Q4 2020 Motorcar Parts of America Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the motorcar parts of Americas fiscal 2024th quarter and yearend conference call.
This time all participants are in a listen only mode. After the speakers presentation. There will be a question answer session to ask a question. During this session you will need to press Star 100 telephone if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Gary there.
Investor Relations of Motorcar parts of America. Please go ahead Sir.
Thank you. Thank you Jason Thanks, everyone for joining us I hope everyone is safe and healthy.
Before we begin and I turn the call overdue Selwyn Joffe, He chairman President and Chief Executive Officer, and David Li The Companys Chief Financial Officer.
I'd like to remind everyone of the Safe Harbor statement included in todays press release.
The private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward looking statements, including statements made during today's call.
Such forward looking statements are based on the Companys current expectations and beliefs concerning future developments and their potential effects on the company.
Can be no assurances of future developments affecting the company will be those anticipated by motorcar parts of America actual results may differ from those projected in the forward looking statements. These forward looking statements involve significant risks and uncertainties some of which are beyond the control of the company and our.
Subject to change based upon various factors.
The company undertakes no obligation to publicly update or revise any forward looking statements whether were the result of new information future events or otherwise.
For a more detailed discussion of some of these ongoing risks and uncertainties of the company's business.
Please.
Okay. The various filings with the Securities and Exchange Commission with that I'd like to begin the call turn it over to sell in to begin our discussion. Thanks Kerry.
I appreciate everyone joining us today.
Startup first off I want to thank all our team members for their commitment and customer centric focus on service and for their exceptional pride in all the products, we sell on the customer service we provide.
We are particularly grateful to our team during these unprecedented times their health and safety remain a top priority.
Since the very beginning of this pandemic, we enhanced already vigorous disinfection procedures. In addition, we implemented stringent social distancing and health safety policies, including the use of protective equipment at our facilities around the globe.
For the most part our corporate team is continuing to work remotely as much as possible.
We are taking steps to gradually and safely return not team back to the office.
During this challenging period I T team has been exceptional and laser focused on maintaining round the clock uninterrupted service to our global operations as a result of everyone's contributions our operations have continued largely on interrupted I'm extremely proud of all the work and now about company.
Ongoing commitment to being socially responsible, particularly during this challenging period is also noteworthy.
One of the company's many initiatives includes food programs for employees and members of the community.
Let me restate, what I said in today's press release, we should never lose sight of individual and collective responsibilities, particularly in times of crisis, and we as a company always strive to nurture the spurred an update today activities.
Clearly the past few months have been challenging for all of us, but from our vantage point, we see light at the end of the tunnel.
While the month of April was strongly impacted across the automotive aftermarket consumer demand has picked up over the past month in the half with industry observers and retailers reporting encouraging trends as states have opened up and consumers are driving more.
We experienced unprecedented declines in April followed by shop gains in May and expect that June will continue with the strong sales trend.
It is still too early to determine if this trend will continue moving forward, but we are cautiously optimistic.
As highlighted in the press release issued this morning, we reported a record sales positive generation of cash flow from operations and margin improvement.
Unfortunately, our results were impacted by two major items.
Firstly, the extraordinary noncash losses due to the week Mexican pestle.
And secondly, some onetime transition expenses related to this expansion of valves in Mexico.
The underlying results however were very strong.
We're making excellent progress in the execution of our strategic plans and investments and we are on target to complete our strategic Buildout in Mexico by the end of the fiscal second quarter.
In short, we have a scalable infrastructure and our growth opportunities remain abundant, particularly as the competitive landscape changes and customers place even more importance on reliable suppliers to meet anticipated demand as the economy recovers.
In summary, all of our initiatives will further our financial performance, particularly as we realize the benefits of our state of the our production of calipers.
The relocation of certain additional product lines to operations in Mexico from our higher cost domestic production and other related overhead absorption initiatives.
