# Motorcar Parts of America Inc: Form 10-Q for the period ended Sep 30, 2010

- Company: [Motorcar Parts of America Inc](/companies/mpaa.md) (CIK 918251)
- Form: 10-Q
- Filed: 2010-11-08
- Accepted by EDGAR: Nov 8, 2010, 06:01 ET
- Period: 2010-09-30
- Accession: 0000950123-10-101975
- Inline XBRL: no
- Main document: https://www.sec.gov/Archives/edgar/data/918251/000095012310101975/v57758e10vq.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/918251/000095012310101975/

## Management's discussion and analysis

As filed, 30,943 characters.

The following discussion and analysis presents factors that Motorcar Parts of America, Inc. and its subsidiaries (“our”, “we”, or “us”) believe are relevant to an assessment and understanding of our consolidated financial position and results of operations. This financial and business analysis should be read in conjunction with our March 31, 2010 audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 14, 2010.

### Disclosure Regarding Private Securities Litigation Reform Act of 1995

This report contains certain forward-looking statements with respect to our future performance that involve risks and uncertainties. Various factors could cause actual results to differ materially from those projected in such statements. These factors include, but are not limited to: concentration of sales to certain customers, changes in our relationship with any of our major customers, the increasing customer pressure for lower prices and more favorable payment and other terms, the increasing demands on our working capital, the significant strain on working capital associated with large Remanufactured Core inventory purchases from customers, our ability to obtain any additional financing we may seek or require, our ability to maintain positive cash flows from operations, potential future changes in our previously reported results as a result of the identification and correction of errors in our accounting policies or procedures or potential material weaknesses in our internal controls over financial reporting, lower revenues than anticipated from new and existing contracts, our failure to meet the financial covenants or the other obligations set forth in our credit agreement and our lenders’ refusal to waive any such defaults, any meaningful difference between projected production needs and ultimate sales to our customers, increases in interest rates, changes in the financial condition of any of our major customers, the impact of high gasoline prices, the potential for changes in consumer spending, consumer preferences and general economic conditions, increased competition in the automotive parts industry, including increased competition from Chinese and other offshore manufacturers, difficulty in obtaining Used Cores and component parts or increases in the costs of those parts, political, criminal or economic instability in any of the foreign countries where we conduct operations, currency exchange fluctuations, unforeseen increases in operating costs and other factors discussed herein and in our other filings with the SEC.

### Management Overview

The after-market for automobile parts is divided into two markets. The first market is the do-it-yourself (“DIY”) market, which is generally serviced by the large retail chain outlets. Consumers who purchase parts from the DIY channel generally install parts into their vehicles themselves. In most cases, this is a cheaper alternative than having the repair performed by a professional installer. The second market is the professional installer market, commonly known as the do-it-for-me (“DIFM”) market. This market is serviced by the retail chains, traditional warehouse distributors and the dealer networks. Generally, the consumer in this channel is a professional parts installer.

We remanufacture alternators and starters for import and domestic cars, light trucks, heavy duty, agricultural and industrial applications. These products are distributed to both the DIY and DIFM markets. Our products are distributed predominantly throughout the United States and Canada. Our products are sold to the largest auto parts retail chains in the United States and Canada. In addition, our products are sold to various traditional warehouses for the professional installers, and to major automobile manufacturers for both their after-market programs and their warranty replacement programs (“OES”). Demand and replacement rates for after-market remanufactured alternators and starters generally increase with increases in miles driven and the age of vehicles.

Historically, our business has focused on the DIY market. In times of recession, we believe consumers are more apt to purchase replacement parts in the DIY market because of lower prices compared to the DIFM market. We believe we have recently increased our market share in the DIY market.

The DIFM market is an attractive opportunity for growth. We are positioned to benefit from this market opportunity in two ways: (1) our auto parts retail customers are expanding their efforts to target the DIFM market and (2) we sell our products under private label and our Quality-Built®, Talon®, Xtreme®, Reliance™ and other brand names directly to suppliers that focus on professional installers. In addition, we sell our products to original equipment manufacturers for distribution to the professional installer both for warranty replacement and their general after-market channels. We have been successful in growing sales to this market.

