Form 8-K MOTORCAR PARTS AMERICA For: Jan 08
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): January 8, 2019
Motorcar Parts of America, Inc.
(Exact name of registrant as specified in its charter)
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New York
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001-33861
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11-2153962
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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2929 California Street, Torrance, CA
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90503
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (310) 212-7910
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:
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☐
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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☐
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Soliciting material pursuant to Rule l4a-12 under the Exchange Act (17 CFR 240.l4a-12)
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☐
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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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. ☐
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Item 2.02.
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Results of Operations and Financial Condition
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On January 8, 2019, Motorcar Parts of America, Inc. (the “Company”) issued a press release announcing its earnings for the fiscal
quarter ended September 30, 2018 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:
Initial return and stock adjustment accruals related to new
business. In connection with new business, the Company may establish initial return and stock adjustment accruals to account for the anticipated increased levels of business activity. The Company excluded these initial 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.
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. 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.
Acquisition, financing, transition, severance, new business and
other costs. The Company has incurred acquisition, financing, transition, severance, new business 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 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.
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Item 9.01.
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Financial Statements and Exhibits.
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The following exhibit is furnished with this Current Report pursuant to Item 2.02:
(d) Exhibits
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Exhibit
No.
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Description
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Press Release, dated January 8, 2019
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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.
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MOTORCAR PARTS OF AMERICA, INC.
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Date: January 8, 2019
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/s/ David Lee
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David Lee
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Chief Financial Officer
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Exhibit 99.1
NEWS RELEASE
| CONTACT: |
Gary S. Maier
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(310) 471-1288
MOTORCAR PARTS OF AMERICA REPORTS FISCAL 2019
SECOND QUARTER RESULTS
-- Record Sales for Quarter and Six Months --
LOS ANGELES, CA – January 8, 2019 – Motorcar Parts
of America, Inc. (Nasdaq: MPAA) today announced results for its fiscal 2019 second quarter ended September 30, 2018 – reflecting record sales for both the
quarter and six months on a reported and adjusted basis.
Net sales for the fiscal 2019 second quarter increased 16.0
percent to $127.9 million from $110.3 million for the same period a year earlier, predominantly as a result of increases in the company’s rotating electrical business.
Adjusted net sales for the fiscal 2019 second quarter
increased 14.5 percent to $130.2 million from $113.7 million a year earlier.
“We are encouraged by our new business wins and revitalization of demand for our products at the consumer level -- both of which support
our optimism and expectations for continued growth,” said Selwyn Joffe, chairman, president and chief executive officer.
In addition, Joffe indicated the company expects strong sales contributions in the next fiscal year from its existing and new product
offerings.
Net income for the fiscal 2019 second quarter was $3.5
million, or $0.18 per diluted share – reflecting the impact of the items listed below compared with $5.6 million, or $0.29 per diluted share, a year ago.
Adjusted net income for the fiscal 2019 second quarter was
$11.5 million, or $0.60 per diluted share, compared with $10.1 million, or $0.52 per diluted share, a year earlier.
The results for the quarter and gross margin were impacted by three items totaling $10.3 million.
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Customer allowances related to new business of $2.2 million
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Up-front one-time costs of $1.2 million related to new business
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Core buyback premium amortization of $1.0 million related to new business (Core buyback premium amortization relates to the refundable premium paid or payable to customers
for the core value in finished goods on their shelves in connection with new business. The company previously recorded the full amount of the core buyback premiums as a reduction to revenue at the inception of a new customer
relationship. As described in “Prior Financial Information” paragraph below, this historical policy was concluded to be a misapplication of GAAP. The company has now revised the application of GAAP, resulting in the amortization of
the full amount of the premium costs over a period, typically ranging from six to eight years).
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(more)
Motorcar Parts of America, Inc.
2-2-2
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The revaluation for cores on customers’ shelves resulted in a non-cash write-down of $6.2 million, which does not affect the reimbursable amount for the full value of cores
on the customers’ shelves should business with the customer be discontinued.
