Dorman Products : Reports Fourth Quarter 2018 Results, Issues Fiscal 2019 Guidance

For Immediate Release

Dorman Products, Inc. Reports Fourth Quarter and Fiscal 2018 Results,

Issues Fiscal 2019 Guidance

Highlights:

•  Net sales of $260.3 million, up 14% compared to $227.7 million last year.

•  Diluted earnings per share (EPS) on a GAAP basis increased 62% to $1.05 compared to $0.65 last year. Adjusted diluted EPS of $1.10, up 26% compared to $0.87 last year.

•  The Company expects 2019 net sales growth between 6%-10% and expects diluted EPS of between $4.22 and $4.38 on a GAAP basis and adjusted diluted EPS of between $4.37 and $4.53 or between a 4% and 8% growth rate.

COLMAR, PA (February 25, 2019) - Dorman Products, Inc. (the "Company" or "Dorman") (NASDAQ:DORM), a leading supplier in the automotive aftermarket, today announced its financial results for the fourth quarter and fiscal year ended December 29, 2018.

4th Quarter Financial Results

The Company reported fourth quarter 2018 net sales of $260.3 million, up 14% compared to net sales of $227.7 million in the fourth quarter of 2017. Sales growth in the quarter attributable to acquisitions was approximately 4%.

Gross profit grew 7% to $96.9 million in the fourth quarter from $90.9 million last year. Gross profit percentage for the fourth quarter was 37.2% compared to 39.9% in the same quarter last year. The adjusted gross profit percentage was 37.8% in the quarter compared to 40.2% in the same quarter last year. The gross profit percentage declined primarily as a result of increased volume of lower margin program rollouts in the fourth quarter as compared to the same quarter in 2017, acquisitions which carry lower gross margins compared to our historical levels, and the negative impact of increased selling prices tied to tariffs that do not provide leverage to gross or operating profit percentages.

Selling, general, and administrative ("SG&A") expenses grew 10% to $52.3 million in the fourth quarter on a GAAP basis compared to $47.5 million in the same quarter last year. Adjusted SG&A increased 10% to $51.2 million or 19.7% of net sales in the quarter compared to $46.4 million or 20.4% of net sales in the same quarter last year. The increase in SG&A was primarily due to the inclusion of expenses of acquired operations, the reinvestment of tax savings from the Tax Cuts and Jobs Act (TCJA), and wage and benefit inflation.

Income tax expense was $9.7 million in the fourth quarter of 2018, or 22.0% of income before income taxes down from $21.3 million, or 49.2% of income before income taxes recorded in the same quarter last year. The reduction in tax rate compared to prior year is primarily a result of the TCJA. Additionally, income tax expense in the fourth quarter of 2017 included $6.0 million of expenses related to the adoption of the TCJA and pre 2016 state tax matters.

Net income for the fourth quarter of 2018 was $34.6 million, or $1.05 per diluted share compared to $22.0 million, or $0.65 per diluted share, in the prior year quarter. Adjusted net income in the fourth quarter was $36.4 million, or $1.10 per diluted share, up 25% compared to $29.1 million or $0.87 per diluted share in the prior year quarter.

Please refer to the Non-GAAP Financial Measures reported in the supplemental schedules at the end of this release for a detailed reconciliation of the reported (GAAP) financial information to the adjusted financial information (Non-GAAP).

In the fourth quarter of 2018, the construction of our new 800,000 square foot distribution facility in Portland, Tennessee (in close proximity to our existing operation) was completed. Over the course of the first and second quarters of 2019, we will be transferring our existing distribution operations in Portland into this new facility. Additionally, in order to better serve our customers, we made the strategic decision to consolidate our Montreal facility (acquired as part of the MAS acquisition) into the new Portland distribution center and to consolidate an existing production facility in Michigan with our newly acquired Flight facility in Pennsylvania. Both of these actions will be completed in the first quarter of 2019. We expect that the pre-tax costs to complete these actions will be approximately $3.4 million, including approximately $1.5 million of duplicate rent and utilities while we transfer operations between our facilities in Portland and approximately $1.9 million of severance, accelerated depreciation, and other integration expenses related to the site consolidations.

In the fourth quarter of 2018 our net inventory increased by $30.5 million to $270.5 million. This increase in inventory was the result of several actions including the acceleration of inventory purchases in advance of a potential 25% tariff rate, a desire to maintain strong customer service while facility consolidations are executed, preparation for new programs to be launched in the first quarter of 2019, and purchases in advance of Chinese New Year. We anticipate that our inventory will return to historical inventory turn levels over the course of fiscal 2019.

Fiscal 2018 Financial Results

Fiscal 2018 net sales were $973.7 million, up 8% compared to $903.2 million in 2017. Sales growth in the full year attributable to acquisitions was approximately 5%.

Net income for the current fiscal year was $133.6 million, or $4.02 per diluted share compared to $106.6 million, or $3.13 per diluted share in the prior year. Adjusted net income in the current fiscal year was $139.4 million, or $4.20 per diluted share, up 22% compared to $114.7 million, or $3.37 per diluted share in the prior year.

Please refer to the Non-GAAP Financial Measures reported in the supplemental schedules at the end of this release for a detailed reconciliation of the reported (GAAP) financial information to the adjusted financial information (Non-GAAP).

