Dorman Products, Inc. 10-Q

ITEM 1. Financial Statements DORMAN PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended (in thousands, except per share data) March 28, 2026 March 29, 2025 Net sales $ 528,770 $ 507,692 Cost of goods sold 338,615 299,984 Gross profit 190,155 207,708 Selling, general, and administrative expenses 131,372 127,634 Income from operations 58,783 80,074 Interest expense, net 5,807 7,358 Other income, net ( 3,246 ) ( 1,361 ) Income before income taxes 56,222 74,077 Provision for income taxes 12,671 16,572 Net income $ 43,551 $ 57,505 Other comprehensive income: Change in foreign currency translation adjustment ( 398 ) 222 Comprehensive Income $ 43,153 $ 57,727 Earnings per share: Basic $ 1.44 $ 1.88 Diluted $ 1.43 $ 1.87 Weighted average shares outstanding: Basic 30,226 30,576 Diluted 30,423 30,810 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) March 28, 2026 December 31, 2025 Assets Current assets: Cash and cash equivalents $ 43,056 $ 49,436 Accounts receivable, less allowance for doubtful accounts of $ 1,879 and $ 1,948 503,026 479,252 Inventories 902,422 959,019 Prepaids and other current assets 26,896 33,819 Total current assets 1,475,400 1,521,526 Property, plant, and equipment, net 166,621 168,777 Operating lease right-of-use assets 110,155 112,805 Goodwill 387,334 387,334 Intangible assets, net 251,785 257,079 Other assets 43,836 45,557 Total assets $ 2,435,131 $ 2,493,078 Liabilities and shareholders’ equity Current liabilities: Accounts payable $ 133,549 $ 185,125 Accrued compensation 17,577 30,756 Accrued customer rebates and returns 184,966 197,398 Revolving credit facility 15,000 — Current portion of long-term debt 37,500 37,500 Other accrued liabilities 59,533 42,048 Total current liabilities 448,125 492,827 Long-term debt 402,512 402,413 Long-term operating lease liabilities 93,226 96,568 Deferred tax liabilities 3,868 3,977 Other long-term liabilities 20,697 20,218 Commitments and contingencies (Note 7) Shareholders’ equity: Common stock, $ 0.01 par value; 50,000,000 shares authorized; 30,031,601 and 30,391,955 shares issued and outstanding in 2026 and 2025, respectively 300 304 Additional paid-in capital 134,230 137,109 Retained earnings 1,337,092 1,344,183 Accumulated other comprehensive loss ( 4,919 ) ( 4,521 ) Total shareholders’ equity 1,466,703 1,477,075 Total liabilities and shareholders' equity $ 2,435,131 $ 2,493,078 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 March 28, 2026 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, 2025 30,391,955 $ 304 $ 137,109 $ 1,344,183 $ ( 4,521 ) $ 1,477,075 Exercise of stock options — — — — — — Compensation cost under incentive stock plans — — 4,087 — — 4,087 Purchase and cancellation of common stock ( 435,174 ) ( 4 ) ( 784 ) ( 50,642 ) — ( 51,430 ) Issuance of non-vested stock, net of cancellations 125,922 1 ( 1 ) — — — Other stock-related activity ( 51,102 ) ( 1 ) ( 6,181 ) — — ( 6,182 ) Other comprehensive loss — — — — ( 398 ) ( 398 ) Net income — — — 43,551 — 43,551 Balance at March 28, 2026 30,031,601 $ 300 $ 134,230 $ 1,337,092 $ ( 4,919 ) $ 1,466,703 Three Months Ended March 29, 2025 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, 2024 30,565,855 $ 306 $ 119,077 $ 1,180,862 $ ( 6,775 ) $ 1,293,470 Exercise of stock options 3,840 — 372 — — 372 Compensation cost under incentive stock plans — — 3,613 — — 3,613 Purchase and cancellation of common stock ( 95,870 ) ( 1 ) ( 173 ) ( 11,906 ) — ( 12,080 ) Issuance of non-vested stock, net of cancellations 109,461 1 ( 1 ) — — — Other stock-related activity ( 43,952 ) — ( 5,698 ) — — ( 5,698 ) Other comprehensive loss — — — — 222 222 Net income — — — 57,505 — 57,505 Balance at March 29, 2025 30,539,334 $ 306 $ 117,190 $ 1,226,461 $ ( 6,553 ) $ 1,337,404 See accompanying Notes to Condensed Consolidated Financial Statements 5 Table of Contents DORMAN PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended (in thousands) March 28, 2026 March 29, 2025 Cash Flows from Operating Activities: Net income $ 43,551 $ 57,505 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 13,998 13,843 Provision for doubtful accounts ( 65 ) 314 Provision for deferred income taxes ( 79 ) ( 46 ) Provision for stock-based compensation 4,087 3,613 Changes in assets and liabilities: Accounts receivable ( 23,770 ) 18,410 Inventories 56,388 ( 26,539 ) Prepaids and other current assets 7,274 5,635 Other assets ( 42 ) ( 3,275 ) Accounts payable ( 49,987 ) ( 11,264 ) Accrued customer rebates and returns ( 12,426 ) ( 971 ) Accrued compensation and other liabilities 4,830 ( 5,988 ) Cash provided by operating activities 43,759 51,237 Cash Flows from Investing Activities: Property, plant, and equipment additions ( 8,449 ) ( 10,985 ) Cash used in investing activities ( 8,449 ) ( 10,985 ) Cash Flows from Financing Activities: Proceeds from revolving credit line 15,000 — Payments of revolving credit line — ( 13,960 ) Payments of long-term debt — ( 6,250 ) Proceeds from exercise of stock options — 372 Purchase and cancellation of common stock ( 50,505 ) ( 11,274 ) Other stock-related activity ( 6,182 ) ( 5,698 ) Cash used in financing activities ( 41,687 ) ( 36,810 ) Effect of exchange rate changes on Cash and Cash Equivalents ( 3 ) 33 Net (Decrease) Increase in Cash and Cash Equivalents ( 6,380 ) 3,475 Cash and Cash Equivalents, Beginning of Period 49,436 57,137 Cash and Cash Equivalents, End of Period $ 43,056 $ 60,612 Supplemental Cash Flow Information Cash paid for interest expense $ 3,581 $ 4,581 Cash paid for income taxes $ 1,601 $ 523 See accompanying Notes to Condensed Consolidated Financial Statements 6 Table of Contents DORMAN PRODUCTS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 28, 2026, AND MARCH 29, 2025 (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 a complete set of financial statements. In the opinion of management, all adjustments (comprising only normal, recurring adjustments) considered necessary for a fair presentation have been included. 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, 2025. 2. Sales of Accounts Receivable We have entered into 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 when sold. Sales of accounts receivable under these agreements, and associated factoring costs, which were included in selling, general, and administrative expenses, were as follows: Three Months Ended (in thousands) March 28, 2026 March 29, 2025 Sales of accounts receivable $ 305,147 $ 334,170 Factoring costs 12,708 14,588 3. Inventories Inventories include the cost of material, freight, duties, direct labor, and overhead utilized to process our products and are stated at the lower of cost or net realizable value. Inventories were as follows: (in thousands) March 28, 2026 December 31, 2025 Raw materials $ 34,774 $ 36,698 Bulk product 247,318 287,653 Finished product 609,141 622,029 Packaging materials 11,189 12,639 Total $ 902,422 $ 959,019 7 Table of Contents 4. Goodwill and Intangible Assets Goodwill Goodwill at both March 28, 2026 , and December 31, 2025, was $ 387.3 million, net of accumulated impairment losses of $ 56.7 million. Intangible Assets Intangible assets included the following: March 28, 2026 December 31, 2025 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 $ 173,984 $ ( 54,188 ) $ 119,796 $ 173,984 $ ( 51,741 ) $ 122,243 Trade names 67,690 ( 20,149 ) 47,541 67,690 ( 19,119 ) 48,571 Product portfolio 107,800 ( 24,890 ) 82,910 107,800 ( 23,215 ) 84,585 Technology 2,167 ( 1,629 ) 538 2,167 ( 1,567 ) 600 Patents and other 2,475 ( 1,475 ) 1,000 2,475 ( 1,395 ) 1,080 Total $ 354,116 $ ( 102,331 ) $ 251,785 $ 354,116 $ ( 97,037 ) $ 257,079 Amortization expense was $ 5.2 million and $ 5.5 million during the three months ended March 28, 2026, and March 29, 2025, respectively. 5. Debt In March 2026, we borrowed $ 15.0 million under our revolving credit facility. As of March 28, 2026, and December 31, 2025, the weighted average interest rate on the outstanding borrowings under our credit facility was 5.09 % and 5.07 %, respectively. 