10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 24, 2016

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission file number: 0-18914

Dorman Products, Inc.

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2078856
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3400 East Walnut Street, Colmar, Pennsylvania	18915
(Address of principal executive offices)	(Zip Code)

(215) 997-1800

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

As of October 24, 2016, the registrant had 34,613,547 shares of common stock, par value $0.01 per share, outstanding.

Page 1 of 21

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT ON FORM 10-Q

September 24, 2016

		Page
Part I — FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Income:
	Thirteen Weeks Ended September 24, 2016 and September 26, 2015		3
	Thirty-nine Weeks Ended September 24, 2016 and September 26, 2015		4
	Consolidated Balance Sheets		5
	Consolidated Statements of Cash Flows		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		17
Item 4.	Controls and Procedures		17
Part II — OTHER INFORMATION
Item 1.	Legal Proceedings		18
Item 1A.	Risk Factors		18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		18
Item 3.	Defaults Upon Senior Securities		18
Item 4.	Mine Safety Disclosures		18
Item 5.	Other Information		18
Item 6.	Exhibits		19
Signatures			20
Exhibit Index			21

Page 2 of 21

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	For the Thirteen Weeks Ended
(in thousands, except per share data)	September 24, 2016		September 26, 2015
Net sales	$	212,786	$	210,928
Cost of goods sold		129,641		130,134
Gross profit		83,145		80,794
Selling, general and administrative expenses		41,512		39,554
Income from operations		41,633		41,240
Interest expense, net		61		48
Income before income taxes		41,572		41,192
Provision for income taxes		14,877		15,132
Net income	$	26,695	$	26,060
Earnings Per Share:
Basic	$	0.77	$	0.73
Diluted	$	0.77	$	0.73
Weighted Average Shares Outstanding:
Basic		34,572		35,514
Diluted		34,672		35,575

See accompanying Notes to Consolidated Financial Statements

Page 3 of 21

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	For the Thirty-nine Weeks Ended
(in thousands, except per share data)	September 24, 2016		September 26, 2015
Net sales	$	630,507	$	598,123
Cost of goods sold		384,604		367,866
Gross profit		245,903		230,257
Selling, general and administrative expenses		124,350		118,470
Income from operations		121,553		111,787
Interest expense, net		180		152
Income before income taxes		121,373		111,635
Provision for income taxes		44,025		41,093
Net income	$	77,348	$	70,542
Earnings Per Share:
Basic	$	2.24	$	1.99
Diluted	$	2.23	$	1.98
Weighted Average Shares Outstanding:
Basic		34,560		35,535
Diluted		34,626		35,611

See accompanying Notes to Consolidated Financial Statements

Page 4 of 21

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except for share data)	September 24, 2016		December 26, 2015
Assets
Current assets:
Cash and cash equivalents	$	95,142	$	78,659
Accounts receivable, less allowance for doubtful accounts and customer credits of $85,797 and $86,986		245,006		203,923
Inventories		168,245		193,725
Prepaids and other current assets		4,259		2,326
Total current assets		512,652		478,633
Property, plant and equipment, net		88,384		87,046
Goodwill and intangible assets, net		29,814		29,889
Deferred tax asset, net		7,581		7,557
Other assets		29,574		18,740
Total	$	668,005	$	621,865
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	52,481	$	63,967
Accrued compensation		8,668		10,970
Other accrued liabilities		22,156		23,633
Total current liabilities		83,305		98,570
Other long-term liabilities		5,536		5,259
Commitments and contingencies
Shareholders’ Equity:
Common stock, par value $0.01; authorized 50,000,000 shares; issued and outstanding 34,613,547 and 34,863,396 in 2016 and 2015, respectively		346		349
Additional paid-in capital		43,756		42,799
Retained earnings		535,062		474,888
Total shareholders’ equity		579,164		518,036
Total	$	668,005	$	621,865

See accompanying Notes to Consolidated Financial Statements

Page 5 of 21

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Thirty-nine Weeks Ended
(in thousands)	September 24, 2016			September 26, 2015
Cash Flows from Operating Activities:
Net income	$	77,348		$	70,542
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, amortization and accretion		13,890			11,739
Provision for doubtful accounts		1,146			85
Benefit for deferred income taxes		(24	)		(2,462	)
Provision for non-cash stock compensation		1,718			752
Changes in assets and liabilities:
Accounts receivable		(42,229	)		6,693
Inventories		24,480			(21,727	)
Prepaids and other current assets		(911	)		(397	)
Other assets		(4,639	)		(4,652	)
Accounts payable		(11,646	)		377
Accrued compensation and other liabilities		(4,627	)		(3,467	)
Cash provided by operating activities		55,506			57,483
Cash Flows from Investing Activities:
Property, plant and equipment additions		(14,890	)		(16,534	)
Purchase of equity investment		(6,195	)		(2,000	)
Cash used in investing activities		(21,085	)		(18,534	)
Cash Flows from Financing Activities:
Proceeds from exercise of stock options		—			16
Other stock related activity		(109	)		34
Purchase and cancellation of common stock		(17,829	)		(7,334	)
Cash used in financing activities		(17,938	)		(7,284	)
Net Increase in Cash and Cash Equivalents		16,483			31,665
Cash and Cash Equivalents, Beginning of Period		78,659			47,656
Cash and Cash Equivalents, End of Period	$	95,142		$	79,321
Supplemental Cash Flow Information
Cash paid for interest expense	$	200		$	211
Cash paid for income taxes	$	46,121		$	41,709

See accompanying Notes to Consolidated Financial Statements

Page 6 of 21

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THRITY-NINE WEEKS ENDED SEPTEMBER 24, 2016 AND SEPTEMBER 26, 2015

(UNAUDITED)

1. Basis of Presentation

As used herein, unless the context otherwise requires, “Dorman”, the “Company”, “we”, “us”, or “our” refers to Dorman Products, Inc. and its subsidiaries. Our ticker symbol on the NASDAQ Global Select Market is “DORM”.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. for interim financial information and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). However, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the thirty-nine weeks ended September 24, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016. We may experience significant fluctuations from quarter to quarter in our results of operations due to the timing of orders placed by our customers. Generally, the second and third quarters have the highest level of net sales. The introduction of new products and product lines to customers may cause significant fluctuations from quarter to quarter. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 26, 2015.

2. Sales of Accounts Receivable

We have entered into several customer sponsored programs administered by unrelated financial institutions that permit us to sell certain accounts receivable at discounted rates to the financial institutions. Transactions under these agreements were accounted for as sales of accounts receivable and were removed from our Consolidated Balance Sheet at the time of the sales transactions. Pursuant to these agreements, we sold $366.6 million and $391.9 million of accounts receivable during the thirty-nine weeks ended September 24, 2016 and September 26, 2015, respectively. If receivables had not been sold, $337.3 million and $335.9 million of additional accounts receivable would have been outstanding at September 24, 2016 and December 26, 2015, respectively, based on standard payment terms. Selling, general and administrative expenses for the thirty-nine weeks ended September 24, 2016 and September 26, 2015 included $6.3 million and $5.4 million, respectively, in financing costs associated with these accounts receivable sales programs.

3. Inventories

Inventories include the cost of material, freight, direct labor and overhead utilized in the processing of our products, and are stated at the lower of cost or market. Inventories were as follows:

(in thousands)	September 24, 2016		December 26, 2015
Bulk product	$	62,445	$	78,533
Finished product		102,331		112,012
Packaging materials		3,469		3,180
Total	$	168,245	$	193,725

4. Stock-Based Compensation

Our 2008 Stock Option and Stock Incentive Plan (the “Plan”) was approved by our shareholders on May 20, 2009. Under the terms of the Plan, our Board of Directors may grant up to 2,000,000 shares of common stock in the form of shares of restricted stock, incentive stock options and non-qualified stock options or combinations thereof to officers, directors, employees, consultants and advisors. Grants under the Plan must be made within ten years of the date the Plan was approved and stock options are exercisable upon the terms set forth in the grant agreement approved by the Board of Directors, but in no event more than ten years from the date of grant. Restricted stock vests in accordance with the terms set forth in each restricted stock agreement. At September 24, 2016, 1,532,856 shares were available for grant under the Plan.

