Edgar Filing: MOTORCAR PARTS AMERICA INC

form10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

R	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2011

£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File No. 001-33861

MOTORCAR PARTS OF AMERICA, INC.

(Exact name of registrant as specified in its charter)

New York		11-2153962
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2929 California Street, Torrance, California		90503
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (310) 212-7910

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes £ No R

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes £ No R

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £	Accelerated filer R	Non-accelerated filer £	Smaller reporting company £
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes £ No R

There were 14,470,821 shares of Common Stock outstanding at May 7, 2012.

MOTORCAR PARTS OF AMERICA, INC.

TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements	4
Consolidated Balance Sheets as of December 31, 2011 (unaudited) and March 31, 2011	4
Consolidated Statements of Operations (unaudited) for the three and nine months ended December 31, 2011 and 2010	5
Consolidated Statements of Cash Flows (unaudited) for the nine months ended December 31, 2011 and 2010	6
Condensed Notes to Consolidated Financial Statements (unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	42
Item 4. Controls and Procedures	42
PART II — OTHER INFORMATION
Item 1A. Risk Factors	44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 5. Other Information	46
Item 6. Exhibits	46
SIGNATURES	50

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MOTORCAR PARTS OF AMERICA, INC.

GLOSSARY

The following terms are frequently used in the text of this report and have the meanings indicated below.

“Used Core” — An automobile part which has been used in the operation of a vehicle. Generally, the Used Core is an original equipment (“OE”) automobile part installed by the vehicle manufacturer and subsequently removed for replacement. Used Cores contain salvageable parts which are an important raw material in the remanufacturing process. We obtain most Used Cores by providing credits to our customers for Used Cores returned to us under our core exchange program. Our customers receive these Used Cores from consumers who deliver a Used Core to obtain credit from our customers upon the purchase of a newly remanufactured automobile part. When sufficient Used Cores cannot be obtained from our customers, we will purchase Used Cores from core brokers, who are in the business of buying and selling Used Cores. The Used Cores purchased from core brokers or returned to us by our customers under the core exchange program, and which have been physically received by us, are part of our raw material or work in process inventory included in long-term core inventory.

“Remanufactured Core” — The Used Core underlying an automobile part that has gone through the remanufacturing process and through that process has become part of a newly remanufactured automobile part. The remanufacturing process takes a Used Core, breaks it down into its component parts, replaces those components that cannot be reused and reassembles the salvageable components of the Used Core and additional new components into a remanufactured automobile part. Remanufactured Cores are included in our on-hand finished goods inventory and in the remanufactured finished good product held for sale at customer locations. Used Cores returned by consumers to our customers but not yet returned to us continue to be classified as Remanufactured Cores until we physically receive these Used Cores. All Remanufactured Cores are included in our long-term core inventory or in our long-term core inventory deposit.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	December 31, 2011			March 31, 2011
ASSETS	(Unaudited)
Current assets:
Cash	$	3,133,000		$	2,477,000
Short-term investments		305,000			304,000
Accounts receivable — net		24,887,000			10,635,000
Inventory— net		123,795,000			29,733,000
Inventory unreturned		13,043,000			5,031,000
Deferred income taxes		5,670,000			5,658,000
Prepaid expenses and other current assets		4,411,000			6,299,000
Total current assets		175,244,000			60,137,000
Plant and equipment — net		13,942,000			11,663,000
Long-term core inventory — net		187,475,000			80,558,000
Long-term core inventory deposit		26,658,000			25,984,000
Long-term deferred income taxes		1,617,000			1,346,000
Long-term note receivable		-			4,863,000
Goodwill		40,263,000			-
Intangible assets — net		44,157,000			5,530,000
Other assets		1,934,000			1,784,000
TOTAL ASSETS	$	491,290,000		$	191,865,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	136,422,000		$	38,973,000
Accrued liabilities		20,345,000			7,318,000
Customer finished goods returns accrual		26,910,000			9,161,000
Revolving loan		40,500,000			-
Other current liabilities		2,114,000			918,000
Current portion of term loan		2,000,000			2,000,000
Current portion of capital lease obligations		559,000			372,000
Total current liabilities		228,850,000			58,742,000
Term loan, less current portion		14,000,000			5,500,000
Revolving loan		47,713,000			-
Deferred core revenue		9,352,000			8,729,000
Customer core returns accrual (see Note 2)		103,079,000			-
Other liabilities		1,120,000			1,255,000
Capital lease obligations, less current portion		241,000			462,000
Total liabilities		404,355,000			74,688,000
Commitments and contingencies
Shareholders' equity:
Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued		-			-
Series A junior participating preferred stock; par value $.01 per share,20,000 shares authorized; none issued		-			-
Common stock; par value $.01 per share, 20,000,000 shares authorized;12,533,821 and 12,078,271 shares issued; 12,519,421 and 12,063,871 outstanding at December 31, 2011 and March 31, 2011, respectively		125,000			121,000
Treasury stock, at cost, 14,400 shares of common stock at December 31, 2011 and March 31, 2011, respectively		(89,000	)		(89,000	)
Additional paid-in capital		98,693,000			93,140,000
Additional paid-in capital-warrant		1,879,000			1,879,000
Accumulated other comprehensive loss		(1,201,000	)		(349,000	)
Retained (deficit) earnings		(12,472,000	)		22,475,000
Total shareholders' equity		86,935,000			117,177,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	491,290,000		$	191,865,000

The accompanying condensed notes to consolidated financial statements are an integral part hereof.

