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 September 29, 201828, 2019
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
Dorman Products, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania |
| 23-2078856 |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| 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. ☒ Yes ☐ 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 and post such files). ☒ Yes ☐ 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 |
| ☒ |
| Accelerated filer |
| ☐ |
|
|
|
| |||
Non-accelerated filer |
| ☐ |
| 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of October 26, 2018,23, 2019, the registrant had 33,046,29132,778,569 shares of common stock, par value $0.01 per share, outstanding.
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 29, 201828, 2019
|
|
|
| Page |
Part I — FINANCIAL INFORMATION |
|
| ||
|
|
| ||
Item 1. |
| Financial Statements (unaudited) |
|
|
|
|
|
|
|
|
| Consolidated Statements of |
|
|
|
|
|
|
|
|
| Thirteen Weeks Ended September |
| 3 |
|
|
|
|
|
|
| Thirty-Nine Weeks Ended September |
| 4 |
|
|
|
|
|
|
|
| 5 | |
|
|
|
|
|
|
|
| 6 | |
|
|
|
|
|
|
|
| 7 | |
8 | ||||
|
|
|
|
|
Item 2. |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
|
|
|
|
|
|
Item 3. |
|
|
| |
|
|
|
|
|
Item 4. |
|
|
| |
|
|
|
|
|
Part II — OTHER INFORMATION |
|
| ||
|
|
|
|
|
Item 1. |
|
|
| |
|
|
|
|
|
Item 1A. |
|
|
| |
|
|
|
|
|
Item 2. |
|
|
| |
|
|
|
|
|
Item 3. |
|
|
| |
|
|
|
|
|
Item 4. |
|
|
| |
|
|
|
|
|
Item 5. |
|
|
| |
|
|
|
|
|
Item 6. |
|
|
| |
|
|
|
|
|
|
| |||
|
|
| ||
|
|
2
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS
(UNAUDITED)
|
| Thirteen Weeks Ended |
|
| Thirteen Weeks Ended |
| ||||||||||
(in thousands, except per share data) |
| September 29, 2018 |
|
| September 30, 2017 |
|
| September 28, 2019 |
|
| September 29, 2018 |
| ||||
Net sales |
| $ | 247,954 |
|
| $ | 224,615 |
|
| $ | 253,796 |
|
| $ | 247,954 |
|
Cost of goods sold |
|
| 152,957 |
|
|
| 136,489 |
|
|
| 166,872 |
|
|
| 152,957 |
|
Gross profit |
|
| 94,997 |
|
|
| 88,126 |
|
|
| 86,924 |
|
|
| 94,997 |
|
Selling, general and administrative expenses |
|
| 51,264 |
|
|
| 45,336 |
|
|
| 59,961 |
|
|
| 51,264 |
|
Income from operations |
|
| 43,733 |
|
|
| 42,790 |
|
|
| 26,963 |
|
|
| 43,733 |
|
Other income, net |
|
| 61 |
|
|
| 168 |
|
|
| 33 |
|
|
| 61 |
|
Income before income taxes |
|
| 43,794 |
|
|
| 42,958 |
|
|
| 26,996 |
|
|
| 43,794 |
|
Provision for income taxes |
|
| 9,777 |
|
|
| 15,950 |
|
|
| 5,688 |
|
|
| 9,777 |
|
Net income |
| $ | 34,017 |
|
| $ | 27,008 |
|
| $ | 21,308 |
|
| $ | 34,017 |
|
Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 1.03 |
|
| $ | 0.80 |
|
| $ | 0.66 |
|
| $ | 1.03 |
|
Diluted |
| $ | 1.03 |
|
| $ | 0.80 |
|
| $ | 0.65 |
|
| $ | 1.03 |
|
Weighted Average Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 32,985 |
|
|
| 33,822 |
|
|
| 32,522 |
|
|
| 32,985 |
|
Diluted |
|
| 33,095 |
|
|
| 33,909 |
|
|
| 32,594 |
|
|
| 33,095 |
|
See accompanying Notes to Consolidated Financial Statements
3
ITEM 1. FINANCIAL STATEMENTS
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS
(UNAUDITED)
|
| Thirty-Nine Weeks Ended |
|
| Thirty-Nine Weeks Ended |
| ||||||||||
(in thousands, except per share data) |
| September 29, 2018 |
|
| September 30, 2017 |
|
| September 28, 2019 |
|
| September 29, 2018 |
| ||||
Net sales |
| $ | 713,363 |
|
| $ | 675,502 |
|
| $ | 751,762 |
|
| $ | 713,363 |
|
Cost of goods sold |
|
| 437,029 |
|
|
| 407,781 |
|
|
| 490,199 |
|
|
| 437,029 |
|
Gross profit |
|
| 276,334 |
|
|
| 267,721 |
|
|
| 261,563 |
|
|
| 276,334 |
|
Selling, general and administrative expenses |
|
| 149,828 |
|
|
| 134,890 |
|
|
| 177,637 |
|
|
| 149,828 |
|
Income from operations |
|
| 126,506 |
|
|
| 132,831 |
|
|
| 83,926 |
|
|
| 126,506 |
|
Other income, net |
|
| 286 |
|
|
| 472 |
|
|
| 90 |
|
|
| 286 |
|
Income before income taxes |
|
| 126,792 |
|
|
| 133,303 |
|
|
| 84,016 |
|
|
| 126,792 |
|
Provision for income taxes |
|
| 27,789 |
|
|
| 48,671 |
|
|
| 17,803 |
|
|
| 27,789 |
|
Net income |
| $ | 99,003 |
|
| $ | 84,632 |
|
| $ | 66,213 |
|
| $ | 99,003 |
|
Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 2.98 |
|
| $ | 2.48 |
|
| $ | 2.03 |
|
| $ | 2.98 |
|
Diluted |
| $ | 2.98 |
|
| $ | 2.47 |
|
| $ | 2.02 |
|
| $ | 2.98 |
|
Weighted Average Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 33,177 |
|
|
| 34,111 |
|
|
| 32,656 |
|
|
| 33,177 |
|
Diluted |
|
| 33,267 |
|
|
| 34,202 |
|
|
| 32,738 |
|
|
| 33,267 |
|
See accompanying Notes to Consolidated Financial Statements
4
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except for share data) |
| September 28, 2019 |
|
| December 29, 2018 |
| ||
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 54,170 |
|
| $ | 43,458 |
|
Accounts receivable, less allowance for doubtful accounts of $984 and $983 |
|
| 372,356 |
|
|
| 400,663 |
|
Inventories |
|
| 282,087 |
|
|
| 270,504 |
|
Prepaids and other current assets |
|
| 16,237 |
|
|
| 5,652 |
|
Total current assets |
|
| 724,850 |
|
|
| 720,277 |
|
Property, plant and equipment, net |
|
| 103,483 |
|
|
| 98,647 |
|
Operating lease right-of-use assets |
|
| 33,870 |
|
|
| - |
|
Goodwill |
|
| 74,458 |
|
|
| 72,606 |
|
Intangible assets, net |
|
| 21,974 |
|
|
| 25,164 |
|
Deferred tax asset, net |
|
| 6,114 |
|
|
| 6,228 |
|
Other assets |
|
| 52,067 |
|
|
| 55,184 |
|
Total |
| $ | 1,016,816 |
|
| $ | 978,106 |
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 80,813 | �� |
| $ | 109,096 |
|
Accrued compensation |
|
| 11,567 |
|
|
| 14,515 |
|
Accrued customer rebates and returns |
|
| 88,575 |
|
|
| 96,888 |
|
Other accrued liabilities |
|
| 14,597 |
|
|
| 11,640 |
|
Total current liabilities |
|
| 195,552 |
|
|
| 232,139 |
|
Long-term operating lease liabilities |
|
| 31,413 |
|
|
| - |
|
Other long-term liabilities |
|
| 12,883 |
|
|
| 13,550 |
|
Deferred tax liabilities, net |
|
| 4,376 |
|
|
| 4,794 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Shareholders’ Equity: |
|
|
|
|
|
|
|
|
Common stock, par value $0.01; authorized 50,000,000 shares; issued and outstanding 32,787,553 and 33,004,861 in 2019 and 2018, respectively |
|
| 328 |
|
|
| 330 |
|
Additional paid-in capital |
|
| 52,551 |
|
|
| 47,861 |
|
Retained earnings |
|
| 719,713 |
|
|
| 679,432 |
|
Total shareholders’ equity |
|
| 772,592 |
|
|
| 727,623 |
|
Total |
| $ | 1,016,816 |
|
| $ | 978,106 |
|
See accompanying Notes to Consolidated Financial Statements
45
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETSSTATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except for share data) |
| September 29, 2018 |
|
| December 30, 2017 |
| ||
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 53,113 |
|
| $ | 71,691 |
|
Accounts receivable, less allowance for doubtful accounts and customer credits of $99,847 and $97,193 |
|
| 301,049 |
|
|
| 241,880 |
|
Inventories |
|
| 239,957 |
|
|
| 212,149 |
|
Prepaids and other current assets |
|
| 7,838 |
|
|
| 7,129 |
|
Total current assets |
|
| 601,957 |
|
|
| 532,849 |
|
Property, plant and equipment, net |
|
| 96,794 |
|
|
| 92,692 |
|
Goodwill |
|
| 80,065 |
|
|
| 65,999 |
|
Intangible assets, net |
|
| 20,707 |
|
|
| 22,158 |
|
Deferred tax asset, net |
|
| 4,297 |
|
|
| 7,884 |
|
Other assets |
|
| 45,242 |
|
|
| 44,342 |
|
Total |
| $ | 849,062 |
|
| $ | 765,924 |
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 97,937 |
|
| $ | 80,218 |
|
Accrued compensation |
|
| 11,859 |
|
|
| 12,162 |
|
Other accrued liabilities |
|
| 18,063 |
|
|
| 18,401 |
|
Total current liabilities |
|
| 127,859 |
|
|
| 110,781 |
|
Other long-term liabilities |
|
| 13,840 |
|
|
| 13,732 |
|
Deferred tax liabilities, net |
|
| 5,410 |
|
|
| 6,604 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Shareholders’ Equity: |
|
|
|
|
|
|
|
|
Common stock, par value $0.01; authorized 50,000,000 shares; issued and outstanding 33,139,997 and 33,571,524 in 2018 and 2017, respectively |
|
| 331 |
|
|
| 336 |
|
Additional paid-in capital |
|
| 47,314 |
|
|
| 44,812 |
|
Retained earnings |
|
| 654,308 |
|
|
| 589,659 |
|
Total shareholders’ equity |
|
| 701,953 |
|
|
| 634,807 |
|
Total |
| $ | 849,062 |
|
| $ | 765,924 |
|
|
| Thirteen Weeks Ended September 28, 2019 |
| |||||||||||||||||
|
| Common Stock |
|
| Additional |
|
|
|
|
|
|
|
|
| ||||||
(in thousands, except share data) |
| Shares Issued |
|
| Par Value |
|
| Paid-In Capital |
|
| Retained Earnings |
|
| Total |
| |||||
Balance at June 29, 2019 |
|
| 32,781,331 |
|
| $ | 328 |
|
| $ | 51,514 |
|
| $ | 698,490 |
|
| $ | 750,332 |
|
Exercise of stock options |
|
| 85 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Provision for stock-based compensation |
|
| — |
|
|
| — |
|
|
| 986 |
|
|
| — |
|
|
| 986 |
|
Purchase and cancellation of common stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Issuance of non-vested stock, net of cancellations |
|
| 6,593 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other stock related activity, net of tax |
|
| (456 | ) |
|
| — |
|
|
| 51 |
|
|
| (85 | ) |
|
| (34 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21,308 |
|
|
| 21,308 |
|
Balance at September 28, 2019 |
|
| 32,787,553 |
|
| $ | 328 |
|
| $ | 52,551 |
|
| $ | 719,713 |
|
| $ | 772,592 |
|
|
| Thirteen Weeks Ended September 29, 2018 |
| |||||||||||||||||
|
| Common Stock |
|
| Additional |
|
|
|
|
|
|
|
|
| ||||||
(in thousands, except share data) |
| Shares Issued |
|
| Par Value |
|
| Paid-In Capital |
|
| Retained Earnings |
|
| Total |
| |||||
Balance at June 30, 2018 |
|
| 33,225,771 |
|
| $ | 332 |
|
| $ | 46,365 |
|
| $ | 627,319 |
|
| $ | 674,016 |
|
Exercise of stock options |
|
| 3,717 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Provision for stock-based compensation |
|
| — |
|
|
| — |
|
|
| 1,131 |
|
|
| — |
|
|
| 1,131 |
|
Purchase and cancellation of common stock |
|
| (96,760 | ) |
|
| (2 | ) |
|
| (174 | ) |
|
| (6,982 | ) |
|
| (7,158 | ) |
Issuance of non-vested stock, net of cancellations |
|
| 8,195 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
Other stock related activity, net of tax |
|
| (926 | ) |
|
| — |
|
|
| (8 | ) |
|
| (46 | ) |
|
| (54 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 34,017 |
|
|
| 34,017 |
|
Balance at September 29, 2018 |
|
| 33,139,997 |
|
| $ | 331 |
|
| $ | 47,314 |
|
| $ | 654,308 |
|
| $ | 701,953 |
|
|
| Thirty-Nine Weeks Ended September 28, 2019 |
| |||||||||||||||||
|
| Common Stock |
|
| Additional |
|
|
|
|
|
|
|
|
| ||||||
(in thousands, except share data) |
| Shares Issued |
|
| Par Value |
|
| Paid-In Capital |
|
| Retained Earnings |
|
| Total |
| |||||
Balance at December 29, 2018 |
|
| 33,004,861 |
|
| $ | 330 |
|
| $ | 47,861 |
|
| $ | 679,432 |
|
| $ | 727,623 |
|
Exercise of stock options |
|
| 11,995 |
|
|
| — |
|
|
| 31 |
|
|
| — |
|
|
| 31 |
|
Provision for stock-based compensation |
|
| — |
|
|
| — |
|
|
| 3,033 |
|
|
| — |
|
|
| 3,033 |
|
Purchase and cancellation of common stock |
|
| (290,274 | ) |
|
| (3 | ) |
|
| (522 | ) |
|
| (23,814 | ) |
|
| (24,339 | ) |
Issuance of non-vested stock, net of cancellations |
|
| 70,885 |
|
|
| 1 |
|
|
| 867 |
|
|
| — |
|
|
| 868 |
|
