LOS ANGELES, Feb. 09, 2018 (GLOBE NEWSWIRE) -- Motorcar Parts of America, Inc. (Nasdaq:MPAA) today reported results for its fiscal 2018 third quarter and nine-months -- reflecting slower than expected sales due to unusually soft demand in the industry and customer inventory reduction programs, with more robust sales activity in the current fourth quarter.
Net sales for the fiscal 2018 third quarter were $100.1 million compared with $112.6 million for the same period a year earlier. The company’s sales and profit performance for the prior fiscal third quarter reflects the benefits of recognizing a $9.3 million revenue pick-up due to a change in estimate for stock adjustment returns. Additional details are included in the attached financial tables. Despite market-share increases, the company’s sales for the quarter were soft due to lower orders and customer inventory reduction initiatives, as noted above, both of which now appear to be reversing.
All results labeled as “adjusted” in this press release are non-GAAP measures as discussed more fully below under the heading “Use of Non-GAAP Measures.”
Adjusted net sales for the fiscal 2018 third quarter were $103.4 million compared with $112.9 million a year earlier.
Net loss for the fiscal 2018 third quarter was $6.8 million, or $0.36 loss per share, compared with net income of $11.1 million, or $0.57 per diluted share, a year ago. The net loss includes a $6.3 million, or $0.33 per share, non-cash book tax charge and a separate transition tax charge of approximately $545,000, or $0.03 per share, payable over eight years, both of which relate to the recently enacted Tax Cuts and Jobs Act (“Tax Reform Act”).
Adjusted net income for the fiscal 2018 third quarter was $6.7 million, or $0.34 per diluted share, compared with $11.7 million, or $0.60 per diluted share, in the same period a year earlier.
Gross profit for the fiscal 2018 third quarter was $22.5 million compared with $32.4 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2018 third quarter was 22.5 percent compared with 28.7 percent a year earlier – primarily reflecting the impact of customer allowances related to new business, as well as higher returns as a percentage of sales, lower overhead absorption, and product mix.
Adjusted gross profit for the fiscal 2018 third quarter was $28.8 million compared with $33.9 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the three months was 27.9 percent compared with 30.1 percent a year earlier. The current quarter adjusted gross profit as a percentage of adjusted net sales was impacted by higher returns as a percentage of adjusted sales, lower overhead absorption, and product mix.
Net sales for the fiscal 2018 nine-month period were $307.0 million compared with $306.8 million a year earlier. As noted above, the company’s sales and profit performance for the prior year period reflects the benefits of recognizing a $9.3 million revenue pick-up due to a change in estimate for stock adjustment returns.
Adjusted net sales for the fiscal 2018 nine-month period were $312.7 million compared with $319.1 million last year.
Net income for the fiscal 2018 nine-month period was $7.1 million, or $0.37 per diluted share, compared with $27.8 million, or $1.43 per diluted share, in fiscal 2017. Net income includes a $6.3 million, or $0.32 per diluted share, non-cash book tax charge and a separate transition tax charge of approximately $545,000, or $0.03 per diluted share, payable over eight years, both of which relate to the recently enacted Tax Reform Act.
Adjusted net income for the fiscal 2018 nine-month period was $24.7 million, or $1.27 per diluted share, compared with $34.3 million, or $1.77 per diluted share, in fiscal 2017.
Gross profit for the fiscal 2018 nine-month period was $75.5 million compared with $83.4 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2018 nine-month period was 24.6 percent compared with 27.2 percent a year earlier – reflecting the impact of customer allowances and return accruals related to new business, higher returns as a percentage of sales and lower overhead absorption.
Adjusted gross profit for the fiscal 2018 nine-month period was $88.3 million compared with $98.7 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the nine months was 28.2 percent compared with 30.9 percent a year earlier. Adjusted gross profit as a percentage of adjusted net sales for the current nine-month period was impacted by higher returns as a percentage of adjusted sales and lower overhead absorption.
