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 JUNE 30, 20192020


☐
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

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 shareMPAAThe Nasdaq Global Select Market


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 18,890,41919,020,587 shares of Common Stock outstanding at August 2, 2019.
3, 2020.



Table of Contents

MOTORCAR PARTS OF AMERICA, INC.


TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
 
 
Item 1. Financial Statements (unaudited)
4
 
Condensed Consolidated Balance Sheets
4
 
Condensed Consolidated Statements of Operations
5
 
Condensed Consolidated Statements of Comprehensive Loss
6
 
Condensed Consolidated Statements of Shareholders’ Equity
7
 
Condensed Consolidated Statements of Cash Flows
8
 
Condensed Notes to Condensed Consolidated Financial Statements
9
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
2324
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
3032
 
Item 4. Controls and Procedures
30
32
PART II — OTHER INFORMATION 
 
Item 1. Legal Proceedings
3233
 
Item 1A. Risk Factors
3233
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
3233
 
Item 5. Other Information
3233
 
Item 6. Exhibits
3334
 
SIGNATURES
3536

2
2
Table of Contents

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 previously 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 are not available from our customers, we 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. Remanufactured Cores held for sale at our customer locations are included in long-term contract assets. The Remanufactured Core portion of stock adjustment returns are classified as contract assets until we physically receive them.them


3
3
Table of Contents
.
PART I — FINANCIAL INFORMATION


Item 1.
Financial Statements


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

 June 30, 2020  March 31, 2020 
ASSETS (Unaudited)    
Current assets:      
Cash and cash equivalents $27,464,000  $49,616,000 
Short-term investments  1,061,000   850,000 
Accounts receivable — net  66,138,000   91,748,000 
Inventory  241,253,000   234,680,000 
Contract assets  30,024,000   20,332,000 
Prepaid expenses and other current assets  14,658,000   11,890,000 
Total current assets  380,598,000   409,116,000 
Plant and equipment — net  46,311,000   44,957,000 
Operating lease assets  68,729,000   53,029,000 
Long-term deferred income taxes  18,578,000   18,950,000 
Long-term contract assets  234,735,000   239,540,000 
Goodwill and intangible assets — net  9,373,000   9,598,000 
Other assets  1,676,000   1,839,000 
TOTAL ASSETS $760,000,000  $777,029,000 
LIABILITIES AND SHAREHOLDERS’  EQUITY        
Current liabilities:        
Accounts payable and accrued liabilities $101,901,000  $95,083,000 
Customer finished goods returns accrual  27,595,000   25,326,000 
Contract liabilities  34,718,000   27,911,000 
Revolving loan  112,000,000   152,000,000 
Other current liabilities  7,047,000   9,390,000 
Operating lease liabilities  6,249,000   5,104,000 
Current portion of term loan  3,678,000   3,678,000 
Total current liabilities  293,188,000   318,492,000 
Term loan, less current portion  19,543,000   20,462,000 
Long-term contract liabilities  90,125,000   92,101,000 
Long-term deferred income taxes  73,000   79,000 
Long-term operating lease liabilities  74,426,000   61,425,000 
Other liabilities  10,544,000   8,950,000 
Total liabilities  487,899,000   501,509,000 
Commitments and contingencies      
Shareholders’ equity:        
Preferred stock; par value $0.01 per share, 5,000,000 shares authorized; NaN issued  -   - 
Series A junior participating preferred stock; par value $0.01 per share, 20,000 shares authorized; NaN issued  -   - 
Common stock; par value $0.01 per share, 50,000,000 shares authorized; 19,002,333 and 18,969,380 shares issued and outstanding at June 30, 2020 and March 31, 2020, respectively  190,000   190,000 
Additional paid-in capital  219,437,000   218,581,000 
Retained earnings  61,105,000   64,117,000 
Accumulated other comprehensive loss  (8,631,000)  (7,368,000)
Total shareholders’ equity  272,101,000   275,520,000 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $760,000,000  $777,029,000 

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

4
Table of Contents

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

 
Three Months Ended
June 30,
 
  2020  2019 
       
       
Net sales $95,356,000  $109,148,000 
Cost of goods sold  81,969,000   91,565,000 
Gross profit  13,387,000   17,583,000 
Operating expenses:        
General and administrative  6,870,000   12,000,000 
Sales and marketing  4,200,000   4,919,000 
Research and development  1,942,000   2,372,000 
Total operating expenses  13,012,000   19,291,000 
Operating income (loss)  375,000   (1,708,000)
Interest expense, net  4,409,000   6,173,000 
Loss before income tax benefit  (4,034,000)  (7,881,000)
Income tax benefit  (1,022,000)  (1,730,000)
Net loss $(3,012,000) $(6,151,000)
Basic net loss per share $(0.16) $(0.33)
Diluted net loss per share $(0.16) $(0.33)
Weighted average number of shares outstanding:        
Basic  18,976,178   18,822,178 
Diluted  18,976,178   18,822,178 

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

5
Table of Contents

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

 
Three Months Ended
June 30,
 
  2020  2019 
       
Net loss $(3,012,000) $(6,151,000)
Other comprehensive (loss) income, net of tax:        
Foreign currency translation (loss) gain  (1,263,000)  599,000 
Total other comprehensive (loss) income, net of tax  (1,263,000)  599,000 
Comprehensive loss $(4,275,000) $(5,552,000)

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

6
Table of Contents

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)

 Common Stock             
  Shares  Amount  
Additional
Paid-in
Capital
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Income Loss
  Total 
                   
Balance at March 31, 2020  18,969,380  $190,000  $218,581,000  $64,117,000  $(7,368,000) $275,520,000 
Compensation recognized under employee stock plans  -   -   1,043,000   -   -   1,043,000 
Exercise of stock options  3,000   -   20,000   -   -   20,000 
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes  29,953   -   (207,000)  -   -   (207,000)
Foreign currency translation  -   -   -   -   (1,263,000)  (1,263,000)
Net loss  -   -   -   (3,012,000)  -   (3,012,000)
Balance at June 30, 2020  19,002,333  $190,000  $219,437,000  $61,105,000  $(8,631,000) $272,101,000 

 Common Stock             
  Shares  Amount  
Additional
Paid-in
Capital
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Income (Loss)
  Total 
                   
Balance at March 31,2019  18,817,400  $188,000  $215,047,000  $71,407,000  $(6,887,000) $279,755,000 
Compensation recognized under employee stock plans  -   -   988,000   -   -   988,000 
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes  36,872   1,000   (363,000)  -   -   (362,000)
Foreign currency translation  -   -   -   -   599,000   599,000 
Net loss  -   -   -   (6,151,000)  -   (6,151,000)
Balance at June 30, 2019  18,854,272  $189,000  $215,672,000  $65,256,000  $(6,288,000) $274,829,000 

The accompanying notes to condensed consolidated financial statements are an integral part hereof.
7
Table of Contents

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

 
Three Months Ended
June 30,
 
  2020  2019 
Cash flows from operating activities:      
Net loss $(3,012,000) $(6,151,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Depreciation and amortization  2,551,000   2,379,000 
Amortization of interest  312,000   328,000��
Amortization of core premiums paid to customers  1,223,000   1,108,000 
Noncash lease expense  1,686,000   1,179,000 
(Gain) loss due to the change in the fair value of the contingent consideration  (47,000)  228,000 
Gain due to the remeasurement of lease liabilities  (1,985,000)  (502,000)
Gain on short-term investments  (155,000)  (109,000)
Net provision for inventory reserves  2,074,000   3,352,000 
Net provision for customer payment discrepancies and credit losses  30,000   562,000 
Deferred income taxes  465,000   191,000 
Share-based compensation expense  1,043,000   988,000 
Loss on disposal of plant and equipment  -   5,000 
Changes in operating assets and liabilities:        
Accounts receivable  25,847,000   10,524,000 
Inventory  (8,034,000)  (31,374,000)
Prepaid expenses and other current assets  (2,898,000)  (1,684,000)
Other assets  219,000   209,000 
Accounts payable and accrued liabilities  6,478,000   (3,924,000)
Customer finished goods returns accrual  1,621,000   (1,132,000)
Contract assets, net  (6,076,000)  9,410,000 
Contract liabilities, net  4,620,000   (1,897,000)
Operating lease liabilities  (1,416,000)  (904,000)
Other liabilities  (2,158,000)  (1,165,000)
Net cash provided by (used in) operating activities  22,388,000   (18,379,000)
Cash flows from investing activities:        
Purchase of plant and equipment  (2,983,000)  (3,976,000)
Change in short-term investments  (55,000)  1,308,000 
Net cash used in investing activities  (3,038,000)  (2,668,000)
Cash flows from financing activities:        
Borrowings under revolving loan  -   25,000,000 
Repayments of revolving loan  (40,000,000)  - 
Repayments of term loan  (938,000)  (938,000)
Payments for debt issuance costs  -   (889,000)
Payments on finance lease obligations  (549,000)  (483,000)
Exercise of stock options  20,000   - 
Cash used to net share settle equity awards  (207,000)  (362,000)
Net cash (used in) provided by financing activities  (41,674,000)  22,328,000 
Effect of exchange rate changes on cash and cash equivalents  172,000   15,000 
Net (decrease) increase in cash and cash equivalents  (22,152,000)  1,296,000 
Cash and cash equivalents — Beginning of period  49,616,000   9,911,000 
Cash and cash equivalents  — End of period $27,464,000  $11,207,000 
Supplemental disclosures of cash flow information:        
Cash paid for interest, net $4,234,000  $5,835,000 
Cash paid for income taxes, net of refunds  447,000   - 
Cash paid for operating leases  2,574,000   1,637,000 
Cash paid for finance leases  632,000   551,000 
Plant and equipment acquired under finance leases  1,427,000   677,000 
Assets acquired under operating leases  15,564,000   3,000 
Non-cash capital expenditures  678,000   - 

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

8
Table of Contents

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 (see Note 6)  
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 (see Note 10)  
50,103,000
   
-
 
Long-term deferred income taxes  
9,592,000
   
9,746,000
 
Long-term contract assets (see Note 6)  
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 (see Note 9)  
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 (see Note 10)  
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 (see Note 9)  
39,159,000
   
40,889,000
 
Long-term deferred income taxes  
275,000
   
257,000
 
Long-term operating lease liabilities (see Note 10)  
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
 

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

4
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)


 
Three Months Ended
June 30,
 

 2019  2018 
       
       
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
 

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

5
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Loss
(Unaudited)



Three Months Ended
June 30,

2019  2018

      
       
Net loss 
$
(6,151,000
)
 
$
(5,495,000
)
Other comprehensive income (loss), net of tax:        
Foreign currency translation gain (loss)  
599,000
   
(715,000
)
Total other comprehensive gain (loss), net of tax  
599,000
   
(715,000
)
Comprehensive loss 
$
(5,552,000
)
 
$
(6,210,000
)

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

6
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
(Unaudited)

  Common Stock             
  Shares  Amount  
Additional
Paid-in
Capital
Common
Stock
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Income (Loss)
  Total 
                   
Balance at March 31, 2019  
18,817,400
  
$
188,000
  
$
215,047,000
  
$
71,407,000
  
$
(6,887,000
)
 
$
279,755,000
 
Compensation recognized under employee stock plans  
-
   
-
   
988,000
   
-
   
-
   
988,000
 
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes
  
36,872
   
1,000
   
(363,000
)
  
-
   
-
   
(362,000
)
Foreign currency translation  
-
   
-
   
-
   
-
   
599,000
   
599,000
 
Net loss  
-
   
-
   
-
   
(6,151,000
)
  
-
   
(6,151,000
)
Balance at June 30, 2019  
18,854,272
  
$
189,000
  
$
215,672,000
  
$
65,256,000
  
$
(6,288,000
)
 
$
274,829,000
 


 Common Stock             
  Shares  Amount  
Additional
Paid-in
Capital
Common
Stock
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Income (Loss)
  Total 
                   
Balance at March 31, 2018  
18,893,102
  
$
189,000
  
$
213,609,000
  
$
78,510,000
  
$
(5,428,000
)
 
$
286,880,000
 
Cumulative-effect adjustment for the adoption of ASU 2016-01  
-
   
-
   
-
   
746,000
   
(746,000
)
  
-
 
Balance at April 1, 2018  
18,893,102
  
$
189,000
  
$
213,609,000
  
$
79,256,000
  
$
(6,174,000
)
 
$
286,880,000
 
Compensation recognized under employee stock plans  
-
   
-
   
941,000
   
-
   
-
   
941,000
 
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes
  
23,006
   
-
   
(192,000
)
  
-
   
-
   
(192,000
)
Foreign currency translation  
-
   
-
   
-
   
-
   
(715,000
)
  
(715,000
)
Net loss  
-
   
-
   
-
   
(5,495,000
)
  
-
   
(5,495,000
)
Balance at June 30, 2018  
18,916,108
  
$
189,000
  
$
214,358,000
  
$
73,761,000
  
$
(6,889,000
)
 
$
281,419,000
 

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

7
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)



Three Months Ended
June 30,

  2019  2018 
Cash flows from operating activities:      
Net loss 
$
(6,151,000
)
 
