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): June 15, 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 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 June 15, 2020, Motorcar Parts of America, Inc. (the “Company”) issued a press release announcing its earnings for the fiscal quarter and year ended March 31, 2020 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 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 business. 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 as a supplement 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:
New product line start-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. 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, and is not used by management to assess the profitability of its business operations.
(Income) loss related to under return of cores. The Remanufactured Core value is recorded as a net revenue based upon the estimate of Used Cores that will not be returned by the customer for credit. The Company excluded this (income) loss related to under return of cores to be consistent with the Company’s exclusion for the revaluation of cores on customers’ shelves, as explained above.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
The following exhibit is furnished with this Current Report pursuant to Item 2.02:
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release, dated June 15, 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: June 15, 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
FOURTH QUARTER AND YEAR-END RESULTS
-- Sales up 13.3 Percent for Record Year; Positive Annual Cash Flow Reflecting Strong Second Half --
LOS ANGELES, CA – June 15, 2020 – Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2020 fourth quarter and year ended March 31, 2020 -- reflecting generation of cash flow from operations of $18.8 million for the fiscal year and gross margin improvement.
Net sales for the fiscal 2020 fourth quarter increased 16.8 percent to a record $150.7 million from $129.1 million for the same period a year earlier.
Net loss for the fiscal 2020 fourth quarter was $8.2 million, or $0.43 per share, compared with a net loss of $2.8 million, or $0.15 per share, a year ago. Results for the fiscal 2020 fourth quarter were impacted by items totaling approximately $25.8 million on a pre-tax basis, or $1.02 per share on a tax-effected basis, as detailed in Exhibit 1. The $25.8 million includes non-cash items of $23.0 million, primarily consisting of the re-measurement of the company’s Mexico lease liabilities and its forward foreign exchange contracts due to the significant devaluation in the Mexican Peso, and transition expenses of $2.8 million related to the expansion of the company’s footprint in Mexico.
The net loss for the prior-year period was impacted by items totaling approximately $17.2 million on a pre-tax basis, or $0.70 per share on a tax-effected basis, as detailed in Exhibit 1. The company has decided to eliminate its reporting of certain non-GAAP financial measures. For information about items that impacted the results, see Exhibits 1 through 5.
“Notwithstanding the global pandemic, which began to impact the automotive aftermarket in mid-March, we achieved record sales and generated strong cash flow from operations. While the sharp decline in the value of the Mexican peso US dollar exchange rate resulted in large non-cash expenses, the underlying operating results for the company are strong,” said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.
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| Motorcar Parts of America, Inc.<br><br> <br>2-2-2 |
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Joffe noted the facilities expansion in Mexico and the company’s brake caliper launch are rapidly nearing completion, and as such the transition costs will be substantially eliminated by the end of this fiscal year.
Gross profit for the fiscal 2020 fourth quarter was $36.6 million compared with $26.0 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2020 fourth quarter was 24.3 percent compared with 20.1 percent a year earlier.
Adjusted gross profit for the fiscal 2020 fourth quarter was $40.2 million compared with $36.6 million a year ago. Adjusted gross profit as a percentage of net sales for the three months was 26.7 percent compared with 28.3 percent a year earlier, as detailed in Exhibit 3.
Gross profit and adjusted gross profit for the fiscal 2020 fourth quarter were negatively impacted by 0.6 percent due to core buyback premium amortization. Gross profit and adjusted gross profit for the prior-year period were also impacted by several items as detailed in Exhibit 3, totaling 2.4 percent.
Twelve-Month Results
Net sales for fiscal 2020 increased 13.3 percent to a record $535.8 million from $472.8 million a year earlier.
Net loss for fiscal 2020 was $7.3 million, or $0.39 per share, compared with a net loss of $7.8 million, or $0.42 per share, a year ago. Results for fiscal 2020 were impacted by approximately $50.0 million on a pre-tax basis, or $1.99 per share on a tax-effected basis, as detailed in Exhibit 2. The $50.0 million includes non-cash items of $37.7 million -- consisting of non-cash, mark-to-market expenses related to the significant devaluation in the Mexican Peso and revaluation of cores on customers’ shelves. In addition, the items totaling $50.0 million include $12.3 million primarily due to transition expenses related to the expansion of the company’s footprint in Mexico.
