What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-28 · 110 added, 131 removed, 180 unchanged (57% of the section changed)

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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 2023 and 2022 results and comparisons of fiscal 2023 results to fiscal 2022 results.

Discussions of fiscal 2021 results and comparisons of fiscal 2021 results to fiscal 2022 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 31, 2022.

In ITEM 7, we discuss 2024 and 2023 results and comparisons of 2024 results to 2023 results.

Discussions of 2022 results and comparisons of 2022 results to 2023 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 year ended December 31, 2023.

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).

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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.

These parts include, among other parts, leaf springs, intake manifolds, exhaust manifolds, oil filters and coolers, window regulators, radiator fan assemblies, tire pressure monitor sensors, exhaust gas recirculation (EGR) coolers, driveshafts, UTV windshields, and complex electronics modules.

We generate most of our net sales from customers in North America, primarily in the United States.

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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.

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 resulted in future years ending on December 31, consistent with fiscal 2022.

Our 2023 fiscal year was a 52-week period that ended on December 31, 2023 ("fiscal 2023").

Our 2022 fiscal year was a 53-week period that ended on December 31, 2022 ("fiscal 2022") and our fiscal 2021 was a 52-week period that ended on December 25, 2021 (“fiscal 2021”).

Our 2024 fiscal year was a 52-week period that ended on December 31, 2024, our 2023 fiscal year was a 52-week period that ended on December 31, 2023 and our fiscal 2022 was a 53-week period that ended on December 31, 2022.

Business Performance Summary

Net sales increased 11% to $1,929.8 million in fiscal 2023 from $1,733.7 million in fiscal 2022.

Fiscal 2022 included an additional week, which we estimate contributed $19.2 million in net sales.

increased 6% to $129.3 million in fiscal 2023 from $121.5 million in fiscal 2022.

Additionally, in fiscal 2023 we generated $208.8 million of cash flows from operations, repaid a total of $159.1 million of outstanding debt obligations, and repurchased 201,632 common shares under our share repurchase program for $15.3 million.

Net sales increased 4% to $2,009.2 million in 2024 from $1,929.8 million in 2023.

Net income increased 47% to $190.0 million in 2024 from $129.3 million in 2023.

Additionally, in 2024 we generated $231.0 million of cash flows from operations, repaid a total of $94.4 million of outstanding debt obligations, and repurchased 865,283 common shares under a share repurchase program for $78.9 million.

New Product Development

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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 2023, we introduced 6,106 new distinct parts to our customers and end-users, including 1,791 “New-to-the-Aftermarket” parts.

In 2024, we introduced 5,335 new distinct parts to our customers and end-users, including 1,659 “New-to-the-Aftermarket” parts.

Please see ITEM 1, “Business – Product Development” for a year-over-year comparison of new product introductions.

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New vehicles contain an average of approximately 100 electronic modules, with some high-end luxury vehicles exceeding that.

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 heavy-duty sector.

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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 Consolidated Financial Statements for additional information.

See Note 2, "Business Acquisitions and Investments", to the Consolidated Financial Statements, included under ITEM 8 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.

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We believe that the declining US SAAR during that period resulted in a follow-on decline in our primary VIO subsegment (7-to-14-year-old vehicles) commencing in 2016.

However, following

2011 and the impact of the Great Recession of 2008, U.S.

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.

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Department of Transportation, the number of miles driven through October 2024 increased 1.0% year over year in the light-duty sector.

However, global gasoline prices remained high during fiscal 2023 and, if they continue, they may negatively impact miles driven as consumers reduce travel or seek alternative methods of transportation.

However, global gasoline prices remained high during 2024 and, if they continue, they may negatively impact miles driven as consumers reduce travel or seek alternative methods of transportation.

Brand Protection

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For those customers that choose to receive their incentives on a quarterly or annual basis instead of “off-invoice,” we provide rebates and accrue for such incentives 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.

Additionally, 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.

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We expect our customers to continue to exert pressure on our margins.

New Customer Acquisition Costs

Customer Acquisition Costs

We may incur 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.

Change-over costs include the costs related to removing the customer’s inventory of competitor products and replacing it with our products, which is commonly referred to as a stock lift.

Customer acquisition costs are recorded as a reduction to revenue when incurred.

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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.

