Dorman Products, Inc.

Previous wording

New product development is a key success factor for us and has been a significant contributor to our growth. We have made incremental investments to increase our new product development efforts to grow our business and strengthen our relationships with our customers. The investments primarily have been in the form of increased product development resources, additional customer and end-user awareness programs, and customer service improvements. These investments have enabled us to provide an expanding array of new product offerings and grow revenues at levels that generally have exceeded market growth rates.

Current wording

New product development is a key success factor for us and has been a significant contributor to our growth. We have made incremental investments to increase our new product development efforts to grow our business and strengthen our relationships with our customers. The investments have primarily been in the form of increased product development resources, additional customer and end-user awareness programs, and customer service improvements. These investments have enabled us to provide an expanding array of new product offerings and grow revenues at levels that generally have exceeded market growth rates.

Previous wording

In the six months ended June 28, 2025, we introduced 2,588 new distinct parts to our customers and end-users, including 914 “New-to-the-Aftermarket” parts. We introduced 5,335 new distinct parts to our customers and end-users in the fiscal year ended December 31, 2024, including 1,659 “New-to-the-Aftermarket” parts.

Current wording

In the nine months ended September 27, 2025, we introduced 4,357 new distinct parts to our customers and end-users, including 1,199 “New-to-the-Aftermarket” parts. We introduced 5,335 new distinct parts to our customers and end-users in the fiscal year ended December 31, 2024, including 1,659 “New-to-the-Aftermarket” parts.

Previous wording

Within the specialty vehicle sector, we focus on providing performance parts and accessories and nondiscretionary repair parts for UTVs and ATVs. We are dedicated to developing better and more innovative materials that will be compatible across a wide variety of makes and models to enhance both the performance and appearance of customers’ vehicles.

Current wording

Within the specialty vehicle sector, we focus on providing performance parts and accessories and nondiscretionary repair parts for UTVs and ATVs. We are dedicated to developing better and more innovative materials that will be compatible across a wide variety of makes and models to maintain as well as to enhance both the performance and appearance of customers’ vehicles.

Previous wording

The number of miles driven is another important statistic that impacts our business. Generally, as vehicles are driven more miles, the more likely it is that parts will fail and there will be increased demand for replacement parts, including our parts. According to the U.S. Department of Transportation, the number of miles driven through October 2024 increased 1.0% year over year in the light-duty sector. However, global gasoline prices remained high during 2024 and, if they continue, they may negatively impact miles driven as consumers reduce travel or seek alternative methods of transportation.

Current wording

The number of miles driven is another important statistic that impacts our business. Generally, as vehicles are driven more miles, the more likely it is that parts will fail and there will be increased demand for replacement parts, including our parts. According to the U.S. Department of Transportation, the number of miles driven through October 2024 increased 1.0% year over year in the light-duty sector. However, global gasoline prices remained high during 2024 and, if high prices persist, they may negatively impact miles driven as consumers reduce travel or seek alternative methods of transportation.

Previous wording

Many of our products and related raw materials and components are sourced from suppliers in various non-U.S. countries. The products generally are sourced through purchase orders with the purchase price specified in U.S. dollars. Accordingly, we generally do not have exposure to fluctuations in the relationship between the U.S. dollar and various foreign currencies between the time of execution of the purchase order and payment for the product.

Current wording

Many of our products and related raw materials and components are sourced from suppliers in various non-U.S. countries. The products are generally sourced through purchase orders with the purchase price specified in U.S. dollars. Accordingly, we generally do not have exposure to fluctuations in the relationship between the U.S. dollar and various foreign currencies between the time of execution of the purchase order and payment for the product.

Previous wording

We experienced broad-based inflationary impacts during the year ended December 31, 2023, due primarily to global transportation and logistics constraints, which resulted in significantly higher transportation costs, tariffs, material costs, and wage inflation from an increasingly competitive labor market. Certain of these increased costs in the second half of 2023 impacted our results of operations in the first half of 2024. Higher labor costs and material inflation resulting from geopolitical events, rising interest rates, disruptions to supply chain and logistics networks, and the trade policies of the U.S. or the countries where we source or sell our products may negatively impact our future results. We attempt to offset inflationary pressures with cost-saving initiatives, price increases to customers, and the use of alternative suppliers. There can be no assurance that we will be successful in implementing such cost-saving initiatives, pricing increases, or supplier diversification in the future to offset increased inflationary costs.

