SOURCE: Dorman Products, Inc.

October 28, 2014 07:00 ET

Dorman Products, Inc. Reports Sales and Earnings for the Third Quarter Ended September 27, 2014; Announces Expansion and Extension of Stock Repurchase Program

COLMAR, PA--(Marketwired - Oct 28, 2014) - Dorman Products, Inc. (NASDAQ: DORM)

Third Quarter Highlights:

  • Sales increased 11% to $197.8 million.

  • EPS increased 10% to $0.68 per diluted share.

  • Cash flow from operations increased to $28.2 million from $15.5 million.

  • Share repurchases totaled $30.7 million under stock repurchase program.

Dorman Products, Inc. (NASDAQ: DORM) today announced sales for the third quarter ended September 27, 2014 of $197.8 million, an increase of 11% from $178.0 million in the third quarter of 2013. Revenue growth was driven by the combination of continued strong overall demand for our products and customer stock-up orders in anticipation of our quarter-end conversion to a new ERP system. Net income for the third quarter ended September 27, 2014 increased 7% to $24.5 million up from the prior year's net income of $22.9 million. Diluted earnings per share in 2014 increased 10% to $0.68 per share from $0.62 per share in the same period last year.

"Third quarter sales growth represents the seventh consecutive quarter of double digit sales growth, and was consistent with our expectations. Sales growth in the third quarter excluding the customer stock-up orders would have been 5%, which is below recent levels. The lower sales growth is the result of softer order patterns from several customers that appear to be working down inventories, as sell-through of our products by our customers continues to be strong," said Mr. Steven Berman, Chairman and Chief Executive Officer. "Sales growth was 17% for the first nine months of 2014, driven by continued strong demand for our new products. We remain committed to our strategy of expanding the aftermarket through new product introduction, and believe that we have the product pipeline necessary to meet our future expectations for growth."

Gross profit margin was 38.4% for the third quarter ended September 27, 2014, compared to 39.2% for the same period last year. The decline in margin was primarily the result of competitive pricing pressures and mix shift that resulted in lower overall net selling prices. Selling, general and administrative expenses increased 10% in 2014 to $37.4 million from $34.0 million in 2013, but declined as a percentage of sales to 18.9% from 19.2%. Cost increases were primarily the result of higher variable costs associated with the 11% sales growth and increased investments in new product development initiatives. 

For the nine months ended September 27, 2014, sales increased 17% over the prior year period to $577.5 million from $494.7 million last year. Net income in 2014 increased 16% to $71.3 million from $61.3 million in the same period last year. Diluted earnings per share in 2014 rose 17% to $1.96 from $1.67 in the same period last year.

"We continue to make investments in the business to achieve our long-term goals. In September, we replaced our ERP software system. While the conversion was not without its challenges, we are happy to report that the conversion resulted in minimal disruption to our customers and the business in general. We expect to spend the next six to twelve months completing the stabilization and transition phase of the conversion after which we believe we will begin to generate benefits in the form of improved customer service and operating efficiencies. The fourth quarter will bear additional costs as a result of post-conversion support activities. These costs are expected to be approximately $2.6 million, exclusive of $0.5 million in incremental depreciation expense in the fourth quarter." said Mr. Berman. 

The Company also announced that its Board of Directors has approved an expansion and extension to the on-going share repurchase program. Under the expansion, the Board of Directors has authorized an increase to the share repurchase program from $50 million to $100 million. In connection with the expansion, the Board of Directors has extended the expiration date of the share repurchase program from May 31, 2015 to December 31, 2015. During the third quarter ended September 27, 2014, Dorman repurchased 671,200 shares of its common stock for $30.7 million, at an average price of $45.80 per share. During the first nine months of 2014, the Company has repurchased 833,100 shares of its common stock for $39.3 million, at an average price of $47.15 per share. 

Dorman Products, Inc. is a leading supplier of Dealer "Exclusive" automotive replacement parts, automotive hardware, brake products, and household hardware to the Automotive Aftermarket and Mass Merchandise markets. 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. 

Visit our website at www.dormanproducts.com

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, dependence on senior management 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 28, 2013. 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.

DORMAN PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per-share data)
 
    13 Weeks   13 Weeks
Third Quarter (unaudited)   9/27/14   Pct.   9/28/13   Pct.
Net sales   $ 197,796   100.0   $ 177,953   100.0
Cost of goods sold     121,915   61.6     108,249   60.8
Gross profit     75,881   38.4     69,704   39.2
Selling, general and administrative expenses     37,405   18.9     34,034   19.2
Income from operations     38,476   19.5     35,670   20.0
Interest expense, net     58   0.1     47   -
Income before income taxes     38,418   19.4     35,623   20.0
Provision for income taxes     13,882   7.0     12,736   7.1
Net income   $ 24,536   12.4   $ 22,887   12.9
                     
Diluted earnings per share   $ 0.68       $ 0.62    
                     
Weighted average diluted shares outstanding     36,024         36,632    
                     
                     
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per-share data)
 
    39 Weeks    39 Weeks 
Third Quarter (unaudited)   9/27/14   Pct.   9/28/13   Pct.
Net sales   $ 577,495   100.0   $ 494,657   100.0
Cost of goods sold     357,011   61.8     299,774   60.6
Gross profit     220,484   38.2     194,883   39.4
Selling, general and administrative expenses     108,361   18.8     98,551   19.9
Income from operations     112,123   19.4     96,332   19.5
Interest expense, net     160   -     148   0.1
Income before income taxes     111,963   19.4     96,184   19.4
Provision for income taxes     40,632   7.0     34,883   7.0
Net income   $ 71,331   12.4   $ 61,301   12.4
                     
Diluted earnings per share   $ 1.96   -   $ 1.67   -
                     
Weighted average diluted shares outstanding     36,372   -     36,610   -
                     
                     
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
         
         
Assets:   9/27/14   12/28/13
Cash and cash equivalents   $ 44,210   $ 60,593
Accounts receivable     189,220     180,777
Inventories     180,155     164,421
Deferred income taxes     21,258     20,798
Prepaid expenses     3,422     5,851
Total current assets     438,265     432,440
Property & equipment     80,972     64,786
Goodwill and other intangible assets     30,014     30,089
Other assets     2,935     1,854
Total assets   $ 552,186   $ 529,169
             
Liabilities & Shareholders' Equity:            
Accounts payable   $ 53,955   $ 61,255
Accrued expenses and other     28,346     30,483
Total current liabilities     82,301     91,738
Other long-term liabilities     5,694     5,310
Deferred income taxes     18,506     18,480
Shareholders' equity     445,685     413,641
Total Liabilities and Equity   $ 552,186   $ 529,169
             
             
Selected Cash Flow Information:        
  (in thousands)   13 Weeks (unaudited)   39 Weeks (unaudited)
    9/27/14   9/28/13   9/27/14   9/28/13
Depreciation, amortization and accretion   $ 3,165   $ 2,684   $ 9,001   $ 7,417
Capital expenditures   $ 7,114   $ 5,863   $ 22,992   $ 12,949