Dorman Products, Inc. 10-Q

ITEM 1. Financial Statements DORMAN PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended Nine Months Ended (in thousands, except per share data) September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net sales $ 503,773 $ 488,186 $ 1,475,425 $ 1,435,492 Cost of goods sold 299,970 304,968 890,775 944,291 Gross profit 203,803 183,218 584,650 491,201 Selling, general and administrative expenses 124,532 119,010 378,489 353,681 Income from operations 79,271 64,208 206,161 137,520 Interest expense, net 9,762 12,215 30,569 36,733 Other income, net 1,615 605 1,711 1,358 Income before income taxes 71,124 52,598 177,303 102,145 Provision for income taxes 15,871 12,076 41,812 23,170 Net income $ 55,253 $ 40,522 $ 135,491 $ 78,975 Other comprehensive income: Change in foreign currency translation adjustment 651 ( 1,214 ) ( 967 ) ( 529 ) Comprehensive Income $ 55,904 $ 39,308 $ 134,524 $ 78,446 Earnings per share: Basic $ 1.81 $ 1.29 $ 4.39 $ 2.51 Diluted $ 1.80 $ 1.28 $ 4.37 $ 2.50 Weighted average shares outstanding: Basic 30,570 31,483 30,888 31,462 Diluted 30,739 31,555 31,019 31,540 See accompanying Notes to Condensed Consolidated Financial Statements 3 Table of Contents DORMAN PRODUCTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED ) (in thousands, except for share data) September 28, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 45,127 $ 36,814 Accounts receivable, less allowance for doubtful accounts of $ 1,647 and $ 3,518 571,051 526,867 Inventories 665,237 637,375 Prepaids and other current assets 34,661 32,653 Total current assets 1,316,076 1,233,709 Property, plant and equipment, net 165,734 160,113 Operating lease right-of-use assets 107,176 103,476 Goodwill 443,340 443,889 Intangible assets, net 284,138 301,556 Other assets 47,633 49,664 Total assets $ 2,364,097 $ 2,292,407 Liabilities and shareholders’ equity Current liabilities: Accounts payable $ 205,905 $ 176,664 Accrued compensation 27,003 23,971 Accrued customer rebates and returns 208,274 204,495 Revolving credit facility 61,760 92,760 Current portion of long-term debt 18,750 15,625 Other accrued liabilities 39,631 33,636 Total current liabilities 561,323 547,151 Long-term debt 455,038 467,239 Long-term operating lease liabilities 94,294 91,262 Other long-term liabilities 9,203 9,627 Deferred tax liabilities, net 9,637 8,925 Commitments and contingencies (Note 7) Shareholders’ equity: Common stock, $ 0.01 par value; 50,000,000 shares authorized; 30,516,759 and 31,299,770 shares issued and outstanding in 2024 and 2023, respectively 305 313 Additional paid-in capital 110,595 101,045 Retained earnings 1,127,259 1,069,435 Accumulated other comprehensive loss ( 3,557 ) ( 2,590 ) Total shareholders’ equity 1,234,602 1,168,203 Total liabilities and shareholders' equity $ 2,364,097 $ 2,292,407 See accompanying Notes to Condensed Consolidated Financial Statements 4 Table of Contents DORMAN PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED ) Three Months Ended September 28, 2024 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total (in thousands, except share data) Shares Issued Par Value Balance at June 29, 2024 30,765,672 $ 308 $ 106,714 $ 1,098,506 $ ( 4,208 ) $ 1,201,320 Exercise of stock options 15,269 — 1,207 — — 1,207 Compensation expense under incentive stock plans — — 3,767 — — 3,767 Purchase and cancellation of common stock ( 276,063 ) ( 3 ) ( 497 ) ( 26,499 ) — ( 26,999 ) Issuance of common stock under incentive stock plans, net of cancellations 17,177 — — — — — Other stock-related activity ( 5,296 ) — ( 596 ) ( 1 ) — ( 597 ) Change in foreign currency translation adjustment — — — — 651 651 Net income — — — 55,253 — 55,253 Balance at September 28, 2024 30,516,759 $ 305 $ 110,595 $ 1,127,259 $ ( 3,557 ) $ 1,234,602 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 Issued Par Value 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 plans — — 2,901 — — 2,901 Purchase and cancellation of common stock ( 2,010 ) — ( 3 ) ( 177 ) — ( 180 ) Issuance of common stock under incentive stock plans, net of cancellations 1,419 — — — — — Other stock-related activity ( 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 Nine Months Ended September 28, 2024 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total (in thousands, except share data) Shares Issued Par Value Balance at December 31, 2023 31,299,770 $ 313 $ 101,045 $ 1,069,435 $ ( 2,590 ) $ 1,168,203 Exercise of stock options 24,358 — 1,766 — — 1,766 Compensation expense under incentive stock plans — — 10,547 — — 10,547 Purchase