UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 


Form 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 9, 2018
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:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o
Soliciting material pursuant to Rule l4a-12 under the Exchange Act (17 CFR 240.l4a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
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.
 


Item 2.02.
Results of Operations and Financial Condition

On February 9, 2018, Motorcar Parts of America, Inc. (the “Company”) issued a press release announcing its earnings for the fiscal quarter ended December 31, 2017 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.
 
Lower of cost or net realizable value revaluation- cores on customers' shelves and inventory step-up amortization. On a quarterly basis, the Company revalues long-term core inventory based on lower of cost or net realizable value in accordance with the Company’s accounting policies. The impact of this revaluation is reflected in cost of goods sold. The Company excluded the lower of cost or net realizable value 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.

Legal, severance, acquisition, financing, transition and other costs. The Company has incurred legal costs related to discontinued subsidiaries and a settlement payment related to a claim by an investment bank. Additionally, the Company has incurred severance, acquisition, financing, transition 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.
 
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
 
Press Release, dated February 9, 2018
 

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
MOTORCAR PARTS OF AMERICA, INC.
 
 
 
Date: February 9, 2018
/s/ David Lee
 
 
David Lee
 
 
Chief Financial Officer
 
 



Exhibit 99.1
 
NEWS RELEASE
CONTACT:  
Gary S. Maier
 
(310) 471-1288

MOTORCAR PARTS OF AMERICA REPORTS FISCAL 2018
THIRD QUARTER RESULTS

--Current Fourth Quarter Sales Outlook Very Favorable--

LOS ANGELES, CA –February 9, 2018 – Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2018 third quarter and nine-months -- reflecting slower than expected sales due to unusually soft demand in the industry and customer inventory reduction programs, with more robust sales activity in the current fourth quarter.
 
Net sales for the fiscal 2018 third quarter were $100.1 million compared with $112.6 million for the same period a year earlier.  The company’s sales and profit performance for the prior fiscal third quarter reflects the benefits of recognizing a $9.3 million revenue pick-up due to a change in estimate for stock adjustment returns. Additional details are included in the attached financial tables. Despite market-share increases, the company’s sales for the quarter were soft due to lower orders and customer inventory reduction initiatives, as noted above, both of which now appear to be reversing.
 
All results labeled as “adjusted” in this press release are non-GAAP measures as discussed more fully below under the heading “Use of Non-GAAP Measures.”
 
Adjusted net sales for the fiscal 2018 third quarter were $103.4 million compared with $112.9 million a year earlier.
 
Net loss for the fiscal 2018 third quarter was $6.8 million, or $0.36 loss per share, compared with net income of $11.1 million, or $0.57 per diluted share, a year ago.  The net loss includes a $6.3 million, or $0.33 per share, non-cash book tax charge and a separate transition tax charge of approximately $545,000, or $0.03 per share, payable over eight years, both of which relate to the recently enacted Tax Cuts and Jobs Act (“Tax Reform Act”).
 
Adjusted net income for the fiscal 2018 third quarter was $6.7 million, or $0.34 per diluted share, compared with $11.7 million, or $0.60 per diluted share, in the same period a year earlier.
 
(more)
 

Motorcar Parts of America, Inc.
2-2-2
 
Gross profit for the fiscal 2018 third quarter was $22.5 million compared with $32.4 million a year earlier.  Gross profit as a percentage of net sales for the fiscal 2018 third quarter was 22.5 percent compared with 28.7 percent a year earlier – primarily reflecting the impact of customer allowances related to new business, as well as higher returns as a percentage of sales, lower overhead absorption, and product mix.
 
Adjusted gross profit for the fiscal 2018 third quarter was $28.8 million compared with $33.9 million a year ago.  Adjusted gross profit as a percentage of adjusted net sales for the three months was 27.9 percent compared with 30.1 percent a year earlier.  The current quarter adjusted gross profit as a percentage of adjusted net sales was impacted by higher returns as a percentage of adjusted sales, lower overhead absorption, and product mix.
 
Net sales for the fiscal 2018 nine-month period were $307.0 million compared with $306.8 million a year earlier.  As noted above, the company’s sales and profit performance for the prior year period reflects the benefits of recognizing a $9.3 million revenue pick-up due to a change in estimate for stock adjustment returns.
 
