UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-Q
_____________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 29, 2025
OR
| 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
_____________________
(Exact name of registrant as specified in its charter)
_____________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (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 | ||||||||||||
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.
| x | Accelerated filer | o | |||||||||
| Non-accelerated filer | o | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
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 May 1, 2025, the registrant had 30,511,174 shares of common stock, par value $0.01 per share, outstanding.
DORMAN PRODUCTS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 29, 2025
| Page | ||||||||
2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
DORMAN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
| Three Months Ended | |||||||||||
| (in thousands, except per share data) | March 29, 2025 | March 30, 2024 | |||||||||
| Net sales | $ | $ | |||||||||
| Cost of goods sold | |||||||||||
| Gross profit | |||||||||||
| Selling, general, and administrative expenses | |||||||||||
| Income from operations | |||||||||||
| Interest expense, net | |||||||||||
| Other (income) expense, net | ( | ||||||||||
| Income before income taxes | |||||||||||
| Provision for income taxes | |||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income: | |||||||||||
| Change in foreign currency translation adjustment | ( | ||||||||||
| Comprehensive Income | $ | $ | |||||||||
| Earnings per share: | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | $ | $ | |||||||||
| Weighted average shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements
3
DORMAN PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| (in thousands, except for share data) | March 29, 2025 | December 31, 2024 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, less allowance for doubtful accounts of $ | |||||||||||
| Inventories | |||||||||||
| Prepaids and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant, and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Deferred tax assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and shareholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued compensation | |||||||||||
| Accrued customer rebates and returns | |||||||||||
| Revolving credit facility | |||||||||||
| Current portion of long-term debt | |||||||||||
| Other accrued liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Long-term operating lease liabilities | |||||||||||
| Deferred tax liabilities, net | |||||||||||
| Other long-term liabilities | |||||||||||
| Commitments and contingencies (Note 7) | |||||||||||
| Shareholders’ equity: | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
| Total liabilities and shareholders' equity | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements
4
DORMAN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
| Three Months Ended March 29, 2025 | |||||||||||||||||||||||||||||||||||
| 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, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Compensation expense under incentive stock plans | — | — | — | — | |||||||||||||||||||||||||||||||
| Purchase and cancellation of common stock | ( | ( | ( | ( | — | ( | |||||||||||||||||||||||||||||
| Issuance of common stock under incentive stock plans, net of cancellations | ( | — | — | — | |||||||||||||||||||||||||||||||
| Other stock-related activity | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Change in foreign currency translation adjustment | — | — | — | — | |||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at March 29, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Three Months Ended March 30, 2024 | |||||||||||||||||||||||||||||||||||
| 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, 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Compensation expense under incentive stock plans | — | — | — | — | |||||||||||||||||||||||||||||||
| Purchase and cancellation of common stock | ( | ( | ( | ( | — | ( | |||||||||||||||||||||||||||||
| Issuance of common stock under incentive stock plans, net of cancellations | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Other stock-related activity | ( | — | ( | ( | — | ( | |||||||||||||||||||||||||||||
| Change in foreign currency translation adjustment | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at March 30, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements
5
DORMAN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended | |||||||||||
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||
| Depreciation, amortization and accretion | |||||||||||
| Provision for doubtful accounts | |||||||||||
| (Benefit) provision for deferred income taxes | ( | ||||||||||
| Provision for stock-based compensation | |||||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | |||||||||||
| Inventories | ( | ||||||||||
| Prepaids and other current assets | |||||||||||
| Other assets | ( | ( | |||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued customer rebates and returns | ( | ( | |||||||||
| Accrued compensation and other liabilities | ( | ||||||||||
| Cash provided by operating activities | |||||||||||
| Cash Flows from Investing Activities: | |||||||||||
| Property, plant, and equipment additions | ( | ( | |||||||||
| Cash used in investing activities | ( | ( | |||||||||
| Cash Flows from Financing Activities: | |||||||||||
| Payments of revolving credit line | ( | ( | |||||||||
| Payments of long-term debt | ( | ( | |||||||||
| Proceeds from exercise of stock options | |||||||||||
| Purchase and cancellation of common stock | ( | ( | |||||||||
| Other stock-related activity | ( | ( | |||||||||
| Cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on Cash and Cash Equivalents | ( | ||||||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | ( | ||||||||||
| Cash and Cash Equivalents, Beginning of Period | |||||||||||
| Cash and Cash Equivalents, End of Period | $ | $ | |||||||||
| Supplemental Cash Flow Information | |||||||||||
| Cash paid for interest expense | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements
6
DORMAN PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 29, 2025, AND MARCH 30, 2024
(UNAUDITED)
1. Basis of Presentation
As used herein, unless the context requires otherwise, “Dorman,” the “Company,” “we,” “us,” or “our” refers to Dorman Products, Inc. and its subsidiaries. Our ticker symbol on The Nasdaq Stock Market LLC is “DORM.”
2. Sales of Accounts Receivable
We have entered into several customer-sponsored programs administered by unrelated financial institutions that permit us to sell (factor) certain accounts receivable at discounted rates to the financial institutions. Transactions under these agreements were accounted for as sales of accounts receivable, and the related accounts receivable were removed from our Condensed Consolidated Balance Sheets when sold. Sales of accounts receivable under these agreements, and related factoring costs, which were included in selling, general, and administrative expenses, were as follows:
| Three Months Ended | |||||||||||
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Sales of accounts receivable | $ | $ | |||||||||
| Factoring costs | |||||||||||
3. Inventories
Inventories include the cost of material, freight, duties, direct labor, and overhead utilized in the processing of our products and are stated at the lower of cost or net realizable value. Inventories were as follows:
| (in thousands) | March 29, 2025 | December 31, 2024 | |||||||||
| Raw materials | $ | $ | |||||||||
| Bulk product | |||||||||||
| Finished product | |||||||||||
| Packaging materials | |||||||||||
| Total | $ | $ | |||||||||
7
4. Goodwill and Intangible Assets
Goodwill
Goodwill included the following:
| (in thousands) | Light Duty | Heavy Duty | Specialty Vehicle | Consolidated | |||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | |||||||||||||||||||
| Measurement period adjustment | |||||||||||||||||||||||
| Foreign currency translation | |||||||||||||||||||||||
| Balance at March 29, 2025 | $ | $ | $ | $ | |||||||||||||||||||
Intangible Assets
Intangible assets included the following:
| March 29, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Trade names | ||||||||||||||||||||||||||||||||||||||
| Product portfolio | ||||||||||||||||||||||||||||||||||||||
| Technology | ||||||||||||||||||||||||||||||||||||||
| Patents and other | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Amortization expense was $5.5 million and $5.6 million during the three months ended March 29, 2025, and March 30, 2024, respectively.
