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

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM       TO

Commission File No. 001-33861

MOTORCAR PARTS OF AMERICA, INC.
(Exact name of registrant as specified in its charter)

New York
 
11-2153962
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

2929 California Street, Torrance, California
 
90503
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (310) 212-7910

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐
Accelerated filer ☑
Non-accelerated filer ☐
Smaller reporting company ☐
 
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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

There were 18,809,102 shares of Common Stock outstanding at December 31, 2018.



MOTORCAR PARTS OF AMERICA, INC.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
 
 
4
 
4
 
5
 
6
 
7
 
8
 
41
 
52
 
53
   
PART II — OTHER INFORMATION
 
 
54
 
54
 
54
 
55
57

MOTORCAR PARTS OF AMERICA, INC.

GLOSSARY

The following terms are frequently used in the text of this report and have the meanings indicated below.

“Used Core” — An automobile part which has been used in the operation of a vehicle. Generally, the Used Core is an original equipment (“OE”) automobile part installed by the vehicle manufacturer and subsequently removed for replacement. Used Cores contain salvageable parts which are an important raw material in the remanufacturing process. We obtain most Used Cores by providing credits to our customers for Used Cores returned to us under our core exchange program. Our customers receive these Used Cores from consumers who deliver a Used Core to obtain credit from our customers upon the purchase of a newly remanufactured automobile part. When sufficient Used Cores cannot be obtained from our customers, we will purchase Used Cores from core brokers, who are in the business of buying and selling Used Cores. The Used Cores purchased from core brokers or returned to us by our customers under the core exchange program, and which have been physically received by us, are part of our raw material and work-in-process inventory. Used Cores returned by consumers to our customers but not yet returned to us are classified as contract assets until we physically receive these Used Cores.

“Remanufactured Core” — The Used Core underlying an automobile part that has gone through the remanufacturing process and through that process has become part of a newly remanufactured automobile part. The remanufacturing process takes a Used Core, breaks it down into its component parts, replaces those components that cannot be reused and reassembles the salvageable components of the Used Core and additional new components into a remanufactured automobile part. Upon adoption of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contract with Customers, (“ASC 606”) on April 1, 2018, the Remanufactured Cores at our facilities, which were previously segregated from cores held at customers’ locations, were reclassified from long-term core inventory to our on-hand finished goods inventory. Remanufactured Cores held for sale at our customer locations are included in long-term contract assets. In addition, upon the adoption of ASC 606, the Remanufactured Core portion of stock adjustment returns are classified as contract assets until we physically receive them.

PART I — FINANCIAL INFORMATION

Item 1.  
Financial Statements

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

   
September 30, 2018
   
March 31, 2018
 
ASSETS
 
(Unaudited)
   
(As Adjusted)
 
Current assets:
       
(Note 4)
 
Cash and cash equivalents
 
$
6,175,000
   
$
13,049,000
 
Short-term investments
   
3,230,000
     
2,828,000
 
Accounts receivable — net
   
56,085,000
     
63,174,000
 
Inventory— net
   
188,287,000
     
161,210,000
 
Inventory unreturned
   
9,100,000
     
7,508,000
 
Contract assets (see Note 8)
   
24,272,000
     
23,206,000
 
Income tax receivable
   
11,572,000
     
7,972,000
 
Prepaid expenses and other current assets
   
10,200,000
     
8,608,000
 
Total current assets
   
308,921,000
     
287,555,000
 
Plant and equipment — net
   
30,512,000
     
28,322,000
 
Long-term deferred income taxes
   
7,345,000
     
6,698,000
 
Long-term contract assets (see Note 8)
   
230,438,000
     
222,731,000
 
Goodwill
   
2,551,000
     
2,551,000
 
Intangible assets — net
   
3,380,000
     
3,766,000
 
Other assets
   
866,000
     
804,000
 
TOTAL ASSETS
 
$
584,013,000
   
$
552,427,000
 
LIABILITIES AND SHAREHOLDERS’  EQUITY
               
Current liabilities:
               
Accounts payable
 
$
92,663,000
   
$
73,273,000
 
Accrued liabilities
   
10,622,000
     
12,048,000
 
Customer finished goods returns accrual
   
19,961,000
     
17,805,000
 
Contract liabilities (see Note 11)
   
31,488,000
     
32,603,000
 
Revolving loan
   
52,906,000
     
54,000,000
 
Other current liabilities
   
4,970,000
     
4,471,000
 
Current portion of term loan
   
3,685,000
     
3,068,000
 
Total current liabilities
   
216,295,000
     
197,268,000
 
Term loan, less current portion
   
26,032,000
     
13,913,000
 
Long-term contract liabilities (see Note 11)
   
52,535,000
     
48,183,000
 
Long-term deferred income taxes
   
211,000
     
226,000
 
Other liabilities
   
6,776,000
     
5,957,000
 
Total liabilities
   
301,849,000
     
265,547,000
 
Commitments and contingencies
               
Shareholders’ equity:
               
Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued
   
-
     
-
 
Series A junior participating preferred stock; par value $.01 per share, 20,000 shares authorized; none issued
   
-
     
-
 
Common stock; par value $.01 per share, 50,000,000 shares authorized; 18,799,477 and 18,893,102 shares issued and outstanding at September 30, 2018 and March 31, 2018, respectively
   
