UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2020 OR ☐ 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 | | ...

PART I — FINANCIAL INFORMATION [Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Unaudited financial statements for December 31, 2019, reflect increased assets and liabilities, improved net income, and reduced operating cash outflow [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$726.7 million** by December 31, 2019, driven by higher inventory and new operating lease assets, with total liabilities also growing Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2019 | Mar 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$726,742** | **$632,362** | | Inventory - net | $256,482 | $233,726 | | Operating lease assets | $65,652 | - | | Long-term contract assets | $224,569 | $221,876 | | **Total Liabilities** | **$442,416** | **$352,607** | | Revolving loan | $130,000 | $110,400 | | Operating lease liabilities (Current & Long-term) | $66,796 | - | | **Total Shareholders' Equity** | **$284,326** | **$279,755** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended December 31, 2019, net sales slightly increased, gross profit improved, and the company reported net income of **$865,000** Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $125,574 | $124,113 | $385,096 | $343,720 | | Gross profit | $27,661 | $21,161 | $81,817 | $63,224 | | Operating income | $9,246 | $1,627 | $22,230 | $10,153 | | Net income (loss) | $865 | $(3,102) | $903 | $(5,084) | | Diluted EPS | $0.04 | $(0.16) | $0.05 | $(0.27) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly improved to **$4.4 million** for the nine months ended December 31, 2019, with financing activities providing **$13.5 million** Cash Flow Summary (Nine Months Ended Dec 31, in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,410) | $(20,328) | | Net cash used in investing activities | $(9,650) | $(13,244) | | Net cash provided by financing activities | $13,546 | $29,290 | | **Net decrease in cash and cash equivalents** | **$(453)** | **$(4,458)** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail the adoption of ASC 842, significant customer concentration, and a pending **$17 million** customs duty claim - The company adopted the new lease guidance (ASC 842) on April 1, 2019, recording operating lease liabilities of **$53.0 million** and corresponding assets of **$50.8 million**[34](index=34&type=chunk) Significant Customer Concentration (as % of Net Sales) | Customer | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Customer A | 39% | 36% | | Customer B | 21% | 23% | | Customer C | 23% | 23% | - The company is disputing a claim from U.S. Customs and Border Protection for approximately **$17 million** in additional duties from 2011 through mid-2018[93](index=93&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a **12.0%** increase in net sales, improved gross margins, and increased operating expenses, with liquidity supported by an amended credit facility [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Q3 net sales rose **1.2%** to **$125.6 million**, driven by new products and acquisitions, with gross margin expanding to **22.0%** due to product mix - For Q3 FY2020, the introduction of brake calipers contributed **$6.9 million** in net sales, and acquisitions from fiscal 2019 added **$6.1 million**[104](index=104&type=chunk) - Q3 gross profit margin improved by **5.0 percentage points** year-over-year, primarily due to a change in product mix and a smaller non-cash revaluation write-down of cores[105](index=105&type=chunk) - For the nine months ended Dec 31, 2019, net sales increased by **$41.4 million (12.0%)**, with acquisitions contributing **$17.3 million** and the new brake caliper line adding **$11.5 million**[115](index=115&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital was **$75.1 million** as of December 31, 2019, with liquidity supported by an amended **$238.6 million** revolving credit facility and receivable discount programs - In June 2019, the company amended its credit facility, increasing the revolving loan facility from **$200.0 million** to **$238.6 million**[124](index=124&type=chunk)[132](index=132&type=chunk) - At December 31, 2019, the company had **$130.0 million** outstanding under its revolving facility and **$73.8 million** available for borrowing[136](index=136&type=chunk) - The company's share repurchase program had **$21.3 million** remaining available as of December 31, 2019, though no shares were repurchased during the quarter[126](index=126&type=chunk)[165](index=165&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposures have occurred since the Annual Report on Form 10-K for the fiscal year ended March 31, 2019 - There have been no material changes in market risk since the Annual Report on Form 10-K as of March 31, 2019[148](index=148&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective due to a material weakness in internal control over financial reporting, with remediation efforts underway - Management concluded that disclosure controls and procedures were not effective as of December 31, 2019, due to a previously identified material weakness[149](index=149&type=chunk) - The material weakness stems from an insufficient review of accounting policies and a lack of technical accounting resources, leading to inconsistent application and inadequate analysis[156](index=156&type=chunk) - Remediation efforts are underway, including hiring more experienced personnel and enhancing training and monitoring, with a target completion before the end of fiscal year 2020[152](index=152&type=chunk)[153](index=153&type=chunk) PART II — OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to litigation matters have occurred since the Annual Report on Form 10-K for the fiscal year ended March 31, 2019 - No material changes to litigation matters have occurred since the last annual report[162](index=162&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the Annual Report on Form 10-K for the fiscal year ended March 31, 2019 - No material changes to risk factors have occurred since the last annual report[163](index=163&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No equity securities were repurchased during the quarter, with **$21.3 million** remaining available under the authorized share repurchase program - No shares were repurchased during the three months ended December 31, 2019[165](index=165&type=chunk) - As of December 31, 2019, **$21.3 million** remained available under the company's authorized share repurchase program[165](index=165&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No additional material information is reported for this item - None[166](index=166&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents and Sarbanes-Oxley Act certifications - Exhibits filed with this report include certifications from the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act[169](index=169&type=chunk)

Financial Data and Key Metrics Changes - Net sales for Q3 2020 increased to $125.6 million from $124.1 million year-over-year, with adjusted net sales rising to $127.7 million from $119.6 million [25] - Gross profit for Q3 2020 was $27.7 million, up from $21.2 million a year earlier, with gross profit as a percentage of net sales increasing to 22% from 17% [26] - Adjusted net income for Q3 2020 was $5.5 million or $0.28 per diluted share, compared to $6.7 million or $0.35 per share a year ago [34] Business Line Data and Key Metrics Changes - The company is focusing on maintaining growth rates in hard parts categories and launching into the multi-billion dollar brake parts category [14] - The facility expansion in Malaysia is substantially complete, allowing for increased capacity and reduced dependence on outsourcing [11] Market Data and Key Metrics Changes - The market for internal combustion engine vehicles in the U.S. is projected to increase by 36 million from 2020 to 2030, which will drive growth in the aftermarket parts replacement industry [12] - The company expects to generate approximately $534 million in net sales for fiscal 2020, representing a 13% year-over-year growth [20] Company Strategy and Development Direction - The company is executing strategic investments to create a transformative platform for growth and profitability within the $125 billion aftermarket hard parts industry [8] - The strategy includes leveraging channel relationships for aftermarket parts and expanding into electric vehicle diagnostics and testing [16] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the outlook for current and expanding product lines, despite short-term softness in demand due to mild weather and deferred orders [21] - The company expects continued year-over-year sales increases and improved adjusted gross margins and operating income for fiscal 2020 [18] Other Important Information - The company has established itself as a leader in supplying internal combustion vehicle hard parts, with significant growth expected in the aftermarket parts replacement industry [12] - The company has a net bank debt of approximately $145.6 million and total cash availability of about $83.2 million as of December 31, 2019 [38] Q&A Session Summary Question: Can you provide more detail on specifics driving the revenue mix? - Management indicated that nearly all underperformance was due to the deferral of over $12 million in product orders, which are expected to hit in future quarters [46] Question: How do you see the impact of the coronavirus on supply chains? - Management stated there has been no effect from the coronavirus as of now, but there are risks associated with unique update orders and componentry sourced from China [58] Question: What are the expectations for the new brake caliper line? - Management expects revenue from calipers to be closer to $25 million to $30 million, depending on order timing [63] Question: How do you feel about capacity and CapEx needs for fiscal 2021? - Management indicated that CapEx will drop dramatically as facilities are completed, and they are well set up to handle expected growth [54] Question: What is the company's plan for debt repayment moving forward? - Management plans to minimize outstanding debt from the revolver and will consider capital allocation for shareholder value once stable positive cash flows are achieved [72]

Financial Data and Key Metrics Changes - Net sales for Q2 2020 increased 17.5% to $150.4 million from $127.9 million year-over-year, driven by sales growth in both hard parts and diagnostic products [22] - Adjusted net sales for Q2 2020 rose 16.4% to $151.4 million from $130.2 million a year earlier [23] - Gross profit for Q2 2020 was $36.6 million, up from $25.7 million a year ago, with gross profit as a percentage of net sales at 24.3% compared to 20.1% [23] - Adjusted net income for Q2 2020 was $13 million or $0.68 per diluted share, compared to $11.5 million or $0.60 per diluted share a year earlier [30] Business Line Data and Key Metrics Changes - The hard parts business saw significant growth, particularly with the launch of the new brake caliper line, which began shipping in Q2 [10] - The diagnostic and testing business is emerging, with expectations for significant revenue generation opportunities in the automotive and aerospace sectors [13] Market Data and Key Metrics Changes - The company is positioned as a major multi-product supplier to the North American aftermarket, with a growing presence in electric vehicle diagnostics [16] - The number of prime placement age vehicles is increasing, supporting optimism for growth in the aftermarket industry over the next several years [19] Company Strategy and Development Direction - The company is focused on increasing absorption from newly expanded distribution centers and relocating operations to lower-cost locations in Mexico and Malaysia [11][12] - Strategic partnerships, such as with OPAL-RT, are enhancing the company's capabilities in electric vehicle powertrain development [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining a growth rate of over 16% in Q3 and anticipates exponential growth in Q4 due to large initiatives [42] - The company expects to generate positive cash flows from operations in the second half of the fiscal year, supported by reduced payments for core buybacks [37] Other Important Information - The company maintains its adjusted net sales guidance for fiscal year 2020 between $552 million and $562 million, representing 16% to 18% growth year-over-year [18] - Adjusted gross margin for fiscal year 2020 is expected to be approximately 27%, impacted by product mix [18] Q&A Session Summary Question: Revenue guidance for fiscal 2020 - Management is comfortable sustaining a 16% growth rate in Q3 and expects additional growth in Q4 due to large initiatives [42] Question: Price increases implementation - Price increases initiated in Q2 are expected to be fully reflected in Q3 [43] Question: Capacity utilization trends - Management anticipates improved operating efficiencies in the next six months as new facilities ramp up [44] Question: Gross margin guidance - Management indicated that ramp-up costs and new product costs are impacting gross margins, but efficiency improvements are expected [52] Question: Revenue growth drivers - Growth is attributed to existing product lines and market share gains, with a minor contribution from tariff passthrough [56] Question: Heavy-duty truck demand - Management is optimistic about heavy-duty product integration and expects gains from consolidating orders through the new distribution warehouse [58] Question: Accounts receivable increase - The increase in accounts receivable is due to record sales in September, which are expected to convert to cash in Q3 [73]

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201%2E%20Financial%20Statements%20%28unaudited%29) This section presents the unaudited condensed consolidated financial statements for the period ended September 30, 2019, covering financial position, operations, and cash flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights | Metric | September 30, 2019 ($) | March 31, 2019 ($) | | :-------------------------- | :----------------- | :--------------- | | Total Assets | $712,558,000 | $632,362,000 | | Total Liabilities | $431,213,000 | $352,607,000 | | Total Shareholders' Equity | $281,345,000 | $279,755,000 | | Operating Lease Assets | $49,262,000 | - | | Revolving Loan | $144,000,000 | $110,400,000 | | Inventory — net | $250,667,000 | $233,726,000 | | Accounts Receivable — net | $69,914,000 | $56,015,000 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Three Months Ended September 30 (YoY) | Metric | 2019 ($) | 2018 ($) | Change ($) | % Change (%) | | :----------------------- | :----------- | :----------- | :----------- | :--------- | | Net sales | $150,374,000 | $127,939,000 | $22,435,000 | 17.5% | | Gross profit | $36,573,000 | $25,711,000 | $10,862,000 | 42.2% | | Operating income | $14,692,000 | $10,393,000 | $4,299,000 | 41.4% | | Net income | $6,189,000 | $3,513,000 | $2,676,000 | 76.2% | | Basic EPS | $0.33 | $0.19 | $0.14 | 73.7% | | Diluted EPS | $0.32 | $0.18 | $0.14 | 77.8% | Six Months Ended September 30 (YoY) | Metric | 2019 ($) | 2018 ($) | Change ($) | % Change (%) | | :----------------------- | :----------- | :----------- | :----------- | :--------- | | Net sales | $259,522,000 | $219,607,000 | $39,915,000 | 18.2% | | Gross profit | $54,156,000 | $42,063,000 | $12,093,000 | 28.7% | | Operating income | $12,984,000 | $8,526,000 | $4,458,000 | 52.3% | | Net income (loss) | $38,000 | $(1,982,000) | $2,020,000 | N/A | | Basic EPS | $0.00 | $(0.10) | $0.10 | N/A | | Diluted EPS | $0.00 | $(0.10) | $0.10 | N/A | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Comprehensive Income (Loss) | Period | 2019 ($) | 2018 ($) | | :----------------------- | :----------- | :----------- | | Three Months Ended Sep 30 | $5,758,000 | $3,511,000 | | Six Months Ended Sep 30 | $206,000 | $(2,699,000) | - Foreign currency translation resulted in a gain of **$168,000** for the six months ended September 30, 2019, compared to a loss of **$(717,000)** in the prior year[19](index=19&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' Equity Changes (March 31, 2019 to September 30, 2019) | Item | Amount ($) | | :------------------------------------ | :----------- | | Balance at March 31, 2019 | $279,755,000 | | Compensation recognized under employee stock plans | $2,041,000 | | Issuance of common stock upon vesting of RSUs, net | $(1,062,000) | | Foreign currency translation | $168,000 | | Net income (six months) | $38,000 | | Balance at September 30, 2019 | $281,345,000 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flows (Six Months Ended September 30) | Activity | 2019 ($) | 2018 ($) | | :------------------------------------ | :------------- | :------------- | | Net cash used in operating activities | $(26,736,000) | $(6,409,000) | | Net cash used in investing activities | $(5,701,000) | $(5,481,000) | | Net cash provided by financing activities | $29,059,000 | $5,112,000 | | Net decrease in cash and cash equivalents | $(3,456,000) | $(6,874,000) | | Cash and cash equivalents — End of period | $6,455,000 | $6,175,000 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Company Background and Organization](index=11&type=section&id=1%2E%20Company%20Background%20and%20Organization) - Motorcar Parts of America, Inc. is a leading supplier of automotive aftermarket non-discretionary replacement parts and diagnostic equipment, primarily in North America[28](index=28&type=chunk) - The company's product portfolio includes rotating electrical products, wheel hub assemblies, brake master cylinders, and newly introduced brake calipers (August 2019), along with other products like turbochargers and diagnostic systems[28](index=28&type=chunk) - The company completed the acquisition of Dixie Electric, Ltd in January 2019 and aggregates its three operating segments into one reportable segment[30](index=30&type=chunk)[31](index=31&type=chunk) [2. Basis of Presentation and New Accounting Pronouncements](index=11&type=section&id=2%2E%20Basis%20of%20Presentation%20and%20New%20Accounting%20Pronouncements) - The company adopted new lease accounting guidance (ASC 842) on April 1, 2019, recognizing operating lease liabilities of **$53,043,000** and corresponding operating lease assets of **$50,773,000**[35](index=35&type=chunk) - The adoption of ASC 842 resulted in losses of **$1,139,000** (three months) and **$637,000** (six months) in general and administrative expenses due to the remeasurement of foreign currency-denominated lease liabilities[35](index=35&type=chunk) - The company is evaluating the impact of new accounting pronouncements on credit losses on financial instruments (effective April 1, 2020) and fair value measurements (effective after December 15, 2019)[36](index=36&type=chunk)[37](index=37&type=chunk) [3. Accounts Receivable — Net](index=13&type=section&id=3%2E%20Accounts%20Receivable%20%E2%80%94%20Net) Accounts Receivable — Net | Metric | September 30, 2019 ($) | March 31, 2019 ($) | | :-------------------------- | :----------------- | :--------------- | | Accounts receivable — trade | $86,974,000 | $75,847,000 | | Allowance for bad debts | $(4,187,000) | $(4,100,000) | | Customer payment discrepancies | $(1,169,000) | $(854,000) | | Customer returns RGA issued | $(11,704,000) | $(14,878,000) | | Total accounts receivable — net | $69,914,000 | $56,015,000 | [4. Inventory](index=13&type=section&id=4%2E%20Inventory) Inventory — Net | Metric | September 30, 2019 ($) | March 31, 2019 ($) | | :--------------------------------- | :----------------- | :--------------- | | Raw materials | $104,180,000 | $95,757,000 | | Work-in-process | $4,720,000 | $3,502,000 | | Finished goods | $154,901,000 | $146,366,000 | | Less allowance for excess and obsolete inventory | $(13,134,000) | $(11,899,000) | | Total inventory — net | $250,667,000 | $233,726,000 | | Inventory unreturned | $8,684,000 | $8,469,000 | [5. Contract Assets](index=13&type=section&id=5%2E%20Contract%20Assets) Contract Assets | Metric | September 30, 2019 ($) | March 31, 2019 ($) | | :------------------------------------ | :----------------- | :--------------- | | Short-term contract assets | $19,471,000 | $22,183,000 | | Long-term contract assets | $224,329,000 | $221,876,000 | | Remanufactured cores held at customers' locations (Long-term) | $203,024,000 | $196,914,000 | [6. Significant Customer and Other Information](index=14&type=section&id=6%2E%20Significant%20Customer%20and%20Other%20Information) Significant Customer Concentrations (Six Months Ended September 30, 2019) | Customer | Net Sales (%) | Accounts Receivable - Trade (%) | | :--------- | :-------- | :-------------------------- | | Customer A | 40% | 33% | | Customer B | 21% | 15% | | Customer C | 22% | 23% | Product Sales Breakdown (Six Months Ended September 30, 2019) | Product Category | Percentage of Net Sales (%) | | :----------------------- | :---------------------- | | Rotating electrical products | 76% | | Wheel hub products | 16% | | Brake caliper products | 2% | | Brake master cylinders products | 2% | | Other products | 4% | - No single supplier accounted for more than **10%** of inventory purchases for the three and six months ended September 30, 2019 and 2018[45](index=45&type=chunk) [7. Debt](index=14&type=section&id=7%2E%20Debt) - The company's Credit Facility was amended in June 2019, increasing the Revolving Facility to **$238,620,000** and modifying financial covenants, including the borrowing base definition to include brake-related products[48](index=48&type=chunk) Debt Outstanding and Interest Rates (September 30, 2019) | Metric | Amount/Rate | | :-------------------------- | :------------ | | Revolving Loan Outstanding | $144,000,000 | | Term Loan Principal | $26,250,000 | | Revolving Facility Interest Rate | 4.84% | | Term Loan Interest Rate | 4.86% | - The company was in compliance with all financial covenants under the Credit Facility as of September 30, 2019[50](index=50&type=chunk) [8. Contract Liabilities](index=16&type=section&id=8%2E%20Contract%20Liabilities) Contract Liabilities | Metric | September 30, 2019 ($) | March 31, 2019 ($) | | :-------------------------- | :----------------- | :--------------- | | Short-term contract liabilities | $24,064,000 | $30,599,000 | | Long-term contract liabilities | $49,327,000 | $40,889,000 | | Long-term customer core returns accruals | $38,841,000 | $25,722,000 | [9. Leases](index=16&type=section&id=9%2E%20Leases) Lease Balance Sheet Information (September 30, 2019) | Metric | Amount ($) | | :-------------------------- | :----------- | | Operating lease assets | $49,262,000 | | Finance lease assets (Plant and equipment) | $7,079,000 | | Total leased assets | $56,341,000 | | Operating lease liabilities (Current) | $4,487,000 | | Finance lease liabilities (Current) | $2,036,000 | | Long-term operating lease liabilities | $47,925,000 | | Long-term finance lease liabilities | $4,149,000 | | Total lease liabilities | $58,597,000 | Total Lease Cost (Six Months Ended September 30, 2019) | Component | Amount ($) | | :-------------------------- | :----------- | | Operating lease cost | $3,885,000 | | Short-term lease cost | $698,000 | | Variable lease cost | $287,000 | | Amortization of finance lease assets | $730,000 | | Interest on finance lease liabilities | $141,000 | | Total lease cost | $5,741,000 | - Weighted-average remaining lease terms are **3.4 years** for finance leases and **12.0 years** for operating leases, with corresponding weighted-average discount rates of **4.8%** and **5.6%**[61](index=61&type=chunk) [10. Accounts Receivable Discount Programs](index=18&type=section&id=10%2E%20Accounts%20Receivable%20Discount%20Programs) Accounts Receivable Discount Programs (Six Months Ended September 30) | Metric | 2019 ($) | 2018 ($) | | :------------------------------------ | :------------- | :------------- | | Receivables discounted | $205,882,000 | $191,849,000 | | Annualized weighted average discount rate | 3.6% | 4.1% | | Amount of discount recognized as interest expense | $7,196,000 | $7,441,000 | [11. Net Income (Loss) Per Share](index=18&type=section&id=11%2E%20Net%20Income%20%28Loss%29%20Per%20Share) Net Income (Loss) Per Share (Three Months Ended September 30) | Metric | 2019 ($) | 2018 ($) | | :-------------------------- | :----- | :----- | | Basic net income (loss) per share | $0.33 | $0.19 | | Diluted net income (loss) per share | $0.32 | $0.18 | Net Income (Loss) Per Share (Six Months Ended September 30) | Metric | 2019 ($) | 2018 ($) | | :-------------------------- | :----- | :----- | | Basic net income (loss) per share | $0.00 | $(0.10) | | Diluted net income (loss) per share | $0.00 | $(0.10) | - Potential common shares considered anti-dilutive and excluded from diluted EPS calculations were **1,221,744** for the three months and **1,166,432** for the six months ended September 30, 2019[66](index=66&type=chunk) [12. Income Taxes](index=19&type=section&id=12%2E%20Income%20Taxes) Income Tax Expense and Effective Tax Rate | Period | 2019 Expense (Benefit) ($) | 2019 Effective Rate (%) | 2018 Expense (Benefit) ($) | 2018 Effective Rate (%) | | :-------------------------- | :--------------------- | :-------------------- | :--------------------- | :-------------------- | | Three Months Ended Sep 30 | $1,980,000 | 24.2% | $1,181,000 | 25.2% | | Six Months Ended Sep 30 | $250,000 | 86.8% | $(266,000) | 11.8% | - The effective tax rate for the six months ended September 30, 2019, was significantly impacted by valuation allowances recorded in connection with the July 2017 and January 2019 acquisitions[67](index=67&type=chunk) [13. Financial Risk Management and Derivatives](index=19&type=section&id=13%2E%20Financial%20Risk%20Management%20and%20Derivatives) - The company uses forward foreign currency exchange contracts to mitigate market risk from fluctuations in the Mexican peso and Chinese yuan, not for speculation[69](index=69&type=chunk)[70](index=70&type=chunk) - The U.S. dollar equivalent notional value of these contracts was **$36,791,000** at September 30, 2019[71](index=71&type=chunk) Effect of Derivative Instruments on General and Administrative Expenses | Period | 2019 Gain (Loss) ($) | 2018 Gain (Loss) ($) | | :-------------------------- | :--------------- | :--------------- | | Three Months Ended Sep 30 | $(663,000) | $1,898,000 | | Six Months Ended Sep 30 | $(628,000) | $(768,000) | [14. Fair Value Measurements](index=20&type=section&id=14%2E%20Fair%20Value%20Measurements) - Financial assets and liabilities measured at fair value include Level 1 mutual funds (**$2,192,000**), Level 2 forward foreign currency exchange contracts (**$421,000** liability), and Level 3 contingent consideration (**$4,851,000** liability) at September 30, 2019[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk)[85](index=85&type=chunk) - Contingent consideration liabilities from the E&M and Dixie acquisitions are Level 3 liabilities, valued using probability-weighted methods or Monte Carlo simulations with specific assumptions for risk-free rates, volatility, and discount rates[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[83](index=83&type=chunk) - Changes in revaluations of contingent consideration included in earnings for the six months ended September 30, 2019, amounted to **$130,000**[85](index=85&type=chunk) [15. Share-based Payments](index=22&type=section&id=15%2E%20Share-based%20Payments) - During the six months ended September 30, 2019, the company granted **300,039** stock options with a weighted average fair value of **$8.28** and **79,851** Restricted Stock Units (RSUs) with an estimated grant date fair value of **$1,591,000**[87](index=87&type=chunk)[88](index=88&type=chunk)[90](index=90&type=chunk) - Total unrecognized compensation expense for unvested stock options was **$4,037,000** (over ~2.2 years) and for RSUs was **$3,175,000** (over ~2.1 years) at September 30, 2019[89](index=89&type=chunk)[91](index=91&type=chunk) [16. Accumulated Other Comprehensive Loss](index=23&type=section&id=16%2E%20Accumulated%20Other%20Comprehensive%20Loss) - Accumulated other comprehensive loss was **$(6,719,000)** at September 30, 2019, primarily due to foreign currency translation losses[92](index=92&type=chunk) - Foreign currency translation resulted in a gain of **$168,000** for the six months ended September 30, 2019, compared to a loss of **$(717,000)** in the prior year[92](index=92&type=chunk) [17. Commitments and Contingencies](index=24&type=section&id=17%2E%20Commitments%20and%20Contingencies) - The warranty return accrual was **$16,575,000** at September 30, 2019[94](index=94&type=chunk) - The company is disputing an approximate **$17 million** claim from U.S. Customs and Border Protection for additional duties from 2011 through mid-2018[95](index=95&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operational results for the three and six months ended September 30, 2019, covering sales growth, profitability, liquidity, and internal control matters [Disclosure Regarding Private Securities Litigation Reform Act of 1995](index=25&type=section&id=Disclosure%20Regarding%20Private%20Securities%20Litigation%20Reform%20Act%20of%201995) - The report contains forward-looking statements subject to various risks and uncertainties, including customer concentration, changes in customer financial condition, increased competition, difficulty in obtaining Used Cores, political/economic instability, currency exchange fluctuations, potential tariffs, and the impact of new accounting pronouncements[98](index=98&type=chunk) [Management Overview](index=25&type=section&id=Management%20Overview) - The company is focused on a multi-pronged growth platform in the non-discretionary automotive aftermarket through organic growth and acquisitions, with investments in infrastructure and manufacturing capacity expansion in Mexico[99](index=99&type=chunk) - Product expansion includes turbochargers, brake power boosters, diagnostic systems (for internal combustion engines, electric vehicles, and aerospace), advanced power emulators, custom power electronic products, and newly introduced brake calipers in August 2019[101](index=101&type=chunk)[102](index=102&type=chunk) - The company's business comprises three operating segments, which are aggregated into one reportable segment[103](index=103&type=chunk) [Results of Operations for the Three Months Ended September 30, 2019 and 2018](index=26&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20September%2030%2C%202019%20and%202018) - Net sales increased by **$22,435,000** (**17.5%**) to **$150,374,000**, driven by growth in rotating electrical and wheel hub products, **$4,572,000** from new brake calipers, and **$5,893,000** from fiscal 2019 acquisitions[106](index=106&type=chunk) - Gross profit percentage improved to **24.3%** from **20.1%**, despite a lower non-cash core revaluation write-down of **$2,908,000** (**1.9%** of gross margin) compared to **$6,221,000** (**4.9%** of gross margin) in the prior year[105](index=105&type=chunk)[108](index=108&type=chunk) - General and administrative expenses increased by **$5,288,000** (**58.8%**) due to a foreign currency exchange contract loss (**$663,000**), lease liability remeasurement loss (**$1,139,000**), acquisition-related expenses (**$565,000**), and internal controls remediation (**$489,000**)[110](index=110&type=chunk) - Sales and marketing expenses increased by **$911,000** (**20.1%**), and research and development expenses increased by **$364,000** (**20.4%**), both primarily due to fiscal 2019 acquisitions and growth initiatives[111](index=111&type=chunk)[112](index=112&type=chunk) - Interest expense, net, increased by **$824,000** (**14.5%**) due to increased average outstanding borrowings[114](index=114&type=chunk) [Results of Operations for the Six Months Ended September 30, 2019 and 2018](index=28&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20September%2030%2C%202019%20and%202018) - Net sales increased by **$39,915,000** (**18.2%**) to **$259,522,000**, reflecting continued growth across all product lines, **$11,151,000** from fiscal 2019 acquisitions, and **$4,572,000** from new brake calipers[118](index=118&type=chunk) - Gross profit percentage improved to **20.9%** from **19.2%**, with a non-cash core revaluation write-down of **$7,472,000** (**2.9%** of gross margin) in 2019[117](index=117&type=chunk)[119](index=119&type=chunk) - General and administrative expenses increased by **$5,197,000** (**24.6%**) due to fiscal 2019 acquisitions (**$1,348,000**), increased professional services (**$1,278,000**), foreign currency-denominated lease liabilities remeasurement loss (**$637,000**), and internal control remediation (**$489,000**)[121](index=121&type=chunk) - Sales and marketing expenses increased by **$1,438,000** (**16.1%**), and research and development expenses increased by **$1,000,000** (**28.4%**), both primarily driven by fiscal 2019 acquisitions and personnel for growth initiatives[122](index=122&type=chunk)[123](index=123&type=chunk) - Interest expense, net, increased by **$1,922,000** (**17.8%**) due to increased average outstanding borrowings to support growth initiatives and inventory build-up[125](index=125&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) - Working capital decreased slightly to **$72,107,000** at September 30, 2019, from **$73,528,000** at March 31, 2019, primarily due to increased borrowing under the credit facility[127](index=127&type=chunk) - Net cash used in operating activities was **$(26,736,000)** for the six months ended September 30, 2019, significantly impacted by growth initiatives, Mexico operations expansion, and inventory build-up[132](index=132&type=chunk) - The Credit Facility was amended in June 2019, increasing the Revolving Facility to **$238,620,000**. The company was in compliance with all financial covenants at September 30, 2019, with a maximum senior leverage ratio of **2.33** (limit **3.00**) and a minimum fixed charge coverage ratio of **1.46** (limit **1.10**)[128](index=128&type=chunk)[136](index=136&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - As of September 30, 2019, **$21,308,000** remained available under the **$37,000,000** authorized share repurchase program, subject to the Credit Facility's annual limit of **$20,000,000** for dividends and share repurchases[130](index=130&type=chunk)[168](index=168&type=chunk) - The company utilized receivable discount programs, discounting **$205,882,000** in receivables at a **3.6%** annualized weighted average discount rate for the six months ended September 30, 2019[142](index=142&type=chunk) [Off-Balance Sheet Arrangements](index=33&type=section&id=Off-Balance%20Sheet%20Arrangements) - As of September 30, 2019, the company had no off-balance sheet financing or other arrangements with unconsolidated entities or financial partnerships[143](index=143&type=chunk) [Capital Expenditures and Commitments](index=33&type=section&id=Capital%20Expenditures%20and%20Commitments) - Total capital expenditures, including finance leases, were **$9,251,000** for the six months ended September 30, 2019, primarily for equipment and the expansion of operations in Mexico[144](index=144&type=chunk) - The company expects to incur approximately **$7,125,000** for current operations and **$15,000,000** for continued expansion in Mexico during fiscal year 2020[144](index=144&type=chunk) [Litigation](index=33&type=section&id=Litigation) - There have been no material changes to the company's litigation matters as presented in its Annual Report on Form 10-K for the year ended March 31, 2019[145](index=145&type=chunk) [Critical Accounting Policies](index=33&type=section&id=Critical%20Accounting%20Policies) - The company adopted new lease accounting guidance (ASC 842) on April 1, 2019, which resulted in balance sheet recognition of operating lease assets and liabilities and foreign currency remeasurement losses in general and administrative expenses[147](index=147&type=chunk)[148](index=148&type=chunk) - The company is currently evaluating the impact of new accounting pronouncements on the measurement of credit losses on financial instruments (effective April 1, 2020) and fair value measurements (effective after December 15, 2019)[149](index=149&type=chunk)[150](index=150&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in the company's market risk profile compared to the disclosures in its Annual Report on Form 10-K as of March 31, 2019 - No material changes in market risk from the information provided in the Annual Report on Form 10-K as of March 31, 2019[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of September 30, 2019, due to material weaknesses, with remediation efforts underway and expected to conclude by fiscal year 2020 [Evaluation of Disclosure Controls and Procedures](index=34&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management concluded that disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2019[152](index=152&type=chunk) - Material weaknesses identified include insufficient review of certain accounting policies, inconsistent application, inadequate analysis, deficient documentation for certain accounts (e.g., inventory), and inadequate oversight of process level controls at a subsidiary due to a lack of sufficient technical accounting resources[154](index=154&type=chunk) [Management's Remediation Efforts](index=35&type=section&id=Management%27s%20Remediation%20Efforts) - Remediation steps include hiring additional finance and accounting personnel, formalizing assessment and documentation of accounting and financial reporting policies, enhancing internal control training for subsidiaries, and improving the risk assessment process and internal control design at subsidiaries[160](index=160&type=chunk) - Management expects the remediation plan to extend over multiple financial reporting periods throughout fiscal year 2020, with completion anticipated prior to the end of fiscal year 2020[156](index=156&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=35&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) - Internal control over financial reporting is designed to provide reasonable assurance, not absolute, regarding the reliability of financial reporting[158](index=158&type=chunk) - Projections of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions or deterioration of compliance[161](index=161&type=chunk) [Changes in Internal Control Over Financial Reporting](index=36&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - The company is taking actions to remediate the material weakness in internal controls over financial reporting, and no other material changes occurred during the three months ended September 30, 2019[162](index=162&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=37&type=section&id=Item%201%2E%20Legal%20Proceedings) No material changes occurred in the company's legal proceedings compared to the disclosures in its Annual Report on Form 10-K as of March 31, 2019 - No material changes to legal proceedings from the Annual Report on Form 10-K[165](index=165&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A%2E%20Risk%20Factors) No material changes occurred in the company's risk factors compared to the disclosures in its Annual Report on Form 10-K as of March 31, 2019 - No material changes in the risk factors set forth in Item 1A to Part I of the Annual Report on Form 10-K[166](index=166&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased during the three months ended September 30, 2019, with **$21,308,000** remaining available under the share repurchase program, subject to Credit Facility limits - No shares were repurchased during the three months ended September 30, 2019[168](index=168&type=chunk) - As of September 30, 2019, **$21,308,000** remained available under the **$37,000,000** authorized share repurchase program[168](index=168&type=chunk) - The Credit Facility permits up to **$20,000,000** of dividends and share repurchases per fiscal year[167](index=167&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205%2E%20Other%20Information) This section contains no additional information to report - No other information to report[169](index=169&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206%2E%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate documents, incentive plans, certifications, and XBRL taxonomy documents - Exhibits include Certificate of Incorporation, Amended and Restated By-Laws, various Incentive Award Plans, and certifications from the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer[171](index=171&type=chunk)[172](index=172&type=chunk) - XBRL Instance Document and Taxonomy Extension Documents are also filed[172](index=172&type=chunk) SIGNATURES [SIGNATURES](index=40&type=section&id=SIGNATURES) The Form 10-Q report is officially signed by the Chief Financial Officer and Chief Accounting Officer on November 12, 2019 - The report was signed by David Lee, Chief Financial Officer, and Kevin Daly, Chief Accounting Officer, on November 12, 2019[176](index=176&type=chunk)

Motorcar Parts of America, Inc. (NASDAQ:MPAA) Q1 2020 Earnings Conference Call August 8, 2019 1:00 PM ET Company Participants Gary Maier - Investor Relations Selwyn Joffe - President and Chief Executive Officer David Lee - Chief Financial Officer Conference Call Participants Christopher Van Horn - B. Riley FBR, Inc. Scott Stember - C.L. King & Associates Steven Dyer - Craig-Hallum Capital Group LLC Operator Hello, and welcome to the Motorcar Parts of America Fiscal 2020 First Quarter Results Conference Call ...

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, 2019 ☐ 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 i ...

TABLE OF CONTENTS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2019 OR o 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 | (Exact name of registrant as specified in its charter) | | | --- | --- | | New York | 11-2153962 | | (State or other jurisdi ...

Financial Data and Key Metrics Changes - Net sales for Q4 2019 increased by 7.8% to $129.1 million from $119.7 million in the same period a year earlier, reflecting sales increases for both hard parts and diagnostic products [31] - Adjusted net sales for Q4 2019 increased by 7.5% to $132.7 million [31] - Gross profit for Q4 was $26 million, down from $29.1 million a year earlier, with gross profit as a percentage of net sales at 20.1% compared to 24.3% a year earlier [32] - Adjusted net income for Q4 was $12 million or $0.63 per diluted share, compared to $10.5 million or $0.54 per diluted share for the prior year [37] - For the fiscal year 2019, net sales increased by 10.6% to $472.8 million from $427.5 million [38] Business Line Data and Key Metrics Changes - The heavy-duty business acquired late in the fiscal year is showing positive sales momentum, with infrastructure investments expected to enhance growth [21][22] - The D&V diagnostic business is gaining traction in both internal combustion engine and electric vehicle markets, with expected growth in sales and service solutions [23][24] Market Data and Key Metrics Changes - The company anticipates adjusted net sales for fiscal year 2020 to be between $552 million and $562 million, representing 16% to 18% organic growth year-over-year [25] - The number of prime replacement aged vehicles is growing, supporting optimism for growth in the aftermarket industry over the next several years [27] Company Strategy and Development Direction - The company is transitioning from a single focus on rotating electrical to becoming a major multi-product supplier to the North American aftermarket [13] - Investments in infrastructure and new product lines are expected to support strategic growth and enhance profitability [14][15] - The company aims to leverage its expanded footprint and reputation as a premier supplier to the aftermarket [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged internal control issues that led to a delay in filing fiscal 2019 results but emphasized that these issues only affected a small portion of revenues [9][10] - The company expects significant improvements in operating metrics as it completes its transition into new facilities [16] - Management expressed confidence in generating positive cash flow in fiscal 2020, with expectations for inventory reductions and lower core buyback payments [50][53] Other Important Information - The company has instituted price increases across all existing product lines to address cost inflation and maintain margins [26][64] - As of March 31, 2019, the company had net debt of approximately $128.4 million and total cash availability on the revolver credit facility was approximately $98.6 million [40] Q&A Session Summary Question: Can you help us with the cadence through the year regarding gross margins? - Management indicated that gross margins would take a step back in the first quarter but are expected to improve in the latter half of the year as new facilities come online [46][47] Question: How do you view organic growth versus acquisitions for this year? - Management stated that most growth is organic, with some contributions from acquisitions, estimating around 12% to 14% organic growth [49][78] Question: When do you expect to see positive cash flow from inventory reductions? - Management expects to see reductions in inventory starting in Q3, with significant cash flow improvements anticipated [50][53] Question: Can you provide details on the competitive landscape for the rotating electrical business? - Management noted that there are two major players in the market, with ongoing price pressures due to cost inflation, but they remain optimistic about growth opportunities [62][64] Question: What are the expectations for core purchases in fiscal 2020? - Management expects core purchase payments to decrease significantly due to the completion of previous core purchase agreements [88][89]

Motorcar Parts of America, Inc. (NASDAQ:MPAA) Q3 2019 Earnings Conference Call February 11, 2019 1:00 PM ET Company Participants Gary Maier - IR Selwyn Joffe - Chairman, President and CEO David Lee - CFO Conference Call Participants Chris Van Horn - B. Riley Scott Stember - CL King Matt Koranda - ROTH Capital Partner Steve Dyer - Craig Hallum Operator Good day, ladies and gentlemen, and welcome to the Motorcar Parts of America Fiscal 2019 Third Quarter Conference Call. At this time, all participants are in ...