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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31,September 29, 2018

OR

For the transition period from                 to                 

Commission file number: 0-18914

Dorman Products, Inc.

(Exact name of registrant as specified in its charter)

(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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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 April 30,October 26, 2018, the registrant had 33,331,37733,046,291 shares of common stock, par value $0.01 per share, outstanding.

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DORMAN PRODUCTS, INC. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT ON FORM 10-Q

March 31,September 29, 2018

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PART I. FINANCIALFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

See accompanying Notes to Consolidated Financial Statements

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DORMAN PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

See accompanying Notes to Consolidated Financial Statements

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DORMAN PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

See accompanying Notes to Consolidated Financial Statements

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DORMAN PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

See accompanying Notes to Consolidated Financial Statements 

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DORMAN PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THIRTEENTHIRTY-NINE WEEKS ENDED MARCH 31,SEPTEMBER 29, 2018 AND APRIL 1,SEPTEMBER 30, 2017

(UNAUDITED)

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 thirteenthirty-nine weeks ended March 31,September 29, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2018. We may experience significant fluctuations from quarter to quarter in our results of operations due to the timing of orders placed by our customers. 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 30, 2017.

On August 31, 2018, we acquired 100% of the outstanding stock of Flight Systems Automotive Group LLC (“Flight Systems” or “Flight”), a privately-held manufacturer and remanufacturer of complex automotive electronics and diesel fuel system components, based in Lewisberry, Pennsylvania. We paid $27.5 million in cash which is subject to customary purchase price adjustments. In connection with this acquisition, we preliminary recorded $13.3 million in goodwill and $14.2 million of other net assets, primarily $2.0 million of accounts receivables, $11.6 million of inventory, and $0.6 million of net other assets and liabilities. We expect that, upon completion of our valuation, we will recognize intangible assets with an offsetting reduction in the preliminary goodwill that was recognized as of September 29, 2018. The purchase price allocation is preliminary and subject to adjustment as we complete our assessment of the fair values of acquired assets and assumed liabilities. We believe that the goodwill and intangible assets resulting from the acquisition will be deductible for tax purposes. The financial results of the acquisition have been included in the Consolidated Financial Statements since the date of acquisition. Flight generated $1.7 million of net sales and an immaterial amount of net income since the date of acquisition. We believe complex electronics and diesel fuel system components represent important growth opportunities for us and Flight’s product portfolio delivers valuable alternatives to aftermarket professionals.

On October 26, 2017, we acquired 100% of the outstanding stock of MAS Automotive Distribution Inc. (“MAS Industries” or “MAS”), a privately-held manufacturer of premium chassis and control arms based in Montreal, Canada. The purchase price was $67.3$67.2 million net of $3.3 million of cash acquired and including contingent consideration at fair value and other purchase price adjustments.  

We believe MAS is complementary to our business and growth strategy. We see opportunities to leverage MAS’ existing presence in the automotive aftermarket, as well as our product development capabilities and financial resources to accelerate the growth of MAS’ premium chassis and control arm products.

We have included the results of MAS in our Consolidated Financial Statements since the acquisition date of October 26, 2017. The Consolidated Statement of Operations for the thirteenthirty-nine weeks ended March 31,September 29, 2018 includes $10.2$30.0 million of net sales and an immaterial amount of net income related to MAS. The Consolidated Balance Sheets as of March 31,September 29, 2018 and December 30, 2017 reflects the acquisition of MAS Industries, effective October 26, 2017.

The following table summarizes the preliminary fair value of the total consideration at October 26, 2017:related to MAS:

Included in the table above is $8.0 million of estimated contingent payments which represents the fair value of the estimated payments which will become due if certain sales thresholds are achieved through December 2020. The fair value of the contingent cash consideration was estimated by using an option pricing model framework, which represents our own assumptions and data, and is based on our best available information. As of March 31,September 29, 2018, we had $8.1$8.2 million recorded which includes $0.1$0.2 million of accretion which was included in Selling, generalGeneral and administrativeAdministrative expenses for the thirteenthirty-nine weeks ended March 31,September 29, 2018, related to this payment. The maximum contingent payment would be $11.7 million. Also excluded fromAdditionally, during the table above arethirty-nine weeks ended September 29, 2018, we finalized working capital and other

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purchase price adjustments which will be finalized in fiscal 2018 based on the MAS standalone audited 2017 financial statements.statements, resulting in a payment to the former shareholder of $1.5 million. This amount had previously been accrued on our Consolidated Balance Sheet.

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The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the assets acquired and liabilities assumed were recorded at fair value, with the remaining purchase price recorded as goodwill. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of October 26, 2017 (in thousands):2017:

The estimated fair value of theOur measurement period adjustments for MAS assets acquired and liabilities assumed are provisionalwere complete as of March 31, 2018 and are based on information that is currently available.  Additional information about conditions that existed as of the date of acquisition are being gathered to finalize these provisional measurements, particularly with respect to net working capital, contingent liabilities, deferred income taxes and income taxes payable.  Accordingly, the measurement of the MAS assets acquired and liabilities assumed may change significantly upon completion of the purchase price allocation, both of which are expected to occur no later than one year from the acquisition date.September 29, 2018.  

The valuation of the intangible assets acquired and related amortization periods are as follows:

The fair values of the Customer relationshipsRelationships and Tradenames were estimated using a discounted present value income approach.  Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, we used cash flows discounted at rates ranging from 15% to 17%, which were considered appropriate given the inherent risk associated with each type of asset. We believe that the level and timing of cash flows appropriately reflect market participant assumptions.

The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to existing automotive aftermarket businesses, the assembled workforce of MAS and other factors. The goodwill is expected to be deductible for tax purposes.

Pro Forma Financial Information (Unaudited)

The unaudited pro forma information for the periods set forth below give effect to the MAS acquisition as if it occurred as of December 27, 2015, the start of our 2016 fiscal year. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of the operations that actually would have been achieved had the acquisition been consummated as of that time:

The unaudited pro forma net income for the thirteen week period ending April 1,thirty-nine weeks ended September 30, 2017 was adjusted to include amortization of intangible assets, accretion for contingent consideration liabilities and to exclude financing costs of MAS which we do not believe would have occurred.

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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 $151.0$438.6 million and $146.0$442.5 million of accounts receivable during the thirteenthirty-nine weeks ended March 31,September 29, 2018 and April 1,September 30, 2017, respectively. If receivables had not been sold, $385.3$333.6 million and $380.8 million of additional accounts receivable would have been outstanding at March 31,September 29, 2018 and December 30, 2017, respectively, based on standard payment terms. Selling, general and administrative expenses for the thirteenthirty-nine weeks ended March 31,September 29, 2018 and April 1,September 30, 2017 included $3.5$10.0 million and $2.5$8.4 million, respectively, in financing costs associated with these accounts receivable sales programs.

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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 net realizable value. Inventories were as follows:

Goodwill

Goodwill included the following:

Intangible Assets

Intangible assets subject to amortization, included the following:

Amortization expense was $0.5$1.6 million and less than $0.1 million for the thirteenthirty-nine weeks ended March 31,September 29, 2018 and April 1,September 30, 2017, respectively.

The FASB issued an accounting standard update in May 2014 regarding the accounting for and disclosure of revenue. Specifically, the update outlined a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers, which will beis common to both U.S. GAAP and International Financial Reporting Standards.  

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As part of our impact assessment of the implementation of the new revenue recognition guidance, we reviewed our historical accounting policies and practices to identify potential differences with the requirements of the new revenue recognition standard, as it related to our contracts and sales arrangements, as well as technical considerations for our future transaction accounting, financial reporting, and disclosure requirements.

We adopted the guidance in the first quarter of 2018, as required, electing to use a modified retrospective adoption approach.  Comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.  In addition, we elected to apply certain of the permitted practical expedients within the revenue recognition guidance and make certain accounting policy elections including those related to significant financing components, sales taxes and shipping and handling activities.  Adoption of the revenue recognition standard did not have a material impact on our reported earnings, cash flows, or balance sheet, however, adoption did increase the amount and level of disclosures concerning our net sales.  The impact of adoption of the new revenue recognition guidance and the impact of the new revenue recognition guidance as compared to the historical revenue recognition guidance was immaterial for the three months ended March 31, 2018.

Business Description

We are a supplier of replacement parts and fasteners for passenger cars, light trucks, and heavy duty trucks in the automotive aftermarket.  We group our products into four major classes: power-train, automotive body, chassis, and hardware.  Our products are sold primarily in the United States through automotive aftermarket retailers, national and regional local warehouse distributors and specialty markets, and salvage yards.  We also distribute automotive replacement parts internationally, with sales primarily into Canada, Mexico, Europe, the Middle East, and Australia.  

We warrant our products against certain defects in material and workmanship when used as designed on the vehicle on which it was originally installed.  We offer a limited lifetime warranty on most of our products.  Our warranty limits the customer’s remedy to the repair or replacement of the part that is defective.

Our primary source of revenue is from contracts with and purchase orders from customers. Revenue is recognized from product sales when goods are shipped, title and risk of loss and control have been transferred to the customer, and collection is reasonably assured. We estimate the transaction price at the inception of a contract or upon fulfilling a purchase order, including any variable consideration, and will update the estimate for changes in circumstances. We utilize the most likely amount method consistently to estimate the effect of uncertainty on the amount of variable consideration to which we would be entitled. The most likely amount method considers the single most likely amount from a range of possible consideration amounts. This method is utilized for all of our variable consideration.  

We record estimates for cash discounts, product returns, promotional rebates, core return deposits and other discounts in the period the related product revenue is recognized (“Customer Credits”). The provision for Customer Credits is recorded as a reduction from gross sales and reserves for Customer Credits are shown as a reduction of accounts receivable. Accrued customer rebates which we expect to settle in cash are classified as other accrued liabilities. Actual Customer Credits have not differed materially from estimated amounts for each period presented.  Amounts billed to customers for shipping and handling are included in net sales. Costs associated with shipping and handling are included in cost of goods sold. We have concluded that our estimates of variable consideration are not constrained according to the definition of the new standard.  

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All of our revenue was recognized under the point of time approach in accordance with the revenue standard during the thirteenthirty-nine weeks ended March 31,September 29, 2018 and April 1,September 30, 2017, respectively. Also, we do not have significant financing arrangements with our customers, as our credit terms are all less than one year. Lastly, we do not receive noncash consideration (such as materials or equipment) from our customers to facilitate the fulfillment of our contracts.  

Five-step model

We apply the FASB’s guidance on revenue recognition, which requires us to recognize the amount of revenue and consideration which we expect to receive in exchange for goods or services transferred to our customers. To do this, we apply the five-step model prescribed by the FASB, which requires us to: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, we satisfy a performance obligation.  A summary of our application of the five-step model is as follows:

For certain customers, we may also enter into a sales agreement which outlines pricing considerations as well as the framework of terms and conditions which apply to future purchase orders for that customer.  In these situations, our contract with the customer is both the sales agreement as well as the specific customer purchase order.  As our contract with a customer is typically for a single transaction or customer purchase order, the duration of the contract is typically one year or less.  As a result, we have elected to apply certain practical expedients and omit certain disclosures of remaining performance obligations for contracts which have an initial term of one year or less as permitted by the FASB.

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Practical Expedients and Accounting Policy Elections

In accordance with the guidance on revenue recognition and as permitted by the FASB, we have elected to use certain practical expedients and policy elections.

- We have elected to not adjust the promised amount of consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when we transfer a promised good or service to the customer and when the customer pays for that good or service will be one year or less.  

- We have elected to expense costs to obtain a contract as incurred when the expected period of benefit, and therefore the amortization period, is one year or less.

- We have elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity for a customer, including sales, use, value-added, excise and various other taxes.

- We have elected to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfilment activity rather than a separate performance obligation.  

Contract Assets and Liabilities  

We recognize a receivable or contract asset when we perform a service or transfer a good in advance of receiving consideration.  

- A receivable is recorded when our right to consideration is unconditional and only the passage of time is required before payment of that consideration is due.

- A contract asset is recorded when our right to consideration in exchange for goodgoods or services that we have transferred to a customer is conditional on something other than the passage of time. We did not have any contract assets recorded as of March 31,September 29, 2018 or December 30, 2017.

We recognize a contract liability when we receive consideration, or if we have the unconditional right to receive consideration, in advance of satisfying the performance obligation. A contract liability is our obligation to transfer goods or services to a customer for which we have received consideration, or an amount of consideration is due from the customer. We did not have any contract liabilities recorded as of March 31,September 29, 2018 or December 30, 2017.

Disaggregated Revenue

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The following tables present our disaggregated net sales by Type of Major Good / Product Line, and Geography.  

Our 2008On May 16, 2018, our shareholders approved our 2018 Stock Option and Stock Incentive Plan (the “2018 Plan” or the “Plan”) was approved by, which supersedes our shareholders on May 20, 2009.2008 Stock Option and Stock Incentive Plan. All future stock compensation grants will be issued under the 2018 Plan. Under the terms of the Plan, our Board of Directors may grant up to 2,000,0001,200,000 shares of common stock in the form of shares of restricted stock, incentiverestricted stock optionsunits, stock appreciation rights and non-qualified stock options or combinations thereof to officers, directors, employees, important consultants and advisors. Grants under the Plan must be made within ten years of the date the Plan was approved and stockapproved. Stock options are exercisable upon the terms set forth in theeach grant agreement approved by the Board of Directors, but in no event more than ten years from the date of grant. Restricted stock vestsand restricted stock units vest in accordance with the terms set forth in each restricted stock agreement.applicable award agreement approved by our Board of Directors. At March 31,September 29, 2018, 1,271,1511,184,305 shares were available for grant under the 2018 Plan.

Restricted Stock

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

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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 calculated based upon the probable outcome of the performance conditions on the date of grant and is recognized over the performance period. Compensation cost related to restricted stock was $ 0.7$2.5 million and $ 0.6$2.1 million for the thirteenthirty-nine weeks ended March 31,September 29, 2018 and April 1,September 30, 2017, respectively.

The following table summarizes our restricted stock activity for the thirteenthirty-nine weeks ended March 31,September 29, 2018:

As of March 31,September 29, 2018, there was $ 6.4$5.2 million of unrecognized compensation cost related to nonvested restricted stock, which is expected to be recognized over a weighted-average period of approximately 2.72.3 years.

Cash flows resulting from tax deductions in excess of the tax effect of compensation cost recognized in the financial statements are classified as operating cash flows. The excess tax benefit generated from restricted shares which vested in the thirteenthirty-nine weeks ended March 31,September 29, 2018 was less than $0.1 million and was credited to income tax expense. The excess tax benefit generated from restricted shares which vested in the thirteenthirty-nine weeks ended April 1,September 30, 2017 was $0.2$0.3 million and was credited to income tax expense.

Stock Options

We grant stock options to certain employees and members of our Board of Directors.employees. 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 was $0.1$0.4 million and $0.2 million for the thirteenthirty-nine weeks ended March 31,September 29, 2018 and April 1,September 30, 2017, respectively. The compensation costs were classified as Selling, general and administrative expense in the Consolidated Statements of Income.  No cost was capitalized during the thirteenthirty-nine weeks ended March 31,September 29, 2018 and April 1,September 30, 2017.

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

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security with terms equal to the expected time of exercise as of the grant date. During the thirteenthirty-nine weeks ended March 31,September 29, 2018 and April 1,September 30, 2017 we granted 61,51469,014 and 55,50858,024 stock options, respectively.

The following table summarizes our stock option activity for the thirteenthirty-nine weeks ended March 31,September 29, 2018:

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There were no4,000 options exercised during the thirteenthirty-nine weeks ended March 31,September 29, 2018. There were 32,000 options exercised in the thirteenthirty-nine weeks ended April 1,September 30, 2017. As of March 31,September 29, 2018, there was $1.6 million of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 3.42.9 years.

There was no cash generated from stock option exercises in the thirteenthirty-nine weeks ended March 31,September 29, 2018. The cash received from stock option exercises was $0.1 million in the thirteenthirty-nine weeks ended April 1,September 30, 2017.

There was no excess tax benefit generated from stock options exercised in the thirteenthirty-nine weeks ended March 31,September 29, 2018. There was $0.6 million of excess tax benefit generated from stock option exercises in the thirteenthirty-nine weeks ended April 1,September 30, 2017 and was credited to income tax expense.

Employee Stock Purchase Plan

In May 2017, our shareholders’ approved the Dorman Products, Inc. Employee Stock Purchase Plan (the “ESPP”), which makes available 1,000,000 shares of our common stock for sale to eligible employees. There were 7,382 shares purchased under this plan in the thirty-nine weeks ended September 29, 2018. During the thirty-nine weeks ended September 29, 2018, compensation cost under the Plan was $0.2 million.

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 197,00063,000 shares and 106,00047,500 shares were excluded from the calculation of diluted earnings per share as of March 31,September 29, 2018 and April 1,September 30, 2017, 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:

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 thirteenthirty-nine weeks ended March 31,September 29, 2018, we repurchased and cancelled 2,88020,160 shares of common stock for $0.2$1.5 million at an average price of $71.70$73.35 per share. During the fifty-two weeks ended December 30, 2017, we repurchased and cancelled 19,110 shares of common stock for $1.4 million at an average price of $73.34 per share.

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Our Board of Directors authorized a share repurchase program of up to $250 million through December 31, 2018. 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 thirteenthirty-nine weeks ended March 31,September 29, 2018, we repurchased and cancelled 128,870486,487 shares of common stock for $9.0$33.8 million at an average price of $69.84$69.41 per share under this program. For the fifty-two weeks ended December 30, 2017, we repurchased and cancelled 1,006,365 shares of common stock for $74.7 million at an average price of $74.26 per share under this program.

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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 2018 and were $1.6 million in fiscal 2017. This lease will expire on December 31, 2022. 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 during November 2016.

Additionally, we have a non-cancelable operating lease for our Canadian operating facility from a corporation of which an employee, who is also the former owner of MAS, and his family members are owners. Based upon the terms of the lease, payments will be $0.5 million in fiscal 2018 and were $0.1 million in fiscal 2017. This lease will expire on OctoberJanuary 31, 2018.2019.

We are a partner in a joint venture with one of our suppliers and own minority interests in threetwo other suppliers. Each of these investments is accounted for according to the equity method. In June 2018 we acquired the remaining outstanding shares of a previously unconsolidated entity.  The estimated fair value of the net assets acquired was less than our prior investment in the entity. As a result, we recorded an impairment charge of $1.1 million which is included within Selling, General, and Administrative expenses in the Consolidated Statement of Income during the thirty-nine weeks ended September 29, 2018.

At March 31,September 29, 2018, we had $2.4$2.5 million of net unrecognized tax benefits, $2.0$2.2 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 March 31,September 29, 2018 we had approximately $0.7 million of accrued interest and penalties related to uncertain tax positions.

We file income tax returns in the United States, Canada, India, and Mexico. All years before 20142015 are closed for federal tax purposes. We are currently under examination by one state tax authority for years 2011-2012.  Tax years before 20112013 are closed for the remainingall states in which we file. We filed tax returns in Sweden through 2012 and all years prior to 2010 are closed. It is reasonably possible that audit settlements, the conclusion of current examinations or the expirations of the statute of limitations could impact the Company’s unrecognized tax benefits.

On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was enacted. The TCJA includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate tax rate from 35% to 21%, for tax years beginning after December 31, 2017. The TCJA also provides for acceleration of depreciation for certain assets placed into service after September 27, 2017, as well as prospective changes beginning in 2018, including additional limitations on deductibility of executive compensation and employee meal benefits.

As permitted by SEC Staff Accounting Bulletin (“SAB No. 118,118”), the net tax expense recorded in our financial statements for the fourth fiscal quarter of 2017 due to the enactment of the Tax Cuts and Jobs Act (the “TCJA”)TCJA is considered “provisional” based on reasonable estimates. The net tax expense recorded was $4.4 million. We are continuing to collect and analyze detailed information that could impact this amount, and may record adjustments to refine those estimates during the measurement period defined in SAB No. 118, as additional analysis is completed. No adjustments to the provisional expense related to the enactment of the TCJA were recorded in the first fiscal quarter ofthirty-nine weeks ended September 29, 2018.

12.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.