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): August 8, 2019
Motorcar Parts of America, Inc.
(Exact name of registrant as specified in its charter)

New York
 
001-33861
 
11-2153962
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)

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

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

N/A
(Former name, former address and former fiscal year, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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

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

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

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
MPAA
The Nasdaq Global Select Market
 


Item 2.02.
Results of Operations and Financial Condition

On August 8, 2019, Motorcar Parts of America, Inc. (the “Company”) issued a press release announcing its earnings for the fiscal quarter ended June 30, 2019 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:

Return and stock adjustment accruals related to new business and product line expansion. In connection with new business, the Company may establish return and stock adjustment accruals to account for the anticipated increased levels of business activity and product line expansion. The Company excluded these 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.
 
Impact of sales price increases related to tariffs and Tariff costs paid for products sold before price increases were effective. The Company excluded the impact of sales price increases related to tariffs and tariff costs paid for products sold before price increases were effective because excluding such amounts enables period-over-period comparability.

Core sales and a fixed cost in connection with a cancelled contract. The Company excluded the core sales and a fixed cost in connection with a cancelled contract, because they do not reflect the Company’s operations on an ongoing basis and excluding such sales 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 and product line expansion. 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.

Cost of goods sold for cores recorded in connection with a cancelled contract. The Company excluded the cost of goods sold for cores recorded in connection with a cancelled contract 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, earn - out accruals from acquisitions, restatement-related fees and other costs. The Company has incurred acquisition, financing, transition, severance, new business, earn - out accruals from acquisitions, restatement-related fees 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 August 8, 2019
 

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: August 8, 2019
/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 2020 FIRST QUARTER RESULTS

-- Record Sales for a First Quarter; Fiscal Year to Benefit From Growth in Existing and New Product Lines, with Improving Financial Metrics --

LOS ANGELES, CA August 8, 2019 Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2020 first quarter ended June 30, 2019 -- reflecting record sales for a fiscal first quarter, and expectations for continued top-line growth and sequential margin and operating cash flow improvement as fiscal 2020 evolves.

Net sales for the fiscal 2020 first quarter increased 19.1 percent to $109.1 million from $91.7 million for the same period a year earlier, reflecting sales increases for both hard parts and diagnostic products.

Adjusted net sales for the fiscal 2020 first quarter increased 15.7 percent to $108.6 million from $93.8 million a year earlier.

“We achieved record sales in our hard parts categories for a first quarter, despite relative softness throughout the industry during this period.  The company’s sales growth for both existing and new product lines is expected to gain momentum throughout fiscal 2020, and should further accelerate later in the fiscal year.  Notwithstanding the short-term impact to profitability, related to new business costs and transition expenses associated with our expansion in Mexico and Malaysia, our investment to position the company as a leading supplier of multiple non-discretionary hard parts is transformational. This will become increasingly evident as the fiscal year evolves.

“Equally exciting, we expect our emerging diagnostic and testing equipment business, which includes applications for rotating electrical, electric vehicles and aerospace, to provide further growth opportunities, with favorable economics as the business gains traction. In summary, the outlook remains favorable, our customer relationships are strong and we expect solid value creation as a result of our strategic investments,” said Selwyn Joffe, chairman, president and chief executive officer.

(more)


Motorcar Parts of America, Inc.
2-2-2

The results for the quarter and gross margin were primarily impacted by four items totaling $8.5 million.


Non-cash expenses of $5.7 million, including a write-down of $4.6 million associated with the quarterly revaluation for cores on customers’ shelves, and $1.1 million of amortization related to the premium for core buy backs.


Transition costs of $1.4 million associated with the move into the new Mexico facilities to support the growth in sales.


Net tariff costs of $1.1 million for products sold before cost increases were passed through to customers.


Cost accrual of $426,000 related to a pending resolution of a previously cancelled customer contract.

Net loss for the fiscal 2020 first quarter was $6.2 million, or $0.33 per share, reflecting the impact of the items listed above, compared with net loss of $5.5 million, or $0.29 per share, a year ago.

Adjusted net income for the fiscal 2020 first quarter was $1.7 million, or $0.09 per diluted share, compared with $3.0 million, or $0.16 per diluted share, a year earlier.

Gross profit for the fiscal 2020 first quarter was $17.6 million compared with $16.4 million a year earlier.  Gross profit as a percentage of net sales for the fiscal 2020 first quarter was 16.1 percent compared with 17.8 percent a year earlier.

