Dorman Products, Inc. Reports Sales and Earnings for the Second Quarter Ended June 30, 2007
COLMAR, PA -- (MARKET WIRE) -- 08/01/07 -- Dorman Products, Inc. (NASDAQ: DORM) today announced financial results for the second quarter ended June 30, 2007.
Sales in the three months ended June 30, 2007 increased 16% to $85.8 from $74.2 million in the same period last year. Revenues for the six months ended June 30, 2007 were up 12% to $160.1 million from $143.1 million last year. Revenues increased as a result of higher new product sales and two large product line updates that shipped during the quarter. Approximately 1% of the 2007 net sales increase was due to the favorable effect of foreign currency exchange.
Reported net income in the second quarter of 2007 was $5.8 million compared to net income of $0.9 million in the same period last year. Reported diluted earnings per share in the second quarter of 2007 were $0.32 compared to $0.05 in the same period last year. Excluding the vacation adjustment, goodwill impairment and deferred tax write off discussed below, net income in the second quarter of 2007 was $5.5 million compared to net income of $4.1 million in the same period last year and diluted EPS in the second quarter of 2007 increased 35% to $0.31 from $0.23 in the same period last year.
For the thirteen weeks ended June 30, 2007 and July 1, 2006:
-- Gross profit margin decreased to 33.9% from 36.0% in the same period
last year. The decrease is the result of higher customer allowances and
initiatives designed to maintain and increase market share for us and our
customers. We partially offset the impact of these initiatives through
material cost savings from suppliers and lower required provisions for
excess and obsolete inventory.
-- Selling, general and administrative expenses decreased 1% despite the
16% sales increase, and declined from 26.1% to 22.4% of sales. We were able
to offset inflationary cost increases and variable spending increases
related to sales growth with cost reductions and a $0.3 million reduction
in vacation expense due to the vacation policy change mentioned below.
Also, results for the three months ended July 1, 2006 include a $0.6
million charge for the write-off of accounts receivable after the loss of
two large customers of our Swedish subsidiary.
-- Interest expense, net, decreased to $0.5 million from $0.6 million due
to lower overall borrowing levels.
-- Our effective tax rate decreased to 38.2% from 76.1% in the same
period last year. The decrease is the result of the $2.9 million goodwill
impairment charge in 2006 which was not tax deductible and therefore had no
income tax benefit associated with it. In addition, the Company's
provision for income taxes for the thirteen weeks ended July 1, 2006,
included a $0.3 million charge to write off deferred tax assets.
Reported net income in the first six months of 2007 was $9.8 million compared to net income of $4.3 million in the same period last year. Reported diluted earnings per share in the six months ended June 30, 2007 were $0.54 compared to $0.24 in the same period last year. Excluding the vacation adjustment, goodwill impairment and deferred tax write off discussed below, net income in the first six months of 2007 was $9.3 million compared to net income of $7.6 million in the same period last year and diluted EPS for the six months ended June 30, 2007 increased 24% to $0.52 from $0.42 in the same period last year.
Effective December 31, 2006, we changed our vacation policy so that vacation is earned ratably throughout the year rather than at the end of the preceding year. This change will result in a reduction in our vacation accrual of approximately $1.6 million in 2007. Results for the three months and six months ended June 30, 2007 include vacation expense reductions of $0.1 million and $0.2 million in cost of goods sold and $0.3 million and $0.6 million in selling, general and administrative expenses, respectively.
Results for the second quarter and six months ended July 1, 2006 include a one-time $3.2 million non-cash write-down for goodwill impairment ($2.9 million or $0.16 per share) and the write off of deferred tax benefits ($0.3 million or $0.02 per share) associated with the Company's Swedish subsidiary.
Mr. Richard Berman, Chairman, President and Chief Executive Officer, said, "Customers at all levels continue to benefit from our new product offerings. Operating expenses were essentially flat despite strong top line growth, which provided bottom line leverage to drive our profit growth. Our Spring 2007 Service Dealer Guide was well received and contributed to the sales growth as well. We plan to build on this success with our fall 2007 guide which will begin to be distributed to over 600,000 parts distributors and service dealers in the fourth quarter of 2007. In addition, we will make further controlled investments in new product infrastructure in the second half of the year to generate additional long-term growth for our customers and our business."
Dorman Products, Inc. is a leading supplier of OE Dealer "Exclusive" automotive replacement parts, automotive hardware, brake products, and household hardware to the Automotive Aftermarket and Mass Merchandise markets. Dorman automotive parts and hardware are marketed under the OE Solutions(TM), HELP!®, AutoGrade(TM), Second Stop(TM), Conduct-Tite®, Pik-A-Nut® and Scan-Tech® brand names.
Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. Factors that could cause actual results to differ materially include, but are not limited to, those factors discussed in the Company's 2006 Annual Report on Form 10-K under "Item 1A - Risk Factors."
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per-share amounts)
13 Weeks 13 Weeks
------------------ -------------------
Second Quarter (unaudited) 6/30/07 Pct. 7/01/06 Pct.