188,000
     
189,000
 
Additional paid-in capital
   
211,593,000
     
213,609,000
 
Retained earnings
   
77,274,000
     
78,510,000
 
Accumulated other comprehensive loss
   
(6,891,000
)
   
(5,428,000
)
Total shareholders’ equity
   
282,164,000
     
286,880,000
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
584,013,000
   
$
552,427,000
 

The accompanying condensed notes to consolidated financial statements are an integral part hereof.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)

   
Three Months Ended
   
Six Months Ended
 
   
September 30,
   
September 30,
 
   
2018
   
2017
   
2018
   
2017
 
         
(As Adjusted)
         
(As Adjusted)
 
Net sales
 
$
127,939,000
   
$
110,261,000
   
$
219,607,000
   
$
204,956,000
 
Cost of goods sold
   
102,228,000
     
84,234,000
     
177,544,000
     
153,077,000
 
Gross profit
   
25,711,000
     
26,027,000
     
42,063,000
     
51,879,000
 
Operating expenses:
                               
General and administrative
   
8,997,000
     
8,615,000
     
21,088,000
     
14,503,000
 
Sales and marketing
   
4,537,000
     
3,457,000
     
8,929,000
     
6,851,000
 
Research and development
   
1,784,000
     
1,240,000
     
3,520,000
     
2,242,000
 
Total operating expenses
   
15,318,000
     
13,312,000
     
33,537,000
     
23,596,000
 
Operating income
   
10,393,000
     
12,715,000
     
8,526,000
     
28,283,000
 
Interest expense, net
   
5,699,000
     
3,522,000
     
10,774,000
     
6,836,000
 
Income (loss) before income tax expense (benefit)
   
4,694,000
     
9,193,000
     
(2,248,000
)
   
21,447,000
 
Income tax expense (benefit)
   
1,181,000
     
3,598,000
     
(266,000
)
   
8,032,000
 
Net income (loss)
 
$
3,513,000
   
$
5,595,000
   
$
(1,982,000
)
 
$
13,415,000
 
Basic net income (loss) per share
 
$
0.19
   
$
0.30
   
$
(0.10
)
 
$
0.72
 
Diluted net income (loss) per share
 
$
0.18
   
$
0.29
   
$
(0.10
)
 
$
0.69
 
Weighted average number of shares outstanding:
                               
Basic
   
18,878,674
     
18,718,709
     
18,887,214
     
18,687,179
 
Diluted
   
19,319,465
     
19,356,809
     
18,887,214
     
19,371,144
 

The accompanying condensed notes to consolidated financial statements are an integral part hereof.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

     
Three Months Ended
September 30,
     
Six Months Ended
September 30,
  
   
2018
   
2017
   
2018
   
2017
 
         
(As Adjusted)
         
(As Adjusted)
 
Net income (loss)
 
$
3,513,000
   
$
5,595,000
   
$
(1,982,000
)
 
$
13,415,000
 
Other comprehensive (loss) income, net of tax:
                               
Unrealized gain on short-term investments (net of tax of $0, $40,000, $0 and $78,000)
   
-
     
60,000
     
-
     
116,000
 
Foreign currency translation (loss) gain
   
(2,000
)
   
608,000
     
(717,000
)
   
837,000
 
Total other comprehensive (loss) gain, net of tax
   
(2,000
)
   
668,000
     
(717,000
)
   
953,000
 
Comprehensive income (loss)
 
$
3,511,000
   
$
6,263,000
   
$
(2,699,000
)
 
$
14,368,000
 

The accompanying condensed notes to consolidated financial statements are an integral part hereof.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

     
Six Months Ended
September 30,
  
   
2018
   
2017
 
Cash flows from operating activities:
       
(As Adjusted)
 
Net (loss) income
 
$
(1,982,000
)
 
$
13,415,000
 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
               
Depreciation
   
2,834,000
     
1,828,000
 
Amortization of intangible assets
   
384,000
     
325,000
 
Amortization and write-off of debt issuance costs
   
647,000
     
426,000
 
Amortization of interest on contract liabilities, net
   
513,000
     
269,000
 
Gain due to change in fair value of the warrant liability
   
-
     
(2,313,000
)
Gain on short-term investments
   
(180,000
)
   
-
 
Net provision for inventory reserves
   
5,285,000
     
3,258,000
 
Net provision for customer payment discrepancies
   
274,000
     
604,000
 
Net provision for (recovery of) doubtful accounts
   
206,000
     
(2,000
)
Deferred income taxes
   
(667,000
)
   
(207,000
)
Share-based compensation expense
   
2,121,000
     
1,744,000
 
Loss on disposal of plant and equipment
   
11,000
     
7,000
 
Changes in operating assets and liabilities, net of effects of acquisitions:
               
Accounts receivable
   
6,598,000
     
2,819,000
 
Inventory
   
(32,380,000
)
   
(28,552,000
)
Inventory unreturned
   
(1,592,000
)
   
(123,000
)
Income tax receivable
   
(3,595,000
)
   
(3,985,000
)
Prepaid expenses and other current assets
   
(658,000
)
   
(2,645,000
)
Other assets
   
(79,000
)
   
(20,000
)
Accounts payable and accrued liabilities
   
17,840,000
     
(3,764,000
)
Customer finished goods returns accrual
   
2,156,000
     
(4,246,000
)
Contract assets, net
   
(8,773,000
)
   
