gross margins continued to improve and benefit from better operating efficiencies as anticipated, particularly from increased overhead absorption with higher sales and production in newer product categories. I should also add that price increases in effect, but not yet realized, will contribute an additional $10 million in annualized sales, and gross profit and EBITDA. We remain focused on three key initiatives: sales, profitability and neutralizing working capital. We are confident that our sales and profitability will grow organically and through market share gains in all of our product lines. Increased profitability along with our working capital initiatives will further enhance cash flow generation. With regard to working capital, we continue to focus on the balance sheet including extending vendor payment terms.

This initiative is being supported by the launch of our vendor finance program offered to our suppliers. This enables us to extend our payment terms while facilitating a program for our suppliers to have early access to capital. We expect to increase the number of days outstanding for accounts payable, which will result in additional cash generation. While in its early stages, this program is progressing nicely and will gain increased traction in the months ahead. I should note that the effects of this program are not yet reflected in our results and will provide additional upside to cash flow generation. From a strategic standpoint, we are continuing to leverage our strengths, including great products manufactured at state-of-the-art facilities, solid customer relationships, industry leading skew coverage, not to mention our value-added merchandising and marketing support.

We are continuing to expand hard part sales in Mexico with opportunities to further expand in other Latin American countries with multiple product lines as our customers experienced increased demand for aftermarket parts. The rate of growth is exciting and we are well positioned to utilize our footprint to meet the growing demand for our non-discretionary aftermarket parts. Our test solutions and diagnostic equipment in particular are industry leading JBT-1 benchtop testers for alternative starters used by major automotive retailers and professional installers continues to grow significantly. We believe the market opportunity for additional growth in the U.S. is approximately $110 million and we are well on our way. favorable industry dynamics continue to bode well for the company and we are extremely well positioned for sustainable top and bottom-line growth in our hard parts business, as well as the testing solutions.

Let me take a moment to further discuss our near-term initiatives to support our long-term growth and profitability plan. Our near-term plan is in motion as we expect to achieve significant growth in all of our product lines, including our quality-built brand that continues to gain significant market share within the professional market. This includes our most recent additions to our portfolio of brake calipers, pads and rotors. Operating efficiency improvements are continuing as volume increases. Overall, this growth is supported by investments, especially the company's global footprint expansion in Mexico, backed by a well-trained and a seasoned team of professional employees. Also, we have expanded our Malaysian operation to add capacity and additional capabilities to support customers.

We recently opened a new state-of-the-art wheel hub manufacturing facility in Malaysia, enabling us to ship product directly to our customer. Congratulations to our spectacular operating team, especially to those in Singapore and Malaysia. Our business growth is strategic and we are focused on generating solid cash flow and profitability. The strong cash generation will enable us the flexibility to further pay down debt and pursue other related opportunities to enhance shareholder value. In conclusion, non-discretionary aftermarket parts for the internal combustion engine market will be here for decades and outlook supported by recently updated industry data showing that the average age of vehicle is twelve and a half years. It is worth highlighting that the population of vehicles operating with internal combustion engines versus EVs represents 98 point -- approximately 98.3% of all vehicles on the road.

One of our key competitive advantages is our ability to offer a broad range of applications for all makes and models. We remain focused on newer model applications and our ability to meet expected demand as these vehicles enter the replacement part [ph]. As you probably know, the emerging electric vehicle market is still quite small relative to the overall car park population. Recent news articles regarding EV range, particularly in cold regions in the country contribute to consumer hesitancy to plug in. but as technology improves and these types of issues are addressed, we expect to continue to benefit in both markets with product functionality and applications across both EV and ICE applications. While I am disappointed in the tax valuation allowance, I want to emphasize that it has no bearing on any operating metrics, cash flow, tax liability, or any economics of the company.

