Dorman Products Inc

Previous wording

In the six months ended June 29, 2024, we introduced 3,096 new distinct parts to our customers and end-users, including 997 “New-to-the-Aftermarket” parts. We introduced 6,106 new distinct parts to our customers and end-users in the fiscal year ended December 31, 2023, including 1,791 “New-to-the-Aftermarket” parts.

Current wording

In the nine months ended September 28, 2024, we introduced 4,498 new distinct parts to our customers and end-users, including 1,374 “New-to-the-Aftermarket” parts. We introduced 6,106 new distinct parts to our customers and end-users in the fiscal year ended December 31, 2023, including 1,791 “New-to-the-Aftermarket” parts.

Previous wording

A key component of our strategy is growth through acquisitions, including the October 2022 acquisition of SuperATV, a leading independent supplier to the powersports aftermarket with a family of highly respected brands spanning functional accessories and upgrades, as well as replacement parts for specialty vehicles, and the August 2021 acquisition of Dayton Parts, a manufacturer of chassis and other parts designed to serve the heavy-duty vehicle sector of the aftermarket. We may acquire businesses in the future to supplement our financial growth, increase our customer base, add to our distribution capabilities or enhance our product development resources, among other reasons.

Current wording

A key component of our strategy is growth through acquisitions, including the October 2022 acquisition of SuperATV and the August 2021 acquisition of Dayton Parts. SuperATV is a leading independent supplier to the powersports aftermarket with a family of highly respected brands spanning functional accessories and upgrades, as well as replacement parts for specialty vehicles. Dayton Parts is a manufacturer of chassis and other parts designed to serve the heavy-duty vehicle sector of the aftermarket. We may acquire businesses in the future to supplement our financial growth, increase our customer base, add to our distribution capabilities or enhance our product development resources, among other reasons.

Previous wording

To the extent that the U.S. dollar changes in value relative to those foreign currencies in the future, the prices charged by our suppliers for goods under new purchase orders may change in equivalent U.S. dollars. The largest portion of our overseas purchases comes from China. The Chinese yuan to U.S. dollar exchange rate has fluctuated over the past several years. Any future changes in the value of the Chinese yuan relative to the U.S. dollar may result in a change in the cost of goods that we purchase from China. However, the cost of the goods we procure is also affected by other factors, including raw material availability, labor cost, tariffs and transportation costs.

Current wording

To the extent that the U.S. dollar changes in value relative to those foreign currencies in the future, the prices charged by our suppliers for goods under new purchase orders may change in equivalent U.S. dollars. The largest portion of our overseas purchases comes from China. The Chinese yuan to U.S. dollar exchange rate has fluctuated over the past several years. Any future changes in the value of the Chinese yuan relative to the U.S. dollar may result in a change in the cost of goods that we purchase from China. However, the cost of the goods we procure is also affected by other factors, including raw material availability, labor costs, tariffs and transportation costs.

Previous wording

Our business is subject to interest rate risk under the terms of our customer accounts receivable sales programs, as a change in the Term Secured Overnight Financing Rate (“Term SOFR”) or alternative discount rate affects the cost incurred to factor eligible accounts receivable. Additionally, our outstanding borrowings under our credit facility bear interest at variable rates tied to Term SOFR or the applicable base rate. Under the terms of the credit facility, a change in interest rates affects the rate at which we can borrow funds thereunder and also impacts the interest cost on existing borrowings. Interest rates may hold steady at their current rates for prolonged periods or may increase in the future, resulting in increased costs associated with our accounts receivable sales programs and outstanding borrowings. During the year ended December 31, 2023, we saw significant increases in Term SOFR, and other reference rates and interest rates have remained elevated throughout the six months ended June 29, 2024, which impacted our results as discussed in Results of Operations that follows.

Current wording

Our business is subject to interest rate risk under the terms of our customer accounts receivable sales programs, as a change in the Term Secured Overnight Financing Rate (“Term SOFR”) or alternative discount rate affects the cost incurred to factor eligible accounts receivable. Additionally, our outstanding borrowings under our credit facility bear interest at variable rates tied to Term SOFR or the applicable base rate. Under the terms of the credit facility, a change in interest rates affects the rate at which we can borrow funds thereunder and also impacts the interest cost on existing borrowings. Interest rates may hold steady at their current rates for prolonged periods or may increase in the future, resulting in increased costs associated with our accounts receivable sales programs and outstanding borrowings. During the year ended December 31, 2023, we saw significant increases in Term SOFR and other reference rates. Interest rates remained elevated throughout the first nine months of 2024 but have shown recent signs of beginning to decline.

Previous wording

Net sales increased $22.4 million, or 5%, for the three months ended June 29, 2024 compared to the prior year period, driven primarily by volume growth in the light duty sector and new product introductions, partially offset by soft market conditions in the heavy duty and specialty vehicle sectors.

Current wording

Net sales increased $15.6 million, or 3.2%, for the three months ended September 28, 2024 compared to the prior year period, driven primarily by increased customer demand and sales of new products launched in our Light Duty segment, partially offset by soft market conditions in the heavy duty and specialty vehicle sectors.

Previous wording

Gross profit as a percentage of net sales increased 560 basis points compared to the prior year period primarily due to easing of inflationary pressures across the businesses and favorable cost savings initiatives.

Current wording

Gross profit as a percentage of net sales increased 300 basis points compared to the prior year period primarily due to the easing of inflationary pressures across the businesses and favorable mix from higher sales of new products, as well as operational efficiency initiatives delivering cost-savings.

Previous wording

Selling, general and administrative expenses (“SG&A”) increased $18.6 million, or 270 basis points as a percentage of net sales, for the three months ended June 29, 2024, compared to the prior year period. In the prior year period, SG&A benefited from a $12.4 million fair value adjustment to the estimated contingent consideration related to a prior acquisition.

Current wording

Selling, general and administrative expenses (“SG&A”) increased $5.5 million, or 30 basis points as a percentage of net sales, for the three months ended September 28, 2024, compared to the prior year period due to higher compensation and benefits costs. In the prior year period, SG&A benefited from a $1.0 million fair value adjustment to the estimated contingent consideration related to a prior acquisition.

Previous wording

Our effective tax rate increased to 24.0% for the three months ended June 29, 2024 from 23.8% for the three months ended July 1, 2023.

Current wording

Our effective tax rate decreased to 22.3% for the three months ended September 28, 2024 from 23.0% for the three months ended September 30, 2023 due to favorable discrete items in the three months ended September 28, 2024.

Previous wording

Net sales increased $24.3 million, or 3%, for the six months ended June 29, 2024 compared to the prior year period, driven primarily by volume, including from new product introductions.

Current wording

Net sales increased $39.9 million, or 2.8%, for the nine months ended September 28, 2024 compared to the prior year period, driven primarily by volume, including from new product introductions.

Previous wording

Gross profit as a percentage of net sales increased 670 basis points compared to the prior year period primarily due to sales of lower-cost inventory and cost savings initiatives.

Current wording

Gross profit as a percentage of net sales increased 540 basis points compared to the prior year period primarily due to sales of lower-cost inventory and cost savings initiatives.

Previous wording

Selling, general and administrative expenses (“SG&A”) increased $19.3 million, or 130 basis points as a percentage of net sales, for the six months ended June 29, 2024, compared to the prior year period. The increase in SG&A was driven by a favorable $12.4 million fair value adjustment in the prior year period to the estimated contingent consideration obligation for an acquisition.

Current wording

Selling, general and administrative expenses (“SG&A”) increased $24.8 million, or 110 basis points as a percentage of net sales, for the nine months ended September 28, 2024, compared to the prior year period, primarily due to $13.4 million of favorable fair value adjustments in the prior year period to the estimated contingent consideration obligation for an acquisition and higher compensation and benefits costs in the current year period.

Previous wording

Our effective tax rate increased to 24.4% for the six months ended June 29, 2024 from 22.4% for the six months ended July 1, 2023 primarily due to favorable discrete items applied to a lower income before income taxes in the six months ended July 1, 2023.

Current wording

Our effective tax rate increased to 23.6% for the nine months ended September 28, 2024 from 22.7% for the nine months ended September 30, 2023 primarily due to favorable discrete items applied to a lower income before income taxes in the nine months ended September 30, 2023.

Previous wording

Heavy Duty net sales decreased $17.7 million, or 13%, for the six months ended June 29, 2024 compared to the prior year period. The decrease in net sales primarily reflects lower freight industry shipping volumes in the six months ended June 29, 2024, as well as strong sales performance in the six months ended July 1, 2023 driven by customers’ inventory restocking at the end of the global pandemic.

Current wording

Heavy Duty net sales decreased $3.2 million, or 5.1%, for the three months ended September 28, 2024 compared to the prior year period. The decrease in net sales primarily reflects reduced customer demand from lower freight industry shipping volumes, partially offset by sales of new products in the three months ended September 28, 2024.

Previous wording

Heavy Duty segment profit as a percentage of net sales decreased 50 basis points for the three months ended June 29, 2024, compared to the prior year period. This decrease was primarily driven by the deleveraging of fixed costs on lower net sales, and the impact of investments we made as part of initiatives to grow sales and improve margins on a long-term basis.

Current wording

Heavy Duty segment profit as a percentage of net sales increased 150 basis points for the three months ended September 28, 2024, compared to the prior year period. This increase was primarily driven by sales of lower-cost inventory, and the impact of investments we made as part of initiatives to grow sales and improve margins on a long-term basis.

Previous wording

Specialty Vehicle segment profit as a percentage of net sales increased to 17.8% from 16.8% for the three months ended June 29, 2024 and July 1, 2023, respectively. This increase was primarily driven by cost savings initiatives.

Current wording

Specialty Vehicle segment profit as a percentage of net sales increased to 17.0% from 13.5% for the three months ended September 28, 2024 and September 30, 2023, respectively. This increase was primarily driven by sales of lower-cost inventory and cost savings initiatives.

Previous wording

Light Duty net sales increased $42.7 million, or 6%, for the six months ended June 29, 2024 compared to the prior year period, primarily due to volume increases, including new product introductions.

Current wording

Light Duty net sales increased $61.6 million, or 5.7%, for the nine months ended September 28, 2024 compared to the prior year period, primarily due to volume increases, including sales of new products launched.

Previous wording

Heavy Duty net sales decreased $7.8 million, or 11%, for the three months ended June 29, 2024 compared to the prior year period. The decrease in net sales primarily reflects lower freight industry shipping volumes in the three months ended June 29, 2024, as well as strong sales performance in the three months ended July 1, 2023 driven by customers’ inventory restocking at the end of the global pandemic.

Current wording

Heavy Duty net sales decreased $20.9 million, or 10.5%, for the nine months ended September 28, 2024 compared to the prior year period. The decrease in net sales primarily reflects reduced customer demand from lower freight industry shipping volumes in the nine months ended September 28, 2024, as well as sales performance in the nine months ended September 30, 2023 driven by customers’ inventory restocking at the end of the global pandemic.

Previous wording

Heavy Duty segment profit as a percentage of net sales decreased by 410 basis points for the six months ended June 29, 2024, compared to the prior year period. This decrease was primarily driven by the deleveraging of fixed costs on lower net sales and the impact of investments we made as part of initiatives to grow sales and improve margins on a long-term basis.

Current wording

Heavy Duty segment profit as a percentage of net sales decreased by 230 basis points for the nine months ended September 28, 2024, compared to the prior year period. This decrease was primarily driven by the deleveraging of fixed costs on lower net sales and the impact of investments we made as part of initiatives to grow sales and improve margins on a long-term basis.

Previous wording

Specialty Vehicle segment profit as a percentage of net sales increased to 15.9% for the six months ended June 29, 2024, from 15.4% for the six months ended July 1, 2023. This increase was primarily driven by the sell-through of lower-cost inventory and cost savings initiatives compared to the six months ended July 1, 2023.

Current wording

Specialty Vehicle segment profit as a percentage of net sales increased to 16.3% for the nine months ended September 28, 2024, from 14.8% for the nine months ended September 30, 2023. This increase was primarily driven by the sell-through of lower-cost inventory and cost savings initiatives compared to the nine months ended September 30, 2023.

Previous wording

If receivables had not been sold over the previous twelve months, approximately $805.4 million and $526.4 million of additional accounts receivable would have been outstanding at June 29, 2024 and December 31, 2023, respectively, based on our standard payment terms. We had capacity to sell more accounts receivable under these programs if the needs of the business warranted.

Current wording

If receivables had not been sold over the previous twelve months, approximately $557.7 million and $526.4 million of additional accounts receivable would have been outstanding at September 28, 2024 and December 31, 2023, respectively, based on our standard payment terms. We had capacity to sell more accounts receivable under these programs if the needs of the business warranted.

Previous wording

The Company has a credit agreement that provides a $600.0 million revolving credit facility and also includes a $500.0 million term loan with quarterly amortization payment requirements. The credit agreement matures on October 4, 2027. As of June 29, 2024, there was $69.5 million in outstanding borrowings under the revolving credit facility and $478.1 million in outstanding borrowings under the term loan. Also on that date, we had outstanding letters of credit for $1.5 million in aggregate. Net of outstanding borrowings and letters of credit, we had $529.0 million available under the credit facility at June 29, 2024.

Current wording

The Company has a credit agreement that provides a $600.0 million revolving credit facility and also includes a $500.0 million term loan with quarterly amortization payment requirements. The credit agreement matures on October 4, 2027. As of September 28, 2024, there was $61.8 million in outstanding borrowings under the revolving credit facility and $475.0 million in outstanding borrowings under the term loan. Also on that date, we had outstanding letters of credit for $1.2 million in aggregate. Net of outstanding borrowings and letters of credit, we had $537.0 million available under the credit facility at September 28, 2024.

Previous wording

For the six months ended June 29, 2024, cash provided by operating activities increased $22.4 million over the prior year period, primarily driven by higher net income, partially offset by favorable working capital in the prior year period from significant inventory reductions.

Current wording

For the nine months ended September 28, 2024, cash provided by operating activities increased $10.5 million over the prior year period, primarily driven by higher net income, partially offset by favorable working capital in the prior year period from significant inventory reductions.

Previous wording

Investing activities used cash of $22.7 million and $23.2 million during the six months ended June 29, 2024 and July 1, 2023, respectively. The decrease in cash used in investing activities during the six months ended June 29, 2024 over the prior year period is primarily due to higher additions for property, plant and equipment in the prior year period.

Current wording

Investing activities used cash of $31.2 million and $32.9 million during the nine months ended September 28, 2024 and September 30, 2023, respectively. The decrease in cash used in investing activities during the nine months ended September 28, 2024 compared to the prior year period is primarily due to higher additions for property, plant and equipment in the prior year period.

Previous wording

Financing activities during the six months ended June 29, 2024 included $51.2 million paid to repurchase 581,880 shares of common stock under our share repurchase plan, and the repayment of $23.3 million of outstanding borrowings under our revolving credit facility and $6.3 million of our term loan balance under our credit agreement. During the six months ended July 1, 2023, we repaid $72.8 million of outstanding borrowings under our revolving credit facility and $6.3 million of our term loan balance under our credit agreement. The remaining uses of cash from financing activities in each period resulted primarily from the repurchase of our common stock from our 401(k) Plan and income tax withholding in connection with the vesting of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”).

Current wording

Financing activities during the nine months ended September 28, 2024 included $78.1 million paid to repurchase 855,971 shares of common stock under our share repurchase plan, and the repayments of $31.0 million of outstanding borrowings under our revolving credit facility and $9.4 million of our term loan balance under our credit agreement. During the nine months ended September 30, 2023, we repaid $119.7 million of outstanding borrowings under our revolving credit facility and $9.4 million of our term loan balance under our credit agreement. The remaining uses of cash from financing activities in each period resulted primarily from the repurchase of our common stock from our 401(k) Plan and income tax withholding in connection with the vesting of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”).