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What changed in MOTORCAR PARTS OF AMERICA INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of MOTORCAR PARTS OF AMERICA INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+283 added−245 removedSource: 10-K (2025-06-09) vs 10-K (2024-06-11)

Top changes in MOTORCAR PARTS OF AMERICA INC's 2025 10-K

283 paragraphs added · 245 removed · 213 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe believe an inclusive workforce is critical to our success, with an ongoing focus on the hiring, retention, and advancement of women and other underrepresented ethnic groups. We employ 37% women and 63% men globally. In the United States, 73% of our workforce are considered ethnic minorities. Health, Safety and Wellness .
Biggest changeWe employ 37% women and 63% men globally. In the United States, 66% of our workforce are considered ethnic minorities. Health, Safety and Wellness . The success of our business is connected to the safety and well-being of our team members and their families.
Item 1. Business General We are a leading supplier of automotive aftermarket non-discretionary replacement parts and test solutions and diagnostic equipment -- building upon industry leading technology to be “The Global Leader for Parts and Solutions that Move Our World Today and Tomorrow” . We operate in the $130 billion non-discretionary automotive aftermarket for replacement hard parts in North America.
Item 1. Business General We are a leading supplier of automotive aftermarket non-discretionary replacement parts and test solutions and diagnostic equipment -- building upon industry leading technology to be “The Global Leader for Parts and Solutions that Move Our World Today and Tomorrow” . We operate in the $130 billion automotive aftermarket for replacement hard parts in North America.
These values are embodied in our Code of Ethics, which has been adopted by our Board of Directors to serve as a statement of principles to guide our decision-making and reinforce our commitment to these values in all aspects of our business.
These values are embodied in our Code of Business Conduct and Ethics, which has been adopted by our Board of Directors to serve as a statement of principles to guide our decision-making and reinforce our commitment to these values in all aspects of our business.
Sales, Marketing and Distribution We sell our hard parts products to the largest automotive chains, including Advance Auto Parts, AutoZone, Genuine Parts (NAPA), and O’Reilly Auto Parts with an aggregate of approximately 25,000 retail outlets. In addition, these products are sold to warranty replacement programs (“OES”) customers, professional installers, and a diverse group of automotive warehouse distributors.
Sales, Marketing and Distribution We sell our hard parts products to the largest automotive chains, including Advance Auto Parts, AutoZone, Genuine Parts (NAPA), and O’Reilly Auto Parts with an aggregate of approximately 26,000 retail outlets. In addition, these products are sold to warranty replacement programs (“OES”) customers, professional installers, and a diverse group of automotive warehouse distributors.
We provide competitive compensation and benefit programs that meet the needs of our employees, and are tailored to their local markets. In addition to wages and salaries, these programs may include annual cash bonuses, stock awards, a 401(k) Plan, healthcare, and insurance, and implemented methodologies to manage performance, provide feedback and develop talent. Social Responsibility.
We provide competitive compensation and benefit programs that meet the needs of our employees, and are tailored to their local markets. In addition to wages and salaries, these programs may include annual cash bonuses, stock awards, a 401(k) Plan, healthcare, and insurance. We have also implemented methodologies to manage performance, provide feedback and develop talent. Social Responsibility.
To maximize remanufacturing efficiency, we store component parts ready for assembly in our production facilities. Our remanufacturing processes combine product families with similar configurations into dedicated factory work cells. This remanufacturing process, known as “lean manufacturing,” eliminated a large number of inventory moves and the need to track inventory movement through the remanufacturing process.
To maximize remanufacturing efficiency, we store component parts ready for assembly in our production facilities. Our remanufacturing processes combine product families with similar configurations into dedicated factory work cells. This remanufacturing process, known as “lean manufacturing,” eliminates a large number of inventory moves and the need to track inventory movement through the remanufacturing process.
The current population of light-duty vehicles in the U.S. is approximately 288 million, and the average age of these vehicles is approximately 13 years and is expected to continue to grow, in particular during recession years. Although miles driven can fluctuate for various reasons, including fuel prices, they have been generally increasing for several years.
The current population of light-duty vehicles in the U.S. is approximately 292 million, and the average age of these vehicles is approximately 13 years and is expected to continue to grow, in particular during recession years. Although miles driven can fluctuate for various reasons, including fuel prices, they have been generally increasing for several years.
Segment Reporting Our three operating segments are as follows: • Hard Parts , which includes (i) light duty rotating electric products such as alternators and starters, (ii) wheel hub products, (iii) brake-related products, including brake calipers, brake boosters, brake rotors, brake pads and brake master cylinders, and (iv) turbochargers, • Test Solutions and Diagnostic Equipment , which includes (i) applications for combustion engine vehicles, including bench-top testers for alternators and starters, (ii) equipment for the pre- and post-production of electric vehicles, and (iii) software emulation of power system applications for the electrification of all forms of transportation (including automobiles, trucks, the emerging electrification of systems within the aerospace industry, and electric vehicle charging stations), and 6 Table of Contents • Heavy Duty , which includes non-discretionary automotive aftermarket replacement hard parts for heavy-duty truck, industrial, marine, and agricultural applications.
Segment Reporting Our three operating segments are as follows: ● Hard Parts , which includes (i) light duty rotating electric products such as alternators and starters, (ii) wheel hub products, (iii) brake-related products, including brake calipers, brake boosters, brake rotors, brake pads and brake master cylinders, and (iv) turbochargers, ● Test Solutions and Diagnostic Equipment , which includes (i) applications for combustion engine vehicles, including bench-top testers for alternators and starters, (ii) equipment for the pre- and post-production of electric vehicles, and (iii) software emulation of power system applications for the electrification of all forms of transportation (including automobiles, trucks, the emerging electrification of systems within the aerospace industry, and electric vehicle charging stations), and ● Heavy Duty , which includes non-discretionary automotive aftermarket replacement hard parts for heavy-duty truck, industrial, marine, and agricultural applications. 6 Table of Contents Our Hard Parts operating segment meets the criteria of a reportable segment.
We also compete with other overseas manufacturers, particularly those located in China who are increasing their operations and could become a significant competitive force in the future. We believe that the reputations for quality, reliability, and customer service that a supplier provides are significant factors in our customers’ purchase decisions.
We also compete with other overseas manufacturers, particularly those located in Asia who are increasing their operations and could become a significant competitive force in the future. We believe that the reputations for quality, reliability, and customer service that a supplier provides are significant factors in our customers’ purchase decisions.
During fiscal 2024, we sold approximately 98% of our products in North America, with approximately 2% of our products sold in Asian and European countries. We publish printed and electronic catalogs with part numbers and applications for our products along with a detailed technical glossary and informational database.
During fiscal 2025, we sold approximately 98% of our products in North America, with approximately 2% of our products sold in Asian and European countries. We publish printed and electronic catalogs with part numbers and applications for our products along with a detailed technical glossary and informational database.
The first is the do-it-yourself (“DIY”) market, which is generally serviced by the large retail chain outlets and on-line resellers. Consumers who purchase parts from the DIY market generally install parts into their vehicles themselves. In most cases, this is a less expensive alternative than having the repair performed by a professional installer.
The first is the do-it-yourself (“DIY”) market, which is generally serviced by the large retail chain outlets and online resellers. Consumers who purchase parts from the DIY market generally install parts into their vehicles themselves. In most cases, this is a less expensive alternative than having the repair performed by a professional installer.
As of March 31, 2024, we employed approximately 5,900 people, with 400 people in the United States, 5,000 people in Mexico, 200 people Canada, and 300 people in Malaysia and China. Approximately 5,400 people are production employees. We have non-union and unionized facilities. Approximately 4,900 production employees are covered by a local union.
As of March 31, 2025, we employed approximately 5,700 people, with 300 people in the United States, 5,000 people in Mexico, 200 people in Canada, and 200 people in Malaysia and China. Approximately 5,300 people are production employees. We have non-union and unionized facilities. Approximately 4,900 production employees are covered by a local union in Mexico.
Our Audit Committee is comprised entirely of independent directors, one of whom has significant work experience related to information security issues or oversight. Management will report information security instances to the Audit Committee as they occur, if material, and will provide a summary multiple times per year to the Audit Committee.
Our Audit Committee is comprised entirely of independent directors, one of whom has significant work experience related to information security issues or oversight. Management reports information security instances to the Audit Committee as they occur, if material, and provides a summary multiple times per year to the Audit Committee.
We continue to develop and improve product performance, ease of installation, and coverage simplification to deliver installation-ready products to provide extended service life and reduced downtime for our customers. Products We carry approximately 42,000 stock keeping units (“SKUs”) to support automotive aftermarket non-discretionary replacement parts and test solutions and diagnostic equipment.
We continue to develop and improve product performance, ease of installation, and coverage simplification to deliver installation-ready products to provide extended service life and reduced downtime for our customers. Products We carry approximately 44,000 stock keeping units (“SKUs”) to support automotive aftermarket non-discretionary replacement parts.
We also operate in the $700 million market for medium and heavy-duty automotive aftermarket replacement parts for truck, industrial, marine, and agricultural applications.
We also operate in the $40 billion market for medium and heavy-duty automotive aftermarket replacement parts for truck, industrial, marine, and agricultural applications.
We seek to protect our proprietary processes and other information by relying on trade secret laws and non-disclosure and confidentiality agreements with certain of our employees and other persons who have access to that information. Operations Production Process for Non-discretionary Replacement Parts.
We seek to protect our proprietary processes and other information by relying on trade secret laws and non-disclosure and confidentiality agreements, as well as limiting the number of employees and other persons who have access to that information. Operations Production Process for Non-discretionary Replacement Parts.
We compete with several large and medium-sized companies, including (i) BBB Industries, First Brands and DRIV for hard parts, (ii) Burke Porter and Loccionni for test solutions and diagnostic equipment, and (iii) a large number of smaller regional and specialty companies.
We compete with several large and medium-sized companies, including (i) Terrepower, First Brands and DRIV for hard parts, (ii) Burke Porter and Langdi Measurement Control for test solutions and diagnostic equipment, and (iii) a large number of smaller regional and specialty companies.
Sales to our three largest customers in the aggregate represented 83%, 84%, and 85%, and sales to our largest customer, represented 35%, 37%, and 38% of our net sales during fiscal 2024, 2023 and 2022, respectively.
Sales to our three largest customers in the aggregate represented 86%, 83%, and 84%, and sales to our largest customer, represented 39%, 35%, and 37% of our net sales during fiscal 2025, 2024 and 2023, respectively.
The success of our business is connected to the safety and well-being of our team members and their families. We provide our employees and their families with flexible and convenient health and wellness programs – including protection and security to lessen concerns about missing work and the potential financial impact.
We provide our employees and their families with flexible and convenient health and wellness programs – including protection and security to lessen concerns about missing work and the potential financial impact.
In addition, we are well-positioned to supply the aerospace industry to support its shift to electric power-driven control systems in airplanes. Heavy Duty • Market and grow our innovative design solutions and commitment to quality.
We believe this is a rapidly emerging business and see the opportunity for accelerating growth rates. In addition, we are well-positioned to supply the aerospace industry to support its shift to electric power-driven control systems in airplanes. Heavy Duty ● Market and grow our innovative design solutions and commitment to quality.
This elevated level of technology aims to deliver our customers high quality products and support services. Test Solutions and Diagnostic Equipment • We provide industry-leading test solutions and diagnostic equipment to both original equipment manufacturers and the aftermarket. We are continuously upgrading our equipment to accommodate testing for the latest alternator and starter technology for both existing and new customers.
We continue to develop in-house technologies and advanced testing methods. This elevated level of technology aims to deliver our customers high quality products and support services. Test Solutions and Diagnostic Equipment ● We provide industry-leading test solutions and diagnostic equipment to both original equipment manufacturers and the aftermarket.
Our Hard Parts operating segment meets the criteria of a reportable segment. The Test Solutions and Diagnostic Equipment and Heavy Duty segments are not material, are not required to be separately reported, and are included within the “all other” category. See Note 19 of the notes to consolidated financial statements for more information.
The Test Solutions and Diagnostic Equipment and Heavy Duty segments are not material, and are not required to be separately reported. See Note 20 of the notes to consolidated financial statements for more information.
The components are cleaned in an environmentally sound process that employs customized equipment and cleaning materials in accordance with the required specifications of the particular component. All components known to be subject to major wear and those components determined not to be reusable or repairable are replaced by new components. Non-salvageable components of the Used Core are sold as scrap.
All components known to be subject to major wear and those components determined not to be reusable or repairable are replaced by new components. Non-salvageable components of the Used Core are sold as scrap.
Our SEC filings are available free of charge to the public over the Internet at the SEC’s website at www.sec.gov . In addition, our SEC filings and Code of Ethics are available free of charge on our website www.motorcarparts.com. The information contained on the websites referenced in this Form 10-K is not incorporated by reference into this filing.
Our SEC filings are available free of charge to the public over the Internet at the SEC’s website at www.sec.gov . In addition, our SEC filings and Code of Business Conduct and Ethics are available free of charge on our website www.motorcarparts.com.
Our strategy is to market these products on a global basis to original equipment manufacturers as well as suppliers to the original equipment manufacturers for development and production of electric vehicles and electric vehicle charging systems. We believe this is a rapidly emerging business and see the opportunity for accelerating growth rates.
In addition, we provide power supply hardware and emulation software diagnostic products. Our strategy is to market these products on a global basis to original equipment manufacturers as well as suppliers to the original equipment manufacturers for development and production of electric vehicles and electric vehicle charging systems.
These software and hardware upgrades are also available for existing products that the customer is using. In addition, we provide industry leading maintenance and service support to provide a better end-user experience and value to our customers. • Market and grow our new product lines on a global basis.
In addition, we provide industry leading maintenance and service support to provide a better end-user experience and value to our customers. ● Market and grow our new product lines on a global basis. We offer products and services that cater to automotive test solutions and diagnostic equipment for inverter and electric motors for both development and production.
We consistently support and pilot our customers’ supply management initiatives in addition to providing demand analytics, inventory management services, online training guides, and market share and retail store layout information to our customers. 5 Table of Contents • Technological innovation. We continue to expand our research and development teams as we further develop in-house technologies and advanced testing methods.
A core part of our strategy is ensuring that we add meaningful value for our customers. We consistently support and pilot our customers’ supply management initiatives in addition to providing demand analytics, inventory management services, online training guides, and market share and retail store layout information to our customers. ● Technological innovation.
We primarily ship our products from our facilities and various third-party warehouse distribution centers in North America, including our 410,000 square foot distribution center in Tijuana, Mexico. Customers: Customer Concentration . While we continually seek to diversify our customer base, we currently derive, and have historically derived, a substantial portion of our sales from a small number of large customers.
While we continually seek to diversify our customer base, we currently derive, and have historically derived, a substantial portion of our sales from a small number of large customers.
Our remanufacturing process begins with the receipt of Used Cores from our customers or core brokers. The Used Cores are evaluated for inventory control purposes and then sorted by part number. Each Used Core is completely disassembled into its fundamental components.
The Used Cores are evaluated for inventory control purposes and then sorted by part number. Each Used Core is completely disassembled into its fundamental components. The components are cleaned in an environmentally sound process that employs customized equipment and cleaning materials in accordance with the required specifications of the particular component.
The majority of our products are remanufactured at our facilities in Mexico, Canada, and to a lesser extent in Malaysia. We continue to maintain production of certain remanufactured units that require specialized service at our Torrance, California facility. We also manufacture and assemble new products at our facilities in Canada, Malaysia and India.
The majority of our products are remanufactured at our facilities in Mexico, Canada, and to a lesser extent in Malaysia. We also manufacture and assemble new products at our facilities in Canada, Malaysia and India. Our remanufacturing process begins with the receipt of Used Cores from our customers or core brokers.
Further, our references to website URLs are intended to be inactive textual references only. 11 Table of Contents
The information contained on the websites referenced in this Form 10-K is not incorporated by reference into this filing. Further, our references to website URLs are intended to be inactive textual references only. 11 Table of Contents
We believe we have a strong relationship with the union that represents our employees. Our facilities are located in labor markets with readily available access to skilled and unskilled workers. Our relationship and communication with our unionized and non-represented workforce is good. Inclusion and Diversity . Our board is ethnically diverse and comprised of 8 independent directors, including three women.
We believe we have a strong relationship with the union that represents our employees. Inclusion and Diversity . Our board is ethnically diverse and comprised of eight independent directors, including two women. We believe an inclusive workforce is critical to our success, with an ongoing focus on the hiring, retention, and advancement of women and other underrepresented ethnic groups.
We continue to strive to expand our business by exploring new product lines, including working with our customers to identify potential new product opportunities. • Creating value for our customers. A core part of our strategy is ensuring that we add meaningful value for our customers.
While we have not introduced any new product lines recently, we have expanded our product coverage for existing product lines, and we continue to engage with our customers to identify potential new product opportunities to grow our business. 5 Table of Contents ● Creating value for our customers.
Removed
We offer products and services that cater to automotive test solutions and diagnostic equipment for inverter and electric motors for both development and production. In addition, we provide power supply hardware and emulation software diagnostic products.
Added
We are continuously upgrading our equipment to accommodate testing for the latest alternator and starter technology for both existing and new customers. These software and hardware upgrades are also available for existing products that the customer is using.
Added
We primarily ship our products from our facilities and various third-party warehouse distribution centers in North America, including our 410,000 square foot distribution center in Tijuana, Mexico. In addition, during fiscal 2025, we added a new warehousing and distribution facility in Malaysia to support our future direct shipment programs. Customers: Customer Concentration .

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCertain of these conditions may impact our operations and the operations of our customers, suppliers, and vendors in a number of ways, including but not limited to, the following: • supply chain delays or stoppages due to shipping delays (cargo ship, train and truck shortages as well as staffing shortages) resulting in increased freight costs, closed supplier facilities or distribution centers, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods from some countries or areas; • change in demand for or availability of our products as a result of our customers modifying their restocking, fulfillment, or shipping practices; • increased raw material, and other input costs; • increased working capital needs and/or an increase in trade accounts receivable write-offs as a result of increased financial pressures on our suppliers or customers; and • fluctuations in foreign currency exchange rates or interest rates.
Biggest changeCertain of these conditions may impact our operations and the operations of our customers, suppliers, and vendors in a number of ways, including but not limited to, the following: ● significantly increased costs and uncertainty in future costs due to higher tariff rates charged on components and finished goods by the United States and by other countries, and uncertainty regarding future tariff rates due to rapidly evolving trade policy in the U.S. and the potential for retaliatory tariffs charged by other countries; ● supply chain delays or stoppages due to shipping delays (cargo ship, train and truck shortages as well as staffing shortages) resulting in increased freight costs, closed supplier facilities or distribution centers, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods from some countries or areas; ● change in demand for or availability of our products as a result of our customers modifying their restocking, fulfillment, or shipping practices; ● increased raw material, and other input costs; ● increased working capital needs and/or an increase in trade accounts receivable write-offs as a result of increased financial pressures on our suppliers or customers; and ● fluctuations in foreign currency exchange rates or interest rates.
As a result, we are subject to various risks of doing business in foreign markets and importing products from abroad, such as the following, which we have experienced in the last fiscal year: ● significant delays in the delivery of cargo due to port security and over-crowding considerations; ● imposition of duties, taxes, tariffs or other charges on imports; ● financial or political instability in the countries in which our product is manufactured; ● potential recalls or cancellations of orders for products that do not meet our quality standards; ● disruption of imports by labor disputes or strikes and local business practices; ● inability of our non-U.S. suppliers to obtain adequate credit or access liquidity to finance their operations; and ● natural disasters, conflicts, disease epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods.
As a result, we are subject to various risks of doing business in foreign markets and importing products from abroad, such as the following, which we have experienced in the last fiscal year: ● significant delays in the delivery of cargo due to port security and over-crowding considerations; ● imposition of new and evolving duties, taxes, tariffs or other charges on imports; ● financial or political instability in the countries in which our product is manufactured; ● potential recalls or cancellations of orders for products that do not meet our quality standards; ● disruption of imports by labor disputes or strikes and local business practices; ● inability of our non-U.S. suppliers to obtain adequate credit or access liquidity to finance their operations; and ● natural disasters, conflicts, disease epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods.
We supplement our participation in ratings systems with published disclosures of our ESG activities, but some investors may desire other disclosures that we do not provide. We also incur significant costs in complying with reporting obligations and could incur liability if a regulator or other third party disagrees with our statements.
We supplement our participation in ratings systems with published disclosures of our ESG activities, but some investors and other stakeholders may desire other disclosures that we do not provide. We also incur significant costs in complying with reporting obligations and could incur liability if a regulator or other third party disagrees with our statements.
If the creditworthiness of any of our customers was downgraded, we could be adversely affected as we may be subjected to higher interest rates on the use of these discount programs or we could be forced to wait longer for payment.
If the creditworthiness of any of our major customers was downgraded, we could be adversely affected as we may be subjected to higher interest rates on the use of these discount programs or we could be forced to wait longer for payment.
A failure to comply with investor or customer expectations and standards, which are evolving, or if we are perceived to not have responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, could also cause reputational harm to our business, cause certain investors to be unwilling to invest in our stock, which could adversely impact our ability to raise capital and could have other material adverse effects on us.
A failure to comply with investor or other stakeholder expectations and standards, which are evolving, or if we are perceived to not have responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, could also cause reputational harm to our business and could cause certain investors to be unwilling to invest in our stock, which could adversely impact our ability to raise capital and could have other material adverse effects on us.
We are affected by trade policy, including the North American Free Trade Agreement (“NAFTA”) and the World Trade Organization (the “WTO”). In December 2019, the United States, Mexico and Canada signed the amended United States-Mexico-Canada Agreement (the “USMCA”), which replaced NAFTA. In July 2020, the U.S. notified the United Nations of its intention to withdraw from the WTO.
We are affected by trade policy, including global tariffs, the North American Free Trade Agreement (“NAFTA”) and the World Trade Organization (the “WTO”). In December 2019, the United States, Mexico and Canada signed the amended United States-Mexico-Canada Agreement (the “USMCA”), which replaced NAFTA. In July 2020, the U.S. notified the United Nations of its intention to withdraw from the WTO.
Risks are inherent in international operations, including: • exchange controls and currency restrictions; • currency fluctuations and devaluations; • changes in local economic conditions; • repatriation restrictions (including the imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries); • global sovereign uncertainty and hyperinflation; • laws and regulations relating to export and import restrictions; • exposure to government actions; • increased required employment related costs; and • exposure to local political or social unrest including resultant acts of war, terrorism or similar events.
Risks are inherent in international operations, including: ● exchange controls and currency restrictions; ● currency fluctuations and devaluations; ● changes in local economic conditions; ● repatriation restrictions (including the imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries); ● global sovereign uncertainty and hyperinflation; ● uncertainty in laws and regulations relating to export and import restrictions; ● exposure to government actions; ● increased required employment related costs; ● labor union activities, and ● exposure to local political or social unrest including resultant acts of war, terrorism or similar events.
Our failure to maintain effective internal control over financial reporting may affect our ability to accurately report our financial results and could materially and adversely affect the market price of our common stock. 16 Table of Contents Under the Sarbanes-Oxley Act, we must maintain effective disclosure controls and procedures and internal control over financial reporting, which requires significant resources and management oversight.
Our failure to maintain effective internal control over financial reporting may affect our ability to accurately report our financial results and could materially and adversely affect the market price of our common stock. Under the Sarbanes-Oxley Act, we must maintain effective disclosure controls and procedures and internal control over financial reporting, which requires significant resources and management oversight.
If renegotiations of existing tariffs are unsuccessful or additional tariffs or trade restrictions are implemented by the U.S. or other countries in connection with a global trade war, the resulting escalation of trade tensions could have a material adverse effect on world trade and the global economy.
If renegotiations related to existing or threatened tariffs are unsuccessful or additional tariffs or trade restrictions are implemented by the U.S. or other countries in connection with a global trade war, the resulting escalation of trade tensions could have a material adverse effect on world trade and the global economy.
The products we manufacture or contract to manufacture contain small quantities of Tin and Gold. We manufacture or contract to manufacture one product with small quantities of Tantalum. For the reporting year ending December 31, 2023, we surveyed 255 smelters or refiners for these minerals that are, or could be, in our supply chain.
The products we manufacture or contract to manufacture contain small quantities of Tin and Gold. We manufacture or contract to manufacture one product with small quantities of Tantalum. For the reporting year ending December 31, 2024, we surveyed 204 smelters or refiners for these minerals that are, or could be, in our supply chain.
We are exposed to market risk from material movements in foreign exchange rates between the U.S. dollar and the currencies of the foreign countries in which we operate. In fiscal 2024, approximately 27% of our total expenses were in currencies other than the U.S. dollar.
We are exposed to market risk from material movements in foreign exchange rates between the U.S. dollar and the currencies of the foreign countries in which we operate. In fiscal 2025, approximately 29% of our total expenses were in currencies other than the U.S. dollar.
These evolving areas have also attracted increased competition from entrants outside the traditional automotive industry. If we do not continue to innovate and develop, or acquire, new and compelling products that capitalize upon new technologies in response to consumer preferences, it could have an adverse impact on our results of operations.
These evolving areas have also attracted increased competition from entrants outside the traditional automotive industry. If we do not continue to innovate and develop, or acquire, new and compelling products that capitalize upon new technologies in response to consumer preferences, it could have a materially adverse impact on our business, results of operations, and financial condition.
Possible new tariffs that might be imposed by the United States government could have a material adverse effect on our results of operations. The U.S. government has placed tariffs on certain goods imported from China and may impose new tariffs on goods imported from China and other countries, including products that we import.
Tariffs imposed by the United States government could have a material adverse effect on our results of operations. The U.S. government has recently placed increased tariffs on certain goods imported from China and other countries and may impose new tariffs on goods imported from China and other countries, including products that we import.
Any of the foregoing, or a combination of them, could cause us to incur additional expenses and materially and adversely impact our business, financial condition, results of operations or liquidity. 19 Table of Contents Increasing attention to environmental, social, and governance matters may impact our business, financial results, or stock price.
Any of the foregoing, or a combination of them, could cause us to incur additional expenses and materially and adversely impact our business, financial condition, results of operations or liquidity. Increased attention to environmental, social, and governance matters may impact our business, financial results, or stock price.
Risks Related to Economic, Political and Health Conditions Developments in global and local conditions, such as international trade disputes, a foreign or domestic debt crisis, currency volatility, natural disasters, war, such as the war in Ukraine and the conflict in Israel, Gaza and surrounding areas, epidemics and pandemics, the fear of spread of contagious diseases and civil unrest, may have a material impact on our results of operations and financial condition, and the continuation of or worsening of such conditions could have a similar or worse impact.
Risks Related to Economic, Political and Health Conditions Developments in global and local economic, political, and social conditions, such as international trade disputes, disruptions from rapid changes in trade policy and new or increased tariffs, a foreign or domestic debt crisis, currency volatility, natural disasters, war, such as the war in Ukraine and the conflict in Israel, Gaza and the surrounding areas, epidemics and pandemics, the fear of spread of contagious diseases and civil unrest, may have a material impact on our results of operations and financial condition, and the continuation of or worsening of such conditions could have a similar or worse impact.
Due to the diversity of our product offering, we compete with several large and medium-sized companies, including (i) BBB Industries, First Brands and DRIV for hard parts, (ii) Burke Porter and Loccionni for test solutions and diagnostic equipment, and (iii) a large number of smaller regional and specialty companies.
Due to the diversity of our product offering, we compete with several large and medium-sized companies, including (i) Terrepower, First Brands and DRIV for hard parts, (ii) Burke Porter and Langdi Measurement Control for test solutions and diagnostic equipment, and (iii) a large number of smaller regional and specialty companies.
These risks and uncertainties include: • the difficulty in integrating newly acquired businesses and operations in an efficient and effective manner; • the challenges in achieving strategic objectives, cost savings and other benefits from acquisitions; • the potential loss of key employees of the acquired businesses; • the risk of diverting the attention of senior management from our operations; • risks associated with integrating financial reporting and internal control systems; • difficulties in expanding information technology systems and other business processes to accommodate the acquired businesses; and • future impairments of any goodwill of an acquired business.
These risks and uncertainties include: ● the difficulty in integrating newly-acquired businesses and operations in an efficient and effective manner; ● the challenges in achieving strategic objectives, cost savings and other benefits from acquisitions; ● the potential loss of key employees of the acquired businesses; ● the risk of diverting the attention of senior management from our operations; ● risks associated with integrating financial reporting and internal control systems; ● difficulties in expanding information technology systems and other business processes to accommodate the acquired businesses; and ● future impairments of any goodwill of an acquired business. 20 Table of Contents We may also incur significant expenses to pursue and consummate acquisitions.
An increase in the cost or a disruption in the flow of our imported products may significantly decrease our sales and profits. Merchandise manufactured offshore represents a significant portion of our total product purchases. A disruption in the shipping or cost of such merchandise may significantly decrease our sales and profits.
An increase in the cost or a disruption in the flow of our imported products may significantly decrease our sales and profits. Merchandise manufactured offshore represents a significant portion of our total product purchases. Disruptions in the shipping or cost of such merchandise recently have and may continue to or may more significantly decrease our sales and profits.
If the U.S. were to withdraw from or materially modify any other international trade agreements to which it is a party or if the U.S. imposes significant additional tariffs on imports from China or other restrictions, it could have an adverse impact on our business.
If the U.S. were to withdraw from or materially modify any other international trade agreements to which it is a party or if the U.S. imposes significant additional tariffs on imports from China or other restrictions, it could have a materially adverse impact on our business, results of operations, and financial condition.
For example, common risks include: 15 Table of Contents • raw material shortages; • problems with oceanic shipping, including shipping container shortages; • increased customs inspections of import shipments or other factors causing delays in shipments; and • increases in shipping rates, all of which we experienced.
For example, common risks include: ● increased sensitivity to changes in tariff rates; ● raw material shortages; ● problems with oceanic shipping, including shipping container shortages; ● increased customs inspections of import shipments or other factors causing delays in shipments; and ● increases in shipping rates, all of which we experienced.
Several conditions have led to adverse impacts on the U.S. and global economies and created uncertainty regarding the potential effects on our employees, supply chains, operations, and customer demand including international trade disputes, a foreign or domestic debt crisis, currency volatility, natural disasters, war, such as the war in Ukraine and the conflict in Israel, Gaza and surrounding areas, epidemics and pandemics, the fear of spread of contagious diseases and civil unrest.
A variety of economic, political, and social conditions have led to adverse impacts on the U.S. and global economies and created uncertainty regarding the potential effects of such conditions on our employees, supply chains, operations, and customer demand including international trade disputes, disruptions from rapid changes in trade policy and new or increased tariffs, a foreign or domestic debt crisis, currency volatility, natural disasters, war, such as the war in Ukraine and the conflict in Israel, Gaza and surrounding areas, epidemics and pandemics, the fear of spread of contagious diseases and civil unrest.
We recorded a non-cash loss of $1,373,000, a non-cash gain of $2,776,000, and a non-cash loss of $316,000 due to the change in the fair value of the forward foreign currency exchange contracts during fiscal 2024, 2023, and 2022, respectively.
We recorded non-cash losses of $4,179,000, $1,373,000, and a non-cash gain of $2,776,000, due to the change in the fair value of the forward foreign currency exchange contracts during fiscal 2025, 2024, and 2023, respectively.
In addition, we recorded gains of $5,187,000, $6,515,000, and $1,989,000 in connection with the remeasurement of foreign currency-denominated lease liabilities during fiscal 2024, 2023, and 2022, respectively. 17 Table of Contents Changes in trade policy and other factors beyond our control could materially adversely affect our business.
In addition, we recorded a loss of $11,713,000, and gains of $5,187,000 and $6,515,000, in connection with the remeasurement of foreign currency-denominated lease liabilities during fiscal 2025, 2024, and 2023, respectively. 18 Table of Contents Changes in trade policy and other factors beyond our control could materially adversely affect our business.
Our net sales are concentrated among a small number of our customers. Sales to our three largest customers in the aggregate represented 83%, and sales to our largest customer represented 35% of our net sales during fiscal 2024.
Our net sales are concentrated among a small number of our customers. Sales to our three largest customers in the aggregate represented 86%, and sales to our largest customer represented 39% of our net sales during fiscal 2025.
The higher prices of these Used Cores that we purchase could impact the cost of raw materials. Raw material price increases have had an impact on our product costs and profitability and continued increases will similarly adversely affect us.
The higher prices of these Used Cores that we purchase could impact the cost of raw materials. Raw material price increases have had an impact on our product costs and profitability and continued increases will similarly adversely affect us. Our financial results are affected by automotive parts failure rates that are outside of our control.
In addition, as the capital markets get more volatile, it may become more difficult to obtain such waivers or refinance our debt. 18 Table of Contents Weakness in conditions in the global credit markets and macroeconomic factors, including interest rates, could adversely affect our financial condition and results of operations.
If we obtained a waiver, it may impose significant costs or covenants on us. In addition, as the capital markets get more volatile, it may become more difficult to obtain such waivers or refinance our debt. Weakness in conditions in the global credit markets and macroeconomic factors, including interest rates, could adversely affect our financial condition and results of operations.
We have also experienced significant disruptions in the supply of several key components from Asia due to work stoppages, production shutdowns, government closures, and other supply chain issues at many of our suppliers, leading to an adverse effect on our financial results. Interruptions or delays in obtaining component parts could impair our business and adversely affect our operating results.
In recent years, we have also experienced significant disruptions in the supply of several key components from Asia due to work stoppages, production shutdowns, government closures, and other supply chain issues at many of our suppliers, leading to an adverse effect on our financial results.
In our remanufacturing processes, we obtain Used Cores, primarily through the core exchange programs with our customers, and component parts from third-party manufacturers. To supplement Used Cores received from our customers we purchase Used Cores from core brokers.
Interruptions or delays in obtaining component parts could impair our business and adversely affect our operating results. In our remanufacturing processes, we obtain Used Cores, primarily through the core exchange programs with our customers, and component parts from third-party manufacturers. To supplement Used Cores received from our customers we purchase Used Cores from core brokers.
Unfavorable economic conditions may adversely affect our business. Adverse changes in economic conditions, including inflation, recession, increased fuel prices, tariffs, and unemployment levels, availability of consumer credit, taxation or instability in the financial markets or credit markets may either lower demand for our products or increase our operational costs, or both.
Adverse changes in economic conditions, including inflation, slower economic growth and the potential for a recession, increased fuel prices, rapid changes in trade policy, new or increased tariffs, including retaliatory tariffs, global trade disruptions, unemployment levels, decreased availability of consumer credit, taxation or instability in the financial markets or credit markets may either lower demand for our products or increase our operational costs, or both.
The weighted average interest on our debt was 8.43% at March 31, 2024 compared with 8.12% at March 31, 2023. In addition, our credit facility has covenants that limit aspects of our operations. In addition, on March 31, 2023, we issued and sold $32,000,000 in aggregate principal amount of 10.0% convertible notes due in 2029 (the “Convertible Notes”).
In addition, our credit facility has restrictions that could limit aspects of our operations. In addition, on March 31, 2023, we issued and sold $32,000,000 in aggregate principal amount of 10.0% convertible notes due in 2029 (the “Convertible Notes”).
In addition, because we depend on independent third parties to manufacture a significant portion of our wheel hub, brake-related products, and other purchased finished goods, we cannot be certain that we will not experience operational difficulties with such manufacturers, such as reductions in the availability of production capacity, errors in complying with merchandise specifications, insufficient quality controls and failure to meet production deadlines or increases in manufacturing costs.
Any of the foregoing factors, or a combination of them, could increase the cost or reduce the supply of products available to us and materially and adversely impact our business, financial condition, results of operations or liquidity. 15 Table of Contents In addition, because we depend on independent third parties to manufacture a significant portion of our brake-related products, and other purchased finished goods, we cannot be certain that we will not experience operational difficulties with such manufacturers, such as reductions in the availability of production capacity, errors in complying with merchandise specifications, insufficient quality controls and failure to meet production deadlines or increases in manufacturing costs.
In addition, if imported merchandise becomes more expensive or unavailable, the transition to alternative sources may not occur in time to meet our demands. Merchandise from alternative sources may also be of lesser quality and more expensive than those we currently import.
In addition, if imported merchandise continues to become more expensive or less available due to increased tariff rates, trade disputes or other unfavorable impacts, the transition to alternative sources may not occur in time to meet our demands. Merchandise from alternative sources may also be of lesser quality and more expensive than those we currently import.
Our reliance on foreign suppliers for some of the automotive parts we sell to our customers or included in our products presents risks to our business . A significant portion of automotive parts and components we use in our remanufacturing process are imported from suppliers located outside the U.S., including China and other countries in Asia.
A significant portion of automotive parts and components we use in our remanufacturing process are imported from suppliers located outside the U.S., including China and other countries in Asia.
The issuance of shares of our common stock upon conversion of the Convertible Notes may dilute the ownership interests of existing stockholders and reduce our per share results of operations. Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
The issuance of shares of our common stock upon conversion of the Convertible Notes may dilute the ownership interests of existing stockholders and reduce our per share results of operations.
While the current presidential administration has rejoined the WTO, it remains difficult to predict what effect the USMCA, the WTO or other trade agreements and organizations will have on our business.
While the U.S. continues to be a member of the WTO, it remains difficult to predict what effect the USMCA, the WTO or other trade agreements and organizations will have on our business.
We may face such attacks through use of malware, computer viruses, attachments to e-mails and other means for disruption or unauthorized access The risk of a cybersecurity attack, including by computer hackers (individual or hacking organizations), foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased.
The risk of a cybersecurity attack, including by computer hackers (individual or hacking organizations), foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased.
In addition, our future growth may require additional investment in our systems to keep up with technological advances in our industry. If we are not able to invest in or adopt changes to our systems, or such upgrades take longer or cost more than anticipated, our business, financial condition and operating results may be adversely affected.
If we are not able to invest in or adopt changes to our systems, or such upgrades take longer or cost more than anticipated, our business, financial condition and operating results may be adversely affected. We use artificial intelligence technologies in our business, and the use of these technologies involve technological and legal risk.
If we fail to meet any of these covenants in the future, there is no assurance that our lenders will waive any such defaults or that we will otherwise be able to cure them. If we obtained a waiver, it may impose significant costs or covenants on us.
Our lenders may not waive future defaults under our credit agreements. Our credit agreement with our lenders contains certain financial and other covenants. If we fail to meet any of these covenants in the future, there is no assurance that our lenders will waive any such defaults or that we will otherwise be able to cure them.
These factors may allow our competitors to: • respond more quickly than we can to new or emerging technologies and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive aftermarket products; • engage in more extensive research and development; and • allocate more money and resources on marketing and promotion. 13 Table of Contents Increased competition could put additional pressure on us to reduce prices or take other actions, which may have an adverse effect on our operating results.
These factors may allow our competitors to: ● respond more quickly than we can to new or emerging technologies and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive aftermarket products; ● engage in more extensive research and development; ● Absorb more regulatory, tax, and tariff costs than the Company; and ● allocate more money and resources on marketing and promotion.
Of these, 87% were validated as Compliant or Conformant as conflict-free, per publicly available information on the Conflict Free Sourcing Initiative website. We have not been able to ascertain the conflict-free status of the remaining smelters or refiners.
Of these, 94% were validated as Compliant or Conformant as conflict-free, per publicly available information on the Conflict Free Sourcing Initiative website.
For example, in October 2023, California passed two bills that require certain companies that do business in California to disclose their GHG emissions and climate-related financial risks starting in 2026.
In addition, some of the domestic and foreign jurisdictions in which we operate could mandate additional ESG disclosure and impose additional requirements on us. For example, in October 2023, California passed two bills that require certain companies that do business in California to disclose their GHG emissions and climate-related financial risks starting in 2026.
As of March 31, 2024, we had $128,000,000 of debt outstanding under our credit facility, which is at variable interest rates. Fluctuations in those rates could impact our operating results and cash flows. In particular, interest rates have been rising recently, which increases our interest expense.
As of March 31, 2025, we had $90,787,000 of debt outstanding under our credit facility, which is at variable interest rates. Fluctuations in those rates could impact our operating results and cash flows. The weighted average interest on our debt was 7.46% at March 31, 2025 compared to 8.43% at March 31, 2024.
These failure rates are impacted by a number of factors outside of our control, including the reliability and durability of vehicles and parts, the number of miles driven by consumers, and the average age of vehicles on the road. These trends could reduce the demand for our products and thus adversely affect our sales and profitability.
Our operating results are affected over the long term by automotive parts failure rates. These failure rates are impacted by a number of factors outside of our control, including the reliability and durability of vehicles, the installation of the part, the number of miles driven by consumers, and the average age of vehicles on the road.
Our strategy for managing risks associated with conflict minerals in products includes continuing to encourage our suppliers to engage in conflict-free sourcing and obtaining data from our suppliers that is more applicable to the products we purchase. We continue to monitor progress on industry efforts to ascertain whether some facilities that suppliers identified are actually smelters.
We have not been able to ascertain the conflict-free status of the remaining smelters or refiners. 21 Table of Contents Our strategy for managing risks associated with conflict minerals in products includes continuing to encourage our suppliers to engage in conflict-free sourcing and obtaining data from our suppliers that is more applicable to the products we purchase.
While we maintain specific cyber insurance coverage, which may apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance coverage.
While we maintain specific cyber insurance coverage, which may apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case.
Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our stock.
Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our stock. 17 Table of Contents Risks Related to Our Overseas Operations Our offshore remanufacturing and logistic activities expose us to increased political and economic risks and place a greater burden on management to achieve quality standards.
These activities include increasing attention and demands for action related to climate change and promoting the use of energy saving building materials. As they evaluate investment decisions, many investors and customers, look not only at company disclosures but also to ESG rating systems that have been developed by third parties to allow ESG comparisons among companies.
As they evaluate investment decisions, many investors and customers, look not only at company disclosures but also to ESG rating systems that have been developed by third parties to allow ESG comparisons among companies. Although we participate in a number of these ratings systems, we do not participate in all such systems.
We rely on computer and telecommunications systems to communicate with our customers and vendors and manage our business. The temporary or permanent loss of our computer and telecommunications equipment and software systems, through casualty, operating malfunction, software virus or service provider failure, could disrupt our operations.
The temporary or permanent loss of our computer and telecommunications equipment and software systems, through casualty, operating malfunction, software virus or service provider failure, could disrupt our operations. In addition, our future growth may require additional investment in our systems to keep up with technological advances in our industry.
Historically, the Used Core returned from customers together with purchases from core brokers have provided us with an adequate supply of Used Cores. If there was a significant disruption in the supply of Used Cores, whether as a result of increased Used Core acquisitions by existing or new competitors or otherwise, our operating activities could be materially and adversely impacted.
Historically, the Used Core returned from customers together with purchases from core brokers have provided us with an adequate supply of Used Cores, but increases or uncertainty in tariff rates and global trade disruptions may cause a significant disruption in the supply of Used Cores, which may cause our operating activities to be materially and adversely impacted.
We also face competition from original equipment manufacturers, which, through their automotive dealerships, supply many of the same types of replacement parts we sell. In addition, other overseas competitors, particularly those located in China, are increasing their operations and are becoming a significant competitive force.
We also face competition from original equipment manufacturers, which, through their automotive dealerships, supply many of the same types of replacement parts we sell.
A substantial portion of our operations are located in Southern California and Baja California, Mexico, including our headquarters, remanufacturing and warehouse facilities.
Natural disasters or other disruptions in our business in California, Baja California, Mexico, and Asia could increase our operating expenses or cause us to lose revenues. A substantial portion of our operations are located in Southern California, Baja California, Mexico, and Asia, including our headquarters, remanufacturing and warehouse facilities.
We are a member of the Automobile Industry Action Group (AIAG) and support their efforts in the conflict minerals area. 20 Table of Contents If our technology and telecommunications systems were to fail, or we were not able to successfully anticipate, invest in or adopt technological advances in our industry, it could have an adverse effect on our operations.
If our technology and telecommunications systems were to fail, or we were not able to successfully anticipate, invest in or adopt technological advances in our industry, it could have an adverse effect on our operations. We rely on computer and telecommunications systems to communicate with our customers and vendors and manage our business.
Risks Related to Our Overseas Operations Our offshore remanufacturing and logistic activities expose us to increased political and economic risks and place a greater burden on management to achieve quality standards. Our international operations, especially our operations in Mexico, increase our exposure to political, criminal or economic instability in the host countries and to currency fluctuations.
Our international operations, especially our operations in Mexico, increase our exposure to political, criminal or economic instability in the host countries and to currency fluctuations.
In addition, elections and other changes in the political landscape could have similar effects. Such conditions may also materially impact our customers, suppliers and other parties with whom we do business. Our revenue will be adversely affected if demand for our products declines.
In addition, rapidly evolving federal, state and local government policies, the results of elections, and other changes in the political landscape could have similar effects, and responding to such changes in policy may divert the attention of senior management from our operations. Such conditions may also materially impact our customers, suppliers and other parties with whom we do business.
In recent years, increasing attention has been given to corporate activities related to environmental, social, and governance (“ESG”) matters in public discourse and the investment community.
In recent years, investors and other stakeholders have often focused on corporate activities related to environmental, social, and governance (“ESG”) matters in public discourse.
Some of our competitors may have larger customer bases and significantly greater financial, technical and marketing resources than we do.
In addition, other overseas competitors, particularly those located in Asia, are increasing their operations and are becoming a significant competitive force. 13 Table of Contents Some of our competitors may have larger customer bases and significantly greater financial, technical and marketing resources than we do.
We may also lose significant customers or lines of business to competitors. If we do not respond appropriately, the evolution of the automotive industry could adversely affect our business. The automotive industry is increasingly focused on the development of hybrid and electric vehicles and of advanced driver assistance technologies, with the goal of a commercially-viable, fully-automated driving experience.
Many leaders and consumers in the automotive industry are increasingly focused on the development of hybrid and electric vehicles and of advanced driver assistance technologies, with the goal of a commercially-viable, fully-automated driving experience.
We also incur allowances, accruals, charges and other expenses that differ from period to period based on changes in our business, which causes our operating income to fluctuate. Natural disasters or other disruptions in our business in California and Baja California, Mexico could increase our operating expenses or cause us to lose revenues.
We also incur allowances, accruals, charges and other expenses that differ from period to period based on changes in our business, which causes our operating income to fluctuate. 16 Table of Contents Changes in effective tax rates could adversely affect our results. We are subject to income taxes in a variety of domestic and foreign jurisdictions.
Increases in the market prices of key component raw materials could increase the cost of our products and negatively impact our profitability.
The imposition of tariffs, or even the potential imposition of tariffs are likely to cause a significant disruption in our manufacturing process, depending on the level and breadth of such tariff. 14 Table of Contents Increases in the market prices of key component raw materials could increase the cost of our products and negatively impact our profitability.
In addition, a number of the other components used in the remanufacturing process are available from a very limited number of suppliers. We are, as a result, vulnerable to any disruption in component supply, and any meaningful disruption in this supply would materially and adversely impact our operating results.
We are, as a result, vulnerable to any disruption in component supply and often are forced to purchase new units to obtain particularly difficult to get cores, and any meaningful disruption in this supply from uncertainty in tariff rates and global trade disruptions or other factors would materially and adversely impact our operating results.
In retaliation, China has responded by imposing tariffs on a wide range of products imported from the U.S. and by adjusting the value of its currency.
In response, China and other countries have, and may again in the future, impose increased tariffs on a wide range of products imported from the U.S. and adjust the value of its currency. Further, the U.S. government has recently imposed new tariffs on additional countries, including Mexico and Canada from which we remanufacture and distribute products, and we have operations.
We may also incur additional debt in the future, which could further increase our leverage, reduce our cash flow or further restrict our business. Our lenders may not waive future defaults under our credit agreements. Our credit agreement with our lenders contains certain financial and other covenants.
Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. 19 Table of Contents We may also incur additional debt in the future, which could further increase our leverage, reduce our cash flow or further restrict our business.
Removed
Our financial results are affected by automotive parts failure rates that are outside of our control. 14 Table of Contents Our operating results are affected over the long term by automotive parts failure rates.
Added
Unfavorable economic conditions may adversely affect our business.
Removed
Any of the foregoing factors, or a combination of them, could increase the cost or reduce the supply of products available to us and materially and adversely impact our business, financial condition, results of operations or liquidity.
Added
Our revenue will be adversely affected if demand for our products declines, including if we are forced to make our products more expensive for customers as a result of increasing costs, including regulatory expenses such as tariffs, and our customers don’t agree to these increased costs.
Removed
During fiscal 2024, we sustained minor damage from rain, which resulted in short-term power outages.
Added
In certain cases, we have experienced higher interest rates due to changes in customer credit profiles, which has impacted the overall cost of these financing arrangements.
Removed
We may also incur significant expenses to pursue and consummate acquisitions.
Added
In addition, some of our competitors may have a different manufacturing and distributing structure and footprint.
Removed
Although we participate in a number of these ratings systems, we do not participate in all such systems.
Added
Increased competition could put additional pressure on us to reduce prices or take other actions, which may have an adverse effect on our operating results. We may also lose significant customers or lines of business to competitors. If we do not respond appropriately, the evolution of the automotive industry could adversely affect our business.
Removed
In addition, the SEC recently issued final rules that mandate additional ESG disclosure and impose other requirements on us. In addition, some of the domestic and foreign jurisdictions in which we operate could mandate additional ESG disclosure and impose additional requirements on us.
Added
Additionally, increased Used Core acquisitions by existing or new competitors or other changes could further disrupt the supply of Used Cores and increase the significance of such impacts. In addition, a number of the other components used in the remanufacturing process are available from a very limited number of suppliers.
Removed
We do not believe conflict minerals pose risk to our operations.
Added
These trends could reduce the demand for our products and thus adversely affect our sales and profitability. Our reliance on foreign suppliers for some of the automotive parts we sell to our customers or included in our products presents risks to our business .
Added
Our future income tax liability could be materially adversely affected by earnings that are lower than anticipated in jurisdictions where we have lower statutory rates, earnings that are higher than anticipated in jurisdictions where we have higher statutory rates, changes in the valuation of our deferred tax assets and liabilities, changes in the amount of our unrecognized tax benefits, or changes in tax laws, regulations, accounting principles, or interpretations thereof.
Added
Tax laws and regulations continue to evolve. For example, ongoing tax reform discussions in the U.S. and other jurisdictions could further impact our tax liabilities. Proposals to modify corporate tax rates, implement new taxation mechanisms on foreign earnings, or change existing tax deductions and credits could materially affect our financial results.
Added
Given the political and economic uncertainty surrounding tax policy, we cannot predict the likelihood, form, or timing of such changes, but any unfavorable developments could have an adverse impact on our effective tax rate, income tax expense, and overall financial performance.
Added
In addition, recent legislative changes in international tax initiatives, including the Organization for Economic Co-operation and Development (“OECD”)’s global minimum tax framework under Pillar Two, aim to establish a minimum corporate tax rate of 15% for large multinational enterprises. As countries implement these measures, our tax obligations could increase, and compliance requirements may become more complex.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+0 added−1 removed14 unchanged
Biggest changeWe maintain a set of core practices and procedures when responding to certain high-risk information security threats and incidents, which are designed to ensure appropriate resources are utilized to provide an effective, timely, and coordinated response in managing crises, including significant cyber threats and incidents.
Biggest changeIn response to the growing risks associated with third-party service providers, we do not have any direct connections between our enterprise resource planning (“ERP”) system and our third-party suppliers nor service providers as their access to our IT systems could significantly disrupt our operations. 23 Table of Contents We maintain a set of core practices and procedures when responding to certain high-risk information security threats and incidents, which are designed to ensure appropriate resources are utilized to provide an effective, timely, and coordinated response in managing crises, including significant cyber threats and incidents.
Our Management Risk Committee will assume overall responsibility in an effort to ensure that the appropriate functions and work streams are mobilized and coordinated to effectively manage any significant cyber events. We have been a target of cyberattacks and other hacking activities, as have certain of our third-party service providers.
Our Management Risk Committee will assume overall responsibility in an effort to ensure that the appropriate functions and work streams are mobilized and coordinated to effectively manage any significant cyber events. We have been a target of cyber-attacks and other hacking activities, as have certain of our third-party service providers.
For additional discussion on our cybersecurity risks, refer to Item 1A. “Risk Factors” of this Form 10-K. 22 Table of Contents Cybersecurity Governance Our Board of Directors oversees the management of risks inherent in the operation of our business, with a focus on the most significant risks that we face, including those related to cybersecurity.
For additional discussion on our cybersecurity risks, refer to Item 1A. “Risk Factors” of this Form 10-K. Cybersecurity Governance Our Board of Directors oversees the management of risks inherent in the operation of our business, with a focus on the most significant risks that we face, including those related to cybersecurity.
Risk Factors - risks relating to “cyber-attacks or other breaches of information technology security could adversely impact our business and operation”. 21 Table of Contents Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity program designed to provide structured and thorough cybersecurity risk management and governance.
Risk Factors - risks relating to “cyber-attacks or other breaches of information technology security could adversely impact our business and operations”. Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity program designed to provide structured and thorough cybersecurity risk management and governance.
To the extent future cyber threats or incidents result in significant disruptions and costs to our operations, reduce the effectiveness of our internal controls over financial reporting, or otherwise substantially impact our business, it could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.
To the extent future cyber threats or incidents result in significant disruptions and costs to our operations, reduce the effectiveness of our internal controls over financial reporting, result in intellectual property theft, fraud, extortion, harm to our employees or customers, violations of privacy laws or damage our reputation or otherwise substantially impact our business, it could have a material adverse impact on our business, results of operations, and financial condition.
Removed
In response to the growing risks associated with third-party service providers, we do not have any direct connections between our enterprise resource planning (“ERP”) system to our third-party suppliers and their access to our IT systems that could significantly disrupt our operations.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeSquare Feet Leased or Owned Expiration Torrance, CA Remanufacturing, Warehouse, Administrative, and Office 231,000 Leased March 2032 Tijuana, Mexico Remanufacturing, Warehouse, and Office 312,000 Leased August 2033 Tijuana, Mexico Distribution Center and Office 410,000 Leased December 2032 Tijuana, Mexico Remanufacturing, Warehouse, and Office 199,000 Leased December 2032 Tijuana, Mexico Core Induction, Warehouse, and Office 173,000 Leased December 2032 Tijuana, Mexico Warehouse 68,000 Leased June 2026 Singapore & Malaysia Remanufacturing, Warehouse, and Office 144,000 Leased Various through September 2032 Shanghai, China Warehouse and Office 27,000 Leased March 2027 Ontario, Canada Remanufacturing, Warehouse, and Office 157,000 Leased May 2026 Ontario, Canada Manufacturing, Warehouse, and Office 35,000 Leased December 2024 We believe the above mentioned facilities are sufficient to satisfy our current and foreseeable operations.
Biggest changeLeased Square or Location Type of Facility Feet Owned Expiration Torrance, CA Remanufacturing, Warehouse, Administrative, and Office 231,000 Leased March 2032 Tijuana, Mexico Remanufacturing, Warehouse, and Office 312,000 Leased August 2033 Tijuana, Mexico Distribution Center and Office 410,000 Leased December 2032 Tijuana, Mexico Remanufacturing, Warehouse, and Office 199,000 Leased December 2032 Tijuana, Mexico Core Induction, Warehouse, and Office 173,000 Leased December 2032 Tijuana, Mexico Warehouse 68,000 Leased June 2026 Malaysia Remanufacturing, Warehouse, and Office 136,000 Leased Various through September 2032 Singapore Warehouse and Office 18,000 Leased December 2027 Shanghai, China Warehouse and Office 27,000 Leased March 2027 Ontario, Canada Remanufacturing, Warehouse, and Office 157,000 Leased May 2026 Ontario, Canada Manufacturing, Warehouse, and Office 35,000 Leased December 2027 We believe the above mentioned facilities are sufficient to satisfy our current and foreseeable operations. 24 Table of Contents
Item 2. Properties The following sets forth the location, type of facility, square footage and ownership interest in each of our material facilities. Location Type of Facility Approx.
Item 2. Properties The following sets forth the location, type of facility, square footage and ownership interest in each of our material facilities: Approx.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+2 added−0 removed1 unchanged
Biggest changePurchases of Equity Securities by the Issuer Share repurchase activity during the fourth quarter of fiscal 2024 was 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) January 1 - January 31, 2024: Open market and privately negotiated purchases - $ - - $ 18,255,000 February 1 - February 29, 2024: Open market and privately negotiated purchases - $ - - 18,255,000 March 1 - March 31, 2024: Open market and privately negotiated purchases - $ - - 18,255,000 Total 0 0 $ 18,255,000 (1) As of March 31, 2024, $18,745,000 of the $37,000,000 was utilized and $18,255,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in our Credit Facility.
Biggest changePurchases of Equity Securities by the Issuer Share repurchase activity during the fourth quarter of fiscal 2025 was 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) January 1 - January 31, 2025: Open market and privately negotiated purchases - $ - - $ 16,159,000 February 1 - February 28, 2025: Open market and privately negotiated purchases 58,068 $ 9.42 547,000 15,612,000 March 1 - March 31, 2025: Open market and privately negotiated purchases 215,936 $ 10.14 2,189,000 13,423,000 Total 274,004 2,736,000 $ 13,423,000 (1) As of March 31, 2025, $23,577,000 of the $37,000,000 authorized under our share repurchase program was utilized and $13,423,000 remains available to repurchase shares under this program, subject to the limit in our credit facility and convertible notes.
(3) Consists of shares available for future issuance under our 2022 Plan. 24 Table of Contents Stock Performance Graph The following graph compares the cumulative return to holders of our common stock for the five years ending March 31, 2024 with the NASDAQ Composite Total Returns Index and the Zacks Retail and Wholesale Auto Parts Index.
(3) Consists of shares available for future issuance under our 2022 Plan. 26 Table of Contents Stock Performance Graph The following graph compares the cumulative return to holders of our common stock for the five years ending March 31, 2025 with the NASDAQ Composite Total Returns Index and the Zacks Retail and Wholesale Auto Parts Index.
The comparison assumes $100 was invested at the close of business on March 31, 2019 in our common stock and in each of the comparison groups, and assumes reinvestment of dividends. 25 Table of Contents
The comparison assumes $100 was invested at the close of business on March 31, 2020 in our common stock and in each of the comparison groups, and assumes reinvestment of dividends. 27 Table of Contents
We retired the 837,007 shares repurchased under this program through March 31, 2024. 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.
We retired the 1,379,141 shares repurchased under this program through March 31, 2025. 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. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Select Market under the trading symbol MPAA. As of June 4, 2024, there were 19,662,380 shares of common stock outstanding held by 10 holders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Select Market under the trading symbol MPAA. As of June 2, 2025, there were 19,435,706 shares of common stock outstanding held by 8 holders of record.
Equity Compensation Plan Information The following summarizes our equity compensation plans as of March 31, 2024: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options warrants and rights (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c ) Equity compensation plans approved by security holders 2,122,863 (1 ) $ 9.32 (2 ) 430,129 (3 ) Equity compensation plans not approved by security holders N/A N/A N/A Total 2,122,863 $ 9.32 430,129 (1) Consists of (i) 140,299 restricted stock units (“RSUs”), 192,696 performance stock units (PSU’s), and 975,884 stock options issued under the Fourth Amended and Restated 2010 Incentive Award Plan (the “2010 Plan”) and (ii) 100,624 RSUs, 581,227 PSUs, and 132,133 stock options issued under our 2022 Incentive Award Plan (the “2022 Plan”).
Equity Compensation Plan Information The following summarizes our equity compensation plans as of March 31, 2025: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options warrants and rights (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders 2,323,321 (1) $ 9.32 (2) 1,516,084 (3) Equity compensation plans not approved by security holders N/A N/A N/A Total 2,323,321 $ 9.32 1,516,084 (1) Consists of (i) 52,842 restricted stock units (“RSUs”), 119,708 performance stock units (“PSUs”), and 922,628 stock options issued under the Fourth Amended and Restated 2010 Incentive Award Plan (the “2010 Plan”) and (ii) 452,531 RSUs, 644,679 PSUs, and 130,933 stock options issued under our First Amended and Restated 2022 Incentive Award Plan (the “2022 Plan”).
Added
During the quarter ended March 31, 2025, we adopted a written trading plan under Rule 10b5-1 of the SEC rule to facilitate share repurchases under our current authorized program.
Added
The adoption of a 10b5-1 plan allows us the ability to repurchase shares when we would be ordinarily restricted from purchases due to blackout periods or being in possession of material non-public information.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

98 edited+42 added−23 removed87 unchanged
Biggest changeThe following significant accomplishments support our optimism moving forward: • Sales increased by 5.1 percent to a record $717.7 million, despite industry softness in the fiscal fourth quarter; • Increased market share for our brake-related product lines for both our branded Quality-Built® and our private label retail brake products; • Expanded brand equity by increasing sales under the MPA portfolio of brands, including Quality-Built®, in the professional installer market; • Sales growth in our recently launched Mexican market continued to accelerate, driven by market share gains through additional business being awarded by current customers; • Secured additional commitments for our JBT-1 bench-top testers that are being rolled-out to the majority of retail stores in North America; • Gross profit increased 16.3 percent to $132.6 million; • Gross margin increased 1.8 percentage points to 18.5 percent; • Opened a new facility in Malaysia to support manufacturing of wheel hub products for direct shipments to our customers; • Operating income increased 26.5 percent to $46.1 million; • Generated cash from operating activities of approximately $39.2 million; • Reduced net bank debt by $32.5 million to $114.0 million; • Restructured our credit agreement to eliminate the senior leverage ratio financial covenant; • Retired our term loans and materially reduced the balance of our revolving facility; • Instituted a vendor supply chain financing program to support our strategy for neutralization of working capital; and • Made significant progress on enhancing our Environmental, Social and Governance practices on a global basis. 27 Table of Contents Trends Affecting Our Business Our business is impacted by various factors within the economy that affect both our customers and our industry, including but not limited to inflation, interest rates, disruptions in the supply chain, fuel costs, wage rates, and other economic conditions.
Biggest changeThe following significant accomplishments support our optimism: ● Sales increased by 5.5 percent to a record $757.4 million, despite industry softness in the fiscal year; ● Gross profit increased 16.1 percent to a record $153.8 million; ● Gross margin increased 1.8 percentage points to 20.3 percent; ● We generated cash from operating activities of approximately $45.5 million; ● Our net bank debt was reduced by $32.7 million to $81.4 million; ● We completed the relocation of certain operations to lower-cost locations as part of our ongoing commitment to continuous improvement; ● Market share for brake-related product lines increased for both our branded Quality-Built® and private label retail brake products; ● Expanded brand equity by increasing sales under the MPA portfolio of brands, including Quality-Built® in the professional installer market; ● We expanded our product coverage for starters and alternators, brake calipers, brake pads, brake rotors, brake boosters, brake master cylinders, and wheel hubs with more than 629 new part numbers -- covering more than approximately 130 million vehicles in operation in North America; ● Sales growth related to our emerging Mexican market presence continued to accelerate, driven by additional business from current customers; ● The roll out of our JBT-1 bench-top testers continued to gain momentum, with the majority of retail stores in North America deploying our diagnostic units, or, we believe, planning to install them; ● We added a new warehousing and distribution facility in Malaysia for future direct shipment programs; 29 Table of Contents ● We repurchased an aggregate 542,134 shares for $4.8 million for the full year under a current authorization program. ● Our strategy for neutralization of working capital is gaining momentum supported by inventory management and supply chain initiatives, including the benefits of our vendor supply chain financing program; and ● We made continued progress on further enhancing our Environmental, Social and Governance practices on a global basis.
We consider, among other things, the length of our largest ongoing customer relationships, duration of customer contracts, and the average life of vehicles on the road in determining the appropriate period of time over which to amortize these premiums.
We consider, among other things, the length of our largest ongoing customer relationships, duration of customer contracts, and the average life of vehicles on the road in determining the appropriate period of time over which to amortize these premiums.
Our loss on extinguishment of debt was $168,000 in connection with the repayment of the remaining outstanding balance of our term loans during fiscal 2024. Provision for Income Taxes Income Tax .
Loss on Extinguishment of Debt Loss on Extinguishment of Debt. Our loss on extinguishment of debt was $168,000 in connection with the repayment of the remaining outstanding balance of our term loans during fiscal 2024. Provision for Income Taxes Income Tax .
The Convertible Notes include customary provisions relating to the occurrence of Events of Default, which include the following: (i) certain payment defaults on the Convertible Notes; (ii) certain events of bankruptcy, insolvency and reorganization involving us or any of our subsidiaries; (iii) the entering of one or more final judgments or orders against us or any of our subsidiaries for an aggregate payment exceeding $25,000,000; (iv) the acceleration of senior debt; (v) certain failures of us to comply with certain provisions of the Note Purchase Agreement or material breaches of the Note Purchase Agreement by us or any of our subsidiaries; (vi) any material provision of the Note Purchase Agreement, the Convertible Notes, the guarantee, the subordination agreement, the warrants or the registration rights agreement, for any reason, ceases to be valid and binding on us or any subsidiary, or any subsidiary shall so claim in writing to challenge the validity of or our liability under the Note Purchase Agreement, the Convertible Notes, or the registration rights agreement; or (vii) we fail to maintain the listing of our capital stock on a national securities exchange.
The Convertible Notes include customary provisions relating to the occurrence of Events of Default, which include the following: (i) certain payment defaults on the Convertible Notes; (ii) certain events of bankruptcy, insolvency and reorganization involving us or any of our subsidiaries; (iii) the entering of one or more final judgments or orders against us or any of our subsidiaries for an aggregate payment exceeding $25,000,000; (iv) the acceleration of senior debt or any other debt greater than $25,000,000; (v) certain failures of us to comply with certain provisions of the Note Purchase Agreement or material breaches of the Note Purchase Agreement by us or any of our subsidiaries; (vi) any material provision of the Note Purchase Agreement, the Convertible Notes, the guarantee, the subordination agreement, the Warrants or the registration rights agreement, for any reason, ceases to be valid and binding on us or any subsidiary, or any subsidiary shall so claim in writing to challenge the validity of or our liability under the Note Purchase Agreement, the Convertible Notes, or the registration rights agreement; or (vii) we fail to maintain the listing of our capital stock on a national securities exchange.
During the period ended March 31, 2024, undrawn availability was greater than the 22.5% threshold, therefore, the fixed charge coverage ratio financial covenant was not required to be tested. Convertible Notes On March 31, 2023, we entered into a note purchase agreement, as amended, (the “Note Purchase Agreement”) with Bison Capital Partners VI, L.P. and Bison Capital Partners VI-A, L.P.
During the period ended March 31, 2025, undrawn availability was greater than the 22.5% threshold, therefore, the fixed charge coverage ratio financial covenant was not required to be tested. Convertible Notes On March 31, 2023, we entered into a note purchase agreement, as amended, (the “Note Purchase Agreement”) with Bison Capital Partners VI, L.P. and Bison Capital Partners VI-A, L.P.
We are not currently aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of March 31, 2024. However, these estimates may change, as new events occur and additional information is obtained.
We are not currently aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of March 31, 2025. However, these estimates may change, as new events occur and additional information is obtained.
This method prevents the distortion in allocated labor and overhead costs that would occur during short periods of abnormally low or high production. In addition, we exclude certain unallocated overhead such as severance costs, duplicative facility overhead costs, start-up costs, training, and spoilage from the calculation and expenses these unallocated overhead costs as period costs.
This method prevents the distortion in allocated labor and overhead costs that would occur during short periods of abnormally low or high production. In addition, we exclude certain unallocated overhead such as severance costs, duplicative facility overhead costs, start-up costs, training, and spoilage from the calculation and expense these unallocated overhead costs as period costs.
The Remanufactured Core value is recorded as a net revenue based upon the estimate of Used Cores that will not be returned by the customer for credit. These estimates are subjective and based on management’s judgment and knowledge of historical, current, and projected return rates.
The Remanufactured Core value is recorded as revenue based upon the estimate of Used Cores that will not be returned by the customer for credit. These estimates are subjective and based on management’s judgment and knowledge of historical, current, and projected return rates.