6,882,000
 
Contract liabilities, net
   
2,724,000
     
5,837,000
 
Other liabilities
   
1,904,000
     
295,000
 
Net cash used in operating activities
   
(6,409,000
)
   
(8,148,000
)
Cash flows from investing activities:
               
Purchase of plant and equipment
   
(5,259,000
)
   
(2,460,000
)
Purchase of business, net of cash acquired
   
-
     
(4,974,000
)
Change in short-term investments
   
(222,000
)
   
(226,000
)
Net cash used in investing activities
   
(5,481,000
)
   
(7,660,000
)
Cash flows from financing activities:
               
Borrowings under revolving loan
   
35,200,000
     
52,000,000
 
Repayments of revolving loan
   
(36,294,000
)
   
(27,000,000
)
Borrowings under term loan
   
13,594,000
     
-
 
Repayments of term loan
   
(782,000
)
   
(1,563,000
)
Payments for debt issuance costs
   
(1,757,000
)
   
(443,000
)
Payments on capital lease obligations
   
(711,000
)
   
(392,000
)
Exercise of stock options
   
244,000
     
295,000
 
Cash used to net share settle equity awards
   
(320,000
)
   
(594,000
)
Settlement of warrant
   
-
     
4,000,000
 
Repurchase of common stock, including fees
   
(4,062,000
)
   
(4,476,000
)
Net cash provided by financing activities
   
5,112,000
     
21,827,000
 
Effect of exchange rate changes on cash and cash equivalents
   
(96,000
)
   
42,000
 
Net (decrease) increase in cash and cash equivalents
   
(6,874,000
)
   
6,061,000
 
Cash and cash equivalents — Beginning of period
   
13,049,000
     
9,029,000
 
Cash and cash equivalents  — End of period
 
$
6,175,000
   
$
15,090,000
 
Supplemental disclosures of cash flow information:
               
Cash paid during the period for:
               
Interest, net
 
$
9,534,000
   
$
6,121,000
 
Income taxes, net of refunds
   
3,263,000
     
11,672,000
 
Non-cash investing and financing activities:
               
Plant and equipment acquired under capital lease
 
$
-
   
$
498,000
 

The accompanying condensed notes to consolidated financial statements are an integral part hereof.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
September 30, 2018
(Unaudited)

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2019. This report should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2018, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 14, 2018.

The accompanying consolidated financial statements have been prepared on a consistent basis with, and there have been no material changes to, except as noted below, the accounting policies described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements that are presented in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018.

1. Company Background and Organization

Motorcar Parts of America, Inc. and its subsidiaries (the “Company”, or “MPA”) is a leading manufacturer, remanufacturer, and distributor of aftermarket automotive and light truck applications. The Company also, to a lesser extent, is a manufacturer, remanufacturer, and distributor of heavy duty truck and industrial and agricultural application parts. These replacement parts are sold for use on vehicles after initial vehicle purchase. These automotive parts are sold to automotive retail chain stores and warehouse distributors throughout North America and to major automobile manufacturers for both their aftermarket programs and warranty replacement programs (“OES”). The Company’s products include (i) rotating electrical products such as alternators and starters, (ii) wheel hub assemblies and bearings, (iii) brake master cylinders, and (iv) other products which include turbochargers, brake power boosters, and diagnostic equipment. As a result of the July 2017 acquisition of D&V Electronics Ltd. (“D&V”), the Company’s business also now includes developing and selling diagnostics systems for alternators, starters, belt-start generators (stop start and hybrid technology), and electric power trains for electric vehicles.

The Company obtains used automotive parts, commonly known as Used Cores, primarily from its customers under the Company’s core exchange program. It also purchases Used Cores from vendors (core brokers). The customers grant credit to the consumer when the used part is returned to them, and the Company in turn provides a credit to the customers upon return to the Company. These Used Cores are an essential raw material needed for the remanufacturing operations.

The Company has remanufacturing, warehousing and shipping/receiving operations for automotive parts in North America and Asia. In addition, the Company utilizes various third party warehouse distribution centers in North America.

Pursuant to the guidance provided under the Financial Accounting Standards Board (“FASB”) ASC for segment reporting, the Company has identified its chief executive officer as chief operating decision maker (“CODM”), has reviewed the documents used by the CODM, and understands how such documents are used by the CODM to make financial and operating decisions. The Company has determined through this review process that it has one reportable segment for purposes of recording and reporting its financial results.

2. Impact on Previously Issued Financial Statements for the Correction of an Error

Revision of Prior Period Financial Statements

During the second quarter ended September 30, 2018, the Company identified and corrected immaterial errors that affected previously issued consolidated financial statements. These errors primarily related to historical misapplication of GAAP related to the timing of recognizing certain expenses incurred in connection with allowances paid for core inventory purchase obligations at the start of a new business relationship. The Company previously recorded the difference between the acquisition price of Remanufactured Cores purchased from customers generally in connection with new business, and the related inventory cost as a sales allowance reducing revenue when the purchases were made. These sales allowances are now recorded as an asset and recognized as a reduction of revenue through the later of the date at which related revenue is recognized or the date at which the sales incentive is offered (as further described under the caption “Contract Assets” in Note 4). The Company also corrected errors resulting from differences between the original cost estimate and the actual cost of the Remanufactured Cores held at customers’ locations.

