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| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
31, 2022
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| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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Pennsylvania | 23-2078856 | |||||
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Title of each class: | Trading Symbol(s) | Name of each exchange on which registered: | ||||||||||||
Common Stock, $0.01 Par Value | DORM | The NASDAQ Global Select Market | ||||||||||||
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. ☒
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As of February 19, 2018 the registrant had 33,568,070 shares of common stock, $0.01 par value, outstanding.
$1,967,865,518.
2
Refers to the year ended December December December 31, Industry Retailers and others who purchase Percentage of Net Sales Year Ended December 30, 2017 December 31, 2016 December 26, 2015 Power-train 41 % 40 % 38 % Automotive Body 27 % 29 % 30 % Chassis 27 % 26 % 25 % Hardware 5 % 5 % 7 % Total 100 % 100 % 100 % Our 2017 2016 2015 New to the aftermarket 1,192 1,255 1,495 Line extensions (many of which are exclusive items) 2,887 2,965 3,357 Total unique parts introduced 4,079 4,220 4,852 others. sales. balance of our purchases in fiscal 2022. For more information on risks relating to our supply chain, see ITEM 1A. "Risk Factors - Risks Related to Our Business - Our Industry, Operations and Competition." cross-docked. For more information on risks relating to our competition, see ITEM 1A, “Risk Factors – Risks Related to Our rate, which generally leads to an increase in our sales for the duration of the extreme weather event. Information Security.” 2017 U.S. Foreign Total Operations 1,223 112 1,335 Product Development 230 33 263 Quality and Engineering 110 23 133 Sales 94 6 100 Administration 212 18 230 Total Employees 1,869 192 2,061 operating results. customer contract terms less favorable to us, which may negatively impact our financial results. the supply of semiconductors. We utilize semiconductors in our products and have at times encountered material shortages in semiconductor supply. If 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 profitability could be adversely affected. develop new products. serve to distinguish our products from those of our competitors. We results of operations. their control. results of operations. claims that arise out of the ordinary course of our business, such as those involving contracts, employment matters, competitive practices, and intellectual property infringement. In addition, if our products are defective or installed or used incorrectly by customers, bodily injury, property damage or other injury, including death, may result and could give rise to product liability claims against us. Legal proceedings and claims 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. securities class action litigation. business, financial condition and results of operations. experienced employees or failing to attract and retain any of such officers or employees could adversely affect our business. financial condition and results of operations. Properties. Location Description Size Ownership Colmar, PA Corporate Headquarters Warehouse and office 342,000 sq. ft. Leased (1) Warsaw, KY Warehouse and office 710,500 sq. ft. Owned Portland, TN Warehouse and office 581,500 sq. ft. Leased Louisiana, MO Warehouse and office 90,000 sq. ft. Owned Montreal, Quebec, Canada Warehouse and office 87,900 sq. ft. Leased (2) Sanford, NC Warehouse and office 52,000 sq. ft. Leased Shanghai, China Office 16,000 sq. ft. Leased Steven L. Berman Executive Chairman President and Chief Executive Officer Paul E. Anderson Senior Vice President, Sales and Marketing 1, 2023. Fiscal 2017 Fiscal 2016 High Low High Low First Quarter $ 82.51 $ 67.03 $ 55.00 $ 40.17 Second Quarter 88.50 76.40 56.73 51.12 Third Quarter 83.50 62.64 67.30 52.80 Fourth Quarter 74.22 60.93 79.03 60.00 We do not anticipate paying cash dividends on our common stock in the foreseeable future. Any payment of dividends in the future Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 1, 2017 through October 28, 2017 75,304 $ 73.28 75,040 $ 86,930,743 October 29, 2017 through November 25, 2017 97,990 $ 68.56 96,400 $ 80,319,046 November 26, 2017 through December 30, 2017 56,848 $ 68.59 52,500 $ 76,702,483 Total 230,142 $ 70.11 223,940 $ 76,702,483 Fiscal year ended (1) (in thousands, except per share data) December 30, 2017 December 31, 2016 December 26, 2015 December 27, 2014 December 28, 2013 Statement of Operations Data: Net sales $ 903,221 $ 859,604 $ 802,957 $ 751,476 $ 664,466 Income from operations 176,240 168,601 146,157 140,734 127,939 Net income $ 106,599 $ 106,049 $ 92,329 $ 89,987 $ 81,920 Earnings per share Basic $ 3.14 $ 3.07 $ 2.60 $ 2.50 $ 2.25 Diluted $ 3.13 $ 3.07 $ 2.60 $ 2.49 $ 2.24 Balance Sheet Data: Total assets $ 765,924 $ 711,792 $ 621,865 $ 557,716 $ 510,689 Working capital $ 422,068 $ 447,766 $ 380,063 $ 339,528 $ 315,870 Long-term debt $ — $ — $ — $ — $ — Dividends paid $ — $ — $ — $ — $ — Shareholders' equity $ 634,807 $ 601,642 $ 518,036 $ 462,061 $ 413,641 coolers, UTV windshields, and complex electronics modules. share repurchase program for $17.6 million. category, as evidenced by our acquisition of Dayton Parts in fiscal 2021. resources, among other reasons. 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. dollars. The largest portion of our overseas purchases comes from China. The Chinese implementing pricing increases in the future to recover increased inflationary costs. that follows. We expect interest rates may continue to increase in the foreseeable future, increasing the costs associated with our accounts receivable sales programs and outstanding borrowings. For the Fiscal Year Ended (in millions, except percentage data) December 30, 2017* December 31, 2016* December 26, 2015 Net sales $ 903.2 100.0 % $ 859.6 100.0 % $ 803.0 100.0 % Cost of goods sold $ 544.6 60.3 % $ 521.5 60.7 % $ 494.9 61.6 % Gross profit $ 358.6 39.7 % $ 338.1 39.3 % $ 308.1 38.4 % Selling, general and administrative expenses $ 182.4 20.2 % $ 169.5 19.7 % $ 161.9 20.2 % Income from operations $ 176.2 19.5 % $ 168.6 19.6 % $ 146.2 18.2 % Other income (expense), net $ 0.3 0.0 % $ (0.2 ) 0.0 % $ (0.2 ) 0.0 % Income before income taxes $ 176.6 19.6 % $ 168.4 19.6 % $ 145.9 18.2 % Provision for income taxes $ 70.0 7.7 % $ 62.3 7.2 % $ 53.6 6.7 % Net income $ 106.6 11.8 % $ 106.0 12.3 % $ 92.3 11.5 % 25, 2021 2022 excluding Dayton Parts and SuperATV was 13.8%. percentage. transaction expenses associated with the acquisition of SuperATV in fiscal 2022. tax expense. See Note 10, “Commitments and Contingencies”, in the accompanying consolidated financial statements for additional information regarding commitments and contingencies that may affect our liquidity. customers 31, 2022. (in thousands) December 30, 2017 December 31, 2016 December 26, 2015 Cash provided by operating activities $ 94,241 $ 121,539 $ 92,060 Cash used in investing activities (94,437 ) (26,254 ) (23,821 ) Cash used in financing activities (77,271 ) (24,823 ) (37,236 ) Effect of exchange rate changes on cash and cash equivalents 37 - - Net (decrease) increase in cash and cash equivalents $ (77,430 ) $ 70,462 $ 31,003 •Capital spending in fiscal •Capital spending in fiscal subsequently repaid $3.1 million of that borrowing in December 2022. Additionally, during fiscal •The remaining Payments Due by Period Contractual Obligations Total Less than 1 year 1-3 years 3-5 years Thereafter Operating leases $ 11,670 $ 4,357 $ 3,790 $ 3,523 $ - $ 11,670 $ 4,357 $ 3,790 $ 3,523 $ - Amount of Commitment Expiration Per Period Other Commercial Commitments Total Amount Committed Less than 1 year 1-3 years 3-5 years Thereafter Letters of Credit $ 825 $ 825 $ — $ — $ — $ 825 $ 825 $ — $ — $ — 401(k) Plan upon retirement, termination or other reasons. 2021, respectively. and Estimates acquisition. Refer to Note 2 reporting The Transaction was accounted for as a business combination under the acquisition method of accounting. The fair value of the product portfolio intangible asset at the acquisition date was $82.5 million, which was determined using a multi-period excess earnings valuation methodology. For the Year Ended (in thousands, except per share data) December 30, 2017 December 31, 2016 December 26, 2015 Net sales $ 903,221 $ 859,604 $ 802,957 Cost of goods sold 544,572 521,530 494,907 Gross profit 358,649 338,074 308,050 Selling, general and administrative expenses 182,409 169,473 161,893 Income from operations 176,240 168,601 146,157 Other income (expense), net 348 (241 ) (216 ) Income before income taxes 176,588 168,360 145,941 Provision for income taxes 69,989 62,311 53,612 Net income $ 106,599 $ 106,049 $ 92,329 Earnings per share: Basic $ 3.14 $ 3.07 $ 2.60 Diluted $ 3.13 $ 3.07 $ 2.60 Weighted average shares outstanding: Basic 33,964 34,516 35,466 Diluted 34,052 34,598 35,538 (in thousands, except share data) December 30, 2017 December 31, 2016 Assets Current assets: Cash and cash equivalents $ 71,691 $ 149,121 Accounts receivable, less allowance for doubtful accounts and customer credits of $97,193 and $99,995 in 2017 and 2016, respectively 241,880 230,526 Inventories 212,149 168,851 Prepaids and other current assets 7,129 3,116 Total current assets 532,849 551,614 Property, plant and equipment, net 92,692 88,436 Goodwill 65,999 28,146 Intangible assets, net 22,158 1,642 Deferred tax asset, net 7,884 12,429 Other assets 44,342 29,525 Total $ 765,924 $ 711,792 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 80,218 $ 72,629 Accrued compensation 12,162 11,899 Other accrued liabilities 18,401 19,320 Total current liabilities 110,781 103,848 Other long-term liabilities 13,732 6,302 Deferred tax liabilities, net 6,604 - Commitments and contingencies (Note 11) Shareholders' equity: Common stock, par value $0.01; authorized 50,000,000 shares; issued and outstanding 33,571,524 and 34,517,633 shares in 2017 and 2016, respectively 336 345 Additional paid-in capital 44,812 44,187 Retained earnings 589,659 557,110 Total shareholders' equity 634,807 601,642 Total $ 765,924 $ 711,792 Common Stock Additional (in thousands, except share data) Shares Issued Par Value Paid-In Capital Retained Earnings Total Balance at December 27, 2014 35,611,238 $ 356 $ 43,413 $ 418,292 $ 462,061 Exercise of stock options 31,305 — 93 — 93 Compensation expense under Incentive Stock Plan — — 882 — 882 Purchase and cancellation of common stock (781,130 ) (7 ) (1,406 ) (35,911 ) (37,324 ) Issuance of non-vested stock, net of cancellations 8,922 — — — — Other stock related activity, net of tax (6,939 ) — (183 ) 178 (5 ) Net income — — — 92,329 92,329 Balance at December 26, 2015 34,863,396 $ 349 $ 42,799 $ 474,888 $ 518,036 Compensation expense under Incentive Stock Plan — — 2,380 — 2,380 Purchase and cancellation of common stock (469,836 ) (5 ) (846 ) (23,827 ) (24,678 ) Issuance of non-vested stock, net of cancellations 131,123 1 (1 ) — — Other stock related activity, net of tax (7,050 ) — (145 ) — (145 ) Net income — — — 106,049 106,049 Balance at December 31, 2016 34,517,633 $ 345 $ 44,187 $ 557,110 $ 601,642 Exercise of stock options 29,750 — 31 — 31 Compensation expense under Incentive Stock Plan — — 3,162 — 3,162 Purchase and cancellation of common stock (1,025,475 ) (10 ) (1,848 ) (74,271 ) (76,129 ) Issuance of non-vested stock, net of cancellations 65,317 1 674 — 675 Other stock related activity, net of tax (15,701 ) — (1,394 ) 221 (1,173 ) Net income — — — 106,599 106,599 Balance at December 30, 2017 33,571,524 $ 336 $ 44,812 $ 589,659 $ 634,807 For the Year Ended (in thousands) December 30, 2017 December 31, 2016 December 26, 2015 Cash Flows from Operating Activities: Net income $ 106,599 $ 106,049 $ 92,329 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, amortization and accretion 22,224 18,907 16,186 Provision for doubtful accounts 299 1,221 3,260 Provision (benefit) from deferred income tax 4,676 (4,888 ) (5,106 ) Provision for non-cash stock compensation 3,162 2,380 882 Changes in assets and liabilities: Accounts receivable (5,709 ) (27,824 ) (1,148 ) Inventories (25,147 ) 24,874 (20,202 ) Prepaids and other current assets (3,748 ) (790 ) 821 Other assets (4,908 ) (4,590 ) (3,962 ) Accounts payable 3,718 8,662 5,389 Accrued compensation and other liabilities (6,925 ) (2,462 ) 3,611 Cash provided by operating activities 94,241 121,539 92,060 Cash Flows from Investing Activities: Property, plant and equipment additions (24,450 ) (20,059 ) (21,688 ) Acquisition, net of cash acquired (59,987 ) — — Purchase of equity investment (10,000 ) (6,195 ) (2,133 ) Cash used in investing activities (94,437 ) (26,254 ) (23,821 ) Cash Flows from Financing Activities: Proceeds from exercise of stock options 31 — 93 Other stock related activity (1,173 ) (145 ) (5 ) Purchase and cancellation of common stock (76,129 ) (24,678 ) (37,324 ) Cash used in financing activities (77,271 ) (24,823 ) (37,236 ) Effect of exchange rate changes on Cash and Cash Equivalents 37 - - Net Increase (Decrease) in Cash and Cash Equivalents (77,430 ) 70,462 31,003 Cash and Cash Equivalents, Beginning of Period 149,121 78,659 47,656 Cash and Cash Equivalents, End of Period $ 71,691 $ 149,121 $ 78,659 Supplemental Cash Flow Information Cash paid for interest expense $ 291 $ 266 $ 281 Cash paid for income taxes $ 74,647 $ 62,348 $ 57,151 31, 2022 2020”). programs of $37.2 million, $11.7 million and $13.2 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively. Factoring costs are impacted both by interest rates and the timing of when accounts receivable are sold in comparison to the original due dates of those accounts receivable. 10 to 39 years Machinery, equipment and tooling 3 to 10 years Software and computer equipment 3 to 10 years Furniture, fixtures and leasehold improvements depreciated. amounts. 12 months from the date of acquisition. 2022, fiscal 2021, and fiscal 2020, respectively. In January 2020, we acquired the remaining 60% of the outstanding stock of Power Train Industries, Inc. (“PTI”), a privately-held supplier of parts to the automotive aftermarket, based in Reno, Nevada of which we held equity investments with a fair value of $12.3 million. Additionally, we have an investment that we account for according to the cost method of accounting. The carrying book value of this investment was $5.0 million as of both December 31, 2022 and December 25, 2021. Operations for fiscal 2022, fiscal 2021, and fiscal 2020, respectively. model on the grant date. fair value at the acquisition date and is adjusted to fair value at each reporting period. accounting. We have that time. (in thousands) Total Acquisition Date Fair Value Cash consideration (net of $3.3 million cash received) $ 56,859 Contingent cash consideration 7,982 Seller liability assumed 896 Working capital adjustment 1,539 Total consideration assigned to net assets acquired $ 67,276 PTI. We previously accounted for our 40% interest as an equity-method investment. price recorded as goodwill. Current assets (net of $3.3 million cash received) $ 21,756 Property, plant and equipment 1,615 Intangible assets 20,440 Goodwill 35,624 Total assets acquired 79,435 Current liabilities 5,691 Long-term liabilities 6,468 Total liabilities assumed 12,159 Net assets acquired $ 67,276 26, 2020. (in thousands) Valuation Amortization Period (in years) Customer relationships $ 14,840 8-12 Tradenames 5,600 15 Total $ 20,440 flows. (in thousands) 2017 2016 Net sales $ 933,446 $ 888,851 Net income 107,948 102,686 Diluted earnings per share 3.17 2.97 (in thousands) December 30, 2017 December 31, 2016 Bulk product $ 82,010 $ 72,833 Finished product 126,827 93,223 Packaging materials 3,312 2,795 Total $ 212,149 $ 168,851 (in thousands) December 30, 2017 December 31, 2016 Buildings $ 32,623 $ 29,450 Machinery, equipment and tooling 97,701 87,175 Furniture, fixtures and leasehold improvements 4,319 4,248 Software and computer equipment 77,618 73,292 Total 212,261 194,165 Less-accumulated depreciation and amortization (119,569 ) (105,729 ) Property, plant and equipment, net $ 92,692 $ 88,436 (in thousands) December 30, 2017 December 31, 2016 Balance at beginning of period $ 28,146 $ 28,146 Goodwill acquired 37,853 - Balance at end of period $ 65,999 $ 28,146 December 30, 2017 December 31, 2016 (in thousands) Weighted Average Amortization Period Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value Intangible assets subject to amortization Tradenames 14.8 $ 5,600 $ 62 $ 5,538 $ - $ - $ - Customer relationships 8.9 17,049 772 16,277 2,000 358 1,642 Technology 14.0 367 24 343 - - - Total $ 23,016 $ 858 $ 22,158 $ 2,000 $ 358 $ 1,642 (in thousands) 2018 $ 2,113 2019 2,113 2020 2,113 2021 2,113 2022 2,113 Thereafter 11,593 Total $ 22,158 (in thousands) 2018 $ 4,357 2019 1,928 2020 1,862 2021 1,784 2022 1,739 Thereafter - Total $ 11,670 2027. (in thousands) 2017 2016 2015 Current: Federal $ 56,641 $ 61,251 $ 55,140 State 8,293 5,948 3,578 Foreign 379 - - 65,313 67,199 58,718 Deferred: Federal 4,582 (4,563 ) (4,874 ) State 343 (325 ) (232 ) Foreign (249 ) - - 4,676 (4,888 ) (5,106 ) Total $ 69,989 $ 62,311 $ 53,612 2017 2016 2015 Federal taxes at statutory rate 35.0 % 35.0 % 35.0 % State taxes, net of federal tax benefit 3.4 2.2 1.8 Research and development tax credit (0.3 ) (0.2 ) (0.2 ) Tax reform 2.5 - - Other (1.0 ) — 0.1 Effective tax rate 39.6 % 37.0 % 36.7 % (in thousands) 2017 2016 2015 Balance at beginning of year $ 3,567 $ 1,855 $ 1,163 Reductions due to lapses in statutes of limitations (181 ) — — Reductions due to tax positions settled (4,543 ) (109 ) (177 ) Reductions due to reversals of prior year positions — (212 ) (20 ) Additions based on tax positions taken during the prior period 3,005 — — Additions based on tax positions taken during the current period 453 2,033 889 Balance at end of year $ 2,301 $ 3,567 $ 1,855 benefits were immaterial. The Company does not anticipate material changes in the amount of unrecognized income tax benefits over the next year. (in thousands) December 30, 2017 December 31, 2016 Assets: Inventories $ 7,335 $ 10,337 Accounts receivable 11,732 20,216 Accrued expenses 1,664 2,935 Other 261 786 Gross deferred tax assets 20,992 34,274 Liabilities: Depreciation 7,936 11,988 Goodwill and intangible assets 11,776 9,857 Gross deferred tax liabilities 19,712 21,845 Net deferred tax assets $ 1,280 $ 12,429 not be sold without registration under the Securities Act of 1933, as amended (the "1933 Act"), we will use our best efforts to cause those shares to be registered under the 1933 Act. The expenses of any such registration will be borne by the estate of the deceased shareholder. The additional shareholders that are a party to the agreement are trusts affiliated with the late Richard Berman, Steven Berman, Jordan Berman, Marc Berman or Fred Berman, or each person’s respective spouse or children. However, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of any of these matters could have a material adverse impact on the Company’s cash flows, financial position and results of operations in the period in which any such effects are recorded. significant transactions. Shares Weighted Average Price Balance at December 27, 2014 72,900 $ 27.82 Granted 44,104 $ 45.68 Vested (38,580 ) $ 25.24 Cancelled (35,182 ) $ 44.84 Balance at December 26, 2015 43,242 $ 34.49 Granted 133,794 $ 49.45 Vested (29,002 ) $ 29.74 Cancelled (2,671 ) $ 33.79 Balance at December 31, 2016 145,363 $ 49.22 Granted 70,611 $ 78.27 Vested (56,953 ) $ 56.03 Cancelled (5,294 ) $ 51.56 Balance at December 30, 2017 153,727 $ 59.96 immaterial for all periods presented. 2020. 2017 2016 Expected dividend yield 0 % 0 % Expected stock price volatility 27 % 26 % Risk-free interest rate 1.5 % 0.9 % Expected life of options 3.0 years 3.0 years Shares Option Price per Share Weighted Average Price Weighted Average Remaining Terms (years) Aggregate Intrinsic Value Balance at December 27, 2014 75,000 $5.05 – $19.37 $ 7.28 Exercised (35,000 ) $5.05 – $19.37 $ 7.76 Balance at December 26, 2015 40,000 $5.67 – $7.74 $ 6.86 Granted 61,084 $41.59 – $53.32 $ 44.36 Balance at December 31, 2016 101,084 $5.67 – $53.32 $ 29.52 Granted 58,024 $69.02 – $82.59 $ 78.58 Exercised (32,751 ) $6.90 – $41.59 $ 7.69 Cancelled (3,810 ) $41.59 – $78.64 $ 56.72 Balance at December 30, 2017 122,547 $5.67 – $82.59 $ 57.74 3.6 $ 1,402,012 Options exercisable at December 30, 2017 22,520 $5.67 – $53.32 $ 31.07 2.6 $ 677,188 Options Outstanding Options Exercisable Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $5.67 - $24.66 8,000 1.4 $ 6.71 8,000 $ 6.71 $26.67 - $41.60 43,679 3.1 $ 41.59 10,920 $ 41.59 $41.61 - $69.01 14,400 3.5 $ 53.32 3,600 $ 53.32 $69.02 - $77.99 1,630 5.1 $ 69.02 — $ — $77.80 - $82.59 54,838 4.2 $ 78.86 — $ — Balance at December 30, 2017 122,547 3.6 $ 57.74 22,520 $ 31.07 Cash received from option exercises was presented. 2020, respectively. 2020, respectively. (in thousands, except per share data) 2017 2016 2015 Numerator: Net income $ 106,599 $ 106,049 $ 92,329 Denominator: Weighted average basic shares outstanding 33,964 34,516 35,466 Effect of compensation awards 88 82 72 Weighted average diluted shares outstanding 34,052 34,598 35,538 Earnings Per Share: Basic $ 3.14 $ 3.07 $ 2.60 Diluted $ 3.13 $ 3.07 $ 2.60 First Quarter Second Quarter Third Quarter Fourth Quarter (in thousands, except per share amounts) 2017 Net sales $ 221,625 $ 229,262 $ 224,615 $ 227,719 Income from operations 45,042 44,999 42,790 43,409 Net income 29,187 28,437 27,008 21,967 Diluted earnings per share 0.85 0.83 0.80 0.65 First Quarter Second Quarter Third Quarter Fourth Quarter (in thousands, except per share amounts) 2016 Net sales $ 208,148 $ 209,573 $ 212,786 $ 229,097 Income from operations 38,931 40,989 41,633 47,048 Net income 24,671 25,982 26,695 28,701 Diluted earnings per share 0.71 0.75 0.77 0.83 reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2022. Super ATV, LLC. assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Committee.” (c) Plan Category (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (b) Weighted- average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)(1)) Equity compensation plans approved by security holders 122,547 $ 57.74 2,399,106 Equity compensation plans not approved by security holders — — — Total 122,547 $ 57.74 2,399,106 Firm (PCAOB ID: 185). 2020. 25, 2021. 2020. 2020. 3.2 Title 4.2 23 31.1 31.2 32 101 The financial statements from the Dorman Products, Inc. Annual Report on Form 10-K for the year ended December By: /s/ Date: February Kevin M. Olsen President, Chief Executive Officer and Director February (principal executive officer) /s/ Senior Vice President, Chief Financial Officer February (principal financial and accounting officer) /s/ Steven L. Berman February Steven L. Berman /s/ Lisa M. Bachmann John J. Gavin /s/ Richard T. Riley Richard T. Riley /s/ Kelly A. Romano Kelly A. Romano /s/ G. Michael Stakias G. Michael Stakias For the Year Ended (in thousands) December 30, 2017 December 31, 2016 December 26, 2015 Allowance for doubtful accounts: Balance, beginning of period $ 1,345 $ 4,503 $ 1,508 Provision 299 1,212 3,260 Charge-offs 12 (4,370 ) (265 ) Balance, end of period $ 1,656 $ 1,345 $ 4,503 Allowance for customer credits: Balance, beginning of period $ 98,650 $ 82,483 $ 77,671 Provision 187,422 175,260 206,560 Credits issued (193,753 ) (159,093 ) (201,748 ) Acquisitions and other 3,218 - - Balance, end of period $ 95,537 $ 98,650 $ 82,483 DORMAN PRODUCTS, INC.INDEX TO ANNUAL REPORT ON FORM 10-KDECEMBER 30, 2017December 31, 2022PagePage Item 1.3Item8Item13Item14Item14Item14Item14Item16Item17Item18Item26Item26Item49Item49Item52Item53Item53Item53Item54Item54Item55Item57The Company’sEffective October 4, 2022, the Board of Directors of Dorman Products, Inc. approved a change in Dorman’s fiscal year ends onend from the last Saturday in December of each year to December 31 of each year, to commence with the calendar year.current fiscal year ending on December 31, 2022.References to Fiscal 2013202028, 2013Fiscal 2014202127, 2014Fiscal 20152022December 26, 2015Fiscal 20162016Fiscal 2017December 30, 20172As used herein, unless the context otherwise requires, “Dorman,” “the Company,” “we,” “us,” or “our” refers to Dorman Products, Inc. and its subsidiaries.This 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 StatementsCertain 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, inflation, 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.1PART IITEM 1. Business.GeneralDorman 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 and upgrade parts and fasteners forin the motor vehicle aftermarket industry, serving passenger cars, lightlight-, medium-, and heavy-duty trucks, as well as specialty vehicles, including utility terrain vehicles (UTVs) and heavy duty trucks in the automotive aftermarket. We distribute and marketall-terrain vehicles (ATVs). As of December 31, 2022, we marketed approximately 216,000 different stock keeping units (“SKU’s”)129,000 distinct parts compared to approximately 118,000 as of automotive replacement parts and fasteners,December 25, 2021, many of which we designdesigned and engineer.engineered. believe we are aone of the leading aftermarket suppliersuppliers of original equipment “dealer exclusive” items. Original equipment “dealer exclusive” items are those whichparts that were traditionally available to professional installers and consumers only from original equipment manufacturers or usedsalvage yards. These parts from salvage yards and include, among other parts, leaf springs, intake manifolds, exhaust manifolds, window regulators, radiator fan assemblies, tire pressure monitor sensors, exhaust gas recirculation (EGR) coolers, UTV windshields, and complex electronics modules. Fasteners include such items as oil drain plugs, wheel bolts, and wheel lug nuts. Approximately 84%For fiscal 2022, 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. We generate most of our net sales from customers in North America, primarily in the United States. 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 on-line platforms; dealers; national, regional and local warehouse distributors (such as Genuine Parts Co. – NAPA (“NAPA”)) and specialty markets,markets; and salvage yards. We also distribute automotive replacementaftermarket parts internationally,outside the United States, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, the Middle East and Australia.The AutomotiveMotor Vehicle AftermarketThe motor vehicle aftermarket that we operate in consists of the automotive aftermarket industry and the powersports aftermarket industry.The automotive replacement parts marketaftermarket industry has two components:distinct sectors: parts for passenger cars and light trucks, which according to the 2023 Auto Care Association Factbook, accounted for projected industry sales of approximately $356.5 billion in 2022, and parts for medium- and heavy-duty trucks, which accounted for projected industry sales of approximately $286.9$117.0 billion in 20171, and parts2022. We sell products into both sectors, with a majority of our products being designed for medium and heavy duty trucks, which accounted for projected industry sales of approximately $94.2 billion in 20171. We market products primarily forthe passenger carscar and light trucks, including those with diesel engines and, since 2012, for medium and heavy duty trucks. truck sector.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.The largest purchasers of medium- and heavy-duty vehicle aftermarket parts are original equipment, or OE, manufacturers, independent distributors, including organizations associated with large buying groups and other distributors, as well as independent component specialists and rebuilders, and auto parts stores. The service work performed on medium- and heavy-duty vehicles is generally completed by end-user businesses that utilize these vehicles in their operations, fleets, and independent garages and distributors, who buy parts from the purchasers above or in some instances directly from suppliers like us.Spending in the lightmotor vehicle aftermarket industry generally can be generally grouped into three categories: discretionary, maintenance, and repair. Discretionary, such as accessories and performance, tends to move in-linein 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.2The 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. Accordingly, the number of parts required to be carried by retailers and wholesale distributors has increased substantially.fleets. 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.1Source: 2018 Auto Care Association Factbook3aftermarket automotive repair and replacementaftermarket parts for resale often 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 typically 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 often seek to purchase products from fewer but stronger suppliers.The powersports aftermarket generally consists of parts for specialty vehicles such as UTVs and ATVs for both functional and upgrade accessories as well as replacement parts. Functional and upgrade accessories include parts such as engine performance upgrades, lighting and electronics, storage and cargo, tires and wheels, cabs, roofs and windshields, and other cosmetic parts.Replacement parts consist of brake systems, engine systems, electronics, frame and body parts, and driveline and transmission parts and are critical given the significant wear and tear often placed on those parts during normal use.This industry consists of direct-to-consumer and direct-to-dealer channels through both retail and e-commerce platforms. Key purchasing decisions of customers in the powersports aftermarket industry include ease of ordering, ease of installation, the availability of products, delivery times, and overall product quality.Brands and ProductsThe DORMAN® ProductsWe market our products under the Dorman®, Dayton Parts® and SuperATV® names, along with several sub-brands, which identify products that address specific segments of the motor vehicle aftermarket industry.
