What changed in this filing

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Item 1A. Risk Factors

2025-02-27 compared with 2024-02-28 · 124 added, 100 removed, 277 unchanged (45% of the section changed)

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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 motor vehicle aftermarket industry has been negatively impacted by the fact that the quality of certain motor vehicles and their component parts (and related warranties) has improved, thereby lengthening the repair cycle.

We believe the motor vehicle aftermarket industry has been negatively

impacted by the fact that the quality of certain 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 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.

These factors could have a material adverse effect on 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 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.

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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.

Some of our competitors may have larger customer bases and greater financial, technical, and marketing resources than we do.

These factors may allow our competitors to:

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A significant percentage of our sales has been, and is expected to be, concentrated among a relatively small number of customers.

During fiscal 2023, three customers each accounted for more than 10% of net sales and in the aggregate accounted for approximately 44% of net sales.

During 2024, two customers each accounted for more than 10% of net sales and in the aggregate accounted for approximately 39% of net sales.

We anticipate that this concentration of sales among these customers will continue in the future.

The loss of a significant customer, changes in customer buying behaviors or a substantial decrease in sales to such a customer could have a material adverse effect on

our sales and operating results.

The loss of a significant customer, changes in customer buying behaviors, 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.

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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.

In addition, given the size and scale of some of our customers, there is a risk that they may establish and grow direct relationships with our suppliers and reduce their purchases or cease purchasing from us.

In addition, given the size and scale of some of our customers, there is a risk that they may establish and grow direct relationships with our suppliers or other suppliers in the marketplace and reduce

their purchases or cease purchasing from us.

A decision by any significant customer, whether motivated by competitive conditions, financial difficulties, or otherwise, to materially decrease the amount of products purchased from us or the number of our product lines they choose to carry, to change their manner of doing business with us, or to stop doing business with us, could have a material adverse effect on our business, financial condition, and results of operations.

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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.

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

This is the result of several industry trends, including the consolidated purchasing power of large customers, the growth of e-commerce, and actions taken by some of our competitors to attract new business, including efforts to enhance their online presence.

In addition, some of our competitors may source their products from countries with more favorable U.S.

tariff and trade treatment than the countries from which we source our products, enabling those competitors to offer lower prices than we do.

Price reductions may be required to remain competitive, 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, and to increase prices to address increasing costs, including costs such as tariffs that are outside of our control.

In addition, our future profitability will depend in part upon our ability 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 who resell our products to expand into new locations may adversely affect our ability to grow.

Because the amount of space available to a retailer and other resellers 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 those retailers and resellers 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 their existing locations or that they 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 retailers and resellers to maintain and/or grow their number of locations, could have a material adverse effect on our business, financial condition and results of operations.

The inability of our customers to grow their businesses and compete effectively may adversely affect our business.

Our products are sold primarily to aftermarket retailers;

national, regional, and local wholesale distributors;

professional installers;

specialty markets;

and salvage yards.

The growth of our business depends, in part, on the ability of our customers to grow their businesses and compete effectively in their respective markets.

If our customers are unable to grow while maintaining or improving their competitive position, it could adversely affect their demand for our products and services.

Factors that could impact our customers' growth and competitiveness include:

• Technological Changes :

Technological advancements and the complexity of motor vehicles may render our customers less competitive if they do not make adequate investments in their businesses, including, but not limited to, investments in training and tools;

• Competitive Pressures :

Increased competition from existing or new market entrants (e.g., the growth of e-commerce) could erode our customers' market share, impacting their business performance and, consequently, their demand for our products;

• Shelf Space Limitations :

The amount of space available to retailers and other resellers of our products is limited, and, therefore, 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.

The failure of our customers to increase shelf space or grow in new locations may adversely impact their demand for our products.

If our customers are unable to grow their businesses and compete effectively, it could lead to reduced sales, increased credit risk, and potential loss of business for those customers, which 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 non-end user customers have grown larger and therefore have more leverage

in the arms-length negotiations of agreements with us for the sale of our products.

As a result of such consolidations, many of our non-end user customers have grown larger and therefore have more leverage in negotiating agreements to buy products from us.

