Dorman Products, Inc 10-Q for FY2020 Q2

About this 10-Q

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Dorman Products, Inc. (DORM)

10-Q 2020-07-30 For: 2020-06-27

Added on April 04, 2026

Dorman Products, Inc filed this 10-Q on July 30, 2020, covering the quarter ended June 27, 2020 (FY2020 Q2).

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Quarter ended June 27, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $233.18M; down 8.3% from $254.18M a year earlier
Net income: $13.89M; down 35.4% from net income of $21.5M a year earlier
Diluted EPS: $0.43; down 34.8% from $0.66 a year earlier

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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)

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

				Page
Part I — FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Consolidated Statements of Operations:

	Thirteen Weeks Ended June 27, 2020 and June 29, 2019			3

		Twenty-Six Weeks Ended June 27, 2020 and June 29, 2019			4

			Consolidated Balance Sheets			5

			Consolidated Statements of Shareholders’ Equity			6

			Consolidated Statements of Cash Flows			7

			Notes to Consolidated Financial Statements			8

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			17

Item 3.			Quantitative and Qualitative Disclosures About Market Risk			24

Item 4.			Controls and Procedures			24

Part II — OTHER INFORMATION

Item 1.			Legal Proceedings			25

Item 1A.			Risk Factors			25

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

Item 3.			Defaults Upon Senior Securities			26

Item 4.			Mine Safety Disclosures			26

Item 5.			Other Information			26

Item 6.			Exhibits			26

Exhibit Index						27

Signatures						28

	Thirteen Weeks Ended
(in thousands, except per share data)	June 27, 2020			June 29, 2019
Net sales	$	233,182		$	254,175
Cost of goods sold		154,034			167,027
Gross profit		79,148			87,148
Selling, general and administrative expenses		61,525			59,925
Income from operations		17,623			27,223
Other (expense) income, net		(297	)		27
Income before income taxes		17,326			27,250
Provision for income taxes		3,441			5,751
Net income	$	13,885		$	21,499
Earnings Per Share:
Basic	$	0.43		$	0.66
Diluted	$	0.43		$	0.66
Weighted Average Shares Outstanding:
Basic		32,269			32,588
Diluted		32,338			32,676

	Twenty-Six Weeks Ended
(in thousands, except per share data)	June 27, 2020		June 29, 2019
Net sales	$	490,912	$	497,966
Cost of goods sold		326,967		323,327
Gross profit		163,945		174,639
Selling, general and administrative expenses		121,260		117,676
Income from operations		42,685		56,963
Other income, net		2,334		57
Income before income taxes		45,019		57,020
Provision for income taxes		8,359		12,115
Net income	$	36,660	$	44,905
Earnings Per Share:
Basic	$	1.13	$	1.37
Diluted	$	1.13	$	1.37
Weighted Average Shares Outstanding:
Basic		32,312		32,722
Diluted		32,388		32,811

(in thousands, except for share data)	June 27, 2020		December 28, 2019
Assets
Current assets:
Cash and cash equivalents	$	359,558	$	68,353
Accounts receivable, less allowance for doubtful accounts of $1,117 and $957		241,901		391,810
Inventories		274,821		280,813
Prepaids and other current assets		10,420		13,614
Total current assets		886,700		754,590
Property, plant and equipment, net		95,886		101,837
Operating lease right-of-use assets		36,034		32,198
Goodwill		91,155		74,458
Intangible assets, net		26,901		21,305
Deferred tax asset, net		3,886		4,336
Other assets		39,087		52,348
Total	$	1,179,649	$	1,041,072
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	83,752	$	90,437
Accrued compensation		9,559		9,782
Accrued customer rebates and returns		113,460		105,903
Revolving credit line		99,000		-
Other accrued liabilities		19,870		14,380
Total current liabilities		325,641		220,502
Long-term operating lease liabilities		34,175		29,730
Other long-term liabilities		9,005		13,297
Deferred tax liabilities, net		3,696		3,959
Commitments and contingencies
Shareholders’ Equity:
Common stock, par value $0.01; authorized 50,000,000 shares; issued and outstanding 32,440,413 and 32,558,168 in 2020 and 2019, respectively		326		326
Additional paid-in capital		55,406		52,605
Retained earnings		751,400		720,653
Total shareholders’ equity		807,132		773,584
Total	$	1,179,649	$	1,041,072