Current wording

We experienced broad-based inflationary impacts during the year ended December 31, 2023, due primarily to global transportation and logistics constraints, which resulted in significantly higher transportation costs, tariffs and material costs, and wage inflation from an increasingly competitive labor market. Certain of these increased costs in the second half of 2023 impacted our results of operations in the first half of 2024. Higher labor costs and material inflation resulting from geopolitical events, rising interest rates, disruptions to supply chain and logistics networks, and the trade policies of the U.S. or the countries where we source or sell our products may negatively impact our future results. We attempt to offset inflationary pressures with cost-saving initiatives, price increases to customers, and the use of alternative suppliers. There can be no assurance that we will be successful in implementing such cost-saving initiatives, pricing increases, or supplier diversification in the future to offset increased inflationary 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 impacts the interest cost on existing borrowings. Interest rates may remain steady at their current levels for prolonged periods or may increase in the future, resulting in increased costs associated with our accounts receivable sales programs and outstanding borrowings. Interest rates remained elevated throughout much of 2024, but began to decline starting in the second half of that year. Interest rates remained relatively stable throughout the first quarter of 2025, but declined in the second quarter of 2025.

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 impacts the interest cost on existing borrowings. Interest rates may remain steady at their current levels for prolonged periods or may increase in the future, resulting in increased costs associated with our accounts receivable sales programs and outstanding borrowings. Interest rates remained elevated throughout much of 2024, but began to decline starting in the second half of that year. Interest rates remained relatively stable throughout the first quarter of 2025, but declined subsequently.

Previous wording

We source the majority of our raw materials and parts from suppliers in various non-U.S. countries. In 2024, approximately 72% of our products were sourced from suppliers in various non-U.S. countries, with approximately 45% of our products sourced from third-party suppliers in China. The current U.S. administration recently implemented new tariffs, announced additional tariffs that are expected to take effect in the coming months, and indicated that further tariff changes are possible depending on the outcome of trade negotiations with other countries. We expect these actions and any reactionary tariff adjustments made by other countries will impact our business and contribute to inflationary cost increases. As a result, we are taking actions designed to mitigate the potential impacts of these tariffs, including, but not limited to, diversifying our supply chain, passing along price increases to our customers, and negotiating cost concessions from our suppliers where possible. Absent any changes in trade regulations, we anticipate inflationary cost increases due to these tariffs, as well as any resulting impact on macroeconomic conditions and our business, to continue throughout the remainder of 2025.

Current wording

We source the majority of our raw materials and parts from suppliers in various non-U.S. countries. In 2024, approximately 72% of our products were sourced from suppliers in various non-U.S. countries, with approximately 45% of our products sourced from third-party suppliers in China. The current U.S. administration recently implemented new tariffs, announced additional tariffs that are expected to take effect in the coming months, and indicated that further tariff changes are possible depending on the outcome of trade negotiations with other countries. We expect these actions and any reactionary tariff adjustments made by other countries will impact our business and contribute to inflationary cost increases. We have taken actions designed to mitigate the potential impacts of these tariffs, including, but not limited to, diversifying our supply chain and negotiating cost concessions from our suppliers where possible.

Previous wording

Starting in the third quarter of 2025, we implemented pass-through price increases to offset the dollar impact of the new tariff costs. We expect to see a temporary increase in gross and operating margin percentages in 2025 due to the price increases taking effect before the increased cost of inventory reflecting higher tariffs is recognized as an expense in our statement of operations.

Current wording

In addition, starting in the third quarter of 2025, we implemented pass-through price increases to offset the dollar impact of certain new tariff costs. We have started to experience a temporary increase in gross and operating margin percentages in 2025 due to the price increases taking effect before the increased cost of inventory, reflecting higher tariffs, is recognized as an expense in our statement of operations. We expect margins to decrease as we start to recognize these higher tariff costs in our Statement of Operations and Comprehensive Income in the fourth quarter of 2025. Absent any changes in trade regulations, we anticipate inflationary cost increases due to these tariffs, as well as any resulting impact on macroeconomic conditions and our business, to continue throughout the remainder of 2025.

Previous wording

The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in our Condensed Consolidated Statements of Operations:

Current wording

The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in our Condensed Consolidated Statements of Operations and Comprehensive Income:

Previous wording

Net sales increased $38.0 million, or 7.6%, for the three months ended June 28, 2025, compared to the prior year period, driven by volume growth from increased customer demand and sales of new products in our Light Duty segment, and new business wins in our Heavy Duty segment, partially offset by reduced demand in our Specialty Vehicle segment impacted by soft market conditions in the specialty vehicle sector.

