UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): February 21, 2019

 

 

Dorman Products, Inc.

(Exact name of Registrant as Specified in Charter)

 

 

 

Pennsylvania   000-18914   23-2078856

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

3400 East Walnut Street, Colmar, Pennsylvania 18915

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (215) 997-1800

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule l2b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.  ☐

 

 

 

Item 2.02.     Results of Operation and Financial Condition .

The information being furnished in this Item 2.02 and in Exhibit 99.1 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as shall be expressly set forth by specific reference in such filing.

On February 25, 2019, Dorman Products, Inc. (the “Company”) issued a press release announcing its operating results for the fourth quarter and year ended December 29, 2018. A copy of the press release is furnished as Exhibit 99.1 and incorporated by reference herein.

Certain statements in this document constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995, including statements related to the Company’s future growth rates. Words such as “believe,” “demonstrate,” “expect,” “estimate,” “forecast,” “anticipate,” “should” and “likely” and similar expressions identify forward-looking statements. In addition, statements that are not historical should also be considered forward-looking statements. Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, competition in the automotive aftermarket industry, concentration of the Company’s sales and accounts receivable among a small number of customers, the impact of consolidation in the automotive aftermarket industry, foreign currency fluctuations, the ability to successfully identify, complete, and integrate acquisitions, imposition of new taxes, duties or tariffs, and other risks detailed in the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 30, 2017. You should not place undue reliance on forward-looking statements. Such statements speak only as to the date on which they are made. The Company is under no obligation to (and expressly disclaims any such obligation to) update any of the information in this document if any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events or otherwise.

Item 5.02     Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers .

On February 21, 2019, the Compensation Committee of the Board of Directors of the Company approved grants of long-term equity incentive awards to the Company’s executive officers to be effective as of March 6, 2019, the seventh trading day following the date of the Company’s release of year-end financial results. The approved grants include two awards of time-based restricted stock (“2019 CEO RS Award Grants”) to Kevin Olsen, the Company’s President and Chief Executive Officer, which contain accelerated vesting provisions. The first award, issued pursuant to Mr. Olsen’s employment agreement with the Company, has an aggregate value of $500,000 and will vest in equal installments on each of the 3 rd , 4 th and 5 th annual anniversaries of the grant date. The second award, issued as part of Mr. Olsen’s annual equity grant, has an aggregate value of $112,500 and will vest 25% per year, beginning on the first anniversary of the grant date. The number of shares to be issued pursuant to each award will be determined by dividing the aggregate value of each award by the fair market value of the Company’s common stock on the grant date, March 6, 2019. The terms of the 2019 CEO RS Award Grants mirror the

form of restricted stock award agreement previously approved by the Compensation Committee on May 10, 2018, except that the 2019 CEO RS Award Grants provide that (i) should Mr. Olsen be terminated by the Company without cause; or (ii) should Mr. Olsen terminate his employment for good reason, all unvested restricted stock will become 100% vested as of the date of termination. The form of award agreement, also approved by the Compensation Committee on February 21, 2019, to be utilized in connection with the 2019 CEO RS Award Grants (the “2019 CEO RS Award Agreement”) is filed herewith.

The foregoing is only a summary of certain terms and conditions of the 2019 CEO RS Award Agreement and is qualified in its entirety by reference to such form, a copy of which is filed as Exhibit 10.1 and incorporated herein by reference.

Item 9.01     Financial Statements and Exhibits .

 

Exhibit

Number

   Description
10.1    Form of 2019 Chief Executive Officer Restricted Stock Award Agreement under the Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan
99.1    Press Release dated February 25, 2019

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    DORMAN PRODUCTS, INC.
Date: February 25, 2019     By:  

/s/ Michael P. Ginnetti

      Name:   Michael P. Ginnetti
      Title:   Interim Chief Financial Officer

Exhibit 10.1

DORMAN PRODUCTS, INC.

2019 CHIEF EXECUTIVE OFFICER RESTRICTED STOCK AWARD

This is a Restricted Stock Award (this “Award”) dated [            ], 2019 (the “Grant Date”) from Dorman Products, Inc. (the “Company”) to Kevin M. Olsen (the “Grantee”).

