8-K
MOTORCAR PARTS OF AMERICA INC (MPAA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 10, 2020
Motorcar Parts of America, Inc.
(Exact name of registrant as specified in its charter)
| New York | 001-33861 | 11-2153962 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 2929 California Street, Torrance, CA | 90503 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (310) 212-7910
N/A
(Former name, former address and former fiscal year, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule l4a-12 under the Exchange Act (17 CFR 240.l4a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
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. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br> <br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | MPAA | The Nasdaq Global Select Market |
| Item 2.02. | Results of Operations and Financial Condition |
|---|
On February 10, 2020, Motorcar Parts of America, Inc. (the “Company”) issued a press release announcing its earnings for the fiscal quarter ended December 31, 2019 which is being furnished as Exhibit 99.1. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.
The attached exhibit includes non-GAAP Adjusted net sales, non-GAAP adjusted net income (loss), non-GAAP adjusted EBITDA, non-GAAP adjusted gross profit and non-GAAP adjusted gross margin. The Company believes that these supplemental non-GAAP financial measures, when presented together with the corresponding GAAP financial measures, provide useful information to investors and management regarding financial and business trends relating to its results of operations. However, non-GAAP financial measures have certain limitations in that they do not reflect all of the costs associated with the operations of the Company’s business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.
The Company makes adjustments to the following items to calculate its non-GAAP financial measures:
Return and stock adjustment accruals related to new business and product line expansion. In connection with new business, the Company may establish return and stock adjustment accruals to account for the anticipated increased levels of business activity and product line expansion. The Company excluded these up-front accruals from net sales because they do not reflect the Company’s operations on an ongoing basis and excluding such accruals enables period-over-period comparability.
Customer allowances related to new business. In connection with new business, the Company may purchase cores from customers, may purchase the customer’s prior supplier’s inventory, or may provide certain customer allowances. The allowances are granted on a negotiated basis, and the Company excluded these allowances from net sales because they do not reflect ongoing product pricing or net sales and excluding such allowances enables period-over-period comparability.
Impact of sales price increases related to tariffs and Tariff costs paid for products sold before price increases were effective. The Company excluded the impact of sales price increases related to tariffs and tariff costs paid for products sold before price increases were effective because excluding such amounts enables period-over-period comparability.
Core sales and cost (recovery) in connection with a cancelled contract. The Company excluded the core sales and cost (recovery) in connection with a cancelled contract, because they do not reflect the Company’s operations on an ongoing basis and excluding such sales and costs enables period over-period comparability.
New product line start-up and ramp-up costs, and transition expenses. These are start-up costs incurred prior to recognizing sales for the launch of new product lines and costs of ramping up production. Transition expenses are costs incurred in connection with the expansion of the Company’s operations in Mexico. The Company excluded start-up and ramp-up costs*, and transition expenses* because they do not reflect the Company’s operations on an ongoing basis and excluding such costs enables period-over-period comparability.
Revaluation- cores on customers’ shelves and inventory step-up amortization. On a quarterly basis, the Company revalues cores on customers’ shelves, which are included as part of contract assets on the balance sheet. The revaluation is in accordance with the Company’s accounting policies on contract assets. The impact of this revaluation is reflected in cost of goods sold. The Company excluded the revaluation for cores on customers’ shelves because the core inventory on the customers’ shelves is not consumed or realized in cash during the Company’s normal operating cycle. Additionally, amortization of inventory step-up relates to an acquisition and is excluded because it is not ongoing. Neither is used by management to assess the profitability of its business operations.
Cost of customer allowances and stock adjustment accruals related to new business and product line expansion. As described above for the adjustments to net sales, the Company also adds back the cost of customer allowances related to inventory purchases and stock adjustment accruals to cost of goods sold because they do not reflect the Company’s operations on an ongoing basis and excluding such costs enables period-over-period comparability.
Cost of goods sold for cores recorded in connection with a cancelled contract. The Company excluded the cost of goods sold for cores recorded in connection with a cancelled contract because they do not reflect the Company’s operations on an ongoing basis and excluding such costs enables period-over-period comparability.