Adjusted net sales for the fiscal 2018 nine-month period were $312.7 million compared with $319.1 million last year.
 
Net income for the fiscal 2018 nine-month period was $7.1 million, or $0.37 per diluted share, compared with $27.8 million, or $1.43 per diluted share, in fiscal 2017. Net income includes a $6.3 million, or $0.32 per diluted share, non-cash book tax charge and a separate transition tax charge of approximately $545,000, or $0.03 per diluted share, payable over eight years, both of which relate to the recently enacted Tax Reform Act.
 
Adjusted net income for the fiscal 2018 nine-month period was $24.7 million, or $1.27 per diluted share, compared with $34.3 million, or $1.77 per diluted share, in fiscal 2017.
 
Gross profit for the fiscal 2018 nine-month period was $75.5 million compared with $83.4 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2018 nine-month period was 24.6 percent compared with 27.2 percent a year earlier – reflecting the impact of customer allowances and return accruals related to new business, higher returns as a percentage of sales and lower overhead absorption.
 
Adjusted gross profit for the fiscal 2018 nine-month period was $88.3 million compared with $98.7 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the nine months was 28.2 percent compared with 30.9 percent a year earlier.  Adjusted gross profit as a percentage of adjusted net sales for the current nine-month period was impacted by higher returns as a percentage of adjusted sales and lower overhead absorption.
 
“We were disappointed in our results for the quarter, especially since we continued to gain market share across all of our product lines.  While we incurred additional expenses related to new business wins, we did not realize the full benefit of the associated revenues during the quarter.  This was due to various factors, including reduced customer orders, which industry observers attribute to mild weather which seems to have reversed in our current fourth quarter.  In addition, the business was impacted by customer inventory reduction initiatives.  As a result, we were negatively impacted by under-absorption of overhead costs.  We are now pleased to see a return to positive momentum in the marketplace.  We expect the colder winter conditions across the majority of the country to further increase demand.
 
(more)
 

Motorcar Parts of America, Inc.
3-3-3
 
“Ongoing positive strategic initiatives supported by organic growth, product line expansion and complementary acquisition opportunities lead me to reconfirm our near-and long-term optimism for growth within the $125 billion aftermarket hard parts industry,” said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.
 
Separately, he said the board of directors last week increased the company’s share repurchase program authorization to $20,000,000 from $15,000,000 of its common stock, with current availability of approximately $13 million.
 
Joffe noted the company recently added a new 410,000 square-foot facility to support current and new growth.
 
UPDATED FISCAL 2018 SALES GUIDANCE
 
Due to the factors impacting the fiscal third quarter noted above, Motorcar Parts of America now believes revenues for its fiscal 2018 ending March 31 should be between $434 million and $440 million, with sales momentum improving in the current fiscal fourth quarter, as discussed above.
 
IMPACT OF TAX REFORM ACT
 
The company has preliminarily evaluated its net income tax expense as a result of the recently enacted Tax Reform Act which reduces its federal corporate income tax rate to 21 percent from 35 percent, among other factors.  The company estimates its effective tax rate commencing in fiscal 2019 will be reduced to approximately 25 percent.
 
The company’s deferred tax assets were provisionally reduced by a non-cash charge of approximately $6.3 million based on current estimates, as explained below.  In addition, transition taxes of approximately $545,000 were provisionally recorded as of December 31, 2017, as explained below.
 
Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in future years.  Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled.  Deferred tax assets and liabilities are adjusted through income tax expense as changes in tax laws are enacted.
 
Transition taxes are one-time expenses for deemed repatriation of accumulated foreign income.
 
(more)
 

Motorcar Parts of America, Inc.
4-4-4
 
The company’s fiscal 2018 third quarter results were impacted by $0.36 per diluted share as a result of the Tax Reform Act.  A prorated federal corporate income tax rate of 31.5% will apply for the company’s full 2018 fiscal year.  The full impact of the Tax Reform Act will be effective in the fiscal year commencing April 1, 2018.
 
These tax charges represent provisional amounts based on the company’s current best estimates. Any future adjustments recorded to the provisional amounts will be included as an adjustment to tax expense as they are identified.  The provisional amounts incorporate assumptions made based upon the company’s current interpretation of the Tax Reform Act and may change as the company receives additional clarification and implementation guidance and completes its analysis.
 
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 6:00 a.m. Pacific time to discuss the company’s financial results and operations.
 
The call will be open to all interested investors either through a live audio Web broadcast at www.motorcarparts.com or live by calling (877)-776-4016 (domestic) or (973)-638-3231 (international).  For those who are not available to listen to the live broadcast, the call will be archived for seven days on Motorcar Parts of America’s website www.motorcarparts.com.  A telephone playback of the conference call will also be available from approximately 1:00 p.m. Pacific time on February 9, 2018 through 8:59 p.m. Pacific time on February 16, 2018 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 8867118.
 
(more)
 

Motorcar Parts of America, Inc.
5-5-5
 
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 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.
 
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 2017 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)

     
Three Months Ended
December 31,
     
Nine Months Ended
December 31,
  
   
2017
   
2016
   
2017
   
2016
 
Net sales
 
$
100,127,000
   
$
112,595,000
   
$
306,964,000
   
$
306,843,000
 
Cost of goods sold
   
77,583,000
     
80,225,000
     
231,419,000
     
223,424,000
 
Gross profit
   
22,544,000
     
32,370,000
     
75,545,000
     
83,419,000
 
Operating expenses:
                               
General and administrative
   
11,915,000
     
7,952,000
     
26,717,000
     
21,446,000
 
Sales and marketing
   
4,048,000
     
3,234,000
     
10,899,000
     
8,575,000
 
Research and development
   
1,678,000
     
1,039,000
     
3,920,000
     
2,813,000
 
Total operating expenses
   
17,641,000
     
12,225,000
     
41,536,000
     
32,834,000
 
Operating income
   
4,903,000
     
20,145,000
     
34,009,000
     
50,585,000
 
Interest expense, net
   
3,953,000
     
3,357,000
     
10,789,000
     
9,365,000
 
Income before income tax expense
   
950,000
     
16,788,000
     
23,220,000
     
41,220,000
 
Income tax expense
   
7,756,000
     
5,678,000
     
16,099,000
     
13,459,000
 
Net (loss) income
 
$
(6,806,000
)
 
$
11,110,000
   
$
7,121,000
   
$
27,761,000
 
Basic net (loss) income per share
 
$
(0.36
)
 
$
0.59
   
$
0.38
   
$
1.49
 
Diluted net (loss) income per share
 
$
(0.36
)
 
$
0.57
   
$
0.37
   
$
1.43
 
Weighted average number of shares outstanding:
                               
Basic
   
19,069,152
     
18,675,125
     
18,814,967
     
18,587,946
 
Diluted
   
19,069,152
     
19,441,265
     
19,400,744
     
19,399,857
 
 

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

      
December 31, 2017
   
March 31, 2017
 
ASSETS
   
(Unaudited)
       
Current assets:
             
Cash and cash equivalents
 
 
$
10,032,000
   
$
9,029,000
 
Short-term investments
 
   
2,759,000
     
2,140,000
 
Accounts receivable — net
 
   
3,330,000
     
26,017,000
 
Inventory— net
 
   
80,991,000
     
67,516,000
 
Inventory unreturned
 
   
7,249,000
     
7,581,000
 
Prepaid expenses and other current assets
 
   
12,829,000
     
9,848,000
 
Total current assets
 
   
117,190,000
     
122,131,000
 
Plant and equipment — net
 
   
21,040,000
     
18,437,000
 
Long-term core inventory — net
 
   
296,274,000
     
262,922,000
 
Long-term core inventory deposits
 
   
5,569,000
     
5,569,000
 
Long-term deferred income taxes
 
   
14,422,000
     
13,546,000
 
Goodwill
 
   
2,551,000
     
2,551,000
 
Intangible assets — net
 
   
3,970,000
     
3,993,000
 
Other assets
 
   
6,678,000
     
6,990,000
 
TOTAL ASSETS
 
 
$
467,694,000
   
$
436,139,000
 
LIABILITIES AND SHAREHOLDERS'  EQUITY
             
Current liabilities:
             
