Motorcar Parts of America (MPAA) 10-Q 2022 Q1 Quarterly report

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, 2021

☐ 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 share	MPAA	The 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 19,119,059 shares of Common Stock outstanding at August 2, 2021.

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 Income (Loss)	6
	Condensed Consolidated Statements of Shareholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	29
	Item 4. Controls and Procedures	29
PART II — OTHER INFORMATION
	Item 1. Legal Proceedings	31
	Item 1A. Risk Factors	31
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	31
	Item 5. Other Information	31
	Item 6. Exhibits	32
	SIGNATURES	34

2

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.

3

.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	June 30, 2021			March 31, 2021
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	24,883,000		$	15,523,000
Short-term investments		1,823,000			1,652,000
Accounts receivable — net		54,019,000			63,122,000
Inventory		320,685,000			302,913,000
Contract assets		26,264,000			26,940,000
Prepaid expenses and other current assets		13,307,000			12,706,000
Total current assets		440,981,000			422,856,000
Plant and equipment — net		53,287,000			53,854,000
Operating lease assets		87,924,000			71,513,000
Long-term deferred income taxes		19,150,000			19,381,000
Long-term contract assets		293,158,000			270,213,000
Goodwill and intangible assets — net		8,194,000			8,534,000
Other assets		1,246,000			1,531,000
TOTAL ASSETS	$	903,940,000		$	847,882,000
LIABILITIES AND SHAREHOLDERS'  EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	141,451,000		$	152,735,000
Customer finished goods returns accrual		35,261,000			31,524,000
Contract liabilities		40,988,000			41,072,000
Revolving loan		103,000,000			84,000,000
Other current liabilities		5,774,000			6,683,000
Operating lease liabilities		5,434,000			6,439,000
Current portion of term loan		3,670,000			3,678,000
Total current liabilities		335,578,000			326,131,000
Term loan, less current portion		15,804,000			16,786,000
Long-term contract liabilities		153,504,000			125,223,000
Long-term deferred income taxes		76,000			73,000
Long-term operating lease liabilities		85,889,000			70,551,000
Other liabilities		7,862,000			7,973,000
Total liabilities		598,713,000			546,737,000
Commitments and contingencies		0			0
Shareholders' equity:
Preferred stock; par value $0.01 per share, 5,000,000 shares authorized; NaN issued		0			0
Series A junior participating preferred stock; par value $0.01 per share, 20,000 shares authorized; NaN issued		0			0
Common stock; par value $0.01 per share, 50,000,000 shares authorized; 19,101,092 and 19,045,386 shares issued and outstanding at June 30, 2021 and March 31, 2021, respectively		191,000			190,000
Additional paid-in capital		224,445,000			223,058,000
Retained earnings		86,454,000			85,593,000
Accumulated other comprehensive loss		(5,863,000	)		(7,696,000	)
Total shareholders' equity		305,227,000			301,145,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	903,940,000		$	847,882,000

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

4

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended June 30,
	2021			2020
Net sales	$	149,034,000		$	95,356,000
Cost of goods sold		125,463,000			81,969,000
Gross profit		23,571,000			13,387,000
Operating expenses:
General and administrative		12,486,000			11,687,000
Sales and marketing		5,368,000			4,200,000
Research and development		2,501,000			1,942,000
Foreign exchange impact of lease liabilities and forward contracts		(2,533,000	)		(4,817,000	)
Total operating expenses		17,822,000			13,012,000
Operating income		5,749,000			375,000
Interest expense, net		3,941,000			4,409,000
Income (loss) before income tax expense (benefit)		1,808,000			(4,034,000	)
Income tax expense (benefit)		947,000			(1,022,000	)
Net income (loss)	$	861,000		$	(3,012,000	)
Basic net income (loss) per share	$	0.05		$	(0.16	)
Diluted net income (loss) per share	$	0.04		$	(0.16	)
Weighted average number of shares outstanding:
Basic		19,054,481			18,976,178
Diluted		19,659,057			18,976,178

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

5

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

	Three Months Ended June 30,
	2021		2020
Net income (loss)	$	861,000	$	(3,012,000	)
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)		1,833,000		(1,263,000	)
Total other comprehensive income (loss), net of tax		1,833,000		(1,263,000	)
Comprehensive income (loss)	$	2,694,000	$	(4,275,000	)

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

6

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, 2021		19,045,386	$	190,000	$	223,058,000		$	85,593,000	$	(7,696,000	)	$	301,145,000
Compensation recognized under employee stock plans		-		0		1,576,000			0		0			1,576,000
Exercise of stock options, net of shares withheld for employee taxes		19,837		0		354,000			0		0			354,000
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes		35,869		1,000		(543,000	)		0		0			(542,000	)
Foreign currency translation		-		0		0			0		1,833,000			1,833,000
Net income		-		0		0			861,000		0			861,000
Balance at June 30, 2021		19,101,092	$	191,000	$	224,445,000		$	86,454,000	$	(5,863,000	)	$	305,227,000

	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		-		0		1,043,000			0			0			1,043,000
Exercise of stock options		3,000		0		20,000			0			0			20,000
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes		29,953		0		(207,000	)		0			0			(207,000	)
Foreign currency translation		-		0		0			0			(1,263,000	)		(1,263,000	)
Net loss		-		0		0			(3,012,000	)		0			(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