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MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended					Nine Months Ended
	December 31,					December 31,
	2011			2010		2011			2010

Net sales	$	84,097,000		$	41,288,000	$	262,223,000		$	118,499,000
Cost of goods sold		86,455,000			28,115,000		239,981,000			81,099,000
Gross (loss) profit		(2,358,000	)		13,173,000		22,242,000			37,400,000
Operating expenses:
General and administrative		10,589,000			4,384,000		30,966,000			11,979,000
Sales and marketing		3,369,000			1,798,000		9,019,000			4,739,000
Research and development		453,000			391,000		1,270,000			1,153,000
Impairment of fixed assets		1,031,000			-		1,031,000			-
Acquisition costs		-			-		713,000			-
Total operating expenses		15,442,000			6,573,000		42,999,000			17,871,000
Operating (loss) income		(17,800,000	)		6,600,000		(20,757,000	)		19,529,000
Interest expense		3,262,000			997,000		8,565,000			4,300,000
(Loss) income before income tax expense		(21,062,000	)		5,603,000		(29,322,000	)		15,229,000
Income tax expense		1,987,000			1,842,000		5,625,000			5,447,000
Net (loss) income	$	(23,049,000	)	$	3,761,000	$	(34,947,000	)	$	9,782,000
Basic net (loss) income per share	$	(1.84	)	$	0.31	$	(2.81	)	$	0.81
Diluted net (loss) income per share	$	(1.84	)	$	0.30	$	(2.81	)	$	0.80
Weighted average number of shares outstanding:
Basic		12,517,269			12,042,792		12,417,292			12,038,296
Diluted		12,517,269			12,399,211		12,417,292			12,254,510

The accompanying condensed notes to consolidated financial statements are an integral part hereof.

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MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	December 31,
Cash flows from operating activities:	2011			2010
Net (loss) income	$	(34,947,000	)	$	9,782,000
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation		4,074,000			2,331,000
Amortization of intangible assets		2,651,000			580,000
Amortization of deferred gain on sale-leaseback		-			(306,000	)
Amortization of deferred financing costs		65,000			64,000
Provision for inventory reserves		804,000			1,454,000
Provision for customer payment discrepancies		114,000			563,000
Net provision recovery of doubtful accounts		(28,000	)		(39,000	)
Deferred income taxes		(313,000	)		160,000
Share-based compensation expense		35,000			46,000
Impact of tax benefit on APIC pool from stock options exercised		84,000			36,000
Gain on redemption of short-term investment		-			(25,000	)
Impairment of fixed assets		1,031,000			-
Loss on disposal of assets		17,000			37,000
Changes in current assets and liabilities:
Accounts receivable		3,650,000			2,271,000
Inventory		(27,125,000	)		2,209,000
Inventory unreturned		1,808,000			(227,000	)
Prepaid expenses and other current assets		4,111,000			26,000
Other assets		(175,000	)		(180,000	)
Accounts payable and accrued liabilities		17,644,000			(464,000	)
Customer finished goods returns accrual		(2,562,000	)		(46,000	)
Deferred core revenue		623,000			1,917,000
Long-term core inventory		(16,707,000	)		(11,535,000	)
Long-term core inventory deposits		(674,000	)		(216,000	)
Customer core returns accrual		541,000			-
Other liabilities		(69,000	)		(804,000	)
Net cash (used in) provided by operating activities		(45,348,000	)		7,634,000
Cash flows from investing activities:
Purchase of plant and equipment		(1,068,000	)		(1,119,000	)
Purchase of businesses		-			(464,000	)
Long-term note receivable		-			(4,863,000	)
Change in short term investments		(29,000	)		178,000
Net cash used in investing activities		(1,097,000	)		(6,268,000	)
Cash flows from financing activities:
Borrowings under revolving loan		128,267,000			39,700,000
Repayments under revolving loan		(89,598,000	)		(39,400,000	)
Proceeds from term loan		10,000,000			-
Repayments of term loan		(1,500,000	)		(1,500,000	)
Deferred financing costs		-			(16,000	)
Payments on capital lease obligations		(452,000	)		(882,000	)
Exercise of stock options		320,000			166,000
Excess tax benefit from employee stock options exercised		255,000			78,000
Impact of tax benefit on APIC pool from stock options exercised		(84,000	)		(36,000	)
Repurchase of common stock, including fees		-			(89,000	)
Proceeds from issuance of common stock		1,000			1,000
Net cash provided by (used in) financing activities		47,209,000			(1,978,000	)
Effect of exchange rate changes on cash		(108,000	)		24,000
Net increase (decrease) in cash		656,000			(588,000	)
Cash — Beginning of period		2,477,000			1,210,000
Cash — End of period	$	3,133,000		$	622,000
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net	$	7,643,000		$	4,306,000
Income taxes, net of refunds		2,796,000			6,658,000
Non-cash investing and financing activities:
Common stock issued in business acquisition	$	4,946,000		$	-

The accompanying condensed notes to consolidated financial statements are an integral part hereof.

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MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements

December 31, 2011

(Unaudited)

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended December 31, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2012. This report should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2011, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 13, 2011.

The accompanying consolidated financial statements have been prepared on a consistent basis with, and there have been no material changes to, the accounting policies described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements that are presented in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011. The accompanying consolidated financial statements include the financial position and results of operations and the effects of the provisional estimates of fair value of the acquired company from the date of acquisition (see Note 2).

Certain prior period amounts have been reclassified to conform to the current period presentation.

1. Company Background and Organization

Motorcar Parts of America, Inc. and its subsidiaries (the “Company” or “MPA”) remanufacture, produce and distribute automobile parts for import and domestic cars, light trucks, heavy duty, agricultural and industrial applications. These replacement parts are sold for use on vehicles after initial vehicle purchase. These automotive parts are sold to automotive retail chain stores and warehouse distributors throughout the United States and Canada and to major automobile manufacturers.

The Company obtains used automobile parts, commonly known as Used Cores, primarily from its customers as trade-ins. It also purchases Used Cores from vendors (core brokers). The customers grant credit to the consumer when the used part is returned to them, and the Company in turn provides a credit to the customers upon return to the Company. These Used Cores are an essential material needed for the remanufacturing operations. The Company has remanufacturing, warehousing and shipping/receiving operations for alternators and starters in Mexico, California, Connecticut, Singapore and Malaysia. In addition, the Company utilizes third party warehouse distribution centers in Edison, New Jersey and Springfield, Oregon.

In May 2011, pursuant to a purchase agreement (the “Fenco Purchase Agreement”) with FAPL Holdings Inc. (“Holdings”), the parent company of Fenwick Automotive Products Limited (“FAPL”), a privately-owned Toronto-based manufacturer, remanufacturer and distributor of new and remanufactured aftermarket auto parts, and certain other individuals, the Company acquired all of the outstanding equity of Holding’s subsidiaries. This transaction provides the Company opportunities to expand beyond its existing product lines of alternators and starters and further enhance its market presence in North America. As a result of this acquisition, the Company now manufactures, remanufactures and distributes new and remanufactured aftermarket auto parts through its newly acquired subsidiaries, including steering components, brake calipers, master cylinders, hub assembly and bearings, clutches and clutch hydraulics for the full range of passenger and truck vehicles. The remanufactured products are sold under the Fenco™ brand name and new products are sold under the Dynapak® brand name.

