Dorman Products Inc.

10/28/2025 | Press release | Distributed by Public on 10/28/2025 07:03

Quarterly Report for Quarter Ending September 27, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of
Operations
"Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the condensed consolidated financial statements and related notes thereto included in PART I, ITEM 1 of this Quarterly Report on Form 10-Q. As used herein, unless the context requires otherwise, "Dorman," the "Company," "we," "us," or "our" refers to Dorman Products, Inc. and its subsidiaries.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this document constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to net sales, diluted earnings per share, gross profit, gross margin, selling, general, and administrative expenses, income tax expense, income before income taxes, net income, cash and cash equivalents, indebtedness, liquidity, the Company's share repurchase program, the Company's outlook, the Company's growth opportunities and future business prospects, operational costs and productivity initiatives, inflation, tariffs, supplier diversification, price increases, long-term value, acquisitions and acquisition opportunities, investments, cost offsets, quarterly fluctuations, new product development, customer concessions, and fluctuations in foreign currency. Words such as "may," "believe," "demonstrate," "expect," "estimate," "forecast," "project," "plan," "anticipate," "intend," "should," "will," and "likely" and similar expressions identify forward-looking statements. However, the absence of these words does not mean the statements are not forward-looking. In addition, statements that are not historical should also be considered forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statements were made. Such forward-looking statements are based on current expectations that involve known and unknown risks, uncertainties, and other factors (many of which are outside of our control) that may cause actual events to be materially different from those expressed or implied by such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected.
Please refer to "Statement Regarding Forward-Looking Statements" and "Item 1A. Risk Factors" located in PART I of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), as updated by our subsequent filings with the SEC, for a description of these and other risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements. The Company is under no obligation to, and expressly disclaims any such obligation to, update any of the information in this document, including but not limited to any situation where any forward-looking statement later turns out to be inaccurate, whether as a result of new information, future events, or otherwise.
Introduction
The following discussion and analysis, as well as other sections in this Quarterly Report on Form 10-Q, should be read in conjunction with the unaudited condensed consolidated financial statements and footnotes thereto of Dorman Products, Inc. included in "PART 1, ITEM 1. Financial Statements" of this Quarterly Report on Form 10-Q and with Management's Discussion and Analysis of Financial Condition and Results of Operations and the audited consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
This Quarterly Report on Form 10-Q contains the registered and unregistered trademarks or service marks of Dorman and are the property of Dorman Products, Inc. and/or its affiliates. This Quarterly Report on Form 10-Q also may contain additional trade names, trademarks, or service marks belonging to other companies. We do not intend our use or display of other parties' trademarks, trade names, or service marks to imply, and such use or display should not be construed to imply, a relationship with or endorsement or sponsorship of us by these parties.
Overview
We are one of the leading suppliers of replacement and upgrade parts in the motor vehicle aftermarket industry, serving passenger cars, light-, medium-, and heavy-duty trucks, as well as specialty vehicles, including utility terrain vehicles (UTVs) and all-terrain vehicles (ATVs). We operate through three business segments: Light Duty, Heavy Duty, and Specialty Vehicle, consistent with the sectors of the motor vehicle aftermarket industry in which we operate. For more information on our segments, refer to Note 8, "Segment Information," to the Consolidated Financial Statements, included under Part II, ITEM 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.
As of December 31, 2024, we marketed approximately 138,000 distinct parts compared to approximately 133,000 as of December 31, 2023, many of which we designed and engineered. This number excludes private label stock keeping units and other variations in how we market, package, and distribute our products, includes distinct parts of acquired companies, and reflects distinct parts that have been discontinued at the end of their lifecycle. Our products are sold under our various brand names, under our customers' private label brands, or in bulk. We are one of the leading aftermarket suppliers of parts that were traditionally available to professional installers and consumers only from original equipment, or OE, manufacturers, or salvage yards. These parts include, among others, leaf springs, intake manifolds, exhaust manifolds, oil filters and coolers, window regulators, radiator fan assemblies, tire pressure monitor sensors, exhaust gas recirculation (EGR) coolers, driveshafts, UTV windshields, and complex electronics modules.