“We were disappointed in our results for the quarter, especially since we continued to gain market share across all of our product lines. While we incurred additional expenses related to new business wins, we did not realize the full benefit of the associated revenues during the quarter. This was due to various factors, including reduced customer orders, which industry observers attribute to mild weather which seems to have reversed in our current fourth quarter. In addition, the business was impacted by customer inventory reduction initiatives. As a result, we were negatively impacted by under-absorption of overhead costs. We are now pleased to see a return to positive momentum in the marketplace. We expect the colder winter conditions across the majority of the country to further increase demand.
“Ongoing positive strategic initiatives supported by organic growth, product line expansion and complementary acquisition opportunities lead me to reconfirm our near-and long-term optimism for growth within the $125 billion aftermarket hard parts industry,” said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.
Separately, he said the board of directors last week increased the company’s share repurchase program authorization to $20,000,000 from $15,000,000 of its common stock, with current availability of approximately $13 million.
Joffe noted the company recently added a new 410,000 square-foot facility to support current and new growth.
UPDATED FISCAL 2018 SALES GUIDANCE
Due to the factors impacting the fiscal third quarter noted above, Motorcar Parts of America now believes revenues for its fiscal 2018 ending March 31 should be between $434 million and $440 million, with sales momentum improving in the current fiscal fourth quarter, as discussed above.
IMPACT OF TAX REFORM ACT
The company has preliminarily evaluated its net income tax expense as a result of the recently enacted Tax Reform Act which reduces its federal corporate income tax rate to 21 percent from 35 percent, among other factors. The company estimates its effective tax rate commencing in fiscal 2019 will be reduced to approximately 25 percent.
The company’s deferred tax assets were provisionally reduced by a non-cash charge of approximately $6.3 million based on current estimates, as explained below. In addition, transition taxes of approximately $545,000 were provisionally recorded as of December 31, 2017, as explained below.
Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted through income tax expense as changes in tax laws are enacted.
Transition taxes are one-time expenses for deemed repatriation of accumulated foreign income.
The company’s fiscal 2018 third quarter results were impacted by $0.36 per diluted share as a result of the Tax Reform Act. A prorated federal corporate income tax rate of 31.5% will apply for the company’s full 2018 fiscal year. The full impact of the Tax Reform Act will be effective in the fiscal year commencing April 1, 2018.
These tax charges represent provisional amounts based on the company’s current best estimates. Any future adjustments recorded to the provisional amounts will be included as an adjustment to tax expense as they are identified. The provisional amounts incorporate assumptions made based upon the company’s current interpretation of the Tax Reform Act and may change as the company receives additional clarification and implementation guidance and completes its analysis.
Use of Non-GAAP Measures
This press release includes the following non-GAAP measures - adjusted net sales, adjusted net income (loss), adjusted EBITDA, adjusted gross profit and adjusted gross margin, which are not measures of financial performance under GAAP, and should not be considered as alternatives to net sales, net income (loss), EBITDA, income from operations, gross profit or gross profit margin as a measure of financial performance. The Company believes these non-GAAP measures, when considered together with the corresponding GAAP measures, provide useful information to investors and management regarding financial and business trends relating to the company’s results of operations. However, these non-GAAP measures have significant limitations in that they do not reflect all of the costs associated with the operations of the company’s business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, measures of financial performance in accordance with GAAP. For a reconciliation of adjusted net sales, adjusted net income (loss), adjusted EBITDA, adjusted gross profit and adjusted gross margin to their corresponding GAAP measures, see the financial tables included in this press release. Also, refer to our Form 8-K to which this release is attached, and other filings we make with the SEC, for further information regarding these adjustments.
Teleconference and Web Cast
Selwyn Joffe, chairman, president and chief executive officer, and David Lee, chief financial officer, will host an investor conference call today at 6:00 a.m. Pacific time to discuss the company’s financial results and operations.