Acquisition, financing, transition, severance, new business, earn - out accruals from acquisitions, restatement-related fees and other costs. The Company has incurred acquisition, financing, transition, severance, new business, earn - out accruals from acquisitions, restatement-related fees and other costs that are not related to current operations. The Company excluded these costs to enable period-over-period comparability.
Share-based compensation expenses. These expenses primarily consist of the cost to provide employee restricted stock and restricted stock units, and employee stock options. The Company excluded share-based compensation expense because it is not used by management to assess the profitability of its business operations.
Mark-to-market losses (gains). The Company excluded mark-to-market gains and losses, including lease liability remeasurement, because they are unrealized and are not reflective of actual current cash flows and operating results.
Write-off of debt issuance costs. The Company excludes the write-off of debt issuance costs because they are not related to the Company’s ongoing business operations or financing arrangements.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
The following exhibit is furnished with this Current Report pursuant to Item 2.02:
(d) Exhibits
| Exhibit<br><br> <br>No. | Description |
|---|---|
| 99.1 | Press Release, dated February 10, 2020 |
SIGNATURES
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 hereunto duly authorized.
| MOTORCAR PARTS OF AMERICA, INC. | |
|---|---|
| Date: February 10, 2020 | /s/ David Lee |
| David Lee | |
| Chief Financial Officer |
Exhibit 99.1
NEWS RELEASE
CONTACT:
Gary S. Maier
(310) 972-5124
MOTORCAR PARTS OF AMERICA REPORTS FISCAL 2020 THIRD QUARTER RESULTS
--Strong Positive Cash Flow Highlights the Quarter; Sales up 12 Percent for Nine Months--
LOS ANGELES, CA – February 10, 2020 – Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2020 third quarter ended December 31, 2019 -- reflecting profitability, generation of cash flow from operations of $22 million during the fiscal third quarter and margin improvement.
Net sales for the fiscal 2020 third quarter increased to $125.6 million for a record third quarter from $124.1 million for the same period a year earlier.
Adjusted net sales for the fiscal 2020 third quarter increased to $127.7 million for a record third quarter from $119.6 million a year earlier.
“Notwithstanding industry sales softness and the deferral of certain product orders late in the quarter, we achieved record sales and generated record cash flow from operations and improved margins. Our strategic investments are creating a transformative platform for growth, as we expand our position within the $125 billion aftermarket hard parts industry,” said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.
Net income for the fiscal 2020 third quarter was $865,000, or $0.04 per diluted share, compared with net loss of $3.1 million, or $0.16 per share, a year ago.
Adjusted net income for the fiscal 2020 third quarter was $5.5 million, or $0.28 per diluted share, compared with $6.7 million, or $0.35 per diluted share, a year earlier.
Gross profit for the fiscal 2020 third quarter was $27.7 million compared with $21.2 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2020 third quarter was 22.0 percent compared with 17.0 percent a year earlier.
Adjusted gross profit for the fiscal 2020 third quarter was $34.3 million compared with $30.9 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the three months was 26.9 percent compared with 25.8 percent a year earlier.
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Motorcar Parts of America, Inc.
2-2-2
The results for the fiscal 2020 third quarter gross margin were primarily impacted by two items totaling $5.8 million.
| • | Non-cash expenses of $3.7 million, including a write-down of $2.4 million associated with the quarterly revaluation for cores on customers’ shelves, and $1.3 million of amortization related to the premium for core buy backs. |
|---|---|
| • | Transition costs of $2.1 million associated with the move into the company’s new facilities in Mexico to support the growth in sales. |
| --- | --- |
“Our footprint of the future is rapidly evolving and we expect to realize incremental benefits from our investments as we reach our target completion by the end of the second quarter of our new fiscal year,” Joffe added.
Nine-Month Results
Net sales for the fiscal 2020 nine-month period increased 12.0 percent to a record $385.1 million from $343.7 million a year earlier.
Adjusted net sales for the fiscal 2020 nine-month period increased 12.8 percent to a record $387.7 million from $343.6 million last year.
Net income for the fiscal 2020 nine-month period was $903,000, or $0.05 per diluted share, compared with net loss of $5.1 million, or $0.27 per share, in fiscal 2019.
Adjusted net income for the fiscal 2020 nine-month period was $20.1 million, or $1.05 per diluted share, compared with $21.2 million, or $1.10 per diluted share, in fiscal 2019.
Gross profit for the fiscal 2020 nine-month period was $81.8 million compared with $63.2 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2020 nine-month period was 21.2 percent compared with 18.4 percent a year earlier.
Adjusted gross profit for the fiscal 2020 nine-month period was $103.4 million compared with $89.8 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the nine months was 26.7 percent compared with 26.1 percent a year earlier.
UPDATED FISCAL 2020 SALES GUIDANCE
Due to the factors impacting the fiscal third quarter noted above, Motorcar Parts of America now believes net sales for its fiscal year 2020 ending March 31 should be approximately $534 million and adjusted net sales for its fiscal year 2020 ending March 31 should be approximately $539 million, representing 13 percent growth year-over-year on both a GAAP and non-GAAP basis, with sales momentum improving in the current fiscal fourth quarter.
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Motorcar Parts of America, Inc.
3-3-3
Use of Non-GAAP Measures
This press release includes the following non-GAAP measures - adjusted net sales, adjusted net income (loss), adjusted EBITDA, adjusted gross profit and adjusted gross margin, which are not measures of financial performance under GAAP, and should not be considered as alternatives to net sales, net income (loss), income from operations, gross profit or gross profit margin as a measure of financial performance. The Company believes these non-GAAP measures, when considered together with the corresponding GAAP measures, provide useful information to investors and management regarding financial and business trends relating to the company’s results of operations. However, these non-GAAP measures have significant limitations in that they do not reflect all of the costs associated with the operations of the company’s business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, measures of financial performance in accordance with GAAP. For a reconciliation of adjusted net sales, adjusted net income (loss), adjusted EBITDA, adjusted gross profit and adjusted gross margin to their corresponding GAAP measures, see the financial tables included in this press release. Also, refer to our Form 8-K to which this release is attached, and other filings we make with the SEC, for further information regarding these adjustments.
Teleconference and Web Cast
Selwyn Joffe, chairman, president and chief executive officer, and David Lee, chief financial officer, will host an investor conference call today at 10:00 a.m. Pacific time to discuss the company’s financial results and operations.
The call will be open to all interested investors either through a live audio Web broadcast at www.motorcarparts.com or live by calling (877)-776-4016 (domestic) or (973)-638-3231 (international). For those who are not available to listen to the live broadcast, the call will be archived for seven days on Motorcar Parts of America’s website www.motorcarparts.com. A telephone playback of the conference call will also be available from approximately 1:00 p.m. Pacific time on February 10, 2020 through 8:59 p.m. Pacific time on February 17, 2020 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 3748079.
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Motorcar Parts of America, Inc.
4-4-4
About Motorcar Parts of America, Inc.
Motorcar Parts of America, Inc. is a remanufacturer, manufacturer and distributor of automotive aftermarket parts -- including alternators, starters, wheel bearing and hub assemblies, brake calipers, brake master cylinders, brake power boosters, rotors, brake pads and turbochargers utilized in imported and domestic passenger vehicles, light trucks and heavy-duty applications. In addition, the company designs and manufactures test solutions for performance, endurance and production testing of electric motors, inverters, alternators, starters, and belt starter generators for the OE, aerospace and aftermarket. Motorcar Parts of America’s products are sold to automotive retail outlets and the professional repair market throughout the United States and Canada, with facilities located in New York, California, Mexico, Malaysia, China and India, and administrative offices located in California, Tennessee, Mexico, Singapore, Malaysia and Canada. Additional information is available at www.motorcarparts.com.
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. The statements contained in this press release that are not historical facts are forward-looking statements based on the company’s current expectations and beliefs concerning future developments and their potential effects on the company. These forward-looking statements involve significant risks and uncertainties (some of which are beyond the control of the company) and are subject to change based upon various factors. Reference is also made to the Risk Factors set forth in the company’s Form 10-K Annual Report filed with the Securities and Exchange Commission (SEC) in June 2019 and in its Forms 10-Q filed with the SEC for additional risks and uncertainties facing the company. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.