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Pursuant to the guidance provided under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), the Company reassessed and revised its segment reporting, as a result of this acquisition. The Company now reflects two reportable segments, rotating electrical and under-the-car product line, based on the way the Company manages, evaluates and internally reports its business activities. Prior to this acquisition, the Company operated in one reportable segment, rotating electrical.

In July 2011, the Company established a wholly owned Chinese subsidiary to, among other things, provide certain purchasing and logistics services to the Company in China.

2. Acquisition

On May 6, 2011, the Company entered into and consummated transactions pursuant to the Purchase Agreement. Pursuant to the Purchase Agreement, the Company purchased (i) all of the outstanding equity of FAPL, (ii) all of the outstanding equity of Introcan, Inc., a Delaware corporation (“Introcan”), and (iii) 1% of the outstanding equity of Fapco S.A. de C.V., a Mexican variable capital company (“Fapco”) (collectively, “Fenco”). Since FAPL owned 99% of Fapco prior to these acquisitions, the Company now owns 100% of Fapco.

In consideration for the acquisition of Fenco, the Company issued Holdings 360,000 shares of the Company’s common stock (the “MPA Shares”). For a period of 18 months following the closing of the acquisition, the MPA Shares shall be (i) subject to transfer restrictions pursuant to a Hold Agreement between the Company and Holdings, dated May 6, 2011 (the “Hold Agreement”), and (ii) held in escrow in order to secure certain indemnification obligations under the Purchase Agreement pursuant to an Escrow Agreement by and among Holdings, Stikeman Elliott LLP, certain other individuals, and the Company, dated May 6, 2011 (the “Escrow Agreement”).

The estimated fair value of Fenco tangible and intangible assets acquired and liabilities assumed are based on provisional estimates and assumptions. These provisional estimates and assumptions could change significantly during the purchase price measurement period, as the valuations of the net tangible assets and intangible assets are finalized. In accordance with ASC 805, during the measurement period an acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. The measurement period ends as soon as the acquirer receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. However, the measurement period shall not exceed one year from the acquisition date. Any change could result in material variances between the Company’s future financial results and the amounts presented below, including variances in fair values recorded. The Company made preliminary estimates of fair value based on its best estimates using information that it obtained as of the reporting date. Based on new information available about facts and circumstances that existed as of the acquisition date, the Company has further adjusted the recognition of certain assets and liabilities as of that date. The preliminary estimate of assets acquired and the liabilities assumed in connection with the acquisition and the subsequent change in valuation estimates made in the third quarter are presented in the following table. These third quarter adjustments to the provisional amounts previously recorded were made retrospectively to the acquisition date and included adjustments to some of its valuation estimates related primarily to long-term core inventory, inventory unreturned, accounts receivable reserves, and the customer core returns accrual.

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	US$
Consideration
Stock issued (1)	$	4,946,000
Total	$	4,946,000

	Revised						Revised
	Provisional Estimated			Subsequent			Provisional Estimated
	Fair Value			Change in			Fair Value			Estimated
	September 30, 2011			Valuation Estimates			December 31, 2011			Useful Life
Accounts receivable, net of allowances	$	24,087,000		$	(1,059,000	)	$	23,028,000
Inventory		65,234,000			-			65,234,000
Long-term core inventory		94,217,000			(1,494,000	)		92,723,000
Inventory unreturned		8,631,000			1,189,000			9,820,000
Prepaid expenses		2,332,000						2,332,000
Trademarks		19,663,000						19,663,000		20 years
Customer contracts		21,531,000						21,531,000		10 years
Non-compete agreements		84,000						84,000		2 years
Plant and equipment, net		6,241,000						6,241,000
Revolving loan		(49,544,000	)					(49,544,000	)
Accounts payable and accrued liabilities		(97,072,000	)		97,000			(96,975,000	)
Customer core returns accrual (2)		(102,538,000	)		-			(102,538,000	)
Income taxes payable		(223,000	)					(223,000	)
Customer finished goods returns accrual		(18,652,000	)		(1,659,000	)		(20,311,000	)
Capital lease obligations		(417,000	)					(417,000	)
Debenture loan - due to registrant		(4,923,000	)					(4,923,000	)
Term loan		(1,042,000	)					(1,042,000	)
Fair value of net assets acquired		(32,391,000	)		(2,926,000	)		(35,317,000	)
Goodwill on acquisition	$	37,337,000		$	2,926,000		$	40,263,000

(1)	Based on the Company’s May 5, 2011, closing common stock price of $13.74 per share.

(2)

The estimated fair value of the customer core return liabilities assumed by the Company in connection with the acquisition is included in customer core returns accrual in the accompanying balance sheet at December 31, 2011. The Company classifies the portion of core liability related to the core inventory purchased and on the shelves of its customers as long-term liabilities. Upon the sale of a remanufactured core a core liability is created to record the obligation to provide the Company’s customer with a credit upon the return of a like core by the customer. Since the return of a core is based on the sale of a remanufactured automobile part to an end user of the Company’s customer, the offset to this core liability generated by its return to the Company by its customer is usually followed by the sale of a replacement remanufactured auto part, and thus a portion of the core liability is continually outstanding and is recorded as long-term. The amount the Company has classified as long-term is the portion that management projects will remain outstanding for an uninterrupted period extending one year from the balance sheet date.

As a result of the revised provisional estimated fair value, the excess of the purchase price over the fair value of the net assets acquired of $40,263,000 was recorded as goodwill on acquisition in the accompanying consolidated balance sheet as of May 6, 2011. The changes in estimated fair value were primarily the result of revisions to the valuation of inventory, including long-term core inventory, the customer core returns accrual, and the further assessment of cores on hand at the date of acquisition.

The above estimates of fair value are still provisional as of December 31, 2011 primarily in the areas of inventory, including long-term core inventory, the customer core returns accrual, and intangible assets. The Company continues to review information as to estimated fair value and quantities. These estimates will be finalized as of March 31, 2012.

