1 unchanged sentence
Evaluation of Disclosure Controls and Procedures
−Removed: Management, with the participation of our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and Chief Accounting Officer (“CAO”), has evaluated the effectiveness of our disclosure
−Removed: controls and procedures (as defined in Rules 13a- 15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the “Exchange Act,”) as of the end of the period covered by this Annual Report on Form 10-K.
−Removed: Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to
−Removed: our management, including our CEO, CFO and CAO, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
−Removed: Based on this
−Removed: evaluation, our CEO, CFO and CAO have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2020.
+Added: Management, with the participation of our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and Chief Accounting Officer (“CAO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the “Exchange Act,”) as of the end of the period covered by this Annual Report on Form 10-K.
+Added: Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO, CFO and CAO, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
+Added: Based on this evaluation, our CEO, CFO and CAO have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2021.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d- 15(f) under the Exchange Act.
−Removed: Our internal control over financial
−Removed: reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles.
−Removed: Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2020 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal
−Removed: Control—Integrated Framework (2013).
+Added: Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles.
+Added: Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2021 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013).
Based on its assessment, our management, including our CEO and CFO, has concluded that our internal control over financial reporting was effective as of March 31, 2021.
The effectiveness of our internal control over financial reporting as of March 31, 2021 has been audited by the Company’s independent registered public accounting firm, Ernst & Young LLP.
−Removed: Their assessment is included
−Removed: in the accompanying Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting.
−Removed: Remediation of Material Weakness
−Removed: Throughout the year ended March 31, 2020, the Company undertook remediation measures related to the previously reported material weaknesses in internal control over financial reporting.
−Removed: We completed these remediation
−Removed: measures in the quarter ended March 31, 2020, including testing of the design and concluding on the operating effectiveness of the related controls.
−Removed: Specifically, we undertook the following remediation measures:
−Removed: Management hired additional finance and accounting personnel with the requisite experience and skill levels, supplemented by third-party technical accounting resources to enable the proper and timely review of
−Removed: accounting analyses and memos in various technical areas.
−Removed: Management formalized the assessment and documentation of the Company’s accounting and financial reporting policies and procedures and enhance controls over the monitoring of compliance with these accounting
−Removed: policies and procedures.
−Removed: Management enhanced the accounting and internal control training program provided to new and existing subsidiaries.
−Removed: Management enhanced its internal control processes to continuously monitor the subsidiaries’
−Removed: compliance with and documentation of the Company’s accounting and financial reporting policies and procedures, including internal control over financial reporting.
−Removed: Management enhanced and will continue to enhance the risk assessment process and design of internal control over financial reporting at D&V Electronics Ltd.
−Removed: This includes implementation of
−Removed: compensating controls, enhanced and revised design of existing transaction level and financial reporting controls at D&V, and enhancements in the documentation of transaction-level controls being performed at D&V.
−Removed: Based on these procedures, we believe that the previously reported material weaknesses have been remediated.
−Removed: However, completion of remediation procedures for these material weaknesses does not provide assurance that our
−Removed: modified controls will continue to operate properly or that our financial statements will be free from error.
+Added: Their assessment is included in the accompanying Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting.
Change in Internal Control Over Financial Reporting
−Removed: Other than described above in this Item 9A, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the
−Removed: evaluation of our internal control performed during the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
+Added: There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control performed during the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
−Removed: Further, the design of a
−Removed: control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
−Removed: Because of the inherent limitations in all control systems, no evaluation of controls can provide
−Removed: absolute assurance that all control issues and instances of fraud or error, if any, have been detected.
−Removed: These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple
−Removed: error or mistake.
+Added: Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
+Added: Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected.
+Added: These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.
−Removed: The design of any system of controls also is based in part
−Removed: upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions;
−Removed: over time, controls may become inadequate because of changes
−Removed: in conditions, or the degree of compliance with policies or procedures may deteriorate.
+Added: The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions;
+Added: over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
16 unchanged sentences
Consolidated Statements of Operations
−Removed: Consolidated Statements of Comprehensive (Loss) Income
+Added: Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Shareholders’ Equity
1 unchanged sentence
Notes to Consolidated Financial Statements
+Added: (2) Schedules.
Schedule II — Valuation and Qualifying Accounts
34 unchanged sentences
Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on November 20, 2017.
−Removed: Amendment to Lease, dated October 3, 1996, by and between the Company and Golkar Enterprises, Ltd.
−Removed: relating to additional property in Torrance, California
−Removed: Incorporated by reference to Exhibit 10.17 to the December 31, 1996 Form 10-Q.
−Removed: Lease Agreement, dated September 19, 1995, by and between Golkar Enterprises, Ltd.
−Removed: and the Company relating to the Company’s facility located in Torrance, California
−Removed: Incorporated by reference to Exhibit 10.18 to the 1995 Registration Statement.
+Added: Fourth Amended and Restated 2010 Incentive Award Plan
+Added: Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on July 24, 2020.
Form of Indemnification Agreement for officers and directors
Incorporated by reference to Exhibit 10.25 to the 1997 Registration Statement.
−Removed: Second Amendment to Lease, dated March 15, 2002, between Golkar Enterprises, Ltd.
−Removed: and the Company relating to property in Torrance, California
−Removed: Incorporated by reference to Exhibit 10.44 to the 2003 10-K.
−Removed: Form of Standard Industrial/Commercial Multi-Tenant Lease, dated May 25, 2004, between the Company and Golkar Enterprises, Ltd for property located at 530 Maple Avenue, Torrance, California
−Removed: Incorporated by reference to Exhibit 10.18 to the 2004 10-K.
−Removed: Description of Exhibit
−Removed: Method of Filing
−Removed: Build to Suit Lease Agreement, dated October 28, 2004, among Motorcar Parts de Mexico, S.A.
−Removed: de CV, the Company and Beatrix Flourie Geoffroy
−Removed: Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K filed on November 2, 2004.
−Removed: Lease Agreement Amendment, dated October 12, 2006, between the Company and Beatrix Flourie Geoffroy
−Removed: Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K filed on October 20, 2006.
−Removed: Third Amendment to Lease Agreement, dated as of November 20, 2006, between Motorcar Parts of America, Inc.
−Removed: and Golkar Enterprises, Ltd.
−Removed: Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K filed on November 27, 2006.
Amended and Restated Employment Agreement, dated as of December 31, 2008, by and between the Company and Selwyn Joffe
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed January 7, 2009.
−Removed: Fifth Amendment, dated as of November 17, 2011, to that certain Standard Industrial Commercial Single Tenant Lease-Gross, dated as of September 19, 1995, between Golkar Enterprises, Ltd and Motorcar Parts of America, Inc., as amended
−Removed: Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on November 25, 2011.
Employment Agreement, dated as of May 18, 2012, between Motorcar Parts of America, Inc., and Selwyn Joffe
6 unchanged sentences
Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on August 12, 2013.
−Removed: Revolving Credit, Term Loan and Security Agreement, dated as of June 3, 2015, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent
−Removed: Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 8, 2015.
Description of Exhibit
Method of Filing
−Removed: First Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of November 5, 2015, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative
+Added: Revolving Credit, Term Loan and Security Agreement, dated as of June 3, 2015, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent
+Added: Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 8, 2015.
+Added: First Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of November 5, 2015, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent
Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on November 9, 2015.
−Removed: Consent and Second Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of May 19, 2016, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as
−Removed: administrative agent
+Added: Consent and Second Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of May 19, 2016, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent
Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed on August 9, 2016.
−Removed: Third Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of March 24, 2017, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative
+Added: Third Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of March 24, 2017, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent
Incorporated by reference to Exhibit 10.38 to Annual Report on Form 10-K filed on June 14, 2017.
−Removed: Fourth Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of April 24, 2017, among Motorcar Parts of America, Inc., each lender from time to time party thereto and PNC Bank, National Association, as administrative
+Added: Fourth Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of April 24, 2017, among Motorcar Parts of America, Inc., each lender from time to time party thereto and PNC Bank, National Association, as administrative agent
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 27, 2017.
3 unchanged sentences
Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on August 9, 2018.
−Removed: First Amendment to Amended and Restated Loan Agreement, dated as of November 14, 2018, among Motorcar Parts of America, Inc., D & V Electronics Ltd., each lender from time to time party thereto, and PNC Bank, National Association, as
−Removed: administrative agent
−Removed: Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 20, 2018.
Description of Exhibit
Method of Filing
+Added: First Amendment to Amended and Restated Loan Agreement, dated as of November 14, 2018, among Motorcar Parts of America, Inc., D & V Electronics Ltd., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent
+Added: Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 20, 2018.
Amendment No.
1 unchanged sentence
Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed on February 11, 2019.
−Removed: Second Amendment to Amended and Restated Loan Agreement, dated as of June 4, 2019, among Motorcar Parts of America, Inc., D&V Electronics Ltd., Dixie Electric Ltd., Dixie Electric Inc., each lender from time to time party thereto, and
−Removed: PNC Bank, National Association, as administrative agent
+Added: Second Amendment to Amended and Restated Loan Agreement, dated as of June 4, 2019, among Motorcar Parts of America, Inc., D&V Electronics Ltd., Dixie Electric Ltd., Dixie Electric Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent
Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 7, 2019.
1 unchanged sentence
3 to Employment Agreement, dated as of March 30, 2020, between Motorcar Parts of America, Inc., and Selwyn Joffe
−Removed: Filed herewith.
−Removed: Motorcar Parts of America, Inc., Code of Business Conduct and Ethics, as amended, effective January 15, 2015
−Removed: Incorporated by reference to Exhibit 14.1 to Current Report on Form 8-K filed on January 20, 2015.
+Added: Incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K filed on June 15, 2020.
+Added: Amendment No.
+Added: 4 to Employment Agreement, dated as of May 21, 2020, between Motorcar Parts of America, Inc., and Selwyn Joffe
+Added: Incorporated by reference to exhibit 10.1 to the Quarterly Report filed on August 10, 2020.
+Added: Third Amendment to Amended and Restated Loan Agreement, dated as of May 28, 2021, among Motorcar Parts of America, Inc., D&V Electronics Ltd., Dixie Electric Ltd., Dixie Electric Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent
+Added: Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 2, 2021.
List of Subsidiaries
2 unchanged sentences
Filed herewith.
+Added: Description of Exhibit
+Added: Method of Filing
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
6 unchanged sentences
Filed herewith.
−Removed: XBRL Instance Document
+Added: Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the XBRL document)
Filed herewith.
−Removed: XBRL Taxonomy Extension Schema Document
+Added: Inline XBRL Taxonomy Extension Schema Document
Filed herewith.
−Removed: XBRL Taxonomy Extension Calculation Linkbase Document
+Added: Inline XBRL Taxonomy Extension Calculation Linkbase Document
Filed herewith.
−Removed: XBRL Taxonomy Extension Definition Linkbase Document
+Added: Inline XBRL Taxonomy Extension Definition Linkbase Document
Filed herewith.
−Removed: XBRL Taxonomy Extension Label Linkbase Document
+Added: Inline XBRL Taxonomy Extension Label Linkbase Document
Filed herewith.
−Removed: XBRL Taxonomy Extension Presentation Linkbase Document
+Added: Inline XBRL Taxonomy Extension Presentation Linkbase Document
Filed herewith.
+Added: Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
+Added: Filed herewith.
* Portions of this exhibit have been granted confidential treatment by the SEC.
−Removed: The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on
−Removed: them for that purpose.
−Removed: In particular, any representations and warranties made by us in those agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of
−Removed: affairs as of the date they were made or at any other time.
+Added: The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose.
+Added: In particular, any representations and warranties made by us in those agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
Form 10-K Summary
14 unchanged sentences
Chief Financial Officer
−Removed: (Principal Financial Officer)
June 14, 2021
+Added: (Principal Financial Officer)
/s/ Kamlesh Shah
Chief Accounting Officer
−Removed: (Principal Accounting Officer)
June 14, 2021
+Added: (Principal Accounting Officer)
/s/ Scott Adelson
−Removed: Scott Adelson
June 14, 2021
+Added: Scott Adelson
/s/ Rudolph Borneo
−Removed: Rudolph Borneo
June 14, 2021
+Added: Rudolph Borneo
/s/ Philip Gay
3 unchanged sentences
/s/ Jeffrey Mirvis
−Removed: Jeffrey Mirvis
June 14, 2021
+Added: Jeffrey Mirvis
/s/ David Bryan
1 unchanged sentence
/s/ Joseph Ferguson
−Removed: Joseph Ferguson
June 14, 2021
+Added: Joseph Ferguson
/s/ Barbara Whittaker
+Added: June 14, 2021
Barbara Whittaker
+Added: /s/ Jamy Rankin
June 14, 2021
4 unchanged sentences
Consolidated Statements of Operations
−Removed: Consolidated Statements of Comprehensive (Loss) Income
+Added: Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Shareholders’ Equity
6 unchanged sentences
We have audited Motorcar Parts of America, Inc.
−Removed: and subsidiaries’ internal control over financial reporting as of March 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
−Removed: Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
+Added: and subsidiaries’ internal control over financial reporting as of March 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
In our opinion, Motorcar Parts of America, Inc.
−Removed: and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as
−Removed: of March 31, 2020, based on the COSO criteria.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2020 and 2019, the related consolidated statements of
−Removed: operations, comprehensive (loss) income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 2020, and the related notes and financial statement schedule and our report dated June 15, 2020 expressed an
−Removed: unqualified opinion thereon.
+Added: and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of March 31, 2021, based on the COSO criteria.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended March 31, 2021, and the related notes and financial statement schedule and our report dated June 14, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
−Removed: The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on
−Removed: Internal Control Over Financial Reporting.
+Added: The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
−Removed: We are a public accounting firm registered with the PCAOB and are required to be
−Removed: independent with respect to the Company in accordance with the U.S.
+Added: We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB.
−Removed: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
−Removed: material respects.
−Removed: Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
−Removed: risk, and performing such other procedures as we considered necessary in the circumstances.
+Added: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
+Added: Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
−Removed: A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
−Removed: generally accepted accounting principles.
−Removed: A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
−Removed: transactions and dispositions of the assets of the company;
−Removed: (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
−Removed: receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
−Removed: and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
−Removed: or disposition of the company’s assets that could have a material effect on the financial statements.
+Added: A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
+Added: A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
+Added: (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
+Added: and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
−Removed: Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
−Removed: inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
+Added: Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
5 unchanged sentences
We have audited the accompanying consolidated balance sheets of Motorcar Parts of America, Inc.
−Removed: and subsidiaries (the Company) as of March 31, 2020 and 2019, the related consolidated statements of operations, comprehensive (loss) income,
−Removed: shareholders' equity and cash flows for each of the three years in the period ended March 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial
−Removed: statements”).
−Removed: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three
−Removed: years in the period ended March 31, 2020, in conformity with U.S.
+Added: and subsidiaries (the Company) as of March 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended March 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).
+Added: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2021, in conformity with U.S.
generally accepted accounting principles.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2020, based on criteria established in Internal
−Removed: Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated June 15, 2020 expressed an unqualified opinion thereon.
−Removed: Adoption of ASU No.
−Removed: As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in the year ended March 31, 2020 due to the adoption of Accounting Standards Update (ASU) No.
−Removed: 2016-02, Leases (Topic 842) , and the related amendments.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated June 14, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
1 unchanged sentence
Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
−Removed: We are a public accounting firm registered with the PCAOB and are
−Removed: required to be independent with respect to the Company in accordance with the U.S.
+Added: We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB.
−Removed: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
−Removed: error or fraud.
+Added: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
−Removed: Such procedures included
−Removed: examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
−Removed: Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
−Removed: presentation of the financial statements.
+Added: Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
+Added: Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
+Added: Critical Audit Matters
+Added: The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:
+Added: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
+Added: The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
+Added: Contractual Agreements with Core Exchange Programs
+Added: Description of the Matter
+Added: As more fully described in Note 2 to the consolidated financial statements, the Company enters into contractual arrangements with customers (core exchange programs) which represent the majority of the Company’s sales for products that contain remanufactured cores.
+Added: At March 31, 2021, contract assets and contract liabilities related to core exchange programs recorded on the consolidated balance sheet were $297,153,000 and $166,295,000, respectively.
+Added: Auditing contract assets and contract liabilities related to the core exchange programs involved complex auditor judgment due to the unique terms of each customer arrangement which impact the completeness, existence, valuation and classification of contract assets and liabilities.
+Added: How We Addressed the Matter in Our Audit
+Added: We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s review of contracts with customers, management’s assessment of the accounting for core exchange programs, including unique contractual terms, and management’s review of the related contract assets and liabilities including controls over the completeness and accuracy of data.
+Added: Our audit procedures to test the contract assets and contract liabilities related to core exchange programs included, among others, (i) reviewing agreements and amendments for significant customers, (ii) testing the completeness of management’s identification of contractual terms, (iii) evaluating the consistency of the accounting treatment with the Company's policies;
+Added: and (v) testing the completeness and accuracy of the underlying data used in management’s analyses.
