Highlights (All comparisons are to the prior year period unless otherwise noted):
- Net sales of $480.6 million, up 15%
- Diluted earnings per share (“EPS”) of $1.04, compared to $1.20
- Adjusted diluted EPS* of $1.01, compared to $1.29
- Generated $67 million of cash from operating activities; repaid $52 million of debt
- The Company confirms its full-year 2023 guidance of net sales of $1.95 billion to $2.00 billion, diluted EPS of $4.35 to $4.55, and adjusted diluted EPS* of $5.15 to $5.35
COLMAR, Pa., Aug. 01, 2023 (GLOBE NEWSWIRE) -- Dorman Products, Inc. (the “Company” or “Dorman”) (DORM, Financial), a leading supplier in the motor vehicle aftermarket industry, today announced its financial results for the second quarter ended July 1, 2023.
Second Quarter Financial Results
The Company reported second quarter 2023 net sales of $480.6 million, up 15% compared to net sales of $417.4 million in the second quarter of 2022. The sales growth was primarily driven by the addition of SuperATV, along with price increases to offset inflation and the introduction of new products to the market. Net sales growth excluding acquisitions was 1% compared to the second quarter of 2022, and 16% compared to the second quarter of 2021.
Gross profit was $163.5 million in the second quarter of 2023, or 34.0% of net sales, compared to $141.5 million, or 33.9% of net sales, for the same quarter last year. Adjusted gross margin* was 35.1% in the second quarter of 2023 compared to 34.0% in the same quarter last year. The 110-basis-point increase in adjusted gross margin* is primarily due to the recognition of sales of lower-cost inventory, price increases and the addition of SuperATV, which has a higher gross margin percentage than the Company average. In addition, adjusted gross margin* increased 270 basis points compared to the first quarter of 2023.
Selling, general and administrative (“SG&A”) expenses were $108.3 million, or 22.5% of net sales, in the second quarter of 2023 compared to $92.1 million, or 22.1% of net sales, for the same quarter last year. Adjusted SG&A expenses* were $114.4 million, or 23.8% of net sales, in the second quarter of 2023 compared to $88.7 million, or 21.3% of net sales, in the same quarter last year. The increase in adjusted SG&A expenses* as a percentage of net sales was due primarily to the addition of SuperATV, which has higher SG&A expenses as a percentage of net sales than the Company average, and the impact of higher interest rates on our customer accounts receivable factoring programs.
Net interest expense was $12.6 million for the second quarter of 2023 compared to $1.6 million for the same quarter last year. The increase of $11.0 million primarily reflects the addition of the term loan used to complete the acquisition of SuperATV in October 2022, and significantly higher interest rates compared to the prior year.
Income tax expense was $10.3 million, or 23.8% of income before income taxes, compared to $10.1 million, or 21.1% of income before income taxes, in the same quarter last year. The increase in the effective tax rate was due to an increase in state tax expense and the effect of foreign operations.
Net income for the second quarter of 2023 was $32.8 million, or $1.04 per diluted share, compared to $37.9 million, or $1.20 per diluted share, in the prior-year quarter. Adjusted net income* in the second quarter of 2023 was $31.9 million, or $1.01 per diluted share, compared to $40.6 million, or $1.29 per diluted share, in the prior-year quarter.
Kevin Olsen, Dorman’s President and Chief Executive Officer, stated, “We reported another solid quarter due to the continuous dedication and hard work of our Contributors. Overall, the quarter played out largely as expected. The forecasted sequential improvement in adjusted gross margin* materialized as we saw a 270 basis-point improvement over the first quarter of 2023, which drove adjusted diluted EPS* growth of more than 80% over the same period. We expect to see gross margins continue to improve throughout the second half of 2023, as a large portion of products sourced when inflationary pressures were much higher are now out of our inventory.
“We were pleased with net sales performance, recognizing that we were up against strong prior year comparables. During the first half of 2022, we believe we benefited from customers restocking their inventories as global supply chains rebounded from the impact of the global pandemic. As a result, our shipments outpaced customer point-of-sale over that time frame. Year-to-date, end-user demand for our products has remained strong as our customer point-of-sale growth was estimated to be in the low double digits, and we expect this demand profile to continue throughout the balance of 2023.
“SuperATV, our latest acquisition, continues to perform well. The business generated high-single-digit year-over-year sales growth and was accretive to both our overall operating margin and EPS in the quarter. We couldn’t be happier with the team, which continues to deliver on our integration and synergy plans.
“As global supply chains have improved, we have been able to reduce inventory $113 million from December 31, 2022. Lower inventory drove a robust $67 million of cash from operating activities in the quarter, which was used to repay $52 million of indebtedness, for a total repayment of $79 million for the first half of 2023. We expect strong cash flows to continue in the second half of 2023, driven by further inventory reductions, and to further pay down our debt.