5. Debt
8
6. Segment and Geographic Information
Segment results are as follows:
| For the Three Months ended March 29, 2025 | |||||||||||||||||||||||
| (in thousands) | Light Duty | Heavy Duty | Specialty Vehicle | Total | |||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Factoring expense | |||||||||||||||||||||||
| Other segment expenses | |||||||||||||||||||||||
| Segment income (loss) from operations | $ | $ | ( | $ | $ | ||||||||||||||||||
| For the Three Months ended March 30, 2024 | |||||||||||||||||||||||
| (in thousands) | Light Duty | Heavy Duty | Specialty Vehicle | Total | |||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Factoring expense | |||||||||||||||||||||||
| Other segment expenses | |||||||||||||||||||||||
| Segment income from operations | $ | $ | $ | $ | |||||||||||||||||||
A reconciliation of segment income from operations to consolidated income before income taxes is as follows:
| For the Three Months Ended | |||||||||||
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Segment income from operations | $ | $ | |||||||||
| Acquisition-related intangible assets amortization | ( | ( | |||||||||
| Acquisition-related transaction and other costs | ( | ( | |||||||||
| Pretax reduction in workforce costs | ( | ( | |||||||||
| Interest expense, net | ( | ( | |||||||||
| Other income (expense), net | ( | ||||||||||
| Consolidated income before income taxes | $ | $ | |||||||||
The following table presents our net sales by geographic region:
| Three Months Ended | |||||||||||
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Net sales to U.S. customers | $ | $ | |||||||||
| Net sales to non-U.S. customers | |||||||||||
| Total | $ | $ | |||||||||
9
7. Commitments and Contingencies
We are a party to or otherwise involved in legal proceedings that arise in the ordinary course of business, such as various claims and legal actions involving contracts, employment claims, competitive practices, intellectual property infringement, product liability claims, and other matters arising out of the conduct of our business. In the opinion of management, none of the actions, individually or in the aggregate, taking into account relevant insurance coverage, would likely have a material financial impact on the Company, and we believe the range of reasonably possible losses from current matters, taking into account relevant insurance coverage, is immaterial. However, legal matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of any of these matters could have a material adverse impact on the Company’s cash flows, financial position, or results of operations in the period in which any such effects are recorded.
8. Stock-Based Compensation
Restricted Stock Awards (“RSAs”) and Restricted Stock Units (“RSUs”)
We grant RSUs, and prior to January 2020 we granted RSAs, to participants in our equity plans. Performance-based RSUs granted in the three months ended March 29, 2025, included certain grants that vest based on our total shareholder return ranking relative to the Nasdaq US Benchmark Auto Parts Index over a three-year performance period (market condition), and other grants that vest based upon achievement of return on invested capital targets over a three-year performance period (performance condition).
Compensation cost related to RSA and RSU grants was $3.3 million and $2.5 million for the three months ended March 29, 2025, and March 30, 2024, respectively, and was included in selling, general, and administrative expenses in the Condensed Consolidated Statements of Operations.
The following table summarizes our RSA and RSU activity for the three months ended March 29, 2025:
| Shares | Weighted Average Fair Value | ||||||||||
| Balance at December 31, 2024 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Canceled | ( | $ | |||||||||
| Balance at March 29, 2025 | $ | ||||||||||
For the three months ended March 29, 2025, we granted 21,948 performance-based RSUs containing a market condition with a grant date fair value of $195.03 per share. For the three months ended March 30, 2024, we granted 32,109 performance-based RSUs containing a market condition with a grant date fair value of $138.58 per share.
As of March 29, 2025, there was $33.0 million of unrecognized compensation cost related to unvested RSU grants that is expected to be recognized over a weighted average period of 2.3 years.
Stock Options
From time to time, we grant stock options to participants in our equity plans. Compensation cost related to stock option grants was $0.3 million and $0.4 million for the three months ended March 29, 2025, and March 30, 2024, respectively, and was included as selling, general, and administrative expenses in the Condensed Consolidated Statements of Operations.
10
The following table summarizes our stock option activity for the three months ended March 29, 2025:
| Shares | Weighted Average Price | Weighted Average Remaining Term (years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
| Balance at December 31, 2024 | $ | ||||||||||||||||||||||
| Canceled | ( | $ | |||||||||||||||||||||
| Exercised | ( | $ | |||||||||||||||||||||
| Balance at March 29, 2025 | $ | $ | |||||||||||||||||||||
| Exercisable at March 29, 2025 | $ | $ | |||||||||||||||||||||
As of March 29, 2025, there was $1.7 million of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted average period of 1.7 years.
9. Earnings Per Share
Basic earnings per share was calculated by dividing our net income by the weighted average number of shares of common stock outstanding during the period, excluding unvested RSAs which are considered to be contingently issuable. To calculate diluted earnings per share, common stock equivalents are added to the weighted average number of common shares outstanding. Common stock equivalents are calculated using the treasury stock method and are computed based on outstanding stock-based awards.
For the three months ended March 29, 2025, and March 30, 2024, there were approximately 39,000 shares and 319,000 shares, respectively, that were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive.