Other stock related activity, net of tax |
|
| (9,914 | ) |
|
| — |
|
|
| 1,281 |
|
|
| (2,118 | ) |
|
| (837 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 66,213 |
|
|
| 66,213 |
|
Balance at September 28, 2019 |
|
| 32,787,553 |
|
| $ | 328 |
|
| $ | 52,551 |
|
| $ | 719,713 |
|
| $ | 772,592 |
|
|
| Thirty-Nine Weeks Ended September 29, 2018 |
| |||||||||||||||||
|
| Common Stock |
|
| Additional |
|
|
|
|
|
|
|
|
| ||||||
(in thousands, except share data) |
| Shares Issued |
|
| Par Value |
|
| Paid-In Capital |
|
| Retained Earnings |
|
| Total |
| |||||
Balance at December 30, 2017 |
|
| 33,571,524 |
|
| $ | 336 |
|
| $ | 44,812 |
|
| $ | 589,659 |
|
| $ | 634,807 |
|
Exercise of stock options |
|
| 3,717 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Provision for stock-based compensation |
|
| — |
|
|
| — |
|
|
| 3,129 |
|
|
| — |
|
|
| 3,129 |
|
Purchase and cancellation of common stock |
|
| (506,648 | ) |
|
| (6 | ) |
|
| (912 | ) |
|
| (34,306 | ) |
|
| (35,224 | ) |
Issuance of non-vested stock, net of cancellations |
|
| 82,018 |
|
|
| 1 |
|
|
| 1,022 |
|
|
| — |
|
|
| 1,023 |
|
Other stock related activity, net of tax |
|
| (10,614 | ) |
|
| — |
|
|
| (737 | ) |
|
| (48 | ) |
|
| (785 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 99,003 |
|
|
| 99,003 |
|
Balance at September 29, 2018 |
|
| 33,139,997 |
|
| $ | 331 |
|
| $ | 47,314 |
|
| $ | 654,308 |
|
| $ | 701,953 |
|
See accompanying Notes to Consolidated Financial Statements
56
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| Thirty-Nine Weeks Ended |
|
| Thirty-Nine Weeks Ended |
| ||||||||||
(in thousands) |
| September 29, 2018 |
|
| September 30, 2017 |
|
| September 28, 2019 |
|
| September 29, 2018 |
| ||||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 99,003 |
|
| $ | 84,632 |
|
| $ | 66,213 |
|
| $ | 99,003 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion |
|
| 19,673 |
|
|
| 15,968 |
|
|
| 21,011 |
|
|
| 19,673 |
|
Provision for doubtful accounts |
|
| (586 | ) |
|
| 225 |
|
|
| 33 |
|
|
| (586 | ) |
Provision (benefit) for deferred income taxes |
|
| 3,584 |
|
|
| (3,998 | ) | ||||||||
Provision for non-cash stock compensation |
|
| 3,129 |
|
|
| 2,282 |
| ||||||||
(Benefit) provision for deferred income taxes |
|
| (302 | ) |
|
| 3,584 |
| ||||||||
Provision for stock-based compensation |
|
| 3,033 |
|
|
| 3,129 |
| ||||||||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (56,484 | ) |
|
| (793 | ) |
|
| 28,276 |
|
|
| (59,806 | ) |
Inventories |
|
| (16,146 | ) |
|
| (30,990 | ) |
|
| (12,231 | ) |
|
| (16,146 | ) |
Prepaids and other current assets |
|
| (2,071 | ) |
|
| (1,232 | ) |
|
| (10,174 | ) |
|
| (2,071 | ) |
Other assets |
|
| (261 | ) |
|
| (5,644 | ) |
|
| 1,976 |
|
|
| (261 | ) |
Accounts payable |
|
| 15,262 |
|
|
| 310 |
|
|
| (28,444 | ) |
|
| 15,262 |
|
Accrued compensation and other liabilities |
|
| 110 |
|
|
| (1,398 | ) |
|
| (9,741 | ) |
|
| 3,432 |
|
Cash provided by operating activities |
|
| 65,213 |
|
|
| 59,362 |
|
|
| 59,650 |
|
|
| 65,213 |
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, net of cash acquired |
|
| (28,040 | ) |
|
| (3,128 | ) | ||||||||
Acquisition, net of cash acquired |
|
| - |
|
|
| (28,040 | ) | ||||||||
Property, plant and equipment additions |
|
| (18,099 | ) |
|
| (17,436 | ) |
|
| (24,656 | ) |
|
| (18,099 | ) |
Purchase of investments |
|
| - |
|
|
| (10,000 | ) | ||||||||
Cash used in investing activities |
|
| (46,139 | ) |
|
| (30,564 | ) |
|
| (24,656 | ) |
|
| (46,139 | ) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration |
|
| (2,036 | ) |
|
| - |
|
|
| - |
|
|
| (2,036 | ) |
Other stock related activity |
|
| (364 | ) |
|
| (997 | ) |
|
| 57 |
|
|
| (364 | ) |
Purchase and cancellation of common stock |
|
| (35,224 | ) |
|
| (60,133 | ) |
|
| (24,339 | ) |
|
| (35,224 | ) |
Cash used in financing activities |
|
| (37,624 | ) |
|
| (61,130 | ) |
|
| (24,282 | ) |
|
| (37,624 | ) |
Effect of exchange rate changes on Cash and Cash Equivalents |
|
| (28 | ) |
|
| - |
|
|
| - |
|
|
| (28 | ) |
Net Decrease in Cash and Cash Equivalents |
|
| (18,578 | ) |
|
| (32,332 | ) | ||||||||
Net Increase (Decrease) in Cash and Cash Equivalents |
|
| 10,712 |
|
|
| (18,578 | ) | ||||||||
Cash and Cash Equivalents, Beginning of Period |
|
| 71,691 |
|
|
| 149,121 |
|
|
| 43,458 |
|
|
| 71,691 |
|
Cash and Cash Equivalents, End of Period |
| $ | 53,113 |
|
| $ | 116,789 |
|
| $ | 54,170 |
|
| $ | 53,113 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest expense |
| $ | 191 |
|
| $ | 218 |
|
| $ | 116 |
|
| $ | 191 |
|
Cash paid for income taxes |
| $ | 21,722 |
|
| $ | 55,713 |
|
| $ | 28,454 |
|
| $ | 21,722 |
|
See accompanying Notes to Consolidated Financial Statements
67
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 201828, 2019 AND SEPTEMBER 30, 201729, 2018
(UNAUDITED)
1. | Basis of Presentation |
As used herein, unless the context otherwise requires, “Dorman”, the “Company”, “we”, “us”, or “our” refers to Dorman Products, Inc. and its subsidiaries. Our ticker symbol on the NASDAQ Global Select Market is “DORM”.“DORM.”
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. for interim financial information and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). However, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the thirty-nine weeks ended September 29, 201828, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2018.28, 2019 or any future period. We may experience significant fluctuations from quarter to quarter in our results of operations due to the timing of orders placed by our customers. The introduction of new products and product lines to customers may cause significant fluctuations from quarter to quarter. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2017.29, 2018.
Certain prior year amounts have been reclassified to conform with current year presentation.
Revision of Prior Period Financial Statements
During the quarter ended June 29, 2019, we identified and corrected an immaterial error that affected previously issued consolidated financial statements. This error related to the application of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, related to the balance sheet classification of accrued customer rebates and returns that are recognized in connection with sales of our products. We adopted this ASU on December 31, 2017, the beginning of our 2018 fiscal year. We previously recorded accrued customer rebates and returns that were expected to be issued as credits to our customers as a valuation account which offset accounts receivable. Accrued customer rebates and returns are now recorded as a current liability.
Previously issued comparative financial statements, which were revised to correct the error noted above, are presented as “As Revised” in the tables presented in the following footnotes.
|
| December 29, 2018 |
| |||||||||
(in thousands) |
| As Previously Reported |
|
| Adjustment |
|
| As Revised |
| |||
Revised Consolidated Balance Sheet Amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
| $ | 310,114 |
|
| $ | 90,549 |
|
| $ | 400,663 |
|
Total current assets |
| $ | 629,728 |
|
| $ | 90,549 |
|
| $ | 720,277 |
|
Total assets |
| $ | 887,557 |
|
| $ | 90,549 |
|
| $ | 978,106 |
|
Liabilities and shareholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
Accrued customer rebates and returns |
| $ | 6,339 |
|
| $ | 90,549 |
|
| $ | 96,888 |
|
Total current liabilities |
| $ | 141,590 |
|
| $ | 90,549 |
|
| $ | 232,139 |
|
Total liabilities and shareholders' equity |
| $ | 887,557 |
|
| $ | 90,549 |
|
| $ | 978,106 |
|
|
| Thirty-Nine Weeks Ended September 29, 2018 |
| |||||||||
(in thousands) |
| As Previously Reported |
|
| Adjustment |
|
| As Revised |
| |||
Revised Consolidated Statement of Cash Flows from Operating Activities Amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
| $ | (56,484 | ) |
| $ | (3,322 | ) |
| $ | (59,806 | ) |
Accrued compensation and other liabilities |
| $ | 110 |
|
| $ | 3,322 |
|
| $ | 3,432 |
|
Net cash used in operating activities |
| $ | 65,213 |
|
| $ | — |
|
| $ | 65,213 |
|
8
Additionally, as a result of the adoption of ASU No. 2014-09, the Company should have disclosed the initial impact to the balance sheet reclassification for accrued customer rebates and returns from accounts receivable, net to accrued customer rebates and returns. The cumulative effect of the changes to the consolidated balance sheet from the adoption was as follows:
(in thousands) |
| As of December 30, 2017 |
|
| Effect of Adoption |
|
| As of December 31, 2017 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
| $ | 241,880 |
|
| $ | 95,537 |
|
| $ | 337,417 |
|
Accrued customer rebates and returns |
| $ | 6,522 |
|
| $ | 95,537 |
|
| $ | 102,059 |
|
The effect of the above corrections on the consolidated statement of cash flows for the fiscal year ended December 29, 2018 is as follows:
|
| Fiscal Year Ended December 29, 2018 |
| |||||||||
(in thousands) |
| As Previously Reported |
|
| Adjustment |
|
| As Revised |
| |||
Revised Consolidated Statement of Cash Flows from Operating Activities Amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
| $ | (66,403 | ) |
| $ | 4,990 |
|
| $ | (61,413 | ) |
Accrued compensation and other liabilities |
| $ | 4,318 |
|
| $ | (4,990 | ) |
| $ | (672 | ) |
Net cash used in operating activities |
| $ | 78,112 |
|
| $ | — |
|
| $ | 78,112 |
|
The correction of this error did not impact our Consolidated Statements of Operations or our Consolidated Statements of Shareholder’s Equity in any period presented.
2. | Business Acquisitions and Investments |
On August 31, 2018, we acquired 100% of the outstanding stock of Flight Systems Automotive Group LLC (“Flight Systems” or “Flight”), a privately-held manufacturer and remanufacturer of complex automotive electronics and diesel fuel system components, based in Lewisberry, Pennsylvania. We paid $27.5 million in cash which is subject to customary purchase price adjustments. In connection with this acquisition, we preliminary recorded $13.3 million in goodwill and $14.2 million of other net assets, primarily $2.0 million of accounts receivables, $11.6 million of inventory, and $0.6 million of net other assets and liabilities. We expect that, upon completion of our valuation, we will recognize intangible assets with an offsetting reduction in the preliminary goodwill that was recognized as of September 29, 2018. The purchase price allocation is preliminary and subject to adjustment as we complete our assessment of the fair values of acquired assets and assumed liabilities. We believe that the goodwill and intangible assets resulting from the acquisition will be deductible for tax purposes. The financial results of the acquisition have been included in the Consolidated Financial Statements since the date of acquisition. Flight generated $1.7 million of net sales and an immaterial amount of net income since the date of acquisition.was $27.5 million. We believe complex electronics and diesel fuel system components represent important growth opportunities for us and Flight’s product portfolio delivers valuable alternatives to aftermarket professionals.
