www.dormanproducts.comGiving repair professionals, enthusiasts and owners greater freedom to fix motor vehicles.2022ANNUAL REPORT LETTER TO
SHAREHOLDERS
To Our Fellow Shareholders:
Fiscal 2022 was another year of record financial
results for Dorman, achieved in a challenging
business environment. We successfully
navigated unprecedented global supply chain
disruptions, COVID-related delays and closures
experienced by many of our global suppliers,
several quarters of extraordinary inflationary
pressures, and rising interest rates. Our team of
Contributors faced those challenges straight on
and focused on driving efficiencies, controlling
costs, and implementing price increases while
continuing to execute against our strategic
initiatives. Customer demand remained
robust throughout 2022, and we leveraged
both our long-standing relationships with our
global supply chain partners and our internal
manufacturing capabilities to ensure that we
had the right products at the right location to
meet our customers’ requirements, enabling
us to grow faster than the overall market. Our
results are a testament to the dedication and
resiliency of our Contributors, whose passion
and drive made our 2022 financial results
possible.
In October 2022, we grew the Dorman
family with the acquisition of SuperATV, the
largest acquisition in our history. SuperATV
expands our product portfolio into the
powersports aftermarket through a family of
highly respected brands spanning functional
accessories and upgrades, as well as break-fix
replacement parts. The combination aligns
with our strategy to diversify our customer base
and product offering by providing a compelling
entry point to the large and rapidly growing
powersports industry. We are confident we
can leverage Dorman’s playbook to further
accelerate SuperATV’s growth and are excited
about the benefits the combined company will
generate for our customers and shareholders.
Other highlights from 2022 include:
• Growing net sales by 29% (14% excluding the
impact of acquisitions), outpacing the overall
estimated market growth.
• Delivering 3% growth in adjusted diluted
earnings per share.
• Increasing the number of launched “New to
the Aftermarket” skus by 58% year-over-year.
• Opening a new 827,000 square foot
distribution center in Whiteland, IN to
increase our capacity.
• Completing the integration of Dayton
Parts, whose financial results exceeded our
expectations.
2022 ANNUAL REPORTANNUAL REPORT • Publishing our inaugural Environmental, Social and
Governance (ESG) report.
Innovation and new product development continued
to be a strategic focus for Dorman throughout the
year, with a customer-first approach keeping owners
and installers in mind. Our engineers and designers
remained focused on creating differentiated solutions
designed to help repair technicians save time and
vehicle owners save money. We continued to build
our capabilities in advanced technology automotive
components with the introduction of several complex
electronics modules. We believe that the capabilities
we have built in complex electronics over the last
decade provide us with a competitive advantage. Our
objective is to continue to deliver products that not
only drive sales and profits for our customers, but also
provide the solutions that professional technicians
and do-it-yourselfers want.
Being a successful innovator and an aftermarket
leader requires increased brand recognition and
awareness. As part of our initiative to strengthen
Dorman’s well-established name and reputation in the
industry, we continued to grow our onsite and virtual
technician training programs, training over 92,000
automotive repair technicians in 2022. We also
increased our investment and presence in marketing
and digital media, including social media, influencer
relationships, and the distribution of popular
content like our annual Dorman® OE FIX™ Guide
that promotes our brand and highlights our new
products. In 2022, we also launched Shop Press, an
online news and idea hub featuring articles targeted
at service technicians, do-it-yourselfers, and motor
vehicle enthusiasts. As a result of these efforts and
our commitment to providing innovative solutions, the
Dorman brand is a market leader in awareness, usage,
and advocacy.
Turning to capital allocation, our strategy remained
focused on both internal and external growth
opportunities, with organic investment remaining
a top priority followed by acquisitions that met our
strategic criteria. The acquisition of SuperATV was
the M&A highlight of 2022 and was financed with
a new credit facility which we believe provides us
with the liquidity to execute our strategic growth
initiatives. Returning excess cash to shareholders
opportunistically through our share buyback program
also remained a cornerstone of our capital allocation
strategy. In 2022, we repurchased 180,750 shares
of our common stock for a total of $17.6 million and
had $228.0 million of availability remaining under
our current share repurchase authorization as of
December 31, 2022.
Looking ahead, demand remains robust for our
products driven by strong macro fundamentals
across the motor vehicle aftermarket. Vehicle
miles driven continue to increase, the average age
of vehicles continues to rise, the number of cars in
our 8 to 13-year-old sweetspot for the aftermarket
continues to grow, and a shortage of new vehicles
all benefit the aftermarket. We expect these macro
demand trends will continue throughout 2023. We
are also encouraged by the easing of inflationary
costs we have seen over the past several months and
anticipate meaningful gross margin improvement as
we progress through 2023, approaching historical
levels. Further, we anticipate inventory levels to
meaningfully decline throughout 2023 due to lower
lead times and lower material and freight costs,
and in the short term, we plan to utilize excess cash
generated from lower inventory requirements to
reduce our debt. These developments make us very
optimistic about 2023.
Overall, while there remains a level of uncertainty
in the global environment, I firmly believe that we
have the right strategies, processes, tools and, most
importantly, people in place to successfully steer our
way through whatever opportunities and challenges
lie ahead. I believe that our Culture of Contribution
is a strategic advantage as our Contributors are
passionate about innovation not only in our new
product development engine but also in every other
facet of the business. The collective creative energy
from these efforts will be the fuel that drives Dorman’s
success in 2023 and beyond. I want to thank our
Contributors, customers, suppliers, shareholders
and other key stakeholders for your unwavering
confidence and support.
Kevin M. Olsen
President & CEO
This letter includes statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of the federal
securities laws, and are based on Dorman’s current expectations and assumptions. For a discussion identifying important factors that could cause actual results to
differ materially from those anticipated in the forward-looking statements, see Dorman’s filings with the U.S. Securities and Exchange Commission, including, but not
limited to, “Risk Factors” in the Form 10-K portion of this Annual Report. Adjusted diluted earnings per share is a Non-GAAP measure. A reconciliation of adjusted diluted
earnings per share to diluted earnings per share is included on the page preceding the inside back cover of this Annual Report.
WWW.DORMANPRODUCTS.COM2022 ANNUAL REPORT
THE STORY OF
DORMAN PRODUCTS
Dorman’s story begins with the mass market
automobile.
The first moving assembly line was introduced
in 1913, accelerating car manufacturing and
making vehicles more affordable. Early cars
offered people the newfound freedom of mobility.
However, to maintain this freedom, people now
needed to maintain their vehicles.
Only a few years later, in 1918, Jack and Lew
Dorman, two enterprising brothers from
Cincinnati, discovered that many people couldn’t
find the basic parts they needed to repair their
cars. They started a company named Dorman
Products, selling hard-to-find automotive
hardware sourced from salvaged vehicles.
The Dormans soon found success manufacturing
star washers, and expanded into selling other
hardware, like brake adjusting screws and center
spring bolts. Over time, the company’s product
lines grew to include dozens of different small part
categories, like bearings, caps, clamps, fittings,
hoses and springs.
Merchandising was where Dorman really made
its mark in the aftermarket. Various assortments
and inventory systems revolutionized the small
parts business, and many of these vintage orange
shelves, trays, bins and display stands are now
highly sought-after collector items.
In 1978, two other brothers, Richard and Steven
Berman, started their own company selling small
replacement parts outside Philadelphia. Seeing
that there were many simple products that people
couldn’t buy from anyone else except original
equipment manufacturers, they founded R&B
Inc. to deliver more convenient and affordable
solutions. They became best known under the
brand name Motormite Manufacturing, which
launched many popular product lines like HELP!®
and Conduct-Tite®.
After competing for decades, Motormite acquired
Dorman in 1994. In 2006, the two companies
further unified under the single Dorman Products
brand. Today the company is publicly listed on the
Nasdaq stock exchange under the ticker DORM.
2022 ANNUAL REPORTANNUAL REPORT Dorman is now one of the leading suppliers of
replacement and upgrade parts in the motor vehicle
aftermarket industry, serving passenger cars, light-,
medium-, and heavy-duty trucks, as well as specialty
vehicles, including utility terrain vehicles and all-terrain
vehicles. Dorman has more than a dozen facilities and
3,786 employees worldwide*. Headquartered in Colmar,
Pennsylvania, Dorman offers more than 4,443 distinct
products.*
As vehicles have evolved, so have we. Far from the early
days of simple components, Dorman now delivers
some of the most advanced replacement parts in the
aftermarket, like ABS modules, electronic throttle
bodies and VVT solenoids. Many of our OE FIX™ parts
solve common problems customers have with the OEM
alternative, reducing repair cost and installation time,
and increasing reliability and serviceability.
The original drive of the Dorman and Berman brothers
still guides the company today. Just as both sets of
brothers saw a need to give people better options for
maintaining automobiles, we continue to give repair
professionals and vehicle owners greater freedom to fix
cars and trucks. Dorman was one of the first companies
to provide these solutions, and we continue to be first to
market with new solutions every day.
Learn more at DormanProducts.com/tour.
*As of December 31, 2022.
SELECTED CONSOLIDATED FINANCIAL DATA
Fiscal Year Ended
(in thousands, except per share data)
2022
2021
2020
2019
2018
Statement of Operations Data:
Net sales
Sales Growth
Gross profit
Gross profit margin
Income from operations
Operating margin
Net income
Earnings per share:
Diluted
Adjusted diluted†
$1,733,749 $1,345,249 $1,092,748
$991,329
$973,705
28.9%
23.1%
10.2%
1.8%
7.8%
564,450
462,916
383,116
339,825
373,281
32.6%
171,048
9.9%
34.4%
171,551
12.8%
35.1%
34.3%
38.3%
133,373
105,828
171,143
12.2%
10.7%
17.6%
121,549
131,532
106,870
83,762
133,602
$3.85
$4.76
$4.12
$4.64
$3.30
$3.45
$2.56
$2.65
$4.02
$4.20
Balance Sheet and Cash Flow Data:
Cash and cash equivalents
$46,034
$58,782
$155,576
$68,353
$43,458
Outstanding debt under credit
736,238
239,360
–
–
–
agreement
Cash provided by operating
41,688
100,338
151,966
95,306
78,112
activities
Capital expenditures
Free cash flow†
Cash used for acquisitions,
net of cash acquired
Share repurchases under
repurchase program
† Non-GAAP measures. See NOTE below.
37,883
3,805
19,840
80,498
488,956
345,483
15,450
136,516
14,808
29,560
65,746
–
26,106
52,006
28,040
17,577
61,583
36,781
39,387
43,386
NOTE: For additional information regarding the amounts presented above, see the Form 10-K portion of this Annual Report. Reconciliations of adjusted
diluted earnings per share to diluted earnings per share and free cash flow to cash provided by operating activities are included on the page preceding
the back cover of this Annual Report.
WWW.DORMANPRODUCTS.COM2022 ANNUAL REPORT
DORMAN PRODUCTS’
ENHANCED CAPABILITY
Our capabilities drive our brand and commitment to growing the aftermarket.
INNOVATING
FOR THE FUTURE
• Deep R&D Investment
START-UP
MINDSET
• Employee Empowerment
• Installer Centric Mindset
• Speed to Market
MARKET
LEADERS
• Growing the Aftermarket
• Category Breadth
129K+
PRODUCTS
DORMAN AT A GLANCE
~3,786
>16
EMPLOYEES
NEW PARTS
DAILY
AS OF THE END OF FISCAL YEAR (12/31/2022)
$1.73
BILLION IN
NET SALES
2022 ANNUAL REPORTANNUAL REPORT UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________
FORM 10-K
____________________________________________________
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
For the transition period from ______ to ______
Commission file number 0-18914
____________________________________________________
DORMAN PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
____________________________________________________
Pennsylvania
(State or other jurisdiction of
incorporation or organization)
23-2078856
(I.R.S Employer
Identification No.)
3400 East Walnut Street, Colmar, Pennsylvania 18915
(Address of principal executive offices) (Zip Code)
(215) 997-1800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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
Securities registered pursuant to Section 12(g) of the Act: None
____________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
Non-accelerated filer
x
o
Accelerated filer
Smaller reporting company
Emerging growth company
o
o
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issues its audit report. x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 25, 2022 was $1,967,865,518.
As of February 23, 2023, the registrant had 31,445,738 shares of common stock, $0.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive proxy statement, in connection with its 2023 Annual Meeting of Shareholders, to be filed with the Securities
and Exchange Commission within 120 days after December 31, 2022, are incorporated by reference into PART III of this Annual Report on Form 10-K.
2 DORMAN PRODUCTS, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
December 31, 2022
PART I
Page
Business
ITEM 1.
ITEM 1A. Risk Factors
ITEM 1B. Unresolved Staff Comments
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 4.1
Properties
Legal Proceedings
Mine Safety Disclosures
Information about Our Executive Officers
PART II
ITEM 5.
ITEM 6.
ITEM 7.
Market for Registrant's Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of
Operations
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
ITEM 8.
Financial Statements and Supplementary Data
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
ITEM 9A. Controls and Procedures
ITEM 9B. Other Information
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
ITEM 15.
ITEM 16.
Exhibits and Financial Statement Schedules
Form 10-K Summary
5
12
26
26
27
27
27
30
31
32
40
40
68
68
71
71
72
72
72
73
73
74
74
3 Effective October 4, 2022, the Board of Directors of Dorman Products, Inc. approved a change in
Dorman’s fiscal year end from the last Saturday in December of each year to December 31 of each year, to
commence with the current fiscal year ending on December 31, 2022.
References to
Fiscal 2020
Fiscal 2021
Fiscal 2022
Refers to the year ended
December 26, 2020
December 25, 2021
December 31, 2022
As 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 Statements
Certain statements in this document constitute “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements related to the global coronavirus pandemic
(“COVID-19”), net sales, diluted earnings per share, gross profit, gross margin, selling, general and
administrative expenses, income tax expense, income before income taxes, net income, cash and cash
equivalents, indebtedness, liquidity, the Company’s share repurchase program, the Company’s outlook, the
Company’s growth opportunities and future business prospects, operational costs and productivity initiatives,
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.
