UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 30, 201726, 2020

OR

For the transition period from to

Commission file number 0-18914

DORMAN PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

3400 East Walnut Street, Colmar, Pennsylvania 18915

(Address of principal executive offices) (Zip Code)

(215) 997-1800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒  No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act. Yes ☐   No ☒

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

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",filer," "accelerated filer",filer," “smaller reporting company”,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 has filed a report on an attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issues its audit report. ☒

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 February 19, 2018 the registrant had 33,568,070 shares of common stock, $0.01 par value, outstanding. The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of July 1, 2017June 27, 2020 was $1,948,324,106.$1,412,107,399.

As of February 18, 2021, the registrant had 32,177,051 shares of common stock, $0.01 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant's definitive proxy statement, in connection with its 2021 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days after December 30, 2017,26, 2020, are incorporated by reference into PartPART III of this Annual Report on Form 10-K10-K.

2

DORMAN PRODUCTS, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

DECEMBER 30, 201726, 2020

The Company’s fiscal year ends on the last Saturday of the calendar year.

As used herein, unless the context otherwise requires, “Dorman,” “the Company,” “we,” “us,” or “our” refers to Dorman Products, Inc. and its subsidiaries.

2This Annual Report on Form 10-K contains the registered and unregistered trademarks or service marks that are the property of Dorman Products, Inc. and/or its affiliates. This Annual Report on Form 10-K also may contain additional trade names, trademarks or service marks belonging to other companies. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by these parties.

Statement Regarding Forward-Looking Statements

Certain statements in this document constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to the global coronavirus pandemic (“COVID-19”), net sales, diluted earnings per share, gross profit, gross margin, selling, general and administrative expenses, income tax expense, income before income taxes, net income, cash and cash equivalents, indebtedness, liquidity, the Company’s share repurchase program, the Company’s outlook, the Company’s growth opportunities and future business prospects, operational costs and productivity initiatives, customs duties and mitigation of tariffs, long-term value, acquisitions and acquisition opportunities, investments, cost offsets, quarterly fluctuations, new product development, customer concessions, and fluctuations in foreign currency. Words such as “may,” “believe,” “demonstrate,” “expect,” “estimate,” “forecast,” “project,” “plan,” “anticipate,” “intend,” “should,” “will” and “likely” and similar expressions identify forward-looking statements. However, the absence of these words does not mean the statements are not forward-looking. In addition, statements that are not historical should also be considered forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors (many of which are outside of our control) which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. For 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.” The Company is under no obligation to (and expressly disclaims any such obligation to) update any of the information in this report if any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events or otherwise.

PART I

ItemITEM 1. Business.

General

Dorman Products, Inc. was incorporated in Pennsylvania in October 1978. As used herein, unlessWe are one of the context otherwise requires, “Dorman”, the “Company”, “we”, “us”, or “our” refers to Dorman Products, Inc. and its subsidiaries.

We believe we are a leading suppliersuppliers of replacement parts and fasteners for passenger cars, light trucks, and heavy dutyheavy-duty trucks in the automotive aftermarket. We distribute and marketaftermarket industry. As of December 26, 2020, we marketed approximately 216,000 different stock keeping units (“SKU’s”)81,000 distinct parts compared to approximately 78,000 as of automotive replacement parts and fasteners,December 28, 2019, many of which we designdesigned and engineer.engineered. This number excludes private label stock keeping units and other variations in how we market, package and distribute our products, includes distinct parts of acquired companies and reflects distinct parts that have been discontinued at the end of their lifecycle. We believe we are aone of the leading aftermarket suppliersuppliers of original equipment (“OE”) “dealer exclusive” items.parts. Original equipment “dealer exclusive” itemsparts are those which were traditionally available to consumers only from original equipment manufacturers or used parts from salvage yards and include, among other parts, intake manifolds, exhaust manifolds, window regulators, radiator fan assemblies, tire pressure monitor sensors, exhaust gas recirculation (EGR) coolers and complex electronics modules. Fasteners include such items as oil drain plugs, wheel bolts, and wheel lug nuts. Approximately 84%For fiscal 2020, approximately 75% of our products arewere sold under brands that we own, and the remainder of our products arewere sold for resale under customers' private labels, other brands or in bulk. Our products are sold primarily in the United States through automotive aftermarket retailers (such as Advance Auto Parts, Inc. (“Advance”), AutoZone, Inc. (“AutoZone”), and O'Reilly Automotive, Inc. (“O’Reilly”)), including through their online platforms; national, regional and local warehouse distributors (such as Genuine Parts Co. – NAPA (“NAPA”)); and specialty markets, and salvage yards. We also distribute automotive replacementaftermarket parts internationally, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, the Middle East, and Australia.

The Automotive Aftermarket Industry

The automotive replacement parts marketaftermarket industry has two components:distinct sectors: parts for passenger cars and light trucks, which accounted for projected industry sales of approximately $286.9$281.3 billion in 20172020¹, and parts for medium and heavy dutyheavy-duty trucks, which accounted for projected industry sales of approximately $94.2$98.8 billion in 20172020¹. We marketsell products primarily for passenger cars and light trucks, including those with diesel engines, and since 2012, for medium and heavy dutyheavy-duty trucks. Two distinct groups of end-users buy replacement vehicle (automotiveparts for passenger cars and truck) parts:light trucks: (i) individual consumers, who purchase parts to perform "do-it-yourself" repairs on their own vehicles; and (ii) professional installers, which include vehicle repair shops and the dealership service departments. The individual consumer market isIndividual consumers typically are supplied through retailers and through the retail arms of warehouse distributors. Vehicle repair shops generally purchase parts through local independent parts wholesalers and through national parts distributors. Automobile dealership service departments generally obtain parts through the distribution systems of vehicle manufacturers and specialized national and regional parts distributors.

Spending in the aftermarket for parts for passenger cars and light vehicle aftermarkettrucks, as well as medium and heavy-duty trucks, generally can be generally grouped into three categories: discretionary, maintenance, and repair. Discretionary, such as accessories and performance, tends to move in-line with consumer discretionary spending. Maintenance is composed of products and services, such as oil and oil changes, and tends to be less correlated with discretionary spending. The repair categoryRepair consists mainly of replacement parts whichthat fail over time and tends to be less cyclical as it is largely comprised of parts necessary for a vehicle to function properly or safely. The majority of our products fall into the repair category.

The increasing complexity of automobiles and the number of different makes and models of automobiles have resulted in a significant increase in the number of products required to service the domestic and foreign automotive fleet.fleets. Accordingly, the number of parts required to be carried by retailers and wholesale distributors has increased substantially.substantially, which is reflected in the increase in the number of distinct parts we marketed in 2020 as compared to 2019. The requirement to include more products in inventory and the significant consolidation among distributors of automotive replacement parts have in turn resulted in larger distributors. See ITEM 1A, “Risk Factors – Risks Related to Our Business – Our Industry, Operations and Competition” for information regarding the potential impacts of consolidation on our business.

3

¹ Source: 2021 Auto Care Association Factbook

Retailers and others who purchase aftermarket automotive repair and replacementaftermarket parts for resale are constrained to a finite amount of space in which to display and stock products. Thus, the reputation for quality, customer service, and line profitability whichthat a supplier enjoysprovides are significant factors in a purchaser'sretailer’s or other reseller’s decision as to which product lines to carry in the limited space available. Further, because of the efficiencies achieved through the ability to order all or part of a complete line of products from one supplier (with possible volume discounts), as opposed to satisfying the same requirements through a variety of different sources, retailers and other purchasersresellers of automotive aftermarket parts seek to purchase products from fewer but stronger suppliers.

Brands and Products

The DORMAN® ProductsWe market our products under the DORMAN^® brand name is known as a leader inand several sub-brands, which identify products that address specific segments of the automotive and heavy duty markets.  DORMAN® is the parent brand coveringaftermarket industry. In addition, across all our sub-brands, customers can find a numbersubset of sub-brands within the DORMAN® portfolio.  products that have been branded DORMAN^®OE FIX™ products.

A unique differentiator for the DORMAN® brand isSome of our OE Fix sub-brand.  OE Fix products can be found throughout our portfolio of sub-brands and feature extensive engineering to eliminate known OE failures or allows for the replacement of the part, not the assembly, saving time and money.most popular brands include:

DORMAN®DORMAN^® OE Solutions ™^® - A wide variety of formerly “dealer only” replacement parts we introduced to the automotive aftermarket, covering many product categories across all areas of the vehicle, including fluid reservoirs, variable valuevalve timing components, complex electronics, and integrated door lock actuators.

DORMAN^® OE FIX™ - Dorman’s distinct repair innovations that you cannot get from original equipment manufacturers, all designed to save time, money or hassle.

DORMAN®DORMAN^® HD Solutions™ - Heavy-duty aftermarket parts for class 4-8 vehicles. These products include lighting, cooling, engine management, wheel hardware, air tanks and cab products.

DORMAN^® HELP!^® - Broad assortment of formerly “dealer only”small automotive replacement parts that are primarily sold in retail store fronts such as door handles, keyless remotes and cases and door hinge repair.repair parts.

DORMAN® HD Solutions™DORMAN^® Conduct-Tite^® - A linewide array of formerly “dealer only” heavy duty aftermarket parts for class 4-8 vehicles. These products are focused on lighting, cooling, engine management, and cab products.

DORMAN® Premium Chassis - A complete premium chassis line. DORMAN® Premium XL® offers leading low-friction technology found in today’s late model automobiles. DORMAN® Premium RD®, offers solutions for rugged duty and fleet applications. MAS® offers replacement chassis part solutions for everyday driving.

Other trade brands in the portfolio include:  DORMAN FirstStop™, a complete offering of brake hardware products, DORMAN® ConductTite®, electrical components for common repairs as well as for enthusiasts to customize and DORMAN® AutoGrade™, application specific repair hardware.upgrade their vehicles.

4

We group our products into four major classes: power-train,powertrain, chassis, automotive body, chassis, and hardware. The following table represents each of the four classes as a percentage of net sales for each of the last three fiscal years:

Our power-trainpowertrain product line includes intake and exhaust manifolds, cooling products, harmonic balancers, fluid lines, fluid reservoirs, connectors, 4 wheel4-wheel drive components and axles, drain plugs, and other engine, transmission and axle components. Our line of automotive body products include door handles and hinges, window lift motors, window regulators, switches and handles, wiper components, lighting, electrical, and other interior and exterior automotive body components.  Chassis products include control arms, ball joints, tie-rod ends, brake hardware and hydraulics, wheel and axle hardware, suspension arms, knuckles, links, bushings, and other suspension, steering, and brake components. Our line of automotive body products includes door handles and hinges, window lift motors,

window regulators, switches and handles, wiper components, lighting, electrical, and other interior and exterior automotive body components. Hardware products include threaded bolts, auto body and home fasteners, automotive and home electrical wiring components, and other hardware assortments and merchandise.

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 standard warranty limits the customer’send-user’s remedy to the repair or replacement of the part that is defective.

Product Development

Product development and continuous innovation are central to our business. The development of a broad range of products, many of which are not conveniently or economically available elsewhere, has enabled us to grow to our present size and is an important driver tofor our future growth. Our product strategy has been to design and engineer products, many of which we believe are better and easier to install and/or use than the original parts they replace, and to commercialize automotive parts for the broadest possible range of uses. New product ideas are reviewed by our product management staff as well as by members of the supply chain, sales, finance, marketing, legal, and administrative staffs.a cross-functional in-house team. The following table represents the number of uniquedistinct parts we introduced for each of the last three fiscal years:

Through careful evaluationIn 2020, we introduced several new product categories to the aftermarket including: a new build electronic power steering rack, complete wiper motor and linkage arm assemblies, pre-pressed axles, loaded brake backing plates and flexible fuel lines. Each of high failure-prone parts, exacting designthese solutions gives installers and precise engineering,consumers additional choice when searching for reliable, affordable replacements.

Other innovative technologies we released in 2020 include climate control modules, new fuel pump driver modules and loaded knuckles, many of which are frequently ableDORMAN^®OE FIX^TM products providing additional durability against wear and elements to offer products which fit a broader range of makes and models, as well as a wider range of application years than the original equipment parts they replace. One such innovation is our replacement spare tire hoist, which through several mechanical design changes allow usreduce potential failure points to offer a part that replaces three original equipment parts, and now fits common domestic models over a thirteen year range.

Our new line of pre-pressed wheel hub and bearing assembly solutions have been developed to address an ongoing technician challenge relating to providing a comprehensive part repair. We have eliminatedhelp avoid the need for future repairs.

Our product teams also grow and expand existing categories by introducing new products that are designed to fit more vehicles, providing enhanced opportunities for aftermarket service providers to serve their customers. In 2020, we extended our lines in strategic categories such as valve covers, oil control valves, and drive shafts.

Some of our most popular innovations are those that provide vehicle owners significant savings over other repair alternatives, such as rust repair solutions. Our truck bed floor supports, differential covers and fuel tank crossmembers often eliminate the automotive technicianneed to disassemble corroded/worn out components and to reuse them with new bearings. Our solution offers a 100% new component assembly replacement which increases bay turns and optimizes the technician’s speed of repair. Additionally, crankcase ventilation filters are another new-to the-aftermarket solution we have pioneered, leveraging a strong team of engineers and intellectual property attorneys to redesign this emission filter to meet stringent, regulated EPA standards. We developed, engineered and utilized a proprietary design to create a new, patented aftermarket solution to meet the needs of the end technician. This flexibility assists

5

retailersreplace entire truck beds, axles and other purchaserslarge vehicle sections by facilitating direct repair of corroded components.

We also grew our lines of diesel and heavy-duty solutions in maximizingfiscal 2020, introducing hundreds of new products in categories such as nitrogen oxide sensors, LED forward lighting and diesel aftertreatment including: diesel exhaust fluid heaters and pumps and a selective catalytic reduction dosing module.

We reduced new product activity in the productivityfirst half of 2020 due to uncertainties related to COVID-19. We increased new product development and commercialization in the limited space available for each classsecond half of part sold. Further, where possible,2020 as overall market demand rebounded. As a result, we improve our parts so that they are betterended the year with lower new product introductions than the parts they replace. Finally,prior year. Development activities have returned to prior levels and we make every attemptexpect to look at the repair through the eyesreturn to our historical levels of the end user, and redesign many of our items to make installation easier, resultingperformance in lower total cost for the repair. In addition, we often package different items in complete kits to further aide installation and value.

Ideas for expansion of our product lines arise through a variety of sources. We maintain an in-house product management staff that routinely generates ideas for new parts and the expansion of existing lines. Further, we maintain an "800" telephone number and an Internet site for "new product ideas" and receive, through our sales force, product development team, or our website, many ideas from our customers and end-users as to which types of presently unavailable parts the ultimate consumers are seeking.2021.

Sales and Marketing

We market our products to three groups of purchasers who in turn supply individual consumers and professional installers. BasedOur products are also available in our customers’ retail stores, on net sales to our customers as ofcustomers’ websites, and through warehouse distributors. For the year ended December 30, 2017:26, 2020:

(i) approximately 48%58% of our revenues werenet sales was generated from sales to automotive aftermarket retailers, (suchincluding major chains such as Advance, AutoZone and O'Reilly), local independent parts wholesalers and national general merchandise chain retailers. We sell manyO'Reilly;

(ii) approximately 31% of our products to virtually all major chains of automotive aftermarket retailers;

(ii) approximately 48% of our revenues werenet sales was generated from sales to automotive partswarehouse distributors, (suchsuch as NAPA),NAPA, which may be local, regional or national in scope, and which also may also engage in retail sales; and

(iii) the balanceapproximately 11% of our revenues (approximately 4%) arenet sales was generated from international salesour heavy-duty channel and sales to special markets, which include, among others, mass merchants, (suchsuch as Wal-Mart),Walmart, salvage yards and the parts distribution systems of OE parts manufacturers.