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

7

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	861,000		$	(3,012,000	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		3,145,000			2,551,000
Amortization of interest		414,000			312,000
Amortization of core premiums paid to customers		2,531,000			1,223,000
Amortization of finished goods premiums paid to customers		146,000			0
Noncash lease expense		1,791,000			1,686,000
Gain due to the change in the fair value of the contingent consideration		(60,000	)		(47,000	)
Foreign exchange impact of lease liabilities and forward contracts		(2,533,000	)		(4,817,000	)
Gain on short-term investments		(5,000	)		(155,000	)
Net provision for inventory reserves		3,141,000			2,074,000
Net provision for customer payment discrepancies and credit losses		229,000			30,000
Deferred income taxes		358,000			465,000
Share-based compensation expense		1,576,000			1,043,000
Loss on disposal of plant and equipment		33,000			0
Changes in operating assets and liabilities:
Accounts receivable		9,020,000			25,847,000
Inventory		(20,625,000	)		(8,034,000	)
Prepaid expenses and other current assets		281,000			(2,898,000	)
Other assets		297,000			219,000
Accounts payable and accrued liabilities		(10,183,000	)		6,478,000
Customer finished goods returns accrual		3,698,000			1,621,000
Contract assets, net		(24,857,000	)		(6,076,000	)
Contract liabilities, net		27,880,000			4,620,000
Operating lease liabilities		(1,259,000	)		(1,416,000	)
Other liabilities		(618,000	)		674,000
Net cash (used in) provided by operating activities		(4,739,000	)		22,388,000
Cash flows from investing activities:
Purchase of plant and equipment		(1,922,000	)		(2,983,000	)
Change in short-term investments		(167,000	)		(55,000	)
Net cash used in investing activities		(2,089,000	)		(3,038,000	)
Cash flows from financing activities:
Borrowings under revolving loan		32,000,000			0
Repayments of revolving loan		(13,000,000	)		(40,000,000	)
Repayments of term loan		(938,000	)		(938,000	)
Payments for debt issuance costs		(1,102,000	)		0
Payments on finance lease obligations		(678,000	)		(549,000	)
Exercise of stock options		354,000			20,000
Cash used to net share settle equity awards		(542,000	)		(207,000	)
Net cash provided by (used in) financing activities		16,094,000			(41,674,000	)
Effect of exchange rate changes on cash and cash equivalents		94,000			172,000
Net increase (decrease) in cash and cash equivalents		9,360,000			(22,152,000	)
Cash and cash equivalents — Beginning of period		15,523,000			49,616,000
Cash and cash equivalents  — End of period	$	24,883,000		$	27,464,000
Supplemental disclosures of cash flow information:
Cash paid for interest, net	$	3,521,000		$	4,234,000
Cash paid for income taxes, net of refunds		1,550,000			447,000
Cash paid for operating leases		2,472,000			2,574,000
Cash paid for finance leases		775,000			632,000
Plant and equipment acquired under finance leases		230,000			1,427,000
Assets acquired under operating leases		15,718,000			15,564,000
Non-cash capital expenditures		206,000			678,000

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

8

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(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 test solutions 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 test solutions and 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, brake rotors, brake pads, and brake master cylinders, and (iv) other products, which include turbochargers and test solutions and diagnostic equipment used for electric vehicle powertrain development and manufacturing including electric motor test systems, e-axle test systems, advanced power emulators, charging unit test systems, test systems for alternators, starters, belt starter generators and bench-top testers used by the automotive retail segment.

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 outbreak of the COVID-19 pandemic continues to adversely impact the U.S. and global economies – creating uncertainty regarding the 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 will depend on numerous factors and future developments, which are highly uncertain and cannot be predicted, including, but not limited to: (i) the severity of the virus, (ii) the occurrence and duration of additional spikes in infections, (iii) the effects of the pandemic on customers, suppliers, and vendors, (iv) the remedial actions and stimulus measures adopted by local, state and federal governments, (v) the availability and acceptance of vaccines, and (vi) the extent to which 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.

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. 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, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2022. 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, 2021, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 14, 2021.

9

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 2, Summary of Significant Accounting Policies, to the consolidated financial statements that are presented in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Recently Adopted Accounting Pronouncements

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 annual and interim periods in fiscal years beginning after December 15, 2020. The adoption of this guidance on April 1, 2021 did not have any material impact on the Company’s consolidated financial statements.

3. 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 allowances for credit losses, customer payment discrepancies, and returned goods authorizations (“RGAs”) issued for in-transit unit returns. 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 the 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).

Accounts receivable — net is comprised of the following:

	June 30, 2021			March 31, 2021
Accounts receivable — trade	$	67,212,000		$	81,549,000
Allowance for credit losses		(273,000	)		(348,000	)
Customer payment discrepancies		(797,000	)		(752,000	)
Customer returns RGA issued		(12,123,000	)		(17,327,000	)
Total accounts receivable — net	$	54,019,000		$	63,122,000

10

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 with the bankruptcy filing of one of its customers.

