For Immediate Release
Dorman Products, Inc. Reports Fourth Quarter and Fiscal 2018 Results,
Issues Fiscal 2019 Guidance
Highlights:
Net sales of $260.3 million, up 14% compared to $227.7 million last year.
Diluted earnings per share (EPS) on a GAAP basis increased 62% to $1.05 compared to $0.65 last year. Adjusted diluted EPS of $1.10, up 26% compared to $0.87 last year.
The Company expects 2019 net sales growth between 6%-10% and expects diluted EPS of between $4.22 and $4.38 on a GAAP basis and adjusted diluted EPS of between $4.37 and $4.53 or between a 4% and 8% growth rate.
COLMAR, PA (February 25, 2019) - Dorman Products, Inc. (the "Company" or "Dorman") (NASDAQ:DORM), a leading supplier in the automotive aftermarket, today announced its financial results for the fourth quarter and fiscal year ended December 29, 2018.
4th Quarter Financial Results
The Company reported fourth quarter 2018 net sales of $260.3 million, up 14% compared to net sales of $227.7 million in the fourth quarter of 2017. Sales growth in the quarter attributable to acquisitions was approximately 4%.
Gross profit grew 7% to $96.9 million in the fourth quarter from $90.9 million last year. Gross profit percentage for the fourth quarter was 37.2% compared to 39.9% in the same quarter last year. The adjusted gross profit percentage was 37.8% in the quarter compared to 40.2% in the same quarter last year. The gross profit percentage declined primarily as a result of increased volume of lower margin program rollouts in the fourth quarter as compared to the same quarter in 2017, acquisitions which carry lower gross margins compared to our historical levels, and the negative impact of increased selling prices tied to tariffs that do not provide leverage to gross or operating profit percentages.
Selling, general, and administrative ("SG&A") expenses grew 10% to $52.3 million in the fourth quarter on a GAAP basis compared to $47.5 million in the same quarter last year. Adjusted SG&A increased 10% to $51.2 million or 19.7% of net sales in the quarter compared to $46.4 million or 20.4% of net sales in the same quarter last year. The increase in SG&A was primarily due to the inclusion of expenses of acquired operations, the reinvestment of tax savings from the Tax Cuts and Jobs Act (TCJA), and wage and benefit inflation.
Income tax expense was $9.7 million in the fourth quarter of 2018, or 22.0% of income before income taxes down from $21.3 million, or 49.2% of income before income taxes recorded in the same quarter last year. The reduction in tax rate compared to prior year is primarily a result of the TCJA. Additionally, income tax expense in the fourth quarter of 2017 included $6.0 million of expenses related to the adoption of the TCJA and pre 2016 state tax matters.
Net income for the fourth quarter of 2018 was $34.6 million, or $1.05 per diluted share compared to $22.0 million, or $0.65 per diluted share, in the prior year quarter. Adjusted net income in the fourth quarter was $36.4 million, or $1.10 per diluted share, up 25% compared to $29.1 million or $0.87 per diluted share in the prior year quarter.
Please refer to the Non-GAAP Financial Measures reported in the supplemental schedules at the end of this release for a detailed reconciliation of the reported (GAAP) financial information to the adjusted financial information (Non-GAAP).
In the fourth quarter of 2018, the construction of our new 800,000 square foot distribution facility in Portland, Tennessee (in close proximity to our existing operation) was completed. Over the course of the first and second quarters of 2019, we will be transferring our existing distribution operations in Portland into this new facility. Additionally, in order to better serve our customers, we made the strategic decision to consolidate our Montreal facility (acquired as part of the MAS acquisition) into the new Portland distribution center and to consolidate an existing production facility in Michigan with our newly acquired Flight facility in Pennsylvania. Both of these actions will be completed in the first quarter of 2019. We expect that the pre-tax costs to complete these actions will be approximately $3.4 million, including approximately $1.5 million of duplicate rent and utilities while we transfer operations between our facilities in Portland and approximately $1.9 million of severance, accelerated depreciation, and other integration expenses related to the site consolidations.
In the fourth quarter of 2018 our net inventory increased by $30.5 million to $270.5 million. This increase in inventory was the result of several actions including the acceleration of inventory purchases in advance of a potential 25% tariff rate, a desire to maintain strong customer service while facility consolidations are executed, preparation for new programs to be launched in the first quarter of 2019, and purchases in advance of Chinese New Year. We anticipate that our inventory will return to historical inventory turn levels over the course of fiscal 2019.
Fiscal 2018 Financial Results
Fiscal 2018 net sales were $973.7 million, up 8% compared to $903.2 million in 2017. Sales growth in the full year attributable to acquisitions was approximately 5%.
Net income for the current fiscal year was $133.6 million, or $4.02 per diluted share compared to $106.6 million, or $3.13 per diluted share in the prior year. Adjusted net income in the current fiscal year was $139.4 million, or $4.20 per diluted share, up 22% compared to $114.7 million, or $3.37 per diluted share in the prior year.
Please refer to the Non-GAAP Financial Measures reported in the supplemental schedules at the end of this release for a detailed reconciliation of the reported (GAAP) financial information to the adjusted financial information (Non-GAAP).
Kevin Olsen, Dorman Products President and Chief Executive Officer, stated: "I'd first like to thank all of our many Dorman contributors for a very successful 2018. Their hard work and commitment to excellence is the driving force behind all of our success. The fourth quarter capped off a pivotal year for our company on many fronts. Our organic growth engine remains strong as we continued to invest in bringing new products to market. We successfully integrated the MAS acquisition fully into Dorman while creating a market leading, comprehensive Chassis offering to meet the needs of both our retail and traditional customers. We acquired Flight Systems Automotive Group in the third quarter greatly increasing our complex electronics capabilities. We continued to grow and invest in our Heavy Duty business, setting us up nicely to continue our aggressive growth trajectory. Also, construction of a new, state of the art distribution facility in Tennessee was completed. This facility will enable us to better serve the needs of customers and provide space for future growth. Continuing to be the number one innovator in the light, medium and heavy duty markets will be the cornerstone of our strategy, supplemented by strategic acquisitions that accelerate growth in targeted segments, markets and geographies. Despite some macro uncertainties around trade policies, we remain optimistic about 2019."
2019 Guidance
The Company expects 2019 net sales growth between 6%-10% and expects diluted EPS of between $4.22 and $4.38 on a GAAP basis and adjusted diluted EPS of between $4.37 and $4.53 or between a 4% and 8% growthrate. Please refer to the 2019 Guidance table at the end of this release for a detailed reconciliation of the forecasted (GAAP) financial information to the adjusted financial information (Non-GAAP). Tariffs are not expected to have an impact on our 2019 net income, but will lower our gross and operating profit percentages as these additional costs are passed through to customers. We have not assumed any share repurchases in this guidance.
Share Repurchases
Under its share repurchase program, Dorman repurchased 135.7 thousand shares of its common stock for $9.6 million at an average share price of $70.86 during the quarter ended December 29, 2018, bringing fiscal year 2018 purchases to 622.2 thousand shares for $43.4 million at an average price of $69.73. Including the additional $150 million authorization announced in December 2018, the Company has $183.3 million left under its current share repurchase authorization.
About Dorman Products
Dorman Products, Inc. is a leading supplier of Dealer "Exclusive" replacement parts to the Automotive, Medium and Heavy Duty Aftermarkets. 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.
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 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, the ability to successfully identify, complete, and integrate acquisitions, imposition of new taxes, duties or tariffs, 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 30, 2017. 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.
Investor Relations Contact
Kevin Olsen, President and CEOkolsen@dormanproducts.com(215) 997-1800
Visit our website atwww.dormanproducts.com
Consolidated Statements of Operations
(in thousands, except per-share amounts)
Fourth Quarter (unaudited)
Net sales
Cost of goods sold Gross profit
Selling, general and administrative expenses Income from operations
Other expense, net
Income before income taxes Provision for income taxes Net income
Diluted earnings per share
13 Weeks
13 Weeks
12/29/18
Pct.
12/30/17
Pct.
$
260,341
100.0
$
227,719 100.0
163,394
62.8
136,791 60.1
96,947
37.2
90,928 39.9
52,310
20.1
47,519 20.9
44,637
17.1
43,409 19.1
295
0.1 124 0.1
44,342 17.0 43,285 19.0
9,743 3.7 21,317 9.4
$ $
34,599
13.3 $ 21,968 9.6
1.05
$ 0.65
Weighted average diluted shares outstanding
32,994 33,605
52 Weeks
52 WeeksFiscal Year Ended (unaudited)
Net sales
Cost of goods sold Gross profit
Selling, general and administrative expenses Income from operations
Other expense (income), net Income before income taxes Provision for income taxes Net income
12/29/18
Pct.*
12/30/17
Pct.
$
973,705
100.0 $ 903,221 100.0
600,424
61.7 $ 544,572 60.3
373,281
38.3 $ 358,649 39.7
202,138
20.8 $ 182,409 20.1
171,143
17.5 $ 176,240 19.5
$
8
0.0 17.5 3.9 13.7
$ (348)
171,135
(0.1 )
$
176,588 19.6
37,533
$ $
69,989 7.7
133,602
106,599 11.8
Diluted earnings per share
Weighted average diluted shares outstanding
* Percentage of sales information does not add due to rounding.
$ 4.02 33,207
$ 3.13
34,052
Condensed Consolidated Balance Sheets
Assets:
Cash and cash equivalents Accounts receivable Inventories
Prepaid expenses Total current assets
Property, plant & equipment, net Goodwill and other intangible assets, net Deferred income taxes, net
Other assets
Total assets
Liabilities & shareholders' equity: Accounts payable
Accrued expenses and other Total current liabilities Other long-term liabilities Shareholders' equity Total liabilities and equity
Selected Cash Flow Information (unaudited):
(in thousands)
Depreciation, amortization and accretion Capital expenditures
(in thousands)
(Unaudited)
$
$
$
$
12/29/18 | 12/30/17 | |
43,458 | $ | 71,691 |
310,114 | 241,880 | |
270,504 | 212,149 | |
7,363 | 7,129 | |
631,439 | 532,849 | |
98,647 | 92,692 | |
97,770 | 88,157 | |
6,316 | 7,884 | |
55,184 | 44,342 | |
889,356 | $ | 765,924 |
109,096 | $ | 80,218 |
34,293 | 30,563 | |
143,389 | 110,781 | |
18,344 | 20,336 | |
727,623 | 634,807 | |
889,356 | $ | 765,924 |
13 Weeks (unaudited)
52 Weeks (unaudited)
12/29/18
12/30/17
12/29/18
$ $
8,718 8,007
$ $
6,256 7,014
$ $
28,391 26,106
12/30/17
$ 22,224
$ 24,450
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Disclaimer
Dorman Products Inc. published this content on 25 February 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 25 February 2019 15:01:10 UTC