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We grant restricted stock to certain employees and members of our Board of Directors. The value of restricted stock issued is based on the fair value of our common stock on the grant date. Vesting of restricted stock is conditional based on continued employment or service for a specified period and, in certain circumstances, the attainment of financial goals. We retain the restricted stock, and any dividends paid thereon, until the vesting conditions have been met. For awards with a service condition only, compensation cost related to the stock is recognized on a straight-line basis over the vesting period. For awards that have a service condition and require the attainment of financial goals, compensation cost related to the stock is recognized over the vesting period if it is probable that the financial goals will be attained. Compensation cost related to restricted stock was $1.6 million and $0.7 million for the thirty-nine weeks ended September 24, 2016 and September 26, 2015, respectively. The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Income. No cost was capitalized during the thirty-nine weeks ended September 24, 2016 or the thirty-nine weeks ended September 26, 2015.

The following table summarizes our restricted stock activity for the thirty-nine weeks ended September 24, 2016:

	Shares			Weighted Average Price
Balance at December 26, 2015		43,242		$	34.49
Granted		117,144		$	45.63
Vested		(23,822	)	$	30.27
Cancelled		(240	)	$	18.94
Balance at September 24, 2016		136,324		$	44.83

As of September 24, 2016, there was approximately $4.5 million of unrecognized compensation cost related to nonvested restricted stock, which is expected to be recognized over a weighted-average period of 2.9 years.

Cash flows resulting from tax deductions in excess of the tax effect of compensation cost recognized in the financial statements are classified as financing cash flows. The excess tax benefit generated from restricted shares which vested was $0.2 million and $0.3 million in the thirty-nine weeks ended September 24, 2016 and September 26, 2015, respectively, and was credited to additional paid-in capital.

We grant stock options to certain employees and members of the Board of Directors. We expense the grant-date fair value of stock options. Compensation cost is recognized on a straight-line basis over the vesting period for which related services are performed. The compensation cost charged against income for the thirty-nine weeks ended September 24, 2016 and September 26, 2015 was less than $0.1 million in each period. The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Income. No cost was capitalized during the thirty-nine weeks ended September 24, 2016 or the thirty-nine weeks ended September 26, 2015. We included a forfeiture assumption of 5.4% in the calculation of expense in each of the thirty-nine weeks ended September 24, 2016 and September 26, 2015.

We use the Black-Scholes option valuation model to estimate the fair value of stock options granted. Expected volatility and expected dividend yield are based on the actual historical experience of our common stock. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using historical option exercise data. The risk-free rate was based on a U.S. Treasury security with terms equal to the expected time of exercise as of the grant date. During the thirty-nine weeks ended September 24, 2016, we granted 61,084 stock options. There were no stock options granted in the thirty-nine weeks ended September 26, 2015.

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The following table summarizes our stock option activity for the thirty-nine weeks ended September 24, 2016:

	Shares		Weighted Average Price		Weighted Average Remaining Term (In years)		Aggregate Intrinsic Value
Balance at December 26, 2015		40,000	$	6.86
Granted		61,084	$	44.36
Balance at September 24, 2016		101,084	$	29.52		3.3	$	3,737,400
Options exercisable at September 24, 2016		40,000	$	6.86		1.5	$	2,385,320

No stock options were exercised during the thirty-nine weeks ended September 24, 2016. As of September 24, 2016, there was $0.5 million of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 3.5 years.

There was no cash received or excess tax benefit generated from stock option exercises in the thirty-nine weeks ended September 24, 2016 or September 26, 2015.

5. Earnings Per Share

Basic earnings per share is calculated by dividing our net income by the weighted average number of common shares outstanding during the period, excluding nonvested restricted stock which is considered to be contingently issuable. To calculate diluted earnings per share, common share equivalents are added to the weighted average number of common shares outstanding. Common share equivalents are calculated using the treasury stock method and are computed based on outstanding stock-based awards. Stock-based awards of approximately 16,000 shares and 7,000 shares were excluded from the calculation of diluted earnings per share as of September 24, 2016 and September 26, 2015, respectively, as their effect would have been anti-dilutive.

The following table sets forth the computation of basic earnings per share and diluted earnings per share:

	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands, except per share data)	September 24, 2016		September 26, 2015		September 24, 2016		September 26, 2015
Numerator
Net income	$	26,695	$	26,060	$	77,348	$	70,542
Denominator:
Weighted average basic shares outstanding		34,572		35,514		34,560		35,535
Effect of stock-based compensation awards		100		61		66		76
Weighted average diluted shares outstanding		34,672		35,575		34,626		35,611
Earnings Per Share:
Basic	$	0.77	$	0.73	$	2.24	$	1.99
Diluted	$	0.77	$	0.73	$	2.23	$	1.98

6. Common Stock Repurchases

We periodically repurchase, at the then current market price, and cancel common stock issued to the Dorman Products, Inc. 401(k) Retirement Plan and Trust (the “401(k) Plan”). Shares are generally purchased from the 401(k) Plan when participants sell units as permitted by the 401(k) Plan or elect to leave the 401(k) Plan upon retirement, termination or other reasons. For the thirty-nine weeks ended September 24, 2016, we repurchased and cancelled 31,690 shares of common stock for $1.7 million at an average price of $54.85 per share. During the fifty-two weeks ended December 26, 2015, we repurchased and cancelled 33,430 shares of common stock for $1.46 million at an average price of $48.14 per share.

Our Board of Directors authorized a share repurchase program of up to $150 million through December 31, 2016. Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion. The share repurchase program does not obligate us to acquire any specific number of shares. For the thirty-nine weeks ended September 24, 2016, we repurchased and cancelled 329,666 shares of common stock for $16.1 million at an average price of $48.81 per share under this program. For the fifty-two weeks ended December 26, 2015, we repurchased and cancelled 747,700 shares of common stock for $35.7 million at an average price of $47.77 per share under this program. As of September 24, 2016, we have $57.8 million remaining under this program to repurchase shares.

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7. Related-Party Transactions

We have a non-cancelable operating lease for our primary operating facility with a partnership in which Steven L. Berman, our Executive Chairman, and his family members, are partners. Based upon the terms of the lease, payments will be $1.6 million in fiscal 2016 and were $1.6 million in fiscal 2015. The lease with the partnership expires December 31, 2017. In the opinion of our Audit Committee, the terms and rates of this lease are no less favorable than those which could have been obtained from an unaffiliated party when the lease was renewed in fiscal 2012.

We are a partner in a joint venture with one of our suppliers and own a minority interest in two other suppliers, including Powertrain Industries, Inc. (“PTI”) whom we acquired a 40% minority equity interest on July 19, 2016 for $6.2 million. PTI is a leading manufacturer of driveshafts and driveline related products and is headquartered in Garden Grove, CA with four driveshaft manufacturing facilities located regionally throughout the United States. At any time, we can elect to purchase all of remaining capital stock of PTI. Also, between July 2019 and July 2021, the majority shareholders may require us to purchase all of the remaining capital stock of PTI. In either case, the purchase price of the shares will be determined using an earnings multiple specified in the PTI purchase agreement.

8. Income Taxes

At September 24, 2016, we had $1.9 million of net unrecognized tax benefits, $1.4 million of which would affect our effective tax rate if recognized. We recognize interest and penalties related to uncertain tax positions in income tax expense. As of September 24, 2016, we had approximately $0.2 million of accrued interest related to uncertain tax positions.

We file income tax returns in the United States, China and Mexico. All years before 2013 are closed for federal tax purposes. We are currently under examination by one state tax authority for years 2011-2012. Tax years before 2011 are closed for the remaining states in which we file. We filed tax returns in Sweden through 2012 and all years prior to 2009 are closed. It is reasonably possible that audit settlements, the conclusion of current examinations or the expiration of the statute of limitations could impact the Company’s unrecognized tax benefits.

9. Fair Value Disclosures

The carrying value of financial instruments such as cash, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair value based on the short-term nature of these instruments.

10. New and Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. As originally issued, the new standard would have been effective for annual periods beginning after December 15, 2016. The FASB has amended the standard to be effective for annual periods beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our consolidated financial statements and related disclosures.