	Three Months Ended June 30,
	2021			2020
Balance at beginning of period	$	348,000		$	4,252,000
Provision for expected credit losses		(36,000	)		170,000
Recoveries		0			(100,000	)
Amounts written off charged against the allowance		(39,000	)		(3,897,000	)
Balance at end of period	$	273,000		$	425,000

4. Inventory

Inventory is comprised of the following:

	June 30, 2021			March 31, 2021
Inventory
Raw materials	$	140,109,000		$	128,190,000
Work-in-process		7,189,000			5,233,000
Finished goods		173,725,000			168,184,000
		321,023,000			301,607,000
Less allowance for excess and obsolete inventory		(13,945,000	)		(13,246,000	)
Inventory — net		307,078,000			288,361,000
Inventory unreturned		13,607,000			14,552,000
Total inventory	$	320,685,000		$	302,913,000

5. Contract Assets

During the three months ended June 30, 2021 and 2020, the Company reduced the carrying value of Remanufactured Cores held at customers’ locations by $984,000 and $1,384,000, respectively.

Contract assets are comprised of the following:

	June 30, 2021		March 31, 2021
Short-term contract assets
Cores expected to be returned by customers	$	15,024,000	$	17,657,000
Upfront payments to customers		533,000		684,000
Finished goods premiums paid to customers		644,000		405,000
Core premiums paid to customers		10,063,000		8,194,000
Total short-term contract assets	$	26,264,000	$	26,940,000
Remanufactured cores held at customers' locations	$	243,389,000	$	229,918,000
Upfront payments to customers		398,000		486,000
Finished goods premiums paid to customers		3,191,000		2,731,000
Core premiums paid to customers		40,611,000		31,509,000
Long-term core inventory deposits		5,569,000		5,569,000
Total long-term contract assets	$	293,158,000	$	270,213,000

11

6. Significant Customer and Other Information

Significant Customer Concentrations

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

	Three Months Ended June 30,
	2021			2020
Net sales
Customer A		34	%		45	%
Customer B		20	%		26	%
Customer C		31	%		17	%

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

	June 30, 2021			March 31,2021
Accounts receivable - trade
Customer A		43	%		50	%
Customer B		24	%		23	%
Customer C		1	%		0

Geographic and Product Information

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

	Three Months Ended June 30,
	2021			2020
Product line
Rotating electrical products		67	%		72	%
Wheel hub products		14	%		18	%
Brake related products		16	%		9	%
Other products		3	%		1	%
		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, 2021 and 2020.

12

7. Debt

The Company is party to a $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 $238,620,000 revolving loan facility, subject to borrowing base restrictions, a $24,000,000 sublimit for borrowings by Canadian borrowers, and a $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 currently permits the payment of up to $29,430,000 of dividends and share repurchases for fiscal year 2022, subject to 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 May 2021, the Company entered into a third amendment to the Credit Facility (the “Third Amendment”). The Third Amendment, among other things, (i) extended the maturity date to May 28, 2026 from June 5, 2023, (ii) modified the fixed charge coverage ratio financial covenant, and (iii) modified the definition of “Consolidated EBITDA”. The Company capitalized $1,102,000 of new debt issuance costs in connection with the Third Amendment.

The Term Loans require quarterly principal payments of $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 2.60% and 2.59%, respectively, at June 30, 2021, and 2.62% at March 31, 2021.

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, 2021.

The Company had cash of $24,883,000 at June 30, 2021, however, 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.

The following summarizes information about the Term Loans:

	June 30, 2021			March 31, 2021
Principal amount of Term Loans	$	19,687,000		$	20,625,000
Unamortized financing fees		(213,000	)		(161,000	)
Net carrying amount of Term Loans		19,474,000			20,464,000
Less current portion of Term Loans		(3,670,000	)		(3,678,000	)
Long-term portion of Term Loans	$	15,804,000		$	16,786,000

Future repayments of the Term Loans are as follows:

Year Ending March 31,
2022 - remaining nine months	$	2,812,000
2023		3,750,000
2024		3,750,000
2025		3,750,000
2026		3,750,000
Thereafter		1,875,000
Total payments	$	19,687,000

The Company had $103,000,000 and $84,000,000 outstanding under the Revolving Facility at June 30, 2021 and March 31, 2021, respectively. In addition, $6,444,000 was outstanding for letters of credit at June 30, 2021. At June 30, 2021, after certain contractual adjustments, $95,323,000 was available under the Revolving Facility.

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8. Contract Liabilities

Contract liabilities are comprised of the following:

	June 30, 2021		March 31, 2021
Short-term contract liabilities
Customer core returns accruals	$	12,350,000	$	12,710,000
Customer allowances earned		17,298,000		16,513,000
Customer deposits		2,735,000		2,234,000
Finished goods liabilities		2,424,000		1,883,000
Core bank liability		1,597,000		1,585,000
Accrued core payment, net		4,584,000		6,147,000
Total short-term contract liabilities	$	40,988,000	$	41,072,000
Long-term contract liabilities
Customer core returns accruals	$	132,469,000	$	103,719,000
Customer allowances earned		245,000		313,000
Finished goods liabilities		2,668,000		2,678,000
Core bank liability		16,499,000		16,903,000
Accrued core payment, net		1,623,000		1,610,000
Total long-term contract liabilities	$	153,504,000	$	125,223,000

9. Leases

The Company leases various facilities in North America and Asia under operating leases expiring through August 2033. The Company has material nonfunctional currency leases that could have a material impact on the Company’s condensed consolidated statements of operations. As required for other monetary liabilities, lessees remeasure foreign currency-denominated lease liabilities using the exchange rate at each reporting date, but the lease assets are nonmonetary assets measured at historical rates and are not affected by subsequent changes in the exchange rates. In connection with the remeasurement of these leases, the Company recorded gains of $2,795,000 and $1,985,000 during the three months ended June 30, 2021 and 2020, respectively. These gains are included in “foreign exchange impact of lease liabilities and forward contracts” in the condensed consolidated statements of operations.

Balance sheet information for leases is as follows:

Leases	Classification	June 30, 2021		March 31, 2021
Assets:
Operating	Operating lease assets	$	87,924,000	$	71,513,000
Finance	Plant and equipment		8,592,000		8,852,000
Total leased assets		$	96,516,000	$	80,365,000
Liabilities:
Current
Operating	Operating lease liabilities	$	5,434,000	$	6,439,000
Finance	Other current liabilities		2,584,000		2,640,000
Long-term
Operating	Long-term operating lease liabilities		85,889,000		70,551,000
Finance	Other liabilities		4,606,000		4,995,000
Total lease liabilities		$	98,513,000	$	84,625,000

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

	Three Months Ended
	June 30,
	2021		2020
Lease cost
Operating lease cost	$	3,042,000	$	2,683,000
Short-term lease cost		376,000		317,000
Variable lease cost		281,000		143,000
Finance lease cost:
Amortization of finance lease assets		499,000		413,000
Interest on finance lease liabilities		97,000		83,000
Total lease cost	$	4,295,000	$	3,639,000

Maturities of lease commitments at June 30, 2021 were as follows:

Maturity of lease liabilities	Operating Leases			Finance Leases			Total
2022 - remaining nine months	$	7,807,000		$	2,246,000		$	10,053,000
2023		11,351,000			2,404,000			13,755,000
2024		9,968,000			1,610,000			11,578,000
2025		10,041,000			1,118,000			11,159,000
2026		10,320,000			432,000			10,752,000
Thereafter		75,101,000			0			75,101,000
Total lease payments		124,588,000			7,810,000			132,398,000
Less amount representing interest		(33,265,000	)		(620,000	)		(33,885,000	)
Present value of lease liabilities	$	91,323,000		$	7,190,000		$	98,513,000

Other information about leases is as follows:

	June 30, 2021			March 31, 2021
Lease term and discount rate
Weighted-average remaining lease term (years):
Finance leases		3.2			3.4
Operating leases		11.0			11.1
Weighted-average discount rate:
Finance leases		5.3	%		5.3	%
Operating leases		5.7	%		5.9	%

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.

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The following is a summary of accounts receivable discount programs:

	Three Months Ended June 30,
	2021			2020
Receivables discounted	$	146,669,000		$	111,360,000
Weighted average days		329			345
Annualized weighted average discount rate		1.8	%		2.5	%
Amount of discount recognized as interest expense	$	2,473,000		$	2,686,000

11. Net Income (Loss) per Share

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

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

	Three Months Ended June 30,
	2021		2020
Net income (loss)	$	861,000	$	(3,012,000	)
Basic shares		19,054,481		18,976,178
Effect of potentially dilutive securities		604,576		0
Diluted shares		19,659,057		18,976,178
Net income (loss) per share:
Basic net income (loss) per share	$	0.05	$	(0.16	)
Diluted net income (loss) per share	$	0.04	$	(0.16	)

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 income (loss) per share. For the three months ended June 30, 2021 and 2020, there were 634,832 and 2,133,786, respectively, of potential common shares not included in the calculation of diluted net income (loss) per share because their effect was anti-dilutive.

12. Income Taxes

The Company recorded income tax expense of $947,000, or an effective tax rate of 52.4%, and an income tax benefit of $1,022,000, or an effective tax rate of 25.3%, for the three months ended June 30, 2021 and 2020, respectively. The effective tax rate for the three months ended June 30, 2021, was primarily impacted by (i) specific jurisdictions that the Company does not expect to recognize benefit of losses, (ii) foreign income taxed at rates that are different from the federal statutory rate, and (iii) non-deductible executive compensation under Internal Revenue Code Section 162(m).

The Company and its subsidiaries file income tax returns in the U.S. federal, various state, and foreign jurisdictions with varying statutes of limitations. At June 30, 2021, the Company is not under examination in any jurisdiction, and remain subject to examination from the years ended March 31, 2017. The Company believes no significant changes in the unrecognized tax benefits will occur within the next 12 months.

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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 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 $43,620,000 and $41,819,000 at June 30, 2021 and March 31, 2021, 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 included in “foreign exchange impact of lease liabilities and forward contracts” in the condensed consolidated statements of operations.

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

	Gain (Loss) Recognized as Foreign Exchange Impact of Lease Liabilities and Forward Contracts
Derivatives Not Designated as	Three Months Ended June 30,
Hedging Instruments	2021			2020
Forward foreign currency exchange contracts	$	(262,000	)	$	2,832,000

The fair value of the forward foreign currency exchange contracts of $1,167,000 and $1,429,000 is included in prepaid and other current assets in the condensed consolidated balance sheets at June 30, 2021 and March 31, 2021, respectively. The changes in the fair values of forward foreign currency exchange contracts are included in “foreign exchange impact of lease liabilities and forward contracts” in the condensed consolidated statements of cash flows for the three months ended June 30, 2021 and 2020.