We generate most of our net sales from customers in North America, primarily in the United States. Our products are sold primarily through aftermarket retailers, including through their online platforms; dealers; national, regional, and local warehouse distributors and specialty markets; and salvage yards. We also distribute aftermarket parts outside the United States, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, the Middle East, and Australia.
We may experience significant fluctuations from quarter to quarter in our results of operations due to the timing of orders placed by our customers as well as our ability and the ability of our suppliers to deliver products ordered by our customers. The introduction of new products and product lines to customers, as well as business acquisitions and changes in weather conditions, may also cause significant fluctuations from quarter to quarter.
Critical Accounting Policies
There have been no material changes to the Company's critical accounting policies as described in the Annual Report on Form 10-K for the year ended December 31, 2024.
New Product Development
New product development is a key success factor for us and has been a significant contributor to our growth. We have made incremental investments to increase our new product development efforts to grow our business and strengthen our relationships with our customers. The investments have primarily been in the form of increased product development resources, additional customer and end-user awareness programs, and customer service improvements. These investments have enabled us to
provide an expanding array of new product offerings and grow revenues at levels that generally have exceeded market growth rates.
In the nine months ended September 27, 2025, we introduced 4,357 new distinct parts to our customers and end-users, including 1,199 "New-to-the-Aftermarket" parts. We introduced 5,335 new distinct parts to our customers and end-users in the fiscal year ended December 31, 2024, including 1,659 "New-to-the-Aftermarket" parts.
One area of focus for the light-duty sector has been our complex electronics program, which capitalizes on the growing number of electronic components being utilized on today's OE platforms. New vehicles contain an average of approximately 100 electronic modules, with some high-end luxury vehicles exceeding that. Our complex electronics products are designed and developed in-house and tested to help ensure consistent performance. Our product portfolio is focused on further developing our leadership position in this category.
Another area of focus has been on products we market for the heavy-duty sector. We believe that this sector provides many of the same growth opportunities that the light-duty sector has provided us. We specialize in offering parts to this sector that were traditionally only available from OE manufacturers or salvage yards, similar to how we approach the light-duty sector.
Within the specialty vehicle sector, we focus on providing performance parts and accessories and nondiscretionary repair parts for UTVs and ATVs. We are dedicated to developing better and more innovative materials that will be compatible across a wide variety of makes and models to maintain as well as to enhance both the performance and appearance of customers' vehicles.
Acquisitions
A key component of our strategy is growth through acquisitions. We may acquire businesses in the future to supplement our financial growth, expand our customer base, add to our distribution capabilities, or enhance our product development resources, among other reasons.
Industry Factors
The Company's financial results are also impacted by various industry factors, including, but not limited to, the number, age, and condition of vehicles in operation at any given time, and the miles driven by those vehicles.
Vehicles in Operation
The Company's products are primarily purchased and installed on a subsegment of the passenger and light-duty vehicles in operation in the United States ("VIO"), specifically weighted towards vehicles aged 7 to 14 years old. Each year, the United States seasonally adjusted annual rate ("US SAAR") of new vehicles purchased adds a new year to the VIO. According to data from the Auto Care Association ("Auto Care"), the US SAAR experienced a decline from 2008 to 2011 as consumers purchased fewer new vehicles as a result of the Great Recession of 2008. We believe that the declining US SAAR during that period led to a follow-on decline in our primary VIO subsegment (7-to-14-year-old vehicles) commencing in 2016. However, following 2011 and the impact of the Great Recession of 2008, U.S. consumers began to increase their purchases of new vehicles, which over time caused the US SAAR to recover and return to more historical levels. The 7-to-14-year-old vehicle car parc has continued to grow over the past several years, which we expect will expand demand for aftermarket replacement parts as more vehicles remain in operation.
In addition, we believe that vehicle owners generally are operating their current vehicles longer than they did several years ago, performing necessary repairs and maintenance to keep those vehicles well-maintained. We believe this trend has supported an increase in VIO, which increased to 298.5
million, a 1% increase in 2024 over 2023. According to data published by Polk, a division of IHS Automotive, the average age of VIO increased to 12.8 years as of October 2024 from 12.6 years as of October 2023.