The net loss for the prior-year period was impacted by items totaling approximately $51.9 million on a pre-tax basis, or $2.08 per share on a tax-effected basis, detailed in Exhibit 2.
Gross profit for fiscal 2020 was $118.4 million compared with $89.2 million a year earlier. Gross profit as a percentage of net sales for fiscal 2020 was 22.1 percent compared with 18.9 percent a year earlier.
Adjusted gross profit for fiscal 2020 was $135.9 million compared with $117.2 million a year ago. Adjusted gross profit as a percentage of net sales for fiscal 2020 was 25.4 percent compared with 24.8 percent a year earlier, as detailed in Exhibit 4.
Gross profit and adjusted gross profit for fiscal 2020 were negatively impacted by core buyback premium amortization, customer allowances and return accruals related to new business, and the impact of tariff costs before being passed through to customers. This negatively affected adjusted gross margins by a combined 1.2 percent.
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| Motorcar Parts of America, Inc.<br><br> <br>3-3-3 |
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Gross profit and adjusted gross profit for the prior fiscal year were negatively impacted by several items detailed in Exhibit 4, totaling 2.7 percent.
Joffe emphasized the company’s ongoing commitment to being socially responsible, particularly during this challenging period. He highlighted that one of the company’s many initiatives includes its food programs for employees and members of the community. “We should never lose sight of our individual and collective responsibilities, particularly in times of crisis, and we always strive to nurture this spirit in our day-to-day activities,” Joffe said.
FISCAL 2021 OUTLOOK
After record sales and a strong end to fiscal 2020, April brought a sharp decrease in demand, as home sheltering took effect across the country. The company implemented a variety of safety and cost-savings initiatives to proactively address the crisis, while at the same time remained prepared for an anticipated resumption of demand. Industry reports indicate that sales of hard parts have increased substantially over the past 45 days, indicating that we may have experienced the low point.
Joffe noted it is encouraging that the company’s sales improved significantly in May, and June is trending nicely.
“Our industry has proven to be resilient and we remain committed to our strategic plans for growth and profitability focusing on excellent returns to our shareholders. However, the company believes it is prudent at this time to not provide annual sales and gross margin guidance.
“Clearly the past few months have been a challenging period for our company, our employees and their families. We are tremendously appreciative of everyone’s contributions and the dedicated focus on providing essential automotive aftermarket products under extraordinary circumstances. Our employees have exhibited enormous bravery, commitment, and innovation to ensure the safety of our entire team. They have accomplished this without compromising our commitment to our customers that they receive their orders with the quality and promptness they expect from MPA. These people are true heroes and we will continue with our utmost commitment and social responsibility to this team, their families, and our customers.
“We are an essential supplier in the $125 billion hard parts industry and well-positioned for growth in the aftermarket industry, and especially proud to play an important role in keeping vehicles of all kinds on the road,” said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.
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| Motorcar Parts of America, Inc.<br><br> <br>4-4-4 |
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Use of Non-GAAP Measures
This press release includes the following non-GAAP measures - adjusted gross profit, adjusted gross margin and EBITDA, which are not measures of financial performance under GAAP, and should not be considered as alternatives to gross profit, gross profit margin or net loss as a measure of financial performance. The company has decided to eliminate its reporting of other non-GAAP financial measures and instead provide additional information about items that impact its results. 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 the costs and other items associated with the operation of the company’s business as determined in accordance with GAAP. In addition, the company’s non-GAAP measures may be calculated differently and are therefore not comparable to similar measures by other companies. 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 gross profit, adjusted gross margin and EBITDA 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 measures.