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Transition costs of $1.8 million associated with the expansion of manufacturing and distribution capacity to support increased demand for the company’s existing product
lines and its recently announced new brake product lines.
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Gross profit for the fiscal 2019 second quarter was $25.7
million compared with $26.0 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2019 second quarter was 20.1 percent compared with 23.6 percent a year earlier.
Adjusted gross profit for the fiscal 2019 second quarter was
$36.0 million compared with $32.0 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the three months was 27.6 percent compared with 28.2 percent a year earlier, impacted by higher freight related costs compared with the prior year and stock adjustment accruals for future update orders.
Six-Month Results
Net sales for the fiscal 2019 six-month period increased 7.1 percent to $219.6 million from $205.0 million a year earlier.
Adjusted net sales for the fiscal 2019 six-month period increased 7.1 percent to $224.0 million from $209.2 million last year.
Net loss for the fiscal 2019 six-month period was $2.0 million, or $0.10 per share, compared with net income of $13.4 million, or $0.69 per diluted share, in fiscal 2018.
Adjusted net income for the fiscal 2019 six-month period was $14.6 million, or $0.75 per diluted share, compared with $18.6 million, or $0.96 per diluted share, in fiscal 2018.
(more)
Motorcar Parts of America, Inc.
3-3-3
Gross profit for the fiscal 2019 six-month period was $42.1 million compared with $51.9 million a year earlier. Gross profit as a percentage of net sales for the
fiscal 2019 first half was 19.2 percent compared with 25.3 percent a year earlier.
Adjusted gross profit for the fiscal 2019 six-month period was $58.9 million compared with $60.1 million a year ago. Adjusted gross profit as a percentage of adjusted net
sales for the six months was 26.3 percent compared with 28.7 percent a year earlier, impacted by higher freight related costs compared with the prior year, stock adjustment accruals for future update orders and lower absorption of overhead costs.
New Acquisition Pending
“In addition to the company’s recent acquisition of E&M Power, we expect to close another strategic tuck-in acquisition this
week which enhances our existing product line offerings,” Joffe said.
Updated Fiscal 2019 Guidance
Motorcar Parts of America reaffirms its annual adjusted sales guidance of between 6.5% and 8.5% growth year over year, with
expectations of reaching the higher end. Adjusted gross margin for fiscal 2019 is now estimated to be at the lower end of our guidance of 27.0% to 30.0%.
Stock Repurchase Authorization
Under the authorized share repurchase program, as of September 30, 2018, $15.7 million of the $37.0 million common stock
authorization has been purchased and $21.3 million is available to repurchase shares. Motorcar Parts of America currently has 18.8 million shares outstanding.
Revenue Recognition
Effective April 1, 2018, the company adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, (“ASC 606”) using the full retrospective transition method. As a result, the prior year three and six months ended September 30, 2017 were revised to reflect the adoption of the new revenue recognition accounting standards. The effects of the adoption were a decrease to previously reported revenues for the three and six months ended September 30, 2017 of $592,000 and $136,000, respectively. The revenue changes were accompanied by related changes
to cost of goods sold - a decrease to previously reported cost of goods sold for the three and six months ended September 30, 2017 of $378,000 and $759,000, respectively.
Also, as a result of the adoption of ASC 606 and the resultant changes in
company policy, the effect on the consolidated balance sheets was to create contract asset and contract liability accounts to document those balance sheet items being impacted by the new revenue recognition requirements. Additional information will be available in the company’s Form 10-Q filing later today.
Prior Financial Information
The company has 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
filed later today. 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.
(more)
Motorcar Parts of America, Inc.
4-4-4
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), EBITDA, 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 3:00 p.m. Pacific time on January 8, 2019 through 8:59 p.m. Pacific time on January 15, 2019 by calling (855)-859-2056 (domestic) or (404)-537-3406
(international) and using access code: 6147027.
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 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 equipment for performance, endurance and production testing of alternators, starters, electric
motors, inverters and belt starter generators for both the OE 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 California, Mexico, Malaysia and China, and administrative offices located in California, Tennessee, Mexico, Singapore, Malaysia and Canada. Additional information is available at www.motorcarparts.com.