Miles Driven
The number of miles driven is another important statistic that impacts our business. Generally, as vehicles are driven more miles, the more likely it is that parts will fail and there will be increased demand for replacement parts, including our parts. According to the U.S. Department of Transportation, the number of miles driven through October 2024 increased 1.0% year over year in the light-duty sector. However, global gasoline prices remained high during 2024 and, if high prices persist, they may negatively impact miles driven as consumers reduce travel or seek alternative methods of transportation.
Brand Protection
We operate in a highly competitive market. As a result, we continuously evaluate our approach to branding, pricing, and terms for our various customers and channels. For example, we maintain brand protection policies, which are designed to ensure that certain of our branded products are not advertised below certain approved pricing levels. In addition, we may pursue legal remedies when we observe third parties violating our intellectual property rights, including those that infringe on our patents, misrepresent our products as their own, or use our product images for their own marketing efforts.
Discounts, Allowances, and Incentives
We offer a variety of customer discounts, rebates, returns for defective and slow-moving products, and other incentives. We may offer cash discounts for paying invoices in accordance with the specified discount terms of the invoice. In addition, we may offer pricing discounts based on volume purchased from us or other pricing discounts related to programs under a customer's agreement. These incentives can be in the form of "off-invoice" discounts that are immediately deducted from sales at the time of sale. For those customers who choose to receive their incentives on a quarterly or annual basis instead of "off-invoice," we provide rebates and accrue for such incentives as the related sales are made and reduce sales accordingly. Additionally, rebates and discounts are provided to customers to support promotional activities such as advertising and sales force allowances.
Our customers, particularly our larger retail customers, regularly seek more favorable pricing and product return provisions, and extended payment terms when negotiating with us. We attempt to avoid or minimize these concessions as much as possible, but we have granted pricing concessions, indemnification rights, and extended customer payment terms, and allowed a higher level of product returns in certain cases. These concessions affect both our net sales and profit levels, and may require additional capital to support the business. We expect our customers to continue to exert pressure on our margins.
Customer Acquisition Costs
We may incur customer acquisition costs where we incur change-over costs to induce a customer to switch from a competitor's brand, including expanding new product lines into our existing customers. Change-over costs include the costs associated with removing the customer's inventory of competitor products and replacing it with our products, which is commonly referred to as a stock lift. Customer acquisition costs are recorded as a reduction to revenue when incurred.
Product Warranty and Overstock Returns
We warrant our products against certain defects in material and workmanship when used as designed on the vehicle on which it was originally installed. We offer a limited lifetime warranty on most of our products in the light-duty parts categories, with more limited warranties for our heavy-duty and specialty vehicle products. In addition to warranty returns, we may permit our customers to return new, undamaged products to us within customer-specific limits if they have overstocked their inventories. At the time products are sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established using historical information on the nature, frequency, and average cost of claims and the probability of customer returns. Significant judgments and estimates must be made and used in connection with establishing the sales returns and other allowances in any accounting period. Revisions to these estimates are made, when necessary, based on changes in these factors. We regularly study trends of such claims.
Foreign Currency
Many of our products and related raw materials and components are sourced from suppliers in various non-U.S. countries. The products are generally sourced through purchase orders with the purchase price specified in U.S. dollars. Accordingly, we generally do not have exposure to fluctuations in the relationship between the U.S. dollar and various foreign currencies between the time of execution of the purchase order and payment for the product.
To the extent that the U.S. dollar changes in value relative to those foreign currencies in the future, the prices charged by our suppliers for goods under new purchase orders may change in equivalent U.S. dollars. The largest portion of our overseas purchases comes from China. The exchange rate of the Chinese yuan to the U.S. dollar has fluctuated over the past several years. Any future changes in the value of the Chinese yuan relative to the U.S. dollar may result in a change in the cost of goods that we purchase from China. However, the cost of the goods we procure is also affected by other factors, including raw material availability, labor costs, tariffs, and transportation costs.