The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the assets acquired and liabilities assumed were recorded at fair value, with the remaining purchase price recorded as goodwill.
In connection with this acquisition, we recorded $7.4 million in goodwill, $4.1 million of identified intangibles, and $16.0 million of other assets, net, primarily $2.0 million of accounts receivable, $8.4 million of inventory, $4.4 million of fixed assets, and $1.2 million of net other assets and liabilities. During the thirteen weeks ended September 28, 2019, we recorded measurement period adjustments of approximately $1.9 million increase to goodwill and approximately $0.7 million decrease to inventory and $1.2 million decrease to identified intangibles. These measurement period entries are included in the balances above. Our measurement period adjustments for Flight were complete as of September 28, 2019.
The valuation of the intangible assets acquired and related amortization periods are as follows:
(in thousands) |
| Valuation |
|
| Amortization Period (in years) |
| ||
Customer relationships |
| $ | 3,400 |
|
|
| 8 |
|
Tradenames |
|
| 460 |
|
|
| 5 |
|
Other |
|
| 240 |
|
|
| 5 |
|
Total |
| $ | 4,100 |
|
|
|
|
|
The fair values of the Customer relationships and Tradenames were estimated using a discounted present value income approach.
The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to existing automotive aftermarket businesses, the assembled workforce of Flight and other factors. The goodwill is expected to be deductible for tax purposes.
The financial results of the acquisition have been included in the Consolidated Financial Statements since the date of acquisition.
On October 26, 2017, we acquired 100% of the outstanding stock of MAS Automotive Distribution Inc. (“MAS Industries” or “MAS”MAS”), a privately-held manufacturer of premium chassis and control arms based in Montreal, Canada. The purchase price was $67.2 million net of $3.3 million of cash acquired and including contingent consideration at fair value and other purchase price adjustments.
We believe MAS is complementary to our business and growth strategy. We see opportunities to leverage MAS’ existing presence in the automotive aftermarket, as well as our product development capabilities and financial resources to accelerate the growth of MAS’ premium chassis and control arm products.
We have included the results of MAS in our Consolidated Financial Statements since the acquisition date of October 26, 2017. The Consolidated Statement of Operations for the thirty-nine weeks ended September 29, 2018 includes $30.0 million of net sales and an immaterial amount of net income related to MAS. The Consolidated Balance Sheets as of September 29, 2018 and December 30, 2017 reflects the acquisition of MAS Industries, effective October 26, 2017.
The following table summarizes the fair value of the total consideration related to MAS:
(in thousands) |
| Total Acquisition Date Fair Value |
| |
Cash consideration (net of $3.3 million cash acquired) |
| $ | 56,859 |
|
Contingent cash consideration |
|
| 7,982 |
|
Seller liability assumed |
|
| 896 |
|
Working capital adjustment |
|
| 1,486 |
|
Total consideration assigned to net assets acquired |
| $ | 67,223 |
|
Included in the table above is $8.0 million of estimated contingent payments which represents the fair value of the estimated payments which will become due if certain sales thresholds are achieved through December 2020. The fair value of the contingent cash consideration was estimated by using an option pricing model framework, which represents our own assumptions and data, and is based on our best available information. As of September 29, 2018,28, 2019, we had $8.2 million recorded as a long-term liability which includesrepresents the fair value of the estimated payment which will become due if certain sales thresholds are achieved through December 2020. Accretion expense was $0.2 million of accretion which was included in Selling, General and Administrative expenses foreach of the thirty-nine weeks ended September 29, 2018, related to this payment. The maximum contingent payment would be $11.7 million. Additionally, during the thirty-nine weeks ended28, 2019 and September 29, 2018, we finalized working capitalwhich was included in selling, general and otheradministrative expenses in the Consolidated Statements of Operations.
79
purchase price adjustments based on the MAS standalone audited 2017 financial statements, resulting in a payment to the former shareholder of $1.5 million. This amount had previously been accrued on our Consolidated Balance Sheet.
The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the assets acquired and liabilities assumed were recorded at fair value, with the remaining purchase price recorded as goodwill. The following table summarizes the fair values of the assets acquired and liabilities assumed as of October 26, 2017:
(in thousands) |
| October 26, 2017 (As initially reported) |
|
| Measurement period adjustments |
|
| October 26, 2017 (As adjusted) |
| |||
Current assets (net of $3.3 million cash acquired) |
| $ | 21,756 |
|
| $ | 90 |
|
| $ | 21,846 |
|
Property, plant and equipment |
|
| 1,615 |
|
|
| - |
|
|
| 1,615 |
|
Intangible assets |
|
| 20,440 |
|
|
| - |
|
|
| 20,440 |
|
Goodwill |
|
| 35,624 |
|
|
| (193 | ) |
|
| 35,431 |
|
Total assets acquired |
|
| 79,435 |
|
|
| (103 | ) |
|
| 79,332 |
|
Current liabilities |
|
| 5,691 |
|
|
| (50 | ) |
|
| 5,641 |
|
Long-term liabilities |
|
| 6,468 |
|
|
| - |
|
|
| 6,468 |
|
Total liabilities assumed |
|
| 12,159 |
|
|
| (50 | ) |
|
| 12,109 |
|
Net assets acquired |
| $ | 67,276 |
|
| $ | (53 | ) |
| $ | 67,223 |
|
Our measurement period adjustments for MAS were complete as of September 29, 2018.
The valuation of the intangible assets acquired and related amortization periods are as follows:
(in thousands) |
| Valuation |
|
| Amortization Period (in years) | |
Customer relationships |
| $ | 14,840 |
|
| 8-12 |
Tradenames |
|
| 5,600 |
|
| 15 |
Total |
| $ | 20,440 |
|
|
|
The fair values of the Customer Relationships and Tradenames were estimated using a discounted present value income approach. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, we used cash flows discounted at rates ranging from 15% to 17%, which were considered appropriate given the inherent risk associated with each type of asset. We believe that the level and timing of cash flows appropriately reflect market participant assumptions.
The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to existing automotive aftermarket businesses, the assembled workforce of MAS and other factors. The goodwill is expected to be deductible for tax purposes.
Pro Forma Financial Information (Unaudited)
The unaudited pro forma information for the periods set forth below give effect to the MAS acquisition as if it occurred as of December 27, 2015, the start of our 2016 fiscal year. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of the operations that actually would have been achieved had the acquisition been consummated as of that time:
|
| Thirty-Nine Weeks Ended |
| |
(in thousands) |
| September 30, 2017 |
| |
Net sales |
| $ | 702,811 |
|
Net income |
| $ | 85,307 |
|
Diluted earnings per share |
| $ | 2.49 |
|
The unaudited pro forma net income for the thirty-nine weeks ended September 30, 2017 was adjusted to include amortization of intangible assets, accretion for contingent consideration liabilities and to exclude financing costs of MAS which we do not believe would have occurred.
3. | Sales of Accounts Receivable |
We have entered into several customer sponsored programs administered by unrelated financial institutions that permit us to sell 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 Consolidated Balance Sheet at the time of the sales transactions. Pursuant to these agreements, we sold $438.6 $530.7million and $442.5$438.6 million of accounts receivable during the thirty-nine weeks ended September 28, 2019 and September 29, 2018, and September 30, 2017, respectively. All of our credit terms with our customers are less than one year. If receivables had not been sold $333.6over the previous twelve months, $458.4 million and $380.8$378.5 million of additional accounts receivable would have been outstanding at September 29, 201828, 2019 and December 30, 2017,29, 2018, respectively, based on standard payment terms. Selling, general and administrative expenses for the thirty-nine weeks ended September 28, 2019 and September 29, 2018 and September 30, 2017 included $10.0$13.6 million and $8.4$10.0 million, respectively, in financing costs associated with these accounts receivable sales programs.
8
Inventories include the cost of material, freight, 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) |
| September 29, 2018 |
|
| December 30, 2017 |
|
| September 28, 2019 |
|
| December 29, 2018 |
| ||||
Bulk product |
| $ | 93,142 |
|
| $ | 82,010 |
|
| $ | 107,816 |
|
| $ | 122,111 |
|
Finished product |
|
| 143,118 |
|
|
| 126,827 |
|
|
| 169,868 |
|
|
| 144,897 |
|
Packaging materials |
|
| 3,697 |
|
|
| 3,312 |
|
|
| 4,403 |
|
|
| 3,496 |
|
Total |
| $ | 239,957 |
|
| $ | 212,149 |
|
| $ | 282,087 |
|
| $ | 270,504 |
|
5. | Leases |
As discussed in Note 15, we adopted ASU No. 2016-02, Leases, on December 30, 2018, the beginning of our fiscal 2019, using the modified retrospective approach. We determine whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases included both lease and non-lease components which are accounted for as a single lease component as we have elected the practical expedient. Some of our operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and as such are accounted for as short-term leases as we have elected the practical expedient.
Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the preset values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term. We had 0 financing leases as of September 28, 2019.
We have operating leases for distribution centers, sales offices and certain warehouse and office equipment. Our leases have remaining lease terms of 1 to 12 years, many of which include one or more renewal options. We consider these renewal options in determining the lease term used to establish our right-of-use assets and lease liabilities when it is determined that it is reasonably certain that the renewal option will be exercised.
As of September 28, 2019, there was no material variable lease costs or sublease income. Cash paid for operating leases was $4.3 million in the thirty-nine weeks ended September 28, 2019, which is classified in operating activities. The following table summarizes the lease expense for the thirteen and thirty-nine weeks ended September 28, 2019:
(in thousands) |
| Thirteen Weeks Ended September 28, 2019 |
|
|
|
| Thirty-Nine Weeks Ended September 28, 2019 |
| ||
Operating lease expense |
| $ | 1,785 |
|
|
|
| $ | 5,582 |
|
Short-term lease expense |
|
| 947 |
|
|
|
|
| 3,288 |
|
Total lease expense |
| $ | 2,732 |
|
|
|
| $ | 8,870 |
|
10
Supplemental balance sheet information related to our operating leases is as follows:
(in thousands) |
| September 28, 2019 |
| |
Operating lease right-of-use assets |
| $ | 33,870 |
|
|
|
|
|
|
Other accrued liabilities |
| $ | 5,303 |
|
Long-term operating lease liabilities |
|
| 31,413 |
|
Total operating lease liabilities |
| $ | 36,716 |
|
|
|
|
|
|
Weighted average remaining lease term (years) |
|
| 9.43 |
|
Weighted average discount rate |
|
| 5.18 | % |
The following table summarizes the maturities of our lease liabilities for all operating leases as of September 28, 2019:
(in thousands) |
| September 28, 2019 |
| |
2019 (Remainder of 2019) |
| $ | 1,754 |
|
2020 |
|
| 7,040 |
|
2021 |
|
| 5,284 |
|
2022 |
|
| 4,909 |
|
2023 |
|
| 3,394 |
|
2024 and thereafter |
|
| 24,973 |
|
Total lease payments |
|
| 47,354 |
|
Less: Imputed interest |
|
| (10,638 | ) |
Present value of lease liabilities |
| $ | 36,716 |
|
For the year ended December 29, 2018, minimum rental payments under operating leases were recognized on a straight-line basis over the term of the lease including any periods of free rent. Rent expense for operating leases, including payments for short-term equipment and storage rentals, was $6.9 million in fiscal 2018. Minimum future rental payments required under operating leases in effect as of December 29, 2018 were as follows:
(in thousands) |
| December 29, 2018 |
| |
2019 |
| $ | 5,489 |
|
2020 |
|
| 5,416 |
|
2021 |
|
| 4,972 |
|
2022 |
|
| 4,599 |
|
2023 |
|
| 3,013 |
|
2024 and thereafter |
|
| 24,297 |
|
Total rental payments |
| $ | 47,786 |
|
6. | Goodwill and Intangible Assets |
Goodwill
Goodwill included the following:
(in thousands) |
| September 29, 2018 |
|
| December 30, 2017 |
|
| September 28, 2019 |
|
| December 29, 2018 |
| ||||
Balance at beginning of period |
| $ | 65,999 |
|
| $ | 28,146 |
|
| $ | 72,606 |
|
| $ | 65,999 |
|
Goodwill acquired |
|
| 14,368 |
|
|
| 37,853 |
|
|
| - |
|
|
| 6,800 |
|
Measurement period adjustments |
|
| (302 | ) |
|
| - |
|
|
| 1,852 |
|
|
| (193 | ) |
Balance at end of period |
| $ | 80,065 |
|
| $ | 65,999 |
|
| $ | 74,458 |
|
| $ | 72,606 |
|
11
Intangible Assets
Intangible assets included the following:
|
|
|
|
|
| September 29, 2018 |
|
| December 30, 2017 |
|
|
|
|
|
| September 28, 2019 |
|
| December 29, 2018 |
| ||||||||||||||||||||||||||||||||||||
(in thousands) |
| Weighted Average Amortization Period |
|
| Gross Carrying Value |
|
| Accumulated Amortization |
|
| Net Carrying Value |
|
| Gross Carrying Value |
|
| Accumulated Amortization |
|
| Net Carrying Value |
|
| Weighted Average Amortization Period |
|
| Gross Carrying Value |
|
| Accumulated Amortization |
|
| Net Carrying Value |
|
| Gross Carrying Value |
|
| Accumulated Amortization |
|
| Net Carrying Value |
| ||||||||||||||
Intangible assets subject to amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradenames |
|
| 14.1 |
|
| $ | 5,600 |
|
| $ | 373 |
|
| $ | 5,227 |
|
| $ | 5,600 |
|
| $ | 62 |
|
| $ | 5,538 |
|
|
| 12.5 |
|
| $ | 6,060 |
|
| $ | 858 |
|
| $ | 5,202 |
|
| $ | 7,590 |
|
| $ | 516 |
|
| $ | 7,074 |
|
Customer relationships |
|
| 9.5 |
|
|
| 17,049 |
|
|
| 1,893 |
|
|
| 15,156 |
|
|
| 17,049 |
|
|
| 772 |
|
|
| 16,277 |
|
|
| 8.2 |
|
|
| 20,450 |
|
|
| 4,166 |
|
|
| 16,284 |
|
|
| 20,130 |
|
|
| 2,582 |
|
|
| 17,548 |
|
Technology |
|
| 13.3 |
|
|
| 367 |
|
|
| 43 |
|
|
| 324 |
|
|
| 367 |
|
|
| 24 |
|
|
| 343 |
|
|
| 12.3 |
|
|
| 367 |
|
|
| 67 |
|
|
| 300 |
|
|
| 367 |
|
|
| 49 |
|
|
| 318 |
|
Other |
|
| 3.9 |
|
|
| 240 |
|
|
| 52 |
|
|
| 188 |
|
|
| 240 |
|
|
| 16 |
|
|
| 224 |
| ||||||||||||||||||||||||||||
Total |
|
|
|
|
| $ | 23,016 |
|
| $ | 2,309 |
|
| $ | 20,707 |
|
| $ | 23,016 |
|
| $ | 858 |
|
| $ | 22,158 |
|
|
|
|
|
| $ | 27,117 |
|
| $ | 5,143 |
|
| $ | 21,974 |
|
| $ | 28,327 |
|
| $ | 3,163 |
|
| $ | 25,164 |
|
Amortization expense was $1.6$2.0 million and less than $0.1$1.6 million for the thirty-nine weeks ended September 28, 2019 and September 29, 2018, and September 30, 2017, respectively.
| Commitments and Contingencies |
CBP Matter
We regularly assess our adherence to customs laws and regulations as part of our trade compliance program. In connection with our assessment process, we discovered that we previously reported incorrect importation codes to the United States Customs & Border Protection (“CBP”) on certain products that we imported into the United States. As a result, we elected to initiate an internal review and commence a voluntary prior disclosure process with CBP. We informed CBP, as part of the prior disclosure, that we had previously incorrectly classified certain products which we believe would result in both underpayments and overpayments of various duties to CBP, that we were continuing to investigate the historical misclassifications, and that at that time we were not able to fully determine the nature and scope of all prior misclassifications. Since discovering the misclassifications, we have taken corrective actions with respect to the ongoing classification of our products and payment of duties on products being imported into the United States.
Since we have made a prior disclosure to CBP, we believe our liability to CBP will be limited to the unpaid duties, after deducting the overpayment of duties, and interest on such net unpaid duties for the last five years, which is the applicable statute of limitations. In July 2019, we engaged a customs advisory firm to assist us in completing the prior disclosure, including determining the nature and scope of the historical misclassifications and the amount of duties and interest payable to CBP. We expect to complete our prior disclosure to CBP and pay any unpaid duties and interest in 2020. Based on currently known information, it is probable that we will be liable to CBP for unpaid duties and interest, but we are unable to reasonably estimate the loss, or range of loss, that may result due to the complexity of the calculations required to complete the prior disclosure and the volume of importation records subject to analysis over the five-year period. The resolution of this prior disclosure could be material to our cash flows in a future period and to our results of operations for any period, but is not expected to be material to our financial position.
Other 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 and results of operations in the period in which any such effects are recorded.
8. | Revenue Recognition |
The FASB issued an accounting standard updateASU No. 2014-09, Revenue from Contracts with Customers, in May 2014 regarding the accounting for and disclosure of revenue. Specifically, the update outlined a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers, which is common to both U.S. GAAP and International Financial Reporting Standards.
Our primary source of revenue is from contracts with and purchase orders from customers. Revenue is recognized from product sales when goods are shipped, title and risk of loss and control have been transferred to the customer, and collection is reasonably assured. We estimate the transaction price at the inception of a contract or upon fulfilling a purchase order, including any variable consideration, and will update the estimate for changes in circumstances. We utilize the most likely amount method consistently to estimate the effect of uncertainty on the amount of variable consideration to which we would be entitled. The most likely amount method considers the single most likely amount from a range of possible consideration amounts. This method is utilized for all of our variable consideration.
12
We record estimates for cash discounts, product returns, promotional rebates, core (i.e. remanufactured parts) return deposits and other discounts in the period the related product revenue is recognized (“Customer Credits”customer rebates and returns”). The provision for Customer Creditscustomer rebates and returns is recorded as a reduction fromof gross salessales. Beginning with our Form 10-Q for the period ended June 29, 2019, our obligation associated with customer rebates and reserves for Customer Credits are shownreturns is classified as a reduction of accounts receivable. Accruedcurrent liability on our consolidated balance sheets (“accrued customer rebates which we expectand returns”). We have revised prior period balances to settle in cash are classified as other accrued liabilities.conform with this presentation. Please refer to Note 1. Actual Customer Creditscustomer rebates and returns have not differed materially from estimated amounts for each period presented. Amounts billed to customers for shipping and handling are included in net sales. Costs associated with shipping and handling are included in cost of goods sold. We have concluded that our estimates of variable consideration are not constrained according to the definition of the new standard.
9
All of our revenue was recognized under the point of time approach in accordance with the revenue standard during the thirty-nine weeks ended September 29, 201828, 2019 and September 30, 2017,29, 2018, respectively. Also, we do not have significant financing arrangements with our customers, as our credit terms are all less than one year. Lastly, we do not receive noncash consideration (such as materials or equipment) from our customers to facilitate the fulfillment of our contracts.
Five-step model
We apply the FASB’s guidance on revenue recognition, which requires us to recognize the amount of revenue and consideration which we expect to receive in exchange for goods or services transferred to our customers. To do this, we apply the five-step model prescribed by the FASB, which requires us to: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, we satisfy a performance obligation.
Contract Assets and Liabilities
We recognize a receivable or contract asset when we perform a service or transfer a good in advance of receiving consideration.
- A receivable is recorded when our right to consideration is unconditional and only the passage of time is required before payment of that consideration is due.
- A contract asset is recorded when our right to consideration in exchange for goods or services that we have transferred to a customer is conditional on something other than the passage of time. We did not0t have any contract assets recorded as of September 29, 201828, 2019 or December 30, 2017.29, 2018.
We recognize a contract liability when we receive consideration, or if we have the unconditional right to receive consideration, in advance of satisfying the performance obligation. A contract liability is our obligation to transfer goods or services to a customer for which we have received consideration, or an amount of consideration is due from the customer. We did not0t have any contract liabilities recorded as of September 29, 201828, 2019 or December 30, 2017.29, 2018.
Disaggregated Revenue
The following tables present our disaggregated net sales by Type of Major Good / Product Line, and Geography.
|
| Thirteen Weeks Ended |
|
| Thirty-Nine Weeks Ended |
|
| Thirteen Weeks Ended |
|
| Thirty-Nine Weeks Ended |
| ||||||||||||||||||||
(in thousands) |
| September 29, 2018 |
|
| September 30, 2017 |
|
| September 29, 2018 |
|
| September 30, 2017 |
|
| September 28, 2019 |
|
| September 29, 2018 |
|
| September 28, 2019 |
|
| September 29, 2018 |
| ||||||||
Powertrain |
| $ | 100,994 |
|
| $ | 94,177 |
|
| $ | 295,363 |
|
| $ | 284,393 |
|
| $ | 104,756 |
|
| $ | 100,994 |
|
| $ | 299,730 |
|
| $ | 295,363 |
|
Chassis |
|
| 69,214 |
|
|
| 57,281 |
|
|
| 206,483 |
|
|
| 173,498 |
|
|
| 70,787 |
|
|
| 69,214 |
|
|
| 228,446 |
|
|
| 206,483 |
|
Automotive Body |
|
| 67,000 |
|
|
| 62,791 |
|
|
| 179,539 |
|
|
| 185,804 |
| ||||||||||||||||
Automotive body |
|
| 65,468 |
|
|
| 67,000 |
|
|
| 189,174 |
|
|
| 179,539 |
| ||||||||||||||||
Hardware |
|
| 10,746 |
|
|
| 10,366 |
|
|
| 31,978 |
|
|
| 31,807 |
|
|
| 12,785 |
|
|
| 10,746 |
|
|
| 34,412 |
|
|
| 31,978 |
|
Net Sales |
| $ | 247,954 |
|
| $ | 224,615 |
|
| $ | 713,363 |
|
| $ | 675,502 |
| ||||||||||||||||
Net sales |
| $ | 253,796 |
|
| $ | 247,954 |
|
| $ | 751,762 |
|
| $ | 713,363 |
|
|
| Thirteen Weeks Ended |
|
| Thirty-Nine Weeks Ended |
| ||||||||||
(in thousands) |
| September 29, 2018 |
|
| September 30, 2017 |
|
| September 29, 2018 |
|
| September 30, 2017 |
| ||||
Net Sales to U.S. Customers |
| $ | 229,761 |
|
| $ | 210,347 |
|
| $ | 663,212 |
|
| $ | 634,422 |
|
Net Sales to Non-U.S. Customers |
|
| 18,193 |
|
|
| 14,268 |
|
|
| 50,151 |
|
|
| 41,080 |
|
Net Sales |
| $ | 247,954 |
|
| $ | 224,615 |
|
| $ | 713,363 |
|
| $ | 675,502 |
|
|
| Thirteen Weeks Ended |
|
| Thirty-Nine Weeks Ended |
| ||||||||||
(in thousands) |
| September 28, 2019 |
|
| September 29, 2018 |
|
| September 28, 2019 |
|
| September 29, 2018 |
| ||||
Net sales to U.S. customers |
| $ | 238,466 |
|
| $ | 229,761 |
|
| $ | 701,778 |
|
| $ | 663,212 |
|
Net sales to non-U.S. customers |
| $ | 15,330 |
|
|
| 18,193 |
|
|
| 49,984 |
|
|
| 50,151 |
|
Net sales |
| $ | 253,796 |
|
| $ | 247,954 |
|
| $ | 751,762 |
|
| $ | 713,363 |
|
13
9.Stock-Based Compensation |
|
On May 16, 2018, our shareholders approved our 2018 Stock Option and Stock Incentive Plan (the “2018 Plan” or the “Plan”), which supersedes our 2008 Stock Option and Stock Incentive Plan. All future stock compensation grants will be issued under the 2018 Plan. Under the terms of the Plan, our Board of Directors may grant up to 1,200,000 shares of common stock in the form of shares of restricted stock, restricted stock units, stock appreciation rights, and stock options, or combinations thereof, to officers, directors, employees, important consultants and advisors. Grants under the Plan must be made within ten years of the date the Plan was approved. Stock options are exercisable upon the terms set forth in each grant agreement, approved by the Board of Directors, but in no event more than ten years from the date of grant. Restricted stock and restricted stock units vest in accordance with the terms set forth in each applicable award agreement approved by our Board of Directors.agreement. At September 29, 2018, 1,184,30528, 2019, 1,035,216 shares were available for grant under the 2018 Plan.
Restricted Stock
We may grant restricted stock to certainofficers, directors, employees, consultants and members of our Board of Directors. The value of restricted stock issued is based on the fair value of our common stock on the grant date.advisors. Vesting of restricted stock is conditional based on continued employment or service for a specified period and, in certain circumstances, the attainment of financialperformance goals. We retain the unvested restricted stock, and any dividends paid thereon, until the vesting conditions have been met. For time-based restricted stock awards, with a service condition only, compensation cost related to the stock is recognized on a
10
straight-line basis over the vesting period.period and is calculated using the closing price per share of our common stock on the grant date. For performance-based restricted stock awards that have a service condition and require the attainment of financial goals,tied to growth in adjusted pre-tax income, compensation cost related to the stock is recognized over the performance period and is calculated based uponusing the closing price per share of our common stock on the grant date and an estimate of the probable outcome of the performance conditions as each the reporting date. In 2019, we introduced performance-based shares that vest based on our total shareholder return ranking relative to the date of grant andS&P Midcap 400 Growth Index over a three-year performance period. For performance-based restricted stock awards tied to total shareholder return, compensation cost related to the stock is recognized on a straight-line basis over the performance period.period and is calculated using the simulated fair value per share of our common stock based on the application of a Monte Carlo simulation model. Compensation cost related to restricted stock was $2.5$2.3 million and $2.1$2.5 million for the thirty-nine weeks ended September 28, 2019 and September 29, 2018, respectively, and September 30, 2017, respectively.is classified as selling, general and administrative expense in the Consolidated Statements of Operations.