Adjusted gross profit for the fiscal 2020 first quarter was $26.2 million compared with $22.9 million a year ago.  Adjusted gross profit as a percentage of adjusted net sales for the three months was 24.1 percent compared with 24.4 percent a year earlier.

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.

(more)


Motorcar Parts of America, Inc.
3-3-3

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 1:00 p.m. Pacific time on August 8, 2019 through 8:59 p.m. Pacific time on August 15, 2019 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 3797116.

About Motorcar Parts of America, Inc.

Motorcar Parts of America, Inc. is a remanufacturer, manufacturer and distributor of automotive aftermarket parts -- including alternators, starters, wheel bearing and hub assemblies, brake calipers, brake master cylinders, brake power boosters, rotors, brake pads and turbochargers utilized in imported and domestic passenger vehicles, light trucks and heavy-duty applications.  In addition, the company designs and manufactures test solutions for performance, endurance and production testing of electric motors, inverters, alternators, starters, and belt starter generators for the OE, aerospace and aftermarket. Motorcar Parts of America’s products are sold to automotive retail outlets and the professional repair market throughout the United States and Canada, with facilities located in New York, California, Mexico, Malaysia, China and India, and administrative offices located in California, Tennessee, Mexico, Singapore, Malaysia and Canada.  Additional information is available at www.motorcarparts.com.

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 2019 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 Operations
(Unaudited)

   
Three Months Ended
 
   
June 30,
 
   
2019
   
2018
 
             
         
(As Adjusted)
 
Net sales
 
$
109,148,000
   
$
91,668,000
 
Cost of goods sold
   
91,565,000
     
75,316,000
 
Gross profit
   
17,583,000
     
16,352,000
 
Operating expenses:
               
General and administrative
   
12,000,000
     
12,091,000
 
Sales and marketing
   
4,919,000
     
4,392,000
 
Research and development
   
2,372,000
     
1,736,000
 
Total operating expenses
   
19,291,000
     
18,219,000
 
Operating loss
   
(1,708,000
)
   
(1,867,000
)
Interest expense, net
   
6,173,000
     
5,075,000
 
Loss before income tax benefit
   
(7,881,000
)
   
(6,942,000
)
Income tax benefit
   
(1,730,000
)
   
(1,447,000
)
                 
Net loss
 
$
(6,151,000
)
 
$
(5,495,000
)
Basic net loss per share
 
$
(0.33
)
 
$
(0.29
)
Diluted net loss per share
 
$
(0.33
)
 
$
(0.29
)
                 
Weighted average number of shares outstanding:
               
Basic
   
18,822,178
     
18,895,847
 
Diluted
   
18,822,178
     
18,895,847
 

Note: The Company had 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.


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

   
June 30, 2019
   
March 31, 2019
 
ASSETS
 
(Unaudited)
       
Current assets:
           
Cash and cash equivalents
 
$
11,207,000
   
$
9,911,000
 
Short-term investments
   
2,074,000
     
3,273,000
 
Accounts receivable — net
   
45,042,000
     
56,015,000
 
Inventory— net
   
262,116,000
     
233,726,000
 
Inventory unreturned
   
8,349,000
     
8,469,000
 
Contract assets
   
20,913,000
     
22,183,000
 
Income tax receivable
   
12,334,000
     
10,009,000
 
Prepaid expenses and other current assets
   
9,030,000
     
9,296,000
 
Total current assets
   
371,065,000
     
352,882,000
 
Plant and equipment — net
   
38,398,000
     
35,151,000
 
Operating lease assets
   
50,103,000
     
-
 
Long-term deferred income taxes
   
9,592,000
     
9,746,000
 
Long-term contract assets
   
212,638,000
     
221,876,000
 
Goodwill
   
3,205,000
     
3,205,000
 
Intangible assets — net
   
7,965,000
     
8,431,000
 
Other assets
   
866,000
     
1,071,000
 
TOTAL ASSETS
 
$
693,832,000
   
$
632,362,000
 
LIABILITIES AND SHAREHOLDERS’  EQUITY
               
Current liabilities:
               
Accounts payable
 
$
87,973,000
   
$
92,461,000
 
Accrued liabilities
   
14,762,000
     
14,604,000
 
Customer finished goods returns accrual
   
21,488,000
     
22,615,000
 
Contract liabilities
   
30,642,000
     
30,599,000
 
Revolving loan
   
135,400,000
     
110,400,000
 
Other current liabilities
   
4,077,000
     
4,990,000
 
Operating lease liabilities
   
3,976,000
     
-
 
Current portion of term loan
   
3,678,000
     
3,685,000
 
Total current liabilities
   
301,996,000
     
279,354,000
 
Term loan, less current portion
   
23,218,000
     
24,187,000
 
Long-term contract liabilities
   
39,159,000
     
40,889,000
 
Long-term deferred income taxes
   
275,000
     
257,000
 
Long-term operating lease liabilities
   
48,155,000
     
-
 
Other liabilities
   
6,200,000
     
7,920,000
 
Total liabilities
   
419,003,000
     
352,607,000
 
Commitments and contingencies
               
Shareholders’ equity:
               
Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued
   
-
     
-
 
Series A junior participating preferred stock; par value $.01 per share, 20,000 shares authorized; none issued
   
-
     
-
 
Common stock; par value $.01 per share, 50,000,000 shares authorized; 18,854,272 and 18,817,400 shares issued and outstanding at June 30, 2019 and March 31, 2019, respectively
   
189,000
     
188,000
 
Additional paid-in capital
   
215,672,000
     
215,047,000
 
Retained earnings
   
65,256,000
     
71,407,000
 
Accumulated other comprehensive loss
   
(6,288,000
)
   
(6,887,000
)
Total shareholders’ equity
   
274,829,000
     
279,755,000
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
693,832,000
   
$
632,362,000
 


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 months ended June 30, 2019 and 2018. 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 months ended June 30, 2019 and 2018 are as follows:


Reconciliation of Non-GAAP Financial Measures
Exhibit 1

   
Three Months Ended June 30,
 
   
2019
   
2018
 
GAAP Results:
       
(As Adjusted)
 
Net sales
 
$
109,148,000
   
$
91,668,000
 
Net loss
   
(6,151,000
)
   
(5,495,000
)
Loss per share (EPS)
   
(0.33
)
   
(0.29
)
Gross margin
   
16.1
%
   
17.8
%
Non-GAAP Adjusted Results:
               
Non-GAAP adjusted net sales
 
$
108,561,000
   
$
93,810,000
 
Non-GAAP adjusted net income
   
1,675,000
     
3,016,000
 
Non-GAAP adjusted diluted earnings per share (EPS)
   
0.09
     
0.16
 
Non-GAAP adjusted gross margin
   
24.1
%
   
24.4
%
Non-GAAP adjusted EBITDA
 
$
10,722,000
   
$
10,237,000
 

Note: The Company had 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.  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 June 30,
 
   
2019
   
2018
 
         
(As Adjusted)
 
GAAP net sales
 
$
109,148,000
   
$
91,668,000
 
Adjustments:
               
Net sales
               
Return and stock adjustment accruals related to new business
   
159,000
     
-
 
Customer allowances related to new business
   
1,108,000
     
2,142,000
 
Impact of sales price increases related to tariffs
   
(2,280,000
)
   
-
 
Cost in connection with a cancelled contract
   
426,000
     
-
 
Adjusted net sales
 
$
108,561,000
   
$
93,810,000
 


Reconciliation of Non-GAAP Financial Measures
Exhibit 3

   
Three Months Ended June 30,
 
   
2019
   
2018
 
               
(As Adjusted)
 
   
$
   
Per Diluted
Share
   
$
   
Per Diluted
Share
 
GAAP net (loss) income
 
$
(6,151,000
)
 
$
(0.33
)
 
$
(5,495,000
)
 
$
(0.29
)
Adjustments:
                               
Net sales
                               
Return and stock adjustment accruals related to new business
   
159,000
   
$
0.01
     
-
   
$
-
 
Customer allowances related to new business
   
1,108,000
   
$
0.06
     
2,142,000
   
$
0.11
 
Impact of sales price increases related to tariffs
   
(2,280,000
)
 
$
(0.12
)
   
-
   
$
-
 
Cost in connection with a cancelled contract
   
426,000
   
$
0.02
     
-
   
$
-
 
Cost of goods sold
                               
New product line start-up and ramp-up costs, and transition expenses
   
1,354,000
   
$
0.07
     
1,755,000
   
$
0.09
 
Revaluation - cores on customers’ shelves
   
4,564,000
   
$
0.24
     
2,626,000
   
$
0.14
 
Cost of stock adjustment accruals related to new business
   
(59,000
)
 
