What changed in this filing

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Item 1. Financial Statements

2023-10-31 compared with 2023-08-01 · 72 added, 75 removed, 298 unchanged (33% of the section changed)

3 unchanged sentences

AND COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

(in thousands, except per share data) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Three Months Ended Nine Months Ended

(in thousands, except per share data) September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Net sales $ 488,186 $ 413,470 $ 1,435,492 $ 1,232,468

4 unchanged sentences

Interest expense, net 12,215 2,344 36,733 5,140

Other income, net ( 396 ) ( 111 ) ( 753 ) ( 195 )

Other (income) expense, net ( 605 ) 65 ( 1,358 ) ( 130 )

Income before income taxes 52,598 39,688 102,145 133,266

13 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share data) July 1, 2023 December 31, 2022

(in thousands, except for share data) September 30, 2023 December 31, 2022

Current assets:

37 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three Months Ended July 1, 2023

Three Months Ended September 30, 2023

Common Stock Additional Paid-In

Capital Retained

Earnings Accumulated Other Comprehensive Income (Loss) Total

Earnings Accumulated Other Comprehensive Loss Total

(in thousands, except share data) Shares

Balance at April 1, 2023 31,469,310 $ 315 $ 90,416 $ 961,597 $ ( 3,184 ) $ 1,049,144

Balance at July 1, 2023 31,488,164 $ 315 $ 94,452 $ 993,923 $ ( 2,618 ) $ 1,086,072

Exercise of stock options 460 — 37 — — 37

3 unchanged sentences

Other stock-related activity, net of tax ( 539 ) — ( 45 ) — — ( 45 )

Other comprehensive income — — — — 566 566

Change in foreign currency translation adjustment — — — — ( 1,214 ) ( 1,214 )

Net income — — — 40,522 — 40,522

Balance at July 1, 2023 31,488,164 $ 315 $ 94,452 $ 993,923 $ ( 2,618 ) $ 1,086,072

Three Months Ended June 25, 2022

Balance at September 30, 2023 31,487,494 $ 315 $ 97,342 $ 1,034,268 $ ( 3,832 ) $ 1,128,093

Three Months Ended September 24, 2022

Common Stock Additional Paid-In

Capital Retained

Earnings Accumulated Other Comprehensive Income (Loss) Total

Earnings Accumulated Other Comprehensive Loss Total

(in thousands, except share data) Shares

Balance at March 26, 2022 31,479,916 $ 315 $ 78,906 $ 879,923 $ 256 $ 959,400

Balance at June 25, 2022 31,425,224 $ 314 $ 82,192 $ 910,194 $ ( 1,743 ) $ 990,957

Exercise of stock options 169 — 14 — — 14

3 unchanged sentences

Other stock-related activity, net of tax ( 927 ) — ( 90 ) ( 91 ) — ( 181 )

Other comprehensive loss — — — — ( 1,999 ) ( 1,999 )

Change in foreign currency translation adjustment — — — — ( 2,112 ) ( 2,112 )

Net income — — — 30,601 — 30,601

Balance at June 25, 2022 31,425,224 $ 314 $ 82,192 $ 910,194 $ ( 1,743 ) $ 990,957

Six Months Ended July 1, 2023

Balance at September 24, 2022 31,419,392 $ 314 $ 85,374 $ 939,208 $ ( 3,855 ) $ 1,021,041

Nine Months Ended September 30, 2023

Common Stock Additional Paid-In

Capital Retained

Earnings Accumulated Other Comprehensive Income (Loss) Total

Earnings Accumulated Other Comprehensive Loss Total

(in thousands, except share data) Shares

5 unchanged sentences

Other stock-related activity, net of tax ( 25,524 ) — ( 1,893 ) ( 590 ) — ( 2,483 )

Other comprehensive income — — — — 685 685

Change in foreign currency translation adjustment — — — — ( 529 ) ( 529 )

Net income — — — 78,975 — 78,975

Balance at July 1, 2023 31,488,164 $ 315 $ 94,452 $ 993,923 $ ( 2,618 ) $ 1,086,072

Six Months Ended June 25, 2022

Balance at September 30, 2023 31,487,494 $ 315 $ 97,342 $ 1,034,268 $ ( 3,832 ) $ 1,128,093

Nine Months Ended September 24, 2022

Common Stock Additional Paid-In

Capital Retained

Earnings Accumulated Other Comprehensive Income (Loss) Total

Earnings Accumulated Other Comprehensive Loss Total

(in thousands, except share data) Shares

5 unchanged sentences

Other stock-related activity, net of tax ( 18,284 ) — ( 617 ) ( 1,561 ) — ( 2,178 )