In July 2015, the FASB issued ASU No. 2015-11, Inventory: Simplifying the Measurement of Inventory, which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. The amendments in this guidance do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out or average cost. Within the scope of this new guidance, an entity should measure inventory at the lower of cost and net realizable value; where, net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The new guidance is effective for annual periods beginning after December 15, 2016, with early adoption permitted. The new guidance must be applied on a prospective basis. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces existing lease guidance. The ASU is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. The new guidance is effective for annual periods beginning after December 15, 2018, with early application permitted. The new standard is required to be applied with a modified retrospective approach. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

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In March 2016, the FASB issued ASU No. 2016-09, Compensation – Improvement to Employee Share-Based Payment Accounting, which amends the current guidance related to stock compensation. The updated guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The update to the standard is effective for annual periods beginning after December 15, 2016, with early application permitted. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies and provides guidance on eight cash flow classification issues and is intended to reduce existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward Looking Statements

Certain statements in this document constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. While forward-looking statements sometimes are presented with numerical specificity, they are based on various assumptions made by management regarding future circumstances over many of which the Company has little or no control. Forward-looking statements may be identified by words including “anticipate,” “believe,” “estimate,” “expect,” and similar expressions. The Company cautions readers that forward-looking statements, including, without limitation, those relating to future business prospects, revenues, working capital, liquidity, and income, are subject to certain risks and uncertainties that would cause actual results to differ materially from those indicated in the forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include but are not limited to competition in the automotive aftermarket industry, unfavorable economic conditions, loss of key vendors, loss of third-party transportation providers, claims of intellectual property infringement, quality problems, delay in the development and design of new products, space limitations on our customers’ shelves, 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, timing and amount of customers’ orders of Company’s products, unfavorable results of legal proceedings, dependence on the Company’s management team, disruption from events beyond the Company’s control, risks associated with conflict minerals, risks associated with cyber-attacks and other risks and factors identified from time to time in the reports the Company files with the SEC. For additional information concerning factors that could cause actual results to differ materially from the information contained in this report, reference is made to the information in “Part I Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2015. You should not place undue reliance on forward-looking statements. Such statements speak only as to the date on which they are made, and we undertake no obligation to update publicly or revise any forward-looking statement, regardless of future developments or availability of new information.

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 consolidated financial statements and footnotes thereto of Dorman Products, Inc. and its subsidiaries included in “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 26, 2015.

Overview

We are a leading supplier of replacement parts and fasteners for passenger cars, light trucks and heavy duty trucks in the automotive aftermarket. We distribute and market approximately 150,000 stock keeping units (“SKU’s”) of automotive replacement parts many of which we design and engineer. These SKU’s are sold under our various brand names, under our customers’ private label brands or in bulk. We believe we are the dominant aftermarket supplier of original equipment “dealer exclusive” items. Original equipment “dealer exclusive” parts are those parts which were traditionally available to consumers only from original equipment manufacturers or salvage yards. These parts include, among other parts, intake manifolds, exhaust manifolds, window regulators, radiator fan assemblies, tire pressure monitor sensors, complex electronics devices and exhaust gas recirculation (EGR) coolers.

We generate virtually all of our revenues from customers in the North American automotive aftermarket, primarily in the United States. Our products are sold primarily through automotive aftermarket retailers (such as Advance Auto Parts, AutoZone and O’Reilly Auto Parts), national, regional and local warehouse distributors (such as Genuine Parts Co - NAPA), specialty markets and salvage yards. We also distribute automotive replacement parts outside the United States, with sales into Europe, Mexico, the Middle East, Asia and Canada.

The automotive aftermarket has benefited from some of the factors affecting the general economy, including the impact of recessions, unemployment, and fluctuating gas prices. We believe vehicle owners have become more likely to keep their current vehicles longer and perform necessary repairs and maintenance in order to keep those vehicles well maintained as a result of these factors. According to data published by Polk, a division of IHS Automotive, the average age of vehicles was 11.6 years as of January 2016, which is an increase from 11.5 years as of January 2015 despite increasing new car sales. The number of miles driven is another important statistic that impacts our business. According to the United States Department of Transportation, the number of miles driven has increased each year since 2011 with miles driven having increased 3.5% as of November 2015 as compared to

Page 12 of 21

November 2014. Generally, as vehicles are driven more miles, the more likely it is that parts will fail. We believe that the combination of the vehicle age increase and number of miles driven has contributed to a portion of our sales growth.

The overall automotive aftermarket in which we compete has benefited from the conditions mentioned above. However, our customer base has been consolidating for a number of years. As a result, our 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, extended customer payment terms and allowed a higher level of product returns in certain cases. These concessions impact our profit levels and may require additional capital to finance the business. We expect our customers to continue to exert pressure on our margins as the customer base continues to consolidate.

New product development is a critical success factor for us and is our primary vehicle for growth. We have made incremental investments to increase our new product development efforts each year since 2003 in an effort to grow our business and strengthen our relationships with our customers. The investments are primarily in the form of increased product development resources, increased 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 exceed market growth rates.

Our complex electronics program capitalizes on the growing number of electronic components being utilized on today’s Original Equipment platforms. Current production models contain an average of approximately thirty five electronic modules, with some high-end luxury vehicles containing over one hundred modules. Our complex electronics products are designed and developed in house and extensively tested to ensure consistent performance.

In 2012, we introduced a new line of products to be marketed for the medium and heavy duty truck aftermarket. We believe that this market provides many of the same opportunities for growth that the automotive aftermarket has provided us over the past several years. Our focus here is on formerly “dealer only” parts similar to the automotive side of the business. We launched the initial program with a limited offering, but have made additional investments in new product development efforts to expand our product offering. We currently have approximately 875 SKU’s in our medium and heavy duty product line.

We may experience significant fluctuations from quarter to quarter in our results of operations due to the timing of orders placed by our customers. Generally, the second and third quarters have the highest level of net sales. The introduction of new products and product lines to customers may cause significant fluctuations from quarter to quarter.

We operate on a fifty-two or fifty-three week fiscal year period ended on the last Saturday of the calendar year. Our 2016 fiscal year will be a fifty-three week period that will end on December 31, 2016. The fiscal year ended December 26, 2015 was a fifty-two week period.

Results of Operations

The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in our Consolidated Statements of Income:

	Thirteen Weeks Ended								Thirty-nine Weeks Ended
	September 24, 2016				September 26, 2015				September 24, 2016				September 26, 2015
Net sales	$	212.8	100.0	%	$	210.9	100.0	%	$	630.5	100.0	%	$	598.1	100.0	%
Cost of goods sold	$	129.6	60.9	%	$	130.1	61.7	%	$	384.6	61.0	%	$	367.9	61.5	%
Gross profit	$	83.1	39.1	%	$	80.8	38.3	%	$	245.9	39.0	%	$	230.3	38.5	%
Selling, general and administrative expenses	$	41.5	19.5	%	$	39.6	18.7	%	$	124.4	19.7	%	$	118.5	19.8	%
Income from operations	$	41.6	19.6	%	$	41.2	19.6	%	$	121.6	19.3	%	$	111.8	18.7	%
Interest expense, net	$	0.0	0.1	%	$	0.0	0.1	%	$	0.2	0.0	%	$	0.2	0.0	%
Income before income taxes	$	41.6	19.5	%	$	41.2	19.5	%	$	121.4	19.3	%	$	111.6	18.7	%
Provision for income taxes	$	14.9	7.0	%	$	15.1	7.1	%	$	44.0	7.0	%	$	41.1	6.9	%
Net income	$	26.7	12.5	%	$	26.1	12.4	%	$	77.3	12.3	%	$	70.5	11.8	%

Page 13 of 21

Thirteen Weeks Ended September 24, 2016 Compared to Thirteen Weeks Ended September 26, 2015

Net sales increased 1% to $212.8 million for the thirteen weeks ended September 24, 2016 from $210.9 million for the thirteen weeks ended September 26, 2015. Net sales for the thirteen weeks ended September 26, 2015 included a significant benefit from stocking orders from one of our major retail customers.

Gross profit margin was 39.1% of net sales for the thirteen weeks ended September 24, 2016 and 38.3% of net sales for the thirteen weeks ended September 26, 2015. The improvement in gross profit margin was due to a favorable sales mix and lower provisions for excess inventory during the thirteen weeks ended September 24, 2016 compared to the thirteen weeks ended September 26, 2015.

Selling, general and administrative expenses were $41.5 million for the thirteen weeks ended September 24, 2016 compared to $39.6 million for the thirteen weeks ended September 26, 2015. The increase during the thirteen weeks ended September 24, 2016 was primarily due to increased investments in new product development and $0.7 million in increased incentive compensation expenses compared to the thirteen weeks ended September 26, 2015.

Our effective tax rate was 35.8% for the thirteen weeks ended September 24, 2016 and 36.7% for the thirteen weeks ended September 26, 2015. The effective income tax rate decreased primarily due to lower provisions for state income taxes and increased benefits for research and development tax credits.

Thirty-nine Weeks Ended September 24, 2016 Compared to Thirty-nine Weeks Ended September 26, 2015

Net sales increased 5% to $630.5 million for the thirty-nine weeks ended September 24, 2016 from $598.1 million for the thirty-nine weeks ended September 26, 2015. The increase in net sales is primarily due to overall strong demand for our products, including our new products.

Gross profit margin was 39.0% of net sales for the thirty-nine weeks ended September 24, 2016 and 38.5% of net sales for the thirty-nine weeks ended September 26, 2015. The improvement in gross profit margin was due to a favorable sales mix and lower provisions for excess inventory during the thirty-nine weeks ended September 24, 2016 compared to the thirty-nine weeks ended September 26, 2015.

Selling, general and administrative expenses were $124.4 million for the thirty-nine weeks ended September 24, 2016 compared to $118.5 million for the thirty-nine weeks ended September 26, 2015. The increase during the thirty-nine weeks ended September 24, 2016 was primarily due to increased variable costs associated with higher net sales, $1.9 million in increased incentive compensation expense, a $0.9 million provision for doubtful accounts due to a customer that is in bankruptcy, and $1.0 million in increased expenses related to the accounts receivable sales program. Results for the thirty-nine weeks ended September 26, 2015 include $2.7 million in costs associated with our now completed September 2014 ERP conversion.

Our effective tax rate was 36.3% for the thirty-nine weeks ended September 24, 2016 and 36.8% for the thirty-nine weeks ended September 26, 2015. The effective income tax rate decreased primarily due to lower provisions for state income taxes and increased benefits for research and development tax credits.

Liquidity and Capital Resources

Historically, our primary sources of liquidity have been our invested cash and the cash flows we generate from our operations, including accounts receivable sales programs provided by our customers. Cash and cash equivalents at September 24, 2016 increased to $95.1 million from $78.7 million at December 26, 2015. Working capital was $429.3 million at September 24, 2016 compared to $380.1 million at December 26, 2015. Shareholders’ equity was $579.2 million at September 24, 2016 and $518.0 million at December 26, 2015. Based on our current operating plan, we believe that our sources of available capital are adequate to meet our ongoing cash needs for at least the next twelve months. However, our liquidity could be negatively affected by extending payment terms to customers, a decrease in demand for our products, or other factors.

Over the past several years we have continued to extend payment terms to certain customers as a result of customer requests and market demands. These extended terms have resulted in increased accounts receivable levels and significant uses of cash flows. We participate in accounts receivable sales programs with several customers which allow us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment terms extensions. During the thirty-nine weeks ended September 24, 2016 and September 26, 2015, we sold approximately $366.6 million and $391.9 million, respectively, under these programs. We had the ability to sell significantly more accounts receivable under these programs if the needs of the business warranted. We expect continued pressure to extend our payment terms for the foreseeable future. Further extensions of customer payment terms will result in additional uses of cash flow or increased costs associated with the sales of accounts receivable.

Page 14 of 21

We have a $30.0 million revolving credit facility which expires in June 2017. Borrowings under the facility are on an unsecured basis with interest at rates ranging from LIBOR plus 65 basis points to LIBOR plus 250 basis points based upon the achievement of certain benchmarks related to the ratio of funded debt to EBITDA, as defined by our credit agreement. The interest rate at September 24, 2016 was LIBOR plus 65 basis points (1.18%). There were no borrowings under the facility as of September 24, 2016. As of September 24, 2016, we had two outstanding letters of credit for approximately $1.0 million in the aggregate which were issued to secure ordinary course of business transactions. Net of these letters of credit, we had approximately $29.0 million available under the facility at September 24, 2016. The credit agreement also contains covenants, the most restrictive of which pertain to net worth and the ratio of debt to EBITDA. As of September 24, 2016, we were in compliance with all financial covenants contained in the revolving credit facility.

Cash Flows

Below is a table setting forth the key lines of our Consolidated Statements of Cash Flows:

	Thirty-nine Weeks Ended
(in thousands)	September 24, 2016			September 26, 2015
Cash provided by operating activities	$	55,506		$	57,483
Cash used in investing activities		(21,085	)		(18,534	)
Cash used in financing activities		(17,938	)		(7,284	)
Net increase in cash and cash equivalents	$	16,483		$	31,665

During the thirty-nine weeks ended September 24, 2016, cash provided by operating activities was $55.5 million primarily as a result of $77.3 million in net income, non-cash adjustments to net income of $16.7 million and a net increase in operating assets and liabilities of $38.6 million. Accounts receivable increased $42.2 million due to increased net sales. Inventory decreased $25.5 million due to lower inventory purchases and the positive effects of several inventory management initiatives. Accounts payable decreased by $11.6 million due to lower inventory purchases. Other liabilities decreased by $4.6 million due to reductions in income taxes payable and compensation-related accruals.

During the thirty-nine weeks ended September 26, 2015, cash provided by operating activities was $57.5 million primarily as a result of $70.5 million in net income, non-cash adjustments to net income of $10.1 million and a net increase in operating assets and liabilities of $23.2 million. Accounts receivable decreased $6.7 million due to increased sales of accounts receivable which were partially offset by higher net sales. Inventory increased $21.7 million due to purchases to support sales growth and new product initiatives. Other liabilities decreased by $3.5 million due to a reduction in accrued customer rebates.

Investing activities used $21.1 million of cash in the thirty-nine weeks ended September 24, 2016 and $18.5 million in the thirty-nine weeks ended September 26, 2015.

• Capital spending in the thirty-nine weeks ended September 24, 2016 was primarily related to $8.3 million in tooling associated with new products, $3.2 million in enhancements and upgrades to our information systems, and $6.2 million to purchase a minority equity interest.

• Capital spending in the thirty-nine weeks ended September 26, 2015 was primarily related to $8.4 million in tooling associated with new products, $2.0 million in the purchase of a minority equity interest, and $4.3 million in enhancements and upgrades to our information systems.

• The remaining capital spending in both periods resulted from scheduled equipment replacements, certain facility improvements and other capital projects.

Financing activities used $17.9 million of cash in the thirty-nine weeks ended September 24, 2016 and $7.3 million in the thirty-nine weeks ended September 26, 2015.

• In the thirty-nine weeks ended September 24, 2016, we paid $16.1 million to repurchase 329,666 common shares. In the thirty-nine weeks ended September 26, 2015, we paid $7.3 million to repurchase 150,740 common shares.

Page 15 of 21

• The remaining sources and uses of cash from financing activities in each period result from stock compensation plan activity and the repurchase of common stock from our 401(k) Plan.

Based on our current operating plan, we believe that our sources of available capital are adequate to meet our ongoing cash needs for at least the next twelve months.

During the thirty-nine weeks ended September 24, 2016, we experienced no material changes to our contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended December 26, 2015.

Foreign Currency Fluctuations

In fiscal 2015, approximately 71% of our products were purchased from vendors in a variety of foreign countries. The products generally are purchased 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 foreign currencies in the future, the price of the product for new purchase orders may change in equivalent U.S. Dollars.

The largest portion of our overseas purchases comes from China. During the thirty-nine weeks ended September 24, 2016, the Chinese Yuan decreased in value relative to the U.S. Dollar by approximately 3.2%. During the fifty-two weeks ended December 26, 2015, the Chinese Yuan decreased in value relative to the U.S. Dollar by approximately 5.4%. 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 products that we purchase from China.

Impact of Inflation

The overall impact of inflation has not resulted in a significant change in labor costs or the cost of general services utilized. The cost of many commodities that are used in our products has fluctuated over time resulting in increases and decreases in the cost of our products. In addition, we have periodically experienced increased transportation costs as a result of higher fuel prices. We will attempt to offset cost increases by passing along selling price increases to customers, using alternative suppliers and by sourcing purchases from other countries. However there can be no assurance that we will be successful in these efforts.

New and Recently Adopted Accounting Pronouncements

Please refer to Note 10, New and Recently Adopted Accounting Pronouncements, to the Notes to Consolidated Financial Statements.

Page 16 of 21

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our market risk is the potential loss arising from adverse changes in interest rates. Substantially all of our available credit and our accounts receivable sale programs bear interest at rates tied to LIBOR. Under the terms of our revolving credit facility and customer-sponsored programs to sell accounts receivable, a change in either the lender’s base rate, LIBOR or discount rates under our accounts receivable sale programs would affect the rate at which we could access funds thereunder. A one percentage point increase in LIBOR would increase our interest expense on our variable rate debt, if any, and our financing costs associated with our sales of accounts receivable by approximately $3.7 million annually. This estimate assumes that our variable rate debt balance and the level of sales of accounts receivable remains constant for an annual period and the interest rate change occurs at the beginning of the period. The hypothetical changes and assumptions may be different from what actually occurs in the future.

We have not historically and do not intend to use derivative financial instruments for trading or to speculate on changes in interest rates or commodity prices. We are not exposed to any significant market risks, foreign currency exchange risk or interest rate risk from the use of derivative instruments.

Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation, as of the end of the period covered by this report, of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures, as defined in Rule 13a-15(e), were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the quarter ended September 24, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there was no such change during the quarter ended September 24, 2016.

Limitations on the Effectiveness of Controls

Control systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. The Company conducts periodic evaluations of its internal controls to enhance, where necessary, its procedures and controls.

Page 17 of 21

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are a party to or otherwise involved in legal proceedings that arise in the ordinary course of business, such as various claims and legal actions involving contracts, competitive practices, intellectual property infringement, product liability claims and other matters arising out of the conduct of our business. In the opinion of management, none of the actions, individually or in the aggregate, would likely have a material financial impact on the Company and we believe the range of reasonably possible losses from current matters is immaterial.

Item 1A. Risk Factors

You should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 26, 2015, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

During the thirteen weeks ended September 24, 2016, we purchased shares of our common stock as follows:

Period	Total Number of Shares Purchased (1) (2)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2)
June 26, 2016 through July 23, 2016		8,070	$	57.58		—	$	57,809,775
July 24, 2016 through August 20, 2016		2,850	$	62.38		—	$	57,809,775
August 21, 2016 through September 24, 2016		1,490	$	64.09		—	$	57,809,775
Total		12,410	$	59.46		—	$	57,809,775

(1) Includes 12,410 shares purchased from the Dorman Products, Inc. 401(k) Plan and Trust (as described in Note 6 to the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q).

(2) On December 12, 2013, we announced that our Board of Directors authorized a share repurchase program of up to $10 million of our outstanding common stock by the end of 2014. Through several expansion and extensions, our Board of Directors has expanded the program to $150 million and extended the program through December 31, 2016. Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion. The share repurchase program does not obligate us to acquire any specific number of shares. We did not repurchase shares under this program during the thirteen weeks ended September 24, 2016.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

Page 18 of 21

Item 6. Exhibits

(a) Exhibits

The Exhibits included in this report are listed in the Exhibit Index on page 21, which is incorporated herein by reference.

Page 19 of 21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dorman Products, Inc.

October 26, 2016

/s/ Mathias J. Barton

Mathias J. Barton

President and Chief Executive Officer

(principal executive officer)

October 26, 2016

/s/ Kevin M. Olsen

Kevin M. Olsen

Senior Vice President and Chief Financial Officer

(principal financial and accounting officer)

Page 20 of 21

EXHIBIT INDEX

31.1	Certification of Chief Executive Officer as required by Section 302 of the Sarbanes-Oxley Act of 2002 (filed with this report).
31.2	Certification of Chief Financial Officer as required by Section 302 of the Sarbanes-Oxley Act of 2002 (filed with this report).
32	Certification of Chief Executive and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished with this report).
101	The following financial statements from the Dorman Products, Inc. Quarterly Report on Form 10-Q as of and for the quarter ended September 24, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income; (ii) the Consolidated Balance Sheets; (iii) the Consolidated Statements of Cash Flows and (iv) the Notes to Consolidated Financial Statements.

Page 21 of 21

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Mathias J. Barton certify that:

1. I have reviewed this Form 10-Q of Dorman Products, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2016

/s/ Mathias J. Barton

Mathias J. Barton

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Kevin M. Olsen certify that:

1. I have reviewed this Form 10-Q of Dorman Products, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2016

/s/ Kevin M. Olsen

Kevin M. Olsen

Senior Vice President and

Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

This Certification is intended to accompany the Quarterly Report of Dorman Products, Inc. (the “Company”) on Form 10-Q for the period ended September 24, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), and is given solely for the purpose of satisfying the requirements of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. To the best of their knowledge, the undersigned, in their respective capacities as set forth below, hereby certify that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mathias J. Barton

Mathias J. Barton

President and Chief Executive Officer

Date: October 26, 2016

/s/ Kevin M. Olsen

Kevin M. Olsen

Senior Vice President and

Chief Financial Officer

Date: October 26, 2016

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 24, 2016	Oct. 24, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 24, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Trading Symbol	DORM
Entity Registrant Name	Dorman Products, Inc.
Entity Central Index Key	0000868780
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		34,613,547

XML

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 24, 2016	Sep. 26, 2015	Sep. 24, 2016	Sep. 26, 2015
Income Statement [Abstract]
Net sales	$ 212,786	$ 210,928	$ 630,507	$ 598,123
Cost of goods sold	129,641	130,134	384,604	367,866
Gross profit	83,145	80,794	245,903	230,257
Selling, general and administrative expenses	41,512	39,554	124,350	118,470
Income from operations	41,633	41,240	121,553	111,787
Interest expense, net	61	48	180	152
Income before income taxes	41,572	41,192	121,373	111,635
Provision for income taxes	14,877	15,132	44,025	41,093
Net income	$ 26,695	$ 26,060	$ 77,348	$ 70,542
Earnings Per Share:
Basic	$ 0.77	$ 0.73	$ 2.24	$ 1.99
Diluted	$ 0.77	$ 0.73	$ 2.23	$ 1.98
Weighted Average Shares Outstanding:
Basic	34,572	35,514	34,560	35,535
Diluted	34,672	35,575	34,626	35,611

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 24, 2016	Dec. 26, 2015
Current assets:
Cash and cash equivalents	$ 95,142	$ 78,659
Accounts receivable, less allowance for doubtful accounts and customer credits of $85,797 and $86,986	245,006	203,923
Inventories	168,245	193,725
Prepaids and other current assets	4,259	2,326
Total current assets	512,652	478,633
Property, plant and equipment, net	88,384	87,046
Goodwill and intangible assets, net	29,814	29,889
Deferred tax asset, net	7,581	7,557
Other assets	29,574	18,740
Total	668,005	621,865
Current liabilities:
Accounts payable	52,481	63,967
Accrued compensation	8,668	10,970
Other accrued liabilities	22,156	23,633
Total current liabilities	83,305	98,570
Other long-term liabilities	5,536	5,259
Commitments and contingencies
Shareholders' Equity:
Common stock, par value $0.01; authorized 50,000,000 shares; issued and outstanding 34,613,547 and 34,863,396 in 2016 and 2015, respectively	346	349
Additional paid-in capital	43,756	42,799
Retained earnings	535,062	474,888
Total shareholders' equity	579,164	518,036
Total	$ 668,005	$ 621,865

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 24, 2016	Dec. 26, 2015
Statement of Financial Position [Abstract]
Allowance for doubtful accounts and customer credits	$ 85,797	$ 86,986
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	34,613,547	34,863,396
Common stock, shares outstanding	34,613,547	34,863,396

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 24, 2016	Sep. 26, 2015
Cash Flows from Operating Activities:
Net income	$ 77,348	$ 70,542
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, amortization and accretion	13,890	11,739
Provision for doubtful accounts	1,146	85
Benefit for deferred income taxes	(24)	(2,462)
Provision for non-cash stock compensation	1,718	752
Changes in assets and liabilities:
Accounts receivable	(42,229)	6,693
Inventories	24,480	(21,727)
Prepaids and other current assets	(911)	(397)
Other assets	(4,639)	(4,652)
Accounts payable	(11,646)	377
Accrued compensation and other liabilities	(4,627)	(3,467)
Cash provided by operating activities	55,506	57,483
Cash Flows from Investing Activities:
Property, plant and equipment additions	(14,890)	(16,534)
Purchase of equity investment	(6,195)	(2,000)
Cash used in investing activities	(21,085)	(18,534)
Cash Flows from Financing Activities:
Proceeds from exercise of stock options		16
Other stock related activity	(109)	34
Purchase and cancellation of common stock	(17,829)	(7,334)
Cash used in financing activities	(17,938)	(7,284)
Net Increase in Cash and Cash Equivalents	16,483	31,665
Cash and Cash Equivalents, Beginning of Period	78,659	47,656
Cash and Cash Equivalents, End of Period	95,142	79,321
Supplemental Cash Flow Information
Cash paid for interest expense	200	211
Cash paid for income taxes	$ 46,121	$ 41,709

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Basis of Presentation

9 Months Ended

Sep. 24, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

1. Basis of Presentation

As used herein, unless the context otherwise requires, “Dorman”, the “Company”, “we”, “us”, or “our” refers to Dorman Products, Inc. and its subsidiaries. Our ticker symbol on the NASDAQ Global Select Market is “DORM”.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. for interim financial information and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). However, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the thirty-nine weeks ended September 24, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016. We may experience significant fluctuations from quarter to quarter in our results of operations due to the timing of orders placed by our customers. Generally, the second and third quarters have the highest level of net sales. The introduction of new products and product lines to customers may cause significant fluctuations from quarter to quarter. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 26, 2015.

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Sales of Accounts Receivable

9 Months Ended

Sep. 24, 2016

Receivables [Abstract]

Sales of Accounts Receivable

2. Sales of Accounts Receivable

We have entered into several customer sponsored programs administered by unrelated financial institutions that permit us to sell certain accounts receivable at discounted rates to the financial institutions. Transactions under these agreements were accounted for as sales of accounts receivable and were removed from our Consolidated Balance Sheet at the time of the sales transactions. Pursuant to these agreements, we sold $366.6 million and $391.9 million of accounts receivable during the thirty-nine weeks ended September 24, 2016 and September 26, 2015, respectively. If receivables had not been sold, $337.3 million and $335.9 million of additional accounts receivable would have been outstanding at September 24, 2016 and December 26, 2015, respectively, based on standard payment terms. Selling, general and administrative expenses for the thirty-nine weeks ended September 24, 2016 and September 26, 2015 included $6.3 million and $5.4 million, respectively, in financing costs associated with these accounts receivable sales programs.

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Inventories

9 Months Ended

Sep. 24, 2016

Inventory Disclosure [Abstract]

Inventories

3. Inventories

Inventories include the cost of material, freight, direct labor and overhead utilized in the processing of our products, and are stated at the lower of cost or market. Inventories were as follows:

(in thousands)	September 24, 2016		December 26, 2015
Bulk product	$	62,445	$	78,533
Finished product		102,331		112,012
Packaging materials		3,469		3,180
Total	$	168,245	$	193,725

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Stock-Based Compensation

9 Months Ended

Sep. 24, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

4. Stock-Based Compensation

Our 2008 Stock Option and Stock Incentive Plan (the “Plan”) was approved by our shareholders on May 20, 2009. Under the terms of the Plan, our Board of Directors may grant up to 2,000,000 shares of common stock in the form of shares of restricted stock, incentive stock options and non-qualified stock options or combinations thereof to officers, directors, employees, consultants and advisors. Grants under the Plan must be made within ten years of the date the Plan was approved and stock options are exercisable upon the terms set forth in the grant agreement approved by the Board of Directors, but in no event more than ten years from the date of grant. Restricted stock vests in accordance with the terms set forth in each restricted stock agreement. At September 24, 2016, 1,532,856 shares were available for grant under the Plan.

We grant restricted stock to certain employees and members of our Board of Directors. The value of restricted stock issued is based on the fair value of our common stock on the grant date. Vesting of restricted stock is conditional based on continued employment or service for a specified period and, in certain circumstances, the attainment of financial goals. We retain the restricted stock, and any dividends paid thereon, until the vesting conditions have been met. For awards with a service condition only, compensation cost related to the stock is recognized on a straight-line basis over the vesting period. For awards that have a service condition and require the attainment of financial goals, compensation cost related to the stock is recognized over the vesting period if it is probable that the financial goals will be attained. Compensation cost related to restricted stock was $1.6 million and $0.7 million for the thirty-nine weeks ended September 24, 2016 and September 26, 2015, respectively. The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Income. No cost was capitalized during the thirty-nine weeks ended September 24, 2016 or the thirty-nine weeks ended September 26, 2015.

The following table summarizes our restricted stock activity for the thirty-nine weeks ended September 24, 2016:

	Shares			Weighted Average Price
Balance at December 26, 2015		43,242		$	34.49
Granted		117,144		$	45.63
Vested		(23,822	)	$	30.27
Cancelled		(240	)	$	18.94
Balance at September 24, 2016		136,324		$	44.83

As of September 24, 2016, there was approximately $4.5 million of unrecognized compensation cost related to nonvested restricted stock, which is expected to be recognized over a weighted-average period of 2.9 years.

Cash flows resulting from tax deductions in excess of the tax effect of compensation cost recognized in the financial statements are classified as financing cash flows. The excess tax benefit generated from restricted shares which vested was $0.2 million and $0.3 million in the thirty-nine weeks ended September 24, 2016 and September 26, 2015, respectively, and was credited to additional paid-in capital.

We grant stock options to certain employees and members of the Board of Directors. We expense the grant-date fair value of stock options. Compensation cost is recognized on a straight-line basis over the vesting period for which related services are performed. The compensation cost charged against income for the thirty-nine weeks ended September 24, 2016 and September 26, 2015 was less than $0.1 million in each period. The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Income. No cost was capitalized during the thirty-nine weeks ended September 24, 2016 or the thirty-nine weeks ended September 26, 2015. We included a forfeiture assumption of 5.4% in the calculation of expense in each of the thirty-nine weeks ended September 24, 2016 and September 26, 2015.

We use the Black-Scholes option valuation model to estimate the fair value of stock options granted. Expected volatility and expected dividend yield are based on the actual historical experience of our common stock. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using historical option exercise data. The risk-free rate was based on a U.S. Treasury security with terms equal to the expected time of exercise as of the grant date. During the thirty-nine weeks ended September 24, 2016, we granted 61,084 stock options. There were no stock options granted in the thirty-nine weeks ended September 26, 2015.

The following table summarizes our stock option activity for the thirty-nine weeks ended September 24, 2016:

	Shares		Weighted Average Price		Weighted Average Remaining Term (In years)		Aggregate Intrinsic Value
Balance at December 26, 2015		40,000	$	6.86
Granted		61,084	$	44.36
Balance at September 24, 2016		101,084	$	29.52		3.3	$	3,737,400
Options exercisable at September 24, 2016		40,000	$	6.86		1.5	$	2,385,320

No stock options were exercised during the thirty-nine weeks ended September 24, 2016. As of September 24, 2016, there was $0.5 million of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 3.5 years.

There was no cash received or excess tax benefit generated from stock option exercises in the thirty-nine weeks ended September 24, 2016 or September 26, 2015.

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Earnings Per Share

9 Months Ended

Sep. 24, 2016

Earnings Per Share [Abstract]

Earnings Per Share

5. Earnings Per Share

Basic earnings per share is calculated by dividing our net income by the weighted average number of common shares outstanding during the period, excluding nonvested restricted stock which is considered to be contingently issuable. To calculate diluted earnings per share, common share equivalents are added to the weighted average number of common shares outstanding. Common share equivalents are calculated using the treasury stock method and are computed based on outstanding stock-based awards. Stock-based awards of approximately 16,000 shares and 7,000 shares were excluded from the calculation of diluted earnings per share as of September 24, 2016 and September 26, 2015, respectively, as their effect would have been anti-dilutive.

The following table sets forth the computation of basic earnings per share and diluted earnings per share:

	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands, except per share data)	September 24, 2016		September 26, 2015		September 24, 2016		September 26, 2015
Numerator
Net income	$	26,695	$	26,060	$	77,348	$	70,542
Denominator:
Weighted average basic shares outstanding		34,572		35,514		34,560		35,535
Effect of stock-based compensation awards		100		61		66		76
Weighted average diluted shares outstanding		34,672		35,575		34,626		35,611
Earnings Per Share:
Basic	$	0.77	$	0.73	$	2.24	$	1.99
Diluted	$	0.77	$	0.73	$	2.23	$	1.98

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Common Stock Repurchases

9 Months Ended

Sep. 24, 2016

Text Block [Abstract]

Common Stock Repurchases

6. Common Stock Repurchases

We periodically repurchase, at the then current market price, and cancel common stock issued to the Dorman Products, Inc. 401(k) Retirement Plan and Trust (the “401(k) Plan”). Shares are generally purchased from the 401(k) Plan when participants sell units as permitted by the 401(k) Plan or elect to leave the 401(k) Plan upon retirement, termination or other reasons. For the thirty-nine weeks ended September 24, 2016, we repurchased and cancelled 31,690 shares of common stock for $1.7 million at an average price of $54.85 per share. During the fifty-two weeks ended December 26, 2015, we repurchased and cancelled 33,430 shares of common stock for $1.46 million at an average price of $48.14 per share.

Our Board of Directors authorized a share repurchase program of up to $150 million through December 31, 2016. Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion. The share repurchase program does not obligate us to acquire any specific number of shares. For the thirty-nine weeks ended September 24, 2016, we repurchased and cancelled 329,666 shares of common stock for $16.1 million at an average price of $48.81 per share under this program. For the fifty-two weeks ended December 26, 2015, we repurchased and cancelled 747,700 shares of common stock for $35.7 million at an average price of $47.77 per share under this program. As of September 24, 2016, we have $57.8 million remaining under this program to repurchase shares.

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Related-Party Transactions

9 Months Ended

Sep. 24, 2016

Related Party Transactions [Abstract]

Related-Party Transactions

7. Related-Party Transactions

We have a non-cancelable operating lease for our primary operating facility with a partnership in which Steven L. Berman, our Executive Chairman, and his family members, are partners. Based upon the terms of the lease, payments will be $1.6 million in fiscal 2016 and were $1.6 million in fiscal 2015. The lease with the partnership expires December 31, 2017. In the opinion of our Audit Committee, the terms and rates of this lease are no less favorable than those which could have been obtained from an unaffiliated party when the lease was renewed in fiscal 2012.

We are a partner in a joint venture with one of our suppliers and own a minority interest in two other suppliers, including Powertrain Industries, Inc. (“PTI”) whom we acquired a 40% minority equity interest on July 19, 2016 for $6.2 million. PTI is a leading manufacturer of driveshafts and driveline related products and is headquartered in Garden Grove, CA with four driveshaft manufacturing facilities located regionally throughout the United States. At any time, we can elect to purchase all of remaining capital stock of PTI. Also, between July 2019 and July 2021, the majority shareholders may require us to purchase all of the remaining capital stock of PTI. In either case, the purchase price of the shares will be determined using an earnings multiple specified in the PTI purchase agreement.

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Income Taxes

9 Months Ended

Sep. 24, 2016

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

At September 24, 2016, we had $1.9 million of net unrecognized tax benefits, $1.4 million of which would affect our effective tax rate if recognized. We recognize interest and penalties related to uncertain tax positions in income tax expense. As of September 24, 2016, we had approximately $0.2 million of accrued interest related to uncertain tax positions.

We file income tax returns in the United States, China and Mexico. All years before 2013 are closed for federal tax purposes. We are currently under examination by one state tax authority for years 2011-2012. Tax years before 2011 are closed for the remaining states in which we file. We filed tax returns in Sweden through 2012 and all years prior to 2009 are closed. It is reasonably possible that audit settlements, the conclusion of current examinations or the expiration of the statute of limitations could impact the Company’s unrecognized tax benefits.

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Fair Value Disclosures

9 Months Ended

Sep. 24, 2016

Fair Value Disclosures [Abstract]

Fair Value Disclosures

9. Fair Value Disclosures

The carrying value of financial instruments such as cash, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair value based on the short-term nature of these instruments.

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New and Recently Adopted Accounting Pronouncements

9 Months Ended

Sep. 24, 2016

Accounting Changes and Error Corrections [Abstract]

New and Recently Adopted Accounting Pronouncements

10. New and Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. As originally issued, the new standard would have been effective for annual periods beginning after December 15, 2016. The FASB has amended the standard to be effective for annual periods beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our consolidated financial statements and related disclosures.

In July 2015, the FASB issued ASU No. 2015-11, Inventory: Simplifying the Measurement of Inventory, which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. The amendments in this guidance do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out or average cost. Within the scope of this new guidance, an entity should measure inventory at the lower of cost and net realizable value; where, net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The new guidance is effective for annual periods beginning after December 15, 2016, with early adoption permitted. The new guidance must be applied on a prospective basis. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces existing lease guidance. The ASU is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. The new guidance is effective for annual periods beginning after December 15, 2018, with early application permitted. The new standard is required to be applied with a modified retrospective approach. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Improvement to Employee Share-Based Payment Accounting, which amends the current guidance related to stock compensation. The updated guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The update to the standard is effective for annual periods beginning after December 15, 2016, with early application permitted. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies and provides guidance on eight cash flow classification issues and is intended to reduce existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

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New and Recently Adopted Accounting Pronouncements (Policies)

9 Months Ended

Sep. 24, 2016

Accounting Changes and Error Corrections [Abstract]

New and Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. As originally issued, the new standard would have been effective for annual periods beginning after December 15, 2016. The FASB has amended the standard to be effective for annual periods beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our consolidated financial statements and related disclosures.

In July 2015, the FASB issued ASU No. 2015-11, Inventory: Simplifying the Measurement of Inventory, which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. The amendments in this guidance do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out or average cost. Within the scope of this new guidance, an entity should measure inventory at the lower of cost and net realizable value; where, net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The new guidance is effective for annual periods beginning after December 15, 2016, with early adoption permitted. The new guidance must be applied on a prospective basis. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces existing lease guidance. The ASU is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. The new guidance is effective for annual periods beginning after December 15, 2018, with early application permitted. The new standard is required to be applied with a modified retrospective approach. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Improvement to Employee Share-Based Payment Accounting, which amends the current guidance related to stock compensation. The updated guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The update to the standard is effective for annual periods beginning after December 15, 2016, with early application permitted. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies and provides guidance on eight cash flow classification issues and is intended to reduce existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

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Inventories (Tables)

9 Months Ended

Sep. 24, 2016

Inventory Disclosure [Abstract]

Inventories

Inventories include the cost of material, freight, direct labor and overhead utilized in the processing of our products, and are stated at the lower of cost or market. Inventories were as follows:

(in thousands)	September 24, 2016		December 26, 2015
Bulk product	$	62,445	$	78,533
Finished product		102,331		112,012
Packaging materials		3,469		3,180
Total	$	168,245	$	193,725

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 24, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Restricted Stock Activity

The following table summarizes our restricted stock activity for the thirty-nine weeks ended September 24, 2016:

	Shares			Weighted Average Price
Balance at December 26, 2015		43,242		$	34.49
Granted		117,144		$	45.63
Vested		(23,822	)	$	30.27
Cancelled		(240	)	$	18.94
Balance at September 24, 2016		136,324		$	44.83

Summary of Stock Option Activity

The following table summarizes our stock option activity for the thirty-nine weeks ended September 24, 2016:

	Shares		Weighted Average Price		Weighted Average Remaining Term (In years)		Aggregate Intrinsic Value
Balance at December 26, 2015		40,000	$	6.86
Granted		61,084	$	44.36
Balance at September 24, 2016		101,084	$	29.52		3.3	$	3,737,400
Options exercisable at September 24, 2016		40,000	$	6.86		1.5	$	2,385,320

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Earnings Per Share (Tables)

9 Months Ended

Sep. 24, 2016

Earnings Per Share [Abstract]

Schedule of Computation of Basic Earnings per Share and Diluted Earnings per Share

The following table sets forth the computation of basic earnings per share and diluted earnings per share:

	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands, except per share data)	September 24, 2016		September 26, 2015		September 24, 2016		September 26, 2015
Numerator
Net income	$	26,695	$	26,060	$	77,348	$	70,542
Denominator:
Weighted average basic shares outstanding		34,572		35,514		34,560		35,535
Effect of stock-based compensation awards		100		61		66		76
Weighted average diluted shares outstanding		34,672		35,575		34,626		35,611
Earnings Per Share:
Basic	$	0.77	$	0.73	$	2.24	$	1.99
Diluted	$	0.77	$	0.73	$	2.23	$	1.98

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Sales of Accounts Receivable - Additional Information (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 24, 2016	Sep. 26, 2015	Dec. 26, 2015
Receivables [Abstract]
Sale of accounts receivable	$ 366.6	$ 391.9
Additional accounts receivable outstanding if receivables had not been sold	337.3		$ 335.9
Factoring costs associated with the sales of accounts receivable	$ 6.3	$ 5.4

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Inventories - Inventories (Detail) - USD ($) $ in Thousands	Sep. 24, 2016	Dec. 26, 2015
Inventory Disclosure [Abstract]
Bulk product	$ 62,445	$ 78,533
Finished product	102,331	112,012
Packaging materials	3,469	3,180
Total	$ 168,245	$ 193,725

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Stock-Based Compensation - Additional Information (Detail) - USD ($)	9 Months Ended
	Sep. 24, 2016	Sep. 26, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Authorized number of common stock shares for grant	2,000,000
Date of plan approval	May 20, 2009
Compensation cost related to restricted stock	$ 1,600,000	$ 700,000
Cash received or excess tax benefit from stock option exercise	0	0
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost related to stock options	$ 100,000	100,000
2008 Stock Option and Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum grant period from date of plan approval	10 years
Shares available for grant under the plan	1,532,856
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Capitalized compensation cost	$ 0	0
Unrecognized compensation cost related to non-vested stock options	$ 4,500,000
Unrecognized compensation cost related to non-vested stock options, weighted-average period	2 years 10 months 24 days
Tax benefit generated from compensation cost and credited to additional paid-in capital	$ 200,000	300,000
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Capitalized compensation cost	0	$ 0
Unrecognized compensation cost related to non-vested stock options	$ 500,000
Unrecognized compensation cost related to non-vested stock options, weighted-average period	3 years 6 months
Percentage of forfeiture assumption in calculation of compensation cost	5.40%	5.40%
Stock options granted	61,084	0
Stock options exercised	0

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Stock-Based Compensation - Summary of Restricted Stock Activity (Detail)	9 Months Ended
	Sep. 24, 2016 $ / shares shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Beginning Balance, Shares | shares	43,242
Granted, Shares | shares	117,144
Vested, Shares | shares	(23,822)
Cancelled, Shares | shares	(240)
Ending Balance, Shares | shares	136,324
Beginning Balance, Weighted Average Price | $ / shares	$ 34.49
Granted, Weighted Average Price | $ / shares	45.63
Vested, Weighted Average Price | $ / shares	30.27
Cancelled, Weighted Average Price | $ / shares	18.94
Ending Balance, Weighted Average Price | $ / shares	$ 44.83

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Stock-Based Compensation - Summary of Stock Option Activity (Detail)	9 Months Ended
	Sep. 24, 2016 USD ($) $ / shares shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Beginning Balance, Shares | shares	40,000
Granted, Shares | shares	61,084
Ending Balance, Shares | shares	101,084
Options Exercisable, Shares | shares	40,000
Beginning Balance, Weighted Average Price | $ / shares	$ 6.86
Granted, Weighted Average Price | $ / shares	44.36
Ending Balance, Weighted Average Price | $ / shares	29.52
Options Exercisable, Weighted Average Price | $ / shares	$ 6.86
Ending Balance, Weighted Average Remaining Term (In years)	3 years 3 months 18 days
Options Exercisable, Weighted Average Remaining Term (In years)	1 year 6 months
Ending Balance, Aggregate Intrinsic Value | $	$ 3,737,400
Options Exercisable, Aggregate Intrinsic Value | $	$ 2,385,320

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Earnings Per Share - Additional Information (Detail) - shares	9 Months Ended
	Sep. 24, 2016	Sep. 26, 2015
Earnings Per Share [Abstract]
Stock-based awards considered as anti-dilutive	16,000	7,000

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Earnings Per Share - Schedule of Computation of Basic Earnings per Share and Diluted Earnings per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 24, 2016	Sep. 26, 2015	Sep. 24, 2016	Sep. 26, 2015
Numerator
Net income	$ 26,695	$ 26,060	$ 77,348	$ 70,542
Denominator:
Weighted average basic shares outstanding	34,572	35,514	34,560	35,535
Effect of stock-based compensation awards	100	61	66	76
Weighted average diluted shares outstanding	34,672	35,575	34,626	35,611
Earnings Per Share:
Basic	$ 0.77	$ 0.73	$ 2.24	$ 1.99
Diluted	$ 0.77	$ 0.73	$ 2.23	$ 1.98

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Common Stock Repurchases - Additional Information (Detail) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 24, 2016	Dec. 26, 2015
Four Zero One K Plan [Member]
Shares Repurchases [Line Items]
Repurchase and cancellation of shares	31,690	33,430
Common stock repurchased, average price	$ 54.85	$ 48.14
Repurchase and cancellation of shares, value	$ 1,700,000	$ 1,460,000
Share Repurchase Program [Member]
Shares Repurchases [Line Items]
Repurchase and cancellation of shares	329,666	747,700
Common stock repurchased, average price	$ 48.81	$ 47.77
Repurchase and cancellation of shares, value	$ 16,100,000	$ 35,700,000
Share repurchase program shares authorized to be repurchased	$ 150,000,000
Share repurchase program expiration date	Dec. 31, 2016
Share repurchase program, remaining authorized amount	$ 57,800,000

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Related Party Transactions - Additional Information (Detail) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 24, 2016	Dec. 31, 2016	Dec. 26, 2015	Jul. 19, 2016
Related Party Transaction [Line Items]
Total annual rental payments to the partnership under the lease arrangement			$ 1.6
Lease expiration date	Dec. 31, 2017
Powertrain Industries, Inc. [Member] | Equity Method Investee [Member]
Related Party Transaction [Line Items]
Equity method investment, ownership percentage				40.00%
Equity method investment, cost				$ 6.2
Scenario, Forecast [Member]
Related Party Transaction [Line Items]
Total annual rental payments to the partnership under the lease arrangement		$ 1.6

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Income Taxes - Additional Information (Detail) $ in Millions	9 Months Ended
	Sep. 24, 2016 USD ($)
Income Tax Contingency [Line Items]
Net unrecognized tax benefits	$ 1.9
Unrecognized tax benefits which would impact effective tax rate if recognized	1.4
Accrued interest related to uncertain tax positions	$ 0.2
Earliest Tax Year [Member] | State Tax Authority [Member]
Income Tax Contingency [Line Items]
Income tax years under examination	2011
Latest Tax Year [Member] | State Tax Authority [Member]
Income Tax Contingency [Line Items]
Income tax years under examination	2012