In August 2010, we made a $1,894,000 secured loan to Fenwick Automotive Products Limited (“Fenwick”), a privately-owned Toronto-based manufacturer, remanufacturer and distributor of new and remanufactured aftermarket auto parts. In connection with this loan, we have an option to acquire substantial ownership interest in Fenwick. We believe this transaction provides us potential opportunities to expand beyond our existing product lines of alternators and starters and further enhance our market presence in North America.

### Results of Operations for the Three Months Ended September 30, 2010 and 2009

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

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

|  | Three Months Ended September 30, 2010 | 2009 |
| --- | ---: | ---: |
| Gross profit percentage | 30.9% | 27.4% |
| Cash flow provided by (used in) operations | $9,013,000 | $(245,000) |
| Finished goods turnover (annualized) (1) | 5.6 | 5.9 |
| Annualized return on equity (2) | 13.5% | 14.8% |

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

(2) Annualized return on equity is computed as net income for the fiscal quarter multiplied by 4 and dividing the result by beginning shareholders’ equity. Annualized return on equity measures our ability to invest shareholders’ funds profitably.

Following is our unaudited results of operations, reflected as a percentage of net sales:

|  | Three Months Ended September 30, 2010 | 2009 |
| --- | ---: | ---: |
| Net sales | 100.0% | 100.0% |
| Cost of goods sold | 69.1 | 72.6 |
| Gross profit | 30.9 | 27.4 |
| Operating expenses: |  |  |
| General and administrative | 8.7 | 9.3 |
| Sales and marketing | 2.9 | 3.9 |
| Research and development | 1.0 | 0.8 |
| Operating income | 18.3 | 13.4 |
| Gain on acquisition | — | 3.4 |
| Interest expense, net | 4.2 | 2.5 |
| Income tax expense | 5.6 | 5.6 |
| Net income | 8.5% | 8.7% |

*Net Sales*. Net sales for the three months ended September 30, 2010 increased by $1,540,000 to $40,977,000 compared to net sales for the three months ended September 30, 2009 of $39,437,000. The increase in our net sales was primarily due to increased sales to our existing customers and increased sales to several new customers.

*Cost of Goods Sold/Gross Profit.* Cost of goods sold as a percentage of net sales decreased during the three months ended September 30, 2010 to 69.1% from 72.6% for the three months ended September 30, 2009, resulting in a corresponding increase in our gross profit of 3.5% to 30.9% for the three months ended September 30, 2010 from 27.4% for the three months ended September 30, 2009. The increase in the gross profit percentage was primarily due to lower per unit manufacturing costs as compared to the three months ended September 30, 2009.

*General and Administrative.* Our general and administrative expenses for the three months ended September 30, 2010 were $3,571,000, which represents a decrease of $82,000, or 2.2%, from general and administrative expenses for the three months ended September 30, 2009 of $3,653,000. This decrease in general and administrative expenses during the three months ended September 30, 2010 was primarily due to (i) $233,000 of decreased employee-related expenses and (ii) $74,000 of decreased professional services fees. These decreases in general and administrative expenses were partly offset by (i) $183,000 of increased general and administrative expenses at our offshore manufacturing facilities and (ii) $47,000 of increased travel expense.

*Sales and Marketing*. Our sales and marketing expenses for the three months ended September 30, 2010 decreased $334,000, or 21.8%, to $1,201,000 from $1,535,000 for the three months ended September 30, 2009. This decrease was due primarily to (i) reversal of commission expenses in connection with our prior year acquisition as certain thresholds were not met and (ii) decreased catalog expenses.

*Research and Development*. Our research and development expenses increased by $62,000, or 18.6%, to $396,000 for the three months ended September 30, 2010 from $334,000 for the three months ended September 30, 2009. The increase in research and development expenses was due primarily to employee-related expenses and an increase in the cost of supplies compared to the three months ended September 30, 2009.

*Gain on Acquisition.* During the three months ended September 30, 2009, we recorded a gain of $1,331,000 in connection with our August 2009 acquisition as the estimated fair value of the net assets acquired exceeded the fair value of the consideration transferred.

