COLMAR, PA — Dorman Products, Inc. (NASDAQ: DORM) this week announced its financial results for the fourth quarter and full year ended December 31, 2022. Financial results include the impact of an additional week in the fourth quarter.
Fourth Quarter Financial Results
The Company reported fourth quarter 2022 net sales of $501.3 million, up 25.9% compared to net sales of $398.2 million in the fourth quarter of 2021. The sales results reflect a continuation of favorable underlying industry dynamics across all customer channels, successful new product development and penetration, the addition of SuperATV, and price increases to offset inflationary costs. The Company also benefited from having an extra week in the fourth quarter compared to last year, which it estimates impacted net sales by approximately $19 million. Net sales growth excluding SuperATV, acquired October 4, 2022, was 13.4% compared to the fourth quarter of 2021.
Gross profit was $157.8 million in the fourth quarter of 2022, or 31.5% of net sales compared to $131.4 million, or 33.0% of net sales, for the same quarter last year. Adjusted gross margin* was 32.8% in the fourth quarter of 2022 compared to 34.6% in the same quarter of last year. The decline in gross margin as a percentage of net sales is primarily due to continued broad-based inflationary cost pressures, partially offset by the favorable gross margin percentage impact of the addition of SuperATV. The Company has implemented many actions over the course of 2022, and has additional actions planned for 2023, including price increases and cost-savings initiatives to offset these costs.
Selling, general and administrative (“SG&A”) expenses were $125.0 million, or 24.9% of net sales, in the fourth quarter of 2022 compared to $86.3 million, or 21.7% of net sales, for the same quarter last year. Adjusted SG&A expenses* were $113.4 million, or 22.6% of net sales, in the fourth quarter of 2022 compared to $82.3 million, or 20.7% of net sales, in the same quarter last year. The increases in SG&A expenses and adjusted SG&A expenses* as a percentage of net sales were due primarily to the impact of higher interest rates on the Company’s customer accounts receivable factoring programs and the addition of SuperATV in the fourth quarter of 2022 which has higher SG&A costs than the rest of the Company’s business.
Income tax expense was $5.1 million, or 22.2% of income before income taxes compared to $9.8 million, or 22.4% of income before income taxes, in the same quarter last year. The decrease in the effective tax rate was due to favorable discrete items in the quarter, partially offset by an increase in state tax expense.
Net income for the fourth quarter of 2022 was $17.8 million, or $0.57 per diluted share, compared to $34.1 million, or $1.07 per diluted share, in the prior year quarter. The Company estimates that the additional week in fiscal 2022 added approximately $2.5 million in net income, or $0.08 per diluted share, during the fourth quarter of 2022. Adjusted net income* in the fourth quarter of 2022 was $31.8 million, or $1.01 per diluted share, compared to $42.1 million, or $1.33 per diluted share, in the prior year quarter. In addition to the factors described above, net income for the fourth quarter of 2022 was also impacted by an additional $9.2 million of net interest expense primarily from a term loan used to complete the acquisition of SuperATV in October 2022 and from higher interest rates during the quarter.
During the fourth quarter of 2022, Dorman completed the acquisition of SuperATV, a leading supplier to the specialty vehicle aftermarket, with a family of highly respected brands spanning replacement parts, functional accessories and upgrades.
Fiscal Year Financial Results
Fiscal 2022 net sales were $1,733.7 million, up 28.9% compared to net sales of $1,345.2 million in fiscal 2021. Year-over-year net sales growth, excluding the impact of acquisitions, was 13.8% compared to fiscal 2021.
Net income for fiscal 2022 was $121.5 million, or $3.85 per diluted share, compared to $131.5 million, or $4.12 per diluted share, for the prior year. Adjusted net income* in fiscal 2022 was $150.1 million, or $4.76 per diluted share, compared to $148.4 million, or $4.64 per diluted share, for the prior year.
Kevin Olsen, Dorman’s President and Chief Executive Officer, stated, “In 2022, we delivered record net sales and adjusted earnings per share, having successfully managed through the unprecedented challenges of global supply chain disruptions, continued COVID-related closures experienced by many of our global suppliers, several quarters of extraordinary inflationary pressures, and the rise in interest rates. We also successfully completed the acquisition of SuperATV which performed in line with our expectations in the fourth quarter. It is important to recognize that the hard work and dedication of our contributors made these results possible. We continue to be encouraged by the strength in the underlying markets we serve and the strong fundamentals across the vehicle aftermarket. We have been seeing an easing of global supply chain constraints and reductions in ocean freight and commodity costs that we expect will drive significant sequential quarterly margin expansion in the back half of 2023.
“Innovation and new products continue to be a strategic focus for the Company, as our expertise and market reach in advanced technology automotive components continued to grow last year with the introduction of all-new construction climate control modules, electronic throttle bodies featuring Hall effect sensors and Dorman’s Sensor Shield™ shaft seals, and pre-programmed fuel pump driver modules. The Company’s product teams have consistently focused on repair solutions engineered to reduce the time technicians and vehicle owners typically spend on repairs. We continue to deliver products that not only drive sales and profits for our customers, but also provide the solutions that professional technicians and do-it-yourselfers want.
“In 2022, we continued to focus on enhancing our supply chain and operations. Our new distribution center in Whiteland, Indiana began shipping products in the fourth quarter of 2022 and continues to ramp up to full capacity, supporting our growth plans. The roll out of state-of-the-art automation technology in our existing warehouses is also going well, and we anticipate realizing productivity savings, greater flexibility, and an enhanced customer experience from these investments. Finally, we are making progress on a strategic initiative to further diversify our supply chain geographically.”
2023 Guidance
The Company is issuing full-year 2023 guidance, detailed in the table below, which includes the impact of the SuperATV acquisition but excludes any potential impacts from future acquisitions, additional supply chain disruptions, or share repurchases.
| 2023 Fiscal Year | |
| Net Sales | $1.95B – $2.00B |
| Growth vs. 2022 | 12.5% – 15.4% |
| Diluted EPS | $4.35 – $4.55 |
| Growth vs. 2022 | 13.0% – 18.2% |
| Adjusted Diluted EPS* | $5.15 – $5.35 |
| Growth vs. 2022 | 8.2% – 12.4% |
| Tax Rate Estimate | 24% |
“We anticipate first quarter adjusted gross margin percentage and adjusted SG&A dollars will be in line sequentially with fourth quarter 2022. However, operating margins and adjusted earnings per share are expected to be significantly lower than the fourth quarter of 2022, driven by seasonally lower sales levels. We remain encouraged by the easing of inflationary costs we have seen over the past several months and anticipate meaningful improvements in our gross margins throughout 2023 and expect to exit the year at a rate approaching pre-COVID levels.
“Finally, as we reduce lead times and safety stocks as a result of improvements in global supply chains, combined with the impact of lower material and freight costs, we anticipate inventory values to meaningfully decline throughout 2023. While our overall capital allocation strategy over the long term will not change, based on current conditions we plan in the short term to utilize excess cash from lower inventory requirements to reduce our debt.”
*Non-GAAP Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings release also contains Non-GAAP financial measures. The reasons why the Company believes these measures provide useful information to investors and a reconciliation of these measures to the most directly comparable GAAP measures and other information relating to these Non-GAAP measures are included in the supplemental schedules attached.
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