We useAs of December 26, 2020, we had a number of different methods to sell our products. Our more than 60 person direct sales force and sales support staff solicits purchasesteam of over 110 people selling our products either directly fromto our customers as well as manages the activities of approximately 35or, with respect to certain select customers, indirectly through independent manufacturers’ representative agencies worldwide. We use independent manufacturers’ representative agencies to help service existing automotive retail, automotive and heavy duty parts distribution customers, providing frequent on-site contact. We increase sales by securing new customers, by adding new product lines and expanding product selection within existing customers. For certain of our major customers, and our private label purchasers, we rely primarily upon the direct efforts of our sales force who, together with our marketing department and our executive officers, coordinate the more complex pricing and ordering requirements of these accounts.

Our sales efforts are not directed merely at selling individual products, but rather more broadly towards selling our entire product portfolioportfolio. Our sales strategy includes increasing sales not only by securing new customers, but also by adding new product lines and expanding product selection within existing customers, in an effort to make our customers a destination for new to the aftermarketnew-to-the-aftermarket products.

We prepare a number of on-lineuse online catalogs, application guides, digital marketing tools, training materials, videos and videos designedadditional content to describe and sell our products and other applications as well as to train our customers' sales teamsteams. Our primary website, www.dormanproducts.com, provides a search engine that can be used to search our extensive catalog. The information on the website is not and should not be considered part of this Form 10-K and is not incorporated by reference in the promotion and salethis Form 10-K.

As of our products. Catalogs of all our parts are available on our website.  

We currently serviceDecember 26, 2020, we serviced more than 2,4003,600 active accounts. During fiscal 2017, fiscal 2016 and fiscal 2015, four2020, three customers (Advance, AutoZone NAPA, and O'Reilly)O’Reilly) each accounted for more than 10% of net sales and in the aggregate accounted for approximately 61%56% of net sales in fiscal 2017, and 60% in each of fiscal 2016 and fiscal 2015.  sales.

Manufacturing and Procurement

Substantially all of our products are manufactured by third parties. We engage professional manufacturing firmsthird-party manufacturers around the world to develop and manufacture products according to our performance and design specifications,requirements, oftentimes using tooling that we own. In fiscal 2017,2020, as a percentage of our total dollar volume of purchases, approximately 29%23% of our products were purchased from various suppliers throughout the United States and the

6

balance of our products were purchased directly from suppliers in a varietyoutside of foreign countries.the United States. Our global supplier network provides access to a broad array of manufacturing capabilities and technologies while limiting our dependency on any single source of supply. While our supplier selection and sourcing programs will continue to leverage our strategic manufacturing firms for a substantial portion of our product portfolio, we also have qualified alternative sources available to provide additional support and capacity, if needed. We make a concerted effort to build and nurture strong, healthy relationships with our suppliers. We purchaseIn fiscal 2020, we purchased automotive products in substantial volumes from over 210 suppliers. For fiscal 2017,250 suppliers, and no single manufacturersupplier accounted for more than 10% of our total product purchases. purchases in fiscal 2020. 

Packaging, Inventory and Shipping

Finished products are received at one or more of our facilities, depending on the type of part. It is our practice to inspect samples of shipments based upon supplier performance. If cleared, these shipments of finished parts are logged into our computerized production tracking systems and staged for packaging, if necessary.

We employ a variety of custom-designed packaging machines which include blister sealing, skin film sealing, clamshell sealing, bagging and boxing lines. Packaged product generally contains our label (or a private label), a part number, a universal packaging bar code suitable for electronic scanning, a description of the part and, if appropriate, installation instructions. Products are also sold in bulk to automotive parts manufacturers and packagers. Computerized tracking systems, mechanical counting devices and experienced workers combine to assurehelp ensure that the proper variety and numbers of parts meet the correct packaging materials at the appropriate places and times to produce the required quantities of finished products.

Packaged inventory is stocked in the warehouse portions of our facilities and is organized to facilitate the most efficient methods of retrieving product to fill customer orders. We strive to maintain a level of inventory to adequately meet current customer order demand with additional inventory to satisfy new customer orders and special programs.

We ship our products from each of our locations by contract carrier, common carrier or parcel service. Products are generally shipped to theeach customer's main warehouses for redistribution within their network. In

certain circumstances, at the request of the customer, we ship directly to the customer's warehouses, stores or other locations either via smaller direct ship orders or consolidated store orders that are cross docked.

Remanufacturing and Recycling Parts

Certain products we sell contain parts that can be recycled, or as more commonly referred to in our industry, remanufactured. We refer to the used product that is ultimately remanufactured as core. A used core is remanufactured and sold to the customer as a replacement for a unit on a vehicle. Customers and end-users that purchase remanufactured products will generally return the used core to us, which we then use in the remanufacturing process to make another finished good. Our core inventory consists of used cores purchased and held in our facilities, used cores that are in the process of being returned from our customers and end-users, and remanufactured cores held in finished goods inventory at our facilities. Our products that utilize cores include electronic control modules, hybrid batteries and complex mechatronics. We believe our remanufactured parts offer end-users an economical and safe way to maintain their cars on the road, while also reducing the impact to environment.

Competition

The replacement automotive partsaftermarket industry is highly competitive. Various competitiveCompetitive factors affecting the automotive aftermarket areinclude price, product quality, breadth of product line, range of applications, customer service and customer service.the growth of e-commerce. Substantially all of our products are subject to competition with similar products manufacturedoffered by other manufacturersproviders of automotive aftermarket automotive repair and replacement parts. Some of these competitors are divisions and subsidiaries of companies much larger than us andwho possess a longer history of operations and greater financial and other resources than we do. We also face competition from automobileOE manufacturers who sell through their dealerships many of the same replacement parts that we sell, although these manufacturers generally sell parts only for cars they produce. Our customers may also be successful in sourcing some of our products directly from our suppliers. Further, some of our private label customers also compete with us. For more information on risks relating to our competition, see ITEM 1A, “Risk Factors – Risks Related to Our Business – Our Industry, Operations and Competition.”

Seasonality

Our business is somewhat seasonal in nature, with the highest sales usually occurring in the spring and summer months. In addition, our business can be affected by weather conditions. Extremely hot or cold weather tends to enhance sales by causinggenerally results in an increase in automotive parts to failfailure at an accelerated rate.rate, which generally leads to an increase in our sales for the duration of the extreme weather event.

Proprietary RightsImpact of COVID-19

WhileThe COVID-19 pandemic has resulted and is expected to continue to result in significant economic disruption. COVID-19 caused state authorities to implement stringent measures to attempt to help control the spread of the virus, including business shutdowns and curtailments. Throughout the pandemic all of our U.S. facilities have remained, and currently remain, open and operating, with modified staffing in certain locations where appropriate. We have taken actions to promote the welfare of our employees by enhancing safety protocols. We have had to adjust our operations and inventory levels as demand has fluctuated due to government-imposed restrictions being imposed and then subsequently lifted or modified across the United States. As government-imposed restrictions vary and continue to change across the United States and elsewhere around the world, it remains difficult to determine the full impact that the pandemic will have on the overall demand environment as well as our ability to source parts and other materials to meet demand levels.

For a more detailed discussion of the impact of COVID-19 on our business, see “Human Capital Resources” below and ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Impacts of COVID-19.”

Patents, Trademarks and Other Intellectual Property

We own a number of patents important to our business, and we take stepsexpect to registercontinue to file patent applications to protect our research and development investments in new products. As of December 26, 2020, we held 71 patents and 16 pending patent applications, including foreign counterpart patents and foreign applications. For the United States, patents may last 20 years from the date of the patent's filing, depending upon term adjustments made by the patent office. In addition, we hold numerous trademarks in the United States and other countries. We also have licenses to intellectual property for the manufacture, use and sale of certain of our products.

We obtain patent and other intellectual property rights used in connection with our business when practicable and appropriate. Historically, we have done so both organically, through commercial relationships and in connection with acquisitions.

For more information concerning the risks related to patents, trademarks and copyrights when possible, we believe that our business is not heavily dependent on such trademarkother intellectual property, see ITEM 1A, "Risk Factors – Risks Related to Our Business – Our Intellectual Property and copyright registration. Similarly, while we actively seek patent protection for the products and improvements which we develop, we do not believe that patent protection is criticalInformation Security.”

7

Human Capital Resources

to the success of our business. Rather, the quality, price, customer service and availability of our product is critical to our success.

EmployeesGeneral

As noted below, atof December 30, 2017,26, 2020, we had 2,0612,681 employees worldwide, essentiallysubstantially all of whichwhom were employed full-time. Our employees are categorized by various functions. “Operations” consists of employees engaged in production, product distribution and inventory and quality control. “Product Development” includes employees involved in product development and purchasing. “Quality and Engineering” consists of employees involved in internal and external quality management, manufacturing engineering, design, and testing. “Sales” includes employees employed in sales and customer service. “Administration” includes executive officers and individuals employed in finance, legal, information technology, human resources and human resources.other functions supporting our business. The number offollowing table shows employees will be affected by plannedfunction and unplanned open positions at any point in time.region.

None of our global employees areis covered by a collective bargaining agreement. We consider our relations with our employees to be generally good.

Health and Safety

We maintain a safety culture grounded on the premise of eliminating workplace incidents, risks and hazards. We have created and implemented processes to help eliminate safety events and reduce their frequency and severity. We also review and monitor our performance closely. In response to COVID-19, we implemented and continue to implement safety measures in all our facilities to promote the welfare of our employees. For example, we enhanced safety protocols, including requiring administrative employees to work from home where applicable, and we implemented symptom screening, social distancing and robust sanitization practices at our facilities. In addition, we adopted a COVID-19 sick leave policy providing continued salary and benefits to eligible employees.

Inclusion and Diversity

We embrace the diversity of our employees, including their unique backgrounds, experiences, thoughts and talents. Employees are valued and appreciated for their distinct contributions to the growth and sustainability of our business. We strive to cultivate a culture and vision that supports and enhances our ability to recruit, develop and retain diverse talent at every level.

Talent and Development

Our talent strategy is focused on attracting the best talent, recognizing and rewarding their performance while continually developing, engaging and retaining them. We focus significant attention on attracting and retaining talented and experienced individuals to manage and support our operations, and our management team routinely reviews employee turnover rates at various levels of the organization. Management also reviews employee engagement surveys to monitor employee morale and receive feedback on a variety of issues.

Compensation

We pay our employees competitively and offer a broad range of company-paid benefits, which we believe are competitive with others in our industry and in the geographies in which we compete for talent. In certain areas of our operations, such as our warehouse and distribution centers in Portland, Tennessee and Warsaw, Kentucky, we tend

to see higher attrition rates among hourly workers than in our other locations, in large part due to competition from other warehouse and distribution operations nearby. We have implemented a number of benefits to help reduce employee turnover at those sites, such as counseling services and establishment of an employee relief fund.

For information on risks relating to our human capital resources, see ITEM 1A, “Risk Factors – General Risk Factors – Losing the services of our executive officers or other highly qualified and experienced employees, or failing to attract and retain any of such officers or employees, could adversely affect our business.”

Available Information

Our Internet address is www.dormanproducts.com. The information on thisthe website is not and should not be considered part of this Form 10-K and is not incorporated by reference in this Form 10-K. ThisThe website is, and is only intended to be, for reference purposes only. We make available free of charge on or through our website our Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). In addition, we will provide, at no cost, paper or electronic copies of our reports and other filings made with the SEC. Requests should be directed to: Attention: Secretary, Dorman Products, Inc. - Office of General Counsel,, 3400 East Walnut Street, Colmar, Pennsylvania 18915.

ItemITEM 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the following factors, which could materially affect our business, financial condition or future results. The risks described below 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 affect our business, financial conditions or results of operations. The risks are listed below in no particular order.

Risks Related to Our Business

Our Industry, Operations and Competition

Our business is impacted by the age, condition and number of vehicles that need servicing and by improvements in the quality of new vehicle parts.

The size of the automobile aftermarket industry depends, in part, upon the growth in number of vehicles on the road, increase in average vehicle age, change in total miles driven per year, new or modified environmental and vehicle safety regulations, including fuel-efficiency and emissions reduction standards, increase in pricing of new cars and new car quality and related warranties. We May Lose Businessbelieve the automobile aftermarket industry has been negatively impacted by the fact that the quality of more recent automotive vehicles and their component parts (and related warranties) has improved, thereby lengthening the repair cycle. Generally, if parts last longer, there will be less demand for our products, and the average useful life of automobile parts has been steadily increasing in recent years due to Competitors.innovations in products and technology. In addition, the introduction by original equipment manufacturers of increased warranty and maintenance initiatives has the potential to decrease the demand for our products. These factors could have a material adverse effect upon our business, financial condition and results of operations.

Competition within theOur industry is highly competitive, and our success depends on our ability to compete with suppliers of automotive aftermarket parts businessproducts, some of which may have substantially greater financial, marketing and other resources than we do.

The automotive aftermarket industry is intense.  Wehighly competitive, and our success depends on our ability to compete in North America with both original equipment parts manufacturersdomestic and with companies that, like us, supply parts onlyinternational suppliers of automotive aftermarket products. Due to the automotive aftermarket. We alsodiversity of our product offering, we compete against a large cross section of aftermarket companies and brands, including, but not limited to, Cardone Industries, Inc., Standard Motor Products, Inc., Tenneco, Inc., Bosch Auto Parts, First Brands Group, LLC, Gates Corporation, Continental Automotive Systems, Inc. (VDO), MevoTech LP, ACDelco (owned by General Motors Company), Motorcraft (owned by Ford Motor Company) and numerous category specific competitors. In addition, we face competition from automobileoriginal equipment manufacturers, who sellwhich, through their automotive dealerships, supply many of the same types of replacement parts that we sell. Our customers may also be successful in sourcingFurther, some of our private label customers also compete with us.

Some of our competitors may have larger customer bases and significantly greater financial, technical and marketing resources than we do. These factors may allow our competitors to:

•engage in more extensive research and development;

•sell products directlyat lower prices than we do;

•undertake more extensive marketing campaigns; and

•make more attractive offers to existing and potential customers and strategic partners.

We cannot assure you that our competitors will not develop products or services that are equal or superior to our products or that achieve greater market acceptance than our products or that in the future other companies involved in the automotive aftermarket industry will not expand their operations into product lines produced and sold by us. We also cannot assure you that additional entrants will not enter the automotive aftermarket industry or that companies in the aftermarket industry will not consolidate. Any such competitive pressures could cause us to lose market share or could result in significant price decreases and could have a material adverse effect upon our business, financial condition and results of operations.

The loss or decrease in sales among one of our top customers, or a material change in the terms on which they are willing to buy from suppliers.  us, could have a substantial negative impact on our sales and operating results.

A significant percentage of our sales has been, and is expected to be, concentrated among a relatively small number of customers. During fiscal 2020, three customers (Advance, AutoZone and O’Reilly) each accounted for more than 10% of net sales and in the aggregate accounted for approximately 56% of net sales. We anticipate that this concentration of sales among these customers will continue in the future. The loss of a significant customer or a substantial decrease in sales to such a customer could have a material adverse effect on our sales and operating results. In addition, any consolidation among our key customers may further increase our customer concentration risk.

