What changed in this filing

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Item 1. Financial Statements

2024-05-07 compared with 2023-10-31 · 100 added, 133 removed, 237 unchanged (50% of the section changed)

3 unchanged sentences

AND COMPREHENSIVE INCOME

Three Months Ended Nine Months Ended

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

Three Months Ended

(in thousands, except per share data) March 30, 2024 April 1, 2023

Net sales $ 468,701 $ 466,738

4 unchanged sentences

Interest expense, net 10,605 11,953

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

Other expense (income), net 40 ( 357 )

Income before income taxes 43,793 6,518

13 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(in thousands, except for share data) March 30, 2024 December 31, 2023

Current assets:

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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three Months Ended September 30, 2023

Common Stock Additional Paid-In

Capital Retained

Earnings Accumulated Other Comprehensive Loss Total

(in thousands, except share data) Shares

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

Compensation expense under Incentive Stock Plan — — 2,901 — — 2,901

Purchase and cancellation of common stock ( 2,010 ) — ( 3 ) ( 177 ) — ( 180 )

Issuance of non-vested stock, net of cancellations 1,419 — — — — —

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

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

Net income — — — 40,522 — 40,522

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 Loss Total

(in thousands, except share data) Shares

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

Exercise of stock options 169 — 14 — — 14

Compensation expense under Incentive Stock Plan — — 2,472 — — 2,472

Purchase and cancellation of common stock ( 14,700 ) — ( 26 ) ( 1,496 ) — ( 1,522 )

Issuance of non-vested stock, net of cancellations 9,626 — 812 — — 812

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

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

Net income — — — 30,601 — 30,601

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

Nine Months Ended September 30, 2023

Three Months Ended March 30, 2024

Common Stock Additional Paid-In

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Net income — — — 32,828 — 32,828

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

Balance at March 30, 2024 31,011,870 $ 310 $ 102,211 $ 1,075,663 $ ( 3,689 ) $ 1,174,495

Three Months Ended April 1, 2023

Common Stock Additional Paid-In

10 unchanged sentences

Net income — — — 5,683 — 5,683

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

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

See accompanying Notes to Condensed Consolidated Financial Statements

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

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

Three Months Ended

(in thousands) March 30, 2024 April 1, 2023

Cash Flows from Operating Activities:

2 unchanged sentences

Depreciation, amortization and accretion 13,851 13,540

Fair value adjustment to contingent consideration ( 13,400 ) —

Provision for doubtful accounts 11 2,744

Provision (benefit) for deferred income taxes 3,319 ( 546 )

Provision for deferred income taxes 475 —

Provision for stock-based compensation 2,931 2,334

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

FOR THE THREE MONTHS ENDED MARCH 30, 2024 AND APRIL 1, 2023

Basis of Presentation

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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 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.

Operating results for the three months ended March 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024 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.

These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

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 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.

The Transaction was accounted for as a business combination under the acquisition method of accounting.

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

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:

(in thousands)

Accounts receivable $ 3,317

Inventories 90,428

Prepaids and other current assets 5,293

Property, plant and equipment 23,776

Goodwill 247,474

Identifiable intangible assets 157,500

Operating lease right-of-use assets 11,661

Other Assets 3,001

Accounts payable ( 7,436 )

Accrued compensation ( 2,086 )

Accrued customer rebates and returns ( 1,609 )

Other current liabilities ( 8,726 )

Long-term operating lease liabilities ( 9,508 )

Other long-term liabilities ( 3,307 )

Net cash consideration $ 509,778

The financial results of the Transaction have been included in the consolidated financial statements since the date of acquisition.

Sales of Accounts Receivable

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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 Nine Months Ended

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

Three Months Ended

(in thousands) March 30, 2024 April 1, 2023

Sales of accounts receivable $ 285,218 $ 237,739

2 unchanged sentences

Inventories were as follows:

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

(in thousands) March 30, 2024 December 31, 2023

Raw materials $ 26,431 $ 29,750

5 unchanged sentences

Goodwill included the following:

(in thousands)

(in thousands) Light Duty Heavy Duty Specialty Vehicle Consolidated

Balance at December 31, 2023 $ 313,704 $ 57,876 $ 72,309 $ 443,889

Measurement period adjustments for SuperATV acquisition 233

Foreign currency translation — ( 593 ) — ( 593 )

Balance at September 30, 2023 $ 443,220

Balance at March 30, 2024 $ 313,704 $ 57,283 $ 72,309 $ 443,296

Intangible Assets

Intangible assets included the following:

September 30, 2023 December 31, 2022

March 30, 2024 December 31, 2023

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 $ 59,437 $ 295,880 $ 355,317 $ 53,761 $ 301,556

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.

