
|
)
|
$
|
(262,000
|
)
|
||
The fair value of the forward foreign currency exchange contracts of $415,000 and $1,113,000 is included in
prepaid expenses and other current assets in the condensed consolidated balance sheets at June 30, 2022 and March 31, 2022, respectively. The changes in the fair values of forward foreign currency exchange contracts are included in “foreign
exchange impact of lease liabilities and forward contracts” in the condensed consolidated statements of cash flows for the three months ended June 30, 2022 and 2021.
14. Fair Value Measurements
The following summarizes financial assets and liabilities measured at fair value, by level within the fair value hierarchy:
|
June 30, 2022
|
March 31, 2022
|
|||||||||||||||||||||||||||||||
|
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
|
$
|
1,995,000
|
$
|
1,995,000
|
$
|
-
|
$
|
-
|
$
|
2,202,000
|
$
|
2,202,000
|
$
|
-
|
$
|
-
|
||||||||||||||||
|
Prepaid expenses and other current assets
|
||||||||||||||||||||||||||||||||
|
Forward foreign currency exchange contracts
|
415,000
|
-
|
415,000
|
-
|
1,113,000
|
-
|
1,113,000
|
-
|
||||||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||||||||||
|
Other current liabilities
|
||||||||||||||||||||||||||||||||
|
Deferred compensation
|
1,995,000
|
1,995,000
|
-
|
-
|
2,202,000
|
2,202,000
|
-
|
-
|
||||||||||||||||||||||||
Short-term Investments and Deferred Compensation
The Company’s short-term investments,
which fund its deferred compensation liabilities, consist of investments in mutual funds. These investments are classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.
Forward Foreign Currency Exchange Contracts
The forward foreign currency exchange
contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers (See Note 13).
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities
approximate their fair value due to the short-term nature of these instruments. The carrying amounts of the revolving loan, term loan and other long-term liabilities approximate their fair value based on the variable nature of interest rates and
current rates for instruments with similar characteristics.
15. Share-based Payments
Stock Options
During the three months ended June 30, 2022 and 2021, no
options to purchase shares of the Company’s common stock were granted.
The following is a summary of stock option transactions:
|
|
Number of
Shares
|
Weighted Average
Exercise Price
|
||||||
|
Outstanding at March 31, 2022
|
1,695,499
|
$
|
17.53
|
|||||
|
Granted
|
-
|
$
|
-
|
|||||
|
Exercised
|
(25,543
|
)
|
$
|
7.46
|
||||
|
Forfeited/Cancelled
|
(60,723
|
)
|
$
|
15.73
|
||||
| Expired | (3,000 | ) | $ | 9.85 | ||||
|
Outstanding at June 30, 2022
|
1,606,233
|
$
|
17.76
|
|||||
At June 30, 2022, options to purchase 197,032
shares of common stock were unvested at a weighted average exercise price of $17.25.
At June 30, 2022, there was $666,000 of total
unrecognized compensation expense related to unvested stock option awards, which will be recognized over the weighted average remaining vesting period of approximately one year.
Restricted Stock Units and Restricted Stock Awards (collectively “RSUs”)
During the three months ended June 30, 2022 and 2021, the Company granted (i) performance-based restricted stock awards which had a
threshold performance level of 33,333 shares, a target performance level of 66,667 shares, and a maximum performance level of 100,000 shares at the grant date for both periods and
(ii) 176,590 and 118,673 of time-based vesting restricted stock units, respectively, based on the closing market price on the grant date.
The following is a summary of non-vested RSUs:
|
|
Number of
Shares
|
Weighted Average
Grant Date Fair
Value
|
||||||
|
Outstanding at March 31, 2022
|
399,063
|
$
|
19.98
|
|||||
|
Granted
|
276,590
|
$
|
13.14
|
|||||
|
Vested
|
(149,313
|
)
|
$
|
20.63
|
||||
|
Forfeited/Cancelled
|
(41,293
|
)
|
$
|
20.72
|
||||
|
Outstanding at June 30, 2022
|
485,047
|
$
|
15.82
|
|||||
At June 30, 2022, there was $5,818,000 of
unrecognized compensation expense related to RSUs, which will be recognized over the weighted average remaining vesting period of approximately 2.0
years. The Company’s unrecognized compensation expense includes restricted stock awards at target performance level.