Accounts payable
 
 
$
69,445,000
   
$
85,960,000
 
Accrued liabilities
 
   
11,992,000
     
10,077,000
 
Customer finished goods returns accrual
 
   
15,962,000
     
17,667,000
 
Accrued core payment
 
   
16,718,000
     
11,714,000
 
Revolving loan
 
   
36,000,000
     
11,000,000
 
Other current liabilities
 
   
4,614,000
     
3,300,000
 
Current portion of term loan
 
   
3,068,000
     
3,064,000
 
Total current liabilities
 
   
157,799,000
     
142,782,000
 
Term loan, less current portion
 
   
14,670,000
     
16,935,000
 
Long-term accrued core payment
 
   
22,560,000
     
12,349,000
 
Long-term deferred income taxes
 
   
212,000
     
180,000
 
Other liabilities
 
   
3,920,000
     
15,212,000
 
Total liabilities
 
   
199,161,000
     
187,458,000
 
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; 19,069,782 and 18,648,854 shares issued and outstanding at December 31, 2017 and March 31, 2017, respectively
 
   
191,000
     
186,000
 
Additional paid-in capital
 
   
217,089,000
     
205,646,000
 
Retained earnings
 
   
57,411,000
     
50,290,000
 
Accumulated other comprehensive loss
 
   
(6,158,000
)
   
(7,441,000
)
Total shareholders' equity
 
   
268,533,000
     
248,681,000
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
$
467,694,000
   
$
436,139,000
 
 

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 nine months ended December 31, 2017 and 2016. Each of these non-GAAP adjusted financial measures is adjusted from results based on GAAP to exclude certain expenses and gains.  Among other things, the Company uses such non-GAAP adjusted financial measures in addition to and in conjunction with corresponding GAAP measures to help analyze the performance of its business.
 
These non-GAAP adjusted financial measures reflect an additional way of viewing aspects of the Company's operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company's results of operations and the factors and trends affecting the Company's business. However, these non-GAAP adjusted financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

Income statement information for the three and nine months ended December 31, 2017 and 2016 are as follows:
 

Reconciliation of Non-GAAP Financial Measures
Exhibit 1
 
   
Three Months Ended December 31,
   
Nine Months Ended December 31,
 
   
2017
   
2016
   
2017
   
2016
 
GAAP Results:
                       
Net sales
 
$
100,127,000
   
$
112,595,000
   
$
306,964,000
   
$
306,843,000
 
Net income (loss)
   
(6,806,000
)
   
11,110,000
     
7,121,000
     
27,761,000
 
Diluted income (loss) per share (EPS)
   
(0.36
)
   
0.57
     
0.37
     
1.43
 
Gross margin
   
22.5
%
   
28.7
%
   
24.6
%
   
27.2
%
Non-GAAP Adjusted Results:
                               
Non-GAAP adjusted net sales
 
$
103,369,000
   
$
112,853,000
   
$
312,702,000
   
$
319,058,000
 
Non-GAAP adjusted net income
   
6,700,000
     
11,744,000
     
24,707,000
     
34,260,000
 
Non-GAAP adjusted diluted earnings per share (EPS)
   
0.34
     
0.60
     
1.27
     
1.77
 
Non-GAAP adjusted gross margin
   
27.9
%
   
30.1
%
   
28.2
%
   
30.9
%
Non-GAAP adjusted EBITDA
 
$
15,278,000
   
$
23,558,000
   
$
52,186,000
   
$
68,247,000
 
 
Note: Results for the three and nine months ended December 31, 2016 include revenue due to the change in estimate for anticipated stock adjustment returns of $9,261,000 (which had a $4,066,000 gross profit and EBITDA impact, $2,551,000 net income impact and $0.13 earnings per diluted share impact).  The change in estimate also had a 1.3% and 0.5% gross margin impact for the three and nine months ended December 31, 2016, respectively.
 

Reconciliation of Non-GAAP Financial Measures
Exhibit 2
 
   
Three Months Ended December 31,
   
Nine Months Ended December 31,
 
   
2017
   
2016
   
2017
   
2016
 
GAAP net sales
 
$
100,127,000
   
$
112,595,000
   
$
306,964,000
   
$
306,843,000
 
Adjustments:
                               
Net sales
                               
Initial return and stock adjustment accruals related to new business
   
-
     
-
     
2,496,000
     
3,168,000
 
Customer allowances related to new business
   
3,242,000
     
258,000
     
3,242,000
     
9,047,000
 
Adjusted net sales
 
$
103,369,000
   
$
112,853,000
   
$
312,702,000
   
$
319,058,000
 
 