Some of our most popular brands include:DORMAN®–Reliable replacement automotive parts and components. A brand name is known as a leader inmechanics have trusted for more than 100 years.DORMAN® OE FIX™– Dorman products that are designed to be better repair solutions than the OE alternative. These parts are made to help save the service technician time and money, and increase reliability and serviceability.HELP!® – Parts and components designed to help the automotive do-it-yourself customer, or DIYer, save time and heavy duty markets. DORMAN® ismoney. A fixture in auto parts store aisles for decades.Conduct-Tite®– Electrical tools, materials and accessories designed to help DIYers fix and customize vehicles. This brand includes the parent brand covering a numberBuilders Series line of sub-brands within the DORMAN® portfolio. A unique differentiatorpremium wiring solutions.3Dayton Parts® – An extensive product offering of heavy-duty commercial vehicle repair solutions, from cab to trailer.SuperATV® – UTV and ATV parts and accessories designed by riders for riders.Keller Performance Products – High-quality ball joints for specialty vehicles.Assault Industries – West Coast-style powersports products built for the DORMAN® brand is our OE Fix sub-brand. OE Fixcool factor and designed with an edge.Gboost – Clutching products can be found throughout our portfolio of sub-brandsfor specialty vehicles.GDP – Premium quality transmission, portals, differentials and feature extensive engineering to eliminate known OE failures or allowsmore for the replacement of the part, not the assembly, saving timeUTVs and money.
DORMAN® OE Solutions ™ - A wide variety of formerly “dealer only” replacement parts covering many product categories including fluid reservoirs, variable value timing components, complex electronics, and integrated door lock actuators.DORMAN® HELP! ® - Broad assortment of formerly “dealer only” automotive replacement parts that are primarily sold in retail store fronts such as door handles, keyless remotes and cases and door hinge repair.DORMAN® HD Solutions™ - A line 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 and DORMAN® AutoGrade™, application specific repair hardware.4We group our products into four major classes: power-train, automotivepowertrain, chassis, motor vehicle 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:Percentage of Net Sales Year Ended December 31, 2022 December 25, 2021 December 26, 2020 Powertrain 37 % 40 % 40 % Chassis 41 % 34 % 30 % Motor Vehicle Body 18 % 22 % 25 % Hardware 4 % 4 % 5 % Total 100 % 100 % 100 % 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. Chassis products include control arms, ball joints, tie-rod ends, brake hardware and hydraulics, wheel and axle hardware, suspension arms, knuckles, links, bushings, leaf springs, and other suspension, steering, and brake components. Our line of automotivemotor vehicle body products includeincludes door handles and hinges, window lift motors, window regulators, switches and handles, wiper components, lighting, electrical, and other interior and exterior automotivevehicle body components. Chassis products include control arms, brake hardware and hydraulics, wheel and axle hardware, suspension arms, knuckles, links, bushings, and other suspension, steering, and brake components.components, including windshields for UTVs. Hardware products include threaded bolts and 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 in the light- and medium-duty parts categories, with more limited warranties for our heavy-duty and specialty vehicle products. Our warranty limitsstandard warranties limit the customer’send-user’s remedy to the repair or replacement of the part that is defective.Product DevelopmentProductDorman is committed to product development and continuous innovation are centralwith a customer-first approach keeping owners and installers in mind. Our engineers and designers focus on solutions designed to our business. The developmenthelp save repair technicians time, save vehicle owners money, and provide sought-after vehicle enhancements and differentiation.Dorman has dedicated teams devoted solely to ideation and innovation in support of a broad range ofits objective to develop new products, many of which are not convenientlyfirst to the aftermarket. Our teams of researchers, field analysts, and product specialists visit repair shop technicians and spend time with customers to listen to and understand their repair challenges and vehicle needs.We categorize our product development opportunities across three different spectrums: (1) alternative parts - direct aftermarket replacements for factory parts, (2) upgraded parts – parts with enhanced design, functionality or economically available elsewhere, has enabled us to grow to our present sizefeatures based on identifying what made original parts problematic and is an important driver to our future growth. Our product strategy has been to design and engineer products, many of which are better and easier to install and/or use thandeveloping new solutions that address the original failure modes, and (3) new parts they replace- identifying parts that are not available from the OE or in the aftermarket that can enhance vehicle performance and user experience. Some of these4opportunities are brand new to commercialize automotive parts for the broadest possible range of uses. New product ideas are reviewed byaftermarket whereas others continue to expand our product management staff, as well as by members of the supply chain, sales, finance, marketing, legal, and administrative staffs.current portfolio offering. The following table represents the number of uniquedistinct parts we introduced for each of the last three fiscal years:Year Ended December 31, 2022 December 25, 2021 December 26, 2020 New to the aftermarket 1,565 990 1,433 Line extensions 2,878 3,325 2,046 Total distinct parts introduced 4,443 4,315 3,479 Through careful evaluation of high failure-prone parts, exacting design and precise engineering,In 2022, we are frequently ableintroduced several first-to-the-aftermarket repair solutions designed to offer products which fit a broaderwide range of makesvehicles. New products included an upgraded OE FIX aluminum oil filter housing, hub rotor and models,caliper bracket bolt kits, additions to our roster of turbocharger components, and new complex electronic solutions, such as well ascruise control distance sensors, blind spot detection modules and other advanced driver assistance system, or ADAS, products. In 2022, we also released the first-to-aftermarket Tesla OE FIX door handle repair kit for Tesla S vehicles.Our capabilities in advanced technology automotive components continued to grow in 2022 with the introduction of all-new construction climate control modules, electronic throttle bodies featuring Hall effect sensors and Sensor Shield™ shaft seals, and pre-programmed fuel pump driver modules.Our product development teams focus on repair solutions engineered to reduce the time technicians and vehicle owners typically spend on repairs requiring multiple related components. In 2022, that ongoing focus resulted in additions to our line of pre-assembled products, including loaded backing plates, drive shafts, and windshield wiper and transmission assemblies. We also provide new, cost-effective products designed to extend the life of cars and trucks. From core categories like window regulators, suspension components, and door lock actuators, to innovative body panel repair kits, we help ensure that aftermarket service providers and end-users have a wider range of application years thanmoney-saving repair options.We expanded our growth in the original equipment parts they replace. One such innovation isheavy-duty sector with the acquisition of Dayton Parts in 2021 and in 2022 released several new heavy-duty products, including in-demand sensors and products for repairs above and below the chassis of Class 7 and Class 8 trucks.We also expanded our replacement spare tire hoist, whichmotor vehicle solutions footprint in 2022 through several mechanicalthe acquisition of Super ATV, LLC (“SuperATV”). SuperATV specializes in the design, changes allow us to offer a part that replaces three original equipmentmanufacturing, and distribution of aftermarket parts and now fits common domestic models overaccessories for UTVs and ATVs. SuperATV is a thirteen year range.Our new lineleader in the powersports aftermarket because of pre-pressed wheel hubits broad range of solutions, dedication to product development and bearing assembly solutions have been developed to address an ongoing technician challenge relating to providing a comprehensive part repair. We have eliminated the need for the automotive technician to disassemble corroded/worn outinnovation, and exceptional customer service. Through its retail presence and growing dealer network, SuperATV offers more than 11,000 products including windshields, axles, lift kits, tires, suspension components, and to reuse them with new bearings. Our solution offers a 100% new component assembly replacement which increases bay turnsother accessories for popular ATV 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 engineersUTV models from manufacturers such as Polaris®, Yamaha®, Honda®, Can-Am® 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 assists5retailers and other purchasers in maximizing the productivity of the limited space available for each class of part sold. Further, where possible, we improve our parts so that they are better than the parts they replace. Finally, we make every attempt to look at the repair through the eyes of the end user, and redesign many of our items to make installation easier, resulting 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.Sales and MarketingWe market our products to three groupspurchasers, many of purchasers whowhom in turn supply individual consumers and professional installers. BasedOur products are available in our customers’ retail stores, on netour website and our customers’ websites, and through dealers and warehouse distributors.As of December 31, 2022, we had a sales and sales support team of over 200 people selling our products either directly to our customers as of December 30, 2017:(i) approximately 48% of our revenues were generated from salesor, with respect to automotive aftermarket retailers (such as, Advance, AutoZone and O'Reilly), local independent parts wholesalers and national general merchandise chain retailers. We sell many of our products to virtually all major chains of automotive aftermarket retailers;(ii) approximately 48% of our revenues were generated from sales to automotive parts distributors (such as NAPA), which may be local, regional or national in scope, and which may also engage in retail sales; and(iii) the balance of our revenues (approximately 4%) are generated from international sales and sales to special markets, which include, among others, mass merchants (such as Wal-Mart), salvage yards and the parts distribution systems of parts manufacturers.We use a number of different methods to sell our products. Our more than 60 person direct sales force and sales support staff solicits purchases of our products directly fromcertain select customers, as well as manages the activities of approximately 35indirectly 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-lineAmong other things, we use digital advertising, social media, email, catalogs application guides, training materials and videos designedbrochures, to describe our products and other applications as well as to train our customers' sales teams in the promotion and sale ofpromote our products. CatalogsOur websites include www.DormanProducts.com, www.DaytonParts.com and5www.SuperATV.com. These sites are not and should not be considered part of all our partsthis Form 10-K and are available on our website. We currently servicenot incorporated by reference in this Form 10-K.As of December 31, 2022, we serviced more than 2,4009,000 active accounts. During fiscal 2017, fiscal 2016 and fiscal 2015, four2022, three customers (Advance, AutoZone, NAPA, and O'Reilly) each accounted for more than 10% of net sales and in the aggregate accounted for approximately 61%49% of net sales in fiscal 2017, and 60% in each of fiscal 2016 and fiscal 2015. Most of our light- and medium-duty aftermarket automotive products are manufactured by third parties. parties, while most of our heavy-duty products are manufactured in our facilities in the United States. The majority of our powersports aftermarket products are manufactured in our facilities in the United States and China. 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 2017,2022, as a percentage of our total dollar volume of purchases, approximately 29%36% of our products were purchased from various suppliers throughout the United States and the6productspurchases 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,manufacturers for a substantial portion of our product portfolio, we also have qualifiedcontinue to qualify 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 2022, 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. Packaging, Inventory and ShippingFinished products acquired from third-party suppliers are received at one or more of our company or third-party-operated facilities in the United States and Canada for sorting and distribution to our customers, depending on the type of part. It is our practice to inspect samples of shipments based uponon 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 either stocked in the warehouse portions of our facilities or in distribution centers maintained by our third-party logistics providers 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.its network or to dealers for further resale. In addition to utilizing our dealer networks, our specialty vehicle products that are ordered through the SuperATV website may be shipped directly to customers. In certain circumstances, at the request of thea customer, we ship directly to thethat customer's warehouses, stores or other locations, either via smaller direct ship orders or consolidated store orders that are cross docked.Remanufacturing and Recycling PartsCertain 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 is6remanufactured and sold to the customer as a replacement for a unit on a vehicle. Customers and end-users that purchase a remanufactured replacement part 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 on the environment.CompetitionThe replacement automotive partsmotor vehicle aftermarket 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 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 carsvehicles they produce. Our customers may also be successful in sourcing someSome of our productscurrent or former suppliers may compete with us by supplying directly from suppliers.to our customers. Further, some of our private label customers also compete with us.Seasonalitybusiness is somewhat seasonal in nature, with the highest sales usually occurring in the springBusiness – Our Industry, Operations and summer months. In addition, ourCompetition.”SeasonalityOur business can be affected by weather conditions. Extremely hot or cold weather tends to enhance sales by causing automotivegenerally results in an increase in parts to failfailure at an accelerated rate.Proprietary RightsImpact of COVID-19While COVID-19 did not adversely affect demand for our products for the year ended December 31, 2022, during the year we did experience lingering pandemic-related pressures in the global supply network that caused logistical issues, including higher freight costs, supplier lead time delays of products and inflation with respect to materials and labor costs, which impacted our results. We will continue to closely monitor updates regarding COVID-19 and any impacts on our business and will adjust our operations according to guidelines from local, state and federal officials. In light of the foregoing, we may take stepsactions that alter our business operations or that we determine are in the best interests of our employees, customers, suppliers and shareholders.Patents, Trademarks and Other Intellectual PropertyWe own a number of patents important to register our business, and we expect to continue to file patent applications to protect our research and development investments in new products. As of December 31, 2022, we held 102 patents and 44 pending patent applications worldwide. 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 organically, through commercial relationships, or 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 critical7to the successHuman Capital ResourcesGeneralAs of our business. Rather, the quality, price, customer service and availability of our product is critical to our success.EmployeesAs noted below, at December 30, 2017,31, 2022, we had 2,0613,786 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.December 31, 2022 U.S. Non-U.S. Total Operations 2,515 226 2,741 Product Development 230 2 232 Quality and Engineering 189 60 249 Sales 293 24 317 Administration 238 9 247 Total Employees 3,465 321 3,786 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 SafetyWe 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. We have adopted an environmental, health and safety policy outlining our commitment to policies and practices that support the health and safety of our employees, contractors and the community, and the protection of the environment in the communities where we operate. We also maintain a human rights policy for the organization outlining our commitment to operating with respect for human rights.Diversity and InclusionWe 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. Our Vice President of Development and Diversity is responsible for leading our diversity and inclusion strategy. Among other things, we demonstrate our commitment to diversity and inclusion through our annual “All In” initiative, a summit focused on inviting our employees to think and engage more with ideas such as diversity and inclusion to foster a collaborative environment.We also embrace diversity on our Board of Directors, where 33% of our independent directors are female and 17% of our independent directors are ethnically diverse.As part of our commitment to a culture of inclusion, our Contributor Resource Group, or CRG, Program broadens and enhances company-wide interaction opportunities for our employees. Our CRG Program is open to all and involves activities for employees whose background is the focus of each CRG and those who are supportive of the groups that have been formed. These company-wide networks build on and coordinate with local teams that are already active in our operations and include groups such as those focused on women, veterans, individuals desiring to learn more about diverse cultural backgrounds and employees who seek to learn more about career growth and leadership opportunities.8Talent and DevelopmentOur talent strategy is focused on attracting the best talent, developing their skill sets and experiences and rewarding their performance. We focus significant attention on attracting and retaining talented and experienced individuals to manage and support our operations, and our leadership team routinely reviews employee turnover rates at various levels of the organization. Leadership also participates in a robust bi-annual talent review and succession planning process. In addition, leadership reviews employee engagement surveys to monitor employee morale and receive feedback on a variety of issues.CompensationWe 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. We conduct an executive compensation benchmarking review annually to help ensure we are providing market-based compensation including base salary, and short-term and long-term incentives. We also participate in annual compensation surveys for all positions and strive to compensate our top talent and key roles competitively. Moreover, we believe our long-term incentives are structured in a manner to provide time-based vesting schedules that are retentive.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 InformationOur 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.ITEM 1A. Risk FactorsIn 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 conditionscondition or results of operations. The risks are listed below in no particular order.We May LoseRisks Related to Our Business to Competitors.Our Industry, Operations and Competition within the automotive aftermarket partsOur business is intense.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 motor vehicle aftermarket industry depends, in part, upon the number of vehicles on the road, 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, pricing of new and used vehicles and new vehicle quality and related warranties. We competebelieve the industry has been negatively impacted by the fact that the quality of more recent motor 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 motor vehicle parts has been steadily increasing in North America with bothrecent years due to innovations in products and technology. In addition, the introduction by original equipment parts manufacturers of9increased 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.Our industry is highly competitive, and our success depends on our ability to compete with companies that, like us, supply parts onlysuppliers of motor vehicle aftermarket products, some of which may have substantially greater financial, marketing and other resources than we do.The motor vehicle aftermarket industry is highly competitive, and our success depends on our ability to compete with domestic and international suppliers of 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), Cummins Inc. (following its acquisition of Meritor, Inc.), Automann Inc., WARN Industries, Rocky Mountain ATV/MC and numerous category specific competitors. In addition, we face competition from automobileoriginal equipment manufacturers, who sellwhich, through their dealers or dealerships, supply many of the same replacementtypes of 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:•respond more quickly than we can to new or emerging technologies and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of motor vehicle aftermarket products;•engage in more extensive research and development;•sell products directly from suppliers. at lower prices than we do;•undertake more extensive marketing campaigns; and•make more attractive offers to existing and potential customers and strategic partners.We expect such competitioncannot assure you that our competitors will not develop products or services that are equal or superior to continue. If we are unable to compete successfullyour products or that achieve greater market acceptance than our products or that in the future other companies involved in our industry wewill not expand their operations into product lines produced and sold by us. We also cannot assure you that additional entrants will not enter our industry or that companies in our industry will not consolidate. Any such competitive pressures could cause us to lose customers.8Unfavorable Economic Conditions May Adversely Affect Our Business.Adverse changesmarket share or could result in economic conditions, including inflation, recession, 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, supplierssignificant price decreases 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 business, financial condition and results of operationsoperations.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 us, could have a substantial negative impact on our sales 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, four2022, three customers (Advance, AutoZone, NAPA and O'Reilly) each accounted for more than 10% of net sales and in the aggregate accounted for approximately 61%49% of net sales in fiscal 2017, and 60% in each of fiscal 2016 and fiscal 2015.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.Customer Consolidation 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 Automotive Aftermarket May Leadpast, and may in the future, lose customers or lose a particular product line of a customer due to the highly competitive conditions in the motor vehicle 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 of10doing 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 industry 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 on 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.Given the substantial price competition in our industry, 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 increase prices to address increasing costs, 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 or to pass through increases in costs to our customers could have a material adverse effect on 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.Because the amount of space available to a retailer and other purchasers of our products is limited, our products compete with other motor vehicle 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 on our business, financial condition and results of operations.Customer Contract Terms Less Favorableconsolidation in the motor vehicle aftermarket industry may lead to Us Which May Negatively Impact Our Financial Results.The automotivemotor vehicle aftermarket industry 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, issue customer credits and accept returns of slow movingslow-moving product in order to obtain new, or retain existing, business. WhileAlthough 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 termsterm extensions and additional factoring costs 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.11Our Business May be Negatively Impacted By Foreign Currency Fluctuationsgrowth in the specialty vehicle category depends upon our continued ability to expand our product sales into specialty vehicles that require performance-defining products and the continued expansion of the market for these vehicles.Our Dependence on Foreign Suppliers.In fiscal 2017, approximately 71%growth in the specialty vehicle category is in part attributable to the expansion of the market for specialty vehicles, such as UTVs and ATVs, that require performance-defining products. Such market growth includes the creation of new classes of vehicles that can benefit from our products and our ability to create products for these vehicles. With our acquisition of SuperATV, a growing portion of our sales are expected to be generated from providing aftermarket parts and accessories for these types of vehicles. In the event these markets stop expanding or contract due to economic factors, changes in consumer preferences or other reasons, or we are unsuccessful in creating new products were purchased from auppliersfor these markets or other competitors successfully enter into these markets, we may fail to achieve future growth or our sales could decrease, which could have a material adverse effect upon our business, financial condition and results of operations.Our business, results of operations and financial condition could be materially adversely affected by the effects of widespread public health pandemics, such as COVID-19, that are beyond our control.Any outbreaks of contagious diseases, public health pandemics and other adverse public health developments in countries where we, our customers or our suppliers operate could have a varietymaterial and adverse effect on our business, results of foreign countries.operations and financial condition. The COVID-19 pandemic adversely impacted businesses around the world, adversely affected supply chain logistics and contributed to increases in raw material, freight labor and other costs. Uncertain factors relating to pandemics such as COVID-19 include the duration, spread and severity of the pandemic, the efficacy and distribution of vaccines and treatments designed to combat the pandemic, the effects 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, workplace mandates, business closures, manufacturing restrictions and any prolonged period of travel, commercial and/or other similar restrictions and limitations.Any such pandemic and the measures designed to contain its spread may negatively impact demand for our products, generally are purchased through purchase orders with the purchase price specified in U.S. Dollars. Accordingly, we generally dowhich could have a material and adverse effect on our business, results of operations and financial condition. Similarly, our suppliers may not have exposurethe materials, capacity, or capability to fluctuationsmanufacture 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 relationship between the U.S. Dollarevent any members of our workforce, or those of our suppliers, become sick as a result of any pandemic or are otherwise compelled to quarantine, or refuse to comply with any related workplace mandates, we may experience shortages in labor and various foreign currencies between the timeservices that we require for our operations. The increased use of executionremote work environments and virtual platforms in response to any such pandemic may also increase our risk of cyber-attacks and data security breaches.The duration of the purchasedisruption to our customers, our supply chain and our employees, and the related financial and operational impacts to us, as a result of any such pandemic, cannot be estimated at this time. Should any such disruption continue for an extended period, the impact could have a material adverse effect on our business, results of operations and financial condition.If we fail to 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, global pandemics such as COVID-19, the age, condition and paymentnumber of vehicles that need servicing, motor vehicle 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 forecast accurately future reductions in demand, we may accumulate excess or obsolete inventory and be forced to12reduce hours or lay off 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 a 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 the product.overstock returns as a percentage of net 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 the U.S. Dollar decreasesoverstocked returns are materially 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 portionexcess of our overseas purchases is from China. However, the products generallyprojections, our business, results of operations and financial condition may be materially adversely affected.Our operations would be materially and adversely affected if our suppliers fail to perform or if we are purchased through purchase orders with the purchase price specified in U.S. dollars. The Chinese Yuanunable 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 thatmanage our supply