Performance Stock Units (“PSUs”)
During the three months ended
June 30, 2022 and 2021, the Company granted 126,028 and 84,593 PSUs (at target performance levels), respectively, which typically cliff vest after three-years
subject to continued employment. These awards are contingent and granted separately for each of the following metrics: adjusted EBITDA, net sales, and relative total shareholder return (“TSR”). Compensation cost is determined at the grant date
and recognized on a straight-line basis over the requisite service period to the extent the conditions are deemed probable. The number of shares earned at the end of the three-year period will vary, based only on actual performance, from 0% to 150% of the target number of
PSUs granted. PSUs are not considered issued or outstanding ordinary shares of the Company.
Adjusted EBITDA and net sales are considered performance conditions. The Company will reassess the probability of achieving each performance condition
separately each reporting period. TSR is considered a market condition because it measures the Company’s return against the performance of the Russell 3000, excluding companies classified as financials and real estate, over a given period of time.
Compensation cost related to the TSR award will not be adjusted even if the market condition is not met.
The Company calculated the fair value of the PSUs for each component individually. The fair value of PSUs subject to performance conditions is equal to the
closing stock price on the grant date. The fair value of PSUs subject to the market condition is determined using the Monte Carlo valuation model.
The following table summarizes
the assumptions used in determining the fair value of the TSR awards:
|
Three Months Ended
June 30, |
||||||||
|
2022
|
2021
|
|||||||
|
Risk free interest rate
|
3.35
|
%
|
0.47
|
%
|
||||
|
Expected life in years
|
3 | 3 | ||||||
|
Expected volatility of MPA common stock
|
51.30
|
%
|
53.70
|
%
|
||||
|
Expected average volatility of peer companies
|
62.70
|
%
|
59.30
|
%
|
||||
|
Average correlation coefficient of peer companies
|
27.50
|
%
|
26.70
|
%
|
||||
|
Expected dividend yield
|
-
|
-
|
||||||
|
Grant date fair value
|
$
|
16.02
|
$
|
26.89
|
||||
The following is a summary of non-vested PSUs:
|
|
Number of
Shares
|
Weighted Average
Grant Date Fair
Value
|
||||||
|
Outstanding at March 31, 2022
|
84,593
|
$
|
23.19
|
|||||
|
Granted
|
126,028
|
$
|
14.00
|
|||||
|
Vested
|
-
|
$
|
-
|
|||||
|
Forfeited
|
-
|
$
|
-
|
|||||
|
Outstanding at June 30, 2022
|
210,621
|
$
|
17.70
|
|||||
At June 30, 2022, there was $3,033,000 of unrecognized compensation expense related to these awards, which will be recognized over
the weighted average remaining vesting period of approximately 2.5 years.
16. Commitments and Contingencies
Warranty Returns
The Company allows its customers to return goods that their consumers have returned to them, whether or not the returned item is defective (“warranty
returns”). The Company accrues an estimate of its exposure to warranty returns based on a historical analysis of the level of this type of return as a percentage of unit sales. Amounts charged to expense for these warranty returns are considered in
arriving at the Company’s net sales.
The following summarizes the changes in the warranty return accrual:
|
|
Three Months Ended
June 30,
|
|||||||
|
|
2022
|
2021
|
||||||
|
Balance at beginning of period
|
$
|
20,125,000
|
$
|
21,093,000
|
||||
|
Charged to expense
|
30,920,000
|
27,261,000
|
||||||
|
Amounts processed
|
(33,177,000
|
)
|
(28,344,000
|
)
|
||||
|
Balance at end of period
|
$
|
17,868,000
|
$
|
20,010,000
|
||||
Contingencies
The Company is subject to various lawsuits and claims. In addition, government agencies and self-regulatory organizations have the ability to conduct periodic
examinations of and administrative proceedings regarding the Company’s business. Following an audit in fiscal 2019, the U.S. Customs and Border Protection stated that it believed that the Company owed additional duties of approximately $17 million from 2011 through mid-2018 relating to products that it imported from Mexico. The Company does not believe that this amount is correct and
believes that it has numerous defenses and intends to dispute this amount vigorously. The Company cannot assure that the U.S. Customs and Border Protection will agree or that it will not need to accrue or pay additional amounts in the future.