The call will be open to all interested investors either through a live audio Web broadcast at www.motorcarparts.com or live by calling (877)-776-4016 (domestic) or (973)-638-3231 (international). For those who are not available to listen to the live broadcast, the call will be archived for seven days on Motorcar Parts of America’s website www.motorcarparts.com. A telephone playback of the conference call will also be available from approximately 1:00 p.m. Pacific time on February 9, 2018 through 8:59 p.m. Pacific time on February 16, 2018 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 8867118.
About Motorcar Parts of America, Inc.
Motorcar Parts of America, Inc. is a remanufacturer, manufacturer and distributor of automotive aftermarket parts -- including alternators, starters, wheel bearing and hub assemblies, brake master cylinders, brake power boosters and turbochargers utilized in imported and domestic passenger vehicles, light trucks and heavy-duty applications. In addition, the company designs and manufactures test equipment for performance, endurance and production testing of alternators, starters, electric motors, inverters and belt starter generators for both the OE and aftermarket. Motorcar Parts of America’s products are sold to automotive retail outlets and the professional repair market throughout the United States and Canada, with facilities located in California, Mexico, Malaysia and China, and administrative offices located in California, Tennessee, Mexico, Singapore, Malaysia and Canada. Additional information is available at www.motorcarparts.com.
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. The statements contained in this press release that are not historical facts are forward-looking statements based on the company’s current expectations and beliefs concerning future developments and their potential effects on the company. These forward-looking statements involve significant risks and uncertainties (some of which are beyond the control of the company) and are subject to change based upon various factors. Reference is also made to the Risk Factors set forth in the company’s Form 10-K Annual Report filed with the Securities and Exchange Commission (SEC) in June 2017 and in its Forms 10-Q filed with the SEC for additional risks and uncertainties facing the company. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.
(Financial tables follow)
| MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES | |||||||||||||
| Consolidated Statements of Income | |||||||||||||
| (Unaudited) | |||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| Net sales | $ | 100,127,000 | $ | 112,595,000 | $ | 306,964,000 | $ | 306,843,000 | |||||
| Cost of goods sold | 77,583,000 | 80,225,000 | 231,419,000 | 223,424,000 | |||||||||
| Gross profit | 22,544,000 | 32,370,000 | 75,545,000 | 83,419,000 | |||||||||
| Operating expenses: | |||||||||||||
| General and administrative | 11,915,000 | 7,952,000 | 26,717,000 | 21,446,000 | |||||||||
| Sales and marketing | 4,048,000 | 3,234,000 | 10,899,000 | 8,575,000 | |||||||||
| Research and development | 1,678,000 | 1,039,000 | 3,920,000 | 2,813,000 | |||||||||
| Total operating expenses | 17,641,000 | 12,225,000 | 41,536,000 | 32,834,000 | |||||||||
| Operating income | 4,903,000 | 20,145,000 | 34,009,000 | 50,585,000 | |||||||||
| Interest expense, net | 3,953,000 | 3,357,000 | 10,789,000 | 9,365,000 | |||||||||
| Income before income tax expense | 950,000 | 16,788,000 | 23,220,000 | 41,220,000 | |||||||||
| Income tax expense | 7,756,000 | 5,678,000 | 16,099,000 | 13,459,000 | |||||||||
| Net (loss) income | $ | (6,806,000 | ) | $ | 11,110,000 | $ | 7,121,000 | $ | 27,761,000 | ||||
| Basic net (loss) income per share | $ | (0.36 | ) | $ | 0.59 | $ | 0.38 | $ | 1.49 | ||||
