Dorman Products Inc.

08/04/2026 | Press release | Distributed by Public on 08/04/2026 05:33

Quarterly Report for Quarter Ending June 27, 2026 (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 on Forward-Looking Information
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, tariff refunds, 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 "Cautionary Statement on Forward-Looking Information" 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, except as may be required by applicable law.
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, 2025.
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 7, "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, 2025.
As of December 31, 2025, we marketed approximately 144,000 distinct parts, 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 consumers only from OEMs 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 their online platforms; dealers; and national, regional, and local warehouse distributors and specialty markets. 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 our customers' orders, as well as our ability and our suppliers' ability to deliver products ordered by our customers. The introduction of new products and product lines to customers, as well as business acquisitions, 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, 2025.
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 six months ended June 27, 2026, we introduced 1,885 new distinct parts to our customers and end-users, including 528 "New-to-the-Aftermarket" parts. We introduced 5,560 new distinct parts to our customers and end-users in the fiscal year ended December 31, 2025, including 1,608 "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 original equipment 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 OEMs 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 one 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. 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 grown over the past several years, which we believe has expanded demand for aftermarket replacement parts as more vehicles remained 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 302.7 million, a 1% increase in 2025 over 2024. According to data published by Polk, a division of IHS
Automotive, the average age of VIO increased to 12.9 years as of October 2025 from 12.8 years as of October 2024.
Miles Driven
The number of miles driven is another important statistic that impacts our business. Generally, as vehicles accumulate more miles, their parts are more likely to wear or fail, which fuels increased demand for replacement parts, including our products. According to the U.S. Department of Transportation, the number of miles driven through October 2025 increased 1.0% year over year in the light-duty sector. However, global gasoline prices remained high during 2025 and through the first half of 2026, 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 are continuously evaluating our approach to branding, pricing, and terms for our customers and channels. For example, we maintain brand protection policies 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, defective and slow-moving product returns, 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 upon changes in these factors. We regularly study trends of such claims.
Foreign Currency
Many of our products and related raw materials and components are purchased from suppliers in 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 Chinese yuan to U.S. dollar exchange rate 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 Inflationary Costs
Geopolitical events, higher labor and material costs, 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 results in the future. We attempt to offset these types of 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, or that the price increases we implement will not make our products uncompetitive or negatively impact customer demand.
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 agreement bear interest at variable rates tied to Term SOFR or the applicable base rate. Under the terms of the credit agreement, 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 generally declined starting in the second half of 2025 and through the first quarter of 2026.
Impact of Tariffs
We source the majority of our raw materials and parts from suppliers in various non-U.S. countries. In 2025, approximately 77% of our total volume of product purchases was sourced from suppliers in various non-U.S. countries, with approximately 38% sourced from third-party suppliers in China. In 2025, the U.S. Administration implemented new tariffs that took effect throughout the year. These new tariffs, as well as reactionary tariff adjustments made by other countries, have impacted our business and contributed to cost increases, and we expect these impacts to continue.
We have taken actions designed to mitigate the impact of these cost increases, 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 price increases to mitigate the cost increases while also considering the competitive dynamic of our parts in the marketplace. We experienced an increase in gross margin in the second half of 2025 due to the timing of price actions taking effect before the higher tariff costs were recognized as an expense in our Statement of Operations and Comprehensive Income. Gross margin decreased beginning in the first quarter of 2026 as we recognized the higher tariff costs in our Statement of Operations and Comprehensive Income.
In February 2026, the U.S. Supreme Court ruled against certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). The ruling did not address refunds of IEEPA tariffs paid. However, in March 2026, the Court of International Trade ("CIT") ordered U.S. Customs and Border Protection ("CBP") to begin the refund process for all importers who were subject to IEEPA duties. CIT's order may be subject to U.S. government challenge. We are the importer of record for certain products that were previously subject to tariffs under IEEPA. During the three months ended June 27, 2026, we recorded refunds of such previously paid tariffs totaling $98.1 million, including a receivable of $19.7 million for amounts that remained uncollected as of June 27, 2026.
We also recognized interest income of $3.5 million related to the refunds received during the three months ended June 27, 2026, which is included in Other income, net on the Condensed Consolidated Statements of Operations and Comprehensive Income.