Such 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 for those customers payment terms have been extended, enhanced credits have been issued and returns of product have exceeded historical levels.

Although we attempt to avoid or minimize such concessions, in some cases customer payment terms have been extended, enhanced 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.

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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.

If these markets do not expand or if they 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.

If these markets do not expand or if they 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 these markets, we may fail to achieve future growth or our sales could decrease, which could have a material adverse effect on our business, financial condition, and results of operations.

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.

We must maintain sufficient in-stock inventory and anticipate future changes in customer demands 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 .

Fluctuations in demand may result from several factors, including, but not limited to, global economic conditions, global pandemics, 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 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.

If we cannot accurately forecast future reductions in demand, we may accumulate excess or obsolete inventory and be forced to reduce hours or lay off or furlough employees.

Conversely, if we cannot accurately forecast 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 because 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 new, 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.

We accrue for overstock returns as a percentage of net sales, after considering 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.

To the extent that overstocked returns materially exceed 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 cannot manage our supply chain effectively.

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 motor vehicle industry previously experienced a shortage in the supply of semiconductors.

We utilize semiconductors in our products and have at times encountered material shortages in semiconductor supply.

If such a shortage were to occur again and if we were 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.

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 risks, including, but not limited to, availability and cost of raw materials, political instability, new regulations or tariffs, military conflict, destruction of their facilities caused by natural and other disasters, work stoppages, and health crises.

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.

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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 production delays or increased expenses, which could result in inventory shortages or 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, 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, logistics costs and transit times for product from our suppliers were adversely impacted during 2023 by drought conditions in the Panama Canal and disruptive conflict around the Suez Canal, resulting in changes to our shipping routes and increased shipping costs.

To the extent we enter into long-term agreements with 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.

Furthermore, the replacement of a key supplier or transitioning to a new supplier in a different geography may result in production delays, product quality issues, or increased expenses, which could result in inventory shortages or 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 logistics providers, which are important in the manufacture and transport of our products.

We depend upon third-party logistics providers, such as ocean freight, port operators, railroad, and trucking carriers, for shipments to and from our suppliers and for delivery of our products to us and our customers.

Our access to third-party logistics providers is not guaranteed, and, even if we have access to logistics 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 logistics providers and other events impacting transportation capacity and costs, such as strikes, political events, international trade disputes, war, terrorism, natural disasters, adverse weather conditions, congestion, increases in fuel prices, public health issues, including pandemics, and other events, may impact the availability of third-party logistics providers to ship our products or the cost to ship our products.

For example, logistics costs and transit times for product from our suppliers were adversely impacted during 2024 by disruptive conflict around the Suez Canal, resulting in changes to our shipping routes and increased shipping costs.

To the extent we enter into long-term agreements with logistics providers, our forecasts of expected capacity needed in future periods may be inaccurate because of unforeseen fluctuations in demand for these logistics 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 unfavorability 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.

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 logistics 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, 2023 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.

For example, while inflation declined in 2024, we experienced broad-based inflationary impacts during the year ended December 31, 2023 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 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.

Such initiatives, however, may not provide immediate relief from such pressures.

For example, in 2023 we implemented pass-through price increases to offset inflationary cost impacts, but, given the amount of time necessary to implement those increases, there was a lag effect to the full recovery of these costs.

Furthermore, in general, 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.

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Changes in U.S.

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

In fiscal 2023, approximately 70% of our products were purchased from suppliers in a variety of non-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.

trade policy, including the imposition and enforcement of tariffs and the resulting consequences, could adversely affect our results of operations.

In 2024, approximately 72% of our products were purchased from suppliers in a variety of non-U.S.

government’s trade policy with countries where we source or sell our products may change based on several factors, including, but not limited to, political and economic factors.

The new political administration in the United States has signaled an intention to use tariffs more robustly in pursuing government policy and has already implemented some new tariffs.

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.

government has imposed tariffs on certain foreign goods, including steel and aluminum, and on certain vehicle parts, which have resulted in increased costs for goods imported into the United States.

When increases are made to U.S.

duty rates or tariffs, reciprocal action by other countries sometimes occurs, and any such increases could impact the price of our products and cause a decline in the demand for our 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.