Kevin Olsen, Dorman Products President and Chief Executive Officer, stated: "I'd first like to thank all of our many Dorman contributors for a very successful 2018. Their hard work and commitment to excellence is the driving force behind all of our success. The fourth quarter capped off a pivotal year for our company on many fronts. Our organic growth engine remains strong as we continued to invest in bringing new products to market. We successfully integrated the MAS acquisition fully into Dorman while creating a market leading, comprehensive Chassis offering to meet the needs of both our retail and traditional customers. We acquired Flight Systems Automotive Group in the third quarter greatly increasing our complex electronics capabilities. We continued to grow and invest in our Heavy Duty business, setting us up nicely to continue our aggressive growth trajectory. Also, construction of a new, state of the art distribution facility in Tennessee was completed. This facility will enable us to better serve the needs of customers and provide space for future growth. Continuing to be the number one innovator in the light, medium and heavy duty markets will be the cornerstone of our strategy, supplemented by strategic acquisitions that accelerate growth in targeted segments, markets and geographies. Despite some macro uncertainties around trade policies, we remain optimistic about 2019."

2019 Guidance

The Company expects 2019 net sales growth between 6%-10% and expects diluted EPS of between $4.22 and $4.38 on a GAAP basis and adjusted diluted EPS of between $4.37 and $4.53 or between a 4% and 8% growthrate. Please refer to the 2019 Guidance table at the end of this release for a detailed reconciliation of the forecasted (GAAP) financial information to the adjusted financial information (Non-GAAP). Tariffs are not expected to have an impact on our 2019 net income, but will lower our gross and operating profit percentages as these additional costs are passed through to customers. We have not assumed any share repurchases in this guidance.

Share Repurchases

Under its share repurchase program, Dorman repurchased 135.7 thousand shares of its common stock for $9.6 million at an average share price of $70.86 during the quarter ended December 29, 2018, bringing fiscal year 2018 purchases to 622.2 thousand shares for $43.4 million at an average price of $69.73. Including the additional $150 million authorization announced in December 2018, the Company has $183.3 million left under its current share repurchase authorization.

About Dorman Products

Dorman Products, Inc. is a leading supplier of Dealer "Exclusive" replacement parts to the Automotive, Medium and Heavy Duty Aftermarkets. Dorman products are marketed under the Dorman®, OE Solutions™, HELP!®, AutoGrade™, First Stop™, Conduct-Tite®, TECHoice™, Dorman® Hybrid Drive Batteries and Dorman HD Solutions™ brand names.

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 we believe 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.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to the Company's future growth rates. Words such as "believe," "demonstrate," "expect," "estimate," "forecast," "anticipate," "should" and "likely" and similar expressions identify forward-looking statements. 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 statement was made. Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, competition in the automotive aftermarket industry, concentration of the Company's sales and accounts receivable among a small number of customers, the impact of consolidation in the automotive aftermarket industry, foreign currency fluctuations, the ability to successfully identify, complete, and integrate acquisitions, imposition of new taxes, duties or tariffs, and other risks detailed in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 30, 2017. The Company is under no obligation to (and expressly disclaims any such obligation to) update any of the information in this press release if any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events or otherwise.

Investor Relations Contact

Kevin Olsen, President and [e-mail][phone]

Visit our website atwww.dormanproducts.com

Consolidated Statements of Operations

(in thousands, except per-share amounts)

Fourth Quarter (unaudited)

Net sales

Cost of goods sold Gross profit

Selling, general and administrative expenses Income from operations

Other expense, net

Income before income taxes Provision for income taxes Net income

Diluted earnings per share

13 Weeks

13 Weeks

12/29/18

Pct.

12/30/17

Pct.

$

260,341

100.0

$

227,719 100.0

163,394

62.8

136,791 60.1

96,947

37.2

90,928 39.9

52,310

20.1

47,519 20.9

44,637

17.1

43,409 19.1

295

0.1 124 0.1

44,342 17.0 43,285 19.0

9,743 3.7 21,317 9.4

$ $

34,599

13.3 $ 21,968 9.6

1.05

$ 0.65

Weighted average diluted shares outstanding

32,994 33,605

52 Weeks

52 WeeksFiscal Year Ended (unaudited)

Net sales

Cost of goods sold Gross profit

Selling, general and administrative expenses Income from operations

Other expense (income), net Income before income taxes Provision for income taxes Net income

12/29/18

Pct.*

12/30/17

Pct.

$

973,705

100.0 $ 903,221 100.0

600,424

61.7 $ 544,572 60.3

373,281

38.3 $ 358,649 39.7

202,138

20.8 $ 182,409 20.1

171,143

17.5 $ 176,240 19.5

$

8

0.0 17.5 3.9 13.7

• $ (348)

171,135

(0.1 )

$

176,588 19.6

37,533

$ $

69,989 7.7

133,602

106,599 11.8

Diluted earnings per share

Weighted average diluted shares outstanding

* Percentage of sales information does not add due to rounding.

• $ 4.02 33,207

$ 3.13

34,052

Condensed Consolidated Balance Sheets

Assets:

Cash and cash equivalents Accounts receivable Inventories

Prepaid expenses Total current assets

Property, plant & equipment, net Goodwill and other intangible assets, net Deferred income taxes, net

Other assets

Total assets

Liabilities & shareholders' equity: Accounts payable

Accrued expenses and other Total current liabilities Other long-term liabilities Shareholders' equity Total liabilities and equity

Selected Cash Flow Information (unaudited):

(in thousands)

Depreciation, amortization and accretion Capital expenditures

(in thousands)

(Unaudited)

$

$

$

$

12/29/18	12/30/17
43,458	$	71,691
310,114	241,880
270,504	212,149
7,363	7,129
631,439	532,849
98,647	92,692
97,770	88,157
6,316	7,884
55,184	44,342
889,356	$	765,924
109,096	$	80,218
34,293	30,563
143,389	110,781
18,344	20,336
727,623	634,807
889,356	$	765,924

13 Weeks (unaudited)

52 Weeks (unaudited)

12/29/18

12/30/17

12/29/18

$ $

8,718 8,007

$ $

6,256 7,014

$ $

28,391 26,106

12/30/17

• $ 22,224

• $ 24,450