+Added: Marketing Allowances
+Added: Description of the Matter
+Added: As more fully described in Note 2 and Note 14 to the consolidated financial statements, revenue is recognized net of applicable marketing allowances.
+Added: These marketing allowances vary by contract and can include (i) the issuance of a specified amount of credits against receivables, (ii) support for research or marketing efforts, (iii) discounts granted in connection with shipments of product, and (iv) other marketing, research, store expansion or product development support.
+Added: At March 31, 2021, marketing allowances recorded on the Company’s consolidated balance sheet was $16,826,000, which is presented within contract liabilities.
+Added: Auditing the completeness of marketing allowances was complex because marketing allowances vary by contract and could be impacted by unrecorded marketing allowances provided to customers.
+Added: How We Addressed the Matter in Our Audit
+Added: We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the marketing allowances processes.
+Added: For example, we tested controls over management’s review of contracts with customers containing marketing allowances, management’s review of the completeness and accuracy of data used in the marketing accrual analysis at period end and management’s review of credits issued to customers subsequent to the balance sheet date.
+Added: Our audit procedures to test marketing allowances included, among others, reviewing significant contracts with customers, obtaining confirmations of contractual terms and conditions from a sample of the Company’s customers, and testing credits issued or payments made to customers throughout the year.
+Added: We tested the completeness and accuracy of data used in the calculation of the marketing allowance by agreeing contractual terms to the underlying agreements.
+Added: In addition, we evaluated the relationship between revenue and marketing allowances and assessed subsequent events to determine whether there was any new information that would require adjustments to the amounts recorded.
/s/ Ernst & Young LLP
19 unchanged sentences
Operating lease assets
−Removed: Long-term deferred income taxes
+Added: Deferred income taxes
Long-term contract assets
12 unchanged sentences
Term loan, less current portion
−Removed: Long-term contract liabilities
−Removed: Long-term deferred income taxes
−Removed: Long-term operating lease liabilities
+Added: Contract liabilities, less current portion
+Added: Deferred income taxes
+Added: Operating lease liabilities, less current portion
Other liabilities
24 unchanged sentences
Research and development
+Added: Foreign exchange impact of lease liabilities and forward contracts
Total operating expenses
1 unchanged sentence
Interest expense, net
−Removed: (Loss) income before income tax (benefit) expense
−Removed: Income tax (benefit) expense
−Removed: Net (loss) income
−Removed: Basic net (loss) income per share
−Removed: Diluted net (loss) income per share
+Added: Income (loss) before income tax expense (benefit)
+Added: Income tax expense(benefit)
+Added: Net income (loss)
+Added: Basic net income (loss) per share
+Added: Diluted net income (loss) per share
Weighted average number of shares outstanding:
2 unchanged sentences
AND SUBSIDIARIES
−Removed: Consolidated Statements of Comprehensive (Loss) Income
+Added: Consolidated Statements of Comprehensive Income (Loss)
Years Ended March 31,
−Removed: Net (loss) income
−Removed: Other comprehensive (loss) income, net of tax:
−Removed: Unrealized gain on short-term investments (net of tax of $0, $0, and $118,000, respectively)
−Removed: Foreign currency translation (loss) gain
−Removed: Total other comprehensive (loss) income, net of tax
−Removed: Comprehensive (loss) income
+Added: Net income (loss)
+Added: Other comprehensive loss, net of tax:
+Added: Foreign currency translation loss
+Added: Total other comprehensive loss, net of tax
+Added: Comprehensive income (loss)
The accompanying notes to consolidated financial statements are an integral part hereof.
8 unchanged sentences
Balance at March 31, 2018
+Added: Cumulative-effect adjustment for the adoption of ASU 2016-01
+Added: Balance at April 1, 2018
Compensation recognized under employee stock plans
2 unchanged sentences
Repurchase and cancellation of treasury stock, including fees
−Removed: Exercise of warrant for shares of common stock
−Removed: Unrealized gain on investments, net of tax
Foreign currency translation
Balance at March 31, 2019
−Removed: Cumulative-effect adjustment for the adoption of ASU 2016-01
−Removed: Balance at April 1, 2018
Compensation recognized under employee stock plans
1 unchanged sentence
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes
−Removed: Repurchase and cancellation of treasury stock, including fees
Foreign currency translation
3 unchanged sentences
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes
+Added: Repurchase and cancellation of treasury stock, including fees
Foreign currency translation
6 unchanged sentences
Cash flows from operating activities:
−Removed: Net (loss) income
−Removed: Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
+Added: Net income (loss)
+Added: Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization
3 unchanged sentences
Amortization of core premiums paid to customers
+Added: Amortization of finished goods premiums paid to customers
Non-cash lease expense
−Removed: Loss due to the remeasurement of lease liabilities
−Removed: Foreign currency remeasurement loss
−Removed: (Gain) loss due to the change in the fair value of the contingent consideration
+Added: Foreign exchange impact of lease liabilities and forward contracts
+Added: Foreign currency remeasurement (gain) loss
+Added: Loss (gain) due to the change in the fair value of the contingent consideration
Gain on short-term investments
−Removed: Gain due to the change in the fair value of the warrant liability
Net provision for inventory reserves
20 unchanged sentences
Proceeds from sale of plant and equipment
−Removed: Redemptions of (payments for) short term investments
+Added: (Payments for) redemptions of short term investments
Net cash used in investing activities
10 unchanged sentences
Repurchase of common stock, including fees
−Removed: Exercise of warrant
−Removed: Net cash provided by financing activities
+Added: Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
−Removed: Net increase (decrease) in cash and cash equivalents
−Removed: Cash and cash equivalents — Beginning of period
−Removed: Cash and cash equivalents — End of period
+Added: Net (decrease) increase in cash and cash equivalents
+Added: Cash and cash equivalents — Beginning of year
+Added: Cash and cash equivalents — End of year
Supplemental disclosures of cash flow information:
13 unchanged sentences
Motorcar Parts of America, Inc.
−Removed: and its subsidiaries (the “Company”, or “MPA”) is a leading supplier of automotive aftermarket non-discretionary replacement parts and diagnostic equipment.
−Removed: These replacement parts
−Removed: are primarily sold to automotive retail chain stores and warehouse distributors throughout North America and to major automobile manufacturers for both their aftermarket programs and warranty replacement programs (“OES”).
−Removed: The Company’s diagnostic
−Removed: equipment primarily serves the global automotive component and powertrain testing market.
−Removed: The Company’s products include (i) rotating electrical products such as alternators and starters, (ii) wheel hub assemblies and bearings, (iii)
−Removed: brake-related products, which include brake calipers, brake boosters, and brake master cylinders, and (iv) diagnostics and other products, which include diagnostics systems, advanced power emulators used for the development of electric vehicles and
−Removed: aerospace applications, and custom power electronic products for quality control in the development and production of electric vehicles and turbochargers.
−Removed: The Company primarily ships its products from its facilities and various third-party warehouse distribution centers in North America, including the Company’s 410,000 square foot distribution center in
−Removed: Tijuana, Mexico.
−Removed: The recent outbreak of the COVID-19 pandemic has led to adverse impacts on the U.S.
−Removed: and global economies and created uncertainty regarding potential impacts to the Company’s employees, supply chain, operations, and customer demand.
−Removed: pandemic could impact the Company’s operations and the operations of its customers, suppliers and vendors as a result of quarantines, facility closures, and travel and logistics restrictions.
−Removed: The extent to which the COVID-19 pandemic impacts the
−Removed: Company’s business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity, and impact of the COVID-19
−Removed: pandemic, the effects of the COVID-19 pandemic on its customers, suppliers, and vendors and the remedial actions and stimulus measures adopted by local, state and federal governments, and to what extent normal economic and operating conditions can
−Removed: Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future.
−Removed: Therefore, the Company
−Removed: cannot reasonably estimate the impact at this time.
+Added: and its subsidiaries (the “Company”, or “MPA”) is a leading supplier of automotive aftermarket non-discretionary replacement parts and test solutions and diagnostic equipment.
+Added: These replacement parts are primarily sold to automotive retail chain stores and warehouse distributors throughout North America and to major automobile manufacturers for both their aftermarket programs and warranty replacement programs (“OES”).
+Added: The Company’s test solutions and diagnostic equipment primarily serves the global automotive component and powertrain testing market.
+Added: The Company’s products include (i) rotating electrical products such as alternators and starters, (ii) wheel hub assemblies and bearings, (iii) brake-related products, which include brake calipers, brake boosters, brake rotors, brake pads, and brake master cylinders, and (iv) test solutions and diagnostic equipment used for electric vehicle powertrain development and manufacturing including electric motor test systems, e-axle test systems, advanced power emulators, charging unit test systems, test systems for alternators, starters, belt starter generators and bench-top testers used by the automotive retail segment and turbochargers.
+Added: The Company primarily ships its products from its facilities and various third-party warehouse distribution centers in North America, including the Company’s 410,000 square foot distribution center in Tijuana, Mexico.
+Added: Impact of the Novel Coronavirus (“COVID-19”)
+Added: The outbreak of the COVID-19 pandemic adversely impacted the U.S.
+Added: and global economies and created uncertainty regarding the potential effects on the Company’s employees, supply chain, operations, and customer demand.
+Added: The COVID-19 pandemic could impact the Company’s operations and the operations of its customers, suppliers, and vendors because of quarantines, facility closures, travel, and logistics restrictions.
+Added: The extent to which the COVID-19 pandemic impacts the Company will depend on numerous factors and future developments, which are highly uncertain and cannot be predicted, including, but not limited to:
+Added: (i) the severity of the virus, (ii) the occurrence and duration of additional spikes, (iii) the effects of the pandemic on customers, suppliers, and vendors, (iv) the remedial actions and stimulus measures adopted by local, state and federal governments, (v) the availability and acceptance of vaccines, and (vi) the extent to which normal economic and operating conditions can resume.
+Added: Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business because of an economic recession or depression that has occurred or may occur in the future.
Summary of Significant Accounting Policies
−Removed: New Accounting Pronouncements Recently Adopted
−Removed: In February 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance that requires balance sheet recognition of a lease asset and lease liability by lessees for all leases, other than leases with a term of 12 months or less if the
−Removed: short-term lease exclusion expedient is elected.
−Removed: The new guidance also required new disclosures providing additional qualitative and quantitative information about the amounts recorded in the financial statements.
−Removed: The new guidance requires a modified
−Removed: retrospective approach with optional practical expedients.
−Removed: The FASB provided entities with an additional transition method, which allows an entity to apply this guidance as of the beginning of the period of adoption instead of the beginning of the
−Removed: earliest comparative period presented in the entity’s financial statements.
−Removed: The Company adopted this guidance on April 1, 2019 using the modified retrospective approach and the optional transition method permitted by the FASB.
−Removed: The Company also elected
−Removed: certain practical expedients permitted under the transition guidance, including the package of practical expedients, which allowed it not to reassess lease classification for leases that commenced prior to the adoption date.
−Removed: In addition, the Company
−Removed: elected to exempt leases with an initial term of 12 months or less from balance sheet recognition and, for all classes of assets, combining non-lease components with lease components.
−Removed: Upon adoption, the Company recorded operating lease liabilities of $53,043,000 and corresponding operating lease assets of $50,773,000.
−Removed: The difference between the operating lease assets and liabilities recognized on the Company’s consolidated
−Removed: balance sheets primarily related to accrued rent on existing leases that were offset against the operating lease asset upon adoption.
−Removed: There was an immaterial reclassification of non-lease components to finance lease assets and finance lease liabilities
−Removed: upon adoption due to the Company’s election to combine non-lease components with lease components.
−Removed: The adoption of the new guidance did not have any impact on the Company’s rent expense and consolidated statement of cash flows.
−Removed: However, the Company has
−Removed: material nonfunctional currency leases that could have a material impact on the Company’s consolidated statements of operations.
−Removed: As required for other monetary liabilities, lessees shall remeasure a foreign currency-denominated lease liability using
−Removed: the exchange rate at each reporting date, but the lease assets are nonmonetary assets measured at historical rates, which are not affected by subsequent changes in the exchange rates.
−Removed: The Company recorded a loss of $11,710,000 in general and
−Removed: administrative expenses in connection with the remeasurement of foreign currency-denominated lease liabilities during year ended March 31, 2020.
−Removed: See Note 11 for additional discussion of the adoption of ASC 842 and the impact on the Company’s financial
−Removed: New Accounting Pronouncements Not Yet Adopted
+Added: Recently Adopted Accounting Pronouncements
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued an accounting pronouncement related to the measurement of credit losses on financial instruments.
−Removed: This pronouncement, along with a subsequent Accounting Standards Updates (“ASU”) issued to clarify certain provisions of
−Removed: the new guidance, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost.
−Removed: Under this model, entities will be required to estimate the lifetime expected
−Removed: credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset.
−Removed: This pronouncement is effective for fiscal
−Removed: years, and for interim periods within those fiscal years, beginning after December 15, 2019.
−Removed: The Company will adopt this guidance on April 1, 2020 and the adoption is not expected to have a significant impact on its consolidated financial statements
−Removed: and related disclosures.
−Removed: In addition, the adoption is not expected to have any significant impact on the Company’s business processes, systems and internal controls.
+Added: This pronouncement, along with a subsequent Accounting Standards Updates (“ASU”) issued to clarify certain provisions of the new guidance, changed the impairment model for most financial assets and requires the use of an “expected loss” model for instruments measured at amortized cost.
+Added: Under this model, entities are required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset.
+Added: The adoption of this guidance on April 1, 2020 increased the Company’s disclosures for its expected credit losses but did not have a material effect on its consolidated financial statements.
+Added: Prior to April 1, 2020, accounts receivable were recorded at cost less an allowance for doubtful accounts.
+Added: The net amount of accounts receivable and corresponding allowance for doubtful accounts were presented in the consolidated balance sheets.
+Added: The Company maintained an allowance for uncollectible accounts receivable for estimated losses resulting from the failure or inability of its customers to make required payments.
+Added: Furthermore, receivable balances were assessed quarterly for impairment and an allowance was recorded if the receivable was considered impaired.
+Added: Subsequent to April 1, 2020, accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered.
+Added: The net amount of accounts receivable and corresponding allowance for credit losses are presented in the consolidated balance sheets.
+Added: The Company maintains allowances for credit losses resulting from the expected failure or inability of its customers to make required payments.
+Added: The Company recognizes the allowance for credit losses at inception and reassess quarterly based on the asset’s expected collectability.
+Added: The allowance is based on multiple factors including historical experience with bad debts, the credit quality of the customer base, the aging of such receivables and current macroeconomic conditions, such as COVID-19, as well as expectations of conditions in the future, if applicable.
+Added: The Company’s allowance for credit losses is based on the assessment of the collectability of assets pooled together with similar risk characteristics.
+Added: The Company records a provision for expected credit losses using a loss-rate method based on the ratio of its historical write-offs to its average trade accounts receivable.
+Added: At each reporting period, the Company assesses whether financial assets in a pool continue to display similar risk characteristics.
+Added: If particular receivables no longer display risk characteristics that are similar to those of the receivables in the pool, the Company may determine that it needs to move those receivables to a different pool or perform an individual assessment of expected credit losses for those specific receivables.
Fair Value Measurements
−Removed: In August 2018, the FASB issued guidance , which changes the disclosure requirements for fair value
−Removed: measurements by removing, adding and modifying certain disclosures.
−Removed: The standard is effective for financial statements issued for fiscal years , and for interim periods within those fiscal years, beginning
−Removed: after December 15, 2019.
−Removed: Early adoption is permitted.
−Removed: The Company will adopt this guidance on April 1, 2020 and the adoption is not expected to have a significant impact on its consolidated financial statements and related disclosures.
−Removed: In December 2019, the FASB issued guidance that simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes , and clarifies certain aspects of the current guidance
−Removed: to promote consistent application.
−Removed: This guidance is effective for annual and interim periods in fiscal years beginning after December 15, 2020.
−Removed: Early adoption is permitted.
−Removed: The Company is currently evaluating the impact this guidance will have on its
−Removed: consolidated financial statements and related disclosures.
+Added: In August 2018, the FASB issued guidance which changed the disclosure requirements for fair value measurements by removing, adding and modifying certain disclosures, including the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements.
+Added: The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 measurements, and the narrative description of measurement uncertainty are applied prospectively only for the most recent interim or annual period presented in the initial year of adoption.
+Added: All other amendments should be applied retrospectively applied to all periods presented upon their effective date.
+Added: The adoption of this guidance on April 1, 2020 modified certain of the Company’s disclosures for its Level 3 fair value measurements but did not have an impact on its consolidated financial statem ents.
Reference Rate Reform
In March 2020, the FASB issued guidance that, for a limited time, eases the potential burden in accounting for reference rate reform.
−Removed: The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships
−Removed: and other transactions affected by reference rate reform if certain criteria are met.
−Removed: The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate or another reference rate expected to be
−Removed: discontinued due to reference rate reform.
+Added: The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.
+Added: The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate or another reference rate expected to be discontinued due to reference rate reform.
