Motorcar Parts of America(MPAA) - 2025 Q4 - Annual Report

Financial Performance - Sales increased by 5.5% to a record $757.4 million in fiscal 2025, despite industry softness [148] - Gross profit rose 16.1% to a record $153.8 million, with gross margin increasing by 1.8 percentage points to 20.3% [148] - Consolidated net sales for fiscal 2025 were $757,354,000, an increase of $39,670,000, or 5.5%, from fiscal 2024's $717,684,000 due to strong demand for rotating electric and brake-related product lines [204] - Gross profit for fiscal 2025 increased by $21,277,000, or 16.1%, to $153,828,000, with a gross profit margin improvement to 20.3% from 18.5% in fiscal 2024 [206] - Operating income for fiscal 2025 was $39,923,000, a decrease from $46,120,000 in fiscal 2024, primarily due to a non-cash loss of $15,892,000 from foreign exchange impacts [212] Cash Flow and Debt Management - Cash generated from operating activities was approximately $45.5 million, and net bank debt was reduced by $32.7 million to $81.4 million [148] - Cash provided by operating activities was $45,477,000 for fiscal 2025, up from $39,172,000 in fiscal 2024, reflecting improved operating results [222] - Net cash used in investing activities increased to $4,469,000 in fiscal 2025 from $479,000 in fiscal 2024, primarily due to higher capital expenditures [223] - Net cash used in financing activities was $44,655,000 in fiscal 2025, compared to $36,439,000 in fiscal 2024, mainly due to net repayments under the revolving facility and stock repurchases [224] - The company has a $268,620,000 senior secured Credit Facility, which includes a $238,620,000 revolving loan facility and a $30,000,000 term loan facility, maturing on December 12, 2028 [226] Inventory and Allowances - The reserve for excess and obsolete inventory increased to $18,964,000 as of March 31, 2025, compared to $17,372,000 in 2024, primarily due to excess finished goods inventory [171] - The customer finished goods returns accrual was $34,411,000 at March 31, 2025, down from $38,312,000 in 2024, reflecting changes in the timing of returned goods authorizations [196] - The company recorded an allowance for warranty returns based on historical return levels as a percentage of total unit sales, with stock adjustment returns typically less than 5% of units sold [185] - The allowance for potentially excess and obsolete inventory is based on recent sales history and forecasted inventory use, with reserves established at management's discretion [171] Shareholder Activities - The company repurchased 542,134 shares for $4.8 million during the full year under a current authorization program [154] - The company repurchased 542,134 shares of common stock for $4,832,000 during fiscal 2025, with $13,423,000 remaining available under the share repurchase program [247] Interest and Financing Costs - The weighted average discount rate for accounts receivable discount programs was 6.2% for fiscal 2025, down from 6.8% in fiscal 2024 [155] - The weighted average interest on borrowings under the credit facility was 7.46% at March 31, 2025, compared to 8.43% at March 31, 2024 [155] - Interest expense for fiscal 2025 decreased by $4,490,000, or 7.5%, to $55,550,000, attributed to lower outstanding balances and interest rates [213] - The effective interest rate on the convertible notes was 18.3% as of March 31, 2025 [239] Operational Developments - The company expanded its product coverage with over 629 new part numbers, covering approximately 130 million vehicles in operation in North America [148] - The roll-out of JBT-1 bench-top testers gained momentum, with most retail stores in North America deploying or planning to install the diagnostic units [148] - The company added a new warehousing and distribution facility in Malaysia to support future direct shipment programs [148] Future Outlook and Commitments - Total capital expenditures for fiscal 2025 were $6,066,000, an increase from $1,755,000 in fiscal 2024, with expectations of approximately $9,500,000 for fiscal 2026 to support global growth initiatives [249] - The company has long-term agreements with major customers, which may require increased inventories and personnel to meet demand [245][246] - Contractual obligations total $310,552,000, with $35,770,000 due within one year and $179,892,000 due in 3 to 5 years [250] Risk Management - Foreign currency exchange risk is significant, with a potential increase of $4,023,000 in operating expenses if exchange rates rise by 10% [255] - Losses of $4,179,000 and $1,373,000 were recorded in fiscal 2025 and 2024, respectively, due to changes in the value of forward foreign currency exchange contracts [255] - The company maintains an allowance for credit losses to cover potential losses from customer defaults, which could materially affect financial position [257]