The following table summarizes our restricted stock activity for the thirty-nine weeks ended September 29, 2018:28, 2019:
|
| Shares |
|
| Weighted Average Price |
|
| Shares |
|
| Weighted Average Price |
| ||||
Balance at December 30, 2017 |
|
| 153,727 |
|
| $ | 59.96 |
| ||||||||
Balance at December 29, 2018 |
|
| 170,737 |
|
| $ | 63.94 |
| ||||||||
Granted |
|
| 80,872 |
|
| $ | 72.19 |
|
|
| 90,434 |
|
| $ | 82.10 |
|
Vested |
|
| (38,631 | ) |
| $ | 61.07 |
|
|
| (38,764 | ) |
| $ | 55.00 |
|
Cancelled |
|
| (6,237 | ) |
| $ | 75.59 |
|
|
| (33,504 | ) |
| $ | 52.08 |
|
Balance at September 29, 2018 |
|
| 189,731 |
|
| $ | 64.43 |
| ||||||||
Balance at September 28, 2019 |
|
| 188,903 |
|
| $ | 76.57 |
|
As of September 29, 2018,28, 2019, there was $5.2$7.5 million of unrecognized compensation cost related to nonvestedunvested restricted stock, which is expected to be recognized over a weighted-average period of approximately 2.32.6 years.
Cash flows resulting from tax deductions in excess of the tax effect of compensation cost recognized in the financial statements are classified as operating cash flows. The excess tax benefit generated from restricted sharesstock which vested was $0.2 million and less than $0.1 million in the thirty-nine weeks ended September 28, 2019 and September 29, 2018, was less than $0.1 million and was credited to income tax expense. The excess tax benefit generated from restricted shares which vested in the thirty-nine weeks ended September 30, 2017 was $0.3 millionrespectively, and was credited to income tax expense.
Stock Options
We may grant stock options to certain employees.officers, directors, employees, consultants and advisors. We expense the grant-date fair value of stock options. Compensation cost is recognized on a straight-line basis over the vesting period for which related services are performed. The compensation cost charged against income was $0.4$0.5 million and $0.2$0.4 million for the thirty-nine weeks ended September 29, 201828, 2019 and September 30, 2017,29, 2018, respectively. The compensation costs were classified as Selling,selling, general and administrative expense in the Consolidated Statements of Income. NoOperations. NaN cost was capitalized during the thirty-nine weeks ended September 29, 201828, 2019 and September 30, 2017.29, 2018.
We use the Black-Scholes option valuation model to estimate the fair value of stock options granted. Expected volatility and expected dividend yield are based on the actual historical experience of our common stock. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using historical option exercise data. The risk-free rate was based on a U.S. Treasury security with terms equal to the expected time of exercise as of the grant date. During the thirty-nine weeks ended September 28, 2019 and September 29, 2018, and September 30, 2017 we granted 69,01438,670 and 58,02469,014 stock options, respectively.
14
The following table summarizes our stock option activity for the thirty-nine weeks ended September 29, 2018:
28, 2019:
| Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Term (In years) |
|
| Aggregate Intrinsic Value |
| ||||
Balance at December 30, 2017 |
| 122,547 |
|
| $ | 57.74 |
|
|
|
|
|
|
|
|
|
Granted |
| 69,014 |
|
| $ | 72.32 |
|
|
|
|
|
|
|
|
|
Exercised |
| (4,000 | ) |
| $ | 5.67 |
|
|
|
|
|
|
|
|
|
Balance at September 29, 2018 |
| 187,561 |
|
| $ | 64.21 |
|
|
| 3.7 |
|
| $ | 2,490,355 |
|
Options exercisable at September 29, 2018 |
| 47,079 |
|
| $ | 51.55 |
|
|
| 2.6 |
|
| $ | 1,220,858 |
|
| Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Term (In years) |
|
| Aggregate Intrinsic Value |
| ||||
Balance at December 29, 2018 |
| 188,469 |
|
| $ | 66.14 |
|
|
|
|
|
|
|
|
|
Granted |
| 38,670 |
|
| $ | 82.94 |
|
|
|
|
|
|
|
|
|
Exercised |
| (35,401 | ) |
| $ | 59.90 |
|
|
|
|
|
|
|
|
|
Forfeited |
| (2,597 | ) |
| $ | 76.03 |
|
|
|
|
|
|
|
|
|
Balance at September 28, 2019 |
| 189,141 |
|
| $ | 70.61 |
|
|
| 3.9 |
|
| $ | 1,815,121 |
|
Options exercisable at September 28, 2019 |
| 65,972 |
|
| $ | 61.51 |
|
|
| 2.4 |
|
| $ | 1,165,216 |
|
11
There were 35,401 and 4,000 options exercised during the thirty-nine weeks ended September 28, 2019 and September 29, 2018. There were 32,000 options exercised in the thirty-nine weeks ended September 30, 2017.2018, respectively. As of September 29, 2018,28, 2019, there was $1.6$1.8 million of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 2.92.8 years.
Cash generated from stock option exercises was less than $0.1 million in the thirty-nine weeks ended September 28, 2019. There was no0 cash generatedreceived from stock option exercises in the thirty-nine weeks ended September 29, 2018. The cash received from stock option exercises
There was $0.1 million in the thirty-nine weeks ended September 30, 2017.
There was no0 excess tax benefit generated from stock options exercised in the thirty-nine weeks ended September 28, 2019 or September 29, 2018. There was $0.6 million of excess tax benefit generated from stock option exercises in the thirty-nine weeks ended September 30, 2017 and was credited to income tax expense.
Employee Stock Purchase Plan
In May 2017, our shareholders’ approved the Dorman Products, Inc. Employee Stock Purchase Plan (the “ESPP”), which makesmade available up to 1,000,000 shares of our common stock for sale to eligible employees. There were 13,669 and 7,382 shares purchased under this plan in the thirty-nine weeks ended September 28, 2019 and September 29, 2018.2018, respectively. During the thirty-nine weeks ended September 28, 2019 and September 29, 2018, compensation cost under the PlanESPP was $0.2 million.
| Earnings Per Share |
Basic earnings per share is calculated by dividing our net income by the weighted average number of common shares outstanding during the period, excluding nonvested restricted stock and stock options which isare considered to be contingently issuable. To calculate diluted earnings per share, common share equivalents are added to the weighted average number of common shares outstanding. Common share equivalents are calculated using the treasury stock method and are computed based on outstanding stock-based awards. Stock-based awards of 63,00096,000 shares and 47,50063,000 shares were excluded from the calculation of diluted earnings per share as of September 29, 201828, 2019 and September 30, 2017,29, 2018, respectively, as their effect would have been anti-dilutive.
The following table sets forth the computation of basic earnings per share and diluted earnings per share:
|
| Thirteen Weeks Ended |
|
| Thirty-Nine Weeks Ended |
|
| Thirteen Weeks Ended |
|
| Thirty-Nine Weeks Ended |
| ||||||||||||||||||||
(in thousands, except per share data) |
| September 29, 2018 |
|
| September 30, 2017 |
|
| September 29, 2018 |
|
| September 30, 2017 |
|
| September 28, 2019 |
|
| September 29, 2018 |
|
| September 28, 2019 |
|
| September 29, 2018 |
| ||||||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 34,017 |
|
| $ | 27,008 |
|
| $ | 99,003 |
|
| $ | 84,632 |
|
| $ | 21,308 |
|
| $ | 34,017 |
|
| $ | 66,213 |
|
| $ | 99,003 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic shares outstanding |
|
| 32,985 |
|
|
| 33,822 |
|
|
| 33,177 |
|
|
| 34,111 |
|
|
| 32,522 |
|
|
| 32,985 |
|
|
| 32,656 |
|
|
| 33,177 |
|
Effect of stock-based compensation awards |
|
| 110 |
|
|
| 87 |
|
|
| 90 |
|
|
| 91 |
|
|
| 72 |
|
|
| 110 |
|
|
| 82 |
|
|
| 90 |
|
Weighted average diluted shares outstanding |
|
| 33,095 |
|
|
| 33,909 |
|
|
| 33,267 |
|
|
| 34,202 |
|
|
| 32,594 |
|
|
| 33,095 |
|
|
| 32,738 |
|
|
| 33,267 |
|
Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 1.03 |
|
| $ | 0.80 |
|
| $ | 2.98 |
|
| $ | 2.48 |
|
| $ | 0.66 |
|
| $ | 1.03 |
|
| $ | 2.03 |
|
| $ | 2.98 |
|
Diluted |
| $ | 1.03 |
|
| $ | 0.80 |
|
| $ | 2.98 |
|
| $ | 2.47 |
|
| $ | 0.65 |
|
| $ | 1.03 |
|
| $ | 2.02 |
|
| $ | 2.98 |
|
| Common Stock Repurchases |
We periodically repurchase, at the then current market price, and cancel shares of Dorman 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 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, termination or other reasons. For the thirty-nine weeks ended September 29, 2018,28, 2019, we repurchased and cancelled 20,16017,710 shares of common stock for $1.5$1.6 million at an average price of $73.35$88.82 per share. During the fifty-two weeks ended December 30, 2017,29, 2018, we repurchased and cancelled 19,11026,280 shares of common stock for $1.4$2.0 million at an average price of $73.34$74.79 per share.
15
Our Board of Directors authorized a share repurchase program of up to $250$400 million through December 31, 2018.2020. Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion. The share repurchase program does not obligate us to acquire any specific number of shares. For the thirty-nine weeks ended September 29, 2018,28, 2019, we repurchased and cancelled 486,487272,564 shares of common stock for $33.8$22.8 million at an average price of $69.41$83.53 per share under this program. For the fifty-two weeks ended December 30, 2017,29, 2018, we repurchased and cancelled 1,006,365622,223 shares of common stock for $74.7$43.4 million at an average price of $74.26$69.73 per share under this program.
12
We have a non-cancelable operating lease for our primary operating facility with a partnership in which Steven L. Berman, our Executive Chairman, and hisother members of the Berman family, members, are partners. Based upon the terms of the lease, payments will be $1.6 million in fiscal 20182019 and were $1.6 million in fiscal 2017.2018. This lease will expire on December 31, 2022. The right-of-use asset and total lease liabilities related to this lease were both $4.9 million as of September 28, 2019. In the opinion of our Audit Committee, the terms and rates of this lease are no less favorable than those which could have been obtained from an unaffiliated party when the lease was renewed during November 2016.
Additionally, we havehad a non-cancelable operating lease for our Canadian operating facility from a corporation of which an employee, who is also the former owner of MAS,an acquired entity, and his family members are owners. Based upon the terms of the lease, payments will bewere $0.2 million in fiscal 2019 and were $0.5 million in fiscal 2018 and were $0.1 million in fiscal 2017.2018. This lease will expireexpired on January 31,April 30, 2019.
We are a partner in a joint venture with one of our suppliers and own minority interests in two2 other suppliers. Each of these investments is accounted for according to the equity method. In June 2018 we acquired the remaining outstanding shares of a previously unconsolidated entity. The estimated fair value of the net assets acquired was less than our prior investment in the entity. As a result, we recorded an impairment charge of $1.1 million which is included within Selling, General, and Administrative expenses in the Consolidated Statement of Income during the thirty-nine weeks ended September 29, 2018.
| Income Taxes |
At September 29, 2018,28, 2019, we had $2.5$2.3 million of net unrecognized tax benefits, $2.2$2.0 million of which would affect our effective tax rate if recognized. We recognize interest and penalties related to uncertain tax positions in income tax expense. As of September 29, 201828, 2019 we had approximately $0.7$0.3 million of accrued interest and penalties related to uncertain tax positions.
We file income tax returns in the United States, Canada, China, India, and Mexico. All years before 20152016 are closed for United States federal tax purposes. Tax years before 20132014 are closed for the all states in which we file. We filed tax returns in Sweden through 2012 and allTax years prior to 2010before 2016 are closed. It is reasonably possible that audit settlements, the conclusion of current examinations or the expirations of the statute of limitations could impact the Company’s unrecognized tax benefits.
On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was enacted. The TCJA includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate tax rate from 35% to 21%,closed for tax purposes in Canada. Tax years beginning after December 31, 2017. The TCJA also providesbefore 2015 are closed for acceleration of depreciationtax purposes in China. All tax years remain open for certain assets placed into service after September 27, 2017, as well as prospective changes beginning in 2018, including additional limitations on deductibility of executive compensation and employee meal benefits.Mexico.
As permitted by SEC Staff Accounting Bulletin (“SAB No. 118”), the net tax expense recorded in our financial statements for the fourth fiscal quarter of 2017 due to the enactment of the TCJA is considered “provisional” based on reasonable estimates. The net tax expense recorded was $4.4 million. We are continuing to collect and analyze detailed information that could impact this amount, and may record adjustments to refine those estimates during the measurement period defined in SAB No. 118, as additional analysis is completed. No adjustments to the provisional expense related to the enactment of the TCJA were recorded in the thirty-nine weeks ended September 29, 2018.