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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.

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.

We have in the past, and expect to continue to, incur significant costs to comply with trade laws imposing tariffs on products imported into the U.S.

However, our competitors may not comply and may engage in transshipping to avoid tariffs and import competing products at lower costs than ours.

If illegal transshipments are not monitored and enforcement is not effective to limit them, these shipments could have a material adverse effect on our business, financial condition, and results of operations.

In addition to duties and tariffs, any actions taken by the United States or by foreign countries to further implement trade policy changes, including limiting foreign investment or trade, increasing regulatory requirements, or other actions that impact our ability to obtain necessary licenses or approvals could negatively impact our business.

These actions are unpredictable, and any of them could also have a material adverse effect on global economic conditions and the stability of global financial markets, significantly reduce global trade, restrict our access to suppliers or customers, and have a material adverse effect on 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 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.

For example, 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 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.

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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.

Further, in the event any members of our workforce, or those of our suppliers, become sick because 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.

Product Development, Acceptance and Quality

The duration of the disruption to our customers, our supply chain, and our employees, and the related financial and operational impacts to us, because of any such pandemic, cannot be estimated at this time.

such disruption continue for an extended period, the impact could have a material adverse effect on our business, results of operations, and financial condition.

Product Development, Acceptance, Quality, and Regulations

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.

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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.

There is no guarantee that our new products or product enhancements 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.

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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.

Investments in artificial intelligence (“AI”) also may impact our ability to develop new products.

If we fail to invest in or utilize AI capabilities in our product development activities, or if our competitors adopt or use such AI capabilities more effectively in developing their own new products, 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.

The motor vehicle aftermarket industry is experiencing a period of significant technological change because 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.

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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.

This in turn could limit our customers' ability to service vehicles as well as our ability to design, manufacture, and sell new products, which 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.

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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.

Failure to comply with safety regulations could result in regulatory enforcement, litigation, and product recalls that damage our reputation and adversely affect our business.

Our products and the vehicles in which they are used may be subject to safety laws and regulations promulgated by federal, state/provincial, and local governments around the world.

For example, the National Highway Traffic Safety Administration (“NHTSA”) has federal oversight over product safety issues related to automobiles in the United States, and the Consumer Product Safety Commission (“CPSC”) has federal oversight over product safety issues related to off-road vehicles.

Changes in the regulatory climate in any of the jurisdictions where we operate could result in additional compliance costs or require us to redesign impacted products.

In addition, we could become subject to regulatory enforcement actions or litigation if our products fail to comply with these regulations.

Moreover, we could be required to conduct product recalls that could damage our reputation and result in additional costs.

Overall, to the extent we fail to comply with safety regulations, it could have a material adverse effect on our business, financial condition, and results of operations.

Our Intellectual Property and Information Security

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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.

In addition, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.

In addition, the rapid evolution and increased adoption of AI technologies may intensify our cybersecurity risks.

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.

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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.

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 gaining and/or maintaining market exclusivity for a product in a particular geographic area.

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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, competitors, non-practicing entities, or others.

Any such infringement claim could have a material adverse effect on our business, financial condition and results of operations due to an increase in legal expense, a time burden on employees involved in defense of such claim or slowed development and/or production of an accused product.

Any such infringement claim could have a material adverse effect on our business, financial condition, and results of operations due to an increase in legal expense, a time burden on employees involved in the defense of such claim, or slowed development and/or production of an accused product.

This may be true whether they are with or without merit and whether they are covered by insurance or not.

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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.

A decline in the reputation of our brands because 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.

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We have a credit agreement with Bank of America, N.A., as administrative agent, under which we borrowed $500.0 million in the form of a term loan and through which we have a $600.0 million revolving credit facility.

As of December 31, 2023, there was $484.4 million in outstanding borrowings under the term loan and $92.8 million in outstanding borrowings under the revolving portion of the credit agreement, and as of such date we had three outstanding letters of credit for $1.3 million in the aggregate.

As of December 31, 2024, there was $468.8 million in outstanding borrowings under the term loan and $14.0 million in

outstanding borrowings under the revolving portion of the credit agreement, and as of such date, we had three outstanding letters of credit for $1.2 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;

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.