# # #
(Financial tables follow)
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MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
| Three Months Ended<br><br> <br>December 31, | Nine Months Ended<br><br> <br>December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |||||||
| Net sales | $ | 125,574,000 | $ | 124,113,000 | $ | 385,096,000 | $ | 343,720,000 | ||
| Cost of goods sold | 97,913,000 | 102,952,000 | 303,279,000 | 280,496,000 | ||||||
| Gross profit | 27,661,000 | 21,161,000 | 81,817,000 | 63,224,000 | ||||||
| Operating expenses: | ||||||||||
| General and administrative | 10,618,000 | 12,331,000 | 36,903,000 | 33,419,000 | ||||||
| Sales and marketing | 5,623,000 | 5,149,000 | 15,990,000 | 14,078,000 | ||||||
| Research and development | 2,174,000 | 2,054,000 | 6,694,000 | 5,574,000 | ||||||
| Total operating expenses | 18,415,000 | 19,534,000 | 59,587,000 | 53,071,000 | ||||||
| Operating income | 9,246,000 | 1,627,000 | 22,230,000 | 10,153,000 | ||||||
| Interest expense, net | 6,879,000 | 5,764,000 | 19,575,000 | 16,538,000 | ||||||
| Income (loss) before income tax expense (benefit) | 2,367,000 | (4,137,000 | ) | 2,655,000 | (6,385,000 | ) | ||||
| Income tax expense (benefit) | 1,502,000 | (1,035,000 | ) | 1,752,000 | (1,301,000 | ) | ||||
| Net income (loss) | $ | 865,000 | $ | (3,102,000 | ) | $ | 903,000 | $ | (5,084,000 | ) |
| Basic net income (loss) per share | $ | 0.05 | $ | (0.16 | ) | $ | 0.05 | $ | (0.27 | ) |
| Diluted net income (loss) per share | $ | 0.04 | $ | (0.16 | ) | $ | 0.05 | $ | (0.27 | ) |
| Weighted average number of shares outstanding: | ||||||||||
| Basic | 18,961,517 | 18,810,702 | 18,895,893 | 18,861,617 | ||||||
| Diluted | 19,305,805 | 18,810,702 | 19,263,114 | 18,861,617 |
Note: The Company revised its financial statements for each of the three years in the period ended March 31, 2018 and for the three months ended June 30, 2018. As of June 30, 2018, the cumulative error for all periods previously reported was an understatement of net income of $2,938,000. Additional information is available in the company’s September 30, 2018 Form 10-Q.
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
| March 31, 2019 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 9,458,000 | $ | 9,911,000 | ||
| Short-term investments | 2,382,000 | 3,273,000 | |||
| Accounts receivable — net | 52,930,000 | 56,015,000 | |||
| Inventory— net | 256,482,000 | 233,726,000 | |||
| Inventory unreturned | 8,266,000 | 8,469,000 | |||
| Contract assets | 22,616,000 | 22,183,000 | |||
| Income tax receivable | 10,952,000 | 10,009,000 | |||
| Prepaid expenses and other current assets | 10,332,000 | 9,296,000 | |||
| Total current assets | 373,418,000 | 352,882,000 | |||
| Plant and equipment — net | 43,314,000 | 35,151,000 | |||
| Operating lease assets | 65,652,000 | - | |||
| Long-term deferred income taxes | 8,722,000 | 9,746,000 | |||
| Long-term contract assets | 224,569,000 | 221,876,000 | |||
| Goodwill | 3,205,000 | 3,205,000 | |||
| Intangible assets — net | 7,183,000 | 8,431,000 | |||
| Other assets | 679,000 | 1,071,000 | |||
| TOTAL ASSETS | 726,742,000 | $ | 632,362,000 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable | 79,820,000 | $ | 92,461,000 | ||
| Accrued liabilities | 17,008,000 | 14,604,000 | |||
| Customer finished goods returns accrual | 25,223,000 | 22,615,000 | |||
| Contract liabilities | 32,953,000 | 30,599,000 | |||
| Revolving loan | 130,000,000 | 110,400,000 | |||
| Other current liabilities | 4,651,000 | 4,990,000 | |||
| Operating lease liabilities | 4,991,000 | - | |||