12.14.Fair Value Disclosures
The carrying value of financial instruments such as cash, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair value based on the short-term nature of these instruments.
| New and Recently Adopted Accounting Pronouncements |
On December 31, 2017,30, 2018, the beginning of our 20182019 fiscal year, we adopted ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Topic 606 is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. We adopted the standard on December 31, 2017 using the modified retrospective transaction method and the adoption did not have a material effect on our financial position, results of operations and internal controls over financial reporting. See Note 6 for additional information on revenue recognition.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall, which relates to the recognition and measurement of financial assets and liabilities. The new guidance makes targeted improvements to GAAP impacting equity investments (other than those accounted for under the equity method or consolidated), financial liabilities accounted for under the fair value election, and presentation and disclosure requirements for financial instruments, among other changes. The new guidance is effective for annual periods beginning after December 15, 2017, with early adoption prohibited other than for certain provisions. Adoption of this ASU did not have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces existing lease guidance. The ASU is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. Additionally, in August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842,
13
which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842 as the date of initial application of transition. The new guidance is effective for annual periods beginning after December 15, 2018, with early application permitted. The newWe adopted the standard is required to be applied with ausing the modified retrospective approach. We are evaluatingapproach and adoption resulted in right-of-use assets of $36.3 million and lease liabilities of $37.9 million as of December 30, 2018. Deferred rent and lease incentive liabilities associated with historical operating leases totaling $1.6 million were reclassified to the effect that the new guidance will have on our consolidated financial statements and related disclosures, which includes adoption of practical expedients, review ofoperating lease agreements, review of services contracts and other supplier agreements for embedded leases and calculation ofright-of-use assets as required by ASC 842. The transition adjustments.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which clarifies and provides guidance on eight cash flow classification issues and is intended to reduce existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. Adoption of this ASU did not have a material impact on our consolidated financial statements.results of operations or Statement of Cash Flows. See Note 5 for additional information on leases.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the need to perform a hypothetical purchase price allocation to measure goodwill impairment. ASU 2017-04 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are evaluating the new guidance, however, we do not believe the new guidance will have a material impact on our consolidated financial statements and related disclosures.
In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of the current employee share-based payment guidance to include share-based payments issued to nonemployees to substantially alignsalign the accounting for share-based payments for nonemployees with those made to employees including, the fair value measurement, measurement date and classification of certain awards. The new guidance is effective for fiscal years beginning after December 15, 2018, with early application permitted. We are evaluatingadopted this ASU effective December 30, 2018, the new guidance, however, we dobeginning of our 2019 fiscal year. Adoption of this ASU did not believe the new guidance will have a material impact on our consolidated financial statementsstatements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which was subsequently amended in November 2018 through ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments Credit Losses. ASU 2016-13 requires entities to estimate lifetime expected credit losses for trade and related disclosures.other receivables, net investments in leases, financial receivables, debt securities, and other instruments, which will result in earlier recognition of credit losses. Further, the new credit loss model will affect how entities in all industries estimate their allowance for loss receivables that are current with respect to their payment terms. ASU 2016-13 is effective for companies beginning with fiscal years beginning after December 15, 2019. The Company is currently evaluating the new guidance to determine the impact the adoption of this guidance will have on the Company’s results of operations, cash flows, and financial condition.
1416
ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward Looking Statements
Certain statements in this document constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. While1995, including statements related to the Company’s growth opportunities, future business prospects, costs and timing of our site consolidation efforts, net sales, margins, acquisitions, investments, cost offsets, quarterly fluctuations, new product development, customer concessions, fluctuations in foreign currency, mitigation of tariffs, available capital and liquidity. 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, sometimes are presented with numerical specificity, theywhich speak only as of the date the statement was made. Such forward-looking statements are based on various assumptions made by management regarding future circumstances over manycurrent expectations that involve a number of known and unknown risks, uncertainties and other factors (many of which the Company has little or no control. Forward-looking statementsare outside of our control) which may be identified by words including “anticipate,” “believe,” “estimate,” “expect,” and similar expressions. The Company cautions readers that forward-looking statements, including, without limitation, those relating to future business prospects, revenues, working capital, liquidity, and income, are subject to certain risks and uncertainties that would cause actual resultsevents to differbe materially different from those indicated in theexpressed or implied by such forward-looking statements. Factors that could cause actual results to differ from forward-looking statementsThese risks, uncertainties and factors include, but are not limited toto: (i) competition in the automotive aftermarket industry,aftermarket; (ii) unfavorable economic conditions, concentrationconditions; (iii) the loss or decrease in sales among one of the Company’s sales and accounts receivable among a small number of customers, the impact ofour top customers; (iv) customer consolidation in the automotive aftermarket industry,leading to less favorable customer contract terms; (v) foreign currency fluctuations and our dependence on foreign suppliers; (vi) extending credit to customers who may be unable to pay; (vii) the loss of a key suppliers, space limitations on oursupplier; (viii) limited customer shelves,shelf space; (ix) delay in the development and design of new products,products; (x) changes in automotive technology and improvements in the quality of new vehicle quality,parts; (xi) claims of intellectual property infringement,infringement; (xii) quality problems with products after their production and sale to customers; (xiii) loss of third-partythird party transportation providers on whom we depend or increases in fuel prices; (xiv) unfavorable results of legal proceedings, concentrationproceedings; (xv) our executive chairman and his family owning a significant portion of ownership, disruptionthe Company; (xvi) operations may be subject to quarterly fluctuations and disruptions from events beyond the Company’s control,our control; (xvii) risks associated with conflict minerals,minerals; (xviii) risks associated with cyber-attacks, thecyber-attacks; (xix) imposition of new taxes, duties, or duties,tariffs; (xx) exposure to risks related to accounts receivable; (xxi) volatility in the termination or modificationmarket price of accounts receivable sales agreements,our common stock market price volatility, lossand potential securities class action litigation; (xxii) losing the services of our executive officers or other highly qualified Contributors,and experienced contributors; and (xxiii) the inability to acquire other businessesidentify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully, and other risks and factors identified from time to time in the reports the Company files with the SEC.successfully. 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. For additional information concerning factors that could cause actual results to differ materially from the information contained in this report, reference is made to the information in “PartPart I, Item“Item 1A Risk Factors.”Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2017. You should not place an undue reliance on forward-looking statements. Such statements speak only as to the date on which they are made, and we undertake29, 2018. The Company is under no obligation to (and expressly disclaims any such obligation to) update publicly or reviseany of the information in this report if any forward-looking statement regardless of future developments or the availabilitylater turns out to be inaccurate whether as a result of new information.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 consolidated financial statements and footnotes thereto of Dorman Products, Inc. and its subsidiaries included in “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 30, 2017.29, 2018.
Overview
We believe we are a leading supplier of replacement parts and fasteners for passenger cars, light trucks, and heavy duty trucks in the automotive aftermarket. We distribute and marketAs of December 29, 2018, we marketed approximately 216,000 different SKU’s77,000 unique parts as compared to 70,000 as of automotive replacement parts,December 30, 2017, many of which we designdesigned and engineer. These SKU’sengineered. Unique parts exclude private label stock keeping units (“SKU’s”) and other variations in how we market, package and distribute our products, but include unique parts of acquired companies. Our products are sold under our various brand names, under our customers’ private label brands or in bulk. We believe we are a leading aftermarket supplier of original equipment “dealer exclusive” items.parts. Original equipment “dealer exclusive” parts are those parts which were traditionally available to consumers only from original equipment manufacturers or salvage yards. These parts include, among other parts, intake manifolds, exhaust manifolds, window regulators, radiator fan assemblies, tire pressure monitor sensors, complex electronics modules and exhaust gas recirculation (EGR) coolers.
We generate virtually all of our revenues from customers in the North American automotive aftermarket, primarily in the United States. Our products are sold primarily through automotive aftermarket retailers;retailers, including through their on-line platforms; national, regional and local warehouse distributors and specialty markets;markets, and salvage yards. We also distribute automotive replacement 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. Generally, the second and third quarters have the highest level of net sales. The introduction of new products and product lines to customers may also cause significant fluctuations from quarter to quarter.
We were engaged in several site consolidation activities during the thirty-nine weeks ended September 28, 2019. Most significantly, we completed the consolidation of our Montreal facility (acquired as part of the MAS acquisition) into our new 800,000 square foot distribution center in Portland, Tennessee. Additionally, we began transferring our existing distribution operations in Portland, Tennessee to the new facility and also completed the consolidation of an existing production facility in Michigan with our Flight facility in Pennsylvania. During the thirty-nine weeks ended September 28, 2019 we incurred $3.0 million of costs primarily related to acquisition integration and accelerated depreciation, $2.8 million of which was included in selling, general and administrative expenses and $0.2 million included in gross profit. Additionally, during the thirty-nine weeks ended September 28, 2019 we incurred $17.1 million of costs related to start up inefficiencies and duplication of facility overhead and operating costs primarily related to our Portland facility consolidation activities, of which $13.4 million was included in selling, general and administrative expenses and $3.6 million included in gross profit. As a part of our Portland consolidation activities, our new Portland
17
distribution center became fully operational in October 2019. We anticipate that we will continue to incur higher costs in the fourth quarter of 2019 and expect our distribution costs to be back to more typical levels as we move through 2020.
We operate on a fifty-two or fifty-three week period endedending on the last Saturday of the calendar year. Our 20182019 fiscal year will be a fifty-two week period that will end on December 29, 2018. The28, 2019. Our fiscal year ended December 30, 20172018 was a fifty-two week period.period that ended on December 29, 2018.
New Product Development
New product development is a critical success factor for us and is our primary vehicle for growth. We have made incremental investments to increase our new product development efforts each year since 2003 in an effort to grow our business and strengthen our relationships with our customers. The investments are primarily in the form of increased product development resources, increased customer and end-user awareness programs and customer service improvements. These investments historically have enabled us to provide an expanding array of new product offerings and grow revenues at levels that exceed market growth rates. As a result of these investments, we introduced 4,9804,108 new products to our customers and end users in the thirty-nine weeks ended September 29, 2018,28, 2019, including 1,2441,316 “New to the Aftermarket” SKU’s. We introduced 4,079 new products5,543 SKU’s to our customers and end users in the fiscal year ended December 30, 2017,29, 2018, including 1,1921,716 “New to the Aftermarket” SKU’s.
Our complex electronics program capitalizes on the growing number of electronic components being utilized on today’s Original Equipmentoriginal equipment platforms. Current production models contain an average of approximately thirty-five electronic modules, with some high-end luxury vehicles containing over one hundred modules. Our complex electronics products are designed and developed in house and extensively tested to ensure consistent performance, and, our product portfolio is focused on further developing Dorman’sour leadership position in the category.
15
In 2012, we introduced Dorman Heavy DutyHD Solutions™, a line of products to be marketed for the medium and heavy duty truck aftermarket. We believe that this market provides many of the same opportunities for growth that the automotive aftermarket has provided us over the past several years. Our focus here is on formerly “dealer only” parts similar to the automotive side of the business. We launched the initial program with a limited offering, but have made additional investments in new product development efforts to expand our product offering. We currently have approximately 1,191During the thirty-nine weeks ended September 28, 2019 we introduced 761 SKU’s in this product line. We willexpect to continue making investments to invest aggressively in thegrow our medium and heavy duty product line.
Acquisitions
Our growth is also impacted by acquisitions. For example, in August of 2018, we acquired Flight Systems Automotive Group LLC (“Flight Systems” or “Flight”). Additionally, in October 2017, we acquired MAS Automotive Distributors, Inc. (“MAS Industries” or “MAS”). We believe Flight and MAS are highly complementary to our business and growth strategy. We may acquire businesses in the future to supplement our financial growth, distribution capabilities, or product development resources.
Economic Factors
Vehicle owners operate their current vehicles longer than they did several years ago. As a result, owners perform necessary repairs and maintenance in order to keep those vehicles well maintained. According to data published by Polk, a division of IHS Automotive, the average age of vehicles was 11.711.8 years as of January 2017,October 2018, which is an increase from 11.611.7 years as of November 2016October 2017 despite increasing new car sales. Additionally, the number of vehicles in operation in the United States continues to increase, growing 2.4%2.2% in 20172018 to 278.6285.7 million from 272.0279.6 million in 2016.2017. Approximately 48% of vehicles in operation are 11 years old or older. Vehicle scrappage rates have also decreased over the last several years. The number of miles driven is another important statistic that impacts our business. According to the United States Department of Transportation, the number of miles driven has increased each year since 2011 with miles driven having increased 1.3%0.3% as of December 2017November 2018 as compared to December 2016.November 2017. Generally, as vehicles are driven more miles, the more likely it is that parts will fail. The combination of the factors above has accounted for a portion of our sales growth.
Competition among our customer base continues to increase.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, in the third quarter of 2019, we modified our brand protection policy which is designed to ensure that certain products bearing the Dorman name are not advertised below certain approved pricing levels. 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, 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.
Effective September 24th, the Office of the United States Trade Representative (USTR) imposed an additional tariff on approximately $200 billion worth of Chinese imports. The tariff will be approximately 10% until December 31, 2018 and will increase to 25% effective January 1, 2019. The tariffs enacted to date will increase the cost of many products that are manufactured for Dorman in China. We are taking several actions to fully mitigate the impact of the tariffs including, but not limited to, price increases to our customers and cost concessions from our suppliers. We do not anticipate that the tariffs will materially impact gross profit in the fourth quarter of 2018. Although we expect to mitigate the impact of tariffs in fiscal 2019, we expect selling price increases associated with the tariffs to be fully offset by the higher tariffs incurred.
