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Motorcar Parts of America Reports Record Sales for Fiscal 2023 Fourth Quarter and Year

– Provides Fiscal 2024 Guidance; Margin Improvement and Free Cash Generation Expected to Gain Momentum as Fiscal Year Evolves –

Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2023 fourth quarter and year ended March 31, 2023, reflecting record sales and solid demand across multiple categories -- including the company’s rotating electrical and emerging brake-related products.

Fiscal 2023 Fourth Quarter Results

Net sales for the fiscal 2023 fourth quarter increased 18.8 percent to a record $194.7 million from $163.9 million in the prior year.

Fiscal fourth quarter results benefited from increasing product demand for the spring and summer seasons and recently implemented price increases.

Net income for the fiscal 2023 fourth quarter was $1.5 million, or $0.07 per diluted share, compared with a net loss of $322,000, or $0.02 per share, a year ago.

Fiscal fourth quarter results were impacted by an income tax expense of $10.4 million, or an effective rate of 87.7 percent.

Interest expense increased by $7.8 million, or $0.30 per diluted share, to $11.9 million from $4.0 million a year ago. The increase in interest expense was mainly due to higher market rates -- primarily related to customer vendor financing programs, representing $4.9 million of the increase. The company expects to realize meaningful annualized price increases throughout the new fiscal year, which will contribute to net income enhancement.

Non-cash items, as detailed in Exhibit 1, benefited results by approximately $1.5 million, or $0.07 per diluted share. Net cash items, including an employee retention credit, partially offset by transitory costs related to supply chain disruptions, benefited results by $922,000, or $0.05 per diluted share, also detailed in Exhibit 1. Results for the quarter were also impacted by inflationary costs not fully absorbed by price increases.

Fiscal 2023 fourth quarter results included a $5.1 million employee retention credit (ERC) related to expenses incurred during the COVID-19 pandemic. Subsequent to the pandemic, cost-reduction initiatives related to employee-related expenses were implemented, along with other ongoing strategic opportunities to reduce costs -- resulting in approximately $5 million annual run-rate expense reductions, going forward.

Prior-year net loss of $322,000, or $0.02 per share, was impacted by approximately $1.9 million, or $0.10 per share, of non-cash items as detailed in Exhibit 1. The company also was impacted by approximately $3.2 million, or $0.17 per share, of other costs, including transitory costs related to supply chain disruptions for the prior year.

Gross profit for the fiscal 2023 fourth quarter increased by 40.3 percent to $36.2 million from $25.8 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2023 fourth quarter was 18.6 percent compared with 15.7 percent a year earlier. Gross margin for the fiscal 2023 fourth quarter benefited from price increases. Gross margin for the fiscal 2023 fourth quarter was impacted by inflationary costs not fully absorbed by price increases, and higher per unit costs resulting from less absorption of overhead costs as the company manages inventory levels, and changes in product mix. In addition to the above items, gross margin for the fiscal 2023 fourth quarter was impacted by $3.6 million, or 1.9 percent, of non-cash items, and $879,000, or 0.5 percent, by the transitory supply chain disruptions, partially offset by an employee retention credit, as detailed in Exhibit 3.

Gross margin improvement is expected to be enhanced as the full benefit of certain price increases is realized, and by higher sales volume and further anticipated operational efficiencies. A portion of the most recent price increases was realized late in the fiscal fourth quarter, with the balance taking effect in the fiscal 2024 first half.

“Fiscal 2023 record sales benefited from the strength of our products and excellent customer relationships, enhanced by being a critical supplier of non-discretionary automotive parts. We expect our position will gain further momentum with favorable industry data indicating that consumers are continuing to defer new car purchases, with the average vehicle age at a new record high of 12.5 years. In addition, as fiscal 2024 evolves, we expect to realize incremental operational efficiencies and increasing sales volume, particularly from our emerging brake-related product lines, as well as benefits from rational pricing increases across the board to help offset inflation and higher interest rates,” said Selwyn Joffe, chairman, president, and chief executive officer.

“Despite headwinds during the year, we remain optimistic about our business. We have built a solid foundation for growth and profitability, as evidenced by our guidance for fiscal 2024 discussed below and expect improving margins and cash flow supported by multiple product line offerings,” Joffe said.