$
(5,495,000
)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  
1,802,000
   
1,394,000
 
Amortization of intangible assets  
577,000
   
192,000
 
Amortization and write-off of debt issuance costs  
173,000
   
484,000
 
Amortization of interest on contract liabilities, net  
155,000
   
272,000
 
Noncash lease expense  
1,179,000
   
-
 
Loss due to the change in the fair value of the contingent consideration  
228,000
   
-
 
Gain due to the remeasurement of lease liabilities  
(502,000
)
  
-
 
Gain on short-term investments  
(109,000
)
  
(69,000
)
Net provision for inventory reserves  
3,352,000
   
2,367,000
 
Net provision for customer payment discrepancies  
574,000
   
(303,000
)
Net recovery of doubtful accounts  
(12,000
)
  
(23,000
)
Deferred income taxes  
191,000
   
(108,000
)
Share-based compensation expense  
988,000
   
941,000
 
Loss on disposal of plant and equipment  
5,000
   
-
 
Changes in operating assets and liabilities, net of effects of acquisitions:        
Accounts receivable  
10,524,000
   
22,953,000
 
Inventory  
(31,494,000
)
  
(28,608,000
)
Inventory unreturned  
120,000
   
(807,000
)
Income tax receivable  
(2,327,000
)
  
(1,791,000
)
Prepaid expenses and other current assets  
643,000
   
(687,000
)
Other assets  
209,000
   
(51,000
)
Accounts payable and accrued liabilities  
(3,924,000
)
  
10,868,000
 
Customer finished goods returns accrual  
(1,132,000
)
  
(1,367,000
)
Contract assets, net  
10,518,000
   
(841,000
)
Contract liabilities, net  
(1,897,000
)
  
(3,309,000
)
Operating lease liabilities  
(904,000
)
  
-
 
Other liabilities  
(1,165,000
)
  
3,064,000
 
Net cash used in operating activities  
(18,379,000
)
  
(924,000
)
Cash flows from investing activities:        
Purchase of plant and equipment  
(3,976,000
)
  
(1,546,000
)
Change in short-term investments  
1,308,000
   
(155,000
)
Net cash used in investing activities  
(2,668,000
)
  
(1,701,000
)
Cash flows from financing activities:        
Borrowings under revolving loan  
25,000,000
   
12,200,000
 
Repayments of revolving loan  
-
   
(20,794,000
)
Borrowings under term loan  
-
   
13,594,000
 
Repayments of term loan  
(938,000
)
  
(782,000
)
Payments for debt issuance costs  
(889,000
)
  
(1,722,000
)
Payments on finance lease obligations  
(483,000
)
  
(349,000
)
Exercise of stock options  
-
   
-
 
Cash used to net share settle equity awards  
(362,000
)
  
(192,000
)
Net cash provided by financing activities  
22,328,000
   
1,955,000
 
Effect of exchange rate changes on cash and cash equivalents  
15,000
   
(137,000
)
Net increase (decrease) in cash and cash equivalents  
1,296,000
   
(807,000
)
Cash and cash equivalents — Beginning of period  
9,911,000
   
13,049,000
 
Cash and cash equivalents  — End of period 
$
11,207,000
  
$
12,242,000
 
Supplemental disclosures of cash flow information:        
Cash paid for interest, net 
$
5,835,000
  
$
4,320,000
 
Cash paid for income taxes, net of refunds  
-
   
111,000
 
Cash paid for operating leases  
1,637,000
   
-
 
Cash paid for finance leases  
551,000
   
-
 
Plant and equipment acquired under finance leases  
677,000
  
$
-
 
Assets acquired under operating leases  
3,000
   
-
 

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

8
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
June 30, 20192020
(Unaudited)


1. Company Background and Organization

Motorcar Parts of America, Inc. and its subsidiaries (the “Company” or “MPA”) is a leading supplier of automotive aftermarket non-discretionary replacement parts and diagnostic equipment. These replacement parts are primarily 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 diagnostic equipment primarily serves the global automotive component and powertrain testing market. The Company’s products include (i) rotating electrical products such as alternators and starters, (ii) wheel hub assemblies and bearings, (iii) brake-related products, which include brake calipers, brake boosters, and brake master cylinders, and (iv) diagnostics and other products, which include diagnostics systems, advanced power emulators used for the development of electric vehicles and aerospace applications, and custom power electronic products for quality control in the development and production of electric vehicles and turbochargers.

The Company primarily ships its products from its facilities and various third-party warehouse distribution centers in North America, including the Company’s 410,000 square foot distribution center in Tijuana, Mexico.

Pursuant to the guidance provided under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for segment reporting, the Company has identified its chief operating decision maker (“CODM”), 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 its business comprises 3 separate operating segments. Two of the operating segments meet all the aggregation criteria, and are aggregated. The remaining operating segment does not meet the quantitative thresholds for individual disclosure and the Company has combined its operating segments into 1 reportable segment.

Impact of the Novel Coronavirus (“COVID-19”)

The recent outbreak of the COVID-19 pandemic has led to adverse impacts on the U.S. and global economies and created uncertainty regarding potential effects on the Company’s employees, supply chain, operations, and customer demand. The COVID-19 pandemic could impact the Company’s operations and the operations of its customers, suppliers, and vendors because of quarantines, facility closures, travel, and logistics restrictions. The extent to which the COVID-19 pandemic impacts the Company’s business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted— including, but not limited to, the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on its customers, suppliers, and vendors and the remedial actions and stimulus measures adopted by local, state and federal governments, and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business because of an economic recession or depression that has occurred or may occur in the future. At this time, the Company is unable to predict accurately the ultimate long-term impact that COVID-19 will have on its business and financial condition.

2. Basis of Presentation and New Accounting Pronouncements

Basis of Presentation


The accompanying unaudited condensed 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.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 months ended June 30, 20192020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2020.2021. 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, 2019,2020, which are included in the Company’s Annual Report on Form 10-K10-K filed with the Securities and Exchange Commission (“SEC”) on June 28, 2019.15,2020.


The accompanying condensed 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 3,2, Summary of Significant Accounting Policies, to the consolidated financial statements that are presented in the Company’s Annual Report on Form 10-K10-K for the fiscal year ended March 31, 2019.2020.

9
1. Company Background and Organization

Table of Contents
Motorcar Parts of America, Inc. and its subsidiaries (the “Company”, or “MPA”) is a leading supplier of automotive aftermarket non-discretionary replacement parts and diagnostic equipment. These replacement parts are primarily 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 diagnostic equipment primarily serves the global automotive component and powertrain testing market. 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. Other products include: (i) turbochargers, (ii) brake power boosters, (iii) diagnostics systems, (iv) advanced power emulators (AC and DC), and (v) custom power electronic products.


The Company primarily ships its products from its facilities and various third party warehouse distribution centers in North America.

Pursuant to the guidance provided under the Financial Accounting Statement Board (“FASB”) Accounting Standards Codification (“ASC”) for segment reporting, the Company has identified its chief operating decision maker (“CODM”), 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 due to recent acquisitions, its business comprises three separate operating segments.  Two of the operating segments meet all of the aggregation criteria, and are aggregated. The remaining operating segment does not meet the quantitative thresholds for individual disclosure. Since this immaterial operating segment meets the aggregation criteria of ASC 280, the Company has combined its operating segments into a single reportable segment.

2. New Accounting Pronouncements


New Accounting Pronouncements Recently Adopted

Leases

In February 2016, the FASB issued new guidance that requires balance sheet recognition of a lease asset and lease liability by lessees for all leases, other than leases with a term of 12 months or less if the short-term lease exclusion expedient is elected. The new guidance also requires new disclosures providing additional qualitative and quantitative information about the amounts recorded in the financial statements. The new guidance requires a modified retrospective approach with optional practical expedients. The FASB provided entities with an additional transition method, which allows an entity to apply this guidance as of the beginning of the period of adoption instead of the beginning of the earliest comparative period presented in the entity’s financial statements. The Company adopted this guidance on April 1, 2019 using the additional transition method. The Company also elected certain practical expedients permitted under the transition guidance, including the package of practical expedients, which allowed it not to reassess lease classification for leases that commenced prior to the adoption date. In addition, the Company elected to exempt leases with an initial term of 12 months or less from balance sheet recognition and, for all classes of assets, combining non-lease components with lease components.


9
Upon adoption, the Company recorded operating lease liabilities of $53,043,000 and corresponding operating lease assets of $50,773,000. The difference between the operating lease assets and liabilities recognized on the Company’s consolidated balance sheets primarily related to accrued rent on existing leases that were offset against the operating lease asset upon adoption. There was an immaterial reclassification of non-lease components to finance lease assets and finance lease liabilities upon adoption due to the Company’s election to combine non-lease components with lease components. The adoption of the new guidance did not have any impact on the Company’s rent expense and consolidated statement of cash flows. However, the Company has material nonfunctional currency leases that could have a material impact on the Company’s consolidated statements of operations. As required for other monetary liabilities, lessees shall remeasure a foreign currency-denominated lease liability using the exchange rate at each reporting date, but the lease assets are nonmonetary assets measured at historical rates, which are not affected by subsequent changes in the exchange rates. The Company recorded a gain of $502,000 in general and administrative expenses in connection with the remeasurement of foreign currency-denominated lease liabilities during the three months ended June 30, 2019. See Note 10 for additional discussion of the adoption of ASC 842 and the impact on the Company’s financial statements.

New Accounting Pronouncements Not Yet Adopted

Measurement of Credit Losses on Financial Instruments


In June 2016, the FASB issued an accounting pronouncement related to the measurement of credit losses on financial instruments. This pronouncement, along with a subsequent Accounting Standards Updates (“ASU”) issued to clarify certain provisions of the new guidance, changes the impairment model for most financial assets and will requirerequires the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will beare required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. This pronouncement is effectiveThe adoption of this guidance on April 1,2020 increased the Company’s required disclosures for fiscal years,its expected credit losses but did not have a material effect on its condensed consolidated financial statements.

Prior to April 1, 2020, accounts receivable were recorded at cost less an allowance for doubtful accounts. The net amount of accounts receivable and corresponding allowance for interim periods within those fiscal years, beginning after December 15, 2019.doubtful accounts were presented in the condensed consolidated balance sheets. The Company plansmaintains allowances for uncollectible accounts receivable for estimated losses resulting from the failure or inability of its customers to adopt this pronouncementmake required payments. Furthermore, receivable balances were assessed quarterly for its fiscal year beginningimpairment and an allowance was recorded if the receivable was considered impaired. Subsequent to April 1, 2020.2020, accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered. The net amount of accounts receivable and corresponding allowance for credit losses are presented separately in the condensed consolidated balance sheets. The Company maintains an allowance for credit losses resulting from the expected failure or inability of the Comany's customers to make required payments. The Company recognizes the allowance for credit losses at inception and reassess quarterly based on the asset’s expected collectability. The allowance is currently evaluatingbased on multiple factors including historical experience with bad debts, the impact this guidance will have on its consolidated financial statements,credit quality of the customer base, the aging of such receivables and current macroeconomic conditions, such as COVID-19, as well as any impactsexpectations of conditions in the future, if applicable. The Company's allowance for credit losses is based on the assessment of the collectability of assets pooled together with similar risk characteristics.

The Company pools its business processes, systems and internal controls.receivables based on the shared risk characteristics of our customers. The Company records a provision for expected credit losses using a loss-rate method based on the ratio of our historical write-offs to our average trade accounts receivable. At each reporting period, the Company will assess whether financial assets in a pool continue to display similar risk characteristics. If particular receivables no longer display risk characteristics that are similar to those of the receivables in the pool, the Company may determine that it needs to move those receivables to a different pool or perform an individual assessment of expected credit losses for those specific receivables.

10
Table of Contents


Fair Value Measurements


In August 2018, the FASB issued guidance, which changes the disclosure requirements for fair value measurements by removing, adding and modifying certain disclosures.disclosures, including the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The standardamendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 measurements, and the narrative description of measurement uncertainty should be applied prospectively only for the most recent interim or annual period presented in the initial year of adoption. All other amendments should be applied retrospectively applied to all periods presented upon their effective date. The adoption of this guidance on April 1,2020 modified certain of the Company’s disclosures for its Level 3 fair value measurements but did not have an impact on its condensed consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued guidance that, for a limited time, eases the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31,2022. The Company will apply these amendments prospectively. The adoption of this guidance on April 1,2020 did not have an impact on the Company’s condensed consolidated financial statements for the three months ended June 30,2020.

New Accounting Pronouncements Not Yet Adopted

Income Taxes

In December 2019, the FASB issued guidance that simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application. This guidance is effective for financial statements issued forannual and interim periods in fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019.2020. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its condensed consolidated financial statements.statements.


