MOTORCAR PARTS OF AMERICA INC (MPAA)

CIK: 0000918251. SIC: 3714 Motor Vehicle Parts & Accessories. Latest 10-K as of: 2026-06-08.

SIC breadcrumb: Manufacturing > Transportation Equipment > SIC 3714 Motor Vehicle Parts & Accessories

SEC company page: https://www.sec.gov/edgar/browse/?CIK=918251. Latest filing source: 0001140361-26-024463.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-06-08. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000918251.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-06-08. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000918251.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001140361-26-004387.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-02-09. Report date: 2025-12-31.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis presents factors that Motorcar Parts of America, Inc. and its subsidiaries (“our,” “we” or “us”) believe are relevant to an assessment and understanding of our consolidated financial position and results of operations. This financial and business analysis should be read in conjunction with our March 31, 2025 audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 9, 2025.

Disclosure Regarding Private Securities Litigation Reform Act of 1995

This report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our future performance that involve risks and uncertainties. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about our strategic initiatives, operational plans and objectives, expectations for economic conditions and recovery and future business and financial performance, as well as statements regarding underlying assumptions related thereto. They include, among others, factors related to the timing and implementation of strategic initiatives, the highly competitive nature of our industry, demand for our products and services, complexities in our inventory and supply chain, challenges with transforming and growing our business. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason. Therefore, you should not place undue reliance on those statements. Please refer to “Item 1A. Risk Factors” of our most recent Annual Report on Form 10-K filed with the SEC on June 9, 2025, as updated by our subsequent filings with the SEC, for a description of these and other risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.

Management Overview

With a scalable infrastructure and abundant growth opportunities, we are focused on growing our aftermarket hard parts business in the North American marketplace and growing our leadership position in the test solutions and diagnostic equipment market by providing innovative and intuitive solutions to our customers. Our on-going investments in global infrastructure and human resources reflects the significant expansion of manufacturing capacity to support multiple product lines. These investments included (i) a 410,000 square foot distribution center, (ii) two buildings totaling 372,000 square feet for remanufacturing and core sorting of brake calipers, and (iii) the realignment of production at our original 312,000 square foot facility in Mexico.

Segment Reporting

Our three operating segments are as follows:

●

Hard Parts, which includes (i) light duty rotating electric products such as alternators and starters, (ii) wheel hub products, (iii) brake-related products, including brake calipers, brake boosters, brake rotors, brake pads and brake master cylinders, and (iv) turbochargers,

●

Test Solutions and Diagnostic Equipment, which includes (i) applications for combustion engine vehicles, including bench-top testers for alternators and starters, (ii) equipment for the pre- and post-production of electric vehicles, and (iii) software emulation of power system applications for the electrification of all forms of transportation (including automobiles, trucks, the emerging electrification of systems within the aerospace industry, and electric vehicle charging stations), and

●

Heavy Duty, which includes non-discretionary automotive aftermarket replacement hard parts for heavy-duty truck, industrial, marine, and agricultural applications.

Our Hard Parts operating segment meets the criteria of a reportable segment. The Test Solutions and Diagnostic Equipment and Heavy Duty segments are not material, and are not required to be separately reported. See Note 18 of the notes to condensed consolidated financial statements for more information.

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Results of Operations for the Three Months Ended December 31, 2025 and 2024

The following discussion and analysis should be read together with the financial statements and notes thereto appearing elsewhere herein.

The following summarizes certain key consolidated operating data:

Three Months Ended

December 31,

2025

2024

Cash flow (used in) provided by operations

$

(8,229,000

) 

$

34,357,000

Finished goods turnover (annualized) (1)

3.4

3.7

(1)

Annualized finished goods turnover for the fiscal quarter is calculated by multiplying cost of goods sold for the quarter by 4 and dividing the result by the average between beginning and ending non-core finished goods inventory values for the fiscal quarter. We believe this provides a useful measure of our ability to turn our inventory into revenues.

Net Sales and Gross Profit

The following summarizes net sales and gross profit:

Three Months Ended

December 31,

2025

2024

Net sales

$

167,697,000

$

186,176,000

Cost of goods sold

134,819,000

141,294,000

Gross profit

32,878,000

44,882,000

Gross margin

19.6

%

24.1

%

Net Sales. Our consolidated net sales for the three months ended December 31, 2025 were $167,697,000, which represents a decrease of $18,479,000, or 9.9%, from the three months ended December 31, 2024 of $186,176,000. This decrease in sales was primarily due to the continued impact of lower purchases by one of our largest customers during the three months ended December 31, 2025 compared with the three months ended December 31, 2024.

Gross Profit. Our consolidated gross profit was $32,878,000, or 19.6% of consolidated net sales, for the three months ended December 31, 2025 compared with $44,882,000, or 24.1% of consolidated net sales, for the three months ended December 31, 2024. The decrease of 4.5% in gross margin was primarily due to lower sales as discussed above.

In addition, our gross margin for the three months ended December 31, 2025 and 2024 was impacted by (i) the continued amortization of core and finished goods premiums of $2,980,000 and $2,664,000, respectively and (ii) the non-cash quarterly revaluation of cores that are part of the finished goods on the customers’ shelves (which are included in contract assets) to the lower of cost or net realizable value, which resulted in a write-down of $554,000 and $758,000, respectively.

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Operating Expenses

The following summarizes our consolidated operating expenses:

Three Months Ended

December 31,

2025

2024

General and administrative

$

15,328,000

$

16,212,000

Sales and marketing

6,350,000

5,621,000

Research and development

3,460,000

3,008,000

Foreign exchange impact of lease liabilities and forward contracts

(594,000

) 

2,460,000

Percent of net sales

General and administrative

9.1

%

8.7

%

Sales and marketing

3.8

%

3.0

%

Research and development

2.1

%

1.6

%

Foreign exchange impact of lease liabilities and forward contracts

(0.4

)%

1.3

%

General and Administrative. Our general and administrative expenses for the three months ended December 31, 2025 were $15,328,000, which represents a decrease of $884,000, or 5.5%, from the three months ended December 31, 2024 of $16,212,000. This decrease was primarily due to $1,225,000 of lower employee incentives partially offset by $397,000 of severance due to headcount reductions.

Sales and Marketing. Our sales and marketing expenses for the three months ended December 31, 2025 were $6,350,000, which represents an increase of $729,000, or 13.0%, from the three months ended December 31, 2024 of $5,621,000. This increase was primarily due to (i) $257,000 from increased headcount to support our growth initiatives, (ii) $245,000 of increased advertising expense, and (iii) $212,000 of increased trade show expense.

Research and Development. Our research and development expenses for the three months ended December 31, 2025 were $3,460,000, which represents an increase of $452,000, or 15.0%, from the three months ended December 31, 2024 of $3,008,000. This increase was primarily due to (i) $205,000 for engineering-related professional services, (ii) $123,000 for increased headcount to support our new product introductions, and (iii) $110,000 of increased expense for supplies and our sample library.

Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts were a non-cash gain of $594,000 compared with a non-cash loss of $2,460,000 for the three months ended December 31, 2025 and 2024, respectively. This change during the three months ended December 31, 2025 compared with the three months ended December 31, 2024 was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities, which resulted in a non-cash gain of $1,183,000 compared with a non-cash loss of $1,875,000, respectively, due to foreign currency exchange rate fluctuations and (ii) the forward foreign currency exchange contracts, which resulted in non-cash losses of $589,000 and $585,000, respectively, due to the changes in their fair values.

Operating Income

Consolidated Operating Income. Our consolidated operating income for the three months ended December 31, 2025 was $8,334,000 compared with $17,581,000 for the three months ended December 31, 2024. This decrease was primarily due to the impact of lower sales partially offset by the foreign exchange remeasurement of lease liabilities and forward contracts, as discussed above.

Interest Expense

Interest Expense, net. Our interest expense for the three months ended December 31, 2025 was $10,901,000, which represents a decrease of $3,534,000, or 24.5%, from interest expense for the three months ended December 31, 2024 of $14,435,000. This decrease was primarily due to (i) lower utilization of our accounts receivable discount programs, (ii) lower average outstanding balances under our credit facility, and (iii) lower interest rates on both our credit facility and accounts receivable discount programs.

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Change in Fair Value of Compound Net Derivative Liability

Change in Fair Value of Compound Net Derivative Liability. Our change in fair value of compound net derivative liability associated with the convertible notes issued on March 31, 2023 was a non-cash gain of $3,910,000 and $260,000 for the three months ended December 31, 2025 and 2024, respectively.

Provision for Income Taxes

Income Tax. We recorded an income tax benefit of $434,000, or an effective tax rate of (32.3)%, and income tax expense of $1,115,000, or an effective tax rate of 32.7%, for the three months ended December 31, 2025 and 2024, respectively. The effective tax rate for the three months ended December 31, 2025, was primarily impacted by the change in valuation allowance on certain jurisdictions’ deferred tax assets resulting from current year activities and foreign income taxed at rates that are different from the federal statutory rate.

Results of Operations for the Nine Months Ended December 31, 2025 and 2024

The following discussion and analysis should be read together with the financial statements and notes thereto appearing elsewhere herein.

The following summarizes certain key consolidated operating data:

Nine Months Ended

December 31,

2025

2024

Cash flows provided by operations

$

23,664,000

$

36,368,000

Finished goods turnover (annualized) (1)

4.0

3.8

(1)

Annualized finished goods turnover for the fiscal period is calculated by multiplying cost of goods sold for the period by 1.33 and dividing the result by the average between beginning and ending non-core finished goods inventory values for the fiscal period. We believe this provides a useful measure of our ability

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-06-08. Report date: 2026-03-31.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains forward-looking statements, including, without limitation, our expectations and statements regarding our outlook and future revenues, expenses, results of operations, liquidity, plans, strategies and objectives of management and any assumptions underlying any of the foregoing. Our actual results may differ significantly from those projected in the forward-looking statements. Our forward-looking statements and factors that might cause future actual results to differ materially from our recent results or those projected in the forward-looking statements include, but are not limited to, those discussed in the section titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” of this Annual Report on Form 10-K. Except as required by law, we assume no obligation to update the forward-looking statements or our risk factors for any reason.

Management Overview

With a scalable infrastructure and abundant growth opportunities, we continue to focus on strategic growth by leveraging our competitive advantage and growing our industry position by providing innovative and intuitive solutions to our customers. To support our strategic growth, we have made investments, which included (i) a 410,000 square foot distribution center, (ii) two buildings totaling 372,000 square feet for remanufacturing and core sorting of brake calipers, (iii) the realignment of production at our original 312,000 square foot facility in Mexico, and (iv) the addition of a warehousing and distribution facility in Malaysia to support our direct shipment programs.

Highlights and Accomplishments in Fiscal 2026

During fiscal 2026, we continued to focus on strategic growth, improving profitability and leveraging our industry position within a rapidly changing competitive environment for non-discretionary aftermarket parts and solutions. Our solid financial position, quality products and customer relationships are key competitive strengths, and we expect to further capitalize on these distinctive qualities in fiscal 2027. The following significant accomplishments support our optimism:

●

Financial performance:

▸

Net sales increased 4.3 percent to a record $789.8 million;

▸

Gross profit increased 3.9 percent to a record $159.9 million;

▸

Operating income increased 64.9 percent to $65.8 million;

▸

Net income increased to $12.4 million from a net loss of $19.5 million in the prior year;

▸

Generated cash from operating activities of approximately $19.2 million;

▸

Repurchased 955,608 shares of our common stock for $11.4 million.

●

Awarded significant new business commitments;

●

Expanded brand equity by increasing sales under the MPA portfolio of brands, including Quality-Built® in the professional installer market;

●

Expanded product coverage with more than 237 new part numbers -- covering more than approximately 54 million vehicles in operation in North America for our Hard Parts products;

●

Successfully executed tariff mitigation programs, including sourcing from lower tariff countries;

●

Commenced the relocation of certain of our operations to our lower cost operation in Mexico, which will enable these products to become more competitive;

●

Continued sales growth in the emerging Mexican market;

●

Continued market share gains for our JBT-1 bench-top testers, with the majority of retail stores in North America deploying our diagnostic units; and

●

Commenced direct shipments from our distribution center in Malaysia.

Trends Affecting Our Business

Our business is impacted by various factors within the economy that affect both our customers and our industry, including but not limited to foreign currency, evolving tariff policy, inflation, interest rates, geopolitical events, and other economic conditions. Given the nature of these various factors, we cannot predict whether or for how long certain trends will continue, nor can we predict to what degree these trends will impact us in the future.

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Foreign Currency

We are exposed to foreign currency exchange risks inherent in our purchases and expenses denominated in currencies other than the U.S. dollar. We transact business in the following foreign currencies: Mexican pesos, Malaysian ringgit, Singapore dollar, Chinese yuan, Indian rupee, and the Canadian dollar. Our primary currency risks result from fluctuations in the value of the Mexican peso and to a lesser extent, the Chinese yuan. To mitigate these risks, we enter into forward foreign currency exchange contracts to exchange U.S. dollars for these foreign currencies.

We have operations located outside the United States with various functional currencies. Because our consolidated financial statements are denominated in U.S. dollars, the assets, liabilities, net sales, and expenses that are denominated in currencies other than the U.S. dollar must be converted into U.S. dollars using exchange rates for the current period. As a result, fluctuations in foreign currency exchange rates may impact our financial results.

