Highlights:
Dorman Products, Inc. (the “Company” or “Dorman”) (NASDAQ:DORM), a
leading supplier in the automotive aftermarket, today announced its
financial results for the first quarter ended March 30, 2019.
1st Quarter Financial
ResultsThe Company reported first quarter 2019 net sales
of $243.8 million, up 7% compared to net sales of $227.3 million in
the first quarter of 2018. Sales growth in the quarter attributable
to acquisitions was approximately 2%. Increasing sales order rates
and site consolidation activities in the first quarter of 2019
resulted in backlog of approximately 3% of 2019 net sales which
will be realized in future quarters.
Gross profit was $87.5 million in the first
quarter compared to $88.6 million last year. Gross profit
percentage for the first quarter was 35.9% compared to 39.0% in the
same quarter last year. The adjusted gross profit percentage was
36.0% in the quarter compared to 39.4% in the same quarter last
year. The gross profit percentage declined primarily as a result of
the pass-through of tariff costs to our customers (~130bps),
acquisitions completed in the last 12 months which carry lower
gross margins compared to our historical levels (~100bps), and
increased spending due to startup inefficiencies and backlog growth
related to our site consolidation activities (~40bps). Compared to
last year, the gross margin percentage was also impacted by the
rollout of a significant new chassis program which carried higher
costs in the first quarter this year.
Selling, general and administrative (“SG&A”)
expenses grew 19% to $57.8 million, or 23.7% of net sales, in the
first quarter of 2019 compared to $48.6 million, or 21.4% of net
sales, in the same quarter last year. Adjusted SG&A expenses
increased 14% to $54.8 million, or 22.5% of net sales, in the
quarter compared to $48.1 million, or 21.1% of net sales, in the
same quarter last year. The increase in SG&A expenses was
primarily due to increased spending and inefficiencies related to
our site consolidation activities, the inclusion of expenses of
acquired operations, higher factoring costs due to increased
interest rates and sales volume, and wage and benefit
inflation.
Income tax expense was $6.4 million in the first
quarter of 2019, or 21.4% of income before income taxes, down from
$9.5 million, or 23.7% of income before income taxes, recorded in
the same quarter last year. The reduction in tax rate compared to
prior year is primarily a result of lower foreign and state
taxes.
Net income for the first quarter of 2019 was
$23.4 million, or $0.71 per diluted share, compared to $30.6
million, or $0.93 per diluted share, in the prior year quarter.
Adjusted net income in the first quarter was $25.8 million, or
$0.79 per diluted share, compared to $31.7 million, or $0.96 per
diluted share, in the prior year quarter.
Please refer to the Non-GAAP Financial Measures
reported in the supplemental schedules at the end of this release
for a detailed reconciliation of the reported (GAAP) financial
information to the adjusted financial information
(Non-GAAP).
We were engaged in several site consolidation
activities during the first quarter of 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. We also completed the
consolidation of a production facility in Michigan with our Flight
facility in Pennsylvania. Additionally, we began to transfer our
existing distribution operations in Portland to our new Portland
distribution center. During the first quarter of 2019, we incurred
approximately $2.4 million of severance, accelerated depreciation,
and other integration expenses related to these site consolidation
activities which are excluded from the calculation of adjusted net
income (Non-GAAP).
During the first quarter of 2019, our operations
costs were $3.1 million higher than in the same period in 2018 due
to startup inefficiencies and redundant facility capacity related
to our site consolidation activities, with approximately $1.0
million included in gross margin and $2.1 million included in
SG&A expenses. We anticipate that we will incur higher costs
throughout 2019 as we complete the consolidation of our Portland
facilities. The impact of these costs is included in our 2019
diluted EPS guidance.
Kevin Olsen, Dorman Products President and Chief
Executive Officer, stated: “2019 started out slow from an orders
perspective but picked up significantly as we moved through the
quarter. Given the planned consolidation activities, combined with
high March sales volumes, we exited the quarter with higher than
normal backlog and realized higher than normal operational
expenses. We expect backlog to normalize during the second quarter
and operational costs to moderate as we move through 2019
concluding with the final consolidation of our Portland facilities
later in the year. These consolidations set us up well for the
future and are expected to enable increased productivity and
capacity to support future growth.”