10
3. Intangible Assets

The following is a summary of acquired intangible assets subject to amortization:

 

 June 30, 2019  March 31, 2019 
Weighted
Average
Amortization
Period
 
Gross Carrying
Value
  
Accumulated
Amortization
  
Gross Carrying
Value
  
Accumulated
Amortization
 
Intangible assets subject to amortization             
Trademarks9 years 
$
1,014,000
  
$
527,000
  
$
1,007,000
  
$
464,000
 
Customer relationships11 years  
8,668,000
   
3,764,000
   
8,610,000
   
3,547,000
 
Order backlog6 months  
332,000
   
332,000
   
325,000
   
180,000
 
Developed technology5 years  
3,054,000
   
480,000
   
2,991,000
   
311,000
 
Total  
$
13,068,000
  
$
5,103,000
  
$
12,933,000
  
$
4,502,000
 

Amortization expense for acquired intangible assets is as follows:



Three Months Ended
June 30,

2019  2018
       
Amortization expense
 
$
577,000
  
$
192,000
 

The estimated future amortization expense for acquired intangible assets is as follows:

Year Ending March 31,
   
2020 - remaining nine months 
$
1,223,000
 
2021  
1,554,000
 
2022  
1,512,000
 
2023  
1,477,000
 
2024  
1,098,000
 
Thereafter  
1,101,000
 
Total 
$
7,965,000
 

4. Accounts Receivable — Net


The Company has trade accounts receivable that result from the sale of goods and services. Accounts receivable — net includes offset accounts related to customer payment discrepancies, returned goods authorizations (“RGA”RGAs”) issued for in-transit unit returns, and potential bad debts.allowances for credit losses. The Company believes its credit risk with respect to trade accounts receivable is limited due to its credit evaluation process and the long-term nature of its relationships with its largest customers. The Company utilizes a historical loss rate method, adjusted for any changes in economic conditions or risk characteristics, to estimate its expected credit losses each period. When developing an estimate of expected credit losses, the Company considers all available relevant information regarding the collectability of cash flows, including historical information, current conditions, and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable. The historical loss rate method considers past write-offs of trade accounts receivable over a period commensurate with the initial term of Company’s contracts with its customers. The Company recognizes the allowance for credit losses at inception and reassesses quarterly based on management’s expectation of the asset’s collectability. The Company’s accounts receivable are short-term in nature and written off only when all collection attempts have failed. The Company uses receivable discount programs with certain customers and their respective banks (see Note 10).

11
Table of Contents


Accounts receivable — net is comprised of the following:


 June 30, 2019  March 31, 2019  June 30, 2020  March 31, 2020 
Accounts receivable — trade 
$
62,727,000
  
$
75,847,000
  $82,835,000  $109,164,000 
Allowance for bad debts 
(4,069,000
)
 
(4,100,000
)
Allowance for credit losses  (425,000)  (4,252,000)
Customer payment discrepancies 
(1,278,000
)
 
(854,000
)
  (754,000)  (1,040,000)
Customer returns RGA issued  
(12,338,000
)
  
(14,878,000
)
  (15,518,000)  (12,124,000)
Less: total accounts receivable offset accounts  
(17,685,000
)
  
(19,832,000
)
Total accounts receivable — net 
$
45,042,000
  
$
56,015,000
  $66,138,000  $91,748,000 


The following table provides a roll-forward of the allowance for credit losses that is deducted from accounts receivable to present the net amount expected to be collected. During the three months ended June 30, 2020, the Company wrote off amounts previously fully reserved for in connection the bankruptcy filing of one of its customers in fiscal 2016.

 Three Months Ended 
  June 30, 2020 
Balance at beginning of period $4,252,000 
Provision for expected credit losses  170,000 
Recoveries  (100,000)
Amounts written off charged against the allowance  (3,897,000)
Balance at end of period $425,000 

4. Inventory
11
Inventory is comprised of the following:

  June 30, 2020  March 31, 2020 
Inventory      
Raw materials $108,143,000  $99,360,000 
Work-in-process  5,165,000   3,906,000 
Finished goods  131,823,000   135,601,000 
   245,131,000   238,867,000 
Less allowance for excess and obsolete inventory  (13,812,000)  (13,208,000)
Inventory — net  231,319,000   225,659,000 
Inventory unreturned  9,934,000   9,021,000 
Total inventory $241,253,000  $234,680,000 

5. Contract Assets

During the quarter ended June 30, 2020, the Company reduced the carrying value of Remanufactured Cores held at customers’ locations by $1,384,000.
12
Table of Contents
5. Inventory


Inventory–net is comprised of the following:

  June 30, 2019  March 31, 2019 
Inventory - net      
Raw materials 
$
101,544,000
  
$
95,757,000
 
Work-in-process  
4,593,000
   
3,502,000
 
Finished goods  
168,992,000
   
146,366,000
 
   
275,129,000
   
245,625,000
 
Less allowance for excess and obsolete inventory  
(13,013,000
)
  
(11,899,000
)
Total inventory - net 
$
262,116,000
  
$
233,726,000
 
Inventory unreturned 
$
8,349,000
  
$
8,469,000
 

6. Contract Assets


Contract assets are comprised of the following:


 June 30, 2019  March 31, 2019  June 30, 2020  March 31, 2020 
Short-term contract assets            
Cores expected to be returned by customers 
$
13,410,000
  
$
14,671,000
  $22,912,000  $12,579,000 
Upfront payments to customers 
3,106,000
  
3,101,000
   2,198,000   2,865,000 
Core premiums paid to customers  
4,397,000
   
4,411,000
   4,914,000   4,888,000 
 
$
20,913,000
  
$
22,183,000
 
Total short-term contract assets $30,024,000  $20,332,000 
              
Long-term contract assets              
Remanufactured cores held at customers' locations 
$
189,505,000
  
$
196,914,000
 
Remanufactured cores held at customers’ locations $213,469,000  $217,616,000 
Upfront payments to customers 
2,007,000
  
2,775,000
   418,000   589,000 
Core premiums paid to customers 
15,557,000
  
16,618,000
   15,279,000   15,766,000 
Long-term core inventory deposits  
5,569,000
   
5,569,000
   5,569,000   5,569,000 
 
$
212,638,000
  
$
221,876,000
 
Total contract assets 
$
233,551,000
  
$
244,059,000
 
Total long-term contract assets $234,735,000  $239,540,000 
7.
6. Significant Customer and Other Information


Significant Customer Concentrations


The largest customers accounted for the following total percentage of net sales:


 
Three Months Ended
June 30,
  
Three Months Ended
June 30,
 
 2019  2018  2020  2019 
Net sales            
Customer A
 
38
%
 
37
%
  45%  38%
Customer B
 
23
%
 
22
%
  26%  23%
Customer C
 
20
%
 
25
%
  17%  20%

The largest customers accounted for the following total percentage of accounts receivable – trade:


 June 30, 2019  March 31, 2019  June 30, 2020  March 31,2020 
Accounts receivable - trade            
Customer A 
31
%
 
34
%
  28%  28%
Customer B 
22
%
 
18
%
  31%  14%
Customer C 
9
%
 
16
%
  13%  33%


13
Table of Contents


Geographic and Product Information


The Company’s products are sold predominantly sold in the U.S. and accounted for the following total percentagepercentages of net sales:


 
Three Months Ended
June 30,
  
Three Months Ended
June 30,
 
 2019  2018  2020  2019 
Rotating electrical products 
75
%
 
77
%
  72%  75%
Wheel hub products 
18
%
 
18
%
  18%  18%
Brake master cylinders products 
2
%
 
3
%
Brake related products  9%  4%
Other products  
5
%
  
2
%
  1%  3%
  
100
%
  
100
%
  100%  100%


Significant Supplier Concentrations


The Company had no suppliers that accounted for more than 10% of inventory purchases for the three months ended June 30, 20192020 and 2018.2019.


8.
7. Debt


The Company is party to a $230,000,000$268,620,000 senior secured financing, (as amended from time to time, the “Credit Facility”) with a syndicate of lenders, and PNC Bank, National Association, as administrative agent, consisting of (i) a $200,000,000$238,620,000 revolving loan facility, subject to borrowing base restrictions, a $20,000,000$24,000,000 sublimit for borrowings by Canadian borrowers, and a $15,000,000$20,000,000 sublimit for letters of credit (the “Revolving Facility”) and (ii) a $30,000,000 term loan facility (the “Term Loans”). The loans under the Credit Facility mature on June 5, 2023. The Credit Facility permits the payment of up to $20,000,000 of dividends and share repurchases per fiscal year, subject to a minimum availability threshold and pro forma compliance with financial covenants. In connection with the Credit Facility, the lenders have a security interest in substantially all of the assets of the Company.

In June 2019, the Company entered into a second amendment to the Credit Facility (the “Second Amendment”). The Second Amendment, among other things, (i) increased the total size of the Revolving Facility to $238,620,000, (ii) modified the fixed charge coverage ratio financial covenant, (iii) modified the definition of “Consolidated EBITDA”, (iv) modified the borrowing base definition to, among other things, include brake-related products as eligible inventory, (v) increased the letter of credit sublimit to $20,000,000, (vi) increased the Canadian revolving sublimit and swing line sublimit to $24,000,000, (vii) increased the swing line sublimit to $23,862,000, (viii) permitted up to $5,000,000 of sale and lease back transactions per fiscal year, (ix) increased the permitted amount of certain capital expenditures, (x) increased the permitted amount of operating lease obligations per fiscal year, and (xi) increased certain other covenant-related baskets. The Company capitalized $889,000 of new debt issuance costs in connection with the Second Amendment.


The Term Loans require quarterly principal payments of $937,500 beginning October 1, 2018.$937,500. The Credit Facility bears interest at rates equal to either LIBOR plus a margin of 2.25%, 2.50% or 2.75% or a reference rate plus a margin of 1.25%, 1.50% or 1.75%, in each case depending on the senior leverage ratio as of the applicable measurement date. There is also a facility fee of 0.375% to 0.50%, depending on the senior leverage ratio as of the applicable measurement date. The interest rate on the Company’s Term Loans and Revolving Facility was 5.19%2.93% and 5.16%2.94%, respectively, as ofat June 30, 20192020, respectively, and 5.24% as of4.34% and 3.64% at March 31, 2019.2020, respectively.

The Credit Facility, among other things, requires the Company to maintain certain financial covenants including a maximum senior leverage ratio and a minimum fixed charge coverage ratio. The Company was in compliance with all financial covenants at June 30, 2020.

While the Company made payments to its Revolving Facility of $40,000,000, in light of COVID-19, it elected not to further pay down its Revolving Facility and accumulated cash of $27,464,000as of June 30, 2019.

2020. The Credit Facility only allows up to $6,000,000 of credit for cash when computing the senior leverage ratio.In addition to other covenants, the Credit Facility places limits on the Company’s ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, redeem or repurchase capital stock, alter the business conducted by the Company and its subsidiaries, transact with affiliates, prepay, redeem or purchase subordinated debt, and amend or otherwise alter debt agreements.

14
Table of Contents


The following summarizes information about the Term Loans at:


 June 30, 2019  March 31, 2019  June 30, 2020  March 31, 2020 
Principal amount of term loan $27,187,000  $28,125,000  $23,437,000  $24,375,000 
Unamortized financing fees  (291,000)  (253,000)  (216,000)  (235,000)
Net carrying amount of term loan 26,896,000  27,872,000   23,221,000   24,140,000 
Less current portion of term loan  (3,678,000)  (3,685,000)  (3,678,000)  (3,678,000)
Long-term portion of term loan 
$
23,218,000
  
$
24,187,000
  $19,543,000  $20,462,000 


Future repayments of the Term Loans are as follows:


Year Ending March 31,
      
2020 - remaining nine months 
2,812,000
 
2021 
3,750,000
 
2021 - remaining nine months $2,812,000 
2022 
3,750,000
   3,750,000 
2023 
3,750,000
   3,750,000 
2024  
13,125,000
   13,125,000 
Total payments 
$
27,187,000
  $23,437,000 


The Company had $135,400,000$112,000,000 and $110,400,000$152,000,000 outstanding under the Revolving Facility at June 30, 20192020 and March 31, 2019,2020, respectively. In addition, $4,039,000$5,679,000 was outstanding for letters of credit at June 30, 2019.2020. At June 30, 2019,2020, after certain contractual adjustments, $72,400,000$85,097,000 was available under the Revolving Facility.


14
9.8. Contract Liabilities


Contract liabilities are comprised of the following:


 June 30, 2019  March 31, 2019  June 30, 2020  March 31, 2020 
Short-term contract liabilities   ��        
Customer core returns accruals $11,355,000  $4,126,000 
Customer allowances earned 
$
15,698,000
  
$
12,755,000
   12,769,000   13,844,000 
Customer core returns accruals 
3,958,000
  
3,933,000
 
Customer deposits 
1,839,000
  
2,674,000
   1,538,000   1,365,000 
Core bank liability  770,000   528,000 
Accrued core payment, net  
9,147,000
   
11,237,000
   8,286,000   8,048,000 
 
$
30,642,000
  
$
30,599,000
 
Total short-term contract liabilities $34,718,000  $27,911,000 
              
Long-term contract liabilities              
Customer core returns accruals 
$
25,643,000
  
$
25,722,000
  $69,212,000  $77,927,000 
Customer allowances earned  517,000   542,000 
Core bank liability  14,892,000   7,556,000 
Accrued core payment, net  
13,516,000
   
15,167,000
   5,504,000   6,076,000 
 
$
39,159,000
  
$
40,889,000
 
Total contract liabilities 
$
69,801,000
  
$
71,488,000
 
Total long-term contract liabilities $90,125,000  $92,101,000 
10.

