Dorman Products Reports 2nd Quarter 2018 Results

Dorman Products Reports 2nd Quarter 2018 Results

The company reported second quarter 2018 net sales of $238.1 million, up 4 percent compared to net sales of $229.3 million in the second quarter of 2017.

Dorman Products Inc. has announced its financial results for the second quarter, ended June 30, 2018.

The company reported second quarter 2018 net sales of $238.1 million, up 4 percent compared to net sales of $229.3 million in the second quarter of 2017. Included in net sales were approximately $10 million of sales from MAS Automotive Distribution Inc. (MAS), which was acquired in October of 2017.

Net income for the second quarter of 2018 was $34.3 million, or $1.03 per diluted share compared to $28.4 million, or 83 cents per diluted share in the prior year quarter. Adjusted net income in the second quarter was $36.2 million, or $1.09 per diluted share, up 30 percent compared to $28.7 million or 84 cents per diluted share in the prior year quarter.

Gross profit percentage for the quarter was 38.9 percent on a GAAP basis. Excluding the impacts of acquisition-related adjustments, adjusted gross profit was 39.3 percent in the quarter compared to 39.6 percent in the same quarter last year. The 30 Bps difference is primarily a result of the MAS acquisition, which carries slightly lower gross margins compared to historical Dorman levels.

Income tax expense was $8.5 million in the second quarter, or 19.9 percent of income before income taxes down from $16.8 million, or 37.1 percent of income before income taxes recorded in the same quarter last year. The reduction in tax rate compared to prior year is primarily a result of the recently enacted U.S. tax legislation known as the Tax Cuts and Jobs Act. The company’s tax rate also was down from the first quarter of 2018, a result of increased tax credits and, to a lesser extent, resolution of a prior period state tax matter.

Matt Barton, Dorman Products president and CEO, said, “We experienced a moderately improved demand environment in the second quarter. Year to date customer sell through, as reported to us by our customers, was up over prior year in the mid-single digit range as sell through from new products more than offset continued sales growth headwinds resulting from our brand protection pricing policy that went into effect early in the fourth quarter of 2017. The impact from our brand protection policy will continue to weigh on our year-over-year organic growth comparisons through the end of the third quarter. Our team continues to execute well. We launched 1,534 new SKUs in the quarter and our Dorman Heavy Duty Solution lines net sales grew 30 percent in the quarter. Our Complex Electronics lines net sales were also up 7 percent in the quarter despite being impacted by our brand protection policies. We firmly believe that our strategy of investing in both Heavy Duty and Complex Electronics, combined with Light Duty New Product development and strategic acquisitions is the right one, and will continue to drive attractive returns for our shareholders.”

2018 Guidance

The company commented, “We are narrowing our fiscal 2018 EPS guidance range. On a GAAP basis, fiscal 2018 EPS is expected to be in the $4.05 to $4.15 range. Fiscal 2018 Adjusted EPS is expected to be in the $4.15 to $4.27 range or a 23 percent to 27 percent growth rate. We are lowering our previously guided full year effective tax rate to approximately 22 percent (from 24 percent), primarily as a result of higher tax credits than previously anticipated. We are also reducing our previously issued full year sales growth guidance to be in the 4 percent to 6 percent range, a result of longer than expected inventory control measures by our customers.”

Tariffs

Effective July 6, the Office of the United States Trade Representative (USTR) imposed an additional duty of 25 percent on approximately $34 billion worth of Chinese imports containing industrially significant technologies, including those related to China’s “Made in China 2025” industrial policy. These additional duties impact a subset of products that are manufactured for Dorman in China. We expect the impact of these additional duties, after mitigating actions including, but not limited to, price increases to its customers, will not be significant to the company’s financial results in 2018. However, the company says its current guidance does not reflect any additional tariffs or duties not already in effect as of the date of this release.

Share Repurchases

Under its share repurchase program, Dorman repurchased 271.5 thousand shares of its common stock for $18.4 million at an average share price of $67.80 during the second quarter ended June 30, 2018. The company has $49.3 million left under its current share repurchase authorization.

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