4 ITEM 1. Business.
General
PART I
We are one of the leading suppliers of replacement and upgrade parts in the motor vehicle aftermarket
industry, serving passenger cars, light-, medium-, and heavy-duty trucks, as well as specialty vehicles, including
utility terrain vehicles (UTVs) and all-terrain vehicles (ATVs). As of December 31, 2022, we marketed
approximately 129,000 distinct parts compared to approximately 118,000 as of December 25, 2021, many of
which we designed and engineered. This number excludes private label stock keeping units and other variations
in how we market, package and distribute our products, includes distinct parts of acquired companies and
reflects distinct parts that have been discontinued at the end of their lifecycle. Our products are sold under our
various brand names, under our customers’ private label brands or in bulk. We are one of the leading
aftermarket suppliers of parts that were traditionally available to professional installers and consumers only
from original equipment 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,
exhaust gas recirculation (EGR) coolers, UTV windshields, and complex electronics modules. For fiscal 2022,
approximately 75% of our products were sold under brands that we own, and the remainder of our products
were 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 through
aftermarket retailers, including through their on-line platforms; dealers; national, regional and local warehouse
distributors and specialty markets; and salvage yards. We also distribute aftermarket parts outside the United
States, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, the Middle East and
Australia.
The Motor Vehicle Aftermarket Industry
The motor vehicle aftermarket that we operate in consists of the automotive aftermarket industry and
the powersports aftermarket industry.
The automotive aftermarket industry has two 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 $117.0 billion in 2022. We sell products into both sectors, with a
majority of our products being designed for the passenger car and light truck sector.
Two distinct groups of end-users buy replacement vehicle parts for passenger cars and 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 dealership service departments. Individual
consumers typically are supplied through retailers and the retail arms of warehouse distributors. Vehicle repair
shops generally purchase parts through local independent parts wholesalers and 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 motor vehicle aftermarket industry generally can be grouped into three categories:
discretionary, maintenance, and repair. Discretionary, such as accessories and performance, tends to move in
line with consumer discretionary spending. Maintenance is composed of products and services, such as oil and
oil changes, and tends to be less correlated with discretionary spending. Repair consists mainly of replacement
parts that 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.
5 The increasing complexity 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
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.
Retailers and others who purchase automotive aftermarket 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 that a supplier provides typically are significant factors in a retailer’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 resellers 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 Products
We 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 mechanics 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 money. 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 Builders Series line of premium wiring solutions.
6 Dayton 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 cool factor and designed with
an edge.
Gboost – Clutching products for specialty vehicles.
GDP – Premium quality transmission, portals, differentials and more for UTVs and ATVs.
We group our products into four major classes: powertrain, chassis, motor vehicle body, and hardware.
The following table represents each of the four classes as a percentage of net sales for each of the last three
years:
fiscal
Powertrain
Chassis
Motor Vehicle Body
Hardware
Total
Percentage of Net Sales
Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
37 %
41 %
18 %
4 %
100 %
40 %
34 %
22 %
4 %
100 %
40 %
30 %
25 %
5 %
100 %
Our powertrain product line includes intake and exhaust manifolds, cooling products, harmonic
balancers, fluid lines, fluid reservoirs, connectors, 4-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 motor vehicle body products
includes door handles and hinges, window lift motors, window regulators, switches and handles, wiper
components, lighting, electrical, and other interior and exterior vehicle body components, including windshields
for UTVs. Hardware products include threaded bolts and auto body 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 standard warranties limit the end-user’s remedy to the repair or replacement of the part
that is defective.
Product Development
Dorman is committed to product development and innovation with a customer-first approach keeping
owners and installers in mind. Our engineers and designers focus on solutions designed to help 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 its objective to
develop new products, many of which are first 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 features based on identifying what made original parts problematic and developing new
solutions that address the original failure modes, and (3) new parts - identifying parts that are not available from
the OE or in the aftermarket that can enhance vehicle performance and user experience. Some of these
7 opportunities are brand new to the aftermarket whereas others continue to expand our current portfolio offering.
The following table represents the number of distinct parts we introduced for each of the last three fiscal years:
New to the aftermarket
Line extensions
Total distinct parts introduced
December 31, 2022 December 25, 2021 December 26, 2020
Year Ended
1,565
2,878
4,443
990
3,325
4,315
1,433
2,046
3,479
In 2022, we introduced several first-to-the-aftermarket repair solutions designed to fit a wide range of
vehicles. New products included an upgraded OE FIX aluminum oil filter housing, hub rotor and caliper bracket
bolt kits, additions to our roster of turbocharger components, and new complex electronic solutions, such as
cruise 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 range of money-saving repair options.
We expanded our growth in the heavy-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 motor vehicle solutions footprint in 2022 through the acquisition of Super ATV,
LLC (“SuperATV”). SuperATV specializes in the design, manufacturing, and distribution of aftermarket parts
and accessories for UTVs and ATVs. SuperATV is a leader in the powersports aftermarket because of its broad
range of solutions, dedication to product development and innovation, 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 other accessories for popular ATV and UTV
models from manufacturers such as Polaris®, Yamaha®, Honda®, Can-Am® and others.
Sales and Marketing
We market our products to purchasers, many of whom in turn supply individual consumers and
professional installers. Our products are available in our customers’ retail stores, on our 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 or, with respect to certain select customers, indirectly through
independent manufacturers’ representative agencies worldwide.
Our sales efforts are not directed merely at selling individual products, but more broadly towards selling
our entire product portfolio. 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-aftermarket products.
Among other things, we use digital advertising, social media, email, catalogs and brochures, to describe
and promote our products. Our websites include www.DormanProducts.com, www.DaytonParts.com and
8 www.SuperATV.com. These sites are not and should not be considered part of this Form 10-K and are not
incorporated by reference in this Form 10-K.
As of December 31, 2022, we serviced more than 9,000 active accounts. During fiscal 2022, three
customers each accounted for more than 10% of net sales and in the aggregate accounted for approximately
49% of net sales.
Manufacturing and Procurement
Most of our light- and medium-duty aftermarket automotive products are manufactured by third 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 third-party manufacturers around the world to develop and manufacture products according to our
performance and design requirements, oftentimes using tooling that we own. In fiscal 2022, as a percentage of
our total dollar volume of purchases, approximately 36% of our products were purchased from various suppliers
throughout the United States and the balance of our purchases were directly from suppliers outside of 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 manufacturers for a substantial portion of our product
portfolio, we also continue 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. In
fiscal 2022, we purchased automotive products in substantial volumes from over 250 suppliers, and no single
supplier accounted for more than 10% of our total product 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."
Packaging, Inventory and Shipping
Finished 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 on 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 help 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 by contract carrier, common carrier or parcel service. Products are generally
shipped to each customer's main warehouses for redistribution within 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 a customer,
we ship directly to that customer's warehouses, stores or other locations, either via smaller direct ship orders or
consolidated store orders that are cross-docked.
Remanufacturing and Recycling Parts
Certain products we sell contain parts that can be recycled, or as more commonly referred to in our
industry, remanufactured. We refer to the used product that is ultimately remanufactured as core. A used core is
9 remanufactured 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.
Competition
The motor vehicle aftermarket industry is highly competitive. Competitive factors include price,
product quality, breadth of product line, range of applications, customer service and the growth of e-commerce.
Substantially all our products are subject to competition with similar products offered by other providers of
aftermarket repair and replacement parts. Some of these competitors are divisions and subsidiaries of companies
much larger than us who possess a longer history of operations and greater financial and other resources than
we do. We also face competition from OE manufacturers who sell through their dealerships many of the same
replacement parts that we sell, although these manufacturers generally sell parts only for vehicles they produce.
Some of our current or former suppliers may compete with us by supplying directly to our customers. Further,
some of our private label customers also compete with us. For more information on risks relating to our
competition, see ITEM 1A, “Risk Factors – Risks Related to Our Business – Our Industry, Operations and
Competition.”
Seasonality
Our business can be affected by weather conditions. Extremely hot or cold weather generally results in
an increase in parts failure at an accelerated rate, which generally leads to an increase in our sales for the
duration of the extreme weather event.
Impact of COVID-19
While 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 actions 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 Property
We own a number of patents important to 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 other intellectual property,
see ITEM 1A, "Risk Factors – Risks Related to Our Business – Our Intellectual Property and Information
Security.”
10 Human Capital Resources
General
As of December 31, 2022, we had 3,786 employees worldwide, substantially all of whom were
employed full-time. Our employees are categorized by various functions. “Operations” consists of employees
engaged in production, product distribution and inventory 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 other functions supporting
our business. The following table shows employees by function and region.
Operations
Product Development
Quality and Engineering
Sales
Administration
Total Employees
December 31, 2022
U.S.
Non-U.S.
Total
2,515
230
189
293
238
3,465
226
2
60
24
9
321
2,741
232
249
317
247
3,786
None of our global employees is covered by a collective bargaining agreement. We consider our
relations with our employees to be generally good.
Health and Safety
We maintain a safety culture grounded on the premise of eliminating workplace incidents, risks and
hazards. We have created and implemented processes to help eliminate safety events and reduce their frequency
and severity. We also review and monitor our performance closely. 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 Inclusion
We embrace the diversity of our employees, including their unique backgrounds, experiences, thoughts
and talents. Employees are valued and appreciated for their distinct contributions to the growth and
sustainability of our business. We strive to cultivate a culture and vision that supports and enhances our ability
to recruit, develop and retain diverse talent at every level. 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.
11 Talent and Development
Our 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.
Compensation
We pay our employees competitively and offer a broad range of company-paid benefits, which we
believe are competitive with others in our industry and in the geographies in which we compete for talent. 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 Information
Our Internet address is 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. The 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., 3400 East Walnut Street,
Colmar, Pennsylvania 18915.
ITEM 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the following
factors, which could materially affect our business, financial condition or future results. The risks described
below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially affect our business, financial condition or results of
operations. The risks are listed below in no particular order.
Risks Related to Our Business
Our Industry, Operations and Competition
Our business is impacted by the age, condition and number of vehicles that need servicing and by
improvements in the quality of new vehicle parts.
The size of the 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 believe 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 recent years due to
innovations in products and technology. In addition, the introduction by original equipment manufacturers of
12 increased warranty and maintenance initiatives has the potential to decrease the demand for our products. These
factors could have a material adverse effect upon our business, financial condition and results of operations.
Our industry is highly competitive, and our success depends on our ability to compete with suppliers 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 diversity 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 original equipment
manufacturers, which, through their dealers or dealerships, supply many of the same types of parts we sell.
Further, 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 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 cannot assure you that our competitors will not develop products or services that are equal or
superior to our products or that achieve greater market acceptance than our products or that in the future other
companies involved in our industry will not expand their operations into product lines produced and sold by us.
We also cannot assure you that additional entrants will not enter our industry or that companies in our industry
will not consolidate. Any such competitive pressures could cause us to lose market share or could result in
significant price decreases and could have a material adverse effect on our business, financial condition and
results of operations.
The loss or decrease in sales among one of our top customers, or a material change in the terms on which
they are willing to buy from us, could have a substantial negative impact on our sales and operating
results.
A significant percentage of our sales has been, and is expected to be, concentrated among a relatively
small number of customers. During fiscal 2022, three customers each accounted for more than 10% of net sales
and in the aggregate accounted for approximately 49% of net sales. We anticipate that this concentration of
sales among these customers will continue in the future. The loss of a significant customer or a substantial
decrease in sales to such a customer could have a material adverse effect on our sales and operating results. In
addition, any consolidation among our key customers may further increase our customer concentration risk.
Also, while we may enter into long-term agreements with certain of our significant customers, those
agreements generally do not contain purchase commitments, which instead are set forth in individual purchase
orders submitted by customers based on their then-current or projected needs. We have in the past, and may in
the future, lose customers or lose a particular product line of a customer due to the highly competitive
conditions in the 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 of
13 doing business with us, or to stop doing business with us, could have a material adverse effect on our business,
financial condition and results of operations.
Because our sales are concentrated, and the 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 consolidation in the motor vehicle aftermarket industry may lead to customer contract terms
less favorable to us, which may negatively impact our financial results.
The motor vehicle aftermarket industry has been consolidating over the past several years. As a result of
such consolidations, many of our customers have grown larger and therefore have more leverage in the arms-
length negotiations of agreements with us for the sale of our products. Customers may require us to provide
extended payment terms, issue customer credits and accept returns of slow-moving product to obtain new, or
retain existing, business. Although we attempt to avoid or minimize such concessions, in some cases payment
terms to customers have been extended, enhanced customer credits have been issued and returns of product
have exceeded historical levels. The product returns and customer credits primarily affect our net sales and
profit levels while payment term extensions and additional factoring costs generally reduce operating cash flow
and require additional capital to finance our business. We expect these trends to continue for the foreseeable
future.
14 Our growth 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 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 for 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 material and adverse
effect on our business, results of 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, which could have a material and adverse effect on our business, results of operations and financial
condition. Similarly, our suppliers may not have the materials, capacity, or capability to manufacture our
products according to our schedule and specifications. If our suppliers’ operations are impacted, we may need to
seek alternate suppliers, which may be more expensive, may not be available or may result in delays in
shipments to us and subsequently to our customers, each of which would affect our results of operations.
Further, in the event any members of our workforce, or those of our suppliers, 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 services that we require for our operations. The increased use of
remote 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 disruption 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 number 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 to
15 reduce 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 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 overstocked
returns are materially in excess of our projections, our business, results of operations and financial condition
may be materially adversely affected.
Our operations would be materially and adversely affected if our suppliers fail to perform or if we are
unable to manage our supply chain effectively.
Because we purchase various types of raw materials, finished goods, equipment, and manufactured
component parts from suppliers, we may be materially and adversely affected by the failure of those suppliers to
perform as expected. This non-performance may consist of delivery delays, or failures caused by production
issues or delivery of non-conforming products. The risk of non-performance may also result from the
insolvency or bankruptcy of one or more of our suppliers. Our suppliers’ ability to supply products to us is also
subject to a number of risks, including, 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 the supply of
semiconductors. We utilize semiconductors in our products and have at times encountered material shortages in
semiconductor supply. If we are unable to source semiconductors on a timely basis or at all, we may be unable
to produce some of our products, which could adversely affect our ability to develop new products and fill
orders on existing products.
Furthermore, because certain products we sell contain parts that are or 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 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 fails to meet our needs or if our relationships with any of our key suppliers are not maintained, it may
not be possible to replace such supplier without disruptions in our operations. 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 or transitioning to a new supplier in a
different geography may result in increased expenses, which could result in lower profit margins and could 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 not guaranteed, and, even if we have access to
transportation providers, we may be unable to transport our products at economically attractive rates in certain
circumstances, particularly in cases of adverse market conditions or disruptions to transportation infrastructure.
