What changed in this filing

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Item 1. Financial Statements

2022-07-25 compared with 2022-04-25 · 112 added, 72 removed, 273 unchanged (40% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

Three Months Ended

Six Months Ended

(in thousands, except per share data)

March 26, 2022

March 27, 2021

June 25, 2022

June 26, 2021

June 25, 2022

June 26, 2021

Cost of goods sold

15 unchanged sentences

(in thousands, except for share data)

March 26, 2022

June 25, 2022

December 25, 2021

26 unchanged sentences

Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Total shareholders’ equity

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three Months Ended March 26, 2022

Three Months Ended June 25, 2022

(in thousands, except share data)

1 unchanged sentence

Accumulated Other Comprehensive Income (Loss)

Balance at December 25, 2021

Balance at March 26, 2022

Exercise of stock options

1 unchanged sentence

Purchase and cancellation of common stock

Cancellation of non-vested stock, net of issuances

Issuance of non-vested stock, net of cancellations

Other stock-related activity, net of tax

Other comprehensive income

Balance at June 25, 2022

Three Months Ended June 26, 2021

(in thousands, except share data)

Additional Paid-In

Accumulated Other Comprehensive Income (Loss)

Balance at March 27, 2021

Three Months Ended March 27, 2021

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 26, 2021

Six Months Ended June 25, 2022

(in thousands, except share data)

5 unchanged sentences

Purchase and cancellation of common stock

Cancellation of non-vested stock, net of issuances

Issuance of non-vested stock, net of cancellations

Other stock-related activity, net of tax

Balance at March 27, 2021

Other comprehensive income

Balance at June 25, 2022

Six Months Ended June 26, 2021

(in thousands, except share data)

Additional Paid-In

Accumulated Other Comprehensive Income (Loss)

Balance at December 26, 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 26, 2021

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 26, 2022

March 27, 2021

June 25, 2022

June 26, 2021

Cash Flows from Operating Activities:

2 unchanged sentences

Provision for doubtful accounts

Benefit for deferred income taxes

Provision for stock-based compensation

12 unchanged sentences

Payments of revolving credit line

Other stock-related activity

Proceeds from exercise of stock options

Purchase and cancellation of common stock

Other stock-related activity

Cash used in financing activities

Effect of exchange rate changes on Cash and Cash Equivalents

Net (Decrease) Increase in Cash and Cash Equivalents

Net Decrease 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 26, 2022 AND MARCH 27, 2021

FOR THE THREE AND SIX MONTHS ENDED JUNE 25, 2022 AND JUNE 26, 2021

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 26, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022 or any future period.

Operating results for the three and six months ended June 25, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022 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

DPL Holding Corporation (“Dayton Parts”)

On August 10, 2021, we acquired 100 % of the equity interests of Dayton Parts, a manufacturer of chassis and other parts designed to serve the heavy-duty vehicle sector of the aftermarket, for a purchase price of $ 344.9 million in cash (net of $ 8.8 million of acquired cash) after certain customary post-acquisition purchase price adjustments.

In the three months ended March 26, 2022, we received $ 0.6 million in cash as proceeds from the closing net working capital adjustments.

On August 10, 2021, we acquired 100 % of the equity interests of DPL Holding Corporation (“Dayton Parts”), a manufacturer of chassis and other parts designed to serve the heavy-duty vehicle sector of the aftermarket, for a purchase price of $ 344.9 million in cash (net of $ 8.8 million of acquired cash) after certain customary post-acquisition purchase price adjustments.

In the six months ended June 25, 2022, we received $ 0.6 million in cash as proceeds from the closing net working capital adjustments.

The acquisition was funded by cash on hand and borrowings under our revolving credit facility.

18 unchanged sentences

These valuation methods rely on management judgment, including expected future cash flows resulting from existing customer relationships, customer attrition rates, contributory effects of other assets utilized in the business, royalty rates and other factors.

The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to the Company’s and Dayton Parts’ existing automotive aftermarket businesses, the assembled workforce of Dayton Parts and other factors.

The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to the Company’s and Dayton Parts’ existing aftermarket businesses, the assembled workforce of Dayton Parts and other factors.

The goodwill is not expected to be deductible for tax purposes.

2 unchanged sentences

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 Sheet at the times of the sales transactions.

Under these agreements, we sold $ 275.2 million and $ 209.9 million of accounts receivable during the three months ended March 26, 2022 and March 27, 2021, respectively.

