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): November 9, 2022
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 November 9, 2022, Motorcar Parts of America, Inc. (the “Company”) issued a press release announcing its earnings for the fiscal quarter ended September 30, 2022 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.
| 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 November 9, 2022 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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: | November 9, 2022 | /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 SECOND QUARTER RESULTS
Reaffirms Fiscal 2023 Guidance
LOS ANGELES, CA – November 9, 2022 – Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2023 second quarter ended September 30, 2022 – reflecting solid demand for aftermarket hard parts, offset by customers delaying orders and supply chain disruptions for critical components.
Fiscal 2023 Second Quarter Results
Net sales for the fiscal 2023 second quarter were $172.5 million -- representing a 6.6 percent increase compared with $161.8 million in the prior year, which excludes $13.7 million of core revenue due to a realignment of inventory at customer distribution centers with sales benefits evolving as product mix changes.
Fiscal second quarter results were sharply impacted by certain customers delaying orders. The bulk of these delayed orders are expected to be shipped by the fiscal 2023 fourth quarter.
Fiscal second quarter results were also impacted by the company’s heavy-duty products, which experienced lower than anticipated sales due in large part to critical component shortages. Sales are expected to increase in the second half of the fiscal year, starting in the current fiscal third quarter.
The company’s diagnostics products also experienced supply chain disruptions for semi-conductor chips, which delayed order shipments to certain EV customers. Sales are expected to increase in the second half of the fiscal year, starting in the current fiscal third quarter.
Order flow for the company’s JBT-1 diagnostic testing equipment for automotive retail stores continues to be robust, with expectations for strong sales contributions from this product in the fiscal second half.
Net loss for the fiscal 2023 second quarter was $6.5 million, or $0.34 per share, compared with net income of $3.7 million, or $0.19 per diluted share, a year ago -- impacted by approximately $5.0 million, or $0.26 per share, of non-cash items, as detailed in Exhibit 1. The company also was impacted by approximately $3.9 million, or $0.20 per share, of other costs, primarily transitory costs related to supply chain disruptions. In addition to the above items, results for the quarter were primarily impacted by unusual supply chain shortages of critical components for the company’s diagnostic products and heavy-duty products, as referenced above.
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Motorcar Parts of America, Inc.
2-2-2
Results for the fiscal second quarter were also impacted by $5.7 million of higher interest expenses compared with the prior year, with price increases expected to help offset higher rates and certain costs.
Prior-year net income of $3.7 million, or $0.19 per diluted share, was impacted by approximately $8.1 million, or $0.41 per diluted share, of non-cash items, including a non-cash loss of $3.9 million, or $0.20 per diluted share on a pre-tax basis, for the foreign exchange impact of lease liabilities and forward contracts, as detailed in Exhibit 1. The company also was impacted by approximately $1.5 million, or $0.08 per diluted share, of other costs, including transitory costs related to supply chain disruptions for the prior year.
Gross profit for the fiscal 2023 second quarter was $26.5 million compared with $36.0 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2023 second quarter was 15.4 percent compared with 20.5 percent a year earlier. Gross margin for the fiscal 2023 second quarter was impacted by $4.3 million, or 2.5 percent, of non-cash items, and $3.7 million, or 2.1 percent, by the transitory supply chain disruptions, as detailed in Exhibit 3. Gross margin for the fiscal 2023 second quarter compared with the prior year was impacted by (i) higher inflationary costs, (ii) changes in product mix, (iii) unusual supply chain shortages of critical components for the company’s diagnostic and heavy-duty products and (iv) the benefit of core revenue in the prior year due to a realignment of inventory at certain customer distribution centers. Gross margin is expected to benefit from certain price increases that went into effect at the end of the fiscal second quarter.
“Despite the inflationary cost environment and the impact on gross margin from order delays due to supply chain challenges primarily for our heavy-duty and diagnostics products, we remain optimistic about our business on a year-over-year basis. We are encouraged by easing supply chain conditions and the demand outlook for our product lines in the second half of the fiscal year,” said Selwyn Joffe, chairman, president, and chief executive officer.
Six-Month Results
Net sales for the fiscal 2023 six-month period were $336.5 million -- representing an 8.3 percent increase compared with $310.8 million in the prior year, which excludes $13.7 million in core revenue due to a realignment of inventory at customer distribution centers with sales benefits evolving as product mix changes.
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Motorcar Parts of America, Inc.