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14. Fair Value Measurements

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

	June 30, 2021								March 31, 2021
			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
Assets
Short-term investments
Mutual funds	$	1,823,000	$	1,823,000	$	0	$	0	$	1,652,000	$	1,652,000	$	0	$	0
Prepaid expenses and other current assets
Forward foreign currency exchange contracts		1,167,000		0		1,167,000		0		1,429,000		0		1,429,000		0
Liabilities
Accrued liabilities
Short-term contingent consideration		850,000		0		0		850,000		910,000		0		0		910,000
Other current liabilities
Deferred compensation		1,823,000		1,823,000		0		0		1,652,000		1,652,000		0		0

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 (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 a three-year period.

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E&M Gross Profit Earn-out Consideration

The fair value of the three-year gross profit earn-out consideration was $850,000 and $910,000 at June 30, 2021 and March 31, 2021, 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, 2021
Risk free interest rate		0.06	%
Counter party rate		3.00	%
Expected volatility		30-40	%
Weighted average cost of capital		13-15.5	%

The Company’s contingent consideration is recorded in accounts payable and accrued liabilities in its condensed consolidated balance sheets at June 30, 2021 and March 31, 2021, and is a Level 3 liability measured at fair value.

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

	Three Months Ended June 30,
Contingent Consideration	2021			2020
Beginning balance	$	910,000		$	2,653,000
Changes in revaluations of contingent consideration included in earnings		(60,000	)		(47,000	)
Ending balance	$	850,000		$	2,606,000

During the three months ended June 30, 2021, 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.

15. Share-based Payments

Stock Options

During the three months ended June 30, 2021, 0 options to purchase shares of the Company’s common stock were granted. The Company granted options to purchase 341,825 shares of common stock during the three months ended June 30, 2020.

The following is a summary of stock option transactions:

	Number of Shares			Weighted Average Exercise Price
Outstanding at March 31, 2021		1,744,885		$	17.51
Granted		0		$	0
Exercised		(21,270	)	$	18.24
Forfeited		(900	)	$	17.90
Outstanding at June 30, 2021		1,722,715		$	17.50

At June 30, 2021, options to purchase 420,746 shares of common stock were unvested at a weighted average exercise price of $17.30.

At June 30, 2021, there was $2,221,000 of total unrecognized compensation expense related to unvested stock option awards. Compensation expense related to unvested stock option awards will be recognized over the weighted average remaining vesting period of approximately 1.6 years.

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

During the three months ended June 30, 2021 and 2020, the Company granted 218,673 and 112,293 shares of RSUs, respectively, based on the closing market price on the grant date.

The following is a summary of non-vested RSUs:

	Number of Shares			Weighted Average Grant Date Fair Value
Outstanding at March 31, 2021		354,484		$	17.22
Granted		218,673		$	22.27
Vested		(59,483	)	$	16.62
Forfeited		0		$	0
Outstanding at June 30, 2021		513,674		$	19.44

At June 30, 2021, there was $6,738,000 of unrecognized compensation expense related to these awards, which will be recognized over the weighted average remaining vesting period of approximately 2.0 years.

Performance Stock Units (“PSUs”)

In June 2021, the Company granted performance-based PSUs to its executives, which typically cliff vest after three-years subject to continued employment. These awards are contingent and granted separately for each of the following metrics: adjusted EBITDA, net sales, and relative total shareholder return (“TSR”). Compensation cost is determined at the grant date and recognized on a straight-line basis over the requisite service period to the extent the conditions are deemed probable. The number of shares earned at the end of the three-year period will vary, based only on actual performance, from 0%% to 150% of the target number of PSUs granted. PSUs are not considered issued or outstanding ordinary shares of the Company.

Adjusted EBITDA and net sales are considered performance conditions. The Company will reassess the probability of achieving each performance condition separately each reporting period. TSR is considered a market condition because it measures the Company’s return against the performance of the Russell 3000, excluding companies classified as financials and real estate, over a given period of time. Compensation cost related to the TSR award will not be adjusted even if the market condition is not met.

The Company calculated the fair value of the PSUs for each component individually. The fair value of PSUs subject to performance conditions is equal to the closing stock price on the grant date. The fair value of PSUs subject to the market condition is determined using the Monte Carlo valuation model.

The following table summarizes the assumptions used in determining the fair value of the TSR awards:

	Three Months Ended June 30,
	2021
Risk free interest rate		0.47	%
Expected life in years		3
Expected volatility of MPA common stock		53.70	%
Expected average volatility of peer companies		59.30	%
Average correlation coefficient of peer companies		26.70	%
Expected dividend yield		0
Grant date fair value	$	26.89

The following is a summary of non-vested PSUs:

	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding at March 31, 2021		0	$	0
Granted		84,593	$	23.19
Vested		0	$	0
Forfeited		0	$	0
Outstanding at June 30, 2021		84,593	$	23.19

At June 30, 2021, there was $1,939,000 of unrecognized compensation expense related to these awards, which will be recognized over the weighted average remaining vesting period of approximately 3.0 years.

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16. Commitments and Contingencies

Warranty Returns

The Company allows its customers to return goods that their consumers 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  unit sales. Amounts charged to expense for these warranty returns are considered in arriving at the Company’s net sales.

The following summarizes the changes in the warranty return accrual:

	Three Months Ended June 30,
	2021			2020
Balance at beginning of period	$	21,093,000		$	18,300,000
Charged to expense		27,261,000			23,089,000
Amounts processed		(28,344,000	)		(19,197,000	)
Balance at end of period	$	20,010,000		$	22,192,000

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.

