Dorman Products, Inc., a leading supplier in the automotive aftermarket, recently announced its financial results for the 3rd quarter ended Sept. 28, 2019.
3rd Quarter Financial Results
The company reported 3rd quarter 2019 net sales of $253.8 million, up 2.4% compared to net sales of $248 million in the 3rd quarter of 2018. Sales growth in the quarter attributable to acquisitions was approximately 1%.
Gross profit was $86.9 million in the 3rd quarter compared to $95 million for the same quarter last year. Gross margin for the 3rd quarter was 34.2% compared to 38.3% in the same quarter last year. The adjusted gross margin was 34.3% in the quarter compared to 38.3% in the same quarter last year. The gross margin decline was primarily due to a shift in customer mix to retail customers from warehouse distributors, redundant overhead costs resulting from operating out of two distribution locations in Portland, Tennessee, and the pass-through of tariff costs to our customers.
Selling, general and administrative (SG&A) expenses were $60 million, or 23.6% of net sales, in the 3rd quarter of 2019 compared to $51.3 million, or 20.7% of net sales, in the same quarter last year. Adjusted SG&A expenses were $59.2 million, or 23.3% of net sales, in the quarter compared to $49.9 million, or 20.1% of net sales, in the same quarter last year. A 2% increase in SG&A as a percentage of sales was primarily due to the temporary duplication of facility and operating costs related to our distribution center consolidation.
Income tax expense was $5.7 million in the 3rd quarter of 2019, or 21.1% of income before income taxes, down from $9.8 million, or 22.3% of income before income taxes, recorded in the same quarter last year. The decrease in tax rate was primarily a result of lower foreign-sourced income.
Net income for the 3rd quarter of 2019 was $21.3 million, or $0.65 per diluted share, compared to $34.0 million, or $1.03 per diluted share, in the prior year quarter. Adjusted net income in the 3rd quarter was $22 million, or $0.67 per diluted share, compared to $35 million, or $1.06 per diluted share, in the prior year quarter.
Kevin Olsen, Dorman Products’ president and CEO, stated, “Our third quarter results came in below our expectations as we faced ongoing soft market conditions, particularly in our warehouse distributor channel. Despite these external headwinds, we focused on executing and importantly, made strong progress on consolidating our Portland distribution locations. We are now fully operating out of our new distribution center and are confident this facility will allow us to more efficiently and effectively serve our customers moving forward. We continued to focus on operational improvements as we reduced inventories by $10 million from the second quarter despite higher acquisition costs related to tariffs. Additionally, we continued to drive innovation in the automotive aftermarket and released 1,055 new SKUs in the quarter, underscored by the strong growth in our Heavy Duty and Complex Electronic product lines.”
Mr. Olsen continued, “We expect these soft demand conditions to continue impacting our results for the remainder of the year and have lowered our expectations for the fourth quarter accordingly. While these past few quarters have been challenging, we remain confident in our long-term strategy. We will continue to focus on bringing new products to market, operational execution to improve margins and free cash flow, and pursuing strategic acquisitions. Looking ahead, we firmly believe these actions will drive attractive returns for our shareholders.”