9. Leases


The Company leases various facilities in North America and Asia under operating leases expiring through December 2032. Non-cancelable minimum lease payments for the two new buildings with 15-year terms in Mexico, which were executed at March 31, 2019, but had not yet commenced at June 30, 2019 were $25,542,000.August 2033. The Company also has financematerial nonfunctional currency leases that could have a material impact on the Company’s condensed consolidated statements of operations. As required for certain office and manufacturing equipment, which generally range from three to five years.

The Company determines if an arrangement contains a lease at inception. Lease assets andother monetary liabilities, lessees remeasure foreign currency-denominated lease liabilities are recorded based onusing the present value of lease payments overexchange rate at each reporting date, but the lease term, which includes the minimum unconditional term of the lease. Certain of the Company’s leases include options to extend the leases for up to five years.  When the Company has the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that it will exercise the option, the option is considered in determining the classification and measurement of the lease. The lease assets are recorded net of any lease incentives received. Leasenonmonetary assets measured at historical rates and are tested for impairmentnot affected by subsequent changes in the same manner as long-lived assets used in operations.

As the rate implicit for each of its leases is not readily determinable, the Company uses its incremental borrowing rate, based on the information available at the lease commencement date, for each of its leases in determining the present value of its expected lease payments. The Company’s incremental borrowing rate is determined by analyzing and combining an applicable risk-free rate, a financial spread adjustment and any lease specific adjustment. Certain leases contain provisions for property-related costs that are variable in nature for which the Company is responsible, including common area maintenance and other property operating services, which are expensed as incurred and not included in the determination of lease assets and lease liabilities. These costs are calculated based on a variety of factors including property values, tax and utility rates, property services fees, and other factors.exchange rates. The Company records rent expense for operating leases, somerecorded gains of which have escalating rent payments, on a straight-line basis over$1,985,000 and $502,000 in general and administrative expenses in connection with the remeasurement of foreign currency-denominated lease term.liabilities during the three months ended June 30,2020 and 2019, respectively.

15
15
Table of Contents


Balance sheet information for leases is as follows:


 June 30, 2019   June 30, 2020  March 31, 2020 
LeasesClassification   Classification      
Assets:          
Operating
Operating lease assets
 
$
50,103,000
 Operating lease assets $68,729,000  $53,029,000 
Finance
Plant and equipment
  
5,206,000
 Plant and equipment  7,504,000   6,922,000 
Total leased assets  
$
55,309,000
   $76,233,000  $59,951,000 
             
Liabilities:             
Current             
Operating
Operating lease liabilities
 
$
3,976,000
 Operating lease liabilities $6,249,000  $5,104,000 
Finance
Other current liabilities
 
1,855,000
 Other current liabilities  2,289,000   2,059,000 
Long-term             
Operating
Long-term operating lease liabilities
 
48,155,000
 Long-term operating lease liabilities  74,426,000   61,425,000 
Finance
Other liabilities
  
3,325,000
 Other liabilities  4,556,000   3,905,000 
Total lease liabilities  
$
57,311,000
   $87,520,000  $72,493,000 


Lease cost recognized in the condensed consolidated statementstatements of operations is as follows:


 
Three Months Ended
June 30,
  
Three Months Ended
June 30,
 
 2019  2020  2019 
Lease cost         
Operating lease cost 
$
1,898,000
  $2,683,000  $1,898,000 
Short-term lease cost 
403,000
   317,000   403,000 
Variable lease cost 
130,000
   143,000   130,000 
Finance lease cost:           
Amortization of finance lease assets 
358,000
   413,000   358,000 
Interest on finance lease liabilities  
68,000
   83,000   68,000 
Total lease cost 
$
2,857,000
  $3,639,000  $2,857,000 


Maturities of lease commitments at June 30, 20192020 were as follows:


Maturity of lease liabilities Operating Leases  Finance Leases  Total  Operating Leases  Finance Leases  Total 
2020 - remaining nine months 
$
5,217,000
  
$
1,611,000
  
$
6,828,000
 
2021 
6,258,000
  
1,700,000
  
7,958,000
 
2021- remaining nine months $8,237,000  $1,981,000  $10,218,000 
2022 
5,895,000
  
1,367,000
  
7,262,000
   10,312,000   2,338,000   12,650,000 
2023 
4,913,000
  
789,000
  
5,702,000
   9,237,000   1,701,000   10,938,000 
2024 
4,861,000
  
130,000
  
4,991,000
   8,097,000   927,000   9,024,000 
2025  8,095,000   528,000   8,623,000 
Thereafter  
47,262,000
   
-
   
47,262,000
   69,261,000   49,000   69,310,000 
Total lease payments 
$
74,406,000
  
$
5,597,000
  
$
80,003,000
   113,239,000   7,524,000   120,763,000 
Less amount representing interest  
(22,275,000
)
  
(417,000
)
  
(22,692,000
)
  (32,564,000)  (679,000)  (33,243,000)
Present value of lease liabilities 
$
52,131,000
  
$
5,180,000
  
$
57,311,000
  $80,675,000  $6,845,000  $87,520,000 



16
16

Other information about leases is as follows:


Three Months Ended
June 30,
2019
Lease term and discount rate
Weighted-average remaining lease term (years):
Finance leases
3.1
Operating leases
12.4
Weighted-average discount rate:
Finance leases
5.0
%
Operating leases
5.6
%

  
Three Months Ended
June 30,
 
  2020  2019 
Lease term and discount rate      
Weighted-average remaining lease term (years):      
Finance leases  3.4   3.1 
Operating leases  11.7   12.4 
Weighted-average discount rate:        
Finance leases  5.6%  5.0%
Operating leases  5.9%  5.6%
11.

10. Accounts Receivable Discount Programs


The Company uses receivable discount programs with certain customers and their respective banks. Under these programs, the Company may sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold. These discount arrangements allow the Company to accelerate receipt of payment on customers’ receivables.


The following is a summary of accounts receivable discount programs:


 
Three Months Ended
June 30,
  
Three Months Ended
June 30,
 
 2019  2018  2020  2019 
Receivables discounted 
$
96,854,000
  
$
86,785,000
  $111,360,000  $96,854,000 
Weighted average days 
346
  
334
   345   346 
Annualized weighted average discount rate 
3.9
%
 
4.1
%
  2.5%  3.9%
Amount of discount recognized as interest expense 
$
3,649,000
  
$
3,324,000
  $2,686,000  $3,649,000 
12.

11. Net Loss Perper Share


Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss income per share includes the effect, if any, from the potential exercise or conversion of securities, such as stock options and warrants, which would result in the issuance of incremental shares of common stock.stock to the extent such impact is not anti-dilutive.


The following presents a reconciliation of basic and diluted net loss per share:



 
Three Months Ended
June 30,
 
 2019  2018  
Three Months Ended
June 30,
 
       2020  2019 
Net loss 
$
(6,151,000
)
 
$
(5,495,000
)
 $(3,012,000) $(6,151,000)
Basic shares 
18,822,178
  
18,895,847
   18,976,178   18,822,178 
Effect of potentially dilutive securities  
-
   
-
   -   - 
Diluted shares  
18,822,178
   
18,895,847
   18,976,178   18,822,178 
Net loss per share:              
        
Basic net loss per share 
$
(0.33
)
 
$
(0.29
)
 $(0.16) $(0.33)
        
Diluted net loss per share 
$
(0.33
)
 
$
(0.29
)
 $(0.16) $(0.33)


Potential common shares that would have the effect of increasing diluted net income per share or decreasing diluted net loss per share are considered to be anti-dilutive and as such, these shares are not included in calculating diluted net loss per share. For the three months ended June 30, 20192020 and 2018,2019, there were 1,520,8112,133,786 and 1,380,598,1,520,811, respectively, of potential common shares not included in the calculation of diluted net loss per share because their effect was anti-dilutive.


13.
17

12. Income Taxes


The Company recorded an income tax benefit of $1,730,000,$1,022,000, or an effective tax rate of 22.0%25.3%, and $1,447,000,$1,730,000, or an effective tax rate of 20.8%22.0%, for the three months ended June 30, 20192020 and 2018,2019, respectively. The estimated effective tax rate for the entire year is based on current estimatesthree months ended June 30,2020, was primarily impacted by non-deductible executive compensation under Internal Revenue Code Section 162(m) and any changes to those estimates in future periods could result in an effective tax rateforeign income taxed at rates that is materiallyare different from the current estimate.federal statutory rate.


The Company remainscontinues to record a valuation allowance against its foreign deferred tax assets as a result of its non-U.S. net operating loss carry-forwards and non-U.S. research and development credits in connection with its acquisitions due to the uncertainty of their utilization in future periods. Should the actual amount differ from the Company’s estimates, the amount of the valuation allowance could be impacted. Realization of deferred tax assets from its U.S. operations is dependent upon the Company’s ability to generate sufficient future taxable income. Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred tax assets. The Company makes these estimates and judgments about its future taxable income that are based on assumptions that are consistent with the Company’s future plans. A valuation allowance is established when the Company believes it is not more likely than not all or some of a deferred tax assets will be realized. In evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they arise, the Company considers all available positive and negative evidence.

At June 30,2020, the Company is not under examination in any jurisdiction and the years ended March 31,2019,2018,2017, and 2016 remain subject to examination for the fiscal years beginning with March 31, 2016.examination. The Company believes no significant changes in the unrecognized tax benefits will occur within the next 12 months.


14.
13. Financial Risk Management and Derivatives


Purchases and expenses denominated in currencies other than the U.S. dollar, which are primarily related to the Company’s overseas facilities, expose the Company to market risk from material movements in foreign exchange rates between the U.S. dollar and the foreign currencies. The Company’s primary risk exposure is from fluctuations in the value of the Mexican peso and to a lesser extent the Chinese yuan. To mitigate these risks, the Company enters into forward foreign currency exchange contracts to exchange U.S. dollars for these foreign currencies. The extent to which forward foreign currency exchange contracts are used is modified periodically in response to the Company’s estimate of market conditions and the terms and length of anticipated requirements.


The Company enters into forward foreign currency exchange contracts in order to reduce the impact of foreign currency fluctuations and not to engage in currency speculation. The use of derivative financial instruments allows the Company to reduce its exposure to the risk that the eventual cash outflow resulting from funding the expenses of the foreign operations will be materially affected by changes in exchange rates between the U.S. dollar and the foreign currencies. The Company does not hold or issue financial instruments for trading purposes. The Company designates forward foreign currency exchange contracts are designated for forecasted expenditure requirements to fund foreign operations.


The Company had forward foreign currency exchange contracts with a U.S. dollar equivalent notional value of $35,021,000$36,307,000 and $32,524,000$42,052,000 at June 30, 20192020 and March 31, 2019,2020, respectively. These contracts generally have a term of one year or less, at rates agreed at the inception of the contracts. The counterparty to this derivative transaction is a major financial institution with investment grade credit rating; however, the Company is exposed to credit risk with this institution. The credit risk is limited to the potential unrealized gains (which offset currency fluctuations adverse to the Company) in any such contract should this counterparty fail to perform as contracted. Any changes in the fair values of forward foreign currency exchange contracts are reflected in current period earnings and accounted for as an increase or offset to general and administrative expenses.

18


The following shows the effect of derivative instruments on the condensed consolidated statements of operations:


  
Derivatives Not Designated as
Hedging Instruments
    
Gain (Loss) Recognized within General
and Administrative Expenses
 
Three Months Ended
June 30,
 
 
2019  2018 
Forward foreign currency exchange contracts
 
$
35,000
  
$
(2,666,000
)
 
Gain Recognized within General
and Administrative Expenses
 
  
Derivatives Not Designated as
 
Three Months Ended
June 30,
 
Hedging Instruments 2020  2019 
Forward foreign currency exchange contracts $2,832,000  $35,000 


The fair value of the forward foreign currency exchange contracts of $242,000$3,452,000 and $207,000 are$6,284,000 is included in prepaid and other current assetsliabilities in the condensed consolidated balance sheets at June 30, 20192020 and March 31, 2019,2020, respectively. The changes in the fair values of forward foreign currency exchange contracts are included in other liabilities in the condensed consolidated statements of cash flows for the three months ended June 30, 20192020 and 2018.2019.


15.14. Fair Value Measurements


The following summarizes financial assets and liabilities measured at fair value, by level within the fair value hierarchy:


 June 30, 2019  March 31, 2019  June 30, 2020  March 31, 2020 
    
Fair Value Measurements
Using Inputs Considered as
     
Fair Value Measurements
Using Inputs Considered as
     
Fair Value Measurements
Using Inputs Considered as
     
Fair Value Measurements
Using Inputs Considered as
 
 Fair Value  Level 1  Level 2  Level 3  Fair Value  Level 1  Level 2  Level 3  Fair Value  Level 1  Level 2  Level 3  Fair Value  Level 1  Level 2  Level 3 
Assets                                                
Short-term investments                                                
Mutual funds 
$
2,074,000
  
$
2,074,000
  
-
  
-
  
$
3,273,000
  
$
3,273,000
  
-
  
-
  $1,061,000  $1,061,000  $-  $-  $850,000  $850,000  $-  $- 
Prepaid expenses and other current assets                        
Forward foreign currency exchange contracts 
242,000
  
-
  
$
242,000
  
-
  
207,000
  
-
  
$
207,000
  
-
 
                                                        
Liabilities                                                        
Accrued liabilities                                                        
Short-term contingent consideration 
2,982,000
  
-
  
-
  
$
2,982,000
  
2,816,000
  
-
  
-
  
$
2,816,000
   2,076,000   -   -   2,076,000   2,190,000   -   -   2,190,000 
Other current liabilities                                                        
Deferred compensation 
2,074,000
  
2,074,000
  
-
  
-
  
3,273,000
  
3,273,000
  
-
  
-
   1,061,000   1,061,000   -   -   850,000   850,000   -   - 
Forward foreign currency exchange contracts  3,452,000   -   3,452,000   -   6,284,000   -   6,284,000   - 
Other liabilities                                                        
Long-term contingent consideration 
1,988,000
  
-
  
-
  
1,988,000
  
1,905,000
  
-
  
-
  
1,905,000
   530,000   -   -   530,000   463,000   -   -   463,000 


Short-term Investments and Deferred Compensation


The Company’s short-term investments, which fund its deferred compensation liabilities, consist of investments in mutual funds. These investments are classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.


Forward Foreign Currency Exchange Contracts


The forward foreign currency exchange contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers. During the three months ended June 30, 2019 and 2018, a gain of $35,000 and a loss of $2,666,000, respectively, were recorded in general and administrative expenses due to the change in the value of the forward foreign currency exchange contracts.dealers (See Note 13).


Contingent Consideration


In December 2018, the Company completed the acquisition of certain assets and assumption of certain liabilities from Mechanical Power Conversion, LLC (“E&M”). In connection with this acquisition, the Company is contingently obligated to make additional payments to the former owners of E&M up to an aggregate of $5,200,000 over the next 2-3three years.

19


In January 2019, the Company completed the acquisition of all the equity interests of Dixie Electric, Ltd (“Dixie”).Dixie. In connection with this acquisition, the Company is contingently obligated to make additional payments to the former owners of Dixie up to $1,130,000 over the next two years.


The Company’s contingent consideration is recorded in accrued expenses and other liabilities in its condensed consolidated balance sheets at June 30, 20192020 and March 31, 2019,2020, and is a Level 3 liability measured at fair value.

E&M Research and Development (“R&D”) Event Milestone


The fair value of the two-year R&D event milestone based on technology development and transfer was $2,230,000$1,200,000 and $1,130,000 at June 30, 20192020 and March 31,2020, respectively, determined using a probability weighted discounted cash flow method with the following assumptions commensurate with the term of the contingent consideration: (i) a risk-free interest rate ranging from 1.84% to 2.06%, (ii) counter party risk discount rate ranging from 5.84% to 6.06%, and (iii) total probability of 90% to 100%.consideration. Any subsequent changes in the fair value of the contingent consideration liability will be recorded in current period earnings as a general and administrative expense.


The assumptions used to determine the fair value is as follows:

June 30, 2020
Risk free interest rate0.18%
Counter party rate6.70%
Probability100.00%

E&M Gross Profit Earn-out Consideration


The fair value of the three-year gross profit earn-out consideration was $1,770,000$1,350,000 and $1,230,000 at June 30, 20192020 and March 31,2020, respectively, determined using a Monte Carlo Simulation Model. Any subsequent changes in the fair value of the contingent consideration liability will be recorded in current period earnings as a general and administrative expense.


The assumptions used to determine the fair value is as follows:


  June 30, 20192020 
Risk free interest rate  
1.75
0.16
%
Counter party rate  
5.75
6.70
%
Expected volatility (1)  
30.00
37.00
%
Weighted average cost of capital (1)  
16.00
13.30
%

(1)The range for expected volatility was 32.5% to 42.5% and the range for the weighted average cost of capital was 12.5% to 14.0%.

Dixie Revenue Earn-out Consideration


The fair value of the two-year revenue earn-out consideration was $970,000$56,000 and $293,000 at June 30, 20192020 and March 31, 2020, respectively, determined using a Monte Carlo Simulation Model.

20


The assumptions used to determine the fair value is as follows:


  
June 30, 20192020
 
Risk free interest rate
  
1.83
0.16
%
Counter party rate
  
4.00
10.55
%
Revenue volatility
(1)		  9.00
6.50		%
Revenue discount rate
(1)		  6.00
2.00		%
Weighted average cost of capital
Asset volatility (1)		  15.00
41.00		%

(1)The range for revenue volatility was 5.5% to 7.5%, 1.5% to 2.5% for the revenue discount rate, and 36% to 46% for asset volatility.

Any subsequent changes in the fair value of the contingent consideration liability will be recorded in current period earnings as a general and administrative expense.


The following table summarizes the activity for financial assets and liabilities utilizing Level 3 fair value measurements:




 
Three Months Ended June 30,
2019
Contingent
Consideration
Beginning balance 
$
4,721,000
 
Newly issued  
-
 
Changes in revaluations of contingent consideration included in earnings  
249,000
 
Exercises/settlements (1)  
-
 
Net transfers in (out) of Level 3  
-
 
Ending balance 
$
4,970,000
 
 
Three Months Ended
June 30,
 
 2020  2019 
 
Contingent
Consideration
  
Contingent
Consideration
 
Beginning balance $2,653,000  $4,721,000 
Changes in revaluations of contingent consideration included in earnings  (47,000)  249,000 
Ending balance $2,606,000  $4,970,000 


During the three months ended June 30, 2019,2020, the Company had no other significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these instruments. The carrying amounts of the revolving loan, term loan and other long-term liabilities approximate their fair value based on the variable nature of interest rates and current rates for instruments with similar characteristics.

16.
15. Share-based Payments


Stock Options


The Company granted options to purchase 341,825 shares of common stock during the three months ended June 30,2020.The Company did not0t grant any options to purchase shares of common stock during the three months ended June 30,2019. The Company granted options to purchase 241,800 shares of common stock during the three months ended June 30, 2018. The cost associated with stock options is estimated using the Black-Scholes option-pricing model. This model requires the input of subjective assumptions including the expected volatility of the underlying stock and the expected holding period of the option. These subjective assumptions are based on both historical and other information. Changes in the values assumed and used in the model can materially affect the estimate of fair value.

21


The following assumptions were used to derive the weighted average fair value of the stock options granted:


 
Three Months Ended
June 30,
  
Three Months Ended
June 30,
 
 2019  2018  2020 
Weighted average risk free interest rate 
-
%
 
2.82
%
  0.44%
Weighted average expected holding period (years) 
-
  
5.95
   5.97 
Weighted average expected volatility 
-
%
 
43.98
%
  44.92%
Weighted average expected dividend yield 
-
  
-
   - 
Weighted average fair value of options granted 
$
-
  
$
8.70
  $6.43 



The following is a summary of stock option transactions:


 
Number of
Shares
  
Weighted Average
Exercise Price
  
Number of
Shares
  
Weighted Average
Exercise Price
 
Outstanding at March 31, 2019 
1,337,165
  
$
17.58
 
Outstanding at March 31, 2020  1,536,123  $18.18 
Granted 
-
  
$
-
   341,825  $15.14 
Exercised 
-
  
$
-
   (3,000) $6.62 
Forfeited  
(1,000
)
 
$
19.00
   (11,509) $24.20 
Outstanding at June 30, 2019  
1,336,165
  
$
17.58
 
Outstanding at June 30, 2020  1,863,439  $17.60 


At June 30, 2019,2020, options to purchase 230,921722,577 shares of common stock were unvested at the weighted average exercise price of $21.22.$17.51.


At June 30, 2019,2020, there was $2,144,000$4,498,000 of total unrecognized compensation expense related to unvested stock option awards. Compensation expense related to unvested stock option awards will be recognized over a weighted average vesting period of approximately 1.72.3 years.


Restricted Stock Units and Restricted Stock (collectively “RSUs”)


The Company did not grant any shares of RSUs during
During the three months ended June 30, 2019. During the three months ended June 30, 2018,2020, the Company granted 78,400112,293 shares of RSUs with an estimated grant date fair value of $1,490,000, which was$1,701,000 based on the closing market price on the grant date. The Company did 0t grant any shares of RSUs during the three months ended June 30,2019.

The following is a summary of non-vested RSUs:


  
Number of
Shares
  
Weighted Average
Grant Date Fair
Value
 
Outstanding at March 31, 2019  
243,134
  
$
21.75
 
Granted  
-
  
$
-
 
Vested  
(58,488
)
 
$
23.99
 
Forfeited  
-
  
$
-
 
Outstanding at June 30, 2019  
184,646
  
$
21.05
 
  
Number of
Shares
  
Weighted Average
Grant Date Fair
Value
 
Outstanding at March 31, 2020  201,983  $20.06 
Granted  112,293  $15.15 
Vested  (43,929) $22.63 
Outstanding at June 30, 2020  270,347  $17.60 


At June 30, 2019,2020, there was $2,107,000$3,839,000 of unrecognized compensation expense related to these awards, which will be recognized over the remaining vesting period of approximately 1.72.3 years.

17. Accumulated Other Comprehensive Loss

The following summarizes changes in accumulated other comprehensive income loss:

  Three Months Ended June 30, 2019  Three Months Ended June 30, 2018 
  
Unrealized
Gain
on Short-Term
Investments
  
Foreign
Currency
Translation
  Total  
Unrealized
Gain
on Short-Term
Investments
  
Foreign
Currency
Translation
  Total 
Balance at March 31, 2019 and 2018 
$
-
  
$
(6,887,000
)
 
$
(6,887,000
)
 
$
746,000
  
$
(6,174,000
)
 
$
(5,428,000
)
Cumulative-effect adjustment  
-
   
-
   
-
   
(746,000
)
  
-
   
(746,000
)
Balance at April 1, 2019 and 2018 
$
-
  
$
(6,887,000
)
 
$
(6,887,000
)
 
$
-
  
$
(6,174,000
)
 
$
(6,174,000
)
Other comprehensive income (loss), net of tax  
-
   
599,000
   
599,000
   
-
   
(715,000
)
  
(715,000
)
Amounts reclassified from accumulated other comprehensive loss, net of tax  
-
   
-
   
-
   
-
   
-
   
-
 
Balance at June 30, 2019 and 2018 
$
-
  
$
(6,288,000
)
 
$
(6,288,000
)
 
$
-
  
$
(6,889,000
)
 
$
(6,889,000
)

18.16. Commitments and Contingencies


Warranty Returns


The Company allows its customers to return goods that their customersconsumers have returned to them, whether or not the returned item is defective (“warranty returns”). The Company accrues an estimate of its exposure to warranty returns based on a historical analysis of the level of this type of return as a percentage of total unit sales. Amounts charged to expense for these warranty returns are considered in arriving at the Company’s net sales.

22


The following summarizes the changes in the warranty return accrual:



 
Three Months Ended
June 30,
  
Three Months Ended
June 30,
 
 2019  2018  2020  2019 
Balance at beginning of period 
$
19,475,000
  
$
16,646,000
  $18,300,000  $19,475,000 
Charged to expense/additions 
23,185,000
  
23,893,000
 
Charged to expense  23,089,000   23,185,000 
Amounts processed  
(26,842,000
)
  
(25,996,000
)
  (19,197,000)  (26,842,000)
Balance at end of period 
$
15,818,000
  
$
14,543,000
  $22,192,000  $15,818,000 


Contingencies


The Company is subject to various lawsuits and claims. In addition, government agencies and self-regulatory organizations have the ability to conduct periodic examinations of and administrative proceedings regarding the Company’s business. Following an audit in fiscal 2019, the U.S. Customs and Border Protection stated that it believed that the Company owed additional duties of approximately $17 million from 2011 through mid-2018 relating to products that it imported from Mexico.  The Company does not believe that this amount is correct and believes that it has numerous defenses and intends to dispute this amount vigorously.  The Company cannot assure that the U.S. Customs and Border Protection will agree or that it will not need to accrue or pay additional amounts in the future.




Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations


The following discussion and analysis presents factors that Motorcar Parts of America, Inc. and its subsidiaries (“our,” “we” or “us”) believe are relevant to an assessment and understanding of our consolidated financial position and results of operations. This financial and business analysis should be read in conjunction with our March 31, 20192020 audited consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on June 28, 2019.15, 2020.