The Company also corrected other immaterial errors, which primarily relate to bonus accruals and core inventory, and recorded certain adjustments to income taxes, including reflecting the tax effect of the aforementioned adjustments. In addition, the Company reclassified certain customer contract related prepayments from prepaid expenses and other current assets and other assets to contract assets related to the adoption of ASC 606 on April 1, 2018 (see Note 4).

As of June 30, 2018, the cumulative error for all periods previously reported was an understatement of net income of $2,938,000. The Company assessed the materiality, both quantitatively and qualitatively, in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99 and SAB No. 108, and concluded that these errors were not material to any of its previously issued financial statements. However, the Company determined that the cumulative correction of these errors would have had a material effect on the financial results for the three and six months ended September 30, 2018. Accordingly, in order to correctly present the errors noted above, previously issued financial statements have been revised and are presented as “As Revised” in the tables presented in the following footnotes. In addition, upon the adoption of ASC 606 on April 1, 2018, the Company adjusted its revised consolidated financial statements and related footnotes for the years ended March 31, 2018, and 2017 and applicable interim periods within the fiscal year ended March 31, 2018. These consolidated financial statements and tables are presented as “As Adjusted”.

The effect of the above corrections on the consolidated statement of operations for the fiscal year ended March 31, 2018 is as follows:

   
Year Ended March 31, 2018
 
 
Revised Consolidated Statement of Operations Amounts:
  
As Previously
Reported
       
Adjustment
       
As Revised
  
                   
Net sales
 
$
428,072,000
   
$
(1,081,000
)
 
$
426,991,000
 
Cost of goods sold
   
322,199,000
     
(1,750,000
)
   
320,449,000
 
Gross profit
   
105,873,000
     
669,000
     
106,542,000
 
Operating expenses:
                       
General and administrative
   
35,527,000
     
(50,000
)
   
35,477,000
 
Sales and marketing
   
15,030,000
     
-
     
15,030,000
 
Research and development
   
5,692,000
     
-
     
5,692,000
 
Total operating expenses
   
56,249,000
     
(50,000
)
   
56,199,000
 
Operating income
   
49,624,000
     
719,000
     
50,343,000
 
Interest expense, net
   
15,445,000
     
-
     
15,445,000
 
Income before income tax expense (benefit)
   
34,179,000
     
719,000
     
34,898,000
 
Income tax expense (benefit)
   
17,863,000
     
(1,791,000
)
   
16,072,000
 
Net income
 
$
16,316,000
   
$
2,510,000
   
$
18,826,000
 
Basic net income per share
 
$
0.87
   
$
0.13
   
$
1.00
 
Diluted net income per share
 
$
0.84
   
$
0.13
   
$
0.96
 

The effect of the above corrections on the consolidated statement of operations for the fiscal year ended March 31, 2017 is as follows:

   
Year Ended March 31, 2017
 
 
Revised Consolidated Statement of Operations Amounts:
  
As Previously
Reported
       
Adjustment
       
As Revised
  
                   
Net sales
 
$
421,253,000
   
$
1,629,000
   
$
422,882,000
 
Cost of goods sold
   
306,207,000
     
(281,000
)
   
305,926,000
 
Gross profit
   
115,046,000
     
1,910,000
     
116,956,000
 
Operating expenses:
                       
General and administrative
   
31,124,000
     
1,000
     
31,125,000
 
Sales and marketing
   
12,126,000
     
-
     
12,126,000
 
Research and development
   
3,824,000
     
-
     
3,824,000
 
Total operating expenses
   
47,074,000
     
1,000
     
47,075,000
 
Operating income
   
67,972,000
     
1,909,000
     
69,881,000
 
Interest expense, net
   
13,094,000
     
-
     
13,094,000
 
Income before income tax expense
   
54,878,000
     
1,909,000
     
56,787,000
 
Income tax expense
   
17,305,000
     
706,000
     
18,011,000
 
Net income
 
$
37,573,000
   
$
1,203,000
   
$
38,776,000
 
Basic net income per share
 
$
2.02
   
$
0.06
   
$
2.08
 
Diluted net income per share
 
$
1.93
   
$
0.06
   
$
2.00
 

The effect of the above corrections on the consolidated statement of operations for the fiscal year ended March 31, 2016 is as follows:

   
Year Ended March 31, 2016
 
Revised Consolidated Statement of Operations Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
                   
Net sales
 
$
368,970,000
   
$
700,000
   
$
369,670,000
 
Cost of goods sold
   
268,046,000
     
402,000
     
268,448,000
 
Gross profit
   
100,924,000
     
298,000
     
101,222,000
 
Operating expenses:
                       
General and administrative
   
49,665,000
     
298,000
     
49,963,000
 
Sales and marketing
   
9,965,000
     
-
     
9,965,000
 
Research and development
   
3,008,000
     
-
     
3,008,000
 
Total operating expenses
   
62,638,000
     
298,000
     
62,936,000
 
Operating income
   
38,286,000
     
-
     
38,286,000
 
Interest expense, net
   
16,244,000
     
-
     
16,244,000
 
Income before income tax expense
   
22,042,000
     
-
     
22,042,000
 
Income tax expense
   
11,479,000
     
294,000
     
11,773,000
 
Net income
 
$
10,563,000
   
$
(294,000
)
 
$
10,269,000
 
Basic net income per share
 
$
0.58
   
$
(0.02
)
 
$
0.56
 
Diluted net income per share
 
$
0.55
   
$
(0.02
)
 