Foreign Currency
Our recent acquisition of MAS increases our exposures to foreign currencies. MAS is headquartered in Montreal, Canada, and its financial transactions occur in both U.S. Dollars and Canadian Dollars. Since our consolidated financial statements are denominated in U.S. Dollars, the assets, liabilities, net sales, and expenses of MAS which 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.
In fiscal 2017,2018, approximately 71%77% of our products were purchased from suppliers in a variety of foreign 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 foreign currencies in the future, the price of the product for 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 products that we purchase from China. However, the cost of the products we procure is also affected by other factors including raw material availability, labor cost,costs, transportation costs and other factors.
Our acquisition of MAS increased our exposure to foreign currencies. MAS was headquartered in Montreal, Canada, and its financial transactions occur in both U.S. Dollars and Canadian Dollars. Since our consolidated financial statements are denominated in U.S. Dollars, the assets, liabilities, net sales, and expenses of MAS which are denominated in currencies other than the U.S. Dollar must be converted into U.S.
18
Dollars using exchange rates for the current period. As a result, fluctuations in foreign currency exchange rates may impact our financial results. In early 2019, we completed the consolidation of our Montreal facility into our new Portland, Tennessee facility.
Impact of Inflation
The overall impact of inflation has not resulted in a significant change in labor costs or the cost of general services utilized.
The cost of many commodities that are used in our products has fluctuated over time resulting in increases and decreases in the cost of our products. In addition, we have periodically experienced increased transportation costs as a result of higher fuel prices, capacity constraints and other factors. We will attempt to offset cost increases by passing along selling price increases to customers, using alternative suppliers and by sourcing purchases from other countries. However, there can be no assurance that we will be successful in these efforts.
16Impact of Tariffs
Effective September 24, 2018, the Office of the United States Trade Representative (USTR) imposed an additional tariff on approximately $200 billion worth of Chinese imports. The tariff was approximately 10% as of December 29, 2018. Effective for shipments departing China on or after May 10, 2019, the USTR increased this tariff to 25%. In addition, effective September 1, 2019, the USTR imposed another tranche of tariffs on approximately $300 billion worth of Chinese imports with a tariff rate of 15%. The tariffs enacted to date will increase the cost of many products that are manufactured for us in China. We are taking several actions to mitigate the impact of the tariffs including, but not limited to, price increases to our customers and cost concessions from our suppliers. We expect to continue to mitigate the impact of tariffs through the remainder of fiscal 2019 primarily through selling price increases to offset the higher tariffs incurred. Tariffs are not expected to have a material impact on our net income but are expected to increase net sales and lower our gross and operating profit margins as these additional costs are passed through to customers.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in our Consolidated Statements of Income:Operations:
|
| Thirteen Weeks Ended* |
|
| Thirty-Nine Weeks Ended* |
|
| Thirteen Weeks Ended* |
|
| Thirty-Nine Weeks Ended* |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
| September 29, 2018 |
|
| September 30, 2017 |
|
| September 29, 2018 |
|
| September 30, 2017 |
|
| September 28, 2019 |
|
| September 29, 2018 |
|
| September 28, 2019 |
|
| September 29, 2018 |
| ||||||||||||||||||||||||||||||||||||||||
Net sales |
| $ | 248.0 |
|
|
| 100.0 | % |
| $ | 224.6 |
|
|
| 100.0 | % |
| $ | 713.4 |
|
|
| 100.0 | % |
| $ | 675.5 |
|
|
| 100.0 | % |
| $ | 253.8 |
|
|
| 100.0 | % |
| $ | 248.0 |
|
|
| 100.0 | % |
| $ | 751.8 |
|
|
| 100.0 | % |
| $ | 713.4 |
|
|
| 100.0 | % |
Cost of goods sold |
| $ | 153.0 |
|
|
| 61.7 | % |
| $ | 136.5 |
|
|
| 60.8 | % |
| $ | 437.0 |
|
|
| 61.3 | % |
| $ | 407.8 |
|
|
| 60.4 | % |
| $ | 166.9 |
|
|
| 65.8 | % |
| $ | 153.0 |
|
|
| 61.7 | % |
| $ | 490.2 |
|
|
| 65.2 | % |
| $ | 437.0 |
|
|
| 61.3 | % |
Gross profit |
| $ | 95.0 |
|
|
| 38.3 | % |
| $ | 88.1 |
|
|
| 39.2 | % |
| $ | 276.3 |
|
|
| 38.7 | % |
| $ | 267.7 |
|
|
| 39.6 | % |
| $ | 86.9 |
|
|
| 34.2 | % |
| $ | 95.0 |
|
|
| 38.3 | % |
| $ | 261.6 |
|
|
| 34.8 | % |
| $ | 276.3 |
|
|
| 38.7 | % |
Selling, general and administrative expenses |
| $ | 51.3 |
|
|
| 20.7 | % |
| $ | 45.3 |
|
|
| 20.2 | % |
| $ | 149.8 |
|
|
| 21.0 | % |
| $ | 134.9 |
|
|
| 19.9 | % |
| $ | 60.0 |
|
|
| 23.6 | % |
| $ | 51.3 |
|
|
| 20.7 | % |
| $ | 177.6 |
|
|
| 23.6 | % |
| $ | 149.8 |
|
|
| 21.0 | % |
Income from operations |
| $ | 43.7 |
|
|
| 17.6 | % |
| $ | 42.8 |
|
|
| 19.1 | % |
| $ | 126.5 |
|
|
| 17.7 | % |
| $ | 132.8 |
|
|
| 19.7 | % |
| $ | 27.0 |
|
|
| 10.6 | % |
| $ | 43.7 |
|
|
| 17.6 | % |
| $ | 83.9 |
|
|
| 11.2 | % |
| $ | 126.5 |
|
|
| 17.7 | % |
Interest income, net |
| $ | 0.1 |
|
|
| 0.0 | % |
| $ | 0.2 |
|
|
| 0.1 | % |
| $ | 0.3 |
|
|
| 0.0 | % |
| $ | 0.5 |
|
|
| 0.0 | % | ||||||||||||||||||||||||||||||||
Other income, net |
| $ | 0.0 |
|
|
| 0.0 | % |
| $ | 0.1 |
|
|
| 0.0 | % |
| $ | 0.1 |
|
|
| 0.0 | % |
| $ | 0.3 |
|
|
| 0.0 | % | ||||||||||||||||||||||||||||||||
Income before income taxes |
| $ | 43.8 |
|
|
| 17.7 | % |
| $ | 43.0 |
|
|
| 19.1 | % |
| $ | 126.8 |
|
|
| 17.8 | % |
| $ | 133.3 |
|
|
| 19.7 | % |
| $ | 27.0 |
|
|
| 10.6 | % |
| $ | 43.8 |
|
|
| 17.7 | % |
| $ | 84.0 |
|
|
| 11.2 | % |
| $ | 126.8 |
|
|
| 17.8 | % |
Provision for income taxes |
| $ | 9.8 |
|
|
| 3.9 | % |
| $ | 16.0 |
|
|
| 7.1 | % |
| $ | 27.8 |
|
|
| 3.9 | % |
| $ | 48.7 |
|
|
| 7.2 | % |
| $ | 5.7 |
|
|
| 2.2 | % |
| $ | 9.8 |
|
|
| 3.9 | % |
| $ | 17.8 |
|
|
| 2.4 | % |
| $ | 27.8 |
|
|
| 3.9 | % |
Net income |
| $ | 34.0 |
|
|
| 13.7 | % |
| $ | 27.0 |
|
|
| 12.0 | % |
| $ | 99.0 |
|
|
| 13.9 | % |
| $ | 84.6 |
|
|
| 12.5 | % |
| $ | 21.3 |
|
|
| 8.4 | % |
| $ | 34.0 |
|
|
| 13.7 | % |
| $ | 66.2 |
|
|
| 8.8 | % |
| $ | 99.0 |
|
|
| 13.9 | % |
*Information in table does not add due to rounding
Thirteen Weeks Ended September 29, 201828, 2019 Compared to Thirteen Weeks Ended September 30, 201729, 2018
Net sales increased 10%2% to $253.8 million for the thirteen weeks ended September 28, 2019 from $248.0 million for the thirteen weeks ended September 29, 20182018. Acquisitions contributed to 1% of the sales growth in the quarter. The remaining growth experienced by our base business was attributable to approximately 4% increase as a result of tariffs, partially offset by a shift in customer mix from $224.6 millionwarehouse distributor customers to retail customers.
Gross profit margin was 34.2% of net sales for the thirteen weeks ended September 30, 2017. The increase in net sales is due28, 2019 compared to increased demand for our products, approximately $10 million of net sales attributed to MAS and approximately $1.7 million of sales attributed to Flight.
Gross profit margin was 38.3% of net sales for the thirteen weeks ended September 29, 2018 compared2018. The gross profit margin declined primarily as a result of a change in customer mix from warehouse distributor customers to 39.2%retail customers, redundant overhead costs as a result of operating out of two distribution locations in Portland, Tennessee and the pass-through of tariff costs to our customers.
Selling, general and administrative expenses were $60.0 million, or 23.6% of net sales, for the thirteen weeks ended September 30, 2017. The decrease in gross profit margin was primarily a result of the impact of acquisitions which carry lower gross margins28, 2019 compared to historical levels.
Selling, general and administrative expenses were $51.3 million, 20.7% of net sales, for the thirteen weeks ended September 29, 2018 compared to $45.3 million for the thirteen weeks ended September 30, 2017.2018. The increase in selling, general and administrative expense during the thirteen weeks ended September 29, 201828, 2019 was primarily due to the inclusion$5.4 million of the expenses of acquired operations, the reinvestment of tax savings in our product development and sales organizations, increased wage and benefit costs, and increase costs associated with start-up inefficiencies and the duplication of facility and operating costs related to our distribution center consolidation in Portland, Tennessee and $0.9 million of higher factoring costs due to increased sales of accounts receivable sales program.receivable.
Our effective tax rate was 21.1% for the thirteen weeks ended September 28, 2019 compared to 22.3% for the thirteen weeks ended September 29, 2018 compared to 37.1% for the thirteen weeks ended September 30, 2017.2018. The effective tax rate decreased primarily due to the Tax Cuts and Jobs Act enacted in the United States in December 2017, which lowered the U.S Corporate federal income tax rate to 21% beginning in 2018.lower foreign-sourced income.
Thirty-Nine Weeks Ended September 29, 201828, 2019 Compared to Thirty-Nine Weeks Ended September 30, 201729, 2018
Net sales increased 6%5% to $751.8 million for the thirty-nine weeks ended September 28, 2019 from $713.4 million for the thirty-nine weeks ended September 29, 2018 from $675.5 million2018. Sales growth attributable to acquisitions was approximately 2% and the impact of tariffs on our base business was approximately 3%.
Gross profit margin was 34.8% of net sales for the thirty-nine weeks ended September 30, 2017. The increase in net sales is primarily due28, 2019 compared to approximately $30.0 million of net sales attributed to MAS and increased demand for our products, which was partially offset by the negative effects of a brand protection policy implemented in the fourth fiscal quarter ofk 2017.
Gross profit margin was 38.7% of net sales for the thirty-nine weeks ended September 29, 20182018. The gross profit margin declined primarily as a result of a change in customer mix from warehouse
19
distributor to retail customers, the pass-through of tariff costs to our customers, negative product mix as growth from our lower margin categories outpaced growth from high margin categories, acquisitions completed in the last 12 months which carry lower gross margins compared to 39.6%our historical levels and redundant overhead costs as a result of operating out of two distribution locations in Portland, Tennessee.
Selling, general and administrative expenses were $177.6 million, or 23.6% of net sales, for the thirty-nine weeks ended September 30, 2017. The decrease in gross profit margin was primarily attributable to lower overall selling prices, a $1.8 million inventory fair value adjustment resulting from the MAS acquisition, the impact of acquisitions which carry lower gross margins28, 2019 compared to historical levels, and an unfavorable sales mix towards lower margin products.
Selling, general and administrative expenses were $149.8 million, 21.0% of net sales, for the thirty-nine weeks ended September 29, 2018 compared to $134.9 million for the thirty-nine weeks ended September 30, 2017.2018. The increase in selling, general and administrative expense during the thirty-nine weeks ended September 29, 201828, 2019 was primarily due to costs associated with our site consolidation activities, including severance, accelerated depreciation and other integration expenses of $2.8 million, $13.4 million of expenses associated with start-up inefficiencies and the duplication of facility and operating costs related to our distribution facility consolidation in Portland, Tennessee, the inclusion of the$5.0 million of expenses of acquired operations, reinvestment$3.6 million of tax savings in product developmenthigher factoring costs due to increased sales of accounts receivable, and other areas, an increase in wage and benefit costs, and a $1.1 million non-cash impairment related to the acquisition of the remaining outstanding shares of a previously unconsolidated entity. In addition, accounts receivable sales costs increased $1.6 million due to increased interest rates associated with the program.inflation.
