Dorman Products, Inc. 10-Q

ITEM 1. Financial Statements DORMAN PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended Six Months Ended (in thousands, except per share data) June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Net sales $ 417,419 $ 310,635 $ 818,998 $ 598,647 Cost of goods sold 275,894 200,510 544,233 384,002 Gross profit 141,525 110,125 274,765 214,645 Selling, general and administrative expenses 92,058 69,517 178,586 132,386 Income from operations 49,467 40,608 96,179 82,259 Interest expense, net 1,565 63 2,796 184 Other income, net ( 111 ) ( 153 ) ( 195 ) ( 238 ) Income before income taxes 48,013 40,698 93,578 82,313 Provision for income taxes 10,108 9,080 20,466 17,965 Net income $ 37,905 $ 31,618 $ 73,112 $ 64,348 Other comprehensive income: Change in foreign currency translation adjustment $ ( 1,999 ) $ — $ ( 303 ) $ — Comprehensive Income $ 35,906 $ 31,618 $ 72,809 $ 64,348 Earnings per share: Basic $ 1.21 $ 0.99 $ 2.32 $ 2.01 Diluted $ 1.20 $ 0.99 $ 2.32 $ 2.00 Weighted average shares outstanding: Basic 31,424 31,942 31,461 31,995 Diluted 31,535 32,089 31,568 32,136 See accompanying Notes to Condensed Consolidated Financial Statements 3 DORMAN PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED ) (in thousands, except for share data) June 25, 2022 December 25, 2021 Assets Current assets: Cash and cash equivalents $ 51,966 $ 58,782 Accounts receivable, less allowance for doubtful accounts of $ 1,373 and $ 1,326 417,354 472,764 Inventories 634,774 531,988 Prepaids and other current assets 26,965 13,048 Total current assets 1,131,059 1,076,582 Property, plant and equipment, net 117,930 114,864 Operating lease right-of-use assets 96,580 59,029 Goodwill 197,165 197,332 Intangible assets, net 172,658 178,809 Other assets 45,775 46,503 Total assets $ 1,761,167 $ 1,673,119 Liabilities and shareholders’ equity Current liabilities: Accounts payable $ 203,456 $ 177,389 Accrued compensation 14,391 26,636 Accrued customer rebates and returns 185,163 188,080 Revolving credit facility 229,360 239,360 Other accrued liabilities 27,965 33,583 Total current liabilities 660,335 665,048 Long-term operating lease liabilities 87,459 52,443 Other long-term liabilities 5,117 4,916 Deferred tax liabilities, net 17,299 17,976 Commitments and contingencies (Note 8) Shareholders’ equity: Common stock, $ 0.01 par value; 50,000,000 shares authorized; 31,425,224 and 31,607,509 shares issued and outstanding in 2022 and 2021, respectively 314 316 Additional paid-in capital 82,192 77,451 Retained earnings 910,194 856,409 Accumulated other comprehensive loss ( 1,743 ) ( 1,440 ) Total shareholders’ equity 990,957 932,736 Total liabilities and shareholders' equity $ 1,761,167 $ 1,673,119 See accompanying Notes to Condensed Consolidated Financial Statements 4 DORMAN PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED ) Three Months Ended June 25, 2022 Common Stock (in thousands, except share data) Shares Issued Par Value Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Balance at March 26, 2022 31,479,916 $ 315 $ 78,906 $ 879,923 $ 256 $ 959,400 Exercise of stock options 14,808 — 957 — — 957 Compensation expense under Incentive Stock Plan — — 2,118 — — 2,118 Purchase and cancellation of common stock ( 75,321 ) ( 1 ) ( 136 ) ( 7,141 ) — ( 7,278 ) Issuance of non-vested stock, net of cancellations 6,732 — — — — — Other stock-related activity, net of tax ( 911 ) — 347 ( 493 ) — ( 146 ) Other comprehensive income — — — — ( 1,999 ) ( 1,999 ) Net income — — — 37,905 — 37,905 Balance at June 25, 2022 31,425,224 $ 314 $ 82,192 $ 910,194 $ ( 1,743 ) $ 990,957 Three Months Ended June 26, 2021 Common Stock (in thousands, except share data) Shares Issued Par Value Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Balance at March 27, 2021 32,115,528 $ 321 $ 67,596 $ 815,894 $ — $ 883,811 Exercise of stock options 5,732 — 420 — — 420 Compensation expense under Incentive Stock Plan — — 2,380 — — 2,380 Purchase and cancellation of common stock ( 266,871 ) ( 2 ) ( 480 ) ( 26,793 ) — ( 27,275 ) Issuance of non-vested stock, net of cancellations 38,120 — 2,493 — — 2,493 Other stock-related activity, net of tax ( 619 ) — ( 462 ) — — ( 462 ) Net income — — — 31,618 — 31,618 Balance at June 26, 2021 31,891,890 $ 319 $ 71,947 $ 820,719 $ — $ 892,985 Six Months Ended June 25, 2022 Common Stock (in thousands, except share data) Shares Issued Par Value Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Balance at December 25, 2021 31,607,509 $ 316 $ 77,451 $ 856,409 $ ( 1,440 ) $ 932,736 Exercise of stock options 17,286 — 957 — — 957 Compensation expense under Incentive Stock Plan — — 4,270 — — 4,270 Purchase and cancellation of common stock ( 186,435 ) ( 2 ) ( 336 ) ( 17,857 ) — ( 18,195 ) Issuance of non-vested