(more)
Motorcar Parts of America, Inc.
5-5-5
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 2018 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)
(more)
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
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Three Months Ended
September 30,
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Six Months Ended
September 30,
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2018
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2017
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2018
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2017
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(As Adjusted)
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(As Adjusted)
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Net sales
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$
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127,939,000
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$
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110,261,000
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$
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219,607,000
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$
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204,956,000
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Cost of goods sold
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102,228,000
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84,234,000
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177,544,000
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153,077,000
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Gross profit
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25,711,000
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26,027,000
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42,063,000
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51,879,000
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Operating expenses:
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General and administrative
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8,997,000
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8,615,000
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21,088,000
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14,503,000
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Sales and marketing
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4,537,000
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3,457,000
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8,929,000
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6,851,000
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Research and development
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1,784,000
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1,240,000
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3,520,000
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2,242,000
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Total operating expenses
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15,318,000
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13,312,000
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33,537,000
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23,596,000
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Operating income
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10,393,000
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12,715,000
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8,526,000
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28,283,000
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Interest expense, net
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5,699,000
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3,522,000
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10,774,000
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6,836,000
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Income (loss) before income tax expense (benefit)
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4,694,000
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9,193,000
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(2,248,000
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)
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21,447,000
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Income tax expense (benefit)
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1,181,000
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3,598,000
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(266,000
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)
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8,032,000
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Net income (loss)
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$
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3,513,000
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$
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5,595,000
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$
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(1,982,000
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)