In addition, our facility expansion in Malaysia is complete which will allow us to increase capacity and productivity for our existing product lines and allow us to utilize the additional capacity to Ruth reduce dependence on outsourcing certain products or components.
For more than 50 years MP has established itself as a leader in the supply of internal combustion vehicle hard parts to our industry.
The market size for our current categories has more than $6 billion at the retail level.
According to land marketing research internal combustion engine vehicles in operation in the United States will increase by 36 million from 2020 through 2030 up from approximately 282 million vehicles in operation last year.
These vehicles will continue to age fueling significant growth in the aftermarket parts replacement industry well beyond 2030.
In fact, these statistics should further benefit from vehicles in the peak SaaS euros entering the prime parts replacement age.
In short our strategy before and since the pandemic is to leverage our significant channel relationships for aftermarket parts and offer superior parts and solutions to our customers and consumers.
Today, we are relentlessly focused on maintaining our growth rates and enhancing our profitability for the hard parts categories that we offer.
As well as launching in establishing ourselves within the multibillion dollar breaks category.
Industry observers believe as the economy opens up personal vehicles will be the main choice of transportation.
In addition industry reports indicate that personal vehicles will be the preferred mode of transportation for vacations in the foreseeable future.
This bodes well for our business.
In addition, during recessionary times people hold onto their vehicles longer.
As these vehicles age the rate of replacement of parts increases substantially.
For example, causing the zero to three year age group have a replacement rate vaults nader's of 2.42% compared with 6.65% in the 12 plus year age group.
We're already seeing a significant increasing used car sales versus new car sales, which indicates that consumers are electing a less expensive alternative to car replacement.
At the same time as new car sales return, we still benefit simply because new cause get old.
As we start a new fiscal year, we are well positioned to benefit from our investments for continued growth notwithstanding the impact of the April stay at home orders across the country.
In short all of our initiatives will further solidify our position as a value premier supply of automotive after power aftermarket parts in North America.
With respect our diagnostic business demand for our bench top tester continues to grow as our customers upgrades to existing testers to meet the latest protocols for starters and Alternators.
As late model application started entering the repair cycle retailers began increasing their capital expenditures for diagnostic and testing products.
During our fiscal fourth quarter, when the pandemic became an issue our customers capital expenditures were deferred.
But now with a fast pickup in the aftermarket business the testing expenditures appeared to be resuming.
These investments support our customers mission to provide continuing trustworthy advice with regard to whether or not a customer's alternator starter is working properly.
This helps significantly reduce emmis diagnosis of the vehicles problem, which is one of the largest reasons for return.
To complement our internal combustion business. We have also embraced the investments of the fast growing world electrified transportation.
Consequently, we have made investments in the rapidly advancing diagnostics for automotive electric vehicles, and the electrification of the aerospace market and military industry.
Our offering of complete solutions for simulation and emulation and production testing for the electric powertrain is gaining traction.
Sales activity is gaining momentum, but orders have been temporarily slowed as OEM manufacturers for these vehicles reopened.
Nonetheless, we are encouraged by order activity from key Blue Chip global companies in both the automotive and aerospace industries and the strength of our strategic partnerships within the space.
The increasing global demand for electric electronic testing products and subscription services represent significant value creation opportunities.
In short our entire company is well positioned for sustainable top and bottom line growth.
Despite favorable sales trends beginning in may supported by demand for do it yourself repairs and improved demand from the professional installer market. The company believes it is prudent at this time to not provide annual guidance.
In summary, notwithstanding the human and economic impact of this terrible pandemic, we're cautiously optimistic about the outlook.
Healthcare professionals and medical researchers around the world appear to be making significant progress in addressing the virus and we are prepared to do our part to keep vehicles on the road.
We expect the number of vehicles and that prime pods replacement age will continue to grow.
And we're pleased to see the number of repairs and miles driven regained momentum.
Particulars people return to work lifestyle changes vacations turn to Roadshows and the new normal takes hold.
All of this supports our optimism for growth and profitability over the next several years and we remain convinced that our strategy to enhance shareholder value is on target.