stock, net of cancellations 4,221 — 377 — — 377 Other stock-related activity, net of tax ( 17,357 ) — ( 527 ) ( 1,470 ) — ( 1,997 ) Other comprehensive income — — — — ( 303 ) ( 303 ) Net income — — — 73,112 — 73,112 Balance at June 25, 2022 31,425,224 $ 314 $ 82,192 $ 910,194 $ ( 1,743 ) $ 990,957 Six Months Ended June 26, 2021 Common Stock (in thousands, except share data) Shares Issued Par Value Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Balance at December 26, 2020 32,168,740 $ 322 $ 64,085 $ 789,152 $ — $ 853,559 Exercise of stock options 17,346 — 736 — — 736 Compensation expense under Incentive Stock Plan — — 4,491 — — 4,491 Purchase and cancellation of common stock ( 305,031 ) ( 3 ) ( 549 ) ( 30,697 ) — ( 31,249 ) Issuance of non-vested stock, net of cancellations 20,521 — 2,493 — — 2,493 Other stock-related activity, net of tax ( 9,686 ) — 691 ( 2,084 ) — ( 1,393 ) Net income — — — 64,348 — 64,348 Balance at June 26, 2021 31,891,890 $ 319 $ 71,947 $ 820,719 $ — $ 892,985 See accompanying Notes to Condensed Consolidated Financial Statements 5 DORMAN PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended (in thousands) June 25, 2022 June 26, 2021 Cash Flows from Operating Activities: Net income $ 73,112 $ 64,348 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, amortization and accretion 19,600 16,850 Provision for doubtful accounts 56 31 Benefit for deferred income taxes ( 551 ) ( 213 ) Provision for stock-based compensation 4,270 4,491 Changes in assets and liabilities: Accounts receivable 55,341 14,605 Inventories ( 102,824 ) ( 58,039 ) Prepaids and other current assets ( 7,347 ) ( 8,288 ) Other assets ( 726 ) ( 3,451 ) Accounts payable 25,565 8,818 Accrued customer rebates and returns ( 2,917 ) 9,826 Accrued compensation and other liabilities ( 26,193 ) ( 9,891 ) Cash provided by operating activities 37,386 39,087 Cash Flows from Investing Activities: Proceeds from purchase price adjustment 595 — Property, plant and equipment additions ( 16,100 ) ( 10,153 ) Cash used in investing activities ( 15,505 ) ( 10,153 ) Cash Flows from Financing Activities: Payments of revolving credit line ( 10,000 ) — Proceeds from exercise of stock options 894 736 Purchase and cancellation of common stock ( 18,195 ) ( 30,848 ) Other stock-related activity ( 1,386 ) 1,141 Cash used in financing activities ( 28,687 ) ( 28,971 ) Effect of exchange rate changes on Cash and Cash Equivalents ( 10 ) — Net Decrease in Cash and Cash Equivalents ( 6,816 ) ( 37 ) Cash and Cash Equivalents, Beginning of Period 58,782 155,576 Cash and Cash Equivalents, End of Period $ 51,966 $ 155,539 Supplemental Cash Flow Information Cash paid for interest expense $ 2,285 $ 140 Cash paid for income taxes $ 36,700 $ 26,436 See accompanying Notes to Condensed Consolidated Financial Statements 6 DORMAN PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 25, 2022 AND JUNE 26, 2021 (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 Global Select Market 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 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. The introduction of new products and product lines to customers may cause significant fluctuations from quarter to quarter. 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 25, 2021. 2. Business Acquisitions and Investments 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. The transaction was accounted for as a business combination under the acquisition method of accounting. We have allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. During the year ended December 25, 2021, we recorded measurement period adjustments of approximately $ 2.1 million to decrease goodwill, $ 0.6 million to decrease the purchase price due to customary net working capital adjustments, $ 0.1 million to increase other current liabilities, and $ 1.6 million to decrease deferred tax liabilities. Our measurement period adjustments for Dayton Parts were complete as of December 25, 2021. The table below details the fair values of the assets acquired and the liabilities assumed at the acquisition date, including applicable measurement period adjustments: (in thousands) Accounts receivable $ 23,216 Inventories 79,625 Prepaids and other current assets 2,302 Property, plant and equipment 29,900 Goodwill 106,816 Identifiable intangible assets 160,400 Operating lease right-of-use assets 21,248 Other assets 848 Accounts payable ( 11,970 ) Accrued compensation ( 2,784 ) Other current liabilities ( 7,604 ) Long-term operating lease liabilities ( 18,444 ) Deferred tax liabilities ( 38,665 ) Net cash consideration $ 344,888 7 The fair values assigned to intangible assets were estimated by discounting expected cash flows based on the relief from royalty and multi-period excess earnings valuation methodologies. 