These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.
−Removed: The Company is
−Removed: currently evaluating its contracts and the optional expedients provided by this guidance and the impact the new standard will have on its consolidated financial statements and related disclosures.
+Added: The Company will apply these amendments prospectively.
+Added: The adoption of this guidance on April 1, 2020 did not have an impact on the Company’s consolidated financial statements for the year ended March 31, 2021.
+Added: Accounting Pronouncements Not Yet Adopted
+Added: In December 2019, the FASB issued guidance that simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application.
+Added: This guidance is effective for annual and interim periods in fiscal years beginning after December 15, 2020.
+Added: Early adoption is permitted.
+Added: The adoption of this guidance on April 1, 2021 is not expected to have any material impact on the Company’s consolidated financial statements.
+Added: Reclassifications
+Added: Certain reclassifications have been made to the presentation of the prior year consolidated financial statements to conform to the current year presentation.
Principles of Consolidation
3 unchanged sentences
Segment Reporting
−Removed: Pursuant to the guidance provided under the Financial Accounting Statement Board (“FASB”) Accounting Standards Codification (“ASC”) for segment reporting, the Company has identified its chief operating decision maker
−Removed: (“CODM”), reviewed the documents used by the CODM, and understands how such documents are used by the CODM to make financial and operating decisions.
−Removed: The Company has determined through this review process that its business comprises three separate
−Removed: operating segments.
−Removed: Two of the operating segments meet all of the aggregation criteria, and are aggregated.
−Removed: The remaining operating segment does not meet the quantitative thresholds for individual disclosure and the Company has combined its operating
−Removed: segments into one reportable segment.
+Added: Pursuant to the guidance provided under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for segment reporting, the Company has identified its chief operating decision maker (“CODM”), reviewed the documents used by the CODM, and understands how such documents are used by the CODM to make financial and operating decisions.
+Added: The Company has determined through this review process that its business comprises three separate operating segments.
+Added: Two of the operating segments meet all the aggregation criteria, and are aggregated.
+Added: The remaining operating segment does not meet the quantitative thresholds for individual disclosure and the Company has combined its operating segments into one reportable segment.
Cash and Cash Equivalents
1 unchanged sentence
Cash equivalents consist of money market funds.
−Removed: The Company considers all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of
−Removed: purchase to be cash equivalents.
+Added: The Company considers all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents.
Cash and cash equivalents are maintained with various financial institutions.
Accounts Receivable
−Removed: The allowance for doubtful accounts is developed based upon several factors including customer credit quality, historical write-off experience and any known specific issues or disputes which exist as of the balance sheet date.
−Removed: Accounts receivable
−Removed: are written off only when all collection attempts have failed.
+Added: The Company’s accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered.
+Added: The net amount of accounts receivable and corresponding allowance for credit losses are presented in the consolidated balance sheets.
+Added: The Company maintains allowances for credit losses resulting from the expected failure or inability of its customers to make required payments.
The Company does not require collateral for accounts receivable.
+Added: The Company believes its credit risk with respect to trade accounts receivable is limited due to its credit evaluation process and the long-term nature of its relationships with its largest customers.
+Added: The Company utilizes a historical loss rate method, adjusted for any changes in economic conditions or risk characteristics, to estimate its expected credit losses each period.
+Added: When developing an estimate of expected credit losses, the Company considers all available relevant information regarding the collectability of cash flows, including historical information, current conditions, and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable.
+Added: The historical loss rate method considers past write-offs of trade accounts receivable over a period commensurate with the initial term of the Company’s contracts with its customers.
+Added: The Company recognizes the allowance for credit losses at inception and reassesses quarterly based on management’s expectation of the asset’s collectability.
+Added: The Company’s accounts receivable are short-term in nature and written off only when all collection attempts have failed.
The Company has receivable discount programs that have been established with certain major customers and their respective banks.
−Removed: Under these programs, the Company has the option to sell those customers’ receivables to those banks at a discount to be
−Removed: agreed upon at the time the receivables are sold.
+Added: Under these programs, the Company has the option to sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold.
Once the customer chooses which outstanding invoices are going to be made available for discounting, the Company can accept or decline the bundle of invoices provided.
−Removed: The receivable discount programs
−Removed: are non-recourse, and funds cannot be reclaimed by the customer or its bank after the related invoices have been discounted.
+Added: The receivable discount programs are non-recourse, and funds cannot be reclaimed by the customer or its bank after the related invoices have been discounted.
Inventory is comprised of:
2 unchanged sentences
Work-in-process is in various stages of production and is valued at the average cost of Used Cores and component raw materials issued to work orders still open, including allocations of labor and overhead costs.
−Removed: Historically, work-in-process
−Removed: inventory has not been material compared to the total inventory balance.
+Added: Historically, work-in-process inventory has not been material compared to the total inventory balance.
Remanufactured finished goods include:
−Removed: (i) the Used Core cost and (ii) the cost of component raw materials, and allocations of labor and variable and fixed overhead costs (the “Unit Value”).
−Removed: The allocations of labor and variable and fixed overhead
−Removed: costs are based on the actual use of the production facilities over the prior 12 months which approximates normal capacity.
−Removed: This method prevents the distortion in allocated labor and overhead costs that would occur during short periods of abnormally
−Removed: low or high production.
−Removed: In addition, the Company excludes 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 as
−Removed: period costs.
+Added: (i) the Used Core cost and (ii) the cost of component raw materials, and allocations of labor and variable and fixed overhead costs (the “Unit Cost”).
+Added: The allocations of labor and variable and fixed overhead costs are based on the actual use of the production facilities over the prior 12 months which approximates normal capacity.
+Added: This method prevents the distortion in allocated labor and overhead costs that would occur during short periods of abnormally low or high production.
+Added: In addition, the Company excludes 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 as period costs.
Purchased finished goods also include an allocation of fixed overhead costs.
The estimate of net realizable value is subjective and based on management’s judgment and knowledge of current industry demand and management’s projections of industry demand.
−Removed: The estimates may, therefore, be revised if there are changes in the
−Removed: overall market for the Company’s products or market changes that in management’s judgment, impact its ability to sell or liquidate potentially excess or obsolete inventory.
+Added: The estimates may, therefore, be revised if there are changes in the overall market for the Company’s products or market changes that in management’s judgment, impact its ability to sell or liquidate potentially excess or obsolete inventory.
Net realizable value is determined at least quarterly as follows:
Net realizable value for finished goods by customer by product line are determined based on the agreed upon selling price with the customer for a product in the trailing 12 months.
−Removed: The Company compares the average selling price, including
−Removed: any discounts and allowances, to the finished goods cost of on-hand inventory less any reserve for excess and obsolete inventory.
+Added: The Company compares the average selling price, including any discounts and allowances, to the finished goods cost of on-hand inventory less any reserve for excess and obsolete inventory.
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.
−Removed: Remanufacturing consumes, on average, more than one Used
−Removed: Core for each remanufactured unit produced since not all Used Cores are resuable.
+Added: Remanufacturing consumes, on average, more than one Used Core for each remanufactured unit produced since not all Used Cores are reusable.
The yield rates depend upon both the product and consumer specifications.
−Removed: The Company purchases Used Cores from core brokers to supplement its yield rates and
−Removed: Used Cores not returned under the core exchange program.
−Removed: The Company also considers the net selling price its customers have agreed to pay for Used Cores that are not returned under its core exchange program to assess whether Used Core cost
−Removed: exceeds Used Core net realizable value on a by customer by product line basis.
+Added: The Company purchases Used Cores from core brokers to supplement its yield rates and Used Cores not returned under the core exchange programs.
+Added: The Company also considers the net selling price its customers have agreed to pay for Used Cores that are not returned under its core exchange programs to assess whether Used Core cost exceeds Used Core net realizable value on a by customer by product line basis.
Any reduction of core cost is recorded as cost of goods sold in the period in which the revaluation is identified.
The Company records 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.
−Removed: The Company periodically reviews inventory
−Removed: to identify excess quantities and part numbers that are experiencing a reduction in demand.
−Removed: Any part numbers with quantities identified during this process are reserved for at rates based upon management’s judgment, historical rates, and
−Removed: consideration of possible scrap and liquidation values which may be as high as 100% of cost if no liquidation market exists for the part.
−Removed: As a result of this process, the Company recorded reserves for excess and obsolete inventory of
−Removed: $13,208,000 and $11,899,000 at March 31, 2020 and 2019, respectively.
−Removed: The increase in the reserve for excess and obsolete inventory was primarily driven by the Company’s January 2019 acquisition of Dixie Electric, Ltd.
−Removed: (see Note 3 below).
+Added: The Company periodically reviews inventory to identify excess quantities and part numbers that are experiencing a reduction in demand.
+Added: Any part numbers with quantities identified during this process are reserved for at rates based upon management’s judgment, historical rates, and consideration of possible scrap and liquidation values which may be as high as 100 % of cost if no liquidation market exists for the part.
+Added: As a result of this process, the Company recorded reserves for excess and obsolete inventory of $ 13,246,000 and $ 13,208,000 at March 31, 2021 and 2020, respectively.
The Company records vendor discounts as a reduction of inventories and are recognized as a reduction to cost of sales as the inventories are sold.
Inventory Unreturned
−Removed: Inventory unreturned represents the Company’s estimate, based on historical data and prospective information provided directly by the customer, of finished goods shipped to customers that the Company expects to be returned under its general right of
−Removed: return policy, after the balance sheet date.
−Removed: Inventory unreturned includes only the Unit Value of a finished good.
+Added: Inventory unreturned represents the Company’s estimate, based on historical data and prospective information provided directly by the customer, of finished goods shipped to customers that the Company expects to be returned under its general right of return policy, after the balance sheet date.
+Added: Inventory unreturned includes only the Unit Cost of a finished good.
The return rate is calculated based on expected returns within the normal operating cycle, which is generally one year .
−Removed: related amounts are classified in current assets.
+Added: As such, the related amounts are classified in current assets.
Inventory unreturned is valued in the same manner as the Company’s finished goods inventory.
1 unchanged sentence
Contract assets consists of:
−Removed: (i) the core portion of the finished goods shipped to the Company’s customers, (ii) upfront payments to customers in connection with customer contracts, (iii) core premiums paid to
−Removed: customers, and (iv) long-term core inventory deposits.
+Added: (i) the core portion of the finished goods shipped to customers, (ii) upfront payments to customers in connection with customer contracts, (iii) core premiums paid to customers, (iv) finished goods premiums paid to customers, and (v) long-term core inventory deposits.
Remanufactured Cores held at customers’ locations as a part of the finished goods sold to the customer are classified as long-term contract assets.
−Removed: These assets are valued at the lower of cost or net realizable value
−Removed: of Used Cores on hand (See Inventory above).
−Removed: For these Remanufactured Cores, the Company expects the finished good containing the Remanufactured Core to be returned under the Company’s general right of return policy or a similar Used Core to be
−Removed: returned to the Company by the customer, under the Company’s core exchange program in each case, for credit.
−Removed: The Remanufactured Cores and Used Cores returned by consumers to the Company’s customers but not yet returned to the Company are classified
−Removed: as “Cores expected to be returned by customers”, which are included in short-term contract assets until the Company physically receives them during its normal operating cycle, which is generally one year.
+Added: These assets are valued at the lower of cost or net realizable value of Used Cores on hand (See Inventory above).
+Added: For these Remanufactured Cores, the Company expects the finished good containing the Remanufactured Core to be returned under the Company’s general right of return policy or a similar Used Core to be returned to the Company by the customer, under the Company’s core exchange programs in each case, for credit.
+Added: The Remanufactured Cores and Used Cores returned by consumers to the Company’s customers but not yet returned to the Company are classified as “Cores expected to be returned by customers”, which are included in short-term contract assets until the Company physically receives them during its normal operating cycle, which is generally one year.
Upfront payments to customers represent the marketing allowances, such as sign-on bonuses, slotting fees, and promotional allowances provided by the Company to its customers.
−Removed: These allowances are recognized as an asset and amortized over the
−Removed: appropriate period of time as a reduction of revenue if the Company expects to generate future revenues associated with the upfront payment.
−Removed: If the Company does not expect to generate additional revenue, then the
−Removed: upfront payment is recognized in the consolidated statements of operations when payment occurs as a reduction of revenue.
−Removed: Upfront payments expected to be amortized during the Company’s normal operating cycle, which is generally one year, are
−Removed: classified as short-term contract assets.
+Added: These allowances are recognized as an asset and amortized over the appropriate period of time as a reduction of revenue if the Company expects to generate future revenues associated with the upfront payment.
+Added: If the Company does 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.
+Added: Upfront payments expected to be amortized during the Company’s normal operating cycle, which is generally one year, are classified as short-term contract assets.
Core premiums paid to customers represent the difference between the Remanufactured Core acquisition price paid to customers generally in connection with new business, and the related Used Core 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.
−Removed: T he Company considers, among other things, the length
−Removed: of its 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.
−Removed: These core premiums are amortized over a
−Removed: period typically ranging from six to eight years, adjusted for specific circumstances associated with the arrangement.
+Added: The Company considers, among other things, the length of its 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.
+Added: 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.
−Removed: Core premiums expected to be amortized
−Removed: within the Company’s normal operating cycle, which is generally one year, are classified as short-term contract assets.
+Added: Core premiums expected to be amortized within the Company’s normal operating cycle, which is generally one year, are classified as short-term contract assets.
+Added: 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.
+Added: The Company considers, among other things, the length of its 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.
+Added: Finished goods premiums are amortized over a period typically ranging from six to eight years , adjusted for specific circumstances associated with the arrangement.
+Added: Finished goods premiums are recorded as long-term contract assets.
+Added: Finished goods premiums expected to be amortized within our normal operating cycle, which is generally one year, are classified as short-term contract assets.
Long-term core inventory deposits represent the cost of Remanufactured Cores the Company has purchased from customers, which are held by the customers and remain on the customers’ premises.
−Removed: The costs of these Remanufactured Cores were established at
−Removed: the time of the transaction based on the then current cost.
+Added: The costs of these Remanufactured Cores were established at the time of the transaction based on the then current cost.
The selling value of these Remanufactured Cores was established based on agreed upon amounts with these customers.
−Removed: The Company expects to realize the selling value and the related cost of
−Removed: these Remanufactured Cores should its relationship with a customer end, a possibility that the Company considers remote based on existing long-term customer agreements and historical experience.
+Added: The Company expects to realize the selling value and the related cost of these Remanufactured Cores should its relationship with a customer end, a possibility that the Company considers remote based on existing long-term customer agreements and historical experience.
Customer Finished Goods Returns Accrual
−Removed: The customer finished goods returns accrual represents the Company’s estimate of its exposure to customer returns, including warranty returns, under its general right of return policy to allow customers to return items that their end user customers
−Removed: have returned to them and from time to time, stock adjustment returns when the customers’ inventory of certain product lines exceeds the anticipated sales to end-user customers.
−Removed: The customer finished goods returns accrual represents the Unit Value of
−Removed: 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.
−Removed: The Company accounts for income taxes using the liability method, which measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and
−Removed: their reported amounts in the financial statements.
+Added: The customer finished goods returns accrual represents the Company’s estimate of its exposure to customer returns, including warranty returns, under its general right of return policy to allow customers to return items that their end user customers have returned to them and from time to time, stock adjustment returns when the customers’ inventory of certain product lines exceeds the anticipated sales to end-user customers.
+Added: 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.
+Added: The Company accounts for income taxes using the liability method, which measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts in the financial statements.
The resulting asset or liability is adjusted to reflect changes in the tax laws as they occur.
−Removed: A valuation allowance is provided to reduce deferred tax assets when it is more likely than not that a
−Removed: portion of the deferred tax asset will not be realized.
−Removed: In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020.
−Removed: The CARES Act:
−Removed: (i) removes certain net operating loss deduction and carry-back limitations originally
−Removed: imposed by the Tax Cuts and Jobs Act of 2017, (ii) increases IRC §163(j) business interest expense limitations, and (iii) technical correction on recovery period for qualified improvement property (QIP), allowing QIP to be eligible for bonus
−Removed: depreciation.
−Removed: Specifically, the Company may now carry back net operating losses originating in the year ended March 31, 2019 to the year ended March 31, 2017, resulting in an increase to its income tax receivable of $1,002,000 as of March 31, 2020.
−Removed: The primary components of income tax (benefit) expense were:
−Removed: (i) federal income taxes, (ii) the impact of net operating loss carry-backs in connection with the CARES Act, (iii) foreign income taxed at rates that are different from the federal
−Removed: statutory rate, (iv) change in realizable deferred tax items, (v) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m), (vi) income taxes associated with uncertain tax positions, (vii) the change in the blended
−Removed: state rate, and (viii) the excess tax benefit relating to share-based compensation.
+Added: A valuation allowance is provided to reduce deferred tax assets when it is more likely than not that a portion of the deferred tax asset will not be realized.
+Added: The primary components of the Company’s income tax expense were (i) federal income taxes, (ii) state income taxes, (iii) foreign income taxed at rates that are different from the federal statutory rate, (iv) change in realizable deferred tax items, (v) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m), (vi) income taxes associated with uncertain tax positions, and (vii) the impact of net operating loss carry-backs in connection with the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020 .
Realization of deferred tax assets is dependent upon the Company’s ability to generate sufficient future taxable income.
−Removed: Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities
−Removed: and any valuation allowance recorded against the Company’s net deferred tax assets.
+Added: Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred tax assets.
The Company makes these estimates and judgments about its future taxable income that are based on assumptions that are consistent with the Company’s future plans.
−Removed: valuation allowance is established when the Company believes it is not more likely than not all or some of a deferred tax assets will be realized.
−Removed: In evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they
−Removed: arise, the Company considers all available positive and negative evidence.
−Removed: Deferred tax assets arising primarily as a result of net operating loss carry-forwards and research and development credits in connection with the Company’s recent acquisitions
−Removed: have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods.
+Added: A valuation allowance is established when the Company believes it is not more likely than not all or some of a deferred tax assets will be realized.
+Added: In evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they arise, the Company considers all available positive and negative evidence.
+Added: Deferred tax assets arising primarily as a result of net operating loss carry-forwards and research and development credits in connection with the Company’s Canadian operations have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods.
Should the actual amount differ from the Company’s estimates, the amount of the valuation allowance could be impacted.
4 unchanged sentences
The cost of additions and improvements are capitalized, while maintenance and repairs are charged to expense when incurred.
−Removed: Depreciation is provided on a straight-line basis in
−Removed: amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives.
+Added: Depreciation is provided on a straight-line basis in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives.
Machinery and equipment are depreciated over a range from five to ten years .
−Removed: Office equipment and fixtures are depreciated over a range from
−Removed: three to ten years.
+Added: Office equipment and fixtures are depreciated over a range from three to ten years .
Leasehold improvements are depreciated over the lives of the respective leases or the service lives of the leasehold improvements, whichever is shorter.
−Removed: Depreciation of assets recorded under finance leases is included in
−Removed: depreciation expense.
−Removed: The Company evaluates plant and equipment, including leasehold improvements, equipment and construction in progress, and right-of-use assets for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group
−Removed: may not be recoverable.
−Removed: The Company groups assets at the lowest level for which cash flows are separately identified in order to measure an impairment.
−Removed: Events or circumstances that would result in an impairment review include a significant change in
−Removed: the use of an asset, the planned sale or disposal of an asset, or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset group.
−Removed: Recoverability of assets to be held and used is measured by a comparison
−Removed: of the carrying amount of the asset to future undiscounted cash flows expected to be generated by the asset group.
−Removed: If it is determined to be impaired, the impairment recognized is measured by the amount by which the carrying value of the asset exceeds
−Removed: its fair value.
−Removed: As a result of the effect of the COVID-19 pandemic on macroeconomic conditions and its potential impact to the Company’s sales and operating income for future periods, it was determined that certain impairment testing triggers had occurred for the
−Removed: Company’s long-lived assets.
−Removed: Assumptions and estimates used to determine cash flows in the evaluation of impairment are subject to a degree of judgment and complexity.
−Removed: Any future changes to the assumptions and estimates resulting from changes in actual
−Removed: results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in impairment charges.
−Removed: Future events that may result in impairment charges include extended unfavorable economic impacts of
−Removed: COVID-19, or other factors which could decrease revenues and profitability of existing locations and changes in the cost structure of existing facilities.
−Removed: Based on the undiscounted cash flow analysis performed, the Company determined that estimated
−Removed: undiscounted future cash flows exceeded the net carrying values of its long-lived assets, and, therefore, as of March 31, 2020, the Company's long-lived assets were not impaired.
−Removed: Assumptions and estimates about future values and remaining useful lives
−Removed: of the Company’s long-lived assets are subjective.
−Removed: They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in the Company’s business strategy and its internal
+Added: Depreciation of assets recorded under finance leases is included in depreciation expense.
+Added: The Company evaluates plant and equipment, including leasehold improvements, equipment, construction in progress, and right-of-use assets for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable.
+Added: There were no indicators of impairment at March 31, 2021.
+Added: The Company determines if an arrangement contains a lease at inception.
+Added: Lease assets and lease liabilities are recorded based on the present value of lease payments over the lease term, which includes the minimum unconditional term of the lease.
+Added: Certain of the Company’s leases include options to extend the leases for up to five years .
+Added: When the Company has the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that it will exercise the option, the option is considered in determining the classification and measurement of the lease.
+Added: The lease assets are recorded net of any lease incentives received.
+Added: The Company exempts leases with an initial term of 12 months or less from balance sheet recognition and, for all classes of assets, combines non-lease components with lease components.
+Added: Lease assets are tested for impairment in the same manner as long-lived assets used in operations.
+Added: The Company uses its incremental borrowing rate for each of its leases in determining the present value of its expected lease payments based on the information available at the lease commencement date as the rate implicit for each of its leases is not readily detainable.
+Added: The Company’s incremental borrowing rate is determined by analyzing and combining (i) an applicable risk-free rate, (ii) a financial spread adjustment, and (iii) any lease specific adjustment.
+Added: Certain leases contain provisions for property-related costs that are variable in nature for which the Company is responsible, including common area maintenance and other property operating services, which are expensed as incurred and not included in the determination of lease assets and lease liabilities.
+Added: These costs are calculated based on a variety of factors including property values, tax and utility rates, property services fees, and other factors.
+Added: The Company records rent expense for operating leases, some of which have escalating rent payments, on a straight-line basis over the lease term.
+Added: The Company has material non-functional currency leases.
+Added: As required for other monetary liabilities, lessees shall remeasure a foreign currency-denominated lease liability using the exchange rate at each reporting date, but the lease assets are nonmonetary assets measured at historical rates, which are not affected by subsequent changes in the exchange rates.
+Added: The Company recorded a gain of $ 9,893,000 and a loss of $ 11,710,000 during the years ended March 31, 2021 and 2020, respectively, which are included in “foreign exchange impact of lease liabilities and forward contracts” in the consolidated statements of operations.
+Added: See Note 10 for additional information regarding the Company’s leases.
The Company evaluates goodwill for impairment at least annually during the fourth quarter of each fiscal year or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable.
−Removed: impairment test is performed at the reporting unit level, which represents the Company’s operating segments.
−Removed: In testing for goodwill impairment, the Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not
−Removed: that the fair value of the reporting unit is less than its carrying amount.
+Added: The goodwill impairment test is performed at the reporting unit level, which represents the Company’s operating segments.
+Added: In testing for goodwill impairment, the Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
If the Company’s qualitative assessment indicates that goodwill impairment is more likely than not, it will proceed with performing the quantitative assessment.
−Removed: value of the reporting unit exceeds its carrying value, goodwill is not considered impaired.
−Removed: If the carrying value of the reporting unit exceeds its fair value an impairment loss will be recognized for the amount by which the carrying value exceeds the
−Removed: reporting unit’s fair value.
−Removed: The Company performed a qualitative assessment of goodwill impairment indicators, considering macroeconomic conditions related to the COVID-19 pandemic and its potential impact to sales and operating income for future periods.
−Removed: The Company expects
−Removed: that the duration of the COVID-19 pandemic and the continued impact of global travel restrictions, government shutdowns of non-essential businesses and disruptions to its supply chain and distribution channels to result in lower revenue and operating
−Removed: income for future periods.
−Removed: As a result, the Company determined that there were indicators of impairment, and it proceeded with a quantitative assessment of goodwill for all reporting units at March 31, 2020.
−Removed: To estimate the fair value of its reporting units, the Company uses a combination of the market approach and the income approach.
−Removed: Under the market approach, the Company estimates fair value by comparing the business to similar businesses, or
−Removed: guideline companies whose securities are actively traded in public markets.
−Removed: Under the income approach, the Company uses a discounted cash flow (“DCF”) model in which cash flows anticipated over several periods, plus a terminal value at the end of that
−Removed: time horizon, are discounted to their present value using an appropriate rate that is commensurate with the risk inherent within the reporting unit.
−Removed: In addition, the Company compares the aggregate of the reporting units’ fair values to its market
−Removed: capitalization as further corroboration of the fair values.
−Removed: Estimates of fair value result from judgments about future events and uncertainties and rely on estimates and assumptions at a point in time.
−Removed: Judgments made in determining an estimate of fair value may materially impact the Company’s results of
−Removed: The valuations are based on information available as of the impairment testing date and are based on expectations and assumptions that have been deemed reasonable by management.
−Removed: Any material changes in key assumptions, including failure to
−Removed: meet business plans, deterioration in the U.S.
−Removed: and global financial markets, an increase in interest rates or an increase in the cost of equity financing by market participants within the industry or other unanticipated events and circumstances, may
−Removed: decrease the projected cash flows or increase the discount rates and could potentially result in an impairment charge.
−Removed: Under the market approach, significant estimates and assumptions also include the selection of appropriate guideline companies and
−Removed: the determination of appropriate valuation multiples to apply to the reporting unit.
−Removed: Under the income approach, significant estimates and assumptions also includes the determination of discount rates.
−Removed: The discount rates represent the weighted average
−Removed: cost of capital measuring the reporting unit’s cost of debt and equity financing, which are weighted by the percentage of debt and percentage of equity in a company’s target capital structure.
−Removed: Included in the estimate of the weighted average cost of
−Removed: capital is the assumption of a risk premium to address incremental uncertainty related to the reporting units’ future cash flow projections.
−Removed: An increase in the risk premium increases the discount rate.
−Removed: The Company completed the required annual testing of goodwill impairment for each of the reporting units during the fourth quarter of the year ended March 31, 2020, and determined through the quantitative assessment that its goodwill of $3,205,000
−Removed: was not impaired.
+Added: If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired.
+Added: If the carrying value of the reporting unit exceeds its fair value an impairment loss will be recognized for the amount by which the carrying value exceeds the reporting unit’s fair value.
+Added: The Company completed the required annual testing of goodwill impairment for each of the reporting units during the fourth quarter of the year ended March 31, 2021, and determined through the qualitative assessment that its goodwill of $ 3,205,000 was not impaired.
Intangible Assets
The Company’s intangible assets other than goodwill are finite–lived and amortized on a straight-line basis over their respective useful lives.
−Removed: The Company analyzes its finite-lived intangible assets for impairment when and if indicators of
−Removed: impairment exist.
−Removed: As discussed under the caption “Goodwill” above, as a result of the COVID-19 pandemic, the Company determined that there were indicators of impairment present at March 31, 2020.
−Removed: Accordingly, the Company analyzed undiscounted cash
−Removed: flows for finite lived intangible assets as of March 31, 2020.
−Removed: Based on that undiscounted cash flow analysis, the Company determined that estimated undiscounted future cash flows exceeded their net carrying values, and, therefore, as of March 31, 2020,
−Removed: the Company's net intangible assets were not impaired.
−Removed: Assumptions and estimates about future values and remaining useful lives of the Company’s intangible assets are subjective.
−Removed: They can be affected by a variety of factors, including external factors
−Removed: such as industry and economic trends, and internal factors such as changes in the Company’s business strategy and its internal forecasts.
+Added: The Company analyzes its finite-lived intangible assets for impairment when and if indicators of impairment exist.
+Added: At March 31, 2021, the Company’s intangible assets were $ 5,329,000 , and there were no indicators of impairment.
Debt Issuance Costs
1 unchanged sentence
Debt issuance costs related to the Company’s term loans are presented in the balance sheet as a direct deduction from the carrying amount of the term loans.
−Removed: Debt issuance costs
−Removed: related to the Company’s revolving loan are presented in prepaid expenses and other current assets in the accompanying consolidated balance sheets, regardless of whether or not there are any outstanding borrowings under the revolving loan.
−Removed: and costs are amortized using the straight-line method, which approximates the effective interest rate method, over the terms of the related loans and are included in interest expense in the Company’s consolidated statements of operations.
+Added: Debt issuance costs related to the Company’s revolving loan are presented in prepaid expenses and other current assets in the accompanying consolidated balance sheets, regardless of whether or not there are any outstanding borrowings under the revolving loan.
+Added: These fees and costs are amortized using the straight-line method, which approximates the effective interest rate method, over the terms of the related loans and are included in interest expense in the Company’s consolidated statements of operations.
Foreign Currency Translation
1 unchanged sentence
The assets and liabilities of foreign operations for which the local currency is the functional currency are translated into the U.S.
−Removed: at the exchange rate in effect at the balance sheet date, while revenues and expenses are translated at average exchange rates during the year.
−Removed: The accumulated foreign currency translation adjustment is presented as a component of comprehensive income
−Removed: or loss in the consolidated statements of shareholders’ equity.
−Removed: During the year ended March 31, 2020, aggregate foreign currency transaction losses of $789,000 were recorded in general and administrative expenses.
+Added: dollar at the exchange rate in effect at the balance sheet date, while revenues and expenses are translated at average exchange rates during the year.
+Added: The accumulated foreign currency translation adjustment is presented as a component of comprehensive income or loss in the consolidated statements of shareholders’ equity.
+Added: During the years ended March 31, 2021 and 2020, aggregate foreign currency transaction gains of $ 1,144,000 and losses of $ 789,000 , respectively, were recorded in general and administrative expenses.
Revenue Recognition
Revenue is recognized when performance obligations under the terms of a contract with its customers are satisfied;
−Removed: generally, this occurs with the transfer of control of its manufactured, remanufactured, or distributed products.
−Removed: Revenue is measured
−Removed: as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.
−Removed: Revenue is recognized net of all anticipated returns, including Used Core returns under the core
−Removed: exchange program, marketing allowances, volume discounts, and other forms of variable consideration .
+Added: generally, this occurs with the transfer of control of its products.
+Added: Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.
+Added: Revenue is recognized net of all anticipated returns, marketing allowances, volume discounts, and other forms of variable consideration .
Revenue is recognized either when products are shipped or when delivered, depending on the applicable contract terms.
Bill and hold shipments are shipped out to the customer as ex-works;
−Removed: in which the customer makes arrangements and is responsible
−Removed: for their shipping cost.
+Added: in which the customer makes arrangements and is responsible for their shipping cost.
No freight or shipping costs are accrued for revenue under the terms of shipments made as ex-works.
−Removed: The price of a finished remanufactured product sold to customers is generally comprised of separately invoiced amounts for the Remanufactured Core included in the product (“Remanufactured Core value”) and the Unit Value.
−Removed: The Unit Value is recorded
−Removed: as revenue based on the Company’s then current price list, net of applicable discounts and allowances.
−Removed: 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
+Added: The price of a finished remanufactured product sold to customers is generally comprised of separately invoiced amounts for the Remanufactured Core included in the product (“Remanufactured Core value”) and the unit portion included in the product (“Unit Value”), for which revenue is recorded based on our then current price list, net of applicable discounts and allowances.
+Added: 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.
−Removed: As reconciliations are completed with the customers the actual rates at which Used Cores are not being returned
−Removed: may differ from the current estimates.
+Added: As reconciliations are completed with the customers the actual rates at which Used Cores are not being returned may differ from the current estimates.
This may result in periodic adjustments of the estimated contract asset and liability amounts recorded and may impact the projected revenue recognition rates used to record the estimated future revenue.
−Removed: estimates may also be revised if there are changes in contractual arrangements with customers, or changes in business practices.
−Removed: A significant portion of the remanufactured automotive parts sold to customers are replaced by similar Used Cores sent back
−Removed: for credit by customers under the core exchange program (as described in further detail below).
−Removed: The number of Used Cores sent back under the core exchange program is generally limited to the number of similar Remanufactured Cores previously shipped to
−Removed: each customer.
−Removed: Revenue Recognition — Core Exchange Program
+Added: These estimates may also be revised if there are changes in contractual arrangements with customers, or changes in business practices.
+Added: A significant portion of the remanufactured automotive parts sold to customers are replaced by similar Used Cores sent back for credit by customers under the core exchange programs (as described in further detail below).
+Added: The number of Used Cores sent back under the core exchange programs is generally limited to the number of similar Remanufactured Cores previously shipped to each customer.
+Added: 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.
−Removed: For these Remanufactured Cores, revenue is only
−Removed: recognized based upon an estimate of the rate at which these customers will pay cash for Remanufactured Cores in lieu of sending back similar Used Cores for credits under the core exchange program.
−Removed: The remainder of the full price Remanufactured Core
−Removed: 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 the Company expects these Remanufactured Cores to be returned for credit under its core
−Removed: exchange program.
+Added: For these Remanufactured Cores, revenue is only recognized based upon an estimate of the rate at which these customers will pay cash for Remanufactured Cores in lieu of sending back similar Used Cores for credits under the core exchange programs.
+Added: 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 the Company expects these Remanufactured Cores to be returned for credit under its core exchange programs.
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.
−Removed: For these nominal Remanufactured Cores, revenue is
−Removed: only recognized based upon an estimate of the rate at which these customers will pay cash for Remanufactured Cores in lieu of sending back similar Used Cores for credits under the core exchange program.
−Removed: Revenue amounts are calculated based on
−Removed: contractually agreed upon pricing for these Remanufactured Cores for which the customers are not returning similar Used Cores.
−Removed: The remainder of the nominal price Remanufactured Core value invoiced to these customers is established as a long-term
−Removed: contract liability rather than being recognized as revenue in the period the products are shipped as the Company expects these Remanufactured Cores to be returned for credit under its core exchange program.
+Added: For these nominal Remanufactured Cores, revenue is only recognized based upon an estimate of the rate at which these customers will pay cash for Remanufactured Cores in lieu of sending back similar Used Cores for credits under the core exchange programs.
+Added: Revenue amounts are calculated based on contractually agreed upon pricing for these Remanufactured Cores for which the customers are not returning similar Used Cores.
+Added: The remainder of the nominal 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 the Company expects these Remanufactured Cores to be returned for credit under its core exchange programs.
Revenue Recognition;
1 unchanged sentence
Customers are allowed to return goods that their end-user customers have returned to them, whether or not the returned item is defective (warranty returns).
−Removed: In addition, under the terms of certain agreements and
−Removed: industry practice, customers from time to time are allowed stock adjustments when their inventory of certain product lines exceeds the anticipated sales to end-user customers (stock adjustment returns).
−Removed: Customers have various contractual rights for
−Removed: stock adjustment returns, which are typically less than 5% of units sold.
+Added: In addition, under the terms of certain agreements and industry practice, customers from time to time are allowed stock adjustments when their inventory of certain product lines exceeds the anticipated sales to end-user customers (stock adjustment returns).
+Added: Customers have various contractual rights for stock adjustment returns, which are typically less than 5 % of units sold.
In some instances, a higher level of returns is allowed in connection with significant restocking orders.
−Removed: The aggregate returns are generally limited to less than 20% of unit
+Added: The aggregate returns are generally limited to less than 20 % of unit sales.
The allowance for warranty returns is established based on a historical analysis of the level of this type of return as a percentage of total unit sales.
−Removed: The allowance for stock adjustment returns is based on specific
−Removed: customer inventory levels, inventory movements, and information on the estimated timing of stock adjustment returns provided by customers.
+Added: The allowance for stock adjustment returns is based on specific customer inventory levels, inventory movements, and information on the estimated timing of stock adjustment returns provided by customers.
Stock adjustment returns do not occur at any specific time during the year.
−Removed: The return rate for stock
−Removed: adjustments is calculated based on expected returns within the normal operating cycle, which is generally one year.
+Added: The return rate for stock adjustments is calculated based on expected returns within the normal operating cycle, which is generally one year.
The Unit Value of the warranty and stock adjustment returns are treated as reductions of revenue based on the estimations made at the time of the sale.
−Removed: The Remanufactured Core value of warranty and stock adjustment
−Removed: returns are provided for as indicated in the paragraph “Revenue Recognition – Core Exchange Program”.
+Added: The Remanufactured Core value of warranty and stock adjustment returns are provided for as indicated in the paragraph “Revenue Recognition – Core Exchange Programs”.
As is standard in the industry, the Company only accepts returns from on-going customers.
If a customer ceases doing business with the Company, it has no further obligation to accept additional product returns from that customer.
−Removed: Similarly, the
−Removed: Company accepts product returns and grants appropriate credits to new customers from the time the new customer relationship is established.
+Added: Similarly, the Company accepts product returns and grants appropriate credits to new customers from the time the new customer relationship is established.
Shipping Costs
3 unchanged sentences
Contract liability consists of:
−Removed: (i) customer allowances earned, (ii) accrued core payments, (iii) customer core returns accruals, (iv) core bank liability, and (v) customer deposits.
+Added: (i) customer allowances earned, (ii) accrued core payments, (iii) customer core returns accruals, (iv) core bank liability, (v) finished goods liabilities, and (vi) customer deposits.
Customer allowances earned includes all marketing allowances provided to customers.
Such allowances include sales incentives and concessions.
−Removed: Voluntary marketing allowances related to a single exchange of product
−Removed: are recorded as a reduction of revenues at the time the related revenues are recorded or when such incentives are offered.
−Removed: Other marketing allowances, which may only be applied against future purchases, are recorded as a reduction to revenues in
−Removed: accordance with a schedule set forth in the relevant contract.
+Added: Voluntary marketing allowances related to a single exchange of product are recorded as a reduction of revenues at the time the related revenues are recorded or when such incentives are offered.
+Added: Other marketing allowances, which may only be applied against future purchases, are recorded as a reduction to revenues in accordance with a schedule set forth in the relevant contract.
Sales incentive amounts are recorded based on the value of the incentive provided.
See Note 14 for a description of all marketing allowances.
−Removed: allowances to be provided to customers within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term.
+Added: Customer allowances to be provided to customers within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.
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.
−Removed: price of these Remanufactured Cores will be realized when the Company’s relationship with a customer ends, a possibility that the Company considers remote based on existing long-term customer agreements and historical experience.
−Removed: The payments to be
−Removed: made to customers for purchases of Remanufactured Cores within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term.
+Added: The sales price of these Remanufactured Cores will be realized when the Company’s relationship with a customer ends, a possibility that the Company considers remote based on existing long-term customer agreements and historical experience.
+Added: The payments to be made to customers for purchases of Remanufactured Cores within the Company’s 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 the Company’s customers.
−Removed: When the Company ships the product, it recognizes an obligation to accept a similar Used
−Removed: Core sent back under the core exchange program based upon the Remanufactured Core price agreed upon by the Company and its customer.
−Removed: The Contract liability related to Used Cores returned by consumers to the Company’s customers but not yet returned to
−Removed: the Company are classified as short-term contract liabilities until the Company physically receives these Used Cores as they are expected to be returned during the Company’s normal operating cycle, which is generally one year and the remainder are
−Removed: recorded as long-term.
−Removed: The core bank liability represents the full Remanufactured Core sales price paid for cores returned under the core exchange program.
−Removed: The payment for these cores will be made over a contractual repayment period pursuant
−Removed: to the Company’s agreement with this customer.
−Removed: Payments to be made within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term.
+Added: When the Company ships the product, it recognizes an obligation to accept a similar Used Core sent back under the core exchange programs based upon the Remanufactured Core price agreed upon by the Company and its customer.
+Added: The Contract liability related to Used Cores returned by consumers to the Company’s customers but not yet returned to the Company are classified as short-term contract liabilities until the Company physically receives these Used Cores as they are expected to be returned during the Company’s normal operating cycle, which is generally one year and the remainder are recorded as long-term contract liabilities.
+Added: The core bank liability represents the full Remanufactured Core sales price paid for cores returned under the core exchange programs.
+Added: The payment for these cores are made over a contractual repayment period pursuant to the Company’s agreement with this customer.
+Added: Payments to be made within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.
+Added: Finished goods liabilities represents the agreed upon price of finished goods purchased from customers, generally in connection with new business.
+Added: The payment for these finished goods are made over a contractual repayment period pursuant to the Company’s agreement with the customer.
+Added: Payments to be made within the Company’s 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 deposits represent the receipt of prepayments from customers for the obligation to transfer goods or services in the future.
−Removed: The Company classifies these customer deposits as short-term contract liabilities as
−Removed: the Company expects to satisfy these obligations within its normal operating cycle, which generally one year and the remainder are recorded as long-term.
+Added: The Company classifies these customer deposits as short-term contract liabilities as the Company expects to satisfy these obligations within its normal operating cycle, which is generally one year.
Advertising Costs
1 unchanged sentence
Advertising expenses for the years ended March 31, 2021, 2020 and 2019 were $ 507,000 , $ 773,000 and $ 819,000 , respectively.
−Removed: Net (Loss) Income Per Share
−Removed: Basic net (loss) income per share is computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding during the period.
−Removed: Diluted net (loss) income per share includes the effect, if any, from the potential
−Removed: exercise or conversion of securities, such as stock options and warrants, which would result in the issuance of incremental shares of common stock to the extent such impact is not anti-dilutive.
−Removed: The following presents a reconciliation of basic and diluted net (loss) income per share.
+Added: Net Income (Loss) Per Share
+Added: Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.
+Added: Diluted net income (loss) per share includes the effect, if any, from the potential exercise or conversion of securities, such as stock options and warrants, which would result in the issuance of incremental shares of common stock to the extent such impact is not anti-dilutive.
+Added: The following presents a reconciliation of basic and diluted net income (loss) per share.
Years Ended March 31,
−Removed: Net (loss) income
+Added: Net income (loss)
Effect of dilutive stock options and warrants
Diluted shares
−Removed: Net (loss) income per share:
−Removed: Basic net (loss) income per share
−Removed: Diluted net (loss) income per share
−Removed: Potential common shares that would have the effect of increasing diluted net income per share or decreasing diluted net loss per share are considered to be anti-dilutive and as such, these shares are not included in calculating diluted net (loss)
−Removed: income per share.
−Removed: For the years ended March 31, 2020, 2019 and 2018, there were 1,738,106, 1,580,299, and 448,039, respectively, of potential common shares not included in the calculation of diluted net (loss) income per share because their effect was
−Removed: anti-dilutive.
+Added: Net income (loss) per share:
+Added: Basic net income (loss) per share
+Added: Diluted net income (loss) per share
+Added: Potential common shares that would have the effect of increasing diluted net income per share or decreasing diluted net loss per share are considered to be anti-dilutive and as such, these shares are not included in calculating diluted net income (loss) per share.
+Added: For the years ended March 31, 2021, 2020 and 2019, there were 1,279,251 , 1,738,106 , and 1,580,299 , respectively, of potential common shares not included in the calculation of diluted net income (loss) per share because their effect was anti-dilutive.
Use of Estimates
−Removed: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the consolidated
−Removed: financial statements and accompanying notes.
+Added: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.
−Removed: On an on-going basis, the Company evaluates its estimates, including allowances for doubtful accounts, valuation of inventory, valuation of long-lived
−Removed: assets, goodwill and intangible assets, depreciation and amortization of long-lived assets, litigation matters, valuation of deferred tax assets, share-based compensation, sales returns and other customer marketing allowances, and the incremental
−Removed: borrowing rate used in determining the present value of lease liabilities.
−Removed: Although the Company does not believe that there is a reasonable likelihood that there will be a material change in the future estimate or in the assumptions used in calculating
−Removed: the estimate, unforeseen changes in the industry, or business could materially impact the estimate and may have a material adverse effect on its business, financial condition and results of operations.
+Added: On an on-going basis, the Company evaluates its estimates, including allowances for credit losses, valuation of inventory, valuation of long-lived assets, goodwill and intangible assets, depreciation and amortization of long-lived assets, litigation matters, valuation of deferred tax assets, share-based compensation, sales returns and other customer marketing allowances, and the incremental borrowing rate used in determining the present value of lease liabilities.
+Added: Although the Company does not believe that there is a reasonable likelihood that there will be a material change in the future estimate or in the assumptions used in calculating the estimate, unforeseen changes in the industry, or business could materially impact the estimate and may have a material adverse effect on its business, financial condition and results of operations.
Financial Instruments
The carrying amounts of cash, short-term investments, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these instruments.
−Removed: The carrying amounts of the revolving loan, term loan
−Removed: and other long-term liabilities approximate their fair value based on current rates for instruments with similar characteristics.
+Added: The carrying amounts of the revolving loan, term loan and other long-term liabilities approximate their fair value based on current rates for instruments with similar characteristics.
Share-Based Payments
The Black-Scholes option-pricing model requires the input of subjective assumptions including the expected volatility of the underlying stock and the expected holding period of the option.
−Removed: These subjective assumptions are based on both historical
−Removed: and other information.
+Added: These subjective assumptions are based on both historical and other information.
Changes in the values assumed and used in the model can materially affect the estimate of fair value.
6 unchanged sentences
Weighted average fair value of options granted
+Added: The Company regularly reviews its 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.
The majority of the Company’s sales are to leading automotive aftermarket parts suppliers.
−Removed: Management believes the credit risk with respect to trade accounts receivable is limited due to the Company’s credit evaluation process and the nature of its
−Removed: However, should the Company’s customers experience significant cash flow problems, the Company’s financial position and results of operations could be materially and adversely affected, and the maximum amount of loss that would be incurred
−Removed: would be the outstanding receivable balance, Used Cores expected to be returned by customers, and the value of the Remanufactured Cores held at customers’ locations.
+Added: Management believes the credit risk with respect to trade accounts receivable is limited due to the Company’s credit evaluation process, the nature of its customers, and its accounts receivable discount programs.
+Added: However, should the Company’s customers experience significant cash flow problems, its financial position and results of operations could be materially and adversely affected, and the maximum amount of loss that would be incurred would be the outstanding receivable balance, Used Cores expected to be returned by customers, and the value of the Remanufactured Cores held at customers’ locations.
+Added: The Company maintains an allowance for credit losses that, in its opinion, provides for an adequate reserve to cover losses that may be incurred.
Deferred Compensation Plan
1 unchanged sentence
The plan allows participants to defer salary and bonuses.
−Removed: The assets of the plan, which are held in a trust and are subject to the claims of the Company’s general
−Removed: creditors under federal and state laws in the event of insolvency, are recorded as short-term investments in the consolidated balance sheets.
+Added: The assets of the plan, which are held in a trust and are subject to the claims of the Company’s general creditors under federal and state laws in the event of insolvency, are recorded as short-term investments in the consolidated balance sheets.
Consequently, the trust qualifies as a Rabbi trust for income tax purposes.
−Removed: The plan’s assets consist
−Removed: primarily of mutual funds and are recorded at market value with any unrealized gain or loss recorded as general and administrative expense.
−Removed: During the year ended March 31, 2020 and 2019, the Company redeemed $2,802,000 and $0, respectively, of its
−Removed: short-term investments for the payment of deferred compensation liabilities.
−Removed: During the year ended March 31, 2020, the Company recognized $96,000 in net gains which consists of $193,000 in realized gains on investments sold during the year partially
−Removed: offset by $97,000 of unrealized losses recognized on investments still held at March 31, 2020.
−Removed: The carrying value of plan assets was $850,000 and $3,273,000, and deferred compensation liability, which is included in other current liabilities in the
−Removed: accompanying consolidated balance sheets, was $850,000 and $3,273,000 at March 31, 2020 and 2019, respectively.
−Removed: During the years ended March 31, 2020, 2019, and 2018, an expense of $79,000, $113,000 and $118,000 respectively, was recorded for each year
−Removed: related to the deferred compensation plan.
−Removed: During the year ended March 31, 2020, one of the Company’s named executive officer who was a participant in the deferred compensation plan redeemed $1,432,000 and elected to be paid out over 24 months.
−Removed: At March 31, 2020, approximately $1,295,000
−Removed: remained unpaid, of which $714,000 was recorded in accrued liabilities and $581,000 was recorded in other liabilities in the accompanying consolidated balance sheet.
+Added: The plan’s assets consist primarily of mutual funds and are recorded at market value with any unrealized gain or loss recorded as general and administrative expense.
+Added: The carrying value of plan assets was $ 1,652,000 and $ 850,000 , and the deferred compensation liability, which is included in other current liabilities in the accompanying consolidated balance sheets, was $ 1,652,000 and $ 850,000 at March 31, 2021 and 2020, respectively.
+Added: During the years ended March 31, 2021, 2020, and 2019, the Company made contributions of $ 96,000 , $ 79,000 and $ 113,000 , respectively.
+Added: During the years ended March 31, 2021 and 2020, the Company redeemed $ 46,000 and $ 2,802,000 , respectively, of its short-term investments for the payment of deferred compensation liabilities.
+Added: The following summarizes the gain (loss) on the Company’s equity investments:
+Added: Years Ended March 31,
+Added: Net gain recognized on equity securities
+Added: net gain recognized on equity securities sold
+Added: Unrealized gain (loss) recognized on equity securities still held
Comprehensive Income or Loss
Comprehensive income or loss is defined as the change in equity during a period resulting from transactions and other events and circumstances from non-owner sources.
−Removed: The Company’s total comprehensive income or loss consists of net unrealized income
−Removed: or loss from foreign currency translation adjustments.
−Removed: Mechanical Power Conversion, LLC
−Removed: In December 2018, the Company completed the acquisition of certain assets and assumption of certain liabilities from Mechanical Power Conversion, LLC (“E&M”), a privately held company operating as E&M Power and engaged in the design and
−Removed: manufacture of advanced power emulators (AC and DC) and custom power electronic products, based in Binghamton, New York.
−Removed: Future activity of this business will be recorded via D&V Electronics USA, operating as the Company’s registered DBA (Doing
−Removed: Business As) entity.
−Removed: The addition of new products from E&M increased the Company’s revenue potential and product portfolio.
−Removed: The acquisition was consummated pursuant to an asset purchase agreement for an initial cash purchase price of $4,417,000,
−Removed: plus an additional working capital adjustment of $42,000 paid to the former owners of E&M.
