dorm-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________

FORM 10-Q

_____________________

(Mark One)


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

For the quarterly period ended September 30, 2023


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

For the transition period from to

Commission file number: 0-18914

_____________________

Dorman Products, Inc.

(Exact name of registrant as specified in its charter)

_____________________


Pennsylvania						23-2078856
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

3400 East Walnut Street, Colmar, Pennsylvania						18915
(Address of principal executive offices)						(Zip Code)

(215) 997-1800

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

DORM

NASDAQ Global Select Market

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. x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No

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


Large Accelerated Filer	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	o

		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

As of October 26, 2023, the registrant had 31,488,115 shares of common stock, par value $0.01 per share, outstanding.


		Page
PART I — FINANCIAL INFORMATION

ITEM 1.	Financial Statements (unaudited)

	Condensed Consolidated Statements of Operations and Comprehensive Income	3

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Shareholders’ Equity	5

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	23

ITEM 4.	Controls and Procedures	24

PART II — OTHER INFORMATION

ITEM 1.	Legal Proceedings	25

ITEM 1A.	Risk Factors	25

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

ITEM 3.	Defaults Upon Senior Securities	26

ITEM 4.	Mine Safety Disclosures	26

ITEM 5.	Other Information	26

ITEM 6.	Exhibits	26

Exhibit Index		27

Signatures		28


	Three Months Ended				Nine Months Ended
(in thousands, except per share data)	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Net sales	$	488,186	$	413,470	$	1,435,492	$	1,232,468
Cost of goods sold	304,968		281,559		944,291		825,792
Gross profit	183,218		131,911		491,201		406,676
Selling, general and administrative expenses	119,010		89,814		353,681		268,400
Income from operations	64,208		42,097		137,520		138,276
Interest expense, net	12,215		2,344		36,733		5,140
Other (income) expense, net	(605)		65		(1,358)		(130)
Income before income taxes	52,598		39,688		102,145		133,266
Provision for income taxes	12,076		9,087		23,170		29,553
Net income	$	40,522	$	30,601	$	78,975	$	103,713
Other comprehensive income:
Change in foreign currency translation adjustment	$	(1,214)	$	(2,112)	$	(529)	$	(2,415)
Comprehensive Income	$	39,308	$	28,489	$	78,446	$	101,298

Earnings per share:
Basic	$	1.29	$	0.97	$	2.51	$	3.30
Diluted	$	1.28	$	0.97	$	2.50	$	3.29
Weighted average shares outstanding:
Basic	31,483		31,411		31,462		31,444
Diluted	31,555		31,545		31,540		31,561


(in thousands, except for share data)	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	31,953	$	46,034
Accounts receivable, less allowance for doubtful accounts of $1,715 and $1,363	484,447		427,385
Inventories	625,593		755,901
Prepaids and other current assets	53,363		39,800
Total current assets	1,195,356		1,269,120
Property, plant and equipment, net	157,737		148,477
Operating lease right-of-use assets	107,645		109,977
Goodwill	443,220		443,035
Intangible assets, net	306,802		322,409
Other assets	49,594		48,768
Total assets	$	2,260,354	$	2,341,786
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	158,418	$	179,819
Accrued compensation	15,844		19,490
Accrued customer rebates and returns	192,014		192,116
Revolving credit facility	119,660		239,363
Current portion of long-term debt	12,500		12,500
Other accrued liabilities	34,612		35,007
Total current liabilities	533,048		678,295
Long-term debt	473,389		482,464
Long-term operating lease liabilities	95,200		98,221
Other long-term liabilities	15,484		28,349
Deferred tax liabilities, net	15,140		11,826
Commitments and contingencies (Note 7)
Shareholders’ equity:
Common stock, $0.01 par value; 50,000,000 shares authorized; 31,487,494 and 31,430,632 shares issued and outstanding in 2023 and 2022, respectively	315		314
Additional paid-in capital	97,342		88,750
Retained earnings	1,034,268		956,870
Accumulated other comprehensive loss	(3,832)		(3,303)
Total shareholders’ equity	1,128,093		1,042,631
Total liabilities and shareholders' equity	$	2,260,354	$	2,341,786