Current wording

Net sales increased $40.0 million, or 7.9%, for the three months ended September 27, 2025, compared to the prior year period, primarily driven by tariff-related pricing actions in our Light Duty and Heavy Duty segments, and new business wins in our Heavy Duty segment.

Previous wording

Gross profit as a percentage of net sales increased 150 basis points compared to the prior year period, primarily due to the sales growth noted above and favorable mix from higher sales of new products, as well as supplier diversification, productivity, and automation initiatives, that delivered cost savings.

Current wording

Gross profit as a percentage of net sales increased 390 basis points compared to the prior year period, primarily due to the sales growth noted above resulting from pricing actions enacted on inventory purchased before higher tariffs took effect earlier this year. Gross margin also benefited from a favorable mix from higher sales of new products and supplier diversification.

Previous wording

Selling, general, and administrative expenses (“SG&A”) increased $10.1 million, or 10 basis points as a percentage of net sales, for the three months ended June 28, 2025, compared to the prior year period, as favorable leverage from higher sales was more than offset by additional investments made in the current year period.

Current wording

Selling, general, and administrative expenses (“SG&A”) increased 30 basis points as a percentage of net sales, for the three months ended September 27, 2025, compared to the prior year period, due to higher factoring costs and additional investments made, partially offset by favorable leverage from higher sales.

Previous wording

Interest expense, net, decreased $3.0 million for the three months ended June 28, 2025, compared to the prior year period. The decrease was driven by lower outstanding principal on our revolving credit facility and term loan, resulting from repayments over the last several quarters, as well as lower average Term SOFR rates during the current year period.

Current wording

Interest expense, net, decreased $2.6 million for the three months ended September 27, 2025, compared to the prior year period. The decrease was driven by lower outstanding principal on our revolving credit facility and term loan, resulting from repayments over the last several quarters, as well as lower average Term SOFR rates during the current year period.

Previous wording

Net sales increased $77.0 million, or 7.9%, for the six months ended June 28, 2025, compared to the prior year period, driven by increased customer demand and sales of new products in our Light Duty segment, partially offset by reduced demand impacted by soft market conditions in the heavy duty and specialty vehicle sectors.

Current wording

Net sales increased $117.0 million, or 7.9%, for the nine months ended September 27, 2025, compared to the prior year period, driven by increased customer demand and sales of new products and tariff-related pricing actions in our Light Duty and Heavy Duty segments, partially offset by reduced demand impacted by soft market conditions in the heavy duty and specialty vehicle sectors.

Previous wording

Gross profit as a percentage of net sales increased 100 basis points compared to the prior year period, primarily due to the sales growth noted above and favorable mix from higher sales of new products, as well as supplier diversification, productivity, and automation initiatives, that delivered cost savings.

Current wording

Gross profit as a percentage of net sales increased 240 basis points for the nine months ended September 27, 2025, compared to the prior year period, primarily due to the sales growth noted above and favorable mix from higher sales of new products, as well as supplier diversification, productivity, and automation initiatives, that delivered cost savings.

Previous wording

Selling, general, and administrative expenses (“SG&A”) increased $10.7 million, but decreased 90 basis points as a percentage of net sales, for the six months ended June 28, 2025, compared to the prior year period, due to favorable leverage on higher net sales that more than offset additional investments made in the current year period.

Current wording

Selling, general, and administrative expenses (“SG&A”) decreased 60 basis points as a percentage of net sales, for the nine months ended September 27, 2025, compared to the prior year period, due to favorable leverage on higher net sales that more than offset additional investments made in the current year period.

Previous wording

Interest expense, net, decreased $6.3 million for the six months ended June 28, 2025, compared to the prior year period. The decrease was driven by lower outstanding principal on our revolving credit facility and term loan resulting from repayments over the last several quarters, as well as lower average Term SOFR rates during the current year period.

Current wording

Interest expense, net, decreased $8.8 million for the nine months ended September 27, 2025, compared to the prior year period. The decrease was driven by lower outstanding principal on our revolving credit facility and term loan resulting from repayments over the last several quarters, as well as lower average Term SOFR rates during the current year period.

Previous wording

Our effective tax rate decreased to 23.0% for the six months ended June 28, 2025, from 24.4% for the three months ended June 29, 2024, due to tax deductions related to the vesting of restricted stock units in the current year period.