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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, 2021 audited consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on June 14, 2021.

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 or other restrictions 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; 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; supply chain delays or stoppages due to shipping delays; 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 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 a multi-pronged platform for growth within the non-discretionary automotive aftermarket for the replacement parts and test solutions and diagnostic equipment industry, through organic growth and acquisitions. Our investments in infrastructure and human resources during the past few years reflects the significant expansion of manufacturing capacity to support multiple product lines and continues to be transformative and scalable. These investments included (i) the opening of a 410,000 square foot distribution center, (ii) two buildings totaling 372,000 square feet for remanufacturing and core sorting of brake calipers, and (iii) the realignment of production at our initial 312,000 square foot facility in Mexico.

Our 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, brake rotors, brake pads, and brake master cylinders, and (iv) other products, which include turbochargers and test solutions and diagnostic equipment used for electric vehicle powertrain development and manufacturing including electric motor test systems, e-axle test systems, advanced power emulators, charging unit test systems, test systems for alternators, starters, belt starter generators and bench-top testers used by the automotive retail segment.

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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 our business comprises three 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 we have combined our operating segments into a single reportable segment.

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

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 continue to implement a variety of measures in response that have the effect of restricting or limiting, among other activities, the operations of certain businesses.

We continue to experience disruptions with worldwide supply chain and logistics services. 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 outlook appears positive, any additional government shutdowns or additional spikes in infections could negatively impact our business and financial condition.

There have been no serious outbreaks in any of our production facilities; however, a serious outbreak could affect our production capabilities. We experienced inefficiencies in operations due to the implementation of additional personnel safety measures throughout our facilities. These personnel safety measures include 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 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, additional board check-in meetings and executive committee meetings, as needed, and regular town hall style communications with all employees.

We continue to incur costs as a result of COVID-19, including employee costs, such as expanded benefits and frontline incentives, and other operating costs associated with the provision of personal protective equipment, which have negatively impacted our profitability. During the three months ended June 30, 2021 and 2020, these expanded benefits, supply costs and other COVID-19 related costs resulted in $854,000 and $2,295,000, respectively, of total expense included in cost of goods sold and operating expenses in the condensed consolidated statements of operations.  During the three months ended June 30, 2021 and 2020, our Asian subsidiaries received $23,000 and $93,000, respectively, from their local assistance programs. During the three months ended June 30, 2020, we received $365,000, in payments from the Canadian Government under the Canadian Emergency Wage Subsidy program. These payments are recorded as a reduction of cost of goods sold and operating expenses in the condensed consolidated statements of operations.

23

Results of Operations for the Three Months Ended June 30, 2021 and 2020

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,
	2021			2020
Cash flow (used in) provided by operations	$	(4,739,000	)	$	22,388,000
Finished goods turnover (annualized) (1)		4.5			3.4

(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 non-core finished goods inventory values for the fiscal quarter. Annualized finished goods turnover for the three months ended June 30, 2020 has been updated to conform to the current year presentation for non-core finished goods turnover. 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,
	2021			2020
Net sales	$	149,034,000		$	95,356,000
Cost of goods sold		125,463,000			81,969,000
Gross profit		23,571,000			13,387,000
Gross profit percentage		15.8	%		14.0	%

Net Sales. Our net sales for the three months ended June 30, 2021 were $149,034,000, which represents an increase of $53,678,000, or 56.3%, from the three months ended June 30, 2020 of $95,356,000. Net sales for the quarter increased across all product lines due to strong demand for our products. We continue to experience a number of challenges related to the global COVID-19 pandemic, including disruptions with worldwide supply chain and logistics services. Our prior year net sales were also impacted by the COVID-19 pandemic.

Gross Profit. Our gross profit was $23,571,000, or 15.8% of net sales, for the three months ended June 30, 2021 compared with $13,387,000, or 14.0% of net sales, for the three months ended June 30, 2020.  Our gross profit was impacted by (i) growth initiatives in connection with the expansion of our new product lines, in addition to the transition costs discussed below, and (ii) inflationary costs related to the global pandemic, including disruptions with worldwide supply chain, logistics services, and related higher freight costs. Higher freight costs impacted gross profit by approximately $2,990,000, or 2.0%. We also incurred additional expenses of $1,771,000 and $1,840,000 due to COVID-19 related costs for inefficiencies in the supply chain, wages and personal protective equipment during the three months ended June 30, 2021 and 2020, respectively.

Our gross profit for the three months ended June 30, 2021 and 2020 was also impacted by: (i) transition expenses in connection with the expansion of our operations in Mexico of $1,947,000 and $3,301,000, respectively, and (ii) amortization of core premiums paid to customers related to new business of $2,531,000 and $1,223,000, respectively.

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In addition, gross profit was impacted by (i) 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, which resulted in a write-down of $984,000 compared with $1,384,000, and (ii) customer allowances and return accruals related to new business of $146,000 and $307,000 for the three months ended June 30, 2021 and 2020, respectively.

