What changed in this filing

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Item 1. Financial Statements

2021-07-26 compared with 2021-04-26 · 110 added, 64 removed, 210 unchanged (45% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands, except per share data)

March 27, 2021

March 28, 2020

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

Cost of goods sold

1 unchanged sentence

Income from operations

Other (expense) income, net

Other income (expense), net

Income before income taxes

7 unchanged sentences

(in thousands, except for share data)

March 27, 2021

June 26, 2021

December 26, 2020

2 unchanged sentences

Accounts receivable, less allowance for doubtful accounts of $ 1,220 and $ 1,260 ,

in 2021 and 2020, respectively

Prepaids and other current assets

2 unchanged sentences

Operating lease right-of-use assets

Intangible assets, net of accumulated amortization of $ 10,040 and $ 9,194 in

2021 and 2020, respectively

Intangible assets, net of accumulated amortization of $ 10,886 and $ 9,194 , respectively

Deferred tax asset, net

12 unchanged sentences

Common stock, $ 0.01 par value;

authorized 50,000,000 shares;

outstanding 32,115,528 and 32,168,740 shares in 2021 and 2020, respectively

50,000,000 shares authorized;

31,891,890 and

32,168,740 shares issued and outstanding in 2021 and 2020, respectively

Additional paid-in capital

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three Months Ended March 27, 2021

Three Months Ended June 26, 2021

(in thousands, except share data)

Balance at December 26, 2020

Balance at March 27, 2021

Exercise of stock options

1 unchanged sentence

Purchase and cancellation of common stock

Cancellations, net of issuance of non-vested stock

Issuance of non-vested stock, net of cancellations

Other stock-related activity, net of tax

Balance at June 26, 2021

Three Months Ended June 27, 2020

(in thousands, except share data)

Balance at March 28, 2020

Three Months Ended March 28, 2020

Exercise of stock options

Compensation expense under Incentive Stock Plan

Purchase and cancellation of common stock

Issuance of non-vested stock, net of cancellations

Other stock-related activity, net of tax

Balance at June 27, 2020

Six Months Ended June 26, 2021

(in thousands, except share data)

3 unchanged sentences

Purchase and cancellation of common stock

Cancellations, net of issuance of non-vested stock

Issuance of non-vested stock, net of cancellations

Other stock related activity, net of tax

Balance at March 28, 2020

Balance at June 26, 2021

Six Months Ended June 27, 2020

(in thousands, except share data)

Balance at December 28, 2019

Exercise of stock options

Compensation expense under Incentive Stock Plan

Purchase and cancellation of common stock

Cancellation of non-vested stock, net of issuances

Other stock related activity, net of tax

Balance at June 27, 2020

See accompanying Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(in thousands)

March 27, 2021

March 28, 2020

June 26, 2021

June 27, 2020

Cash Flows from Operating Activities:

22 unchanged sentences

Cash (used in) provided by financing activities

Net Increase in Cash and Cash Equivalents

Net (Decrease) Increase in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Period

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 27, 2021 AND MARCH 28, 2020

FOR THE THREE AND SIX MONTHS ENDED JUNE 26, 2021 AND JUNE 27, 2020

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 months ended March 27, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 25, 2021 or any future period.

Operating results for the three and six months ended June 26, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 25, 2021 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.

2 unchanged sentences

Business Acquisitions and Investments

On January 2, 2020, we acquired the remaining outstanding stock of Power Train Industries, Inc.

(“PTI”) not already owned by the Company.

DPL Holding Corporation (“Dayton Parts”)

On June 25, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire 100 % of the equity interests of Dayton Parts, a manufacturer of undercarriage and other parts designed to serve the heavy-duty vehicle sector of the aftermarket, for aggregate consideration of $ 338 million, subject to certain customary adjustments based on, among other things, the amount of cash, indebtedness and working capital in the business of Dayton Parts as of the closing date of the transaction.

The transaction is subject to customary closing conditions, including the expiration or earlier termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

We expect the transaction to close in the second half of 2021.

In connection with entering into the Merger Agreement, we have entered into a commitment letter, dated as of June 25, 2021, with certain lenders as counterparties, whereby the lenders have committed to provide us with a new $ 600 million revolving credit facility (the “ New Facility ”) contingent on the satisfaction of customary conditions.

The New Facility would replace our existing $ 100 million revolving credit facility.

We may finance all or a portion of the merger transaction and related fees and expenses with borrowings under the New Facility.

Power Train Industries, Inc.

On January 2, 2020, we acquired the remaining outstanding stock of PTI not already owned by the Company.

The total purchase price for PTI was approximately $ 30.7 million, which included $ 18.4 million paid for the remaining 60 % of the outstanding stock, subject to customary purchase price adjustments, and $ 12.3 million which represents the fair value of the previously held 40 % equity interest in PTI that was acquired by the Company in 2016.

4 unchanged sentences

Transactions under these agreements were accounted for as sales of accounts receivable and the related accounts receivable were removed from our Condensed Consolidated Balance Sheet at the times of the sales transactions.

Pursuant to these agreements, we sold $ 209.9 million and $ 151.3 million of accounts receivable during the three months ended March 27, 2021 and March 28, 2020, respectively.

Under these agreements, we sold $ 433.7 million and $ 496.4 million of accounts receivable during the six months ended June 26, 2021 and June 27, 2020, respectively.

All credit terms with our customers are 365 days or less.

Selling, general and administrative expenses include $ 2.6 million and $ 2.8 million during the three months ended March 27, 2021 and March 28, 2020, respectively, of financing costs associated with these accounts receivable sales programs.

Selling, general and administrative expenses include financing costs associated with these accounts receivable sales programs of $ 2.9 million and $ 6.8 million during the three months ended June 26, 2021 and June 27, 2020, respectively, and $ 5.5 million and $ 9.6 million during the six months ended June 26, 2021 and June 27, 2020, respectively.

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.

1 unchanged sentence

(in thousands)

March 27, 2021

June 26, 2021

December 26, 2020

3 unchanged sentences

We have contingent consideration related to certain of our prior acquisitions due to the uncertainty of the ultimate amount of payment which will become due as earnout payments if performance targets are achieved.

As of both March 27, 2021 and December 26, 2020, we have accrued $ 8.0 million, which represents the fair value of the estimated payments that we expect will become due in connection with these prior acquisitions based upon performance targets.

If the performance targets are fully achieved, the maximum contingent payments under these agreements would be $ 15.6 million based on foreign currency exchange rates at March 27, 2021.

As of June 26, 2021 and December 26, 2020, we accrued $ 10.4 million and $ 8.0 million, respectively, representing the fair value of the estimated payments that we expected would become due in connection with prior acquisitions based upon performance targets.

For the three and six months ended June 26, 2021, we increased this accrual by $ 2.4 million, primarily due to the expected payout based on negotiations with the applicable counterparties.

The changes in the accrual balance were included in Selling, General and Administration expenses.

If the performance targets are fully achieved, the maximum contingent payments under these agreements would be $ 16.0 million using foreign currency exchange rates at June 26, 2021.

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.

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 and results of operations in the period in which any such effects are recorded.

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 the possibility exists that the ultimate resolution of any of these matters could have a material adverse impact on the Company’s cash flows, financial position and results of operations in the period in which any such effects are recorded.

Revenue Recognition

1 unchanged sentence

In many instances, our contract with a customer is the customer’s purchase order.

Upon acceptance of the purchase order, a contract exists with a customer as it indicates approval and commitment of the parties, identifies the rights of both parties, identifies the payment terms, has commercial substance, and it is probable that we will collect the consideration to which we will be entitled in exchange for the goods transferred to the customer.

Upon acceptance of the purchase order, a contract exists with a customer as it indicates approval and commitment of the parties, identifies the rights of both parties, identifies the payment terms, has commercial substance, and makes it probable that we will collect the consideration to which we will be entitled in exchange for the goods transferred to the customer.

We record estimates for cash discounts, defective and slow-moving product returns, promotional rebates, core return deposits and other discounts in the period the related product revenue is recognized (“Customer Credits”).

5 unchanged sentences

We have concluded that our estimates of variable consideration are not constrained.

All our revenue was recognized under the point of time approach during the three months ended March 27, 2021 and March 28, 2020.

All our revenue was recognized under the point of time approach during the six months ended June 26, 2021 and June 27, 2020.

We do not have significant financing arrangements with our customers, as our credit terms are all 365 days or less.

3 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

March 27, 2021

March 28, 2020

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

Automotive body

Three Months Ended

Six Months Ended

(in thousands)

March 27, 2021

March 28, 2020

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

Net sales to U.S.

3 unchanged sentences

Vesting of RSA and RSU grants is conditional based on continued employment or service for a specified period and, in certain circumstances, the attainment of performance goals.

With respect to RSA and RSU grants, we retain the shares underlying the grant, and any dividends paid thereon, until the vesting conditions have been met.

We retain the shares underlying the grant, and any dividends paid thereon, until the vesting conditions have been met.

For time-based RSA and RSU grants, compensation cost related to the stock is recognized on a straight-line basis over the vesting period and is calculated using the closing price per share of our common stock on the grant date.

2 unchanged sentences

For performance-based RSU grants tied to total shareholder return, compensation cost related to the award is recognized on a straight-line basis over the performance period and is calculated using the simulated fair value per share of our common stock based on the application of a Monte Carlo simulation model.

For the three months ended March 27, 2021, we granted 17,714 performance-based RSU awards with a grant date fair value of $ 131.02 per share.

Compensation cost related to RSA and RSU grants was $ 1.8 million and $ 1.0 million for the three months ended March 27, 2021 and March 28, 2020, respectively, and were included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations.

The following table summarizes our RSA and RSU activity for the three months ended March 27, 2021:

For the six months ended June 26, 2021, we granted 17,714 performance-based RSUs with a grant date fair value of $ 131.02 per share.

Compensation cost related to RSA and RSU grants was $ 1.3 million and $ 1.1 million for the three months ended June 26, 2021 and June 27, 2020, respectively, and $ 3.1 million and $ 2.0 million for the six months ended June 26, 2021 and June 27, 2020, respectively, and were included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations.

The following table summarizes our RSA and RSU activity for the six months ended June 26, 2021:

Balance at December 26, 2020

Balance at March 27, 2021

As of March 27, 2021, there was $ 10.9 million of unrecognized compensation cost related to unvested RSA and RSU grants that is expected to be recognized over a weighted average period of 2.6 years.

Balance at June 26, 2021

As of June 26, 2021, there was $ 9.5 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 expense the grant-date fair value of stock options as compensation cost on a straight-line basis over the vesting period for which related services are performed.

The compensation cost charged against income was $ 0.3 million and $ 0.2 million for the three months ended March 27, 2021 and March 28, 2020, respectively, and included as selling, general and administrative expense in the Condensed Consolidated Statements of Operations.

The compensation cost charged against income was $ 0.3 million for each of the three months ended June 26, 2021 and June 27, 2020, and $ 0.6 million and $ 0.5 million for the six months ended June 26, 2021 and June 27, 2020, respectively.

These costs are included as selling, general and administrative expense in the Condensed Consolidated Statements of Operations.

We use the Black-Scholes option valuation model to estimate the fair value of stock options granted.

Expected volatility and expected dividend yield are based on the actual historical experience of our common stock.

The expected life represents the period of time that options granted are expected to be outstanding and was calculated using historical option exercise data.

The expected life represents the period that options granted are expected to be outstanding and was calculated using historical option exercise data.

The risk-free rate was based on a U.S.

Treasury security with terms equal to the expected time of exercise as of the grant date.

The following table summarizes our stock option activity for the three months ended March 27, 2021:

The following table summarizes our stock option activity for the six months ended June 26, 2021:

Balance at December 26, 2020

Balance at March 27, 2021

Options exercisable at March 27, 2021

As of March 27, 2021, there was $ 3.7 million of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted average period of 3.2 years.

Balance at June 26, 2021

Options exercisable at June 26, 2021

As of June 26, 2021, there was $ 3.4 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.

Employee Stock Purchase Plan

Under the Company’s employee stock purchase program, employees purchased 31,462 shares of the Company’s common stock during the three and six months ended June 26, 2021, and 10,735 shares during the three and six months ended June 27, 2020.

The Company recognized compensation cost of $ 0.7 million for the three and six months ended June 26, 2021, and $ 0.1 million and $ 0.2 million for the three and six months ended June 27, 2020, respectively.

Earnings Per Share

2 unchanged sentences

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

Stock-based awards of 9,000 shares and 91,273 shares were excluded from the calculation of diluted earnings per share as of March 27, 2021 and March 28, 2020, respectively, as their effect would have been anti-dilutive.

Stock-based awards that were excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive were 19,000 shares and 123,000 shares for the three months ended June 26, 2021 and June 27, 2020, respectively, and 14,000 shares and 107,000 shares for the six months ended June 26, 2021 and June 27, 2020, respectively.

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

Three Months Ended

Six Months Ended

(in thousands, except per share data)

March 27, 2021

March 28, 2020

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

Weighted average basic shares outstanding

5 unchanged sentences

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.

Under the 401(k) Plan, participants can no longer purchase shares of Dorman common stock as an investment option.

Shares are generally purchased 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 in our 401(k) Plan :

The following table summarizes the repurchase and cancellation of common stock in the 401(k) Plan:

For the Three Months Ended

March 27, 2021

March 28, 2020

For the Six Months Ended

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

Shares repurchased and canceled

4 unchanged sentences

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

At March 27, 2021, $ 203.4 million was available for repurchase under this share repurchase program.

At June 26, 2021, $ 176.2 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:

For the Three Months Ended

March 27, 2021

March 28, 2020

Shares repurchased and cancelled

For the Six Months Ended

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

Shares repurchased and canceled

Total cost of shares repurchased and canceled (in thousands)

Average price per share

At March 27, 2021, we had $ 1.1 million of net unrecognized tax benefits, all of which would lower our effective tax rate if recognized.

At June 26, 2021, we had $ 1.2 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 March 27, 2021, accrued interest and penalties related to uncertain tax positions were not material.

As of June 26, 2021, 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.

15 unchanged sentences

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

Each of these investments is accounted for according to the equity method.

Each of these investments is accounted for under the equity method.

Fair Value Disclosures

1 unchanged sentence

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