The following table sets forth the computation of basic earnings per share and diluted earnings per share:
| Three Months Ended | |||||||||||
| (in thousands, except per share data) | March 29, 2025 | March 30, 2024 | |||||||||
| Net income | $ | $ | |||||||||
| Denominator: | |||||||||||
| Weighted average basic shares outstanding | |||||||||||
| Effect of stock-based compensation awards | |||||||||||
| Weighted average diluted shares outstanding | |||||||||||
| Earnings Per Share: | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | $ | $ | |||||||||
10. Common Stock Repurchases
We periodically repurchase, at the then-current market price, and cancel common stock issued to the Dorman Products, Inc. 401(k) Retirement Plan and Trust (the “401(k) Plan”). 401(k) Plan participants can no longer purchase shares of Dorman common stock as an investment option under the 401(k) Plan. Shares are generally purchased by the Company from the 401(k) Plan when participants sell units as permitted by the 401(k) Plan or elect to leave the 401(k) Plan upon retirement,
11
termination, or other reasons. The following table summarizes the repurchase and cancellation of common stock by the Company for the periods indicated:
| Three Months Ended | |||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||
| Shares repurchased and canceled | |||||||||||
| Total cost of shares repurchased and canceled (in thousands) | $ | $ | |||||||||
| Average price per share | $ | $ | |||||||||
Separately, our Board of Directors previously authorized the repurchase of up to $600 million of our common stock through December 31, 2024, under a share repurchase program and subsequent authorizations (the “Prior Program”). The Prior Program expired on December 31, 2024, along with all amounts that remained available for use under the Prior Program as of that date.
In October 2024, the Company’s Board of Directors authorized the purchase of up to $500 million of our common stock under a new share repurchase program that is effective from January 1, 2025, through December 31, 2027 (the “New Program”). At March 29, 2025, $488 million was available for repurchase under the New Program.
Under each of the Prior Program and the New Program, share repurchases may be made from time to time depending on market conditions, share price, share availability, and other factors at the Company’s discretion. The share repurchase programs do not obligate us to acquire any specific number of shares.
The following table summarizes the repurchase and cancellation of common stock under the New Program in the three months ended March 29, 2025, and under the Prior Program in the three months ended March 30, 2024:
| Three Months Ended | |||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||
| Shares repurchased and canceled | |||||||||||
| Total cost of shares repurchased and canceled (in thousands) | $ | $ | |||||||||
| Average price per share | $ | $ | |||||||||
11. Income Taxes
At March 29, 2025, we had $10.4 million of net unrecognized tax benefits, $8.9 million of which would lower our effective tax rate if recognized. Interest and penalties related to uncertain tax positions are recognized in income tax expense and were not material as of March 29, 2025.
We file income tax returns in the United States, Canada, China, India, and Mexico. The statute of limitations for tax years before 2021 is closed for U.S. federal income tax purposes. The statute of limitations for tax years before 2017 is closed for the states in which we filed. The statute of limitations for tax years before 2021 is closed for income tax purposes in Canada and China. The statute of limitations for tax years before 2020 is closed for income tax purposes in India. The statute of limitations for tax years before 2019 is closed for income tax purposes in Mexico.
12. Related-Party Transactions
We lease a portion of our Lewisberry, PA facility from an entity in which Mr. Berman and certain of his family members are owners. The Lewisberry lease is a non-cancelable operating lease and expires December 31, 2027.
We also lease our facilities in Madison, IN, and Shreveport, LA, from entities in which Lindsay Hunt, our President, Specialty Vehicle, and certain of her family members are owners. Each lease is a
12
non-cancelable operating lease, was renewed in October 2022 in connection with the acquisition of Super ATV, LLC, a leading supplier to the powersports aftermarket ("SuperATV"), and will expire on October 31, 2027.
We have service agreements with counterparties that are majority-owned by a family member of Ms. Hunt. These agreements provide for various warehouse and facility-related services at agreed-upon rates.
The following table represents the estimated payments for the year ending December 31, 2025, and actual payments for the year ended December 31, 2024, under the related party agreements described above:
| Year Ending | Year Ended | ||||||||||
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Facility leases with entities related to Steven Berman | $ | $ | |||||||||
| Facility leases with entities related to Lindsay Hunt | $ | $ | |||||||||
| Service agreements with entities related to Lindsay Hunt | $ | $ | |||||||||
13. Fair Value Disclosures
The carrying values of financial instruments such as cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair value based on the short-term nature of these instruments. The carrying value of borrowings under our credit facility approximates fair value because these borrowings bear interest at rates indexed to a market rate (Term SOFR).
14. Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. The ASU expands disclosures in the income tax rate reconciliations table and cash taxes paid, and is effective for annual periods beginning after December 15, 2024.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. The ASU requires additional disclosures about categories of expenses, including, among other things, quantitative disclosures for employee compensation, depreciation, intangible asset amortization, selling expenses, and purchases of inventory. The updated guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027.
We expect to implement these new standards by their effective dates, and do not expect their adoption to have an impact on our results of operations, financial condition, or cash flows.
13
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the condensed consolidated financial statements and related notes thereto included in PART I, ITEM 1 of this Quarterly Report on Form 10-Q. As used herein, unless the context requires otherwise, “Dorman,” the “Company,” “we,” “us,” or “our” refers to Dorman Products, Inc. and its subsidiaries.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this document constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to net sales, diluted earnings per share, gross profit, gross margin, selling, general, and administrative expenses, income tax expense, income before income taxes, net income, cash and cash equivalents, indebtedness, liquidity, the Company’s share repurchase program, the Company’s outlook, the Company’s growth opportunities and future business prospects, operational costs and productivity initiatives, inflation, tariffs, supplier diversification, price increases, long-term value, acquisitions and acquisition opportunities, investments, cost offsets, quarterly fluctuations, new product development, customer concessions, and fluctuations in foreign currency. Words such as “may,” “believe,” “demonstrate,” “expect,” “estimate,” “forecast,” “project,” “plan,” “anticipate,” “intend,” “should,” “will” and “likely” and similar expressions identify forward-looking statements. However, the absence of these words does not mean the statements are not forward-looking. In addition, statements that are not historical should also be considered forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statements were made. Such forward-looking statements are based on current expectations that involve known and unknown risks, uncertainties, and other factors (many of which are outside of our control) that may cause actual events to be materially different from those expressed or implied by such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected.