chain effectively.Because 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:uncertainty caused by the elimination of import quotas and the possible imposition of additional quotas or antidumping or countervailing duties or other retaliatory or punitive trade measures;imposition of duties, taxes and other charges on imports;significant devaluation of the dollar against foreign currencies;restrictions on the transfer of funds to or from foreign countries;9disease, epidemics and health-related concerns could result in closed factories, reduced workforces, scarcitytypes of raw materials, finished goods, equipment, and scrutinymanufactured component parts from suppliers, we may be materially and embargoingadversely affected by the failure of goods producedthose 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, but not limited to, availability and cost of raw materials, political instability, military conflict, destruction of their facilities caused by natural and other disasters, work stoppages and health crises. For example, the automotive industry is currently recovering from a shortage in infected areas.these risks limitwe are unable to source semiconductors on a timely basis or prevent us from acquiring products from foreign suppliers or significantly increase the costat all, we may be unable to produce some of our products, our operations could be seriously disrupted until alternative suppliers are found, which could negatively impactadversely affect our business.Additionally, we recently acquired a business based in Montreal, Canada, whose operations are conducted in both U.S. Dollarability to develop new products 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 thefill orders on existing products.Furthermore, because certain products we sell contain parts that are purchasedor can be recycled and remanufactured -- parts 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 a number of foreign suppliers.our suppliers on favorable terms, if at all.Our efforts to protect against and minimize these risks may not always be effective. If any of our key suppliers failfails 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 a disruptiondisruptions in our operations. In addition, we may not be able to consolidate or diversify our supply chain as business needs dictate, and our operations may be adversely impacted as a result. For example, we may experience delays as new suppliers are qualified or as tooling is moved or replaced. Furthermore, the 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 availableor transitioning to a retailernew supplier in a different geography may result in increased expenses, which could result in lower profit margins and other purchaserscould have a material adverse effect on 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, such as ocean freight, railroad and trucking carriers, 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 limited,not guaranteed, and, even if we have access to transportation providers, we may be unable to transport our products competeat 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 impacting transportation capacity and costs, such as strikes, political events, international trade disputes, war, terrorism, natural disasters,13adverse weather conditions, congestion, 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. For example, during 2022, like many other companies, we experienced significantly higher freight and transportation costs as a result of global transportation and logistics constraints following the height of the COVID-19 pandemic. To the extent we enter into long-term agreements with any of these transportation providers, our forecasts of expected capacity needed in future periods may be inaccurate as a result of unforeseen fluctuations in demand for these transportation services, which could result in us paying for capacity that is not needed or result in us having to purchase additional capacity on a spot-market basis. To the extent our transportation mix changes between contracted and market volume, driven by market conditions or other automotivevariables, we may observe impacts that create favorability or unfavourability in our end-to-end logistics cost structure. In addition, 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.Significant inflation could adversely affect our business and financial results.Inflation can adversely affect us by increasing our operating costs, which could have an adverse impact on our business or financial results. For example, we experienced broad-based inflationary impacts during the year ended December 31, 2022 due primarily to global transportation and logistics constraints, which resulted in significantly higher transportation costs, tariffs, material costs, and wage inflation from an increasingly competitive labor market. In a highly inflationary environment, we may attempt to offset inflationary pressures with cost-saving initiatives, price increases to customers or the use of alternative suppliers. Although we have implemented pass-through price increases to offset recent inflationary cost impacts, the price increases have often been implemented after we experienced higher costs, resulting in a lag effect to the full recovery of these costs. Furthermore, pricing increases that we implemented to pass through the increased costs had no added profit dollars and consequently did not fully offset the impact that the increased costs had on our gross and operating margin percentages. Moreover, these pricing actions may have a negative impact on customers’ willingness to purchase our products. There can be no assurance that we will be successful in implementing pricing increases in the future to recover increased inflationary costs, and such inflationary pressures could have a material adverse effect on 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 2022, approximately 64% of our products were purchased from suppliers in a variety of non-U.S. countries. The U.S. government’s trade policy with countries where we source our products may change based on a number of factors, including, but not limited to, political and economic factors. For instance, the U.S. government has 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 on our business, financial condition, results of operations, customers, suppliers and the global economy.Product Development, Acceptance and QualityIf 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 have depended, in part, on the introduction of new parts to the motor vehicle 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 beyond14our 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 2020 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 which are entirely dissimilarour development decisions, including significant expenditures on acquisitions, research and otherwise non-competitive (such as car waxesdevelopment, or investments in technologies, will not meet our expectations, and engine oil), for shelf and floor space. No assurance can be given that additional spaceour investment in some projects will be available in our customers' stores to support any expansion of the number of productsunprofitable. There is also a possibility that we offer.We Do Not Continuewe fail to Develop New Productsmake 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 Bring Them to Market, Our Business, Financial Conditionour revenue and Results of Operations Could Be Materially Impacted.The development and production of any new products isare often accompanied by design and production delays and related costs typically associated with the development and production of new products.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 motor vehicle aftermarket industry, we face additional challenges in designing and producing replacement products as original equipment manufacturers may design parts that contain enhanced technology features or proprietary technologies 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 on our business, financial condition, and results of operations.We May Be Adversely Affected By Changes in Automotive Technology and Improvements in the Quality of New Vehicle Parts.Our business and financial condition may be adversely impacted by changes in, automotive technologies, suchor restrictions on access to, motor vehicle technology.The motor vehicle 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. These factorsSoftware, firmware, and hardware increasingly are becoming functionally integrated with, and inseparable from, physical parts. While, traditionally, repair shops and vehicle owners could resultdiagnose and repair their vehicles 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 less demand forturn could limit our ability to design, manufacture and sell new products thereby causingand could have a decline inmaterial adverse effect on our business, financial condition and results of operations.10These 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 on our business, financial condition and results of operations.Design and 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 design and 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, manufacturing 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 on our business, financial condition and results of operations.15Our Intellectual Property and Information SecurityCyber-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 our 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 various areas, including 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 cyber-attack or other security breach of one of our vendors’ systems causes a disruption in its operations or 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 disrupt our operations or 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 on our business, financial condition and results of operations.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, copyrights, trade secrets, confidentiality and nondisclosure agreements, information security practices, 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 misappropriated, challenged, invalidated or circumvented. In addition, improvementsthe level of protection of our proprietary technology varies by country and may be uncertain in qualitycountries 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 may 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 may also impact our intellectual property protection investment decisions. If we are unable to adequately 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 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 on our business, financial condition and results of operations.16Claims of intellectual property infringement by original equipment manufacturers and others could adversely affect our business. Generally, if original equipment parts last longer, there could be less demand forbusiness and negatively impact our products.Claims of Intellectual Property Infringement by Original Equipment Manufacturers Could Adversely Affect Our Business and Negatively Impact Our Abilityability to Develop New Products.From time to time in the pastordinary course of our business, we have beenare subject to claims that we are infringing the intellectual property rights of original equipment manufacturers, non-practicing entities, or others. We currently are the subject of such claims and it is possible that others will assert infringement claims against us in the future. 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.products. 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 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 Products Could Damage Our Reputationbrands are an important component of our value proposition and Adversely Affect Our Business.have experienced,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 demand for our products and, where we do not sell direct to end-users of our products, make us a valued business partner to our customers through the support of their marketing initiatives. A decline in the futurereputation of our brands as a result of events, such as deficiencies or defects in the design or manufacture of our products, from legal proceedings, product recalls or warranty claims resulting from such deficiencies or defects, or from failures to meet stakeholder expectations regarding environmental, social and governance matters may experience, reliability, quality, or compatibility problems in products after their production and sale to customers. Product quality problems could result in damage toharm our reputation, lossreduce demand for our products and adversely affect our business. Moreover, our business may be adversely affected if we fail to develop adequate branding strategies following acquisitions of customers, a decrease in revenue, litigation, unexpected expenses, and a losscompanies with their own established brands. In addition to the foregoing, certain of market share. We have invested and will continueour customer agreements require us 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.supply them with private-label branded products. To the extent we experience significant quality problemsuse our own products to promote the brands of our customers over our own brands, our business may be adversely affected.Risks Related to Our Capital Structure and FinancesIncreasing our indebtedness could negatively affect our financial health.We have a credit agreement with Bank of America, N.A., as administrative agent, under which we borrowed $500 million in the future,form of a term loan and through which we have a $600 million revolving credit facility. As of December 31, 2022, there was $496.9 million in outstanding borrowings under the term loan and $239.4 in outstanding borrowings under the revolving portion of the credit agreement, and as of such date we had three outstanding letters of credit for $1.0 million in the aggregate.Our outstanding indebtedness and any additional indebtedness we incur may have negative consequences on our business, including, among others: requiring us to use cash to pay the principal of and interest on our indebtedness, thereby reducing the amount of cash available for other purposes; limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, stock repurchases, and general corporate or other purposes; and limiting our flexibility in planning for, or reacting to, changes in our business, industries or the market.Our ability to make payments of principal and interest on our indebtedness depends upon our future performance, which is subject to economic and political conditions, interest rates, industry cycles and financial, business and other factors, many of which are beyond our control. If we are unable to generate sufficient cash flow from operations to service our indebtedness, we may be required to, among other things: refinance or restructure all or a portion of our indebtedness; reduce or delay planned capital or operating expenditures; reduce, suspend or eliminate our stock repurchase program; or sell selected assets. Such measures might not be sufficient to enable us to service our indebtedness. In addition, any such refinancing, restructuring or sale of assets might not be available on economically favorable terms or at all, and if prevailing interest rates at the time of any such refinancing or restructuring are higher than our current rates, interest expense related to such refinancing or restructuring would increase. The occurrence of any of such events could have a material adverse effect on our business, financial condition and results of operationsoperations.17Our credit agreement contains covenants that restrict our operational flexibility. If we cannot comply with these covenants, we may be negatively impacted.Loss of Third-Party Transportation Providers Upon Whom We Depend or Increases in Fuel Prices Could Increase default under our credit agreement.Our Costs or Causecredit agreement contains affirmative and negative covenants, including with regard to requirements that we maintain specified financial ratios, which limit and restrict our operations and may hamper our ability to engage in activities that may be in our long-term best interests. Events beyond our control could affect our ability to meet these and other covenants under the credit agreement. Moreover, our credit agreement is guaranteed by our material domestic subsidiaries and is supported by a Disruptionsecurity interest in Our Operations.We depend upon third-party transportation providers for deliverysubstantially all of our productsand their personal property and assets, subject to certain exceptions.Our failure to comply with our covenants and other obligations under the credit agreement may result in an event of default thereunder. A default, if not cured or waived, may permit acceleration of our indebtedness and provide our lenders with the ability to foreclose on the collateral securing their loans. If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds available to pay down the indebtedness (together with accrued interest and fees), or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all. This 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 experiences financial difficulties or otherwise modifies or terminates 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 on our financial condition, results of operations and cash flows.Interest rate increases may adversely affect our financial condition and results of operations.Borrowings under our credit agreement are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same. As a result, our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. A one-percentage-point increase in the interest rates on outstanding borrowings under our credit agreement would have increased our interest expense by approximately $2.4 million for the year ended December 31, 2022.Our accounts receivable sales agreements are variable rate instruments impacted by reference interest rates, such as the Term Secured Overnight Financing Rate ("Term SOFR"), which are components of the discount rate applicable to each arrangement. A one-percentage-point increase in the discount rates on these arrangements would have increased our factoring costs by approximately $8.7 million for the year ended December 31, 2022. Rising interest rates increase the costs associated with these arrangements and result in us collecting less on our accounts receivable serviced through them. If interest rates increase 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 on 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. Strikes, slowdowns, transportation disruptions or other conditionsA significant percentage of our accounts receivable have been, and are expected to continue to be, concentrated among a relatively small number of automotive parts retailers and distributors in the transportation industry, including, but not limited to, shortagesUnited States. Our four largest customers accounted for 69% of truck drivers, disruptions in rail service, port congestion, or increases in fuel prices, could increase our coststotal accounts receivable as of December 31, 2022 and disrupt our operations and our ability to service our customers on a timely basis.Unfavorable Results82% of Legal Proceedings Could Materially Adversely Affect Us.We are subject to various legal proceedings and claims that have arisen outtotal accounts receivable as of December 25, 2021. In the ordinary course of business, management monitors, among other things, credit terms and credit limits for these18and other customers. In addition, from time to time, some of our customers request increases in their credit limits. Such requests may pose incremental risks to us, 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 which are not yet resolved and additional claims may arise in the future. Although we currently believe that resolving allto another supplier offering better credit terms. If any of these matters, individuallyour customers were unable to pay, or in the aggregate, will notif any of those customers redirect their business to other suppliers offering better credit terms, it could have a material adverse impacteffect on our business, financial position, legal claimscondition and proceedings areresults of operations.Our business may be negatively impacted by our dependence on foreign suppliers and by foreign currency fluctuations.In fiscal 2022, approximately 64% of our products were purchased from suppliers in a variety of non-U.S. countries, with the largest portion of our overseas purchases being made in China. As a result of the magnitude of our foreign sourcing, our business may be subject to inherent various risks, including the following:a.uncertainty caused by the elimination of import quotas and the possible imposition of additional quotas, bans on importing goods or materials from certain countries or regions or other retaliatory or punitive trade measures;b.imposition of duties, tariffs, taxes and other charges on imports;c.significant devaluation of the U.S. dollar against foreign currencies;d.restrictions on the transfer of funds to or from foreign countries;e.political instability, military conflict or terrorism involving the United States or any of the countries where our view on these mattersproducts are manufactured or sold, which could cause labor shortages, a delay in transportation or an increase in costs of transportation, labor, raw materials or finished product or otherwise disrupt our business operations; andf.disease, epidemics and health-related concerns could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny and embargoing of goods produced in infected areas.In addition to the foregoing, the products we purchase from our foreign suppliers generally are purchased through purchase orders with the purchase price specified in U.S. dollars. Accordingly, we generally do not have exposure to fluctuations in the relationship between the U.S. dollar and various foreign currencies between the time of execution of the purchase order and payment for the product. To the extent that the U.S. dollar changes in value relative to those foreign currencies in the future, the prices charged by our suppliers under new purchase orders may change in equivalent U.S. dollars. For example, the Chinese yuan to U.S. dollar exchange rate has fluctuated over the past several years. Any future changes in the value of the Chinese yuan relative to the U.S. dollar may result in a change in the cost of products that we purchase from China in the future. RegardlessIf these risks limit or prevent us from acquiring products from foreign suppliers or significantly increase the cost of merit, litigation may be both time-consuming and disruptive toour products, our operations and cause significant expense and diversion of management attention. Should we fail to prevail in certain matters, we maycould be faced with significant monetary damages or injunctive relief that would materially adversely affectseriously disrupted until alternative suppliers are found, which could have a material adverse effect upon our business, and financial condition and operating results.Dorman’s Executive Chairman and His Family Members Ownhis family members own a Significant Portionsignificant portion of the Company.As of January 1, 2018,February 23, 2023, Steven L. Berman, our Executive Chairman, and his family members beneficially ownowned approximately 20%17% of the Company’s outstanding common stock. As such, Mr. Berman and his family members can influence matters requiring the 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.1119General Risk FactorsUnfavorable economic conditions may adversely affect our business.Adverse changes in economic conditions, including inflation, recession, increases in fuel prices, decreased transportation capacity, rising interest rates, tariffs, labor shortages and 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 Operations, Revenuesrevenue will be adversely affected if demand for our products declines. The impact of unfavorable economic conditions may also limit discretionary spending or otherwise impair the ability of our customers to pay for products they have purchased. As a result, reserves for doubtful accounts and Operating Results,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 business, financial condition and results of operations.Our operations, revenues and operating results, and the Operationsoperations of Our Third Party Manufacturers, Suppliersour third-party manufacturers, suppliers, warehouse and Customers,distribution providers, and customers, may be Subjectsubject to Quarter to Quarter Fluctuationsquarter-over-quarter fluctuations and Disruptionsdisruptions from Events Beyond Ourevents beyond our or Their Control.Our operations, revenues and operating results, as well as the operations of our third partythird-party manufacturers, suppliers, warehouse and distribution providers, and customers, may be subject to quarter to quarterquarter-over-quarter fluctuations and disruptions from a variety of causes outside of our or their control, including work stoppages, market volatility, fuel and transportation prices, acts of war, terrorism, cyber incidents, pandemics, power outages, 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, warehouse and distribution providers, or customers, it could result in harm to people or the natural environment, delays in shipments of products to customers or suspension of operations, anyoperations. In addition, such events could result in our inability to fill orders on a timely basis or at all and result in penalties owed to our customers and the loss of whichnet sales. Any of the foregoing could have a material adverse effect on our business, revenuesfinancial condition and operating results.We rely extensively on our computer systems to manage inventory, process transactions and timely provide products to our customers. OurThese systems are subject to damage or interruption from power outages, telecommunications failures, computer viruses, security breaches, cyber-attacks or other catastrophic events. If ourthese 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 ourto these 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.12We 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 on 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.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.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 our20ability to meet analysts’ expectations. Failure to meet such expectations, even slightly, could have an adverse effect onnegatively affect 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 on our business.Losing the Servicesservices of Our Executive Officersour executive officers or Other Highly Qualifiedother highly qualified and Experienced Contributors 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, information technology and operations personnel. CompetitionAlthough we periodically conduct compensation benchmarking and surveys, competition for qualified personnel is often intense, our compensation programs may not be adequately designed, and we may not be successful in hiring and retaining these people. To the extent we experience increases in demand for labor, as a result of competition, the impacts of pandemics such as COVID-19 or otherwise, such increase in demand may drive higher wages for impacted roles and 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 on our business, could be adversely affected.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, such as SuperATV, 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 on 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 on our business, financial condition and results of operations.We 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. The21effects 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 the jurisdictions in which we distribute or sell our products. Import and export controls 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 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 delay22the 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.ITEM 2. Properties.FacilitiesAs of December 30, 2017 have 1731, 2022, we had 35 warehouse and office facilities located throughout the United States, Canada, China, Taiwan and India. TwoFive of these facilities are owned and the remainder are leased. Our principal facilities are as follows:(1)We lease the Colmar facility from a partnership of which Steven L. Berman, Executive Chairman, and his family members are partners. Under this lease agreement we paid rent of $4.61 per square foot ($1.6 million per year) in fiscal 2017. The rents payable will be adjusted on January 1 of each year to reflect annual changes in the Consumer Price Index for All Urban Consumers - U.S. City Average, All Items. This lease was renewed during November 2016, effective as of January 1, 2018, and will expire on December 31, 2022. In the opinion of the Audit Committee of our Board of Directors, the terms of this lease were no less favorable than those which could have been obtained from an unaffiliated party when the lease was renewed during November 2016.(2)We lease the Montreal facility from a corporation of which an employee and his family members are owners. Under this lease agreement we began paying rent of $7.55 per square foot ($0.7 million per year) in October 2017. This lease will expire on October 31, 2018.Location Description Size Ownership Portland, TN Warehouse and office 997,310 sq. ft. Leased Whiteland, IN Warehouse and office 827,180 sq. ft. Leased Warsaw, KY Warehouse and office 710,500 sq. ft. Owned Colmar, PA Corporate headquarters
Warehouse and office342,000 sq. ft. Leased (1) Shiremanstown, PA Warehouse and office 318,872 sq. ft. Leased Franklin, KY Manufacturing Facility 244,000 sq. ft. Leased Durant, OK Warehouse and office 208,000 sq. ft. Owned Madison, IN Warehouse and office 208,000 sq. ft. Leased Lewisberry, PA Warehouse and office 170,500 sq. ft. Leased (2) Madison, IN Warehouse 145,000 sq. ft. Leased Jiangsu Province, China Warehouse and office 105,911 sq. ft. Leased Florence, KY Warehouse 101,250 sq. ft. Leased Harrisburg, PA Manufacturing Facility 101,132 sq. ft. Owned Lewisville, TX Warehouse and office 101,029 sq. ft. Leased Franklin, KY Warehouse 100,000 sq. ft. Leased Louisiana, MO Warehouse and office 90,000 sq. ft. Owned Las Vegas, NV Warehouse and office 89,728 sq. ft. Leased Shreveport, LA Warehouse and office 65,000 sq. ft. Leased Reno, NV Warehouse and office 54,354 sq. ft. Leased Kankakee, IL Manufacturing Facility 53,574 sq. ft. Owned Jacksonville, FL Warehouse and office 52,080 sq. ft. Leased Sanford, NC Warehouse and office 52,000 sq. ft. Leased (1)We lease the Colmar facility from a partnership of which our Executive Chairman, Steven L. Berman, and certain of his family members are owners. Under this lease agreement, we paid rent of $2.5 million in fiscal 2022. The rent payment will be adjusted on January 1 of each year to reflect annual changes in the Consumer Price Index for All Urban Consumers - U.S. City Average, All Items. This lease was renewed during December 2022, effective as of January 1, 2023, and will expire on December 31, 2027.(2)We lease one of our two Lewisberry facilities (consisting of approximately 142,500 square feet) from a limited liability company of which our Executive Chairman, Steven L. Berman, and certain of his family members are owners. Under this lease agreement, we paid rent of $0.6 million in fiscal 2022. The rent payable will be increased by 3% on July 1st of each year. This lease commenced in September 2020 and will expire on December 31, 2027.23ITEM 3. Legal Proceedings.We are a partyThe information set forth under the heading “Other Contingencies” appearing in Note 10. “Commitments and Contingencies,” to or otherwise involvedthe Notes to Consolidated Financial Statements contained in legal proceedings that arise in the ordinary coursePART II, ITEM 8 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.ITEM 4. Mine Safety Disclosures.ITEM 4.1. Information about Our Executive Officers of the Registrant.Executive Officers of the Registrant.14The following table sets forth certain information with respect to our executive officers:officers as of February 28, 2023:NameAgeName Age Position with the Company 58 Secretary and TreasurerMathias J. Barton58 and Director64 President, Heavy Duty Joseph P. Braun 49 Senior Vice President, General Counsel and Secretary Jeffrey L. Darby 50Michael B. Kealey43Executive Vice President, CommercialKevin M. Olsen46ExecutiveSenior Vice President, Chief Financial OfficerScott D. Leff 51 Senior Vice President, Chief Human Resources Officer Donna M. Long 55 Senior Vice President, Chief Information Officer Eric B. Luftig 49 Senior Vice President, Product John McKnight 54 Senior Vice President, Operations 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 As reported in the Company in November 1999 as Senior Vice President, Chief Financial Officer. He became co-PresidentCompany’s Form 8-K filed on February 24, 2023, Mr. Berman will transition from the Company’s Executive Chairman to Non-Executive Chairman of the Company in February 2011, President in August 2013, and President and Chief Executive Officer in September 2015. Mr. Barton was appointed to ourCompany’s 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 fromon 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.15Paul E. Anderson joined the Company in August 2021 as President, Heavy Duty, in connection with the Company’s acquisition of Dayton Parts, a manufacturer and distributor of chassis and other parts for the heavy-duty vehicle sector of the aftermarket. Mr. Anderson most recently served as President and Chief Executive Officer of Dayton Parts, a role that he held beginning in July 2016. Prior to that time, Mr. Anderson held roles of increasing responsibility within Dayton Parts and its predecessor, TRW Heavy Duty Parts, including as Product Engineer, Product Manager and Vice President of Manufacturing.24Joseph 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 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 and held positions in sales and marketing management.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.Scott D. Leff joined the Company in April 2019 as Senior Vice President, Chief Human Resources Officer. Prior to joining Dorman, Mr. Leff held a variety of global divisional human resources roles at HP Inc. and its subsequent spin‐off, Hewlett‐Packard Enterprise Company, both multinational information technology companies. He served as Chief Human Resources Officer of Hewlett‐Packard Financial Services from March 2010 to March 2018 and Vice President of HPE Pointnext from March 2018 to April 2019. Prior to that, Mr. Leff held chief human resources officer roles and divisional human resource and employee relations roles within various publicly and privately held companies. Mr. Leff began his career as a lawyer in a New Jersey County Prosecutor’s office and a New Jersey-based law firm.Donna M. Long joined the Company in April 2015 as Senior Vice President, Chief Information Officer. Prior to joining the Company, she served as Chief Information Officer of Veritiv Corporation, a business-to-business provider of packaging, publishing, and hygiene products (“Veritiv”), from July 2014 to April 2015. Veritiv was formed as a result of the merger of Unisource Worldwide, Inc., a distributor of printing paper, packaging and supplies (“Unisource”) with xpedx, a division of International Paper Co. Prior to July 2014, Ms. Long held roles of increasing responsibility within Unisource, including as its Chief Information Officer, and she previously was a Manager at Accenture plc, a professional services company.Eric B. Luftig joined the Company in December 2021 as Senior Vice President, Product. Previously, he was the founder and Managing Partner of EBL Consulting LLC, a provider of executive management and leadership consulting services, from June 2020 to December 2021. From October 2009 to June 2020, Mr. Luftig served as Vice President and Marketing Officer for Victaulic Company, a leading producer of mechanical pipe joining solutions. Prior to that, Mr. Luftig served in various engineering, sales and marketing roles for publicly and privately held companies, including General Electric, a leader in the power, renewable energy, aviation and healthcare industries, and Nordson Corporation, a designer and manufacturer of dispensing equipment for consumer and industrial adhesives, sealants and coatings.John McKnight joined the Company in November 2019 as Senior Vice President, Operations. Prior to joining the Company, he served as Chief Operating Officer of Morgan Corporation, a leading producer of truck and van bodies in North America, from January 2019 to September 2019, and as Chief Operating Officer of25Consolidated Glass Holdings, Inc., a holding company for architectural, security, and custom glass and metal fabrication businesses, from September 2017 to July 2018. Prior to September 2017, Mr. McKnight held various roles with the Colfax Corporation, a diversified global manufacturing and engineering company ﴾“Colfax”﴿, including most recently as Executive Director of its Howden Industrial Fans division. Before Colfax, he held various leadership roles with Danaher, a designer, manufacturer, and marketer of professional, medical, industrial, and commercial products and services.26PART IIITEM 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, 201823, 2023, there were 203320 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: 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, provisions of our existing credit agreement 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 AutomotiveNASDAQ US Benchmark Auto Parts & Accessories Peer Group of the Morningstar Group Index (formerly Hemscott Group Index)TR index and the NASDAQ Composite Market Index for the period from December 31, 201230, 2017 to December 31, 2017. 2022.The AutomotiveNASDAQ US Benchmark Auto Parts & Accessories Peer GroupTR index is comprised of 14023 public companies and the information was furnished by Morningstar,Zacks Investment Research, Inc. throughThe NASDAQ Composite Market Index is comprised of more than 3,600 public companies and the information was furnished by Zacks Investment Research, Inc. The graph assumes $100 invested on December 31, 201230, 2017 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 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.27Stock RepurchasesDuring the last thirteen weeks of the fiscal yearthree months ended December 30, 2017,31, 2022, we purchased shares of our common stock as follows:(1)Includes 2,222 shares of our common stock withheld from participants for income tax withholding purposes in connection with the vesting of restricted stock grants during the period. The restricted stock was issued to participants pursuant to our 2008 Stock Option and Incentive Plan. Also includes 3,980 shares purchased from the Dorman Products, Inc. 401(k) Plan and Trust (as described in Note 12, Capital Stock, to the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K).(2)On December 12, 2013 we announced that our Board of Directors authorized a share repurchase program, authorizing the repurchase of up to $10 million of our outstanding common stock by the end of 2014. Through several expansions and extensions, our Board of Directors has expanded the program to $250 million and extended the program through December 31, 2018. Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion. The share repurchase program does not obligate us to acquire any specific number of shares. We repurchased 1,006,365 and 430,866 shares under this program during the fiscal years ended December 30, 2017 and December 31, 2016, respectively. Period Total Number
of Shares
PurchasedAverage
Price Paid
per ShareTotal Numberof SharesPurchased asPart of PubliclyAnnounced Plansor Programs (4)MaximumNumber (orApproximateDollar Value)of Shares thatMay Yet BePurchased Underthe Plans orPrograms (4)September 25, 2022 through October 22, 2022 (1)882 $ 83.81 — $ 227,989,218 October 23, 2022 through November 19, 2022 (2)1,072 $ 77.62 — $ 227,989,218 November 20, 2022 through December 31, 2022 (3)897 $ 86.49 — $ 227,989,218 Total 2,851 — $ 227,989,218 (1)Consists of 882 shares purchased from the Dorman Products, Inc. 401(k) Plan and Trust (as described in Note 12, Capital Stock, to the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, the “401(k) Plan”).(2)Includes 148 shares withheld from participants for income tax withholding purposes in connection with the vesting of restricted stock awards (“RSAs”) during the period. The RSAs were granted to participants in prior periods pursuant to our 2018 Stock Option and Stock Incentive Plan (the “2018 Plan”). Also includes 924 shares purchased from the 401(k) Plan.(3)Includes 73 shares withheld from participants for income tax withholding purposes in connection with the vesting of RSAs during the period. The RSAs were granted to participants in prior periods pursuant to the 2018 Plan. Also includes 824 shares purchased from the 401(k) Plan.(4)On December 12, 2013 we announced that our Board of Directors authorized a share repurchase program, authorizing the repurchase of up to $10 million of our outstanding common stock by the end of 2014. Through several actions taken since that time, including most recently in July 2022, our Board of Directors has expanded the program to $600 million and extended the program through December 31, 2024. Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion.ITEM 6. Selected Financial Data.[Reserved]28(1)We operate on a fifty-two, fifty-three week period ending on the last Saturday of the calendar year. The fiscal year ended December 31, 2016 was a fifty-three week period. All other fiscal years presented were fifty-two week periods.17ItemITEM 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 StatementsCertain 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 2022 and 2021 results and comparisons of fiscal 2022 results to fiscal 2021 results. Discussions of fiscal 2020 results and comparisons of fiscal 2021 results to fiscal 2020 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 theyForm 10-K for the fiscal year ended December 25, 2021.OverviewWe are made and we undertake no obligation to update publicly or revise any forward-looking statements, regardlessone of future developments or the availability of new information.OverviewWe believe we are a leading suppliersuppliers of replacement and upgrade parts and fasteners forin the motor vehicle aftermarket industry, serving passenger cars, lightlight-, medium-, and heavy-duty trucks, as well as specialty vehicles, including utility terrain vehicles (UTVs) and heavy duty trucks in the automotive aftermarket. We distribute and marketall-terrain vehicles (ATVs). As of December 31, 2022, we marketed approximately 216,000 different SKU’s129,000 distinct parts compared to approximately 118,000 as of automotive replacement parts,December 25, 2021, 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 equipment “dealer exclusive” items. Original equipment “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, leaf springs, intake manifolds, exhaust manifolds, window regulators, radiator fan assemblies, tire pressure monitor sensors, complex electronics modules, and exhaust gas recirculation (EGR) coolers.We generate virtually allmost of our revenuesnet sales from customers in the North American automotive aftermarket,America, primarily in the United States. Our products are sold primarily through automotive aftermarket retailers;retailers, including through their online platforms; dealers; 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.We operatePrior to October 4, 2022, we operated on a fifty-two, fifty-three week52-53-week period endedending on the last Saturday of the calendar year. TheOur 2022 fiscal year under this schedule is a 53-week period that ended on December 31, 2022 (“fiscal 2022”). Effective October 4, 2022, our Board of Directors approved a change in Dorman’s fiscal year end from the last Saturday in December of each year to December 31 of each year. This change will result in future years ending on December 31, consistent with fiscal 2022. Our fiscal 2021 and fiscal 2020 were 52-week periods that ended on December 30, 201725, 2021 (“fiscal 2021”) and December 26, 2015 were fifty-two week periods. The 2020 (“fiscal year ended December 31, 2016 was a fifty-three week period.18Business PerformanceWe achieved record net sales and net income in fiscal 2017. SummaryNet sales increased 5% over29% to $1,733.7 million in fiscal 2016 levels2022 from $1,345.2 million in fiscal 2021. Net income decreased 8% to $903.2$121.5 million while net income increased 1% to $106.6 million.in fiscal 2022 from $131.5 million in fiscal 2021. Additionally, in fiscal 2022 we generated $94.2 million of cash flows from operations of $41.7 million and repurchased approximately $76.1 million of180,750 common shares under our outstanding common stock. We believe our strong financial results have been driven by continued investments in new product development, a thoughtful approach to acquisitions, industry dynamics, and other economic factors.29New Product DevelopmentNew 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 2022, we introduced 4,0794,443 new productsdistinct parts to our customers and end users in fiscal 2017,end-users, including 1,192 “New to the Aftermarket” SKU’s. Our1,565 “New-to-the-Aftermarket” parts. Please see ITEM 1, “Business – Product Development” for a year-over-year comparison of new product introductions.One 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 five50 electronic modules, with some high-end luxury vehicles containing over one hundred100 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,Another area of focus has been on products we introduced a new line of products to be marketedmarket for the mediummedium- and heavy dutyheavy-duty truck aftermarket.sector of the motor vehicle aftermarket industry. We believe that this marketsector provides many of the same opportunities for growth that the automotivepassenger car and light-duty truck sector of the motor vehicle aftermarket industry has provided us over the past several years. Our focus here is on formerly “dealer only”us. We specialize in offering heavy-duty parts that were traditionally only available from OE manufacturers or salvage yards, similar to how we approach 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 2022, we introduced 486 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 mediummedium- and heavy dutyheavy-duty product category.AcquisitionsOurA key component of our strategy is growth is also impacted bythrough acquisitions. For example, inOn October 2017,4, 2022, we acquired MAS Automotive Distributors, Inc. (“MAS Industries” or “MAS”). We believe MAS isSuper ATV, a leading independent supplier to the powersports aftermarket with a family of highly complementaryrespected brands spanning functional accessories and upgrades, as well as replacement parts for specialty vehicles. On August 10, 2021, we acquired Dayton Parts, a manufacturer of chassis and other parts designed to our businessserve the heavy-duty vehicle sector of the aftermarket. See Note 2, Business Acquisitions and growth strategy.Investments under Notes to Condensed Consolidated Financial Statements for additional information. 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.Economic FactorsVehicleThe 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 the miles driven by those vehicles.Vehicles in OperationThe 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, we expect the VIO for vehicles aged 8 to 13 years old to continue to recover over the next several years. Additionally, during 2023, we expect fewer new vehicles to be purchased in the near term, benefiting demand for aftermarket parts, given the lack of availability of new vehicles and increased interest rates.30In 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 supported an increase in VIO, which increased to 293.4 million, a 1% increase in 2022 over 2021. According to data published by Polk, a division of IHS Automotive, the average age of vehicles was 11.7VIO increased to 12.4 years as of January 2017, which is an increaseOctober 2022 from 11.612.2 years as of November 2016October 2021 despite increasing new car sales. Additionally, the number of vehicles in operation in the United States continues to increase, growing 2.4% in 2017 to 278.6 million from 272.0 million in 2016. Approximately 48% of vehicles in operation are 11 years old or older. Vehicle scrappage rates have also decreased over the last several years. Miles DrivenThe number of miles driven is another important statistic that impacts our business. According to the United States Department of Transportation, the number of miles driven has increased each year since 2011 with miles driven having increased 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 combinationfail and there will be increased demand for replacement parts, including our parts. According the U.S. Department of Transportation, the factors above has accounted fornumber of miles driven through October 2022 increased 1.5% year over year. We expect this increase in miles driven may continue, given that certain employers have begun to lift work-from-home policies implemented during the pandemic and, consequently, consumers may return to commuting to work on a portionmore regular basis. However, global gasoline prices have been volatile in recent months, which may negatively impact miles driven as consumers reduce travel or seek alternative methods of our sales growth.Competition among our customer base continues to increase.transportation.Brand ProtectionWe 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, we maintain a brand protection policy, which is designed to ensure that certain products bearing the Dorman name are not advertised below certain approved pricing levels. In addition, we pursue legal remedies when we see third parties, such as e-commerce retailers, violating our intellectual property rights by wrongfully representing our products as their own or using our product images for their own marketing efforts.Discounts, Allowances, and IncentivesWe offer a variety of customer discounts, rebates, defective and slow-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 attempt19Foreign CurrencyOur recentNew Customer Acquisition CostsWe may incur new customer acquisition of MAS increasescosts where we incur change-over costs to induce a customer to switch from a competitor’s brand, including expanding new product lines into our exposuresexisting customers. Change-over costs include the costs related to foreign currencies. MASremoving the new customer’s inventory and replacing it with our inventory, which is headquartered in Montreal, Canada,commonly referred to as a stock lift. New customer acquisition costs are recorded as a reduction to revenue when incurred.Product Warranty and its financial transactions occur in both U.S. Dollars and Canadian Dollars. Since our consolidated financial statements 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%Overstock ReturnsMany of our products werecarry 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 overstock31returns 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 CurrencyOur products are 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 those foreign currencies in the future, the price of the productprices charged by our suppliers for products under new purchase orders may change in equivalent U.S. Dollars.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.Since our consolidated financial statements are denominated in U.S. dollars, the assets, liabilities, net sales, and expenses that 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.Impact of Labor Market and Inflationary CostsWe have experienced broad-based inflationary impacts during the year ended December 31, 2022, due primarily to global transportation and logistics constraints, which have resulted in significantly higher transportation costs; tariffs; material costs; and wage inflation from an increasingly competitive labor market. We expect increased freight, higher labor costs and other factors.Impactmaterial inflation costs to continue to negatively impact our results through fiscal 2023, despite recent signs of InflationThe overall impact of inflation has not resulted in a significant change in labor costs or the cost of general services utilized.The cost of many commodities that are used in our products has fluctuated over time resulting in increasesglobal supply chain constraints easing, which could lead to lower ocean freight 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.commodity costs. We will attempt to offset cost increases by passing along sellinginflationary pressures with cost-saving initiatives, price increases to customers usingand the use of alternative supplierssuppliers. Although we have implemented pass-through price increases to offset inflationary cost impacts, the price increases have often been implemented after we have experienced higher costs resulting in a lag effect to the full recovery of these costs. Furthermore, pricing increases that we implemented to pass through the increased costs had no added profit dollars and by sourcing purchases from other countries. However thereconsequently did not fully offset the impact that the increased costs had on our gross and operating margin percentages. There can be no assurance that we will be successful in these efforts.Impact of Interest RatesOur business is subject to interest rate risk under the terms of our customer accounts receivable sales programs, as a change in the Term Secured Overnight Financing Rate (“Term SOFR”), or alternative discount rate affects the cost incurred to factor eligible accounts receivable. Additionally, our outstanding borrowings under our credit facility bear interest at variable rates tied to Term SOFR, or the applicable base rate. Under the terms of the credit facility, a change in interest rates affects the rate at which we can borrow funds thereunder and also impacts the interest cost on existing borrowings. During the year ended December 31, 2022, we saw significant increases in Term SOFR, and other reference rates, which impacted our results as discussed in Results of OperationsImpact of TariffsIn the third quarter of 2018, the Office of the United States Trade Representative (USTR) began imposing additional tariffs on products imported from China, including many of our products, ranging from327.5% to 25%. The tariffs enacted to date increase the cost of many of the 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 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.In January 2020, the USTR granted temporary tariff relief for certain categories of products being imported from China. The tariff relief granted by the USTR expired on most categories of products being imported from China at the end of 2020. However, in March 2022, the USTR reinstated tariff relief for certain categories of products imported from China. The reinstated tariff relief applied retroactively to October 12, 2021 and is scheduled to expire on September 30, 2023. The reinstated tariff relief applies to a limited number of our products and is not expected to materially impact our operating results.Results of OperationsThe 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:For the Fiscal Year Ended (in thousands, except percentage data) (in thousands, except percentage data) December 31, 2022 December 25, 2021 Net sales $ 1,733,749 100.0 % $ 1,345,249 100.0 % Cost of goods sold 1,169,299 67.4 % 882,333 65.6 % Gross profit 564,450 32.6 % 462,916 34.4 % Selling, general and administrative expenses 393,402 22.7 % 291,365 21.7 % Income from operations 171,048 9.9 % 171,551 12.8 % Interest expense, net Interest expense, net 15,582 0.9 % 2,162 0.2 % Other income, net Other income, net (735) 0.0 % (377) 0.0 % Income before income taxes 156,201 9.0 % 169,766 12.6 % Provision for income taxes 34,652 2.0 % 38,234 2.8 % Net income $ 121,549 7.0 % $ 131,532 9.8 % Fiscal Year Ended December 30, 201731, 2022 Compared to Fiscal Year Ended December 31, 2016Net sales increased 5%29% to $903.2$1,733.7 million in fiscal 20172022 from $859.6$1,345.2 million in fiscal 2016. Our revenue growth was driven by overall strong demand for our products2021. The increase in net sales reflected a full year of results from Dayton Parts, which was partiallyacquired in August 2021; a continuation of favorable underlying industry dynamics across our customer channels; increased new product launches; price increases to offset byinflationary costs; the acquisition of SuperATV in October 2022; and the benefit of an additionalextra week of sales in fiscal 2016. Additionally, the MAS acquisition accounted2022. Year-over-year net sales growth for approximately $7.0 million of sales in fiscal 2017.Gross profit margin was 39.7%32.6% of net sales in fiscal 20172022 compared to 39.3%34.4% of net sales in fiscal 2016. The increased2021. Gross margin contraction was driven by broad-based cost pressures due to global supply chain constraints as well as commodity and wage rate inflation. We continued to implement price increases and cost-savings initiatives to offset the inflationary cost pressures experienced during the period, which maintained gross profit dollars but resulted in a lower gross margin was primarily due to a favorable sales mix towards higher margin products, leverage of costs across higher sales volume, and material price decreases which 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 adjustments related to MAS of $0.6 million.Selling, general and administrative expenses were $182.4$393.4 million, or 20.2%22.7% of net sales, in fiscal 20172022 compared to $169.5$291.4 million, or 19.7%21.7% of net sales, in fiscal 2016.2021. The increase in expenseSG&A as a percentage of net sales was primarily due to the impact of higher variable costs associated withinterest rates on our 5% sales growth, $5.9 million of general wage and fringe inflation, $2.5 million of increased expenses related to thecustomer accounts receivable sales program,factoring programs and $1.0 millionhigher amortization of intangible assets resulting from the Dayton Parts acquisition related costs. Provisions for doubtful accounts were $0.9 million lessin August 2021 and the SuperATV acquisition in October 2022, partially offset by operating leverage from the increase in net sales in fiscal 20172022 as compared to fiscal 2016, partially offsetting2021. SG&A expenses as a percentage of net sales also increased as a result of the increases noted above.33Our effective tax rate increaseddecreased to 39.6%22.2% in fiscal 20172022 from 37.0%22.5% in fiscal 2016.2021. 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, 2015Net 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 increasedin 2022 was the result of an increase to 37.0%the acquired Dayton Parts net operating loss deferred tax asset and favorable provision-to-return items, offset by 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.Liquidity and Capital ResourcesHistorically, 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, 201731, 2022 decreased to $71.7$46.0 million from $149.1$58.8 million at December 25, 2021. Working capital was $590.8 million at December 31, 2016. Working capital was $422.12022 compared to $411.5 million at December 30, 2017 compared to $447.825, 2021. Shareholders’ equity was $1,042.6 million at December 31, 2016. Shareholders’ equity was $634.82022 and $932.7 million at December 30, 2017 and $601.6 million at December 31, 2016. 25, 2021.