Our ability to make payments of principal and interest on our indebtedness depends upon our future performance, which is subject to economic 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:

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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.

Our credit agreement contains affirmative and negative covenants, including 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.

Moreover, our credit agreement is guaranteed by our material domestic subsidiaries and is supported by a security interest in substantially all 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.

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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.

This could have a material adverse effect on our business, financial condition, and results of operations.

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

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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.

The financial institutions with which we have these agreements may experience financial difficulties or may modify or terminate these agreements because of changes in our customers’ credit profiles, market conditions, or otherwise.

The modification, termination, or other loss of these arrangements could have a material and adverse effect on our liquidity and our financial condition, results of operations, and cash flows.

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, the financial institutions with which we have these agreements may experience financial difficulties or may modify or terminate these agreements because of changes in our customers’ credit profiles, market conditions or otherwise.

The modification, termination or other loss of these arrangements could have a material and adverse effect on our liquidity and our financial condition, results of operations and cash flows.

Interest rate increases may adversely affect our financial condition and results of operations.

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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 $6.8 million for the year ended December 31, 2023.

A one-percentage-point increase in the interest rates on

outstanding borrowings under our credit agreement would have increased our interest expense by approximately $5.6 million for the year ended December 31, 2024.

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.

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

In fiscal 2023, approximately 70% of our products were purchased from suppliers in a variety of non-U.S.

In 2024, approximately 72% 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.

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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.

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 on our business, financial condition, and results of operations.

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

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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.

Such a disruption to these systems could negatively impact net sales 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.

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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.

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.

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The market price of our common stock may be volatile and could expose us to securities class action litigation and increased shareholder activism.

The stock market and the price of our common stock may be subject to wide fluctuations based upon general economic and market conditions.

The stock market and the price of our common stock may be subject to wide fluctuations based on general economic and market conditions.

The market price for our common stock also may be affected by our ability to meet analysts’ expectations.

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In addition, market price volatility may attract shareholder activism, which could take many forms, including potential proxy contests and public information campaigns.

Shareholder activism could result in substantial costs to the Company, adversely affect our relationships with suppliers, customers, and regulators, and adversely impact our stock price.

Shareholder activism could cause us to incur substantial costs, adversely affect our relationships with suppliers, customers, and regulators, and adversely impact our stock price.

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.

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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 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.

To the extent we experience increases in demand for labor, because of competition or otherwise, such increases 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 because 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.

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Our future growth may depend in part 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 not be able to identify suitable acquisition candidates, complete acquisitions, or integrate acquisitions successfully.

We may seek additional acquisition opportunities, both to further diversify our businesses and to penetrate or expand important product offerings, geographies, or markets.

There are no assurances, however, that we will be able to successfully identify suitable candidates, negotiate appropriate terms, obtain financing on acceptable terms, complete proposed acquisitions, successfully integrate acquired businesses, or expand into new geographies or markets.

Once acquired, operations may not achieve

anticipated levels of revenues or profitability.

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.

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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 provisions.

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.

We regularly assess the likely outcomes of these audits to determine the appropriateness of our tax provisions.

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 on our business, financial condition, and results of operations.

Additionally, changes in tax laws or tax rulings could materially impact our effective tax rate.

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New international, federal, or state legislative or regulatory restrictions or standards adopted regarding emissions of carbon dioxide that may be imposed on motor vehicles and related fuels could adversely affect demand for motor vehicles, annual miles driven, or the products we sell and could lead to or require changes in motor vehicle technology or increased costs.

For example, California recently enacted a climate focused disclosure law and the SEC has proposed climate change related regulations.

We will be required to spend significant time and resources to comply with these types of new laws and regulations.

For example, California recently enacted a climate-focused disclosure law.

We will be required to spend significant time and resources to comply with this type of new law.

Compliance with any new or more stringent laws, regulations, or standards, or stricter interpretations of existing laws, regulations, or standards, could require us to incur increased capital expenditures.

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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.

If 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.

In addition, we could be subject to commercial impacts such as lost revenue from customers who decline to do business with us because 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 and economic sanctions laws and regulations in various jurisdictions, and violations could adversely affect us.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors