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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-02-22 · 277 added, 226 removed, 577 unchanged (47% of the section changed)

21 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

Critical Audit Matters

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

3 unchanged sentences

As disclosed in Notes 1 and 11 to the consolidated financial statements, the Company estimates customer credits for defective product returns and other items.

The accrual for customer credits to be issued for defective product returns includes assumptions about the length of time between when a sale occurs and a credit is issued.

The accrual for customer credits to be issued for defective

product returns includes assumptions about the length of time between when a sale occurs and a credit is issued.

The provision for customer credits is reflected in the consolidated financial statements as a reduction from gross sales and accruals for customer credits are a portion of accrued customer rebates and returns.

At December 25, 2021, accrued customer rebates and returns were $188,080 thousand.

At December 31, 2022 , accrued customer rebates and returns were $192.1 million.

We identified the evaluation of the accrual for customer credits for defective product returns as a critical audit matter.

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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.

Fair value of product portfolio intangible asset

As discussed in Note 2 to the consolidated financial statements, on October 4, 2022, the Company acquired 100% of the equity interests of Super ATV, LLC (“SuperATV”).

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

The fair value of the product portfolio intangible asset at the acquisition date was $82.5 million, which was determined using a multi-period excess earnings valuation methodology.

We identified the evaluation of the fair value of the product portfolio intangible asset acquired in the SuperATV business combination as a critical audit matter.

Subjective auditor judgment was required to assess the future revenue growth rates, technology obsolescence rate, and the discount rate used in the multi-period excess earnings valuation methodology used to determine the fair value of the product portfolio intangible asset.

In addition, valuation professionals with specialized skill and knowledge were required to assess the discount rate.

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

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the 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 evaluated the future revenue growth rates by comparing them to publicly available information for comparable companies, industry reports, and historical results.

We evaluated the useful life of the technology acquired by the Company which was used to develop the technology obsolescence rate, by comparing it to publicly available information for comparable companies and historical results.

We involved valuation professionals with specialized skills and knowledge, who assisted in assessing the discount rate by comparing it to a discount rate that was independently developed using publicly available market data for comparable companies.

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

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For the Year Ended

(in thousands, except per share data)

December 25, 2021

December 26, 2020

December 28, 2019

(in thousands, except per share data) December 31, 2022 December 25, 2021 December 26, 2020

Net sales $ 1,733,749 $ 1,345,249 $ 1,092,748

Cost of goods sold 1,169,299 882,333 709,632

Gross profit 564,450 462,916 383,116

Selling, general and administrative expenses 393,402 291,365 249,743

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Provision for income taxes 34,652 38,234 28,866

Net income $ 121,549 $ 131,532 $ 106,870

Other comprehensive income:

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Earnings per share:

Basic $ 3.87 $ 4.13 $ 3.31

Diluted $ 3.85 $ 4.12 $ 3.30

Weighted average shares outstanding:

Basic 31,434 31,810 32,280

Diluted 31,543 31,961 32,373

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

December 25, 2021

December 26, 2020

(in thousands, except share data) December 31, 2022 December 25, 2021

Current assets:

1 unchanged sentence

Accounts receivable, less allowance for doubtful accounts of $ 1,363 and $ 1,326

427,385 472,764

Inventories 755,901 531,988

Prepaids and other current assets 39,800 13,048

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Operating lease right-of-use assets 109,977 59,029

Goodwill 443,035 197,332

Intangible assets, net 322,409 178,809

Deferred tax asset, net

Other assets 48,768 46,503

Total assets $ 2,341,786 $ 1,673,119

Liabilities and shareholders' equity

4 unchanged sentences

Revolving credit facility 239,363 239,360

Current portion of long-term debt 12,500 —

Other accrued liabilities 35,007 33,583

Total current liabilities 678,295 665,048

Long-term debt 482,464 —

Long-term operating lease liabilities 98,221 52,443

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Accumulated Other

(in thousands, except share data)

Comprehensive Loss

Common Stock Additional

Capital Retained

Earnings Accumulated Other Comprehensive Loss Total

(in thousands, except share data) Shares

Balance at December 28, 2019 32,556,263 $ 326 $ 52,605 $ 720,653 $ — $ 773,584

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Other stock-related activity, net of tax ( 6,247 ) — 81 ( 533 ) — ( 452 )

Net income — — — 106,870 — 106,870

Balance at December 26, 2020 32,168,740 322 64,085 789,152 — 853,559

4 unchanged sentences

Other stock-related activity, net of tax ( 14,765 ) — 533 ( 2,636 ) — ( 2,103 )

Other comprehensive loss — — — — ( 1,440 ) ( 1,440 )

Net income — — — 131,532 — 131,532

Balance at December 25, 2021 31,607,509 316 77,451 856,409 ( 1,440 ) 932,736

5 unchanged sentences

Other comprehensive loss — — — — ( 1,863 ) ( 1,863 )

Net income — — — 121,549 — 121,549

Balance at December 31, 2022 31,430,632 $ 314 $ 88,750 $ 956,870 $ ( 3,303 ) $ 1,042,631

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For the Year Ended

(in thousands)

December 25, 2021

December 26, 2020

December 28, 2019

(in thousands) December 31, 2022 December 25, 2021 December 26, 2020

Cash Flows from Operating Activities:

Adjustments to reconcile net income to cash provided by

operating activities:

Net income $ 121,549 $ 131,532 $ 106,870

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation, amortization and accretion 44,677 35,193 32,307

1 unchanged sentence

Provision for doubtful accounts 86 181 316

(Benefit) provision from deferred income taxes

Benefit from deferred income taxes ( 5,880 ) ( 11,970 ) ( 9,599 )

Provision for stock-based compensation 9,370 8,228 7,586

2 unchanged sentences

Accounts receivable 48,479 10,918 ( 67,369 )

Inventories ( 133,790 ) ( 153,823 ) ( 12,334 )

Prepaids and other current assets ( 11,150 ) ( 2,680 ) 5,353

Other assets ( 28 ) ( 5,004 ) ( 3,975 )

Accounts payable ( 5,542 ) 47,000 25,251

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Payments of revolving credit line ( 10,000 ) ( 13,000 ) ( 99,000 )

Proceeds of long-term debt 500,000 — —

Payments of long-term debt ( 3,125 ) — —

Payment of contingent consideration ( 1,705 ) ( 7,982 ) —

Payment of debt issuance costs ( 3,918 ) ( 4,215 ) —

Other stock related activity

Proceeds from exercise of stock options 1,046 2,455 1,184

Purchase and cancellation of common stock ( 19,934 ) ( 62,649 ) ( 38,676 )

Other stock-related activity 132 1,266 3,007

Cash provided by (used in) financing activities 472,496 168,235 ( 34,485 )

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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 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.

("Dorman", the "Company", “we”, “us”, or “our”) is a supplier of replacement and upgrade parts in the motor vehicle aftermarket industry, serving passenger cars, light-, medium-, and heavy-duty trucks as well as specialty vehicles, including utility terrain vehicles (UTVs) and all-terrain vehicles (ATVs).

Prior to October 4, 2022, we operated on a 52-53-week period ending on the last Saturday of the calendar year.

Our 2022 fiscal year under this schedule is a 53-week period that ended on December 31, 2022 (“fiscal 2022”).

Effective October 4, 2022, our Board of Directors approved a change in Dorman’s fiscal year end from the last Saturday in December of each year to December 31 of each year.

This change will result in future years ending on December 31, consistent with fiscal 2022.

Our fiscal 2021 and fiscal 2020 were 52-week periods that ended on December 25, 2021 (“fiscal 2021”) and December 26, 2020 (“fiscal 2020”).

Principles of Consolidation .

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During fiscal 2022, fiscal 2021 and fiscal 2020, we sold $ 1,048.7 million, $ 935.8 million and $ 740.0 million, respectively, under these programs.

Selling, general and administrative expenses include 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.

Selling, general and administrative expenses include factoring costs associated with these accounts receivable sales programs of $ 37.2 million, $ 11.7 million and $ 13.2 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

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

Inventories .

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Estimated useful lives by major asset category are as follows:

Buildings and building improvements

10 to 39 years

Machinery, equipment and tooling

Software and computer equipment

3 to 10 years

Furniture, fixtures and leasehold improvements

7 to 39 years

Buildings and building improvements 10 to 39 years

Machinery, equipment and tooling 3 to 10 years

Software and computer equipment 3 to 10 years

Furniture, fixtures and leasehold improvements 1 to 39 years

Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets .

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

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

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 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.

If through the Step 0 test we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we would perform a quantitative test (“Step 1”) to determine whether an impairment charge was necessary.

During fiscal 2022 and fiscal 2021, we assessed the qualitative factors which could affect the fair values of our reporting units and determined that it was not more likely than not that the fair value of our reporting units were less than their carrying amounts.

Purchase Accounting .

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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 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, 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.

The total book value of these investments was $ 9.4 million and $ 8.5 million as of December 25, 2021 and December 26, 2020, respectively.

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 Industrie s, Inc.

The total book value of these investments was $ 9.4 million at both of December 31, 2022 and December 25, 2021, respectively.

These investments provided $ 5.5 million, $ 4.6 million and $ 1.3 million of income during fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

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

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

2 unchanged sentences

Other Accrued Liabilities.

Other accrued liabilities include primarily accrued commissions, accrued income taxes, insurance liabilities, product warranties, and other current liabilities.

We warrant our products against certain defects in material and workmanship when used as designed on the vehicle on which it was originally installed.

We offer a limited lifetime warranty on most of our products.

Our warranty limits the end-user’s remedy to the repair or replacement of the part that is defective.

Product warranty reserves were immaterial as of December 25, 2021 and December 26, 2020 and are based upon experience and forecasts using the best historical and current claim information available.

Provisions and payments related to end-user product warranty reserves were not material in fiscal 2021, fiscal 2020 or fiscal 2019.

Other accrued liabilities include primarily accrued commissions, accrued income taxes, insurance liabilities, and other current liabilities.

Revenue Recognition and Accrued Customer Rebates and Returns .

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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 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.

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Otherwise, no benefit is recognized.

The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being

realized upon ultimate settlement.

Additionally, we accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws.

Interest and penalties are classified as income tax expense in the Consolidated Statements of Operations.

The Company does not anticipate material changes in the amount of unrecognized income tax benefits over the next year.

Concentrations of Risk .

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents and accounts receivable.

All cash equivalents are managed within established guidelines which limit the amount that may be invested with one issuer.

All cash equivalents are managed within established guidelines that limit the amount that may be invested with one issuer.

A significant percentage of our accounts receivable have been, and will continue to be, concentrated among a relatively small number of automotive retailers and warehouse distributors in the United States.

Our four largest customers accounted for 71 % and 82 % of net accounts receivable as of December 25, 2021 and December 26, 2020, respectively.

We continually monitor the credit terms and credit limits to these and other customers.

Our 4 largest customers accounted for 69 % and 71 % of net accounts receivable as of December 31, 2022 and December 25, 2021, respectively.

We continually monitor the credit terms and credit limits for these and other customers.

In fiscal 2022 and fiscal 2021, approximately 64 % and 74 %, respectively, of our products were purchased from suppliers located in a variety of foreign countries, with the largest portion coming from China.

1 unchanged sentence

The carrying value of financial instruments such as cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair value based on the short-term nature of these instruments.

The carrying value of our long-term debt approximates its fair value because it bears interest at a rate indexed to a market rate (Term SOFR).

Additionally, the fair value of assets acquired and liabilities assumed are determined at the date of acquisition.

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Business Acquisitions and Investments

Super ATV, LLC (“SuperATV”)

On October 4, 2022 (the “Closing Date”), Dorman acquired 100 % of the issued and outstanding equity interests of SuperATV (the “Transaction”), for aggregate consideration of $ 509.6 million (net of $ 6.8 million cash acquired), subject to certain customary adjustments based on, among other things, the amount of cash, debt and working capital in the business of SuperATV as of the closing of the Transaction, plus a potential earn-out payment to the sellers of SuperATV not to exceed $ 100 million in the aggregate, which remains subject to the achievement by SuperATV of certain revenue and gross margin targets in the years ended December 31, 2023 and December 31, 2024.

SuperATV is a leading independent supplier to the powersports aftermarket with a family of highly respected brands spanning functional accessories and upgrades, as well as replacement parts for specialty vehicles.

The Transaction was funded in cash through the refinancing of our existing credit facility discussed further in Note 7.

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

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

The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, as of December 31, 2022, is based upon preliminary information and is subject to change within the permitted measurement period (up to one year from the acquisition date) as additional information concerning final asset and liability valuations is obtained.

The fair values that remain preliminary include tax-related liabilities and contingent liabilities.

While they are not expected to be materially different than those shown, any material adjustments to the estimates based upon new information identified during the measurement period will be reflected, retroactively, as of the date of the acquisition.

The table below details the fair values of the assets acquired and the liabilities assumed at the acquisition date:

(in thousands)

Accounts receivable $ 3,317

Inventories 90,428

Prepaids and other current assets 5,293

Property, plant and equipment 23,776

Goodwill 247,247

Identifiable intangible assets 157,500

Operating lease right-of-use assets 11,661

Other Assets 3,001

Accounts payable ( 7,436 )

Accrued compensation ( 2,086 )

Accrued customer rebates and returns ( 1,609 )

Other current liabilities ( 8,726 )

Long-term operating lease liabilities ( 9,508 )

Other long-term liabilities ( 3,307 )

Net cash consideration 509,551

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

(in thousands) Fair Value Amortization Period (in years)

Product portfolio 82,500 15

Trade names 48,400 20

Customer relationships 26,600 15

Total $ 157,500

The fair values assigned to the product portfolio and customer relationships were estimated by discounting expected cash flows based on the multi-period excess earnings valuation methodology, and the trade names were estimated by discounting expected cash flows based on the relief from royalty methodology.

The product portfolio valuation method relies on various management judgments, including expected future cash flows resulting from the product portfolio, technology obsolescence rates, contributory effects of other assets utilized in the business, discount rates and other factors.

The trade names valuation method relies on various management judgments, including royalty rates, discount rates and other factors.

The customer relationship valuation method relies on various management judgments, including expected future cash flows resulting from existing customer relationships, customer attrition rates, contributory effects of other assets utilized in the business, discount rates, and other factors.

As of December 31, 2022, the total amount of goodwill resulting from the SuperATV acquisition that is expected to be deductible for tax purposes is estimated at $ 420.3 million.

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

The net sales and net income of SuperATV included in the consolidated financial statements for the fiscal year ended December 31, 2022 were $ 49.6 million and $ 2.3 million, respectively.

The unaudited pro forma information for the periods set forth below gives effect to the Transaction as if it had occurred as of December 26, 2020, the beginning of the fiscal 2021 period.

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 31, 2022 December 25, 2021

Net sales $ 1,888,379 $ 1,556,360

Net income $ 130,375 $ 143,419

Diluted earnings per share $ 4.13 $ 4.49

The fiscal 2022 unaudited pro forma net income set forth above was adjusted to exclude the impact of acquisition date fair value adjustments to inventory, and to also remove acquisition-related transaction costs.

The 2021 unaudited pro forma net income was adjusted to include the impact of these items.

DPL Holding Corporation (“Dayton Parts”)

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Accounts receivable $ 23,216

Inventories 79,625

Prepaids and other current assets 2,302

Property, plant and equipment 29,900

Goodwill 106,816

Identifiable intangible assets 160,400

Operating lease right-of-use assets 21,248

Other assets 848

Accounts payable ( 11,970 )

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

(in thousands)

Amortization Period (in years)

(in thousands) Fair Value Amortization Period (in years)

Customer relationships $ 124,100 20

Product portfolio 25,300 20

Trade names 11,000 10

Total $ 160,400

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

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For the Year Ended

(in thousands, unaudited)

December 25, 2021

December 26, 2020

(in thousands, unaudited) December 25, 2021 December 26, 2020

Net sales $ 1,468,415 $ 1,260,077

Net income $ 147,090 $ 100,334

Diluted earnings per share $ 4.60 $ 3.10

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

(in thousands)

(in thousands) Valuation Amortization

Customer relationships $ 4,600 15

Trade names 700 5

Technology 1,800 8

Total $ 7,290

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.

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Inventories were as follows:

(in thousands)

December 25, 2021

December 26, 2020

(in thousands) December 31, 2022 December 25, 2021

Raw materials $ 34,267 $ 12,746

Bulk product 234,871 225,879

Finished product 478,032 287,415

Packaging materials 8,731 5,948

Total $ 755,901 $ 531,988

Property, Plant and Equipment

Property, plant and equipment include the following:

(in thousands)

December 25, 2021

December 26, 2020

(in thousands) December 31, 2022 December 25, 2021

Buildings $ 59,980 $ 58,788

Machinery, equipment and tooling 184,184 146,999

1 unchanged sentence

Software and computer equipment 100,814 90,471

Total 357,203 303,561

Less-accumulated depreciation and amortization ( 208,726 ) ( 188,697 )

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

Our operating leases have remaining lease terms of 1 to 10 years , many of which include one or more renewal options.

Our operating leases have remaining lease terms of 1 to 11 years, many of which include one or more renewal

We consider these renewal options in determining the lease term used to establish our right-of-use assets and lease liabilities when it is determined that it is reasonably certain that the renewal option will be exercised.

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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.

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

We utilized the consolidated group borrowing rate for all leases as we operate a centralized treasury operation.

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As of December 31, 2022 and December 25, 2021 there were no material variable lease costs or sublease income.

Cash paid for operating leases was $ 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 .

Cash paid for operating leases was $ 16.8 million, $ 9.2 million and $ 7.7 million during fiscal 2022, fiscal 2021 and fiscal 2020, respectively, which are classified in operating activities on the Consolidated Statements of Cash Flows.

The following table summarizes the lease expense:

For the Year Ended

(in thousands)

December 25, 2021

December 26, 2020

December 28, 2019

(in thousands) December 31, 2022 December 25, 2021 December 26, 2020

Operating lease expense $ 17,340 $ 9,549 $ 7,732

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Supplemental balance sheet information related to our operating leases is as follows:

(in thousands)

December 25, 2021

December 26, 2020

(in thousands) December 31, 2022 December 25, 2021

Operating lease right-of-use assets $ 109,977 $ 59,029

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The following table summarizes the maturities of our lease liabilities for all operating leases as of December 31, 2022:

(in thousands)

December 25, 2021

(in thousands) December 31, 2022

2023 $ 19,984

Thereafter 44,318

Total lease payments 132,481

1 unchanged sentence

Present value of lease liabilities $ 114,133

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

Goodwill included the following:

(in thousands)

December 25, 2021

December 26, 2020

(in thousands) December 31, 2022 December 25, 2021

Balance at beginning of period $ 197,332 $ 91,080

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Intangible assets, subject to amortization, included the following:

December 25, 2021

December 26, 2020

Intangible assets subject to amortization

Weighted Average Amortization Period (years)

Gross Carrying Value

Accumulated Amortization

Net Carrying Value

Gross Carrying Value

Accumulated Amortization

Net Carrying Value

December 31, 2022 December 25, 2021

Intangible assets subject to amortization Weighted Average Amortization Period (years) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value

(dollars in thousands)

Customer relationships 17.0 $ 175,430 $ 21,643 $ 153,787 $ 149,150 $ 12,139 $ 137,011

Trade names 17.4 67,690 6,370 61,320 17,760 2,592 15,168

Product Portfolio 15.6 107,800 2,953 104,847 25,300 460 24,840

Technology 5.7 2,167 820 1,347 2,167 571 1,596

Patents and Other 9.9 1,430 322 1,108 430 236 194

Total $ 354,517 $ 32,108 $ 322,409 $ 194,807 $ 15,998 $ 178,809

Amortization expense associated with intangible assets was $ 14.2 million, $ 6.5 million and $ 3.4 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

1 unchanged sentence

(in thousands)

2023 $ 21,740

Thereafter 215,991

Total $ 322,409

Long-Term Debt

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.

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

The 2021 Facility replaced our previous $ 100 million revolving credit facility.

The 2021 Facility was scheduled to mature on August 10, 2026 and was guaranteed by the Company’s material domestic subsidiaries (together with the Company, the “Credit Parties”) and was supported by a security interest in substantially all of the Credit Parties’ personal property and assets, subject to certain exceptions.

In connection with the acquisition of SuperATV, we amended and restated the 2021 Facility (as amended and restated, the “New Facility”) by and among us, the lenders from time to time party thereto, and the administrative agent.

In addition to including the existing $ 600.0 million revolving facility, the New Facility includes a $ 500.0 million term loan, which was used to fund the SuperATV acquisition.

The New Facility (including the revolving portion of the New Facility) matures on October 4, 2027, is guaranteed by the Credit Parties and is supported by a security interest in substantially all of the Credit Parties’ personal property and assets, subject to certain exceptions .

Borrowings under the New Facility bear interest at a rate per annum equal to, at our option, either a term Secured Overnight Financing Rate (“Term SOFR”) (subject to a 0.00 % floor) or a base rate (as defined in the New Facility), in each case plus an applicable margin of, initially (i) in the case of Term SOFR loans, 1.50 % or (ii) in the case of base rate loans, 0.50 %.

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

The commitment fee under the New Facility is initially equal to 0.20 % and thereafter ranges from 0.125 % to 0.250 % based on the Total Net Leverage Ratio (as defined in the New Facility).

As of December 31, 2022, the interest rate on the outstanding borrowings under the New Facility was 5.78 % and the commitment fee was 0.15 %.

The term loan portion of the New Facility contains mandatory repayment provisions that require quarterly principal amortization payments on the term loan equal to a defined percentage of the initial borrowing amount of $ 500.0 million as follows, with the balance payable upon maturity in October 2027:

Fiscal Quarter Ending Principal Amortization Payment Percentage

December 31, 2022 through September 24, 2024 0.625 %

December 31, 2024 through September 30, 2025 1.250 %

December 31, 2025 through September 30, 2027 1.875 %

The New Facility contains affirmative and negative covenants, including, 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.

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Total rental payments to those entities under these lease arrangements were $ 2.5 million, $ 2.3 million, and $ 1.8 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

The lease for our corporate headquarters in Colmar, PA was renewed during November 2016, effective as of January 1, 2018 , and will expire on December 31, 2022 .

The lease for our corporate headquarters in Colmar, PA was renewed during December 2022, effective as of January 1, 2023, and will expire on December 31, 2027.

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

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

Purchases from these companies, and from PTI prior to our full acquisition on January 2, 2020 were $ 18.9 million, $ 10.7 million and $ 23.2 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.

Purchases from these companies, and from PTI before our full acquisition on January 2, 2020 were $ 24.9 million, $ 18.9 million and $ 10.7 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

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

(in thousands) December 31, 2022 December 25, 2021 December 26, 2020

Federal $ 31,683 $ 43,374 $ 33,698

State 7,141 5,755 4,276

Foreign 1,708 1,075 491

40,532 50,204 38,465

Federal ( 4,003 ) ( 9,609 ) ( 8,475 )

State ( 1,022 ) ( 1,368 ) ( 893 )

Foreign ( 855 ) ( 993 ) ( 231 )

( 5,880 ) ( 11,970 ) ( 9,599 )

Total $ 34,652 $ 38,234 $ 28,866

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

For the Year Ended

December 25, 2021

December 26, 2020

December 28, 2019

December 31, 2022 December 25, 2021 December 26, 2020

Federal taxes at statutory rate 21.0 % 21.0 % 21.0 %

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Effect of foreign operations — ( 0.2 ) 0.1

Other ( 0.6 ) — ( 1.0 )

Effective tax rate 22.2 % 22.5 % 21.3 %

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For the Year Ended

(in thousands)

December 25, 2021

December 26, 2020

December 28, 2019

(in thousands) December 31, 2022 December 25, 2021 December 26, 2020

Balance at beginning of year $ 1,204 $ 1,060 $ 2,301

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Reductions due to tax positions settled — — ( 1,308 )

Additions related to positions taken during a prior period 2,136 — —

Reductions due to reversals of prior year positions — ( 30 ) ( 202 )

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As of December 31, 2022, accrued interest and penalties related to unrecognized tax benefits were immaterial.

The Company does not anticipate material changes in the amount of unrecognized income tax benefits over the next year.

Deferred income taxes result from timing differences in the recognition of revenue and expense between tax and financial statement purposes.

The sources of temporary differences are as follows:

(in thousands)

December 25, 2021

December 26, 2020

(in thousands) December 31, 2022 December 25, 2021

Inventories $ 13,662 $ 13,689

Accounts receivable 20,446 18,589

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Net deferred tax assets 72,799 56,129

Depreciation 18,132 14,541

Goodwill and intangible assets 41,693 45,522

Operating lease right of use asset 23,924 13,733

Other 876 309

Gross deferred tax liabilities 84,625 74,105

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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.

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

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.

During 2022, we reduced the valuation allowance against the deferred tax assets noted above by $ 0.5 million.

As of December 31, 2022, the Company has tax-effected net operating loss carryforwards of $ 1.0 million and $ 0.2 million for U.S.

federal and state jurisdictions, respectively.

Tax-effected federal net operating losses of $ 0.1 million begin to expire in 2036 .

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

All years before 2017 are closed for U.S.

federal tax purposes.

Tax years before 2017 are closed for the states in which we file.

Tax years before 2018 are closed for tax purposes in Canada.

Tax years before 2018 are closed for tax purposes in China.

Tax years before 2016 are closed for tax purposes in Mexico.

All tax years remain open for India.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020 in response to the COVID-19 pandemic.

The CARES Act, among other things, allows net operating losses incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The CARES Act also includes provisions relating to increased interest expense deductibility, refundable payroll tax credits, deferment of employer social security payments, and technical corrections to tax depreciation methods for qualified improvement property.

Most significant to the Company is the accelerated depreciation on qualified improvement property.

The Company continues to monitor Coronavirus-related federal and state relief opportunities.

The statute of limitations for tax years before 2017 is closed for U.S.

federal income tax purposes.

The statute of limitations for tax years before 2018 is closed for the states in which we file.

The statute of limitations for tax years before 2019 is closed for income tax purposes in Canada, China, and India.

The statute of limitations for tax years before 2017 is closed for income tax purposes in Mexico.

Commitments and Contingencies

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The Company recorded an estimated liability of $ 2.8 million in its Statement of Operations for the year ended December 26, 2020, which represents the Company’s estimated underpayment of duties, after deducting its estimated overpayment of duties, to CBP due to misclassifications over the prior five-year period, which is the applicable statute of limitations, plus applicable interest.

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

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

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

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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.

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.

We have contingent consideration related to an acquisition due to the uncertainty of the ultimate amount of any payments that will become due as earnout payments if performance targets are achieved.

If the remaining performance targets for the acquisition are fully achieved, the maximum additional contingent payments to be made under the Transaction documents would be $ 100.0 million in the aggregate.

As of December 31, 2022, we accrued $ 20.0 million, representing the fair value of the estimated payments that we expect could become due in connection with the Transaction.

For the year ended December 31, 2022, we recorded a charge of $ 1.8 million in connection with earnout provisions under a prior acquisition, with the charge included in Selling, General and Administration expenses.

During the year ended December 31, 2022, we paid $ 1.8 million to fully settle this earnout provision associated with the prior acquisition.

Other Contingencies .

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Revenue Recognition

Business Description

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:

powertrain, automotive body, chassis, and hardware.

Our products are sold primarily in the United States through automotive aftermarket retailers, including through their online platforms, national and regional local warehouse distributors and specialty markets, and salvage yards.

We also distribute automotive replacement parts internationally, with sales primarily into Canada, Mexico, Europe, the Middle East, and Australia.

Our primary source of revenue is from contracts with and purchase orders from customers.

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

Upon acceptance of the purchase order, a contract exists with a customer as a sales agreement indicates approval and commitment of the parties, identifies the rights of both parties, identifies the payment terms, and has commercial substance.

Upon acceptance of the purchase order, a contract exists with a customer as a sales agreement indicates the approval and commitment of the parties, identifies the rights of both parties, identifies the payment terms, and has commercial substance.

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

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We record estimates for cash discounts, defective and slow-moving product returns, promotional rebates, core return deposits and other discounts in the period the related product revenue is recognized (“Customer Credits”).

The provision for Customer Credits is recorded as a reduction from gross sales and reserves for Customer Credits are shown as an increase of accrued customer rebates and returns.

The provision for Customer Credits is recorded as a reduction from gross sales and reserves for Customer Credits are shown as an increase in accrued customer rebates and returns.

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

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

period presented.

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 constraine d according to the definition in the standard.

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

All of our revenue was recognized under the point of time approach during fiscal 2022, fiscal 2021 and fiscal 2020.

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• 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.

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

Disaggregated Revenue

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For the Year Ended

(in thousands)

December 25, 2021

December 26, 2020

December 28, 2019

Automotive Body

(in thousands) December 31, 2022 December 25, 2021 December 26, 2020

Powertrain $ 644,059 $ 539,235 $ 442,221

Chassis 715,005 458,986 324,399

Motor Vehicle Body 314,451 288,599 266,699

Hardware 60,234 58,429 59,429

Net Sales $ 1,733,749 $ 1,345,249 $ 1,092,748

For the Year Ended

(in thousands)

December 25, 2021

December 26, 2020

December 28, 2019

(in thousands) December 31, 2022 December 25, 2021 December 26, 2020

Net Sales to U.S.

Customers $ 1,606,472 $ 1,269,050 $ 1,031,183

Net Sales to Non-U.S.

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.

Customers 127,277 76,199 61,565

Net Sales $ 1,733,749 $ 1,345,249 $ 1,092,748

During fiscal 2022, fiscal 2021, and fiscal 2020, three customers each accounted for more than 10% of net sales and in the aggregate accounted for 49 %, 54 %and 56 % of net sales in fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

Capital Stock

Controlling Interest by Officers, Directors and Family Members .

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 .

As of December 31, 2022 and December 25, 2021, Steven Berman, the Executive Chairman of the Company, and members of his family beneficially owned approximately 17 % of the outstanding shares of our common stock, and could influence matters requiring approval of shareholders, including the election of the Board of Directors and the approval of significant transactions.

Undesignated Stock .

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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.

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

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

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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:

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

For the Year Ended

December 25, 2021

December 26, 2020

December 28, 2019

December 31, 2022 December 25, 2021 December 26, 2020

Share price $ 96.36 $ 101.45 $ 61.68

Expected dividend yield 0.0 % 0.0 % 0.0 %

1 unchanged sentence

Risk-free interest rate 1.6 % 0.2 % 0.9 %

Expected life

Expected life 2.8 years 2.8 years 2.8 years

The share price is the Company’s closing share price as of the valuation date.

1 unchanged sentence

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 RSAs and RSU’s granted during fiscal 2021, fiscal 2020, and fiscal 2019 were $ 131.02 , $ 65.09 , and $ 81.44 , respectively.

The weighted-average grant-date fair value of total shareholder return RSUs granted during fiscal 2022, fiscal 2021, and fiscal 2020 were $ 111.31 , $ 131.02 , and $ 65.09 , respectively.

Compensation cost related to performance-based and time-based RSAs and RSUs was $ 7.2 million, $ 6.1 million and $ 3.2 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively, and was included in selling, general and administrative expense in the Consolidated Statements of Operations.

1 unchanged sentence

The following table summarizes our RSA and RSU activity for the three years ended December 31, 2022:

Shares Weighted

Average Fair Value

Balance at December 28, 2019 177,491 $ 76.70

Granted 83,875 $ 64.66

Vested ( 27,477 ) $ 71.25

Canceled ( 16,154 ) $ 76.44

Balance at December 26, 2020 217,735 $ 72.77

Granted 81,694 $ 106.23

Vested ( 45,970 ) $ 70.62

Canceled ( 46,782 ) $ 74.85

Balance at December 25, 2021 206,677 $ 85.97

Granted 130,131 $ 96.32

Vested ( 55,255 ) $ 83.70

Canceled ( 42,631 ) $ 85.89

Balance at December 31, 2022 238,922 $ 92.07

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For the Year Ended

December 25, 2021

December 26, 2020

December 28, 2019

December 31, 2022 December 25, 2021 December 26, 2020

Expected dividend yield 0 % 0 % 0 %

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Risk-free interest rate 1.8 % 0.7 % 0.8 %

Expected life of options

Expected life of options 5.3 years 5.3 years 5.3 years

Weighted-average grant-date fair value $ 32.55 $ 31.68 $ 17.84

The following table summarizes our stock option activity for the three years ended December 31, 2022:

Shares Option Price

per Share Weighted

Price Weighted

(years) Aggregate

Value (in thousands)

Balance at December 28, 2019 181,712 $ 41.59 – $ 82.94

$7.74 – $82.94

$73.72 – $84.93

$7.74 – $78.76

$41.59 – $82.94

Granted 109,352 $ 61.68 – $ 83.06

Exercised ( 31,521 ) $ 41.59 – $ 82.94

Canceled ( 8,764 ) $ 61.68 – $ 74.21

Balance at December 26, 2020 250,779 $ 41.59 –$ 84.93

$41.59 – $82.94

$61.68 – $83.06

$41.59 – $82.94

$61.68 – $74.21

Granted 59,578 $ 95.98 – $ 103.61

Exercised ( 67,504 ) $ 41.59 – $ 82.94

Canceled ( 9,457 ) $ 61.68 –$ 101.45

Balance at December 25, 2021 233,396 $ 61.68 – $ 103.61

$41.59 – $84.93

$95.98 – $103.61

$41.59 – $82.94

$61.68 – $101.45

Granted 79,749 $ 83.81 – $ 111.53

Exercised ( 32,201 ) $ 61.68 – $ 83.06

Expired ( 663 ) $ 101.45

Canceled ( 12,162 ) $ 61.68 – $ 101.45

Balance at December 31, 2022 268,119 $ 61.68 – $ 111.53

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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 were

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

Beginning in March 2018, share purchases under the plan were made twice annually, with the purchase windows being April to September and October to March.

In 2022, the decision was made to modify the timing of those two purchase windows to align them with the calendar year.

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

Shares are generally purchased from the 401(k) Plan when participants sell units as permitted by the 401(k) Plan or elect to leave the 401(k) Plan upon retirement, termination or other reasons.

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.

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

For the Year Ended

December 25, 2021

December 26, 2020

December 28, 2019

December 31, 2022 December 25, 2021 December 26, 2020

Shares repurchased and canceled 23,015 11,452 23,360

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Share Repurchase Program .

On December 12, 2013 we announced that our Board of Directors authorized a share repurchase program, authorizing the repurchase of up to $ 10 million of our outstanding common stock by the end of 2014.

Through several expansions and extensions, our Board of Directors has expanded the program up to $ 500 million and extended the program through December 31, 2022 .

Our Board of Directors has authorized a share repurchase program.

Through several actions, including expansions and extensions, the Board has authorized the repurchase of up to $ 600 million of our outstanding common stock through December 31, 2024.

Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion.

The share repurchase program does not obligate us to acquire any specific number of shares.

At December 31, 2022, $ 228.0 million was available for repurchase under this program.

1 unchanged sentence

For the Years Ended

December 25, 2021

December 26, 2020

December 28, 2019

December 31, 2022 December 25, 2021 December 26, 2020

Shares repurchased and canceled 180,750 605,628 439,275

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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.

We have various 401(k) plans that cover substantially all of our employees as of December 31, 2022.

Annual company contributions are discretionary in nature, in accordance with the respective plan documents.

Total expense related to the plans were $ 8.2 million, $ 6.3 million and $ 5.7 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

Earnings Per Share

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

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

weighted average number of common shares outstanding.

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

To calculate diluted earnings per share, common share equivalents are added to the weighted average number of common shares outstanding.

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

Stock-based awards of approximately 63,500 shares, 14,250 shares and 35,975 shares were excluded from the calculation of diluted earnings per share for fiscal 2022, fiscal 2021 and fiscal 2020, respectively, as their effect would have been anti-dilutive.

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For the Year Ended

(in thousands, except per share data)

December 25, 2021

December 26, 2020

December 28, 2019

(in thousands, except per share data) December 31, 2022 December 25, 2021 December 26, 2020

Net income $ 121,549 $ 131,532 $ 106,870

Weighted average basic shares outstanding 31,434 31,810 32,280

2 unchanged sentences

Earnings Per Share:

Basic $ 3.87 $ 4.13 $ 3.31

Diluted $ 3.85 $ 4.12 $ 3.30

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 and, light-, medium-, 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 and upgrade parts in the motor vehicle aftermarket industry, serving passenger cars, light-, medium-, and heavy-duty trucks as well as specialty vehicles.

Net sales to countries outside the United States, primarily to Canada and Mexico, and to a lesser extent into Europe, the Middle East, and Australia, in fiscal 2022, fiscal 2021 and fiscal 2020 were $ 127.3 million, $ 76.2 million and $ 61.6 million, respectively.

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

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

Net long-lived assets outside the United States, consisting of net property, plant and equipment was $ 3.6 million and $ 1.0 million as of December 31, 2022 and December 25, 2021, respectively.

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