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$
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13,415,000
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Basic net income (loss) per share
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$
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0.19
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$
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0.30
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$
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(0.10
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)
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$
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0.72
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Diluted net income (loss) per share
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$
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0.18
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$
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0.29
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$
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(0.10
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)
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$
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0.69
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Weighted average number of shares outstanding:
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Basic
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18,878,674
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18,718,709
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18,887,214
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18,687,179
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Diluted
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19,319,465
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19,356,809
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18,887,214
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19,371,144
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Note: Prior year three and six months ended September 30, 2017 results reflect the adoption of the new
revenue recognition accounting standards. Effective April 1, 2018, the Company adopted Accounting
Standards Codification Topic 606, Revenue from Contracts with Customers ("ASC 606") using the full
retrospective transition method. Additionally, the Company has 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 $2,938,000. For further information, please see the Company's September 30, 2018 Form 10-Q filed later today.
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
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September 30, 2018
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March 31, 2018
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ASSETS
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(Unaudited)
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(As Adjusted)
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Current assets:
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Cash and cash equivalents
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$
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6,175,000
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$
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13,049,000
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Short-term investments
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3,230,000
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2,828,000
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Accounts receivable — net
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56,085,000
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63,174,000
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Inventory— net
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188,287,000
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161,210,000
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Inventory unreturned
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9,100,000
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7,508,000
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Contract assets
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24,272,000
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23,206,000
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Income tax receivable
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11,572,000
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7,972,000
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Prepaid expenses and other current assets
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10,200,000
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8,608,000
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||||||
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Total current assets
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308,921,000
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287,555,000
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||||||
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Plant and equipment — net
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30,512,000
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28,322,000
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||||||
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Long-term deferred income taxes
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7,345,000
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6,698,000
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||||||
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Long-term contract assets
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230,438,000
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222,731,000
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||||||
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Goodwill
|
2,551,000
|
2,551,000
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||||||
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Intangible assets — net
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3,380,000
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3,766,000
|
||||||
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Other assets
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866,000
|
804,000
|
||||||
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TOTAL ASSETS
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$
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584,013,000
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$
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552,427,000
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||||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
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||||||||
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Current liabilities:
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||||||||
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Accounts payable
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$
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92,663,000
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$
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73,273,000
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||||
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Accrued liabilities
|
10,622,000
|
12,048,000
|
||||||
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Customer finished goods returns accrual
|
19,961,000
|
17,805,000
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||||||
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Contract liabilities
|
31,488,000
|
32,603,000
|
||||||
|
Revolving loan
|
52,906,000
|
54,000,000
|
||||||
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Other current liabilities
|
4,970,000
|
4,471,000
|
||||||
|
Current portion of term loan
|
3,685,000
|
3,068,000
|
||||||
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Total current liabilities
|
216,295,000
|
197,268,000
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||||||
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Term loan, less current portion
|
26,032,000
|
13,913,000
|
||||||
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Long-term contract liabilities
|
52,535,000
|
48,183,000
|
||||||
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Long-term deferred income taxes
|
211,000
|
226,000
|
||||||
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Other liabilities
|
6,776,000
|
5,957,000
|
||||||
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Total liabilities
|
301,849,000
|
265,547,000
|
||||||
|
Commitments and contingencies
|
||||||||
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Shareholders’ equity:
|
||||||||
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Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued
|
-
|
-
|
||||||
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Series A junior participating preferred stock; par value $.01 per share, 20,000 shares authorized; none
issued
|
-
|
-
|
||||||
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Common stock; par value $.01 per share, 50,000,000 shares authorized;18,799,477 and 18,893,102 shares
issued and outstanding at September 30, 2018 and March 31, 2018, respectively
|
188,000
|
189,000
|
||||||
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Additional paid-in capital
|
211,593,000
|
213,609,000
|
||||||
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Retained earnings
|
77,274,000
|
78,510,000
|
||||||
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Accumulated other comprehensive loss
|
(6,891,000
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)
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(5,428,000
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)
|
||||
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Total shareholders’ equity
|
282,164,000
|
286,880,000
|
||||||
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
584,013,000
|
$
|
552,427,000
|
||||
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 six months ended September 30, 2018 and 2017. 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 six months ended September 30, 2018 and 2017 are as follows:
| Reconciliation of Non-GAAP Financial Measures |
Exhibit 1
|
|
Three Months Ended September 30,
|