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The unaudited pro forma financial information presented below assumes the acquisition had occurred on April 1, 2011 and 2010, respectively. The unaudited pro forma information presented is for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the acquisition had been completed on the date indicated, nor is it indicative of future operating results. The following historical financial information has been adjusted to give effect to pro forma events that are (i) directly attributable to the acquisition, (ii) factually supportable, and (iii) with respect to statements of operations, expected to have a continuing impact on the combined results, including the amortization of the fair value of the identifiable intangible assets and the cost of goods sold impact related to the fair value step-up of inventory acquired. The unaudited pro forma information does not reflect any operating efficiencies, associated cost savings or additional costs that the Company may achieve with respect to the combined companies.

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2011			2010			2011			2010

Net sales	$	84,097,000		$	84,607,000		$	288,757,000		$	273,887,000
Operating (loss) income		(17,800,000	)		5,700,000			(22,401,000	)		17,606,000
(Loss) income before income tax expense		(21,062,000	)		1,213,000			(31,759,000	)		5,101,000
Net loss		(23,049,000	)		(646,000	)		(37,591,000	)		(363,000	)
Basic net loss per share	$	(1.84	)	$	(0.05	)	$	(3.03	)	$	(0.03	)
Diluted net loss per share	$	(1.84	)	$	(0.05	)	$	(3.03	)	$	(0.03	)

3. Intangible Assets

The following is a summary of the Company’s intangible assets subject to amortization at December 31, 2011 and March 31, 2011.

		December 31, 2011				March 31, 2011
	Weighted Average Amortization Period	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Intangible assets subject to amortization
Trademarks	20 years	$	20,216,000	$	884,000	$	553,000	$	189,000
Customer relationships	10 years		27,995,000		3,337,000		6,464,000		1,447,000
Non-compete agreements	3 years		341,000		174,000		257,000		108,000
Total	13 years	$	48,552,000	$	4,395,000	$	7,274,000	$	1,744,000

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Amortization expense for acquired intangible assets for the three and nine months ended December 31, 2011 and 2010 is as follows:

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2011		2010		2011		2010

Amortization expense	$	940,000	$	193,000	$	2,651,000	$	580,000

The aggregate estimated future amortization expense for intangible assets subject to amortization is as follows:

Year Ending March 31,
2012 - remaining 3 months	$	1,036,000
2013		3,952,000
2014		3,878,000
2015		3,807,000
2016		3,485,000
Thereafter		27,999,000
Total	$	44,157,000

4. Accounts Receivable — Net

Included in accounts receivable — net are significant offset accounts related to customer allowances earned, customer payment discrepancies, returned goods authorizations (“RGA”) issued for in-transit unit returns, estimated future credits to be provided for Used Cores returned by the customers and potential bad debts. Due to the forward looking nature and the different aging periods of certain estimated offset accounts, they may not, at any point in time, directly relate to the balances in the open trade accounts receivable.

Accounts receivable — net is comprised of the following:

	December 31, 2011			March 31, 2011
Accounts receivable — trade	$	76,049,000		$	33,066,000
Allowance for bad debts		(1,021,000	)		(1,026,000	)
Customer allowances earned		(21,855,000	)		(6,644,000	)
Customer payment discrepancies		(208,000	)		(648,000	)
Customer returns RGA issued		(5,151,000	)		(3,719,000	)
Customer core returns accruals		(22,927,000	)		(10,394,000	)
Less: total accounts receivable offset accounts		(51,162,000	)		(22,431,000	)
Total accounts receivable — net	$	24,887,000		$	10,635,000

Warranty Returns

The Company allows its customers to return goods to the Company that their end-user customers have returned to them, whether the returned item is or is not defective (warranty returns). 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. At December 31, 2011, the warranty return accrual of $1,995,000 was included under the customer returns RGA issued in the above table and the warranty estimate of $5,570,000 was included in customer finished goods returns accrual in the consolidated balance sheets.

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Change in the Company’s warranty return accrual is as follows:

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2011			2010			2011			2010
Balance at beginning of period (1)	$	7,324,000		$	2,975,000		$	8,969,000		$	3,445,000
Charged to expense		15,421,000			9,622,000			44,079,000			28,841,000
Amounts processed		(15,180,000	)		(9,936,000	)		(45,483,000	)		(29,625,000	)
Balance at end of period	$	7,565,000		$	2,661,000		$	7,565,000		$	2,661,000

Includes $5,204,000 of estimated warranty return accrual established in the opening balance sheet in connection with the Company’s May 6, 2011 acquisition.

5. Inventory

Inventory is comprised of the following:

	December 31, 2011			March 31, 2011
Non-core inventory
Raw materials	$	34,733,000		$	11,805,000
Work-in-process		138,000			104,000
Finished goods		96,058,000			19,579,000
		130,929,000			31,488,000
Less allowance for excess and obsolete inventory		(7,134,000	)		(1,755,000	)

Total	$	123,795,000		$	29,733,000

Inventory unreturned	$	13,043,000		$	5,031,000
Long-term core inventory
Used cores held at the Company's facilities	$	50,662,000		$	22,112,000
Used cores expected to be returned by customers		4,451,000			3,467,000
Remanufactured cores held in finished goods		32,971,000			13,994,000
Remanufactured cores held at customers' locations		105,788,000			41,829,000
		193,872,000			81,402,000
Less allowance for excess and obsolete inventory		(6,397,000	)		(844,000	)
Total	$	187,475,000		$	80,558,000

Long-term core inventory deposit	$	26,658,000		$	25,984,000

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6. Major Customers

The Company’s largest customers accounted for the following total percentage of net sales and accounts receivable — trade:

	Three Months Ended December 31,						Nine Months Ended December 31,
	2011			2010			2011			2010
Sales
Customer A		48	%		52	%		45	%		49	%
Customer B		11	%		18	%		9	%		18	%
Customer C		4	%		7	%		4	%		8	%
Customer D		12	%		4	%		13	%		4	%

	December 31, 2011			March 31, 2011
Accounts Receivable Trade
Customer A		31	%		26	%
Customer B		6	%		13	%
Customer C		8	%		17	%
Customer D		19	%		2	%

The Company’s largest suppliers accounted for the following total percentage of raw materials purchases:

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
Significant supplier purchases	2011			2010			2011			2010
Supplier A		1	%		9	%		2	%		15	%
Supplier B		7	%		-			11	%		-

7. Debt

The Company has two outstanding credit agreements as described below.