$
(0.00
)
   
-
   
$
-
 
Tariff costs paid for products sold before price increases were effective
   
3,347,000
   
$
0.18
     
-
   
$
-
 
Operating expenses
                               
Acquisition, financing, transition, severance, earn-out accruals from acquisitions and other costs
   
1,045,000
   
$
0.06
     
531,000
   
$
0.03
 
Share-based compensation expenses
   
988,000
   
$
0.05
     
941,000
   
$
0.05
 
Mark-to-market losses (gains)
   
(537,000
)
 
$
(0.03
)
   
2,666,000
   
$
0.14
 
Interest
                               
Write-off of debt issuance costs
   
-
   
$
-
     
303,000
   
$
0.02
 
Tax effected (a)
   
(2,289,000
)
 
$
(0.12
)
   
(2,453,000
)
 
$
(0.13
)
Adjusted net income
 
$
1,675,000
   
$
0.09
   
$
3,016,000
   
$
0.16
 

(a) Adjusted net income is calculated by applying an income tax rate of 25.0% to adjusted pre-tax income for the three months ended June 30, 2019 and 2018; this rate may differ from the period’s actual income tax rate


Reconciliation of Non-GAAP Financial Measures
Exhibit 4

   
Three Months Ended June 30,
 
   
2019
   
2018
 
               
(As Adjusted)
 
   
$
   
Gross
Margin
   

$
   
Gross
Margin
 
GAAP gross profit
 
$
17,583,000
     
16.1
%
 
$
16,352,000
     
17.8
%
Adjustments:
                               
Net sales
                               
Return and stock adjustment accruals related to new business
   
159,000
             
-
         
Customer allowances related to new business
   
1,108,000
             
2,142,000
         
Impact of sales price increases related to tariffs
   
(2,280,000
)
           
-
         
Cost in connection with a cancelled contract
   
426,000
             
-
         
Cost of goods sold
                               
New product line start-up and ramp-up costs, and transition expenses
   
1,354,000
             
1,755,000
         
Revaluation - cores on customers’ shelves
   
4,564,000
             
2,626,000
         
Cost of stock adjustment accruals related to new business
   
(59,000
)
           
-
         
Tariff costs paid for products sold before price increases were effective
   
3,347,000
             
-
         
Total adjustments
   
8,619,000
     
8.0
%
   
6,523,000
     
6.6
%
Adjusted gross profit
 
$
26,202,000
     
24.1
%
 
$
22,875,000
     
24.4
%


Reconciliation of Non-GAAP Financial Measures
Exhibit 5

   
Three Months Ended June 30,
 
   
2019
   
2018
 
         
(As Adjusted)
 
GAAP net (loss) income
 
$
(6,151,000
)
 
$
(5,495,000
)
Interest expense, net
   
6,173,000
     
5,075,000
 
Income tax (benefit) expense
   
(1,730,000
)
   
(1,447,000
)
Depreciation and amortization
   
2,379,000
     
1,586,000
 
EBITDA
 
$
671,000
   
$
(281,000
)
                 
Adjustments:
               
Net sales
               
Return and stock adjustment accruals related to new business
   
159,000
     
-
 
Customer allowances related to new business
   
1,108,000
     
2,142,000
 
Impact of sales price increases related to tariffs
   
(2,280,000
)
   
-
 
Cost in connection with a cancelled contract
   
426,000
     
-
 
Cost of goods sold
               
New product line start-up and ramp-up costs, and transition expenses (a)
   
1,322,000
     
1,694,000
 
Revaluation - cores on customers’ shelves
   
4,564,000
     
2,626,000
 
Cost of stock adjustment accruals related to new business
   
(59,000
)
   
-
 
Tariff costs paid for products sold before price increases were effective
   
3,347,000
     
-
 
Operating expenses
               
Acquisition, financing, transition (a), severance, earn-out accruals from acquisitions and other costs
   
1,013,000
     
449,000
 
Share-based compensation expenses
   
988,000
     
941,000
 
Mark-to-market losses (gains)
   
(537,000
)
   
2,666,000
 
Adjusted EBITDA
 
$
10,722,000
   
$
10,237,000
 

(a)
Excludes depreciation