1. Award of Stock . Effective as of the Grant Date, pursuant to the Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan (the “Plan”), the Company hereby awards the Grantee [                ] shares of Common Stock (the “Awarded Shares”), subject to the restrictions and on the terms and conditions set forth in this Award and the Plan.

2. Lapse of Restrictions; Vesting . The Awarded Shares are subject to forfeiture to the Company until they become nonforfeitable in accordance with this Section 2.

(a) The Awarded Shares shall vest and become nonforfeitable as follows:

 

Vesting Date:

   Percent of Award Vested:  
           
           
           

(b) In addition, upon a Change in Control, 100% of the unvested Awarded Shares shall vest and become nonforfeitable.

(c) In addition, upon the Grantee’s termination of employment for any of the following reasons, the unvested Awarded Shares shall vest and become nonforfeitable as indicated:

(i) 100% as of the date of Grantee’s death;

(ii) 100% as of the date of Grantee’s termination of employment due to Disability;

(iii) 100% as of the date of Grantee’s termination of employment by the Company without Cause (as defined in the Employment Agreement entered into by and between the Grantee and the Company effective as of January 1, 2019 (the “Employment Agreement”)); or

(iv) 100% as of the date of Grantee’s termination of employment by Grantee for Good Reason (as defined in the Employment Agreement).

Except as provided above, upon the termination of employment of Grantee any unvested Awarded Shares will immediately and automatically, without any action on the part of the Company, be forfeited and the Grantee will have no further rights with respect to those Shares.

3. Certificates.

(a) The Company will cause the Awarded Shares to be issued in the Grantee’s name by issuance of a stock certificate or certificates. The Company may, in lieu of issuing such a certificate, arrange for the recording of Grantee’s ownership of the Awarded Shares on a book entry recordkeeping system maintained on behalf of the Company.

(b) While the Awarded Shares remain forfeitable, the Company will cause an appropriate stop-transfer order to be issued and to remain in effect with respect to the Awarded Shares. As soon as practicable following the time that any Awarded Shares become nonforfeitable (and provided that appropriate arrangements have been made with the Company for the withholding or payment of any taxes that may be due with respect to such Shares), the Company will cause that stop-transfer order to be removed.

(c) If any certificate is issued in respect of Awarded Shares, that certificate will be legended as described herein and held in escrow by the Company’s Secretary or Assistant Secretary or his or her designee. In addition, the Grantee may be required to execute and deliver to the Company a stock power with respect to those Awarded Shares. At such time as those Awarded Shares become nonforfeitable, the Company will cause a new certificate to be issued without that portion of the legend referencing the previously applicable forfeiture conditions and will cause that new certificate to be delivered to the Grantee (again, provided that appropriate arrangements have been made with the Grantee for the withholding or payment of any taxes that may be due with respect to such Shares). The Company may also condition delivery of certificates for Awarded Shares upon receipt from the Grantee of any undertakings that it may determine are appropriate to facilitate compliance with federal and state securities laws.

4. Stock Splits, etc . If, while any of the Awarded Shares remain subject to forfeiture, there occurs any merger, consolidation, reorganization, reclassification, recapitalization, stock split, stock dividend, or other similar change in the Common Stock, then any and all new, substituted or additional securities or other consideration to which the Grantee is entitled by reason of the Grantee’s ownership of the Awarded Shares will be immediately subject to the stop-transfer order and escrow contemplated by Section 3, deposited with the Company and will thereafter be included in the term “Awarded Shares” for all purposes of the Plan and this Award.

5. Rights of Participant . The Grantee shall have all the rights of a shareholder with respect to such Awarded Shares, including, but not limited to, the right to vote such shares and to receive all dividends and other distributions paid with respect to them; provided however , that any cash dividends or distributions paid on the Awarded Shares while those shares remain forfeitable will be deposited with the Company, in escrow, and distributed only when, and if, the Awarded Shares giving rise to such dividends or distributions become nonforfeitable.

6. Tax Consequences . The Grantee acknowledges that the Company has not advised the Grantee regarding the Grantee’s income tax liability in connection with the grant or vesting of the Awarded Shares or with an election under Section 83(b) of the Internal Revenue Code, as amended, with respect to the grant of the Awarded Shares. The Grantee has reviewed with the Grantee’s own tax advisors the federal, state, local and foreign tax consequences of the transactions contemplated by this Agreement. The Grantee is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Grantee understands that the Grantee (and not the Company) shall be responsible for the Grantee’s own tax liability that may arise as a result of the transactions contemplated by this Award.