Twelve-Month Results

Net sales for fiscal 2023 increased 5.0 percent to a record $683.1 million from $650.3 million in the prior year. Prior-year net sales were positively impacted by $13.3 million in core revenue due to a realignment of inventory at customer distribution centers with sales benefits evolving as product mix changes.

Sales benefited from increasing product demand for the spring and summer seasons and recently implemented price increases.

Net loss for fiscal 2023 was $4.2 million, or $0.22 per share, compared with net income of $7.4 million, or $0.38 per diluted share, a year ago. Fiscal 2023 results included a $5.1 million employee retention credit, as referenced in the fiscal 2023 fourth quarter discussion above.

Interest expense increased by $24.0 million, or $0.93 per share, to $39.6 million from $15.6 million a year ago. The increase in interest expense was mainly due to higher market rates -- primarily related to customer vendor financing programs, representing approximately $17.2 million of the increase.

Non-cash items, as detailed in Exhibit 2, impacted results by approximately $8.2 million, or $0.42 per share. Other impacts to results, including transitory costs related to supply chain disruptions, partially offset by an employee retention credit, were approximately $8.5 million, or $0.44 per share, also detailed in Exhibit 2. Net loss for fiscal 2023 was impacted by various other items discussed above for the quarter.

Gross profit for fiscal 2023 was $114.0 million compared with $117.9 million a year earlier. Gross profit as a percentage of net sales for fiscal 2023 was 16.7 percent compared with 18.1 percent a year earlier. Gross margin for fiscal 2023 was impacted by $15.5 million, or 2.3 percent, of non-cash items, and $9.5 million, or 1.4 percent, by the transitory supply chain disruptions, partially offset by an employee retention credit, as detailed in Exhibit 4. In addition, gross margin for fiscal 2023 was also impacted by various items discussed above for the quarter. Gross margin improvement is expected to be enhanced as the full benefit of certain price increases is realized, and by higher sales volume and further operational efficiencies.

Considerations for Fiscal 2024

  • No customer or share losses in Fiscal 2023.
  • Ordering activity has resumed related to previous delays by a certain customer.
  • New brake-related business is now gaining momentum following certain customer change-over delays.
  • Better absorption of overhead costs with greater production and purchasing volume from increasing orders; and new business activity, with margin improvement expected to benefit.
  • Management is working with customers to address the impact of a sharply higher interest rate environment and customer vendor financing program costs.
  • Easing of supply chain challenges.
  • Capital expenditures requirements have greatly reduced as the build out in Mexico is now completed.
  • Recent strategic $32 million convertible note complements management’s ongoing goals and objectives, while enhancing the company’s working capital to support building sustainable shareholder value.

Fiscal 2024 Guidance

Motorcar Parts of America expects net sales for its fiscal year ending March 31, 2024 to be between $720 million to $740 million, representing between 5.4 percent and 8.3 percent year-over-year growth. Operating income is expected to be between $60 million and $65 million, before the non-cash foreign exchange impact of lease liabilities and forward contracts, the non-cash impact of revaluation of cores on customers’ shelves, and supply chain disruptions. The company estimates other non-cash items will be approximately $16 million, including core and finished goods premium amortization and share-based compensation, and cash expenses will be approximately $2 million for special EV-related research and development expenses impacting operating income. The company estimates depreciation and amortization will be approximately $12 million.

Use of Non-GAAP Measure

This press release includes the following non-GAAP measure – EBITDA, which is not a measure of financial performance under GAAP and should not be considered as an alternative to net income as a measure of financial performance. The company believes this non-GAAP measure, when considered together with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to the company’s results of operations. However, this non-GAAP measure has significant limitations in that it does not reflect all the costs and other items associated with the operation of the company’s business as determined in accordance with GAAP. In addition, the company’s non-GAAP measures may be calculated differently and are therefore not comparable to similar measures by other companies. Therefore, investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, measures of financial performance in accordance with GAAP. For a definition and reconciliation of EBITDA to net income, its corresponding GAAP measure, see the financial tables included in this press release. Also, refer to our Form 8-K to which this release is attached, and other filings we make with the SEC, for further information regarding this measure.