3-3-3
Net loss for the fiscal 2023 six-month period was $6.7 million, or $0.35 per share, compared with net income of $4.5 million, or $0.23 per diluted share, a year ago -- impacted by approximately $9.2 million, or $0.48 per share, of non-cash items, as detailed in Exhibit 2. The company also was impacted by approximately $6.6 million, or $0.35 per share, of other costs, primarily transitory costs related to supply chain disruptions. In addition to the above items, results for the six-month period were primarily impacted by unusual supply chain shortages of critical components for the company’s diagnostic products and heavy-duty products, as referenced above.
Results for the fiscal 2023 six-month period were also impacted by $8.6 million of higher interest expenses compared with the prior year, with price increases expected to help offset higher rates and certain costs.
Gross profit for the fiscal 2023 six-month period was $56.8 million compared with $59.5 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2023 six-month period was 16.9 percent compared with 18.3 percent a year earlier. Gross margin for the fiscal 2023 six-month period was impacted by $7.9 million, or 2.4 percent, of non-cash items, and $6.2 million, or 1.8 percent, by the transitory supply chain disruptions, as detailed in Exhibit 4. Gross margin for the fiscal 2023 six-month period compared with the prior year was impacted by various items discussed above for the quarter.
Fiscal 2023 Second Half Considerations
| • | Reaffirming previously announced guidance -- including year-over-year record sales targets between $680 million and $700 million,<br> representing between 4.6 and 7.6 percent year-over-year growth. |
|---|---|
| • | Expected margin improvement from additional price increases, easing supply chain constraints and further operational efficiencies. |
| --- | --- |
| • | Improved cash flow from enhanced profitability across all product lines. |
| --- | --- |
Fiscal 2023 Guidance Reaffirmed
Motorcar Parts of America expects net sales for its fiscal year ending March 31, 2023 to be between $680 million and $700 million, representing between 4.6 and 7.6 percent year-over-year growth -- ramping up throughout the year. Excluding $13.3 million of core revenue realized in fiscal year 2022 (which the company does not expect in fiscal 2023), net sales are expected to increase between 6.8 and 9.9 percent in fiscal year 2023. Operating income is expected to be between $57 million and $61 million, before the non-cash foreign exchange impact of lease liabilities and forward contracts, the non-cash impact of revaluation of cores on customers’ shelves, and supply chain disruptions and costs related to COVID-19. The company estimates other non-cash items will be approximately $21 million, including core and finished goods premium amortization and share-based compensation, and cash expenses will be approximately $2 million for special EV-related research and development expenses, impacting operating income. The company estimates depreciation and amortization will be approximately $13 million.
Use of Non-GAAP Measure
This press release includes the following non-GAAP measure – EBITDA, which is not a measure of financial performance under GAAP and should not be considered as an alternative to net income as a measure of financial performance. The company believes this non-GAAP measure, when considered together with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to the company’s results of operations. However, this non-GAAP measure has significant limitations in that it does 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 definition and reconciliation of EBITDA to net income, its corresponding GAAP measure, 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 this measure.
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Motorcar Parts of America, Inc.
4-4-4
Earnings Conference Call and Webcast
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 webcast at www.motorcarparts.com or live by calling (888) 440-5584 (domestic) or (646) 960-0457 (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 November 9, 2022 through 8:59 p.m. Pacific time on November 16, 2022 by calling (800) 770-2030 (domestic) or (647) 362-9199 (international) and using access code: 1545314.