I'll now turn the call over to data to review the results for the fiscal fourth quarter and fiscal year.
Thank you sell in to begin I encourage everyone to read the 8-K filed this morning with respect to our March 31, 2020 earnings press release.
For more detailed explanations as a result.
As noted in today's press release, the company has decided to eliminate is reporting of certain non-GAAP financial measures.
For information about the items that impacted the result.
The exhibit one to five of the press release.
Let me take a moment to review the financial highlights for the fiscal 2024th quarter and fiscal year.
Both periods, reflecting a record sales.
Net sales for the fiscal 2024th quarter increased 16.8% to a record 150.7 million from 129.1 million for the same period a year earlier.
Gross profit for fiscal 2024th quarter, what 36.6 million compared with 26 million a year earlier.
Gross profit as a percentage of net sales for the fiscal 2024th quarter was 24.3% compared with 20.1% a year earlier.
Adjusted gross profit for the fiscal 24th quarter.
40.2 million compared with 36.6 million a year ago.
Adjusted gross profit as a percentage of net sales for the three month.
Was 26.7%.
Compared with 28.3% a year earlier.
As detailed in exhibit three in this morning's earnings press release.
Gross profit and adjusted gross profit for the fiscal 2024th quarter were negatively impacted 5.6% due to core buyback premium amortization, which is not adjusted for India. Adjusted gross margin of 26.7%, which I just mentioned.
Gross profit and adjusted gross profit for the prior year period were also impacted by several items as detailed in exhibit three totaling 2.4%.
Total operating expenses increased by 21.6 million to 42.1 million for the fourth quarter from 20.5 million for the prior year. This increase was primarily due to a noncash loss.
18.2 million related to the Remeasurement of foreign currency denominated lease liabilities.
Typically our leases in Mexico.
And a noncash loss of 7.5 million recorded during the quarter related to change in the fair value afford currency contract related to the significant devaluation in the Mexican peso.
Painted with a noncash gain of 656000 recorded during the prior period.
The devaluation in the Mexican peso versus the U.S. dollar is a benefit to the company because our operating expenses in Mexico are primarily in pesos.
Nonetheless as I just described there are noncash impact for the accounting for the fluctuation in the U.S. dollar Mexico peso exchange rate that May result, in non cash gains and losses.
Interest expense was 5.5 million for the fourth quarter compared with 6.7 million last year.
The decrease in interest expense was primarily due to lower interest rate, partially offset by increased borrowing and the USAT accounts receivable at discount program offered by our customers due to higher sales during the quarter compared with the prior period.
Income tax benefit for the fourth quarter was 2.8 million compared with income tax expense of 1.6 million for the prior year period.
Net loss for fiscal 2024th quarter was 8.2 million or 43 cents per share compared with a net loss of 2.8 million or 15 cents per share a year ago.
Results for the fiscal 2024th quarter were impacted by items totaling approximately 25.8 million on a pre tax basis or a dollar two cents per share on a tax effected basis as detailed in exhibit one in this morning's earnings press release.
The 25.8 million include non cash items at 23 million.
Primarily consisting of the remeasurement of lease liabilities and the company's forward foreign exchange contracts due to the devaluation of the Mexican peso.
And transition expenses of 2.8 million related to the expansion of the company's footprint in Mexico.
The net loss for the prior year period was impacted by items totaling approximately 17.2 million on a pre tax basis.
Or 70 cents per share on a tax effective basis as detailed as did it want in this morning's earnings press release.
Let me now discussing results for the 12 months ended March 30, Onest linked 20.
Net sales for fiscal 2020 increased 13.3% to a record 535.8 million.
On 472.8 million a year earlier.
Gross profit for fiscal 2020 was 118.4 million compared with 89.2 million a year earlier.
Gross profit at the percentage of net sales for fiscal 2000 was 22.1% compared with 18.9% a year earlier.