Operating Expenses

The following summarizes operating expenses:

	Three Months Ended June 30,
	2021			2020
General and administrative	$	12,486,000		$	11,687,000
Sales and marketing		5,368,000			4,200,000
Research and development		2,501,000			1,942,000
Foreign exchange impact of lease liabilities and forward contracts		(2,533,000	)		(4,817,000	)
Percent of net sales
General and administrative		8.4	%		12.3	%
Sales and marketing		3.6	%		4.4	%
Research and development		1.7	%		2.0	%
Foreign exchange impact of lease liabilities and forward contracts		(1.7	)%		(5.1	)%

General and Administrative. Our general and administrative expenses for the three months ended June 30, 2021 were $12,486,000, which represents an increase of $799,000, or 6.8%, from the three months ended June 30, 2020 of $11,687,000. General and administrative expenses decreased to 8.4% of net sales for the three months ended June 30, 2021 compared with 12.3% in the prior year. The increase in general and administrative expense was primarily due to (i) $997,000 of increased costs at our offshore locations, primarily resulting from our expansion in Mexico, (ii) $533,000 of increased share-based compensation due to equity grants made to employees in June 2021, and (iii) $468,000 of increased employee-related expenses, primarily due to salary reductions in the prior year in response to the COVID-19 pandemic. These increases in general and administrative expenses were partially offset by $1,396,000 decreased professional services.

Sales and Marketing. Our sales and marketing expenses for the three months ended June 30, 2021 were $5,368,000, which represents an increase of $1,168,000, or 27.8%, from the three months ended June 30, 2020 of $4,200,000. The increase in sales and marketing expense was primarily due to our cost-cutting measures in the prior year in response to COVID-19. These increases in sales and marketing expense during the three months ended June 30, 2021 were primarily due to (i) $407,000 of increased employee-related expenses, primarily due to salary reductions in the prior year in response to the COVID-19 pandemic, (ii) $338,000 of increased advertising expense, (iii) $258,000 of increased commissions, and (iv) $136,000 of increased travel.

Research and Development. Our research and development expenses for the three months ended June 30, 2021 were $2,501,000, which represents an increase of $559,000, or 28.8%, from the three months ended June 30, 2020 of $1,942,000. The increase in research and development expense was primarily due to our cost-cutting measures in the prior year in response to COVID-19. These increases in research and development expenses during the three months ended June 30, 2021 were primarily due to (i) $319,000 of increased employee-related expenses, primarily due to salary reductions in the prior year in response to the COVID-19 pandemic, (ii) $145,000 of increased samples for our library, and (iii) $78,000 of increased outside services.

Foreign Exchange Impact of Lease Liabilities and Forward Contracts. The remeasurement of our foreign currency-denominated lease liabilities resulted in non-cash gains of $2,795,000 and $1,985,000 for the three months ended June 30, 2021 and 2020, respectively, due to movements in foreign exchange rates. In addition, the forward foreign currency exchange contracts resulted in a non-cash loss of $262,000 and a non-cash gain of $2,832,000 for the three months ended June 30, 2021 and 2020, respectively, due to the changes in their fair values.

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Interest Expense

Interest Expense, net. Our interest expense, net, for the three months ended June 30, 2021 was $3,941,000, which represents a decrease of $468,000, or 10.6%, from the three months ended June 30, 2020 of $4,409,000. The decrease in interest expense was primarily due to lower interest rates and lower average outstanding balances under our credit facility.

Provision for Income Taxes

Income Tax. We recorded income tax expense of $947,000, or an effective tax rate of 52.4%, and an income tax benefit of $1,022,000, or an effective tax rate of 25.3%, for the three months ended June 30, 2021 and 2020, respectively. The effective tax rate for the three months ended June 30, 2021 was primarily impacted by (i) specific jurisdictions that we do not expect to recognize the benefit of losses, (ii) foreign income taxed at rates that are different from the federal statutory rate, and (iii) non-deductible executive compensation under Internal Revenue Code Section 162(m).

Liquidity and Capital Resources

Overview

We had working capital (current assets minus current liabilities) of $105,403,000 and $96,725,000, a ratio of current assets to current liabilities of 1.3:1.0, at June 30, 2021 and March 31, 2021, respectively. The increase in working capital was due primarily to the buildup of our inventory to meet anticipated future demand.

We generated cash during the three months ended June 30, 2021 from the use of our receivable discount programs and credit facility. As we manage through the impacts of the COVID-19 pandemic, we have access to our existing cash, as well as our available credit facilities to 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

Our board of directors approved a stock repurchase program of up to $37,000,000 of our common stock. As of June 30, 2021, $16,831,000 was utilized and $20,169,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in our Credit Facility. We retired the 730,521 shares repurchased under this program through June 30, 2021. 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.

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Cash Flows

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

	Three Months Ended June 30,
	2021			2020
Cash flows provided by (used in):
Operating activities	$	(4,739,000	)	$	22,388,000
Investing activities		(2,089,000	)		(3,038,000	)
Financing activities		16,094,000			(41,674,000	)
Effect of exchange rates on cash and cash equivalents		94,000			172,000
Net increase (decrease) in cash and cash equivalents	$	9,360,000		$	(22,152,000	)
Additional selected cash flow data:
Depreciation and amortization	$	3,145,000		$	2,551,000
Capital expenditures		1,922,000			2,983,000

Net cash used in operating activities was $4,739,000 during the three months ended June 30, 2021 compared with net cash provided by operating activities of $22,388,000 during the three months ended June 30, 2020. The significant change in our operating activities was due to (i) the buildup of our inventory to meet anticipated future demand, (ii) the paydown of our accounts payable balances, and (iii) increased operating results (net income plus the net add-back for non-cash transactions in earnings). In addition, our operating activities continue to be impacted, to a lesser extent, by our growth initiatives, including our expanded footprint and product lines.

Net cash used in investing activities was $2,089,000 and $3,038,000 during the three months ended June 30, 2021 and 2020, respectively. The significant change in our investing activities was due primarily to decreased capital expenditures as we near the completion of our expansion in Mexico.

Net cash provided by financing activities was $16,094,000 during the three months ended June 30, 2021 compared with net cash used in financing activities $41,674,000 during the three months ended June 30, 2020. The significant change in our financing activities was due mainly to additional borrowings under our credit facility during the three months ended June 30, 2021 compared with repayments under our credit facility during the three months ended June 30, 2020.

Capital Resources

Credit Facility

We are party to a $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 $238,620,000 revolving loan facility, subject to borrowing base restrictions, a $24,000,000 sublimit for borrowings by Canadian borrowers, and a $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 currently permits the payment of up to $29,430,000 of dividends and share repurchases for fiscal year 2022, subject to 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 May 2021, we entered into a third amendment to the Credit Facility (the “Third Amendment”). The Third Amendment, among other things, (i) extended the maturity date to May 28, 2026 from June 5, 2023, (ii) modified the fixed charge coverage ratio financial covenant, and (iii) modified the definition of “Consolidated EBITDA”. We capitalized $1,102,000 of new debt issuance costs in connection with the Third Amendment.

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The Term Loans require quarterly principal payments of $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 2.60% and 2.59%, respectively, at June 30, 2021, and 2.62% at March 31, 2021.

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, 2021.

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

	Financial covenants  required under the  Credit Facility	Calculation as of June 30, 2021
Maximum senior leverage ratio	3.00	1.57
Minimum fixed charge coverage ratio	1.10	1.34

We had cash of $24,883,000 at June 30, 2021, however, the Credit Facility only allows up to $6,000,000 of credit for cash when computing the senior leverage ratio. Our senior leverage ratio would have been 1.51 had we paid down the Revolving Facility with cash on hand. 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 $103,000,000 and $84,000,000 outstanding under the Revolving Facility at June 30, 2021 and March 31, 2021, respectively. In addition, $6,444,000 was outstanding for letters of credit at June 30, 2021. At June 30, 2021, after certain contractual adjustments, $95,323,000 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.

The following is a summary of the receivable discount programs:

	Three Months Ended June 30,
	2021			2020
Receivables discounted	$	146,669,000		$	111,360,000
Weighted average days		329			345
Annualized weighted average discount rate		1.8	%		2.5	%
Amount of discount recognized as interest expense	$	2,473,000		$	2,686,000

Off-Balance Sheet Arrangements

At June 30, 2021, 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.

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Capital Expenditures and Commitments

Capital Expenditures

Our total capital expenditures, including finance leases and non-cash capital expenditures were $1,622,000 and $5,088,000 for the three months ended June 30, 2021 and 2020, 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 $12,300,000 of capital expenditures for our current operations and approximately $4,000,000 for continued expansion of our operations in Mexico for the full fiscal year 2022. We have used and expect to continue using our working capital and other available capital resources to fund 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, 2021, which was filed on June 14, 2021.

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, 2021, which was filed on June 14, 2021, except as discussed below.

Recently Adopted Accounting Pronouncements

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 annual and interim periods in fiscal years beginning after December 15, 2020. The adoption of this guidance on April 1, 2021 did not have any material impact on our 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, 2021, which was filed with the SEC on June 14, 2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We 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, chief financial officer, and chief accounting officer, we have conducted an evaluation of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, our chief executive officer, chief financial officer, and chief accounting officer concluded that MPA’s disclosure controls and procedures were effective as of June 30, 2021.

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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;

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 Company are being made only in accordance with authorizations of management and directors of the Company; and

3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’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

There 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, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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, 2021, which was filed on June 14, 2021.

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, 2021, filed on June 14, 2021.

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

Limitation on Payment of Dividends and Share Repurchases

The Credit Facility currently permits the payment of up to $29,430,000 of dividends and share repurchases for fiscal year 2022, subject to pro forma compliance with financial covenants.

Purchases of Equity Securities by the Issuer

Shares repurchased during the three months ended June 30, 2021 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)
April 1 - April 30, 2021:
Open market and privately negotiated purchases		-	$	-		-	$	20,169,000
May 1 - May 31, 2021:
Open market and privately negotiated purchases		-	$	-		-		20,169,000
June 1 - June 30, 2021:
Open market and privately negotiated purchases		-	$	-		-		20,169,000
Total		0				0	$	20,169,000

(1) As of June 30, 2021, $16,831,000 was utilized and $20,169,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in our Credit Facility. We retired the 730,521 shares repurchased under this program through June 30, 2021. 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.

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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	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.
4.2	2010 Incentive Award Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on December 15, 2010.
4.3	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.

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Number	Description of Exhibit	Method of Filing
4.4	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.
4.5	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.
4.6	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 Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on July 24, 2020.
10.1	Amendment No. 5 to Employment Agreement, dated as of June 18, 2021, between Motorcar Parts of America, Inc., and Selwyn Joffe	Filed 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
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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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, 2021	By:	/s/ David Lee
		David Lee
		Chief Financial Officer
Dated: August 9, 2021	By:	/s/ Kamlesh Shah
		Kamlesh Shah
		Chief Accounting Officer

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