Other comprehensive loss — — — — ( 303 ) ( 303 )

Change in foreign currency translation adjustment — — — — ( 2,415 ) ( 2,415 )

Net income — — — 103,713 — 103,713

Balance at June 25, 2022 31,425,224 $ 314 $ 82,192 $ 910,194 $ ( 1,743 ) $ 990,957

Balance at September 24, 2022 31,419,392 $ 314 $ 85,374 $ 939,208 $ ( 3,855 ) $ 1,021,041

See accompanying Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

(in thousands) July 1, 2023 June 25, 2022

Nine Months Ended

(in thousands) September 30, 2023 September 24, 2022

Cash Flows from Operating Activities:

36 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 1, 2023 AND JUNE 25, 2022

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND SEPTEMBER 24, 2022

Basis of Presentation

7 unchanged sentences

In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the three and six months ended July 1, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023 or any future period.

Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023 or any future period.

We may experience significant fluctuations from quarter to quarter in our results of operations due to the timing of orders placed by our customers and the introduction of new products and product lines to customers.

1 unchanged sentence

On October 4, 2022 (the “Closing Date”), Dorman acquired 100 % of the issued and outstanding equity interests of Super ATV, LLC ("SuperATV") (the “Transaction”), for aggregate consideration of $ 509.8 million (net of $ 6.8 million cash acquired), plus a potential earn-out payment to the sellers of SuperATV not to exceed $ 100 million in the aggregate, which remains subject to the achievement by SuperATV of certain revenue and gross margin targets in the years ending December 31, 2023 and December 31, 2024.

In the six months ended July 1, 2023, we received $ 0.3 million in cash as proceeds from the closing net working capital adjustments.

In the nine months ended September 30, 2023, we received $ 0.3 million in cash as proceeds from the closing net working capital adjustments.

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.

1 unchanged sentence

We have allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values.

The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, as of July 1, 2023, is based upon preliminary information and is subject to change within the permitted measurement period (up to one year from the acquisition date) as additional information concerning final asset and liability valuations is obtained.

The fair values that remain preliminary include tax-related liabilities and contingent liabilities.

Any material adjustments to the estimates based upon new information identified during the measurement period will be reflected as of the date of the acquisition.

Our purchase price allocation for SuperATV assets acquired and liabilities assumed was complete as of September 30, 2023.

The table below details the fair values of the assets acquired and the liabilities assumed at the acquisition date, including applicable measurement period adjustments:

20 unchanged sentences

Sales of accounts receivable under these agreements, and related factoring costs, which were included in selling, general and administrative expenses, were as follows:

Three Months Ended Six Months Ended

(in thousands) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Three Months Ended Nine Months Ended

(in thousands) September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Sales of accounts receivable $ 233,513 $ 239,926 $ 713,190 $ 778,051

2 unchanged sentences

Inventories were as follows:

(in thousands) July 1, 2023 December 31, 2022

(in thousands) September 30, 2023 December 31, 2022

Raw materials $ 30,570 $ 34,267

9 unchanged sentences

Foreign currency translation ( 48 )

Balance at July 1, 2023 $ 443,889

Balance at September 30, 2023 $ 443,220

Intangible Assets

Intangible assets included the following:

July 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Intangible assets subject to amortization Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value

6 unchanged sentences

Total $ 355,317 $ 48,515 $ 306,802 $ 354,517 $ 32,108 $ 322,409

Amortization expense was $ 5.5 million and $ 3.1 million during the three months ended July 1, 2023 and June 25, 2022, respectively, and $ 11.0 million and $ 6.1 million during the six months ended July 1, 2023 and June 25, 2022, respectively.

As of July 1, 2023 and December 31, 2022, the weighted average interest rate on the outstanding borrowings under our credit facility was 6.95 % and 5.78 %, respectively.

Amortization expense was $ 5.5 million and $ 3.0 million during the three months ended September 30, 2023 and September 24, 2022, respectively, and $ 16.5 million and $ 9.1 million during the nine months ended September 30, 2023 and September 24, 2022, respectively.

As of September 30, 2023 and December 31, 2022, the weighted average interest rate on the outstanding borrowings under our credit facility was 6.92 % and 5.78 %, respectively.

Commitments and Contingencies

1 unchanged sentence

If the remaining performance targets for the acquisitions are fully achieved, the maximum additional contingent payments to be made under the transaction documents would be $ 102.0 million in aggregate.

As of July 1, 2023 and December 31, 2022, we accrued $ 8.0 million and $ 20.0 million, respectively, representing the fair value of the estimated payments that we expect could become due in connection with the transactions.