Our effective tax rate was 21.2% for the thirty-nine weeks ended September 28, 2019 compared to 21.9% for the thirty-nine weeks ended September 29, 2018 compared to 36.5% for the thirty-nine weeks ended September 30, 2017.2018. The effective tax rate decreased primarily due to lower foreign-sourced income during the Tax Cuts and Jobs Act enacted in the United States in December 2017, which lowered the U.S Corporate federal income tax rate to 21% beginning in 2018.thirty-nine weeks ended September 28, 2019.
Liquidity and Capital Resources
Historically, our primary sources of liquidity have been our invested cash and the cash flow we generate from our operations, including accounts receivable sales programs provided by our customers. Cash and cash equivalents at September 29, 2018 decreased28, 2019 increased to $53.1$54.2 million from $71.7$43.5 million at December 30, 2017.29, 2018. Working capital was $474.1$529.3 million at September 29, 201828, 2019 compared to $422.1$488.1 million at December 30, 2017.29, 2018. Shareholders’ equity was $702.0$772.6 million at September 29, 201828, 2019 and $634.8$727.6 million at December 30, 2017.29, 2018. 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 extending payment terms to customers, a decrease in demand for our products, the outcome of contingencies or other factors. See Note 7, Commitments and Contingencies, in the accompanying unaudited consolidated financial statements for additional information regarding commitments and contingencies that may affect our liquidity.
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 flows. Tariffs are also increasing our uses of cash since we pay for the tariffs upon the arrival of our goods in the United States but collect the cash on any passthrough price increases from our customers on a delayed basis according to the payment terms negotiated with our customers. We participate in
17
accounts receivable sales programs with several customers which allow us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment terms extensions. During the thirty-nine weeks ended September 29, 201828, 2019 and September 30, 2017,29, 2018, we sold approximately $438.6$530.7 million and $442.5$438.6 million, respectively, under these programs. We had the ability to sell significantly more accounts receivable under these programs if the needs of the business warranted. Further extensions of customer payment terms will result in additional uses of cash flow or increased costs associated with the sales of accounts receivable.
In December 2017, we entered into a credit agreement which will expire in December 2022. This agreement provides for an initial revolving credit facility of $100.0 million and gives us the ability to request increases of up to an incremental $100.0 million. Borrowings under the facility are on an unsecured basis with interest rates ranging from LIBOR plus 65 basis points to LIBOR plus 125 basis points based upon the ratio of consolidated funded debt to consolidated EBITDA, as defined by the credit agreement. The interest rate at September 29, 201828, 2019 was LIBOR plus 65 basis points (2.91%(2.68%). The credit agreement also contains other covenants, including those related to the ratio of certain consolidated fixed charges to consolidated EBITDA, capital expenditures, and share repurchases, each as defined by the credit agreement. The credit agreement also requires us to pay an unused fee of 0.10% on the average daily unused portion of the facility. As of September 29, 2018,28, 2019, there were no borrowings under the facility and we had two outstandingissued but undrawn letters of credit for approximately $0.8 million in the aggregate which were issued to secure ordinary course of business transactions. Net of these letters of credit, we had approximately $99.2 million available under the facility at September 29, 2018.28, 2019.
Cash Flows
The following summarizes the activities included in the Consolidated Statements of Cash Flows:
|
| Thirty-Nine Weeks Ended |
|
| Thirty-Nine Weeks Ended |
| ||||||||||
(in thousands) |
| September 29, 2018 |
|
| September 30, 2017 |
|
| September 28, 2019 |
|
| September 29, 2018 |
| ||||
Cash provided by operating activities |
| $ | 65,213 |
|
| $ | 59,362 |
|
| $ | 59,650 |
|
| $ | 65,213 |
|
Cash used in investing activities |
|
| (46,139 | ) |
|
| (30,564 | ) |
|
| (24,656 | ) |
|
| (46,139 | ) |
Cash used in financing activities |
|
| (37,624 | ) |
|
| (61,130 | ) |
|
| (24,282 | ) |
|
| (37,624 | ) |
Net decrease in cash and cash equivalents |
| $ | (18,550 | ) |
| $ | (32,332 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents |
| $ | 10,712 |
|
| $ | (18,550 | ) |
During the thirty-nine weeks ended September 28, 2019, cash provided by operating activities was $59.7 million primarily as a result of $66.2 million in net income, non-cash adjustments to net income of $23.8 million and a net increase in operating assets and liabilities of $30.3 million. Compared to the Consolidated Balance Sheet at December 29, 2018, accounts receivable decreased $28.3 million due to higher sales of accounts receivable. Inventory increased $12.2 million due to inventory purchases to support new product launches, the maintenance of customer fill rates as we consolidate facilities, and due to increased costs from higher tariffs. Prepaids and other current assets increased $10.2 million primarily due to income tax payments. Accrued compensation and other liabilities decreased $9.7 million primarily due to the timing of payments associated with employee compensation programs. Other assets decreased $2.0 million primarily due to a decrease in our long-term core inventory. Accounts payable decreased $28.4 million primarily due to the timing of vendor payments.
20
During the thirty-nine weeks ended September 29, 2018, cash provided by operating activities was $65.2 million primarily as a result of $99.0 million in net income, non-cash adjustments to net income of $25.8 million and a net increase in operating assets and liabilities of $59.6 million. Compared to the Consolidated Balance Sheet at December 30, 2017, and including the impact of acquisitions, accounts receivable increased $56.5$59.8 million due to the timing of cash receipts. Inventory increased $16.1 million due to increased inventory purchases. Accounts payable increased $15.3 million due to the timing of payments to our vendors. The change in prepaids, other assets, and accrued compensation and other liabilities was not material.
During the thirty-nine weeks ended September 30, 2017, cash provided by operating activities was $59.4 million primarily as a result of $84.6 million in net income, non-cash adjustments to net income of $14.5 million and a net increase in operating assets and liabilities of $39.7 million. Compared to the Consolidated Balance Sheet at December 31, 2016, inventory increased $31.0 million due to higher inventory purchases to support new product launches and customer fill rates. Other assets and liabilities, net, increased by $13.3 million primarily due to an increase in long-term core inventory and payments related to accrued income taxes and accrued compensation. The change in accounts receivable and accounts payable was not material.
Investing activities used $46.1$24.7 million of cash in the thirty-nine weeks ended September 29, 201828, 2019 and $30.6$46.1 million in the thirty-nine weeks ended September 30, 2017.
Capital spending in the thirty-nine weeks ended September 29, 2018, was primarily related to $6.4 million in tooling associated with new products and $4.2 million in enhancements and upgrades to our information systems.as summarized below:
• | Capital spending in the thirty-nine weeks ended September 28, 2019 was primarily related to $6.1 million in tooling associated with new products and $5.0 million in enhancements and upgrades to our information systems. |
Capital spending in the thirty-nine weeks ended September 30, 2017 was primarily related to $7.8 million in tooling associated with new products and $5.8 million in enhancements and upgrades to our information systems.
• | Capital spending in the thirty-nine weeks ended September 29, 2018 was primarily related to $6.4 million in tooling associated with new products and $4.2 million in enhancements and upgrades to our information systems. |
During the thirty-nine weeks ended September 29, 2018, we used $27.5 million to acquire all of the outstanding equity of Flight Systems Automotive Group.
• | During the thirty-nine weeks ended September 29, 2018, we used $27.5 million to acquire all of the outstanding equity of Flight Systems. |
Additionally, during the thirty-nine weeks ended September 30, 2017, we used $3.1 million to acquire certain assets of Ingalls Engineering Co., Inc. and $10.0 million to acquire a minority equity interest in a supplier.
The remaining capital spending in both periods resulted from scheduled equipment replacements, certain facility improvements and other capital projects.
• | The remaining capital spending in both periods resulted from scheduled equipment replacements, certain facility improvements and other capital projects. |
Financing activities used $37.6$24.3 million of cash in the thirty-nine weeks ended September 29, 201828, 2019 and $61.1$37.6 million in the thirty-nine weeks ended September 30, 2017.
In the thirty-nine weeks ended September 29, 2018 we paid $33.8 million to repurchase 486,487 common shares. In the thirty-nine weeks ended September 30, 2017, we paid $59.0 million to repurchase 782,425 common shares.as summarized below:
• | In the thirty-nine weeks ended September 28, 2019, we paid $22.8 million to repurchase 272,564 common shares. In the thirty-nine weeks ended September 29, 2018, we paid $33.8 million to repurchase 486,487 common shares. |
The remaining uses of cash from financing activities in each period result from payment of contingent consideration, stock compensation plan activity and the repurchase of common stock from our 401(k) Plan.
• | The remaining uses of cash from financing activities in each period result from stock compensation plan activity and the repurchase of our common stock from our 401(k) Plan. |
18
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.
During the thirty-nine weeks ended September 29, 2018,28, 2019, we experienced no material changes to our contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended December 30, 2017.29, 2018.
New and Recently Adopted Accounting Pronouncements
Please refer to Note 13,15, New and Recently Adopted Accounting Pronouncements, to the Notes to Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our market risk is the potential loss arising from adverse changes in interest rates. Substantially all of our available credit and our accounts receivable sale programs bear interest at rates tied to LIBOR. Under the terms of our revolving credit facility and customer-sponsored programs to sell accounts receivable, a change in the lender’s base rate, LIBORrates under our credit agreement or discount rates under our accounts receivable sale programs would affect the rate at which we could access funds thereunder. A one percentage point increase in LIBOR or the discount rates under the accounts receivable sales programs would increase our interest expense on our variable rate debt, if any, and our financing costs associated with our sales of accounts receivable by approximately $3.3$4.6 million annually. This estimate assumes that our variable rate debt balance and the level of sales of accounts receivable remains constant for an annual period and the interest rate change occurs at the beginning of the period. The hypothetical changes and assumptions may be different from what actually occurs in the future.
We have not historically and do not intend to use derivative financial instruments for trading or to speculate on changes in interest rates or commodity prices. We are not exposed to any significant market risks, foreign currency exchange risk or interest rate risk from the use of derivative instruments.
Item 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.
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 Exchange Act Rule 13a-15(e). 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
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation ofThere was no change in our internal control over financial reporting to determine whether any changes(as defined in Rule 13a-15(f) under the Exchange Act), that occurred during the quarter ended September 29, 201828, 2019, that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there was no such change during the quarter ended September 29, 2018.
21
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.
1922
We are a partyThe information set forth under Note 7, “Commitments and Contingencies,” to or otherwise involvedthe Notes to Consolidated Financial Statements contained in legal proceedings that arise in the ordinary coursePart I, Item 1 of business, such as various claims and legal actions involving contracts, 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, would likely have a material financial impact on the Company and we believe the range of reasonably possible losses from current mattersthis report is immaterial.incorporated herein by reference.
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 29, 2018. 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 30, 2017,29, 2018, 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 thirteen weeks ended September 29, 2018,28, 2019, we purchased shares of our common stock as follows:
Period |
| Total Number of Shares Purchased (1) (2) |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) |
|
| Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2) |
| ||||
July 1, 2018 through July 28, 2018 |
|
| 47,920 |
|
| $ | 70.46 |
|
|
| 43,500 |
|
| $ | 46,233,590 |
|
July 29, 2018 through August 25, 2018 |
|
| 31,893 |
|
| $ | 77.19 |
|
|
| 29,448 |
|
| $ | 43,966,427 |
|
August 26, 2018 through September 29, 2018 |
|
| 17,231 |
|
| $ | 79.11 |
|
|
| 13,151 |
|
| $ | 42,934,590 |
|
Total |
|
| 97,044 |
|
| $ | 74.21 |
|
|
| 86,099 |
|
| $ | 42,934,590 |
|
Period |
| Total Number of Shares Purchased (1) (2) |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) |
|
| Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2) |
| ||||
June 30, 2019 through July 27, 2019 |
|
| 80 |
|
| $ | 88.54 |
|
|
| - |
|
| $ | 160,550,221 |
|
July 28, 2019 through August 24, 2019 |
|
| 285 |
|
| $ | 70.53 |
|
|
| - |
|
| $ | 160,550,221 |
|
August 25, 2019 through September 28, 2019 |
|
| 91 |
|
| $ | 79.48 |
|
|
| - |
|
| $ | 160,550,221 |
|
Total |
|
| 456 |
|
| $ | 75.47 |
|
|
| - |
|
| $ | 160,550,221 |
|
(1) | Includes |
(2) | On December 12, 2013 we announced that our Board of Directors authorized a share repurchase program, authorizing the repurchase of up to $10 million of our outstanding common stock by the end of 2014. Through several expansions and extensions, our Board of Directors expanded the program up to |
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not Applicable
None
| (a) | Exhibits |
The Exhibits included in this report are listed in the Exhibit Index on page 22,25, which is incorporated herein by reference.
2123
10.1 | ||
|
|
|
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 September |
104 | The cover page from the Company’s Quarterly Report on Form 10-Q as of and for the quarter ended September 28, 2019, formatted in Inline XBRL (included as Exhibit 101). |
22*Filed herewith
**Furnished herewith
24
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.
October 30, 201828, 2019
/s/ |
|
President, Chief Executive Officer |
(principal executive officer) |
October 30, 201828, 2019
/s/ |
|
Senior Vice President and |
Chief Financial Officer |
|
(principal financial and accounting officer) |
2325