Fluctuations in demand for third-party transportation providers and other events impacting transportation
capacity and costs, such as strikes, political events, international trade disputes, war, terrorism, natural disasters,
16 adverse 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 variables, 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 Quality
If we do not continue to develop new products and bring them to market, our business, financial
condition and results of operations could be materially impacted.
Our historical growth and profitability 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 beyond
17 our control may impact our ability to further our research and development activities. For example, new product
activity was adversely impacted in the first half of 2020 due to COVID-19. Although new product development
and commercialization rebounded towards the end of 2020, we ended 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 our development decisions, including significant expenditures on acquisitions, research
and development, or investments in technologies, will not meet our expectations, and that our investment in
some projects will be unprofitable. There is also a possibility that we may miss a market opportunity because
we failed to invest or invested too late in a technology, product or enhancement sought by our customers or the
markets into which we sell. If we fail to make the right investments or fail to make them at the right time,
competing solutions may be more attractive in the market. As a result, our competitive position may suffer, and
our revenue and profitability could be adversely affected.
The development and production of any new products are often accompanied by design and production
delays and related costs. While we expect and plan for such delays and related costs, we cannot predict with
precision the time and expense required to overcome these initial problems so that the products comply with
specifications. Moreover, as a supplier in the 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 impacted by changes in, or 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. Software, firmware, and hardware increasingly are
becoming functionally integrated with, and inseparable from, physical parts. While, traditionally, repair shops
and vehicle owners could diagnose 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 turn could limit our ability to design, manufacture and sell new products and
could have a material adverse effect on our business, financial condition and results of operations.
These trends have led to an increase in the significance of technology to our current and future products
and the amount of capital we need to invest to develop these new technologies, as well as an increase in the
amount of competition we face from technology-focused new market entrants. If we misjudge the amount of
capital to invest or are otherwise unable to continue providing products that meet our customers’ needs in this
environment of rapid technological change, our market competitiveness could be adversely affected, which
could have a material adverse effect 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.
18 Our Intellectual Property and Information Security
Cyber-attacks or other breaches of information technology security could adversely impact our business
and operations.
Cyber-attacks or other breaches of network or information technology security may cause equipment
failure, disruption to our operations or the loss or theft of sensitive data relating to our Company and 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, the level of protection of our proprietary technology varies
by country and may be uncertain in countries that do not have well-developed judicial systems or laws that
adequately protect intellectual property rights. Patent litigation and other challenges to our patents and other
proprietary rights are costly and unpredictable and may prevent us from marketing and selling a product in a
particular geographic area. Financial considerations 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.
19 Claims of intellectual property infringement by original equipment manufacturers and others could
adversely affect our business and negatively impact our ability to develop new products.
From time to time in the ordinary course of our business, we are subject to claims that we are infringing
the intellectual property rights of original equipment manufacturers, non-practicing entities, or others. An
adverse finding against us in these or similar intellectual property disputes may have a material adverse effect
on our business, financial condition and results of operations if we are not able to successfully develop or
license non-infringing alternatives. In addition, an unfavorable ruling in intellectual property litigation could
subject us to significant liability, increased legal expense, and require us to cease developing or selling the
affected products. 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.
Failure to maintain the value of our brands could have an adverse effect on our reputation, cause us to
incur significant costs and negatively impact our business.
Our brands are an important component of our value proposition and serve to distinguish our products
from those of our competitors. We believe that our success depends, in part, on maintaining and enhancing the
value of our brands and executing our brand strategies, which are designed to drive 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 reputation 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 harm our reputation,
reduce 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 companies with their own
established brands. In addition to the foregoing, certain of our customer agreements require us to supply them
with private-label branded products. To the extent we use our own products to promote the brands of our
customers over our own brands, our business may be adversely affected.
Risks Related to Our Capital Structure and Finances
Increasing 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 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 operations.
20 Our credit agreement contains covenants that restrict our operational flexibility. If we cannot comply
with these covenants, we may be in default under our credit agreement.
Our credit 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 security interest in substantially all of
our and 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. A 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 United States. Our four largest customers accounted for 69% of total accounts
receivable as of December 31, 2022 and 82% of total accounts receivable as of December 25, 2021. In the
ordinary course of business, management monitors, among other things, credit terms and credit limits for these
21 and 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 to another supplier offering better credit terms. If any of our customers were unable to pay,
or if any of those customers redirect their business to other suppliers offering better credit terms, it could have a
material adverse effect on our business, financial condition and results 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 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;
imposition of duties, tariffs, taxes and other charges on imports;
significant devaluation of the U.S. dollar against foreign currencies;
restrictions on the transfer of funds to or from foreign countries;
b.
c.
d.
e. political instability, military conflict or terrorism involving the United States or any of the countries
where our products 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; and
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.
f.
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.
If these risks limit or prevent us from acquiring products from foreign suppliers or significantly increase
the cost of our products, our operations could be seriously disrupted until alternative suppliers are found, which
could have a material adverse effect upon our business, financial condition and results of operations.
Dorman’s Executive Chairman and his family members own a significant portion of the Company.
As of February 23, 2023, Steven L. Berman, our Executive Chairman, and his family members
beneficially owned approximately 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. Moreover, sales of substantial amounts of the shares beneficially
owned by Mr. Berman and his family members, including shares held in family trusts and foundations, or the
perception that such sales could occur, may lower the prevailing market price of our common stock.
22 General Risk Factors
Unfavorable 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 revenue 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 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 operations of our third-party manufacturers,
suppliers, warehouse and distribution providers, and customers, may be subject to quarter-over-quarter
fluctuations and disruptions from events beyond our or their control.
Our operations, revenues and operating results, as well as the operations of our third-party
manufacturers, suppliers, warehouse and distribution providers, and customers, may be subject to quarter-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-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. 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 net
sales. Any of the foregoing could have a material adverse effect on our business, financial condition and results
of operations.
We rely extensively on computer systems to manage inventory, process transactions and timely provide
products to our customers. These systems are subject to damage or interruption from power outages,
telecommunications failures, computer viruses, security breaches, cyber-attacks or other catastrophic events. If
these 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 to these
systems could negatively impact revenue and could have a material adverse effect on our business, financial
condition and results of operations.
Unfavorable results of legal proceedings could materially adversely affect us.
We are subject to various legal proceedings and 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.
The market price of our common stock may be volatile and could 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 be affected by our
23 ability to meet analysts’ expectations. Failure to meet such expectations, even slightly, could negatively 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
a material adverse effect on our business, financial condition and results of operations.
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.
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 retain experienced and highly skilled engineering, sales and marketing, finance,
logistics, information technology and operations personnel. Although 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 our key
employees, 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, financial condition and
results of operations.
Our growth may be impacted by acquisitions. We may not be able to identify suitable acquisition
candidates, complete acquisitions or integrate acquisitions successfully.
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 could 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. The
24 effects of climate change could also disrupt our operations by impacting the availability and cost of materials
needed for manufacturing and could increase insurance and other operating costs. We could also face indirect
financial risks passed through the supply chain and disruptions that could result in increased prices for our
products and the resources needed to produce them.
Climate change is continuing to receive ever-increasing attention worldwide. Many scientists,
legislators and others attribute climate change to increased levels of greenhouse gases, including carbon
dioxide, which could lead to additional legislative and regulatory efforts to limit greenhouse gas emissions. For
example, new federal or state restrictions on emissions of carbon dioxide that may be imposed on vehicles and
automobile fuels could adversely affect demand for vehicles, annual miles driven or the products we sell or lead
to changes in automotive technology. Compliance with any new or more stringent laws or regulations, or
stricter interpretations of existing laws, could require increased capital expenditures to improve our product
portfolio to meet such new laws, regulations and standards. While we have been committed to continuous
improvements to our product portfolio to meet and exceed anticipated regulatory standard levels, there can be
no assurance that our commitments will be successful, that our products will be accepted by the market, that
proposed regulation or deregulation will not have a negative competitive impact or that economic returns will
reflect our investments in new product development.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar anti-
bribery laws around the world.
The U.S. Foreign Corrupt Practices Act (the "FCPA") and similar anti-bribery laws in other
jurisdictions generally prohibit companies and their intermediaries from making improper payments to
government officials or other persons for the purpose of obtaining or retaining business. Recent years have seen
a substantial increase in anti-bribery law enforcement activity, with more frequent and aggressive investigations
and enforcement proceedings by both U.S. and non-U.S. regulators, and increases in criminal and civil
proceedings brought against companies and individuals. Our policies mandate compliance with these anti-
bribery laws. We operate in parts of the world that are recognized as having governmental and commercial
corruption and local customs and practices that can be inconsistent with anti-bribery laws. We cannot assure
you that our internal control policies and procedures will always protect us from reckless or criminal acts
committed by our employees or third-party intermediaries. In the event that we believe or have reason to believe
that our employees or agents have or may have violated applicable anti-corruption laws, or if we are subject to
allegations of any such violations, we may be required to investigate or have outside counsel investigate the
relevant facts and circumstances, which can be expensive and require significant time and attention from senior
management. Violations of these laws may result in criminal or civil sanctions, which could disrupt our
business and result in a material adverse effect on our reputation, business, financial condition and results of
operations. In addition, we could be subject to commercial impacts such as lost revenue from customers who
decline to do business with us as a result of such compliance matters, or we could be subject to lawsuits brought
by private litigants, each of which could have a material adverse effect on our reputation, business, financial
condition, and results of operations.
Our products are subject to import and export controls in 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 delay
25 the introduction and sale of our products in the U.S. and international markets, require us to spend resources to
seek necessary government authorizations or to develop different versions of our products, or, in some cases,
prevent the export or import of our products to certain countries, regions, governments, persons or entities,
which could adversely affect our business, financial condition and operating results.
ITEM 1B. Unresolved Staff Comments.
None
ITEM 2. Properties.
Facilities
As of December 31, 2022, we had 35 warehouse and office facilities located throughout the United
States, Canada, China, Taiwan and India. Five of these facilities are owned and the remainder are leased. Our
principal facilities are as follows:
Location
Portland, TN
Whiteland, IN
Warsaw, KY
Colmar, PA
Shiremanstown, PA
Franklin, KY
Durant, OK
Madison, IN
Lewisberry, PA
Madison, IN
Jiangsu Province, China
Florence, KY
Harrisburg, PA
Lewisville, TX
Franklin, KY
Louisiana, MO
Las Vegas, NV
Shreveport, LA
Reno, NV
Kankakee, IL
Jacksonville, FL
Sanford, NC
Description
Size
Ownership
Warehouse and office
Warehouse and office
Warehouse and office
Corporate headquarters
Warehouse and office
Warehouse and office
Manufacturing Facility
Warehouse and office
Warehouse and office
Warehouse and office
Warehouse
Warehouse and office
Warehouse
Manufacturing Facility
Warehouse and office
Warehouse
Warehouse and office
Warehouse and office
Warehouse and office
Warehouse and office
Manufacturing Facility
Warehouse and office
Warehouse and office
997,310 sq. ft.
827,180 sq. ft.
710,500 sq. ft.
342,000 sq. ft.
318,872 sq. ft.
244,000 sq. ft.
208,000 sq. ft.
208,000 sq. ft.
170,500 sq. ft.
145,000 sq. ft.
105,911 sq. ft.
101,250 sq. ft.
101,132 sq. ft.
101,029 sq. ft.
100,000 sq. ft.
90,000 sq. ft.
89,728 sq. ft.
65,000 sq. ft.
54,354 sq. ft.
53,574 sq. ft.
52,080 sq. ft.
52,000 sq. ft.
Leased
Leased
Owned
Leased (1)
Leased
Leased
Owned
Leased
Leased (2)
Leased
Leased
Leased
Owned
Leased
Leased
Owned
Leased
Leased
Leased
Owned
Leased
Leased
(1)
(2)
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.
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.
26 ITEM 3. Legal Proceedings.
The information set forth under the heading “Other Contingencies” appearing in Note 10.
“Commitments and Contingencies,” to the Notes to Consolidated Financial Statements contained in PART II,
ITEM 8 of this report is incorporated herein by reference.
ITEM 4. Mine Safety Disclosures.
Not Applicable
ITEM 4.1. Information about Our Executive Officers.
The following table sets forth certain information with respect to our executive officers as of
February 28, 2023:
Name
Steven L. Berman
Kevin M. Olsen
Paul E. Anderson
Joseph P. Braun
Jeffrey L. Darby
David M. Hession
Scott D. Leff
Donna M. Long
Eric B. Luftig
John McKnight
Age
63
51
64
49
55
54
51
55
49
54
Position with the Company
Executive Chairman
President and Chief Executive Officer
President, Heavy Duty
Senior Vice President, General Counsel and Secretary
Senior Vice President, Sales and Marketing
Senior Vice President, Chief Financial Officer and Treasurer
Senior Vice President, Chief Human Resources Officer
Senior Vice President, Chief Information Officer
Senior Vice President, Product
Senior Vice President, Operations
Steven L. Berman became the Executive Chairman of the Company in September 2015. Additionally,
Mr. Berman has served as a director of the Company since its inception in 1978. From January 2011 to
September 2015, Mr. Berman served as Chairman of the Board and Chief Executive Officer of the Company
and from October 2007 to January 2011, Mr. Berman served as President of the Company. Prior to October
2007, Mr. Berman served as Executive Vice President of the Company. As reported in the Company’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’s Board of Directors on April 1, 2023.
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, 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. Mr. Olsen is also a director of Twin Disc,
Inc., (Nasdaq: TWIN), an international manufacturer and worldwide distributor of heavy-duty off-highway and
marine power transmission equipment and related products.
Paul 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.
27 Joseph P. Braun joined the Company in April 2019 as Senior Vice President and General Counsel, and
he was appointed Corporate Secretary in May 2019. Prior to joining the Company, Mr. Braun served as Chief
Legal Officer and Corporate Secretary of Avantor, Inc., a leading, global provider of 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 of
28 Consolidated 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
the Colfax Corporation, a diversified global manufacturing and engineering
various
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.
roles with
29 PART II
ITEM 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 23, 2023, there were 320 holders of record of our common stock.