and cancellation of common stock ( 867,385 ) ( 9 ) ( 1,561 ) ( 77,569 ) — ( 79,139 ) Issuance of common stock under incentive stock plans, net of cancellations 83,055 1 960 — — 961 Other stock-related activity ( 23,039 ) — ( 2,162 ) ( 98 ) — ( 2,260 ) Change in foreign currency translation adjustment — — — — ( 967 ) ( 967 ) Net income — — — 135,491 — 135,491 Balance at September 28, 2024 30,516,759 $ 305 $ 110,595 $ 1,127,259 $ ( 3,557 ) $ 1,234,602 Nine Months Ended September 30, 2023 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total (in thousands, except share data) Shares Issued Par Value Balance at December 31, 2022 31,430,632 $ 314 $ 88,750 $ 956,870 $ ( 3,303 ) $ 1,042,631 Exercise of stock options 17,489 — 1,167 — — 1,167 Compensation expense under incentive stock plans — — 8,336 — — 8,336 Purchase and cancellation of common stock ( 11,850 ) — ( 21 ) ( 987 ) — ( 1,008 ) Issuance of common stock under incentive stock plans, net of cancellations 76,747 1 1,003 — — 1,004 Other stock-related activity ( 25,524 ) — ( 1,893 ) ( 590 ) — ( 2,483 ) Change in foreign currency translation adjustment — — — — ( 529 ) ( 529 ) Net income — — — 78,975 — 78,975 Balance at September 30, 2023 31,487,494 $ 315 $ 97,342 $ 1,034,268 $ ( 3,832 ) $ 1,128,093 See accompanying Notes to Condensed Consolidated Financial Statements 5 Table of Contents DORMAN PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended (in thousands) September 28, 2024 September 30, 2023 Cash Flows from Operating Activities: Net income $ 135,491 $ 78,975 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, amortization and accretion 43,015 40,786 Fair value adjustment to contingent consideration — ( 13,400 ) Provision for doubtful accounts 74 2,721 Provision for deferred income taxes 694 3,319 Provision for stock-based compensation 10,547 8,407 Changes in assets and liabilities: Accounts receivable ( 44,304 ) ( 59,786 ) Inventories ( 27,962 ) 130,156 Prepaids and other current assets ( 4,450 ) ( 6,597 ) Other assets ( 406 ) ( 3,981 ) Accounts payable 29,067 ( 21,615 ) Accrued customer rebates and returns 3,784 ( 101 ) Accrued compensation and other liabilities 14,072 ( 9,774 ) Cash provided by operating activities 159,622 149,110 Cash Flows from Investing Activities: Acquisition, net of cash acquired — 67 Property, plant and equipment additions ( 31,245 ) ( 32,936 ) Cash used in investing activities ( 31,245 ) ( 32,869 ) Cash Flows from Financing Activities: Payments of revolving credit line ( 31,000 ) ( 119,700 ) Payments of long-term debt ( 9,375 ) ( 9,375 ) Payment of deferred acquisition consideration ( 200 ) — Proceeds from exercise of stock options 1,766 1,167 Purchase and cancellation of common stock ( 79,923 ) ( 1,008 ) Other stock-related activity ( 1,301 ) ( 1,389 ) Cash used in financing activities ( 120,033 ) ( 130,305 ) Effect of exchange rate changes on Cash and Cash Equivalents ( 31 ) ( 17 ) Net Increase (Decrease) in Cash and Cash Equivalents 8,313 ( 14,081 ) Cash and Cash Equivalents, Beginning of Period 36,814 46,034 Cash and Cash Equivalents, End of Period $ 45,127 $ 31,953 Supplemental Cash Flow Information Cash paid for interest expense $ 26,865 $ 38,613 Cash paid for income taxes $ 39,761 $ 27,242 See accompanying Notes to Condensed Consolidated Financial Statements 6 Table of Contents DORMAN PRODUCTS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 28, 2024 AND SEPTEMBER 30, 2023 (UNAUDITED) 1. Basis of Presentation As used herein, unless the context requires otherwise, “Dorman,” the “Company,” “we,” “us,” or “our” refers to Dorman Products, Inc. and its subsidiaries. Our ticker symbol on The Nasdaq Stock Market LLC is “DORM.” The accompanying unaudited condensed consolidated financial statements have been prepared under U.S. generally accepted accounting principles (“GAAP”) for interim financial information and under the rules and regulations of the U.S. Securities and Exchange Commission. However, they do not include all the information and footnotes required by GAAP for complete financial statements. 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 28, 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. 2. Sales of Accounts Receivable We have entered several customer-sponsored programs administered by unrelated financial institutions that permit us to sell (factor) certain accounts receivable at discounted rates to the financial institutions. Transactions under these agreements were accounted for as sales of accounts receivable and the related accounts receivable were removed from our Condensed Consolidated Balance Sheets at the times of the sales transactions. 