EX-99 2 ex99.txt EARNINGS RELEASE DATED OCTOBER 30, 2006 NEWS RELEASE DORMAN NEW SINCE 1918 Corporate Headquarters: Dorman Products, Inc. 3400 East Walnut Street Colmar, Pennsylvania 18915 Fax: (215) 997-8577 For Further Information Contact Visit our Home Page: Mathias J. Barton, CFO www.dormanproducts.com (215) 997-1800 x 5132 E-mail:MBarton@dormanproducts.com Dorman Products, Inc. Reports Sales and Earnings for the Third Quarter Ended September 30, 2006 Colmar, Pennsylvania (October 30, 2006) - Dorman Products, Inc., (NASDAQ:DORM) (formerly R&B, Inc. NASDAQ: RBIN) today reported sales increased 1.5% to $74.9 million for the third quarter ended September 30, 2006 from $73.8 million in the same period last year. Sales for the nine months ended September 30, 2006 increased 7.0% to $217.9 million from $203.6 million in the same period last year. Revenue growth from products introduced in the past two years continued to climb during the quarter, but was offset by a softening of demand from most of the Company's aftermarket customers. Net income in the third quarter of 2006 was $4.5 million compared to net income of $4.6 million in the same period last year. Diluted earnings per share for both the third quarter of 2006 and the third quarter of 2005 were $0.25. Results for the nine months ended September 30, 2006 include a one-time $3.2 million non-cash write-down for goodwill impairment ($2.9 million or $0.16 per share) and the write off of deferred tax benefits ($0.3 million or $0.02 per share) associated with the Company's Swedish subsidiary (Scan-Tech). The charges, which are not tax deductible, were the result of a second quarter review of the Scan-Tech business in response to bad debt charge offs at two large customers and the resulting loss of those customers in the first half of the year. Total bad debt charges for the Swedish business were $0.8 million for the nine months ended September 30, 2006. Excluding the goodwill impairment and deferred tax write off, net income for the first nine months of the year was $12.1 million compared to net income of $12.7 million in the same period last year and fully diluted EPS for the first nine months of the year were $0.67 compared to $0.69 in the same period last year. Net income for the first nine months of 2006 was $8.9 million compared to net income of $12.7 million in the same period last year. Diluted earnings per share for the first nine months of 2006 decreased to $0.49 from $0.69 in the same period last year. Effective January 1, 2006, the Company adopted SFAS No. 123R, "Share-Based Payment" and related interpretations and began expensing the grant date fair value of employee stock options. Prior to January 1, 2006, the Company applied Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock option plans. Accordingly, no compensation expense was recognized in net income for employee stock options in the prior year. The Company adopted SFAS No. 123R using the modified prospective transition method and therefore has not restated prior periods. The estimated impact of adopting SFAS No. 123R in 2006, is expected to reduce diluted earnings per share for the year by approximately $0.02. Mr. Richard Berman, Chairman, President and Chief Executive Officer said, "Order patterns were lower than expected throughout the third quarter. We remain enthusiastic about our new product initiatives despite the softened demand that we experienced in the third quarter. We look forward to sharing many of these exciting new product ideas with our customers during this week's AAPEX show." Dorman Products, Inc., is a leading supplier of OE Dealer "Exclusive" automotive replacement parts, automotive hardware, brake products, and household hardware to the Automotive Aftermarket and Mass Merchandise markets. Dorman automotive parts and hardware are marketed under the OE Solutions(TM), HELP!