Mr. Olsen continued: “Our end markets remain
very healthy. We exited the quarter with POS (our customer’s point
of sale) up high-single digits over last year and our new product
pipeline remains robust. We continued to launch new products at a
very healthy pace and expect to deliver our full year goals. During
the first quarter, we also successfully launched a significant new
chassis program to a major retail customer which increases our
penetration in this targeted growth category. I’d like to thank our
many Dorman contributors who were called upon to execute both the
site consolidation activities and the launch of one of the largest
new programs in our Company’s history.”
2019 GuidanceThe Company
confirms its previous 2019 guidance of estimated net sales growth
of between 6%-10% for 2019 and expected diluted EPS of between
$4.22 and $4.38 on a GAAP basis and adjusted diluted EPS of between
$4.37 and $4.53 or between a 4% and 8% growth rate. Please refer to
the 2019 Guidance table at the end of this release for a detailed
reconciliation of the forecasted (GAAP) financial information to
the forecasted adjusted financial information (Non-GAAP). Tariffs
are not expected to have an impact on our 2019 net income, but will
lower our gross and operating profit percentages as these
additional costs are expected to be passed through to customers. We
have not assumed any share repurchases in this guidance.
Share RepurchasesUnder its
share repurchase program, Dorman repurchased 101.0 thousand shares
of its common stock for $8.4 million at an average share price of
$82.89 during the quarter ended March 30, 2019. The Company has
$174.9 million left under its current share repurchase
authorization.
About Dorman ProductsDorman
Products, Inc. is a leading supplier of Dealer “Exclusive”
replacement parts to the Automotive, Medium and Heavy Duty
Aftermarkets. Dorman products are marketed under the Dorman®, OE
Solutions™, HELP!®, AutoGrade™, First Stop™, Conduct‑Tite®,
TECHoice™, Dorman® Hybrid Drive Batteries and Dorman HD Solutions™
brand names.
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 the Company’s site consolidation
activities, backlog converting to net sales, operational costs,
productivity, capacity, future growth, full year goals, net sales,
diluted EPS, adjusted diluted EPS and future growth rates. Words
such as “believe,” “demonstrate,” “expect,” “estimate,” “forecast,”
“anticipate,” “should,” “will” and “likely” and similar expressions
identify forward-looking statements. However, the absence of these
words does not mean the statements are not forward-looking. In
addition, statements that are not historical should also be
considered forward-looking statements. Readers are cautioned not to
place undue reliance on those forward-looking statements, which
speak only as of the date the statement was 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) which may
cause actual events to be materially different from those expressed
or implied by such forward-looking statements. These risks,
uncertainties and other factors include, but are not limited to:
(i) competition in the automotive aftermarket; (ii) unfavorable
economic conditions; (iii) the loss or decrease in sales among one
of our top customers; (iv) customer consolidation in the automotive
aftermarket; (v) foreign currency fluctuations and our dependence
on foreign suppliers; (vi) extending credit to customers; (vii) the
loss of a key vendor; (viii) limited customer shelf space; (ix)
reliance on new product development; (x) changes in automotive
technology and improvements in the quality of new vehicle parts;
(xi) claims of intellectual property infringement; (xii) quality
problems with products after their production and sale to
customers; (xiii) loss of third party transportation providers on
whom we depend; (xiv) unfavorable results of legal proceedings;
(xv) our executive chairman and his family owning a significant
portion of the Company; (xvi) operations may be subject to
quarterly fluctuations and disruptions from events beyond our
control; (xvii) regulations related to conflict minerals; (xviii)
cyber-attacks; (xix) imposition of taxes, duties or tariffs; (xx)
exposure to risks related to accounts receivable; (xxi) volatility
in the market price of our common stock and potential securities
class action litigation; (xxii) losing the services of our
executive officers or other highly qualified and experienced
contributors; and (xxiii) the inability to identify suitable
acquisition candidates, complete acquisitions or integrate
acquisitions 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 press release,
reference is made to the information in Part I, “Item 1A Risk
Factors” in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 29, 2018. The Company is under no obligation to
(and expressly disclaims any such obligation to) update any of the
information in this press release if any forward-looking statement
later turns out to be inaccurate whether as a result of new
information, future events or otherwise.