| Diluted net (loss) income per share | $ | (0.36 | ) | $ | 0.57 | $ | 0.37 | $ | 1.43 | ||||
| Weighted average number of shares outstanding: | |||||||||||||
| Basic | 19,069,152 | 18,675,125 | 18,814,967 | 18,587,946 | |||||||||
| Diluted | 19,069,152 | 19,441,265 | 19,400,744 | 19,399,857 | |||||||||
| MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES | ||||||||
| Consolidated Balance Sheets | ||||||||
| December 31, 2017 | March 31, 2017 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 10,032,000 | $ | 9,029,000 | ||||
| Short-term investments | 2,759,000 | 2,140,000 | ||||||
| Accounts receivable — net | 3,330,000 | 26,017,000 | ||||||
| Inventory— net | 80,991,000 | 67,516,000 | ||||||
| Inventory unreturned | 7,249,000 | 7,581,000 | ||||||
| Prepaid expenses and other current assets | 12,829,000 | 9,848,000 | ||||||
| Total current assets | 117,190,000 | 122,131,000 | ||||||
| Plant and equipment — net | 21,040,000 | 18,437,000 | ||||||
| Long-term core inventory — net | 296,274,000 | 262,922,000 | ||||||
| Long-term core inventory deposits | 5,569,000 | 5,569,000 | ||||||
| Long-term deferred income taxes | 14,422,000 | 13,546,000 | ||||||
| Goodwill | 2,551,000 | 2,551,000 | ||||||
| Intangible assets — net | 3,970,000 | 3,993,000 | ||||||
| Other assets | 6,678,000 | 6,990,000 | ||||||
| TOTAL ASSETS | $ | 467,694,000 | $ | 436,139,000 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 69,445,000 | $ | 85,960,000 | ||||
| Accrued liabilities | 11,992,000 | 10,077,000 | ||||||
| Customer finished goods returns accrual | 15,962,000 | 17,667,000 | ||||||
| Accrued core payment | 16,718,000 | 11,714,000 | ||||||
| Revolving loan | 36,000,000 | 11,000,000 | ||||||
| Other current liabilities | 4,614,000 | 3,300,000 | ||||||
| Current portion of term loan | 3,068,000 | 3,064,000 | ||||||
| Total current liabilities | 157,799,000 | 142,782,000 | ||||||
| Term loan, less current portion | 14,670,000 | 16,935,000 | ||||||
| Long-term accrued core payment | 22,560,000 | 12,349,000 | ||||||
| Long-term deferred income taxes | 212,000 | 180,000 | ||||||
| Other liabilities | 3,920,000 | 15,212,000 | ||||||
| Total liabilities | 199,161,000 | 187,458,000 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders' equity: | ||||||||
| Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued | - | - | ||||||
| Series A junior participating preferred stock; par value $.01 per share, | ||||||||
| 20,000 shares authorized; none issued | - | - | ||||||
| Common stock; par value $.01 per share, 50,000,000 shares authorized; | ||||||||
| 19,069,782 and 18,648,854 shares issued and outstanding at December 31, 2017 and | ||||||||
| March 31, 2017, respectively | 191,000 | 186,000 | ||||||
| Additional paid-in capital | 217,089,000 | 205,646,000 | ||||||
| Retained earnings | 57,411,000 | 50,290,000 | ||||||
| Accumulated other comprehensive loss | (6,158,000 | ) | (7,441,000 | ) | ||||
| Total shareholders' equity | 268,533,000 | 248,681,000 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 467,694,000 | $ | 436,139,000 | ||||
Reconciliation of Non-GAAP Financial Measures
To supplement the consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company has included the following non-GAAP adjusted financial measures in this press release and in the webcast to discuss the Company's financial results for the three and nine months ended December 31, 2017 and 2016. Each of these non-GAAP adjusted financial measures is adjusted from results based on GAAP to exclude certain expenses and gains. Among other things, the Company uses such non-GAAP adjusted financial measures in addition to and in conjunction with corresponding GAAP measures to help analyze the performance of its business.
These non-GAAP adjusted financial measures reflect an additional way of viewing aspects of the Company's operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company's results of operations and the factors and trends affecting the Company's business. However, these non-GAAP adjusted financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
Income statement information for the three and nine months ended December 31, 2017 and 2016 are as follows:
| Reconciliation of Non-GAAP Financial Measures | Exhibit 1 | ||||||||||||||
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| GAAP Results: | |||||||||||||||
| Net sales | $ | 100,127,000 | $ | 112,595,000 | $ | 306,964,000 | $ | 306,843,000 | |||||||
| Net income (loss) | (6,806,000 | ) | 11,110,000 | 7,121,000 | 27,761,000 | ||||||||||
| Diluted income (loss) per share (EPS) | (0.36 | ) | 0.57 | 0.37 | 1.43 | ||||||||||
| Gross margin | 22.5 | % | 28.7 | % | 24.6 | % | 27.2 | % | |||||||
| Non-GAAP Adjusted Results: | |||||||||||||||
| Non-GAAP adjusted net sales | $ | 103,369,000 | $ | 112,853,000 | $ | 312,702,000 | $ | 319,058,000 | |||||||
| Non-GAAP adjusted net income | 6,700,000 | 11,744,000 | 24,707,000 | 34,260,000 | |||||||||||
| Non-GAAP adjusted diluted earnings per share (EPS) | 0.34 | 0.60 | 1.27 | 1.77 | |||||||||||
| Non-GAAP adjusted gross margin | 27.9 | % | 30.1 | % | 28.2 | % | 30.9 | % | |||||||
| Non-GAAP adjusted EBITDA | $ | 15,278,000 | $ | 23,558,000 | $ | 52,186,000 | $ | 68,247,000 | |||||||
| Note: Results for the three and nine months ended December 31, 2016 include revenue due to the change in estimate for anticipated stock adjustment returns of $9,261,000 (which had a $4,066,000 gross profit and EBITDA impact, $2,551,000 net income impact and $0.13 earnings per diluted share impact). The change in estimate also had a 1.3% and 0.5% gross margin impact for the three and nine months ended December 31, 2016, respectively. | |||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | Exhibit 2 | |||||||||||
| Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||
| GAAP net sales | $ | 100,127,000 | $ | 112,595,000 | $ | 306,964,000 | $ | 306,843,000 | ||||
| Adjustments: | ||||||||||||
| Net sales | ||||||||||||
| Initial return and stock adjustment accruals related to new business | - | - | 2,496,000 | 3,168,000 | ||||||||
| Customer allowances related to new business | 3,242,000 | 258,000 | 3,242,000 | 9,047,000 | ||||||||
| Adjusted net sales | $ | 103,369,000 | $ | 112,853,000 | $ | 312,702,000 | $ | 319,058,000 | ||||
| Reconciliation of Non-GAAP Financial Measures | Exhibit 3 | |||||||||||||||
| Three Months Ended December 31, | ||||||||||||||||
| 2017 | 2016 | |||||||||||||||
| $ | Per Diluted Share | $ | Per Diluted Share | |||||||||||||
| GAAP net income (loss) | $ | (6,806,000 | ) | $ | (0.36 | ) | $ | 11,110,000 | $ | 0.57 | ||||||
| Adjustments: | ||||||||||||||||
| Net sales | ||||||||||||||||
| Customer allowances related to new business | 3,242,000 | $ | 0.17 | 258,000 | $ | 0.01 | ||||||||||
| Cost of goods sold | ||||||||||||||||
| Transition expenses | 803,000 | $ | 0.04 | - | $ | - | ||||||||||
| Lower of cost or net realizable value revaluation - cores on customers' shelves and inventory step-up amortization | 2,227,000 | $ | 0.11 | 1,295,000 | $ | 0.07 | ||||||||||
| Operating expenses | ||||||||||||||||
| Legal, severance, acquisition, financing, transition and other costs | 236,000 | $ | 0.01 | 92,000 | $ | 0.00 | ||||||||||