*Interest Expense, Net.* Our interest expense, net of interest income of $23,000, for the three months ended September 30, 2010 was $1,701,000. This represents an increase of $727,000, or 74.6%, over interest expense of $974,000 for the three months ended September 30, 2009. This increase was primarily attributable to a higher balance of receivables being discounted under the receivable discount programs during the three months ended September 30, 2010 as compared to the three months ended September 30, 2009.

*Income Tax*. For the three months ended September 30, 2010 and 2009, we recognized income tax expense of $2,312,000 and $2,216,000, respectively. Our effective tax rates for the three months ended September 30, 2010 and 2009 were 39.8% and 39.2%, respectively. This increase was primarily due to a decrease in the benefit of lower statutory rates in foreign taxing jurisdiction during the three months ended September 30, 2010 as compared to the three months ended September 30, 2009.

### Results of Operations for the Six Months Ended September 30, 2010 and 2009

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

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

|  | Six Months Ended September 30, 2010 | 2009 |
| --- | ---: | ---: |
| Gross profit percentage | 31.4% | 24.9% |
| Cash flow provided by operations | $9,080,000 | $2,725,000 |
| Finished goods turnover (annualized) (1) | 5.1 | 5.6 |
| Annualized return on equity (2) | 11.6% | 9.9% |

18

(1) Annualized finished goods turnover for the six months ended September 30, 2010 and 2009 is calculated by multiplying cost of sales for each six month period by 2 and dividing the result by the average between beginning and ending non-core finished goods inventory values for each six month period. We believe this provides a useful measure of our ability to turn production into revenues.

(2) Annualized return on equity is computed as net income for the six months ended September 30, 2010 and 2009 multiplied by 2 and dividing the result by beginning shareholders’ equity. Annualized return on equity measures our ability to invest shareholders’ funds profitably.

Following is our unaudited results of operations, reflected as a percentage of net sales:

|  | Six Months Ended September 30, 2010 | 2009 |
| --- | ---: | ---: |
| Net sales | 100.0% | 100.0% |
| Cost of goods sold | 68.6 | 75.1 |
| Gross profit | 31.4 | 24.9 |
| Operating expenses: |  |  |
| General and administrative | 9.8 | 8.5 |
| Sales and marketing | 3.8 | 3.9 |
| Research and development | 1.0 | 0.9 |
| Operating income | 16.8 | 11.6 |
| Gain on acquisition | — | 1.8 |
| Interest expense, net | 4.3 | 2.7 |
| Income tax expense | 4.7 | 4.3 |
| Net income | 7.8% | 6.4% |

*Net Sales*. Net sales for the six months ended September 30, 2010 increased by $5,084,000 to $77,211,000 compared to net sales for the six months ended September 30, 2009 of $72,127,000. The increase in our net sales was primarily due to increased sales to our existing customers and increased sales to several new customers.

*Cost of Goods Sold/Gross Profit.* Cost of goods sold as a percentage of net sales decreased during the six months ended September 30, 2010 to 68.6% from 75.1% for the six months ended September 30, 2009, resulting in a corresponding increase in our gross profit of 6.5% to 31.4% for the six months ended September 30, 2010 from 24.9% for the six months ended September 30, 2009. The increase in the gross profit percentage was primarily due to lower per unit manufacturing costs during the six months ended September 30, 2010 as compared to the six months ended September 30, 2009.

*General and Administrative.* Our general and administrative expenses for the six months ended September 30, 2010 were $7,595,000, which represents an increase of $1,430,000, or 23.2%, from general and administrative expenses for the six months ended September 30, 2009 of $6,165,000. This increase in general and administrative expenses during the six months ended September 30, 2010 was primarily due to a loss of $332,000 recorded due to the changes in the fair value of forward foreign currency exchange contracts, compared to a gain of $1,103,000 during the six months ended September 30, 2009.

*Sales and Marketing*. Our sales and marketing expenses for the six months ended September 30, 2010 increased $134,000, or 4.8%, to $2,941,000 from $2,807,000 for the six months ended September 30, 2009. This increase was due primarily to (i) the addition of employees as a result of our acquisition in the prior year and (ii) increased travel expenses. These increases were partly offset by (i) reversal of commission expenses in connection with our prior year acquisition as certain thresholds were not met and (ii) decreased catalog expenses.