17. Share Repurchases
In August 2018, the Company’s board of directors approved an increase in its share repurchase program
from $20,000,000 to $37,000,000
of its common stock. During the three months ended June 30, 2022, the Company did not repurchase any shares of its common stock. As of
June 30, 2022, $18,745,000 was utilized and $18,255,000
remains available to repurchase shares under the authorized share repurchase program, subject to the limit in the Company’s Credit Facility. The Company retired the 837,007 shares repurchased under this program through June 30, 2022. The Company’s share repurchase program does not obligate it to acquire any specific number of shares and shares may be repurchased in privately
negotiated and/or open market transactions.
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
The following discussion and analysis presents factors that Motorcar Parts of America, Inc. and its subsidiaries (“our,” “we” or “us”) believe are relevant to an assessment and understanding of our consolidated financial position and results of
operations. This financial and business analysis should be read in conjunction with our March 31, 2022 audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on
June 14, 2022.
Disclosure Regarding Private Securities Litigation Reform Act of 1995
This report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our future performance that involve risks and uncertainties. All
statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about our strategic initiatives, operational plans and objectives, expectations for economic conditions and recovery and
future business and financial performance, as well as statements regarding underlying assumptions related thereto. They include, among others, factors related to the timing and implementation of strategic initiatives, the highly
competitive nature of our industry, demand for our products and services, complexities in our inventory and supply chain, challenges with transforming and growing our business and factors related to the current global COVID-19 pandemic. Except as
required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason. Therefore, you should not place undue reliance on those statements. Please refer to “Item 1A. Risk Factors” of our most recent Annual Report on Form 10-K filed with the SEC on
June 14, 2022, as updated by our subsequent filings with the SEC, for a description of these and other risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.
Management Overview
We have a multi-pronged platform for growth within the automotive aftermarket for non-discretionary replacement hard parts and test solutions. In addition, we offer diagnostic equipment applications focused on the fast-evolving electric mobility
markets. Our investments in infrastructure and human resources during the past few years reflects the significant expansion of manufacturing capacity to support multiple product lines and continues to be transformative and scalable. These
investments included (i) a 410,000 square foot distribution center, (ii) two buildings totaling 372,000 square feet for remanufacturing and core sorting of brake calipers, and (iii) the realignment of production at our initial 312,000 square foot
facility in Mexico.
New products introduced through our growth strategies include: (i) brake calipers in August 2019; (ii) alternators and starters for heavy-duty truck, industrial, marine, and agriculture applications, through an acquisition in January 2019; (iii)
brake power boosters in August 2016; and (iv) turbochargers through an acquisition in July 2016. In addition, our test solutions and diagnostic equipment include: (a) the design and manufacture of test solutions and diagnostic equipment for
alternators, starters, belt-start generators (stop start and hybrid technology), and electric power trains for electric vehicles through an acquisition in July 2017 and (b) the design and manufacture of advanced power emulators (AC and DC) and
custom power electronic products for the automotive and aerospace industries through an acquisition in December 2018.
Pursuant to the guidance provided under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for segment reporting, we have identified our chief operating decision maker (“CODM”),
reviewed the documents used by the CODM, and understand how such documents are used by the CODM to make financial and operating decisions. We have determined through this review process that our business comprises three separate operating segments.
The operating segments meet all the criteria to be aggregated and are presented as such.
Impact of the Novel Coronavirus (“COVID-19”)
The COVID-19 pandemic has spread globally and created significant volatility, uncertainty and economic disruption in many countries, including the countries in which we operate. National, state and local
governments in these countries continue to implement a variety of measures in response that have the effect of restricting or limiting, among other activities, the operations of certain businesses.