Current wording

Our effective tax rate of 23.2% for the nine months ended September 27, 2025 was lower than our effective tax rate of 23.6% for the nine months ended September 28, 2024 due to tax deductions related to the vesting of restricted stock units in the current year period.

Previous wording

Light Duty segment income from operations as a percentage of net sales increased to 18.5% for the three months ended June 28, 2025, from 17.1% for the three months ended June 29, 2024. This increase was primarily driven by supplier diversification initiatives, favorable mix driven by higher new product sales, operational excellence initiatives delivering cost savings, and favorable leverage on higher net sales.

Current wording

Light Duty segment income from operations as a percentage of net sales increased to 23.7% for the three months ended September 27, 2025, from 19.0% for the three months ended September 28, 2024. This increase was primarily driven by the sales growth noted above from pricing actions enacted on inventory purchased before higher tariffs went into effect earlier this year and supplier diversification initiatives.

Previous wording

Heavy Duty net sales increased $0.9 million, or 1.4%, for the three months ended June 28, 2025, compared to the prior year period. The increase in net sales primarily reflects new business wins.

Current wording

Heavy Duty net sales increased $3.4 million, or 5.7%, for the three months ended September 27, 2025, compared to the prior year period. The increase in net sales primarily reflects tariff-related pricing actions and new business wins.

Previous wording

Specialty Vehicle net sales decreased $1.8 million, or 3.2%, for the three months ended June 28, 2025, compared to the prior year period, primarily due to reduced customer demand, partially offset by price increases.

Current wording

Specialty Vehicle net sales decreased slightly, for the three months ended September 27, 2025, compared to the prior year period, primarily due to reduced customer demand.

Previous wording

Light Duty net sales increased $88.5 million, or 11.9%, for the six months ended June 28, 2025, compared to the prior year period, primarily due to increased customer demand and sales of new products.

Current wording

Light Duty net sales increased $125.3 million, or 11.0%, for the nine months ended September 27, 2025, compared to the prior year period, primarily due to increased customer demand and sales of new products, as well as tariff-related pricing actions.

Previous wording

Light Duty segment income from operations as a percentage of net sales increased to 19.2% for the six months ended June 28, 2025, from 16.6% for the six months ended June 29, 2024. This increase was primarily driven by favorable mix from higher new product sales, operational excellence initiatives delivering cost savings, and favorable leverage on higher net sales.

Current wording

Light Duty segment income from operations as a percentage of net sales increased to 20.7% for the nine months ended September 27, 2025, from 17.4% for the nine months ended September 28, 2024. This increase was primarily driven by the sales growth noted above from pricing actions enacted on inventory purchased before higher tariffs went into effect earlier this year, favorable mix from higher new product sales, operational excellence initiatives delivering cost savings, and favorable leverage on higher net sales.

Previous wording

Heavy Duty net sales decreased $5.3 million, or 4.4%, for the six months ended June 28, 2025, compared to the prior year period. The decrease in net sales primarily reflects reduced customer demand from continued market pressures in freight transportation and the trucking aftermarket, partially offset by price increases.

Current wording

Heavy Duty net sales decreased $1.8 million, or 1.0%, for the nine months ended September 27, 2025, compared to the prior year period. The decrease in net sales primarily reflects reduced customer demand from continued market pressures in freight transportation and the trucking aftermarket, partially offset by tariff-related pricing actions and new business wins.

Previous wording

Heavy Duty segment income as a percentage of net sales decreased to 0.3% for the six months ended June 28, 2025, from 2.3% for the six months ended June 29, 2024. This decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes 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 income as a percentage of net sales decreased to 1.8% for the nine months ended September 27, 2025, from 3.0% for the nine months ended September 28, 2024. This decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes, lower manufacturing productivity, 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 net sales decreased $6.3 million, or 5.8%, for the six months ended June 28, 2025, compared to the prior year period, primarily due to reduced customer demand.

Current wording

Specialty Vehicle net sales decreased $6.5 million, or 4.1%, for the nine months ended September 27, 2025, compared to the prior year period, primarily due to reduced customer demand.

Previous wording

Over the past several years, we have continued to extend payment terms to certain customers in response to customer requests and market demands. These extended terms have resulted in increased accounts receivable levels and significant cash usage. Where available and when we deem appropriate, we participate in accounts receivable sales programs with several customers that enable us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment term extensions. However, any sales of accounts receivable through these programs ultimately result in us receiving a lesser amount of cash upfront than if we collected those accounts receivable ourselves in due course, resulting in accounts receivable factoring costs. Moreover, since these accounts receivable sales programs bear interest at rates tied to the Term SOFR or other reference rates, increases in these applicable rates increase our cost to sell our receivables and reduce the amount of cash we receive. See PART I, ITEM 3. Quantitative and Qualitative Disclosures about Market Risk for more information. Further extensions of customer payment terms would result in additional cash usage or increased costs associated with the sales of accounts receivable.