| Share-based compensation expenses | 914,000 | $ | 0.05 | 818,000 | $ | 0.04 | ||||||||||
| Mark-to-market losses (gains) | 1,784,000 | $ | 0.09 | 2,000 | $ | 0.00 | ||||||||||
| Interest | ||||||||||||||||
| Write-off of debt issuance costs | 231,000 | $ | 0.01 | - | $ | - | ||||||||||
| Tax effected (a) | (2,766,000 | ) | $ | (0.14 | ) | (1,831,000 | ) | $ | (0.09 | ) | ||||||
| Tax charge for revaluation of deferred tax assets and liabilities | 6,290,000 | $ | 0.33 | - | $ | - | ||||||||||
| Transition tax on deemed repatriation of accumulated foreign income | 545,000 | $ | 0.03 | - | $ | - | ||||||||||
| Adjusted net income | $ | 6,700,000 | $ | 0.34 | $ | 11,744,000 | $ | 0.60 | ||||||||
| (a) Adjusted net income is calculated by applying an income tax rate of 35.5% for the three months ended December 31, 2017 and 39.0% for the three months ended December 31, 2016; this rate may differ from the period's actual income tax rate | ||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | Exhibit 4 | |||||||||||||||
| Nine Months Ended December 31, | ||||||||||||||||
| 2017 | 2016 | |||||||||||||||
| $ | Per Diluted Share | $ | Per Diluted Share | |||||||||||||
| GAAP net income | $ | 7,121,000 | $ | 0.37 | $ | 27,761,000 | $ | 1.43 | ||||||||
| Adjustments: | ||||||||||||||||
| Net sales | ||||||||||||||||
| Initial return and stock adjustment accruals related to new business | 2,496,000 | $ | 0.13 | 3,168,000 | $ | 0.16 | ||||||||||
| Customer allowances related to new business | 3,242,000 | $ | 0.17 | 9,047,000 | $ | 0.47 | ||||||||||
| Cost of goods sold | ||||||||||||||||
| New product line start-up and ramp-up costs, and transition expenses | 803,000 | $ | 0.04 | 140,000 | $ | 0.01 | ||||||||||
| Lower of cost or net realizable value revaluation - cores on customers' shelves and inventory step-up amortization | 6,532,000 | $ | 0.34 | 3,488,000 | $ | 0.18 | ||||||||||
| Cost of customer allowances and stock adjustment accruals related to new business | (362,000 | ) | $ | (0.02 | ) | (568,000 | ) | $ | (0.03 | ) | ||||||
| Operating expenses | ||||||||||||||||
| Legal, severance, acquisition, financing, transition and other costs | 737,000 | $ | 0.04 | 707,000 | $ | 0.04 | ||||||||||
| Share-based compensation expenses | 2,658,000 | $ | 0.14 | 2,555,000 | $ | 0.13 | ||||||||||
| Mark-to-market losses (gains) | (1,251,000 | ) | $ | (0.06 | ) | (3,593,000 | ) | $ | (0.19 | ) | ||||||
| Interest | ||||||||||||||||
| Write-off of debt issuance costs | 231,000 | $ | 0.01 | - | $ | - | ||||||||||
| Tax effected (a) | (4,335,000 | ) | $ | (0.22 | ) | (8,445,000 | ) | $ | (0.44 | ) | ||||||
| Tax charge for revaluation of deferred tax assets and liabilities | 6,290,000 | $ | 0.32 | - | $ | - | ||||||||||
| Transition tax on deemed repatriation of accumulated foreign income | 545,000 | $ | 0.03 | - | $ | - | ||||||||||
| Adjusted net income | $ | 24,707,000 | $ | 1.27 | $ | 34,260,000 | $ | 1.77 | ||||||||
| (a) Adjusted net income is calculated by applying an income tax rate of 35.5% for the nine months ended December 31, 2017 and 39.0% for the nine months | ||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | Exhibit 5 | |||||||||||
| Three Months Ended December 31, | ||||||||||||
| 2017 | 2016 | |||||||||||
| $ | Gross Margin | $ | Gross Margin | |||||||||
| GAAP gross profit | $ | 22,544,000 | 22.5 | % | $ | 32,370,000 | 28.7 | % | ||||
| Adjustments: | ||||||||||||
| Net sales | ||||||||||||
| Customer allowances related to new business | 3,242,000 | 258,000 | ||||||||||
| Cost of goods sold | ||||||||||||
| Transition expenses | 803,000 | - | ||||||||||
| Lower of cost or net realizable value revaluation - cores on customers' shelves and inventory step-up amortization | 2,227,000 | 1,295,000 | ||||||||||
| Total adjustments | 6,272,000 | 5.4 | % | 1,553,000 | 1.4 | % | ||||||
| Adjusted gross profit | $ | 28,816,000 | 27.9 | % | $ | 33,923,000 | 30.1 | % | ||||
| Reconciliation of Non-GAAP Financial Measures | Exhibit 6 | |||||||||||||
| Nine Months Ended December 31, | ||||||||||||||
| 2017 | 2016 | |||||||||||||
| $ | Gross Margin | $ | Gross Margin | |||||||||||
| GAAP gross profit | $ | 75,545,000 | 24.6 | % | $ | 83,419,000 | 27.2 | % | ||||||
| Adjustments: | ||||||||||||||
| Net sales | ||||||||||||||
| Initial return and stock adjustment accruals related to new business | 2,496,000 | 3,168,000 | ||||||||||||
| Customer allowances related to new business | 3,242,000 | 9,047,000 | ||||||||||||
| Cost of goods sold | ||||||||||||||
| New product line start-up and ramp-up costs, and transition expenses | 803,000 | 140,000 | ||||||||||||
| Lower of cost or net realizable value revaluation - cores on customers' shelves and inventory step-up amortization | 6,532,000 | 3,488,000 | ||||||||||||
| Cost of customer allowances and stock adjustment accruals related to new business | (362,000 | ) | (568,000 | ) | ||||||||||
| Total adjustments | 12,711,000 | 3.6 | % | 15,275,000 | 3.7 | % | ||||||||
| Adjusted gross profit | $ | 88,256,000 | 28.2 | % | $ | 98,694,000 | 30.9 | % | ||||||
| Reconciliation of Non-GAAP Financial Measures | Exhibit 7 | ||||||||||||||
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| GAAP net income (loss) | $ | (6,806,000 | ) | $ | 11,110,000 | $ | 7,121,000 | $ | 27,761,000 | ||||||
| Interest expense, net | 3,953,000 | 3,357,000 | 10,789,000 | 9,365,000 | |||||||||||
| Income tax expense | 7,756,000 | 5,678,000 | 16,099,000 | 13,459,000 | |||||||||||
| Depreciation and amortization | 1,169,000 | 948,000 | 3,322,000 | 2,718,000 | |||||||||||
| EBITDA | $ | 6,072,000 | $ | 21,093,000 | $ | 37,331,000 | $ | 53,303,000 | |||||||
| Adjustments: | |||||||||||||||
| Net sales | |||||||||||||||
| Initial return and stock adjustment accruals related to new business | - | - | 2,496,000 | 3,168,000 | |||||||||||
| Customer allowances related to new business | 3,242,000 | 258,000 | 3,242,000 | 9,047,000 | |||||||||||
| Cost of goods sold | |||||||||||||||
| New product line start-up and ramp-up costs, and transition expenses | 803,000 | - | 803,000 | 140,000 | |||||||||||
| Lower of cost or net realizable value revaluation - cores on customers' shelves and inventory step-up amortization | 2,227,000 | 1,295,000 | 6,532,000 | 3,488,000 | |||||||||||
| Cost of customer allowances and stock adjustment accruals related to new business | - | - | (362,000 | ) | (568,000 | ) | |||||||||
| Operating expenses | |||||||||||||||
| Legal, severance, acquisition, financing, transition and other costs | 236,000 | 92,000 | 737,000 | 707,000 | |||||||||||
| Share-based compensation expenses | 914,000 | 818,000 | 2,658,000 | 2,555,000 | |||||||||||
| Mark-to-market losses (gains) | 1,784,000 | 2,000 | (1,251,000 | ) | (3,593,000 | ) | |||||||||
| Adjusted EBITDA | $ | 15,278,000 | $ | 23,558,000 | $ | 52,186,000 | $ | 68,247,000 | |||||||
CONTACT: Gary S. Maier
(310) 471-1288