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 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Sales of accounts receivable $ 254,657 $ 233,513 $ 791,413 $ 713,190 Factoring costs 11,939 12,255 38,171 37,674 3. Inventories Inventories include the cost of material, freight, direct labor and overhead utilized in the processing of our products and are stated at the lower of cost or net realizable value. Inventories were as follows: (in thousands) September 28, 2024 December 31, 2023 Raw materials $ 28,975 $ 29,750 Bulk product 226,419 211,805 Finished product 400,812 387,668 Packaging materials 9,031 8,152 Total $ 665,237 $ 637,375 7 Table of Contents 4. Goodwill and Intangible Assets Goodwill Goodwill included the following: (in thousands) Light Duty Heavy Duty Specialty Vehicle Consolidated Balance at December 31, 2023 $ 313,704 $ 57,876 $ 72,309 $ 443,889 Foreign currency translation — ( 549 ) — ( 549 ) Balance at September 28, 2024 $ 313,704 $ 57,327 $ 72,309 $ 443,340 Intangible Assets Intangible assets included the following: September 28, 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 (in thousands) Customer relationships $ 173,430 $ 38,461 $ 134,969 $ 175,430 $ 31,678 $ 143,752 Trade names 67,690 13,848 53,842 67,690 10,676 57,014 Product portfolio 107,800 14,702 93,098 107,800 9,720 98,080 Technology 2,167 1,254 913 2,167 1,069 1,098 Patents and other 2,230 914 1,316 2,230 618 1,612 Total $ 353,317 $ 69,179 $ 284,138 $ 355,317 $ 53,761 $ 301,556 Amortization expense was $ 6.3 million and $ 5.5 million during the three months ended September 28, 2024 and September 30, 2023, and $ 17.4 million and $ 16.5 million during the nine months ended September 28, 2024 and September 30, 2023, respectively. 5. Debt As of September 28, 2024 and December 31, 2023, the interest rate on the outstanding borrowings under our credit facility was 6.60 % and 6.96 %, respectively. 8 Table of Contents 6. Segment and Geographic Information Segment results are as follows: For the Three Months Ended For the Nine Months Ended (in thousands) September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net Sales: Light Duty $ 393,577 $ 374,697 $ 1,138,228 $ 1,076,619 Heavy Duty 59,615 62,841 178,613 199,495 Specialty Vehicle 50,581 50,648 158,584 159,378 Total $ 503,773 $ 488,186 $ 1,475,425 $ 1,435,492 Segment profit: Light Duty $ 74,632 $ 60,457 $ 198,339 $ 122,917 Heavy Duty 2,660 1,861 5,390 10,595 Specialty Vehicle 8,624 6,840 25,823 23,625 Total $ 85,916 $ 69,158 $ 229,552 $ 157,137 A reconciliation of segment profit to income before income taxes is as follows: For the Three Months Ended For the Nine Months Ended (in thousands) September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Segment profit $ 85,916 $ 69,158 $ 229,552 $ 157,137 Acquisition-related intangible assets amortization ( 6,173 ) ( 5,485 ) ( 17,138 ) ( 16,336 ) Acquisition-related transaction and other costs ( 396 ) ( 465 ) ( 1,327 ) ( 14,880 ) Pretax reduction in workforce costs ( 76 ) — ( 4,926 ) ( 1,801 ) Fair value adjustment to contingent consideration — 1,000 — 13,400 Interest expense, net ( 9,762 ) ( 12,215 ) ( 30,569 ) ( 36,733 ) Other income, net 1,615 605 1,711 1,358 Income before income taxes $ 71,124 $ 52,598 $ 177,303 $ 102,145 The following table presents our net sales by geographic region: Three Months Ended Nine Months Ended (in thousands) September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net sales to U.S. customers $ 464,132 $ 448,360 $ 1,355,501 $ 1,317,353 Net sales to non-U.S. customers 39,641 39,826 119,924 118,139 Total $ 503,773 $ 488,186 $ 1,475,425 $ 1,435,492 9 Table of Contents 7. Commitments and Contingencies Acquisitions We have contingent consideration related to acquisitions due to the uncertainty of the ultimate amount of any payments that will become due as earnout payments if performance targets are achieved. 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 September 28, 2024 and December 31, 2023, we estimated that no such contingent 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. 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. The approach to valuing the contingent consideration uses unobservable factors such as projected revenues and cost of goods sold over the term of the earnout period, discounted for the period over which the contingent consideration is measured, and volatility rates. Based upon these assumptions, the contingent consideration is then valued using a Monte Carlo simulation. An increase in future revenue and gross profit may result in a higher estimated fair value, while a decrease in future revenue and gross profit may result in a lower estimated fair value of the contingent consideration liability. Other Contingencies We are a party to or otherwise involved in legal proceedings that arise in the ordinary course of business, such as various claims and legal actions involving contracts, employment claims, competitive practices, intellectual property infringement, product liability claims and other matters arising out of the conduct of our business. In the opinion of management, none of the actions, individually or in the aggregate, taking into account relevant insurance coverage, would likely have a material financial impact on the Company and we believe the range of reasonably possible losses from current matters, taking into account relevant insurance coverage, is immaterial. However, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of any of these matters could have a material adverse impact on the Company’s cash flows, financial position or results of operations in the period in which any such effects are recorded. 8. Stock-Based Compensation Restricted Stock Awards (“RSAs”) and Restricted Stock Units (“RSUs”) We grant RSUs, and prior to January 2020 we granted RSAs, to participants in our equity plans. Performance-based RSUs granted in the nine months ended September 28, 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 $ 3.4 million and $ 2.4 million for the three months ended September 28, 2024 and September 30, 2023, respectively, and $ 9.1 million and $ 6.7 million for the nine months ended September 28, 2024 and September 30, 2023, respectively, and was included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. 10 Table of Contents The following table summarizes our RSA and RSU activity for the nine months ended September 28, 2024: Shares Weighted Average Fair Value Balance at December 31, 2023 257,554 $ 97.33 Granted 187,645 $ 98.95 Vested ( 72,701 ) $ 89.90 Canceled ( 28,792 ) $ 112.06 Balance at September 28, 2024 343,706 $ 98.56 For the nine months ended September 28, 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 nine months ended September 30, 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 September 28, 2024, there was $ 21.7 million of unrecognized compensation cost related to unvested RSA and RSU grants that is expected to be recognized over a weighted average period of 2.1 years. Stock Options From time to time, we grant stock options to participants in our equity plans. Compensation cost related to stock option grants was $ 0.3 million and $ 0.5 million for the three months ended September 28, 2024 and September 30, 2023, respectively, and $ 1.1 million and $ 1.5 million for the nine months ended September 28, 2024 and September 30, 2023, 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 28, 2024 : Shares Weighted Average Price Weighted Average Remaining Term (years) Aggregate Intrinsic Value (in thousands) Balance at December 31, 2023 311,217 $ 86.52 Canceled ( 10,936 ) $ 95.80 Exercised ( 25,580 ) $ 72.88 Balance at September 28, 2024 274,701 $ 87.42 4.7 $ 7,187 Exercisable at September 28, 2024 174,775 $ 83.34 4.1 $ 5,284 As of September 28, 2024, there was $ 2.5 million of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted average period of 2.1 years. Employee Stock Purchase Plan ("ESPP") During the nine months ended September 28, 2024, we issued 13,555 shares under the ESPP. During the nine months ended September 30, 2023, we issued 14,975 shares under the ESPP. 9. Earnings Per Share Basic earnings per share was calculated by dividing our net income by the weighted average number of common shares outstanding during the period, excluding unvested RSAs which are considered to be contingently issuable. To calculate diluted earnings per share, common share equivalents are added to the weighted average number of common shares outstanding. Common share 11 Table of Contents equivalents are calculated using the treasury stock method and are computed based on outstanding stock-based awards. For the three months ended September 28, 2024 and September 30, 2023, there were approximately 214,000 shares and 294,000 shares, respectively, and for the nine months ended September 28, 2024 and September 30, 2023 there were approximately 253,000 shares and 295,000 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 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net income $ 55,253 $ 40,522 $ 135,491 $ 78,975 Denominator: Weighted average basic shares outstanding 30,570 31,483 30,888 31,462 Effect of stock-based compensation awards 169 71 131 78 Weighted average diluted shares outstanding 30,739 31,555 31,019 31,540 Earnings Per Share: Basic $ 1.81 $ 1.29 $ 4.39 $ 2.51 Diluted $ 1.80 $ 1.28 $ 4.37 $ 2.50 10. Common Stock Repurchases We periodically repurchase, at the then current market price, and cancel common stock issued to the Dorman Products, Inc. 401(k) Retirement Plan and Trust (the “401(k) Plan”). 401(k) Plan participants can no longer purchase shares of Dorman common stock as an investment option under the 401(k) Plan. Shares are generally purchased by the Company from the 401(k) Plan when participants sell units as permitted by the 401(k) Plan or elect to leave the 401(k) Plan upon retirement, termination or other reasons. 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 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Shares repurchased and canceled 2,410 2,010 11,414 11,850 Total cost of shares repurchased and canceled (in thousands) $ 262 $ 181 $ 1,048 $ 1,009 Average price per share $ 108.70 $ 89.99 $ 91.85 $ 85.11 Separately, our Board of Directors previously authorized the repurchase of up to $ 600 million of our common stock through December 31, 2024 under a share repurchase program and subsequent authorizations (the “Existing Program”). At September 28, 2024, $ 134.6 million was available for repurchase under the Existing Program. The Existing Program will expire on December 31, 2024, along with all amounts that remain available for use under the Existing Program as of that date. In October 2024, the Company’s Board of Directors authorized the purchase of up to $ 500 million of our common stock under a new share repurchase program that is effective from January 1, 2025 through December 31, 2027 (the “New Program”). Under each of the Existing Program and the New Program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at the 12 Table of Contents Company’s discretion. These share repurchase programs do not obligate us to acquire any specific number of shares. The following table summarizes the repurchase and cancellation of common stock under the Existing Program: Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Shares repurchased and canceled 273,653 — 855,971 — Total cost of shares repurchased and canceled (in thousands) $ 26,737 $ — $ 78,091 $ — Average price per share $ 97.70 $ — $ 91.23 $ — 11. Income Taxes At September 28, 2024, we had $ 3.4 million of net unrecognized tax benefits, all of which would lower our effective tax rate if recognized. Interest and penalties related to uncertain tax positions are recognized in income tax expense and were not material as of September 28, 2024. We file income tax returns in the United States, Canada, China, India, and Mexico. The statute of limitations for tax years before 2020 is closed for U.S. federal income tax purposes. 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 2021 is closed for income tax purposes in Canada and China. The statute of limitations for tax years before 2020 is closed for income tax purposes in India. The statute of limitations for tax years before 2019 is closed for income tax purposes in Mexico. 12. Related-Party Transactions 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. The Colmar lease was, and the Lewisberry lease is, a non-cancelable operating lease. The Lewisberry lease expires December 31, 2027. We also lease our facilities in Madison, IN and Shreveport, LA, from entities in which Lindsay Hunt, our President, Specialty Vehicle, and certain of her family members are owners. Each lease is a non-cancelable operating lease, was renewed in October 2022 in connection with the acquisition of Super ATV, 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 Ms. Hunt. 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 leases with Steven Berman related entities $ 715 $ 2,918 Facility leases with Lindsay Hunt related entities $ 2,757 $ 2,603 Service agreements with Lindsay Hunt related entities $ 54 $ 200 13 Table of Contents We are a partner in a joint venture with one of our suppliers and own a minority interest in two other suppliers. Two of these investments are accounted for under the equity method and one is accounted for under the cost method. 13. 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 borrowings under our credit facility approximates fair value because these borrowings bear interest at rates indexed to a market rate (Term SOFR). 14. 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. 14 Table of Contents