Six Months Ended September 30,
|
|||||||||||||||
|
2018
|
2017
|
2018
|
2017
|
|||||||||||||
|
GAAP Results:
|
(As Adjusted)
|
(As Adjusted)
|
||||||||||||||
|
Net sales
|
$
|
127,939,000
|
$
|
110,261,000
|
$
|
219,607,000
|
$
|
204,956,000
|
||||||||
|
Net income (loss)
|
3,513,000
|
5,595,000
|
(1,982,000
|
)
|
13,415,000
|
|||||||||||
|
Diluted income (loss) per share (EPS)
|
0.18
|
0.29
|
(0.10
|
)
|
0.69
|
|||||||||||
|
Gross margin
|
20.1
|
%
|
23.6
|
%
|
19.2
|
%
|
25.3
|
%
|
||||||||
|
Non-GAAP Adjusted Results:
|
||||||||||||||||
|
Non-GAAP adjusted net sales
|
$
|
130,152,000
|
$
|
113,678,000
|
$
|
223,962,000
|
$
|
209,197,000
|
||||||||
|
Non-GAAP adjusted net income
|
11,540,000
|
10,100,000
|
14,557,000
|
18,602,000
|
||||||||||||
|
Non-GAAP adjusted diluted earnings per share (EPS)
|
0.60
|
0.52
|
0.75
|
0.96
|
||||||||||||
|
Non-GAAP adjusted gross margin
|
27.6
|
%
|
28.2
|
%
|
26.3
|
%
|
28.7
|
%
|
||||||||
|
Non-GAAP adjusted EBITDA
|
$
|
22,534,000
|
$
|
20,295,000
|
$
|
32,771,000
|
$
|
37,830,000
|
||||||||
Note: Prior year three and six months ended September 30, 2017 results reflect the adoption of the new revenue recognition accounting standards. Effective April 1, 2018, the Company adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”) using the full retrospective transition
method. Additionally, the Company has 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 filed later today. 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 September 30,
|
Six Months Ended September 30,
|
|||||||||||||||
|
2018
|
2017
|
2018
|
2017
|
|||||||||||||
|
(As Adjusted)
|
(As Adjusted)
|
|||||||||||||||
|
GAAP net sales
|
$
|
127,939,000
|
$
|
110,261,000
|
$
|
219,607,000
|
$
|
204,956,000
|
||||||||
|
Adjustments:
|
||||||||||||||||
|
Net sales
|
||||||||||||||||
|
Initial return and stock adjustment accruals related to new business
|
-
|
2,496,000
|
-
|
2,496,000
|
||||||||||||
|
Customer allowances related to new business
|
2,213,000
|
921,000
|
4,355,000
|
1,745,000
|
||||||||||||
|
Adjusted net sales
|
$
|
130,152,000
|
$
|
113,678,000
|
$
|
223,962,000
|
$
|
209,197,000
|
||||||||
| Reconciliation of Non-GAAP Financial Measures | Exhibit 3 |
|
Three Months Ended September 30,
|
||||||||||||||||
|
2018
|
2017
|
|||||||||||||||
|
(As Adjusted)
|
||||||||||||||||
|
$
|
Per Diluted
Share
|
$ |
Per Diluted
Share
|
|||||||||||||
|
GAAP net income
|
$
|
3,513,000
|
$
|
0.18
|
$
|
5,595,000
|
$
|
0.29
|
||||||||
|
Adjustments:
|
||||||||||||||||
|
Net sales
|
||||||||||||||||
|
Initial return and stock adjustment accruals related to new business
|
-
|
$
|
-
|
2,496,000
|
$
|
0.13
|
||||||||||
|
Customer allowances related to new business
|
2,213,000
|
$
|
0.11
|
921,000
|
$
|
0.05
|
||||||||||
|
Cost of goods sold
|
||||||||||||||||
|
New product line start-up and ramp-up costs, and transition expenses
|
1,833,000
|
$
|
0.09
|
-
|
$
|
-
|
||||||||||
|
Revaluation - cores on customers’ shelves and inventory step-up amortization
|
6,221,000
|
$
|
0.32
|
2,955,000
|
$
|
0.15
|
||||||||||
|
Cost of customer allowances and stock adjustment accruals related to new business
|
-
|
$
|
-
|
(362,000
|
)
|
$
|
(0.02
|
)
|
||||||||
|
Operating expenses
|
||||||||||||||||
|
Acquisition, financing, transition, severance, new business and other costs
|
1,144,000
|
$
|
0.06
|
236,000
|
$
|
0.01
|
||||||||||
|
Share-based compensation expenses
|
1,180,000
|
$
|
0.06
|
910,000
|
$
|
0.05
|
||||||||||
|
Mark-to-market losses (gains)
|
(1,898,000
|
)
|
$
|
(0.10
|
)
|
(690,000
|
)
|
$
|
(0.04
|
)
|
||||||
|
Tax effected (a)
|
(2,666,000
|
)
|
$
|
(0.14
|
)
|
(1,961,000
|
)
|
$
|
(0.10
|
)
|
||||||
|
Adjusted net income
|
$
|
11,540,000
|
$
|
0.60
|
$
|
10,100,000
|
$
|
0.52
|
||||||||
(a) Adjusted net income is calculated by applying an income tax rate of 25.0% for the three months ended September 30, 2018 and 35.5% for the three months ended September 30, 2017; this rate may differ from the period’s actual income tax rate
| Reconciliation of Non-GAAP Financial Measures | Exhibit 4 |
|
Six Months Ended September 30,
|
||||||||||||||||
|
2018
|
2017
|
|||||||||||||||
|
(As Adjusted)
|
||||||||||||||||
|
$
|
Per Diluted
Share
|
$
|
Per Diluted
Share
|
|||||||||||||
|
GAAP net (loss) income
|
$
|
(1,982,000
|
)
|
$
|
(0.10
|
)
|
$
|
13,415,000
|
$
|
0.69
|
||||||
|
Adjustments:
|
||||||||||||||||
|
Net sales
|
||||||||||||||||
|
Initial return and stock adjustment accruals related to new business
|
-
|
$
|
-
|
2,496,000
|
$
|
0.13
|
||||||||||
|
Customer allowances related to new business
|
4,355,000
|
$
|
0.23
|
1,745,000
|
$
|
0.09
|
||||||||||
|
Cost of goods sold
|
||||||||||||||||
|
New product line start-up and ramp-up costs, and transition expenses
|
3,588,000
|
$
|
0.19
|
-
|
$
|
-
|
||||||||||
|
Revaluation - cores on customers’ shelves and inventory step-up amortization
|
8,847,000
|
$
|
0.46
|
4,305,000
|
$
|
0.22
|
||||||||||
|
Cost of customer allowances and stock adjustment accruals related to new business
|
-
|
$
|
-
|
(362,000
|
)
|
$
|
(0.02
|
)
|
||||||||
|
Operating expenses
|
||||||||||||||||
|
Acquisition, financing, transition, severance, new business and other costs
|
1,675,000
|
$
|
0.09
|
501,000
|
$
|
0.03
|
||||||||||
|
Share-based compensation expenses