Investor Relations ContactDavid
Hession, SVP and Chief Financial
Officerdhession@dormanproducts.com(215) 997-1800
Visit our website
at: www.dormanproducts.com
|
DORMAN PRODUCTS, INC. AND
SUBSIDIARIES |
Consolidated Statements of Operations |
(in thousands, except per-share amounts) |
|
|
|
13 Weeks |
|
|
13 Weeks |
|
First Quarter
(unaudited) |
|
03/30/19 |
|
|
Pct. |
|
|
03/31/18 |
|
|
Pct. |
|
Net sales |
|
$ |
243,791 |
|
|
|
100.0 |
|
|
$ |
227,262 |
|
|
|
100.0 |
|
Cost of goods sold |
|
|
156,299 |
|
|
|
64.1 |
|
|
|
138,627 |
|
|
|
61.0 |
|
Gross profit |
|
|
87,492 |
|
|
|
35.9 |
|
|
|
88,635 |
|
|
|
39.0 |
|
Selling, general and
administrative expenses |
|
|
57,750 |
|
|
|
23.7 |
|
|
|
48,641 |
|
|
|
21.4 |
|
Income from
operations |
|
|
29,742 |
|
|
|
12.2 |
|
|
|
39,994 |
|
|
|
17.6 |
|
Other income, net |
|
|
29 |
|
|
|
0.0 |
|
|
|
152 |
|
|
|
0.1 |
|
Income before income
taxes |
|
|
29,771 |
|
|
|
12.2 |
|
|
|
40,146 |
|
|
|
17.7 |
|
Provision for income
taxes |
|
|
6,364 |
|
|
|
2.6 |
|
|
|
9,499 |
|
|
|
4.2 |
|
Net income |
|
$ |
23,407 |
|
|
|
9.6 |
|
|
$ |
30,647 |
|
|
|
13.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share |
|
$ |
0.71 |
|
|
|
|
|
|
$ |
0.93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding |
|
|
32,889 |
|
|
|
|
|
|
|
33,003 |
|
|
|
|
|
DORMAN PRODUCTS, INC. AND
SUBSIDIARIES |
Condensed Consolidated Balance Sheets |
(in thousands) |
(Unaudited) |
|
|
|
03/30/19 |
|
|
12/29/18 |
|
Assets: |
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
40,794 |
|
|
$ |
43,458 |
|
Accounts
receivable |
|
|
297,509 |
|
|
|
310,114 |
|
Inventories |
|
|
288,862 |
|
|
|
270,504 |
|
Prepaid expenses |
|
|
7,409 |
|
|
|
5,652 |
|
Total current
assets |
|
|
634,574 |
|
|
|
629,728 |
|
Property, plant &
equipment, net |
|
|
101,395 |
|
|
|
98,647 |
|
Right of use assets
[1] |
|
|
34,819 |
|
|
|
- |
|
Goodwill and other
intangible assets, net |
|
|
97,264 |
|
|
|
97,770 |
|
Deferred income taxes,
net |
|
|
6,230 |
|
|
|
6,228 |
|
Other assets |
|
|
53,200 |
|
|
|
55,184 |
|
Total assets |
|
$ |
927,482 |
|
|
|
887,557 |
|
Liabilities
& shareholders’ equity: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
98,281 |
|
|
$ |
109,096 |
|
Accrued expenses and
other [1] |
|
|
35,635 |
|
|
|
32,494 |
|
Total current
liabilities |
|
|
133,916 |
|
|
|
141,590 |
|
Long-term lease
liabilities [1] |
|
|
32,856 |
|
|
|
- |
|
Other long-term
liabilities |
|
|
19,003 |
|
|
|
18,344 |
|
Shareholders’
equity |
|
|
741,707 |
|
|
|
727,623 |
|
Total liabilities and
equity |
|
$ |
927,482 |
|
|
$ |
887,557 |
|
[1] - The Company adopted Accounting Standard
Codification 842 – Leases (“ASC 842”) during the first quarter
ended March 30, 2019, using the modified retrospective approach,
which does not require prior periods to be restated.
Selected Cash Flow Information
(unaudited):
|
|
13 Weeks (unaudited) |
|
(in thousands) |
|
03/30/19 |
|
|
03/31/18 |
|
Depreciation,
amortization and accretion |
|
$ |
7,265 |
|
|
$ |
6,378 |
|
Capital
expenditures |
|
$ |
8,838 |
|
|
$ |
6,276 |
|
|
|
|
|
|
|
|
|
|
DORMAN PRODUCTS, INC. AND
SUBSIDIARIESNon-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. 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 are not related to our
ongoing performance.
Adjusted Net Income:
|
|
13 Weeks |
|
|
13 Weeks |
|
(unaudited) |
|
03/30/19 |
|
|
03/31/18 |
|
Net income (GAAP) |
|
$ |
23,407 |
|
|
$ |
30,647 |
|
Pretax
acquisition-related inventory fair value adjustment [1] |
|
|
129 |
|
|
|
899 |
|
Pretax
acquisition-related intangible assets amortization [2] |
|
|
616 |
|
|
|
500 |
|
Pretax
acquisition-related transaction and other costs [3] |
|
|
2,453 |
|
|
|
80 |
|
Tax adjustment (related
to above items) [4] |
|
|
(783 |
) |
|
|
(396 |
) |
Adjusted net income
(Non-GAAP) |
|
$ |
25,822 |
|
|
$ |
31,730 |
|
|
|
|
|
|
|
|
|
|
Adjusted
Diluted Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
13 Weeks |
|
|
13 Weeks |
|
(unaudited) |
|
03/30/19 * |
|
|
03/31/18 * |
|
Diluted earnings per
share (GAAP) |
|
$ |
0.71 |
|
|
$ |
0.93 |
|
Pretax
acquisition-related inventory fair value adjustment [1] |
|
|
0.00 |
|
|
|
0.03 |
|
Pretax
acquisition-related intangible assets amortization [2] |
|
|
0.02 |
|
|
|
0.02 |
|
Pretax
acquisition-related transaction and other costs [3] |
|
|
0.07 |
|
|
|
0.00 |
|
Tax adjustment (related
to above items) [4] |
|
|
(0.02 |
) |
|
|
(0.01 |
) |
Adjusted diluted
earnings per share (Non-GAAP) |
|
$ |
0.79 |
|
|
$ |
0.96 |
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding |
|
|
32,889 |
|
|
|
33,003 |
|
* Adjusted diluted earnings per share (Non-GAAP)
may not add due to rounding.
[1] – Pretax acquisition-related inventory fair
value adjustments result from adjusting the value of acquired
inventory from historical cost to fair value. Such costs were $0.1
million pretax (or $0.1 million after tax) during the thirteen
weeks ended March 30, 2019 and were included in Cost of Goods
Sold.
[2] – 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. Exclusion of this amortization expense
facilitates more consistent comparisons of operating results over
time between our newly acquired and long-held businesses, and with
both acquisitive and non-acquisitive peer companies. We believe it
is important for investors to understand that such intangible
assets contribute to sales generation and that intangible asset
amortization related to past acquisitions will recur in future
periods until such intangible assets have been fully amortized.
Such costs were $0.6 million pretax (or $0.5 million after tax)
during the thirteen weeks ended March 30, 2019 and were included in
Selling, General and Administrative expenses.
DORMAN PRODUCTS, INC. AND
SUBSIDIARIESNon-GAAP Financial Measures(in thousands,
except per-share amounts)
[3] – Pretax acquisition-related transaction and
other costs include costs incurred to complete and integrate
acquisitions as well as adjustments to contingent consideration
obligations. During the thirteen weeks ended March 30, 2019, we
incurred charges for integration costs, severance, and other plant
closure expenses of $1.6 million pretax (or $1.1 million after tax)
and accelerated depreciation of $0.8 million pretax (or $0.6
million after tax). Each of these were included in Selling, General
and Administrative expenses. Additionally, we recorded inventory
transfer costs of $0.1 million pretax ($0.1 million after tax)
during the thirteen weeks ended March 30, 2019 which was included
in Cost of Goods Sold.
[4] – Tax adjustments represent the aggregate
tax effect of all Non-GAAP adjustments reflected in the table above
of $0.8 million during the thirteen weeks ended March 30, 2019.
Such items are estimated by applying our overall estimated tax rate
to the pretax amount, or, by applying a specific tax rate if one is
appropriate.
Adjusted Gross Profit:
|
|
13 Weeks |
|
|
13 Weeks |
|
(unaudited) |
|
03/30/19 |
|
|
Pct.* |
|
|
03/31/18 |
|
|
Pct. |
|
Gross profit (GAAP) |
|
$ |
87,492 |
|
|
|
35.9 |
|
|
$ |
88,635 |
|
|
|
39.0 |
|
Pretax
acquisition-related inventory fair value adjustment |
|
|
129 |
|
|
|
0.1 |
|
|
|
899 |
|
|
|
0.4 |
|
Pretax
acquisition-related transaction and other costs |
|
|
133 |
|
|
|
0.1 |
|
|
|
- |
|
|
|
0.0 |
|
Adjusted gross profit
(Non-GAAP) |
|
$ |
87,754 |
|
|
|
36.0 |
|
|
$ |
89,534 |
|
|
|
39.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
243,791 |
|
|
|
|
|
|
$ |
227,262 |
|
|
|
|
|
* Percentage of sales information does not add
due to rounding.
Adjusted SG&A Expenses:
|
|
13 Weeks |
|
|
13 Weeks |
|
(unaudited) |
|
03/30/19 |
|
|
Pct. |
|
|
03/31/18 |
|
|
Pct. |
|
SG&A expenses
(GAAP) |
|
$ |
57,750 |
|
|
|
23.7 |
|
|
$ |
48,641 |
|
|
|
21.4 |
|
Pretax
acquisition-related intangible assets amortization |
|
|
(616 |
) |
|
|
(0.3 |
) |
|
|
(580 |
) |
|
|
(0.3 |
) |
Pretax
acquisition-related transaction and other costs |
|
|
(2,320 |
) |
|
|
(0.9 |
) |
|
|
- |
|
|
|
- |
|
Adjusted SG&A
expenses (Non-GAAP) |
|
$ |
54,814 |
|
|
|
22.5 |
|
|
$ |
48,061 |
|
|
|
21.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
243,791 |
|
|
|
|
|
|
$ |
227,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DORMAN PRODUCTS, INC. AND
SUBSIDIARIESNon-GAAP Financial Measures(in thousands,
except per-share amounts)
2019 Guidance:
The Company provided the following guidance
ranges related to their fiscal 2019 outlook:
|
|
December 28, 2019 |
|
Fiscal Year
Ended (unaudited) |
|
Low End* |
|
|
High End* |
|
Diluted earnings per
share (GAAP) |
|
$ |
4.22 |
|
|
$ |
4.38 |
|
Pretax
acquisition-related inventory fair value adjustment [1] |
|
|
0.00 |
|
|
|
0.00 |
|
Pretax
acquisition-related intangible assets amortization [2] |
|
|
0.08 |
|
|
|
0.08 |
|
Pretax
acquisition-related transaction and other costs [1] [2] |
|
|
0.10 |
|
|
|
0.10 |
|
Tax adjustments
(related to above items) [3] |
|
|
(0.04 |
) |
|
|
(0.04 |
) |
Adjusted diluted
earnings per share (Non-GAAP) |
|
$ |
4.37 |
|
|
$ |
4.53 |
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding |
|
|
33,207 |
|
|
|
33,207 |
|
|
|
|
|
|
|
|
|
|
[1] - Included in Cost
of Goods Sold |
|
|
|
|
|
|
|
|
[2] - Included in
Selling, General and Administrative Expenses |
|
|
|
|
|
|
|
|
[3] - Included in
Provision for Income Taxes |
|
|
|
|
|
|
|
|
* Adjusted diluted earnings per share (Non-GAAP)
may not add due to rounding.
Dorman Products (NASDAQ:DORM)
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From Aug 2024 to Sep 2024
Dorman Products (NASDAQ:DORM)
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From Sep 2023 to Sep 2024