After March 31, 2026, we may redeem all or part of the Convertible Notes for a cash purchase (the “Company Redemption”) price equal to the redemption price plus $5,000,000, but only if (i) we are listed on a national exchange, (ii) there is no “Event of Default” occurring and continuing and (iii) Adjusted EBITDA for the prior four quarters is greater than $80,000,000.
After March 31, 2026, we may redeem all or part of the Convertible Notes for a cash purchase (the “Company Redemption”) price equal to the Redemption Price (as defined below) plus $5,000,000, but only if (i) we are listed on a national exchange, (ii) there is no “Event of Default” occurring and continuing and (iii) Adjusted EBITDA for the prior four quarters is greater than $80,000,000.
The Convertible Notes also contain additional features, such as, default interest and options related to a Fundamental Transaction, requiring bifurcation which were not separately accounted for as the value of such features were not material at March 31, 2024 and 2023.
The Convertible Notes also contain additional features, such as, default interest and options related to a Fundamental Transaction, requiring bifurcation which were not separately accounted for as the value of such features were not material at March 31, 2025 and 2024.
Debt issuance costs are amortized using the effective interest method through the maturity of the Convertible Notes and recorded in interest expense in the consolidated statements of operations. The effective interest rate was 18.3% as of March 31, 2024.
Debt issuance costs are amortized using the effective interest method through the maturity of the Convertible Notes and recorded in interest expense in the consolidated statements of operations. The effective interest rate was 18.3% as of March 31, 2025 and 2024, respectively.
Events of Default will be subject to a 30-day cure period except for those related to clause (ii) and (iv) of the preceding sentence. If an Event of Default occurs and is continuing, then, we shall deliver written notice to the Purchasers within 5 business days of first learning of such Event of Default.
Events of Default will be subject to a 30-day cure period except for those related to clause (ii) and (iv) of the preceding sentence. 43 Table of Contents If an Event of Default occurs and is continuing, then, we shall deliver written notice to the Purchasers within 5 business days of first learning of such Event of Default.
The payments to be made to customers for purchases of Remanufactured Cores within our normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities. Customer core returns accruals represent the full and nominally priced Remanufactured Cores shipped to our customers.
The payments to be made to customers for purchases of Remanufactured Cores within our normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities. 36 Table of Contents Customer core returns accruals represent the full and nominally priced Remanufactured Cores shipped to our customers.
Any reduction of value is recorded as cost of goods sold in the period in which the revaluation is identified. 30 Table of Contents • Net realizable value for Used Cores are determined based on current core purchase prices from core brokers to the extent that core purchases in the trailing 12 months are significant.
Any reduction of value is recorded as cost of goods sold in the period in which the revaluation is identified. ● Net realizable value for Used Cores are determined based on current core purchase prices from core brokers to the extent that core purchases in the trailing 12 months are significant.
The fair value of the Warrants, using Level 3 inputs and the Monte Carlo simulation model, was zero at March 31, 2024 and 2023. We estimate the fair value of the Warrants at each balance sheet date.
The fair value of the Warrants, using Level 3 inputs and the Monte Carlo simulation model, was zero at March 31, 2025 and 2024. We estimate the fair value of the Warrants at each balance sheet date.
(7) Finished goods liabilities represents the amounts due for principal of $549,000 and no interest payments to be made in connection with the purchase of finished goods from our customers.
(7) Finished goods liabilities represents the amounts due for principal of $518,000 and no interest payments to be made in connection with the purchase of finished goods from our customers.
Any reduction of core cost is recorded as cost of goods sold in the period in which the revaluation is identified. • We record an allowance for potentially excess and obsolete inventory based upon recent sales history, the quantity of inventory on-hand, and a forecast of potential use of the inventory.
Any reduction of core cost is recorded as cost of goods sold in the period in which the revaluation is identified. 33 Table of Contents ● We record an allowance for potentially excess and obsolete inventory based upon recent sales history, the quantity of inventory on-hand, and a forecast of potential use of the inventory.
The change in the customer finished goods returns accrual primarily resulted from the timing of returned goods authorizations (“RGAs”) issued at March 31, 2024 compared with March 31, 2023.
The change in the customer finished goods returns accrual primarily resulted from the timing of returned goods authorizations (“RGAs”) issued at March 31, 2025 compared with March 31, 2024.
The following summarizes certain key operating consolidated data for the periods indicated: Fiscal Years Ended March 31, 2024 2023 2022 Cash flows provided by (used in) operations $ 39,172,000 $ (21,754,000 ) $ (44,862,000 ) Finished goods turnover (1) 3.7 3.6 3.8 (1) Finished goods turnover is calculated by dividing the cost of goods sold for the year by the average of beginning and ending non-core finished goods inventory values, for each fiscal year.
The following summarizes certain key operating consolidated data for the periods indicated: Fiscal Years Ended March 31, 2025 2024 2023 Cash flows provided by (used in) operations $ 45,477,000 $ 39,172,000 $ (21,754,000 ) Finished goods turnover (1) 3.8 3.7 3.6 (1) Finished goods turnover is calculated by dividing the cost of goods sold for the year by the average of beginning and ending non-core finished goods inventory values, for each fiscal year.
(8) We are unable to reliably estimate the timing of future payments related to uncertain tax position liabilities at March 31, 2024; therefore, future tax payment accruals related to uncertain tax positions in the amount of $1,784,000 have been excluded from the table above.
(8) We are unable to reliably estimate the timing of future payments related to uncertain tax position liabilities at March 31, 2025; therefore, future tax payment accruals related to uncertain tax positions in the amount of $1,362,000 have been excluded from the table above.
In connection with our entry into the Note Purchase Agreement, we appointed Douglas Trussler to serve on our Board. 41 Table of Contents Accounts Receivable Discount Programs We use accounts receivable discount programs offered by certain customers and their respective banks.
In connection with our entry into the Note Purchase Agreement, we appointed Douglas Trussler to serve on our Board. Accounts Receivable Discount Programs We use accounts receivable discount programs offered by certain customers and their respective banks.
Revenue Recognition — Core Exchange Programs 32 Table of Contents Full price Remanufactured Cores: When remanufactured products are shipped, certain customers are invoiced for the Remanufactured Core value of the product at the full Remanufactured Core sales price.
Revenue Recognition — Core Exchange Programs Full price Remanufactured Cores: When remanufactured products are shipped, certain customers are invoiced for the Remanufactured Core value of the product at the full Remanufactured Core sales price.
Any subsequent changes from the initial recognition in the fair value of the Compound Net Derivative Liability will be recorded in current period earnings in the consolidated statements of operations.
Any subsequent changes from the initial recognition in the fair value of the Compound Net Derivative Liability is recorded in current period earnings in the consolidated statements of operations.
Unamortized debt issuance costs of $1,058,000 and $1,006,000 are presented in the balance sheet as a direct deduction from the carrying amounts of the Convertible Notes at March 31, 2024 and 2023, respectively.
Unamortized debt issuance costs of $916,000 and $1,058,000 are presented in the balance sheet as a direct deduction from the carrying amounts of the Convertible Notes at March 31, 2025 and 2024, respectively.
The fair value of the Conversion Option and the Company Redemption option using Level 3 inputs and the Monte Carlo simulation model was a liability of $9,800,000 and $10,400,000, and an asset of $2,390,000 and $1,970,000 at March 31, 2024 and 2023, respectively. We estimate the fair value of the Compound Net Derivative Liability at each balance sheet date.
The fair value of the Conversion Option and the Company Redemption option using Level 3 inputs and the Monte Carlo simulation model was a liability of $9,000,000 and $9,800,000, and an asset of $1,530,000 and $2,390,000 at March 31, 2025 and 2024, respectively. We estimate the fair value of the Compound Net Derivative Liability at each balance sheet date.
The customer finished goods returns accrual represents the Unit Value of the estimated returns and is classified as a current liability due to the expectation that these returns will occur within the normal operating cycle of one year. Our customer finished goods returns accrual was $38,312,000 and $37,984,000 at March 31, 2024 and 2023, respectively.
The customer finished goods returns accrual represents the Unit Value of the estimated returns and is classified as a current liability due to the expectation that these returns will occur within the normal operating cycle of one year. Our customer finished goods returns accrual was $34,411,000 and $38,312,000 at March 31, 2025 and 2024, respectively.
Any subsequent changes from the initial recognition in the fair value of those features will be recorded in current period earnings in the consolidated statements of operations.
Any subsequent changes from the initial recognition in the fair value of those features is recorded in current period earnings in the consolidated statements of operations.
The initial conversion rate is 66.6667 shares of our common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $15.00 per share of common stock). At March 31, 2024, we had 28,214,757 shares of our common stock available to be issued if the Convertible Notes were converted.
The initial conversion rate is 66.6667 shares of our common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $15.00 per share of common stock). At March 31, 2025, we had 28,240,973 shares of our common stock available to be issued if the Convertible Notes were converted.
As a result of this process, we recorded reserves for excess and obsolete inventory of $17,372,000 and $16,436,000 at March 31, 2024 and 2023, respectively. This increase in the reserve was primarily due to excess inventory of certain finished goods on hand at March 31, 2024 compared with March 31, 2023.
As a result of this process, we recorded reserves for excess and obsolete inventory of $18,964,000 and $17,372,000 at March 31, 2025 and 2024, respectively. This increase in the reserve was primarily due to excess inventory of certain finished goods on hand at March 31, 2025 compared with March 31, 2024.
These capital expenditures include (i) cash paid for the purchase of plant and equipment plant, (ii) equipment acquired under finance leases, and (iii) non-cash capital expenditures. Capital expenditures for fiscal 2024 primarily include the purchase of equipment for our current operations.
These capital expenditures include (i) cash paid for the purchase of plant and equipment, (ii) equipment acquired under finance leases, and (iii) non-cash capital expenditures. Capital expenditures for fiscal 2025 primarily include the purchase of equipment for our current operations and our global growth initiatives.
Our Hard Parts operating segment meets the criteria of a reportable segment. The Test Solutions and Diagnostic Equipment and Heavy Duty segments are not material, are not required to be separately reported, and are included within the “all other” category. See Note 19 of the notes to consolidated financial statements for more information.
Our Hard Parts operating segment meets the criteria of a reportable segment. The Test Solutions and Diagnostic Equipment and Heavy Duty segments are not material, and are not required to be separately reported. See Note 20 of the notes to consolidated financial statements for more information.
This standard requires us to disclose significant segment expenses that are regularly provided to the CODM and are included within each reported measure of segment operating results.
This standard requires us to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and are included within each reported measure of segment operating results.
Change in Fair Value of Compound Net Derivative Liability Change in Fair Value of Compound Net Derivative Liability. Our change in fair value of compound net derivative liability for fiscal 2024 was a non-cash gain of $1,020,000 associated with the convertible notes issued on March 31, 2023. Loss on Extinguishment of Debt Loss on Extinguishment of Debt.
Change in Fair Value of Compound Net Derivative Liability Change in Fair Value of Compound Net Derivative Liability. Our change in fair value of compound net derivative liability was a non-cash loss of $60,000 compared with a non-cash gain of $1,020,000 for fiscal 2025 and 2024, respectively, associated with the convertible notes issued on March 31, 2023.
Our use of estimates and assumptions affect the reported amounts of assets, liabilities and the amount and timing of revenues and expenses we recognize for and during the reporting period.
We base our estimates on historical experiences and reasonable assumptions. Our use of estimates and assumptions affect the reported amounts of assets, liabilities and the amount and timing of revenues and expenses we recognize for and during the reporting period.
Any subsequent changes from the initial recognition in the fair value of the Warrants will be recorded in current period earnings in the consolidated statements of operations. The Convertible Notes may be converted, subject to certain conditions, at a conversion price of approximately $15.00 (the “Conversion Option”).
Any subsequent changes from the initial recognition in the fair value of the Warrants will be recorded in current period earnings in the consolidated statements of operations. 42 Table of Contents The Convertible Notes may be converted, subject to certain conditions, at an initial conversion price of $15.00, subject to adjustment as provided in the Convertible Notes (the “Conversion Option”).
The interest rate on our Revolving Facility was 8.43% and 8.13% respectively, at March 31, 2024 and 2023, respectively. 39 Table of Contents The Credit Facility, as amended, requires us to maintain a minimum fixed charge coverage ratio if undrawn availability is less than 22.5% of the aggregate revolving commitments and a specified minimum undrawn availability.
The interest rate on our Revolving Facility was 7.46% and 8.43%, at March 31, 2025 and 2024, respectively. The Credit Facility requires us to maintain a minimum fixed charge coverage ratio if undrawn availability is less than 22.5% of the aggregate revolving commitments and a specified minimum undrawn availability.
We believe cash generated from operations, our cash and cash equivalents, use of accounts receivable discount programs, amounts available under our credit facility, and other sources are sufficient to satisfy our working capital needs, and lease and capital expenditure obligations over the next 12 months.
We believe our cash and cash equivalents, use of receivable discount programs, amounts available under our credit facility, and other sources are sufficient to satisfy our expected future liquidity needs, including lease and capital expenditure obligations over the next 12 months.
During the year ended March 31, 2024, we recorded a gain of $1,020,000 as the change in fair value of the Compound Net Derivative Liability in the consolidated statement of operations and consolidated statement of cash flows.
During the years ended March 31, 2025 and 2024, we recorded a loss of $60,000 and a gain of $1,020,000, respectively, as the change in fair value of the Compound Net Derivative Liability in the consolidated statements of operations and consolidated statements of cash flows.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of the annual report on Form 10-K for the year ended March 31, 2023, filed with the SEC on June 14, 2023, which is available free of charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “MPAA” or at our internet address, www.motorcarparts.com , by clicking “Investors” located at the top of the page.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the annual report on Form 10-K for the year ended March 31, 2024, filed with the SEC on June 11, 2024, and the 10-K/A for the fiscal year ended March 31, 2024, as filed with the SEC on June 28, 2024, which is available free of charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “MPAA” or at our internet address, www.motorcarparts.com , by clicking “Investors/Financials/SEC Filings” located at the top of the page.
Share Repurchase Program In August 2018, our board of directors approved an increase in our share repurchase program from $20,000,000 to $37,000,000 of our common stock. During fiscal 2024 and 2023, we did not repurchase any shares of our common stock. During fiscal 2022, we repurchased 106,486 shares of our common stock for $1,914,000.
Share Repurchase Program In August 2018, our board of directors approved an increase in our share repurchase program from $20,000,000 to $37,000,000 of our common stock. During fiscal 2025, we repurchased 542,134 shares of our common stock for $4,832,000. During fiscal 2024 and 2023, we did not repurchase any shares of our common stock.
Cash Flows The following summarizes cash flows as reflected in the consolidated statements of cash flows: Fiscal Years Ended March 31, 2024 2023 2022 Cash provided by (used in): Operating activities $ 39,172,000 $ (21,754,000 ) $ (44,862,000 ) Investing activities (479,000 ) (4,191,000 ) (7,938,000 ) Financing activities (36,439,000 ) 14,308,000 60,215,000 Effect of exchange rates on cash and cash equivalents 124,000 217,000 78,000 Net increase (decrease) in cash and cash equivalents $ 2,378,000 $ (11,420,000 ) $ 7,493,000 Additional selected cash flow data: Depreciation and amortization $ 11,619,000 $ 12,444,000 $ 12,886,000 Capital expenditures 1,000,000 4,201,000 7,550,000 Fiscal 2024 Compared with Fiscal 2023 Net cash provided by operating activities was $39,172,000 for fiscal 2024 compared with net cash used in operations of $21,754,000 for fiscal 2023.
Cash Flows The following summarizes cash flows as reflected in the consolidated statements of cash flows: Fiscal Years Ended March 31, 2025 2024 2023 Cash provided by (used in): Operating activities $ 45,477,000 $ 39,172,000 $ (21,754,000 ) Investing activities (4,469,000 ) (479,000 ) (4,191,000 ) Financing activities (44,655,000 ) (36,439,000 ) 14,308,000 Effect of exchange rates on cash and cash equivalents (898,000 ) 124,000 217,000 Net (decrease) increase in cash and cash equivalents $ (4,545,000 ) $ 2,378,000 $ (11,420,000 ) Additional selected cash flow data: Depreciation and amortization $ 10,400,000 $ 11,619,000 $ 12,444,000 Capital expenditures 4,578,000 1,000,000 4,201,000 Fiscal 2025 Compared with Fiscal 2024 Net cash provided by operating activities was $45,477,000 and $39,172,000 for fiscal 2025 and 2024, respectively.
The remainder of the full price Remanufactured Core value invoiced to these customers is established as a long-term contract liability rather than being recognized as revenue in the period the products are shipped as we expect these Remanufactured Cores to be returned for credit under our core exchange programs.
The remainder of the full price Remanufactured Core value invoiced to these customers is established as a long-term contract liability rather than being recognized as revenue in the period the products are shipped as we expect these Remanufactured Cores to be returned for credit under our core exchange programs. 35 Table of Contents Nominal price Remanufactured Cores: Certain other customers are invoiced for the Remanufactured Core value of the product shipped at a nominal (generally $0.01 or less) Remanufactured Core price.
This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact this guidance will have on our financial statement disclosures.
This guidance is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements and disclosures.
We expect to incur approximately $7,000,000 of capital expenditures primarily to support our global growth initiatives and current operations during fiscal 2025. We have used and expect to continue using our working capital and additional capital lease obligations to finance these capital expenditures.
We expect to incur approximately $9,500,000 of capital expenditures primarily to support our global growth initiatives and maintenance of our facilities and equipment during fiscal 2026. We have used and expect to continue using our working capital and additional capital lease obligations to finance these capital expenditures.
Operating Expenses The following summarizes consolidated operating expenses: Fiscal Years Ended March 31, 2024 2023 General and administrative $ 57,769,000 $ 54,756,000 Sales and marketing 22,481,000 21,729,000 Research and development 9,995,000 10,322,000 Foreign exchange impact of lease liabilities and forward contracts (3,814,000 ) (9,291,000 ) Percent of net sales General and administrative 8.0 % 8.0 % Sales and marketing 3.1 % 3.2 % Research and development 1.4 % 1.5 % Foreign exchange impact of lease liabilities and forward contracts (0.5 )% (1.4 )% General and Administrative.
Operating Expenses The following summarizes consolidated operating expenses: Fiscal Years Ended March 31, 2025 2024 General and administrative $ 64,047,000 $ 57,769,000 Sales and marketing 22,561,000 22,481,000 Research and development. 11,405,000 9,995,000 Foreign exchange impact of lease liabilities and forward contracts 15,892,000 (3,814,000 ) Percent of net sales General and administrative 8.5 % 8.0 % Sales and marketing 3.0 % 3.1 % Research and development 1.5 % 1.4 % Foreign exchange impact of lease liabilities and forward contracts 2.1 % (0.5 )% General and Administrative.
Our investments in infrastructure and human resources during the past few years reflects the significant expansion of manufacturing capacity to support multiple product lines.
Our on-going investments in global infrastructure and human resources reflects the significant expansion of manufacturing capacity to support multiple product lines.
Our consolidated gross profit for fiscal 2024 increased $18,589,000, or 16.3%, to $132,551,000 from $113,962,000 for fiscal 2023. Our consolidated gross margin, as a percentage of consolidated net sales, improved by 1.8% for fiscal 2024 to 18.5% from 16.7% for fiscal 2023.
Our consolidated gross profit for fiscal 2025 increased $21,277,000, or 16.1%, to $153,828,000 from $132,551,000 for fiscal 2024. Our consolidated gross margin, as a percentage of consolidated net sales, improved by 1.8% for fiscal 2025 to 20.3% from 18.5% for fiscal 2024.
In addition, our gross margin for fiscal 2024 compared with fiscal 2023 was impacted by (i) additional expenses of $7,472,000 and $8,195,000, respectively, primarily due to certain costs for disruptions in the supply chain, (ii) amortization of core and finished goods premiums paid to customers related to new business of $10,963,000 and $11,791,000, respectively, and (iii) the 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 $5,353,000 and $3,736,000, respectively.
In addition, our gross margin for fiscal 2025 compared with fiscal 2024 was impacted by (i) amortization of core and finished goods premiums paid to customers related to new business of $10,738,000 and $10,963,000, respectively and (ii) the 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 $2,805,000 and $5,353,000, respectively.
This change during fiscal 2024 compared with fiscal 2023 was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities, which resulted in non-cash gains of $5,187,000 and $6,515,000, respectively, due to foreign currency exchange rate fluctuations and (ii) the forward foreign currency exchange contracts, which resulted in a non-cash loss of $1,373,000 compared with a non-cash gain of $2,776,000, respectively, due to the changes in their fair values.
This change during fiscal 2025 compared with fiscal 2024 was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities, which resulted in a non-cash loss of $11,713,000 compared with a non-cash gain of $5,187,000, respectively, due to foreign currency exchange rate fluctuations and (ii) the forward foreign currency exchange contracts, which resulted in non-cash losses of $4,179,000 and $1,373,000, respectively, due to the changes in their fair values. 39 Table of Contents Operating Income Consolidated Operating Income .
We are currently evaluating the impact this guidance will have on our financial statement disclosures. Inventory Inventory is comprised of: (i) Used Core and component raw materials, (ii) work-in-process, and (iii) remanufactured and purchased finished goods. Used Core, component raw materials, and purchased finished goods are stated at the lower of average cost or net realizable value.
Inventory Inventory is comprised of: (i) Used Core and component raw materials, (ii) work-in-process, and (iii) remanufactured and purchased finished goods. Used Core, component raw materials, and purchased finished goods are stated at the lower of average cost or net realizable value.
These core premiums are amortized over a period typically ranging from six to eight years, adjusted for specific circumstances associated with the arrangement. Core premiums are recorded as long-term contract assets. Core premiums expected to be amortized within our normal operating cycle, which is generally one year, are classified as short-term contract assets.
These core premiums are amortized over a period typically ranging from six to eight years, adjusted for specific circumstances associated with the arrangement. Core premiums are recorded as long-term contract assets.
Finished goods premiums paid to customers represent the difference between the finished good acquisition price paid to customers, generally in connection with new business, and the related finished good cost, which is treated as an asset and recognized as a reduction of revenue through the later of the date at which related revenue is recognized or the date at which the sales incentive is offered.
Core premiums expected to be amortized within our normal operating cycle, which is generally one year, are classified as short-term contract assets. 34 Table of Contents Finished goods premiums paid to customers represent the difference between the finished good acquisition price paid to customers, generally in connection with new business, and the related finished good cost, which is treated as an asset and recognized as a reduction of revenue through the later of the date at which related revenue is recognized or the date at which the sales incentive is offered.
We had $128,000,000 and $145,200,000 outstanding under the Revolving Facility at March 31, 2024 and 2023, respectively. In addition, $6,370,000 was outstanding for letters of credit at March 31, 2024. At March 31, 2024, after certain contractual adjustments, $100,915,000 was available under the Revolving Facility.
We had $90,787,000 and $128,000,000 outstanding under the Revolving Facility at March 31, 2025 and 2024, respectively. In addition, $7,047,000 was outstanding for letters of credit at March 31, 2025. At March 31, 2025, after certain contractual adjustments, $135,150,000 was available under the Revolving Facility.
As of March 31, 2024, $18,745,000 was utilized and $18,255,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in our Credit Facility. We retired the 837,007 shares repurchased under this program through March 31, 2024.
As of March 31, 2025, $23,577,000 was utilized and $13,423,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in our Credit Facility and Convertible Notes. We retired the 1,379,141 shares repurchased under this program through March 31, 2025.
We have no economic interest in the sale of these receivables and no direct relationship with the financial institution. Payments to the third-party administrator are based on services rendered and are not on related to the volume or number of financing agreements between suppliers, financial institution, and the third-party administrator.
Payments to the third-party administrator are based on services rendered and are not related to the volume or number of financing agreements between suppliers, financial institution, and the third-party administrator. We are not a party to agreements negotiated between participating suppliers and the financial institution.
During fiscal 2023 we generated proceeds, less debt issuance costs, from the issuance of $32,000,000 in convertible notes issued on March 31, 2023. 38 Table of Contents Fiscal 2023 Compared with Fiscal 2022 A discussion of the changes in our operating activities, investing activities, and financing activities for the year ended March 31, 2023, as compared with the year ended March 31, 2022, has been omitted from this Form 10-K but may be found in Item 7.
During the prior fiscal year, we paid off our remaining term loans of $13,125,000. 41 Table of Contents Fiscal 2024 Compared with Fiscal 2023 A discussion of the changes in our operating activities, investing activities, and financing activities for the year ended March 31, 2024, as compared with the year ended March 31, 2023, has been omitted from this Form 10-K but may be found in Item 7.
Fiscal 2024 Compared with Fiscal 2023 Net Sales and Gross Profit The following summarizes net sales and gross profit: Fiscal Years Ended March 31, 2024 2023 Net sales to external customers $ 717,684,000 $ 683,074,000 Cost of goods sold 585,133,000 569,112,000 Gross profit 132,551,000 113,962,000 Gross profit percentage 18.5 % 16.7 % Net Sales .
Fiscal 2025 Compared with Fiscal 2024 Net Sales and Gross Profit The following summarizes consolidated net sales and gross profit: Fiscal Years Ended March 31, 2025 2024 Net sales to external customers $ 757,354,000 $ 717,684,000 Cost of goods sold 603,526,000 585,133,000 Gross profit 153,828,000 132,551,000 Gross profit percentage 20.3 % 18.5 % Net Sales .
(9) Other long-term obligations represent commitments we have with certain customers to provide marketing allowances in consideration for multi-year customer agreements to provide products over a defined period. We are not obligated to provide these marketing allowances should our business relationships end with these customers.
(9) Customer allowances earned represent commitments we have with certain customers to provide marketing allowances in consideration for multi-year customer agreements to provide products over a defined period.
Foreign Exchange Impact of Lease Liabilities and Forward Contracts . Our foreign exchange impact of lease liabilities and forward contracts for fiscal 2024 and 2023 were non-cash gains of $3,814,000 and $9,291,000, respectively.
Our foreign exchange impact of lease liabilities and forward contracts were a non-cash loss of $15,892,000 compared with a non-cash gain of $3,814,000 for fiscal 2025 and 2024, respectively.
We are currently evaluating the impact this guidance will have on our financial statement disclosures. 29 Table of Contents Reportable Segment Disclosures In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280) .
We are currently evaluating the impact this guidance will have on our financial statement disclosures. Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740) .
The Convertible Notes also include a provision for a return of interest (“Return of Interest”), which requires the Purchasers to return 15.0% of the interest paid to us in certain circumstances.
The Convertible Notes also include a provision for a return of interest (“Return of Interest”), which requires the Purchasers to return 15.0% of the interest paid to us in certain circumstances, subject to reduction of the Return of Interest amount in the event that the Return of Interest amount would result in total payments to the Purchasers of less than two times the original principal amount.
Our significant accounting policies are discussed in detail below and in Note 2 of the notes to consolidated financial statements. 28 Table of Contents In preparing our consolidated financial statements, we use estimates and assumptions for matters that are inherently uncertain. We base our estimates on historical experiences and reasonable assumptions.
Critical Accounting Policies We prepare our consolidated financial statements in accordance with generally accepted accounting principles, or GAAP, in the United States. Our significant accounting policies are discussed in detail below and in Note 2 of the notes to consolidated financial statements. In preparing our consolidated financial statements, we use estimates and assumptions for matters that are inherently uncertain.
Our general and administrative expenses for fiscal 2024 were $57,769,000, which represents an increase of $3,013,000, or 5.5%, from fiscal 2023 of $54,756,000.
Our general and administrative expenses for fiscal 2025 were $64,047,000, which represents an increase of $6,278,000, or 10.9%, from fiscal 2024 of $57,769,000.
However, if the volume weighted average price of our common stock for 20 consecutive days prior to the notice of the Company Redemption is less than $15, the Purchasers may exercise the warrants and we will pay the Redemption Price plus $2,000,000. 40 Table of Contents The Conversion Option and the Company Redemption both met the criteria for bifurcation from the Convertible Notes as derivatives and have been combined as a compound net derivative liability (the “Compound Net Derivative Liability”).
However, if the volume weighted average price of our common stock for 20 consecutive days prior to the notice of the Company Redemption is less than $15, the Purchasers may exercise the warrants and we will pay the Redemption Price plus $2,000,000.
We also offer our customers marketing and other allowances that impact revenue recognition. These elements of our business give rise to more complex accounting than many businesses our size or larger.
We also offer our customers marketing and other allowances that impact revenue recognition. These elements of our business give rise to more complex accounting than many businesses our size or larger. 31 Table of Contents Recently Adopted Accounting Pronouncements Reportable Segment Disclosures In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280) .
We are not a party to agreements negotiated between participating suppliers and the financial institution. Our obligations to our suppliers, including amounts due and payment terms, are not affected by a supplier's decision to participate in this program.
Our obligations to our suppliers, including amounts due and payment terms, are not affected by a supplier's decision to participate in this program. We do not provide guarantees and there are no assets pledged to the financial institution or the third-party administrator for the committed payment in connection with this program.
Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740) . This standard requires us to provide further disaggregated income tax disclosures for specific categories on the effective tax rate reconciliation, as well as additional information about federal, state/local and foreign income taxes.
This standard requires us to provide further disaggregated income tax disclosures for specific categories on the effective tax rate reconciliation, as well as additional information about federal, state/local and foreign income taxes. The standard also requires us to annually disclose our income taxes paid (net of refunds received), disaggregated by jurisdiction.
If we do not expect to generate additional revenue, then the upfront payment is recognized in the consolidated statements of operations when payment occurs as a reduction of revenue.
If we do not expect to generate additional revenue, then the upfront payment is recognized in the consolidated statements of operations when payment occurs as a reduction of revenue. Upfront payments expected to be amortized during our normal operating cycle, which is generally one year, are classified as short-term contract assets.
A valuation allowance is established when we believe it is not more likely than not all or some of a deferred tax assets will be realized.
We make these estimates and judgments about our future taxable income based on assumptions that are consistent with our future plans. A valuation allowance is established when we believe it is not more likely than not all or some of a deferred tax assets will be realized.
There are no future payments required under the Convertible Notes prior to their maturity, therefore, the carrying value of the notes plus interest payable in kind, assuming no early redemption or conversion has occurred, is included in the above table based on their maturity date of March 30, 2029.
There are no future payments required under the Convertible Notes prior to their maturity, therefore, the carrying value of the notes plus interest payable in kind, assuming no early redemption or conversion has occurred, is included in the above table based on their maturity date of March 30, 2029. 46 Table of Contents (5) Accrued core payment represents the amounts due for principal of $6,964,000 and interest payments of $323,000 to be made in connection with the purchases of Remanufactured Cores from our customers, which are held by these customers and remain on their premises.
Interest Rates Interest rates remain high in an effort to curb on-going inflation. We are experiencing higher interest costs for our accounts receivable discount programs and borrowings under our credit facility, which have interest costs that vary with interest rate movements.
Although interest rates decreased slightly during fiscal 2025, overall, interest costs for our accounts receivable discount programs and borrowings under our credit facility, which have interest costs that vary with interest rate movements, remain high.
We continue to manage our working capital to maximize our operating cash flow. Net cash used in investing activities was $479,000 and $4,191,000 for fiscal 2024 and 2023, respectively. The change in our investing activities primarily resulted from decreased capital expenditures.
Net cash used in investing activities was $4,469,000 and $479,000 for fiscal 2025 and 2024, respectively. The change in our investing activities primarily resulted from increased capital expenditures. Net cash used in financing activities was $44,655,000 and $36,439,000 for fiscal 2025 and 2024, respectively.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of the annual report on Form 10-K for the year ended March 31, 2023, filed with the SEC on June 14, 2023, which is available free of charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “MPAA” or at our internet address, www.motorcarparts.com , by clicking “Investors” located at the top of the page.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the annual report on Form 10-K for the year ended March 31, 2024, filed with the SEC on June 11, 2024, and the 10-K/A for the fiscal year ended March 31, 2024 as filed with the SEC on June 28, 2024, which is available free of charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “MPAA” or at our internet address, www.motorcarparts.com , by clicking “Investors/Financials/SEC Filings” located at the top of the page. 40 Table of Contents Liquidity and Capital Resources Overview We had working capital (current assets minus current liabilities) of $160,446,000 and $156,034,000, a ratio of current assets to current liabilities of 1.5:1.0 at March 31, 2025 and 1.4:1.0 at March 31, 2024.
Customer allowances to be provided to customers within our normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities. 33 Table of Contents Accrued core payments represent the sales price of Remanufactured Cores purchased from customers, generally in connection with new business, which are held by these customers and remain on their premises.
Accrued core payments represent the sales price of Remanufactured Cores purchased from customers, generally in connection with new business, which are held by these customers and remain on their premises.
(2) Operating lease obligations represent amounts due for rent under our leases for all our facilities, certain equipment, and our Company automobile. (3) Obligations under our Revolving Facility mature on December 12, 2028.
(2) Operating lease obligations represent amounts due for rent under our leases for all our facilities and certain equipment. (3) Obligations under our Revolving Facility mature on December 12, 2028. This debt is classified as a short term liability on our balance sheet as we expect to use our working capital to repay the amounts outstanding under our Revolving Facility.
Highlights and Accomplishments in Fiscal 2024 During fiscal 2024, we continued to execute our strategic plan – focusing on meaningful growth and improving profitability by leveraging our offshore infrastructure, industry position and customer relationships.
Highlights and Accomplishments in Fiscal 2025 During fiscal 2025, we continued to focus on strategic growth, improving profitability, and leveraging our industry position as a leading non-discretionary aftermarket parts supplier and customer relationships.
Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We make these estimates and judgments about our future taxable income that are based on assumptions that are consistent with our future plans.
Realization of deferred tax assets is dependent upon our ability to generate sufficient future taxable income. Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets.
Contractual Obligations The following summarizes our contractual obligations and other commitments as of March 31, 2024 and the effect such obligations could have on our cash flows in future periods: Payments Due by Period Contractual Obligations Total Less than 1 year 1 to 3 years 3 to 5 years More than 5 years Finance lease obligations (1) $ 3,825,000 $ 1,753,000 $ 1,539,000 $ 533,000 $ - Operating lease obligations (2) 101,759,000 12,676,000 23,568,000 22,054,000 43,461,000 Revolving facility (3) 128,000,000 - - 128,000,000 - Convertible notes (4) 56,704,000 - - 56,704,000 - Accrued core payment (5) 10,650,000 3,792,000 5,737,000 1,121,000 - Core bank liability (6) 14,130,000 2,018,000 4,036,000 4,036,000 4,040,000 Finished goods liabilities (7) 549,000 404,000 145,000 - - Unrecognized tax benefits (8) - - - - - Other long-term obligations (9) 54,095,000 14,701,000 21,479,000 15,089,000 2,826,000 Total $ 369,712,000 $ 35,344,000 $ 56,504,000 $ 227,537,000 $ 50,327,000 (1) Finance lease obligations represent amounts due under finance leases for various types of equipment.
Contractual Obligations The following summarizes our contractual obligations and other commitments as of March 31, 2025 and the effect such obligations could have on our cash flows in future periods: Payments Due by Period Contractual Obligations Total Less than 1 year 1 to 3 years 3 to5 years More than 5 years Finance lease obligations (1) $ 3,557,000 $ 1,396,000 $ 1,555,000 $ 606,000 $ - Operating lease obligations (2) 92,392,000 13,983,000 23,760,000 22,530,000 32,119,000 Revolving facility (3) 90,787,000 - 90,787,000 Convertible notes (4) 56,704,000 - 56,704,000 Accrued core payment (5) 7,287,000 3,404,000 3,883,000 - Core bank liability (6) 12,113,000 2,018,000 10,095,000 - Finished goods liabilities (7) 518,000 518,000 - - Unrecognized tax benefits (8) - - - - Customer allowances earned (9) 47,194,000 14,451,000 21,430,000 9,265,000 2,048,000 Total $ 310,552,000 $ 35,770,000 $ 60,723,000 $ 179,892,000 $ 34,167,000 (1) Finance lease obligations represent amounts due under finance leases for various types of equipment.
During fiscal 2024, we experienced increased costs of raw materials, finished goods, higher labor costs in Mexico, and other administrative costs. We can only pass our increased costs onto customers on a limited basis. Future general price inflation and its impact on costs and availability of materials could adversely affect our financial results.
Inflation The cost to manufacture and distribute our products is impacted by the cost of raw materials, finished goods, labor, and transportation. During fiscal 2025, we continued to experience increased costs of raw materials, finished goods, higher labor costs in Mexico, and other administrative costs. We can only pass our increased costs onto customers on a limited basis.
The standard also requires us to annually disclose our income taxes paid (net of refunds received), disaggregated by jurisdiction. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to be applied prospective basis, although optional retrospective application is permitted.
This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to be applied prospective basis, although optional retrospective application is permitted. We are currently evaluating the impact this guidance will have on our financial statement disclosures.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−0 removed8 unchanged
Biggest changeIn addition, we recorded gains $5,187,000 and $6,515,000 in connection with the remeasurement of foreign currency-denominated lease liabilities during fiscal 2024 and fiscal 2023, respectively. 44 Table of Contents Credit Risk We regularly review our accounts receivable and allowance for credit losses by considering factors such as historical experience, credit quality and age of the accounts receivable, and the current economic conditions that may affect a customer’s ability to pay such amounts owed to us.
Biggest changeIn addition, we recorded a loss of $11,713,000 and a gain of $5,187,000 in connection with the remeasurement of foreign currency-denominated lease liabilities during fiscal 2025 and fiscal 2024, respectively. 47 Table of Contents Credit Risk We regularly review our accounts receivable and allowance for credit losses by considering factors such as historical experience, credit quality and age of the accounts receivable, and the current economic conditions that may affect a customer’s ability to pay such amounts owed to us.
Foreign currency risk We are exposed to foreign currency exchange risk inherent in our anticipated purchases and expenses denominated in currencies other than the U.S. dollar. We transact business in the following foreign currencies; Mexican pesos, Malaysian ringgit, Singapore dollar, Chinese yuan, and the Canadian dollar.
Foreign currency risk We are exposed to foreign currency exchange risk inherent in our purchases and expenses denominated in currencies other than the U.S. dollar. We transact business in the following foreign currencies: Mexican pesos, Malaysian ringgit, Singapore dollar, Chinese yuan, Indian rupee, and the Canadian dollar.
Interest rate risk We are exposed to changes in interest rates primarily as a result of our borrowing and receivable discount programs, which have interest costs that vary with interest rate movements. Our revolving facility bears interest at variable base rates, plus an applicable margin, which was 8.43% and 8.12% at March 31, 2024 and 2023, respectively.
Interest rate risk We are exposed to changes in interest rates primarily as a result of our borrowing and receivable discount programs, which have interest costs that vary with interest rate movements. Our revolving facility bears interest at variable base rates, plus an applicable margin, which was 7.46% and 8.43% at March 31, 2025 and 2024, respectively.
Any changes in the fair values of our forward foreign currency exchange contracts are reflected in current period earnings. Based upon our forward foreign currency exchange contracts related to these currencies, an increase of 10% in exchange rates at March 31, 2024 would have increased our operating expenses by approximately $5,146,000.
Any changes in the fair values of our forward foreign currency exchange contracts are reflected in current period earnings. Based upon our forward foreign currency exchange contracts related to these currencies, an increase of 10% in exchange rates at March 31, 2025 would have increased our operating expenses by approximately $4,023,000.
The weighted average discount rate was 6.8% and 5.3% during fiscal 2024 and 2023, respectively. If discount rates were to increase 1%, our net annual interest expense on our accounts receivable discount programs would have increased by approximately $6,180,000.
The weighted average discount rate was 6.2% and 6.8% during fiscal 2025 and 2024, respectively. If discount rates were to increase 1%, our net annual interest expense on our accounts receivable discount programs would have increased by approximately $6,439,000.
At March 31, 2024, borrowings under our revolving facility totaled $128,000,000. If interest rates were to increase 1%, our net annual interest expense on our revolving facility would have increased by approximately $1,280,000. In addition, during the years ended March 31, 2024 and 2023, collections under our accounts receivable discount program were $618,012,000 and $548,376,000, respectively.
At March 31, 2025, borrowings under our revolving facility totaled $90,787,000. If interest rates were to increase 1%, our net annual interest expense on our revolving facility would have increased by approximately $908,000. In addition, during the years ended March 31, 2025 and 2024, collections under our accounts receivable discount program were $643,918,000 and $618,012,000, respectively.
During fiscal 2024 and fiscal 2023, a loss of $1,373,000 and a gain of $2,776,000, respectively, was recorded due to the change in the value of the forward foreign currency exchange contracts subsequent to entering into the contracts.
During fiscal 2025 and fiscal 2024, losses of $4,179,000 and $1,373,000, respectively, were recorded due to the change in the value of the forward foreign currency exchange contracts subsequent to entering into the contracts.
Added
In certain cases, we have experienced higher interest rates due to changes in customer credit profiles, which has impacted the overall cost of these financing arrangements.

Other MPAA 10-K year-over-year comparisons