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 aftermarket businesses, the assembled workforce of Dayton Parts and other factors. The goodwill is not expected to be deductible for tax purposes. The financial results of the acquisition have been included in the unaudited condensed consolidated financial statements since the date of acquisition. 3. 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. 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. 4. 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) June 25, 2022 December 25, 2021 Raw materials $ 15,997 $ 12,746 Bulk product 236,354 225,879 Finished product 373,537 287,415 Packaging materials 8,886 5,948 Total $ 634,774 $ 531,988 8 5. Leases 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. The lease commenced on March 1, 2022 and runs through February 28, 2034 . The lease includes fixed rental payments as well as variable payments for operating expenses that will be billed based on actual costs. 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 June 25, 2022: (in thousands) June 25, 2022 Remainder of 2022 $ 1,548 2023 3,160 2024 3,239 2025 3,320 2026 3,403 2027 and thereafter 27,001 Total remaining fixed lease payments $ 41,671 6 . Goodwill and Intangible Assets Goodwill Goodwill included the following: (in thousands) Balance at December 25, 2021 $ 197,332 Foreign currency translation ( 167 ) Balance at June 25, 2022 $ 197,165 Intangible Assets Intangible assets included the following: June 25, 2022 December 25, 2021 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 $ 149,150 $ 16,636 $ 132,514 $ 149,150 $ 12,139 $ 137,011 Trade names 17,760 3,446 14,314 17,760 2,592 15,168 Product Portfolio 25,300 1,093 24,207 25,300 460 24,840 Technology 2,167 695 1,472 2,167 571 1,596 Other 430 279 151 430 236 194 Total $ 194,807 $ 22,149 $ 172,658 $ 194,807 $ 15,998 $ 178,809 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. 7 . Revolving Credit Facility 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. 9 8 . Commitments and Contingencies Acquisitions 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 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 and results of operations in the period in which any such effects are recorded. 9 . Revenue Recognition Our primary source of revenue is from contracts with and purchase orders from customers. In most 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 a sales agreement indicates approval and commitment of the parties, identifies the rights of both parties, identifies the payment terms, and has commercial substance. At this point, we believe it is 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”). 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. Actual Customer Credits have not differed materially from estimated amounts for each period presented. Amounts billed to customers for shipping and handling are included in net sales. Costs associated with shipping and handling are included in cost of goods sold. 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 six months ended June 25, 2022 and June 26, 2021. Also, we do not have significant financing arrangements with our customers. Our credit terms are all less than one year. Lastly, we do not receive noncash consideration (such as materials or equipment) from our customers to facilitate the fulfillment of our contracts. Disaggregated Revenue The following tables present our disaggregated revenue by type of major good / product line, and geography. Three Months Ended Six Months Ended (in thousands) June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Powertrain $ 156,555 $ 128,811 $ 308,783 $ 249,933 Chassis 177,732 98,551 338,594 184,038 Automotive body 69,767 66,970 143,047 135,632 Hardware 13,365 16,303 28,574 29,044 Total $ 417,419 $ 310,635 $ 818,998 $ 598,647 Three Months Ended Six Months Ended (in thousands) June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Net sales to U.S. customers $ 384,223 $ 295,081 $ 757,841 $ 568,231 Net sales to non-U.S. customers 33,196 15,554 61,157 30,416 Total $ 417,419 $ 310,635 $ 818,998 $ 598,647 10 10 . Stock-Based Compensation Restricted Stock Awards (“RSAs”) and Restricted Stock Units (“RSUs”) 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. 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 awards 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. For performance-based RSA grants tied to growth in adjusted pre-tax income, compensation cost related to the award is recognized over the performance period and is calculated using the closing price per share of our common stock on the grant date and an estimate of the probable outcome of the performance conditions at each reporting date. Since March 2020, we have made performance-based RSU grants that vest based on our total shareholder return ranking relative to the total shareholder return of the companies comprising the S&P Mid-Cap 400 Growth Index over a three-year performance period. 