What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-22 compared with 2021-02-22 · 231 added, 172 removed, 572 unchanged (41% of the section changed)

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We have audited the accompanying consolidated balance sheets of Dorman Products, Inc.

and subsidiaries (the Company) as of December 26, 2020 and December 28, 2019, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three‑year period ended December 26, 2020, and the related notes and financial statement schedule II (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 25, 2021 and December 26, 2020, the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 25, 2021, and the related notes and financial statement schedule II (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 25, 2021 and December 26, 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 25, 2021, in conformity with U.S.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 25, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of December 30, 2018, due to the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842) and ASU 2018-11, Leases (Topic 842) :

Targeted Improvements.

Basis for Opinion

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accrual for customer credits for defective product returns

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We analyzed a sample of customer credits issued after year-end and evaluated their effect on the accrual.

Fair value of customer relationships intangible asset

As discussed in Note 2 to the consolidated financial statements, on August 10, 2021, the Company acquired 100% of the equity interests of Dayton Parts (“Dayton”), in a business combination.

The Company acquired a customer relationships intangible asset associated with the generation of future income from Dayton’s existing customers.

The estimated acquisition-date fair value for the customer relationships intangible asset was approximately $124,100 thousand.

The Company used a multiperiod excess earnings valuation methodology to determine the estimated fair value of the customer relationships intangible asset.

We identified the evaluation of the estimated fair value of the customer relationships intangible asset acquired in the Dayton business combination as a critical audit matter.

There was a high degree of subjective auditor judgment related to certain assumptions used in the valuation model.

These assumptions included the forecasted revenue growth rates, customer attrition rate, and the discount rate applied.

In addition, valuation professionals with specialized skill and knowledge were also required to perform sensitivity analyses to assist us in determining the significant assumptions used to value the customer relationships intangible asset, assess certain assumptions, and evaluate evidence obtained.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the development of the above assumptions.

We evaluated the amount and timing of forecasted revenue growth rates used by the Company by comparing them to publicly available information for comparable companies, industry reports, and historical results.

We involved valuation professionals with specialized skills and knowledge, who assisted in:

• performing sensitivity analyses over the Company’s assumptions used to determine the estimated fair value of the customer relationships intangible asset to assess the impact of changes in those assumptions on the Company’s determination of fair value

• evaluating the expected customer attrition rate used in the determination of fair value, by comparing it to an independently developed attrition rate using historical sales data

• assessing the discount rate used in the determination of fair value, by comparing it to a discount rate that was independently developed using publicly available market data for comparable entities.

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

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

For the Year Ended

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Income from operations

Other income (expense), net

Interest expense, net

Other income, net

Income before income taxes

Provision for income taxes

Other comprehensive income:

Change in foreign currency translation adjustment

Comprehensive Income

Earnings per share:

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Cash and cash equivalents

Accounts receivable, less allowance for doubtful accounts of $ 1,260 and $ 957 in 2020 and 2019, respectively

Accounts receivable, less allowance for doubtful accounts of $ 1,326 and $ 1,260

Prepaids and other current assets

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Accrued customer rebates and returns

Revolving credit facility

Other accrued liabilities

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authorized 50,000,000 shares;

and outstanding 32,168,740 and 32,558,168 shares in 2020 and

2019, respectively

issued and outstanding 31,607,509 and 32,168,740 shares in 2021 and 2020, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Total shareholders' equity

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Accumulated Other

(in thousands, except share data)

Comprehensive Loss

Balance at December 29, 2018

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Other stock related activity, net of tax

Other comprehensive loss

Balance at December 25, 2021

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Gain on equity method investment

Provision (benefit) for doubtful accounts

Provision for doubtful accounts

(Benefit) provision from deferred income taxes

Provision for stock-based compensation

Payment of contingent consideration

Changes in assets and liabilities:

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Property, plant and equipment additions

Purchase of investments

Cash used in investing activities

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Payments of revolving credit line

Contingent consideration payments

Payment of contingent consideration

Payment of debt issuance costs

Other stock related activity

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Purchase and cancellation of common stock

Cash used in financing activities

Cash provided by (used in) financing activities

Effect of exchange rate changes on Cash and Cash Equivalents

Net Increase (Decrease) in Cash and Cash Equivalents

Net (Decrease) Increase in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Period

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Dorman Products, Inc.

("Dorman", the "Company", “we”, “us”, or “our”) is a supplier of replacement parts and fasteners for passenger cars, light trucks, and heavy-duty trucks in the automotive aftermarket industry.

We operate on a fifty-two, fifty-three week period ending on the last Saturday of the calendar year.

The fiscal years ended December 26, 2020 (“fiscal 2020”), December 28, 2019 (“fiscal 2019”) and December 29, 2018 (“fiscal 2018”) were each fifty-two week periods.

("Dorman", the "Company", “we”, “us”, or “our”) is a supplier of replacement parts and fasteners for passenger cars and light-, medium-, and heavy-duty trucks in the automotive aftermarket industry.

We operate on a 52-53-week period ending on the last Saturday of the calendar year.

The fiscal years ended December 25, 2021 (“fiscal 2021”), December 26, 2020 (“fiscal 2020”) and December 28, 2019 (“fiscal 2019”) were each 52-week periods.

Principles of Consolidation .

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Use of Estimates in the Preparation of Financial Statements .

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

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During fiscal 2021, fiscal 2020 and fiscal 2019, we sold $ 935.8 million, $ 740.0 million and $ 676.4 million, respectively, under these programs.

Selling, general and administrative expenses include $ 13.2 million, $ 16.7 million and $ 14.5 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively, of financing costs associated with these accounts receivable sales programs.

Selling, general and administrative expenses include financing costs associated with these accounts receivable sales programs of $ 11.7 million, $ 13.2 million and $ 16.7 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.

Financing costs are impacted both by interest rates and the timing of when accounts receivable are sold in comparison to the original due dates of those accounts receivable.

Inventories .

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Property, Plant and Equipment .

Property, plant and equipment are recorded at cost and depreciated over their estimated useful lives, which range from 3 to 39 years , using the straight-line method for financial statement reporting purposes and accelerated methods for income tax purposes.

Property, plant and equipment are recorded at cost and depreciated over the estimated useful lives, which range from 3 to 39 years , using the straight-line method for financial statement reporting purposes and accelerated methods for income tax purposes.

The costs of maintenance and repairs are expensed as incurred.

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First, recoverability is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount exceeds the estimated undiscounted future cash flows, the second step of the impairment test is performed and an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds

its fair value.

Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.

The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

If the carrying amount exceeds the estimated undiscounted future cash flows, the second step of the impairment test is performed, and an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds its fair value.

The assets and liabilities of a disposal group classified as held for sale would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated.

Goodwill is reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of the goodwill may be impaired.

In regard to the annual test, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

For the annual test, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.

During fiscal 2020 and fiscal 2019, we assessed the qualitative factors which could affect the fair values of our reporting units and determined that it was not more likely than not that the fair value of our reporting unit was less than its carrying amount.

During fiscal 2021 and fiscal 2020, we assessed the qualitative factors which could affect the fair values of our reporting unit and determined that it was not more likely than not that the fair value of our reporting unit was less than its carrying amount.

Purchase Accounting .

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Such fair market value assessments require judgments and estimates which may change over time and may cause the final amounts to differ materially from their original estimates.

These adjustments to fair value assessments are recorded to goodwill over the purchase price allocation period which cannot exceed twelve months from the date of acquisition.

These adjustments to fair value assessments are recorded to goodwill over the purchase price allocation period which cannot exceed 12 months from the date of acquisition.

Other Assets .

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We believe that the most appropriate classification of core inventory is a long-term asset.

According to guidance provided under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), current assets are defined as “assets or resources commonly identified as those which are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business.” The determination of the long-term classification is based on our view that the value of the cores is not expected to be consumed or realized in cash during our normal annual operating cycle.

According to guidance provided under the Financial Accounting Standards Board Accounting Standards Codification (“ASC”), current assets are defined as “assets or resources commonly identified as those which are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business.” The determination of the long-term classification is based on our view that the value of the cores is not expected to be consumed or realized in cash during our normal annual operating cycle.

We have investments that we account for according to the equity method of accounting.

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These investments provided us $ 4.6 million, $ 1.3 million and $ 3.2 million of income during fiscal 2021, fiscal 2020, and fiscal 2019, respectively.

In January 2020, we acquired the remaining 60 % of the outstanding stock of Power Train Industries, Inc.

In January 2020, we

acquired the remaining 60 % of the outstanding stock of Power Train Industrie s, Inc.

(“PTI”), a privately-held supplier of parts to the automotive aftermarket, based in Reno, Nevada of which we held equity investments with a fair value of $ 12.3 million.

Additionally, in fiscal 2018 we purchased an investment that we account for according to the cost method of accounting.

The carrying book value of this investment was $ 5.0 million as of December 26, 2020.

Additionally, we have an investment that we account for according to the cost method of accounting.

The carrying book value of this investment was $ 5.0 million as of both December 25, 2021 and December 26, 2020 .

Other Accrued Liabilities.

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As noted above, Customer Credits include core return deposits which are an estimate of the amount we believe we will refund to our customers when used cores are returned to us.

The price we invoice to customers for remanufactured cores contain both the amount we charge to remanufacture the part and a deposit for the core.

The price we invoice to customers for remanufactured cores contains both the amount we charge to remanufacture the part and a deposit for the core.

We charge a core deposit to encourage the customer to return the used core to us so that it can be used in our remanufacturing process.

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Research and development costs are expensed as incurred.

Research and development costs totaling $ 20.7 million in fiscal 2020, $ 21.0 million in fiscal 2019 and $ 20.1 million in fiscal 2018 have been recorded in selling, general and administrative expenses in the Consolidated Statements of Operations.

Research and development costs totaling $ 23.1 million, $ 20.7 million and $ 21.0 million have been recorded in selling, general and administrative expenses in the Consolidated Statements of Operations for fiscal 2021, fiscal 2020, and fiscal 2019, respectively.

Stock-Based Compensation .

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We record compensation expense for all awards granted.

The value of restricted stock and restricted stock units issued is based on the fair value of our common stock on the grant date.

For performance-based restricted stock awards tied to growth in adjusted pre-tax income, compensation costs related to the stock is recognized over the performance period and is calculated using the closing price per share of our common stock on the grant date and an estimate of the probable outcome of the performance conditions as of the reporting date.

The fair value of performance-based restricted stock and performance-based restricted stock units, for which the performance measure is total shareholder return, was determined using a Monte Carlo simulation model.

The fair value of stock options granted was determined using the Black-Scholes option valuation model on the grant date.

The value of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) issued was based on the fair value of our common stock on the grant date.

For performance-based RSAs tied to growth in adjusted pre-tax income, compensation costs related to the stock is recognized over the performance period and is calculated using the closing price per share of our common stock on the grant date and an estimate of the probable outcome of the performance conditions as of the reporting date.

The fair value of performance-based RSUs, for which the performance measure is total shareholder return, is determined using a Monte Carlo simulation model.

The fair value of stock options granted is determined using the Black-Scholes option valuation model on the grant date.

Income Taxes .

We follow the asset and liability method of accounting for deferred income taxes.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities.

Deferred tax assets or liabilities at the end of each period are determined using the enacted tax rate expected to be in effect when taxes are actually paid or recovered.

Deferred tax assets and liabilities are determined based on the difference between the financial statement

and tax bases of assets and liabilities.

Deferred tax assets or liabilities at the end of each period are determined using the enacted tax rate expected to be in effect when taxes are paid or recovered.

Unrecognized income tax benefits represent income tax positions taken on income tax returns that have not been recognized in the consolidated financial statements.

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Contingent consideration associated with an acquisition is recorded at fair value at the acquisition date and is adjusted to fair value at each reporting period.

New and Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment , which eliminates the need to perform a hypothetical purchase price allocation to measure goodwill impairment.

ASU 2017-04 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.

Early adoption is permitted, including adoption in an interim period.

We adopted this ASU effective December 29, 2019 , the beginning of our 2020 fiscal year.

Adoption of this ASU did not have a material impact on our condensed consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses, which was subsequently amended in November 2018 through ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments Credit Losses.

ASU 2016-13 requires entities to estimate lifetime expected credit losses for trade and other receivables, net investments in leases, financial receivables, debt securities and other instruments, which will result in earlier recognition of credit losses.

Further, the new credit loss model will affect how entities in all industries estimate their allowance for loss receivables that are current with respect to their payment terms.

ASU 2016-13 is effective for companies beginning with fiscal years beginning after December 15, 2019.

We adopted this ASU effective December 29, 2019 , the beginning of our 2020 fiscal year.

Adoption of this ASU did not have a material impact on our condensed consolidated financial statements and related disclosures.

Business Acquisitions and Investments

DPL Holding Corporation (“Dayton Parts”)

On August 10, 2021, we acquired 100 % of the equity interests of Dayton Parts, a manufacturer of chassis and other parts designed to serve the heavy-duty vehicle sector of the aftermarket for a purchase price of $ 344.9 million in cash (net of $ 8.8 million of acquired cash), after certain customary post-acquisition purchase price adjustments.

The acquisition was funded by cash on hand as well as through the refinancing of our revolving credit facility discussed further in Note 7.

The transaction was accounted for as a business combination under the acquisition method of accounting.

We have allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values.

During the year ended December 25, 2021, we recorded measurement and period adjustments of approximately $ 2.1 million to decrease goodwill, $ 0.6 million to decrease the purchase price due to customary net working capital adjustments, $ 0.1 million to increase other current liabilities, and $ 1.6 million to decrease deferred tax liabilities.

Our measurement period adjustments for Dayton Parts were complete as of December 25, 2021 .

The table below details the fair values of the assets acquired and the liabilities assumed at the acquisition date , including applicable measurement period adjustments :

(in thousands)

Accounts receivable

Prepaids and other current assets

Property, plant and equipment

Identifiable intangible assets

Operating lease right-of-use assets

Accounts payable

Accrued compensation

Other current liabilities

Long-term operating lease liabilities

Deferred tax liabilities

Net cash consideration

The estimated valuation of the intangible assets acquired, and related amortization periods are as follows:

(in thousands)

Amortization Period (in years)

Customer relationships

Product portfolio

The fair values assigned to intangible assets were estimated by discounting expected cash flows based on the relief from royalty and multi-period excess earnings valuation methodologies.

These valuation methods rely on management judgment, including expected future cash flows resulting from existing customer relationships, customer attrition rates, contributory effects of other assets utilized in the business, royalty rates and other factors.

The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to the Company’s and Dayton Parts’ existing automotive aftermarket businesses, the assembled workforce of Dayton Parts and other factors.

The goodwill is not expected to be deductible for tax purposes.

The financial results of the acquisition have been included in the consolidated financial statements since the date of acquisition.

The net sales and net income of Dayton Parts included in the consolidated financial statements for the fiscal year ended December 25, 2021 were $ 78.0 million and $ 0.0 million, respectively.

The unaudited pro forma information for the periods set forth below gives effect to the Dayton Parts acquisition as if it had occurred as of December 28, 2019, the beginning of the fiscal 2020 period.

The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been consummated as of that time.

For the Year Ended

(in thousands, unaudited)

December 25, 2021

December 26, 2020

Diluted earnings per share

The fiscal 2021 unaudited pro forma net income set forth above was adjusted to exclude the impact of acquisition date fair value adjustments to inventory, and to also remove acquisition-related transaction costs.

The 2020 unaudited pro forma net income was adjusted to include the impact of these items.

Power Train Industries, Inc.

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The goodwill is not expected to be deductible for tax purposes.

The financial results of the acquisition have been included in the Condensed Consolidated Financial Statements since the date of acquisition.

Flight Systems Automotive Group L.L.C.

On August 31, 2018, we acquired 100 % of the outstanding stock of Flight Systems Automotive Group L.L.C.

(“Flight Systems” or “Flight”), a privately-held manufacturer and remanufacturer of complex automotive electronics and diesel fuel system components, based in Lewisberry, Pennsylvania.

The purchase price was $ 27.5 million.

We believe complex electronics components represent important growth opportunities for us and Flight’s product portfolio delivers valuable alternatives to aftermarket professionals.

The transaction was accounted for as a business combination under the acquisition method of accounting.

Accordingly, the assets acquired and liabilities assumed were recorded at fair value, with the remaining purchase price recorded as goodwill.

In connection with this acquisition, we recorded $ 7.4 million in goodwill, $ 4.1 million of identified intangibles, and $ 16.0 million of other net assets, primarily $ 2.0 million of accounts receivables, $ 8.4 million of inventory, $ 4.4 million of fixed assets, and $ 1.2 million of net other assets and liabilities.

During the year ended December 28, 2019, we recorded measurement and period adjustments of approximately $ 1.9 million to increase goodwill, $ 0.7 million to decrease inventory, and $ 1.2 million to decrease identified intangibles.

These measurement period entries are included in the balances above.

Our measurement period adjustments for Flight were complete as of December 28, 2019.

The valuation of the intangible assets acquired and related amortization periods are as follows:

(in thousands)

Amortization Period (in years)

Customer relationships

The fair values of the customer relationships and trade names were estimated using an income approach based on the present value of future cash flows.

Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life.

The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to existing automotive aftermarket businesses, the assembled workforce of Flight and other factors.

The goodwill is expected to be deductible for tax purposes.

The financial results of the acquisition have been included in the Consolidated Financial Statements since the date of acquisition .

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December 26, 2020

Raw materials

Finished product

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This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration.

Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset.

Control of an underlying asset is conveyed if we obtain the rights to direct the use of the asset and to obtain substantially all of the economic benefit from its use.

We have operating leases for distribution centers, sales offices and certain warehouse and office equipment.

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When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments.

The incremental borrowing rate is not a commonly quoted rate and is derived through a combination of inputs including our credit rating and the impact of full collateralization.

The incremental borrowing rate is not commonly quoted and is derived through a combination of inputs including our credit rating and the impact of full collateralization.

The incremental borrowing rate is based on our collateralized borrowing capabilities over a similar term of the lease payments.

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Operating lease payments are recognized on a straight-line basis over the lease term.

We had no finance leases as of December 26, 2020 or December 28, 2019.

We had no material finance leases as of December 25, 2021 or December 26, 2020.

Practical Expedients and Accounting Policy Elections

In accordance with the guidance on leases and as permitted by the FASB, we have elected to use certain practical expedients and policy elections.

- We have elected to include both lease and non-lease components as a single lease component, as non-lease components of contracts have not historically been material.

- We have elected to account for leases with terms of one year or less as short-term leases and, as such, are not included in the right-of-use assets or lease liabilities.

We have made certain accounting policy elections and are using certain practical expedients permitted under GAAP, as follows:

Include both lease and non-lease components as a single lease component, as non-lease components of contracts have not historically been material.

Account for leases with terms of one year or less as short-term leases and, as such, are not included in the right-of-use assets or lease liabilities.

As of December 25, 2021 and December 26, 2020 there were no material variable lease costs or sublease income.

Cash paid for operating leases was $ 7.7 million and $ 6.0 million during fiscal 2020 and fiscal 2019, respectively, which are classified in operating activities on the Consolidated Statements of Cash Flows.

Cash paid for operating leases was $ 9.2 million, $ 7.7 million and $ 6.0 million during

fiscal 2021 , fiscal 2020 and fiscal 2019 , respectively, which are classified in operating activities on the Consolidated Statements of Cash Flows .

The following table summarizes the lease expense :

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December 26, 2020

December 28, 2019

Operating lease expense

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December 25, 2021

2026 and thereafter

Total lease payments

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Present value of lease liabilities

For the year ended December 29, 2018, minimum rental payments under operating leases were recognized on a straight-line basis over the term of the lease including any periods of free rent.

Rent expense for operating leases, including short-term equipment and storage rentals, was $ 6.9 million in fiscal 2018.

In February of 2022, we signed a binding letter of intent for warehouse and distribution services that increases future lease payments for operating leases by a total of approximately $ 53 million over 12 years .

Goodwill and Intangible Assets

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Goodwill acquired

Measurement period adjustment

Measurement period adjustments for Dayton acquisition

Foreign currency translation

Balance at end of period

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Customer relationships

Product Portfolio

Amortization expense associated with intangible assets was $ 6.5 million, $ 3.4 million and $ 2.6 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.

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Long-Term Debt

We have a credit agreement, expiring in December 2022 , that provides for a revolving credit facility of $ 100.0 million and, subject to certain requirements, gives us the ability to request increases in revolving credit commitments of up to an additional $ 100.0 million.

Borrowings under the credit agreement are on an unsecured basis.

At the Company’s election, the interest rate applicable to borrowings under the credit agreement will be either (1) the Prime Rate as announced by Wells Fargo from time to time, (2) an Adjusted LIBOR Market Index Rate as measured by the LIBOR Market Index Rate plus the Applicable Margin which fluctuates between 65 basis points and 125 basis points based on the ratio of the Company’s Consolidated Funded Debt to Consolidated EBITDA, or (3) an Adjusted LIBOR Rate as measured by the LIBOR Rate plus the Applicable Margin which fluctuates between 65 basis points and 125 basis points based on the ratio of the Company’s Consolidated Funded Debt to Consolidated EBITDA.

During the occurrence and continuance of an event of default, as defined in the credit agreement, all outstanding revolving credit loans will bear interest at a rate per annum equal to 2.00 % in excess of the greater of (1) the Prime Rate or (2) the Adjusted LIBOR Market Index Rate then applicable .

The credit agreement also contains covenants, including those related to the ratio of certain consolidated fixed charges to consolidated EBITDA, capital expenditures, and share repurchases, each as defined by the credit agreement.

As of December 26, 2020, we were no t in default in respect to the credit agreement.

The credit agreement also requires us to pay a fee of 0.10 % on the average daily unused portion of the facility, provided the fee will not be charged on the first $ 30 million of the revolving credit facility.

On June 29, 2020, the first day of our fiscal third quarter, the Company repaid the $ 99.0 million of outstanding borrowings under this revolving credit facility, which borrowings were made earlier in the year to help manage liquidity in light of the COVID-19 pandemic.

Additionally, we paid $ 0.4 million in interest during the year.

The average interest rate while the debt was outstanding was 1.41 %.

As of December 26, 2020 and December 28, 2019, we had no borrowings under the credit agreement and two outstanding letters of credit for approximately $ 0.8 million in the aggregate which were issued to secure ordinary course of business transactions.

Net of these letters of credit, we had approximately $ 99.2 million available under the credit agreement as of December 26, 2020.

On August 10, 2021, in connection with the acquisition of Dayton Parts, we entered into a new credit agreement that provides for a $ 600 million revolving credit facility, including a letter of credit sub-facility of up to $ 60 million (the “New Facility”).

The New Facility replaced our previous $ 100 million revolving credit facility.

The New Facility matures on August 10, 2026 and is guaranteed by the Company’s material domestic subsidiaries (together with the Company, the “Credit Parties”) and is supported by a security interest in substantially all of the Credit Parties’ personal property and assets, subject to certain exceptions.

Borrowings under the New Facility bear interest at a rate per annum equal to, at the Company’s option, either a LIBOR rate (subject to a 0.00 % floor) or a base rate, in each case plus an applicable margin of, initially (i) in the case of LIBOR rate, 1.250 % or (ii) in the case of base rate loans, 0.250 %.

The applicable margin for (i) base rate loans ranges from 0.000 % to 1.000 % per annum and (ii) for LIBOR loans ranges from 1.000 % to 2.000 % per annum, in each case, based on the Total Net Leverage Ratio (as defined in the New Facility).

The commitment fee is initially equal to 0.150 % and thereafter ranges from 0.125 % to 0.250 % based on the Total Net Leverage Ratio.

As of December 25, 2021, the interest rate on the outstanding borrowings under the New Facility was 1.35 % and the commitment fee was 0.15 %.

The New Facility contains affirmative and negative covenants, including, but not limited to, covenants regarding capital expenditures, share repurchases, and financial covenants related to the ratio of consolidated interest expense to consolidated EBITDA and the ratio of total net indebtedness to consolidated EBITDA, each as defined by the New Facility.

As of December 25, 2021, we were not in default with respect to the New Facility.

Related Party Transactions

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The lease for our Lewisberry, PA operating facility was signed in September 2020 and will expire on December 31, 2027 .

In the opinion of our Audit Committee, the terms and rates of these leases were no less favorable than those which could have been obtained from an unaffiliated party when the lease for our corporate headquarters in Colmar, PA was renewed during November 2016 and when the lease for our Lewisberry, PA operating facility was signed in September 2020.

We are a partner in a joint venture with one of our suppliers and own a minority interest in two other suppliers.

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The components of the income tax provision (benefit) are as follows:

For the Year Ended

(in thousands)

December 25, 2021

December 26, 2020

December 28, 2019

The following is a reconciliation of income taxes at the statutory tax rate to the Company's effective tax rate:

For the Year Ended

December 25, 2021

December 26, 2020

December 28, 2019

Federal taxes at statutory rate

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The following table summarizes the change in unrecognized tax benefits for the three years ended December 25, 2021:

For the Year Ended

(in thousands)

December 25, 2021

December 26, 2020

December 28, 2019

Balance at beginning of year

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Accrued expenses

Net operating losses

Foreign tax credits

State tax credits

Capital loss carryforward

Total deferred tax assets

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Gross deferred tax liabilities

Net deferred tax assets

Net deferred tax (liabilities) assets

A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

When determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assesses all positive and negative evidence.

This evidence includes, but is not limited to, prior earnings history, expected future earnings, carryback and carryforward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of the deferred tax asset.

Management has determined it was necessary to establish a valuation allowance against the foreign tax credits, various state tax credits and a capital loss from investment.

Based on our history of taxable income and our projection of future earnings, we believe that it is more likely than not that sufficient taxable income will be generated in the foreseeable future to realize the remaining net deferred tax assets.

During the year, we adjusted the valuation allowance against the deferred tax assets noted above by $ 0.6 million primarily due to the increase in capital loss carryforward.

As of December 25, 2021, the Company has tax-effected net operating loss carryforwards of $ 1.7 million and $ 0.2 million for U.S federal and state jurisdictions, respectively.

Tax-effected federal net operating losses of $ 0.1 million begin to expire in 2035 .

The remaining federal net operating losses do not expire.

The state net operating loss carryforwards expire in various years starting in 2037 .

We file income tax returns in the United States, Canada, China, India, and Mexico.

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In June 2020, we completed our internal review and submitted our prior disclosure statement to CBP, along with payment of $ 2.8 million for underpaid duties and interest.

CBP has acknowledged receipt of our prior disclosure submission but has not yet communicated that our prior disclosure submission is closed.

We intend to work cooperatively with CBP in connection with its review of our prior disclosure submission.

We have cooperated with CBP in connection with its review of our prior disclosure submission, including providing additional information as requested.

CBP has not yet communicated that its review of our prior disclosure submission is completed.

Acquisitions.

We have contingent consideration related to certain of our prior acquisitions due to the uncertainty of the ultimate amount of payment which will become due as earnout payments if performance targets are achieved.

As of December 26, 2020 and December 28, 2019, we have accrued approximately $ 8.0 million and $ 5.6 million, respectively, which represents the fair value of the estimated payments that will become due in connection with these prior acquisitions if performance targets are achieved.

During fiscal 2020 we increased this accrual by $ 2.4 million, primarily due to updates to the net sales attributable to the earnout period.

In fiscal 2019, we reduced this accrual by $ 2.3 million, primarily due to updates in the assumptions used for forecasted net sales attributable to the earnout period.

This accrual balance change during fiscal 2018 was immaterial.

The changes in the accrual balance during fiscal 2020, fiscal 2019, and fiscal 2018 were included in Selling, General and Administrative expenses in each of the respective periods.

If the performance targets are fully achieved, the remaining maximum contingent payments under these agreements would be $ 15.3 million.

During the fiscal year ended December 25, 2021, we paid $ 10.4 million in contingent consideration in connection with prior acquisitions based upon performance targets.

As of December 26,

2020 , we had accrued approximately $ 8.0 million, which represent ed our estimate at the time of the fair value of the estimated payments that w ould have become due in connection with these prior acquisitions if performance targ ets are achieved.

C hanges in the accrual balance during fiscal 2020 and fiscal 2019 were included in Selling, General and Administrative expenses in each of the respecti ve periods.

If the remaining performance targets are fully achieved, the maximum additional contingent payments to be made under the related acquisition agreements would be $ 3.6 million.

Other Contingencies .

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Business Description

We are a supplier of replacement parts and fasteners for passenger cars, light trucks, and heavy-duty trucks in the automotive aftermarket.

We are a supplier of replacement parts and fasteners for passenger cars and light-, medium- and heavy-duty trucks in the automotive aftermarket.

We group our products into four major classes:

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In most instances, our contract with a customer is the customer’s purchase order.

Upon acceptance of the purchase order, a contract exists with a customer as a sales agreement indicates approval and commitment of the parties, identifies the rights of both parties, identifies the payment terms, has commercial substance, and it is probable that we will collect the consideration to which we will be entitled in exchange for the goods transferred to the customer.

For certain customers, we may also enter into a sales agreement which outlines pricing considerations as well as the framework of terms and conditions which apply to future purchase orders for that customer.

At this point, we believe it is probable that we will collect the consideration to which we will be entitled in exchange for the goods transferred to the customer.

For certain customers, we may also enter into a sales agreement that outlines pricing considerations as well as the framework of terms and conditions which apply to future purchase orders for that customer.

In these situations, our contract with the customer is both the sales agreement as well as the specific customer purchase order.

As our contract with a customer is typically for a single transaction or customer purchase order, the duration of the contract is typically one year or less.

As a result, we have elected to apply certain practical expedients and omit certain disclosures of remaining performance obligations for contracts which have an initial term of one year or less as permitted by the FASB.

As a result, we have elected to apply certain practical expedients and omit certain disclosures of remaining performance obligations for contracts that have an initial term of one year or less as permitted by GAAP.

Revenue is recognized from product sales when goods are shipped, title and risk of loss and control have been transferred to the customer, and collection is reasonably assured.

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Customer Credits are estimated based on contractual provisions, historical experience, and our assessment of current market conditions.

Actual Customer Credits have not differed materially from estimated amounts for each period presented.

Actual Customer Credits have not differed materially from estimated amounts for each

period presented.

Amounts billed to customers for shipping and handling are included in net sales.

Costs associated with shipping and handling are included in cost of goods sold.

We have concluded that our estimates of variable consideration are not constrained according to the definition in the new standard.

All of our revenue was recognized under the point of time approach in accordance with U.S.

generally accepted accounting principles during fiscal 2020, fiscal 2019 and fiscal 2018.

Also, we do not have significant financing arrangements with our customers, as our credit terms are all less than one year .

We have concluded that our estimates of variable consideration are not constraine d according to the definition in the standard.

All of our revenue was recognized under the point of time approach during fiscal 2021, fiscal 2020 and fiscal 2019.

Also, we do not have significant financing arrangements with our customers.

Our credit terms are all less than one year .

Lastly, we do not receive noncash consideration (such as materials or equipment) from our customers to facilitate the fulfillment of our contracts.

Practical Expedients and Accounting Policy Elections

In accordance with the guidance on revenue recognition and as permitted by the FASB, we have elected to use certain practical expedients and policy elections, as follows:

- We have elected to not adjust the promised amount of consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when we transfer a promised good or service to the customer and when the customer pays for that good or service will be one year or less.

- We have elected to expense costs to obtain a contract as incurred when the expected period of benefit, and therefore the amortization period, is one year or less.

- We have elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity for a customer, including sales, use, value-added, excise and various other taxes.

- We have elected to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfilment activity rather than a separate performance obligation.

We have made certain accounting policy elections and are using certain practical expedients permitted under GAAP, as follows:

Not adjust the promised amount of consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when we transfer a promised good or service to the customer and when the customer pays for that good or service will be one year or less.

Expense costs to obtain a contract as incurred when the expected period of benefit, and therefore the amortization period, is one year or less.

Exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity for a customer, including sales, use, value-added, excise and various other taxes.

Account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfilment activity rather than a separate performance obligation.

Disaggregated Revenue

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Net Sales to Non-U.S.

During fiscal 2020, three customers (Advance, AutoZone and O’Reilly) each accounted for more than 10% of net sales and in the aggregate accounted for 56 % of net sales in fiscal 2020.

In fiscal 2019 and fiscal 2018, four customers (Advance, AutoZone, NAPA, and O'Reilly) each accounted for more than 10% of net sales and in the aggregate accounted for approximately 66 % in fiscal 2019 and 63 % in fiscal 2018.

During fiscal 2021 and fiscal 2020, three customers each accounted for more than 10% of net sales and in the aggregate accounted for 54 % and 56 % of net sales in fiscal 2021 and fiscal 2020, respectively.

In fiscal 2019, four customers each accounted for more than 10% of net sales and in the aggregate accounted for approximately 66 % of net sales.

Capital Stock

Controlling Interest by Officers, Directors and Family Members .

As of both December 26, 2020 and December 28, 2019, Steven Berman, the Executive Chairman of the Company, and members of his family beneficially owned approximately 18 % of the outstanding shares of our common stock and can influence matters requiring approval of shareholders, including the election of the Board of Directors and the approval of significant transactions.

As of December 25, 2021 and December 26, 2020, Steven Berman, the Executive Chairman of the Company, and members of his family

beneficially own ed approximately 17 % and 18 % of the outstanding shares of our common stock , respectively and c ould influence matters requiring approval of shareholders, including the election of the Board of Directors and the approval of significant transactions .

Undesignated Stock .

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At December 25, 2021, 727,834 shares were available for grant under the Plan.

Restricted Stock Awards and Restricted Stock Units

Prior to March 2020, we issued awards of restricted stock to certain employees and members of our Board of Directors.

Grants were made in the form of time-based restricted stock awards and performance-based restricted stock awards.

For all restricted stock awards, we retain the restricted stock, and any dividends paid thereon, until the vesting restrictions have been met.

For time-based restricted stock awards, compensation cost is recognized on a straight-line basis over the vesting period and is calculated using the closing price per share of our common stock on the grant date.

Prior to 2019, we issued performance-based restricted stock awards tied to growth in adjusted pre-tax income.

Restricted Stock Awards (“RSAs”) and Restricted Stock Units (“RSUs”)

Prior to March 2020, we issued RSAs to certain employees and members of our Board of Directors.

Grants were made in the form of time-based RSAs and performance-based RSAs.

For all RSAs, we retain the restricted stock, and any dividends paid thereon, until the vesting restrictions have been met.

For time-based RSAs, compensation cost is recognized on a straight-line basis over the vesting period and is calculated using the closing price per share of our common stock on the grant date.

Prior to 2019, we issued performance-based RSAs tied to growth in adjusted pre-tax income.

Compensation costs related to those awards is recognized over the performance period and is calculated using the closing price per share of our common stock on the grant date and an estimate of the probable outcome of the performance conditions as of the reporting date.

In 2019, we introduced performance-based restricted stock awards that vest based on our total shareholder return ranking relative to the S&P Mid-Cap 400 Growth Index over a three-year performance period.

For those awards, compensation cost is recognized on a straight-line basis over the

performance period and is calculated using the simulated fair value per share of our common stock based on the application of a Monte Carlo simulation model.

In 2019, we introduced performance-based RSAs that vest based on our total shareholder return ranking relative to the S&P Mid-Cap 400 Growth Index over a three-year performance period.

For those awards, compensation cost is recognized on a straight-line basis over the performance period and is calculated using the simulated fair value per share of our common stock based on the application of a Monte Carlo simulation model.

This valuation technique includes estimating the movement of stock prices and the effects of volatility, interest rates and dividends.

Beginning in March 2020, we began issuing restricted stock units to certain employees and members of our Board of Directors.

For time-based restricted stock units, compensation cost is recognized on a straight-line basis over the vesting period and is calculated using the closing price per share of our common stock on the grant date.

Also, in March 2020, we began issuing performance-based restricted stock units that vest based on our total shareholder return ranking relative to the S&P Mid-Cap 400 Growth Index over a three-year performance period.

For performance-based restricted stock units tied to total shareholder return, compensation cost is recognized on a straight-line basis over the performance period and is calculated using the simulated fair value per share of our common stock based on the application of a Monte Carlo simulation model as discussed in the paragraph above.

The following table summarizes the weighted average valuation assumptions used to calculate the fair value of total shareholder return performance-based restricted stock awards and performance-based restricted stock units granted:

For the Years Ended

Beginning in March 2020, we began issuing RSUs to certain employees and members of our Board of Directors.

For time-based RSUs, compensation cost is recognized on a straight-line basis over the vesting period and is calculated using the closing price per share of our common stock on the grant date.

Also, in March 2020, we began issuing performance-based RSUs that vest based on our total shareholder return ranking relative to the S&P Mid-Cap 400 Growth Index over a three-year performance period.

For performance-based RSUs tied to total shareholder return, compensation cost is recognized on a straight-line basis over the performance period and is calculated using the simulated fair value per share of our common stock based on the application of a Monte Carlo simulation model as discussed in the paragraph above.

The following table summarizes the weighted average valuation assumptions used to calculate the fair value of total shareholder return performance-based RSAs and performance-based RSUs granted:

For the Year Ended

December 25, 2021

December 26, 2020

December 28, 2019

Expected dividend yield

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Treasury security with terms equal to the expected time of vesting as of the grant date.

The weighted-average grant-date fair value of total shareholder return performance-based restricted stock units granted during fiscal 2020 was $ 65.09 .

Compensation cost related to performance-based and time-based restricted stock awards and restricted stock units was $ 3.2 million, $ 2.1 million and $ 2.6 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Operations.

The weighted-average grant-date fair value of total shareholder return performance-based RSAs and RSU’s granted during fiscal 2021, fiscal 2020, and fiscal 2019 were $ 131.02 , $ 65.09 , and $ 81.44 , respectively.

Compensation cost related to performance-based and time-based RSAs and RSUs was $ 6.1 million, $ 3.2 million and $ 2.1 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively, and was included in selling, general and administrative expense in the Consolidated Statements of Operations.

No cost was capitalized during fiscal 2021, fiscal 2020 or fiscal 2019.

The following table summarizes our restricted stock awards and restricted stock unit activity for the three years ended December 26, 2020:

Average Price

The following table summarizes our RSA and RSU activity for the three years ended December 25, 2021:

Average Fair Value

Balance at December 29, 2018

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Balance at December 25, 2021

As of December 26, 2020, there was approximately $ 6.9 million of unrecognized compensation cost related to unvested restricted stock and unvested restricted stock units, which is expected to be recognized over a weighted-average period of approximately 2.3 years.

As of December 25, 2021, there was approximately $ 9.7 million of unrecognized compensation cost related to unvested RSAs and RSUs, which is expected to be recognized over a weighted-average period of approximately 2.3 years.

Cash flows resulting from tax deductions in excess of the tax effect of compensation cost recognized in the financial statements are classified as operating cash flows.

The excess tax benefit generated from restricted stock awards and restricted stock units was immaterial for all periods presented.

The excess tax benefit generated from RSAs and RSUs was immaterial for all periods presented.

Stock Options

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We expense the grant-date fair value of stock options as compensation cost over the vesting or performance period.

Compensation cost charged against income for stock options was $ 1.0 million , $ 0.7 million and $ 0.5 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively .

The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Operations.

Compensation cost charged against income for stock options was $ 1.3 million , $ 1.0 million and $ 0.7 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively, and was included in selling, general and administrative expense in the Consolidated Statements of Operations.

No cost was capitalized during fiscal 2021, fiscal 2020 or fiscal 2019.

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The following table summarizes the weighted average valuation assumptions used to calculate the fair value of options granted and the associated weighted-average grant-date fair values:

For the Years Ended

For the Year Ended

December 25, 2021

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The following table summarizes our stock option activity for the three years ended December 25, 2021:

Value (in thousands)

Balance at December 29, 2018

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$7.74 – $78.76

$41.59 – $82.94

Balance at December 28, 2019

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$61.68 – $103.61

Options exercisable at December 26, 2020

Exercisable at December 25, 2021

$61.68 – $84.93

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The tax benefit generated from option exercises was immaterial for all periods presented.

2020 20192018

Employee Stock Purchase Plan.

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These contributions are used to purchase shares of the Company’s common stock at a 15 % discount from the lower of the market price at the beginning or end of the purchase window.

Beginning in March 2018, share purchases under the plan are made twice annually.

Beginning in March 2018, share purchases under the plan were

made twice annually, with the purchase windows being April to September and October to March.

In 2021, the decision was made to modify the timing of those two purchase windows to align them with the calendar year.

As a result, beginning January 2022, the two purchase windows are January to June and July to December.

In order to effectuate that alignment, the purchase window beginning in October 2021 was shortened from six months to three months and ended December 2021.

There were 40,303 shares , 79,089 shares and 21,200 shares purchased under this plan during fiscal 2021 , fiscal 2020 and fiscal 2019 , respectively.

Compensation cost under the ESPP plan was $ 0.9 million , $ 3.3 million and $ 0.3 million in fiscal 2021 , fiscal 2020 and fiscal 2019 , respectively.

The tax benefit generated from ESPP purchases was $ 0.5 million in 2020.

There was no tax benefit generated from ESPP purchases in fiscal 2019 or fiscal 2018.

401(k) Retirement Plan .

The Dorman Products, Inc.

401(k) Retirement Plan and Trust (the “401(k) Plan”) is a defined contribution profit sharing and 401(k) plan covering substantially all of our employees as of December 26, 2020.

Annual company contributions under the 401(k) Plan are determined by the Compensation Committee of our Board of Directors.

Total expense related to the 401(k) Plan was $ 3.6 million, $ 3.1 million and $ 4.3 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

At December 26, 2020, the 401(k) Plan held 195,368 shares of our common stock.

The tax benefit generated from ESPP purchases was immaterial in fiscal 2021, fiscal 2020, and fiscal 2019, respectively .

Common Stock Repurchases.

We periodically repurchase, at the then current market price, and cancel common stock issued to the 401(k) Plan.

We periodically repurchase, at the then current market price, and cancel common stock issued to the Dorman Products, Inc.

401(k) Plan and Trust (the “401(k) Plan”).

401(k) Plan participants can no longer purchase shares of Dorman common stock as an investment option under the 401(k) Plan.

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The following table summarizes the repurchase and cancellation of common stock:

For the Years Ended

For the Year Ended

December 25, 2021

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December 28, 2019

Shares repurchased and cancelled

Total cost of shares repurchased and cancelled (in millions)

Shares repurchased and canceled

Total cost of shares repurchased and canceled (in thousands)

Average price per share

At December 25, 2021, the 401(k) Plan held 183,916 shares of our common stock.

Share Repurchase Program .

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December 28, 2019

Shares repurchased and cancelled

Total cost of shares repurchased and cancelled (in millions)

Shares repurchased and canceled

Total cost of shares repurchased and canceled (in thousands)

Average price per share

401(k) Retirement Plans .

The 401(k) Plan and the Dayton Parts, LLC 401(k) Savings Plan (the “Dayton 401(k) Plan”) are both defined contribution profit sharing and 401(k) plans that together cover substantially all of our employees as of December 25, 2021.

Annual company contributions under both the 401(k) Plan and Dayton 401(k) Plan are discretionary in nature, in accordance with the respective plan documents.

Total expense related to the 401(k) Plan and Dayton 401(k) Plan were $ 6.3 million, $ 5.7 million and $ 4.5 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.

Earnings Per Share

Basic earnings per share was calculated by dividing our net income by the weighted average number of common shares outstanding during the period, excluding unvested restricted stock and unvested restricted stock units which are considered to be contingently issuable.

To calculate diluted earnings per share, common share

equivalents are added to the weighted average number of common shares outstanding.

Basic earnings per share was calculated by dividing our net income by the weighted average number of common shares outstanding during the period, excluding unvested RSAs which are considered to be contingently issuable.

To calculate diluted earnings per share, common share equivalents are added to the

weighted average number of common shares outstanding.

Common share equivalents are calculated using the treasury stock method and are computed based on o utstanding stock-based awards.

Stock-based awards of approximately 35,975 shares, 92,000 shares and 116,000 shares were excluded from the calculation of diluted earnings per share as of December 26, 2020 , December 28, 2019 and December 29, 2018 , respectively, as their effect would have been anti-dilutive.

Stock-based awards of approximately 14,250 shares, 35,975 shares and 92,000 shares were excluded from the calculation of diluted earnings per share for fiscal 2021 , fiscal 2020 and fiscal 2019 , respectively, as their effect would have been anti-dilutive.

The following table sets forth the computation of basic earnings per share and diluted earnings per share:

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Business Segments

We have determined that our business comprises a single reportable operating segment, namely, the sale of replacement parts and fasteners for passenger cars, light trucks, and heavy-duty trucks in the automotive aftermarket industry.

We have determined that our business comprises a single reportable operating segment, namely, the sale of replacement parts and fasteners for passenger cars and, light-, medium-, and heavy-duty trucks in the automotive aftermarket industry.

Net sales to countries outside the United States, primarily to Canada and Mexico, and to a lesser extent into Europe, the Middle East, and Australia, in fiscal 2021, fiscal 2020 and fiscal 2019 were $ 76.2 million, $ 61.6 million and $ 61.4 million, respectively.

Net long-lived assets outside the United States, consisting of net property, plant and equipment was $ 1.0 million as of December 25, 2021.

There were no long-lived assets outside of the United States as of December 26, 2020.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data