Please refer to “Statement Regarding Forward-Looking Statements” and “Item 1A. Risk Factors” located in PART I of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), as updated by our subsequent filings with the SEC, for a description of these and other risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements. The Company is under no obligation to, and expressly disclaims any such obligation to, update any of the information in this document, including but not limited to any situation where any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events, or otherwise.
Introduction
The following discussion and analysis, as well as other sections in this Quarterly Report on Form 10-Q, should be read in conjunction with the unaudited condensed consolidated financial statements and footnotes thereto of Dorman Products, Inc. included in “PART 1, ITEM 1. Financial Statements” of this Quarterly Report on Form 10-Q and with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
14
This Quarterly Report on Form 10-Q contains the registered and unregistered trademarks or service marks of Dorman and are the property of Dorman Products, Inc. and/or its affiliates. This Quarterly Report on Form 10-Q also may contain additional trade names, trademarks, or service marks belonging to other companies. We do not intend our use or display of other parties’ trademarks, trade names, or service marks to imply, and such use or display should not be construed to imply, a relationship with or endorsement or sponsorship of us by these parties.
Overview
We are one of the leading suppliers of replacement and upgrade parts in the motor vehicle aftermarket industry, serving passenger cars, light-, medium-, and heavy-duty trucks, as well as specialty vehicles, including utility terrain vehicles (UTVs) and all-terrain vehicles (ATVs). We operate through three business segments: Light Duty, Heavy Duty, and Specialty Vehicle, consistent with the sectors of the motor vehicle aftermarket industry in which we operate. For more information on our segments, refer to Note 8, “Segment Information,” to the Consolidated Financial Statements, included under Part II, ITEM 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.
As of December 31, 2024, we marketed approximately 138,000 distinct parts compared to approximately 133,000 as of December 31, 2023, many of which we designed and engineered. This number excludes private label stock keeping units and other variations in how we market, package, and distribute our products, includes distinct parts of acquired companies, and reflects distinct parts that have been discontinued at the end of their lifecycle. Our products are sold under our various brand names, under our customers’ private label brands, or in bulk. We are one of the leading aftermarket suppliers of parts that were traditionally available to professional installers and consumers only from original equipment, or OE, manufacturers, or salvage yards. These parts include, among other parts, leaf springs, intake manifolds, exhaust manifolds, oil filters and coolers, window regulators, radiator fan assemblies, tire pressure monitor sensors, exhaust gas recirculation (EGR) coolers, driveshafts, UTV windshields, and complex electronics modules.
We generate most of our net sales from customers in North America, primarily in the United States. Our products are sold primarily through aftermarket retailers, including through their online platforms; dealers; national, regional, and local warehouse distributors and specialty markets; and salvage yards. We also distribute aftermarket parts outside the United States, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, the Middle East, and Australia.
We may experience significant fluctuations from quarter to quarter in our results of operations due to the timing of orders placed by our customers as well as our ability and the ability of our suppliers to deliver products ordered by our customers. The introduction of new products and product lines to customers, as well as business acquisitions and changes in weather conditions, may also cause significant fluctuations from quarter to quarter.
Critical Accounting Policies
There have been no material changes to the Company’s critical accounting policies as described in the Annual Report on Form 10-K for the year ended December 31, 2024.
New Product Development
New product development is an important success factor for us and has been a source of our growth. We have made incremental investments to increase our new product development efforts to grow our business and strengthen our relationships with our customers. The investments primarily have been in the form of increased product development resources, increased customer and end-user awareness programs, and customer service improvements. These investments have enabled us to
15
provide an expanding array of new product offerings and grow revenues at levels that generally have exceeded market growth rates.
In the three months ended March 29, 2025, we introduced 1,185 new distinct parts to our customers and end-users, including 492 “New-to-the-Aftermarket” parts. We introduced 5,335 new distinct parts to our customers and end-users in the fiscal year ended December 31, 2024, including 1,659 “New-to-the-Aftermarket” parts.
One area of focus for the light-duty sector has been our complex electronics program, which capitalizes on the growing number of electronic components being utilized on today’s OE platforms. New vehicles contain an average of approximately 100 electronic modules, with some high-end luxury vehicles exceeding that. Our complex electronics products are designed and developed in-house and tested to help ensure consistent performance, and our product portfolio is focused on further developing our leadership position in this category.
Another area of focus has been on products we market for the heavy-duty sector. We believe that this sector provides many of the same growth opportunities that the light-duty sector has provided us. We specialize in offering parts to this sector that were traditionally only available from OE manufacturers or salvage yards, similar to how we approach the light-duty sector.
Within the specialty vehicle sector, we focus on providing performance parts and accessories and nondiscretionary repair parts for UTVs and ATVs. We are dedicated to developing better and more innovative materials that will be compatible across a wide variety of makes and models to enhance both the performance and appearance of customers’ vehicles.
Acquisitions
A key component of our strategy is growth through acquisitions. We may acquire businesses in the future to supplement our financial growth, increase our customer base, add to our distribution capabilities, or enhance our product development resources, among other reasons.
Industry Factors
The Company’s financial results are also impacted by various industry factors, including, but not limited to, the number, age, and condition of vehicles in operation at any one time, and the miles driven by those vehicles.