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 (833)-968-1924 (domestic) or (825)-312-2355 (international). For those who are not available to listen to the live broadcast, the call will be archived 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 June 15, 2020 through 8:59 p.m. Pacific time on June 23, 2020 by calling (800)-585-8367 (domestic) or (416)-621-4642 (international) and using access code: 2892708.
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.
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| Motorcar Parts of America, Inc.<br><br> <br>5-5-5 |
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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 2020 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.
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(Financial tables follow)
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MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
| Three Months Ended March 31, | Twelve Months Ended March 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| (Unaudited) | ||||||||||||
| Net sales | $ | 150,735,000 | $ | 129,077,000 | $ | 535,831,000 | $ | 472,797,000 | ||||
| Cost of goods sold | 114,152,000 | 103,127,000 | 417,431,000 | 383,623,000 | ||||||||
| Gross profit | 36,583,000 | 25,950,000 | 118,400,000 | 89,174,000 | ||||||||
| Operating expenses: | ||||||||||||
| General and administrative | 34,522,000 | 12,553,000 | 71,425,000 | 45,972,000 | ||||||||
| Sales and marketing | 5,047,000 | 5,464,000 | 21,037,000 | 19,542,000 | ||||||||
| Research and development | 2,506,000 | 2,440,000 | 9,200,000 | 8,014,000 | ||||||||
| Total operating expenses | 42,075,000 | 20,457,000 | 101,662,000 | 73,528,000 | ||||||||
| Operating (loss) income | (5,492,000 | ) | 5,493,000 | 16,738,000 | 15,646,000 | |||||||
| Interest expense, net | 5,464,000 | 6,689,000 | 25,039,000 | 23,227,000 | ||||||||
| Loss before income tax (benefit) expense | (10,956,000 | ) | (1,196,000 | ) | (8,301,000 | ) | (7,581,000 | ) | ||||
| Income tax (benefit) expense | (2,763,000 | ) | 1,569,000 | (1,011,000 | ) | 268,000 | ||||||
| Net loss | $ | (8,193,000 | ) | $ | (2,765,000 | ) | $ | (7,290,000 | ) | $ | (7,849,000 | ) |
| Basic net loss per share | $ | (0.43 | ) | $ | (0.15 | ) | $ | (0.39 | ) | $ | (0.42 | ) |
| Diluted net loss per share | $ | (0.43 | ) | $ | (0.15 | ) | $ | (0.39 | ) | $ | (0.42 | ) |
| Weighted average number of shares outstanding: | ||||||||||||
| Basic | 18,967,865 | 18,814,133 | 18,913,788 | 18,849,909 | ||||||||
| Diluted | 18,967,865 | 18,814,133 | 18,913,788 | 18,849,909 |
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
| March 31, 2019 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 49,616,000 | $ | 9,911,000 | ||
| Short-term investments | 850,000 | 3,273,000 | |||
| Accounts receivable — net | 91,748,000 | 56,015,000 | |||
| Inventory — net | 225,659,000 | 233,726,000 | |||
| Inventory unreturned | 9,021,000 | 8,469,000 | |||
| Contract assets | 20,332,000 | 22,183,000 | |||
| Income tax receivable | 3,282,000 | 10,009,000 | |||
| Prepaid expenses and other current assets | 8,608,000 | 9,296,000 | |||
| Total current assets | 409,116,000 | 352,882,000 | |||
| Plant and equipment — net | 44,957,000 | 35,151,000 | |||
| Operating lease assets | 53,029,000 | - | |||
| Long-term deferred income taxes | 18,950,000 | 9,746,000 | |||
| Long-term contract assets | 239,540,000 | 221,876,000 | |||
| Goodwill | 3,205,000 | 3,205,000 | |||
| Intangible assets — net | 6,393,000 | 8,431,000 | |||
| Other assets | 1,839,000 | 1,071,000 | |||
| TOTAL ASSETS | 777,029,000 | $ | 632,362,000 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable | 78,664,000 | $ | 92,461,000 | ||
| Accrued liabilities | 16,419,000 | 14,604,000 | |||
| Customer finished goods returns accrual | 25,326,000 | 22,615,000 | |||
| Contract liabilities | 27,911,000 | 30,599,000 | |||
| Revolving loan | 152,000,000 | 110,400,000 | |||
| Other current liabilities | 9,390,000 | 4,990,000 | |||
| Operating lease liabilities | 5,104,000 | - | |||
| Current portion of term loan | 3,678,000 | 3,685,000 | |||
| Total current liabilities | 318,492,000 | 279,354,000 | |||
| Term loan, less current portion | 20,462,000 | 24,187,000 | |||
| Long-term contract liabilities | 92,101,000 | 40,889,000 | |||
| Long-term deferred income taxes | 79,000 | 257,000 | |||
| Long-term operating lease liabilities | 61,425,000 | - | |||
| Other liabilities | 8,950,000 | 7,920,000 | |||
| Total liabilities | 501,509,000 | 352,607,000 | |||
| Commitments and contingencies | |||||
| Shareholders' equity: | |||||
| Preferred stock; par value .01 per share, 5,000,000 shares authorized; none issued | - | - | |||
| Series A junior participating preferred stock; par value .01 per share, 20,000 shares authorized; none issued | - | - | |||
| Common stock; par value .01 per share, 50,000,000 shares authorized; 18,969,380 and 18,817,400 shares issued and outstanding at March 31, 2020 and 2019, respectively | 190,000 | 188,000 | |||
| Additional paid-in capital | 218,581,000 | 215,047,000 | |||
| Retained earnings | 64,117,000 | 71,407,000 | |||
| Accumulated other comprehensive loss | (7,368,000 | ) | (6,887,000 | ) | |
| Total shareholders' equity | 275,520,000 | 279,755,000 | |||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 777,029,000 | $ | 632,362,000 |
All values are in US Dollars.
Additional Information and 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 additional information and non-GAAP financial measures for the three and twelve months ended March 31, 2020 and 2019. Among other things, the company uses such additional information and non-GAAP adjusted financial measures in addition to and together with corresponding GAAP measures to help analyze the performance of its business.
The company believes this information helps provide a more complete understanding of the company's results of operations and the factors and trends affecting the company's business. However, this information should be considered as a supplement to, and not as a substitute for, or superior to, information contained in the company’s financial statements prepared in accordance with GAAP. In addition, the company’s non-GAAP measures may be calculated differently and are therefore not comparable to similar measures by other companies.
The company defines EBITDA as earnings before interest, taxes, depreciation, and amortization. The Company is no longer disclosing an Adjusted EBITDA financial measure and is instead providing information about items that could affect EBITDA. A reconciliation of EBITDA to net loss is provided below along with information regarding such items.
| Items Impacting Net Loss for the Three Months Ended March 31, 2020 | Exhibit 1 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended March 31, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 | 2019 | |||||||||
| Per Share | Per Share | |||||||||
| GAAP net loss | ) | $ | (0.43 | ) | ) | $ | (0.15 | ) | ||
| Items impacting net loss | ||||||||||
| Customer allowances, return accruals and changeover costs (a) related to new business and product line expansion, net of costs | ) | (0.00 | ) | 0.12 | ||||||
| Core buy-back premium amortization | 0.05 | 0.06 | ||||||||
| New product line start-up costs and transition expenses (b) | 0.15 | 0.18 | ||||||||
| Revaluation - cores on customers' shelves | 0.05 | 0.39 | ||||||||
| Inventory step-up amortization | - | 0.01 | ||||||||
| Acquisition costs and earn-out accruals, financing, severance, and restatement-related fees | ) | (0.03 | ) | 0.07 | ||||||
| Share-based compensation expenses | 0.05 | 0.13 | ||||||||
| Mark-to-market losses (gains) | 1.09 | ) | (0.03 | ) | ||||||
| Tax effect (c) | ) | (0.34 | ) | ) | (0.23 | ) |
All values are in US Dollars.
(a) Includes changeover costs related to new business of $301,000 recorded in operating expenses for the three months ended March 31, 2019.
(b) Consists of $2,508,000 included in cost of goods sold and $308,000 included in operating expenses for the three months ended March 31, 2020 and $2,512,000 included in cost of goods sold and $872,000 included in operating expenses for the three months ended March 31, 2019.
(c) Tax effect is calculated by applying an income tax rate of 25.0% to items listed above; this rate may differ from the period's actual income tax rate. Historically, the company calculated the tax impact by applying an income tax rate of 25.0% to adjusted pre-tax income; if calculated on that basis, the tax effect would have been ($6,483,000) or ($0.34) per share and ($2,439,000) or ($0.13) per share for three months ended March 31, 2020 and 2019, respectively.
| Items Impacting Net Loss for the Twelve Months Ended March 31, 2020 | Exhibit 2 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Twelve Months Ended March 31, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 | 2019 | |||||||||
| Per Share | Per Share | |||||||||
| GAAP net loss | ) | $ | (0.39 | ) | ) | $ | (0.42 | ) | ||
| Items impacting net loss | ||||||||||
| Customer allowances, return accruals and changeover costs (a) related to new business and product line expansion, net of costs | 0.06 | 0.37 | ||||||||
| Core buy-back premium amortization | 0.24 | 0.22 | ||||||||
| Impact of tariff costs before being passed through to customers | 0.06 | 0.08 | ||||||||
| Loss in connection with a cancelled contract | 0.01 | 0.04 | ||||||||
| New product line start-up costs and transition expenses (b) | 0.54 | 0.56 | ||||||||
| Revaluation - cores on customers' shelves | 0.57 | 1.00 | ||||||||
| Inventory step-up amortization | - | 0.01 | ||||||||
| Acquisition costs and earn-out accruals, financing, severance, and restatement-related fees | ) | (0.01 | ) | 0.12 | ||||||
| Share-based compensation expenses | 0.22 | 0.30 | ||||||||
| Mark-to-market losses (gains) | 0.96 | 0.05 | ||||||||
| Write-off of debt issuance costs | - | 0.02 | ||||||||
| Tax effect (c) | ) | (0.66 | ) | ) | (0.69 | ) |
All values are in US Dollars.
(a) Includes changeover costs related to new business of $112,000 and $865,000 recorded in operating expenses for the twelve months ended March 31, 2020 and 2019, respectively.
(b) Consists of $8,337,000 included in cost of goods sold and $1,944,000 included in operating expenses for the twelve months ended March 31, 2020 and $8,178,000 included in cost of goods sold and $2,350,000 included in operating expenses for the twelve months ended March 31, 2019.
(c) Tax effect is calculated by applying an income tax rate of 25.0% to items listed above; this rate may differ from the period's actual income tax rate. Historically, the company calculated the tax impact by applying an income tax rate of 25.0% to adjusted pre-tax income; if calculated on that basis, the tax effect would have been ($11,446,000) or ($0.59) per share and ($10,821,000) or ($0.56) per share for twelve months ended March 31, 2020 and 2019, respectively.
| Items Impacting Gross Profit for the Three Months Ended March 31, 2020 | Exhibit 3 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended March 31, | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 | 2019 | ||||||||
| Gross Margin | Gross Margin | ||||||||
| GAAP gross profit | 24.3 | % | 20.1 | % | |||||
| Adjustments: | |||||||||
| New product line start-up costs and transition expenses | 1.7 | % | 1.9 | % | |||||
| Revaluation - cores on customers' shelves | 0.6 | % | 5.7 | % | |||||
| Loss related to under return of cores | 0.1 | % | 0.6 | % | |||||
| Total adjustments | 2.4 | % | 8.2 | % | |||||
| Adjusted gross profit (a) | 26.7 | % | 28.3 | % | |||||
| Other items not adjusted | |||||||||
| Customer allowances and return accruals related to new business and product line expansion, net of costs | ) | 0.0 | % | 1.5 | % | ||||
| Core buy-back premium amortization | 0.6 | % | 0.8 | % | |||||
| Inventory step-up amortization | - | 0.1 | % |
All values are in US Dollars.