For the six months ended July 1, 2023, we recorded a net decrease of $ 12.0 million to the contingent consideration liability, comprising a $ 12.4 million decrease in fair value based on the modeling of a range of performance outcomes relative to the achievement of targets established in the purchase agreement, partially offset by $ 0.4 million of accretion on the liability resulting from the passage of time.

As of September 30, 2023 and December 31, 2022, we accrued $ 7.0 million and $ 20.0 million, respectively, representing the fair value of the estimated payments that we expect could become due in connection with the transactions.

For the nine months ended September 30, 2023, we recorded a net decrease of $ 13.0 million to the contingent consideration liability, comprising a $ 13.4 million decrease in fair value based on the modeling of a range of performance outcomes relative to the achievement of targets established in the purchase agreement, partially offset by $ 0.4 million of accretion on the liability resulting from the passage of time.

The net benefit was included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

The contingent consideration liability is measured on a recurring basis and recorded at fair value.

The contingent consideration liability is measured each reporting period and recorded at fair value.

The inputs used to calculate the fair value of the contingent consideration liability are considered to be Level 3 inputs due to the lack of relevant observable market activity and significant management judgment.

8 unchanged sentences

The following tables present our disaggregated revenue by type of major good / product line and geography.

Three Months Ended Six Months Ended

(in thousands) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Three Months Ended Nine Months Ended

(in thousands) September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Powertrain $ 193,493 $ 153,773 $ 546,212 $ 462,556

3 unchanged sentences

Total $ 488,186 $ 413,470 $ 1,435,492 $ 1,232,468

Three Months Ended Six Months Ended

(in thousands) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Three Months Ended Nine Months Ended

(in thousands) September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Net sales to U.S.

6 unchanged sentences

We issue RSAs and RSUs to participants in our equity plans in the form of time-based RSAs and RSUs and performance-based RSAs and RSUs.

Compensation cost related to RSA and RSU grants was $ 2.6 million and $ 1.7 million for the three months ended July 1, 2023 and June 25, 2022, respectively, and $ 4.3 million and $ 3.3 million for the six months ended July 1, 2023 and June 25, 2022, respectively, and was included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

The following table summarizes our RSA and RSU activity for the six months ended July 1, 2023:

Compensation cost related to RSA and RSU grants was $ 2.4 million and $ 1.8 million for the three months ended September 30, 2023 and September 24, 2022, respectively, and $ 6.7 million and $ 5.1 million for the nine months ended September 30, 2023 and September 24, 2022, respectively, and

was included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

The following table summarizes our RSA and RSU activity for the nine months ended September 30, 2023:

Shares Weighted

3 unchanged sentences

Canceled ( 17,692 ) $ 83.49

Balance at July 1, 2023 265,293 $ 97.36

For the six months ended July 1, 2023, we granted 29,399 performance-based RSUs with a grant date fair value of $ 113.15 per share.

For the six months ended June 25, 2022, we granted 23,995 performance-based RSUs with a grant date fair value of $ 111.31 per share.

As of July 1, 2023, there was $ 18.6 million of unrecognized compensation cost related to unvested RSA and RSU grants that is expected to be recognized over a weighted average period of 2.3 years.

Balance at September 30, 2023 260,368 $ 97.51

For the nine months ended September 30, 2023, we granted 29,399 performance-based RSUs with a grant date fair value of $ 113.15 per share.

For the nine months ended September 24, 2022, we granted 23,995 performance-based RSUs with a grant date fair value of $ 111.31 per share.

As of September 30, 2023, there was $ 16.0 million of unrecognized compensation cost related to unvested RSA and RSU grants that is expected to be recognized over a weighted average period of 2.2 years.

Stock Options

We grant stock options to participants in our equity plans.

Compensation cost related to stock option grants was $ 0.6 million and $ 0.4 million for the three months ended July 1, 2023 and June 25, 2022, respectively, and $ 1.0 million and $ 0.8 million for the six months ended July 1, 2023 and June 25, 2022, respectively, and was included as selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

The following table summarizes our stock option activity for the six months ended July 1, 2023 :

Compensation cost related to stock option grants was $ 0.5 million and $ 0.5 million for the three months ended September 30, 2023 and September 24, 2022, respectively, and $ 1.5 million and $ 1.3 million for the nine months ended September 30, 2023 and September 24, 2022, respectively, and was included as selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

The following table summarizes our stock option activity for the nine months ended September 30, 2023 :

Shares Weighted

6 unchanged sentences

Exercised ( 24,297 ) $ 72.33

Balance at July 1, 2023 318,323 $ 86.55 5.9 $ 1,210

Exercisable at July 1, 2023 133,943 $ 80.43 4.8 $ 868

As of July 1, 2023, there was $ 5.1 million of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted average period of 3.0 years.