Tariffs

We source the majority of our raw materials and parts from suppliers in a variety of non-U.S. countries, which are subject to tariffs. As a result, we have taken actions designed to mitigate the potential impacts of tariffs, including, but not limited to, passing along price increases to our customers and negotiating cost concessions from our suppliers where possible. Absent any changes in trade regulations, we anticipate inflationary cost increases due to these tariffs and any resulting impact on macroeconomic conditions and our business to continue. There can be no assurance that these tariffs or future imposition of any additional tariffs, changes thereto, or actions taken by countries in response to these tariffs will not have a material adverse effect on our business, results of operations, financial condition, or liquidity in any period or that any actions we take to mitigate the impact of these tariffs will be effective.

Inflation

The cost to manufacture and distribute our products is impacted by the cost of raw materials, finished goods, labor, and transportation. During fiscal 2026, we continued to experience increased costs of raw materials, finished goods, higher labor costs in Mexico, and other administrative costs. We can only pass our increased costs onto customers on a limited basis. Future general price inflation and its impact on costs and availability of materials could adversely affect our financial results.

Interest Rates

Interest rates in the U.S. remain high as a result of the federal government’s efforts to curb on-going inflation. Although interest rates decreased slightly during fiscal 2026, overall, interest costs for our accounts receivable discount programs and borrowings under our credit facility, which have interest costs that vary with interest rate movements, remain high. Most of our interest costs result from our accounts receivable discount programs, which had a weighted average discount rate of 5.4% for fiscal 2026 compared with 6.2% for fiscal 2025. The weighted average interest on borrowings under our credit facility was 6.79% at March 31, 2026 compared with 7.46% at March 31, 2025. Any future increases in interest rates will continue to adversely impact our financial results.

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Segment Reporting

Our three operating segments are as follows:

●

Hard Parts, which include (i) light duty rotating electric products such as alternators and starters and (ii) brake-related products, which includes brake calipers, brake boosters, brake rotors, brake pads and brake master cylinders, and wheel hub assemblies and bearings,

●

Test Solutions and Diagnostic Equipment, which includes (i) applications for combustion engine vehicles, including bench-top testers for alternators and starters, (ii) equipment for the pre- and post-production of electric vehicles, and (iii) software emulation of power system applications for the electrification of all forms of transportation (including automobiles, trucks, the emerging electrification of systems within the aerospace industry, and electric vehicle charging stations), and

●

Heavy Duty, which includes non-discretionary automotive aftermarket replacement hard parts for heavy-duty truck, industrial, marine, and agricultural applications.

Our Hard Parts operating segment meets the criteria of a reportable segment. The Test Solutions and Diagnostic Equipment and Heavy Duty segments are not material, and are not required to be separately reported. See Note 20 of the notes to consolidated financial statements for more information.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with generally accepted accounting principles, or GAAP, in the United States. Our significant accounting policies are discussed in detail below and in Note 2 of the notes to consolidated financial statements.

In preparing our consolidated financial statements, we use estimates and assumptions for matters that are inherently uncertain. We base our estimates on historical experiences and reasonable assumptions. Our use of estimates and assumptions affect the reported amounts of assets, liabilities and the amount and timing of revenues and expenses we recognize for and during the reporting period. We are not currently aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of March 31, 2026. However, these estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Our remanufacturing operations include core exchange programs for the core portion of the finished goods. The Used Cores that we acquire and are returned to us from our customers are a necessary raw material for remanufacturing. We also offer our customers marketing and other allowances that impact revenue recognition. These elements of our business give rise to more complex accounting than many businesses our size or larger.

Recently Adopted Accounting Pronouncements

Improvements to Income Tax Disclosures

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Improvements to Income Tax Disclosures (Topic 740). This standard requires us to provide further disaggregated income tax disclosures for specific categories on the effective tax rate reconciliation, as well as additional information about federal, state/local and foreign income taxes. The standard also requires us to annually disclose our income taxes paid (net of refunds received), disaggregated by jurisdiction. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to be applied on a prospective basis, although optional retrospective application is permitted. We adopted this standard on a prospective basis as of March 31, 2026, which expanded our income tax disclosures.

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Accounting Pronouncements Not Yet Adopted

Disclosure Improvements

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This standard was issued in response to the SEC’s disclosure update and simplification initiative, which affects a variety of topics within the Accounting Standards Codification. The amendments apply to all reporting entities within the scope of the affected Topics unless otherwise indicated. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. We are currently evaluating the impact this guidance will have on our financial statement disclosures.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (“DISE”) (Subtopic 220-40). This standard requires us to disclose, in the footnotes at each interim and annual reporting period, information about expenses by the nature of the expense in addition to certain disclosures about selling expenses. Entities are required to include the following relevant expense captions: (i) purchase of inventory, (ii) employee compensation, (iii) depreciation, (iv) intangible asset amortization, and (v) depreciation, depletion and amortization recognized as part of oil and gas producing activities. In January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) Clarifying the Effective Date, which is intended to clarify the effective date of ASU No. 2024-03. As clarified in ASU 2025-01, the new guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact this guidance will have on our financial statement disclosures.

Debt with Conversion and Other Options

In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which seeks to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. This guidance is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements and disclosures.

Measurement of Credit Losses

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. This guidance is effective for annual periods beginning after December 15, 2025, including interim reporting periods within those fiscal years, with early adoption permitted. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. We are currently evaluating the impact this guidance will have on our consolidated financial statements and disclosures.

Internal-Use Software

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which amends the recognition and disclosure guidance for internal-use software costs, removing the previous software development stage model with a probable-to-complete recognition threshold. This guidance is effective for annual periods beginning after December 15, 2027, including interim reporting periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements and disclosures.

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Interim Reporting

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) Narrow-Scope Improvements, which improves the navigability of the guidance in ASC 270, Interim Reporting, and clarifies when it applies. Under this guidance, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. This guidance is effective for annual periods beginning after December 15, 2027, including interim reporting periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements and disclosures.

Codification Improvements

In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which addresses suggestions received from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to GAAP. The update represents changes to the Accounting Standards Codification that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply. This guidance is effective for annual periods beginning after December 15, 2026, including interim reporting periods within those fiscal years, with early adoption permitted. Entities are required to apply the amendments to ASC 260 retrospectively. All other amendments may be applied prospectively or retrospectively. We are currently evaluating the impact this guidance will have on our consolidated financial statements and disclosures.

Inventory

Inventory is comprised of: (i) Used Core and component raw materials, (ii) work-in-process, and (iii) remanufactured and purchased finished goods.

Used Core, component raw materials, and purchased finished goods are stated at the lower of average cost or net realizable value.

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. Historically, work-in-process inventory has not been material compared to the total inventory balance.

Remanufactured finished goods include: (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”). 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. This method prevents the distortion in allocated labor and overhead costs that would occur during short periods of abnormally low or high production. In addition, we exclude certain unallocated overhead such as severance costs, duplicative facility overhead costs, start-up costs, training, and spoilage from the calculation and expense these unallocated overhead costs as period costs. Purchased finished goods also include an allocation of fixed overhead costs.