−Removed: In addition, the Company is contingently obligated to make additional payments to the former owners of E&M up to an aggregate of $5,200,000 over the next
−Removed: The initial fair value of the contingent consideration as of the acquisition date was $3,560,000 determined using a probability weighted method and a Monte Carlo Simulation model.
−Removed: Identified intangible assets acquired have the following useful lives:
−Removed: (i) five years for developed technology, (ii) eight years for customer relationships, and (iii) six months for order backlog.
−Removed: The goodwill recorded in connection with the
−Removed: acquisition of E&M is deductible for income tax purposes.
−Removed: The Company incurred $355,000 in acquisition costs during the year ended March 31, 2019, which were recorded in general and administrative expenses.
−Removed: The assets and results of operations of
−Removed: E&M were not significant to the Company’s consolidated financial position or results of operations, and thus pro forma information is not presented.
−Removed: Dixie Electric, Ltd.
−Removed: In January 2019, the Company completed the acquisition of all the equity interests of Dixie Electric, Ltd (“Dixie”), a privately held manufacturer and remanufacturer of alternators and starters for automotive aftermarket non-discretionary
−Removed: replacement parts for heavy-duty truck, industrial, marine and agricultural applications, based in Ontario, Canada.
−Removed: The addition of Dixie is expected to expand the Company’s heavy duty product portfolio.
−Removed: The initial cash purchase price of $8,049,000,
−Removed: which was reduced by a working capital adjustment of $71,000, was paid to the former owners of Dixie.
−Removed: In addition, the Company is contingently obligated to make additional payments to the former owners of Dixie up to $1,130,000 over the next two years.
−Removed: The preliminary fair value of the contingent consideration as of the acquisition date was $840,000 determined using a Monte Carlo Simulation model.
−Removed: Trademarks acquired will have useful life of three years.
−Removed: The Company incurred $576,000 in acquisition costs during the year ended March 31, 2019, which were recorded in general and administrative expenses.
−Removed: The assets and results of operations of
−Removed: Dixie, and in the aggregate with the E&M acquisition, were not significant to the Company’s consolidated financial position or results of operations, and thus pro forma information is not presented.
−Removed: During the year ended March 31, 2020, the Company finalized the purchase price allocation of Dixie with no material adjustments.
+Added: The Company’s total comprehensive income or loss consists of net unrealized income or loss from foreign currency translation adjustments.
Goodwill and Intangible Assets
−Removed: The following summarizes the change in the Company’s goodwill:
−Removed: Years Ended March 31,
−Removed: Balance at beginning of period
−Removed: Goodwill acquired
−Removed: Balance at end of period
+Added: The Company had goodwill of $ 3,205,000 at March 31, 2021 and 2020.
Intangible Assets
6 unchanged sentences
Customer relationships
−Removed: Order backlog
Developed technology
−Removed: During the year ended March 31, 2020, the Company retired $470,000 of fully amortized intangible assets.
+Added: During the years ended March 31, 2021 and 2020, the Company retired $ 291,000 and $ 470,000 , respectively, of fully amortized intangible assets.
Amortization expense for acquired intangible assets is as follows:
4 unchanged sentences
Accounts Receivable — Net
−Removed: Accounts receivable — net includes offset accounts related to customer payment discrepancies, returned goods authorizations (“RGA”) issued for in-transit unit returns, and potential bad debts.
+Added: The Company has trade accounts receivable that result from the sale of goods and services.
+Added: Accounts receivable — net includes offset accounts related to customer payment discrepancies, returned goods authorizations (“RGAs”) issued for in-transit unit returns, and allowances for credit losses.
Accounts receivable — net is comprised of the following:
2 unchanged sentences
Accounts receivable — trade
−Removed: Allowance for bad debts
+Added: Allowance for credit losses
Customer payment discrepancies
2 unchanged sentences
Total accounts receivable — net
+Added: The following table provides a roll-forward of the allowance for credit losses that is deducted from accounts receivable to present the net amount expected to be collected.
+Added: During the year ended March 31, 2021, the Company wrote off amounts previously fully reserved for in connection the bankruptcy filing of one of its customers.
+Added: March 31, 2021
+Added: Balance at beginning of period
+Added: Provision for expected credit losses
+Added: Amounts written off charged against the allowance
+Added: Balance at end of period
Inventory is comprised of the following:
7 unchanged sentences
Contract Assets
+Added: During the year ended March 31, 2021, the Company reduced the carrying value of Remanufactured Cores held at customers’ locations by $ 4,600,000 .
Contract assets are comprised of the following:
4 unchanged sentences
Upfront payments to customers
+Added: Finished goods premiums paid to customers
Core premiums paid to customers
Total short-term contract assets
−Removed: Long-term contract assets
Remanufactured cores held at customers’ locations
Upfront payments to customers
+Added: Finished goods premiums paid to customers
Core premiums paid to customers
2 unchanged sentences
Plant and Equipment
−Removed: Plant and equipment if comprised of the following:
+Added: Plant and equipment is comprised of the following:
March 31, 2021
4 unchanged sentences
Less accumulated depreciation
−Removed: Plant and equipment located in the foreign countries where the Company has facilities, net of accumulated depreciation, totaled $35,410,000 and $25,608,000, of which $31,845,000 and $21,822,000 is located in Mexico, at March 31, 2020 and 2019,
−Removed: respectively.
−Removed: These assets constitute substantially all the long-lived assets of the Company located outside of the United States.
−Removed: The Company is party to a $230,000,000 senior secured financing, (as amended from time to time, the “Credit Facility”) with a syndicate of lenders, and PNC Bank, National Association, as administrative agent, consisting of (i) a $200,000,000
−Removed: revolving loan facility, subject to borrowing base restrictions, a $20,000,000 sublimit for borrowings by Canadian borrowers, and a $15,000,000 sublimit for letters of credit (the “Revolving Facility”) and (ii) a $30,000,000 term loan facility (the
−Removed: “Term Loans”).
+Added: Plant and equipment located in the foreign countries where the Company has facilities, net of accumulated depreciation, totaled $ 45,831,000 and $ 35,410,000 , of which $ 42,215,000 and $ 31,845,000 is located in Mexico, at March 31, 2021 and 2020, respectively.
+Added: The Company is party to a $ 268,620,000 senior secured financing, (as amended from time to time, the “Credit Facility”) with a syndicate of lenders, and PNC Bank, National Association, as administrative agent, consisting of (i) a $ 238,620,000 revolving loan facility, subject to borrowing base restrictions, a $ 24,000,000 sublimit for borrowings by Canadian borrowers, and a $ 20,000,000 sublimit for letters of credit (the “Revolving Facility”) and (ii) a $ 30,000,000 term loan facility (the “Term Loans”).
The loans under the Credit Facility mature on June 5, 2023 .
−Removed: The Credit Facility permits the payment of up to $20,000,000 of dividends and share repurchases per fiscal year, subject to a minimum availability threshold and pro forma
−Removed: compliance with financial covenants.
+Added: The Credit Facility currently permits the payment of up to $ 30,000,000 of dividends and share repurchases for fiscal year 2021, subject to pro forma compliance with financial covenants.
In connection with the Credit Facility, the lenders have a security interest in substantially all of the assets of the Company.
−Removed: In June 2019, the Company entered into a second amendment to the Credit Facility (the “Second Amendment”).
−Removed: The Second Amendment, among other things, (i) increased the total size of the Revolving Facility to $238,620,000, (ii) modified the fixed
−Removed: charge coverage ratio financial covenant, (iii) modified the definition of “Consolidated EBITDA”, (iv) modified the borrowing base definition to, among other things, include brake-related products as eligible inventory, (v) increased the letter of
−Removed: credit sublimit to $20,000,000, (vi) increased the Canadian revolving sublimit and swing line sublimit to $24,000,000, (vii) increased the swing line sublimit to $23,862,000, (viii) permitted up to $5,000,000 of sale and lease back transactions per
−Removed: fiscal year, (ix) increased the permitted amount of certain capital expenditures, (x) increased the permitted amount of operating lease obligations per fiscal year, and (xi) increased certain other covenant-related baskets.
−Removed: The Company capitalized $973,000 of new debt issuance costs in connection with the Second Amendment, which is included in prepaid and other current assets in the consolidated balance sheet at March 31, 2020.
The Term Loans require quarterly principal payments of $ 937,500 .
−Removed: The Credit Facility bears interest at rates equal to either LIBOR plus a margin of 2.25%, 2.50% or 2.75% or a reference rate plus a margin of 1.25%, 1.50% or 1.75%, in each case
−Removed: depending on the senior leverage ratio as of the applicable measurement date.
+Added: The Credit Facility bears interest at rates equal to either LIBOR plus a margin of 2.25 %, 2.50 % or 2.75 % or a reference rate plus a margin of 1.25 %, 1.50 % or 1.75 %, in each case depending on the senior leverage ratio as of the applicable measurement date.
There is also a facility fee of 0.375 % to 0.50 %, depending on the senior leverage ratio as of the applicable measurement date.
−Removed: The interest rate on the Company’s Term Loans
−Removed: and Revolving Facility was 4.34% and 3.64%, at March 31, 2020, respectively, and 5.24% at March 31, 2019.
+Added: The interest rate on the Company’s Term Loans and Revolving Facility was 2.62 % at March 31, 2021, and 4.34 % and 3.64 %, respectively, at March 31, 2020.
The Credit Facility, among other things, requires the Company to maintain certain financial covenants including a maximum senior leverage ratio and a minimum fixed charge coverage ratio.
−Removed: The Company was in compliance
−Removed: with all financial covenants at March 31, 2020.
−Removed: In light of COVID-19, the Company elected not to pay down its Revolving Facility and accumulated cash of $49,616,000 as of March 31, 2020.
−Removed: The Credit Facility only allows up to $6,000,000 of credit for cash when
−Removed: computing the senior leverage ratio.
−Removed: In addition to other covenants, the Credit Facility places limits on the Company’s ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in
−Removed: asset sales, redeem or repurchase capital stock, alter the business conducted by the Company and its subsidiaries, transact with affiliates, prepay, redeem or purchase subordinated debt, and amend or otherwise alter debt agreements.
+Added: The Company was in compliance with all financial covenants at March 31, 2021.
+Added: On May 28, 2021, the Company entered into a third amendment to the Amended Credit Facility (the “Third Amendment”).
+Added: The Third Amendment, among other things, (i) extends the maturity date to May 28, 2026 from June 5, 2023 , (ii) modifies the fixed charge coverage ratio financial covenant, and (iii) modifies the definition of “Consolidated EBITDA”.
+Added: The modifications to the financial covenants were effective as of March 31, 2021.
+Added: The Company had cash of $ 15,523,000 at March 31, 2021 and paid down its outstanding debt by $ 71,750,000 during the year ended March 31, 2021.
+Added: In addition to other covenants, the Credit Facility places limits on the Company’s ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, redeem or repurchase capital stock, alter the business conducted by the Company and its subsidiaries, transact with affiliates, prepay, redeem or purchase subordinated debt, and amend or otherwise alter debt agreements.
The Company’s Term Loans are comprised of the following:
1 unchanged sentence
March 31, 2020
−Removed: Principal amount of term loan
+Added: Principal amount of Term Loans
Unamortized financing fees
−Removed: Net carrying amount of term loan
−Removed: Less current portion of term loan
−Removed: Long-term portion of term loan
+Added: Net carrying amount of Term Loans
+Added: Less current portion of Term Loans
+Added: Long-term portion of Term Loans
Future repayments of the Company’s Term Loans are as follows:
3 unchanged sentences
In addition, $ 6,193,000 was reserved for letters of credit at March 31, 2021.
−Removed: 2020, after certain adjustments, $58,461,000 was available under the Revolving Facility.
+Added: At March 31, 2021, after certain adjustments, $ 125,296,000 was available under the Revolving Facility.
Contract Liabilities
6 unchanged sentences
Customer deposits
+Added: Finished goods liabilities
Core bank liability
−Removed: Accrued core payment, net
+Added: Accrued core payment
Total short-term contract liabilities
2 unchanged sentences
Customer allowances earned
+Added: Finished goods liabilities
Core bank liability
−Removed: Accrued core payment, net
+Added: Accrued core payment
Total long-term contract liabilities
The Company leases various facilities in North America and Asia under operating leases expiring through August 2033.
−Removed: During the year ended March 31, 2020, the lease of the Company’s 199,000 square foot remanufacturing facility in Mexico commenced,
−Removed: resulting in an increase in the operating lease liability of $16,245,000.
−Removed: The Company has one non-cancellable lease agreement for a building in Mexico, which was executed, but had not commenced as of March 31, 2020, and accordingly was not included in
−Removed: the operating lease assets and operating lease liabilities as of March 31, 2020.
−Removed: Total commitments for this agreement, which expires in December 2032, are $12,538,000.
−Removed: In addition, the Company has a non-cancellable lease agreement for the renewal of a
−Removed: building lease in Canada, which was executed, but had not yet commenced as of March 31, 2020, and accordingly was not included in the operating lease assets and operating lease liabilities as of March 31, 2020.
−Removed: Total commitments for this agreement,
−Removed: which expires in May 2023, are $4,299,000.
−Removed: Both of these operating leases are expected to commence early in the Company’s fiscal year ending March 31, 2021.
−Removed: The Company also has finance leases for certain office and manufacturing equipment, which
−Removed: generally range from three to five years.
−Removed: The Company determines if an arrangement contains a lease at inception.
−Removed: Lease assets and lease liabilities are recorded based on the present value of lease payments over the lease term, which includes the minimum unconditional term of the lease.
−Removed: Certain of the Company’s leases include options to extend the leases for up to five years.
−Removed: When the Company has the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is
−Removed: reasonably certain that it will exercise the option, the option is considered in determining the classification and measurement of the lease.
−Removed: The lease assets are recorded net of any lease incentives received.
−Removed: Lease assets are tested for impairment in
−Removed: the same manner as long-lived assets used in operations.
−Removed: As the rate implicit for each of its leases is not readily determinable, the Company uses its incremental borrowing rate, based on the information available at the lease commencement date, for each of its leases in determining the present value of
−Removed: its expected lease payments.
−Removed: The Company’s incremental borrowing rate is determined by analyzing and combining an applicable risk-free rate, a financial spread adjustment and any lease specific adjustment.
−Removed: Certain leases contain provisions for
−Removed: property-related costs that are variable in nature for which the Company is responsible, including common area maintenance and other property operating services, which are expensed as incurred and not included in the determination of lease assets and
−Removed: lease liabilities.
−Removed: These costs are calculated based on a variety of factors including property values, tax and utility rates, property services fees, and other factors.
−Removed: The Company records rent expense for operating leases, some of which have
−Removed: escalating rent payments, on a straight-line basis over the lease term.
−Removed: The Company has material nonfunctional currency leases that could have a material impact on the Company’s consolidated statements of operations.
−Removed: As required for other monetary liabilities, lessees shall remeasure a foreign currency-denominated lease
−Removed: liability using the exchange rate at each reporting date, but the lease assets are nonmonetary assets measured at historical rates, which are not affected by subsequent changes in the exchange rates.
−Removed: The Company recorded a loss of $11,710,000 in
−Removed: general and administrative expenses in connection with the remeasurement of foreign currency-denominated lease liabilities during year ended March 31, 2020.
+Added: During the year ended March 31, 2021, the following material operating leases commenced:
+Added: (i) the lease of the Company’s 173,000 square foot core induction, warehouse, and office facility in Mexico, which resulted in an increase in the operating lease liability of $ 12,724,000 and (ii) the renewal of the Company’s 157,000 square foot remanufacturing, warehouse, and office facility in Canada, which resulted in an increase in the operating lease liability of $ 2,715,000 .
+Added: During the first quarter of fiscal 2022, the Company renewed the lease for its corporate headquarters in Torrance, California, for an additional 10 -year period, and accordingly it is not included in the operating lease assets and operating lease liabilities as of March 31, 2021.
+Added: Total commitments for this agreement, which expires in March 2032 , are $ 20,789,000 .
+Added: The Company also has finance leases for certain office and manufacturing equipment, which generally range from three to five years .
+Added: The Company has material non-functional currency leases, which resulted in a remeasurement gain of $ 9,893,000 compared with a loss of $ 11,710,000 during the years ended March 31, 2021 and 2020, respectively.
+Added: These remeasurement gains and losses are included in “foreign exchange impact of lease liabilities and forward contracts” in the consolidated statements of operations.
Balance sheet information for leases is comprised of the following:
March 31, 2021
+Added: March 31, 2020
Classification
7 unchanged sentences
Total lease liabilities
−Removed: The Company had $5,403,000 in capital lease assets included in plant and equipment at March 31, 2019.
Lease cost recognized in the consolidated statement of operations is comprised of the following:
−Removed: Year Ended March 31,
+Added: Years Ended March 31,
Operating lease cost (1)
5 unchanged sentences
Total lease cost
−Removed: During the years ended March 31, 2019 and 2018, the Company incurred total operating lease expenses of $6,188,000 and $4,362,000, respectively.
+Added: During the year ended March 31, 2019, the Company incurred total operating lease expenses of $ 6,188,000 .
Maturities of lease commitments at March 31, 2021 were as follows:
5 unchanged sentences
Present value of lease liabilities
−Removed: Maturities of lease commitments at March 31, 2019 were as follows:
−Removed: Maturity of lease liabilities
−Removed: Operating Leases
−Removed: Capital Leases
−Removed: Total lease payments
−Removed: Less amount representing interest
−Removed: Present value of lease liabilities
Other information about leases is as follows:
−Removed: Year Ended March 31,
+Added: March 31, 2021
+Added: March 31, 2020
Lease term and discount rate
7 unchanged sentences
The Company uses receivable discount programs with certain customers and their respective banks.
−Removed: Under these programs, the Company may sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are
+Added: Under these programs, the Company may sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold.
These discount arrangements allow the Company to accelerate receipt of payment on customers’ receivables.
10 unchanged sentences
The Company’s primary risk exposure is from fluctuations in the value of the Mexican peso and to a lesser extent the Chinese yuan.
−Removed: To mitigate these risks, the Company enters into forward foreign currency exchange
−Removed: contracts to exchange U.S.
+Added: To mitigate these risks, the Company enters into forward foreign currency exchange contracts to exchange U.S.
dollars for these foreign currencies.
−Removed: The extent to which forward foreign currency exchange contracts are used is modified periodically in response to the Company’s estimate of market conditions and the terms and length of
−Removed: anticipated requirements.
+Added: The extent to which forward foreign currency exchange contracts are used is modified periodically in response to the Company’s estimate of market conditions and the terms and length of anticipated requirements.
The Company enters into forward foreign currency exchange contracts in order to reduce the impact of foreign currency fluctuations and not to engage in currency speculation.
−Removed: The use of derivative financial instruments allows the Company to reduce
−Removed: its exposure to the risk that the eventual cash outflow resulting from funding the expenses of the foreign operations will be materially affected by changes in exchange rates between the U.S.
+Added: The use of derivative financial instruments allows the Company to reduce its exposure to the risk that the eventual cash outflow resulting from funding the expenses of the foreign operations will be materially affected by changes in exchange rates between the U.S.
dollar and the foreign currencies.
−Removed: The Company does not hold
−Removed: or issue financial instruments for trading purposes.
+Added: The Company does not hold or issue financial instruments for trading purposes.
The forward foreign currency exchange contracts are designated for forecasted expenditure requirements to fund foreign operations.
1 unchanged sentence
dollar equivalent notional value of $ 41,819,000 and $ 42,052,000 at March 31, 2021 and 2020, respectively.
−Removed: These contracts generally have a term of one year or less, at rates
−Removed: agreed at the inception of the contracts.
+Added: These contracts generally have a term of one year or less, at rates agreed at the inception of the contracts.
The counterparty to this derivative transaction is a major financial institution with investment grade credit rating;
however, the Company is exposed to credit risk with this institution.
−Removed: The credit risk is
−Removed: limited to the potential unrealized gains (which offset currency fluctuations adverse to the Company) in any such contract should this counterparty fail to perform as contracted.
−Removed: Any changes in the fair values of forward foreign currency exchange
−Removed: contracts are reflected in current period earnings and accounted for as an increase or offset to general and administrative expenses.
+Added: The credit risk is limited to the potential unrealized gains (which offset currency fluctuations adverse to the Company) in any such contract should this counterparty fail to perform as contracted.
+Added: Any changes in the fair values of forward foreign currency exchange contracts are included in “foreign exchange impact of lease liabilities and forward contracts” in the consolidated statements of operations .
The following shows the effect of the Company’s derivative instruments on its consolidated statements of operations:
−Removed: Gain (Loss) Recognized within General and Administrative Expenses
+Added: Gain (Loss) Recognized as Foreign Exchange Impact of Lease Liabilities and Forward Contracts
Derivatives Not Designated as
2 unchanged sentences
Forward foreign currency exchange contracts
+Added: The fair value of the forward foreign currency exchange contracts of $ 1,429,000 is included in prepaid and other current assets in the consolidated balance sheet at March 31, 2021.
The fair value of the forward foreign currency exchange contracts of $ 6,284,000 is included other current liabilities in the accompanying consolidated balance sheet at March 31, 2020.
−Removed: The fair value of the forward foreign currency exchange contracts
−Removed: of $207,000 is included in prepaid and other current assets in the accompanying consolidated balance sheet at March 31, 2019.
−Removed: The changes in the fair values of forward foreign currency exchange contracts are included in other liabilities in the
−Removed: consolidated statements of cash flows for the years ended March 31, 2020, 2019, and 2018.
+Added: The changes in the fair values of forward foreign currency exchange contracts are included in “foreign exchange impact of lease liabilities and forward contracts” in the consolidated statements of cash flows for the years ended March 31, 2021, 2020, and 2019.
Fair Value Measurements
−Removed: The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
−Removed: participants on the measurement date.
+Added: The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
The Company uses a three-tier valuation hierarchy based upon observable and unobservable inputs:
Level 1 — Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities.
−Removed: Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the
−Removed: financial instrument.
+Added: Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 — Valuation is based upon unobservable inputs that are significant to the fair value measurement.
The fair value hierarchy requires the use of observable market data when available.
−Removed: In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined
−Removed: based on the lowest level input that is significant to the fair value measurement in its entirety.
−Removed: The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the
−Removed: consideration of inputs specific to the asset or liability.
−Removed: The following sets forth by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis according to the valuation techniques the Company used to determine their
−Removed: fair values at:
+Added: In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.
+Added: The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.
+Added: The following sets forth by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis according to the valuation techniques the Company used to determine their fair values at:
March 31, 2021
4 unchanged sentences
Using Inputs Considered as
−Removed: Short-term investments Mutual funds
+Added: Short-term investments
Prepaid expenses and other current assets
9 unchanged sentences
The Company’s short-term investments, which fund its deferred compensation liabilities, consist of investments in mutual funds.
−Removed: These investments are classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and
−Removed: volume to enable the Company to obtain pricing information on an ongoing basis.
+Added: These investments are classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.
Forward Foreign Currency Exchange Contracts
−Removed: The forward foreign currency exchange contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers.
−Removed: During the years ended March 31, 2020 and 2019, losses of $6,491,000 and
−Removed: $972,000, respectively, were recorded in general and administrative expenses due to the change in the value of the forward foreign currency exchange contracts.
+Added: The forward foreign currency exchange contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers (See Note 12).
Contingent Consideration
−Removed: In December 2018, the Company completed the acquisition of certain assets and assumption of certain liabilities from E&M.
−Removed: In connection with this acquisition, the Company is contingently obligated to make additional payments to the former owners
−Removed: of E&M up to an aggregate of $5,200,000 over the next three years.
−Removed: In January 2019, the Company completed the acquisition of all the equity interests of Dixie.
−Removed: In connection with this acquisition, the Company is contingently obligated to make additional payments to the former owners of Dixie up to $1,130,000 over
−Removed: the next two years.
−Removed: The Company’s contingent consideration is recorded in accrued expenses and other liabilities in its consolidated balance sheets at March 31, 2020 and 2019, and is a Level 3 liability measured at fair value.
+Added: In December 2018, the Company completed the acquisition of certain assets and assumption of certain liabilities from Mechanical Power Conversion, LLC (“E&M”).
+Added: In connection with this acquisition, the Company is contingently obligated to make additional payments to the former owners of E&M up to an aggregate of $ 5,200,000 over a three-year period.
E&M Research and Development (“R&D”) Event Milestone
−Removed: The fair value of the two-year R&D event milestone based on technology development and transfer was $1,130,000 and $2,190,000 at March 31, 2020 and 2019, respectively, determined using a probability weighted method with commensurate with the
−Removed: term of the contingent consideration.
−Removed: The assumptions used to determine the fair value is as follows:
−Removed: March 31, 2020
−Removed: Risk free interest rate
−Removed: Counter party rate
−Removed: The assumptions used to determine fair value of the two-year R&D event milestone at March 31, 2019 is as follows:
−Removed: (i) a risk-free interest rate ranging from 2.30% to 2.41%, (ii) counter party risk discount rate ranging from 6.30% to 6.41%, and
−Removed: (iii) total probability of 90% to 100%.
−Removed: Any subsequent changes in the fair value of the contingent consideration liability will be recorded in current period earnings as a general and administrative expense.
+Added: In connection with the Company’s E&M acquisition in December 2018, it had a two-year R&D event milestone based on technology development and transfer.
+Added: The milestone was achieved and, as a result, the Company paid $ 1,250,000 to the former owners of E&M during the year ended March 31, 2021.
+Added: The fair value of the two-year R&D event milestone was $ 1,130,000 at March 31, 2020, determined using a probability weighted method with commensurate with the term of the contingent consideration.
E&M Gross Profit Earn-out Consideration
The fair value of the three-year gross profit earn-out consideration was $ 910,000 and $ 1,230,000 at March 31, 2021 and 2020, respectively, determined using a Monte Carlo Simulation Model.
+Added: Any subsequent changes in the fair value of the contingent consideration liability will be recorded in current period earnings as a general and administrative expense.
+Added: The second year milestone was achieved and, as a result, the Company paid $ 723,000 to the former owners of E&M during the year ended March 31, 2021.
The assumptions used to determine the fair value is as follows:
5 unchanged sentences
Weighted average cost of capital
−Removed: Any subsequent changes in the fair value of the contingent consideration liability will be recorded in current period earnings as a general and administrative expense.
Dixie Revenue Earn-out Consideration
−Removed: The fair value of the two-year revenue earn-out consideration was $293,000 and $871,000 at March 31, 2020 and 2019, respectively, determined using a Monte Carlo Simulation Model.
−Removed: The assumptions used to determine the fair value is as follows:
−Removed: March 31, 2020
−Removed: March 31, 2019
−Removed: Risk free interest rate
−Removed: Counter party rate
−Removed: Revenue discount rate
−Removed: Expected volatility
−Removed: Revenue volatility
−Removed: Any subsequent changes in the fair value of the contingent consideration liability will be recorded in current period earnings as a general and administrative expense.
+Added: In January 2019, the Company completed the acquisition of all the equity interests of Dixie.
+Added: In connection with this acquisition, the Company was contingently obligated to make additional payments to the former owners of Dixie up to $ 1,130,000 over a two-year period.
+Added: The fair value of the two-year revenue earn-out consideration was $ 0 and $ 293,000 at March 31, 2021 and 2020, determined using a Monte Carlo Simulation Model.
The following table summarizes the activity for financial assets and liabilities utilizing Level 3 fair value measurements:
8 unchanged sentences
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these instruments.
−Removed: The carrying amounts of the revolving loan, term loan
−Removed: and other long-term liabilities approximate their fair value based on the variable nature of interest rates and current rates for instruments with similar characteristics.
−Removed: Fair value assessments of the reporting unit and the reporting unit's net assets, which are performed for goodwill impairment tests, are considered Level 3 measurements due to the significance of unobservable inputs developed using company specific
−Removed: The Company considered a market approach as well as an income approach (a DCF model) to determine the fair value of the reporting unit.
−Removed: Refer to Financial Note 2, “Significant Accounting Policies for more information regarding goodwill impairment assumptions.
−Removed: Long-lived Assets and Intangible Assets
−Removed: The Company utilizes multiple approaches including the DCF model and market approaches for estimating the fair value of long-lived assets and intangible assets.
−Removed: The future cash flows used in the analysis are based on internal cash flow projections
−Removed: from its long-range plans and include significant assumptions by management.
−Removed: Accordingly, the fair value assessment of the long-lived assets and intangible assets are considered Level 3 fair value measurements.
−Removed: The Company measures certain long-lived and intangible assets at fair value on a nonrecurring basis when events occur that indicate an asset group may not be recoverable.
−Removed: If the carrying amount of an asset group is not recoverable, an impairment
−Removed: charge is recorded to reduce the carrying amount by the excess over its fair value.
+Added: The carrying amounts of the revolving loan, term loan and other long-term liabilities approximate their fair value based on the variable nature of interest rates and current rates for instruments with similar characteristics.
Commitments and Contingencies
1 unchanged sentence
The Company allows its customers to return goods that their consumers have returned to them, whether or not the returned item is defective (“warranty returns”).
−Removed: The Company accrues an estimate of its exposure to warranty
−Removed: returns based on a historical analysis of the level of this type of return as a percentage of total unit sales.
+Added: The Company accrues an estimate of its exposure to warranty returns based on a historical analysis of the level of this type of return as a percentage of total unit sales.
Amounts charged to expense for these warranty returns are considered in arriving at the Company’s net sales.
5 unchanged sentences
Amounts processed
+Added: ( 108,232,000
+Added: ( 113,765,000
+Added: ( 108,713,000
Balance at end of year
2 unchanged sentences
The Company has or is renegotiating long-term agreements with many of its major customers.
−Removed: Under these agreements, which in most cases have initial terms of at least four years, the Company is designated as the exclusive or primary supplier for
−Removed: specified categories of the Company’s products.
−Removed: Because of the very competitive nature of the market and the limited number of customers for these products, the Company’s customers have sought and obtained price concessions, significant marketing
−Removed: allowances, and more favorable delivery and payment terms in consideration for the Company’s designation as a customer’s exclusive or primary supplier.
−Removed: These incentives differ from contract to contract and can include (i) the issuance of a specified
−Removed: amount of credits against receivables in accordance with a schedule set forth in the relevant contract, (ii) support for a particular customer’s research or marketing efforts provided on a scheduled basis, (iii) discounts granted in connection with
−Removed: each individual shipment of product, and (iv) other marketing, research, store expansion or product development support.
+Added: Under these agreements, which in most cases have initial terms of at least four years , the Company is designated as the exclusive or primary supplier for specified categories of the Company’s products.
+Added: Because of the very competitive nature of the market and the limited number of customers for these products, the Company’s customers have sought and obtained price concessions, significant marketing allowances, and more favorable delivery and payment terms in consideration for the Company’s designation as a customer’s exclusive or primary supplier.
+Added: These incentives differ from contract to contract and can include (i) the issuance of a specified amount of credits against receivables in accordance with a schedule set forth in the relevant contract, (ii) support for a particular customer’s research or marketing efforts provided on a scheduled basis, (iii) discounts granted in connection with each individual shipment of product, and (iv) other marketing, research, store expansion or product development support.
These contracts typically require that the Company meet ongoing performance standards.
−Removed: The Company’s contracts with its customers
−Removed: expire at various dates through December 2024.
+Added: The Company’s contracts with its customers expire at various dates through December 2024.
While these longer-term agreements strengthen the Company’s customer relationships, the increased demand for the Company’s products often requires that the Company increase its inventories and personnel.
2 unchanged sentences
Such allowances include sales incentives and concessions and typically consist of:
−Removed: (i) allowances which may only be applied against future purchases and are recorded as a reduction to revenues in accordance with a schedule set forth in the long-term
−Removed: contract, (ii) allowances related to a single exchange of product that are recorded as a reduction of revenues at the time the related revenues are recorded or when such incentives are offered, and (iii) amortization of core premiums paid to customers
−Removed: generally in connection with new business.
+Added: (i) allowances which may only be applied against future purchases and are recorded as a reduction to revenues in accordance with a schedule set forth in the long-term contract, (ii) allowances related to a single exchange of product that are recorded as a reduction of revenues at the time the related revenues are recorded or when such incentives are offered, and (iii) amortization of core premiums paid to customers generally in connection with new business.
The following summarizes the breakout of allowances discussed above, recorded as a reduction to revenues:
10 unchanged sentences
In addition, government agencies and self-regulatory organizations have the ability to conduct periodic examinations of and administrative proceedings regarding the Company’s business.
−Removed: an audit in fiscal 2019, the U.S.
+Added: Following an audit in fiscal 2019, the U.S.
Customs and Border Protection stated that it believed that the Company owed additional duties of approximately $ 17 million from 2011 through mid-2018 relating to products that it imported from Mexico.
−Removed: The Company does
−Removed: not believe that this amount is correct and believes that it has numerous defenses and intends to dispute this amount vigorously.
+Added: The Company does not believe that this amount is correct and believes that it has numerous defenses and is disputing this amount vigorously.
The Company cannot assure that the U.S.
−Removed: Customs and Border Protection will agree or that it will not need to accrue or pay
−Removed: additional amounts in the future.
+Added: Customs and Border Protection will agree or that it will not need to accrue or pay additional amounts in the future.
Significant Customer and Other Information
15 unchanged sentences
No suppliers accounted for more than 10% of the Company’s inventory purchases for the years ended March 31, 2021, 2020, and 2019.
−Removed: In response to the COVID-19 pandemic, the CARES Act was signed into law on March 27, 2020.
−Removed: The CARES Act:
−Removed: (i) removes certain net operating loss deduction and carry-back limitations originally imposed by the Tax Cuts and Jobs Act of 2017, (ii)
−Removed: increases IRC §163(j) business interest expense limitations, and (iii) technical correction on recovery period for qualified improvement property (QIP), allowing QIP to be eligible for bonus depreciation.
−Removed: Specifically, the Company may now carry back
−Removed: net operating losses originating in the year ended March 31, 2019 to the year ended March 31, 2017, resulting in an increase to its income tax receivable of $1,002,000 as of March 31, 2020.
−Removed: On December 22, 2017, comprehensive tax reform legislation known as the Act was signed into law.
−Removed: The Act amended the Internal Revenue Code to reduce U.S.
−Removed: tax rates and modify policies, credits and deductions for individuals and businesses.
−Removed: The income tax expense is as follows:
+Added: The income tax expense (benefit) is as follows:
Years Ended March 31,
2 unchanged sentences
Deferred tax (benefit) expense
−Removed: Total deferred tax (benefit) expense
−Removed: Total income tax (benefit) expense
+Added: Total deferred tax benefit
+Added: Total income tax expense (benefit)
Deferred income taxes consist of the following:
16 unchanged sentences
Less valuation allowance
−Removed: Adoption of the new lease standard as of April 1, 2019 (see Note 2) resulted in the recognition of a deferred tax asset for operating lease liabilities and a deferred tax liability for operating lease assets.
−Removed: These temporary differences will
−Removed: reverse over the estimated term of the relevant operating leases.
−Removed: As of March 31, 2019, the deferred tax assets associated with operating leases were reported as other deferred tax assets under legacy US GAAP.
−Removed: As of March 31, 2020, the Company had state net operating loss carryforwards of $1,689,000 and foreign net operating loss carryforwards of $14,953,000.
−Removed: The state net operating loss carryforwards expire beginning fiscal year 2034, and the foreign net
−Removed: operating loss carryforwards expire beginning fiscal year 2038.
−Removed: As of March 31, 2020, the Company also had investment tax credits carryforward of $1,343,000, which will expire beginning fiscal year 2032.
−Removed: A full valuation allowance was established on
−Removed: the foreign net operating loss and tax credits carryforward as the Company believes it is more likely than not these tax attributes would not be realizable in the future.
+Added: As of March 31, 2021, the Company had federal net operating loss carryforwards of $ 828,000 related to its January 2019 acquisition, state net operating loss carryforwards of $ 1,130,000 and foreign net operating loss carryforwards of $ 14,931,000 .
+Added: The federal net operating loss carryforwards expire beginning fiscal year 2033 , the state net operating loss carryforwards expire beginning fiscal year 2033 , and the foreign net operating loss carryforwards expire beginning fiscal year 2038 .
+Added: As of March 31, 2021, the Company also had non-US tax credit carryforwards of $ 1,828,000 , which will expire beginning fiscal year 2034 .
+Added: A full valuation allowance was established on the federal and foreign net operating loss and tax credits carryforward as the Company believes it is more likely than not these tax attributes would not be realizable in the future.
+Added: The net increase in the valuation allowance was $ 670,000 during the year ended March 31, 2021.
Realization of deferred tax assets is dependent upon the Company’s ability to generate sufficient future taxable income.
−Removed: Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities
−Removed: and any valuation allowance recorded against the Company’s net deferred tax assets.
+Added: Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred tax assets.
The Company makes these estimates and judgments about its future taxable income that are based on assumptions that are consistent with the Company’s future plans.
−Removed: valuation allowance is established when the Company believes it is not more likely than not all or some of a deferred tax assets will be realized.
−Removed: In evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they
−Removed: arise, the Company considers all available positive and negative evidence.
−Removed: Deferred tax assets arising primarily as a result of non-US net operating loss carry-forwards and non-US research and development credits in connection with the Company’s
−Removed: acquisitions have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods.
+Added: A valuation allowance is established when the Company believes it is not more likely than not all or some of a deferred tax assets will be realized.
+Added: In evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they arise, the Company considers all available positive and negative evidence.
+Added: Deferred tax assets arising primarily as a result of non-US net operating loss carry-forwards and non-US research and development credits in connection with the Company’s Canadian operations have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods.
Should the actual amount differ from the Company’s estimates, the amount of the valuation allowance could be impacted.
−Removed: For the years ended March 31, 2020, 2019, and 2018, the primary components of the Company’s income tax expense were:
−Removed: (i) federal income taxes, (ii) the impact of net operating loss carry-backs in connection with the CARES Act, (iii) foreign income
−Removed: taxed at rates that are different from the federal statutory rate, (iv) change in realizable deferred tax items, (v) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m), (vi) income taxes associated with
−Removed: uncertain tax positions, (vii) the change in the blended state rate, and (viii) the excess tax benefit relating to share-based compensation.
+Added: For the years ended March 31, 2021, 2020, and 2019, the primary components of the Company’s income tax expense were (i) federal income taxes, (ii) state income taxes, (iii) foreign income taxed at rates that are different from the federal statutory rate, (iv) change in realizable deferred tax items, (v) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m), (vi) income taxes associated with uncertain tax positions, and (vii) the impact of net operating loss carry-backs in connection with the CARES Act.
The difference between the income tax expense at the federal statutory rate and the Company’s effective tax rate is as follows:
8 unchanged sentences
Net operating loss carryback
−Removed: Effects of mandatory redeemed repatriation
−Removed: Effects of U.S.
−Removed: tax rate changes
Uncertain tax positions
4 unchanged sentences
federal jurisdiction and various state and foreign jurisdictions with varying statutes of limitations.
−Removed: At March 31, 2020, the Company is not under examination in any jurisdiction
−Removed: and the years ended March 31, 2019, 2018, 2017, and 2016 remain subject to examination.
+Added: At March 31, 2021, the Company is not under examination in any jurisdiction and the years ended March 31, 2017 through 2020 remain subject to examination.
The Company believes no significant changes in the unrecognized tax benefits will occur within the next 12 months.
3 unchanged sentences
Additions based on tax positions related to the current year
+Added: Additions for tax positions of prior year
Reductions for tax positions of prior year
2 unchanged sentences
The Company recognizes interest and penalties accrued related to unrecognized tax benefits as part of income tax expense.
−Removed: During the years ended March 31, 2020, 2019, and 2018, the Company recognized approximately $(50,000), $(23,000), and $5,000 in
−Removed: interest and penalties, respectively.
+Added: During the years ended March 31, 2021, 2020, and 2019, the Company recognized approximately $( 16,000 ), $( 50,000 ), and $( 23,000 ) in interest and penalties, respectively.
The Company had approximately $ 58,000 and $ 74,000 for the payment of interest and penalties accrued at March 31, 2021 and 2020, respectively.
+Added: The Company intends to indefinitely reinvest its undistributed earnings from foreign subsidiaries in foreign operations and no incremental U.S.
+Added: tax or withholding taxes have been provided for these earnings.
Defined Contribution Plans
The Company has a 401(k) plan covering all employees who are 21 years of age with at least six months of service.
−Removed: The plan permits eligible employees to make contributions up to certain limitations, with the Company matching 50% of each
−Removed: participating employee’s contribution up to the first 6% of employee compensation.
+Added: The plan permits eligible employees to make contributions up to certain limitations, with the Company matching 50 % of each participating employee’s contribution up to the first 6 % of employee compensation.
Employees are immediately vested in their voluntary employee contributions and vest in the Company’s matching contributions ratably over five years .
−Removed: The Company’s
−Removed: matching contribution to the 401(k) plan was $496,000, $445,000, and $389,000 for the years ended March 31, 2020, 2019, and 2018, respectively.
+Added: The Company’s matching contribution to the 401(k) plan was $ 507,000 , $ 496,000 , and $ 445,000 for the years ended March 31, 2021, 2020, and 2019, respectively.
Share-based Payments
At March 31, 2021 , there were 342,000 shares of the Company’s common stock reserved for grants to the Company’s non-employee directors under the 2014 Non-Employee Director Incentive Award Plan (the “2014 Plan”).
−Removed: Under the 2014 Plan, (i) 53,784 and
−Removed: 40,238 of restricted stock units were issued and (ii) 143,909 and 201,084 shares of common stock were available for grant under this plan at March 31, 2020 and 2019, respectively.
+Added: Under the 2014 Plan, (i) 69,732 and 53,784 of restricted stock units were outstanding and (ii) 76,746 and 143,909 shares of common stock were available for grant under this plan at March 31, 2021 and 2020, respectively.
At March 31, 2021, there were 5,150,000 shares of common stock reserved for grant to all employees of the Company under the 2010 Incentive Award Plan (the “2010 Plan”).
−Removed: Under the 2010 Plan, (i) 148,199 and 127,896 shares of restricted stock units
−Removed: were outstanding, (ii) options to purchase 1,485,123 and 1,274,165 shares of common stock were outstanding, (iii) none and 75,000 restricted shares were outstanding, and (iv) 629,823 and 1,040,728 shares of common stock were available for grant at
−Removed: March 31, 2020 and 2019, respectively.
+Added: Under the 2010 Plan, (i) 184,752 and 148,199 shares of restricted stock units were outstanding, (ii) options to purchase 1,714,885 and 1,485,123 shares of common stock were outstanding, (iii) 100,000 and no restricted shares were outstanding, and (iv) 1,267,802 and 629,823 shares of common stock were available for grant at March 31, 2021 and 2020, respectively.
In addition, at March 31, 2021 and 2020, options to purchase 30,000 and 51,000 shares of common stock, respectively, were outstanding under the 2004 Non-Employee Director Stock Option Plan.
9 unchanged sentences
Based on the market value of the Company’s common stock at March 31, 2021, 2020, and 2019, the pre-tax intrinsic value of options exercised was $ 546,000 , $ 508,000 , and $ 788,000 , respectively.
−Removed: The total fair value of stock options vested during the
−Removed: years ended March 31, 2020, 2019, and 2018 was $2,189,000, $1,973,000, and $1,572,000, respectively.
+Added: The total fair value of stock options vested during the years ended March 31, 2021, 2020, and 2019 was $ 2,184,000 , $ 2,189,000 , and $ 1,973,000 , respectively.
The following summarizes information about the options outstanding at March 31, 2021:
9 unchanged sentences
At March 31, 2021, there was $ 2,745,000 of total unrecognized compensation expense from stock-based compensation granted under the plans, which is related to non-vested shares.
−Removed: The compensation expense is expected to be recognized over a weighted
−Removed: average vesting period of 1.8 years.
+Added: The compensation expense is expected to be recognized over a weighted average vesting period of 1.8 years.
Restricted Stock Units and Restricted Stock (collectively “RSUs”)
−Removed: During the years ended March 31, 2020 and 2019 the Company granted 113,483 and 179,725 shares of RSUs, respectively, with an estimated grant date fair value of $2,112,000 and $3,490,000, respectively, which was based on the closing market price on
−Removed: the date of grant.
+Added: During the years ended March 31, 2021 and 2020 the Company granted 251,801 and 113,483 shares of RSUs, respectively, with an estimated grant date fair value of $ 4,150,000 and $ 2,112,000 , respectively, which was based on the closing market price on the date of grant.
The fair value related to these awards is recognized as compensation expense over the vesting period.
−Removed: These awards generally vest in three equal installments beginning each anniversary from the grant date, subject to continued
+Added: These awards generally vest in three equal installments beginning each anniversary from the grant date, subject to continued employment.
Upon vesting, these awards may be net share settled to cover the required withholding tax with the remaining amount converted into an equivalent number of shares of common stock.
−Removed: Total shares withheld during the years ended March 31, 2020
−Removed: and 2019 were 58,802 and 14,959, respectively, based on the value of these awards as determined by the Company’s closing stock price on the vesting date.
+Added: Total shares withheld during the years ended March 31, 2021 and 2020 were 22,202 and 58,802 , respectively, based on the value of these awards as determined by the Company’s closing stock price on the vesting date.
The following is a summary of non-vested RSUs:
4 unchanged sentences
As of March 31, 2021, there was $ 3,637,000 of unrecognized compensation expense related to these awards, which will be recognized over the remaining vesting period of approximately 1.6 years.
−Removed: Accumulated Other Comprehensive Loss
−Removed: The changes in accumulated other comprehensive loss are as follows:
−Removed: March 31, 2020
−Removed: March 31, 2019
−Removed: on Short-Term
−Removed: Balance at March 31, 2019 and 2018
−Removed: Cumulative-effect adjustment
−Removed: Balance at April 1, 2019 and 2018
−Removed: Other comprehensive loss, net of tax
−Removed: Balance at March 31, 2020 and 2019
+Added: Share Repurchase Program
+Added: The Company’s board of directors approved a stock repurchase program of up to $ 37,000,000 of its common stock.
+Added: During the years ended March 31, 2021 and 2019, the Company repurchased 54,960 and 163,815 shares of its common stock, respectively, for $ 1,139,000 and $ 4,062,000 , respectively.
+Added: During the year ended March 31, 2020 the Company did no t repurchase any shares of its common stock.
+Added: As of March 31, 2021, $ 16,831,000 was utilized and $ 20,169,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in the Company’s Credit Facility.
+Added: The Company retired the 730,521 shares repurchased under this program through March 31, 2021.
+Added: The Company’s share repurchase program does not obligate it to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.
Subsequent Event
−Removed: In light of the COVID-19 pandemic, the Company has taken proactive steps to manage its costs and bolster its liquidity, including increasing the level of receivables collected under its receivable discount programs.
−Removed: During April 2020, the Company
−Removed: collected $59,730,000 of receivables under these programs, with $1,552,000 in interest expense associated with these accounts receivable sales, which was higher than its average monthly utilization of these programs.
−Removed: Additionally, as part of the cost reduction measures implemented by the Company in response to the impact of the COVID-19 pandemic on its business, executive committee members have all agreed to at least a 25% reduction in base salary, until the
−Removed: Company believes it is fiscally responsible to reinstate the original base salaries.
−Removed: The Company’s Board of Directors agreed to defer all board and committee fees and retainers, as well as waive any fees related to weekly board check in meetings, as
−Removed: long as the executive committee continues with a base salary reduction.
−Removed: The Company continues to analyze its cost structure and may implement additional cost reduction measures as may be necessary due to the on-going economic challenges resulting from
−Removed: the COVID-19 pandemic.
+Added: Credit Facility
+Added: On May 28, 2021, the Company entered into a third amendment to the Amended Credit Facility (the “Third Amendment”).
+Added: The Third Amendment, among other things, (i) extends the maturity date to May 28, 2026 from June 5, 2023 , (ii) modifies the fixed charge coverage ratio financial covenant, and (iii) modifies the definition of “Consolidated EBITDA”.
+Added: The modifications to the financial covenants were effective as of March 31, 2021.
Unaudited Quarterly Financial Data
5 unchanged sentences
Research and development
+Added: Foreign exchange impact of lease liabilities and forward contracts
Total operating expenses
−Removed: Operating (loss) income
+Added: Operating income
Other expense:
Interest expense, net
−Removed: (Loss) income before income tax (benefit) expense
−Removed: Income tax (benefit) expense
−Removed: Net (loss) income
−Removed: Basic net (loss) income per share
−Removed: Diluted net (loss) income per share
+Added: Income (loss) before income tax expense (benefit)
+Added: Income tax expense (benefit)
+Added: Net income (loss)
+Added: Basic net income (loss) per share
+Added: Diluted net income (loss) per share
The following summarizes selected quarterly financial data for the year ended March 31, 2020:
4 unchanged sentences
Research and development
+Added: Foreign exchange impact of lease liabilities and forward contracts
Total operating expenses
−Removed: Operating (loss) income
+Added: Operating income
Other expense:
Interest expense, net
−Removed: (Loss) income before income tax (benefit) expense
−Removed: Income tax (benefit) expense
−Removed: Net (loss) income
−Removed: Basic net (loss) income per share
−Removed: Diluted net (loss) income per share
+Added: Income (loss) before income tax expense (benefit)
+Added: Income tax expense (benefit)
+Added: Net income (loss)
+Added: Basic net income (loss) per share
+Added: Diluted net income (loss) per share
Quarterly and year-to-date computations of per share amounts are made independently.
1 unchanged sentence
Schedule II — Valuation and Qualifying Accounts
−Removed: Accounts Receivable — Allowance for doubtful accounts
−Removed: Allowance for doubtful accounts
−Removed: Allowance for doubtful accounts
−Removed: Allowance for doubtful accounts
−Removed: Allowance for doubtful accounts established in the opening balance sheet in connection with the Company’s January 2019 acquisition.
+Added: Accounts Receivable — Allowance for credit losses
+Added: (recovery of)
+Added: Allowance for credit losses
+Added: Allowance for credit losses
+Added: Allowance for credit losses
+Added: Allowance for credit losses established in the opening balance sheet in connection with the Company’s January 2019 acquisition.
Accounts Receivable — Allowance for customer-payment discrepancies
8 unchanged sentences
Allowance for excess and obsolete inventory
−Removed: Allowance for excess and obsolete inventory established in the opening balance sheet in connection with the Company’s July 2017 acquisition.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.