Adjusted gross profit for fiscal 2020, with 135.9 million compared with $117.2 million a year ago.
Adjusted gross profit as a percentage of net sales for fiscal 2021, 25.4%.
Compared with 24.8% a year earlier as detailed in exhibit four in this morning's earnings press release.
Gross profit and adjusted gross profit for fiscal 2020 were negatively impacted by core buyback premium amortization.
Customer allowances and return accruals related to new business.
The impact of tariff costs before being passed through to customers.
This negatively affected adjusted gross margins.
Our combined 1.2%, which is not adjusted for India, adjusted gross margin of 25.4%, which I just mentioned.
Gross profit and adjusted gross profit for the prior fiscal year would negatively impacted by several items detailed in exhibit four in this morning's earnings press release.
Totaling 2.7%.
Net loss for fiscal 2020 was 7.3 million or 39 cents per share.
Compared with a net loss of 7.8 million or 42 cents per share a year ago.
Results for fiscal 2020 were impacted by approximately 50 million on a pre tax basis.
For a $1.99 per share on a tax effected basis as detailed in exhibit to in this morning's earnings press release.
This $50 million include non cash items are 37.7 million.
Primarily consisting of noncash mark to market expenses related to the significant devaluation in the Mexican peso and it really an evaluation of course and custom Michelle.
In addition, the items totaling 50 million include 12.3 million, primarily due to transition expenses related to the expansion of the company's footprint in Mexico.
The net loss for the prior year period was impacted by items totaling approximately 51.9 million on a pre tax basis or $2.08 per share on a tax effected basis.
As detailed in exhibit to in this morning's earnings press release.
The company has historically used adjusted EBITDA to calculated ROI c.
We will no longer use adjusted EBITDA instead in order to compute return on invested capital. The company will utilize operating income and add back non cash expenses, including depreciation and amortization write down of course and question Michelle.
Our buyback premium amortization.
Fas 123, our expenses.
Foreign currency, mark to market gains or losses in certain noncash accruals and onetime expenses.
The company believes this metric consider together with GAAP measures provides useful information to investors and to management regarding the company's return on invested capital.
In short we take this metric, which was approximately $76 million for fiscal 2020.
Divided by the average equity and net debt balance that's 410 million.
Resulting in a 18.5% return on invested capital.
I should point out that we have just began to realize the benefits of expanding our Mexico operations and the launch of our new break categories with the expectation of increased returns from both new and existing product lines.
This should result in higher ROI fee as a benefit of our strategic expansion are realized.
At March 30, Onest 2020, we had net bank debt of approximately 126.5 million.
Total cash availability under revolver credit facility was approximately 108.1 million at March 31st 2020 based on a total 238.6 million revolver credit facility and subject to certain limitations.
Consolidated EBITDA for the purposes of bank Covenant calculations for the year ended March 30, Onest 2020 was 80.1 million.
In light of Cobot 19, we elected to not pay down our revolving credit facility and we accumulated cash at 49.6 million as of March 30, Onest 2020.
Our credit arrangement for computing, the senior leverage ratio only allowed up to 6 million of credit for cash.
If we had paid down the revolving credit facility with cash on hand.
Our senior leverage ratio would have been 1.77 at March 31st 2020, compared with 2.23 ratio based on the bank defined calculation of the senior leverage ratio.
At March 31 to 2020, the company had approximately 777 million in total asset.
Current assets were 409 million in current liabilities were 318 million.
This reflects the adoption of new lease accounting pronouncement.
Which requires balance sheet recognition of a leased assets and lease I ability for all leases.
Net cash provided by operating activities during the fiscal year, 2024th quarter was 23.2 million due in part to management of working capital and the growth of the newly launched break caliper program during fiscal 2000.
Net cash provided by operating activities during the full fiscal year 2020 was 18.8 million compared with cash used in operating activities a $40 million for the prior year fiscal 2019.
The reconciliation of items that impact result, and non-GAAP financial measures.