	Three Months Ended September 30, 2023
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
(in thousands, except share data)	Shares Issued	Par Value
Balance at July 1, 2023	31,488,164	$	315	$	94,452	$	993,923	$	(2,618)	$	1,086,072
Exercise of stock options	460	—		37		—		—		37
Compensation expense under Incentive Stock Plan	—	—		2,901		—		—		2,901
Purchase and cancellation of common stock	(2,010)	—		(3)		(177)		—		(180)
Issuance of non-vested stock, net of cancellations	1,419	—		—		—		—		—
Other stock-related activity, net of tax	(539)	—		(45)		—		—		(45)
Change in foreign currency translation adjustment	—	—		—		—		(1,214)		(1,214)
Net income	—	—		—		40,522		—		40,522
Balance at September 30, 2023	31,487,494	$	315	$	97,342	$	1,034,268	$	(3,832)	$	1,128,093

	Three Months Ended September 24, 2022
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
(in thousands, except share data)	Shares Issued	Par Value
Balance at June 25, 2022	31,425,224	$	314	$	82,192	$	910,194	$	(1,743)	$	990,957
Exercise of stock options	169	—		14		—		—		14
Compensation expense under Incentive Stock Plan	—	—		2,472		—		—		2,472
Purchase and cancellation of common stock	(14,700)	—		(26)		(1,496)		—		(1,522)
Issuance of non-vested stock, net of cancellations	9,626	—		812		—		—		812
Other stock-related activity, net of tax	(927)	—		(90)		(91)		—		(181)
Change in foreign currency translation adjustment	—	—		—		—		(2,112)		(2,112)
Net income	—	—		—		30,601		—		30,601
Balance at September 24, 2022	31,419,392	$	314	$	85,374	$	939,208	$	(3,855)	$	1,021,041

	Nine Months Ended September 30, 2023
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
(in thousands, except share data)	Shares Issued	Par Value
Balance at December 31, 2022	31,430,632	$	314	$	88,750	$	956,870	$	(3,303)	$	1,042,631
Exercise of stock options	17,489	—		1,167		—		—		1,167
Compensation expense under Incentive Stock Plan	—	—		8,336		—		—		8,336
Purchase and cancellation of common stock	(11,850)	—		(21)		(987)		—		(1,008)
Issuance of non-vested stock, net of cancellations	76,747	1		1,003		—		—		1,004
Other stock-related activity, net of tax	(25,524)	—		(1,893)		(590)		—		(2,483)
Change in foreign currency translation adjustment	—	—		—		—		(529)		(529)
Net income	—	—		—		78,975		—		78,975
Balance at September 30, 2023	31,487,494	$	315	$	97,342	$	1,034,268	$	(3,832)	$	1,128,093

	Nine Months Ended September 24, 2022
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
(in thousands, except share data)	Shares Issued	Par Value
Balance at December 25, 2021	31,607,509	$	316	$	77,451	$	856,409	$	(1,440)	$	932,736
Exercise of stock options	17,455	—		971		—		—		971
Compensation expense under Incentive Stock Plan	—	—		6,742		—		—		6,742
Purchase and cancellation of common stock	(201,135)	(2)		(362)		(19,353)		—		(19,717)
Issuance of non-vested stock, net of cancellations	13,847	—		1,189		—		—		1,189
Other stock-related activity, net of tax	(18,284)	—		(617)		(1,561)		—		(2,178)
Change in foreign currency translation adjustment	—	—		—		—		(2,415)		(2,415)
Net income	—	—		—		103,713		—		103,713
Balance at September 24, 2022	31,419,392	$	314	$	85,374	$	939,208	$	(3,855)	$	1,021,041


	Nine Months Ended
(in thousands)	September 30, 2023		September 24, 2022
Cash Flows from Operating Activities:
Net income	$	78,975	$	103,713
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, amortization and accretion	40,786		31,131
Fair value adjustment to contingent consideration	(13,400)		—
Provision for doubtful accounts	2,721		80
Provision (benefit) for deferred income taxes	3,319		(546)
Provision for stock-based compensation	8,407		6,742
Changes in assets and liabilities:
Accounts receivable	(59,786)		39,325
Inventories	130,156		(146,278)
Prepaids and other current assets	(6,597)		(7,228)
Other assets	(3,981)		157
Accounts payable	(21,615)		17,887
Accrued customer rebates and returns	(101)		11,712
Accrued compensation and other liabilities	(9,774)		(27,351)
Cash provided by operating activities	149,110		29,344
Cash Flows from Investing Activities:
Acquisition, net of cash acquired	67		595
Property, plant and equipment additions	(32,936)		(23,780)
Cash used in investing activities	(32,869)		(23,185)
Cash Flows from Financing Activities:
Payments of revolving credit line	(119,700)		(10,000)