The estimate of net realizable value is subjective and based on our judgment and knowledge of current industry demand and management’s projections of industry demand. The estimates may, therefore, be revised if there are changes in the overall market for our products or market changes that in our judgment impact our ability to sell or liquidate potentially excess or obsolete inventory. Net realizable value is determined at least quarterly as follows:

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●

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. We compare 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. 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 customer specifications. We purchase Used Cores from core brokers to supplement our yield rates and Used Cores not returned under the core exchange programs. We also consider the net selling price our customers have agreed to pay for Used Cores that are not returned under our 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.

●

We record an allowance for potentially excess and obsolete inventory based upon recent sales history, the quantity of inventory on-hand, and a forecast of potential use of the inventory. We periodically review inventory to identify excess quantities and part numbers that are experiencing a reduction in demand. Any part numbers with quantities identified during this process are reserved for at rates based upon our 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. As a result of this process, we recorded reserves for excess and obsolete inventory of $19,002,000 and $18,964,000 at March 31, 2026 and 2025, respectively.

We record vendor discounts as a reduction of inventories and are recognized as a reduction to cost of sales as the inventories are sold.

Inventory Unreturned

Inventory unreturned represents our estimate, based on historical data and prospective information provided directly by the customer, of finished goods shipped to customers that we expect to be returned, under our general right of return policy, after the balance sheet date. 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. As such, the related amounts are classified in current assets. Inventory unreturned is valued in the same manner as our finished goods inventory.

Contract Assets

Contract assets consists of: (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, and (iv) finished goods premiums paid to customers.

Remanufactured Cores held at customers’ locations as a part of the finished goods sold to the customer are classified as long-term contract assets. These assets are valued at the lower of cost or net realizable value of Used Cores on hand (see Inventory above). For these Remanufactured Cores, we expect the finished good containing the Remanufactured Core to be returned under our general right of return policy or a similar Used Core to be returned to us by the customer, under our core exchange programs, in each case for credit. Remanufactured Cores and Used Cores returned by consumers to our customers but not yet returned to us are classified as “Cores expected to be returned by customers”, which are included in short-term contract assets until we physically receive them during our normal operating cycle, which is generally one year.

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Upfront payments to customers represent marketing allowances, such as sign-on bonuses, slotting fees, and promotional allowances provided to our customers. These allowances are recognized as an asset and amortized over the appropriate period of time as a reduction of revenue if we expect to generate future revenues associated with the upfront payment. If we do not expect to generate additional revenue, then the upfront payment is recognized in the consolidated statements of operations when payment occurs as a reduction of revenue. Upfront payments expected to be amortized during our normal operating cycle, which is generally one year, are classified as short-term contract assets.

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. The core premiums are treated as an asset and recognized as a reduction of revenue through the later of the date at which related revenue is recognized or the date at which the sales incentive is offered. We consider, among other things, the length of our largest ongoing customer relationships, duration of customer contracts, and the average life of vehicles on the road in determining the appropriate period of time over which to amortize these premiums. These core premiums are amortized over a period typically ranging from six to eight years, adjusted for specific circumstances associated with the arrangement. Core premiums are recorded as long-term contract assets. Core premiums expected to be amortized within our normal operating cycle, which is generally one year, are classified as short-term contract assets.

Finished goods premiums paid to customers represent the difference between the finished good acquisition price paid to customers, generally in connection with new business, and the related finished good cost, which is treated as an asset and recognized as a reduction of revenue through the later of the date at which related revenue is recognized or the date at which the sales incentive is offered. We consider, among other things, the length of our largest ongoing customer relationships, duration of customer contracts, and the average life of vehicles on the road in determining the appropriate period of time over which to amortize these premiums. Finished goods premiums are amortized over a period of up to eight years, adjusted for specific circumstances associated with the arrangement. Finished goods premiums are recorded as long-term contract assets. Finished goods premiums expected to be amortized within our normal operating cycle, which is generally one year, are classified as short-term contract assets.

Revenue Recognition

Revenue is recognized when performance obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our products. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. 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.

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. The Remanufactured Core value is recorded as revenue based upon the estimate of Used Cores that will not be returned by the customer for credit. These estimates are subjective and based on management’s judgment and knowledge of historical, current, and projected return rates. 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. These estimates may also be revised if there are changes in contractual arrangements with customers, or changes in business practices. 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). 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.

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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. 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. The remainder of the full price Remanufactured Core value invoiced to these customers is established as a long-term contract liability rather than being recognized as revenue in the period the products are shipped as we expect these Remanufactured Cores to be returned for credit under our core exchange programs.

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. 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. Revenue amounts are calculated based on contractually agreed upon pricing for these Remanufactured Cores for which the customers are not returning similar Used Cores. 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 we expect these Remanufactured Cores to be returned for credit under our core exchange programs.

Revenue Recognition; General Right of Return

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). 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). 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. 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. 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. 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. 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, we only accept returns from on-going customers. If a customer ceases doing business with us, we have no further obligation to accept additional product returns from that customer. Similarly, we accept product returns and grant appropriate credits to new customers from the time the new customer relationship is established.

Contract Liability

Contract liability consists of: (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.

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Customer allowances earned includes all marketing allowances provided to customers. Such allowances include sales incentives and concessions. 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. 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. Customer allowances to be provided to customers within our normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.

Accrued core payments represent the agreed upon price of Remanufactured Cores purchased from customers, generally in connection with new business, which are held by these customers and remain on their premises. The sales price of these Remanufactured Cores will be realized when our relationship with a customer ends, a possibility that we consider remote based on existing long-term customer agreements and historical experience. The payments to be made to customers for purchases of Remanufactured Cores within our normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.

Customer core returns accruals represent the full and nominally priced Remanufactured Cores shipped to our customers. When we ship product, we recognize an obligation to accept a similar Used Core sent back under the core exchange programs based upon the Remanufactured Core price agreed upon by us and our customer. The contract liability related to Used Cores returned by consumers to our customers but not yet returned to us are classified as short-term contract liabilities until we physically receive these Used Cores as they are expected to be returned during our normal operating cycle, which is generally one year and the remainder are recorded as long-term contract liabilities.

The core bank liability represents the full Remanufactured Core sales price for cores returned under our core exchange programs. The payment for these returned cores are made over a contractual repayment period pursuant to our agreement with this customer. Payments to be made within our normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.

Finished goods liabilities represents the agreed upon price of finished goods acquired from customers, generally in connection with new business. The payment for these finished goods are made over a contractual repayment period pursuant to our agreement with the customer. Payments to be made within our normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.

Customer deposits represent the receipt of prepayments from customers for the obligation to transfer goods or services in the future. We classify these customer deposits as short-term contract liabilities as we expect to satisfy these obligations within our normal operating cycle, which is generally one year.

Customer Finished Goods Returns Accrual

The customer finished goods returns accrual represents our estimate of our exposure to customer returns, including warranty returns, under our 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. The customer finished goods returns accrual represents the Unit Value of the estimated returns and is classified as a current liability due to the expectation that these returns will occur within the normal operating cycle of one year. Our customer finished goods returns accrual was $29,923,000 and $34,411,000 at March 31, 2026 and 2025, respectively. The change in the customer finished goods returns accrual primarily resulted from the timing of returned goods authorizations (“RGAs”) issued at March 31, 2026 compared with March 31, 2025.

Income Taxes

We account 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. 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.

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The primary components of our income tax expense were (i) federal income taxes, (ii) state income taxes, (iii) change in realizable deferred tax items, (iv) foreign income taxed at rates that are different from the federal statutory rate, and (v) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m).

Realization of deferred tax assets is dependent upon our ability to generate sufficient future taxable income. Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We make these estimates and judgments about our future taxable income based on assumptions that are consistent with our future plans. A valuation allowance is established when we believe it is not more likely than not all or some of a deferred tax assets will be realized. In evaluating our ability to recover deferred tax assets within the jurisdiction in which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, past financial performance, and tax planning strategies. At March 31, 2026 and 2025, we had a valuation allowance on deferred tax assets that is considered not more likely than not to be realized under U.S. GAAP. Should the actual amount differ from our estimate, the amount of our valuation allowance could be impacted.

We have made an accounting policy election to recognize the U.S. tax effects of global intangible low-taxed income as a component of income tax expense in the period the tax arises.

Results of Operations

The following discussion and analysis should be read together with the financial statements and notes thereto appearing elsewhere herein.

The following summarizes certain key operating consolidated data for the periods indicated:

Fiscal Years Ended March 31,

2026

2025

2024

Cash flows provided by operations

$

19,158,000

$

45,477,000

$

39,172,000

Finished goods turnover (1)

3.9

3.8

3.7

(1)

Finished goods turnover is calculated by dividing the cost of goods sold for the year by the average of beginning and ending non-core finished goods inventory values, for each fiscal year. We believe that this provides a useful measure of our ability to turn our inventory into revenues.

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Fiscal 2026 Compared with Fiscal 2025

Net Sales and Gross Profit

The following summarizes consolidated net sales and gross profit:

Fiscal Years Ended March 31,

2026

2025

Net sales to external customers

$

789,806,000

$

757,354,000

Cost of goods sold

629,905,000

603,526,000

Gross profit

159,901,000

153,828,000

Gross profit percentage

20.2

%

20.3

%

Net Sales. Our consolidated net sales for fiscal 2026 were $789,806,000, which represents an increase of $32,452,000, or 4.3%, from fiscal 2025 of $757,354,000. The increase in our sales for fiscal 2026 compared with fiscal 2025 includes the recognition of remanufactured core revenue of $34,714,000 in connection with the realignment of inventory at certain customers’ distribution centers.

The following summarizes consolidated net sales by product mix:

Years Ended March 31,

2026

2025

Rotating electrical products

68

%

67

%

Brake-related products (1)

28

%

29

%

Other products

4

%

4

%

100

%

100

%

(1)

During fiscal 2026, we combined our wheel hub products into our brake-related products. Prior year amounts have been recast to conform to the current year presentation.

Gross Profit. Our consolidated gross profit was $159,901,000, or 20.2% of consolidated net sales, for fiscal 2026 compared with $153,828,000, or 20.3% of consolidated net sales, for fiscal 2025. Our gross margin for fiscal 2026 compared with fiscal 2025 was impacted by (i) continued amortization of core and finished goods premiums of $11,901,000 and $10,738,000, respectively, (ii) the non-cash quarterly revaluation of cores that are part of the finished goods on the customers’ shelves (which are included in contract assets) to the lower of cost or net realizable value, which resulted in a write-down of $3,590,000 and $2,805,000, respectively, (iii) transition expenses of $2,571,000 and $1,298,000, respectively, in connection with our on-going strategy to utilize our global footprint to enhance operating efficiencies, and (iv) net tariff costs paid for products sold before price increases were effective of $2,124,000 and $4,607,000, respectively.

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Operating Expenses

The following summarizes consolidated operating expenses:

Fiscal Years Ended March 31,

2026

2025

General and administrative

$

63,303,000

$

64,047,000

Sales and marketing

25,491,000

22,561,000

Research and development

14,196,000

11,405,000

Foreign exchange impact of lease liabilities and forward contracts

(8,924,000

) 

15,892,000

Percent of net sales

General and administrative

8.0

%

8.5

%

Sales and marketing

3.2

%

3.0

%

Research and development

1.8

%

1.5

%

Foreign exchange impact of lease liabilities and forward contracts

(1.1

)%

2.1

%

General and Administrative. Our general and administrative expenses for fiscal 2026 were $63,303,000, which represents a decrease of $744,000, or 1.2%, from fiscal 2025 of $64,047,000. This decrease was primarily due to $2,265,000 in decreased severance costs partially offset by $1,087,000 of increased information technology costs in connection with cybersecurity and other productivity tools.

Sales and Marketing. Our sales and marketing expenses for fiscal 2026 were $25,491,000, which represents an increase of $2,930,000, or 13.0%, from fiscal 2025 of $22,561,000. This increase was primarily due to (i) $986,000 from increased headcount to support our growth initiatives, (ii) $782,000 in increased commissions expense, and (iii) $829,000 in increased advertising and other marketing expenses.

Research and Development. Our research and development expenses for fiscal 2026 were $14,196,000, which represents an increase of $2,791,000, or 24.5%, from fiscal 2025 of $11,405,000. This increase was primarily due to (i) $1,213,000 for increased employee-related costs primarily to support our new product introductions, (ii) $999,000 for engineering-related professional services, and (iii) $454,000 in increased expense for supplies and our sample library.

Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts were a non-cash gain of $8,924,000 compared with a non-cash loss of $15,892,000 for fiscal 2026 and 2025, respectively. This change during fiscal 2026 compared with fiscal 2025 was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities resulted in a non-cash gain of $6,409,000 compared with a non-cash loss of $11,713,000, respectively, and (ii) the change in the fair values of forward foreign currency exchange contracts resulted in a non-cash gain of $2,515,000 compared with a non-cash loss of $4,179,000, respectively.

Operating Income

Consolidated Operating Income. Our consolidated operating income for fiscal 2026 was $65,835,000 compared with $39,923,000 for fiscal 2025. This increase was primarily due to the impact of the foreign exchange remeasurement of lease liabilities and forward contracts and other items as discussed above.

Interest Expense

Interest Expense, net. Our interest expense for fiscal 2026 was $46,696,000, which represents a decrease of $8,854,000, or 15.9%, from interest expense for fiscal 2025 of $55,550,000. This decrease was primarily due to (i) lower interest rates on both our credit facility and accounts receivable discount programs, (ii) lower average outstanding balances under our credit facility, and (iii) lower utilization of our accounts receivable discount programs.

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Change in Fair Value of Compound Net Derivative Liability

Change in Fair Value of Compound Net Derivative Liability. Our change in fair value of compound net derivative liability was a non-cash gain of $1,130,000 compared with a non-cash loss of $60,000 for fiscal 2026 and 2025, respectively, associated with the convertible notes issued on March 31, 2023.

Provision for Income Taxes

Income Tax. We recorded income tax expense of $7,875,000, or an effective tax rate of 38.9%, and $3,783,000, or an effective tax rate of (24.1)%, for fiscal 2026 and 2025, respectively. The effective tax rate for fiscal 2026 and 2025 were primarily impacted by (i) the change in valuation allowance on certain jurisdictions’ deferred tax assets resulting from current year activities, (ii) foreign income taxed at rates that are different from the federal statutory rate, and (iii) non-deductible executive compensation under Internal Revenue Code Section 162(m).

Fiscal 2025 Compared with Fiscal 2024

A discussion of the changes in our results of operations for the year ended March 31, 2025, as compared with the year ended March 31, 2024, has been omitted from this Form 10-K but may be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the annual report on Form 10-K for the year ended March 31, 2025, filed with the SEC on June 9, 2025, which is available free of charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “MPAA” or at our internet address, www.motorcarparts.com, by clicking “Investors/Financials/SEC Filings” located at the top of the page.

Liquidity and Capital Resources

Overview

We had working capital (current assets minus current liabilities) of $184,386,000 and $160,446,000, a ratio of current assets to current liabilities of 1.5:1.0 at March 31, 2026 and 2025, respectively.

Our primary source of liquidity was from cash generated from operations and the use of our accounts receivable discount programs during the year ended March 31, 2026. We believe our cash generated from operations, cash and cash equivalents, use of accounts receivable discount programs, and amounts available under our credit facility are sufficient to satisfy our expected future liquidity needs over the next 12 months.

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Cash Flows

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

Fiscal Years Ended March 31,

2026

2025

2024

Cash provided by (used in):

Operating activities

$

19,158,000

$

45,477,000

$

39,172,000

Investing activities

(3,590,000

) 

(4,469,000

) 

(479,000

) 

Financing activities

(10,980,000

) 

(44,655,000

) 

(36,439,000

) 

Effect of exchange rates on cash and cash equivalents

633,000

(898,000

) 

124,000

Net increase (decrease) in cash and cash equivalents

$

5,221,000

$

(4,545,000

) 

$

2,378,000

Additional selected cash flow data:

Depreciation and amortization

$

9,788,000

$

10,400,000

$

11,619,000

Capital expenditures

3,696,000

4,578,000

1,000,000

Fiscal 2026 Compared with Fiscal 2025

Net cash provided by operating activities was $19,158,000 and $45,477,000 for fiscal 2026 and 2025, respectively. Our operating activities were primarily impacted by the following changes in our working capital: (i) the build-up of our inventory to support future sales and (ii) higher accounts receivable balances resulting from increased sales that will be collected in future periods. In addition, our operating activities were further impacted by changes in operating results (net income (loss) plus the net add-back for non-cash transactions in earnings). We continue to manage our working capital to maximize our operating cash flow.

Net cash used in investing activities was $3,590,000 and $4,469,000 for fiscal 2026 and 2025, respectively. The change in our investing activities primarily resulted from decreased capital expenditures.

Net cash used in financing activities was $10,980,000 and $44,655,000 for fiscal 2026 and 2025, respectively. The change in our financing activities primarily resulted from (i) net borrowing of $3,881,000 in fiscal 2026 compared with net repayments of $37,213,000 in fiscal 2025, under our revolving facility and (ii) the repurchase of 955,608 shares of our common stock for $11,351,000 in fiscal 2026 compared with 542,134 shares of our common stock for $4,832,000 in fiscal 2025.

Fiscal 2025 Compared with Fiscal 2024

A discussion of the changes in our operating activities, investing activities, and financing activities for the year ended March 31, 2025, as compared with the year ended March 31, 2024, has been omitted from this Form 10-K but may be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the annual report on Form 10-K for the year ended March 31, 2025, filed with the SEC on June 9, 2025, which is available free of charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “MPAA” or at our internet address, www.motorcarparts.com, by clicking “Investors/Financials/SEC Filings” located at the top of the page.

Capital Resources

Credit Facility

We are party to a $268,620,000 senior secured financing, (as amended from time to time, the “Credit Facility”) with a syndicate of lenders, and PNC Bank, National Association, as administrative agent, consisting of (i) a $238,620,000 revolving loan facility, subject to borrowing base restrictions, a $24,000,000 sublimit for borrowings by Canadian borrowers, and a $20,000,000 sublimit for letters of credit (the “Revolving Facility”) and (ii) a $30,000,000 term loan facility (the “Term Loans”). The Term Loans were repaid during the year ended March 31, 2024. The Credit Facility matures on December 12, 2028. The lenders have a security interest in substantially all of our assets.

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We had $94,668,000 and $90,787,000 outstanding under the Revolving Facility at March 31, 2026 and 2025, respectively. In addition, $15,470,000 was outstanding for letters of credit at March 31, 2026. At March 31, 2026, after certain contractual adjustments, $119,048,000 was available under the Revolving Facility. The interest rate on our Revolving Facility was 6.79% and 7.46%, at March 31, 2026 and 2025, respectively.

The Credit Facility requires us to maintain a minimum fixed charge coverage ratio if undrawn availability is less than 22.5% of the aggregate revolving commitments and a specified minimum undrawn availability. During the year ended March 31, 2026, undrawn availability was greater than the 22.5% threshold, therefore, the fixed charge coverage ratio financial covenant was not required to be tested.

Convertible Notes, Related Party

On March 31, 2023, we entered into a note purchase agreement, as amended, (the “Note Purchase Agreement”) with Bison Capital Partners VI, L.P. and Bison Capital Partners VI-A, L.P. (collectively, the “Purchasers”) and Bison Capital Partners VI, L.P., as the purchaser representative (the “Purchaser Representative”) for the issuance and sale of $32,000,000 in aggregate principal amount of convertible notes due in 2029 (the “Convertible Notes”), which was used for general corporate purposes. The Convertible Notes bear interest at a rate of 10.0% per annum, compounded annually, and payable (i) in kind or (ii) in cash, annually in arrears on April 1 of each year. In April 2025, non-cash accrued interest on the Convertible Notes of $3,521,000 was paid in-kind and is included in the principal amount of Convertible Notes at March 31, 2026. In April 2024, non-cash accrued interest on the Convertible Notes of $3,209,000 was paid in-kind and is included in the principal amount of Convertible Notes at March 31, 2025.

The aggregate proceeds from the offering were approximately $31,280,000, net of initial purchasers’ fees and other related expenses. The initial conversion rate is 66.6667 shares of our common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $15.00 per share of common stock). At March 31, 2026, we had 28,680,086 shares of our common stock available to be issued if the Convertible Notes were converted.

In connection with the Note Purchase Agreement, we entered into common stock warrants (the “Warrants”) with the Purchasers, which mature on March 30, 2029. The Warrants do not become exercisable unless a Company Redemption (as defined below) occurs and the volume weighted average price of our common stock for 20 consecutive days prior to the redemption is less than $15.00. The fair value of the Warrants, using Level 3 inputs and the Monte Carlo simulation model, was zero at March 31, 2026 and 2025. We estimate the fair value of the Warrants at each balance sheet date. Any subsequent changes from the initial recognition in the fair value of the Warrants will be recorded in current period earnings in the consolidated statements of operations.

The Convertible Notes may be converted, subject to certain conditions, at an initial conversion price of $15.00, subject to adjustment as provided in the Convertible Notes (the “Conversion Option”). The Convertible Notes also include a provision for a return of interest (“Return of Interest”), which requires the Purchasers to return 15.0% of the interest paid to us in certain circumstances, subject to reduction of the Return of Interest amount in the event that the Return of Interest amount would result in total payments to the Purchasers of less than two times the original principal amount. The Return of Interest provision is accounted for as part of the Conversion Option and if the Conversion Option is exercised in the future, the Return of Interest provision will remain outstanding until the Purchaser sells all of the underlying stock received upon conversion. Upon conversion, any value associated with the Return of Interest provision will be reflected as a derivative asset upon conversion, with changes in fair value being recorded in earnings in the consolidated statements of operations until settlement in connection with the sale of the underlying stock by the Purchaser. Unless and until we deliver a redemption notice, the Purchasers of the Convertible Notes may convert their Convertible Notes at any time at their option. Upon conversion, the Convertible Notes will be settled in shares of our common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. The Convertible Notes have a stated maturity of March 30, 2029, subject to earlier conversion or redemption in accordance with their terms.

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If there is a Fundamental Transaction, as defined in the Form of Convertible Promissory Note, we may redeem all or part of the Convertible Notes. Except in the case of the occurrence of a Fundamental Transaction, we may not redeem the Convertible Notes prior to March 31, 2026. After March 31, 2026, we may redeem all or part of the Convertible Notes for a cash purchase (the “Company Redemption”) price equal to the Redemption Price (as defined below) plus $5,000,000, but only if (i) we are listed on a national exchange, (ii) there is no “Event of Default” occurring and continuing and (iii) Adjusted EBITDA for the prior four quarters is greater than $80,000,000. The “Redemption Price” shall mean a cash amount equal to the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest. However, if the volume weighted average price of our common stock for 20 consecutive days prior to the notice of the Company Redemption is less than $15, the Purchasers may exercise the warrants and we will pay the Redemption Price plus $2,000,000.

The Conversion Option and the Company Redemption both met the criteria for bifurcation from the Convertible Notes as derivatives and have been combined as a compound net derivative liability (the “Compound Net Derivative Liability”). The Compound Net Derivative Liability has been recorded within convertible note, related party in the consolidated balance sheets. The fair value of the Conversion Option and the Company Redemption option using Level 3 inputs and the Monte Carlo simulation model was a liability of $16,900,000 and $9,000,000, and an asset of $10,560,000 and $1,530,000 at March 31, 2026 and 2025, respectively. We estimate the fair value of the Compound Net Derivative Liability at each balance sheet date. Any subsequent changes from the initial recognition in the fair value of the Compound Net Derivative Liability are recorded in current period earnings in the consolidated statements of operations. During the years ended March 31, 2026, 2025, and 2024, we recorded a gain of $1,130,000, a loss of $60,000, and a gain of $1,020,000, respectively, as the change in fair value of the Compound Net Derivative Liability in the consolidated statements of operations and consolidated statements of cash flows.

The Convertible Notes also contain additional features, such as, default interest and options related to a Fundamental Transaction, requiring bifurcation which were not separately accounted for as the value of such features were not material at March 31, 2026 and 2025. Any subsequent changes from the initial recognition in the fair value of those features are recorded in current period earnings in the consolidated statements of operations.

The Convertible Notes include customary provisions relating to the occurrence of Events of Default, which include the following: (i) certain payment defaults on the Convertible Notes; (ii) certain events of bankruptcy, insolvency and reorganization involving us or any of our subsidiaries; (iii) the entering of one or more final judgments or orders against us or any of our subsidiaries for an aggregate payment exceeding $25,000,000; (iv) the acceleration of senior debt or any other debt greater than $25,000,000; (v) certain failures of us to comply with certain provisions of the Note Purchase Agreement or material breaches of the Note Purchase Agreement by us or any of our subsidiaries; (vi) any material provision of the Note Purchase Agreement, the Convertible Notes, the guarantee, the subordination agreement, the Warrants or the registration rights agreement, for any reason, ceases to be valid and binding on us or any subsidiary, or any subsidiary shall so claim in writing to challenge the validity of or our liability under the Note Purchase Agreement, the Convertible Notes, or the registration rights agreement; or (vii) we fail to maintain the listing of our capital stock on a national securities exchange. Events of Default will be subject to a 30-day cure period except for those related to clause (ii) and (iv) of the preceding sentence.

If an Event of Default occurs and is continuing, then, we shall deliver written notice to the Purchasers within 5 business days of first learning of such Event of Default. If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us (and not solely with respect to our significant subsidiary) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Convertible Notes then outstanding will immediately become due and payable without any further action.

Unamortized debt issuance costs of $745,000 and $916,000 are presented in the balance sheet as a direct deduction from the carrying amounts of the Convertible Notes at March 31, 2026 and 2025, respectively. Debt issuance costs are amortized using the effective interest method through the maturity of the Convertible Notes and recorded in interest expense in the consolidated statements of operations. The effective interest rate was 18.3% as of March 31, 2026, 2025 and 2024, respectively.

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Additionally, pursuant to the Note Purchase Agreement, subject to certain conditions, the Purchaser Representative shall have the right to nominate one director to serve (the “Investor Director”) on our Board of Directors (the “Board”). If an Investor Director is not currently serving on the Board, and subject to certain other conditions set forth in the Note Purchase Agreement, the Purchaser Representative shall have the right to designate one person to have observation rights with respect to all meetings of the Board. In connection with our entry into the Note Purchase Agreement, we appointed Douglas Trussler to serve on our Board.