	Thirteen Weeks Ended June 27, 2020
	Common Stock						Additional
(in thousands, except share data)	Shares Issued			Par Value			Paid-In Capital			Retained Earnings			Total
Balance at March 28, 2020		32,434,665		$	325		$	53,454		$	737,596		$	791,375
Exercise of stock options		—		—			—				—			—
Compensation expense under Incentive Stock Plan		—		—				1,504		—				1,504
Purchase and cancellation of common stock		(1,620	)		(1	)		(2	)		(83	)		(86	)
Issuance of non-vested stock, net of cancellations		10,129			2			504			—			506
Other stock related activity, net of tax		(2,761	)		—			(54	)		2			(52	)
Net income		—			—			—			13,885			13,885
Balance at June 27, 2020		32,440,413		$	326		$	55,406		$	751,400		$	807,132

	Thirteen Weeks Ended June 29, 2019
	Common Stock						Additional
(in thousands, except share data)	Shares Issued			Par Value			Paid-In Capital			Retained Earnings			Total
Balance at March 30, 2019		32,942,013		$	329		$	49,890		$	691,488		$	741,707
Exercise of stock options		196			—			—			—			—
Compensation expense under Incentive Stock Plan		—			—			1,132			—			1,132
Purchase and cancellation of common stock		(175,184	)		(2	)		(315	)		(14,387	)		(14,704	)
Issuance of non-vested stock, net of cancellations		16,099			1			867			—			868
Other stock related activity, net of tax		(1,793	)		—			(60	)		(110	)		(170	)
Net income		—			—			—			21,499			21,499
Balance at June 29, 2019		32,781,331		$	328		$	51,514		$	698,490		$	750,332

	Twenty-Six Weeks Ended June 27, 2020
	Common Stock						Additional
(in thousands, except share data)	Shares Issued			Par Value			Paid-In Capital			Retained Earnings			Total
Balance at December 28, 2019		32,556,263		$	326		$	52,605		$	720,653		$	773,584
Exercise of stock options		10		—			—			—			—
Compensation expense under Incentive Stock Plan	—			—				2,718		—				2,718
Purchase and cancellation of common stock		(98,329	)		(1	)		(177	)		(5,687	)		(5,865	)
Issuance of non-vested stock, net of cancellations		(11,845	)		1			504		—				505
Other stock related activity, net of tax		(5,686	)		—			(244	)		(226	)		(470	)
Net income		—			—			—			36,660			36,660
Balance at June 27, 2020		32,440,413		$	326		$	55,406		$	751,400		$	807,132

	Twenty-Six Weeks Ended June 29, 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		11,910			—			31			—			31
Compensation expense under Incentive Stock Plan		—			—			2,047			—			2,047
Purchase and cancellation of common stock		(290,274	)		(3	)		(522	)		(23,814	)		(24,339	)
Issuance of non-vested stock, net of cancellations		64,292			1			867			—			868
Other stock related activity, net of tax		(9,458	)		—			1,230			(2,033	)		(803	)
Net income		—			—			—			44,905			44,905
Balance at June 29, 2019		32,781,331		$	328		$	51,514		$	698,490		$	750,332

	Twenty-Six Weeks Ended
(in thousands)	June 27, 2020			June 29, 2019
Cash Flows from Operating Activities:
Net income	$	36,660		$	44,905
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, amortization and accretion		15,035			14,097
Gain on equity method investment		(2,498	)		-
Provision for doubtful accounts		105			21
Benefit for deferred income taxes		(1,074	)		(64	)
Provision for stock-based compensation		2,718			2,047
Changes in assets and liabilities:
Accounts receivable		151,818			21,500
Inventories		11,564			(21,235	)
Prepaids and other current assets		2,462			(11,200	)
Other assets		(4,779	)		2,238
Accounts payable		(8,665	)		(6,925	)
Accrued customer rebates and returns		7,557			(7,345	)
Accrued compensation and other liabilities		8,498			(1,491	)
Cash provided by operating activities		219,401			36,548
Cash Flows from Investing Activities:
Acquisition, net of cash acquired		(14,308	)		-
Property, plant and equipment additions		(7,143	)		(17,335	)
Cash used in investing activities		(21,451	)		(17,335	)
Cash Flows from Financing Activities:
Net proceeds of revolving credit line		99,000			-
Other stock related activity		120			92
Purchase and cancellation of common stock		(5,865	)		(24,339	)
Cash provided by (used in) financing activities		93,255			(24,247	)
Net Increase (Decrease) in Cash and Cash Equivalents		291,205			(5,034	)
Cash and Cash Equivalents, Beginning of Period		68,353			43,458
Cash and Cash Equivalents, End of Period	$	359,558		$	38,424
Supplemental Cash Flow Information
Cash paid for interest expense	$	433		$	90
Cash paid for income taxes	$	1,750		$	21,730

(in thousands)	Valuation		Amortization Period (in years)
Customer relationships	$	4,600		15
Tradenames		700		5
Technology		1,800		8
Other		190		5
Total	$	7,290

(in thousands)	June 27, 2020		December 28, 2019
Bulk product	$	106,968	$	114,308
Finished product		163,311		161,866
Packaging materials		4,542		4,639
Total	$	274,821	$	280,813

(in thousands)	June 27, 2020
2020 (Remainder of 2020)	$	3,502
2021		6,253
2022		5,713
2023		4,090
2024		4,159
2025 and thereafter		26,448
Total lease payments		50,165
Less: Imputed interest		(11,219	)
Present value of lease liabilities	$	38,946

	Shares			Weighted Average Price
Balance at December 28, 2019		177,491		$	76.70
Granted		80,580		$	62.45
Vested		(17,408	)	$	65.41
Cancelled		(23,823	)	$	78.04
Balance at June 27, 2020		216,840		$	72.16

			June 27, 2020						December 28, 2019
(in thousands)	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		11.0	$	6,760	$	1,280	$	5,480	$	6,060	$	975	$	5,085
Customer relationships		9.1		25,050		5,920		19,130		20,450		4,698	$	15,752
Technology		8.1		2,167		198		1,969		367		74	$	293
Other		3.9		430		108		322		240		65	$	175
Total			$	34,407	$	7,506	$	26,901	$	27,117	$	5,812	$	21,305

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Term (In years)		Aggregate Intrinsic Value
Balance at December 28, 2019		181,712		$	70.78
Granted		102,584		$	61.96
Forfeited		(4,728	)	$	67.27
Exercised		(419	)	$	72.55
Balance at June 27, 2020		279,149		$	67.60		4.9	$	928,794
Options exercisable at June 27, 2020		105,038		$	65.30		2.3	$	702,837

	Thirteen Weeks Ended*									Twenty-Six Weeks Ended*
(in millions)	June 27, 2020					June 29, 2019				June 27, 2020				June 29, 2019
Net sales	$	233.2		100.0	%	$	254.2	100.0	%	$	490.9	100.0	%	$	498.0	100.0	%
Cost of goods sold	$	154.0		66.1	%	$	167.0	65.7	%	$	327.0	66.6	%	$	323.3	64.9	%
Gross profit	$	79.1		33.9	%	$	87.1	34.3	%	$	163.9	33.4	%	$	174.6	35.1	%
Selling, general and administrative expenses	$	61.5		26.4	%	$	59.9	23.6	%	$	121.3	24.7	%	$	117.7	23.6	%
Income from operations	$	17.6		7.6	%	$	27.2	10.7	%	$	42.7	8.7	%	$	57.0	11.4	%
Other (expense) income, net	$	(0.3	)	-0.1	%	$	0.0	0.0	%	$	2.3	0.5	%	$	0.1	0.0	%
Income before income taxes	$	17.3		7.4	%	$	27.3	10.7	%	$	45.0	9.2	%	$	57.0	11.5	%
Provision for income taxes	$	3.4		1.5	%	$	5.8	2.3	%	$	8.4	1.7	%	$	12.1	2.4	%
Net income	$	13.9		6.0	%	$	21.5	8.5	%	$	36.7	7.5	%	$	44.9	9.0	%

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (4)		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (4)
March 29, 2020 through April 25, 2020 (1)		1,820	$	52.94		-	$	138,465,024
April 26, 2020 through May 23, 2020 (2)		565	$	62.69		-	$	138,465,024
May 24, 2020 through June 27, 2020 (3)		71	$	79.16		-	$	138,465,024
Total		2,456	$	55.94		-	$	138,465,024




10.2		Form of Dorman Products, Inc. Restricted Stock Unit Award for Non-Employee Directors Pursuant to the Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan. *
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished with this report). **

101		The following financial statements from the Dorman Products, Inc. Quarterly Report on Form 10-Q as of and for the quarter ended June 27, 2020, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations; (ii) the Consolidated Balance Sheets; (iii) Consolidated Statements of Shareholders’ Equity; (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements.

104		The cover page from the Company’s Quarterly Report on Form 10-Q as of and for the quarter ended June 27, 2020, formatted in Inline XBRL (included as Exhibit 101).