We have operations located outside the United States with various functional currencies. Because our consolidated financial statements are denominated in U.S. dollars, the assets, liabilities, net sales, and expenses that are denominated in currencies other than the U.S. dollar must be converted into U.S. dollars using exchange rates for the current period. As a result, fluctuations in foreign currency exchange rates may impact our financial results.
Impact of Labor Market and Inflationary Costs
We experienced broad-based inflationary impacts during the year ended December 31, 2023, due primarily to global transportation and logistics constraints, which resulted in significantly higher transportation costs, tariffs and material costs, and wage inflation from an increasingly competitive labor market. Certain of these increased costs in the second half of 2023 impacted our results of operations in the first half of 2024. Higher labor costs and material inflation resulting from geopolitical events, rising interest rates, disruptions to supply chain and logistics networks, and the trade policies of the U.S. or the countries where we source or sell our products may negatively impact our future results. We attempt to offset inflationary pressures with cost-saving initiatives, price increases to customers, and the use of alternative suppliers. There can be no assurance that we will be successful in implementing such cost-saving initiatives, pricing increases, or supplier diversification in the future to offset increased inflationary costs.
Impact of Interest Rates
Our business is subject to interest rate risk under the terms of our customer accounts receivable sales programs, as a change in the Term Secured Overnight Financing Rate ("Term SOFR") or
alternative discount rate affects the cost incurred to factor eligible accounts receivable. Additionally, our outstanding borrowings under our credit facility bear interest at variable rates tied to Term SOFR or the applicable base rate. Under the terms of the credit facility, a change in interest rates affects the rate at which we can borrow funds thereunder and impacts the interest cost on existing borrowings. Interest rates may remain steady at their current levels for prolonged periods or may increase in the future, resulting in increased costs associated with our accounts receivable sales programs and outstanding borrowings. Interest rates remained elevated throughout much of 2024, but began to decline starting in the second half of that year. Interest rates remained relatively stable throughout the first quarter of 2025, but declined subsequently.
Impact of Tariffs
We source the majority of our raw materials and parts from suppliers in various non-U.S. countries. In 2024, approximately 72% of our products were sourced from suppliers in various non-U.S. countries, with approximately 45% of our products sourced from third-party suppliers in China. The current U.S. administration recently implemented new tariffs, announced additional tariffs that are expected to take effect in the coming months, and indicated that further tariff changes are possible depending on the outcome of trade negotiations with other countries. We expect these actions and any reactionary tariff adjustments made by other countries will impact our business and contribute to inflationary cost increases. We have taken actions designed to mitigate the potential impacts of these tariffs, including, but not limited to, diversifying our supply chain and negotiating cost concessions from our suppliers where possible.
In addition, starting in the third quarter of 2025, we implemented pass-through price increases to offset the dollar impact of certain new tariff costs. We have started to experience a temporary increase in gross and operating margin percentages in 2025 due to the price increases taking effect before the increased cost of inventory, reflecting higher tariffs, is recognized as an expense in our statement of operations. We expect margins to decrease as we start to recognize these higher tariff costs in our Statement of Operations and Comprehensive Income in the fourth quarter of 2025. Absent any changes in trade regulations, we anticipate inflationary cost increases due to these tariffs, as well as any resulting impact on macroeconomic conditions and our business, to continue throughout the remainder of 2025.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in our Condensed Consolidated Statements of Operations and Comprehensive Income:
Three Months Ended* Nine Months Ended*
(in thousands, except percentage data) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024
Net sales $ 543,736 100.0 % $ 503,773 100.0 % $ 1,592,387 100.0 % $ 1,475,425 100.0 %
Cost of goods sold 302,309 55.6 % 299,970 59.5 % 923,739 58.0 % 890,775 60.4 %
Gross profit 241,427 44.4 % 203,803 40.5 % 668,648 42.0 % 584,650 39.6 %
Selling, general, and administrative expenses 135,677 25.0 % 124,532 24.7 % 400,343 25.1 % 378,489 25.7 %
Income from operations 105,750 19.4 % 79,271 15.7 % 268,305 16.8 % 206,161 14.0 %
Interest expense, net 7,207 1.3 % 9,762 1.9 % 21,747 1.4 % 30,569 2.1 %
Other income, net (1,385) (0.3) % (1,615) (0.3) % (4,290) (0.3) % (1,711) (0.1) %
Income before income taxes 99,928 18.4 % 71,124 14.1 % 250,848 15.8 % 177,303 12.0 %
Provision for income taxes 23,508 4.3 % 15,871 3.2 % 58,214 3.7 % 41,812 2.8 %
Net income $ 76,420 14.1 % $ 55,253 11.0 % $ 192,634 12.1 % $ 135,491 9.2 %
*Percentage of sales information may not add due to rounding
Three Months Ended September 27, 2025, Compared to Three Months Ended September 28, 2024
Net sales increased $40.0 million, or 7.9%, for the three months ended September 27, 2025, compared to the prior year period, primarily driven by tariff-related pricing actions in our Light Duty and Heavy Duty segments, and new business wins in our Heavy Duty segment.