We offer a limited lifetime warranty on most of our products in the light-duty parts categories, with more limited warranties for our heavy-duty and specialty vehicle products.

In addition to warranty returns, we may permit our customers to return new, undamaged products to us within customer-specific limits if they have overstocked their inventories.

At the time products are sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established using historical information on the nature, frequency and average cost of the claim and the probability of the customer return.

At the time products are sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established

using historical information on the nature, frequency, and average cost of the claim and the probability of the customer return.

Significant judgments and estimates must be made and used in connection with establishing the sales returns and other allowances in any accounting period.

Revision to these estimates is made when necessary, based upon changes in these factors.

Revisions to these estimates are made when necessary, based upon changes in these factors.

We regularly study trends of such claims.

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dollar may result in a change in the cost of goods that we purchase from China.

However, the cost of the goods we procure is also affected by other factors, including raw material availability, labor cost, tariffs and transportation costs.

However, the cost of the goods we procure is also affected by other factors, including raw material availability, labor costs, tariffs, and transportation costs.

We have operations located outside the United States with various functional currencies.

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Impact of Labor Market and Inflationary Costs

We have experienced broad-based inflationary impacts during the year ended December 31, 2023, due primarily to global transportation and logistics constraints, which have resulted in significantly higher transportation costs;

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;

material costs;

and wage inflation from an increasingly competitive labor market.

Higher labor costs and material inflation costs may continue to negatively impact our results in the future, despite signs of global supply chain constraints easing.

Higher labor costs and material inflation resulting from geopolitical events, rising interest rates, disruptions to supply chain and logistics networks, and the trade policies of the U.S.

or the countries where we source or sell our products may negatively impact our results in the future.

We attempt to offset inflationary pressures with cost-saving initiatives, price increases to customers, and the use of alternative suppliers.

There can be no assurance that we will be successful in implementing pricing increases in the future to recover increased inflationary costs.

There can be no assurance that we will be successful in implementing such cost-saving initiatives, pricing increases, or supplier diversification in the future to offset 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 T erm Secured Overnight Financing Rate (“Term SOFR”) or alternative discount rate affects the cost incurred to factor eligible accounts receivable.

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.

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Interest rates may hold steady at their current rates for prolonged periods or may increase in the future, resulting in increased costs associated with our accounts receivable sales programs and outstanding borrowings.

During the year ended December 31, 2023, we saw significant increases in Term SOFR and other reference rates.

Interest rates remained elevated throughout much of 2024, but began to decline starting in the second half of 2024.

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 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, among other things, diversification of suppliers across geographies and 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 applies retroactively to October 12, 2021 and is scheduled to expire on May 31, 2024.

The reinstated tariff relief applies to a limited number of our products and is not expected to materially impact our operating results.

We source the majority of our raw materials and parts from suppliers in a variety of non-U.S.

Prior to 2025, the U.S.

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

Those tariffs primarily impacted raw materials and parts that we source from China.

We have taken several actions to

mitigate the impact of those tariffs, including, but not limited to, passing along price increases to our customers and negotiating cost concessions from our suppliers.

We are actively monitoring recent trade policy and tariff announcements, including the executive orders issued by the President of the United States in February 2025.

Among other things, those executive orders directed the United States to impose new tariffs on imports from Canada, Mexico, and China, subsequently paused the imposition of tariffs on Canada and Mexico for a month, announced tariffs on steel and aluminum imported into the United States, and directed federal agencies to investigate how to adjust U.S.

tariffs to match those of other countries.

We are currently evaluating the potential impact of the announced tariffs on our business and financial condition and actions we may take to mitigate the impact.

In addition, we are currently monitoring the potential impact, if any, of actions taken by these countries in response to the announced tariffs.

There can be no assurance that the recently announced tariffs or future imposition of any tariffs, changes thereto, or potential actions taken by countries in response to the tariffs will not have a material adverse effect on our business, results of operations, financial condition, or liquidity in any period or that any actions we take to mitigate the impact of the tariffs will be effective.

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:

For the Fiscal Year Ended

(in thousands, except percentage data) December 31, 2023 December 31, 2022

For the Year Ended December 31,

(in thousands, except percentage data) 2024 2023

Net sales $ 2,009,197 100.0 % $ 1,929,788 100.0 %

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* Percentage of sales information may not add due to rounding

Fiscal Year Ended December 31, 2023 Compared to Fiscal Year Ended December 31, 2022

Net sales increased 11% to $1,929.8 million in fiscal 2023 from $1,733.7 million in fiscal 2022.