(R), AutoGrade(TM), First Stop(TM), Conduct-Tite(R), Pik-A-Nut(R) and Scan-Tech(R) brand names. Forward looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward looking statements which speak only as of the date hereof. Factors that cause actual results to differ materially include, but are not limited to, those factors discussed in the Company's Annual Report on Form 10-K under "Item1A - Risk Factors." DORMAN PRODUCTS, INC. AND SUBSIDIARIES Consolidated Statements of Operations (in thousands, except per-share amounts) 13 Weeks 13 Weeks Third Quarter (unaudited) 9/30/06 Pct. 9/24/05 Pct. Net sales $74,891 100.0 $73,783 100.0 Cost of goods sold 48,714 65.0 48,005 65.1 Gross profit 26,177 35.0 25,778 34.9 Selling, general and administrative expenses 18,370 24.6 17,769 24.0 Income from operations 7,807 10.4 8,009 10.9 Interest expense, net 576 0.7 672 1.0 Income before income taxes 7,231 9.7 7,337 9.9 Provision for income taxes 2,682 3.6 2,724 3.6 Net income $ 4,549 6.1 $ 4,613 6.3 Earnings per share Basic $ 0.26 - $ 0.26 - Diluted $ 0.25 - $ 0.25 - Average shares outstanding Basic 17,708 - 17,932 - Diluted 18,147 - 18,444 - 39 Weeks 39 Weeks Year-to-Date (unaudited) 9/30/06 Pct. 9/24/05 Pct. Net sales $217,943 100.0 $203,625 100.0 Cost of goods sold 140,390 64.4 130,211 63.9 Gross profit 77,553 35.6 73,414 36.1 Selling, general and administrative expenses 56,362 25.9 51,317 25.2 Goodwill impairment 2,897 1.3 - - Income from operations 18,294 8.4 22,097 10.9 Interest expense, net 1,797 0.8 1,961 1.0 Income before income taxes 16,497 7.6 20,136 9.9 Provision for income taxes 7,612 3.5 7,441 3.7 Net income $ 8,885 4.1 $12,695 6.2 Earnings per share Basic $ 0.50 - $ 0.71 - Diluted $ 0.49 - $ 0.69 - Average shares outstanding Basic 17,728 - 17,915 - Diluted 18,148 - 18,452 - DORMAN PRODUCTS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands) 9/30/06 12/31/05 Assets: (unaudited) Cash and cash equivalents $ 4,991 $ 2,944 Accounts receivable 66,729 64,778 Inventories 74,685 75,535 Deferred income taxes 10,133 9,560 Prepaid expenses 1,490 1,545 Total current assets 158,028 154,362 Property & equipment 27,929 27,473 Goodwill 26,998 29,617 Other assets 1,242 704 Total assets $214,197 $212,156 Liability & Shareholders' Equity: Current portion of long-term debt $ 8,651 $ 8,571 Accounts payable 12,077 14,739 Accrued expenses and other 15,077 15,240 Total current liabilities 35,805 38,550 Long-term debt and other 22,367 27,869 Deferred income taxes 7,794 7,195 Shareholders' equity 148,231 138,542 Total Liabilities and Equity $214,197 $212,156 Selected Cash Flow Information: (in thousands) 13 Weeks (unaudited) 39 Weeks (unaudited) -------------------- -------------------- 9/30/06 9/24/05 9/30/06 9/24/05 Depreciation and amortization $ 1,731 $1,420 $ 5,012 $4,194 Capital Expenditures $ 1,637 $1,409 $ 5,432 $5,522 DORMAN PRODUCTS, INC. AND SUBSIDIARIES Reconciliation of Non-GAAP Measures (in thousands, except per-share amounts) During the second quarter of 2006 the Company recorded a $3.2 million non-cash write-down for goodwill impairment ($2.9 million) and the write off of deferred tax benefits ($0.3 million) associated with the Company's Swedish operation (Scan-Tech). This press release contains non-GAAP measures which adjust current year net income and fully diluted earnings per share to exclude the impact of these charges. The presentation of these non-GAAP measures is intended to enhance the usefulness of the financial information by providing measures which the Company's management uses internally to evaluate the Company's baseline performance. A reconciliation of net income and fully diluted earnings per share follows: 39 Weeks -------------------------------------------- 09/30/06 09/25/06 % Change Net Income, as reported $ 8,885 $ 12,695 -30.0% Add: Goodwill and asset impariment charge 3,216 - N/A ____________________________________________ Net Income, as adjusted $ 12,101 $ 12,695 -4.7% Fully diluted EPS, as reported $ 0.49 $ 0.69 -29.% Add: Goodwill and asset impariment charge 0.18 - N/A ___________________________________________ Fully diluted EPS, as reported $ 0.67 $ 0.69 -2.9%