Amortization expense was $ 5.6 million and $ 5.5 million during the three months ended March 30, 2024 and April 1, 2023, respectively.

As of March 30, 2024 and December 31, 2023, the interest rate on the outstanding borrowings under our credit facility was 6.93 % and 6.96 %, respectively.

Segment Information

Segment results are as follows:

For the Three Months Ended

(in thousands) March 30, 2024 April 1, 2023

Light Duty $ 359,293 $ 348,083

Heavy Duty 57,809 67,647

Specialty Vehicle 51,599 51,008

Total $ 468,701 $ 466,738

Segment profit:

Light Duty $ 57,795 $ 21,447

Heavy Duty 9 5,348

Specialty Vehicle 7,169 7,080

Total $ 64,973 $ 33,875

A reconciliation of segment profit to income before income taxes is as follows:

For the Three Months Ended

(in thousands) March 30, 2024 April 1, 2023

Segment profit $ 64,973 $ 33,875

Acquisition-related intangible assets amortization ( 5,484 ) ( 5,433 )

Acquisition-related transaction and other costs ( 483 ) ( 8,549 )

Executive transaction services expenses — ( 1,779 )

Pretax reduction in workforce costs ( 4,568 ) —

Interest expense, net ( 10,605 ) ( 11,953 )

Other (expense) income, net ( 40 ) 357

Income before income taxes $ 43,793 $ 6,518

Commitments and Contingencies

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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 $ 52.0 million in aggregate.

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.

As of March 30, 2024 and December 31, 2023, we estimated that no payments are expected to become due in connection with the acquisitions, and therefore accrued no liability.

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

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Revenue Recognition

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

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

Chassis 181,723 174,707 559,509 513,301

Motor Vehicle body 97,843 72,717 283,468 215,764

Hardware 15,127 12,273 46,303 40,847

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

Three Months Ended Nine Months Ended

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

The following tables present our disaggregated revenue by geography.

Three Months Ended

(in thousands) March 30, 2024 April 1, 2023

Net sales to U.S.

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Restricted Stock Awards (“RSAs”) and Restricted Stock Units (“RSUs”)

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 $ 2.4 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:

We issue RSUs, and, prior to January 2020 we issued RSAs, to participants in our equity plans.

Performance-based RSUs granted in the three months ended March 30, 2024 included certain grants that vest based on our total shareholder return ranking relative to the Nasdaq US Benchmark Auto Parts Index over a three-year performance period (market condition), and other grants that vest based

upon achievement of return on invested capital targets over a three-year performance period (performance condition).

Compensation cost related to RSA and RSU grants was $ 2.5 million and $ 1.7 million for the three months ended March 30, 2024 and April 1, 2023, 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 three months ended March 30, 2024:

Shares Weighted

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Canceled ( 16,085 ) $ 128.96

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.

Balance at March 30, 2024 368,974 $ 97.83

For the three months ended March 30, 2024, we granted 32,109 performance-based RSUs containing a market condition with a grant date fair value of $ 138.58 per share.

For the three months ended April 1, 2023, we granted 29,399 performance-based RSUs containing a market condition with a grant date fair value of $ 113.15 per share.

As of March 30, 2024, there was $ 27.4 million of unrecognized compensation cost related to unvested RSA and RSU grants that is expected to be recognized over a weighted average period of 2.4 years.

Stock Options

We grant stock options to participants in our equity plans.

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 :

From time to time, we grant stock options to participants in our equity plans.

Compensation cost related to stock option grants was $ 0.4 million for both the three months ended March 30, 2024 and April 1, 2023, 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 three months ended March 30, 2024 :

Shares Weighted

3 unchanged sentences

Balance at December 31, 2023 311,217 $ 86.52

Granted 79,404 $ 91.13

Canceled ( 6,510 ) $ 93.48

Exercised ( 6,046 ) $ 62.75

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 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.

Balance at March 30, 2024 305,171 $ 86.99 5.2 $ 3,193

Exercisable at March 30, 2024 195,683 $ 82.99 4.6 $ 2,844

As of March 30, 2024, there was $ 3.3 million of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted average period of 2.3 years.

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.

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.