| Current portion of term loan | 3,678,000 | 3,685,000 | |||
| Total current liabilities | 298,324,000 | 279,354,000 | |||
| Term loan, less current portion | 21,380,000 | 24,187,000 | |||
| Long-term contract liabilities | 55,476,000 | 40,889,000 | |||
| Long-term deferred income taxes | 302,000 | 257,000 | |||
| Long-term operating lease liabilities | 61,805,000 | - | |||
| Other liabilities | 5,129,000 | 7,920,000 | |||
| Total liabilities | 442,416,000 | 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; 18,965,030 and 18,817,400 shares issued and outstanding at December 31, 2019 and March 31, 2019, respectively | 190,000 | 188,000 | |||
| Additional paid-in capital | 217,530,000 | 215,047,000 | |||
| Retained earnings | 72,310,000 | 71,407,000 | |||
| Accumulated other comprehensive loss | (5,704,000 | ) | (6,887,000 | ) | |
| Total shareholders’ equity | 284,326,000 | 279,755,000 | |||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 726,742,000 | $ | 632,362,000 |
All values are in US Dollars.
Reconciliation of Non-GAAP Financial Measures
To supplement the consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company has included the following non-GAAP adjusted financial measures in this press release and in the webcast to discuss the Company’s financial results for the three and nine months ended December 31, 2019 and 2018. Each of these non-GAAP adjusted financial measures is adjusted from results based on GAAP to exclude certain expenses and gains. Among other things, the Company uses such non-GAAP adjusted financial measures in addition to and in conjunction with corresponding GAAP measures to help analyze the performance of its business.
These non-GAAP adjusted financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company’s results of operations and the factors and trends affecting the Company’s business. However, these non-GAAP adjusted financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
Income statement information for the three and nine months ended December 31, 2019 and 2018 are as follows:
| Reconciliation of Non-GAAP Financial Measures | Exhibit 1 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | 2018 | 2019 | 2018 | |||||||||
| GAAP Results: | ||||||||||||
| Net sales | $ | 125,574,000 | $ | 124,113,000 | $ | 385,096,000 | $ | 343,720,000 | ||||
| Net income (loss) | 865,000 | (3,102,000 | ) | 903,000 | (5,084,000 | ) | ||||||
| Income (loss) per share (EPS) | 0.04 | (0.16 | ) | 0.05 | (0.27 | ) | ||||||
| Gross margin | 22.0 | % | 17.0 | % | 21.2 | % | 18.4 | % | ||||
| Non-GAAP Adjusted Results: | ||||||||||||
| Non-GAAP adjusted net sales | $ | 127,677,000 | $ | 119,630,000 | $ | 387,670,000 | $ | 343,592,000 | ||||
| Non-GAAP adjusted net income | 5,467,000 | 6,683,000 | 20,143,000 | 21,240,000 | ||||||||
| Non-GAAP adjusted diluted income per share (EPS) | 0.28 | 0.35 | 1.05 | 1.10 | ||||||||
| Non-GAAP adjusted gross margin | 26.9 | % | 25.8 | % | 26.7 | % | 26.1 | % | ||||
| Non-GAAP adjusted EBITDA | $ | 16,486,000 | $ | 16,190,000 | $ | 53,233,000 | $ | 48,961,000 |
Note: The Company had revised its financial statements for each of the three years in the period ended March 31, 2018 and for the three months ended June 30, 2018. As of June 30, 2018, the cumulative error for all periods previously reported was an understatement of net income of $2,938,000. For further information, please see the Company’s September 30, 2018 Form 10-Q. As of June 30, 2018, the cumulative impact to non-GAAP adjusted net income for all periods previously reported was an understatement of $1,220,000.
| Reconciliation of Non-GAAP Financial Measures | Exhibit 2 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | 2018 | 2019 | 2018 | ||||||||
| GAAP net sales | $ | 125,574,000 | $ | 124,113,000 | $ | 385,096,000 | $ | 343,720,000 | |||
| Adjustments: | |||||||||||
| Return and stock adjustment accruals related to new business and product line expansion | - | 673,000 | 159,000 | 673,000 | |||||||
| Customer allowances related to new business | 2,103,000 | 2,139,000 | 4,562,000 | 6,494,000 | |||||||
| Impact of sales price increases related to tariffs | - | (309,000 | ) | (2,280,000 | ) | (309,000 | ) | ||||
| Core sales and cost in connection with a cancelled contract | - | (6,986,000 | ) | 133,000 | (6,986,000 | ) | |||||
| Adjusted net sales | $ | 127,677,000 | $ | 119,630,000 | $ | 387,670,000 | $ | 343,592,000 |
| Reconciliation of Non-GAAP Financial Measures | Exhibit 3 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | 2018 | |||||||||
| Per Diluted<br><br> <br>Share | Per Diluted<br><br> <br>Share | |||||||||
| GAAP net income (loss) | $ | 865,000 | $ | 0.04 | $ | (3,102,000 | $ | (0.16 | ) | |
| Adjustments: | ||||||||||
| Net sales | ||||||||||
| Return and stock adjustment accruals related to new business and product line expansion | - | - | 673,000 | 0.04 | ||||||
| Customer allowances related to new business | 2,103,000 | 0.11 | 2,139,000 | 0.11 | ||||||
| Impact of sales price increases related to tariffs | - | - | (309,000 | (0.02 | ) | |||||
| Core sales and cost in connection with a cancelled contract | - | - | (6,986,000 | (0.36 | ) | |||||
| Cost of goods sold | ||||||||||
| New product line start-up and ramp-up costs, and transition expenses | 2,148,000 | 0.11 | 2,078,000 | 0.11 | ||||||
| Revaluation - cores on customers’ shelves | 2,395,000 | 0.12 | 2,619,000 | 0.14 | ||||||
| Cost of customer allowances and stock adjustment accruals related to new business and product line expansion | - | - | (51,000 | (0.00 | ) | |||||
| Tariff costs paid for products sold before price increases were effective | - | - | 1,835,000 | 0.10 | ||||||
| Cost of goods sold for cores recorded in connection with a cancelled contract | - | - | 7,750,000 | 0.40 | ||||||
| Operating expenses | ||||||||||
| Acquisition, financing, transition, severance, new business, earn-out accruals from acquisitions, restatement-related fees and other costs | 977,000 | 0.05 | 1,410,000 | 0.07 | ||||||
| Share-based compensation expenses | 1,071,000 | 0.06 | 1,030,000 | 0.05 | ||||||
| Mark-to-market losses (gains) | (3,772,000 | (0.20 | ) | 860,000 | 0.04 | |||||
| Tax effected (a) | (320,000 | (0.02 | ) | (3,263,000 | (0.17 | ) | ||||
| Adjusted net income | $ | 5,467,000 | $ | 0.28 | $ | 6,683,000 | $ | 0.35 |
All values are in US Dollars.