$
0.54
 

The effect of the above corrections on the consolidated statement of comprehensive income for the fiscal year ended March 31, 2018 is as follows:

   
Year Ended March 31, 2018
 
Revised Consolidated Statement of Comprehensive Income Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
                   
Net income
 
$
16,316,000
   
$
2,510,000
   
$
18,826,000
 
Comprehensive income
 
$
18,329,000
   
$
2,510,000
   
$
20,839,000
 

The effect of the above corrections on the consolidated statement of comprehensive income for the fiscal year ended March 31, 2017 is as follows:

   
Year Ended March 31, 2017
 
Revised Consolidated Statement of Comprehensive Income Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
                   
Net income
 
$
37,573,000
   
$
1,203,000
   
$
38,776,000
 
Comprehensive income
 
$
34,984,000
   
$
1,203,000
   
$
36,187,000
 

The effect of the above corrections on the consolidated statement of comprehensive income for the fiscal year ended March 31, 2016 is as follows:

   
Year Ended March 31, 2016
 
Revised Consolidated Statement of Comprehensive Income Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
                   
Net income
 
$
10,563,000
   
$
(294,000
)
 
$
10,269,000
 
Comprehensive income
 
$
8,229,000
   
$
(294,000
)
 
$
7,935,000
 

The effect of the above corrections on the consolidated balance sheet at March 31, 2018 is as follows:

   
March 31, 2018
 
Revised Consolidated Balance Sheet Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
ASSETS
                 
Income tax receivable
 
$
7,796,000
   
$
176,000
   
$
7,972,000
 
Prepaid expenses and other current assets
   
11,491,000
     
3,613,000
     
15,104,000
 
Long-term core inventory — net
   
301,656,000
     
(3,362,000
)
   
298,294,000
 
Long-term deferred income taxes
   
10,556,000
     
(3,619,000
)
   
6,937,000
 
Other assets
   
7,392,000
     
14,603,000
     
21,995,000
 
TOTAL ASSETS
 
$
494,497,000
   
$
11,411,000
   
$
505,908,000
 
LIABILITIES AND SHAREHOLDERS’  EQUITY
                       
Accrued liabilities
 
$
11,799,000
   
$
249,000
   
$
12,048,000
 
TOTAL LIABILITIES
 
$
219,521,000
   
$
249,000
   
$
219,770,000
 
Retained earnings
 
$
66,606,000
   
$
11,162,000
   
$
77,768,000
 
TOTAL SHAREHOLDERS’ EQUITY
 
$
274,976,000
   
$
11,162,000
   
$
286,138,000
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
494,497,000
   
$
11,411,000
   
$
505,908,000
 

The effect of the above corrections on the consolidated balance sheet at March 31, 2017 is as follows:

   
March 31, 2017
 
Revised Consolidated Balance Sheet Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
ASSETS
                 
Prepaid expenses and other current assets
 
$
9,848,000
   
$
3,240,000
   
$
13,088,000
 
Long-term core inventory — net
   
262,922,000
     
(4,501,000
)
   
258,421,000
 
Long-term deferred income taxes
   
13,546,000
     
(5,179,000
)
   
8,367,000
 
Other assets
   
6,990,000
     
15,391,000
     
22,381,000
 
TOTAL ASSETS
 
$
436,139,000
   
$
8,951,000
   
$
445,090,000
 
LIABILITIES AND SHAREHOLDERS’  EQUITY
                       
Accrued liabilities
 
$
10,077,000
   
$
299,000
   
$
10,376,000
 
TOTAL LIABILITIES
 
$
187,458,000
   
$
299,000
   
$
187,757,000
 
Retained earnings
 
$
50,290,000
   
$
8,652,000
   
$
58,942,000
 
TOTAL SHAREHOLDERS’ EQUITY
 
$
248,681,000
   
$
8,652,000
   
$
257,333,000
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
436,139,000
   
$
8,951,000
   
$
445,090,000
 

The effect of the above corrections on the consolidated statement of shareholders’ equity for the fiscal year ended March 31, 2018 is as follows:

   
Year Ended March 31, 2018
 
Revised Consolidated Statement of Shareholders’ Equity Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
                   
Retained earnings at March 31, 2017
 
$
50,290,000
   
$
8,652,000
   
$
58,942,000
 
Net income
   
16,316,000
     
2,510,000
     
18,826,000
 
Retained earnings at March 31, 2018
 
$
66,606,000
   
$
11,162,000
   
$
77,768,000
 

The effect of the above corrections on the consolidated statement of shareholders’ equity for the fiscal year ended March 31, 2017 is as follows:

   
Year Ended March 31, 2017
 
Revised Consolidated Statement of Shareholders’ Equity Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
                   
Retained earnings at March 31, 2016
 
$
11,825,000
   
$
7,449,000
   
$
19,274,000
 
Cumulative effect adjustment
   
892,000
     
-
     
892,000
 
Net income
   
37,573,000
     
1,203,000
     
38,776,000
 
Retained earnings at March 31, 2017
 
$
50,290,000
   
$
8,652,000
   
$
58,942,000
 

The effect of the above corrections on the consolidated statement of shareholders’ equity for the fiscal year ended March 31, 2016 is as follows:

   
Year Ended March 31, 2016
 
Revised Consolidated Statement of Shareholders’ Equity Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
                   