*Research and Development*. Our research and development expenses increased by $94,000, or 14.1%, to $762,000 for the six months ended September 30, 2010 from $668,000 for the six months ended September 30, 2009. The increase in research and development expenses was due primarily to employee-related expenses and an increase in the cost of supplies compared to the six months ended September 30, 2009.

*Gain on Acquisition.* During the six months ended September 30, 2009, we recorded a gain of $1,331,000 in connection with our August 2009 acquisition as the estimated fair value of the net assets acquired exceeded the fair value of the consideration transferred.

*Interest Expense, Net.* Our interest expense, net of interest income of $23,000, for the six months ended September 30, 2010 was $3,303,000. This represents an increase of $1,333,000, or 67.7%, over interest expense of $1,970,000 for the six months ended September 30, 2009. This increase was primarily attributable to a higher balance of receivables being discounted under the receivable discount programs during the six months ended September 30, 2010 as compared to the six months ended September 30, 2009. This increase in net interest expense was partly offset by a decrease in interest expense incurred on our Revolving Loan and capital lease obligations.

*Income Tax*. For the six months ended September 30, 2010, we recognized income tax expense of $3,605,000 compared to an income tax expense of $3,078,000 recognized for the six months ended September 30, 2009. Our effective tax rate for the six months ended September 30, 2010 and 2009 was 37.5% and 39.9%, respectively. The lower effective tax rate for the six months ended September 30, 2010 reflects a reduction in the liability for unrecognized tax benefits due to the conclusion of an IRS examination of the federal tax returns for fiscal years ended March 31, 2007 and March 31, 2008. We were notified during May 2010 that the IRS required no changes to our tax returns for those fiscal years as filed.

### Liquidity and Capital Resources

### Overview

At September 30, 2010, we had working capital of $1,337,000, a ratio of current assets to current liabilities of 1:1, and cash of $5,815,000, compared to working capital of $3,399,000, a ratio of current assets to current liabilities of 1.1:1, and cash of $1,210,000 at March 31, 2010. The decrease in working capital from March 31, 2010 primarily resulted from a decrease in our non-core inventory levels, which was due primarily to higher sales, and a decrease in our accounts receivable balance due primarily to a higher balance of receivables being discounted under the receivable discount programs, which allowed us to pay down our accounts payable balances.

During the six months ended September 30, 2010, we used cash generated by operations and from our use of receivable discount programs with certain of our major customers as our primary sources of liquidity. These sources were primarily used to make the quarterly principal payment on the Term Loan and pay the purchase price holdback in connection with our May 2008 acquisition. In addition, in August 2010, we made a secured loan of $1,894,000 to Fenwick.

We believe our cash generated by operations, amounts available under our Revolving Loan, and our cash and short term investments on hand are sufficient to satisfy our expected future working capital needs, capital lease commitments, repayment of the current portion of our Term Loan, and capital expenditure obligations over the next twelve months.

### Cash Flows

Net cash provided by operating activities was $9,080,000 and $2,725,000 for the six months ended September 30, 2010 and 2009, respectively. The most significant changes in operating activities for the six months ended September 30, 2010 compared to the six months ended September 30, 2009 were (i) a higher balance of receivables being discounted under the receivable discount programs we have with certain of our major customers and (ii) a decrease in our non-core inventory levels due primarily to higher sales. These changes in operating activities were partly offset by (i) an increase in our long-term core inventory levels and (ii) a decrease in our accounts payable balances. During the six months ended September 30, 2010, the increase in long-term core inventory was primarily due to increase in our Used Cores held in our facilities and increase in Remanufactured Cores held for sale at our customers’ locations.

Net cash used in investing activities was $2,712,000 and $2,936,000 during the six months ended September 30, 2010 and 2009, respectively. The decrease in net cash used in investing activities primarily resulted from the payment of the purchase price holdback of $464,000 in connection with our May 2008 acquisition compared to the payment of $2,489,000 during the six months ended September 30, 2009 for our acquisitions. This decrease in net cash used in investing activities was partly offset by the secured loan made to Fenwick in August 2010. Capital expenditures for the six months ended September 30, 2010 primarily related to the purchase of equipment for our manufacturing facilities and improvements to our California facility compared to purchases in the same period of the prior year primarily related to purchases of equipment for our manufacturing facilities.

Net cash used in financing activities was $1,780,000 during the six months ended September 30, 2010 compared to net cash provided by financing activities of $1,373,000 during the six months ended September 30, 2009. This change was primarily due to repayments of our Term Loan during the six months ended September 30, 2010 compared to borrowings under our previous revolving loan during the six months ended September 30, 2009. Additionally, during the six months ended September 30, 2010, we repurchased 14,400 shares at a total cost of $89,000 pursuant to a share repurchase program authorized by our Board of Directors in March 2010.

### Capital Resources

#### Debt

In October 2009, we entered into a revolving credit and term loan agreement (the “Credit Agreement”) with our bank and one additional lender (the “Lenders”), which permits us to borrow up to $45,000,000 (the “Credit Facility”). The Credit Facility is comprised of (i) a revolving facility with a $7,000,000 letter of credit sub-facility and (ii) a term loan. We may borrow on a revolving basis up to an amount equal to $35,000,000 minus all outstanding letter of credit obligations minus a borrowing reserve of $7,500,000 (the “Revolving Loan”). The borrowing reserve remains in effect only if we are party to a receivable discount program pursuant to which our accounts receivable owed to us by our largest customer are being discounted. The term loan is in the principal amount of $10,000,000 (the “Term Loan”).

The Credit Agreement, among other things, requires us to maintain certain financial covenants, including tangible net worth, fixed charge coverage ratio and leverage ratio covenants. We were in compliance with all financial covenants under the Credit Agreement as of September 30, 2010.

The Term Loan matures in October 2014 and requires principal payments of $500,000 on a quarterly basis. The Revolving Loan expires in October 2011 and provides us the option to request up to three one-year extensions.

In May 2010, we entered into a first amendment to the Credit Agreement with our Lenders. This amendment provides, among other things, that the borrowing reserve against our Revolving Loan commitment amount be increased from $7,500,000 to $10,000,000.

In November 2010, we entered into a second amendment to the Credit Agreement with our Lenders. This amendment, among other things, (i) extended the expiration date of the Revolving Loan to October 2012 and (ii) lowered the applicable margins on our borrowings to the levels described below.

The Lenders hold a security interest in substantially all of our assets. There was no outstanding balance on the Revolving Loan at September 30, 2010 and March 31, 2010. Additionally, we had reserved $1,826,000 of the Revolving Loan for standby letters of credit for workers’ compensation insurance and $1,808,000 for commercial letters of credit as of September 30, 2010. As of September 30, 2010, $31,366,000 was available under the Revolving Loan, and of this, $10,000,000 was reserved for use in the event our largest customer discontinued its current practice of having our receivables discounted.

The Revolving Loan and the Term Loan bear interest at either our bank’s reference rate plus an applicable margin or a London Interbank Offered Rate (“LIBOR”) rate (which in the case of the Term Loan shall not be lower than 3.75%) plus an applicable margin, as selected by us in accordance with the Credit Agreement. The reference rate is, as further described in the Credit Agreement, the higher of our bank’s announced base rate and the Federal funds rate plus 1/2 percent. The applicable margins are determined quarterly on a prospective basis as set forth below:

| Leverage Ratio | Applicable LIBOR Margin | Applicable Reference Rate Margin |
| --- | --- | --- |
| Less than 1.0:1.0 | 250 basis points | 125 basis points |
| Greater than or equal to 1.0:1.0, but less than 1.5:1.0 | 275 basis points | 150 basis points |
| Greater than or equal to 1.5:1.0 | 300 basis points | 175 basis points |

Our ability to comply in future periods with the financial covenants in the Credit Agreement, will depend on our ongoing financial and operating performance, which, in turn, will be subject to economic conditions and to financial, business and other factors, many of which are beyond our control and will be substantially dependent on the selling prices and demand for our products, customer demands for marketing allowances and other concessions, raw material costs, and our ability to successfully implement our overall business strategy, including acquisitions. If a violation of any of the covenants occurs in the future, we would attempt to obtain a waiver or an amendment from our Lenders. No assurance can be given that we would be successful in this regard.

#### Receivable Discount Programs

Our liquidity has been positively impacted by receivable discount programs we have established with certain customers and their respective banks. Under these programs, we have the option to sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold. The weighted average discount under this program was 4.5% during the six months ended September 30, 2010 and has allowed us to accelerate collection of receivables aggregating $70,950,000 by a weighted average of 325 days. While these arrangements have reduced our working capital needs, there can be no assurance that these programs will continue in the future. These programs resulted in interest expense of $2,855,000 during the six months ended September 30, 2010. Interest expense resulting from these programs would increase if interest rates rise, if utilization of these discounting arrangements expands or if the discount period is extended to reflect more favorable payment terms to customers.

#### Off-Balance Sheet Arrangements

At September 30, 2010, we had no off-balance sheet financing or other arrangements with unconsolidated entities or financial partnerships (such as entities often referred to as structured finance or special purpose entities) established for purposes of facilitating off-balance sheet financing or other debt arrangements or for other contractually narrow or limited purposes.

### Capital Expenditures and Commitments

### Capital Expenditures

Our capital expenditures were $540,000 for the six months ended September 30, 2010 and primarily related to the purchase of equipment for our manufacturing facilities and improvements for our California facility. We expect our fiscal year 2011 capital expenditures to be approximately $2.0 million. We expect to use our working capital and incur additional capital lease obligations to finance these capital expenditures.

### Related Party Transactions

Our related party transactions primarily consist of employment and director agreements and stock option agreements. Our related party transactions have not changed since March 31, 2010.

### Critical Accounting Policies

There have been no material changes to our critical accounting policies and estimates that are presented in the

Company’s Annual Report on Form 10-K for the year ended March 31, 2010, which was filed on June 14, 2010, except as discussed below.

### New Accounting Pronouncements

#### Transfers of Financial Assets

In June 2009, the Financial Accounting Standards Board (the “FASB”) issued new guidance on the treatment of transfers of financial assets which eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. This new guidance is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2009. The adoption of this guidance on April 1, 2010 did not have any impact on our consolidated financial position and results of operations.

#### Consolidation of Variable Interest Entities

In June 2009, the FASB issued new guidance which amends the consolidation guidance applicable to variable interest entities and is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2009. The adoption of this guidance on April 1, 2010 did not have any impact on our consolidated financial position and results of operations.

#### Fair Value Measurements and Disclosures

In January 2010, the FASB issued an update which requires new disclosures for transfers in and out of Level 1 and Level 2 of the fair value hierarchy and expanded disclosures for activity in Level 3 of the fair value hierarchy. The update also clarifies existing disclosures regarding the level of disaggregation for disclosure and disclosures about inputs and valuation techniques. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of this update on January 1, 2010 did not have any impact on our consolidated financial position and results of operations. The disclosures regarding certain Level 3 activity are effective for fiscal years beginning after December 15, 2010. We do not expect the adoption of this guidance on April 1, 2011 to have any material impact on our consolidated financial position and results of operations.

#### Disclosure Requirements Related to Financing Receivables

In July 2010, the FASB issued an update which requires enhanced disclosures about the credit quality of financing receivables and the related allowance for credit losses. Trade accounts receivable with maturities of one year or less are excluded from the disclosure requirements. Disclosures required as of the end of a reporting period are effective for interim and annual periods ending on or after December 15, 2010. We do not expect the adoption of this guidance on December 31, 2010 to have any material impact on our consolidated financial position and results of operations. The disclosures required about activity that occurs during a reporting period are effective for interim and annual periods beginning on or after December 15, 2010. We do not expect the adoption of this guidance on January 1, 2011 to have any material impact on our consolidated financial position and the results of operations.

## Market risk

As filed, 243 characters.

There have been no material changes in market risk from the information provided in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K as of March 31, 2010, which was filed on June 14, 2010.

## Controls and procedures

As filed, 891 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, we have conducted an evaluation of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2010.

### Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the second quarter ended September 30, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 186 characters.

There have been no material changes to the risk factors set forth in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended March 31, 2010, filed on June 14, 2010.

Filed Nov 8, 2010.
Source: SEC EDGAR, the filing index for accession 0000950123-10-101975. Last ingested by Listed: Nov 10, 2026, 01:42 ET. No prices; not investment advice.