(a) Adjusted net income is calculated by applying an income tax rate of 25.0% to adjusted pre-tax income for the three months ended December 31, 2019 and 2018; this rate may differ from the period’s actual income tax rate
| Reconciliation of Non-GAAP Financial Measures | Exhibit 4 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Nine Months Ended December 31, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | 2018 | |||||||||
| Per Diluted<br><br> <br>Share | Per Diluted<br><br> <br>Share | |||||||||
| GAAP net income (loss) | $ | 903,000 | $ | 0.05 | $ | (5,084,000 | $ | (0.27 | ) | |
| Adjustments: | ||||||||||
| Net sales | ||||||||||
| Return and stock adjustment accruals related to new business and product line expansion | 159,000 | 0.01 | 673,000 | 0.03 | ||||||
| Customer allowances related to new business | 4,562,000 | 0.24 | 6,494,000 | 0.34 | ||||||
| Impact of sales price increases related to tariffs | (2,280,000 | (0.12 | ) | (309,000 | (0.02 | ) | ||||
| Core sales and cost in connection with a cancelled contract | 133,000 | 0.01 | (6,986,000 | (0.36 | ) | |||||
| Cost of goods sold | ||||||||||
| New product line start-up and ramp-up costs, and transition expenses | 5,829,000 | 0.30 | 5,666,000 | 0.29 | ||||||
| Revaluation - cores on customers’ shelves | 9,867,000 | 0.51 | 11,466,000 | 0.60 | ||||||
| Cost of customer allowances and stock adjustment accruals related to new business and product line expansion | (59,000 | (0.00 | ) | (51,000 | (0.00 | ) | ||||
| Tariff costs paid for products sold before price increases were effective | 3,347,000 | 0.17 | 1,835,000 | 0.10 | ||||||
| Cost of goods sold for cores recorded in connection with a cancelled contract | - | - | 7,750,000 | 0.40 | ||||||
| Operating expenses | ||||||||||
| Acquisition, financing, transition, severance, new business, earn-out accruals from acquisitions, restatement-related fees and other costs | 2,040,000 | 0.11 | 3,085,000 | 0.16 | ||||||
| Share-based compensation expenses | 3,112,000 | 0.16 | 3,151,000 | 0.16 | ||||||
| Mark-to-market losses (gains) | (2,507,000 | (0.13 | ) | 1,628,000 | 0.08 | |||||
| Interest | ||||||||||
| Write-off of debt issuance costs | - | 303,000 | 0.02 | |||||||
| Tax effected (a) | (4,963,000 | (0.26 | ) | (8,381,000 | (0.44 | ) | ||||
| Adjusted net income | $ | 20,143,000 | $ | 1.05 | $ | 21,240,000 | $ | 1.10 |
All values are in US Dollars.
(a) Adjusted net income is calculated by applying an income tax rate of 25.0% to adjusted pre-tax income for the nine months ended December 31, 2019 and 2018; this rate may differ from the period’s actual income tax rate
| Reconciliation of Non-GAAP Financial Measures | Exhibit 5 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | 2018 | |||||||||
| $ | Gross Margin | Gross Margin | ||||||||
| GAAP gross profit | $ | 27,661,000 | 22.0 | % | $ | 21,161,000 | 17.0 | % | ||
| Adjustments: | ||||||||||
| Net sales | ||||||||||
| Return and stock adjustment accruals related to new business and product line expansion | - | 673,000 | ||||||||
| Customer allowances related to new business | 2,103,000 | 2,139,000 | ||||||||
| Impact of sales price increases related to tariffs | - | (309,000 | ||||||||
| Core sales and cost in connection with a cancelled contract | - | (6,986,000 | ||||||||
| Cost of goods sold | ||||||||||
| New product line start-up and ramp-up costs, and transition expenses | 2,148,000 | 2,078,000 | ||||||||
| Revaluation - cores on customers’ shelves | 2,395,000 | 2,619,000 | ||||||||
| Cost of customer allowances and stock adjustment accruals related to new business and product line expansion | - | (51,000 | ||||||||
| Tariff costs paid for products sold before price increases were effective | - | 1,835,000 | ||||||||
| Cost of goods sold for cores recorded in connection with a cancelled contract | - | 7,750,000 | ||||||||
| Total adjustments | 6,646,000 | 4.9 | % | 9,748,000 | 8.8 | % | ||||
| Adjusted gross profit | $ | 34,307,000 | 26.9 | % | $ | 30,909,000 | 25.8 | % |
All values are in US Dollars.
| Reconciliation of Non-GAAP Financial Measures | Exhibit 6 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Nine Months Ended December 31, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | 2018 | |||||||||
| Gross Margin | Gross Margin | |||||||||
| GAAP gross profit | $ | 81,817,000 | 21.2 | % | $ | 63,224,000 | 18.4 | % | ||
| Adjustments: | ||||||||||
| Net sales | ||||||||||
| Return and stock adjustment accruals related to new business and product line expansion | 159,000 | 673,000 | ||||||||
| Customer allowances related to new business | 4,562,000 | 6,494,000 | ||||||||
| Impact of sales price increases related to tariffs | (2,280,000 | (309,000 | ||||||||
| Core sales and cost in connection with a cancelled contract | 133,000 | (6,986,000 | ||||||||
| Cost of goods sold | ||||||||||
| New product line start-up and ramp-up costs, and transition expenses | 5,829,000 | 5,666,000 | ||||||||
| Revaluation - cores on customers’ shelves | 9,867,000 | 11,466,000 | ||||||||
| Cost of customer allowances and stock adjustment accruals related to new business and product line expansion | (59,000 | (51,000 | ||||||||
| Tariff costs paid for products sold before price increases were effective | 3,347,000 | 1,835,000 | ||||||||
| Cost of goods sold for cores recorded in connection with a cancelled contract | - | 7,750,000 | ||||||||
| Total adjustments | 21,558,000 | 5.5 | % | 26,538,000 | 7.7 | % | ||||
| Adjusted gross profit | $ | 103,375,000 | 26.7 | % | $ | 89,762,000 | 26.1 | % |
All values are in US Dollars.
| Reconciliation of Non-GAAP Financial Measures | Exhibit 7 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | 2018 | 2019 | 2018 | |||||||||
| GAAP net income (loss) | $ | 865,000 | $ | (3,102,000 | ) | $ | 903,000 | $ | (5,084,000 | ) | ||
| Interest expense, net | 6,879,000 | 5,764,000 | 19,575,000 | 16,538,000 | ||||||||
| Income tax expense (benefit) | 1,502,000 | (1,035,000 | ) | 1,752,000 | (1,301,000 | ) | ||||||
| Depreciation and amortization | 2,400,000 | 1,715,000 | 7,019,000 | 4,933,000 | ||||||||
| EBITDA | $ | 11,646,000 | $ | 3,342,000 | $ | 29,249,000 | $ | 15,086,000 | ||||
| Adjustments: | ||||||||||||
| Net sales | ||||||||||||
| Return and stock adjustment accruals related to new business and product line expansion | - | 673,000 | 159,000 | 673,000 | ||||||||
| Customer allowances related to new business | 2,103,000 | 2,139,000 | 4,562,000 | 6,494,000 | ||||||||
| Impact of sales price increases related to tariffs | - | (309,000 | ) | (2,280,000 | ) | (309,000 | ) | |||||
| Core sales and cost in connection with a cancelled contract | - | (6,986,000 | ) | 133,000 | (6,986,000 | ) | ||||||
| Cost of goods sold | ||||||||||||
| New product line start-up and ramp-up costs, and transition expenses (a) | 2,096,000 | 1,969,000 | 5,703,000 | 5,399,000 | ||||||||
| Revaluation - cores on customers’ shelves | 2,395,000 | 2,619,000 | 9,867,000 | 11,466,000 | ||||||||
| Cost of customer allowances and stock adjustment accruals related to new business and product line expansion | - | (51,000 | ) | (59,000 | ) | (51,000 | ) | |||||
| Tariff costs paid for products sold before price increases were effective | - | 1,835,000 | 3,347,000 | 1,835,000 | ||||||||
| Cost of goods sold for cores recorded in connection with a cancelled contract | - | 7,750,000 | - | 7,750,000 | ||||||||
| Operating expenses | ||||||||||||
| Acquisition, financing, transition (a), severance, new business, earn-out accruals from acquisitions, restatement-related fees and other costs | 947,000 | 1,319,000 | 1,947,000 | 2,825,000 | ||||||||
| Share-based compensation expenses | 1,071,000 | 1,030,000 | 3,112,000 | 3,151,000 | ||||||||
| Mark-to-market losses (gains) | (3,772,000 | ) | 860,000 | (2,507,000 | ) | 1,628,000 | ||||||
| Adjusted EBITDA | $ | 16,486,000 | $ | 16,190,000 | $ | 53,233,000 | $ | 48,961,000 |
(a) Excludes depreciation