Retained earnings at March 31, 2015
 
$
1,262,000
   
$
-
   
$
1,262,000
 
Cumulative effect adjustment of error corrections
   
-
     
7,743,000
     
7,743,000
 
Net income (loss)
   
10,563,000
     
(294,000
)
   
10,269,000
 
Retained earnings at March 31, 2016
 
$
11,825,000
   
$
7,449,000
   
$
19,274,000
 

The effect of the above corrections on the consolidated statement of cash flows for the fiscal year ended March 31, 2018 is as follows:

   
Year Ended March 31, 2018
 
Revised Consolidated Statement of Cash Flow from Operating Activities Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
Net income
 
$
16,316,000
   
$
2,510,000
   
$
18,826,000
 
Deferred income taxes
   
3,055,000
     
(1,560,000
)
   
1,495,000
 
Income tax receivable
   
(6,081,000
)
   
(231,000
)
   
(6,312,000
)
Prepaid expenses and other current assets
   
(2,507,000
)
   
(318,000
)
   
(2,825,000
)
Other assets
   
(384,000
)
   
788,000
     
404,000
 
Accounts payable and accrued liabilities
   
(11,621,000
)
   
(50,000
)
   
(11,671,000
)
Long-term core inventory
   
(45,839,000
)
   
(1,139,000
)
   
(46,978,000
)
Net cash used in operating activities
 
$
(13,944,000
)
 
$
-
   
$
(13,944,000
)

The effect of the above corrections on the consolidated statement of cash flows for the fiscal year ended March 31, 2017 is as follows:

   
Year Ended March 31, 2017
 
Revised Consolidated Statement of Cash Flow from Operating Activities Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
Net income
 
$
37,573,000
   
$
1,203,000
   
$
38,776,000
 
Deferred income taxes
   
6,510,000
     
355,000
     
6,865,000
 
Prepaid expenses and other current assets
   
(4,333,000
)
   
(549,000
)
   
(4,882,000
)
Other assets
   
(3,339,000
)
   
(1,025,000
)
   
(4,364,000
)
Accounts payable and accrued liabilities
   
12,446,000
     
1,000
     
12,447,000
 
Long-term core inventory
   
(24,964,000
)
   
(281,000
)
   
(25,245,000
)
Other liabilities
   
(1,344,000
)
   
296,000
     
(1,048,000
)
Net cash used in operating activities
 
$
(5,269,000
)
 
$
-
   
$
(5,269,000
)

The effect of the above corrections on the consolidated statement of cash flows for the fiscal year ended March 31, 2016 is as follows:

   
Year Ended March 31, 2016
 
Revised Consolidated Statement of Cash Flow from Operating Activities Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
Net income
 
$
10,563,000
   
$
(294,000
)
 
$
10,269,000
 
Deferred income taxes
   
(3,781,000
)
   
590,000
     
(3,191,000
)
Prepaid expenses and other current assets
   
2,765,000
     
618,000
     
3,383,000
 
Other assets
   
(477,000
)
   
(1,318,000
)
   
(1,795,000
)
Accounts payable and accrued liabilities
   
6,620,000
     
298,000
     
6,918,000
 
Long-term core inventory
   
(53,408,000
)
   
402,000
     
(53,006,000
)
Other liabilities
   
1,673,000
     
(296,000
)
   
1,377,000
 
Net cash used in operating activities
 
$
15,334,000
   
$
-
   
$
15,334,000
 

The effect of the above corrections on the consolidated statement of operations for the three months ended June 30, 2017 is as follows:

   
Three Months Ended June 30, 2017
 
Revised Consolidated Statement of Operations Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
Net sales
 
$
95,063,000
   
$
(824,000
)
 
$
94,239,000
 
Cost of goods sold
   
69,224,000
     
-
     
69,224,000
 
Gross profit
   
25,839,000
     
(824,000
)
   
25,015,000
 
Operating expenses:
                       
General and administrative
   
6,187,000
     
(299,000
)
   
5,888,000
 
Sales and marketing
   
3,394,000
     
-
     
3,394,000
 
Research and development
   
1,002,000
     
-
     
1,002,000
 
Total operating expenses
   
10,583,000
     
(299,000
)
   
10,284,000
 
Operating income
   
15,256,000
     
(525,000
)
   
14,731,000
 
Interest expense, net
   
3,314,000
     
-
     
3,314,000
 
Income (loss) before income tax expense (benefit)
   
11,942,000
     
(525,000
)
   
11,417,000
 
Income tax expense (benefit)
   
4,316,000
     
(194,000
)
   
4,122,000
 
Net income (loss)
 
$
7,626,000
   
$
(331,000
)
 
$
7,295,000
 
Basic net income (loss) per share
 
$
0.41
   
$
(0.02
)
 
$
0.39
 
Diluted net income (loss) per share
 
$
0.39
   
$
(0.02
)
 
$
0.38
 

The effect of the above corrections on the consolidated statements of operations for the three and six months ended September 30, 2017 is as follows:

   
Three Months Ended September 30, 2017
   
Six Months Ended September 30, 2017
 
Revised Consolidated Statement of Operations Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
   
As Previously
Reported
   
Adjustment
   
As Revised
 
                                     
Net sales
 
$
111,774,000
   
$
(921,000
)
 
$
110,853,000
   
$
206,837,000
   
$
(1,745,000
)
 