Reconciliation of Non-GAAP Financial Measures
Exhibit 3
 
   
Three Months Ended December 31,
 
   
2017
   
2016
 
   
 
 
$
   
Per Diluted
Share
   
 
$
   
Per Diluted
Share
 
GAAP net income (loss)
 
$
(6,806,000
)
 
$
(0.36
)
 
$
11,110,000
   
$
0.57
 
Adjustments:
                               
Net sales
                               
Customer allowances related to new business
   
3,242,000
   
$
0.17
     
258,000
   
$
0.01
 
Cost of goods sold
                               
Transition expenses
   
803,000
   
$
0.04
     
-
   
$
-
 
Lower of cost or net realizable value revaluation - cores on customers' shelves and inventory step-up amortization
   
2,227,000
   
$
0.11
     
1,295,000
   
$
0.07
 
Operating expenses
                               
Legal, severance, acquisition, financing, transition and other costs
   
236,000
   
$
0.01
     
92,000
   
$
0.00
 
Share-based compensation expenses
   
914,000
   
$
0.05
     
818,000
   
$
0.04
 
Mark-to-market losses (gains)
   
1,784,000
   
$
0.09
     
2,000
   
$
0.00
 
Interest
                               
Write-off of debt issuance costs
   
231,000
   
$
0.01
     
-
   
$
-
 
Tax effected (a)
   
(2,766,000
)
 
$
(0.14
)
   
(1,831,000
)
 
$
(0.09
)
Tax charge for revaluation of deferred tax assets and liabilities
   
6,290,000
   
$
0.33
     
-
   
$
-
 
Transition tax on deemed repatriation of accumulated foreign income
   
545,000
   
$
0.03
     
-
   
$
-
 
Adjusted net income
 
$
6,700,000
   
$
0.34
   
$
11,744,000
   
$
0.60
 
 
(a) Adjusted net income is calculated by applying an income tax rate of 35.5% for the three months ended December 31, 2017 and 39.0% for the three months ended December 31, 2016; this rate may differ from the period's actual income tax rate
 

Exhibit 4
 
Reconciliation of Non-GAAP Financial Measures
   
Nine Months Ended December 31,
 
   
2017
   
2016
 
   
 
$
   
Per Diluted
Share
   
 
$
   
Per Diluted
Share
 
GAAP net income
 
$
7,121,000
   
$
0.37
   
$
27,761,000
   
$
1.43
 
Adjustments:
                           
Net sales
                           
Initial return and stock adjustment accruals related to new business
   
2,496,000
   
$
0.13
     
3,168,000
   
$
0.16
 
Customer allowances related to new business
   
3,242,000
   
$
0.17
     
9,047,000
   
$
0.47
 
Cost of goods sold
                               
New product line start-up and ramp-up costs, and transition expenses
   
803,000
   
$
0.04
     
140,000
   
$
0.01
 
Lower of cost or net realizable value revaluation - cores on customers' shelves and inventory step-up amortization
   
6,532,000
   
$
0.34
     
3,488,000
   
$
0.18
 
Cost of customer allowances and stock adjustment accruals related to new business
   
(362,000
)
 
$
(0.02
)
   
(568,000
)
 
$
(0.03
)
Operating expenses
                               
Legal, severance, acquisition, financing, transition and other costs
   
737,000
   
$
0.04
     
707,000
   
$
0.04
 
Share-based compensation expenses
   
2,658,000
   
$
0.14
     
2,555,000
   
$
0.13
 
Mark-to-market losses (gains)
   
(1,251,000
)
 
$
(0.06
)
   
(3,593,000
)
 
$
(0.19
)
Interest
                               
Write-off of debt issuance costs
   
231,000
   
$
0.01
     
-
   
$
-
 
Tax effected (a)
   
(4,335,000
)
 
$
(0.22
)
   
(8,445,000
)
 
$
(0.44
)
Tax charge for revaluation of deferred tax assets and liabilities
   
6,290,000
   
$
0.32
     
-
   
$
-
 
Transition tax on deemed repatriation of accumulated foreign income
   
545,000
   
$
0.03
     
-
   
$
-
 
Adjusted net income
 
$
24,707,000
   
$
1.27
   
$
34,260,000
   
$
1.77
 
 
(a) Adjusted net income is calculated by applying an income tax rate of 35.5% for the nine months ended December 31, 2017 and 39.0% for the nine months ended December 31, 2016; this rate may differ from the period's actual income tax rate
 

