Dorman Products, Inc. (the “Company” or “Dorman”) (NASDAQ:DORM), a
leading supplier in the motor vehicle aftermarket industry, today
announced its financial results for the first quarter ended
April 1, 2023.
First Quarter Financial
ResultsThe Company reported first quarter 2023 net sales
of $466.7 million, up 16% compared to net sales of $401.6 million
in the first quarter of 2022. The sales results reflect the
addition of SuperATV, successful new product launches and price
increases to offset inflationary costs. Net sales growth excluding
acquisitions was approximately 3.5% compared to the first quarter
of 2022 and 23% to the first quarter of 2021.
Gross profit was $144.5 million in the first
quarter of 2023, or 31.0% of net sales, compared to $133.2 million,
or 33.2% of net sales, for the same quarter last year. Adjusted
gross margin* was 32.4% in the first quarter of 2023 compared to
34.1% in the same quarter last year. The decline in gross margin as
a percentage of net sales is primarily due to the sell-through of
high-cost inventory purchased in 2022 that was impacted by
inflationary costs, partially offset by the favorable impacts of
pricing actions and the addition of SuperATV, which has a higher
gross margin percentage than the Company average.
Selling, general and administrative (“SG&A”)
expenses were $126.4 million, or 27.1% of net sales, in the first
quarter of 2023 compared to $86.5 million, or 21.5% of net sales,
for the same quarter last year. Adjusted SG&A expenses* were
$117.4 million, or 25.2% of net sales, in the first quarter of 2023
compared to $83.2 million, or 20.7% of net sales, in the same
quarter last year. The increase in SG&A expenses as a
percentage of net sales was due primarily to the impact of higher
interest rates on our customer accounts receivable factoring
programs and the addition of SuperATV, which has higher SG&A
expenses as a percentage of net sales than the Company average. In
addition, the Company recorded two charges in the quarter related
to a customer bankruptcy filing and the settlement of a commercial
dispute.
Net interest expense was $12.0 million for the
first quarter of 2023 compared to $1.2 million for the same quarter
last year. The increase of $10.8 million primarily reflects the
addition of the term loan used to complete the acquisition of
SuperATV and significantly higher interest rates compared to the
prior year.
Income tax expense was $0.8 million, or 12.8% of
income before income taxes, compared to $10.4 million, or 22.7% of
income before income taxes, in the same quarter last year. The
decrease in the effective tax rate was due to favorable discrete
items in the quarter, partially offset by an increase in state tax
expense and the effect of foreign operations.
Net income for the first quarter of 2023 was
$5.7 million, or $0.18 per diluted share, compared to $35.2
million, or $1.11 per diluted share, in the prior year quarter.
Adjusted net income* in the first quarter of 2023 was $17.6
million, or $0.56 per diluted share, compared to $40.7 million, or
$1.29 per diluted share, in the prior year quarter.
Kevin Olsen, Dorman’s President and Chief
Executive Officer, stated, “I am pleased to report that 2023 got
off to a solid start made possible by the dedication and hard work
of our Contributors. We delivered net sales in line with our
expectations although the quarter started slowly due to certain
customers normalizing their inventory levels early in the quarter,
which we saw through customer point-of-sale (POS) performance
outpacing our net sales. However, as the quarter progressed, our
net sales increased and realigned with customer POS, which we
expect to continue throughout 2023. Earnings per share for the
quarter were aligned with our expectations, excluding the impact of
two SG&A expense items totaling approximately $4 million.
“As expected, inventory played an important role
in our results this quarter. Margins continued to be depressed as
we sold through a large portion of our high-cost inventory over the
last two quarters that was sourced during peak inflationary times.
However, we believe the high-water mark is behind us as our
inventory balance dropped substantially in the quarter. Starting in
the second quarter, we expect to see lower cost inventory selling
through, which will drive sequential margin expansion and solid
free cash flow throughout the remainder of 2023. In addition, we
were able to reduce our debt in the quarter by $27 million. The
positive trends we are seeing around inventory, coupled with
favorable industry dynamics and new product execution that we
expect to drive demand, give us the confidence to confirm our
full-year guidance.
“Operationally, we executed well against our
strategic priorities. The integration of SuperATV is on schedule
and their first quarter results were in line with our expectations.