$
205,092,000
 
Cost of goods sold
   
84,612,000
     
-
     
84,612,000
     
153,836,000
     
-
     
153,836,000
 
Gross profit
   
27,162,000
     
(921,000
)
   
26,241,000
     
53,001,000
     
(1,745,000
)
   
51,256,000
 
Operating expenses:
                                               
General and administrative
   
8,615,000
     
-
     
8,615,000
     
14,802,000
     
(299,000
)
   
14,503,000
 
Sales and marketing
   
3,457,000
     
-
     
3,457,000
     
6,851,000
     
-
     
6,851,000
 
Research and development
   
1,240,000
     
-
     
1,240,000
     
2,242,000
     
-
     
2,242,000
 
Total operating expenses
   
13,312,000
     
-
     
13,312,000
     
23,895,000
     
(299,000
)
   
23,596,000
 
Operating income (loss)
   
13,850,000
     
(921,000
)
   
12,929,000
     
29,106,000
     
(1,446,000
)
   
27,660,000
 
Interest expense, net
   
3,522,000
     
-
     
3,522,000
     
6,836,000
     
-
     
6,836,000
 
Income (loss) before income tax expense (benefit)
   
10,328,000
     
(921,000
)
   
9,407,000
     
22,270,000
     
(1,446,000
)
   
20,824,000
 
Income tax expense (benefit)
   
4,027,000
     
(343,000
)
   
3,684,000
     
8,343,000
     
(537,000
)
   
7,806,000
 
Net income (loss)
 
$
6,301,000
   
$
(578,000
)
 
$
5,723,000
   
$
13,927,000
   
$
(909,000
)
 
$
13,018,000
 
Basic net income (loss) per share
 
$
0.34
   
$
(0.03
)
 
$
0.31
   
$
0.75
   
$
(0.05
)
 
$
0.70
 
Diluted net income (loss) per share
 
$
0.33
   
$
(0.03
)
 
$
0.30
   
$
0.72
   
$
(0.05
)
 
$
0.67
 

The effect of the above corrections on the consolidated statement of operations for the three and nine months ended December 31, 2017 is as follows:

   
Three Months Ended December 31, 2017
   
Nine Months Ended December 31, 2017
 
Revised Consolidated Statement of Operations Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
   
As Previously
Reported
   
Adjustment
   
As Revised
 
Net sales
 
$
100,127,000
   
$
1,586,000
   
$
101,713,000
   
$
306,964,000
   
$
(159,000
)
 
$
306,805,000
 
Cost of goods sold
   
77,583,000
     
(1,750,000
)
   
75,833,000
     
231,419,000
     
(1,750,000
)
   
229,669,000
 
Gross profit
   
22,544,000
     
3,336,000
     
25,880,000
     
75,545,000
     
1,591,000
     
77,136,000
 
Operating expenses:
                                               
General and administrative
   
11,915,000
     
-
     
11,915,000
     
26,717,000
     
(299,000
)
   
26,418,000
 
Sales and marketing
   
4,048,000
     
-
     
4,048,000
     
10,899,000
     
-
     
10,899,000
 
Research and development
   
1,678,000
     
-
     
1,678,000
     
3,920,000
     
-
     
3,920,000
 
Total operating expenses
   
17,641,000
     
-
     
17,641,000
     
41,536,000
     
(299,000
)
   
41,237,000
 
Operating income
   
4,903,000
     
3,336,000
     
8,239,000
     
34,009,000
     
1,890,000
     
35,899,000
 
Interest expense, net
   
3,953,000
     
-
     
3,953,000
     
10,789,000
     
-
     
10,789,000
 
Income before income tax expense (benefit)
   
950,000
     
3,336,000
     
4,286,000
     
23,220,000
     
1,890,000
     
25,110,000
 
Income tax expense (benefit)
   
7,756,000
     
(820,000
)
   
6,936,000
     
16,099,000
     
(1,357,000
)
   
14,742,000
 
Net (loss) income
 
$
(6,806,000
)
 
$
4,156,000
   
$
(2,650,000
)
 
$
7,121,000
   
$
3,247,000
   
$
10,368,000
 
Basic net (loss) income per share
 
$
(0.36
)
 
$
0.22
   
$
(0.14
)
 
$
0.38
   
$
0.17
   
$
0.55
 
Diluted net (loss) income per share
 
$
(0.36
)
 
$
0.22
   
$
(0.14
)
 
$
0.37
   
$
0.17
   
$
0.53
 

The effect of the above corrections on the consolidated statement of comprehensive income (loss) for the three months ended June 30, 2017 is as follows:

   
Three Months Ended June 30, 2017
 
Revised Consolidated Statement of Comprehensive Income (Loss) Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
                   
Net income (loss)
 
$
7,626,000
   
$
(331,000
)
 
$
7,295,000
 
Comprehensive income (loss)
 
$
7,911,000
   
$
(331,000
)
 
$
7,580,000
 


The effect of the above corrections on the consolidated statements of comprehensive income (loss) for the three and six months ended September 30, 2017 is as follows:

   
Three Months Ended September 30, 2017
   
Six Months Ended September 30, 2017
 
Revised Consolidated Statement of Comprehensive Income (Loss) Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
   
As Previously
Reported
   
Adjustment
   
As Revised
 
Net income (loss)
 
$
6,301,000
   
$
(578,000
)
 
$
5,723,000
   
$
13,927,000
   
$
(909,000
)
 