Earnings Conference Call and Webcast

Selwyn Joffe, chairman, president and chief executive officer, and David Lee, chief financial officer, will host an investor conference call today at 10:00 a.m. Pacific time to discuss the company’s financial results and operations. The call will be open to all interested investors either through a live audio webcast at www.motorcarparts.com or live by calling (888) 440-5584 (domestic) or (646) 960-0457 (international). For those who are not available to listen to the live broadcast, the call will be archived on Motorcar Parts of America’s website www.motorcarparts.com. A telephone playback of the conference call will also be available from approximately 1:00 p.m. Pacific time on June 13, 2023 through 8:59 p.m. Pacific time on June 20, 2023 by calling (800) 770-2030 (domestic) or (647) 362-9199 (international) and using access code: 1545314.

About Motorcar Parts of America, Inc.

Motorcar Parts of America, Inc. is a remanufacturer, manufacturer, and distributor of automotive aftermarket parts -- including alternators, starters, wheel bearings and hub assemblies, brake calipers, brake pads, brake rotors, brake master cylinders, brake power boosters, turbochargers, and diagnostic testing equipment utilized in imported and domestic passenger vehicles, light trucks, and heavy-duty applications. Its products are sold to automotive retail outlets and the professional repair market throughout the United States, Canada, and Mexico, with facilities located in California, New York, Mexico, Malaysia, China and India, and administrative offices located in California, Tennessee, Mexico, Singapore, Malaysia, and Canada. In addition, the company’s electrical vehicle subsidiary designs and manufactures testing solutions for performance, endurance, and production of multiple components in the electric power train – providing simulation, emulation, and production applications for the electrification of both automotive and aerospace industries, including electric vehicle charging systems. Additional information is available at www.motorcarparts.com.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. The statements contained in this press release that are not historical facts are forward-looking statements based on the company’s current expectations and beliefs concerning future developments and their potential effects on the company. These forward-looking statements involve significant risks and uncertainties (some of which are beyond the control of the company) and are subject to change based upon various factors. Reference is also made to the Risk Factors set forth in the company’s Form 10-K Annual Report filed with the Securities and Exchange Commission (SEC) in June 2023 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.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

 

Three Months Ended March 31,

Year Ended March 31,

2023

2022

2023

2022

(Unaudited)
 
Net sales

$

194,727,000

 

$

163,916,000

 

$

683,074,000

 

$

650,308,000

 

Cost of goods sold

 

158,576,000

 

 

138,148,000

 

 

569,112,000

 

 

532,443,000

 

Gross profit

 

36,151,000

 

 

25,768,000

 

 

113,962,000

 

 

117,865,000

 

Operating expenses:
General and administrative

 

12,677,000

 

 

15,943,000

 

 

54,756,000

 

 

57,499,000

 

Sales and marketing

 

4,487,000

 

 

5,671,000

 

 

21,729,000

 

 

22,833,000

 

Research and development

 

1,992,000

 

 

2,871,000

 

 

10,322,000

 

 

10,502,000

 

Foreign exchange impact of lease liabilities and forward contracts

 

(6,738,000

)

 

(3,442,000

)

 

(9,291,000

)

 

(1,673,000

)

Total operating expenses

 

12,418,000

 

 

21,043,000

 

 

77,516,000

 

 

89,161,000

 

Operating income

 

23,733,000

 

 

4,725,000

 

 

36,446,000

 

 

28,704,000

 

Interest expense, net

 

11,880,000

 

 

4,045,000

 

 

39,555,000

 

 

15,555,000

 

Income (loss) before income tax expense

 

11,853,000

 

 

680,000

 

 

(3,109,000

)

 

13,149,000

 

Income tax expense

 

10,394,000

 

 

1,002,000

 

 

1,098,000

 

 

5,788,000

 

Net income (loss)

$

1,459,000

 

$

(322,000

)

$

(4,207,000

)

$

7,361,000

 

Basic net income (loss) per share

$

0.07

 

$

(0.02

)

$

(0.22

)

$

0.38

 

Diluted net income (loss) per share

$

0.07

 

$

(0.02

)