The U.S. Administration has taken several tariff-related actions following the Supreme Court's decision, including adopting temporary tariffs under Section 122 of the Trade Act of 1974, which expired on July 24, 2026, and adopting new tariffs under Section 301 of the Trade Act of 1974 on imports from a broad range of countries, which became effective upon the expiration of the Section 122 tariffs. The current tariff environment remains uncertain, and there can be no assurance as to whether additional tariffs may be imposed or what the impacts of such actions may be on our business. There also remains uncertainty regarding how countries with which the U.S. has negotiated or is in the process of negotiating tariff trade deals will respond to tariff actions by the U.S. Administration. We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations.
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* Six Months Ended*
(in thousands, except percentage data) June 27, 2026 June 28, 2025 June 27, 2026 June 28, 2025
Net sales $ 544,598 100.0 % $ 540,959 100.0 % $ 1,073,368 100.0 % $ 1,048,651 100.0 %
Cost of goods sold 293,373 53.9 % 321,446 59.4 % 631,988 58.9 % 621,430 59.3 %
Gross profit 251,225 46.1 % 219,513 40.6 % 441,380 41.1 % 427,221 40.7 %
Selling, general, and administrative expenses 135,008 24.8 % 137,032 25.3 % 266,380 24.8 % 264,666 25.2 %
Income from operations 116,217 21.3 % 82,481 15.2 % 175,000 16.3 % 162,555 15.5 %
Interest expense, net 6,311 1.2 % 7,182 1.3 % 12,118 1.1 % 14,540 1.4 %
Other income, net 5,577 1.0 % 1,544 0.3 % 8,823 0.8 % 2,905 0.3 %
Income before income taxes 115,483 21.2 % 76,843 14.2 % 171,705 16.0 % 150,920 14.4 %
Provision for income taxes 27,712 5.1 % 18,134 3.4 % 40,383 3.8 % 34,706 3.3 %
Net income $ 87,771 16.1 % $ 58,709 10.9 % $ 131,322 12.2 % $ 116,214 11.1 %
*Percentage of sales information may not add due to rounding
Three Months Ended June 27, 2026, Compared to Three Months Ended June 28, 2025
Net sales increased $3.6 million, or 0.7%, for the three months ended June 27, 2026, compared to the prior year period, primarily driven by tariff-related pricing actions enacted during the second half of 2025 across our segments, partially offset by lower volume in the light duty and specialty vehicle sectors, and market-based price concessions.
Gross profit as a percentage of net sales increased 550 basis points compared to the prior year period, primarily due to lower net tariff costs resulting from recognition of IEEPA refunds, which added 820 basis points to gross profit as a percentage of net sales in the current year period.
Selling, general, and administrative expenses decreased 50 basis points as a percentage of net sales for the three months ended June 27, 2026, compared to the prior year period, due to continued operational improvement and lower factoring costs.
Our effective tax rate of 24.0% for the three months ended June 27, 2026, was slightly higher than our effective tax rate of 23.6% for the three months ended June 28, 2025.
Six Months Ended June 27, 2026, Compared to Six Months Ended June 28, 2025
Net sales increased $24.7 million, or 2.4%, for the six months ended June 27, 2026, compared to the prior year period, primarily driven by tariff-related pricing actions enacted during the second half of 2025 across our segments, partially offset by lower volume when compared to the strong sales in the prior year period, and price concessions.
Gross profit as a percentage of net sales increased 40 basis points compared to the prior year period, primarily due to lower net tariff costs resulting from recognition of IEEPA refunds, which added 110 basis points to gross profit as a percentage of net sales in the current year period.
Selling, general, and administrative expenses decreased 40 basis points as a percentage of net sales for the six months ended June 27, 2026, compared to the prior year period, due to favorable leverage from higher net sales and lower factoring costs.
Interest expense, net, decreased $2.4 million for the six months ended June 27, 2026, 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 six months ended June 27, 2026, was slightly higher than our effective tax rate of 23.0% for the six months ended June 28, 2025.