We continue to experience disruptions with worldwide supply chain and logistics services. We are unable to predict accurately the ultimate long-term impact that COVID-19
will have on our business and financial condition. While the near-term outlook appears positive, any additional government shutdowns or the emergence and spread of new variants of the virus, including the Delta or Omicron variant, the likelihood
of a resurgence of positive cases, the development, availability and public acceptance of effective treatments and vaccines, the speed at which such vaccines are administered, the efficacy of current vaccines against evolving strains or variants
of the virus, could negatively impact our business and financial condition.
There have been no serious outbreaks in any of our production facilities; however, a serious outbreak could affect our production capabilities. We continue to incur costs as a result of COVID-19, including employee costs
and other operating costs associated with the provision of personal protective equipment, which have negatively impacted our profitability. These expanded benefits, supply costs and other COVID-19 related costs resulted in total expense, included
in cost of goods sold and operating expenses in the condensed consolidated statements of operations, of $715,000 and $854,000 during the three months ended June 30, 2022 and 2021, respectively.
Results of Operations for the Three Months Ended June 30, 2022 and 2021
The following discussion and analysis should be read together with the financial statements and notes thereto appearing elsewhere herein.
The following summarizes certain key operating data:
|
Three Months Ended
June 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Cash flow used in operations
|
$
|
(982,000
|
)
|
$
|
(4,739,000
|
)
|
||
|
Finished goods turnover (annualized) (1)
|
3.1
|
4.5
|
||||||
| (1) |
Annualized finished goods turnover for the fiscal quarter is calculated by multiplying cost of goods sold for the quarter by 4 and dividing the result by the average between beginning and ending non-core finished goods inventory values
for the fiscal quarter. We believe this provides a useful measure of our ability to turn our inventory into revenues. The first quarter of fiscal 2023 reflects our investment in inventory to address disruptions related to the worldwide
supply chain and logistics challenges to meet higher anticipated future sales.
|
Net Sales and Gross Profit
The following summarizes net sales and gross profit:
|
Three Months Ended
June 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Net sales
|
$
|
163,985,000
|
$
|
149,034,000
|
||||
|
Cost of goods sold
|
133,683,000
|
125,463,000
|
||||||
|
Gross profit
|
30,302,000
|
23,571,000
|
||||||
|
Gross profit percentage
|
18.5
|
%
|
15.8
|
%
|
||||
Net Sales. Our net sales for the three months ended June 30, 2022 were $163,985,000, which represents an increase of $14,951,000, or 10.0%, from the three months ended June 30, 2021 of $149,034,000. While
our net sales for the quarter increased due to strong demand for our products, we experienced a number of challenges related to the global COVID-19 pandemic, including disruptions with worldwide supply chain and logistics services during both
periods.
Gross Profit. Our gross profit increased $6,731,000, or 28.6%, to $30,302,000 for the three months ended June 30, 2022 compared with $23,571,000 for the three months ended June
30, 2021.
Our gross margin was 18.5% of net sales for the three months ended June 30, 2022 compared with 15.8% of net sales for the three months ended June 30, 2021. Despite an increase in the gross margin, our gross margin
reflects inflationary costs related to the global pandemic, including disruptions with worldwide supply chain, logistics services, and related higher freight costs.
Our gross margin was impacted for the three months ended June 30, 2022 and 2021 by higher freight costs, net of certain price increases, of approximately $1,749,000, and $2,990,000, respectively. For the three months
ended June 30, 2022 and 2021, we incurred additional expenses of $799,000 and $1,771,000, respectively, primarily due to certain costs for disruptions in the supply chain.
Our gross margin for the three months ended June 30, 2022 and 2021 was also impacted by amortization of core and finished goods premiums paid to customers related to new business of $3,044,000 and $2,667,000, respectively. Gross margin for the three months ended June 30, 2021 was further impacted by transition expenses in connection with the expansion of our brake-related operations in Mexico of $1,947,000.