Disclosure Regarding Private Securities Litigation Reform Act of 1995


This report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our future performance that involve risks and uncertainties. Various factors could cause actual results to differ materially from those expressed or implied by such statements. These factors include, but are not limited to: the current and future impacts of the COVID-19 public health crisis; concentration of sales to a small number of customers; changes in the financial condition of or our relationship with any of our major customers; increases in the average accounts receivable collection period; the loss of sales to customers; delays in payments by customers; the increasing customer pressure for lower prices and more favorable payment and other terms; lower revenues than anticipated from new and existing contracts; the increasing demands on our working capital; the significant strain on working capital associated with large inventory purchases from customers; lower efficiency or production due to stay at home orders issued by governments due to COVID-19 concerns; any meaningful difference between expected production needs and ultimate sales to our customers; investments in operational changes or acquisitions; our ability to obtain any additional financing we may seek or require; our ability to maintain positive cash flows from operations; potential future changes in our previously reported results as a result of the identification and correction of errors in our accounting policies or procedures or the material weaknesses in our internal controls over financial reporting; our failure to meet the financial covenants or the other obligations set forth in our credit agreement and the lenders’ refusal to waive any such defaults; increases in interest rates; the impact of high gasoline prices; consumer preferences and general economic conditions; increased competition in the automotive parts industry including increased competition from Chinese and other offshore manufacturers; difficulty in obtaining Used Cores and component parts or increases in the costs of those parts; political, criminal or economic instability in any of the foreign countries where we conduct operations; currency exchange fluctuations; potential tariffs, unforeseen increases in operating costs; risks associated with cyber-attacks; risks associated with conflict minerals; the impact of new accounting pronouncements and tax laws and interpretations thereof; uncertainties affecting our ability to estimate our tax rate and other factors discussed herein and in our other filings with the Securities and Exchange Commission (the “SEC”). These and other risks and uncertainties may cause our actual results to differ materially and adversely from those expected in any forward-looking statements. Readers are directed to risks and uncertainties identified below under “Risk Factors” and elsewhere in this report for additional detail regarding factors that may cause actual results to be different than those expressed in our forward-looking statements. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason.


Management Overview


We have been focused on implementing a multi-pronged platform for growth within the non-discretionary automotive aftermarket for the replacement parts and diagnostic testing industry, through organic growth and acquisitions. Our investments in infrastructure and human resources, including the consolidation of our distribution center in Mexico and the significant expansion of manufacturing capacity, are expected to be transformative and scalable. As a result, gross profit and net income continues to behave been impacted, and our future performance and opportunities should be considered with these factors in mind.


NewOur products introduced through our growth strategies noted above include:include (i) turbochargers through an acquisition in July 2016;rotating electrical products such as alternators and starters, (ii) wheel hub assemblies and bearings, (iii) brake-related products, which include brake powercalipers, brake boosters, in August 2016; (iii) the design and manufacture ofbrake master cylinders, and (iv) diagnostics systems for alternators, starters, belt-start generators (stop start and hybrid technology), and electric power trains for electric vehicles through an acquisition in July 2017; (iv) the design and manufacture ofother products, which include diagnostics systems, advanced power emulators (ACused for the development of electric vehicles and DC)aerospace applications, and custom power electronic products for quality control in the automotivedevelopment and aerospace industries through an acquisition in December 2018;production of electric vehicles and (v) alternators and starters for medium truck, farm, and marine applications through an acquisition in January 2019.turbochargers.

Pursuant to the guidance provided under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for segment reporting, we have identified our chief operating decision maker (“CODM”), reviewed the documents used by the CODM, and understand how such documents are used by the CODM to make financial and operating decisions. We have determined through this review process that due to recent acquisitions, our business comprises three separate operating segments. Two of the operating segments meet all of the aggregation criteria, and are aggregated. The remaining operating segment does not meet the quantitative thresholds for individual disclosure. Since this immaterial operating segment meets the aggregation criteria of ASC 280,disclosure and we have combined our operating segments into a single reportable segment.


24
Impact of the Novel Coronavirus (“COVID-19”)

The recent outbreak of the COVID-19 pandemic has spread globally and created significant volatility, uncertainty and economic disruption in many countries, including the countries in which we operate. National, state and local governments in these countries have implemented a variety of measures in response to the COVID-19 pandemic that have the effect of restricting or limiting, among other activities, the operations of certain businesses.

We experienced a significant reduction in customer demand for our products during April 2020, but sales have substantially recovered; however; at this time, we are unable to predict accurately the ultimate long-term impact that COVID-19 will have on our business and financial condition. While the near-term outook appears positive, any additional government shut-downs would negatively impact our  business and financial condition. There have been no serious outbreaks in any of our production facilities. If there was a serious outbreak in any of our production facilities, our production capabilities would be negativey impacted.

Our business has continued to operate as we have been declared an essential business; however, we have experienced disruption in our global supply chain as a result of the ongoing impact of COVID-19 at all of our facilities as well as our supply partners. In addition, we experienced inefficiencies at our Mexico and Asian production and distribution facilities due to a shutdown for a brief period. The implementation of additional personnel safety measures, required throughout our production facilities, negatively affects our production efficiencies. These personnel safety measures included adding an additional shift in conjunction with reducing the number of hours in the existing shift, greater spacing (less personnel) in production areas and sanitizing procedures between shifts. High-risk employees at all of our facilities have been required to remain at home; however, they continue to receive their compensation. We also implemented safe work practices across all of our facilities, including work from home rules, staggered shifts, Plexiglas barriers, and many other safety precautions. Our employees have embraced the challenges of working remotely, continuing to operate effectively through constant communication with team members.

Enhanced levels of communication at all levels within the organization are critical to address the ever-changing landscape brought on by COVID-19, especially with most of our office staff continuing to work from home. Such efforts have included, weekly board check-in meetings, daily executive committee meetings, as needed, and regular town hall style communications with all employees.

To date, we have incurred increased costs as a result of COVID-19, including increased employee costs, such as expanded benefits and frontline incentives, and other operating costs, such as costs associated with the provision of personal protective equipment, which have negatively impacted our profitability. These expanded benefits, supply costs and other COVID-19 related costs resulted in approximately $2,295,000 of total expense included in cost of goods sold and operating expenses in the condensed consolidated statements of operations for the three months ended June 30, 2020. We have received approximately $365,000 in payments from the Canadian Government under the Canadian Emergency Wage Subsidy program and our Asian subsidiaries have received approximately $93,000 from their local government assistance programs. These payments are included in cost of goods sold and operating expenses in the condensed consolidated statements of operations for the three months ended June 30, 2020. In addition, we deferred the employer’s share of social security taxes of $369,000, which is included in other liabilities in the condensed consolidated balance sheet at June 30, 2020.

Due to the seriousness of the COVID-19 pandemic and the unknown impact at the time on our business, we conserved cash wherever practicable. We implemented furloughs, layoffs, and salary reductions. Salary decreases affected 175 employees, ranging from 5% - 50% of base pay.  In addition, we implemented a worldwide travel ban and controls on all other expenses, including a freeze on hiring and salary increases.

25
Results of Operations for the Three Months Ended June 30, 20192020 and 20182019


The following discussion and analysis should be read together with the financial statements and notes thereto appearing elsewhere herein.


The following summarizes certain key operating data:


  
Three Months Ended
June 30,
 
  2019  2018 
Gross profit percentage  
16.1
%
  
17.8
%
Cash flow used in operations 
$
(18,379,000
)
 
$
(924,000
)
Finished goods turnover (annualized) (1)  
2.3
   
3.1
 
 
Three Months Ended
June 30,
 
  2020  2019 
Gross profit  percentage  14.0%  16.1%
Cash flow provided by (used in) operations $22,388,000  $(18,379,000)
Finished goods turnover (annualized) (1)  2.5   2.3 


(1)
Annualized finished goods turnover for the fiscal quarter is calculated by multiplying cost of goods sold for the quarter by 4 and dividing the result by the average between beginning and ending finished goods inventory values, which includes all on-hand core inventory, for the fiscal quarter. We believe this provides a useful measure of our ability to turn our inventory into revenues.


Net Sales and Gross Profit


The following summarizes net sales and gross profit:



 
Three Months Ended
June 30,
  
Three Months Ended
June 30,
 
 2019  2018  2020  2019 
Net sales
 
$
109,148,000
  
$
91,668,000
  $95,356,000  $109,148,000 
Cost of goods sold
 
91,565,000
  
75,316,000
   81,969,000   91,565,000 
Gross profit
 
17,583,000
  
16,352,000
   13,387,000   17,583,000 
Gross profit percentage
 
16.1
%
 
17.8
%
  14.0%  16.1%


Net Sales. Our net sales for the three months ended June 30, 2019 increased2020 decreased by $17,480,000,$13,792,000, or 19.1%12.6%, to $109,148,000$95,356,000 compared towith net sales for the three months ended June 30, 20182019 of $91,668,000, reflecting continued growth for our rotating electrical products, wheel hub products, brake power booster products, and diagnostic equipment. In addition,$109,148,000. This decrease in our net sales were positively impactedwas due primarily to the negative economic effects of the COVID-19 pandemic partially offset by $5,258,000the expansion of our automotive aftermarket brake-related product offerings introduced in connection with acquisitions completed during the latterlater part of fiscal 2019.2020, which contributed net sales of $2,925,000 during the three months ended June 30, 2020.


Gross Profit.Our gross profit was $13,387,000, or 14.0% of net sales for the three months ended June 30, 2020 compared with $17,583,000, or 16.1% of net sales for the three months ended June 30, 2019 compared2019. Our gross profit was negatively impacted by $1,840,000, or 1.9%, due to $16,352,000 or 17.8% of net sales for the three months ended June 30, 2018. COVID-19 related costs.

The gross profit was impacted by a non-cash quarterly revaluation of cores that are part of the finished goods on the customers’ shelves (which are included in contract assets) to the lower of cost or net realizable value and resulted in a write-down of $4,564,000$1,384,000 compared to $2,626,000with $4,564,000 for the three months ended June 30, 2020 and 2019, respectively.

Our gross profit for the three months ended June 30, 2020 and 2018,2019 was also impacted by: (i) transition expenses in connection with the expansion of our operations in Mexico of $3,301,000 and $1,354,000, respectively, for remanufactured cores held at customers’ locations, which are included in contract assets.(ii) amortization of core premiums paid to customers related to new business of $1,223,000 and $1,108,000, respectively, and (iii) return accruals related to new business of $307,000 and $100,000, respectively.


In addition, gross profit for the three months ended June 30, 2019 was further impacted by (i) transition expenses of $1,354,000 in connection with the expansion of our operations in Mexico, (ii) $1,108,000 of amortization of core buy-back premiums paid to customers related to new business, (iii) net tariff costs of $1,067,000 paid for products sold before price increases were effective, (iv) costnot passed through to customers, and (ii) costs of $426,000 in connection with the cancellation of a customer contract, and (v) $100,000contract.

26

Operating Expenses

The following summarizes operating expenses:


 
Three Months Ended
June 30,
  
Three Months Ended
June 30,
 
 2019  2018  2020  2019 
General and administrative 
$
12,000,000
  
$
12,091,000
  $6,870,000  $12,000,000 
Sales and marketing 
4,919,000
  
4,392,000
   4,200,000   4,919,000 
Research and development 
2,372,000
  
1,736,000
   1,942,000   2,372,000 
        
Percent of net sales              
        
General and administrative 
11.0
%
 
13.2
%
  7.2%  11.0%
Sales and marketing 
4.5
%
 
4.8
%
  4.4%  4.5%
Research and development 
2.2
%
 
1.9
%
  2.0%  2.2%


General and Administrative. Our general and administrative expenses for the three months ended June 30, 20192020 were $12,000,000,$6,870,000, which represents a decrease of $91,000,$5,130,000, or 0.8%42.8%, from general and administrative expenses for the three months ended June 30, 20182019 of $12,091,000.$12,000,000. This decrease was due to (i) $35,000a non-cash gain of $2,832,000 compared towith a loss of $2,666,000non-cash gain $35,000 recorded due to the change in the fair value of the forward foreign currency exchange contracts during the three months ended June 30, 2020 and 2019, and 2018, respectively, and (ii) a non-cash gain of $1,985,000 compared with a non-cash gain of $502,000 recorded due to the remeasurement of foreign currency-denominated lease liabilities during the three months ended June 30, 2019. These decreases were partially offset by (i) $1,233,000 of increased2020 and 2019, respectively, and (iii) $910,000 from decreased professional services, (ii) $783,000 of general and administrative expenses attributable to our fiscal 2019 acquisitions, (iii) $385,000 of increased amortization of intangible assets in connection with our fiscal 2019 acquisitions, (iv) $327,000 of increased general and administrative expenses at our offshore locations to support our growth initiatives, and (v) $287,000 for personnel to support our growth initiatives.services.


Sales and Marketing. Our sales and marketing expenses for the three months ended June 30, 2019 increased $527,000,2020 decreased $719,000, or 12.0%14.6%, to $4,919,000$4,200,000 from $4,392,000$4,919,000 for the three months ended June 30, 20182019 primarily due to our cost-cutting measures in connection with COVID-19. These decreases in sales and marketing expenses attributable to our fiscal 2019 acquisitions.expense were as follows: (i) $408,000 from decreased travel, (ii) $157,000 from decreased marketing expense in connection with new business, (iii) $125,000 from decreased employee-related expenses.