Segment Operating Results
Segment operating results were as follows:
For the Three Months Ended For the Six Months Ended
(in thousands) June 27, 2026 June 28, 2025 June 27, 2026 June 28, 2025
Net Sales:
Light Duty $ 424,320 $ 424,328 $ 848,059 $ 833,184
Heavy Duty 66,266 62,060 124,079 113,740
Specialty Vehicle 54,012 54,571 101,230 101,727
Total $ 544,598 $ 540,959 $ 1,073,368 $ 1,048,651
Segment Income From Operations
Light Duty $ 104,740 $ 78,301 $ 164,401 $ 159,794
Heavy Duty 2,775 522 3,223 359
Specialty Vehicle 14,108 9,438 18,198 14,259
Total $ 121,623 $ 88,261 $ 185,822 $ 174,412
Three Months Ended June 27, 2026, Compared to Three Months Ended June 28, 2025
Light Duty
Light Duty net sales were flat for the three months ended June 27, 2026, compared to the prior year period, primarily due to tariff-related pricing actions enacted during the second half of 2025, partially offset by lower volume, when compared to the strong sales in the prior year period, and market-based price concessions.
Light Duty segment income from operations as a percentage of net sales increased to 24.7% for the three months ended June 27, 2026, from 18.5% for the three months ended June 28, 2025. This increase was primarily driven by lower net tariff costs resulting from recognition of IEEPA refunds, which added 910 basis points to segment income from operations as a percentage of net sales in the current year period, partially offset by higher wage and benefits costs in the current year period.
Heavy Duty
Heavy Duty net sales increased $4.2 million, or 6.8%, for the three months ended June 27, 2026, compared to the prior year period, primarily reflecting tariff-related pricing actions and business wins in certain categories and channels.
Heavy Duty segment income as a percentage of net sales increased 340 basis points, to 4.2% for the three months ended June 27, 2026. This increase was primarily driven by lower net tariff costs resulting from recognition of IEEPA refunds, which added 190 basis points to segment income from operations as a percentage of net sales in the current year period, and favorable leverage from higher net sales.
Specialty Vehicle
Specialty Vehicle net sales were flat for the three months ended June 27, 2026, compared to the prior year period, as reduced customer demand in the specialty vehicle sector was partially offset by tariff-related pricing actions in certain categories.
Specialty Vehicle segment income as a percentage of net sales increased to 26.1% for the three months ended June 27, 2026, from 17.3% for the three months ended June 28, 2025. This increase was primarily driven by lower net tariff costs resulting from recognition of IEEPA refunds, which added 830 basis points to segment income from operations as a percentage of net sales in the current year period.
Six Months Ended June 27, 2026, Compared to Six Months Ended June 28, 2025
Light Duty
Light Duty net sales increased $14.9 million, or 2%, for the six months ended June 27, 2026, compared to the prior year period, primarily due to tariff-related pricing actions enacted during the second half of 2025, partially offset by lower volume when compared to the strong sales in the prior year period.
Light Duty segment income from operations as a percentage of net sales increased to 19.4% for the six months ended June 27, 2026, from 19.2% for the six months ended June 28, 2025. This increase was primarily driven by lower net tariff costs resulting from recognition of IEEPA refunds, which added 120 basis points to segment income from operations as a percentage of net sales in the current year period, partially offset by higher wage and benefits costs in the current year period.
Heavy Duty
Heavy Duty net sales increased $10.3 million, or 9%, for the six months ended June 27, 2026, compared to the prior year period, primarily reflecting tariff-related pricing actions.
Heavy Duty segment income as a percentage of net sales increased 230 basis points, to 2.6% for the six months ended June 27, 2026. This increase was primarily driven by favorable leverage on higher net sales.
Specialty Vehicle
Specialty Vehicle net sales were flat for the six months ended June 27, 2026, compared to the prior year period, as tariff-related pricing actions in certain categories were offset by reduced customer demand in the specialty vehicle sector.
Specialty Vehicle segment income as a percentage of net sales increased to 18.0% for the six months ended June 27, 2026, from 14.0% for the six months ended June 28, 2025. This increase was primarily driven by lower net tariff costs resulting from recognition of IEEPA refunds, which added 110 basis points to segment income from operations as a percentage of net sales in the current year period.