Once again, please refer to is that it's one to five in this morning's earnings press release.
I will now open the call for question and someone will then provide some closing remarks.
Thank you as a reminder to ask a question you need to press Star one and your telephone to try your question press the pound or hash key please standby Willie compiled documenting roster.
And your first question here comes from the line of Brian Nagel with Oppenheimer. Please go ahead. Your line is now open.
Hi, good morning.
Morning, Brian.
Sorry, I wrote the audio may have been in and out a little bit, but hopefully people could get good good to hear us but.
I am happy to answer all your question. Thanks.
I heard you find so I don't know Allstate brand loyalty program.
So when I guess the first question I wanted to ask you in your prepared comments, you talked about the rebounds and business in bay them into June as well could you just help us size that better.
Particularly as it relates to the slowdown a business that occurred during April.
As the shelter place orders were put into place.
Yes, hi.
I think it's good I normally wouldn't do that but I do think it's good for the industry and on our competitors and probably have customers listening but.
You know April was probably a 40% to 50% decline.
And may is probably afford a 10% decline depending on how you measure and we're hoping to.
In June still early but we hope that will be ahead of the of last year in June, but we don't know I mean, I just want to preface that the.
Junos is pretty forward looking things are moving around pretty quickly, but from what I can tell right now Brian muscle for everybody, having its a great question.
I mean, fortunately for our industry. The v. It looks like there is a V curve of recovery, that's going to be subject to all sorts of variables as us pandemic.
Evolves.
Now, let's see that's really helpful. Then fixing a follow up question to that of habits, and we've seen the password, particularly during periods of disruption your retail partners.
Worked down inventories instrument. So as you look at that rebound that you're seeing your business. How much you think that reflects.
Actual end demand versus some type of inventory judgment tapping into retail partners.
Well I go to tell you I meant and I'll just referred to the retailers that have announced their earnings publicly I mean, I don't want to give up their individual information, but based on public information where sales have recovered dramatically. So I don't believe much of that is inventory I think most of the versus.
He is actual demand because if you think about a gone through March we had record sales and shipments and so inventory levels at our customers will probably very good.
Then April Youre now you have this massive declines where they don't order, but there's still sitting on pretty good inventory and so I don't believe that.
That is disproportionately skewed by inventory not to say that someone isn't building. Some inventory I think that the outlook is that we have the spring demand on the summer demand compressed into one.
And so hopefully again as we see people driving mall, which hopefully will continue the choice of vacations the choice of transportation being in.
In personal vehicles as opposed to public vehicles the decline of ride sharing.
I mean, I think given carpooling is affected will be affected by it so and with the weather we've come off a very much all the conditions would come off have been pretty.
Adverse may we've had very mild weather coming out of a mild winter.
If we get increased miles driven.
I think people are going to be more concerned about making sure. The their vehicles are in working condition.
And we have a hot summer and the outlook could be good.
Okay.
I appreciate that color. Thank you.
Thanks, Brian.
Your next question comes from the line as Steve Dyer with Craig Hallum Capital Group. Please go ahead your line now open.
Hi, guys Ryan on for Steve.
Hi.
Maybe maybe just to start to piggyback off that last question, but it sounds like some inventory de stocking in April and May from your key customers based on kind of their sales in what you just mentioned.
And those months for you guys is it reasonable to assume that there could be some pent up demand later this calendar year to refill and restock that channel in addition to.
The end customer demand rebounding or is it now kind of getting to more of a rate size position.
Look I think you know the one thing we know for certain is that we don't know anything for certain I mean thats. The one thing that we know.
Again, if you sort of extrapolate where we are today.
I think of that the theory, a pent up demand is a pretty strong one I think.
Again, you know.
It's going to be the priority for people is gonna be to make sure that vehicle is good and good operating condition.
And I do think that while we seeing a pop now the professional installer market is just rebounding. It's late it's been late to the rebound that'll pickup some momentum.
And I am personally and you know static vision I'm fairly optimistic.
But I'm also in our core shows to to be too optimistic because you know there's lot of uncertainty.
Yes, not fair.
Maybe just on on freight calipers, specifically you had a nice Big award kind of initial award that was this year any traction there any new awards snow.
Look we expect a break caliper business to be at a run rate of at least 50 million those by the under this fiscal year.
We've got we've got lots of traction.
And then as it relates to free cash flow.
So free cash flow in the quarter.
And for the year, which is nice how do you see that do you think you can remain free cash flow positive in that improved throughout the year.
Well I think what it shows that in a relatively static environment. The company generates a lot of cash I believe.
Are we going to be deploying cash to complete our buildings in Mexico, we got to be deploying some cash to complete the ramp up of the caliper facilities.
Are we going to be deploying cash to get through the final stages of our transition. So I think we're going to have some use of cash.
Our liquidity continues to be strong and.
We've got some some nice opportunities that we were looking at them.
You know those take cash, but but in a stable environment than we were getting there as we get through the end of this calendar year as we get into our new facilities.
We should see you know again in the back end to the euro should be much stronger in terms of cash flow in the early part of this year.
Got it and then last one just kind of a housekeeping items or on same page here, but you're eliminating.
Non-GAAP financial measures.
It appears like the only difference in this quarter was you gave the non-GAAP adjustments.
He broke those out but you didnt explicitly state adjusted EPS adjusted EBITDA. This away you guys plan to report going forward and I guess, what's the rationale to change kind of this hybrid approach.
I mean this is the way we intend to report going forward them in subject to in our thinking as a better way but.
The rationale is an under the new six or six recognition revenue recognition. This some debate as to whether you can have adjustments that relate to revenue.
And so if you eliminate those adjustments because unfortunately in our business. These one these expenses that we think are very adjustable affect revenue, which means that they're not adjustables, so and we're moving towards relying on GAAP numbers as we get through December and our transition is over we were we think that.
The GAAP numbers are going to speak for themselves. So this is the beginning of a transition to you know to to be more.
GAAP oriented we've gone through significant growth and really significant change in the way we operate and so we felt it's been very necessary to show that and we still showing up but.
So as we get through towards the end of the Euro.
We think that will become less important although we do I am not to and I might point out and I. Appreciate this question actually.
The Mexican currency Mark to market is something that you know, we don't adjust for but just because we want to move to GAAP to GAAP numbers, but.
We have our.
The Mexican leases on our Mexico subsidiary books, and so and their dollar leases so to the extent that those leases.
If the Mexican peso declines in value versus the US dollar the amount of Mexican peso liability on the balance sheet in Mexico, ASP increased the asset of increases and so when you consolidate you have to take that loss and that's what we're going to have some big variations I mean, I expect to see big gains big losses, as we go as the year.
So goes along but we got to have those that are going to you know superficially effect on numbers.
And then on the amortization and recorded our core write downs and customer shells, which all non cash.
We got to continue to have those fluctuations and so we will call those out.
Got it.
Thanks, guys. Good luck.
Thank you.
Your next question comes from the line as Scott Stember with CL King. Please go ahead your line now open.
Good afternoon, and thanks for taking my questions.
Hey, Scott.
So when you had said that you gave the numbers for April and May I think you said down for 10%.
For the month of May that was year over year, but was that was for the whole month and if it was what was the exit run rate heading into June so could just kind of get a sense of what to potentially look for in June.
In our June again.
It looks like June as in our results will match last year, even be up.
And so I just I just want to urge caution one thing with revenue recognition policies only allow us to recognize revenue from the customer takes a ownership. So we may have from our perspective, we may have some cut off you know in terms of revenue, but do not volume is very very strong.
Okay.
And just going back over to the decision to.
Yes.
Report formally on a GAAP basis in the past one of the major differences was.
I guess related to.
Buybacks or course off the customer shelves for new business.
Where are we with that are we going to be seeing charges like that the future or is that what are the reasons since that some of those arrangements I believe event. It is that just indicative of the fact that you expect the earnings to stand on its own.
Right without having to add anything back.
Well I think start where we now amortize the difference in the.
Book value versus the core the cold post repurchase price over nature period.
And so that's an amortization number.
And you know as far as coal buybacks continue and are continuing I mean clearly.
We've bought back an enormous amount of close on on relative to the business over whether we have right now that is coming towards the end.
I don't know, if we're going to get more business or not that requires core buyback, we going to have to evaluate that as we go down the road I think our industry on the supply side would prefer not to be paying cash out for core buybacks them.
You know I think maybe this event will make people more rational but that I will tell you we're committed to keeping ahead of the industry.
Okay, and just in general from a profitability standpoint, I know, we're not giving guidance here, but assuming that these trends continue in that we get back to normal.
What can you say about your expectations about property just give us any.
Any guidance, whether or in formal guidance, whether its a.
From an adjusted standpoint, or even a non adjusted whether its gross margins or end of the bottom line.
Unfortunately, Scott once we start that that means we are giving guidance I mean, there's so much uncertainty I think there the rule of thumb as our historical adjusted margins have been should we should remain stable and.
But there's we have incremental costs that relate to covert I mean, we're spending money to make sure our employees remain space.
Fill rates for our products is excellent despite social distancing enough factories.
Special mail programs in our factories separation of our functions and duties.
Yes.
We take turns a right now in terms of scheduling people come into the office, so it kind of equivalent.
An appropriate social distancing so.
You know wireless pandemic continues they're going to be some incremental expenses, we will try and capture those.
I will say that we have not taken a nor do we qualify for any help from the government we have not needed any of that and we've had no covenant issues at all of their bank debt and fat extremely strong cash flow. So we're proud of where we are and we are ready to we ready to buckled down to make sure. Those thing works, we've cut costs significantly through.
We're out our organization.
While there is declining revenue in the revenues picked up I think we're going to have to scale up a little bit to manage that but.
And our as of now I.
I think.
An assumption of soda status quo margins subject to cover expenses is probably a safe.
Hi, There last question, David I missed the cash flow numbers for the year and for the quarter can you just get that one more time.
Yes for the fourth quarter, we generated 23.2 million in cash from operating activities for the full year, we generated 18.8 million cash from operating activities.
Hi.
And what were capital expenditures for the year.
The 19 million.
So the majority of that is growth capex.
We are expanding interim Mexico footprint.
Okay got it.
All right solutions coming towards towards the end of their capex expenditures as we get through this calendar year.
And maintenance capex will be less than half of that.
Okay correct.
Got it thank you.
Thank you.
Your next question here comes from the line of Sarkis Sherbetchyan.
With B. Riley. Please go ahead. Your line is now open.
Hey, good morning, and thanks for taking my question here more uncertainties.
So just wanted to actually touch on.
Deploying additional cash to complete the building in Mexico and also the caliber so have you ever.
[music].
Let us know how much that use of cash is going to be so essentially what's left.
So the 10-K will be filed later today and we will have in their $11 million of Capex for fiscal 21, and we just arnie.
For completing the majority of the Mexico footprint.
Got it and is that 11 million number of the total.
On top of that there'll be about 6 million of maintenance Capex say looking at total about 17.
Okay, great. Thanks for that I'm in the and would that include the.
Cash for the expansion of the calipers as well.
Yes, okay.
Okay perfect.
And then just kind of I.
I know some of the others asked about the some of the changes in the non-GAAP presentation, maybe can you remind us what key metrics management's using as part of its plan.
Planning purposes, and kind of judging the health of the business on a go forward basis, just kind of help us understand what we should also be paying attention to closely yes, where we talked about on return on invested capital. How we look at that done in a we eliminate the noncash expenses I mean, the the mark to market on lease revaluation is non economic.
We feel like almost all the noncash expenses that we have a noneconomic amend depreciation and amortization, obviously, we have maintenance capex.
In line with that.
But.
So you know and really the calls or sort of a separate in some ways there and I don't like to use this word but there are separate segment, but in our they want to get into that or some segments for GAAP purposes, but if you do the analysis of looking at our the call portion of our business that's a little separate from the with.
The fundamentals of the finished goods sales on the margins on a finished goods sales so.
So return on invested capital margins will fluctuate by product group, none of the product groups of at the same margins. They will fluctuate a little bit based on that but generally lower margin product has a higher return on invested capital.
Usually there's less capex related to them the high margin business like break calipers rotating electrical require significant more capital expenditures to get to get to those.
And so thats not a return on invested capital we've been operating.
No.
In the mid teens right now mid to high teens in terms of return on invested capital once we get through with initiatives of completing our facilities and getting moved I mean, I expect goes to go up.
By double digits.
And if that answers your question Sarkies anything anything else does have have you communicated a target. So you know go up double digits I mean is that.
And any target in mind that you'd like to aspire to.
Yeah, I mean, I think I've said this before Weve historically said, we'd like to have a 35% pretax return on invested capital.
We've got to get through we're spending a lot of capital right now in transition Weve.
And have tripled the size of our Mexico facility almost doubled the size of the Malaysian facility.
We've expanded our Indian capacity and so lot of a lot of investment spending for our future for our future right now.
Great. That's all for me I'll hop back in.
And once again, ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad. Your next question here comes from the line of so does that does Alan will tighten capital. Please go ahead. Your line is now open and good morning, NAC first of all the.
Great Caliper business or would you. Please give us an update on the move to Mexico, and where you're at in that in that transition.
Yes, so the break caliper factory is up and running the re manufacturing facilities up and running.
Core sorting is up and running in a temporary facility right now as we complete our main because we've taken delivery now all of the real estate.
We're where we have three newbuildings recall and building a b and C building a is our new distribution center building visa break caliper re manufacturing facility in building building see as a additional logistics in core sorting facility.
They are all complete we've taken we've now taken possession of all of them.
Build outs or and building B O are reaching.
Final stages and building see their beginning so.
Great progress a being tricky during the covered outbreaks in Mexico, Mexico still is experiencing some tough times.
So.
But but but we remain for the most part on track come in.
Team that has done an amazing job of keeping going despite a low handicaps.
Thank you and are you still producing a break calipers.
Yes.
In California or has that all moved now to <unk> to Mexico.
We still produce brake boosters, I believe you're probably referring to in California.
About half of that has moved to Mexico and over the next six months, we're expecting the other half to go.
Okay, so selling I'm apologize for the ignorance here, but I thought both to calipers and the.
Boosters, we're starting in California, and then moving there.
Moving to Mexico, none of our engineering, our engineering capabilities for fall calipers ambitions of both in California.
Quality assurance engineering cataloguing, all that stuff is still in the USA.
The calipers is in Mexico.
Directly events.
Great. Thank you.
And I'm not showing any further questions that are in time I will now turn the call back over to selling Jaffe for closing comments.
Okay, well first of all I appreciate everybody's time, and I hope everybody is doing well.
I think just to summarize and we've had had some good questions. I mean, our investments are starting to bear fruit. We remain confident that this is the right. The right way to go for the future we have solid new business commitments for break calipers, we expect strong business growth as we ramp up our production.
Notwithstanding the many challenges that we have in the world today, New business company commitments and businesses continuing.
That supported by an expanding line of products in both hard parts and diagnostics near term outlook appears positive.
We are proud of our more than 50 year history in the aftermarket industry and all of US are committed to our vision of being the global leader for parts and solutions that move our world today and tomorrow with the electric vehicle initiatives.
We appreciate your continued support and we thank you again for joining us for the coal and we look forward speaking with you. When we hosted our fiscal 2021 first quarter conference call in August and hopefully soon at Investor conferences sometime in the future.
Thank you so much.
And ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
No.
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