Research and Development. Our research and development expenses increaseddecreased by $636,000,$430,000, or 36.3%18.1%, to $1,942,000 for the three months ended June 30, 2020 from $2,372,000 for the three months ended June 30, 2019 from $1,736,000 for the three months ended June 30, 2018. The increase wasprimarily due primarily to (i) $368,000 for personnel to support our growth initiatives, (ii) $212,000 ofcost-cutting measures in connection with COVID-19. These decreases in research and development expenses attributable to our fiscal 2019 acquisitions,were as follows: (i) $181,000 from decreased supplies and (iii) $43,000 of increased outside services to support our growth initiatives.(ii) $165,000 from decreased employee-related expenses.


Interest Expense


Interest Expense, net. Our interest expense, net for the three months ended June 30, 2019 increased $1,098,000,2020 decreased $1,764,000, or 21.6%28.6%, to $6,173,000$4,409,000 from $5,075,000$6,173,000 for the three months ended June 30, 2018. The increase in2019, primarily due to lower interest expense was due primarily to (i) increased average outstanding borrowings in connection with our growth initiatives and as we build our inventory levels to support anticipated higher sales and (ii) an increase in the utilization of our accounts receivable discount programs.rates.

Provision for Income Taxes


Income Tax. We recorded an income tax benefit of $1,022,000, or an effective tax rate of 25.3%, and an income tax benefit of $1,730,000, or an effective tax rate of 22.0%, and $1,447,000, or an effective tax rate of 20.8%, for the three months ended June 30, 20192020 and 2018,2019, respectively. The estimated effective tax rate for the entire year is based on current estimatesthree months ended June 30, 2020, was primarily impacted by non-deductible executive compensation under Internal Revenue Code Section 162(m) and any changes to those estimates in future periods could result in an effective tax rateforeign income taxed at rates that is materiallyare different from the current estimate.federal statutory rate.


27
Liquidity and Capital Resources


Overview


We had working capital (current assets minus current liabilities) of $69,069,000$87,410,000 and $73,528,000,$90,624,000, a ratio of current assets to current liabilities of 1.2:1.0 and 1.3:1.0 at June 30, 20192020 and March 31, 2019,2020, respectively. The decrease in working capital was due primarily to increased borrowing under our credit facility.


We generated cash during the three months ended June 30, 20192020 from operations and the use of receivable discount programsprograms. As we manage through the impacts of the COVID-19 pandemic, we have access to our existing cash, as well as from our available credit facility. The cash generated from these activities was primarily used for our growth initiatives andfacilities to build our inventory levels to support anticipated higher sales.

In June 2019, we entered into a second amendment to the credit facility, which, among other things, increased our revolving loan facility from $200,000,000 to $238,620,000.

meet short-term liquidity needs. We believe our cash and cash equivalents, short-term investments, use of receivable discount programs, amounts available under our credit facility, and other sources are sufficient to satisfy our expected future working capital needs, repayment of the current portion of our term loans, and lease and capital expenditure obligations over the next 12 months.


Share Repurchase Program


As of June 30, 2019,2020, $15,692,000 of the $37,000,000 authorized share repurchase program had been utilized and $21,308,000 remained available to repurchase shares, subject to the limit in our credit facility. Our credit facility permits the payment of up to $20,000,000 of dividends and share repurchases per fiscal year, subject to a minimum availability threshold and pro forma compliance with financial covenants. We retired the 675,561 shares repurchased under this program through June 30, 2019.2020. Our share repurchase program does not obligate us to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.


Cash Flows


The following summarizes cash flows as reflected in the condensed consolidated statements of cash flows:


 
Three Months Ended
June 30,
  
Three Months Ended
June 30,
 
 2019  2018  2020  2019 
Cash provided by (used in):      
Cash flows provided by (used in):      
Operating activities 
$
(18,379,000
)
 
$
(924,000
)
 $22,388,000  $(18,379,000)
Investing activities 
(2,668,000
)
 
(1,701,000
)
  (3,038,000)  (2,668,000)
Financing activities 
22,328,000
  
1,955,000
   (41,674,000)  22,328,000 
Effect of exchange rates on cash and cash equivalents  
15,000
   
(137,000
)
  172,000   15,000 
Net increase (decrease) in cash and cash equivalents 
$
1,296,000
  
$
(807,000
)
Net (decrease) increase in cash and cash equivalents $(22,152,000) $1,296,000 
              
Additional selected cash flow data:              
Depreciation and amortization 
$
2,379,000
  
$
1,586,000
  $2,551,000  $2,379,000 
Capital expenditures 
3,976,000
  
1,546,000
   2,983,000   3,976,000 


Net cash used inprovided by operating activities was $18,379,000 and $924,000$22,388,000 during the three months ended June 30, 2019 and 2018, respectively. Our2020 compared with net cash used in operating activities continue to be significantly impacted by our growth initiatives, including our product line expansion. Operating activities for the three months ended June 30, 2019 include (i) expenses incurred in connection with the expansion of our Mexico operations, (ii) the build-up of inventory to support anticipated higher sales, (iii) payments made to customers for core buy-backs made in connection with new business expansion, and (iv) a less significant decrease in accounts receivable$18,379,000 during the three months ended June 30, 20192019. The significant change in our operating activities was due to increased collections of accounts receivable and a less significant increase in our inventory as comparedwe continue to manage our inventory levels during the three months ended June 30, 2018.2020.


Net cash used in investing activities was $2,668,000$3,038,000 and $1,701,000$2,668,000 during the three months ended June 30, 20192020 and 2018,2019, respectively, due primarily to increaseddecreased purchases of plant and equipment for our current operations and the expansion of our operations in Mexico. This increase was partially offset byIn addition, we generated cash from the redemption of short-term investments during the three months ended June 30, 2019.


Net cash provided byused in financing activities was $22,328,000 and $1,955,000$41,674,000 during the three months ended June 30, 2019 and 2018, respectively,2020 compared with net cash provided by financing activities $22,328,000 during the three months ended June 30, 2019. The significant change in our financing activities was due mainly to increased net borrowingsrepayments under our credit facility.facility during the three months ended June 30, 2020 compared with borrowing under our credit facility during the three months ended June 30, 2019.


28
Capital Resources


Credit Facility


We are a party to a $230,000,000$268,620,000 senior secured financing, (as amended from time to time, the “Credit Facility”) with a syndicate of lenders, and PNC Bank, National Association, as administrative agent, consisting of (i) a $200,000,000$238,620,000 revolving loan facility, subject to borrowing base restrictions, a $20,000,000$24,000,000 sublimit for borrowings by Canadian borrowers, and a $15,000,000$20,000,000 sublimit for letters of credit (the “Revolving Facility”) and (ii) a $30,000,000 term loan facility (the “Term Loans”). The loans under the Credit Facility mature on June 5, 2023. The Credit Facility permits the payment of up to $20,000,000 of dividends and share repurchases per fiscal year, subject to a minimum availability threshold and pro forma compliance with financial covenants. In connection with the Credit Facility, the lenders have a security interest in substantially all of our assets.

In June 2019, we entered into a second amendment to the Credit Facility (the “Second Amendment”). The Second Amendment, among other things, (i) increased the total size of the Revolving Facility to $238,620,000, (ii) modified the fixed charge coverage ratio financial covenant, (iii) modified the definition of “Consolidated EBITDA”, (iv) modified the borrowing base definition to, among other things, include brake-related products as eligible inventory, (v) increased the letter of credit sublimit to $20,000,000, (vi) increased the Canadian revolving sublimit and swing line sublimit to $24,000,000, (vii) increased the swing line sublimit to $23,862,000, (viii) permitted up to $5,000,000 of sale and lease back transactions per fiscal year, (ix) increased the permitted amount of certain capital expenditures, (x) increased the permitted amount of operating lease obligations per fiscal year, and (xi) increased certain other covenant-related baskets. We capitalized $889,000 of new debt issuance costs in connection with the Second Amendment.


The Term Loans require quarterly principal payments of $937,500 beginning October 1, 2018.$937,500. The Credit Facility bears interest at rates equal to either LIBOR plus a margin of 2.25%, 2.50% or 2.75% or a reference rate plus a margin of 1.25%, 1.50% or 1.75%, in each case depending on the senior leverage ratio as of the applicable measurement date. There is also a facility fee of 0.375% to 0.50%, depending on the senior leverage ratio as of the applicable measurement date. The interest rate on our Term Loans and Revolving Facility was 5.19%2.93% and 5.16%2.94%, respectively, as ofat June 30, 20192020, respectively, and 5.24% as of4.34% and 3.64% at March 31, 2019.2020, respectively.


The Credit Facility, among other things, requires us to maintain certain financial covenants including a maximum senior leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with all financial covenants as of June 30, 2019.2020.

The following summarizes the financial covenants required under the Credit Facility:


 
Calculation as of
June 30, 2019
  
Financial covenants
required under the
Credit Facility
  
Financial covenants
required under the
Credit Facility
  
Calculation as of
June 30, 2020
 
Maximum senior leverage ratio 
2.36
  
3.00
   3.00   1.82 
Minimum fixed charge coverage ratio 
1.34
  
1.10
   1.10   1.38 


While we made payments to our Revolving Facility of $40,000,000, in light of COVID-19, we elected not to further pay down our Revolving Facility and accumulated cash of $27,464,000 as of June 30, 2020. Our credit arrangement only allows up to $6,000,000 of credit for cash when computing the senior leverage ratio. If we had paid down the Revolving Facility with cash on hand, our senior leverage ratio would have been 1.62. In addition to other covenants, the Credit Facility places limits on our ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, redeem or repurchase capital stock, alter the business conducted by us and our subsidiaries, transact with affiliates, prepay, redeem or purchase subordinated debt, and amend or otherwise alter debt agreements.


We had $135,400,000$112,000,000 and $110,400,000$152,000,000 outstanding under the Revolving Facility at June 30, 20192020 and March 31, 2019,2020, respectively. In addition, $4,039,000$5,679,000 was outstanding for letters of credit at June 30, 2019.2020. At June 30, 2019,2020, after certain contractual adjustments, $72,400,000$85,097,000 was available under the Revolving Facility.


Receivable Discount Programs


We use receivable discount programs with certain customers and their respective banks. Under these programs, we have options to sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold. These discount arrangements allow us to accelerate receipt of payment on customers’ receivables. While these arrangements have reduced our working capital needs, there can be no assurance that these programs will continue in the future. Interest expense resulting from these programs would increase if interest rates rise, if utilization of these discounting arrangements expands, if customers extend their payment to us, or if the discount period is extended to reflect more favorable payment terms to customers.


29
The following is a summary of the receivable discount programs:


 
Three Months Ended
June 30,
  
Three Months Ended
June 30,
 
 2019  2018  2020  2019 
Receivables discounted
 
$
96,854,000
  
$
86,785,000
  $111,360,000  $96,854,000 
Weighted average days
 
346
  
334
   345   346 
Annualized weighted average discount rate
 
3.9
%
 
4.1
%
  2.5%  3.9%
Amount of discount recognized as interest expense
 
$
3,649,000
  
$
3,324,000
  $2,686,000  $3,649,000 


Off-Balance Sheet Arrangements


At June 30, 2019,2020, we had no off-balance sheet financing or other arrangements with unconsolidated entities or financial partnerships (such as entities often referred to as structured finance or special purpose entities) established for purposes of facilitating off-balance sheet financing or other debt arrangements or for other contractually narrow or limited purposes.


Capital Expenditures and Commitments


Capital Expenditures


Our total capital expenditures, including finance leases and non-cash capital expenditures were $4,653,000$5,088,000 and $1,546,000$4,653,000 for the three months ended June 30, 20192020 and 2018,2019, respectively. These capital expenditures primarily include the purchase of equipment for our current operations and the expansion of our operations in Mexico. We expect to incur approximately $7,000,000$6,300,000 of capital expenditures for our current operations and approximately $18,000,000$11,000,000 for continued expansion of our operations in Mexico during fiscal 2020.2021. We have used and expect to continue using our working capital and additionalother available capital lease obligationsresources to financefund these capital expenditures.

Litigation


There have been no material changes to our litigation matters that are presented in our Annual Report on Form 10-K for the year ended March 31, 2019,2020, which was filed on June 28, 2019.15, 2020.


Critical Accounting Policies


There have been no material changes to our critical accounting policies and estimates that are presented in our Annual Report on Form 10-K for the year ended March 31, 2019,2020, which was filed on June 28, 2019,15, 2020, except as discussed below.


New Accounting Pronouncements Recently Adopted

Leases

In February 2016, the FASB issued new guidance that requires balance sheet recognition of a lease asset and lease liability by lessees for all leases, other than leases with a term of 12 months or less if the short-term lease exclusion expedient is elected. The new guidance also requires new disclosures providing additional qualitative and quantitative information about the amounts recorded in the financial statements. The new guidance requires a modified retrospective approach with optional practical expedients. The FASB provided entities with an additional transition method, which allows an entity to apply this guidance as of the beginning of the period of adoption instead of the beginning of the earliest comparative period presented in the entity’s financial statements. We adopted this guidance on April 1, 2019 using the additional transition method. We also elected certain practical expedients permitted under the transition guidance, including the package of practical expedients, which allowed us not to reassess lease classification for leases that commenced prior to the adoption date. In addition, we elected to exempt leases with an initial term of 12 months or less from balance sheet recognition and, for all classes of assets, combining non-lease components with lease components.