WHILE THE COMPANY WILL EXERCISE REASONABLE EFFORTS TO ASSIST THE GRANTEE OR OTHERWISE FACILITATE ANY SECTION 83(b) ELECTION MADE BY THE GRANTEE WITH RESPECT TO THE AWARDED SHARES, THE GRANTEE ACKNOWLEDGES THAT IT IS THE GRANTEE’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY ANY SECTION 83(b) ELECTION.

7. Restriction on Transfer of Awarded Shares . Except for the forfeiture to the Company contemplated by Section 2 hereof, none of the Awarded Shares or any beneficial interest therein shall be transferred, encumbered, pledged or otherwise alienated or disposed of in any way until they have become nonforfeitable in accordance with Section 2 of this Award.

8. Share Legends . A legend will be placed on any certificates evidencing all the Awarded Shares, pursuant to the Plan, applicable law or otherwise.

9. Award Not to Affect Employment . The Awarded Shares granted hereunder shall not confer upon the Grantee any right to continue in service as an employee, officer or director of the Company or any subsidiary of the Company.

10. Miscellaneous .

(a) The address for the Grantee to which notice, demands and other communications to be given or delivered under or by reason of the provisions hereof shall be the address contained in the Company’s personnel records, or such other address as the Grantee may provide to the Company by written notice.

(b) This Award may be executed in one or more counterparts all of which taken together will constitute one and the same instrument.

(c) The validity, performance, construction and effect of this Award shall be governed by the laws of the Commonwealth of Pennsylvania, without giving effect to principles of conflicts of law.

(d) The Grantee hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the Commonwealth of Pennsylvania and of the United States of America, in each case located in Philadelphia, Pennsylvania, for any actions, suits or proceedings arising out of or relating to this Award and the transactions contemplated hereby (“Litigation”) and agrees not to commence any Litigation except in any such court, and further agrees that service of process, summons, notice or document by U.S. registered mail to his

respective address shall be effective service of process for any Litigation brought against him in any such court. Each party hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation in the courts of the Commonwealth of Pennsylvania or of the United States of America, in each case located in Philadelphia, Pennsylvania, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any Litigation brought in any such court has been brought in an inconvenient forum.

11. Repayment . This Award shall be subject to any repayment or clawback policy of the Company that is currently in effect or that is hereinafter adopted.

12. Incorporation of Plan Terms . This Award is subject to the terms and conditions of the Plan. Such terms and conditions of the Plan are incorporated into and made a part of this Award by reference. In the event of any conflicts between the provisions of this Award and the terms of the Plan, the terms of the Plan will control. In the event, however, of any conflict between the provisions of this Award or the Plan and the provisions of an employment or change-in-control agreement between the Company and the Grantee, the provisions of the latter shall prevail, to the extent consistent with the Plan. Capitalized terms used but not defined in this Award shall have the meanings set forth in the Plan unless the context clearly requires an alternative meaning.

IN WITNESS WHEREOF, the Company has granted this Award on the day and year first above written.

 

DORMAN PRODUCTS, INC.
BY:  

                    

I hereby acknowledge receipt of a copy of the forgoing Award and the Plan and, having read them hereby, signify my understanding of, and my agreement with, their terms and conditions. I accept this Award in full satisfaction of any previously written or verbal promises made to me by the Company with respect to restricted stock grants.

 

                                                                                                                                                                
(Name)     (Date)

Exhibit 99.1

 

LOGO

For Immediate Release

Dorman Products, Inc. Reports Fourth Quarter and Fiscal 2018 Results,

Issues Fiscal 2019 Guidance

Highlights:

 

  •  

Net sales of $260.3  million, up 14% compared to $227.7  million last year.

 

  •  

Diluted earnings per share (EPS) on a GAAP basis increased 62% to $1.05 compared to $0.65 last year. Adjusted diluted EPS of $1.10, up 26% compared to $0.87 last year.

 

  •  

The Company expects 2019 net sales growth between 6%-10% and expects 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.