Gross profit as a percentage of net sales increased 390 basis points compared to the prior year period, primarily due to the sales growth noted above resulting from pricing actions enacted on inventory purchased before higher tariffs took effect earlier this year. Gross margin also benefited from a favorable mix from higher sales of new products and supplier diversification.
Selling, general, and administrative expenses ("SG&A") increased 30 basis points as a percentage of net sales, for the three months ended September 27, 2025, compared to the prior year period, due to higher factoring costs and additional investments made, partially offset by favorable leverage from higher sales.
Interest expense, net, decreased $2.6 million for the three months ended September 27, 2025, compared to the prior year period. The decrease was driven by lower outstanding principal on our revolving credit facility and term loan, resulting from repayments over the last several quarters, as well as lower average Term SOFR rates during the current year period.
Our effective tax rate of 23.5% for the three months ended September 27, 2025 was higher than our effective tax rate of 22.3% for the three months ended September 28, 2024 because the three months ended September 28, 2024 benefited from favorable discrete items.
Nine Months Ended September 27, 2025, Compared to Nine Months Ended September 28, 2024
Net sales increased $117.0 million, or 7.9%, for the nine months ended September 27, 2025, compared to the prior year period, driven by increased customer demand and sales of new products and tariff-related pricing actions in our Light Duty and Heavy Duty segments, partially offset by reduced demand impacted by soft market conditions in the heavy duty and specialty vehicle sectors.
Gross profit as a percentage of net sales increased 240 basis points for the nine months ended September 27, 2025, compared to the prior year period, primarily due to the sales growth noted above and favorable mix from higher sales of new products, as well as supplier diversification, productivity, and automation initiatives, that delivered cost savings.
Selling, general, and administrative expenses ("SG&A") decreased 60 basis points as a percentage of net sales, for the nine months ended September 27, 2025, compared to the prior year period, due to favorable leverage on higher net sales that more than offset additional investments made in the current year period.
Interest expense, net, decreased $8.8 million for the nine months ended September 27, 2025, compared to the prior year period. The decrease was driven by lower outstanding principal on our revolving credit facility and term loan resulting from repayments over the last several quarters, as well as lower average Term SOFR rates during the current year period.
Our effective tax rate of 23.2% for the nine months ended September 27, 2025 was lower than our effective tax rate of 23.6% for the nine months ended September 28, 2024 due to tax deductions related to the vesting of restricted stock units in the current year period.
Segment Operating Results
Segment operating results were as follows:
For the Three Months Ended For the Nine Months Ended
(in thousands) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024
Net Sales:
Light Duty $ 430,316 $ 393,577 $ 1,263,500 $ 1,138,228
Heavy Duty 63,025 59,615 176,765 178,613
Specialty Vehicle 50,395 50,581 152,122 158,584
Total $ 543,736 $ 503,773 $ 1,592,387 $ 1,475,425
Segment Income From Operations
Light Duty $ 102,161 $ 74,632 $ 261,955 $ 198,339
Heavy Duty 2,855 2,660 3,214 5,390
Specialty Vehicle 6,462 8,624 20,721 25,823
Total $ 111,478 $ 85,916 $ 285,890 $ 229,552
Three Months Ended September 27, 2025, Compared to Three Months Ended September 28, 2024
Light Duty
Light Duty net sales increased $36.7 million, or 9.3%, for the three months ended September 27, 2025, compared to the prior year period, primarily due to tariff-related pricing actions.