Upon adoption, we recorded operating lease liabilities of $53,043,000 and corresponding operating lease assets of $50,773,000. The difference between the operating lease assets and liabilities recognized on our consolidated balance sheet primarily related to accrued rent on existing leases that were offset against the operating lease asset upon adoption. There was an immaterial reclassification of non-lease components to finance lease assets and finance lease liabilities upon adoption due to our election to combine non-lease components with lease components. The adoption of the new guidance did not have any impact on our rent expense and consolidated statement of cash flows. However, we have material nonfunctional currency leases that could have a material impact on our consolidated statements of operations. As required for other monetary liabilities, lessees shall remeasure a foreign currency-denominated lease liability using the exchange rate at each reporting date, but the lease assets are nonmonetary assets measured at historical rates, which are not affected by subsequent changes in the exchange rates. We recorded a gain of $502,000 in general and administrative expenses in connection with the remeasurement of foreign currency-denominated lease liabilities during the three months ended June 30, 2019. See Note 10 for additional discussion of the adoption of ASC 842 and the impact on our financial statements.

New Accounting Pronouncements Not Yet Adopted


Measurement of Credit Losses on Financial Instruments


In June 2016, the FASB issued an accounting pronouncement related to the measurement of credit losses on financial instruments. This pronouncement, along with a subsequent ASUAccounting Standards Updates (“ASU”) issued to clarify certain provisions of the new guidance, changes the impairment model for most financial assets and will requirerequires the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. We plan to adoptThe adoption of this pronouncementguidance on April 1, 2020 increased our required disclosures for our fiscal year beginning April 1, 2020. We are currently evaluating the impact this guidance willexpected credit losses but did not have a material effect on our condensed consolidated financial statements, as well as any impacts on our business processes, systems and internal controls.statements.


Prior to April 1, 2020, accounts receivable were recorded at cost less an allowance for doubtful accounts. The net amount of accounts receivable and corresponding allowance for doubtful accounts were presented in the condensed consolidated balance sheets. We maintain an allowance for uncollectible accounts receivable for estimated losses resulting from the failure or inability of its customers to make required payments. Furthermore, receivable balances were assessed quarterly for impairment and an allowance was recorded if the receivable was considered impaired. Subsequent to April 1, 2020, accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered. The net amount of accounts receivable and corresponding allowance for credit losses are presented separately in the condensed consolidated balance sheets. We maintain an allowances for credit losses resulting from the expected failure or inability of our customers to make required payments. We recogniz the allowance for credit losses at inception and reassess quarterly based on the asset’s expected collectability. The allowance is based on multiple factors including historical experience with bad debts, the credit quality of the customer base, the aging of such receivables and current macroeconomic conditions, such as COVID-19, as well as expectations of conditions in the future, if applicable. Our allowance for credit losses is based on the assessment of the collectability of assets pooled together with similar risk characteristics.

We pool our receivables based on the shared risk characteristics of our customers. We record a provision for expected credit losses using a loss-rate method based on the ratio of our historical write-offs to our average trade accounts receivable. At each reporting period, we will assess whether financial assets in a pool continue to display similar risk characteristics. If particular receivables no longer display risk characteristics that are similar to those of the receivables in the pool, we may determine that we need to move those receivables to a different pool or perform an individual assessment of expected credit losses for those specific receivables.

Fair Value Measurements


In August 2018, the FASB issued guidance,, which changes the disclosure requirements for fair value measurements by removing, adding and modifying certain disclosures.disclosures, including the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The standardamendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 measurements, and the narrative description of measurement uncertainty should be applied prospectively only for the most recent interim or annual period presented in the initial year of adoption. All other amendments should be applied retrospectively applied to all periods presented upon their effective date. The adoption of this guidance on April 1, 2020 modified certain of our disclosures for our Level 3 fair value measurements but did not have an impact on our condensed consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued guidance that, for a limited time, eases the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We will apply these amendments prospectively. The adoption of this guidance on April 1, 2020 did not have an impact on our condensed consolidated financial statements for the three months ended June 30, 2020.

31
New Accounting Pronouncements Not Yet Adopted

Income Taxes

In December 2019, the FASB issued guidance that simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application. This guidance is effective for financial statements issued forannual and interim periods in fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019.2020. Early adoption is permitted. We are currently evaluating the impact this guidance will have on our condensed consolidated financial statements.


Item 3.
Quantitative and Qualitative Disclosures About Market Risk


There have been no material changes in market risk from the information provided in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K as of March 31, 2019,2020, which was filed with the SEC on June 28, 2019.15, 2020.


Item 4.
Controls and Procedures


Evaluation of Disclosure Controls and Procedures
 
OurWe have established disclosure controls and procedures designed to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including our chief executive officer, chief financial officer, and chief accounting officer, as appropriate to allow timely decisions regarding required disclosures.
Under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”)chief executive officer, chief financial officer, and Chief Accounting Officer (“CAO”), evaluatedchief accounting officer, we have conducted an evaluation of the effectiveness of our disclosure controls and procedures (asas defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2019.. Based on this evaluation, our CEO, CFOchief executive officer, chief financial officer, and CAOchief accounting officer concluded that ourMPA’s disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2019 as a result of the material weakness described in our Annual Report on Form 10-K and below.
A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As disclosed in more detail in Item 9A. “Controls and Procedures” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019, we identified the following material weakness in internal control over financial reporting:

(1)We did not perform a sufficient review of certain accounting policies and lacked oversight of the compliance with those policies, which resulted in inconsistent application, inadequate analysis and deficient documentation to support the financial statement presentation and disclosures over certain accounts, including inventory.


(2)Our lack of sufficient technical accounting resources resulted in inadequate oversight of process level controls of one of our subsidiaries.

Management’s Remediation Efforts
We have designed and begun to implement several steps, as further described below, to remediate the material weakness described in this Item 4 and enhance our overall control environment.

1.Management plans to hire and has hired additional finance and accounting personnel with the requisite experience and skill levels, supplemented by third-party technical accounting resources, sufficient to enable the proper and timely review of accounting analyses and memos in various technical areas.


2.Management will continue to formalize the assessment and documentation of the Company’s accounting and financial reporting policies and procedures and enhance controls over the monitoring of compliance with those accounting policies and procedures.


3.Management will enhance the accounting and internal control training program provided to staff of new and existing subsidiaries. Management will enhance its internal control processes to continuously monitor the subsidiaries’ compliance with and documentation of the Company’s accounting and financial reporting policies and procedures, including internal control over financial reporting.


4.Management has enhanced and will continue to enhance the risk assessment process and design of internal control over financial reporting at its subsidiary.
The actions that we are taking are subject to ongoing review by our management, including our CEO, CFO and CAO, as well as Audit Committee oversight. Management expects the remediation plan to extend over multiple financial reporting periods throughout fiscal year 2020. The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed prior to the end of fiscal year 2020.

While the foregoing measures are intended to effectively remediate the material weakness described in this Item 4, it is possible that additional remediation steps will be necessary. As such, as we continue to evaluate and implement our plan to remediate the material weakness, management may decide to take additional measures to address the material weakness or modify the remediation steps described above. Until the material weakness is remediated, we plan to continue to perform additional analyses and other procedures to help ensure that our consolidated financial statements are prepared in accordance with GAAP.
Inherent Limitations on Effectiveness of Controls
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
 
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America, applying certain estimates and judgments as required.
 
Internal control over financial reporting includes those policies and procedures that:
 
1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;Company;
 
2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the companyCompany are being made only in accordance with authorizations of management and directors of the company;Company; and
 
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’sCompany’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
Changes in Internal Control Over Financial Reporting
 
We are taking actions to remediate the material weakness relating to our internal controls over financial reporting, as described above. Additionally, during the quarter ended June 30, 2019, the Company adopted a comprehensive new lease standard which superseded previous lease guidance and, as a result, changes were made to related business processes and control activities in order to monitor and maintain appropriate controls over financial reporting. Except as discussed above, thereThere have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that occurred during the three months ended June 30, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II — OTHER INFORMATION


Item 1.
Legal Proceedings


There have been no material changes to our litigation matters that are presented in our Annual Report on Form 10-K for the year ended March 31, 2019,2020, which was filed on June 28, 2019.15, 2020.


Item 1A.
Risk Factors


There have been no material changes in the risk factors set forth in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended March 31, 2019,2020, filed on June 28, 2019.15, 2020.


Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds


Limitation on Payment of Dividends and Share Repurchases


The Credit Facility permits the payment of up to $20,000,000 of dividends and share repurchases per fiscal year, subject to a minimum availability threshold and pro forma compliance with financial covenants.


Purchases of Equity Securities by the Issuer


Shares repurchased during the three months ended June 30, 20192020 were as follows:


Periods 
Total Number of
Shares Purchased
  
Average Price
Paid Per Share
  
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
  
Approximate
Dollar Value of
Shares That May
Yet Be Purchased
Under the Plans
or Programs (1)
  
Total Number of
Shares Purchased
  
Average Price
Paid Per Share
  
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
  
Approximate
Dollar Value of
Shares That May
Yet Be Purchased
Under the Plans
or Programs (1)
 
                        
April 1 - April 30, 2019:            
April 1 - April 30, 2020:            
Open market and privately negotiated purchases -  $-  -  $21,308,000   -  $-   -  $21,308,000 
May 1 - May 31, 2019:            
May 1 - May 31, 2020:                
Open market and privately negotiated purchases -  $-  -  21,308,000   -  $-   -   21,308,000 
June 1 - June 30, 2019:            
June 1 - June 30, 2020:                
Open market and privately negotiated purchases  -  $-   -   21,308,000   -  $-   -   21,308,000 
Total  0      0  $21,308,000   0       0  $21,308,000 


(1)
As of June 30, 2019,2020, $15,692,000 of the $37,000,000 authorized share repurchase program had been utilized and $21,308,000 remained available to repurchase shares, subject to the limit in our Credit Facility. We retired the 675,561 shares repurchased under this program through June 30, 2019.2020. Our share repurchase program does not obligate us to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.


Item 5.
Other Information


None.

Item 6.
Exhibits


(a)
Exhibits:


Number
 
Description of Exhibit
 
Method of Filing
3.1 Certificate of Incorporation of the Company Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2 declared effective on March 22, 1994 (the “1994 Registration Statement”).
     
3.2 Amendment to Certificate of Incorporation of the Company Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (No. 33-97498) declared effective on November 14, 1995.
     
3.3
 Amendment to Certificate of Incorporation of the Company Incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1997.
     
3.4
 Amendment to Certificate of Incorporation of the Company Incorporated by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1998 (the “1998 Form 10-K”).
     
3.5
 Amendment to Certificate of Incorporation of the Company Incorporated by reference to Exhibit C to the Company’s proxy statement on Schedule 14A filed with the SEC on November 25, 2003.
     
3.6
 Amended and Restated By-Laws of Motorcar Parts of America, Inc. Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on August 24, 2010.
     
3.7
 Certificate of Amendment of the Certificate of Incorporation of the Company Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on April 17, 2014.
     
3.8
 Amendment to the Amended and Restated By-Laws of Motorcar Parts of America, Inc., as adopted on June 9, 2016 Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on June 14, 2016.
     
3.9
 Amendment to the Amended and Restated By-Laws of the Company Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on February 22, 2017.
     
4.1
 2003 Long Term Incentive PlanIncorporated by reference to Exhibit 4.9 to the Company’s Registration Statement on Form S-8 filed with the SEC on April 2, 2004.
4.2
2004 Non-Employee Director Stock Option Plan Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A for the 2004 Annual Shareholders Meeting.
     
4.34.2
 2010 Incentive Award Plan Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on December 15, 2010.
     
4.44.3
 Amended and Restated 2010 Incentive Award Plan Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on March 5, 2013.




Number 
Description of Exhibit
 
Method of Filing
4.54.4
 Second Amended and Restated 2010 Incentive Award Plan Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on March 3, 2014.
     
4.64.5
 2014 Non-Employee Director Incentive Award Plan Incorporated by reference to Appendix B to the Proxy Statement on Schedule 14A filed on March 3, 2014.
     
4.74.6
 Third Amended and Restated 2010 Incentive Award Plan Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on November 20, 2017.
4.7
Fourth Amended and Restated 2010 Incentive Award PlanIncorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on July 24, 2020.
10.1
Amendment No. 4 to Employment Agreement, dated as of May 21, 2020, between Motorcar Parts of America, Inc., and Selwyn JoffeFiled herewith.
     
31.1
 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 Filed herewith.
     
31.2
 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 Filed herewith.
     
31.3
 Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 Filed herewith.
     
32.1
 Certifications of Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 Filed herewith.
     
101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document).  
     
101.SCM Inline XBRL Taxonomy Extension Schema Document  
     
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document  
     
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document  
     
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document  
     
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document  
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)



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, thereunto duly authorized.


 
MOTORCAR PARTS OF AMERICA, INC.
   
Dated: August 9, 2019
10, 2020
By:
/s/ David Lee
  
David Lee
  
Chief Financial Officer
   
Dated: August 9, 2019
10, 2020
By:
/s/ Kevin Daly
Kamlesh Shah
  
Kevin Daly
Kamlesh Shah
  
Chief Accounting Officer



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