$
13,018,000
 
Comprehensive income (loss)
 
$
6,969,000
   
$
(578,000
)
 
$
6,391,000
   
$
14,880,000
   
$
(909,000
)
 
$
13,971,000
 


The effect of the above corrections on the consolidated statements of comprehensive (loss) income for the three and nine months ended December 31, 2017 is as follows:

   
Three Months Ended December 31, 2017
   
Nine Months Ended December 31, 2017
 
Revised Consolidated Statement of Comprehensive (Loss) Income Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
   
As Previously
Reported
   
Adjustment
   
As Revised
 
Net (loss) income
 
$
(6,806,000
)
 
$
4,156,000
   
$
(2,650,000
)
 
$
7,121,000
   
$
3,247,000
   
$
10,368,000
 
Comprehensive (loss) income
 
$
(6,476,000
)
 
$
4,156,000
   
$
(2,320,000
)
 
$
8,404,000
   
$
3,247,000
   
$
11,651,000
 

The effect of the above corrections on the consolidated statement of cash flows for the three months ended June 30, 2017 is as follows:

   
Three Months Ended June 30, 2017
 
Revised Consolidated Statement of Cash Flow from Operating Activities Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
Net income (loss)
 
$
7,626,000
   
$
(331,000
)
 
$
7,295,000
 
Prepaid expenses and other current assets
   
421,000
     
(55,000
)
   
366,000
 
Other assets
   
608,000
     
824,000
     
1,432,000
 
Accounts payable and accrued liabilities
   
(5,254,000
)
   
(299,000
)
   
(5,553,000
)
Other liabilities
   
2,324,000
     
(139,000
)
   
2,185,000
 
Net cash used in operating activities
 
$
(644,000
)
 
$
-
   
$
(644,000
)

The effect of the above corrections on the consolidated statement of cash flows for the six months ended September 30, 2017 is as follows:

   
Six Months Ended September 30, 2017
 
Revised Consolidated Statement of Cash Flow from Operating Activities Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
Net income (loss)
 
$
13,927,000
   
$
(909,000
)
 
$
13,018,000
 
Prepaid expenses and other current assets
   
(6,093,000
)
   
(537,000
)
   
(6,630,000
)
Other assets
   
1,198,000
     
1,745,000
     
2,943,000
 
Accounts payable and accrued liabilities
   
(3,465,000
)
   
(299,000
)
   
(3,764,000
)
Net cash used in operating activities
 
$
(8,148,000
)
 
$
-
   
$
(8,148,000
)


The effect of the above corrections on the consolidated statement of cash flows for the nine months ended December 31, 2017 is as follows:

   
Nine Months Ended December 31, 2017
 
Revised Consolidated Statement of Cash Flow from Operating Activities Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
Net income
 
$
7,121,000
   
$
3,247,000
   
$
10,368,000
 
Deferred income taxes
   
(909,000
)
   
(1,805,000
)
   
(2,714,000
)
Prepaid expenses and other current assets
   
(2,093,000
)
   
448,000
     
(1,645,000
)
Other assets
   
289,000
     
(452,000
)
   
(163,000
)
Accounts payable and accrued liabilities
   
(15,647,000
)
   
(299,000
)
   
(15,946,000
)
Long-term core inventory
   
(37,222,000
)
   
(1,139,000
)
   
(38,361,000
)
Net cash used in operating activities
 
$
(9,803,000
)
 
$
-
   
$
(9,803,000
)

The effect of the above corrections on the consolidated statement of operations for the three months ended June 30, 2018 is as follows:

   
Three Months Ended June 30, 2018
 
Revised Consolidated Statement of Operations Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
                   
Net sales
 
$
92,565,000
   
$
(897,000
)
 
$
91,668,000
 
Cost of goods sold
   
75,314,000
     
2,000
     
75,316,000
 
Gross profit
   
17,251,000
     
(899,000
)
   
16,352,000
 
Operating expenses:
                       
General and administrative
   
12,340,000
     
(249,000
)
   
12,091,000
 
Sales and marketing
   
4,392,000
     
-
     
4,392,000
 
Research and development
   
1,736,000
     
-
     
1,736,000
 
Total operating expenses
   
18,468,000
     
(249,000
)
   
18,219,000
 
Operating loss
   
(1,217,000
)
   
(650,000
)
   
(1,867,000
)
Interest expense, net
   
5,075,000
     
-
     
5,075,000
 
Loss before income tax benefit
   
(6,292,000
)
   
(650,000
)
   
(6,942,000
)
Income tax benefit
   
(1,278,000
)
   
(169,000
)
   
(1,447,000
)
Net loss
 
$
(5,014,000
)
 
$
(481,000
)
 
$
(5,495,000
)
Basic net loss per share
 
$
(0.27
)
 
$
(0.03
)
 
$
(0.29
)
Diluted net loss per share
 
$
(0.27
)
 
$
(0.03
)
 
$
(0.29
)

The effect of the above corrections on the consolidated statement of comprehensive loss for the three months ended June 30, 2018 is as follows:

   
Three Months Ended June 30, 2018
 
Revised Consolidated Statement of Comprehensive Loss Amounts:
 
As Previously
Reported
   
Adjustment
   
As Revised
 
                   
Net loss
 
$
(5,014,000
)
 
$
(481,000
)
 
$
(5,495,000
)
Comprehensive loss
 
$</