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 bearings and hub assemblies, brake calipers, brake pads, brake rotors, brake master cylinders, brake power boosters, turbochargers, and diagnostic testing equipment utilized in imported and domestic passenger vehicles, light trucks, and heavy-duty applications. Its products are sold to automotive retail outlets and the professional repair market throughout the United States, Canada, and Mexico, with facilities located in California, New York, Mexico, Malaysia, China and India, and administrative offices located in California, Tennessee, Mexico, Singapore, Malaysia, and Canada. In addition, the company’s electrical vehicle subsidiary designs and manufactures testing solutions for performance, endurance, and production of multiple components in the electric power train – providing simulation, emulation, and production applications for the electrification of both automotive and aerospace industries, including electric vehicle charging systems. 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 2022 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
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | |||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||
| Net sales | $ | 172,543,000 | $ | 175,548,000 | $ | 336,528,000 | $ | 324,582,000 | ||
| Cost of goods sold | 146,027,000 | 139,597,000 | 279,710,000 | 265,060,000 | ||||||
| Gross profit | 26,516,000 | 35,951,000 | 56,818,000 | 59,522,000 | ||||||
| Operating expenses: | ||||||||||
| General and administrative | 14,846,000 | 14,465,000 | 28,480,000 | 26,951,000 | ||||||
| Sales and marketing | 6,066,000 | 5,520,000 | 11,608,000 | 10,888,000 | ||||||
| Research and development | 2,670,000 | 2,495,000 | 5,783,000 | 4,996,000 | ||||||
| Foreign exchange impact of lease liabilities and forward contracts | 1,082,000 | 3,917,000 | 1,760,000 | 1,384,000 | ||||||
| Total operating expenses | 24,664,000 | 26,397,000 | 47,631,000 | 44,219,000 | ||||||
| Operating income | 1,852,000 | 9,554,000 | 9,187,000 | 15,303,000 | ||||||
| Interest expense, net | 9,283,000 | 3,620,000 | 16,204,000 | 7,561,000 | ||||||
| (Loss) income before income tax (benefit) expense | (7,431,000 | ) | 5,934,000 | (7,017,000 | ) | 7,742,000 | ||||
| Income tax (benefit) expense | (914,000 | ) | 2,251,000 | (325,000 | ) | 3,198,000 | ||||
| Net (loss) income | $ | (6,517,000 | ) | $ | 3,683,000 | $ | (6,692,000 | ) | $ | 4,544,000 |
| Basic net (loss) income per share | $ | (0.34 | ) | $ | 0.19 | $ | (0.35 | ) | $ | 0.24 |
| Diluted net (loss) income per share | $ | (0.34 | ) | $ | 0.19 | $ | (0.35 | ) | $ | 0.23 |
| Weighted average number of shares outstanding: | ||||||||||
| Basic | 19,272,557 | 19,135,356 | 19,197,181 | 19,094,904 | ||||||
| Diluted | 19,272,557 | 19,619,774 | 19,197,181 | 19,638,045 |
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
| March 31, 2022 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 7,611,000 | $ | 23,016,000 | ||
| Short-term investments | 1,989,000 | 2,202,000 | |||
| Accounts receivable — net | 79,861,000 | 85,075,000 | |||
| Inventory | 401,202,000 | 385,504,000 | |||
| Contract assets | 33,861,000 | 27,500,000 | |||
| Prepaid expenses and other current assets | 15,511,000 | 13,688,000 | |||
| Total current assets | 540,035,000 | 536,985,000 | |||
| Plant and equipment — net | 47,853,000 | 51,062,000 | |||
| Operating lease assets | 77,965,000 | 81,997,000 | |||
| Long-term deferred income taxes | 28,150,000 | 26,982,000 | |||
| Long-term contract assets | 313,188,000 | 310,255,000 | |||
| Goodwill and intangible assets — net | 6,046,000 | 7,004,000 | |||
| Other assets | 1,476,000 | 1,413,000 | |||
| TOTAL ASSETS | 1,014,713,000 | $ | 1,015,698,000 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable and accrued liabilities | 169,518,000 | $ | 168,435,000 | ||
| Customer finished goods returns accrual | 27,516,000 | 38,086,000 | |||
| Contract liabilities | 50,213,000 | 42,496,000 | |||
| Revolving loan | 163,000,000 | 155,000,000 | |||
| Other current liabilities | 4,841,000 | 11,930,000 | |||
| Operating lease liabilities | 6,752,000 | 6,788,000 | |||
| Current portion of term loan | 3,670,000 | 3,670,000 | |||
| Total current liabilities | 425,510,000 | 426,405,000 | |||
| Term loan, less current portion | 11,171,000 | 13,024,000 | |||
| Long-term contract liabilities | 181,145,000 | 172,764,000 | |||
| Long-term deferred income taxes | 115,000 | 126,000 | |||
| Long-term operating lease liabilities | 78,359,000 | 80,803,000 | |||
| Other liabilities | 7,715,000 | 7,313,000 | |||
| Total liabilities | 704,015,000 | 700,435,000 | |||
| 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,<br> 20,000 shares authorized; none issued | - | - | |||
| Common stock; par value .01 per share, 50,000,000 shares authorized;<br> 19,423,148 and 19,104,751 shares issued and outstanding at September 30, 2022 <br> and March 31, 2022, respectively | 194,000 | 191,000 | |||
| Additional paid-in capital | 229,489,000 | 227,184,000 | |||
| Retained earnings | 86,262,000 | 92,954,000 | |||
| Accumulated other comprehensive loss | (5,247,000 | ) | (5,066,000 | ) | |
| Total shareholders’ equity | 310,698,000 | 315,263,000 | |||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 1,014,713,000 | $ | 1,015,698,000 |
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 six months ended September 30, 2022 and 2021. 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. A reconciliation of EBITDA to net income is provided below along with information regarding such items.
| Items Impacting Net Income for the Three Months Ended September 30, 2022 and 2021 | Exhibit 1 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended September 30, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2022 | 2021 | |||||||||
| Per Share | Per Share | |||||||||
| GAAP net (loss) income | ) | $ | (0.34 | ) | $ | 0.19 | ||||
| Non-cash items impacting net (loss) income | ||||||||||
| Core and finished goods premium amortization | $ | 0.16 | $ | 0.16 | ||||||
| Revaluation - cores on customers’ shelves | 0.07 | 0.09 | ||||||||
| Share-based compensation expenses and earn-out accruals | 0.06 | 0.10 | ||||||||
| Foreign exchange impact of lease liabilities and forward contracts | 0.06 | 0.20 | ||||||||
| Tax effect (a) | ) | (0.09 | ) | ) | (0.14 | ) | ||||
| Total non-cash items impacting net (loss) income | $ | 0.26 | $ | 0.41 | ||||||
| Cash items impacting net (loss) income | ||||||||||
| Supply chain disruptions and related costs (b) | $ | 0.22 | $ | 0.31 | ||||||
| New product line start-up costs and transition expenses, and severance (c) | 0.05 | 0.05 | ||||||||
| Gain due to realignment of inventory at customer distribution centers | - | ) | (0.25 | ) | ||||||
| Tax effect (a) | ) | (0.07 | ) | ) | (0.03 | ) | ||||
| Total cash items impacting net (loss) income | $ | 0.20 | $ | 0.08 |
All values are in US Dollars.
(a) 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.
(b) For the three-months ended September 30, 2022, consists of $3,654,000 impacting gross profit and $566,000 included in operating expenses.
For the three-months ended September 30, 2021, consists of of $5,452,000 impacting gross profit and $573,000 included in operating expenses.
(c) For the three-months ended September 30, 2022, consists of $921,000 included in operating expenses.
For the three-months ended September 30, 2021, consists of $797,000 included in cost of goods sold and $87,000 included in operating expenses.
| Items Impacting Net Income for the Six Months Ended September 30, 2022 and 2021 | Exhibit 2 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Six Months Ended September 30, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2022 | 2021 | |||||||||
| Per Share | Per Share | |||||||||
| GAAP net (loss) income | ) | $ | (0.35 | ) | $ | 0.23 | ||||
| Non-cash items impacting net (loss) income | ||||||||||
| Core and finished goods premium amortization | $ | 0.32 | $ | 0.30 | ||||||
| Revaluation - cores on customers’ shelves | 0.10 | 0.14 | ||||||||
| Share-based compensation expenses and earn-out accruals | 0.13 | 0.18 | ||||||||
| Foreign exchange impact of lease liabilities and forward contracts | 0.09 | 0.07 | ||||||||
| Tax effect (a) | ) | (0.16 | ) | ) | (0.17 | ) | ||||
| Total non-cash items impacting net (loss) income | $ | 0.48 | $ | 0.51 | ||||||
| Cash items impacting net (loss) income | ||||||||||
| Supply chain disruptions and related costs (b) | $ | 0.38 | $ | 0.58 | ||||||
| New product line start-up costs and transition expenses, and severance (c) | 0.08 | 0.16 | ||||||||
| Gain due to realignment of inventory at customer distribution centers | - | ) | (0.25 | ) | ||||||
| Tax effect (a) | ) | (0.12 | ) | ) | (0.12 | ) | ||||
| Total cash items impacting net (loss) income | $ | 0.35 | $ | 0.36 |
All values are in US Dollars.
(a) 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.
(b) For the six-months ended September 30, 2022, consists of $6,202,000 impacting gross profit and $1,112,000 included in operating expenses.
For the six-months ended September 30, 2021, consists of of $10,213,000 impacting gross profit and $1,109,000 included in operating expenses.
(c) For the six-months ended September 30, 2022, consists of $1,539,000 included in operating expenses.
For the six-months ended September 30, 2021, consists of $2,744,000 included in cost of goods sold and $323,000 included in operating expenses.
| Items Impacting Gross Profit for the Three Months Ended September 30, 2022 and 2021 | Exhibit 3 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended September 30, | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2022 | 2021 | ||||||||
| Gross<br><br> <br>Margin | Gross<br><br> <br>Margin | ||||||||
| GAAP gross profit | 15.4 | % | 20.5 | % | |||||
| Non-cash items impacting gross profit | |||||||||
| Core and finished goods premium amortization | 1.8 | % | 1.8 | % | |||||
| Revaluation - cores on customers’ shelves | 0.7 | % | 1.0 | % | |||||
| Total non-cash items impacting gross profit | 2.5 | % | 2.8 | % | |||||
| Cash items impacting gross profit | |||||||||
| Supply chain disruptions and related costs | 2.1 | % | 3.1 | % | |||||
| New product line start-up costs and transition expenses | - | 0.5 | % | ||||||
| Gain due to realignment of inventory at customer distribution centers (a) | - | ) | -1.3 | % | |||||
| Total cash items impacting gross profit | 2.1 | % | 2.3 | % |
All values are in US Dollars.
(a) gross margin reflecting impact to net sales and cost of goods sold
| Items Impacting Gross Profit for the Six Months Ended September 30, 2022 and 2021 | Exhibit 4 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Six Months Ended September 30, | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2022 | 2021 | ||||||||
| Gross<br><br> <br>Margin | Gross<br><br> <br>Margin | ||||||||
| GAAP gross profit | 16.9 | % | 18.3 | % | |||||
| Non-cash items impacting gross profit | |||||||||
| Core and finished goods premium amortization | 1.8 | % | 1.8 | % | |||||
| Revaluation - cores on customers’ shelves | 0.5 | % | 0.8 | % | |||||
| Total non-cash items impacting gross profit | 2.4 | % | 2.6 | % | |||||
| Cash items impacting gross profit | |||||||||
| Supply chain disruptions and related costs | 1.8 | % | 3.1 | % | |||||
| New product line start-up costs and transition expenses | - | 0.8 | % | ||||||
| Gain due to realignment of inventory at customer distribution centers (a) | - | ) | -0.8 | % | |||||
| Total cash items impacting gross profit | 1.8 | % | 3.2 | % |
All values are in US Dollars.
(a) gross margin reflecting impact to net sales and cost of goods sold
| Items Impacting EBITDA for the Three and Six Months Ended September 30, 2022 and 2021 | Exhibit 5 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2022 | 2021 | 2022 | 2021 | |||||||||
| GAAP net (loss) income | $ | (6,517,000 | ) | $ | 3,683,000 | $ | (6,692,000 | ) | $ | 4,544,000 | ||
| Interest expense, net | 9,283,000 | 3,620,000 | 16,204,000 | 7,561,000 | ||||||||
| Income tax expense | (914,000 | ) | 2,251,000 | (325,000 | ) | 3,198,000 | ||||||
| Depreciation and amortization | 3,090,000 | 3,219,000 | 6,214,000 | 6,364,000 | ||||||||
| EBITDA | $ | 4,942,000 | $ | 12,773,000 | $ | 15,401,000 | $ | 21,667,000 | ||||
| Non-cash items impacting EBITDA | ||||||||||||
| Core and finished goods premium amortization | $ | 3,064,000 | $ | 3,190,000 | $ | 6,108,000 | $ | 5,867,000 | ||||
| Revaluation - cores on customers’ shelves | 1,269,000 | 1,687,000 | 1,841,000 | 2,671,000 | ||||||||
| Share-based compensation expenses and earn-out accruals | 1,251,000 | 1,981,000 | 2,500,000 | 3,524,000 | ||||||||
| Foreign exchange impact of lease liabilities and forward contracts | 1,082,000 | 3,917,000 | 1,760,000 | 1,384,000 | ||||||||
| Total non-cash items impacting EBITDA | $ | 6,666,000 | $ | 10,775,000 | $ | 12,209,000 | $ | 13,446,000 | ||||
| Cash items impacting EBITDA | ||||||||||||
| Supply chain disruptions and related costs | $ | 4,220,000 | $ | 6,025,000 | $ | 7,314,000 | $ | 11,322,000 | ||||
| New product line start-up costs and transition expenses, and severance (a) | 921,000 | 820,000 | 1,539,000 | 2,836,000 | ||||||||
| Gain due to realignment of inventory at customer distribution centers | - | (4,862,000 | ) | - | (4,862,000 | ) | ||||||
| Total cash items impacting EBITDA | $ | 5,141,000 | $ | 1,983,000 | $ | 8,853,000 | $ | 9,296,000 |
(a) Excludes depreciation, which is included in the depreciation and amortization line item.