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.TariffsTariffs increase our use 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 ProgramsOver 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 impacted cash flows.significant uses of cash. We participate in accounts receivable sales programs with several21whichthat allow us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment termsterm extensions. However, any sales of accounts receivable through these programs ultimately result in us receiving a lesser amount of cash upfront than if we collected those accounts receivable ourselves in due course, resulting in accounts receivable factoring costs. Moreover, to the extent that any of these accounts receivable sales programs bear interest rates tied to the Term SOFR, or other reference rates, increases in these applicable rates increase our cost to sell our receivables and reduce the amount of cash we receive. See ITEM 7A, “Quantitative and Qualitative Disclosures about Market Risk” for more information.During fiscal 20172022 and fiscal 2016,2021, we sold approximately $582.9$1,048.7 million and $521.9$935.8 million, respectively, under these programs. If receivables had not been sold, $722.3 million and $598.8 million of additional receivables would have been outstanding at December 31, 2022 and December 25, 2021, 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 expect continued pressure to extend our payment terms for the foreseeable future. Further extensions of customer payment terms willwould result in additional uses of cash flow or increased costs associated with the salesales of accounts receivable.InDuring the years ended December 2017,31, 2022 and December 25, 2021, factoring costs associated with these accounts receivable sales programs were $37.2 million and $11.7 million, respectively. The increase in factoring costs year over year was primarily driven by higher Term SOFR and other reference rates, and higher accounts receivable sold under these programs.Credit AgreementOn August 10, 2021, in connection with the acquisition of Dayton Parts, we entered into a credit agreement which will expire in December 2022. This agreement providesthat provided for an initiala $600.0 million revolving credit facility, including a letter of $ 100.0 million and gives us the ability to request increasescredit sub-facility of up to an incremental $ 100.0 million. This agreement replaces$60 million (the “2021 Facility”). The 2021 Facility replaced our previous $ 30.0$100.0 million revolving credit agreement. Borrowings under the facility arefacility. The 2021 Facility was scheduled to mature on an unsecured basis with interest rates ranging from LIBOR plus 65 basis points to LIBOR plus 125 basis points based upon the ratio of consolidated funded debt to consolidated EBITDA, as definedAugust 10, 2026, was guaranteed by the credit agreement.Company’s material domestic subsidiaries (together with the Company, the “Credit Parties”) and was supported by a security interest in substantially all of the Credit Parties’ personal property and assets, subject to certain exceptions.34On October 4, 2022, Dorman entered into an amendment and restatement of the 2021 Facility (as amended and restated, the “New Facility”) by and among Dorman, the lenders from time to time party thereto, and the administrative agent. In addition to including the existing $600.0 million revolving facility, the New Facility includes a $500.0 million term loan, which was used to fund the SuperATV acquisition. The interest rate at December 30, 2017 was LIBOR plus 65 basis points (2.22%). The credit agreement also contains other covenants, including those related toNew Facility (including the ratio of certain consolidated fixed changes to consolidated EBITDA, capital expenditures, and share repurchases, each as defined by the credit agreement. The new agreement also requires us to pay an unused fee of 0.10% on the average daily unusedrevolving portion of the facility. New Facility) matures on October 4, 2027, is guaranteed by the Credit Parties and issupported by a security interest in substantially all of the Credit Parties’ personal property and assets, subject to certain exceptions.As of December 30, 2017,31, 2022, we were not in compliancedefault with all financial covenants contained inrespect to the credit agreement.New Facility. As of December 30, 2017,31, 2022, there were nowas $239.4 million in outstanding borrowings under the facilityrevolver, and $496.9 million in outstanding borrowings under the term loan portions of the New Facility, and as of such date we had twothree outstanding letters of credit for approximately $ 0.8$1.0 million in the aggregate which were issued to secure ordinary course of business transactions.aggregate. Net of theseoutstanding borrowings and letters of credit, we had approximately $ 99.2$362.7 million available under the facilityNew Facility at December 30, 2017Refer to Note 2, “Business Acquisitions and Investments,” in the Notes to the Consolidated Financial Statements for additional information.Refer to Note 7, Long-Term Debt under Notes to Consolidated Financial Statements for additional information regarding the New FacilityCash FlowsBelow is a table setting forth the key lines of our Consolidated Statements of Cash Flows:For the Fiscal Year Ended (in thousands) December 31, 2022 December 25, 2021 Cash provided by operating activities $ 41,688 $ 100,338 Cash used in investing activities (526,839) (365,323) Cash provided by financing activities Cash provided by financing activities 472,496 168,235 Effect of foreign exchange on cash and cash equivalents Effect of foreign exchange on cash and cash equivalents (93) (44) Net decrease in cash and cash equivalents Net decrease in cash and cash equivalents $ (12,748) $ (96,794) During fiscal 2017,2022, cash provided by operating activities was $94.2$41.7 million compared to $100.3 million during fiscal 2021. The $58.7 million decrease was driven by higher cash outflows for working capital. The cash outflows for working capital were primarily as a result of $106.6 million in net income, non-cash adjustments to net income of $30.4 million and a net increase in operating assets and liabilities of $42.7 million. Accounts receivable increased $5.7 million due to increased net sales and the timing of cash receipts at year end. Inventory increased $25.1 million due todriven by higher inventory purchases to support new product launchesmeet demand and to improve customer fill rates. Accounts payable increased by $3.7 millionprovide safety stock due to increased inventory andglobal supply chain constraints, partially offset by the timingbenefits of payments to our vendors. Other assets and liabilities, net, increased $15.6 million primarily due to an increase in long-term core inventory and a decrease in customer rebates which we expect to settle in cash.During fiscal 2016, cash provided by operating activities was $121.5 million primarily as a result of $106.0 million in net income, non-cash adjustments to net income of $17.6 million and a net increase in operating assets and liabilities of $2.1 million. Accountsaccounts receivable increased $27.8 million due to increased net sales and the timing of cash receipts at year end. Inventory decreased $24.9 million due to lower inventory purchases and the effects of several inventory management initiatives. Accounts payable increased by $8.7 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.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.22Investing activities used $94.4$526.8 million and $365.3 million of cash in fiscal 2017, $26.32022 and 2021 respectively.•During fiscal 2022, we used $489.0 million to acquire SuperATV, net of cash inacquired, and during fiscal 2016, and $23.82021, we used $345.5 million to acquire Dayton Parts, net of cash in fiscal 2015. acquired.projects, including the opening of a new leased distribution center in Whiteland, Indiana.2017 was2022 totaled $37.9 million and primarily related to $11.2 million inconsisted of tooling associated with new products, $7.7 million in enhancements and upgrades to our information systems and infrastructure, scheduled equipment replacements,certain facility improvements and other capital projects.2016 was2021 totaled $19.8 million and primarily related to $10.6 million inconsisted of tooling associated with new products, $5.2 million in enhancements and upgrades to our information systems and infrastructure, scheduled equipment replacements,certain facility improvements and other capital projects.35Capital spendingFinancing activities provided cash of $472.5 million in fiscal 2015 was primarily related to $11.12022 and used cash of $168.2 million in tooling associated with new products, $5.3fiscal 2021.•During fiscal 2022, we borrowed $500.0 million under the New Facility to help fund the acquisition of SuperATV in enhancementsOctober 2022, and upgrades to our information systems, scheduled equipment replacements,certain facility improvements and other capital projects.2017, we used $56.9 million to acquire the outstanding shares of MAS, $10.0 million to acquire a minority equity interest in a supplier, and $3.1 million to acquire certain assets of Ingalls Engineering Co., Inc. During fiscal 2016, we used $6.2 million to acquire a minority equity interest in a supplier. During fiscal 2015, we used $2.1 million to acquire a minority equity interest in a supplier.Cash used in financing activities was $77.3 million in fiscal 2017, $24.8 million in fiscal 2016, and $37.2 million in fiscal 2015.On December 12, 2013 we announced that our Board of Directors authorized a share repurchase program. This plan was amended in December 2016. In fiscal 2017,2022, we paid $74.7$17.6 million to repurchase 1,006,365180,750 common shares. Inshares under our share repurchase plan.•During fiscal plan.2016,2021, we borrowed $252.4 million under the Prior Facility to help fund the acquisition of Dayton Parts in August 2021, and subsequently repaid $13.0 million of that borrowing during fiscal 2021. Additionally, during fiscal 2021, we paid $22.5$61.5 million to repurchase 430,866604,628 common shares. In fiscal 2015, we paid $35.7 million toshares under our share repurchase 747,700 common shares. sources and uses of cash from financing activities in each period resultresulted from stock compensation plan activity and the repurchase of shares of our common stock fromheld in a fund under our 401(k) Plan.Contractual Obligations and Commercial CommitmentsWe have obligations for future minimum rental and similar commitments Plan participants can no longer purchase shares of Dorman common stock as an investment option under non-cancellable operating leases as well as contingent obligations related to outstanding letters of credit. These obligations as of December 30, 2017the 401(k) Plan. Shares are summarized in the tables below (in thousands):We have excludedgenerally purchased from the table above contingent consideration related401(k) Plan when participants sell units as permitted by the 401(k) Plan or elect to leave the acquisition of MAS due to the uncertainty of the amount of payment. As of December 30, 2017, the Company has accrued approximately $8.0 million which represents the fair value of the estimated payments which will become due if certain sales thresholds 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).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, the Company has gross unrecognized tax benefits of $2.323million (see Note 10, Income Taxes, to the Consolidated Financial Statements included in this Annual Report on Form 10-K).Off-Balance Sheet ArrangementsOff-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-bystandby letters of credit under the revolvingour credit facility.agreement. Letters of credit totaling $1.0 million were outstanding at December 31, 2022 and $0.8 million were outstanding at December 30, 2017 and $1.0 million at December 31, 2016, respectively.25, 2021. 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 TransactionsWe 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.owners. Total annual rental payments each year to the partnershipthose companies under the lease arrangement was $1.6arrangements were $2.5 million in each of fiscal 2017, fiscal 2016, and fiscal 2015. In the opinion of our Audit Committee, the terms and rates of this lease are no less favorable than those which could have been obtained from an unaffiliated party when the lease was renewed in 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 agreement were $0.1$2.3 million in fiscal 2017. We did not make any payments to the corporation in2022 and fiscal 2016 or fiscal 2015. This lease will expire on October 31, 2018.We are a partner in a joint venture with one of our suppliers and we own a minority interest investments in threetwo other suppliers. Purchases from these suppliers, since we acquired our investment interestscompanies were $21.4 million, $16.5$24.9 million and $9.9$18.9 million in fiscal 2017, fiscal 20162022 and fiscal 2015,2021, respectively.Critical Accounting PoliciesOur 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, judgments and judgmentsassumptions 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, inventories, long-lived assets, purchase accounting, and income taxes. 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 believeThe following areas all require the following critical accounting policies affect our more significantuse of subjective or complex estimates, judgments 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, and2436is 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 judgementsjudgments 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 the25current 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.New and Recently Adopted Accounting PronouncementsNew 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.ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.Our market risk is the potential loss arising from adverse changes in interest rates. Substantially all ofAccounts receivable factored under our available credit andcustomer-sponsored accounts receivable salesales programs bear interest at rates tied to LIBOR. Term SOFR or alternative discount rates and result in us incurring costs as those accounts receivable are factored. Additionally, interest expense from our variable rate debt is impacted by reference rates.Under the terms of our revolving credit facility and customer-sponsored programs to sell accounts receivable, a change in eitherthe reference rate would affect the amount of financing costs we incur, and the amount of cash we receive upon the sales of accounts receivable under these programs. A one-percentage-point increase in Term SOFR or the discount rates on the accounts receivable sales programs would have increased our factoring costs and reduced the amount of cash we would have received by approximately $8.7 million, $6.7 million and $5.1 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.Under the terms of our New Facility, a change in the reference rate or 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 pointone-percentage-point increase in LIBORthe reference rate or the discount rates on the accounts receivable sale programsbase rate would have increased our interest expense on our variable rate debt if any, and accounts receivable financing costsunder our credit agreement by approximately $3.8$2.4 million, $1.1 million and $0.3 million in fiscal 20172022, fiscal 2021 and $3.4 million in fiscal 2016. This estimate assumes2020, respectively.These estimates assume that our variable rate debt balance and the level of sales of accounts receivable and variable rate debt balance 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.Historically we have not used, See ITEM 1A, “Risk Factors – Risks Related to Our Capital Structure and currently do not intendFinances” for information regarding the risks relating to use derivative financial instruments for trading or to speculate on changes inour indebtedness, our accounts receivable sales agreements and 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 contracts at December 30, 2017.ITEM 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.”2637Report of Independent Registered Public Accounting FirmTo the Shareholders and Board of Directors and ShareholdersDorman Products, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of Dorman Products, Inc. and subsidiaries (the Company) as of December 30, 2017 31, 2022 and December 31, 2016,25, 2021, the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for each of the fiscal years in the three‑yearthree-year period ended December 30, 2017,31, 2022, 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, 201731, 2022 and December 31, 2016,25, 2021, and the results of its operations and its cash flows for each of the fiscal years in the three‑yearthree-year period ended December 30, 2017,31, 2022, 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, 2017,31, 2022, 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, 201828, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.Basis for OpinionThese 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.Critical Audit MattersThe critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate 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 critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.Accrual for customer credits for defective product returnsAs disclosed in Notes 1 and 11 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 defective38product 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 31, 2022 , accrued customer rebates and returns were $192.1 million.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.Fair value of product portfolio intangible assetAs discussed in Note 2 to the consolidated financial statements, on October 4, 2022, the Company acquired 100% of the equity interests of Super ATV, LLC (“SuperATV”).We identified the evaluation of the fair value of the product portfolio intangible asset acquired in the SuperATV business combination as a critical audit matter. Subjective auditor judgment was required to assess the future revenue growth rates, technology obsolescence rate, and the discount rate used in the multi-period excess earnings valuation methodology used to determine the fair value of the product portfolio intangible asset. In addition, valuation professionals with specialized skill and knowledge were required to assess the discount rate.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 acquisition-date valuation process, including controls related to the assessment of the future revenue growth rates, technology obsolescence rate, and the discount rate. We evaluated the future revenue growth rates by comparing them to publicly available information for comparable companies, industry reports, and historical results. We evaluated the useful life of the technology acquired by the Company which was used to develop the technology obsolescence rate, by comparing it to publicly available information for comparable companies and historical results. We involved valuation professionals with specialized skills and knowledge, who assisted in assessing the discount rate by comparing it to a discount rate that was independently developed using publicly available market data for comparable companies./s/ KPMG LLPWe have served as the Company’s auditorsauditor since 2002.Philadelphia, PennsylvaniaFebruary 27, 20182739DORMAN PRODUCTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOMEFor the Year Ended (in thousands, except per share data) December 31, 2022 December 25, 2021 December 26, 2020 Net sales $ 1,733,749 $ 1,345,249 $ 1,092,748 Cost of goods sold 1,169,299 882,333 709,632 Gross profit 564,450 462,916 383,116 Selling, general and administrative expenses 393,402 291,365 249,743 Income from operations 171,048 171,551 133,373 Interest expense, net Interest expense, net 15,582 2,162 599 Other income, net Other income, net (735) (377) (2,962) Income before income taxes 156,201 169,766 135,736 Provision for income taxes 34,652 38,234 28,866 Net income $ 121,549 $ 131,532 $ 106,870 Other comprehensive income: Other comprehensive income: Change in foreign currency translation adjustment Change in foreign currency translation adjustment $ (1,863) $ (1,440) $ — Comprehensive Income Comprehensive Income $ 119,686 $ 130,092 $ 106,870 Earnings per share: Basic $ 3.87 $ 4.13 $ 3.31 Diluted $ 3.85 $ 4.12 $ 3.30 Weighted average shares outstanding: Basic 31,434 31,810 32,280 Diluted 31,543 31,961 32,373 See accompanying Notes to Consolidated Financial Statements.2840DORMAN PRODUCTS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands, except share data) December 31, 2022 December 25, 2021 Assets Current assets: Cash and cash equivalents $ 46,034 $ 58,782 Accounts receivable, less allowance for doubtful accounts of $1,363 and $1,326 Accounts receivable, less allowance for doubtful accounts of $1,363 and $1,326 427,385 472,764 Inventories 755,901 531,988 Prepaids and other current assets 39,800 13,048 Total current assets 1,269,120 1,076,582 Property, plant and equipment, net 148,477 114,864 Operating lease right-of-use assets Operating lease right-of-use assets 109,977 59,029 Goodwill 443,035 197,332 Intangible assets, net 322,409 178,809 Other assets 48,768 46,503 Total assets Total assets $ 2,341,786 $ 1,673,119 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 179,819 $ 177,389 Accrued compensation 19,490 26,636 Accrued customer rebates and returns Accrued customer rebates and returns 192,116 188,080 Revolving credit facility Revolving credit facility 239,363 239,360 Current portion of long-term debt Current portion of long-term debt 12,500 — Other accrued liabilities 35,007 33,583 Total current liabilities 678,295 665,048 Long-term debt Long-term debt 482,464 — Long-term operating lease liabilities Long-term operating lease liabilities 98,221 52,443 Other long-term liabilities 28,349 4,916 Deferred tax liabilities, net 11,826 17,976 Commitments and contingencies (Note 10) Commitments and contingencies (Note 10) Shareholders' equity: Common stock, par value $0.01; authorized 50,000,000 shares; issued and outstanding 31,430,632 and 31,607,509 shares in 2022 and 2021, respectively Common stock, par value $0.01; authorized 50,000,000 shares; issued and outstanding 31,430,632 and 31,607,509 shares in 2022 and 2021, respectively 314 316 Additional paid-in capital 88,750 77,451 Retained earnings 956,870 856,409 Accumulated other comprehensive loss Accumulated other comprehensive loss (3,303) (1,440) Total shareholders' equity 1,042,631 932,736 Total liabilities and shareholders' equity Total liabilities and shareholders' equity $ 2,341,786 $ 1,673,119 See accompanying Notes to Consolidated Financial Statements.2941DORMAN PRODUCTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITYCommon Stock Additional
Paid-In
CapitalRetained
EarningsAccumulated Other Comprehensive Loss Total (in thousands, except share data) Shares
IssuedPar
ValueBalance at December 28, 2019 Balance at December 28, 2019 32,556,263 $ 326 $ 52,605 $ 720,653 $ — $ 773,584 Exercise of stock options 27,787 — 1,184 — — 1,184 Compensation expense under incentive stock plan Compensation expense under incentive stock plan — — 7,586 — — 7,586 Purchase and cancellation of common stock (462,635) (5) (833) (37,838) — (38,676) Issuance of non-vested stock, net of cancellations 53,572 1 3,462 — — 3,463 Other stock-related activity, net of tax Other stock-related activity, net of tax (6,247) — 81 (533) — (452) Net income — — — 106,870 — 106,870 Balance at December 26, 2020 Balance at December 26, 2020 32,168,740 322 64,085 789,152 — 853,559 Exercise of stock options Exercise of stock options 41,700 — 2,455 — — 2,455 Compensation expense under incentive stock plan Compensation expense under incentive stock plan — — 8,228 — — 8,228 Purchase and cancellation of common stock (617,080) (6) (1,111) (61,639) — (62,756) Issuance of non-vested stock, net of cancellations 28,914 — 3,261 — — 3,261 Other stock-related activity, net of tax Other stock-related activity, net of tax (14,765) — 533 (2,636) — (2,103) Other comprehensive loss Other comprehensive loss — — — — (1,440) (1,440) Net income — — — 131,532 — 131,532 Balance at December 25, 2021 Balance at December 25, 2021 31,607,509 316 77,451 856,409 (1,440) 932,736 Exercise of stock options 18,515 — 1,046 — — 1,046 Compensation expense under incentive stock plan Compensation expense under incentive stock plan — — 9,370 — — 9,370 Purchase and cancellation of common stock (203,765) (2) (367) (19,565) — (19,934) Issuance of non-vested stock, net of cancellations 27,224 — 2,032 — — 2,032 Other stock-related activity, net of tax Other stock-related activity, net of tax (18,851) — (782) (1,523) — (2,305) Other comprehensive loss Other comprehensive loss — — — — (1,863) (1,863) Net income — — — 121,549 — 121,549 Balance at December 31, 2022 Balance at December 31, 2022 31,430,632 $ 314 $ 88,750 $ 956,870 $ (3,303) $ 1,042,631 See accompanying Notes to Consolidated Financial Statements.3042DORMAN PRODUCTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFor the Year Ended (in thousands) December 31, 2022 December 25, 2021 December 26, 2020 Cash Flows from Operating Activities: Net income $ 121,549 $ 131,532 $ 106,870 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, amortization and accretion 44,677 35,193 32,307 Gain on equity method investment Gain on equity method investment — — (2,498) Provision for doubtful accounts 86 181 316 Benefit from deferred income taxes Benefit from deferred income taxes (5,880) (11,970) (9,599) Provision for stock-based compensation Provision for stock-based compensation 9,370 8,228 7,586 Payment of contingent consideration Payment of contingent consideration (120) (2,418) — Changes in assets and liabilities: Accounts receivable 48,479 10,918 (67,369) Inventories (133,790) (153,823) (12,334) Prepaids and other current assets (11,150) (2,680) 5,353 Other assets (28) (5,004) (3,975) Accounts payable (5,542) 47,000 25,251 Accrued customer rebates and returns Accrued customer rebates and returns 2,433 31,275 49,849 Accrued compensation and other liabilities (28,396) 11,906 20,209 Cash provided by operating activities 41,688 100,338 151,966 Cash Flows from Investing Activities: Acquisitions, net of cash acquired Acquisitions, net of cash acquired (488,956) (345,483) (14,808) Property, plant and equipment additions (37,883) (19,840) (15,450) Cash used in investing activities (526,839) (365,323) (30,258) Cash Flows from Financing Activities: Proceeds of revolving credit line Proceeds of revolving credit line 10,000 252,360 99,000 Payments of revolving credit line Payments of revolving credit line (10,000) (13,000) (99,000) Proceeds of long-term debt Proceeds of long-term debt 500,000 — — Payments of long-term debt Payments of long-term debt (3,125) — — Payment of contingent consideration Payment of contingent consideration (1,705) (7,982) — Payment of debt issuance costs Payment of debt issuance costs (3,918) (4,215) — Proceeds from exercise of stock options 1,046 2,455 1,184 Purchase and cancellation of common stock (19,934) (62,649) (38,676) Other stock-related activity Other stock-related activity 132 1,266 3,007 Cash provided by (used in) financing activities Cash provided by (used in) financing activities 472,496 168,235 (34,485) Effect of exchange rate changes on Cash and Cash Equivalents (93) (44) — Net (Decrease) Increase in Cash and Cash Equivalents Net (Decrease) Increase in Cash and Cash Equivalents (12,748) (96,794) 87,223 Cash and Cash Equivalents, Beginning of Period 58,782 155,576 68,353 Cash and Cash Equivalents, End of Period $ 46,034 $ 58,782 $ 155,576 Supplemental Cash Flow Information Cash paid for interest expense $ 11,647 $ 1,782 $ 753 Cash paid for income taxes $ 62,861 $ 46,225 $ 28,341 See accompanying Notes to Consolidated Financial Statements.3143NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 30, 20171. Summary of Significant Accounting PoliciesDorman Products, Inc. ("Dorman", the "Company", “we”, “us”, or “our”) is a leading supplier of Original Equipment (“OE”) Dealer "Exclusive" automotive replacement and upgrade parts automotive hardwarein the motor vehicle aftermarket industry, serving passenger cars, light-, medium-, and brake productsheavy-duty trucks as well as specialty vehicles, including utility terrain vehicles (UTVs) and all-terrain vehicles (ATVs).Prior to the Automotive Aftermarket and Mass Merchandise markets. Dorman parts are marketed under the OE Solutions™, Dorman Premium Chassis, HELP!®, AutoGrade™, Conduct-Tite®, FirstStop™ and HD Solutions™ brand names.We operateOctober 4, 2022, we operated on a fifty-two, fifty-three week52-53-week period ending on the last Saturday of the calendar year. TheOur 2022 fiscal year under this schedule is a 53-week period that ended on December 31, 2022 (“fiscal 2022”). Effective October 4, 2022, our Board of Directors approved a change in Dorman’s fiscal year end from the last Saturday in December of each year to December 31 of each year. This change will result in future years ending on December 31, consistent with fiscal 2022. Our fiscal 2021 and fiscal 2020 were 52-week periods that ended on December 30, 201725, 2021 (“fiscal 2021”) and December 26, 2015 were fifty-two week periods. The 2020 (“fiscal year ended December 31, 2016 was a fifty-three week period.Principles of Consolidation. The Consolidated Financial Statements include our accounts and the accounts of our wholly-ownedwholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Reclassifications. Certain prior year amounts have been reclassified to conform with current-year presentation.Cash and Cash Equivalents. We consider all highly liquid short-term investments with original maturities of three months or less to be cash equivalents.Sales of Accounts Receivable. We have entered into several customer sponsoredcustomer-sponsored programs administered by unrelated financial institutions that permit us to sell certain accounts receivable at discounted rates to the financial institutions. Transactions under these agreementsprograms were accounted for as sales of accounts receivable and were removed from our Consolidated Balance Sheet at the time of the sales transactions. During fiscal 2017,2022, fiscal 20162021 and fiscal 2015,2020, we sold $582.9$1,048.7 million, $521.9$935.8 million and $519.2$740.0 million, respectively, pursuant tounder these agreements. If receivables had not been sold, $380.8 million and $338.3 million of additional receivables would have been outstanding at December 30, 2017 and December 31, 2016, respectively, based on standard payment terms.programs. Selling, general and administrative expenses include $11.4 million, $8.9 million and $7.2 million in fiscal 2017, fiscal 2016 and fiscal 2015, respectively, of financingfactoring costs associated with these accounts receivable sales programs.Inventories. Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. Inventories include the cost of material, freight, direct labor and overhead utilized in the processing of our products. We provide reserves for discontinued and excess inventory based upon historical demand, forecasted usage, estimated customer requirements and product line updates.Property, Plant and Equipment. Property, plant and equipment are recorded at cost and depreciated over theirthe estimated useful lives, which range from three1 to thirty-nine39 years, using the straight-line method for financial statement reporting purposes and accelerated methods for income tax purposes. The costs of maintenance and repairs are expensed as incurred. Renewals and betterments are capitalized. Gains and losses on disposals are included in operating results.3244Estimated useful lives by major asset category are as follows:Buildings and building improvements 31 to 1539 yearsLong-Lived Assets Including Goodwill and Other Acquired Intangible Assets. Long-lived assets, including property, plant, and equipment and amortizable 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 disposedThe assets and liabilities of a disposal group classified as held for sale 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 arewould 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 toFor 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.amount (“Step 0”). If through the Step 0 test 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-stepwe would perform a quantitative test (“Step 1”) to determine whether an impairment test is unnecessary. charge was necessary. During fiscal 20172022 and fiscal 2016,2021, 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 valuesvalue of eachour reporting unit wasunits were less than itstheir 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 the excess recorded as goodwill. Such fair market value assessments require judgments and estimates which may change over time and may cause the final amounts to differ materially from their original estimates. These adjustments to fair value assessments are recorded to goodwill over the purchase price allocation period which cannot exceed twelve months.Other Assets. Other assets include primarily long-term core inventory, deposits, and equity method investments.Certain products we sell contain parts that can be recycled, or as more commonly referred to in our industry, remanufactured. We refer to these parts as cores. A used core is remaufacturedremanufactured and sold to the customer as a replacement for a unit inside 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 a core primarily include instrument clusters, hybrid batteries, radios, and climate control modules.Long-term core inventory was $20.2$19.8 million and $18.5$20.8 million as of December 30, 201731, 2022 and December 31, 2016,25, 2021, respectively. Long-term core inventory is recorded at the lower of cost or net realizable value. Cost is determined based on actual purchases of core inventory. We believe that the most appropriate classification of core inventory is a long-term asset. According to guidance provided under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification(“ASC”),Codification, current assets are defined as “assets or resources commonly identified as those which are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business.” The determination of the long-term classification is based on our view that the value of the cores is not expected to be consumed or realized in cash during our normal annual operating cycle.3345We also have investments that we account for according to the equity method of accounting. The total book value of these investments was $21.1$9.4 million asat both of December 30, 201731, 2022 and theseDecember 25, 2021, respectively. These investments provided us $3.3$5.5 million, $4.6 million and $1.3 million of income during fiscal 2017.Other Accrued Liabilities. Other accrued liabilities include primarily accrued customer rebates which we expect to settle in cash of $6.8 million and $7.3 million as of December 30, 2017 and December 31, 2016, respectively. Also included are accrued commissions, accrued income taxes, insurance liabilities, product warranties, and other current liabilities. We warrant our products against certain defects in material and workmanship when used as designed on the vehicle on which it was originally installed. We offer a limited lifetime warranty on most of our products. Our warranty limits the end-user’s remedy to the repair or replacement of the part that is defective. Product warranty reserves, which were $0.5 million as of December 30, 2017 and December 31, 2016, are based upon actual experience and forecasts using the best historical and current claim information available. Provisions and payments related to product warranty reserves were not material in fiscal 2017, fiscal 2016 or fiscal 2015.Revenue Recognition and Allowance forAccrued Customer CreditsRebates 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 creditsrebates and returns, which we expect to settleis included in cashcurrent liabilities. Customer Credits are classified as other accrued liabilities.estimated based on contractual provisions, historical experience, and our assessment of current market conditions. Actual Customer Credits have not differed materially from estimated 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.As noted above, Customer Credits include core return deposits which are an estimate of the amount we believe we will refund to our customers when used cores are returned to us. The price we invoice to customers for remanufactured cores containcontains both the amount we charge to remanufacture the part and a deposit for the core. We charge a core deposit to encourage the customer to return the used core to us so that it can be used in our remanufacturing process. We allow our customers up to twenty-four months to return the used core to us. Core return deposits are reserved based on the expected deposits to be issued to customers based on historical returns.Research and Development. Research and development costs are expensed as incurred. Research and development costs totaling $20.0$24.8 million, in fiscal 2017, $18.9$23.1 million in fiscal 2016 and $16.8$20.7 million in fiscal 2015 have been recorded in selling, general and administrative expenses in the Consolidated Statements of Operations.Stock-Based Compensation. At December 30, 201731, 2022 and December 31, 2016,25, 2021, we had oneawards outstanding under two stock-based employee compensation plan,plans, which isare described more fully in Note 12, Capital Stock. We record compensation expense for all awards granted. The value of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) issued iswas based on the fair value of our common stock on the grant date. For performance-based RSAs tied to growth in adjusted pre-tax income, compensation costs related to the stock is recognized over the performance period and is calculated using the closing price per share of our common stock on the grant date and an estimate of the probable outcome of the performance conditions as of the reporting date. The fair value of performance-based RSUs, for which the performance measure is total shareholder return, is determined using a Monte Carlo simulation model. The fair value of stock options granted wasis determined using the Black-Scholes option valuation model.Income Taxes. We follow the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities. Deferred tax assets or liabilities at the end of each period are determined using the enacted tax rate expected to be in effect when taxes are actually paid or recovered.Unrecognized income tax benefits represent income tax positions taken on income tax returns that have not been recognized in the consolidated financial statements. The Company recognizes the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being46realized upon ultimate settlement. Additionally, we accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest and penalties are classified as income tax expense in the Consolidated Statements of Operations. The Company does not anticipate material changes in the amount of unrecognized income tax benefits over the next year.34Concentrations of Risk. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents and accounts receivable. All cash equivalents are managed within established guidelines whichthat limit the amount whichthat may be invested with one issuer. A significant percentage of our accounts receivable have been, and will continue to be, concentrated among a relatively small number of automotive retailers and warehouse distributors in the United States. Our five4 largest customers accounted for 85% of net accounts receivable as of December 30, 201769% and 87%71% of net accounts receivable as of December 31, 2016.2022 and December 25, 2021, respectively. We continually monitor the credit terms and credit limits tofor these and other customers.In fiscal 2017,2022 and fiscal 2021, approximately 71%64% and 74%, respectively, of our products were purchased from suppliers located in a variety of foreign countries, with the largest portion coming from China.Fair Value Disclosures. The carrying value of financial instruments such as cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair value based on the short-term nature of these instruments. The carrying value of our long-term debt approximates its fair value because it bears interest at a rate indexed to a market rate (Term SOFR). Additionally, the fair value of assets acquired and liabilities assumed are determined at the date of acquisition. We did not hold any foreign currency forward contractsContingent consideration associated with an acquisition is recorded at December 30, 2017 or December 31, 2016. 2. NewBusiness Acquisitions and Recently Adopted Accounting PronouncementsIn May 2014,InvestmentsSuper ATV, LLC (“SuperATV”)On October 4, 2022 (the “Closing Date”), Dorman acquired 100% of the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entityand outstanding equity interests of SuperATV (the “Transaction”), for aggregate consideration of $509.6 million (net of $6.8 million cash acquired), subject to recognizecertain customary adjustments based on, among other things, the amount of cash, debt and working capital in the business of SuperATV as of the closing of the Transaction, plus a potential earn-out payment to the sellers of SuperATV not to exceed $100 million in the aggregate, which remains subject to the achievement by SuperATV of certain revenue and gross margin targets in the years ended December 31, 2023 and December 31, 2024. SuperATV is a leading independent supplier to which it expectsthe powersports aftermarket with a family of highly respected brands spanning functional accessories and upgrades, as well as replacement parts for specialty vehicles.The Transaction was funded in cash through the refinancing of our existing credit facility discussed further in Note 7.The Transaction was accounted for as a business combination under the acquisition method of accounting. We have allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, as of December 31, 2022, is based upon preliminary information and is subject to change within the permitted measurement period (up to one year from the acquisition date) as additional information concerning final asset and liability valuations is obtained. The fair values that remain preliminary include tax-related liabilities and contingent liabilities. While they are not expected to be entitledmaterially different than those shown, any material adjustments to the estimates based upon new information identified during the measurement period will be reflected, retroactively, as of the date of the acquisition.47The table below details the fair values of the assets acquired and the liabilities assumed at the acquisition date:(in thousands) Accounts receivable $ 3,317 Inventories 90,428 Prepaids and other current assets 5,293 Property, plant and equipment 23,776 Goodwill 247,247 Identifiable intangible assets 157,500 Operating lease right-of-use assets 11,661 Other Assets 3,001 Accounts payable (7,436) Accrued compensation (2,086) Accrued customer rebates and returns (1,609) Other current liabilities (8,726) Long-term operating lease liabilities (9,508) Other long-term liabilities (3,307) Net cash consideration 509,551 The estimated valuation of the intangible assets acquired, and related amortization periods are as follows:(in thousands) Fair Value Amortization Period (in years) Product portfolio 82,500 15 Trade names 48,400 20 Customer relationships 26,600 15 Total $ 157,500 The fair values assigned to the product portfolio and customer relationships were estimated by discounting expected cash flows based on the multi-period excess earnings valuation methodology, and the trade names were estimated by discounting expected cash flows based on the relief from royalty methodology. The product portfolio valuation method relies on various management judgments, including expected future cash flows resulting from the product portfolio, technology obsolescence rates, contributory effects of other assets utilized in the business, discount rates and other factors. The trade names valuation method relies on various management judgments, including royalty rates, discount rates and other factors. The customer relationship valuation method relies on various management judgments, including expected future cash flows resulting from existing customer relationships, customer attrition rates, contributory effects of other assets utilized in the business, discount rates, and other factors.As of December 31, 2022, the total amount of goodwill resulting from the SuperATV acquisition that is expected to be deductible for tax purposes is estimated at $420.3 million.The financial results of the Transaction have been included in the consolidated financial statements since the date of acquisition. The net sales and net income of SuperATV included in the consolidated financial statements for the transferfiscal year ended December 31, 2022 were $49.6 million and $2.3 million, respectively.The unaudited pro forma information for the periods set forth below gives effect to the Transaction as if it had occurred as of promised goods or services to customers. December 26, 2020, the beginning of the fiscal 2021 period.48The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. As originally issued,pro forma information is presented for informational purposes only and is not necessarily indicative of the new standardresults of operations that would have been effective for annual periods beginning after December 15, 2016. achieved had the acquisition been consummated as of that time.For the Year Ended (in thousands, unaudited) December 31, 2022 December 25, 2021 Net sales $ 1,888,379 $ 1,556,360 Net income $ 130,375 $ 143,419 Diluted earnings per share $ 4.13 $ 4.49 The FASB has amendedfiscal 2022 unaudited pro forma net income set forth above was adjusted to exclude the standard to be effective for annual periods beginning after December 15, 2017. The standard permits the useimpact of either the retrospective or cumulative effect transition method. We adopted the standard on December 31, 2017 using the modified retrospective transaction method and the adoption did not have a material effect on our financial position, results of operations and internal controls over financial reporting. Certain additional financial statement disclosures are required beginning in our 2018 quarterly reporting, including a disaggregated view of revenue.In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. The amendments in this guidance do not applyacquisition date fair value adjustments to inventory, that is measured using last-in, first-out (LIFO) or the retail inventory method.and to also remove acquisition-related transaction costs. The amendments apply2021 unaudited pro forma net income was adjusted to all other inventory, which includes inventory that is measured using first-in, first-out or average cost. Within the scope of this new guidance, an entity should measure inventory at the lower of cost and net realizable value; where, net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The new guidance was effective for annual periods beginning after December 15, 2016, with early adoption permitted. The new guidance must be applied on a prospective basis. Adoption of this ASU did not have a material impact on our consolidated financial statements.In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall, which relates to the recognition and measurement of financial assets and liabilities. The new guidance makes targeted improvements to GAAP impacting equity investments (other than those accounted for under the equity method or consolidated), financial liabilities accounted for under the fair value election, and presentation and disclosure requirements for financial instruments, among other changes. The new guidance is effective for annual periods beginning after December 15, 2017, with early adoption prohibited other than for certain provisions. We are evaluatinginclude the impact that the new guidance will have on our consolidated financial statements and related disclosures, however, we do not believe the adoption of this new guidance will have a material impact on our consolidated financial statements.In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces existing lease guidance. The ASU is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The new guidance is effective for annual periods beginning after December 15, 2018, with early application permitted. The new standard is required to be applied with a modified retrospective approach. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.35In March 2016, the FASB issued ASU No. 2016-09, Compensation – Improvement to Employee Share-Based Payment Accounting, which amends the current guidance related to stock compensation. The updated guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The update to the standard was effective for annual periods beginning after December 15, 2016, with early application permitted. Adoption of this ASU resulted in a $1.0 million tax benefit during fiscal 2017. The amount of benefit, if any, in future periods will vary.Inthese items.DPL Holding Corporation (“Dayton Parts”)On August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies and provides guidance on eight cash flow classification issues and is intended to reduce existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures, however, we do not believe the adoption of this new guidance will have a material impact on our consolidated financial statements.In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the need to perform a hypothetical purchase price allocation to measure goodwill impairment. ASU 2017-04 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are evaluating the effect that the new guidance will have, however, we do not believe the new guidance will have a material impact on our consolidated financial statements and related disclosures.3. Business Acquisitions and InvestmentsOn October 26, 2017,10, 2021, we acquired 100% of the outstanding stockequity interests of MAS Automotive Distribution Inc. (“MAS Industries” or “MAS”),Dayton Parts, a privately-held manufacturer of premium chassis and control arms based in Montreal, Canada. Theother parts designed to serve the heavy-duty vehicle sector of the aftermarket for a purchase price was $67.3of $344.9 million netin cash (net of $3.3$8.8 million of cash acquired and including contingent consideration and othercash), after certain customary post-acquisition purchase price adjustments.The Company believes MAS is complementary to our business and growth strategy. We see opportunities to leverage MAS’ existing presence in the automotive aftermarket,acquisition was funded by cash on hand as well as through the refinancing of our product development capabilities and financial resources to acceleraterevolving credit facility discussed further in Note 7.The transaction was accounted for as a business combination under the growthacquisition method of MAS’ premium chassis and control arms.includedallocated the results of MAS in our Consolidated Financial Statements since the acquisition date of October 26, 2017. The Consolidated Statement of Operations forpurchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values.During the year ended December 30, 2017 includes $7.025, 2021, we recorded measurement and period adjustments of approximately $2.1 million to decrease goodwill, $0.6 million to decrease the purchase price due to customary net working capital adjustments, $0.1 million to increase other current liabilities, and $1.6 million to decrease deferred tax liabilities. Our measurement period adjustments for Dayton Parts were complete as of December 25, 2021.The table below details the fair values of the assets acquired and the liabilities assumed at the acquisition date, including applicable measurement period adjustments:(in thousands) Accounts receivable $ 23,216 Inventories 79,625 Prepaids and other current assets 2,302 Property, plant and equipment 29,900 Goodwill 106,816 Identifiable intangible assets 160,400 Operating lease right-of-use assets 21,248 Other assets 848 Accounts payable (11,970) Accrued compensation (2,784) Other current liabilities (7,604) Long-term operating lease liabilities (18,444) Deferred tax liabilities (38,665) Net cash consideration $ 344,888 49The estimated valuation of the intangible assets acquired, and related amortization periods are as follows:(in thousands) Fair Value Amortization Period (in years) Customer relationships $ 124,100 20 Product portfolio 25,300 20 Trade names 11,000 10 Total $ 160,400 The fair values assigned to intangible assets were estimated by discounting expected cash flows based on the relief from royalty and multi-period excess earnings valuation methodologies. These valuation methods rely on management judgment, including expected future cash flows resulting from existing customer relationships, customer attrition rates, contributory effects of other assets utilized in the business, royalty rates and other factors.The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to the Company’s and Dayton Parts’ existing automotive aftermarket businesses, the assembled workforce of Dayton Parts and other factors. The goodwill is not expected to be deductible for tax purposes.The financial results of the acquisition have been included in the consolidated financial statements since the date of acquisition. The net sales and an immaterial amount of net income relatedof Dayton Parts included in the consolidated financial statements for the fiscal year ended December 25, 2021 were $78.0 million and $0.0 million, respectively.The unaudited pro forma information for the periods set forth below gives effect to MAS. The Consolidated Balance Sheetthe Dayton Parts acquisition as if it had occurred as of December 30, 2017 reflects28, 2019, the beginning of the fiscal 2020 period.The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been consummated as of MAS Industries, effective October 26, 2017. For the Year Ended (in thousands, unaudited) December 25, 2021 December 26, 2020 Net sales $ 1,468,415 $ 1,260,077 Net income $ 147,090 $ 100,334 Diluted earnings per share $ 4.60 $ 3.10 The following table summarizesfiscal 2021 unaudited pro forma net income set forth above was adjusted to exclude the preliminaryimpact of acquisition date fair value adjustments to inventory, and to also remove acquisition-related transaction costs. The 2020 unaudited pro forma net income was adjusted to include the impact of these items.Power Train Industries, Inc.On January 2, 2020, we acquired the remaining 60% of the outstanding stock of PTI. The total consideration at October 26, 2017:Included inpurchase price for PTI was approximately $30.7 million, which included $18.4 million paid for the table above is $8.0remaining 60% of the outstanding stock, subject to customary purchase price adjustments, and $12.3 million of estimated contingent payments which represents the fair value of the estimated payments which will become due if certain sales thresholds are achieved throughpreviously held 40% equity interest in PTI that was acquired by the Company in 2016. As a result of the acquisition, we recorded a gain of approximately $2.5 million in other income (expense), net during the year ended December 2020. The26, 2020 from the increase in fair value of the contingent cash consideration was estimated by using the option pricing model framework. The maximum contingent payment would be $11.7 million. Also excluded from the table above are working capital and other purchase price adjustments which will be finalizedpreviously owned 40% interest in fiscal 2018 based on the MAS standalone audited 2017 financial statements.The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the assets acquired, and liabilities assumed were recorded at fair value, with the remaining purchase36 The following table summarizes the preliminary fair valuesIn connection with this acquisition, we recorded $16.7 million in goodwill, $7.3 million of theidentified intangibles, and $6.7 million of other assets, acquirednet, consisting of $3.5 million of cash, $2.0 million of accounts receivable, $5.6 million of inventory, and liabilities assumed as($4.4 million) of October 26, 2017 (in thousands):The estimated fair value of the MASnet other assets acquired and liabilities assumed are provisionalliabilities.50Our measurement period adjustments for PTI were complete as of December 30, 2017 and are based on information that is currently available to the Company. Additional information about conditions that existed as of the date of acquisition are being gathered to finalize these provisional measurements, particularly with respect to net working capital, intangible assets, contingent liabilities, deferred income taxes and income taxes payable. Accordingly, the measurement of the MAS assets acquired and liabilities assumed may change significantly upon finalization of the Company’s valuations and completion of the purchase price allocation, both of which are expected to occur no later than one year from the acquisition date.The valuation of the intangible assets acquired and related amortization periods are as follows:(in thousands) Valuation Amortization
Period
(in years)Customer relationships $ 4,600 15 Trade names Trade names 700 5 Technology Technology 1,800 8 Other Other 190 5 Total $ 7,290 The preliminary fair values of the Customercustomer relationships and Tradenamestrade names were estimated using a discounted present valuean income approach. Under this method, an intangible asset’s fair value is equal toapproach based on the present value of the incremental after-taxfuture cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, we used cash flows discounted at rates ranging from 15% to 17%, which were considered appropriate given the inherent risks associated with each type of asset. We believe that the level and timing of cash flows appropriately reflect market participant assumptions.The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to existing automotive aftermarket businesses, the assembled workforce of MASPTI and other factors. The goodwill is not expected to be deductible for tax purposes.Pro Forma Financial Information (Unaudited)The unaudited pro forma information for the periods set forth below gives effect to the MAS acquisition as if it had occurred as of December 27, 2015, the start of our 2016 fiscal year. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time:The 2017 unaudited pro forma net income set forth above was adjusted to include amortization of intangible assets and to exclude the impact of the nonrecurring acquisition date fair value adjustments to inventory as well as acquisition and financing costs of MAS which we do not believe would have occurred. The 2016 unaudited pro forma net income set forth above was adjusted for these same adjustments as if the acquisition had occurred on December 27, 2015.37On January 27, 2017 we acquired a 33% minority equity interest in a supplier for $10.0 million. We are accounting for our interest using the equity method of accounting, as our investment gives us the ability to exercise significant influence, but not control, over the investee.On January 6, 2017, we acquired certain assets of Ingalls Engineering Company, Inc., a chassis and suspension business, primarily to expand our product portfolio. The purchase price was $4.8 million, comprised of $3.1 million of cash and $1.7 million of estimated contingent payments as of the date of acquisition. The contingent payment arrangement is based upon future net sales of the acquired business. In connection with this acquisition, we have completed our purchase price allocation procedures and recorded $2.8 million in goodwill and other intangible assets and $2.0 million of other net assets. All of the intangible assets resulting from the asset purchase are expected to be deductible for tax purposes. The financial results of the acquisition have been included in the Consolidated Financial Statements since the acquisition date.4.date of acquisition.3. InventoriesInventories were as follows:(in thousands) December 31, 2022 December 25, 2021 Raw materials Raw materials $ 34,267 $ 12,746 Bulk product 234,871 225,879 Finished product 478,032 287,415 Packaging materials 8,731 5,948 Total $ 755,901 $ 531,988 5.4. Property, Plant and EquipmentProperty, plant and equipment include the following:(in thousands) December 31, 2022 December 25, 2021 Buildings $ 59,980 $ 58,788 Machinery, equipment and tooling 184,184 146,999 Furniture, fixtures and leasehold improvements 12,225 7,303 Software and computer equipment 100,814 90,471 Total 357,203 303,561 Less-accumulated depreciation and amortization (208,726) (188,697) Property, plant and equipment, net $ 148,477 $ 114,864 Depreciation and amortization expenses associated with property, plant, and equipment were $21.5$28.6 million, $18.7$26.3 million, and $15.9$26.6 million in fiscal 2017,2022, fiscal 2016,2021, and fiscal 2015,2020, respectively.5. LeasesWe determine whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of the asset and to obtain substantially all of the economic benefit from its use. We have operating leases for distribution centers, sales offices and certain warehouse and office equipment. Our operating leases have remaining lease terms of 1 to 11 years, many of which include one or more renewal51options. We consider these renewal options in determining the lease term used to establish our right-of-use assets and lease liabilities when it is determined that it is reasonably certain that the renewal option will be exercised. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year. Some of our operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation.Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. The incremental borrowing rate is not commonly quoted and is derived through a combination of inputs including our credit rating and the impact of full collateralization. The incremental borrowing rate is based on our collateralized borrowing capabilities over a similar term to the lease payments. We utilized the consolidated group borrowing rate for all leases as we operate a centralized treasury operation. Operating lease payments are recognized on a straight-line basis over the lease term. We had no material finance leases as of December 31, 2022 or December 25, 2021.Practical Expedients and Accounting Policy ElectionsWe have made certain accounting policy elections and are using certain practical expedients permitted under GAAP, as follows:•Include both lease and non-lease components as a single lease component, as non-lease components of contracts have not historically been material.•Account for leases with terms of one year or less as short-term leases and, as such, are not included in the right-of-use assets or lease liabilities.As of December 31, 2022 and December 25, 2021 there were no material variable lease costs or sublease income. Cash paid for operating leases was $16.8 million, $9.2 million and $7.7 million during fiscal 2022, fiscal 2021 and fiscal 2020, respectively, which are classified in operating activities on the Consolidated Statements of Cash Flows. The following table summarizes the lease expense:For the Year Ended (in thousands) December 31, 2022 December 25, 2021 December 26, 2020 Operating lease expense $ 17,340 $ 9,549 $ 7,732 Short-term lease expense 5,838 3,172 3,647 Total lease expense $ 23,178 $ 12,721 $ 11,379 Supplemental balance sheet information related to our operating leases is as follows:(in thousands) December 31, 2022 December 25, 2021 Operating lease right-of-use assets $ 109,977 $ 59,029 Other accrued liabilities $ 15,912 $ 10,065 Long-term operating lease liabilities 98,221 52,443 Total operating lease liabilities $ 114,133 $ 62,508 Weighted average remaining lease term (years) 7.76 7.55 Weighted average discount rate 3.91 % 3.73 % 52The following table summarizes the maturities of our lease liabilities for all operating leases as of December 31, 2022:(in thousands) December 31, 2022 2023 $ 19,984 2024 18,714 2025 17,033 2026 16,821 2027 15,611 Thereafter 44,318 Total lease payments 132,481 Less: Imputed interest (18,348) Present value of lease liabilities $ 114,133 6. Goodwill and Intangible AssetsGoodwillGoodwill included the following:(in thousands) December 31, 2022 December 25, 2021 Balance at beginning of period $ 197,332 $ 91,080 Goodwill acquired 247,247 108,945 Measurement period adjustments for Dayton acquisition Measurement period adjustments for Dayton acquisition — (2,130) Foreign currency translation Foreign currency translation (1,544) (563) Balance at end of period $ 443,035 $ 197,332 38Intangible AssetsIntangible assets, subject to amortization, included the following:December 31, 2022 December 25, 2021 Intangible assets subject to amortization Weighted Average Amortization Period (years) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value (dollars in thousands) (dollars in thousands) Customer relationships 17.0 $ 175,430 $ 21,643 $ 153,787 $ 149,150 $ 12,139 $ 137,011 Trade names Trade names 17.4 67,690 6,370 61,320 17,760 2,592 15,168 Product Portfolio Product Portfolio 15.6 107,800 2,953 104,847 25,300 460 24,840 Technology 5.7 2,167 820 1,347 2,167 571 1,596 Patents and Other Patents and Other 9.9 1,430 322 1,108 430 236 194 Total $ 354,517 $ 32,108 $ 322,409 $ 194,807 $ 15,998 $ 178,809 53Amortization expense associated with intangible assets was $0.5$14.2 million, $6.5 million and $3.4 million in fiscal 2017 and $0.1 million in each of2022, fiscal 20162021 and fiscal 2015. Included in the table below is $2.1 million of annual amortization expense related to the acquisition of MAS.2020, respectively. The estimated future amortization expense for intangible assets as of December 31, 2022, is summarized as follows:(in thousands) 2023 $ 21,740 2024 21,740 2025 21,596 2026 21,418 2027 19,924 Thereafter 215,991 Total $ 322,409 7. Long-Term DebtIn December 2017,On August 10, 2021, in connection with the acquisition of Dayton Parts, we entered into a new credit agreement which will expire in December 2022. This agreement providesthat provided for an initiala $600 million revolving credit facility, including a letter of $ 100.0 million and gives us the ability to request increasescredit sub-facility of up to an incremental $ 100.0 million. This agreement replaces$60 million (the “2021 Facility”). The 2021 Facility replaced our previous $ 30.0$100 million revolving credit agreement. facility. The 2021 Facility was scheduled to mature on August 10, 2026 and was guaranteed by the Company’s material domestic subsidiaries (together with the Company, the “Credit Parties”) and was supported by a security interest in substantially all of the Credit Parties’ personal property and assets, subject to certain exceptions.In connection with the acquisition of SuperATV, we amended and restated the 2021 Facility (as amended and restated, the “New Facility”) by and among us, the lenders from time to time party thereto, and the administrative agent. In addition to including the existing $600.0 million revolving facility, the New Facility includes a $500.0 million term loan, which was used to fund the SuperATV acquisition. The New Facility (including the revolving portion of the New Facility) matures on October 4, 2027, is guaranteed by the Credit Parties and issupported by a security interest in substantially all of the Credit Parties’ personal property and assets, subject to certain exceptions.Borrowings under the facility areNew Facility bear interest at a rate per annum equal to, at our option, either a term Secured Overnight Financing Rate (“Term SOFR”) (subject to a 0.00% floor) or a base rate (as defined in the New Facility), in each case plus an applicable margin of, initially (i) in the case of Term SOFR loans, 1.50% or (ii) in the case of base rate loans, 0.50%. The applicable margin for (i) base rate loans ranges from 0.000% to 1.000% per annum and (ii) for Term SOFR loans ranges from 1.000% to 2.000% per annum, in each case, based on an unsecured basis with interest rates rangingthe Total Net Leverage Ratio (as defined in the New Facility). The commitment fee under the New Facility is initially equal to 0.20% and thereafter ranges from LIBOR plus 65 basis points0.125% to LIBOR plus 125 basis points0.250% based uponon the ratioTotal Net Leverage Ratio (as defined in the New Facility). As of consolidated funded debt to consolidated EBITDA, as defined byDecember 31, 2022, the credit agreement. The interest rate at December 30, 2017on the outstanding borrowings under the New Facility was LIBOR plus 65 basis points (2.22%)5.78% and the commitment fee was 0.15%.The credit agreement alsoterm loan portion of the New Facility contains othermandatory repayment provisions that require quarterly principal amortization payments on the term loan equal to a defined percentage of the initial borrowing amount of $500.0 million as follows, with the balance payable upon maturity in October 2027:Fiscal Quarter Ending Principal Amortization Payment Percentage December 31, 2022 through September 24, 2024 0.625% December 31, 2024 through September 30, 2025 1.250% December 31, 2025 through September 30, 2027 1.875% The New Facility contains affirmative and negative covenants, including, thosebut not limited to, covenants regarding capital expenditures, share repurchases, and financial covenants related to the ratio of certain consolidated fixed changesinterest expense to consolidated EBITDA capital expenditures, and share repurchases,the ratio of total net indebtedness to consolidated EBITDA, each as defined by the credit agreement. The new agreement also requires us to pay an unused fee of 0.10% on the average daily unused portion of the facility.New Facility. As of December 30, 2017,31, 2022, we were not in compliancedefault with all financial covenants contained inrespect to the credit agreement. As of December 30, 2017, there were no borrowings under theNew Facility.548. Related Party TransactionsWe lease our Colmar, PA facility and we had two outstanding lettersa portion of credit for approximately $ 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 million available under the facility at December 30, 2017.398. Operating Lease Commitments and Rent ExpenseWe lease certain equipment and operating facilities, including our primary operating facility which is leased from a partnership described in Note 9, Related Party Transactions, under non-cancelable operating leases. Approximate future minimum rental payments as of December 30, 2017 under these leases are summarized as follows:Rent expense, including payments for short-term equipment and storage rentals, was $5.4 million in fiscal 2017, $4.2 in fiscal 2016, and $4.5 million in fiscal 2015.9. Related Party TransactionsWe have a non-cancelable operating lease for our primary operatingLewisberry, PA facility from a partnershipentities in which Steven L. Berman, our Executive Chairman, and certain of his family members are partners.owners. Each lease is a non-cancelable operating lease. Total rental payments each year to the partnershipthose entities under thethese lease arrangementarrangements were $1.6$2.5 million, $2.3 million, and $1.8 million in each of fiscal 2017,2022, fiscal 20162021 and fiscal 2015. This2020, respectively. The lease for our corporate headquarters in Colmar, PA was renewed during November 2016,December 2022, effective as of January 1, 2018,2023, and will expire on December 31, 2022. In the opinion of our Audit Committee, the terms and rates of this lease were no less favorable than those which could have been obtained from an unaffiliated party when the lease was renewed during November 2016.Additionally, we have a non-cancelable operating2027. The lease for our CanadianLewisberry, PA operating facility from a corporation of which an employeewas signed in September 2020 and his family members are owners. Total rental payments to the corporation under the lease agreement were $0.1 million in fiscal 2017. We did not make any payments to the corporation in fiscal 2016 or fiscal 2015. This lease will expire on OctoberDecember 31, 2018.We are a partner in a joint venture with one of our suppliers and own a minority interestsinterest in threetwo other suppliers. Purchases from these supplierscompanies, and from PTI before our full acquisition on January 2, 2020 were $21.4$24.9 million, $16.5$18.9 million and $9.9$10.7 million in fiscal 2017,2022, fiscal 20162021 and fiscal 2015,2020, respectively.10.9. Income TaxesU.S. Tax Reform: Tax Cuts and Jobs ActOn December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted in the United States. The TCJA represents sweeping changes in U.S. tax law. Among the numerous changes in tax law, the TCJA permanently reduces the U.S. corporate income tax rate to 21% beginning in 2018; allows 100% expensing for qualified property placed in service after September 27, 2017; imposes a one-time transition tax on deferred foreign earnings; establishes a participation exemption system by allowing a 100% dividends received deduction on qualifying dividends paid by foreign subsidiaries; limits deductions for net interest expense; and expands the U.S. taxation of foreign earned income to include "global intangible low taxed income".The TCJA represents the first significant change in U.S. tax law in over 30 years. In response to the TCJA, the Staff of the U.S. Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 ("SAB No. 118") to provide guidance to registrants in applying ASC Topic 740 in connection with the TCJA. SAB No. 118 provides that in the period of enactment, the income tax effects of the TCJA may be reported as a provisional amount based on a reasonable estimate (to the extent a reasonable estimate can be determined), which would be subject to adjustment during a "measurement period". The measurement period begins in the reporting period of the40TCJA's enactment and ends when a registrant has obtained, prepared, and analyzed the information that was needed in order to complete the accounting requirements under ASC Topic 740. SAB No. 118 also describes supplemental disclosures that should accompany the provisional amounts.As permitted by SAB No. 118, the net tax expense recorded in our financial statements for the fourth fiscal quarter of 2017 due to the enactment of the TCJA is considered "provisional," based on reasonable estimates. We are continuing to collect and analyze detailed information about the earnings and profits of our non-U.S. subsidiaries, the related taxed paid and the associated impact of these items under the TCJA. We may record adjustments to refine those estimates during the measurement period, as additional analysis is completed. Furthermore, we are continuing to evaluate the TCJA's provisions and may prospectively adjust our financial structure and business practices accordinglyAs a result of the TCJA, we recognized a provisional tax expense of $4.4 million to remeasure our net deferred tax assets at the lower 21% rate.The TCJA transitions the U.S. from a worldwide tax system to a territorial tax system. Under previous law, companies could indefinitely defer U.S. income taxation on unremitted foreign earnings. The TCJA imposes a one-time transition tax on deferred foreign earnings of 15.5% for liquid assets and 8% for illiquid assets, payable in defined increments over eight years. As a result of this requirement, we recognized no provisional tax expense and will continue collecting additional information about earnings and profits of our non-U.S. subsidiaries. The components of the income tax provision (benefit) are as follows:For the Year Ended (in thousands) December 31, 2022 December 25, 2021 December 26, 2020 Current: Federal $ 31,683 $ 43,374 $ 33,698 State 7,141 5,755 4,276 Foreign 1,708 1,075 491 40,532 50,204 38,465 Deferred: Federal (4,003) (9,609) (8,475) State (1,022) (1,368) (893) Foreign (855) (993) (231) (5,880) (11,970) (9,599) Total $ 34,652 $ 38,234 $ 28,866 The following is a reconciliation of income taxes at the statutory tax rate to the Company's effective tax rate:For the Year Ended December 31, 2022 December 25, 2021 December 26, 2020 Federal taxes at statutory rate 21.0 % 21.0 % 21.0 % State taxes, net of federal tax benefit 2.7 2.1 2.0 Research and development tax credit (0.7) (0.4) (0.6) Federal permanent items Federal permanent items (0.2) — (0.2) Effect of foreign operations Effect of foreign operations — (0.2) 0.1 Other (0.6) — (1.0) Effective tax rate 22.2 % 22.5 % 21.3 % At December 30, 2017,31, 2022, we had $2.3$3.9 million of unrecognized tax benefits, $2.0 millionall of which would affect our effective tax rate if recognized.4155The following table summarizes the change in uncertainunrecognized tax benefits for the three years ended December 30, 2017:31, 2022:For the Year Ended (in thousands) December 31, 2022 December 25, 2021 December 26, 2020 Balance at beginning of year $ 1,204 $ 1,060 $ 2,301 Reductions due to lapses in statutes of limitations (139) — — Reductions due to tax positions settled — — (1,308) Additions related to positions taken during a prior period Additions related to positions taken during a prior period 2,136 — — Reductions due to reversals of prior year positions — (30) (202) Additions based on tax positions taken during the current period 655 174 269 Balance at end of year 3,856 1,204 1,060 We recognize interest and penalties related to uncertainunrecognized tax positionsbenefits in income tax expense. As of December 30, 2017, we had approximately $0.7 million of31, 2022, accrued interest and penalties related to uncertainunrecognized tax positions.Deferred income taxes result from timing differences in the recognition of revenue and expense forbetween tax and financial statement purposes. The sources of temporary differences are as follows:(in thousands) December 31, 2022 December 25, 2021 Assets: Inventories $ 13,662 $ 13,689 Accounts receivable 20,446 18,589 Operating lease liability Operating lease liability 24,904 14,526 Accrued expenses 12,526 7,515 Net operating losses Net operating losses 1,285 1,892 Foreign tax credits Foreign tax credits 469 469 State tax credits State tax credits 403 819 Capital loss carryforward Capital loss carryforward 481 467 Total deferred tax assets Total deferred tax assets 74,176 57,966 Valuation allowance Valuation allowance (1,377) (1,837) Net deferred tax assets Net deferred tax assets 72,799 56,129 Liabilities: Depreciation 18,132 14,541 Goodwill and intangible assets 41,693 45,522 Operating lease right of use asset Operating lease right of use asset 23,924 13,733 Other Other 876 309 Gross deferred tax liabilities 84,625 74,105 Net deferred tax (liabilities) assets Net deferred tax (liabilities) assets $ (11,826) $ (17,976) A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assesses all positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carryback and carryforward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of the deferred tax asset. Management has determined it was necessary to establish a valuation allowance against the foreign tax credits, various state tax credits and a capital loss carryforward.56Based on our history of taxable income and our projection of future earnings, we believe that it is more likely than not that sufficient taxable income will be generated in the foreseeable future to realize the remaining net deferred tax assets.During 2022, we reduced the valuation allowance against the deferred tax assets noted above by $0.5 million.As of December 31, 2022, the Company has tax-effected net operating loss carryforwards of $1.0 million and $0.2 million for U.S. federal and state jurisdictions, respectively. Tax-effected federal net operating losses of $0.1 million begin to expire in 2036. The remaining federal net operating losses do not expire. The state net operating loss carryforwards expire in various years starting in 2037.We file income tax returns in the United States, Canada, China, India, and Mexico. AllThe statute of limitations for tax years before 2014 are2017 is closed for U.S. federal income tax purposes. We are currently under examination by one stateThe statute of limitations for tax authority for years 2011-2012. Tax years before 2011 are2018 is closed for the remaining states in which we file. We filed tax returns in Sweden through 2012 and all years prior to 2010 are closed. It is reasonably possible that audit settlements, the conclusion of current examinations or the expiration of theThe statute of limitations could impact the Company’s unrecognizedfor tax benefits.11.years before 2019 is closed for income tax purposes in Canada, China, and India. The statute of limitations for tax years before 2017 is closed for income tax purposes in Mexico.Shareholders’ Agreement. A shareholders’ agreement was entered into in September 1990 and amended and restated on July 1, 2006. Under the agreement, each of the late Richard Berman, Steven Berman, Jordan Berman, Marc Berman, Fred Berman, Deanna Berman and additional shareholders named in the agreement has, among other things, granted the others of them rights of first refusal, exercisable on a pro ratapro-rata basis or in such other proportions as the exercising shareholders may agree, to purchase shares of our common stock which any of them, or upon their deaths their respective estates, proposes to sell to third parties. We have agreed with these shareholders that, upon their deaths, to the extent that any of their shares are not purchased by any of these surviving shareholders and may42Legal ProceedingsCBP Matter. During 2020, we commenced a voluntary disclosure process in which we committed to disclosing to U.S. Customs & Border Protection (“CBP”) certain product misclassifications and reimbursing CBP for any resulting underpayment of duties that were identified as part of a voluntary internal review conducted by the Company. The Company recorded an estimated liability of $2.8 million in its Statement of Operations for the year ended December 26, 2020, which represents the Company’s estimated underpayment of duties, after deducting its estimated overpayment of duties, to CBP due to misclassifications over the prior five-year period, which is the applicable statute of limitations, plus applicable interest.In June 2020, we completed our internal review and submitted our prior disclosure statement to CBP, along with a payment of $2.8 million for underpaid duties and interest. We have cooperated with CBP in connection with its review of our prior disclosure submission, including providing additional information as requested. CBP has not yet communicated that its review of our prior disclosure submission is completed.Acquisitions. We have contingent consideration related to an acquisition due to the uncertainty of the ultimate amount of any payments that will become due as earnout payments if performance targets are achieved. If the remaining performance targets for the acquisition are fully achieved, the maximum additional contingent payments to be made under the Transaction documents would be $100.0 million in the aggregate.As of December 31, 2022, we accrued $20.0 million, representing the fair value of the estimated payments that we expect could become due in connection with the Transaction.For the year ended December 31, 2022, we recorded a charge of $1.8 million in connection with earnout provisions under a prior acquisition, with the charge included in Selling, General and Administration expenses. During the year ended December 31, 2022, we paid $1.8 million to fully settle this earnout provision associated with the prior acquisition.57Other Contingencies. We are a party to or otherwise involved in legal proceedings that arise in the ordinary course of business, such as various claims and legal actions involving contracts, employment claims, 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, taking into account relevant insurance coverage, would likely have a material financial impact on usthe Company and we believe the range of reasonably possible losses from current matters, taking into account relevant insurance coverage, is immaterial.11. Revenue RecognitionOur primary source of revenue is from contracts with and purchase orders from customers. In most instances, our contract with a customer is the customer’s purchase order. Upon acceptance of the purchase order, a contract exists with a customer as a sales agreement indicates the approval and commitment of the parties, identifies the rights of both parties, identifies the payment terms, and has commercial substance. At this point, we believe it is probable that we will collect the consideration to which we will be entitled in exchange for the goods transferred to the customer.For certain customers, we may also enter into a sales agreement that outlines pricing considerations as well as the framework of terms and conditions which apply to future purchase orders for that customer. In these situations, our contract with the customer is both the sales agreement as well as the specific customer purchase order. As our contract with a customer is typically for a single transaction or customer purchase order, the duration of the contract is typically one year or less. As a result, we have elected to apply certain practical expedients and omit certain disclosures of remaining performance obligations for contracts that have an initial term of one year or less as permitted by GAAP.Revenue is recognized from product sales when goods are shipped, title and risk of loss and control have been transferred to the customer, and collection is reasonably assured. We estimate the transaction price at the inception of a contract or upon fulfilling a purchase order, including any variable consideration, and will update the estimate for changes in circumstances.We record estimates for cash discounts, defective and slow-moving product returns, promotional rebates, core return deposits and other discounts in the period the related product revenue is recognized (“Customer Credits”). The provision for Customer Credits is recorded as a reduction from gross sales and reserves for Customer Credits are shown as an increase in accrued customer rebates and returns. Customer Credits are estimated based on contractual provisions, historical experience, and our assessment of current market conditions. Actual Customer Credits have not differed materially from estimated amounts for each period presented. Amounts billed to customers for shipping and handling are included in net sales. Costs associated with shipping and handling are included in cost of goods sold. We have concluded that our estimates of variable consideration are not constrained according to the definition in the standard.All of our revenue was recognized under the point of time approach during fiscal 2022, fiscal 2021 and fiscal 2020. Also, we do not have significant financing arrangements with our customers. Our credit terms are all less than one year. Lastly, we do not receive noncash consideration (such as materials or equipment) from our customers to facilitate the fulfillment of our contracts.Practical Expedients and Accounting Policy ElectionsWe have made certain accounting policy elections and are using certain practical expedients permitted under GAAP, as follows:•Not adjust the promised amount of consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when we transfer a promised good or service to the customer and when the customer pays for that good or service will be one year or less.58•Expense costs to obtain a contract as incurred when the expected period of benefit, and therefore the amortization period, is one year or less.•Exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity for a customer, including sales, use, value-added, excise and various other taxes.•Account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment activity rather than a separate performance obligation.Disaggregated RevenueThe following tables present our disaggregated net sales by type of major good / product line, and geography.For the Year Ended (in thousands) December 31, 2022 December 25, 2021 December 26, 2020 Powertrain $ 644,059 $ 539,235 $ 442,221 Chassis 715,005 458,986 324,399 Motor Vehicle Body 314,451 288,599 266,699 Hardware 60,234 58,429 59,429 Net Sales $ 1,733,749 $ 1,345,249 $ 1,092,748 For the Year Ended (in thousands) December 31, 2022 December 25, 2021 December 26, 2020 Net Sales to U.S. Customers $ 1,606,472 $ 1,269,050 $ 1,031,183 Net Sales to Non-U.S. Customers 127,277 76,199 61,565 Net Sales $ 1,733,749 $ 1,345,249 $ 1,092,748 During fiscal 2022, fiscal 2021, and fiscal 2020, three customers each accounted for more than 10% of net sales and in the aggregate accounted for 49%, 54%and 56% of net sales in fiscal 2022, fiscal 2021, and fiscal 2020, respectively.12. Capital StockControlling Interest by Officers, Directors and Family Members. As of December 30, 2017,31, 2022 and December 25, 2021, Steven Berman, the Executive Chairman of the Company, and members of his family beneficially ownowned approximately 20%17% of the outstanding shares of our common stock, and cancould influence matters requiring approval of shareholders, including the election of ourthe Board of Directors the outcome of most corporate actions requiring shareholder approval (including certain fundamental transactions) and the affairsapproval of the Company.Undesignated Stock. We have 50,000,000 shares authorized of undesignated capital stock for future issuance. The designation, rights and preferences of such shares will be determined by our Board of Directors.Incentive Stock Plan. OurPrior to May 16, 2018, we issued stock compensation grants under our 2008 Stock Option and Stock Incentive Plan. On May 16, 2018, our shareholders approved our 2018 Stock Option and Stock Incentive Plan (the “2018 Plan” or the “Plan”) was approved by, which supersedes our shareholders on May 20, 2009.2008 Stock Option and Stock Incentive Plan. All future stock compensation grants will be issued under the 2018 Plan. Under the terms of the Plan, our Board of Directors may grant up to 2,000,0001,200,000 shares of common stock in the form of shares of restricted stock, incentiverestricted stock optionsunits, stock appreciation rights and non-qualified stock options, or combinations thereof, to officers, directors, employees, consultants and advisors. Grants under the Plan must be made within ten years of the date the Plan was approved and stockapproved. Stock options are exercisable upon the terms set forth in theeach grant agreement approved by the Board of Directors, but in no event more than ten years from the date of grant. Restricted stock and restricted stock units vest in accordance with the terms set forth in each applicable award agreement approved by our Board of Directors. At December 30, 2017, 1,399,10631, 2022, 599,845 shares were available for grant under the Plan.59Restricted StockWe grant restricted stock Awards (“RSAs”) and Restricted Stock Units (“RSUs”)Prior to March 2020, we issued RSAs to certain employees and members of our Board of Directors. The valueGrants were made in the form of restricted stock issued is based on the fair value of our common stock on the grant date. Vesting of restricted stock is based on continued employment or service for a specified periodtime-based RSAs and in certain circumstances, the attainment of financial goals. Compensation cost related to the stock is recognized on a straight-line basis over the vesting period. Weperformance-based RSAs. For all RSAs, we retain the restricted stock, and any dividends paid thereon, until the vesting provisionsrestrictions have been met. For awards with a service condition only,time-based RSAs, compensation cost related to the stock is recognized on a straight-line basis over the vesting period. For awards that have a service conditionperiod and requireis calculated using the attainmentclosing price per share of financial goals, compensationour common stock on the grant date. Prior to 2019, we issued performance-based RSAs tied to growth in adjusted pre-tax income. Compensation cost related to those awards was recognized over the performance period and was calculated using the closing price per share of our common stock on the grant date and an estimate of the probable outcome of the performance conditions as of the reporting date. In 2019, we introduced performance-based RSAs that vest based on our total shareholder return ranking relative to the S&P Mid-Cap 400 Growth Index over a three-year performance period. For those awards, compensation cost is recognized on a straight-line basis over the performance period and is calculated using the simulated fair value per share of our common stock based on the application of a Monte Carlo simulation model. This valuation technique includes estimating the movement of stock prices and the effects of volatility, interest rates and dividends.Beginning in March 2020, we began issuing RSUs to certain employees and members of our Board of Directors. For time-based RSUs, compensation cost is recognized on a straight-line basis over the vesting period if itand is probablecalculated using the closing price per share of our common stock on the grant date. Also, in March 2020, we began issuing performance-based RSUs that vest based on our total shareholder return ranking relative to the financial goals will be attained. S&P Mid-Cap 400 Growth Index over a three-year performance period. For performance-based RSUs tied to total shareholder return, compensation cost is recognized on a straight-line basis over the performance period and is calculated using the simulated fair value per share of our common stock based on the application of a Monte Carlo simulation model as discussed in the paragraph above.The following table summarizes the weighted average valuation assumptions used to calculate the fair value of total shareholder return performance-based RSUs granted:For the Year Ended December 31, 2022 December 25, 2021 December 26, 2020 Share price $ 96.36 $ 101.45 $ 61.68 Expected dividend yield 0.0 % 0.0 % 0.0 % Expected stock price volatility 38.3 % 38.9 % 31.5 % Risk-free interest rate 1.6 % 0.2 % 0.9 % Expected life 2.8 years 2.8 years 2.8 years The share price is the Company’s closing share price as of the valuation date. The risk-free rate is based on the U.S. Treasury security with terms equal to the expected time of vesting as of the grant date. The weighted-average grant-date fair value of total shareholder return RSUs granted during fiscal 2022, fiscal 2021, and fiscal 2020 were $111.31, $131.02, and $65.09, respectively.Compensation cost related to restricted stockperformance-based and time-based RSAs and RSUs was $2.8$7.2 million, $2.3$6.1 million and $0.9$3.2 million in fiscal 2017,2022, fiscal 20162021 and fiscal 2015, respectively. The compensation costs were classified as2020, respectively, and was included in selling, general and administrative expense in the Consolidated Statements of Operations. No cost was capitalized during fiscal 2017,2022, fiscal 20162021 or fiscal 2015. 4360The following table summarizes our restricted stockRSA and RSU activity for the three years ended December 30, 2017:31, 2022:Shares Weighted
Average Fair ValueBalance at December 28, 2019 177,491 $ 76.70 Granted 83,875 $ 64.66 Vested (27,477) $ 71.25 Canceled (16,154) $ 76.44 Balance at December 26, 2020 217,735 $ 72.77 Granted 81,694 $ 106.23 Vested (45,970) $ 70.62 Canceled (46,782) $ 74.85 Balance at December 25, 2021 206,677 $ 85.97 Granted 130,131 $ 96.32 Vested (55,255) $ 83.70 Canceled (42,631) $ 85.89 Balance at December 31, 2022 238,922 $ 92.07 As of December 30, 2017,31, 2022, there was approximately $4.6$13.5 million of unrecognized compensation cost related to nonvested restricted stock,unvested RSAs and RSUs, which is expected to be recognized over a weighted-average period of approximately 2.62.3 years.Cash flows resulting from tax deductions in excess of the tax effect of compensation cost recognized in the financial statements are classified as operating cash flows. In accordance with ASU 2016-09 (see Note 2), the excess tax benefit generated from restricted shares which vested was $0.4 million in fiscal 2017 and was credited to income tax expense. The excess tax benefit generated from restricted shares which vestedRSAs and RSUs was $0.3 million in both of fiscal 2016 and fiscal 2015 and was credited to additional paid in capital.Stock OptionsWe grant stock options to certain employees and members of our Board of Directors.employees. We expense the grant-date fair value of stock options. Compensationoptions as compensation cost is recognized over the vesting or performance period. Compensation cost charged against income for stock options was $0.3$1.7 million, $1.3 million and $1.0 million in fiscal 2017 and $0.1 million in each of2022, fiscal 20162021 and fiscal 2015,2020, respectively,. The compensation costs were classified as and was included in selling, general and administrative expense in the Consolidated Statements of Operations. No cost was capitalized during fiscal 2017,2022, fiscal 20162021 or fiscal 2015. We used the Black-Scholes option valuation model to estimate the fair value of stock options granted in fiscal 2017 and fiscal 2016. No stock options were granted in fiscal 2015.granted. Expected volatility and expected dividend yield are based on the actual historical experience of our common stock. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using historical option exercise data. The risk-free rate is based on the U.S. Treasury security with terms equal to the expected time of exercise as of the grant date. The weighted-average grant-date fair value of options granted during fiscal 2017 was $15.81 and fiscal 2016 was $8.40 per option.The following table summarizes the weighted average valuation assumptions used to calculate the fair value of options granted:granted and the associated weighted-average grant-date fair values:For the Year Ended December 31, 2022 December 25, 2021 December 26, 2020 Expected dividend yield 0 % 0 % 0 % Expected stock price volatility 34 % 34 % 29 % Risk-free interest rate 1.8 % 0.7 % 0.8 % Expected life of options 5.3 years 5.3 years 5.3 years Weighted-average grant-date fair value Weighted-average grant-date fair value $ 32.55 $ 31.68 $ 17.84 4461The following table summarizes our stock option activity for the three years ended December 30, 2017:31, 2022:Shares Option Price
per ShareWeighted
Average
PriceWeighted
Average
Remaining
Terms
(years)Aggregate
Intrinsic
Value (in thousands)Balance at December 28, 2019 181,712 $41.59– $82.94 $ 70.78 Granted 109,352 $61.68 – $83.06 $ 63.25 Exercised (31,521) $41.59 – $82.94 $ 50.77 Canceled (8,764) $61.68 – $74.21 $ 65.24 Balance at December 26, 2020 250,779 $41.59 –$84.93 $ 70.21 Granted 59,578 $95.98 – $103.61 $ 101.36 Exercised (67,504) $41.59 – $82.94 $ 70.04 Canceled (9,457) $61.68 –$101.45 $ 79.02 Balance at December 25, 2021 233,396 $61.68– $103.61 $ 77.85 Granted 79,749 $83.81– $111.53 $ 96.96 Exercised (32,201) $61.68 – $83.06 $ 71.74 Expired (663) $101.45 $ 101.45 Canceled (12,162) $61.68 – $101.45 $ 82.19 Balance at December 31, 2022 268,119 $61.68 – $111.53 $ 84.03 6.2 $ 1,572 Exercisable at December 31, 2022 98,600 $61.68 – $103.61 $ 76.32 3.9 $ 796 As of December 30, 2017,31, 2022, there was approximately $1.0$3.4 million of unrecognized compensation cost related to nonvestedunvested stock options, which is expected to be recognized over a weighted-average period of approximately 2.92.6 years.The following table summarizes information concerning currently outstanding and exercisable options at December 30, 2017:less than $0.1$1.0 million, $2.5 million, and $1.2 million in fiscal 20172022, fiscal 2021 and was $0.1 million in fiscal 2015,2020, respectively. There were no option exercises during fiscal 2016. In accordance with ASU No.2016-09 (see Note 2), the excessThe tax benefit generated from option exercises was $0.6 million fiscal 2017 and was credited to income tax expense. There was no excess tax benefit generated from stock option exercises in fiscal 2016. The excess tax benefit generated from option exercises was $0.1 million in fiscal 2015 and was credited to additional paid in capital.Performance-Based Long Term Award Program. The Compensation Committee of our Board of Directors has approved the Performance-Based Long Term Award Program (the “Program”) which connects compensationimmaterial for certain of our executives to the three-year compound annual growth in our pre-tax income as defined in the Program. For the three-yearall periods ending in 2015 through 2017, the Compensation Committee has the discretion to settle the Performance-Based Long Term Award in either cash or equity. These are liability-classified awards. The Compensation Committee elected to settle the award in equity for the three-year periods ending in fiscal 2017 and fiscal 2016 and cash for three-year periods ending in fiscal 2015. In fiscal 2016, the Compensation Committee modified the Program to settle the awards earned in the three-year periods ending in fiscal 2018 and beyond in equity alone. These awards are equity-classified. Any equity payments related to the Program will be from the 2008 Stock Option and Stock Incentive Plan.45Employee Stock Purchase Plan. In May 2017, our shareholders’shareholders approved the Dorman Products, Inc. Employee Stock Purchase Plan (the ‘ESPP”“ESPP”), which makes available 1,000,000 shares of our common stock for sale to eligible employees. The purpose of this plan,the ESPP, which is qualified under Section 423 of the Internal Revenue Service Code of 1986, as amended, is to encourage stock ownership through payroll deductions and limited cash contributions by our employees. These contributions are used to purchase shares of the Company’s common stock at a 15% discount from the lower of the market price at the beginning or end of the purchase window. ShareBeginning in March 2018, share purchases under the plan arewere made twice annually, with the purchase windows being April to September and October to March. In 2022, the decision was made to modify the timing of those two purchase windows to align them with the calendar year. As a result, beginning January 2022, the two purchase windows are January to June and July to December. In order to effectuate that alignment, the purchase window beginning in March 2018.October 2021 was shortened from six months to three months and ended December 2022. There were no25,600 shares, 40,303 shares and 79,089 shares purchased under this plan during fiscal 2017.2022, fiscal 2021 and fiscal 2020, respectively. Compensation cost under the ESPP plan was $0.1$0.4 million, $0.9 million and $3.3 million in fiscal 2017.401(k) Retirement Plan.2022, fiscal 2021 and fiscal 2020, respectively. The Dorman Products, Inc. 401(k) Retirement Plan and Trust (the “401(k) Plan”) is a defined contribution profit sharing and 401(k) plan covering substantially all of our employees as of December 30, 2017. Annual contributions under the 401(k) Plan are determined by the Compensation Committee of our Board of Directors. Total expense related to the 401(k) Plantax benefit generated from ESPP purchases was $2.7 millionimmaterial in fiscal 2017 and $2.5 million in each of2022, fiscal 20162021, and fiscal 2015. At December 30, 2017, the 401(k) Plan held 269,628 shares of our common stock.Common Stock Repurchases. We periodically repurchase, at the then current market price, and cancel common stock issued to the Dorman Products, Inc. 401(k) Plan and Trust (the “401(k) Plan”). 401(k) Plan participants can no longer purchase shares of Dorman common stock as an investment option under the 401(k) Plan. Shares are generally purchased from the 401(k) Plan when participants sell units as permitted by the62401(k) Plan or elect to leave the 401(k) Plan upon retirement, termination or other reasons. During fiscal 2017 our Board of Directors approvedThe following table summarizes the repurchase and cancellation of 19,110common stock:For the Year Ended December 31, 2022 December 25, 2021 December 26, 2020 Shares repurchased and canceled 23,015 11,452 23,360 Total cost of shares repurchased and canceled (in thousands) $ 2,357 $ 1,172 $ 1,895 Average price per share $ 102.40 $ 102.38 $ 81.12 At December 31, 2022, the 401(k) Plan held 160,901 shares of our common stock for $1.4 million at an average price of $73.34 per share. During fiscal 2016, ourstock.Share Repurchase Program. Our Board of Directors approved the repurchase and cancellation of 38,970 shares of our common stock for $2.2 million at an average price of $56.66 per share. During fiscal 2015, our Board of Directors approved the repurchase and cancellation of 33,430 shares of our common stock for $1.6 million at an average price of $48.14 per share.Share Repurchase Program. On December 12, 2013 we announced that our Board of Directorshas authorized a share repurchase program, authorizingprogram. Through several actions, including expansions and extensions, the Board has authorized the repurchase of up to $10$600 million of our outstanding common stock by the end of 2014. Through several expansions and extensions, our Board of Directors has expanded the program to $250 million and extended the program through December 31, 2018.2024. Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion. The shareAt December 31, 2022, $228.0 million was available for repurchase program does not obligate us to acquire any specific number of shares. We repurchased 1,006,365 common shares for $74.7 million at an average price of $74.26 under this program duringprogram.The following table summarizes the repurchase and cancellation of common stock:For the Years Ended December 31, 2022 December 25, 2021 December 26, 2020 Shares repurchased and canceled 180,750 605,628 439,275 Total cost of shares repurchased and canceled (in thousands) $ 17,577 $ 61,583 $ 36,781 Average price per share $ 97.24 $ 101.68 $ 83.73 401(k) Retirement Plans. We have various 401(k) plans that cover substantially all of our employees as of December 31, 2022. Annual company contributions are discretionary in nature, in accordance with the respective plan documents. Total expense related to the plans were $8.2 million, $6.3 million and $5.7 million in fiscal 2017. We repurchased 430,866 common shares for $22.5 million at an average price of $52.15 under this program during2022, fiscal 2016. We repurchased 747,700 common shares for $35.7 million at an average price of $47.77 under this program during2021 and fiscal 2015.13. Earnings Per ShareBasic earnings per share was calculated by dividing our net income by the weighted average number of common shares outstanding during the period, excluding nonvested restricted stockunvested RSAs which isare considered to be contingently issuable. To calculate diluted earnings per share, common share equivalents are added to the weighted average number of common shares outstanding. Common share equivalents are calculated using the treasury stock method and are computed based on outstanding stock-based awards. Stock-based awards of approximately 106,00063,500 shares, 50,00014,250 shares and 7,50035,975 shares were excluded from the calculation of diluted earnings per share as of December 30, 2017, December 31, 2016for fiscal 2022, fiscal 2021 and December 26, 2015,fiscal 2020, respectively, as their effect would have been anti-dilutive.4663The following table sets forth the computation of basic earnings per share and diluted earnings per share:For the Year Ended (in thousands, except per share data) December 31, 2022 December 25, 2021 December 26, 2020 Numerator: Net income $ 121,549 $ 131,532 $ 106,870 Denominator: Weighted average basic shares outstanding 31,434 31,810 32,280 Effect of compensation awards 109 151 93 Weighted average diluted shares outstanding 31,543 31,961 32,373 Earnings Per Share: Basic $ 3.87 $ 4.13 $ 3.31 Diluted $ 3.85 $ 4.12 $ 3.30 14. Business SegmentsWe have determined that our business comprises a single reportable operating segment, namely, the sale of replacement and upgrade parts forin the automotive aftermarket.During fiscal 2017, fiscal 2016motor vehicle aftermarket industry, serving passenger cars, light-, medium-, and fiscal 2015, four of our customers (Advance Auto Parts, Inc., AutoZone, Inc., Genuine Parts Co. – NAPA, and O’Reilly Automotive, Inc.) each accounted for more than 10% of net sales and in aggregate accounted for 61% of net sales in fiscal 2017, and 60% in each of fiscal 2016 and fiscal 2015. heavy-duty trucks as well as specialty vehicles.Net sales to countries outside the United States, primarily to Canada and Mexico, and to a lesser extent into Europe, the Middle East, and Australia, in fiscal 2017,2022, fiscal 20162021 and fiscal 20152020 were $55.8$127.3 million, $48.6$76.2 million and $49.8$61.6 million, respectively.15. Quarterly ResultsNet long-lived assets outside the United States, consisting of Operations (Unaudited)The following is a summarynet property, plant and equipment was $3.6 million and $1.0 million as of the unaudited quarterly Results of Operations for the fiscal years ended December 30, 201731, 2022 and December 31, 2016:6447ItemITEM 9. Changes in and Disagreements with AccountantsAccountants on Accounting and Financial Disclosure.NoneITEM 9A. Controls and Procedures.Conclusion Regarding the Effectiveness of Disclosure Controls and ProceduresWe maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation, as of the end of the period covered by this report, of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures, as defined in Rule 13a-15(e), were effective at the reasonable assurance level.Management's Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation, as of December 30, 2017, of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, our management concluded that, as of December 30, 2017, our internal control over financial reporting was effective.On October 26, 2017,4, 2022, we completed our acquisition of MAS Automotive Distribution Inc.Super ATV, LLC (“MAS”SuperATV”). We are in the process of evaluating the existing controls and procedures of MASSuperATV and integrating MASSuperATV into our internal control over financial reporting. In accordance with SEC Staff guidance permitting a company to exclude an acquired business from management’s assessment of the effectiveness of internal control over financial reporting for one year following the year indate on which the acquisition is completed, we have excluded MASSuperATV from our assessment of the effectiveness of internal control over financial reporting as of December 30, 2017. MAS31, 2022. SuperATV represented $82.9 millionapproximately 23% of the Company’s consolidated total assets as of December 30, 2017,31, 2022, and $7.0 millionapproximately 3% of the Company’s consolidated net sales for the year ended December 30, 2017. The scope31, 2022. Refer to Note 2 to the Consolidated Financial Statements for additional information.Management's Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Management, with the participation of management’s assessmentour Chief Executive Officer and Chief Financial Officer, conducted an evaluation, as of December 31, 2022, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 30, 2017 includes all of the Company’s consolidated operations except for those disclosure controls and procedures of MAS that are subsumed byour internal control over financial reporting.Our independent registered public accounting firm, KPMG LLP, has issued an attestation report on our internal control over financial reporting. Their report appears below.Changes in Internal Control Over Financial ReportingOur management, withExcept for the participationacquisition of our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation ofSuperATV noted above, there was no change in our internal control over financial reporting to determine whether any changes(as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended December 30, 201731, 2022, that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, other than noted above there was no change during the quarter ended December 30, 2017.4865Report of Independent RegisteredRegistered Public Accounting FirmTo the Shareholders and Board of Directors and ShareholdersDorman Products, Inc.:Opinion on Internal Control Over Financial ReportingWe have audited Dorman Products, Inc. and subsidiaries’subsidiaries' (the Company) internal control over financial reporting as of December 30, 2017,31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 30, 2017,31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 30, 2017 31, 2022 and December 31, 2016, and25, 2021, the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for each of the fiscal years in the three-year period ended December 30, 2017,31, 2022, and the related notes and the consolidated financial statement schedule listed under Item 15(a)(2)II (collectively, the consolidated financial statements), and our report dated February 27, 2018 28, 2023expressed an unqualified opinion on those consolidated financial statements.The Company acquired MAS Automotive Distribution Inc. (MAS)Super ATV, LLC during 2017,2022, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 30, 2017, MAS’s31, 2022, Super ATV, LLC’s internal control over financial reporting associated with approximately 23% of consolidated total assets and approximately 3% of $82.9 million and total revenues of $7.0 millionconsolidated net sales included in the consolidated financial statements of the Company as of and for the year ended December 30, 2017.31, 2022. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of MAS.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’sManagement's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial66reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable49Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate./s/ KPMG LLPPhiladelphia, PennsylvaniaFebruary 27, 20185067ItemITEM 9B. OtherOther Information.In connection with new universal proxy card rules adopted by the US Securities and Exchange Commission (“SEC”), the Board of Directors (the "Board") of Dorman Products, Inc. (the "Company") approved amended and restated by-laws of the Company (the "Amended and Restated By-Laws"), effective as of February 23, 2023.Among other things, the Amended and Restated By-Laws require that any shareholder soliciting proxies in support of a nominee other than the Board's nominees must comply with Rule 14a-19 under the Securities Exchange Act of 1934, as amended, including applicable notice and solicitation requirements. Further, any shareholder directly or indirectly soliciting proxies from other shareholders must use a proxy card color other than white, with the white proxy card being reserved for the exclusive use by the Board.This description of the Amended and Restated By-Laws does not purport to be complete and is qualified in its entirety by reference to the text of the Amended and Restated By-Laws, which is attached hereto as Exhibit 3.2 and incorporated herein by reference.ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.None5168PART IIIITEM 10. Directors, Executive Officers and Corporate Governance.Except for the information provided in “PartPART I – ItemITEM 4.1, Executive“Executive Officers of the Registrant” and as set forth below, the required information is incorporated by reference from our definitive proxy statement for our 20182023 Annual Meeting of Shareholders, including, but not necessarily limited to, the sections entitled “Proposal I: Election of Directors,” and “Committees of the Board of Directors – Audit Committee” and “Section 16(a) Beneficial Ownership Reporting Compliance”.We have adopted a written code of ethics, "Our Valuesthe “Dorman Products, Inc. Code of Ethics and Standards of Business Conduct," whichConduct” that is applicable to all of our directors, officers and employees, including our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, Controller and other executive officers.employees. We have also adopted a written code of ethics, “Code of Ethics for Senior Financial Officers,” which applies to our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Controller and any other person performing similar functions. In accordance with the SEC's rules and regulations a copyfunctions (the “Code”). Each of each code of ethicsthese codes is posted on our website www.dormanproducts.com.www.DormanProducts.com. Dorman will provide to any person without charge, upon request, a copy of such codes of ethics.the Code. Requests for copies of such codes of ethicsthe Code should be directed to: Thomas Knoblauch,Attn: Secretary, Dorman Products, Inc., 3400 East Walnut Street, Colmar, PA 18915. We intend to disclose any changes in or waivers from our codes of ethicsthe Code on our website at www.dormanproducts.com.www.DormanProducts.com. 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 this Form 10-K.ITEM 11. Executive Compensation.The required information is incorporated by reference from our definitive proxy statement for our 20182023 Annual Meeting of Shareholders, including, but not necessarily limited to, the sections entitled “Director Compensation,” “Executive Compensation: Compensation Discussion and Analysis,” “Executive Compensation: Compensation Tables,” “Risk Assessment in Compensation Policies and Practices for Employees,” and “Compensation Committee Interlocks and Insider Participation”.Participation.”ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.Except for the information set forth below, the required information is incorporated by reference from our definitive proxy statement for our 20182023 Annual Meeting of Shareholders, including, but not necessarily limited to, the section entitled “Security Ownership of Certain Beneficial Owners and Management”.52Equity Compensation Plan InformationThe following table details information regarding our existing equity compensation plans as of December 30, 2017:31, 2022:Plan Category (a)
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights(b)
Weighted-
average exercise
price of
outstanding
options, warrants
and rights(c)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected
in column (a))Equity compensation plans approved by security holders 2008 Stock Option and Stock Incentive Plan 2008 Stock Option and Stock Incentive Plan 84,322 $ 71.31 — 2018 Stock Option and Stock Incentive Plan 2018 Stock Option and Stock Incentive Plan 166,457 $ 69.69 853,471 Dorman Products, Inc. Employee Stock Purchase Plan Dorman Products, Inc. Employee Stock Purchase Plan — — 878,536 Equity compensation plans not approved by security holders — — — Total 250,779 — 1,732,007 (1)This number includes 1,399,106 shares available for issuance under the 2008 Stock Option and Stock Incentive Plan and 1,000,000 shares reserved for issuance under the Dorman Products, Inc. Employee Stock Purchase Plan.ITEM 13. Certain Relationships and Related Transactions, and Director Independence.The required information is incorporated by reference from our definitive proxy statement for our 20182023 Annual Meeting of Shareholders, including, but not necessarily limited to, the sections entitled “Certain Relationships and Related Transactions” and “Corporate Governance –- The Board of Directors and Director Independence”.ITEM 14. Principal Accounting Fees and Services.The required information is incorporated by reference from our definitive proxy statement for our 20182023 Annual Meeting of Shareholders, including, but not necessarily limited to, the sections entitled “Principal Accountant Fees and Services” and “Pre-Approval Policies and Procedures”.5370ITEM 15. Exhibits, Financial Statement Schedules.
(a)(1)Consolidated Financial Statements. Our Consolidated Financial Statements and related documents are provided in PART II - ITEM 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K:(a)(1)Consolidated Financial Statements. Our Consolidated Financial Statements and related documents are provided in Part II - Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K:Report of Independent Registered Public Accounting Firm.Consolidated Statements of Operations for the fiscal years ended December 30, 2017,31, 2022, December 31, 201625, 2021 and December 26, 2015.Consolidated Balance Sheets as of December 30, 201731, 2022 and December 31, 2016.Consolidated Statements of Shareholders' Equity for the fiscal years ended December 30, 2017,31, 2022, December 31, 201625, 2021 and December 26, 2015.Consolidated Statements of Cash Flows for the fiscal years ended December 30, 2017,31, 2022, December 31, 2016,25, 2021, and December 26, 2015.Notes to Consolidated Financial Statements.
(a)(2)Consolidated Financial Statement Schedules. The following consolidated financial statement schedule of the Company and related documents are filed with this Annual Report on Form 10-K:(a)(2)Consolidated Financial Statement Schedules. The following consolidated financial statement schedule of the Company and related documents are filed with this Annual Report on Form 10-K:Schedule II - Valuation and Qualifying Accounts.(a)(3)Exhibits. Reference is made to ITEM 15(b) below.(b)Exhibits. The Exhibit Index, which immediately precedes the signature page, is incorporated by reference into this Report.(c)Financial Statement Schedule. Reference is made to ITEM 15(a)(2) above.ITEM 16. Form 10-K SummaryNone
8-K filed on June 28, 2021.(a)(3)Exhibits requiredNumber Title 2.1 NumberTitle 3.12.1.2 3.1 71 4.14.1 10.110.1.110.2. 10.2.154NumberTitle10.310.4†10.3 10.4† 10.4.1†10.4.2†10.4.3†10.4.4†10.4.5†10.4.6†10.5†10.5.1† 72Number Title 10.5.2† 10.5.3† 10.5.4† 10.5.5† 10.5.6† 10.5.7† 10.5.8† 10.5.9† 10.5.10† 10.5.11† 10.5.12† 10.5.13† 10.5.14† 10.6† 10.6†10.7†10.7.1†10.8†10.9†10.10†5573NumberTitleNumber Title 10.11†10.9† 10.10† 10.12†10.12† 2110.14† 21 30, 2017,31, 2022, formatted inInline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations for the years ended December 30, 2017,31, 2022, December 31, 201625, 2021, and December 26, 2015;2020; (ii) the Consolidated Balance Sheets as of December 30, 201731, 2022 and December 31, 2016;25, 2021; (iii) the Consolidated Statements of Shareholders’ Equity for the years ended December 30, 2017,31, 2022, December 31, 201625, 2021, and December 26, 2015;2020; (iv) the Consolidated Statements of Cash Flows for the years ended December 30, 2017,31, 2022, December 31, 201625, 2021, and December 26, 2015;2020; and (v) the Notes to Consolidated Financial Statements.104 The cover page from the Company’s Annual Report on Form 10-K as of and for the fiscal year ended December 31, 2022, formatted in Inline XBRL (included as Exhibit 101).
*Filed herewith†Management Contracts and Compensatory Plans, Contracts or Arrangements.† Management Contracts and Compensatory Plans, Contracts or Arrangements+ The schedules and exhibits have been omitted pursuant to Item 16. 10-K Summary.None5674SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.Dorman Products, Inc. Mathias J. Barton27, 2018Mathias J. Barton
President and Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.SignatureTitleDateSignature Title Date /s/ Mathias J. BartonKevin M. Olsen27, 2018Mathias J. BartonKevinDavid M. Olsen27, 2018KevinDavid M. OlsenExecutive Chairman 27, 2018Executive ChairmanDirector Lisa M. Bachmann February 28, 2023 /s/ John J. Gavin Director February 27, 2018 DirectorFebruary 28, 2023 /s/ Paul R. LedererFebruary 27, 2018Paul R. Lederer DirectorDirector February 27, 2018DirectorFebruary 28, 2023 Director February 27, 2018DirectorFebruary 28, 2023 Director February 27, 2018DirectorFebruary 28, 2023 /s/ J. Darrell Thomas Director J. Darrell Thomas February 28, 2023 5775SCHEDULE II: Valuation andand Qualifying AccountsFor the Year Ended (in thousands) December 31, 2022 December 25, 2021 December 26, 2020 Allowance for doubtful accounts: Balance, beginning of period $ 1,326 $ 1,260 $ 957 Provision 56 177 315 Charge-offs (19) (111) (111) Acquisitions and other Acquisitions and other — — 99 Balance, end of period $ 1,363 $ 1,326 $ 1,260 Allowance for customer credits: Balance, beginning of period $ 188,080 $ 155,751 $ 105,950 Provision 373,157 334,615 308,783 Charge-offs Charge-offs (369,121) (302,286) (258,982) Balance, end of period $ 192,116 $ 188,080 $ 155,751 5876