Reconciliation of Non-GAAP Financial Measures
Exhibit 5
 
 
 
Three Months Ended December 31,
 
 
 
2017
   
2016
 
 
 
 
$
   
Gross Margin
   
 
$
   
Gross Margin
 
GAAP gross profit
 
$
22,544,000
     
22.5
%
 
$
32,370,000
     
28.7
%
Adjustments:
                               
Net sales
                               
Customer allowances related to new business
   
3,242,000
             
258,000
         
Cost of goods sold
                               
Transition expenses
   
803,000
             
-
         
Lower of cost or net realizable value revaluation - cores on customers' shelves and inventory step-up amortization
   
2,227,000
             
1,295,000
         
Total adjustments
   
6,272,000
     
5.4
%
   
1,553,000
     
1.4
%
Adjusted gross profit
 
$
28,816,000
     
27.9
%
 
$
33,923,000
     
30.1
%
 

Reconciliation of Non-GAAP Financial Measures
Exhibit 6

   
Nine Months Ended December 31,
 
   
2017
   
2016
 
   
 
$ 
   
Gross Margin
   
 
$ 
   
Gross Margin
 
GAAP gross profit
 
$
75,545,000
     
24.6
%
 
$
83,419,000
     
27.2
%
Adjustments:
                               
Net sales
                               
Initial return and stock adjustment accruals related to new business
   
2,496,000
             
3,168,000
         
Customer allowances related to new business
   
3,242,000
             
9,047,000
         
Cost of goods sold
                               
New product line start-up and ramp-up costs, and transition expenses
   
803,000
             
140,000
         
Lower of cost or net realizable value revaluation - cores on customers' shelves and inventory step-up amortization
   
6,532,000
             
3,488,000
         
Cost of customer allowances and stock adjustment accruals related to new business
   
(362,000
)
           
(568,000
)
       
Total adjustments
   
12,711,000
     
3.6
%
   
15,275,000
     
3.7
%
Adjusted gross profit
 
$
88,256,000
     
28.2
%
 
$
98,694,000
     
30.9
%
 

Reconciliation of Non-GAAP Financial Measures
Exhibit 7
 
   
Three Months Ended December 31,
   
Nine Months Ended December 31,
 
   
2017
   
2016
   
2017
   
2016
 
GAAP net income (loss)
 
$
(6,806,000
)
 
$
11,110,000
   
$
7,121,000
   
$
27,761,000
 
Interest expense, net
   
3,953,000
     
3,357,000
     
10,789,000
     
9,365,000
 
Income tax expense
   
7,756,000
     
5,678,000
     
16,099,000
     
13,459,000
 
Depreciation and amortization
   
1,169,000
     
948,000
     
3,322,000
     
2,718,000
 
EBITDA
 
$
6,072,000
   
$
21,093,000
   
$
37,331,000
   
$
53,303,000
 
                                 
Adjustments:
                               
Net sales
                               
Initial return and stock adjustment accruals related to new business
   
-
     
-
     
2,496,000
     
3,168,000
 
Customer allowances related to new business
   
3,242,000
     
258,000
     
3,242,000
     
9,047,000
 
Cost of goods sold
                               
New product line start-up and ramp-up costs, and transition expenses
   
803,000
     
-
     
803,000
     
140,000
 
Lower of cost or net realizable value revaluation - cores on customers' shelves and inventory step-up amortization
   
2,227,000
     
1,295,000
     
6,532,000
     
3,488,000
 
Cost of customer allowances and stock adjustment accruals related to new business
   
-
     
-
     
(362,000
)
   
(568,000
)
Operating expenses
                               
Legal, severance, acquisition, financing, transition and other costs
   
236,000
     
92,000
     
737,000
     
707,000
 
Share-based compensation expenses
   
914,000
     
818,000
     
2,658,000
     
2,555,000
 
Mark-to-market losses (gains)
   
1,784,000
     
2,000
     
(1,251,000
)
   
(3,593,000
)
Adjusted EBITDA
 
$
15,278,000
   
$
23,558,000
   
$
52,186,000
   
$
68,247,000