We made meaningful progress against our initiatives to roll out
state-of-the-art automation technology across our warehouses as
well as diversifying our supply chain geographically. Finally, we
continue to focus on new product innovation. During the quarter we
launched numerous products including two new Dorman® OE FIXTM
control arms for certain EVs, a 4WD front differential housing, and
a new air suspension upfit kit for millions of trucks and SUVs. We
continue to deliver products that not only drive sales and profits
for our customers, but also provide the solutions that professional
technicians and do-it-yourselfers want.”
2023 GuidanceThe Company
confirms its full-year 2023 guidance, detailed in the table below,
which includes the impact of the SuperATV acquisition but excludes
any potential impacts from future acquisitions, additional supply
chain disruptions, significant interest rate increases, or share
repurchases.
|
2023 Fiscal Year |
Net
Sales |
$1.95B - $2.00B |
Growth vs. 2022 |
12.5% - 15.4% |
Diluted
EPS |
$4.35 - $4.55 |
Growth vs. 2022 |
13.0% - 18.2% |
Adjusted
Diluted EPS* |
$5.15 - $5.35 |
Growth vs. 2022 |
8.2% - 12.4% |
Tax Rate Estimate |
24% |
About Dorman ProductsDorman
gives professionals, enthusiasts and owners greater freedom to fix
motor vehicles. For over 100 years, we have been driving new
solutions, releasing tens of thousands of aftermarket replacement
products engineered to save time and money and increase convenience
and reliability.
Founded and headquartered in the United States,
we are a pioneering global organization offering an always-evolving
catalog of products, covering cars, trucks and specialty vehicles,
from chassis to body, from underhood to undercarriage, and from
hardware to complex electronics.
*Non-GAAP MeasuresIn addition
to the financial measures prepared in accordance with generally
accepted accounting principles (GAAP), this earnings release also
contains Non-GAAP financial measures. The reasons why we believe
these measures provide useful information to investors and a
reconciliation of these measures to the most directly comparable
GAAP measures and other information relating to these Non-GAAP
measures are included in the supplemental schedules attached.
Forward-Looking StatementsThis
press release contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements related to net sales, diluted and adjusted
diluted earnings per share, gross profit, gross margin, adjusted
gross margin, SG&A, adjusted SG&A, income tax expense,
income before income taxes, net income, cash and cash equivalents,
indebtedness, liquidity, the Company’s share repurchase program,
the Company’s outlook and distribution facility costs and
productivity initiatives. Words such as “believe,” “demonstrate,”
“expect,” “estimate,” “forecast,” “anticipate,” “plan,” “should,”
“will” and “likely” and similar expressions identify
forward-looking statements. However, the absence of these words
does not mean the statements are not forward-looking. In addition,
statements that are not historical should also be considered
forward-looking statements. Readers are cautioned not to place
undue reliance on those forward-looking statements, which speak
only as of the date such statements were made. Such forward-looking
statements are based on current expectations that involve a number
of known and unknown risks, uncertainties and other factors (many
of which are outside of our control). Such risks, uncertainties and
other factors relate to, among other things: competition in and the
evolution of the motor vehicle aftermarket industry; changes in our
relationships with, or the loss of, any customers or suppliers; our
ability to develop, market and sell new and existing products; our
ability to anticipate and meet customer demand; widespread public
health pandemics, such as COVID-19; our ability to purchase
necessary materials from our suppliers and the impacts of any
related logistics constraints; financial and economic factors, such
as our level of indebtedness, fluctuations in interest rates and
inflation; political and regulatory matters, such as changes in
trade policy, the imposition of tariffs and climate regulation; our
ability to protect our intellectual property and defend against any
claims of infringement; and our ability to protect our information
security systems and defend against cyberattacks.. Please refer to
“Statement Regarding Forward-Looking Statements” and “Item 1A. Risk
Factors” located in Part I of our in the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2022, filed with
the Securities and Exchange Commission (“SEC”), for a description
of these and other risks and uncertainties that could cause actual
results to differ materially from those projected or implied by the
forward-looking statements. The Company is under no obligation to,
and expressly disclaims any such obligation to, update any of the
information in this document, including but not limited to any
situation where any forward-looking statement later turns out to be
inaccurate whether as a result of new information, future events or
otherwise.
Investor Relations
ContactMichael P. DickersonVice President, Investor
Relations and Risk Managementmdickerson@dormanproducts.com (517)
667-4003
Visit our website at www.dormanproducts.com. The
Investor Relations section of the website contains a significant
amount of information about Dorman, including financial and other
information for investors. Dorman encourages investors to visit its
website periodically to view new and updated information.
|
DORMAN PRODUCTS, INC. Consolidated Statements of
Operations(in thousands, except per-share amounts) |
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
(unaudited) |
4/1/23 |
|
Pct.* |
|
3/26/22 |
|
Pct. * |
Net sales |
$ |
466,738 |
|
|
100.0 |
|
|
$ |
401,579 |
|
|
100.0 |
Cost of goods sold |
|
322,261 |
|
|
69.0 |
|
|
|
268,339 |
|
|
66.8 |
Gross profit |
|
144,477 |
|
|
31.0 |
|
|
|
133,240 |
|
|
33.2 |
Selling, general and
administrative expenses |
|
126,363 |
|
|
27.1 |
|
|
|
86,528 |
|
|
21.5 |
Income from operations |
|
18,114 |
|
|
3.9 |
|
|
|
46,712 |
|
|
11.6 |
Interest expense, net |
|
11,953 |
|
|
2.6 |
|
|
|
1,231 |
|
|
0.3 |
Other income, net |
|
(357 |
) |
|
(0.1 |
) |
|
|
(84 |
) |
|
0.0 |
Income before income taxes |
|
6,518 |
|
|
1.4 |
|
|
|
45,565 |
|
|
11.3 |
Provision for income
taxes |
|
835 |
|
|
0.2 |
|
|
|
10,358 |
|
|
2.6 |
Net income |
$ |
5,683 |
|
|
1.2 |
|
|
$ |
35,207 |
|
|
8.8 |
|
|
|
|
|
|
|
|
Diluted earnings per
share |
$ |
0.18 |
|
|
|
|
$ |
1.11 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted
shares outstanding |
|
31,537 |
|
|
|
|
|
31,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Percentage of
sales. Data may not add due to rounding. |
|
DORMAN PRODUCTS, INC. Consolidated Balance Sheets
(in thousands, except share data) |
|
(unaudited) |
4/1/23 |
|
12/31/22 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
33,307 |
|
|
$ |
46,034 |
|
Accounts receivable, less allowance for doubtful accounts of $1,398
and $1,363 |
|
429,308 |
|
|
|
427,385 |
|
Inventories |
|
686,949 |
|
|
|
755,901 |
|
Prepaids and other current assets |
|
40,173 |
|
|
|
39,800 |
|
Total current assets |
|
1,189,737 |
|
|
|
1,269,120 |
|
Property, plant and equipment,
net |
|
151,541 |
|
|
|
148,477 |
|
Operating lease right-of-use
assets |
|
108,549 |
|
|
|
109,977 |
|
Goodwill |
|
443,336 |
|
|
|
443,035 |
|
Intangible assets, net |
|
316,999 |
|
|
|
322,409 |
|
Other assets |
|
50,497 |
|
|
|
48,768 |
|
Total assets |
$ |
2,260,659 |
|
|
$ |
2,341,786 |
|
Liabilities and
shareholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
145,686 |
|
|
$ |
179,819 |
|
Accrued compensation |
|
14,606 |
|
|
|
19,490 |
|
Accrued customer rebates and returns |
|
170,432 |
|
|
|
192,116 |
|
Revolving credit facility |
|
215,460 |
|
|
|
239,363 |
|
Current portion of long-term debt |
|
12,500 |
|
|
|
12,500 |
|
Other accrued liabilities |
|
48,239 |
|
|
|
35,007 |
|
Total current liabilities |
|
606,923 |
|
|
|
678,295 |
|
Long-term debt |
|
479,439 |
|
|
|
482,464 |
|
Long-term operating lease
liabilities |
|
96,571 |
|
|
|
98,221 |
|
Other long-term
liabilities |
|
16,749 |
|
|
|
28,349 |
|
Deferred tax liabilities,
net |
|
11,833 |
|
|
|
11,826 |
|
Commitments and
contingencies |
|
|
|
Shareholders’
equity: |
|
|
|
Common stock, $0.01 par value; 50,000,000 shares authorized;
31,469,310 and 31,430,632 shares issued and outstanding in 2023 and
2022, respectively |
|
315 |
|
|
|
314 |
|
Additional paid-in capital |
|
90,416 |
|
|
|
88,750 |
|
Retained earnings |
|
961,597 |
|
|
|
956,870 |
|
Accumulated other comprehensive loss |
|
(3,184 |
) |
|
|
(3,303 |
) |
Total shareholders’ equity |
|
1,049,144 |
|
|
|
1,042,631 |
|
