Dorman Products, Inc.DORM
Dorman Products, Inc. Income Taxes Disclosure
Income Taxes
The components of the provision for income taxes are as follows:
| For the Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 52,419 | $ | 56,879 | $ | 34,600 | |||||||||||
| State | 11,094 | 17,907 | 5,602 | ||||||||||||||
| Foreign | 1,586 | 2,300 | 2,002 | ||||||||||||||
| 65,099 | 77,086 | 42,204 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 7,755 | (7,407) | (1,936) | ||||||||||||||
| State | (850) | (2,618) | (338) | ||||||||||||||
| Foreign | (753) | (813) | (686) | ||||||||||||||
| 6,152 | (10,838) | (2,960) | |||||||||||||||
| Provision for income taxes | $ | 71,251 | $ | 66,248 | $ | 39,244 | |||||||||||
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:
| For the Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| (in thousands, except percentage data) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| $ | 57,843 | 21.0 | % | $ | 53,813 | 21.0 | % | $ | 35,386 | 21.0 | % | ||||||||||||||||||||||||
State and local income tax, net of federal income tax effect (1) | 7,159 | 2.6 | % | 6,219 | 2.4 | % | 3,255 | 1.9 | % | ||||||||||||||||||||||||||
| Foreign tax effects | 1,298 | 0.5 | % | 311 | 0.1 | % | 550 | 0.3 | % | ||||||||||||||||||||||||||
| Effect of cross-border tax laws | (979) | (0.4) | % | (891) | (0.3) | % | (380) | (0.2) | % | ||||||||||||||||||||||||||
| Tax credits | (1,450) | (0.5) | % | (1,584) | (0.6) | % | (1,304) | (0.8) | % | ||||||||||||||||||||||||||
| Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
| Goodwill impairment charge | 5,845 | 2.1 | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other | 1,099 | 0.4 | % | 813 | 0.3 | % | 825 | 0.5 | % | ||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | 741 | 0.3 | % | 7,497 | 2.9 | % | 598 | 0.4 | % | ||||||||||||||||||||||||||
| Other adjustments | (305) | (0.1) | % | 70 | 0.1 | % | 314 | 0.2 | % | ||||||||||||||||||||||||||
| Effective tax rate | $ | 71,251 | 25.9 | % | $ | 66,248 | 25.9 | % | $ | 39,244 | 23.3 | % | |||||||||||||||||||||||
(1) The state and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California, Pennsylvania and Tennessee.
The amounts of cash income taxes paid were as follows:
| (in thousands) | For the Year Ended December 31, | ||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 56,700 | $ | 50,195 | $ | 27,022 | |||||||||||
| State and local | 10,064 | 4,859 | 6,926 | ||||||||||||||
| Foreign | 1,868 | 1,651 | 1,517 | ||||||||||||||
| Income taxes paid, net of amounts refunded | $ | 68,632 | $ | 56,705 | $ | 35,465 | |||||||||||
No state and local or foreign jurisdictions exceeded 5 percent of total income taxes paid (net of refunds) in any period presented.
At December 31, 2025, we had $10.5 million of unrecognized tax benefits, all of which would affect our effective tax rate if recognized.
The following table summarizes the change in unrecognized tax benefits for the three years ended December 31:
| For the Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of year | $ | 10,313 | $ | 4,539 | $ | 3,856 | |||||||||||
| Reductions due to lapses in statutes of limitations | (211) | (174) | (716) | ||||||||||||||
| Reductions due to tax positions settled | — | (180) | — | ||||||||||||||
| Additions related to positions taken during a prior period | — | — | — | ||||||||||||||
| Reductions due to reversals of prior year positions | — | (1,125) | — | ||||||||||||||
| Additions based on tax positions taken during the current period | 368 | 7,253 | 1,399 | ||||||||||||||
| Balance at end of year | 10,470 | 10,313 | 4,539 | ||||||||||||||
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. The total amount of interest and penalties related to unrecognized tax benefits recorded within tax expense was $0.7 million and $3.1 million for the years ended December 31, 2025, and 2024, respectively. As of December 31, 2025, accrued interest and penalties related to unrecognized tax benefits were $4.2 million.
Deferred income taxes result from timing differences in the recognition of revenue and expense between tax and financial statement purposes. The sources of temporary differences are as follows:
| December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Assets: | |||||||||||
| Inventories | $ | 20,327 | $ | 15,111 | |||||||
| Accounts receivable | 23,146 | 24,723 | |||||||||
| Operating lease liability | 30,860 | 31,850 | |||||||||
| Accrued expenses | 11,329 | 10,932 | |||||||||
| Capitalized research and development expenses | 5,203 | 16,840 | |||||||||
| Net operating losses | 384 | 295 | |||||||||
| Foreign tax credits | 469 | 469 | |||||||||
| State tax credits | 13 | 427 | |||||||||
| Capital loss carryforward | 475 | 474 | |||||||||
| Total deferred tax assets | 92,206 | 101,121 | |||||||||
| Valuation allowance | (1,076) | (1,429) | |||||||||
| Net deferred tax assets | 91,130 | 99,692 | |||||||||
| Liabilities: | |||||||||||
| Depreciation | 14,166 | 12,938 | |||||||||
| Goodwill and intangible assets | 50,814 | 52,564 | |||||||||
| Operating lease right of use asset | 28,681 | 30,146 | |||||||||
| Other | 1,446 | 1,958 | |||||||||
| Gross deferred tax liabilities | 95,107 | 97,606 | |||||||||
| Net deferred tax assets (liabilities) | $ | (3,977) | $ | 2,086 | |||||||
A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assesses all positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carryback and carryforward periods, and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of the deferred tax asset. Management has determined it was necessary to establish a valuation allowance against the foreign tax credits, various state tax credits, and a capital loss carryforward.
Based on our history of taxable income and our projection of future earnings, we believe that it is more likely than not that sufficient taxable income will be generated in the foreseeable future to realize the remaining deferred tax assets.
During 2025, we decreased the valuation allowance against the deferred tax assets noted above by an immaterial amount.
We file income tax returns in the United States, Canada, China, India, and Mexico. The statute of limitations for tax years before 2022 is closed for U.S. federal income tax purposes. The statute of limitations for tax years before 2017 is closed for the states in which we file. The statute of limitations for tax years before 2022 is closed for income tax purposes in Canada, China, and India. The statute of limitations for tax years before 2020 is closed for income tax purposes in Mexico.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 22, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 27, 2017 | |
| 2015 | Feb 23, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.