“Regarding new product development, we launched hundreds of new products during the quarter, including a new Dorman® OE FIX™ engine heater hose assembly and torque converter lock-up solenoid, a first-to-the-aftermarket suspension sway bar bracket kit, and additional offerings for the Electric Vehicle (EV) market. We believe that our focus on innovation and new product development will enable us to continue to deliver the products desired by end users and help drive profitable growth for our customers.”
2023 Guidance
The 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 Products
Dorman 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 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 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”), as updated by our subsequent filings with the 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 Contact
Michael P. Dickerson
Vice President, Investor Relations and Risk Management
[email protected]
(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) | 7/1/23 | Pct.* | 6/25/22 | Pct. * | |||||||||
| Net sales | $ | 480,568 | 100.0 | $ | 417,419 | 100.0 | |||||||
| Cost of goods sold | 317,062 | 66.0 | 275,894 | 66.1 | |||||||||
| Gross profit | 163,506 | 34.0 | 141,525 | 33.9 | |||||||||
| Selling, general and administrative expenses | 108,308 | 22.5 | 92,058 | 22.1 | |||||||||
| Income from operations | 55,198 | 11.5 | 49,467 | 11.9 | |||||||||
| Interest expense, net | 12,565 | 2.6 | 1,565 | 0.4 | |||||||||
| Other income, net | (396 | ) | (0.1 | ) | (111 | ) | (0.0 | ) | |||||
| Income before income taxes | 43,029 | 9.0 | 48,013 | 11.5 | |||||||||
| Provision for income taxes | 10,259 | 2.1 | 10,108 | 2.4 | |||||||||
| Net income | $ | 32,770 | 6.8 | $ | 37,905 | 9.1 | |||||||
| Diluted earnings per share | $ | 1.04 | $ | 1.20 | |||||||||
| Weighted average diluted shares outstanding | 31,528 | 31,535 | |||||||||||
| Six Months Ended | Six Months Ended | ||||||||||||
| (unaudited) | 7/1/23 | Pct.* | 6/25/22 | Pct. * | |||||||||
| Net sales | $ | 947,306 | 100.0 | $ | 818,998 | 100.0 | |||||||
| Cost of goods sold | 639,323 | 67.5 | 544,233 | 66.5 | |||||||||
| Gross profit | 307,983 | 32.5 | 274,765 | 33.5 | |||||||||
| Selling, general and administrative expenses | 234,671 | 24.8 | 178,586 | 21.8 | |||||||||
| Income from operations | 73,312 | 7.7 | 96,179 | 11.7 | |||||||||
| Interest expense, net | 24,518 | 2.6 | 2,796 | 0.3 | |||||||||
| Other income, net | (753 | ) | (0.1 | ) | (195 | ) | 0.0 | ||||||
| Income before income taxes | 49,547 | 5.2 | 93,578 | 11.4 | |||||||||
| Provision for income taxes | 11,094 | 1.2 | 20,466 | 2.5 | |||||||||
| Net income | $ | 38,453 | 4.1 | $ | 73,112 | 8.9 | |||||||
| Diluted earnings per share | $ | 1.22 | $ | 2.32 | |||||||||
| Weighted average diluted shares outstanding | 31,533 | 31,568 | |||||||||||
* Percentage of sales. Data may not add due to rounding.
| DORMAN PRODUCTS, INC. | |||||||
| Consolidated Balance Sheets | |||||||
| (in thousands, except share data) | |||||||
| (unaudited) | 7/1/23 | 12/31/22 | |||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 35,666 | $ | 46,034 | |||
| Accounts receivable, less allowance for doubtful accounts of $1,384 and $1,363 | 452,603 | 427,385 | |||||
| Inventories | 642,721 | 755,901 | |||||
| Prepaids and other current assets | 57,790 | 39,800 | |||||
| Total current assets | 1,188,780 | 1,269,120 | |||||
| Property, plant and equipment, net | 156,544 | 148,477 | |||||
| Operating lease right-of-use assets | 104,294 | 109,977 | |||||
| Goodwill | 443,889 | 443,035 | |||||
| Intangible assets, net | 312,554 | 322,409 | |||||
| Other assets | 50,779 | 48,768 | |||||
| Total assets | $ | 2,256,840 | $ | 2,341,786 | |||
| Liabilities and shareholders’ equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 152,121 | $ | 179,819 | |||
| Accrued compensation | 15,311 | 19,490 | |||||
| Accrued customer rebates and returns | 189,409 | 192,116 | |||||
| Revolving credit facility | 166,560 | 239,363 | |||||
| Current portion of long-term debt | 12,500 | 12,500 | |||||
| Other accrued liabilities | 34,470 | 35,007 | |||||
| Total current liabilities | 570,371 | 678,295 | |||||
| Long-term debt | 476,414 | 482,464 | |||||
| Long-term operating lease liabilities | 92,620 | 98,221 | |||||
| Other long-term liabilities | 16,497 | 28,349 | |||||
| Deferred tax liabilities, net | 14,866 | 11,826 | |||||
| Commitments and contingencies | |||||||
| Shareholders’ equity: | |||||||