Parent Company Credit Agreement

The Company’s revolving credit and term loan agreement, as amended, (the “Old Parent Company Credit Agreement”), with Union Bank, N.A. and Branch Banking & Trust Company, allowed the Company to borrow up to a total of $60,000,000 (the “Old Parent Company Credit Facility”). The Old Parent Company Credit Facility was comprised of (i) a revolving facility with a $7,000,000 letter of credit sub-facility and (ii) a term loan. The Company was able to borrow on a revolving basis up to an amount equal to $50,000,000 minus all outstanding letter of credit obligations (the “Old Parent Company Revolving Loan”). The term loan was in the principal amount of $10,000,000 (the “Old Parent Company Term Loan”).

The Old Parent Company Term Loan was scheduled to mature in October 2014 and required principal payments of $500,000 on a quarterly basis. The Old Parent Company Revolving Loan was scheduled to expire in October 2012 and provided the Company the option to request up to two one-year extensions.

The balance outstanding under the Old Parent Company Revolving Loan was $40,500,000 at December 31, 2011. There was no outstanding balance on the Old Parent Company Revolving Loan at March 31, 2011. The Company had reserved $1,126,000 of the Old Parent Company Revolving Loan for standby letters of credit for workers’ compensation insurance and $4,406,000 for commercial letters of credit as of December 31, 2011. As of December 31, 2011, $3,968,000 was available under the Old Parent Company Revolving Loan.

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In January 2012, the Company replaced the Old Parent Company Credit Agreement by entering into a new parent company financing agreement (the “New Parent Company Financing Agreement”) with a syndicate of lenders, Cerberus Business Finance, LLC, as collateral agent, and PNC Bank, National Association, as administrative agent (the “New Parent Company Loans”). The New Parent Company Loans consist of: (i) term loans aggregating $75,000,000 (the “New Parent Company Term Loans”) and (ii) revolving loans of up to $20,000,000, subject to borrowing base restrictions and a $10,000,000 sublimit for letters of credit (the “New Parent Company Revolving Loans,”). The lenders hold a security interest in substantially all of the assets of the Company’s rotating electrical segment. As permitted by the New Parent Company Financing Agreement, the Company subsequently raised $15,000,000 of capital. The New Parent Company Financing Agreement permits the Company to invest up to $20,000,000 in Fenco.

A portion of the proceeds from the New Parent Company Term Loans was used to repay all amounts outstanding under the Old Parent Company Credit Facility and the Old Parent Company Credit Agreement was terminated.

Fenco Credit Agreement

In connection with the acquisition of Fenco, the Company’s now wholly-owned subsidiaries, FAPL and Introcan, as borrowers (the “Fenco Borrowers”), entered into an amended and restated credit agreement, dated May 6, 2011 (the “Fenco Credit Agreement”) with Manufacturers and Traders Trust Company as lead arranger, M&T Bank as lender and administrative agent and the other lenders from time to time party thereto (the “Fenco Lenders”). Pursuant to the Fenco Credit Agreement, the Fenco Lenders have made available to the Fenco Borrowers a revolving credit facility in the maximum principal amount of $50,000,000 (the “Fenco Revolving Facility”) and a term loan in the principal amount of $10,000,000 (the “Fenco Term Loan”). The availability of the Fenco Revolving Facility is subject to a borrowing base calculation consisting of eligible accounts receivable and eligible inventory. At December 31, 2011, approximately $1,128,000 was available under the Fenco Revolving Facility.

As of December 31, 2011, $47,713,000 of the Fenco Revolving Facility was outstanding, $712,000 was reserved for standby commercial letters of credit and $372,000 was reserved for certain expenses. In addition, $1,000,000 of this Fenco Revolving Facility was reserved for Canadian operations use. The Fenco Lenders hold a security interest in substantially all of the assets of the under-the-car product line segment.

The Fenco Revolving Facility and the Fenco Term Loan mature on October 6, 2012, but may be accelerated upon the occurrence of an insolvency event or event of default under the Fenco Credit Agreement. On May 11, 2012, the maturity date of the Fenco Revolving Facility and the Fenco Term Loan was extended to May 13, 2013.

The Fenco Borrowers may receive advances under the Fenco Revolving Facility by any one or more of the following options: (i) swingline advances in Canadian or US dollars; (ii) Canadian dollar prime-based loans; (iii) US dollar base rate loans; (iv) LIBOR loans; or (v) letters of credits.

The Fenco Term Loan bears interest at the LIBO rate plus an applicable margin. Outstanding advances under the Revolving Facility bear interest as follows:

(i)

in respect of swingline advances in Canadian dollars and Canadian dollar prime-based loans, at the reference rate announced by the Royal Bank of Canada plus an applicable margin;

(ii)

in respect of swingline advances in US dollars and US dollar base rate loans, at a base rate (which shall be equal to the highest of (x) M&T Bank’s prime rate, (y) the Federal Funds Rate plus ½ of 1%, or (z) the one month LIBO rate) plus an applicable margin;

(iii)

in respect of LIBOR loans, at the LIBO rate plus an applicable margin.

The Company has classified the Fenco Revolving Facility as long-term as of December 31, 2011 as the Company has the ability and intent to hold the balance outstanding for an uninterrupted period extending beyond one year from the balance sheet date. The Fenco Credit Agreement, among other things, requires the Fenco Borrowers to maintain certain financial covenants. As of December 31, 2011, the Fenco Borrowers were not in compliance with the minimum EBITDA covenant and the requirement to submit the most recent interim financial statements within time frames specified by the Fenco Credit Agreement. On May 11, 2012, the Fenco Borrowers obtained a waiver for non-compliance with these covenants.

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8. Accounts Receivable Discount Programs

The Company has established receivable discount programs with certain customers and their respective banks. 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 collection of customers’ receivables.

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

	Nine Months Ended
	December 31,
	2011			2010

Receivables discounted	$	197,019,000		$	100,857,000
Weighted average days		314			328
Annualized weighted average discount rate		2.9	%		4.1	%
Amount of discount as interest expense	$	4,984,000		$	3,755,000

9. Net (Loss) Income Per Share

Basic net (loss) income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income 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.