6. Segment and Geographic Information Segment results are as follows: For the Three Months ended March 28, 2026 (in thousands) Light Duty Heavy Duty Specialty Vehicle Total Net sales $ 423,739 $ 57,813 $ 47,218 $ 528,770 Cost of goods sold 269,536 43,220 25,859 338,615 Factoring expense 12,708 — — 12,708 Other segment expenses 81,834 14,145 17,269 113,248 Segment income from operations $ 59,661 $ 448 $ 4,090 $ 64,199 For the Three Months ended March 29, 2025 (in thousands) Light Duty Heavy Duty Specialty Vehicle Total Net sales $ 408,856 $ 51,680 $ 47,156 $ 507,692 Cost of goods sold 236,999 38,477 24,508 299,984 Factoring expense 14,588 — — 14,588 Other segment expenses 75,776 13,366 17,827 106,969 Segment income (loss) from operations $ 81,493 $ ( 163 ) $ 4,821 $ 86,151 8 Table of Contents A reconciliation of segment income from operations to consolidated income before income taxes is as follows: For the Three Months Ended (in thousands) March 28, 2026 March 29, 2025 Segment income from operations $ 64,199 $ 86,151 Acquisition-related intangible assets amortization ( 5,174 ) ( 5,471 ) Acquisition-related transaction and other costs ( 242 ) ( 492 ) Pretax reduction in workforce costs — ( 114 ) Interest expense, net ( 5,807 ) ( 7,358 ) Other income, net 3,246 1,361 Consolidated income before income taxes $ 56,222 $ 74,077 The following table presents our net sales by geographic region: Three Months Ended (in thousands) March 28, 2026 March 29, 2025 Net sales to U.S. customers $ 489,060 $ 464,453 Net sales to non-U.S. customers 39,710 43,239 Total $ 528,770 $ 507,692 7. Commitments and Contingencies We are a party to, or otherwise involved in, legal proceedings that arise in the ordinary course of business, including various claims and legal actions involving contracts, employment disputes, competitive practices, intellectual property infringement, product liability claims, and other matters related to 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. In February 2026, the U.S. Supreme Court ruled against certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). The ruling did not address refunds of IEEPA tariffs paid. However, in March 2026, the Court of International Trade (“CIT”) ordered U.S. Customs and Border Protection (“CBP”) to begin the refund process for all importers who were subject to IEEPA duties. CIT's order may be subject to U.S. government challenge. We are the importer of record for certain products that were previously subject to tariffs under IEEPA. While we intend to pursue refunds for IEEPA tariffs, there can be no assurance that we will receive all or any portion of such refunds. No adjustments have been recorded in the accompanying unaudited condensed consolidated financial statements. 8. Stock-Based Compensation Restricted Stock Units (“RSUs”) We grant RSUs to participants in our equity plans. Performance-based RSUs granted in the three months ended March 28, 2026, 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 on achievement of return on invested capital targets over a three-year performance period (performance condition). 9 Table of Contents Compensation cost related to RSU grants was $ 3.9 million and $ 3.3 million for the three months ended March 28, 2026, and March 29, 2025, respectively, and was included in selling, general, and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income. The following table summarizes our RSU activity for the three months ended March 28, 2026: Shares Weighted Average Fair Value Balance at December 31, 2025 324,125 $ 117.70 Granted 183,581 $ 117.92 Vested ( 125,922 ) $ 107.42 Canceled ( 6,661 ) $ 121.34 Balance at March 28, 2026 375,123 $ 121.19 As of March 28, 2026, there was $ 38.0 million of unrecognized compensation cost related to unvested RSU grants that is expected to be recognized over a weighted average period of 2.2 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 not material for the three months ended March 28, 2026, and March 29, 2025. The following table summarizes our stock option activity for the three months ended March 28, 2026 : Shares Weighted Average Price Weighted Average Remaining Term (years) Aggregate Intrinsic Value (in thousands) Balance at December 31, 2025 191,677 $ 88.44 Canceled ( 703 ) $ 91.28 Exercised — $ — Balance at March 28, 2026 190,974 $ 88.43 3.3 $ 3,095 Exercisable at March 28, 2026 174,970 $ 88.17 3.2 $ 2,882 As of March 28, 2026, there was $ 0.5 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 1.0 years. 9. Earnings Per Share Basic earnings per share was calculated by dividing our net income by the weighted average number of shares of common stock outstanding during the period. To calculate diluted earnings per share, common stock equivalents are added to the weighted average number of shares of common stock outstanding. Common stock equivalents are calculated using the treasury stock method and are computed based on outstanding stock-based awards. For the three months ended March 28, 2026, and March 29, 2025, there were approximately 78,000 shares and 39,000 shares, respectively, that were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive. 10 Table of Contents The following table sets forth the computation of basic earnings per share and diluted earnings per share: Three Months Ended (in thousands, except per share data) March 28, 2026 March 29, 2025 Numerator: Net income $ 43,551 $ 57,505 Denominator: Weighted average basic shares outstanding 30,226 30,576 Effect of stock-based compensation awards 197 234 Weighted average diluted shares outstanding 30,423 30,810 Earnings Per Share: Basic $ 1.44 $ 1.88 Diluted $ 1.43 $ 1.87 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. There were no shares repurchased from the 401(k) Plan during the three months ended March 28, 2026. The following table summarizes the repurchase and cancellation of common stock by the Company for the three months ended March 29, 2025: Three Months Ended March 29, 2025 Shares repurchased and canceled 2,070 Total cost of shares repurchased and canceled (in thousands) $ 261 Average price per share $ 126.08 Separately, we repurchase shares under share repurchase programs authorized by our Board of Directors. Share repurchases may be made from time to time depending on market conditions, share price, share availability, and other factors at the Company’s discretion. The Company is not obligated to acquire a specific number of shares under the programs. The following table summarizes the repurchase and cancellation of common stock in the three months ended March 28, 2026, and March 29, 2025: Three Months Ended March 28, 2026 March 29, 2025 Shares repurchased and canceled 435,174 93,800 Total cost of shares repurchased and canceled (in thousands) $ 51,430 $ 11,818 Average price per share $ 118.18 $ 125.99 At March 28, 2026, $ 407.9 million was available for repurchase under the share repurchase program. 11. Income Taxes At March 28, 2026, we had $ 10.5 million of net unrecognized tax benefits, $ 9.0 million of which would lower our effective tax rate if recognized. We recognize interest and penalties related to 11 Table of Contents unrecognized tax benefits in income tax expense. At March 28, 2026, accrued interest and penalties related to unrecognized tax benefits were $ 4.4 million. We file income tax returns in the United States, Canada, China, India, and Mexico. The statute of limitations for tax years before 2022 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 2022 is closed for income tax purposes in Canada, China, and India. The statute of limitations for tax years before 2020 is closed for income tax purposes in Mexico. 12. Fair Value Disclosures The carrying values of financial instruments such as cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair values due to their short-term nature. 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). 13. Recent Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. The ASU requires additional disclosures about categories of expenses, including, among other things, quantitative disclosures for employee compensation, depreciation, intangible asset amortization, selling expenses, and purchases of inventory. The updated guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. We expect to implement this new standard by its effective date, and do not anticipate that its adoption will have an impact on our results of operations, financial condition, or cash flows. 12 Table of Contents