Also, while we may enter into long-term agreements with certain of our significant customers, those agreements generally do not contain purchase commitments, which instead are set forth in individual purchase orders submitted by customers based on their then-current or projected needs. We have in the past, and may in the future, lose customers or lose a particular product line of a customer due to the highly competitive conditions in the automotive aftermarket industry, consolidation of customers and customer initiatives to buy direct from foreign suppliers or other business considerations. A decision by any significant customer, whether motivated by competitive conditions, financial difficulties or otherwise, to materially decrease the amount of products purchased from us or the number of our product lines they choose to carry, to change their manner of doing business with us, or to stop doing business with us, could have a material adverse effect on our business, financial condition and results of operations.

Because our sales are concentrated, and the market in which we operate is very competitive, we are under ongoing pressure from our customers to offer lower prices, extend payment terms, increase marketing and transportation allowances, provide enhanced rebates, discounts, rights of return and credits and offer other terms more favorable to these customers. These customer demands have put continued pressure on our operating margins and profitability and in the future could have a material adverse effect upon our business, financial condition and results of operations.

There is substantial price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure.

There is substantial price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure. This is the result of a number of industry trends, including the consolidated purchasing power of large customers, the growth of e-commerce and actions taken by some of our competitors in an effort to attract new business, including efforts to enhance their online presence. Price reductions may be required to remain competitive in light of such industry trends, and such reductions may impact our sales and profit margins. Our future profitability will depend in part upon our ability to respond to changes in product and distribution channel mix, to continue to improve our manufacturing and distribution efficiencies, to generate cost reductions, including reductions in the cost of components purchased from outside suppliers, and to maintain a cost

structure that will enable us to offer competitive prices. Our inability to maintain a competitive cost structure could have a material adverse effect upon our business, financial condition and results of operations.

Limited shelf space and the inability of our customers to expand into new locations may adversely affect our ability to grow.

Since the amount of space available to a retailer and other purchasers of our products is limited, our products compete with other automotive aftermarket products, some of which are entirely dissimilar and otherwise non-competitive (such as car waxes and engine oil), for shelf and floor space. Moreover, our growth depends, in part, on the ability of our customers to open and operate new locations in which our products may be sold. No assurance can be given that additional space will be available in our customers' existing locations or that our customers will be able to expand into new locations that would support growth in the number of products and product lines that we offer. Any failure to maintain and/or grow our shelf or floor space, and any failure of our customers to maintain and/or grow their number of locations, could have a material adverse effect upon our business, financial condition and results of operations.

Customer consolidation in the automotive aftermarket industry may lead to customer contract terms less favorable to us which may negatively impact our financial results.

The automotive aftermarket industry has been consolidating over the past several years. As a result of such consolidations, many of our customers have grown larger and therefore have more leverage in the arms-length negotiations of agreements with us for the sale of our products. Customers may require us to provide extended payment terms, issue customer credits and accept returns of slow-moving product to obtain new, or retain existing, business. While we attempt to avoid or minimize such concessions, in some cases payment terms to customers have been extended, enhanced customer credits have been issued and returns of product have exceeded historical levels. The product returns and customer credits primarily affect our net sales and profit levels while payment term extensions and additional factoring costs generally reduce operating cash flow and require additional capital to finance our business. We expect these trends to continue for the foreseeable future.

Our business, results of operations and financial condition could be materially adversely affected by the effects of widespread public health epidemics, including COVID-19, that are beyond our control.

Any outbreaks of contagious diseases, public health epidemics and other adverse public health developments in countries where we, our customers and suppliers, operate could have a material and adverse effect on our business, results of operations and financial condition. The COVID-19 pandemic has adversely impacted, and is expected to continue to adversely impact, our business, and the nature and extent of the impact may be highly uncertain and beyond our control. Uncertain factors relating to COVID-19 include the duration, spread and severity of the virus, the impact of potential mutations to the virus, the efficacy and distribution of vaccines designed to combat COVID-19, the effects of the COVID-19 pandemic on our customers, vendors, suppliers and employees, and the actions, or perception of actions that may be taken, to contain or treat its impact, including declarations of states of emergency, business closures, manufacturing restrictions and a prolonged period of travel, commercial and/or other similar restrictions and limitations.

COVID-19 and the measures designed to contain its spread may negatively impact demand for our products, which could have a material and adverse effect on our business, results of operations and financial condition. Similarly, our suppliers may not have the materials, capacity, or capability to manufacture our products according to our schedule and specifications. If our suppliers’ operations are impacted, we may need to seek alternate suppliers, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our customers, each of which would affect our results of operations. Further, in the event any members of our workforce, or those of our suppliers, contract COVID-19 or are otherwise compelled to quarantine, we may experience shortages in labor and services that we require for our operations. Our increased use of remote work environments and virtual platforms in response to the COVID-19 pandemic may also increase our risk of cyber-attacks and data security breaches.

The duration of the disruption to our customers, our supply chain and our employees, and the related financial and operational impacts to us, cannot be estimated at this time. Should any such competitiondisruption continue for an extended period of time, the impact could have a material adverse effect on our business, results of operations and financial condition.

If we fail to continue.maintain sufficient inventory to meet current customer demands, or if we fail to anticipate future changes in customer demands, our financial results could be adversely affected.

We must maintain sufficient in-stock inventory and anticipate future changes in customer demands in order to be successful. If we fail to do so, our financial results could be adversely affected. Fluctuations in demand may result from a number of factors, including, but not limited to, global economic conditions, COVID-19, the age, condition and number of vehicles that need servicing, automotive parts failure rates, loss of market share and improvements in product designs that result in enhanced quality and reliability of new vehicle parts. As a result of these and other factors, we have experienced and expect to continue to experience fluctuating levels of demand that require us to monitor, and, where appropriate, adjust our operations, including our inventory levels and staffing at our facilities. If we are unable to compete successfullyforecast accurately future reductions in demand, we may accumulate excess or obsolete inventory and be forced to reduce hours or layoff or furlough employees. Conversely, if we are unable to forecast accurately future increases in demand, we may have inventory shortfalls or inadequate staffing levels to meet demand, which may result in our inability to fill orders on timely basis or at all and could result in penalties owed to our customers and the loss of net sales.

Our profitability may be materially adversely affected as a result of overstock inventory-related returns by our customers in excess of anticipated amounts.

In certain instances, we permit overstock returns of inventory that may be either new or non-defective or non-obsolete. To the extent our customer agreements permit overstock returns, those customers are generally limited to returning overstocked inventory according to a specified percentage of their annual purchases from us. We accrue for overstock returns as a percentage of sales, after giving consideration to recent historical returns. While we believe that we make reasonable estimates for overstock returns in accordance with our revenue recognition policies, actual returns may differ from our estimates. To the extent that overstocked returns are materially in excess of our projections, our business, results of operations and financial condition may be materially adversely affected.

Our operations would be materially and adversely affected if we are unable to purchase raw materials, finished goods, equipment, manufactured components, or “core” products from our suppliers.

Because we purchase various types of raw materials, finished goods, equipment, and manufactured component parts from suppliers, we may be materially and adversely affected by the failure of those suppliers to perform as expected. This non-performance may consist of delivery delays or failures caused by production issues or delivery of non-conforming products. The risk of non-performance may also result from the insolvency or bankruptcy of one or more of our suppliers. Our suppliers’ ability to supply products to us is also subject to a number of risks, including availability and cost of raw materials, destruction of their facilities, natural disasters, work stoppages or health crises. For example, the automotive industry is currently experiencing a shortage in the supply of semi-conductors. We utilize semi-conductors in our products and, to date, have not encountered a shortage in semi-conductors. However, if we are unable to source semi-conductors on a timely basis or at all, we may be unable to produce some of our products, which could adversely affect our ability to develop new products and fill orders on existing products. The COVID-19 pandemic may have a lasting impact on global production and industrial supply chains. In addition, our failure to promptly pay, or order sufficient quantities of inventory from our suppliers may increase the cost of products we purchase or may lead to suppliers refusing to sell products to us at all.

Furthermore, because certain products we sell contain parts that can be recycled and remanufactured, which parts are more commonly referred to in our industry as “core,” our ability to sell those products may be materially and adversely affected if we are unable to obtain those core parts from our suppliers on favorable terms, if at all.

Our efforts to protect against and to minimize these risks may not always be effective. If any of our key suppliers fail to meet our needs or if our relationships with any of our key suppliers are not maintained, it may not be possible to replace such supplier without disruptions in our operations. For example, we may experience delays in supply of manufacturing as new suppliers are qualified or as tooling is moved or replaced. Furthermore, replacement of a key supplier is often at higher prices, which could loseresult in lower profit margins and could have a material adverse effect upon our business, financial condition and results of operations.

Our operating results are sensitive to the availability and cost of third-party transportation providers, which are important in the manufacture and transport of our products.

We depend upon third-party transportation providers for shipments to and from our suppliers and for delivery of our products to us and to our customers. Our access to third-party transportation providers is not guaranteed, and,

even if we have access to transportation providers, we may be unable to transport our products at economically attractive rates in certain circumstances, particularly in cases of adverse market conditions or disruptions to transportation infrastructure. Fluctuations in demand for third-party transportation providers and other events, such as strikes, political events, international trade disputes, war, terrorism, natural disasters, adverse weather conditions, increases in fuel prices, public health issues, including the COVID-19 pandemic, and other events, may impact the availability of third-party transportation providers to ship our products or the cost to ship our products. Our business, financial position, results of operations or cash flows could be materially and adversely affected if we are unable to pass along increased transportation costs to our customers, or if third-party transportation capacity were to decline significantly or otherwise become unavailable.

8

Product Development, Acceptance and Quality

If we do not continue to develop new products and bring them to market, our business, financial condition and results of operations could be materially impacted.

Our historical growth and profitability has depended, in part, on the introduction of new parts to the automotive aftermarket industry. We invest in research and development to sustain or enhance our existing product portfolio. In certain circumstances, there may be a lengthy period between commencing these development initiatives and bringing new or improved products to market. In other instances, factors beyond our control may impact our ability to further our research and development activities. For example, new product activity was adversely impacted in the first half of 2020 due to COVID-19. Although new product development and commercialization rebounded towards the end of 2020, we ended the year with lower new product introductions than the prior year. During any period of delay in research and development activities, technology advancements, customer demand and the markets for our products may move in directions that we had not anticipated. There is no guarantee that our new products, or enhancements to existing products, will achieve market acceptance or that the timing of market adoption will be as predicted. As a result, there is a significant possibility that some of our development decisions, including significant expenditures on acquisitions, research and development, or investments in technologies, will not meet our expectations, and that our investment in some projects will be unprofitable. There is also a possibility that we may miss a market opportunity because we failed to invest or invested too late in a technology, product or enhancement sought by our customers or the markets into which we sell. If we fail to make the right investments or fail to make them at the right time, competing solutions may be more attractive in the market. As a result, our competitive position may suffer, and our revenue and profitability could be adversely affected.

The development and production of any new products is often accompanied by design and production delays and related costs. While we expect and plan for such delays and related costs, we cannot predict with precision the time and expense required to overcome these initial problems so that the products comply with specifications. Moreover, as a supplier in the automotive aftermarket industry, we may face additional challenges in designing and producing replacement products as original equipment manufacturers design parts that contain enhanced technology features or that are required to interface with other vehicle systems in order to work properly. There is a risk that we may not be able to introduce or bring to full-scale production new products as quickly as we expected in our product introduction plans, which could have a material adverse effect upon our business, financial condition, and results of operations.

We may be adversely impacted by changes in, or restrictions on access to, automotive technology.

The automotive aftermarket industry is experiencing a period of significant technological change as a result of the trends toward the integration of advanced electronics into traditional products and the increase in the number of vehicles powered by fuel cells or electricity. Software, firmware, and hardware increasingly are becoming functionally integrated with, and inseparable from, physical automotive parts. While, traditionally, repair shops and car owners could diagnose and repair their automobiles with mechanical adjustments, today they often need access to vehicles’ control units using laptops, complex diagnostic tools and software. Restrictions on access to testing and diagnostic tools, software, telematics, data and repair information imposed by the original vehicle manufacturers or by governmental regulations may force vehicle owners to rely on dealers to perform maintenance and repairs. This in turn could limit our ability to design, manufacture and sell new products and could have a material adverse effect upon our business, financial condition and results of operations.

These trends have led to an increase in the significance of technology to our current and future products and the amount of capital we need to invest to develop these new technologies, as well as an increase in the amount of

competition we face from technology focused new market entrants. If we misjudge the amount of capital to invest or are otherwise unable to continue providing products that meet our customers’ needs in this environment of rapid technological change, our market competitiveness could be adversely affected, which could have a material adverse effect upon our business, financial condition and results of operations.

Quality problems with our products could damage our reputation and adversely affect our business.

We have experienced, and in the future may experience, reliability, quality, or compatibility problems in products after their production and sale to customers. Product quality problems and any associated product recalls could result in damage to our reputation, loss of customers, a decrease in revenue, litigation, unexpected expenses, and a loss of market share. We have invested and will continue to invest in our engineering, design, and quality infrastructure to help reduce these problems; however, there can be no assurance that we can successfully remedy these issues. To the extent we experience significant quality problems in the future, it could have a material adverse effect upon our business, financial condition and results of operations.

Our Intellectual Property and Information Security

We are dependent, in part, on our intellectual property. If we are not able to protect our proprietary rights or if those rights are invalidated or circumvented, our business may be adversely affected.

Our business is dependent, in part, on our ability to innovate, and, as a result, we are reliant on our intellectual property. We generally protect our intellectual property through patents, trademarks, trade secrets, confidentiality and nondisclosure agreements and other measures to the extent our budget permits. There can be no assurance that patents will be issued from pending applications that we have filed or that our patents will be sufficient to protect our key technology from misappropriation or falling into the public domain, nor can assurances be made that any of our patents, patent applications, trademarks or our other intellectual property or proprietary rights will not be challenged, invalidated or circumvented. In addition, the level of protection of our proprietary technology varies by country and may be particularly uncertain in countries that do not have well developed judicial systems or laws that adequately protect intellectual property rights. Patent litigation and other challenges to our patents and other proprietary rights are costly and unpredictable and may prevent us from marketing and selling a product in a particular geographic area. Financial considerations also preclude us from seeking patent protection in every country where infringement litigation could arise. Our inability to predict our intellectual property requirements in all geographies and affordability constraints also impact our intellectual property protection investment decisions. If we are unable to protect our proprietary rights, we may be at a disadvantage to others who do not incur the substantial time and expense we incur to create our products. Preventing unauthorized use or infringement of our intellectual property rights is inherently difficult. Moreover, it may be difficult or practically impossible to detect theft or unauthorized use of our intellectual property. Any of the foregoing could have a material adverse effect upon our business, financial condition and results of operations.

Claims of intellectual property infringement by original equipment manufacturers and others could adversely affect our business and negatively impact our ability to develop new products.

From time to time in the ordinary course of our business we are subject to claims that we are infringing the intellectual property rights of original equipment manufacturers or others. An adverse finding against us in these or similar intellectual property disputes may have a material adverse effect on our business, financial condition and results of operations if we are not able to successfully develop or license non-infringing alternatives. In addition, an unfavorable ruling in intellectual property litigation could subject us to significant liability, increased legal expense, and require us to cease developing or selling the affected products or using the affected works of authorship or trademarks. Any significant restriction that impedes our ability to develop and commercialize our products could have a material adverse effect upon our business, financial condition and results of operations.

Failure to maintain the value of our brands could have an adverse effect on our reputation, cause us to incur significant costs and negatively impact our business.

Our brands are an important component of our value proposition and serve to distinguish our products from those of our competitors. We believe that our success depends, in part, on maintaining and enhancing the value of our brands and executing our brand strategies, which are designed to drive end-user demand for our products and make us a valued business partner to our customers through the support of their marketing initiatives. A decline in the reputation of our brands as a result of events, such as deficiencies or defects in the design or manufacture of our

products, or from legal proceedings, product recalls or warranty claims resulting from such deficiencies or defects, may harm our reputation, reduce demand for our products and adversely affect our business. In addition to the foregoing, certain of our customer agreements require us to supply them with private-label branded products. To the extent we use our own products to promote the brands of our customers over our own brands, our business may be adversely affected.

Cyber-attacks or other breaches of information technology security could adversely impact our business and operations.

Cyber-attacks or other breaches of network or information technology security may cause equipment failure, disruption to our operations or the loss or theft of sensitive data relating to our Company and its employees, customers, suppliers, and business partners, including intellectual property, proprietary business information, and other sensitive material. Such attacks, which include the use of malware, encryption, computer viruses and other means for disruption or unauthorized access, on companies have increased in frequency, scope and potential harm in recent years. We take preventive actions to reduce the risk of cyber incidents and protect our information technology and networks, including the data that is maintained within them. However, such preventative actions may be insufficient to repel a cyber-attack or other network breach in the future. Furthermore, because the techniques used to carry out cyber-attacks change frequently and in many instances are not recognized until after they are used against a target, we may be unable to anticipate these changes or implement adequate preventative measures. Moreover, we utilize third-party vendors that provide information technology services for areas such as customer order processing and human resources functions (e.g., payroll). While we generally require these vendors to monitor and protect their information technology systems against cyber-attacks and other breaches, their efforts may not be effective. To the extent that any disruption or security breach of one of our vendors’ systems results in a loss or damage to our data, loss or theft of our intellectual property, or unauthorized disclosure of confidential information, including information regarding our customers and the ultimate purchasers of our products, it could cause significant damage to our reputation, affect our relationship with our customers, suppliers and employees, and lead to claims against us and ultimately harm our business. Moreover, intruders that gain access to our intellectual property and trade secrets may attempt to use that information to harm our business, by developing competing or counterfeit products. Additionally, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future. Any such cyber-attacks and loss or theft of our intellectual property or unauthorized disclosure of confidential information could have a material adverse effect upon our business, financial condition and results of operations.

Risks Related to Our Capital Structure and Finances

Our business may be negatively impacted by foreign currency fluctuations and our dependence on foreign suppliers.

In fiscal 2020, approximately 77% of our products were purchased from suppliers in a variety of foreign countries, with the largest portion of our overseas purchases being made in China. The products generally are purchased through purchase orders with the purchase price specified in U.S. dollars. Accordingly, we generally do not have direct 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. The Chinese yuan to U.S. dollar exchange rate has fluctuated over the past several years, and, to the extent that the U.S. dollar decreases in value relative to the Chinese yuan or any other foreign currencies in the future, the prices of products in U.S. dollars for new purchase orders may increase.

As a result of the magnitude of our foreign sourcing, our business may be subject to various risks, including the following:

If these risks limit or prevent us from acquiring products from foreign suppliers or significantly increase the cost of our products, our operations could be seriously disrupted until alternative suppliers are found, which could have a material adverse effect upon our business, financial condition and results of operations.

We extend credit to our customers, some of whom may be unable to pay in the future.

We regularly extend credit to our customers. A significant percentage of our accounts receivable have been, and are expected to continue to be, concentrated among a relatively small number of automotive retailers and automotive parts distributors in the United States. Our four largest customers accounted for 82% of total accounts receivable as of December 26, 2020 and 80% of total accounts receivable as of December 28, 2019. In the ordinary course of business, management monitors credit terms, credit limits, and the availability of credit insurance for these and other customers. In addition, from time to time, some of the Company’s customers request increases in their credit limits. Such requests may pose incremental risks to the Company, either by increasing the credit limit for a customer and accepting additional financial risk of non-payment, or maintaining the credit limit and risking the customer redirecting business to another supplier offering better credit terms. If any of the Company’s customers were unable to pay, or if any of those customers redirect their business to other suppliers offering better credit terms, it could have a material adverse effect upon our business, financial condition and results of operations.

Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, could adversely affect our results of operations.

In fiscal 2020, approximately 77% of our products were purchased from suppliers in a variety of foreign countries. The U.S. government has adopted a new approach to trade policy and in some cases has attempted to renegotiate or terminate certain existing bilateral or multi-lateral trade agreements. It has also imposed tariffs on certain foreign goods, including steel and certain commercial vehicle parts, which have resulted in increased costs for goods imported into the United States. In response to these tariffs, a number of U.S. trading partners have imposed retaliatory tariffs on a wide range of U.S. products. If we are unable to pass price increases on to our customer base or otherwise mitigate the costs, or if demand for our products decreases due to the higher cost, our results of operations could be materially adversely affected. In addition, further tariffs have been proposed by the United States and its trading partners and additional trade restrictions could be implemented on a broader range of products or raw materials. The resulting environment of retaliatory trade or other practices could have a material adverse effect upon our business, financial condition, results of operations, customers, suppliers and the global economy.

Increasing our indebtedness could negatively affect our financial health.

We have an existing revolving credit facility of $100 million with Wells Fargo Bank, National Association, as administrative agent and lender, which, subject to certain requirements, gives us the ability to request increases of up to an incremental $100 million. As of December 26, 2020, although we did not have any borrowings outstanding, there were $0.8 million of issued but undrawn letters of credit outstanding under the credit agreement.

Our growth strategy includes reviewing and evaluating potential acquisitions, and we may utilize borrowings under our credit agreement to consummate transactions. Any significant increase in our indebtedness, whether in connection with acquisitions or otherwise, could increase our vulnerability to general adverse economic and industry conditions and limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate. Any such issue could have a material adverse effect upon our business, financial condition and results of operations

We are exposed to risks related to accounts receivable sales agreements.

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 without recourse. These agreements permit us to recover on our accounts receivable sooner than if they were not in place and help reduce the risk of non-payment by customers. Certain of our customers, however, do not offer the ability to participate in such sponsored programs. If we do not enter into these agreements, our financial condition, results of operations and cash flows could be materially and adversely affected by delays or failures in collecting trade accounts receivables. In addition, if any of the financial institutions with which we have these agreements experience financial difficulties or otherwise modify or terminate these agreements, we may experience material

and adverse economic losses due to the loss of such arrangements and the impact of such loss on our liquidity. The modification, termination or other loss of these arrangements could have a material and adverse effect upon our financial condition, results of operations and cash flows. The utility of these arrangements also depends upon LIBOR, as it is a component of the discount rate applicable to each arrangement. If LIBOR increases such that the cost of these arrangements becomes more than the cost of servicing our receivables with existing debt, we may not be able to rely on such arrangements, which could have a material adverse effect upon our business, financial condition and results of operations.

The phaseout of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate, may have an adverse effect on our business.

In July 2017, the United Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced that it would phase out LIBOR by the end of 2021. It is unclear whether new methods of calculating LIBOR will be established or if alternative rates or benchmarks will be adopted. Our credit agreement and all our accounts receivable sales agreements utilize LIBOR as a benchmark for calculating the applicable interest rate. Changes in the method of calculating LIBOR, the elimination of LIBOR or the replacement of LIBOR with an alternative rate or benchmark may require us to renegotiate or amend these facilities, loans and programs, which may adversely affect interest rates and result in higher borrowing costs. This could materially and adversely affect our results of operations, cash flows and liquidity. We cannot predict the effect of the potential changes to or elimination of LIBOR or the establishment and use of alternative rates or benchmarks and the corresponding effects upon our cost of capital.

Dorman’s Executive Chairman and his family members own a significant portion of the Company.

As of February 18, 2021, Steven L. Berman, our Executive Chairman, and his family members beneficially own approximately 18% of the Company’s outstanding common stock. As such, Mr. Berman and his family members can influence matters requiring approval of shareholders, including the election of the Board of Directors and the approval of significant transactions. Such concentration of ownership may have the effect of delaying, preventing or deterring a change in control of the Company, could deprive shareholders of an opportunity to receive a premium for their common stock as part of a sale of the Company and might ultimately affect the market price of our common stock.

General Risk Factors

Unfavorable Economic Conditions May Adversely Affect Our Business.economic conditions may adversely affect our business.

Adverse changes in economic conditions, including inflation, recession, increases in fuel prices, tariffs, unemployment levels, availability of consumer credit, taxation or instability in the financial markets or credit markets may either lower demand for our products or increase our operational costs, or both. Such conditions may also materially impact our customers, suppliers and other parties with whom we do business. Our revenue will be adversely affected if demand for our products declines. The impact of unfavorable economic conditions may also impair the ability of our customers to pay for products they have purchased. As a result, reserves for doubtful accounts and write-offs of accounts receivables may increase and failure to collect a significant portion of amounts due on those receivables could have a material adverse effect on our results of operations and financial condition.  

The Loss or Decrease in Sales Among One of Our Top Customers Could Have a Substantial Negative Impact on Our Sales and Operating Results.

A significant percentage of our sales has been, and is expected to be, concentrated among a relatively small number of customers. During fiscal 2017, fiscal 2016 and fiscal 2015, four customers (Advance, AutoZone, NAPA and O'Reilly) each accounted for more than 10% of net sales and in the aggregate accounted for approximately 61% of net sales in fiscal 2017, and 60% in each of fiscal 2016 and fiscal 2015. We anticipate that this concentration of sales among these customers will continue in the future. The loss of a significant customer or a substantial decrease in sales to such a customer could have a material adverse effect on our sales and operating results.

Customer Consolidation in the Automotive Aftermarket May Lead to Customer Contract Terms Less Favorable to Us Which May Negatively Impact Our Financial Results.

The automotive aftermarket has been consolidating over the past several years. By way of example, in January 2014, Advance Auto Parts acquired General Parts International, Inc. (Carquest), one of the largest automotive parts distributors. As a result of such consolidations, many of our customers have grown larger and therefore have more leverage in the arms-length negotiations of agreements with us for the sale of our products. Customers may require us to provide extended payment terms and returns of slow moving product in order to obtain new, or retain existing, business. While we attempt to avoid or minimize such concessions, in some cases payment terms to customers have been extended and returns of product have exceeded historical levels. The product returns primarily affect our profit levels while payment terms extensions generally reduce operating cash flow and require additional capital to finance our business. We expect both of these trends to continue for the foreseeable future.

Our Business May be Negatively Impacted By Foreign Currency Fluctuations and Our Dependence on Foreign Suppliers.

In fiscal 2017, approximately 71% of our products were purchased from auppliers 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 decreases in value relative to foreign currencies in the future, the price of the product in U.S. Dollars for new purchase orders may increase.

The largest portion of our overseas purchases is from China. However, the products generally are purchased through purchase orders with the purchase price specified in U.S. dollars. The Chinese Yuan to U.S. Dollar exchange rate has fluctuated over the past several years. Any future change in the value of the Chinese Yuan relative to the U.S. Dollar may impact the cost of products that we purchase from China.

As a result of the magnitude of our foreign sourcing, our business may be subject to various risks, including the following:

9

If these risks limit or prevent us from acquiring products from foreign suppliers or significantly increase the cost of our products, our operations could be seriously disrupted until alternative suppliers are found, which could negatively impact our business.

Additionally, we recently acquired a business based in Montreal, Canada, whose operations are conducted in both U.S. Dollar and Canadian Dollar currencies.  Since our consolidated financial statements are denominated in U.S. dollars, amounts of assets, liabilities, net sales, and other revenues and expenses denominated in local currencies must be translated into U.S. dollars using exchange rates for the current period.  As a result, foreign currency exchange rates and fluctuations in those rates could adversely impact our financial performance.

We Extend Credit to Our Customers Who May Be Unable to Pay In the Future.

We regularly extend credit to our customers.   A significant percentage of our accounts receivable have been, and expected to continue to be concentrated among a relatively small number of automotive retailers and automotive parts distributors in the United States. Our five largest customers accounted for 85% of total accounts receivable as of December 30, 2017 and 87% of total accounts receivable as of December 31, 2016. Management continually monitors the credit terms and credit limits of these and other customers. If any of these customers were unable to pay, our business and financial condition would be adversely affected.

The Loss of a Key Supplier Could Lead to Increased Costs and Lower Profit Margins.

The majority of the products we sell are purchased from a number of foreign suppliers.   If any of our key suppliers fail to meet our needs, it may not be possible to replace such supplier without a disruption in our operations. Furthermore, replacement of a key supplier is often at higher prices.

Limited Shelf Space May Adversely Affect Our Ability to Expand Our Product Offerings.

Since the amount of space available to a retailer and other purchasers of our products is limited, our products compete with other automotive aftermarket products, some of which are entirely dissimilar and otherwise non-competitive (such as car waxes and engine oil), for shelf and floor space. No assurance can be given that additional space will be available in our customers' stores to support any expansion of the number of products that we offer.

If We Do Not Continue to Develop New Products and Bring Them to Market, Our Business, Financial Condition and Results of Operations Could Be Materially Impacted.

The development and production of new products is often accompanied by design and production delays and related costs typically associated with the development and production of new products. While we expect and plan for such delays and related costs, we cannot predict with precision the time and expense required to overcome these initial problems so that the products comply with specifications.  There is a risk that we may not be able to introduce or bring to full-scale production new products as quickly as we expected in our product introduction plans, which could have a material adverse effect onupon our business, financial condition and results of operations.

We May Be Adversely Affected By Changes in Automotive TechnologyOur operations, revenues and Improvements inoperating results, and the Qualityoperations of New Vehicle Parts.

Our businessour third-party manufacturers, suppliers and financial conditioncustomers, may be adversely impacted by changes in automotive technologies, such as vehicles powered by fuel cells or electricity. These factors could result in less demand for our products thereby causing a decline in our business, financial condition, and results of operations.

10

In addition, improvements in quality by original equipment manufacturers could adversely affect our business. Generally, if original equipment parts last longer, there could be less demand for our products.

Claims of Intellectual Property Infringement by Original Equipment Manufacturers Could Adversely Affect Our Business and Negatively Impact Our Ability to Develop New Products.

From time to time in the past we have been subject to claims that we are infringing the intellectual property of others.  We currently are the subject of such claimsquarter over quarter fluctuations and it is possible that others will assert infringement claims against us in the future.  An adverse finding against us in thesedisruptions from events beyond our or similar intellectual property disputes may have a material adverse effect on our business, financial condition and results of operations if we are not able to successfully develop or license non-infringing alternatives.  In addition, an unfavorable ruling in intellectual property litigation could subject us to significant liability, increased legal expense, and require us to cease developing or selling the affected products or using the affected works of authorship or trademarks.  Any significant restriction that impedes our ability to develop and commercialize our products could have a material adverse effect on our business, financial condition and results of operations.

Quality Problems with Our Products Could Damage Our Reputation and Adversely Affect Our Business.

We have experienced, and in the future may experience, reliability, quality, or compatibility problems in products after their production and sale to customers.  Product quality problems could result in damage to our reputation, loss of customers, a decrease in revenue, litigation, unexpected expenses, and a loss of market share. We have invested and will continue to invest in our engineering, design, and quality infrastructure in an effort to reduce these problems; however, there can be no assurance that we can successfully remedy all of these issues.  To the extent we experience significant quality problems in the future, our business and results of operations may be negatively impacted.