The following presents a reconciliation of basic and diluted net (loss) income per share:

	Three Months Ended					Nine Months Ended
	December 31,					December 31,
	2011			2010		2011			2010
Net (loss) income	$	(23,049,000	)	$	3,761,000	$	(34,947,000	)	$	9,782,000
Basic shares		12,517,269			12,042,792		12,417,292			12,038,296
Effect of dilutive stock options and warrants		-			356,419		-			216,214
Diluted shares		12,517,269			12,399,211		12,417,292			12,254,510
Net (loss) income per share:
Basic	$	(1.84	)	$	0.31	$	(2.81	)	$	0.81
Diluted	$	(1.84	)	$	0.30	$	(2.81	)	$	0.80

The effect of dilutive options and warrants excludes 1,442,284 shares subject to options and 546,283 shares subject to warrants with exercise prices ranging from $1.80 to $15.06 per share for the three and nine months ended December 31, 2011— all of which were anti-dilutive. The effect of dilutive options and warrants excludes 449,001 shares subject to options and 546,283 shares subject to warrants with exercise prices ranging from $11.50 to $15.00 per share for the three months ended December 31, 2010 and 1,063,984 shares subject to options and 546,283 shares subject to warrants with exercise prices ranging from $8.70 to $15.00 per share for the nine months ended December 31, 2010 — all of which were anti-dilutive.

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10. Comprehensive (Loss) Income

Comprehensive (loss) income is defined as the change in equity during a period resulting from transactions and other events and circumstances from non-owner sources. The Company’s total comprehensive (loss) income consists of net (loss) income, unrealized (loss) gain on short-term investments and foreign currency translation adjustments.

	Three Months Ended					Nine Months Ended
	December 31,					December 31,
	2011			2010		2011			2010

Net (loss) income	$	(23,049,000	)	$	3,761,000	$	(34,947,000	)	$	9,782,000
Unrealized gain (loss) on short-term investments		9,000			9,000		(17,000	)		(5,000	)
Foreign currency translation		(389,000	)		237,000		(835,000	)		696,000
Comprehensive net (loss) income	$	(23,429,000	)	$	4,007,000	$	(35,799,000	)	$	10,473,000

11. Income Taxes

The Company recorded income tax expense for the nine months ended December 31, 2011. This is primarily due to not recognizing income tax benefits related to the net losses of the Fenco operations for the nine months ended December 31, 2011 due to the recoverability of these tax benefits not being deemed by the Company to be more likely than not to be realized. For the nine months ended December 31, 2011, the Company recorded $275,000 of income tax expense specifically related to the Fenco subsidiaries located in Mexico, a separate tax jurisdiction.

The income tax expenses, excluding the net losses of the Fenco operations, reflect income tax rates of 39.3%, which are higher than the federal statutory rates primarily due to state income taxes, which were partially offset by the benefit of lower statutory tax rates in other foreign taxing jurisdictions. In addition, the Company’s income tax rates for the nine months ended December 31, 2011 were impacted by an additional 1.0% in the period due to certain non-deductible transaction costs incurred in connection with the Company’s acquisition of Fenco.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions with varying statutes of limitations.

12. Financial Risk Management and Derivatives

Purchases and expenses denominated in currencies other than the U.S. dollar, which are primarily related to the Company’s production facilities overseas, expose the Company to market risk from material movements in foreign exchange rates between the U.S. dollar and the foreign currency. The Company’s primary risk exposure is from changes in the rate between the U.S. dollar and the Mexican peso related to the operation of one of the Company’s facilities in Mexico. The Company enters into forward foreign currency exchange contracts to exchange U.S. dollars for Mexican pesos in order to mitigate this risk. In addition, during the year ended March 31, 2011, the Company began entering into forward foreign currency exchange contracts to exchange U.S. dollars for Chinese yuan to mitigate the risk of exposure from material movements in exchange rates on certain purchases made from Chinese vendors. The extent to which forward foreign currency exchange contracts are used is modified periodically in response to management’s estimate of market conditions and the terms and length of specific purchase requirements to fund those overseas facilities and purchases.

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. 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 and purchases will be materially affected by changes in exchange rates. 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 and purchases.

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The Company had forward foreign currency exchange contracts with a U.S. dollar equivalent notional value of $13,746,000 and $9,356,000 at December 31, 2011 and March 31, 2011, respectively. The forward foreign currency exchange contracts entered into require the Company to exchange U.S. dollars for foreign currencies. These contracts generally expire in a 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 or better credit rating; however, the Company is exposed to credit risk with this institution. 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. Any changes in the fair values of forward foreign currency exchange contracts are reflected in current period earnings and accounted for as an increase or offset to general and administrative expenses.

The following table shows the effect of the Company’s derivative instruments on its consolidated statements of operations:

	Loss (Gain) Recognized within General and Administrative Expenses
	Three Months Ended						Nine Months Ended
Derivatives Not Designated as	December 31,						December 31,
Hedging Instruments	2011			2010			2011		2010

Forward foreign currency exchange contracts	$	(488,000	)	$	(31,000	)	$	1,399,000	$	301,000

The fair value of the forward foreign currency exchange contracts of $1,044,000 is included in other current liabilities in the consolidated balance sheet at December 31, 2011. The fair value of the forward foreign currency exchange contracts of $355,000 is included in prepaid expenses and other current assets in the consolidated balance sheet at March 31, 2011.

13. Fair Value Measurements

The following table summarizes the Company’s financial assets and liabilities measured at fair value, by level within the fair value hierarchy as of December 31, 2011 and March 31, 2011:

	December 31, 2011								March 31, 2011
			Fair Value Measurements								Fair Value Measurements
			Using Inputs Considered as								Using Inputs Considered as
	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Assets
Short-term investments
Mutual funds	$	305,000	$	305,000		-		-	$	304,000	$	304,000		-		-
Prepaid expenses and other current assets
Forward foreign currency exchange contracts		-		-		-		-		355,000		-	$	355,000		-

Liabilities
Other current liabilities
Deferred compensation		305,000		305,000		-		-		304,000		304,000		-		-
Forward foreign currency exchange contracts		1,044,000		-	$	1,044,000		-		-		-		-		-

The Company’s short-term investments, which fund its deferred compensation liabilities, consist of investments in mutual funds. 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.

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. During the three months ended December 31, 2011 and 2010, a gain of $488,000 and $31,000, respectively, was recorded in general and administrative expenses due to the change in the value of the forward foreign currency exchange contracts subsequent to entering into the contracts. During the nine months ended December 31, 2011 and 2010, a loss of $1,399,000 and $301,000, respectively, was recorded in general and administrative expenses due to the change in the value of the forward foreign currency exchange contracts subsequent to entering into the contracts.

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During the three and nine months ended December 31, 2011, the Company had no significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

The fair value of assets acquired and liabilities assumed in connection with the acquisition of Fenco on May 6, 2011 were determined using Level 3 inputs. Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. The valuation techniques that were used by the Company to determine the fair value of the assets acquired and liabilities assumed are the market approach, the income approach and the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value based on current market expectations about those future amounts, including present value techniques, option-pricing models and the excess earnings method. The cost approach is based on the amount that would be required to replace the service capacity of an asset (replacement cost). The Company used significant assumptions in the valuation techniques used including the discount rate and forecasted profitability of the Company.

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. The carrying amounts of the revolving loans, term loans and other long-term liabilities approximate their fair value based on current rates for instruments with similar characteristics.

14. Impairment of Fixed Assets

In December 2011, the Company decided to discontinue the constant velocity (“CV”) axle product line and shut-down the related facility located in Bedford, New Hampshire. As a result the Company recorded an impairment loss of approximately $1,031,000 for the three and nine months ended December 31, 2011, which represents the write-off of the carrying amount of fixed assets. The CV business did not qualify for discontinued operations presentation under US GAAP as of December 31, 2011.

15. Segment Information

On May 6, 2011, the Company acquired Fenco. As a result of this acquisition, the Company reassessed and revised its segment reporting to reflect two reportable segments, the rotating electrical segment and the under-the-car product line segment, based on the way the Company manages, evaluates and internally reports its business activities. Prior to this acquisition, the Company operated only in the rotating electrical segment.

The rotating electrical segment is comprised of the Company’s alternator and starter business. This segment remanufactures, produces, and distributes alternators and starters for import and domestic cars, light trucks, heavy duty, agricultural and industrial applications. These replacement parts are sold for use on vehicles after initial vehicle purchase.

The under-the-car product line segment manufactures, remanufactures and distributes new and remanufactured aftermarket auto parts, including steering components, brake calipers, master cylinders, hub assembly and bearings, clutches and clutch hydraulics for the full range of passenger and truck vehicles.

The Company’s products are sold to automotive retail chain stores, warehouse distributors, and to major automobile manufacturers throughout North America.

The accounting policies for each of the Company’s segments are the same as those described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements that are presented in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011.

The results of operations of Fenco have been included from the date of acquisition on May 6, 2011. Financial information relating to the Company’s reportable segments is as follows:

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	Three months ended December 31, 2011
	Rotating		Under-the-Car
Selected income statement data	Electrical		Product Line			Eliminations			Consolidated

Net sales to external customers	$	41,895,000	$	42,202,000		$	-		$	84,097,000
Intersegment revenue, net of cost		241,000		-			(241,000	)		-
Gross profit (loss)		12,636,000		(14,994,000	)		-			(2,358,000	)
Operating income (loss)		5,630,000		(23,430,000	)		-			(17,800,000	)
Net income (loss)		3,028,000		(26,077,000	)		-			(23,049,000	)

	Three months ended December 31, 2010
	Rotating		Under-the-Car
Selected income statement data	Electrical		Product Line		Eliminations		Consolidated

Net sales to external customers	$	41,288,000	$	-	$	-	$	41,288,000
Gross profit		13,173,000		-		-		13,173,000
Operating income		6,600,000		-		-		6,600,000
Net income		3,761,000		-		-		3,761,000

	Nine months ended December 31, 2011
	Rotating		Under-the-Car
Selected income statement data	Electrical		Product Line			Eliminations			Consolidated

Net sales to external customers	$	126,648,000	$	135,575,000		$	-		$	262,223,000
Intersegment revenue, net of cost		1,853,000		-			(1,853,000	)		-
Gross profit		40,483,000		(18,241,000	)		-			22,242,000
Operating income (loss)		15,902,000		(36,659,000	)		-			(20,757,000	)
Net income (loss)		8,280,000		(43,227,000	)		-			(34,947,000	)

	Nine months ended December 31, 2010
	Rotating		Under-the-Car
Selected income statement data	Electrical		Product Line		Eliminations		Consolidated

Net sales to external customers	$	118,499,000	$	-	$	-	$	118,499,000
Gross profit		37,400,000		-		-		37,400,000
Operating income		19,529,000		-		-		19,529,000
Net income		9,782,000		-		-		9,782,000

	December 31, 2011
	Rotating		Under-the-Car
Selected balance sheet data	Electrical		Product Line			Eliminations			Consolidated

Current assets	$	90,842,000	$	112,612,000		$	(28,210,000	)	$	175,244,000
Non-current assets		166,525,000		181,116,000			(31,595,000	)		316,046,000
Total assets	$	257,367,000	$	293,728,000		$	(59,805,000	)	$	491,290,000
Current liabilities	$	112,805,000	$	144,255,000		$	(28,210,000	)	$	228,850,000
Non-current liabilities		14,400,000		187,754,000			(26,649,000	)		175,505,000
Total liabilities		127,205,000		332,009,000			(54,859,000	)		404,355,000
Equity (deficit)		130,162,000		(38,281,000	)		(4,946,000	)		86,935,000
Total liabilities and equity	$	257,367,000	$	293,728,000		$	(59,805,000	)	$	491,290,000

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	March 31, 2011
	Rotating		Under-the-Car
Selected balance sheet data	Electrical		Product Line		Eliminations		Consolidated

Current assets	$	60,137,000	$	-	$	-	$	60,137,000
Non-current assets		131,728,000		-		-		131,728,000
Total assets	$	191,865,000	$	-	$	-	$	191,865,000
Current liabilities	$	58,742,000	$	-	$	-	$	58,742,000
Non-current liabilities		15,946,000		-		-		15,946,000
Total liabilities		74,688,000		-		-		74,688,000
Equity		117,177,000		-		-		117,177,000
Total liabilities and equity	$	191,865,000	$	-	$	-	$	191,865,000

	Nine months ended December 31, 2011
	Rotating			Under-the-Car
Selected cash flow data	Electrical			Product Line			Eliminations		Consolidated

Net cash provided by (used in) operating activities	$	7,124,000		$	(52,472,000	)	$	-	$	(45,348,000	)
Net cash used in investing activities		(775,000	)		(322,000	)		-		(1,097,000	)
Net cash provided by financing activities		39,209,000			8,000,000					47,209,000
Effect of exchange rate changes on cash		(108,000	)		-					(108,000	)
Cash — Beginning of period		2,477,000			-					2,477,000
Cash — End of period		2,856,000			277,000			-		3,133,000
Additional selected financial data
Depreciation and amortization	$	2,634,000		$	4,091,000		$	-	$	6,725,000
Capital expenditures		746,000			322,000			-		1,068,000

	Nine months ended December 31, 2010
	Rotating			Under-the-Car
Selected cash flow data	Electrical			Product Line		Eliminations		Consolidated

Net cash provided by operating activities	$	7,634,000		$	-	$	-	$	7,634,000
Net cash used in investing activities		(6,268,000	)		-		-		(6,268,000	)
Net cash used in financing activities		(1,978,000	)		-		-		(1,978,000	)
Effect of exchange rate changes on cash		24,000			-		-		24,000
Cash — Beginning of period		1,210,000			-		-		1,210,000
Cash — End of period		622,000			-		-		622,000
Additional selected financial data
Depreciation and amortization	$	2,911,000		$	-	$	-	$	2,911,000
Capital expenditures		1,119,000			-		-		1,119,000

16. Impact on Previously Issued Financial Statements of Changes in Provisional Estimates of Fair Value

On May 6, 2011, the Company acquired Fenco. The Company made preliminary estimates of fair value based on its best estimates using information that it obtained as of the reporting date. Based on new information available about facts and circumstances that existed as of the acquisition date, the Company adjusted the recognition of certain assets and liabilities to the provisional amounts previously recorded in the first two quarters ended September 30, 2011. During the third quarter ended December 31, 2011, the Company has further adjusted the recognition of certain assets and liabilities as of that date. These adjustments to the provisional amounts previously recorded were made retrospectively to the acquisition date and adjustments were primarily related to long-term core inventory, inventory unreturned, accounts receivable reserves, and the customer core returns accrual.

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The consolidated balance sheet as of June 30, 2011 as previously restated, was further impacted during the third quarter ended December 31, 2011 by the retrospective impact of the adjustments presented in the table below:

	June 30, 2011 (Unaudited)
	As Previously Reported			Change in Opening Valuation Estimates (1)			As Restated
ASSETS
Current assets:
Cash	$	1,275,000		$	-		$	1,275,000
Short-term investments		311,000			-			311,000
Accounts receivable — net		28,917,000			(1,059,000	)		27,858,000
Inventory— net		106,897,000			-			106,897,000
Inventory unreturned		12,257,000			1,189,000			13,446,000
Deferred income taxes		5,715,000			-			5,715,000
Prepaid expenses and other current assets		5,353,000			-			5,353,000
Total current assets		160,725,000			130,000			160,855,000
Plant and equipment — net		17,159,000			-			17,159,000
Long-term core inventory — net		177,339,000			(1,494,000	)		175,845,000
Long-term core inventory deposit		26,248,000			-			26,248,000
Long-term deferred income taxes		1,368,000			-			1,368,000
Goodwill		37,337,000			2,926,000			40,263,000
Intangible assets — net		46,084,000			-			46,084,000
Other assets		1,839,000			-			1,839,000
TOTAL ASSETS	$	468,099,000		$	1,562,000		$	469,661,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	98,723,000		$	-		$	98,723,000
Accrued liabilities		34,760,000			(97,000	)		34,663,000
Customer finished goods returns accrual		25,193,000			1,659,000			26,852,000
Revolving loan		18,500,000			-			18,500,000
Other current liabilities		914,000			-			914,000
Current portion of term loan		2,000,000			-			2,000,000
Current portion of capital lease obligations		749,000			-			749,000
Total current liabilities		180,839,000			1,562,000			182,401,000
Term loan, less current portion		15,000,000			-			15,000,000
Revolving loan		47,630,000			-			47,630,000
Deferred core revenue		8,930,000			-			8,930,000
Customer core returns accrual (see Note 2)		97,479,000			-			97,479,000
Other liabilities		1,692,000			-			1,692,000
Capital lease obligations, less current portion		372,000			-			372,000
Total liabilities		351,942,000			1,562,000			353,504,000
Commitments and contingencies
Shareholders' equity:
Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued		-			-			-
Series A junior participating preferred stock; par value $.01 per share,20,000 shares authorized; none issued		-			-			-
Common stock; par value $.01 per share, 20,000,000 shares authorized;12,441,971 and 12,078,271 shares issued; 12,499,421 and 12,427,571 outstanding at June 30, 2011 and March 31, 2011, respectively		124,000			-			124,000
Treasury stock, at cost, 14,400 shares of common stock at June 30, 2011 and March 31, 2011, respectively		(89,000	)		-			(89,000	)
Additional paid-in capital		98,139,000			-			98,139,000
Additional paid-in capital-warrant		1,879,000			-			1,879,000
Accumulated other comprehensive loss		(64,000	)		-			(64,000	)
Retained earnings		16,168,000			-			16,168,000
Total shareholders' equity		116,157,000			-			116,157,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	468,099,000		$	1,562,000		$	469,661,000

Represents the impact of the change in the opening valuation estimates on the previously restated consolidated balance sheet at June 30, 2011.

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The consolidated balance sheet as of September 30, 2011 as previously reported, was impacted during the third quarter ended December 31, 2011 by the retrospective impact of the adjustments presented in the table below:

	September 30, 2011 (Unaudited)
	As Previously Reported		Change in Opening Valuation Estimates (1)			As Restated
ASSETS
Current assets:
Cash	$	1,197,000	$	-		$	1,197,000
Short-term investments		281,000		-			281,000
Accounts receivable — net		35,411,000		(1,059,000	)		34,352,000
Inventory— net		116,241,000		-			116,241,000
Inventory unreturned		13,489,000		1,189,000			14,678,000
Deferred income taxes		5,722,000		-			5,722,000
Prepaid expenses and other current assets		4,756,000		-			4,756,000
Total current assets		177,097,000		130,000			177,227,000
Plant and equipment — net		15,198,000		-			15,198,000
Long-term core inventory — net		188,151,000		(1,494,000	)		186,657,000
Long-term core inventory deposit		26,473,000		-