(a) Adjusted gross margin is based on GAAP net sales; historically, the company calculated the adjusted gross margin percentage based on adjusted net sales, which it no longer utilize.
| Items Impacting Gross Profit for the Twelve Months Ended March 31, 2020 | Exhibit 4 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Twelve Months Ended March 31, | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 | 2019 | ||||||||
| Gross Margin | Gross Margin | ||||||||
| GAAP gross profit | 22.1 | % | 18.9 | % | |||||
| Adjustments: | |||||||||
| New product line start-up costs and transition expenses | 1.6 | % | 1.7 | % | |||||
| Revaluation - cores on customers' shelves | 2.0 | % | 4.0 | % | |||||
| (Income) loss related to under return of cores | ) | -0.3 | % | 0.2 | % | ||||
| Total adjustments | 3.3 | % | 5.9 | % | |||||
| Adjusted gross profit (a) | 25.4 | % | 24.8 | % | |||||
| Other items not adjusted | |||||||||
| Customer allowances and return accruals related to new business and product line expansion, net of costs | 0.2 | % | 1.3 | % | |||||
| Core buy-back premium amortization | 0.8 | % | 0.9 | % | |||||
| Impact of tariff costs before being passed through to customers | 0.2 | % | 0.3 | % | |||||
| Loss in connection with a cancelled contract | 0.0 | % | 0.2 | % | |||||
| Inventory step-up amortization | 0.0 | % |
All values are in US Dollars.
(a) Adjusted gross margin is based on GAAP net sales; historically, the company calculated the adjusted gross margin percentage based on adjusted net sales, which it no longer utilize.
| Items Impacting EBITDA for the Three and Twelve Months Ended March 31, 2020 | Exhibit 5 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended March 31, | Twelve Months Ended March 31, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 | 2019 | 2020 | 2019 | |||||||||
| GAAP net loss | $ | (8,193,000 | ) | $ | (2,765,000 | ) | $ | (7,290,000 | ) | $ | (7,849,000 | ) |
| Interest expense, net | 5,464,000 | 6,689,000 | 25,039,000 | 23,227,000 | ||||||||
| Income tax (benefit) expense | (2,763,000 | ) | 1,569,000 | (1,011,000 | ) | 268,000 | ||||||
| Depreciation and amortization | 2,542,000 | 2,396,000 | 9,561,000 | 7,329,000 | ||||||||
| EBITDA | $ | (2,950,000 | ) | $ | 7,889,000 | $ | 26,299,000 | $ | 22,975,000 | |||
| Items impacting EBITDA | ||||||||||||
| Customer allowances, return accruals and changeover costs related to new business and product line expansion, net of costs | (54,000 | ) | 2,260,000 | 1,177,000 | 6,907,000 | |||||||
| Core buy-back premium amortization | 958,000 | 1,093,000 | 4,501,000 | 4,126,000 | ||||||||
| Impact of tariff costs before being passed through to customers | - | - | 1,067,000 | 1,526,000 | ||||||||
| Loss in connection with a cancelled contract | - | - | 133,000 | 764,000 | ||||||||
| New product line start-up costs and transition expenses (a) | 2,752,000 | 3,095,000 | 9,998,000 | 9,712,000 | ||||||||
| Revaluation - cores on customers' shelves | 932,000 | 7,377,000 | 10,799,000 | 18,843,000 | ||||||||
| Inventory step-up amortization | - | 104,000 | - | 104,000 | ||||||||
| Acquisition costs and earn-out accruals, financing, severance, and restatement-related fees | (553,000 | ) | 1,253,000 | (261,000 | ) | 2,296,000 | ||||||
| Share-based compensation expenses | 1,029,000 | 2,413,000 | 4,141,000 | 5,564,000 | ||||||||
| Mark-to-market losses (gains) | 20,708,000 | (656,000 | ) | 18,201,000 | 972,000 |
(a) Excludes depreciation, which is included in the depreciation and amortization line item.