Light Duty segment income from operations as a percentage of net sales increased to 23.7% for the three months ended September 27, 2025, from 19.0% for the three months ended September 28, 2024. This increase was primarily driven by the sales growth noted above from pricing actions enacted on inventory purchased before higher tariffs went into effect earlier this year and supplier diversification initiatives.
Heavy Duty
Heavy Duty net sales increased $3.4 million, or 5.7%, for the three months ended September 27, 2025, compared to the prior year period. The increase in net sales primarily reflects tariff-related pricing actions and new business wins.
Heavy Duty segment income as a percentage of net sales remained stable at 4.5% for the three months ended September 27, 2025, and September 28, 2024, as the benefit of higher net sales was offset by lower manufacturing productivity.
Specialty Vehicle
Specialty Vehicle net sales decreased slightly, for the three months ended September 27, 2025, compared to the prior year period, primarily due to reduced customer demand.
Specialty Vehicle segment income as a percentage of net sales decreased to 12.8% for the three months ended September 27, 2025, from 17.0% for the three months ended September 28, 2024. This decrease was primarily driven by lower manufacturing productivity in the first quarter of 2025, as we proactively reduced production in our Chinese manufacturing facility following our ramp up of production in the fourth quarter of 2024 in advance of tariff increases.
Nine Months Ended September 27, 2025, Compared to Nine Months Ended September 28, 2024
Light Duty
Light Duty net sales increased $125.3 million, or 11.0%, for the nine months ended September 27, 2025, compared to the prior year period, primarily due to increased customer demand and sales of new products, as well as tariff-related pricing actions.
Light Duty segment income from operations as a percentage of net sales increased to 20.7% for the nine months ended September 27, 2025, from 17.4% for the nine months ended September 28, 2024. This increase was primarily driven by the sales growth noted above from pricing actions enacted on inventory purchased before higher tariffs went into effect earlier this year, favorable mix from higher new product sales, operational excellence initiatives delivering cost savings, and favorable leverage on higher net sales.
Heavy Duty
Heavy Duty net sales decreased $1.8 million, or 1.0%, for the nine months ended September 27, 2025, compared to the prior year period. The decrease in net sales primarily reflects reduced customer demand from continued market pressures in freight transportation and the trucking aftermarket, partially offset by tariff-related pricing actions and new business wins.
Heavy Duty segment income as a percentage of net sales decreased to 1.8% for the nine months ended September 27, 2025, from 3.0% for the nine months ended September 28, 2024. This decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes, lower manufacturing productivity, and the impact of investments we made as part of initiatives to grow sales and improve margins on a long-term basis.
Specialty Vehicle
Specialty Vehicle net sales decreased $6.5 million, or 4.1%, for the nine months ended September 27, 2025, compared to the prior year period, primarily due to reduced customer demand.
Specialty Vehicle segment income as a percentage of net sales decreased to 13.6% for the nine months ended September 27, 2025, from 16.3% for the nine months ended September 28, 2024. This
decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes and lower manufacturing productivity.
Liquidity and Capital Resources
Historically, our primary source of liquidity has been the cash flow generated from our operations, including flexibility provided by accounts receivable sales programs facilitated through certain customers. Key components of our liquidity and capital resources were as follows:
(in thousands) September 27, 2025 December 31, 2024
Cash and cash equivalents $ 55,505 $ 57,137
Working Capital $ 1,000,273 $ 805,958
Shareholders' equity $ 1,482,581 $ 1,293,470
Based on our current operating plan, we believe that our sources of available capital are sufficient to meet our ongoing cash needs for at least the next twelve months. However, our liquidity could be negatively affected by higher tariffs, an extension of customer payment terms, a decrease in demand for our products, higher interest rates, the outcome of contingencies, or other factors. See Note 7, "Commitments and Contingencies", in the accompanying condensed consolidated financial statements for additional information regarding commitments and contingencies that may affect our liquidity.