COLMAR, PA (February 25, 2019) – Dorman Products, Inc. (the “Company” or “Dorman”) (NASDAQ:DORM), a leading supplier in the automotive aftermarket, today announced its financial results for the fourth quarter and fiscal year ended December 29, 2018.

4th Quarter Financial Results

The Company reported fourth quarter 2018 net sales of $260.3 million, up 14% compared to net sales of $227.7 million in the fourth quarter of 2017. Sales growth in the quarter attributable to acquisitions was approximately 4%.

Gross profit grew 7% to $96.9 million in the fourth quarter from $90.9 million last year. Gross profit percentage for the fourth quarter was 37.2% compared to 39.9% in the same quarter last year. The adjusted gross profit percentage was 37.8% in the quarter compared to 40.2% in the same quarter last year. The gross profit percentage declined primarily as a result of increased volume of lower margin program rollouts in the fourth quarter as compared to the same quarter in 2017, acquisitions which carry lower gross margins compared to our historical levels, and the negative impact of increased selling prices tied to tariffs that do not provide leverage to gross or operating profit percentages.

Selling, general, and administrative (“SG&A”) expenses grew 10% to $52.3 million in the fourth quarter on a GAAP basis compared to $47.5 million in the same quarter last year. Adjusted SG&A increased 10% to $51.2 million or 19.7% of net sales in the quarter compared to $46.4 million or 20.4% of net sales in the same quarter last year. The increase in SG&A was primarily due to the inclusion of expenses of acquired operations, the reinvestment of tax savings from the Tax Cuts and Jobs Act (TCJA), and wage and benefit inflation.

Income tax expense was $9.7 million in the fourth quarter of 2018, or 22.0% of income before income taxes down from $21.3 million, or 49.2% 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 the TCJA. Additionally, income tax expense in the fourth quarter of 2017 included $6.0 million of expenses related to the adoption of the TCJA and pre 2016 state tax matters.

Net income for the fourth quarter of 2018 was $34.6 million, or $1.05 per diluted share compared to $22.0 million, or $0.65 per diluted share, in the prior year quarter. Adjusted net income in the fourth quarter was $36.4 million, or $1.10 per diluted share, up 25% compared to $29.1 million or $0.87 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).

In the fourth quarter of 2018, the construction of our new 800,000 square foot distribution facility in Portland, Tennessee (in close proximity to our existing operation) was completed. Over the course of the first and second quarters of 2019, we will be transferring our existing distribution operations in Portland into this new facility. Additionally, in order to better serve our customers, we made the strategic decision to consolidate our Montreal facility (acquired as part of the MAS acquisition) into the new Portland distribution center and to consolidate an existing production facility in Michigan with our newly acquired Flight facility in Pennsylvania. Both of these actions will be completed in the first quarter of 2019. We expect that the pre-tax costs to complete these actions will be approximately $3.4 million, including approximately $1.5 million of duplicate rent and utilities while we transfer operations between our facilities in Portland and approximately $1.9 million of severance, accelerated depreciation, and other integration expenses related to the site consolidations.

In the fourth quarter of 2018 our net inventory increased by $30.5 million to $270.5 million. This increase in inventory was the result of several actions including the acceleration of inventory purchases in advance of a potential 25% tariff rate, a desire to maintain strong customer service while facility consolidations are executed, preparation for new programs to be launched in the first quarter of 2019, and purchases in advance of Chinese New Year. We anticipate that our inventory will return to historical inventory turn levels over the course of fiscal 2019.

Fiscal 2018 Financial Results

Fiscal 2018 net sales were $973.7 million, up 8% compared to $903.2 million in 2017. Sales growth in the full year attributable to acquisitions was approximately 5%.

Net income for the current fiscal year was $133.6 million, or $4.02 per diluted share compared to $106.6 million, or $3.13 per diluted share in the prior year. Adjusted net income in the current fiscal year was $139.4 million, or $4.20 per diluted share, up 22% compared to $114.7 million, or $3.37 per diluted share in the prior year.

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).

Kevin Olsen, Dorman Products President and Chief Executive Officer, stated: “I’d first like to thank all of our many Dorman contributors for a very successful 2018. Their hard work and commitment to excellence is the driving force behind all of our success. The fourth quarter capped off a pivotal year for our company on many fronts. Our organic growth engine remains strong as we continued to invest in bringing new products to market. We successfully integrated the MAS acquisition fully into Dorman while creating a market leading, comprehensive Chassis offering to meet the needs of both our retail and traditional customers. We acquired Flight Systems Automotive Group in the third quarter greatly increasing our complex electronics capabilities. We continued to grow and invest in our Heavy Duty business, setting us up nicely to continue our aggressive growth trajectory. Also, construction of a new, state of the art distribution facility in Tennessee was completed. This facility will enable us to better serve the needs of customers and provide space for future growth. Continuing to be the number one innovator in the light, medium and heavy duty markets will be the cornerstone of our strategy, supplemented by strategic acquisitions that accelerate growth in targeted segments, markets and geographies. Despite some macro uncertainties around trade policies, we remain optimistic about 2019.”

2019 Guidance

The Company expects 2019 net sales growth between 6%-10% and expects 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 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 passed through to customers. We have not assumed any share repurchases in this guidance.

Share Repurchases

Under its share repurchase program, Dorman repurchased 135.7 thousand shares of its common stock for $9.6 million at an average share price of $70.86 during the quarter ended December 29, 2018, bringing fiscal year 2018 purchases to 622.2 thousand shares for $43.4 million at an average price of $69.73. Including the additional $150 million authorization announced in December 2018, the Company has $183.3 million left under its current share repurchase authorization.

About Dorman Products

Dorman 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 Measures

In 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 Statements

This 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 future growth rates. Words such as “believe,” “demonstrate,” “expect,” “estimate,” “forecast,” “anticipate,” “should” and “likely” and similar expressions identify forward-looking statements. 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 which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, competition in the automotive aftermarket industry, concentration of the Company’s sales and accounts receivable among a small number of customers, the impact of consolidation in the automotive aftermarket industry, foreign currency fluctuations, the ability to successfully identify, complete, and integrate acquisitions, imposition of new taxes, duties or tariffs, and other risks detailed in the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 30, 2017. 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 Contact

Kevin Olsen, President and CEO

kolsen@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  
Fourth Quarter (unaudited)    12/29/18      Pct.      12/30/17     Pct.  

Net sales

   $ 260,341        100.0      $ 227,719       100.0  

Cost of goods sold

     163,394        62.8        136,791       60.1  

Gross profit

     96,947        37.2        90,928       39.9  

Selling, general and administrative expenses

     52,310        20.1        47,519       20.9  

Income from operations

     44,637        17.1        43,409       19.1  

Other expense, net

     295        0.1        124       0.1  

Income before income taxes

     44,342        17.0        43,285       19.0  

Provision for income taxes

     9,743        3.7        21,317       9.4  

Net income

   $ 34,599        13.3      $ 21,968       9.6  

Diluted earnings per share

   $ 1.05         $ 0.65    

Weighted average diluted shares outstanding

     32,994           33,605    
     52 Weeks      52 Weeks  
Fiscal Year Ended (unaudited)    12/29/18      Pct.*      12/30/17     Pct.  

Net sales

   $ 973,705        100.0      $ 903,221       100.0  

Cost of goods sold

     600,424        61.7      $ 544,572       60.3  

Gross profit

     373,281        38.3      $ 358,649       39.7  

Selling, general and administrative expenses

     202,138        20.8      $ 182,409       20.1  

Income from operations

     171,143        17.5      $ 176,240       19.5  

Other expense (income), net

     8        0.0      $ (348 )      (0.1 ) 

Income before income taxes

     171,135        17.5      $ 176,588       19.6  

Provision for income taxes

     37,533        3.9      $ 69,989       7.7  

Net income

   $ 133,602        13.7      $ 106,599       11.8  

Diluted earnings per share

   $ 4.02         $ 3.13    

Weighted average diluted shares outstanding

     33,207           34,052    

 

*

Percentage of sales information does not add due to rounding.