In addition, gross margin was impacted by (i) non-cash quarterly revaluation of cores that are part of the finished goods on the customers’ shelves (which are included in contract assets) to the lower of cost or net
realizable value, which resulted in a write-down of $572,000 and $984,000 for the three months ended June 30, 2022 and 2021, respectively.
Operating Expenses
The following summarizes operating expenses:
|
Three Months Ended
June 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
General and administrative
|
$
|
13,634,000
|
$
|
12,486,000
|
||||
|
Sales and marketing
|
5,542,000
|
5,368,000
|
||||||
|
Research and development
|
3,113,000
|
2,501,000
|
||||||
|
Foreign exchange impact of lease liabilities and forward contracts
|
678,000
|
(2,533,000
|
)
|
|||||
|
Percent of net sales
|
||||||||
|
General and administrative
|
8.3
|
%
|
8.4
|
%
|
||||
|
Sales and marketing
|
3.4
|
%
|
3.6
|
%
|
||||
|
Research and development
|
1.9
|
%
|
1.7
|
%
|
||||
|
Foreign exchange impact of lease liabilities and forward contracts
|
0.4
|
%
|
(1.7
|
)%
|
||||
General and Administrative. Our general and administrative expenses for the three months ended June 30, 2022 were $13,634,000, which represents an increase of $1,148,000, or 9.2%, from the three months
ended June 30, 2021 of $12,486,000. This increase was primarily due to (i) $820,000 of increased expense resulting from foreign currency transactions, (ii) $302,000 of increased professional services, (iii) $162,000 of increased information
technology costs in connection with cybersecurity and other productivity tools, and (iv) $80,000 of increased travel costs as some business travel resumed. These increases were partially offset by $327,000 of decreased share-based compensation in
connection with equity grants made to employees in fiscal 2023.
Sales and Marketing. Our sales and marketing expenses for the three months ended June 30, 2022 were $5,542,000, which represents an increase of $174,000, or 3.2%, from the three months ended June 30, 2021
of $5,368,000. This increase was primarily due to (i) $236,000 of increased commissions due to higher sales and (ii) $118,000 of increased travel costs as some business travel resumed. These increases were partially offset by $207,000 of lower
marketing and advertising expenses compared with the prior year.
Research and Development. Our research and development expenses for the three months ended June 30, 2022 were $3,113,000, which represents an increase of $612,000, or 24.5%, from the three months ended
June 30, 2021 of $2,501,000. This increase was primarily due to (i) $376,000 of increased employee-related expenses, primarily due to our electric vehicle testing system initiatives, (ii) $125,000 of increased samples for our core library and other
research and development supplies, and (iii) $82,000 of increased outside services primarily due to development projects.
Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts for the three months ended June 30, 2022 was a non-cash loss of
$678,000 compared with a non-cash gain of $2,533,000 for the three months ended June 30, 2021. This change was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities which resulted in non-cash gains of $20,000
compared with $2,795,000 for the three months ended June 30, 2022 and 2021, respectively, due to foreign currency exchange rate fluctuations and (ii) the forward foreign currency exchange contracts which resulted in non-cash losses of $698,000
compared with $262,000 for the three months ended June 30, 2022 and 2021, respectively, due to the changes in their fair values.
Interest Expense
Interest Expense, net. Our interest expense for the three months ended June 30, 2022 was $6,921,000, which represents an increase of $2,980,000, or 75.6%, from interest expense
for the three months ended June 30, 2021 of $3,941,000. This increase was primarily due to higher interest rates and increased average borrowing under our credit facility.
Provision for Income Taxes
Income Tax. We recorded income tax expense of $589,000, or an effective tax rate of 142.3%, and $947,000, or an effective tax rate of 52.4%, for the three months ended June 30,
2022 and 2021, respectively. Effective tax rates are based on current annual projections and any changes in future periods could result in an effective tax rate that is materially different from the current estimate. The effective tax rate for the
three months ended June 30, 2022, was primarily impacted by (i) specific jurisdictions that we do not expect to recognize the benefit of losses, (ii) foreign income taxed at rates that are different from the federal statutory rate, and (iii)
non-deductible executive compensation under Internal Revenue Code Section 162(m).
Liquidity and Capital Resources
Overview
We had working capital (current assets minus current liabilities) of $115,077,000 and $110,580,000, a ratio of current assets to current liabilities of 1.3:1.0, at June 30, 2022 and March 31, 2022, respectively. The increase in working capital
reflects our investment in inventory to address disruptions related to the worldwide supply chain and logistics challenges to meet higher anticipated sales.
We generated cash during the three months ended June 30, 2022 from the use of our receivable discount programs and credit facility. In addition, we have access to our existing cash, as well as our available credit facilities to meet short-term
liquidity needs. We believe our cash and cash equivalents, short-term investments, use of receivable discount programs, amounts available under our credit facility, and other sources are sufficient to satisfy our expected future working capital
needs, repayment of the current portion of our term loans, and lease and capital expenditure obligations over the next 12 months.
Share Repurchase Program
In August 2018, our board of directors approved an increase in our share repurchase program from $20,000,000 to $37,000,000 of our common stock. As of June 30, 2022, $18,745,000 was utilized and $18,255,000 remains available to repurchase shares
under the authorized share repurchase program, subject to the limit in our credit facility. We retired the 837,007 shares repurchased under this program through June 30, 2022. 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.
Cash Flows
The following summarizes cash flows as reflected in the condensed consolidated statements of cash flows:
|
Three Months Ended
June 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Cash flows (used in) provided by:
|
||||||||
|
Operating activities
|
$
|
(982,000
|
)
|
$
|
(4,739,000
|
)
|
||
|
Investing activities
|
(1,461,000
|
)
|
(2,089,000
|
)
|
||||
|
Financing activities
|
(11,266,000
|
)
|
16,094,000
|
|||||
|
Effect of exchange rates on cash and cash equivalents
|
(90,000
|
)
|
94,000
|
|||||
|
Net (decrease) increase in cash and cash equivalents
|
$
|
(13,799,000
|
)
|
$
|
9,360,000
|
|||
|
Additional selected cash flow data:
|
||||||||
|
Depreciation and amortization
|
$
|
3,124,000
|
$
|
3,145,000
|
||||
|
Capital expenditures
|
1,375,000
|
1,922,000
|
||||||
Net cash used in operating activities was $982,000 and $4,739,000 during the three months ended June 30, 2022 and 2021, respectively. The primary change in our operating activities reflects increased operating results (net income plus the net
add-back for non-cash transactions in earnings) and changes in operating assets and liabilities, including the timing of supplier payments and our investments in inventory to support anticipated future demand for our products. We continue to manage our working capital to maximize our operating cash flow.
Net cash used in investing activities was $1,461,000 and $2,089,000 during the three months ended June 30, 2022 and 2021, respectively. The change in our investing activities resulted from decreased capital expenditures due to the completion of
our expansion of our brake-related operations in Mexico during the second quarter of fiscal 2022.
Net cash used in financing activities was $11,266,000 compared with net cash provided by financing activities of $16,094,000 during the three months ended June 30, 2022 and 2021, respectively. The change in our financing activities resulted from
lower borrowing and higher repayments under our credit facility during the three months ended June 30, 2022. In addition, we paid $1,102,000 for debt issuance costs in connection with the third amendment to the credit facility in the prior year.
Capital Resources
Credit Facility
We are party to a $268,620,000 senior secured financing, (as amended from time to time, the “Credit Facility”) with a syndicate of lenders, and PNC Bank, National Association, as administrative agent, consisting of (i) a $238,620,000 revolving
loan facility, subject to borrowing base restrictions, a $24,000,000 sublimit for borrowings by Canadian borrowers, and a $20,000,000 sublimit for letters of credit (the “Revolving Facility”) and (ii) a $30,000,000 term loan facility (the “Term
Loans”). The loans under the Credit Facility mature on May 28, 2026. The Credit Facility currently permits the payment of up to $29,043,000 of dividends and share repurchases for fiscal year 2023, subject to pro forma compliance with financial
covenants. In connection with the Credit Facility, the lenders have a security interest in substantially all of our assets.
The Term Loans require quarterly principal payments of $937,500. The Credit Facility bears interest at rates equal to either LIBOR plus a margin of 2.25%, 2.50% or 2.75% or a reference rate plus a margin of 1.25%, 1.50% or 1.75%, in each case
depending on the senior leverage ratio as of the applicable measurement date. There is also a facility fee of 0.375% to 0.50%, depending on the senior leverage ratio as of the applicable measurement date. The interest rate on our Term Loans and
Revolving Facility was 3.82% and 4.20% respectively, at June 30, 2022, and 2.99% and 3.13% respectively, at March 31, 2022.
The Credit Facility, among other things, requires us to maintain certain financial covenants including a maximum senior leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with all financial
covenants as of June 30, 2022.
The following summarizes the financial covenants required under the Credit Facility:
|
Financial covenants
required under the
Credit Facility
|
Calculation as of
June 30, 2022
|
|||||||
|
Maximum senior leverage ratio
|
3.00
|
2.53
|
||||||
|
Minimum fixed charge coverage ratio
|
1.15
|
1.26
|
||||||
In addition to other covenants, the Credit Facility places limits on our ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales,
redeem, or repurchase capital stock, alter the business conducted by us and our subsidiaries, transact with affiliates, prepay, redeem, or purchase subordinated debt, and amend or otherwise alter debt agreements.
We had $146,000,000 and $155,000,000 outstanding under the Revolving Facility at June 30, 2022 and March 31, 2022, respectively. In addition, $6,370,000 was outstanding for letters of credit at June 30, 2022. At June 30,
2022, after certain contractual adjustments, $86,250,000 was available under the Revolving Facility.
Receivable Discount Programs
We use receivable discount programs with certain customers and their respective banks. Under these programs, we have options to sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are
sold. These discount arrangements allow us to accelerate receipt of payment on customers’ receivables. While these arrangements have reduced our working capital needs, there can be no assurance that these programs will continue in the future.
Interest expense resulting from these programs would increase if interest rates rise, if utilization of these discounting arrangements expands, if customers extend their payment to us, or if the discount period is extended to reflect more favorable
payment terms to customers.
The following is a summary of the receivable discount programs:
|
Three Months Ended
June 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Receivables discounted
|
$
|
142,624,000
|
$
|
146,669,000
|
||||
|
Weighted average days
|
327
|
329
|
||||||
|
Annualized weighted average discount rate
|
3.7
|
%
|
1.8
|
%
|
||||
|
Amount of discount recognized as interest expense
|
$
|
4,874,000
|
$
|
2,473,000
|
||||
Capital Expenditures and Commitments
Capital Expenditures
Our total capital expenditures, including finance leases and non-cash capital expenditures were $1,190,000 and $1,622,000 for the three months ended June 30, 2022 and 2021, respectively. These capital expenditures primarily include the purchase
of equipment for our current operations. We completed the expansion of our operations in Mexico during the second quarter of fiscal 2022. We expect to incur approximately $9,500,000 of capital expenditures primarily to support our current
operations and our growth initiates, including purchases of equipment during fiscal 2023. We fund these expenditures primarily from our working capital and leasing.
Litigation
There have been no material changes to our litigation matters that are presented in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed on June 14, 2022.
Critical Accounting Policies
There have been no material changes to our critical accounting policies and estimates that are presented in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed on June 14, 2022.
There have been no material changes in market risk from the information provided in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K as of March 31, 2022, which was filed with the SEC on
June 14, 2022.
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures designed to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including our chief executive officer, chief financial officer, and
chief accounting officer, as appropriate to allow timely decisions regarding required disclosures.
Under the supervision and with the participation of management, including our chief executive officer, chief financial officer, and chief accounting officer, we have conducted an evaluation of the effectiveness of our
disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, our chief executive officer, chief financial officer, and chief accounting officer concluded that MPA’s disclosure controls and
procedures were effective as of June 30, 2022.