It is simply required by GAAP. Finally, we have recently announced change to our sales team. Jamie Cook has been promoted to Senior Vice President of sales and marketing. She's succeeding Rick Mochulsky, who will transition to a new role as Senior Vice President of Business Development. Jamie and Rick have worked closely together at MPA for many years. Jamie is recognized throughout the automotive aftermarket. She is an exceptional leader with the added benefit of being a role model for women seeking to advance in the industry. Rick will remain an important member of our team in his new role, helping to drive demand for all of our products, both from existing and new retail and professional customers. I'll now turn the call over to David to review our results in greater detail.

David Lee: Thank you, Selwyn and good morning, everyone. I encourage everyone to read the earnings press release issued this morning, as well as the 10-Q that will be filed later today. Let me first provide key highlights for the fiscal third quarter. net sales increased 13.2% to $171.9 million. gross margin improved by 3.7 percentage points. Gross profit increased 43.1% to $30 million. Operating income increased 170.1% to $9.5 million, and the company generated cash of approximately $53.6 million. I should mention that gross profit for the quarter was impacted by non-cash items, as well as cash items. The non-cash items reflect core and finished good premium amortization, and revaluation of cores on customers' shelves, which are unique to certain of our products and required by GAAP.

The total for these non-cash items in the quarter was approximately $4.4 million. A more detailed explanation of core accounting is available on our website and I would encourage anyone with questions about this topic to review the video. Third quarter gross margin was 17.5%, compared with 13.8% a year earlier. Gross margin was impacted by 2.6% from the previously-mentioned non-cash items, as well as 0.9% from cash items as detailed in Exhibit 3 of this morning's earnings press release. in summary, in addition to the non-cash and cash items explained previously, gross margin for the fiscal '24 third quarter reflects the partial benefit of pricing increases that went into effect during the current quarter and operating efficiencies. Additionally, we have meaningful annualized pricing increases that started in the current fourth quarter, which will further contribute to gross margin enhancements.

Operating expenses were $20.5 million, compared with $17.5 million in the prior-year period. This included a non-cash gain of $3.1 million for the foreign exchange impact of lease liabilities in Florida contracts, compared with a prior-year non-cash gain of $4.3 million. The remaining $1.9 million of operating expense increases included employee-related expenses. Operating income for the third quarter increased 170.1% to $9.5 million from $3.5 million in the prior year. Results for the fiscal third quarter were impacted by $6.8 million or $0.26 per share of higher interest expenses, primarily due to higher market interest rates and higher utilization of the accounts receivable discount programs due to higher sales. interest expense was $18.3 million, compared with $11.5 million for last year, which is primarily related to our customers' accounts receivable discount programs.

We are working diligently to address the higher interest environment, particularly areas that we can control. For example, among other initiatives, we are focused on neutralizing working capital to generate positive cash flow to pay down debt as evidenced by our year-to-date results. In addition, we continue to work with our customers to mitigate higher interest rates. due primarily to a $37.5 million U.S. federal and state deferred tax asset valuation allowance under U.S. GAAP recorded during the fiscal '24 third quarter, income tax expense was $37.3 million, compared with an income tax benefit of $9 million for the same period a year ago. Let me emphasize that this tax valuation allowance is required by GAAP and is non-cash and does not impact any operating metrics.

due primarily to $40.4 million of non-cash items including a $37.5 million U.S. federal and state deferred tax asset valuation allowance under U.S. GAAP noted previously, we reported a net loss for the fiscal '24 third quarter of $47.2 million or $2.40 per share compared with net income of $1 million or $0.05 per diluted share a year ago. To reemphasize, this accounting item is non-cash and does not impact any operating metrics. The details of the non-cash and cash items impacting results are in exhibit 1 of this morning's earnings press release. As I mentioned previously, we experienced a 13.2% sales increase despite industry's softness in November and December with this higher expected sales volume moving forward and the full impact of certain price increases already in effect, results are expected to further improve.

As someone mentioned, I should also add that price increases in effect will contribute an additional $10 million in annualized sales, gross profit and EBITDA. EBITDA for the fiscal third quarter was $11.2 million. EBITDA was impacted by $3.9 million of non-cash items and impacted by $1.9 million in cash items. EBITDA before the impact of non-cash and cash items mentioned above was $17 million for the third quarter. EBITDA for the prior year's fiscal third quarter was $6.6 million. EBITDA was impacted by $646,000 of non-cash items as was $3.8 million in cash items. EBITDA before the impact of non-cash and cash items mentioned above was $11 million for the prior-year third quarter. Now, let me discuss the nine-month results. Net sales for the fiscal '24 nine-month period increased 8.2% to a record $528.2 million from $488.3 million.

gross profit for the fiscal '24 nine-month period increased 25.6% to $97.8 million from $77.8 million a year earlier. Gross margin for the fiscal '24 nine-month period was 18.5%, compared with 15.9% a year earlier. Gross margin for the fiscal '24 nine-month period was impacted by $12.6 million or a 2.4% of non-cash items and $6.7 million or 1.3% of cash items. operating income for the nine-month period increased 166.7% to $33.9 million from $12.7 million in the prior year. Results for the nine months were impacted by $17.7 million or $0.68 per share of higher interest expenses, primarily due to higher market interest rates and higher utilization for our customers' accounts receivable discount programs due to higher sales. interest expense was $45.4 million, compared with $27.7 million for last year.

As I previously noted, we are working diligently to address the higher interest environment, particularly areas that we can control. due primarily to $49.5 million of non-cash items including a $37.5 million U.S. federal and state deferred tax assets valuation allowance under U.S. GAAP, we reported a net loss for the fiscal '24 nine-month period of $50.6 million or $2.58 per share, compared with a net loss of $5.7 million or $0.29 per share a year ago. Once again, this accounting item is non-cash and does not impact any operating metrics. The details of the non-cash and cash items impacting results on exhibit 2 of this morning's earnings press release, results are expected to improve from various initiatives that will be realized as I discussed earlier, concerning pricing increases in effect and higher sales volume.

EBITDA for the fiscal '24 nine-month period was $40.9 million. EBITDA was impacted by $16 million of non-cash items, as well as $7.7 million in cash items. EBITDA before the impact of non-cash and cash items mentioned above was $64.7 million for the current period. EBITDA for the prior-year fiscal '23 nine-month period was $22 million. EBITDA was impacted by $12.9 million of non-cash items, as well as $12.6 million in cash items. EBITDA before the impact of non-cash and cash items mentioned above was $47.5 million for the prior-year nine-month period. Now, we will move on to cash flow and key corporate items. The company generated approximately $53.6 million of cash from operating activities during the quarter, including accounts receivable catch up from the prior quarter and approximately $48.4 million of cash from operating activities for the nine-month period, which is not impacted by any accounts receivable deferral.

During the nine-month period, the company reduced net bank debt by $43.7 million to $102.8 million from $146.5 million. We expect to generate an increase in operating profit on a year-over-year basis for fiscal '24, supported by organic growth from customer demand and operating efficiencies from a now-completed footprint expansion and generate positive cash flow for fiscal '24. In addition to our goal of generating increased operating profits, we are diligently focused on opportunities to neutralize working capital growth, including customer product demand planning, enhanced inventory management and improving vendor payment terms. Our investments are bearing fruit. We are gratified by the ongoing success of our expanded operations in Mexico, and the growth and momentum of our emerging brake categories along with expectations of increasing financial performance from both new and existing product lines.

Our net debt at the end of the quarter, excluding our convertible note, was approximately $102.8 million while total cash and availability was approximately $126.3 million. For further explanation, on the reconciliation of items that impact the results and non-GAAP financial measures, please refer to exhibits 1 through 5 in this morning's earnings press release. I would now like to open the line for questions.

Operator: [Operator Instructions] Your first question comes from the line of Matt Koranda from Roth MKM. Your line is open.

Mike Zabran: Hey guys, it's Mike Zabran on for Matt. Can we just start like usual with the breakdown of product revenue by mix?

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