Current wording

We have extended payment terms in place with certain of our customers. These extended terms have resulted in increased accounts receivable levels and significant cash usage. Where available and when we deem appropriate, we participate in accounts receivable sales programs with several customers that enable us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment term extensions. However, any sales of accounts receivable through these programs ultimately result in us receiving a lesser amount of cash upfront than if we collected those accounts receivable ourselves in due course, resulting in accounts receivable factoring costs. Moreover, since these accounts receivable sales programs bear interest at rates tied to the Term SOFR or other reference rates, increases in these applicable rates increase our cost to sell our receivables and reduce the amount of cash we receive. See PART I, ITEM 3. Quantitative and Qualitative Disclosures about Market Risk for more information. Further extensions of customer payment terms would result in additional cash usage or increased costs associated with the sales of accounts receivable.

Previous wording

If receivables had not been sold, $989.1 million and $853.6 million of additional receivables would have been outstanding at June 28, 2025, and December 31, 2024, respectively, based on standard payment terms. Further extensions of customer payment terms would result in additional cash usage or increased costs associated with the sales of accounts receivable.

Current wording

If receivables had not been sold, $1,028.5 million and $853.6 million of additional receivables would have been outstanding at September 27, 2025, and December 31, 2024, respectively, based on standard payment terms. Further extensions of customer payment terms would result in additional cash usage or increased costs associated with the sales of accounts receivable.

Previous wording

We have a credit agreement that consists of a $600.0 million revolving credit facility and a $500.0 million term loan. The credit agreement matures on October 4, 2027, is guaranteed by the Company’s material domestic subsidiaries, and is supported by a security interest in substantially all of the Company’s material domestic subsidiaries’ personal property and assets, subject to certain exceptions. As of June 28, 2025, there was $462.5 million in outstanding borrowings under the term loan. Also on that date, we had outstanding letters of credit for $1.1 million in aggregate. Net of outstanding borrowings and letters of credit, we had $598.9 million available under the credit facility at June 28, 2025.

Current wording

We have a credit agreement that consists of a $600.0 million revolving credit facility and a $500.0 million term loan. The credit agreement matures on October 4, 2027, is guaranteed by the Company’s material domestic subsidiaries, and is supported by a security interest in substantially all of the Company’s material domestic subsidiaries’ personal property and assets, subject to certain exceptions. As of September 27, 2025, there was $456.3 million in outstanding borrowings under the term loan. Also on that date, we had outstanding letters of credit for $1.1 million in aggregate. Net of outstanding borrowings and letters of credit, we had $598.9 million available under the credit facility at September 27, 2025.

Previous wording

For the six months ended June 28, 2025, cash provided by operating activities decreased $55.5 million from the prior year period as a result of cash used to fund investments in inventory to meet customer demand and to pay for increased tariffs on imports, partially offset by higher proceeds from accounts receivable.

Current wording

For the nine months ended September 27, 2025, cash provided by operating activities decreased $87.6 million from the prior year period as a result of cash used to fund investments in inventory to meet customer demand and increased tariffs on imports, partially offset by higher proceeds from accounts receivable.

Previous wording

Investing activities used cash of $19.4 million and $22.7 million during the six months ended June 28, 2025, and June 29, 2024, respectively.

Current wording

Investing activities used cash of $29.8 million and $31.2 million during the nine months ended September 27, 2025, and September 28, 2024, respectively, reflecting timing of spending on capital investments.

Previous wording

Financing activities during the six months ended June 28, 2025, included $15.3 million paid to repurchase 122,923 shares of common stock and $20.2 million to repay outstanding borrowings under our credit agreement. During the six months ended June 29, 2024, we paid $51.2 million to repurchase 581,880 shares of common stock and $29.6 million to repay outstanding borrowings under our credit agreement.

Current wording

Financing activities during the nine months ended September 27, 2025, included $15.3 million paid to repurchase 122,923 shares of common stock and $26.5 million to repay outstanding borrowings under our credit agreement. During the nine months ended September 28, 2024, we paid $78.1 million to repurchase 855,971 shares of common stock, and repaid $40.4 million of outstanding borrowings under our credit agreement.