Tariffs
Increases in tariffs accelerate our use of cash, as we pay for the higher costs upon arrival of our goods in the United States, but we collect the cash on any pass-through price increases from our customers on a delayed basis, taking into account our inventory turns and payment terms negotiated with our customers. We currently anticipate that additional liquidity needs to cover increased tariffs on imported products can be managed through additional factoring under our accounts receivable sales programs with certain customers, as well as borrowings under our existing revolving credit facility.
Payment Terms and Accounts Receivable Sales Programs
We have extended payment terms in place with certain of our customers. These extended terms have resulted in increased accounts receivable levels and significant cash usage. Where available and when we deem appropriate, we participate in accounts receivable sales programs with several customers that enable us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment term extensions. However, any sales of accounts receivable through these programs ultimately result in us receiving a lesser amount of cash upfront than if we collected those accounts receivable ourselves in due course, resulting in accounts receivable factoring costs. Moreover, since these accounts receivable sales programs bear interest at rates tied to the Term SOFR or other reference rates, increases in these applicable rates increase our cost to sell our receivables and reduce the amount of cash we receive. See PART I, ITEM 3. Quantitative and Qualitative Disclosures about Market Risk for more information. Further extensions of customer payment terms would result in additional cash usage or increased costs associated with the sales of accounts receivable.
Sales of accounts receivable under these programs, and related factoring costs, were as follows:
Three Months Ended Nine Months Ended
(in thousands) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024
Sales of accounts receivable $ 341,011 $ 254,657 $ 1,030,085 $ 791,413
Factoring costs 14,590 11,939 43,744 38,171
If receivables had not been sold, $1,028.5 million and $853.6 million of additional receivables would have been outstanding at September 27, 2025, and December 31, 2024, respectively, based on standard payment terms. Further extensions of customer payment terms would result in additional cash usage or increased costs associated with the sales of accounts receivable.
Credit Agreement
We have a credit agreement that consists of a $600.0 million revolving credit facility and a $500.0 million term loan. The credit agreement matures on October 4, 2027, is guaranteed by the Company's material domestic subsidiaries, and is supported by a security interest in substantially all of the Company's material domestic subsidiaries' personal property and assets, subject to certain exceptions. As of September 27, 2025, there was $456.3 million in outstanding borrowings under the term loan. Also on that date, we had outstanding letters of credit for $1.1 million in aggregate. Net of outstanding borrowings and letters of credit, we had $598.9 million available under the credit facility at September 27, 2025.
Our credit agreement contains affirmative and negative covenants. As of September 27, 2025, we were not in default with respect to our credit agreement.
Refer to Note 7, "Long-Term Debt" to the Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024, for additional information.
Cash Flows
The following summarizes the activities included in the Condensed Consolidated Statements of Cash Flows:
Nine Months Ended
(in thousands) September 27, 2025 September 28, 2024
Cash provided by operating activities $ 71,990 $ 159,622
Cash used in investing activities (29,818) (31,245)
Cash used in financing activities (43,970) (120,033)
Effect of foreign exchange on cash and cash equivalents 166 (31)
Net (decrease) increase in cash and cash equivalents $ (1,632) $ 8,313
For the nine months ended September 27, 2025, cash provided by operating activities decreased $87.6 million from the prior year period as a result of cash used to fund investments in inventory to meet customer demand and increased tariffs on imports, partially offset by higher proceeds from accounts receivable.
Investing activities used cash of $29.8 million and $31.2 million during the nine months ended September 27, 2025, and September 28, 2024, respectively, reflecting timing of spending on capital investments.
Financing activities during the nine months ended September 27, 2025, included $15.3 million paid to repurchase 122,923 shares of common stock and $26.5 million to repay outstanding borrowings under our credit agreement. During the nine months ended September 28, 2024, we paid $78.1 million to repurchase 855,971 shares of common stock, and repaid $40.4 million of outstanding borrowings under our credit agreement.
Dorman Products Inc. published this content on October 28, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 28, 2025 at 13:04 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]