Balance at September 30, 2023 316,716 $ 86.51 5.6 $ 982

Exercisable at September 30, 2023 136,117 $ 80.50 4.6 $ 704

As of September 30, 2023, there was $ 4.6 million of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted average period of 2.8 years.

Employee Stock Purchase Plan ("ESPP")

During the three and six months ended July 1, 2023, we issued 14,975 shares under the ESPP.

During the six months ended June 25, 2022, we issued 4,615 shares under the ESPP.

During the nine months ended September 30, 2023, we issued 14,975 shares under the ESPP.

During the three and nine months ended September 24, 2022, we issued 8,712 shares and 13,327 shares, respectively, under the ESPP.

Earnings Per Share

1 unchanged sentence

To calculate diluted earnings per share, common share equivalents are added to the weighted average number of common shares outstanding.

equivalents are calculated using the treasury stock method and are computed based on outstanding stock-based awards.

For the three months ended July 1, 2023 and June 25, 2022, there were approximately 353,000 shares and 37,000 shares, respectively, and for the six months ended July 1, 2023 and June 25, 2022 there were approximately 295,000 shares and 32,000 shares, respectively, that were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive.

Common share equivalents are calculated using the treasury stock method and are computed based on outstanding stock-based awards.

For the three months ended September 30, 2023 and September 24, 2022, there were approximately 294,000 shares and 31,000 shares, respectively, and for the nine months ended September 30, 2023 and September 24, 2022 there were approximately 295,000 shares and 32,000 shares, respectively, that were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive.

The following table sets forth the computation of basic earnings per share and diluted earnings per share:

Three Months Ended Six Months Ended

(in thousands, except per share data) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Three Months Ended Nine Months Ended

(in thousands, except per share data) September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Net income $ 40,522 $ 30,601 $ 78,975 $ 103,713

11 unchanged sentences

The following table summarizes the repurchase and cancellation of common stock by the Company for the periods indicated:

Three Months Ended Six Months Ended

July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Shares repurchased and canceled 2,010 — 11,850 20,385

3 unchanged sentences

Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion.

The share repurchase program does not obligate us to acquire any specific number of shares.

At July 1, 2023, $ 228.0 million was available for repurchase under this share repurchase program.

The following

table summarizes the repurchase and cancellation of common stock under the share repurchase program:

Three Months Ended Six Months Ended

July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

share repurchase program does not obligate us to acquire any specific number of shares.

At September 30, 2023, $ 228.0 million was available for repurchase under this share repurchase program.

The following table summarizes the repurchase and cancellation of common stock under the share repurchase program:

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Shares repurchased and canceled — 14,700 — 180,750

1 unchanged sentence

Average price per share $ — $ 103.57 $ — $ 97.24

At July 1, 2023, we had $ 3.5 million of net unrecognized tax benefits, $ 3.4 million of which would lower our effective tax rate if recognized.

At September 30, 2023, we had $ 3.2 million of net unrecognized tax benefits, all of which would lower our effective tax rate if recognized.

We recognize interest and penalties related to uncertain tax positions in income tax expense.

As of July 1, 2023, accrued interest and penalties related to uncertain tax positions were not material.

As of September 30, 2023, accrued interest and penalties related to uncertain tax positions were not material.

We file income tax returns in the United States, Canada, China, India, and Mexico.

1 unchanged sentence

federal income tax purposes.

The statute of limitations for tax years before 2018 is closed for the states in which we file.

The statute of limitations for tax years before 2017 is closed for the states in which we filed.

The statute of limitations for tax years before 2020 is closed for income tax purposes in Canada and China.

15 unchanged sentences

Total payments under the arrangement are expected to be $ 0.2 million in fiscal 2023.

The agreement was signed in October 2020 and expires in October 2023.

The agreement was signed in October 2020 and expired in October 2023, but was extended on a month-to-month basis.

We are a partner in a joint venture with one of our suppliers and own a minority interest in two other suppliers.

1 unchanged sentence

Fair Value Disclosures

The carrying value of financial instruments such as cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair value based

on the short-term nature of these instruments.

The carrying value of financial instruments such as cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair value based on the short-term nature of these instruments.

The carrying value of borrowings under our credit facility approximates fair value because these borrowings bear interest at rates indexed to a market rate (Term SOFR).

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements