Dorman Products Inc. Reports Operating Results (10-K)
Dorman Products has a market cap of $830 million; its shares were traded at around $45.1 with a P/E ratio of 15 and P/S ratio of 1.6. Dorman Products had an annual average earning growth of 14.3% over the past 10 years. GuruFocus rated Dorman Products the business predictability rank of 4.5-star.
Highlight of Business Operations:Net sales increased 16.1% to $529.3 million in fiscal 2011 from $455.7 million in fiscal 2010. Our revenue growth was driven by overall strong demand for our products, higher new product sales and the impact of one additional weeks sales in fiscal 2011. Excluding the additional one week of sales, net sales growth was 15% in fiscal 2011 compared to fiscal 2010.
Over the past several years we have continued to extend payment terms to certain customers as a result of customer requests and market demands. These extended terms have resulted in increased accounts receivable levels and significant uses of cash flow. We participate in accounts receivable sales programs with several customers which allow us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment terms extensions. During fiscal 2011 and fiscal 2010, we sold approximately $208.8 million and $104.3 million, respectively, under these programs. We expect continued pressure to extend our payment terms for the foreseeable future. Further extensions of customer payment terms will result in additional uses of cash flow or increased costs associated with the sale of accounts receivable.
Allowance for Doubtful Accounts. The preparation of our financial statements requires us to make estimates of the collectability of our accounts receivable. We specifically analyze accounts receivable and historical bad debts, customer creditworthiness, current economic trends and changes in customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts. A significant percentage of our accounts receivable have been, and will continue to be, concentrated among a relatively small number of automotive retailers and warehouse distributors in the United States. Our five largest customers accounted for 83% and 78% of net accounts receivable as of December 31, 2011 and December 25, 2010, respectively. A bankruptcy or financial loss associated with a major customer could have a material adverse effect on our sales and operating results.
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