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) June 27, 2026 December 31, 2025
Cash and cash equivalents $ 131,982 $ 49,436
Working Capital $ 1,121,501 $ 1,028,699
Shareholders' equity $ 1,515,040 $ 1,477,075
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 from any price increases to our customers on a delayed basis, taking into account our inventory turns and payment terms negotiated with those 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 at discounted rates without recourse 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 Six Months Ended
(in thousands) June 27, 2026 June 28, 2025 June 27, 2026 June 28, 2025
Sales of accounts receivable $ 280,272 $ 354,904 $ 585,419 $ 689,074
Factoring costs 12,467 14,566 25,175 29,154
If receivables had not been sold, $1,044.1 million and $1,093.1 million of additional receivables would have been outstanding at June 27, 2026, and December 31, 2025, respectively, based on standard payment terms.
Credit Agreement
In June 2026, we entered into a third amendment to our credit agreement to refinance the existing revolving credit facility with a new five-year revolving credit facility in an aggregate principal amount of $800.0 million, extending the maturity date to June 16, 2031. As of June 27, 2026, we had outstanding letters of credit for $1.1 million in aggregate. Net of outstanding letters of credit, we had $798.9 million available under the revolving credit facility at June 27, 2026.
The loans under the amended credit agreement are guaranteed by each of the Company's material wholly owned domestic subsidiaries and are supported by a security interest in substantially all the Company's and its material wholly owned domestic subsidiaries' personal property and assets, subject to certain exceptions.
In June 2026, we also issued $450.0 million aggregate principal amount of 6.25% senior notes due June 2034 (the "Senior Notes") pursuant to an indenture entered into among the Company, the subsidiary guarantors party thereto, and the trustee. The Senior Notes pay interest semi-annually in June and December of each year, commencing in December 2026.
The proceeds from the issuance of the Senior Notes were (i) utilized to repay our outstanding term loan balance of $431.3 million, as well as accrued interest and fee obligations, under our credit agreement, (ii) to pay advisory and other fees in connection with the refinancing transactions, and (iii) for general corporate purposes.
The obligations under the Senior Notes are fully and unconditionally guaranteed by each of the Company's existing and future wholly owned subsidiaries that is a guarantor or other obligor under the Company's credit agreement and certain other indebtedness, as further specified in the indenture.
The amended credit agreement and the indenture contain customary representations and warranties, affirmative and negative covenants, and events of default. Additionally, the amended credit agreement contains financial maintenance covenants that require the Company to (i) maintain a consolidated secured net leverage ratio of not more than 3.50 to 1.00 (increasing to 4.00 to 1.00 for the four fiscal quarters following certain acquisitions) and (ii) a consolidated interest coverage ratio of not less than 2.00 to 1.00. As of June 27, 2026, we were not in default with respect to either the revolving credit facility or indenture governing the Senior Notes.
Cash Flows
The following summarizes the activities included in the Condensed Consolidated Statements of Cash Flows:
Six Months Ended
(in thousands) June 27, 2026 June 28, 2025
Cash provided by operating activities $ 196,381 $ 59,785
Cash used in investing activities (10,317) (19,435)
Cash used in financing activities (103,475) (40,846)
Effect of foreign exchange on cash and cash equivalents (43) 204
Net increase (decrease) in cash and cash equivalents $ 82,546 $ (292)
For the six months ended June 27, 2026, cash provided by operating activities increased $136.6 million from the prior year period, primarily due to $81.5 million of IEEPA refunds and related
interest received, as well as the benefits of inventory reductions in the current year, partially offset by lower sales of accounts receivable.
Investing activities used cash of $10.3 million and $19.4 million during the six months ended June 27, 2026, and June 28, 2025, respectively, reflecting timing of spending on capital investments. The six months ended June 27, 2026, also included $7.2 million of proceeds from the sale of an investment.
Financing activities during the six months ended June 27, 2026, included $97.3 million paid to repurchase 825,213 shares of common stock, as well as $450.0 million of proceeds received from the issuance of our Senior Notes and the repayment of $440.6 million of outstanding borrowings under our credit agreement prior to the amendment. During the six months ended June 28, 2025, we paid $15.3 million to repurchase 122,923 shares of common stock, and repaid $20.2 million of outstanding borrowings under our credit agreement.
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