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

(Unaudited)

 

     12/29/18      12/30/17  

Assets:

     

Cash and cash equivalents

   $ 43,458      $ 71,691  

Accounts receivable

     310,114        241,880  

Inventories

     270,504        212,149  

Prepaid expenses

     7,363        7,129  

Total current assets

     631,439        532,849  

Property, plant & equipment, net

     98,647        92,692  

Goodwill and other intangible assets, net

     97,770        88,157  

Deferred income taxes, net

     6,316        7,884  

Other assets

     55,184        44,342  

Total assets

   $ 889,356      $ 765,924  

Liabilities & shareholders’ equity:

     

Accounts payable

   $ 109,096      $ 80,218  

Accrued expenses and other

     34,293        30,563  

Total current liabilities

     143,389        110,781  

Other long-term liabilities

     18,344        20,336  

Shareholders’ equity

     727,623        634,807  

Total liabilities and equity

   $ 889,356      $ 765,924  

Selected Cash Flow Information (unaudited):

 

     13 Weeks (unaudited)      52 Weeks (unaudited)  
(in thousands)    12/29/18      12/30/17      12/29/18      12/30/17  

Depreciation, amortization and accretion

   $ 8,718      $ 6,256      $ 28,391      $ 22,224  

Capital expenditures

   $ 8,007      $ 7,014      $ 26,106      $ 24,450  

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

Non-GAAP Financial Measures

(in thousands, except per-share amounts)

The Company’s 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, the Company has presented these non-GAAP financial measures because management believes this presentation, when reconciled to the corresponding GAAP measure, provides useful information to investors by offering additional ways of viewing the Company’s 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 which the Company has determined are material as well as other items that are not related to the Company’s ongoing performance.

Adjusted Net Income:

 

     13 Weeks      13 Weeks      52 Weeks     52 Weeks  
(unaudited)    12/29/18      12/30/17      12/29/18     12/30/17  

Net income (GAAP)

   $ 34,599      $ 21,968      $ 133,602     $ 106,599  

Pretax acquisition-related inventory fair value adjustment [1]

     259        592        2,038       592  

Pretax acquisition-related intangible assets amortization [2]

     666        349        2,141       349  

Pretax acquisition-related transaction and other costs [3]

     1,538        769        2,726       1,079  

Pretax investment impairment [4]

     —          —          1,064       —    

Tax adjustments (related to above items) [5]

     (613 )       (599 )       (1,771 )      (707 ) 

Discrete tax adjustments [5]

     —          5,997        (368 )      6,761  
  

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted net income (Non-GAAP)

   $ 36,449      $ 29,076      $ 139,432     $ 114,673  

Diluted earnings per share (GAAP)

   $ 1.05      $ 0.65      $ 4.02     $ 3.13  

Pretax acquisition-related inventory fair value adjustment [1]

     0.01        0.02        0.06       0.02  

Pretax acquisition-related intangible assets amortization [2]

     0.02        0.01        0.06       0.01  

Pretax acquisition-related transaction and other costs [3]

     0.05        0.02        0.08       0.03  

Pretax investment impairment [4]

     —          —          0.03       —    

Tax adjustments (related to above items) [5]

     (0.02 )       (0.02 )       (0.05 )      (0.02 ) 

Discrete tax adjustments [5]

     —          0.18        (0.01 )      0.20  
  

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted diluted earnings per share (Non-GAAP)

   $ 1.10 *     $ 0.87 *     $ 4.20 *    $ 3.37  

Weighted average diluted shares outstanding

     32,994        33,605        33,207       34,052  

 

*

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 $0.3 million pretax (or $0.2 million after tax) during the thirteen weeks ended December 29, 2018 and were $2.0 million pretax (or $1.5 million after tax) during the fifty-two weeks ended December 29, 2018 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 $0.7 million pretax (or $0.5 million after tax) during the thirteen weeks ended December 29, 2018 and $2.1 million pretax (or $1.6 million after tax) during the fifty-two weeks ended December 29, 2018 and were included in Selling, General and Administrative expenses.

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

Non-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 December 29, 2018, the Company incurred charges for integration costs, severance, and other plant closure expenses of $1.2 million pretax (or $0.9million after tax) and accelerated depreciation of $1.2 million pretax (or $0.9 million after tax). The Company also reduced contingent consideration obligations by $2.0 million pretax (or $1.6 million after tax). During the fifty-two weeks ended December 29, 2018 , the Company incurred charges for integration costs, severance, and other plant closure expenses of $2.2 million pretax (or $1.7 million after tax) and accelerated depreciation of fixed assets and leasehold improvements of $1.2 million pretax (or $0.9 million after tax). The Company also reduced contingent consideration obligations by $1.8 million pretax (or $1.4 million after tax). Each of these was included in Selling, General and Administrative expenses. Additionally, the Company recorded inventory transfer costs and inventory reserves of $1.1 million pretax ($0.8 million after tax) during the thirteen and fifty-two weeks ended December 29, 2018, respectively, which was included in Cost of Goods Sold.

[4] –

Pretax investment impairment results from the acquisition of 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. Such costs were $1.1 million pretax (and $1.1 million after tax) during the fifty-two weeks ended December 29, 2018 and were included in Selling, General and Administrative expenses.

[5] –

Tax adjustments represent the aggregate tax effect of all Non-GAAP adjustments reflected in the table above of $0.6 million during the thirteen weeks ended December 29, 2018 and $1.8 million during the fifty-two weeks ended December 29, 2018. Such items are estimated by applying the Company’s overall estimated tax rate to the pretax amount, or, by applying a specific tax rate if one is appropriate. Also included in Provision for Income Taxes are discrete tax adjustments resulting from pre 2016 tax matters of $0.4 million in the fifty-two weeks ended December 29, 2018.

Adjusted Gross Profit:

 

     13 Weeks      13 Weeks  
(unaudited)    12/29/18      Pct.*      12/30/17      Pct.  

Gross profit (GAAP)

   $ 96,947        37.2      $ 90,928        39.9  

Pretax acquisition-related inventory fair value adjustment

     259        0.1        592        0.3  

Pretax acquisition-related transaction and other costs

     1,079        0.4        —          —    
  

 

 

       

 

 

    

Adjusted gross profit (Non-GAAP)

   $ 98,285        37.8      $ 91,520        40.2  

Net sales

   $ 260,341         $ 227,719     
     52 Weeks      52 Weeks  
(unaudited)    12/29/18      Pct.*      12/30/17      Pct.  

Gross profit (GAAP)

   $ 373,281        38.3      $ 358,649        39.7  

Pretax acquisition-related inventory fair value adjustment

     2,038        0.2        592        0.1  

Pretax acquisition-related transaction and other costs

     1,079        0.1        —          —    
  

 

 

       

 

 

    

Adjusted gross profit (Non-GAAP)

   $ 376,398        38.7      $ 359,241        39.8  

Net sales

   $ 973,705         $ 903,221     

 

*

Percentage of sales information does not add due to rounding.

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

Non-GAAP Financial Measures

(in thousands, except per-share amounts)

 

Adjusted SG&A Expenses:

 

     13 Weeks      13 Weeks  
(unaudited)    12/29/18      Pct.*      12/30/17     Pct.  

SG&A expenses (GAAP)

   $ 52,310        20.1      $ 47,519       20.9  

Pretax acquisition-related intangible assets amortization

     (666 )       (0.3 )       (349 )      (0.2 ) 

Pretax acquisition-related transaction and other costs

     (458 )       (0.2 )       (769 )      (0.3 ) 
  

 

 

       

 

 

   

Adjusted SG&A expenses (Non-GAAP)

   $ 51,186        19.7      $ 46,401       20.4  

Net sales

   $ 260,341         $ 227,719    
     52 Weeks      52 Weeks  
(unaudited)    12/29/18      Pct.      12/30/17     Pct.*  

SG&A expenses (GAAP)

   $ 202,138        20.8      $ 182,409       20.2  

Pretax acquisition-related intangible assets amortization

     (2,141 )       (0.2 )       (349 )      (0.0 ) 

Pretax acquisition-related transaction and other costs

     (1,646 )       (0.2 )       (1,079 )      (0.1 ) 

Pretax investment impairment

     (1,064 )       (0.1 )       —         —    
  

 

 

       

 

 

   

 

 

 

Adjusted SG&A expenses (Non-GAAP)

   $ 197,287        20.3      $ 180,981       20.0  

Net sales

   $ 973,705         $ 903,221    

 

*

Percentage of sales information does not add due to rounding.

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.