Vehicles in Operation
The Company’s products are primarily purchased and installed on a subsegment of the passenger and light-duty vehicles in operation in the United States (“VIO”), specifically weighted towards vehicles aged 7 to 14 years old. Each year, the United States seasonally adjusted annual rate (“US SAAR”) of new vehicles purchased adds a new year to the VIO. According to data from the Auto Care Association (“Auto Care”), the US SAAR experienced a decline from 2008 to 2011 as consumers purchased fewer new vehicles as a result of the Great Recession of 2008. We believe that the declining US SAAR during that period resulted in a follow-on decline in our primary VIO subsegment (7-to-14-year-old vehicles) commencing in 2016. However, following 2011 and the impact of the Great Recession of 2008, U.S. consumers began to increase their purchases of new vehicles, which over time caused the US SAAR to recover and return to more historical levels. The 7-to-14-year-old vehicle car parc has continued to grow over the past several years, which we expect will expand demand for aftermarket replacement parts as more vehicles remain in operation.
In addition, we believe that vehicle owners generally are operating their current vehicles longer than they did several years ago, performing necessary repairs and maintenance to keep those vehicles well-maintained. We believe this trend has supported an increase in VIO, which increased to 298.5
16
million, a 1% increase in 2024 over 2023. According to data published by Polk, a division of IHS Automotive, the average age of VIO increased to 12.8 years as of October 2024 from 12.6 years as of October 2023.
Miles Driven
The number of miles driven is another important statistic that impacts our business. Generally, as vehicles are driven more miles, the more likely it is that parts will fail and there will be increased demand for replacement parts, including our parts. According to the U.S. Department of Transportation, the number of miles driven through October 2024 increased 1.0% year over year in the light-duty sector. However, global gasoline prices remained high during 2024 and, if they continue, they may negatively impact miles driven as consumers reduce travel or seek alternative methods of transportation.
Brand Protection
We operate in a highly competitive market. As a result, we are continuously evaluating our approach to brand, pricing, and terms to our different customers and channels. For example, we maintain brand protection policies, which are designed to ensure that certain of our branded products are not advertised below certain approved pricing levels. In addition, we may pursue legal remedies when we see third parties violating our intellectual property rights, including those that violate our patents, wrongfully represent our products as their own, or use our product images for their own marketing efforts.
Discounts, Allowances, and Incentives
We offer a variety of customer discounts, rebates, defective and slow-moving product returns, and other incentives. We may offer cash discounts for paying invoices in accordance with the specified discount terms of the invoice. In addition, we may offer pricing discounts based on volume purchased from us or other pricing discounts related to programs under a customer’s agreement. These incentives can be in the form of “off-invoice” discounts that are immediately deducted from sales at the time of sale. For those customers who choose to receive their incentives on a quarterly or annual basis instead of “off-invoice,” we provide rebates and accrue for such incentives as the related sales are made and reduce sales accordingly. Additionally, rebates and discounts are provided to customers to support promotional activities such as advertising and sales force allowances.
Our customers, particularly our larger retail customers, regularly seek more favorable pricing and product return provisions, and extended payment terms when negotiating with us. We attempt to avoid or minimize these concessions as much as possible, but we have granted pricing concessions, indemnification rights, and extended customer payment terms, and allowed a higher level of product returns in certain cases. These concessions impact net sales as well as our profit levels and may require additional capital to finance the business. We expect our customers to continue to exert pressure on our margins.
Customer Acquisition Costs
We may incur customer acquisition costs where we incur change-over costs to induce a customer to switch from a competitor’s brand, including expanding new product lines into our existing customers. Change-over costs include the costs related to removing the customer’s inventory of competitor products and replacing it with our products, which is commonly referred to as a stock lift. Customer acquisition costs are recorded as a reduction to revenue when incurred.
17
Product Warranty and Overstock Returns
We warrant our products against certain defects in material and workmanship when used as designed on the vehicle on which it was originally installed. We offer a limited lifetime warranty on most of our products in the light-duty parts categories, with more limited warranties for our heavy-duty and specialty vehicle products. In addition to warranty returns, we may permit our customers to return new, undamaged products to us within customer-specific limits if they have overstocked their inventories. At the time products are sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established using historical information on the nature, frequency, and average cost of the claim and the probability of the customer return. Significant judgments and estimates must be made and used in connection with establishing the sales returns and other allowances in any accounting period. Revisions to these estimates are made when necessary, based on changes in these factors. We regularly study trends of such claims.
Foreign Currency
Many of our products and related raw materials and components are purchased from suppliers in a variety of non-U.S. countries. The products generally are purchased through purchase orders with the purchase price specified in U.S. dollars. Accordingly, we generally do not have exposure to fluctuations in the relationship between the U.S. dollar and various foreign currencies between the time of execution of the purchase order and payment for the product.
To the extent that the U.S. dollar changes in value relative to those foreign currencies in the future, the prices charged by our suppliers for goods under new purchase orders may change in equivalent U.S. dollars. The largest portion of our overseas purchases comes from China. The Chinese yuan to U.S. dollar exchange rate has fluctuated over the past several years. Any future changes in the value of the Chinese yuan relative to the U.S. dollar may result in a change in the cost of goods that we purchase from China. However, the cost of the goods we procure is also affected by other factors, including raw material availability, labor costs, tariffs, and transportation costs.
We have operations located outside the United States with various functional currencies. Because our consolidated financial statements are denominated in U.S. dollars, the assets, liabilities, net sales, and expenses that are denominated in currencies other than the U.S. dollar must be converted into U.S. dollars using exchange rates for the current period. As a result, fluctuations in foreign currency exchange rates may impact our financial results.
Impact of Labor Market and Inflationary Costs
We experienced broad-based inflationary impacts during the year ended December 31, 2023, due primarily to global transportation and logistics constraints, which resulted in significantly higher transportation costs, tariffs, material costs, and wage inflation from an increasingly competitive labor market. Certain of these increased costs in the second half of 2023 impacted our results of operations in the first half of 2024. Higher labor costs and material inflation resulting from geopolitical events, rising interest rates, disruptions to supply chain and logistics networks, and the trade policies of the U.S. or the countries where we source or sell our products may negatively impact our results in the future. We attempt to offset inflationary pressures with cost-saving initiatives, price increases to customers, and the use of alternative suppliers. There can be no assurance that we will be successful in implementing such cost-saving initiatives, pricing increases, or supplier diversification in the future to offset increased inflationary costs.
Impact of Interest Rates
Our business is subject to interest rate risk under the terms of our customer accounts receivable sales programs, as a change in the Term Secured Overnight Financing Rate (“Term SOFR”) or
18
alternative discount rate affects the cost incurred to factor eligible accounts receivable. Additionally, our outstanding borrowings under our credit facility bear interest at variable rates tied to Term SOFR or the applicable base rate. Under the terms of the credit facility, a change in interest rates affects the rate at which we can borrow funds thereunder and impacts the interest cost on existing borrowings. Interest rates may hold steady at their current rates for prolonged periods or may increase in the future, resulting in increased costs associated with our accounts receivable sales programs and outstanding borrowings. Interest rates remained elevated throughout much of 2024, but began to decline starting in the second half of 2024, and remained relatively stable throughout the first quarter of 2025.
Impact of Tariffs
We source the majority of our raw materials and parts from suppliers in a variety of non-U.S. countries. In 2024, approximately 72% of our products were purchased from suppliers in a variety of non-U.S. countries, with approximately 45% of our products being purchased from third-party suppliers in China. The current U.S. administration recently implemented tariffs and announced the possibility of increasing current tariffs or implementing additional ones. We expect these actions and reactionary tariff adjustments by other countries to impact our business and contribute to inflationary cost increases. As a result, we are taking actions designed to mitigate the potential impacts of these tariffs, including, but not limited to, passing along price increases to our customers and negotiating cost concessions from our suppliers where possible. Absent any changes in trade regulations, we anticipate inflationary cost increases due to these tariffs and any resulting impact on macroeconomic conditions and our business to continue throughout the remainder of 2025. There can be no assurance that the recently announced tariffs or future imposition of any tariffs, changes thereto, or actions taken by countries in response to the tariffs will not have a material adverse effect on our business, results of operations, financial condition, or liquidity in any period or that any actions we take to mitigate the impact of the tariffs will be effective.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in our Condensed Consolidated Statements of Operations:
| Three Months Ended* | |||||||||||||||||||||||
| (in thousands, except percentage data) | March 29, 2025 | March 30, 2024 | |||||||||||||||||||||
| Net sales | $ | 507,692 | 100.0 | % | $ | 468,701 | 100.0 | % | |||||||||||||||
| Cost of goods sold | 299,984 | 59.1 | % | 287,255 | 61.3 | % | |||||||||||||||||
| Gross profit | 207,708 | 40.9 | % | 181,446 | 38.7 | % | |||||||||||||||||
| Selling, general, and administrative expenses | 127,634 | 25.1 | % | 127,008 | 27.1 | % | |||||||||||||||||
| Income from operations | 80,074 | 15.8 | % | 54,438 | 11.6 | % | |||||||||||||||||
| Interest expense, net | 7,358 | 1.4 | % | 10,605 | 2.3 | % | |||||||||||||||||
| Other (income) expense, net | (1,361) | (0.3) | % | 40 | — | % | |||||||||||||||||
| Income before income taxes | 74,077 | 14.6 | % | 43,793 | 9.3 | % | |||||||||||||||||
| Provision for income taxes | 16,572 | 3.3 | % | 10,965 | 2.3 | % | |||||||||||||||||
| Net income | $ | 57,505 | 11.3 | % | $ | 32,828 | 7.0 | % | |||||||||||||||
*Percentage of sales information may not add due to rounding
Three Months Ended March 29, 2025, Compared to Three Months Ended March 30, 2024
Net sales increased $39.0 million, or 8.3%, for the three months ended March 29, 2025, compared to the prior year period, driven by increased customer demand and sales of new products in our Light Duty segment, partially offset by soft market conditions in the heavy duty and specialty vehicle sectors.
19
Gross profit as a percentage of net sales increased 220 basis points compared to the prior year period, primarily due to the sales growth noted above and favorable mix from higher sales of new products, as well as productivity, automation, and supplier diversification initiatives, which delivered cost savings.
Selling, general, and administrative expenses (“SG&A”) increased $0.6 million, but decreased 200 basis points as a percentage of net sales, for the three months ended March 29, 2025, compared to the prior year period, due to favorable leverage on higher net sales in the current year period. SG&A for the three months ended March 30, 2024, included costs incurred in connection with a reduction in workforce action that was enacted in February 2024, net of realized savings as a result of that action.
Interest expense, net, decreased $3.2 million for the three months ended March 29, 2025, compared to the prior year period. The decrease was driven by lower outstanding principal on our revolving credit facility and term loan as a result of repayments over the last several quarters, as well as lower average Term SOFR rates in the current year period.
Our effective tax rate decreased to 22.4% for the three months ended March 29, 2025, from 25.0% for the three months ended March 30, 2024, due to tax deductions related to the vesting of restricted stock units in the current year period.
Segment Operating Results
Segment operating results were as follows:
| For the Three Months Ended | |||||||||||
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Net Sales: | |||||||||||
| Light Duty | $ | 408,856 | $ | 359,293 | |||||||
| Heavy Duty | 51,680 | 57,809 | |||||||||
| Specialty Vehicle | 47,156 | 51,599 | |||||||||
| Total | $ | 507,692 | $ | 468,701 | |||||||
| Segment income (loss) from operations | |||||||||||
| Light Duty | $ | 81,493 | $ | 57,795 | |||||||
| Heavy Duty | (163) | 9 | |||||||||
| Specialty Vehicle | 4,821 | 7,169 | |||||||||
| Total | $ | 86,151 | $ | 64,973 | |||||||
Light Duty
Light Duty net sales increased $49.6 million, or 13.8%, for the three months ended March 29, 2025, compared to the prior year period, primarily due to increased customer demand and sales of new products.
Light Duty segment income from operations as a percentage of net sales increased to 19.9% for the three months ended March 29, 2025, from 16.1% for the three months ended March 30, 2024. This increase was primarily driven by favorable mix driven by higher new product sales, operational excellence initiatives delivering cost-savings, and favorable leverage on higher net sales.
20
Heavy Duty
Heavy Duty net sales decreased $6.1 million, or 10.6%, for the three months ended March 29, 2025, compared to the prior year period. The decrease in net sales primarily reflects reduced customer demand from continued market pressures in freight transportation and the trucking aftermarket.
Heavy Duty segment income as a percentage of net sales decreased 30 basis points for the three months ended March 29, 2025, compared to the prior year period. This decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes.
Specialty Vehicle
Specialty Vehicle net sales decreased $4.4 million, or 8.6%, for the three months ended March 29, 2025, compared to the prior year period, primarily due to reduced customer demand.
Specialty Vehicle segment income as a percentage of net sales decreased to 10.2% from 13.9% for the three months ended March 29, 2025, and March 30, 2024, respectively. This decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes.
Liquidity and Capital Resources
Historically, our primary source of liquidity has been the cash flow we generate from our operations, including accounts receivable sales programs facilitated through certain customers. Key components of our liquidity and capital resources were as follows:
| (in thousands) | March 29, 2025 | December 31, 2024 | |||||||||
| Cash and cash equivalents | $ | 60,612 | $ | 57,137 | |||||||
| Working Capital | $ | 849,822 | $ | 805,958 | |||||||
| Shareholders' equity | $ | 1,337,404 | $ | 1,293,470 | |||||||
Based on our current operating plan, we believe that our sources of available capital are adequate to meet our ongoing cash needs for at least the next twelve months. However, our liquidity could be negatively affected by tariffs, extending payment terms to customers, a decrease in demand for our products, higher interest rates, the outcome of contingencies, or other factors. See Note 7, “Commitments and Contingencies”, in the accompanying condensed consolidated financial statements for additional information regarding commitments and contingencies that may affect our liquidity.
Tariffs
Tariffs increase our use of cash since we pay for the tariffs upon the arrival of our goods in the United States, but we collect the cash on any pass-through price increases from our customers on a delayed basis according to the payment terms negotiated with our customers. We currently anticipate that additional liquidity needs to pay for increased tariffs on products we import can be managed through increased use of our accounts receivable sales programs with certain customers, as well as our existing revolving credit facility.
Payment Terms and Accounts Receivable Sales Programs
Over the past several years, we have continued to extend payment terms to certain customers as a result of customer requests and market demands. These extended terms have resulted in increased accounts receivable levels and significant uses of cash. Where available and when we deem appropriate, we participate in accounts receivable sales programs with several customers that allow us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment term extensions. However, any sales of accounts receivable through these programs ultimately result in us receiving a lesser amount of cash upfront than if we collected those accounts
21
receivable ourselves in due course, resulting in accounts receivable factoring costs. Moreover, since these accounts receivable sales programs bear interest at rates tied to the Term SOFR or other reference rates, increases in these applicable rates increase our cost to sell our receivables and reduce the amount of cash we receive. See PART I, ITEM 3. Quantitative and Qualitative Disclosures about Market Risk for more information. Further extensions of customer payment terms would result in additional uses of cash or increased costs associated with the sales of accounts receivable.
Sales of accounts receivable under these programs, and related factoring costs, were as follows:
| Three Months Ended | |||||||||||
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Sales of accounts receivable | $ | 334,170 | $ | 285,218 | |||||||
| Factoring costs | 14,588 | 13,610 | |||||||||
If receivables had not been sold, $918.3 million and $853.6 million of additional receivables would have been outstanding at March 29, 2025, and December 31, 2024, respectively, based on standard payment terms. Further extensions of customer payment terms would result in additional uses of cash or increased costs associated with the sales of accounts receivable.
Credit Agreement
We have a credit agreement that consists of a $600.0 million revolving credit facility and a $500.0 million term loan. The credit agreement matures on October 4, 2027, is guaranteed by the Company’s material domestic subsidiaries, and is supported by a security interest in substantially all of the Company’s material domestic subsidiaries’ personal property and assets, subject to certain exceptions. As of March 29, 2025, there was $462.5 million in outstanding borrowings under the term loan. Also on that date, we had outstanding letters of credit for $1.2 million in aggregate. Net of outstanding borrowings and letters of credit, we had $598.8 million available under the credit facility at March 29, 2025.
Our credit agreement contains affirmative and negative covenants. As of March 29, 2025, we were not in default with respect to our credit agreement.
Refer to Note 7, “Long-Term Debt” to the Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, for additional information.
Cash Flows
The following summarizes the activities included in the Condensed Consolidated Statements of Cash Flows:
| Three Months Ended | |||||||||||
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Cash provided by operating activities | $ | 51,237 | $ | 51,980 | |||||||
| Cash used in investing activities | (10,985) | (10,755) | |||||||||
| Cash used in financing activities | (36,810) | (43,567) | |||||||||
| Effect of foreign exchange on cash and cash equivalents | 33 | (39) | |||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 3,475 | $ | (2,381) | |||||||
For the three months ended March 29, 2025, cash provided by operating activities decreased $0.7 million over the prior year period.
Investing activities used cash of $11.0 million and $10.8 million during the three months ended March 29, 2025, and March 30, 2024, respectively.
22
Financing activities during the three months ended March 29, 2025, included $11.8 million paid to repurchase 93,800 shares of common stock under our new share repurchase plan, and the repayments of $14.0 million of outstanding borrowings under our revolving credit facility and $6.3 million of our term loan balance under our credit agreement. During the three months ended March 30, 2024, we paid $26.9 million to repurchase 316,285 shares of common stock under our prior share repurchase plan, and the repayment of $11.6 million of outstanding borrowings under our revolving credit facility and $3.1 million of our term loan balance under our credit agreement
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Our market risk is the potential loss arising from adverse changes in interest rates. Accounts receivable factored under our customer-sponsored accounts receivable sales programs bear interest at rates tied to Term SOFR or alternative discount rates and result in us incurring costs as those accounts receivable are factored. Additionally, interest expense from our variable-rate debt is impacted by reference rates.
Under the terms of our customer-sponsored programs to sell accounts receivable, a change in the reference rate would affect the amount of financing costs we incur and the amount of cash we receive upon the sales of accounts receivable under these programs. A one-percentage-point increase in Term SOFR or the discount rates on the accounts receivable sales programs would have increased our factoring costs and reduced the amount of cash we would have received by approximately $2.7 million and $2.3 million for the three months ended March 29, 2025, and March 30, 2024, respectively.
Under the terms of our credit agreement, a change in the reference rate or the lender’s base rate would affect the rate at which we could borrow funds thereunder. A one-percentage-point increase in the reference rate or base rate would have increased our interest expense on our variable rate debt under our credit agreement by approximately $1.2 million and $1.4 million for the three months ended March 29, 2025, and March 30, 2024, respectively.
ITEM 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation, as of the end of the period covered by this report, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures, as defined in Rule 13a-15(e), were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
During the quarter ended March 29, 2025, we completed a project to replace our Heavy Duty segment’s enterprise resource planning (ERP) software with SAP as part of a plan to integrate and upgrade our technology platforms. We believe that we have taken the necessary steps to monitor and maintain appropriate internal control over financial reporting during this period of change. We have also updated our processes related to internal control over financial reporting, as necessary, to accommodate applicable changes in our business processes resulting from the implementation of the new SAP technology to support accounting activities for the Heavy Duty segment. We will continue to evaluate the operating effectiveness of related key controls during subsequent periods to ensure adequate internal control over financial reporting.
23
Other than the changes described above, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the three months ended March 29, 2025, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Control systems, no matter how well-conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. The Company conducts periodic evaluations of its internal controls to enhance, where necessary, its procedures and controls.
24
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The information set forth under Note 7, “Commitments and Contingencies,” to the Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this report is incorporated herein by reference.
ITEM 1A. Risk Factors
There have been no material changes in our risk factors from the risks previously reported in PART 1, ITEM 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024. You should carefully consider the factors discussed in PART I, ITEM 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition, or future results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
During the three months ended March 29, 2025, we purchased shares of our common stock as follows:
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (3) | |||||||||||||||||||
| January 1, 2025, through January 25, 2025 (1) | 1,403 | $ | 125.76 | — | $ | 500,000,000 | |||||||||||||||||
| January 26, 2025, through February 22, 2025 | — | $ | — | — | $ | 500,000,000 | |||||||||||||||||
| February 23, 2025, through March 29, 2025 (2) | 94,467 | $ | 126.00 | 93,800 | $ | 488,182,136 | |||||||||||||||||
| Total | 95,870 | 93,800 | $ | 488,182,136 | |||||||||||||||||||
(1)Includes 1,403 shares purchased from the Dorman Products, Inc. 401(k) Plan and Trust (as described in Note 12, "Capital Stock", to the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K).
(2)Includes 667 shares purchased from the Dorman Products, Inc. 401(k) Plan and Trust.
(3)The Company's Board of Directors authorized a share repurchase program in December 2013, and through several actions taken since that time, has expanded the program to $600 million and extended the program through December 31, 2024 (the “Prior Program”). The Prior Program expired on December 31, 2024, along with all amounts that remained available for use under the Prior Program as of that date. In October 2024, the Company’s Board of Directors authorized the purchase of up to $500 million of our common stock under a new share repurchase program effective from January 1, 2025, through December 31, 2027 (the “New Program”). At March 29, 2025, $488.2 million was available for repurchase under the New Program.
ITEM 3. Defaults Upon Senior Securities
None
25
ITEM 4. Mine Safety Disclosures
Not Applicable
ITEM 5. Other Information
Director and Executive Officer Trading Arrangements
The following table describes contracts, instructions, or written plans for the purchase or sale of the Company’s common stock intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) non-Rule 10b5-1 trading arrangements
| Name and Title of Director or Officer | Date of Adoption of Agreement | Expiration Date of Agreement1 | Aggregate Number of Securities to be Purchased or Sold | ||||||||
1 Rule 10b5-1 Plan expires upon the date shown or, if earlier, upon completion of all authorized transactions under such plan (the “New Plan”).
2 Mr. Darby previously executed a Rule 10b5-1 Plan on December 5, 2024, that expires on June 30, 2025, or, if earlier, upon completion of all authorized transactions under such plan (the “Prior Plan”). The New Plan includes some of the same shares as the Prior Plan, but the New Plan is effective with respect to such shares only to the extent they remain unsold under the Prior Plan.
ITEM 6. Exhibits
(a)Exhibits
The Exhibits included in this report are listed in the Exhibit Index on page 27, which is incorporated herein by reference.
26
EXHIBIT INDEX
| 31.1 | |||||
| 31.2 | |||||
| 32 | |||||
| 101 | The following financial statements from the Dorman Products, Inc. Quarterly Report on Form 10-Q as of and for the quarter ended March 29, 2025, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations; (ii) the Condensed Consolidated Balance Sheets; (iii) Condensed Consolidated Statements of Shareholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements. | ||||
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q as of and for the quarter ended March 29, 2025, formatted in Inline XBRL (included as Exhibit 101). | ||||
* Filed herewith
** Furnished herewith
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dorman Products, Inc.
May 6, 2025
| /s/ Kevin M. Olsen | |||||
| Kevin M. Olsen | |||||
| President, Chief Executive Officer | |||||
| (principal executive officer) | |||||
May 6, 2025
| /s/ David M. Hession | |||||
| David M. Hession | |||||
| Senior Vice President and | |||||
| Chief Financial Officer | |||||
| (principal financial and accounting officer) | |||||
28