Accounts Receivable Discount Programs

We use accounts receivable discount programs offered by certain customers and their respective banks. Under these programs, we have options to sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold. These accounts receivable discount programs allow us to accelerate receipt of payment on customers’ receivables. While these arrangements have reduced our working capital needs, there can be no assurance that these accounts receivable discount programs will continue in the future. Interest expense resulting from these accounts receivable discount programs would increase if (i) interest rates were to rise, (ii) utilization of these accounts receivable discount programs expand, (iii) customers extend their payment to us, or (iv) the discount period is extended to reflect more favorable payment terms to customers.

The following is a summary of the accounts receivable discount programs:

Years Ended March 31,

2026

2025

Receivables discounted

$

620,561,000

$

643,918,000

Weighted average days

346

343

Weighted average discount rate

5.4

%

6.2

%

Amount of discount as interest expense

$

32,023,000

$

38,021,000

Supplier Finance Programs

We utilize a supplier finance program, which allows certain of our suppliers to sell their receivables due from us to participating financial institutions at the sole discretion of both the supplier and the financial institutions. The program is administered by a third party. Commitments from participating financial institutions that are available to suppliers under this program were $40,000,000 as of March 31, 2026. We have no economic interest in the sale of these receivables and no direct relationship with the financial institution. Payments to the third-party administrator are based on services rendered and are not related to the volume or number of financing agreements between suppliers, financial institution, and the third-party administrator. We are not a party to agreements negotiated between participating suppliers and the financial institution. Our obligations to our suppliers, including amounts due and payment terms, are not affected by a supplier's decision to participate in this program. We do not provide guarantees and there are no assets pledged to the financial institution or the third-party administrator for the committed payment in connection with this program. At March 31, 2026 and 2025, we had $42,076,000 and $33,661,000, respectively, in outstanding supplier obligations confirmed as valid under this program, included in accounts payable in the consolidated balance sheets.

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The following is a summary of the changes in outstanding supplier obligations confirmed as valid under this program:

Years Ended March 31,

2026

2025

Confirmed obligations outstanding at beginning of year

$

33,661,000

$

1,695,000

Invoices confirmed as valid during the year

128,236,000

91,951,000

Confirmed invoices paid during the year

(119,821,000

) 

(59,985,000

) 

Confirmed obligations outstanding at end of year

$

42,076,000

$

33,661,000

Multi-year Customer Agreements

We have or are renegotiating long-term agreements with many of our major customers. Under these agreements, which in most cases have initial terms of at least four years, we are designated as the exclusive or primary supplier for specified categories of our products. Because of the very competitive nature of the market and the limited number of customers for these products, our customers have sought and obtained price concessions, significant marketing allowances and more favorable delivery and payment terms in consideration for our designation as a customer’s exclusive or primary supplier. 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 we meet ongoing performance standards.

While these longer-term agreements strengthen our customer relationships, the increased demand for our products often requires that we increase our inventories and personnel. Customer demands that we purchase their Remanufactured Core inventory also require the use of our working capital. The marketing and other allowances we typically grant our customers in connection with our new or expanded customer relationships adversely impact the near-term revenues, profitability and associated cash flows from these arrangements. However, we believe the investment we make in these new or expanded customer relationships will improve our overall liquidity and cash flow from operations over time.

Share Repurchase Program

In December 2025, our board of directors approved an increase in our share repurchase program from $37,000,000 to $57,000,000 of our common stock. During fiscal 2026, we repurchased 955,608 shares of our common stock for $11,351,000. As of March 31, 2026, $34,928,000 has been utilized and $22,072,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in our Credit Facility and Convertible Notes. We retired the 2,334,749 shares repurchased under this program through March 31, 2026. Our share repurchase program does not obligate us to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.

Capital Expenditures and Commitments

Our total capital expenditures were $6,915,000 in fiscal 2026 and $6,066,000 in fiscal 2025. These capital expenditures include (i) cash paid for the purchase of plant and equipment, (ii) plant and equipment acquired under finance leases, and (iii) accrued capital expenditures. Capital expenditures in fiscal 2026 primarily include the purchase of equipment for our current operations. We expect to incur approximately $9,000,000 of capital expenditures primarily to support our operations in fiscal 2027. We have used and expect to continue using our working capital and additional capital lease obligations to finance these capital expenditures.

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Contractual Obligations

The following summarizes our contractual obligations and other commitments as of March 31, 2026 and the effect such obligations could have on our cash flows in future periods:

Payments Due by Period

Less than

1 to 3 

3 to 5 

More than 5

Contractual Obligations

Total

1 year

years

years

years

Finance lease obligations (1)

$

5,085,000

$

1,547,000

$

2,319,000

$

1,219,000

$

-

Operating lease obligations (2)

79,084,000

12,454,000

23,091,000

23,010,000

20,529,000

Revolving facility (3)

94,668,000

-

94,668,000

-

-

Convertible notes (4)

56,704,000

-

56,704,000

-

-

Accrued core payment (5)

14,469,000

10,448,000

2,803,000

1,218,000

-

Core bank liability (6)

10,095,000

10,095,000

-

-

-

Finished goods liabilities (7)

837,000

837,000

-

-

-

Unrecognized tax benefits (8)

-

-

-

-

-

Allowances incurred under long-term customer contracts (9)

15,497,000

5,982,000

6,292,000

1,849,000

1,374,000

Total

$

276,439,000

$

41,363,000

$

185,877,000

$

27,296,000

$

21,903,000

(1)

Finance lease obligations represent amounts due under finance leases for various types of equipment.

(2)

Operating lease obligations represent amounts due for rent under our leases for all our facilities and certain equipment.

(3)

Obligations under our Revolving Facility mature on December 12, 2028. This debt is classified as a short term liability on our balance sheet as we expect to use our working capital to repay the amounts outstanding under our Revolving Facility.

(4)

Obligations under our Convertible Notes mature on March 30, 2029. There are no future payments required under the Convertible Notes prior to their maturity, therefore, the carrying value of the notes plus interest payable in kind, assuming no early redemption or conversion has occurred, is included in the above table based on their maturity date of March 30, 2029.

(5)

Accrued core payment represents the amounts due for principal of $13,725,000 and interest payments of $744,000 to be made in connection with the purchases of Remanufactured Cores from our customers, which are held by these customers and remain on their premises.

(6)

The core bank liability represents the amounts due for principal of $10,048,000 and interest payments of $47,000 to be made in connection with the return of Used Cores from our customers.

(7)

Finished goods liabilities represents the amounts due for principal of $837,000 and no interest payments to be made in connection with the purchase of finished goods from our customers.

(8)

We are unable to reliably estimate the timing of future payments related to uncertain tax position liabilities at March 31, 2026; therefore, future tax payment accruals related to uncertain tax positions in the amount of $913,000 have been excluded from the table above.

(9)  Allowances incurred under long-term customer contracts represent commitments we have with certain customers to provide marketing allowances in consideration for multi-year customer agreements to provide products over a defined period.

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