We do not anticipate paying cash dividends on our common stock in the foreseeable future. Any
payment of dividends in the future 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 information regarding our equity compensation plans, see PART 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 NASDAQ US Benchmark Auto Parts
TR index and the NASDAQ Composite Market Index for the period from December 30, 2017 to December 31,
2022.
The NASDAQ US Benchmark Auto Parts TR index is comprised of 23 public companies and the
information was furnished by Zacks Investment Research, Inc. The 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 30, 2017 in our common stock and each of the
indices, and that 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.
The stock price performance shown in the graph is not necessarily indicative of future price performance.
The performance graph and the information set forth therein shall not be deemed to be filed for
purposes of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference in any
filing made by us with the U.S. Securities and Exchange Commission, except as shall be expressly set forth by
specific reference in such a filing.
30 Stock Repurchases
During the three months ended December 31, 2022, we purchased shares of our common stock as
follows:
Period
September 25, 2022 through October 22, 2022 (1)
October 23, 2022 through November 19, 2022 (2)
November 20, 2022 through December 31, 2022 (3)
Total
Total Number
of Shares
Purchased
Average
Price Paid
per Share
882 $
1,072 $
897 $
2,851
83.81
77.62
86.49
Maximum
Number (or
Approximate
Dollar Value)
of Shares that
May Yet Be
Purchased Under
the Plans or
Programs (4)
Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans
or Programs (4)
— $ 227,989,218
— $ 227,989,218
— $ 227,989,218
— $ 227,989,218
(1)
(2)
(3)
(4)
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”).
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.
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.
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. [Reserved]
31
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in
conjunction with the Consolidated Financial Statements 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 within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-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 and the factors that could cause actual results to differ materially from those anticipated in the
forward-looking statements. In 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 Company’s Annual Report on Form 10-K for the fiscal year ended
December 25, 2021.
Overview
We are one of the leading suppliers of replacement and upgrade parts in the motor vehicle aftermarket
industry, serving passenger cars, light-, medium-, and heavy-duty trucks, as well as specialty vehicles, including
utility terrain vehicles (UTVs) and all-terrain vehicles (ATVs). As of December 31, 2022, we marketed
approximately 129,000 distinct parts compared to approximately 118,000 as of December 25, 2021, many of
which we designed and engineered. This number excludes private label stock keeping units and other variations
in how we market, package and distribute our products, includes distinct parts of acquired companies and
reflects distinct parts that have been discontinued at the end of their lifecycle. Our products are sold under our
various brand names, under our customers’ private label brands or in bulk. We are one of the leading
aftermarket suppliers of parts that were traditionally available to consumers only from OE 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, exhaust gas recirculation (EGR)
coolers, UTV windshields, and complex electronics modules.
We generate most of our net sales from customers in North America, primarily in the United States. Our
products are sold primarily through aftermarket retailers, including through their online platforms; dealers;
national, regional and local warehouse distributors and specialty markets; and salvage yards. We also distribute
aftermarket 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 as well as our ability and the ability of 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.
Prior to October 4, 2022, we operated on a 52-53-week period ending on the last Saturday of the
calendar year. Our 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 25, 2021 (“fiscal 2021”) and December 26, 2020 (“fiscal 2020”), respectively.
Business Performance Summary
Net sales increased 29% to $1,733.7 million in fiscal 2022 from $1,345.2 million in fiscal 2021. Net
income decreased 8% to $121.5 million in fiscal 2022 from $131.5 million in fiscal 2021. Additionally, in fiscal
2022 we generated cash flows from operations of $41.7 million and repurchased 180,750 common shares under
our share repurchase program for $17.6 million.
32 New Product Development
New product development is an important success factor for us and traditionally has been our primary
vehicle for growth. We have made incremental investments to increase our new product development efforts to
grow our business and strengthen our relationships with our customers. The investments 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 generally have exceeded market growth rates.
In fiscal 2022, we introduced 4,443 new distinct parts to our customers and end-users, including 1,565
“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 OE platforms. New vehicles contain an average of
approximately 50 electronic modules, with some high-end luxury vehicles containing over 100 modules. Our
complex electronics products are designed and developed in-house and tested to help ensure consistent
performance, and our product portfolio is focused on further developing our leadership position in the category.
Another area of focus has been on products we market for the medium- and heavy-duty truck sector of
the motor vehicle aftermarket industry. We believe that this sector provides many of the same opportunities for
growth that the passenger car and light-duty truck sector of the motor vehicle aftermarket industry has provided
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 passenger car and light-duty truck sector. During fiscal 2022, we
introduced 486 distinct parts in this product line. We expect to continue to invest in the medium- and heavy-
duty product category, as evidenced by our acquisition of Dayton Parts in fiscal 2021.
Acquisitions
A key component of our strategy is growth through acquisitions. On October 4, 2022, we acquired
Super ATV, a leading independent supplier to the powersports aftermarket with a family of highly respected
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 serve the
heavy-duty vehicle sector of the aftermarket. See Note 2, Business Acquisitions and 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, among other reasons.
Economic Factors
The 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 Operation
The Company’s products are primarily purchased and installed on a subsegment of the passenger and
light-duty vehicles in operation in the United States (“VIO”), specifically weighted towards vehicles aged 8 to
13 years old. Each year, the United States seasonally adjusted annual rate (“US SAAR”) of new vehicles
purchased adds a new year to the VIO. According to data from the Auto Care Association (“Auto Care”), the
US SAAR experienced a decline from 2008 to 2011 as consumers purchased fewer new vehicles as a result of
the Great Recession of 2008. We believe that the declining US SAAR during that period resulted in a follow-on
decline in our primary VIO subsegment (8 to 13-year-old vehicles) commencing in 2016. However, following
2011 and the impact of the Great Recession of 2008, U.S. consumers began to increase their purchases of new
vehicles which over time caused the US SAAR to recover and return to more historical levels. Consequently,
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.
33 In addition, we believe that vehicle owners generally are operating their current vehicles longer than
they did several years ago, performing necessary repairs and maintenance 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 VIO increased to 12.4 years as of October 2022 from 12.2 years as of October 2021 despite increasing
new car sales.
Miles Driven
The number of miles driven is another important statistic that impacts our business. Generally, as
vehicles are driven more miles, the more likely it is that parts will fail and there will be increased demand for
replacement parts, including our parts. According the U.S. Department of Transportation, the number 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 more 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 transportation.
Brand Protection
We operate in a highly competitive market. As a result, we are continuously evaluating our approach to
brand, pricing and terms to our different customers and channels. For example, 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 Incentives
We 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 attempt to avoid or
minimize these concessions as much as possible, but we have granted pricing concessions, indemnification
rights, extended customer payment terms, and allowed a higher level of product returns in certain cases. These
concessions impact net sales as well as our profit levels and may require additional capital to finance the
business. We expect our customers to continue to exert pressure on our margins.
New Customer Acquisition Costs
We may incur new customer acquisition costs where we incur change-over costs to induce a customer
to switch from a competitor’s brand, including expanding new product lines into our existing customers.
Change-over costs include the costs related to removing the new customer’s inventory and replacing it with our
inventory, which is commonly referred to as a stock lift. New customer acquisition costs are recorded as a
reduction to revenue when incurred.
Product Warranty and Overstock Returns
Many of our products carry a lifetime limited warranty, which generally covers defects in materials or
workmanship and failure to meet specifications. In addition to warranty returns, we also may permit our
customers to return new, undamaged products to us within customer-specific limits if they have overstocked
their inventories. At the time products are sold, we accrue a liability for product warranties and overstock
34 returns as a percentage of sales based upon estimates established using historical information on the nature,
frequency and average cost of the claim and the probability of the customer return. Significant judgments and
estimates must be made and used in connection with establishing the sales returns and other allowances in any
accounting period. Revision to these estimates is made when necessary, based upon changes in these factors.
We regularly study trends of such claims.
Foreign Currency
Our products are purchased from suppliers in the United States and a variety of non-U.S. countries. The
products generally are purchased through purchase orders with the purchase price specified in U.S. dollars.
Accordingly, we generally do not have exposure to fluctuations in the relationship between the U.S. dollar and
various foreign currencies between the time of execution of the purchase order and payment for the product.
To the extent that the U.S. dollar changes in value relative to those foreign currencies in the future, the
prices charged by our suppliers for products under new purchase orders may change in equivalent U.S. dollars.
The largest portion of our overseas purchases comes from China. 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. 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 Costs
We 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 material inflation costs to continue to negatively impact our
results through fiscal 2023, despite recent signs of global supply chain constraints easing, which could lead to
lower ocean freight and commodity costs. We attempt to offset inflationary pressures with cost-saving
initiatives, price increases to customers and the use of alternative suppliers. 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
consequently 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 implementing pricing increases in the
future to recover increased inflationary costs.
Impact of Interest Rates
Our 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 Operations 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.
Impact of Tariffs
In 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 from
35 7.5% 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 Operations
The following table sets forth, for the periods indicated, the dollar value and percentage of net sales
represented by certain items in our Consolidated Statements of Operations:
(in thousands, except percentage data)
December 31, 2022
December 25, 2021
For the Fiscal Year Ended
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Income from operations
Interest expense, net
Other income, net
Income before income taxes
Provision for income taxes
Net income
$
1,733,749
100.0 % $
1,345,249
100.0 %
1,169,299
564,450
393,402
171,048
15,582
(735)
156,201
34,652
67.4 %
32.6 %
22.7 %
9.9 %
0.9 %
0.0 %
9.0 %
2.0 %
882,333
462,916
291,365
171,551
2,162
(377)
169,766
38,234
$
121,549
7.0 % $
131,532
65.6 %
34.4 %
21.7 %
12.8 %
0.2 %
0.0 %
12.6 %
2.8 %
9.8 %
*
Percentage of sales information may not add due to rounding
Fiscal Year Ended December 31, 2022 Compared to Fiscal Year Ended December 25, 2021
Net sales increased 29% to $1,733.7 million in fiscal 2022 from $1,345.2 million in fiscal 2021. The
increase in net sales reflected a full year of results from Dayton Parts, which was acquired in August 2021; a
continuation of favorable underlying industry dynamics across our customer channels; increased new product
launches; price increases to offset inflationary costs; the acquisition of SuperATV in October 2022; and the
benefit of an extra week in fiscal 2022. Year-over-year net sales growth for fiscal 2022 excluding Dayton Parts
and SuperATV was 13.8%.
Gross profit margin was 32.6% of net sales in fiscal 2022 compared to 34.4% of net sales in fiscal 2021.
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 percentage.
Selling, general and administrative expenses were $393.4 million, or 22.7% of net sales, in fiscal 2022
compared to $291.4 million, or 21.7% of net sales, in fiscal 2021. The increase in SG&A as a percentage of net
sales was primarily due to the impact of higher interest rates on our customer accounts receivable factoring
programs and higher amortization of intangible assets resulting from the Dayton Parts acquisition in August
2021 and the SuperATV acquisition in October 2022, partially offset by operating leverage from the increase in
net sales in fiscal 2022 as compared to fiscal 2021. SG&A expenses as a percentage of net sales also increased
as a result of the transaction expenses associated with the acquisition of SuperATV in fiscal 2022.
36
Our effective tax rate decreased to 22.2% in fiscal 2022 from 22.5% in fiscal 2021. The lower effective
tax rate in 2022 was the result of an increase to the acquired Dayton Parts net operating loss deferred tax asset
and favorable provision-to-return items, offset by an increase in state tax expense.
Liquidity and Capital Resources
Historically, our primary sources of liquidity have been our invested cash and the cash flow we generate
from our operations, including accounts receivable sales programs provided by certain customers. Cash and
cash equivalents at December 31, 2022 decreased to $46.0 million from $58.8 million at December 25, 2021.
Working capital was $590.8 million at December 31, 2022 compared to $411.5 million at December 25, 2021.
Shareholders’ equity was $1,042.6 million at December 31, 2022 and $932.7 million at December 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. See Note 10, “Commitments and Contingencies”, in the accompanying
consolidated financial statements for additional information regarding commitments and contingencies that may
affect our liquidity.
Tariffs
Tariffs increase our 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 Programs
Over the past several years, we have continued to extend payment terms to certain customers as a result
of customer requests and market demands. These extended terms have resulted in increased accounts receivable
levels and significant uses of cash. We participate in accounts receivable sales programs with several customers
that allow us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of
these payment term 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 2022 and fiscal 2021, we sold approximately $1,048.7 million and $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 capacity to sell more accounts receivable under these
programs if the needs of the business warranted. Further extensions of customer payment terms would result in
additional uses of cash or increased costs associated with the sales of accounts receivable.
During the years ended December 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 Agreement
On August 10, 2021, in connection with the acquisition of Dayton Parts, we entered into a credit
agreement that provided for a $600.0 million revolving credit facility, including a letter of credit sub-facility of
up to $60 million (the “2021 Facility”). The 2021 Facility replaced our previous $100.0 million revolving credit
facility. The 2021 Facility was scheduled to mature on August 10, 2026, 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.
37 On 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 New
Facility (including the revolving portion of the New Facility) matures on October 4, 2027, is guaranteed by the
Credit Parties and is supported by a security interest in substantially all of the Credit Parties’ personal property
and assets, subject to certain exceptions.
As of December 31, 2022, we were not in default with respect to the New Facility. As of December 31,
2022, there was $239.4 million in outstanding borrowings under the revolver, and $496.9 million in outstanding
borrowings under the term loan portions of the New Facility, and as of such date we had three outstanding
letters of credit for $1.0 million in the aggregate. Net of outstanding borrowings and letters of credit, we had
$362.7 million available under the New Facility at December 31, 2022.
Refer 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 Facility
Cash Flows
Below is a table setting forth the key lines of our Consolidated Statements of Cash Flows:
(in thousands)
Cash provided by operating activities
Cash used in investing activities
Cash provided by financing activities
Effect of foreign exchange on cash and cash equivalents
For the Fiscal Year Ended
December 31, 2022 December 25, 2021
$
41,688 $
100,338
(526,839)
(365,323)
472,496
168,235
(93)
(44)
Net decrease in cash and cash equivalents
$
(12,748) $
(96,794)
During fiscal 2022, cash provided by operating activities was $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 driven by higher inventory purchases to meet demand and
provide safety stock due to global supply chain constraints, partially offset by the benefits of accounts
receivable collections from higher factoring.
Investing activities used $526.8 million and $365.3 million of cash in fiscal 2022 and 2021 respectively.
•
•
•
During fiscal 2022, we used $489.0 million to acquire SuperATV, net of cash acquired,
and during fiscal 2021, we used $345.5 million to acquire Dayton Parts, net of cash
acquired.
Capital spending in fiscal 2022 totaled $37.9 million and primarily consisted of tooling
associated with new products, enhancements and upgrades to our information systems
and infrastructure, scheduled equipment replacements, certain facility improvements
and other capital projects, including the opening of a new leased distribution center in
Whiteland, Indiana.
Capital spending in fiscal 2021 totaled $19.8 million and primarily consisted of tooling
associated with new products, enhancements and upgrades to our information systems
and infrastructure, scheduled equipment replacements, certain facility improvements
and other capital projects.
38
Financing activities provided cash of $472.5 million in fiscal 2022 and used cash of $168.2 million in
fiscal 2021.
•
•
•
During fiscal 2022, we borrowed $500.0 million under the New Facility to help fund
the acquisition of SuperATV in October 2022, and subsequently repaid $3.1 million of
that borrowing in December 2022. Additionally, during fiscal 2022, we paid
$17.6 million to repurchase 180,750 common shares under our share repurchase plan.
During fiscal 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 $61.5
million to repurchase 604,628 common shares under our share repurchase plan.
The remaining uses of cash from financing activities in each period resulted from stock
compensation plan activity and the repurchase of shares of our common stock held in a
fund under our 401(k) Plan. 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 the 401(k)
Plan or elect to leave the 401(k) Plan upon retirement, termination or other reasons.
Off-Balance Sheet Arrangements
Off-balance sheet arrangements are transactions, agreements, or other contractual arrangements with an
unconsolidated entity for which we have an obligation to the entity that is not recorded in our consolidated
financial statements. We historically have not utilized off-balance sheet financial instruments, and currently do
not plan to utilize off-balance sheet arrangements in the future to fund our working capital requirements,
operations or growth plans.
We may issue standby letters of credit under our credit agreement. Letters of credit totaling $1.0 million
were outstanding at December 31, 2022 and $0.8 million were outstanding at December 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.
We 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.
Related-Party Transactions
We have two non-cancelable operating leases for operating facilities from companies in which Steven
L. Berman, our Executive Chairman, and his family members are owners. Total annual rental payments each
year to those companies under the lease arrangements were $2.5 million and $2.3 million in fiscal 2022 and
fiscal 2021, respectively.
We are a partner in a joint venture with one of our suppliers and own minority interest investments in
two other suppliers. Purchases from these companies were $24.9 million and $18.9 million in fiscal 2022 and
fiscal 2021, respectively.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon the
Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted
accounting principles. The preparation of these financial statements requires us to make estimates, judgments
and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities
and the reported amounts of revenues and expenses. 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. The
following areas all require the use of subjective or complex estimates, judgments and assumptions.
39 Revenue Recognition and Accrued Customer 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 an increase of accrued customer rebates and returns, which is
included in current liabilities. Customer Credits are estimated based on contractual provisions, historical
experience, and our assessment of current market conditions. Historically, 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.
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 to understand buying patterns, customer preferences and the life cycle of our products.
Changes in customer requirements are factored into the reserves, as needed.
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 any 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 original estimates. Any
adjustments to fair value assessments are recorded to goodwill over the purchase price allocation period which
cannot exceed twelve months from the date of acquisition. Refer to Note 2 to the Consolidated Financial
Statements for additional information.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.
Our market risk is the potential loss arising from adverse changes in interest rates. Accounts receivable
factored under our customer-sponsored accounts receivable sales programs bear interest at rates tied to 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 customer-sponsored programs to sell accounts receivable, a change in the
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 would
affect the rate at which we could borrow funds thereunder. A one-percentage-point increase in the reference rate
or base rate would have increased our interest expense on our variable rate debt under our credit agreement by
approximately $2.4 million, $1.1 million and $0.3 million in fiscal 2022, fiscal 2021 and fiscal 2020,
respectively.
These estimates assume that our 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 occurs in the future. See ITEM 1A, “Risk
Factors – Risks Related to Our Capital Structure and Finances” for information regarding the risks relating to
our indebtedness, our accounts receivable sales agreements and interest rates.
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 PART
IV –ITEM 15, “Exhibits, Financial Statement Schedules.”
40 Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Dorman Products, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Dorman Products, Inc. and subsidiaries (the
Company) as of December 31, 2022 and December 25, 2021, the related consolidated statements of
operations and comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-
year period ended December 31, 2022, and the related notes and financial statement schedule 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 31, 2022 and December 25, 2021, and
the results of its operations and its cash flows for each of the years in the three-year period ended December 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 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 28, 2023 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are
free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matters
The 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 returns
As 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 defective
41 product returns includes assumptions about the length of time between when a sale occurs and a credit is issued.
The provision for customer credits is reflected in the consolidated financial statements as a reduction from gross
sales and accruals for customer credits are a portion of accrued customer rebates and returns. At December 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 asset
As 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”). 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.
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.
We have served as the Company’s auditor since 2002.
Philadelphia, Pennsylvania
February 28, 2023
/s/ KPMG LLP
42 DORMAN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Income from operations
Interest expense, net
Other income, net
Income before income taxes
Provision for income taxes
Net income
Other comprehensive income:
Change in foreign currency translation adjustment
Comprehensive Income
Earnings per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
$
1,733,749 $
1,345,249 $
1,092,748
1,169,299
564,450
393,402
171,048
15,582
882,333
462,916
291,365
171,551
2,162
(735)
(377)
156,201
34,652
169,766
38,234
121,549 $
131,532 $
709,632
383,116
249,743
133,373
599
(2,962)
135,736
28,866
106,870
(1,863) $
(1,440) $
—
119,686 $
130,092 $
106,870
3.87 $
3.85 $
4.13 $
4.12 $
31,434
31,543
31,810
31,961
3.31
3.30
32,280
32,373
$
$
$
$
$
See accompanying Notes to Consolidated Financial Statements.
43
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of $1,363 and $1,326
Inventories
Prepaids and other current assets
Total current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Other assets
Total assets
Liabilities and shareholders' equity
Current liabilities:
Accounts payable
Accrued compensation
Accrued customer rebates and returns
Revolving credit facility
Current portion of long-term debt
Other accrued liabilities
Total current liabilities
Long-term debt
Long-term operating lease liabilities
Other long-term liabilities
Deferred tax liabilities, net
Commitments and contingencies (Note 10)
Shareholders' equity:
December 31, 2022 December 25, 2021
$
46,034 $
427,385
755,901
39,800
58,782
472,764
531,988
13,048
1,269,120
1,076,582
148,477
109,977
443,035
322,409
114,864
59,029
197,332
178,809
48,768
2,341,786 $
46,503
1,673,119
$
$
179,819 $
19,490
192,116
239,363
12,500
35,007
678,295
482,464
98,221
28,349
11,826
177,389
26,636
188,080
239,360
—
33,583
665,048
—
52,443
4,916
17,976
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
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total shareholders' equity
314
88,750
956,870
(3,303)
1,042,631
316
77,451
856,409
(1,440)
932,736
Total liabilities and shareholders' equity
$
2,341,786 $
1,673,119
See accompanying Notes to Consolidated Financial Statements.
44
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share data)
Common Stock
Shares
Issued
Par
Value
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Balance at December 28, 2019
32,556,263 $
326 $
52,605 $ 720,653 $
— $ 773,584
Exercise of stock options
Compensation expense under
incentive stock plan
Purchase and cancellation of
common stock
Issuance of non-vested stock, net
of cancellations
Other stock-related activity, net of
tax
Net income
Balance at December 26, 2020
Exercise of stock options
Compensation expense under
incentive stock plan
Purchase and cancellation of
common stock
Issuance of non-vested stock, net
of cancellations
Other stock-related activity, net of
tax
Other comprehensive loss
Net income
Exercise of stock options
Compensation expense under
incentive stock plan
Purchase and cancellation of
common stock
Issuance of non-vested stock, net
of cancellations
Other stock-related activity, net of
tax
Other comprehensive loss
Net income
27,787
—
—
—
1,184
7,586
—
—
(462,635)
(5)
(833)
(37,838)
53,572
1
3,462
—
(6,247)
—
32,168,740
41,700
—
—
—
322
—
—
81
—
64,085
2,455
(533)
106,870
789,152
—
8,228
—
(617,080)
(6)
(1,111)
(61,639)
3,261
—
28,914
(14,765)
—
—
18,515
—
—
—
—
—
316
—
—
27,224
(18,851)
—
—
—
—
—
—
(2,636)
—
(1,440)
131,532
856,409
—
131,532
(1,440)
932,736
533
—
—
77,451
1,046
9,370
—
—
2,032
—
(782)
(1,523)
—
—
—
(1,863)
121,549
—
121,549
(203,765)
(2)
(367)
(19,565)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,184
7,586
(38,676)
3,463
(452)
106,870
853,559
2,455
8,228
(62,756)
3,261
(2,103)
(1,440)
1,046
9,370
(19,934)
2,032
(2,305)
(1,863)
Balance at December 25, 2021
31,607,509
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.
45
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to cash provided by operating
activities:
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
$
121,549 $
131,532 $
106,870
Depreciation, amortization and accretion
44,677
35,193
Gain on equity method investment
Provision for doubtful accounts
Benefit from deferred income taxes
Provision for stock-based compensation
Payment of contingent consideration
Changes in assets and liabilities:
Accounts receivable
Inventories
Prepaids and other current assets
Other assets
Accounts payable
Accrued customer rebates and returns
Accrued compensation and other liabilities
Cash provided by operating activities
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired
Property, plant and equipment additions
Cash used in investing activities
Cash Flows from Financing Activities:
Proceeds of revolving credit line
Payments of revolving credit line
Proceeds of long-term debt
Payments of long-term debt
Payment of contingent consideration
Payment of debt issuance costs
Proceeds from exercise of stock options
Purchase and cancellation of common stock
Other stock-related activity
Cash provided by (used in) financing activities
—
86
—
181
(5,880)
(11,970)
9,370
(120)
8,228
(2,418)
48,479
10,918
(133,790)
(153,823)
(11,150)
(28)
(5,542)
2,433
(28,396)
41,688
(2,680)
(5,004)
47,000
31,275
11,906
100,338
(488,956)
(345,483)
(37,883)
(19,840)
(526,839)
(365,323)
10,000
252,360
(10,000)
(13,000)
500,000
(3,125)
(1,705)
(3,918)
1,046
—
—
(7,982)
(4,215)
2,455
(19,934)
(62,649)
132
472,496
1,266
168,235
Effect of exchange rate changes on Cash and Cash Equivalents
(93)
(44)
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Period
(12,748)
(96,794)
58,782
155,576
32,307
(2,498)
316
(9,599)
7,586
—
(67,369)
(12,334)
5,353
(3,975)
25,251
49,849
20,209
151,966
(14,808)
(15,450)
(30,258)
99,000
(99,000)
—
—
—
—
1,184
(38,676)
3,007
(34,485)
—
87,223
68,353
Cash and Cash Equivalents, End of Period
Supplemental Cash Flow Information
Cash paid for interest expense
Cash paid for income taxes
$
$
$
46,034 $
58,782 $
155,576
11,647 $
62,861 $
1,782 $
46,225 $
753
28,341
See accompanying Notes to Consolidated Financial Statements.
46
DORMAN PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022
1. Summary of Significant Accounting Policies
Dorman Products, Inc. ("Dorman", the "Company", “we”, “us”, or “our”) is a supplier of replacement
and upgrade parts in the motor vehicle aftermarket industry, serving passenger cars, light-, medium-, and heavy-
duty trucks as well as specialty vehicles, including utility terrain vehicles (UTVs) and all-terrain vehicles
(ATVs).
Prior to October 4, 2022, we operated on a 52-53-week period ending on the last Saturday of the
calendar year. Our 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 25, 2021 (“fiscal 2021”) and December 26, 2020 (“fiscal 2020”).
Principles of Consolidation. The Consolidated Financial Statements include our accounts and the
accounts of our wholly 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.
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-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 programs 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 2022, fiscal 2021 and fiscal 2020, we sold $1,048.7 million, $935.8 million and $740.0 million,
respectively, under these programs. Selling, general and administrative expenses include factoring costs
associated with these accounts receivable sales 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.
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 the estimated useful lives, which range from 1 to 39 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.
47 Estimated useful lives by major asset category are as follows:
Buildings and building improvements
Machinery, equipment and tooling
Software and computer equipment
Furniture, fixtures and leasehold improvements
10 to 39 years
3 to 10 years
3 to 10 years
1 to 39 years
Long-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. The 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 would no longer be depreciated.
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. For 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
(“Step 0”). If through the Step 0 test we determine it is more likely than not that the fair value of a reporting unit
is less than its carrying amount, then we would perform a quantitative test (“Step 1”) to determine whether an
impairment charge was necessary. During fiscal 2022 and fiscal 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
value of our reporting units were less than their carrying amounts.
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 12 months from the date of acquisition.
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 remanufactured 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 $19.8 million and $20.8 million as of December 31, 2022 and
December 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 Accounting Standards 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.
48 We have investments that we account for according to the equity method of accounting. The total book
value of these investments was $9.4 million at both of December 31, 2022 and December 25, 2021,
respectively. These investments provided $5.5 million, $4.6 million and $1.3 million of income during fiscal
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.
Other Accrued Liabilities. Other accrued liabilities include primarily accrued commissions, accrued
income taxes, insurance liabilities, and other current liabilities.
Revenue Recognition and Accrued Customer 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 an increase of accrued customer rebates and returns, which is
included in current liabilities. 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. 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 contains 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 $24.8 million, $23.1 million and $20.7 million have been recorded in selling, general
and administrative expenses in the Consolidated Statements of Operations for fiscal 2022, fiscal 2021, and fiscal
2020, respectively.
Stock-Based Compensation. At December 31, 2022 and December 25, 2021, we had awards
outstanding under two stock-based employee compensation plans, which are 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 was 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
is determined using the Black-Scholes option valuation model on the grant date.
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 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 being
49 realized 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.
Concentrations 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 that limit the amount that 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 4 largest customers accounted for 69%
and 71% of net accounts receivable as of December 31, 2022 and December 25, 2021, respectively. We
continually monitor the credit terms and credit limits for these and other customers.
In fiscal 2022 and fiscal 2021, approximately 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. Contingent consideration
associated with an acquisition is recorded at fair value at the acquisition date and is adjusted to fair value at each
reporting period.
2. Business Acquisitions and Investments
Super ATV, LLC (“SuperATV”)
On October 4, 2022 (the “Closing Date”), Dorman acquired 100% of the issued and outstanding equity
interests of SuperATV (the “Transaction”), for aggregate consideration of $509.6 million (net of $6.8 million
cash acquired), subject to certain 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 the 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 materially 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.
50 The table below details the fair values of the assets acquired and the liabilities assumed at the
acquisition date:
(in thousands)
Accounts receivable
Inventories
Prepaids and other current assets
Property, plant and equipment
Goodwill
Identifiable intangible assets
Operating lease right-of-use assets
Other Assets
Accounts payable
Accrued compensation
Accrued customer rebates and returns
Other current liabilities
Long-term operating lease liabilities
Other long-term liabilities
Net cash consideration
$
3,317
90,428
5,293
23,776
247,247
157,500
11,661
3,001
(7,436)
(2,086)
(1,609)
(8,726)
(9,508)
(3,307)
509,551
The estimated valuation of the intangible assets acquired, and related amortization periods are as
follows:
(in thousands)
Product portfolio
Trade names
Customer relationships
Total
Fair Value
Amortization
Period (in years)
82,500
48,400
26,600
$
157,500
15
20
15
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 fiscal 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 December 26, 2020, the beginning of the fiscal 2021 period.
51
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 that
time.
(in thousands, unaudited)
Net sales
Net income
Diluted earnings per share
For the Year Ended
December 31, 2022 December 25, 2021
$
$
$
1,888,379 $
1,556,360
130,375 $
143,419
4.13 $
4.49
The fiscal 2022 unaudited pro forma net income set forth above was adjusted to exclude the impact of
acquisition date fair value adjustments to inventory, and to also remove acquisition-related transaction costs.
The 2021 unaudited pro forma net income was adjusted to include the impact of these items.
DPL Holding Corporation (“Dayton Parts”)
On August 10, 2021, we acquired 100% of the equity interests of Dayton Parts, a manufacturer of
chassis and other parts designed to serve the heavy-duty vehicle sector of the aftermarket for a purchase price of
$344.9 million in cash (net of $8.8 million of acquired cash), after certain customary post-acquisition purchase
price adjustments.
The acquisition was funded by cash on hand as well as through the refinancing of our revolving 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.
During the year ended December 25, 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
Inventories
Prepaids and other current assets
Property, plant and equipment
Goodwill
Identifiable intangible assets
Operating lease right-of-use assets
Other assets
Accounts payable
Accrued compensation
Other current liabilities
Long-term operating lease liabilities
Deferred tax liabilities
Net cash consideration
$
23,216
79,625
2,302
29,900
106,816
160,400
21,248
848
(11,970)
(2,784)
(7,604)
(18,444)
(38,665)
$
344,888
52
The estimated valuation of the intangible assets acquired, and related amortization periods are as
follows:
(in thousands)
Customer relationships
Product portfolio
Trade names
Total
Fair Value
$
124,100
25,300
11,000
$
160,400
Amortization
Period (in years)
20
20
10
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 net income of 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 the Dayton Parts
acquisition as if it had occurred as of December 28, 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 that
time.
(in thousands, unaudited)
Net sales
Net income
Diluted earnings per share
For the Year Ended
December 25, 2021 December 26, 2020
$
$
$
1,468,415 $
1,260,077
147,090 $
100,334
4.60 $
3.10
The fiscal 2021 unaudited pro forma net income set forth above was adjusted to exclude the impact 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 purchase
price for PTI was approximately $30.7 million, which included $18.4 million paid for the remaining 60% of the
outstanding stock, subject to customary purchase price adjustments, and $12.3 million which represents the fair
value of the previously 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 26, 2020 from the increase in fair value of the previously owned 40% interest in PTI. We
previously accounted for our 40% interest as an equity-method investment.
The transaction was accounted for as a business combination under the acquisition method of
accounting. Accordingly, the assets acquired, and liabilities assumed were recorded at fair value, with the
remaining purchase price recorded as goodwill.
In connection with this acquisition, we recorded $16.7 million in goodwill, $7.3 million of identified
intangibles, and $6.7 million of other assets, net, consisting of $3.5 million of cash, $2.0 million of accounts
receivable, $5.6 million of inventory, and ($4.4 million) of net other assets and liabilities.
53
Our measurement period adjustments for PTI were complete as of December 26, 2020.
The valuation of the intangible assets acquired and related amortization periods are as follows:
(in thousands)
Customer relationships
Trade names
Technology
Other
Total
Valuation
Amortization
Period
(in years)
$
$
4,600
700
1,800
190
7,290
15
5
8
5
The fair values of the customer relationships and trade names were estimated using an income approach
based on the present value of future cash flows.
The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to
existing automotive aftermarket businesses, the assembled workforce of PTI 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.
3. Inventories
Inventories were as follows:
(in thousands)
Raw materials
Bulk product
Finished product
Packaging materials
Total
4. Property, Plant and Equipment
Property, plant and equipment include the following:
(in thousands)
Buildings
Machinery, equipment and tooling
Furniture, fixtures and leasehold improvements
Software and computer equipment
Total
Less-accumulated depreciation and amortization
Property, plant and equipment, net
December 31, 2022 December 25, 2021
$
34,267 $
234,871
478,032
8,731
12,746
225,879
287,415
5,948
$
755,901 $
531,988
December 31, 2022 December 25, 2021
$
59,980 $
184,184
12,225
100,814
357,203
58,788
146,999
7,303
90,471
303,561
(208,726)
(188,697)
$
148,477 $
114,864
Depreciation and amortization expenses associated with property, plant, and equipment were $28.6
million, $26.3 million, and $26.6 million in fiscal 2022, fiscal 2021, and fiscal 2020, respectively.
5. Leases
We 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 renewal
54
options. 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 Elections
We 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:
(in thousands)
Operating lease expense
Short-term lease expense
Total lease expense
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
$
$
17,340 $
9,549 $
5,838
3,172
23,178 $
12,721 $
7,732
3,647
11,379
Supplemental balance sheet information related to our operating leases is as follows:
(in thousands)
Operating lease right-of-use assets
Other accrued liabilities
Long-term operating lease liabilities
Total operating lease liabilities
Weighted average remaining lease term (years)
Weighted average discount rate
December 31, 2022 December 25, 2021
$
$
$
109,977
15,912
98,221
114,133
$
$
$
59,029
10,065
52,443
62,508
7.76
3.91 %
7.55
3.73 %
55
The following table summarizes the maturities of our lease liabilities for all operating leases as of
December 31, 2022:
(in thousands)
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
6. Goodwill and Intangible Assets
Goodwill
Goodwill included the following:
(in thousands)
Balance at beginning of period
Goodwill acquired
Measurement period adjustments for Dayton acquisition
Foreign currency translation
Balance at end of period
Intangible Assets
December 31, 2022
$
$
19,984
18,714
17,033
16,821
15,611
44,318
132,481
(18,348)
114,133
December 31, 2022 December 25, 2021
$
197,332 $
247,247
—
(1,544)
91,080
108,945
(2,130)
(563)
$
443,035 $
197,332
Intangible assets, subject to amortization, included the following:
Intangible assets subject to
amortization
(dollars in thousands)
Customer relationships
Trade names
Product Portfolio
Technology
Patents and Other
Total
December 31, 2022
December 25, 2021
Weighted
Average
Amortization
Period (years)
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
17.0
17.4
15.6
5.7
9.9
$ 175,430 $
21,643 $ 153,787 $ 149,150 $
12,139 $ 137,011
67,690
107,800
2,167
1,430
6,370
2,953
61,320
104,847
17,760
25,300
820
322
1,347
1,108
2,167
430
2,592
460
15,168
24,840
571
236
1,596
194
$ 354,517 $
32,108 $ 322,409 $ 194,807 $
15,998 $ 178,809
56
Amortization expense associated with intangible assets was $14.2 million, $6.5 million and $3.4 million
in fiscal 2022, fiscal 2021 and fiscal 2020, respectively. The estimated future amortization expense for
intangible assets as of December 31, 2022, is summarized as follows:
(in thousands)
2023
2024
2025
2026
2027
Thereafter
Total
7. Long-Term Debt
$
$
21,740
21,740
21,596
21,418
19,924
215,991
322,409
On August 10, 2021, in connection with the acquisition of Dayton Parts, we entered into a new credit
agreement that provided for a $600 million revolving credit facility, including a letter of credit sub-facility of up
to $60 million (the “2021 Facility”). The 2021 Facility replaced our previous $100 million revolving credit
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 is supported by a security interest in substantially all of the Credit Parties’ personal property and
assets, subject to certain exceptions.
Borrowings under the New 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 the 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 0.125% to 0.250% based on the Total Net
Leverage Ratio (as defined in the New Facility). As of December 31, 2022, the interest rate on the outstanding
borrowings under the New Facility was 5.78% and the commitment fee was 0.15%.
The term loan portion of the New Facility contains mandatory 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
December 31, 2022 through September 24, 2024
December 31, 2024 through September 30, 2025
December 31, 2025 through September 30, 2027
Principal Amortization
Payment Percentage
0.625%
1.250%
1.875%
The New Facility contains affirmative and negative covenants, including, but not limited to, covenants
regarding capital expenditures, share repurchases, and financial covenants related to the ratio of consolidated
interest expense to consolidated EBITDA and the ratio of total net indebtedness to consolidated EBITDA, each
as defined by the New Facility. As of December 31, 2022, we were not in default with respect to the New
Facility.
57
8. Related Party Transactions
We lease our Colmar, PA facility and a portion of our Lewisberry, PA facility from entities in which
Steven L. Berman, our Executive Chairman, and certain of his family members are owners. Each lease is a non-
cancelable operating lease. Total rental payments to those entities under these lease arrangements were $2.5
million, $2.3 million, and $1.8 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively. The lease for our
corporate headquarters in Colmar, PA was renewed during December 2022, effective as of January 1, 2023, and
will expire on December 31, 2027. The lease for our Lewisberry, PA operating facility was signed in September
2020 and will expire on December 31, 2027.
We are a partner in a joint venture with one of our suppliers and own a minority interest in two other
suppliers. Purchases from these companies, and from PTI before our full acquisition on January 2, 2020 were
$24.9 million, $18.9 million and $10.7 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
9. Income Taxes
The components of the income tax provision (benefit) are as follows:
(in thousands)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Total
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
$
31,683 $
43,374 $
7,141
1,708
40,532
(4,003)
(1,022)
(855)
(5,880)
5,755
1,075
50,204
(9,609)
(1,368)
(993)
(11,970)
$
34,652 $
38,234 $
33,698
4,276
491
38,465
(8,475)
(893)
(231)
(9,599)
28,866
The following is a reconciliation of income taxes at the statutory tax rate to the Company's effective tax
rate:
Federal taxes at statutory rate
State taxes, net of federal tax benefit
Research and development tax credit
Federal permanent items
Effect of foreign operations
Other
Effective tax rate
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
21.0 %
21.0 %
21.0 %
2.7
(0.7)
(0.2)
—
(0.6)
2.1
(0.4)
—
(0.2)
—
2.0
(0.6)
(0.2)
0.1
(1.0)
22.2 %
22.5 %
21.3 %
At December 31, 2022, we had $3.9 million of unrecognized tax benefits, all of which would affect our
effective tax rate if recognized.
58
The following table summarizes the change in unrecognized tax benefits for the three years ended
December 31, 2022:
(in thousands)
Balance at beginning of year
Reductions due to lapses in statutes of limitations
Reductions due to tax positions settled
Additions related to positions taken during a prior period
Reductions due to reversals of prior year positions
Additions based on tax positions taken during the current period
Balance at end of year
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
$
1,204 $
(139)
—
2,136
—
655
3,856
1,060 $
—
—
—
(30)
174
1,204
2,301
—
(1,308)
—
(202)
269
1,060
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of
December 31, 2022, accrued interest and penalties related to unrecognized tax benefits were immaterial. The
Company does not anticipate material changes in the amount of unrecognized income tax benefits over the next
year.
Deferred income taxes result from timing differences in the recognition of revenue and expense
between tax and financial statement purposes. The sources of temporary differences are as follows:
(in thousands)
Assets:
Inventories
Accounts receivable
Operating lease liability
Accrued expenses
Net operating losses
Foreign tax credits
State tax credits
Capital loss carryforward
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Liabilities:
Depreciation
Goodwill and intangible assets
Operating lease right of use asset
Other
Gross deferred tax liabilities
Net deferred tax (liabilities) assets
December 31, 2022 December 25, 2021
$
13,662 $
20,446
24,904
12,526
1,285
469
403
481
74,176
(1,377)
72,799
18,132
41,693
23,924
876
84,625
$
(11,826) $
13,689
18,589
14,526
7,515
1,892
469
819
467
57,966
(1,837)
56,129
14,541
45,522
13,733
309
74,105
(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.
59
Based on our history of taxable income and our projection of future earnings, we believe that it is more
likely than not that sufficient taxable income will be generated in the foreseeable future to realize the remaining
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. The statute of
limitations for tax years before 2017 is closed for U.S. federal income tax purposes. The statute of limitations
for tax years before 2018 is closed for the states in which we file. The statute of limitations for tax 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.
10. Commitments and Contingencies
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-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 may 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.
CBP 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.
60 Other 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 the
Company and we believe the range of reasonably possible losses from current matters, taking into account
relevant insurance coverage, is immaterial. 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.
11. Revenue Recognition
Our 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 Elections
We 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.
61 •
•
•
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 Revenue
The following tables present our disaggregated net sales by type of major good / product line, and
geography.
(in thousands)
Powertrain
Chassis
Motor Vehicle Body
Hardware
Net Sales
(in thousands)
Net Sales to U.S. Customers
Net Sales to Non-U.S. Customers
Net Sales
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
$
644,059 $
539,235 $
715,005
314,451
60,234
458,986
288,599
58,429
442,221
324,399
266,699
59,429
$
1,733,749 $
1,345,249 $
1,092,748
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
$
$
1,606,472 $
1,269,050 $
1,031,183
127,277
76,199
61,565
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 Stock
Controlling Interest by Officers, Directors and Family Members. As of December 31, 2022 and
December 25, 2021, Steven Berman, the Executive Chairman of the Company, and members of his family
beneficially owned approximately 17% of the outstanding shares of our common stock, and could influence
matters requiring approval of shareholders, including the election of the Board of Directors and the approval of
significant transactions.
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. Prior 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”), which supersedes our 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 1,200,000 shares of common stock in the form of shares of
restricted stock, restricted stock units, stock appreciation rights and 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. Stock options are exercisable upon the terms set forth in each 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 31, 2022, 599,845 shares were available for grant under the
Plan.
62
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.
Grants were made in the form of time-based RSAs and performance-based RSAs. For all RSAs, we retain the
restricted stock, and any dividends paid thereon, until the vesting restrictions have been met. For time-based
RSAs, compensation cost is recognized on a straight-line basis over the vesting period and is calculated using
the closing price per share of our 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
and is calculated 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
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:
Share price
Expected dividend yield
Expected stock price volatility
Risk-free interest rate
Expected life
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
$
96.36
$
101.45
$
61.68
0.0 %
38.3 %
1.6 %
0.0 %
38.9 %
0.2 %
0.0 %
31.5 %
0.9 %
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 performance-based and time-based RSAs and RSUs was $7.2 million,
$6.1 million and $3.2 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively, and was included in
selling, general and administrative expense in the Consolidated Statements of Operations. No cost was
capitalized during fiscal 2022, fiscal 2021 or fiscal 2020.
63 The following table summarizes our RSA and RSU activity for the three years ended December 31,
2022:
Balance at December 28, 2019
Granted
Vested
Canceled
Balance at December 26, 2020
Granted
Vested
Canceled
Balance at December 25, 2021
Granted
Vested
Canceled
Balance at December 31, 2022
Weighted
Average Fair
Value
Shares
177,491 $
83,875 $
(27,477) $
(16,154) $
217,735 $
76.70
64.66
71.25
76.44
72.77
81,694 $
106.23
(45,970) $
(46,782) $
206,677 $
130,131 $
(55,255) $
(42,631) $
238,922 $
70.62
74.85
85.97
96.32
83.70
85.89
92.07
As of December 31, 2022, there was approximately $13.5 million of unrecognized compensation cost
related to unvested RSAs and RSUs, which is expected to be recognized over a weighted-average period of
approximately 2.3 years.
Cash flows resulting from tax deductions in excess of the tax effect of compensation cost recognized in
the financial statements are classified as operating cash flows. The excess tax benefit generated from RSAs and
RSUs was immaterial for all periods presented.
Stock Options
We grant stock options to certain employees. We expense the grant-date fair value of stock options as
compensation cost over the vesting or performance period. Compensation cost charged against income for stock
options was $1.7 million, $1.3 million and $1.0 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively,
and was included in selling, general and administrative expense in the Consolidated Statements of Operations.
No cost was capitalized during fiscal 2022, fiscal 2021 or fiscal 2020.
We used the Black-Scholes option valuation model to estimate the fair value of stock options granted.
Expected volatility and expected dividend yield are based on the actual historical experience of our common
stock. The expected life represents the period of time that options granted are expected to be outstanding and
was calculated using historical option exercise data. The risk-free rate is based on the U.S. Treasury security
with terms equal to the expected time of exercise as of the grant date.
The following table summarizes the weighted average valuation assumptions used to calculate the fair
value of options granted and the associated weighted-average grant-date fair values:
Expected dividend yield
Expected stock price volatility
Risk-free interest rate
Expected life of options
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
0 %
34 %
1.8 %
5.3 years
0 %
34 %
0.7 %
5.3 years
0 %
29 %
0.8 %
5.3 years
Weighted-average grant-date fair value
$
32.55
$
31.68
$
17.84
64 The following table summarizes our stock option activity for the three years ended December 31, 2022:
Balance at December 28, 2019
Granted
Exercised
Canceled
Balance at December 26, 2020
Granted
Exercised
Canceled
Balance at December 25, 2021
Granted
Exercised
Expired
Canceled
Balance at December 31, 2022
Shares
Option Price
per Share
181,712
$41.59– $82.94
109,352
$61.68 – $83.06
(31,521)
$41.59 – $82.94
(8,764)
$61.68 – $74.21
250,779
$41.59 –$84.93
59,578
$95.98 – $103.61
(67,504)
$41.59 – $82.94
(9,457)
$61.68 –$101.45
233,396
$61.68– $103.61
79,749
$83.81– $111.53
(32,201)
$61.68 – $83.06
(663)
$101.45
(12,162)
$61.68 – $101.45
268,119
$61.68 – $111.53
Exercisable at December 31, 2022
98,600
$61.68 – $103.61
Weighted
Average
Remaining
Terms
(years)
Aggregate
Intrinsic
Value (in
thousands)
Weighted
Average
Price
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
70.78
63.25
50.77
65.24
70.21
101.36
70.04
79.02
77.85
96.96
71.74
101.45
82.19
84.03
76.32
6.2 $
3.9 $
1,572
796
As of December 31, 2022, there was approximately $3.4 million of unrecognized compensation cost
related to unvested stock options, which is expected to be recognized over a weighted-average period of
approximately 2.6 years.
Cash received from option exercises was $1.0 million, $2.5 million, and $1.2 million in fiscal 2022,
fiscal 2021 and fiscal 2020, respectively. The tax benefit generated from option exercises was immaterial for all
periods presented.
Employee Stock Purchase Plan. In May 2017, our shareholders approved the Dorman Products, Inc.
Employee Stock Purchase Plan (the “ESPP”), which makes available 1,000,000 shares of our common stock for
sale to eligible employees. The purpose of 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. Beginning in March 2018, share purchases under the plan were 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 October 2021 was shortened from six months to three months and
ended December 2022. There were 25,600 shares, 40,303 shares and 79,089 shares purchased under this plan
during fiscal 2022, fiscal 2021 and fiscal 2020, respectively. Compensation cost under the ESPP plan was $0.4
million, $0.9 million and $3.3 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively. The tax benefit
generated from ESPP purchases was immaterial in fiscal 2022, fiscal 2021, and fiscal 2020, respectively.
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 the
65
401(k) Plan or elect to leave the 401(k) Plan upon retirement, termination or other reasons. The following table
summarizes the repurchase and cancellation of common stock:
Shares repurchased and canceled
Total cost of shares repurchased and canceled (in thousands)
Average price per share
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
23,015
2,357 $
102.40 $
11,452
1,172 $
102.38 $
23,360
1,895
81.12
$
$
At December 31, 2022, the 401(k) Plan held 160,901 shares of our common stock.
Share Repurchase Program. Our Board of Directors has authorized a share repurchase program.
Through several actions, including expansions and extensions, the Board has authorized the repurchase of up to
$600 million of our outstanding common stock 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. At December 31, 2022, $228.0 million was available for repurchase under this
program.
The following table summarizes the repurchase and cancellation of common stock:
Shares repurchased and canceled
Total cost of shares repurchased and canceled (in thousands)
Average price per share
For the Years Ended
December 31, 2022 December 25, 2021 December 26, 2020
180,750
605,628
$
$
17,577 $
97.24 $
61,583 $
101.68 $
439,275
36,781
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 2022, fiscal 2021 and fiscal 2020, respectively.
13. Earnings Per Share
Basic earnings per share was calculated by dividing our net income by the weighted average number of
common shares outstanding during the period, excluding unvested RSAs which are 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 63,500 shares, 14,250 shares and 35,975 shares were excluded from the calculation of diluted
earnings per share for fiscal 2022, fiscal 2021 and fiscal 2020, respectively, as their effect would have been anti-
dilutive.
66 The following table sets forth the computation of basic earnings per share and diluted earnings per
share:
(in thousands, except per share data)
December 31, 2022 December 25, 2021 December 26, 2020
For the Year Ended
Numerator:
Net income
Denominator:
Weighted average basic shares outstanding
Effect of compensation awards
Weighted average diluted shares outstanding
Earnings Per Share:
Basic
Diluted
14. Business Segments
$
121,549 $
131,532 $
106,870
31,434
109
31,543
31,810
151
31,961
$
$
3.87 $
3.85 $
4.13 $
4.12 $
32,280
93
32,373
3.31
3.30
We have determined that our business comprises a single reportable operating segment, namely, the
sale of replacement and upgrade parts in the motor vehicle aftermarket industry, serving passenger cars, light-,
medium-, and 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 2022, fiscal 2021 and fiscal 2020 were $127.3 million,
$76.2 million and $61.6 million, respectively.
Net long-lived assets outside the United States, consisting of net property, plant and equipment was
$3.6 million and $1.0 million as of December 31, 2022 and December 25, 2021, respectively.
67 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None
ITEM 9A. Controls and Procedures.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that
information required to be disclosed in reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the 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.
On October 4, 2022, we completed our acquisition of Super ATV, LLC (“SuperATV”). We are in the
process of evaluating the existing controls and procedures of SuperATV and integrating SuperATV 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 date on which the acquisition is completed, we have excluded
SuperATV from our assessment of the effectiveness of internal control over financial reporting as of December
31, 2022. SuperATV represented approximately 23% of the Company’s consolidated total assets as of
December 31, 2022, and approximately 3% of the Company’s consolidated net sales for the year ended
December 31, 2022. Refer to Note 2 to the Consolidated Financial Statements for additional information.
Management's Report on Internal Control Over Financial Reporting
Our 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 our Chief
Executive Officer and Chief Financial Officer, conducted an evaluation, as of December 31, 2022, 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. Based on this evaluation, management concluded that our internal control over financial reporting
was effective as of December 31, 2022.
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 Reporting
Except for the acquisition of SuperATV noted above, there was no change in our internal control over
financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter
ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
68 Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Dorman Products, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Dorman Products, Inc. and subsidiaries' (the Company) internal control over financial
reporting as of December 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 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 31, 2022 and
December 25, 2021, the related consolidated statements of operations and comprehensive income, shareholders’
equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the
related notes and financial statement schedule II (collectively, the consolidated financial statements), and our
report dated February 28, 2023 expressed an unqualified opinion on those consolidated financial
statements.
The Company acquired Super ATV, LLC during 2022, and management excluded from its assessment of the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, Super ATV,
LLC’s internal control over financial reporting associated with approximately 23% of consolidated total
assets and approximately 3% of consolidated net sales included in the consolidated financial statements of
the Company as of and for the year ended December 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 Super
ATV, LLC.
Basis for Opinion
The 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'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.
Definition and Limitations of Internal Control Over Financial Reporting
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 financial
69 reporting 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 reasonable 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.
Because 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 LLP
Philadelphia, Pennsylvania
February 28, 2023
70 ITEM 9B. Other 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.
None
71 ITEM 10. Directors, Executive Officers and Corporate Governance.
PART III
Except for the information provided in PART I – ITEM 4.1, “Executive Officers of the Registrant” and
as set forth below, the required information is incorporated by reference from our definitive proxy statement for
our 2023 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.”
We have adopted a written code of ethics, the “Dorman Products, Inc. Code of Ethics and Business
Conduct” that is applicable to our directors, officers and 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
(the “Code”). Each of these codes is posted on our website www.DormanProducts.com. Dorman will provide to
any person without charge, upon request, a copy of the Code. Requests for copies of the Code should be
directed to: Attn: Secretary, Dorman Products, Inc., 3400 East Walnut Street, Colmar, PA 18915. We intend to
disclose any changes in or waivers from the Code on our website at 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 2023
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.”
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 2023 Annual Meeting of Shareholders, including, but not necessarily
limited to, the section entitled “Security Ownership of Certain Beneficial Owners and Management – Security
Ownership Table.”
Equity Compensation Plan Information
The following table details information regarding our existing equity compensation plans as of
December 31, 2022:
(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))
84,322 $
166,457 $
—
—
250,779
71.31
69.69
—
—
—
—
853,471
878,536
—
1,732,007
Plan Category
Equity compensation plans approved by security holders
2008 Stock Option and Stock Incentive Plan
2018 Stock Option and Stock Incentive Plan
Dorman Products, Inc. Employee Stock Purchase Plan
Equity compensation plans not approved by security holders
Total
72 ITEM 13. Certain Relationships and Related Transactions, and Director Independence.
The required information is incorporated by reference from our definitive proxy statement for our 2023
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 2023
Annual Meeting of Shareholders, including, but not necessarily limited to, the sections entitled “Principal
Accountant Fees and Services” and “Pre-Approval Policies and Procedures.”
73 ITEM 15. Exhibits, Financial Statement Schedules.
PART IV
(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 (PCAOB ID: 185).
Consolidated Statements of Operations for the fiscal years ended December 31, 2022,
December 25, 2021 and December 26, 2020.
Consolidated Balance Sheets as of December 31, 2022 and December 25, 2021.
Consolidated Statements of Shareholders' Equity for the fiscal years ended December 31, 2022,
December 25, 2021 and December 26, 2020.
Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2022,
December 25, 2021, and December 26, 2020.
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:
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 Summary
None
Number
Title
2.1
2.1.1
2.1.2
3.1
3.2
Agreement and Plan of Merger, dated June 25, 2021, by and among Dorman Products, Inc.,
Senators Merger Sub, Inc., DPL Holding Corporation and SBF II Representative Corp., solely
in its capacity as Equityholder Representative. Incorporated by reference to Exhibit 2.1 to the
company’s Current Report on Form 8-K filed on June 28, 2021.
Unit Purchase Agreement, dated August 17, 2022, by and among Dorman Products, Inc., Super
ATV, LLC, the Sellers listed on the signature pages thereto, and Lindsay Hunt, in her capacity
as the Sellers’ Representative. Incorporated by reference to Exhibit 2.1 to the Company’s
Current Report on Form 8-K filed on August 18, 2022. +
Amendment, dated as of October 4, 2022 to Unit Purchase Agreement, dated August 17, 2022,
by and among Dorman Products, Inc., Super ATV, LLC, the Sellers listed on the signature
pages thereto, and Lindsay Hunt, in her capacity as the Sellers’ Representative. Incorporated by
reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 4,
2022 . +
Amended and Restated Articles of Incorporation, as amended. Incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 19, 2017.
Dorman Products, Inc. Amended and Restated By-Laws, as amended February 23, 2023.*
74 Number
4.1
Title
Specimen Common Stock Certificate of the Company. Incorporated by reference to Exhibit 4.1
to the Company’s Registration Statement on Form S-8 (Registration No. 333-160979).
4.2
4.3
10.1
10.2
10.3
10.4†
10.4.1†
10.4.2†
10.4.3†
10.4.4†
10.4.5†
10.5†
10.5.1†
Amended and Restated Shareholders' Agreement dated as of July 1, 2006. Incorporated by
reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter
ended September 27, 2008.
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities
Exchange Act of 1934. Incorporated by reference to Exhibit 4.3 to the Company’s Current
Report on Form 10-K filed on February 22, 2021.
Credit Agreement dated as of December 7, 2017, by and between the Company and Wells
Fargo Bank, National Association. Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on December 8, 2017.
Credit Agreement, dated August 10, 2021 by and among Dorman Products, Inc., the lenders
from time to time party thereto, and Bank of American, N.A., as administrative agent.
Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
on August 10, 2021.
Amendment No. 1 to Credit Agreement, dated October 4, 2022 by and among Dorman
Products, Inc., the lenders from time to time party thereto, and Bank of America, N.A., as
administrative agent. Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on October 4, 2022. +
Dorman Products, Inc. 2008 Stock Option and Stock Incentive Plan. Incorporated by reference
to Exhibit 10.1 to the Company’s Registration Statement on Form S-8 (Registration No.
333-160979).
Form of Incentive Stock Option Agreement pursuant to the Dorman Products, Inc. 2008 Stock
Option and Stock Incentive Plan. Incorporated by reference to Exhibit 10.1 to the Company’s
Registration Statement on Form S-8 (Registration No. 333-160979).
Form of Non-Qualified Stock Option Agreement for Officers and Other Key Employees
pursuant to the Dorman Products, Inc. 2008 Stock Option and Stock Incentive Plan.
Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form
S-8 (Registration No. 333-160979).
Form of Restricted Stock Agreement pursuant to the Dorman Products, Inc. 2008 Stock Option
and Stock Incentive Plan. Incorporated by reference to Exhibit 10.1 to the Company’s
Registration Statement on Form S-8 (Registration No. 333-160979).
Amendment No. 1 to the Dorman Products, Inc. 2008 Stock Option and Stock Incentive Plan.
Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q
for the quarter ended September 28, 2013.
Amendment No. 2 to the Dorman Products, Inc. 2008 Stock Option Plan and Stock Incentive
Plan. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed on May 20, 2014.
Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan. Incorporated by reference
to Exhibit A of the Company’s Definitive Proxy Statement filed on Schedule 14A on March
22, 2018.
Form of Non-Qualified Stock Option Award for grants under the Dorman Products, Inc. 2018
Stock Option and Stock Incentive Plan. Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on May 14, 2018.
75 Number
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†
10.7†
10.8†
Form of Incentive Stock Option Award for grants under the Dorman Products, Inc. 2018 Stock
Option and Stock Incentive Plan. Incorporated by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed on May 14, 2018.
Form of Restricted Stock Award for grants under the Dorman Products, Inc. 2018 Stock
Option and Stock Incentive Plan. Incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K filed on May 14, 2018.
Form of 2019 Chief Executive Officer Restricted Stock Award Agreement under the Dorman
Products, Inc. 2018 Stock Option and Stock Incentive Plan. Incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 25, 2019.
Form of Dorman Products, Inc. Non-Qualified Stock Option Award Pursuant to the Dorman
Products, Inc. 2018 Stock Option and Stock Incentive Plan. Incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 2, 2020.
Form of Dorman Products, Inc. Restricted Stock Unit Award Pursuant to the Dorman Products,
Inc. 2018 Stock Option and Stock Incentive Plan. Incorporated by reference to Exhibit 10.2 to
the Company’s Current Report on Form 8-K filed on March 2, 2020.
Form of Dorman Products, Inc. Performance Restricted Stock Unit Award Pursuant to the
Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan. Incorporated by reference
to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 2, 2020.
Form of Dorman Products, Inc. Restricted Stock Unit Award for Non-Employee Directors
Pursuant to the Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan.
Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 10-Q for
the quarter ended June 27, 2020.
Amended Form of Dorman Products, Inc. Non-Qualified Stock Option Award Pursuant to the
Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan.*
Amended Form of Dorman Products, Inc. Restricted Stock Unit Award Pursuant to the
Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan.*
Amended Form of Dorman Products, Inc. Performance Restricted Stock Unit Award Pursuant
to the Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan.*
CEO Amended Form of Dorman Products, Inc. Non-Qualified Stock Option Award Pursuant
to the Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan.*
CEO Amended Form of Dorman Products, Inc. Restricted Stock Unit Award Pursuant to the
Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan.*
CEO Amended Form of Dorman Products, Inc. Performance Restricted Stock Unit Award
Pursuant to the Dorman Products, Inc. 2018 Stock Option and Stock Incentive Plan.*
Dorman Products, Inc. Nonqualified Deferred Compensation Plan. Incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 11, 2011.
Dorman Products, Inc. 2018 Cash Bonus Plan. Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on March 22, 2018.
Amended and Restated Employment Agreement, dated December 28, 2015, between the
Company and Steven Berman. Incorporated by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed on December 28, 2015.
76 Number
Title
10.9†
10.10†
10.11†
10.12†
10.13†
10.14†
21
23
31.1
31.2
32
101
Amended and Restated Employment Agreement between the Company and Kevin M. Olsen
dated December 13, 2021. Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on December 13, 2021.
Offer Letter, dated January 24, 2019, between the Company and David Hession. Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February
19, 2019.
Offer Letter, dated April 8, 2019, between the Company and Joseph P. Braun. Incorporated by
reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year
ended December 28, 2019.
Dorman Products, Inc. Executive Severance Plan. Incorporated by reference to Exhibit 10.2 to
the Company’s Current Report on Form 8-K filed on December 13, 2021.
Non-Disclosure, Invention Assignment and Restrictive Covenant Agreement – Michael B.
Kealey.
Transition and Release Agreement dated February 23, 2023 between the Company and Steven
L. Berman. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on February 24, 2023.
Subsidiaries of the Company.
Consent of Independent Registered Public Accounting Firm.
Certification of Chief Executive Officer as required by Section 302 of the Sarbanes-Oxley Act
of 2002.
Certification of Chief Financial Officer as required by Section 302 of the Sarbanes-Oxley Act
of 2002.
Certification of Chief Executive and Chief Financial Officer as required by Section 906 of the
Sarbanes-Oxley Act of 2002.
The financial statements from the Dorman Products, Inc. Annual Report on Form 10-K for the
year ended December 31, 2022, formatted Inline XBRL (eXtensible Business Reporting
Language): (i) the Consolidated Statements of Operations for the years ended December 31,
2022, December 25, 2021, and December 26, 2020; (ii) the Consolidated Balance Sheets as of
December 31, 2022 and December 25, 2021; (iii) the Consolidated Statements of Shareholders’
Equity for the years ended December 31, 2022, December 25, 2021, and December 26, 2020;
(iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2022,
December 25, 2021, and December 26, 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
+ The schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The
Company agrees to furnish a copy of such schedules and exhibits, or any section thereof, to the SEC
upon request
77 Pursuant 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.
SIGNATURES
Date: February 28, 2023
Dorman Products, Inc.
By: /s/ Kevin M. Olsen
Kevin M. Olsen
President and Chief Executive Officer
Pursuant 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.
Signature
Title
/s/ Kevin M. Olsen
Kevin M. Olsen
President, Chief Executive Officer and Director
(principal executive officer)
Date
February 28, 2023
/s/ David M. Hession
David M. Hession
/s/ Steven L. Berman
Steven L. Berman
/s/ Lisa M. Bachmann
Lisa M. Bachmann
/s/ John J. Gavin
John J. Gavin
/s/ Richard T. Riley
Richard T. Riley
/s/ Kelly A. Romano
Kelly A. Romano
/s/ G. Michael Stakias
G. Michael Stakias
/s/ J. Darrell Thomas
J. Darrell Thomas
Senior Vice President, Chief Financial Officer and
Treasurer
(principal financial and accounting officer)
February 28, 2023
Executive Chairman
February 28, 2023
Director
Director
Director
Director
Director
Director
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
78 SCHEDULE II: Valuation and Qualifying Accounts
(in thousands)
Allowance for doubtful accounts:
Balance, beginning of period
Provision
Charge-offs
Acquisitions and other
Balance, end of period
Allowance for customer credits:
Balance, beginning of period
Provision
Charge-offs
Balance, end of period
For the Year Ended
December 31, 2022 December 25, 2021 December 26, 2020
$
1,326 $
1,260 $
56
(19)
—
177
(111)
—
1,363 $
1,326 $
957
315
(111)
99
1,260
188,080 $
155,751 $
373,157
334,615
105,950
308,783
(369,121)
(302,286)
(258,982)
$
192,116 $
188,080 $
155,751
$
$
79
NON-GAAP FINANCIAL MEASURES
This Annual Report includes adjusted diluted earnings per share and free cash flow, each a “non-GAAP financial measure” as defined
under the rules of the Securities and Exchange Commission. These non-GAAP financial measures should not be used as a substitute for
measures in accordance with generally accepted accounting principles ("GAAP"), or considered in isolation, for the purpose of analyzing
our cash flows or results of operations. Additionally, these non-GAAP financial measures may not be comparable to similarly titled
measures reported by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP
financial measures follow.
Adjusted Diluted Earnings Per Share:
Diluted earnings per share (GAAP)
Pretax acquisition-related intangible assets amortization [1]
Pretax acquisition-related transaction and other costs [2]
Pretax (gain) loss on equity method investment [3]
Pretax noncash impairment related to equity method investment [4]
Tax adjustment (related to above items) [5]
Discrete tax adjustments [6]
Adjusted diluted earnings per share (Non-GAAP)*
*Amounts may not add due to rounding
2022
Fiscal Year Ended
2020
2021
2019
2018
$
$
$
$
$
3.85
0.45
0.72
-
-
(0.27)
-
4.76
4.12
0.20
0.47
-
-
(0.14)
-
4.64
3.30
0.10
0.14
(0.08)
0.06
(0.06)
(0.03)
3.45
2.56
0.08
0.04
-
-
(0.03)
-
2.65
4.02
0.06
0.14
0.03
-
(0.05)
(0.01)
4.20
$
$
$
$
$
[1] – Pretax acquisition-related intangible asset amortization results from allocating the purchase price of acquisitions to the acquired tangible and intangible assets of the
acquired business and recognizing the cost of the intangible asset over the period of benefit.
[2] – Pretax acquisition-related transaction and other costs include costs incurred to complete and integrate acquisitions, adjustments to contingent consideration
obligations, inventory fair value adjustments and facility consolidation expenses.
[3] – Pretax (gain) loss on equity method investment results from the acquisition of the remaining outstanding shares of a previously unconsolidated entity. The
estimated fair value of the net assets acquired was either higher or lower than the carry value of our prior investment in the entity.
[4] – Pretax noncash impairment related to equity method investment represents our share of an impairment recognized by an equity investment investee.
[5] – Tax adjustments represent the aggregate tax effect of all Non-GAAP adjustments reflected in the table above.
[6] – Discrete tax adjustments include the impact of changes in tax legislation (e.g., Tax Cuts and Jobs Act of 2017).
Free Cash Flow:
($ thousands)
Cash provided by operating activities (GAAP)
Less: capital expenditures
Free cash flow (non-GAAP)
$
2022
41,688
(37,883)
3,805
$
Fiscal Year Ended
2020
151,966
(15,450)
136,516
2021
100,338
(19,840)
80,498
$
$
2019
95,306
$
(29,560)
$
65,746
$
$
2018
78,112
(26,106)
52,006
$
$
EXECUTIVE
MANAGEMENT
BOARD OF
DIRECTORS
Kevin M. Olsen
President & CEO
David M. Hession
Senior Vice President & CFO
Joseph P. Braun
Senior Vice President, General Counsel
Jeffrey L. Darby
Senior Vice President, Sales and Marketing
Lindsay Hunt
President & CEO, Specialty Vehicles
Scott D. Leff
Senior Vice President, CHRO
Donna M. Long
Senior Vice President & CIO
Eric B. Luftig
Senior Vice President, Product
John McKnight
President, Heavy Duty
Steven L. Berman
Non-Executive Chairman
Kevin M. Olsen
Director
President & Chief Executive Officer
Lisa M. Bachmann
Director
Former Executive VP, Big Lots, Inc.
John J. Gavin
Director
Chairman of GMS Inc.
Richard T. Riley
Director
Retired Executive Chairman, LoJack Corporation
Kelly A. Romano
Director
Founder & CEO, BlueRipple Capital, LLC
G. Michael Stakias
Director
President & CEO, Liberty Partners
J. Darrell Thomas
Director
Retired VP & Treasurer, Harley-Davidson, Inc.
SHAREHOLDER INFORMATION
Stock Listing:
The common stock of Dorman Products, Inc. is
traded on the Nasdaq Global Select Market under the
symbol DORM.
Auditors:
KPMG LLP, 1601 Market Street,
Philadelphia, PA 19103
Number of Shareholders:
At March 22, 2023, there were 294 holders of record
of our common stock.
Transfer Agent:
Computershare
Website: www.computershare.com
E-mail Inquiries: web.queries@computershare.com
Telephone Inquiries:
1-800-736-3001 option 1 (U.S. callers)
1-781-575-3100 option 1 (non-U.S. callers)
Written Inquiries:
Computershare, P.O. Box 43006,
Providence, RI 02940 (Regular Mail)
Computershare, 150 Royall Street, Suite 101,
Canton, MA 02021 (Overnight Delivery)
Investor Relations:
Michael P. Dickerson, Vice President, Investor
Relations & Risk Management
mdickerson@dormanproducts.com
517-667-4003
investors.dormanproducts.com
Recent financial data, press releases, reports filed
with the U.S. Securities and Exchange Commission,
corporate governance documents and historical information
are available on the Dorman investor home page located at
investors.dormanproducts.com.
If you wish to be added to our e-mail list, visit our investor
home page or contact Investor Relations.
WWW.DORMANPRODUCTS.COM2022 ANNUAL REPORT
www.DormanProducts.comDorman Products, Inc. | 3400 East Walnut Street | Colmar, PA 18915 Corporate Office and Customer Service: 1-800-523-2492 ©2023 No reproduction in whole or in part without prior written approval.