$

(0.22

)

$

0.38

 

Weighted average number of shares outstanding:
Basic

 

19,492,962

 

 

19,104,198

 

 

19,340,246

 

 

19,119,727

 

Diluted

 

19,603,394

 

 

19,104,198

 

 

19,340,246

 

 

19,559,646

 

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 
March 31, 2023 March 31, 2022
ASSETS
Current assets:
Cash and cash equivalents

$

11,596,000

 

$

23,016,000

 

Short-term investments

 

2,011,000

 

 

2,202,000

 

Accounts receivable — net

 

119,868,000

 

 

85,075,000

 

Inventory — net

 

339,675,000

 

 

370,503,000

 

Inventory unreturned

 

16,579,000

 

 

15,001,000

 

Contract assets

 

25,443,000

 

 

27,500,000

 

Income tax receivable

 

2,156,000

 

 

301,000

 

Prepaid expenses and other current assets

 

20,150,000

 

 

13,387,000

 

Total current assets

 

537,478,000

 

 

536,985,000

 

Plant and equipment — net

 

46,052,000

 

 

51,062,000

 

Operating lease assets

 

87,619,000

 

 

81,997,000

 

Deferred income taxes

 

32,625,000

 

 

26,982,000

 

Long-term contract assets

 

318,381,000

 

 

310,255,000

 

Goodwill

 

3,205,000

 

 

3,205,000

 

Intangible assets — net

 

2,143,000

 

 

3,799,000

 

Other assets

 

1,062,000

 

 

1,413,000

 

TOTAL ASSETS

$

1,028,565,000

 

$

1,015,698,000

 

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

119,437,000

 

$

147,469,000

 

Accrued liabilities

 

22,329,000

 

 

20,966,000

 

Customer finished goods returns accrual

 

37,984,000

 

 

38,086,000

 

Contract liabilities

 

40,340,000

 

 

42,496,000

 

Revolving loan

 

145,200,000

 

 

155,000,000

 

Other current liabilities

 

4,871,000

 

 

11,930,000

 

Operating lease liabilities

 

8,767,000

 

 

6,788,000

 

Current portion of term loan

 

3,664,000

 

 

3,670,000

 

Total current liabilities

 

382,592,000

 

 

426,405,000

 

Term loan, less current portion

 

9,279,000

 

 

13,024,000

 

Convertible notes, related party

 

30,994,000

 

 

-

 

Contract liabilities, less current portion

 

193,606,000

 

 

172,764,000

 

Deferred income taxes

 

718,000

 

 

126,000

 

Operating lease liabilities, less current portion

 

79,318,000

 

 

80,803,000

 

Other liabilities

 

11,583,000

 

 

7,313,000

 

Total liabilities

 

708,090,000

 

 

700,435,000

 

Commitments and contingencies
Shareholders' equity:
Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued

 

-

 

 

-

 

Series A junior participating preferred stock; par value $.01 per share,
20,000 shares authorized; none issued

 

-

 

 

-

 

Common stock; par value $.01 per share, 50,000,000 shares authorized;
19,494,615 and 19,104,751 shares issued and outstanding at March 31, 2023 and

 

-

 

 

-

 

2022, respectively

 

195,000

 

 

191,000

 

Additional paid-in capital

 

231,836,000

 

 

227,184,000

 

Retained earnings

 

88,747,000

 

 

92,954,000

 

Accumulated other comprehensive loss

 

(303,000

)

 

(5,066,000

)

Total shareholders' equity

 

320,475,000

 

 

315,263,000

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,028,565,000

 

$

1,015,698,000

 

Additional Information and Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the company has included the following additional information and non-GAAP financial measures for the three and twelve months ended March 31, 2023 and 2022. Among other things, the company uses such additional information and non-GAAP adjusted financial measures in addition to and together with corresponding GAAP measures to help analyze the performance of its business.

The company believes this information helps provide a more complete understanding of the company's results of operations and the factors and trends affecting the company's business. However, this information should be considered as a supplement to, and not as a substitute for, or superior to, information contained in the company’s financial statements prepared in accordance with GAAP. In addition, the company’s non-GAAP measures may be calculated differently and are therefore not comparable to similar measures by other companies.