|
2,121,000
|
$
|
0.11
|
1,744,000
|
$
|
0.09
|
||||||||||
|
Mark-to-market losses (gains)
|
768,000
|
$
|
0.04
|
(3,035,000
|
)
|
$
|
(0.16
|
)
|
||||||||
|
Interest
|
||||||||||||||||
|
Write-off of debt issuance costs
|
303,000
|
$
|
0.02
|
-
|
$
|
-
|
||||||||||
|
Tax effected (a)
|
(5,118,000
|
)
|
$
|
(0.27
|
)
|
(2,207,000
|
)
|
$
|
(0.11
|
)
|
||||||
|
Adjusted net income
|
$
|
14,557,000
|
$
|
0.75
|
$
|
18,602,000
|
$
|
0.96
|
||||||||
(a) Adjusted net income is calculated by applying an income tax rate of 25.0% for the six months ended September 30, 2018 and 35.5% for the six months ended September 30, 2017; this rate may differ from the period’s actual income tax rate
| Reconciliation of Non-GAAP Financial Measures | Exhibit 5 |
|
Three Months Ended September 30,
|
||||||||||||||||
|
2018
|
2017
|
|||||||||||||||
|
(As Adjusted)
|
||||||||||||||||
|
$
|
Gross Margin
|
$
|
Gross Margin
|
|||||||||||||
|
GAAP gross profit
|
$
|
25,711,000
|
20.1
|
%
|
$
|
26,027,000
|
23.6
|
%
|
||||||||
|
Adjustments:
|
||||||||||||||||
|
Net sales
|
||||||||||||||||
|
Initial return and stock adjustment accruals related to new business
|
-
|
2,496,000
|
||||||||||||||
|
Customer allowances related to new business
|
2,213,000
|
921,000
|
||||||||||||||
|
Cost of goods sold
|
||||||||||||||||
|
New product line start-up and ramp-up costs, and transition expenses
|
1,833,000
|
-
|
||||||||||||||
|
Revaluation - cores on customers’ shelves and inventory step-up amortization
|
6,221,000
|
2,955,000
|
||||||||||||||
|
Cost of customer allowances and stock adjustment accruals related to new business
|
-
|
(362,000
|
)
|
|||||||||||||
|
Total adjustments
|
10,267,000
|
7.5
|
%
|
6,010,000
|
4.6
|
%
|
||||||||||
|
Adjusted gross profit
|
$
|
35,978,000
|
27.6
|
%
|
$
|
32,037,000
|
28.2
|
%
|
||||||||
| Reconciliation of Non-GAAP Financial Measures | Exhibit 6 |
|
Six Months Ended September 30,
|
||||||||||||||||
|
2018
|
2017
|
|||||||||||||||
|
(As Adjusted)
|
||||||||||||||||
|
$
|
Gross Margin
|
$ |
Gross Margin
|
|||||||||||||
|
GAAP gross profit
|
$
|
42,063,000
|
19.2
|
%
|
$
|
51,879,000
|
25.3
|
%
|
||||||||
|
Adjustments:
|
||||||||||||||||
|
Net sales
|
||||||||||||||||
|
Initial return and stock adjustment accruals related to new business
|
-
|
2,496,000
|
||||||||||||||
|
Customer allowances related to new business
|
4,355,000
|
1,745,000
|
||||||||||||||
|
Cost of goods sold
|
||||||||||||||||
|
New product line start-up and ramp-up costs, and transition expenses
|
3,588,000
|
-
|
||||||||||||||
|
Revaluation - cores on customers’ shelves and inventory step-up amortization
|
8,847,000
|
4,305,000
|
||||||||||||||
|
Cost of customer allowances and stock adjustment accruals related to new business
|
-
|
(362,000
|
)
|
|||||||||||||
|
Total adjustments
|
16,790,000
|
7.1
|
%
|
8,184,000
|
3.4
|
%
|
||||||||||
|
Adjusted gross profit
|
$
|
58,853,000
|
26.3
|
%
|
$
|
60,063,000
|
28.7
|
%
|
||||||||
| Reconciliation of Non-GAAP Financial Measures | Exhibit 7 |
|
Three Months Ended September 30,
|
Six Months Ended September 30,
|
|||||||||||||||
|
2018
|
2017
|
2018
|
2017
|
|||||||||||||
|
(As Adjusted)
|
(As Adjusted)
|
|||||||||||||||
|
GAAP net income (loss)
|
$
|
3,513,000
|
$
|
5,595,000
|
$
|
(1,982,000
|
)
|
$
|
13,415,000
|
|||||||
|
Interest expense, net
|
5,699,000
|
3,522,000
|
10,774,000
|
6,836,000
|
||||||||||||
|
Income tax expense (benefit)
|
1,181,000
|
3,598,000
|
(266,000
|
)
|
8,032,000
|
|||||||||||
|
Depreciation and amortization
|
1,632,000
|
1,114,000
|
3,218,000
|
2,153,000
|
||||||||||||
|
EBITDA
|
$
|
12,025,000
|
$
|
13,829,000
|
$
|
11,744,000
|
$
|
30,436,000
|
||||||||
|
Adjustments:
|
||||||||||||||||
|
Net sales
|
||||||||||||||||
|
Initial return and stock adjustment accruals related to new business
|
-
|
2,496,000
|
-
|
2,496,000
|
||||||||||||
|
Customer allowances related to new business
|
2,213,000
|
921,000
|
4,355,000
|
1,745,000
|
||||||||||||
|
Cost of goods sold
|
||||||||||||||||
|
New product line start-up and ramp-up costs, and transition expenses (a)
|
1,736,000
|
-
|
3,430,000
|
-
|
||||||||||||
|
Revaluation - cores on customers’ shelves and inventory step-up amortization
|
6,221,000
|
2,955,000
|
8,847,000
|
4,305,000
|
||||||||||||
|
Cost of customer allowances and stock adjustment accruals related to new business
|
-
|
(362,000
|
)
|
-
|
(362,000
|
)
|
||||||||||
|
Operating expenses
|
||||||||||||||||
|
Acquisition, financing, transition (a), severance, new business and other costs
|
1,057,000
|
236,000
|
1,506,000
|
501,000
|
||||||||||||
|
Share-based compensation expenses
|
1,180,000
|
910,000
|
2,121,000
|
1,744,000
|
||||||||||||
|
Mark-to-market losses (gains)
|
(1,898,000
|
)
|
(690,000
|
)
|
768,000
|
(3,035,000
|
)
|
|||||||||
|
Adjusted EBITDA
|
$
|
22,534,000
|
$
|
20,295,000
|
$
|
32,771,000
|
$
|
37,830,000
|
||||||||
(a) Of the total new product line start-up and ramp-up costs, and transition expenses of $1,833,000 and $3,588,000 for the three and six months ended
September 30, 2018, and transition expenses included in other operating expense adjustments of $1,144,000 and $1,675,000 for the three and six months ended September 30,
2018, $184,000 and $327,000 represents depreciation and amortization expense