Inherent Limitations on Effectiveness of Controls
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of America, applying certain estimates and judgments as required.
Internal control over financial reporting includes those policies and procedures that:
1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management and directors of the Company; and
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that occurred during the three months ended
June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
| Item 1. |
Legal Proceedings
|
There have been no material changes to our litigation matters that are presented in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed on June 14, 2022.
| Item 1A. |
Risk Factors
|
There have been no material changes in the risk factors set forth in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed on June 14, 2022.
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
Limitation on Payment of Dividends and Share Repurchases
The Credit Facility currently permits the payment of up to $29,043,000 of dividends and share repurchases for fiscal year 2023, subject to pro forma compliance with financial covenants.
Purchases of Equity Securities by the Issuer
Shares repurchased during the three months ended June 30, 2022 were as follows:
|
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)
|
||||||||||||
|
April 1 - April 30, 2022:
|
||||||||||||||||
|
Open market and privately negotiated purchases
|
-
|
$
|
-
|
-
|
$
|
18,255,000
|
||||||||||
|
May 1 - May 31, 2022:
|
||||||||||||||||
|
Open market and privately negotiated purchases
|
-
|
$
|
-
|
-
|
18,255,000
|
|||||||||||
|
June 1 - June 30, 2022:
|
||||||||||||||||
|
Open market and privately negotiated purchases
|
-
|
$
|
-
|
-
|
18,255,000
|
|||||||||||
|
Total
|
0
|
0
|
$
|
18,255,000
|
||||||||||||
| (1) |
As of June 30, 2022, $18,745,000 was utilized and $18,255,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in our Credit Facility. We retired the 837,007 shares repurchased
under this program through June 30, 2022. 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.
|
None.
| Item 6. |
Exhibits
|
| (a) |
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.
|
||
|
3.3
|
Amendment to Certificate of Incorporation of the Company
|
|||
|
3.4
|
Amendment to Certificate of Incorporation of the Company
|
|||
|
3.5
|
Amendment to Certificate of Incorporation of the Company
|
|||
|
3.6
|
Amended and Restated By-Laws of Motorcar Parts of America, Inc.
|
|||
|
3.7
|
Certificate of Amendment of the Certificate of Incorporation of the Company
|
|||
|
3.8
|
Amendment to the Amended and Restated By-Laws of Motorcar Parts of America, Inc., as adopted on June 9, 2016
|
|
||
|
3.9
|
Amendment to the Amended and Restated By-Laws of the Company
|
|||
|
3.10
|
Third Amendment to the Amended and Restated By-Laws of Motorcar Parts of America, Inc., as adopted on January 26, 2022
|
|||
| 4.1 |
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
|
Filed herewith.
|
||
|
4.2
|
2004 Non-Employee Director Stock Option Plan
|
|||
|
4.3
|
2010 Incentive Award Plan
|
|||
|
4.4
|
Amended and Restated 2010 Incentive Award Plan
|
|
Number
|
Description of Exhibit
|
Method of Filing
|
||
|
4.5
|
Second Amended and Restated 2010 Incentive Award Plan
|
|||
|
4.6
|
2014 Non-Employee Director Incentive Award Plan
|
|||
|
4.7
|
Third Amended and Restated 2010 Incentive Award Plan
|
|||
|
4.8
|
Fourth Amended and Restated 2010 Incentive Award Plan
|
|||
|
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
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document).
|
|||
|
101.SCM
|
Inline XBRL Taxonomy Extension Schema Document
|
|||
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|||
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
|||
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
|||
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|||
|
104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MOTORCAR PARTS OF AMERICA, INC. | ||
| Dated: August 9, 2022 | By: | /s/ David Lee |
| David Lee | ||
| Chief Financial Officer | ||
|
Dated: August 9, 2022
|
By: | /s/ Kamlesh Shah |
| Kamlesh Shah | ||
| Chief Accounting Officer | ||
32