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

For the three months ended March 30, 2024 and April 1, 2023, there were approximately 319,000 shares and 237,000 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 Nine Months Ended

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

Three Months Ended

(in thousands, except per share data) March 30, 2024 April 1, 2023

Net income $ 32,828 $ 5,683

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

Three Months Ended Nine Months Ended

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

Three Months Ended

March 30, 2024 April 1, 2023

Shares repurchased and canceled 7,759 5,125

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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.

At March 30, 2024, $ 186.2 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

Three Months Ended

March 30, 2024 April 1, 2023

Shares repurchased and canceled 310,173 —

1 unchanged sentence

Average price per share $ 85.32 $ —

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.

Our effective tax rate was 25.0 % and 12.8 % for the three months ended March 30, 2024 and April 1, 2023, respectively.

The increase in the effective tax rate was primarily due to favorable discrete items applied to a lower income before income taxes in the three months ended April 1, 2023.

At March 30, 2024, we had $ 4.6 million of net unrecognized tax benefits, $ 4.3 million 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 September 30, 2023, accrued interest and penalties related to uncertain tax positions were not material.

As of March 30, 2024, 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.

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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.

The statute of limitations for tax years before 2019 is closed for income tax purposes in India.

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

The statute of limitations for tax years before 2018 is closed for income tax purposes in Mexico.

Related-Party Transactions

We lease our Colmar, PA facility and a portion of our Lewisberry, PA facility from entities in which Steven L.

Berman, our Non-Executive Chairman, and certain of his family members are owners.

Each lease is a non-cancelable operating lease.

Total rental payments to those entities under these lease arrangements will be $ 2.9 million in fiscal 2023 and were $ 2.5 million in fiscal 2022.

The lease for our corporate headquarters in Colmar, PA was renewed in December 2022, effective as of January 1, 2023, and will expire on December 31, 2027.

The lease for our Lewisberry, PA operating facility was signed in September 2020 and will expire on December 31, 2027.

We also lease our facilities in Madison, IN and Shreveport, LA, from entities in which Lindsay Hunt, our President and Chief Executive Officer, Specialty Vehicles, and certain of her family members are owners.

Prior to December 1, 2023, we leased our Colmar, PA facility from an entity in which Steven Berman, our Non-Executive Chairman, and certain of his family members are owners.

On December 1, 2023, the Colmar facility was sold to a third party, subject to our lease.

We also lease a portion of our Lewisberry, PA facility from an entity in which Mr.

Berman, and certain of his family members are owners.

Each lease is a non-cancelable operating lease and expires December 31, 2027.

We also lease our facilities in Madison, IN and Shreveport, LA, from entities in which Lindsay Hunt, our President and Chief Executive Officer, Specialty Vehicle, and certain of her family members are owners.

Each lease is a non-cancelable operating lease.

Total rental payments to those entities under these lease arrangements will be $ 2.6 million in fiscal 2023.

The leases for our operating facilities in Madison, IN and Shreveport, LA were renewed in October 2022 in connection with the acquisition of SuperATV and will expire on October 31, 2027.

We signed a warehouse storage and services agreement with a counterparty that is majority-owned by a family member of Lindsay Hunt.

The agreement provides for indoor storage space and material handling services at agreed-upon rates.

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

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

The leases for our operating facilities in Madison, IN and Shreveport, LA were renewed in October 2022 in connection with the acquisition of SuperATV, LLC, a leading supplier to the powersports aftermarket ("SuperATV"), and will expire on October 31, 2027.

We have service agreements with counterparties that are majority-owned by a family member of Lindsay Hunt, our President and Chief Executive Officer, Specialty Vehicle.

These agreements provide for various warehouse and facility-related services at agreed-upon rates.

The following table represents the estimated payments for the year ending December 31, 2024 and actual payments for the year ended December 31, 2023 under the related party agreements described above:

Year Ending Year Ended

(in thousands) December 31, 2024 December 31, 2023

Facility lease with Steven Berman related entities $ 715 $ 2,918

Facility lease with Lindsay Hunt related entities $ 2,757 $ 2,603

Service agreements with Lindsay Hunt related entities $ 54 $ 200

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

3 unchanged sentences

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).

New and Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures.

The ASU requires additional disclosures about reportable segments’ significant expenses on an interim and annual basis.

The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures.

The ASU expands disclosures in the income tax rate reconciliations table and cash taxes paid and is effective for annual periods beginning after December 15, 2024.

We expect to implement these new standards by their effective dates, and do not expect their adoption to have an impact on our results of operations, financial condition or cash flows.

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