Loss of Third-Party Transportation Providers Upon Whom We Depend or Increases in Fuel Prices Could Increase Our Costs or Cause a Disruption in Our Operations.

We depend upon third-party transportation providers for delivery of our products to us and to our customers. Strikes, slowdowns, transportation disruptions or other conditions in the transportation industry, including, but not limited to, shortages of truck drivers, disruptions in rail service, port congestion, or increases in fuel prices, could increase our costs and disrupt our operations and our ability to service our customers on a timely basis.

Unfavorable Results of Legal Proceedings Could Materially Adversely Affect Us.

We are subject to various legal proceedings and claims that have arisen out of the ordinary course of our business which are not yet resolved and additional claims may arise in the future.  Although we currently believe that resolving all of these matters, individually or in the aggregate, will not have a material adverse impact on our financial position, legal claims and proceedings are subject to inherent uncertainty and our view on these matters may change in the future.  Regardless of merit, litigation may be both time-consuming and disruptive to our operations and cause significant expense and diversion of management attention.  Should we fail to prevail in certain matters, we may be faced with significant monetary damages or injunctive relief that would materially adversely affect our business and financial condition and operating results.

Dorman’s Executive Chairman and His Family Members Own a Significant Portion of the Company.

As of January 1, 2018, Steven L. Berman, our Executive Chairman, and his family members beneficially own approximately 20% of the Company’s outstanding common stock.  As such, Mr. Berman and his family members can influence matters requiring approval of shareholders, including the election of the Board of Directors and the approval of significant transactions.  Such concentration of ownership may have the effect of delaying, preventing or deterring a change in control of the Company, could deprive shareholders of an opportunity to receive a premium for their common stock as part of a sale of the Company and might ultimately affect the market price of our common stock.

11

Our Operations, Revenues and Operating Results, and the Operations of Our Third Party Manufacturers, Suppliers and Customers, may be Subject to Quarter to Quarter Fluctuations and Disruptions from Events Beyond Our or Their Control.control.

Our operations, revenues and operating results, as well as the operations of our third partythird-party manufacturers, suppliers and customers, may be subject to quarter toover quarter fluctuations and disruptions from a variety of causes outside of our or their control, including work stoppages, market volatility, fuel prices, acts of war, terrorism, cyber incidents, pandemics, fire, earthquake, flooding, changes in weather patterns, weather or seasonal fluctuations or other climate-based changes, including hurricanes or tornadoes, or other natural disasters. If a major disruption were to occur at our operations or the operations of our third partythird-party manufacturers, suppliers or customers, it could result in harm to people or the natural environment, delays in shipments of products to customers or suspension of operations, any of which could have a material adverse effect onupon our business, revenuesfinancial condition and operating results.results of operations.

We rely extensively on our computer systems to manage inventory, process transactions and timely provide products to our customers. Our systems are subject to damage or interruption from power outages, telecommunications failures, computer viruses, security breaches, cyber-attacks or other catastrophic events. If our systems are damaged or fail to function properly, we may experience loss of critical data and interruptions or delays in our ability to manage inventories or process customer transactions. Such a disruption of our systems could negatively impact revenue and potentially have a negative impact on our results of operations, financial condition and cash flows.

Regulations Related to Conflict Minerals Could Adversely Impact Our Business.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) contains provisions to improve transparency and accountability concerning the supply of certain minerals, known as “conflict minerals”, originating from the Democratic Republic of Congo (“DRC”) and adjoining countries. These rules could adversely affect the sourcing, supply, and pricing of materials used in our products, as the number of suppliers who provide conflict-free minerals may be limited. We may also suffer reputational harm if we determine that certain of our products contain minerals not determined to be conflict-free or if we are unable to modify our products to avoid the use of such materials.  We may also face challenges in satisfying customers who may require that our products be certified as containing conflict-free minerals.

Cyber-attacks or Other Breaches of Information Technology Security Could Adversely Impact Our Business and Operations.

Cyber-attacks or other breaches of network or information technology security may cause equipment failure or disruption to our operations.  Such attacks, which include the use of malware, computer viruses and other means for disruption or unauthorized access, on companies have increased in frequency, scope and potential harm in recent years.  While, to the best of our knowledge, we have not been subject to cyber-attacks or to other cyber incidents which, individually or in the aggregate, have been material to our operations or financial conditions, the preventive actions we take to reduce the risk of cyber incidents and protect our information technology and networks may be insufficient to repel a major cyber-attack in the future.  To the extent that any disruption or security breach results in a loss or damage to our data or unauthorized disclosure of confidential information, it could cause significant damage to our reputation, affect our relationship with our customers, suppliers and employees, and lead to claims against us and ultimately harm our business.  Additionally, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

Imposition of New Taxes or Customs Duties on Our Products Could Adversely Affect Our Business.

In fiscal 2017, approximately 71% of our products were purchased from suppliers in a variety of foreign countries. Due to economic and political conditions, tax and duty rates on imported goods may be subject to significant change. The imposition or proposed imposition of new or increased taxes or duties on our products could increase the cost of our products or reduce overall consumption of our products, or both, particularly if tax or duty levels increased substantially relative to those for products manufactured in the United States. The imposition of new taxes on our products or any substantial increase in duty rates on our products could adversely affect our business, financial condition or results of operations.

12

We are Exposed To Risks Related to Accounts Receivable Sales Agreements.

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. The termination of these agreements could have a material adverse effect onupon our operating results and operating cash flow. Additionally, the interest rates of these agreements are tied to LIBOR. Increases in LIBOR could have a material adverse effect on ourbusiness, financial condition and results of operationsoperations.

Unfavorable results of legal proceedings could materially adversely affect us.

We are subject to various legal proceedings and operating cash flows.claims that arise out of the ordinary course of our business, such as those involving contracts, employment matters, competitive practices, intellectual property infringement and product liability claims. Legal proceedings and claims and associated internal investigations may be time-consuming and expensive to prosecute, defend or conduct. This may be true whether they are with or without merit and whether they are covered by insurance or not. They also may divert management’s attention and other resources; inhibit our ability to sell our products; result in adverse judgments for damages, injunctive relief, penalties and fines; and negatively affect our reputation, business, financial condition and results of operations. There can be no assurance regarding the outcome of current or future legal proceedings, claims or investigations.

The Market Pricemarket price of Our Common Stock May Be Volatileour common stock may be volatile and Could Expose Uscould expose us to Securities Class Action Litigation.securities class action litigation.

The stock market and the price of our common stock may be subject to wide fluctuations based upon general economic and market conditions. The market price for our common stock also may also be affected by our ability to meet analysts’ expectations. Failure to meet such expectations, even slightly, could have an adverse effect on the market price of our common stock. In addition, stock market volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of these companies. Downturns in the stock market may cause the price of our common stock to decline.

Following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against such companies. If similar litigation were instituted against us, it could result in substantial costs and a diversion of our management’s attention and resources, which could have ana material adverse effect onupon our business.business, financial condition and results of operations.

Losing the Servicesservices of Our Executive Officersour executive officers or Other Highly Qualifiedother highly qualified and Experienced Contributors Could Adversely Affect Our Business.experienced employees or failing to attract and retain any of such officers or employees could adversely affect our business.

Our future success depends upon the continued contributions of our executive officers and senior management, many of whom have numerous years of experience and would be extremely difficult to replace. We must also attract and maintainretain experienced and highly skilled engineering, sales and marketing, finance, logistics, and operations personnel. Competition for qualified personnel is often intense, and we may not be successful in hiring and retaining these people. In addition, we have seen an increase in demand for qualified workers in distribution centers, and, to the extent that drives higher wages for those roles versus other roles, our ability to attract talent and maintain a competitive cost structure may be challenged. If we lose the services of theseour key contributors oremployees, cannot attract and retain other qualified personnel or cannot maintain a competitive cost structure as a result of any of the foregoing, it could have a material adverse effect upon our business, could be adversely affected.financial condition and results of operations.

Our growth may be impacted by acquisitions. We may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully.

We may not be able to identify suitable acquisition candidates, complete acquisitions, or integrate acquisitions successfully. Our future growth is likely to depend to some degree on our ability to acquire and successfully integrate new businesses. We may not be able to identify suitable acquisition candidates, complete acquisitions, or integrate acquisitions successfully. We may seek additional acquisition opportunities, both to further diversify our businesses and to penetrate or expand important product offerings, geographies or markets. There are no assurances, however, that we will be able to successfully identify suitable candidates, negotiate appropriate terms, obtain financing on acceptable terms, complete proposed acquisitions, successfully integrate acquired businesses, or expand into new geographies or markets. Once acquired, operations may not achieve anticipated levels of revenues or profitability. Acquisitions involve risks, including difficulties in the integration of the operations, technologies, services and products of the acquired companies and the diversion of management's attention from other business concerns. Although our management will endeavor to evaluate the risks inherent in any particular transaction, there are no

assurances that we will properly ascertain all such risks. Difficulties encountered with acquisitions maycould have a material adverse effect onupon our business, financial condition and results of operations.

Changes in tax laws or exposure to additional income tax liabilities could have a material adverse effect upon our business, financial condition and results of operations.

ItemWe are subject to income taxes, as well as non-income-based taxes, at the federal, state and local levels. We are subject to tax audits in various jurisdictions. Tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcomes of these audits, and the actual outcomes of these audits could have a material adverse effect upon our business, financial condition and results of operations. Additionally, changes in tax laws or tax rulings could materially impact our effective tax rate.

Global climate change and related regulations could negatively affect our business.

The effects of climate change, such as extreme weather conditions, create financial risks to our business. For example, the demand for our products may be affected by unseasonable weather conditions. The effects of climate change could also disrupt our operations by impacting the availability and cost of materials needed for manufacturing and could increase insurance and other operating costs. We could also face indirect financial risks passed through the supply chain and disruptions that could result in increased prices for our products and the resources needed to produce them.

Climate change is continuing to receive ever increasing attention worldwide. Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which could lead to additional legislative and regulatory efforts to limit greenhouse gas emissions. For example, new federal or state restrictions on emissions of carbon dioxide that may be imposed on vehicles and automobile fuels could adversely affect demand for vehicles, annual miles driven or the products we sell or lead to changes in automotive technology. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require increased capital expenditures to improve our product portfolio to meet such new laws, regulations and standards. While we have been committed to continuous improvements to our product portfolio to meet and exceed anticipated regulatory standard levels, there can be no assurance that our commitments will be successful, that our products will be accepted by the market, that proposed regulation or deregulation will not have a negative competitive impact or that economic returns will reflect our investments in new product development.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws around the world.

The U.S. Foreign Corrupt Practices Act (the "FCPA") and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or other persons for the purpose of obtaining or retaining business. Recent years have seen a substantial increase in anti-bribery law enforcement activity, with more frequent and aggressive investigations and enforcement proceedings by both U.S. and non-U.S. regulators, and increases in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance with these anti-bribery laws. We operate in parts of the world that are recognized as having governmental and commercial corruption and local customs and practices that can be inconsistent with anti-bribery laws. We cannot assure you that our internal control policies and procedures will always protect us from reckless or criminal acts committed by our employees or third-party intermediaries. In the event that we believe or have reason to believe that our employees or agents have or may have violated applicable anti-corruption laws, or if we are subject to allegations of any such violations, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management. Violations of these laws may result in criminal or civil sanctions, which could disrupt our business and result in a material adverse effect on our reputation, business, financial condition and results of operations. In addition, we could be subject to commercial impacts such as lost revenue from customers who decline to do business with us as a result of such compliance matters, or we could be subject to lawsuits brought by private litigants, each of which could have a material adverse effect on our reputation, business, financial condition, and results of operations.

Our products are subject to import and export controls in jurisdictions in which we distribute or sell our products. Import and exports control and economic sanctions laws and regulations include restrictions and

prohibitions on the sale or supply of certain products and on our transfer of parts, components, and related technical information and know-how to certain countries, regions, governments, persons and entities.

Various countries regulate the importation of certain products through import permitting and licensing requirements and have enacted laws that could limit our ability to distribute our products. The exportation, re-exportation, transfers within foreign countries and importation of our products, including by our suppliers and vendors, must comply with these laws and regulations, and any violations may result in reputational harm, government investigations and penalties, and a denial or curtailment of importing or exporting activities. Complying with export control and sanctions laws for a particular sale may be time consuming, may increase our costs, and may result in the delay or loss of sales opportunities. If we are found to be in violation of U.S. sanctions or export control laws, or similar laws in other jurisdictions, we and the individuals working for us could incur substantial fines and penalties. Changes in export, sanctions or import laws or regulations may delay the introduction and sale of our products in the U.S. and international markets, require us to spend resources to seek necessary government authorizations or to develop different versions of our products, or, in some cases, prevent the export or import of our products to certain countries, regions, governments, persons or entities, which could adversely affect our business, financial condition and operating results.

ITEM 1B. Unresolved Staff Comments.

None

13

ItemITEM 2. Properties.Properties.

Facilities

As of December 30, 2017 have 1726, 2020, we had 16 warehouse and office facilities located throughout the United States, Canada, China, Taiwan and India.

Two of these facilities are owned and the remainder are leased. Our principal facilities are as follows:

ItemITEM 3. Legal Proceedings.

We are a partyThe information set forth under the heading “Other Contingencies” appearing in Note 11. “Commitments and Contingencies,” to or otherwise involvedthe Notes to Consolidated Financial Statements contained in legal proceedings that arise in the ordinary coursePART IV, ITEM 15 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 mattersthis report is immaterial.incorporated herein by reference.

ItemITEM 4. Mine Safety Disclosures.

Not Applicable

ItemITEM 4.1. Information about Our Executive Officers of the Registrant.Officers.

Executive Officers of the Registrant.

14

The following table sets forth certain information with respect to our executive officers:officers as of February 22, 2021:

Steven L. Berman became the Executive Chairman of the Company onin September 24, 2015. Additionally, Mr. Berman has served as a director of the Company and as Secretary and Treasurer of the Company since its inception in 1978. From January 30, 2011 to September 24, 2015, Mr. Berman served as Chairman of the Board and Chief Executive Officer of the Company and from October 24, 2007 to January 30, 2011, Mr. Berman served as President of the Company. Prior to October 24, 2007, Mr. Berman served as Executive Vice President of the Company.

Mathias J. Barton joined the Company in November 1999 as Senior Vice President, Chief Financial Officer. He became co-President of the Company in February 2011, President in August 2013, and President and Chief Executive Officer in September 2015.  Mr. Barton was appointed to our Board of Directors in January 2014.  Prior to joining the Company, Mr. Barton was Senior Vice President and Chief Financial Officer of Central Sprinkler Corporation, a manufacturer and distributor of automatic fire sprinklers, valves and component parts.  From May 1989 to September 1998, Mr. Barton was employed by Rapidforms, Inc., a manufacturer of business forms and other products, most recently as Executive Vice President and Chief Financial Officer.

Jeffrey L. Darby joined the Company in November 1998 as a National Account Manager.  He became Senior Vice President, Sales and Marketing in February 2011.  Prior to joining the Company, Mr. Darby worked for Federal Mogul Corporation/Moog Automotive, an automotive parts supplier, beginning in 1990.

Michael B. Kealey joined the Company in November 2002, as a Product Manager. He became Executive Vice President, Commercial in June 2017. He previously held the positions of Senior Vice President, Product from February 2011 through May 2017, Vice President – Product from January 2007 through January 2011, and Director – Product Management from April 2003 through December 2006. Prior to joining the Company, Mr. Kealey was employed by Eastern Warehouse Distributors, Inc., a distributor of automotive replacement parts, most recently as Vice President – Purchasing.

Kevin M. Olsen joined the Company in July 2016 as Senior Vice President and Chief Financial Officer. He became Executive Vice President, Chief Financial Officer in June 2017.2017, President and Chief Operating Officer in August 2018 and President and Chief Executive Officer in January 2019. Prior to joining the Company, Mr. Olsen was Chief Financial Officer of Colfax Fluid Handling, a division of Colfax Corporation, a diversified global manufacturing and engineering company that provides gas and fluid-handling and fabrication technology products and services to commercial and governmental customers around the world, from January 2013 through June 2016. Prior to joining Colfax, he served in progressively responsible management roles at the Forged Products Aero Turbine Division of Precision Castparts Corp, Crane Energy Flow Solutions, a division of Crane Co., Netshape Technologies, Inc., and Danaher Corporation. Prior thereto, Mr. Olsen performed public accounting work at PricewaterhouseCoopers LLP.

15

Joseph P. Braun joined the Company in April 2019 as Senior Vice President and General Counsel, and he was appointed Corporate Secretary in May 2019. Prior to joining the Company, Mr. Braun served as Chief Legal Officer and Corporate Secretary of Avantor, Inc., a leading, global provider of mission-critical products and services to customers in the life sciences and advanced technologies and applied materials industries. Prior to joining Avantor, he worked at Tyco International plc (now known as Johnson Controls International plc), a leading global provider of security, fire detection and suppression, and life safety products and services, where he served in positions of increasing responsibility, including, most recently, as Vice President, Mergers & Acquisitions. Mr. Braun began his legal career in private practice at various law firms, where he advised public and private companies on mergers and acquisitions and securities and corporate governance matters.

Jeffrey L. Darby joined the Company in November 1998 as a National Account Manager. He became Senior Vice President, Sales and Marketing in February 2011. He previously held the positions of Group Vice President from 2008 to 2010 and Vice President of Sales – Traditional and Key Accounts from 2006 to 2008. Prior to joining the Company, Mr. Darby worked for Federal Mogul Corporation/Moog Automotive, an automotive parts supplier, beginning in 1990.

David M. Hession joined the Company in February 2019 and was appointed to serve as the Company’s Senior Vice President and Chief Financial Officer effective March 2019. Mr. Hession was also appointed Treasurer in May 2019. Mr. Hession was Vice President, Chief Financial Officer of Johnsonville, LLC, a privately held manufacturer of sausage and other protein products, from May 2013 to January 2019. Prior to that time, Mr. Hession worked at McCormick & Company, Inc., a global leader in the manufacture, marketing and distribution of spices, seasonings and flavors to the entire food industry, where he served in various positions of increasing responsibility including, most recently, as Vice President Finance & Administration. Mr. Hession also previously held positions with Tradeout, Inc., a business-to-business Internet exchange for surplus inventory and fixed assets, and Xylum

Corporation, a development stage medical device manufacturer, and he performed management consulting work for Ernst & Young, LLP and Peterson Consulting LP.

Michael B. Kealey joined the Company in November 2002, as a Product Manager. He became Executive Vice President, Commercial in June 2017. He previously held the positions of Senior Vice President, Product from February 2011 through May 2017, Vice President – Product from January 2007 through January 2011, and Director – Product Management from April 2003 through December 2006. Prior to joining the Company, Mr. Kealey was employed by Eastern Warehouse Distributors, Inc., a distributor of automotive replacement parts, most recently as Vice President – Purchasing.

PART II

ItemITEM 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

Our shares of common stock are traded publicly on the NASDAQ Global Select Market under the ticker symbol “DORM”. At February 19, 201818, 2021, there were 203226 holders of record of our common stock. The range of high and low sales prices for our common stock for each quarterly period of fiscal 2017 and fiscal 2016 were as follows:

We do not anticipate paying cash dividends on our common stock in the foreseeable future. Any payment of future dividends will be at the discretion of our board of directors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, and other factors that our board of directors deems relevant.

For the information regarding our equity compensation plans, see ItemPART III ITEM 12, “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.”

Stock Performance Graph. Below is a line graph comparing the cumulative total shareholder return for our common stock with the cumulative total shareholder return for the Automotive Parts & Accessories Peer Group of the Morningstar Group Index (formerly Hemscott Group Index) and the NASDAQ Composite Market Index for the period from December 31, 201226, 2015 to December 31, 2017.26, 2020. The Automotive Parts & Accessories Peer Group is comprised of 140169 public companies and the information was furnished by Morningstar, Inc. through Zacks Investment Research, Inc. The graph assumes $100 invested on December 31, 201226, 2015 in our common stock and each of the indices, and that the dividends were reinvested when and as paid. In calculating the cumulative total shareholder returns, the companies included are weighted according to the stock market capitalization of such companies.

16

The stock price performance shown in the graph is not necessarily indicative of future price performance.

The performance graph and the information set forth therein shall not be deemed to be filed for purposes of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference in any filing made by us with the U.S. Securities and Exchange Commission, except as shall be expressly set forth by specific reference in such a filing.

Stock Repurchases

During the last thirteen weeks of the fiscal yearthree months ended December 30, 2017,26, 2020, we purchased shares of our common stock as follows:

ItemITEM 6. Selected Financial Data.Data

Not required.

17

ItemITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Statement Regarding Forward Looking“Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the Consolidated Financial Statements

Certain and related notes thereto included in PART II, ITEM 8 of this Annual Report on Form 10-K. The matters discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain certain forward-looking statements in this document constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. WhileForward-looking statements involve significant risks and uncertainties. See the “Statement Regarding Forward-Looking Statements” above and PART I, ITEM 1A, “Risk Factors” in this Annual Report on Form 10-K for additional information regarding forward-looking statements sometimes are presented with numerical specificity, they are based on various assumptions made by management regarding future circumstances over many of whichand 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, 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, loss of key suppliers, space limitations on our customers’ shelves, delay in the development and design of new products, improvements in new vehicle quality, claims of intellectual property infringement, quality problems, loss of third-party transportation providers, unfavorable results of legal proceedings, concentration of ownership, disruption from events beyond the Company’s control, risks associated with conflict minerals, risks associated with cyber-attacks, the imposition of new taxes or duties, the termination or modification of accounts receivable sales agreements, common stock market price volatility, loss of highly qualified Contributors, inability to acquire other businesses, and other risks and factors identified from time to time in the reports the Company files with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. For additional information concerning factors that could cause actual results to differ materially from the information containedthose anticipated in this report, reference is made to the information in “Part I, Item 1A Risk Factors.”  You should not place an undue reliance on forward-looking statements. Such statements speak onlyIn ITEM 7, we discuss fiscal 2020 and 2019 results and comparisons of fiscal 2020 results to fiscal 2019 results. Discussions of fiscal 2018 results and comparisons of fiscal 2019 results to fiscal 2018 results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in PART II, ITEM 7 of the dateCompany’s Annual Report on which they are made and we undertake no obligation to update publicly or revise any forward-looking statements, regardless of future developments orForm 10-K for the availability of new information.fiscal year ended December 28, 2019.

Overview

We believe we are aone of the leading suppliersuppliers of replacement parts and fasteners for passenger cars, light trucks, and heavy dutyheavy-duty trucks in the automotive aftermarket.  We distribute and marketaftermarket industry. As of December 26, 2020, we marketed approximately 216,000 different SKU’s81,000 distinct parts compared to approximately 78,000 as of automotive replacement parts,December 28, 2019, many of which we designdesigned and engineer. These SKU’sengineered. This number excludes private label stock keeping units and other variations in how we market, package and distribute our products, includes distinct parts of acquired companies and reflects distinct parts that have been discontinued at the end of their lifecycle. Our products are sold under our various brand names, under our customers’ private label brands or in bulk. We believe we are aone of the leading aftermarket suppliersuppliers of original equipmentOE “dealer exclusive” items. Original equipmentparts. OE “dealer exclusive” parts are those parts whichthat were traditionally available to consumers only from original equipmentOE 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 modules, and exhaust gas recirculation (EGR) coolers.coolers, and complex electronics modules.

We generate virtually all of our revenuesnet sales from customers in the North American automotive aftermarket industry, primarily in the United States. Our products are sold primarily through automotive aftermarket retailers;retailers, including through their on-line platforms; national, regional and local warehouse distributors and specialty markets; and salvage yards. We also distribute automotive replacementaftermarket parts outside the United States, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, the Middle East and Australia.

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,customers as well as our ability and the second and third quarters have the highest levelability of net sales.our suppliers to deliver products ordered by our customers. The introduction of new products and product lines to customers, as well as business acquisitions, may also cause significant fluctuations from quarter to quarter.

Early in 2019, we began the process of transferring operations of our existing distribution facility in Portland, Tennessee to a new, larger facility nearby. The new 800,000 square foot facility became fully operational in October 2019. In the second quarter of 2019, we began incurring additional costs related to start-up inefficiencies and duplication of facility overhead and operating costs primarily related to those facility consolidation activities. We began implementing productivity initiatives in the fourth quarter of 2019 to address those inefficiencies and costs while at the same time expanding the facility to cover an aggregate of approximately 1 million square feet, which expansion was completed in June 2020. During 2020, we implemented initiatives to improve productivity levels at the new facility, which resulted in distribution costs returning to levels more in-line with our expectations.

We operate on a fifty-two, fifty-three week period ended on the last Saturday of the calendar year. The fiscal years ended December 30, 201726, 2020 (“fiscal 2020”), December 28, 2019 (“fiscal 2019”) and December 26, 201529, 2018 (“fiscal 2018”) were fifty-two week periods. The fiscal year ended December 31, 2016 was a fifty-three week period.

18

Business Performance Summary

We achieved record net sales and net income in fiscal 2017.  Net sales increased 5% over10% to $1,092.7 million in fiscal 2016 levels to $903.22020 from $991.3 million in fiscal 2019, while net income increased 1%28% to $106.6 million.$106.9 million in fiscal 2020 from $83.8 million in fiscal 2019. Additionally, in fiscal 2020 we generated $94.2 million of cash flows from operations of $152.0 million and repurchased approximately $76.1 million439,275 common shares under our share repurchase program for $36.8 million.

Impacts of COVID-19

The COVID-19 pandemic has resulted and is expected to continue to result in significant economic disruption. Since COVID-19 was declared a pandemic in early 2020, state orders shutting down or restricting business operations to contain the spread of COVID-19 have generally exempted automotive repair and the related supply and distribution of parts as those businesses have generally been classified as critical, essential or life-sustaining. Therefore, the vast majority of our outstanding common stock. We believe our strong financial resultsretail and wholesale customers have been drivenand currently remain open for business. In turn, all of our U.S. facilities have also remained, and currently remain, open and operating, with modified staffing in certain locations where appropriate. We have taken actions to promote the welfare of our employees by enhancing safety protocols, including requiring administrative employees to work from home where applicable and implementing symptom screening, social distancing and robust sanitization practices at our facilities. We also have adopted a COVID-19 sick leave policy providing continued investmentssalary and benefits to eligible employees. We have had to adjust our operations and inventory levels as demand has fluctuated due to government-imposed restrictions being imposed and then subsequently lifted or modified across the United States.

In late March 2020, we began experiencing softening customer demand as a result of government-imposed restrictions designed to slow the spread of COVID-19. While customer orders dropped significantly early in new product development,the second quarter of 2020 due to government-imposed restrictions, we saw a thoughtful approachrapid recovery as the second quarter progressed with June orders up above June 2019 levels. We continued to acquisitions,see an increase in orders in the third and fourth quarters of 2020, with third and fourth quarter net sales reaching record highs for the Company. At the same time, these favorable results were partially offset by increased freight costs due to global supply chain pressures and industry dynamics,constraints related to the ongoing COVID-19 pandemic.

As government-imposed restrictions vary and continue to change across the United States and elsewhere around the world, it remains difficult to determine the full impact that the pandemic will have on the overall demand environment as well as our ability to source parts and other economic factors.materials to meet demand levels. Correspondingly, to the extent there may be fluctuations in demand or delays or increased costs impacting our ability to source parts and other materials, it remains difficult to determine the full impact that the pandemic will have on various aspects of our operations, including, but not limited to, inventory levels, our ability to fulfill contractual requirements and staffing at our facilities.

At the time of this filing and as we look ahead, we are unable to determine or predict the overall impact the COVID-19 pandemic will have on our customers, vendors and suppliers or our business, results of operations, liquidity or capital resources. Significant uncertainty still exists concerning the overall magnitude of the impact and the duration of the COVID-19 pandemic. As a result, we will continue to closely monitor updates regarding the spread of COVID-19 and its variants and the distribution of vaccines developed to combat COVID-19, and we will adjust our operations according to guidelines from local, state and federal officials. In light of the foregoing, we may take further actions that alter our business operations or that we determine are in the best interests of our employees, customers, suppliers and shareholders.

New Product Development

New product development is a criticalan important success factor for us and istraditionally has been 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 have been in the form of increased product development resources, increased customer and end-user awareness programs, and customer service improvements. These investments historically have enabled us to provide an expanding array of new product offerings and grow revenues at levels that exceedgenerally have exceeded market growth rates. As a result of these investments,

In fiscal 2020, we introduced 4,0793,479 new productsdistinct parts to our customers and end usersend-users, including 1,433 “New-to-the-Aftermarket” parts. We reduced new product activity in fiscal 2017, including 1,192 “Newthe first half of 2020 due to uncertainties related to COVID-19 but increased new product development and commercialization in the Aftermarket” SKU’s.  second half of 2020 as overall market demand rebounded. As a result, we ended the year with lower new product introductions than the prior year. Development activities have returned to prior levels and we expect to return to our historical levels of performance in 2021. Please see ITEM 1, “Business – Product Development” for a year-over-year comparison of new product introductions.

OurOne area of focus has been our complex electronics program, which capitalizes on the growing number of electronic components being utilized on today’s Original EquipmentOE platforms. Current production modelsNew vehicles contain an average of approximately thirty fivethirty-five electronic modules, with some high-end luxury vehicles containing over one hundred modules. Our

complex electronics products are designed and developed in housein-house and extensively tested to help ensure consistent performance, and our product portfolio is focused on further developing Dorman’sour leadership position in the category.

In 2012, we introducedAnother area of focus has been on Dorman^® HD Solutions™, a new line of products to be marketedwe market for the medium and heavy dutyheavy-duty truck aftermarket.sector of the automotive aftermarket industry. We believe that this marketsector provides many of the same opportunities for growth that the passenger car and light truck sector of the automotive aftermarket industry has provided us over the past several years.  Our focus here is onus. Through Dorman^® HD Solutions™, we specialize in what formerly were “dealer only”exclusive” parts similar to how we have approached the automotive side of the business. We launched the initial program with a limited offering, but have made additional investmentspassenger car and light-duty truck sector. During fiscal 2020, we introduced 458 distinct parts in new product development efforts to expand our product offering.  We currently have approximately 1,060 SKU’s in our medium and heavy dutythis product line. We willexpect to continue to invest aggressively in the medium and heavy dutyheavy-duty product category.

Acquisitions

Our growthPart of our strategy is also impacted byto grow our business through acquisitions. For example, in October 2017,on January 2, 2020, we acquired MASthe remaining 60% of the outstanding stock of Power Train Industries, Inc. (“PTI”) and in August 2018, we acquired Flight Systems Automotive Distributors, Inc.Group L.L.C. (“MAS Industries” or “MAS”Flight”). We believe MAS isPTI and Flight are highly complementary to our business and growth strategy. We may acquire businesses in the future to supplement our financial growth, increase our customer base, add to our distribution capabilities or enhance our product development resources.resources, among other reasons.

Economic Factors

VehicleThe Company’s financial results are also impacted by various economic and industry factors, including, but not limited to the number, age and condition of vehicles in operation at any one time, and miles driven by those vehicles.

Vehicles in Operation

The Company’s products are primarily purchased and installed on a subsegment of the passenger and light duty vehicles in operation in the United States (“VIO”), specifically weighted towards vehicles aged 8 to 13 years old. Each year, the United States seasonally adjusted annual rate (“US SAAR”) of new vehicles purchased adds a new year to the VIO. According to data from the Auto Care Association (“Auto Care”), the US SAAR experienced a decline from 2008 to 2011 as consumers purchased fewer new vehicles as a result of the Great Recession of 2008. We believe that the declining US SAAR during that period resulted in a follow-on decline in our primary VIO subsegment (8 to 13-year-old vehicles) commencing in 2016. However, following 2011 and the impact of the Great Recession of 2008, U.S. consumers began to increase their purchases of new vehicles which over time caused the US SAAR to recover and return to more historical levels. Consequently, subject to any potential impacts from COVID-19, we expect the VIO for vehicles aged 8 to 13 years old to continue to recover over the next several years.

In addition, we believe that vehicle owners operategenerally are operating their current vehicles longer than they did several years ago. As a result, owners performago, performing necessary repairs and maintenance in order to keep those vehicles well maintained. We believe this trend has resulted in an increase in VIO. According to data published by Polk, a division of IHS Automotive, the average age of vehicles was 11.7VIO increased to 12.0 years as of January 2017, which is an increaseOctober 2020 from 11.611.9 years as of November 2016October 2019 despite increasing new car sales. Additionally, while the number of vehicles in operationVIO in the United States continuesdecreased 4% in 2020 to increase, growing 2.4% in 2017 to 278.6279.8 million from 272.0290.0 million in 2016.  Approximately 48%2019, the number of vehicles in operationVIO that are 11 years old or older.older increased from 57% in 2019 to 60% in 2020. Vehicle scrappage rates have also decreased over the last several years.

Miles Driven

The number of miles driven is another important statistic that impacts our business.  AccordingCOVID-19 pandemic in general, as well as restrictions imposed by certain states in response to the United StatesCOVID-19 pandemic, are adversely impacting work-related and personal travel. In fact, according the U.S. Department of Transportation, the number of miles driven through October 2020 has increased eachdecreased 13.9% year since 2011 withover year due to the impacts of the COVID-19 pandemic. We believe that demand for our products is negatively impacted by the decrease to miles driven, having increased 1.3% as of December 2017 as compared to December 2016. Generally, as vehicles are driven more miles, the more likely it is that parts will fail.  The combination of the factors above has accountedresulting in a reduction in vehicle maintenance and reduced demand for a portion of our sales growth.parts.

Competition among our customer base continues to increase. As a result, while, prior to COVID-19, we might have expected to see additional sales growth due to the VIO and mileage trends referenced above, the impact of COVID-19 may adversely affect our sales growth potential and our future results.

Brand Protection

We operate in a highly competitive market. As a result, we are continuously evaluating our approach to brand, pricing and terms to our different customers and channels. For example, in the third quarter of 2019, we modified our brand protection policy, which is designed to ensure that certain products bearing the Dorman name are not advertised below certain approved pricing levels.

Discounts, Allowances, and Incentives

We offer a variety of customer discounts, rebates, defective and slowing moving product returns and other incentives. We may offer cash discounts for paying invoices in accordance with the specified discount terms of the invoice. In addition, we may offer pricing discounts based on volume purchased from us or other pricing discounts related to programs under a customer’s agreement. These discounts can be in the form of “off-invoice” discounts and are immediately deducted from sales at the time of sale. For those customers that choose to receive a payment on a quarterly or annual basis instead of “off-invoice,” we accrue for such payments as the related sales are made and reduce sales accordingly. Finally, rebates and discounts are provided to customers to support promotional activities such as advertising and sales force allowances.

Our customers, particularly our larger retail customers, regularly seek more favorable pricing and product return provisions, and extended payment terms when negotiating with us. We attempt

19

to avoid or minimize these concessions as much as possible, but we have granted pricing concessions, indemnification rights, extended customer payment terms, and allowed a higher level of product returns in certain cases. These concessions impact net sales as well as our profit levels and may require additional capital to finance the business. We expect our customers to continue to exert pressure on our margins.

New Customer Acquisition Costs

New customer acquisition costs refer to arrangements under which we incur change-over costs to induce a customer to switch from a competitor’s brand. Change-over costs include the costs related to removing the new customer’s inventory and replacing it with our inventory, which is commonly referred to as a stock-lift. New customer acquisition costs are recorded as a reduction to revenue when incurred.

Product Warranty and Overstock Returns

Many of our products carry a lifetime limited warranty, which generally covers defects in materials or workmanship and failure to meet specifications. In addition to warranty returns, we also may permit our customers to return new, undamaged products to us within customer-specific limits if they have overstocked their inventories. At the time products are sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established using historical information on the nature, frequency and average cost of the claim and the probability of the customer return. Significant judgments and estimates must be made and used in connection with establishing the sales returns and other allowances in any accounting period. Revision to these estimates is made when necessary, based upon changes in these factors. We regularly study trends of such claims.

Foreign Currency

Our recent acquisition of MAS increases our exposures to foreign currencies.  MAS is headquartered in Montreal, Canada, and its financial transactions occur in both U.S. Dollars and Canadian Dollars.  Since our consolidated financial statementsproducts are denominated in U.S. Dollars, the assets, liabilities, net sales, and expenses of MAS which are denominated in currencies other than the U.S. Dollar must be converted into U.S. Dollars using exchange rates for the current period.  As a result, fluctuations in foreign currency exchange rates may impact our financial results.

In fiscal 2017, approximately 71% of our products were purchased from suppliers in the United States and a variety of foreignnon-U.S. countries. The products generally are purchased through purchase orders with the purchase price specified in U.S. Dollars.dollars. Accordingly, we generally do not have exposure to fluctuations in the relationship between the U.S. Dollardollar 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. Dollardollar 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.dollars.

The largest portion of our overseas purchases comes from China. The Chinese Yuanyuan to U.S. Dollardollar exchange rate has fluctuated over the past several years. Any future changes in the value of the Chinese Yuanyuan relative to the U.S. Dollardollar may result in a change in the cost of products that we purchase from China. However, the cost of the products we procure is also affected by other factors including raw material availability, labor cost, and transportation costs, and other factors.costs.

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 ofof 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, capacity constraints and other factors. We will attempt to offset cost increases by passing along selling price increases to customers and using alternative suppliers and by sourcing purchases from other countries.suppliers. However, there can be no assurance that we will be successful in these efforts.

Impact of Tariffs

Effective the third quarter of 2018, the Office of the United States Trade Representative (USTR) imposed three additional tranches of tariffs on approximately $250 billion worth of Chinese imports. Tariffs ranged from 10% to 25% depending on the commodity. Effective for shipments departing China on or after May 10, 2019, the USTR modified the tranches to impose tariffs of 25% for all commodities. In addition, effective September 1, 2019, the USTR imposed the fourth tranche of tariffs on approximately $300 billion worth of Chinese imports with a tariff rate of 15%, which was reduced to 7.5% in February 2020. The tariffs enacted to date will increase the cost of many products that are manufactured for us in China. We have taken several actions to mitigate the impact of the tariffs including, but not limited to, price increases to our customers and cost concessions from our suppliers. We expect to continue mitigating the impact of tariffs in fiscal 2020 primarily through selling price increases to offset the higher tariffs incurred. Tariffs are not expected to have a material impact on our net income but are expected to increase net sales and lower our gross and operating profit margins to the extent that these additional costs are passed through to customers.

In January 2020, the U.S. and Chinese governments signed a trade deal that reduced some U.S. tariffs on Chinese goods in exchange for Chinese pledges to, among other things, purchase more of American farm, energy and manufactured goods. In addition, the USTR has granted temporary tariff relief for certain categories of products being imported from China. However, the tariff relief granted by the USTR expired on most categories of products being imported from China at the end of 2020 and has not been extended. We expect that we will reverse tariff-related price increases previously passed along to our customers and cost concessions previously received from our suppliers as such tariffs are reduced or such other relief is granted.

Results of Operations

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

* Percentage of sales information doesmay not add due to rounding

20

Fiscal Year Ended December 30, 201726, 2020 Compared to Fiscal Year Ended December 31, 201628, 2019

Net sales increased 5%10% to $903.2$1,092.7 million in fiscal 20172020 from $859.6$991.3 million in fiscal 2016. Our revenue growth2019. The increase in net sales was primarily organic and driven by overall strong demand for our products which was partially offset by an additional weekincreased volumes, particularly in the second half of sales in fiscal 2016. Additionally, the MAS acquisition accounted for approximately $7.0 million of sales in fiscal 2017.2020.

Gross profit margin was 39.7%35.1% of net sales in fiscal 20172020 compared to 39.3%34.3% of net sales in fiscal 2016.  The2019. Gross margin expansion was driven by improved efficiencies, as well as lower provisions for excess and obsolete inventory as part of our ongoing efforts to streamline our end-to-end supply chain processes. Additionally, we benefitted from the absence of certain charges that impacted gross margin in the prior year, including increased gross profit margin was primarily duecustomer return provisions and a charge related to a favorable sales mix towards higher margin products, leveragehistorical underpayment of costs across higher sales volume, and material price decreases whichcustoms duties. These benefits were partially offset by lower overall selling prices during fiscal 2017 compared to fiscal 2016. Additionally, 2017 gross profit margin was negatively impacted by inventory fair value adjustmentsout-of-pocket costs related to MAS of $0.6 million.the COVID-19 pandemic.

Selling, general and administrative expenses were $182.4$249.7 million, or 20.2%22.9% of net sales, in fiscal 20172020 compared to $169.5$234.0 million, or 19.7%23.6% of net sales, in fiscal 2016.  2019. The increasedecrease in selling, general and administrative expense as a percentage of net sales during the period was primarily due to improved leverage from the $101.4 million increase in net sales compared to the prior year, productivity improvements in our Portland distribution facility, as well as reduced travel expenses stemming from COVID-19 restrictions. These decreases were partially offset by higher variable costs associated with our 5% sales growth, $5.9incentive compensation and employee stock purchase plan expenses compared to the prior year.

Other Income, net was $2.4 million in fiscal 2020 which includes a gain of general wage and fringe inflation, $2.5 million recognized as the difference between the carrying value of increased expenses related toour previously held equity method investment in PTI and the accounts receivable sales program, and $1.0 million of acquisition related costs. Provisions for doubtful accounts were $0.9 million lessimplied fair value when we acquired PTI fully in fiscal 2017 compared to fiscal 2016, partially offsetting the increases noted above.January 2020.

Our effective tax rate increased to 39.6%21.3% in fiscal 20172020 from 37.0%20.8% in fiscal 2016.2019. The increase was primarily attributable to increased provisions for state income taxes in fiscal 2017 compared to fiscal 2016 and approximately $4.4 million of expense resulting from the revaluation of net deferred tax assets due to the adoption of the Tax Cuts and Jobs Act.

Fiscal Year Ended December 31, 2016 Compared to Fiscal Year Ended December 26, 2015

Net sales increased 7% to $859.6 million in fiscal 2016 from $803.0 in fiscal 2015. Our revenue growth was driven by overall strong demand for our products and an additional week of sales in fiscal 2016.

Gross profit margin was 39.3% in fiscal 2016 compared to 38.4% in fiscal 2015.  The increased gross profit margin was primarily due to a favorable sales mix towards higher margin products, leverage of costs across higher sales volume, and approximately $2.1 million of lower inventory provisions which were partially offset by lower overall selling prices during fiscal 2016 compared to fiscal 2015.

Selling, general and administrative expenses were $169.5 million, or 19.7% of net sales, in fiscal 2016 compared to $161.9 million, or 20.2% of net sales, in fiscal 2015.  The increase in expense was primarily due to higher variable costs associated with our 7% sales growth, $2.8 million of general wage and fringe inflation, and $1.7 million of increased expenses related to the accounts receivable sales program. Provisions for doubtful accounts were $2.1 million less in fiscal 2016 compared to fiscal 2015, partially offsetting the increases noted above.

Our effective tax rate increased primarily due to 37.0%an increase in fiscal 2016 from 36.7% in fiscal 2015.  The increase was primarily attributable to increased provisions for state income taxes in fiscal 2016 compared to fiscal 2015.tax and higher income of foreign entities included within the consolidated U.S. tax group.

Liquidity and Capital Resources

Historically, our primary sources of liquidity have been our invested cash and the cash flow we generate from our operations, including accounts receivable sales programs provided by certain customers. Cash and cash equivalents at December 30, 2017 decreased26, 2020 increased to $71.7$155.6 million from $149.1$68.4 million at December 31, 2016.28, 2019. Working capital was $422.1$600.3 million at December 30, 201726, 2020 compared to $447.8$534.1 million at December 31, 2016.28, 2019. Shareholders’ equity was $634.8$853.6 million at December 30, 201726, 2020 and $601.6$773.6 million at December 31, 2016.  28, 2019. 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, the outcome of contingencies or other factors. See Note 11, “Commitments and Contingencies”, in the accompanying consolidated financial statements for additional information regarding commitments and contingencies that may affect our liquidity.

Tariffs

Tariffs increase our uses of cash since we pay for the tariffs upon the arrival of our goods in the United States but collect the cash on any passthrough price increases from our customers on a delayed basis according to the payment terms negotiated with our customers.

Payment Terms and Accounts Receivable Sales Programs

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 have significantly impactedsignificant uses of cash flows. We participate in accounts receivable sales programs with several

21

customers whichthat allow us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment terms extensions. However, any sales of accounts receivable through these programs ultimately result in us receiving a lesser amount of cash than if we collected those accounts receivable ourselves in due course. Moreover, to the extent that any of these accounts receivable sales programs bear interest rates tied to the London Inter-Bank Offered Rate (“LIBOR”), as LIBOR rates increase our cost to sell our receivables also increases. See ITEM 7A, “Quantitative and Qualitative Disclosures about Market Risk” for more information. During fiscal 20172020 and fiscal 2016,2019, we sold approximately $582.9$740.0 million and $521.9$676.4 million, respectively, under these programs. If receivables had not been sold, $505.1 million and $437.9 million of additional receivables would have been outstanding at December 26, 2020 and December 28, 2019, respectively, based on standard payment terms. We had the abilitycapacity to sell significantly more accounts receivable under these programs if the needs of the business warranted.  We expectwarranted, whether due to continued pressure to extend our payment terms for the foreseeable future.impacts of COVID-19 or other factors. Further extensions of customer payment terms willwould result in additional uses of cash flow or increased costs associated with the salesales of accounts receivable.

In December 2017, we entered intoCredit Agreement

We have a credit agreement, which will expireexpiring in December 2022.  This agreement2022, that provides for an initiala revolving credit facility of $ 100.0$100.0 million and, subject to certain requirements, gives us the ability to request increases in revolving credit commitments of up to an incremental $ 100.0additional $100.0 million.  This agreement replaces our previous $ 30.0 million credit agreement. Borrowings under the facilitycredit agreement are on an unsecured basis withbasis. At the Company’s election, the interest rates rangingrate applicable to borrowings under the credit agreement will be either (1) the Prime Rate as announced by Wells Fargo from time to time, (2) an Adjusted LIBOR Market Index Rate as measured by the LIBOR Market Index Rate plus the Applicable Margin which fluctuates between 65 basis points to LIBOR plusand 125 basis points based uponon the ratio of consolidated funded debtthe Company’s Consolidated Funded Debt to consolidatedConsolidated EBITDA, or

(3) an Adjusted LIBOR Rate as definedmeasured by the credit agreement. LIBOR Rate plus the Applicable Margin which fluctuates between 65 basis points and 125 basis points based on the ratio of the Company’s Consolidated Funded Debt to Consolidated EBITDA. The interest rate at December 30, 201726, 2020 was LIBOR plus 65 basis points (2.22%(0.80%). During the occurrence and continuance of an event of default, all outstanding revolving credit loans will bear interest at a rate per annum equal to 2.00% in excess of the greater of (1) the Prime Rate or (2) the Adjusted LIBOR Market Index Rate then applicable. The credit agreement also contains other covenants, including those related to the ratio of certain consolidated fixed changescharges to consolidated EBITDA, capital expenditures, and share repurchases, each as defined by the credit agreement. As of December 26, 2020, we were not in default in respect to the credit agreement. The newcredit agreement also requires us to pay an unuseda fee of 0.10% on the average daily unused portion of the facility, provided the fee will not be charged on the first $30 million of the revolving credit facility. As of December 30, 2017, we were in compliance with all financial covenants contained in the credit agreement. As of December 30, 2017,26, 2020, there were no borrowings under the facilitycredit agreement and we had two outstanding letters of credit for approximately $ 0.8$0.8 million in the aggregate which were issued to secure ordinary course of business transactions. Net of these letters of credit, we had approximately $ 99.2$99.2 million available under the facilitycredit agreement at December 30, 201726, 2020.

Cash Flows

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

During fiscal 2017,2020, cash provided by operating activities was $94.2$152.0 million, primarily as a result of $106.6$106.9 million in net income, non-cash adjustments to net income of $30.4$28.1 million and a net increasedecrease in operating assetsworking capital of $16.5 million. Accrued customer rebates and liabilitiesreturns increased $49.8 million due to higher sales volume in the second half of $42.7 million.2020 and timing of payments to customers. Accounts payable increased by $25.3 million due to the timing of payments to our vendors. Accounts receivable increased $5.7$67.4 million due to increasedhigher net sales and the timing of cash receipts at year end.sales. Inventory increased $25.1$12.3 million due to higher inventory purchases to support new product launches and to improvemaintain customer fill rates. Accounts payable increased by $3.7 million due to increased inventory and the timing of payments to our vendors. Other assets and liabilities, net, increased $15.6decreased $21.1 million in fiscal 2020 primarily due to an increase in long-term core inventory and a decrease in customer rebates which we expect to settle in cash.higher incentive compensation accruals.

During fiscal 2016,2019, cash provided by operating activities was $121.5$95.3 million, primarily as a result of $106.0$83.8 million in net income, non-cash adjustments to net income of $17.6$30.1 million and a net increase in operating assets and liabilitiesworking capital of $2.1$18.5 million. Accounts receivable increased $27.8decreased $8.8 million due to increased net sales and the timing and factoring of cash receipts at year end.receivables during the year. Inventory decreased $24.9increased $11.0 million due to lowerhigher inventory purchases to support new product launches and the effects of several inventory management initiatives.maintain customer fill rates as we consolidated facilities. Accounts payable increaseddecreased by $8.7$19.1 million due to the timing of payments to our vendors. Other assets and liabilities, net, increased $7.8 million primarily due to an increase in long-term core inventory and a decrease in customer rebates which we expect to settle in cash.$6.3 million.

During fiscal 2015, cash provided by operating activities was $92.1 million primarily as a result of $92.3 million in net income, non-cash adjustments to net income of $15.2 million and a net increase in operating assets and liabilities of $15.4 million.  Accounts receivable increased $1.1 million due to the timing of cash receipts at year end. Inventory increased $20.2 million to support new product initiatives and sales growth. Accounts payable increased by $5.4 million due to inventory purchases and the timing of payments to our vendors.

22

Investing activities used $94.4$30.3 million and $29.6 million of cash in fiscal 2017, $26.3 million of cash in fiscal 2016,2020 and $23.8 million of cash in fiscal 2015.  2019, respectively.

Cash used in financing activities was $77.3$34.5 million and $40.9 million in fiscal 2017, $24.8 million in2020 and fiscal 2016, and $37.2 million in fiscal 2015.2019, respectively.

Contractual Obligations and Commercial Commitments

We have obligations for future minimum rental payments and similar commitments under non-cancellable operating leases as well as contingent obligations related to outstanding letters of credit. These obligations as of December 30, 201726, 2020 are summarized in the tables below (in thousands):

We have excluded from the table above contingent consideration related to the acquisition of MASacquisitions due to the uncertainty of the amount of payment. As of December 30, 2017,26, 2020, the Company has accrued approximately $8.0 million which represents the fair value of the estimated payments whichthat will become due in connection with certain prior acquisitions if certain sales thresholdsperformance targets are achieved through December 2020, and will be paid out in 2021(see Note 3, Business Acquisitions and Investments, to the Consolidated Financial Statements included in this Annual Report on Form 10-K).achieved.

Additionally, we have excluded from the table above unrecognized tax benefits due to the uncertainty of the amount and period of payment. As of December 30, 2017,26, 2020, the Company has gross unrecognized tax benefits of $2.3

23

million$1.1 million. (see Note 10, Income Taxes, to the Consolidated Financial Statements included in this Annual Report on Form 10-K).

Off-Balance Sheet Arrangements

Off-balance sheet arrangements are transactions, agreements, or other contractual arrangements with an unconsolidated entity for which we have an obligation to the entity that is not recorded in our consolidated financial statements. We historically have not utilized off-balance sheet financial instruments, and currently do not plan to utilize off-balance sheet arrangements in the future to fund our working capital requirements, operations or growth plans.

We may issue stand-by letters of credit under the revolvingour credit facility.agreement. Letters of credit totaling $0.8 million were outstanding at both December 30, 201726, 2020 and $1.0 million at December 31, 2016, respectively.28, 2019. Those letters of credit are issued primarily to satisfy the requirements of workers compensation, general liability and other insurance policies. Each of the outstanding letters of credit has a one-year term from the date of issuance.

Other than in connection with executing operating leases, weWe do not have any off-balance sheet financing that has, or is reasonably likely to have, a material, current or future effect on our financial condition, revenues, expenses, cash flows, results of operations, liquidity, capital expenditures or capital resources. See "Contractual Obligations and Commercial Commitments" and Note 8, Operating Lease Commitments and Rent Expense, to the Consolidated Financial Statements included in this Annual Report on Form 10-K for information on our operating leases.

Related-Party Transactions

We have a noncancelabletwo non-cancelable operating leaseleases for our primary operating facilityfacilities from a partnershipcompanies in which Steven L. Berman, our Executive Chairman, and his family members are partners. Total annual rental payments each year to the partnershipthose companies under the lease arrangement wasarrangements were $1.8 million and $1.6 million in each of fiscal 2017, fiscal 2016,2020 and fiscal 2015.2019, respectively. In the opinion of our Audit Committee, the terms and rates of this leasethese leases are no less favorable than those which could have been obtained from an unaffiliated party when the lease was renewed in November 2016.

Additionally, we have a non-cancelable operating lease for our Canadian operating facility from a corporation of which an employee and his family members are owners. Total rental payments to the corporation under the lease agreementleases were $0.1 million in fiscal 2017. We did not make any payments to the corporation in fiscal 2016 entered into and/or fiscal 2015. This lease will expire on October 31, 2018.renewed.

We are a partner in a joint venture with one of our suppliers and we own a minority interest in threetwo other suppliers. Purchases from these suppliers,companies, since we acquired our investment interests were $21.4 million, $16.5 million and $9.9$10.7 million in fiscal 2017,2020 and $23.2 million in fiscal 2016 and fiscal 2015, respectively.2019.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon the Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenues and expenses. We regularly evaluate our estimates and judgments, including those related to allowance for doubtful accounts, revenue recognition, customer credits,rebates and returns, inventories, long-lived assets and purchase accounting, and income taxes.accounting. Estimates and judgments are based upon historical experience and on various other assumptions believed to be accurate and reasonable under the circumstances. Actual results may differ materially from these estimates due to different assumptions or conditions. We believe the following critical accounting policies affect our more significant estimates and judgments used in the preparation of our Consolidated Financial Statements.

Allowance for Doubtful Accounts. The preparation of our financial statements requires us to make estimates of the collectability of our accounts receivable. We specifically analyze accounts receivable and historical bad debts, customer creditworthiness, current economic trends and changes in customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts. A significant percentage of our accounts receivable has been, and

24

is expected to continue to be, concentrated among a relatively small number of automotive retailers and warehouse distributors in the United States. Our five largest customers accounted for 85% of net accounts receivable as of December 30, 2017 and 87% of net accounts receivable as of December 31, 2016. A bankruptcy or financial loss associated with a major customer could have a material adverse effect on our sales and operating results.

Revenue Recognition and Allowance forAccrued Customer Credits.Rebates and Returns. 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 record estimates for cash discounts, defective and slow-moving product returns, promotional rebates, core return deposits, and other discounts in the period of the sale ("Customer Credits").The provision for Customer Credits is recorded as a reduction from gross sales and reserves for Customer Credits are shown as a reductionan increase of accounts receivable. Accruedaccrued customer rebates and returns, which we expect to settleis included in cashcurrent liabilities. Customer Credits are classified as other accrued liabilities. Actualestimated based on contractual provisions, historical experience, and our assessment of current market conditions. Historically, actual Customer Credits have not differed materially from estimated amounts for each period presented.amounts. 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.

Excess and Obsolete Inventory Reserves. We must make estimates of potential future excess and obsolete inventory costs. We provide reserves for discontinued and excess inventory based upon historical demand, forecasted usage, estimated customer requirements and product line updates. We maintain contact with our customer base in order to understand buying patterns, customer preferences and the life cycle of our products. Changes in customer requirements are factored into the reserves, as needed.

Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets.  Long-lived assets, including property, plant, and equipment and identifiable intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The impairment review is a two-step process.  First, recoverability is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount exceeds the estimated undiscounted future cash flows, the second step of the impairment test is performed and an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds its fair value.  Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

Goodwill is reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of the goodwill may be impaired.   In regards to the annual test, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.  During fiscal 2017 and fiscal 2016, we assessed the qualitative factors which could affect the fair values of our reporting units and determined that it was not more likely than not that the fair values of each reporting unit was less than its carrying amount.

Purchase Accounting. The purchase price of an acquired business is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based upon their respective fair market values, with theany excess recorded as goodwill. Such fair market value assessments require judgements and estimates which may change over time and may cause the final amounts to differ materially from their original estimates. Any adjustments to fair value assessments are recorded to goodwill over the purchase price allocation period which cannot exceed twelve months.

Income Taxes. We followmonths from the asset and liability methoddate of accounting for deferred income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year and for the change in the deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity's financial statements or tax returns. We must make assumptions, judgments and estimates to determine our current provision for income taxes and also our deferred tax assets and liabilities and any valuation allowance to be recorded against a deferred tax asset. Our judgments, assumptions and estimates relative to the

25

current provision for income taxes takes into account current tax laws, our interpretation of current tax laws and possible outcomes of current and future audits conducted by tax authorities. Changes in tax laws or our interpretation of tax laws and the resolution of current and future tax audits could significantly impact the amounts provided for income taxes in our Consolidated Financial Statements. Our assumptions, judgments and estimates relative to the value of a deferred tax asset takes into account predictions of the amount and category of future taxable income. Actual operating results and the underlying amount and category of income in future years could render our current assumptions, judgments and estimates of recoverable net deferred taxes inaccurate. Any of the assumptions, judgments and estimates mentioned above could cause our actual income tax obligations to differ from our estimates.acquisition.

New and Recently Adopted Accounting Pronouncements

Refer to Note 2, New and Recently Adopted Accounting Pronouncements, to the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated herein.

ItemITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.

Our market risk is the potential loss arising from adverse changes in interest rates. Substantially all ofAll our available credit and accounts receivable salesales programs bear interest at rates tied to LIBOR. Under the terms of our revolving credit facilityagreement and customer-sponsored programs to sell accounts receivable, a change in either the lender’s base rate, LIBOR or discount rates under the accounts receivable sale programs would affect the rate at which we could borrow funds thereunder. A one percentage point increase in LIBOR or the discount rates on the accounts receivable salesales programs would have increased our interest expense on our variable rate debt, if any, and accounts receivable financing costs by approximately $3.8$5.1 million, $4.4 million and $4.4 million in fiscal 20172020, fiscal 2019 and $3.4 million in fiscal 2016.2018, respectively. 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. See ITEM 1A, “Risk Factors – Risks Related to Our Capital Structure and Finances” for information regarding the risks relating to our indebtedness, our accounts receivable sales agreements and LIBOR.

Historically we have not used, and currently 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 risks, or interest rate risks from the use of derivative instruments. We did not hold any foreign exchange forward contractsderivative instruments at December 30, 2017.26, 2020.

ItemITEM 8. Financial Statements and Supplementary Data.

Our financial statement schedule that is filed with this Annual Report on Form 10-K is listed in PartPART IV - Item–ITEM 15, “Exhibits, Financial Statement Schedules.”

26

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors and Shareholders

Dorman Products, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Dorman Products, Inc. and subsidiaries (the Company) as of December 30, 201726, 2020 and December 31, 2016,28, 2019, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the fiscal years in the three‑year period ended December 30, 2017,26, 2020, and the related notes and the consolidated financial statement schedule listed under Item 15(a)(2)II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 201726, 2020 and December 31, 2016,28, 2019, and the results of its operations and its cash flows for each of the fiscal years in the three‑year period ended December 30, 2017,26, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 30, 2017,26, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 27, 201822, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of December 30, 2018, due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) and ASU 2018-11, Leases (Topic 842): Targeted Improvements.  

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrual for customer credits for defective product returns

As disclosed in Notes 1 and 12 to the consolidated financial statements, the Company estimates customer credits for defective product returns and other items. The accrual for customer credits to be issued for defective product returns includes assumptions about the length of time between when a sale occurs and a credit is issued. The provision for customer credits is reflected in the consolidated financial statements as a reduction from gross sales and accruals for customer credits are a portion of accrued customer rebates and returns. At December 26, 2020, accrued customer rebates and returns were $155,751 thousand.

We identified the evaluation of the accrual for customer credits for defective product returns as a critical audit matter. Subjective auditor judgment was required to evaluate the Company’s determination of the impact of market conditions on the length of time between when a sale occurs and a credit is issued for defective product returns.  

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process to record the accrual for customer credits for defective product returns. This included a control related to the determination of the impact of market conditions on the length of time between when a sale occurs and a credit is issued for defective product returns. We assessed the Company’s accrual for customer credits for defective product returns by evaluating (1) the historical relationship between sales and customer credits for defective product returns, (2) the Company’s internal data, (3) certain external market data, and (4) a sample of executed third-party contracts. We inquired of personnel within the Company’s quality control department regarding the impact of current market conditions on the length of time between when a sale occurs and a credit is issued for defective product returns. We analyzed a sample of customer credits issued after year-end and evaluated their effect on the accrual.

/s/ KPMG LLP

We have served as the Company’s auditorsauditor since 2002.

Philadelphia, Pennsylvania

February 27, 201822, 2021

27

DORMAN PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS