Dorman Products has announced its financial results for the fourth quarter and fiscal year ended Dec. 29, 2018.
The company reported fourth quarter 2018 net sales of $260.3 million, up 14 percent compared to net sales of $227.7 million in the fourth quarter of 2017. Sales growth in the quarter attributable to acquisitions was approximately 4 percent.
Gross profit grew 7 percent to $96.9 million in the fourth quarter from $90.9 million last year.
Selling, general and administrative (SG&A) expenses grew 10 percent to $52.3 million in the fourth quarter on a GAAP basis compared to $47.5 million in the same quarter last year. Adjusted SG&A increased 10 percent to $51.2 million or 19.7 percent of net sales in the quarter compared to $46.4 million or 20.4 percent of net sales in the same quarter last year. The increase in SG&A was primarily due to the inclusion of expenses of acquired operations, the reinvestment of tax savings from the Tax Cuts and Jobs Act (TCJA) and wage and benefit inflation.
Net income for the fourth quarter of 2018 was $34.6 million, or $1.05 per diluted share compared to $22 million, or 65 cents per diluted share, in the prior year quarter. Adjusted net income in the fourth quarter was $36.4 million, or $1.10 per diluted share, up 25 percent compared to $29.1 million or 87 cents per diluted share in the prior year quarter.
In the fourth quarter of 2018, the construction of Dorman’s new 800,000-square-foot distribution facility in Portland, Tennessee, (in close proximity to the company’s existing operation) was completed. Over the course of the first and second quarters of 2019, Dorman will be transferring its existing distribution operations in Portland into this new facility. In addition, in order to better serve customers, Dorman made the strategic decision to consolidate its Montreal facility (acquired as part of the MAS acquisition) into the new Portland distribution center and to consolidate an existing production facility in Michigan with its newly acquired Flight facility in Pennsylvania. Both of these actions will be completed in the first quarter of 2019.
Dorman says it expects that the pre-tax costs to complete these actions will be approximately $3.4 million, including approximately $1.5 million of duplicate rent and utilities while it transfers operations between its facilities in Portland and approximately $1.9 million of severance, accelerated depreciation and other integration expenses related to the site consolidations.
Fiscal 2018 Financial Results
Fiscal 2018 net sales were $973.7 million, up 8 percent compared to $903.2 million in 2017. Sales growth in the full year attributable to acquisitions was approximately 5 percent.
Net income for the current fiscal year was $133.6 million, or $4.02 per diluted share compared to $106.6 million, or $3.13 per diluted share in the prior year. Adjusted net income in the current fiscal year was $139.4 million, or $4.20 per diluted share, up 22 percent compared to $114.7 million, or $3.37 per diluted share in the prior year.
Kevin Olsen, Dorman Products president and CEO, stated, “I’d first like to thank all of our many Dorman contributors for a very successful 2018. Their hard work and commitment to excellence is the driving force behind all of our success. The fourth quarter capped off a pivotal year for our company on many fronts. Our organic growth engine remains strong as we continued to invest in bringing new products to market. We successfully integrated the MAS acquisition fully into Dorman while creating a market-leading, comprehensive chassis offering to meet the needs of both our retail and traditional customers. We acquired Flight Systems Automotive Group in the third quarter greatly increasing our complex electronics capabilities. We continued to grow and invest in our heavy-duty business, setting us up nicely to continue our aggressive growth trajectory. Also, construction of a new, state of the art distribution facility in Tennessee was completed. This facility will enable us to better serve the needs of customers and provide space for future growth. Continuing to be the No. 1 innovator in the light-, medium- and heavy-duty markets will be the cornerstone of our strategy, supplemented by strategic acquisitions that accelerate growth in targeted segments, markets and geographies. Despite some macro uncertainties around trade policies, we remain optimistic about 2019.”
2019 Guidance
The company expects 2019 net sales growth between 6 and 10 percent and expects diluted EPS of between $4.22 and $4.38 on a GAAP basis and adjusted diluted EPS of between $4.37 and $4.53 or between a 4 and 8 percent growth rate. Dorman said tariffs are not expected to have an impact on its 2019 net income, but will lower gross and operating profit percentages as these additional costs are passed through to customers.
Share Repurchases
Under its share repurchase program, Dorman repurchased 135.7 thousand shares of its common stock for $9.6 million at an average share price of $70.86 during the quarter ended Dec. 29, 2018, bringing fiscal year 2018 purchases to 622.2 thousand shares for $43.4 million at an average price of $69.73. Including the additional $150 million authorization announced in December 2018, the company has $183.3 million left under its current share repurchase authorization.