The company defines EBITDA as earnings before interest, taxes, depreciation, and amortization. A reconciliation of EBITDA to net income is provided below along with information regarding such items.

Items Impacting Net Income for the Three Months Ended March 31, 2023 and 2022

Exhibit 1

 
Three Months Ended March 31,

2023

2022

$ Per Share $ Per Share
GAAP net income (loss)

$

1,459,000

 

$

0.07

 

$

(322,000

)

$

(0.02

)

 
Non-cash items impacting net income (loss)
Core and finished goods premium amortization

$

2,608,000

 

$

0.13

 

$

2,947,000

 

$

0.15

 

Revaluation - cores on customers' shelves

 

1,032,000

 

 

0.05

 

 

1,154,000

 

 

0.06

 

Share-based compensation expenses and earn-out accruals

 

1,164,000

 

 

0.06

 

 

1,830,000

 

 

0.10

 

Foreign exchange impact of lease liabilities and forward contracts

 

(6,738,000

)

 

(0.34

)

 

(3,442,000

)

 

(0.18

)

Tax effect (a)

 

484,000

 

 

0.02

 

 

(622,000

)

 

(0.03

)

Total non-cash items impacting net income (loss)

$

(1,450,000

)

$

(0.07

)

$

1,867,000

 

$

0.10

 

 
Cash items impacting net income (loss)
Supply chain disruptions and related costs (b)

$

2,951,000

 

$

0.15

 

$

3,938,000

 

$

0.21

 

New product line start-up costs and transition expenses, and severance (c)

 

923,000

 

 

0.05

 

 

358,000

 

 

0.02

 

Employee retention credit (d)

 

(5,104,000

)

 

(0.26

)

 

-

 

 

-

 

Tax effect (a)

 

308,000

 

 

0.02

 

 

(1,074,000

)

 

(0.06

)

Total cash items impacting net income (loss)

$

(922,000

)

$

(0.05

)

$

3,222,000

 

$

0.17

 

(a) Tax effect is calculated by applying an income tax rate of 25.0% to items listed above; this rate may differ from the period's actual income tax rate.
(b) For the three-months ended March 31, 2023, consists of $2,913,000 impacting gross profit and $38,000 included in operating expenses.
For the three-months ended March 31, 2022, consists of $3,337,000 impacting gross profit and $601,000 included in operating expenses.
(c) For the three-months ended March 31, 2023, consists of $923,000 included in operating expenses.
For the three-months ended March 31, 2022, consists of $358,000 included in operating expenses.
(d) For the three-months ended March 31, 2023, consists of ($2,034,000) impacting gross profit and ($3,070,000) included in operating expenses.

Note: Results for the three months ended March 31, 2023 include a $5.1 million, employee retention credit (ERC). The ERC was reimbursement for prior incurred expenses during the COVID-19 pandemic. Subsequent to the pandemic, cost-reduction initiatives related to employee-related expenses were implemented, along with other ongoing strategic opportunities to reduce costs -- resulting in approximately $5 million annual run-rate expense reductions, going forward.

Items Impacting Net Income for the Twelve Months Ended March 31, 2023 and 2022

Exhibit 2

 
Twelve Months Ended March 31,

2023

2022

$ Per Share $ Per Share
GAAP net (loss) income

$

(4,207,000

)

$

(0.22

)

$

7,361,000

 

$

0.38

 

 
Non-cash items impacting net (loss) income
Core and finished goods premium amortization

$

11,791,000

 

$

0.61

 

$

11,960,000

 

$

0.61

 

Revaluation - cores on customers' shelves

 

3,736,000

 

 

0.19

 

 

4,671,000

 

 

0.24

 

Share-based compensation expenses and earn-out accruals

 

4,685,000

 

 

0.24

 

 

7,384,000

 

 

0.38

 

Foreign exchange impact of lease liabilities and forward contracts

 

(9,291,000

)

 

(0.48

)

 

(1,673,000

)

 

(0.09

)

Tax effect (a)

 

(2,730,000

)

 

(0.14

)

 

(5,586,000

)

 

(0.29

)

Total non-cash items impacting net (loss) income

$

8,191,000

 

$

0.42

 

$

16,756,000

 

$

0.86

 

 
Cash items impacting net (loss) income
Supply chain disruptions and related costs (b)

$

12,914,000

 

$

0.67

 

$

20,195,000

 

$

1.03

 

New product line start-up costs and transition expenses, and severance (c)

 

3,565,000

 

 

0.18

 

 

3,425,000

 

 

0.18

 

Employee retention credit (d)

 

(5,104,000

)

 

(0.26

)

 

-

 

 

-

 

Gain due to realignment of inventory at customer distribution centers

 

-

 

 

-

 

 

(4,862,000

)

 

(0.25

)

Tax effect (a)

 

(2,844,000

)

 

(0.15

)

 

(4,690,000

)

 

(0.24

)

Total cash items impacting net (loss) income

$

8,531,000

 

$

0.44

 

$

14,068,000

 

$

0.72

 

(a) Tax effect is calculated by applying an income tax rate of 25.0% to items listed above; this rate may differ from the period's actual income tax rate.
(b) For the twelve-months ended March 31, 2023, consists of $11,485,000 impacting gross profit and $1,429,000 included in operating expenses.
For the twelve-months ended March 31, 2022, consists of $17,894,000 impacting gross profit and $2,301,000 included in operating expenses.
(c) For the twelve-months ended March 31, 2023, consists of $3,565,000 included in operating expenses.
For the twelve-months ended March 31, 2022, consists of $2,744,000 included in cost of goods sold and $681,000 included in operating expenses.
(d) For the twelve-months ended March 31, 2023, consists of ($2,034,000) impacting gross profit and ($3,070,000) included in operating expenses.

Note: Results for the twelve months ended March 31, 2023 include a $5.1 million, employee retention credit (ERC). The ERC was reimbursement for prior incurred expenses during the COVID-19 pandemic. Subsequent to the pandemic, cost-reduction initiatives related to employee-related expenses were implemented, along with other ongoing strategic opportunities to reduce costs -- resulting in approximately $5 million annual run-rate expense reductions, going forward.

Items Impacting Gross Profit for the Three Months Ended March 31, 2023 and 2022

Exhibit 3

 
Three Months Ended March 31,

2023

2022

$ Gross

Margin
$ Gross

Margin
GAAP gross profit

$

36,151,000

 

18.6

%

$

25,768,000

15.7

%

 
Non-cash items impacting gross profit
Core and finished goods premium amortization

$

2,608,000

 

1.3

%

$

2,947,000

1.8

%

Revaluation - cores on customers' shelves

 

1,032,000

 

0.5

%

 

1,154,000

0.7

%

Total non-cash items impacting gross profit

$

3,640,000

 

1.9

%

$

4,101,000

2.5

%

 
Cash items impacting gross profit
Supply chain disruptions and related costs

$

2,913,000

 

1.5

%

$

3,337,000

2.0

%

Employee retention credit

 

(2,034,000

)

-1.0

%

 

-

-

 

Total cash items impacting gross profit

$

879,000

 

0.5

%

$

3,337,000

2.0

%

Note: Results for the three months ended March 31, 2023 include a $5.1 million, employee retention credit (ERC), including a $2.0 million impact to cost of goods sold and a $3.1 million impact to operating expenses. The ERC was reimbursement for prior incurred expenses during the COVID-19 pandemic. Subsequent to the pandemic, cost-reduction initiatives related to employee-related expenses were implemented, along with other ongoing strategic opportunities to reduce costs -- resulting in approximately $5 million annual run-rate expense reductions, going forward.

Items Impacting Gross Profit for the Twelve Months Ended March 31, 2023 and 2022

Exhibit 4

 
Twelve Months Ended March 31,

2023

2022

$ Gross

Margin
$ Gross

Margin
GAAP gross profit

$

113,962,000

 

16.7

%

$

117,865,000

 

18.1

%

 
Non-cash items impacting gross profit
Core and finished goods premium amortization

$

11,791,000

 

1.7

%

$

11,960,000

 

1.8

%

Revaluation - cores on customers' shelves

 

3,736,000

 

0.5

%

 

4,671,000

 

0.7

%

Total non-cash items impacting gross profit

$

15,527,000

 

2.3

%

$

16,631,000

 

2.6

%

 
Cash items impacting gross profit
Supply chain disruptions and related costs

$

11,485,000

 

1.7

%

$

17,894,000

 

2.8

%

New product line start-up costs and transition expenses

 

-

 

-

 

 

2,744,000

 

0.4

%

Employee retention credit

 

(2,034,000

)

-0.3

%

 

-

 

-

 

Gain due to realignment of inventory at customer distribution centers (a)

 

-

 

-

 

 

(4,862,000

)

-0.4

%

Total cash items impacting gross profit

$

9,451,000

 

1.4

%

$

15,776,000

 

2.8

%

(a) gross margin reflecting impact to net sales and cost of goods sold

Note: Results for the twelve months ended March 31, 2023 include a $5.1 million, employee retention credit (ERC), including a $2.0 million impact to cost of goods sold and a $3.1 million impact to operating expenses. The ERC was reimbursement for prior incurred expenses during the COVID-19 pandemic. Subsequent to the pandemic, cost-reduction initiatives related to employee-related expenses were implemented, along with other ongoing strategic opportunities to reduce costs -- resulting in approximately $5 million annual run-rate expense reductions, going forward.

Items Impacting EBITDA for the Three and Twelve Months Ended March 31, 2023 and 2022

Exhibit 5

 
Three Months Ended March 31, Twelve Months Ended March 31,

2023

2022

2023

2022

GAAP net income (loss)

$

1,459,000

 

$

(322,000

)

$

(4,207,000

)

$

7,361,000

 

Interest expense, net

 

11,880,000

 

 

4,045,000

 

 

39,555,000

 

 

15,555,000

 

Income tax (benefit) expense

 

10,394,000

 

 

1,002,000

 

 

1,098,000

 

 

5,788,000

 

Depreciation and amortization

 

3,122,000

 

 

3,295,000

 

 

12,444,000

 

 

12,886,000

 

EBITDA

$

26,855,000

 

$

8,020,000

 

$

48,890,000

 

$

41,590,000

 

 
Non-cash items impacting EBITDA
Core and finished goods premium amortization

$

2,608,000

 

$

2,947,000

 

$

11,791,000

 

$

11,960,000

 

Revaluation - cores on customers' shelves

 

1,032,000

 

 

1,154,000

 

 

3,736,000

 

 

4,671,000

 

Share-based compensation expenses and earn-out accruals

 

1,164,000

 

 

1,830,000

 

 

4,685,000

 

 

7,384,000

 

Foreign exchange impact of lease liabilities and forward contracts

 

(6,738,000

)

 

(3,442,000

)

 

(9,291,000

)

 

(1,673,000

)

Total non-cash items impacting EBITDA

$

(1,934,000

)

$

2,489,000

 

$

10,921,000

 

$

22,342,000

 

 
Cash items impacting EBITDA
Supply chain disruptions and related costs

$

2,951,000

 

$

3,938,000

 

$

12,914,000

 

$

20,195,000

 

New product line start-up costs and transition expenses, and severance (a)

 

923,000

 

 

358,000

 

 

3,565,000

 

 

3,194,000

 

Employee retention credit

 

(5,104,000

)

 

-

 

 

(5,104,000

)

 

-

 

Gain due to realignment of inventory at customer distribution centers

 

-

 

 

-

 

 

-

 

 

(4,862,000

)

Total cash items impacting EBITDA

$

(1,230,000

)

$

4,296,000

 

$

11,375,000

 

$

18,527,000

 

(a) Excludes depreciation, which is included in the depreciation and amortization line item.

Note: Results for the three and twelve months ended March 31, 2023 include a $5.1 million, employee retention credit (ERC). The ERC was reimbursement for prior incurred expenses during the COVID-19 pandemic. Subsequent to the pandemic, cost-reduction initiatives related to employee-related expenses were implemented, along with other ongoing strategic opportunities to reduce costs -- resulting in approximately $5 million annual run-rate expense reductions, going forward.

Contacts

Gary S. Maier

Vice President, Corporate Communications & IR

(310) 972-5124

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