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 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: Shares Weighted Average Fair Value Balance at December 25, 2021 206,677 $ 85.97 Granted 95,226 $ 100.79 Vested ( 51,027 ) $ 83.67 Canceled ( 40,002 ) $ 83.51 Balance at June 25, 2022 210,874 $ 93.69 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 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. Expected volatility and expected dividend yield are based on the actual historical experience of our common stock. 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. 11 The following table summarizes our stock option activity for the six months ended June 25, 2022 : Shares Weighted Average Exercise Price Weighted Average Remaining Term (In years) Aggregate Intrinsic Value Balance at December 25, 2021 233,396 $ 77.85 Granted 78,574 $ 97.16 Cancelled ( 11,236 ) $ 77.45 Exercised ( 30,972 ) $ 71.73 Balance at June 25, 2022 269,762 $ 84.20 5.8 $ 5,532,808 Exercisable at June 25, 2022 94,126 $ 76.03 4.3 $ 2,699,534 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”) 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. 1 1 . 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 equivalents are calculated using the treasury stock method and are computed based on outstanding stock-based awards. 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) June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Net income $ 37,905 $ 31,618 $ 73,112 $ 64,348 Denominator: Weighted average basic shares outstanding 31,424 31,942 31,461 31,995 Effect of stock-based compensation awards 111 147 107 141 Weighted average diluted shares outstanding 31,535 32,089 31,568 32,136 Earnings Per Share: Basic $ 1.21 $ 0.99 $ 2.32 $ 2.01 Diluted $ 1.20 $ 0.99 $ 2.32 $ 2.00 1 2 . 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 12 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 Six Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Shares repurchased and canceled 7,621 982 20,385 3,142 Total cost of shares repurchased and canceled (in thousands) $ 752 $ 106 $ 2,140 $ 316 Average price per share $ 98.71 $ 107.63 $ 104.99 $ 100.49 Separately, our Board of Directors has authorized the repurchase of up to $ 500 million of our common stock through December 31, 2022 under a previously announced share repurchase program. Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion. The share repurchase program does not obligate us to acquire any specific number of shares. 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 Six Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 Shares repurchased and canceled 67,700 265,889 166,050 301,889 Total cost of shares repurchased and canceled (in thousands) $ 6,525 $ 27,171 $ 16,054 $ 30,934 Average price per share $ 96.38 $ 102.19 $ 96.68 $ 102.47 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 . 1 3 . Income Taxes 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 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. All years before 2017 are closed for U.S. federal tax purposes. Tax years before 2017 are closed for the states in which we file. Tax years before 2019 are closed for tax purposes in Canada. Tax years before 2019 are closed for tax purposes in China. Tax years before 2017 are closed for tax purposes in Mexico. All tax years remain open for India. 1 4 . Related-Party Transactions We lease our Colmar, PA facility and a portion of our Lewisberry, PA facility from entities in which Steven L. Berman, our Executive Chairman, and certain of his family members are owners. Each lease is a non-cancelable operating lease. Total rental payments to those entities under these lease arrangements will be $ 2.4 million in fiscal 2022 and were $ 2.3 million in fiscal 2021. The lease for our corporate headquarters in Colmar, PA was renewed during November 2016, effective as of January 1, 2018 , and will expire on December 31, 2022 . The lease for our Lewisberry, PA operating facility was signed in September 2020 and will expire on December 31, 2027 . We are a partner in a joint venture with one of our suppliers and own minority interests in two other suppliers. One of these investments is accounted for under the equity method and one is accounted for under the cost method. 1 5 . Fair Value Disclosures The carrying value of financial instruments such as cash, accounts receivable, accounts payable, debt under our revolving credit facility, and other current assets and liabilities approximate their fair value based on the short-term nature of these instruments. 13