The increase in net sales reflected the addition of SuperATV in October 2022, price increases to offset inflation, and higher volume including the introduction of new products to market, partially offset by an additional week in fiscal 2022, which we estimate increased fiscal 2022 net sales by $19.2 million.

Net sales growth for the year ended December 31, 2023 excluding the incremental period of SuperATV net sales was 2%.

Gross profit margin was 35.5% of net sales in fiscal 2023 compared to 32.6% of net sales in fiscal 2022.

The increase in gross margin as a percentage of net sales was primarily due to the addition of SuperATV, which has a higher gross margin percentage than the Company average, cost saving initiatives, and pricing actions taken to offset inflation, partially offset by the sell-through of high-cost inventory purchased in 2022 that was impacted by inflationary costs.

Selling, general and administrative ("SG&A") expenses were $470.7 million, or 24.4% of net sales, in fiscal 2023 compared to $393.4 million, or 22.7% of net sales, in fiscal 2022.

The increase in SG&A expenses as a percentage of net sales was primarily due to the impact of higher interest rates on our customer accounts receivable factoring programs and the addition of SuperATV, which has higher SG&A expenses as a percentage of net sales than the Company average.

The increase was also impacted by higher amortization of intangible assets, and a charge recorded related to a customer bankruptcy filing, partially offset by a decrease in the fair value estimate of a contingent consideration obligation for a potential earnout payment on a previous acquisition in the year ended December 31, 2023.

Our effective tax rate increased to 23.3% in fiscal 2023 from 22.2% in fiscal 2022.

The increase in the effective tax rate was primarily due to the effect of foreign operations and a favorable discrete benefit recorded in fiscal 2022.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net sales increased $79.4 million, or 4.1%, for the year ended December 31, 2024 compared to the prior year, driven primarily by volume, including from new product introductions.

Gross profit as a percentage of net sales increased 460 basis points compared to the prior year primarily due to sales of lower-cost inventory and cost savings initiatives.

Selling, general and administrative expenses (“SG&A”) increased $42.8 million, or 120 basis points as a percentage of net sales for the year ended December 31, 2024, compared to the prior year, primarily due to $20.5 million of favorable fair value adjustments in the prior year period to the estimated contingent consideration obligation for an acquisition and higher compensation and benefits costs in the current year period.

Our effective tax rate increased to 25.9% in the year ended December 31, 2024 from 23.3% in the year ended December 31, 2023, primarily due to recording a reserve in 2024 in connection with a state tax dispute.

Segment Operating Results

Segment operating results were as follows:

For the Year Ended

(in thousands) December 31, 2023 December 31, 2022

For the Year Ended December 31,

(in thousands) 2024 2023

Light Duty $ 1,565,601 $ 1,462,474

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Total $ 322,979 $ 233,282

Light Duty net sales increased 3% to $1,462.5 million in fiscal 2023 from $1,425.9 million in fiscal 2022.

The increase in net sales reflected price increases to offset inflation, and higher volume including the introduction of new products to market, partially offset by an additional week in fiscal 2022, which we estimate increased fiscal 2022 Light Duty net sales by $16.8 million.

Light Duty segment income from operations as a percentage of net sales increased to 12.8% in fiscal 2023 from 11.9% in fiscal 2022.

This increase was primarily driven by pricing increases and cost savings initiatives to offset inflation.

Heavy Duty net sales decreased 1% to $256.9 million in fiscal 2023 from $258.2 million in fiscal 2022.

The decrease in net sales was primarily due to lower trucking demand in fiscal 2023 which reduced the demand for replacement parts.

Additionally, fiscal 2022 included higher volumes as customers restocked inventories coming out of the global pandemic and supply chain pressures began to ease.

Heavy Duty segment income from operations as a percentage of net sales decreased to 5.6% in fiscal 2023 from 11.5% in fiscal 2022.

This decrease was primarily driven by the sell through of high-cost inventory that was purchased during peak inflationary times, partially offset by cost savings initiatives and pricing actions implemented.

Light Duty net sales increased $103.1 million, or 7.1%, for the year ended December 31, 2024 compared to the prior year, primarily due to volume increases, including sales of new products launched.

Light Duty segment income from operations as a percentage of net sales increased to 18.2% for the year ended December 31, 2024, from 12.8% for the year ended December 31, 2023.

This increase was primarily driven by the sell-through of lower-cost inventory and operational excellence initiatives delivering cost-savings, partially offset by higher compensation and benefits costs.

Heavy Duty net sales decreased $25.4 million, or 9.9%, for the year ended December 31, 2024 compared to the prior year.

The decrease in net sales primarily reflects reduced customer demand from lower freight industry shipping volumes in the year ended December 31, 2024, as well as sales performance in the year ended December 31, 2023 driven by customers’ inventory restocking at the end of the global pandemic.

Heavy Duty segment income from operations as a percentage of net sales decreased by 280 basis points for the year ended December 31, 2024, compared to the prior year.

This decrease was primarily driven by the deleveraging of fixed costs on lower net sales and the impact of investments we made as part of initiatives to grow sales and improve margins on a long-term basis.

Specialty Vehicle

Specialty Vehicle net sales were $210.4 million in fiscal 2023 compared to $49.6 million in fiscal 2022.

The increase in net sales was due to inclusion of a full-year results in fiscal 2023 whereas fiscal 2022 only included results following our acquisition of SuperATV in October 2022.

Specialty Vehicle segment income from operations as a percentage of net sales decreased to 15.0% in fiscal 2023 from 17.2% in fiscal 2022.

This decrease was primarily driven by product mix.

Specialty Vehicle net sales increased $1.7 million, or 0.8%, for the year ended December 31, 2024 compared to the prior year, primarily due to volume increases, including sales of new products launched.

Specialty Vehicle segment income from operations as a percentage of net sales increased to 15.2% for the year ended December 31, 2024, from 15.0% for the year ended December 31, 2023.

This increase was primarily driven by the sell-through of lower-cost inventory and cost savings initiatives compared to the year ended December 31, 2023.

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, 2023 decreased to $36.8 million from $46.0 million at December 31, 2022.

Working capital was $686.6 million at December 31, 2023 compared to $590.8 million at December 31, 2022.

Shareholders’ equity was $1,168.2 million at December 31, 2023 and $1042.6 million at December 31, 2022.

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 facilitated by certain customers.

The following table presents key liquidity and capital resource metrics as of December 31, 2024 and 2023.

(in thousands) December 31, 2024 December 31, 2023

Cash and cash equivalents $ 57,137 $ 36,814

Working capital $ 805,958 $ 686,558

Shareholders' equity $ 1,293,470 $ 1,168,203

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, higher interest rates, 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.

See Note 11, “Commitments and Contingencies”, to the Consolidated Financial Statements, included under ITEM 8, for additional information regarding commitments and contingencies that may affect our liquidity.

At December 31, 2024, our long-term cash requirements under our various contractual obligations include non-cancellable operating leases and outstanding borrowings under our credit agreement as follows:

• Operating leases – total obligations under non-cancellable operating leases were $146.0 million, with $25.1 million due over the next twelve months.

Refer to Note 5, “Leases”, in the accompanying consolidated financial statements for additional information regarding our leases.

Refer to Note 5, “Leases”, to the Consolidated Financial Statements, included under ITEM 8, for additional information regarding our leases.

• Credit agreement – total obligations under our credit agreement were $482.8 million, with $28.1 million due over the next twelve months.

Refer to Note 7, “Long-Term Debt”, in the accompanying consolidated financial statements for additional information regarding our credit agreement.

Refer to Note 7, “Long-Term Debt”, to the Consolidated Financial Statements, included under ITEM 8, for additional information regarding our credit agreement.

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.

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Further extensions of customer payment terms would result in additional uses of cash or increased costs associated with the sales of accounts receivable.

During fiscal 2023 and fiscal 2022, we sold approximately $949.5 million and $1,048.7 million, respectively, under these programs.

If receivables had not been sold, $526.4 million and $722.3 million of additional receivables would have been outstanding at December 31, 2023 and December 31, 2022, respectively, based on standard payment terms.

During the years ended December 31, 2024 and 2023, we sold approximately $1,106.4 million and $949.5 million, respectively, under these programs.

If receivables had not been sold, $853.6 million and $526.4 million of additional receivables would have been outstanding at December 31, 2024 and 2023, 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, 2023 and December 31, 2022, factoring costs associated with these accounts receivable sales programs were $50.2 million and $37.2 million, respectively.

The increase in factoring costs year over year was primarily driven by higher Term SOFR and other reference rates, partially offset by lower accounts receivable sold under these programs.

During the years ended December 31, 2024 and 2023, factoring costs associated with these accounts receivable sales programs were $51.3 million and $50.2 million, respectively.

The increase in factoring costs year over year was primarily driven by 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 $60.0 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.

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 credit 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, 2023, we were not in default with respect to the New Facility.

As of December 31, 2023, there was $92.8 million in outstanding borrowings under the revolver, and $484.4 million in outstanding borrowings under the term loan portions of the New Facility, and as of such date we had outstanding letters of credit for $1.3 million in the aggregate.

Net of outstanding borrowings and letters of credit, we had $505.9 million available under the New Facility at December 31, 2023.

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

We have a credit agreement which consists of a $600.0 million revolving credit facility and a $500.0 million term loan.

The credit agreement matures on October 4, 2027, is guaranteed by the Company’s material domestic subsidiaries , and is supported by a security interest in substantially all of the Company’s material domestic subsidiaries’ personal property and assets, subject to certain exceptions.

As of December 31, 2024, we were not in default with respect to the credit agreement.

As of December 31, 2024, there was $14.0 million in outstanding borrowings under the revolving credit facility, and $468.8 million in outstanding borrowings under the term loan portion of the credit agreement, and as of such date we had outstanding letters of credit for $1.2 million in the aggregate.

Net of outstanding borrowings and letters of credit, we had $584.8 million available under the credit agreement as of December 31, 2024.

Refer to Note 7, "Long-Term Debt", to the Consolidated Financial Statements, included under ITEM 8, for additional information regarding the credit agreement.

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

For the Fiscal Year Ended

(in thousands) December 31, 2023 December 31, 2022

For the Year Ended December 31,

(in thousands) 2024 2023

Cash provided by operating activities $ 231,047 $ 208,758

Cash used in investing activities (39,321) (43,901)

Cash (used in) provided by financing activities (174,109) 472,496

Cash used in financing activities (170,979) (174,109)

Effect of foreign exchange on cash and cash equivalents (424) 32

Net decrease in cash and cash equivalents $ (9,220) $ (12,748)

During fiscal 2023, cash provided by operating activities was $208.8 million compared to $41.7 million during fiscal 2022.

The $167.1 million increase was driven by cash inflows for working capital versus cash outflows from working capital in the prior year period, primarily from the reduction of inventory, as well as higher income.

Investing activities used $43.9 million and $526.8 million of cash in fiscal 2023 and 2022, respectively.

• During fiscal 2022, we used $489.0 million to acquire SuperATV, net of cash acquired.

• Capital spending totaled $44.0 million and $37.0 million in fiscal 2023 and 2022, respectively.

The increase in capital spending is primarily due to the inclusion of a full year of SuperATV spending compared to a partial year in fiscal 2022 following its acquisition in October 2022.

Financing activities used cash of $174.1 million in fiscal 2023 and provided cash of $472.5 million in fiscal 2022.

• During fiscal 2023, we repaid $146.6 million of outstanding borrowings under our revolving credit facility, and $12.5 million of our term loan balance under our credit agreement.

• During fiscal 2023, we paid $15.3 million to repurchase 201,632 common shares under our share repurchase plan.

• 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.

• 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.

Net increase (decrease) in cash and cash equivalents $ 20,323 $ (9,220)

During the year ended December 31, 2024, cash provided by operating activities was $231.0 million compared to $208.8 million during the year ended December 31, 2023.

The $22.3 million increase was primarily driven by higher net income, partially offset by working capital changes, primarily higher inventory balances.

Investing activities used $39.3 million and $43.9 million of cash in the years ended December 31, 2024 and 2023, respectively.

The decrease in cash used in investing activities during the year ended December 31, 2024 compared to the prior year was primarily due to higher additions for property, plant and equipment in the prior year.

Financing activities in the year ended December 31, 2024 included $78.9 million paid to repurchase 865,283 shares of common stock under our share repurchase plan, and the repayments of $78.8 million of outstanding borrowings under our revolving credit facility and $15.6 of our term loan balance under our credit agreement.

During the year ended December 31, 2023, we repaid $146.6 million of outstanding borrowings under our revolving credit facility and $12.5 million of our term loan balance under our credit agreement.

The remaining uses of cash from financing activities in each period resulted primarily from the repurchase of our common stock from our 401(k) Plan and income tax withholding in connection with the vesting of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”), and proceeds from the exercise of stock options.

Off-Balance Sheet Arrangements

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Letters of credit totaling $1.2 million and $1.3 million were outstanding at December 31, 2024 and 2023, respectively.

Those letters of credit are issued primarily to satisfy the requirements of workers compensation, general liability and other insurance policies.

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.

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Related-Party Transactions

During fiscal 2022 and a portion of fiscal 2023, we had two non-cancelable operating leases for operating facilities from entities in which Steven L.

Berman, our Non-Executive Chairman, and his family members were owners.

Total annual rental payments each year to those entities under the lease arrangements were $2.9 million and $2.5 million in fiscal 2023 and fiscal 2022, respectively.

On December 1, 2023, one of the leases was assumed by a third-party purchaser in connection with a sale of the underlying property to the third party.

During fiscal 2023 and for a portion of fiscal 2022, we leased our facilities in Madison, IN and Shreveport, LA, from entities in which Lindsay Hunt, our President and Chief Executive Officer, Specialty Vehicles, and certain of her family members are owners.

Each lease is a non-cancelable operating lease.

Total rental payments to those entities under these lease arrangements were $2.6 million in fiscal 2023 and $0.5 million in fiscal 2022.

The leases for our operating facilities in Madison, IN and Shreveport, LA were renewed in October 2022 in connection with the acquisition of SuperATV and will expire on October 31, 2027.

During fiscal 2023 and for a portion of fiscal 2022, we had a warehouse storage and services agreement with a counterparty that is majority-owned by a family member of Ms.

Lindsay Hunt, our President and Chief Executive Officer, Specialty Vehicle.

The agreement provides for indoor storage space and material handling services at agreed-upon rates.

Total payments under the arrangement were $0.2 million in fiscal 2023 and less than $0.1 million in fiscal 2022.

The agreement was signed in October 2020 and expired in October 2023, but was extended on a month-to-month basis.

Prior to December 1, 2023, we leased our Colmar, PA facility from an entity in which Steven Berman, our Non-Executive Chairman, and certain of his family members are owners.

On December 1, 2023, the Colmar facility was sold to a third party, subject to our lease.

We currently lease a portion of our Lewisberry, PA facility from an entity in which Mr.

Berman and certain of his family members are owners.

The Colmar lease was, and the Lewisberry lease is, a non-cancelable operating lease.

The Lewisberry lease expires December 31, 2027.

We also lease our facilities in Madison, IN, and Shreveport, LA, from entities in which Lindsay Hunt, our President, Specialty Vehicle, and certain of her family members are owners.

Each lease is a non-cancelable operating lease, was renewed in October 2022 in connection with the acquisition of Super ATV, LLC, a leading supplier to the powersports aftermarket ("SuperATV"), and will expire on October 31, 2027.

We have service agreements with counterparties that are majority-owned by a family member of Ms.

These agreements provide for various warehouse and facility-related services at agreed-upon rates.

The following table represents the total payments for the years ended December 31, 2024, 2023, and 2022, under the related party agreements described above:

For the Year Ended December 31,

(in thousands) 2024 2023 2022

Facility leases with Steven Berman-related entities $ 715 $ 2,918 $ 2,458

Facility leases with Lindsay Hunt-related entities $ 2,757 $ 2,603 $ 519

Service agreements with Lindsay Hunt-related entities $ 54 $ 200 $ 67

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 $22.7 million and $24.9 million in fiscal 2023 and fiscal 2022, respectively.

Aggregate purchases from both of these companies were $18.4 million, $22.7 million, and $24.9 million in the years ended December 31, 2024, 2023, and 2022, respectively.

Critical Accounting Policies and Estimates

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The following areas all require the use of subjective or complex estimates, judgments, and assumptions.

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.

Accrued Customer Rebates and Returns.

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").

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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 .

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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.

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.

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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 7. Management’s Discussion and Analysis