Total liabilities and shareholders' equity |
$ |
2,260,659 |
|
|
$ |
2,341,786 |
|
|
Selected Cash Flow Information (unaudited):
|
Three Months Ended |
(in thousands) |
4/1/23 |
|
3/26/22 |
Cash provided by operating activities |
$ |
26,210 |
|
$ |
23,214 |
Depreciation, amortization and
accretion |
$ |
13,540 |
|
$ |
9,743 |
Capital expenditures |
$ |
10,537 |
|
$ |
7,247 |
|
|
|
|
|
|
DORMAN PRODUCTS, INC. Non-GAAP
Financial Measures(in thousands, except per-share amounts)
Our financial results include certain financial
measures not derived in accordance with generally accepted
accounting principles (GAAP). Non-GAAP financial measures should
not be used as a substitute for GAAP measures, or considered in
isolation, for the purpose of analyzing our operating performance,
financial position or cash flows. Additionally, these non-GAAP
measures may not be comparable to similarly titled measures
reported by other companies. However, we have presented these
non-GAAP financial measures because we believe this presentation,
when reconciled to the corresponding GAAP measure, provides useful
information to investors by offering additional ways of viewing our
results, profitability trends, and underlying growth relative to
prior and future periods and to our peers. Management uses these
non-GAAP financial measures in making financial, operating, and
planning decisions and in evaluating our performance. Non-GAAP
financial measures may reflect adjustments for charges such as fair
value adjustments, amortization, transaction costs, severance,
accelerated depreciation, and other similar expenses related to
acquisitions as well as other items that we believe are not related
to our ongoing performance.
Adjusted Net Income:
|
Three Months Ended |
|
(unaudited) |
4/1/23 |
* |
3/26/22 |
* |
Net income (GAAP) |
$ |
5,683 |
|
|
$ |
35,207 |
|
|
Pretax acquisition-related
intangible assets amortization [1] |
|
5,433 |
|
|
|
2,998 |
|
|
Pretax acquisition-related
transaction and other costs [2] |
|
8,549 |
|
|
|
4,151 |
|
|
Executive transition services
expense [3] |
|
1,779 |
|
|
|
— |
|
|
Tax adjustment (related to
above items) [4] |
|
(3,878 |
) |
|
|
(1,645 |
) |
|
Adjusted net income
(Non-GAAP) |
$ |
17,566 |
|
|
$ |
40,711 |
|
|
|
|
|
|
|
Diluted earnings per share
(GAAP) |
$ |
0.18 |
|
|
$ |
1.11 |
|
|
Pretax acquisition-related
intangible assets amortization [1] |
|
0.17 |
|
|
|
0.09 |
|
|
Pretax acquisition-related
transaction and other costs [2] |
|
0.27 |
|
|
|
0.13 |
|
|
Executive transition services
expense [3] |
|
0.06 |
|
|
|
— |
|
|
Tax adjustment (related to
above items) [4] |
|
(0.12 |
) |
|
|
(0.05 |
) |
|
Adjusted diluted earnings per
share (Non-GAAP) |
$ |
0.56 |
|
|
$ |
1.29 |
|
|
|
|
|
|
|
Weighted average diluted
shares outstanding |
|
31,537 |
|
|
|
31,601 |
|
|
* Amounts may not
add due to rounding.See accompanying notes at the end of this
supplemental schedule. |
|
Adjusted Gross Profit:
|
Three Months Ended |
|
Three Months Ended |
(unaudited) |
4/1/23 |
|
Pct.** |
|
3/26/22 |
|
Pct.** |
Gross profit (GAAP) |
$ |
144,477 |
|
31.0 |
|
$ |
133,240 |
|
33.2 |
Pretax acquisition-related
transaction and other costs [2] |
|
6,829 |
|
1.5 |
|
|
3,856 |
|
1.0 |
Adjusted gross profit
(Non-GAAP) |
$ |
151,306 |
|
32.4 |
|
$ |
137,096 |
|
34.1 |
|
|
|
|
|
|
|
|
Net sales |
$ |
466,738 |
|
|
|
$ |
401,579 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted SG&A Expenses:
|
Three Months Ended |
|
Three Months Ended |
(unaudited) |
4/1/23 |
|
Pct.** |
|
3/26/22 |
|
Pct.** |
SG&A expenses (GAAP) |
$ |
126,363 |
|
|
27.1 |
|
|
$ |
86,528 |
|
|
21.5 |
|
Pretax acquisition-related
intangible assets amortization [1] |
|
(5,433 |
) |
|
(1.2 |
) |
|
|
(2,998 |
) |
|
(0.7 |
) |
Pretax acquisition-related
transaction and other costs [2] |
|
(1,719 |
) |
|
(0.4 |
) |
|
|
(295 |
) |
|
(0.1 |
) |
Executive transition services
expense [3] |
|
(1,779 |
) |
|
(0.4 |
) |
|
|
— |
|
|
— |
|
Adjusted SG&A expenses
(Non-GAAP) |
$ |
117,432 |
|
|
25.2 |
|
|
$ |
83,235 |
|
|
20.7 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
466,738 |
|
|
|
|
$ |
401,579 |
|
|
|
* *Percentage of
sales. Data may not add due to rounding. |
|
[1] – Pretax acquisition-related intangible asset amortization
results from allocating the purchase price of acquisitions to the
acquired tangible and intangible assets of the acquired business
and recognizing the cost of the intangible asset over the period of
benefit. Such costs were $5.4 million pretax (or $4.1 million after
tax) during the three months ended April 1, 2023. Such costs
were $3.0 million pretax (or $2.3 million after tax) during the
three months ended March 26, 2022.
[2] – Pretax acquisition-related transaction and
other costs include costs incurred to complete and integrate
acquisitions, adjustments to contingent consideration obligations,
inventory fair value adjustments and facility consolidation and
start-up expenses. During the three months ended April 1,
2023, we incurred charges included in cost of goods sold for
integration costs, other facility consolidation expenses and
inventory fair value adjustments of $6.8 million pretax (or $5.1
million after tax). During the three months ended April 1,
2023, we incurred charges included in selling, general and
administrative expenses to complete and integrate acquisitions,
adjustments to contingent consideration obligations and facility
consolidation and start-up expenses of $1.7 million pretax (or $1.3
million after tax).
During the three months ended March 26,
2022, we incurred charges included in cost of goods sold for
integration costs, other facility consolidation expenses and
inventory fair value adjustments of $3.9 million pretax (or $3.0
million after tax). During the three months ended March 26,
2022, we incurred charges included in selling, general and
administrative expenses to complete and integrate acquisitions of
$0.3 million pretax (or $0.3 million after tax).
[3] – Executive transition service expenses
represents an accrual for costs required to be paid under an
agreement in connection with the planned transition of our
Executive Chairman to Non-Executive Chairman. The expense was $1.8
million (or $1.3 million after tax) during the three months ended
April 1, 2023.
[4] – Tax adjustments represent the aggregate
tax effect of all non-GAAP adjustments reflected in the table
above, and totaled $(3.9) million during the three months ended
April 1, 2023, and $(1.6) million during the three months
ended March 26, 2022. Such items are estimated by applying our
statutory tax rate to the pretax amount, or an actual tax amount
for discrete items.
2023 Guidance:
The Company provided the following guidance ranges related to
their fiscal 2023 outlook:
|
Year Ending 12/31/2023 |
(unaudited) |
Low End* |
|
High End* |
Diluted earnings per share (GAAP) |
$ |
4.35 |
|
|
$ |
4.55 |
|
Pretax acquisition-related
intangible assets amortization |
|
0.69 |
|
|
|
0.69 |
|
Pretax acquisition transaction
and other costs |
|
0.38 |
|
|
|
0.38 |
|
Tax adjustment (related to
above items) |
|
(0.27 |
) |
|
|
(0.27 |
) |
Adjusted diluted earnings per
share (Non-GAAP) |
$ |
5.15 |
|
|
$ |
5.35 |
|
|
|
|
|
Weighted average diluted
shares outstanding |
|
31,500 |
|
|
|
31,500 |
|
*Data may not add due to
rounding. |
|
|
|
|
|
|
|
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