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

Selling, general and administrative expenses include factoring costs associated with these accounts receivable sales programs of $ 4.9 million and $ 2.6 million during the three months ended March 26, 2022 and March 27, 2021, respectively.

Under these agreements, we sold $ 262.9 million and $ 223.8 million of accounts receivable during the three months ended June 25, 2022 and June 26, 2021, respectively, and $ 538.1 million and $ 433.7 million of accounts receivable during the six months ended June 25, 2022 and June 26, 2021 respectively.

Selling, general and administrative expenses include factoring costs associated with these accounts receivable sales programs of $ 8.3 million and $ 2.9 million during the three months ended June 25, 2022 and June 26, 2021, respectively, and $ 13.2 million and $ 5.5 million during the six months ended June 25, 2022 and June 26, 2021, respectively.

The increase in factoring costs for the three and six months ended June 25, 2022 compared to the prior year periods was primarily driven by higher LIBOR and other reference rates, and higher accounts receivable sold under these programs.

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 26, 2022

June 25, 2022

December 25, 2021

2 unchanged sentences

Packaging materials

During the three months ended March 26, 2022, we entered into a warehouse and distribution services agreement with a third-party.

In connection with the services agreement, we have agreed to reimburse the service provider for substantially all of its facility costs applicable to the warehouse in which services are provided.

During the six months ended June 25, 2022, we entered into a warehouse and distribution services agreement with a third-party.

In connection with the services agreement, we have agreed to reimburse the service provider for substantially all of its facility costs applicable to the warehouse where services are provided.

This agreement resulted in a deemed new lease for the company for accounting purposes.

2 unchanged sentences

Upon the lease commencement date, we recorded an operating lease right of use asset of $ 35.1 million, a short-term operating lease liability (included in other accrued liabilities in the consolidated balance sheet) of $ 2.0 million, and a long-term operating lease liability of $ 33.1 million.

The following table summarizes the maturities of the lease liability for our new deemed lease as of March 26, 2022:

The following table summarizes the maturities of the lease liability for our new deemed lease as of June 25, 2022:

(in thousands)

March 26, 2022

June 25, 2022

Remainder of 2022

2027 and thereafter

Total fixed lease payments

Total remaining fixed lease payments

Goodwill and Intangible Assets

1 unchanged sentence

(in thousands)

Three Months Ended

Balance at December 25, 2021

Foreign currency translation

Balance at March 26, 2022

Balance at June 25, 2022

Intangible Assets

Intangible assets included the following:

March 26, 2022

June 25, 2022

December 25, 2021

9 unchanged sentences

Product Portfolio

Amortization expense was $ 3.0 million and $ 0.8 million during the three months ended March 26, 2022 and March 27, 2021, respectively.

Amortization expense was $ 3.1 million and $ 0.9 million during the three months ended June 25, 2022 and June 26, 2021, respectively and $ 6.1 million and $ 1.7 million during the six months ended June 25, 2022 and June 26, 2021, respectively.

Revolving Credit Facility

As of March 26, 2022, the interest rate on the outstanding borrowings under our revolving credit facility was 1.6 %.

No borrowings were outstanding as of March 27, 2021.

As of June 25, 2022 and December 25, 2021, the interest rate on the outstanding borrowings under our revolving credit facility was 3.25 % and 1.35 %, respectively.

Commitments and Contingencies

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.

If the remaining performance targets for prior acquisitions are fully achieved, the maximum additional contingent payments to be made under the related acquisition agreements would be $ 3.6 million.

We have contingent consideration related to a prior acquisition due to the uncertainty of the ultimate amount of payment that will become due as earnout payments if performance targets are achieved.

If the remaining performance targets for the prior acquisition are fully achieved, the maximum additional contingent payment to be made under the related acquisition agreement would be $ 3.6 million.

Other Contingencies

8 unchanged sentences

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”).

The provision

for Customer Credits is recorded as a reduction from gross sales and reserves for Customer Credits are shown as an increase of accrued customer rebates and returns.

The provision for Customer Credits is recorded as a reduction from gross sales and reserves for Customer Credits are shown as an increase of accrued customer rebates and returns.

Customer Credits are estimated based on contractual provisions, historical experience, and our assessment of current market conditions.

3 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 26, 2022 and March 27, 2021.

All our revenue was recognized under the point of time approach during the six months ended June 25, 2022 and June 26, 2021.

Also, we do not have significant financing arrangements with our customers.

4 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

March 26, 2022

March 27, 2021

June 25, 2022

June 26, 2021

June 25, 2022

June 26, 2021

Automotive body

Three Months Ended

Six Months Ended

(in thousands)

March 26, 2022

March 27, 2021

June 25, 2022

June 26, 2021

June 25, 2022

June 26, 2021

Net sales to U.S.

8 unchanged sentences

For these awards, 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 26, 2022, we granted 23,995 performance-based RSUs with a grant date fair value of $ 111.31 per share.

For the three months ended March 27, 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 $ 1.6 million and $ 1.8 million for the three months ended March 26, 2022 and March 27, 2021, respectively, and was 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 26, 2022:

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

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 $ 1.7 million and $ 1.3 million for the three months ended June 25, 2022 and June 26, 2021, respectively, and $ 3.3 million and $ 3.1 million for the six months ended June 25, 2022 and June 26, 2021, respectively, and was 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 25, 2022:

Balance at December 25, 2021

Balance at March 26, 2022

As of March 26, 2022, there was $ 16.8 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 25, 2022

As of June 25, 2022, there was $ 14.6 million of unrecognized compensation cost related to unvested RSA and RSU grants that is expected to be recognized over a weighted average period of 2.4 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 $ 0.4 million and $ 0.3 million for the three months ended March 26, 2022 and March 27, 2021, respectively.

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

The compensation cost charged against income was $ 0.4 million and $ 0.3 million for the three months ended June 25, 2022 and June 26, 2021, respectively, and $ 0.8 million and $ 0.6 million for the six months ended June 25, 2022 and June 26, 2021, respectively, and was 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.

3 unchanged sentences

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 26, 2022 :

The following table summarizes our stock option activity for the six months ended June 25, 2022 :

Balance at December 25, 2021

Balance at March 26, 2022

Options exercisable at March 26, 2022

As of March 26, 2022, there was $ 3.6 million of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted average period of 3.3 years.

Balance at June 25, 2022

Exercisable at June 25, 2022

As of June 25, 2022, 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 3.1 years.

Employee Stock Purchase Plan (“ESPP”)

There were 4,615 shares purchased during the three months ended March 26, 2022 under the ESPP.

During the three months ended March 26, 2022, compensation costs related to the ESPP were $ 0.1 million.

During the six months ended June 25, 2022 and June 26, 2021, we purchased 4,615 shares and 36,077 shares, respectively, under the ESPP.

Compensation cost related to the ESPP was $ 0.0 million and $ 0.7 million for the three months ended June 25, 2022 and June 26, 2021, respectively, and $ 0.1 million and $ 0.7 million for the six months ended June 25, 2022 and June 26, 2021, 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 approximately 27,000 shares and 9,000 shares were excluded from the calculation of diluted earnings per share for the three months ended March 26, 2022 and March 27, 2021, respectively, as the impact would have been antidilutive.

Stock-based awards that were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive totaled 37,000 shares and 19,000 shares for the three months ended June 25, 2022 and June 26, 2021, respectively, and 32,000 shares and 14,000 shares for the six months ended June 25, 2022 and June 26, 2021, respectively.

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

Three Months Ended

Six Months Ended

(in thousands, except per share data)

March 26, 2022

March 27, 2021

June 25, 2022

June 26, 2021

June 25, 2022

June 26, 2021

Weighted average basic shares outstanding

6 unchanged sentences

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.

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

March 26, 2022

March 27, 2021

Six Months Ended

June 25, 2022

June 26, 2021

June 25, 2022

June 26, 2021

Shares repurchased and canceled

4 unchanged sentences

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

At March 26, 2022, $ 136.0 million was available for repurchase under this share repurchase program.

At June 25, 2022, $ 129.5 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

March 26, 2022

March 27, 2021

Six Months Ended

June 25, 2022

June 26, 2021

June 25, 2022

June 26, 2021

Shares repurchased and canceled

1 unchanged sentence

Average price per share

At March 26, 2022, we had $ 1.2 million of net unrecognized tax benefits, all of which would lower our effective tax rate if recognized.

On July 21, 2022, the Company’s Board of Directors authorized a $ 100 million increase and two-year extension to the share repurchase program, raising the aggregate authorization under the program to $ 600 million and extending it through December 31, 2024 .

At June 25, 2022, we had $ 1.3 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 26, 2022, accrued interest and penalties related to uncertain tax positions were not material.

As of June 25, 2022, 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.

14 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 under the equity method.

One of these investments is accounted for under the equity method and one is accounted for under the cost 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