Net sales $ 85,796 100.0 $ 74,187 100.0
Cost of goods sold 56,726 66.1 47,500 64.0
Gross profit 29,070 33.9 26,687 36.0
Selling, general and
administrative expenses 19,225 22.4 19,333 26.1
Goodwill impairment - - 2,897 3.9
Income from operations 9,845 11.5 4,457 6.0
Interest expense, net 512 0.6 631 0.8
Income before income taxes 9,333 10.9 3,826 5.2
Provision for income taxes 3,565 4.2 2,910 4.0
Net income $ 5,768 6.7 $ 916 1.2
Earnings per share
Basic $ 0.33 - $ 0.05 -
Diluted $ 0.32 - $ 0.05 -
Average shares outstanding
Basic 17,688 - 17,730 -
Diluted 18,129 - 18,147 -
26 Weeks 26 Weeks
------------------ -------------------
Second Quarter (unaudited) 6/30/07 Pct. 7/01/06 Pct.
Net sales $160,089 100.0 $ 143,052 100.0
Cost of goods sold 105,243 65.7 91,676 64.1
Gross profit 54,846 34.3 51,376 35.9
Selling, general and
administrative expenses 38,010 23.8 37,992 26.6
Goodwill impairment - - 2,897 2.0
Income from operations 16,836 10.5 10,487 7.3
Interest expense, net 1,039 0.6 1,221 0.8
Income before income taxes 15,797 9.9 9,266 6.5
Provision for income taxes 5,967 3.8 4,930 3.5
Net income $ 9,830 6.1 $ 4,336 3.0
Earnings per share
Basic $ 0.56 - $ 0.24 -
Diluted $ 0.54 - $ 0.24 -
Average shares outstanding
Basic 17,689 - 17,738 -
Diluted 18,119 - 18,153 -
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
6/30/07 12/30/06
Assets: (unaudited)
Cash and cash equivalents $ 5,866 $ 5,080
Accounts receivable 83,102 77,187
Inventories 68,870 67,768
Deferred income taxes 10,525 10,330
Prepaid expenses 1,309 1,443
Total current assets 169,672 161,808
Property & equipment 26,905 27,963
Goodwill 27,044 26,958
Other assets 906 1,029
Total assets $224,527 $217,758
Liability & Shareholders' Equity:
Current portion of long-term debt $15,253 $ 8,651
Accounts payable 15,813 12,822
Accrued expenses and other 11,023 13,531
Total current liabilities 42,089 35,004
Long-term debt and other 11,009 20,596
Deferred income taxes 7,776 8,315
Shareholders' equity 163,653 153,843
Total Liabilities and Equity $224,527 $217,758
Selected Cash Flow Information:
(in thousands) 13 Weeks (unaudited) 26 Weeks (unaudited)
------------------- -------------------
6/30/07 7/1/06 6/30/07 7/1/06
Depreciation and
amortization $ 1,885 $1,659 $ 3,748 $3,281
Capital Expenditures $ 1,410 $2,293 $ 2,652 $3,795
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
(in thousands, except per-share amounts)
Effective December 31, 2006, we changed our vacation policy so that vacation is earned ratably throughout the year rather than at the end of the preceding year. This change will result in a reduction in our vacation accrual of approximately $1.6 million in 2007. As a result, vacation expense in cost of goods sold and selling, general and administrative expenses will be reduced during each of the fiscal quarters in 2007. Results for the second quarter and six months ended July 1, 2006 include a one-time $3.2 million non-cash write-down for goodwill impairment ($2.9 million or $0.16 per share) and the write off of deferred tax benefits ($0.3 million or $0.02 per share) associated with the Company's Swedish subsidiary. This press release contains non-GAAP measures which adjust net income and diluted earnings per share to exclude the impact of these items. The presentation of these non-GAAP measures is intended to enhance the usefulness of the financial information by providing measures which the Company's management uses internally to evaluate the Company's baseline performance. A reconciliation of net income and diluted earnings per share follows:
13 Weeks (unaudited)
----------------------------
06/30/07 07/01/06 % Change
Net income, as reported $ 5,768 $ 916 529.7%
Less: Vacation adjustment, net of tax (238) - N/A
Add: Goodwill and deferred tax write offs - 3,216
-------- --------- --------
Net income, as adjusted $ 5,530 $ 4,132 33.8%
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Diluted EPS, as reported $ 0.32 $ 0.05 540.0%
Less: Vacation adjustment, net of tax (0.01) - N/A
Add: Goodwill and deferred tax write offs - 0.18
-------- --------- --------
Diluted EPS, as adjusted $ 0.31 $ 0.23 34.8%
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26 Weeks (unaudited)
----------------------------
06/30/07 07/01/06 % Change
Net income, as reported $ 9,830 $ 4,336 126.7%
Less: Vacation adjustment, net of tax (487) - N/A
Add: Goodwill and deferred tax write offs - 3,216
-------- --------- --------
Net income, as adjusted $ 9,343 $ 7,552 23.7%
======== ========= ========
Diluted EPS, as reported $ 0.54 $ 0.24 125.0%
Less: Vacation adjustment, net of tax (0.02) - N/A
Add: Goodwill and deferred tax write offs - 0.18
-------- --------- --------
Diluted EPS, as adjusted $ 0.52 $ 0.42 23.8%
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For Further Information Contact: Mathias J. Barton CFO (215) 997-1800 x 5132 E-mail: Email Contact Visit our Home Page: www.dormanproducts.com Corporate Headquarters: Dorman Products, Inc. 3400 East Walnut Street Colmar, Pennsylvania 18915 Fax: (215) 997-8577
Released August 1, 2007