Payments of long-term debt	(9,375)		—
Proceeds from exercise of stock options	1,167		971
Purchase and cancellation of common stock	(1,008)		(19,717)
Other stock-related activity	(1,389)		(664)
Cash used in financing activities	(130,305)		(29,410)
Effect of exchange rate changes on Cash and Cash Equivalents	(17)		(96)
Net Decrease in Cash and Cash Equivalents	(14,081)		(23,347)
Cash and Cash Equivalents, Beginning of Period	46,034		58,782
Cash and Cash Equivalents, End of Period	$	31,953	$	35,435
Supplemental Cash Flow Information
Cash paid for interest expense	$	38,613	$	4,366
Cash paid for income taxes	$	27,242	$	49,670


(in thousands)
Accounts receivable	$	3,317
Inventories	90,428
Prepaids and other current assets	5,293
Property, plant and equipment	23,776
Goodwill	247,474
Identifiable intangible assets	157,500
Operating lease right-of-use assets	11,661
Other Assets	3,001
Accounts payable	(7,436)
Accrued compensation	(2,086)
Accrued customer rebates and returns	(1,609)
Other current liabilities	(8,726)
Long-term operating lease liabilities	(9,508)
Other long-term liabilities	(3,307)
Net cash consideration	$	509,778


	September 30, 2023						December 31, 2022
Intangible assets subject to amortization	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
(in thousands)
Customer relationships	$	175,430	$	29,388	$	146,042	$	175,430	$	21,643	$	153,787
Trade names	67,690		9,591		58,099		67,690		6,370		61,320
Product portfolio	107,800		8,012		99,788		107,800		2,953		104,847
Technology	2,167		1,006		1,161		2,167		820		1,347
Patents and other	2,230		518		1,712		1,430		322		1,108
Total	$	355,317	$	48,515	$	306,802	$	354,517	$	32,108	$	322,409


	Shares	Weighted Average Fair Value
Balance at December 31, 2022	238,922	$	92.07
Granted	109,688	$	96.01
Vested	(70,550)	$	80.24
Canceled	(17,692)	$	83.49
Balance at September 30, 2023	260,368	$	97.51


	Shares	Weighted Average Price		Weighted Average Remaining Term (years)	Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2022	268,119	$	84.03
Granted	79,404	$	91.13
Canceled	(6,510)	$	93.48
Exercised	(24,297)	$	72.33
Balance at September 30, 2023	316,716	$	86.51	5.6	$	982
Exercisable at September 30, 2023	136,117	$	80.50	4.6	$	704


	Three Months Ended*								Nine Months Ended*
(in thousands, except percentage data)	September 30, 2023				September 24, 2022				September 30, 2023				September 24, 2022
Net sales	$	488,186	100.0	%	$	413,470	100.0	%	$	1,435,492	100.0	%	$	1,232,468	100.0	%
Cost of goods sold	304,968		62.5	%	281,559		68.1	%	944,291		65.8	%	825,792		67.0	%
Gross profit	183,218		37.5	%	131,911		31.9	%	491,201		34.2	%	406,676		33.0	%
Selling, general and administrative expenses	119,010		24.4	%	89,814		21.7	%	353,681		24.6	%	268,400		21.8	%
Income from operations	64,208		13.2	%	42,097		10.2	%	137,520		9.6	%	138,276		11.2	%
Interest expense, net	12,215		2.5	%	2,344		0.6	%	36,733		2.6	%	5,140		0.4	%
Other (income) expense, net	(605)		-0.1	%	65		0.0	%	(1,358)		-0.1	%	(130)		-0.0	%
Income before income taxes	52,598		10.8	%	39,688		9.6	%	102,145		7.1	%	133,266		10.8	%
Provision for income taxes	12,076		2.5	%	9,087		2.2	%	23,170		1.6	%	29,553		2.4	%
Net income	$	40,522	8.3	%	$	30,601	7.4	%	$	78,975	5.5	%	$	103,713	8.4	%


(in thousands)	September 30, 2023		December 31, 2022
Raw materials	$	30,570	$	34,267
Bulk product	193,470		234,871
Finished product	393,271		478,032
Packaging materials	8,282		8,731
Total	$	625,593	$	755,901

SEC Form 10-Q filed by Dorman Products Inc.